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 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 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 52nd Street, New York, NY 10055
Registrant’s telephone number, including area code: (800) 441-7762
Date of fiscal year end: 12/31/2018
Date of reporting period: 06/30/2018
Item 1 – Report to Stockholders
JUNE 30, 2018
| | |
SEMI-ANNUAL REPORT (UNAUDITED) | | |
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 June 30, 2018, the strongest corporate profits in seven years drove the equity market higher, while rising interest rates constrained bond returns. Though the market’s appetite for risk remained healthy, risk taking was tempered somewhat, as shorter-term, higher-quality securities led the bond market, and U.S. equities outperformed most international stock markets.
Strong equity performance worldwide was driven by synchronized economic growth across the most influential economies. However, volatility in emerging market stocks rose, as U.S.-China trade relations and debt concerns weighed heavily on the Chinese stock market.
Short-term U.S. Treasury interest rates rose the fastest, while longer-term rates slightly increased, leading to a substantial flattening of the yield curve. The annual return for the three-month U.S. Treasury bill surpassed 1.0%, but remained well below the annual headline inflation rate of 2.9%. In contrast, the ten-year U.S. Treasury — a bellwether of the bond market — posted a negative return, as rising inflation expectations drove yields higher. Although the fundamentals in credit markets remained relatively solid, investment-grade bonds declined slightly, and high-yield bonds posted modest returns.
In response to rising growth and inflation, the U.S. Federal Reserve (the “Fed”) increased short-term interest rates three times during the reporting period. The Fed also announced plans to reduce its $4.4 trillion balance sheet by $420 billion in 2018, which began the process of gradually reversing its unprecedented stimulus measures after the financial crisis. Meanwhile, the European Central Bank announced that its bond-purchasing program would conclude at the end of the year, while also expressing an open-ended commitment to low interest rates. In contrast, the Bank of Japan continued to expand its balance sheet through bond purchasing while lowering its expectations for inflation.
The U.S. economy continued to gain momentum despite the Fed’s modest reduction of economic stimulus; unemployment declined to 4.0%, wages increased, and the number of job openings reached a record high. Strong economic performance may justify a more rapid pace of rate hikes in 2018, as the headline inflation rate and investors’ expectations for inflation have already surpassed the Fed’s target of 2.0%.
While U.S. monetary policy is seeking to restrain economic growth and inflation, fiscal policy has produced new sources of growth that could nourish the economy for the next few years. Corporate tax cuts and repatriation of capital held abroad could encourage a virtuous cycle of business spending. Lower individual tax rates coupled with the robust job market may refresh consumer spending. Proposed infrastructure spending would deliver growth from the government sector, generate demand, and improve economic activity in other sectors.
We continue to believe the primary risks to economic expansion are trade protectionism, rapidly rising interest rates, and geopolitical tension. Given the deflationary forces of technology and globalization, a substantial increase in inflation is unlikely to materialize as long as the unemployment rate remains above 3.0%. However, we are closely monitoring trade protectionism and the rise of populism in Western nations. In particular, the outcome of trade negotiations between the United States and China is likely to influence the global growth trajectory and set the tone for free trade in many other nations.
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 June 30, 2018 |
| | 6-month | | 12-month |
U.S. large cap equities (S&P 500® Index) | | 2.65% | | 14.37% |
U.S. small cap equities (Russell 2000® Index) | | 7.66 | | 17.57 |
International equities (MSCI Europe, Australasia, Far East Index) | | (2.75) | | 6.84 |
Emerging market equities (MSCI Emerging Markets Index) | | (6.66) | | 8.20 |
3-month Treasury bills (ICE BofAML 3-Month U.S. Treasury Bill Index) | | 0.81 | | 1.36 |
U.S. Treasury securities (ICE BofAML 10-Year U.S. Treasury Index) | | (2.68) | | (2.69) |
U.S. investment grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index) | | (1.62) | | (0.40) |
Tax-exempt municipal bonds (S&P Municipal Bond Index) | | (0.02) | | 1.61 |
U.S. high yield bonds (Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index) | | 0.16 | | 2.62 |
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 | | | | |
JUNE 30, 2018
| | |
SEMI-ANNUAL REPORT (UNAUDITED) | | |
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 June 30, 2018 | | 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.
Portfolio Management Commentary
How did the Fund perform?
For the six-month period ended June 30, 2018, the Fund outperformed its benchmark, the Russell 1000® Index.
What factors influenced performance?
Overall fundamental stock selection insights, specifically those that identify quality measures, performed well amid a rise in volatility. Notably, an insight that identifies stocks with the ability to generate consistent free cash flow contributed to results. Additionally, a signal that identifies consistent dividend growth proved beneficial. Elsewhere, stock selection insights that seek to capture sentiment and trends across informed market participants were broadly rewarded. Specifically, an insight that captures sentiment across bond markets contributed to performance as the Fed raised rates over the period. Additionally, our proprietary text-based analysis of executive statements to capture longer-term trends in company fundamentals and analysis of sell-side analyst reports drove gains.
Fundamental insights that identify attractive valuations struggled during the period. This has coincided with the value style continuing to lag the market in the prolonged growth regime. Notably, signals that compare companies across top-line sales, earnings and cash flows underperformed during the period. Elsewhere, a macro thematic insight that evaluates sector sensitivity to China detracted as emerging markets were under pressure during the period. Additionally, insights that seek to capture trends across consumer activity, such as foot traffic in brick-and-mortar retail locations, weighed on results.
Describe recent portfolio activity.
Over the course of the period, the portfolio maintained a balanced allocation of risk across all major return drivers. However, a number of new stock selection insights were added to the portfolio. A model that evaluates companies on the basis of governance and the ethics and sustainability of its business practices from a social and environmental perspective was added to the Fund’s bucket of quality signals. A new macro thematic model that evaluates industries across various inputs such as labor costs and hiring activity was also added.
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 industrials and health care and slight underweight positions in energy and utilities.
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.
Performance Summary for the Period Ended June 30, 2018
| | | | | | | | | | | | | | | | | | | | |
| | 6-Month Total Returns (c) | | | | | | Average Annual Total Returns | |
| | | | | 1 Year (c) | | | 5 Years (c) | | | 10 Years (c) | |
Class I(a)(b) | | | 3.66 | % | | | | | | | 15.67 | % | | | 13.53 | % | | | 8.61 | % |
Class II(a)(b) | | | 3.58 | | | | | | | | 15.50 | | | | 13.33 | | | | 8.44 | |
Class III(a)(b) | | | 3.51 | | | | | | | | 15.34 | | | | 13.21 | | | | 8.32 | (d) |
Russell 1000® Index(e) | | | 2.85 | | | | | | | | 14.54 | | | | 13.37 | | | | 10.20 | |
| (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. | |
| (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 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) | 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 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. | |
| (e) | 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. | |
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.
| | |
2 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Fund Summary as of June 30, 2018 (continued) | | BlackRock Advantage Large Cap Core V.I. Fund |
Expense Example
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Actual | | | | | | Hypothetical (a) | | | | |
| | Beginning Account Value (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | | | | Beginning Account Value (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | Annualized Expense Ratio | |
Class I | | $ | 1,000.00 | | | $ | 1,036.60 | | | $ | 2.93 | | | | | | | $ | 1,000.00 | | | $ | 1,021.92 | | | $ | 2.91 | | | | 0.58 | % |
Class II | | | 1,000.00 | | | | 1,035.80 | | | | 3.79 | | | | | | | | 1,000.00 | | | | 1,021.08 | | | | 3.76 | | | | 0.75 | |
Class III | | | 1,000.00 | | | | 1,035.10 | | | | 4.34 | | | | | | | | 1,000.00 | | | | 1,020.53 | | | | 4.31 | | | | 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 annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown). | |
See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.
Portfolio Information
SECTOR ALLOCATION
| | | | |
Sector | | Percent of Net Assets | |
Information Technology | | | 26 | % |
Health Care | | | 14 | |
Financials | | | 14 | |
Consumer Discretionary | | | 13 | |
Industrials | | | 10 | |
Consumer Staples | | | 6 | |
Energy | | | 6 | |
Real Estate | | | 4 | |
Materials | | | 3 | |
Utilities | | | 2 | |
Telecommunication Services | | | 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 January 1, 2018 and held through June 30, 2018) 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.
| | |
Schedule of Investments (unaudited) June 30, 2018 | | BlackRock Advantage Large Cap Core V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Common Stocks — 98.9% | |
| |
Aerospace & Defense — 1.8% | | | | |
Boeing Co. (The) | | | 625 | | | $ | 209,694 | |
Curtiss-Wright Corp. | | | 1,933 | | | | 230,066 | |
General Dynamics Corp. | | | 934 | | | | 174,107 | |
Harris Corp. | | | 3,942 | | | | 569,777 | |
Lockheed Martin Corp. | | | 3,489 | | | | 1,030,755 | |
Raytheon Co. | | | 34,666 | | | | 6,696,778 | |
Rockwell Collins, Inc. | | | 3,205 | | | | 431,649 | |
| | | | | | | | |
| | | | | | | 9,342,826 | |
Air Freight & Logistics — 0.1% | | | | |
FedEx Corp. | | | 2,037 | | | | 462,521 | |
| | | | | | | | |
Airlines — 0.2% | | | | |
Delta Air Lines, Inc. | | | 19,490 | | | | 965,535 | |
Southwest Airlines Co. | | | 4,409 | | | | 224,330 | |
| | | | | | | | |
| | | | | | | 1,189,865 | |
Auto Components — 1.0% | | | | |
BorgWarner, Inc. | | | 118,345 | | | | 5,107,770 | |
| | | | | | | | |
Banks — 5.1% | | | | |
Bank of America Corp. | | | 218,849 | | | | 6,169,353 | |
Citigroup, Inc. | | | 102,768 | | | | 6,877,235 | |
Citizens Financial Group, Inc. | | | 73,378 | | | | 2,854,404 | |
First Hawaiian, Inc.(a) | | | 56,078 | | | | 1,627,384 | |
First Horizon National Corp. | | | 25,501 | | | | 454,938 | |
First Republic Bank | | | 24,036 | | | | 2,326,444 | |
JPMorgan Chase & Co. | | | 25,201 | | | | 2,625,944 | |
SunTrust Banks, Inc. | | | 6,425 | | | | 424,179 | |
Synovus Financial Corp. | | | 41,074 | | | | 2,169,939 | |
Western Alliance Bancorp(b) | | | 13,689 | | | | 774,934 | |
| | | | | | | | |
| | | | | | | 26,304,754 | |
Beverages — 1.5% | | | | |
Brown-Forman Corp., Class B | | | 12,976 | | | | 635,954 | |
Coca-Cola European Partners plc | | | 37,405 | | | | 1,520,139 | |
Constellation Brands, Inc., Class A | | | 8,181 | | | | 1,790,575 | |
Dr Pepper Snapple Group, Inc. | | | 3,505 | | | | 427,610 | |
PepsiCo, Inc. | | | 32,409 | | | | 3,528,368 | |
| | | | | | | | |
| | | | | | | 7,902,646 | |
Biotechnology — 4.1% | | | | |
AbbVie, Inc. | | | 43,958 | | | | 4,072,709 | |
Amgen, Inc. | | | 7,921 | | | | 1,462,137 | |
Biogen, Inc.(b) | | | 3,913 | | | | 1,135,709 | |
Celgene Corp.(b) | | | 78,634 | | | | 6,245,112 | |
Gilead Sciences, Inc. | | | 103,890 | | | | 7,359,568 | |
United Therapeutics Corp.(b) | | | 4,092 | | | | 463,010 | |
| | | | | | | | |
| | | | | | | 20,738,245 | |
Building Products — 0.8% | | | | |
Fortune Brands Home & Security, Inc. | | | 75,166 | | | | 4,035,663 | |
| | | | | | | | |
Capital Markets — 4.4% | | | | |
Affiliated Managers Group, Inc. | | | 6,540 | | | | 972,302 | |
Charles Schwab Corp. (The) | | | 37,834 | | | | 1,933,317 | |
Franklin Resources, Inc. | | | 45,107 | | | | 1,445,679 | |
Intercontinental Exchange, Inc. | | | 87,343 | | | | 6,424,078 | |
Invesco Ltd. | | | 4,374 | | | | 116,174 | |
Moelis & Co., Class A | | | 43,905 | | | | 2,575,028 | |
Morgan Stanley | | | 61,283 | | | | 2,904,814 | |
S&P Global, Inc. | | | 30,374 | | | | 6,192,955 | |
| | | | | | | | |
| | | | | | | 22,564,347 | |
Chemicals — 1.9% | | | | |
Air Products & Chemicals, Inc. | | | 38,306 | | | | 5,965,393 | |
Celanese Corp. | | | 892 | | | | 99,066 | |
| | | | | | | | |
Security | | Shares | | | Value | |
Chemicals (continued) | | | | |
Eastman Chemical Co. | | | 33,158 | | | $ | 3,314,474 | |
WR Grace & Co. | | | 2,048 | | | | 150,139 | |
| | | | | | | | |
| | | | | | | 9,529,072 | |
Commercial Services & Supplies — 0.1% | | | | |
Republic Services, Inc. | | | 5,964 | | | | 407,699 | |
| | | | | | | | |
Communications Equipment — 1.3% | | | | |
Cisco Systems, Inc. | | | 118,226 | | | | 5,087,265 | |
Motorola Solutions, Inc.(a) | | | 14,391 | | | | 1,674,680 | |
| | | | | | | | |
| | | | | | | 6,761,945 | |
Consumer Finance — 0.3% | | | | |
American Express Co. | | | 12,877 | | | | 1,261,946 | |
Green Dot Corp., Class A(b) | | | 6,433 | | | | 472,118 | |
| | | | | | | | |
| | | | | | | 1,734,064 | |
Containers & Packaging — 0.3% | | | | |
Packaging Corp. of America | | | 15,902 | | | | 1,777,685 | |
| | | | | | | | |
Diversified Consumer Services — 0.5% | | | | |
H&R Block, Inc.(a) | | | 102,978 | | | | 2,345,839 | |
| | | | | | | | |
Diversified Financial Services — 0.7% | | | | |
Berkshire Hathaway, Inc., Class B(b) | | | 18,195 | | | | 3,396,097 | |
| | | | | | | | |
Diversified Telecommunication Services — 0.9% | | | | |
AT&T, Inc. | | | 108,037 | | | | 3,469,068 | |
Verizon Communications, Inc. | | | 15,918 | | | | 800,834 | |
Zayo Group Holdings, Inc.(b) | | | 15,670 | | | | 571,642 | |
| | | | | | | | |
| | | | | | | 4,841,544 | |
Electric Utilities — 1.5% | | | | |
IDACORP, Inc. | | | 16,163 | | | | 1,490,875 | |
Pinnacle West Capital Corp. | | | 69,443 | | | | 5,594,328 | |
Portland General Electric Co. | | | 14,785 | | | | 632,207 | |
| | | | | | | | |
| | | | | | | 7,717,410 | |
Electrical Equipment — 1.1% | | | | |
AMETEK, Inc. | | | 73,450 | | | | 5,300,152 | |
Rockwell Automation, Inc. | | | 2,177 | | | | 361,883 | |
| | | | | | | | |
| | | | | | | 5,662,035 | |
Electronic Equipment, Instruments & Components — 0.5% | |
Amphenol Corp., Class A | | | 24,667 | | | | 2,149,729 | |
CDW Corp. | | | 2,255 | | | | 182,181 | |
SYNNEX Corp. | | | 760 | | | | 73,348 | |
TE Connectivity Ltd. | | | 1,210 | | | | 108,973 | |
Zebra Technologies Corp., Class A(b) | | | 1,064 | | | | 152,418 | |
| | | | | | | | |
| | | | | | | 2,666,649 | |
Energy Equipment & Services — 0.5% | | | | |
Apergy Corp.(b) | | | 7,452 | | | | 311,121 | |
Halliburton Co. | | | 45,131 | | | | 2,033,603 | |
TechnipFMC plc | | | 1,660 | | | | 52,688 | |
| | | | | | | | |
| | | | | | | 2,397,412 | |
Equity Real Estate Investment Trusts (REITs) — 3.4% | | | | |
Alexandria Real Estate Equities, Inc. | | | 15,658 | | | | 1,975,570 | |
Highwoods Properties, Inc. | | | 37,642 | | | | 1,909,579 | |
Host Hotels & Resorts, Inc. | | | 25,806 | | | | 543,732 | |
National Retail Properties, Inc. | | | 7,176 | | | | 315,457 | |
Outfront Media, Inc. | | | 31,289 | | | | 608,571 | |
Prologis, Inc. | | | 97,426 | | | | 6,399,914 | |
Simon Property Group, Inc. | | | 33,862 | | | | 5,762,974 | |
| | | | | | | | |
| | | | | | | 17,515,797 | |
Food & Staples Retailing — 2.0% | | | | |
Costco Wholesale Corp. | | | 12,077 | | | | 2,523,852 | |
Walmart, Inc. | | | 90,302 | | | | 7,734,366 | |
| | | | | | | | |
| | | | | | | 10,258,218 | |
| | |
4 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Advantage Large Cap Core V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Food Products — 2.0% | | | | |
Archer-Daniels-Midland Co.(a) | | | 89,624 | | | $ | 4,107,468 | |
Bunge Ltd. | | | 33,819 | | | | 2,357,523 | |
Hershey Co. (The) | | | 12,708 | | | | 1,182,606 | |
Kellogg Co. | | | 37,354 | | | | 2,609,924 | |
| | | | | | | | |
| | | | | | | 10,257,521 | |
Gas Utilities — 0.0% | | | | |
UGI Corp. | | | 2,276 | | | | 118,511 | |
| | | | | | | | |
Health Care Equipment & Supplies — 2.1% | | | | |
Abbott Laboratories | | | 51,511 | | | | 3,141,656 | |
Danaher Corp. | | | 29,750 | | | | 2,935,730 | |
IDEXX Laboratories, Inc.(b) | | | 2,402 | | | | 523,492 | |
Medtronic plc | | | 10,417 | | | | 891,799 | |
Stryker Corp. | | | 20,077 | | | | 3,390,202 | |
| | | | | | | | |
| | | | | | | 10,882,879 | |
Health Care Providers & Services — 2.6% | | | | |
Aetna, Inc. | | | 6,260 | | | | 1,148,710 | |
AmerisourceBergen Corp. | | | 19,828 | | | | 1,690,734 | |
Express Scripts Holding Co.(b) | | | 7,915 | | | | 611,117 | |
Humana, Inc. | | | 21,611 | | | | 6,432,082 | |
McKesson Corp. | | | 14,413 | | | | 1,922,694 | |
UnitedHealth Group, Inc. | | | 5,499 | | | | 1,349,125 | |
| | | | | | | | |
| | | | | | | 13,154,462 | |
Health Care Technology — 0.3% | | | | |
Veeva Systems, Inc., Class A(b) | | | 23,230 | | | | 1,785,458 | |
| | | | | | | | |
Hotels, Restaurants & Leisure — 4.2% | | | | |
Carnival Corp. | | | 87,560 | | | | 5,018,064 | |
Darden Restaurants, Inc. | | | 5,817 | | | | 622,768 | |
Domino’s Pizza, Inc. | | | 8,912 | | | | 2,514,699 | |
Las Vegas Sands Corp. | | | 71,060 | | | | 5,426,142 | |
Marriott International, Inc., Class A | | | 2,894 | | | | 366,380 | |
McDonald’s Corp. | | | 47,457 | | | | 7,436,037 | |
| | | | | | | | |
| | | | | | | 21,384,090 | |
Household Durables — 0.6% | | | | |
DR Horton, Inc.(a) | | | 21,523 | | | | 882,443 | |
Garmin Ltd. | | | 12,544 | | | | 765,184 | |
Whirlpool Corp. | | | 9,251 | | | | 1,352,774 | |
| | | | | | | | |
| | | | | | | 3,000,401 | |
Household Products — 0.2% | | | | |
Church & Dwight Co., Inc. | | | 9,674 | | | | 514,270 | |
Kimberly-Clark Corp. | | | 5,026 | | | | 529,439 | |
| | | | | | | | |
| | | | | | | 1,043,709 | |
Industrial Conglomerates — 2.3% | | | | | | |
3M Co. | | | 35,255 | | | | 6,935,363 | |
Honeywell International, Inc. | | | 32,353 | | | | 4,660,450 | |
| | | | | | | | |
| | | | | | | 11,595,813 | |
Insurance — 3.3% | | | | |
Allstate Corp. (The)(a) | | | 20,533 | | | | 1,874,047 | |
American Financial Group, Inc. | | | 5,323 | | | | 571,318 | |
Arthur J. Gallagher & Co. | | | 9,873 | | | | 644,509 | |
Athene Holding Ltd., Class A(b) | | | 38,464 | | | | 1,686,262 | |
First American Financial Corp. | | | 19,325 | | | | 999,489 | |
Hanover Insurance Group, Inc. (The) | | | 10,468 | | | | 1,251,554 | |
Hartford Financial Services Group, Inc. (The) | | | 20,951 | | | | 1,071,225 | |
Lincoln National Corp. | | | 58,208 | | | | 3,623,448 | |
Prudential Financial, Inc. | | | 28,220 | | | | 2,638,852 | |
Travelers Cos., Inc. (The) | | | 9,310 | | | | 1,138,985 | |
Unum Group | | | 31,661 | | | | 1,171,140 | |
| | | | | | | | |
| | | | | | | 16,670,829 | |
| | | | | | | | |
Security | | Shares | | | Value | |
Internet & Direct Marketing Retail — 2.7%(b) | | | | |
Amazon.com, Inc. | | | 7,235 | | | $ | 12,298,053 | |
Netflix, Inc. | | | 4,375 | | | | 1,712,506 | |
| | | | | | | | |
| | | | | | | 14,010,559 | |
Internet Software & Services — 4.7%(b) | | | | |
Alphabet, Inc., Class A | | | 3,628 | | | | 4,096,701 | |
Alphabet, Inc., Class C | | | 5,961 | | | | 6,650,390 | |
Facebook, Inc., Class A | | | 50,723 | | | | 9,856,493 | |
GoDaddy, Inc., Class A | | | 11,283 | | | | 796,580 | |
New Relic, Inc. | | | 2,772 | | | | 278,836 | |
Twitter, Inc. | | | 33,563 | | | | 1,465,696 | |
Yelp, Inc. | | | 18,986 | | | | 743,871 | |
| | | | | | | | |
| | | | | | | 23,888,567 | |
IT Services — 5.3% | | | | |
Accenture plc, Class A | | | 17,861 | | | | 2,921,881 | |
Automatic Data Processing, Inc. | | | 7,162 | | | | 960,711 | |
Booz Allen Hamilton Holding Corp. | | | 52,685 | | | | 2,303,915 | |
Fidelity National Information Services, Inc. | | | 58,841 | | | | 6,238,911 | |
First Data Corp., Class A(b) | | | 77,752 | | | | 1,627,349 | |
Mastercard, Inc., Class A | | | 46,137 | | | | 9,066,843 | |
Visa, Inc., Class A | | | 27,966 | | | | 3,704,097 | |
| | | | | | | | |
| | | | | | | 26,823,707 | |
Life Sciences Tools & Services — 0.2% | | | | |
Agilent Technologies, Inc. | | | 12,390 | | | | 766,197 | |
Thermo Fisher Scientific, Inc. | | | 2,220 | | | | 459,851 | |
| | | | | | | | |
| | | | | | | 1,226,048 | |
Machinery — 2.3% | | | | |
Illinois Tool Works, Inc. | | | 27,264 | | | | 3,777,155 | |
Ingersoll-Rand plc | | | 26,066 | | | | 2,338,902 | |
PACCAR, Inc. | | | 87,138 | | | | 5,399,070 | |
| | | | | | | | |
| | | | | | | 11,515,127 | |
Media — 1.0% | | | | |
CBS Corp. (Non-Voting), Class B | | | 10,091 | | | | 567,316 | |
Cinemark Holdings, Inc. | | | 2,746 | | | | 96,330 | |
Comcast Corp., Class A | | | 42,486 | | | | 1,393,966 | |
Interpublic Group of Cos., Inc. (The) | | | 74,628 | | | | 1,749,280 | |
John Wiley & Sons, Inc., Class A | | | 18,079 | | | | 1,128,129 | |
| | | | | | | | |
| | | | | | | 4,935,021 | |
Metals & Mining — 0.6% | | | | |
Newmont Mining Corp. | | | 81,001 | | | | 3,054,548 | |
| | | | | | | | |
Multiline Retail — 1.5% | | | | |
Kohl’s Corp. | | | 14,866 | | | | 1,083,732 | |
Target Corp. | | | 83,794 | | | | 6,378,399 | |
| | | | | | | | |
| | | | | | | 7,462,131 | |
Multi-Utilities — 0.8% | | | | |
CenterPoint Energy, Inc. | | | 42,646 | | | | 1,181,721 | |
CMS Energy Corp. | | | 10,886 | | | | 514,690 | |
Consolidated Edison, Inc. | | | 27,734 | | | | 2,162,697 | |
| | | | | | | | |
| | | | | | | 3,859,108 | |
Oil, Gas & Consumable Fuels — 5.1% | | | | |
Anadarko Petroleum Corp. | | | 7,715 | | | | 565,124 | |
Antero Resources Corp.(b) | | | 3,034 | | | | 64,776 | |
Chevron Corp. | | | 33,517 | | | | 4,237,554 | |
ConocoPhillips | | | 107,395 | | | | 7,476,840 | |
EOG Resources, Inc. | | | 20,850 | | | | 2,594,366 | |
Exxon Mobil Corp. | | | 43,620 | | | | 3,608,683 | |
Occidental Petroleum Corp. | | | 30,657 | | | | 2,565,378 | |
Parsley Energy, Inc., Class A(b) | | | 14,186 | | | | 429,552 | |
RSP Permian, Inc.(b) | | | 2,873 | | | | 126,469 | |
Suncor Energy, Inc. | | | 63,552 | | | | 2,585,295 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 5 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Advantage Large Cap Core V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Oil, Gas & Consumable Fuels (continued) | | | | |
Williams Cos., Inc. (The) | | | 64,385 | | | $ | 1,745,477 | |
| | | | | | | | |
| | | | | | | 25,999,514 | |
Personal Products — 0.3% | | | | |
Estee Lauder Cos., Inc. (The), Class A | | | 7,279 | | | | 1,038,640 | |
Herbalife Nutrition Ltd.(b) | | | 9,047 | | | | 486,005 | |
| | | | | | | | |
| | | | | | | 1,524,645 | |
Pharmaceuticals — 4.6% | | | | |
Bristol-Myers Squibb Co. | | | 113,547 | | | | 6,283,691 | |
Eli Lilly & Co. | | | 23,295 | | | | 1,987,762 | |
Johnson��& Johnson | | | 61,388 | | | | 7,448,820 | |
Merck & Co., Inc. | | | 99,143 | | | | 6,017,980 | |
Zoetis, Inc. | | | 22,761 | | | | 1,939,010 | |
| | | | | | | | |
| | | | | | | 23,677,263 | |
Professional Services — 0.4% | | | | |
Insperity, Inc. | | | 6,324 | | | | 602,361 | |
ManpowerGroup, Inc. | | | 16,919 | | | | 1,456,049 | |
| | | | | | | | |
| | | | | | | 2,058,410 | |
Real Estate Management & Development — 0.2% | | | | |
Jones Lang LaSalle, Inc. | | | 5,662 | | | | 939,835 | |
| | | | | | | | |
Road & Rail — 0.9% | | | | |
Landstar System, Inc. | | | 10,449 | | | | 1,141,031 | |
Norfolk Southern Corp. | | | 22,392 | | | | 3,378,281 | |
| | | | | | | | |
| | | | | | | 4,519,312 | |
Semiconductors & Semiconductor Equipment — 4.0% | | | | |
Applied Materials, Inc. | | | 37,705 | | | | 1,741,594 | |
Broadcom, Inc. | | | 7,612 | | | | 1,846,976 | |
Intel Corp. | | | 36,730 | | | | 1,825,848 | |
Maxim Integrated Products, Inc. | | | 99,740 | | | | 5,850,748 | |
NVIDIA Corp.(a) | | | 5,011 | | | | 1,187,106 | |
NXP Semiconductors NV(b) | | | 517 | | | | 56,493 | |
Texas Instruments, Inc. | | | 59,165 | | | | 6,522,941 | |
Xilinx, Inc. | | | 19,451 | | | | 1,269,372 | |
| | | | | | | | |
| | | | | | | 20,301,078 | |
Software — 6.9% | | | | |
Activision Blizzard, Inc. | | | 18,773 | | | | 1,432,755 | |
Adobe Systems, Inc.(b) | | | 10,821 | | | | 2,638,268 | |
Cadence Design Systems, Inc.(b) | | | 9,303 | | | | 402,913 | |
Dell Technologies, Inc., Class V(b) | | | 10,938 | | | | 925,136 | |
Electronic Arts, Inc.(b) | | | 19,689 | | | | 2,776,543 | |
Microsoft Corp. | | | 161,500 | | | | 15,925,515 | |
RingCentral, Inc., Class A(b) | | | 13,858 | | | | 974,910 | |
Synopsys, Inc.(b) | | | 50,702 | | | | 4,338,570 | |
Workday, Inc., Class A(b) | | | 24,241 | | | | 2,936,070 | |
Zendesk, Inc.(b) | | | 49,655 | | | | 2,705,701 | |
| | | | | | | | |
| | | | | | | 35,056,381 | |
Specialty Retail — 1.1% | | | | |
Burlington Stores, Inc.(b) | | | 871 | | | | 131,112 | |
Lithia Motors, Inc., Class A(a) | | | 13,217 | | | | 1,249,932 | |
Penske Automotive Group, Inc.(a) | | | 48,916 | | | | 2,291,714 | |
Tiffany & Co. | | | 16,042 | | | | 2,111,127 | |
| | | | | | | | |
| | | | | | | 5,783,885 | |
Technology Hardware, Storage & Peripherals — 3.0% | | | | |
Apple, Inc. | | | 79,344 | | | | 14,687,368 | |
HP, Inc. | | | 27,979 | | | | 634,843 | |
Western Digital Corp. | | | 2,790 | | | | 215,974 | |
| | | | | | | | |
| | | | | | | 15,538,185 | |
Textiles, Apparel & Luxury Goods — 0.8% | | | | |
Lululemon Athletica, Inc.(b) | | | 4,184 | | | | 522,372 | |
Michael Kors Holdings Ltd.(b) | | | 5,241 | | | | 349,051 | |
| | | | | | | | |
Security | | Shares | | | Value | |
Textiles, Apparel & Luxury Goods (continued) | | | | |
NIKE, Inc., Class B | | | 17,591 | | | $ | 1,401,651 | |
Skechers U.S.A., Inc., Class A(a)(b) | | | 58,923 | | | | 1,768,279 | |
VF Corp. | | | 3,402 | | | | 277,331 | |
| | | | | | | | |
| | | | | | | 4,318,684 | |
Thrifts & Mortgage Finance — 0.0% | | | | |
Essent Group Ltd.(b) | | | 5,303 | | | | 189,954 | |
| | | | | | | | |
Trading Companies & Distributors — 0.3% | | | | |
Watsco, Inc.(a) | | | 8,557 | | | | 1,525,542 | |
| | | | | | | | |
Water Utilities — 0.1% | | | | |
American Water Works Co., Inc. | | | 4,148 | | | | 354,156 | |
| | | | | | | | |
Wireless Telecommunication Services — 0.5% | | | | |
Telephone & Data Systems, Inc. | | | 71,891 | | | | 1,971,251 | |
T-Mobile US, Inc.(b) | | | 5,523 | | | | 330,000 | |
| | | | | | | | |
| | | | | | | 2,301,251 | |
Total Common Stocks — 98.9% (Cost: $475,360,591) | | | | 505,416,687 | |
| | | | | | | | |
Total Long-Term Investments — 98.9% (Cost: $475,360,591) | | | | 505,416,687 | |
| | | | | | | | |
|
Short-Term Securities — 2.1%(c)(e) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.80% | | | 3,935,386 | | | | 3,935,386 | |
SL Liquidity Series, LLC, Money Market Series, 2.16%(d) | | | 6,553,130 | | | | 6,553,786 | |
| | | | | | | | |
Total Short-Term Securities — 2.1% (Cost: $10,488,753) | | | | 10,489,172 | |
| | | | | | | | |
| |
Total Investments — 101.0% (Cost: $485,849,344) | | | | 515,905,859 | |
Liabilities in Excess of Other Assets — (1.0)% | | | | (5,103,567 | ) |
| | | | | | | | |
Net Assets — 100.0% | | | $ | 510,802,292 | |
| | | | | | | | |
(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. |
| | |
6 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Advantage Large Cap Core V.I. Fund |
(e) | During the six months ended June 30, 2018, 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 12/31/17 | | | Net Activity | | | Shares Held at 06/30/18 | | | Value at 06/30/18 | | | Income | | | Net Realized Gain (Loss) (a) | | | Change in Unrealized Appreciation (Depreciation) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class | | | 4,977,061 | | | | (1,041,675 | ) | | | 3,935,386 | | | $ | 3,935,386 | | | $ | 32,767 | | | $ | — | | | $ | — | |
SL Liquidity Series, LLC, Money Market Series | | | 8,447,651 | | | | (1,894,521 | ) | | | 6,553,130 | | | | 6,553,786 | | | | 10,165 | (b) | | | 1,361 | | | | 440 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | 10,489,172 | | | $ | 42,932 | | | $ | 1,361 | | | $ | 440 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 |
| |
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 | | | 40 | | | | 09/21/18 | | | $ | 5,443 | | | $ | (75,883 | ) |
| | | | | | | | | | | | | | | | |
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) | | $ | — | | | $ | — | | | $ | 75,883 | | | $ | — | | | $ | — | | | $ | — | | | $ | 75,883 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | Includes cumulative 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 six months ended June 30, 2018, the effect of derivative financial instruments in the Statement of Operations were 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 | | $ | — | | | $ | — | | | $ | 249,061 | | | $ | — | | | $ | — | | | $ | — | | | $ | 249,061 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Change in Unrealized Appreciation (Depreciation) on: | | | | | | | | | | | | | | | | | | | | | |
Futures contracts | | $ | — | | | $ | — | | | $ | (111,609 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | (111,609 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 7 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Advantage Large Cap Core V.I. Fund |
Average Quarterly Balances of Outstanding Derivative Financial Instruments
| | | | |
Futures contracts: | | | | |
Average notional value of contracts — long | | $ | 5,496,750 | |
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 table 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(a) | | $ | 505,416,687 | | | $ | — | | | $ | — | | | $ | 505,416,687 | |
Short-Term Securities | | | 3,935,386 | | | | — | | | | — | | | | 3,935,386 | |
| | | | | | | | | | | | | | | | |
| | $ | 509,352,073 | | | $ | — | | | $ | — | | | $ | 509,352,073 | |
| | | | | | | | | | | | | | | | |
Investments valued at NAV(b) | | | | | | | | | | | | | | | 6,553,786 | |
| | | | | | | | | | | | | | | | |
Total Investments | | | | | | | | | | | | | | $ | 515,905,859 | |
| | | | | | | | | | | | | | | | |
Derivative Financial Instruments(c) | | | | | | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | | | | |
Equity contracts | | $ | (75,883 | ) | | $ | — | | | $ | — | | | $ | (75,883 | ) |
| | | | | | | | | | | | | | | | |
| (a) | See above Schedule of Investments for values in each industry. | |
| (b) | As of June 30, 2018, 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 six months ended June 30, 2018, there were no transfers between levels.
See notes to financial statements.
| | |
8 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statement of Assets and Liabilities (unaudited)
June 30, 2018
| | | | |
| | BlackRock Advantage Large Cap Core V.I. Fund | |
| |
ASSETS | | | | |
Investments at value — unaffiliated (including securities loaned at value of $6,313,278) (cost — $475,360,591) | | $ | 505,416,687 | |
Investments at value — affiliated (cost — $10,488,753) | | | 10,489,172 | |
Cash pledged for futures contracts | | | 223,000 | |
Receivables: | | | | |
Investments sold | | | 6,376,283 | |
Securities lending income — affiliated | | | 2,199 | |
Capital shares sold | | | 535,320 | |
Dividends — affiliated | | | 6,316 | |
Dividends — unaffiliated | | | 341,927 | |
Prepaid expenses | | | 1,168 | |
| | | | |
Total assets | | | 523,392,072 | |
| | | | |
| |
LIABILITIES | | | | |
Bank overdraft | | | 12,726 | |
Cash collateral on securities loaned at value | | | 6,552,778 | |
Payables: | | | | |
Investments purchased | | | 5,360,801 | |
Capital shares redeemed | | | 80,903 | |
Distribution fees | | | 69,626 | |
Board realignment and consolidation | | | 13,721 | |
Investment advisory fees | | | 241,029 | |
Directors’ and Officer’s fees | | | 3,166 | |
Other affiliates | | | 1,098 | |
Other accrued expenses | | | 253,932 | |
| | | | |
Total liabilities | | | 12,589,780 | |
| | | | |
| |
NET ASSETS | | $ | 510,802,292 | |
| | | | |
| |
NET ASSETS CONSIST OF | | | | |
Paid-in capital | | $ | 428,864,252 | |
Undistributed net investment income | | | 3,157,853 | |
Accumulated net realized gain | | | 48,799,372 | |
Net unrealized appreciation (depreciation) | | | 29,980,815 | |
| | | | |
NET ASSETS | | $ | 510,802,292 | |
| | | | |
| |
NET ASSET VALUE | | | | |
Class I — Based on net assets of $176,904,545 and 5,999,671 shares outstanding, 200 million shares authorized, $0.10 par value | | $ | 29.49 | |
| | | | |
Class II — Based on net assets of $4,962,406 and 168,301 shares outstanding, 100 million shares authorized, $0.10 par value | | $ | 29.49 | |
| | | | |
Class III — Based on net assets of $328,935,341 and 11,258,316 shares outstanding, 100 million shares authorized, $0.10 par value | | $ | 29.22 | |
| | | | |
See notes to financial statements.
Statement of Operations (unaudited)
Six Months Ended June 30, 2018
| | | | |
| | BlackRock Advantage Large Cap Core V.I. Fund | |
| |
INVESTMENT INCOME | | | | |
Dividends — affiliated | | $ | 32,767 | |
Dividends — unaffiliated(a) | | | 5,071,571 | |
Securities lending income — affiliated — net | | | 10,165 | |
Foreign taxes withheld | | | (5,236 | ) |
| | | | |
Total investment income | | | 5,109,267 | |
| | | | |
| |
EXPENSES | | | | |
Investment advisory | | | 1,193,991 | |
Transfer agent — class specific | | | 532,908 | |
Distribution — class specific | | | 422,009 | |
Professional | | | 36,360 | |
Accounting services | | | 34,979 | |
Printing | | | 34,614 | |
Custodian | | | 21,910 | |
Board realignment and consolidation | | | 13,721 | |
Directors and Officer | | | 11,120 | |
Transfer agent | | | 2,480 | |
Miscellaneous | | | 37,158 | |
| | | | |
Total expenses | | | 2,341,250 | |
Less: | | | | |
Fees waived and/or reimbursed by the Manager | | | (2,067 | ) |
Transfer agent fees waived and/or reimbursed — class specific | | | (351,564 | ) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 1,987,619 | |
| | | | |
Net investment income | | | 3,121,648 | |
| | | | |
| |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain from: | | | | |
Investments — affiliated | | | 1,361 | |
Investments — unaffiliated | | | 39,677,885 | |
Futures contracts | | | 249,061 | |
| | | | |
| | | 39,928,307 | |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | |
Investments — affiliated | | | 440 | |
Investments — unaffiliated | | | (23,819,157 | ) |
Foreign currency translations | | | (428 | ) |
Futures contracts | | | (111,609 | ) |
| | | | |
| | | (23,930,754 | ) |
| | | | |
Net realized and unrealized gain | | | 15,997,553 | |
| | | | |
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 19,119,201 | |
| | | | |
(a) | Includes non-recurring dividends in the amount of $300,804. |
See notes to financial statements.
| | |
10 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statements of Changes in Net Assets
| | | | | | | | |
| | BlackRock Advantage Large Cap Core V.I. Fund | |
| | Six Months Ended 06/30/2018 (unaudited) | | | Year Ended 12/31/2017 | |
| | |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | |
| | |
OPERATIONS | | | | | | | | |
Net investment income | | $ | 3,121,648 | | | $ | 5,600,747 | |
Net realized gain | | | 39,928,307 | | | | 142,044,998 | |
Net change in unrealized appreciation (depreciation) | | | (23,930,754 | ) | | | (44,362,526 | ) |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 19,119,201 | | | | 103,283,219 | |
| | | | | | | | |
| | |
DISTRIBUTIONS TO SHAREHOLDERS(a) | | | | | | | | |
From net investment income: | | | | | | | | |
Class I | | | — | | | | (2,307,598 | ) |
Class II | | | — | | | | (51,894 | ) |
Class III | | | — | | | | (3,340,143 | ) |
From net realized gain: | | | | | | | | |
Class I | | | — | | | | (49,237,913 | ) |
Class II | | | — | | | | (1,276,586 | ) |
Class III | | | — | | | | (91,053,975 | ) |
| | | | | | | | |
Decrease in net assets resulting from distributions to shareholders | | | — | | | | (147,268,109 | ) |
| | | | | | | | |
| | |
CAPITAL SHARE TRANSACTIONS | | | | | | | | |
Net increase (decrease) in net assets derived from capital share transactions | | | (40,746,451 | ) | | | 67,256,971 | |
| | | | | | | | |
| | |
NET ASSETS | | | | | | | | |
Total increase (decrease) in net assets | | | (21,627,250 | ) | | | 23,272,081 | |
Beginning of period | | | 532,429,542 | | | | 509,157,461 | |
| | | | | | | | |
End of period | | $ | 510,802,292 | | | $ | 532,429,542 | |
| | | | | | | | |
Undistributed net investment income, end of period | | $ | 3,157,853 | | | $ | 36,205 | |
| | | | | | | | |
(a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
Financial Highlights
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Advantage Large Cap Core V.I. Fund | |
| | Class I | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 28.45 | | | | | | | $ | 31.91 | | | $ | 31.40 | | | $ | 33.26 | | | $ | 33.80 | | | $ | 25.55 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.20 | (b) | | | | | | | 0.44 | | | | 0.39 | | | | 0.36 | | | | 0.34 | | | | 0.30 | |
Net realized and unrealized gain (loss) | | | 0.84 | | | | | | | | 6.64 | | | | 2.91 | | | | (0.16 | ) | | | 3.86 | | | | 8.27 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase from investment operations | | | 1.04 | | | | | | | | 7.08 | | | | 3.30 | | | | 0.20 | | | | 4.20 | | | | 8.57 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions(c) | | | | | | | | | | | | | | | | | | | | | |
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 period | | $ | 29.49 | | | | | | | $ | 28.45 | | | $ | 31.91 | | | $ | 31.40 | | | $ | 33.26 | | | $ | 33.80 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(d) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 3.66 | %(e) | | | | | | | 22.33 | % | | | 10.55 | % | | | 0.52 | % | | | 12.36 | % | | | 33.56 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 0.74 | %(f) | | | | | | | 0.73 | % | | | 0.72 | % | | | 0.71 | % | | | 0.73 | % | | | 0.73 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.58 | %(f) | | | | | | | 0.58 | % | | | 0.58 | % | | | 0.56 | % | | | 0.57 | % | | | 0.58 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.38 | %(b)(f) | | | | | | | 1.27 | % | | | 1.26 | % | | | 1.08 | % | | | 0.97 | % | | | 1.03 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 176,905 | | | | | | | $ | 185,938 | | | $ | 175,947 | | | $ | 184,151 | | | $ | 212,067 | | | $ | 219,418 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 72 | % | | | | | | | 149 | % | | | 50 | % | | | 31 | % | | | 48 | % | | | 42 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) | Based on average shares outstanding. |
(b) | Net investment income per share and the ratio of net investment income to average net assets includes $0.02 per share and 0.12%, respectively, resulting from a special dividend. |
(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. |
See notes to financial statements.
| | |
12 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Advantage Large Cap Core V.I. Fund (continued) | |
| | Class II | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 28.47 | | | | | | | $ | 31.93 | | | $ | 31.42 | | | $ | 33.27 | | | $ | 33.79 | | | $ | 25.56 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.18 | (b) | | | | | | | 0.38 | | | | 0.34 | | | | 0.30 | | | | 0.28 | | | | 0.25 | |
Net realized and unrealized gain (loss) | | | 0.84 | | | | | | | | 6.64 | | | | 2.90 | | | | (0.16 | ) | | | 3.87 | | | | 8.25 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase from investment operations | | | 1.02 | | | | | | | | 7.02 | | | | 3.24 | | | | 0.14 | | | | 4.15 | | | | 8.50 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions(c) | | | | | | | | | | | | | | | | | | | | | |
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 period | | $ | 29.49 | | | | | | | $ | 28.47 | | | $ | 31.93 | | | $ | 31.42 | | | $ | 33.27 | | | $ | 33.79 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(d) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 3.58 | %(e) | | | | | | | 22.12 | % | | | 10.37 | % | | | 0.34 | % | | | 12.23 | % | | | 33.28 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 0.89 | %(f) | | | | | | | 0.88 | % | | | 0.88 | % | | | 0.85 | % | | | 0.89 | % | | | 0.86 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.75 | %(f) | | | | | | | 0.75 | % | | | 0.75 | % | | | 0.73 | % | | | 0.74 | % | | | 0.75 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.21 | %(b)(f) | | | | | | | 1.08 | % | | | 1.09 | % | | | 0.91 | % | | | 0.81 | % | | | 0.86 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 4,962 | | | | | | | $ | 4,862 | | | $ | 5,170 | | | $ | 5,333 | | | $ | 6,203 | | | $ | 6,080 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 72 | % | | | | | | | 149 | % | | | 50 | % | | | 31 | % | | | 48 | % | | | 42 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) | Based on average shares outstanding. |
(b) | Net investment income per share and the ratio of net investment income to average net assets includes $0.02 per share and 0.11%, respectively, resulting from a special dividend. |
(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. |
See notes to financial statements.
Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Advantage Large Cap Core V.I. Fund (continued) | |
| | Class III | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 28.23 | | | | | | | $ | 31.74 | | | $ | 31.25 | | | $ | 33.11 | | | $ | 33.66 | | | $ | 25.46 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.16 | (b) | | | | | | | 0.34 | | | | 0.31 | | | | 0.27 | | | | 0.24 | | | | 0.22 | |
Net realized and unrealized gain (loss) | | | 0.83 | | | | | | | | 6.59 | | | | 2.88 | | | | (0.17 | ) | | | 3.84 | | | | 8.22 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase from investment operations | | | 0.99 | | | | | | | | 6.93 | | | | 3.19 | | | | 0.10 | | | | 4.08 | | | | 8.44 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions(c) | | | | | | | | | | | | | | | | | | | | | |
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 period | | $ | 29.22 | | | | | | | $ | 28.23 | | | $ | 31.74 | | | $ | 31.25 | | | $ | 33.11 | | | $ | 33.66 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(d) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 3.51 | %(e) | | | | | | | 21.97 | % | | | 10.26 | % | | | 0.23 | % | | | 12.07 | % | | | 33.16 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 0.98 | %(f) | | | | | | | 0.99 | % | | | 0.97 | % | | | 0.96 | % | | | 0.98 | % | | | 0.99 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.86 | %(f) | | | | | | | 0.86 | % | | | 0.86 | % | | | 0.84 | % | | | 0.85 | % | | | 0.86 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.09 | %(b)(f) | | | | | | | 0.98 | % | | | 0.98 | % | | | 0.80 | % | | | 0.69 | % | | | 0.75 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 328,935 | | | | | | | $ | 341,630 | | | $ | 328,040 | | | $ | 306,567 | | | $ | 322,418 | | | $ | 300,005 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 72 | % | | | | | | | 149 | % | | | 50 | % | | | 31 | % | | | 48 | % | | | 42 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) | Based on average shares outstanding. |
(b) | Net investment income per share and the ratio of net investment income to average net assets includes $0.02 per share and 0.11%, respectively, resulting from a special dividend. |
(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. |
See notes to financial statements.
| | |
14 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited)
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 19 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:
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.
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. 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 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 (unaudited) (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 June 30, 2018, 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.
| | |
16 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (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. | | $ | 3,380,391 | | | $ | (3,380,391 | ) | | $ | — | |
Credit Suisse Securities (USA) LLC | | | 753,766 | | | | (753,766 | ) | | | — | |
Deutsche Bank Securities Inc. | | | 55,287 | | | | (55,287 | ) | | | — | |
JP Morgan Securities LLC | | | 2,123,834 | | | | (2,123,834 | ) | | | — | |
| | | | | | | | | | | | |
| | $ | 6,313,278 | | | $ | (6,313,278 | ) | | $ | — | |
| | | | | | | | | | | | |
| (a) | Cash collateral with a value of $6,552,778 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) and 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. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts on the Statement of Assets and Liabilities.
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 (unaudited) (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 six months ended June 30, 2018, 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 | | $ | 3,702 | | | $ | 418,307 | | | $ | 422,009 | |
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 six months ended June 30, 2018, 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 six months ended June 30, 2018, 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 | |
$ | 195,046 | | | | | $ | 5,247 | | | | | $ | 332,615 | | | | | $ | 532,908 | |
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 described below 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 six months ended June 30, 2018, the amount waived was $2,067.
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 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 six months ended June 30, 2018, there were no fees waived by the Manager.
For the six months ended June 30, 2018, the Fund reimbursed the Manager $2,967 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 waived and/or reimbursed — class specific in the Statement of Operations. For the six months ended June 30, 2018, class specific expense waivers and/or reimbursements were as follows:
| | | | | | | | | | | | | | | | |
| | Class I | | | Class II | | | Class III | | | Total | |
Transfer agent fees waived and/or reimbursed | | $ | 149,289 | | | $ | 3,519 | | | $ | 198,756 | | | $ | 351,564 | |
| | |
18 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (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 | |
| 1.25% | | | | | | 1.40% | | | | | | 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 the outstanding voting securities of the Fund. For the six months ended June 30, 2018, 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 six months ended June 30, 2018, the Fund paid BIM $1,684 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 period ended June 30, 2018, the Fund did not participate in the Interfund Lending Program.
Directors and Officers: 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.
For the six months ended June 30, 2018, purchases and sales of investments, excluding short-term securities, were $376,141,045 and $413,399,905, respectively.
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 June 30, 2018, 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.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 19 | |
Notes to Financial Statements (unaudited) (continued)
As of June 30, 2018, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
| | | | |
Tax cost | | $ | 487,428,651 | |
| | | | |
Gross unrealized appreciation | | $ | 44,237,257 | |
Gross unrealized depreciation | | | (15,835,932 | ) |
| | | | |
Net unrealized appreciation (depreciation) | | $ | 28,401,325 | |
| | | | |
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Although the Act does not amend any provisions directly related to the qualification or taxation of regulated investment companies (“RICs”), the Act does change the taxation of entities in which some RICs invest, the tax treatment of income derived from those entities and the taxation of RIC shareholders. While management does not anticipate significant impact to the Fund or to its shareholders, there is uncertainty in the application of certain provisions in the Act. Specifically, provisions in the Act may increase the amount of or accelerate the recognition of taxable income and may limit the deductibility of certain expenses by RICs. Until full clarity around these provisions is obtained, the impact on the Fund’s financial statements, if any, cannot be fully determined.
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, $2.25 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 $1.75 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 0.10% 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 2019 unless extended or renewed. Prior to April 19, 2018, the aggregate commitment amount was $2.1 billion and the fee was 0.12% per annum. Participating Funds paid an upfront commitment fee of 0.02% on the total commitment amounts, in addition to administration, legal and arrangement fees, which 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 six months ended June 30, 2018, the Fund did not borrow under the credit agreement.
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.
| | |
20 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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:
| | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 | | | Year Ended 12/31/2017 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
Class I | | | | | | | | | | | | | | | | |
Shares sold | | | 32,306 | | | $ | 958,666 | | | | 53,694 | | | $ | 1,884,794 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 1,784,901 | | | | 51,545,512 | |
Shares redeemed | | | (569,095 | ) | | | (16,740,603 | ) | | | (815,802 | ) | | | (28,296,841 | ) |
| | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (536,789 | ) | | $ | (15,781,937 | ) | | | 1,022,793 | | | $ | 25,133,465 | |
| | | | | | | | | | | | | | | | |
| | | | |
Class II | | | | | | | | | | | | | | | | |
Shares sold | | | 22,374 | | | $ | 659,839 | | | | 17,194 | | | $ | 592,585 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 45,977 | | | | 1,328,480 | |
Shares redeemed | | | (24,838 | ) | | | (740,892 | ) | | | (54,296 | ) | | | (1,841,122 | ) |
| | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (2,464 | ) | | $ | (81,053 | ) | | | 8,875 | | | $ | 79,943 | |
| | | | | | | | | | | | | | | | |
| | | | |
Class III | | | | | | | | | | | | | | | | |
Shares sold | | | 197,305 | | | $ | 5,713,023 | | | | 117,007 | | | $ | 4,065,534 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 3,293,938 | | | | 94,394,117 | |
Shares redeemed | | | (1,042,275 | ) | | | (30,596,484 | ) | | | (1,644,501 | ) | | | (56,416,088 | ) |
| | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (844,970 | ) | | $ | (24,883,461 | ) | | | 1,766,444 | | | $ | 42,043,563 | |
| | | | | | | | | | | | | | | | |
Total Net Increase (Decrease) | | | (1,384,223 | ) | | $ | (40,746,451 | ) | | | 2,798,112 | | | $ | 67,256,971 | |
| | | | | | | | | | | | | | | | |
Management’s evaluation of the impact of all subsequent events on the Fund’s financial statements was completed through the date the financial statements were issued and the following items were noted:
The Fund paid net investment income, short-term capital gain and long-term capital gain distributions in the following amounts per share on July 20, 2018 to the shareholders of record on July 18, 2018.
| | | | | | | | | | | | |
| | Net Investment Income | | | Short-Term Capital Gain | | | Long-Term Capital Gain | |
Class I | | $ | 0.000691 | | | $ | 0.306031 | | | $ | 0.300273 | |
Class II | | | 0.000691 | | | | 0.306031 | | | | 0.300273 | |
Class III | | | 0.000691 | | | | 0.306031 | | | | 0.300273 | |
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 21 | |
JUNE 30, 2018
| | |
SEMI-ANNUAL REPORT (UNAUDITED) | | |
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 June 30, 2018 | | 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.
Portfolio Management Commentary
How did the Fund perform?
For the six-month period ended June 30, 2018, the Fund outperformed its benchmark, the Russell 1000® Value Index.
What factors influenced performance?
The Fund’s stock selection insights that seek to capture sentiment and trends across informed market participants were broadly rewarded. Specifically, an insight that captures sentiment from bond markets contributed to performance as the Fed raised rates during the period. Additionally, our proprietary text-based analysis of executive statements to capture longer-term trends in company fundamentals and analysis of sell-side analyst reports drove gains. Overall fundamental stock selection insights, specifically those that identify quality measures, performed well amid a rise in volatility. Notably, a balance sheet-driven metric that identifies productivity and company efficiency and an insight that identifies stocks with the ability to generate consistent free cash flow drove gains. Additionally, a signal that identifies consistent dividend growth proved beneficial to performance.
Fundamental insights that identify attractive valuations struggled during the period. This has coincided with the value style continuing to lag the market in the prolonged growth regime. Notably, signals that compare companies across top-line sales, earnings and cash flows underperformed during the period. Elsewhere, a macro thematic insight that evaluates sector sensitivity to China detracted as emerging markets were under pressure during the period. Additionally, signals that measure stock performance based on online job postings detracted from performance. Further, insights that seek to capture trends across consumer activity, such as foot traffic in brick-and-mortar retail locations, weighed on results.
Describe recent portfolio activity.
Over the course of the period, the portfolio maintained a balanced allocation of risk across all major return drivers. However, a number of new stock selection insights were added to the portfolio. A model that evaluates companies on the basis of governance and the ethics and sustainability of its business practices from a social and environmental perspective was added to the Fund’s bucket of quality signals. A new macro thematic model that evaluates industries across various inputs such as labor costs and hiring activity was also added.
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 industrials and health care and slight underweight positions in energy and telecommunication services.
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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Fund Summary as of June 30, 2018 (continued) | | BlackRock Advantage Large Cap Value V.I. Fund |
Performance Summary for the Period Ended June 30, 2018
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 6-Month Total Return (c) | | | | | | Average Annual Total Returns | |
| | | | | 1 Year (c) | | | 5 Years (c) | | | | | | 10 Years (c) | |
Class I(a)(b) | | | (0.66 | )% | | | | | | | 9.72 | % | | | 11.22 | % | | | | | | | 6.76 | % |
Class II(a)(b) | | | (0.75 | ) | | | | | | | 9.56 | | | | 11.01 | | | | | | | | 6.57 | |
Class III(a)(b) | | | (0.86 | ) | | | | | | | 9.34 | | | | 10.81 | | | | | | | | 6.37 | (d) |
Russell 1000® Value Index(e) | | | (1.69 | ) | | | | | | | 6.77 | | | | 10.34 | | | | | | | | 8.49 | |
| (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. | |
| (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 returns prior to June 12, 2017 are the returns of the Fund when it followed different investment strategies under the name “BlackRock Large Cap Value V.I. Fund”. | |
| (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 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. | |
| (e) | 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. | |
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 (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | | | | Beginning Account Value (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | Annualized Expense Ratio | |
Class I | | $ | 1,000.00 | | | $ | 993.40 | | | $ | 2.97 | | | | | | | $ | 1,000.00 | | | $ | 1,021.82 | | | $ | 3.01 | | | | 0.60 | % |
Class II | | | 1,000.00 | | | | 992.50 | | | | 3.71 | | | | | | | | 1,000.00 | | | | 1,021.08 | | | | 3.76 | | | | 0.75 | |
Class III | | | 1,000.00 | | | | 991.40 | | | | 4.20 | | | | | | | | 1,000.00 | | | | 1,020.58 | | | | 4.26 | | | | 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 annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 181/365 (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 as of June 30, 2018 (continued) | | BlackRock Advantage Large Cap Value V.I. Fund |
Portfolio Information
SECTOR ALLOCATION
| | | | |
Sector | | Percent of Net Assets | |
Financials | | | 24 | % |
Health Care | | | 14 | |
Energy | | | 11 | |
Information Technology | | | 9 | |
Consumer Discretionary | | | 9 | |
Industrials | | | 8 | |
Consumer Staples | | | 7 | |
Utilities | | | 5 | |
Real Estate | | | 5 | |
Materials | | | 4 | |
Telecommunication Services | | | 3 | |
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 January 1, 2018 and held through June 30, 2018) 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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) June 30, 2018 | | BlackRock Advantage Large Cap Value V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Common Stocks — 99.1% | |
|
Aerospace & Defense — 1.1% | |
Curtiss-Wright Corp. | | | 240 | | | $ | 28,565 | |
Harris Corp. | | | 161 | | | | 23,271 | |
Lockheed Martin Corp. | | | 771 | | | | 227,776 | |
Raytheon Co. | | | 4,534 | | | | 875,878 | |
| | | | | | | | |
| | | | | | | 1,155,490 | |
Airlines — 0.3% | |
Delta Air Lines, Inc. | | | 6,863 | | | | 339,993 | |
| | | | | | | | |
Auto Components — 0.9% | |
BorgWarner, Inc. | | | 21,722 | | | | 937,521 | |
| | | | | | | | |
Banks — 10.8% | |
Bank of America Corp. | | | 87,127 | | | | 2,456,110 | |
Citigroup, Inc. | | | 36,553 | | | | 2,446,127 | |
Citizens Financial Group, Inc. | | | 16,533 | | | | 643,134 | |
First Hawaiian, Inc. | | | 27,124 | | | | 787,139 | |
First Horizon National Corp. | | | 21,669 | | | | 386,575 | |
First Republic Bank | | | 3,296 | | | | 319,020 | |
JPMorgan Chase & Co. | | | 22,373 | | | | 2,331,267 | |
SunTrust Banks, Inc. | | | 3,918 | | | | 258,666 | |
Synovus Financial Corp. | | | 12,922 | | | | 682,669 | |
Wells Fargo & Co. | | | 13,367 | | | | 741,066 | |
| | | | | | | | |
| | | | | | | 11,051,773 | |
Beverages — 0.8% | |
Coca-Cola European Partners plc | | | 7,601 | | | | 308,905 | |
PepsiCo, Inc. | | | 5,088 | | | | 553,930 | |
| | | | | | | | |
| | | | | | | 862,835 | |
Biotechnology — 2.4% | |
AbbVie, Inc. | | | 115 | | | | 10,655 | |
Amgen, Inc. | | | 459 | | | | 84,727 | |
Celgene Corp.(a) | | | 10,925 | | | | 867,663 | |
Gilead Sciences, Inc. | | | 18,300 | | | | 1,296,372 | |
United Therapeutics Corp.(a) | | | 1,665 | | | | 188,395 | |
| | | | | | | | |
| | | | | | | 2,447,812 | |
Building Products — 1.1% | |
Fortune Brands Home & Security, Inc. | | | 19,057 | | | | 1,023,170 | |
Owens Corning | | | 1,903 | | | | 120,593 | |
| | | | | | | | |
| | | | | | | 1,143,763 | |
Capital Markets — 4.7% | |
Affiliated Managers Group, Inc. | | | 1,648 | | | | 245,008 | |
Franklin Resources, Inc. | | | 19,649 | | | | 629,750 | |
Intercontinental Exchange, Inc. | | | 17,160 | | | | 1,262,118 | |
Invesco Ltd. | | | 28,301 | | | | 751,675 | |
Jefferies Financial Services, Inc. | | | 2,216 | | | | 50,392 | |
Moelis & Co., Class A | | | 9,072 | | | | 532,073 | |
Morgan Stanley | | | 24,242 | | | | 1,149,071 | |
S&P Global, Inc.(b) | | | 689 | | | | 140,480 | |
| | | | | | | | |
| | | | | | | 4,760,567 | |
Chemicals — 2.3% | |
Air Products & Chemicals, Inc. | | | 8,661 | | | | 1,348,778 | |
Celanese Corp. | | | 948 | | | | 105,285 | |
DowDuPont, Inc. | | | 914 | | | | 60,251 | |
Eastman Chemical Co. | | | 4,389 | | | | 438,724 | |
International Flavors & Fragrances, Inc. | | | 1,101 | | | | 136,480 | |
WR Grace & Co. | | | 3,364 | | | | 246,615 | |
| | | | | | | | |
| | | | | | | 2,336,133 | |
Commercial Services & Supplies — 0.4% | |
Republic Services, Inc. | | | 5,810 | | | | 397,172 | |
| | | | | | | | |
| | | | | | | | |
Security | | Shares | | | Value | |
Communications Equipment — 1.9% | |
Cisco Systems, Inc. | | | 36,137 | | | $ | 1,554,975 | |
Motorola Solutions, Inc. | | | 3,521 | | | | 409,739 | |
| | | | | | | | |
| | | | | | | 1,964,714 | |
Consumer Finance — 0.7% | |
American Express Co. | | | 4,803 | | | | 470,694 | |
Capital One Financial Corp. | | | 2,689 | | | | 247,119 | |
| | | | | | | | |
| | | | | | | 717,813 | |
Containers & Packaging — 0.3% | |
Packaging Corp. of America | | | 3,014 | | | | 336,935 | |
| | | | | | | | |
Diversified Consumer Services — 0.5% | |
H&R Block, Inc.(b) | | | 20,852 | | | | 475,009 | |
| | | | | | | | |
Diversified Financial Services — 2.2% | |
Berkshire Hathaway, Inc., Class B(a) | | | 12,068 | | | | 2,252,492 | |
| | | | | | | | |
Diversified Telecommunication Services — 2.3% | |
AT&T, Inc. | | | 57,168 | | | | 1,835,665 | |
Verizon Communications, Inc. | | | 10,855 | | | | 546,115 | |
Zayo Group Holdings, Inc.(a) | | | 359 | | | | 13,096 | |
| | | | | | | | |
| | | | | | | 2,394,876 | |
Electric Utilities — 2.6% | |
Alliant Energy Corp.(b) | | | 2,683 | | | | 113,545 | |
Eversource Energy | | | 8,223 | | | | 481,950 | |
IDACORP, Inc. | | | 4,337 | | | | 400,045 | |
Pinnacle West Capital Corp. | | | 14,856 | | | | 1,196,799 | |
Portland General Electric Co. | | | 11,687 | | | | 499,736 | |
| | | | | | | | |
| | | | | | | 2,692,075 | |
Electrical Equipment — 1.1% | |
AMETEK, Inc. | | | 13,784 | | | | 994,653 | |
Eaton Corp. plc | | | 2,285 | | | | 170,781 | |
| | | | | | | | |
| | | | | | | 1,165,434 | |
Electronic Equipment, Instruments & Components — 0.4% | |
Arrow Electronics, Inc.(a) | | | 4,021 | | | | 302,701 | |
SYNNEX Corp. | | | 218 | | | | 21,039 | |
TE Connectivity Ltd. | | | 458 | | | | 41,248 | |
| | | | | | | | |
| | | | | | | 364,988 | |
Energy Equipment & Services — 0.7% | |
Apergy Corp.(a) | | | 2,910 | | | | 121,492 | |
Halliburton Co. | | | 8,611 | | | | 388,012 | |
Patterson-UTI Energy, Inc. | | | 767 | | | | 13,806 | |
TechnipFMC plc | | | 6,225 | | | | 197,582 | |
| | | | | | | | |
| | | | | | | 720,892 | |
Equity Real Estate Investment Trusts (REITs) — 5.0% | |
Alexandria Real Estate Equities, Inc. | | | 5,522 | | | | 696,711 | |
American Campus Communities, Inc. | | | 487 | | | | 20,883 | |
Boston Properties, Inc. | | | 335 | | | | 42,016 | |
Highwoods Properties, Inc. | | | 18,970 | | | | 962,348 | |
Host Hotels & Resorts, Inc. | | | 7,551 | | | | 159,100 | |
National Retail Properties, Inc. | | | 8,946 | | | | 393,266 | |
Outfront Media, Inc. | | | 11,406 | | | | 221,847 | |
Prologis, Inc. | | | 21,721 | | | | 1,426,852 | |
Realty Income Corp. | | | 6,419 | | | | 345,278 | |
Simon Property Group, Inc. | | | 4,808 | | | | 818,273 | |
| | | | | | | | |
| | | | | | | 5,086,574 | |
Food & Staples Retailing — 1.9% | |
Walmart, Inc. | | | 23,265 | | | | 1,992,647 | |
| | | | | | | | |
Food Products — 3.1% | |
Archer-Daniels-Midland Co.(b) | | | 28,556 | | | | 1,308,721 | |
Bunge Ltd. | | | 10,724 | | | | 747,570 | |
Hershey Co. (The) | | | 2,122 | | | | 197,473 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 5 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Advantage Large Cap Value V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Food Products (continued) | |
Kellogg Co. | | | 9,956 | | | $ | 695,626 | |
Pilgrim’s Pride Corp.(a) | | | 9,091 | | | | 183,002 | |
| | | | | | | | |
| | | | | | | 3,132,392 | |
Gas Utilities — 0.4% | |
UGI Corp. | | | 8,026 | | | | 417,914 | |
| | | | | | | | |
Health Care Equipment & Supplies — 2.5% | |
Abbott Laboratories | | | 17,789 | | | | 1,084,951 | |
Danaher Corp. | | | 4,070 | | | | 401,627 | |
Medtronic plc | | | 10,767 | | | | 921,763 | |
Stryker Corp. | | | 1,030 | | | | 173,926 | |
| | | | | | | | |
| | | | | | | 2,582,267 | |
Health Care Providers & Services — 2.6% | |
Aetna, Inc. | | | 1,590 | | | | 291,765 | |
AmerisourceBergen Corp. | | | 3,290 | | | | 280,538 | |
Express Scripts Holding Co.(a) | | | 4,014 | | | | 309,921 | |
Humana, Inc. | | | 3,812 | | | | 1,134,566 | |
McKesson Corp. | | | 3,503 | | | | 467,300 | |
Quest Diagnostics, Inc. | | | 1,475 | | | | 162,161 | |
| | | | | | | | |
| | | | | | | 2,646,251 | |
Health Care Technology — 0.0% | |
Veeva Systems, Inc., Class A(a) | | | 292 | | | | 22,443 | |
| | | | | | | | |
Hotels, Restaurants & Leisure — 3.2% | |
Carnival Corp. | | | 16,203 | | | | 928,594 | |
Darden Restaurants, Inc. | | | 4,268 | | | | 456,932 | |
Domino’s Pizza, Inc. | | | 1,214 | | | | 342,554 | |
Las Vegas Sands Corp. | | | 6,592 | | | | 503,365 | |
McDonald’s Corp. | | | 6,672 | | | | 1,045,436 | |
| | | | | | | | |
| | | | | | | 3,276,881 | |
Household Durables — 0.4% | |
Garmin Ltd. | | | 2,836 | | | | 172,996 | |
Whirlpool Corp. | | | 1,371 | | | | 200,481 | |
| | | | | | | | |
| | | | | | | 373,477 | |
Household Products — 1.0% | |
Church & Dwight Co., Inc. | | | 3,205 | | | | 170,378 | |
Colgate-Palmolive Co. | | | 964 | | | | 62,477 | |
Kimberly-Clark Corp. | | | 2,300 | | | | 242,282 | |
Procter & Gamble Co. (The) | | | 7,212 | | | | 562,968 | |
| | | | | | | | |
| | | | | | | 1,038,105 | |
Industrial Conglomerates — 1.3% | | | | | | |
3M Co. | | | 2,513 | | | | 494,358 | |
Honeywell International, Inc. | | | 5,564 | | | | 801,494 | |
| | | | | | | | |
| | | | | | | 1,295,852 | |
Insurance — 5.1% | |
Allstate Corp. (The) | | | 6,884 | | | | 628,303 | |
American Financial Group, Inc. | | | 2,079 | | | | 223,139 | |
Athene Holding Ltd., Class A(a) | | | 7,015 | | | | 307,538 | |
First American Financial Corp. | | | 9,136 | | | | 472,514 | |
Hanover Insurance Group, Inc. (The) | | | 3,467 | | | | 414,514 | |
Hartford Financial Services Group, Inc. (The) | | | 6,947 | | | | 355,200 | |
Lincoln National Corp. | | | 15,533 | | | | 966,929 | |
Principal Financial Group, Inc. | | | 1,967 | | | | 104,153 | |
Prudential Financial, Inc. | | | 9,218 | | | | 861,975 | |
Travelers Cos., Inc. (The) | | | 3,841 | | | | 469,908 | |
Unum Group | | | 10,807 | | | | 399,751 | |
Validus Holdings Ltd. | | | 519 | | | | 35,084 | |
| | | | | | | | |
| | | | | | | 5,239,008 | |
Internet Software & Services — 0.2%(a) | |
Twitter, Inc. | | | 1,596 | | | | 69,697 | |
Yelp, Inc. | | | 2,900 | | | | 113,622 | |
| | | | | | | | |
| | | | | | | 183,319 | |
| | | | | | | | |
Security | | Shares | | | Value | |
IT Services — 1.8% | |
Booz Allen Hamilton Holding Corp. | | | 6,493 | | | $ | 283,939 | |
Fidelity National Information Services, Inc. | | | 10,347 | | | | 1,097,092 | |
First Data Corp., Class A(a) | | | 6,136 | | | | 128,426 | |
Mastercard, Inc., Class A | | | 1,751 | | | | 344,107 | |
| | | | | | | | |
| | | | | | | 1,853,564 | |
Machinery — 1.8% | |
Ingersoll-Rand plc | | | 5,781 | | | | 518,729 | |
Oshkosh Corp. | | | 2,159 | | | | 151,821 | |
PACCAR, Inc. | | | 19,454 | | | | 1,205,370 | |
| | | | | | | | |
| | | | | | | 1,875,920 | |
Media — 1.7% | |
CBS Corp. (Non-Voting), Class B | | | 3,572 | | | | 200,818 | |
Cinemark Holdings, Inc. | | | 2,299 | | | | 80,649 | |
Comcast Corp., Class A | | | 25,831 | | | | 847,515 | |
Interpublic Group of Cos., Inc. (The) | | | 20,878 | | | | 489,380 | |
John Wiley & Sons, Inc., Class A | | | 272 | | | | 16,973 | |
Tribune Media Co., Class A | | | 836 | | | | 31,994 | |
Viacom, Inc., Class B | | | 959 | | | | 28,923 | |
| | | | | | | | |
| | | | | | | 1,696,252 | |
Metals & Mining — 1.0% | |
Newmont Mining Corp. | | | 20,807 | | | | 784,632 | |
Reliance Steel & Aluminum Co. | | | 2,250 | | | | 196,965 | |
| | | | | | | | |
| | | | | | | 981,597 | |
Multiline Retail — 1.4% | |
Kohl’s Corp. | | | 486 | | | | 35,429 | |
Target Corp. | | | 18,541 | | | | 1,411,341 | |
| | | | | | | | |
| | | | | | | 1,446,770 | |
Multi-Utilities — 2.1% | |
Black Hills Corp.(b) | | | 1,084 | | | | 66,352 | |
CenterPoint Energy, Inc. | | | 20,955 | | | | 580,663 | |
CMS Energy Corp. | | | 3,113 | | | | 147,183 | |
Consolidated Edison, Inc. | | | 16,883 | | | | 1,316,536 | |
| | | | | | | | |
| | | | | | | 2,110,734 | |
Oil, Gas & Consumable Fuels — 9.8% | |
Anadarko Petroleum Corp. | | | 6,837 | | | | 500,810 | |
Antero Resources Corp.(a) | | | 19,255 | | | | 411,094 | |
Chevron Corp. | | | 16,694 | | | | 2,110,622 | |
ConocoPhillips | | | 26,190 | | | | 1,823,348 | |
Continental Resources, Inc.(a) | | | 866 | | | | 56,082 | |
EOG Resources, Inc. | | | 5,544 | | | | 689,840 | |
Exxon Mobil Corp. | | | 31,965 | | | | 2,644,465 | |
Kinder Morgan, Inc. | | | 4,848 | | | | 85,664 | |
Marathon Petroleum Corp. | | | 1,411 | | | | 98,996 | |
Occidental Petroleum Corp. | | | 5,731 | | | | 479,570 | |
Parsley Energy, Inc., Class A(a) | | | 2,973 | | | | 90,023 | |
Phillips 66 | | | 1,391 | | | | 156,223 | |
RSP Permian, Inc.(a) | | | 548 | | | | 24,123 | |
Suncor Energy, Inc. | | | 11,863 | | | | 482,587 | |
Williams Cos., Inc. (The) | | | 14,728 | | | | 399,276 | |
| | | | | | | | |
| | | | | | | 10,052,723 | |
Personal Products — 0.1% | |
Herbalife Nutrition Ltd.(a) | | | 1,540 | | | | 82,729 | |
| | | | | | | | |
Pharmaceuticals — 6.8% | |
Bristol-Myers Squibb Co. | | | 24,248 | | | | 1,341,884 | |
Eli Lilly & Co. | | | 1,484 | | | | 126,630 | |
Johnson & Johnson | | | 21,996 | | | | 2,668,995 | |
Merck & Co., Inc. | | | 37,437 | | | | 2,272,426 | |
Pfizer, Inc. | | | 14,536 | | | | 527,366 | |
| | | | | | | | |
| | | | | | | 6,937,301 | |
| | |
6 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Advantage Large Cap Value V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Professional Services — 0.4% | |
Insperity, Inc. | | | 729 | | | $ | 69,437 | |
ManpowerGroup, Inc. | | | 3,949 | | | | 339,851 | |
| | | | | | | | |
| | | | | | | 409,288 | |
Real Estate Management & Development — 0.2% | |
Jones Lang LaSalle, Inc. | | | 1,430 | | | | 237,366 | |
| | | | | | | | |
Road & Rail — 0.5% | |
Norfolk Southern Corp. | | | 3,475 | | | | 524,273 | |
| | | | | | | | |
Semiconductors & Semiconductor Equipment — 3.2% | |
Intel Corp. | | | 26,429 | | | | 1,313,785 | |
Maxim Integrated Products, Inc. | | | 18,759 | | | | 1,100,403 | |
Texas Instruments, Inc. | | | 6,107 | | | | 673,297 | |
Xilinx, Inc. | | | 2,293 | | | | 149,641 | |
| | | | | | | | |
| | | | | | | 3,237,126 | |
Software — 1.6%(a) | |
Dell Technologies, Inc., Class V | | | 1,990 | | | | 168,314 | |
Electronic Arts, Inc. | | | 274 | | | | 38,640 | |
Synopsys, Inc. | | | 10,576 | | | | 904,988 | |
Workday, Inc., Class A | | | 1,815 | | | | 219,833 | |
Zendesk, Inc. | | | 5,509 | | | | 300,185 | |
| | | | | | | | |
| | | | | | | 1,631,960 | |
Specialty Retail — 0.4% | |
Lithia Motors, Inc., Class A(b) | | | 1,154 | | | | 109,134 | |
Penske Automotive Group, Inc.(b) | | | 3,727 | | | | 174,610 | |
Tiffany & Co. | | | 1,338 | | | | 176,081 | |
| | | | | | | | |
| | | | | | | 459,825 | |
Technology Hardware, Storage & Peripherals — 0.4% | |
Hewlett Packard Enterprise Co. | | | 9,505 | | | | 138,868 | |
HP, Inc. | | | 3,517 | | | | 79,801 | |
Western Digital Corp. | | | 2,294 | | | | 177,578 | |
| | | | | | | | |
| | | | | | | 396,247 | |
Textiles, Apparel & Luxury Goods — 0.3% | |
Skechers U.S.A., Inc., Class A(a) | | | 9,375 | | | | 281,344 | |
| | | | | | | | |
| | | | | | | | |
Security | | Shares | | | Value | |
Tobacco — 0.2% | |
Philip Morris International, Inc. | | | 2,136 | | | $ | 172,461 | |
| | | | | | | | |
Trading Companies & Distributors — 0.2% | |
Univar, Inc.(a) | | | 1,781 | | | | 46,733 | |
Watsco, Inc.(b) | | | 456 | | | | 81,296 | |
WESCO International, Inc.(a) | | | 1,487 | | | | 84,908 | |
| | | | | | | | |
| | | | | | | 212,937 | |
Water Utilities — 0.3% | |
American Water Works Co., Inc. | | | 3,830 | | | | 327,005 | |
| | | | | | | | |
Wireless Telecommunication Services — 0.7% | |
Telephone & Data Systems, Inc. | | | 27,899 | | | | 764,991 | |
| | | | | | | | |
Total Common Stocks — 99.1% (Cost: $96,912,516) | | | | 101,497,830 | |
| | | | | |
Total Long-Term Investments — 99.1% (Cost: $96,912,516) | | | | 101,497,830 | |
| | | | | |
|
Short-Term Securities — 3.1%(c)(e) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.80% | | | 813,900 | | | | 813,900 | |
SL Liquidity Series, LLC, Money Market Series, 2.16%(d) | | | 2,317,694 | | | | 2,317,926 | |
| | | | | | | | |
Total Short-Term Securities — 3.1% (Cost: $3,131,731) | | | | 3,131,826 | |
| | | | | | | | |
| |
Total Investments — 102.2% (Cost: $100,044,247) | | | | 104,629,656 | |
Liabilities in Excess of Other Assets — (2.2)% | | | | (2,242,461 | ) |
| | | | | | | | |
Net Assets — 100.0% | | | $ | 102,387,195 | |
| | | | | | | | |
(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 six months ended June 30, 2018, 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 12/31/17 | | | Net Activity | | | Shares Held at 06/30/18 | | | Value at 06/30/18 | | | Income | | | Net Realized Gain (Loss) (a) | | | Change in Unrealized Appreciation (Depreciation) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class | | | 1,446,302 | | | | (632,402 | ) | | | 813,900 | | | $ | 813,900 | | | $ | 6,688 | | | $ | — | | | $ | — | |
SL Liquidity Series, LLC, Money Market Series | | | 3,613,873 | | | | (1,296,179 | ) | | | 2,317,694 | | | | 2,317,926 | | | | 2,198 | (b) | | | 1,030 | | | | 179 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | 3,131,826 | | | $ | 8,886 | | | $ | 1,030 | | | $ | 179 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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
| | | | |
SCHEDULE OF INVESTMENTS | | | 7 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Advantage Large Cap Value 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 | | | 7 | | | | 09/21/18 | | | $ | 953 | | | $ | (16,284 | ) |
| | | | | | | | | | | | | | | | |
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) | | $ | — | | | $ | — | | | $ | 16,284 | | | $ | — | | | $ | — | | | $ | — | | | $ | 16,284 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 six months ended June 30, 2018, the effect of derivative financial instruments in the Statement of Operations were 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 | | $ | — | | | $ | — | | | $ | 40,614 | | | $ | — | | | $ | — | | | $ | — | | | $ | 40,614 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Change in Unrealized Appreciation (Depreciation) on: | | | | | | | | | | | | | | | | | | | | | |
Futures contracts | | $ | — | | | $ | — | | | $ | (24,518 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | (24,518 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average Quarterly Balances of Outstanding Derivative Financial Instruments
| | | | |
Futures contracts: | | | | |
Average notional value of contracts — long | | $ | 1,137,030 | |
For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.
| | |
8 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Advantage Large Cap Value 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(a) | | $ | 101,497,830 | | | $ | — | | | $ | — | | | $ | 101,497,830 | |
Short-Term Securities | | | 813,900 | | | | — | | | | — | | | | 813,900 | |
| | | | | | | | | | | | | | | | |
| | $ | 102,311,730 | | | $ | — | | | $ | — | | | $ | 102,311,730 | |
| | | | | | | | | | | | | | | | |
Investments valued at NAV(b) | | | | | | | | | | | | | | | 2,317,926 | |
| | | | | | | | | | | | | | | | |
Total Investments | | | | | | | | | | | | | | $ | 104,629,656 | |
| | | | | | | | | | | | | | | | |
Derivative Financial Instruments(c) | | | | | | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | | | | |
Equity contracts | | $ | (16,284 | ) | | $ | — | | | $ | — | | | $ | (16,284 | ) |
| | | | | | | | | | | | | | | | |
| (a) | See above Schedule of Investments for values in each industry. | |
| (b) | As of June 30, 2018, 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 six months ended June 30, 2018, there were no transfers between levels
See notes to financial statements.
| | | | |
SCHEDULE OF INVESTMENTS | | | 9 | |
Statement of Assets and Liabilities (unaudited)
June 30, 2018
| | | | |
| | BlackRock Advantage Large Cap Value V.I. Fund | |
| |
ASSETS | | | | |
Investments at value — unaffiliated (including securities loaned at value of $2,226,000) (cost — $96,912,516) | | $ | 101,497,830 | |
Investments at value — affiliated (cost — $3,131,731) | | | 3,131,826 | |
Cash | | | 6,910 | |
Cash pledged for futures contracts | | | 40,000 | |
Receivables: | | | | |
Investments sold | | | 1,700,737 | |
Securities lending income — affiliated | | | 367 | |
Dividends — affiliated | | | 1,270 | |
Dividends — unaffiliated | | | 105,840 | |
From the Manager | | | 1,633 | |
Prepaid expenses | | | 235 | |
| | | | |
Total assets | | | 106,486,648 | |
| | | | |
| |
LIABILITIES | | | | |
Cash collateral on securities loaned at value | | | 2,317,088 | |
Payables: | | | | |
Investments purchased | | | 1,596,569 | |
Capital shares redeemed | | | 5,448 | |
Distribution fees | | | 1,554 | |
Variation margin on futures contracts | | | 19 | |
Board realignment and consolidation | | | 2,183 | |
Investment advisory fees | | | 44,376 | |
Directors’ and Officer’s fees | | | 1,728 | |
Other affiliates | | | 202 | |
Other accrued expenses | | | 130,286 | |
| | | | |
Total liabilities | | | 4,099,453 | |
| | | | |
| |
NET ASSETS | | $ | 102,387,195 | |
| | | | |
| |
NET ASSETS CONSIST OF | | | | |
Paid-in capital | | $ | 90,134,878 | |
Undistributed net investment income | | | 961,661 | |
Accumulated net realized gain | | | 6,721,531 | |
Net unrealized appreciation (depreciation) | | | 4,569,125 | |
| | | | |
NET ASSETS | | $ | 102,387,195 | |
| | | | |
| |
NET ASSET VALUE | | | | |
Class I — Based on net assets of $91,912,140 and 8,706,624 shares outstanding, 100 million shares authorized, $0.10 par value | | $ | 10.56 | |
| | | | |
Class II — Based on net assets of $7,099,698 and 670,639 shares outstanding, 100 million shares authorized, $0.10 par value | | $ | 10.59 | |
| | | | |
Class III — Based on net assets of $3,375,357 and 325,358 shares outstanding, 100 million shares authorized, $0.10 par value | | $ | 10.37 | |
| | | | |
See notes to financial statements.
| | |
10 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statement of Operations (unaudited)
Six Months Ended June 30, 2018
| | | | |
| | BlackRock Advantage Large Cap Value V.I. Fund | |
| |
INVESTMENT INCOME | | | | |
Dividends — affiliated | | $ | 6,688 | |
Dividends — unaffiliated(a) | | | 1,277,730 | |
Securities lending income — affiliated — net | | | 2,198 | |
Foreign taxes withheld | | | (977 | ) |
| | | | |
Total investment income | | | 1,285,639 | |
| | | | |
| |
EXPENSES | | | | |
Investment advisory | | | 397,419 | |
Transfer agent — class specific | | | 112,634 | |
Professional | | | 29,357 | |
Accounting services | | | 21,624 | |
Printing | | | 14,426 | |
Custodian | | | 12,090 | |
Distribution — class specific | | | 9,366 | |
Directors and Officer | | | 8,604 | |
Transfer agent | | | 2,480 | |
Board realignment and consolidation | | | 2,183 | |
Miscellaneous | | | 28,905 | |
| | | | |
Total expenses | | | 639,088 | |
Less: | | | | |
Fees waived and/or reimbursed by the Manager | | | (196,970 | ) |
Transfer agent fees waived and /or reimbursed — class specific | | | (112,634 | ) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 329,484 | |
| | | | |
Net investment income | | | 956,155 | |
| | | | |
| |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain from: | | | | |
Investments — affiliated | | | 1,030 | |
Investments — unaffiliated | | | 6,197,411 | |
Futures contracts | | | 40,614 | |
| | | | |
| | | 6,239,055 | |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | |
Investments — affiliated | | | 179 | |
Investments — unaffiliated | | | (7,877,058 | ) |
Futures contracts | | | (24,518 | ) |
| | | | |
| | | (7,901,397 | ) |
| | | | |
Net realized and unrealized loss | | | (1,662,342 | ) |
| | | | |
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | (706,187 | ) |
| | | | |
(a) | Includes non-recurring dividends in the amount of $97,575. |
See notes to financial statements.
Statements of Changes in Net Assets (unaudited)
| | | | | | | | |
| | BlackRock Advantage Large Cap Value V.I. Fund | |
| | Six Months Ended 06/30/2018 (unaudited) | | | Year Ended 12/31/2017 | |
| | |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | |
| | |
OPERATIONS | | | | | | | | |
Net investment income | | $ | 956,155 | | | $ | 1,617,399 | |
Net realized gain | | | 6,239,055 | | | | 25,548,122 | |
Net change in unrealized appreciation (depreciation) | | | (7,901,397 | ) | | | (10,474,117 | ) |
| | | | | | | | |
Net increase (decrease) in net assets resulting from operations | | | (706,187 | ) | | | 16,691,404 | |
| | | | | | | | |
| | |
DISTRIBUTIONS TO SHAREHOLDERS(a) | | | | | | | | |
From net investment income: | | | | | | | | |
Class I | | | — | | | | (1,493,752 | ) |
Class II | | | — | | | | (93,118 | ) |
Class III | | | — | | | | (38,131 | ) |
From net realized gain: | | | | | | | | |
Class I | | | — | | | | (23,621,034 | ) |
Class II | | | — | | | | (1,667,678 | ) |
Class III | | | — | | | | (725,996 | ) |
| | | | | | | | |
Decrease in net assets resulting from distributions to shareholders | | | — | | | | (27,639,709 | ) |
| | | | | | | | |
| | |
CAPITAL SHARE TRANSACTIONS | | | | | | | | |
Net increase (decrease) in net assets derived from capital share transactions | | | (6,201,495 | ) | | | 19,457,704 | |
| | | | | | | | |
| | |
NET ASSETS | | | | | | | | |
Total increase (decrease) in net assets | | | (6,907,682 | ) | | | 8,509,399 | |
Beginning of period | | | 109,294,877 | | | | 100,785,478 | |
| | | | | | | | |
End of period | | $ | 102,387,195 | | | $ | 109,294,877 | |
| | | | | | | | |
Undistributed net investment income, end of period | | $ | 961,661 | | | $ | 5,506 | |
| | | | | | | | |
(a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
| | |
12 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Financial Highlights
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Advantage Large Cap Value V.I. Fund | |
| | Class I | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 10.63 | | | | | | | $ | 12.06 | | | $ | 11.49 | | | $ | 12.74 | | | $ | 13.22 | | | $ | 10.73 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.10 | (b) | | | | | | | 0.20 | | | | 0.15 | | | | 0.14 | | | | 0.15 | | | | 0.14 | |
Net realized and unrealized gain (loss) | | | (0.17 | ) | | | | | | | 1.86 | | | | 1.41 | | | | (0.36 | ) | | | 1.47 | | | | 3.46 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | (0.07 | ) | | | | | | | 2.06 | | | | 1.56 | | | | (0.22 | ) | | | 1.62 | | | | 3.60 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions(c) | | | | | | | | | | | | | | | | | | | | | |
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 period | | $ | 10.56 | | | | | | | $ | 10.63 | | | $ | 12.06 | | | $ | 11.49 | | | $ | 12.74 | | | $ | 13.22 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(d) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | (0.66 | )%(e) | | | | | | | 17.22 | % | | | 13.60 | % | | | (1.72 | )% | | | 12.22 | % | | | 33.61 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.19 | %(f) | | | | | | | 1.17 | %(g) | | | 1.09 | % | | | 1.08 | % | | | 1.08 | % | | | 1.08 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.60 | %(f) | | | | | | | 0.71 | %(g) | | | 0.82 | % | | | 0.77 | % | | | 0.77 | % | | | 0.78 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.82 | %(b)(f) | | | | | | | 1.57 | %(g) | | | 1.29 | % | | | 1.14 | % | | | 1.10 | % | | | 1.10 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 91,912 | | | | | | | $ | 99,213 | | | $ | 92,795 | | | $ | 93,983 | | | $ | 109,570 | | | $ | 115,094 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 82 | % | | | | | | | 168 | % | | | 47 | % | | | 29 | % | | | 35 | % | | | 41 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) | Based on average shares outstanding. |
(b) | Net investment income per share and the ratio of net investment income to average net assets includes $0.01 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) | Where applicable, excludes insurance-related fees and expenses and assumes the reinvestments of distributions. |
(e) | Aggregate total return. |
(g) | Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%. |
See notes to financial statements.
Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Advantage Large Cap Value V.I. Fund (continued) | |
| | Class II | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 10.67 | | | | | | | $ | 12.09 | | | $ | 11.52 | | | $ | 12.77 | | | $ | 13.25 | | | $ | 10.75 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.09 | (b) | | | | | | | 0.18 | | | | 0.13 | | | | 0.12 | | | | 0.13 | | | | 0.11 | |
Net realized and unrealized gain (loss) | | | (0.17 | ) | | | | | | | 1.86 | | | | 1.40 | | | | (0.36 | ) | | | 1.46 | | | | 3.47 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | (0.08 | ) | | | | | | | 2.04 | | | | 1.53 | | | | (0.24 | ) | | | 1.59 | | | | 3.58 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions(c) | | | | | | | | | | | | | | | | | | | | | |
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 period | | $ | 10.59 | | | | | | | $ | 10.67 | | | $ | 12.09 | | | $ | 11.52 | | | $ | 12.77 | | | $ | 13.25 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(d) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | (0.75 | )%(e) | | | | | | | 17.06 | % | | | 13.35 | % | | | (1.96 | )% | | | 11.94 | % | | | 33.39 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.34 | %(f)(g) | | | | | | | 1.32 | %(h) | | | 1.27 | % | | | 1.19 | % | | | 1.23 | % | | | 1.20 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.75 | %(f)(g) | | | | | | | 0.88 | %(h) | | | 1.03 | % | | | 0.96 | % | | | 0.97 | % | | | 0.98 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.69 | %(b)(g) | | | | | | | 1.38 | %(h) | | | 1.10 | % | | | 0.95 | % | | | 0.92 | % | | | 0.90 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 7,100 | | | | | | | $ | 7,063 | | | $ | 6,060 | | | $ | 5,680 | | | $ | 4,002 | | | $ | 5,324 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 82 | % | | | | | | | 168 | % | | | 47 | % | | | 29 | % | | | 35 | % | | | 41 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) | Based on average shares outstanding. |
(b) | Net investment income per share and the ratio of net investment income to average net assets includes $0.01 per share and 0.19%, respectively, resulting from a special dividend. |
(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 reinvestments of distributions. |
(e) | Aggregate total return. |
(f) | Board realignment and consolidation costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses and total expenses after fees waived and/or reimbursed would have been 1.34% and 0.76%, respectively. |
(h) | Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%. |
See notes to financial statements.
| | |
14 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Advantage Large Cap Value V.I. Fund (continued) | |
| | Class III | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 10.46 | | | | | | | $ | 11.92 | | | $ | 11.37 | | | $ | 12.61 | | | $ | 13.12 | | | $ | 10.66 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.08 | (b) | | | | | | | 0.16 | | | | 0.11 | | | | 0.10 | | | | 0.10 | | | | 0.09 | |
Net realized and unrealized gain (loss) | | | (0.17 | ) | | | | | | | 1.83 | | | | 1.38 | | | | (0.36 | ) | | | 1.44 | | | | 3.44 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | (0.09 | ) | | | | | | | 1.99 | | | | 1.49 | | | | (0.26 | ) | | | 1.54 | | | | 3.53 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions(c) | | | | | | | | | | | | | | | | | | | | | |
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 period | | $ | 10.37 | | | | | | | $ | 10.46 | | | $ | 11.92 | | | $ | 11.37 | | | $ | 12.61 | | | $ | 13.12 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(d) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | (0.86 | )%(e) | | | | | | | 16.86 | % | | | 13.17 | % | | | (2.11 | )% | | | 11.72 | % | | | 33.16 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.42 | %(f)(g) | | | | | | | 1.43 | %(h) | | | 1.35 | % | | | 1.34 | % | | | 1.32 | % | | | 1.33 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.85 | %(f)(g) | | | | | | | 0.99 | %(h) | | | 1.18 | % | | | 1.13 | % | | | 1.13 | % | | | 1.14 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.59 | %(b)(g) | | | | | | | 1.26 | %(h) | | | 0.92 | % | | | 0.78 | % | | | 0.73 | % | | | 0.74 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 3,375 | | | | | | | $ | 3,019 | | | $ | 1,930 | | | $ | 1,810 | | | $ | 1,931 | | | $ | 1,576 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 82 | % | | | | | | | 168 | % | | | 47 | % | | | 29 | % | | | 35 | % | | | 41 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) | Based on average shares outstanding. |
(b) | Net investment income per share and the ratio of net investment income to average net assets includes $0.01 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) | Where applicable, excludes insurance-related fees and expenses and assumes the reinvestments of distributions. |
(e) | Aggregate total return. |
(f) | Board realignment and consolidation costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses and total expenses after fees waived and/or reimbursed would have been 1.43% and 0.86%, respectively. |
(h) | Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%. |
See notes to financial statements
Notes to Financial Statements (unaudited)
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 19 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. Upon notification from issuers, a portion 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 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. |
| | |
16 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (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 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 June 30, 2018, 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.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 17 | |
Notes to Financial Statements (unaudited) (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. | | $ | 215,493 | | | $ | (215,493 | ) | | $ | — | |
Credit Suisse Securities (USA) LLC | | | 1,313,977 | | | | (1,313,977 | ) | | | — | |
Deutsche Bank Securities Inc. | | | 449,478 | | | | (449,478 | ) | | | — | |
JP Morgan Securities LLC | | | 107,999 | | | | (107,999 | ) | | | — | |
SG Americas Securities LLC | | | 139,053 | | | | (139,053 | ) | | | — | |
| | | | | | | | | | | | |
| | $ | 2,226,000 | | | $ | (2,226,000 | ) | | $ | — | |
| | | | | | | | | | | | |
| (a) | Cash collateral with a value of 2,317,088 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. | 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 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) and 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. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts on the Statement of Assets and Liabilities.
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 | |
| | |
18 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (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 six months ended June 30, 2018, 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 | | $ | 5,296 | | | $ | 4,070 | | | $ | 9,366 | |
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 six months ended June 30, 2018, 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 six months ended June 30, 2018, 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 | |
$ | 101,820 | | | | | $ | 7,563 | | | | | $ | 3,251 | | | | | $ | 112,634 | |
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 six months ended June 30, 2018, the amount waived and/or reimbursed was $26,495 .
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 six months ended June 30, 2018, the amount waived was $345.
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 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 six months ended June 30, 2018, there were no fees waived by the Manager.
For the six months ended June 30, 2018, the Fund reimbursed the Manager $608 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 waived and/or reimbursed — class specific in the Statement of Operations. For the six months ended June 30, 2018, class specific expense waivers and/or reimbursements were as follows:
| | | | | | | | | | | | | | | | |
| | Class I | | | Class II | | | Class III | | | Total | |
Transfer Agent Fees Waived and/or Reimbursed | | $ | 101,820 | | | $ | 7,563 | | | $ | 3,251 | | | $ | 112,634 | |
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% | |
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 19 | |
Notes to Financial Statements (unaudited) (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 outstanding voting securities of the Fund. For the six months ended June 30, 2018, the Manager waived and/or reimbursed $170,130, 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 six months ended June 30, 2018, the Fund paid BIM $369 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 six months ended June 30, 2018, the Fund did not participate in the Interfund Lending Program.
Directors and Officers: 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.
For the six months ended June 30, 2018, purchases and sales of investments, excluding short-term securities, were $86,524,621 and $91,273,188, respectively.
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 June 30, 2018, 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.
As of June 30, 2018, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
| | | | |
Tax cost | | $ | 100,695,599 | |
| | | | |
Gross unrealized appreciation | | $ | 7,192,855 | |
Gross unrealized depreciation | | | (3,275,082 | ) |
| | | | |
Net unrealized appreciation (depreciation) | | $ | 3,917,773 | |
| | | | |
| | |
20 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Although the Act does not amend any provisions directly related to the qualification or taxation of regulated investment companies (“RICs”), the Act does change the taxation of entities in which some RICs invest, the tax treatment of income derived from those entities and the taxation of RIC shareholders. While management does not anticipate significant impact to the Fund or to its shareholders, there is uncertainty in the application of certain provisions in the Act. Specifically, provisions in the Act may increase the amount of or accelerate the recognition of taxable income and may limit the deductibility of certain expenses by RICs. Until full clarity around these provisions is obtained, the impact on the Fund’s financial statements, if any, cannot be fully determined.
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, $2.25 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 $1.75 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 0.10% 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 2019 unless extended or renewed. Prior to April 19, 2018, the aggregate commitment amount was $2.1 billion and the fee was 0.12% per annum. Participating Funds paid an upfront commitment fee of 0.02% on the total commitment amounts, in addition to administration, legal and arrangement fees, which 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 six months ended June 30, 2018, the Fund did not borrow under the credit agreement.
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.
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.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 21 | |
Notes to Financial Statements (unaudited) (continued)
11. | CAPITAL SHARE TRANSACTIONS |
Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 | | | Year Ended 12/31/2017 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
Class I | | | | | | | | | | | | | | | | |
Shares sold | | | 228,624 | | | $ | 2,421,497 | | | | 365,201 | | | $ | 4,677,279 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 2,324,002 | | | | 25,114,786 | |
Shares redeemed | | | (851,288 | ) | | | (9,121,721 | ) | | | (1,056,648 | ) | | | (13,532,267 | ) |
| | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (622,664 | ) | | $ | (6,700,224 | ) | | | 1,632,555 | | | $ | 16,259,798 | |
| | | | | | | | | | | | | | | | |
| | | | |
Class II | | | | | | | | | | | | | | | | |
Shares sold | | | 155,346 | | | $ | 1,677,520 | | | | 110,054 | | | $ | 1,387,115 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 162,376 | | | | 1,760,796 | |
Shares redeemed | | | (146,441 | ) | | | (1,568,092 | ) | | | (111,932 | ) | | | (1,430,159 | ) |
| | | | | | | | | | | | | | | | |
Net increase | | | 8,905 | | | $ | 109,428 | | | | 160,498 | | | $ | 1,717,752 | |
| | | | | | | | | | | | | | | | |
| | | | |
Class III | | | | | | | | | | | | | | | | |
Shares sold | | | 82,544 | | | $ | 872,869 | | | | 120,811 | | | $ | 1,549,360 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 71,929 | | | | 764,127 | |
Shares redeemed | | | (45,724 | ) | | | (483,568 | ) | | | (66,112 | ) | | | (833,333 | ) |
| | | | | | | | | | | | | | | | |
Net increase | | | 36,820 | | | $ | 389,301 | | | | 126,628 | | | $ | 1,480,154 | |
| | | | | | | | | | | | | | | | |
Total Net Increase (Decrease) | | | (576,939 | ) | | $ | (6,201,495 | ) | | | 1,919,681 | | | $ | 19,457,704 | |
| | | | | | | | | | | | | | | | |
Management’s evaluation of the impact of all subsequent events on the Fund’s financial statements was completed through the date the financial statements were issued and the following items were noted:
The Fund paid short-term capital gain and long-term capital gain distributions in the following amounts per share on July 20, 2018 to the shareholders of record on July 18, 2018.
| | | | | | | | |
| | Short-Term Capital Gain | | | Long-Term Capital Gain | |
Class I | | $ | 0.086508 | | | $ | 0.033023 | |
Class II | | | 0.086508 | | | | 0.033023 | |
Class III | | | 0.086508 | | | | 0.033023 | |
| | |
22 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
JUNE 30, 2018
| | |
SEMI-ANNUAL REPORT (UNAUDITED) | | |
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 June 30, 2018 | | 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.
Portfolio Management Commentary
How did the Fund perform?
For the six-month period ended June 30, 2018, the Fund underperformed its benchmark, the Russell 3000® Index.
What factors influenced performance?
Fundamental insights that identify attractive valuations detracted from performance during the period, as the value style continued to lag growth by a wide margin. Notably, signals that compare companies across top-line sales, cash flows and earnings underperformed. A signal that seeks to identify lower-risk stocks was an additional detractor.
Certain stock-specific events also affected performance. An underweight in Netflix, Inc., which staged a substantial rally due to a series of strong earnings reports, detracted from results. The underweight position was driven primarily by the stock’s expensive valuation.
Fundamental stock selection insights, specifically those that identify quality measures, performed well amid rising market volatility. Notably, an insight that highlights companies with founding members still serving in an executive capacity was additive. Other quality-based signals that contributed to performance included a balance sheet metric that identifies productivity and company efficiency, as well as an insight that evaluates stocks with the ability to generate consistent free cash flow. Further, a quality insight that evaluates stocks based on key corporate events like such as initial public offerings, chief executive officer changes and revisions to forward guidance proved beneficial.
Stock selection insights that seek to capture sentiment and trends among informed market participants were also positive. Specifically, a proprietary text-based analysis of executive statements to capture longer-term trends in company fundamentals performed well, as did an analysis of sell-side analyst reports.
Please describe portfolio activity during the period.
The portfolio maintained a balanced allocation of risk across all major return drivers, but a number of new stock selection insights were added to the portfolio. A model that evaluates companies on the basis of governance and ethics, as well as the sustainability of their business practices from a social and environmental perspective, was added to the Fund’s bucket of quality signals. The Fund also added a macro thematic industry model that derives positioning from inputs such as labor costs and hiring activity.
Describe portfolio positioning at period end.
The Fund retained a largely sector-neutral positioning, with slight overweight positions in industrials and health care and small underweight positions in information technology and energy.
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 | | | 24 | % |
Financials | | | 15 | |
Health Care | | | 14 | |
Consumer Discretionary | | | 13 | |
Industrials | | | 11 | |
Consumer Staples | | | 6 | |
Energy | | | 5 | |
Real Estate | | | 4 | |
Materials | | | 3 | |
Utilities | | | 3 | |
Telecommunication Services | | | 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.
| | |
2 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Fund Summary as of June 30, 2018 (continued) | | BlackRock Advantage U.S. Total Market V.I. Fund |
Performance Summary for the Period Ended June 30, 2018
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 6-Month Total Returns (c) | | | | | | Average Annual Total Returns | |
| | | | | 1 Year (c) | | | | | | 5 Years (c) | | | | | | 10 Years (c) | |
Class I(a)(b) | | | 2.46 | % | | | | | | | 15.17 | % | | | | | | | 11.44 | % | | | | | | | 9.27 | % |
Class II(a)(b) | | | 2.39 | | | | | | | | 15.00 | | | | | | | | 11.25 | | | | | | | | 9.10 | |
Class III(a)(b) | | | 2.29 | | | | | | | | 14.87 | | | | | | | | 11.21 | | | | | | | | 9.03 | |
Russell 3000® Index(d) | | | 3.22 | | | | | | | | 14.78 | | | | | | | | 13.29 | | | | | | | | 10.23 | |
| (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) | Under normal circumstances, the Fund seeks to invest at least 80% of its assets (plus the amount of any borrowings for investments 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) | 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) | An index that measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity markets. | |
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 (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | | | | Beginning Account Value (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | Annualized Expense Ratio | |
Class I | | $ | 1,000.00 | | | $ | 1,024.60 | | | $ | 2.76 | | | | | | | $ | 1,000.00 | | | $ | 1,022.07 | | | $ | 2.76 | | | | 0.55 | % |
Class II | | | 1,000.00 | | | | 1,023.90 | | | | 3.51 | | | | | | | | 1,000.00 | | | | 1,021.32 | | | | 3.51 | | | | 0.70 | |
Class III | | | 1,000.00 | | | | 1,022.90 | | | | 4.01 | | | | | | | | 1,000.00 | | | | 1,020.83 | | | | 4.01 | | | | 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 annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown). | |
See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.
| | |
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 January 1, 2018 and held through June 30, 2018) 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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) June 30, 2018 | | 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 — 2.5% | | | | | | |
Boeing Co. (The) | | | 2,390 | | | $ | 801,869 | |
Curtiss-Wright Corp. | | | 17,567 | | | | 2,090,824 | |
General Dynamics Corp. | | | 1,162 | | | | 216,609 | |
Harris Corp. | | | 1,861 | | | | 268,989 | |
HEICO Corp., Class A | | | 188 | | | | 11,443 | |
KLX, Inc.(a) | | | 710 | | | | 51,049 | |
Lockheed Martin Corp. | | | 1,016 | | | | 300,157 | |
Raytheon Co. | | | 14,102 | | | | 2,724,224 | |
| | | | | | | | |
| | | | | | | 6,465,164 | |
Airlines — 0.2% | | | | | | |
Southwest Airlines Co. | | | 8,103 | | | | 412,281 | |
| | | | | | | | |
Auto Components — 1.2% | | | | | | |
BorgWarner, Inc. | | | 62,499 | | | | 2,697,457 | |
Dana, Inc. | | | 10,550 | | | | 213,004 | |
Modine Manufacturing Co.(a) | | | 7,636 | | | | 139,357 | |
| | | | | | | | |
| | | | | | | 3,049,818 | |
Banks — 5.6% | | | | | | |
Bank of America Corp. | | | 52,627 | | | | 1,483,555 | |
Cadence BanCorp(b) | | | 6,332 | | | | 182,805 | |
Citigroup, Inc. | | | 53,483 | | | | 3,579,082 | |
Citizens Financial Group, Inc. | | | 36,786 | | | | 1,430,975 | |
First Hawaiian, Inc. | | | 1,855 | | | | 53,832 | |
First Horizon National Corp.(b) | | | 150,070 | | | | 2,677,249 | |
First Republic Bank | | | 17,676 | | | | 1,710,860 | |
JPMorgan Chase & Co. | | | 31,011 | | | | 3,231,346 | |
Synovus Financial Corp. | | | 2,915 | | | | 154,000 | |
| | | | | | | | |
| | | | | | | 14,503,704 | |
Beverages — 1.6% | | | | | | |
Coca-Cola European Partners plc | | | 18,430 | | | | 748,995 | |
Constellation Brands, Inc., Class A | | | 1,608 | | | | 351,943 | |
PepsiCo, Inc. | | | 28,370 | | | | 3,088,642 | |
| | | | | | | | |
| | | | | | | 4,189,580 | |
Biotechnology — 4.0% | | | | | | |
AbbVie, Inc. | | | 21,495 | | | | 1,991,512 | |
Amgen, Inc. | | | 5,093 | | | | 940,117 | |
Biogen, Inc.(a) | | | 2,000 | | | | 580,480 | |
Celgene Corp.(a) | | �� | 34,258 | | | | 2,720,771 | |
Exelixis, Inc.(a) | | | 5,293 | | | | 113,905 | |
Gilead Sciences, Inc. | | | 47,030 | | | | 3,331,605 | |
United Therapeutics Corp.(a) | | | 6,687 | | | | 756,634 | |
| | | | | | | | |
| | | | | | | 10,435,024 | |
Building Products — 1.0% | | | | | | |
Fortune Brands Home & Security, Inc. | | | 35,645 | | | | 1,913,780 | |
Universal Forest Products, Inc. | | | 19,169 | | | | 701,969 | |
| | | | | | | | |
| | | | | | | 2,615,749 | |
Capital Markets — 4.0% | | | | | | |
Charles Schwab Corp. (The) | | | 14,637 | | | | 747,951 | |
Donnelley Financial Solutions, Inc.(a) | | | 4,679 | | | | 81,274 | |
Franklin Resources, Inc. | | | 4,921 | | | | 157,718 | |
Intercontinental Exchange, Inc. | | | 42,801 | | | | 3,148,014 | |
Moelis & Co., Class A | | | 36,965 | | | | 2,167,997 | |
Morgan Stanley | | | 38,640 | | | | 1,831,536 | |
S&P Global, Inc. | | | 10,380 | | | | 2,116,378 | |
Westwood Holdings Group, Inc. | | | 4,602 | | | | 274,003 | |
| | | | | | | | |
| | | | | | | 10,524,871 | |
Chemicals — 1.5% | | | | | | |
Air Products & Chemicals, Inc. | | | 19,349 | | | | 3,013,220 | |
Eastman Chemical Co. | | | 5,491 | | | | 548,880 | |
| | | | | | | | |
Security | | Shares | | | Value | |
Chemicals (continued) | | | | | | |
PolyOne Corp. | | | 865 | | | $ | 37,385 | |
Trinseo SA | | | 3,863 | | | | 274,080 | |
| | | | | | | | |
| | | | | | | 3,873,565 | |
Commercial Services & Supplies — 0.4% | | | | | | |
McGrath RentCorp | | | 11,773 | | | | 744,878 | |
Republic Services, Inc. | | | 2,760 | | | | 188,673 | |
| | | | | | | | |
| | | | | | | 933,551 | |
Communications Equipment — 1.4% | | | | | | |
Cisco Systems, Inc. | | | 63,540 | | | | 2,734,126 | |
Motorola Solutions, Inc. | | | 8,611 | | | | 1,002,062 | |
| | | | | | | | |
| | | | | | | 3,736,188 | |
Construction & Engineering — 0.2% | | | | | | |
Comfort Systems USA, Inc. | | | 8,565 | | | | 392,277 | |
| | | | | | | | |
Consumer Finance — 0.5% | | | | | | |
American Express Co. | | | 3,708 | | | | 363,384 | |
Green Dot Corp., Class A(a) | | | 12,315 | | | | 903,798 | |
| | | | | | | | |
| | | | | | | 1,267,182 | |
Containers & Packaging — 0.4% | | | | | | |
Packaging Corp. of America | | | 8,528 | | | | 953,345 | |
| | | | | | | | |
Diversified Consumer Services — 0.4% | | | | | | |
H&R Block, Inc. | | | 48,493 | | | | 1,104,670 | |
| | | | | | | | |
Diversified Financial Services — 0.9%(a) | | | | | | |
Berkshire Hathaway, Inc., Class B | | | 7,596 | | | | 1,417,793 | |
FGL Holdings | | | 104,645 | | | | 877,972 | |
| | | | | | | | |
| | | | | | | 2,295,765 | |
Diversified Telecommunication Services — 1.1% | | | | | | |
AT&T, Inc. | | | 62,731 | | | | 2,014,293 | |
Cogent Communications Holdings, Inc. | | | 843 | | | | 45,016 | |
IDT Corp., Class B(a) | | | 20,366 | | | | 114,457 | |
Verizon Communications, Inc. | | | 13,046 | | | | 656,344 | |
| | | | | | | | |
| | | | | | | 2,830,110 | |
Electric Utilities — 1.5% | | | | | | |
Eversource Energy | | | 7,332 | | | | 429,728 | |
IDACORP, Inc. | | | 30,049 | | | | 2,771,720 | |
Pinnacle West Capital Corp. | | | 2,467 | | | | 198,742 | |
Portland General Electric Co. | | | 14,117 | | | | 603,643 | |
| | | | | | | | |
| | | | | | | 4,003,833 | |
Electrical Equipment — 0.8% | | | | | | |
AMETEK, Inc. | | | 27,899 | | | | 2,013,192 | |
Atkore International Group, Inc.(a) | | | 1,311 | | | | 27,229 | |
| | | | | | | | |
| | | | | | | 2,040,421 | |
Electronic Equipment, Instruments & Components — 1.1% | | | | | | |
CDW Corp. | | | 6,170 | | | | 498,474 | |
Flex Ltd.(a) | | | 7,633 | | | | 107,702 | |
SYNNEX Corp. | | | 13,740 | | | | 1,326,047 | |
Systemax, Inc. | | | 2,089 | | | | 71,715 | |
TE Connectivity Ltd. | | | 9,361 | | | | 843,052 | |
| | | | | | | | |
| | | | | | | 2,846,990 | |
Energy Equipment & Services — 0.6% | | | | | | |
Cactus, Inc., Class A(a) | | | 867 | | | | 29,296 | |
Halliburton Co. | | | 22,408 | | | | 1,009,704 | |
ProPetro Holding Corp.(a) | | | 17,519 | | | | 274,698 | |
TechnipFMC plc | | | 7,724 | | | | 245,160 | |
| | | | | | | | |
| | | | | | | 1,558,858 | |
Equity Real Estate Investment Trusts (REITs) — 3.7% | |
EastGroup Properties, Inc. | | | 27,328 | | | | 2,611,464 | |
Highwoods Properties, Inc. | | | 3,877 | | | | 196,680 | |
Host Hotels & Resorts, Inc. | | | 8,780 | | | | 184,995 | |
| | | | |
SCHEDULES OF INVESTMENTS | | | 5 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Advantage U.S. Total Market V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Equity Real Estate Investment Trusts (REITs) (continued) | | | | | | |
National Retail Properties, Inc. | | | 969 | | | $ | 42,597 | |
Prologis, Inc. | | | 49,231 | | | | 3,233,984 | |
Simon Property Group, Inc. | | | 19,539 | | | | 3,325,342 | |
| | | | | | | | |
| | | | | | | 9,595,062 | |
Food & Staples Retailing — 1.5% | | | | | | |
Costco Wholesale Corp. | | | 1,337 | | | | 279,406 | |
Performance Food Group Co.(a) | | | 21,128 | | | | 775,397 | |
Walmart, Inc. | | | 34,158 | | | | 2,925,633 | |
| | | | | | | | |
| | | | | | | 3,980,436 | |
Food Products — 2.3% | | | | | | |
Archer-Daniels-Midland Co. | | | 54,952 | | | | 2,518,450 | |
Bunge Ltd. | | | 20,204 | | | | 1,408,421 | |
Hormel Foods Corp. | | | 3,563 | | | | 132,579 | |
Kellogg Co. | | | 27,735 | | | | 1,937,845 | |
| | | | | | | | |
| | | | | | | 5,997,295 | |
Health Care Equipment & Supplies — 3.0% | | | | | | |
Abbott Laboratories | | | 19,696 | | | | 1,201,259 | |
Cantel Medical Corp. | | | 752 | | | | 73,967 | |
Danaher Corp. | | | 22,024 | | | | 2,173,328 | |
IDEXX Laboratories, Inc.(a) | | | 730 | | | | 159,096 | |
Integer Holdings Corp.(a) | | | 2,175 | | | | 140,614 | |
Masimo Corp.(a) | | | 10,736 | | | | 1,048,370 | |
Medtronic plc | | | 13,937 | | | | 1,193,147 | |
Stryker Corp. | | | 10,221 | | | | 1,725,918 | |
| | | | | | | | |
| | | | | | | 7,715,699 | |
Health Care Providers & Services — 2.7% | | | | | | |
AmerisourceBergen Corp. | | | 10,450 | | | | 891,072 | |
Express Scripts Holding Co.(a) | | | 5,176 | | | | 399,639 | |
Humana, Inc. | | | 6,405 | | | | 1,906,320 | |
McKesson Corp. | | | 7,588 | | | | 1,012,239 | |
Quest Diagnostics, Inc. | | | 1,927 | | | | 211,855 | |
UnitedHealth Group, Inc. | | | 3,553 | | | | 871,693 | |
WellCare Health Plans, Inc.(a) | | | 6,914 | | | | 1,702,503 | |
| | | | | | | | |
| | | | | | | 6,995,321 | |
Health Care Technology — 0.3% | | | | | | |
Veeva Systems, Inc., Class A(a) | | | 11,024 | | | | 847,305 | |
| | | | | | | | |
Hotels, Restaurants & Leisure — 4.1% | | | | | | |
Carnival Corp. | | | 39,615 | | | | 2,270,336 | |
Darden Restaurants, Inc. | | | 270 | | | | 28,906 | |
Domino’s Pizza, Inc. | | | 5,075 | | | | 1,432,013 | |
Las Vegas Sands Corp. | | | 29,867 | | | | 2,280,644 | |
Marriott International, Inc., Class A | | | 4,184 | | | | 529,694 | |
McDonald’s Corp. | | | 18,385 | | | | 2,880,746 | |
Texas Roadhouse, Inc. | | | 17,133 | | | | 1,122,383 | |
| | | | | | | | |
| | | | | | | 10,544,722 | |
Household Durables — 0.6% | | | | | | |
Garmin Ltd. | | | 5,362 | | | | 327,082 | |
MDC Holdings, Inc. | | | 19,172 | | | | 589,922 | |
Whirlpool Corp. | | | 3,455 | | | | 505,225 | |
| | | | | | | | |
| | | | | | | 1,422,229 | |
Household Products — 0.2% | | | | | | |
Church & Dwight Co., Inc. | | | 11,205 | | | | 595,658 | |
| | | | | | | | |
Industrial Conglomerates — 1.5% | | | | | | |
3M Co. | | | 12,621 | | | | 2,482,803 | |
Honeywell International, Inc. | | | 9,351 | | | | 1,347,012 | |
| | | | | | | | |
| | | | | | | 3,829,815 | |
Insurance — 2.6% | | | | | | |
Allstate Corp. (The) | | | 7,197 | | | | 656,870 | |
American Financial Group, Inc. | | | 2,833 | | | | 304,066 | |
| | | | | | | | |
Security | | Shares | | | Value | |
Insurance (continued) | | | | | | |
Arthur J. Gallagher & Co. | | | 9,849 | | | $ | 642,943 | |
Athene Holding Ltd., Class A(a) | | | 25,913 | | | | 1,136,026 | |
First American Financial Corp. | | | 1,023 | | | | 52,910 | |
Hanover Insurance Group, Inc. (The) | | | 6,540 | | | | 781,922 | |
Hartford Financial Services Group, Inc. (The) | | | 26,125 | | | | 1,335,771 | |
Lincoln National Corp. | | | 2,026 | | | | 126,119 | |
Principal Financial Group, Inc. | | | 9,592 | | | | 507,896 | |
Progressive Corp. (The) | | | 6,711 | | | | 396,956 | |
Travelers Cos., Inc. (The) | | | 4,989 | | | | 610,354 | |
Unum Group | | | 8,069 | | | | 298,472 | |
| | | | | | | | |
| | | | | | | 6,850,305 | |
Internet & Direct Marketing Retail — 2.8%(a) | | | | | | |
Amazon.com, Inc. | | | 3,812 | | | | 6,479,637 | |
Netflix, Inc. | | | 1,955 | | | | 765,246 | |
| | | | | | | | |
| | | | | | | 7,244,883 | |
Internet Software & Services — 4.5%(a) | | | | | | |
Alphabet, Inc., Class A | | | 1,649 | | | | 1,862,034 | |
Alphabet, Inc., Class C | | | 2,808 | | | | 3,132,745 | |
Care.com, Inc. | | | 12,001 | | | | 250,581 | |
eBay, Inc. | | | 4,169 | | | | 151,168 | |
Facebook, Inc., Class A | | | 21,911 | | | | 4,257,746 | |
GrubHub, Inc. | | | 1,258 | | | | 131,977 | |
New Relic, Inc. | | | 4,919 | | | | 494,802 | |
Twilio, Inc., Class A | | | 3,895 | | | | 218,198 | |
Twitter, Inc. | | | 18,053 | | | | 788,374 | |
Yelp, Inc. | | | 11,533 | | | | 451,863 | |
| | | | | | | | |
| | | | | | | 11,739,488 | |
IT Services — 4.5% | | | | | | |
Accenture plc, Class A | | | 6,939 | | | | 1,135,151 | |
Automatic Data Processing, Inc. | | | 6,980 | | | | 936,297 | |
CSG Systems International, Inc. | | | 296 | | | | 12,098 | |
Fidelity National Information Services, Inc. | | | 23,008 | | | | 2,439,538 | |
First Data Corp., Class A(a) | | | 50,126 | | | | 1,049,137 | |
Mastercard, Inc., Class A | | | 20,204 | | | | 3,970,490 | |
Visa, Inc., Class A | | | 15,938 | | | | 2,110,988 | |
| | | | | | | | |
| | | | | | | 11,653,699 | |
Leisure Products — 0.0% | | | | | | |
MCBC Holdings, Inc.(a) | | | 3,543 | | | | 102,570 | |
| | | | | | | | |
Life Sciences Tools & Services — 0.3% | | | | | | |
Agilent Technologies, Inc. | | | 13,052 | | | | 807,136 | |
| | | | | | | | |
Machinery — 2.9% | | | | | | |
Illinois Tool Works, Inc. | | | 18,985 | | | | 2,630,182 | |
Ingersoll-Rand plc | | | 15,905 | | | | 1,427,156 | |
Milacron Holdings Corp.(a) | | | 2,532 | | | | 47,931 | |
Oshkosh Corp. | | | 1,316 | | | | 92,541 | |
PACCAR, Inc. | | | 49,366 | | | | 3,058,717 | |
Watts Water Technologies, Inc., Class A(b) | | | 2,981 | | | | 233,710 | |
| | | | | | | | |
| | | | | | | 7,490,237 | |
Media — 1.0% | | | | | | |
CBS Corp. (Non-Voting), Class B | | | 909 | | | | 51,104 | |
Comcast Corp., Class A | | | 47,463 | | | | 1,557,261 | |
Interpublic Group of Cos., Inc. (The) | | | 29,950 | | | | 702,028 | |
John Wiley & Sons, Inc., Class A | | | 4,101 | | | | 255,903 | |
Viacom, Inc., Class B | | | 2,326 | | | | 70,152 | |
| | | | | | | | |
| | | | | | | 2,636,448 | |
Metals & Mining — 0.9% | | | | | | |
Newmont Mining Corp. | | | 55,663 | | | | 2,099,052 | |
Reliance Steel & Aluminum Co. | | | 3,772 | | | | 330,201 | |
| | | | | | | | |
| | | | | | | 2,429,253 | |
| | |
6 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Advantage U.S. Total Market V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Mortgage Real Estate Investment Trusts (REITs) — 0.2% | | | | | | |
Invesco Mortgage Capital, Inc. | | | 26,400 | | | $ | 419,760 | |
Ladder Capital Corp. | | | 5,442 | | | | 85,004 | |
| | | | | | | | |
| | | | | | | 504,764 | |
Multiline Retail — 1.4% | | | | | | |
Big Lots, Inc.(b) | | | 393 | | | | 16,420 | |
Kohl’s Corp. | | | 6,375 | | | | 464,737 | |
Target Corp. | | | 42,335 | | | | 3,222,540 | |
| | | | | | | | |
| | | | | | | 3,703,697 | |
Multi-Utilities — 1.0% | | | | | | |
Avista Corp. | | | 593 | | | | 31,228 | |
Black Hills Corp.(b) | | | 10,170 | | | | 622,506 | |
CenterPoint Energy, Inc. | | | 4,396 | | | | 121,813 | |
CMS Energy Corp. | | | 39,412 | | | | 1,863,399 | |
| | | | | | | | |
| | | | | | | 2,638,946 | |
Oil, Gas & Consumable Fuels — 4.9% | | | | | | |
Anadarko Petroleum Corp. | | | 6,256 | | | | 458,252 | |
Antero Resources Corp.(a) | | | 2,380 | | | | 50,813 | |
Chevron Corp. | | | 17,599 | | | | 2,225,042 | |
Cimarex Energy Co. | | | 2,194 | | | | 223,218 | |
ConocoPhillips | | | 52,853 | | | | 3,679,626 | |
EOG Resources, Inc. | | | 5,330 | | | | 663,212 | |
Exxon Mobil Corp. | | | 29,051 | | | | 2,403,389 | |
Marathon Oil Corp. | | | 4,887 | | | | 101,943 | |
Occidental Petroleum Corp. | | | 7,997 | | | | 669,189 | |
ONEOK, Inc. | | | 2,247 | | | | 156,908 | |
Parsley Energy, Inc., Class A(a) | | | 4,809 | | | | 145,616 | |
Peabody Energy Corp.(b) | | | 5,574 | | | | 253,505 | |
Plains GP Holdings LP, Class A(a) | | | 2,407 | | | | 57,551 | |
RSP Permian, Inc.(a) | | | 1,349 | | | | 59,383 | |
Valero Energy Corp. | | | 1,489 | | | | 165,026 | |
Whiting Petroleum Corp.(a) | | | 1,196 | | | | 63,053 | |
Williams Cos., Inc. (The) | | | 48,701 | | | | 1,320,284 | |
| | | | | | | | |
| | | | | | | 12,696,010 | |
Personal Products — 0.4% | | | | | | |
Estee Lauder Cos., Inc. (The), Class A | | | 7,065 | | | | 1,008,105 | |
Herbalife Nutrition Ltd.(a) | | | 1,390 | | | | 74,671 | |
| | | | | | | | |
| | | | | | | 1,082,776 | |
Pharmaceuticals — 3.9% | | | | | | |
Bristol-Myers Squibb Co. | | | 40,694 | | | | 2,252,006 | |
Johnson & Johnson | | | 33,437 | | | | 4,057,246 | |
Merck & Co., Inc. | | | 36,409 | | | | 2,210,026 | |
Zoetis, Inc. | | | 17,815 | | | | 1,517,659 | |
| | | | | | | | |
| | | | | | | 10,036,937 | |
Professional Services — 0.5% | | | | | | |
ASGN, Inc.(a) | | | 3,250 | | | | 254,118 | |
Insperity, Inc. | | | 7,271 | | | | 692,563 | |
ManpowerGroup, Inc. | | | 5,391 | | | | 463,949 | |
| | | | | | | | |
| | | | | | | 1,410,630 | |
Real Estate Management & Development — 0.0% | |
Jones Lang LaSalle, Inc. | | | 306 | | | | 50,793 | |
Marcus & Millichap, Inc.(a) | | | 1,719 | | | | 67,058 | |
| | | | | | | | |
| | | | | | | 117,851 | |
Road & Rail — 0.7% | | | | | | |
Landstar System, Inc. | | | 3,298 | | | | 360,141 | |
Norfolk Southern Corp. | | | 9,038 | | | | 1,363,563 | |
Universal Logistics Holdings, Inc. | | | 4,655 | | | | 122,194 | |
| | | | | | | | |
| | | | | | | 1,845,898 | |
Semiconductors & Semiconductor Equipment — 4.5% | |
Applied Materials, Inc. | | | 20,960 | | | | 968,143 | |
Broadcom, Inc. | | | 3,337 | | | | 809,690 | |
| | | | | | | | |
Security | | Shares | | | Value | |
Semiconductors & Semiconductor Equipment (continued) | | | | | | |
Cirrus Logic, Inc.(a) | | | 18,433 | | | $ | 706,537 | |
Intel Corp. | | | 18,561 | | | | 922,667 | |
Maxim Integrated Products, Inc. | | | 51,141 | | | | 2,999,931 | |
Monolithic Power Systems, Inc. | | | 1,664 | | | | 222,427 | |
NVIDIA Corp. | | | 4,607 | | | | 1,091,398 | |
NXP Semiconductors NV(a) | | | 1,151 | | | | 125,770 | |
Texas Instruments, Inc. | | | 34,145 | | | | 3,764,486 | |
Xilinx, Inc.(b) | | | 2,959 | | | | 193,104 | |
| | | | | | | | |
| | | | | | | 11,804,153 | |
Software — 5.1% | | | | | | |
Activision Blizzard, Inc. | | | 9,818 | | | | 749,310 | |
Adobe Systems, Inc.(a) | | | 7,465 | | | | 1,820,042 | |
Altair Engineering, Inc., Class A(a) | | | 1,995 | | | | 68,189 | |
Dell Technologies, Inc., Class V(a) | | | 3,937 | | | | 332,991 | |
Electronic Arts, Inc.(a) | | | 3,660 | | | | 516,133 | |
Microsoft Corp. | | | 53,048 | | | | 5,231,063 | |
Progress Software Corp. | | | 3,778 | | | | 146,662 | |
RingCentral, Inc., Class A(a) | | | 11,049 | | | | 777,297 | |
Synopsys, Inc.(a) | | | 18,166 | | | | 1,554,465 | |
Workday, Inc., Class A(a) | | | 4,748 | | | | 575,078 | |
Zendesk, Inc.(a) | | | 28,083 | | | | 1,530,243 | |
| | | | | | | | |
| | | | | | | 13,301,473 | |
Specialty Retail — 1.5% | | | | | | |
Aaron’s, Inc. | | | 588 | | | | 25,549 | |
American Eagle Outfitters, Inc. | | | 5,352 | | | | 124,434 | |
Asbury Automotive Group, Inc.(a) | | | 1,641 | | | | 112,490 | |
Burlington Stores, Inc.(a) | | | 269 | | | | 40,493 | |
Group 1 Automotive, Inc. | | | 860 | | | | 54,180 | |
Lithia Motors, Inc., Class A(b) | | | 17,938 | | | | 1,696,397 | |
Penske Automotive Group, Inc.(b) | | | 18,130 | | | | 849,390 | |
Tiffany & Co. | | | 7,195 | | | | 946,862 | |
| | | | | | | | |
| | | | | | | 3,849,795 | |
Technology Hardware, Storage & Peripherals — 2.9% | |
Apple, Inc. | | | 39,918 | | | | 7,389,221 | |
Pure Storage, Inc., Class A(a) | | | 9,444 | | | | 225,523 | |
| | | | | | | | |
| | | | | | | 7,614,744 | |
Textiles, Apparel & Luxury Goods — 0.5% | | | | | | |
Movado Group, Inc. | | | 7,741 | | | | 373,890 | |
NIKE, Inc., Class B | | | 3,238 | | | | 258,004 | |
Oxford Industries, Inc. | | | 986 | | | | 81,818 | |
Skechers U.S.A., Inc., Class A(a) | | | 21,198 | | | | 636,152 | |
| | | | | | | | |
| | | | | | | 1,349,864 | |
Thrifts & Mortgage Finance — 0.8% | | | | | | |
Essent Group Ltd.(a) | | | 9,724 | | | | 348,314 | |
MGIC Investment Corp.(a) | | | 3,580 | | | | 38,377 | |
Riverview Bancorp, Inc. | | | 25,565 | | | | 215,769 | |
United Community Financial Corp. | | | 98,351 | | | | 1,080,877 | |
Washington Federal, Inc. | | | 11,824 | | | | 386,645 | |
| | | | | | | | |
| | | | | | | 2,069,982 | |
Trading Companies & Distributors — 0.1% | | | | | | |
Watsco, Inc. | | | 1,688 | | | | 300,937 | |
| | | | | | | | |
Water Utilities — 0.1% | | | | | | |
American Water Works Co., Inc. | | | 3,623 | | | | 309,332 | |
| | | | | | | | |
Wireless Telecommunication Services — 0.2% | | | | | | |
Telephone & Data Systems, Inc. | | | 19,045 | | | | 522,214 | |
| | | | | | | | |
Total Common Stocks — 99.0% (Cost: $244,696,432) | | | | | | | 257,670,510 | |
| | | | | | | | |
Total Long-Term Investments — 99.0% (Cost: $244,696,432) | | | | | | | 257,670,510 | |
| | | | | | | | |
| | | | |
SCHEDULES OF INVESTMENTS | | | 7 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Advantage U.S. Total Market V.I. Fund |
| | | | | | | | |
Security | | Shares | | | Value | |
Short-Term Securities — 2.3%(c)(e) | | | | | | | | |
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.80% | | | 2,402,648 | | | $ | 2,402,648 | |
SL Liquidity Series, LLC, Money Market Series, 2.16%(d) | | | 3,499,354 | | | | 3,499,704 | |
| | | | | | | | |
| | |
Total Short-Term Securities — 2.3% (Cost: $5,902,352) | | | | | | | 5,902,352 | |
| | | | | | | | |
| | |
Total Investments — 101.3% (Cost: $250,598,784) | | | | | | | 263,572,862 | |
| | | | | | | | |
Liabilities in Excess of Other Assets — (1.3)% | | | | | | | (3,259,827 | ) |
| | | | | | | | |
Net Assets — 100.0% | | | | | | $ | 260,313,035 | |
| | | | | | | | |
(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 six months ended June 30, 2018, 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 12/31/2017 | | | Net Activity | | | Shares Held at 06/30/2018 | | | Value at 06/30/2018 | | | Income | | | Net Realized Gain (Loss) (a) | | | Change in Unrealized Appreciation (Depreciation) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class | | | 1,558,684 | | | | 843,964 | | | | 2,402,648 | | | $ | 2,402,648 | | | $ | 16,467 | | | $ | — | | | $ | — | |
SL Liquidity Series, LLC, Money Market Series | | | 8,368,069 | | | | (4,868,715 | ) | | | 3,499,354 | | | | 3,499,704 | | | | 6,172 | (b) | | | 805 | | | | 70 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | 5,902,352 | | | $ | 22,639 | | | $ | 805 | | | $ | 70 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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. | |
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 | | | | 09/21/18 | | | $ | 2,858 | | | $ | (50,329 | ) |
| | | | | | | | | | | | | | | | |
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) | | $ | — | | | $ | — | | | $ | 50,329 | | | $ | — | | | $ | — | | | $ | — | | | $ | 50,329 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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. | |
| | |
8 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Advantage U.S. Total Market V.I. Fund |
For the six months ended June 30, 2018, the effect of derivative financial instruments in the Statement of Operations were 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 | | $ | — | | | $ | — | | | $ | 166,890 | | | $ | — | | | $ | — | | | $ | — | | | $ | 166,890 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Change In Unrealized Appreciation (Depreciation) on: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Futures contracts | | $ | — | | | $ | — | | | $ | (47,953 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | (47,953 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average Quarterly Balances of Outstanding Derivative Financial Instruments
| | | | |
Futures contracts: | | | | |
Average notional value of contracts — long | | $ | 2,750,340 | |
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 | |
Assets: | | | | | | | | | | | | | | | | |
Investments: | | | | | | | | | | | | | | | | |
Long-Term Investments | | | | | | | | | | | | | | | | |
Common Stocks(a) | | $ | 257,670,510 | | | $ | — | | | $ | — | | | $ | 257,670,510 | |
Short-Term Securities | | | 2,402,648 | | | | — | | | | — | | | | 2,402,648 | |
| | | | | | | | | | | | | | | | |
Subtotal | | $ | 260,073,158 | | | $ | — | | | $ | — | | | $ | 260,073,158 | |
| | | | | | | | | | | | | | | | |
Investments valued at NAV(b) | | | | | | | | | | | | | | | 3,499,704 | |
| | | | | | | | | | | | | | | | |
Total Investments | | | | | | | | | | | | | | $ | 263,572,862 | |
| | | | | | | | | | | | | | | | |
Derivative Financial Instruments(c) | | | | | | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | | | | |
Equity contracts | | $ | (50,329 | ) | | $ | — | | | $ | — | | | $ | (50,329 | ) |
| | | | | | | | | | | | | | | | |
| (a) | See above Schedule of Investments for values in each industry. | |
| (b) | As of June 30, 2018, 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 six months ended June 30, 2018, there were no transfers between levels.
See notes to financial statements.
| | | | |
SCHEDULES OF INVESTMENTS | | | 9 | |
Statement of Assets and Liabilities (unaudited)
June 30, 2018
| | | | |
| | BlackRock Advantage U.S. Total Market V.I. Fund | |
| |
ASSETS | | | | |
Investments at value — unaffiliated (including securities loaned at value of $3,371,053) (cost — $244,696,432) | | $ | 257,670,510 | |
Investments at value — affiliated (cost — $5,902,352) | | | 5,902,352 | |
Cash | | | 2,205 | |
Cash pledged: | | | | |
Futures contracts | | | 119,000 | |
Foreign currency at value (cost — $785) | | | 742 | |
Receivables: | | | | |
Investments sold | | | 3,285,336 | |
Securities lending income — affiliated | | | 1,484 | |
Capital shares sold | | | 12,510 | |
Dividends — affiliated | | | 3,260 | |
Dividends — unaffiliated | | | 165,981 | |
Variation margin on futures contracts | | | 3 | |
Prepaid expenses | | | 585 | |
| | | | |
Total assets | | | 267,163,968 | |
| | | | |
| |
LIABILITIES | | | | |
Cash collateral on securities loaned at value | | | 3,493,592 | |
Payables: | | | | |
Investments purchased | | | 3,022,309 | |
Capital shares redeemed | | | 85,977 | |
Distribution fees | | | 1,594 | |
Board realignment and consolidation | | | 3,643 | |
Investment advisory fees | | | 112,554 | |
Directors’ and Officer’s fees | | | 5,570 | |
Other affiliates | | | 525 | |
Other accrued expenses | | | 125,169 | |
| | | | |
Total liabilities | | | 6,850,933 | |
| | | | |
| |
NET ASSETS | | $ | 260,313,035 | |
| | | | |
| |
NET ASSETS CONSIST OF | | | | |
Paid-in capital | | $ | 229,975,022 | |
Undistributed net investment income | | | 1,512,356 | |
Accumulated net realized gain | | | 15,901,951 | |
Net unrealized appreciation (depreciation) | | | 12,923,706 | |
| | | | |
NET ASSETS | | $ | 260,313,035 | |
| | | | |
| |
NET ASSET VALUE | | | | |
Class I — Based on net assets of $251,552,719 and 9,579,422 shares outstanding, 100 million shares authorized, $0.10 par value | | $ | 26.26 | |
| | | | |
Class II — Based on net assets of $3,138,736 and 119,895 shares outstanding, 100 million shares authorized, $0.10 par value | | $ | 26.18 | |
| | | | |
Class III — Based on net assets of $5,621,580 and 293,184 shares outstanding, 10 million shares authorized, $0.10 par value | | $ | 19.17 | |
| | | | |
See notes to financial statements.
| | |
10 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statement of Operations (unaudited)
Six Months Ended June 30, 2018
| | | | |
| | BlackRock Advantage U.S. Total Market V.I. Fund | |
| |
INVESTMENT INCOME | | | | |
Dividends — affiliated | | $ | 16,467 | |
Dividends — unaffiliated | | | 2,196,072 | |
Securities lending income — affiliated — net | | | 6,172 | |
| | | | |
Total investment income | | | 2,218,711 | |
| | | | |
| |
EXPENSES | | | | |
Investment advisory | | | 994,036 | |
Transfer agent — class specific | | | 237,968 | |
Professional | | | 37,585 | |
Accounting services | | | 28,637 | |
Printing | | | 22,430 | |
Custodian | | | 16,103 | |
Distribution — class specific | | | 9,208 | |
Directors and Officer | | | 7,971 | |
Board realignment and consolidation | | | 3,643 | |
Transfer agent | | | 2,480 | |
Miscellaneous | | | 28,006 | |
| | | | |
Total expenses | | | 1,388,067 | |
Less: | | | | |
Fees waived and/or reimbursed by the Manager | | | (408,271 | ) |
Transfer agent fees waived and/or reimbursed — class specific | | | (237,946 | ) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 741,850 | |
| | | | |
Net investment income | | | 1,476,861 | |
| | | | |
| |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain from: | | | | |
Investments — affiliated | | | 805 | |
Investments — unaffiliated | | | 13,721,930 | |
Futures contracts | | | 166,890 | |
| | | | |
| | | 13,889,625 | |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | |
Investments — affiliated | | | 70 | |
Investments — unaffiliated | | | (8,750,206 | ) |
Foreign currency translations | | | (34 | ) |
Futures contracts | | | (47,953 | ) |
| | | | |
| | | (8,798,123 | ) |
| | | | |
Net realized and unrealized gain | | | 5,091,502 | |
| | | | |
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 6,568,363 | |
| | | | |
See notes to financial statements.
Statements of Changes in Net Assets
| | | | | | | | |
| | BlackRock Advantage U.S. Total Market V.I. Fund | |
| | Six Months Ended 06/30/2018 (Unaudited) | | | Year Ended 12/31/2017 | |
| | |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | |
| | |
OPERATIONS | | | | | | | | |
Net investment income | | $ | 1,476,861 | | | $ | 2,321,558 | |
Net realized gain | | | 13,889,625 | | | | 47,664,838 | |
Net change in unrealized appreciation (depreciation) | | | (8,798,123 | ) | | | (15,719,118 | ) |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 6,568,363 | | | | 34,267,278 | |
| | | | | | | | |
| | |
DISTRIBUTIONS TO SHAREHOLDERS(a) | | | | | | | | |
From net investment income: | | | | | | | | |
Class I | | | — | | | | (2,278,683 | ) |
Class II | | | — | | | | (22,476 | ) |
Class III | | | — | | | | (48,843 | ) |
From net realized gain: | | | | | | | | |
Class I | | | — | | | | (50,143,967 | ) |
Class II | | | — | | | | (616,770 | ) |
Class III | | | — | | | | (1,323,283 | ) |
| | | | | | | | |
Decrease in net assets resulting from distributions to shareholders | | | — | | | | (54,434,022 | ) |
| | | | | | | | |
| | |
CAPITAL SHARE TRANSACTIONS | | | | | | | | |
Net increase (decrease) in net assets derived from capital share transactions | | | (16,581,961 | ) | | | 30,391,828 | |
| | | | | | | | |
| | |
NET ASSETS | | | | | | | | |
Total increase (decrease) in net assets | | | (10,013,598 | ) | | | 10,225,084 | |
Beginning of period | | | 270,326,633 | | | | 260,101,549 | |
| | | | | | | | |
End of period | | $ | 260,313,035 | | | $ | 270,326,633 | |
| | | | | | | | |
Undistributed net investment income, end of period | | $ | 1,512,356 | | | $ | 35,495 | |
| | | | | | | | |
(a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
| | |
12 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Financial Highlights
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Advantage U.S. Total Market V.I. Fund | |
| | Class I | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 25.63 | | | | | | | $ | 27.93 | | | $ | 23.24 | | | $ | 26.96 | | | $ | 27.48 | | | $ | 19.39 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.15 | | | | | | | | 0.26 | (b) | | | 0.07 | | | | 0.07 | | | | 0.10 | | | | 0.09 | |
Net realized and unrealized gain (loss) | | | 0.48 | | | | | | | | 3.60 | | | | 5.43 | | | | (1.80 | ) | | | 1.35 | | | | 8.13 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | 0.63 | | | | | | | | 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 period | | $ | 26.26 | | | | | | | $ | 25.63 | | | $ | 27.93 | | | $ | 23.24 | | | $ | 26.96 | | | $ | 27.48 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(e) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 2.46 | %(f) | | | | | | | 14.05 | % | | | 23.65 | % | | | (6.61 | )% | | | 5.22 | % | | | 42.40 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.04 | %(g) | | | | | | | 1.05 | % | | | 1.01 | % | | | 1.01 | % | | | 1.02 | % | | | 1.00 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.55 | %(g) | | | | | | | 0.71 | % | | | 0.92 | % | | | 0.90 | % | | | 0.90 | % | | | 0.90 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.12 | %(g) | | | | | | | 0.91 | %(b) | | | 0.28 | % | | | 0.26 | % | | | 0.37 | % | | | 0.37 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 251,553 | | | | | | | $ | 261,872 | | | $ | 250,567 | | | $ | 220,681 | | | $ | 260,860 | | | $ | 279,345 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 73 | % | | | | | | | 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. |
(f) | Aggregate total return. |
See notes to financial statements.
Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Advantage U.S. Total Market V.I. Fund (continued) | |
| | Class II | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 25.57 | | | | | | | $ | 27.88 | | | $ | 23.21 | | | $ | 26.91 | | | $ | 27.43 | | | $ | 19.35 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.13 | | | | | | | | 0.20 | (b) | | | 0.03 | | | | 0.02 | | | | 0.05 | | | | 0.05 | |
Net realized and unrealized gain (loss) | | | 0.48 | | | | | | | | 3.60 | | | | 5.41 | | | | (1.77 | ) | | | 1.34 | | | | 8.12 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | 0.61 | | | | | | | | 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 period | | $ | 26.18 | | | | | | | $ | 25.57 | | | $ | 27.88 | | | $ | 23.21 | | | $ | 26.91 | | | $ | 27.43 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(e) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 2.39 | %(f) | | | | | | | 13.85 | % | | | 23.40 | % | | | (6.76 | )% | | | 5.03 | % | | | 42.25 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.23 | %(g) | | | | | | | 1.22 | % | | | 1.20 | % | | | 1.18 | % | | | 1.19 | % | | | 1.14 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.70 | %(g) | | | | | | | 0.88 | % | | | 1.09 | % | | | 1.07 | % | | | 1.07 | % | | | 1.04 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.97 | %(g) | | | | | | | 0.72 | %(b) | | | 0.10 | % | | | 0.08 | % | | | 0.20 | % | | | 0.22 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 3,139 | | | | | | | $ | 3,131 | | | $ | 3,351 | | | $ | 3,120 | | | $ | 3,764 | | | $ | 4,701 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 73 | % | | | | | | | 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. |
(f) | Aggregate total return. |
See notes to financial statements.
| | |
14 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Advantage U.S. Total Market V.I. Fund (continued) | |
| | Class III | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 18.74 | | | | | | | $ | 21.89 | | | $ | 18.36 | | | $ | 21.73 | | | $ | 22.50 | | | $ | 15.90 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.08 | | | | | | | | 0.14 | (b) | | | 0.01 | | | | 0.01 | | | | 0.04 | | | | 0.02 | |
Net realized and unrealized gain (loss) | | | 0.35 | | | | | | | | 2.82 | | | | 4.29 | | | | (1.43 | ) | | | 1.11 | | | | 6.67 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | 0.43 | | | | | | | | 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 period | | $ | 19.17 | | | | | | | $ | 18.74 | | | $ | 21.89 | | | $ | 18.36 | | | $ | 21.73 | | | $ | 22.50 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(e) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 2.29 | %(f) | | | | | | | 13.83 | % | | | 23.41 | % | | | (6.78 | )% | | | 5.07 | % | | | 42.08 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.32 | %(g) | | | | | | | 1.32 | % | | | 1.29 | % | | | 1.29 | % | | | 1.25 | % | | | 1.32 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.80 | %(g) | | | | | | | 0.95 | % | | | 1.11 | % | | | 1.09 | % | | | 1.09 | % | | | 1.09 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.87 | %(g) | | | | | | | 0.65 | %(b) | | | 0.08 | % | | | 0.06 | % | | | 0.18 | % | | | 0.13 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 5,621 | | | | | | | $ | 5,324 | | | $ | 6,184 | | | $ | 6,152 | | | $ | 8,002 | | | $ | 8,764 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 73 | % | | | | | | | 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. |
(f) | Aggregate total return. |
See notes to financial statements.
| | |
Notes to Financial Statements (unaudited) | | |
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 19 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 know 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 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 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.
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. |
| | |
16 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (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 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 June 30, 2018, 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.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 17 | |
Notes to Financial Statements (unaudited) (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 | |
Citigroup Global Markets, Inc. | | $ | 1,225,074 | | | $ | (1,225,074 | ) | | $ | — | |
Credit Suisse Securities (USA) LLC | | | 83,794 | | | | (83,794 | ) | | | — | |
Deutsche Bank Securities Inc. | | | 3,138 | | | | (3,138 | ) | | | — | |
JP Morgan Securities LLC | | | 1,582,698 | | | | (1,582,698 | ) | | | — | |
Morgan Stanley | | | 12,534 | | | | (12,534 | ) | | | — | |
State Street Bank & Trust Co. | | | 463,815 | | | | (463,815 | ) | | | — | |
| | | | | | | | | | | | |
| | $ | 3,371,053 | | | $ | (3,371,053 | ) | | $ | — | |
| | | | | | | | | | | | |
| (a) | Cash collateral with a value of $3,493,592 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. | 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) and 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. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts on the Statement of Assets and Liabilities.
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 Fund’s net assets:
| | | | |
Average Daily Net Assets | | Investment Advisory Fees | |
First $1 Billion | | | 0.75 | % |
$1 Billion — $3 Billion | | | 0.71 | |
| | |
18 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
| | | | |
Average Daily Net Assets | | Investment Advisory Fees | |
$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 six months ended June 30, 2018, 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 | | $ | 2,343 | | | $ | 6,865 | | | $ | 9,208 | |
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 six months ended June 30, 2018, 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 six months ended June 30, 2018, 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 | |
$ | 228,801 | | | | | $ | 3,353 | | | | | $ | 5,814 | | | | | $ | 237,968 | |
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 six months ended June 30, 2018, the amount waived was $838.
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 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 six months ended June 30, 2018, there were no fees waived by the Manager.
For the six months ended June 30, 2018, the Fund reimbursed the Manager $1,495 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 waived and/or reimbursed — class specific in the Statement of Operations. For the six months ended June 30, 2018, class specific expense waivers and/or reimbursements are as follows:
| | | | | | | | | | | | | | | | |
| | Class I | | | Class II | | | Class III | | | Total | |
Transfer Agent Fees Waived and/or Reimbursed | | $ | 228,779 | | | $ | 3,353 | | | $ | 5,814 | | | $ | 237,946 | |
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% |
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 19 | |
Notes to Financial Statements (unaudited) (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 majority of the outstanding voting securities of the Fund. For the six months ended June 30, 2018, the Manager waived $407,433, 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 six months ended June 30, 2018, the Fund paid BIM $996 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 lend and 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 six months ended June 30, 2018, the Fund did not participate in the lnterfund Lending Program
Directors and Officers: 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.
For the six months ended June 30, 2018, purchases and sales of investments, excluding short-term securities, were $191,806,543 and $206,688,694, respectively.
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 June 30, 2018, 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.
As of June 30, 2018, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
| | | | |
Tax cost | | $ | 251,069,000 | |
| | | | |
Gross unrealized appreciation | | $ | 20,854,552 | |
Gross unrealized depreciation | | | (8,401,019 | ) |
| | | | |
Net unrealized appreciation (depreciation) | | $ | 12,453,533 | |
| | | | |
| | |
20 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Although the Act does not amend any provisions directly related to the qualification or taxation of regulated investment companies (“RICs”), the Act does change the taxation of entities in which some RICs invest, the tax treatment of income derived from those entities and the taxation of RIC shareholders. While management does not anticipate significant impact to the Fund or to its shareholders, there is uncertainty in the application of certain provisions in the Act. Specifically, provisions in the Act may increase the amount of or accelerate the recognition of taxable income and may limit the deductibility of certain expenses by RICs. Until full clarity around these provisions is obtained, the impact on the Fund’s financial statements, if any, cannot be fully determined.
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, $2.25 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 $1.75 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 0.10% 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 2019 unless extended or renewed. Prior to April 19, 2018, the aggregate commitment amount was $2.1 billion and the fee was 0.12% per annum. Participating Funds paid an upfront commitment fee of 0.02% on the total commitment amounts, in addition to administration, legal and arrangement fees, which 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 six months ended June 30, 2018, the Fund did not borrow under the credit agreement.
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.
11. | CAPITAL SHARE TRANSACTIONS |
Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 | | | Year Ended 12/31/2017 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
Class I | | | | | | | | | | | | | | | | |
Shares sold | | | 155,750 | | | $ | 4,056,202 | | | | 289,177 | | | $ | 8,303,261 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 2,015,232 | | | | 52,422,649 | |
Shares redeemed | | | (793,008 | ) | | | (20,738,438 | ) | | | (1,058,658 | ) | | | (30,166,900 | ) |
| | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (637,258 | ) | | $ | (16,682,236 | ) | | | 1,245,751 | | | $ | 30,559,010 | |
| | | | | | | | | | | | | | | | |
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 21 | |
Notes to Financial Statements (unaudited) (continued)
| | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 | | | Year Ended 12/31/2017 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
| | | | |
Class II | | | | | | | | | | | | | | | | |
Shares sold | | | 57 | | | $ | 1,451 | | | | 836 | | | $ | 22,989 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 24,627 | | | | 639,247 | |
Shares redeemed | | | (2,605 | ) | | | (68,648 | ) | | | (23,204 | ) | | | (646,382 | ) |
| | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (2,548 | ) | | $ | (67,197 | ) | | | 2,259 | | | $ | 15,854 | |
| | | | | | | | | | | | | | | | |
| | | | |
Class III | | | | | | | | | | | | | | | | |
Shares sold | | | 30,949 | | | $ | 588,416 | | | | 20,673 | | | $ | 458,121 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 71,553 | | | | 1,372,125 | |
Shares redeemed | | | (21,862 | ) | | | (420,944 | ) | | | (90,639 | ) | | | (2,013,282 | ) |
| | | | | | | | | | | | | | | | |
Net increase (decrease) | | | 9,087 | | | $ | 167,472 | | | | 1,587 | | | $ | (183,036 | ) |
| | | | | | | | | | | | | | | | |
Total Net Increase (Decrease) | | | (630,719 | ) | | $ | (16,581,961 | ) | | | 1,249,597 | | | $ | 30,391,828 | |
| | | | | | | | | | | | | | | | |
Management’s evaluation of the impact of all subsequent events on the Fund’s financial statements was completed through the date the financial statements were issued and the following items were noted:
The Fund paid net investment income, short-term capital gain and long-term capital gain distributions in the following amounts per share on July 20, 2018 to the shareholders of record on July 18, 2018.
| | | | | | | | | | | | |
| | Net Investment Income | | | Short-Term Capital Gain | | | Long-Term Capital Gain | |
Class I | | $ | 0.000227 | | | $ | 0.236111 | | | $ | 0.016702 | |
Class II | | | 0.000227 | | | | 0.236111 | | | | 0.016702 | |
Class III | | | 0.000227 | | | | 0.236111 | | | | 0.016702 | |
| | |
22 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Glossary of Terms Used in this Report
| | |
Portfolio Abbreviations |
| |
REIT | | Real Estate Investment Trust |
S&P | | Standard & Poor’s |
| | | | |
GLOSSARYOF TERMS USEDINTHIS REPORT | | | 23 | |
JUNE 30, 2018
| | |
SEMI-ANNUAL REPORT (UNAUDITED) | | |
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 June 30, 2018 | | 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 six-month period ended June 30, 2018, the Fund outperformed its benchmark, the Russell 1000® Value Index.
What factors influenced performance?
The largest contributor to relative performance over the period was stock selection in the utilities sector. Most notably, an overweight position in independent power producer AES Corporation generated positive results. This was followed by stock selection in energy where overweight positions in ConocoPhillips and Devon Energy Corp. benefited from rising oil prices over the period. Lastly, stock selection within the financials sector added to relative performance, with contributions led by an overweight position in insurance holding XL Group.
The largest detractor over the six-month period was stock selection in the consumer staples sector, where weakness was driven by positions in food product companies such as General Mills, Inc. and J.M. Smucker Co. Underweight exposure to the real estate sector also weighed on relative performance. Finally, stock selection in the industrials sector hurt relative results, with an overweight position in Switzerland-based robotics and automation technology firm ABB Ltd. the biggest detractor.
Describe recent portfolio activity.
During the period, a combination of market movement and trading activity modestly increased the Fund’s allocations to the utilities and health care sectors, while reducing the Fund’s weights in financials and industrials.
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, financials, utilities and telecommunication services sectors. The Fund maintained underweight exposures to real estate, consumer discretionary, industrials and materials.
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 | | | 26 | % |
Health Care | | | 19 | |
Energy | | | 11 | |
Information Technology | | | 11 | |
Consumer Staples | | | 8 | |
Utilities | | | 7 | |
Telecommunication Services | | | 5 | |
Consumer Discretionary | | | 4 | |
Industrials | | | 4 | |
Materials | | | 2 | |
Short-Term Securities | | | 10 | |
Liabilities in Excess of Other Assets | | | (7 | ) |
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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Fund Summary as of June 30, 2018 (continued) | | BlackRock Basic Value V.I. Fund |
Performance Summary for the Period Ended June 30, 2018
| | | | | | | | | | | | | | | | | | | | |
| | 6-Month Total Returns (c) | | | Average Annual Total Returns | |
| | 1 Year (c) | | | | | | 5 Years (c) | | | 10 Years (c) | |
Class I(a)(b) | | | 0.26 | % | | | 9.38 | % | | | | | | | 9.06 | % | | | 8.13 | % |
Class II(a)(b) | | | 0.13 | | | | 9.22 | | | | | | | | 8.86 | | | | 7.95 | |
Class III(a)(b) | | | 0.06 | | | | 9.10 | | | | | | | | 8.74 | | | | 7.83 | |
Russell 1000® Value Index(d) | | | (1.69 | ) | | | 6.77 | | | | | | | | 10.34 | | | | 8.49 | |
| (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) | The Fund invests primarily in equity securities that Fund management believes are undervalued, which means their prices are less than Fund management believes they are worth. | |
| (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) | 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. | |
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 (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | | | | Beginning Account Value (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | Annualized Expense Ratio | |
Class I | | $ | 1,000.00 | | | $ | 1,002.60 | | | $ | 3.58 | | | | | | | $ | 1,000.00 | | | $ | 1,021.22 | | | $ | 3.61 | | | | 0.72 | % |
Class II | | | 1,000.00 | | | | 1,001.30 | | | | 4.42 | | | | | | | | 1,000.00 | | | | 1,020.38 | | | | 4.46 | | | | 0.89 | |
Class III | | | 1,000.00 | | | | 1,000.60 | | | | 4.96 | | | | | | | | 1,000.00 | | | | 1,019.84 | | | | 5.01 | | | | 1.00 | |
| (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 annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown). | |
See “Disclosure of Expenses” for further information on how expenses were calculated.
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 January 1, 2018 and held through June 30, 2018) 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 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.
| | |
Schedule of Investments (unaudited) June 30, 2018 | | BlackRock Basic Value V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Common Stocks — 96.7% | |
| |
Auto Components — 0.8% | | | | |
Lear Corp. | | | 20,747 | | | $ | 3,855,000 | |
| | | | | | | | |
Banks — 15.0% | | | | |
Bank of America Corp. | | | 334,611 | | | | 9,432,684 | |
Citigroup, Inc. | | | 201,354 | | | | 13,474,610 | |
JPMorgan Chase & Co. | | | 233,747 | | | | 24,356,438 | |
Regions Financial Corp. | | | 377,208 | | | | 6,706,758 | |
Wells Fargo & Co. | | | 254,089 | | | | 14,086,694 | |
| | | | | | | | |
| | | | | | | 68,057,184 | |
Beverages — 2.4% | | | | |
Molson Coors Brewing Co., Class B | | | 160,586 | | | | 10,926,271 | |
| | | | | | | | |
Biotechnology — 2.0% | | | | |
Biogen, Inc.(a) | | | 9,320 | | | | 2,705,037 | |
Gilead Sciences, Inc.(b) | | | 89,151 | | | | 6,315,457 | |
| | | | | | | | |
| | | | | | | 9,020,494 | |
Capital Markets — 3.3% | | | | |
E*TRADE Financial Corp.(a) | | | 70,538 | | | | 4,314,104 | |
Morgan Stanley | | | 180,619 | | | | 8,561,341 | |
Nasdaq, Inc. | | | 20,265 | | | | 1,849,586 | |
| | | | | | | | |
| | | | | | | 14,725,031 | |
Chemicals — 0.7% | | | | |
Akzo Nobel NV, ADR | | | 112,269 | | | | 3,186,194 | |
| | | | | | | | |
Communications Equipment — 4.6% | | | | |
Cisco Systems, Inc. | | | 480,717 | | | | 20,685,252 | |
| | | | | | | | |
Consumer Finance — 1.9% | | | | |
Ally Financial, Inc. | | | 26,008 | | | | 683,230 | |
Capital One Financial Corp. | | | 38,830 | | | | 3,568,477 | |
Discover Financial Services(b) | | | 34,111 | | | | 2,401,756 | |
SLM Corp.(a) | | | 163,896 | | | | 1,876,609 | |
| | | | | | | | |
| | | | | | | 8,530,072 | |
Containers & Packaging — 0.4% | | | | |
Owens-Illinois, Inc.(a)(b) | | | 98,301 | | | | 1,652,440 | |
| | | | | | | | |
Diversified Telecommunication Services — 2.6% | | | | |
Verizon Communications, Inc.(b) | | | 232,760 | | | | 11,710,156 | |
| | | | | | | | |
Electric Utilities — 4.5% | | | | |
Exelon Corp. | | | 200,579 | | | | 8,544,666 | |
FirstEnergy Corp.(b) | | | 204,241 | | | | 7,334,294 | |
PG&E Corp. | | | 103,159 | | | | 4,390,447 | |
| | | | | | | | |
| | | | | | | 20,269,407 | |
Electrical Equipment — 1.7% | | | | |
ABB Ltd., ADR(b) | | | 259,420 | | | | 5,647,574 | |
Hubbell, Inc. | | | 20,645 | | | | 2,183,002 | |
| | | | | | | | |
| | | | | | | 7,830,576 | |
Food & Staples Retailing — 2.0% | | | | |
Kroger Co. (The) | | | 131,207 | | | | 3,732,839 | |
Walgreens Boots Alliance, Inc.(b) | | | 91,443 | | | | 5,487,952 | |
| | | | | | | | |
| | | | | | | 9,220,791 | |
Food Products — 3.0% | | | | |
JM Smucker Co. (The) | | | 56,758 | | | | 6,100,350 | |
Kellogg Co. | | | 108,884 | | | | 7,607,725 | |
| | | | | | | | |
| | | | | | | 13,708,075 | |
Health Care Equipment & Supplies — 7.9% | | | | |
Baxter International, Inc. | | | 114,714 | | | | 8,470,482 | |
Koninklijke Philips NV, NYRS(b) | | | 134,351 | | | | 5,679,017 | |
Medtronic plc | | | 72,240 | | | | 6,184,466 | |
Zimmer Biomet Holdings, Inc.(b) | | | 139,265 | | | | 15,519,692 | |
| | | | | | | | |
| | | | | | | 35,853,657 | |
| | | | | | | | |
Security | | Shares | | | Value | |
Health Care Providers & Services — 1.2% | | | | |
Laboratory Corp. of America Holdings(a) | | | 31,208 | | | $ | 5,602,772 | |
| | | | | | | | |
Independent Power and Renewable Electricity Producers — 3.0% | | | | |
AES Corp.(b) | | | 1,005,936 | | | | 13,489,602 | |
| | | | | | | | |
Industrial Conglomerates — 1.3% | | | | |
General Electric Co. | | | 437,745 | | | | 5,957,709 | |
| | | | | | | | |
Insurance — 5.6% | | | | |
American International Group, Inc.(b) | | | 92,324 | | | | 4,895,018 | |
Assured Guaranty Ltd. | | | 69,840 | | | | 2,495,383 | |
Brighthouse Financial, Inc.(a) | | | 39,726 | | | | 1,591,821 | |
Hartford Financial Services Group, Inc. (The) | | | 132,485 | | | | 6,773,958 | |
Lincoln National Corp. | | | 64,978 | | | | 4,044,881 | |
XL Group Ltd. | | | 98,373 | | | | 5,503,969 | |
| | | | | | | | |
| | | | | | | 25,305,030 | |
Media — 2.8% | | | | |
Comcast Corp., Class A | | | 163,129 | | | | 5,352,262 | |
Interpublic Group of Cos., Inc. (The) | | | 313,856 | | | | 7,356,785 | |
| | | | | | | | |
| | | | | | | 12,709,047 | |
Metals & Mining — 1.4% | | | | |
Nucor Corp. | | | 58,493 | | | | 3,655,812 | |
Reliance Steel & Aluminum Co. | | | 29,407 | | | | 2,574,289 | |
| | | | | | | | |
| | | | | | | 6,230,101 | |
Oil, Gas & Consumable Fuels — 11.2% | | | | |
ConocoPhillips | | | 116,794 | | | | 8,131,198 | |
Devon Energy Corp. | | | 159,756 | | | | 7,022,874 | |
Marathon Oil Corp. | | | 149,527 | | | | 3,119,133 | |
Marathon Petroleum Corp. | | | 53,074 | | | | 3,723,672 | |
Royal Dutch Shell plc, ADR, Class A | | | 164,422 | | | | 11,382,935 | |
Suncor Energy, Inc. | | | 215,603 | | | | 8,770,730 | |
Valero Energy Corp. | | | 34,544 | | | | 3,828,511 | |
Williams Cos., Inc. (The) | | | 180,705 | | | | 4,898,913 | |
| | | | | | | | |
| | | | | | | 50,877,966 | |
Pharmaceuticals — 7.7% | | | | |
Novartis AG, ADR(b) | | | 129,320 | | | | 9,768,833 | |
Pfizer, Inc. | | | 688,786 | | | | 24,989,156 | |
| | | | | | | | |
| | | | | | | 34,757,989 | |
Road & Rail — 1.1% | | | | |
Norfolk Southern Corp. | | | 31,771 | | | | 4,793,291 | |
| | | | | |
Semiconductors & Semiconductor Equipment — 3.5% | | | | |
NXP Semiconductors NV(a) | | | 16,385 | | | | 1,790,389 | |
QUALCOMM, Inc. | | | 247,385 | | | | 13,883,246 | |
| | | | | |
| | | | | | | 15,673,635 | |
Software — 1.2% | | | | |
Oracle Corp. | | | 127,870 | | | | 5,633,952 | |
| | | | | |
Specialty Retail — 0.6% | | | | |
Lowe’s Cos., Inc. | | | 26,390 | | | | 2,522,092 | |
| | | | | |
Technology Hardware, Storage & Peripherals — 1.4% | | | | |
Apple, Inc. | | | 34,530 | | | | 6,391,848 | |
| | | | | |
Wireless Telecommunication Services — 1.9% | | | | |
Telephone & Data Systems, Inc. | | | 279,437 | | | | 7,662,163 | |
United States Cellular Corp.(a) | | | 22,201 | | | | 822,325 | |
| | | | | |
| | | | | | | 8,484,488 | |
Total Common Stocks — 96.7% (Cost: $374,570,070) | | | | 437,660,122 | |
| | | | | |
Total Long-Term Investments — 96.7% (Cost: $374,570,070) | | | | 437,660,122 | |
| | | | | |
| | |
4 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Basic Value V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Short-Term Securities — 10.2%(c)(e) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.80% | | | 15,032,459 | | | $ | 15,032,459 | |
SL Liquidity Series, LLC, Money Market Series, 2.16%(d) | | | 31,068,259 | | | | 31,071,365 | |
| | | | | |
Total Short-Term Securities — 10.2% (Cost: $46,103,234) | | | | 46,103,824 | |
| | | | | |
Total Investments — 106.9% (Cost: $420,673,304) | | | | 483,763,946 | |
Liabilities in Excess of Other Assets — (6.9)% | | | | (31,030,541 | ) |
| | | | | |
Net Assets — 100.0% | | | $ | 452,733,405 | |
| | | | | |
(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 six months ended June 30, 2018, 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 12/31/17 | | | Net Activity | | | Shares Held at 06/30/18 | | | Value at 06/30/18 | | | Income | | | Net Realized Gain (Loss) (a) | | | Change in Unrealized Appreciation (Depreciation) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class | | | 3,156,745 | | | | 11,875,714 | | | | 15,032,459 | | | $ | 15,032,459 | | | $ | 40,008 | | | $ | — | | | $ | — | |
SL Liquidity Series, LLC, Money Market Series | | | 28,837,798 | | | | 2,230,461 | | | | 31,068,259 | | | | 31,071,365 | | | | 27,991 | (b) | | | 3,355 | | | | 1,197 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | 46,103,824 | | | $ | 67,999 | | | $ | 3,355 | | | $ | 1,197 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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.
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(a) | | $ | 437,660,122 | | | $ | — | | | $ | — | | | $ | 437,660,122 | |
Short-Term Securities(a) | | | 15,032,459 | | | | — | | | | — | | | | 15,032,459 | |
| | | | | | | | | | | | | | | | |
Subtotal | | $ | 452,692,581 | | | $ | — | | | $ | — | | | $ | 452,692,581 | |
| | | | | | | | | | | | | | | | |
Investments valued at NAV(b) | | | | | | | | | | | | | | $ | 31,071,365 | |
| | | | | | | | | | | | | | | | |
Total Investments | | | | | | | | | | | | | | $ | 483,763,946 | |
| | | | | | | | | | | | | | | | |
| (a) | See above Schedule of Investments for values in each Industry. | |
| (b) | As of June 30, 2018, 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 six months ended June 30, 2018, there were no transfers between levels.
See notes to financial statements.
| | | | |
SCHEDULE OF INVESTMENTS | | | 5 | |
Statement of Assets and Liabilities (unaudited)
June 30, 2018
| | | | |
| | BlackRock Basic Value V.I. Fund | |
| |
ASSETS | | | | |
Investments at value — unaffiliated (including securities loaned at value of $30,467,331) (cost — $374,570,070) | | $ | 437,660,122 | |
Investments at value — affiliated (cost — $46,103,234) | | | 46,103,824 | |
Cash | | | 41,761 | |
Receivables: | | | | |
Investments sold | | | 649,227 | |
Securities lending income — affiliated | | | 4,256 | |
Capital shares sold | | | 29,901 | |
Dividends — affiliated | | | 17,277 | |
Dividends — unaffiliated | | | 252,006 | |
Prepaid expenses | | | 1,039 | |
| | | | |
Total assets | | | 484,759,413 | |
| | | | |
| |
LIABILITIES | | | | |
Cash collateral on securities loaned at value | | | 31,069,384 | |
Payables: | | | | |
Investments purchased | | | 232,238 | |
Capital shares redeemed | | | 275,936 | |
Distribution fees | | | 15,687 | |
Board realignment and consolidation | | | 6,462 | |
Investment advisory fees | | | 267,089 | |
Directors’ and Officer’s fees | | | 3,145 | |
Other affiliates | | | 1,491 | |
Other accrued expenses | | | 154,576 | |
| | | | |
Total liabilities | | | 32,026,008 | |
| | | | |
| |
NET ASSETS | | $ | 452,733,405 | |
| | | | |
| |
NET ASSETS CONSIST OF | | | | |
Paid-in capital | | $ | 363,078,737 | |
Undistributed net investment income | | | 4,353,611 | |
Accumulated net realized gain | | | 22,210,415 | |
Net unrealized appreciation (depreciation) | | | 63,090,642 | |
| | | | |
NET ASSETS | | $ | 452,733,405 | |
| | | | |
| |
NET ASSET VALUE | | | | |
Class I — Based on net assets of $374,939,490 and 23,976,215 shares outstanding, 300 million shares authorized, $0.10 par value | | $ | 15.64 | |
| | | | |
Class II — Based on net assets of $4,654,472 and 298,797 shares outstanding, 100 million shares authorized, $0.10 par value | | $ | 15.58 | |
| | | | |
Class III — Based on net assets of $73,139,443 and 4,720,655 shares outstanding, 100 million shares authorized, $0.10 par value | | $ | 15.49 | |
| | | | |
See notes to financial statements.
| | |
6 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statement of Operations (unaudited)
Six Months Ended June 30, 2018
| | | | |
| | BlackRock Basic Value V.I. Fund | |
| |
INVESTMENT INCOME | | | | |
Dividends — affiliated | | $ | 40,008 | |
Dividends — unaffiliated | | | 5,986,307 | |
Securities lending income — affiliated — net | | | 27,991 | |
Foreign taxes withheld | | | (16,459 | ) |
| | | | |
Total investment income | | | 6,037,847 | |
| | | | |
| |
EXPENSES | | | | |
Investment advisory | | | 1,396,177 | |
Transfer agent — class specific | | | 464,091 | |
Distribution — class specific | | | 98,219 | |
Professional | | | 36,217 | |
Accounting services | | | 32,982 | |
Printing | | | 25,529 | |
Directors and Officer | | | 10,834 | |
Custodian | | | 8,305 | |
Board realignment and consolidation | | | 6,462 | |
Transfer agent | | | 2,479 | |
Miscellaneous | | | 17,289 | |
| | | | |
Total expenses | | | 2,098,584 | |
Less: | | | | |
Fees waived and/or reimbursed by the Manager | | | (2,956 | ) |
Transfer agent fees waived and/or reimbursed — class specific | | | (312,639 | ) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 1,782,989 | |
| | | | |
Net investment income | | | 4,254,858 | |
| | | | |
| |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain from: | | | | |
Investments — affiliated | | | 3,355 | |
Investments — unaffiliated | | | 19,815,003 | |
| | | | |
| | | 19,818,358 | |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | |
Investments — affiliated | | | 1,197 | |
Investments — unaffiliated | | | (22,826,404 | ) |
| | | | |
| | | (22,825,207 | ) |
| | | | |
Net realized and unrealized loss | | | (3,006,849 | ) |
| | | | |
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 1,248,009 | |
| | | | |
See notes to financial statements.
Statements of Changes in Net Assets
| | | | | | | | |
| | BlackRock Basic Value V.I. Fund | |
| | Six Months Ended 06/30/2018 (unaudited) | | | Year Ended 12/31/2017 | |
| | |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | |
| | |
OPERATIONS | | | | | | | | |
Net investment income | | $ | 4,254,858 | | | $ | 6,925,805 | |
Net realized gain | | | 19,818,358 | | | | 20,230,521 | |
Net change in unrealized appreciation (depreciation) | | | (22,825,207 | ) | | | 10,057,649 | |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 1,248,009 | | | | 37,213,975 | |
| | | | | | | | |
| | |
DISTRIBUTIONS TO SHAREHOLDERS(a) | | | | | | | | |
From net investment income: | | | | | | | | |
Class I | | | — | | | | (5,893,355 | ) |
Class II | | | — | | | | (64,132 | ) |
Class III | | | — | | | | (909,408 | ) |
From net realized gain: | | | | | | | | |
Class I | | | — | | | | (15,171,206 | ) |
Class II | | | — | | | | (189,626 | ) |
Class III | | | — | | | | (3,173,178 | ) |
| | | | | | | | |
Decrease in net assets resulting from distributions to shareholders | | | — | | | | (25,400,905 | ) |
| | | | | | | | |
| | |
CAPITAL SHARE TRANSACTIONS | | | | | | | | |
Net decrease in net assets derived from capital share transactions | | | (29,518,855 | ) | | | (59,465,107 | ) |
| | | | | | | | |
| | |
NET ASSETS | | | | | | | | |
Total decrease in net assets | | | (28,270,846 | ) | | | (47,652,037 | ) |
Beginning of period | | | 481,004,251 | | | | 528,656,288 | |
| | | | | | | | |
End of period | | $ | 452,733,405 | | | $ | 481,004,251 | |
| | | | | | | | |
Undistributed net investment income, end of period | | $ | 4,353,611 | | | $ | 98,753 | |
| | | | | | | | |
(a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
| | |
8 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Financial Highlights
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Basic Value V.I. Fund | |
| | Class I | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 15.60 | | | | | | | $ | 15.21 | | | $ | 13.36 | | | $ | 16.42 | | | $ | 17.44 | | | $ | 12.80 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.15 | | | | | | | | 0.22 | | | | 0.23 | | | | 0.24 | | | | 0.25 | | | | 0.22 | |
Net realized and unrealized gain (loss) | | | (0.11 | ) | | | | | | | 1.03 | | | | 2.19 | | | | (1.20 | ) | | | 1.51 | | | | 4.65 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | 0.04 | | | | | | | | 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 period | | $ | 15.64 | | | | | | | $ | 15.60 | | | $ | 15.21 | | | $ | 13.36 | | | $ | 16.42 | | | $ | 17.44 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(c) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 0.26 | %(d) | | | | | | | 8.24 | % | | | 18.19 | % | | | (5.95 | )% | | | 9.93 | % | | | 38.07 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 0.85 | %(e)(f) | | | | | | | 0.85 | %(f) | | | 0.84 | % | | | 0.86 | % | | | 0.85 | % | | | 0.84 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.72 | %(e)(f) | | | | | | | 0.73 | %(f) | | | 0.73 | % | | | 0.73 | % | | | 0.72 | % | | | 0.72 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.88 | %(e)(f) | | | | | | | 1.47 | %(f) | | | 1.63 | % | | | 1.47 | % | | | 1.40 | % | | | 1.41 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 374,939 | | | | | | | $ | 397,180 | | | $ | 409,216 | | | $ | 393,370 | | | $ | 468,876 | | | $ | 448,299 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 13 | % | | | | | | | 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) | Aggregate total return. |
(f) | Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%. |
See notes to financial statements.
Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Basic Value V.I. Fund (continued) | |
| | Class II | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 15.56 | | | | | | | $ | 15.16 | | | $ | 13.33 | | | $ | 16.38 | | | $ | 17.40 | | | $ | 12.77 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.13 | | | | | | | | 0.20 | | | | 0.20 | | | | 0.21 | | | | 0.22 | | | | 0.19 | |
Net realized and unrealized gain (loss) | | | (0.11 | ) | | | | | | | 1.03 | | | | 2.18 | | | | (1.18 | ) | | | 1.51 | | | | 4.64 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | 0.02 | | | | | | | | 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 period | | $ | 15.58 | | | | | | | $ | 15.56 | | | $ | 15.16 | | | $ | 13.33 | | | $ | 16.38 | | | $ | 17.40 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(c) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 0.13 | %(d) | | | | | | | 8.15 | % | | | 17.88 | % | | | (6.07 | )% | | | 9.75 | % | | | 37.85 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.02 | %(e)(f) | | | | | | | 1.02 | %(f) | | | 1.02 | % | | | 1.02 | % | | | 1.02 | % | | | 1.01 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.89 | %(e)(f) | | | | | | | 0.90 | %(f) | | | 0.90 | % | | | 0.90 | % | | | 0.89 | % | | | 0.89 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.70 | %(e)(f) | | | | | | | 1.29 | %(f) | | | 1.47 | % | | | 1.30 | % | | | 1.23 | % | | | 1.24 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 4,654 | | | | | | | $ | 4,928 | | | $ | 5,280 | | | $ | 5,466 | | | $ | 6,233 | | | $ | 6,715 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 13 | % | | | | | | | 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) | Aggregate total return. |
(f) | Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%. |
See notes to financial statements.
| | |
10 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Basic Value V.I. Fund (continued) | |
| | Class III | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 15.48 | | | | | | | $ | 15.08 | | | $ | 13.28 | | | $ | 16.32 | | | $ | 17.35 | | | $ | 12.74 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.12 | | | | | | | | 0.18 | | | | 0.18 | | | | 0.19 | | | | 0.20 | | | | 0.17 | |
Net realized and unrealized gain (loss) | | | (0.11 | ) | | | | | | | 1.02 | | | | 2.17 | | | | (1.17 | ) | | | 1.50 | | | | 4.62 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | 0.01 | | | | | | | | 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 period | | $ | 15.49 | | | | | | | $ | 15.48 | | | $ | 15.08 | | | $ | 13.28 | | | $ | 16.32 | | | $ | 17.35 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(c) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 0.06 | %(d) | | | | | | | 8.01 | % | | | 17.72 | % | | | (6.15 | )% | | | 9.63 | % | | | 37.65 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.15 | %(e)(f) | | | | | | | 1.16 | %(f) | | | 1.04 | % | | | 1.13 | % | | | 1.11 | % | | | 1.12 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 1.00 | %(e)(f) | | | | | | | 1.01 | %(f) | | | 1.00 | % | | | 1.01 | % | | | 1.00 | % | | | 1.00 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.60 | %(e)(f) | | | | | | | 1.16 | %(f) | | | 1.25 | % | | | 1.19 | % | | | 1.11 | % | | | 1.14 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 73,139 | | | | | | | $ | 78,896 | | | $ | 114,160 | | | $ | 45,197 | | | $ | 54,394 | | | $ | 47,184 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 13 | % | | | | | | | 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) | Aggregate total return. |
(f) | Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%. |
See notes to financial statements.
Notes to Financial Statements (unaudited)
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 19 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
| | |
12 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (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. 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 June 30, 2018, 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.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 13 | |
Notes to Financial Statements (unaudited) (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. | | $ | 5,907,117 | | | $ | (5,904,792 | ) | | $ | 2,325 | |
Credit Suisse Securities (USA) LLC | | | 7,489,999 | | | | (7,489,999 | ) | | | — | |
JP Morgan Securities LLC | | | 10,416,357 | | | | (10,416,357 | ) | | | — | |
Merrill Lynch, Pierce, Fenner & Smith | | | 3,935,416 | | | | (3,935,416 | ) | | | — | |
Morgan Stanley | | | 317,842 | | | | (317,842 | ) | | | — | |
State Street Bank & Trust Co. | | | 2,400,600 | | | | (2,400,600 | ) | | | — | |
| | | | | | | | | | | | |
| | $ | 30,467,331 | | | $ | (30,465,006 | ) | | $ | 2,325 | |
| | | | | | | | | | | | |
| (a) | Cash collateral with a value of $31,069,384 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 six months ended June 30, 2018, 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 | | $ | 3,581 | | | $ | 94,638 | | | $ | 98,219 | |
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 six months ended June 30, 2018, 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 six months ended June 30, 2018, 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 | |
$ | 366,455 | | | | | $ | 5,096 | | | | | $ | 92,540 | | | | | $ | 464,091 | |
| | |
14 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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 six months ended June 30, 2018, the amount waived was $2,956.
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 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 six months ended June 30, 2018, there were no fees waived by the Manager.
For the six months ended June 30, 2018, the Fund reimbursed the Manager $2,549 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, 2019, 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 waived and/or reimbursed — class specific in the Statement of Operations. For the six months ended June 30, 2018, class specific expense waivers and/or reimbursements were as follows:
| | | | | | | | | | | | | | | | |
| | Class I | | | Class II | | | Class III | | | Total | |
Transfer Agent Fees Waived and/or Reimbursed | | $ | 250,983 | | | $ | 3,186 | | | $ | 58,470 | | | $ | 312,639 | |
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, 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 six months ended June 30, 2018, 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 six months ended June 30, 2018, the Fund paid BIM $4,243 for securities lending agent services.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 15 | |
Notes to Financial Statements (unaudited) (continued)
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 six months ended June 30, 2018, the Fund did not participate in the Interfund Lending Program.
Directors and Officers: 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.
For the six months ended June 30, 2018, purchases and sales of investments, excluding short-term securities, were $60,856,638 and $98,309,271, respectively.
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 June 30, 2018, 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.
As of June 30, 2018, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:
| | | | |
Tax cost | | $ | 423,712,426 | |
| | | | |
Gross unrealized appreciation | | $ | 72,676,964 | |
Gross unrealized depreciation | | | (12,625,444 | ) |
| | | | |
Net unrealized appreciation (depreciation) | | $ | 60,051,520 | |
| | | | |
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Although the Act does not amend any provisions directly related to the qualification or taxation of regulated investment companies (“RICs”), the Act does change the taxation of entities in which some RICs invest, the tax treatment of income derived from those entities and the taxation of RIC shareholders. While management does not anticipate significant impact to the Fund or to its shareholders, there is uncertainty in the application of certain provisions in the Act. Specifically, provisions in the Act may increase the amount of or accelerate the recognition of taxable income and may limit the deductibility of certain expenses by RICs. Until full clarity around these provisions is obtained, the impact on the Fund’s financial statements, if any, cannot be fully determined.
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, $2.25 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 $1.75 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 0.10% 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 2019 unless extended or renewed. Prior to April 19, 2018, the aggregate commitment amount was $2.1 billion and the fee was 0.12% per annum. Participating Funds paid an upfront commitment fee of 0.02% on the total commitment amounts, in addition to administration, legal and arrangement fees, which 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 six months ended June 30, 2018, the Fund did not borrow under the credit agreement.
| | |
16 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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 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.
10. | CAPITAL SHARE TRANSACTIONS |
Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 | | | Year Ended 12/31/2017 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
Class I | | | | | | | | | | | | | | | | |
Shares sold | | | 265,167 | | | $ | 4,116,904 | | | | 654,115 | | | $ | 9,987,597 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 1,355,509 | | | | 21,064,561 | |
Shares redeemed | | | (1,743,745 | ) | | | (27,449,121 | ) | | | (3,465,286 | ) | | | (53,113,894 | ) |
| | | | | | | | | | | | | | | | |
Net decrease | | | (1,478,578 | ) | | $ | (23,332,217 | ) | | | (1,455,662 | ) | | $ | (22,061,736 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Class II | | | | | | | | | | | | | | | | |
Shares sold | | | 1,668 | | | $ | 25,550 | | | | 5,727 | | | $ | 86,583 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 16,392 | | | | 253,758 | |
Shares redeemed | | | (19,683 | ) | | | (312,963 | ) | | | (53,552 | ) | | | (815,043 | ) |
| | | | | | | | | | | | | | | | |
Net decrease | | | (18,015 | ) | | $ | (287,413 | ) | | | (31,433 | ) | | $ | (474,702 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Class III | | | | | | | | | | | | | | | | |
Shares sold | | | 91,427 | | | $ | 1,419,888 | | | | 805,717 | | | $ | 12,136,647 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 265,245 | | | | 4,082,586 | |
Shares redeemed | | | (467,164 | ) | | | (7,319,113 | ) | | | (3,542,663 | ) | | | (53,147,902 | ) |
| | | | | | | | | | | | | | | | |
Net decrease | | | (375,737 | ) | | $ | (5,899,225 | ) | | | (2,471,701 | ) | | $ | (36,928,669 | ) |
| | | | | | | | | | | | | | | | |
Total Net Decrease | | | (1,872,330 | ) | | $ | (29,518,855 | ) | | | (3,958,796 | ) | | $ | (59,465,107 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 17 | |
Notes to Financial Statements (unaudited) (continued)
Management’s evaluation of the impact of all subsequent events on the Fund’s financial statements was completed through the date the financial statements were issued and the following items were noted:
The Fund paid long-term capital gain distributions in the following amounts per share on July 20, 2018 to the shareholders of record on July 18, 2018.
| | | | |
| | Long-Term Capital Gain | |
Class I | | $ | 0.192114 | |
Class II | | | 0.192114 | |
Class III | | | 0.192114 | |
| | |
18 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Glossary of Terms Used in this Report
| | |
Portfolio Abbreviations |
| |
ADR | | American Depositary Receipt |
NYRS | | New York Registered Shares |
| | | | |
GLOSSARYOF TERMS USEDINTHIS REPORT | | | 19 | |
JUNE 30, 2018
| | |
SEMI-ANNUAL REPORT (UNAUDITED) | | |
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 June 30, 2018 | | 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 six-month period ended June 30, 2018, the Fund outperformed its benchmark, the 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?
In sector terms, the largest contributor to the Fund’s relative performance was consumer discretionary, where internet & direct marketing retail holdings had the most significant impact on results. Selection in hotels, restaurants & leisure and a lack of exposure to media also added value within the sector. The industrials and health care sectors were additional sources of positive performance. An underweight to machinery and selection in conglomerates benefited performance in industrials, while an underweight to biotechnology and positioning in pharmaceuticals drove gains in health care. Finally, positioning in consumer staples proved advantageous.
At the individual stock level, Netflix Inc. and Amazon.com Inc. were the largest contributors. Netflix outperformed after a series of strong earnings reports, and the company continues to gain scale based on original content and new subscribers. Amazon continued to perform well after a series of solid earnings reports and acceleration in several of its key segments.
While the Fund’s overall security selection was notably strong for the period, an overweight position to financials weighed on results. In particular, bank and diversified financial services holdings had the most negative impact.
A position in Chinese internet conglomerate Tencent Holding Ltd. was the leading detractor. The stock pulled back amid fears of a slowdown in PC gaming and a near-term profit margin contraction. The Fund has maintained its overweight position on a positive view of the company’s growth opportunities especially in payments, mobile gaming and advertising. An underweight to Apple Inc. also detracted as the company outperformed during the period. The underweight to Apple is based on the view that a mature smartphone market, increasing competition and a lack of new innovative products will limit the company’s growth once the most recent iPhone product cycles are complete.
Describe recent portfolio activity.
Due to a combination of portfolio trading activity and market movement during the six-month period, the Fund’s weighting in consumer discretionary increased, particularly within internet & direct marketing retail. The Fund’s information technology (“IT”) exposure also increased, namely within software and IT services. Exposure to materials decreased, largely with respect to chemicals. Financials, particularly banks, and health care, primarily biotechnology, saw declines as well.
Describe portfolio positioning at period end.
As of period end, the Fund’s largest overweight relative to the Russell 1000® Growth Index was the consumer discretionary sector, followed by financials. Industrials was the largest sector underweight, followed by consumer staples and health care.
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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Fund Summary as of June 30, 2018 (continued) | | BlackRock Capital Appreciation V.I. Fund |
Performance Summary for the Period Ended June 30, 2018
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 6-Month Total Returns (c) | | | | | | Average Annual Total Returns | |
| | | | | 1 Year (c) | | | | | | 5 Years (c) | | | | | | 10 Years (c) | |
Class I(a)(b) | | | 15.01 | % | | | | | | | 30.40 | % | | | | | | | 17.17 | % | | | | | | | 10.54 | % |
Class III(a)(b) | | | 14.75 | | | | | | | | 30.07 | | | | | | | | 16.84 | | | | | | | | 10.26 | (d) |
Russell 1000® Growth Index(e) | | | 7.25 | | | | | | | | 22.51 | | | | | | | | 16.36 | | | | | | | | 11.83 | |
S&P 500® Index(f) | | | 2.65 | | | | | | | | 14.37 | | | | | | | | 13.42 | | | | | | | | 10.17 | |
| (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) | 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) | 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 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. | |
| (e) | 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. | |
| (f) | An unmanaged index that covers 500 leading companies and captures approximately 80% coverage of available market capitalization. | |
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 (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | | | | Beginning Account Value (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | Annualized Expense Ratio | |
Class I | | $ | 1,000.00 | | | $ | 1,150.10 | | | $ | 4.21 | | | | | | | $ | 1,000.00 | | | $ | 1,020.88 | | | $ | 3.96 | | | | 0.79 | % |
Class III | | | 1,000.00 | | | | 1,147.50 | | | | 5.59 | | | | | | | | 1,000.00 | | | | 1,019.59 | | | | 5.26 | | | | 1.05 | |
| (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 annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 181/365 (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 as of June 30, 2018 (continued) | | BlackRock Capital Appreciation V.I. Fund |
Portfolio Information
SECTOR ALLOCATION
| | | | |
Sector | | Percent of Net Assets | |
Information Technology | | | 42 | % |
Consumer Discretionary | | | 23 | |
Health Care | | | 12 | |
Industrials | | | 8 | |
Financials | | | 6 | |
Consumer Staples | | | 4 | |
Materials | | | 3 | |
Energy | | | 1 | |
Real Estate | | | 1 | |
Telecommunication Services | | | — | (a) |
Short-Term Securities | | | 2 | |
Liabilities in Excess of Other Assets | | | (2 | ) |
| (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.
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 January 1, 2018 and held through June 30, 2018) 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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) June 30, 2018 | | 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. | | | 9,521 | | | $ | 3,286,078 | |
| | | | | | | | |
Automobiles — 1.1% | |
Tesla, Inc.(a) | | | 10,143 | | | | 3,478,542 | |
| | | | | | | | |
Banks — 1.9% | |
Bank of America Corp. | | | 112,155 | | | | 3,161,649 | |
First Republic Bank | | | 30,349 | | | | 2,937,480 | |
| | | | | | | | |
| | | | | | | 6,099,129 | |
Beverages — 2.8% | |
Constellation Brands, Inc., Class A | | | 27,192 | | | | 5,951,513 | |
Dr Pepper Snapple Group, Inc. | | | 22,684 | | | | 2,767,448 | |
| | | | | | | | |
| | | | | | | 8,718,961 | |
Biotechnology — 0.9% | |
Vertex Pharmaceuticals, Inc.(a) | | | 17,030 | | | | 2,894,419 | |
| | | | | | | | |
Capital Markets — 3.0% | |
E*TRADE Financial Corp.(a) | | | 80,000 | | | | 4,892,800 | |
S&P Global, Inc. | | | 23,271 | | | | 4,744,724 | |
| | | | | | | | |
| | | | | | | 9,637,524 | |
Chemicals — 1.8% | |
DowDuPont, Inc. | | | 27,700 | | | | 1,825,984 | |
Sherwin-Williams Co. (The) | | | 9,408 | | | | 3,834,419 | |
| | | | | | | | |
| | | | | | | 5,660,403 | |
Construction Materials — 1.2% | |
Vulcan Materials Co. | | | 28,421 | | | | 3,668,014 | |
| | | | | | | | |
Diversified Financial Services — 1.2% | |
Berkshire Hathaway, Inc., Class B(a) | | | 20,838 | | | | 3,889,413 | |
| | | | | | | | |
Diversified Telecommunication Services — 0.4% | |
Zayo Group Holdings, Inc.(a) | | | 34,928 | | | | 1,274,173 | |
| | | | | | | | |
Electrical Equipment — 0.4% | |
Rockwell Automation, Inc.(b) | | | 8,441 | | | | 1,403,147 | |
| | | | | | | | |
Equity Real Estate Investment Trusts (REITs) — 1.4% | |
SBA Communications Corp.(a) | | | 27,402 | | | | 4,524,618 | |
| | | | | | | | |
Food Products — 0.8% | |
Bunge Ltd. | | | 36,930 | | | | 2,574,390 | |
| | | | | | | | |
Health Care Equipment & Supplies — 3.9% | |
Becton Dickinson and Co. | | | 26,912 | | | | 6,447,039 | |
Boston Scientific Corp.(a) | | | 184,139 | | | | 6,021,345 | |
| | | | | | | | |
| | | | | | | 12,468,384 | |
Health Care Providers & Services — 4.6% | |
UnitedHealth Group, Inc. | | | 58,687 | | | | 14,398,269 | |
| | | | | | | | |
Hotels, Restaurants & Leisure — 1.1% | |
Domino’s Pizza, Inc. | | | 12,797 | | | | 3,610,930 | |
| | | | | | | | |
Household Durables — 0.8% | |
Mohawk Industries, Inc.(a) | | | 11,040 | | | | 2,365,541 | |
| | | | | | | | |
Industrial Conglomerates — 1.8% | |
Honeywell International, Inc. | | | 19,090 | | | | 2,749,915 | |
Roper Technologies, Inc. | | | 10,717 | | | | 2,956,927 | |
| | | | | | | | |
| | | | | | | 5,706,842 | |
Internet & Direct Marketing Retail — 15.6%(a) | |
Amazon.com, Inc. | | | 16,778 | | | | 28,519,245 | |
Booking Holdings, Inc. | | | 4,759 | | | | 9,646,921 | |
Netflix, Inc. | | | 28,238 | | | | 11,053,200 | |
| | | | | | | | |
| | | | | | | 49,219,366 | |
| | | | | | | | |
Security | | Shares | | | Value | |
Internet Software & Services — 13.7% | |
Alibaba Group Holding Ltd., ADR(a)(b) | | | 11,931 | | | $ | 2,213,559 | |
Alphabet, Inc., Class A(a) | | | 14,097 | | | | 15,918,191 | |
Facebook, Inc., Class A(a) | | | 51,973 | | | | 10,099,393 | |
MercadoLibre, Inc.(b) | | | 14,317 | | | | 4,279,781 | |
Tencent Holdings Ltd. | | | 218,200 | | | | 10,957,001 | |
| | | | | | | | |
| | | | | | | 43,467,925 | |
IT Services — 8.5% | |
Mastercard, Inc., Class A | | | 34,739 | | | | 6,826,908 | |
PayPal Holdings, Inc.(a) | | | 61,372 | | | | 5,110,447 | |
Visa, Inc., Class A | | | 113,347 | | | | 15,012,810 | |
| | | | | | | | |
| | | | | | | 26,950,165 | |
Life Sciences Tools & Services — 1.5% | |
Illumina, Inc.(a) | | | 17,054 | | | | 4,763,012 | |
| | | | | | | | |
Machinery — 0.2% | |
Xylem, Inc. | | | 7,100 | | | | 478,398 | |
| | | | | | | | |
Oil, Gas & Consumable Fuels — 1.0% | |
Pioneer Natural Resources Co. | | | 16,262 | | | | 3,077,421 | |
| | | | | | | | |
Pharmaceuticals — 1.0% | |
Zoetis, Inc. | | | 35,186 | | | | 2,997,495 | |
| | | | | | | | |
Professional Services — 3.0% | |
CoStar Group, Inc.(a) | | | 13,568 | | | | 5,598,564 | |
Equifax, Inc. | | | 32,099 | | | | 4,015,906 | |
| | | | | | | | |
| | | | | | | 9,614,470 | |
Road & Rail — 1.8% | |
Union Pacific Corp. | | | 39,800 | | | | 5,638,864 | |
| | | | | | | | |
Semiconductors & Semiconductor Equipment — 3.5% | |
ASML Holding NV (Registered), NYRS | | | 23,599 | | | | 4,671,894 | |
Broadcom, Inc. | | | 6,345 | | | | 1,539,551 | |
NVIDIA Corp. | | | 20,996 | | | | 4,973,952 | |
| | | | | | | | |
| | | | | | | 11,185,397 | |
Software — 14.8% | |
Activision Blizzard, Inc. | | | 52,133 | | | | 3,978,791 | |
Adobe Systems, Inc.(a) | | | 29,890 | | | | 7,287,481 | |
Autodesk, Inc.(a) | | | 35,943 | | | | 4,711,768 | |
Electronic Arts, Inc.(a) | | | 42,467 | | | | 5,988,696 | |
Intuit, Inc. | | | 7,910 | | | | 1,616,052 | |
Microsoft Corp. | | | 181,872 | | | | 17,934,398 | |
salesforce.com, Inc.(a) | | | 38,572 | | | | 5,261,221 | |
| | | | | | | | |
| | | | | | | 46,778,407 | |
Specialty Retail — 3.1% | |
Home Depot, Inc. (The) | | | 18,723 | | | | 3,652,857 | |
Ulta Beauty, Inc.(a) | | | 25,817 | | | | 6,027,237 | |
| | | | | | | | |
| | | | | | | 9,680,094 | |
Textiles, Apparel & Luxury Goods — 1.1% | |
NIKE, Inc., Class B | | | 43,547 | | | | 3,469,825 | |
| | | | | | | | |
| |
Total Common Stocks — 98.9% (Cost: $214,493,853) | | | | 312,979,616 | |
| | | | | | | | |
|
Preferred Stocks — 0.8% | |
| |
Software — 0.8% | | | | |
Palantir Technologies, Inc., Series I (Acquired 02/07/14, cost $2,858,020), 0.00%(a)(c)(d) | | | 466,235 | | | | 2,694,838 | |
| | | | | | | | |
Total Preferred Stocks — 0.8% (Cost: $2,858,020) | | | | 2,694,838 | |
| | | | | | | | |
Total Long-Term Investments — 99.7% (Cost: $217,351,873) | | | | 315,674,454 | |
| | | | | | | | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 5 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Capital Appreciation V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Short-Term Securities — 2.0%(e)(g) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.80% | | | 2,652,903 | | | $ | 2,652,903 | |
SL Liquidity Series, LLC, Money Market Series, 2.16%(f) | | | 3,787,268 | | | | 3,787,647 | |
| | | | | | | | |
Total Short-Term Securities — 2.0% (Cost: $6,440,550) | | | | 6,440,550 | |
| | | | | | | | |
| |
Total Investments — 101.7% (Cost: $223,792,423) | | | | 322,115,004 | |
Liabilities in Excess of Other Assets — (1.7)% | | | | (5,528,280 | ) |
| | | | | | | | |
Net Assets — 100.0% | | | $ | 316,586,724 | |
| | | | | | | | |
(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 $2,694,838, representing 0.85% 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 six months ended June 30, 2018, investments in issuers considered to be an affiliate 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 12/31/17 | | | Net Activity | | | Shares Held at 06/30/18 | | | Value at 06/30/18 | | | Income | | | Net Realized Gain (Loss) (a) | | | Change in Unrealized Appreciation (Depreciation) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class | | | 2,708,926 | | | | (56,023 | ) | | | 2,652,903 | | | $ | 2,652,903 | | | $ | 15,149 | | | $ | — | | | $ | — | |
SL Liquidity Series, LLC, Money Market Series | | | 15,256,731 | | | | (11,469,463 | ) | | | 3,787,268 | | | | 3,787,647 | | | | 21,985 | (b) | | | (487 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | 6,440,550 | | | $ | 37,134 | | | $ | (487 | ) | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 |
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 | | $ | 3,286,078 | | | $ | — | | | $ | — | | | $ | 3,286,078 | |
Automobiles | | | 3,478,542 | | | | — | | | | — | | | | 3,478,542 | |
Banks | | | 6,099,129 | | | | — | | | | — | | | | 6,099,129 | |
Beverages | | | 8,718,961 | | | | — | | | | — | | | | 8,718,961 | |
Biotechnology | | | 2,894,419 | | | | — | | | | — | | | | 2,894,419 | |
Capital Markets | | | 9,637,524 | | | | — | | | | — | | | | 9,637,524 | |
Chemicals | | | 5,660,403 | | | | — | | | | — | | | | 5,660,403 | |
Construction Materials | | | 3,668,014 | | | | — | | | | — | | | | 3,668,014 | |
Diversified Financial Services | | | 3,889,413 | | | | — | | | | — | | | | 3,889,413 | |
Diversified Telecommunication Services | | | 1,274,173 | | | | — | | | | — | | | | 1,274,173 | |
Electrical Equipment | | | 1,403,147 | | | | — | | | | — | | | | 1,403,147 | |
Equity Real Estate Investment Trusts (REITs) | | | 4,524,618 | | | | — | | | | — | | | | 4,524,618 | |
Food Products | | | 2,574,390 | | | | — | | | | — | | | | 2,574,390 | |
| | |
6 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Capital Appreciation V.I. Fund |
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Health Care Equipment & Supplies | | $ | 12,468,384 | | | $ | — | | | $ | — | | | $ | 12,468,384 | |
Health Care Providers & Services | | | 14,398,269 | | | | — | | | | — | | | | 14,398,269 | |
Hotels, Restaurants & Leisure | | | 3,610,930 | | | | — | | | | — | | | | 3,610,930 | |
Household Durables | | | 2,365,541 | | | | — | | | | — | | | | 2,365,541 | |
Industrial Conglomerates | | | 5,706,842 | | | | — | | | | — | | | | 5,706,842 | |
Internet & Direct Marketing Retail | | | 49,219,366 | | | | — | | | | — | | | | 49,219,366 | |
Internet Software & Services | | | 32,510,924 | | | | 10,957,001 | | | | — | | | | 43,467,925 | |
IT Services | | | 26,950,165 | | | | — | | | | — | | | | 26,950,165 | |
Life Sciences Tools & Services | | | 4,763,012 | | | | — | | | | — | | | | 4,763,012 | |
Machinery | | | 478,398 | | | | — | | | | — | | | | 478,398 | |
Oil, Gas & Consumable Fuels | | | 3,077,421 | | | | — | | | | — | | | | 3,077,421 | |
Pharmaceuticals | | | 2,997,495 | | | | — | | | | — | | | | 2,997,495 | |
Professional Services | | | 9,614,470 | | | | — | | | | — | | | | 9,614,470 | |
Road & Rail | | | 5,638,864 | | | | — | | | | — | | | | 5,638,864 | |
Semiconductors & Semiconductor Equipment | | | 11,185,397 | | | | — | | | | — | | | | 11,185,397 | |
Software | | | 46,778,407 | | | | — | | | | — | | | | 46,778,407 | |
Specialty Retail | | | 9,680,094 | | | | — | | | | — | | | | 9,680,094 | |
Textiles, Apparel & Luxury Goods | | | 3,469,825 | | | | — | | | | — | | | | 3,469,825 | |
Preferred Stocks | | | — | | | | — | | | | 2,694,838 | | | | 2,694,838 | |
Short-Term Securities | | | 2,652,903 | | | | — | | | | — | | | | 2,652,903 | |
| | | | | | | | | | | | | | | | |
Subtotal | | $ | 304,675,518 | | | $ | 10,957,001 | | | $ | 2,694,838 | | | $ | 318,327,357 | |
| | | | | | | | | | | | | | | | |
Investments valued at NAV(a) | | | | | | | | | | | | | | $ | 3,787,647 | |
| | | | | | | | | | | | | | | | |
Total Investments | | | | | | | | | | | | | | $ | 322,115,004 | |
| | | | | | | | | | | | | | | | |
| (a) | As of June 30, 2018, 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 six month ended June 30, 2018, there were no transfers between Level 1 and Level 2.
See notes to financial statements.
| | | | |
SCHEDULE OF INVESTMENTS | | | 7 | |
Statement of Assets and Liabilities (unaudited)
June 30, 2018
| | | | |
| | BlackRock Capital Appreciation V.I. Fund | |
| |
ASSETS | | | | |
Investments at value — unaffiliated (including securities loaned at value of $3,694,056) (cost — $217,351,873) | | $ | 315,674,454 | |
Investments at value — affiliated (cost — $6,440,550) | | | 6,440,550 | |
Cash | | | 193 | |
Foreign currency at value (cost — $41) | | | 41 | |
Receivables: | | | | |
Investments sold | | | 1,007,746 | |
Securities lending income — affiliated | | | 2,526 | |
Capital shares sold | | | 7,617 | |
Dividends — affiliated | | | 3,286 | |
Dividends — unaffiliated | | | 11,390 | |
From the Manager | | | 3,528 | |
Prepaid expenses | | | 853 | |
| | | | |
Total assets | | | 323,152,184 | |
| | | | |
| |
LIABILITIES | | | | |
Cash collateral on securities loaned at value | | | 3,792,956 | |
Payables: | | | | |
Investments purchased | | | 1,991,153 | |
Capital shares redeemed | | | 374,875 | |
Distribution fees | | | 37,844 | |
Board realignment and consolidation | | | 12,531 | |
Investment advisory fees | | | 203,159 | |
Directors’ and Officer’s fees | | | 2,626 | |
Other affiliates | | | 802 | |
Other accrued expenses | | | 149,514 | |
| | | | |
Total liabilities | | | 6,565,460 | |
| | | | |
| |
NET ASSETS | | $ | 316,586,724 | |
| | | | |
| |
NET ASSETS CONSIST OF | | | | |
Paid-in capital | | $ | 148,855,134 | |
Accumulated net investment loss | | | (484,071 | ) |
Accumulated net realized gain | | | 69,893,080 | |
Net unrealized appreciation (depreciation) | | | 98,322,581 | |
| | | | |
NET ASSETS | | $ | 316,586,724 | |
| | | | |
| |
NET ASSET VALUE | | | | |
Class I — Based on net assets of $144,842,440 and 12,279,940 shares outstanding, 100 million shares authorized, $0.10 par value. | | $ | 11.80 | |
| | | | |
Class III — Based on net assets of $171,744,284 and 14,716,922 shares outstanding, 100 million shares authorized, $0.10 par value. | | $ | 11.67 | |
| | | | |
See notes to financial statements.
| | |
8 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statement of Operations (unaudited)
Six Months Ended June 30, 2018
| | | | |
| | BlackRock Capital Appreciation V.I. Fund | |
| |
INVESTMENT INCOME | | | | |
Dividends — affiliated | | $ | 15,149 | |
Dividends — unaffiliated | | | 1,158,522 | |
Securities lending income — affiliated — net | | | 21,985 | |
| | | | |
Total investment income | | | 1,195,656 | |
| | | | |
| | | | |
| |
EXPENSES | | | | |
Investment advisory | | | 1,195,322 | |
Transfer agent — class specific | | | 377,146 | |
Distribution — class specific | | | 278,016 | |
Printing | | | 33,445 | |
Accounting services | | | 30,051 | |
Professional | | | 27,759 | |
Board realignment and consolidation | | | 12,531 | |
Directors and Officer | | | 10,253 | |
Custodian | | | 8,623 | |
Transfer agent | | | 2,479 | |
Miscellaneous | | | 4,941 | |
| | | | |
Total expenses | | | 1,980,566 | |
| | | | |
Less: | | | | |
Fees waived and/or reimbursed by the Manager | | | (1,259 | ) |
Transfer agent fees waived and/or reimbursed — class specific | | | (237,298 | ) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 1,742,009 | |
| | | | |
Net investment loss | | | (546,353 | ) |
| | | | |
| |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain (loss) from: | | | | |
Investments — affiliated | | | (487 | ) |
Investments — unaffiliated | | | 59,340,379 | |
Foreign currency transactions | | | (268 | ) |
| | | | |
| | | 59,339,624 | |
| | | | |
Net change in unrealized depreciation on investments — unaffiliated | | | (11,083,672 | ) |
| | | | |
Net realized and unrealized gain | | | 48,255,952 | |
| | | | |
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 47,709,599 | |
| | | | |
See notes to financial statements.
Statements of Changes in Net Assets
| | | | | | | | |
| | BlackRock Capital Appreciation V.I. Fund | |
| | Six Months Ended 06/30/2018 (unaudited) | | | Year Ended 12/31/2017 | |
| | |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | |
| | |
OPERATIONS | | | | | | | | |
Net investment loss | | $ | (546,353 | ) | | $ | (685,408 | ) |
Net realized gain | | | 59,339,624 | | | | 48,210,072 | |
Net change in unrealized appreciation (depreciation) | | | (11,083,672 | ) | | | 62,728,743 | |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 47,709,599 | | | | 110,253,407 | |
| | | | | | | | |
| | |
DISTRIBUTIONS TO SHAREHOLDERS(a) | | | | | | | | |
From net realized gain: | | | | | | | | |
Class I | | | — | | | | (15,570,061 | ) |
Class III | | | — | | | | (28,079,992 | ) |
| | | | | | | | |
Decrease in net assets resulting from distributions to shareholders | | | — | | | | (43,650,053 | ) |
| | | | | | | | |
| | |
CAPITAL SHARE TRANSACTIONS | | | | | | | | |
Net decrease in net assets derived from capital share transactions | | | (133,337,828 | ) | | | (20,276,483 | ) |
| | | | | | | | |
| | |
NET ASSETS | | | | | | | | |
Total increase (decrease) in net assets | | | (85,628,229 | ) | | | 46,326,871 | |
Beginning of period | | | 402,214,953 | | | | 355,888,082 | |
| | | | | | | | |
End of period | | $ | 316,586,724 | | | $ | 402,214,953 | |
| | | | | | | | |
Undistributed (accumulated) net investment income (loss), end of period | | $ | (484,071 | ) | | $ | 62,282 | |
| | | | | | | | |
(a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
| | |
10 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Financial Highlights
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Capital Appreciation V.I. Fund | |
| | Class I | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 10.26 | | | | | | | $ | 8.63 | | | $ | 8.86 | | | $ | 9.02 | | | $ | 9.80 | | | $ | 8.50 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment loss(a) | | | (0.01 | ) | | | | | | | (0.00 | )(b)(c) | | | (0.00 | )(b)(d) | | | (0.01 | ) | | | (0.01 | ) | | | (0.00 | )(b) |
Net realized and unrealized gain | | | 1.55 | | | | | | | | 2.86 | | | | 0.01 | | | | 0.63 | | | | 0.87 | | | | 2.86 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase from investment operations | | | 1.54 | | | | | | | | 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 period | | $ | 11.80 | | | | | | | $ | 10.26 | | | $ | 8.63 | | | $ | 8.86 | | | $ | 9.02 | | | $ | 9.80 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(f) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 15.01 | %(g) | | | | | | | 33.22 | % | | | 0.10 | % | | | 6.73 | % | | | 9.02 | % | | | 33.82 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 0.93 | %(h)(i) | | | | | | | 0.92 | % | | | 0.92 | % | | | 0.93 | % | | | 0.91 | % | | | 0.93 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.79 | %(h)(i) | | | | | | | 0.79 | % | | | 0.80 | % | | | 0.79 | % | | | 0.79 | % | | | 0.80 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment loss | | | (0.13 | )%(h)(i) | | | | | | | (0.00 | )%(c)(j) | | | (0.06 | )%(d) | | | (0.15 | )% | | | (0.10 | )% | | | (0.00 | )%(j) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 144,842 | | | | | | | $ | 142,246 | | | $ | 124,752 | | | $ | 139,045 | | | $ | 166,586 | | | $ | 180,580 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 22 | % | | | | | | | 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 includes $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 includes $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 reinvestments of distributions. |
(g) | Aggregate total return. |
(h) | Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%. |
(j) | Amount is greater than (0.005)%. |
See notes to financial statements.
Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Capital Appreciation V.I. Fund (continued) | |
| | Class III | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 10.17 | | | | | | | $ | 8.56 | | | $ | 8.81 | | | $ | 8.97 | | | $ | 9.76 | | | $ | 8.48 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment loss(a) | | | (0.02 | ) | | | | | | | (0.03 | )(b) | | | (0.03 | )(c) | | | (0.04 | ) | | | (0.03 | ) | | | (0.03 | ) |
Net realized and unrealized gain | | | 1.52 | | | | | | | | 2.84 | | | | 0.02 | | | | 0.63 | | | | 0.86 | | | | 2.84 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | 1.50 | | | | | | | | 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 period | | $ | 11.67 | | | | | | | $ | 10.17 | | | $ | 8.56 | | | $ | 8.81 | | | $ | 8.97 | | | $ | 9.76 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(f) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 14.75 | %(g) | | | | | | | 32.94 | % | | | (0.13 | )% | | | 6.49 | % | | | 8.68 | % | | | 33.40 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.17 | %(h)(i) | | | | | | | 1.17 | % | | | 1.18 | % | | | 1.17 | % | | | 1.18 | % | | | 1.19 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 1.05 | %(h)(i) | | | | | | | 1.05 | % | | | 1.06 | % | | | 1.05 | % | | | 1.05 | % | | | 1.06 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment loss | | | (0.40 | )%(h)(i) | | | | | | | (0.27 | )%(b) | | | (0.32 | )%(c) | | | (0.40 | )% | | | (0.35 | )% | | | (0.27 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 171,744 | | | | | | | $ | 259,969 | | | $ | 231,136 | | | $ | 233,706 | | | $ | 233,723 | | | $ | 207,582 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 22 | % | | | | | | | 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 includes $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 includes $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 reinvestments of distributions. |
(g) | Aggregate total return. |
(h) | Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%. |
See notes to financial statements.
| | |
12 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited)
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 19 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.
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, a portion 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 (unaudited) (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. |
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) |
| • | | 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.
| | |
14 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (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 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 June 30, 2018, 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 Received (a) | | | Net Amount | |
Deutsche Bank Securities Inc. | | $ | 1,524,543 | | | $ | (1,524,543 | ) | | $ | — | |
JP Morgan Securities LLC | | | 16,623 | | | | (16,623 | ) | | | — | |
State Street Bank & Trust Co. | | | 2,152,890 | | | | (2,152,890 | ) | | | — | |
| | | | | | | | | | | | |
| | $ | 3,694,056 | | | $ | (3,694,056 | ) | | $ | — | |
| | | | | | | | | | | | |
| (a) | Cash collateral with a value of $3,792,956 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.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 15 | |
Notes to Financial Statements (unaudited) (continued)
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 six months ended June 30, 2018, the class specific distribution fees borne directly by Class III were $278,016.
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 six months ended June 30, 2018, 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 six months ended June 30, 2018, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:
| | | | | | | | | | | | | | |
Class I | | | | | Class III | | | | | Total | |
$ | 153,095 | | | | | $ | 224,051 | | | | | $ | 377,146 | |
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 six months ended June 30, 2018, the amount waived was $1,259.
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 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 six months ended June 30, 2018, there were no fees waived by the Manager.
For the six months ended June 30, 2018, the Fund reimbursed the Manager $2,152 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, 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 waived and/or reimbursed — class specific in the Statement of Operations. For the six months ended June 30, 2018, class specific expense waivers and/or reimbursements were as follows:
| | | | | | | | | | | | |
| | Class I | | | Class III | | | Total | |
Transfer Agent Fees Waived and/or Reimbursed | | $ | 102,213 | | | $ | 135,085 | | | $ | 237,298 | |
| | |
16 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (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 | | | | | | |
| 1.25% | | | | | | 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 six months ended June 30, 2018, 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 six months ended June 30, 2018, the Fund paid BIM $2,298 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 six months ended June 30, 2018, the Fund did not participate in the lnterfund Lending Program.
Directors and Officers: 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.
For the six months ended June 30, 2018, purchases and sales of investments, excluding short-term securities, were $80,527,075 and $213,602,155, respectively.
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 June 30, 2018, 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 | | | 17 | |
Notes to Financial Statements (unaudited) (continued)
As of June 30, 2018, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:
| | | | |
Tax cost | | $ | 223,877,533 | |
| | | | |
Gross unrealized appreciation | | $ | 99,428,644 | |
Gross unrealized depreciation | | | (1,191,173 | ) |
| | | | |
Net unrealized appreciation (depreciation) | | $ | 98,237,471 | |
| | | | |
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Although the Act does not amend any provisions directly related to the qualification or taxation of regulated investment companies (“RICs”), the Act does change the taxation of entities in which some RICs invest, the tax treatment of income derived from those entities and the taxation of RIC shareholders. While management does not anticipate significant impact to the Fund or to its shareholders, there is uncertainty in the application of certain provisions in the Act. Specifically, provisions in the Act may increase the amount of or accelerate the recognition of taxable income and may limit the deductibility of certain expenses by RICs. Until full clarity around these provisions is obtained, the impact on the Fund’s financial statements, if any, cannot be fully determined.
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, $2.25 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 $1.75 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 0.10% 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 2019 unless extended or renewed. Prior to April 19, 2018, the aggregate commitment amount was $2.1 billion and the fee was 0.12% per annum. Participating Funds paid an upfront commitment fee of 0.02% on the total commitment amounts, in addition to administration, legal and arrangement fees, which 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 six months ended June 30, 2018, the Fund did not borrow under the credit agreement.
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.
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.
| | |
18 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
10. | CAPITAL SHARE TRANSACTIONS |
Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 | | | Year Ended 12/31/2017 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
Class I | | | | | | | | | | | | | | | | |
Shares sold | | | 112,114 | | | $ | 1,287,669 | | | | 334,343 | | | $ | 3,268,914 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 1,510,157 | | | | 15,570,061 | |
Shares redeemed | | | (1,693,623 | ) | | | (18,911,615 | ) | | | (2,438,122 | ) | | | (24,590,116 | ) |
| | | | | | | | | | | | | | | | |
Net decrease | | | (1,581,509 | ) | | $ | (17,623,946 | ) | | | (593,622 | ) | | $ | (5,751,141 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Class III | | | | | | | | | | | | | | | | |
Shares sold | | | 167,943 | | | $ | 1,819,975 | | | | 608,475 | | | $ | 5,912,633 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 2,750,278 | | | | 28,079,992 | |
Shares redeemed | | | (11,024,469 | ) | | | (117,533,857 | ) | | | (4,789,157 | ) | | | (48,517,967 | ) |
| | | | | | | | | | | | | | | | |
Net decrease | | | (10,856,526 | ) | | $ | (115,713,882 | ) | | | (1,430,404 | ) | | $ | (14,525,342 | ) |
| | | | | | | | | | | | | | | | |
Total Net Decrease | | | (12,438,035 | ) | | $ | (133,337,828 | ) | | | (2,024,026 | ) | | $ | (20,276,483 | ) |
| | | | | | | | | | | | | | | | |
Management’s evaluation of the impact of all subsequent events on the Fund’s financial statements was completed through the date the financial statements were issued and the following items were noted:
The Fund paid short-term capital gain and long-term capital gain distributions in the following amounts per share on July 20, 2018 to the shareholders of record on July 18, 2018.
| | | | | | | | |
| | Short-Term Capital Gain | | | Long-Term Capital Gain | |
Class I | | $ | 0.087260 | | | $ | 0.316304 | |
Class III | | | 0.087260 | | | | 0.316304 | |
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 19 | |
JUNE 30, 2018
| | |
SEMI-ANNUAL REPORT (UNAUDITED) | | |
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 June 30, 2018 | | 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 six-month period ended June 30, 2018, 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 relative performance came from a combination of stock selection and allocation decisions within the consumer staples sector. Notably, selection decisions in the beverages industry, underweight exposure to household products companies, and a combination of stock selection in and an underweight to food & staples retailers proved beneficial. In health care, a combination of stock selection in pharmaceuticals and an overweight to the health care providers & services industry added to relative performance. Lastly, stock selection in energy, a combination of stock selection in and an underweight to industrials, and selection within utilities and telecommunication services contributed positively.
The largest detractor from relative performance was stock selection within financials. In particular, selection decisions among banks and capital markets firms weighed on returns. Within consumer discretionary, a combination of stock selection and an underweight to the sector negatively impacted relative return, with significant underperformance coming from selection decisions within the media industry. Finally, a lack of exposure to the real estate sector, specifically real estate investment trusts, detracted from relative results.
Describe recent portfolio activity.
During the six-month period, the Fund significantly boosted exposure to the information technology sector. Holdings within energy and health care also were increased. Conversely, the Fund significantly reduced exposure to the industrials sector. The Fund also reduced its positioning within financials and materials.
Describe portfolio positioning at period end.
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 energy sectors. The Fund’s largest relative underweight positions were in the real estate, consumer discretionary and materials 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 | | | 26 | % |
Health Care | | | 19 | |
Energy | | | 12 | |
Information Technology | | | 11 | |
Consumer Staples | | | 7 | |
Industrials | | | 6 | |
Utilities | | | 5 | |
Consumer Discretionary | | | 4 | |
Telecommunication Services | | | 3 | |
Materials | | | 2 | |
Short-Term Securities | | | 6 | |
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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Fund Summary as of June 30, 2018 (continued) | | BlackRock Equity Dividend V.I. Fund |
Performance Summary for the Period Ended June 30, 2018
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 6-Month Total Returns (c) | | | | | | Average Annual Total Returns | |
| | | | | 1 Year (c) | | | | | | 5 Years (c) | | | | | | 10 Years (c) | |
Class I(a)(b) | | | (0.37 | )% | | | | | | | 9.37 | % | | | | | | | 10.71 | % | | | | | | | 6.59 | % |
Class III(a)(b) | | | (0.51 | ) | | | | | | | 9.12 | | | | | | | | 10.45 | | | | | | | | 6.33 | (d) |
Russell 1000® Value Index(e) | | | (1.69 | ) | | | | | | | 6.77 | | | | | | | | 10.34 | | | | | | | | 8.49 | |
S&P 500® Index(f) | | | 2.65 | | | | | | | | 14.37 | | | | | | | | 13.42 | | | | | | | | 10.17 | |
| (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 returns prior to October 1, 2010 are the returns of the Fund when it followed different objectives and different investment strategies under the name “BlackRock Utilities and Telecommunications V.I. Fund.” | |
| (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. | |
| (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 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. | |
| (e) | 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. | |
| (f) | This unmanaged index covers 500 leading companies and captures approximately 80% coverage of available market capitalization. | |
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 (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | | | | Beginning Account Value (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | Annualized Expense Ratio | |
Class I | | $ | 1,000.00 | | | $ | 996.30 | | | $ | 3.27 | | | | | | | $ | 1,000.00 | | | $ | 1,021.52 | | | $ | 3.31 | | | | 0.66 | % |
Class III | | | 1,000.00 | | | | 994.90 | | | | 4.50 | | | | | | | | 1,000.00 | | | | 1,020.28 | | | | 4.56 | | | | 0.91 | |
| (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 annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown). | |
See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.
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 January 1, 2018 and held through June 30, 2018) 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.
| | |
Schedule of Investments (unaudited) June 30, 2018 | | BlackRock Equity Dividend V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Common Stocks — 95.4% | |
|
Aerospace & Defense — 1.1% | |
Lockheed Martin Corp. | | | 3,630 | | | $ | 1,072,411 | |
Northrop Grumman Corp. | | | 8,004 | | | | 2,462,831 | |
| | | | | | | | |
| | | | | | | 3,535,242 | |
Banks — 16.9% | |
Bank of America Corp. | | | 437,230 | | | | 12,325,514 | |
Citigroup, Inc. | | | 157,480 | | | | 10,538,561 | |
JPMorgan Chase & Co. | | | 121,800 | | | | 12,691,560 | |
KeyCorp | | | 75,950 | | | | 1,484,063 | |
SunTrust Banks, Inc. | | | 51,087 | | | | 3,372,764 | |
US Bancorp | | | 81,290 | | | | 4,066,126 | |
Wells Fargo & Co. | | | 171,225 | | | | 9,492,714 | |
| | | | | | | | |
| | | | | | | 53,971,302 | |
Beverages — 2.2% | |
Diageo plc | | | 89,230 | | | | 3,205,668 | |
Dr Pepper Snapple Group, Inc. | | | 13,770 | | | | 1,679,940 | |
PepsiCo, Inc. | | | 19,380 | | | | 2,109,900 | |
| | | | | | | | |
| | | | | | | 6,995,508 | |
Capital Markets — 3.2% | |
Charles Schwab Corp. (The) | | | 28,510 | | | | 1,456,861 | |
Goldman Sachs Group, Inc. (The) | | | 16,560 | | | | 3,652,639 | |
Morgan Stanley | | | 106,330 | | | | 5,040,042 | |
| | | | | | | | |
| | | | | | | 10,149,542 | |
Chemicals — 1.1% | |
DowDuPont, Inc. | | | 55,295 | | | | 3,645,046 | |
| | | | | | | | |
Communications Equipment — 1.5% | |
Cisco Systems, Inc. | | | 41,590 | | | | 1,789,618 | |
Motorola Solutions, Inc. | | | 26,010 | | | | 3,026,784 | |
| | | | | | | | |
| | | | | | | 4,816,402 | |
Construction Materials — 0.7% | |
CRH plc | | | 65,740 | | | | 2,305,979 | |
| | | | | | | | |
Containers & Packaging — 0.3% | |
International Paper Co. | | | 20,220 | | | | 1,053,058 | |
| | | | | | | | |
Diversified Financial Services — 0.3% | |
AXA Equitable Holdings, Inc.(a) | | | 48,100 | | | | 991,341 | |
| | | | | | | | |
Diversified Telecommunication Services — 2.8% | |
AT&T, Inc. | | | 9,781 | | | | 314,068 | |
BCE, Inc. | | | 18,975 | | | | 768,298 | |
Verizon Communications, Inc. | | | 153,180 | | | | 7,706,486 | |
| | | | | | | | |
| | | | | | | 8,788,852 | |
Electric Utilities — 3.7% | |
Edison International | | | 13,978 | | | | 884,388 | |
FirstEnergy Corp. | | | 109,250 | | | | 3,923,168 | |
NextEra Energy, Inc. | | | 20,439 | | | | 3,413,926 | |
PG&E Corp. | | | 82,000 | | | | 3,489,920 | |
| | | | | | | | |
| | | | | | | 11,711,402 | |
Electrical Equipment — 0.2% | |
nVent Electric plc(a) | | | 19,230 | | | | 482,673 | |
| | | | | | | | |
Electronic Equipment, Instruments & Components — 0.7% | |
CDW Corp. | | | 28,310 | | | | 2,287,165 | |
| | | | | | | | |
Food & Staples Retailing — 0.7% | |
Kroger Co. (The) | | | 76,810 | | | | 2,185,245 | |
| | | | | | | | |
Food Products — 1.3% | |
Danone SA | | | 10,250 | | | | 748,378 | |
General Mills, Inc. | | | 33,050 | | | | 1,462,793 | |
| | | | | | | | |
Security | | Shares | | | Value | |
Food Products (continued) | |
Kellogg Co. | | | 27,990 | | | $ | 1,955,661 | |
| | | | | | | | |
| | | | | | | 4,166,832 | |
Health Care Equipment & Supplies — 3.0% | |
Koninklijke Philips NV | | | 121,620 | | | | 5,152,793 | |
Medtronic plc | | | 51,120 | | | | 4,376,383 | |
| | | | | | | | |
| | | | | | | 9,529,176 | |
Health Care Providers & Services — 8.0% | |
Aetna, Inc. | | | 28,383 | | | | 5,208,280 | |
Anthem, Inc. | | | 33,181 | | | | 7,898,073 | |
Cardinal Health, Inc. | | | 28,760 | | | | 1,404,351 | |
CVS Health Corp. | | | 36,170 | | | | 2,327,540 | |
Humana, Inc. | | | 4,840 | | | | 1,440,529 | |
McKesson Corp. | | | 19,850 | | | | 2,647,990 | |
Quest Diagnostics, Inc. | | | 11,925 | | | | 1,311,035 | |
UnitedHealth Group, Inc. | | | 13,362 | | | | 3,278,233 | |
| | | | | | | | |
| | | | | | | 25,516,031 | |
Household Products — 0.8% | |
Procter & Gamble Co. (The) | | | 31,935 | | | | 2,492,846 | |
| | | | | | | | |
Industrial Conglomerates — 2.8% | | | | | | |
3M Co. | | | 7,865 | | | | 1,547,203 | |
General Electric Co. | | | 268,395 | | | | 3,652,856 | |
Honeywell International, Inc. | | | 25,750 | | | | 3,709,287 | |
| | | | | | | | |
| | | | | | | 8,909,346 | |
Insurance — 5.7% | |
American International Group, Inc. | | | 110,080 | | | | 5,836,442 | |
Arthur J. Gallagher & Co. | | | 4,158 | | | | 271,434 | |
Brighthouse Financial, Inc.(a) | | | 6,904 | | | | 276,643 | |
Lincoln National Corp. | | | 8,130 | | | | 506,093 | |
Marsh & McLennan Cos., Inc. | | | 29,060 | | | | 2,382,048 | |
MetLife, Inc. | | | 129,624 | | | | 5,651,606 | |
Travelers Cos., Inc. (The) | | | 27,468 | | | | 3,360,435 | |
| | | | | | | | |
| | | | | | | 18,284,701 | |
IT Services — 0.4% | |
Cognizant Technology Solutions Corp., Class A | | | 14,540 | | | | 1,148,515 | |
| | | | | | | | |
Leisure Products — 0.5% | | | | | | |
Mattel, Inc.(b) | | | 98,006 | | | | 1,609,259 | |
| | | | | | | | |
Machinery — 0.3% | | | | | | |
Pentair plc | | | 19,230 | | | | 809,198 | |
| | | | | | | | |
Media — 2.1% | | | | | | |
Comcast Corp., Class A | | | 156,890 | | | | 5,147,561 | |
Interpublic Group of Cos., Inc. (The) | | | 69,010 | | | | 1,617,594 | |
| | | | | | | | |
| | | | | | | 6,765,155 | |
Multiline Retail — 0.3% | | | | | | |
Dollar General Corp. | | | 9,610 | | | | 947,546 | |
| | | | | | | | |
Multi-Utilities — 1.2% | | | | | | |
Public Service Enterprise Group, Inc. | | | 69,630 | | | | 3,769,768 | |
| | | | | | | | |
Oil, Gas & Consumable Fuels — 12.5% | | | | | | |
Anadarko Petroleum Corp. | | | 9,180 | | | | 672,435 | |
BP plc | | | 894,600 | | | | 6,806,579 | |
Chevron Corp. | | | 20,663 | | | | 2,612,423 | |
Devon Energy Corp. | | | 94,820 | | | | 4,168,287 | |
Enterprise Products Partners LP | | | 134,440 | | | | 3,719,955 | |
Hess Corp. | | | 63,779 | | | | 4,266,178 | |
Marathon Oil Corp. | | | 30,160 | | | | 629,138 | |
Marathon Petroleum Corp. | | | 34,380 | | | | 2,412,101 | |
ONEOK, Inc. | | | 24,540 | | | | 1,713,628 | |
Royal Dutch Shell plc, ADR, Class A | | | 20,810 | | | | 1,440,676 | |
Suncor Energy, Inc. | | | 199,090 | | | | 8,098,981 | |
TOTAL SA, ADR(b) | | | 36,228 | | | | 2,193,968 | |
| | |
4 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Equity Dividend V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Oil, Gas & Consumable Fuels (continued) | | | | | | |
Williams Cos., Inc. (The) | | | 45,829 | | | $ | 1,242,424 | |
| | | | | | | | |
| | | | | | | 39,976,773 | |
Personal Products — 0.7% | | | | | | |
Unilever NV, NYRS | | | 41,985 | | | | 2,339,404 | |
| | | | | | | | |
Pharmaceuticals — 8.3% | | | | | | |
AstraZeneca plc | | | 82,136 | | | | 5,681,116 | |
Bayer AG (Registered) | | | 19,188 | | | | 2,107,295 | |
Merck & Co., Inc. | | | 73,590 | | | | 4,466,913 | |
Novo Nordisk A/S, ADR | | | 50,500 | | | | 2,329,060 | |
Pfizer, Inc. | | | 326,080 | | | | 11,830,182 | |
| | | | | | | | |
| | | | | | | 26,414,566 | |
Professional Services — 1.2% | | | | | | |
Experian plc | | | 81,320 | | | | 2,006,053 | |
Nielsen Holdings plc | | | 53,950 | | | | 1,668,673 | |
| | | | | | | | |
| | | | | | | 3,674,726 | |
Road & Rail — 0.6% | | | | | | |
Union Pacific Corp. | | | 14,655 | | | | 2,076,320 | |
| | | | | | | | |
Semiconductors & Semiconductor Equipment — 1.7% | | | | | | |
QUALCOMM, Inc. | | | 68,190 | | | | 3,826,823 | |
Taiwan Semiconductor Manufacturing Co. Ltd., ADR | | | 41,770 | | | | 1,527,111 | |
| | | | | | | | |
| | | | | | | 5,353,934 | |
Software — 5.8% | | | | | | |
Constellation Software, Inc. | | | 2,364 | | | | 1,833,352 | |
Microsoft Corp. | | | 83,005 | | | | 8,185,123 | |
Oracle Corp. | | | 195,660 | | | | 8,620,780 | |
| | | | | | | | |
| | | | | | | 18,639,255 | |
Specialty Retail — 0.7% | | | | | | |
Lowe’s Cos., Inc. | | | 23,130 | | | | 2,210,534 | |
| | | | | | | | |
Technology Hardware, Storage & Peripherals — 0.8% | | | | | | |
Lenovo Group Ltd. | | | 2,014,000 | | | | 1,084,057 | |
Samsung Electronics Co. Ltd., GDR | | | 20 | | | | 20,743 | |
| | | | | | | | |
Security | | Shares | | | Value | |
Technology Hardware, Storage & Peripherals (continued) | | | | | | |
Samsung Electronics Co. Ltd., GDR(c) | | | 1,369 | | | $ | 1,430,605 | |
| | | | | | | | |
| | | | | | | 2,535,405 | |
Tobacco — 1.3% | | | | | | |
Altria Group, Inc. | | | 56,895 | | | | 3,231,067 | |
Philip Morris International, Inc. | | | 12,380 | | | | 999,561 | |
| | | | | | | | |
| | | | | | | 4,230,628 | |
Total Common Stocks — 95.4% (Cost: $266,869,641) | | | | | | | 304,318,675 | |
| | | | | | | | |
Total Long-Term Investments — 95.4% (Cost: $266,869,641) | | | | | | | 304,318,675 | |
| | | | | | | | |
|
Short-Term Securities — 6.0%(d)(f) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class, | | | | | | | | |
1.80% | | | 15,815,216 | | | | 15,815,216 | |
SL Liquidity Series, LLC, Money Market Series, | | | | | | | | |
2.16%(e) | | | 3,335,172 | | | | 3,335,506 | |
| | | | | | | | |
Total Short-Term Securities — 6.0% (Cost: $19,150,722) | | | | 19,150,722 | |
| | | | | | | | |
| |
Total Investments — 101.4% (Cost: $286,020,363) | | | | 323,469,397 | |
Liabilities in Excess of Other Assets — (1.4)% | | | | (4,420,417 | ) |
| | | | | | | | |
Net Assets — 100.0% | | | $ | 319,048,980 | |
| | | | | | | | |
(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 six months ended June 30, 2018, 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 12/31/17 | | | Net Activity | | | Shares Held at 06/30/18 | | | Value at 06/30/18 | | | Income | | | Net Realized Gain (Loss) (a) | | | Change in Unrealized Appreciation (Depreciation) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class | | | 14,132,925 | | | | 1,682,291 | | | | 15,815,216 | | | $ | 15,815,216 | | | $ | 109,366 | | | $ | — | | | $ | — | |
SL Liquidity Series, LLC, Money Market Series | | | 1,608,659 | | | | 1,726,513 | | | | 3,335,172 | | | | 3,335,506 | | | | 3,078 | (b) | | | 111 | | | | 255 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | 19,150,722 | | | $ | 112,444 | | | $ | 111 | | | $ | 255 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 Receipt |
GDR | | Global Depositary Receipts |
NYRS | | New York Registered Shares |
| | | | |
SCHEDULE OF INVESTMENTS | | | 5 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | 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 | | $ | 273,769,409 | | | $ | 30,549,266 | | | $ | — | | | $ | 304,318,675 | |
Common Stocks: | | | | | | | | | | | | | | | | |
Aerospace & Defense | | | 3,535,242 | | | | — | | | | — | | | | 3,535,242 | |
Banks | | | 53,971,302 | | | | — | | | | — | | | | 53,971,302 | |
Beverages | | | 3,789,840 | | | | 3,205,668 | | | | — | | | | 6,995,508 | |
Capital Markets | | | 10,149,542 | | | | — | | | | — | | | | 10,149,542 | |
Chemicals | | | 3,645,046 | | | | — | | | | — | | | | 3,645,046 | |
Communications Equipment | | | 4,816,402 | | | | — | | | | — | | | | 4,816,402 | |
Construction Materials | | | — | | | | 2,305,979 | | | | — | | | | 2,305,979 | |
Containers & Packaging | | | 1,053,058 | | | | — | | | | — | | | | 1,053,058 | |
Diversified Financial Services | | | 991,341 | | | | — | | | | — | | | | 991,341 | |
Diversified Telecommunication Services | | | 8,788,852 | | | | — | | | | — | | | | 8,788,852 | |
Electric Utilities | | | 11,711,402 | | | | — | | | | — | | | | 11,711,402 | |
Electrical Equipment | | | 482,673 | | | | — | | | | — | | | | 482,673 | |
Electronic Equipment, Instruments & Components | | | 2,287,165 | | | | — | | | | — | | | | 2,287,165 | |
Food & Staples Retailing | | | 2,185,245 | | | | — | | | | — | | | | 2,185,245 | |
Food Products | | | 3,418,454 | | | | 748,378 | | | | — | | | | 4,166,832 | |
Health Care Equipment & Supplies | | | 4,376,383 | | | | 5,152,793 | | | | — | | | | 9,529,176 | |
Health Care Providers & Services | | | 25,516,031 | | | | — | | | | — | | | | 25,516,031 | |
Household Products | | | 2,492,846 | | | | — | | | | — | | | | 2,492,846 | |
Industrial Conglomerates | | | 8,909,346 | | | | — | | | | — | | | | 8,909,346 | |
Insurance | | | 18,284,701 | | | | — | | | | — | | | | 18,284,701 | |
IT Services | | | 1,148,515 | | | | — | | | | — | | | | 1,148,515 | |
Leisure Products | | | 1,609,259 | | | | — | | | | — | | | | 1,609,259 | |
Machinery | | | 809,198 | | | | — | | | | — | | | | 809,198 | |
Media | | | 6,765,155 | | | | — | | | | — | | | | 6,765,155 | |
Multiline Retail | | | 947,546 | | | | — | | | | — | | | | 947,546 | |
Multi-Utilities | | | 3,769,768 | | | | — | | | | — | | | | 3,769,768 | |
Oil, Gas & Consumable Fuels | | | 33,170,194 | | | | 6,806,579 | | | | — | | | | 39,976,773 | |
Personal Products | | | 2,339,404 | | | | — | | | | — | | | | 2,339,404 | |
Pharmaceuticals | | | 18,626,155 | | | | 7,788,411 | | | | — | | | | 26,414,566 | |
Professional Services | | | 1,668,673 | | | | 2,006,053 | | | | — | | | | 3,674,726 | |
Road & Rail | | | 2,076,320 | | | | — | | | | — | | | | 2,076,320 | |
Semiconductors & Semiconductor Equipment | | | 5,353,934 | | | | — | | | | — | | | | 5,353,934 | |
Software | | | 18,639,255 | | | | — | | | | — | | | | 18,639,255 | |
Specialty Retail | | | 2,210,534 | | | | — | | | | — | | | | 2,210,534 | |
Technology Hardware, Storage & Peripherals | | | — | | | | 2,535,405 | | | | — | | | | 2,535,405 | |
Tobacco | | | 4,230,628 | | | | — | | | | — | | | | 4,230,628 | |
Short-Term Securities | | | 15,815,216 | | | | — | | | | — | | | | 15,815,216 | |
| | | | | | | | | | | | | | | | |
Subtotal | | $ | 289,584,625 | | | $ | 30,549,266 | | | $ | — | | | $ | 320,133,891 | |
| | | | | | | | | | | | | | | | |
Investments valued at NAV(a) | | | | | | | | | | | | | | $ | 3,335,506 | |
| | | | | | | | | | | | | | | | |
Total Investments | | | | | | | | | | | | | | $ | 323,469,397 | |
| | | | | | | | | | | | | | | | |
| (a) | As of June 30, 2018, 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 six months ended June 30, 2018, there were no transfers between levels.
See notes to financial statements.
| | |
6 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statement of Assets and Liabilities (unaudited)
June 30, 2018
| | | | |
| | BlackRock Equity Dividend V.I. Fund | |
| |
ASSETS | | | | |
Investments at value — unaffiliated (including securities loaned at value of $3,256,216) (cost — $266,869,641) | | $ | 304,318,675 | |
Investments at value — affiliated (cost — $19,150,722) | | | 19,150,722 | |
Foreign currency at value (cost — $1,278) | | | 1,260 | |
Receivables: | | | | |
Investments sold | | | 149,524 | |
Securities lending income — affiliated | | | 559 | |
Capital shares sold | | | 44,870 | |
Dividends — affiliated | | | 21,453 | |
Dividends — unaffiliated | | | 387,146 | |
From the Manager | | | 5,504 | |
Prepaid expenses | | | 702 | |
| | | | |
Total assets | | | 324,080,415 | |
| | | | |
| |
LIABILITIES | | | | |
Cash collateral on securities loaned at value | | | 3,335,655 | |
Payables: | | | | |
Investments purchased | | | 543,731 | |
Capital shares redeemed | | | 821,256 | |
Distribution fees | | | 57,371 | |
Board realignment and consolidation | | | 1,078 | |
Investment advisory fees | | | 205,646 | |
Directors’ and Officer’s fees | | | 2,474 | |
Other affiliates | | | 721 | |
Other accrued expenses | | | 63,503 | |
| | | | |
Total liabilities | | | 5,031,435 | |
| | | | |
| |
NET ASSETS | | $ | 319,048,980 | |
| | | | |
| |
NET ASSETS CONSIST OF | | | | |
Paid-in capital | | $ | 265,345,691 | |
Undistributed net investment income | | | 1,345,384 | |
Accumulated net realized gain | | | 14,908,992 | |
Net unrealized appreciation (depreciation) | | | 37,448,913 | |
| | | | |
NET ASSETS | | $ | 319,048,980 | |
| | | | |
| |
NET ASSET VALUE | | | | |
Class I — Based on net assets of $36,393,291 and 3,023,588 shares outstanding, 100 million shares authorized, $0.10 par value. | | $ | 12.04 | |
| | | | |
Class III — Based on net assets of $282,655,689 and 23,542,497 shares outstanding, 100 million shares authorized, $0.10 par value. | | $ | 12.01 | |
| | | | |
See notes to financial statements.
Statement of Operations (unaudited)
Six Months Ended June 30, 2018
| | | | |
| | BlackRock Equity Dividend V.I. Fund | |
| |
INVESTMENT INCOME | | | | |
Dividends — affiliated | | $ | 109,366 | |
Dividends — unaffiliated | | | 3,951,296 | |
Securities lending income — affiliated — net | | | 3,078 | |
Foreign taxes withheld | | | (59,783 | ) |
| | | | |
Total investment income | | | 4,003,957 | |
| | | | |
| |
EXPENSES | | | | |
Investment advisory | | | 958,939 | |
Distribution — class specific | | | 353,410 | |
Transfer agent — class specific | | | 337,107 | |
Accounting services | | | 27,654 | |
Printing | | | 22,221 | |
Professional | | | 21,914 | |
Custodian | | | 10,758 | |
Directors and Officer | | | 9,814 | |
Transfer agent | | | 2,480 | |
Board realignment and consolidation | | | 1,078 | |
Miscellaneous | | | 4,763 | |
| | | | |
Total expenses | | | 1,750,138 | |
Less: | | | | |
Fees waived and/or reimbursed by the Manager | | | (6,756 | ) |
Transfer agent fees waived and/or reimbursed — class specific | | | (337,107 | ) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 1,406,275 | |
| | | | |
Net investment income | | | 2,597,682 | |
| | | | |
| |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain (loss) from: | | | | |
Investments — affiliated | | | 111 | |
Investments — unaffiliated | | | 11,394,690 | |
Foreign currency transactions | | | (8,329 | ) |
| | | | |
| | | 11,386,472 | |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | |
Investments — affiliated | | | 255 | |
Investments — unaffiliated | | | (15,373,682 | ) |
Foreign currency translations | | | (211 | ) |
| | | | |
| | | (15,373,638 | ) |
| | | | |
Net realized and unrealized loss | | | (3,987,166 | ) |
| | | | |
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | (1,389,484 | ) |
| | | | |
See notes to financial statements.
| | |
8 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statements of Changes in Net Assets
| | | | | | | | |
| | BlackRock Equity Dividend V.I. Fund | |
| | Six Months Ended 06/30/2018 (unaudited) | | | Year Ended 12/31/2017 | |
| | |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | |
| | |
OPERATIONS | | | | | | | | |
Net investment income | | $ | 2,597,682 | | | $ | 4,765,364 | |
Net realized gain | | | 11,386,472 | | | | 18,274,738 | |
Net change in unrealized appreciation (depreciation) | | | (15,373,638 | ) | | | 22,925,712 | |
| | | | | | | | |
Net increase (decrease) in net assets resulting from operations | | | (1,389,484 | ) | | | 45,965,814 | |
| | | | | | | | |
| | |
DISTRIBUTIONS TO SHAREHOLDERS(a) | | | | | | | | |
From net investment income: | | | | | | | | |
Class I | | | (166,606 | ) | | | (645,417 | ) |
Class III | | | (1,098,416 | ) | | | (4,129,646 | ) |
From net realized gain: | | | | | | | | |
Class I | | | — | | | | (1,906,002 | ) |
Class III | | | — | | | | (14,552,840 | ) |
| | | | | | | | |
Decrease in net assets resulting from distributions to shareholders | | | (1,265,022 | ) | | | (21,233,905 | ) |
| | | | | | | | |
| | |
CAPITAL SHARE TRANSACTIONS | | | | | | | | |
Net increase (decrease) in net assets derived from capital share transactions | | | (3,435,792 | ) | | | 41,813,020 | |
| | | | | | | | |
| | |
NET ASSETS | | | | | | | | |
Total increase (decrease) in net assets | | | (6,090,298 | ) | | | 66,544,929 | |
Beginning of period | | | 325,139,278 | | | | 258,594,349 | |
| | | | | | | | |
End of period | | $ | 319,048,980 | | | $ | 325,139,278 | |
| | | | | | | | |
Undistributed net investment income, end of period | | $ | 1,345,384 | | | $ | 12,724 | |
| | | | | | | | |
(a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
Financial Highlights
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Equity Dividend V.I. Fund | |
| | Class I | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 12.14 | | | | | | | $ | 11.15 | | | $ | 10.04 | | | $ | 10.90 | | | $ | 10.78 | | | $ | 8.95 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.11 | | | | | | | | 0.22 | | | | 0.21 | | | | 0.19 | | | | 0.20 | | | | 0.19 | |
Net realized and unrealized gain (loss) | | | (0.16 | ) | | | | | | | 1.62 | | | | 1.42 | | | | (0.25 | ) | | | 0.80 | | | | 1.99 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | (0.05 | ) | | | | | | | 1.84 | | | | 1.63 | | | | (0.06 | ) | | | 1.00 | | | | 2.18 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions(b) | | | | | | | | | | | | | | | | | | | | | |
From net investment income | | | (0.05 | ) | | | | | | | (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 | | | (0.05 | ) | | | | | | | (0.85 | ) | | | (0.52 | ) | | | (0.80 | ) | | | (0.88 | ) | | | (0.35 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | $ | 12.04 | | | | | | | $ | 12.14 | | | $ | 11.15 | | | $ | 10.04 | | | $ | 10.90 | | | $ | 10.78 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(c) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | (0.37 | )%(d) | | | | | | | 16.74 | % | | | 16.40 | % | | | (0.61 | )% | | | 9.34 | % | | | 24.52 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets(e) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 0.88 | %(f) | | | | | | | 0.89 | % | | | 0.89 | % | | | 1.00 | % | | | 0.99 | % | | | 1.04 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.66 | %(f) | | | | | | | 0.68 | % | | | 0.70 | % | | | 0.79 | % | | | 0.78 | % | | | 0.84 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.84 | %(f) | | | | | | | 1.82 | % | | | 1.98 | % | | | 1.79 | % | | | 1.81 | % | | | 1.95 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 36,393 | | | | | | | $ | 37,525 | | | $ | 35,256 | | | $ | 30,527 | | | $ | 35,694 | | | $ | 36,658 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 19 | % | | | | | | | 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 reinvestments of distributions. |
(d) | Aggregate total return. |
(e) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | 2013 | | | | |
Investments in underlying funds | | | 0.01 | % | | | | | | | 0.01 | % | | | | | | | 0.01 | % | | | | | | | — | % | | | | | | | — | % | | | | | | | — | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See notes to financial statements.
| | |
10 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Equity Dividend V.I. Fund (continued) | |
| | Class III | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 12.12 | | | | | | | $ | 11.13 | | | $ | 10.03 | | | $ | 10.89 | | | $ | 10.77 | | | $ | 8.95 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.10 | | | | | | | | 0.19 | | | | 0.18 | | | | 0.17 | | | | 0.17 | | | | 0.17 | |
Net realized and unrealized gain (loss) | | | (0.16 | ) | | | | | | | 1.62 | | | | 1.42 | | | | (0.25 | ) | | | 0.80 | | | | 1.97 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | (0.06 | ) | | | | | | | 1.81 | | | | 1.60 | | | | (0.08 | ) | | | 0.97 | | | | 2.14 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions(b) | | | | | | | | | | | | | | | | | | | | | |
From net investment income | | | (0.05 | ) | | | | | | | (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 | | | (0.05 | ) | | | | | | | (0.82 | ) | | | (0.50 | ) | | | (0.78 | ) | | | (0.85 | ) | | | (0.32 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | $ | 12.01 | | | | | | | $ | 12.12 | | | $ | 11.13 | | | $ | 10.03 | | | $ | 10.89 | | | $ | 10.77 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(c) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | (0.51 | )%(d) | | | | | | | 16.49 | % | | | 16.06 | % | | | (0.82 | )% | | | 9.07 | % | | | 24.12 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets(e) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.12 | %(f) | | | | | | | 1.16 | % | | | 1.13 | % | | | 1.16 | % | | | 1.24 | % | | | 1.28 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.91 | %(f) | | | | | | | 0.93 | % | | | 0.95 | % | | | 1.03 | % | | | 1.03 | % | | | 1.09 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.60 | %(f) | | | | | | | 1.57 | % | | | 1.73 | % | | | 1.59 | % | | | 1.56 | % | | | 1.71 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 282,656 | | | | | | | $ | 287,615 | | | $ | 223,338 | | | $ | 85,163 | | | $ | 22,619 | | | $ | 20,567 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 19 | % | | | | | | | 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 reinvestments of distributions. |
(d) | Aggregate total return. |
(e) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | 2013 | | | | |
Investments in underlying funds | | | 0.01 | % | | | | | | | 0.01 | % | | | | | | | 0.01 | % | | | | | | — | | % | | | | | | | — | % | | | | | | | — | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See notes to financial statements.
Notes to Financial Statements (unaudited)
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 19 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.
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. |
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
| | |
12 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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 June 30, 2018, 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.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 13 | |
Notes to Financial Statements (unaudited) (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 | | $ | 3,256,216 | | | $ | (3,256,216 | ) | | $ | — | |
| (a) | Cash collateral with a value of $3,335,655 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 six months ended June 30, 2018, the class specific distribution fees borne directly by Class III were 353,410.
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 six months ended June 30, 2018, 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 six months ended June 30, 2018, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:
| | | | | | | | | | | | | | |
Class I | | | | | | Class III | | | | Total | |
$ | 39,267 | | | | | | | $297,840 | | | | $ | 337,107 | |
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 six months ended June 30, 2018, the amount waived was $6,756.
| | |
14 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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 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 six months ended June 30, 2018, there were no fees waived by the Manager.
For the six months ended June 30, 2018, the Fund reimbursed the Manager $1,720 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, 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 waived and/or reimbursed — class specific in the Statement of Operations. For the six months ended June 30, 2018, class specific waivers and/or reimbursements were as follows:
| | | | | | | | | | | | |
| | Class I | | | Class III | | | Total | |
Transfer Agent Fees Waived and/or Reimbursed | | $ | 39,267 | | | $ | 297,840 | | | $ | 337,107 | |
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, 2019, 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 six months ended June 30, 2018, 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 six months ended June 30, 2018, the Fund paid BIM $289 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 six months ended June 30, 2018, the Fund did not participate in the Interfund Lending Program.
Directors and Officers: 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.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 15 | |
Notes to Financial Statements (unaudited) (continued)
For the six months ended June 30, 2018, purchases and sales of investments, excluding short-term securities, were $57,545,843 and $60,418,109, respectively.
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 June 30, 2018, 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.
As of June 30, 2018, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:
| | | | |
Tax cost | | $ | 286,362,636 | |
| | | | |
Gross unrealized appreciation | | $ | 47,105,401 | |
Gross unrealized depreciation | | | (9,998,640 | ) |
| | | | |
Net unrealized appreciation (depreciation) | | $ | 37,106,761 | |
| | | | |
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Although the Act does not amend any provisions directly related to the qualification or taxation of regulated investment companies (“RICs”), the Act does change the taxation of entities in which some RICs invest, the tax treatment of income derived from those entities and the taxation of RIC shareholders. While management does not anticipate significant impact to the Fund or to its shareholders, there is uncertainty in the application of certain provisions in the Act. Specifically, provisions in the Act may increase the amount of or accelerate the recognition of taxable income and may limit the deductibility of certain expenses by RICs. Until full clarity around these provisions is obtained, the impact on the Fund’s financial statements, if any, cannot be fully determined.
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, $2.25 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 $1.75 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 0.10% 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 2019 unless extended or renewed. Prior to April 19, 2018, the aggregate commitment amount was $2.1 billion and the fee was 0.12% per annum. Participating Funds paid an upfront commitment fee of 0.02% on the total commitment amounts, in addition to administration, legal and arrangement fees, which 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 six months ended June 30, 2018, the Fund did not borrow under the credit agreement.
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
| | |
16 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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:
| | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 | | | Year Ended 12/31/2017 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
Class I | | | | | | | | | | | | | | | | |
Shares sold | | | 214,274 | | | $ | 2,585,882 | | | | 305,267 | | | $ | 3,599,163 | |
Shares issued in reinvestment of distributions | | | 14,001 | | | | 166,606 | | | | 211,779 | | | | 2,551,419 | |
Shares redeemed | | | (295,916 | ) | | | (3,585,036 | ) | | | (588,300 | ) | | | (6,980,961 | ) |
| | | | | | | | | | | | | | | | |
Net decrease | | | (67,641 | ) | | $ | (832,548 | ) | | | (71,254 | ) | | $ | (830,379 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Class III | | | | | | | | | | | | | | | | |
Shares sold | | | 1,243,090 | | | $ | 15,095,083 | | | | 4,790,801 | | | $ | 55,321,887 | |
Shares issued in reinvestment of distributions | | | 92,537 | | | | 1,098,416 | | | | 1,552,013 | | | | 18,682,485 | |
Shares redeemed | | | (1,531,264 | ) | | | (18,796,743 | ) | | | (2,671,545 | ) | | | (31,360,973 | ) |
| | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (195,637 | ) | | $ | (2,603,244 | ) | | | 3,671,269 | | | $ | 42,643,399 | |
| | | | | | | | | | | | | | | | |
Total Net Increase (Decrease) | | | (263,278 | ) | | $ | (3,435,792 | ) | | | 3,600,015 | | | $ | 41,813,020 | |
| | | | | | | | | | | | | | | | |
Management’s evaluation of the impact of all subsequent events on the Fund’s financial statements was completed through the date the financial statements were issued and the following items were noted:
The Fund paid net investment income, short-term capital gain and long-term capital gain distributions in the following amounts per share on July 20, 2018 to the shareholders of record on July 18, 2018.
| | | | | | | | | | | | |
| | Net Investment Income | | | Short-Term Capital Gain | | | Long-Term Capital Gain | |
Class I | | $ | 0.057441 | | | $ | 0.023744 | | | $ | 0.124117 | |
Class III | | | 0.049634 | | | | 0.023744 | | | | 0.124117 | |
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 17 | |
JUNE 30, 2018
| | |
SEMI-ANNUAL REPORT (UNAUDITED) | | |
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 June 30, 2018 | | 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 six-month period ended June 30, 2018, 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% FTSE Non-US Dollar World Government Bond Index. The Fund invests in both equities and bonds, and therefore, Fund management believes that 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, options and swaps (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 U.S. market detracted from performance. From a sector perspective, stock selection in consumer discretionary and materials negatively impacted returns. An overweight to emerging market government bonds weighed on performance. The Fund’s commodity-related exposures, most notably to gold, also detracted.
Also within equities, stock selection in health care, utilities and information technology (“IT”) along with an underweight to consumer staples contributed to performance. Exposure to cash and cash equivalents was additive as well.
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 use of derivatives detracted from the Fund’s performance.
Describe recent portfolio activity.
During the six-month period, the Fund’s overall equity allocation decreased from 62% to 61% of net assets. Within equities, the Fund decreased exposure to Europe and Japan. From a sector perspective, the Fund decreased exposure to industrials, utilities, energy, telecommunication services (“telecom”) and consumer discretionary, and increased exposure to health care, IT and consumer staples.
The Fund’s overall allocation to fixed income decreased from 30% to 28% of net assets. Within fixed income, the Fund decreased exposure to non-U.S. government bonds in Australia, Brazil and Poland, as well as to corporate bonds. The Fund increased exposure to U.S. government bonds.
The Fund’s allocation to commodity-related securities decreased from 4% to 3% of net assets.
Reflecting the above changes, the Fund’s cash and cash equivalent holdings increased from 4% to 8% of net assets. During the six-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 in equities, underweight in fixed income, overweight in commodity-related, and overweight in cash and cash equivalents. Within equities, the Fund was overweight in Asia and underweight in the U.S. market. Within Europe, the Fund was overweight in the Netherlands and France, and underweight in the United Kingdom and Ireland. From a sector perspective, the Fund was overweight in health care, energy, IT, consumer discretionary and telecom, and underweight in industrials, financials, consumer staples and real estate. Within fixed income, the Fund was underweight in developed market government bonds, and overweight in corporate and convertible bonds. With respect to currency exposures, the Fund was overweight in the U.S. dollar and Indian rupee, and underweight in the euro, Australian dollar and Japanese yen.
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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Fund Summary as of June 30, 2018 (continued) | | BlackRock Global Allocation V.I. Fund |
Performance Summary for the Period Ended June 30, 2018
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 6-Month Total Returns (c) | | | | | | Average Annual Total Returns | |
| | | | | 1 Year (c) | | | | | | 5 Years (c) | | | | | | 10 Years (c) | |
Class I(a)(b) | | | (1.51 | )% | | | | | | | 4.09 | % | | | | | | | 5.39 | % | | | | | | | 4.71 | % |
Class II(a)(b) | | | (1.63 | ) | | | | | | | 3 .90 | | | | | | | | 5.24 | | | | | | | | 4.55 | |
Class III(a)(b) | | | (1.62 | ) | | | | | | | 3 .94 | | | | | | | | 5.15 | | | | | | | | 4.46 | |
FTSE World Index(d) | | | (0.05 | ) | | | | | | | 11.14 | | | | | | | | 10.13 | | | | | | | | 6.59 | |
Reference Benchmark(e) | | | (0.22 | ) | | | | | | | 6 .98 | | | | | | | | 6.83 | | | | | | | | 5.75 | |
U.S. Stocks: S&P 500® Index(f) | | | 2.65 | | | | | | | | 14.37 | | | | | | | | 13.42 | | | | | | | | 10.17 | |
Non-U.S. Stocks: FTSE World (ex-U.S.) Index(g) | | | (3.50 | ) | | | | | | | 7 .03 | | | | | | | | 6.51 | | | | | | | | 3.14 | |
U.S. Bonds: ICE BofAML Current 5-year U.S. Treasury Index(h) | | | (1.08 | ) | | | | | | | (1.53 | ) | | | | | | | 0.89 | | | | | | | | 2.92 | |
Non-U.S. Bonds: FTSE Non-U.S. Dollar World Govt Bond Index(i) | | | (0.92 | ) | | | | | | | 3.22 | | | | | | | | 1.01 | | | | | | | | 1.78 | |
| (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) | 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) | 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. | |
| (d) | This unmanaged capitalization-weighted index is comprised of 2,602 equities from 35 countries in 4 regions, including the United States. | |
| (e) | 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% FTSE Non-U.S. Dollar World Government Bond Index. | |
| (f) | This unmanaged index covers 500 leading companies and captures approximately 80% coverage of available market capitalization. | |
| (g) | This unmanaged capitalization-weighted index is comprised of 1,990 equities from 34 countries, excluding the United States. | |
| (h) | This unmanaged index is designed to track the total return of the current coupon five-year U.S. Treasury bond. | |
| (i) | 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.
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 01/01/18 | | | Ending Account Value 06/30/18 | | | Expenses Paid During the Period (b) | | | Expenses Paid During the Period (b) | | | | | | Beginning Account Value 01/01/18 | | | Ending Account Value 06/30/18 | | | Expenses Paid During the Period (b) | | | Ending Account Value 06/30/18 | | | Expenses Paid During the Period (b) | |
Class I | | $ | 1,000.00 | | | $ | 984.90 | | | $ | 3.59 | | | $ | 3.59 | | | | | | | $ | 1,000.00 | | | $ | 1,021.17 | | | $ | 3.66 | | | $ | 1,021.17 | | | $ | 3.66 | |
Class II | | | 1,000.00 | | | | 983.70 | | | | 4.33 | | | | 4.33 | | | | | | | | 1,000.00 | | | | 1,020.43 | | | | 4.41 | | | | 1,020.43 | | | | 4.41 | |
Class III | | | 1,000.00 | | | | 983.80 | | | | 4.82 | | | | 4.82 | | | | | | | | 1,000.00 | | | | 1,019.93 | | | | 4.91 | | | | 1,019.93 | | | | 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 (0.73% for Class I , 0.88% for Class II and 0.98% for Class III ), multiplied by the average account value over the period, multiplied by 181/365 (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 | | 6/30/2018 | | | 12/31/2017 | |
U.S. Equities | | | 32 | % | | | 32 | % | | | 35 | % |
European Equities | | | 13 | | | | 15 | | | | 13 | |
Asia Pacific Equities | | | 15 | | | | 14 | | | | 9 | |
Other Equities | | | 1 | | | | 1 | | | | 3 | |
| | | | | | | | | | | | |
Total Equities | | | 61 | | | | 62 | | | | 60 | |
| | | | | | | | | | | | |
U.S Dollar Denominated Fixed Income Securities | | | 22 | | | | 22 | | | | 24 | |
U.S. Issuers | | | 21 | | | | 19 | | | | — | |
Non-U.S. Issuers | | | 1 | | | | 3 | | | | — | |
Non-U.S Dollar Denominated Fixed Income Securities | | | 6 | | | | 8 | | | | 16 | |
| | | | | | | | | | | | |
Total Fixed Income Securities | | | 28 | | | | 30 | | | | 40 | |
| | | | | | | | | | | | |
Commodity-Related Securities | | | 3 | | | | 4 | | | | | |
| | | | | | | | | | | | |
Cash & Short-Term Securities | | | 8 | | | | 4 | | | | — | |
| | | | | | | | | | | | |
| (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% ICE BofA ML Current 5-Year U.S. Treasury Index; and 16% FTSE 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. | |
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 January 1, 2018 and held through June 30, 2018 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 Consolidated Financial Statements.
| | |
4 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Consolidated Schedule of Investments (unaudited) June 30, 2018 | | BlackRock Global Allocation V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Common Stocks — 57.7% | |
|
Australia — 0.0% | |
AMP Ltd. | | | 26,272 | | | $ | 69,101 | |
Newcrest Mining Ltd. | | | 832 | | | | 13,509 | |
Ramsay Health Care Ltd. | | | 1,054 | | | | 42,090 | |
Rio Tinto Ltd. | | | 1,943 | | | | 120,049 | |
Rio Tinto plc | | | 3,709 | | | | 204,434 | |
South32 Ltd. | | | 14,048 | | | | 37,513 | |
Stockland | | | 21,837 | | | | 64,161 | |
Wesfarmers Ltd. | | | 7,084 | | | | 258,469 | |
Woolworths Group Ltd. | | | 8,937 | | | | 201,831 | |
| | | | | | | | |
| | | | | | | 1,011,157 | |
Belgium — 0.4% | |
Anheuser-Busch InBev SA | | | 420,829 | | | | 42,446,911 | |
| | | | | | | | |
Brazil — 0.5% | |
Azul SA, ADR(a)(b) | | | 1,832,500 | | | | 29,979,700 | |
Banco do Brasil SA(a) | | | 11,723 | | | | 86,053 | |
Banco Santander Brasil SA | | | 6,359 | | | | 47,991 | |
Hapvida Participacoes e Investimentos SA(a)(c) | | | 752,034 | | | | 5,733,756 | |
JBS SA | | | 48,941 | | | | 116,173 | |
Notre Dame Intermedica Participacoes SA(a) | | | 1,793,904 | | | | 10,020,776 | |
Petroleo Brasileiro SA(a) | | | 1,691 | | | | 8,464 | |
Suzano Papel e Celulose SA | | | 2,020 | | | | 23,308 | |
Vale SA(a) | | | 5,676 | | | | 72,316 | |
| | | | | | | | |
| | | | | | | 46,088,537 | |
Canada — 0.7% | |
Bank of Nova Scotia (The) | | | 1,716 | | | | 97,166 | |
Canadian Natural Resources Ltd. | | | 3,772 | | | | 136,144 | |
Enbridge, Inc. | | | 443,303 | | | | 15,848,508 | |
Encana Corp. | | | 2,903,346 | | | | 37,888,665 | |
Husky Energy, Inc. | | | 10,131 | | | | 157,901 | |
Imperial Oil Ltd. | | | 1,859 | | | | 61,795 | |
Manulife Financial Corp. | | | 4,321 | | | | 77,634 | |
Royal Bank of Canada | | | 5,162 | | | | 388,686 | |
Suncor Energy, Inc. | | | 4,209 | | | | 171,286 | |
Teck Resources Ltd., Class B | | | 8,238 | | | | 209,858 | |
Toronto-Dominion Bank (The) | | | 1,673 | | | | 96,831 | |
TransCanada Corp.(b) | | | 388,596 | | | | 16,813,099 | |
| | | | | | | | |
| | | | | | | 71,947,573 | |
China — 1.3% | |
Agile Group Holdings Ltd. | | | 24,000 | | | | 40,835 | |
Agricultural Bank of China Ltd., Class H | | | 204,000 | | | | 95,213 | |
Alibaba Group Holding Ltd., ADR(a)(b) | | | 309,495 | | | | 57,420,607 | |
Autohome, Inc., ADR | | | 52 | | | | 5,252 | |
BAIC Motor Corp. Ltd., Class H(a)(c) | | | 110,000 | | | | 104,697 | |
Bank of China Ltd., Class H | | | 184,000 | | | | 91,250 | |
Beijing Capital International Airport Co. Ltd., Class H | | | 144,000 | | | | 151,262 | |
China Communications Services Corp. Ltd., Class H | | | 186,000 | | | | 117,537 | |
China Construction Bank Corp., Class H(a) | | | 213,000 | | | | 194,904 | |
China Mobile Ltd. | | | 21,000 | | | | 186,332 | |
China National Building Material Co. Ltd., Class H | | | 46,000 | | | | 45,276 | |
China Resources Gas Group Ltd. | | | 14,000 | | | | 60,525 | |
China Resources Power Holdings Co. Ltd. | | | 36,000 | | | | 63,267 | |
CITIC Ltd. | | | 26,000 | | | | 36,575 | |
CNOOC Ltd. | | | 144,000 | | | | 246,751 | |
Country Garden Holdings Co. Ltd. | | | 30,000 | | | | 52,590 | |
Country Garden Services Holdings Co. Ltd.(a) | | | 6,321 | | | | 8,105 | |
Dongfeng Motor Group Co. Ltd., Class H | | | 112,000 | | | | 118,050 | |
Fosun International Ltd. | | | 28,500 | | | | 53,380 | |
Guangzhou Automobile Group Co. Ltd., Class H | | | 78,400 | | | | 76,276 | |
Industrial & Commercial Bank of China Ltd., Class H | | | 203,000 | | | | 151,406 | |
Momo, Inc., ADR(a) | | | 729 | | | | 31,711 | |
| | | | | | | | |
Security | | Shares | | | Value | |
China (continued) | |
New Oriental Education & Technology Group, Inc., ADR | | | 1,960 | | | $ | 185,534 | |
PICC Property & Casualty Co. Ltd., Class H | | | 33,000 | | | | 35,492 | |
Ping An Healthcare and Technology Co. Ltd. (Acquired 05/03/18, cost $12,198,634)(a)(c)(d)(e) | | | 1,729,470 | | | | 10,638,568 | |
Shimao Property Holdings Ltd. | | | 6,500 | | | | 16,947 | |
SINA Corp.(a) | | | 2,446 | | | | 207,152 | |
Tencent Holdings Ltd. | | | 1,237,300 | | | | 62,131,518 | |
Want Want China Holdings Ltd. | | | 3,976,000 | | | | 3,535,570 | |
Yum China Holdings, Inc. | | | 1,284 | | | | 49,383 | |
Zhejiang Expressway Co. Ltd., Class H | | | 128,000 | | | | 113,996 | |
| | | | | | | | |
| | | | | | | 136,265,961 | |
Czech Republic — 0.0% | |
CEZ A/S(b) | | | 194,193 | | | | 4,601,062 | |
| | | | | | | | |
Denmark — 0.0% | |
Carlsberg A/S, Class B | | | 623 | | | | 73,301 | |
Danske Bank A/S | | | 4,149 | | | | 129,258 | |
Novo Nordisk A/S, Class B | | | 291 | | | | 13,441 | |
| | | | | | | | |
| | | | | | | 216,000 | |
Finland — 0.0% | |
Nokia OYJ | | | 46,947 | | | | 269,282 | |
| | | | | | | | |
France — 2.5% | |
AXA SA | | | 812,915 | | | | 19,862,585 | |
BNP Paribas SA | | | 3,166 | | | | 195,839 | |
Cie de Saint-Gobain | | | 6,628 | | | | 295,244 | |
Cie Generale des Etablissements Michelin SCA | | | 779 | | | | 94,242 | |
Credit Agricole SA | | | 5,109 | | | | 67,809 | |
Danone SA | | | 941,291 | | | | 68,726,006 | |
Dassault Aviation SA | | | 11,027 | | | | 20,967,457 | |
Eiffage SA | | | 20,504 | | | | 2,227,626 | |
Engie SA | | | 10,899 | | | | 166,717 | |
L’Oreal SA | | | 43 | | | | 10,601 | |
Safran SA | | | 545,811 | | | | 66,100,388 | |
Sanofi | | | 2,989 | | | | 239,896 | |
Societe Generale SA | | | 3,137 | | | | 131,848 | |
Sodexo SA | | | 377,900 | | | | 37,723,541 | |
TOTAL SA | | | 1,233 | | | | 74,875 | |
TOTAL SA, ADR | | | 16,458 | | | | 996,696 | |
Unibail-Rodamco-Westfield | | | 152,534 | | | | 33,586,262 | |
| | | | | | | | |
| | | | | | | 251,467,632 | |
Germany — 1.5% | |
adidas AG | | | 642 | | | | 139,775 | |
Allianz SE (Registered) | | | 556 | | | | 114,566 | |
BASF SE | | | 1,150 | | | | 109,789 | |
Bayer AG (Registered) | | | 676,133 | | | | 74,255,365 | |
Deutsche Post AG (Registered) | | | 4,963 | | | | 161,250 | |
Evonik Industries AG | | | 232 | | | | 7,938 | |
Fresenius Medical Care AG & Co. KGaA | | | 1,318 | | | | 132,711 | |
Fresenius SE & Co. KGaA | | | 949,568 | | | | 76,026,872 | |
GEA Group AG(b) | | | 117,525 | | | | 3,958,032 | |
Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen (Registered) | | | 240 | | | | 50,458 | |
SAP SE | | | 3,197 | | | | 368,991 | |
Siemens Healthineers AG(a)(c) | | | 2,135 | | | | 87,980 | |
| | | | | | | | |
| | | | | | | 155,413,727 | |
Hong Kong — 0.8% | |
CK Infrastructure Holdings Ltd. | | | 359,500 | | | | 2,661,280 | |
CLP Holdings Ltd. | | | 418,500 | | | | 4,507,827 | |
Galaxy Entertainment Group Ltd. | | | 20,000 | | | | 154,169 | |
Hang Lung Properties Ltd. | | | 1,372,000 | | | | 2,818,191 | |
HKT Trust & HKT Ltd.(f) | | | 2,032,000 | | | | 2,592,048 | |
| | | | |
CONSOLIDATED SCHEDULE OF INVESTMENTS | | | 5 | |
| | |
Consolidated Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Global Allocation V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Hong Kong (continued) | |
Hong Kong Exchanges & Clearing Ltd. | | | 2,700 | | | $ | 80,804 | |
I-CABLE Communications Ltd.(a) | | | 379,342 | | | | 5,922 | |
Jardine Matheson Holdings Ltd. | | | 77,900 | | | | 4,908,731 | |
Link REIT | | | 473,000 | | | | 4,313,471 | |
Power Assets Holdings Ltd. | | | 334,500 | | | | 2,338,550 | |
Sino Land Co. Ltd. | | | 1,416,000 | | | | 2,300,960 | |
Sun Hung Kai Properties Ltd. | | | 2,934,083 | | | | 44,204,713 | |
Swire Pacific Ltd., Class A | | | 323,000 | | | | 3,414,061 | |
WH Group Ltd.(c) | | | 189,000 | | | | 152,936 | |
Wharf Holdings Ltd. (The) | | | 592,000 | | | | 1,895,775 | |
Wharf Real Estate Investment Co. Ltd. | | | 469,000 | | | | 3,330,256 | |
| | | | | | | | |
| | | | | | | 79,679,694 | |
India — 1.5% | |
Aurobindo Pharma Ltd. | | | 5,941 | | | | 52,680 | |
Coal India Ltd. | | | 818,840 | | | | 3,159,817 | |
GAIL India Ltd. | | | 10,149 | | | | 50,441 | |
HCL Technologies Ltd. | | | 5,819 | | | | 78,627 | |
Hero MotoCorp Ltd. | | | 84,337 | | | | 4,276,302 | |
Hindustan Petroleum Corp. Ltd. | | | 52,445 | | | | 199,013 | |
Hindustan Unilever Ltd. | | | 8,572 | | | | 205,305 | |
Housing Development Finance Corp. Ltd. | | | 1,101,757 | | | | 30,699,998 | |
Indian Oil Corp. Ltd. | | | 28,603 | | | | 65,329 | |
Infosys Ltd. | | | 502 | | | | 9,624 | |
Kotak Mahindra Bank Ltd. | | | 1,178,697 | | | | 23,132,593 | |
Maruti Suzuki India Ltd. | | | 108,150 | | | | 13,938,631 | |
Oil & Natural Gas Corp. Ltd. | | | 1,101,484 | | | | 2,546,537 | |
Reliance Industries Ltd. | | | 3,424,696 | | | | 48,657,854 | |
State Bank of India(a) | | | 2,414,376 | | | | 9,153,078 | |
Tata Motors Ltd.(a) | | | 2,233 | | | | 8,778 | |
Titan Co. Ltd. | | | 2,008 | | | | 25,759 | |
Vedanta Ltd. | | | 11,645 | | | | 40,186 | |
Yes Bank Ltd. | | | 2,252,396 | | | | 11,192,232 | |
| | | | | | | | |
| | | | | | | 147,492,784 | |
Indonesia — 0.1% | |
Siloam International Hospitals Tbk. PT(a) | | | 15,052,742 | | | | 5,485,025 | |
| | | | | | | | |
Israel — 0.0% | |
Check Point Software Technologies Ltd.(a) | | | 1,095 | | | | 106,960 | |
| | | | | | | | |
Italy — 0.9% | |
Atlantia SpA | | | 633 | | | | 18,662 | |
Ei Towers SpA | | | 300,933 | | | | 16,640,190 | |
Enel SpA | | | 4,173,245 | | | | 23,124,709 | |
Eni SpA | | | 6,189 | | | | 114,753 | |
Intesa Sanpaolo SpA(b) | | | 15,616 | | | | 45,181 | |
Luxottica Group SpA | | | 439,421 | | | | 28,292,446 | |
RAI Way SpA(c) | | | 2,096,261 | | | | 9,811,053 | |
Snam SpA(b) | | | 348,869 | | | | 1,453,878 | |
Telecom Italia SpA(a) | | | 15,116,218 | | | | 11,199,327 | |
Telecom Italia SpA(b) | | | 805,191 | | | | 524,000 | |
UniCredit SpA | | | 5,973 | | | | 98,999 | |
| | | | | | | | |
| | | | | | | 91,323,198 | |
Japan — 8.4% | |
Aisin Seiki Co. Ltd. | | | 230,939 | | | | 10,515,244 | |
Ajinomoto Co., Inc. | | | 1,320,300 | | | | 24,992,060 | |
Alfresa Holdings Corp. | | | 102,900 | | | | 2,416,329 | |
Alpine Electronics, Inc. | | | 72,900 | | | | 1,503,206 | |
Asahi Glass Co. Ltd. | | | 300 | | | | 11,669 | |
Asahi Kasei Corp. | | | 1,281,100 | | | | 16,246,206 | |
Astellas Pharma, Inc. | | | 2,782,365 | | | | 42,343,654 | |
Bridgestone Corp. | | | 706,432 | | | | 27,595,251 | |
Canon Marketing Japan, Inc. | | | 87,100 | | | | 1,814,192 | |
COMSYS Holdings Corp. | | | 104,800 | | | | 2,773,755 | |
| | | | | | | | |
Security | | Shares | | | Value | |
Japan (continued) | |
Daicel Corp. | | | 390,100 | | | $ | 4,309,380 | |
Daikin Industries Ltd. | | | 133,500 | | | | 15,954,998 | |
Daiwa House Industry Co. Ltd. | | | 3,900 | | | | 132,685 | |
Denso Corp. | | | 547,120 | | | | 26,696,301 | |
Dowa Holdings Co. Ltd. | | | 49,400 | | | | 1,520,927 | |
East Japan Railway Co. | | | 557,051 | | | | 53,346,213 | |
Eisai Co. Ltd. | | | 800 | | | | 56,312 | |
Exedy Corp. | | | 60,900 | | | | 1,884,934 | |
Fujitsu Ltd. | | | 30,000 | | | | 181,545 | |
GS Yuasa Corp.(b) | | | 418,000 | | | | 1,903,207 | |
Hino Motors Ltd. | | | 181,800 | | | | 1,938,584 | |
Hitachi Chemical Co. Ltd. | | | 135,500 | | | | 2,727,831 | |
Hitachi Ltd. | | | 44,000 | | | | 309,979 | |
Hoya Corp. | | | 633,474 | | | | 35,936,339 | |
Inpex Corp. | | | 4,100 | | | | 42,582 | |
Japan Airlines Co. Ltd. | | | 1,270,500 | | | | 45,015,180 | |
Japan Aviation Electronics Industry Ltd. | | | 123,000 | | | | 1,934,730 | |
Japan Post Holdings Co. Ltd. | | | 7,300 | | | | 79,890 | |
JFE Holdings, Inc. | | | 3,700 | | | | 69,884 | |
Kajima Corp. | | | 8,000 | | | | 61,813 | |
Kamigumi Co. Ltd. | | | 95,000 | | | | 1,971,805 | |
Kansai Electric Power Co., Inc. (The) | | | 2,400 | | | | 35,002 | |
Kao Corp. | | | 700 | | | | 53,355 | |
KDDI Corp. | | | 140,200 | | | | 3,833,757 | |
Keyence Corp. | | | 7,800 | | | | 4,399,313 | |
Kinden Corp. | | | 311,600 | | | | 5,082,053 | |
Kintetsu Group Holdings Co. Ltd. | | | 1,900 | | | | 77,473 | |
Kirin Holdings Co. Ltd. | | | 2,200 | | | | 58,971 | |
Koito Manufacturing Co. Ltd. | | | 214,000 | | | | 14,135,366 | |
Kuraray Co. Ltd. | | | 131,000 | | | | 1,801,699 | |
Kyudenko Corp.(b) | | | 51,700 | | | | 2,491,423 | |
Mabuchi Motor Co. Ltd. | | | 75,300 | | | | 3,573,949 | |
Maeda Road Construction Co. Ltd. | | | 126,000 | | | | 2,391,857 | |
Medipal Holdings Corp. | | | 117,900 | | | | 2,368,288 | |
Mitsubishi Chemical Holdings Corp. | | | 7,500 | | | | 62,631 | |
Mitsubishi Electric Corp. | | | 3,690,200 | | | | 48,961,270 | |
Mitsubishi Heavy Industries Ltd. | | | 500 | | | | 18,176 | |
Mitsubishi Tanabe Pharma Corp. | | | 4,600 | | | | 79,420 | |
Mitsubishi UFJ Financial Group, Inc. | | | 20,000 | | | | 113,298 | |
MS&AD Insurance Group Holdings, Inc. | | | 2,500 | | | | 77,646 | |
Murata Manufacturing Co. Ltd. | | | 382,428 | | | | 64,200,642 | |
Nichias Corp. | | | 133,000 | | | | 1,663,203 | |
Nippo Corp. | | | 123,000 | | | | 2,238,645 | |
Nippon Telegraph & Telephone Corp. | | | 74,260 | | | | 3,373,484 | |
Nippon Television Holdings, Inc. | | | 237,700 | | | | 4,006,394 | |
Nitto Denko Corp. | | | 704,400 | | | | 53,180,377 | |
Nomura Holdings, Inc. | | | 13,600 | | | | 65,811 | |
Okumura Corp.(b) | | | 116,050 | | | | 3,777,462 | |
Olympus Corp. | | | 2,600 | | | | 97,260 | |
Oracle Corp. | | | 2,300 | | | | 187,462 | |
Otsuka Holdings Co. Ltd. | | | 41,900 | | | | 2,026,817 | |
Panasonic Corp. | | | 7,500 | | | | 101,133 | |
Rakuten, Inc. | | | 19,100 | | | | 128,919 | |
Resona Holdings, Inc. | | | 25,800 | | | | 137,508 | |
Rohm Co. Ltd. | | | 283,953 | | | | 23,728,391 | |
Seino Holdings Co. Ltd. | | | 134,500 | | | | 2,380,002 | |
Seven & i Holdings Co. Ltd. | | | 36,900 | | | | 1,609,419 | |
Shimamura Co. Ltd. | | | 18,500 | | | | 1,626,482 | |
Shin-Etsu Chemical Co. Ltd. | | | 473,434 | | | | 42,073,346 | |
Shionogi & Co. Ltd. | | | 5,400 | | | | 277,095 | |
Sony Corp. | | | 4,300 | | | | 220,222 | |
Stanley Electric Co. Ltd. | | | 61,800 | | | | 2,104,294 | |
Subaru Corp. | | | 1,646,964 | | | | 47,901,971 | |
| | |
6 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Consolidated Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Global Allocation V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Japan (continued) | |
Sumitomo Chemical Co. Ltd. | | | 4,000 | | | $ | 22,623 | |
Sumitomo Mitsui Financial Group, Inc. | | | 547 | | | | 21,336 | |
Suzuken Co. Ltd. | | | 52,200 | | | | 2,207,508 | |
Suzuki Motor Corp. | | | 913,589 | | | | 50,346,171 | |
T&D Holdings, Inc. | | | 500 | | | | 7,499 | |
Taisei Corp. | | | 2,700 | | | | 148,687 | |
Takeda Pharmaceutical Co. Ltd. | | | 1,800 | | | | 75,723 | |
Toagosei Co. Ltd. | | | 128,900 | | | | 1,487,419 | |
Toda Corp. | | | 568,896 | | | | 4,940,379 | |
Toho Co. Ltd. | | | 78,800 | | | | 2,639,329 | |
Tokio Marine Holdings, Inc. | | | 369,623 | | | | 17,292,164 | |
Tokyo Gas Co. Ltd. | | | 1,310,014 | | | | 34,783,853 | |
Tokyo Steel Manufacturing Co. Ltd. | | | 359,900 | | | | 3,192,875 | |
Toray Industries, Inc. | | | 1,405,400 | | | | 11,092,630 | |
Toshiba Corp.(a) | | | 19,000 | | | | 57,039 | |
Toyota Industries Corp. | | | 530,377 | | | | 29,688,265 | |
TV Asahi Holdings Corp. | | | 172,900 | | | | 3,792,801 | |
Ube Industries Ltd. | | | 693,934 | | | | 18,018,221 | |
Unicharm Corp. | | | 3,200 | | | | 96,206 | |
West Japan Railway Co. | | | 200 | | | | 14,725 | |
Yakult Honsha Co. Ltd. | | | 500 | | | | 33,430 | |
Yamato Kogyo Co. Ltd.(b) | | | 73,400 | | | | 2,214,224 | |
| | | | | | | | |
| | | | | | | 855,181,078 | |
Luxembourg — 0.0% | |
ArcelorMittal | | | 883 | | | | 25,762 | |
| | | | | | | | |
Macau — 0.0% | |
Sands China Ltd. | | | 6,000 | | | | 31,988 | |
| | | | | | | | |
Malaysia — 0.0% | |
Malaysia Airports Holdings Bhd. | | | 673,600 | | | | 1,467,424 | |
| | | | | | | | |
Mexico — 0.0% | |
Cemex SAB de CV(a) | | | 379,272 | | | | 249,598 | |
Grupo Financiero Banorte SAB de CV, Class O | | | 11,266 | | | | 66,245 | |
| | | | | | | | |
| | | | | | | 315,843 | |
Netherlands — 2.4% | |
ABN AMRO Group NV, CVA(b)(c) | | | 898,430 | | | | 23,235,012 | |
ING Groep NV | | | 2,769,111 | | | | 39,749,270 | |
Koninklijke Ahold Delhaize NV | | | 2,957 | | | | 70,606 | |
Koninklijke DSM NV | | | 1,169 | | | | 116,946 | |
Koninklijke Philips NV | | | 2,092,402 | | | | 88,650,834 | |
Royal Dutch Shell plc, Class A | | | 1,485,443 | | | | 51,551,048 | |
Royal Dutch Shell plc, Class B | | | 10,955 | | | | 392,332 | |
Royal Dutch Shell plc, ADR, Class A(b) | | | 596,656 | | | | 41,306,495 | |
| | | | | | | | |
| | | | | | | 245,072,543 | |
Norway — 0.0% | |
DNB ASA | | | 3,566 | | | | 69,441 | |
| | | | | | | | |
Poland — 0.0% | |
LPP SA | | | 9 | | | | 20,301 | |
PGE Polska Grupa Energetyczna SA(a) | | | 54,010 | | | | 134,217 | |
Polski Koncern Naftowy ORLEN SA | | | 3,699 | | | | 82,847 | |
| | | | | | | | |
| | | | | | | 237,365 | |
Portugal — 0.1% | |
Jeronimo Martins SGPS SA | | | 101,310 | | | | 1,459,319 | |
NOS SGPS SA | | | 1,343,082 | | | | 7,346,322 | |
| | | | | | | | |
| | | | | | | 8,805,641 | |
Singapore — 0.2% | |
CapitaLand Ltd. | | | 7,377,850 | | | | 17,076,038 | |
ComfortDelGro Corp. Ltd. | | | 1,679,500 | | | | 2,890,392 | |
Genting Singapore Ltd. | | | 288,100 | | | | 257,968 | |
Singapore Telecommunications Ltd. | | | 1,673,800 | | | | 3,779,101 | |
| | | | | | | | |
| | | | | | | 24,003,499 | |
| | | | | | | | |
Security | | Shares | | | Value | |
South Africa — 0.0% | |
Anglo American plc | | | 3,395 | | | $ | 75,372 | |
Kumba Iron Ore Ltd. | | | 488 | | | | 10,445 | |
MTN Group Ltd. | | | 4,118 | | | | 32,392 | |
Tiger Brands Ltd. | | | 6,602 | | | | 159,450 | |
| | | | | | | | |
| | | | | | | 277,659 | |
South Korea — 0.7% | |
Coway Co. Ltd. | | | 40,596 | | | | 3,154,431 | |
Doosan Bobcat, Inc. | | | 503,116 | | | | 14,446,872 | |
Hana Financial Group, Inc. | | | 2,768 | | | | 106,293 | |
Hyundai Mobis Co. Ltd. | | | 69 | | | | 13,124 | |
Industrial Bank of Korea | | | 7,676 | | | | 105,865 | |
KT&G Corp. | | | 226,115 | | | | 21,726,243 | |
LG Chem Ltd.(b) | | | 15,076 | | | | 4,512,375 | |
LG Display Co. Ltd. | | | 631 | | | | 10,352 | |
Lotte Chemical Corp. | | | 130 | | | | 40,525 | |
POSCO | | | 16,301 | | | | 4,809,772 | |
Samsung Electronics Co. Ltd. | | | 562,335 | | | | 23,555,978 | |
Shinhan Financial Group Co. Ltd. | | | 275 | | | | 10,648 | |
SK Hynix, Inc. | | | 1,862 | | | | 142,926 | |
SK Innovation Co. Ltd. | | | 384 | | | | 69,553 | |
SK Telecom Co. Ltd. | | | 16,304 | | | | 3,407,692 | |
Woori Bank | | | 3,929 | | | | 57,307 | |
| | | | | | | | |
| | | | | | | 76,169,956 | |
Spain — 0.3% | |
Aena SME SA(c) | | | 1,729 | | | | 313,030 | |
Amadeus IT Group SA | | | 419 | | | | 32,947 | |
Banco Bilbao Vizcaya Argentaria SA | | | 13,800 | | | | 97,326 | |
CaixaBank SA | | | 37,750 | | | | 162,487 | |
Cellnex Telecom SA(b)(c) | | | 1,257,887 | | | | 31,625,127 | |
Repsol SA | | | 5,569 | | | | 108,702 | |
| | | | | | | | |
| | | | | | | 32,339,619 | |
Sweden — 0.0% | |
Essity AB, Class B | | | 6,575 | | | | 161,755 | |
Sandvik AB | | | 7,516 | | | | 132,740 | |
Skandinaviska Enskilda Banken AB, Class A | | | 17,221 | | | | 162,986 | |
Volvo AB, Class B | | | 18,568 | | | | 295,104 | |
| | | | | | | | |
| | | | | | | 752,585 | |
Switzerland — 1.1% | |
Cie Financiere Richemont SA (Registered) | | | 454 | | | | 38,379 | |
Glencore plc(a) | | | 8,083 | | | | 38,376 | |
Nestle SA (Registered) | | | 781,584 | | | | 60,573,424 | |
Novartis AG (Registered) | | | 1,883 | | | | 142,639 | |
Roche Holding AG | | | 2,092 | | | | 464,127 | |
SGS SA (Registered) | | | 26 | | | | 69,087 | |
Swatch Group AG (The) | | | 17 | | | | 8,048 | |
Swatch Group AG (The) (Registered) | | | 2,231 | | | | 192,640 | |
UBS Group AG (Registered)(a) | | | 3,492,960 | | | | 53,548,343 | |
| | | | | | | | |
| | | | | | | 115,075,063 | |
Taiwan — 0.8% | |
Catcher Technology Co. Ltd. | | | 1,000 | | | | 11,165 | |
Cathay Financial Holding Co. Ltd. | | | 2,326,000 | | | | 4,097,024 | |
Cheng Shin Rubber Industry Co. Ltd. | | | 1,312,323 | | | | 1,973,880 | |
Chunghwa Telecom Co. Ltd. | | | 5,502,000 | | | | 19,828,276 | |
CTBC Financial Holding Co. Ltd. | | | 25,000 | | | | 17,963 | |
Far EasTone Telecommunications Co. Ltd.(a) | | | 3,428,000 | | | | 8,855,087 | |
Formosa Chemicals & Fibre Corp. | | | 944,000 | | | | 3,756,469 | |
Formosa Petrochemical Corp.(a) | | | 673,000 | | | | 2,699,996 | |
Formosa Plastics Corp. | | | 982,000 | | | | 3,618,963 | |
Fubon Financial Holding Co. Ltd. | | | 2,590,000 | | | | 4,333,372 | |
Hon Hai Precision Industry Co. Ltd.(a) | | | 1,536,200 | | | | 4,186,249 | |
Nan Ya Plastics Corp. | | | 1,232,000 | | | | 3,518,786 | |
| | | | |
CONSOLIDATED SCHEDULE OF INVESTMENTS | | | 7 | |
| | |
Consolidated Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Global Allocation V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Taiwan (continued) | |
Nanya Technology Corp. | | | 29,000 | | | $ | 78,720 | |
Taiwan Cooperative Financial Holding Co. Ltd. | | | 42,000 | | | | 24,574 | |
Taiwan Mobile Co. Ltd. | | | 2,831,000 | | | | 10,256,341 | |
Taiwan Semiconductor Manufacturing Co. Ltd. | | | 621,000 | | | | 4,409,770 | |
Uni-President Enterprises Corp. | | | 2,301,000 | | | | 5,832,630 | |
| | | | | | | | |
| | | | | | | 77,499,265 | |
Thailand — 0.2% | |
Advanced Info Service PCL | | | 910,500 | | | | 5,081,475 | |
Intouch Holdings PCL, Class F | | | 2,284,600 | | | | 3,689,597 | |
PTT Global Chemical PCL | | | 1,915,300 | | | | 4,216,070 | |
Siam Cement PCL (The) | | | 282,400 | | | | 3,526,135 | |
Thai Oil PCL | | | 1,022,400 | | | | 2,396,776 | |
| | | | | | | | |
| | | | | | | 18,910,053 | |
Turkey — 0.0% | |
BIM Birlesik Magazalar A/S | | | 3,239 | | | | 47,303 | |
Eregli Demir ve Celik Fabrikalari TAS | | | 8,167 | | | | 18,113 | |
Turk Hava Yollari AO(a) | | | 26,135 | | | | 77,078 | |
| | | | | | | | |
| | | | | | | 142,494 | |
United Arab Emirates — 0.5% | |
NMC Health plc | | | 1,051,788 | | | | 49,505,301 | |
| | | | | | | | |
United Kingdom — 1.5% | |
Aviva plc | | | 7,114 | | | | 47,202 | |
Barclays plc | | | 12,569 | | | | 31,067 | |
Berkeley Group Holdings plc | | | 35,397 | | | | 1,763,231 | |
BP plc | | | 28,278 | | | | 215,154 | |
Diageo plc | | | 1,515 | | | | 54,428 | |
Experian plc | | | 735 | | | | 18,131 | |
GlaxoSmithKline plc | | | 13,621 | | | | 274,612 | |
GW Pharmaceuticals plc, ADR(a)(b) | | | 46,948 | | | | 6,551,124 | |
HSBC Holdings plc | | | 4,776,860 | | | | 44,636,656 | |
Imperial Brands plc | | | 3,118 | | | | 115,797 | |
Legal & General Group plc | | | 44,110 | | | | 154,290 | |
Liberty Global plc, Class A(a) | | | 626,045 | | | | 17,241,279 | |
Lloyds Banking Group plc | | | 375,513 | | | | 311,570 | |
Prudential plc | | | 1,348 | | | | 30,729 | |
RELX plc | | | 608 | | | | 12,984 | |
SSE plc | | | 1,165 | | | | 20,796 | |
Unilever NV, CVA | | | 2,774 | | | | 154,559 | |
Unilever plc | | | 1,900 | | | | 104,957 | |
Vodafone Group plc | | | 27,500,988 | | | | 66,615,409 | |
Vodafone Group plc, ADR(b) | | | 499,896 | | | | 12,152,472 | |
| | | | | | | | |
| | | | | | | 150,506,447 | |
United States — 31.3% | |
AbbVie, Inc. | | | 21,218 | | | | 1,965,848 | |
Acadia Healthcare Co., Inc.(a)(b) | | | 442,659 | | | | 18,109,180 | |
Accenture plc, Class A | | | 13,280 | | | | 2,172,475 | |
Activision Blizzard, Inc. | | | 548 | | | | 41,823 | |
Adobe Systems, Inc.(a) | | | 11,759 | | | | 2,866,962 | |
Aetna, Inc. | | | 11,858 | | | | 2,175,943 | |
Agilent Technologies, Inc. | | | 1,586 | | | | 98,078 | |
Air Products & Chemicals, Inc. | | | 421,850 | | | | 65,694,701 | |
Allergan plc | | | 1,207 | | | | 201,231 | |
Alliance Data Systems Corp. | | | 2,297 | | | | 535,660 | |
Allstate Corp. (The) | | | 1,637 | | | | 149,409 | |
Ally Financial, Inc. | | | 27,785 | | | | 729,912 | |
Alphabet, Inc., Class A(a) | | | 516 | | | | 582,662 | |
Alphabet, Inc., Class C(a) | | | 98,826 | | | | 110,255,227 | |
Altria Group, Inc. | | | 739,201 | | | | 41,979,225 | |
Amazon.com, Inc.(a)(g) | | | 67,728 | | | | 115,124,054 | |
Amdocs Ltd. | | | 27,552 | | | | 1,823,667 | |
American Express Co. | | | 94 | | | | 9,212 | |
American International Group, Inc. | | | 154 | | | | 8,165 | |
| | | | | | | | |
Security | | Shares | | | Value | |
United States (continued) | |
American Tower Corp. | | | 15,720 | | | $ | 2,266,352 | |
Ameriprise Financial, Inc. | | | 8,194 | | | | 1,146,177 | |
AmerisourceBergen Corp. | | | 205 | | | | 17,480 | |
Amgen, Inc. | | | 12,354 | | | | 2,280,425 | |
Anadarko Petroleum Corp. | | | 1,251,899 | | | | 91,701,602 | |
Anthem, Inc. | | | 326,348 | | | | 77,680,614 | |
Aon plc | | | 626 | | | | 85,868 | |
Apple, Inc. | | | 1,161,823 | | | | 215,065,056 | |
Applied Materials, Inc. | | | 3,459 | | | | 159,771 | |
AT&T, Inc. | | | 5,650 | | | | 181,422 | |
Automatic Data Processing, Inc. | | | 1,236 | | | | 165,797 | |
AutoZone, Inc.(a) | | | 137 | | | | 91,917 | |
Bank of America Corp. | | | 3,086,243 | | | | 87,001,190 | |
Bank of New York Mellon Corp. (The) | | | 16,137 | | | | 870,268 | |
Baxter International, Inc.(b) | | | 59,874 | | | | 4,421,096 | |
BB&T Corp. | | | 197 | | | | 9,937 | |
Berkshire Hathaway, Inc., Class B(a) | | | 25,044 | | | | 4,674,463 | |
Biogen, Inc.(a) | | | 48,493 | | | | 14,074,608 | |
Boeing Co. (The) | | | 8,279 | | | | 2,777,687 | |
Booking Holdings, Inc.(a) | | | 69 | | | | 139,869 | |
Boston Scientific Corp.(a) | | | 2,705 | | | | 88,454 | |
Bristol-Myers Squibb Co. | | | 5,003 | | | | 276,866 | |
Broadcom, Inc. | | | 148 | | | | 35,911 | |
CA, Inc. | | | 4,049 | | | | 144,347 | |
Capital One Financial Corp. | | | 14,213 | | | | 1,306,175 | |
Cardinal Health, Inc. | | | 822 | | | | 40,138 | |
Carnival Corp. | | | 3,587 | | | | 205,571 | |
Caterpillar, Inc. | | | 5,269 | | | | 714,845 | |
Celgene Corp.(a) | | | 1,794 | | | | 142,480 | |
Charles Schwab Corp. (The) | | | 1,176,652 | | | | 60,126,917 | |
Charter Communications, Inc., Class A(a) | | | 254,380 | | | | 74,586,760 | |
Chevron Corp. | | | 9,147 | | | | 1,156,455 | |
Chubb Ltd. | | | 204,285 | | | | 25,948,281 | |
Cigna Corp. | | | 1,635 | | | | 277,868 | |
Cisco Systems, Inc. | | | 10,410 | | | | 447,942 | |
Citigroup, Inc. | | | 790,367 | | | | 52,891,360 | |
Cloudera, Inc.(a) | | | 1,593,528 | | | | 21,735,722 | |
CME Group, Inc. | | | 603 | | | | 98,844 | |
Coca-Cola Co. (The) | | | 3,567 | | | | 156,449 | |
Cognizant Technology Solutions Corp., Class A | | | 2,799 | | | | 221,093 | |
Colgate-Palmolive Co. | | | 39,573 | | | | 2,564,726 | |
Comcast Corp., Class A | | | 3,428,813 | | | | 112,499,355 | |
Conagra Brands, Inc. | | | 8,184 | | | | 292,414 | |
ConocoPhillips | | | 5,742 | | | | 399,758 | |
Constellation Brands, Inc., Class A | | | 9,039 | | | | 1,978,366 | |
Corning, Inc. | | | 6,024 | | | | 165,720 | |
Costco Wholesale Corp. | | | 4,050 | | | | 846,369 | |
Crown Holdings, Inc.(a) | | | 19,636 | | | | 878,907 | |
CSX Corp. | | | 7,381 | | | | 470,760 | |
Cummins, Inc. | | | 830 | | | | 110,390 | |
CVS Health Corp.(b) | | | 1,061,497 | | | | 68,307,332 | |
Danaher Corp. | | | 935 | | | | 92,266 | |
Dave & Buster’s Entertainment, Inc.(a) | | | 204,379 | | | | 9,728,440 | |
Dell Technologies, Inc., Class V(a) | | | 2,097 | | | | 177,364 | |
Delta Air Lines, Inc. | | | 16,862 | | | | 835,344 | |
Discover Financial Services | | | 21,988 | | | | 1,548,175 | |
DISH Network Corp., Class A(a) | | | 89,350 | | | | 3,003,054 | |
Dollar General Corp. | | | 52,952 | | | | 5,221,067 | |
Domo, Inc., Class B(a) | | | 338,616 | | | | 9,244,217 | |
Domo, Inc., Class B (Acquired 04/01/15-04/12/17, cost $23,596,895)(a)(d)(e) | | | 186,575 | | | | 4,839,757 | |
DowDuPont, Inc. | | | 1,428,100 | | | | 94,140,352 | |
Dropbox, Inc. Class A (Acquired 01/24/14, cost $28,835,783)(a)(d)(e) | | | 1,006,421 | | | | 31,885,442 | |
| | |
8 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Consolidated Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Global Allocation V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
United States (continued) | |
DXC Technology Co. | | | 1,040 | | | $ | 83,834 | |
Eaton Corp. plc | | | 385 | | | | 28,775 | |
eBay, Inc.(a) | | | 12,864 | | | | 466,449 | |
Edgewell Personal Care Co.(a)(b) | | | 473,472 | | | | 23,891,397 | |
Edwards Lifesciences Corp.(a) | | | 3,406 | | | | 495,811 | |
Electronic Arts, Inc.(a) | | | 13,888 | | | | 1,958,486 | |
Emerson Electric Co. | | | 445 | | | | 30,767 | |
Entergy Corp. | | | 830 | | | | 67,056 | |
Equity Residential | | | 1,926 | | | | 122,667 | |
Expedia Group, Inc. | | | 3,082 | | | | 370,426 | |
Express Scripts Holding Co.(a) | | | 3,506 | | | | 270,698 | |
Exxon Mobil Corp. | | | 267,597 | | | | 22,138,300 | |
Facebook, Inc., Class A(a) | | | 895,435 | | | | 174,000,929 | |
Fieldwood Energy, Inc.(a)(e) | | | 86,636 | | | | 3,162,214 | |
Fifth Third Bancorp | | | 543,929 | | | | 15,610,762 | |
FleetCor Technologies, Inc.(a) | | | 231,282 | | | | 48,719,553 | |
Ford Motor Co. | | | 4,252 | | | | 47,070 | |
Fortune Brands Home & Security, Inc. | | | 40,260 | | | | 2,161,559 | |
Franklin Resources, Inc. | | | 950 | | | | 30,448 | |
Freeport-McMoRan, Inc. | | | 3,937 | | | | 67,953 | |
General Dynamics Corp. | | | 4,327 | | | | 806,596 | |
General Electric Co.(b) | | | 1,237,485 | | | | 16,842,171 | |
General Mills, Inc. | | | 3,013 | | | | 133,355 | |
General Motors Co. | | | 3,720 | | | | 146,568 | |
Gilead Sciences, Inc. | | | 791,185 | | | | 56,047,545 | |
Global Payments, Inc.(b) | | | 44,026 | | | | 4,908,459 | |
Goldman Sachs Group, Inc. (The) | | | 7,034 | | | | 1,551,489 | |
Halliburton Co. | | | 2,606 | | | | 117,426 | |
Hartford Financial Services Group, Inc. (The)(b) | | | 57,587 | | | | 2,944,423 | |
HCA Healthcare, Inc. | | | 463,463 | | | | 47,551,304 | |
Helmerich & Payne, Inc.(b) | | | 15,048 | | | | 959,461 | |
Hewlett Packard Enterprise Co. | | | 10,013 | | | | 146,290 | |
Hilton Worldwide Holdings, Inc. | | | 556 | | | | 44,013 | |
Home Depot, Inc. (The) | | | 14,981 | | | | 2,922,793 | |
HP, Inc. | | | 13,381 | | | | 303,615 | |
Humana, Inc. | | | 377 | | | | 112,207 | |
Huntsman Corp. | | | 22,829 | | | | 666,607 | |
Hyatt Hotels Corp., Class A | | | 3,842 | | | | 296,410 | |
Illinois Tool Works, Inc. | | | 3,967 | | | | 549,588 | |
Ingersoll-Rand plc | | | 1,832 | | | | 164,385 | |
Intel Corp. | | | 42,158 | | | | 2,095,674 | |
International Business Machines Corp. | | | 242,389 | | | | 33,861,743 | |
International Paper Co. | | | 19,680 | | | | 1,024,934 | |
Intuit, Inc. | | | 11,887 | | | | 2,428,574 | |
Intuitive Surgical, Inc.(a) | | | 342 | | | | 163,640 | |
Jawbone Health Hub, Inc. (Acquired 01/24/17, cost $0)(a)(d)(e) | | | 333,860 | | | | 3 | |
Johnson & Johnson | | | 371,255 | | | | 45,048,082 | |
JPMorgan Chase & Co. | | | 245,699 | | | | 25,601,836 | |
Kimberly-Clark Corp. | | | 1,178 | | | | 124,091 | |
Kinder Morgan, Inc. | | | 7,645 | | | | 135,087 | |
KLA-Tencor Corp. | | | 14,265 | | | | 1,462,590 | |
Kohl’s Corp. | | | 13,590 | | | | 990,711 | |
Lam Research Corp. | | | 1,029 | | | | 177,863 | |
Las Vegas Sands Corp. | | | 4,614 | | | | 352,325 | |
Lear Corp. | | | 8,124 | | | | 1,509,520 | |
Liberty Broadband Corp., Class A(a) | | | 65,154 | | | | 4,928,248 | |
Liberty Broadband Corp., Class C(a) | | | 275,079 | | | | 20,828,982 | |
Liberty Media Corp.-Liberty SiriusXM, Class A(a) | | | 233,636 | | | | 10,525,302 | |
Liberty Media Corp.-Liberty SiriusXM, Class C(a) | | | 384,586 | | | | 17,444,821 | |
Lockheed Martin Corp. | | | 317 | | | | 93,651 | |
Lookout, Inc. Series F (Acquired 03/04/15, cost $936,169)(a)(d)(e) | | | 81,954 | | | | 16,391 | |
Lowe’s Cos., Inc. | | | 54,514 | | | | 5,209,903 | |
| | | | | | | | |
Security | | Shares | | | Value | |
United States (continued) | |
M&T Bank Corp. | | | 351 | | | $ | 59,723 | |
Marathon Petroleum Corp. | | | 35,729 | | | | 2,506,747 | |
Marsh & McLennan Cos., Inc. | | | 328,694 | | | | 26,943,047 | |
Masco Corp. | | | 49,548 | | | | 1,854,086 | |
Mastercard, Inc., Class A | | | 29,296 | | | | 5,757,250 | |
McDonald’s Corp. | | | 7,563 | | | | 1,185,046 | |
McKesson Corp. | | | 5,866 | | | | 782,524 | |
Medtronic plc | | | 38,920 | | | | 3,331,941 | |
Merck & Co., Inc. | | | 53,889 | | | | 3,271,062 | |
MetLife, Inc. | | | 103,015 | | | | 4,491,454 | |
MGM Resorts International | | | 1,162,797 | | | | 33,755,997 | |
Micron Technology, Inc.(a) | | | 21,066 | | | | 1,104,701 | |
Microsoft Corp. | | | 1,889,883 | | | | 186,361,363 | |
Mohawk Industries, Inc.(a) | | | 230,923 | | | | 49,479,871 | |
Mondelez International, Inc., Class A | | | 72,423 | | | | 2,969,343 | |
Morgan Stanley | | | 1,332,168 | | | | 63,144,763 | |
NextEra Energy Partners LP(b) | | | 343,194 | | | | 16,016,864 | |
NextEra Energy, Inc. | | | 323,297 | | | | 54,000,298 | |
NIKE, Inc., Class B | | | 549 | | | | 43,744 | |
Norfolk Southern Corp. | | | 406 | | | | 61,253 | |
Northrop Grumman Corp. | | | 11,457 | | | | 3,525,319 | |
NVIDIA Corp. | | | 608 | | | | 144,035 | |
Occidental Petroleum Corp. | | | 1,276 | | | | 106,776 | |
Oracle Corp.(b) | | | 78,767 | | | | 3,470,474 | |
O’Reilly Automotive, Inc.(a)(b) | | | 96,043 | | | | 26,274,484 | |
PACCAR, Inc. | | | 616 | | | | 38,167 | |
Packaging Corp. of America | | | 12,737 | | | | 1,423,869 | |
Paychex, Inc. | | | 456 | | | | 31,168 | |
PepsiCo, Inc. | | | 37,494 | | | | 4,081,972 | |
Perspecta, Inc. | | | 486 | | | | 9,987 | |
Pfizer, Inc. | | | 2,029,456 | | | | 73,628,664 | |
PG&E Corp. | | | 1,894 | | | | 80,609 | |
Philip Morris International, Inc. | | | 2,932 | | | | 236,730 | |
Phillips 66 | | | 15,116 | | | | 1,697,678 | |
Pioneer Natural Resources Co. | | | 72,530 | | | | 13,725,577 | |
Procter & Gamble Co. (The) | | | 760,424 | | | | 59,358,697 | |
Progressive Corp. (The) | | | 180 | | | | 10,647 | |
Prologis, Inc. | | | 2,679 | | | | 175,984 | |
Prudential Financial, Inc. | | | 11,860 | | | | 1,109,029 | |
Pure Storage, Inc., Class A(a) | | | 1,150,854 | | | | 27,482,394 | |
PVH Corp. | | | 6,054 | | | | 906,405 | |
QUALCOMM, Inc. | | | 1,187,813 | | | | 66,660,066 | |
Raytheon Co. | | | 17,309 | | | | 3,343,753 | |
Red Hat, Inc.(a) | | | 163 | | | | 21,902 | |
Reinsurance Group of America, Inc. | | | 9,407 | | | | 1,255,646 | |
Republic Services, Inc. | | | 248 | | | | 16,953 | |
Rockwell Automation, Inc. | | | 3,774 | | | | 627,352 | |
Ross Stores, Inc. | | | 12,032 | | | | 1,019,712 | |
Royal Caribbean Cruises Ltd. | | | 8,115 | | | | 840,714 | |
Schlumberger Ltd. | | | 220,124 | | | | 14,754,912 | |
Sempra Energy | | | 186,329 | | | | 21,634,660 | |
Snap, Inc., Class A(a)(b) | | | 1,369,765 | | | | 17,930,224 | |
St Joe Co. (The)(a) | | | 683,172 | | | | 12,262,937 | |
State Street Corp. | | | 8,674 | | | | 807,463 | |
Stryker Corp. | | | 22,558 | | | | 3,809,144 | |
SunTrust Banks, Inc.(b) | | | 560,974 | | | | 37,035,504 | |
Symantec Corp. | | | 2,006 | | | | 41,424 | |
Sysco Corp. | | | 6,082 | | | | 415,340 | |
Target Corp. | | | 4,109 | | | | 312,777 | |
Tenet Healthcare Corp.(a) | | | 763,907 | | | | 25,644,358 | |
TESARO, Inc.(a)(b) | | | 148,293 | | | | 6,594,590 | |
Texas Instruments, Inc. | | | 2,157 | | | | 237,809 | |
Thermo Fisher Scientific, Inc. | | | 12,435 | | | | 2,575,786 | |
| | | | |
CONSOLIDATED SCHEDULE OF INVESTMENTS | | | 9 | |
| | |
Consolidated Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Global Allocation V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Shares | | | Value | |
United States (continued) | |
Travelers Cos., Inc. (The) | | | | | | | 31,833 | | | $ | 3,894,449 | |
Union Pacific Corp. | | | | | | | 814 | | | | 115,328 | |
United Continental Holdings, Inc.(a) | | | | | | | 633,456 | | | | 44,170,887 | |
United Rentals, Inc.(a) | | | | | | | 11,147 | | | | 1,645,520 | |
UnitedHealth Group, Inc. | | | | | | | 24,725 | | | | 6,066,032 | |
Valero Energy Corp. | | | | | | | 27,921 | | | | 3,094,484 | |
VeriSign, Inc.(a) | | | | | | | 16,996 | | | | 2,335,590 | |
Verizon Communications, Inc. | | | | | | | 60,944 | | | | 3,066,093 | |
VF Corp. | | | | | | | 3,424 | | | | 279,125 | |
Visa, Inc., Class A | | | | | | | 41,279 | | | | 5,467,404 | |
Vistra Energy Corp.(a) | | | | | | | 210,970 | | | | 4,991,550 | |
VMware, Inc., Class A(a) | | | | | | | 1,858 | | | | 273,070 | |
Vornado Realty Trust | | | | | | | 1,714 | | | | 126,699 | |
Walgreens Boots Alliance, Inc. | | | | | | | 2,808 | | | | 168,522 | |
Walmart, Inc. | | | | | | | 71,431 | | | | 6,118,065 | |
Walt Disney Co. (The) | | | | | | | 7,899 | | | | 827,894 | |
Waste Management, Inc. | | | | | | | 2,962 | | | | 240,929 | |
Wells Fargo & Co. | | | | | | | 477,593 | | | | 26,477,756 | |
Western Digital Corp. | | | | | | | 146,203 | | | | 11,317,574 | |
Weyerhaeuser Co. | | | | | | | 5,153 | | | | 187,878 | |
Williams Cos., Inc. (The) | | | | | | | 3,271,013 | | | | 88,677,162 | |
Wyndham Destinations, Inc. | | | | | | | 17,042 | | | | 754,449 | |
Wyndham Hotels & Resorts, Inc. | | | | | | | 11,929 | | | | 701,783 | |
Yum! Brands, Inc. | | | | | | | 3,989 | | | | 312,020 | |
Zynga, Inc., Class A(a) | | | | | | | 3,848,743 | | | | 15,664,384 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 3,183,588,331 | |
| | | | | | | | | | | | |
Total Common Stocks — 57.7% (Cost: $5,218,534,974) | | | | 5,873,792,860 | |
| | | | | | | | | | | | |
| | |
| | Par (000) | | | | |
Corporate Bonds — 2.4% | |
|
Australia — 0.2% | |
Quintis Ltd.(h): | | | | | | | | | | | | |
(Acquired 05/29/18, cost $2,167,000), 14.00%, 09/30/18(a)(d)(e) | | | USD | | | | 2,167 | | | | 2,167,000 | |
8.75%, 08/01/23(a)(c) | | | | | | | 28,698 | | | | 20,250,543 | |
(Acquired 11/13/17, cost $2,077,220), 14.00%, 05/31/19(a)(d)(e) | | | | | | | 2,323 | | | | 2,294,554 | |
| | | | | | | | |
| | | | | | | | | | | 24,712,097 | |
Belgium — 0.1% | |
Anheuser-Busch InBev Worldwide, Inc.: | | | | | | | | | | | | |
3.50%, 01/12/24 | | | | | | | 4,440 | | | | 4,412,582 | |
4.00%, 04/13/28 | | | | | | | 7,315 | | | | 7,298,010 | |
| | | | | | | | |
| | | | | | | | | | | 11,710,592 | |
Brazil — 0.0% | |
Odebrecht Finance Ltd., 4.38%, 04/25/25(c) | | | | | | | 5,283 | | | | 1,822,635 | |
| | | | | | | | |
Chile — 0.0% | |
Inversiones Alsacia SA, 8.00%, 12/31/18(a)(c)(h) | | | | | | | 7,809 | | | | 195,219 | |
| | | | | | | | |
China — 0.0% | |
China Milk Products Group Ltd., 0.00%, 01/05/12(a)(h)(i)(j) | | | | | | | 4,800 | | | | 48,000 | |
| | | | | | | | |
France — 0.1% | |
Danone SA, 2.59%, 11/02/23(c) | | | | | | | 8,441 | | | | 7,949,704 | |
| | | | | | | | |
Germany — 0.2% | |
Bayer Capital Corp. BV, 5.63%, 11/22/19(c)(j) | | | EUR | | | | 14,900 | | | | 18,618,235 | |
| | | | | | | | |
| | | | | | | | | | | | |
Security | | Shares | | | Value | |
India — 0.0% | |
REI Agro Ltd.(a)(e)(h)(j): | | | | | | | | | | | | |
5.50%, 11/13/14(c) | | | USD | | | | 6,148 | | | $ | 1 | |
5.50%, 11/13/14 | | | | | | | 2,291 | | | | — | |
| | | | | | | | |
| | | | | | | | | | | 1 | |
Italy — 0.0% | |
Telecom Italia SpA, 5.30%, 05/30/24(c) | | | | | | | 4,459 | | | | 4,397,689 | |
| | | | | | | | |
Luxembourg — 0.1% | |
Intelsat Jackson Holdings SA: | | | | | | | | | | | | |
7.50%, 04/01/21 | | | | | | | 6,671 | | | | 6,620,967 | |
8.00%, 02/15/24(c) | | | | | | | 2,264 | | | | 2,377,200 | |
| | | | | | | | |
| | | | | | | | | | | 8,998,167 | |
Netherlands — 0.0% | |
Cooperatieve Rabobank UA, 3.95%, 11/09/22 | | | | | | | 2,236 | | | | 2,214,372 | |
| | | | | | | | |
Singapore — 0.1% | |
CapitaLand Ltd., 1.95%, 10/17/23(c)(j) | | | SGD | | | | 8,750 | | | | 6,365,826 | |
| | | | | | | | |
Switzerland — 0.1% | |
UBS Group Funding Switzerland AG, 4.13%, 09/24/25(c) | | | USD | | | | 5,294 | | | | 5,257,006 | |
| | | | | | | | |
Turkey — 0.0% | |
Bio City Development Co. BV, 8.00%, 07/06/20(a)(c)(e)(h)(j) | | | | | | | 21,400 | | | | 4,868,500 | |
| | | | | | | | |
United Arab Emirates — 0.2% | |
Dana Gas Sukuk Ltd., 7.00%, 10/31/17(a)(c)(h)(l) | | | | | | | 17,922 | | | | 16,219,274 | |
| | | | | | | | |
United States — 1.3% | |
AbbVie, Inc., 2.90%, 11/06/22 | | | | | | | 6,988 | | | | 6,780,948 | |
AliphCom (Acquired 04/27/15-07/21/15, cost $44,105,789), 15.00%, 04/28/20(a)(d)(e)(h)(j) | | | | | | | 44,575 | | | | 4 | |
AliphCom (Acquired 11/11/15, cost $3,000,000), 15.00%, 04/28/20(a)(d)(e)(h)(j) | | | | | | | 3,000 | | | | — | |
Allergan Funding SCS, 3.45%, 03/15/22 | | | | | | | 6,938 | | | | 6,826,907 | |
Allergan Sales LLC, 5.00%, 12/15/21(c) | | | | | | | 3,723 | | | | 3,851,989 | |
Ally Financial, Inc., 3.50%, 01/27/19 | | | | | | | 5,076 | | | | 5,069,655 | |
Amgen, Inc., 1.85%, 08/19/21 | | | | | | | 1,391 | | | | 1,332,301 | |
Apple, Inc.: | | | | | | | | | | | | |
3.35%, 02/09/27 | | | | | | | 12,762 | | | | 12,462,053 | |
3.20%, 05/11/27 | | | | | | | 12,263 | | | | 11,827,331 | |
Bank of America Corp.: | | | | | | | | | | | | |
(LIBOR USD 3 Month + 0.66%), 2.37%, 07/21/21(k) | | | | | | | 3,214 | | | | 3,150,666 | |
4.00%, 01/22/25 | | | | | | | 4,152 | | | | 4,098,657 | |
Becton Dickinson and Co.: | | | | | | | | | | | | |
3.13%, 11/08/21 | | | | | | | 7,085 | | | | 6,982,221 | |
2.89%, 06/06/22 | | | | | | | 5,840 | | | | 5,648,643 | |
3.36%, 06/06/24 | | | | | | | 3,461 | | | | 3,324,583 | |
Citigroup, Inc., 2.45%, 01/10/20 | | | | | | | 7,108 | | | | 7,028,172 | |
CVS Health Corp., 3.70%, 03/09/23 | | | | | | | 29,065 | | | | 28,917,609 | |
eBay, Inc., 2.75%, 01/30/23 | | | | | | | 4,090 | | | | 3,940,311 | |
Edgewell Personal Care Co.: | | | | | | | | | | | | |
4.70%, 05/19/21 | | | | | | | 3,708 | | | | 3,698,730 | |
4.70%, 05/24/22 | | | | | | | 3,820 | | | | 3,734,050 | |
General Motors Financial Co., Inc., 3.45%, 04/10/22 | | | | | | | 3,200 | | | | 3,144,394 | |
Hughes Satellite Systems Corp., 7.63%, 06/15/21 | | | | | | | 1,337 | | | | 1,422,234 | |
Santander Holdings USA, Inc., 3.70%, 03/28/22 | | | | | | | 2,205 | | | | 2,172,553 | |
Sherwin-Williams Co. (The), 2.25%, 05/15/20 | | | | | | | 1,395 | | | | 1,371,826 | |
Synchrony Financial, 3.75%, 08/15/21 | | | | | | | 2,199 | | | | 2,196,719 | |
| | | | | | | | |
| | | | | | | | | | | 128,982,556 | |
| | | | | | | | | | | | |
Total Corporate Bonds — 2.4% (Cost: $339,421,835) | | | | 242,359,873 | |
| | | | | | | | |
| | |
10 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Consolidated Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Global Allocation V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Floating Rate Loan Interests — 0.2%(l) | |
|
United States — 0.2% | |
Fieldwood Energy LLC, 2nd Lien Term Loan, (LIBOR USD 1 Month + 7.25%), 9.34%, 04/11/23 | | | USD | | | | 2,958 | | | $ | 2,857,328 | |
Fieldwood Energy LLC, Term Loan, (LIBOR USD 1 Month + 5.25%), 7.34%, 04/11/22 | | | | | | | 2,191 | | | | 2,192,514 | |
Hilton Worldwide Finance LLC, 1st Lien Term Loan B2, (LIBOR USD 1 Month + 1.75%), 3.84%, 10/25/23 | | | | | | | 12,543 | | | | 12,537,604 | |
| | | | | | | | |
| | | | | | | | | | | 17,587,446 | |
| | | | | | | | |
Total Floating Rate Loan Interests — 0.2% (Cost: $15,519,431) | | | | 17,587,446 | |
| | | | | | | | |
|
Foreign Agency Obligations — 0.0% | |
|
Mexico — 0.0% | |
Petroleos Mexicanos, (LIBOR USD 3 Month + 3.65%), 5.98%, 03/11/22(k) | | | | | | | 4,493 | | | | 4,796,277 | |
| | | | | | | | |
Total Foreign Agency Obligations — 0.0% (Cost: $4,552,873) | | | | 4,796,277 | |
| | | | | | | | |
|
Foreign Government Obligations — 5.8% | |
|
Argentina — 0.8% | |
Republic of Argentina: | | | | | | | | | | | | |
3.38%, 01/15/23 | | | EUR | | | | 8,765 | | | | 9,263,369 | |
7.50%, 04/22/26 | | | USD | | | | 18,053 | | | | 16,653,892 | |
6.88%, 01/26/27 | | | | | | | 12,979 | | | | 11,421,520 | |
5.88%, 01/11/28 | | | | | | | 23,191 | | | | 18,842,688 | |
5.25%, 01/15/28 | | | EUR | | | | 1,388 | | | | 1,385,875 | |
7.82%, 12/31/33 | | | | | | | 17,809 | | | | 20,699,536 | |
| | | | | | | | |
| | | | | | | | | | | 78,266,880 | |
Australia — 0.2% | |
Commonwealth of Australia, 3.00%, 03/21/47 | | | AUD | | | | 31,299 | | | | 22,697,089 | |
| | | | | | | | |
Brazil — 0.2% | |
Federative Republic of Brazil, 10.00%, 01/01/23 | | | BRL | | | | 62 | | | | 14,840,892 | |
| | | | | | | | |
Canada — 0.9% | |
Canadian Government Bond: | | | | | | | | | | | | |
0.50%, 08/01/18 | | | CAD | | | | 100,081 | | | | 76,082,571 | |
0.75%, 03/01/21 | | | | | | | 24,582 | | | | 18,104,087 | |
| | | | | | | | |
| | | | | | | | | | | 94,186,658 | |
Germany — 2.2% | |
Federal Republic of Germany: | | | | | | | | | | | | |
0.00%, 08/15/26 | | | EUR | | | | 45,299 | | | | 52,351,717 | |
0.50%, 02/15/28 | | | | | | | 142,136 | | | | 168,992,103 | |
| | | | | | | | |
| | | | | | | | | | | 221,343,820 | |
Japan — 0.6% | |
Government of Japan (2 year), 0.10%, 10/15/18 | | | JPY | | | | 7,006,100 | | | | 63,322,260 | |
| | | | | | | | |
Mexico — 0.9% | |
United Mexican States: | | | | | | | | | | | | |
8.50%, 12/13/18 | | | MXN | | | | 7,061 | | | | 35,622,929 | |
6.50%, 06/10/21 | | | | | | | 4,970 | | | | 24,226,568 | |
6.50%, 06/09/22 | | | | | | | 6,978 | | | | 33,702,809 | |
| | | | | | | | |
| | | | | | | | | | | 93,552,306 | |
United Kingdom — 0.0% | |
U.K. Treasury Bonds, 2.00%, 09/07/25 | | | GBP | | | | — | (m) | | | 1 | |
| | | | | | | | |
Total Foreign Government Obligations — 5.8% (Cost: $609,708,254) | | | | 588,209,906 | |
| | | | | | | | |
| | | | | | | | | | | | |
Security | | Shares | | | Value | |
Investment Companies — 2.6%(a)(n) | |
iShares Gold Trust(t) | | | | | | | 5,628,395 | | | $ | 67,653,308 | |
SPDR Gold Shares(g) | | | | | | | 1,665,412 | | | | 197,601,134 | |
| | | | | | | | |
Total Investment Companies — 2.6% (Cost: $274,840,322) | | | | 265,254,442 | |
| | | | | | | | |
| | |
| | Par (000) | | | | |
Preferred Securities — 2.3% | |
|
Capital Trusts — 1.0% | |
Netherlands — 0.0% | |
ING Groep NV, 6.00%(l)(o) | | | USD | | | | 3,944 | | | | 3,925,069 | |
| | | | | | | | |
United Kingdom — 0.4%(l)(o) | | | | | | | | | |
HSBC Holdings plc, 6.37% | | | | | | | 14,266 | | | | 14,111,785 | |
Lloyds Bank plc, 13.00% | | | GBP | | | | 8,180 | | | | 19,047,590 | |
| | | | | | | | |
| | | | | | | | | | | 33,159,375 | |
United States — 0.6% | |
American Express Co., Series C, 4.90%(l)(o) | | | USD | | | | 5,135 | | | | 5,150,405 | |
Citigroup, Inc.(l)(o) | | | | | | | | | | | | |
Series O, 5.87% | | | | | | | 16,717 | | | | 17,124,059 | |
Series Q, 5.95% | | | | | | | 6,705 | | | | 6,906,150 | |
Goldman Sachs Group, Inc. (The), Series M, 5.38%(l)(o) | | | | | | | 7,760 | | | | 7,895,800 | |
Morgan Stanley, Series H, 5.45%(l)(o) | | | | | | | 5,940 | | | | 6,017,992 | |
NBCUniversal Enterprise, Inc., 5.25%(c)(o) | | | | | | | 5,610 | | | | 5,666,100 | |
Prudential Financial, Inc. (l) : | | | | | | | | | | | | |
5.62%, 06/15/43 | | | | | | | 2,954 | | | | 3,046,312 | |
5.87%, 09/15/42 | | | | | | | 4,447 | | | | 4,697,144 | |
USB Capital IX, 3.50%(l)(o) | | | | | | | 2,096 | | | | 1,899,500 | |
| | | | | | | | |
| | | | | | | | | | | 58,403,462 | |
Total Capital Trusts — 1.0% (Cost: $92,554,539) | | | | 95,487,906 | |
| | | | | | | | |
| | |
| | Shares | | | | |
Preferred Stocks — 0.8% | |
|
Brazil — 0.0%(a) | |
Centrais Eletricas Brasileiras SA (Preference), 0.00% | | | | | | | 3,868 | | | | 13,693 | |
Petroleo Brasileiro SA (Preference), 0.00% | | | | | | | 26,852 | | | | 118,957 | |
| | | | | | | | |
| | | | | | | | | | | 132,650 | |
South Korea — 0.0% | |
Samsung Electronics Co. Ltd. (Preference), 0.00%(a) | | | | | | | 3,450 | | | | 116,502 | |
| | | | | | | | |
United States — 0.8% | |
Grand Rounds, Inc., Series C (Acquired 03/31/15, cost $5,939,231), 0.00%(a)(d)(e) | | | | | | | 2,139,107 | | | | 5,369,159 | |
Grand Rounds, Inc., Series D (Acquired 05/01/18, cost $3,180,966), 0.00%(a)(d)(e) | | | | | | | 1,312,469 | | | | 3,268,048 | |
Lookout, Inc., Series F (Acquired 09/19/14-10/22/14, cost $10,936,522), 0.00%(a)(d)(e) | | | | | | | 957,404 | | | | 7,994,323 | |
Palantir Technologies, Inc., Series I (Acquired 02/11/14, cost $11,447,321), 0.00%(a)(d)(e) | | | | | | | 1,867,426 | | | | 10,793,722 | |
Uber Technologies, Inc., Series D (Acquired 06/06/14, cost $17,574,548), 0.00%(a)(d)(e) | | | | | | | 1,132,888 | | | | 45,315,520 | |
Wells Fargo & Co., Series L, 7.50%(j)(o) | | | | | | | 3,211 | | | | 4,044,126 | |
| | | | |
CONSOLIDATED SCHEDULE OF INVESTMENTS | | | 11 | |
| | |
Consolidated Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Global Allocation V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Shares | | | Value | |
United States (continued) | |
Welltower, Inc., Series I, 6.50%(j)(o) | | | | | | | 140,528 | | | $ | 8,354,390 | |
| | | | | | | | |
| | | | | | | | | | | 85,139,288 | |
| | | | | | | | |
Total Preferred Stocks — 0.8% (Cost: $60,236,215) | | | | 85,388,440 | |
| | | | | | | | |
|
Trust Preferreds — 0.5% | |
|
China — 0.3% | |
Mandatory Exchangeable Trust, 5.75%, 06/01/19(c)(j) | | | | | | | 147,555 | | | | 30,784,562 | |
| | | | | | | | |
United States — 0.2%(l) | |
Citigroup Capital XIII, 8.73%, 10/30/40 | | | | | | | 340,358 | | | | 9,223,702 | |
GMAC Capital Trust I, 8.13%, 02/15/40 | | | | | | | 373,879 | | | | 9,833,018 | |
| | | | | | | | |
| | | | | | | | | | | 19,056,720 | |
| | | | | | | | |
Total Trust Preferreds — 0.5% (Cost: $32,794,269) | | | | 49,841,282 | |
| | | | | | | | |
Total Preferred Securities — 2.3% (Cost: $185,585,023) | | | | 230,717,628 | |
| | | | | | | | |
|
Rights — 0.0% | |
|
Italy — 0.0% | |
Intesa Sanpaolo SpA(a)(b) | | | | | | | 15,616 | | | | — | |
| | | | | | | | |
Spain — 0.0% | |
Repsol SA(a) | | | | | | | 5,569 | | | | 3,161 | |
| | | | | | | | |
Total Rights — 0.0% (Cost: $3,139) | | | | 3,161 | |
| | | | | | | | |
| | |
| | Par (000) | | | | |
U.S. Treasury Obligations — 18.3% | |
U.S. Treasury Notes: | | | | | | | | | | | | |
1.25%, 12/15/18(g)(n) | | | USD | | | | 22,253 | | | | 22,165,676 | |
1.13%, 07/31/21 | | | | | | | 21,068 | | | | 20,130,984 | |
2.63%, 02/28/23 | | | | | | | 247,986 | | | | 246,987,845 | |
2.75%, 04/30/23 - 02/15/28 | | | | | | | 962,010 | | | | 959,231,837 | |
2.88%, 05/31/25 - 05/15/28(p) | | | | | | | 606,967 | | | | 609,134,729 | |
| | | | | | | | |
Total U.S. Treasury Obligations — 18.3% (Cost: $1,851,034,917) | | | | 1,857,651,071 | |
| | | | | | | | |
| | |
| | Shares | | | | |
Warrants — 0.0% | |
|
Australia — 0.0%(a)(e) | |
Quintis Ltd. (Issued/exercisable 08/01/11, 1 share for 1 warrant, Expires 07/15/18, Strike Price AUD 1.00) | | | | | | | 3,767,700 | | | | 28 | |
| | | | | | | | |
Total Warrants — 0.0% | | | | 28 | |
| | | | | | | | |
Total Long-Term Investments — 89.3% (Cost: $8,499,200,768) | | | | 9,080,372,692 | |
| | | | | | | | |
|
Short-Term Securities — 15.4% | |
| | |
| | Par (000) | | | | |
Foreign Government Obligations — 0.9% | |
|
Japan — 0.9% | |
Japan Treasury Bill (q) : | | | | | | | | | | | | |
(0.15)%, 09/10/18 | | | JPY | | | | 6,519,900 | | | | 58,903,408 | |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Japan (continued) | |
(0.14)%, 10/01/18 | | | JPY | | | | 4,301,050 | | | $ | 38,860,530 | |
| | | | | | | | |
Total Foreign Government Obligations — 0.9% (Cost: $98,158,020) | | | | 97,763,938 | |
| | | | | | | | |
| | |
| | Shares | | | | |
Money Market Funds ��� 2.6%(r)(t) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.80% | | | USD | | | | 5,274,808 | | | | 5,274,808 | |
SL Liquidity Series, LLC, Money Market Series, 2.16%(s) | | | | | | | 256,563,258 | | | | 256,588,914 | |
| | | | | | | | |
Total Money Market Funds — 2.6% (Cost: $261,863,723) | | | | 261,863,722 | |
| | | | | | | | |
| | | |
Time Deposits — 0.0% | | | | | | | | | | | | |
| | | |
Australia — 0.0% | | | | | | | | | |
Brown Brothers Harriman & Co., 1.13%, 07/02/18 | | | AUD | | | | — | (m) | | | 157 | |
| | | | | | | | |
Canada — 0.0% | | | | | | | | | |
Brown Brothers Harriman & Co., 0.51%, 07/03/18 | | | CAD | | | | 66 | | | | 49,958 | |
| | | | | | | | |
Europe — 0.0% | | | | | | | | | |
BNP Paribas SA, (0.57)%, 07/02/18 | | | EUR | | | | 1,605 | | | | 1,874,862 | |
| | | | | | | | |
Hong Kong — 0.0% | | | | | | | | | |
Brown Brothers Harriman & Co., 0.89%, 07/03/18 | | | HKD | | | | 83 | | | | 10,558 | |
| | | | | | | | |
Japan — 0.0% | | | | | | | | | |
Sumitomo, (0.22)%, 07/02/18 | | | JPY | | | | 311,827 | | | | 2,816,484 | |
| | | | | | | | |
United Kingdom — 0.0% | | | | | | | | | |
Brown Brothers Harriman & Co., 0.23%, 07/02/18 | | | GBP | | | | 10 | | | | 13,411 | |
| | | | | | | | |
United States — 0.0% | | | | | | | | | |
JPMorgan Chase Bank N.A., 1.92%, 07/02/18 | | | USD | | | | 43 | | | | 42,996 | |
| | | | | | | | |
Total Time Deposits — 0.0% (Cost: $4,808,425) | | | | 4,808,426 | |
| | | | | | | | |
| | |
| | Par (000) | | | | |
U.S. Treasury Obligations — 11.9%(q) | |
U.S. Treasury Bills: | | | | | | | | | | | | |
1.75%, 07/05/18 | | | USD | | | | 271,000 | | | | 270,962,513 | |
1.77%, 07/12/18 | | | | | | | 378,000 | | | | 377,823,992 | |
1.77%, 07/19/18 | | | | | | | 361,000 | | | | 360,703,803 | |
1.80%, 07/26/18 | | | | | | | 34,000 | | | | 33,960,843 | |
U.S. Treasury Bills, 1.81%, 08/02/18(p) | | | | | | | 169,000 | | | | 168,736,652 | |
| | | | | | | | |
Total U.S. Treasury Obligations — 11.9% (Cost: $1,212,109,750) | | | | 1,212,187,803 | |
| | | | | | | | |
Total Short-Term Securities — 15.4% (Cost: $1,576,939,918) | | | | 1,576,623,889 | |
| | | | | | | | |
Total Options Purchased — 0.2% (Cost: $36,489,116) | | | | 23,657,456 | |
| | | | | | | | |
Total Investments Before Options Written and Investments Sold Short- 104.9% (Cost: $10,112,629,802) | | | | 10,680,654,037 | |
| | | | | | | | |
Total Options Written — (0.4)% (Premiums Received — $(28,808,504)) | | | | (36,727,802 | ) |
| | | | | | | | |
|
Investments Sold Short — (0.4)% | |
| | |
| | Shares | | | | |
Common Stocks — (0.4)% | |
| | | |
France — (0.1)% | | | | | | | | | |
Pernod Ricard SA | | | | | | | 30,757 | | | | (5,019,691 | ) |
| | | | | | | | | | | | |
| | |
12 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Consolidated Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Global Allocation V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Japan — (0.1)% | | | | | | |
Yaskawa Electric Corp. | | | 143,900 | | | $ | (5,067,454 | ) |
| | | | | | | | |
United States — (0.2)% | | | | | | |
Estee Lauder Cos., Inc. (The), Class A | | | 52,023 | | | | (7,423,162 | ) |
LyondellBasell Industries NV, Class A | | | 162,395 | | | | (17,839,090 | ) |
| | | | | | | | |
| | | | | | | (25,262,252 | ) |
| | | | | | | | |
Total Common Stocks — (0.3)% (Proceeds: $(35,757,234)) | | | | (35,349,397 | ) |
| | | | | | | | |
Total Investments Sold Short — (0.4)% (Proceeds: $(35,757,234)) | | | | (35,349,397 | ) |
| | | | | | | | |
| |
Total Investments Net of Options Written and Investments Sold Short- 104.1% (Cost: $10,048,064,064) | | | | 10,608,576,838 | |
| | | | | | | | |
Liabilities in Excess of Other Assets — (4.1)% | | | | (439,284,160 | ) |
| | | | | | | | |
Net Assets — 100.0% | | | $ | 10,169,292,678 | |
| | | | | | | | |
(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) | Restricted security as to resale, excluding 144A securities. The Fund held restricted securities with a current value of $124,582,487, representing 1.2% of its net assets as of period end, and an original cost of $165,996,078. |
(e) | Security is valued using significant unobservable inputs and is classified as Level 3 in the fair value hierarchy. |
(f) | A security contractually bound to one or more other securities to form a single saleable unit which cannot be sold separately. |
(g) | All or a portion of security has been pledged and/or segregated as collateral in connection with outstanding exchange-traded options written. |
(h) | Issuer filed for bankruptcy and/or is in default. |
(j) | Convertible security. |
(k) | 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. |
(l) | Variable rate security. Rate shown is the rate in effect as of period end. |
(m) | Amount is less than $500. |
(n) | All or a portion of the security is held by a wholly-owned subsidiary. See Note 1 of the Consolidated Notes to Financial Statements for details on the wholly-owned subsidiary. |
(o) | Perpetual security with no stated maturity date. |
(p) | All or a portion of security has been pledged in connection with outstanding centrally cleared swaps. |
(q) | Rates are discount rates or a range of discount rates at the time of purchase. |
(r) | Annualized 7-day yield as of period end. |
(s) | Security was purchased with the cash collateral from loaned securities. |
(t) | During the six months ended June 30, 2018, 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, and/or related parties of the fund were as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Affiliate | | Shares Held at 12/31/17 | | | Shares Purchased | | | Shares Sold | | | Shares Held at 06/30/18 | | | Value at 06/30/18 | | | Income | | | Net Realized Gain (Loss) (a) | | | Change in Unrealized (Depreciation) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class | | | 10,574,106 | | | | — | | | | (5,299,298 | )(b) | | | 5,274,808 | | | $ | 5,274,808 | | | $ | 66,015 | | | $ | 20 | | | $ | — | |
SL Liquidity Series, LLC, Money Market Series | | | 235,838,442 | | | | 20,724,816 | (c) | | | — | | | | 256,563,258 | | | | 256,588,914 | | | | 545,884 | (d) | | | 37,739 | | | | 14,693 | |
iShares Gold Trust | | | 2,098,037 | | | | 3,530,358 | | | | — | | | | 5,628,395 | | | | 67,653,308 | | | | — | | | | — | | | | (4,155,532 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | 329,517,030 | | | $ | 611,899 | | | $ | 37,759 | | | $ | (4,140,839 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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. | |
Futures Contracts
| | | | | | | | | | | | | | | | |
Description | | Number of Contracts | | | Expiration Date | | | Notional Amount (000) | | | Value/ Unrealized Appreciation (Depreciation) | |
Short Contracts | | | | | | | | | | | | | | | | |
Yen Denominated Nikkei 225 Index | | | 124 | | | | 09/13/18 | | | $ | 12,446 | | | $ | 282,717 | |
EURO STOXX 50 Index | | | 89 | | | | 09/21/18 | | | | 3,524 | | | | 84,771 | |
FTSE 100 Index | | | 9 | | | | 09/21/18 | | | | 903 | | | | 5,881 | |
NASDAQ 100 E-Mini Index | | | 188 | | | | 09/21/18 | | | | 26,571 | | | | 430,155 | |
S&P 500 E-Mini Index | | | 97 | | | | 09/21/18 | | | | 13,200 | | | | 257,764 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | 1,061,288 | |
| | | | | | | | | | | | | | | | |
| | | | |
CONSOLIDATED SCHEDULE OF INVESTMENTS | | | 13 | |
| | |
Consolidated Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Global Allocation V.I. Fund |
Forward Foreign Currency Exchange Contracts
| | | | | | | | | | | | | | | | | | | | |
Currency Purchased | | | Currency Sold | | | Counterparty | | Settlement Date | | | Unrealized Appreciation (Depreciation) | |
USD | | | 3,225,388 | | | JPY | | | 356,760,000 | | | JP Morgan Chase Bank NA | | | 07/05/18 | | | $ | 2,640 | |
USD | | | 34,997,115 | | | EUR | | | 29,558,000 | | | UBS AG | | | 07/12/18 | | | | 457,166 | |
USD | | | 45,569,592 | | | JPY | | | 4,955,921,000 | | | Deutsche Bank AG | | | 07/12/18 | | | | 780,045 | |
USD | | | 27,030,448 | | | AUD | | | 34,887,000 | | | Deutsche Bank AG | | | 07/13/18 | | | | 1,212,264 | |
USD | | | 55,060,650 | | | EUR | | | 46,500,000 | | | Deutsche Bank AG | | | 07/13/18 | | | | 719,012 | |
USD | | | 45,607,640 | | | JPY | | | 4,955,042,000 | | | BNP Paribas SA | | | 07/19/18 | | | | 804,239 | |
USD | | | 55,089,434 | | | EUR | | | 46,500,000 | | | Goldman Sachs International | | | 07/20/18 | | | | 718,783 | |
USD | | | 17,753,552 | | | AUD | | | 23,332,000 | | | Goldman Sachs International | | | 07/26/18 | | | | 485,479 | |
USD | | | 56,986,680 | | | EUR | | | 46,500,000 | | | BNP Paribas SA | | | 07/27/18 | | | | 2,587,018 | |
USD | | | 57,031,552 | | | EUR | | | 46,500,000 | | | UBS AG | | | 08/03/18 | | | | 2,602,690 | |
USD | | | 11,220,266 | | | EUR | | | 9,447,000 | | | JP Morgan Chase Bank NA | | | 08/20/18 | | | | 147,466 | |
USD | | | 25,712,000 | | | BRL | | | 99,335,741 | | | BNP Paribas SA | | | 09/06/18 | | | | 263,568 | |
USD | | | 59,548,236 | | | JPY | | | 6,519,900,000 | | | Barclays Bank plc | | | 09/10/18 | | | | 369,789 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 11,150,159 | |
| | | | | | | | | | | | | | | | | | | | |
EUR | | | 29,558,000 | | | USD | | | 36,693,006 | | | UBS AG | | | 07/12/18 | | | | (2,153,056 | ) |
JPY | | | 4,955,921,000 | | | USD | | | 46,456,823 | | | Deutsche Bank AG | | | 07/12/18 | | | | (1,667,276 | ) |
AUD | | | 34,887,000 | | | USD | | | 26,095,650 | | | Deutsche Bank AG | | | 07/13/18 | | | | (277,466 | ) |
EUR | | | 46,500,000 | | | USD | | | 58,179,870 | | | Deutsche Bank AG | | | 07/13/18 | | | | (3,838,232 | ) |
JPY | | | 4,955,042,000 | | | USD | | | 46,516,170 | | | BNP Paribas SA | | | 07/19/18 | | | | (1,712,770 | ) |
EUR | | | 46,500,000 | | | USD | | | 58,208,468 | | | Goldman Sachs International | | | 07/20/18 | | | | (3,837,817 | ) |
ZAR | | | 431,189,063 | | | USD | | | 32,288,890 | | | Barclays Bank plc | | | 07/20/18 | | | | (924,555 | ) |
EUR | | | 46,500,000 | | | USD | | | 58,253,805 | | | BNP Paribas SA | | | 07/27/18 | | | | (3,854,143 | ) |
NOK | | | 164,095,000 | | | USD | | | 20,645,295 | | | Morgan Stanley & Co. International plc | | | 07/27/18 | | | | (477,149 | ) |
PLN | | | 90,895,000 | | | USD | | | 26,140,285 | | | Goldman Sachs International | | | 08/02/18 | | | | (1,863,488 | ) |
EUR | | | 46,500,000 | | | USD | | | 58,277,381 | | | UBS AG | | | 08/03/18 | | | | (3,848,518 | ) |
GBP | | | 19,574,000 | | | USD | | | 26,627,608 | | | JP Morgan Chase Bank NA | | | 08/10/18 | | | | (749,117 | ) |
GBP | | | 19,529,000 | | | USD | | | 26,475,659 | | | Barclays Bank plc | | | 08/16/18 | | | | (649,631 | ) |
GBP | | | 20,231,000 | | | USD | | | 27,302,287 | | | JP Morgan Chase Bank NA | | | 08/23/18 | | | | (539,406 | ) |
GBP | | | 33,866,000 | | | USD | | | 45,311,421 | | | Deutsche Bank AG | | | 09/14/18 | | | | (467,748 | ) |
GBP | | | 33,862,000 | | | USD | | | 45,189,719 | | | Deutsche Bank AG | | | 09/21/18 | | | | (337,753 | ) |
SEK | | | 223,848,236 | | | EUR | | | 21,668,000 | | | Goldman Sachs International | | | 09/21/18 | | | | (311,378 | ) |
GBP | | | 33,867,000 | | | USD | | | 45,203,382 | | | Goldman Sachs International | | | 09/28/18 | | | �� | (331,201 | ) |
SEK | | | 221,464,591 | | | EUR | | | 21,440,000 | | | Barclays Bank plc | | | 09/28/18 | | | | (311,278 | ) |
USD | | | 39,070,267 | | | JPY | | | 4,301,050,000 | | | JP Morgan Chase Bank NA | | | 10/01/18 | | | | (28,853 | ) |
GBP | | | 33,747,000 | | | USD | | | 45,069,132 | | | JP Morgan Chase Bank NA | | | 10/05/18 | | | | (341,171 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | (28,522,006 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | Net Unrealized Depreciation | | | $ | (17,371,847 | ) |
| | | | | | | | | | | | | | | | | | | | |
Exchange-Traded Options Purchased
| | | | | | | | | | | | | | | | | | | | | | | | |
Description | | Number of Contracts | | | Expiration Date | | | Exercise Price | | | Notional Amount (000) | | | Value | |
Call | | | | | | | | | | | | | | | | | | | | | | | | |
SPDR Gold Shares Index(a) | | | 2,091 | | | | 07/20/18 | | | USD | | | 128.00 | | | USD | | | 24,810 | | | $ | 5,227 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (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 Options Purchased
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Description | | Counterparty | | Number of Contracts | | | Expiration Date | | | Exercise Price | | | Notional Amount (000) | | | Value | |
Call | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SPDR Gold Shares Index(a) | | JP Morgan Chase Bank NA | | | 125,287 | | | | 07/20/18 | | | | USD | | | | 129.00 | | | | USD | | | | 14,865 | | | $ | 3,132 | |
SPDR Gold Shares Index(a) | | JP Morgan Chase Bank NA | | | 125,287 | | | | 07/20/18 | | | | USD | | | | 130.00 | | | | USD | | | | 14,865 | | | | 1,879 | |
SPDR Gold Shares Index(a) | | Societe Generale SA | | | 418,874 | | | | 08/17/18 | | | | USD | | | | 129.00 | | | | USD | | | | 49,699 | | | | 112,288 | |
EURO STOXX 50 Index | | Deutsche Bank AG | | | 3,336 | | | | 09/21/18 | | | | EUR | | | | 3,426.55 | | | | EUR | | | | 11,328 | | | | 286,654 | |
Russell 2000 Index | | Bank of America NA | | | 20,884 | | | | 12/21/18 | | | | USD | | | | 1,700.00 | | | | USD | | | | 34,314 | | | | 1,073,438 | |
Chevron Corp. | | UBS AG | | | 275,840 | | | | 01/18/19 | | | | USD | | | | 125.00 | | | | USD | | | | 34,874 | | | | 2,261,888 | |
Exxon Mobil Corp. | | UBS AG | | | 187,537 | | | | 01/18/19 | | | | USD | | | | 95.00 | | | | USD | | | | 15,515 | | | | 149,092 | |
| | |
14 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Consolidated Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Global Allocation V.I. Fund |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Description | | Counterparty | | Number of Contracts | | | Expiration Date | | | Exercise Price | | | Notional Amount (000) | | | Value | |
Occidental Petroleum Corp. | | UBS AG | | | 175,751 | | | | 01/18/19 | | | | USD | | | | 75.00 | | | | USD | | | | 14,707 | | | $ | 1,937,655 | |
Schlumberger Ltd. | | UBS AG | | | 271,460 | | | | 01/18/19 | | | | USD | | | | 90.00 | | | | USD | | | | 18,196 | | | | 65,150 | |
TOTAL SA | | UBS AG | | | 598,145 | | | | 01/18/19 | | | | USD | | | | 60.00 | | | | USD | | | | 36,224 | | | | 2,183,229 | |
Russell 2000 Index | | Bank of America NA | | | 27,781 | | | | 03/15/19 | | | | USD | | | | 1,700.00 | | | | USD | | | | 45,646 | | | | 1,978,007 | |
BP plc | | UBS AG | | | 886,818 | | | | 06/21/19 | | | | USD | | | | 52.00 | | | | USD | | | | 40,492 | | | | 1,102,146 | |
ConocoPhillips Co. | | UBS AG | | | 463,986 | | | | 06/21/19 | | | | USD | | | | 75.00 | | | | USD | | | | 32,303 | | | | 2,343,129 | |
Occidental Petroleum Corp. | | UBS AG | | | 232,548 | | | | 06/21/19 | | | | USD | | | | 92.50 | | | | USD | | | | 19,460 | | | | 853,893 | |
Royal Dutch Shell plc | | UBS AG | | | 506,206 | | | | 06/21/19 | | | | USD | | | | 77.00 | | | | USD | | | | 35,045 | | | | 756,636 | |
Suncor Energy, Inc. | | UBS AG | | | 598,975 | | | | 06/21/19 | | | | USD | | | | 45.00 | | | | USD | | | | 24,366 | | | | 1,245,790 | |
TOPIX Banks Index | | Bank of America NA | | | 6,922,824 | | | | 12/13/19 | | | | JPY | | | | 191.28 | | | | JPY | | | | 1,193,010 | | | | 449,346 | |
TOPIX Banks Index | | Morgan Stanley & Co. International plc | | | 13,094,289 | | | | 12/13/19 | | | | JPY | | | | 191.28 | | | | JPY | | | | 2,256,539 | | | | 849,906 | |
Sumitomo Mitsui Financial Group, Inc. | | Morgan Stanley & Co. International plc | | | 360,617 | | | | 03/13/20 | | | | JPY | | | | 4,756.33 | | | | JPY | | | | 1,552,817 | | | | 606,310 | |
TOPIX Banks Index | | BNP Paribas SA | | | 9,345,369 | | | | 03/13/20 | | | | JPY | | | | 194.04 | | | | JPY | | | | 1,610,487 | | | | 626,711 | |
EURO STOXX Bank Index | | Societe Generale SA | | | 127,477 | | | | 03/20/20 | | | | EUR | | | | 117.57 | | | | EUR | | | | 71,584 | | | | 902,721 | |
TOPIX Banks Index | | Morgan Stanley & Co. International plc | | | 8,316,020 | | | | 04/10/20 | | | | JPY | | | | 192.04 | | | | JPY | | | | 1,433,100 | | | | 611,322 | |
EURO STOXX Bank Index | | Citibank NA | | | 209,850 | | | | 06/19/20 | | | | EUR | | | | 131.88 | | | | EUR | | | | 117,840 | | | | 629,395 | |
Sumitomo Mitsui Financial Group, Inc. | | Morgan Stanley & Co. International plc | | | 291,273 | | | | 09/11/20 | | | | JPY | | | | 4,816.24 | | | | JPY | | | | 1,254,222 | | | | 321,365 | |
Sumitomo Mitsui Financial Group, Inc. | | Morgan Stanley & Co. International plc | | | 291,267 | | | | 12/11/20 | | | | JPY | | | | 4,894.87 | | | | JPY | | | | 1,254,196 | | | | 508,151 | |
EURO STOXX Bank Index | | Barclays Bank plc | | | 162,397 | | | | 03/19/21 | | | | EUR | | | | 136.97 | | | | EUR | | | | 91,193 | | | | 588,531 | |
EURO STOXX Bank Index | | Deutsche Bank AG | | | 154,612 | | | | 04/16/21 | | | | EUR | | | | 136.56 | | | | EUR | | | | 86,821 | | | | 585,047 | |
EURO STOXX Bank Index | | UBS AG | | | 167,445 | | | | 06/18/21 | | | | EUR | | | | 134.92 | | | | EUR | | | | 94,027 | | | | 618,444 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 23,651,255 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Description | | Paid by the Fund | | Received by the Fund | | Counterparty | | Expiration Date | | | Exercise Rate | | | Notional Amount (000) | | | Value | |
| Rate | | | Frequency | | Rate | | | Frequency |
Call | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
10-Year Interest Rate Swap | | | 3 month LIBOR | | | Quarterly | | | 2.42 | % | | Semi-Annual | | Goldman Sachs International | | | 07/09/18 | | | | 2.42 | % | | | USD | | | | 278,785 | | | $ | 28 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | | | $ | 946 | | | $ | 659,486 | | | $ | (658,540 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
OTC Options Written
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Description | | Counterparty | | Number of Contracts | | | Expiration Date | | | Exercise Price | | | Notional Amount (000) | | | Value | |
Call | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SPDR Gold Shares Index(a) | | Societe Generale SA | | | 418,874 | | | | 08/17/18 | | | | USD | | | | 142.00 | | | | USD | | | | 49,699 | | | $ | (1 | ) |
Fifth Third Bancorp | | Morgan Stanley & Co. International plc | | | 505,187 | | | | 11/16/18 | | | | USD | | | | 34.00 | | | | USD | | | | 14,499 | | | | (136,400 | ) |
Charter Communications, Inc. | | Citibank NA | | | 27,715 | | | | 12/21/18 | | | | USD | | | | 305.00 | | | | USD | | | | 8,126 | | | | (663,774 | ) |
Charter Communications, Inc. | | Citibank NA | | | 53,950 | | | | 12/21/18 | | | | USD | | | | 315.00 | | | | USD | | | | 15,819 | | | | (1,079,000 | ) |
Russell 2000 Index | | Bank of America NA | | | 20,884 | | | | 12/21/18 | | | | USD | | | | 1,875.00 | | | | USD | | | | 34,314 | | | | (109,553 | ) |
Apple, Inc. | | Barclays Bank plc | | | 69,668 | | | | 01/18/19 | | | | USD | | | | 160.00 | | | | USD | | | | 12,896 | | | | (2,058,689 | ) |
Comcast Corp. | | Citibank NA | | | 296,904 | | | | 01/18/19 | | | | USD | | | | 36.25 | | | | USD | | | | 9,741 | | | | (420,119 | ) |
DowDuPont, Inc. | | Barclays Bank plc | | | 154,298 | | | | 01/18/19 | | | | USD | | | | 70.00 | | | | USD | | | | 10,171 | | | | (455,179 | ) |
FleetCor Technologies, Inc. | | Barclays Bank plc | | | 34,069 | | | | 01/18/19 | | | | USD | | | | 180.00 | | | | USD | | | | 7,177 | | | | (1,289,512 | ) |
Microsoft Corp. | | Barclays Bank plc | | | 123,473 | | | | 01/18/19 | | | | USD | | | | 90.00 | | | | USD | | | | 12,176 | | | | (1,549,586 | ) |
Pioneer Natural Resources Co. | | UBS AG | | | 72,530 | | | | 01/18/19 | | | | USD | | | | 165.00 | | | | USD | | | | 13,726 | | | | (2,480,526 | ) |
United Continental Holdings, Inc. | | Deutsche Bank AG | | | 90,361 | | | | 01/18/19 | | | | USD | | | | 75.00 | | | | USD | | | | 6,301 | | | | (424,697 | ) |
Russell 2000 Index | | Bank of America NA | | | 27,781 | | | | 03/15/19 | | | | USD | | | | 1,900.00 | | | | USD | | | | 45,646 | | | | (287,533 | ) |
BP plc | | UBS AG | | | 886,818 | | | | 06/21/19 | | | | USD | | | | 59.00 | | | | USD | | | | 40,492 | | | | (368,340 | ) |
ConocoPhillips Co. | | UBS AG | | | 463,986 | | | | 06/21/19 | | | | USD | | | | 85.00 | | | | USD | | | | 32,303 | | | | (1,043,969 | ) |
Occidental Petroleum Corp. | | UBS AG | | | 232,548 | | | | 06/21/19 | | | | USD | | | | 105.00 | | | | USD | | | | 19,460 | | | | (281,927 | ) |
Royal Dutch Shell plc | | UBS AG | | | 506,206 | | | | 06/21/19 | | | | USD | | | | 87.50 | | | | USD | | | | 35,045 | | | | (519,798 | ) |
| | | | |
CONSOLIDATED SCHEDULE OF INVESTMENTS | | | 15 | |
| | |
Consolidated Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Global Allocation V.I. Fund |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Description | | Counterparty | | Number of Contracts | | | Expiration Date | | | Exercise Price | | | Notional Amount (000) | | | Value | |
Suncor Energy, Inc. | | UBS AG | | | 598,975 | | | | 06/21/19 | | | | USD | | | | 50.00 | | | | USD | | | | 24,366 | | | $ | (549,176 | ) |
TOPIX Banks Index | | Bank of America NA | | | 6,922,824 | | | | 12/13/19 | | | | JPY | | | | 221.29 | | | | JPY | | | | 1,193,010 | | | | (163,554 | ) |
TOPIX Banks Index | | Morgan Stanley & Co. International plc | | | 13,094,289 | | | | 12/13/19 | | | | JPY | | | | 221.29 | | | | JPY | | | | 2,256,539 | | | | (309,404 | ) |
Sumitomo Mitsui Financial Group, Inc. | | Morgan Stanley & Co. International plc | | | 360,617 | | | | 03/13/20 | | | | JPY | | | | 5,679.90 | | | | JPY | | | | 1,552,817 | | | | (192,009 | ) |
TOPIX Banks Index | | BNP Paribas SA | | | 9,345,369 | | | | 03/13/20 | | | | JPY | | | | 237.47 | | | | JPY | | | | 1,610,487 | | | | (174,027 | ) |
EURO STOXX Bank Index | | Societe Generale SA | | | 127,477 | | | | 03/20/20 | | | | EUR | | | | 159.00 | | | | EUR | | | | 71,584 | | | | (86,995 | ) |
TOPIX Banks Index | | Morgan Stanley & Co. International plc | | | 8,316,020 | | | | 04/10/20 | | | | JPY | | | | 233.87 | | | | JPY | | | | 1,433,100 | | | | (184,325 | ) |
EURO STOXX Bank Index | | Citibank NA | | | 209,850 | | | | 06/19/20 | | | | EUR | | | | 161.62 | | | | EUR | | | | 117,840 | | | | (131,641 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | (14,959,734 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Put | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SPDR Gold Shares Index(a) | | Societe Generale SA | | | 418,874 | | | | 08/17/18 | | | | USD | | | | 119.00 | | | | USD | | | | 49,699 | | | | (684,214 | ) |
Russell 2000 Index | | Bank of America NA | | | 17,404 | | | | 12/21/18 | | | | USD | | | | 1,600.00 | | | | USD | | | | 28,596 | | | | (994,639 | ) |
Exxon Mobil Corp. | | UBS AG | | | 187,537 | | | | 01/18/19 | | | | USD | | | | 60.00 | | | | USD | | | | 15,515 | | | | (68,451 | ) |
Schlumberger Ltd. | | UBS AG | | | 271,460 | | | | 01/18/19 | | | | USD | | | | 60.00 | | | | USD | | | | 18,196 | | | | (545,635 | ) |
S&P 500 Index | | Bank of America NA | | | 15,974 | | | | 03/15/19 | | | | USD | | | | 2,600.00 | | | | USD | | | | 43,423 | | | | (1,527,913 | ) |
TOPIX Banks Index | | Bank of America NA | | | 6,922,824 | | | | 12/13/19 | | | | JPY | | | | 156.59 | | | | JPY | | | | 1,193,010 | | | | (770,614 | ) |
TOPIX Banks Index | | Morgan Stanley & Co. International plc | | | 13,094,289 | | | | 12/13/19 | | | | JPY | | | | 156.59 | | | | JPY | | | | 2,256,539 | | | | (1,457,469 | ) |
Sumitomo Mitsui Financial Group, Inc. | | Morgan Stanley & Co. International plc | | | 360,617 | | | | 03/13/20 | | | | JPY | | | | 3,832.77 | | | | JPY | | | | 1,552,817 | | | | (957,060 | ) |
TOPIX Banks Index | | BNP Paribas SA | | | 9,345,369 | | | | 03/13/20 | | | | JPY | | | | 155.80 | | | | JPY | | | | 1,610,487 | | | | (1,151,247 | ) |
EURO STOXX Bank Index | | Societe Generale SA | | | 84,986 | | | | 03/20/20 | | | | EUR | | | | 100.77 | | | | EUR | | | | 47,723 | | | | (1,027,923 | ) |
TOPIX Banks Index | | Morgan Stanley & Co. International plc | | | 8,316,020 | | | | 04/10/20 | | | | JPY | | | | 157.82 | | | | JPY | | | | 1,433,100 | | | | (1,130,995 | ) |
EURO STOXX Bank Index | | Citibank NA | | | 139,901 | | | | 06/19/20 | | | | EUR | | | | 106.02 | | | | EUR | | | | 78,560 | | | | (2,504,204 | ) |
Sumitomo Mitsui Financial Group, Inc. | | Morgan Stanley & Co. International plc | | | 194,182 | | | | 09/11/20 | | | | JPY | | | | 3,820.96 | | | | JPY | | | | 836,148 | | | | (545,779 | ) |
Sumitomo Mitsui Financial Group, Inc. | | Morgan Stanley & Co. International plc | | | 194,178 | | | | 12/11/20 | | | | JPY | | | | 3,786.60 | | | | JPY | | | | 836,130 | | | | (689,162 | ) |
EURO STOXX Bank Index | | Barclays Bank plc | | | 108,265 | | | | 03/19/21 | | | | EUR | | | | 110.23 | | | | EUR | | | | 60,795 | | | | (2,595,518 | ) |
EURO STOXX Bank Index | | Deutsche Bank AG | | | 51,538 | | | | 04/16/21 | | | | EUR | | | | 118.81 | | | | EUR | | | | 28,941 | | | | (1,609,019 | ) |
EURO STOXX Bank Index | | Deutsche Bank AG | | | 51,538 | | | | 04/16/21 | | | | EUR | | | | 99.04 | | | | EUR | | | | 28,941 | | | | (872,895 | ) |
EURO STOXX Bank Index | | UBS AG | | | 110,158 | | | | 06/18/21 | | | | EUR | | | | 106.38 | | | | EUR | | | | 61,858 | | | | (2,635,331 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | (21,768,068 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | (36,727,802 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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. | |
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 5,817 | | | $ | (366,006 | ) | | $ | — | | | $ | (366,006 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 |
0.42% | | Annual | | 6 month EURIBOR | | Semi-Annual | | | N/A | | | | 03/07/23 | | | EUR | | | 119,219 | | | $ | (1,612,056 | ) | | $ | — | | | $ | (1,612,056 | ) |
3 month LIBOR | | Quarterly | | 2.40% | | Semi-Annual | | | N/A | | | | 03/07/23 | | | USD | | | 134,710 | | | | (2,003,457 | ) | | | — | | | | (2,003,457 | ) |
0.34% | | Annual | | 6 month EURIBOR | | Semi-Annual | | | N/A | | | | 06/14/23 | | | EUR | | | 118,086 | | | | (628,092 | ) | | | — | | | | (628,092 | ) |
3 month LIBOR | | Quarterly | | 2.33% | | Semi-Annual | | | N/A | | | | 06/14/23 | | | USD | | | 147,260 | | | | (3,767,990 | ) | | | — | | | | (3,767,990 | ) |
0.37% | | Annual | | 6 month EURIBOR | | Semi-Annual | | | N/A | | | | 08/15/26 | | | EUR | | | 45,313 | | | | 1,041,719 | | | | — | | | | 1,041,719 | |
0.84% | | Annual | | 6 month EURIBOR | | Semi-Annual | | | N/A | | | | 02/15/28 | | | EUR | | | 78,180 | | | | — | | | | — | | | | — | |
0.84% | | Annual | | 6 month EURIBOR | | Semi-Annual | | | N/A | | | | 02/15/28 | | | EUR | | | 78,170 | | | | — | | | | — | | | | — | |
1.08% | | Annual | | 6 month EURIBOR | | Semi-Annual | | | 07/25/18 | (a) | | | 07/25/28 | | | EUR | | | 55,837 | | | | (1,224,197 | ) | | | — | | | | (1,224,197 | ) |
3 month LIBOR | | Quarterly | | 2.73% | | Semi-Annual | | | 07/25/18 | (a) | | | 07/25/28 | | | USD | | | 79,567 | | | | (1,406,274 | ) | | | — | | | | (1,406,274 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | $ | (9,600,347 | ) | | $ | — | | | $ | (9,600,347 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
16 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Consolidated Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Global Allocation V.I. Fund |
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 | | 2.01% | | Semi-Annual | | JPY | | | 7,006,100 | | | USD | | 67,725 | | Bank of America NA | | 10/15/18 | | $ | 4,697,849 | | | $ | — | | | $ | 4,697,849 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | At expiration date, the notional amount delivered will be exchanged for the notional amount received. | |
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) | |
S&P 500 Index Annual Dividend Future December 2018 | | | USD | | | | 7,094,313 | | | BNP Paribas SA | | | 12/21/18 | | | | USD | | | | 7,094 | | | $ | 1,092,600 | | | $ | — | | | $ | 1,092,600 | |
Euro Stoxx 50 Index Dividend Future December 2019 | | | EUR | | | | 3,305,250 | | | BNP Paribas SA | | | 12/20/19 | | | | EUR | | | | 3,305 | | | | 812,205 | | | | — | | | | 812,205 | |
Euro Stoxx 50 Index Dividend Future December 2019 | | | EUR | | | | 2,608,580 | | | BNP Paribas SA | | | 12/20/19 | | | | EUR | | | | 2,609 | | | | 605,107 | | | | — | | | | 605,107 | |
Euro Stoxx 50 Index Dividend Future December 2019 | | | EUR | | | | 3,589,050 | | | BNP Paribas SA | | | 12/20/19 | | | | EUR | | | | 3,589 | | | | 912,052 | | | | — | | | | 912,052 | |
Euro Stoxx 50 Index Dividend Future December 2020 | | | EUR | | | | 2,800,780 | | | BNP Paribas SA | | | 12/18/20 | | | | EUR | | | | 2,801 | | | | 550,735 | | | | — | | | | 550,735 | |
Euro Stoxx 50 Index Dividend Future December 2020 | | | EUR | | | | 970,000 | | | BNP Paribas SA | | | 12/18/20 | | | | EUR | | | | 970 | | | | 325,816 | | | | — | | | | 325,816 | |
Euro Stoxx 50 Index Dividend Future December 2020 | | | EUR | | | | 2,919,700 | | | BNP Paribas SA | | | 12/18/20 | | | | EUR | | | | 2,920 | | | | 980,707 | | | | — | | | | 980,707 | |
Euro Stoxx 50 Index Dividend Future December 2020 | | | EUR | | | | 720,000 | | | BNP Paribas SA | | | 12/18/20 | | | | EUR | | | | 720 | | | | 253,121 | | | | — | | | | 253,121 | |
Euro Stoxx 50 Index Dividend Future December 2020 | | | EUR | | | | 1,810,440 | | | BNP Paribas SA | | | 12/18/20 | | | | EUR | | | | 1,810 | | | | 627,903 | | | | — | | | | 627,903 | |
Euro Stoxx 50 Index Dividend Future December 2020 | | | EUR | | | | 836,940 | | | BNP Paribas SA | | | 12/18/20 | | | | EUR | | | | 837 | | | | 291,588 | | | | — | | | | 291,588 | |
Euro Stoxx 50 Index Dividend Future December 2020 | | | EUR | | | | 964,000 | | | BNP Paribas SA | | | 12/18/20 | | | | EUR | | | | 964 | | | | 332,823 | | | | — | | | | 332,823 | |
S&P 500 Index Annual Dividend Future December 2020 | | | USD | | | | 2,914,481 | | | Goldman Sachs International | | | 12/18/20 | | | | USD | | | | 2,914 | | | | 675,844 | | | | — | | | | 675,844 | |
Nikkei Dividend Future December 2020 | | | JPY | | | | 384,120,000 | | | BNP Paribas SA | | | 04/01/21 | | | | JPY | | | | 384,120 | | | | 613,413 | | | | — | | | | 613,413 | |
Nikkei Dividend Future December 2020 | | | JPY | | | | 104,085,000 | | | BNP Paribas SA | | | 04/01/21 | | | | JPY | | | | 104,085 | | | | 173,391 | | | | — | | | | 173,391 | |
Nikkei Dividend Future December 2020 | | | JPY | | | | 143,310,000 | | | BNP Paribas SA | | | 04/01/21 | | | | JPY | | | | 143,310 | | | | 107,790 | | | | — | | | | 107,790 | |
Nikkei Dividend Future December 2020 | | | JPY | | | | 191,375,000 | | | BNP Paribas SA | | | 04/01/21 | | | | JPY | | | | 191,375 | | | | 333,514 | | | | — | | | | 333,514 | |
Nikkei Dividend Future December 2020 | | | JPY | | | | 89,240,000 | | | BNP Paribas SA | | | 04/01/21 | | | | JPY | | | | 89,240 | | | | 142,510 | | | | — | | | | 142,510 | |
Euro Stoxx 50 Index Dividend Future December 2021 | | | EUR | | | | 1,353,230 | | | BNP Paribas SA | | | 12/17/21 | | | | EUR | | | | 1,353 | | | | 279,957 | | | | — | | | | 279,957 | |
Euro Stoxx 50 Index Dividend Future December 2021 | | | EUR | | | | 1,524,150 | | | BNP Paribas SA | | | 12/17/21 | | | | EUR | | | | 1,524 | | | | 137,158 | | | | — | | | | 137,158 | |
Euro Stoxx 50 Index Dividend Future December 2021 | | | EUR | | | | 1,637,150 | | | BNP Paribas SA | | | 12/17/21 | | | | EUR | | | | 1,637 | | | | 33,597 | | | | — | | | | 33,597 | |
Euro Stoxx 50 Index Dividend Future December 2021 | | | EUR | | | | 833,520 | | | BNP Paribas SA | | | 12/17/21 | | | | EUR | | | | 834 | | | | 6,446 | | | | — | | | | 6,446 | |
Euro Stoxx 50 Index Dividend Future December 2021 | | | EUR | | | | 1,409,760 | | | BNP Paribas SA | | | 12/17/21 | | | | EUR | | | | 1,410 | | | | 228,141 | | | | — | | | | 228,141 | |
S&P 500 Index Annual Dividend Future December 2021 | | | USD | | | | 3,726,213 | | | BNP Paribas SA | | | 12/17/21 | | | | USD | | | | 3,726 | | | | 974,725 | | | | — | | | | 974,725 | |
Nikkei Dividend Future December 2021 | | | JPY | | | | 389,070,000 | | | BNP Paribas SA | | | 04/01/22 | | | | JPY | | | | 389,070 | | | | 619,672 | | | | — | | | | 619,672 | |
Nikkei Dividend Future December 2021 | | | JPY | | | | 198,750,000 | | | BNP Paribas SA | | | 04/01/22 | | | | JPY | | | | 198,750 | | | | 292,643 | | | | — | | | | 292,643 | |
Nikkei Dividend Future December 2021 | | | JPY | | | | 144,840,000 | | | BNP Paribas SA | | | 04/01/22 | | | | JPY | | | | 144,840 | | | | 111,476 | | | | — | | | | 111,476 | |
Nikkei Dividend Future December 2021 | | | JPY | | | | 199,250,000 | | | BNP Paribas SA | | | 04/01/22 | | | | JPY | | | | 199,250 | | | | 288,127 | | | | — | | | | 288,127 | |
Euro Stoxx 50 Index Dividend Future December 2022 | | | EUR | | | | 744,600 | | | BNP Paribas SA | | | 12/16/22 | | | | EUR | | | | 745 | | | | 69,087 | | | | — | | | | 69,087 | |
Euro Stoxx 50 Index Dividend Future December 2022 | | | EUR | | | | 3,130,720 | | | BNP Paribas SA | | | 12/16/22 | | | | EUR | | | | 3,131 | | | | 98,469 | | | | — | | | | 98,469 | |
Euro Stoxx 50 Index Dividend Future December 2022 | | | EUR | | | | 1,495,800 | | | BNP Paribas SA | | | 12/16/22 | | | | EUR | | | | 1,496 | | | | 116,663 | | | | — | | | | 116,663 | |
Euro Stoxx 50 Index Dividend Future December 2022 | | | EUR | | | | 1,481,040 | | | BNP Paribas SA | | | 12/16/22 | | | | EUR | | | | 1,481 | | | | 147,703 | | | | — | | | | 147,703 | |
Nikkei Dividend Future December 2022 | | | JPY | | | | 143,820,000 | | | BNP Paribas SA | | | 04/03/23 | | | | JPY | | | | 143,820 | | | | 129,287 | | | | — | | | | 129,287 | |
Nikkei Dividend Future December 2022 | | | JPY | | | | 145,520,000 | | | JP Morgan Chase Bank NA | | | 04/03/23 | | | | JPY | | | | 145,520 | | | | 113,932 | | | | — | | | | 113,932 | |
Euro Stoxx 50 Index Dividend Future December 2023 | | | EUR | | | | 2,147,040 | | | BNP Paribas SA | | | 12/15/23 | | | | EUR | | | | 2,147 | | | | 35,314 | | | | — | | | | 35,314 | |
Euro Stoxx 50 Index Dividend Future December 2023 | | | EUR | | | | 2,214,720 | | | BNP Paribas SA | | | 12/15/23 | | | | EUR | | | | 2,215 | | | | (3,363 | ) | | | — | | | | (3,363 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | $ | 12,510,153 | | | $ | — | | | $ | 12,510,153 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | At termination, the fixed amount paid (received) will be exchanged for the total return of the reference entity. | |
The following reference rates, and their values as of period end, are used for security descriptions:
| | | | | | |
Reference Index | | | | Reference Rate | |
3 month LIBOR | | London Interbank Offered Rate | | | 2.34 | % |
6 month EURIBOR | | Euro Interbank Offered Rate | | | (0.27 | )% |
| | | | |
CONSOLIDATED SCHEDULE OF INVESTMENTS | | | 17 | |
| | |
Consolidated Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Global Allocation V.I. Fund |
Balances Reported in Statement of Assets and Liabilities for Centrally Cleared Swaps, OTC Derivatives and Options Written
| | | | | | | | | | | | | | | | | | | | |
| | Swap Premiums Paid | | | Swap Premiums Received | | | Unrealized Appreciation | | | Unrealized Depreciation | | | Value | |
Centrally Cleared Swaps(a) | | $ | — | | | $ | — | | | $ | 1,041,719 | | | $ | (11,008,072 | ) | | $ | — | |
OTC Derivatives | | | — | | | | — | | | | 17,211,365 | | | | (3,363 | ) | | | — | |
Options Written | | | N/A | | | | N/A | | | | 3,699,687 | | | | (11,618,985 | ) | | | (36,727,802 | ) |
| (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. | |
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) | | $ | — | | | $ | — | | | $ | 1,061,288 | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,061,288 | |
Forward foreign currency exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized appreciation on forward foreign currency exchange contracts | | | — | | | | — | | | | — | | | | 11,150,159 | | | | — | | | | — | | | | 11,150,159 | |
Options purchased | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Investments at value — unaffiliated(b) | | | — | | | | — | | | | 23,656,482 | | | | — | | | | 974 | | | | — | | | | 23,657,456 | |
Swaps — centrally cleared | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized appreciation(a) | | | — | | | | — | | | | — | | | | — | | | | 1,041,719 | | | | — | | | | 1,041,719 | |
Swaps — OTC | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized appreciation on OTC swaps; Swap premiums paid | | | — | | | | — | | | | 12,513,516 | | | | — | | | | 4,697,849 | | | | — | | | | 17,211,365 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | — | | | $ | 37,231,286 | | | $ | 11,150,159 | | | $ | 5,740,542 | | | $ | — | | | $ | 54,121,987 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Liabilities — Derivative Financial Instruments | | | | | | | | | | | | | | | | | | | | | |
Forward foreign currency exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized depreciation on forward foreign currency exchange contracts | | $ | — | | | $ | — | | | $ | — | | | $ | 28,522,006 | | | $ | — | | | $ | — | | | $ | 28,522,006 | |
Options written | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Options written, at value | | | — | | | | — | | | | 36,727,802 | | | | — | | | | — | | | | — | | | | 36,727,802 | |
Swaps — centrally cleared | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized depreciation(a) | | | — | | | | 366,006 | | | | — | | | | — | | | | 10,642,066 | | | | — | | | | 11,008,072 | |
Swaps — OTC | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized depreciation on OTC swaps; Swap premiums received | | | — | | | | — | | | | 3,363 | | | | — | | | | — | | | | — | | | | 3,363 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | 366,006 | | | $ | 36,731,165 | | | $ | 28,522,006 | | | $ | 10,642,066 | | | $ | — | | | $ | 76,261,243 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 Consolidated Statement of Assets and Liabilities. | |
| (b) | Includes options purchased at value as reported in the Consolidated Schedule of Investments. | |
For the six months ended June 30, 2018, the effect of derivative financial instruments in the Consolidated Statement of Operations were 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 | | $ | — | | | $ | — | | | $ | (18,900,593 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | (18,900,593 | ) |
Forward foreign currency exchange contracts | | | — | | | | — | | | | — | | | | 7,519,081 | | | | — | | | | — | | | | 7,519,081 | |
Options purchased(a) | | | — | | | | — | | | | 18,774,863 | | | | (10,696,472 | ) | | | (7,177,405 | ) | | | — | | | | 900,986 | |
Options written | | | — | | | | — | | | | 10,227,551 | | | | 4,490,388 | | | | (4,700,979 | ) | | | — | | | | 10,016,960 | |
Swaps | | | — | | | | (1,117,522 | ) | | | 7,776,278 | | | | — | | | | (3,039,218 | ) | | | — | | | | 3,619,538 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | (1,117,522 | ) | | $ | 17,878,099 | | | $ | 1,312,997 | | | $ | (14,917,602 | ) | | $ | — | | | $ | 3,155,972 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
18 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Consolidated Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Global Allocation V.I. Fund |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commodity Contracts | | | Credit Contracts | | | Equity Contracts | | | Foreign Currency Exchange Contracts | | | Interest Rate Contracts | | | Other Contracts | | | Total | |
Net Change in Unrealized Appreciation (Depreciation) on: | | | | | | | | | | | | | | | | | | | | | | | | | |
Futures contracts | | $ | — | | | $ | — | | | $ | 1,452,299 | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,452,299 | |
Forward foreign currency exchange contracts | | | — | | | | — | | | | — | | | | (24,168,922 | ) | | | — | | | | — | | | | (24,168,922 | ) |
Options purchased(b) | | | — | | | | — | | | | (19,018,358 | ) | | | (2,812,567 | ) | | | 2,487,369 | | | | — | | | | (19,343,556 | ) |
Options written | | | — | | | | — | | | | (14,325,559 | ) | | | (2,426,158 | ) | | | (2,993,117 | ) | | | — | | | | (19,744,834 | ) |
Swaps | | | — | | | | 918,880 | | | | (10,509,509 | ) | | | — | | | | (13,526,008 | ) | | | — | | | | (23,116,637 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | 918,880 | | | $ | (42,401,127 | ) | | $ | (29,407,647 | ) | | $ | (14,031,756 | ) | | $ | — | | | $ | (84,921,650 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 | | | — | (a) |
Average notional value of contracts — short | | $ | 129,742,370 | |
Forward foreign currency exchange contracts: | | | | |
Average amounts purchased — in USD | | $ | 414,665,661 | |
Average amounts sold — in USD | | $ | 763,757,017 | |
Options: | | | | |
Average value of option contracts purchased | | $ | 25,863,534 | |
Average value of option contracts written | | $ | 24,875,417 | |
Average notional value of swaption contracts purchased | | $ | 1,965,566,527 | |
Average notional value of swaption contracts written | | | — | (a) |
Credit default swaps: | | | | |
Average notional value — buy protection | | $ | 5,816,935 | |
Interest rate swaps: | | | | |
Average notional value — pays fixed rate | | $ | 496,974,675 | |
Average notional value — receives fixed rate | | $ | 361,537,411 | |
Currency swaps: | | | | |
Average notional value — pays | | $ | 64,456,120 | |
Total return swaps: | | | | |
Average notional value | | $ | 96,823,194 | |
| (a) | Derivative not held at period end. The amount shown in the Consolidated Statement of Operations reflects the results of activity during the period. | |
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 | | $ | — | | | $ | 16,554 | |
Forward foreign currency exchange contracts | | | 11,150,159 | | | | 28,522,006 | |
Options(a) | | | 23,657,456 | | | | 36,727,802 | |
Swaps — Centrally cleared | | | 47,795 | | | | — | |
Swaps — OTC(b) | | | 17,211,365 | | | | 3,363 | |
| | | | | | | | |
Total derivative assets and liabilities in the Statement of Assets and Liabilities | | $ | 52,066,775 | | | $ | 65,269,725 | |
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”) | | | (53,022 | ) | | | (16,554 | ) |
| | | | | | | | |
Total derivative assets and liabilities subject to an MNA | | $ | 52,013,753 | | | $ | 65,253,171 | |
| | | | | | | | |
| (a) | Includes options purchased at value which is included in Investments at value — unaffiliated in the Consolidated Statement 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. | |
| | | | |
CONSOLIDATED SCHEDULE OF INVESTMENTS | | | 19 | |
| | |
Consolidated Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Global Allocation V.I. Fund |
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 an MNA by Counterparty | | | Derivatives Available for Offset (a) | | | Non-cash Collateral Received (b) | | | Cash Collateral Received (b) | | | Net Amount of Derivative Assets (c)(f) | |
Bank of America NA | | $ | 8,198,640 | | | $ | (3,853,806 | ) | | $ | (3,985,328 | ) | | $ | — | | | $ | 359,506 | |
Barclays Bank plc | | | 958,320 | | | | (958,320 | ) | | | — | | | | — | | | | — | |
BNP Paribas SA | | | 16,005,276 | | | | (6,895,550 | ) | | | — | | | | (9,109,726 | ) | | | — | |
Citibank NA | | | 629,395 | | | | (629,395 | ) | | | — | | | | — | | | | — | |
Deutsche Bank AG | | | 3,583,022 | | | | (3,583,022 | ) | | | — | | | | — | | | | — | |
Goldman Sachs International | | | 1,881,080 | | | | (1,881,080 | ) | | | — | | | | — | | | | — | |
JP Morgan Chase Bank NA | | | 264,038 | | | | (264,038 | ) | | | — | | | | — | | | | — | |
JP Morgan Chase Bank NA(g) | | | 5,011 | | | | — | | | | — | | | | (5,011 | ) | | | — | |
Morgan Stanley & Co. International plc | | | 2,897,054 | | | | (2,897,054 | ) | | | — | | | | — | | | | — | |
Societe Generale SA | | | 902,721 | | | | (902,721 | ) | | | — | | | | — | | | | — | |
Societe Generale SA(g) | | | 112,288 | | | | (112,288 | ) | | | — | | | | — | | | | — | |
UBS AG | | | 16,576,908 | | | | (14,494,727 | ) | | | (2,082,181 | ) | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
| | $ | 52,013,753 | | | $ | (36,472,001 | ) | | $ | (6,067,509 | ) | | $ | (9,114,737 | ) | | $ | 359,506 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative Liabilities Subject to an MNA by Counterparty | | | Derivatives Available for Offset (a) | | | Non-cash Collateral Pledged (d) | | | Cash Collateral Pledged | | | Net Amount of Derivative Liabilities (e)(f) | |
Bank of America NA | | $ | 3,853,806 | | | $ | (3,853,806 | ) | | $ | — | | | $ | — | | | $ | — | |
Barclays Bank plc | | | 9,833,948 | | | | (958,320 | ) | | | (7,583,482 | ) | | | — | | | | 1,292,146 | |
BNP Paribas SA | | | 6,895,550 | | | | (6,895,550 | ) | | | — | | | | — | | | | — | |
Citibank NA | | | 4,798,738 | | | | (629,395 | ) | | | (4,169,343 | ) | | | — | | | | — | |
Deutsche Bank AG | | | 9,495,086 | | | | (3,583,022 | ) | | | (1,802,044 | ) | | | — | | | | 4,110,020 | |
Goldman Sachs International | | | 6,343,884 | | | | (1,881,080 | ) | | | — | | | | — | | | | 4,462,804 | |
JP Morgan Chase Bank NA | | | 1,658,547 | | | | (264,038 | ) | | | — | | | | — | | | | 1,394,509 | |
Morgan Stanley & Co. International plc | | | 6,079,752 | | | | (2,897,054 | ) | | | (2,403,205 | ) | | | — | | | | 779,493 | |
Societe Generale SA | | | 1,114,918 | | | | (902,721 | ) | | | (212,197 | ) | | | — | | | | — | |
Societe Generale SA(g) | | | 684,215 | | | | (112,288 | ) | | | (499,789 | ) | | | — | | | | 72,138 | |
UBS AG | | | 14,494,727 | | | | (14,494,727 | ) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
| | $ | 65,253,171 | | | $ | (36,472,001 | ) | | $ | (16,670,060 | ) | | $ | — | | | $ | 12,111,110 | |
| | | | | | | | | | | | | | | | | | | | |
| (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) | 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) | Excess of collateral pledged to the individual counterparty is not shown for financial reporting purposes. | |
| (e) | Net amount represents the net amount payable due to the counterparty in the event of default. | |
| (f) | Net amount may also include forward foreign currency exchange contracts that are not required to be collateralized. | |
| (g) | Represents derivatives owned by the BlackRock Cayman Global Allocation V.I. Fund I, Ltd., a wholly-owed 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 Financial Statements.
The following table summarizes 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 | | $ | — | | | $ | 1,011,157 | | | $ | — | | | $ | 1,011,157 | |
Belgium | | | — | | | | 42,446,911 | | | | — | | | | 42,446,911 | |
Brazil | | | 46,088,537 | | | | — | | | | — | | | | 46,088,537 | |
Canada | | | 71,947,573 | | | | — | | | | — | | | | 71,947,573 | |
China | | | 57,907,744 | | | | 67,719,649 | | | | 10,638,568 | | | | 136,265,961 | |
Czech Republic | | | — | | | | 4,601,062 | | | | — | | | | 4,601,062 | |
| | |
20 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Consolidated Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Global Allocation V.I. Fund |
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Denmark | | $ | — | | | $ | 216,000 | | | $ | — | | | $ | 216,000 | |
Finland | | | — | | | | 269,282 | | | | — | | | | 269,282 | |
France | | | 34,582,958 | | | | 216,884,674 | | | | — | | | | 251,467,632 | |
Germany | | | — | | | | 155,413,727 | | | | — | | | | 155,413,727 | |
Hong Kong | | | 2,338,550 | | | | 77,341,144 | | | | — | | | | 79,679,694 | |
India | | | — | | | | 147,492,784 | | | | — | | | | 147,492,784 | |
Indonesia | | | — | | | | 5,485,025 | | | | — | | | | 5,485,025 | |
Israel | | | 106,960 | | | | — | | | | — | | | | 106,960 | |
Italy | | | 16,640,190 | | | | 74,683,008 | | | | — | | | | 91,323,198 | |
Japan | | | — | | | | 855,181,078 | | | | — | | | | 855,181,078 | |
Luxembourg | | | — | | | | 25,762 | | | | — | | | | 25,762 | |
Macau | | | — | | | | 31,988 | | | | — | | | | 31,988 | |
Malaysia | | | — | | | | 1,467,424 | | | | — | | | | 1,467,424 | |
Mexico | | | 315,843 | | | | — | | | | — | | | | 315,843 | |
Netherlands | | | 41,306,495 | | | | 203,766,048 | | | | — | | | | 245,072,543 | |
Norway | | | — | | | | 69,441 | | | | — | | | | 69,441 | |
Poland | | | — | | | | 237,365 | | | | — | | | | 237,365 | |
Portugal | | | — | | | | 8,805,641 | | | | — | | | | 8,805,641 | |
Singapore | | | 257,968 | | | | 23,745,531 | | | | — | | | | 24,003,499 | |
South Africa | | | 32,392 | | | | 245,267 | | | | — | | | | 277,659 | |
South Korea | | | 3,154,431 | | | | 73,015,525 | | | | — | | | | 76,169,956 | |
Spain | | | — | | | | 32,339,619 | | | | — | | | | 32,339,619 | |
Sweden | | | — | | | | 752,585 | | | | — | | | | 752,585 | |
Switzerland | | | — | | | | 115,075,063 | | | | — | | | | 115,075,063 | |
Taiwan | | | — | | | | 77,499,265 | | | | — | | | | 77,499,265 | |
Thailand | | | 3,689,597 | | | | 15,220,456 | | | | — | | | | 18,910,053 | |
Turkey | | | — | | | | 142,494 | | | | — | | | | 142,494 | |
United Arab Emirates | | | — | | | | 49,505,301 | | | | — | | | | 49,505,301 | |
United Kingdom | | | 35,944,875 | | | | 114,561,572 | | | | — | | | | 150,506,447 | |
United States | | | 3,143,684,524 | | | | — | | | | 39,903,807 | | | | 3,183,588,331 | |
Corporate Bonds: | | | | | | | | | | | | | | | | |
Australia | | | — | | | | 20,250,543 | | | | 4,461,554 | | | | 24,712,097 | |
Belgium | | | — | | | | 11,710,592 | | | | — | | | | 11,710,592 | |
Brazil | | | — | | | | 1,822,635 | | | | — | | | | 1,822,635 | |
Chile | | | — | | | | 195,219 | | | | — | | | | 195,219 | |
China | | | — | | | | 48,000 | | | | — | | | | 48,000 | |
France | | | — | | | | 7,949,704 | | | | — | | | | 7,949,704 | |
Germany | | | — | | | | 18,618,235 | | | | — | | | | 18,618,235 | |
India | | | — | | | | — | | | | 1 | | | | 1 | |
Italy | | | — | | | | 4,397,689 | | | | — | | | | 4,397,689 | |
Luxembourg | | | — | | | | 8,998,167 | | | | — | | | | 8,998,167 | |
Netherlands | | | — | | | | 2,214,372 | | | | — | | | | 2,214,372 | |
Singapore | | | — | | | | 6,365,826 | | | | — | | | | 6,365,826 | |
Switzerland | | | — | | | | 5,257,006 | | | | — | | | | 5,257,006 | |
Turkey | | | — | | | | — | | | | 4,868,500 | | | | 4,868,500 | |
United Arab Emirates | | | — | | | | 16,219,274 | | | | — | | | | 16,219,274 | |
United States | | | — | | | | 128,982,552 | | | | 4 | | | | 128,982,556 | |
Floating Rate Loan Interests | | | — | | | | 17,587,446 | | | | — | | | | 17,587,446 | |
Foreign Agency Obligations | | | — | | | | 4,796,277 | | | | — | | | | 4,796,277 | |
Foreign Government Obligations | | | — | | | | 588,209,906 | | | | — | | | | 588,209,906 | |
Investment Companies | | | 265,254,442 | | | | — | | | | — | | | | 265,254,442 | |
Preferred Securities: | | | | | | | | | | | | | | | | |
Brazil | | | 132,650 | | | | — | | | | — | | | | 132,650 | |
China | | | — | | | | 30,784,562 | | | | — | | | | 30,784,562 | |
Netherlands | | | — | | | | 3,925,069 | | | | — | | | | 3,925,069 | |
South Korea | | | — | | | | 116,502 | | | | — | | | | 116,502 | |
United Kingdom | | | — | | | | 33,159,375 | | | | — | | | | 33,159,375 | |
United States | | | 31,455,236 | | | | 58,403,462 | | | | 72,740,772 | | | | 162,599,470 | |
Rights | | | 3,161 | | | | — | | | | — | | | | 3,161 | |
U.S. Treasury Obligations | | | — | | | | 1,857,651,071 | | | | — | | | | 1,857,651,071 | |
Warrants | | | — | | | | 24 | | | | 4 | | | | 28 | |
Short-Term Securities: | | | | | | | | | | | | | | | | |
Foreign Government Obligations | | | — | | | | 97,763,938 | | | | — | | | | 97,763,938 | |
Money Market Funds | | | 5,274,808 | | | | — | | | | — | | | | 5,274,808 | |
Time Deposits | | | — | | | | 4,808,426 | | | | — | | | | 4,808,426 | |
U.S. Treasury Obligations | | | — | | | | 1,212,187,803 | | | | — | | | | 1,212,187,803 | |
| | | | |
CONSOLIDATED SCHEDULE OF INVESTMENTS | | | 21 | |
| | |
Consolidated Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Global Allocation V.I. Fund |
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Options Purchased: | | | | | | | | | | | | | | | | |
Equity contracts | | $ | 5,227 | | | $ | 23,651,255 | | | $ | — | | | $ | 23,656,482 | |
Interest rate contracts | | | — | | | | 974 | | | | — | | | | 974 | |
Liabilities: | | | | | | | | | | | | | | | | |
Investment Sold Short | | | | | | | | | | | | | | | | |
Common Stocks: | | | — | | | | — | | | | — | | | | — | |
France | | | — | | | | (5,019,691 | ) | | | — | | | | (5,019,691 | ) |
Japan | | | — | | | | (5,067,454 | ) | | | — | | | | (5,067,454 | ) |
United States | | | (25,262,252 | ) | | | — | | | | — | | | | (25,262,252 | ) |
| | | | | | | | | | | | | | | | |
Subtotal | | $ | 3,734,861,909 | | | $ | 6,521,240,607 | | | $ | 132,613,210 | | | $ | 10,388,715,726 | |
| | | | | | | | | | | | | | | | |
Investments valued at NAV(a) | | | | | | | | | | | | | | $ | 256,588,914 | |
| | | | | | | | | | | | | | | | |
Total Investments | | | | | | | | | | | | | | $ | 10,645,304,640 | |
| | | | | | | | | | | | | | | | |
Derivative Financial Instruments(b) | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Equity contracts | | $ | 1,061,288 | | | $ | 12,513,516 | | | $ | — | | | $ | 13,574,804 | |
Foreign currency exchange contracts | | | — | | | | 11,150,159 | | | | — | | | | 11,150,159 | |
Interest rate contracts | | | — | | | | 5,739,568 | | | | — | | | | 5,739,568 | |
Liabilities: | | | | | | | | | | | | | | | | |
Credit contracts | | | — | | | | (366,006 | ) | | | — | | | | (366,006 | ) |
Equity contracts | | | — | | | | (36,731,165 | ) | | | — | | | | (36,731,165 | ) |
Foreign currency exchange contracts | | | — | | | | (28,522,006 | ) | | | — | | | | (28,522,006 | ) |
Interest rate contracts | | | — | | | | (10,642,066 | ) | | | — | | | | (10,642,066 | ) |
| | | | | | | | | | | | | | | | |
Total | | $ | 1,061,288 | | | $ | (46,858,000 | ) | | $ | — | | | $ | (45,796,712 | ) |
| | | | | | | | | | | | | | | | |
| (a) | As of June 30, 2018, 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 six months ended June 30, 2018, 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:
| | | | | | | | | | | | | | | | | | | | |
| | Common Stocks | | | Corporate Bonds | | | Preferred Securities | | | Warrants | | | Total | |
Investments: | | | | | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | | | | | |
Opening Balance, as of December 31, 2017 | | $ | 472,461 | | | $ | 8,403,598 | | | $ | 101,952,816 | | | $ | 29 | | | $ | 110,828,904 | |
Transfers into Level 3 | | | — | | | | — | | | | — | | | | — | | | | — | |
Transfers out of Level 3 | | | — | | | | (24,000 | ) | | | — | | | | (25 | ) | | | (24,025 | ) |
Other(a) | | | 52,432,678 | | | | — | | | | (52,432,678 | ) | | | — | | | | — | |
Accrued discounts/premiums | | | — | | | | 81,780 | | | | — | | | | — | | | | 81,780 | |
Net realized gain (loss) | | | — | | | | — | | | | — | | | | — | | | | — | |
Net change in unrealized appreciation (depreciation)(b)(c) | | | (20,982,654 | ) | | | (1,298,319 | ) | | | 20,039,668 | | | | — | | | | (2,241,305 | ) |
Purchases | | | 18,619,890 | | | | 2,167,000 | | | | 3,180,966 | | | | — | | | | 23,967,856 | |
Sales | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Closing Balance, as of June 30, 2018 | | $ | 50,542,375 | | | $ | 9,330,059 | | | $ | 72,740,772 | | | $ | 4 | | | $ | 132,613,210 | |
| | | | | | | | | | | | | | | | | | | | |
Net change in unrealized appreciation (depreciation) on investments still held at June 30, 2018(c) | | $ | (20,982,654 | ) | | $ | (1,271,954 | ) | | $ | 6,591,150 | | | $ | — | | | $ | (15,663,458 | ) |
| | | | | | | | | | | | | | | | | | | | |
| (a) | Certain Level 3 investments were re-classified between Preferred Securities and Common Stocks. | |
| (b) | Included in the related net change in unrealized appreciation (depreciation) in the Consolidated Statement of Operations | |
| (c) | Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at June 30, 2018 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 consolidated financial statements.
| | |
22 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Consolidated Statement of Assets and Liabilities (unaudited)
June 30, 2018
| | | | |
| | BlackRock Global Allocation V.I. Fund | |
| |
ASSETS | | | | |
Investments at value — unaffiliated (including securities loaned at value of $248,451,375) (cost — $9,776,200,234) | | $ | 10,351,137,007 | |
Investments at value — affiliated (cost — $336,429,568) | | | 329,517,030 | |
Cash | | | 31,627,347 | |
Due from broker | | | 5,833,448 | |
Cash pledged: | | | | |
Futures contracts | | | 2,526,000 | |
Centrally cleared swaps | | | 5,942,000 | |
Foreign currency at value (cost — $1,330,708) | | | 1,320,422 | |
Receivables: | | | | |
Investments sold | | | 30,184,715 | |
Securities lending income — affiliated | | | 104,546 | |
Capital shares sold | | | 800,815 | |
Dividends — affiliated | | | 16,226 | |
Dividends — unaffiliated | | | 10,650,323 | |
Interest — unaffiliated | | | 20,752,258 | |
Variation margin on centrally cleared swaps | | | 47,795 | |
Unrealized appreciation on: | | | | |
Forward foreign currency exchange contracts | | | 11,150,159 | |
OTC swaps | | | 17,211,365 | |
Prepaid expenses | | | 24,457 | |
| | | | |
Total assets | | | 10,818,845,913 | |
| | | | |
| |
LIABILITIES | | | | |
Investments sold short, at value (proceeds $35,757,234) | | | 35,349,397 | |
Cash received: | | | | |
Collateral — OTC derivatives | | | 18,360,000 | |
Cash collateral on securities loaned at value | | | 256,531,353 | |
Options written at value (premium received $28,808,504) | | | 36,727,802 | |
Payables: | | | | |
Investments purchased | | | 255,325,890 | |
Capital shares redeemed | | | 8,567,329 | |
Deferred foreign capital gain tax | | | 565,481 | |
Distribution fees | | | 1,642,630 | |
Variation margin on futures contracts | | | 16,554 | |
Board realignment and consolidation | | | 97,584 | |
Investment advisory fees | | | 5,294,577 | |
Directors’ and Officer’s fees | | | 41,672 | |
Other affiliates | | | 60,675 | |
Other accrued expenses | | | 2,446,922 | |
Unrealized depreciation on: | | | | |
Forward foreign currency exchange contracts | | | 28,522,006 | |
OTC swaps | | | 3,363 | |
| | | | |
Total liabilities | | | 649,553,235 | |
| | | | |
| |
NET ASSETS | | $ | 10,169,292,678 | |
| | | | |
| |
NET ASSETS CONSIST OF | | | | |
Paid-in capital | | $ | 9,292,808,586 | |
Undistributed net investment income | | | 25,834,366 | |
Accumulated net realized gain | | | 300,214,792 | |
Net unrealized appreciation (depreciation) | | | 550,434,934 | |
| | | | |
NET ASSETS | | $ | 10,169,292,678 | |
| | | | |
| |
NET ASSET VALUE | | | | |
Class I — Based on net assets of $2,275,511,585 and 133,839,063 shares outstanding, 400 million shares authorized, $0.10 par value. | | $ | 17.00 | |
| | | | |
Class II — Based on net assets of $243,972,726 and 14,408,346 shares outstanding, 200 million shares authorized, $0.10 par value. | | $ | 16.93 | |
| | | | |
Class III — Based on net assets of $7,649,808,367 and 523,836,689 shares outstanding, 1.5 billion shares authorized, $0.10 par value. | | $ | 14.60 | |
| | | | |
See notes to consolidated financial statements.
| | | | |
CONSOLIDATED FINANCIAL STATEMENTS | | | 23 | |
Consolidated Statement of Operations (unaudited)
Six Months Ended June 30, 2018
| | | | |
| | BlackRock Global Allocation V.I. Fund | |
| |
INVESTMENT INCOME | | | | |
Dividends — affiliated | | $ | 66,015 | |
Dividends — unaffiliated | | | 75,010,651 | |
Interest — unaffiliated | | | 51,003,251 | |
Securities lending income — affiliated — net | | | 545,884 | |
Foreign taxes withheld | | | (4,343,314 | ) |
| | | | |
Total investment income | | | 122,282,487 | |
| | | | |
| |
EXPENSES | | | | |
Investment advisory | | | 32,956,764 | |
Distribution — class specific | | | 10,151,885 | |
Transfer agent — class specific | | | 9,727,099 | |
Custodian | | | 704,039 | |
Professional | | | 315,700 | |
Accounting services | | | 315,521 | |
Printing | | | 281,536 | |
Board realignment and consolidation | | | 97,584 | |
Directors and Officer | | | 71,387 | |
Transfer agent | | | 2,338 | |
Miscellaneous | | | 136,448 | |
| | | | |
Total expenses excluding dividend expense | | | 54,760,301 | |
Dividends expense — unaffiliated | | | 197,105 | |
| | | | |
Total expenses | | | 54,957,406 | |
Less: | | | | |
Fees waived and/or reimbursed by the Manager | | | (230,960 | ) |
Transfer agent fees waived and /or reimbursed — class specific | | | (6,045,175 | ) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 48,681,271 | |
| | | | |
Net investment income | | | 73,601,216 | |
| | | | |
| |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain (loss) from: | | | | |
Investments — affiliated | | | 37,739 | |
Investments — unaffiliated (net of $428,567 foreign capital gain tax) | | | 261,666,532 | |
Capital gain distributions from investment companies — affiliated | | | 20 | |
Forward foreign currency exchange contracts | | | 7,519,081 | |
Foreign currency transactions | | | 6,463,312 | |
Futures contracts | | | (18,900,593 | ) |
Options written | | | 10,016,960 | |
Short sales — unaffiliated | | | (64,825 | ) |
Swaps | | | 3,619,538 | |
| | | | |
| | | 270,357,764 | |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | |
Investments — affiliated | | | (4,140,839 | ) |
Investments — unaffiliated (net of $557,799 foreign capital gain tax) | | | (436,765,721 | ) |
Forward foreign currency exchange contracts | | | (24,168,922 | ) |
Foreign currency translations | | | (522,467 | ) |
Futures contracts | | | 1,452,299 | |
Options written | | | (19,744,834 | ) |
Short sales — unaffiliated | | | 407,837 | |
Swaps | | | (23,116,637 | ) |
| | | | |
| | | (506,599,284 | ) |
| | | | |
Net realized and unrealized loss | | | (236,241,520 | ) |
| | | | |
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | (162,640,304 | ) |
| | | | |
See notes to consolidated financial statements.
| | |
24 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Consolidated Statements of Changes in Net Assets
| | | | | | | | |
| | BlackRock Global Allocation V.I. Fund | |
| Six Months Ended 06/30/2018 (Unaudited) | | | Year Ended 12/31/2017 | |
| | |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | |
| | |
OPERATIONS | | | | | | | | |
Net investment income | | $ | 73,601,216 | | | $ | 126,982,603 | |
Net realized gain | | | 270,357,764 | | | | 414,074,260 | |
Net change in unrealized appreciation (depreciation) | | | (506,599,284 | ) | | | 831,654,996 | |
| | | | | | | | |
Net increase (decrease) in net assets resulting from operations | | | (162,640,304 | ) | | | 1,372,711,859 | |
| | | | | | | | |
| | |
DISTRIBUTIONS TO SHAREHOLDERS(a) | | | | | | | | |
From net investment income: | | | | | | | | |
Class I | | | — | | | | (29,375,286 | ) |
Class II | | | — | | | | (2,933,651 | ) |
Class III | | | — | | | | (102,989,429 | ) |
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 | ) |
| | | | | | | | |
| | |
CAPITAL SHARE TRANSACTIONS | | | | | | | | |
Net decrease in net assets derived from capital share transactions | | | (466,280,206 | ) | | | (795,038,529 | ) |
| | | | | | | | |
| | |
NET ASSETS | | | | | | | | |
Total increase (decrease) in net assets | | | (628,920,510 | ) | | | 322,358,975 | |
Beginning of period | | | 10,798,213,188 | | | | 10,475,854,213 | |
| | | | | | | | |
End of period | | $ | 10,169,292,678 | | | $ | 10,798,213,188 | |
| | | | | | | | |
Undistributed (accumulated) net investment income (loss), end of period | | $ | 25,834,366 | | | $ | (47,766,850 | ) |
| | | | | | | | |
(a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to consolidated financial statements.
| | | | |
CONSOLIDATED FINANCIAL STATEMENTS | | | 25 | |
Consolidated Financial Highlights
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Global Allocation V.I. Fund | |
| | Class I | |
| | Six Months Ended 06/30/2018 (Unaudited) | | | | | | Year Ended December 31, | |
| 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 17.26 | | | | | | | $ | 15.51 | | | $ | 15.09 | | | $ | 16.26 | | | $ | 17.61 | | | $ | 16.10 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.14 | | | | | | | | 0.22 | | | | 0.22 | | | | 0.22 | | | | 0.29 | | | | 0.22 | |
Net realized and unrealized gain (loss) | | | (0.40 | ) | | | | | | | 1.92 | | | | 0.40 | | | | (0.35 | ) | | | 0.12 | | | | 2.14 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | (0.26 | ) | | | | | | | 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 period | | $ | 17.00 | | | | | | | $ | 17.26 | | | $ | 15.51 | | | $ | 15.09 | | | $ | 16.26 | | | $ | 17.61 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(c) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | (1.51 | )%(d) | | | | | | | 13.86 | % | | | 4.11 | % | | | (0.89 | )% | | | 2.30 | % | | | 14.76 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets(e) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 0.74 | %(f) | | | | | | | 0.72 | % | | | 0.74 | % | | | 0.75 | % | | | 0.74 | % | | | 0.72 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.73 | %(f) | | | | | | | 0.72 | % | | | 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 | | | 0.73 | %(f) | | | | | | | 0.70 | % | | | 0.73 | % | | | 0.73 | % | | | 0.72 | % | | | 0.72 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.60 | %(f) | | | | | | | 1.32 | % | | | 1.47 | % | | | 1.32 | % | | | 1.64 | % | | | 1.26 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 2,275,512 | | | | | | | $ | 2,306,034 | | | $ | 2,107,145 | | | $ | 1,994,371 | | | $ | 1,708,903 | | | $ | 2,426,154 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 70 | % | | | | | | | 118 | % | | | 135 | % | | | 90 | %(g) | | | 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 reinvestments of distributions. |
(d) | Aggregate total return. |
(e) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 6/30/2018 (Unaudited) | | | | | | Year Ended December 31, | |
| | | | | 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | 2013 | | | | |
Investments in underlying funds | | | 0.02 | % | | | | | | | 0.01 | % | | | | | | | N/A | | | | | | | | N/A | | | | | | | | N/A | | | | | | | | N/A | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(g) | Includes mortgage dollar roll transactions (“MDRs”). Excluding these transactions the portfolio turnover would have been 88%. |
See notes to consolidated financial statements.
| | |
26 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Consolidated Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Global Allocation V.I. Fund (continued) | |
| | Class II | |
| | Six Months Ended 06/30/2018 (Unaudited) | | | | | | Year Ended December 31, | |
| 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 17.21 | | | | | | | $ | 15.46 | | | $ | 15.04 | | | $ | 16.21 | | | $ | 17.56 | | | $ | 16.07 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.12 | | | | | | | | 0.19 | | | | 0.20 | | | | 0.19 | | | | 0.25 | | | | 0.19 | |
Net realized and unrealized gain (loss) | | | (0.40 | ) | | | | | | | 1.93 | | | | 0.40 | | | | (0.35 | ) | | | 0.14 | | | | 2.14 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | (0.28 | ) | | | | | | | 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 period | | $ | 16.93 | | | | | | | $ | 17.21 | | | $ | 15.46 | | | $ | 15.04 | | | $ | 16.21 | | | $ | 17.56 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(c) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | (1.63 | )%(d) | | | | | | | 13.74 | % | | | 3.96 | % | | | (1.05 | )% | | | 2.16 | % | | | 14.55 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets(e) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.03 | %(f) | | | | | | | 1.00 | % | | | 1.02 | % | | | 1.02 | % | | | 1.01 | % | | | 1.00 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.88 | %(f) | | | | | | | 0.87 | % | | | 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 | | | 0.88 | %(f) | | | | | | | 0.85 | % | | | 0.88 | % | | | 0.88 | % | | | 0.87 | % | | | 0.87 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.37 | %(f) | | | | | | | 1.17 | % | | | 1.33 | % | | | 1.17 | % | | | 1.39 | % | | | 1.07 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 243,973 | | | | | | | $ | 258,564 | | | $ | 229,492 | | | $ | 256,964 | | | $ | 260,312 | | | $ | 216,395 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 70 | % | | | | | | | 118 | % | | | 135 | % | | | 90 | %(g) | | | 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 reinvestments of distributions. |
(d) | Aggregate total return. |
(e) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 6/30/2018 (Unaudited) | | | | | | Year Ended December 31, | |
| | | | | 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | 2013 | | | | |
Investments in underlying funds | | | 0.02 | % | | | | | | | 0.01 | % | | | | | | | N/A | | | | | | | | N/A | | | | | | | | N/A | | | | | | | | N/A | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(g) | 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 | | | 27 | |
Consolidated Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Global Allocation V.I. Fund (continued) | |
| | Class III | |
| | Six Months Ended 06/30/2018 (Unaudited) | | | | | | Year Ended December 31, | |
| 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 14.84 | | | | | | | $ | 13.37 | | | $ | 13.04 | | | $ | 14.19 | | | $ | 15.58 | | | $ | 14.34 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.10 | | | | | | | | 0.17 | | | | 0.16 | | | | 0.15 | | | | 0.21 | | | | 0.16 | |
Net realized and unrealized gain (loss) | | | (0.34 | ) | | | | | | | 1.66 | | | | 0.34 | | | | (0.30 | ) | | | 0.12 | | | | 1.89 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | (0.24 | ) | | | | | | | 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 period | | $ | 14.60 | | | | | | | $ | 14.84 | | | $ | 13.37 | | | $ | 13.04 | | | $ | 14.19 | | | $ | 15.58 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(c) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | (1.62 | )%(d) | | | | | | | 13.71 | % | | | 3.81 | % | | | (1.14 | )% | | | 2.08 | % | | | 14.42 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets(e) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.13 | %(f) | | | | | | | 1.13 | % | | | 1.12 | % | | | 1.12 | % | | | 1.11 | % | | | 1.11 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.98 | %(f) | | | | | | | 1.00 | % | | | 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 | %(f) | | | | | | | 0.98 | % | | | 0.98 | % | | | 0.98 | % | | | 0.97 | % | | | 0.97 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.34 | %(f) | | | | | | | 1.15 | % | | | 1.22 | % | | | 1.07 | % | | | 1.32 | % | | | 1.02 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 7,649,808 | | | | | | | $ | 8,233,615 | | | $ | 8,139,218 | | | $ | 8,869,288 | | | $ | 9,780,007 | | | $ | 10,014,301 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 70 | % | | | | | | | 118 | % | | | 135 | % | | | 90 | %(g) | | | 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 reinvestments of distributions. |
(d) | Aggregate total return. |
(e) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 6/30/2018 (Unaudited) | | | | | | Year Ended December 31, | |
| | | | | 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | 2013 | | | | |
Investments in underlying funds | | | 0.02 | % | | | | | | | 0.01 | % | | | | | | | N/A | | | | | | | | N/A | | | | | | | | N/A | | | | | | | | N/A | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(g) | Includes mortgage dollar roll transactions (“MDRs”). Excluding these transactions the portfolio turnover would have been 88%. |
See notes to consolidated financial statements.
| | |
28 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Consolidated Financial Statements (unaudited)
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 19 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 $288,523,870, which is 2.8% 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 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.
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.
| | | | |
NOTESTO CONSOLIDATED FINANCIAL STATEMENTS | | | 29 | |
Notes to Consolidated Financial Statements (unaudited) (continued)
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. |
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
| | |
30 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Consolidated Financial Statements (unaudited) (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 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.
As of June 30, 2018, 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.
| | | | |
NOTESTO CONSOLIDATED FINANCIAL STATEMENTS | | | 31 | |
Notes to Consolidated Financial Statements (unaudited) (continued)
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.
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.
| | |
32 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Consolidated Financial Statements (unaudited) (continued)
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: 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. 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.
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.
| | | | |
NOTESTO CONSOLIDATED FINANCIAL STATEMENTS | | | 33 | |
Notes to Consolidated Financial Statements (unaudited) (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 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 | | $ | 1,382,945 | | | $ | (1,382,945 | ) | | $ | — | |
BNP PARIBAS | | | 15,323,476 | | | | (15,323,476 | ) | | | — | |
Citigroup | | | 36,464,471 | | | | (36,464,471 | ) | | | — | |
Credit Suisse | | | 2,055,353 | | | | (2,055,353 | ) | | | — | |
Deutsche Bank | | | 974,871 | | | | (974,871 | ) | | | — | |
Fidelity Investments | | | 1,448,730 | | | | (1,443,772 | ) | | | 4,958 | |
Goldman Sachs | | | 8,803,728 | | | | (8,803,728 | ) | | | — | |
Jefferies & Co | | | 650,069 | | | | (650,069 | ) | | | — | |
JP Morgan | | | 46,710,459 | | | | (46,710,459 | ) | | | — | |
Merrill Lynch | | | 38,398,952 | | | | (38,398,952 | ) | | | — | |
Mizuho | | | 265,126 | | | | (265,126 | ) | | | — | |
Morgan Stanley | | | 60,654,357 | | | | (60,654,357 | ) | | | — | |
Nomura | | | 12,979,881 | | | | (12,979,881 | ) | | | — | |
SG Americas | | | 3,648,832 | | | | (3,648,832 | ) | | | — | |
State Street Bank | | | 9,108,410 | | | | (9,108,410 | ) | | | — | |
UBS | | | 9,581,715 | | | | (9,581,715 | ) | | | — | |
| | | | | | | | | | | | |
| | $ | 248,451,375 | | | $ | (248,446,417 | ) | | $ | 4,958 | |
| | | | | | | | | | | | |
| (a) | Cash collateral with a value of $256,531,353 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. | |
| | |
34 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Consolidated Financial Statements (unaudited) (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) and 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. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts on the Statement of Assets and Liabilities.
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. Cash amounts pledged for forward foreign currency exchange contracts are considered restricted and are included in cash pledged as collateral for OTC derivatives on the Statement of Assets and Liabilities.
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. These amounts, which are considered restricted, are included in cash pledged as collateral for options written on the Statement of Assets and Liabilities.
| • | | 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 CONSOLIDATED FINANCIAL STATEMENTS | | | 35 | |
Notes to Consolidated Financial Statements (unaudited) (continued)
| • | | 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.” |
| • | | 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. Amounts pledged, which are considered restricted cash, are included in cash pledged for centrally cleared swaps on 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 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
| | |
36 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Consolidated Financial Statements (unaudited) (continued)
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. |
| • | | 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 | |
| | | | |
NOTESTO CONSOLIDATED FINANCIAL STATEMENTS | | | 37 | |
Notes to Consolidated Financial Statements (unaudited) (continued)
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 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 six months ended June 30, 2018, 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 | | $ | 189,396 | | | $ | 9,962,489 | | | $ | 10,151,885 | |
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 six months ended June 30, 2018, 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 six months ended June 30, 2018, 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 | |
$ | 904,552 | | | | | $ | 272,901 | | | | | $ | 8,549,646 | | | | | $ | 9,727,099 | |
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 six months ended June 30, 2018, the amount waived was $3,659.
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 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 six months ended June 30, 2018, the Fund waived $227,301 in investment advisory fees pursuant to these arrangements.
For the six months ended June 30, 2018, the Fund reimbursed the Manager $58,348 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, 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 waived and/or reimbursed — class specific in the Consolidated Statement of Operations. For the six months ended June 30, 2018, class specific expense waivers and/or reimbursements are as follows:
| | | | | | | | | | | | | | | | |
| | Class I | | | Class II | | | Class III | | | Total | |
Transfer Agent Fees Waived and/or Reimbursed | | $ | 100,509 | | | $ | 184,516 | | | $ | 5,760,150 | | | $ | 6,045,175 | |
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% | |
| | |
38 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Consolidated Financial Statements (unaudited) (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 six months ended June 30, 2018, 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 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 six months ended June 30, 2018, the Fund paid BIM $53,840 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 six months ended June 30, 2018, the Fund did not participate in the Interfund Lending Program.
Directors and Officers: 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 six months ended June 30, 2018, 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 | | $ | — | |
Sales | | | 7,143,408 | |
Net Realized Loss | | | 230,887 | |
For the six months ended June 30, 2018, purchases and sales of investments, including paydowns and excluding short-term securities, were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
Non-U.S Government Securities | | $ | 2,277,423,022 | | | $ | 3,053,066,661 | |
U.S Government Securities | | $ | 4,311,130,324 | | | $ | 4,025,130,761 | |
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 | | | 39 | |
Notes to Consolidated Financial Statements (unaudited) (continued)
Management has analyzed tax laws and regulations and their application to the Fund as of June 30, 2018, 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.
As of June 30, 2018, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
| | | | |
Tax cost | | $ | 10,169,032,806 | |
| | | | |
Gross unrealized appreciation | | $ | 906,074,895 | |
Gross unrealized depreciation | | | (411,034,036 | ) |
| | | | |
Net unrealized appreciation (depreciation) | | $ | 495,040,859 | |
| | | | |
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Although the Act does not amend any provisions directly related to the qualification or taxation of regulated investment companies (“RICs”), the Act does change the taxation of entities in which some RICs invest, the tax treatment of income derived from those entities and the taxation of RIC shareholders. While management does not anticipate significant impact to the Fund or to its shareholders, there is uncertainty in the application of certain provisions in the Act. Specifically, provisions in the Act may increase the amount of or accelerate the recognition of taxable income and may limit the deductibility of certain expenses by RICs. Until full clarity around these provisions is obtained, the impact on the Fund’s financial statements, if any, cannot be fully determined.
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, $2.25 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 $1.75 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 0.10% 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 2019 unless extended or renewed. Prior to April 19, 2018, the aggregate commitment amount was $2.1 billion and the fee was 0.12% per annum. Participating Funds paid an upfront commitment fee of 0.02% on the total commitment amounts, in addition to administration, legal and arrangement fees, which 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 six months ended June 30, 2018, the Fund did not borrow under the credit agreement.
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.
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,
| | |
40 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Consolidated Financial Statements (unaudited) (continued)
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.
11. | CAPITAL SHARE TRANSACTIONS |
Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 | | | Year Ended 12/31/2017 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
Class I | | | | | | | | | | | | | | | | |
Shares sold | | | 5,938,964 | | | $ | 103,054,326 | | | | 8,584,248 | | | $ | 143,679,674 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 2,672,740 | | | | 46,050,926 | |
Shares redeemed | | | (5,669,770 | ) | | | (98,559,075 | ) | | | (13,573,580 | ) | | | (224,416,668 | ) |
| | | | | | | | | | | | | | | | |
Net increase (decrease) | | | 269,194 | | | $ | 4,495,251 | | | | (2,316,592 | ) | | $ | (34,686,068 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Class II | | | | | | | | | �� | | | | | | | |
Shares sold | | | 609,321 | | | $ | 10,508,116 | | | | 1,384,696 | | | $ | 23,128,223 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 320,419 | | | | 5,499,573 | |
Shares redeemed | | | (1,227,442 | ) | | | (21,206,752 | ) | | | (1,525,356 | ) | | | (25,239,075 | ) |
| | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (618,121 | ) | | $ | (10,698,636 | ) | | | 179,759 | | | $ | 3,388,721 | |
| | | | | | | | | | | | | | | | |
| | | | |
Class III | | | | | | | | | | | | | | | | |
Shares sold | | | 4,509,103 | | | $ | 67,285,515 | | | | 10,049,191 | | | $ | 144,899,286 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 13,347,588 | | | | 197,591,823 | |
Shares redeemed | | | (35,393,538 | ) | | | (527,362,336 | ) | | | (77,304,864 | ) | | | (1,106,232,291 | ) |
| | | | | | | | | | | | | | | | |
Net decrease | | | (30,884,435 | ) | | $ | (460,076,821 | ) | | | (53,908,085 | ) | | $ | (763,741,182 | ) |
| | | | | | | | | | | | | | | | |
Total Net Decrease | | | (31,233,362 | ) | | $ | (466,280,206 | ) | | | (56,044,918 | ) | | $ | (795,038,529 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
NOTESTO CONSOLIDATED FINANCIAL STATEMENTS | | | 41 | |
Notes to Consolidated Financial Statements (unaudited) (continued)
Management’s evaluation of the impact of all subsequent events on the Fund’s financial statements was completed through the date the financial statements were issued and the following items were noted:
The Fund paid net investment income, short-term capital gain and long-term capital gain distributions in the following amounts per share on July 20, 2018 to the shareholders of record on July 18, 2018.
| | | | | | | | | | | | |
| | Net Investment Income | | | Short-Term Capital Gain | | | Long-Term Capital Gain | |
Class I | | $ | 0.013026 | | | $ | 0.007062 | | | $ | 0.114520 | |
Class II | | | 0.013026 | | | | 0.007062 | | | | 0.114520 | |
Class III | | | 0.013026 | | | | 0.007062 | | | | 0.114520 | |
Glossary of Terms Used in this Report
| | |
Currency |
| |
AUD | | Australian Dollar |
BRL | | Brazilian Real |
CAD | | Canadian Dollar |
EUR | | Euro |
GBP | | British Pound |
HKD | | Hong Kong Dollar |
JPY | | Japanese Yen |
MXN | | Mexican Peso |
NOK | | Norwegian Krone |
PLN | | Polish Zloty |
SEK | | Swedish Krona |
SGD | | Singapore Dollar |
USD | | United States Dollar |
ZAR | | South African Rand |
| | |
Portfolio Abbreviations |
| |
ADR | | American Depositary Receipt |
CDX | | Credit Default Swap Index |
CVA | | Certification Van Aandelon (Dutch Certificate) |
LIBOR | | London Interbank Offered Rate |
NASDAQ | | National Association of Securities Dealers Automated |
OTC | | Over-The-Counter |
PCL | | Public Company Limited |
REIT | | Real Estate Investment Trust |
S&P | | Standard & Poor’s |
SPDR | | S&P Depository Receipt |
| | |
42 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
JUNE 30, 2018
| | |
SEMI-ANNUAL REPORT (UNAUDITED) | | |
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 Six-Month Period Ended June 30, 2018
Noteworthy market conditions for the six-month period ended June 30, 21018 included the continued steady removal of monetary accommodation by the Federal Open Market Committee (“FOMC”), the ongoing gradual reduction of the Fed’s balance sheet, increased Treasury issuance and various geopolitical events including trade-tariffs and the Italian elections. All of these factors contributed to a volatile first half of the year.
Heading into the end of the second quarter of 2018, at their June 13, 2018 FOMC meeting, the FOMC raised interest rates by 0.25% for the second time this year, bringing the Fed Funds target rate range to 1.75% – 2.00%. At the same time and consistent with guidance provided in the minutes from the May FOMC meeting, the rate paid on interest on excess reserves (the rate banks earn on deposits at the Federal Reserve) was increased by 0.20%, opposed to the traditional 0.25% in an effort to promote consistent and sustainable trading in the federal funds market.
Following the resolution of the debt ceiling limit in early February, the U.S. Treasury increased net bill supply by an estimated $330 billion over a six-week period ending March 29, 2018. The massive amount of supply, in combination with the base erosion and anti-abuse tax stemming from the repatriation of U.S. dollars held offshore, pressured short-term credit spreads wider. These pressures lead to money market fund managers generally maintaining a conservative posture leading up to the March and June 2018 FOMC meetings and in advance of seasonal redemptions that occur at quarter end. Credit spreads, as reflected in the differential between three-month London Inter-Bank Offered Rate (“LIBOR”) and overnight index swaps (“OIS”), widened significantly as the market figured out how to digest the surge in front-end supply. The trend continued up until the better-than-expected tax-receipts in April where a contraction and stabilization of the credit spreads occurred. This was evidenced by the three-month LIBOR and OIS spread contracting to 40 basis points in June, down from a high of 60 basis points earlier in the year.
In our opinion, at least one additional 0.25% interest rate increase is possible during the balance of 2018 with the possibility of a fourth estimated at roughly 50%, per Fed Fund futures and the OIS rate, as of June 30. The third rate hike is expected to occur in September, with the fourth, if necessary, in December. While income tax receipts have produced a temporary respite from the heavy Treasury bill issuance, a projected decline in revenues from the tax overhaul along with an increase in federal spending are expected to result in a slightly elevated net Treasury bill supply in the second half of 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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Fund Summary as of June 30, 2018 | | 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.
At a meeting held on November 14, 2017, the Board of Directors of BlackRock Variable Series Funds, Inc. (the “Company”) and, at a meeting held on May 23, 2018, the Board of Trustees of State Farm Variable Product Trust each approved a reorganization of the State Farm Money Market Fund (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.
Fund Information
CURRENT SEVEN-DAY YIELDS
| | | | | | | | |
| | 7-Day SEC Yields | | | 7-Day Yields | |
BlackRock Government Money Market V.I. Fund | | | 1.67 | % | | | 1.67 | % |
The 7-Day SEC Yields may differ from the 7-Day Yields shown above due to the fact that the 7-Day SEC Yield excludes distributed capital gains.
Past performance is not indicative of future results.
PORTFOLIO COMPOSITION
| | | | |
Asset Type | | Percent of Net Assets | |
U.S. Government Sponsored Agency Obligations | | | 43 | % |
Repurchase Agreements | | | 26 | |
U.S. Treasury Obligations | | | 15 | |
Other Assets Less Liabilities | | | 16 | |
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 January 1, 2018 and held through June 30, 2018) 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 (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | | | | Beginning Account Value (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | Annualized Expense Ratio | |
Class I | | $ | 1,000.00 | | | $ | 1,006.60 | | | $ | 1.49 | | | | | | | $ | 1,000.00 | | | $ | 1,023.31 | | | $ | 1.51 | | | | 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 181/365 (to reflect the one-half year period shown). | |
| | | | |
FUND SUMMARY / DISCLOSUREOF EXPENSES | | | 3 | |
| | |
Schedule of Investments (unaudited) June 30, 2018 | | BlackRock Government Money Market V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
U.S. Government Sponsored Agency Obligations — 43.4% | |
Federal Farm Credit Bank Discount Notes(a): | | | | | | | | | | | | |
1.54%, 08/10/18 | | | USD | | | | 105 | | | $ | 104,823 | |
1.95%, 09/10/18 | | | | | | | 935 | | | | 931,423 | |
1.94%, 09/19/18 | | | | | | | 1,410 | | | | 1,403,953 | |
2.07%, 11/19/18 | | | | | | | 2,515 | | | | 2,494,807 | |
2.08%, 11/27/18 | | | | | | | 995 | | | | 986,516 | |
2.17%, 01/04/19 | | | | | | | 745 | | | | 736,718 | |
2.17%, 02/08/19 | | | | | | | 175 | | | | 172,701 | |
2.27%, 03/11/19 | | | | | | | 885 | | | | 871,193 | |
2.28%, 03/19/19 | | | | | | | 885 | | | | 870,692 | |
2.26%, 04/12/19 | | | | | | | 215 | | | | 211,221 | |
Federal Farm Credit Bank Variable Rate Notes, (LIBOR USD 1 Month - 0.05%), 1.97%, 02/07/20(b) | | | | | | | 1,900 | | | | 1,899,969 | |
Federal Home Loan Bank Discount Notes(a): | | | | | | | | | | | | |
1.85%, 07/11/18 | | | | | | | 1,335 | | | | 1,334,315 | |
1.86%, 07/18/18 | | | | | | | 2,130 | | | | 2,128,133 | |
1.89%, 08/08/18 | | | | | | | 1,330 | | | | 1,327,362 | |
1.87%, 07/10/18 | | | | | | | 1,065 | | | | 1,064,505 | |
1.84%, 07/20/18 | | | | | | | 855 | | | | 854,172 | |
1.86%, 07/25/18 | | | | | | | 1,725 | | | | 1,722,862 | |
1.90%, 08/03/18 | | | | | | | 845 | | | | 843,532 | |
1.74%, 08/10/18 | | | | | | | 3,500 | | | | 3,493,276 | |
1.90%, 08/22/18 | | | | | | | 1,400 | | | | 1,396,168 | |
1.94%, 08/29/18 | | | | | | | 345 | | | | 343,914 | |
1.94%, 09/07/18 | | | | | | | 1,025 | | | | 1,021,263 | |
2.02%, 10/19/18 | | | | | | | 1,740 | | | | 1,729,367 | |
2.02%, 10/22/18 | | | | | | | 160 | | | | 158,996 | |
2.02%, 10/24/18 | | | | | | | 100 | | | | 99,361 | |
Federal Home Loan Bank Variable Rate Notes(b): | | | | | | | | | | | | |
(LIBOR USD 1 Month - 0.16%), 1.94%, 07/27/18 | | | | | | | 2,135 | | | | 2,135,000 | |
(LIBOR USD 1 Month - 0.15%), 1.95%, 07/27/18 | | | | | | | 865 | | | | 865,000 | |
(LIBOR USD 1 Month - 0.12%), 1.89%, 10/03/18 | | | | | | | 1,000 | | | | 1,000,000 | |
(LIBOR USD 1 Month - 0.14%), 1.96%, 10/26/18 | | | | | | | 750 | | | | 750,000 | |
(LIBOR USD 1 Month - 0.10%), 1.88%, 11/01/18 | | | | | | | 3,000 | | | | 3,000,000 | |
(LIBOR USD 1 Month - 0.10%), 1.90%, 11/02/18 | | | | | | | 2,000 | | | | 2,000,000 | |
(LIBOR USD 1 Month - 0.09%), 2.00%, 01/25/19 | | | | | | | 750 | | | | 750,000 | |
(LIBOR USD 1 Month - 0.13%), 1.97%, 01/28/19 | | | | | | | 595 | | | | 595,000 | |
(LIBOR USD 1 Month - 0.12%), 1.98%, 02/25/19 | | | | | | | 960 | | | | 960,000 | |
(LIBOR USD 1 Month - 0.12%), 1.97%, 03/25/19 | | | | | | | 1,800 | | | | 1,800,000 | |
(LIBOR USD 3 Month - 0.16%), 2.17%, 06/12/19 | | | | | | | 420 | | | | 419,896 | |
(LIBOR USD 3 Month - 0.16%), 2.17%, 06/20/19 | | | | | | | 1,000 | | | | 1,000,000 | |
(LIBOR USD 1 Month - 0.05%), 2.05%, 06/28/19 | | | | | | | 435 | | | | 435,000 | |
(LIBOR USD 1 Month - 0.08%), 2.02%, 08/27/19 | | | | | | | 1,190 | | | | 1,190,000 | |
(LIBOR USD 1 Month - 0.06%), 2.04%, 09/27/19 | | | | | | | 1,000 | | | | 1,000,000 | |
(LIBOR USD 3 Month - 0.14%), 2.19%, 12/19/19 | | | | | | | 535 | | | | 535,000 | |
(LIBOR USD 1 Month - 0.04%), 2.05%, 04/17/20 | | | | | | | 940 | | | | 940,000 | |
Federal Home Loan Mortgage Corp. Discount Notes, 1.80%, 07/26/18(a) | | | | | | | 2,825 | | | | 2,821,488 | |
Federal Home Loan Mortgage Corp. Notes, 0.88%, 10/12/18 | | | | | | | 840 | | | | 838,234 | |
Federal Home Loan Mortgage Corp. Variable Rate Notes, (LIBOR USD 1 Month - 0.10%), 1.93%, 08/08/19(b) | | | | | | | 1,500 | | | | 1,499,178 | |
| | | | | | | | | | | | |
Total U.S. Government Sponsored Agency Obligations — 43.4% (Cost: $52,735,038) | | | | 52,735,038 | |
| | | | | |
U.S. Treasury Obligations — 14.8% | |
U.S. Treasury Bills(a): | | | | | | | | | | | | |
1.59%, 07/12/18 | | | | | | | 1,000 | | | | 999,519 | |
1.61%, 07/19/18 | | | | | | | 1,310 | | | | 1,308,952 | |
1.64%, 08/02/18 | | | | | | | 2,630 | | | | 2,626,201 | |
1.69%, 08/09/18 | | | | | | | 1,555 | | | | 1,552,186 | |
1.84%, 08/23/18 | | | | | | | 1,930 | | | | 1,924,829 | |
2.11%, 12/27/18 | | | | | | | 1,875 | | | | 1,855,562 | |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
U.S. Treasury Obligations (continued) | |
U.S. Treasury Notes: | | | | | | | | | | | | |
1.38%, 07/31/18 | | | USD | | | | 830 | | | $ | 829,901 | |
1.13%, 01/31/19 | | | | | | | 100 | | | | 99,422 | |
(US Treasury 3 Month Bill Money Market Yield + 0.14%), 2.05%, 01/31/19(b) | | | | | | | 3,775 | | | | 3,775,000 | |
1.50%, 02/28/19 | | | | | | | 3,000 | | | | 2,985,024 | |
| | | | | | | | | | | | |
Total U.S. Treasury Obligations — 14.8% (Cost: $17,956,596) | | | | 17,956,596 | |
| | | | | |
Total Repurchase Agreements — 25.6% (Cost: $31,070,000) | | | | 31,070,000 | |
| | | | | |
| |
Total Investments — 83.8% (Cost: $101,761,634)* | | | | 101,761,634 | |
Other Assets Less Liabilities — 16.2% | | | | 19,738,119 | |
| | | | | |
Net Assets — 100.0% | | | $ | 121,499,753 | |
| | | | | |
(a) | Rates are discount rates or a range of discount rates at the time of purchase. |
(b) | Variable rate security. Rate shown is the rate in effect as of period end. |
* | Cost for U.S. federal income tax purposes. |
| | |
Currency |
| |
USD | | United States Dollar |
| | |
Portfolio Abbreviations |
| |
LIBOR | | London Interbank Offered Rate |
| | |
4 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | 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 | | | 2.10 | % | | | 06/29/18 | | | | 07/02/18 | | | $ | 4,000 | | | $ | 4,000 | | | $4,000,700 | | | | U.S. Government Sponsored Agency Obligations and U.S. Treasury Obligations, 0.00% to 4.00%, due 01/31/19 to 05/01/48 | | $ 4,060,082 | | $ 4,100,053 |
BNP Paribas SA | | | 2.12 | | | | 06/29/18 | | | | 07/02/18 | | | | 2,000 | | | | 2,000 | | | 2,000,353 | | | | U.S. Government Sponsored Agency Obligations, 2.63% to 6.00%, due 09/01/25 to 11/01/46 | | 20,380,202 | | 2,058,223 |
Goldman Sachs & Co. LLC | | | 2.00 | | | | 06/27/18 | | | | 07/03/18 | | | | 2,570 | | | | 2,570 | | | 2,570,857 | | | | U.S. Government Sponsored Agency Obligations, 2.50% to 5.50%, due 09/15/33 to 05/15/53 | | 5,121,893 | | 2,621,400 |
JP Morgan Securities LLC | | | 2.10 | | | | 06/29/18 | | | | 07/02/18 | | | | 3,000 | | | | 3,000 | | | 3,000,525 | | | | U.S. Treasury Obligation, 3.63%, due 02/15/21 | | 2,945,000 | | 3,060,557 |
| | | 2.26 | (a) | | | 06/29/18 | | | | 08/06/18 | | | | 3,500 | | | | 3,500 | | | 3,508,351 | | | | U.S. Government Sponsored Agency Obligation, 3.50%, due 07/20/46 | | 4,720,000 | | 3,570,505 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total JP Morgan Securities LLC | | | $ | 6,500 | | | | | | | | | | | $ 6,631,062 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Merrill Lynch, Pierce, Fenner & Smith, Inc. | | | 2.00 | | | | 06/27/18 | | | | 07/03/18 | | | | 500 | | | | 500 | | | 500,167 | | | | U.S. Government Sponsored Agency Obligation, 4.00%, due 08/01/47 | | 543,098 | | 515,000 |
| | | 2.12 | | | | 06/29/18 | | | | 07/02/18 | | | | 8,000 | | | | 8,000 | | | 8,001,413 | | | | U.S. Government Sponsored Agency Obligation, 3.82%, due 04/01/47 | | 12,603,410 | | 8,240,001 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Merrill Lynch, Pierce, Fenner & Smith, Inc. | | | $ | 8,500 | | | | | | | | | | | $ 8,755,001 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mizuho Securities USA LLC | | | 2.12 | | | | 06/29/18 | | | | 07/02/18 | | | | 5,000 | | | | 5,000 | | | 5,000,883 | | | | U.S. Treasury Obligation, 0.13%, due 04/15/19 | | 4,798,900 | | 5,100,065 |
Wells Fargo Securities LLC | | | 1.92 | | | | 06/27/18 | | | | 07/03/18 | | | | 1,500 | | | | 1,500 | | | 1,500,480 | | | | U.S. Government Sponsored Agency Obligations, 3.65% to 5.00%, due 08/01/36 to 07/01/48 | | 1,544,313 | | 1,545,000 |
| | | 1.93 | | | | 06/28/18 | | | | 07/05/18 | | | | 1,000 | | | | 1,000 | | | 1,000,375 | | | | U.S. Government Sponsored Agency Obligations, 2.55% to 4.00%, due 01/01/33 to 02/01/57 | | 1,029,813 | | 1,030,000 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Wells Fargo Securities LLC | | | $ | 2,500 | | | | | | | | | | | $ 2,575,000 |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | $ | 31,070 | | | | | | | | | | | $31,840,804 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | Variable rate security. Rate as of period end and maturity is the date the principal owed can be recovered through demand. | |
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: | | | | | | | | | | | | | | | | |
Short-Term Securities(a) | | $ | — | | | $ | 101,761,634 | | | $ | — | | | $ | 101,761,634 | |
| | | | | | | | | | | | | | | | |
| (a) | See above Schedule of Investments for values in each security type. | |
During the six months ended June 30, 2018, there were no transfers between levels.
See notes to financial statements.
| | | | |
SCHEDULE OF INVESTMENTS | | | 5 | |
Statement of Assets and Liabilities (unaudited)
June 30, 2018
| | | | |
| | BlackRock Government Money Market V.I. Fund | |
| |
ASSETS | | | | |
Investments at value — unaffiliated (cost — $70,691,634) | | $ | 70,691,634 | |
Cash | | | 4,784,877 | |
Repurchase agreements at value (cost — $31,070,000) | | | 31,070,000 | |
Receivables: | | | | |
Capital shares sold | | | 14,976,446 | |
Interest — unaffiliated | | | 58,357 | |
From the Manager | | | 4,147 | |
Prepaid expenses | | | 354 | |
Other assets | | | 23,187 | |
| | | | |
Total assets | | | 121,609,002 | |
| | | | |
| |
LIABILITIES | | | | |
Payables: | | | | |
Accounting Fees | | | 7,639 | |
Capital shares redeemed | | | 221 | |
Printing fees | | | 43,779 | |
Professional fees | | | 17,760 | |
Board realignment and consolidation | | | 4,310 | |
Investment advisory fees | | | 27,091 | |
Directors’ and Officer’s fees | | | 2,567 | |
Other affiliates | | | 406 | |
Other accrued expenses | | | 5,476 | |
| | | | |
Total liabilities | | | 109,249 | |
| | | | |
| |
NET ASSETS | | $ | 121,499,753 | |
| | | | |
| |
NET ASSETS CONSIST OF | | | | |
Paid-in capital | | $ | 121,495,176 | |
Accumulated net realized gain | | | 4,577 | |
| | | | |
NET ASSETS | | $ | 121,499,753 | |
| | | | |
Class I — Based on net assets of $121,499,753 and 121,499,315 shares outstanding, 3.3 billion shares authorized, $0.10 par value. | | $ | 1.00 | |
| | | | |
See notes to financial statements.
| | |
6 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statement of Operations (unaudited)
Six Months Ended June 30, 2018
| | | | |
| | BlackRock Government Money Market V.I. Fund | |
| |
INVESTMENT INCOME | | | | |
Interest — unaffiliated | | $ | 1,192,985 | |
| | | | |
Total investment income | | | 1,192,985 | |
| | | | |
| |
EXPENSES | | | | |
Investment advisory | | | 370,085 | |
Transfer agent — class specific | | | 61,356 | |
Professional | | | 30,814 | |
Accounting services | | | 19,680 | |
Printing | | | 18,299 | |
Directors and Officer | | | 8,488 | |
Custodian | | | 6,566 | |
Board realignment and consolidation | | | 4,310 | |
Transfer agent | | | 2,480 | |
Miscellaneous | | | 3,050 | |
| | | | |
Total expenses | | | 525,128 | |
Less: | | | | |
Fees waived and/or reimbursed by the Manager | | | (241,718 | ) |
Transfer agent fees waived and/or reimbursed | | | (61,356 | ) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 222,054 | |
| | | | |
Net investment income | | | 970,931 | |
| | | | |
| |
REALIZED GAIN | | | | |
Net realized gain from investments | | | 4,430 | |
| | | | |
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 975,361 | |
| | | | |
See notes to financial statements.
Statements of Changes in Net Assets
| | | | | | | | |
| | BlackRock Government Money Market V.I. Fund | |
| | Six Months Ended 06/30/2018 (unaudited) | | | Year Ended 12/31/2017 | |
| | |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | |
| | |
OPERATIONS | | | | | | | | |
Net investment income | | $ | 970,931 | | | $ | 915,448 | |
Net realized gain | | | 4,430 | | | | 475 | |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 975,361 | | | | 915,923 | |
| | | | | | | | |
| | |
DISTRIBUTIONS TO SHAREHOLDERS(a) | | | | | | | | |
From net investment income | | | (970,931 | ) | | | (915,448 | ) |
From net realized gain | | | — | | | | (477 | ) |
| | | | | | | | |
Decrease in net assets resulting from distributions to shareholders | | | (970,931 | ) | | | (915,925 | ) |
| | | | | | | | |
| | |
CAPITAL SHARE TRANSACTIONS | | | | | | | | |
Net proceeds from sale of shares | | | 129,712,169 | | | | 110,014,964 | |
Reinvestments of distributions | | | 970,931 | | | | 916,673 | |
Cost of shares redeemed | | | (144,846,377 | ) | | | (126,795,881 | ) |
| | | | | | | | |
Net decrease in net assets derived from capital share transactions | | | (14,163,277 | ) | | | (15,864,244 | ) |
| | | | | | | | |
| | |
NET ASSETS | | | | | | | | |
Total decrease in net assets | | | (14,158,847 | ) | | | (15,864,246 | ) |
Beginning of period | | | 135,658,600 | | | | 151,522,846 | |
| | | | | | | | |
End of period | | $ | 121,499,753 | | | $ | 135,658,600 | |
| | | | | | | | |
(a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
| | |
8 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Financial Highlights
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Government Money Market V.I. Fund | |
| | Class I | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 1.00 | | | | | | | $ | 1.00 | | | $ | 1.00 | | | $ | 1.00 | | | $ | 1.00 | | | $ | 1.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.0065 | | | | | | | | 0.0064 | | | | 0.0013 | | | | 0.0000 | (a) | | | 0.0000 | (a) | | | 0.0000 | (a) |
Net realized gain | | | 0.0001 | | | | | | | | 0.0000 | (a) | | | 0.0000 | (a) | | | 0.0001 | | | | 0.0001 | | | | 0.0000 | (a) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase from investment operations | | | 0.0066 | | | | | | | | 0.0064 | | | | 0.0013 | | | | 0.0001 | | | | 0.0001 | | | | 0.0000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions(b) | | | | | | | | | | | | | | | | | | | | | |
From net investment income | | | (0.0066 | ) | | | | | | | (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 | | | (0.0066 | ) | | | | | | | (0.0064 | ) | | | (0.0013 | ) | | | (0.0001 | ) | | | (0.0001 | ) | | | (0.0000 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | $ | 1.00 | | | | | | | $ | 1.00 | | | $ | 1.00 | | | $ | 1.00 | | | $ | 1.00 | | | $ | 1.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(d) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 0.66 | %(e) | | | | | | | 0.65 | % | | | 0.13 | % | | | 0.01 | % | | | 0.01 | % | | | 0.00 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 0.71 | %(f) | | | | | | | 0.72 | % | | | 0.62 | % | | | 0.61 | % | | | 0.61 | % | | | 0.63 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.30 | %(f) | | | | | | | 0.30 | % | | | 0.30 | % | | | 0.18 | % | | | 0.17 | % | | | 0.20 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.31 | %(f) | | | | | | | 0.63 | % | | | 0.13 | % | | | 0.00 | % | | | 0.00 | % | | | 0.00 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 121,500 | | | | | | | $ | 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. |
(e) | Aggregate total return. |
See notes to financial statements.
Notes to Financial Statements (unaudited)
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 19 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 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 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.
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) |
| • | | 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.
| | |
10 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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 six months ended June 30, 2018, 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 six months ended June 30, 2018, 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 six months ended June 30, 2018, the Fund reimbursed the Manager $705 for certain accounting services, which is included in accounting services in the 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”), 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, 2019, unless approved by the Board, including a majority of the 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 six months ended June 30, 2018, the Manager waived $237,408 and reimbursed $61,356, which is shown as fees waived and/or reimbursed by the Manager and transfer agent fees waived and/or reimbursed, respectively, in the Statement of Operations.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 11 | |
Notes to Financial Statements (unaudited) (continued)
The Fund has begun to incur expenses in connection with a potential realignment and consolidation of the boards of directors of certain BlackRock-advised funds, including the Fund. The Manager has voluntarily agreed to reimburse the Fund for all or a portion of such expenses, which amounts are included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the six months ended June 30, 2018, the amount reimbursed was $4,310.
Directors and Officers: 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.
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 June 30, 2018, 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 Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Although the Act does not amend any provisions directly related to the qualification or taxation of regulated investment companies (“RICs”), the Act does change the taxation of entities in which some RICs invest, the tax treatment of income derived from those entities and the taxation of RIC shareholders. While management does not anticipate significant impact to the Fund or to its shareholders, there is uncertainty in the application of certain provisions in the Act. Specifically, provisions in the Act may increase the amount of or accelerate the recognition of taxable income and may limit the deductibility of certain expenses by RICs. Until full clarity around these provisions is obtained, the impact on the Fund’s financial statements, if any, cannot be fully determined.
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.
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.
| | |
12 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
JUNE 30, 2018
| | |
SEMI-ANNUAL REPORT (UNAUDITED) | | |
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 June 30, 2018 | | 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 six-month period ended June 30, 2018, the Fund’s Class I Shares performed in line with its benchmark, the Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index, while the Fund’s Class III shares underperformed.
What factors influenced performance?
High-yield bonds finished the first half of the year with flat returns, as income offset a modest decline in prices. The bulk of the price weakness occurred in February, when a spike in U.S. Treasury yields weighed on performance across the fixed-income market.
Selection in the cable & satellite, wireline telecommunications, and retail industries were the most significant detractors. Positions in bonds rated CCC and below also cost the Fund some relative performance. A modest allocation to investment-grade bonds detracted slightly, as did the use of equity derivatives to manage the risk of market volatility.
The largest contributions to Fund performance came from security selection in the gaming, chemicals and technology industries. By credit rating, positions in unrated and B rated securities were the largest contributors. Allocations to preferred and common stocks were also additive to performance, as was the Fund’s weighting in bank loans.
The Fund may utilize derivatives in the form of credit default swaps (“CDS”), index credit default swaps “(CDX”), total return swaps (“TRS”) and currency forwards from time to time and did so over the period. Currency forwards were intermittently employed in the portfolio to manage the currency risk of non-dollar denominated bonds (maintaining U.S. dollar risk only). CDS/CDX were used as hedging vehicles, but are also used to express credit views, and as a means to put capital to work in moving markets. On occasion, the Fund utilized S&P 500 and Russell 2000 futures as an additional mechanism to manage portfolio beta and general market volatility. For the period, overall derivative usage positively contributed to Fund performance.
Describe recent portfolio activity.
The Fund added to its allocation to bank loans on the belief that these senior, secured assets provide attractive income with minimal interest-rate risk.
The Fund reduced its exposure to the independent energy and media & entertainment industries, while adding to the healthcare and aerospace & defense industries.
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.
While the lower-quality and distressed portions of the high yield market outperformed over the period, the Fund remained underweight in these areas in order to manage risk. However, the Fund retained positions in select CCC rated issues with improving credit characteristics and attractive yields. The Fund maintained an underweight in BB rated bonds and an overweight in B rated issues. As a result, the Fund was underweight in the market’s “tails”, both the higher-yielding segment of the market that contains a larger concentration of stressed assets, as well as the portion of the market that features lower yields.
At the industry level, the Fund’s largest overweights were in gaming, metals/mining and technology. Conversely, it was underweight in the retail, automotive and home construction industries. The Fund had an approximately 9.0% weighting in bank loans, coupled with smaller positions in both 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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Fund Summary as of June 30, 2018 (continued) | | BlackRock High Yield V.I. Fund |
Performance Summary for the Period Ended June 30, 2018
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Standardized 30-Day Yields (c) | | | Unsubsidized 30-Day Yields (c) | | | 6-Month Total Returns (d) | | | | | | Average Annual Total Returns | |
| 1 Year (d) | | | 5 Years (d) | | | 10 Years (d) | |
Class I(a)(b) | | | 5.47 | % | | | 5.35 | % | | | 0.19 | % | | | | | | | 2.87 | % | | | 5.30 | % | | | 7.26 | % |
Class III(a)(b) | | | 5.23 | | | | 5.10 | | | | 0.07 | | | | | | | | 2.62 | | | | 5.05 | | | | 6.98 | (e) |
Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index(f) | | | — | | | | — | | | | 0.16 | | | | | | | | 2.62 | | | | 5.52 | | | | 8.23 | |
| (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) | The Fund invests primarily in non-investment grade bonds with maturities of ten years or less. The Fund’s 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) | 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. | |
| (d) | 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. | |
| (e) | 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 (12b-1) fees applicable to Class III Shares. | |
| (f) | 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. | |
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 (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | | | | Beginning Account Value (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | Annualized Expense Ratio | |
Class I | | $ | 1,000.00 | | | $ | 1,001.90 | | | $ | 3.08 | | | | | | | $ | 1,000.00 | | | $ | 1,021.72 | | | $ | 3.11 | | | | 0.62 | % |
Class III | | | 1,000.00 | | | | 1,000.70 | | | | 4.27 | | | | | | | | 1,000.00 | | | | 1,020.53 | | | | 4.31 | | | | 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 annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown). | |
See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.
Portfolio Information as of June 30, 2018
CREDIT QUALITY ALLOCATIONS
| | | | |
Credit Rating (a) | | Percent of Total Investments (b) | |
BBB/Baa | | | 6 | % |
BB/Ba | | | 40 | % |
B | | | 41 | % |
CCC/Caa | | | 10 | % |
NR | | | 3 | % |
| (a) | For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) 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. | |
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 January 1, 2018 and held through June 30, 2018) 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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) June 30, 2018 | | BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Shares | | | Value | |
Common Stocks — 1.6% | | | | | | | | | | | | |
|
Banks — 0.1% | |
Bank of America Corp. | | | | | | | 8,172 | | | $ | 230,368 | |
JPMorgan Chase & Co. | | | | | | | 2,204 | | | | 229,657 | |
| | | | | | | | |
| | | | | | | | | | | 460,025 | |
Capital Markets — 0.1% | |
Goldman Sachs Group, Inc. (The) | | | | | | | 1,047 | | | | 230,937 | |
Morgan Stanley | | | | | | | 4,686 | | | | 222,116 | |
| | | | | | | | |
| | | | | | | | | | | 453,053 | |
Chemicals — 0.2% | |
Advanced Emissions Solutions, Inc. | | | | | | | 1,644 | | | | 18,676 | |
Platform Specialty Products Corp.(a) | | | | | | | 107,358 | | | | 1,245,353 | |
| | | | | | | | |
| | | | | | | | | | | 1,264,029 | |
Construction & Engineering — 0.4% | |
Star Group, Inc. (The)(a) | | | | | | | 56,419 | | | | 2,046,216 | |
| | | | | | | | |
Containers & Packaging — 0.0% | |
Crown Holdings, Inc.(a) | | | | | | | 5,501 | | | | 246,225 | |
| | | | | | | | |
Diversified Telecommunication Services — 0.1% | |
CenturyLink, Inc. | | | | | | | 14,043 | | | | 261,761 | |
| | | | | | | | |
Equity Real Estate Investment Trusts (REITs) — 0.1% | |
Gaming and Leisure Properties, Inc. | | | | | | | 12,660 | | | | 453,228 | |
| | | | | | | | |
Health Care Providers & Services — 0.1% | |
Tenet Healthcare Corp.(a) | | | | | | | 5,617 | | | | 188,562 | |
Universal Health Services, Inc., Class B | | | | | | | 2,970 | | | | 330,977 | |
| | | | | | | | |
| | | | | | | | | | | 519,539 | |
IT Services — 0.1% | |
First Data Corp., Class A(a) | | | | | | | 26,389 | | | | 552,322 | |
| | | | | | | | |
Machinery — 0.0% | |
Gates Industrial Corp. plc(a) | | | | | | | 3,921 | | | | 63,795 | |
| | | | | | | | |
Media — 0.1% | |
Altice USA, Inc., Class A | | | | | | | 20,929 | | | | 357,049 | |
| | | | | | | | |
Metals & Mining — 0.2% | |
Constellium NV, Class A(a) | | | | | | | 80,736 | | | | 831,581 | |
| | | | | | | | |
Wireless Telecommunication Services — 0.1% | |
T-Mobile US, Inc.(a) | | | | | | | 11,157 | | | | 666,631 | |
| | | | | | | | |
Total Common Stocks — 1.6% (Cost: $7,697,922) | | | | 8,175,454 | |
| | | | | | | | |
| | |
| | Par (000) | | | | |
Corporate Bonds — 84.3% | |
|
Aerospace & Defense — 3.0% | |
Arconic, Inc.: | | | | | | | | | | | | |
6.15%, 08/15/20 | | | USD | | | | 595 | | | | 618,800 | |
5.13%, 10/01/24 | | | | | | | 1,822 | | | | 1,799,225 | |
5.90%, 02/01/27 | | | | | | | 257 | | | | 258,927 | |
6.75%, 01/15/28 | | | | | | | 234 | | | | 248,333 | |
BBA US Holdings, Inc., 5.38%, 05/01/26(b) | | | | | | | 401 | | | | 402,508 | |
Bombardier, Inc.(b): | | | | | | | | | | | | |
7.75%, 03/15/20 | | | | | | | 256 | | | | 270,080 | |
8.75%, 12/01/21 | | | | | | | 1,246 | | | | 1,370,600 | |
5.75%, 03/15/22 | | | | | | | 70 | | | | 70,262 | |
6.00%, 10/15/22 | | | | | | | 24 | | | | 23,903 | |
6.13%, 01/15/23 | | | | | | | 1,414 | | | | 1,417,535 | |
7.50%, 12/01/24 | | | | | | | 1,188 | | | | 1,250,370 | |
7.50%, 03/15/25 | | | | | | | 1,584 | | | | 1,649,340 | |
7.45%, 05/01/34 | | | | | | | 210 | | | | 212,625 | |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Aerospace & Defense (continued) | |
BWX Technologies, Inc., 5.38%, 07/15/26(b) | | | USD | | | | 244 | | | $ | 247,050 | |
KLX, Inc., 5.88%, 12/01/22(b) | | | | | | | 2,006 | | | | 2,083,733 | |
Kratos Defense & Security Solutions, Inc., 6.50%, 11/30/25(b) | | | | | | | 271 | | | | 281,162 | |
Pioneer Holdings LLC, 9.00%, 11/01/22(b) | | | | | | | 219 | | | | 226,118 | |
TransDigm UK Holdings plc, 6.88%, 05/15/26(b) | | | | | | | 948 | | | | 961,035 | |
TransDigm, Inc.: | | | | | | | | | | | | |
6.00%, 07/15/22 | | | | | | | 428 | | | | 430,268 | |
6.50%, 07/15/24 | | | | | | | 978 | | | | 995,115 | |
6.38%, 06/15/26 | | | | | | | 522 | | | | 518,085 | |
| | | | | | | | |
| | | | | | | | | | | 15,335,074 | |
Air Freight & Logistics — 0.2% | |
XPO Logistics, Inc.(b): | | | | | | | | | | | | |
6.50%, 06/15/22 | | | | | | | 664 | | | | 678,940 | |
6.13%, 09/01/23 | | | | | | | 400 | | | | 410,500 | |
| | | | | | | | |
| | | | | | | | | | | 1,089,440 | |
Airlines — 0.0%(b) | | | | | | | | | |
American Airlines Group, Inc., 5.50%, 10/01/19 | | | | | | | 30 | | | | 30,300 | |
Virgin Australia Pass-Through Trust, 7.13%, 10/23/18 | | | | | | | 61 | | | | 61,793 | |
| | | | | | | | |
| | | | | | | | | | | 92,093 | |
Auto Components — 0.7% | | | | | | | | | |
Allison Transmission, Inc., 5.00%, 10/01/24(b) | | | | | | | 16 | | | | 15,740 | |
Icahn Enterprises LP: | | | | | | | | | | | | |
6.25%, 02/01/22 | | | | | | | 1,147 | | | | 1,169,940 | |
6.75%, 02/01/24 | | | | | | | 875 | | | | 881,562 | |
6.38%, 12/15/25 | | | | | | | 198 | | | | 198,248 | |
IHO Verwaltungs GmbH(b)(c): | | | | | | | | | | | | |
4.12% (4.12% Cash or 4.88% PIK), 09/15/21 | | | | | | | 201 | | | | 197,985 | |
4.50% (4.50% Cash or 5.25% PIK), 09/15/23 | | | | | | | 515 | | | | 493,113 | |
4.75% (4.75% Cash or 5.50% PIK), 09/15/26 | | | | | | | 505 | | | | 475,331 | |
JB Poindexter & Co., Inc., 7.13%, 04/15/26(b) | | | | | | | 139 | | | | 142,475 | |
| | | | | | | | |
| | | | | | | | | | | 3,574,394 | |
Automobiles — 0.1%(b) | |
Jaguar Land Rover Automotive plc, 5.63%, 02/01/23 | | | | | | | 150 | | | | 152,062 | |
Tesla, Inc., 5.30%, 08/15/25 | | | | | | | 682 | | | | 606,980 | |
| | | | | | | | |
| | | | | | | | | | | 759,042 | |
Banks — 0.6% | |
Banco Espirito Santo SA(a)(d): | | | | | | | | | | | | |
2.63%, 05/08/17 | | | EUR | | | | 100 | | | | 33,282 | |
4.75%, 01/15/18 | | | | | | | 100 | | | | 32,991 | |
4.00%, 01/21/19 | | | | | | | 100 | | | | 33,866 | |
Barclays plc: | | | | | | | | | | | | |
4.38%, 09/11/24 | | | USD | | | | 850 | | | | 826,183 | |
5.20%, 05/12/26 | | | | | | | 200 | | | | 196,472 | |
CIT Group, Inc.: | | | | | | | | | | | | |
5.00%, 08/15/22 | | | | | | | 30 | | | | 30,338 | |
5.00%, 08/01/23 | | | | | | | 634 | | | | 641,354 | |
5.25%, 03/07/25 | | | | | | | 247 | | | | 248,852 | |
6.13%, 03/09/28 | | | | | | | 138 | | | | 141,795 | |
HSBC Holdings plc(e)(f): | | | | | | | | | | | | |
(USD Swap Rate 5 Year + 3.45%), 6.25% | | | | | | | 358 | | | | 351,288 | |
(USD Swap Rate 5 Year + 3.75%), 6.00% | | | | | | | 465 | | | | 431,287 | |
| | | | | | | | |
| | | | | | | | | | | 2,967,708 | |
Building Products — 0.3%(b) | |
CPG Merger Sub LLC, 8.00%, 10/01/21 | | | | | | | 396 | | | | 400,950 | |
Jeld-Wen, Inc.: | | | | | | | | | | | | |
4.63%, 12/15/25 | | | | | | | 137 | | | | 130,492 | |
4.88%, 12/15/27 | | | | | | | 74 | | | | 68,820 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 5 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Building Products (continued) | |
Standard Industries, Inc.: | | | | | | | | | | | | |
5.50%, 02/15/23 | | | USD | | | | 5 | | | $ | 5,050 | |
5.38%, 11/15/24 | | | | | | | 245 | | | | 241,937 | |
6.00%, 10/15/25 | | | | | | | 552 | | | | 553,380 | |
USG Corp.: | | | | | | | | | | | | |
5.50%, 03/01/25 | | | | | | | 37 | | | | 38,018 | |
4.88%, 06/01/27 | | | | | | | 176 | | | | 179,960 | |
| | | | | | | | |
| | | | | | | | | | | 1,618,607 | |
Capital Markets — 0.1%(b) | |
Eagle Holding Co. II LLC, 7.63% ( 7.63% Cash or 8.38% PIK), 05/15/22(c) | | | | | | | 324 | | | | 327,305 | |
Lions Gate Capital Holdings LLC, 5.88%, 11/01/24 | | | | | | | 92 | | | | 93,121 | |
MSCI, Inc., 5.25%, 11/15/24 | | | | | | | 167 | | | | 168,670 | |
| | | | | | | | |
| | | | | | | | | | | 589,096 | |
Chemicals — 3.6% | |
Alpha 2 BV, 8.75% ( 8.75% Cash or 9.50% PIK), 06/01/23(b)(c) | | | | | | | 410 | | | | 407,950 | |
Alpha 3 BV, 6.25%, 02/01/25(b) | | | | | | | 1,300 | | | | 1,277,250 | |
Axalta Coating Systems LLC, 4.88%, 08/15/24(b) | | | | | | | 703 | | | | 697,728 | |
Blue Cube Spinco LLC: | | | | | | | | | | | | |
9.75%, 10/15/23 | | | | | | | 377 | | | | 426,952 | |
10.00%, 10/15/25 | | | | | | | 1,067 | | | | 1,240,388 | |
CF Industries, Inc.: | | | | | | | | | | | | |
7.13%, 05/01/20 | | | | | | | 71 | | | | 74,994 | |
5.15%, 03/15/34 | | | | | | | 105 | | | | 97,387 | |
4.95%, 06/01/43 | | | | | | | 310 | | | | 261,950 | |
Chemours Co. (The): | | | | | | | | | | | | |
6.63%, 05/15/23 | | | | | | | 215 | | | | 225,481 | |
7.00%, 05/15/25 | | | | | | | 108 | | | | 115,830 | |
4.00%, 05/15/26 | | | EUR | | | | 100 | | | | 116,196 | |
5.38%, 05/15/27 | | | USD | | | | 340 | | | | 328,950 | |
Gates Global LLC, 6.00%, 07/15/22(b) | | | | | | | 892 | | | | 903,150 | |
Hexion, Inc.: | | | | | | | | | | | | |
6.63%, 04/15/20 | | | | | | | 332 | | | | 310,885 | |
10.38%, 02/01/22(b) | | | | | | | 222 | | | | 217,560 | |
Huntsman International LLC, 5.13%, 11/15/22 | | | | | | | 1,355 | | | | 1,392,923 | |
Koppers, Inc., 6.00%, 02/15/25(b) | | | | | | | 278 | | | | 278,000 | |
Momentive Performance Materials, Inc., 3.88%, 10/24/21 | | | | | | | 1,530 | | | | 1,606,500 | |
MPM Escrow LLC, 8.88%, 10/15/20(a)(g) | | | | | | | 334 | | | | — | |
NOVA Chemicals Corp., 4.88%, 06/01/24(b) | | | | | | | 338 | | | | 321,100 | |
Olin Corp., 5.00%, 02/01/30 | | | | | | | 172 | | | | 162,540 | |
Platform Specialty Products Corp.(b): | | | | | | | | | | | | |
6.50%, 02/01/22 | | | | | | | 3,755 | | | | 3,820,712 | |
5.88%, 12/01/25 | | | | | | | 1,463 | | | | 1,430,083 | |
PQ Corp.(b): | | | | | | | | | | | | |
6.75%, 11/15/22 | | | | | | | 685 | | | | 719,250 | |
5.75%, 12/15/25 | | | | | | | 779 | | | | 766,341 | |
W.R. Grace & Co.- Conn., 5.13%, 10/01/21(b) | | | | | | | 949 | | | | 967,695 | |
| | | | | | | | |
| | | | | | | | | | | 18,167,795 | |
Commercial Services & Supplies — 2.4% | |
ACCO Brands Corp., 5.25%, 12/15/24(b) | | | | | | | 108 | | | | 107,730 | |
ADT Corp. (The): | | | | | | | | | | | | |
3.50%, 07/15/22 | | | | | | | 74 | | | | 69,264 | |
4.13%, 06/15/23 | | | | | | | 1,794 | | | | 1,681,875 | |
4.88%, 07/15/32(b) | | | | | | | 652 | | | | 510,190 | |
Advanced Disposal Services, Inc., 5.63%, 11/15/24(b) | | | | | | | 219 | | | | 217,905 | |
Algeco Global Finance plc: | | | | | | | | | | | | |
6.50%, 02/15/23 | | | EUR | | | | 200 | | | | 237,890 | |
8.00%, 02/15/23(b) | | | USD | | | | 1,066 | | | | 1,081,990 | |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Commercial Services & Supplies (continued) | |
APX Group, Inc.: | | | | | | | | | | | | |
8.75%, 12/01/20 | | | USD | | | | 357 | | | $ | 341,685 | |
7.88%, 12/01/22 | | | | | | | 191 | | | | 189,806 | |
Aramark Services, Inc.: | | | | | | | | | | | | |
5.13%, 01/15/24 | | | | | | | 1,170 | | | | 1,170,000 | |
4.75%, 06/01/26 | | | | | | | 500 | | | | 483,125 | |
5.00%, 02/01/28(b) | | | | | | | 43 | | | | 41,065 | |
Harland Clarke Holdings Corp., 8.38%, 08/15/22(b) | | | | | | | 182 | | | | 178,360 | |
Hulk Finance Corp., 7.00%, 06/01/26(b) | | | | | | | 415 | | | | 397,362 | |
KAR Auction Services, Inc., 5.13%, 06/01/25(b) | | | | | | | 481 | | | | 459,355 | |
Matthews International Corp., 5.25%, 12/01/25(b) | | | | | | | 90 | | | | 86,175 | |
Mobile Mini, Inc., 5.88%, 07/01/24 | | | | | | | 1,275 | | | | 1,290,938 | |
Nielsen Co. Luxembourg SARL (The), 5.00%, 02/01/25(b) | | | | | | | 176 | | | | 167,640 | |
Prime Security Services Borrower LLC, 9.25%, 05/15/23(b) | | | | | | | 1,397 | | | | 1,487,386 | |
Ritchie Bros Auctioneers, Inc., 5.38%, 01/15/25(b) | | | | | | | 767 | | | | 743,990 | |
Tervita Escrow Corp., 7.63%, 12/01/21(b) | | | | | | | 460 | | | | 469,200 | |
Waste Pro USA, Inc., 5.50%, 02/15/26(b) | | | | | | | 283 | | | | 272,034 | |
Wrangler Buyer Corp., 6.00%, 10/01/25(b) | | | | | | | 392 | | | | 370,440 | |
| | | | | | | | |
| | | | | | | | | | | 12,055,405 | |
Communications Equipment — 0.4% | |
CommScope Technologies LLC(b): | | | | | | | | | | | | |
6.00%, 06/15/25 | | | | | | | 2 | | | | 2,042 | |
5.00%, 03/15/27 | | | | | | | 795 | | | | 748,294 | |
CommScope, Inc., 5.00%, 06/15/21(b) | | | | | | | 165 | | | | 165,000 | |
Nokia OYJ: | | | | | | | | | | | | |
3.38%, 06/12/22 | | | | | | | 133 | | | | 128,755 | |
4.38%, 06/12/27 | | | | | | | 187 | | | | 175,780 | |
6.63%, 05/15/39 | | | | | | | 788 | | | | 821,490 | |
| | | | | | | | |
| | | | | | | | | | | 2,041,361 | |
Construction & Engineering — 0.3% | |
Brand Industrial Services, Inc., 8.50%, 07/15/25(b) | | | | | | | 582 | | | | 589,275 | |
Engility Corp., 8.88%, 09/01/24 | | | | | | | 287 | | | | 299,915 | |
New Enterprise Stone & Lime Co., Inc.(b): | | | | | | | | | | | | |
10.13%, 04/01/22 | | | | | | | 200 | | | | 212,500 | |
6.25%, 03/15/26 | | | | | | | 103 | | | | 104,030 | |
Tutor Perini Corp., 6.88%, 05/01/25(b) | | | | | | | 298 | | | | 298,372 | |
Weekley Homes LLC, 6.63%, 08/15/25(b) | | | | | | | 82 | | | | 77,695 | |
| | | | | | | | |
| | | | | | | | | | | 1,581,787 | |
Consumer Finance — 1.6% | |
Ally Financial, Inc.: | | | | | | | | | | | | |
5.13%, 09/30/24 | | | | | | | 1,032 | | | | 1,050,060 | |
8.00%, 11/01/31 | | | | | | | 2,390 | | | | 2,844,100 | |
Navient Corp.: | | | | | | | | | | | | |
6.63%, 07/26/21 | | | | | | | 515 | | | | 529,008 | |
6.50%, 06/15/22 | | | | | | | 288 | | | | 294,840 | |
5.50%, 01/25/23 | | | | | | | 1,165 | | | | 1,144,612 | |
7.25%, 09/25/23 | | | | | | | 154 | | | | 161,315 | |
5.88%, 10/25/24 | | | | | | | 63 | | | | 60,874 | |
6.75%, 06/25/25 | | | | | | | 120 | | | | 118,800 | |
6.75%, 06/15/26 | | | | | | | 335 | | | | 327,362 | |
5.63%, 08/01/33 | | | | | | | 100 | | | | 84,500 | |
Springleaf Finance Corp.: | | | | | | | | | | | | |
6.13%, 05/15/22 | | | | | | | 90 | | | | 91,800 | |
5.63%, 03/15/23 | | | | | | | 14 | | | | 13,926 | |
6.88%, 03/15/25 | | | | | | | 548 | | | | 543,890 | |
7.13%, 03/15/26 | | | | | | | 732 | | | | 728,340 | |
| | | | | | | | |
| | | | | | | | | | | 7,993,427 | |
| | |
6 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Containers & Packaging — 2.8% | |
Ardagh Packaging Finance plc(b): | | | | | | | | | | | | |
6.00%, 06/30/21 | | | USD | | | | 550 | | | $ | 556,188 | |
4.63%, 05/15/23 | | | | | | | 2,092 | | | | 2,068,465 | |
7.25%, 05/15/24 | | | | | | | 2,967 | | | | 3,085,680 | |
4.75%, 07/15/27 | | | GBP | | | | 100 | | | | 126,201 | |
Ball Corp.: | | | | | | | | | | | | |
5.00%, 03/15/22 | | | USD | | | | 279 | | | | 287,021 | |
4.00%, 11/15/23 | | | | | | | 182 | | | | 176,831 | |
Berry Global, Inc., 4.50%, 02/15/26(b) | | | | | | | 180 | | | | 167,850 | |
BWAY Holding Co.(b): | | | | | | | | | | | | |
5.50%, 04/15/24 | | | | | | | 2,087 | | | | 2,034,825 | |
7.25%, 04/15/25 | | | | | | | 284 | | | | 276,900 | |
Crown Americas LLC: | | | | | | | | | | | | |
4.75%, 02/01/26(b) | | | | | | | 784 | | | | 744,800 | |
4.25%, 09/30/26 | | | | | | | 1,031 | | | | 943,365 | |
Flex Acquisition Co., Inc., 7.88%, 07/15/26(b) | | | | | | | 169 | | | | 168,341 | |
OI European Group BV, 4.00%, 03/15/23(b) | | | | | | | 376 | | | | 350,620 | |
Reynolds Group Issuer, Inc.: | | | | | | | | | | | | |
5.75%, 10/15/20 | | | | | | | 189 | | | | 189,685 | |
6.87%, 02/15/21 | | | | | | | 41 | | | | 41,402 | |
(LIBOR USD 3 Month + 3.50%), 5.85%, 07/15/21(b)(f) | | | | | | | 620 | | | | 625,766 | |
5.13%, 07/15/23(b) | | | | | | | 592 | | | | 584,600 | |
7.00%, 07/15/24(b) | | | | | | | 1,091 | | | | 1,114,184 | |
Sealed Air Corp.(b): | | | | | | | | | | | | |
4.88%, 12/01/22 | | | | | | | 536 | | | | 541,360 | |
6.88%, 07/15/33 | | | | | | | 31 | | | | 34,022 | |
| | | | | | | | |
| | | | | | | | | | | 14,118,106 | |
Distributors — 0.3% | |
American Builders & Contractors Supply Co., Inc.(b): | | | | | | | | | | | | |
5.75%, 12/15/23 | | | | | | | 993 | | | | 1,017,825 | |
5.88%, 05/15/26 | | | | | | | 311 | | | | 305,946 | |
| | | | | | | | |
| | | | | | | | | | | 1,323,771 | |
Diversified Consumer Services — 0.4% | | | | | | | | | |
Carriage Services, Inc., 6.63%, 06/01/26(b) | | | | | | | 242 | | | | 245,327 | |
Graham Holdings Co., 5.75%, 06/01/26(b) | | | | | | | 274 | | | | 276,740 | |
Laureate Education, Inc., 8.25%, 05/01/25(b) | | | | | | | 319 | | | | 340,335 | |
Service Corp. International: | | | | | | | | | | | | |
4.50%, 11/15/20 | | | | | | | 240 | | | | 240,300 | |
5.38%, 01/15/22 | | | | | | | 166 | | | | 167,660 | |
ServiceMaster Co. LLC (The), 5.13%, 11/15/24(b) | | | | | | | 549 | | | | 532,530 | |
| | | | | | | | |
| | | | | | | | | | | 1,802,892 | |
Diversified Financial Services — 0.5%(b) | | | | | | | | | |
FBM Finance, Inc., 8.25%, 08/15/21 | | | | | | | 355 | | | | 369,644 | |
Infinity Acquisition LLC, 7.25%, 08/01/22 | | | | | | | 125 | | | | 127,600 | |
Jefferies Finance LLC: | | | | | | | | | | | | |
7.38%, 04/01/20 | | | | | | | 200 | | | | 200,946 | |
6.88%, 04/15/22 | | | | | | | 741 | | | | 739,147 | |
Tempo Acquisition LLC, 6.75%, 06/01/25 | | | | | | | 755 | | | | 724,800 | |
Travelport Corporate Finance plc, 6.00%, 03/15/26 | | | | | | | 240 | | | | 241,800 | |
Vantiv LLC, 4.38%, 11/15/25 | | | | | | | 263 | | | | 250,960 | |
| | | | | | | | |
| | | | | | | | | | | 2,654,897 | |
Diversified Telecommunication Services — 5.5% | | | | | | | | | |
Altice France SA(b): | | | | | | | | | | | | |
6.00%, 05/15/22 | | | | | | | 1,069 | | | | 1,072,795 | |
7.38%, 05/01/26 | | | | | | | 3,144 | | | | 3,073,889 | |
CCO Holdings LLC(b): | | | | | | | | | | | | |
4.00%, 03/01/23 | | | | | | | 469 | | | | 440,860 | |
5.13%, 05/01/23 | | | | | | | 218 | | | | 215,209 | |
5.13%, 05/01/27 | | | | | | | 3,774 | | | | 3,531,049 | |
5.00%, 02/01/28 | | | | | | | 609 | | | | 557,235 | |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Diversified Telecommunication Services (continued) | |
CenturyLink, Inc.: | | | | | | | | | | | | |
Series S, 6.45%, 06/15/21 | | | USD | | | | 1,402 | | | $ | 1,441,494 | |
Series T, 5.80%, 03/15/22 | | | | | | | 205 | | | | 202,950 | |
Series W, 6.75%, 12/01/23 | | | | | | | 380 | | | | 381,900 | |
Series Y, 7.50%, 04/01/24 | | | | | | | 1,018 | | | | 1,045,995 | |
Series P, 7.60%, 09/15/39 | | | | | | | 21 | | | | 17,430 | |
Series U, 7.65%, 03/15/42 | | | | | | | 160 | | | | 132,800 | |
Cincinnati Bell, Inc., 7.00%, 07/15/24(b) | | | | | | | 1,098 | | | | 1,001,925 | |
Embarq Corp., 8.00%, 06/01/36 | | | | | | | 266 | | | | 251,037 | |
Frontier Communications Corp.: | | | | | | | | | | | | |
7.13%, 03/15/19 | | | | | | | 349 | | | | 351,618 | |
10.50%, 09/15/22 | | | | | | | 120 | | | | 108,900 | |
7.13%, 01/15/23 | | | | | | | 208 | | | | 153,270 | |
6.88%, 01/15/25 | | | | | | | 148 | | | | 95,275 | |
11.00%, 09/15/25 | | | | | | | 1,252 | | | | 1,001,224 | |
8.50%, 04/01/26(b) | | | | | | | 674 | | | | 650,410 | |
Intelsat Jackson Holdings SA: | | | | | | | | | | | | |
7.25%, 10/15/20 | | | | | | | 323 | | | | 321,385 | |
5.50%, 08/01/23 | | | | | | | 839 | | | | 752,751 | |
9.75%, 07/15/25(b) | | | | | | | 933 | | | | 984,315 | |
Intelsat SA, 4.50%, 06/15/25(b)(h) | | | | | | | 79 | | | | 96,671 | |
Level 3 Financing, Inc.: | | | | | | | | | | | | |
5.38%, 08/15/22 | | | | | | | 395 | | | | 395,000 | |
5.13%, 05/01/23 | | | | | | | 516 | | | | 505,680 | |
5.38%, 01/15/24 | | | | | | | 227 | | | | 222,347 | |
5.38%, 05/01/25 | | | | | | | 363 | | | | 349,387 | |
5.25%, 03/15/26 | | | | | | | 2,132 | | | | 2,027,745 | |
Qualitytech LP, 4.75%, 11/15/25(b) | | | | | | | 204 | | | | 190,934 | |
Qwest Corp., 6.75%, 12/01/21 | | | | | | | 160 | | | | 170,256 | |
Sprint Capital Corp.: | | | | | | | | | | | | |
6.90%, 05/01/19 | | | | | | | 375 | | | | 382,575 | |
6.88%, 11/15/28 | | | | | | | 278 | | | | 266,185 | |
8.75%, 03/15/32 | | | | | | | 556 | | | | 594,920 | |
Telecom Italia Capital SA: | | | | | | | | | | | | |
6.38%, 11/15/33 | | | | | | | 230 | | | | 226,550 | |
6.00%, 09/30/34 | | | | | | | 1,579 | | | | 1,504,787 | |
7.20%, 07/18/36 | | | | | | | 525 | | | | 543,848 | |
Telesat Canada, 8.88%, 11/15/24(b) | | | | | | | 325 | | | | 347,750 | |
Virgin Media Finance plc, 5.75%, 01/15/25(b) | | | | | | | 1,797 | | | | 1,684,688 | |
Virgin Media Secured Finance plc, 5.25%, 01/15/26(b) | | | | | | | 465 | | | | 430,125 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 27,725,164 | |
Electric Utilities — 0.1% | | | | | | | | | |
DPL, Inc., 7.25%, 10/15/21 | | | | | | | 39 | | | | 42,114 | |
NextEra Energy Operating Partners LP, 4.25%, 09/15/24(b) | | | | | | | 239 | | | | 230,038 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 272,152 | |
Electrical Equipment — 0.6%(b) | | | | | | | | | |
Energizer Gamma Acquisition, Inc., 6.38%, 07/15/26 | | | | | | | 286 | | | | 290,826 | |
Sensata Technologies BV: | | | | | | | | | | | | |
5.63%, 11/01/24 | | | | | | | 547 | | | | 567,513 | |
5.00%, 10/01/25 | | | | | | | 896 | | | | 902,720 | |
Vertiv Group Corp., 9.25%, 10/15/24 | | | | | | | 1,165 | | | | 1,141,700 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,902,759 | |
Electronic Equipment, Instruments & Components — 0.5% | |
Anixter, Inc., 5.63%, 05/01/19 | | | | | | | 55 | | | | 55,963 | |
CDW LLC: | | | | | | | | | | | | |
5.00%, 09/01/23 | | | | | | | 314 | | | | 314,283 | |
5.50%, 12/01/24 | | | | | | | 1,763 | | | | 1,798,260 | |
5.00%, 09/01/25 | | | | | | | 547 | | | | 537,427 | |
Itron, Inc., 5.00%, 01/15/26(b) | | | | | | | 36 | | | | 34,189 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,740,122 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 7 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Energy Equipment & Services — 2.6% | |
Apergy Corp., 6.38%, 05/01/26(b) | | | USD | | | | 148 | | | $ | 150,405 | |
Calfrac Holdings LP, 8.50%, 06/15/26(b) | | | | | | | 295 | | | | 293,525 | |
CSI Compressco LP, 7.50%, 04/01/25(b) | | | | | | | 463 | | | | 464,736 | |
Diamond Offshore Drilling, Inc., 7.88%, 08/15/25 | | | | | | | 262 | | | | 271,498 | |
Ensco plc: | | | | | | | | | | | | |
4.50%, 10/01/24 | | | | | | | 136 | | | | 112,030 | |
5.20%, 03/15/25 | | | | | | | 45 | | | | 37,350 | |
7.75%, 02/01/26 | | | | | | | 856 | | | | 808,663 | |
McDermott Technology Americas, Inc., 10.63%, 05/01/24(b) | | | | | | | 555 | | | | 578,588 | |
Nabors Industries, Inc.: | | | | | | | | | | | | |
4.63%, 09/15/21 | | | | | | | 91 | | | | 88,953 | |
5.75%, 02/01/25(b) | | | | | | | 230 | | | | 217,350 | |
Noble Holding International Ltd.: | | | | | | | | | | | | |
7.75%, 01/15/24 | | | | | | | 528 | | | | 500,280 | |
7.95%, 04/01/25 | | | | | | | 61 | | | | 56,730 | |
7.88%, 02/01/26(b) | | | | | | | 1,342 | | | | 1,382,260 | |
Pioneer Energy Services Corp., 6.13%, 03/15/22 | | | | | | | 399 | | | | 379,050 | |
Precision Drilling Corp.: | | | | | | | | | | | | |
6.50%, 12/15/21 | | | | | | | 35 | | | | 35,898 | |
7.75%, 12/15/23 | | | | | | | 110 | | | | 115,775 | |
5.25%, 11/15/24 | | | | | | | 168 | | | | 158,760 | |
7.13%, 01/15/26(b) | | | | | | | 175 | | | | 179,725 | |
Rowan Cos., Inc.: | | | | | | | | | | | | |
4.88%, 06/01/22 | | | | | | | 90 | | | | 85,050 | |
4.75%, 01/15/24 | | | | | | | 164 | | | | 141,450 | |
7.38%, 06/15/25 | | | | | | | 460 | | | | 445,050 | |
SESI LLC: | | | | | | | | | | | | |
7.13%, 12/15/21 | | | | | | | 110 | | | | 111,925 | |
7.75%, 09/15/24 | | | | | | | 281 | | | | 288,376 | |
Transocean Guardian Ltd., 5.88%, 01/15/24(b) | | | | | | | 449 | | | | 447,316 | |
Transocean, Inc.: | | | | | | | | | | | | |
8.37%, 12/15/21 | | | | | | | 135 | | | | 144,450 | |
5.80%, 10/15/22 | | | | | | | 363 | | | | 360,277 | |
9.00%, 07/15/23(b) | | | | | | | 1,306 | | | | 1,405,583 | |
7.50%, 01/15/26(b) | | | | | | | 361 | | | | 366,641 | |
6.80%, 03/15/38 | | | | | | | 117 | | | | 95,062 | |
Trinidad Drilling Ltd., 6.63%, 02/15/25(b) | | | | | | | 449 | | | | 432,163 | |
USA Compression Partners LP, 6.88%, 04/01/26(b) | | | | | | | 786 | | | | 813,510 | |
Weatherford International Ltd.: | | | | | | | | | | | | |
7.75%, 06/15/21 | | | | | | | 967 | | | | 994,801 | |
8.25%, 06/15/23 | | | | | | | 696 | | | | 690,495 | |
6.50%, 08/01/36 | | | | | | | 116 | | | | 90,770 | |
7.00%, 03/15/38 | | | | | | | 183 | | | | 145,942 | |
5.95%, 04/15/42 | | | | | | | 190 | | | | 142,025 | |
| | | | | | | | |
| | | | | | | | | | | 13,032,462 | |
Equity Real Estate Investment Trusts (REITs) — 2.5% | |
AHP Health Partners, Inc., 9.75%, 07/15/26(b) | | | | | | | 222 | | | | 222,000 | |
CoreCivic, Inc., 4.75%, 10/15/27 | | | | | | | 685 | | | | 621,638 | |
CyrusOne LP: | | | | | | | | | | | | |
5.00%, 03/15/24 | | | | | | | 954 | | | | 954,000 | |
5.38%, 03/15/27 | | | | | | | 68 | | | | 67,490 | |
Equinix, Inc.: | | | | | | | | | | | | |
5.38%, 04/01/23 | | | | | | | 70 | | | | 71,654 | |
5.88%, 01/15/26 | | | | | | | 1,633 | | | | 1,654,229 | |
ESH Hospitality, Inc., 5.25%, 05/01/25(b) | | | | | | | 1,027 | | | | 991,055 | |
GEO Group, Inc. (The): | | | | | | | | | | | | |
5.13%, 04/01/23 | | | | | | | 212 | | | | 207,760 | |
5.88%, 10/15/24 | | | | | | | 586 | | | | 577,210 | |
6.00%, 04/15/26 | | | | | | | 70 | | | | 67,900 | |
iStar, Inc.: | | | | | | | | | | | | |
4.63%, 09/15/20 | | | | | | | 46 | | | | 45,310 | |
6.00%, 04/01/22 | | | | | | | 74 | | | | 74,000 | |
5.25%, 09/15/22 | | | | | | | 75 | | | | 72,609 | |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Equity Real Estate Investment Trusts (REITs) (continued) | |
MGM Growth Properties Operating Partnership LP: | | | | | | | | | | | | |
5.63%, 05/01/24 | | | USD | | | | 1,159 | | | $ | 1,173,488 | |
4.50%, 09/01/26 | | | | | | | 1,293 | | | | 1,200,874 | |
4.50%, 01/15/28 | | | | | | | 1,267 | | | | 1,149,802 | |
MPT Operating Partnership LP, 5.00%, 10/15/27 | | | | | | | 190 | | | | 181,450 | |
SBA Communications Corp.: | | | | | | | | | | | | |
4.00%, 10/01/22(b) | | | | | | | 1,807 | | | | 1,727,944 | |
4.88%, 09/01/24 | | | | | | | 505 | | | | 483,052 | |
Uniti Group LP, 8.25%, 10/15/23 | | | | | | | 572 | | | | 546,260 | |
VICI Properties 1 LLC, 8.00%, 10/15/23 | | | | | | | 321 | | | | 356,349 | |
| | | | | | | | |
| | | | | | | | | | | 12,446,074 | |
Food & Staples Retailing — 0.2% | |
Albertsons Cos. LLC: | | | | | | | | | | | | |
6.63%, 06/15/24 | | | | | | | 163 | | | | 153,888 | |
5.75%, 03/15/25 | | | | | | | 152 | | | | 134,520 | |
Albertsons Cos., Inc., (LIBOR USD 3 Month + 3.75%), 6.09%, 01/15/24(b)(f) | | | | | | | 378 | | | | 378,945 | |
Rite Aid Corp., 6.13%, 04/01/23(b) | | | | | | | 299 | | | | 303,186 | |
| | | | | | | | |
| | | | | | | | | | | 970,539 | |
Food Products — 0.9% | |
B&G Foods, Inc., 5.25%, 04/01/25 | | | | | | | 80 | | | | 75,400 | |
Chobani LLC, 7.50%, 04/15/25(b) | | | | | | | 362 | | | | 347,520 | |
JBS USA LUX SA(b): | | | | | | | | | | | | |
5.88%, 07/15/24 | | | | | | | 1,177 | | | | 1,124,047 | |
5.75%, 06/15/25 | | | | | | | 1,360 | | | | 1,264,800 | |
6.75%, 02/15/28 | | | | | | | 722 | | | | 682,073 | |
Post Holdings, Inc.(b): | | | | | | | | | | | | |
5.50%, 03/01/25 | | | | | | | 182 | | | | 177,677 | |
5.00%, 08/15/26 | | | | | | | 758 | | | | 706,835 | |
5.75%, 03/01/27 | | | | | | | 29 | | | | 28,130 | |
5.63%, 01/15/28 | | | | | | | 35 | | | | 32,813 | |
| | | | | | | | |
| | | | | | | | | | | 4,439,295 | |
Gas Utilities — 0.1% | | | | | | | | | |
Superior Plus LP, 7.00%, 07/15/26(b) | | | | | | | 520 | | | | 523,900 | |
| | | | | | | | |
Health Care Equipment & Supplies — 2.0% | | | | | | | | | |
Avantor, Inc.(b): | | | | | | | | | | | | |
6.00%, 10/01/24 | | | | | | | 3,034 | | | | 3,001,233 | |
9.00%, 10/01/25 | | | | | | | 706 | | | | 711,436 | |
DJO Finance LLC, 8.13%, 06/15/21(b) | | | | | | | 1,803 | | | | 1,824,997 | |
Fresenius US Finance II, Inc., 4.50%, 01/15/23(b) | | | | | | | 127 | | | | 129,122 | |
Mallinckrodt International Finance SA(b): | | | | | | | | | | | | |
4.88%, 04/15/20 | | | | | | | 155 | | | | 152,287 | |
5.75%, 08/01/22 | | | | | | | 1,191 | | | | 1,071,900 | |
5.63%, 10/15/23 | | | | | | | 50 | | | | 41,675 | |
5.50%, 04/15/25 | | | | | | | 23 | | | | 18,400 | |
Ortho-Clinical Diagnostics, Inc., 6.63%, 05/15/22(b) | | | | | | | 2,311 | | | | 2,259,002 | |
Sotera Health Holdings LLC, 6.50%, 05/15/23(b) | | | | | | | 398 | | | | 405,960 | |
Teleflex, Inc., 4.88%, 06/01/26 | | | | | | | 273 | | | | 267,540 | |
| | | | | | | | |
| | | | | | | | | | | 9,883,552 | |
Health Care Providers & Services — 4.9% | | | | | | | | | |
Acadia Healthcare Co., Inc.: | | | | | | | | | | | | |
5.13%, 07/01/22 | | | | | | | 31 | | | | 30,922 | |
5.63%, 02/15/23 | | | | | | | 279 | | | | 281,093 | |
6.50%, 03/01/24 | | | | | | | 474 | | | | 485,850 | |
Centene Corp.: | | | | | | | | | | | | |
5.63%, 02/15/21 | | | | | | | 286 | | | | 292,042 | |
4.75%, 05/15/22 | | | | | | | 448 | | | | 450,800 | |
6.13%, 02/15/24 | | | | | | | 73 | | | | 76,924 | |
Centene Escrow I Corp., 5.38%, 06/01/26(b) | | | | | | | 2,180 | | | | 2,208,623 | |
Community Health Systems, Inc., 8.63%, 01/15/24(b) | | | | | | | 363 | | | | 363,907 | |
DaVita, Inc., 5.13%, 07/15/24 | | | | | | | 757 | | | | 734,290 | |
| | |
8 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Health Care Providers & Services (continued) | | | | | | | | | |
Encompass Health Corp., 5.75%, 11/01/24 | | | USD | | | | 445 | | | $ | 445,258 | |
Envision Healthcare Corp.: | | | | | | | | | | | | |
5.13%, 07/01/22(b) | | | | | | | 261 | | | | 263,284 | |
5.63%, 07/15/22 | | | | | | | 744 | | | | 753,765 | |
6.25%, 12/01/24(b) | | | | | | | 223 | | | | 237,495 | |
HCA, Inc.: | | | | | | | | | | | | |
5.88%, 03/15/22 | | | | | | | 435 | | | | 453,488 | |
4.75%, 05/01/23 | | | | | | | 1,006 | | | | 1,003,485 | |
5.00%, 03/15/24 | | | | | | | 2,193 | | | | 2,193,000 | |
5.25%, 04/15/25 | | | | | | | 896 | | | | 896,000 | |
5.88%, 02/15/26 | | | | | | | 1,479 | | | | 1,491,941 | |
5.25%, 06/15/26 | | | | | | | 988 | | | | 981,282 | |
4.50%, 02/15/27 | | | | | | | 129 | | | | 121,421 | |
5.50%, 06/15/47 | | | | | | | 1,358 | | | | 1,245,965 | |
MEDNAX, Inc., 5.25%, 12/01/23(b) | | | | | | | 144 | | | | 140,400 | |
Molina Healthcare, Inc., 4.88%, 06/15/25(b) | | | | | | | 134 | | | | 129,980 | |
MPH Acquisition Holdings LLC, 7.13%, 06/01/24(b) | | | | | | | 734 | | | | 752,350 | |
NVA Holdings, Inc., 6.88%, 04/01/26(b) | | | | | | | 372 | | | | 369,675 | |
Polaris Intermediate Corp., 8.50% ( 8.50% Cash or 9.25% PIK), 12/01/22(b)(c) | | | | | | | 1,560 | | | | 1,608,750 | |
RegionalCare Hospital Partners Holdings, Inc., 8.25%, 05/01/23(b) | | | | | | | 187 | | | | 196,701 | |
Surgery Center Holdings, Inc.(b): | | | | | | | | | | | | |
8.88%, 04/15/21 | | | | | | | 145 | | | | 149,169 | |
6.75%, 07/01/25 | | | | | | | 771 | | | | 731,486 | |
Team Health Holdings, Inc., 6.38%, 02/01/25(b) | | | | | | | 566 | | | | 486,760 | |
Tenet Healthcare Corp.: | | | | | | | | | | | | |
6.75%, 02/01/20 | | | | | | | 85 | | | | 86,913 | |
4.75%, 06/01/20 | | | | | | | 167 | | | | 167,417 | |
6.00%, 10/01/20 | | | | | | | 118 | | | | 121,245 | |
7.50%, 01/01/22(b) | | | | | | | 226 | | | | 235,040 | |
8.13%, 04/01/22 | | | | | | | 1,798 | | | | 1,879,845 | |
6.75%, 06/15/23 | | | | | | | 535 | | | | 532,325 | |
4.63%, 07/15/24(b) | | | | | | | 1,601 | | | | 1,516,467 | |
Vizient, Inc., 10.38%, 03/01/24(b) | | | | | | | 444 | | | | 489,510 | |
WellCare Health Plans, Inc., 5.25%, 04/01/25 | | | | | | | 136 | | | | 135,320 | |
| | | | | | | | |
| | | | | | | | | | | 24,740,188 | |
Health Care Technology — 0.0% | |
IQVIA, Inc., 3.25%, 03/15/25 | | | EUR | | | | 224 | | | | 253,922 | |
| | | | | | | | |
Hotels, Restaurants & Leisure — 4.6% | |
1011778 BC ULC(b): | | | | | | | | | | | | |
4.25%, 05/15/24 | | | USD | | | | 1,799 | | | | 1,704,553 | |
5.00%, 10/15/25 | | | | | | | 2,776 | | | | 2,626,651 | |
Aramark International Finance SARL, 3.13%, 04/01/25 | | | EUR | | | | 506 | | | | 600,923 | |
Boyd Gaming Corp., 6.00%, 08/15/26(b) | | | USD | | | | 310 | | | | 306,900 | |
Boyne USA, Inc., 7.25%, 05/01/25(b) | | | | | | | 109 | | | | 113,632 | |
Caesars Resort Collection LLC, 5.25%, 10/15/25(b) | | | | | | | 522 | | | | 493,942 | |
Churchill Downs, Inc., 4.75%, 01/15/28(b) | | | | | | | 90 | | | | 83,250 | |
Eldorado Resorts, Inc., 6.00%, 04/01/25 | | | | | | | 131 | | | | 131,164 | |
GLP Capital LP: | | | | | | | | | | | | |
5.38%, 11/01/23 | | | | | | | 66 | | | | 67,402 | |
5.25%, 06/01/25 | | | | | | | 76 | | | | 76,000 | |
5.38%, 04/15/26 | | | | | | | 192 | | | | 190,080 | |
Golden Nugget, Inc., 6.75%, 10/15/24(b) | | | | | | | 602 | | | | 602,108 | |
Hilton Domestic Operating Co., Inc.: | | | | | | | | | | | | |
4.25%, 09/01/24 | | | | | | | 225 | | | | 213,750 | |
5.13%, 05/01/26(b) | | | | | | | 827 | | | | 812,528 | |
Hilton Worldwide Finance LLC, 4.63%, 04/01/25 | | | | | | | 143 | | | | 139,425 | |
IRB Holding Corp., 6.75%, 02/15/26(b) | | | | | | | 125 | | | | 119,375 | |
KFC Holding Co.(b): | | | | | | | | | | | | |
5.00%, 06/01/24 | | | | | | | 35 | | | | 34,552 | |
5.25%, 06/01/26 | | | | | | | 651 | | | | 641,235 | |
4.75%, 06/01/27 | | | | | | | 26 | | | | 24,570 | |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Hotels, Restaurants & Leisure (continued) | |
LHMC Finco SARL, 7.88%, 12/20/23(b) | | | USD | | | | 206 | | | $ | 200,582 | |
Melco Resorts Finance Ltd., 4.88%, 06/06/25(b) | | | | | | | 265 | | | | 250,359 | |
MGM Resorts International: | | | | | | | | | | | | |
5.25%, 03/31/20 | | | | | | | 161 | | | | 163,818 | |
6.75%, 10/01/20 | | | | | | | 113 | | | | 118,367 | |
6.63%, 12/15/21 | | | | | | | 2,360 | | | | 2,486,850 | |
7.75%, 03/15/22 | | | | | | | 287 | | | | 311,395 | |
6.00%, 03/15/23 | | | | | | | 395 | | | | 406,850 | |
Sabre GLBL, Inc.(b): | | | | | | | | | | | | |
5.38%, 04/15/23 | | | | | | | 65 | | | | 65,650 | |
5.25%, 11/15/23 | | | | | | | 278 | | | | 279,732 | |
Scientific Games International, Inc.: | | | | | | | | | | | | |
10.00%, 12/01/22 | | | | | | | 1,608 | | | | 1,715,688 | |
5.00%, 10/15/25(b) | | | | | | | 1,306 | | | | 1,243,965 | |
3.38%, 02/15/26 | | | EUR | | | | 400 | | | | 443,283 | |
Silversea Cruise Finance Ltd., 7.25%, 02/01/25(b) | | | USD | | | | 76 | | | | 82,088 | |
Six Flags Entertainment Corp., 4.88%, 07/31/24(b) | | | | | | | 2,840 | | | | 2,765,450 | |
Stars Group Holdings BV, 7.00%, 07/15/26(b) | | | | | | | 716 | | | | 723,160 | |
Station Casinos LLC, 5.00%, 10/01/25(b) | | | | | | | 601 | | | | 564,940 | |
Viking Cruises Ltd.(b): | | | | | | | | | | | | |
6.25%, 05/15/25 | | | | | | | 482 | | | | 472,360 | |
5.88%, 09/15/27 | | | | | | | 1,008 | | | | 952,560 | |
Wyndham Destinations, Inc., 4.15%, 04/01/24 | | | | | | | 256 | | | | 251,840 | |
Wyndham Hotels & Resorts, Inc., 5.38%, 04/15/26(b) | | | | | | | 115 | | | | 114,138 | |
Wynn Macau Ltd., 5.50%, 10/01/27(b) | | | | | | | 800 | | | | 764,000 | |
Yum! Brands, Inc., 3.88%, 11/01/23 | | | | | | | 97 | | | | 92,635 | |
| | | | | | | | |
| | | | | | | | | | | 23,451,750 | |
Household Durables — 1.3% | |
Brookfield Residential Properties, Inc.(b): | | | | | | | | | | | | |
6.50%, 12/15/20 | | | | | | | 20 | | | | 20,250 | |
6.38%, 05/15/25 | | | | | | | 93 | | | | 93,000 | |
K. Hovnanian Enterprises, Inc., 10.00%, 07/15/22(b) | | | | | | | 276 | | | | 290,490 | |
Lennar Corp.: | | | | | | | | | | | | |
4.50%, 11/15/19 | | | | | | | 64 | | | | 64,400 | |
6.63%, 05/01/20 | | | | | | | 255 | | | | 267,750 | |
8.38%, 01/15/21 | | | | | | | 488 | | | | 533,140 | |
4.75%, 04/01/21 | | | | | | | 51 | | | | 51,727 | |
4.13%, 01/15/22 | | | | | | | 684 | | | | 677,160 | |
5.38%, 10/01/22 | | | | | | | 20 | | | | 20,400 | |
4.88%, 12/15/23 | | | | | | | 450 | | | | 448,875 | |
5.25%, 06/01/26 | | | | | | | 170 | | | | 166,600 | |
4.75%, 11/29/27 | | | | | | | 465 | | | | 436,077 | |
LGI Homes, Inc., 6.88%, 07/15/26(b) | | | | | | | 256 | | | | 255,360 | |
Mattamy Group Corp.(b): | | | | | | | | | | | | |
6.88%, 12/15/23 | | | | | | | 234 | | | | 237,182 | |
6.50%, 10/01/25 | | | | | | | 241 | | | | 236,315 | |
MDC Holdings, Inc., 6.00%, 01/15/43 | | | | | | | 256 | | | | 222,182 | |
Meritage Homes Corp.: | | | | | | | | | | | | |
7.15%, 04/15/20 | | | | | | | 70 | | | | 73,850 | |
5.13%, 06/06/27 | | | | | | | 291 | | | | 270,630 | |
PulteGroup, Inc.: | | | | | | | | | | | | |
5.50%, 03/01/26 | | | | | | | 161 | | | | 159,390 | |
6.38%, 05/15/33 | | | | | | | 473 | | | | 473,000 | |
6.00%, 02/15/35 | | | | | | | 244 | | | | 235,460 | |
Tempur Sealy International, Inc., 5.50%, 06/15/26 | | | | | | | 241 | | | | 233,168 | |
TRI Pointe Group, Inc.: | | | | | | | | | | | | |
4.38%, 06/15/19 | | | | | | | 165 | | | | 165,858 | |
4.88%, 07/01/21 | | | | | | | 115 | | | | 115,719 | |
5.88%, 06/15/24 | | | | | | | 170 | | | | 168,725 | |
5.25%, 06/01/27 | | | | | | | 147 | | | | 134,872 | |
William Lyon Homes, Inc.: | | | | | | | | | | | | |
6.00%, 09/01/23(b) | | | | | | | 80 | | | | 78,977 | |
5.88%, 01/31/25 | | | | | | | 76 | | | | 71,915 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 9 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Household Durables (continued) | |
Williams Scotsman International, Inc., 7.88%, 12/15/22(b) | | | USD | | | | 140 | | | $ | 144,900 | |
| | | | | | | | |
| | | | | | | | | | | 6,347,372 | |
Household Products — 0.2% | |
Spectrum Brands, Inc.: | | | | | | | | | | | | |
6.63%, 11/15/22 | | | | | | | 460 | | | | 474,950 | |
5.75%, 07/15/25 | | | | | | | 405 | | | | 399,938 | |
| | | | | | | | |
| | | | | | | | | | | 874,888 | |
Independent Power and Renewable Electricity Producers — 1.7% | |
AES Corp.: | | | | | | | | | | | | |
4.50%, 03/15/23 | | | | | | | 261 | | | | 258,716 | |
4.88%, 05/15/23 | | | | | | | 223 | | | | 222,442 | |
5.50%, 04/15/25 | | | | | | | 173 | | | | 174,298 | |
6.00%, 05/15/26 | | | | | | | 273 | | | | 282,555 | |
5.13%, 09/01/27 | | | | | | | 574 | | | | 572,565 | |
Calpine Corp.: | | | | | | | | | | | | |
5.38%, 01/15/23 | | | | | | | 352 | | | | 334,840 | |
5.88%, 01/15/24(b) | | | | | | | 272 | | | | 269,280 | |
5.75%, 01/15/25 | | | | | | | 80 | | | | 73,150 | |
5.25%, 06/01/26(b) | | | | | | | 1,750 | | | | 1,648,281 | |
NRG Energy, Inc., 6.63%, 01/15/27 | | | | | | | 2,603 | | | | 2,674,583 | |
NRG Yield Operating LLC, 5.38%, 08/15/24 | | | | | | | 279 | | | | 279,000 | |
Pattern Energy Group, Inc., 5.88%, 02/01/24(b) | | | | | | | 276 | | | | 276,000 | |
Talen Energy Supply LLC, 6.50%, 06/01/25 | | | | | | | 231 | | | | 176,138 | |
Vistra Energy Corp.: | | | | | | | | | | | | |
7.38%, 11/01/22 | | | | | | | 605 | | | | 632,225 | |
5.88%, 06/01/23 | | | | | | | 136 | | | | 139,910 | |
7.63%, 11/01/24 | | | | | | | 117 | | | | 124,751 | |
8.00%, 01/15/25(b) | | | | | | | 292 | | | | 313,535 | |
8.13%, 01/30/26(b) | | | | | | | 228 | | | | 247,665 | |
| | | | | | | | |
| | | | | | | | | | | 8,699,934 | |
Insurance — 1.1%(b) | | | | | | | | | |
Acrisure LLC, 7.00%, 11/15/25 | | | | | | | 94 | | | | 85,540 | |
Alliant Holdings Intermediate LLC, 8.25%, 08/01/23 | | | | | | | 2,195 | | | | 2,266,063 | |
AmWINS Group, Inc., 7.75%, 07/01/26 | | | | | | | 431 | | | | 437,465 | |
Ardonagh Midco 3 plc, 8.63%, 07/15/23 | | | | | | | 1,116 | | | | 1,132,740 | |
AssuredPartners, Inc., 7.00%, 08/15/25 | | | | | | | 20 | | | | 19,250 | |
HUB International Ltd., 7.00%, 05/01/26 | | | | | | | 814 | | | | 803,825 | |
NFP Corp., 6.88%, 07/15/25 | | | | | | | 127 | | | | 124,460 | |
USIS Merger Sub, Inc., 6.88%, 05/01/25 | | | | | | | 80 | | | | 79,600 | |
Wand Merger Corp.: | | | | | | | | | | | | |
8.13%, 07/15/23 | | | | | | | 307 | | | | 311,221 | |
9.13%, 07/15/26 | | | | | | | 308 | | | | 311,850 | |
| | | | | | | | |
| | | | | | | | | | | 5,572,014 | |
Internet & Direct Marketing Retail — 0.3% | | | | | | | | | |
Netflix, Inc.: | | | | | | | | | | | | |
5.38%, 02/01/21 | | | | | | | 60 | | | | 61,668 | |
5.50%, 02/15/22 | | | | | | | 446 | | | | 458,756 | |
4.38%, 11/15/26 | | | | | | | 129 | | | | 120,589 | |
5.88%, 11/15/28(b) | | | | | | | 650 | | | | 656,305 | |
| | | | | | | | |
| | | | | | | | | | | 1,297,318 | |
Internet Software & Services — 0.7% | | | | | | | | | |
GTT Communications, Inc., 7.88%, 12/31/24(b) | | | | | | | 284 | | | | 281,160 | |
Rackspace Hosting, Inc., 8.63%, 11/15/24(b) | | | | | | | 232 | | | | 233,160 | |
Zayo Group LLC: | | | | | | | | | | | | |
6.00%, 04/01/23 | | | | | | | 902 | | | | 917,785 | |
6.38%, 05/15/25 | | | | | | | 16 | | | | 16,300 | |
5.75%, 01/15/27(b) | | | | | | | 1,947 | | | | 1,912,927 | |
| | | | | | | | |
| | | | | | | | | | | 3,361,332 | |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
IT Services — 1.6%(b) | | | | | | | | | |
Alliance Data Systems Corp.: | | | | | | | | | | | | |
5.88%, 11/01/21 | | | USD | | | | 490 | | | $ | 499,800 | |
5.38%, 08/01/22 | | | | | | | 874 | | | | 878,261 | |
First Data Corp.: | | | | | | | | | | | | |
7.00%, 12/01/23 | | | | | | | 1,128 | | | | 1,174,902 | |
5.75%, 01/15/24 | | | | | | | 4,262 | | | | 4,262,085 | |
Gartner, Inc., 5.13%, 04/01/25 | | | | | | | 516 | | | | 513,420 | |
WEX, Inc., 4.75%, 02/01/23 | | | | | | | 874 | | | | 878,108 | |
| | | | | | | | |
| | | | | | | | | | | 8,206,576 | |
Leisure Products — 0.1% | | | | | | | | | |
Mattel, Inc.: | | | | | | | | | | | | |
6.75%, 12/31/25(b) | | | | | | | 525 | | | | 511,219 | |
6.20%, 10/01/40 | | | | | | | 101 | | | | 86,102 | |
5.45%, 11/01/41 | | | | | | | 59 | | | | 47,495 | |
| | | | | | | | |
| | | | | | | | | | | 644,816 | |
Life Sciences Tools & Services — 0.0% | | | | | | | | | |
Charles River Laboratories International, Inc., 5.50%, 04/01/26(b) | | | | | | | 173 | | | | 173,381 | |
| | | | | | | | |
Machinery — 2.6% | | | | | | | | | |
BlueLine Rental Finance Corp., 9.25%, 03/15/24(b) | | | | | | | 3,381 | | | | 3,597,046 | |
EnPro Industries, Inc., 5.88%, 09/15/22 | | | | | | | 160 | | | | 163,200 | |
Grinding Media, Inc., 7.38%, 12/15/23(b) | | | | | | | 1,268 | | | | 1,321,890 | |
Mueller Water Products, Inc., 5.50%, 06/15/26(b) | | | | | | | 269 | | | | 271,017 | |
Navistar International Corp., 6.63%, 11/01/25(b) | | | | | | | 370 | | | | 380,175 | |
Novelis Corp.(b): | | | | | | | | | | | | |
6.25%, 08/15/24 | | | | | | | 1,981 | | | | 1,981,000 | |
5.88%, 09/30/26 | | | | | | | 2,131 | | | | 2,040,432 | |
RBS Global, Inc., 4.88%, 12/15/25(b) | | | | | | | 394 | | | | 370,360 | |
SPX FLOW, Inc., 5.63%, 08/15/24(b) | | | | | | | 557 | | | | 552,823 | |
Terex Corp., 5.63%, 02/01/25(b) | | | | | | �� | 1,462 | | | | 1,454,690 | |
Titan Acquisition Ltd., 7.75%, 04/15/26(b) | | | | | | | 868 | | | | 809,410 | |
Wabash National Corp., 5.50%, 10/01/25(b) | | | | | | | 303 | | | | 290,880 | |
| | | | | | | | |
| | | | | | | | | | | 13,232,923 | |
Media — 6.7% | | | | | | | | | |
Acosta, Inc., 7.75%, 10/01/22(b) | | | | | | | 261 | | | | 129,195 | |
Altice Financing SA(b): | | | | | | | | | | | | |
6.63%, 02/15/23 | | | | | | | 400 | | | | 394,200 | |
7.50%, 05/15/26 | | | | | | | 1,793 | | | | 1,734,190 | |
Altice Luxembourg SA, 7.75%, 05/15/22(b) | | | | | | | 2,199 | | | | 2,127,532 | |
Altice US Finance I Corp.(b): | | | | | | | | | | | | |
5.38%, 07/15/23 | | | | | | | 2,131 | | | | 2,120,345 | |
5.50%, 05/15/26 | | | | | | | 254 | | | | 245,110 | |
AMC Networks, Inc.: | | | | | | | | | | | | |
5.00%, 04/01/24 | | | | | | | 238 | | | | 234,430 | |
4.75%, 08/01/25 | | | | | | | 318 | | | | 305,681 | |
Cablevision Systems Corp., 8.00%, 04/15/20 | | | | | | | 125 | | | | 131,212 | |
CBS Radio, Inc., 7.25%, 11/01/24(b) | | | | | | | 18 | | | | 17,145 | |
Cequel Communications Holdings I LLC(b): | | | | | | | | | | | | |
5.13%, 12/15/21 | | | | | | | 1,634 | | | | 1,623,917 | |
7.75%, 07/15/25 | | | | | | | 1,294 | | | | 1,352,230 | |
7.50%, 04/01/28 | | | | | | | 657 | | | | 665,015 | |
Charter Communications Operating LLC, 4.91%, 07/23/25 | | | | | | | 10 | | | | 10,099 | |
Clear Channel International BV, 8.75%, 12/15/20(b) | | | | | | | 1,189 | | | | 1,229,129 | |
Clear Channel Worldwide Holdings, Inc.: | | | | | | | | | | | | |
Series A, 7.63%, 03/15/20 | | | | | | | 1,401 | | | | 1,392,003 | |
Series A, 6.50%, 11/15/22 | | | | | | | 5,009 | | | | 5,104,615 | |
CSC Holdings LLC: | | | | | | | | | | | | |
10.13%, 01/15/23(b) | | | | | | | 2,140 | | | | 2,359,350 | |
5.25%, 06/01/24 | | | | | | | 612 | | | | 578,340 | |
10.88%, 10/15/25(b) | | | | | | | 2,686 | | | | 3,096,421 | |
| | |
10 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Media (continued) | | | | | | | | | |
DISH DBS Corp.: | | | | | | | | | | | | |
5.88%, 07/15/22 | | | USD | | | | 1,290 | | | $ | 1,212,600 | |
5.00%, 03/15/23 | | | | | | | 273 | | | | 236,827 | |
5.88%, 11/15/24 | | | | | | | 427 | | | | 361,349 | |
7.75%, 07/01/26 | | | | | | | 924 | | | | 809,655 | |
DISH Network Corp., 3.38%, 08/15/26(h) | | | | | | | 402 | | | | 389,376 | |
MDC Partners, Inc., 6.50%, 05/01/24(b) | | | | | | | 440 | | | | 381,700 | |
Meredith Corp., 6.88%, 02/01/26(b) | | | | | | | 232 | | | | 228,810 | |
Midcontinent Communications, 6.88%, 08/15/23(b) | | | | | | | 293 | | | | 306,551 | |
Outfront Media Capital LLC: | | | | | | | | | | | | |
5.63%, 02/15/24 | | | | | | | 54 | | | | 54,646 | |
5.88%, 03/15/25 | | | | | | | 240 | | | | 241,956 | |
Radiate Holdco LLC(b): | | | | | | | | | | | | |
6.88%, 02/15/23 | | | | | | | 90 | | | | 86,400 | |
6.63%, 02/15/25 | | | | | | | 293 | | | | 268,095 | |
Sirius XM Radio, Inc., 5.00%, 08/01/27(b) | | | | | | | 1,003 | | | | 939,059 | |
TEGNA, Inc., 5.50%, 09/15/24(b) | | | | | | | 83 | | | | 83,000 | |
Telenet Finance Luxembourg Notes SARL, 5.50%, 03/01/28(b) | | | | | | | 400 | | | | 364,000 | |
Tribune Media Co., 5.88%, 07/15/22 | | | | | | | 16 | | | | 16,148 | |
Univision Communications, Inc.(b): | | | | | | | | | | | | |
5.13%, 05/15/23 | | | | | | | 498 | | | | 478,080 | |
5.13%, 02/15/25 | | | | | | | 164 | | | | 151,495 | |
UPCB Finance IV Ltd., 5.38%, 01/15/25(b) | | | | | | | 202 | | | | 191,920 | |
Videotron Ltd., 5.13%, 04/15/27(b) | | | | | | | 899 | | | | 872,210 | |
WMG Acquisition Corp., 5.50%, 04/15/26(b) | | | | | | | 168 | | | | 166,530 | |
Ziggo Bond Finance BV, 5.88%, 01/15/25(b) | | | | | | | 600 | | | | 560,634 | |
Ziggo BV, 5.50%, 01/15/27(b) | | | | | | | 525 | | | | 490,403 | |
| | | | | | | | |
| | | | | | | | | | | 33,741,603 | |
Metals & Mining — 3.5% | | | | | | | | | |
Alcoa Nederland Holding BV, 6.13%, 05/15/28(b) | | | | | | | 200 | | | | 201,250 | |
Big River Steel LLC, 7.25%, 09/01/25(b) | | | | | | | 234 | | | | 240,458 | |
Cleveland-Cliffs, Inc., 4.88%, 01/15/24(b) | | | | | | | 273 | | | | 263,445 | |
Constellium NV(b): | | | | | | | | | | | | |
5.75%, 05/15/24 | | | | | | | 952 | | | | 921,060 | |
6.63%, 03/01/25 | | | | | | | 587 | | | | 591,402 | |
5.88%, 02/15/26 | | | | | | | 378 | | | | 364,770 | |
First Quantum Minerals Ltd., 7.25%, 05/15/22(b) | | | | | | | 387 | | | | 390,870 | |
Freeport-McMoRan, Inc.: | | | | | | | | | | | | |
3.10%, 03/15/20 | | | | | | | 1,943 | | | | 1,904,140 | |
4.00%, 11/14/21 | | | | | | | 215 | | | | 209,625 | |
3.55%, 03/01/22 | | | | | | | 1,620 | | | | 1,539,000 | |
3.88%, 03/15/23 | | | | | | | 2,143 | | | | 2,025,135 | |
4.55%, 11/14/24 | | | | | | | 67 | | | | 63,650 | |
5.40%, 11/14/34 | | | | | | | 35 | | | | 31,763 | |
5.45%, 03/15/43 | | | | | | | 2,156 | | | | 1,891,243 | |
Joseph T. Ryerson & Son, Inc., 11.00%, 05/15/22(b) | | | | | | | 177 | | | | 194,700 | |
Kaiser Aluminum Corp., 5.88%, 05/15/24 | | | | | | | 81 | | | | 82,620 | |
Steel Dynamics, Inc.: | | | | | | | | | | | | |
5.13%, 10/01/21 | | | | | | | 475 | | | | 479,156 | |
5.25%, 04/15/23 | | | | | | | 673 | | | | 678,889 | |
5.50%, 10/01/24 | | | | | | | 57 | | | | 58,069 | |
4.13%, 09/15/25 | | | | | | | 558 | | | | 534,982 | |
5.00%, 12/15/26 | | | | | | | 45 | | | | 45,000 | |
SunCoke Energy Partners LP, 7.50%, 06/15/25(b) | | | | | | | 387 | | | | 393,773 | |
Teck Resources Ltd.: | | | | | | | | | | | | |
4.50%, 01/15/21 | | | | | | | 106 | | | | 106,000 | |
4.75%, 01/15/22 | | | | | | | 77 | | | | 77,161 | |
3.75%, 02/01/23 | | | | | | | 653 | | | | 619,534 | |
8.50%, 06/01/24(b) | | | | | | | 1,998 | | | | 2,190,307 | |
5.20%, 03/01/42 | | | | | | | 867 | | | | 759,709 | |
5.40%, 02/01/43 | | | | | | | 362 | | | | 324,895 | |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Metals & Mining (continued) | | | | | | | | | |
United States Steel Corp.: | | | | | | | | | | | | |
6.88%, 08/15/25 | | | USD | | | | 384 | | | $ | 386,285 | |
6.25%, 03/15/26 | | | | | | | 346 | | | | 341,246 | |
| | | | | | | | |
| | | | | | | | | | | 17,910,137 | |
Mortgage Real Estate Investment Trusts (REITs) — 0.1% | |
Starwood Property Trust, Inc., 5.00%, 12/15/21 | | | | | | | 267 | | | | 269,003 | |
| | | | | | | | |
Multiline Retail — 0.0% | | | | | | | | | |
JC Penney Corp., Inc., 8.13%, 10/01/19 | | | | | | | 11 | | | | 11,358 | |
Neiman Marcus Group Ltd. LLC, 8.00%, 10/15/21(b) | | | | | | | 257 | | | | 169,941 | |
| | | | | | | | |
| | | | | | | | | | | 181,299 | |
Oil, Gas & Consumable Fuels — 10.0% | | | | | | | | | |
Aker BP ASA, 5.88%, 03/31/25(b) | | | | | | | 317 | | | | 326,431 | |
Alta Mesa Holdings LP, 7.88%, 12/15/24 | | | | | | | 129 | | | | 136,579 | |
Antero Midstream Partners LP, 5.38%, 09/15/24 | | | | | | | 60 | | | | 60,450 | |
Antero Resources Corp.: | | | | | | | | | | | | |
5.13%, 12/01/22 | | | | | | | 115 | | | | 115,287 | |
5.63%, 06/01/23 | | | | | | | 795 | | | | 804,938 | |
5.00%, 03/01/25 | | | | | | | 53 | | | | 52,735 | |
Ascent Resources Utica Holdings LLC, 10.00%, 04/01/22(b) | | | | | | | 232 | | | | 255,200 | |
Berry Petroleum Co. LLC, 7.00%, 02/15/26(b) | | | | | | | 238 | | | | 243,355 | |
California Resources Corp., 8.00%, 12/15/22(b) | | | | | | | 399 | | | | 362,092 | |
Callon Petroleum Co.: | | | | | | | | | | | | |
6.13%, 10/01/24 | | | | | | | 401 | | | | 406,012 | |
6.38%, 07/01/26(b) | | | | | | | 261 | | | | 261,653 | |
Calumet Specialty Products Partners LP: | | | | | | | | | | | | |
6.50%, 04/15/21 | | | | | | | 38 | | | | 37,810 | |
7.63%, 01/15/22 | | | | | | | 192 | | | | 192,000 | |
Carrizo Oil & Gas, Inc.: | | | | | | | | | | | | |
6.25%, 04/15/23 | | | | | | | 422 | | | | 427,275 | |
8.25%, 07/15/25 | | | | | | | 383 | | | | 405,980 | |
Chaparral Energy, Inc., 8.75%, 07/15/23(b) | | | | | | | 368 | | | | 370,530 | |
Cheniere Corpus Christi Holdings LLC: | | | | | | | | | | | | |
7.00%, 06/30/24 | | | | | | | 617 | | | | 672,530 | |
5.88%, 03/31/25 | | | | | | | 582 | | | | 605,280 | |
5.13%, 06/30/27 | | | | | | | 862 | | | | 854,457 | |
Cheniere Energy Partners LP, 5.25%, 10/01/25(b) | | | | | | | 953 | | | | 929,604 | |
Chesapeake Energy Corp.: | | | | | | | | | | | | |
8.00%, 01/15/25 | | | | | | | 142 | | | | 144,620 | |
8.00%, 06/15/27 | | | | | | | 1,352 | | | | 1,375,660 | |
CNX Resources Corp.: | | | | | | | | | | | | |
5.88%, 04/15/22 | | | | | | | 3,231 | | | | 3,247,769 | |
8.00%, 04/01/23 | | | | | | | 12 | | | | 12,761 | |
CONSOL Energy, Inc., 11.00%, 11/15/25(b) | | | | | | | 725 | | | | 797,500 | |
Covey Park Energy LLC, 7.50%, 05/15/25(b) | | | | | | | 1,143 | | | | 1,165,860 | |
Crestwood Midstream Partners LP, 6.25%, 04/01/23 | | | | | | | 260 | | | | 264,550 | |
CrownRock LP, 5.63%, 10/15/25(b) | | | | | | | 1,292 | | | | 1,246,780 | |
DCP Midstream Operating LP(b): | | | | | | | | | | | | |
4.75%, 09/30/21 | | | | | | | 150 | | | | 151,500 | |
6.45%, 11/03/36 | | | | | | | 198 | | | | 208,395 | |
6.75%, 09/15/37 | | | | | | | 314 | | | | 332,840 | |
Denbury Resources, Inc., 9.25%, 03/31/22(b) | | | | | | | 873 | | | | 925,380 | |
Diamondback Energy, Inc.: | | | | | | | | | | | | |
4.75%, 11/01/24 | | | | | | | 141 | | | | 137,475 | |
5.38%, 05/31/25 | | | | | | | 55 | | | | 55,000 | |
5.38%, 05/31/25(b) | | | | | | | 46 | | | | 45,885 | |
Eclipse Resources Corp., 8.88%, 07/15/23 | | | | | | | 85 | | | | 80,537 | |
Endeavor Energy Resources LP(b): | | | | | | | | | | | | |
5.50%, 01/30/26 | | | | | | | 74 | | | | 71,780 | |
5.75%, 01/30/28 | | | | | | | 213 | | | | 207,675 | |
Energy Transfer Equity LP: | | | | | | | | | | | | |
4.25%, 03/15/23 | | | | | | | 567 | | | | 547,161 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 11 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Oil, Gas & Consumable Fuels (continued) | | | | | | | | | |
5.88%, 01/15/24 | | | USD | | | | 360 | | | $ | 369,000 | |
5.50%, 06/01/27 | | | | | | | 50 | | | | 50,000 | |
EnLink Midstream Partners LP: | | | | | | | | | | | | |
4.15%, 06/01/25 | | | | | | | 63 | | | | 58,225 | |
4.85%, 07/15/26 | | | | | | | 60 | | | | 56,854 | |
EP Energy LLC: | | | | | | | | | | | | |
9.38%, 05/01/20 | | | | | | | 12 | | | | 11,850 | |
9.38%, 05/01/24(b) | | | | | | | 546 | | | | 447,720 | |
8.00%, 11/29/24(b) | | | | | | | 47 | | | | 47,470 | |
7.75%, 05/15/26(b) | | | | | | | 826 | | | | 844,585 | |
Extraction Oil & Gas, Inc.(b): | | | | | | | | | | | | |
7.38%, 05/15/24 | | | | | | | 671 | | | | 702,872 | |
5.63%, 02/01/26 | | | | | | | 614 | | | | 587,942 | |
Genesis Energy LP: | | | | | | | | | | | | |
6.50%, 10/01/25 | | | | | | | 127 | | | | 121,920 | |
6.25%, 05/15/26 | | | | | | | 232 | | | | 218,660 | |
Great Western Petroleum LLC, 9.00%, 09/30/21(b) | | | | | | | 802 | | | | 818,040 | |
Gulfport Energy Corp.: | | | | | | | | | | | | |
6.63%, 05/01/23 | | | | | | | 504 | | | | 507,780 | |
6.00%, 10/15/24 | | | | | | | 79 | | | | 76,037 | |
6.38%, 01/15/26 | | | | | | | 247 | | | | 237,120 | |
Halcon Resources Corp., 6.75%, 02/15/25 | | | | | | | 827 | | | | 773,245 | |
Hess Infrastructure Partners LP, 5.63%, 02/15/26(b) | | | | | | | 751 | | | | 749,122 | |
Indigo Natural Resources LLC, 6.88%, 02/15/26(b) | | | | | | | 142 | | | | 137,030 | |
Jagged Peak Energy LLC, 5.88%, 05/01/26(b) | | | | | | | 262 | | | | 256,760 | |
Matador Resources Co., 6.88%, 04/15/23 | | | | | | | 598 | | | | 626,405 | |
MEG Energy Corp.(b): | | | | | | | | | | | | |
6.38%, 01/30/23 | | | | | | | 188 | | | | 174,840 | |
7.00%, 03/31/24 | | | | | | | 319 | | | | 297,467 | |
6.50%, 01/15/25 | | | | | | | 698 | | | | 696,255 | |
Murphy Oil Corp.: | | | | | | | | | | | | |
4.45%, 12/01/22 | | | | | | | 127 | | | | 125,083 | |
5.75%, 08/15/25 | | | | | | | 24 | | | | 23,933 | |
5.87%, 12/01/42 | | | | | | | 57 | | | | 51,585 | |
Newfield Exploration Co.: | | | | | | | | | | | | |
5.63%, 07/01/24 | | | | | | | 43 | | | | 45,311 | |
5.38%, 01/01/26 | | | | | | | 551 | | | | 563,398 | |
NGL Energy Partners LP: | | | | | | | | | | | | |
5.13%, 07/15/19 | | | | | | | 193 | | | | 193,241 | |
6.88%, 10/15/21 | | | | | | | 848 | | | | 858,600 | |
NGPL PipeCo LLC(b): | | | | | | | | | | | | |
4.38%, 08/15/22 | | | | | | | 250 | | | | 247,500 | |
4.88%, 08/15/27 | | | | | | | 236 | | | | 233,050 | |
7.77%, 12/15/37 | | | | | | | 554 | | | | 650,950 | |
Oasis Petroleum, Inc.: | | | | | | | | | | | | |
6.88%, 03/15/22 | | | | | | | 241 | | | | 245,148 | |
6.88%, 01/15/23 | | | | | | | 57 | | | | 57,997 | |
Parkland Fuel Corp., 6.00%, 04/01/26(b) | | | | | | | 65 | | | | 64,025 | |
Parsley Energy LLC(b): | | | | | | | | | | | | |
6.25%, 06/01/24 | | | | | | | 74 | | | | 76,775 | |
5.38%, 01/15/25 | | | | | | | 1,345 | | | | 1,334,912 | |
5.25%, 08/15/25 | | | | | | | 509 | | | | 500,093 | |
5.63%, 10/15/27 | | | | | | | 258 | | | | 256,065 | |
PBF Holding Co. LLC, 7.25%, 06/15/25 | | | | | | | 263 | | | | 276,479 | |
PDC Energy, Inc., 5.75%, 05/15/26(b) | | | | | | | 141 | | | | 139,590 | |
QEP Resources, Inc.: | | | | | | | | | | | | |
6.88%, 03/01/21 | | | | | | | 8 | | | | 8,500 | |
5.38%, 10/01/22 | | | | | | | 858 | | | | 873,015 | |
5.63%, 03/01/26 | | | | | | | 343 | | | | 328,423 | |
Range Resources Corp.: | | | | | | | | | | | | |
5.88%, 07/01/22 | | | | | | | 366 | | | | 370,575 | |
5.00%, 08/15/22 | | | | | | | 37 | | | | 36,630 | |
5.00%, 03/15/23 | | | | | | | 98 | | | | 94,815 | |
4.88%, 05/15/25 | | | | | | | 268 | | | | 251,250 | |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Oil, Gas & Consumable Fuels (continued) | | | | | | | | | |
Resolute Energy Corp., 8.50%, 05/01/20 | | | USD | | | | 1,012 | | | $ | 1,009,470 | |
Rockies Express Pipeline LLC(b): | | | | | | | | | | | | |
5.63%, 04/15/20 | | | | | | | 765 | | | | 783,169 | |
6.88%, 04/15/40 | | | | | | | 660 | | | | 752,400 | |
RSP Permian, Inc., 6.63%, 10/01/22 | | | | | | | 22 | | | | 23,115 | |
Sanchez Energy Corp.: | | | | | | | | | | | | |
7.75%, 06/15/21 | | | | | | | 1,167 | | | | 994,867 | |
6.13%, 01/15/23 | | | | | | | 369 | | | | 250,920 | |
7.25%, 02/15/23(b) | | | | | | | 170 | | | | 168,300 | |
Seven Generations Energy Ltd.(b): | | | | | | | | | | | | |
6.88%, 06/30/23 | | | | | | | 109 | | | | 112,406 | |
5.38%, 09/30/25 | | | | | | | 866 | | | | 832,443 | |
SM Energy Co.: | | | | | | | | | | | | |
6.50%, 11/15/21 | | | | | | | 75 | | | | 76,725 | |
6.13%, 11/15/22 | | | | | | | 371 | | | | 380,275 | |
6.50%, 01/01/23 | | | | | | | 169 | | | | 170,690 | |
5.00%, 01/15/24 | | | | | | | 73 | | | | 69,076 | |
5.63%, 06/01/25 | | | | | | | 70 | | | | 66,675 | |
6.75%, 09/15/26 | | | | | | | 483 | | | | 484,208 | |
Southern Star Central Corp., 5.13%, 07/15/22(b) | | | | | | | 47 | | | | 46,883 | |
Southwestern Energy Co.: | | | | | | | | | | | | |
6.70%, 01/23/25 | | | | | | | 267 | | | | 261,326 | |
7.50%, 04/01/26 | | | | | | | 556 | | | | 575,460 | |
7.75%, 10/01/27 | | | | | | | 123 | | | | 127,613 | |
Sunoco LP(b): | | | | | | | | | | | | |
4.88%, 01/15/23 | | | | | | | 627 | | | | 601,920 | |
5.88%, 03/15/28 | | | | | | | 185 | | | | 174,424 | |
Tallgrass Energy Partners LP(b): | | | | | | | | | | | | |
5.50%, 09/15/24 | | | | | | | 1,098 | | | | 1,119,960 | |
5.50%, 01/15/28 | | | | | | | 913 | | | | 897,023 | |
Targa Resources Partners LP: | | | | | | | | | | | | |
5.25%, 05/01/23 | | | | | | | 15 | | | | 15,000 | |
5.13%, 02/01/25 | | | | | | | 107 | | | | 105,663 | |
5.88%, 04/15/26(b) | | | | | | | 458 | | | | 461,435 | |
5.00%, 01/15/28(b) | | | | | | | 719 | | | | 668,670 | |
TerraForm Power Operating LLC(b): | | | | | | | | | | | | |
4.25%, 01/31/23 | | | | | | | 237 | | | | 228,705 | |
6.62%, 06/15/25(i) | | | | | | | 75 | | | | 79,875 | |
5.00%, 01/31/28 | | | | | | | 237 | | | | 224,558 | |
Tullow Oil plc, 7.00%, 03/01/25(b) | | | | | | | 200 | | | | 189,250 | |
Whiting Petroleum Corp., 6.63%, 01/15/26(b) | | | | | | | 422 | | | | 434,660 | |
WildHorse Resource Development Corp.: | | | | | | | | | | | | |
6.88%, 02/01/25 | | | | | | | 4 | | | | 4,075 | |
6.88%, 02/01/25(b) | | | | | | | 206 | | | | 209,863 | |
Williams Cos., Inc. (The): | | | | | | | | | | | | |
4.55%, 06/24/24 | | | | | | | 107 | | | | 107,000 | |
8.75%, 03/15/32 | | | | | | | 162 | | | | 208,875 | |
5.75%, 06/24/44 | | | | | | | 1,062 | | | | 1,097,842 | |
WPX Energy, Inc.: | | | | | | | | | | | | |
6.00%, 01/15/22 | | | | | | | 56 | | | | 58,240 | |
8.25%, 08/01/23 | | | | | | | 83 | | | | 93,997 | |
5.25%, 09/15/24 | | | | | | | 496 | | | | 487,940 | |
5.75%, 06/01/26 | | | | | | | 268 | | | | 267,247 | |
| | | | | | | | |
| | | | | | | | | | | 50,235,711 | |
Paper & Forest Products — 0.1% | | | | | | | | | |
Mercer International, Inc.: | | | | | | | | | | | | |
7.75%, 12/01/22 | | | | | | | 54 | | | | 56,700 | |
6.50%, 02/01/24 | | | | | | | 188 | | | | 190,350 | |
5.50%, 01/15/26(b) | | | | | | | 172 | | | | 166,840 | |
Norbord, Inc., 6.25%, 04/15/23(b) | | | | | | | 261 | | | | 272,119 | |
PH Glatfelter Co., 5.38%, 10/15/20 | | | | | | | 34 | | | | 34,085 | |
| | | | | | | | |
| | | | | | | | | | | 720,094 | |
| | |
12 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Personal Products — 0.0% | |
Prestige Brands, Inc., 6.38%, 03/01/24(b) | | | USD | | | | 202 | | | $ | 199,980 | |
| | | | | | | | |
Pharmaceuticals — 2.1% | |
Catalent Pharma Solutions, Inc., 4.88%, 01/15/26(b) | | | | | | | 445 | | | | 427,329 | |
Endo Dac, 6.00%, 07/15/23(b) | | | | | | | 360 | | | | 296,100 | |
Endo Finance LLC, 7.25%, 01/15/22(b) | | | | | | | 211 | | | | 194,120 | |
inVentiv Group Holdings, Inc., 7.50%, 10/01/24(b) | | | | | | | 306 | | | | 322,065 | |
Teva Pharmaceutical Finance Netherlands III BV, 1.70%, 07/19/19 | | | | | | | 607 | | | | 592,571 | |
Valeant Pharmaceuticals International, Inc.: | | | | | | | | | | | | |
7.50%, 07/15/21(b) | | | | | | | 752 | | | | 763,750 | |
6.75%, 08/15/21(b) | | | | | | | 672 | | | | 679,560 | |
5.63%, 12/01/21(b) | | | | | | | 188 | | | | 184,945 | |
6.50%, 03/15/22(b) | | | | | | | 486 | | | | 503,010 | |
7.25%, 07/15/22(b) | | | | | | | 24 | | | | 24,580 | |
5.50%, 03/01/23(b) | | | | | | | 660 | | | | 613,800 | |
4.50%, 05/15/23 | | | EUR | | | | 643 | | | | 709,206 | |
5.88%, 05/15/23(b) | | | USD | | | | 1,054 | | | | 990,101 | |
7.00%, 03/15/24(b) | | | | | | | 594 | | | | 622,779 | |
6.13%, 04/15/25(b) | | | | | | | 1,505 | | | | 1,386,481 | |
5.50%, 11/01/25(b) | | | | | | | 1,044 | | | | 1,028,862 | |
9.25%, 04/01/26(b) | | | | | | | 133 | | | | 138,154 | |
8.50%, 01/31/27(b) | | | | | | | 894 | | | | 905,175 | |
| | | | | | | | |
| | | | | | | | | | | 10,382,588 | |
Professional Services — 0.6%(b) | | | | | | | | | |
Booz Allen Hamilton, Inc., 5.13%, 05/01/25 | | | | | | | 1,020 | | | | 997,050 | |
Jaguar Holding Co. II, 6.38%, 08/01/23 | | | | | | | 1,843 | | | | 1,834,154 | |
| | | | | | | | |
| | | | | | | | | | | 2,831,204 | |
Real Estate Management & Development — 0.3%(b) | | | | | | | | | |
Five Point Operating Co. LP, 7.88%, 11/15/25 | | | | | | | 213 | | | | 216,994 | |
Greystar Real Estate Partners LLC, 5.75%, 12/01/25 | | | | | | | 242 | | | | 234,740 | |
Howard Hughes Corp. (The), 5.38%, 03/15/25 | | | | | | | 704 | | | | 690,800 | |
Realogy Group LLC: | | | | | | | | | | | | |
4.50%, 04/15/19 | | | | | | | 127 | | | | 127,317 | |
5.25%, 12/01/21 | | | | | | | 85 | | | | 84,575 | |
4.88%, 06/01/23 | | | | | | | 296 | | | | 278,240 | |
| | | | | | | | |
| | | | | | | | | | | 1,632,666 | |
Road & Rail — 0.5%(b) | | | | | | | | | |
Avis Budget Car Rental LLC, 5.13%, 06/01/22 | | | | | | | 601 | | | | 587,477 | |
Herc Rentals, Inc.: | | | | | | | | | | | | |
7.50%, 06/01/22 | | | | | | | 392 | | | | 414,540 | |
7.75%, 06/01/24 | | | | | | | 146 | | | | 155,855 | |
Hertz Corp. (The), 7.63%, 06/01/22 | | | | | | | 562 | | | | 539,520 | |
Park Aerospace Holdings Ltd.: | | | | | | | | | | | | |
3.63%, 03/15/21 | | | | | | | 310 | | | | 300,313 | |
5.25%, 08/15/22 | | | | | | | 612 | | | | 605,886 | |
| | | | | | | | |
| | | | | | | | | | | 2,603,591 | |
Semiconductors & Semiconductor Equipment — 0.3% | |
Advanced Micro Devices, Inc., 7.50%, 08/15/22 | | | | | | | 83 | | | | 91,715 | |
Entegris, Inc., 4.63%, 02/10/26(b) | | | | | | | 261 | | | | 248,602 | |
Micron Technology, Inc., 5.50%, 02/01/25 | | | | | | | 11 | | | | 11,454 | |
NXP BV(b): | | | | | | | | | | | | |
4.63%, 06/15/22 | | | | | | | 430 | | | | 436,450 | |
4.63%, 06/01/23 | | | | | | | 550 | | | | 554,813 | |
| | | | | | | | |
| | | | | | | | | | | 1,343,034 | |
Software — 3.4% | |
Ascend Learning LLC, 6.88%, 08/01/25(b) | | | | | | | 377 | | | | 380,299 | |
BMC Software Finance, Inc., 8.13%, 07/15/21(b) | | | | | | | 525 | | | | 536,812 | |
CDK Global, Inc.: | | | | | | | | | | | | |
5.88%, 06/15/26 | | | | | | | 306 | | | | 311,814 | |
4.88%, 06/01/27 | | | | | | | 414 | | | | 396,922 | |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Software (continued) | |
Change Healthcare Holdings LLC, 5.75%, 03/01/25(b) | | | USD | | | | 669 | | | $ | 632,941 | |
Genesys Telecommunications Laboratories, Inc., 10.00%, 11/30/24(b) | | | | | | | 892 | | | | 995,583 | |
Infor Software Parent LLC, 7.13% (7.13% Cash or 7.88% PIK), 05/01/21(b)(c) | | | | | | | 858 | | | | 860,145 | |
Infor US, Inc., 6.50%, 05/15/22 | | | | | | | 3,927 | | | | 3,931,909 | |
Informatica LLC, 7.13%, 07/15/23(b) | | | | | | | 1,475 | | | | 1,490,075 | |
Nuance Communications, Inc.: | | | | | | | | | | | | |
5.38%, 08/15/20(b) | | | | | | | 33 | | | | 33,000 | |
6.00%, 07/01/24 | | | | | | | 148 | | | | 149,295 | |
5.63%, 12/15/26 | | | | | | | 459 | | | | 448,677 | |
PTC, Inc., 6.00%, 05/15/24 | | | | | | | 314 | | | | 326,560 | |
RP Crown Parent LLC, 7.38%, 10/15/24(b) | | | | | | | 658 | | | | 677,543 | |
Solera LLC, 10.50%, 03/01/24(b) | | | | | | | 3,463 | | | | 3,846,112 | |
Sophia LP, 9.00%, 09/30/23(b) | | | | | | | 290 | | | | 304,464 | |
Symantec Corp., 5.00%, 04/15/25(b) | | | | | | | 230 | | | | 222,818 | |
TIBCO Software, Inc., 11.38%, 12/01/21(b) | | | | | | | 1,189 | | | | 1,284,120 | |
Veritas US, Inc.(b): | | | | | | | | | | | | |
7.50%, 02/01/23 | | | | | | | 200 | | | | 187,500 | |
10.50%, 02/01/24 | | | | | | | 211 | | | | 173,020 | |
| | | | | | | | |
| | | | | | | | | | | 17,189,609 | |
Specialty Retail — 0.6% | | | | | | | | | |
Asbury Automotive Group, Inc., 6.00%, 12/15/24 | | | | | | | 856 | | | | 848,245 | |
Group 1 Automotive, Inc.: | | | | | | | | | | | | |
5.00%, 06/01/22 | | | | | | | 80 | | | | 79,400 | |
5.25%, 12/15/23(b) | | | | | | | 45 | | | | 43,200 | |
L Brands, Inc.: | | | | | | | | | | | | |
6.88%, 11/01/35 | | | | | | | 598 | | | | 532,220 | |
6.75%, 07/01/36 | | | | | | | 119 | | | | 104,720 | |
Penske Automotive Group, Inc., 5.50%, 05/15/26 | | | | | | | 476 | | | | 466,480 | |
SRS Distribution, Inc., 8.25%, 07/01/26(b) | | | | | | | 295 | | | | 293,525 | |
Staples, Inc., 8.50%, 09/15/25(b) | | | | | | | 478 | | | | 445,735 | |
| | | | | | | | |
| | | | | | | | | | | 2,813,525 | |
Technology Hardware, Storage & Peripherals — 0.4% | |
Dell International LLC, 7.13%, 06/15/24(b) | | | | | | | 901 | | | | 954,546 | |
Western Digital Corp., 4.75%, 02/15/26 | | | | | | | 1,235 | | | | 1,201,037 | |
| | | | | | | | |
| | | | | | | | | | | 2,155,583 | |
Textiles, Apparel & Luxury Goods — 0.1% | | | | | | | | | |
Eagle Intermediate Global Holding BV, 7.50%, 05/01/25(b) | | | | | | | 318 | | | | 317,602 | |
| | | | | | | | |
Thrifts & Mortgage Finance — 0.1% | | | | | | | | | |
Ladder Capital Finance Holdings LLLP(b): | | | | | | | | | | | | |
5.25%, 03/15/22 | | | | | | | 33 | | | | 33,000 | |
5.25%, 10/01/25 | | | | | | | 536 | | | | 503,063 | |
| | | | | | | | |
| | | | | | | | | | | 536,063 | |
Trading Companies & Distributors — 1.3% | | | | | | | | | |
Beacon Roofing Supply, Inc.: | | | | | | | | | | | | |
6.38%, 10/01/23 | | | | | | | 169 | | | | 174,493 | |
4.88%, 11/01/25(b) | | | | | | | 356 | | | | 327,306 | |
Flexi-Van Leasing, Inc., 10.00%, 02/15/23(b) | | | | | | | 247 | | | | 233,415 | |
Fortress Transportation & Infrastructure Investors LLC, 6.75%, 03/15/22(b) | | | | | | | 113 | | | | 115,543 | |
HD Supply, Inc., 5.75%, 04/15/24(b)(i) | | | | | | | 3,303 | | | | 3,464,021 | |
United Rentals North America, Inc.: | | | | | | | | | | | | |
4.63%, 07/15/23 | | | | | | | 78 | | | | 77,805 | |
5.50%, 07/15/25 | | | | | | | 539 | | | | 543,043 | |
4.63%, 10/15/25 | | | | | | | 861 | | | | 820,102 | |
5.88%, 09/15/26 | | | | | | | 997 | | | | 1,006,970 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 6,762,698 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 13 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Water Utilities — 0.2% | |
Core & Main LP, 6.13%, 08/15/25(b) | | | USD | | | | 825 | | | $ | 781,687 | |
| | | | | | | | | | | | |
Wireless Telecommunication Services — 2.6% | |
Digicel Group Ltd., 8.25%, 09/30/20(b) | | | | | | | 818 | | | | 617,590 | |
Digicel Ltd., 6.00%, 04/15/21(b) | | | | | | | 1,305 | | | | 1,182,656 | |
Hughes Satellite Systems Corp.: | | | | | | | | | | | | |
7.63%, 06/15/21 | | | | | | | 162 | | | | 172,327 | |
5.25%, 08/01/26 | | | | | | | 1,029 | | | | 964,688 | |
Inmarsat Finance plc, 4.88%, 05/15/22(b) | | | | | | | 200 | | | | 196,500 | |
SoftBank Group Corp., (USD Swap Rate 5 Year + 4.85%), 6.87%(e)(f) | | | | | | | 385 | | | | 329,577 | |
Sprint Communications, Inc., 7.00%, 03/01/20(b) | | | | | | | 605 | | | | 627,688 | |
Sprint Corp.: | | | | | | | | | | | | |
7.88%, 09/15/23 | | | | | | | 1,628 | | | | 1,688,033 | |
7.13%, 06/15/24 | | | | | | | 3,672 | | | | 3,707,214 | |
7.63%, 02/15/25 | | | | | | | 244 | | | | 248,882 | |
7.63%, 03/01/26 | | | | | | | 1,263 | | | | 1,288,260 | |
T-Mobile USA, Inc.: | | | | | | | | | | | | |
4.00%, 04/15/22 | | | | | | | 239 | | | | 236,562 | |
6.38%, 03/01/25 | | | | | | | 124 | | | | 128,365 | |
6.50%, 01/15/26 | | | | | | | 441 | | | | 454,781 | |
4.50%, 02/01/26 | | | | | | | 514 | | | | 479,948 | |
4.75%, 02/01/28 | | | | | | | 785 | | | | 727,106 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 13,050,177 | |
| | | | | | | | | | | | |
Total Corporate Bonds — 84.3% (Cost: $433,984,392) | | | | 425,215,182 | |
| | | | | | | | | | | | |
|
Floating Rate Loan Interests — 9.6%(j) | |
|
Aerospace & Defense — 0.1% | |
Sequa Mezzanine Holdings LLC, 1st Lien Term Loan, (LIBOR USD 1 Month + 5.00%), 7.05%, 11/28/21 | | | | | | | 211 | | | | 211,134 | |
Sequa Mezzanine Holdings LLC, 2nd Lien Term Loan, (LIBOR USD 3 Month + 9.00%), 11.10%, 04/28/22(g) | | | | | | | 75 | | | | 74,812 | |
WP CPP Holdings, Term Loan B, (LIBOR USD 6 Month + 3.75%), 6.28%, 03/16/25 | | | | | | | 84 | | | | 84,294 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 370,240 | |
Air Freight & Logistics — 0.1% | |
Ceva Group plc, Term Loan, (LIBOR USD 3 Month - 0.10%), 2.21%, 03/19/21 | | | | | | | 126 | | | | 125,814 | |
Ceva Intercompany BV, Term Loan, (LIBOR USD 3 Month + 5.50%), 7.86%, 03/19/21 | | | | | | | 52 | | | | 51,395 | |
CEVA Logistics Holdings, Inc., Term Loan B, (LIBOR USD 3 Month + 5.50%), 7.86%, 03/19/21 | | | | | | | 216 | | | | 215,522 | |
Ceva Logistics ULC, Term Loan, (LIBOR USD 3 Month + 5.50%), 7.86%, 03/19/21 | | | | | | | 24 | | | | 23,710 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 416,441 | |
Auto Components — 0.0% | | | | | | | | | |
Mavis Tire Express, 1st Lien Term Loan, (LIBOR USD 1 Month + 3.25%), 5.33%, 03/15/25 | | | | | | | 102 | | | | 101,187 | |
Mavis Tire Express, Delayed Draw 1st Lien Term Loan, (LIBOR USD 1 Month + 3.25%), 0.00% - 5.33%, 03/15/25 | | | | | | | 1 | | | | 893 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 102,080 | |
Chemicals — 0.2% | | | | | | | | | |
Alpha 3 BV, Term Loan, 01/31/24(k) | | | | | | | 236 | | | | 234,222 | |
Ascend Performance Materials Operations LLC, 1st Lien Term Loan B, (LIBOR USD 1 Month + 5.25%), 7.13%, 08/12/22 | | | | | | | 522 | | | | 522,218 | |
Greenrock Finance, Inc., Term Loan, (LIBOR USD 1 Month + 3.50%), 5.59%, 06/28/24 | | | | | | | 64 | | | | 63,600 | |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Chemicals (continued) | | | | | | | | | |
Invictus Co., Term Loan B, (LIBOR USD 3 Month + 3.00%), 5.10%, 03/28/25 | | | USD | | | | 154 | | | $ | 153,423 | |
Invictus Co., Term Loan B26, (LIBOR USD 3 Month + 6.75%), 8.73%, 03/30/26 | | | | | | | 84 | | | | 84,525 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,057,988 | |
Commercial Services & Supplies — 0.4% | | | | | | | | | |
Access CIG LLC, 1st Lien Term Loan, 02/27/25(k) | | | | | | | 14 | | | �� | 13,996 | |
Access CIG LLC, 2nd Lien Term Loan: | | | | | | | | | | | | |
02/27/26(k) | | | | | | | 3 | | | | 2,998 | |
Access CIG LLC, Initial Loan 2nd Lien Term Loan, (LIBOR USD 1 Month + 7.75%), 9.84%, 02/27/26 | | | | | | | 33 | | | | 32,627 | |
(LIBOR USD 1 Month + 3.75%), 5.84% , 02/27/25 | | | | | | | 91 | | | | 90,893 | |
Brand Energy & Infrastructure Services, Inc., Term Loan, (LIBOR USD 3 Month + 4.25%), 6.58% - 6.61%, 06/21/24 | | | | | | | 1,901 | | | | 1,902,337 | |
West Corp., Term Loan, (LIBOR USD 1 Month + 3.50%), 5.59%, 10/10/24 | | | | | | | 100 | | | | 99,125 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,141,976 | |
Construction & Engineering — 0.2% | | | | | | | | | |
Ply Gem, Inc., Term Loan B, (LIBOR USD 3 Month + 3.75%), 6.09%, 04/01/25 | | | | | | | 755 | | | | 752,255 | |
| | | | | | | | | | | | |
Containers & Packaging — 0.2% | |
Verallia Packaging, Term Loan B4, (EURIBOR 6 Month + 2.75%), 2.75%, 10/31/22 | | | EUR | | | | 1,000 | | | | 1,142,178 | |
| | | | | | | | | | | | |
Diversified Consumer Services — 0.1% | |
Laureate Education, Inc., Term Loan, 04/26/24(k) | | | USD | | | | 206 | | | | 205,831 | |
TierPoint LLC, Term Loan, (LIBOR USD 1 Month + 3.75%), 5.84%, 05/06/24 | | | | | | | 198 | | | | 191,701 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 397,532 | |
Diversified Financial Services — 0.1% | | | | | | | | | |
AHP Health Partners, Inc., Term Loan, 06/30/25(k) | | | | | | | 234 | | | | 232,830 | |
Sedgwick Claims Management Services, Inc., 1st Lien Term Loan, (LIBOR USD 1 Month + 2.75%), 4.84%, 03/01/21 | | | | | | | 198 | | | | 197,201 | |
Sedgwick Claims Management Services, Inc., 2nd Lien Term Loan, (LIBOR USD 3 Month + 5.75%), 7.84% - 7.89%, 02/28/22 | | | | | | | 201 | | | | 201,629 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 631,660 | |
Diversified Telecommunication Services — 0.2% | | | | | | | | | |
CenturyLink, Inc., Term Loan, (LIBOR USD 1 Month + 2.75%), 4.84%, 01/31/25 | | | | | | | 942 | | | | 922,242 | |
TDC AS, Term Loan B, 06/11/25(k) | | | | | | | 298 | | | | 297,163 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,219,405 | |
Electrical Equipment — 0.0% | | | | | | | | | |
Graftech International Ltd., 1st Lien Term Loan B, (LIBOR USD 1 Month + 3.50%), 5.51% - 5.50%, 02/12/25 | | | | | | | 127 | | | | 126,128 | |
| | | | | | | | | | | | |
Energy Equipment & Services — 0.6% | | | | | | | | | |
McDermott International, Inc., Term Loan, (LIBOR USD 1 Month + 5.00%), 7.09%, 05/12/25 | | | | | | | 1,997 | | | | 2,004,484 | |
Pioneer Energy Services Corp., Term Loan, (LIBOR USD 1 Month + 7.75%), 9.80%, 11/08/22(g) | | | | | | | 819 | | | | 845,617 | |
Weatherford International Ltd., Term Loan, (LIBOR USD 1 Month + 1.43%), 3.53%, 07/13/20 | | | | | | | 246 | | | | 243,067 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 3,093,168 | |
Food Products — 0.4% | |
Albertson’s Co. LLC, Term Loan B, 05/03/23(k) | | | | | | | 546 | | | | 545,205 | |
CHG PPC Parent LLC, Term Loan, (LIBOR USD 1 Month + 2.75%), 4.84%, 03/31/25(g) | | | | | | | 148 | | | | 147,260 | |
| | |
14 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Food Products (continued) | |
Chobani LLC, Term Loan, (LIBOR USD 1 Month + 3.50%), 5.59%, 10/10/23 | | | USD | | | | 69 | | | $ | 69,125 | |
Froneri International plc, Term Loan B, (EURIBOR 3 Month + 2.63%), 2.63%, 01/31/25 | | | EUR | | | | 1,000 | | | | 1,156,858 | |
JBS USA Lux SA, Term Loan, 10/30/22(k) | | | USD | | | | 233 | | | | 230,854 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,149,302 | |
Health Care Equipment & Supplies — 0.4% | |
DJO Finance LLC, 1st Lien Term Loan B, (LIBOR USD 1 Month + 3.25%), 5.34% - 5.47%, 06/08/20 | | | | | | | 1,143 | | | | 1,136,168 | |
Immucor, Inc., 1st Lien Term Loan, (LIBOR USD 1 Month + 5.00%), 7.09%, 06/15/21 | | | | | | | 992 | | | | 1,001,856 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,138,024 | |
Health Care Providers & Services — 0.4% | |
Dentalcorp Perfect Smile ULC, 1st Lien Term Loan, (LIBOR USD 6 Month + 3.75%), 5.76%, 05/31/25 | | | | | | | 153 | | | | 152,787 | |
Gentiva Health Services, Inc. Term Loan U, 06/23/25(g)(k) | | | | | | | 410 | | | | 406,490 | |
Gentiva Health Services, Inc., Term Loan(g)(k): | | | | | | | | | | | | |
06/23/25 | | | | | | | 256 | | | | 254,056 | |
06/22/26 | | | | | | | 91 | | | | 92,011 | |
Ortho-Clinical Diagnostics, Inc., Term Loan B, 06/30/25(k) | | | | | | | 282 | | | | 281,156 | |
Quorum Health Corp., 1st Lien Term Loan, 04/29/22(k) | | | | | | | 331 | | | | 336,009 | |
Team Health Holdings, Inc., Term Loan, (LIBOR USD 1 Month + 2.75%), 4.84%, 02/06/24 | | | | | | | 527 | | | | 505,852 | |
| | | | | | | | |
| | | | | | | | | | | 2,028,361 | |
Hotels, Restaurants & Leisure — 0.4% | |
GVC Holdings plc, Term Loan, 03/29/24(k) | | | EUR | | | | 1,000 | | | | 1,159,041 | |
GVC Holdings plc, Term Loan B2, (LIBOR USD 1 Month + 2.50%), 4.60%, 03/15/24 | | | USD | | | | 55 | | | | 55,125 | |
Las Vegas Sands LLC, Term Loan, (LIBOR USD 1 Month + 1.75%), 3.84%, 03/27/25 | | | | | | | 927 | | | | 919,561 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,133,727 | |
Household Products — 0.0% | | | | | | | | | |
Energizer Holdings, Term Loan B1, 06/20/25(k) | | | | | | | 145 | | | | 144,939 | |
| | | | | | | | | | | | |
Industrial Conglomerates — 0.4% | | | | | | | | | |
Accudyne Industries LLC, Term Loan, (LIBOR USD 1 Month + 3.25%), 5.34%, 08/18/24 | | | | | | | 458 | | | | 456,546 | |
Filtration Group Corp., Term Loan B, (LIBOR USD 1 Month + 3.00%), 5.09%, 03/29/25 | | | | | | | 78 | | | | 77,727 | |
PSAV Holdings LLC, 1st Lien Term Loan, (LIBOR USD 1 Month + 3.25%), 5.23% - 5.39%, 02/21/25 | | | | | | | 177 | | | | 174,497 | |
PSAV Holdings LLC, 2nd Lien Term Loan, (LIBOR USD 1 Month + 7.25%), 9.34%, 09/01/25 | | | | | | | 143 | | | | 141,689 | |
Uber Technologies, Inc., Term Loan, (LIBOR USD 1 Month + 4.00%), 6.00%, 03/14/25 | | | | | | | 607 | | | | 608,262 | |
Vertiv Group Corp., Term Loan B, (LIBOR USD 1 Month + 4.00%), 6.00%, 11/30/23 | | | | | | | 297 | | | | 295,118 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,753,839 | |
Insurance — 0.2% | | | | | | | | | |
Alliant Holdings Intermediate LLC, Term Loan, (LIBOR USD 1 Month + 3.00%), 5.05%, 05/09/25 | | | | | | | 82 | | | | 81,385 | |
Asurion LLC, 2nd Lien Term Loan B2, 08/04/25(g)(k) | | | | | | | 681 | | | | 690,364 | |
USI, Inc., 1st Lien Term Loan B, (LIBOR USD 3 Month + 3.00%), 5.33%, 05/16/24 | | | | | | | 234 | | | | 232,307 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,004,056 | |
Internet Software & Services — 0.0% | |
Deck Chassis Acquisition, Inc., Term Loan, (LIBOR USD 1 Month + 6.00%), 8.09%, 06/15/23(g) | | | | | | | 68 | | | | 68,510 | |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Internet Software & Services (continued) | |
GTT Communications, Inc., 1st Lien Term Loan, 05/31/25(k) | | | USD | | | | 6 | | | $ | 6,364 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 74,874 | |
IT Services — 0.4% | | | | | | | | | |
Applied Systems, Inc., Term Loan, (LIBOR USD 3 Month + 7.00%), 9.33%, 09/19/25 | | | | | | | 38 | | | | 39,045 | |
BMC Software Finance, Inc., Term Loan B, 09/01/25(k) | | | | | | | 773 | | | | 768,169 | |
CCC Information Services, Inc., 2nd Lien Term Loan, (LIBOR USD 1 Month + 6.75%), 8.84%, 04/28/25 | | | | | | | 40 | | | | 39,867 | |
CCC Information Services, Inc., Term Loan, (LIBOR USD 1 Month + 3.00%), 5.10%, 04/29/24 | | | | | | | 131 | | | | 130,708 | |
Mitchell International, Inc., 1st Lien Term Loan, 11/29/24(k) | | | | | | | 103 | | | | 102,168 | |
Mitchell International, Inc., 2nd Lien Term Loan, | | | | | | | | | | | | |
11/29/24(k) | | | | | | | 14 | | | | 13,433 | |
(LIBOR USD 1 Month + 7.25%), 9.34% , 12/01/25 | | | | | | | 184 | | | | 183,540 | |
Peak 10 Holding Corp., 2nd Lien Term Loan, (LIBOR USD 3 Month + 7.25%), 9.61%, 08/01/25 | | | | | | | 83 | | | | 82,357 | |
Peak 10 Holding Corp., Term Loan, (LIBOR USD 3 Month + 3.50%), 5.83%, 08/01/24 | | | | | | | 194 | | | | 191,058 | |
Tempo Acquisition LLC, Term Loan, (LIBOR USD 1 Month + 3.00%), 5.09%, 05/01/24 | | | | | | | 192 | | | | 190,567 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,740,912 | |
Life Sciences Tools & Services — 0.0% | | | | | | | | | |
Albany Molecular Research, Inc., Term Loan, (LIBOR USD 1 Month + 3.25%), 5.34%, 08/30/24 | | | | | | | 124 | | | | 123,414 | |
| | | | | | | | | | | | |
Machinery — 0.3% | | | | | | | | | |
Pike Corp., 1st Lien Term Loan, (LIBOR USD 1 Month + 3.50%), 5.60%, 03/12/25 | | | | | | | 117 | | | | 117,581 | |
Titan Acquisition Ltd., Term Loan, (LIBOR USD 1 Month + 3.00%), 5.09%, 03/28/25 | | | | | | | 1,144 | | | | 1,125,705 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,243,286 | |
Media — 1.6% | | | | | | | | | |
Ascend Learning LLC, Term Loan B, (LIBOR USD 1 Month + 3.00%), 5.09%, 07/12/24 | | | | | | | 76 | | | | 76,136 | |
Charter Communications Operating, LLC, Term Loan, (LIBOR USD 1 Month + 1.50%), 3.60%, 03/31/23 | | | | | | | 1,976 | | | | 1,972,629 | |
Intelsat Jackson Holdings SA, Term Loan: | | | | | | | | | | | | |
(LIBOR USD 1 Month + 3.75%), 5.85% , 11/27/23 | | | | | | | 117 | | | | 116,515 | |
(LIBOR USD 1 Month + 4.50%), 6.60% , 01/02/24 | | | | | | | 413 | | | | 428,410 | |
(LIBOR USD 6 Month + 6.63%), 6.63% , 01/02/24 | | | | | | | 2,255 | | | | 2,324,045 | |
Stars Group Holdings B.V., Term Loan, 06/27/25(k) | | | | | | | 2,430 | | | | 2,431,531 | |
Unitymedia Finance LLC, Term Loan, (LIBOR USD 1 Month + 2.25%), 4.32%, 01/15/26 | | | | | | | 555 | | | | 550,244 | |
Xplornet Communications, Inc., Term Loan, (LIBOR USD 3 Month + 4.00%), 6.33%, 09/09/21(g) | | | | | | | 398 | | | | 398,000 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 8,297,510 | |
Multiline Retail — 0.1% | |
Neiman Marcus Group Ltd. LLC, Term Loan, (LIBOR USD 1 Month + 3.25%), 4.81% - 5.29%, 10/25/20 | | | | | | | 334 | | | | 295,670 | |
| | | | | | | | |
Multi-Utilities — 0.0% | | | | | | | | | |
Exgen Renewables IV LLC, Term Loan, (LIBOR USD 3 Month + 3.00%), 5.31%, 11/28/24(g) | | | | | | | 104 | | | | 104,214 | |
| | | | | | | | |
Oil, Gas & Consumable Fuels — 1.0% | | | | | | | | | |
Bison Midstream Holdings LLC, Term Loan B, (LIBOR USD 1 Month + 4.00%), 6.09%, 05/21/25(g) | | | | | | | 73 | | | | 73,000 | |
Bronco Midstream Funding LLC, Term Loan B, (LIBOR USD 3 Month + 3.50%), 5.83%, 08/14/23(g) | | | | | | | 156 | | | | 155,828 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 15 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Oil, Gas & Consumable Fuels (continued) | | | | | | | | | |
California Resources Corp., Term Loan, (LIBOR USD 1 Month + 4.75%), 6.84%, 12/31/22 | | | USD | | | | 982 | | | $ | 998,576 | |
Chesapeake Energy Corp., Term Loan, (LIBOR USD 1 Month + 7.50%), 9.59%, 08/23/21 | | | | | | | 2,031 | | | | 2,122,561 | |
CONSOL Energy., Inc., Term Loan, (LIBOR USD 3 Month + 6.00%), 8.32%, 11/28/22 | | | | | | | 421 | | | | 431,636 | |
Gavilan Resources LLC, 2nd Lien Term Loan, (LIBOR USD 1 Month + 6.00%), 8.09%, 03/01/24 | | | | | | | 404 | | | | 396,175 | |
Lucid Energy Group II Borrower LLC, Term Loan, (LIBOR USD 1 Month + 3.00%), 5.09%, 02/17/25(g) | | | | | | | 129 | | | | 127,874 | |
Medallian Midland Acquisition LLC, Term Loan B, (LIBOR USD 1 Month + 3.25%), 5.34%, 10/30/24(g) | | | | | | | 162 | | | | 160,563 | |
Midcoast Operating LP, Term Loan, 06/30/25(g)(k) | | | | | | | 430 | | | | 427,850 | |
Vine Oil & Gas LP, Term Loan B, (LIBOR USD 1 Month + 6.88%), 8.97%, 11/25/21(g) | | | | | | | 367 | | | | 367,000 | |
| | | | | | | | |
| | | | | | | | | | | 5,261,063 | |
Pharmaceuticals — 0.3% | |
Amneal Pharmaceuticals LLC, Term Loan B18, (LIBOR USD 1 Month + 3.50%), 5.63%, 03/21/25 | | | | | | | 516 | | | | 514,602 | |
Endo Pharma, Term Loan B, (LIBOR USD 1 Month + 4.25%), 6.38%, 04/29/24 | | | | | | | 756 | | | | 754,363 | |
Valeant Pharmaceuticals International, Inc., Term Loan, (LIBOR USD 1 Month + 3.00%), 4.98% - 5.09%, 06/02/25 | | | | | | | 258 | | | | 257,063 | |
| | | | | | | | |
| | | | | | | | | | | 1,526,028 | |
Semiconductors & Semiconductor Equipment — 0.1% | |
Microchip Technology, Inc., Term Loan, 05/29/25(k) | | | | | | | 510 | | | | 508,805 | |
| | | | | | | | |
Software — 0.4% | |
Kronos, Inc., 2nd Lien Term Loan B, (LIBOR USD 3 Month + 8.25%), 10.61%, 11/01/24 | | | | | | | 569 | | | | 584,648 | |
McAfee LLC, 1st Lien Term Loan, (LIBOR USD 1 Month + 4.50%), 6.59%, 09/30/24 | | | | | | | 209 | | | | 209,891 | |
PowerSchool, Inc., 1st Lien Term Loan, 07/31/25(g)(k) | | | | | | | 245 | | | | 243,163 | |
Renaissance Learning, Inc., Term Loan, (LIBOR USD 3 Month + 3.25%), 5.58%, 05/24/25 | | | | | | | 173 | | | | 171,941 | |
SS&C Technologies Holdings, Inc., Term Loan, (LIBOR USD 1 Month + 2.50%), 4.59%, 04/16/25 | | | | | | | 260 | | | | 259,657 | |
SS&C Technologies Holdings, Inc., Term Loan B, (LIBOR USD 1 Month + 2.50%), 4.59%, 04/16/25 | | | | | | | 726 | | | | 725,327 | |
| | | | | | | | |
| | | | | | | | | | | 2,194,627 | |
Specialty Retail — 0.3% | | | | | | | | | |
Belron Finance LLC, Term Loan B, (LIBOR USD 3 Month + 2.50%), 4.86%, 11/07/24(g) | | | | | | | 165 | | | | 164,757 | |
EG Group Ltd., Term Loan, 02/07/25(k) | | | EUR | | | | 336 | | | | 387,762 | |
EG Group Ltd., Term Loan B1, (EURIBOR 3 Month + 4.00%), 4.00%, 02/07/25 | | | | | | | 662 | | | | 764,220 | |
| | | | | | | | |
| | | | | | | | | | | 1,316,739 | |
Trading Companies & Distributors — 0.2% | |
Beacon Roofing Supply, Inc., Term Loan B, (LIBOR USD 1 Month + 2.25%), 4.28% - 6.00%, 01/02/25 | | | USD | | | | 178 | | | | 176,298 | |
Reece Ltd., Term Loan B, 06/01/25(g)(k) | | | | | | | 103 | | | | 102,823 | |
SRS Distribution, Inc., Term Loan B, (LIBOR USD 3 Month + 3.25%), 5.58%, 05/23/25 | | | | | | | 595 | | | | 585,581 | |
| | | | | | | | |
| | | | | | | | | | | 864,702 | |
Wireless Telecommunication Services — 0.5% | | | | | | | | | |
Digicel International Finance Ltd., Term Loan, (LIBOR USD 3 Month + 3.25%), 5.61%, 05/27/24 | | | | | | | 287 | | | | 274,118 | |
Ligado Networks LLC, 1st Lien Term Loan, (LIBOR USD 3 Month + 8.75%), 11.07%, 12/07/20 | | | | | | | 2,282 | | | | 1,831,133 | |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
Wireless Telecommunication Services (continued) | | | | | | | | | |
Ligado Networks LLC, Term Loan, (LIBOR USD 3 Month + 12.50%), 14.82%, 12/07/20 | | | USD | | | | 569 | | | $ | 162,411 | |
| | | | | | | | |
| | | | | | | | | | | 2,267,662 | |
| | | | | | | | |
Total Floating Rate Loan Interests — 9.6% (Cost: $49,342,371) | | | | 48,622,805 | |
| | | | | | | | |
| | | |
Foreign Agency Obligations — 0.0% | | | | | | | | | | | | |
| | | |
Mexico — 0.0% | | | | | | | | | |
Petroleos Mexicanos, 5.38%, 03/13/22 | | | | | | | 44 | | | | 45,122 | |
| | | | | | | | |
Total Foreign Agency Obligations — 0.0% (Cost: $43,756) | | | | 45,122 | |
| | | | | | | | |
| | | |
Preferred Securities — 2.6% | | | | | | | | | | | | |
| | | |
Capital Trusts — 2.0% | | | | | | | | | |
Banks — 1.6% | |
Bank of America Corp.(e)(j): | | | | | | | | | | | | |
Series X, 6.25% | | | | | | | 558 | | | | 583,110 | |
Series Z, 6.50% | | | | | | | 341 | | | | 362,313 | |
Series AA, 6.10% | | | | | | | 1,463 | | | | 1,520,642 | |
CIT Group, Inc., Series A, 5.80%(e) | | | | | | | 295 | | | | 291,312 | |
Citigroup, Inc.(e)(j): | | | | | | | | | | | | |
Series N, 5.80% | | | | | | | 460 | | | | 470,065 | |
Series O, 5.87% | | | | | | | 315 | | | | 322,670 | |
Series R, 6.12% | | | | | | | 175 | | | | 182,656 | |
5.95% | | | | | | | 302 | | | | 307,285 | |
JPMorgan Chase & Co.(e)(j): | | | | | | | | | | | | |
Series V, 5.00% | | | | | | | 640 | | | | 643,200 | |
Series Q, 5.15% | | | | | | | 190 | | | | 187,150 | |
Series R, 6.00% | | | | | | | 90 | | | | 91,912 | |
Series U, 6.12% | | | | | | | 99 | | | | 101,723 | |
Series X, 6.10% | | | | | | | 1,406 | | | | 1,451,836 | |
Wells Fargo & Co.(e)(j): | | | | | | | | | | | | |
Series S, 5.90% | | | | | | | 150 | | | | 150,562 | |
Series U, 5.87% | | | | | | | 1,195 | | | | 1,232,344 | |
| | | | | | | | |
| | | | | | | | | | | 7,898,780 | |
Capital Markets — 0.2%(e)(j) | | | | | | | | | |
Goldman Sachs Group, Inc. (The), Series P, 5.00% | | | | | | | 1,320 | | | | 1,238,292 | |
Morgan Stanley, Series H, 5.45% | | | | | | | 162 | | | | 164,127 | |
| | | | | | | | |
| | | | | | | | | | | 1,402,419 | |
Consumer Finance — 0.1% | | | | | | | | | |
General Motors Financial Co., Inc., Series A, 5.75%(e)(j) | | | | | | | 482 | | | | 462,118 | |
| | | | | | | | |
Oil, Gas & Consumable Fuels — 0.1% | | | | | | | | | |
Andeavor Logistics LP, Series A, 6.87%(e)(j) | | | | | | | 426 | | | | 421,740 | |
| | | | | | | | |
Total Capital Trusts — 2.0% (Cost: $10,423,447) | | | | 10,185,057 | |
| | | | | | | | |
| | | |
| | | | | Shares | | | | |
|
Preferred Stocks — 0.4% | |
|
Hotels, Restaurants & Leisure — 0.3% | |
Stars Group, Inc. (The), 0.00%(a)(e)(g) | | | | | | | 921 | | | | 1,760,804 | |
| | | | | | | | |
Machinery — 0.1% | |
Rexnord Corp., Series A, 5.75%(h) | | | | | | | 4,760 | | | | 297,405 | |
| | | | | | | | |
Total Preferred Stocks — 0.4% (Cost: $1,062,532) | | | | 2,058,209 | |
| | | | | | | | |
| | |
16 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Shares | | | Value | |
|
Trust Preferreds — 0.2% | |
| | | |
Banks — 0.2% | | | | | | | | | |
GMAC Capital Trust I, 8.13%, 02/15/40(j) | | | | | | | 32,966 | | | $ | 867,006 | |
| | | | | | | | |
Total Trust Preferreds — 0.2% (Cost: $862,505) | | | | 867,006 | |
| | | | | | | | |
Total Preferred Securities — 2.6% (Cost: $12,348,484) | | | | 13,110,272 | |
| | | | | | | | |
Total Long-Term Investments — 98.1% (Cost: $503,416,925) | | | | 495,168,835 | |
| | | | | | | | |
|
Short-Term Securities — 3.1%(l) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class, | | | | | | | | | | | | |
1.80%(m) | | | | | | | 15,125,324 | | | | 15,125,324 | |
JPMorgan US Treasury Plus Money Market Fund, Agency Class, 1.72% | | | | | | | 485,496 | | | | 485,496 | |
| | | | | | | | |
Total Short-Term Securities — 3.1% (Cost: $15,610,820) | | | | 15,610,820 | |
| | | | | | | | |
| |
Total Investments — 101.2% (Cost: $519,027,745) | | | | 510,779,655 | |
Liabilities in Excess of Other Assets — (1.2)% | | | | (5,980,101 | ) |
| | | | | | | | |
Net Assets — 100.0% | | | $ | 504,799,554 | |
| | | | | | | | |
(a) | Non-income producing security. |
(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) | 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) | Perpetual security with no stated maturity date. |
(f) | 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. |
(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) | Annualized 7-day yield as of period end. |
(m) | During the six months ended June 30, 2018, investments in issuers considered to be an affiliate 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 12/31/17 | | | Net Activity | | | Shares Held at 06/30/18 | | | Value at 06/30/18 | | | Income | | | Net Realized Gain (Loss) (a) | | | Change in Unrealized Appreciation (Depreciation) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class | | | 15,856,054 | | | | (730,730 | ) | | | 15,125,324 | | | $ | 15,125,324 | | | $ | 114,430 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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.
| | |
Currency |
| |
EUR | | Euro |
GBP | | British Pound |
USD | | United States Dollar |
| | |
Portfolio Abbreviations |
| |
CDX | | Credit Default Swap Index |
DAC | | Designated Activity Company |
LIBOR | | London Interbank Offered Rate |
OTC | | Over-The-Counter |
S&P | | Standard & Poor’s |
| | | | |
SCHEDULE OF INVESTMENTS | | | 17 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | 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 | | | | | | | | | | | | | | | | |
Russell 2000 E-Mini Index | | | 30 | | | | 09/21/18 | | | $ | 2,471 | | | $ | 58,430 | |
S&P 500 E-Mini Index | | | 18 | | | | 09/21/18 | | | | 2,449 | | | | 60,251 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | 118,681 | |
| | | | | | | | | | | | | | | | |
Forward Foreign Currency Exchange Contracts
| | | | | | | | | | | | | | | | | | | | |
Currency Purchased | | | Currency Sold | | | Counterparty | | Settlement Date | | | Unrealized Appreciation (Depreciation) | |
EUR | | | 4,780,000 | | | USD | | | 5,563,729 | | | HSBC Bank plc | | | 07/05/18 | | | $ | 19,134 | |
GBP | | | 98,000 | | | USD | | | 128,799 | | | State Street Bank and Trust Co. | | | 07/05/18 | | | | 548 | |
USD | | | 5,475,800 | | | EUR | | | 4,682,000 | | | Deutsche Bank AG | | | 07/05/18 | | | | 7,398 | |
USD | | | 115,139 | | | EUR | | | 98,000 | | | Toronto Dominion Bank | | | 07/05/18 | | | | 679 | |
USD | | | 129,501 | | | GBP | | | 97,192 | | | BNP Paribas SA | | | 07/05/18 | | | | 1,220 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | 28,979 | |
| | | | | | | | | | | | | | | | | |
| | | | | | |
USD | | | 1,153,036 | | | EUR | | | 995,000 | | | Goldman Sachs International | | | 08/06/18 | | | | (11,903 | ) |
USD | | | 5,576,707 | | | EUR | | | 4,780,000 | | | HSBC Bank plc | | | 08/06/18 | | | | (19,682 | ) |
USD | | | 128,984 | | | GBP | | | 98,000 | | | State Street Bank and Trust Co. | | | 08/06/18 | | | | (557 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | (32,142 | ) |
| | | | | | | | | | | | | | | | | |
| | | Net unrealized depreciation | | | $ | (3,163 | ) |
| | | | | | | | |
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 | | | $ | 12,100 | | | $ | (7,032 | ) | | $ | 19,132 | |
CDX.NA.HY.29.V1 | | | 5.00 | | | | Quarterly | | | | 12/20/22 | | | | B+ | | | | USD | | | | 6,850 | | | | 431,007 | | | | 461,055 | | | | (30,048 | ) |
CDX.NA.HY.30.V1 | | | 5.00 | | | | Quarterly | | | | 06/20/23 | | | | B | | | | USD | | | | 14,694 | | | | 864,637 | | | | 887,789 | | | | (23,152 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | $ | 1,307,744 | | | $ | 1,341,812 | | | $ | (34,068 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 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) | |
Frontier Communications Corp. | | | 5.00 | % | | | Quarterly | | | Barclays Bank plc | | | 06/20/23 | | | | USD | | | | 151 | | | $ | 41,771 | | | $ | 50,206 | | | $ | (8,435 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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) | |
CenturyLink, Inc. | | | 1.00 | % | | Quarterly | | | Barclays Bank plc | | | 06/20/25 | | B+ | | | USD | | | | 567 | | | $ | (101,952 | ) | | $ | (104,969 | ) | | $ | 3,017 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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. | |
| | |
18 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock High Yield V.I. Fund |
Balances Reported in the Statement of Assets and Liabilities for Centrally Cleared Swaps and OTC Swaps
| | | | | | | | | | | | | | | | |
| | Swap Premiums Paid | | | Swap Premiums Received | | | Unrealized Appreciation | | | Unrealized Depreciation | |
Centrally Cleared Swaps(a) | | $ | 1,348,844 | | | $ | (7,032 | ) | | $ | 19,132 | | | $ | (53,200 | ) |
OTC Swaps | | | 50,206 | | | | (104,969 | ) | | | 3,017 | | | | (8,435 | ) |
| (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) | | $ | — | | | $ | — | | | $ | 118,681 | | | $ | — | | | $ | — | | | $ | — | | | $ | 118,681 | |
Forward foreign currency exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized appreciation on forward foreign currency exchange contracts | | | — | | | | — | | | | — | | | | 28,979 | | | | — | | | | — | | | | 28,979 | |
Swaps — centrally cleared | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized appreciation(a) | | | — | | | | 19,132 | | | | — | | | | — | | | | — | | | | — | | | | 19,132 | |
Swaps — OTC | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized appreciation on OTC swaps; Swap premiums paid | | | — | | | | 53,223 | | | | — | | | | — | | | | — | | | | — | | | | 53,223 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | 72,355 | | | $ | 118,681 | | | $ | 28,979 | | | $ | — | | | $ | — | | | $ | 220,015 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Liabilities — Derivative Financial Instruments | | | | | | | | | | | | | | | | | | | | | |
Forward foreign currency exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized depreciation on forward foreign currency exchange contracts | | $ | — | | | $ | — | | | $ | — | | | $ | 32,142 | | | $ | — | | | $ | — | | | $ | 32,142 | |
Swaps — centrally cleared | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized depreciation(a) | | | — | | | | 53,200 | | | | — | | | | — | | | | — | | | | — | | | | 53,200 | |
Swaps — OTC | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized depreciation on OTC swaps; Swap premiums received | | | — | | | | 113,404 | | | | — | | | | — | | | | — | | | | — | | | | 113,404 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | 166,604 | | | $ | — | | | $ | 32,142 | | | $ | — | | | $ | — | | | $ | 198,746 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 six months ended June 30, 2018, the effect of derivative financial instruments in the Statement of Operations were 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 | | $ | — | | | $ | — | | | $ | (8,917 | ) | | $ | — | | | $ | 88,745 | | | $ | — | | | $ | 79,828 | |
Forward foreign currency exchange contracts | | | — | | | | — | | | | — | | | | 109,320 | | | | — | | | | — | | | | 109,320 | |
Swaps | | | — | | | | 182,454 | | | | — | | | | — | | | | — | | | | — | | | | 182,454 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | 182,454 | | | $ | (8,917 | ) | | $ | 109,320 | | | $ | 88,745 | | | $ | — | | | $ | 371,602 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Change in Unrealized Appreciation (Depreciation) on: | | | | | | | | | | | | | | | | | | | | | |
Futures contracts | | $ | — | | | $ | — | | | $ | 118,681 | | | $ | — | | | $ | (11,264 | ) | | $ | — | | | $ | 107,417 | |
Forward foreign currency exchange contracts | | | — | | | | — | | | | — | | | | 46,103 | | | | — | | | | — | | | | 46,103 | |
Swaps | | | — | | | | (93,378 | ) | | | — | | | | — | | | | — | | | | — | | | | (93,378 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | (93,378 | ) | | $ | 118,681 | | | $ | 46,103 | | | $ | (11,264 | ) | | $ | — | | | $ | 60,142 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 19 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock High Yield V.I. Fund |
Average Quarterly Balances of Outstanding Derivative Financial Instruments
| | | | |
Futures contracts: | | | | |
Average notional value of contracts — short | | $ | 3,247,759 | |
Forward foreign currency exchange contracts: | | | | |
Average amounts purchased — in USD | | $ | 7,385,463 | |
Average amounts sold — in USD | | $ | 5,692,528 | |
Credit default swaps: | | | | |
Average notional value — buy protection | | $ | 150,904 | |
Average notional value — sell protection | | $ | 15,855,500 | |
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: | | | | | | | | |
Forward foreign currency exchange contracts | | $ | 28,979 | | | $ | 32,142 | |
Swaps — Centrally cleared | | | — | | | | 19,287 | |
Swaps — OTC(a) | | | 53,223 | | | | 113,404 | |
| | | | | | | | |
Total derivative assets and liabilities in the Statement of Assets and Liabilities | | $ | 82,202 | | | $ | 164,833 | |
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”) | | | — | | | | (19,287 | ) |
| | | | | | | | |
Total derivative assets and liabilities subject to an MNA | | $ | 82,202 | | | $ | 145,546 | |
| | | | | | | | |
| (a) | 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 an MNA by Counterparty | | | Derivatives Available for Offset (a) | | | Non-cash Collateral Received | | | Cash Collateral Received | | | Net Amount of Derivative Assets (b) | |
Barclays Bank plc | | $ | 53,223 | | | $ | (53,223 | ) | | $ | — | | | $ | — | | | $ | — | |
BNP Paribas SA | | | 1,220 | | | | — | | | | — | | | | — | | | | 1,220 | |
Deutsche Bank AG | | | 7,398 | | | | — | | | | — | | | | — | | | | 7,398 | |
HSBC Bank plc | | | 19,134 | | | | (19,134 | ) | | | — | | | | — | | | | — | |
State Street Bank and Trust Co. | | | 548 | | | | (548 | ) | | | — | | | | — | | | | — | |
Toronto Dominion Bank | | | 679 | | | | — | | | | — | | | | — | | | | 679 | |
| | | | | | | | | | | | | | | | | | | | |
| | $ | 82,202 | | | $ | (72,905 | ) | | $ | — | | | $ | — | | | $ | 9,297 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
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) | |
Barclays Bank plc | | $ | 113,404 | | | $ | (53,223 | ) | | $ | — | | | $ | — | | | $ | 60,181 | |
Goldman Sachs International | | | 11,903 | | | | — | | | | — | | | | — | | | | 11,903 | |
HSBC Bank plc | | | 19,682 | | | | (19,134 | ) | | | — | | | | — | | | | 548 | |
State Street Bank and Trust Co. | | | 557 | | | | (548 | ) | | | — | | | | — | | | | 9 | |
| | | | | | | | | | | | | | | | | | | | |
| | $ | 145,546 | | | $ | (72,905 | ) | | $ | — | | | $ | — | | | $ | 72,641 | |
| | | | | | | | | | | | | | | | | | | | |
| (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. | |
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.
| | |
20 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock High Yield V.I. Fund |
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(a) | | $ | 8,175,454 | | | $ | — | | | $ | — | | | $ | 8,175,454 | |
Corporate Bonds(a) | | | — | | | | 425,215,182 | | | | — | | | | 425,215,182 | |
Floating Rate Loan Interests: | | | | | | | | | | | | | | | | |
Aerospace & Defense | | | — | | | | 295,428 | | | | 74,812 | | | | 370,240 | |
Air Freight & Logistics | | | — | | | | 416,441 | | | | — | | | | 416,441 | |
Auto Components | | | — | | | | 102,080 | | | | — | | | | 102,080 | |
Chemicals | | | — | | | | 1,057,988 | | | | — | | | | 1,057,988 | |
Commercial Services & Supplies | | | — | | | | 2,141,976 | | | | — | | | | 2,141,976 | |
Construction & Engineering | | | — | | | | 752,255 | | | | — | | | | 752,255 | |
Containers & Packaging | | | — | | | | 1,142,178 | | | | — | | | | 1,142,178 | |
Diversified Consumer Services | | | — | | | | 397,532 | | | | — | | | | 397,532 | |
Diversified Financial Services | | | — | | | | 631,660 | | | | — | | | | 631,660 | |
Diversified Telecommunication Services | | | — | | | | 1,219,405 | | | | — | | | | 1,219,405 | |
Electrical Equipment | | | — | | | | 126,128 | | | | — | | | | 126,128 | |
Energy Equipment & Services | | | — | | | | 2,247,551 | | | | 845,617 | | | | 3,093,168 | |
Food Products | | | — | | | | 2,002,042 | | | | 147,260 | | | | 2,149,302 | |
Health Care Equipment & Supplies | | | — | | | | 2,138,024 | | | | — | | | | 2,138,024 | |
Health Care Providers & Services | | | — | | | | 1,275,804 | | | | 752,557 | | | | 2,028,361 | |
Hotels, Restaurants & Leisure | | | — | | | | 2,133,727 | | | | — | | | | 2,133,727 | |
Household Products | | | — | | | | 144,939 | | | | — | | | | 144,939 | |
Industrial Conglomerates | | | — | | | | 1,753,839 | | | | — | | | | 1,753,839 | |
Insurance | | | — | | | | 313,692 | | | | 690,364 | | | | 1,004,056 | |
Internet Software & Services | | | — | | | | 6,364 | | | | 68,510 | | | | 74,874 | |
IT Services | | | — | | | | 1,740,912 | | | | — | | | | 1,740,912 | |
Life Sciences Tools & Services | | | — | | | | 123,414 | | | | — | | | | 123,414 | |
Machinery | | | — | | | | 1,243,286 | | | | — | | | | 1,243,286 | |
Media | | | — | | | | 7,899,510 | | | | 398,000 | | | | 8,297,510 | |
Multiline Retail | | | — | | | | 295,670 | | | | — | | | | 295,670 | |
Multi-Utilities | | | — | | | | — | | | | 104,214 | | | | 104,214 | |
Oil, Gas & Consumable Fuels | | | — | | | | 3,948,948 | | | | 1,312,115 | | | | 5,261,063 | |
Pharmaceuticals | | | — | | | | 1,526,028 | | | | — | | | | 1,526,028 | |
Semiconductors & Semiconductor Equipment | | | — | | | | 508,805 | | | | — | | | | 508,805 | |
Software | | | — | | | | 1,951,464 | | | | 243,163 | | | | 2,194,627 | |
Specialty Retail | | | — | | | | 1,151,982 | | | | 164,757 | | | | 1,316,739 | |
Trading Companies & Distributors | | | — | | | | 761,879 | | | | 102,823 | | | | 864,702 | |
Wireless Telecommunication Services | | | — | | | | 2,267,662 | | | | — | | | | 2,267,662 | |
Foreign Agency Obligations | | | — | | | | 45,122 | | | | — | | | | 45,122 | |
Preferred Securities: | | | | | | | | | | | | | | | | |
Banks | | | 867,006 | | | | 7,898,780 | | | | — | | | | 8,765,786 | |
Capital Markets | | | — | | | | 1,402,419 | | | | — | | | | 1,402,419 | |
Consumer Finance | | | — | | | | 462,118 | | | | — | | | | 462,118 | |
Hotels, Restaurants & Leisure | | | — | | | | — | | | | 1,760,804 | | | | 1,760,804 | |
Machinery | | | 297,405 | | | | — | | | | — | | | | 297,405 | |
Oil, Gas & Consumable Fuels | | | — | | | | 421,740 | | | | — | | | | 421,740 | |
Short-Term Securities | | | 15,610,820 | | | | — | | | | — | | | | 15,610,820 | |
Unfunded Floating Rate Loan Interests(b) | | | — | | | | 71 | | | | — | | | | 71 | |
| | | | | | | | | | | | | | | | |
| | $ | 24,950,685 | | | $ | 479,164,045 | | | $ | 6,664,996 | | | $ | 510,779,726 | |
| | | | | | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | | | | |
Unfunded Floating Rate Loan Interests(b) | | | — | | | | (159 | ) | | | — | | | | (159 | ) |
| | | | | | | | | | | | | | | | |
| | $ | 24,950,685 | | | $ | 479,163,886 | | | $ | 6,664,996 | | | $ | 510,779,567 | |
| | | | | | | | | | | | | | | | |
Derivative Financial Instruments(c) | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Credit contracts | | $ | — | | | $ | 22,149 | | | $ | — | | | $ | 22,149 | |
Equity contracts | | | 118,681 | | | | — | | | | — | | | | 118,681 | |
Foreign currency exchange contracts | | | — | | | | 28,979 | | | | — | | | | 28,979 | |
Liabilities: | | | | | | | | | | | | | | | | |
Credit contracts | | | — | | | | (61,635 | ) | | | — | | | | (61,635 | ) |
Foreign currency exchange contracts | | | — | | | | (32,142 | ) | | | — | | | | (32,142 | ) |
| | | | | | | | | | | | | | | | |
| | $ | 118,681 | | | $ | (42,649 | ) | | $ | — | | | $ | 76,032 | |
| | | | | | | | | | | | | | | | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 21 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock High Yield V.I. Fund |
| (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 six months ended June 30, 2018, 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 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:
| | | | | | | | | | | | | | | | | | | | |
| | Corporate Bonds | | | Floating Rate Loan Interests | | | Preferred Securities | | | Unfunded Floating Rate Loan Interests | | | Total | |
Investments: | | | | | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | | | | | |
Opening Balance, as of December 31, 2017 | | $ | 470,250 | | | $ | 2,263,498 | | | $ | 1,972,247 | | | $ | 110 | | | $ | 4,706,105 | |
Transfers into Level 3 | | | — | | | | 429,021 | | | | — | | | | — | | | | 429,021 | |
Transfers out of Level 3 | | | — | | | | (637,272 | ) | | | — | | | | — | | | | (637,272 | ) |
Accrued discounts/premiums | | | — | | | | 2,369 | | | | — | | | | — | | | | 2,369 | |
Net realized gain (loss) | | | 11,581 | | | | 5,840 | | | | 657,271 | | | | — | | | | 674,692 | |
Net change in unrealized appreciation (depreciation)(a)(b) | | | 4,750 | | | | 20,724 | | | | 293,265 | | | | (110 | ) | | | 318,629 | |
Purchases | | | — | | | | 3,414,982 | | | | — | | | | — | | | | 3,414,982 | |
Sales | | | (486,581 | ) | | | (594,970 | ) | | | (1,161,979 | ) | | | — | | | | (2,243,530 | ) |
| | | | | | | | | | | | | | | | | | | | |
Closing Balance, as of June 30, 2018 | | $ | — | | | $ | 4,904,192 | | | $ | 1,760,804 | | | $ | — | | | $ | 6,664,996 | |
| | | | | | | | | | | | | | | | | | | | |
Net change in unrealized appreciation (depreciation) on investments still held at June 30, 2018(b) | | $ | — | | | $ | 20,724 | | | $ | 293,265 | | | $ | — | | | $ | 313,989 | |
| | | | | | | | | | | | | | | | | | | | |
| (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 June 30, 2018 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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statement of Assets and Liabilities (unaudited)
June 30, 2018
| | | | |
| | BlackRock High Yield V.I. Fund | |
| |
ASSETS | | | | |
Investments at value — unaffiliated (cost — $503,902,421) | | $ | 495,654,331 | |
Investments at value — affiliated (cost — $15,125,324) | | | 15,125,324 | |
Cash | | | 145,794 | |
Cash pledged: | | | | |
Futures contracts | | | 198,000 | |
Centrally cleared swaps | | | 1,193,000 | |
Foreign currency at value (cost — $1,164,580) | | | 1,164,573 | |
Receivables: | | | | |
Investments sold | | | 6,074,176 | |
Capital shares sold | | | 103,851 | |
Dividends — affiliated | | | 22,935 | |
Dividends — unaffiliated | | | 100 | |
Interest — unaffiliated | | | 7,336,865 | |
From the Manager | | | 61,439 | |
Swap premiums paid | | | 50,206 | |
Unrealized appreciation on: | | | | |
Forward foreign currency exchange contracts | | | 28,979 | |
OTC swaps | | | 3,017 | |
Unfunded floating rate loan interests | | | 71 | |
Prepaid expenses | | | 967 | |
| | | | |
Total assets | | | 527,163,628 | |
| | | | |
| |
LIABILITIES | | | | |
Payables: | | | | |
Investments purchased | | | 14,470,996 | |
Capital shares redeemed | | | 5,263,262 | |
Income dividend distributions | | | 1,934,818 | |
Distribution fees | | | 60,891 | |
Variation margin on centrally cleared swaps | | | 19,287 | |
Board realignment and consolidation | | | 61,439 | |
Investment advisory fees | | | 188,335 | |
Directors’ and Officer’s fees | | | 2,910 | |
Other affiliates | | | 2,106 | |
Other accrued expenses | | | 214,325 | |
Swap premiums received | | | 104,969 | |
Unrealized depreciation on: | | | | |
Forward foreign currency exchange contracts | | | 32,142 | |
OTC swaps | | | 8,435 | |
Unfunded floating rate loan interests | | | 159 | |
| | | | |
Total liabilities | | | 22,364,074 | |
| | | | |
| |
NET ASSETS | | $ | 504,799,554 | |
| | | | |
| |
NET ASSETS CONSIST OF | | | | |
Paid-in capital | | $ | 517,382,265 | |
Distributions in excess of net investment income | | | (846,031 | ) |
Accumulated net realized loss | | | (3,650,869 | ) |
Net unrealized appreciation (depreciation) | | | (8,085,811 | ) |
| | | | |
NET ASSETS | | $ | 504,799,554 | |
| | | | |
| |
NET ASSET VALUE | | | | |
Class I — Based on net assets of $198,210,579 and 27,504,054 shares outstanding, 200 million shares authorized, $0.10 par value. | | $ | 7.21 | |
| | | | |
Class III — Based on net assets of $306,588,975 and 42,567,036 shares outstanding, 100 million shares authorized, $0.10 par value. | | $ | 7.20 | |
| | | | |
See notes to financial statements.
Statement of Operations (unaudited)
Six Months Ended June 30, 2018
| | | | |
| | BlackRock High Yield V.I. Fund | |
| |
INVESTMENT INCOME | | | | |
Dividends — affiliated | | $ | 114,430 | |
Dividends — unaffiliated | | | 98,584 | |
Interest — unaffiliated | | | 13,065,169 | |
| | | | |
Total investment income | | | 13,278,183 | |
| | | | |
| |
EXPENSES | | | | |
Investment advisory | | | 1,101,956 | |
Transfer agent — class specific | | | 366,298 | |
Distribution — class specific | | | 331,553 | |
Accounting services | | | 65,820 | |
Board realignment and consolidation | | | 61,439 | |
Professional | | | 42,502 | |
Printing | | | 31,548 | |
Custodian | | | 13,748 | |
Directors and Officer | | | 10,469 | |
Transfer agent | | | 2,377 | |
Miscellaneous | | | 20,821 | |
| | | | |
Total expenses | | | 2,048,531 | |
Less: | | | | |
Fees waived and/or reimbursed by the Manager | | | (67,243 | ) |
Transfer agent fees waived and/or reimbursed — class specific | | | (243,562 | ) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 1,737,726 | |
| | | | |
Net investment income | | | 11,540,457 | |
| | | | |
| |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain from: | | | | |
Investments — unaffiliated | | | 638,356 | |
Forward foreign currency exchange contracts | | | 109,320 | |
Foreign currency transactions | | | 114,000 | |
Futures contracts | | | 79,828 | |
Swaps . . . . . | | | 182,454 | |
| | | | |
| | | 1,123,958 | |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | |
Investments — unaffiliated | | | (13,041,589 | ) |
Forward foreign currency exchange contracts | | | 46,103 | |
Foreign currency translations | | | 86,237 | |
Futures contracts | | | 107,417 | |
Swaps . . . . . | | | (93,378 | ) |
Unfunded floating rate loan interests | | | (198 | ) |
| | | | |
| | | (12,895,408 | ) |
| | | | |
Net realized and unrealized loss | | | (11,771,450 | ) |
| | | | |
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | (230,993 | ) |
| | | | |
See notes to financial statements.
| | |
24 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statements of Changes in Net Assets
| | | | | | | | |
| | BlackRock High Yield V.I. Fund | |
| | Six Months Ended 06/30/2018 (unaudited) | | | Year Ended 12/31/2017 | |
| | |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | |
| | |
OPERATIONS | | | | | | | | |
Net investment income | | $ | 11,540,457 | | | $ | 19,309,067 | |
Net realized gain | | | 1,123,958 | | | | 7,903,036 | |
Net change in unrealized appreciation (depreciation) | | | (12,895,408 | ) | | | (1,348,280 | ) |
| | | | | | | | |
Net increase (decrease) in net assets resulting from operations | | | (230,993 | ) | | | 25,863,823 | |
| | | | | | | | |
| | |
DISTRIBUTIONS TO SHAREHOLDERS(a) | | | | | | | | |
From net investment income: | | | | | | | | |
Class I | | | (5,088,501 | ) | | | (8,390,075 | ) |
Class III | | | (6,764,211 | ) | | | (11,127,344 | ) |
| | | | | | | | |
Decrease in net assets resulting from distributions to shareholders | | | (11,852,712 | ) | | | (19,517,419 | ) |
| | | | | | | | |
| | |
CAPITAL SHARE TRANSACTIONS | | | | | | | | |
Net increase in net assets derived from capital share transactions | | | 71,458,896 | | | | 96,093,493 | |
| | | | | | | | |
| | |
NET ASSETS | | | | | | | | |
Total increase in net assets | | | 59,375,191 | | | | 102,439,897 | |
Beginning of period | | | 445,424,363 | | | | 342,984,466 | |
| | | | | | | | |
End of period | | $ | 504,799,554 | | | $ | 445,424,363 | |
| | | | | | | | |
Distributions in excess of net investment income, end of period | | $ | (846,031 | ) | | $ | (533,776 | ) |
| | | | | | | | |
(a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
Financial Highlights
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock High Yield V.I. Fund | |
| | Class I | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 7.39 | | | | | | | $ | 7.24 | | | $ | 6.77 | | | $ | 7.44 | | | $ | 7.67 | | | $ | 7.44 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.19 | | | | | | | | 0.38 | | | | 0.37 | | | | 0.36 | | | | 0.40 | | | | 0.43 | |
Net realized and unrealized gain (loss) | | | (0.18 | ) | | | | | | | 0.15 | | | | 0.48 | | | | (0.61 | ) | | | (0.18 | ) | | | 0.24 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | 0.01 | | | | | | | | 0.53 | | | | 0.85 | | | | (0.25 | ) | | | 0.22 | | | | 0.67 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions from net investment income(b) | | | (0.19 | ) | | | | | | | (0.38 | ) | | | (0.38 | ) | | | (0.42 | ) | | | (0.45 | ) | | | (0.44 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | $ | 7.21 | | | | | | | $ | 7.39 | | | $ | 7.24 | | | $ | 6.77 | | | $ | 7.44 | | | $ | 7.67 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(c) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 0.19 | %(d) | | | | | | | 7.48 | % | | | 12.92 | % | | | (3.60 | )% | | | 2.89 | % | | | 9.33 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets(e) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 0.75 | %(f)(g) | | | | | | | 0.78 | % | | | 0.80 | % | | | 0.84 | % | | | 0.87 | % | | | 0.85 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.62 | %(f) | | | | | | | 0.67 | % | | | 0.68 | % | | | 0.70 | % | | | 0.73 | % | | | 0.73 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 5.23 | %(f) | | | | | | | 5.13 | % | | | 5.29 | % | | | 4.86 | % | | | 5.23 | % | | | 5.65 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 198,211 | | | | | | | $ | 201,945 | | | $ | 152,835 | | | $ | 127,742 | | | $ | 139,729 | | | $ | 150,691 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 36 | % | | | | | | | 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) | Aggregate total return. |
(e) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | 2013 | | | | |
Investments in underlying funds | | | 0.01 | % | | | | | | | 0.01 | % | | | | | | | 0.01 | % | | | | | | | 0.01 | % | | | | | | | — | % | | | | | | | — | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(g) | Board realignment and consolidation costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses would have been 0.76%. |
See notes to financial statements.
| | |
26 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock High Yield V.I. Fund (continued) | |
| | Class III | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 7.38 | | | | | | | $ | 7.24 | | | $ | 6.76 | | | $ | 7.43 | | | $ | 7.67 | | | $ | 7.44 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.18 | | | | | | | | 0.36 | | | | 0.36 | | | | 0.34 | | | | 0.38 | | | | 0.40 | |
Net realized and unrealized gain (loss) | | | (0.18 | ) | | | | | | | 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 from net investment income(b) | | | (0.18 | ) | | | | | | | (0.36 | ) | | | (0.36 | ) | | | (0.40 | ) | | | (0.44 | ) | | | (0.42 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | $ | 7.20 | | | | | | | $ | 7.38 | | | $ | 7.24 | | | $ | 6.76 | | | $ | 7.43 | | | $ | 7.67 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(c) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 0.07 | %(d) | | | | | | | 7.08 | % | | | 12.82 | % | | | (3.85 | )% | | | 2.51 | % | | | 9.07 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets(e) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 0.99 | %(f)(g) | | | | | | | 1.03 | % | | | 1.00 | % | | | 1.06 | % | | | 1.07 | % | | | 1.07 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.86 | %(f) | | | | | | | 0.92 | % | | | 0.92 | % | | | 0.94 | % | | | 0.98 | % | | | 0.96 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 4.98 | %(f) | | | | | | | 4.87 | % | | | 5.05 | % | | | 4.63 | % | | | 4.86 | % | | | 5.23 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 306,589 | | | | | | | $ | 243,479 | | | $ | 190,149 | | | $ | 95,139 | | | $ | 51,524 | | | $ | 18,567 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 36 | % | | | | | | | 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) | Aggregate total return. |
(e) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | 2013 | | | | |
Investments in underlying funds | | | 0.01 | % | | | | | | | 0.01 | % | | | | | | | 0.01 | % | | | | | | | 0.01 | % | | | | | | | — | % | | | | | | | — | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(g) | Board realignment and consolidation costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses would have been 1.00%. |
See notes to financial statements.
Notes to Financial Statements (unaudited)
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 19 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.
| | |
28 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (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 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.
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.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 29 | |
Notes to Financial Statements (unaudited) (continued)
| | |
| | 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.
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
| | |
30 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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.
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 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) | |
Access CIG LLC | | $ | 11,356 | | | $ | 11,356 | | | $ | 11,354 | | | $ | (2 | ) |
Access CIG LLC | | | 1,784 | | | | 1,784 | | | | 1,783 | | | | (1 | ) |
Mavis Tire Express | | | 15,499 | | | | 15,499 | | | | 15,343 | | | | (156 | ) |
Dentalcorp Perfect Smile ULC | | | 38,125 | | | | 38,125 | | | | 38,196 | | | | 71 | |
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 31 | |
Notes to Financial Statements (unaudited) (continued)
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. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts in the Statement of Assets and Liabilities.
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. Cash amounts pledged for forward foreign currency exchange contracts are considered restricted and are included in cash pledged as collateral for OTC derivatives in the Statement of Assets and Liabilities.
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. Amounts pledged, which are considered restricted cash, are included in 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.
| | |
32 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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 aggregate average daily net assets of the Fund and BlackRock Total Return V.I. Fund, a series of the Company, 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 six months ended June 30, 2018, the aggregate average daily net assets of the Fund and the Company’s BlackRock Total Return V.I. Fund were approximately $889,341,646.
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 six months ended June 30, 2018, the class specific distribution fees borne directly by Class III were $331,553.
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 six months ended June 30, 2018, 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.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 33 | |
Notes to Financial Statements (unaudited) (continued)
For the six months ended June 30, 2018, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:
| | | | | | | | | | | | | | |
Class I | | | | | Class III | | | | | Total | |
$ | 156,977 | | | | | $ | 209,321 | | | | | $ | 366,298 | |
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 six months ended June 30, 2018, the amount waived was $5,804.
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, 2020. The contractual agreement may be terminated upon 90 days’ notice by a majority of the 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 six months ended June 30, 2018, there were no fees waived by the Manager.
The Fund has begun to incur expenses in connection with a potential realignment and consolidation of the boards of directors of certain BlackRock-advised funds, including the Fund. The Manager has voluntarily agreed to reimburse the Fund for all or a portion of such expenses, which amounts are included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the six months ended June 30, 2018, the amount reimbursed was $61,439.
For the six months ended June 30, 2018, the Fund reimbursed the Manager $2,260 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, 2020, 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 waived and/or reimbursed — class specific in the Statement of Operations. For the six months ended June 30, 2018, class specific expense waivers and/or reimbursements were as follows:
| | | | | | | | | | | | |
| | Class I | | | Class III | | | Total | |
Transfer agent fees waived and/or reimbursed | | $ | 100,263 | | | $ | 143,299 | | | $ | 243,562 | |
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, 2020, 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 six months ended June 30, 2018, there were no fees waived and/or reimbursed by the Manager.
Interfund Lending: In accordance with an exemptive order (the “Order”) from the U.S. Securities and Exchange Commission (“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 six months ended June 30, 2018, the Fund did not participate in the Interfund Lending Program.
Directors and Officers: 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.
| | |
34 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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 six months ended June 30, 2018, 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 | | $ | 26,887,027 | |
Sales | | | — | |
Net Realized Gain (Loss) | | | — | |
For the six months ended June 30, 2018, purchases and sales of investments, including paydowns and excluding short-term securities, were $234,496,354 and $161,953,526, respectively.
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 June 30, 2018, 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.
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.
As of June 30, 2018, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
| | | | |
Tax cost | | $ | 519,452,261 | |
| | | | |
Gross unrealized appreciation | | $ | 4,505,961 | |
Gross unrealized depreciation | | | (13,102,535 | ) |
| | | | |
Net unrealized appreciation (depreciation) | | $ | (8,596,574 | ) |
| | | | |
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Although the Act does not amend any provisions directly related to the qualification or taxation of regulated investment companies (“RICs”), the Act does change the taxation of entities in which some RICs invest, the tax treatment of income derived from those entities and the taxation of RIC shareholders. While management does not anticipate significant impact to the Fund or to its shareholders, there is uncertainty in the application of certain provisions in the Act. Specifically, provisions in the Act may increase the amount of or accelerate the recognition of taxable income and may limit the deductibility of certain expenses by RICs. Until full clarity around these provisions is obtained, the impact on the Fund’s financial statements, if any, cannot be fully determined.
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, $2.25 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 $1.75 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 0.10% 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 2019 unless extended or renewed. Prior to April 19, 2018, the aggregate commitment amount was $2.1 billion and the fee was 0.12% per annum. Participating Funds paid an upfront commitment fee of 0.02% on the total commitment amounts, in addition to administration, legal and arrangement fees, which 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 six months ended June 30, 2018, the Fund did not borrow under the credit agreement.
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
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 35 | |
Notes to Financial Statements (unaudited) (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.
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.
11. | CAPITAL SHARE TRANSACTIONS |
Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 | | | Year Ended 12/31/2017 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
Class I | | | | | | | | | | | | | | | | |
Shares sold | | | 3,192,138 | | | $ | 23,206,023 | | | | 8,305,552 | | | $ | 61,351,404 | |
Shares issued in reinvestment of distributions | | | 698,866 | | | | 5,096,084 | | | | 1,123,883 | | | | 8,293,740 | |
Shares redeemed | | | (3,732,125 | ) | | | (27,200,506 | ) | | | (3,183,322 | ) | | | (23,471,934 | ) |
| | | | | | | | | | | | | | | | |
Net increase | | | 158,879 | | | $ | 1,101,601 | | | | 6,246,113 | | | $ | 46,173,210 | |
| | | | | | | | | | | | | | | | |
| | | | |
Class III | | | | | | | | | | | | | | | | |
Shares sold | | | 18,479,463 | | | $ | 135,015,407 | | | | 27,190,401 | | | $ | 200,516,323 | |
Shares issued in reinvestment of distributions | | | 888,990 | | | | 6,474,185 | | | | 1,490,839 | | | | 11,005,500 | |
Shares redeemed | | | (9,789,865 | ) | | | (71,132,297 | ) | | | (21,963,775 | ) | | | (161,601,540 | ) |
| | | | | | | | | | | | | | | | |
Net increase | | | 9,578,588 | | | $ | 70,357,295 | | | | 6,717,465 | | | $ | 49,920,283 | |
| | | | | | | | | | | | | | | | |
Total Net Increase | | | 9,737,467 | | | $ | 71,458,896 | | | | 12,963,578 | | | $ | 96,093,493 | |
| | | | | | | | | | | | | | | | |
| | |
36 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
Management’s evaluation of the impact of all subsequent events on the Fund’s financial statements was completed through the date the financial statements were issued and the following items were noted:
The Board has approved an Agreement and Plan of Reorganization (the “Plan”) with respect to the Fund, pursuant to which the Fund will reorganize into a newly created series (the “New Fund”) of a newly organized Maryland corporation. This reorganization with respect to the Fund (the “Reorganization”) is expected to close in the third quarter of 2018. The Reorganization is not subject to approval by shareholders of the Fund.
The New Fund will have the same investment objective, strategies and policies, investment adviser, portfolio management team and service providers as the corresponding Fund. The Fund will be the performance and accounting survivor of its Reorganization, meaning that the New Fund will assume the performance and financial history of the Fund at the completion of the Reorganization. In addition, the New Fund will be subject to the same contractual arrangements, including the same contractual fees and expenses, as those of the Fund. The Reorganization is intended to be tax-free meaning that the Fund’s shareholders will become shareholders of the New Fund without realizing any gain or loss for federal income tax purposes.
Upon the consummation of the Reorganization, shareholders of the Fund will become shareholders of the New Fund. If you are a shareholder of the Fund, the cash value of your investment will not change. You will receive New Fund shares with a total dollar value equal to the Fund shares that you own at the time of the Reorganization.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 37 | |
JUNE 30, 2018
| | |
SEMI-ANNUAL REPORT (UNAUDITED) | | |
BlackRock Variable Series Funds, Inc.
Ø | | BlackRock International V.I. Fund |
|
Not FDIC Insured • May Lose Value • No Bank Guarantee |
| | |
Fund Summary as of June 30, 2018 | | 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 six-month period ended June 30, 2018, the Fund underperformed its benchmark, the MSCI All Country World (ACWI) ex-USA Index.
What factors influenced performance?
Negative stock selection in the consumer staples sector, principally driven by holdings within the tobacco industry, was the largest detractor from the Fund’s return relative to the benchmark. Stock selection in the information technology (“IT”) sector, in both the internet software & services and IT services industries, also detracted. The largest individual detractors were British American Tobacco PLC, Chinese internet technology company NetEase Inc., and Argentinian bank Banco Macro S.A. British American Tobacco underperformed during the period as investor sentiment with respect to tobacco companies has suffered from concerns about potential disruption from regulations, next generation products and new competitors.
Stock selection within the consumer discretionary sector, particularly in the household durables and media industries, was the largest positive contributor to relative return. Selection within the real estate sector also contributed modestly. The top individual contributors were Japanese electronics and gaming giant Sony Corp., global luxury brand Burberry Group PLC and Brazilian bank Itau Unibanco S.A. Sony was the largest individual contributor after releasing better-than-expected results and benefiting from speculation related to merger and acquisition activity in the media space.
Describe recent portfolio activity.
The largest change to the Fund’s positioning in the period was a reduction in consumer staples exposure, which moved from a meaningful overweight to neutral. This was largely driven by a reduction in tobacco exposure as one position was sold and the remaining exposure was reduced by nearly half. In addition, a household products company and a brewer were sold, although a soft drink company was added. The next largest change was an increase in the Fund’s real estate exposure, which moved from zero to a modest overweight. This was driven by the addition of a Japanese real estate management company and an equity real estate investment trust which specializes in global data centers.
Describe portfolio positioning at period end.
As of period-end, the Fund’s largest sector overweight positions were to consumer discretionary, financials and real estate. The largest underweight exposures were to industrials, telecommunication services and materials. At the industry level, the largest overweight exposures were household durables, insurance and energy equipment & services. The largest industry underweight positions were to oil, gas & consumable fuels, metals & mining and automobiles. From a regional perspective, the Fund was overweight in Europe, driven by holdings within the United Kingdom and Spain, and North America due to a large U.S. overweight. The Fund was underweight emerging markets despite a large overweight to China, as well as to Asia, driven by a lack of holdings in 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 | |
Japan | | | 14 | % |
United Kingdom | | | 14 | |
China | | | 14 | |
Spain | | | 10 | |
France | | | 10 | |
United States | | | 9 | |
Germany | | | 7 | |
India | | | 4 | |
Netherlands | | | 3 | |
Mexico | | | 3 | |
Switzerland | | | 2 | |
Canada | | | 2 | |
Portugal | | | 2 | |
Singapore | | | 2 | |
Italy | | | 2 | |
Other(a) | | | — | |
Short-Term Securities | | | 2 | |
Other Assets Less Liabilities | | | — | (b) |
| (a) | Includes holdings within countries that are 1% or less of net assets. Please refer to the Schedule of Investments for such countries. | |
| (b) | Representing less than 0.5% of the Fund’s net assets. | |
| | |
2 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Fund Summary as of June 30, 2018 (continued) | | BlackRock International V.I. Fund |
Performance Summary for the Period Ended June 30, 2018
| | | | | | | | | | | | | | | | | | | | |
| | 6-Month Total Returns (c) | | | | | | Average Annual Total Returns | |
| | | | | 1 Year (c) | | | 5 Years (c) | | | 10 Years (c) | |
Class I(a)(b) | | | (5.57 | )% | | | | | | | 6.18 | % | | | 6.16 | % | | | 2.39 | % |
MSCI ACWI ex-USA Index(d) | | | (3.77 | ) | | | | | | | 7.28 | | | | 5.99 | | | | 2.54 | |
| (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. | |
| (b) | The Fund invests primarily in stocks of companies located outside of 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) | 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) | A free float adjusted market capitalization index designed to measure the combined equity market performance of developed and emerging countries, 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.
Expense Example
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Actual | | | | | | Hypothetical (a) | | | | |
| | Beginning Account Value (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | | | | Beginning Account Value (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | Annualized Expense Ratio | |
Class I | | $ | 1,000.00 | | | $ | 944.30 | | | $ | 5.11 | | | | | | | $ | 1,000.00 | | | $ | 1,019.54 | | | $ | 5.31 | | | | 1.06 | % |
| (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 Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown). | |
See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.
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 January 1, 2018 and held through June 30, 2018) 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 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.
| | | | |
FUND SUMMARY / DERIVATIVE FINANCIAL INSTRUMENTS | | | 3 | |
| | |
Schedule of Investments (unaudited) June 30, 2018 | | BlackRock International V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Common Stocks — 98.2% | |
|
Canada — 2.1% | |
Suncor Energy, Inc. | | | 54,294 | | | $ | 2,209,507 | |
| | | | | | | | |
China — 14.1% | |
Baidu, Inc., ADR(a) | | | 13,711 | | | | 3,331,773 | |
Bank of China Ltd., Class H | | | 7,010,000 | | | | 3,476,433 | |
NetEase, Inc., ADR | | | 16,035 | | | | 4,051,564 | |
Ping An Insurance Group Co. of China Ltd., Class H | | | 445,000 | | | | 4,075,165 | |
| | | | | | | | |
| | | | | | | 14,934,935 | |
France — 9.5% | |
Arkema SA | | | 29,559 | | | | 3,487,970 | |
AXA SA | | | 107,312 | | | | 2,622,038 | |
Engie SA | | | 262,944 | | | | 4,022,124 | |
| | | | | | | | |
| | | | | | | 10,132,132 | |
Germany — 7.3% | |
BASF SE | | | 32,718 | | | | 3,123,540 | |
Bayer AG (Registered) | | | 42,370 | | | | 4,653,226 | |
| | | | | | | | |
| | | | | | | 7,776,766 | |
Hong Kong — 0.2% | |
Nine Dragons Paper Holdings Ltd. | | | 201,000 | | | | 255,031 | |
| | | | | | | | |
India — 3.5% | |
ICICI Bank Ltd.(a) | | | 929,287 | | | | 3,737,718 | |
| | | | | | | | |
Italy — 1.5% | |
Intesa Sanpaolo SpA | | | 559,139 | | | | 1,617,741 | |
| | | | | | | | |
Japan — 14.5% | |
Mitsui Fudosan Co. Ltd. | | | 139,100 | | | | 3,350,679 | |
Omron Corp. | | | 49,700 | | | | 2,315,218 | |
Sony Corp. | | | 119,200 | | | | 6,104,751 | |
Trend Micro, Inc. | | | 63,400 | | | | 3,609,181 | |
| | | | | | | | |
| | | | | | | 15,379,829 | |
Mexico — 2.5% | |
Fomento Economico Mexicano SAB de CV | | | 302,498 | | | | 2,658,476 | |
| | | | | | | | |
Netherlands — 3.0% | |
Aegon NV(b) | | | 542,286 | | | | 3,237,781 | |
| | | | | | | | |
Portugal — 2.0% | |
Banco Comercial Portugues SA, Class R(a) | | | 7,232,044 | | | | 2,162,609 | |
| | | | | | | | |
Singapore — 1.9% | |
Sea Ltd., ADR(a) | | | 131,583 | | | | 1,973,745 | |
| | | | | | | | |
Spain — 10.2% | |
Banco Bilbao Vizcaya Argentaria SA | | | 658,830 | | | | 4,646,444 | |
CaixaBank SA | | | 604,329 | | | | 2,601,205 | |
Industria de Diseno Textil SA | | | 106,198 | | | | 3,616,479 | |
| | | | | | | | |
| | | | | | | 10,864,128 | |
Switzerland — 2.4% | |
Cie Financiere Richemont SA (Registered) | | | 30,206 | | | | 2,553,448 | |
| | | | | | | | |
United Kingdom — 14.2% | |
British American Tobacco plc | | | 42,192 | | | | 2,125,354 | |
Burberry Group plc | | | 93,547 | | | | 2,658,657 | |
Diageo plc | | | 74,571 | | | | 2,679,030 | |
Imperial Brands plc | | | 63,093 | | | | 2,343,155 | |
ITV plc | | | 1,572,524 | | | | 3,595,169 | |
TechnipFMC plc | | | 51,514 | | | | 1,635,054 | |
| | | | | | | | |
| | | | | | | 15,036,419 | |
United States — 9.3% | |
BioMarin Pharmaceutical, Inc.(a) | | | 41,224 | | | | 3,883,301 | |
Equinix, Inc. | | | 6,999 | | | | 3,008,800 | |
| | | | | | | | |
Security | | Shares | | | Value | |
United States (continued) | |
Schlumberger Ltd. | | | 44,874 | | | $ | 3,007,904 | |
| | | | | | | | |
| | | | | | | 9,900,005 | |
| | | | | | | | |
Total Common Stocks — 98.2% (Cost: $99,543,028) | | | | 104,430,270 | |
| | | | | | | | |
Rights — 0.0% | |
|
Italy — 0.0% | |
Intesa Sanpaolo SpA(a) | | | 559,139 | | | | — | |
| | | | | | | | |
Total Rights — 0.0% (Cost: $0) | | | | — | |
| | | | | | | | |
Total Long-Term Investments — 98.2% (Cost: $99,543,028) | | | | 104,430,270 | |
| | | | | | | | |
| | |
| | Par (000) | | | | |
Short-Term Securities — 1.7% | |
|
Money Market Funds — 1.7%(c)(e) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.80% | | USD | 178,632 | | | | 178,632 | |
SL Liquidity Series, LLC, Money Market Series, 2.16%(d) | | | 1,579,597 | | | | 1,579,755 | |
| | | | | | | | |
Total Money Market Funds — 1.7% (Cost: $1,758,198) | | | | 1,758,387 | |
| | | | | | | | |
|
Time Deposits — 0.0% | |
| | |
United Kingdom — 0.0% | | | | | | |
Citibank NA, 0.23%, 07/02/18 | | GBP | 18 | | | | 23,677 | |
| | | | | | | | |
Total Time Deposits — 0.0% (Cost: $23,677) | | | | 23,677 | |
| | | | | |
Total Short-Term Securities — 1.7% (Cost: $1,781,875) | | | | 1,782,064 | |
| | | | | |
| |
Total Investments — 99.9% (Cost: $101,324,903) | | | | 106,212,334 | |
| | | | | |
| |
Total Investments — 99.9% (Cost: $101,324,903) | | | | 106,212,334 | |
Other Assets Less Liabilities — 0.1% | | | | 76,979 | |
| | | | | |
Net Assets — 100.0% | | | $ | 106,289,313 | |
| | | | | |
(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. |
| | |
4 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock International V.I. Fund |
(e) | During the six months ended June 30, 2018, 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 12/31/17 | | | Net Activity | | | Shares Held at 06/30/18 | | | Value at 06/30/18 | | | Income | | | Net Realized Gain (Loss) (a) | | | Change in Unrealized Appreciation (Depreciation) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class | | | 3,135,204 | | | | (2,956,572 | ) | | | 178,632 | | | $ | 178,632 | | | $ | 27,392 | | | $ | — | | | $ | — | |
SL Liquidity Series, LLC, Money Market Series | | | 6,216,364 | | | | (4,636,767 | ) | | | 1,579,597 | | | | 1,579,755 | | | | 9,622 | (b) | | | (199 | ) | | | 463 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | 1,758,387 | | | $ | 37,014 | | | $ | (199 | ) | | $ | 463 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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. | |
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: | | | | | | | | | | | | | | | | |
Canada | | $ | 2,209,507 | | | $ | — | | | $ | — | | | $ | 2,209,507 | |
China | | | 7,383,337 | | | | 7,551,598 | | | | — | | | | 14,934,935 | |
France | | | — | | | | 10,132,132 | | | | — | | | | 10,132,132 | |
Germany | | | — | | | | 7,776,766 | | | | — | | | | 7,776,766 | |
Hong Kong | | | — | | | | 255,031 | | | | — | | | | 255,031 | |
India | | | — | | | | 3,737,718 | | | | — | | | | 3,737,718 | |
Italy | | | — | | | | 1,617,741 | | | | — | | | | 1,617,741 | |
Japan | | | — | | | | 15,379,829 | | | | — | | | | 15,379,829 | |
Mexico | | | 2,658,476 | | | | — | | | | — | | | | 2,658,476 | |
Netherlands | | | — | | | | 3,237,781 | | | | — | | | | 3,237,781 | |
Portugal | | | — | | | | 2,162,609 | | | | — | | | | 2,162,609 | |
Singapore | | | 1,973,745 | | | | — | | | | — | | | | 1,973,745 | |
Spain | | | — | | | | 10,864,128 | | | | — | | | | 10,864,128 | |
Switzerland | | | — | | | | 2,553,448 | | | | — | | | | 2,553,448 | |
United Kingdom | | | 1,635,054 | | | | 13,401,365 | | | | — | | | | 15,036,419 | |
United States | | | 9,900,005 | | | | — | | | | — | | | | 9,900,005 | |
Short-Term Securities: | | | | | | | | | | | | | | | | |
Money Market Funds | | | 178,632 | | | | — | | | | — | | | | 178,632 | |
Time Deposits | | | — | | | | 23,677 | | | | — | | | | 23,677 | |
| | | | | | | | | | | | | | | | |
Subtotal | | $ | 25,938,756 | | | $ | 78,693,823 | | | $ | — | | | $ | 104,632,579 | |
| | | | | | | | | | | | | | | | |
Investments valued at NAV(a) | | | | | | | | | | | | | | $ | 1,579,755 | |
| | | | | | | | | | | | | | | | |
Total Investments | | | | | | | | | | | | | | $ | 106,212,334 | |
| | | | | | | | | | | | | | | | |
| (a) | As of June 30, 2018, 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 out of Level 1 (a) | | | Transfers into Level 2 (a) | |
Assets: | | | | | | | | |
Investments: | | | | | | | | |
Common Stocks: | | | | | | | | |
United Kingdom | | $ | 3,595,169 | | | $ | 3,595,169 | |
| | | | | | | | |
| (a) | 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. | |
See notes to financial statements.
| | | | |
SCHEDULE OF INVESTMENTS | | | 5 | |
Statement of Assets and Liabilities (unaudited)
June 30, 2018
| | | | |
| | BlackRock International V.I. Fund | |
| |
ASSETS | | | | |
Investments at value — unaffiliated (including securities loaned at value of $1,527,880) (cost — $99,566,705) | | $ | 104,453,947 | |
Investments at value — affiliated (cost — $1,758,198) | | | 1,758,387 | |
Cash | | | 10,490 | |
Receivables: | | | | |
Investments sold | | | 1,496,903 | |
Securities lending income — affiliated | | | 948 | |
Capital shares sold | | | 127,247 | |
Dividends — affiliated | | | 4,487 | |
Dividends — unaffiliated | | | 344,444 | |
Prepaid expenses | | | 245 | |
| | | | |
Total assets | | | 108,197,098 | |
| | | | |
| |
LIABILITIES | | | | |
Foreign bank overdraft (cost — $(39,736)) | | | 39,267 | |
Cash collateral on securities loaned at value | | | 1,581,930 | |
Payables: | | | | |
Capital shares redeemed | | | 20,145 | |
Printing fees | | | 38,621 | |
Professional fees | | | 100,447 | |
Transfer agent fees | | | 16,173 | |
Board realignment and consolidation | | | 3,133 | |
Investment advisory fees | | | 66,494 | |
Directors’ and Officer’s fees | | | 2,135 | |
Other affiliates | | | 522 | |
Other accrued expenses | | | 38,918 | |
| | | | |
Total liabilities | | | 1,907,785 | |
| | | | |
| |
NET ASSETS | | $ | 106,289,313 | |
| | | | |
| |
NET ASSETS CONSIST OF | | | | |
Paid-in capital | | $ | 95,049,787 | |
Undistributed net investment income | | | 2,426,686 | |
Accumulated net realized gain | | | 3,920,243 | |
Net unrealized appreciation (depreciation) | | | 4,892,597 | |
| | | | |
NET ASSETS | | $ | 106,289,313 | |
| | | | |
Class I — Based on net assets of $106,289,313 and 8,963,329 shares outstanding, 100 million shares authorized, $0.10 par value | | $ | 11.86 | |
| | | | |
See notes to financial statements.
| | |
6 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statement of Operations (unaudited)
Six Months Ended June 30, 2018
| | | | |
| | BlackRock International V.I. Fund | |
| |
INVESTMENT INCOME | | | | |
Dividends — affiliated | | $ | 27,392 | |
Dividends — unaffiliated | | | 1,827,366 | |
Securities lending income — affiliated — net | | | 9,622 | |
Foreign taxes withheld | | | (142,737 | ) |
| | | | |
Total investment income | | | 1,721,643 | |
| | | | |
| |
EXPENSES | | | | |
Investment advisory | | | 422,948 | |
Transfer agent | | | 123,020 | |
Professional | | | 59,182 | |
Accounting services | | | 21,085 | |
Custodian | | | 17,677 | |
Printing | | | 11,532 | |
Directors and Officer | | | 8,860 | |
Board realignment and consolidation | | | 3,133 | |
Miscellaneous | | | 5,696 | |
| | | | |
Total expenses | | | 673,133 | |
Less: | | | | |
Fees waived and/or reimbursed by the Manager | | | (1,552 | ) |
Transfer agent fees waived and /or reimbursed — class specific | | | (75,571 | ) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 596,010 | |
| | | | |
Net investment income | | | 1,125,633 | |
| | | | |
| |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain (loss) from: | | | | |
Investments — affiliated | | | (199 | ) |
Investments — unaffiliated (net of $(19) foreign capital gain tax) | | | 4,049,548 | |
Foreign currency transactions | | | (65,953 | ) |
| | | | |
| | | 3,983,396 | |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | |
Investments — affiliated | | | 463 | |
Investments — unaffiliated (net of $125,570 foreign capital gain tax) | | | (11,429,453 | ) |
Foreign currency translations | | | 1,841 | |
| | | | |
| | | (11,427,149 | ) |
| | | | |
Net realized and unrealized loss | | | (7,443,753 | ) |
| | | | |
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | (6,318,120 | ) |
| | | | |
See notes to financial statements.
Statements of Changes in Net Assets
| | | | | | | | |
| | BlackRock International V.I. Fund | |
| | Six Months Ended 06/30/2018 (unaudited) | | | Year Ended 12/31/2017 | |
| | |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | |
| | |
OPERATIONS | | | | | | | | |
Net investment income | | $ | 1,125,633 | | | $ | 1,434,265 | |
Net realized gain | | | 3,983,396 | | | | 9,173,925 | |
Net change in unrealized appreciation (depreciation) | | | (11,427,149 | ) | | | 17,210,656 | |
| | | | | | | | |
Net increase (decrease) in net assets resulting from operations | | | (6,318,120 | ) | | | 27,818,846 | |
| | | | | | | | |
| | |
CAPITAL SHARE TRANSACTIONS | | | | | | | | |
Net decrease in net assets derived from capital share transactions | | | (2,825,183 | ) | | | (8,586,936 | ) |
| | | | | | | | |
| | |
NET ASSETS | | | | | | | | |
Total increase (decrease) in net assets | | | (9,143,303 | ) | | | 19,231,910 | |
Beginning of period | | | 115,432,616 | | | | 96,200,706 | |
| | | | | | | | |
End of period | | $ | 106,289,313 | | | $ | 115,432,616 | |
| | | | | | | | |
Undistributed net investment income, end of period | | $ | 2,426,686 | | | $ | 1,301,053 | |
| | | | | | | | |
See notes to financial statements.
| | |
8 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Financial Highlights
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock International V.I. Fund | |
| | Class I | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 12.56 | | | | | | | $ | 9.58 | | | $ | 9.71 | | | $ | 10.10 | | | $ | 10.87 | | | $ | 9.04 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.12 | | | | | | | | 0.15 | | | | 0.15 | | | | 0.14 | | | | 0.13 | | | | 0.19 | |
Net realized and unrealized gain (loss) | | | (0.82 | ) | | | | | | | 2.83 | | | | (0.11 | ) | | | (0.42 | ) | | | (0.69 | ) | | | 1.86 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | (0.70 | ) | | | | | | | 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 period | | $ | 11.86 | | | | | | | $ | 12.56 | | | $ | 9.58 | | | $ | 9.71 | | | $ | 10.10 | | | $ | 10.87 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(d) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | (5.57 | )%(e) | | | | | | | 31.11 | % | | | 0.39 | % | | | (2.76 | )% | | | (5.19 | )% | | | 22.75 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.19 | %(f)(g) | | | | | | | 1.24 | %(g) | | | 1.15 | % | | | 1.09 | % | | | 1.11 | % | | | 1.08 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 1.06 | %(f)(g) | | | | | | | 1.11 | %(g) | | | 1.04 | % | | | 0.98 | % | | | 0.99 | % | | | 0.97 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 2.00 | %(f)(g) | | | | | | | 1.37 | %(g) | | | 1.57 | % | | | 1.35 | % | | | 1.21 | % | | | 1.92 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 106,289 | | | | | | | $ | 115,433 | | | $ | 96,201 | | | $ | 107,942 | | | $ | 125,144 | | | $ | 150,314 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 53 | % | | | | | | | 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) | Aggregate total return. |
(g) | Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%. |
See notes to financial statements.
Notes to Financial Statements (unaudited)
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 19 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.
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.
| | |
10 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (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. |
| • | | 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 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 June 30, 2018, 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
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 11 | |
Notes to Financial Statements (unaudited) (continued)
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 | |
UBS Securities LLC | | $ | 1,527,880 | | | $ | (1,527,880 | ) | | $ | — | |
| (a) | Cash collateral with a value of $1,581,930 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. Cash amounts pledged for forward foreign currency exchange contracts are considered restricted and are included in cash pledged as collateral for OTC derivatives on the Statement of Assets and Liabilities.
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.
| | |
12 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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 six months ended June 30, 2018, 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 six months ended June 30, 2018, 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 six months ended June 30, 2018, the Fund had no class specific transfer agent fees.
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 six months ended June 30, 2018, the amount waived was $1,552.
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 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 six months ended June 30, 2018, there were no fees waived by the Manager.
For the six months ended June 30, 2018, the Fund reimbursed the Manager $597 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, 2019, unless approved by the Board, including a majority of the Independent Directors, or by a
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 13 | |
Notes to Financial Statements (unaudited) (continued)
vote of a majority of the outstanding voting securities of the Fund. This amount is shown as transfer agent fees waived and/or reimbursed — class specific in the Statement of Operations. For the six months ended June 30, 2018, class specific waivers and/or reimbursements were $75,571.
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, 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 six months ended June 30, 2018, there were no fees waived 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 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 six months ended June 30, 2018, the Fund paid BIM $921 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 and 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 six months ended June 30, 2018, the Fund did not participate in the Interfund Lending Program.
Directors and Officers: 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.
For the six months ended June 30, 2018, purchases and sales of investments, excluding short-term securities, were $57,279,262 and $57,804,603, respectively.
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 June 30, 2018, 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.
| | |
14 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
As of June 30, 2018, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:
| | | | |
Tax cost | | $ | 101,361,773 | |
| | | | |
Gross unrealized appreciation | | $ | 8,610,772 | |
Gross unrealized depreciation | | | (3,760,211 | ) |
| | | | |
Net unrealized appreciation (depreciation) | | $ | 4,850,561 | |
| | | | |
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Although the Act does not amend any provisions directly related to the qualification or taxation of regulated investment companies (“RICs”), the Act does change the taxation of entities in which some RICs invest, the tax treatment of income derived from those entities and the taxation of RIC shareholders. While management does not anticipate significant impact to the Fund or to its shareholders, there is uncertainty in the application of certain provisions in the Act. Specifically, provisions in the Act may increase the amount of or accelerate the recognition of taxable income and may limit the deductibility of certain expenses by RICs. Until full clarity around these provisions is obtained, the impact on the Fund’s financial statements, if any, cannot be fully determined.
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, $2.25 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 $1.75 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 0.10% 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 2019 unless extended or renewed. Prior to April 19, 2018, the aggregate commitment amount was $2.1 billion and the fee was 0.12% per annum. Participating Funds paid an upfront commitment fee of 0.02% on the total commitment amounts, in addition to administration, legal and arrangement fees, which 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 six months ended June 30, 2018, the Fund did not borrow under the credit agreement.
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
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 15 | |
Notes to Financial Statements (unaudited) (continued)
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.
11. | CAPITAL SHARE TRANSACTIONS |
Transactions in capital shares were as follows:
| | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 | | | Year Ended 12/31/2017 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
Class I | | | | | | | | | | | | | | | | |
Shares sold | | | 476,634 | | | $ | 6,004,486 | | | | 766,286 | | | $ | 8,733,286 | |
Shares redeemed | | | (706,878 | ) | | | (8,829,669 | ) | | | (1,613,860 | ) | | | (17,320,222 | ) |
| | | | | | | | | | | | | | | | |
Net decrease | | | (230,244 | ) | | $ | (2,825,183 | ) | | | (847,574 | ) | | $ | (8,586,936 | ) |
| | | | | | | | | | | | | | | | |
Management’s evaluation of the impact of all subsequent events on the Fund’s financial statements was completed through the date the financial statements were issued and the following items were noted:
The Fund paid a net investment income distribution in the following amount per share on July 20, 2018 to the shareholders of record on July 18, 2018.
| | | | |
| | Net Investment Income | |
Class I | | $ | 0.143186 | |
| | |
16 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Glossary of Terms Used in this Report
| | |
Currency |
| |
GBP | | British Pound |
USD | | United States Dollar |
| | |
Portfolio Abbreviations |
| |
ADR | | American Depositary Receipts |
| | | | |
GLOSSARYOF TERMS USEDINTHIS REPORT | | | 17 | |
JUNE 30, 2018
| | |
SEMI-ANNUAL REPORT (UNAUDITED) | | |
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 June 30, 2018 | | 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.
On May 8, 2018, the Board of Directors (the “Board”) of BlackRock Variable Series Funds, Inc. (the “Company”) approved the liquidation of BlackRock iShares® Alternative Strategies V.I. Fund, a series of the Company. Effective August 8, 2018, the Fund will be closed to new insurance company separate accounts, including through exchanges into the Fund from other funds of the Company. The Fund is expected to be liquidated on or about August 31, 2018 (the “Liquidation Date”).
Portfolio Management Commentary
How did the Fund perform?
For the six-month period ended June 30, 2018, the Fund outperformed its blended benchmark, the 60% MSCI All Country World Index / 40% Bloomberg Barclays U.S. Aggregate Bond Index.
What factors influenced performance?
The largest contributor to Fund performance was exposure to the iShares U.S. Real Estate ETF. This was followed by exposure to the iShares Commodities Select Strategy ETF.
The largest detractor from performance was exposure to the iShares J.P. Morgan USD Emerging Markets Bond ETF. This was followed by exposure to the iShares Global Infrastructure ETF.
Describe recent portfolio activity.
In the reporting period, the Fund increased exposure to the iShares U.S. Real Estate ETF and the iShares Edge MSCI USA Momentum Factor ETF. The Fund reduced exposure to the iShares US Preferred Stock ETF and the iShares Global Infrastructure ETF.
Describe portfolio positioning at period end.
At period end, the Fund was overweight in U.S. equities relative to international market equities, and had shorter duration. The Fund’s top holdings included minimum volatility global equities, U.S. real estate and emerging market debt.
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 | | | 48 | % |
Fixed Income Funds | | | 16 | |
Commodity Funds | | | 10 | |
Short-Term Securities | | | 26 | |
| | |
2 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Fund Summary as of June 30, 2018 (continued) | | BlackRock iShares® Alternative Strategies V.I. Fund |
Performance Summary for the Period Ended June 30, 2018
| | | | | | | | | | | | | | | | |
| | | | | | | | Average Annual Total Returns | |
| | 6-Month Total Returns (c) | | | | | | 1 Year (c) | | | Since Inception (c)(d) | |
Class I(a)(b) | | | 0.18 | % | | | | | | | 5.17 | % | | | 5.11 | % |
Class III(a)(b) | | | 0.00 | | | | | | | | 4 .88 | | | | 4.85 | |
60% MSCI All Country World Index / 40% Bloomberg Barclays U.S. Aggregate Bond Index(e) | | | (0.83 | ) | | | | | | | 6.25 | | | | 5.11 | |
MSCI All Country World Index(f) | | | (0.43 | ) | | | | | | | 10.73 | | | | 7.02 | |
Bloomberg Barclays U.S. Aggregate Bond Index(g) | | | (1.62 | ) | | | | | | | (0.40 | ) | | | 1.97 | |
| (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) | The Fund invests in a portfolio of underlying exchange-traded funds that seek to track alternative indices. | |
| (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 Fund commenced operations on April 30, 2014. | |
| (e) | A customized weighted index comprised of 60% MSCI All Country World Index and 40% Bloomberg Barclays U.S. Aggregate Bond Index. | |
| (f) | 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. | |
| (g) | 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. | |
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 (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | | | | Beginning Account Value (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | Annualized Expense Ratio | |
Class I | | $ | 1,000.00 | | | $ | 1,001.80 | | | $ | 3.23 | | | | | | | $ | 1,000.00 | | | $ | 1,021.57 | | | $ | 3.26 | | | | 0.65 | % |
Class III | | | 1,000.00 | | | | 1,000.00 | | | | 4.46 | | | | | | | | 1,000.00 | | | | 1,020.33 | | | | 4.51 | | | | 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 annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown). | |
See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.
| | |
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 January 1, 2018 and held through June 30, 2018) 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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Consolidated Schedule of Investments (unaudited) June 30, 2018 | | BlackRock iShares® Alternative Strategies V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Affiliated Investment Companies — 135.4%(f) | |
| |
Commodity Funds — 13.1% | | | | |
iShares Commodities Select Strategy ETF(a) | | | 54,133 | | | $ | 2,113,352 | |
iShares Gold Trust(b)(c) | | | 61,248 | | | | 736,201 | |
iShares Silver Trust(b)(c) | | | 50,388 | | | | 763,378 | |
| | | | | | | | |
| | | | | | | 3,612,931 | |
Equity Funds — 64.9% | | | | |
iShares Edge MSCI Minimum Volatility Global ETF | | | 97,753 | | | | 8,118,387 | |
iShares Edge MSCI USA Momentum Factor ETF(a) | | | 26,560 | | | | 2,913,632 | |
iShares Global Infrastructure ETF(a) | | | 53,665 | | | | 2,305,985 | |
iShares U.S. Real Estate ETF(a) | | | 57,184 | | | | 4,607,887 | |
| | | | | | | | |
| | | | | | | 17,945,891 | |
Fixed Income Funds — 22.4% | | | | |
iShares International Aggregate Bond ETF(a) | | | 16,600 | | | | 874,654 | |
iShares J.P. Morgan USD Emerging Markets Bond ETF(a) | | | 30,169 | | | | 3,221,144 | |
iShares U.S. Preferred Stock ETF(a) | | | 54,768 | | | | 2,065,301 | |
| | | | | | | | |
| | | | | | | 6,161,099 | |
| | | | | | | | |
Security | | Shares | | | Value | |
Short-Term Securities — 35.0% | |
SL Liquidity Series, LLC, Money Market Series, 2.16%(d)(e) | | | 9,657,576 | | | $ | 9,658,542 | |
| | | | | | | | |
| |
Total Affiliated Investment Companies — 135.4% (Cost: $36,204,314) | | | | 37,378,463 | |
Liabilities in Excess of Other Assets — (35.4)% | | | | (9,762,821 | ) |
| | | | | |
Net Assets — 100.0% | | | $ | 27,615,642 | |
| | | | | | | | |
(a) | Security, or a portion of the security, is on loan. |
(b) | Non-income producing security. |
(c) | 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. |
(d) | Annualized 7-day yield as of period end. |
(e) | Security was purchased with cash collateral from loaned securities. |
(f) | During the six months ended June 30, 2018, 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 12/31/17 | | | Shares Purchased | | | Shares Sold | | | Shares Held at 06/30/18 | | | Value at 06/30/18 | | | Income | | | Net Realized Gain (Loss) (a) | | | Change in Unrealized Appreciation (Depreciation) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class | | | 88,209 | | | | — | | | | (88,209 | )(b) | | | — | | | $ | — | | | $ | 500 | | | $ | — | | | $ | — | |
SL Liquidity Series, LLC, Money Market Series | | | 2,666,376 | | | | 6,991,200 | (c) | | | — | | | | 9,657,576 | | | | 9,658,542 | | | | 15,292 | (d) | | | 2,239 | | | | 335 | |
iShares Commodities Select Strategy ETF | | | 62,033 | | | | 20,300 | | | | (28,200 | ) | | | 54,133 | | | | 2,113,352 | | | | 15,851 | | | | 170,002 | | | | 8,074 | |
iShares Edge MSCI Minimum Volatility Global ETF | | | 88,203 | | | | 19,050 | | | | (9,500 | ) | | | 97,753 | | | | 8,118,387 | | | | 89,046 | | | | 156,995 | | | | (277,511 | ) |
iShares Edge MSCI USA Momentum Factor ETF | | | 14,300 | | | | 14,460 | | | | (2,200 | ) | | | 26,560 | | | | 2,913,632 | | | | 14,493 | | | | 32,410 | | | | 75,601 | |
iShares Global Infrastructure ETF | | | 86,765 | | | | 5,800 | | | | (38,900 | ) | | | 53,665 | | | | 2,305,985 | | | | 37,814 | | | | 167,004 | | | | (324,051 | ) |
iShares Gold Trust | | | 105,748 | | | | 6,700 | | | | (51,200 | ) | | | 61,248 | | | | 736,201 | | | | — | | | | 70,491 | | | | (93,891 | ) |
iShares International Aggregate Bond ETF | | | — | | | | 17,900 | | | | (1,300 | ) | | | 16,600 | | | | 874,654 | | | | 1,173 | | | | (57 | ) | | | 4,562 | |
iShares J.P. Morgan USD Emerging Markets Bond ETF | | | 31,319 | | | | 7,650 | | | | (8,800 | ) | | | 30,169 | | | | 3,221,144 | | | | 65,477 | | | | 14,111 | | | | (335,468 | ) |
iShares Silver Trust | | | 56,107 | | | | 3,281 | | | | (9,000 | ) | | | 50,388 | | | | 763,378 | | | | — | | | | 4,779 | | | | (48,538 | ) |
iShares U.S. Preferred Stock ETF | | | 125,328 | | | | 7,450 | | | | (78,010 | ) | | | 54,768 | | | | 2,065,301 | | | | 81,469 | | | | (63,769 | ) | | | (3,417 | ) |
iShares U.S. Real Estate ETF | | | 35,364 | | | | 34,300 | | | | (12,480 | ) | | | 57,184 | | | | 4,607,887 | | | | 62,791 | | | | 10,862 | | | | 173,933 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | 37,378,463 | | | $ | 383,906 | | | $ | 565,067 | | | $ | (820,371 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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. | |
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 | | $ | 27,719,921 | | | $ | — | | | $ | — | | | $ | 27,719,921 | |
| | | | | | | | | | | | | | | | |
Investments valued at NAV(a) | | | | | | | | | | | | | | $ | 9,658,542 | |
| | | | | | | | | | | | | | | | |
Total Investments | | | | | | | | | | | | | | $ | 37,378,463 | |
| | | | | | | | | | | | | | | | |
| (a) | As of June 30, 2018, 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 six months ended June 30, 2018, there were no transfers between levels.
See notes to consolidated financial statements.
| | | | |
CONSOLIDATED SCHEDULE OF INVESTMENTS | | | 5 | |
Consolidated Statement of Assets and Liabilities (unaudited)
June 30, 2018
| | | | |
| | BlackRock iShares® Alternative Strategies V.I. Fund | |
| |
ASSETS | | | | |
Investments at value — affiliated (including securities loaned at value of $9,490,742) (cost — $36,204,314) | | $ | 37,378,463 | |
Receivables: | | | | |
Investments sold | | | 86,237 | |
Securities lending income — affiliated | | | 2,061 | |
Capital shares sold | | | 427 | |
Dividends — affiliated | | | 60,922 | |
From the Manager | | | 211 | |
Prepaid expenses | | | 61 | |
| | | | |
Total assets | | | 37,528,382 | |
| | | | |
| |
LIABILITIES | | | | |
Bank overdraft | | | 86,860 | |
Cash collateral on securities loaned at value | | | 9,657,395 | |
Payables: | | | | |
Accounting Fees | | | 9,511 | |
Capital shares redeemed | | | 120,589 | |
Professional fees | | | 31,776 | |
Distribution fees | | | 2,450 | |
Board realignment and consolidation | | | 430 | |
Investment advisory fees | | | 222 | |
Directors’ and Officer’s fees | | | 1,045 | |
Other affiliates | | | 17 | |
Other accrued expenses | | | 2,445 | |
| | | | |
Total liabilities | | | 9,912,740 | |
| | | | |
| |
NET ASSETS | | $ | 27,615,642 | |
| | | | |
| |
NET ASSETS CONSIST OF | | | | |
Paid-in capital | | $ | 26,022,239 | |
Undistributed net investment income | | | 297,049 | |
Accumulated net realized gain | | | 122,205 | |
Net unrealized appreciation (depreciation) | | | 1,174,149 | |
| | | | |
NET ASSETS | | $ | 27,615,642 | |
| | | | |
| |
NET ASSET VALUE | | | | |
Class I — Based on net assets of $16,109,766 and 1,444,021 shares outstanding, 100 million shares authorized, $0.10 par value | | $ | 11.16 | |
| | | | |
Class III — Based on net assets of $11,505,876 and 1,036,938 shares outstanding, 100 million shares authorized, $0.10 par value | | $ | 11.10 | |
| | | | |
See notes to consolidated financial statements.
| | |
6 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Consolidated Statement of Operations (unaudited)
Six Months Ended June 30, 2018
| | | | |
| | BlackRock iShares® Alternative Strategies V.I. Fund | |
| |
INVESTMENT INCOME | | | | |
Dividends — affiliated | | $ | 368,614 | |
Dividends — unaffiliated | | | 126 | |
Securities lending income — affiliated — net | | | 15,292 | |
| | | | |
Total investment income | | | 384,032 | |
| | | | |
| | | | |
| |
EXPENSES | | | | |
Investment advisory | | | 35,798 | |
Transfer agent — class specific | | | 31,388 | |
Professional | | | 29,885 | |
Accounting services | | | 23,495 | |
Printing | | | 16,011 | |
Distribution — class specific | | | 15,885 | |
Directors and Officer | | | 7,807 | |
Custodian | | | 3,845 | |
Transfer agent | | | 2,479 | |
Board realignment and consolidation | | | 430 | |
Miscellaneous | | | 1,905 | |
| | | | |
Total expenses | | | 168,928 | |
Less: | | | | |
Fees waived and/or reimbursed by the Manager | | | (28,171 | ) |
Transfer agent fees waived and/or reimbursed — class specific | | | (31,378 | ) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 109,379 | |
| | | | |
Net investment income | | | 274,653 | |
| | | | |
| |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain from investments — affiliated | | | 565,067 | |
Net change in unrealized depreciation on investments — affiliated | | | (820,371 | ) |
| | | | |
Net realized and unrealized loss | | | (255,304 | ) |
| | | | |
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 19,349 | |
| | | | |
See notes to consolidated financial statements.
| | | | |
CONSOLIDATED FINANCIAL STATEMENTS | | | 7 | |
Consolidated Statements of Changes in Net Assets
| | | | | | | | |
| | BlackRock iShares® Alternative Strategies V.I. Fund | |
| | Six Months Ended 06/30/2018 (unaudited) | | | Year Ended 12/31/2017 | |
| | |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | |
| | |
OPERATIONS | | | | | | | | |
Net investment income | | $ | 274,653 | | | $ | 747,349 | |
Net realized gain | | | 565,067 | | | | 18,827 | |
Net change in unrealized appreciation (depreciation) | | | (820,371 | ) | | | 2,109,463 | |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 19,349 | | | | 2,875,639 | |
| | | | | | | | |
| | |
DISTRIBUTIONS TO SHAREHOLDERS(a) | | | | | | | | |
From net investment income: | | | | | | | | |
Class I | | | — | | | | (422,009 | ) |
Class III | | | — | | | | (307,726 | ) |
From return of capital: | | | | | | | | |
Class I | | | — | | | | (1,366 | ) |
Class III | | | — | | | | (900 | ) |
| | | | | | | | |
Decrease in net assets resulting from distributions to shareholders | | | — | | | | (732,001 | ) |
| | | | | | | | |
| | |
CAPITAL SHARE TRANSACTIONS | | | | | | | | |
Net increase (decrease) in net assets derived from capital share transactions | | | (970,060 | ) | | | 4,937,220 | |
| | | | | | | | |
| | |
NET ASSETS | | | | | | | | |
Total increase (decrease) in net assets | | | (950,711 | ) | | | 7,080,858 | |
Beginning of period | | | 28,566,353 | | | | 21,485,495 | |
| | | | | | | | |
End of period | | $ | 27,615,642 | | | $ | 28,566,353 | |
| | | | | | | | |
Undistributed net investment income, end of period | | $ | 297,049 | | | $ | 22,396 | |
| | | | | | | | |
(a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to consolidated financial statements.
| | |
8 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Consolidated Financial Highlights
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock iShares® Alternative Strategies V.I. Fund | |
| | Class I | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | | | | | | Period from 04/30/2014 (a) to 12/31/2014 | |
| | 2017 | | | 2016 | | | 2015 | | | | |
Net asset value, beginning of period | | $ | 11.14 | | | | | | | $ | 10.15 | | | $ | 9.79 | | | $ | 10.20 | | | | | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(b) | | | 0.11 | | | | | | | | 0.33 | | | | 0.35 | | | | 0.37 | | | | | | | | 0.31 | |
Net realized and unrealized gain (loss) | | | (0.09 | ) | | | | | | | 0.96 | | | | 0.30 | | | | (0.47 | ) | | | | | | | 0.03 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | 0.02 | | | | | | | | 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 gain | | | — | | | | | | | | — | | | | — | | | | — | | | | | | | | (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 | | $ | 11.16 | | | | | | | $ | 11.14 | | | $ | 10.15 | | | $ | 9.79 | | | | | | | $ | 10.20 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(e) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 0.18 | %(f) | | | | | | | 12.74 | % | | | 6.59 | % | | | (1.02 | )% | | | | | | | 3.32 | %(f) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets(g) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.07 | %(h) | | | | | | | 0.94 | % | | | 1.10 | % | | | 2.15 | % | | | | | | | 8.81 | %(h)(i) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.65 | %(h) | | | | | | | 0.65 | % | | | 0.65 | % | | | 0.71 | % | | | | | | | 0.75 | %(h) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 2.06 | %(h) | | | | | | | 3.04 | % | | | 3.30 | % | | | 3.59 | % | | | | | | | 4.36 | %(h) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 16,110 | | | | | | | $ | 16,000 | | | $ | 13,800 | | | $ | 9,707 | | | | | | | $ | 5,116 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 31 | % | | | | | | | 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: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 6/30/2018 (unaudited) | | | | | | Year Ended December 31, | | | | | | Period from 04/30/2014 (a) to 12/31/2014 | |
| 2017 | | | 2016 | | | 2015 | | | | |
Investments in underlying funds | | | 0.36 | % | | | | | | | 0.38 | % | | | 0.34 | % | | | 0.37 | % | | | | | | | 0.41 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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 | | | 9 | |
Consolidated Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock iShares® Alternative Strategies V.I. Fund (continued) | |
| | Class III | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | | | | | | Period from 04/30/2014 (a) to 12/31/2014 | |
| 2017 | | | 2016 | | | 2015 | |
Net asset value, beginning of period | | $ | 11.10 | | | | | | | $ | 10.12 | | | $ | 9.77 | | | $ | 10.20 | | | | | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(b) | | | 0.10 | | | | | | | | 0.32 | | | | 0.36 | | | | 0.39 | | | | | | | | 0.36 | |
Net realized and unrealized gain (loss) | | | (0.10 | ) | | | | | | | 0.94 | | | | 0.26 | | | | (0.52 | ) | | | | | | | (0.03 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | (0.00 | ) | | | | | | | 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 gain | | | — | | | | | | | | — | | | | — | | | | — | | | | | | | | (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 | | | | | | | $ | 11.10 | | | $ | 10.12 | | | $ | 9.77 | | | | | | | $ | 10.20 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(e) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 0.00 | %(f) | | | | | | | 12.45 | % | | | 6.33 | % | | | (1.24 | )% | | | | | | | 3.26 | %(f) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets(g) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.32 | %(h) | | | | | | | 1.22 | % | | | 1.29 | % | | | 2.26 | % | | | | | | | 8.54 | %(h)(i) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.90 | %(h) | | | | | | | 0.90 | % | | | 0.90 | % | | | 0.94 | % | | | | | | | 1.00 | %(h) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.75 | %(h) | | | | | | | 2.94 | % | | | 3.38 | % | | | 3.81 | % | | | | | | | 5.05 | %(h) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 11,506 | | | | | | | $ | 12,566 | | | $ | 7,685 | | | $ | 2,160 | | | | | | | $ | 334 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 31 | % | | | | | | | 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: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 6/30/2018 (unaudited) | | | | | | Year Ended December 31, | | | | | | Period from 04/30/2014 (a) to 12/31/2014 | |
| 2017 | | | 2016 | | | 2015 | | | | |
Investments in underlying funds | | | 0.36 | % | | | | | | | 0.38 | % | | | 0.34 | % | | | 0.37 | % | | | | | | | 0.41 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Consolidated Financial Statements (unaudited)
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 19 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 June 30, 2018 were $1,505,468, which is 5.5% 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.
On May 8, 2018, the Board of Directors (the “Board”) of the Company approved the liquidation of the Fund. Effective August 8, 2018, the Fund will be closed to new insurance company separate accounts, including through exchanges into the Fund from other funds of the Company. The Fund is expected to be liquidated on or about August 31, 2018 (the “Liquidation Date”).
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.
| | | | |
NOTESTO CONSOLIDATED FINANCIAL STATEMENTS | | | 11 | |
Notes to Consolidated Financial Statements (unaudited) (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:
| • | | 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 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 June 30, 2018, 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.
| | |
12 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Consolidated Financial Statements (unaudited) (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:
Securities Lending Agreements
| | | | | | | | | | | | |
Counterparty | | Securities Loaned at Value | | | Cash Collateral Received (a) | | | Net Amount | |
Citigroup Global Markets, Inc. | | $ | 1,131,300 | | | $ | (1,131,300 | ) | | $ | — | |
Deutsche Bank Securities Inc. | | | 259,754 | | | | (259,754 | ) | | | — | |
Goldman Sachs & Co. | | | 341,825 | | | | (341,825 | ) | | | — | |
Jefferies LLC | | | 289,877 | | | | (289,877 | ) | | | — | |
JP Morgan Securities LLC | | | 6,413,906 | | | | (6,413,906 | ) | | | — | |
Merrill Lynch, Pierce, Fenner & Smith | | | 1,054,080 | | | | (1,054,080 | ) | | | — | |
| | | | | | | | | | | | |
| | $ | 9,490,742 | | | $ | (9,490,742 | ) | | $ | — | |
| | | | | | | | | | | | |
| (a) | Cash collateral with a value of $9,657,395 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 six months ended June 30, 2018, the class specific distribution fees borne directly by Class III is $15,885.
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 six months ended June 30, 2018, the Fund did not pay any amounts to affiliates in return for these services.
| | | | |
NOTESTO CONSOLIDATED FINANCIAL STATEMENTS | | | 13 | |
Notes to Consolidated Financial Statements (unaudited) (continued)
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 six months ended June 30, 2018, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:
| | | | | | | | | | | | | | |
Class I | | | | | Class III | | | | | Total | |
$ | 17,336 | | | | | $ | 14,052 | | | | | $ | 31,388 | |
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 six months ended June 30, 2018, the amount waived was $28.
For the six months ended June 30, 2018, the Fund reimbursed the Manager $156 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, 2019, unless approved by the Board, including a majority of the 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 six months ended June 30, 2018, the Manager waived and/or reimbursed $28,143, 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 waived and/or reimbursed — class specific in the Consolidated Statement of Operations. For the six months ended June 30, 2018, class specific expense waivers and/or reimbursements are as follows:
| | | | | | | | | | | | |
| | Class I | | | Class III | | | Total | |
Transfer Agent Fees Waived and/or Reimbursed | | $ | 17,330 | | | $ | 14,048 | | | $ | 31,378 | |
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 June 30, 2018, 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 | | | 2020 | |
Fund Level | | $ | 46,338 | | | $ | 49,095 | | | $ | 28,143 | |
Class I | | | 22,342 | | | | 18,123 | | | | 17,330 | |
Class III | | | 6,323 | | | | 119,566 | | | | 14,048 | |
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.
| | |
14 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Consolidated Financial Statements (unaudited) (continued)
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 Consolidated Statement of Operations. For the six months ended June 30, 2018, the Fund paid BIM $1,337 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 six months ended June 30, 2018, the Fund did not participate in the Interfund Lending Program.
Directors and Officers: 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.
For the six months ended June 30, 2018, purchases and sales of investments, excluding short-term securities, were $8,967,606 and $9,571,904, respectively.
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 June 30, 2018, 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.
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.
As of June 30, 2018, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:
| | | | |
Tax cost | | $ | 36,452,768 | |
| | | | |
Gross unrealized appreciation | | $ | 1,184,918 | |
Gross unrealized depreciation | | | (259,223 | ) |
| | | | |
Net unrealized appreciation (depreciation) | | $ | 925,695 | |
| | | | |
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Although the Act does not amend any provisions directly related to the qualification or taxation of regulated investment companies (“RICs”), the Act does change the taxation of entities in which some RICs invest, the tax treatment of income derived from those entities and the taxation of RIC shareholders. There is uncertainty in the application of certain provisions in the Act which could impact certain funds and their shareholders. Specifically, provisions in the Act may increase the amount of or accelerate the recognition of taxable income and may limit the deductibility of certain expenses by RICs. Until full clarity around these provisions is obtained, the impact on the Fund’s consolidated financial statements, if any, cannot be fully determined.
| | | | |
NOTESTO CONSOLIDATED FINANCIAL STATEMENTS | | | 15 | |
Notes to Consolidated Financial Statements (unaudited) (continued)
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, $2.25 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 $1.75 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 0.10% 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 2019 unless extended or renewed. Prior to April 19, 2018, the aggregate commitment amount was $2.1 billion and the fee was 0.12% per annum. Participating Funds paid an upfront commitment fee of 0.02% on the total commitment amounts, in addition to administration, legal and arrangement fees, which 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 six months ended June 30, 2018, the Fund did not borrow under the credit agreement.
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.
10. | CAPITAL SHARE TRANSACTIONS |
Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 | | | Year Ended 12/31/2017 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
Class I | | | | | | | | | | | | | | | | |
Shares sold | | | 132,284 | | | $ | 1,465,643 | | | | 267,737 | | | $ | 2,911,781 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 38,005 | | | | 423,375 | |
Shares redeemed | | | (124,246 | ) | | | (1,369,293 | ) | | | (228,855 | ) | | | (2,485,980 | ) |
| | | | | | | | | | | | | | | | |
Net increase | | | 8,038 | | | $ | 96,350 | | | | 76,887 | | | $ | 849,176 | |
| | | | | | | | | | | | | | | | |
| | | | |
Class III | | | | | | | | | | | | | | | | |
Shares sold | | | 167,940 | | | $ | 1,845,958 | | | | 533,162 | | | $ | 5,813,619 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 27,804 | | | | 308,626 | |
Shares redeemed | | | (263,461 | ) | | | (2,912,368 | ) | | | (188,023 | ) | | | (2,034,201 | ) |
| | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (95,521 | ) | | $ | (1,066,410 | ) | | | 372,943 | | | $ | 4,088,044 | |
| | | | | | | | | | | | | | | | |
Total Net Increase (Decrease) | | | (87,483 | ) | | $ | (970,060 | ) | | | 449,830 | | | $ | 4,937,220 | |
| | | | | | | | | | | | | | | | |
| | |
16 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Consolidated Financial Statements (unaudited) (continued)
Management’s evaluation of the impact of all subsequent events on the Fund’s financial statements was completed through the date the financial statements were issued and the following items were noted:
On May 8, 2018, the Board approved the liquidation of the Fund. Effective August 8, 2018, the Fund will be closed to new insurance company separate accounts, including through exchanges into the Fund from other funds of the Company. The Fund is expected to be liquidated on or about August 31, 2018 (the “Liquidation Date”).
Glossary of Terms Used in this Report
| | |
Portfolio Abbreviation |
| |
ETF | | Exchange-Traded Fund |
| | | | |
NOTESTO CONSOLIDATED FINANCIAL STATEMENTS / GLOSSARYOF TERMS USEDINTHIS REPORT | | | 17 | |
JUNE 30, 2018
| | |
SEMI-ANNUAL REPORT (UNAUDITED) | | |
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 June 30, 2018 | | 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.
At a meeting held on November 14, 2017, the Board of Directors of BlackRock Variable Series Funds, Inc. (the “Company”) and, at a meeting held on May 23, 2018, the Board of Trustees of State Farm Variable Product Trust each approved a reorganization of the State Farm Stock and Bond Balanced Fund (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 six-month period ended June 30, 2018, the Fund outperformed its blended benchmark (60% MSCI All Country World Index / 40% Bloomberg Barclays U.S. Aggregate Bond Index).
What factors influenced performance?
The largest contributions to Fund performance came from exposure to the iShares Core S&P 500 ETF and the iShares Core S&P Small-Cap ETF.
The largest detractors from performance derived from exposure to the iShares Core MSCI Emerging Markets ETF and the iShares MSCI EAFE ETF.
Describe recent portfolio activity.
During the six-month period, the Fund increased exposure to U.S. equities, reducing allocations to small- and mid-cap stocks, and increasing allocations to large-cap and momentum stocks. The Fund reduced exposure to emerging market and international developed market equities. In addition, the Fund sought exposure to shorter duration in investment grade credit, and longer duration in U.S. Treasuries. (Duration is a measure of interest-rate sensitivity.) Lastly, the Fund reduced exposure to high-yield and agency bonds in favor of emerging market and short-term bonds, and trimmed its holdings within commodities.
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. equities, international developed equities and intermediate U.S. credit. Within equities, the Fund maintained broad exposure to U.S. large cap and momentum stocks, and small allocations to value, growth and minimum volatility issues. Within fixed income, the Fund held an underweight duration and overweight broader credit versus rates. The Fund’s top fixed-income holdings included exposure to investment grade intermediate credit and short-term bonds. In addition, the Fund ended the period with small allocations to investment grade corporate and emerging market bonds, U.S. real estate and U.S. Treasuries.
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 | | | 55 | % |
Short-Term Securities | | | 22 | |
Fixed Income Funds | | | 22 | |
Commodity Funds | | | 1 | |
| | |
2 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Fund Summary as of June 30, 2018 (continued) | | BlackRock iShares® Dynamic Allocation V.I. Fund |
Performance Summary for the Period Ended June 30, 2018
| | | | | | | | | | | | | | | | |
| | | | | | | | Average Annual Total Returns | |
| | 6-Month Total Returns (c) | | | | | | 1 Year (c) | | | Since Inception (c)(d) | |
Class I(a)(b) | | | 0.00 | % | | | | | | | 7.37 | % | | | 4.33 | % |
Class III(a)(b) | | | (0.09 | ) | | | | | | | 7.00 | | | | 4.06 | |
60% MSCI All Country World Index / 40% Bloomberg Barclays U.S. Aggregate Bond Index(e) | | | (0.83 | ) | | | | | | | 6.25 | | | | 5.11 | |
MSCI All Country World Index(f) | | | (0.43 | ) | | | | | | | 10.73 | | | | 7.02 | |
Bloomberg Barclays U.S. Aggregate Bond Index(g) | | | (1.62 | ) | | | | | | | (0.40 | ) | | | 1.97 | |
| (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) | The Fund invests in a portfolio of underlying exchange-traded funds that seek to track equity, fixed income and alternative indices. | |
| (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 Fund commenced operations on April 30, 2014. | |
| (e) | A customized weighted index comprised of 60% MSCI All Country World Index and 40% Bloomberg Barclays U.S. Aggregate Bond Index. | |
| (f) | 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. | |
| (g) | 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. | |
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 (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | | | | Beginning Account Value (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | Annualized Expense Ratio | |
Class I | | $ | 1,000.00 | | | $ | 1,000.00 | | | $ | 2.63 | | | | | | | $ | 1,000.00 | | | $ | 1,022.17 | | | $ | 2.66 | | | | 0.53 | % |
Class III | | | 1,000.00 | | | | 999.10 | | | | 3.87 | | | | | | | | 1,000.00 | | | | 1,028.70 | | | | 3.92 | | | | 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 annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown). | |
See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.
| | |
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 January 1, 2018 and held through June 30, 2018) 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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Consolidated Schedule of Investments (unaudited) June 30, 2018 | | BlackRock iShares® Dynamic Allocation V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Affiliated Investment Companies — 128.5%(f) | |
| |
Commodity Funds — 1.4% | | | | |
iShares Commodities Select Strategy ETF(a) | | | 6,361 | | | $ | 248,333 | |
iShares Gold Trust(b)(c) | | | 7,189 | | | | 86,412 | |
iShares Silver Trust(b)(c) | | | 5,605 | | | | 84,916 | |
| | | | | | | | |
| | | | | | | 419,661 | |
Equity Funds — 70.0% | | | | |
iShares Core MSCI EAFE ETF(a) | | | 42,707 | | | | 2,706,343 | |
iShares Core MSCI Emerging Markets ETF | | | 39,143 | | | | 2,055,399 | |
iShares Core S&P 500 ETF | | | 27,104 | | | | 7,400,747 | |
iShares Core S&P Mid-Cap ETF(a) | | | 8,253 | | | | 1,607,519 | |
iShares Core S&P Small-Cap ETF(a) | | | 7,886 | | | | 658,166 | |
iShares Edge MSCI Minimum Volatility Global ETF(a) | | | 10,397 | | | | 863,471 | |
iShares Edge MSCI Minimum Volatility USA ETF(a) | | | 23,600 | | | | 1,254,576 | |
iShares Edge MSCI USA Momentum Factor ETF(a) | | | 27,755 | | | | 3,044,723 | |
iShares Global Infrastructure ETF(a) | | | 7,277 | | | | 312,693 | |
iShares S&P 500 Growth ETF | | | 3,900 | | | | 634,179 | |
iShares S&P 500 Value ETF(a) | | | 5,400 | | | | 594,702 | |
iShares U.S. Real Estate ETF(a) | | | 5,600 | | | | 451,248 | |
| | | | | | | | |
| | | | | | | 21,583,766 | |
Fixed Income Funds — 28.3% | | | | |
iShares 20+ Year Treasury Bond ETF | | | 5,600 | | | | 681,632 | |
iShares iBoxx $ Investment Grade Corporate Bond ETF | | | 13,786 | | | | 1,579,462 | |
iShares Intermediate Credit Bond ETF(a) | | | 27,200 | | | | 2,889,728 | |
| | | | | | | | |
Security | | Shares | | | Value | |
Fixed Income Funds (continued) | | | | |
iShares International Aggregate Bond ETF(a) | | | 1,600 | | | $ | 84,304 | |
iShares J.P. Morgan USD Emerging Markets Bond ETF(a) | | | 9,240 | | | | 986,555 | |
iShares Short Maturity Bond ETF | | | 31,100 | | | | 1,560,287 | |
iShares U.S. Preferred Stock ETF(a) | | | 7,413 | | | | 279,544 | |
iShares U.S. Treasury Bond ETF | | | 27,452 | | | | 676,005 | |
| | | | | | | | |
| | | | | | | 8,737,517 | |
Short-Term Securities — 28.8%(d) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.80% | | | 132,471 | | | | 132,471 | |
SL Liquidity Series, LLC, Money Market Series, 2.16%(e) | | | 8,727,335 | | | | 8,728,208 | |
| | | | | | | | |
| | | | | | | 8,860,679 | |
| |
Total Affiliated Investment Companies — 128.5% (Cost: $38,304,293) | | | | 39,601,623 | |
Liabilities in Excess of Other Assets — (28.5)% | | | | (8,778,988 | ) |
| | | | | |
Net Assets — 100.0% | | | $ | 30,822,635 | |
| | | | | |
(a) | Security, or a portion of the security, is on loan. |
(b) | Non-income producing security. |
(c) | 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. |
(d) | Annualized 7-day yield as of period end. |
(e) | Security was purchased with the cash collateral from loaned securities. |
(f) | During the six months ended June 30, 2018, 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 12/31/17 | | | Shares Purchased | | | Shares Sold | | | Shares Held at 06/30/18 | | | Value at 06/30/18 | | | Income | | | Net Realized Gain (Loss) (a) | | | Change in Unrealized Appreciation (Depreciation) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class | | | 57,845 | | | | 74,626 | (b) | | | — | | | | 132,471 | | | $ | 132,471 | | | $ | 510 | | | $ | — | | | $ | — | |
SL Liquidity Series, LLC, Money Market Series | | | 2,016,002 | | | | 6,711,333 | (b) | | | — | | | | 8,727,335 | | | | 8,728,208 | | | | 22,240 | (c) | | | (930 | ) | | | 22 | |
iShares 1-3 Year Treasury Bond ETF | | | 23,797 | | | | 3,441 | | | | (27,238 | ) | | | — | | | | — | | | | 7,040 | | | | (32,501 | ) | | | 16,848 | |
iShares 20+ Year Treasury Bond ETF | | | — | | | | 5,600 | | | | — | | | | 5,600 | | | | 681,632 | | | | 2,931 | | | | — | | | | 17,622 | |
iShares Agency Bond ETF | | | 11,079 | | | | 300 | | | | (11,379 | ) | | | — | | | | — | | | | 5,711 | | | | (24,942 | ) | | | 220 | |
iShares Commodities Select Strategy ETF | | | 6,561 | | | | 400 | | | | (600 | ) | | | 6,361 | | | | 248,333 | | | | 1,560 | | | | 3,512 | | | | 14,731 | |
iShares Core MSCI EAFE ETF | | | — | | | | 43,207 | | | | (500 | ) | | | 42,707 | | | | 2,706,343 | | | | 46,186 | | | | (69 | ) | | | (142,503 | ) |
iShares Core MSCI Emerging Markets ETF | | | 50,350 | | | | 2,593 | | | | (13,800 | ) | | | 39,143 | | | | 2,055,399 | | | | 16,505 | | | | 192,586 | | | | (329,863 | ) |
iShares Core S&P 500 ETF | | | 15,804 | | | | 11,900 | | | | (600 | ) | | | 27,104 | | | | 7,400,747 | | | | 53,021 | | | | 40,944 | | | | 80,074 | |
iShares Core S&P Mid-Cap ETF | | | 12,423 | | | | 2,920 | | | | (7,090 | ) | | | 8,253 | | | | 1,607,519 | | | | 16,825 | | | | 305,387 | | | | (278,416 | ) |
iShares Core S&P Small-Cap ETF | | | 19,736 | | | | 410 | | | | (12,260 | ) | | | 7,886 | | | | 658,166 | | | | 6,648 | | | | 273,621 | | | | (195,360 | ) |
iShares Edge MSCI Minimum Volatility Global ETF | | | 8,397 | | | | 2,000 | | | | — | | | | 10,397 | | | | 863,471 | | | | 8,960 | | | | — | | | | (11,964 | ) |
iShares Edge MSCI Minimum Volatility USA ETF | | | 18,450 | | | | 5,550 | | | | (400 | ) | | | 23,600 | | | | 1,254,576 | | | | 11,092 | | | | 2,666 | | | | 6,485 | |
iShares Edge MSCI USA Momentum Factor ETF | | | 1,400 | | | | 26,355 | | | | — | | | | 27,755 | | | | 3,044,723 | | | | 9,684 | | | | — | | | | 70,513 | |
iShares Global Infrastructure ETF | | | 8,277 | | | | 200 | | | | (1,200 | ) | | | 7,277 | | | | 312,693 | | | | 4,923 | | | | 4,240 | | | | (22,325 | ) |
iShares Gold Trust | | | 10,379 | | | | 610 | | | | (3,800 | ) | | | 7,189 | | | | 86,412 | | | | — | | | | 5,633 | | | | (8,325 | ) |
iShares iBoxx $ High Yield Corporate Bond ETF | | | 14,263 | | | | 600 | | | | (14,863 | ) | | | — | | | | — | | | | 15,356 | | | | (9,613 | ) | | | (13,821 | ) |
iShares iBoxx $ Investment Grade Corporate Bond ETF | | | 15,740 | | | | 1,594 | | | | (3,548 | ) | | | 13,786 | | | | 1,579,462 | | | | 24,400 | | | | 8,259 | | | | (115,339 | ) |
iShares Intermediate Credit Bond ETF | | | — | | | | 27,200 | | | | — | | | | 27,200 | | | | 2,889,728 | | | | 13,135 | | | | — | | | | (3,115 | ) |
iShares International Aggregate Bond ETF | | | — | | | | 1,600 | | | | — | | | | 1,600 | | | | 84,304 | | | | 107 | | | | — | | | | 440 | |
iShares J.P. Morgan USD Emerging Markets Bond ETF | | | 3,140 | | | | 6,100 | | | | — | | | | 9,240 | | | | 986,555 | | | | 10,801 | | | | — | | | | (52,450 | ) |
iShares MSCI Canada ETF | | | 21,075 | | | | 300 | | | | (21,375 | ) | | | — | | | | — | | | | — | | | | 46,125 | | | | (82,130 | ) |
iShares MSCI EAFE ETF | | | 56,073 | | | | 1,700 | | | | (57,773 | ) | | | — | | | | — | | | | — | | | | 657,197 | | | | (615,024 | ) |
iShares MSCI EAFE Small-Cap ETF | | | 13,600 | | | | 100 | | | | (13,700 | ) | | | — | | | | — | | | | — | | | | 157,760 | | | | (135,709 | ) |
iShares Short Maturity Bond ETF | | | — | | | | 31,200 | | | | (100 | ) | | | 31,100 | | | | 1,560,287 | | | | 5,381 | | | | (2 | ) | | | 192 | |
iShares Silver Trust | | | 4,905 | | | | 700 | | | | — | | | | 5,605 | | | | 84,916 | | | | — | | | | — | | | | (4,446 | ) |
iShares S&P 500 Growth ETF | | | — | | | | 3,900 | | | | — | | | | 3,900 | | | | 634,179 | | | | 1,825 | | | | — | | | | 22,173 | |
iShares S&P 500 Value ETF | | | — | | | | 5,400 | | | | — | | | | 5,400 | | | | 594,702 | | | | 3,781 | | | | — | | | | (3,808 | ) |
iShares U.S. Credit Bond ETF | | | 20,159 | | | | 1,099 | | | | (21,258 | ) | | | — | | | | — | | | | 18,141 | | | | (32,278 | ) | | | (61,398 | ) |
iShares U.S. Preferred Stock ETF | | | 13,613 | | | | 200 | | | | (6,400 | ) | | | 7,413 | | | | 279,544 | | | | 9,901 | | | | (5,670 | ) | | | (2,141 | ) |
| | | | |
CONSOLIDATED SCHEDULE OF INVESTMENTS | | | 5 | |
| | |
Consolidated Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock iShares® Dynamic Allocation V.I. Fund |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Affiliates | | Shares Held at 12/31/17 | | | Shares Purchased | | | Shares Sold | | | Shares Held at 06/30/18 | | | Value at 06/30/18 | | | Income | | | Net Realized Gain (Loss) (a) | | | Change in Unrealized Appreciation (Depreciation) | |
iShares U.S. Real Estate ETF | | | 3,900 | | | | 2,100 | | | | (400 | ) | | | 5,600 | | | $ | 451,248 | | | $ | 6,672 | | | $ | 456 | | | $ | 8,161 | |
iShares U.S. Treasury Bond ETF | | | — | | | | 27,952 | | | | (500 | ) | | | 27,452 | | | | 676,005 | | | | 2,124 | | | | 11 | | | | 5,367 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | | | | | | | | | | | | | | | | $ | 39,601,623 | | | $ | 325,460 | | | $ | 1,592,392 | | | $ | (1,835,289 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | Includes net capital gain distributions, if applicable. | |
| (b) | Represents net shares purchased. | |
| (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. | |
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 | | $ | 30,740,944 | | | $ | — | | | $ | — | | | $ | 30,740,944 | |
Short-Term Securities | | | 132,471 | | | | — | | | | — | | | | 132,471 | |
| | | | | | | | | | | | | | | | |
Subtotal | | $ | 30,873,415 | | | $ | — | | | $ | — | | | $ | 30,873,415 | |
| | | | | | | | | | | | | | | | |
Investments valued at NAV(a) | | | | | | | | | | | | | | | 8,728,208 | |
| | | | | | | | | | | | | | | | |
Total Investment | | | | | | | | | | | | | | $ | 39,601,623 | |
| | | | | | | | | | | | | | | | |
| (a) | As of June 30, 2018, 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 six months ended June 30, 2018, there were no transfers between levels.
See notes to consolidated financial statements.
| | |
6 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Consolidated Statement of Assets and Liabilities (unaudited)
June 30, 2018
| | | | |
| | BlackRock iShares® Dynamic Allocation V.I. Fund | |
| |
ASSETS | | | | |
Investments at value — affiliated (including securities loaned at value of $8,548,758) (cost — $38,304,293) | | $ | 39,601,623 | |
Cash | | | 639 | |
Receivables: | | | | |
Securities lending income — affiliated | | | 3,894 | |
Capital shares sold | | | 83,191 | |
Dividends — affiliated | | | 69,208 | |
Dividends — unaffiliated | | | 4 | |
Prepaid expenses | | | 63 | |
| | | | |
Total assets | | | 39,758,622 | |
| | | | |
| |
LIABILITIES | | | | |
Cash collateral on securities loaned at value | | | 8,728,815 | |
Payables: | | | | |
Investments purchased | | | 141,271 | |
Capital shares redeemed | | | 104 | |
Printing fees | | | 14,405 | |
Professional fees | | | 38,346 | |
Distribution fees | | | 780 | |
Board realignment and consolidation | | | 422 | |
Investment advisory fees | | | 2,534 | |
Directors’ and Officer’s fees | | | 1,410 | |
Other affiliates | | | 19 | |
Other accrued expenses | | | 7,881 | |
| | | | |
Total liabilities | | | 8,935,987 | |
| | | | |
| |
NET ASSETS | | $ | 30,822,635 | |
| | | | |
| |
NET ASSETS CONSIST OF | | | | |
Paid-in capital | | $ | 28,247,885 | |
Undistributed net investment income | | | 259,194 | |
Accumulated net realized gain | | | 1,018,226 | |
Net unrealized appreciation (depreciation) | | | 1,297,330 | |
| | | | |
NET ASSETS | | $ | 30,822,635 | |
| | | | |
| |
NET ASSET VALUE | | | | |
Class I — Based on net assets of $26,902,951 and 2,417,062 shares outstanding, 100 million shares authorized, $0.10 par value | | $ | 11.13 | |
| | | | |
Class III — Based on net assets of $3,919,684 and 353,606 shares outstanding, 100 million shares authorized, $0.10 par value | | $ | 11.08 | |
| | | | |
See notes to consolidated financial statements.
| | | | |
CONSOLIDATED FINANCIAL STATEMENTS | | | 7 | |
Consolidated Statement of Operations (unaudited)
Six Months Ended June 30, 2018
| | | | |
| | BlackRock iShares® Dynamic Allocation V.I. Fund | |
| |
INVESTMENT INCOME | | | | |
Dividends — affiliated | | $ | 303,220 | |
Dividends — unaffiliated | | | 9 | |
Securities lending income — affiliated — net | | | 22,240 | |
| | | | |
Total investment income | | | 325,469 | |
| | | | |
| |
EXPENSES | | | | |
Professional | | | 33,893 | |
Transfer agent — class specific | | | 31,641 | |
Accounting services | | | 23,459 | |
Investment advisory | | | 21,957 | |
Printing | | | 14,012 | |
Directors and Officer | | | 8,096 | |
Distribution — class specific | | | 4,678 | |
Custodian | | | 3,395 | |
Transfer agent | | | 2,479 | |
Board realignment and consolidation | | | 422 | |
Miscellaneous | | | 2,917 | |
| | | | |
Total expenses | | | 146,949 | |
Less: | | | | |
Fees waived and/or reimbursed by the Manager | | | (32,644 | ) |
Transfer agent fees waived and/or reimbursed — class specific | | | (31,631 | ) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 82,674 | |
| | | | |
Net investment income | | | 242,795 | |
| | | | |
| |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain from investments — affiliated | | | 1,592,392 | |
Net change in unrealized depreciation on investments — affiliated | | | (1,835,289 | ) |
| | | | |
Net realized and unrealized loss | | | (242,897 | ) |
| | | | |
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | (102 | ) |
| | | | |
See notes to consolidated financial statements.
| | |
8 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Consolidated Statements of Changes in Net Assets
| | | | | | | | |
| | BlackRock iShares® Dynamic Allocation V.I. Fund | |
| | Six Months Ended 06/30/2018 (unaudited) | | | Year Ended 12/31/2017 | |
| | |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | |
| | |
OPERATIONS | | | | | | | | |
Net investment income | | $ | 242,795 | | | $ | 518,378 | |
Net realized gain | | | 1,592,392 | | | | 379,198 | |
Net change in unrealized appreciation (depreciation) | | | (1,835,289 | ) | | | 2,493,939 | |
| | | | | | | | |
Net increase (decrease) in net assets resulting from operations | | | (102 | ) | | | 3,391,515 | |
| | | | | | | | |
| | |
DISTRIBUTIONS TO SHAREHOLDERS(a) | | | | | | | | |
From net investment income: | | | | | | | | |
Class I | | | — | | | | (452,727 | ) |
Class III | | | — | | | | (56,728 | ) |
From return of capital: | | | | | | | | |
Class I | | | — | | | | (13,367 | ) |
Class III | | | — | | | | (3,178 | ) |
| | | | | | | | |
Decrease in net assets resulting from distributions to shareholders | | | — | | | | (526,000 | ) |
| | | | | | | | |
| | |
CAPITAL SHARE TRANSACTIONS | | | | | | | | |
Net increase in net assets derived from capital share transactions | | | 1,875,683 | | | | 6,142,899 | |
| | | | | | | | |
| | |
NET ASSETS | | | | | | | | |
Total increase in net assets | | | 1,875,581 | | | | 9,008,414 | |
Beginning of period | | | 28,947,054 | | | | 19,938,640 | |
| | | | | | | | |
End of period | | $ | 30,822,635 | | | $ | 28,947,054 | |
| | | | | | | | |
Undistributed net investment income, end of period | | $ | 259,194 | | | $ | 16,399 | |
| | | | | | | | |
(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 | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | | | | | | Period from 04/30/2014 (a) to 12/31/2014 | |
| 2017 | | | 2016 | | | 2015 | | | | |
Net asset value, beginning of period | | $ | 11.13 | | | | | | | $ | 9.85 | | | $ | 9.45 | | | $ | 10.02 | | | | | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(b) | | | 0.09 | | | | | | | | 0.23 | | | | 0.22 | | | | 0.24 | | | | | | | | 0.20 | |
Net realized and unrealized gain (loss) | | | (0.09 | ) | | | | | | | 1.26 | | | | 0.39 | | | | (0.63 | ) | | | | | | | (0.07 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | 0.00 | | | | | | | | 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 | | | | | | | $ | 11.13 | | | $ | 9.85 | | | $ | 9.45 | | | | | | | $ | 10.02 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(d) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 0.00 | %(e) | | | | | | | 15.11 | % | | | 6.49 | % | | | (3.88 | )% | | | | | | | 1.27 | %(e) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets(f) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 0.97 | %(g) | | | | | | | 0.94 | % | | | 0.83 | % | | | 1.90 | % | | | | | | | 6.47 | %(g)(h) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.53 | %(g) | | | | | | | 0.53 | % | | | 0.53 | % | | | 0.64 | % | | | | | | | 0.75 | %(g) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.69 | %(g) | | | | | | | 2.14 | % | | | 2.27 | % | | | 2.41 | % | | | | | | | 2.85 | %(g) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 26,903 | | | | | | | $ | 25,332 | | | $ | 18,135 | | | $ | 14,636 | | | | | | | $ | 6,092 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 57 | % | | | | | | | 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: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | | | | | | Period from 04/30/2014 (a) to 12/31/2014 | |
| 2017 | | | 2016 | | | 2015 | | | | |
Investments in underlying funds | | | 0.21 | % | | | | | | | 0.21 | % | | | 0.23 | % | | | 0.29 | % | | | | | | | 0.27 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Consolidated Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock iShares® Dynamic Allocation V.I. Fund (continued) | |
| | Class III | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | | | | | | Period from 04/30/2014 (a) to 12/31/2014 | |
| 2017 | | | 2016 | | | 2015 | | | | |
Net asset value, beginning of period | | $ | 11.09 | | | | | | | $ | 9.83 | | | $ | 9.44 | | | $ | 10.01 | | | | | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(b) | | | 0.08 | | | | | | | | 0.21 | | | | 0.21 | | | | 0.26 | | | | | | | | 0.17 | |
Net realized and unrealized gain (loss) | | | (0.09 | ) | | | | | | | 1.24 | | | | 0.37 | | | | (0.66 | ) | | | | | | | (0.06 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | (0.01 | ) | | | | | | | 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 | | $ | 11.08 | | | | | | | $ | 11.09 | | | $ | 9.83 | | | $ | 9.44 | | | | | | | $ | 10.01 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(d) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | (0.09 | )%(e) | | | | | | | 14.72 | % | | | 6.16 | % | | | (3.99 | )% | | | | | | | 1.05 | %(e) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets(f) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.23 | %(g) | | | | | | | 1.25 | % | | | 1.02 | % | | | 1.87 | % | | | | | | | 8.32 | %(g)(h) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.78 | %(g) | | | | | | | 0.78 | % | | | 0.78 | % | | | 0.86 | % | | | | | | | 1.00 | %(g) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.45 | %(g) | | | | | | | 1.97 | % | | | 2.08 | % | | | 2.56 | % | | | | | | | 2.54 | %(g) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 3,920 | | | | | | | $ | 3,615 | | | $ | 1,804 | | | $ | 1,174 | | | | | | | $ | 20 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 57 | % | | | | | | | 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: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | | | | | | Period from 04/30/2014 (a) to 12/31/2014 | |
| 2017 | | | 2016 | | | 2015 | | | | |
Investments in underlying funds | | | 0.21 | % | | | | | | | 0.21 | % | | | 0.23 | % | | | 0.29 | % | | | | | | | 0.27 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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 (unaudited)
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 19 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 June 30, 2018 were $172,141, which is 0.6% 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. 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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Consolidated Financial Statements (unaudited) (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 June 30, 2018, 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 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 (unaudited) (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:
Securities Lending Agreements
| | | | | | | | | | | | |
Counterparty | | Securities Loaned at Value | | | Cash Collateral Received (a) | | | Net Amount | |
Citigroup Global Markets, Inc. | | $ | 1,579,610 | | | $ | (1,579,610 | ) | | $ | — | |
Deutsche Bank Securities Inc. | | | 304,216 | | | | (304,216 | ) | | | — | |
Goldman Sachs & Co. | | | 2,938,205 | | | | (2,938,205 | ) | | | — | |
Jefferies LLC | | | 1,224,547 | | | | (1,224,547 | ) | | | — | |
JP Morgan Securities LLC | | | 2,502,180 | | | | (2,502,180 | ) | | | — | |
| | | | | | | | | | | | |
| | $ | 8,548,758 | | | $ | (8,548,758 | ) | | $ | — | |
| | | | | | | | | | | | |
| (a) | Cash collateral with a value of $8,728,815 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 six months ended June 30, 2018, the class specific distribution fees borne directly by Class III were $4,678.
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 six months ended June 30, 2018, 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.
| | |
14 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Consolidated Financial Statements (unaudited) (continued)
For the six months ended June 30, 2018, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:
| | | | | | | | | | | | | | |
Class I | | | | | Class III | | | | | Total | |
| $27,436 | | | | | $ | 4,205 | | | | | | $31,641 | |
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 six months ended June 30, 2018, the amount waived was $26.
For the six months ended June 30, 2018, the Fund reimbursed the Manager $160 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 | |
| 0.53% | | | | | | 0.78% | |
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 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 six months ended June 30, 2018, the Manager waived and/or reimbursed $32,618 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 waived and/or reimbursed — class specific in the Consolidated Statement of Operations. For the six months ended June 30, 2018, class specific expense waivers and/or reimbursements were as follows:
| | | | | | | | | | | | |
| | Class I | | | Class III | | | Total | |
Transfer Agent Fees Waived and/or Reimbursed | | $ | 27,428 | | | $ | 4,203 | | | $ | 31,631 | |
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 June 30, 2018, 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 | | | 2020 | |
Fund Level | | $ | 21,999 | | | $ | 79,451 | | | $ | 32,618 | |
Class I | | | 29,259 | | | | 25,064 | | | | 27,428 | |
Class III | | | 2,053 | | | | 3,305 | | | | 4,203 | |
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 (unaudited) (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 six months ended June 30, 2018, the Fund paid BIM $1,220 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 six months ended June 30, 2018, the Fund did not participate in the Interfund Lending Program.
Directors and Officers: 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.
For the six months ended June 30, 2018, purchases and sales of investments, excluding short-term securities, were $18,904,994 and $16,864,408, respectively.
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 June 30, 2018, 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.
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.
As of June 30, 2018, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:
| | | | |
Tax cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | | $ | 38,419,730 | |
| | | | |
Gross unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . | | $ | 1,413,813 | |
Gross unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . | | | (231,920 | ) |
| | | | |
Net unrealized appreciation (depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. | | $ | 1,181,893 | |
| | | | |
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Although the Act does not amend any provisions directly related to the qualification or taxation of regulated investment companies (“RICs”), the Act does change the taxation of entities in which some RICs invest, the tax treatment of income derived from those entities and the taxation of RIC shareholders. While management does not anticipate significant impact to the Fund or to its shareholders, there is uncertainty in the application of certain provisions in the Act. Specifically, provisions in the Act may increase the amount of or accelerate the recognition of taxable income and may limit the deductibility of certain expenses by RICs. Until full clarity around these provisions is obtained, the impact on the Fund’s consolidated financial statements, if any, cannot be fully determined.
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, $2.25 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 $1.75 billion at any time outstanding, subject to asset
| | |
16 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Consolidated Financial Statements (unaudited) (continued)
coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.10% 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 2019 unless extended or renewed. Prior to April 19, 2018, the aggregate commitment amount was $2.1 billion and the fee was 0.12% per annum. Participating Funds paid an upfront commitment fee of 0.02% on the total commitment amounts, in addition to administration, legal and arrangement fees, which 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 six months ended June 30, 2018, the Fund did not borrow under the credit agreement.
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.
10. | CAPITAL SHARE TRANSACTIONS |
Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 | | | Year Ended 12/31/2017 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
Class I | | | | | | | | | | | | | | | | |
Shares sold | | | 255,033 | | | $ | 2,844,288 | | | | 583,027 | | | $ | 6,150,100 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 41,877 | | | | 466,094 | |
Shares redeemed | | | (114,796 | ) | | | (1,278,094 | ) | | | (189,522 | ) | | | (1,993,433 | ) |
| | | | | | | | | | | | | | | | |
Net increase | | | 140,237 | | | $ | 1,566,194 | | | | 435,382 | | | $ | 4,622,761 | |
| | | | | | | | | | | | | | | | |
| | | | |
Class III | | | | | | | | | | | | | | | | |
Shares sold | | | 46,399 | | | $ | 517,240 | | | | 176,888 | | | $ | 1,880,454 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 5,402 | | | | 59,907 | |
Shares redeemed | | | (18,640 | ) | | | (207,751 | ) | | | (39,950 | ) | | | (420,223 | ) |
| | | | | | | | | | | | | | | | |
Net increase | | | 27,759 | | | $ | 309,489 | | | | 142,340 | | | $ | 1,520,138 | |
| | | | | | | | | | | | | | | | |
Total Net Increase | | | 167,996 | | | $ | 1,875,683 | | | | 577,722 | | | $ | 6,142,899 | |
| | | | | | | | | | | | | | | | |
| | | | |
NOTESTO CONSOLIDATED FINANCIAL STATEMENTS | | | 17 | |
Notes to Consolidated Financial Statements (unaudited) (continued)
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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Glossary of Terms Used in this Report
| | |
Currency |
| |
USD | | United States Dollar |
| | |
Portfolio Abbreviation |
| |
ETF | | Exchange-Traded Fund |
| | | | |
GLOSSARYOF TERMS USEDINTHIS REPORT | | | 19 | |
JUNE 30, 2018
| | |
SEMI-ANNUAL REPORT (UNAUDITED) | | |
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 June 30, 2018 | | 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.
Portfolio Management Commentary
How did the Fund perform?
For the six-month period ended June 30, 2018, the Fund outperformed its benchmark, the Russell 1000® Growth Index.
What factors influenced performance?
In sector terms, the largest contributor to the Fund’s relative performance was consumer discretionary, where internet & direct marketing retail holdings had the most significant impact on results. Selection in hotels, restaurants & leisure along with an underweight to media also added value within the sector. The health care and industrials sectors were additional sources of strength. An underweight stance to biotechnology and selection in pharmaceuticals drove gains in health care, while an underweight to machinery and positioning in conglomerates benefited performance in industrials. Finally, positioning in consumer staples proved advantageous to results.
At the individual stock level, Netflix Inc. and Amazon.com Inc. were the largest contributors. Netflix outperformed after a series of strong earnings reports, and the company continues to gain scale based on original content and new subscribers. Amazon continued to perform well after a series of solid earnings reports and acceleration in several of its key segments.
While the Fund’s overall security selection was notably strong for the period, positioning with respect to financials weighed on results. In particular, bank and diversified financial services holdings had the most negative impact.
The largest individual detractor was an underweight position in Apple Inc. as the company outperformed during the period. The underweight to Apple is based on the view that a mature smartphone market, increasing competition and a lack of new innovative products will limit the company’s growth once the most recent iPhone product cycles are complete. A position in Chinese internet conglomerate Tencent Holding Ltd. was also a notable detractor. The stock pulled back amid fears of a slowdown in PC gaming and a near-term profit margin contraction. The Fund has maintained the overweight position on a positive view of the company’s growth opportunities, especially in payments, mobile gaming and advertising.
Describe recent portfolio activity.
Due to a combination of portfolio trading activity and market movement during the six-month period, the Fund’s weighting in information technology (“IT”) increased, particularly within software and IT services. Health care exposure also increased, namely within equipment & supplies. Exposure to materials decreased, largely with respect to chemicals. Consumer staples, namely beverages, and energy, primarily equipment & services, saw declines as well.
Describe portfolio positioning at period end.
Relative to the Russell 1000® Growth Index, the Fund ended the period with the largest sector overweights in consumer discretionary and financials, while the most significant 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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Fund Summary as of June 30, 2018 (continued) | | BlackRock Large Cap Focus Growth V.I. Fund |
Performance Summary for the Period Ended June 30, 2018
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Average Annual Total Returns | |
| | 6-Month Total Returns (c) | | | | | | 1 Year (c) | | | 5 Years (c) | | | | | | 10 Years (c) | |
Class I(a)(b) | | | 15.23 | % | | | | | | | 30.18 | % | | | 18.22 | % | | | | | | | 11.65 | % |
Class III(a)(b) | | | 15.11 | | | | | | | | 29.92 | | | | 17.92 | | | | | | | | 11.37 | |
Russell 1000® Growth Index(d) | | | 7.25 | | | | | | | | 22.51 | | | | 16.36 | | | | | | | | 11.83 | |
| (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) | 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) | 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) | 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. | |
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 (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | | | | Beginning Account Value (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | Annualized Expense Ratio | |
Class I | | $ | 1,000.00 | | | $ | 1,152.30 | | | $ | 4.48 | | | | | | | $ | 1,000.00 | | | $ | 1,020.63 | | | $ | 4.21 | | | | 0.84 | % |
Class III | | | 1,000.00 | | | | 1,151.10 | | | | 5.81 | | | | | | | | 1,000.00 | | | | 1,019.39 | | | | 5.46 | | | | 1.09 | |
| (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 annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown). | |
See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.
Portfolio Information
SECTOR ALLOCATION
| | | | |
Sector | | Percent of Net Assets | |
Information Technology | | | 43 | % |
Consumer Discretionary | | | 22 | |
Health Care | | | 14 | |
Financials | | | 7 | |
Industrials | | | 7 | |
Consumer Staples | | | 3 | |
Real Estate | | | 2 | |
Materials | | | 1 | |
Energy | | | 1 | |
Short-Term Securities | | | 5 | |
Liabilities in Excess of Other Assets | | | (5 | ) |
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 January 1, 2018 and held through June 30, 2018) 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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) June 30, 2018 | | BlackRock Large Cap Focus Growth V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Common Stocks — 99.3% | |
|
Automobiles — 1.4% | |
Tesla, Inc.(a) | | | 7,244 | | | $ | 2,484,330 | |
| | | | | | | | |
|
Banks — 1.3% | |
First Republic Bank | | | 23,054 | | | | 2,231,397 | |
| | | | | | | | |
|
Beverages — 2.2% | |
Constellation Brands, Inc., Class A(b) | | | 18,121 | | | | 3,966,143 | |
| | | | | | | | |
|
Biotechnology — 1.4% | |
Vertex Pharmaceuticals, Inc.(a) | | | 14,082 | | | | 2,393,377 | |
| | | | | | | | |
|
Capital Markets — 3.2% | |
E*TRADE Financial Corp.(a) | | | 47,664 | | | | 2,915,130 | |
S&P Global, Inc. | | | 13,577 | | | | 2,768,215 | |
| | | | | | | | |
| | | | | | | 5,683,345 | |
|
Construction Materials — 1.5% | |
Vulcan Materials Co. | | | 19,960 | | | | 2,576,038 | |
| | | | | | | | |
|
Diversified Financial Services — 2.1% | |
Berkshire Hathaway, Inc., Class B(a) | | | 19,884 | | | | 3,711,349 | |
| | | | | | | | |
|
Electrical Equipment — 1.1% | |
Rockwell Automation, Inc. | | | 12,069 | | | | 2,006,230 | |
| | | | | | | | |
|
Equity Real Estate Investment Trusts (REITs) — 1.5% | |
SBA Communications Corp.(a)(b) | | | 16,396 | | | | 2,707,307 | |
| | | | | | | | |
|
Food Products — 0.8% | |
Bunge Ltd. | | | 20,644 | | | | 1,439,093 | |
| | | | | | | | |
|
Health Care Equipment & Supplies — 4.7% | |
Becton Dickinson and Co. | | | 18,964 | | | | 4,543,016 | |
Boston Scientific Corp.(a) | | | 116,955 | | | | 3,824,428 | |
| | | | | | | | |
| | | | | | | 8,367,444 | |
|
Health Care Providers & Services — 5.0% | |
UnitedHealth Group, Inc. | | | 35,867 | | | | 8,799,610 | |
| | | | | | | | |
|
Hotels, Restaurants & Leisure — 1.3% | |
Domino’s Pizza, Inc. | | | 8,188 | | | | 2,310,408 | |
| | | | | | | | |
|
Internet & Direct Marketing Retail — 16.3%(a) | |
Amazon.com, Inc. | | | 9,508 | | | | 16,161,699 | |
Booking Holdings, Inc. | | | 2,837 | | | | 5,750,854 | |
Netflix, Inc. | | | 17,886 | | | | 7,001,117 | |
| | | | | | | | |
| | | | | | | 28,913,670 | |
|
Internet Software & Services — 13.6% | |
Alphabet, Inc., Class A(a) | | | 5,705 | | | | 6,442,029 | |
Alphabet, Inc., Class C(a) | | | 2,078 | | | | 2,318,321 | |
Facebook, Inc., Class A(a) | | | 29,768 | | | | 5,784,518 | |
MercadoLibre, Inc. | | | 9,175 | | | | 2,742,683 | |
Tencent Holdings Ltd. | | | 132,646 | | | | 6,660,872 | |
| | | | | | | | |
| | | | | | | 23,948,423 | |
|
IT Services — 9.6% | |
Mastercard, Inc., Class A | | | 22,720 | | | | 4,464,935 | |
PayPal Holdings, Inc.(a) | | | 41,387 | | | | 3,446,295 | |
Visa, Inc., Class A | | | 67,957 | | | | 9,000,905 | |
| | | | | | | | |
| | | | | | | 16,912,135 | |
|
Life Sciences Tools & Services — 1.7% | |
Illumina, Inc.(a) | | | 10,662 | | | | 2,977,790 | |
| | | | | | | | |
| | | | | | | | |
Security | | Shares | | | Value | |
Oil, Gas & Consumable Fuels — 1.0% | |
Pioneer Natural Resources Co. | | | 9,093 | | | $ | 1,720,759 | |
| | | | | | | | |
|
Pharmaceuticals — 1.4% | |
Zoetis, Inc. | | | 28,528 | | | | 2,430,300 | |
| | | | | | | | |
|
Professional Services — 3.4% | |
CoStar Group, Inc.(a) | | | 9,950 | | | | 4,105,668 | |
Equifax, Inc. | | | 15,421 | | | | 1,929,321 | |
| | | | | | | | |
| | | | | | | 6,034,989 | |
|
Road & Rail — 2.7% | |
Union Pacific Corp.(b) | | | 33,815 | | | | 4,790,909 | |
| | | | | | | | |
| | |
Semiconductors & Semiconductor Equipment — 3.2% | | | | | | |
ASML Holding NV (Registered), NYRS | | | 12,399 | | | | 2,454,630 | |
NVIDIA Corp. | | | 13,885 | | | | 3,289,356 | |
| | | | | | | | |
| | | | | | | 5,743,986 | |
|
Software — 16.4% | |
Activision Blizzard, Inc. | | | 35,238 | | | | 2,689,364 | |
Adobe Systems, Inc.(a) | | | 16,552 | | | | 4,035,543 | |
Autodesk, Inc.(a) | | | 21,556 | | | | 2,825,776 | |
Electronic Arts, Inc.(a) | | | 33,945 | | | | 4,786,924 | |
Microsoft Corp. | | | 110,400 | | | | 10,886,544 | |
salesforce.com, Inc.(a) | | | 27,494 | | | | 3,750,182 | |
| | | | | | | | |
| | | | | | | 28,974,333 | |
|
Specialty Retail — 2.5% | |
Ulta Beauty, Inc.(a) | | | 19,326 | | | | 4,511,848 | |
| | | | | | | | |
| |
Total Common Stocks — 99.3% (Cost: $127,870,817) | | | | 175,635,213 | |
| | | | | | | | |
| |
Total Long-Term Investments — 99.3% (Cost: $127,870,817) | | | | 175,635,213 | |
| | | | | | | | |
| | |
Short-Term Securities — 5.2% | | | | | | | | |
| | |
Money Market Funds — 5.2%(c)(f) | | | | | | |
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.80% | | | 2,651,009 | | | | 2,651,009 | |
SL Liquidity Series, LLC, Money Market Series, 2.16%(d) | | | 6,527,293 | | | | 6,527,946 | |
| | | | | | | | |
Total Money Market Funds — 5.2% (Cost: $9,178,955) | | | | 9,178,955 | |
| | | | | | | | |
Time Deposits — 0.0% | | | | | | | | |
| | |
Brown Brothers Harriman & Co.: | | | | | | | | |
0.89%, 07/02/18 | | HKD | — | (e) | | | 49 | |
1.13%, 07/02/18 | | AUD | — | (e) | | | 240 | |
| | | | | | | | |
Total Time Deposits — 0.0% (Cost: $289) | | | | 289 | |
| | | | | | | | |
| |
Total Short-Term Securities — 5.2% (Cost: $9,179,244) | | | | 9,179,244 | |
| | | | | | | | |
| |
Total Investments — 104.5% (Cost: $137,050,061) | | | | 184,814,457 | |
| | | | | | | | |
Liabilities in Excess of Other Assets — (4.5)% | | | | (7,907,597 | ) |
| | | | | | | | |
Net Assets — 100.0% | | | $ | 176,906,860 | |
| | | | | | | | |
(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. |
| | | | |
SCHEDULE OF INVESTMENTS | | | 5 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Large Cap Focus Growth V.I. Fund |
(d) | Security was purchased with the cash collateral from loaned securities. |
(e) | Amount is less than $500. |
(f) | During the six months ended June 30, 2018, 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 12/31/17 | | | Net Activity | | | Shares Held at 06/30/18 | | | Value at 06/30/18 | | | Income | | | Net Realized Gain (Loss) (a) | | | Change in Unrealized Appreciation (Depreciation) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class | | | 82,464 | | | | 2,568,545 | | | | 2,651,009 | | | $ | 2,651,009 | | | $ | 13,617 | | | $ | — | | | $ | — | |
SL Liquidity Series, LLC, Money Market Series | | | 2,198,635 | | | | 4,328,658 | | | | 6,527,293 | | | | 6,527,946 | | | | 12,346 | (b) | | | 1,355 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | 9,178,955 | | | $ | 25,963 | | | $ | 1,355 | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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.
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: | | | | | | | | | | | | | | | | |
Automobiles | | $ | 2,484,330 | | | $ | — | | | $ | — | | | $ | 2,484,330 | |
Banks | | | 2,231,397 | | | | — | | | | — | | | | 2,231,397 | |
Beverages | | | 3,966,143 | | | | — | | | | — | | | | 3,966,143 | |
Biotechnology | | | 2,393,377 | | | | — | | | | — | | | | 2,393,377 | |
Capital Markets | | | 5,683,345 | | | | — | | | | — | | | | 5,683,345 | |
Construction Materials | | | 2,576,038 | | | | — | | | | — | | | | 2,576,038 | |
Diversified Financial Services | | | 3,711,349 | | | | — | | | | — | | | | 3,711,349 | |
Electrical Equipment | | | 2,006,230 | | | | — | | | | — | | | | 2,006,230 | |
Equity Real Estate Investment Trusts (REITs) | | | 2,707,307 | | | | — | | | | — | | | | 2,707,307 | |
Food Products | | | 1,439,093 | | | | — | | | | — | | | | 1,439,093 | |
Health Care Equipment & Supplies | | | 8,367,444 | | | | — | | | | — | | | | 8,367,444 | |
Health Care Providers & Services | | | 8,799,610 | | | | — | | | | — | | | | 8,799,610 | |
Hotels, Restaurants & Leisure | | | 2,310,408 | | | | — | | | | — | | | | 2,310,408 | |
Internet & Direct Marketing Retail | | | 28,913,670 | | | | — | | | | — | | | | 28,913,670 | |
Internet Software & Services | | | 17,287,551 | | | | 6,660,872 | | | | — | | | | 23,948,423 | |
IT Services | | | 16,912,135 | | | | — | | | | — | | | | 16,912,135 | |
Life Sciences Tools & Services | | | 2,977,790 | | | | — | | | | — | | | | 2,977,790 | |
Oil, Gas & Consumable Fuels | | | 1,720,759 | | | | — | | | | — | | | | 1,720,759 | |
Pharmaceuticals | | | 2,430,300 | | | | — | | | | — | | | | 2,430,300 | |
Professional Services | | | 6,034,989 | | | | — | | | | — | | | | 6,034,989 | |
Road & Rail | | | 4,790,909 | | | | — | | | | — | | | | 4,790,909 | |
Semiconductors & Semiconductor Equipment | | | 5,743,986 | | | | — | | | | — | | | | 5,743,986 | |
Software | | | 28,974,333 | | | | — | | | | — | | | | 28,974,333 | |
Specialty Retail | | | 4,511,848 | | | | — | | | | — | | | | 4,511,848 | |
Short-Term Securities: | | | | | | | | | | | | | | | | |
Money Market Funds | | | 2,651,009 | | | | — | | | | — | | | | 2,651,009 | |
Time Deposits | | | — | | | | 289 | | | | — | | | | 289 | |
| | | | | | | | | | | | | | | | |
Subtotal | | $ | 171,625,350 | | | $ | 6,661,161 | | | $ | — | | | $ | 178,286,511 | |
| | | | | | | | | | | | | | | | |
Investments valued at NAV(a) | | | | | | | | | | | | | | $ | 6,527,946 | |
| | | | | | | | | | | | | | | | |
Total Investments | | | | | | | | | | | | | | $ | 184,814,457 | |
| | | | | | | | | | | | | | | | |
| (a) | As of June 30, 2018, 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 six months ended June 30, 2018, there were no transfers between levels.
See notes to financial statements.
| | |
6 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statement of Assets and Liabilities (unaudited)
June 30, 2018
| | | | |
| | BlackRock Large Cap Focus Growth V.I. Fund | |
|
ASSETS | |
Investments at value — unaffiliated (including securities loaned at value of $6,323,407) (cost — $127,871,106) | | $ | 175,635,502 | |
Investments at value — affiliated (cost — $9,178,955) | | | 9,178,955 | |
Cash | | | 17,529 | |
Foreign currency at value (cost — $14) | | | 7 | |
Receivables: | | | | |
Securities lending income — affiliated | | | 2,050 | |
Capital shares sold | | | 56,107 | |
Dividends — affiliated | | | 1,902 | |
Dividends — unaffiliated | | | 1,838 | |
Prepaid expenses | | | 349 | |
| | | | |
Total assets | | | 184,894,239 | |
| | | | |
|
LIABILITIES | |
Cash collateral on securities loaned at value | | | 6,527,341 | |
Payables: | | | | |
Investments purchased | | | 1,174,211 | |
Capital shares redeemed | | | 10,267 | |
Distribution fees | | | 14,053 | |
Board realignment and consolidation | | | 2,792 | |
Investment advisory fees | | | 95,969 | |
Directors’ and Officer’s fees | | | 2,151 | |
Other affiliates | | | 620 | |
Other accrued expenses | | | 159,975 | |
| | | | |
Total liabilities | | | 7,987,379 | |
| | | | |
| |
NET ASSETS | | $ | 176,906,860 | |
| | | | |
|
NET ASSETS CONSIST OF | |
Paid-in capital | | $ | 115,756,642 | |
Accumulated net investment loss | | | (199,778 | ) |
Accumulated net realized gain | | | 13,585,607 | |
Net unrealized appreciation (depreciation) | | | 47,764,389 | |
| | | | |
NET ASSETS | | $ | 176,906,860 | |
| | | | |
|
NET ASSET VALUE | |
Class I — Based on net assets of $108,163,481 and 6,469,652 shares outstanding, 100 million shares authorized, $0.10 par value. | | $ | 16.72 | |
| | | | |
Class III — Based on net assets of $68,743,379 and 4,159,315 shares outstanding, 100 million shares authorized, $0.10 par value. | | $ | 16.53 | |
| | | | |
See notes to financial statements.
Statement of Operations (unaudited)
Six Months Ended June 30, 2018
| | | | |
| | BlackRock Large Cap Focus Growth V.I. Fund | |
| |
INVESTMENT INCOME | | | | |
Dividends — affiliated | | $ | 13,617 | |
Dividends — unaffiliated | | | 538,048 | |
Securities lending income — affiliated — net | | | 12,346 | |
| | | | |
Total investment income | | | 564,011 | |
| | | | |
| |
EXPENSES | | | | |
Investment advisory | | | 542,884 | |
Transfer agent — class specific | | | 174,570 | |
Distribution — class specific | | | 77,545 | |
Professional | | | 32,588 | |
Accounting services | | | 22,515 | |
Printing | | | 14,894 | |
Custodian | | | 10,338 | |
Directors and Officer | | | 8,718 | |
Board realignment and consolidation | | | 2,792 | |
Transfer agent | | | 2,480 | |
Miscellaneous | | | 8,387 | |
| | | | |
Total expenses | | | 897,711 | |
| | | | |
Less: | | | | |
Fees waived and/or reimbursed by the Manager | | | (735 | ) |
Transfer agent fees waived and/or reimbursed — class specific | | | (116,105 | ) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 780,871 | |
| | | | |
Net investment loss | | | (216,860 | ) |
| | | | |
| |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain (loss) from: | | | | |
Investments — affiliated | | | 1,355 | |
Investments — unaffiliated | | | 10,190,090 | |
Foreign currency transactions | | | (13 | ) |
| | | | |
| | | 10,191,432 | |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | |
Investments — unaffiliated | | | 13,484,833 | |
Foreign currency translations | | | (13 | ) |
| | | | |
| | | 13,484,820 | |
| | | | |
Net realized and unrealized gain | | | 23,676,252 | |
| | | | |
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 23,459,392 | |
| | | | |
See notes to financial statements.
| | |
8 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statements of Changes in Net Assets
| | | | | | | | |
| | BlackRock Large Cap Focus Growth V.I. Fund | |
| | Six Months Ended 06/30/2018 (Unaudited) | | | Year Ended 12/31/2017 | |
| | |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | |
| | |
OPERATIONS | | | | | | | | |
Net investment income (loss) | | $ | (216,860 | ) | | $ | 24,367 | |
Net realized gain | | | 10,191,432 | | | | 27,208,552 | |
Net change in unrealized appreciation (depreciation) | | | 13,484,820 | | | | 9,233,119 | |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 23,459,392 | | | | 36,466,038 | |
| | | | | | | | |
| | |
DISTRIBUTIONS TO SHAREHOLDERS(a) | | | | | | | | |
From net investment income: | | | | | | | | |
Class I | | | — | | | | (39,574 | ) |
Class III | | | — | | | | (2,263 | ) |
From net realized gain: | | | | | | | | |
Class I | | | — | | | | (16,352,959 | ) |
Class III | | | — | | | | (8,778,098 | ) |
| | | | | | | | |
Decrease in net assets resulting from distributions to shareholders | | | — | | | | (25,172,894 | ) |
| | | | | | | | |
| | |
CAPITAL SHARE TRANSACTIONS | | | | | | | | |
Net increase (decrease) in net assets derived from capital share transactions | | | (1,680,409 | ) | | | 17,142,344 | |
| | | | | | | | |
| | |
NET ASSETS | | | | | | | | |
Total increase in net assets | | | 21,778,983 | | | | 28,435,488 | |
Beginning of period | | | 155,127,877 | | | | 126,692,389 | |
| | | | | | | | |
End of period | | $ | 176,906,860 | | | $ | 155,127,877 | |
| | | | | | | | |
Undistributed (accumulated) net investment income (loss), end of period | | $ | (199,778 | ) | | $ | 17,082 | |
| | | | | | | | |
(a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
Financial Highlights
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Large Cap Focus Growth V.I. Fund | |
| | Class I | |
| | Six Months Ended 06/30/2018 (Unaudited) | | | | | | Year Ended December 31, | |
| 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 14.51 | | | | | | | $ | 13.35 | | | $ | 13.59 | | | $ | 14.08 | | | $ | 14.22 | | | $ | 11.54 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss)(a) | | | (0.01 | ) | | | | | | | 0.02 | | | | 0.09 | | | | 0.08 | | | | 0.09 | | | | 0.09 | |
Net realized and unrealized gain | | | 2.22 | | | | | | | | 3.92 | | | | 0.99 | | | | 0.31 | | | | 1.92 | | | | 3.82 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase from investment operations | | | 2.21 | | | | | | | | 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 period | | $ | 16.72 | | | | | | | $ | 14.51 | | | $ | 13.35 | | | $ | 13.59 | | | $ | 14.08 | | | $ | 14.22 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(c) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 15.23 | %(d) | | | | | | | 29.56 | % | | | 7.89 | % | | | 2.73 | % | | | 14.16 | % | | | 33.92 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets(e) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 0.98 | %(f) | | | | | | | 1.01 | % | | | 0.96 | % | | | 0.95 | % | | | 0.96 | % | | | 0.97 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.84 | %(f) | | | | | | | 0.89 | % | | | 0.84 | % | | | 0.82 | % | | | 0.83 | % | | | 0.84 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | | (0.17 | )%(f) | | | | | | | 0.10 | % | | | 0.68 | % | | | 0.59 | % | | | 0.57 | % | | | 0.70 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 108,163 | | | | | | | $ | 100,308 | | | $ | 87,346 | | | $ | 98,485 | | | $ | 108,329 | | | $ | 107,378 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 32 | % | | | | | | | 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) | Aggregate total return. |
(e) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (Unaudited) | | | | | | Year Ended December 31, | |
| | 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | 2013 | | | | |
Investments in underlying funds | | | 0.01 | % | | | | | | | 0.01 | % | | | | | | | 0.01 | % | | | | | | — | | | | | | | | — | | | | | | | | — | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See notes to financial statements.
| | |
10 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Large Cap Focus Growth V.I. Fund (continued) | |
| | Class III | |
| | Six Months Ended 06/30/2018 (Unaudited) | | | | | | Year Ended December 31, | |
| 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 14.36 | | | | | | | $ | 13.24 | | | $ | 13.50 | | | $ | 13.99 | | | $ | 14.14 | | | $ | 11.49 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss)(a) | | | (0.03 | ) | | | | | | | (0.02 | ) | | | 0.06 | | | | 0.05 | | | | 0.05 | | | | 0.06 | |
Net realized and unrealized gain | | | 2.20 | | | | | | | | 3.88 | | | | 0.96 | | | | 0.30 | | | | 1.92 | | | | 3.79 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase from investment operations | | | 2.17 | | | | | | | | 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 period | | $ | 16.53 | | | | | | | $ | 14.36 | | | $ | 13.24 | | | $ | 13.50 | | | $ | 13.99 | | | $ | 14.14 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(d) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 15.11 | %(e) | | | | | | | 29.23 | % | | | 7.54 | % | | | 2.51 | % | | | 13.96 | % | | | 33.58 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets(f) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.23 | %(g) | | | | | | | 1.28 | % | | | 1.22 | % | | | 1.21 | % | | | 1.22 | % | | | 1.22 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 1.09 | %(g) | | | | | | | 1.14 | % | | | 1.09 | % | | | 1.07 | % | | | 1.09 | % | | | 1.09 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | | (0.41 | )%(g) | | | | | | | (0.16 | )% | | | 0.42 | % | | | 0.35 | % | | | 0.32 | % | | | 0.45 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 68,743 | | | | | | | $ | 54,820 | | | $ | 39,346 | | | $ | 37,818 | | | $ | 32,090 | | | $ | 20,864 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 32 | % | | | | | | | 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) | Aggregate total return. |
(f) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (Unaudited) | | | | | | Year Ended December 31, | |
| | 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | 2013 | | | | |
Investments in underlying funds | | | 0.01 | % | | | | | | | 0.01 | % | | | | | | | 0.01 | % | | | | | | — | | | | | | | | — | | | | | | | | — | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See notes to financial statements.
Notes to Financial Statements (unaudited)
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 19 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.
| | |
12 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (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. |
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 June 30, 2018, 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.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 13 | |
Notes to Financial Statements (unaudited) (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 | |
Citigroup Global Markets, Inc. | | $ | 4,672,207 | | | $ | (4,672,207 | ) | | $ | — | |
JP Morgan Securities LLC | | | 1,651,200 | | | | (1,651,200 | ) | | | — | |
| | | | | | | | | | | | |
| | $ | 6,323,407 | | | $ | (6,323,407 | ) | | $ | — | |
| | | | | | | | | | | | |
| (a) | Cash collateral with a value of $6,527,341 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 | | | 0.65 | % |
$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 six months ended June 30, 2018, the class specific distribution fees borne directly by Class III were $77,545.
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 six months ended June 30, 2018, 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 six months ended June 30, 2018, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:
| | | | | | | | | | | | | | |
Class I | | | | | | Class III | | | | Total | |
$ | 111,228 | | | | | | | $63,342 | | | | $ | 174,570 | |
| | |
14 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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 six months ended June 30, 2018, the amount waived was $735.
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 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 six months ended June 30, 2018, there were no fees waived by the Manager.
For the six months ended June 30, 2018, the Fund reimbursed the Manager $880 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 waived and/or reimbursed — class specific in the Statement of Operations. For the six months ended June 30, 2018, class specific expense waivers and/or reimbursements are as follows:
| | | | | | | | | | | | |
| | Class I | | | Class III | | | Total | |
Transfer Agent Fees Waived and/or Reimbursed | | $ | 74,476 | | | $ | 41,629 | | | $ | 116,105 | |
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, 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 six months ended June 30, 2018, 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 six months ended June 30, 2018, the Fund paid BIM $1,045 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 and borrow under the Interfund Lending Program.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 15 | |
Notes to Financial Statements (unaudited) (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 period ended June 30, 2018, the Fund did not participate in the Interfund Lending Program.
Directors and Officers: 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.
For the six months ended June 30, 2018, purchases and sales of investments, excluding short-term securities, were $52,417,573 and $55,282,598, respectively.
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 June 30, 2018, 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.
As of June 30, 2018, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
| | | | |
Tax cost | | $ | 137,044,145 | |
| | | | |
Gross unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . | | $ | 48,614,938 | |
Gross unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . | | | (844,626 | ) |
| | | | |
Net unrealized appreciation (depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. | | $ | 47,770,312 | |
| | | | |
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Although the Act does not amend any provisions directly related to the qualification or taxation of regulated investment companies (“RICs”), the Act does change the taxation of entities in which some RICs invest, the tax treatment of income derived from those entities and the taxation of RIC shareholders. While management does not anticipate significant impact to the Fund or to its shareholders, there is uncertainty in the application of certain provisions in the Act. Specifically, provisions in the Act may increase the amount of or accelerate the recognition of taxable income and may limit the deductibility of certain expenses by RICs. Until full clarity around these provisions is obtained, the impact on the Fund’s financial statements, if any, cannot be fully determined.
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, $2.25 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 $1.75 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 0.10% 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 2019 unless extended or renewed. Prior to April 19, 2018, the aggregate commitment amount was $2.1 billion and the fee was 0.12% per annum. Participating Funds paid an upfront commitment fee of 0.02% on the total commitment amounts, in addition to administration, legal and arrangement fees, which 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 six months ended June 30, 2018, the Fund did not borrow under the credit agreement.
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.
| | |
16 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (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.
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.
10. | CAPITAL SHARE TRANSACTIONS |
Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 | | | Year Ended 12/31/2017 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
Class I | | | | | | | | | | | | | | | | |
Shares sold | | | 255,646 | | | $ | 4,023,222 | | | | 299,156 | | | $ | 4,606,186 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 1,121,874 | | | | 16,392,533 | |
Shares redeemed | | | (698,456 | ) | | | (11,102,635 | ) | | | (1,052,862 | ) | | | (16,192,812 | ) |
| | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (442,810 | ) | | $ | (7,079,413 | ) | | | 368,168 | | | $ | 4,805,907 | |
| | | | | | | | | | | | | | | | |
| | | | |
Class III | | | | | | | | | | | | | | | | |
Shares sold | | | 887,647 | | | $ | 14,032,494 | | | | 722,465 | | | $ | 10,907,398 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 607,374 | | | | 8,780,361 | |
Shares redeemed | | | (545,064 | ) | | | (8,633,490 | ) | | | (485,328 | ) | | | (7,351,322 | ) |
| | | | | | | | | | | | | | | | |
Net increase | | | 342,583 | | | $ | 5,399,004 | | | | 844,511 | | | $ | 12,336,437 | |
| | | | | | | | | | | | | | | | |
Total Net Increase (Decrease) | | | (100,227 | ) | | $ | (1,680,409 | ) | | | 1,212,679 | | | $ | 17,142,344 | |
| | | | | | | | | | | | | | | | |
Management’s evaluation of the impact of all subsequent events on the Fund’s financial statements was completed through the date the financial statements were issued and the following items were noted:
The Fund paid short-term capital gain and long-term capital gain distributions in the following amounts per share on July 20, 2018 to the shareholders of record on July 18, 2018.
| | | | | | | | |
| | Short-Term Capital Gain | | | Long-Term Capital Gain | |
Class I | | $ | 0.048051 | | | $ | 0.270609 | |
Class III | | | 0.048051 | | | | 0.270609 | |
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 17 | |
Glossary of Terms Used in this Report
| | |
Currency |
| |
AUD | | Australian Dollar |
HKD | | Hong Kong Dollar |
| | |
Portfolio Abbreviations |
| |
NYRS | | New York Registered Shares |
S&P | | Standard & Poor’s |
| | |
18 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
JUNE 30, 2018
| | |
SEMI-ANNUAL REPORT (UNAUDITED) | | |
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 June 30, 2018 | | 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 into the Fund. At a special shareholder meeting on April 4, 2018, the shareholders of the Target Fund approved the reorganization, which was completed on April 23, 2018.
Portfolio Management Commentary
How did the Fund perform?
For the six-month period ended June 30, 2018, the Fund outperformed its blended benchmark (50% MSCI All Country World Index/50% FTSE World Government Bond Index (hedged into USD)) as well as its performance benchmark, the ICE BofAML 3-Month U.S. Treasury Bill Index.
What factors influenced performance?
The Fund’s cautious stance on the U.S. bond market contributed positively to performance, especially early in the period as domestic inflation strengthened, growth remained firm and the U.S. Federal Reserve (the “Fed”) maintained relatively hawkish rhetoric despite equity market volatility. A defensive view on domestic stocks also contributed as concerns over rising inflation and tightening monetary policy acted as a headwind to the U.S. equity market. Exposure to equities in Europe, Asia (ex Japan) and emerging markets also added value.
Exposure to European bonds dampened returns toward the latter part of the period. Additionally, an allocation to Mexican bonds detracted from returns amid heightened concerns over the outcome of that country’s presidential election. An underweight position in the Japanese yen also weighed on returns as increased risk aversion in global markets and more hawkish comments from the Bank of Japan resulted in appreciation of the yen.
Describe recent portfolio activity.
The Fund began the period with a preference for stocks relative to bonds. Within equities, the Fund held notable exposure to U.S. and Japanese stocks. Within fixed income, the Fund maintained a cautious stance on U.S. bonds.
During the period, the Fund added to emerging market stocks and bonds on attractive valuations. Meanwhile, the Fund trimmed its overweight position to European stocks and significantly reduced exposure to both European bonds and U.S. stocks.
The Fund held a relatively high allocation to cash as a means of reducing overall portfolio volatility. The cash position did not have a material impact on performance.
Derivatives are used by the investment adviser as a means to take outright views on interest rates, credit risk and/or foreign exchange positions in the Fund and to efficiently implement and manage risk. During the period, the Fund’s use of derivatives contributed positively to Fund performance.
Describe portfolio positioning at period end.
The Fund ended the period with a relatively cautious stance on U.S. assets on the view that domestic inflation is heading higher and an expectation that the Fed will continue to withdraw stimulus at a faster pace than in other economies. The Fund was overweight in emerging market stocks and bonds. The Fund also held exposure to European and Japanese equities.
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 Total Investments (a) | |
Common Stocks | | | 71 | % |
U.S. Treasury Obligations | | | 29 | |
U.S. Government Sponsored Agency Obligations | | | — | (b) |
Preferred Stocks | | | — | (b) |
Rights | | | — | (b) |
Corporate Bonds | | | — | (b) |
Non-Agency Mortgage-Backed Securities | | | — | (b) |
Other Interests | | | — | (b) |
| (a) | Total investments exclude short-term securities. | |
| (b) | Representing less than 0.5% of the Fund’s total investments. | |
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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Fund Summary as of June 30, 2018 (continued) | | BlackRock Managed Volatility V.I. Fund |
Performance Summary for the Period Ended June 30, 2018
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 6-Month Total Returns (c) | | | | | | Average Annual Total Returns | |
| | | | | 1 Year (c) | | | | | | 5 Years (c) | | | | | | 10 Years (c) | |
Class I(a)(b) | | | 1.17 | % | | | | | | | 3.61 | % | | | | | | | 3.79 | % | | | | | | | 3.46 | % |
Class III(a)(b) | | | 1.06 | | | | | | | | 3.38 | | | | | | | | 3.54 | | | | | | | | 3.20 | (d) |
50% MSCI ACWI/50% FTSE WGBI (hedged into USD)(e) | | | 0.26 | | | | | | | | 6.46 | | | | | | | | 6.52 | | | | | | | | 5.27 | |
MSCI ACWI(f) | | | (0.43 | ) | | | | | | | 10.73 | | | | | | | | 9.41 | | | | | | | | 5.80 | |
FTSE WGBI (hedged into USD)(g) | | | 0.78 | | | | | | | | 2.12 | | | | | | | | 3.40 | | | | | | | | 3.95 | |
ICE BofAML 3-Month U.S. Treasury Bill Index(h) | | | 0.81 | | | | | | | | 1.36 | | | | | | | | 0.42 | | | | | | | | 0.35 | |
| (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) | The Fund uses an asset allocation strategy, investing various percentages of its portfolio in three major categories: stocks, bonds and money market investments. | |
| (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 14, 2018, 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. | |
| (e) | A customized weighted index comprised of the returns of 50% MSCI ACWI/50% FTSE WGBI (hedged into USD). | |
| (f) | A free float-adjusted market capitalization weighted index that is designated 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. | |
| (g) | A market capitalization weighted bond index consisting of government bond markets of 23 countries, including the United States. | |
| (h) | 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. | |
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 (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | | | | Beginning Account Value (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | Annualized Expense Ratio | |
Class I | | $ | 1,000.00 | | | $ | 1,011.70 | | | $ | 4.09 | | | | | | | $ | 1,000.00 | | | $ | 1,020.73 | | | $ | 4.11 | | | | 0.82 | % |
Class III | | | 1,000.00 | | | | 1,011.70 | | | | 3.07 | | | | | | | | 1,000.00 | | | | 1,020.73 | | | | 4.11 | | | | 0.82 | |
| (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 annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown), except for Class III, which is multiplied by 136/365 (to reflect the period since inception date of February 14, 2018). | |
See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.
| | |
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 January 1, 2018 and held through June 30, 2018, except with respect to Class III Shares which are based on a hypothetical investment of $1,000 on February 14, 2018 (commencement of operations) and held through June 30, 2018) 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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) June 30, 2018 | | BlackRock Managed Volatility V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Shares | | | Value | |
Common Stocks — 57.4% | | | | | | | | | | | | |
| | | |
Aerospace & Defense — 0.4% | | | | | | | | | |
Airbus SE | | | | | | | 1,786 | | | $ | 208,417 | |
BAE Systems plc | | | | | | | 8,470 | | | | 72,057 | |
Bombardier, Inc., Class B(a) | | | | | | | 51,231 | | | | 202,641 | |
CAE, Inc. | | | | | | | 33,902 | | | | 704,266 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,187,381 | |
Air Freight & Logistics — 0.1% | | | | | | | | | |
Deutsche Post AG (Registered) | | | | | | | 5,141 | | | | 167,033 | |
| | | | | | | | | | | | |
Airlines — 0.1% | | | | | | | | | |
Deutsche Lufthansa AG (Registered) | | | | | | | 5,703 | | | | 136,630 | |
Japan Airlines Co. Ltd. | | | | | | | 1,800 | | | | 63,776 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 200,406 | |
Auto Components — 0.6% | | | | | | | | | |
Bridgestone Corp. | | | | | | | 13,100 | | | | 511,723 | |
Continental AG | | | | | | | 288 | | | | 65,543 | |
Linamar Corp. | | | | | | | 5,234 | | | | 230,158 | |
Magna International, Inc. | | | | | | | 11,543 | | | | 671,341 | |
Sumitomo Rubber Industries Ltd. | | | | | | | 3,500 | | | | 55,478 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,534,243 | |
Automobiles — 0.2% | | | | | | | | | |
Daimler AG (Registered) | | | | | | | 652 | | | | 41,765 | |
General Motors Co. | | | | | | | 2,489 | | | | 98,067 | |
Peugeot SA | | | | | | | 4,875 | | | | 111,078 | |
Toyota Motor Corp. | | | | | | | 2,400 | | | | 155,205 | |
Volkswagen AG | | | | | | | 1,195 | | | | 196,450 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 602,565 | |
Banks — 4.4% | | | | | | | | | |
Aozora Bank Ltd. | | | | | | | 2,100 | | | | 79,698 | |
Australia & New Zealand Banking Group Ltd. | | | | | | | 3,779 | | | | 79,093 | |
Banco Bilbao Vizcaya Argentaria SA | | | | | | | 62,262 | | | | 439,107 | |
Bank Hapoalim BM | | | | | | | 11,895 | | | | 80,639 | |
Bank Leumi Le-Israel BM | | | | | | | 17,492 | | | | 103,502 | |
Bank of America Corp. | | | | | | | 38,310 | | | | 1,079,959 | |
Barclays plc | | | | | | | 97,989 | | | | 242,203 | |
BB&T Corp. | | | | | | | 4,398 | | | | 221,835 | |
BNP Paribas SA | | | | | | | 128 | | | | 7,918 | |
BOC Hong Kong Holdings Ltd. | | | | | | | 18,500 | | | | 86,949 | |
CaixaBank SA | | | | | | | 32,431 | | | | 139,592 | |
Chiba Bank Ltd. (The) | | | | | | | 8,200 | | | | 57,834 | |
CIT Group, Inc. | | | | | | | 2,339 | | | | 117,909 | |
Citigroup, Inc. | | | | | | | 956 | | | | 63,975 | |
Citizens Financial Group, Inc. | | | | | | | 4,365 | | | | 169,798 | |
Commonwealth Bank of Australia | | | | | | | 524 | | | | 28,261 | |
Concordia Financial Group Ltd. | | | | | | | 7,000 | | | | 35,573 | |
Danske Bank A/S | | | | | | | 7,828 | | | | 243,873 | |
DNB ASA | | | | | | | 22,887 | | | | 445,680 | |
East West Bancorp, Inc. | | | | | | | 240 | | | | 15,648 | |
Fifth Third Bancorp | | | | | | | 5,521 | | | | 158,453 | |
Fukuoka Financial Group, Inc. | | | | | | | 7,000 | | | | 35,128 | |
Hang Seng Bank Ltd. | | | | | | | 2,000 | | | | 49,941 | |
HSBC Holdings plc | | | | | | | 149,067 | | | | 1,392,934 | |
ING Groep NV | | | | | | | 8,069 | | | | 115,827 | |
Intesa Sanpaolo SpA | | | | | | | 101,540 | | | | 306,803 | |
Japan Post Bank Co. Ltd. | | | | | | | 15,600 | | | | 181,374 | |
JPMorgan Chase & Co. | | | | | | | 13,428 | | | | 1,399,198 | |
M&T Bank Corp. | | | | | | | 146 | | | | 24,842 | |
Mitsubishi UFJ Financial Group, Inc. | | | | | | | 73,200 | | | | 414,669 | |
Mizuho Financial Group, Inc. | | | | | | | 182,800 | | | | 307,924 | |
NatWest Markets plc(a) | | | | | | | 58,855 | | | | 198,137 | |
Nordea Bank AB | | | | | | | 15,004 | | | | 143,927 | |
| | | | | | | | | | | | |
Security | | Shares | | | Value | |
Banks (continued) | | | | | | | | | |
Oversea-Chinese Banking Corp. Ltd. | | | | | | | 13,100 | | | $ | 111,583 | |
Regions Financial Corp. | | | | | | | 11,158 | | | | 198,389 | |
Resona Holdings, Inc. | | | | | | | 20,500 | | | | 109,260 | |
Royal Bank of Canada | | | | | | | 1,359 | | | | 102,329 | |
Shizuoka Bank Ltd. (The) | | | | | | | 4,500 | | | | 40,461 | |
Skandinaviska Enskilda Banken AB, Class A | | | | | | | 1,759 | | | | 16,648 | |
Standard Chartered plc | | | | | | | 22,394 | | | | 203,414 | |
Sumitomo Mitsui Financial Group, Inc. | | | | | | | 11,300 | | | | 440,768 | |
Sumitomo Mitsui Trust Holdings, Inc. | | | | | | | 3,100 | | | | 122,306 | |
SunTrust Banks, Inc. | | | | | | | 3,399 | | | | 224,402 | |
Suruga Bank Ltd. | | | | | | | 6,100 | | | | 54,335 | |
SVB Financial Group(a) | | | | | | | 340 | | | | 98,178 | |
Svenska Handelsbanken AB, Class A | | | | | | | 3,244 | | | | 35,929 | |
Swedbank AB, Class A | | | | | | | 3,723 | | | | 79,323 | |
Toronto-Dominion Bank (The) | | | | | | | 4,530 | | | | 262,190 | |
UniCredit SpA | | | | | | | 554 | | | | 9,182 | |
United Overseas Bank Ltd. | | | | | | | 5,500 | | | | 107,793 | |
US Bancorp | | | | | | | 9,983 | | | | 499,350 | |
Wells Fargo & Co. | | | | | | | 20,561 | | | | 1,139,902 | |
Yamaguchi Financial Group, Inc. | | | | | | | 4,000 | | | | 44,998 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 12,368,943 | |
Beverages — 1.1% | | | | | | | | | |
Asahi Group Holdings Ltd. | | | | | | | 2,000 | | | | 102,576 | |
Carlsberg A/S, Class B | | | | | | | 211 | | | | 24,826 | |
Coca-Cola Amatil Ltd. | | | | | | | 4,618 | | | | 31,410 | |
Coca-Cola Bottlers Japan Holdings, Inc. | | | | | | | 400 | | | | 16,004 | |
Coca-Cola European Partners plc | | | | | | | 4,813 | | | | 195,600 | |
Coca-Cola HBC AG(a) | | | | | | | 2,472 | | | | 82,280 | |
Diageo plc | | | | | | | 20,902 | | | | 750,923 | |
Heineken Holding NV | | | | | | | 4,532 | | | | 433,422 | |
Heineken NV | | | | | | | 6,163 | | | | 617,462 | |
Kirin Holdings Co. Ltd. | | | | | | | 10,300 | | | | 276,090 | |
Pernod Ricard SA | | | | | | | 1,466 | | | | 239,258 | |
Treasury Wine Estates Ltd. | | | | | | | 30,494 | | | | 391,788 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 3,161,639 | |
Biotechnology — 2.2% | | | | | | | | | |
AbbVie, Inc. | | | | | | | 11,844 | | | | 1,097,347 | |
Alexion Pharmaceuticals, Inc.(a) | | | | | | | 92 | | | | 11,422 | |
Alkermes plc(a) | | | | | | | 728 | | | | 29,965 | |
Alnylam Pharmaceuticals, Inc.(a) | | | | | | | 623 | | | | 61,359 | |
Amgen, Inc. | | | | | | | 7,608 | | | | 1,404,361 | |
Biogen, Inc.(a) | | | | | | | 1,691 | | | | 490,796 | |
Celgene Corp.(a) | | | | | | | 7,458 | | | | 592,314 | |
CSL Ltd. | | | | | | | 5,471 | | | | 778,759 | |
Gilead Sciences, Inc. | | | | | | | 11,338 | | | | 803,184 | |
Incyte Corp.(a) | | | | | | | 278 | | | | 18,626 | |
Regeneron Pharmaceuticals, Inc.(a) | | | | | | | 284 | | | | 97,977 | |
Shire plc | | | | | | | 1,703 | | | | 95,945 | |
United Therapeutics Corp.(a) | | | | | | | 1,268 | | | | 143,474 | |
Vertex Pharmaceuticals, Inc.(a) | | | | | | | 2,296 | | | | 390,228 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 6,015,757 | |
Building Products — 0.0% | | | | | | | | | |
Cie de Saint-Gobain | | | | | | | 137 | | | | 6,103 | |
| | | | | | | | | | | | |
Capital Markets — 1.0% | | | | | | | | | |
Ameriprise Financial, Inc. | | | | | | | 2,795 | | | | 390,965 | |
Charles Schwab Corp. (The) | | | | | | | 6,386 | | | | 326,325 | |
CME Group, Inc. | | | | | | | 1,974 | | | | 323,578 | |
Credit Suisse Group AG (Registered)(a) | | | | | | | 12,151 | | | | 181,695 | |
Daiwa Securities Group, Inc. | | | | | | | 13,000 | | | | 75,346 | |
E*TRADE Financial Corp.(a) | | | | | | | 636 | | | | 38,898 | |
Goldman Sachs Group, Inc. (The) | | | | | | | 925 | | | | 204,027 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 5 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Managed Volatility V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Shares | | | Value | |
Capital Markets (continued) | | | | | | | | | |
Hargreaves Lansdown plc | | | | | | | 1,527 | | | $ | 39,582 | |
Investec plc | | | | | | | 1,023 | | | | 7,233 | |
Japan Exchange Group, Inc. | | | | | | | 6,300 | | | | 116,853 | |
Morgan Stanley | | | | | | | 3,154 | | | | 149,500 | |
MSCI, Inc. | | | | | | | 279 | | | | 46,155 | |
Nomura Holdings, Inc. | | | | | | | 25,500 | | | | 123,396 | |
Quilter plc(a)(b) | | | | | | | 18,593 | | | | 35,561 | |
Raymond James Financial, Inc. | | | | | | | 97 | | | | 8,667 | |
S&P Global, Inc. | | | | | | | 383 | | | | 78,090 | |
SBI Holdings, Inc. | | | | | | | 1,900 | | | | 48,717 | |
SEI Investments Co. | | | | | | | 709 | | | | 44,327 | |
Singapore Exchange Ltd. | | | | | | | 3,300 | | | | 17,341 | |
St James’s Place plc | | | | | | | 313 | | | | 4,722 | |
T. Rowe Price Group, Inc. | | | | | | | 360 | | | | 41,792 | |
TD Ameritrade Holding Corp. | | | | | | | 2,516 | | | | 137,801 | |
UBS Group AG (Registered)(a) | | | | | | | 30,442 | | | | 466,687 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,907,258 | |
Chemicals — 6.2% | | | | | | | | | |
Akzo Nobel NV | | | | | | | 3,375 | | | | 287,861 | |
Albemarle Corp. | | | | | | | 8,541 | | | | 805,673 | |
Arkema SA | | | | | | | 2,570 | | | | 303,261 | |
Asahi Kasei Corp. | | | | | | | 8,700 | | | | 110,329 | |
Axalta Coating Systems Ltd.(a) | | | | | | | 24,129 | | | | 731,350 | |
BASF SE | | | | | | | 7,281 | | | | 695,107 | |
Celanese Corp. | | | | | | | 12,333 | | | | 1,369,703 | |
CF Industries Holdings, Inc. | | | | | | | 8,713 | | | | 386,857 | |
Chemours Co. (The) | | | | | | | 11,603 | | | | 514,709 | |
Covestro AG(b) | | | | | | | 3,779 | | | | 335,891 | |
Daicel Corp. | | | | | | | 10,600 | | | | 117,097 | |
DowDuPont, Inc. | | | | | | | 30,791 | | | | 2,029,743 | |
Eastman Chemical Co. | | | | | | | 3,451 | | | | 344,962 | |
Ecolab, Inc. | | | | | | | 11,187 | | | | 1,569,872 | |
Evonik Industries AG | | | | | | | 4,993 | | | | 170,829 | |
Hitachi Chemical Co. Ltd. | | | | | | | 900 | | | | 18,118 | |
Incitec Pivot Ltd. | | | | | | | 39,835 | | | | 106,877 | |
International Flavors & Fragrances, Inc. | | | | | | | 4,151 | | | | 514,558 | |
JSR Corp. | | | | | | | 1,000 | | | | 16,994 | |
Koninklijke DSM NV | | | | | | | 3,822 | | | | 382,349 | |
Kuraray Co. Ltd. | | | | | | | 3,400 | | | | 46,762 | |
LyondellBasell Industries NV, Class A | | | | | | | 8,523 | | | | 936,252 | |
Methanex Corp. | | | | | | | 2,473 | | | | 174,868 | |
Mitsubishi Chemical Holdings Corp. | | | | | | | 28,900 | | | | 241,338 | |
Mitsubishi Gas Chemical Co., Inc. | | | | | | | 3,900 | | | | 88,131 | |
Mitsui Chemicals, Inc. | | | | | | | 2,800 | | | | 74,420 | |
Nitto Denko Corp. | | | | | | | 2,200 | | | | 166,094 | |
Nutrien Ltd. | | | | | | | 10,057 | | | | 547,124 | |
Orica Ltd. | | | | | | | 8,283 | | | | 108,743 | |
PPG Industries, Inc. | | | | | | | 15,784 | | | | 1,637,274 | |
Sherwin-Williams Co. (The) | | | | | | | 4,417 | | | | 1,800,237 | |
Shin-Etsu Chemical Co. Ltd. | | | | | | | 2,400 | | | | 213,284 | |
Sumitomo Chemical Co. Ltd. | | | | | | | 24,000 | | | | 135,735 | |
Teijin Ltd. | | | | | | | 6,000 | | | | 109,906 | |
Tosoh Corp. | | | | | | | 7,900 | | | | 122,151 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 17,214,459 | |
Commercial Services & Supplies — 0.0% | | | | | | | | | |
Societe BIC SA | | | | | | | 584 | | | | 54,150 | |
| | | | | | | | | | | | |
Construction & Engineering — 0.1% | | | | | | | | | |
Fluor Corp. | | | | | | | 923 | | | | 45,024 | |
Kajima Corp. | | | | | | | 6,000 | | | | 46,360 | |
Taisei Corp. | | | | | | | 1,200 | | | | 66,083 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 157,467 | |
| | | | | | | | | | | | |
Security | | Shares | | | Value | |
Construction Materials — 1.4% | | | | | | | | | |
CRH plc | | | | | | | 8,604 | | | $ | 302,640 | |
HeidelbergCement AG | | | | | | | 2,280 | | | | 191,444 | |
Martin Marietta Materials, Inc. | | | | | | | 6,095 | | | | 1,361,196 | |
Taiheiyo Cement Corp. | | | | | | | 1,700 | | | | 55,924 | |
Vulcan Materials Co. | | | | | | | 14,369 | | | | 1,854,463 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 3,765,667 | |
Consumer Finance — 0.3% | | | | | | | | | |
American Express Co. | | | | | | | 4,738 | | | | 464,324 | |
Capital One Financial Corp. | | | | | | | 1,677 | | | | 154,116 | |
Discover Financial Services | | | | | | | 2,934 | | | | 206,583 | |
Synchrony Financial | | | | | | | 4,529 | | | | 151,178 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 976,201 | |
Containers & Packaging — 0.4% | | | | | | | | | |
Amcor Ltd. | | | | | | | 9,882 | | | | 105,290 | |
CCL Industries, Inc., Class B | | | | | | | 2,816 | | | | 138,053 | |
International Paper Co. | | | | | | | 12,254 | | | | 638,188 | |
Packaging Corp. of America | | | | | | | 1,146 | | | | 128,111 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,009,642 | |
Diversified Consumer Services — 0.0% | | | | | | | | | |
H&R Block, Inc. | | | | | | | 1,788 | | | | 40,731 | |
| | | | | | | | | | | | |
Diversified Financial Services — 0.5% | | | | | | | | | |
Berkshire Hathaway, Inc., Class B(a) | | | | | | | 2,687 | | | | 501,529 | |
Groupe Bruxelles Lambert SA | | | | | | | 2,506 | | | | 263,632 | |
ORIX Corp. | | | | | | | 31,600 | | | | 498,082 | |
Standard Life Aberdeen plc | | | | | | | 23,801 | | | | 101,920 | |
Voya Financial, Inc. | | | | | | | 2,498 | | | | 117,406 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,482,569 | |
Electric Utilities — 0.1% | | | | | | | | | |
Fortum OYJ | | | | | | | 9,920 | | | | 236,286 | |
Kansai Electric Power Co., Inc. (The) | | | | | | | 2,500 | | | | 36,460 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 272,746 | |
Electrical Equipment — 0.0% | | | | | | | | | |
Mitsubishi Electric Corp. | | | | | | | 1,000 | | | | 13,268 | |
| | | | | | | | | | | | |
Electronic Equipment, Instruments & Components — 0.0% | |
Hitachi Ltd. | | | | | | | 4,000 | | | | 28,180 | |
| | | | | | | | | | | | |
Energy Equipment & Services — 0.0% | | | | | | | | | |
Apergy Corp.(a) | | | | | | | 236 | | | | 9,853 | |
| | | | | | | | | | | | |
Equity Real Estate Investment Trusts (REITs) — 0.7% | |
Crown Castle International Corp. | | | | | | | 435 | | | | 46,902 | |
Weyerhaeuser Co. | | | | | | | 52,798 | | | | 1,925,015 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,971,917 | |
Food & Staples Retailing — 0.2% | | | | | | | | | |
Alimentation Couche-Tard, Inc., Class B | | | | | | | 2,879 | | | | 125,067 | |
Koninklijke Ahold Delhaize NV | | | | | | | 9,273 | | | | 221,417 | |
Seven & i Holdings Co. Ltd. | | | | | | | 200 | | | | 8,723 | |
Tesco plc | | | | | | | 41,762 | | | | 141,306 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 496,513 | |
Food Products — 0.8% | | | | | | | | | |
a2 Milk Co. Ltd.(a) | | | | | | | 784 | | | | 6,072 | |
Ajinomoto Co., Inc. | | | | | | | 4,500 | | | | 85,181 | |
Campbell Soup Co. | | | | | | | 276 | | | | 11,189 | |
Conagra Brands, Inc. | | | | | | | 5,607 | | | | 200,338 | |
Kikkoman Corp. | | | | | | | 1,300 | | | | 65,635 | |
MEIJI Holdings Co. Ltd. | | | | | | | 1,700 | | | | 143,572 | |
Nestle SA (Registered) | | | | | | | 11,720 | | | | 908,310 | |
Saputo, Inc. | | | | | | | 8,192 | | | | 271,997 | |
Toyo Suisan Kaisha Ltd. | | | | | | | 1,900 | | | | 67,789 | |
| | |
6 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Managed Volatility V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Shares | | | Value | |
Food Products (continued) | | | | | | | | | |
Tyson Foods, Inc., Class A | | | | | | | 1,910 | | | $ | 131,504 | |
WH Group Ltd.(b) | | | | | | | 94,500 | | | | 76,468 | |
Yakult Honsha Co. Ltd. | | | | | | | 200 | | | | 13,372 | |
Yamazaki Baking Co. Ltd. | | | | | | | 6,600 | | | | 173,055 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,154,482 | |
Gas Utilities — 0.0% | | | | | | | | | |
Tokyo Gas Co. Ltd. | | | | | | | 3,800 | | | | 100,899 | |
| | | | | | | | | | | | |
Health Care Equipment & Supplies — 0.2% | | | | | | | | | |
Coloplast A/S, Class B | | | | | | | 1,181 | | | | 117,914 | |
Koninklijke Philips NV | | | | | | | 10,162 | | | | 430,543 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 548,457 | |
Health Care Providers & Services — 2.3% | | | | | | | | | |
Aetna, Inc. | | | | | | | 4,609 | | | | 845,752 | |
Alfresa Holdings Corp. | | | | | | | 700 | | | | 16,438 | |
AmerisourceBergen Corp. | | | | | | | 170 | | | | 14,496 | |
Anthem, Inc. | | | | | | | 782 | | | | 186,139 | |
Centene Corp.(a) | | | | | | | 2,284 | | | | 281,412 | |
Cigna Corp. | | | | | | | 2,878 | | | | 489,116 | |
CVS Health Corp. | | | | | | | 6,587 | | | | 423,873 | |
DaVita, Inc.(a) | | | | | | | 1,298 | | | | 90,133 | |
Express Scripts Holding Co.(a) | | | | | | | 5,404 | | | | 417,243 | |
Fresenius Medical Care AG & Co. KGaA | | | | | | | 3,536 | | | | 356,045 | |
Fresenius SE & Co. KGaA | | | | | | | 2,059 | | | | 164,853 | |
HCA Healthcare, Inc. | | | | | | | 3,744 | | | | 384,134 | |
Humana, Inc. | | | | | | | 1,880 | | | | 559,544 | |
McKesson Corp. | | | | | | | 574 | | | | 76,572 | |
Mediclinic International plc | | | | | | | 9,380 | | | | 64,983 | |
Quest Diagnostics, Inc. | | | | | | | 1,719 | | | | 188,987 | |
Suzuken Co. Ltd. | | | | | | | 1,400 | | | | 59,205 | |
UnitedHealth Group, Inc. | | | | | | | 7,006 | | | | 1,718,852 | |
Universal Health Services, Inc., Class B | | | | | | | 984 | | | | 109,657 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 6,447,434 | |
Hotels, Restaurants & Leisure — 1.7% | | | | | | | | | |
Aristocrat Leisure Ltd. | | | | | | | 1,716 | | | | 39,189 | |
Chipotle Mexican Grill, Inc.(a) | | | | | | | 608 | | | | 262,273 | |
Compass Group plc | | | | | | | 6,405 | | | | 136,527 | |
Darden Restaurants, Inc. | | | | | | | 1,687 | | | | 180,610 | |
Domino’s Pizza, Inc. | | | | | | | 1,552 | | | | 437,928 | |
Galaxy Entertainment Group Ltd. | | | | | | | 46,000 | | | | 354,589 | |
McDonald’s Corp. | | | | | | | 7,396 | | | | 1,158,879 | |
Melco Resorts & Entertainment Ltd., ADR | | | | | | | 7,991 | | | | 223,748 | |
MGM China Holdings Ltd. | | | | | | | 56,000 | | | | 129,485 | |
Sands China Ltd. | | | | | | | 58,000 | | | | 309,221 | |
Shangri-La Asia Ltd. | | | | | | | 76,000 | | | | 142,380 | |
SJM Holdings Ltd. | | | | | | | 143,000 | | | | 177,353 | |
Starbucks Corp. | | | | | | | 11,617 | | | | 567,490 | |
TUI AG | | | | | | | 366 | | | | 8,005 | |
Wynn Macau Ltd. | | | | | | | 46,000 | | | | 147,414 | |
Yum! Brands, Inc. | | | | | | | 7,152 | | | | 559,429 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 4,834,520 | |
Household Durables — 0.1% | | | | | | | | | |
Panasonic Corp. | | | | | | | 1,900 | | | | 25,621 | |
Sony Corp. | | | | | | | 2,800 | | | | 143,400 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 169,021 | |
Household Products — 3.6% | | | | | | | | | |
Church & Dwight Co., Inc. | | | | | | | 14,321 | | | | 761,304 | |
Clorox Co. (The) | | | | | | | 8,318 | | | | 1,125,009 | |
Colgate-Palmolive Co. | | | | | | | 14,421 | | | | 934,625 | |
Essity AB, Class B | | | | | | | 45,992 | | | | 1,131,476 | |
Henkel AG & Co. KGaA | | | | | | | 1,253 | | | | 139,123 | |
| | | | | | | | | | | | |
Security | | Shares | | | Value | |
Household Products (continued) | | | | | | | | | |
Kimberly-Clark Corp. | | | | | | | 14,737 | | | $ | 1,552,396 | |
Lion Corp. | | | | | | | 5,800 | | | | 106,130 | |
Procter & Gamble Co. (The) | | | | | | | 53,438 | | | | 4,171,370 | |
Unicharm Corp. | | | | | | | 700 | | | | 21,045 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 9,942,478 | |
Independent Power and Renewable Electricity Producers — 0.0% | |
Uniper SE | | | | | | | 2,836 | | | | 84,436 | |
| | | | | | | | | | | | |
Industrial Conglomerates — 0.1% | | | | | | | | | |
Honeywell International, Inc. | | | | | | | 858 | | | | 123,595 | |
Siemens AG (Registered) | | | | | | | 891 | | | | 117,394 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 240,989 | |
Insurance — 3.9% | | | | | | | | | |
Admiral Group plc | | | | | | | 1,102 | | | | 27,696 | |
Aegon NV | | | | | | | 24,810 | | | | 148,131 | |
Ageas | | | | | | | 15,922 | | | | 801,562 | |
AIA Group Ltd. | | | | | | | 61,800 | | | | 538,365 | |
Allianz SE (Registered) | | | | | | | 4,604 | | | | 948,676 | |
Allstate Corp. (The) | | | | | | | 4,699 | | | | 428,878 | |
American International Group, Inc. | | | | | | | 3,078 | | | | 163,196 | |
Athene Holding Ltd., Class A(a) | | | | | | | 3,305 | | | | 144,891 | |
Aviva plc | | | | | | | 57,519 | | | | 381,644 | |
AXA SA | | | | | | | 13,611 | | | | 332,568 | |
Baloise Holding AG (Registered) | | | | | | | 240 | | | | 34,814 | |
Brighthouse Financial, Inc.(a) | | | | | | | 681 | | | | 27,288 | |
Chubb Ltd. | | | | | | | 1,419 | | | | 180,241 | |
Dai-ichi Life Holdings, Inc. | | | | | | | 10,800 | | | | 192,215 | |
Direct Line Insurance Group plc | | | | | | | 12,259 | | | | 55,321 | |
Everest Re Group Ltd. | | | | | | | 185 | | | | 42,639 | |
Fairfax Financial Holdings Ltd. | | | | | | | 154 | | | | 86,293 | |
Gjensidige Forsikring ASA | | | | | | | 6,293 | | | | 103,026 | |
Hannover Rueck SE | | | | | | | 1,952 | | | | 242,676 | |
Hartford Financial Services Group, Inc. (The) | | | | | | | 3,814 | | | | 195,010 | |
Japan Post Holdings Co. Ltd. | | | | | | | 15,600 | | | | 170,723 | |
Legal & General Group plc | | | | | | | 96,605 | | | | 337,909 | |
Lincoln National Corp. | | | | | | | 913 | | | | 56,834 | |
Loews Corp. | | | | | | | 465 | | | | 22,450 | |
Manulife Financial Corp. | | | | | | | 17,152 | | | | 308,166 | |
MetLife, Inc. | | | | | | | 5,850 | | | | 255,060 | |
MS&AD Insurance Group Holdings, Inc. | | | | | | | 9,600 | | | | 298,163 | |
Muenchener Rueckversicherungs-Gesellschaft AG (Registered) | | | | | | | 2,003 | | | | 421,116 | |
Old Mutual Ltd.(a) | | | | | | | 55,780 | | | | 110,275 | |
Principal Financial Group, Inc. | | | | | | | 2,203 | | | | 116,649 | |
Progressive Corp. (The) | | | | | | | 3,066 | | | | 181,354 | |
Prudential Financial, Inc. | | | | | | | 1,833 | | | | 171,404 | |
Prudential plc | | | | | | | 32,923 | | | | 750,523 | |
QBE Insurance Group Ltd. | | | | | | | 10,587 | | | | 76,218 | |
Sompo Holdings, Inc. | | | | | | | 7,100 | | | | 286,485 | |
Sun Life Financial, Inc. | | | | | | | 5,922 | | | | 237,979 | |
Swiss Life Holding AG (Registered)(a) | | | | | | | 325 | | | | 112,694 | |
Swiss Re AG | | | | | | | 5,017 | | | | 438,029 | |
T&D Holdings, Inc. | | | | | | | 9,200 | | | | 137,982 | |
Tokio Marine Holdings, Inc. | | | | | | | 8,800 | | | | 411,693 | |
Torchmark Corp. | | | | | | | 140 | | | | 11,397 | |
Travelers Cos., Inc. (The) | | | | | | | 1,969 | | | | 240,887 | |
Tryg A/S | | | | | | | 2,027 | | | | 47,469 | |
Unum Group | | | | | | | 6,039 | | | | 223,383 | |
Zurich Insurance Group AG | | | | | | | 1,600 | | | | 473,168 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 10,973,140 | |
Internet & Direct Marketing Retail — 0.8%(a) | | | | | | | | | |
Amazon.com, Inc. | | | | | | | 1,175 | | | | 1,997,265 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 7 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Managed Volatility V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Shares | | | Value | |
Internet & Direct Marketing Retail (continued) | | | | | | | | | |
Netflix, Inc. | | | | | | | 774 | | | $ | 302,967 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,300,232 | |
Internet Software & Services — 1.7% | | | | | | | | | |
Alphabet, Inc., Class A(a) | | | | | | | 1,068 | | | | 1,205,975 | |
Alphabet, Inc., Class C(a) | | | | | | | 1,336 | | | | 1,490,508 | |
Delivery Hero AG(a)(b) | | | | | | | 384 | | | | 20,354 | |
eBay, Inc.(a) | | | | | | | 3,273 | | | | 118,679 | |
Facebook, Inc., Class A(a) | | | | | | | 7,728 | | | | 1,501,705 | |
Kakaku.com, Inc. | | | | | | | 900 | | | | 20,266 | |
OneMarket Ltd.(a) | | | | | | | 273 | | | | 258 | |
Shopify, Inc., Class A(a) | | | | | | | 1,116 | | | | 162,742 | |
VeriSign, Inc.(a) | | | | | | | 773 | | | | 106,226 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 4,626,713 | |
IT Services — 1.2% | | | | | | | | | |
Accenture plc, Class A | | | | | | | 186 | | | | 30,428 | |
Automatic Data Processing, Inc. | | | | | | | 766 | | | | 102,751 | |
Capgemini SE | | | | | | | 1,072 | | | | 143,659 | |
Cognizant Technology Solutions Corp., Class A | | | | | | | 1,199 | | | | 94,709 | |
Computershare Ltd. | | | | | | | 11,385 | | | | 155,092 | |
Fidelity National Information Services, Inc. | | | | | | | 333 | | | | 35,308 | |
Fiserv, Inc.(a) | | | | | | | 2,838 | | | | 210,267 | |
Fujitsu Ltd. | | | | | | | 50,000 | | | | 302,576 | |
International Business Machines Corp. | | | | | | | 4,731 | | | | 660,921 | |
Mastercard, Inc., Class A | | | | | | | 2,188 | | | | 429,986 | |
Nomura Research Institute Ltd. | | | | | | | 400 | | | | 19,352 | |
NTT Data Corp. | | | | | | | 2,300 | | | | 26,457 | |
Otsuka Corp. | | | | | | | 2,700 | | | | 105,698 | |
Paychex, Inc. | | | | | | | 1,473 | | | | 100,679 | |
PayPal Holdings, Inc.(a) | | | | | | | 1,505 | | | | 125,321 | |
Visa, Inc., Class A | | | | | | | 5,518 | | | | 730,859 | |
Wirecard AG | | | | | | | 252 | | | | 40,325 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 3,314,388 | |
Life Sciences Tools & Services — 0.5% | | | | | | | | | |
Agilent Technologies, Inc. | | | | | | | 2,051 | | | | 126,834 | |
Illumina, Inc.(a) | | | | | | | 965 | | | | 269,515 | |
Mettler-Toledo International, Inc.(a) | | | | | | | 211 | | | | 122,091 | |
QIAGEN NV(a) | | | | | | | 7,198 | | | | 260,921 | |
Thermo Fisher Scientific, Inc. | | | | | | | 2,278 | | | | 471,865 | |
Waters Corp.(a) | | | | | | | 921 | | | | 178,296 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,429,522 | |
Machinery — 0.0%(a) | | | | | | | | | |
Epiroc AB, Class A | | | | | | | 3,593 | | | | 37,704 | |
Epiroc AB, Class B | | | | | | | 6,825 | | | | 62,484 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 100,188 | |
Media — 0.3% | | | | | | | | | |
CBS Corp. (Non-Voting), Class B | | | | | | | 1,284 | | | | 72,187 | |
Charter Communications, Inc., Class A(a) | | | | | | | 64 | | | | 18,765 | |
Comcast Corp., Class A | | | | | | | 12,100 | | | | 397,001 | |
Walt Disney Co. (The) | | | | | | | 3,836 | | | | 402,051 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 890,004 | |
Metals & Mining — 0.7% | | | | | | | | | |
Barrick Gold Corp. | | | | | | | 6,895 | | | | 90,577 | |
BHP Billiton Ltd. | | | | | | | 38,710 | | | | 968,602 | |
Newcrest Mining Ltd. | | | | | | | 6,294 | | | | 102,197 | |
Rio Tinto Ltd. | | | | | | | 8,825 | | | | 545,255 | |
South32 Ltd. | | | | | | | 51,642 | | | | 137,901 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,844,532 | |
Multiline Retail — 0.2% | | | | | | | | | |
Dollar General Corp. | | | | | | | 406 | | | | 40,032 | |
Kohl’s Corp. | | | | | | | 1,036 | | | | 75,524 | |
| | | | | | | | | | | | |
Security | | Shares | | | Value | |
Multiline Retail (continued) | | | | | | | | | |
Macy’s, Inc. | | | | | | | 3,953 | | | $ | 147,961 | |
Target Corp. | | | | | | | 3,591 | | | | 273,347 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 536,864 | |
Multi-Utilities — 0.0% | | | | | | | | | |
National Grid plc | | | | | | | 4,740 | | | | 52,382 | |
| | | | | | | | | | | | |
Oil, Gas & Consumable Fuels — 4.8% | | | | | | | | | |
BP plc | | | | | | | 117,870 | | | | 896,816 | |
Canadian Natural Resources Ltd. | | | | | | | 6,720 | | | | 242,547 | |
Chevron Corp. | | | | | | | 3,956 | | | | 500,157 | |
ConocoPhillips | | | | | | | 339 | | | | 23,601 | |
Enbridge, Inc. | | | | | | | 765 | | | | 27,350 | |
Eni SpA | | | | | | | 48,577 | | | | 900,684 | |
Equinor ASA | | | | | | | 10,024 | | | | 265,060 | |
Exxon Mobil Corp. | | | | | | | 8,758 | | | | 724,549 | |
Galp Energia SGPS SA | | | | | | | 41,180 | | | | 783,394 | |
Idemitsu Kosan Co. Ltd. | | | | | | | 9,400 | | | | 334,279 | |
JXTG Holdings, Inc. | | | | | | | 107,300 | | | | 744,424 | |
Lundin Petroleum AB | | | | | | | 3,320 | | | | 105,377 | |
Marathon Petroleum Corp. | | | | | | | 1,787 | | | | 125,376 | |
Neste OYJ | | | | | | | 3,767 | | | | 294,726 | |
Occidental Petroleum Corp. | | | | | | | 2,138 | | | | 178,908 | |
Oil Search Ltd. | | | | | | | 67,103 | | | | 440,863 | |
OMV AG | | | | | | | 4,013 | | | | 226,966 | |
Phillips 66 | | | | | | | 997 | | | | 111,973 | |
Repsol SA | | | | | | | 85,441 | | | | 1,667,730 | |
Royal Dutch Shell plc, Class A | | | | | | | 32,830 | | | | 1,136,211 | |
Royal Dutch Shell plc, Class B | | | | | | | 28,635 | | | | 1,025,505 | |
Showa Shell Sekiyu KK | | | | | | | 36,700 | | | | 546,790 | |
TOTAL SA | | | | | | | 23,228 | | | | 1,410,538 | |
Valero Energy Corp. | | | | | | | 1,144 | | | | 126,790 | |
Woodside Petroleum Ltd. | | | | | | | 21,056 | | | | 551,804 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 13,392,418 | |
Paper & Forest Products — 0.2% | | | | | | | | | |
Oji Holdings Corp. | | | | | | | 7,000 | | | | 43,379 | |
West Fraser Timber Co. Ltd. | | | | | | | 6,858 | | | | 472,050 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 515,429 | |
Personal Products — 1.5% | | | | | | | | | |
Coty, Inc., Class A | | | | | | | 21,938 | | | | 309,326 | |
Estee Lauder Cos., Inc. (The), Class A | | | | | | | 10,482 | | | | 1,495,676 | |
Kao Corp. | | | | | | | 4,800 | | | | 365,863 | |
Kose Corp. | | | | | | | 600 | | | | 129,057 | |
L’Oreal SA | | | | | | | 2,776 | | | | 684,358 | |
Pola Orbis Holdings, Inc. | | | | | | | 4,000 | | | | 175,782 | |
Shiseido Co. Ltd. | | | | | | | 4,300 | | | | 341,231 | |
Unilever NV, CVA | | | | | | | 14,629 | | | | 815,084 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 4,316,377 | |
Pharmaceuticals — 5.5% | | | | | | | | | |
Allergan plc | | | | | | | 5,081 | | | | 847,104 | |
Astellas Pharma, Inc. | | | | | | | 32,900 | | | | 500,691 | |
Bayer AG (Registered) | | | | | | | 4,489 | | | | 492,998 | |
Bristol-Myers Squibb Co. | | | | | | | 25,702 | | | | 1,422,349 | |
Chugai Pharmaceutical Co. Ltd. | | | | | | | 200 | | | | 10,472 | |
Daiichi Sankyo Co. Ltd. | | | | | | | 4,200 | | | | 160,455 | |
Eisai Co. Ltd. | | | | | | | 1,200 | | | | 84,468 | |
Eli Lilly & Co. | | | | | | | 13,061 | | | | 1,114,495 | |
H Lundbeck A/S | | | | | | | 847 | | | | 59,363 | |
Hisamitsu Pharmaceutical Co., Inc. | | | | | | | 100 | | | | 8,426 | |
Jazz Pharmaceuticals plc(a) | | | | | | | 1,125 | | | | 193,838 | |
Johnson & Johnson | | | | | | | 15,793 | | | | 1,916,323 | |
Merck & Co., Inc. | | | | | | | 28,966 | | | | 1,758,236 | |
Merck KGaA | | | | | | | 634 | | | | 61,718 | |
| | |
8 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Managed Volatility V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Shares | | | Value | |
Pharmaceuticals (continued) | | | | | | | | | |
Mylan NV(a) | | | | | | | 6,558 | | | $ | 237,006 | |
Nektar Therapeutics(a) | | | | | | | 5,467 | | | | 266,954 | |
Novartis AG (Registered) | | | | | | | 6,731 | | | | 509,880 | |
Novo Nordisk A/S, Class B | | | | | | | 10,979 | | | | 507,126 | |
Otsuka Holdings Co. Ltd. | | | | | | | 500 | | | | 24,186 | |
Perrigo Co. plc | | | | | | | 1,289 | | | | 93,981 | |
Pfizer, Inc. | | | | | | | 58,162 | | | | 2,110,117 | |
Roche Holding AG | | | | | | | 2,769 | | | | 614,325 | |
Sanofi | | | | | | | 11,073 | | | | 888,714 | |
Shionogi & Co. Ltd. | | | | | | | 3,300 | | | | 169,336 | |
Sumitomo Dainippon Pharma Co. Ltd. | | | | | | | 3,400 | | | | 71,862 | |
Takeda Pharmaceutical Co. Ltd. | | | | | | | 1,600 | | | | 67,309 | |
Teva Pharmaceutical Industries Ltd., ADR(a) | | | | | | | 5,184 | | | | 126,075 | |
UCB SA | | | | | | | 4,291 | | | | 336,373 | |
Valeant Pharmaceuticals International, Inc.(a) | | | | | | | 4,397 | | | | 102,345 | |
Zoetis, Inc. | | | | | | | 5,497 | | | | 468,290 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 15,224,815 | |
Professional Services — 0.1% | |
Recruit Holdings Co. Ltd. | | | | | | | 7,100 | | | | 196,093 | |
Robert Half International, Inc. | | | | | | | 1,262 | | | | 82,156 | |
Wolters Kluwer NV | | | | | | | 1,926 | | | | 108,196 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 386,445 | |
Real Estate Management & Development — 0.1% | |
Daito Trust Construction Co. Ltd. | | | | | | | 1,100 | | | | 178,941 | |
Daiwa House Industry Co. Ltd. | | | | | | | 5,000 | | | | 170,109 | |
Mitsubishi Estate Co. Ltd. | | | | | | | 400 | | | | 6,983 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 356,033 | |
Road & Rail — 0.0% | | | | | | | | | |
Central Japan Railway Co. | | | | | | | 300 | | | | 62,109 | |
| | | | | | | | | | | | |
Semiconductors & Semiconductor Equipment — 0.2% | |
ASM Pacific Technology Ltd. | | | | | | | 10,200 | | | | 128,556 | |
Intel Corp. | | | | | | | 6,178 | | | | 307,109 | |
NVIDIA Corp. | | | | | | | 70 | | | | 16,583 | |
Tokyo Electron Ltd. | | | | | | | 700 | | | | 120,157 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 572,405 | |
Software — 4.2% | |
Activision Blizzard, Inc. | | | | | | | 4,897 | | | | 373,739 | |
Adobe Systems, Inc.(a) | | | | | | | 3,335 | | | | 813,106 | |
Autodesk, Inc.(a) | | | | | | | 962 | | | | 126,109 | |
CA, Inc. | | | | | | | 6,372 | | | | 227,162 | |
Cadence Design Systems, Inc.(a) | | | | | | | 4,574 | | | | 198,100 | |
CDK Global, Inc. | | | | | | | 3,870 | | | | 251,743 | |
Check Point Software Technologies Ltd.(a) | | | | | | | 623 | | | | 60,855 | |
Citrix Systems, Inc.(a) | | | | | | | 3,706 | | | | 388,537 | |
Constellation Software, Inc. | | | | | | | 55 | | | | 42,654 | |
Dassault Systemes SE | | | | | | | 1,450 | | | | 202,918 | |
Dell Technologies, Inc., Class V(a) | | | | | | | 3,692 | | | | 312,269 | |
Electronic Arts, Inc.(a) | | | | | | | 1,711 | | | | 241,285 | |
Fortinet, Inc.(a) | | | | | | | 1,937 | | | | 120,927 | |
Intuit, Inc. | | | | | | | 4,038 | | | | 824,984 | |
Konami Holdings Corp. | | | | | | | 2,300 | | | | 116,867 | |
Micro Focus International plc | | | | | | | 1,902 | | | | 33,002 | |
Microsoft Corp. | | | | | | | 38,251 | | | | 3,771,931 | |
Nintendo Co. Ltd. | | | | | | | 700 | | | | 228,500 | |
Oracle Corp. | | | | | | | 21,762 | | | | 958,834 | |
Red Hat, Inc.(a) | | | | | | | 2,024 | | | | 271,965 | |
Sage Group plc (The) | | | | | | | 4,439 | | | | 36,662 | |
salesforce.com, Inc.(a) | | | | | | | 2,354 | | | | 321,086 | |
SAP SE | | | | | | | 7,294 | | | | 841,857 | |
ServiceNow, Inc.(a) | | | | | | | 696 | | | | 120,039 | |
Splunk, Inc.(a) | | | | | | | 2,170 | | | | 215,069 | |
| | | | | | | | | | | | |
Security | | Shares | | | Value | |
Software (continued) | |
Symantec Corp. | | | | | | | 989 | | | $ | 20,423 | |
Take-Two Interactive Software, Inc.(a) | | | | | | | 110 | | | | 13,020 | |
Trend Micro, Inc. | | | | | | | 1,300 | | | | 74,005 | |
VMware, Inc., Class A(a) | | | | | | | 2,171 | | | | 319,072 | |
Workday, Inc., Class A(a) | | | | | | | 357 | | | | 43,240 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 11,569,960 | |
Specialty Retail — 0.6% | |
AutoZone, Inc.(a) | | | | | | | 128 | | | | 85,879 | |
Best Buy Co., Inc. | | | | | | | 2,636 | | | | 196,593 | |
Fast Retailing Co. Ltd. | | | | | | | 100 | | | | 45,834 | |
Hennes & Mauritz AB, Class B | | | | | | | 2,020 | | | | 30,068 | |
Home Depot, Inc. (The) | | | | | | | 4,202 | | | | 819,810 | |
Lowe’s Cos., Inc. | | | | | | | 2,783 | | | | 265,971 | |
O’Reilly Automotive, Inc.(a) | | | | | | | 336 | | | | 91,919 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,536,074 | |
Technology Hardware, Storage & Peripherals — 0.8% | |
Apple, Inc. | | | | | | | 11,723 | | | | 2,170,045 | |
| | | | | | | | | | | | |
Textiles, Apparel & Luxury Goods — 0.3% | |
adidas AG | | | | | | | 354 | | | | 77,072 | |
Gildan Activewear, Inc. | | | | | | | 23,016 | | | | 648,296 | |
LVMH Moet Hennessy Louis Vuitton SE | | | | | | | 245 | | | | 81,345 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 806,713 | |
Tobacco — 0.4% | |
Altria Group, Inc. | | | | | | | 2,142 | | | | 121,644 | |
British American Tobacco plc | | | | | | | 10,256 | | | | 516,629 | |
Imperial Brands plc | | | | | | | 1,745 | | | | 64,806 | |
Japan Tobacco, Inc. | | | | | | | 12,100 | | | | 338,152 | |
Swedish Match AB | | | | | | | 273 | | | | 13,492 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,054,723 | |
Trading Companies & Distributors — 0.4% | |
Fastenal Co. | | | | | | | 969 | | | | 46,638 | |
Ferguson plc | | | | | | | 2,738 | | | | 221,525 | |
HD Supply Holdings, Inc.(a) | | | | | | | 5,231 | | | | 224,358 | |
United Rentals, Inc.(a) | | | | | | | 645 | | | | 95,215 | |
WW Grainger, Inc. | | | | | | | 1,823 | | | | 562,213 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,149,949 | |
Transportation Infrastructure — 0.2% | |
Auckland International Airport Ltd. | | | | | | | 36,839 | | | | 169,028 | |
Transurban Group(c) | | | | | | | 55,006 | | | | 487,096 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 656,124 | |
| | | | | | | | | | | | |
Total Common Stocks — 57.4% (Cost: $153,745,041) | | | | 160,004,991 | |
| | | | | | | | | | | | |
| | |
| | Par (000) | | | | |
Corporate Bonds — 0.0% | |
|
Diversified Telecommunication Services — 0.0% | |
AT&T, Inc., 7.13%, 12/15/31(b) | | | USD | | | | 25 | | | | 29,274 | |
| | | | | | | | | | | | |
Total Corporate Bonds — 0.0% (Cost: $30,440) | | | | 29,274 | |
| | | | | | | | | | | | |
|
Non-Agency Mortgage-Backed Securities — 0.0% | |
|
Collateralized Mortgage Obligations — 0.0% | |
Impac Secured Assets Corp., Series 2004-3, Class 1A4, 2.89%, 11/25/34(d) | | | | | | | 1 | | | | 713 | |
| | | | | | | | | | | | |
Total Non-Agency Mortgage-Backed Securities — 0.0% (Cost: $716) | | | | 713 | |
| | | | | | | | | | | | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 9 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Managed Volatility V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | Beneficial Interest (000) | | | Value | |
Other Interests — 0.0%(a)(e)(f)(g) | |
|
Capital Markets — 0.0% | |
Lehman Brothers Holdings, Inc. | | | USD | | | | 25 | | | $ | — | |
| | | | | | | | | | | | |
Total Other Interests — 0.0% | | | | — | |
| | | | | | | | | | | | |
| | |
| | Shares | | | | |
Preferred Stocks — 0.1% | |
|
Auto Components — 0.0% | |
Schaeffler AG (Preference), 0.00% | | | | | | | 3,068 | | | | 39,820 | |
| | | | | | | | | | | | |
Automobiles — 0.1% | |
Bayerische Motoren Werke AG (Preference), 0.00% | | | | | | | 2,351 | | | | 187,017 | |
| | | | | | | | | | | | |
Total Preferred Stocks — 0.1% (Cost: $263,721) | | | | 226,837 | |
| | | | | | | | | | | | |
|
Rights — 0.0%(a) | |
|
Banks — 0.0% | |
Intesa Sanpaolo SpA | | | | | | | 84,449 | | | | — | |
| | | | | | | | | | | | |
Oil, Gas & Consumable Fuels — 0.0% | |
Repsol SA | | | | | | | 68,504 | | | | 38,887 | |
| | | | | | | | | | | | |
Total Rights — 0.0% (Cost: $38,595) | | | | 38,887 | |
| | | | | | | | | | | | |
| | |
| | Par (000) | | | | |
U.S. Government Sponsored Agency Obligations — 0.3% | |
Federal Home Loan Mortgage Corp. Notes, 3.75%, 03/27/19 | | | USD | | | | 680 | | | | 687,351 | |
| | | | | | | | | | | | |
Total U.S. Government Sponsored Agency Obligations — 0.3% (Cost: $691,281) | | | | 687,351 | |
| | | | | | | | | | | | |
|
U.S. Treasury Obligations — 23.5% | |
U.S. Treasury Bonds, 8.75%, 08/15/20 | | | | | | | 16,000 | | | | 18,029,375 | |
U.S. Treasury Notes: | | | | | | | | | | | | |
2.00%, 01/31/20 | | | | | | | 16,000 | | | | 15,879,375 | |
| | | | | | | | | | | | |
Security | | Par (000) | | | Value | |
U.S. Treasury Obligations (continued) | |
U.S. Treasury Notes (continued): | |
3.63%, 02/15/20 | | | USD | | | | 16,000 | | | $ | 16,282,500 | |
1.13%, 08/31/21 | | | | | | | 16,000 | | | | 15,264,375 | |
| | | | | | | | | | | | |
Total U.S. Treasury Obligations — 23.5% (Cost: $65,433,437) | | | | 65,455,625 | |
| | | | | | | | | | | | |
Total Long-Term Investments — 81.3% (Cost: $220,203,231) | | | | 226,443,678 | |
| | | | | | | | | | | | |
| | | |
| | | | | Shares | | | | |
Short-Term Securities — 5.3%(h) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.80%(i) | | | | | | | 14,645,140 | | | | 14,645,140 | |
JPMorgan US Treasury Plus Money Market Fund, Agency Class, 1.72% | | | | | | | 210,000 | | | | 210,000 | |
| | | | | | | | | | | | |
Total Short-Term Securities — 5.3% (Cost: $14,855,140) | | | | 14,855,140 | |
| | | | | | | | | | | | |
| |
Total Investments — 86.6% (Cost: $235,058,371) | | | | 241,298,818 | |
Other Assets Less Liabilities — 13.4% | | | | 37,232,041 | |
| | | | | | | | | | | | |
Net Assets — 100.0% | | | $ | 278,530,859 | |
| | | | | | | | | | | | |
(a) | Non-income producing security. |
(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) | A security contractually bound to one or more other securities to form a single saleable unit which cannot be sold separately. |
(d) | 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. |
(e) | Other interests represent beneficial interests in liquidation trusts and other reorganizational or private entities. |
(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) | During the six months ended June 30, 2018, 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 | | Par/ Shares Held at 12/31/17 | | | Par/ Shares Purchased | | | Par/ Shares Sold | | | Par/ Shares Held at 06/30/18 | | | Value at 06/30/18 | | | Income | | | Net Realized Gain (Loss) (a) | | | Change in Unrealized Appreciation (Depreciation) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class | | | 3,387,049 | | | | 11,258,091 | (b) | | | — | | | | 14,645,140 | | | $ | 14,645,140 | | | $ | 328,034 | | | $ | — | | | $ | — | |
SL Liquidity Series, LLC, Money Market Series | | | 1,935,844 | | | | — | | | | (1,935,844 | )(c) | | | — | | | | — | | | | 1,250 | (d) | | | 21 | | | | — | |
BlackRock, Inc. | | | — | | | | 105,000 | | | | (105,000 | ) | | | — | | | | — | | | | 102 | | | | (212 | ) | | | — | |
BlackRock, Inc. | | | — | | | | 378 | | | | (378 | ) | | | — | | | | — | | | | — | | | | 79,675 | | | | — | |
iShares 1-3 Year Credit Bond ETF | | | 15,923 | | | | — | | | | (15,923 | ) | | | — | | | | — | | | | 7,571 | | | | (29,567 | ) | | | 14,296 | |
iShares 3-7 Year Treasury Bond ETF | | | 6,491 | | | | — | | | | (6,491 | ) | | | — | | | | — | | | | 3,290 | | | | (25,574 | ) | | | 7,607 | |
iShares Core U.S. Aggregate Bond ETF | | | 17,278 | | | | — | | | | (17,278 | ) | | | — | | | | — | | | | 12,444 | | | | (85,240 | ) | | | 27,745 | |
iShares MSCI EAFE ETF | | | 21,263 | | | | — | | | | (21,263 | ) | | | — | | | | — | | | | — | | | | 131,855 | | | | (116,368 | ) |
PNC Financial Services Group, Inc. (The) | | | — | | | | 1,442 | | | | (1,442 | ) | | | — | | | | — | | | | 1,082 | | | | 90,833 | | | | — | |
PNC Financial Services Group, Inc. (The) | | | — | | | | 320,000 | | | | (320,000 | ) | | | — | | | | — | | | | 259 | | | | (2,665 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | 14,645,140 | | | $ | 354,032 | | | $ | 159,126 | | | $ | (66,720 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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. | |
| | |
10 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Managed Volatility V.I. Fund |
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 | | | | | | | | | | | | | | | | |
Amsterdam Exchange Index | | | 131 | | | | 07/20/18 | | | $ | 16,877 | | | $ | (301,251 | ) |
CAC 40 10 Euro Index | | | 15 | | | | 07/20/18 | | | | 932 | | | | 3,063 | |
OMXS30 Index | | | 152 | | | | 07/20/18 | | | | 2,649 | | | | 44,088 | |
Hang Seng Index | | | 18 | | | | 07/30/18 | | | | 3,295 | | | | (46,355 | ) |
Euro-BTP | | | 2 | | | | 09/06/18 | | | | 297 | | | | 1,059 | |
Nikkei 225 Index | | | 41 | | | | 09/13/18 | | | | 8,254 | | | | (45,786 | ) |
Australia 10 Year Bond | | | 523 | | | | 09/17/18 | | | | 50,069 | | | | 223,142 | |
Canada 10 Year Bond | | | 517 | | | | 09/19/18 | | | | 53,763 | | | | (433,896 | ) |
FTSE/MIB Index | | | 282 | | | | 09/21/18 | | | | 35,514 | | | | 125,157 | |
Long Gilt | | | 444 | | | | 09/26/18 | | | | 72,109 | | | | 637,729 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 206,950 | |
| | | | | | | | | | | | | | | | |
Short Contracts | | | | | | | | | | | | | | | | |
IBEX 35 Index | | | 289 | | | | 07/20/18 | | | | 32,406 | | | | 506,302 | |
MSCI Singapore Index | | | 487 | | | | 07/30/18 | | | | 13,082 | | | | 16,321 | |
Euro-Bund | | | 192 | | | | 09/06/18 | | | | 36,447 | | | | (86,007 | ) |
TOPIX Index | | | 4 | | | | 09/13/18 | | | | 625 | | | | (6,863 | ) |
U.S. Treasury 10 Year Note | | | 533 | | | | 09/19/18 | | | | 64,060 | | | | (218,461 | ) |
U.S. Treasury Ultra Bond | | | 182 | | | | 09/19/18 | | | | 29,040 | | | | (915,246 | ) |
S&P/TSX 60 Index | | | 40 | | | | 09/20/18 | | | | 5,862 | | | | (64,904 | ) |
SPI 200 Index | | | 137 | | | | 09/20/18 | | | | 15,583 | | | | (176,343 | ) |
DAX Index | | | 2 | | | | 09/21/18 | | | | 719 | | | | 610 | |
FTSE 100 Index | | | 21 | | | | 09/21/18 | | | | 2,107 | | | | (25,764 | ) |
MSCI EAFE E-Mini Index | | | 613 | | | | 09/21/18 | | | | 59,933 | | | | 1,750,305 | |
S&P 500 E-Mini Index | | | 876 | | | | 09/21/18 | | | | 119,206 | | | | 2,184,531 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2,964,481 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | 3,171,431 | |
| | | | | | | | | | | | | | | | |
Forward Foreign Currency Exchange Contracts
| | | | | | | | | | | | | | | | | | | | |
Currency Purchased | | | Currency Sold | | | Counterparty | | Settlement Date | | | Unrealized Appreciation (Depreciation) | |
AUD | | | 13,858,000 | | | USD | | | 10,223,932 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | $ | 34,147 | |
CAD | | | 2,511,000 | | | USD | | | 1,899,625 | | | Citibank NA | | | 09/19/18 | | | | 12,976 | |
CZK | | | 10,058,000 | | | USD | | | 453,104 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 981 | |
MXN | | | 129,416,000 | | | USD | | | 6,171,094 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 264,284 | |
USD | | | 2,312,661 | | | AUD | | | 3,047,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 57,186 | |
USD | | | 3,565,743 | | | BRL | | | 13,573,000 | | | Citibank NA | | | 09/19/18 | | | | 92,383 | |
USD | | | 1,237,433 | | | BRL | | | 4,677,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 40,578 | |
USD | | | 15,323,027 | | | CAD | | | 19,899,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 166,180 | |
USD | | | 918,882 | | | CNY | | | 6,049,000 | | | Citibank NA | | | 09/19/18 | | | | 10,773 | |
USD | | | 2,351,152 | | | CNY | | | 15,306,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 53,332 | |
USD | | | 980,721 | | | CZK | | | 21,297,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 19,233 | |
USD | | | 19,132,312 | | | EUR | | | 16,157,000 | | | Citibank NA | | | 09/19/18 | | | | 150,503 | |
USD | | | 2,304,281 | | | EUR | | | 1,944,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 20,402 | |
USD | | | 706,590 | | | GBP | | | 530,000 | | | Citibank NA | | | 09/19/18 | | | | 4,638 | |
USD | | | 3,602,810 | | | GBP | | | 2,716,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 5,638 | |
USD | | | 519,182 | | | INR | | | 35,848,000 | | | Citibank NA | | | 09/19/18 | | | | 1,295 | |
USD | | | 4,055,038 | | | INR | | | 277,689,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 43,335 | |
USD | | | 218,150 | | | JPY | | | 23,774,000 | | | Citibank NA | | | 09/19/18 | | | | 2,221 | |
USD | | | 2,996,344 | | | JPY | | | 329,000,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 8,171 | |
USD | | | 11,011,572 | | | KRW | | | 12,108,463,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 111,692 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 11 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Managed Volatility V.I. Fund |
| | | | | | | | | | | | | | | | | | | | |
Currency Purchased | | | Currency Sold | | | Counterparty | | Settlement Date | | | Unrealized Appreciation (Depreciation) | |
USD | | | 2,272,557 | | | MYR | | | 9,105,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | $ | 22,119 | |
USD | | | 471,492 | | | NOK | | | 3,769,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 7,247 | |
USD | | | 77,487 | | | NZD | | | 110,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 2,979 | |
USD | | | 567,781 | | | PLN | | | 2,058,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 17,643 | |
USD | | | 1,490,412 | | | SEK | | | 13,104,000 | | | Citibank NA | | | 09/19/18 | | | | 18,435 | |
USD | | | 7,682,552 | | | SEK | | | 65,862,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 284,251 | |
USD | | | 559,898 | | | SGD | | | 759,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 1,880 | |
USD | | | 2,125,246 | | | THB | | | 68,010,000 | | | Citibank NA | | | 09/19/18 | | | | 67,579 | |
USD | | | 5,576,869 | | | THB | | | 182,754,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 47,580 | |
USD | | | 1,191,852 | | | ZAR | | | 16,301,000 | | | Goldman Sachs International | | | 09/19/18 | | | | 15,746 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 1,585,407 | |
| | | | | | | | | | | | | | | | | | | | |
AUD | | | 531,000 | | | USD | | | 394,032 | | | Citibank NA | | | 09/19/18 | | | | (971 | ) |
AUD | | | 700,000 | | | USD | | | 531,297 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (13,138 | ) |
BRL | | | 9,222,000 | | | USD | | | 2,432,918 | | | Citibank NA | | | 09/19/18 | | | | (72,988 | ) |
CHF | | | 1,225,000 | | | USD | | | 1,252,396 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (6,849 | ) |
CZK | | | 154,496,000 | | | USD | | | 7,114,500 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (139,525 | ) |
EUR | | | 1,409,000 | | | USD | | | 1,660,260 | | | Citibank NA | | | 09/19/18 | | | | (4,918 | ) |
GBP | | | 514,000 | | | USD | | | 685,259 | | | Citibank NA | | | 09/19/18 | | | | (4,498 | ) |
GBP | | | 3,297,000 | | | USD | | | 4,418,788 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (52,120 | ) |
INR | | | 466,575,000 | | | USD | | | 6,757,351 | | | Citibank NA | | | 09/19/18 | | | | (16,860 | ) |
INR | | | 28,364,000 | | | USD | | | 414,194 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (4,426 | ) |
JPY | | | 527,124,000 | | | USD | | | 4,836,888 | | | Citibank NA | | | 09/19/18 | | | | (49,235 | ) |
JPY | | | 40,673,000 | | | USD | | | 371,054 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (1,638 | ) |
KRW | | | 311,681,000 | | | USD | | | 280,700 | | | Citibank NA | | | 09/19/18 | | | | (129 | ) |
MYR | | | 10,285,000 | | | USD | | | 2,554,010 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (11,918 | ) |
PLN | | | 2,137,000 | | | USD | | | 577,111 | | | Goldman Sachs International | | | 09/19/18 | | | | (5,854 | ) |
PLN | | | 46,070,000 | | | USD | | | 12,577,793 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (262,495 | ) |
SEK | | | 7,653,000 | | | USD | | | 868,186 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (8,522 | ) |
SGD | | | 741,000 | | | USD | | | 545,966 | | | Goldman Sachs International | | | 09/19/18 | | | | (1,182 | ) |
SGD | | | 528,000 | | | USD | | | 396,240 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (8,054 | ) |
USD | | | 8,181,777 | | | CAD | | | 10,815,000 | | | Citibank NA | | | 09/19/18 | | | | (55,889 | ) |
USD | | | 211,479 | | | CAD | | | 281,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (2,555 | ) |
USD | | | 360,930 | | | CHF | | | 357,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (2,058 | ) |
USD | | | 4,157,985 | | | CZK | | | 92,306,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (9,321 | ) |
USD | | | 5,097,307 | | | EUR | | | 4,366,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (32,023 | ) |
USD | | | 538,719 | | | MXN | | | 11,266,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (21,497 | ) |
USD | | | 92,108 | | | ZAR | | | 1,295,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (1,325 | ) |
ZAR | | | 34,270,000 | | | USD | | | 2,558,435 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (85,878 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | (875,866 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | Net Unrealized Appreciation | | | $ | 709,541 | |
| | | | | | | | | | | | | | | | | | | | |
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 | | | | | | | |
7.91% | | Monthly | | 28 day MXIBTIIE | | Monthly | | | 09/19/18 | (a) | | | 09/13/23 | | | MXN | | 641,000 | | $ | (57,893 | ) | | $ | — | | | $ | (57,893 | ) |
0.32% | | Annual | | 6 month EURIBOR | | Semi-Annual | | | 09/19/18 | (a) | | | 09/19/23 | | | EUR | | 85,000 | | | 6,009 | | | | — | | | | 6,009 | |
0.40% | | Annual | | 6 month EURIBOR | | Semi-Annual | | | 09/19/18 | (a) | | | 09/19/23 | | | EUR | | 43,000 | | | (202,008 | ) | | | 3,993 | | | | (206,001 | ) |
0.57% | | Annual | | 3 month STIBOR | | Quarterly | | | 09/19/18 | (a) | | | 09/19/23 | | | SEK | | 439,000 | | | (208,672 | ) | | | 17,254 | | | | (225,926 | ) |
0.65% | | Annual | | 3 month STIBOR | | Quarterly | | | 09/19/18 | (a) | | | 09/19/23 | | | SEK | | 92,000 | | | (361,461 | ) | | | — | | | | (361,461 | ) |
2.49% | | Annual | | 6 month WIBOR | | Semi-Annual | | | 09/19/18 | (a) | | | 09/19/23 | | | PLN | | 232,000 | | | 89,434 | | | | — | | | | 89,434 | |
2.55% | | Semi-Annual | | 6 month BBR | | Semi-Annual | | | 09/19/18 | (a) | | | 09/19/23 | | | AUD | | 30,000 | | | (14,379 | ) | | | — | | | | (14,379 | ) |
2.63% | | Annual | | 6 month WIBOR | | Semi-Annual | | | 09/19/18 | (a) | | | 09/19/23 | | | PLN | | 338,000 | | | (438,909 | ) | | | — | | | | (438,909 | ) |
2.70% | | Semi-Annual | | 6 month BBR | | Semi-Annual | | | 09/19/18 | (a) | | | 09/19/23 | | | AUD | | 69,000 | | | (402,136 | ) | | | — | | | | (402,136 | ) |
2.78% | | Quarterly | | 3 month HIBOR | | Quarterly | | | 09/19/18 | (a) | | | 09/19/23 | | | HKD | | 162,000 | | | (18,397 | ) | | | — | | | | (18,397 | ) |
2.99% | | Semi-Annual | | 3 month LIBOR | | Quarterly | | | 09/19/18 | (a) | | | 09/19/23 | | | USD | | 121,000 | | | (107,864 | ) | | | — | | | | (107,864 | ) |
3 month BA | | Semi-Annual | | 2.33% | | Semi-Annual | | | 09/19/18 | (a) | | | 09/19/23 | | | CAD | | 126,000 | | | (729,911 | ) | | | — | | | | (729,911 | ) |
3 month BA | | Semi-Annual | | 2.72% | | Semi-Annual | | | 09/19/18 | (a) | | | 09/19/23 | | | CAD | | 78,000 | | | 636,211 | | | | — | | | | 636,211 | |
3 month JIBAR | | Quarterly | | 7.57% | | Quarterly | | | 09/19/18 | (a) | | | 09/19/23 | | | ZAR | | 212,000 | | | (181,710 | ) | | | — | | | | (181,710 | ) |
3 month JIBAR | | Quarterly | | 7.62% | | Quarterly | | | 09/19/18 | (a) | | | 09/19/23 | | | ZAR | | 157,000 | | | (113,634 | ) | | | — | | | | (113,634 | ) |
3 month JIBAR | | Quarterly | | 7.86% | | Quarterly | | | 09/19/18 | (a) | | | 09/19/23 | | | ZAR | | 165,000 | | | 360 | | | | — | | | | 360 | |
| | |
12 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Managed Volatility 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 | | | | | | | |
3 month JIBAR | | Quarterly | | 8.02% | | Quarterly | | | 09/19/18 | (a) | | | 09/19/23 | | | ZAR | | 292,000 | | $ | 139,076 | | | $ | — | | | $ | 139,076 | |
3 month JIBAR | | Quarterly | | 8.11% | | Quarterly | | | 09/19/18 | (a) | | | 09/19/23 | | | ZAR | | 383,000 | | | 284,556 | | | | — | | | | 284,556 | |
6 month LIBOR | | Semi-Annual | | 1.34% | | Semi-Annual | | | 09/19/18 | (a) | | | 09/19/23 | | | GBP | | 64,000 | | | (47,611 | ) | | | — | | | | (47,611 | ) |
6 month PRIBOR | | Semi-Annual | | 1.91% | | Annual | | | 09/19/18 | (a) | | | 09/19/23 | | | CZK | | 2,464,000 | | | (246,316 | ) | | | — | | | | (246,316 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | $ | (1,975,255 | ) | | $ | 21,247 | | | $ | (1,996,502 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | | | | | | | | |
1 day BZDIOVER | | At Termination | | 10.98% | | At Termination | | | Bank of America NA | | | | N/A | | | 01/02/23 | | | BRL | | | | 90,969 | | | $ | 437,579 | | | $ | — | | | $ | 437,579 | |
1 day BZDIOVER | | At Termination | | 11.04% | | At Termination | | | Bank of America NA | | | | N/A | | | 01/02/23 | | | BRL | | | | 40,465 | | | | 209,390 | | | | — | | | | 209,390 | |
1 day BZDIOVER | | At Termination | | 10.91% | | At Termination | | | Deutsche Bank AG | | | | N/A | | | 01/02/23 | | | BRL | | | | 22,854 | | | | 92,670 | | | | — | | | | 92,670 | |
1 day BZDIOVER | | At Termination | | 11.16% | | At Termination | | | Deutsche Bank AG | | | | N/A | | | 01/02/23 | | | BRL | | | | 40,887 | | | | 264,435 | | | | — | | | | 264,435 | |
3 month CD_KSDA | | Quarterly | | 2.18% | | Quarterly | | | Bank of America NA | | | | 09/19/18 | (a) | | 09/19/23 | | | KRW | | | | 19,650,649 | | | | 27,361 | | | | — | | | | 27,361 | |
3 month CD_KSDA | | Quarterly | | 2.19% | | Quarterly | | | Bank of America NA | | | | 09/19/18 | (a) | | 09/19/23 | | | KRW | | | | 19,647,702 | | | | 35,683 | | | | — | | | | 35,683 | |
3 month KLIBOR | | Quarterly | | 3.98% | | Quarterly | | | Bank of America NA | | | | 09/19/18 | (a) | | 09/19/23 | | | MYR | | | | 49,997 | | | | (14,678 | ) | | | — | | | | (14,678 | ) |
3 month TWCPBA | | Quarterly | | 0.99% | | Quarterly | | | Bank of America NA | | | | 09/19/18 | (a) | | 09/19/23 | | | TWD | | | | 386,490 | | | | 34,309 | | | | — | | | | 34,309 | |
3 month TWCPBA | | Quarterly | | 0.99% | | Quarterly | | | Bank of America NA | | | | 09/19/18 | (a) | | 09/19/23 | | | TWD | | | | 604,510 | | | | 61,410 | | | | — | | | | 61,410 | |
3.51% | | Quarterly | | 1 week CNREPOFI | | Quarterly | | | Bank of America NA | | | | 09/19/18 | (a) | | 09/19/23 | | | CNY | | | | 180,000 | | | | (211,662 | ) | | | — | | | | (211,662 | ) |
3.39% | | Quarterly | | 1 week CNREPOFI | | Quarterly | | | Deutsche Bank AG | | | | 09/19/18 | (a) | | 09/19/23 | | | CNY | | | | 94,872 | | | | (33,660 | ) | | | — | | | | (33,660 | ) |
3.39% | | Quarterly | | 1 week CNREPOFI | | Quarterly | | | Deutsche Bank AG | | | | 09/19/18 | (a) | | 09/19/23 | | | CNY | | | | 109,880 | | | | (37,468 | ) | | | — | | | | (37,468 | ) |
3.40% | | Quarterly | | 1 week CNREPOFI | | Quarterly | | | Deutsche Bank AG | | | | 09/19/18 | (a) | | 09/19/23 | | | CNY | | | | 63,248 | | | | (25,931 | ) | | | — | | | | (25,931 | ) |
6 month THBFIX | | Semi-Annual | | 2.13% | | Semi-Annual | | | Deutsche Bank AG | | | | 09/19/18 | (a) | | 09/19/23 | | | THB | | | | 792,000 | | | | (14,501 | ) | | | — | | | | (14,501 | ) |
3 month CD_KSDA | | Quarterly | | 2.19% | | Quarterly | |
| Goldman Sachs International | | | | 09/19/18 | (a) | | 09/19/23 | | | KRW | | | | 19,650,649 | | | | 35,689 | | | | — | | | | 35,689 | |
3 month KLIBOR | | Quarterly | | 4.01% | | Quarterly | |
| Goldman Sachs International | | | | 09/19/18 | (a) | | 09/19/23 | | | MYR | | | | 54,163 | | | | (2,666 | ) | | | — | | | | (2,666 | ) |
3 month KLIBOR | | Quarterly | | 4.03% | | Quarterly | |
| Goldman Sachs International | | | | 09/19/18 | (a) | | 09/19/23 | | | MYR | | | | 63,840 | | | | 14,586 | | | | — | | | | 14,586 | |
6 month SOR | | Semi-Annual | | 2.39% | | Semi-Annual | |
| Goldman Sachs International | | | | 09/19/18 | (a) | | 09/19/23 | | | SGD | | | | 8,000 | | | | 4,658 | | | | — | | | | 4,658 | |
6 month THBFIX | | Semi-Annual | | 2.11% | | Semi-Annual | |
| Goldman Sachs International | | | | 09/19/18 | (a) | | 09/19/23 | | | THB | | | | 95,000 | | | | (3,436 | ) | | | — | | | | (3,436 | ) |
6 month THBFIX | | Semi-Annual | | 2.26% | | Semi-Annual | |
| Goldman Sachs International | | | | 09/19/18 | (a) | | 09/19/23 | | | THB | | | | 1,668,000 | | | | 279,322 | | | | — | | | | 279,322 | |
7.20% | | Semi-Annual | | 1 day MIBOR | | Semi-Annual | |
| Goldman Sachs International | | | | 09/19/18 | (a) | | 09/19/23 | | | INR | | | | 2,454,440 | | | | 121,676 | | | | — | | | | 121,676 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | $ | 1,274,766 | | | $ | — | | | $ | 1,274,766 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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) | |
TAIEX Futures July 2018 | | TWD | | 442,245,688 | | | Bank of America NA | | | | 07/18/18 | | | | TWD | | | | 442,246 | | | $ | (7,147 | ) | | $ | — | | | $ | (7,147 | ) |
KOSPI 200 Index Futures September 2018 | | KRW | | 10,447,903,725 | | | Bank of America NA | | | | 09/13/18 | | | | KRW | | | | 10,447,904 | | | | (20,551 | ) | | | — | | | | (20,551 | ) |
KOSPI 200 Index Futures September 2018 | | KRW | | 6,329,571,700 | | | Bank of America NA | | | | 09/13/18 | | | | KRW | | | | 6,329,572 | | | | (93,828 | ) | | | — | | | | (93,828 | ) |
KOSPI 200 Index Futures September 2018 | | KRW | | 1,823,114,550 | | | Bank of America NA | | | | 09/13/18 | | | | KRW | | | | 1,823,115 | | | | (88,035 | ) | | | — | | | | (88,035 | ) |
KOSPI 200 Index Futures September 2018 | | KRW | | 4,455,417,400 | | | Bank of America NA | | | | 09/13/18 | | | | KRW | | | | 4,455,417 | | | | (229,175 | ) | | | — | | | | (229,175 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | $ | (438,736 | ) | | $ | — | | | $ | (438,736 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | At termination, the fixed amount paid (received) will be exchanged for the total return of the reference entity. | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 13 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Managed Volatility V.I. Fund |
The following reference rates, and their values as of period end, are used for security descriptions:
| | | | | | |
Reference Index | | | | Reference Rate | |
1 day BZDIOVER | | Overnight Brazil CETIP — Interbank Rate | | | 0.25 | % |
1 day MIBOR | | Mumbai Interbank Offered Rate | | | 6.25 | % |
1 week CNREPOFI | | 7 Day China Fixing Repo Rates | | | 2.55 | % |
28 day MXIBTIIE | | Mexico Interbank TIIE 28-Day | | | 8.10 | % |
3 month BA | | 3 month Canadian Bankers Acceptances | | | 1.70 | % |
3 month CD_KSDA | | Certificates of Deposit by the Korean Securities Dealers Association | | | 1.68 | % |
3 month HIBOR | | Hong Kong Inter-bank Offered Rate | | | 2.10 | % |
3 month JIBAR | | Johannesburg Interbank Average Rate | | | 6.96 | % |
3 month KLIBOR | | Kuala Lumpur Interbank Offered Rate | | | 3.69 | % |
3 month LIBOR | | London Interbank Offered Rate | | | 2.34 | % |
3 month STIBOR | | Stockholm Interbank Offered Rate | | | (0.35 | )% |
3 month TWCPBA | | Taiwan Secondary Markets Bills Rate | | | 1.38 | % |
6 month BBR | | Australian Bank Bill Rate | | | 2.11 | % |
6 month EURIBOR | | Euro Interbank Offered Rate | | | (0.27 | )% |
6 month LIBOR | | London Interbank Offered Rate | | | 2.50 | % |
6 month PRIBOR | | Prague Interbank Offered Rate | | | 1.24 | % |
6 month SOR | | Singapore Interbank Offered Rates | | | 1.70 | % |
6 month THBFIX | | 6 month Thai Baht Interest Rate Fixing | | | 1.71 | % |
6 month WIBOR | | Warsaw Interbank Offered Rate | | | 1.68 | % |
Balances Reported in the Statement of Assets and Liabilities for Centrally Cleared Swaps and OTC Swaps
| | | | | | | | | | | | | | | | |
| | Swap Premiums Paid | | | Swap Premiums Received | | | Unrealized Appreciation | | | Unrealized Depreciation | |
Centrally Cleared Swaps(a) | | $ | 21,247 | | | $ | — | | | $ | 1,155,646 | | | $ | (3,152,148 | ) |
OTC Swaps | | | — | | | | — | | | | 1,618,768 | | | | (782,738 | ) |
| (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) | | $ | — | | | $ | — | | | $ | 4,630,377 | | | $ | — | | | $ | 861,930 | | | $ | — | | | $ | 5,492,307 | |
Forward foreign currency exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized appreciation on forward foreign currency exchange contracts | | | — | | | | — | | | | — | | | | 1,585,407 | | | | — | | | | — | | | | 1,585,407 | |
Swaps — centrally cleared | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized appreciation(a) | | | — | | | | — | | | | — | | | | — | | | | 1,155,646 | | | | — | | | | 1,155,646 | |
Swaps — OTC | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized appreciation on OTC swaps; Swap premiums paid | | | — | | | | — | | | | — | | | | — | | | | 1,618,768 | | | | — | | | | 1,618,768 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | — | | | $ | 4,630,377 | | | $ | 1,585,407 | | | $ | 3,636,344 | | | $ | — | | | $ | 9,852,128 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Liabilities — Derivative Financial Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Futures contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized depreciation(a) | | $ | — | | | $ | — | | | $ | 667,266 | | | $ | — | | | $ | 1,653,610 | | | $ | — | | | $ | 2,320,876 | |
Forward foreign currency exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized depreciation on forward foreign currency exchange contracts | | | — | | | | — | | | | — | | | | 875,866 | | | | — | | | | — | | | | 875,866 | |
Swaps — centrally cleared | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized depreciation(a) | | | — | | | | — | | | | — | | | | — | | | | 3,152,148 | | | | — | | | | 3,152,148 | |
Swaps — OTC | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized depreciation on OTC swaps; Swap premiums received | | | — | | | | — | | | | 438,736 | | | | — | | | | 344,002 | | | | — | | | | 782,738 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | — | | | $ | 1,106,002 | | | $ | 875,866 | | | $ | 5,149,760 | | | $ | — | | | $ | 7,131,628 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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. | |
| | |
14 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Managed Volatility V.I. Fund |
For the six months ended June 30, 2018, the effect of derivative financial instruments in the Statement of Operations were 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 | | $ | — | | | $ | — | | | $ | (604,766 | ) | | $ | — | | | $ | 1,315,748 | | | $ | — | | | $ | 710,982 | |
Forward foreign currency exchange contracts | | | — | | | | — | | | | — | | | | 289,016 | | | | — | | | | — | | | | 289,016 | |
Swaps | | | — | | | | — | | | | 94,923 | | | | — | | | | (477,014 | ) | | | — | | | | (382,091 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | — | | | $ | (509,843 | ) | | $ | 289,016 | | | $ | 838,734 | | | $ | — | | | $ | 617,907 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Change in Unrealized Appreciation (Depreciation) on: | | | | | | | | | | | | | | | | | | | | | |
Futures contracts | | $ | — | | | $ | — | | | $ | 3,936,380 | | | $ | — | | | $ | (798,218 | ) | | $ | — | | | $ | 3,138,162 | |
Forward foreign currency exchange contracts | | | — | | | | — | | | | — | | | | 754,712 | | | | — | | | | — | | | | 754,712 | |
Swaps | | | — | | | | — | | | | (438,736 | ) | | | — | | | | (721,736 | ) | | | — | | | | (1,160,472 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | — | | | $ | 3,497,644 | | | $ | 754,712 | | | $ | (1,519,954 | ) | | $ | — | | | $ | 2,732,402 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average Quarterly Balances of Outstanding Derivative Financial Instruments
| | | | |
Futures contracts: | | | | |
Average notional value of contracts — long | | $ | 122,355,143 | |
Average notional value of contracts — short | | $ | 191,682,778 | |
Forward foreign currency exchange contracts: | | | | |
Average amounts purchased — in USD | | $ | 59,149,352 | |
Average amounts sold — in USD | | $ | 34,987,567 | |
Interest rate swaps: | | | | |
Average notional value — pays fixed rate | | $ | 396,819,112 | |
Average notional value — receives fixed rate | | $ | 349,690,380 | |
Total return swaps: | | | | |
Average notional value | | $ | 17,628,033 | |
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 | | $ | — | | | $ | 633,788 | |
Forward foreign currency exchange contracts | | | 1,585,407 | | | | 875,866 | |
Swaps — Centrally cleared | | | 737,323 | | | | — | |
Swaps — OTC(a) | | | 1,618,768 | | | | 782,738 | |
| | | | | | | | |
Total derivative assets and liabilities in the Statement of Assets and Liabilities | | $ | 3,941,498 | | | $ | 2,292,392 | |
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”) | | | (737,323 | ) | | | (633,788 | ) |
| | | | | | | | |
Total derivative assets and liabilities subject to an MNA | | $ | 3,204,175 | | | $ | 1,658,604 | |
| | | | | | | | |
| (a) | 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 an MNA by Counterparty | | | Derivatives Available for Offset (a) | | | Non-cash Collateral Received | | | Cash Collateral Received | | | Net Amount of Derivative Assets (b)(d) | |
Bank of America NA | | $ | 805,732 | | | $ | (665,076 | ) | | $ | — | | | $ | — | | | $ | 140,656 | |
Citibank NA | | | 360,803 | | | | (205,488 | ) | | | — | | | | (155,315 | ) | | | — | |
Deutsche Bank AG | | | 357,105 | | | | (111,560 | ) | | | — | | | | — | | | | 245,545 | |
Goldman Sachs International | | | 471,677 | | | | (13,138 | ) | | | — | | | | (430,000 | ) | | | 28,539 | |
Morgan Stanley & Co. International plc | | | 1,208,858 | | | | (663,342 | ) | | | — | | | | (340,000 | ) | | | 205,516 | |
| | | | | | | | | | | | | | | | | | | | |
| | $ | 3,204,175 | | | $ | (1,658,604 | ) | | $ | — | | | $ | (925,315 | ) | | $ | 620,256 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 15 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Managed Volatility V.I. Fund |
| | | | | | | | | | | | | | | | | | | | |
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)(d) | |
Bank of America NA | | $ | 665,076 | | | $ | (665,076 | ) | | $ | — | | | $ | — | | | $ | — | |
Citibank NA | | | 205,488 | | | | (205,488 | ) | | | — | | | | — | | | | — | |
Deutsche Bank AG | | | 111,560 | | | | (111,560 | ) | | | — | | | | — | | | | — | |
Goldman Sachs International | | | 13,138 | | | | (13,138 | ) | | | — | | | | — | | | | — | |
Morgan Stanley & Co. International plc | | | 663,342 | | | | (663,342 | ) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
| | $ | 1,658,604 | | | $ | (1,658,604 | ) | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | |
| (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. | |
| (d) | Net amount may also include forward foreign currency exchange contracts that are not required to be collateralized. | |
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 table summarizes 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: | | | | | | | | | | | | | | | | |
Aerospace & Defense | | $ | 906,907 | | | $ | 280,474 | | | $ | — | | | $ | 1,187,381 | |
Air Freight & Logistics | | | — | | | | 167,033 | | | | — | | | | 167,033 | |
Airlines | | | — | | | | 200,406 | | | | — | | | | 200,406 | |
Auto Components | | | 901,499 | | | | 632,744 | | | | — | | | | 1,534,243 | |
Automobiles | | | 98,067 | | | | 504,498 | | | | — | | | | 602,565 | |
Banks | | | 6,352,861 | | | | 6,016,082 | | | | — | | | | 12,368,943 | |
Beverages | | | 267,840 | | | | 2,893,799 | | | | — | | | | 3,161,639 | |
Biotechnology | | | 5,141,053 | | | | 874,704 | | | | — | | | | 6,015,757 | |
Building Products | | | — | | | | 6,103 | | | | — | | | | 6,103 | |
Capital Markets | | | 1,877,223 | | | | 1,030,035 | | | | — | | | | 2,907,258 | |
Chemicals | | | 13,363,182 | | | | 3,851,277 | | | | — | | | | 17,214,459 | |
Commercial Services & Supplies | | | 54,150 | | | | — | | | | — | | | | 54,150 | |
Construction & Engineering | | | 45,024 | | | | 112,443 | | | | — | | | | 157,467 | |
Construction Materials | | | 3,215,659 | | | | 550,008 | | | | — | | | | 3,765,667 | |
Consumer Finance | | | 976,201 | | | | — | | | | — | | | | 976,201 | |
Containers & Packaging | | | 1,009,642 | | | | — | | | | — | | | | 1,009,642 | |
Diversified Consumer Services | | | 40,731 | | | | — | | | | — | | | | 40,731 | |
Diversified Financial Services | | | 984,487 | | | | 498,082 | | | | — | | | | 1,482,569 | |
Electric Utilities | | | — | | | | 272,746 | | | | — | | | | 272,746 | |
Electrical Equipment | | | — | | | | 13,268 | | | | — | | | | 13,268 | |
Electronic Equipment, Instruments & Components | | | — | | | | 28,180 | | | | — | | | | 28,180 | |
Energy Equipment & Services | | | 9,853 | | | | — | | | | — | | | | 9,853 | |
Equity Real Estate Investment Trusts (REITs) | | | 1,971,917 | | | | — | | | | — | | | | 1,971,917 | |
Food & Staples Retailing | | | 125,067 | | | | 371,446 | | | | — | | | | 496,513 | |
Food Products | | | 1,529,410 | | | | 625,072 | | | | — | | | | 2,154,482 | |
Gas Utilities | | | — | | | | 100,899 | | | | — | | | | 100,899 | |
Health Care Equipment & Supplies | | | — | | | | 548,457 | | | | — | | | | 548,457 | |
Health Care Providers & Services | | | 5,802,348 | | | | 645,086 | | | | — | | | | 6,447,434 | |
Hotels, Restaurants & Leisure | | | 3,390,357 | | | | 1,444,163 | | | | — | | | | 4,834,520 | |
Household Durables | | | — | | | | 169,021 | | | | — | | | | 169,021 | |
Household Products | | | 8,544,704 | | | | 1,397,774 | | | | — | | | | 9,942,478 | |
Independent Power and Renewable Electricity Producers | | | — | | | | 84,436 | | | | — | | | | 84,436 | |
Industrial Conglomerates | | | 123,595 | | | | 117,394 | | | | — | | | | 240,989 | |
Insurance | | | 4,393,465 | | | | 6,579,675 | | | | — | | | | 10,973,140 | |
Internet & Direct Marketing Retail | | | 2,300,232 | | | | — | | | | — | | | | 2,300,232 | |
Internet Software & Services | | | 4,606,447 | | | | 20,266 | | | | — | | | | 4,626,713 | |
IT Services | | | 2,580,906 | | | | 733,482 | | | | — | | | | 3,314,388 | |
Life Sciences Tools & Services | | | 1,168,601 | | | | 260,921 | | | | — | | | | 1,429,522 | |
| | |
16 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Managed Volatility V.I. Fund |
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Machinery | | $ | 100,188 | | | $ | — | | | $ | — | | | $ | 100,188 | |
Media | | | 890,004 | | | | — | | | | — | | | | 890,004 | |
Metals & Mining | | | 90,577 | | | | 1,753,955 | | | | — | | | | 1,844,532 | |
Multiline Retail | | | 536,864 | | | | — | | | | — | | | | 536,864 | |
Multi-Utilities | | | — | | | | 52,382 | | | | — | | | | 52,382 | |
Oil, Gas & Consumable Fuels | | | 2,061,251 | | | | 11,331,167 | | | | — | | | | 13,392,418 | |
Paper & Forest Products | | | 472,050 | | | | 43,379 | | | | — | | | | 515,429 | |
Personal Products | | | 1,805,002 | | | | 2,511,375 | | | | — | | | | 4,316,377 | |
Pharmaceuticals | | | 10,759,560 | | | | 4,465,255 | | | | — | | | | 15,224,815 | |
Professional Services | | | 82,156 | | | | 304,289 | | | | — | | | | 386,445 | |
Real Estate Management & Development | | | — | | | | 356,033 | | | | — | | | | 356,033 | |
Road & Rail | | | — | | | | 62,109 | | | | — | | | | 62,109 | |
Semiconductors & Semiconductor Equipment | | | 323,692 | | | | 248,713 | | | | — | | | | 572,405 | |
Software | | | 10,036,149 | | | | 1,533,811 | | | | — | | | | 11,569,960 | |
Specialty Retail | | | 1,490,240 | | | | 45,834 | | | | — | | | | 1,536,074 | |
Technology Hardware, Storage & Peripherals | | | 2,170,045 | | | | — | | | | — | | | | 2,170,045 | |
Textiles, Apparel & Luxury Goods | | | 729,641 | | | | 77,072 | | | | — | | | | 806,713 | |
Tobacco | | | 135,136 | | | | 919,587 | | | | — | | | | 1,054,723 | |
Trading Companies & Distributors | | | 1,149,949 | | | | — | | | | — | | | | 1,149,949 | |
Transportation Infrastructure | | | — | | | | 656,124 | | | | — | | | | 656,124 | |
Corporate Bonds(a) | | | — | | | | 29,274 | | | | — | | | | 29,274 | |
Non-Agency Mortgage-Backed Securities | | | — | | | | 713 | | | | — | | | | 713 | |
Preferred Stocks | | | — | | | | 226,837 | | | | — | | | | 226,837 | |
Rights | | | 38,887 | | | | — | | | | — | | | | 38,887 | |
U.S. Government Sponsored Agency Obligations | | | — | | | | 687,351 | | | | — | | | | 687,351 | |
U.S. Treasury Obligations | | | — | | | | 65,455,625 | | | | — | | | | 65,455,625 | |
Short-Term Securities | | | 14,855,140 | | | | — | | | | — | | | | 14,855,140 | |
| | | | | | | | | | | | | | | | |
| | $ | 119,507,959 | | | $ | 121,790,859 | | | $ | — | | | $ | 241,298,818 | |
| | | | | | | | | | | | | | | | |
Derivative Financial Instruments(b) | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Equity contracts | | $ | 4,630,377 | | | $ | — | | | $ | — | | | $ | 4,630,377 | |
Foreign currency exchange contracts | | | — | | | | 1,585,407 | | | | — | | | | 1,585,407 | |
Interest rate contracts | | | 861,930 | | | | 2,774,414 | | | | — | | | | 3,636,344 | |
Liabilities: | | | | | | | | | | | | | | | | |
Equity contracts | | | (667,266 | ) | | | (438,736 | ) | | | — | | | | (1,106,002 | ) |
Foreign currency exchange contracts | | | — | | | | (875,866 | ) | | | — | | | | (875,866 | ) |
Interest rate contracts | | | (1,653,610 | ) | | | (3,496,150 | ) | | | — | | | | (5,149,760 | ) |
| | | | | | | | | | | | | | | | |
| | $ | 3,171,431 | | | $ | (450,931 | ) | | $ | — | | | $ | 2,720,500 | |
| | | | | | | | | | | | | | | | |
| (a) | See above Schedule of Investments for values in each industry. | |
| (b) | 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 six months ended June 30, 2018, there were no transfers between levels.
See notes to financial statements.
| | | | |
SCHEDULE OF INVESTMENTS | | | 17 | |
Statement of Assets and Liabilities (unaudited)
June 30, 2018
| | | | |
| | BlackRock Managed Volatility V.I. Fund | |
| |
ASSETS | | | | |
Investments at value — unaffiliated (cost — $220,413,231) | | $ | 226,653,678 | |
Investments at value — affiliated (cost — $14,645,140) | | | 14,645,140 | |
Cash pledged: | | | | |
Futures contracts | | | 22,887,000 | |
Centrally cleared swaps | | | 7,124,000 | |
Foreign currency at value (cost — $5,831,795) | | | 5,850,903 | |
Receivables: | | | | |
Dividends — affiliated | | | 73,174 | |
Dividends — unaffiliated | | | 164,971 | |
Interest — unaffiliated | | | 944,064 | |
Variation margin on centrally cleared swaps | | | 737,323 | |
Unrealized appreciation on: | | | | |
Forward foreign currency exchange contracts | | | 1,585,407 | |
OTC swaps | | | 1,618,768 | |
Prepaid expenses | | | 163 | |
Other assets | | | 156 | |
| | | | |
Total assets | | | 282,284,747 | |
| | | | |
| |
LIABILITIES | | | | |
Bank overdraft | | | 4,871 | |
Cash received as collateral for OTC derivatives | | | 1,080,000 | |
Payables: | | | | |
Capital shares redeemed | | | 73,493 | |
Distribution fees | | | 49,394 | |
Variation margin on futures contracts | | | 633,788 | |
Board realignment and consolidation | | | 790 | |
Investment advisory fees | | | 116,384 | |
Directors’ and Officer’s fees | | | 313 | |
Other affiliates | | | 303 | |
Other accrued expenses | | | 135,948 | |
Unrealized depreciation on: | | | | |
Forward foreign currency exchange contracts | | | 875,866 | |
OTC swaps | | | 782,738 | |
| | | | |
Total liabilities | | | 3,753,888 | |
| | | | |
| |
NET ASSETS | | $ | 278,530,859 | |
| | | | |
| |
NET ASSETS CONSIST OF | | | | |
Paid-in capital | | $ | 260,716,483 | |
Undistributed net investment income | | | 733,598 | |
Accumulated net realized gain | | | 8,131,061 | |
Net unrealized appreciation (depreciation) | | | 8,949,717 | |
| | | | |
NET ASSETS | | $ | 278,530,859 | |
| | | | |
| |
NET ASSET VALUE | | | | |
Class I — Based on net assets of $13,427,786 and 968,272 shares outstanding, 100 million shares authorized, $0.10 par value. | | $ | 13.87 | |
| | | | |
Class III — Based on net assets of $265,103,073 and 19,130,473 shares outstanding, 100 million shares authorized, $0.10 par value. | | $ | 13.86 | |
| | | | |
See notes to financial statements.
| | |
18 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statement of Operations (unaudited)
Six Months Ended June 30, 2018
| | | | |
| | BlackRock Managed Volatility V.I. Fund | |
| |
INVESTMENT INCOME | | | | |
Dividends — affiliated | | $ | 352,782 | |
Dividends — unaffiliated | | | 728,802 | |
Interest — unaffiliated | | | 178,275 | |
Securities lending income — affiliated — net | | | 1,250 | |
Foreign taxes withheld | | | (20,070 | ) |
| | | | |
Total investment income | | | 1,241,039 | |
| | | | |
| |
EXPENSES | | | | |
Investment advisory | | | 316,538 | |
Distribution — class specific | | | 126,694 | |
Professional | | | 29,031 | |
Accounting services | | | 18,095 | |
Transfer agent — class specific | | | 14,020 | |
Custodian | | | 11,909 | |
Printing | | | 10,542 | |
Directors and Officer | | | 3,642 | |
Offering | | | 2,882 | |
Transfer agent | | | 2,479 | |
Board realignment and consolidation | | | 790 | |
Miscellaneous | | | 2,379 | |
| | | | |
Total expenses | | | 539,001 | |
| | | | |
Less: | | | | |
Fees waived and/or reimbursed by the Manager | | | (48,917 | ) |
Transfer agent fees waived and/or reimbursed — class specific | | | (14,020 | ) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 476,064 | |
| | | | |
Net investment income | | | 764,975 | |
| | | | |
| |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain (loss) from: | | | | |
Investments — affiliated | | | 159,126 | |
Investments — unaffiliated | | | 7,479,866 | |
Forward foreign currency exchange contracts | | | 289,016 | |
Foreign currency transactions | | | (116,738 | ) |
Futures contracts | | | 710,982 | |
Swaps . . . . . | | | (382,091 | ) |
| | | | |
| | | 8,140,161 | |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | |
Investments — affiliated | | | (66,720 | ) |
Investments — unaffiliated | | | (9,912,203 | ) |
Forward foreign currency exchange contracts | | | 754,712 | |
Foreign currency translations | | | (26,148 | ) |
Futures contracts | | | 3,138,162 | |
Swaps . . . . . | | | (1,160,472 | ) |
| | | | |
| | | (7,272,669 | ) |
| | | | |
Net realized and unrealized gain | | | 867,492 | |
| | | | |
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 1,632,467 | |
| | | | |
See notes to financial statements.
Statements of Changes in Net Assets
| | | | | | | | |
| | BlackRock Managed Volatility V.I. Fund | |
| | Six Months Ended 06/30/2018 (unaudited) | | | Year Ended 12/31/2017 | |
| | |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | |
| | |
OPERATIONS | | | | | | | | |
Net investment income | | $ | 764,975 | | | $ | 43,960 | |
Net realized gain | | | 8,140,161 | | | | 47,809 | |
Net change in unrealized appreciation (depreciation) | | | (7,272,669 | ) | | | 644,084 | |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 1,632,467 | | | | 735,853 | |
| | | | | | | | |
| | |
DISTRIBUTIONS TO SHAREHOLDERS(a) | | | | | | | | |
From net investment income: | | | | | | | | |
Class I | | | — | | | | (50,000 | ) |
From net realized gain: | | | | | | | | |
Class I | | | — | | | | (98,699 | ) |
| | | | | | | | |
Decrease in net assets resulting from distributions to shareholders | | | — | | | | (148,699 | ) |
| | | | | | | | |
| | |
CAPITAL SHARE TRANSACTIONS | | | | | | | | |
Net increase (decrease) in net assets derived from capital share transactions | | | 262,362,362 | | | | (1,946,110 | ) |
| | | | | | | | |
| | |
NET ASSETS | | | | | | | | |
Total increase (decrease) in net assets | | | 263,994,829 | | | | (1,358,956 | ) |
Beginning of period | | | 14,536,030 | | | | 15,894,986 | |
| | | | | | | | |
End of period | | $ | 278,530,859 | | | $ | 14,536,030 | |
| | | | | | | | |
Undistributed (distributions in excess of) net investment income, end of period | | $ | 733,598 | | | $ | (31,377 | ) |
| | | | | | | | |
(a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
| | |
20 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Financial Highlights
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Managed Volatility V.I. Fund | |
| | Class I | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 13.71 | | | | | | | $ | 13.19 | | | $ | 13.08 | | | $ | 13.70 | | | $ | 14.41 | | | $ | 13.28 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss)(a) | | | 0.05 | | | | | | | | 0.04 | | | | 0.02 | (b) | | | (0.06 | ) | | | 0.04 | | | | 0.07 | |
Net realized and unrealized gain (loss) | | | 0.11 | | | | | | | | 0.62 | �� | | | 0.20 | | | | (0.01 | ) | | | 0.29 | | | | 1.60 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | 0.16 | | | | | | | | 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 period | | $ | 13.87 | | | | | | | $ | 13.71 | | | $ | 13.19 | | | $ | 13.08 | | | $ | 13.70 | | | $ | 14.41 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(d) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 1.17 | %(e) | | | | | | | 4.98 | % | | | 1.71 | %(f) | | | (0.57 | )% | | | 2.28 | % | | | 12.62 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets(g) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.43 | %(h)(i) | | | | | | | 1.48 | % | | | 1.39 | % | | | 1.47 | % | | | 1.60 | % | | | 1.78 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.82 | %(h)(i) | | | | | | | 0.89 | % | | | 0.94 | % | | | 1.00 | % | | | 1.07 | % | | | 1.23 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | | 0.73 | %(h) | | | | | | | 0.29 | % | | | 0.18 | %(b) | | | (0.46 | )% | | | 0.25 | % | | | 0.47 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 13,428 | | | | | | | $ | 14,536 | | | $ | 15,895 | | | $ | 18,180 | | | $ | 21,283 | | | $ | 24,092 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate(j) | | | 271 | % | | | | | | | 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) | Aggregate total return. |
(f) | Includes reimbursements of out of pocket expenses from a third party administrator. Excluding this amount, the Fund’s total return is 1.48%. |
(g) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | 2013 | |
Investments in underlying funds | | | 0.08 | % | | | | | | | 0.23 | % | | | | | | | 0.25 | % | | | | | | | 0.23 | % | | | | | | | 0.23 | % | | | | | | | 0.22 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(i) | Board realignment and consolidation costs and Offering costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses and total expenses after fees waived and/or reimbursed would have been 1.44% and 0.83%, respectively. |
(j) | Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | | 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | 2013 | |
Portfolio turnover rate (excluding MDRs) | | | 271 | % | | | | | | | 0 | % | | | | | | | 1 | % | | | | | | | 13 | % | | | | | | | 64 | % | | | | | | | 229 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See notes to financial statements.
Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | |
| | BlackRock Managed Volatility V.I. Fund (continued) | |
| | Class III | |
| | Period from 02/14/2018 (a) to 06/30/2018 (unaudited) | |
Net asset value, beginning of period | | $ | 13.70 | |
| | | | |
Net investment income(b) | | | 0.07 | |
Net realized and unrealized gain | | | 0.09 | |
| | | | |
Net increase from investment operations | | | 0.16 | |
| | | | |
Net asset value, end of period | | $ | 13.86 | |
| | | | |
| |
Total Return(c) | | | | |
Based on net asset value | | | 1.17 | %(d) |
| | | | |
| |
Ratios to Average Net Assets(e) | | | | |
Total expenses | | | 0.86 | %(f)(g) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 0.82 | %(f)(g) |
| | | | |
Net investment income | | | 1.41 | %(f) |
| | | | |
| |
Supplemental Data | | | | |
Net assets, end of period (000) | | $ | 265,103 | |
| | | | |
Portfolio turnover rate | | | 271 | % |
| | | | |
(a) | Recommencement of operations. |
(b) | Based on average shares outstanding. |
(c) | Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions. |
(d) | Aggregate total return. |
(e) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| | | | | | | | |
| | Period from 02/14/2018(a) to 06/30/2018 (unaudited) | | | | |
|
Investments in underlying funds | | | 0.08 | % | | | | |
| | | | | | | | |
(g) | Board realignment and consolidation costs and Offering costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses and total expenses after fees waived and/or reimbursed would have been 0.87% and 0.83%, respectively. |
See notes to financial statements.
| | |
22 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited)
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 19 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. 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 operations on February 14, 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.
At a meeting held on November 15, 2017, the Board of Directors of the Company and, at a meeting held on December 1, 2017, the Board of Trustees of HIMCO Variable Insurance Trust each approved a reorganization of the HIMCO VIT Portfolio Diversifier Fund (the “Target Fund”) with and into the Fund. At a special shareholder meeting on April 4, 2018, the shareholders of the Target Fund approved the reorganization, which was completed on April 23, 2018.
REORGANIZATION
The Board of the Company, the Board of the HIMCO Variable Insurance Trust and shareholders of the Target Fund approved the reorganizations of the Target Fund into the Fund. As a result, the Fund acquired substantially all of the assets and assumed substantially all of the liabilities of the Target Fund in exchange for an equal aggregate value of newly-issued Class III Shares of the Fund.
Each shareholder of the Target Fund received shares of the Fund in an amount equal to the aggregate net asset value (“NAV”) of such shareholder’s Target Fund shares, as determined at the close of business on April 23, 2018, less the costs of the Target Fund’s reorganization.
The reorganization was accomplished by a tax-free exchange of shares of the Fund in the following amounts and at the following conversion ratios:
| | | | | | | | | | | | | | | | |
Target Fund’s Share Class | | Shares Prior to Reorganization | | | Conversion Ratio | | | Managed Volatility V.I. Fund’s Share Class | | | Shares of Managed Volatility V.I. Fund | |
Class IB | | | 39,633,345 | | | | 0.49126053 | | | | Class III | | | | 19,470,298 | |
The Target Fund’s net assets and composition of net assets as of the close of business on April 20, 2018, the valuation date of the reorganization were as follows:
| | | | | | | | | | | | | | | | | | | | |
Target Fund | | Net Assets | | | Paid-In Capital | | �� | Undistributed Net Investment Income | | | Accumulated Net Realized Loss | | | Net Unrealized Appreciation | |
HIMCO VIT Portfolio Diversifier Fund | | $ | 268,343,917 | | | $ | 392,342,469 | | | $ | — | | | $ | (140,377,841 | ) | | $ | 16,379,289 | |
For financial reporting purposes, assets received and shares issued by the Fund were recorded at fair value. However, the cost basis of the investments received from the Target Fund was carried forward to align ongoing reporting of the Fund realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.
The net assets of the Fund before the reorganization were $13,676,731. The aggregate net assets of the Fund immediately after the reorganization amounted to $282,020,648. The Target Fund’s fair value and cost of investments prior to the reorganization were as follows:
| | | | | | | | |
Target Fund | | Fair Value of Investments | | | Cost of Investments | |
HIMCO VIT Portfolio Diversifier Fund | | $ | 202,633,700 | | | $ | 186,254,411 | |
The purpose of these transactions was to combine two funds with the same or substantially similar (but not identical) investment objectives, investment policies, strategies, risks and restrictions. The reorganization was a tax-free event and was effective on April 23, 2018.
Assuming the acquisition had been completed on January 1, 2018, the beginning of the fiscal reporting period of the Fund, the pro forma results of operations for the six months ended June 30, 2018, are as follows:
| • | | Net investment income: $1,883,592 |
| • | | Net realized and change in unrealized loss on investments: $(5,690,944) |
| • | | Net decrease in net assets resulting from operations: $(3,807,352) |
Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of the Fund that have been included in the Fund’s Statement of Operations since April 23, 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
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 23 | |
Notes to Financial Statements (unaudited) (continued)
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., 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.
Offering Costs: Offering costs are amortized over a 12–month period beginning with the commencement of operations of a class of shares.
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.
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 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 |
| | |
24 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
| 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. |
| • | | 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. |
| • | | 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 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 June 30, 2018, 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.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 25 | |
Notes to Financial Statements (unaudited) (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.
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: 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 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.
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) and 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. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts on the Statement of Assets and Liabilities.
| | |
26 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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. Cash amounts pledged for forward foreign currency exchange contracts are considered restricted and are included in cash pledged as collateral for OTC derivatives on the Statement of Assets and Liabilities.
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. Amounts pledged, which are considered restricted cash, are included in cash pledged for centrally cleared swaps on 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 Statements 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.
| • | | 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, or basket or underlying instruments, in exchange for fixed or floating rate interest payments. If the total return of the instrument(s) or index underlying the transaction exceeds or falls short of the offsetting fixed or floating interest rate obligation, the Funds 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.
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
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 27 | |
Notes to Financial Statements (unaudited) (continued)
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.
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 | | | 0.55 | % |
$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 rate of 0.25% based upon the average daily net assets attributable to Class III.
For the six months ended June 30, 2018, the class specific distribution fees borne directly by Class III were $126,694.
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 six months ended June 30, 2018, 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 six months ended June 30, 2018, the class specific transfer agent fees borne directly by Class I was $14,020.
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 six months ended June 30, 2018, the amount waived was $14,844.
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, 2021. The contractual agreement may be terminated upon 90
| | |
28 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
days’ notice by a majority of the 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 six months ended June 30, 2018, the Fund waived $9,793 in investment advisory fees pursuant to these arrangements.
For the six months ended June 30, 2018, the Fund reimbursed the Manager $327 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 and Class III Shares.
The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2021, 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 waived and/or reimbursed — class specific in the Statement of Operations. For the six months ended June 30, 2018, class specific expense waivers and/or reimbursements directly borne by Class I was $14,020.
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 (a) | |
| | | | | | | 0.59% | | | | | | 0.84% | |
| (a) | Class III recommenced operations on February 14, 2018. | |
Prior to April 23, 2018, Class I and Class III’s expense limitations as a percentage of average daily net assets were 1.00% and 1.25%, respectively.
The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2021 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 six months ended June 30, 2018, the amount waived was $24,280.
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.
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 six months ended June 30, 2018, the Fund paid BIM $190 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 six months ended June 30, 2018, the Fund did not participate in the lnterfund Lending Program.
Directors and Officers: 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.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 29 | |
Notes to Financial Statements (unaudited) (continued)
For the six months ended June 30, 2018, purchases and sales of investments, including paydowns and excluding short-term securities, were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
Non-U.S Government Securities | | $ | 159,733,766 | | | $ | 160,594,936 | |
U.S Government Securities | | $ | 65,453,233 | | | $ | 48,277,261 | |
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 June 30, 2018, 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.
As of June 30, 2018, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
| | | | |
Tax cost | | $ | 235,662,487 | |
| | | | |
Gross unrealized appreciation | | $ | 19,821,233 | |
Gross unrealized depreciation | | | (11,464,403 | ) |
| | | | |
Net unrealized appreciation(depreciation) | | $ | 8,356,830 | |
| | | | |
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Although the Act does not amend any provisions directly related to the qualification or taxation of regulated investment companies (“RICs”), the Act does change the taxation of entities in which some RICs invest, the tax treatment of income derived from those entities and the taxation of RIC shareholders. While management does not anticipate significant impact to the Fund or to its shareholders, there is uncertainty in the application of certain provisions in the Act. Specifically, provisions in the Act may increase the amount of or accelerate the recognition of taxable income and may limit the deductibility of certain expenses by RICs. Until full clarity around these provisions is obtained, the impact on the Fund’s financial statements, if any, cannot be fully determined.
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, $2.25 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 $1.75 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 0.10% 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 2019 unless extended or renewed. Prior to April 19, 2018, the aggregate commitment amount was $2.1 billion and the fee was 0.12% per annum. Participating Funds paid an upfront commitment fee of 0.02% on the total commitment amounts, in addition to administration, legal and arrangement fees, which 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 six months ended June 30, 2018, the Fund did not borrow under the credit agreement.
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.
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.
| | |
30 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (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.
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.
11. | CAPITAL SHARE TRANSACTIONS |
Transactions in capital shares were as follows:
| | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (a) | | | Year Ended 12/31/2017 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
Class I | | | | | | | | | | | | | | | | |
Shares sold | | | 7,716 | | | $ | 106,198 | | | | 41,987 | | | $ | 563,708 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 10,985 | | | | 148,699 | |
Shares redeemed | | | (99,545 | ) | | | (1,371,586 | ) | | | (197,978 | ) | | | (2,658,517 | ) |
| | | | | | | | | | | | | | | | |
Net decrease | | | (91,829 | ) | | $ | (1,265,388 | ) | | | (145,006 | ) | | $ | (1,946,110 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Class III | | | | | | | | | | | | | | | | |
Shares sold | | | 169,281 | | | $ | 2,332,827 | | | | — | | | $ | — | |
Shares issued resulting from reorganization | | | 19,470,298 | | | | 268,343,917 | | | | — | | | | — | |
Shares redeemed | | | (509,106 | ) | | | (7,048,994 | ) | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Net increase | | | 19,130,473 | | | $ | 263,627,750 | | | | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total Net Increase (Decrease) | | | 19,038,644 | | | $ | 262,362,362 | | | | (145,006 | ) | | $ | (1,946,110 | ) |
| | | | | | | | | | | | | | | | |
| (a) | Period February 14, 2018 (recommencement of operations) to June 30, 2018 for Class III. | |
As of June 30, 2018, BlackRock Financial Management, Inc, an affiliate of the Fund, owned 730 Class III shares of BlackRock Managed Volatility V.I. Fund.
Management’s evaluation of the impact of all subsequent events on the Fund’s financial statements was completed through the date the financial statements were issued and the following items were noted:
The Fund paid short-term capital gain distribution in the following amount per share on July 20, 2018 to the shareholders of record on July 18, 2018.
| | | | |
| | Short-Term Capital Gain | |
Class I | | $ | 0.001050 | |
Class III | | | 0.001050 | |
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 31 | |
Glossary of Terms Used in this Report
| | |
Currency |
| |
AUD | | Australian Dollar |
BRL | | Brazilian Real |
CAD | | Canadian Dollar |
CHF | | Swiss Franc |
CNY | | Chinese Yuan |
CZK | | Czech Koruna |
DKK | | Danish Krone |
EUR | | Euro |
GBP | | British Pound |
HKD | | Hong Kong Dollar |
ILS | | Israeli Shekel |
INR | | Indian Rupee |
JPY | | Japanese Yen |
KRW | | South Korean Won |
MXN | | Mexican Peso |
MYR | | Malaysian Ringgit |
NOK | | Norwegian Krone |
NZD | | New Zealand Dollar |
PLN | | Polish Zloty |
SEK | | Swedish Krona |
SGD | | Singapore Dollar |
THB | | Thai Baht |
TWD | | New Taiwan Dollar |
USD | | United States Dollar |
ZAR | | South African Rand |
| | |
Portfolio Abbreviations |
| |
ADR | | American Depositary Receipt |
CVA | | Certification Van Aandelon (Dutch Certificate) |
ETF | | Exchange-Traded Fund |
OTC | | Over-The-Counter |
S&P | | Standard & Poor’s |
| | |
32 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
JUNE 30, 2018
| | |
SEMI-ANNUAL REPORT (UNAUDITED) | | |
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 June 30, 2018 | | 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 Variable Insurance Trust each approved a reorganization of the HIMCO VIT Index Fund (the “Target Fund”), with and into the Fund. At a special shareholder meeting on April 4, 2018, the shareholders of the Target Fund approved the reorganization, which was completed on April 23, 2018.
At a meeting held on November 14, 2017, the Board of Directors of the Company and, at a meeting held on May 23, 2018, the Board of Trustees of State Farm Variable Product Trust each approved a reorganization of the State Farm Large Cap Equity Index Fund (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 six-month period ended June 30, 2018, the Fund’s Class I, Class II and Class III Shares returned 2.50%, 2.43% and 2.39%, respectively, while the benchmark S&P 500® Index returned 2.65%.
Returns for the Fund’s respective share classes differ from the benchmark index based on individual share class expenses.
Describe the market environment.
In the beginning of 2018, the low volatility regime that helped global equity markets reach record highs in 2017 continued to support U.S. markets. Further fueled by tax-reform optimism, January saw markets rally, led higher by momentum and information technology names. However, as the first quarter of 2018 progressed, a combination of economic over-heating concerns, the return of volatility, rising yields and the specter of trade wars weighed on markets. The annualized realized volatility of the S&P 500® Index was 19% in the first quarter of 2018, meaningfully higher than the 6.6% witnessed in 2017.
From a sector standpoint, technology and consumer discretionary stocks outperformed, due to their impressive early-quarter runs. Later in the first quarter of 2018, negative headlines regarding Facebook’s usage of user data, FAANMG regulation (regulation that was considered after the breach of consumer data by Facebook), and artificial intelligence weighed on the technology sector. Although the first quarter was plagued with volatility, the defensive sectors of telecommunications and consumer staples were the worst performing in the S&P 500® Index.
Contrary to what the U.S. equity market’s lackluster performance would suggest, the U.S. economy remained healthy in the first quarter of 2018. The unemployment rate remained at multi-decade lows, consumer confidence was high by historical standards, and both the Institute for Supply Management Index manufacturing and non-manufacturing components accelerated. This supported the Fed’s decision to increase interest rates in March and to revise higher their rate hike expectations for 2019. The combination of increased interest rate expectations, a strong economic backdrop, in addition to technical issues regarding the deficit, drove selling in U.S. Treasuries. The ten-year U.S. Treasury yield increased by 0.33% in the first quarter of 2018 to 2.75%.
Despite the fluid headlines and ongoing threats regarding the topic of U.S. protectionism in the second quarter of 2018, investors found confidence in strong U.S. economic data and earnings growth. On the macroeconomic front, the U.S. unemployment rate struck 3.8%, the lowest level since 1975. Economic reports throughout the second quarter of 2018 also indicated strong economic conditions. Additionally, the core personal consumption expenditure hit the Fed’s target rate of 2%, supporting their decision to raise rates in June. The Fed has also signaled the likelihood of two additional hikes this year. On the earnings front, the aggregate earnings growth of S&P 500® constituents was 26.6% based on Thomson Reuters IBES estimates. Both of these factors were supportive for the index broadly and pushed volatility lower in the second quarter of 2018. The average level of the CBOE Volatility Index was 15.3% in the second quarter, lower than the 17.4% experienced in the first quarter of 2018.
From a sector standpoint, energy outperformed as a prolonged period of higher crude oil prices increased the attractiveness of energy company shares. In addition to the fact that West Texas Intermediate crude appreciated throughout the second quarter of 2018 and reached $77 per barrel in June, the exercising of cost discipline by U.S. producers, evident from low levels of capital expenditure from first quarter earnings reports, was supportive for investor sentiment given uncertainty over OPEC production plans.
Elsewhere, financials underperformed all other sectors, led lower by shares of diversified financial services companies. While deregulation provided a tailwind for regional banks, investor sentiment on the broader sector was fraught by the narrowing term structure of the U.S. Treasury curve, uncertainty ahead of the Comprehensive Capital Analysis and Review stress tests (an annual exercise by the Fed to assess the largest bank holding companies operating in the United States), and global protectionism.
For the six-month period ended June 30, 2018, the strongest returns in the S&P 500® Index came from consumer discretionary (+11.47%) and information technology (+10.87%). Negative returns were found in consumer staples (-8.92%), telecommunication services (-8.35%), industrials (-4.70%), financials (-4.09%), materials (-3.08%), and telecommunication services (-0.94%). All remaining sectors had positive returns.
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 seeking investment results that before expenses, correspond to the aggregate price and yield performance of the benchmark index.
| | |
2 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Fund Summary as of June 30, 2018 (continued) | | BlackRock S&P 500 Index V.I. Fund |
Describe portfolio positioning at period end.
The Fund remains 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.
Performance Summary for the Period Ended June 30, 2018
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Average Annual Total Returns | |
| | 6-Month Total Returns (c) | | | | | | 1 Year (c) | | | 5 Years (c) | | | 10 Years (c) | |
Class I(a)(b) | | | 2.50 | % | | | | | | | 14.05 | % | | | 13.05 | % | | | 9.81 | % |
Class II(a)(b) | | | 2.43 | | | | | | | | 13.93 | | | | 12.89 | | | | 9.66 | |
Class III(a)(b) | | | 2.39 | | | | | | | | 13.79 | | | | 12.78 | | | | 9.54 | (d) |
S&P 500® Index(e) | | | 2.65 | | | | | | | | 14.37 | | | | 13.42 | | | | 10.17 | |
| (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) | 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 investments linked to the S&P 500® Index. | |
| (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 14, 2018, 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. | |
| (e) | This unmanaged index covers 500 leading companies and captures approximately 80% coverage of available market capitalization. | |
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 (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | | | | Beginning Account Value (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | Annualized Expense Ratio | |
Class I | | $ | 1,000.00 | | | $ | 1,025.00 | | | $ | 0.90 | | | | | | | $ | 1,000.00 | | | $ | 1,023.90 | | | $ | 0.90 | | | | 0.18 | % |
Class II | | | 1,000.00 | | | | 1,024.30 | | | | 1.91 | | | | | | | | 1,000.00 | | | | 1,022.91 | | | | 1.91 | | | | 0.38 | |
Class III | | | 1,000.00 | | | | 1,013.10 | | | | 1.28 | | | | | | | | 1,000.00 | | | | 1,023.11 | | | | 1.71 | | | | 0.34 | |
| (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 annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown), except for Class III, which is multiplied by 136/365 (to reflect the period since inception date of February 14, 2018). | |
See “Disclosure of Expenses” on the following page for further information on how expenses were calculated
Portfolio Information
Sector Allocation
| | | | |
Sector | | Percent of Net Assets | |
Information Technology | | | 26 | % |
Financials | | | 14 | |
Health Care | | | 14 | |
Consumer Discretionary | | | 13 | |
Industrials | | | 9 | |
Consumer Staples | | | 7 | |
Energy | | | 6 | |
Utilities | | | 3 | |
Real Estate | | | 3 | |
Materials | | | 2 | |
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 January 1, 2018 and held through June 30, 2018, except with respect to Class III Shares which are based on a hypothetical investment of $1,000 on February 14, 2018 (commencement of operations) and held through June 30, 2018) 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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) June 30, 2018 | | BlackRock S&P 500 Index V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Common Stocks — 99.2% | |
|
Aerospace & Defense — 2.6% | |
Arconic, Inc. | | | 24,437 | | | $ | 415,673 | |
Boeing Co. (The) | | | 31,027 | | | | 10,409,869 | |
General Dynamics Corp. | | | 15,652 | | | | 2,917,689 | |
Harris Corp. | | | 6,720 | | | | 971,309 | |
Huntington Ingalls Industries, Inc. | | | 2,492 | | | | 540,241 | |
L3 Technologies, Inc. | | | 4,469 | | | | 859,478 | |
Lockheed Martin Corp. | | | 14,094 | | | | 4,163,790 | |
Northrop Grumman Corp.(a) | | | 9,889 | | | | 3,042,845 | |
Raytheon Co. | | | 16,299 | | | | 3,148,641 | |
Rockwell Collins, Inc. | | | 9,298 | | | | 1,252,255 | |
Textron, Inc. | | | 14,512 | | | | 956,486 | |
TransDigm Group, Inc. | | | 2,755 | | | | 950,861 | |
United Technologies Corp.(a) | | | 42,180 | | | | 5,273,765 | |
| | | | | | | | |
| | | | | | | 34,902,902 | |
Air Freight & Logistics — 0.7% | |
CH Robinson Worldwide, Inc. | | | 8,027 | | | | 671,539 | |
Expeditors International of Washington, Inc. | | | 9,968 | | | | 728,661 | |
FedEx Corp.(a) | | | 13,876 | | | | 3,150,684 | |
United Parcel Service, Inc., Class B | | | 39,055 | | | | 4,148,813 | |
| | | | | | | | |
| | | | | | | 8,699,697 | |
Airlines — 0.4% | |
Alaska Air Group, Inc. | | | 7,077 | | | | 427,380 | |
American Airlines Group, Inc. | | | 23,253 | | | | 882,684 | |
Delta Air Lines, Inc. | | | 36,709 | | | | 1,818,564 | |
Southwest Airlines Co. | | | 30,127 | | | | 1,532,861 | |
United Continental Holdings, Inc.(b) | | | 13,352 | | | | 931,035 | |
| | | | | | | | |
| | | | | | | 5,592,524 | |
Auto Components — 0.2% | |
Aptiv plc | | | 15,001 | | | | 1,374,542 | |
BorgWarner, Inc. | | | 11,409 | | | | 492,412 | |
Goodyear Tire & Rubber Co. (The)(a) | | | 13,728 | | | | 319,725 | |
| | | | | | | | |
| | | | | | | 2,186,679 | |
Automobiles — 0.4% | |
Ford Motor Co. | | | 220,904 | | | | 2,445,407 | |
General Motors Co. | | | 71,767 | | | | 2,827,620 | |
Harley-Davidson, Inc. | | | 9,691 | | | | 407,797 | |
| | | | | | | | |
| | | | | | | 5,680,824 | |
Banks — 6.1% | |
Bank of America Corp. | | | 535,613 | | | | 15,098,931 | |
BB&T Corp. | | | 44,108 | | | | 2,224,808 | |
Citigroup, Inc. | | | 144,529 | | | | 9,671,881 | |
Citizens Financial Group, Inc. | | | 27,337 | | | | 1,063,409 | |
Comerica, Inc. | | | 9,750 | | | | 886,470 | |
Fifth Third Bancorp | | | 38,631 | | | | 1,108,710 | |
Huntington Bancshares, Inc. | | | 63,207 | | | | 932,935 | |
JPMorgan Chase & Co. | | | 193,226 | | | | 20,134,149 | |
KeyCorp | | | 58,705 | | | | 1,147,096 | |
M&T Bank Corp. | | | 8,340 | | | | 1,419,051 | |
People’s United Financial, Inc. | | | 19,968 | | | | 361,221 | |
PNC Financial Services Group, Inc. (The)* | | | 26,456 | | | | 3,574,206 | |
Regions Financial Corp. | | | 62,230 | | | | 1,106,449 | |
SunTrust Banks, Inc.(a) | | | 26,423 | | | | 1,744,446 | |
SVB Financial Group(b) | | | 2,997 | | | | 865,414 | |
US Bancorp | | | 88,455 | | | | 4,424,519 | |
Wells Fargo & Co. | | | 248,627 | | | | 13,783,881 | |
Zions Bancorp | | | 11,176 | | | | 588,863 | |
| | | | | | | | |
| | | | | | | 80,136,439 | |
Beverages — 1.8% | |
Brown-Forman Corp., Class B | | | 14,835 | | | | 727,063 | |
Coca-Cola Co. (The) | | | 217,073 | | | | 9,520,822 | |
| | | | | | | | |
Security | | Shares | | | Value | |
Beverages (continued) | |
Constellation Brands, Inc., Class A | | | 9,490 | | | $ | 2,077,076 | |
Molson Coors Brewing Co., Class B | | | 10,633 | | | | 723,469 | |
Monster Beverage Corp.(b) | | | 23,418 | | | | 1,341,852 | |
PepsiCo, Inc. | | | 80,358 | | | | 8,748,576 | |
| | | | | | | | |
| | | | | | | 23,138,858 | |
Biotechnology — 2.5% | |
AbbVie, Inc. | | | 85,941 | | | | 7,962,434 | |
Alexion Pharmaceuticals, Inc.(b) | | | 12,604 | | | | 1,564,786 | |
Amgen, Inc. | | | 37,747 | | | | 6,967,719 | |
Biogen, Inc.(b) | | | 11,962 | | | | 3,471,851 | |
Celgene Corp.(b) | | | 40,043 | | | | 3,180,215 | |
Gilead Sciences, Inc. | | | 73,773 | | | | 5,226,079 | |
Incyte Corp.(b) | | | 10,091 | | | | 676,097 | |
Regeneron Pharmaceuticals, Inc.(b) | | | 4,375 | | | | 1,509,331 | |
Vertex Pharmaceuticals, Inc.(b) | | | 14,435 | | | | 2,453,373 | |
| | | | | | | | |
| | | | | | | 33,011,885 | |
Building Products — 0.3% | |
Allegion plc | | | 5,476 | | | | 423,623 | |
AO Smith Corp. | | | 8,383 | | | | 495,854 | |
Fortune Brands Home & Security, Inc. | | | 8,062 | | | | 432,849 | |
Johnson Controls International plc | | | 52,335 | | | | 1,750,606 | |
Masco Corp. | | | 17,898 | | | | 669,743 | |
| | | | | | | | |
| | | | | | | 3,772,675 | |
Capital Markets — 3.0% | | | | | | |
Affiliated Managers Group, Inc. | | | 3,122 | | | | 464,148 | |
Ameriprise Financial, Inc. | | | 8,109 | | | | 1,134,287 | |
Bank of New York Mellon Corp. (The) | | | 57,240 | | | | 3,086,953 | |
BlackRock, Inc.* | | | 6,990 | | | | 3,488,289 | |
Cboe Global Markets, Inc. | | | 6,476 | | | | 673,957 | |
Charles Schwab Corp. (The) | | | 68,019 | | | | 3,475,771 | |
CME Group, Inc. | | | 19,307 | | | | 3,164,803 | |
E*TRADE Financial Corp.(b) | | | 14,654 | | | | 896,239 | |
Franklin Resources, Inc. | | | 18,593 | | | | 595,906 | |
Goldman Sachs Group, Inc. (The) | | | 19,895 | | | | 4,388,240 | |
Intercontinental Exchange, Inc. | | | 32,895 | | | | 2,419,427 | |
Invesco Ltd.(a) | | | 23,252 | | | | 617,573 | |
Jefferies Financial Services, Inc. | | | 18,043 | | | | 410,298 | |
Moody’s Corp. | | | 9,463 | | | | 1,614,009 | |
Morgan Stanley | | | 77,148 | | | | 3,656,815 | |
MSCI, Inc. | | | 5,000 | | | | 827,150 | |
Nasdaq, Inc. | | | 6,698 | | | | 611,327 | |
Northern Trust Corp. | | | 12,069 | | | | 1,241,779 | |
Raymond James Financial, Inc. | | | 7,434 | | | | 664,228 | |
S&P Global, Inc. | | | 14,248 | | | | 2,905,025 | |
State Street Corp. | | | 20,732 | | | | 1,929,942 | |
T. Rowe Price Group, Inc. | | | 13,658 | | | | 1,585,557 | |
| | | | | | | | |
| | | | | | | 39,851,723 | |
Chemicals — 1.8% | | | | | | |
Air Products & Chemicals, Inc. | | | 12,343 | | | | 1,922,175 | |
Albemarle Corp.(a) | | | 6,364 | | | | 600,316 | |
CF Industries Holdings, Inc. | | | 13,416 | | | | 595,670 | |
DowDuPont, Inc. | | | 131,506 | | | | 8,668,876 | |
Eastman Chemical Co. | | | 7,874 | | | | 787,085 | |
Ecolab, Inc. | | | 14,748 | | | | 2,069,587 | |
FMC Corp. | | | 7,716 | | | | 688,344 | |
International Flavors & Fragrances, Inc. | | | 4,503 | | | | 558,192 | |
LyondellBasell Industries NV, Class A | | | 18,263 | | | | 2,006,191 | |
Mosaic Co. (The) | | | 20,179 | | | | 566,021 | |
PPG Industries, Inc. | | | 14,047 | | | | 1,457,095 | |
Praxair, Inc. | | | 16,245 | | | | 2,569,147 | |
Sherwin-Williams Co. (The) | | | 4,675 | | | | 1,905,390 | |
| | | | | | | | |
| | | | | | | 24,394,089 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 5 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock S&P 500 Index V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Commercial Services & Supplies — 0.3% | |
Cintas Corp. | | | 4,883 | | | $ | 903,697 | |
Copart, Inc.(b) | | | 11,450 | | | | 647,612 | |
Republic Services, Inc. | | | 12,890 | | | | 881,160 | |
Stericycle, Inc.(b) | | | 4,902 | | | | 320,052 | |
Waste Management, Inc. | | | 22,459 | | | | 1,826,815 | |
| | | | | | | | |
| | | | | | | 4,579,336 | |
Communications Equipment — 1.0% | | | | | | |
Cisco Systems, Inc. | | | 266,823 | | | | 11,481,394 | |
F5 Networks, Inc.(b) | | | 3,416 | | | | 589,089 | |
Juniper Networks, Inc. | | | 19,668 | | | | 539,297 | |
Motorola Solutions, Inc.(a) | | | 9,169 | | | | 1,066,996 | |
| | | | | | | | |
| | | | | | | 13,676,776 | |
Construction & Engineering — 0.1% | | | | | | |
Fluor Corp. | | | 8,020 | | | | 391,215 | |
Jacobs Engineering Group, Inc. | | | 6,930 | | | | 439,986 | |
Quanta Services, Inc.(b) | | | 8,890 | | | | 296,926 | |
| | | | | | | | |
| | | | | | | 1,128,127 | |
Construction Materials — 0.1% | |
Martin Marietta Materials, Inc. | | | 3,548 | | | | 792,375 | |
Vulcan Materials Co. | | | 7,567 | | | | 976,597 | |
| | | | | | | | |
| | | | | | | 1,768,972 | |
Consumer Finance — 0.7% | |
American Express Co. | | | 40,390 | | | | 3,958,220 | |
Capital One Financial Corp. | | | 27,482 | | | | 2,525,596 | |
Discover Financial Services | | | 19,651 | | | | 1,383,627 | |
Synchrony Financial | | | 40,423 | | | | 1,349,319 | |
| | | | | | | | |
| | | | | | | 9,216,762 | |
Containers & Packaging — 0.3% | | | | | | |
Avery Dennison Corp. | | | 5,074 | | | | 518,055 | |
Ball Corp. | | | 19,848 | | | | 705,597 | |
International Paper Co. | | | 23,330 | | | | 1,215,026 | |
Packaging Corp. of America | | | 5,435 | | | | 607,579 | |
Sealed Air Corp.(a) | | | 8,986 | | | | 381,456 | |
WestRock Co. | | | 14,356 | | | | 818,579 | |
| | | | | | | | |
| | | | | | | 4,246,292 | |
Distributors — 0.1% | |
Genuine Parts Co. | | | 8,376 | | | | 768,833 | |
LKQ Corp.(b) | | | 17,811 | | | | 568,171 | |
| | | | | | | | |
| | | | | | | 1,337,004 | |
Diversified Consumer Services — 0.0% | | | | | | |
H&R Block, Inc. | | | 12,049 | | | | 274,476 | |
| | | | | | | | |
Diversified Financial Services — 1.5% | | | | | | |
Berkshire Hathaway, Inc., Class B(b) | | | 109,180 | | | | 20,378,447 | |
| | | | | | | | |
Diversified Telecommunication Services — 2.0% | |
AT&T, Inc. | | | 410,677 | | | | 13,186,839 | |
CenturyLink, Inc.(a) | | | 55,358 | | | | 1,031,873 | |
Verizon Communications, Inc.(a) | | | 234,287 | | | | 11,786,979 | |
| | | | | | | | |
| | | | | | | 26,005,691 | |
Electric Utilities — 1.8% | | | | | | |
Alliant Energy Corp. | | | 13,313 | | | | 563,406 | |
American Electric Power Co., Inc. | | | 28,042 | | | | 1,941,909 | |
Duke Energy Corp. | | | 39,815 | | | | 3,148,570 | |
Edison International(a) | | | 18,475 | | | | 1,168,913 | |
Entergy Corp. | | | 10,392 | | | | 839,570 | |
Evergy, Inc. | | | 15,188 | | | | 852,806 | |
Eversource Energy | | | 17,948 | | | | 1,051,932 | |
Exelon Corp. | | | 54,919 | | | | 2,339,549 | |
FirstEnergy Corp.(a) | | | 25,360 | | | | 910,678 | |
NextEra Energy, Inc. | | | 26,863 | | | | 4,486,927 | |
| | | | | | | | |
Security | | Shares | | | Value | |
Electric Utilities (continued) | | | | | | |
PG&E Corp. | | | 29,349 | | | $ | 1,249,093 | |
Pinnacle West Capital Corp. | | | 6,433 | | | | 518,242 | |
PPL Corp.(a) | | | 39,281 | | | | 1,121,473 | |
Southern Co. (The) | | | 57,334 | | | | 2,655,138 | |
Xcel Energy, Inc. | | | 28,212 | | | | 1,288,724 | |
| | | | | | | | |
| | | | | | | 24,136,930 | |
Electrical Equipment — 0.5% | | | | | | |
AMETEK, Inc. | | | 13,058 | | | | 942,265 | |
Eaton Corp. plc | | | 24,563 | | | | 1,835,839 | |
Emerson Electric Co. | | | 35,582 | | | | 2,460,139 | |
Rockwell Automation, Inc. | | | 7,092 | | | | 1,178,903 | |
| | | | | | | | |
| | | | | | | 6,417,146 | |
Electronic Equipment, Instruments & Components — 0.4% | |
Amphenol Corp., Class A | | | 16,905 | | | | 1,473,271 | |
Corning, Inc. | | | 46,752 | | | | 1,286,147 | |
FLIR Systems, Inc. | | | 7,992 | | | | 415,344 | |
IPG Photonics Corp.(b) | | | 2,166 | | | | 477,885 | |
TE Connectivity Ltd. | | | 19,831 | | | | 1,785,980 | |
| | | | | | | | |
| | | | | | | 5,438,627 | |
Energy Equipment & Services — 0.8% | | | | | | |
Baker Hughes a GE Co. | | | 23,310 | | | | 769,929 | |
Halliburton Co. | | | 49,590 | | | | 2,234,525 | |
Helmerich & Payne, Inc.(a) | | | 6,263 | | | | 399,329 | |
National Oilwell Varco, Inc.(a) | | | 21,707 | | | | 942,084 | |
Schlumberger Ltd. | | | 78,535 | | | | 5,264,201 | |
TechnipFMC plc | | | 24,847 | | | | 788,644 | |
| | | | | | | | |
| | | | | | | 10,398,712 | |
Equity Real Estate Investment Trusts (REITs) — 2.8% | |
Alexandria Real Estate Equities, Inc. | | | 5,773 | | | | 728,380 | |
American Tower Corp. | | | 25,048 | | | | 3,611,170 | |
Apartment Investment & Management Co., Class A | | | 9,043 | | | | 382,519 | |
AvalonBay Communities, Inc. | | | 7,724 | | | | 1,327,678 | |
Boston Properties, Inc. | | | 8,700 | | | | 1,091,154 | |
Crown Castle International Corp. | | | 23,506 | | | | 2,534,417 | |
Digital Realty Trust, Inc. | | | 11,597 | | | | 1,293,993 | |
Duke Realty Corp. | | | 20,543 | | | | 596,363 | |
Equinix, Inc. | | | 4,498 | | | | 1,933,645 | |
Equity Residential | | | 20,790 | | | | 1,324,115 | |
Essex Property Trust, Inc. | | | 3,771 | | | | 901,533 | |
Extra Space Storage, Inc.(a) | | | 7,243 | | | | 722,924 | |
Federal Realty Investment Trust | | | 4,207 | | | | 532,396 | |
GGP, Inc. | | | 36,281 | | | | 741,221 | |
HCP, Inc. | | | 27,020 | | | | 697,656 | |
Host Hotels & Resorts, Inc. | | | 41,643 | | | | 877,418 | |
Iron Mountain, Inc. | | | 16,057 | | | | 562,156 | |
Kimco Realty Corp. | | | 24,487 | | | | 416,034 | |
Macerich Co. (The) | | | 6,244 | | | | 354,847 | |
Mid-America Apartment Communities, Inc. | | | 6,541 | | | | 658,483 | |
Prologis, Inc. | | | 30,206 | | | | 1,984,232 | |
Public Storage | | | 8,495 | | | | 1,927,176 | |
Realty Income Corp. | | | 15,796 | | | | 849,667 | |
Regency Centers Corp. | | | 8,546 | | | | 530,536 | |
SBA Communications Corp.(b) | | | 6,428 | | | | 1,061,391 | |
Simon Property Group, Inc. | | | 17,553 | | | | 2,987,345 | |
SL Green Realty Corp. | | | 4,925 | | | | 495,110 | |
UDR, Inc. | | | 15,463 | | | | 580,481 | |
Ventas, Inc. | | | 20,120 | | | | 1,145,834 | |
Vornado Realty Trust | | | 9,859 | | | | 728,777 | |
Welltower, Inc. | | | 20,889 | | | | 1,309,531 | |
Weyerhaeuser Co. | | | 42,745 | | | | 1,558,483 | |
| | | | | | | | |
| | | | | | | 36,446,665 | |
| | |
6 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock S&P 500 Index V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Food & Staples Retailing — 1.4% | |
Costco Wholesale Corp. | | | 24,863 | | | $ | 5,195,870 | |
Kroger Co. (The) | | | 46,050 | | | | 1,310,122 | |
Sysco Corp. | | | 27,271 | | | | 1,862,337 | |
Walgreens Boots Alliance, Inc. | | | 48,210 | | | | 2,893,323 | |
Walmart, Inc. | | | 82,027 | | | | 7,025,612 | |
| | | | | | | | |
| | | | | | | 18,287,264 | |
Food Products — 1.1% | |
Archer-Daniels-Midland Co. | | | 31,726 | | | | 1,454,003 | |
Campbell Soup Co.(a) | | | 11,070 | | | | 448,778 | |
Conagra Brands, Inc. | | | 21,965 | | | | 784,809 | |
General Mills, Inc. | | | 33,370 | | | | 1,476,956 | |
Hershey Co. (The) | | | 8,047 | | | | 748,854 | |
Hormel Foods Corp.(a) | | | 15,535 | | | | 578,057 | |
JM Smucker Co. (The) | | | 6,525 | | | | 701,307 | |
Kellogg Co. | | | 14,216 | | | | 993,272 | |
Kraft Heinz Co. (The) | | | 33,575 | | | | 2,109,182 | |
McCormick & Co., Inc. (Non-Voting)(a) | | | 6,901 | | | | 801,137 | |
Mondelez International, Inc., Class A | | | 83,682 | | | | 3,430,962 | |
Tyson Foods, Inc., Class A | | | 16,838 | | | | 1,159,296 | |
| | | | | | | | |
| | | | | | | 14,686,613 | |
Health Care Equipment & Supplies — 3.1% | |
Abbott Laboratories | | | 99,310 | | | | 6,056,917 | |
ABIOMED, Inc.(b) | | | 2,417 | | | | 988,674 | |
Align Technology, Inc.(b) | | | 4,085 | | | | 1,397,642 | |
Baxter International, Inc. | | | 27,808 | | | | 2,053,343 | |
Becton Dickinson and Co. | | | 15,132 | | | | 3,625,022 | |
Boston Scientific Corp.(b) | | | 78,004 | | | | 2,550,731 | |
Cooper Cos., Inc. (The) | | | 2,818 | | | | 663,498 | |
Danaher Corp. | | | 34,795 | | | | 3,433,570 | |
DENTSPLY SIRONA, Inc. | | | 13,201 | | | | 577,808 | |
Edwards Lifesciences Corp.(b) | | | 11,923 | | | | 1,735,631 | |
Hologic, Inc.(b) | | | 15,221 | | | | 605,035 | |
IDEXX Laboratories, Inc.(b) | | | 4,945 | | | | 1,077,713 | |
Intuitive Surgical, Inc.(b) | | | 6,416 | | | | 3,069,928 | |
Medtronic plc | | | 76,724 | | | | 6,568,342 | |
ResMed, Inc. | | | 8,062 | | | | 835,062 | |
Stryker Corp. | | | 18,228 | | | | 3,077,980 | |
Varian Medical Systems, Inc.(b) | | | 5,249 | | | | 596,916 | |
Zimmer Biomet Holdings, Inc. | | | 11,526 | | | | 1,284,457 | |
| | | | | | | | |
| | | | | | | 40,198,269 | |
Health Care Providers & Services — 3.1% | |
Aetna, Inc. | | | 18,527 | | | | 3,399,704 | |
AmerisourceBergen Corp. | | | 9,195 | | | | 784,058 | |
Anthem, Inc. | | | 14,451 | | | | 3,439,771 | |
Cardinal Health, Inc. | | | 17,496 | | | | 854,330 | |
Centene Corp.(b) | | | 11,568 | | | | 1,425,293 | |
Cigna Corp.(a) | | | 13,760 | | | | 2,338,512 | |
CVS Health Corp. | | | 57,545 | | | | 3,703,021 | |
DaVita, Inc.(b) | | | 7,886 | | | | 547,604 | |
Envision Healthcare Corp.(a)(b) | | | 6,979 | | | | 307,146 | |
Express Scripts Holding Co.(b) | | | 31,857 | | | | 2,459,679 | |
HCA Healthcare, Inc. | | | 15,749 | | | | 1,615,847 | |
Henry Schein, Inc.(b) | | | 8,796 | | | | 638,941 | |
Humana, Inc. | | | 7,790 | | | | 2,318,538 | |
Laboratory Corp. of America Holdings(b) | | | 5,820 | | | | 1,044,865 | |
McKesson Corp. | | | 11,519 | | | | 1,536,635 | |
Quest Diagnostics, Inc. | | | 7,614 | | | | 837,083 | |
UnitedHealth Group, Inc. | | | 54,548 | | | | 13,382,806 | |
Universal Health Services, Inc., Class B | | | 5,013 | | | | 558,649 | |
| | | | | | | | |
| | | | | | | 41,192,482 | |
Health Care Technology — 0.1% | |
Cerner Corp.(b) | | | 17,872 | | | | 1,068,567 | |
| | | | | | | | |
| | | | | | | | |
Security | | Shares | | | Value | |
Hotels, Restaurants & Leisure — 1.6% | |
Carnival Corp. | | | 23,078 | | | $ | 1,322,600 | |
Chipotle Mexican Grill, Inc.(b) | | | 1,360 | | | | 586,663 | |
Darden Restaurants, Inc. | | | 7,102 | | | | 760,340 | |
Hilton Worldwide Holdings, Inc. | | | 15,686 | | | | 1,241,704 | |
Marriott International, Inc., Class A | | | 16,801 | | | | 2,127,007 | |
McDonald’s Corp. | | | 44,501 | | | | 6,972,862 | |
MGM Resorts International | | | 28,271 | | | | 820,707 | |
Norwegian Cruise Line Holdings Ltd.(b) | | | 11,819 | | | | 558,448 | |
Royal Caribbean Cruises Ltd. | | | 9,670 | | | | 1,001,812 | |
Starbucks Corp. | | | 78,530 | | | | 3,836,190 | |
Wynn Resorts Ltd. | | | 4,826 | | | | 807,583 | |
Yum! Brands, Inc.(a) | | | 18,174 | | | | 1,421,570 | |
| | | | | | | | |
| | | | | | | 21,457,486 | |
Household Durables — 0.4% | |
DR Horton, Inc.(a) | | | 19,518 | | | | 800,238 | |
Garmin Ltd. | | | 6,360 | | | | 387,960 | |
Leggett & Platt, Inc. | | | 7,605 | | | | 339,487 | |
Lennar Corp., Class A | | | 15,639 | | | | 821,048 | |
Mohawk Industries, Inc.(b) | | | 3,608 | | | | 773,086 | |
Newell Brands, Inc. | | | 27,765 | | | | 716,059 | |
PulteGroup, Inc.(a) | | | 15,233 | | | | 437,949 | |
Whirlpool Corp. | | | 3,613 | | | | 528,329 | |
| | | | | | | | |
| | | | | | | 4,804,156 | |
Household Products — 1.4% | |
Church & Dwight Co., Inc. | | | 14,067 | | | | 747,802 | |
Clorox Co. (The) | | | 7,400 | | | | 1,000,850 | |
Colgate-Palmolive Co. | | | 49,371 | | �� | | 3,199,734 | |
Kimberly-Clark Corp. | | | 19,711 | | | | 2,076,357 | |
Procter & Gamble Co. (The) | | | 142,514 | | | | 11,124,643 | |
| | | | | | | | |
| | | | | | | 18,149,386 | |
Independent Power and Renewable Electricity Producers — 0.1% | |
AES Corp. | | | 38,010 | | | | 509,714 | |
NRG Energy, Inc. | | | 17,357 | | | | 532,860 | |
| | | | | | | | |
| | | | | | | 1,042,574 | |
Industrial Conglomerates — 1.6% | |
3M Co. | | | 33,650 | | | | 6,619,628 | |
General Electric Co. | | | 491,845 | | | | 6,694,010 | |
Honeywell International, Inc. | | | 42,372 | | | | 6,103,687 | |
Roper Technologies, Inc. | | | 5,793 | | | | 1,598,347 | |
| | | | | | | | |
| | | | | | | 21,015,672 | |
Insurance — 2.4% | |
Aflac, Inc. | | | 43,718 | | | | 1,880,748 | |
Allstate Corp. (The) | | | 19,846 | | | | 1,811,345 | |
American International Group, Inc. | | | 50,713 | | | | 2,688,803 | |
Aon plc | | | 13,787 | | | | 1,891,163 | |
Arthur J. Gallagher & Co. | | | 10,430 | | | | 680,870 | |
Assurant, Inc.(a) | | | 3,035 | | | | 314,092 | |
Brighthouse Financial, Inc.(b) | | | 5,505 | | | | 220,585 | |
Chubb Ltd. | | | 26,361 | | | | 3,348,374 | |
Cincinnati Financial Corp.(a) | | | 8,595 | | | | 574,662 | |
Everest Re Group Ltd. | | | 2,352 | | | | 542,089 | |
Hartford Financial Services Group, Inc. (The) | | | 20,189 | | | | 1,032,264 | |
Lincoln National Corp. | | | 12,487 | | | | 777,316 | |
Loews Corp. | | | 14,819 | | | | 715,461 | |
Marsh & McLennan Cos., Inc.(a) | | | 28,790 | | | | 2,359,916 | |
MetLife, Inc.(a) | | | 57,786 | | | | 2,519,470 | |
Principal Financial Group, Inc. | | | 15,383 | | | | 814,530 | |
Progressive Corp. (The) | | | 33,167 | | | | 1,961,828 | |
Prudential Financial, Inc. | | | 23,601 | | | | 2,206,930 | |
Torchmark Corp. | | | 6,118 | | | | 498,066 | |
Travelers Cos., Inc. (The) | | | 15,360 | | | | 1,879,142 | |
Unum Group | | | 12,764 | | | | 472,140 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 7 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock S&P 500 Index V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Insurance (continued) | | | | | | |
Willis Towers Watson plc | | | 7,451 | | | $ | 1,129,572 | |
XL Group Ltd. | | | 14,622 | | | | 818,101 | |
| | | | | | | | |
| | | | | | | 31,137,467 | |
Internet & Direct Marketing Retail — 4.2% | |
Amazon.com, Inc.(b) | | | 22,828 | | | | 38,803,034 | |
Booking Holdings, Inc.(b) | | | 2,729 | | | | 5,531,929 | |
Expedia Group, Inc.(a) | | | 6,912 | | | | 830,753 | |
Netflix, Inc.(b) | | | 24,630 | | | | 9,640,921 | |
TripAdvisor, Inc.(a)(b) | | | 6,287 | | | | 350,249 | |
| | | | | | | | |
| | | | | | | 55,156,886 | |
Internet Software & Services — 5.3%(b) | |
Akamai Technologies, Inc. | | | 9,777 | | | | 715,970 | |
Alphabet, Inc., Class A | | | 16,908 | | | | 19,092,345 | |
Alphabet, Inc., Class C | | | 17,233 | | | | 19,225,996 | |
eBay, Inc. | | | 52,660 | | | | 1,909,452 | |
Facebook, Inc., Class A | | | 135,975 | | | | 26,422,662 | |
Twitter, Inc. | | | 37,082 | | | | 1,619,371 | |
VeriSign, Inc. | | | 5,382 | | | | 739,594 | |
| | | | | | | | |
| | | | | | | 69,725,390 | |
IT Services — 4.5% | |
Accenture plc, Class A | | | 36,454 | | | | 5,963,510 | |
Alliance Data Systems Corp. | | | 2,776 | | | | 647,363 | |
Automatic Data Processing, Inc. | | | 25,001 | | | | 3,353,634 | |
Broadridge Financial Solutions, Inc. | | | 6,596 | | | | 759,200 | |
Cognizant Technology Solutions Corp., Class A | | | 33,205 | | | | 2,622,863 | |
DXC Technology Co. | | | 16,235 | | | | 1,308,703 | |
Fidelity National Information Services, Inc. | | | 18,667 | | | | 1,979,262 | |
Fiserv, Inc.(b) | | | 23,169 | | | | 1,716,591 | |
FleetCor Technologies, Inc.(b) | | | 5,086 | | | | 1,071,366 | |
Gartner, Inc.(a)(b) | | | 5,224 | | | | 694,270 | |
Global Payments, Inc. | | | 8,957 | | | | 998,616 | |
International Business Machines Corp. | | | 48,376 | | | | 6,758,127 | |
Mastercard, Inc., Class A | | | 52,016 | | | | 10,222,184 | |
Paychex, Inc. | | | 17,980 | | | | 1,228,933 | |
PayPal Holdings, Inc.(b) | | | 63,120 | | | | 5,256,002 | |
Total System Services, Inc.(a) | | | 9,386 | | | | 793,305 | |
Visa, Inc., Class A | | | 101,210 | | | | 13,405,264 | |
Western Union Co. (The)(a) | | | 26,432 | | | | 537,363 | |
| | | | | | | | |
| | | | | | | 59,316,556 | |
Leisure Products — 0.1%(a) | |
Hasbro, Inc. | | | 6,501 | | | | 600,107 | |
Mattel, Inc.(b) | | | 19,811 | | | | 325,297 | |
| | | | | | | | |
| | | | | | | 925,404 | |
Life Sciences Tools & Services — 0.9% | |
Agilent Technologies, Inc. | | | 17,883 | | | | 1,105,885 | |
Illumina, Inc.(b) | | | 8,334 | | | | 2,327,603 | |
IQVIA Holdings, Inc.(b) | | | 9,173 | | | | 915,649 | |
Mettler-Toledo International, Inc.(b) | | | 1,457 | | | | 843,064 | |
PerkinElmer, Inc.(a) | | | 6,357 | | | | 465,523 | |
Thermo Fisher Scientific, Inc. | | | 22,786 | | | | 4,719,892 | |
Waters Corp.(b) | | | 4,504 | | | | 871,929 | |
| | | | | | | | |
| | | | | | | 11,249,545 | |
Machinery — 1.5% | |
Caterpillar, Inc. | | | 33,870 | | | | 4,595,143 | |
Cummins, Inc. | | | 8,658 | | | | 1,151,514 | |
Deere & Co. | | | 18,367 | | | | 2,567,707 | |
Dover Corp.(a) | | | 8,838 | | | | 646,942 | |
Flowserve Corp.(a) | | | 7,520 | | | | 303,808 | |
Fortive Corp. | | | 17,341 | | | | 1,337,164 | |
Illinois Tool Works, Inc. | | | 17,304 | | | | 2,397,296 | |
Ingersoll-Rand plc | | | 13,864 | | | | 1,244,017 | |
| | | | | | | | |
Security | | Shares | | | Value | |
Machinery (continued) | |
PACCAR, Inc. | | | 19,878 | | | $ | 1,231,641 | |
Parker-Hannifin Corp.(a) | | | 7,458 | | | | 1,162,329 | |
Pentair plc | | | 9,538 | | | | 401,359 | |
Snap-on, Inc. | | | 3,267 | | | | 525,072 | |
Stanley Black & Decker, Inc. | | | 8,643 | | | | 1,147,877 | |
Xylem, Inc. | | | 10,184 | | | | 686,198 | |
| | | | | | | | |
| | | | | | | 19,398,067 | |
Media — 2.2% | |
CBS Corp. (Non-Voting), Class B | | | 19,364 | | | | 1,088,644 | |
Charter Communications, Inc., Class A(b) | | | 10,478 | | | | 3,072,255 | |
Comcast Corp., Class A | | | 260,262 | | | | 8,539,196 | |
Discovery, Inc., Class A(a)(b) | | | 8,841 | | | | 243,127 | |
Discovery, Inc., Class C(b) | | | 19,045 | | | | 485,648 | |
DISH Network Corp., Class A(b) | | | 13,123 | | | | 441,064 | |
Interpublic Group of Cos., Inc. (The) | | | 22,166 | | | | 519,571 | |
News Corp., Class A | | | 22,041 | | | | 341,635 | |
News Corp., Class B | | | 6,983 | | | | 110,681 | |
Omnicom Group, Inc.(a) | | | 12,806 | | | | 976,714 | |
Twenty-First Century Fox, Inc., Class A | | | 59,650 | | | | 2,964,008 | |
Twenty-First Century Fox, Inc., Class B | | | 24,928 | | | | 1,228,203 | |
Viacom, Inc., Class B | | | 20,156 | | | | 607,905 | |
Walt Disney Co. (The) | | | 84,173 | | | | 8,822,172 | |
| | | | | | | | |
| | | | | | | 29,440,823 | |
Metals & Mining — 0.3% | |
Freeport-McMoRan, Inc.(b) | | | 76,090 | | | | 1,313,313 | |
Newmont Mining Corp. | | | 30,543 | | | | 1,151,777 | |
Nucor Corp. | | | 17,979 | | | | 1,123,687 | |
| | | | | | | | |
| | | | | | | 3,588,777 | |
Multiline Retail — 0.5% | |
Dollar General Corp. | | | 14,231 | | | | 1,403,176 | |
Dollar Tree, Inc.(b) | | | 13,429 | | | | 1,141,465 | |
Kohl’s Corp. | | | 9,644 | | | | 703,048 | |
Macy’s, Inc.(a) | | | 17,539 | | | | 656,485 | |
Nordstrom, Inc.(a) | | | 6,725 | | | | 348,220 | |
Target Corp. | | | 30,272 | | | | 2,304,305 | |
| | | | | | | | |
| | | | | | | 6,556,699 | |
Multi-Utilities — 0.9% | |
Ameren Corp. | | | 13,727 | | | | 835,288 | |
CenterPoint Energy, Inc. | | | 24,823 | | | | 687,845 | |
CMS Energy Corp. | | | 16,257 | | | | 768,631 | |
Consolidated Edison, Inc. | | | 17,275 | | | | 1,347,105 | |
Dominion Energy, Inc. | | | 36,933 | | | | 2,518,092 | |
DTE Energy Co. | | | 10,171 | | | | 1,054,021 | |
NiSource, Inc. | | | 19,394 | | | | 509,674 | |
Public Service Enterprise Group, Inc. | | | 28,698 | | | | 1,553,710 | |
SCANA Corp. | | | 8,206 | | | | 316,095 | |
Sempra Energy | | | 14,939 | | | | 1,734,567 | |
WEC Energy Group, Inc.(a) | | | 17,405 | | | | 1,125,233 | |
| | | | | | | | |
| | | | | | | 12,450,261 | |
Oil, Gas & Consumable Fuels — 5.5% | |
Anadarko Petroleum Corp. | | | 29,144 | | | | 2,134,798 | |
Andeavor | | | 7,827 | | | | 1,026,746 | |
Apache Corp.(a) | | | 21,798 | | | | 1,019,057 | |
Cabot Oil & Gas Corp. | | | 25,399 | | | | 604,496 | |
Chevron Corp. | | | 108,377 | | | | 13,702,104 | |
Cimarex Energy Co. | | | 5,487 | | | | 558,247 | |
Concho Resources, Inc.(b) | | | 8,445 | | | | 1,168,366 | |
ConocoPhillips | | | 66,342 | | | | 4,618,730 | |
Devon Energy Corp. | | | 29,739 | | | | 1,307,326 | |
EOG Resources, Inc. | | | 32,832 | | | | 4,085,286 | |
EQT Corp. | | | 14,056 | | | | 775,610 | |
Exxon Mobil Corp. | | | 240,139 | | | | 19,866,699 | |
| | |
8 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock S&P 500 Index V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | |
Security | | Shares | | | Value | |
Oil, Gas & Consumable Fuels (continued) | | | | | | |
Hess Corp. | | | 14,692 | | | $ | 982,748 | |
HollyFrontier Corp. | | | 9,975 | | | | 682,589 | |
Kinder Morgan, Inc. | | | 106,253 | | | | 1,877,491 | |
Marathon Oil Corp. | | | 48,568 | | | | 1,013,129 | |
Marathon Petroleum Corp. | | | 26,235 | | | | 1,840,648 | |
Newfield Exploration Co.(b) | | | 11,489 | | | | 347,542 | |
Noble Energy, Inc. | | | 27,128 | | | | 957,076 | |
Occidental Petroleum Corp. | | | 43,434 | | | | 3,634,557 | |
ONEOK, Inc. | | | 23,295 | | | | 1,626,690 | |
Phillips 66 | | | 23,865 | | | | 2,680,278 | |
Pioneer Natural Resources Co. | | | 9,639 | | | | 1,824,084 | |
Valero Energy Corp. | | | 24,486 | | | | 2,713,783 | |
Williams Cos., Inc. (The) | | | 46,361 | | | | 1,256,847 | |
| | | | | | | | |
| | | | | | | 72,304,927 | |
Personal Products — 0.2% | |
Coty, Inc., Class A(a) | | | 27,174 | | | | 383,153 | |
Estee Lauder Cos., Inc. (The), Class A | | | 12,747 | | | | 1,818,870 | |
| | | | | | | | |
| | | | | | | 2,202,023 | |
Pharmaceuticals — 4.3% | |
Allergan plc | | | 19,175 | | | | 3,196,856 | |
Bristol-Myers Squibb Co. | | | 92,634 | | | | 5,126,365 | |
Eli Lilly & Co. | | | 53,987 | | | | 4,606,711 | |
Johnson & Johnson | | | 152,114 | | | | 18,457,513 | |
Merck & Co., Inc. | | | 152,507 | | | | 9,257,175 | |
Mylan NV(b) | | | 29,116 | | | | 1,052,252 | |
Nektar Therapeutics(b) | | | 9,227 | | | | 450,554 | |
Perrigo Co. plc | | | 7,176 | | | | 523,202 | |
Pfizer, Inc. | | | 332,695 | | | | 12,070,175 | |
Zoetis, Inc. | | | 27,278 | | | | 2,323,813 | |
| | | | | | | | |
| | | | | | | 57,064,616 | |
Professional Services — 0.3% | |
Equifax, Inc. | | | 6,804 | | | | 851,248 | |
IHS Markit Ltd.(b) | | | 19,931 | | | | 1,028,240 | |
Nielsen Holdings plc | | | 19,264 | | | | 595,836 | |
Robert Half International, Inc. | | | 7,162 | | | | 466,246 | |
Verisk Analytics, Inc.(b) | | | 8,865 | | | | 954,229 | |
| | | | | | | | |
| | | | | | | 3,895,799 | |
Real Estate Management & Development — 0.1% | |
CBRE Group, Inc., Class A(b) | | | 17,086 | | | | 815,686 | |
| | | | | | | | |
Road & Rail — 1.0% | | | | | | |
CSX Corp. | | | 49,671 | | | | 3,168,016 | |
JB Hunt Transport Services, Inc. | | | 4,926 | | | | 598,755 | |
Kansas City Southern | | | 5,940 | | | | 629,403 | |
Norfolk Southern Corp. | | | 16,047 | | | | 2,421,011 | |
Union Pacific Corp. | | | 43,919 | | | | 6,222,444 | |
| | | | | | | | |
| | | | | | | 13,039,629 | |
Semiconductors & Semiconductor Equipment — 4.0% | |
Advanced Micro Devices, Inc.(a)(b) | | | 47,236 | | | | 708,068 | |
Analog Devices, Inc. | | | 20,980 | | | | 2,012,402 | |
Applied Materials, Inc. | | | 57,163 | | | | 2,640,359 | |
Broadcom, Inc. | | | 22,758 | | | | 5,522,001 | |
Intel Corp. | | | 264,198 | | | | 13,133,283 | |
KLA-Tencor Corp. | | | 8,835 | | | | 905,852 | |
Lam Research Corp. | | | 9,284 | | | | 1,604,739 | |
Microchip Technology, Inc.(a) | | | 13,288 | | | | 1,208,544 | |
Micron Technology, Inc.(b) | | | 65,726 | | | | 3,446,671 | |
NVIDIA Corp. | | | 34,414 | | | | 8,152,677 | |
Qorvo, Inc.(b) | | | 7,235 | | | | 580,030 | |
QUALCOMM, Inc. | | | 84,024 | | | | 4,715,427 | |
Skyworks Solutions, Inc. | | | 10,309 | | | | 996,365 | |
Texas Instruments, Inc. | | | 55,553 | | | | 6,124,718 | |
| | | | | | | | |
Security | | Shares | | | Value | |
Semiconductors & Semiconductor Equipment (continued) | |
Xilinx, Inc.(a) | | | 14,090 | | | $ | 919,513 | |
| | | | | | | | |
| | | | | | | 52,670,649 | |
Software — 6.0% | |
Activision Blizzard, Inc. | | | 43,024 | | | | 3,283,592 | |
Adobe Systems, Inc.(b) | | | 27,895 | | | | 6,801,080 | |
ANSYS, Inc.(b) | | | 4,753 | | | | 827,878 | |
Autodesk, Inc.(b) | | | 12,477 | | | | 1,635,610 | |
CA, Inc. | | | 18,001 | | | | 641,736 | |
Cadence Design Systems, Inc.(b) | | | 16,274 | | | | 704,827 | |
Citrix Systems, Inc.(b) | | | 7,412 | | | | 777,074 | |
Electronic Arts, Inc.(b) | | | 17,355 | | | | 2,447,402 | |
Intuit, Inc. | | | 13,787 | | | | 2,816,753 | |
Microsoft Corp. | | | 435,551 | | | | 42,949,684 | |
Oracle Corp. | | | 169,197 | | | | 7,454,820 | |
Red Hat, Inc.(b) | | | 10,030 | | | | 1,347,731 | |
salesforce.com, Inc.(b) | | | 39,851 | | | | 5,435,676 | |
Symantec Corp. | | | 35,425 | | | | 731,526 | |
Synopsys, Inc.(b) | | | 8,503 | | | | 727,602 | |
Take-Two Interactive Software, Inc.(b) | | | 6,562 | | | | 776,678 | |
| | | | | | | | |
| | | | | | | 79,359,669 | |
Specialty Retail — 2.3% | |
Advance Auto Parts, Inc. | | | 4,249 | | | | 576,589 | |
AutoZone, Inc.(b) | | | 1,493 | | | | 1,001,698 | |
Best Buy Co., Inc. | | | 14,026 | | | | 1,046,059 | |
CarMax, Inc.(b) | | | 9,973 | | | | 726,733 | |
Foot Locker, Inc. | | | 6,890 | | | | 362,758 | |
Gap, Inc. (The) | | | 12,536 | | | | 406,041 | |
Home Depot, Inc. (The) | | | 65,334 | | | | 12,746,663 | |
L Brands, Inc. | | | 13,412 | | | | 494,635 | |
Lowe’s Cos., Inc. | | | 46,558 | | | | 4,449,548 | |
O’Reilly Automotive, Inc.(b) | | | 4,652 | | | | 1,272,648 | |
Ross Stores, Inc. | | | 21,452 | | | | 1,818,057 | |
Tiffany & Co. | | | 5,866 | | | | 771,966 | |
TJX Cos., Inc. (The) | | | 35,515 | | | | 3,380,318 | |
Tractor Supply Co. | | | 6,851 | | | | 524,033 | |
Ulta Beauty, Inc.(b) | | | 3,204 | | | | 748,006 | |
| | | | | | | | |
| | | | | | | 30,325,752 | |
Technology Hardware, Storage & Peripherals — 4.5% | |
Apple, Inc. | | | 278,686 | | | | 51,587,565 | |
Hewlett Packard Enterprise Co. | | | 85,891 | | | | 1,254,868 | |
HP, Inc. | | | 92,762 | | | | 2,104,770 | |
NetApp, Inc. | | | 15,149 | | | | 1,189,651 | |
Seagate Technology plc | | | 16,217 | | | | 915,774 | |
Western Digital Corp.(a) | | �� | 16,918 | | | | 1,309,622 | |
Xerox Corp. | | | 12,307 | | | | 295,368 | |
| | | | | | | | |
| | | | | | | 58,657,618 | |
Textiles, Apparel & Luxury Goods — 0.8% | |
Hanesbrands, Inc.(a) | | | 20,774 | | | | 457,443 | |
Michael Kors Holdings Ltd.(b) | | | 8,364 | | | | 557,042 | |
NIKE, Inc., Class B | | | 72,445 | | | | 5,772,418 | |
PVH Corp. | | | 4,316 | | | | 646,192 | |
Ralph Lauren Corp. | | | 3,189 | | | | 400,921 | |
Tapestry, Inc. | | | 16,379 | | | | 765,063 | |
Under Armour, Inc., Class A(a)(b) | | | 10,681 | | | | 240,109 | |
Under Armour, Inc., Class C(b) | | | 10,648 | | | | 224,460 | |
VF Corp. | | | 18,469 | | | | 1,505,593 | |
| | | | | | | | |
| | | | | | | 10,569,241 | |
Tobacco — 1.0% | |
Altria Group, Inc. | | | 107,204 | | | | 6,088,115 | |
Philip Morris International, Inc. | | | 88,065 | | | | 7,110,368 | |
| | | | | | | | |
| | | | | | | 13,198,483 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 9 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | 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. | | | 16,294 | | | $ | 784,230 | |
United Rentals, Inc.(b) | | | 4,830 | | | | 713,005 | |
WW Grainger, Inc. | | | 2,926 | | | | 902,378 | |
| | | | | | | | |
| | | | | | | 2,399,613 | |
Water Utilities — 0.1% | | | | | | |
American Water Works Co., Inc. | | | 10,149 | | | | 866,522 | |
| | | | | | | | |
Total Common Stocks — 99.2% (Cost: $586,231,370) | | | | 1,305,036,829 | |
| | | | | | | | |
Total Long-Term Investments — 99.2% (Cost: $586,231,370) | | | | 1,305,036,829 | |
| | | | | | | | |
| | | | | | | | |
Security | | Shares | | | Value | |
Short-Term Securities — 2.6%(c)(e) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.80% | | | 10,109,403 | | | $ | 10,109,403 | |
SL Liquidity Series, LLC, Money Market Series, 2.16%(d) | | | 23,973,705 | | | | 23,976,102 | |
| | | | | | | | |
Total Short-Term Securities — 2.6% (Cost: $34,084,379) | | | | 34,085,505 | |
| | | | | | | | |
| |
Total Investments — 101.8% (Cost: $620,315,749) | | | | 1,339,122,334 | |
Liabilities in Excess of Other Assets — (1.8)% | | | | (24,148,806 | ) |
| | | | | | | | |
Net Assets — 100.0% | | | | | | $ | 1,314,973,528 | |
| | | | | | | | |
(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 six months ended June 30, 2018, 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 12/31/17 | | | Shares Purchased | | | Shares Sold | | | Shares Held at 06/30/18 | | | Value at 06/30/18 | | | Income | | | Net Realized Gain (Loss) (a) | | | Change in Unrealized Appreciation (Depreciation) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class | | | 2,592,667 | | | | 7,516,736 | (b) | | | — | | | | 10,109,403 | | | $ | 10,109,403 | | | $ | 83,342 | | | $ | — | | | $ | — | |
SL Liquidity Series, LLC, Money Market Series | | | 3,040,710 | | | | 20,932,995 | (b) | | | — | | | | 23,973,705 | | | | 23,976,102 | | | | 11,120 | (c) | | | 3,367 | | | | 1,126 | |
BlackRock, Inc. | | | 1,183 | | | | 5,991 | | | | (184 | ) | | | 6,990 | | | | 3,488,289 | | | | 23,302 | | | | 60,468 | | | | (223,989 | ) |
PNC Financial Services Group, Inc. (The) | | | 4,559 | | | | 22,622 | | | | (725 | ) | | | 26,456 | | | | 3,574,206 | | | | 23,684 | | | | 79,392 | | | | (314,457 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | 41,148,000 | | | $ | 141,448 | | | $ | 143,227 | | | $ | (537,320 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | Includes net capital gains distributions, if applicable. | |
| (b) | Represents net shares purchased. | |
| (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 | | | | | | | | | | | | | | | | |
S&P 500 E-Mini Index | | | 88 | | | | 09/21/18 | | | $ | 11,975 | | | $ | (235,506 | ) |
| | | | | | | | | | | | | | | | |
| | |
Portfolio Abbreviation |
| |
S&P | | Standard & Poor’s |
| | |
10 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | 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) | | $ | — | | | $ | — | | | $ | 235,506 | | | $ | — | | | $ | — | | | $ | — | | | $ | 235,506 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 six months ended June 30, 2018, the effect of derivative financial instruments in the Statement of Operations were 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 | | $ | — | | | $ | — | | | $ | 613,030 | | | $ | — | | | $ | — | | | $ | — | | | $ | 613,030 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Change in Unrealized Appreciation (Depreciation) on: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Futures contracts | | $ | — | | | $ | — | | | $ | (231,851 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | (231,851 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 table summarizes 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(a) | | $ | 1,305,036,829 | | | $ | — | | | $ | — | | | $ | 1,305,036,829 | |
Short-Term Securities(a) | | | 10,109,403 | | | | — | | | | — | | | | 10,109,403 | |
| | | | | | | | | | | | | | | | |
Subtotal | | $ | 1,315,146,232 | | | $ | — | | | $ | — | | | $ | 1,315,146,232 | |
| | | | | | | | | | | | | | | | |
Investments valued at NAV(b) | | | | | | | | | | | | | | $ | 23,976,102 | |
| | | | | | | | | | | | | | | | |
Total Investments | | | | | | | | | | | | | | $ | 1,339,122,334 | |
| | | | | | | | | | | | | | | | |
Derivative Financial Instruments(c) | | | | | | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | | | | |
Equity contracts | | $ | (235,506 | ) | | $ | — | | | $ | — | | | $ | (235,506 | ) |
| | | | | | | | | | | | | | | | |
| (a) | See above Schedule of Investments for values in each security type. | |
| (b) | As of June 30, 2018, certain investments of the Fund’s 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 six months ended June 30, 2018, there were no transfers between levels.
See notes to financial statements.
| | | | |
SCHEDULE OF INVESTMENTS | | | 11 | |
Statement of Assets and Liabilities (unaudited)
June 30, 2018
| | | | |
| | BlackRock S&P 500 Index V.I. Fund | |
| |
ASSETS | | | | |
Investments at value — unaffiliated (including securities loaned at value of $23,401,186) (cost — $582,995,162) | | $ | 1,297,974,334 | |
Investments at value — affiliated (cost — $37,320,587) | | | 41,148,000 | |
Cash | | | 13,904 | |
Cash pledged for futures contracts | | | 493,000 | |
Receivables: | | | | |
Investments sold | | | 1,374,542 | |
Securities lending income — affiliated | | | 4,294 | |
Capital shares sold | | | 138,795 | |
Dividends — affiliated | | | 25,734 | |
Dividends — unaffiliated | | | 1,073,954 | |
From the Manager | | | 904 | |
Board realignment and consolidation | | | 2,343 | |
Variation margin on futures contracts | | | 1 | |
Prepaid expenses | | | 11,018 | |
| | | | |
Total assets | | | 1,342,260,823 | |
| | | | |
| |
LIABILITIES | | | | |
Cash collateral on securities loaned at value | | | 23,972,968 | |
Payables: | | | | |
Investments purchased | | | 647,643 | |
Capital shares redeemed | | | 2,286,477 | |
Distribution fees | | | 71,487 | |
Board realignment and consolidation | | | 2,343 | |
Investment advisory fees | | | 68,858 | |
Directors’ and Officer’s fees | | | 3,126 | |
Other affiliates | | | 1,421 | |
Other accrued expenses | | | 232,972 | |
| | | | |
Total liabilities | | | 27,287,295 | |
| | | | |
| |
NET ASSETS | | $ | 1,314,973,528 | |
| | | | |
| |
NET ASSETS CONSIST OF | | | | |
Paid-in capital | | $ | 564,039,198 | |
Undistributed net investment income | | | 5,864,773 | |
Accumulated net realized gain | | | 26,498,478 | |
Net unrealized appreciation (depreciation) | | | 718,571,079 | |
| | | | |
NET ASSETS | | $ | 1,314,973,528 | |
| | | | |
| |
NET ASSET VALUE | | | | |
Class I — Based on net assets of $934,957,261 and 39,967,930 shares outstanding, 100 million shares authorized, $0.10 par value | | $ | 23.39 | |
| | | | |
Class II — Based on net assets of $4,015,179 and 173,207 shares outstanding, 100 million shares authorized, $0.10 par value | | $ | 23.18 | |
| | | | |
Class III — Based on net assets of $376,001,088 and 16,222,717 shares outstanding, 100 million shares authorized, $0.10 par value | | $ | 23.18 | |
| | | | |
See notes to financial statements.
| | |
12 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statement of Operations (unaudited)
Six Months Ended June 30, 2018
| | | | |
| | BlackRock S&P 500 Index V.I. Fund | |
| |
INVESTMENT INCOME | | | | |
Dividends — affiliated | | $ | 130,328 | |
Dividends — unaffiliated | | | 6,401,973 | |
Securities lending income — affiliated — net | | | 11,120 | |
| | | | |
Total investment income | | | 6,543,421 | |
| | | | |
| |
EXPENSES | | | | |
Investment advisory | | | 381,773 | |
Distribution — class specific | | | 182,628 | |
Transfer agent — class specific | | | 130,867 | |
Professional | | | 31,915 | |
Accounting services | | | 26,113 | |
Printing | | | 15,930 | |
Custodian | | | 12,376 | |
Directors and Officer | | | 10,317 | |
Offering | | | 7,366 | |
Board realignment and consolidation | | | 2,343 | |
Transfer agent | | | 2,479 | |
Miscellaneous | | | 6,178 | |
| | | | |
Total expenses | | | 810,285 | |
| | | | |
Less: | | | | |
Fees waived and/or reimbursed by the Manager | | | (74,798 | ) |
Transfer agent fees waived and/or reimbursed — class specific | | | (41,263 | ) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 694,224 | |
| | | | |
Net investment income | | | 5,849,197 | |
| | | | |
| |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain from: | | | | |
Investments — affiliated | | | 143,227 | |
Investments — unaffiliated | | | 28,711,938 | |
Futures contracts | | | 613,030 | |
| | | | |
| | | 29,468,195 | |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | |
Investments — affiliated | | | (537,320 | ) |
Investments — unaffiliated | | | (9,687,458 | ) |
Futures contracts | | | (231,851 | ) |
| | | | |
| | | (10,456,629 | ) |
| | | | |
Net realized and unrealized gain | | | 19,011,566 | |
| | | | |
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 24,860,763 | |
| | | | |
See notes to financial statements.
Statement of Changes in Net Assets
| | | | | | | | |
| | BlackRock S&P 500 Index V.I. Fund | |
| | Six Months Ended 06/30/2018 (unaudited) | | | Year Ended 12/31/2017 | |
| | |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | |
| | |
OPERATIONS | | | | | | | | |
Net investment income | | $ | 5,849,197 | | | $ | 3,577,169 | |
Net realized gain | | | 29,468,195 | | | | 10,983,785 | |
Net change in unrealized appreciation (depreciation) | | | (10,456,629 | ) | | | 26,662,306 | |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 24,860,763 | | | | 41,223,260 | |
| | | | | | | | |
| | |
DISTRIBUTIONS TO SHAREHOLDERS(a) | | | | | | | | |
From net investment income: | | | | | | | | |
Class I | | | — | | | | (3,518,974 | ) |
Class II | | | — | | | | (50,068 | ) |
From net realized gain: | | | | | | | | |
Class I | | | — | | | | (8,765,237 | ) |
Class II | | | — | | | | (134,609 | ) |
| | | | | | | | |
Decrease in net assets resulting from distributions to shareholders | | | — | | | | (12,468,888 | ) |
| | | | | | | | |
| | |
CAPITAL SHARE TRANSACTIONS | | | | | | | | |
Net increase (decrease) in net assets derived from capital share transactions | | | 1,070,521,298 | | | | (6,721,848 | ) |
| | | | | | | | |
| | |
NET ASSETS | | | | | | | | |
Total increase in net assets | | | 1,095,382,061 | | | | 22,032,524 | |
Beginning of period | | | 219,591,467 | | | | 197,558,943 | |
| | | | | | | | |
End of period | | $ | 1,314,973,528 | | | $ | 219,591,467 | |
| | | | | | | | |
Undistributed net investment income, end of period | | $ | 5,864,773 | | | $ | 15,576 | |
| | | | | | | | |
(a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
| | |
14 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Financial Highlights
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock S&P 500 Index V.I. Fund | |
| | Class I | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 22.82 | | | | | | | $ | 19.90 | | | $ | 19.08 | | | $ | 20.63 | | | $ | 19.43 | | | $ | 15.43 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.21 | | | | | | | | 0.37 | | | | 0.37 | | | | 0.37 | | | | 0.35 | | | | 0.30 | |
Net realized and unrealized gain (loss) | | | 0.36 | | | | | | | | 3.91 | | | | 1.85 | | | | (0.14 | ) | | | 2.25 | | | | 4.61 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase from investment operations | | | 0.57 | | | | | | | | 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 period | | $ | 23.39 | | | | | | | $ | 22.82 | | | $ | 19.90 | | | $ | 19.08 | | | $ | 20.63 | | | $ | 19.43 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(c) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 2.50 | %(d) | | | | | | | 21.50 | % | | | 11.60 | % | | | 1.05 | % | | | 13.30 | % | | | 31.87 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets(e) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 0.22 | %(f) | | | | | | | 0.46 | % | | | 0.46 | % | | | 0.46 | % | | | 0.46 | % | | | 0.46 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.18 | %(f) | | | | | | | 0.30 | % | | | 0.31 | % | | | 0.31 | % | | | 0.34 | % | | | 0.41 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.81 | %(f) | | | | | | | 1.68 | % | | | 1.87 | % | | | 1.76 | % | | | 1.70 | % | | | 1.69 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 934,958 | | | | | | | $ | 216,251 | | | $ | 195,261 | | | $ | 187,048 | | | $ | 204,029 | | | $ | 199,825 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 3 | % | | | | | | | 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. |
(d) | Aggregate total return. |
(e) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | | 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | 2013 | | | | |
Investments in underlying funds | | | 0.00 | % | | | | | | | — | | | | | | | | — | | | | | | | | — | | | | | | | | — | | | | | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See notes to financial statements.
Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock S&P 500 Index V.I. Fund (continued) | |
| | Class II | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 22.63 | | | | | | | $ | 19.75 | | | $ | 18.94 | | | $ | 20.49 | | | $ | 19.31 | | | $ | 15.34 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.18 | | | | | | | | 0.34 | | | | 0.33 | | | | 0.33 | | | | 0.32 | | | | 0.27 | |
Net realized and unrealized gain (loss) | | | 0.37 | | | | | | | | 3.87 | | | | 1.85 | | | | (0.13 | ) | | | 2.22 | | | | 4.58 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase from investment operations | | | 0.55 | | | | | | | | 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 period | | $ | 23.18 | | | | | | | $ | 22.63 | | | $ | 19.75 | | | $ | 18.94 | | | $ | 20.49 | | | $ | 19.31 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(c) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | 2.43 | %(d) | | | | | | | 21.31 | % | | | 11.47 | % | | | 0.89 | % | | | 13.11 | % | | | 31.67 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets(e) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 0.47 | %(f) | | | | | | | 0.60 | % | | | 0.62 | % | | | 0.61 | % | | | 0.60 | % | | | 0.60 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 0.38 | %(f) | | | | | | | 0.45 | % | | | 0.46 | % | | | 0.46 | % | | | 0.48 | % | | | 0.56 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.60 | %(f) | | | | | | | 1.54 | % | | | 1.71 | % | | | 1.61 | % | | | 1.55 | % | | | 1.54 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 4,015 | | | | | | | $ | 3,340 | | | $ | 2,298 | | | $ | 1,780 | | | $ | 1,962 | | | $ | 1,828 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | | 3 | % | | | | | | | 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. |
(d) | Aggregate total return. |
(e) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | | | | 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | 2013 | | | | |
Investments in underlying funds | | | 0.00 | % | | | | | | | — | | | | | | | | — | | | | | | | | — | | | | | | | | — | | | | | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See notes to financial statements.
| | |
16 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | |
| | BlackRock S&P 500 Index V.I. Fund
(continued) | |
| | Class III | |
| | Period from 02/14/2018 (a) to 06/30/2018 (unaudited) | |
Net asset value, beginning of period | | $ | 22.88 | |
| | | | |
Net investment income(b) | | | 0.15 | |
Net realized and unrealized gain | | | 0.15 | |
| | | | |
Net increase from investment operations | | | 0.30 | |
| | | | |
Net asset value, end of period | | $ | 23.18 | |
| | | | |
| |
Total Return(c) | | | | |
Based on net asset value | | | 1.31 | %(d) |
| | | | |
| |
Ratios to Average Net Assets(e) | | | | |
Total expenses | | | 0.34 | %(f) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 0.34 | %(f) |
| | | | |
Net investment income | | | 1.75 | %(f) |
| | | | |
| |
Supplemental Data | | | | |
Net assets, end of period (000) | | $ | 376,001 | |
| | | | |
Portfolio turnover rate | | | 3 | % |
| | | | |
(a) | Recommencement of operations. |
(b) | Based on average shares outstanding. |
(c) | Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions. |
(d) | Aggregate total return. |
(e) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| | | | | | | | |
| | Period from 02/14/2018 (a) to 06/30/2018 (unaudited) | | | | |
| | | |
Investments in underlying funds | | | 0.00 | % | | | | |
| | | | | | | | |
See notes to financial statements.
Notes to Financial Statements (unaudited)
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 19 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 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. Class III Shares recommenced operations on February 14, 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.
At a meeting held on November 15, 2017, the Board of Directors of the Company and, at a meeting held on December 1, 2017, the Board of Trustees of HIMCO Variable Insurance Trust each approved a reorganization of the HIMCO VIT Index Fund (the “Target Fund”), with and into the Fund. At a special shareholder meeting on April 4, 2018, the shareholders of the Target Fund approved the reorganization, which was completed on April 23, 2018.
Reorganization
The Board of the Company, the Board of the HIMCO Variable Insurance Trust and shareholders of the Target Fund approved the reorganizations of the Target Fund into the Fund. As a result, the Fund acquired substantially all of the assets and assumed substantially all of the liabilities of the Target Fund in exchange for an equal aggregate value of newly-issued Class I and Class III Shares of the Fund.
Each shareholder of the Target Fund received shares of the Fund in an amount equal to the aggregate net asset value (“NAV”) of such shareholder’s Target Fund shares, as determined at the close of business on April 23, 2018, less the costs of the Target Fund’s reorganization.
The reorganization was accomplished by a tax-free exchange of shares of the Fund in the following amounts and at the following conversion ratios:
| | | | | | | | | | | | | | | | |
Target Fund’s Share Class | | Shares Prior to Reorganization | | | Conversion Ratio | | | S&P 500 Index V.I. Fund’s Share Class | | | Shares of S&P 500 Index V.I. Fund | |
Class IA | | | 17,179,594 | | | | 1.83129659 | | | | Class I | | | | 31,460,932 | |
Class IB | | | 9,244,848 | | | | 1.81412014 | | | | Class III | | | | 16,771,265 | |
The Target Fund’s net assets and composition of net assets as of the close of business on April 23, 2018, the valuation date of the reorganization were as follows:
| | | | | | | | | | | | | | | | | | | | |
Target Fund | | Net Assets | | | Paid-In Capital | | | Undistributed Net Investment Loss | | | Accumulated Net Realized Loss | | | Net Unrealized Appreciation | |
HIMCO VIT Index Fund | | $ | 1,100,925,673 | | | $ | 552,473,484 | | | $ | — | | | $ | (28,979,554 | ) | | $ | 577,431,743 | |
For financial reporting purposes, assets received and shares issued by the Fund were recorded at fair value. However, the cost basis of the investments received from the Target Fund was carried forward to align ongoing reporting of the Fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.
The net assets of the Fund before the reorganization were $221,043,512. The aggregate net assets of the Fund immediately after the reorganization amounted to $1,321,969,185. The Target Fund’s fair value and cost of investments prior to the reorganization were as follows:
| | | | | | | | |
Fund | | Fair Value of Investments | | | Cost of Investments | |
HIMCO VIT Index Fund | | $ | 1,091,642,970 | | | $ | 514,211,227 | |
The purpose of these transactions was to combine two funds with the same or substantially similar (but not identical) investment objectives, investment policies, strategies, risks and restrictions. The reorganization was a tax-free event and was effective on April 23, 2018.
Assuming the acquisition had been completed on January 1, 2018, the beginning of the fiscal reporting period of the Fund, the pro forma results of operations for the six months ended June 30, 2018, are as follows:
| • | | Net investment income: $11,022,894 |
| • | | Net realized and change in unrealized loss on investments: $19,520,816 |
| • | | Net increase in net assets resulting from operations: $30,543,710 |
Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of the Fund that have been included in the Fund’s Statement of Operations since April 23, 2018.
| | |
18 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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 security 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) 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.
Offering Costs: Offering costs are amortized over a 12- month period beginning with the commencement of operations of a class of shares.
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. |
| • | | 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. |
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 19 | |
Notes to Financial Statements (unaudited) (continued)
| 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 June 30, 2018, 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
| | |
20 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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 | | $ | 49,260 | | | $ | (49,260 | ) | | $ | — | |
Deutsche Bank | | | 134,926 | | | | (134,926 | ) | | | — | |
Mizuho | | | 139,937 | | | | (139,937 | ) | | | — | |
Merrill Lynch | | | 372,039 | | | | (372,039 | ) | | | — | |
Fidelity Investments | | | 427,915 | | | | (427,915 | ) | | | — | |
State Street Bank | | | 808,077 | | | | (808,077 | ) | | | — | |
Credit Suisse | | | 1,424,901 | | | | (1,424,901 | ) | | | — | |
Morgan Stanley | | | 2,501,699 | | | | (2,501,699 | ) | | | — | |
Citigroup | | | 5,270,814 | | | | (5,270,814 | ) | | | — | |
JP Morgan | | | 12,271,618 | | | | (12,271,618 | ) | | | — | |
| | | | | | | | | | | | |
Total | | $ | 23,401,186 | | | $ | (23,401,186 | ) | | $ | — | |
| | | | | | | | | | | | |
| (a) | Cash collateral with a value of $23,972,968 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.
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 six months ended June 30, 2018, the Fund did not participate in the Interfund Lending Program.
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) and 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. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts on the Statement of Assets and Liabilities.
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 value of the contract at the time it was opened and the notional 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.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 21 | |
Notes to Financial Statements (unaudited) (continued)
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 0.07% of the average daily value of the Fund’s net assets.
Prior to April 23, 2018, this fee was 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 rates upon the average daily net assets of the relevant share class of the Fund as follows:
| | | | | | | | | | | | |
| | Class I | | | Class II | | | Class III | |
Distribution Fee | | | N/A | | | | 0.15 | % | | | 0.25 | % |
For the six months ended June 30, 2018, the class specific distribution fees were as follows:
| | | | | | | | | | | | |
| | Class II | | | Class III | | | Total | |
Distribution Fees | | $ | 2,787 | | | $ | 179,841 | | | $ | 182,628 | |
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 six months ended June 30, 2018, 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 six months ended June 30, 2018, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:
| | | | | | | | | | | | | | |
Class I | | | | | Class II | | | | | Total | |
$ | 129,803 | | | | | $ | 1,064 | | | | | $ | 130,867 | |
Expense Limitations, Waivers and Reimbursements: Effective April 23, 2018, the contractual advisory fee waiver of 0.10% is discontinued in conjunction with the reduced advisory fee from 0.30% to 0.07%. For the six months ended June 30, 2018, the amount waived and/or reimbursed by the Manager was $68,657. 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 six months ended June 30, 2018, the amount waived was $3,798.
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, 2021. The contractual agreement may be terminated upon 90 days’ notice by a majority of 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 six months ended June 30, 2018, there were no fees waived by the Manager.
For the six months ended June 30, 2018, the Fund reimbursed the Manager $2,291 for certain accounting services, which is included in accounting services in the Statement of Operations.
The Fund has begun to incur expenses in connection with a potential realignment and consolidation of the boards of trustees of certain BlackRock-advised funds, including the Fund. The Manager has voluntarily agreed to reimburse the Fund for all or a portion of such expenses, which amounts are included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the six months ended June 30, 2018, the amount waived was $2,343.
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 | | | 0.05 | |
Class III | | | 0.05 | |
The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2021, 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.
Prior to April 23, 2018, the Manager reimbursed all transfer agent fees — class specific for Class I, Class II and Class III of the Fund.
| | |
22 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
These amounts are shown as transfer agent fees waived and/or reimbursed — class specific in the Statement of Operations. For the six months ended June 30, 2018, class specific expense waivers and/or reimbursements were as follows:
| | | | | | | | | | | | |
| | Class I | | | Class II | | | Total | |
Transfer Agent Fees Waived and/or Reimbursed | | $ | 40,579 | | | $ | 684 | | | $ | 41,263 | |
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, 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 (a) | |
| 0.15% | | | | | | 0.30% | | | | | | 0.40% | |
| (a) | Class III recommenced operations on February 14, 2018. | |
Prior to April 23, 2018, Class I, Class II and Class III expense limitations as a percentage of average daily net assets were 1.25%, 1.40% and 1.50%, respectively.
The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2021, 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 six months ended June 30, 2018, 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 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 six months ended June 30, 2018, the Fund paid BIM $1,693 for securities lending agent services.
Directors and Officers: 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 six months ended June 30, 2018, 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 | | $ | 13,347,099 | |
Sales | | | 3,344,430 | |
Net Realized Loss | | | 153,357 | |
For the six months ended June 30, 2018, purchases and sales of investments, excluding short-term securities, were $19,991,550 and $48,097,586, respectively.
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 | | | 23 | |
Notes to Financial Statements (unaudited) (continued)
Management has analyzed tax laws and regulations and their application to the Fund as of June 30, 2018, 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.
As of June 30, 2018, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
| | | | |
Tax cost | | $ | 653,777,726 | |
| | | | |
Gross unrealized appreciation | | $ | 704,734,346 | |
Gross unrealized depreciation | | | (19,625,244 | ) |
| | | | |
Net unrealized appreciation(depreciation) | | $ | 685,109,102 | |
| | | | |
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Although the Act does not amend any provisions directly related to the qualification or taxation of regulated investment companies (“RICs”), the Act does change the taxation of entities in which some RICs invest, the tax treatment of income derived from those entities and the taxation of RIC shareholders. While management does not anticipate significant impact to the Fund or to its shareholders, there is uncertainty in the application of certain provisions in the Act. Specifically, provisions in the Act may increase the amount of or accelerate the recognition of taxable income and may limit the deductibility of certain expenses by RICs. Until full clarity around these provisions is obtained, the impact on the Fund’s financial statements, if any, cannot be fully determined.
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, $2.25 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 $1.75 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 0.10% 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 2019 unless extended or renewed. Prior to April 19, 2018, the aggregate commitment amount was $2.1 billion and the fee was 0.12% per annum. Participating Funds paid an upfront commitment fee of 0.02% on the total commitment amounts, in addition to administration, legal and arrangement fees, which 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 six months ended June 30, 2018, the Fund did not borrow under the credit agreement.
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.
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.
| | |
24 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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:
| | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (a) | | | Year Ended 12/31/2017 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
Class I | | | | | | | | | | | | | | | | |
Shares sold | | | 657,593 | | | $ | 16,099,518 | | | | 853,159 | | | $ | 18,530,628 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 537,342 | | | | 12,284,211 | |
Shares issued resulting from reorganization | | | 31,460,932 | | | | 720,323,840 | | | | — | | | | — | |
Shares redeemed | | | (1,628,928 | ) | | | (35,694,516 | ) | | | (1,723,846 | ) | | | (38,229,011 | ) |
| | | | | | | | | | | | | | | | |
Net increase (decrease) | | | 30,489,597 | | | $ | 700,728,842 | | | | (333,345 | ) | | $ | (7,414,172 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Class II | | | | | | | | | | | | | | | | |
Shares sold | | | 50,687 | | | $ | 1,166,492 | | | | 133,824 | | | $ | 2,754,443 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | 8,145 | | | | 184,677 | |
Shares redeemed | | | (25,122 | ) | | | (582,554 | ) | | | (110,703 | ) | | | (2,246,796 | ) |
| | | | | | | | | | | | | | | | |
Net increase | | | 25,565 | | | $ | 583,938 | | | | 31,266 | | | $ | 692,324 | |
| | | | | | | | | | | | | | | | |
| | | | |
Class III | | | | | | | | | | | | | | | | |
Shares sold | | | 150,802 | | | $ | 3,739,106 | | | | — | | | $ | — | |
Shares issued resulting from reorganization | | | 16,771,265 | | | | 380,601,833 | | | | — | | | | — | |
Shares redeemed | | | (699,350 | ) | | | (15,132,421 | ) | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Net increase | | | 16,222,717 | | | $ | 369,208,518 | | | | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total Net Increase (Decrease) | | | 46,737,879 | | | $ | 1,070,521,298 | | | | (302,079 | ) | | $ | (6,721,848 | ) |
| | | | | | | | | | | | | | | | |
| (a) | Period February 14, 2018 (recommencement of operations) to June 30, 2018 for Class III. | |
As of June 30, 2018, BlackRock Financial Management, Inc, an affiliate of the Fund, owned 437 Class III shares of BlackRock S&P 500 Index V.I. Fund.
Management’s evaluation of the impact of all subsequent events on the Fund’s financial statements was completed through the date the financial statements were issued and the following items were noted:
The Fund paid short-term capital gain and long-term capital gain distributions in the following amounts per share on July 20, 2018 to the shareholders of record on July 18, 2018.
| | | | | | | | |
| | Short-Term Capital Gain | | | Long-Term Capital Gain | |
Class I | | $ | 0.000584 | | | $ | 0.031885 | |
Class II | | | 0.000584 | | | | 0.031885 | |
Class III | | | 0.000584 | | | | 0.031885 | |
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 25 | |
JUNE 30, 2018
| | |
SEMI-ANNUAL REPORT (UNAUDITED) | | |
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 June 30, 2018 | | 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.
At a meeting held on May 8, 2018, the Board of Directors of BlackRock Variable Series Funds II, Inc. (the “Company”) and, at a meeting held on May 23, 2018, the Board of Trustees of State Farm Variable Product Trust each approved a reorganization of the State Farm Bond Fund (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 six-month period ended June 30, 2018, the Fund’s Class I Shares outperformed its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, while the Class III Shares performed in line with the benchmark.
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”), collateralized loan obligations (“CLOs”) and commercial mortgage-backed securities (“CMBS”). Out-of-benchmark exposure to emerging market bonds and municipal bonds contributed positively as well.
The Fund’s underweight positioning with respect to duration (and corresponding interest rate sensitivity) added to performance.
The Fund held derivatives including options, futures contracts and swaps for risk management purposes as well as to manage exposures with the goal of generating return. The Fund’s use of derivatives to manage the portfolio added to the Fund’s performance during the period.
While the reported cash balance for the Fund over the period was above 5%, the Fund held approximately 3.5% of physical cash with the remainder consisting of cash equivalents used in various fashions. These purposes include but are not limited to borrowed bonds for shorting, reverse repos for leverage, and commercial paper for additional short-dated return. These positions did not have a material impact on performance.
Describe recent portfolio activity.
Entering 2018 the Fund was positioned with a preference for the front end of the yield curve given the more attractive risk versus reward profile relative to longer-dated Treasuries. The Fund also emphasized income-oriented opportunities within high quality assets with less interest rate risk by holding overweight exposure to securitized assets, most notably non-agency MBS and CLOs. As the first quarter of 2018 progressed, while maintaining an underweight, the Fund’s duration was tactically increased as a hedge against an uptick in investor risk aversion, mostly concentrated on the front end of the yield curve. The Fund maintained a positive stance on emerging markets based on the backdrop of synchronized developed market growth.
Into the second quarter of 2018, the Fund maintained an underweight duration stance given firming U.S. inflation and growth alongside increased Treasury issuance. That said, the Fund took a tactical approach to duration management given the crosscurrents impacting Treasury yields including geopolitical risk and dovish European Central Bank rhetoric. The Fund’s overweight to emerging markets was reduced as broad-based selling pressure impacted the sector during the second quarter amid tightening financial conditions from a stronger U.S. dollar and higher developed market rates. The Fund held long U.S. dollar exposures relative to other developed market currencies as a hedge against geopolitical risk.
Describe portfolio positioning at period end.
At the end of the period, the Fund maintained its defensive posture as rolling bouts of market volatility kept downward pressure on riskier assets as well as interest rates despite elevated Treasury issuance. The Fund’s duration was maintained at an underweight, with a continued preference for the front end of the yield curve. The Fund remained cautious on corporate credit and preferred diversifying into sectors such as agency MBS and municipal bonds. Within high quality assets, the Fund continued to favor income-oriented opportunities with less interest rate risk. Overall, the Fund was positioned with a low risk profile while seeking attractive income as the market waits for geopolitical uncertainty to subside.
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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Fund Summary as of June 30, 2018 (continued) | | BlackRock Total Return V.I. Fund |
Performance Summary for the Period Ended June 30, 2018
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Standardized 30-Day Yields (c) | | | | | | Unsubsidized 30-Day Yields (c) | | | 6-Month Total Returns (d) | | | | | | Average Annual Total Returns | |
| | | | | | | | 1 Year (d) | | | 5 Years (d) | | | | | | 10 Years (d) | |
Class I(a)(b) | | | 2.92 | % | | | | | | | 2.68 | % | | | (1.48 | )% | | | | | | | (0.41 | )% | | | 2.58 | % | | | | | | | 3.87 | % |
Class III(a)(b) | | | 2.58 | | | | | | | | 2.47 | | | | (1.58 | ) | | | | | | | (0.75 | ) | | | 2.24 | | | | | | | | 3.57 | (e) |
Bloomberg Barclays U.S. Aggregate Bond Index(f) | | | — | | | | | | | | — | | | | (1.62 | ) | | | | | | | (0.40 | ) | | | 2.27 | | | | | | | | 3.72 | |
| (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) | 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) | 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. | |
| (d) | 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. | |
| (e) | 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 (12b-1) fees applicable to Class III Shares. | |
| (f) | 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. | |
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 (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | Expenses Paid During the Period (c) | | | | | | Beginning Account Value (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (c) | |
Class I | | $ | 1,000.00 | | | $ | 985.20 | | | $ | 2.95 | | | $ | 2.71 | | | | | | | $ | 1,000.00 | | | $ | 1,021.82 | | | $ | 3.01 | | | $ | 1,022.07 | | | $ | 2.76 | |
Class III | | | 1,000.00 | | | | 984.20 | | | | 4.48 | | | | 4.23 | | | | | | | | 1,000.00 | | | | 1,020.28 | | | | 4.56 | | | | 1,020.53 | | | | 4.31 | |
| (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 (0.60% for Class I and 0.91% for Class III), multiplied by the average account value over the period, multiplied by 181/365 (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 (0.55% for Class I and 0.86% for Class III), multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown). | |
See “Disclosure of Expenses” on page 5 for further information on how expenses were calculated.
| | |
Fund Summary as of June 30, 2018 (continued) | | BlackRock Total Return V.I. Fund |
Portfolio Information
PORTFOLIO COMPOSITION
| | | | |
Asset Type | | Percent of Total Investments (a) | |
U.S. Government Sponsored Agency Securities | | | 30 | % |
Corporate Bonds | | | 26 | |
U.S. Treasury Obligations | | | 16 | |
Asset-Backed Securities | | | 11 | |
Non-Agency Mortgage-Backed Securities | | | 6 | |
Foreign Government Obligations | | | 5 | |
Municipal Bonds | | | 5 | |
Floating Rate Loan Interests | | | 1 | |
Preferred Securities | | | — | (b) |
Foreign Agency Obligations | | | — | (b) |
Other Interests | | | — | (b) |
| (a) | Total investments exclude short-term securities, options purchased, options written and TBA sale commitments. | |
| (b) | Representing less than 0.5% of the Fund’s total long investments. | |
CREDIT QUALITY ALLOCATION (a)
| | | | |
Credit Rating | | Percent of Total Investments (b) | |
AAA/Aaa(c) | | | 53 | % |
AA/Aa | | | 5 | |
A | | | 13 | |
BBB/Baa | | | 15 | |
BB/Ba | | | 2 | |
B | | | 1 | |
CCC/Caa | | | 1 | |
CC/Ca | | | 2 | |
D | | | — | (d) |
NR | | | 8 | |
| (a) | For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) 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 rating 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 advisor 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. | |
| (d) | Represents less than 0.5% of the Fund’s total investments. | |
| | |
4 | | 2018 BLACKROCK SEMI-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 January 1, 2018 and held through June 30, 2018) 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 (unaudited) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Asset-Backed Securities — 12.5% | |
Accredited Mortgage Loan Trust, Series 2006-1, Class M2, (LIBOR USD 1 Month + 0.34%), 2.43%, 04/25/36(a) | | | USD | | | | 190 | | | $ | 98,542 | |
ACE Securities Corp. Home Equity Loan Trust(a): | | | | | | | | | | | | |
Series 2003-OP1 Class A2, (LIBOR USD 1 Month + 0.72%), 2.81%, 12/25/33 | | | | | | | 122 | | | | 118,232 | |
Series 2007-HE4 Class A2A, (LIBOR USD 1 Month + 0.13%), 2.22%, 05/25/37 | | | | | | | 102 | | | | 32,278 | |
Adams Mill CLO Ltd., Series 2014-1A, Class A2R, (LIBOR USD 3 Month + 1.10%), 3.45%, 07/15/26(a)(b) | | | | | | | 250 | | | | 249,962 | |
Ajax Mortgage Loan Trust(b): | | | | | | | | | | | | |
Series 2016-B Class A, 4.00%, 09/25/65(c) | | | | | | | 87 | | | | 87,285 | |
Series 2016-C Class A, 4.00%, 10/25/57(c) | | | | | | | 77 | | | | 76,751 | |
Series 2017-A Class A, 3.47%, 04/25/57(c) | | | | | | | 313 | | | | 310,819 | |
Series 2017-D Class A, 3.75%, 12/25/57(d) | | | | | | | 410 | | | | 408,303 | |
Series 2018-A Class A, 3.85%, 04/25/58(d) | | | | | | | 403 | | | | 403,336 | |
Series 2018-A Class B, 0.00%, 04/25/58(d)(e) | | | | | | | 91 | | | | 54,613 | |
Allegro CLO II Ltd., Series 2014-1A, Class A1R, (LIBOR USD 3 Month + 1.31%), 3.67%, 01/21/27(a)(b) | | | | | | | 500 | | | | 499,332 | |
Allegro CLO V Ltd., Series 2017-1A, Class A, (LIBOR USD 3 Month + 1.24%), 3.59%, 10/16/30(a)(b) | | | | | | | 250 | | | | 251,000 | |
ALM V Ltd.(a)(b): | | | | | | | | | | | | |
Series 2012-5A Class A1R3, (LIBOR USD 3 Month + 0.91%), 3.27%, 10/18/27 | | | | | | | 290 | | | | 289,959 | |
Series 2012-5A Class A2R3, (LIBOR USD 3 Month + 1.25%), 3.61%, 10/18/27 | | | | | | | 250 | | | | 248,661 | |
Series 2012-5A Class BR3, (LIBOR USD 3 Month + 1.65%), 4.01%, 10/18/27 | | | | | | | 250 | | | | 250,157 | |
ALM XII Ltd., Series 2015-12A, Class A1R2, (LIBOR USD 3 Month + 0.89%), 2.98%, 04/16/27(a)(b) | | | | | | | 250 | | | | 250,069 | |
ALM XVI Ltd., Series 2015-16A, Class A2R2, (LIBOR USD 3 Month + 1.50%), 3.83%, 07/15/27(a)(b) | | | | | | | 255 | | | | 255,000 | |
AMMC CLO 19 Ltd., Series 2016-19A, Class C, (LIBOR USD 3 Month + 2.80%), 5.15%, 10/15/28(a)(b) | | | | | | | 100 | | | | 100,527 | |
Anchorage Capital CLO 1-R Ltd., Series 2018-1RA, Class A1, (LIBOR USD 3 Month + 0.99%), 3.33%, 04/13/31(a)(b) | | | | | | | 310 | | | | 309,491 | |
Anchorage Capital CLO 4-R Ltd.(a)(b): | | | | | | | | | | | | |
Series 2014-4RA Class A, (LIBOR USD 3 Month + 1.05%), 3.41%, 01/28/31 | | | | | | | 250 | | | | 249,876 | |
Series 2014-4RA Class C, (LIBOR USD 3 Month + 1.85%), 4.21%, 01/28/31 | | | | | | | 250 | | | | 248,966 | |
Anchorage Capital CLO 5-R Ltd.(a)(b): | | | | | | | | | | | | |
Series 2014-5RA Class B, (LIBOR USD 3 Month + 1.45%), 3.80%, 01/15/30 | | | | | | | 500 | | | | 500,617 | |
Series 2014-5RA Class C, (LIBOR USD 3 Month + 1.85%), 4.20%, 01/15/30 | | | | | | | 250 | | | | 248,629 | |
Anchorage Capital CLO 6 Ltd., Series 2015-6A, Class AR, (LIBOR USD 3 Month + 1.27%), 3.62%, 07/15/30(a)(b) | | | | | | | 250 | | | | 250,584 | |
Anchorage Capital CLO 7 Ltd., Series 2015-7A, Class AR, (LIBOR USD 3 Month + 0.96%), 3.31%, 10/15/27(a)(b) | | | | | | | 750 | | | | 749,934 | |
Apidos CLO XII, Series 2013-12A, Class AR, (LIBOR USD 3 Month + 1.08%), 3.12%, 04/15/31(a)(b) | | | | | | | 500 | | | | 499,766 | |
Apidos CLO XV, Series 2013-15A, Class A1RR, (LIBOR USD 3 Month + 1.01%), 3.37%, 04/20/31(a)(b) | | | | | | | 500 | | | | 500,873 | |
Apidos Clo XXV, Series 2016-25A, Class A2A, (LIBOR USD 3 Month + 1.80%), 4.16%, 10/20/28(a)(b) | | | | | | | 250 | | | | 250,156 | |
Arbor Realty Collateralized Loan Obligation Ltd., Series 2017-FL3, Class A, (LIBOR USD 1 Month + 0.99%), 3.06%, 12/15/27(a)(b) | | | | | | | 130 | | | | 129,597 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Asset-Backed Securities (continued) | |
Arbor Realty Commercial Real Estate Notes Ltd.(a)(b): | | | | | | | | | | | | |
Series 2016-FL1A Class A, (LIBOR USD 1 Month + 1.70%), 3.77%, 09/15/26 | | | USD | | | | 130 | | | $ | 130,552 | |
Series 2017-FL2 Class A, (LIBOR USD 1 Month + 0.99%), 3.06%, 08/15/27 | | | | | | | 250 | | | | 249,592 | |
Ares XXVIII CLO Ltd., Series 2013-3A, Class B1R, (LIBOR USD 3 Month + 1.50%), 3.85%, 10/17/24(a)(b) | | | | | | | 250 | | | | 249,685 | |
Ares XXXIII CLO Ltd., Series 2015-1A, Class B2R, (LIBOR USD 3 Month + 2.80%), 5.12%, 12/05/25(a)(b) | | | | | | | 250 | | | | 251,721 | |
Ares XXXVII CLO Ltd., Series 2015-4A, Class A1R, (LIBOR USD 3 Month + 1.17%), 3.52%, 10/15/30(a)(b) | | | | | | | 250 | | | | 250,753 | |
Argent Mortgage Loan Trust, Series 2005-W1, Class A2, (LIBOR USD 1 Month + 0.24%), 2.33%, 05/25/35(a)(d) | | | | | | | 58 | | | | 43,267 | |
Atlas Senior Loan Fund IV Ltd., Series 2013-2A, Class A1RR, (LIBOR USD 3 Month + 0.68%), 3.02%, 02/17/26(a)(b) | | | | | | | 250 | | | | 249,910 | |
Avery Point V CLO Ltd., Series 2014-5A, Class AR, (LIBOR USD 3 Month + 0.98%), 3.33%, 07/17/26(a)(b) | | | | | | | 250 | | | | 249,870 | |
B2R Mortgage Trust(b): | | | | | | | | | | | | |
Series 2015-1 Class A1, 2.52%, 05/15/48 | | | | | | | 62 | | | | 61,110 | |
Series 2015-2 Class A, 3.34%, 11/15/48 | | | | | | | 71 | | | | 70,145 | |
Babson CLO Ltd.(a)(b): | | | | | | | | | | | | |
Series 2015-2A Class AR, (LIBOR USD 3 Month + 1.19%), 3.55%, 10/20/30 | | | | | | | 260 | | | | 260,802 | |
Series 2015-IA Class AR, (LIBOR USD 3 Month + 0.99%), 3.35%, 01/20/31 | | | | | | | 250 | | | | 249,727 | |
Series 2016-2A Class C, (LIBOR USD 3 Month + 2.60%), 4.96%, 07/20/28 | | | | | | | 250 | | | | 250,758 | |
BankAmerica Manufactured Housing Contract Trust, Series 1998-2, Class B1, 7.93%, 12/10/25(e) | | | | | | | 300 | | | | 210,193 | |
Bayview Financial Revolving Asset Trust(a)(b): | | | | | | | | | | | | |
Series 2004-B Class A1, (LIBOR USD 1 Month + 0.50%), 2.60%, 05/28/39 | | | | | | | 147 | | | | 130,056 | |
Series 2005-A Class A1, (LIBOR USD 1 Month + 1.00%), 3.10%, 02/28/40 | | | | | | | 202 | | | | 199,454 | |
Series 2005-E Class A1, (LIBOR USD 1 Month + 1.00%), 3.10%, 12/28/40 | | | | | | | 88 | | | | 82,956 | |
BCMSC Trust(e): | | | | | | | | | | | | |
Series 2000-A Class A2, 7.58%, 06/15/30 | | | | | | | 40 | | | | 15,191 | |
Series 2000-A Class A3, 7.83%, 06/15/30 | | | | | | | 37 | | | | 14,581 | |
Series 2000-A Class A4, 8.29%, 06/15/30 | | | | | | | 63 | | | | 26,521 | |
Bear Stearns Asset-Backed Securities I Trust(a): | | | | | | | | | | | | |
Series 2007-FS1 Class 1A3, (LIBOR USD 1 Month + 0.17%), 2.26%, 05/25/35 | | | | | | | 84 | | | | 86,273 | |
Series 2007-HE2 Class 23A, (LIBOR USD 1 Month + 0.14%), 2.23%, 03/25/37 | | | | | | | 58 | | | | 57,046 | |
Series 2007-HE3 Class 1A4, (LIBOR USD 1 Month + 0.35%), 2.44%, 04/25/37 | | | | | | | 203 | | | | 159,901 | |
Bear Stearns Asset-Backed Securities Trust, Series 2005-4, Class M2, (LIBOR USD 1 Month + 1.20%), 3.29%, 01/25/36(a) | | | | | | | 10 | | | | 9,463 | |
Benefit Street Partners CLO VI Ltd., Series 2015-VIA, Class A1R, (LIBOR USD 3 Month + 1.24%), 3.60%, 10/18/29(a)(b) | | | | | | | 250 | | | | 250,973 | |
BlueMountain CLO Ltd.(a)(b): | | | | | | | | | | | | |
Series 2013-2A Class A1R, (LIBOR USD 3 Month + 1.18%), 3.54%, 10/22/30 | | | | | | | 500 | | | | 500,741 | |
Series 2013-3A Class AR, (LIBOR USD 3 Month + 0.89%), 3.25%, 10/29/25 | | | | | | | 163 | | | | 163,220 | |
Series 2013-4A Class AR, (LIBOR USD 3 Month + 1.01%), 3.36%, 04/15/25 | | | | | | | 222 | | | | 221,916 | |
| | |
6 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Asset-Backed Securities (continued) | |
BSPRT Issuer Ltd.(a)(b): | | | | | | | | | | | | |
Series 2017-FL1 Class A, (LIBOR USD 1 Month + 1.35%), 3.42%, 06/15/27 | | | USD | | | | 130 | | | $ | 130,109 | |
Series 2018-FL3 Class A, (LIBOR USD 1 Month + 1.05%), 3.12%, 03/15/28 | | | | | | | 160 | | | | 159,460 | |
Carlyle Global Market Strategies CLO Ltd., Series 2012-4A, Class AR, (LIBOR USD 3 Month + 1.45%), 3.81%, 01/20/29(a)(b) | | | | | | | 300 | | | | 300,993 | |
Carrington Mortgage Loan Trust(a): | | | | | | | | | | | | |
Series 2005-FRE1 Class M1, (LIBOR USD 1 Month + 0.47%), 2.56%, 12/25/35 | | | | | | | 160 | | | | 159,349 | |
Series 2006-FRE2 Class A2, (LIBOR USD 1 Month + 0.12%), 2.21%, 10/25/36 | | | | | | | 75 | | | | 56,747 | |
Series 2006-FRE2 Class A3, (LIBOR USD 1 Month + 0.16%), 2.25%, 10/25/36 | | | | | | | 150 | | | | 113,801 | |
Series 2006-FRE2 Class A5, (LIBOR USD 1 Month + 0.08%), 2.17%, 10/25/36 | | | | | | | 25 | | | | 19,028 | |
Series 2006-NC4 Class A3, (LIBOR USD 1 Month + 0.16%), 2.25%, 10/25/36 | | | | | | | 95 | | | | 88,480 | |
Series 2007-HE1 Class A2, (LIBOR USD 1 Month + 0.15%), 2.24%, 06/25/37 | | | | | | | 291 | | | | 288,497 | |
Series 2007-RFC1 Class A4, (LIBOR USD 1 Month + 0.22%), 2.31%, 10/25/36 | | | | | | | 100 | | | | 67,685 | |
CBAM Ltd., Series 2017-1A, Class A1, (LIBOR USD 3 Month + 1.25%), 3.61%, 07/20/30(a)(b) | | | | | | | 250 | | | | 250,606 | |
C-BASS Trust: | | | | | | | | | | | | |
Series 2006-CB7 Class A4, (LIBOR USD 1 Month + 0.16%), 2.25%, 10/25/36(a) | | | | | | | 64 | | | | 46,630 | |
Series 2007-CB1 Class AF2, 3.67%, 01/25/37(c) | | | | | | | 179 | | | | 85,424 | |
Series 2007-CB1 Class AF4, 3.67%, 01/25/37(c) | | | | | | | 74 | | | | 35,435 | |
Series 2007-CB5 Class A2, (LIBOR USD 1 Month + 0.17%), 2.26%, 04/25/37(a) | | | | | | | 61 | | | | 45,926 | |
Cedar Funding IX CLO Ltd., Series 2018-9A, Class A1, (LIBOR USD 3 Month + 0.98%), 3.22%, 04/20/31(a)(b) | | | | | | | 250 | | | | 249,872 | |
Cedar Funding VIII CLO Ltd., Series 2017-8A, Class A1, (LIBOR USD 3 Month + 1.25%), 3.60%, 10/17/30(a)(b) | | | | | | | 510 | | | | 511,804 | |
CIFC Funding Ltd.(a): | | | | | | | | | | | | |
Series 2013-2A Class A1LR, (LIBOR USD 3 Month + 1.21%), 3.57%, 10/18/30(b) | | | | | | | 230 | | | | 230,332 | |
Series 2014-3A Class C1R, (LIBOR USD 3 Month + 1.90%), 4.26%, 07/22/26(b) | | | | | | | 250 | | | | 250,137 | |
Series 2014-4A Class A1R, (LIBOR USD 3 Month + 1.38%), 3.73%, 10/17/26(b) | | | | | | | 250 | | | | 250,273 | |
Series 2014-V, (LIBOR USD 3 Month + 1.40%), 3.75%, 01/17/27 | | | | | | | 890 | | | | 891,103 | |
Series 2018-1A Class A, (LIBOR USD 3 Month + 1.00%), 3.16%, 04/18/31(b) | | | | | | | 260 | | | | 259,032 | |
Citicorp Residential Mortgage Trust, Series 2007-2, Class M1, 5.19%, 06/25/37(c) | | | | | | | 100 | | | | 95,276 | |
Citigroup Mortgage Loan Trust(a): | | | | | | | | | | | | |
Series 2006-NC1 Class A2D, (LIBOR USD 1 Month + 0.25%), 2.34%, 08/25/36 | | | | | | | 100 | | | | 97,025 | |
Series 2007-AHL2 Class A3B, (LIBOR USD 1 Month + 0.20%), 2.29%, 05/25/37 | | | | | | | 264 | | | | 191,989 | |
Series 2007-AHL2 Class A3C, (LIBOR USD 1 Month + 0.27%), 2.36%, 05/25/37 | | | | | | | 120 | | | | 87,911 | |
Citigroup Mortgage Loan Trust, Inc., Series 2006-WFH4, Class M3, (LIBOR USD 1 Month + 0.32%), 2.41%, 11/25/36(a) | | | | | | | 100 | | | | 84,898 | |
Colony American Homes, Series 2015-1A, Class A, (LIBOR USD 1 Month + 1.20%), 3.25%, 07/17/32(a)(b) | | | | | | | 93 | | | | 93,439 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Asset-Backed Securities (continued) | |
Conseco Finance Corp.: | | | | | | | | | | | | |
Series 1997-3 Class M1, 7.53%, 03/15/28(e) | | | USD | | | | 61 | | | $ | 60,344 | |
Series 1997-6 Class M1, 7.21%, 01/15/29(e) | | | | | | | 39 | | | | 39,472 | |
Series 1998-8 Class M1, 6.98%, 09/01/30(e) | | | | | | | 114 | | | | 98,398 | |
Series 1999-5 Class A5, 7.86%, 03/01/30(e) | | | | | | | 48 | | | | 35,321 | |
Series 1999-5 Class A6, 7.50%, 03/01/30(e) | | | | | | | 34 | | | | 24,561 | |
Series 2001-D Class B1, (LIBOR USD 1 Month + 2.50%), 4.57%, 11/15/32(a) | | | | | | | 74 | | | | 73,864 | |
Conseco Finance Securitizations Corp.: | | | | | | | | | | | | |
Series 2000-1 Class A5, 8.06%, 09/01/29(e) | | | | | | | 57 | | | | 29,352 | |
Series 2000-4 Class A6, 8.31%, 05/01/32(e) | | | | | | | 152 | | | | 76,620 | |
Series 2000-5 Class A7, 8.20%, 05/01/31 | | | | | | | 149 | | | | 96,462 | |
Countrywide Asset-Backed Certificates(a): | | | | | | | | | | | | |
Series 2003-BC3 Class A2, (LIBOR USD 1 Month + 0.62%), 2.71%, 09/25/33 | | | | | | | 122 | | | | 119,409 | |
Series 2006-S10 Class A3, (LIBOR USD 1 Month + 0.32%), 2.41%, 10/25/36 | | | | | | | 45 | | | | 43,051 | |
Series 2006-SPS1 Class A, (LIBOR USD 1 Month + 0.22%), 2.31%, 12/25/25 | | | | | | | 2 | | | | 2,612 | |
Series 2007-S3 Class A3, (LIBOR USD 1 Month + 0.38%), 2.47%, 05/25/37 | | | | | | | 80 | | | | 72,903 | |
Credit-Based Asset Servicing & Securitization LLC: | | | | | | | | | | | | |
Series 2006-CB2 Class AF4, 3.45%, 12/25/36(c) | | | | | | | 16 | | | | 13,753 | |
Series 2006-MH1 Class B1, 6.25%, 10/25/36(b)(c) | | | | | | | 100 | | | | 101,009 | |
Series 2006-SL1 Class A2, 5.56%, 09/25/36(b)(c) | | | | | | | 89 | | | | 15,921 | |
Series 2007-CB6 Class A4, (LIBOR USD 1 Month + 0.34%), 2.43%, 07/25/37(a)(b) | | | | | | | 62 | | | | 41,248 | |
Series 2007-RP1 Class A, (LIBOR USD 1 Month + 0.31%), 2.40%, 05/25/46(a)(b) | | | | | | | 46 | | | | 40,811 | |
CSMC Trust, Series 2017-14.50%, 03/25/21(e) | | | | | | | 540 | | | | 543,483 | |
CWABS Asset-Backed Certificates Trust: | | | | | | | | | | | | |
Series 2005-16 Class 1AF, 5.00%, 05/25/36(e) | | | | | | | 157 | | | | 153,579 | |
Series 2005-16 Class 2AF3, 4.55%, 05/25/36(e) | | | | | | | 34 | | | | 33,020 | |
Series 2006-11 Class 3AV2, (LIBOR USD 1 Month + 0.16%), 2.25%, 09/25/46(a) | | | | | | | 10 | | | | 10,113 | |
CWABS Revolving Home Equity Loan Trust, Series 2004-U, Class 2A, (LIBOR USD 1 Month + 0.27%), 2.34%, 03/15/34(a) | | | | | | | 31 | | | | 28,104 | |
CWABS, Inc. Asset-Backed Certificates Trust, Series 2004-5, Class A, (LIBOR USD 1 Month + 0.90%), 2.99%, 10/25/34(a) | | | | | | | 116 | | | | 117,673 | |
CWHEQ Home Equity Loan Trust: | | | | | | | | | | | | |
Series 2006-S5 Class A4, 5.84%, 06/25/35 | | | | | | | 5 | | | | 6,729 | |
Series 2006-S5 Class A5, 6.16%, 06/25/35 | | | | | | | 15 | | | | 16,472 | |
Series 2007-S1 Class A3, 5.81%, 11/25/36(e) | | | | | | | 19 | | | | 19,392 | |
CWHEQ Revolving Home Equity Loan Resuritization Trust(a)(b): | | | | | | | | | | | | |
Series 2006-RES Class 4Q1B, (LIBOR USD 1 Month + 0.30%), 2.37%, 12/15/33(d) | | | | | | | 24 | | | | 22,698 | |
Series 2006-RES Class 5B1B, (LIBOR USD 1 Month + 0.19%), 2.26%, 05/15/35(d) | | | | | | | 14 | | | | 13,619 | |
Series 2006-RES Class 5F1A, (LIBOR USD 1 Month + 0.24%), 2.31%, 12/15/35 | | | | | | | 167 | | | | 164,099 | |
CWHEQ Revolving Home Equity Loan Trust(a): | | | | | | | | | | | | |
Series 2005-B Class 2A, (LIBOR USD 1 Month + 0.18%), 2.25%, 05/15/35 | | | | | | | 25 | | | | 23,996 | |
Series 2006-C Class 2A, (LIBOR USD 1 Month + 0.18%), 2.25%, 05/15/36 | | | | | | | 153 | | | | 147,205 | |
Series 2006-H Class 1A, (LIBOR USD 1 Month + 0.15%), 2.22%, 11/15/36 | | | | | | | 85 | | | | 69,698 | |
DCP Rights LLC, Series 2014-1A, Class A, 5.46%, 10/25/44(b) | | | | | | | 214 | | | | 213,861 | |
Dorchester Park CLO Ltd., Series 2015-1A, Class BR, (LIBOR USD 3 Month + 1.45%), 3.53%, 04/20/28(a)(b) | | | | | | | 250 | | | | 250,000 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 7 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Asset-Backed Securities (continued) | |
Dryden 41 Senior Loan Fund, Series 2015-41A, Class AR, (LIBOR USD 3 Month + 0.97%), 3.32%, 04/15/31(a)(b) | | | USD | | | | 250 | | | $ | 249,717 | |
Dryden 53 CLO Ltd., Series 2017-53A, Class A, (LIBOR USD 3 Month + 1.12%), 3.47%, 01/15/31(a)(b) | | | | | | | 800 | | | | 800,385 | |
Dryden XXV Senior Loan Fund, Series 2012-25A, Class ARR, (LIBOR USD 3 Month + 0.90%), 3.25%, 10/15/27(a)(b) | | | | | | | 250 | | | | 249,224 | |
First Franklin Mortgage Loan Trust(a): | | | | | | | | | | | | |
Series 2004-FFH3 Class M3, (LIBOR USD 1 Month + 1.05%), 3.14%, 10/25/34 | | | | | | | 33 | | | | 28,925 | |
Series 2006-FF5 Class 2A3, (LIBOR USD 1 Month + 0.16%), 2.25%, 04/25/36 | | | | | | | 33 | | | | 31,394 | |
Series 2006-FF16 Class 2A3, (LIBOR USD 1 Month + 0.14%), 2.23%, 12/25/36 | | | | | | | 801 | | | | 492,744 | |
Series 2006-FF17 Class A5, (LIBOR USD 1 Month + 0.15%), 2.24%, 12/25/36 | | | | | | | 673 | | | | 598,209 | |
Series 2006-FFH1 Class M2, (LIBOR USD 1 Month + 0.40%), 2.49%, 01/25/36 | | | | | | | 117 | | | | 70,911 | |
Flatiron CLO Ltd., Series 2015-1A, Class AR, (LIBOR USD 3 Month + 0.89%), 3.24%, 04/15/27(a)(b) | | | | | | | 250 | | | | 249,962 | |
Fremont Home Loan Trust, Series 2006-3, Class 1A1, (LIBOR USD 1 Month + 0.14%), 2.23%, 02/25/37(a) | | | | | | | 267 | | | | 216,027 | |
Galaxy XXII CLO Ltd., Series 2016-22A, Class A1, (LIBOR USD 3 Month + 1.58%), 3.93%, 07/16/28(a)(b) | | | | | | | 250 | | | | 250,009 | |
GE-WMC Asset-Backed Pass-Through Certificates(a): | | | | | | | | | | | | |
Series 2005-2 Class A2C, (LIBOR USD 1 Month + 0.25%), 2.34%, 12/25/35 | | | | | | | 25 | | | | 24,922 | |
Series 2005-2 Class M1, (LIBOR USD 1 Month + 0.44%), 2.53%, 12/25/35 | | | | | | | 181 | | | | 107,031 | |
GE-WMC Mortgage Securities Trust, Series 2006-1, Class A2B, (LIBOR USD 1 Month + 0.15%), 2.24%, 08/25/36(a) | | | | | | | 704 | | | | 452,137 | |
GMACM Home Equity Loan Trust, Series 2006-HE4, Class A2, (LIBOR USD 1 Month + 0.50%), 2.59%, 12/25/36(a) | | | | | | | 79 | | | | 76,543 | |
GSAA Home Equity Trust: | | | | | | | | | | | | |
Series 2007-2 Class AF3, 5.92%, 03/25/37(e) | | | | | | | 30 | | | | 11,965 | |
Series 2007-4 Class A3B, (LIBOR USD 1 Month + 0.35%), 2.44%, 03/25/37(a) | | | | | | | 120 | | | | 15,496 | |
GSAMP Trust(a): | | | | | | | | | | | | |
Series 2006-FM2 Class A2B, (LIBOR USD 1 Month + 0.12%), 2.21%, 09/25/36 | | | | | | | 83 | | | | 40,446 | |
Series 2007-H1 Class A1B, (LIBOR USD 1 Month + 0.20%), 2.29%, 01/25/47 | | | | | | | 31 | | | | 20,350 | |
Series 2007-HS1 Class M6, (LIBOR USD 1 Month + 2.25%), 4.34%, 02/25/47 | | | | | | | 40 | | | | 41,078 | |
GT Loan Financing I Ltd., Series 2013-1A, Class A, (LIBOR USD 3 Month + 1.27%), 3.63%, 10/28/24(a)(b) | | | | | | | 27 | | | | 27,429 | |
Highbridge Loan Management Ltd., Series 6A-2015, Class A1R, (LIBOR USD 3 Month + 1.00%), 3.36%, 02/05/31(a)(b) | | | | | | | 250 | | | | 250,267 | |
Home Equity Asset Trust, Series 2007-1, Class 2A3, (LIBOR USD 1 Month + 0.15%), 2.24%, 05/25/37(a) | | | | | | | 90 | | | | 74,006 | |
Home Equity Mortgage Loan Asset-Backed Trust(a): | | | | | | | | | | | | |
Series 2004-A Class M2, (LIBOR USD 1 Month + 2.03%), 4.12%, 07/25/34 | | | | | | | 29 | | | | 29,289 | |
Series 2007-A Class 2A2, (LIBOR USD 1 Month + 0.19%), 2.28%, 04/25/37 | | | | | | | 75 | | | | 55,808 | |
Series 2007-B Class 2A3, (LIBOR USD 1 Month + 0.20%), 2.29%, 07/25/37 | | | | | | | 126 | | | | 82,843 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Asset-Backed Securities (continued) | |
Home Equity Mortgage Trust, Series 2006-2, Class 1A15.87%, 07/25/36(c) | | | USD | | | | 77 | | | $ | 28,541 | |
Home Loan Mortgage Loan Trust, Series 2005-1, Class A3, (LIBOR USD 1 Month + 0.72%), 2.79%, 04/15/36(a) | | | | | | | 29 | | | | 26,247 | |
Invitation Homes Trust(a)(b): | | | | | | | | | | | | |
Series 2015-SFR3 Class A, (LIBOR USD 1 Month + 1.30%), 3.37%, 08/17/32 | | | | | | | 94 | | | | 93,630 | |
Series 2015-SFR3 Class E, (LIBOR USD 1 Month + 3.75%), 5.82%, 08/17/32 | | | | | | | 100 | | | | 99,991 | |
Series 2018-SFR1 Class E, (LIBOR USD 1 Month + 2.00%), 4.09%, 03/17/37 | | | | | | | 100 | | | | 100,289 | |
Series 2018-SFR1 Class F, (LIBOR USD 1 Month + 2.50%), 4.59%, 03/17/37 | | | | | | | 100 | | | | 100,313 | |
Series 2018-SFR3 Class A, (LIBOR USD 1 Month + 1.00%), 3.00%, 07/17/37 | | | | | | | 130 | | | | 130,163 | |
Irwin Home Equity Loan Trust, Series 2006-3, Class 2A3, 6.03%, 09/25/37(b)(c) | | | | | | | 63 | | | | 60,995 | |
JPMorgan Mortgage Acquisition Trust: | | | | | | | | | | | | |
Series 2006-CW1 Class M1, (LIBOR USD 1 Month + 0.27%), 2.36%, 05/25/36(a) | | | | | | | 100 | | | | 95,140 | |
Series 2006-WF1 Class A3A, 5.83%, 07/25/36(c) | | | | | | | 273 | | | | 137,273 | |
Series 2006-WF1 Class A5, 6.41%, 07/25/36(c) | | | | | | | 60 | | | | 30,132 | |
Series 2006-WF1 Class A6, 6.00%, 07/25/36(c) | | | | | | | 55 | | | | 27,467 | |
LCM 26 Ltd., Series 26A, Class A1, (LIBOR USD 3 Month + 1.07%), 3.00%, 01/20/31(a)(b) | | | | | | | 280 | | | | 280,170 | |
LCM XXIV Ltd., Series 24A, Class A, (LIBOR USD 3 Month + 1.31%), 3.67%, 03/20/30(a)(b) | | | | | | | 250 | | | | 251,003 | |
Lehman ABS Manufactured Housing Contract Trust, Series 2001-B, Class M1, 6.63%, 04/15/40(e) | | | | | | | 90 | | | | 95,174 | |
Lendmark Funding Trust, Series 2017-1A, Class A, 2.83%, 01/22/24(b) | | | | | | | 510 | | | | 504,892 | |
Litigation Fee Residual Funding LLC, Series 2015-14.00%, 10/30/27(d) | | | | | | | 94 | | | | 93,153 | |
LoanCore Issuer Ltd., Series 2018-CRE1, Class A, (LIBOR USD 1 Month + 1.13%), 3.20%, 05/15/28(a)(b) | | | | | | | 250 | | | | 250,173 | |
Long Beach Mortgage Loan Trust(a): | | | | | | | | | | | | |
Series 2006-2 Class 2A3, (LIBOR USD 1 Month + 0.19%), 2.28%, 03/25/46 | | | | | | | 747 | | | | 368,974 | |
Series 2006-2 Class 2A4, (LIBOR USD 1 Month + 0.29%), 2.38%, 03/25/46 | | | | | | | 226 | | | | 113,046 | |
Series 2006-3 Class 2A3, (LIBOR USD 1 Month + 0.18%), 2.27%, 05/25/46 | | | | | | | 361 | | | | 155,433 | |
Series 2006-4 Class 2A3, (LIBOR USD 1 Month + 0.16%), 2.25%, 05/25/36 | | | | | | | 387 | | | | 177,364 | |
Series 2006-4 Class 2A4, (LIBOR USD 1 Month + 0.26%), 2.35%, 05/25/36 | | | | | | | 430 | | | | 200,856 | |
Series 2006-9 Class 2A2, (LIBOR USD 1 Month + 0.11%), 2.20%, 10/25/36 | | | | | | | 56 | | | | 24,485 | |
Series 2006-9 Class 2A3, (LIBOR USD 1 Month + 0.16%), 2.25%, 10/25/36 | | | | | | | 344 | | | | 150,823 | |
Series 2006-9 Class 2A4, (LIBOR USD 1 Month + 0.23%), 2.32%, 10/25/36 | | | | | | | 127 | | | | 56,321 | |
Series 2006-10 Class 2A3, (LIBOR USD 1 Month + 0.16%), 2.25%, 11/25/36 | | | | | | | 89 | | | | 40,464 | |
Series 2006-10 Class 2A4, (LIBOR USD 1 Month + 0.22%), 2.31%, 11/25/36 | | | | | | | 67 | | | | 30,621 | |
Madison Avenue Manufactured Housing Contract Trust, Series 2002-A, Class B2, (LIBOR USD 1 Month + 3.25%), 5.34%, 03/25/32(a) | | | | | | | 40 | | | | 40,884 | |
Madison Park Funding XIII Ltd., Series 2014-13A, Class AR2, (LIBOR USD 3 Month + 0.95%), 3.31%, 04/19/30(a)(b)(d) | | | | | | | 330 | | | | 329,867 | |
| | |
8 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Asset-Backed Securities (continued) | |
Madison Park Funding XIV Ltd., Series 2014-14A, Class A2R, (LIBOR USD 3 Month + 1.12%), 3.48%, 07/20/26(a)(b) | | | USD | | | | 830 | | | $ | 829,892 | |
Madison Park Funding XVIII Ltd., Series 2015-18A, Class A1R, (LIBOR USD 3 Month + 1.19%), 3.55%, 10/21/30(a)(b) | | | | | | | 510 | | | | 511,261 | |
Madison Park Funding XXVI Ltd., Series 2017-26A, Class AR, (LIBOR USD 3 Month + 1.20%), 3.56%, 07/29/30(a)(b) | | | | | | | 520 | | | | 521,290 | |
Marathon CRE Ltd., Series 2018-FL1, Class A, (LIBOR USD 1 Month + 1.15%), 3.24%, 06/15/28(a)(b) | | | | | | | 100 | | | | 100,000 | |
Marble Point CLO XI Ltd., Series 2017-2A, Class A, (LIBOR USD 3 Month + 1.18%), 3.54%, 12/18/30(a)(b) | | | | | | | 250 | | | | 250,248 | |
MASTR Asset-Backed Securities Trust, Series 2006-HE2, Class A3, (LIBOR USD 1 Month + 0.15%), 2.24%, 06/25/36(a) | | | | | | | 219 | | | | 125,926 | |
MASTR Specialized Loan Trust, Series 2006-3, Class A, (LIBOR USD 1 Month + 0.26%), 2.35%, 06/25/46(a)(b) | | | | | | | 20 | | | | 18,874 | |
Merrill Lynch Mortgage Investors Trust(a): | | | | | | | | | | | | |
Series 2006-OPT1 Class M1, (LIBOR USD 1 Month + 0.26%), 2.35%, 08/25/37 | | | | | | | 43 | | | | 8,991 | |
Series 2006-RM3 Class A2B, (LIBOR USD 1 Month + 0.09%), 2.18%, 06/25/37 | | | | | | | 28 | | | | 9,072 | |
Morgan Stanley ABS Capital I, Inc. Trust(a): | | | | | | | | | | | | |
Series 2005-HE1 Class A2MZ, (LIBOR USD 1 Month + 0.60%), 2.69%, 12/25/34 | | | | | | | 155 | | | | 151,839 | |
Series 2005-HE5 Class M4, (LIBOR USD 1 Month + 0.87%), 2.96%, 09/25/35 | | | | | | | 145 | | | | 64,941 | |
Series 2007-NC1 Class A1, (LIBOR USD 1 Month + 0.13%), 2.22%, 11/25/36 | | | | | | | 483 | | | | 303,125 | |
Morgan Stanley IXIS Real Estate Capital Trust, Series 2006-2, Class A2, (LIBOR USD 1 Month + 0.11%), 2.20%, 11/25/36(a) | | | | | | | 34 | | | | 17,110 | |
Mountain Hawk I CLO Ltd., Series 2013-1A, Class B1, (LIBOR USD 3 Month + 2.18%), 4.54%, 01/20/24(a)(b) | | | | | | | 250 | | | | 249,945 | |
MP CLO III Ltd., Series 2013-1A, Class AR, (LIBOR USD 3 Month + 1.25%), 3.61%, 10/20/30(a)(b) | | | | | | | 250 | | | | 250,759 | |
MP CLO VIII Ltd., Series 2015-2A, Class AR, (LIBOR USD 3 Month + 0.91%), 3.27%, 10/28/27(a)(b) | | | | | | | 270 | | | | 269,534 | |
Navient Private Education Loan Trust(b): | | | | | | | | | | | | |
Series 2014-AA Class A2B, (LIBOR USD 1 Month + 1.25%), 3.32%, 02/15/29(a) | | | | | | | 447 | | | | 451,750 | |
Series 2014-CTA Class B, (LIBOR USD 1 Month + 1.75%), 3.82%, 10/17/44(a) | | | | | | | 200 | | | | 203,205 | |
Series 2016-AA Class B, 3.50%, 12/16/58(e) | | | | | | | 100 | | | | 97,421 | |
Neuberger Berman Loan Advisers CLO 26 Ltd., Series 2017-26A, Class A, (LIBOR USD 3 Month + 1.17%), 3.53%, 10/18/30(a)(b) | | | | | | | 250 | | | | 250,749 | |
Northwoods Capital XVII Ltd., Series 2018-17A, Class A, (LIBOR USD 3 Month + 1.06%), 3.31%, 04/22/31(a)(b) | | | | | | | 380 | | | | 380,292 | |
Oakwood Mortgage Investors, Inc.(e): | | | | | | | | | | | | |
Series 2001-D Class A2, 5.26%, 01/15/19 | | | | | | | 24 | | | | 18,740 | |
Series 2001-D Class A4, 6.93%, 09/15/31 | | | | | | | 14 | | | | 12,132 | |
Series 2002-B Class M1, 7.62%, 06/15/32 | | | | | | | 81 | | | | 67,294 | |
OCP CLO Ltd.(a)(b): | | | | | | | | | | | | |
Series 2014-5A Class A1R, (LIBOR USD 3 Month + 1.08%), 3.44%, 04/26/31 | | | | | | | 100 | | | | 99,612 | |
Series 2017-13A Class A1A, (LIBOR USD 3 Month + 1.26%), 3.61%, 07/15/30 | | | | | | | 300 | | | | 300,716 | |
Series 2017-14A Class B, (LIBOR USD 3 Month + 1.95%), 4.28%, 11/20/30 | | | | | | | 250 | | | | 248,199 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Asset-Backed Securities (continued) | |
Octagon Investment Partners 24 Ltd.(a)(b): | | | | | | | | | | | | |
Series 2015-1A Class A1R, (LIBOR USD 3 Month + 0.90%), 3.23%, 05/21/27 | | | USD | | | | 470 | | | $ | 469,870 | |
Series 2015-1A Class A2AR, (LIBOR USD 3 Month + 1.35%), 3.68%, 05/21/27 | | | | | | | 310 | | | | 308,161 | |
Octagon Investment Partners XIX Ltd., Series 2014-1A, Class AR, (LIBOR USD 3 Month + 1.10%), 3.45%, 04/15/26(a)(b) | | | | | | | 457 | | | | 456,953 | |
Octagon Investment Partners XVI Ltd.(a)(b): | | | | | | | | | | | | |
Series 2013-1A Class A, (LIBOR USD 3 Month + 1.12%), 3.47%, 07/17/25 | | | | | | | 241 | | | | 240,874 | |
Series 2013-1A Class A1R, (LIBOR USD 3 Month + 1.02%), 3.36%, 07/17/30(d) | | | | | | | 510 | | | | 510,000 | |
Octagon Investment Partners XVII Ltd., Series 2013-1A, Class A1R2, (LIBOR USD 3 Month + 1.00%), 2.98%, 01/25/31(a)(b) | | | | | | | 250 | | | | 249,863 | |
OFSI Fund VI Ltd., Series 2014-6A, Class A2R, (LIBOR USD 3 Month + 1.13%), 3.48%, 03/20/25(a)(b) | | | | | | | 201 | | | | 200,471 | |
OHA Loan Funding Ltd.(b): | | | | | | | | | | | | |
Series 2013-1A Class B2R, 3.28%, 07/23/25 | | | | | | | 200 | | | | 199,247 | |
Series 2013-2A Class AR, (LIBOR USD 3 Month + 1.04%), 3.37%, 05/23/31(a)(d) | | | | | | | 225 | | | | 225,000 | |
OneMain Financial Issuance Trust(b): | | | | | | | | | | | | |
Series 2014-2A Class D, 5.31%, 09/18/24 | | | | | | | 200 | | | | 201,648 | |
Series 2016-2A Class A, 4.10%, 03/20/28 | | | | | | | 136 | | | | 136,719 | |
Option One Mortgage Accep Corp. Asset-Backed Certificates, Series 2003-4, Class A2, (LIBOR USD 1 Month + 0.64%), 2.73%, 07/25/33(a) | | | | | | | 190 | | | | 187,654 | |
Option One Mortgage Loan Trust: | | | | | | | | | | | | |
Series 2007-CP1 Class 2A3, (LIBOR USD 1 Month + 0.21%), 2.30%, 03/25/37(a) | | | | | | | 90 | | | | 61,699 | |
Series 2007-FXD1 Class 2A1, 5.87%, 01/25/37(c) | | | | | | | 300 | | | | 282,663 | |
Series 2007-FXD2 Class 1A1, 5.82%, 03/25/37(c) | | | | | | | 480 | | | | 471,812 | |
Origen Manufactured Housing Contract Trust, Series 2007-B, Class A1, (LIBOR USD 1 Month + 1.20%), 3.27%, 10/15/37(a)(b)(d) | | | | | | | 98 | | | | 92,847 | |
Ownit Mortgage Loan Trust, Series 2006-2, Class A2C, 6.00%, 01/25/37(c) | | | | | | | 70 | | | | 64,599 | |
OZLM Funding II Ltd., Series 2012-2A, Class A1R, (LIBOR USD 3 Month + 1.44%), 3.80%, 10/30/27(a)(b) | | | | | | | 1,043 | | | | 1,045,479 | |
OZLM Funding III Ltd., Series 2013-3A, Class BR, (LIBOR USD 3 Month + 3.00%), 5.36%, 01/22/29(a)(b) | | | | | | | 320 | | | | 322,109 | |
OZLM Funding IV Ltd., Series 2013-4A, Class A1R, (LIBOR USD 3 Month + 1.25%), 3.61%, 10/22/30(a)(b) | | | | | | | 390 | | | | 391,542 | |
OZLM IX Ltd., Series 2014-9A, Class CR, (LIBOR USD 3 Month + 3.55%), 5.91%, 01/20/27(a)(b) | | | | | | | 250 | | | | 250,279 | |
OZLM XIV Ltd., Series 2015-14A, Class A2AR, (LIBOR USD 3 Month + 1.70%), 3.70%, 01/15/29(a)(b)(d) | | | | | | | 250 | | | | 250,000 | |
Palmer Square CLO Ltd.(a)(b): | | | | | | | | | | | | |
Series 2014-1A Class A1R2, (LIBOR USD 3 Month + 1.13%), 3.48%, 01/17/31 | | | | | | | 250 | | | | 249,983 | |
Series 2018-1A Class A1, (LIBOR USD 3 Month + 1.03%), 3.21%, 04/18/31(d) | | | | | | | 250 | | | | 250,250 | |
Palmer Square Loan Funding Ltd., Series 2017-1A, Class A1, (LIBOR USD 3 Month + 0.74%), 3.09%, 10/15/25(a)(b) | | | | | | | 336 | | | | 334,668 | |
Park Avenue Institutional Advisers CLO Ltd.(a)(b): | | | | | | | | | | | | |
Series 2017-1A Class A1, (LIBOR USD 3 Month + 1.22%), 3.05%, 11/14/29 | | | | | | | 280 | | | | 281,114 | |
Series 2017-1A Class A2, (LIBOR USD 3 Month + 1.70%), 3.53%, 11/14/29 | | | | | | | 300 | | | | 300,522 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 9 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Asset-Backed Securities (continued) | |
Progress Residential Trust(b): | | | | | | | | | | | | |
Series 2016-SFR1 Class A, (LIBOR USD 1 Month + 1.50%), 3.59%, 09/17/33(a) | | | USD | | | | 198 | | | $ | 197,939 | |
Series 2016-SFR1 Class E, (LIBOR USD 1 Month + 3.85%), 5.94%, 09/17/33(a) | | | | | | | 100 | | | | 101,096 | |
Series 2016-SFR2 Class E, (LIBOR USD 1 Month + 3.55%), 5.64%, 01/17/34(a) | | | | | | | 100 | | | | 101,609 | |
Series 2017-SFR1 Class A, 2.77%, 08/17/34 | | | | | | | 100 | | | | 96,421 | |
Series 2018-SFR1 Class E, 4.38%, 03/17/35 | | | | | | | 100 | | | | 99,562 | |
Series 2018-SFR1 Class F, 4.78%, 03/17/35 | | | | | | | 100 | | | | 99,777 | |
PRPM LLC, Series 2017-1A, Class A1, 4.25%, 01/25/22(b)(c) | | | | | | | 88 | | | | 87,955 | |
Race Point IX CLO Ltd., Series 2015-9A, Class A1AR, (LIBOR USD 3 Month + 1.21%), 3.56%, 10/15/30(a)(b) | | | | | | | 500 | | | | 501,741 | |
Race Point X CLO Ltd., Series 2016-10A, Class A, (LIBOR USD 3 Month + 1.60%), 3.96%, 07/25/28(a)(b) | | | | | | | 250 | | | | 250,031 | |
RAMP Trust(a): | | | | | | | | | | | | |
Series 2006-RS6 Class A4, (LIBOR USD 1 Month + 0.27%), 2.36%, 11/25/36 | | | | | | | 238 | | | | 199,878 | |
Series 2007-RS1 Class A3, (LIBOR USD 1 Month + 0.17%), 2.26%, 02/25/37 | | | | | | | 176 | | | | 96,622 | |
Rockford Tower CLO Ltd.(a)(b): | | | | | | | | | | | | |
Series 2017-1A Class A, (LIBOR USD 3 Month + 1.37%), 3.72%, 04/15/29 | | | | | | | 250 | | | | 250,904 | |
Series 2017-1A Class B, (LIBOR USD 3 Month + 1.80%), 4.15%, 04/15/29 | | | | | | | 250 | | | | 250,397 | |
Series 2017-2A Class B, (LIBOR USD 3 Month + 1.75%), 4.10%, 10/15/29 | | | | | | | 250 | | | | 250,543 | |
Series 2017-2A Class C, (LIBOR USD 3 Month + 2.30%), 4.65%, 10/15/29 | | | | | | | 250 | | | | 252,088 | |
Series 2017-3A Class A, (LIBOR USD 3 Month + 1.19%), 3.15%, 10/20/30 | | | | | | | 250 | | | | 250,011 | |
Romark WM-R Ltd., Series 2018-1A, Class A1, (LIBOR USD 3 Month + 1.03%), 2.78%, 04/20/31(a)(b) | | | | | | | 250 | | | | 250,196 | |
RR 3 Ltd., Series 2018-3A, Class A1R2, (LIBOR USD 3 Month + 1.09%), 3.44%, 01/15/30(a)(b) | | | | | | | 1,250 | | | | 1,249,940 | |
Securitized Asset Backed Receivables LLC Trust, Series 2006-WM4, Class A1, (LIBOR USD 1 Month + 0.19%), 2.28%, 11/25/36(a)(b) | | | | | | | 106 | | | | 65,512 | |
Securitized Asset-Backed Receivables LLC Trust(a): | | | | | | | | | | | | |
Series 2006-WM4 Class A2A, (LIBOR USD 1 Month + 0.08%), 2.17%, 11/25/36 | | | | | | | 50 | | | | 20,724 | |
Series 2006-WM4 Class A2C, (LIBOR USD 1 Month + 0.16%), 2.25%, 11/25/36 | | | | | | | 149 | | | | 62,777 | |
SG Mortgage Securities Trust, Series 2006-OPT2, Class A3D, (LIBOR USD 1 Month + 0.21%), 2.30%, 10/25/36(a) | | | | | | | 100 | | | | 70,082 | |
Silver Creek CLO Ltd., Series 2014-1A, Class AR, (LIBOR USD 3 Month + 1.24%), 3.60%, 07/20/30(a)(b) | | | | | | | 250 | | | | 250,828 | |
SLM Private Credit Student Loan Trust, Series 2004-B, Class A3, (LIBOR USD 3 Month + 0.33%), 2.67%, 03/15/24(a) | | | | | | | 325 | | | | 323,826 | |
SMB Private Education Loan Trust, Series 2015-B, Class B, 3.50%, 12/17/40(b) | | | | | | | 100 | | | | 97,246 | |
Sound Point CLO XI Ltd., Series 2016-1A, Class A, (LIBOR USD 3 Month + 1.65%), 4.01%, 07/20/28(a)(b) | | | | | | | 250 | | | | 250,000 | |
Sound Point CLO XII Ltd., Series 2016-2A, Class A, (LIBOR USD 3 Month + 1.66%), 4.02%, 10/20/28(a)(b) | | | | | | | 250 | | | | 250,000 | |
Sound Point CLO XIV Ltd., Series 2016-3A, Class A, (LIBOR USD 3 Month + 1.53%), 3.89%, 01/23/29(a)(b) | | | | | | | 260 | | | | 260,847 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Asset-Backed Securities (continued) | |
Sound Point CLO XV Ltd., Series 2017-1A, Class A, (LIBOR USD 3 Month + 1.39%), 3.75%, 01/23/29(a)(b) | | | USD | | | | 250 | | | $ | 250,782 | |
Soundview Home Loan Trust, Series 2004-WMC1, Class M2, (LIBOR USD 1 Month + 0.80%), 2.89%, 01/25/35(a) | | | | | | | 2 | | | | 1,937 | |
SpringCastle America Funding LLC, Series 2016-AA, Class A, 3.05%, 04/25/29(b) | | | | | | | 275 | | | | 274,227 | |
Stanwich Mortgage Loan Co. LLC(b)(c)(d): | | | | | | | | | | | | |
Series 2016-NPL2 Class NOTE, 3.72%, 08/16/46 | | | | | | | 231 | | | | 229,933 | |
Series 2017-NPB1 Class A1, 3.60%, 05/17/22 | | | | | | | 438 | | | | 437,751 | |
Structured Asset Securities Corp. Mortgage Pass-Through Certificates, Series 2004-23XS, Class 2A1, (LIBOR USD 1 Month + 0.30%), 2.39%, 01/25/35(a) | | | | | | | 129 | | | | 125,951 | |
Symphony CLO XII Ltd., Series 2013-12A, Class AR, (LIBOR USD 3 Month + 1.03%), 3.38%, 10/15/25(a)(b) | | | | | | | 251 | | | | 250,848 | |
TCI-Flatiron CLO Ltd., Series 2017-1A, Class A, (LIBOR USD 3 Month + 1.20%), 3.52%, 11/17/30(a)(b) | | | | | | | 250 | | | | 250,898 | |
Tricon American Homes Trust, Series 2018-SFR1, Class E, 4.56%, 05/17/37(b) | | | | | | | 100 | | | | 99,304 | |
Union Pacific Railroad Co. Pass-Through Trust, Series 2014-1, 3.23%, 05/14/26 | | | | | | | 98 | | | | 95,245 | |
Velocity Commercial Capital Loan Trust, Series 2017-1, Class AFL, (LIBOR USD 1 Month + 1.25%), 3.34%, 05/25/47(a)(b) | | | | | | | 117 | | | | 117,461 | |
Venture XIX CLO Ltd., Series 2014-19A, Class AR, (LIBOR USD 3 Month + 1.37%), 3.72%, 01/15/27(a)(b) | | | | | | | 250 | | | | 249,887 | |
Venture XVIII CLO Ltd., Series 2014-18A, Class AR, (LIBOR USD 3 Month + 1.22%), 3.57%, 10/15/29(a)(b) | | | | | | | 315 | | | | 316,227 | |
Vibrant CLO III Ltd., Series 2015-3A, Class A1R, (LIBOR USD 3 Month + 1.48%), 3.84%, 04/20/26(a)(b) | | | | | | | 250 | | | | 250,090 | |
Voya CLO Ltd.(a)(b): | | | | | | | | | | | | |
Series 2013-2A Class A1R, (LIBOR USD 3 Month + 0.97%), 3.31%, 04/25/31(d) | | | | | | | 250 | | | | 249,800 | |
Series 2014-3A Class A1R, (LIBOR USD 3 Month + 0.72%), 3.08%, 07/25/26 | | | | | | | 250 | | | | 249,697 | |
Series 2017-4A Class A1, (LIBOR USD 3 Month + 1.13%), 3.48%, 10/15/30 | | | | | | | 250 | | | | 250,767 | |
Wachovia Asset Securitization Issuance II LLC Trust, Series 2007-HE2A, Class A, (LIBOR USD 1 Month + 0.13%), 2.22%, 07/25/37(a)(b) | | | | | | | 100 | | | | 94,574 | |
WaMu Asset-Backed Certificates Trust(a): | | | | | | | | | | | | |
Series 2007-HE2 Class 2A3, (LIBOR USD 1 Month + 0.25%), 2.34%, 04/25/37 | | | | | | | 565 | | | | 306,965 | |
Series 2007-HE2 Class 2A4, (LIBOR USD 1 Month + 0.36%), 2.45%, 04/25/37 | | | | | | | 35 | | | | 19,402 | |
Washington Mutual Asset-Backed CertificatesTrust(a): | | | | | | | | | | | | |
Series 2006-HE4 Class 2A2, (LIBOR USD 1 Month + 0.18%), 2.27%, 09/25/36 | | | | | | | 164 | | | | 81,847 | |
Series 2006-HE5 Class 1A, (LIBOR USD 1 Month + 0.16%), 2.25%, 10/25/36 | | | | | | | 190 | | | | 163,653 | |
Series 2007-HE2 Class 2A2, (LIBOR USD 1 Month + 0.22%), 2.31%, 02/25/37 | | | | | | | 214 | | | | 97,755 | |
Wellfleet CLO Ltd., Series 2017-1A, Class A1, (LIBOR USD 3 Month + 1.32%), 3.68%, 04/20/29(a)(b) | | | | | | | 250 | | | | 250,794 | |
WVUE, Series 2015-1A, Class A, 7.50%, 09/25/20(b)(c) | | | | | | | 4 | | | | 3,506 | |
Yale Mortgage Loan Trust, Series 2007-1, Class A, (LIBOR USD 1 Month + 0.40%), 2.49%, 06/25/37(a)(b) | | | | | | | 97 | | | | 42,698 | |
| | |
10 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Asset-Backed Securities (continued) | |
York CLO-2 Ltd., Series 2015-1A, Class AR, (LIBOR USD 3 Month + 1.15%), 3.51%, 01/22/31(a)(b) | | | USD | | | | 250 | | | $ | 249,844 | |
| | | | | | | | | | | | |
Total Asset-Backed Securities — 12.5% (Cost: $54,367,701) | | | | 54,320,144 | |
| | | | | | | | | | | | |
|
Corporate Bonds — 28.3% | |
| | | |
Aerospace & Defense — 0.7% | | | | | | | | | |
BAE Systems Holdings, Inc.(b): | | | | | | | | | | | | |
2.85%, 12/15/20 | | | | | | | 39 | | | | 38,518 | |
4.75%, 10/07/44 | | | | | | | 8 | | | | 8,234 | |
General Dynamics Corp., 3.75%, 05/15/28 | | | | | | | 340 | | | | 343,106 | |
Harris Corp.: | | | | | | | | | | | | |
2.70%, 04/27/20 | | | | | | | 28 | | | | 27,752 | |
4.40%, 06/15/28 | | | | | | | 340 | | | | 342,658 | |
L3 Technologies, Inc.: | | | | | | | | | | | | |
3.85%, 06/15/23 | | | | | | | 200 | | | | 199,584 | |
3.85%, 12/15/26 | | | | | | | 215 | | | | 206,887 | |
Lockheed Martin Corp.: | | | | | | | | | | | | |
2.90%, 03/01/25 | | | | | | | 90 | | | | 85,632 | |
3.55%, 01/15/26 | | | | | | | 44 | | | | 43,242 | |
3.60%, 03/01/35 | | | | | | | 139 | | | | 129,292 | |
4.50%, 05/15/36 | | | | | | | 18 | | | | 18,681 | |
4.07%, 12/15/42 | | | | | | | 94 | | | | 90,439 | |
3.80%, 03/01/45 | | | | | | | 50 | | | | 45,921 | |
4.70%, 05/15/46 | | | | | | | 90 | | | | 95,681 | |
4.09%, 09/15/52 | | | | | | | 56 | | | | 52,714 | |
Northrop Grumman Corp.: | | | | | | | | | | | | |
2.55%, 10/15/22 | | | | | | | 220 | | | | 211,909 | |
2.93%, 01/15/25 | | | | | | | 360 | | | | 341,771 | |
3.25%, 01/15/28 | | | | | | | 299 | | | | 280,899 | |
3.85%, 04/15/45 | | | | | | | 100 | | | | 90,725 | |
United Technologies Corp.: | | | | | | | | | | | | |
4.15%, 05/15/45 | | | | | | | 98 | | | | 91,025 | |
4.05%, 05/04/47 | | | | | | | 240 | | | | 219,642 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,964,312 | |
Air Freight & Logistics — 0.1% | | | | | | | | | |
FedEx Corp.: | | | | | | | | | | | | |
4.90%, 01/15/34 | | | | | | | 185 | | | | 194,842 | |
3.90%, 02/01/35 | | | | | | | 94 | | | | 87,905 | |
4.05%, 02/15/48 | | | | | | | 120 | | | | 107,791 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 390,538 | |
Airlines — 0.4% | | | | | | | | | |
American Airlines Group, Inc., 4.63%, 03/01/20(b) | | | | | | | 103 | | | | 102,485 | |
American Airlines Pass-Through Trust, Series 2015-1, Class A, 3.38%, 05/01/27 | | | | | | | 229 | | | | 220,591 | |
Delta Air Lines, Inc.: | | | | | | | | | | | | |
2.88%, 03/13/20 | | | | | | | 871 | | | | 865,263 | |
2.60%, 12/04/20 | | | | | | | 340 | | | | 332,625 | |
Gol Finance, Inc., 7.00%, 01/31/25(b) | | | | | | | 107 | | | | 85,889 | |
Turkish Airlines Pass-Through Trust, Series 2015-1, Class A, 4.20%, 03/15/27(b) | | | | | | | 34 | | | | 32,111 | |
United Airlines Pass-Through Trust: | | | | | | | | | | | | |
Series 2014-1, Class B, 4.75%, 04/11/22 | | | | | | | 14 | | | | 13,847 | |
Series 2018-1, Class B, 4.60%, 03/01/26 | | | | | | | 80 | | | | 80,397 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,733,208 | |
Auto Components — 0.1% | | | | | | | | | |
Aptiv plc: | | | | | | | | | | | | |
4.25%, 01/15/26 | | | | | | | 115 | | | | 114,624 | |
4.40%, 10/01/46 | | | | | | | 111 | | | | 104,284 | |
ZF North America Capital, Inc., 4.75%, 04/29/25(b) | | | | | | | 225 | | | | 224,970 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 443,878 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Automobiles — 0.5% | | | | | | | | | |
BMW US Capital LLC, 3.10%, 04/12/21(b) | | | USD | | | | 335 | | | $ | 332,910 | |
Daimler Finance North America LLC(b): | | | | | | | | | | | | |
3.10%, 05/04/20 | | | | | | | 340 | | | | 339,309 | |
2.30%, 02/12/21 | | | | | | | 150 | | | | 145,704 | |
3.35%, 05/04/21 | | | | | | | 430 | | | | 428,330 | |
General Motors Co., 5.40%, 04/01/48 | | | | | | | 110 | | | | 104,505 | |
Hyundai Capital America, 2.55%, 04/03/20(b) | | | | | | | 786 | | | | 772,426 | |
Volkswagen Group of America Finance LLC, 2.40%, 05/22/20(b) | | | | | | | 200 | | | | 196,732 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,319,916 | |
Banks — 7.1% | | | | | | | | | |
ABN AMRO Bank NV, 2.65%, 01/19/21(b) | | | | | | | 275 | | | | 270,061 | |
Banco Santander SA, 3.85%, 04/12/23 | | | | | | | 200 | | | | 195,598 | |
Bank of America Corp.: | | | | | | | | | | | | |
Series L, 2.25%, 04/21/20 | | | | | | | 290 | | | | 286,021 | |
2.63%, 10/19/20 | | | | | | | 765 | | | | 755,590 | |
(LIBOR USD 3 Month + 0.66%), 2.37%, 07/21/21(a) | | | | | | | 935 | | | | 916,575 | |
(LIBOR USD 3 Month + 0.63%), 2.33%, 10/01/21(a) | | | | | | | 1,795 | | | | 1,754,804 | |
(LIBOR USD 3 Month + 0.63%), 3.50%, 05/17/22(a) | | | | | | | 550 | | | | 549,811 | |
3.30%, 01/11/23 | | | | | | | 202 | | | | 199,037 | |
3.88%, 08/01/25 | | | | | | | 460 | | | | 457,697 | |
3.50%, 04/19/26 | | | | | | | 166 | | | | 160,567 | |
Series L, 4.18%, 11/25/27 | | | | | | | 460 | | | | 447,993 | |
Bank of Montreal, Series D, 3.10%, 04/13/21 | | | | | | | 580 | | | | 577,683 | |
Bank of Nova Scotia (The), 3.13%, 04/20/21 | | | | | | | 855 | | | | 850,586 | |
Barclays plc: | | | | | | | | | | | | |
(LIBOR USD 3 Month + 1.36%), 4.34%, 05/16/24(a) | | | | | | | 200 | | | | 197,527 | |
4.38%, 09/11/24 | | | | | | | 200 | | | | 194,396 | |
(LIBOR USD 3 Month + 1.90%), 4.97%, 05/16/29(a) | | | | | | | 380 | | | | 376,472 | |
4.95%, 01/10/47 | | | | | | | 200 | | | | 187,501 | |
BB&T Corp., 2.45%, 01/15/20 | | | | | | | 96 | | | | 95,062 | |
BNP Paribas SA(b): | | | | | | | | | | | | |
2.95%, 05/23/22 | | | | | | | 565 | | | | 545,409 | |
3.80%, 01/10/24 | | | | | | | 200 | | | | 195,503 | |
Citigroup, Inc.: | | | | | | | | | | | | |
2.50%, 07/29/19 | | | | | | | 453 | | | | 450,968 | |
2.90%, 12/08/21 | | | | | | | 620 | | | | 607,367 | |
3.50%, 05/15/23 | | | | | | | 114 | | | | 111,482 | |
3.88%, 03/26/25 | | | | | | | 135 | | | | 130,932 | |
(LIBOR USD 3 Month + 1.56%), 3.89%, 01/10/28(a) | | | | | | | 145 | | | | 140,438 | |
Citizens Bank NA: | | | | | | | | | | | | |
2.25%, 03/02/20 | | | | | | | 544 | | | | 535,104 | |
2.65%, 05/26/22 | | | | | | | 555 | | | | 536,693 | |
Cooperatieve Rabobank UA, 2.25%, 01/14/20 | | | | | | | 539 | | | | 532,321 | |
Credit Suisse Group Funding Guernsey Ltd., 2.75%, 03/26/20 | | | | | | | 500 | | | | 494,534 | |
Danske Bank A/S, 3.88%, 09/12/23(b) | | | | | | | 210 | | | | 208,370 | |
Fifth Third Bank, 2.25%, 06/14/21 | | | | | | | 216 | | | | 210,443 | |
HSBC Holdings plc: | | | | | | | | | | | | |
5.10%, 04/05/21 | | | | | | | 200 | | | | 209,060 | |
2.65%, 01/05/22 | | | | | | | 928 | | | | 898,519 | |
(LIBOR USD 3 Month + 0.99%), 3.95%, 05/18/24(a) | | | | | | | 200 | | | | 199,284 | |
(USD Swap Rate 5 Year + 3.75%), 6.00%(a)(f) | | | | | | | 380 | | | | 352,450 | |
Huntington National Bank (The), 3.25%, 05/14/21 | | | | | | | 280 | | | | 279,342 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 11 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Banks (continued) | | | | | | | | | |
Intesa Sanpaolo SpA(b): | | | | | | | | | | | | |
6.50%, 02/24/21 | | | USD | | | | 200 | | | $ | 207,219 | |
5.02%, 06/26/24 | | | | | | | 611 | | | | 554,584 | |
JPMorgan Chase & Co.: | | | | | | | | | | | | |
4.63%, 05/10/21 | | | | | | | 430 | | | | 444,789 | |
(LIBOR USD 3 Month + 0.61%), 3.51%, 06/18/22(a) | | | | | | | 670 | | | | 670,516 | |
2.97%, 01/15/23 | | | | | | | 1,140 | | | | 1,110,315 | |
3.90%, 07/15/25 | | | | | | | 196 | | | | 195,265 | |
(LIBOR USD 3 Month + 1.38%), 3.54%, 05/01/28(a) | | | | | | | 220 | | | | 210,626 | |
(LIBOR USD 3 Month + 1.36%), 3.88%, 07/24/38(a) | | | | | | | 330 | | | | 304,786 | |
Lloyds Banking Group plc: | | | | | | | | | | | | |
4.45%, 05/08/25 | | | | | | | 200 | | | | 201,209 | |
4.65%, 03/24/26 | | | | | | | 520 | | | | 511,638 | |
Mitsubishi UFJ Financial Group, Inc.: | | | | | | | | | | | | |
3.00%, 02/22/22 | | | | | | | 455 | | | | 446,700 | |
3.46%, 03/02/23 | | | | | | | 935 | | | | 926,958 | |
Mizuho Financial Group, Inc.: | | | | | | | | | | | | |
2.27%, 09/13/21 | | | | | | | 200 | | | | 191,942 | |
2.95%, 02/28/22 | | | | | | | 1,338 | | | | 1,305,889 | |
NatWest Markets plc, (LIBOR USD 3 Month + 1.48%), 3.50%, 05/15/23(a) | | | | | | | 200 | | | | 193,742 | |
Santander UK Group Holdings plc, 2.88%, 08/05/21 | | | | | | | 635 | | | | 615,126 | |
Santander UK plc, 5.00%, 11/07/23(b) | | | | | | | 350 | | | | 355,315 | |
Sumitomo Mitsui Trust Bank Ltd.(b): | | | | | | | | | | | | |
2.05%, 03/06/19 | | | | | | | 1,634 | | | | 1,625,192 | |
1.95%, 09/19/19 | | | | | | | 555 | | | | 547,562 | |
SunTrust Banks, Inc., 4.00%, 05/01/25 | | | | | | | 70 | | | | 70,334 | |
Svenska Handelsbanken AB, 3.35%, 05/24/21 | | | | | | | 250 | | | | 250,365 | |
UBS Group Funding Switzerland AG(b): | | | | | | | | | | | | |
2.95%, 09/24/20 | | | | | | | 795 | | | | 786,621 | |
(LIBOR USD 3 Month + 0.95%), 2.86%, 08/15/23(a) | | | | | | | 510 | | | | 488,129 | |
UniCredit SpA, (USD Swap Rate 5 Year + 3.70%), 5.86%, 06/19/32(a)(b) | | | | | | | 415 | | | | 368,466 | |
US Bancorp: | | | | | | | | | | | | |
2.95%, 07/15/22 | | | | | | | 190 | | | | 185,651 | |
3.10%, 04/27/26 | | | | | | | 70 | | | | 66,023 | |
Series X, 3.15%, 04/27/27 | | | | | | | 100 | | | | 95,589 | |
US Bank NA, (LIBOR USD 3 Month + 0.29%), 3.10%, 05/21/21(a) | | | | | | | 265 | | | | 264,980 | |
Washington Mutual Bank(d)(g)(h): | | | | | | | | | | | | |
1.40%, 11/06/09 | | | | | | | 300 | | | | — | |
0.00%, 09/19/17(i) | | | | | | | 250 | | | | — | |
Washington Mutual, Escrow Bond, 0.00%, 09/29/17(d)(g)(h) | | | | | | | 500 | | | | — | |
Wells Fargo & Co.: | | | | | | | | | | | | |
2.60%, 07/22/20 | | | | | | | 77 | | | | 76,022 | |
2.55%, 12/07/20 | | | | | | | 95 | | | | 93,500 | |
2.50%, 03/04/21 | | | | | | | 475 | | | | 464,400 | |
2.10%, 07/26/21 | | | | | | | 180 | | | | 172,957 | |
2.63%, 07/22/22 | | | | | | | 830 | | | | 799,442 | |
Westpac Banking Corp.: | | | | | | | | | | | | |
2.60%, 11/23/20 | | | | | | | 355 | | | | 349,388 | |
3.65%, 05/15/23 | | | | | | | 380 | | | | 380,366 | |
| | | | | | | | |
| | | | | | | | | | | 30,642,806 | |
Beverages — 0.4% | |
Anheuser-Busch InBev Finance, Inc.: | | | | | | | | | | | | |
2.65%, 02/01/21 | | | | | | | 516 | | | | 508,888 | |
3.30%, 02/01/23 | | | | | | | 185 | | | | 183,453 | |
3.65%, 02/01/26 | | | | | | | 20 | | | | 19,579 | |
4.70%, 02/01/36 | | | | | | | 135 | | | | 136,829 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Beverages (continued) | |
Anheuser-Busch InBev Worldwide, Inc., 4.38%, 04/15/38 | | | USD | | | | 425 | | | $ | 412,592 | |
Maple Escrow Subsidiary, Inc.(b): | | | | | | | | | | | | |
3.55%, 05/25/21 | | | | | | | 230 | | | | 230,203 | |
4.06%, 05/25/23 | | | | | | | 220 | | | | 220,536 | |
| | | | | | | | |
| | | | | | | | | | | 1,712,080 | |
Biotechnology — 0.5% | | | | | | | | | |
AbbVie, Inc.: | | | | | | | | | | | | |
2.50%, 05/14/20 | | | | | | | 439 | | | | 433,710 | |
2.90%, 11/06/22 | | | | | | | 106 | | | | 102,859 | |
4.50%, 05/14/35 | | | | | | | 540 | | | | 525,568 | |
Amgen, Inc.: | | | | | | | | | | | | |
2.13%, 05/01/20 | | | | | | | 107 | | | | 105,191 | |
4.40%, 05/01/45 | | | | | | | 222 | | | | 211,582 | |
Baxalta, Inc.: | | | | | | | | | | | | |
4.00%, 06/23/25 | | | | | | | 310 | | | | 303,482 | |
5.25%, 06/23/45 | | | | | | | 120 | | | | 123,818 | |
Gilead Sciences, Inc.: | | | | | | | | | | | | |
2.35%, 02/01/20 | | | | | | | 20 | | | | 19,804 | |
2.50%, 09/01/23 | | | | | | | 117 | | | | 111,535 | |
4.60%, 09/01/35 | | | | | | | 27 | | | | 27,788 | |
4.00%, 09/01/36 | | | | | | | 130 | | | | 125,089 | |
4.50%, 02/01/45 | | | | | | | 105 | | | | 104,952 | |
4.15%, 03/01/47 | | | | | | | 48 | | | | 45,882 | |
| | | | | | | | |
| | | | | | | | | | | 2,241,260 | |
Building Products — 0.1% | | | | | | | | | |
CRH America Finance, Inc., 3.40%, 05/09/27(b) | | | | | | | 210 | | | | 197,659 | |
Johnson Controls International plc, 5.13%, 09/14/45 | | | | | | | 180 | | | | 186,477 | |
LafargeHolcim Finance US LLC, 4.75%, 09/22/46(b) | | | | | | | 240 | | | | 224,771 | |
| | | | | | | | |
| | | | | | | | | | | 608,907 | |
Capital Markets — 2.1% | | | | | | | | | |
Blackstone Holdings Finance Co. LLC, 4.00%, 10/02/47(b) | | | | | | | 238 | | | | 213,996 | |
CME Group, Inc., 3.75%, 06/15/28 | | | | | | | 10 | | | | 10,079 | |
Credit Suisse Group AG, (LIBOR USD 3 Month + 1.24%), 4.21%, 06/12/24(a)(b) | | | | | | | 325 | | | | 325,236 | |
Goldman Sachs & Co. LLC(a)(d): | | | | | | | | | | | | |
(LIBOR USD 3 Month + 0.25%), 2.69%, 08/13/18 | | | | | | | 1,000 | | | | 1,000,000 | |
(LIBOR USD 3 Month + 0.44%), 2.78%, 02/08/19 | | | | | | | 2,000 | | | | 2,000,000 | |
Goldman Sachs Bank USA, 3.20%, 06/05/20 | | | | | | | 60 | | | | 60,175 | |
Goldman Sachs Group, Inc. (The): | | | | | | | | | | | | |
(LIBOR USD 3 Month + 0.35%), 0.00%, 11/13/18(a)(d) | | | | | | | 1,000 | | | | 1,000,000 | |
2.63%,��01/31/19 | | | | | | | 263 | | | | 262,788 | |
2.00%, 04/25/19 | | | | | | | 68 | | | | 67,530 | |
2.60%, 04/23/20 | | | | | | | 138 | | | | 136,698 | |
2.75%, 09/15/20 | | | | | | | 65 | | | | 64,225 | |
2.63%, 04/25/21 | | | | | | | 143 | | | | 139,844 | |
2.35%, 11/15/21 | | | | | | | 498 | | | | 478,922 | |
(LIBOR USD 3 Month + 1.17%), 3.49%, 05/15/26(a) | | | | | | | 230 | | | | 227,197 | |
(LIBOR USD 3 Month + 1.37%), 4.02%, 10/31/38(a) | | | | | | | 140 | | | | 127,560 | |
Moody’s Corp., 2.75%, 12/15/21 | | | | | | | 230 | | | | 224,637 | |
Morgan Stanley: | | | | | | | | | | | | |
2.80%, 06/16/20 | | | | | | | 239 | | | | 237,071 | |
2.75%, 05/19/22 | | | | | | | 1,190 | | | | 1,152,813 | |
3.75%, 02/25/23 | | | | | | | 193 | | | | 193,219 | |
3.70%, 10/23/24 | | | | | | | 36 | | | | 35,541 | |
(LIBOR USD 3 Month + 1.34%), 3.59%, 07/22/28(a) | | | | | | | 695 | | | | 660,561 | |
| | |
12 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Capital Markets (continued) | | | | | | | | | |
Northern Trust Corp., (LIBOR USD 3 Month + 1.13%), 3.38%, 05/08/32(a) | | | USD | | | | 80 | | | $ | 75,153 | |
State Street Corp., 2.65%, 05/19/26 | | | | | | | 103 | | | | 96,706 | |
UBS AG, 2.35%, 03/26/20 | | | | | | | 257 | | | | 254,107 | |
| | | | | | | | |
| | | | | | | | | | | 9,044,058 | |
Chemicals — 0.1% | | | | | | | | | |
Dow Chemical Co. (The): | | | | | | | | | | | | |
4.38%, 11/15/42 | | | | | | | 23 | | | | 21,665 | |
4.63%, 10/01/44 | | | | | | | 103 | | | | 101,313 | |
EI du Pont de Nemours & Co., 2.20%, 05/01/20 | | | | | | | 105 | | | | 103,497 | |
Monsanto Co., 3.60%, 07/15/42 | | | | | | | 107 | | | | 87,706 | |
Sherwin-Williams Co. (The): | | | | | | | | | | | | |
4.00%, 12/15/42 | | | | | | | 20 | | | | 17,817 | |
4.50%, 06/01/47 | | | | | | | 75 | | | | 71,581 | |
| | | | | | | | |
| | | | | | | | | | | 403,579 | |
Commercial Services & Supplies — 0.1% | | | | | | | | | |
Catholic Health Initiatives, 4.35%, 11/01/42 | | | | | | | 30 | | | | 28,388 | |
Republic Services, Inc., 3.95%, 05/15/28 | | | | | | | 215 | | | | 212,091 | |
Waste Management, Inc., 3.90%, 03/01/35 | | | | | | | 106 | | | | 103,091 | |
| | | | | | | | |
| | | | | | | | | | | 343,570 | |
Communications Equipment — 0.0% | | | | | | | | | |
Juniper Networks, Inc., 3.30%, 06/15/20 | | | | | | | 63 | | | | 62,926 | |
| | | | | | | | |
Consumer Finance — 1.6% | | | | | | | | | |
AerCap Ireland Capital DAC: | | | | | | | | | | | | |
4.63%, 10/30/20 | | | | | | | 462 | | | | 470,691 | |
4.50%, 05/15/21 | | | | | | | 295 | | | | 300,568 | |
American Express Co., 3.38%, 05/17/21 | | | | | | | 340 | | | | 340,405 | |
American Express Credit Corp.: | | | | | | | | | | | | |
2.25%, 08/15/19 | | | | | | | 177 | | | | 175,914 | |
3.30%, 05/03/27 | | | | | | | 100 | | | | 96,363 | |
Capital One Financial Corp.: | | | | | | | | | | | | |
2.40%, 10/30/20 | | | | | | | 252 | | | | 245,797 | |
3.45%, 04/30/21 | | | | | | | 330 | | | | 329,239 | |
Discover Financial Services, 4.10%, 02/09/27 | | | | | | | 104 | | | | 99,755 | |
Ford Motor Credit Co. LLC: | | | | | | | | | | | | |
5.75%, 02/01/21 | | | | | | | 200 | | | | 209,857 | |
3.22%, 01/09/22 | | | | | | | 1,070 | | | | 1,046,775 | |
General Motors Financial Co., Inc.: | | | | | | | | | | | | |
3.10%, 01/15/19 | | | | | | | 41 | | | | 41,039 | |
3.70%, 11/24/20 | | | | | | | 512 | | | | 514,788 | |
4.20%, 03/01/21 | | | | | | | 92 | | | | 93,282 | |
3.55%, 04/09/21 | | | | | | | 165 | | | | 164,465 | |
3.20%, 07/06/21 | | | | | | | 760 | | | | 750,111 | |
3.15%, 06/30/22 | | | | | | | 630 | | | | 612,278 | |
4.00%, 01/15/25 | | | | | | | 151 | | | | 146,384 | |
HSBC USA, Inc., 2.35%, 03/05/20 | | | | | | | 880 | | | | 869,722 | |
Synchrony Financial: | | | | | | | | | | | | |
2.60%, 01/15/19 | | | | | | | 94 | | | | 93,819 | |
2.70%, 02/03/20 | | | | | | | 48 | | | | 47,494 | |
4.50%, 07/23/25 | | | | | | | 105 | | | | 103,122 | |
Tarjeta Naranja SA, (Argentina Deposit Rates Badlar Private Banks ARS 30 to 35 Days + 3.50%), 24.62%, 04/11/22(a)(b) | | | | | | | 108 | | | | 57,240 | |
| | | | | | | | |
| | | | | | | | | | | 6,809,108 | |
Containers & Packaging — 0.1% | | | | | | | | | |
International Paper Co., 4.35%, 08/15/48 | | | | | | | 53 | | | | 47,543 | |
Reynolds Group Issuer, Inc., 5.75%, 10/15/20 | | | | | | | 237 | | | | 238,322 | |
| | | | | | | | |
| | | | | | | | | | | 285,865 | |
Diversified Consumer Services — 0.1% | | | | | | | | | |
George Washington University (The), Series 2018, 4.13%, 09/15/48 | | | | | | | 181 | | | | 183,054 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Diversified Consumer Services (continued) | |
Northwestern University, Series 2017, 3.66%, 12/01/57 | | | USD | | | | 86 | | | $ | 83,911 | |
University of Notre Dame du Lac, Series 2017, 3.39%, 02/15/48 | | | | | | | 95 | | | | 89,451 | |
University of Southern California, 3.03%, 10/01/39 | | | | | | | 226 | | | | 204,945 | |
Wesleyan University, 4.78%, 07/01/2116 | | | | | | | 79 | | | | 80,636 | |
| | | | | | | | |
| | | | | | | | | | | 641,997 | |
Diversified Financial Services — 0.5% | | | | | | | | | |
ARI Investments LLC, 4.91%, 01/06/25(d)(e) | | | | | | | 967 | | | | 967,239 | |
AXA Equitable Holdings, Inc.(b): | | | | | | | | | | | | |
3.90%, 04/20/23 | | | | | | | 55 | | | | 54,567 | |
5.00%, 04/20/48 | | | | | | | 65 | | | | 59,969 | |
GE Capital International Funding Co. Unlimited Co., 4.42%, 11/15/35 | | | | | | | 495 | | | | 479,546 | |
ORIX Corp., 2.90%, 07/18/22 | | | | | | | 155 | | | | 150,796 | |
Shell International Finance BV: | | | | | | | | | | | | |
4.13%, 05/11/35 | | | | | | | 101 | | | | 102,450 | |
3.63%, 08/21/42 | | | | | | | 44 | | | | 40,167 | |
Synchrony Bank, 3.65%, 05/24/21 | | | | | | | 485 | | | | 485,281 | |
Woodside Finance Ltd., 3.65%, 03/05/25(b) | | | | | | | 16 | | | | 15,593 | |
| | | | | | | | |
| | | | | | | | | | | 2,355,608 | |
Diversified Telecommunication Services — 1.2% | | | | | | | | | |
AT&T, Inc.: | | | | | | | | | | | | |
4.25%, 03/01/27 | | | | | | | 240 | | | | 234,892 | |
4.30%, 02/15/30(b) | | | | | | | 680 | | | | 641,856 | |
5.25%, 03/01/37 | | | | | | | 224 | | | | 220,316 | |
4.35%, 06/15/45 | | | | | | | 240 | | | | 203,313 | |
4.50%, 03/09/48 | | | | | | | 490 | | | | 422,424 | |
Deutsche Telekom International Finance BV, 3.60%, 01/19/27(b) | | | | | | | 150 | | | | 141,448 | |
Telefonica Emisiones SAU, 4.67%, 03/06/38 | | | | | | | 280 | | | | 261,902 | |
TELUS Corp., 4.60%, 11/16/48 | | | | | | | 25 | | | | 24,443 | |
Verizon Communications, Inc.: | | | | | | | | | | | | |
(LIBOR USD 3 Month + 0.55%), 2.88%, 05/22/20(a) | | | | | | | 710 | | | | 715,179 | |
3.45%, 03/15/21 | | | | | | | 85 | | | | 85,541 | |
4.33%, 09/21/28(b) | | | | | | | 1,419 | | | | 1,406,372 | |
4.50%, 08/10/33 | | | | | | | 400 | | | | 387,353 | |
4.40%, 11/01/34 | | | | | | | 75 | | | | 69,947 | |
4.13%, 08/15/46 | | | | | | | 130 | | | | 111,522 | |
4.52%, 09/15/48 | | | | | | | 490 | | | | 446,738 | |
| | | | | | | | |
| | | | | | | | | | | 5,373,246 | |
Electric Utilities — 1.4% | | | | | | | | | |
AEP Texas, Inc., 3.95%, 06/01/28(b) | | | | | | | 260 | | | | 259,182 | |
Alabama Power Co.: | | | | | | | | | | | | |
4.15%, 08/15/44 | | | | | | | 30 | | | | 29,609 | |
Series A, 4.30%, 07/15/48 | | | | | | | 155 | | | | 157,405 | |
Alliant Energy Finance LLC, 3.75%, 06/15/23(b) | | | | | | | 65 | | | | 64,988 | |
Baltimore Gas & Electric Co., 3.50%, 08/15/46 | | | | | | | 77 | | | | 68,896 | |
CenterPoint Energy Houston Electric LLC, 3.95%, 03/01/48 | | | | | | | 140 | | | | 137,419 | |
DTE Electric Co., Series A, 4.05%, 05/15/48 | | | | | | | 200 | | | | 198,612 | |
Duke Energy Corp.: | | | | | | | | | | | | |
4.80%, 12/15/45 | | | | | | | 220 | | | | 230,144 | |
3.75%, 09/01/46 | | | | | | | 240 | | | | 211,394 | |
Duke Energy Florida LLC, 3.80%, 07/15/28 | | | | | | | 100 | | | | 100,542 | |
Emera U.S. Finance LP: | | | | | | | | | | | | |
2.15%, 06/15/19 | | | | | | | 147 | | | | 145,466 | |
2.70%, 06/15/21 | | | | | | | 222 | | | | 216,075 | |
Enel Finance International NV(b): | | | | | | | | | | | | |
2.88%, 05/25/22 | | | | | | | 420 | | | | 400,187 | |
3.63%, 05/25/27 | | | | | | | 230 | | | | 210,385 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 13 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Electric Utilities (continued) | | | | | | | | | |
Entergy Corp., 2.95%, 09/01/26 | | | USD | | | | 210 | | | $ | 191,603 | |
Exelon Corp.: | | | | | | | | | | | | |
2.85%, 06/15/20 | | | | | | | 161 | | | | 159,567 | |
2.45%, 04/15/21 | | | | | | | 38 | | | | 36,930 | |
4.95%, 06/15/35 | | | | | | | 48 | | | | 50,530 | |
4.45%, 04/15/46 | | | | | | | 335 | | | | 325,467 | |
Florida Power & Light Co., 4.13%, 06/01/48 | | | | | | | 150 | | | | 151,619 | |
Genneia SA, 8.75%, 01/20/22(b) | | | | | | | 131 | | | | 126,370 | |
Kansas City Power & Light Co., 4.20%, 03/15/48 | | | | | | | 235 | | | | 230,997 | |
MidAmerican Energy Co., 4.40%, 10/15/44 | | | | | | | 91 | | | | 93,803 | |
Mid-Atlantic Interstate Transmission LLC, 4.10%, 05/15/28(b) | | | | | | | 70 | | | | 69,990 | |
Northern States Power Co., 3.40%, 08/15/42 | | | | | | | 170 | | | | 153,781 | |
Ohio Power Co., Series G, 6.60%, 02/15/33 | | | | | | | 30 | | | | 38,395 | |
Oncor Electric Delivery Co. LLC, 4.55%, 12/01/41 | | | | | | | 120 | | | | 127,534 | |
Pacific Gas & Electric Co.: | | | | | | | | | | | | |
3.30%, 12/01/27 | | | | | | | 190 | | | | 170,610 | |
3.95%, 12/01/47 | | | | | | | 100 | | | | 85,545 | |
Southern Co. (The), 4.40%, 07/01/46 | | | | | | | 235 | | | | 229,423 | |
Stoneway Capital Corp., 10.00%, 03/01/27(b) | | | | | | | 150 | | | | 149,924 | |
Tampa Electric Co., 4.30%, 06/15/48 | | | | | | | 30 | | | | 29,696 | |
Trans-Allegheny Interstate Line Co., 3.85%, 06/01/25(b) | | | | | | | 250 | | | | 249,187 | |
Virginia Electric & Power Co.: | | | | | | | | | | | | |
Series C, 2.75%, 03/15/23 | | | | | | | 210 | | | | 203,532 | |
Series A, 3.50%, 03/15/27 | | | | | | | 291 | | | | 285,715 | |
4.00%, 01/15/43 | | | | | | | 170 | | | | 162,435 | |
4.45%, 02/15/44 | | | | | | | 44 | | | | 44,700 | |
Series B, 4.20%, 05/15/45 | | | | | | | 93 | | | | 91,447 | |
Series C, 4.00%, 11/15/46 | | | | | | | 110 | | | | 105,698 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 5,994,802 | |
Electrical Equipment — 0.0% | | | | | | | | | |
Eaton Corp., 2.75%, 11/02/22 | | | | | | | 118 | | | | 114,566 | |
| | | | | | | | | | | | |
Electronic Equipment, Instruments & Components — 0.1% | |
Amphenol Corp., 3.20%, 04/01/24 | | | | | | | 114 | | | | 109,981 | |
Corning, Inc., 4.38%, 11/15/57 | | | | | | | 320 | | | | 278,971 | |
Tyco Electronics Group SA: | | | | | | | | | | | | |
3.45%, 08/01/24 | | | | | | | 30 | | | | 29,376 | |
3.13%, 08/15/27 | | | | | | | 65 | | | | 60,635 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 478,963 | |
Energy Equipment & Services — 0.2% | | | | | | | | | |
Halliburton Co.: | | | | | | | | | | | | |
3.80%, 11/15/25 | | | | | | | 590 | | | | 585,781 | |
5.00%, 11/15/45 | | | | | | | 39 | | | | 41,552 | |
Odebrecht Drilling Norbe VIII/IX Ltd., 6.35%, 12/01/21(b) | | | | | | | 48 | | | | 45,289 | |
Odebrecht Offshore Drilling Finance Ltd., 6.72%, 12/01/22(b) | | | | | | | 30 | | | | 26,914 | |
Schlumberger Holdings Corp., 3.00%, 12/21/20(b) | | | | | | | 164 | | | | 163,017 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 862,553 | |
Equity Real Estate Investment Trusts (REITs) — 0.4% | |
American Tower Corp.: | | | | | | | | | | | | |
3.30%, 02/15/21 | | | | | | | 81 | | | | 80,912 | |
3.45%, 09/15/21 | | | | | | | 77 | | | | 76,681 | |
3.00%, 06/15/23 | | | | | | | 675 | | | | 647,244 | |
4.40%, 02/15/26 | | | | | | | 16 | | | | 15,886 | |
CC Holdings GS V LLC, 3.85%, 04/15/23 | | | | | | | 100 | | | | 99,094 | |
Crown Castle International Corp.: | | | | | | | | | | | | |
3.40%, 02/15/21 | | | | | | | 48 | | | | 47,944 | |
2.25%, 09/01/21 | | | | | | | 197 | | | | 188,846 | |
3.20%, 09/01/24 | | | | | | | 405 | | | | 382,226 | |
Simon Property Group LP, 2.50%, 09/01/20 | | | | | | | 200 | | | | 197,126 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,735,959 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Food & Staples Retailing — 0.1% | | | | | | | | | |
Kroger Co. (The), 2.65%, 10/15/26 | | | USD | | | | 270 | | | $ | 239,020 | |
Walgreens Boots Alliance, Inc., 4.65%, 06/01/46 | | | | | | | 8 | | | | 7,352 | |
Walmart, Inc.: | | | | | | | | | | | | |
3.55%, 06/26/25 | | | | | | | 160 | | | | 161,015 | |
4.05%, 06/29/48 | | | | | | | 75 | | | | 75,524 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 482,911 | |
Food Products — 0.1% | | | | | | | | | |
Arcor SAIC, 6.00%, 07/06/23(b) | | | | | | | 23 | | | | 22,988 | |
Campbell Soup Co., 8.88%, 05/01/21 | | | | | | | 100 | | | | 112,877 | |
General Mills, Inc., 3.20%, 04/16/21 | | | | | | | 105 | | | | 104,455 | |
Tyson Foods, Inc., 3.95%, 08/15/24 | | | | | | | 185 | | | | 184,629 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 424,949 | |
Health Care Equipment & Supplies — 0.5% | |
Abbott Laboratories: | | | | | | | | | | | | |
2.80%, 09/15/20 | | | | | | | 75 | | | | 74,432 | |
3.88%, 09/15/25 | | | | | | | 25 | | | | 24,920 | |
3.75%, 11/30/26 | | | | | | | 615 | | | | 604,497 | |
Becton Dickinson and Co.: | | | | | | | | | | | | |
2.13%, 06/06/19 | | | | | | | 600 | | | | 597,070 | |
2.68%, 12/15/19 | | | | | | | 114 | | | | 113,145 | |
2.89%, 06/06/22 | | | | | | | 425 | | | | 411,074 | |
4.69%, 12/15/44 | | | | | | | 30 | | | | 29,079 | |
Edwards Lifesciences Corp., 4.30%, 06/15/28 | | | | | | | 55 | | | | 54,911 | |
Medtronic, Inc.: | | | | | | | | | | | | |
3.15%, 03/15/22 | | | | | | | 115 | | | | 114,079 | |
3.50%, 03/15/25 | | | | | | | 10 | | | | 9,895 | |
4.38%, 03/15/35 | | | | | | | 270 | | | | 279,234 | |
Stryker Corp., 4.63%, 03/15/46 | | | | | | | 69 | | | | 70,297 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,382,633 | |
Health Care Providers & Services — 1.1% | |
Aetna, Inc.: | | | | | | | | | | | | |
4.50%, 05/15/42 | | | | | | | 88 | | | | 86,303 | |
4.13%, 11/15/42 | | | | | | | 32 | | | | 29,612 | |
4.75%, 03/15/44 | | | | | | | 60 | | | | 59,898 | |
AHS Hospital Corp., 5.02%, 07/01/45 | | | | | | | 49 | | | | 55,766 | |
Anthem, Inc.: | | | | | | | | | | | | |
2.30%, 07/15/18 | | | | | | | 457 | | | | 456,942 | |
3.70%, 08/15/21 | | | | | | | 161 | | | | 162,382 | |
4.10%, 03/01/28 | | | | | | | 45 | | | | 44,020 | |
Baylor Scott & White Holdings, 4.19%, 11/15/45 | | | | | | | 40 | | | | 40,678 | |
Cigna Corp., 3.25%, 04/15/25 | | | | | | | 281 | | | | 264,226 | |
CVS Health Corp.: | | | | | | | | | | | | |
4.00%, 12/05/23 | | | | | | | 235 | | | | 235,978 | |
4.10%, 03/25/25 | | | | | | | 330 | | | | 328,251 | |
4.78%, 03/25/38 | | | | | | | 85 | | | | 83,604 | |
5.13%, 07/20/45 | | | | | | | 395 | | | | 400,246 | |
5.05%, 03/25/48 | | | | | | | 260 | | | | 264,601 | |
Dignity Health, 2.64%, 11/01/19 | | | | | | | 149 | | | | 148,715 | |
HCA, Inc., 3.75%, 03/15/19 | | | | | | | 245 | | | | 245,919 | |
Howard Hughes Medical Institute, 3.50%, 09/01/23 | | | | | | | 31 | | | | 31,398 | |
Kaiser Foundation Hospitals: | | | | | | | | | | | | |
3.50%, 04/01/22 | | | | | | | 145 | | | | 146,292 | |
4.15%, 05/01/47 | | | | | | | 148 | | | | 149,872 | |
Laboratory Corp. of America Holdings, 2.63%, 02/01/20 | | | | | | | 63 | | | | 62,498 | |
New York and Presbyterian Hospital (The), 3.56%, 08/01/36 | | | | | | | 40 | | | | 37,936 | |
Ochsner Clinic Foundation, 5.90%, 05/15/45 | | | | | | | 35 | | | | 43,311 | |
Partners Healthcare System, Inc., Series 2011, 3.44%, 07/01/21 | | | | | | | 20 | | | | 20,177 | |
Providence St. Joseph Health Obligated Group, Series A, 3.93%, 10/01/48 | | | | | | | 97 | | | | 92,957 | |
| | |
14 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Health Care Providers & Services (continued) | |
Southern Baptist Hospital of Florida, Inc., 4.86%, 07/15/45 | | | USD | | | | 35 | | | $ | 39,183 | |
SSM Health Care Corp.: | | | | | | | | | | | | |
Series 2018, 3.69%, 06/01/23 | | | | | | | 161 | | | | 161,866 | |
Series A, 3.82%, 06/01/27 | | | | | | | 297 | | | | 295,869 | |
Sutter Health, Series 2018, 3.70%, 08/15/28 | | | | | | | 118 | | | | 117,056 | |
Trinity Health Corp., 4.13%, 12/01/45 | | | | | | | 119 | | | | 116,480 | |
UnitedHealth Group, Inc.: | | | | | | | | | | | | |
2.70%, 07/15/20 | | | | | | | 46 | | | | 45,725 | |
3.75%, 07/15/25 | | | | | | | 220 | | | | 220,036 | |
4.63%, 07/15/35 | | | | | | | 16 | | | | 16,828 | |
4.20%, 01/15/47 | | | | | | | 123 | | | | 120,501 | |
3.75%, 10/15/47 | | | | | | | 110 | | | | 101,105 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 4,726,231 | |
Hotels, Restaurants & Leisure — 0.1% | | | | | | | | | |
McDonald’s Corp.: | | | | | | | | | | | | |
4.70%, 12/09/35 | | | | | | | 160 | | | | 166,737 | |
4.88%, 12/09/45 | | | | | | | 27 | | | | 28,347 | |
4.45%, 03/01/47 | | | | | | | 120 | | | | 118,420 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 313,504 | |
Household Durables — 0.1% | | | | | | | | | |
Newell Brands, Inc.: | | | | | | | | | | | | |
2.88%, 12/01/19 | | | | | | | 164 | | | | 163,396 | |
5.38%, 04/01/36 | | | | | | | 85 | | | | 84,600 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 247,996 | |
Industrial Conglomerates — 0.1% | | | | | | | | | |
Cia Latinoamericana de Infraestructura & Servicios SA, 9.50%, 07/20/23(b) | | | | | | | 18 | | | | 14,607 | |
General Electric Co., 4.50%, 03/11/44 | | | | | | | 216 | | | | 211,769 | |
Honeywell International, Inc., 3.81%, 11/21/47 | | | | | | | 55 | | | | 53,849 | |
Ingersoll-Rand Luxembourg Finance SA, 4.65%, 11/01/44 | | | | | | | 16 | | | | 16,281 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 296,506 | |
Insurance — 0.2% | | | | | | | | | |
Ambac Assurance Corp., 5.10%, 06/07/20(b) | | | | | | | 15 | | | | 19,893 | |
Ambac LSNI LLC, (LIBOR USD 3 Month + 5.00%), 6.81%, 02/12/23(a)(b) | | | | | | | 111 | | | | 113,046 | |
Aon plc, 4.75%, 05/15/45 | | | | | | | 50 | | | | 49,373 | |
Marsh & McLennan Cos., Inc.: | | | | | | | | | | | | |
3.75%, 03/14/26 | | | | | | | 18 | | | | 17,824 | |
4.35%, 01/30/47 | | | | | | | 28 | | | | 27,852 | |
MetLife, Inc., 4.60%, 05/13/46 | | | | | | | 65 | | | | 65,868 | |
Principal Financial Group, Inc., 4.30%, 11/15/46 | | | | | | | 40 | | | | 38,030 | |
Prudential Financial, Inc., 3.88%, 03/27/28 | | | | | | | 240 | | | | 237,213 | |
Travelers Cos., Inc. (The), 4.60%, 08/01/43 | | | | | | | 120 | | | | 125,942 | |
Willis North America, Inc., 3.60%, 05/15/24 | | | | | | | 206 | | | | 199,078 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 894,119 | |
IT Services — 0.2% | | | | | | | | | |
DXC Technology Co., 2.88%, 03/27/20 | | | | | | | 124 | | | | 123,112 | |
Fidelity National Information Services, Inc.: | | | | | | | | | | | | |
3.63%, 10/15/20 | | | | | | | 7 | | | | 7,044 | |
4.50%, 08/15/46 | | | | | | | 38 | | | | 35,294 | |
4.75%, 05/15/48 | | | | | | | 150 | | | | 144,905 | |
Total System Services, Inc.: | | | | | | | | | | | | |
3.80%, 04/01/21 | | | | | | | 60 | | | | 60,410 | |
3.75%, 06/01/23 | | | | | | | 200 | | | | 198,204 | |
4.80%, 04/01/26 | | | | | | | 235 | | | | 240,906 | |
Visa, Inc.: | | | | | | | | | | | | |
3.15%, 12/14/25 | | | | | | | 70 | | | | 67,717 | |
4.15%, 12/14/35 | | | | | | | 198 | | | | 205,163 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,082,755 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Life Sciences Tools & Services — 0.1% | | | | | | | | | |
Thermo Fisher Scientific, Inc., 3.65%, 12/15/25 | | | USD | | | | 398 | | | $ | 388,569 | |
| | | | | | | | | | | | |
Media — 1.1% | | | | | | | | | |
CBS Corp., 2.30%, 08/15/19 | | | | | | | 96 | | | | 95,115 | |
Charter Communications Operating LLC: | | | | | | | | | | | | |
3.58%, 07/23/20 | | | | | | | 475 | | | | 474,397 | |
4.46%, 07/23/22 | | | | | | | 405 | | | | 409,976 | |
4.50%, 02/01/24 | | | | | | | 255 | | | | 254,749 | |
4.91%, 07/23/25 | | | | | | | 329 | | | | 332,252 | |
6.38%, 10/23/35 | | | | | | | 199 | | | | 207,956 | |
5.38%, 05/01/47 | | | | | | | 198 | | | | 179,803 | |
5.75%, 04/01/48 | | | | | | | 132 | | | | 127,792 | |
Comcast Corp.: | | | | | | | | | | | | |
4.25%, 01/15/33 | | | | | | | 35 | | | | 34,179 | |
4.40%, 08/15/35 | | | | | | | 196 | | | | 190,707 | |
3.20%, 07/15/36 | | | | | | | 370 | | | | 307,821 | |
3.40%, 07/15/46 | | | | | | | 65 | | | | 52,710 | |
Cox Communications, Inc., 3.15%, 08/15/24(b) | | | | | | | 335 | | | | 317,368 | |
CSC Holdings LLC, 7.63%, 07/15/18 | | | | | | | 225 | | | | 225,112 | |
Discovery Communications LLC: | | | | | | | | | | | | |
3.80%, 03/13/24 | | | | | | | 151 | | | | 148,612 | |
3.95%, 06/15/25(b) | | | | | | | 140 | | | | 136,477 | |
5.20%, 09/20/47 | | | | | | | 75 | | | | 72,746 | |
Interpublic Group of Cos., Inc. (The), 4.00%, 03/15/22 | | | | | | | 62 | | | | 62,496 | |
NBCUniversal Media LLC, 4.45%, 01/15/43 | | | | | | | 76 | | | | 71,845 | |
Time Warner Cable LLC: | | | | | | | | | | | | |
5.00%, 02/01/20 | | | | | | | 58 | | | | 59,211 | |
4.13%, 02/15/21 | | | | | | | 160 | | | | 160,814 | |
4.00%, 09/01/21 | | | | | | | 22 | | | | 22,000 | |
5.50%, 09/01/41 | | | | | | | 63 | | | | 58,613 | |
4.50%, 09/15/42 | | | | | | | 9 | | | | 7,395 | |
Viacom, Inc.: | | | | | | | | | | | | |
2.75%, 12/15/19 | | | | | | | 9 | | | | 8,918 | |
4.50%, 03/01/21 | | | | | | | 69 | | | | 70,200 | |
5.85%, 09/01/43 | | | | | | | 90 | | | | 89,959 | |
Warner Media LLC: | | | | | | | | | | | | |
2.10%, 06/01/19 | | | | | | | 260 | | | | 258,186 | |
3.60%, 07/15/25 | | | | | | | 50 | | | | 47,541 | |
4.65%, 06/01/44 | | | | | | | 55 | | | | 48,816 | |
4.85%, 07/15/45 | | | | | | | 246 | | | | 224,087 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 4,757,853 | |
Metals & Mining — 0.2% | | | | | | | | | |
Anglo American Capital plc, 3.63%, 09/11/24(b) | | | | | | | 270 | | | | 255,639 | |
Barrick Gold Corp., 5.25%, 04/01/42 | | | | | | | 80 | | | | 83,668 | |
BHP Billiton Finance USA Ltd., 5.00%, 09/30/43 | | | | | | | 90 | | | | 100,981 | |
Largo Resources Ltd., 9.25%, 06/01/21(b) | | | | | | | 12 | | | | 12,000 | |
Newmont Mining Corp., 3.50%, 03/15/22 | | | | | | | 250 | | | | 248,596 | |
Nucor Corp., 5.20%, 08/01/43 | | | | | | | 40 | | | | 44,203 | |
Steel Dynamics, Inc., 5.13%, 10/01/21 | | | | | | | 110 | | | | 110,962 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 856,049 | |
Multi-Utilities — 0.2% | | | | | | | | | |
Ameren Illinois Co., 3.80%, 05/15/28 | | | | | | | 120 | | | | 121,171 | |
Consumers Energy Co., 4.05%, 05/15/48 | | | | | | | 45 | | | | 44,919 | |
Dominion Energy, Inc., 2.58%, 07/01/20 | | | | | | | 245 | | | | 241,407 | |
NiSource, Inc., 3.49%, 05/15/27 | | | | | | | 210 | | | | 200,804 | |
WEC Energy Group, Inc., 3.38%, 06/15/21 | | | | | | | 45 | | | | 45,128 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 653,429 | |
Oil, Gas & Consumable Fuels — 2.5% | | | | | | | | | |
Anadarko Petroleum Corp.: | | | | | | | | | | | | |
3.45%, 07/15/24 | | | | | | | 280 | | | | 269,050 | |
6.20%, 03/15/40 | | | | | | | 190 | | | | 214,065 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 15 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Oil, Gas & Consumable Fuels (continued) | | | | | | | | | |
Andeavor, 4.75%, 12/15/23 | | | USD | | | | 90 | | | $ | 93,395 | |
Andeavor Logistics LP: | | | | | | | | | | | | |
5.50%, 10/15/19 | | | | | | | 245 | | | | 251,125 | |
3.50%, 12/01/22 | | | | | | | 180 | | | | 175,874 | |
5.20%, 12/01/47 | | | | | | | 170 | | | | 163,972 | |
Apache Corp.: | | | | | | | | | | | | |
2.63%, 01/15/23 | | | | | | | 181 | | | | 171,788 | |
4.25%, 01/15/44 | | | | | | | 390 | | | | 344,799 | |
BP Capital Markets plc: | | | | | | | | | | | | |
2.32%, 02/13/20 | | | | | | | 1,125 | | | | 1,114,204 | |
3.22%, 04/14/24 | | | | | | | 120 | | | | 117,743 | |
Buckeye Partners LP, 4.88%, 02/01/21 | | | | | | | 360 | | | | 366,302 | |
Cenovus Energy, Inc., 4.25%, 04/15/27 | | | | | | | 260 | | | | 250,430 | |
Cimarex Energy Co.: | | | | | | | | | | | | |
4.38%, 06/01/24 | | | | | | | 160 | | | | 161,320 | |
3.90%, 05/15/27 | | | | | | | 200 | | | | 192,042 | |
Concho Resources, Inc., 3.75%, 10/01/27 | | | | | | | 330 | | | | 317,442 | |
Continental Resources, Inc., 4.50%, 04/15/23 | | | | | | | 613 | | | | 622,062 | |
Devon Energy Corp., 4.00%, 07/15/21 | | | | | | | 100 | | | | 101,263 | |
Enbridge, Inc.: | | | | | | | | | | | | |
2.90%, 07/15/22 | | | | | | | 205 | | | | 199,113 | |
3.70%, 07/15/27 | | | | | | | 165 | | | | 156,356 | |
(LIBOR USD 3 Month + 3.42%), 5.50%, 07/15/77(a) | | | | | | | 170 | | | | 154,912 | |
Energy Transfer Partners LP, 6.50%, 02/01/42 | | | | | | | 340 | | | | 350,302 | |
Enterprise Products Operating LLC: | | | | | | | | | | | | |
5.10%, 02/15/45 | | | | | | | 38 | | | | 39,121 | |
4.90%, 05/15/46 | | | | | | | 177 | | | | 177,347 | |
EOG Resources, Inc.: | | | | | | | | | | | | |
2.45%, 04/01/20 | | | | | | | 343 | | | | 339,127 | |
4.15%, 01/15/26 | | | | | | | 85 | | | | 86,937 | |
Exxon Mobil Corp., 1.82%, 03/15/19 | | | | | | | 529 | | | | 526,336 | |
Hess Corp., 5.80%, 04/01/47 | | | | | | | 225 | | | | 232,502 | |
Kinder Morgan Energy Partners LP, 4.30%, 05/01/24 | | | | | | | 128 | | | | 127,860 | |
Kinder Morgan, Inc., 5.05%, 02/15/46 | | | | | | | 520 | | | | 482,551 | |
Marathon Petroleum Corp., 5.85%, 12/15/45 | | | | | | | 65 | | | | 68,813 | |
MPLX LP: | | | | | | | | | | | | |
4.13%, 03/01/27 | | | | | | | 210 | | | | 200,320 | |
5.20%, 03/01/47 | | | | | | | 68 | | | | 67,566 | |
Pioneer Natural Resources Co., 4.45%, 01/15/26 | | | | | | | 20 | | | | 20,566 | |
Plains All American Pipeline LP, 3.65%, 06/01/22 | | | | | | | 30 | | | | 29,407 | |
Resolute Energy Corp., 8.50%, 05/01/20 | | | | | | | 245 | | | | 244,388 | |
Sabine Pass Liquefaction LLC: | | | | | | | | | | | | |
5.75%, 05/15/24 | | | | | | | 360 | | | | 383,996 | |
5.88%, 06/30/26 | | | | | | | 130 | | | | 139,424 | |
Spectra Energy Partners LP, 4.50%, 03/15/45 | | | | | | | 230 | | | | 213,068 | |
Sunoco Logistics Partners Operations LP, 5.40%, 10/01/47 | | | | | | | 275 | | | | 252,860 | |
Tecpetrol SA, 4.88%, 12/12/22(b) | | | | | | | 65 | | | | 59,943 | |
TransCanada PipeLines Ltd.: | | | | | | | | | | | | |
2.50%, 08/01/22 | | | | | | | 389 | | | | 373,724 | |
4.88%, 05/15/48 | | | | | | | 110 | | | | 111,072 | |
Transcontinental Gas Pipe Line Co. LLC, 7.85%, 02/01/26 | | | | | | | 90 | | | | 109,074 | |
Valero Energy Corp., 3.65%, 03/15/25 | | | | | | | 305 | | | | 297,900 | |
Williams Partners LP: | | | | | | | | | | | | |
4.00%, 09/15/25 | | | | | | | 310 | | | | 302,987 | |
5.40%, 03/04/44 | | | | | | | 170 | | | | 175,171 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 10,849,619 | |
Paper & Forest Products — 0.0% | | | | | | | | | |
Georgia-Pacific LLC, 7.38%, 12/01/25 | | | | | | | 97 | | | | 118,150 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Pharmaceuticals — 0.6% | | | | | | | | | |
Allergan Finance LLC, 3.25%, 10/01/22 | | | USD | | | | 235 | | | $ | 228,314 | |
Allergan Funding SCS: | | | | | | | | | | | | |
3.00%, 03/12/20 | | | | | | | 789 | | | | 785,261 | |
3.80%, 03/15/25 | | | | | | | 500 | | | | 485,523 | |
GlaxoSmithKline Capital plc, 2.85%, 05/08/22 | | | | | | | 220 | | | | 216,277 | |
GlaxoSmithKline Capital, Inc., 3.88%, 05/15/28 | | | | | | | 100 | | | | 100,788 | |
Merck & Co., Inc., 3.60%, 09/15/42 | | | | | | | 25 | | | | 23,350 | |
Pfizer, Inc., 4.00%, 12/15/36 | | | | | | | 190 | | | | 190,085 | |
Shire Acquisitions Investments Ireland DAC, 1.90%, 09/23/19 | | | | | | | 740 | | | | 728,372 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,757,970 | |
Road & Rail — 0.2% | | | | | | | | | |
Burlington Northern Santa Fe LLC: | | | | | | | | | | | | |
4.15%, 04/01/45 | | | | | | | 20 | | | | 19,502 | |
4.70%, 09/01/45 | | | | | | | 35 | | | | 36,927 | |
4.13%, 06/15/47 | | | | | | | 120 | | | | 117,369 | |
CSX Corp., 4.25%, 11/01/66 | | | | | | | 59 | | | | 51,010 | |
Norfolk Southern Corp., 4.05%, 08/15/52 | | | | | | | 112 | | | | 102,142 | |
Penske Truck Leasing Co. LP, 3.40%, 11/15/26(b) | | | | | | | 273 | | | | 254,572 | |
Ryder System, Inc., 3.75%, 06/09/23 | | | | | | | 15 | | | | 14,988 | |
Union Pacific Corp.: | | | | | | | | | | | | |
3.38%, 02/01/35 | | | | | | | 27 | | | | 24,143 | |
3.60%, 09/15/37 | | | | | | | 230 | | | | 210,992 | |
3.88%, 02/01/55 | | | | | | | 134 | | | | 117,222 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 948,867 | |
Semiconductors & Semiconductor Equipment — 0.9% | |
Analog Devices, Inc.: | | | | | | | | | | | | |
2.50%, 12/05/21 | | | | | | | 215 | | | | 208,315 | |
3.90%, 12/15/25 | | | | | | | 20 | | | | 19,813 | |
3.50%, 12/05/26 | | | | | | | 330 | | | | 314,738 | |
5.30%, 12/15/45 | | | | | | | 10 | | | | 10,652 | |
Applied Materials, Inc., 4.35%, 04/01/47 | | | | | | | 69 | | | | 68,977 | |
Broadcom Corp.: | | | | | | | | | | | | |
2.38%, 01/15/20 | | | | | | | 1,073 | | | | 1,059,019 | |
3.00%, 01/15/22 | | | | | | | 1,165 | | | | 1,133,150 | |
3.63%, 01/15/24 | | | | | | | 70 | | | | 67,760 | |
Lam Research Corp.: | | | | | | | | | | | | |
2.75%, 03/15/20 | | | | | | | 121 | | | | 120,293 | |
2.80%, 06/15/21 | | | | | | | 116 | | | | 114,021 | |
QUALCOMM, Inc.: | | | | | | | | | | | | |
2.60%, 01/30/23 | | | | | | | 290 | | | | 277,308 | |
4.80%, 05/20/45 | | | | | | | 78 | | | | 78,004 | |
4.30%, 05/20/47 | | | | | | | 140 | | | | 130,245 | |
Texas Instruments, Inc., 4.15%, 05/15/48 | | | | | | | 70 | | | | 71,042 | |
Xilinx, Inc., 2.95%, 06/01/24 | | | | | | | 125 | | | | 118,896 | |
| | | | | | | | |
| | | | | | | | | | | 3,792,233 | |
Software — 0.8% | |
Autodesk, Inc., 3.50%, 06/15/27 | | | | | | | 425 | | | | 397,690 | |
Microsoft Corp.: | | | | | | | | | | | | |
3.50%, 02/12/35 | | | | | | | 231 | | | | 223,838 | |
3.45%, 08/08/36 | | | | | | | 455 | | | | 435,605 | |
4.25%, 02/06/47 | | | | | | | 495 | | | | 525,076 | |
Oracle Corp.: | | | | | | | | | | | | |
2.65%, 07/15/26 | | | | | | | 135 | | | | 124,501 | |
3.25%, 05/15/30 | | | | | | | 151 | | | | 141,448 | |
3.90%, 05/15/35 | | | | | | | 181 | | | | 175,485 | |
4.00%, 07/15/46 | | | | | | | 183 | | | | 172,675 | |
VMware, Inc., 2.30%, 08/21/20 | | | | | | | 1,115 | | | | 1,091,610 | |
| | | | | | | | |
| | | | | | | | | | | 3,287,928 | |
Specialty Retail — 0.1% | |
Home Depot, Inc. (The), 5.88%, 12/16/36 | | | | | | | 65 | | | | 78,886 | |
| | |
16 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Specialty Retail (continued) | |
Lowe’s Cos., Inc., 4.38%, 09/15/45 | | | USD | | | | 150 | | | $ | 149,449 | |
| | | | | | | | |
| | | | | | | | | | | 228,335 | |
Technology Hardware, Storage & Peripherals — 0.4% | |
Apple, Inc.: | | | | | | | | | | | | |
3.00%, 02/09/24 | | | | | | | 276 | | | | 270,323 | |
2.85%, 05/11/24 | | | | | | | 550 | | | | 532,490 | |
3.45%, 02/09/45 | | | | | | | 39 | | | | 34,855 | |
4.65%, 02/23/46 | | | | | | | 489 | | | | 526,800 | |
Dell International LLC, 8.35%, 07/15/46(b) | | | | | | | 37 | | | | 44,560 | |
Hewlett Packard Enterprise Co., 2.85%, 10/05/18 | | | | | | | 185 | | | | 185,269 | |
HP, Inc., 3.75%, 12/01/20 | | | | | | | 16 | | | | 16,126 | |
Xerox Corp., 3.63%, 03/15/23 | | | | | | | 69 | | | | 66,205 | |
| | | | | | | | |
| | | | | | | | | | | 1,676,628 | |
Thrifts & Mortgage Finance — 0.1% | |
BPCE SA, 3.00%, 05/22/22(b) | | | | | | | 330 | | | | 318,733 | |
| | | | | | | | |
Tobacco — 0.2% | |
BAT Capital Corp., 2.30%, 08/14/20(b) | | | | | | | 310 | | | | 302,940 | |
Reynolds American, Inc.: | | | | | | | | | | | | |
3.25%, 06/12/20 | | | | | | | 25 | | | | 24,974 | |
4.45%, 06/12/25 | | | | | | | 590 | | | | 593,778 | |
| | | | | | | | |
| | | | | | | | | | | 921,692 | |
Trading Companies & Distributors — 0.1% | |
Air Lease Corp., 2.63%, 07/01/22 | | | | | | | 175 | | | | 167,690 | |
Aviation Capital Group LLC, 2.88%, 09/17/18(b) | | | | | | | 160 | | | | 160,030 | |
GATX Corp.: | | | | | | | | | | | | |
2.60%, 03/30/20 | | | | | | | 59 | | | | 58,282 | |
3.85%, 03/30/27 | | | | | | | 86 | | | | 82,413 | |
| | | | | | | | |
| | | | | | | | | | | 468,415 | |
Wireless Telecommunication Services — 0.5% | |
Rogers Communications, Inc., 5.00%, 03/15/44 | | | | | | | 22 | | | | 22,849 | |
Sprint Spectrum Co. LLC(b): | | | | | | | | | | | | |
3.36%, 09/20/21 | | | | | | | 456 | | | | 450,685 | |
4.74%, 03/20/25 | | | | | | | 1,085 | | | | 1,076,645 | |
Vodafone Group plc: | | | | | | | | | | | | |
3.75%, 01/16/24 | | | | | | | 340 | | | | 337,094 | |
4.13%, 05/30/25 | | | | | | | 145 | | | | 144,449 | |
5.25%, 05/30/48 | | | | | | | 345 | | | | 344,045 | |
| | | | | | | | |
| | | | | | | | | | | 2,375,767 | |
| | | | | | | | |
Total Corporate Bonds — 28.3% (Cost: $125,753,702) | | | | 122,815,546 | |
| | | | | | | | |
|
Floating Rate Loan Interests — 1.5%(j) | |
|
Aerospace & Defense — 0.0% | |
TransDigm, Inc., Term Loan G, (LIBOR USD 1 Month + 2.50%), 4.59%, 08/22/24 | | | | | | | 215 | | | | 212,921 | |
| | | | | | | | |
Air Freight & Logistics — 0.0% | |
XPO Logistics, Inc., Term Loan B, (LIBOR USD 1 Month + 2.00%), 4.09%, 02/24/25 | | | | | | | 193 | | | | 190,766 | |
| | | | | | | | |
Building Products — 0.0% | |
Jeld-Wen, Inc., Term Loan, (LIBOR USD 3 Month + 2.00%), 4.33%, 12/14/24 | | | | | | | 109 | | | | 108,069 | |
| | | | | | | | |
Chemicals — 0.0% | |
Gates Global LLC, Term Loan B, 04/01/24(k) | | | | | | | 192 | | | | 191,727 | |
| | | | | | | | |
Construction & Engineering — 0.1% | |
Ply Gem, Inc., Term Loan B, (LIBOR USD 3 Month + 3.75%), 6.09%, 04/01/25 | | | | | | | 255 | | | | 254,204 | |
| | | | | | | | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Construction Materials — 0.1% | |
Summit Materials LLC, Term Loan B, (LIBOR USD 1 Month + 2.00%), 4.09%, 11/21/24 | | | USD | | | | 300 | | | $ | 298,478 | |
| | | | | | | | |
Containers & Packaging — 0.1% | |
Reynolds Group Holdings, Inc., 1st Lien Term Loan, (LIBOR USD 1 Month + 2.75%), 4.84%, 02/05/23 | | | | | | | 301 | | | | 300,472 | |
| | | | | | | | |
Diversified Financial Services — 0.1% | |
VICI Properties, Inc., Term Loan B, (LIBOR USD 1 Month + 2.00%), 4.08%, 12/20/24 | | | | | | | 302 | | | | 299,623 | |
| | | | | | | | |
Diversified Telecommunication Services — 0.1% | |
Level 3 Financing, Inc., Term Loan, (LIBOR USD 1 Month + 2.25%), 4.33%, 02/22/24 | | | | | | | 303 | | | | 301,964 | |
| | | | | | | | |
Electric Utilities — 0.1% | |
Vistra Operations Co. LLC, Term Loan B2, 12/14/23(k) | | | | | | | 128 | | | | 127,294 | |
Vistra Operations Co. LLC, Term Loan B3, (LIBOR USD 1 Month + 2.00%), 4.06% - 4.07%, 12/31/25 | | | | | | | 150 | | | | 148,917 | |
| | | | | | | | |
| | | | | | | | | | | 276,211 | |
Hotels, Restaurants & Leisure — 0.1% | |
MGM Growth Properties, Term Loan B, (LIBOR USD 1 Month + 2.00%), 4.09%, 03/21/25 | | | | | | | 258 | | | | 256,673 | |
Scientific Games International, Inc., Term Loan B, (LIBOR USD 3 Month + 2.75%), 4.84% - 4.91%, 08/14/24 | | | | | | | 192 | | | | 190,598 | |
| | | | | | | | |
| | | | | | | | | | | 447,271 | |
IT Services — 0.1% | | | | | | | | | |
First Data Corp., 1st Lien Term Loan, (LIBOR USD 1 Month + 2.00%), 4.09%, 04/26/24 | | | | | | | 303 | | | | 300,827 | |
| | | | | | | | |
Machinery — 0.1% | | | | | | | | | |
Robertshaw Holdings Corp., Term Loan B, (LIBOR USD 1 Month + 3.50%), 5.63%, 02/14/25 | | | | | | | 258 | | | | 256,933 | |
| | | | | | | | |
Media — 0.1% | | | | | | | | | |
Stars Group Holdings B.V., Term Loan, (LIBOR USD 3 Month + 3.50%), 06/27/25(k) | | | | | | | 537 | | | | 537,574 | |
| | | | | | | | |
Oil, Gas & Consumable Fuels — 0.0% | | | | | | | | | |
Midcoast Operating LP, Term Loan, 06/30/25(d)(k) | | | | | | | 130 | | | | 129,350 | |
| | | | | | | | |
Specialty Finance — 0.3% | | | | | | | | | |
LSTAR Securities Investments Ltd., Term Loan, (LIBOR USD 1 Month + 2.00%), 3.98% - 4.10%, 04/01/21(d) | | | | | | | 1,422 | | | | 1,416,859 | |
| | | | | | | | |
Thrifts and Mortgage Finance — 0.1% | | | | | | | | | |
Caliber Home Loans, Inc., Term Loan, (LIBOR USD 3 Month + 3.14%), 0.00%, 04/24/21 | | | | | | | 520 | | | | 519,720 | |
| | | | | | | | |
Trading Companies & Distributors — 0.1% | | | | | | | | | |
ABC Supply Co., Inc., Term Loan B, 4.09%, 10/31/23 | | | | | | | 62 | | | | 61,446 | |
Beacon Roofing Supply, Inc., Term Loan B, (LIBOR USD 1 Month + 2.25%), 4.28% - 6.00%, 01/02/25 | | | | | | | 171 | | | | 169,365 | |
Foundation Building Materials, Inc., 1st Lien Term Loan B, 05/09/25(k) | | | | | | | 135 | | | | 134,579 | |
SRS Distribution, Inc., Term Loan B, (LIBOR USD 3 Month + 3.25%), 5.58%, 05/23/25 | | | | | | | 100 | | | | 98,417 | |
| | | | | | | | |
| | | | | | | | | | | 463,807 | |
| | | | | | | | |
Total Floating Rate Loan Interests — 1.5% (Cost: $6,545,019) | | | | 6,506,776 | |
| | | | | | | | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 17 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Foreign Agency Obligations — 0.2% | |
|
Argentina — 0.1% | |
YPF SA: | | | | | | | | | | | | |
8.88%, 12/19/18(b) | | | USD | | | | 69 | | | $ | 70,035 | |
8.50%, 03/23/21(b) | | | | | | | 78 | | | | 79,287 | |
8.75%, 04/04/24(b) | | | | | | | 72 | | | | 71,136 | |
8.75%, 04/04/24 | | | | | | | 68 | | | | 67,184 | |
| | | | | | | | |
| | | | | | | | | | | 287,642 | |
Mexico — 0.1% | |
Petroleos Mexicanos: | | | | | | | | | | | | |
6.50%, 03/13/27 | | | | | | | 264 | | | | 270,711 | |
5.35%, 02/12/28(b) | | | | | | | 287 | | | | 271,731 | |
6.75%, 09/21/47 | | | | | | | 62 | | | | 58,460 | |
| | | | | | | | |
| | | | | | | | | | | 600,902 | |
| | | | | | | | |
Total Foreign Agency Obligations — 0.2% (Cost: $921,090) | | | | 888,544 | |
| | | | | | | | |
|
Foreign Government Obligations — 3.8% | |
| | | |
Argentina — 0.3% | | | | | | | | | |
Bonos de la Nacion Argentina con Ajuste por CER, 4.00%, 03/06/20 | | | ARS | | | | 1,374 | | | | 44,062 | |
Republic of Argentina: | | | | | | | | | | | | |
6.25%, 04/22/19 | | | USD | | | | 150 | | | | 150,601 | |
8.00%, 10/08/20 | | | | | | | 156 | | | | 161,293 | |
6.88%, 04/22/21 | | | | | | | 229 | | | | 225,565 | |
5.63%, 01/26/22 | | | | | | | 444 | | | | 414,918 | |
8.75%, 05/07/24 | | | | | | | 266 | | | | 275,523 | |
5.88%, 01/11/28 | | | | | | | 254 | | | | 206,375 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,478,337 | |
Brazil — 0.1% | | | | | | | | | |
Federative Republic of Brazil, 4.63%, 01/13/28 | | | | | | | 400 | | | | 361,000 | |
| | | | | | | | | | | | |
Colombia — 0.3% | | | | | | | | | |
Republic of Colombia: | | | | | | | | | | | | |
4.38%, 07/12/21 | | | | | | | 200 | | | | 204,100 | |
3.88%, 04/25/27 | | | | | | | 1,250 | | | | 1,208,750 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,412,850 | |
Dominican Republic — 0.1% | | | | | | | | | |
Dominican Republic, 5.95%, 01/25/27 | | | | | | | 234 | | | | 231,075 | |
| | | | | | | | | | | | |
Egypt — 0.1% | | | | | | | | | |
Arab Republic of Egypt: | | | | | | | | | | | | |
5.75%, 04/29/20 | | | | | | | 145 | | | | 146,782 | |
5.58%, 02/21/23(b) | | | | | | | 400 | | | | 379,000 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 525,782 | |
France — 0.3% | | | | | | | | | |
Republic of France, 0.00%, 02/25/20 | | | EUR | | | | 1,130 | | | | 1,332,084 | |
| | | | | | | | | | | | |
Germany — 0.3% | | | | | | | | | |
Federal Republic of Germany, 0.00%, 12/13/19 | | | | | | | 1,130 | | | | 1,332,851 | |
| | | | | | | | | | | | |
Hungary — 0.1% | | | | | | | | | |
Republic of Hungary, 5.38%, 03/25/24 | | | USD | | | | 280 | | | | 297,437 | |
| | | | | | | | | | | | |
Indonesia — 0.2% | | | | | | | | | |
Republic of Indonesia: | | | | | | | | | | | | |
8.38%, 09/15/26 | | | IDR | | | | 4,076,000 | | | | 289,416 | |
7.00%, 05/15/27 | | | | | | | 4,713,000 | | | | 308,664 | |
4.10%, 04/24/28 | | | USD | | | | 270 | | | | 260,899 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 858,979 | |
Japan — 0.3% | | | | | | | | | |
Japan Government Two Year Bond, 0.10%, 03/15/20 | | | JPY | | | | 151,350 | | | | 1,372,369 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Lebanon — 0.1% | | | | | | | | | |
Republic of Lebanon: | | | | | | | | | | | | |
6.10%, 10/04/22 | | | USD | | | | 111 | | | $ | 95,196 | |
6.25%, 11/04/24 | | | | | | | 164 | | | | 132,742 | |
6.85%, 03/23/27 | | | | | | | 30 | | | | 23,675 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 251,613 | |
Mexico — 0.8% | | | | | | | | | |
United Mexican States: | | | | | | | | | | | | |
4.15%, 03/28/27 | | | | | | | 2,661 | | | | 2,619,755 | |
3.75%, 01/11/28 | | | | | | | 736 | | | | 695,888 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 3,315,643 | |
Panama — 0.1% | | | | | | | | | |
Republic of Panama, 3.75%, 03/16/25 | | | | | | | 530 | | | | 523,375 | |
| | | | | | | | | | | | |
Peru — 0.1% | | | | | | | | | |
Republic of Peru, 7.35%, 07/21/25 | | | | | | | 217 | | | | 264,740 | |
| | | | | | | | | | | | |
Philippines — 0.1% | | | | | | | | | |
Republic of the Philippines, 3.00%, 02/01/28 | | | | | | | 610 | | | | 563,217 | |
| | | | | | | | | | | | |
Russia — 0.1% | | | | | | | | | |
Russian Federation, 4.25%, 06/23/27 | | | | | | | 400 | | | | 385,468 | |
| | | | | | | | | | | | |
Saudi Arabia — 0.1% | | | | | | | | | |
Kingdom of Saudi Arabia, 4.50%, 04/17/30(b) | | | | | | | 200 | | | | 199,767 | |
| | | | | | | | | | | | |
South Africa — 0.2% | | | | | | | | | |
Republic of South Africa: | | | | | | | | | | | | |
5.50%, 03/09/20 | | | | | | | 444 | | | | 455,219 | |
5.88%, 05/30/22 | | | | | | | 100 | | | | 104,625 | |
6.25%, 03/31/36 | | | ZAR | | | | 3,312 | | | | 174,501 | |
8.50%, 01/31/37 | | | | | | | 2,867 | | | | 189,398 | |
6.50%, 02/28/41 | | | | | | | 2,224 | | | | 115,643 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,039,386 | |
Turkey — 0.0% | | | | | | | | | |
Republic of Turkey, 5.13%, 02/17/28 | | | USD | | | | 200 | | | | 176,056 | |
| | | | | | | | | | | | |
Uruguay — 0.1% | | | | | | | | | |
Republic of Uruguay, 4.38%, 10/27/27 | | | | | | | 348 | | | | 352,190 | |
| | | | | | | | | | | | |
Total Foreign Government Obligations — 3.8% (Cost: $17,013,090) | | | | 16,274,219 | |
| | | | | | | | | | | | |
|
Municipal Bonds — 5.4% | |
Alamo Community College District; | | | | | | | | | | | | |
Series 2017, GO, 5.00%, 08/15/35 | | | | | | | 40 | | | | 46,512 | |
Series 2017, GO, 5.00%, 08/15/36 | | | | | | | 50 | | | | 57,966 | |
Series 2017, GO, 5.00%, 08/15/37 | | | | | | | 60 | | | | 69,508 | |
Series 2017, GO, 5.00%, 08/15/38 | | | | | | | 50 | | | | 57,880 | |
American Municipal Power, Inc. (Combined Hyroelectric Project); | | | | | | | | | | | | |
Series 2009C, RB, 6.05%, 02/15/43 | | | | | | | 90 | | | | 113,595 | |
Series 2009B, RB, 6.45%, 02/15/44 | | | | | | | 30 | | | | 39,252 | |
Arizona Health Facilities Authority (Banner Health), Series 2007B, RB, VRDN, 2.36%, 01/01/37(l) | | | | | | | 35 | | | | 33,083 | |
Arizona State University, Series 2017B, RB, 5.00%, 07/01/43 | | | | | | | 40 | | | | 46,129 | |
Bay Area Toll Authority; | | | | | | | | | | | | |
Series 2010S-1, RB, 6.92%, 04/01/40 | | | | | | | 90 | | | | 124,026 | |
Series 2010S-1, RB, 7.04%, 04/01/50 | | | | | | | 300 | | | | 438,726 | |
Berks County Industrial Development Authority (Tower Health Project); | | | | | | | | | | | | |
Series 2017, RB, 5.00%, 11/01/47 | | | | | | | 60 | | | | 66,402 | |
Series 2017, RB, 5.00%, 11/01/50 | | | | | | | 60 | | | | 66,152 | |
Buckeye Tobacco Settlement Financing Authority, Series 2007A-2, RB, 5.88%, 06/01/47 | | | | | | | 180 | | | | 180,769 | |
| | |
18 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Municipal Bonds (continued) | |
Buena Park School District, Series 2018, GO, 5.00%, 08/01/47 | | | USD | | | | 30 | | | $ | 34,582 | |
California Health Facilities Financing Authority (Cedars- Sinai Medical Center); | | | | | | | | | | | | |
Series 2016A, RB, 5.00%, 08/15/33 | | | | | | | 40 | | | | 46,506 | |
Series 2017A, RB, 5.00%, 08/15/47 | | | | | | | 60 | | | | 66,773 | |
California Infrastructure & Economic Development Bank; | | | | | | | | | | | | |
Series 2017, RB, 5.00%, 05/15/47 | | | | | | | 20 | | | | 23,153 | |
Series 2017, RB, 5.00%, 05/15/52 | | | | | | | 20 | | | | 23,135 | |
California State Public Works Board (Various Capital Projects), Series 2009G, Sub-series G-2, RB, 8.36%, 10/01/34 | | | | | | | 35 | | | | 51,865 | |
Central Puget Sound Regional Transit Authority, Series 2015S-1, RB, 5.00%, 11/01/50 | | | | | | | 60 | | | | 67,127 | |
Central Texas Regional Mobility Authority; | | | | | | | | | | | | |
Series 2015A, RB, 5.00%, 01/01/45 | | | | | | | 30 | | | | 32,731 | |
Series 2016, RB, 5.00%, 01/01/46 | | | | | | | 30 | | | | 32,799 | |
Chesapeake Bay Bridge & Tunnel District (Parallel Thimble Shoal Tunnel Project); | | | | | | | | | | | | |
Series 2016, RB, 5.00%, 07/01/41 | | | | | | | 30 | | | | 33,558 | |
Series 2016, RB, 5.00%, 07/01/51 | | | | | | | 25 | | | | 27,413 | |
City & County of Denver, Series 2016A, RB, 5.00%, 08/01/44 | | | | | | | 100 | | | | 113,483 | |
City & County of Denver Airport System; | | | | | | | | | | | | |
Series 2017A, RB, 5.00%, 11/15/28 | | | | | | | 40 | | | | 46,206 | |
Series 2017A, RB, 5.00%, 11/15/29 | | | | | | | 40 | | | | 46,066 | |
Series 2017A, RB, 5.00%, 11/15/30 | | | | | | | 30 | | | | 34,470 | |
City of Atlanta; | | | | | | | | | | | | |
Series 2015, RB, 5.00%, 11/01/40 | | | | | | | 30 | | | | 33,757 | |
Series 2018A, RB, 5.00%, 11/01/41 | | | | | | | 90 | | | | 104,309 | |
City of Aurora; | | | | | | | | | | | | |
Series 2016, RB, 5.00%, 08/01/41 | | | | | | | 120 | | | | 136,915 | |
Series 2016, RB, 5.00%, 08/01/46 | | | | | | | 130 | | | | 147,826 | |
City of Austin Water & Wastewater System, Series 2014, RB, 5.00%, 11/15/43 | | | | | | | 60 | | | | 66,853 | |
City of Cartersville, Series 2018, RB, 5.00%, 06/01/48 | | | | | | | 60 | | | | 69,385 | |
City of Colorado Springs Utilities System, Series 2017A-2, RB, 5.00%, 11/15/42 | | | | | | | 30 | | | | 34,787 | |
City of Columbia; | | | | | | | | | | | | |
Series 2018, RB, 5.00%, 02/01/42 | | | | | | | 40 | | | | 46,761 | |
Series 2018, RB, 5.00%, 02/01/48 | | | | | | | 50 | | | | 58,179 | |
City of Los Angeles Department of Airports, Series 2018A, RB, 5.00%, 05/15/44 | | | | | | | 30 | | | | 34,318 | |
City of New York; | | | | | | | | | | | | |
Series 2018F, Sub-series F-1, GO, 5.00%, 04/01/40 | | | | | | | 90 | | | | 104,365 | |
Series 2018F, Sub-series F-1, GO, 5.00%, 04/01/45 | | | | | | | 120 | | | | 138,498 | |
City of Riverside, Series 2010A, RB, 7.61%, 10/01/40 | | | | | | | 50 | | | | 73,086 | |
City of San Antonio, Series 2015B, RB, 5.00%, 05/15/39 | | | | | | | 150 | | | | 168,486 | |
Clark County School District; | | | | | | | | | | | | |
Series 2018A, GO, 5.00%, 06/15/30 | | | | | | | 60 | | | | 69,863 | |
Series 2018A, GO, 5.00%, 06/15/31 | | | | | | | 70 | | | | 81,311 | |
Series 2018A, GO, 5.00%, 06/15/33 | | | | | | | 70 | | | | 80,793 | |
Colorado Health Facilities Authority (Catholic Health Initiatives), Series 2011A, RB, 5.25%, 02/01/31 | | | | | | | 25 | | | | 26,359 | |
Commonwealth Financing Authority; | | | | | | | | | | | | |
Series 2018A, RB, 3.86%, 06/01/38 | | | | | | | 80 | | | | 78,314 | |
Series 2016A, RB, 4.14%, 06/01/38 | | | | | | | 60 | | | | 60,508 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Municipal Bonds (continued) | |
Commonwealth of Massachusetts; | | | | | | | | | | | | |
Series 2017F, GO, 5.00%, 11/01/42 | | | USD | | | | 70 | | | $ | 80,699 | |
Series 2018A, GO, 5.00%, 01/01/45 | | | | | | | 80 | | | | 92,206 | |
Series 2017F, GO, 5.00%, 11/01/45 | | | | | | | 60 | | | | 69,013 | |
Commonwealth of Puerto Rico, Series 2014A, GO, 8.00%, 07/01/35(g)(h) | | | | | | | 410 | | | | 166,050 | |
Connecticut State Health & Educational Facilities Authority (Hartford Healthcare Corp.); | | | | | | | | | | | | |
Series 2015F, RB, 5.00%, 07/01/45 | | | | | | | 60 | | | | 65,153 | |
Series 2015L, RB, 5.00%, 07/01/45 | | | | | | | 90 | | | | 98,721 | |
Contra Costa Community College District, Series 2010B, GO, 6.50%, 08/01/34 | | | | | | | 10 | | | | 12,678 | |
County of Anne Arundel, Series 2018, GO, 5.00%, 10/01/47 | | | | | | | 60 | | | | 69,728 | |
County of Clark; | | | | | | | | | | | | |
Series 2018A, GO, 5.00%, 06/01/43 | | | | | | | 110 | | | | 127,307 | |
Series 2018A, GO, 5.00%, 05/01/48 | | | | | | | 210 | | | | 242,075 | |
County of Franklin; | | | | | | | | | | | | |
Series 2018, RB, 5.00%, 06/01/43 | | | | | | | 50 | | | | 58,611 | |
Series 2018, RB, 5.00%, 06/01/48 | | | | | | | 100 | | | | 116,755 | |
County of King; | | | | | | | | | | | | |
Series 2017, RB, 5.00%, 07/01/42 | | | | | | | 40 | | | | 46,163 | |
Series 2015A, RB, 5.00%, 07/01/47 | | | | | | | 60 | | | | 66,734 | |
County of Miami-Dade; | | | | | | | | | | | | |
Series 2016B, RB, 2.50%, 10/01/24 | | | | | | | 80 | | | | 76,246 | |
Series 2017D, RB, 3.35%, 10/01/29 | | | | | | | 20 | | | | 19,325 | |
Series 2017D, RB, 3.45%, 10/01/30 | | | | | | | 35 | | | | 33,959 | |
Series 2017D, RB, 3.50%, 10/01/31 | | | | | | | 30 | | | | 29,128 | |
Series 2016A, GO, 5.00%, 07/01/35 | | | | | | | 20 | | | | 22,824 | |
Series 2015A, RB, 5.00%, 10/01/38 | | | | | | | 10 | | | | 10,972 | |
Series 2017B, RB, 5.00%, 10/01/40 | | | | | | | 60 | | | | 67,811 | |
Dallas Area Rapid Transit; | | | | | | | | | | | | |
Series 2016A, RB, 5.00%, 12/01/41 | | | | | | | 60 | | | | 67,792 | |
Series 2016A, RB, 5.00%, 12/01/46 | | | | | | | 90 | | | | 101,370 | |
District of Columbia, Series 2017D, GO, 5.00%, 06/01/42 | | | | | | | 75 | | | | 86,335 | |
District of Columbia Water & Sewer Authority, Series 2018B, RB, 5.00%, 10/01/49 | | | | | | | 50 | | | | 58,026 | |
Dutchess County Local Development Corp. (Health Quest Systems, Inc. Project), Series 2016B, RB, 5.00%, 07/01/46 | | | | | | | 100 | | | | 110,381 | |
Florida State Board of Administration Finance Corp., Series 2016A, RB, 2.64%, 07/01/21 | | | | | | | 150 | | | | 148,599 | |
Golden State Tobacco Securitization Corp., Series 2007A-1, RB, 5.13%, 06/01/47 | | | | | | | 140 | | | | 140,001 | |
Grant County Public Utility District No. 2 (The Priest Rapids Project), Series 2015M, RB, 4.58%, 01/01/40 | | | | | | | 15 | | | | 15,705 | |
Great Lakes Water Authority Michigan Water Supply System, Series 2016C, RB, 5.25%, 07/01/33 | | | | | | | 20 | | | | 23,224 | |
Health & Educational Facilities Authority of the State of Missouri (Saint Luke’s Health System, Inc.); | | | | | | | | | | | | |
Series 2016, RB, 5.00%, 11/15/29 | | | | | | | 25 | | | | 28,536 | |
Series 2016A, RB, 3.65%, 01/15/46 | | | | | | | 40 | | | | 38,639 | |
Series 2016B, RB, 3.09%, 09/15/51 | | | | | | | 160 | | | | 136,710 | |
Series 2017A, RB, 3.65%, 08/15/57 | | | | | | | 155 | | | | 146,478 | |
JobsOhio Beverage System, Series 2013B, RB, 3.99%, 01/01/29 | | | | | | | 95 | | | | 97,687 | |
Kentucky Economic Development Finance Authority (Owensboro Health, Inc.), Series 2015A, RB, 5.25%, 06/01/50 | | | | | | | 30 | | | | 32,131 | |
Lexington County Health Services District, Inc., Series 2016, RB, 5.00%, 11/01/41 | | | | | | | 30 | | | | 32,906 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 19 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Municipal Bonds (continued) | |
Los Angeles Community College District, Series 2010E, GO, 6.60%, 08/01/42 | | | USD | | | | 190 | | | $ | 265,504 | |
Los Angeles County Metropolitan Transportation Authority, Series 2017A, RB, 5.00%, 07/01/42 | | | | | | | 90 | | | | 104,869 | |
Los Angeles Department of Water & Power System, Series 2010A, RB, 6.60%, 07/01/50 | | | | | | | 30 | | | | 43,426 | |
Los Angeles Unified School District, Series 2010I, GO, 6.76%, 07/01/34 | | | | | | | 150 | | | | 198,390 | |
Maryland Stadium Authority (Baltimore City Public Schools Construction & Revitalization Program), Series 2016, RB, 5.00%, 05/01/41 | | | | | | | 50 | | | | 56,370 | |
Massachusetts Bay Transportation Authority; | | | | | | | | | | | | |
Series 2017A, Sub-Series A-1, RB, 5.00%, 07/01/39 | | | | | | | 30 | | | | 34,546 | |
Series 2017A, Sub-Series A-1, RB, 5.00%, 07/01/40 | | | | | | | 30 | | | | 34,495 | |
Series 2017A, Sub-Series A-1, RB, 5.00%, 07/01/41 | | | | | | | 40 | | | | 45,926 | |
Series 2017A, Sub-Series A-1, RB, 5.00%, 07/01/42 | | | | | | | 40 | | | | 45,892 | |
Series 2017A, Sub-Series A-2, RB, 5.00%, 07/01/43 | | | | | | | 30 | | | | 34,393 | |
Massachusetts Development Finance Agency (Partners Healthcare System Issue); | | | | | | | | | | | | |
Series 2018J-2, RB, 5.00%, 07/01/43 | | | | | | | 30 | | | | 33,313 | |
Series 2017, RB, 5.00%, 09/01/45 | | | | | | | 30 | | | | 33,977 | |
Series 2016Q, RB, 5.00%, 07/01/47 | | | | | | | 50 | | | | 55,448 | |
Series 2018J-2, RB, 5.00%, 07/01/48 | | | | | | | 150 | | | | 165,772 | |
Series 2018J-2, RB, 5.00%, 07/01/53 | | | | | | | 60 | | | | 65,888 | |
Massachusetts Housing Finance Agency; | | | | | | | | | | | | |
Series 2014B, RB, 4.50%, 12/01/39 | | | | | | | 30 | | | | 31,196 | |
Series 2014B, RB, 4.60%, 12/01/44 | | | | | | | 40 | | | | 41,630 | |
Series 2015A, RB, 4.50%, 12/01/48 | | | | | | | 40 | | | | 41,625 | |
Massachusetts Port Authority, Series 2016B, RB, 5.00%, 07/01/43 | | | | | | | 50 | | | | 55,930 | |
Massachusetts School Building Authority, Series 2018A, RB, 5.25%, 02/15/48 | | | | | | | 85 | | | | 100,637 | |
Massachusetts Water Resources Authority, Series 2016C, RB, 5.00%, 08/01/40 | | | | | | | 30 | | | | 34,437 | |
Mesquite Independent School District, Series 2017B, GO, 5.00%, 08/15/42 | | | | | | | 60 | | | | 68,401 | |
Metropolitan Atlanta Rapid Transit Authority; | | | | | | | | | | | | |
Series 2015A, RB, 5.00%, 07/01/41 | | | | | | | 60 | | | | 67,642 | |
Series 2015A, RB, 5.00%, 07/01/42 | | | | | | | 60 | | | | 67,601 | |
Series 2015B, RB, 5.00%, 07/01/45 | | | | | | | 50 | | | | 57,023 | |
Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board (Vanderbilt University Medical Center), Series 2016A, RB, 5.00%, 07/01/46 | | | | | | | 60 | | | | 66,405 | |
Metropolitan St. Louis Sewer District; | | | | | | | | | | | | |
Series 2017A, RB, 5.00%, 05/01/42 | | | | | | | 80 | | | | 92,661 | |
Series 2017A, RB, 5.00%, 05/01/47 | | | | | | | 80 | | | | 92,392 | |
Metropolitan Transportation Authority; | | | | | | | | | | | | |
Series 2010A, RB, 6.67%, 11/15/39 | | | | | | | 55 | | | | 73,320 | |
Series 2010C-1, RB, 6.69%, 11/15/40 | | | | | | | 30 | | | | 39,935 | |
Series 2017A, RB, 5.00%, 11/15/42 | | | | | | | 60 | | | | 68,677 | |
Series 2017A, Sub-Series A-1, RB, 5.25%, 11/15/57 | | | | | | | 80 | | | | 91,047 | |
Metropolitan Washington Airports Authority (Dulles Metrorail and Capital Improvement Project); | | | | | | | | | | | | |
Series 2016A, RB, 5.00%, 10/01/32 | | | | | | | 90 | | | | 102,703 | |
Series 2018A, RB, 5.00%, 10/01/43(m) | | | | | | | 90 | | | | 103,288 | |
Series 2009D, RB, 7.46%, 10/01/46 | | | | | | | 30 | | | | 44,075 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Municipal Bonds (continued) | |
Miami-Dade County Educational Facilities Authority (University of Miami Issue); | | | | | | | | | | | | |
Series 2018A, RB, 5.00%, 04/01/48 | | | USD | | | | 60 | | | $ | 67,585 | |
Series 2015B, RB, 5.07%, 04/01/50 | | | | | | | 30 | | | | 33,668 | |
Series 2018A, RB, 5.00%, 04/01/53 | | | | | | | 120 | | | | 134,327 | |
Michigan Finance Authority (Henry Ford Health System); | | | | | | | | | | | | |
Series 2016, RB, 5.00%, 11/15/41 | | | | | | | 30 | | | | 33,215 | |
Series 2017A-MI, RB, 5.00%, 12/01/47 | | | | | | | 190 | | | | 205,504 | |
Michigan State Housing Development Authority; | | | | | | | | | | | | |
Series 2018B, RB, 3.55%, 10/01/33(m) | | | | | | | 30 | | | | 30,069 | |
Series 2018A, RB, 4.00%, 10/01/43 | | | | | | | 30 | | | | 30,137 | |
Series 2018A, RB, 4.05%, 10/01/48 | | | | | | | 20 | | | | 20,091 | |
Series 2018A, RB, 4.15%, 10/01/53 | | | | | | | 80 | | | | 80,362 | |
Mississippi Hospital Equipment & Facilities Authority (Baptist Memorial Health Corp.), Series 2016A, RB, 5.00%, 09/01/46 | | | | | | | 60 | | | | 64,399 | |
Municipal Electric Authority of Georgia (Plant Vogtle Units 3&4 Units Project), Series 2010A, RB, 6.64%, 04/01/57 | | | | | | | 40 | | | | 50,576 | |
New Jersey Transportation Trust Fund Authority; | | | | | | | | | | | | |
Series 2010C, RB, 6.10%, 12/15/28 | | | | | | | 135 | | | | 141,854 | |
Series 2016A, Sub-Series A-1, RB, 5.00%, 06/15/29 | | | | | | | 30 | | | | 32,816 | |
New Jersey Turnpike Authority, Series 2009F, RB, 7.41%, 01/01/40 | | | | | | | 60 | | | | 87,260 | |
New Orleans Aviation Board (North Terminal Project), Series 2015B, RB, 5.00%, 01/01/40 | | | | | | | 50 | | | | 54,444 | |
New York City Housing Development Corp.; | | | | | | | | | | | | |
Series 2018C-1-A, RB, 3.70%, 11/01/38 | | | | | | | 40 | | | | 40,188 | |
Series 2018C-1-B, RB, 3.85%, 11/01/43 | | | | | | | 110 | | | | 110,439 | |
Series 2018C-1-A, RB, 3.95%, 11/01/48 | | | | | | | 40 | | | | 40,213 | |
Series 2018C-1-A, RB, 4.00%, 11/01/53 | | | | | | | 120 | | | | 120,636 | |
New York City Municipal Water Finance Authority; | | | | | | | | | | | | |
Series 2018FF, RB, 5.00%, 06/15/39 | | | | | | | 120 | | | | 139,950 | |
Series 2018FF, RB, 5.00%, 06/15/40 | | | | | | | 90 | | | | 104,879 | |
Series 2010AA, RB, 5.75%, 06/15/41 | | | | | | | 35 | | | | 44,150 | |
Series 2010EE, RB, 6.01%, 06/15/42 | | | | | | | 25 | | | | 32,486 | |
Series 2011EE, RB, 5.38%, 06/15/43 | | | | | | | 200 | | | | 216,910 | |
Series 2011EE, RB, 5.50%, 06/15/43 | | | | | | | 240 | | | | 261,127 | |
Series 2011CC, RB, 5.88%, 06/15/44 | | | | | | | 40 | | | | 52,057 | |
Series 2017DD, RB, 5.00%, 06/15/47 | | | | | | | 70 | | | | 79,541 | |
New York City Transitional Finance Authority, Series 2018, Sub-series C-4, RB, 3.55%, 05/01/25 | | | | | | | 170 | | | | 170,774 | |
New York City Transitional Finance Authority Building Aid, Series 2015S-2, RB, 5.00%, 07/15/40 | | | | | | | 30 | | | | 33,738 | |
New York City Transitional Finance Authority Future Tax Secured; | | | | | | | | | | | | |
Series 2017F, Sub-Series F-2, RB, 3.05%, 05/01/27 | | | | | | | 160 | | | | 153,621 | |
Series 2017B, RB, 5.00%, 08/01/31 | | | | | | | 20 | | | | 23,161 | |
Series 2016E, Sub-Series E-1, RB, 5.00%, 02/01/35 | | | | | | | 40 | | | | 45,415 | |
Series 2017A, Sub-Series A-1, RB, 5.00%, 05/01/36 | | | | | | | 40 | | | | 45,543 | |
New York Convention Center Development Corp.; | | | | | | | | | | | | |
Series 2015, RB, 5.00%, 11/15/40 | | | | | | | 30 | | | | 33,790 | |
Series 2016A, RB, 5.00%, 11/15/46 | | | | | | | 90 | | | | 101,947 | |
New York Liberty Development Corp., Series 2005, RB, 5.25%, 10/01/35 | | | | | | | 40 | | | | 49,653 | |
New York State Dormitory Authority; | | | | | | | | | | | | |
Series 2016A, RB, 5.00%, 02/15/31 | | | | | | | 30 | | | | 34,879 | |
Series 2015B, RB, 5.00%, 03/15/32 | | | | | | | 40 | | | | 45,925 | |
| | |
20 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Municipal Bonds (continued) | |
Series 2017B, RB, 5.00%, 02/15/36 | | | USD | | | | 60 | | | $ | 69,249 | |
Series 2017B, RB, 5.00%, 02/15/37 | | | | | | | 30 | | | | 34,599 | |
Series 2017B, RB, 5.00%, 02/15/38 | | | | | | | 30 | | | | 34,573 | |
Series 2018B, RB, 5.00%, 10/01/38 | | | | | | | 90 | | | | 106,696 | |
Series 2017B, RB, 5.00%, 02/15/39 | | | | | | | 30 | | | | 34,470 | |
Series 2018A, RB, 5.00%, 03/15/39 | | | | | | | 90 | | | | 104,637 | |
Series 2017B, RB, 5.00%, 02/15/40 | | | | | | | 30 | | | | 34,444 | |
Series 2010H, RB, 5.39%, 03/15/40 | | | | | | | 60 | | | | 71,573 | |
Series 2017B, RB, 5.00%, 02/15/41 | | | | | | | 60 | | | | 68,735 | |
Series 2018A, RB, 5.00%, 03/15/41 | | | | | | | 60 | | | | 69,649 | |
Series 2017B, RB, 5.00%, 02/15/42 | | | | | | | 80 | | | | 91,578 | |
Series 2018A, RB, 5.00%, 03/15/42 | | | | | | | 60 | | | | 69,593 | |
Series 2017B, RB, 5.00%, 02/15/43 | | | | | | | 40 | | | | 45,755 | |
Series 2017A, RB, 5.00%, 03/15/43 | | | | | | | 60 | | | | 68,731 | |
Series 2018A, RB, 5.00%, 03/15/43 | | | | | | | 60 | | | | 69,539 | |
Series 2018A, RB, 5.00%, 10/01/48 | | | | | | | 40 | | | | 53,132 | |
New York State Urban Development Corp.; | | | | | | | | | | | | |
Series 2017B, RB, 2.86%, 03/15/24 | | | | | | | 190 | | | | 186,375 | |
Series 2017B, RB, 3.12%, 03/15/25 | | | | | | | 100 | | | | 98,510 | |
Series 2017D, RB, 3.32%, 03/15/29 | | | | | | | 140 | | | | 133,885 | |
New York Transportation Development Corp. (LaGuardia Airport Terminal B Redevelopment Project); | | | | | | | | | | | | |
Series 2016A, RB, 5.00%, 07/01/46 | | | | | | | 30 | | | | 32,347 | |
Series 2016A, RB, 5.25%, 01/01/50 | | | | | | | 340 | | | | 370,005 | |
Ohio Turnpike & Infrastructure Commission, Series 2013A, RB, 5.00%, 02/15/48 | | | | | | | 60 | | | | 65,189 | |
Omaha Public Power District, Series 2017A, RB, 5.00%, 02/01/42 | | | | | | | 70 | | | | 81,092 | |
Orange County Local Transportation Authority, Series 2010A, RB, 6.91%, 02/15/41 | | | | | | | 75 | | | | 101,547 | |
Oregon School Boards Association; | | | | | | | | | | | | |
Series 2002B, GO, 5.48%, 06/30/22 | | | | | | | 170 | | | | 184,659 | |
Series 2002B, GO, 5.49%, 06/30/23 | | | | | | | 245 | | | | 270,286 | |
Series 2005A, GO, 4.76%, 06/30/28 | | | | | | | 160 | | | | 172,328 | |
Pennsylvania State University; | | | | | | | | | | | | |
Series 2018, RB, 5.00%, 09/01/43 | | | | | | | 40 | | | | 46,618 | |
Series 2018, RB, 5.00%, 09/01/48 | | | | | | | 50 | | | | 57,988 | |
Port Authority of New York & New Jersey; | | | | | | | | | | | | |
Series 181, RB, 4.96%, 08/01/46 | | | | | | | 170 | | | | 200,923 | |
Series 180-1, RB, 5.00%, 11/15/47 | | | | | | | 30 | | | | 33,796 | |
Series 174, RB, 4.46%, 10/01/62 | | | | | | | 115 | | | | 122,138 | |
Series 192, RB, 4.81%, 10/15/65 | | | | | | | 60 | | | | 67,525 | |
Public Power Generation Agency, Series 2016A, RB, 5.00%, 01/01/35 | | | | | | | 40 | | | | 44,983 | |
Royal Oak Hospital Finance Authority (William Beaumont Hospital Obligated Group), Series 2014D, RB, 5.00%, 09/01/39 | | | | | | | 40 | | | | 43,808 | |
Sacramento County Sanitation Districts Financing Authority, Series 2035B, RB, VRDN, 2.07%, 12/01/35(l) | | | | | | | 60 | | | | 58,060 | |
Salt Lake City Corp.; | | | | | | | | | | | | |
Series 2017A, RB, 5.00%, 07/01/47 | | | | | | | 105 | | | | 117,924 | |
Series 2017B, RB, 5.00%, 07/01/47 | | | | | | | 50 | | | | 57,154 | |
Salt River Project Agricultural Improvement & Power District, Series 2015A, RB, 5.00%, 12/01/45 | | | | | | | 220 | | | | 248,299 | |
San Antonio Electric & Gas; | | | | | | | | | | | | |
Series 2010A, RB, 5.81%, 02/01/41 | | | | | | | 90 | | | | 112,395 | |
Series 2013, RB, 5.00%, 02/01/48(m) | | | | | | | 45 | | | | 48,983 | |
San Diego County Regional Airport Authority, Series 2017A, RB, 5.00%, 07/01/47 | | | | | | | 50 | | | | 57,450 | |
San Diego Public Facilities Financing Authority, Series 2016A, RB, 5.00%, 05/15/39 | | | | | | | 50 | | | | 58,062 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Municipal Bonds (continued) | |
San Diego Unified School District, Series 2017I, GO, 5.00%, 07/01/41 | | | USD | | | | 80 | | | $ | 93,770 | |
San Francisco City & County Airport Comm-San Francisco International Airport; | | | | | | | | | | | | |
Series 2016B, RB, 5.00%, 05/01/41 | | | | | | | 30 | | | | 33,623 | |
Series 2016B, RB, 5.00%, 05/01/46 | | | | | | | 110 | | | | 122,883 | |
Series 2017A, RB, 5.00%, 05/01/47 | | | | | | | 70 | | | | 79,046 | |
San Jose Redevelopment Agency Successor Agency, Series 2017A-T, 2.96%, 08/01/24 | | | | | | | 250 | | | | 245,925 | |
South Carolina Public Service Authority; | | | | | | | | | | | | |
Series 2016D, RB, 2.39%, 12/01/23 | | | | | | | 292 | | | | 272,071 | |
Series 2012E, RB, 3.72%, 12/01/23 | | | | | | | 80 | | | | 79,214 | |
Series 2014A, RB, 5.00%, 12/01/49 | | | | | | | 60 | | | | 63,615 | |
Series 2010C, RB, 6.45%, 01/01/50 | | | | | | | 136 | | | | 182,943 | |
Series 2015A, RB, 5.00%, 12/01/50 | | | | | | | 60 | | | | 64,112 | |
State Board of Administration Finance Corp., Series 2013A, RB, 3.00%, 07/01/20(m) | | | | | | | 130 | | | | 130,367 | |
State of California; | | | | | | | | | | | | |
Series 2017, GO, 2.25%, 10/01/23 | | | | | | | 255 | | | | 243,660 | |
Series 2009, GO, 7.50%, 04/01/34 | | | | | | | 60 | | | | 84,269 | |
Series 2018, GO, 4.60%, 04/01/38 | | | | | | | 420 | | | | 439,942 | |
Series 2009, GO, 7.55%, 04/01/39 | | | | | | | 85 | | | | 125,344 | |
Series 2009, GO, 7.30%, 10/01/39 | | | | | | | 85 | | | | 120,428 | |
Series 2009, GO, 7.35%, 11/01/39 | | | | | | | 40 | | | | 56,939 | |
State of Connecticut, Series 2017A, GO, 3.31%, 01/15/26 | | | | | | | 155 | | | | 150,829 | |
State of Illinois; | | | | | | | | | | | | |
Series 2018A, GO, 5.00%, 05/01/20 | | | | | | | 50 | | | | 51,619 | |
Series 2017D, GO, 5.00%, 11/01/22 | | | | | | | 60 | | | | 63,434 | |
Series 2017D, GO, 5.00%, 11/01/24 | | | | | | | 150 | | | | 159,598 | |
Series 2017A, GO, 5.00%, 12/01/24 | | | | | | | 30 | | | | 31,925 | |
Series 2017D, GO, 5.00%, 11/01/25 | | | | | | | 400 | | | | 425,692 | |
Series 2003, GO, 5.10%, 06/01/33 | | | | | | | 220 | | | | 208,199 | |
State of Ohio; | | | | | | | | | | | | |
Series 2017A, GO, 5.00%, 05/01/30 | | | | | | | 40 | | | | 45,915 | |
Series 2017A, GO, 5.00%, 03/15/32 | | | | | | | 90 | | | | 101,728 | |
Series 2017A, GO, 5.00%, 05/01/34 | | | | | | | 40 | | | | 45,513 | |
Series 2017A, GO, 5.00%, 05/01/35 | | | | | | | 40 | | | | 45,433 | |
Series 2017A, GO, 5.00%, 05/01/36 | | | | | | | 90 | | | | 102,105 | |
Series 2017A, GO, 5.00%, 05/01/37 | | | | | | | 70 | | | | 79,322 | |
State of Texas; | | | | | | | | | | | | |
Series 2016, GO, 5.00%, 04/01/40 | | | | | | | 40 | | | | 45,520 | |
Series 2016, GO, 5.00%, 04/01/43 | | | | | | | 70 | | | | 79,504 | |
State of Washington; | | | | | | | | | | | | |
Series R-2015C, GO, 5.00%, 07/01/30 | | | | | | | 150 | | | | 171,000 | |
Series R-2017A, GO, 5.00%, 08/01/30 | | | | | | | 30 | | | | 34,906 | |
Series 2016A-1, GO, 5.00%, 08/01/40 | | | | | | | 100 | | | | 112,802 | |
Series 2018B, GO, 5.00%, 08/01/40 | | | | | | | 40 | | | | 46,109 | |
Series 2017D, GO, 5.00%, 02/01/41 | | | | | | | 60 | | | | 68,673 | |
Series 2018B, GO, 5.00%, 08/01/41 | | | | | | | 40 | | | | 46,075 | |
Series 2018B, GO, 5.00%, 08/01/42 | | | | | | | 40 | | | | 46,041 | |
State of West Virginia; | | | | | | | | | | | | |
Series 2018B, GO, 5.00%, 06/01/40 | | | | | | | 80 | | | | 93,329 | |
Series 2018B, GO, 5.00%, 12/01/40 | | | | | | | 80 | | | | 93,329 | |
Series 2018B, GO, 5.00%, 12/01/41 | | | | | | | 80 | | | | 93,254 | |
State of Wisconsin; | | | | | | | | | | | | |
Series 2017C, RB, 3.15%, 05/01/27 | | | | | | | 115 | | | | 112,422 | |
Series 2017B, GO, 5.00%, 05/01/32 | | | | | | | 40 | | | | 45,834 | |
Series 2017B, GO, 5.00%, 05/01/33 | | | | | | | 30 | | | | 34,275 | |
Series 2017-3, GO, 5.00%, 11/01/33 | | | | | | | 50 | | | | 58,336 | |
Series 2017B, GO, 5.00%, 05/01/34 | | | | | | | 40 | | | | 45,540 | |
Series 2017B, GO, 5.00%, 05/01/36 | | | | | | | 50 | | | | 56,659 | |
Series 2017B, GO, 5.00%, 05/01/38 | | | | | | | 50 | | | | 56,427 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 21 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Municipal Bonds (continued) | |
Sumter Landing Community Development District, Series 2016, RB, 4.17%, 10/01/47 | | | USD | | | | 100 | | | $ | 105,200 | |
Texas A&M University; | | | | | | | | | | | | |
Series 2017B, RB, 2.76%, 05/15/26 | | | | | | | 175 | | | | 168,695 | |
Series 2017B, RB, 2.84%, 05/15/27 | | | | | | | 75 | | | | 72,059 | |
Texas Municipal Gas Acquisition & Supply Corp., Series 2008D, RB, 6.25%, 12/15/26 | | | | | | | 30 | | | | 34,920 | |
Texas Transportation Commission, Series 2016A, RB, 5.00%, 10/01/19 | | | | | | | 110 | | | | 114,671 | |
Texas Water Development Board; | | | | | | | | | | | | |
Series 2018A, RB, 5.00%, 10/15/43 | | | | | | | 90 | | | | 104,332 | |
Series 2017A, RB, 5.00%, 10/15/47 | | | | | | | 30 | | | | 34,514 | |
Tobacco Settlement Finance Authority, Series 2007A, RB, 7.47%, 06/01/47 | | | | | | | 125 | | | | 124,561 | |
TSASC, Inc., Series 2017A, RB, 5.00%, 06/01/41 | | | | | | | 60 | | | | 64,926 | |
University of California; | | | | | | | | | | | | |
Series 2017, RB, 3.06%, 07/01/25 | | | | | | | 100 | | | | 97,315 | |
Series 2013AJ, RB, 4.60%, 05/15/31 | | | | | | | 65 | | | | 70,120 | |
Series 2010H, RB, 6.40%, 05/15/31 | | | | | | | 70 | | | | 84,542 | |
Series 2016L, RB, 5.00%, 05/15/47 | | | | | | | 100 | | | | 113,095 | |
Series 2009F, RB, 6.58%, 05/15/49 | | | | | | | 75 | | | | 100,540 | |
Series 2012AD, RB, 4.86%, 05/15/2112 | | | | | | | 20 | | | | 21,204 | |
University of Delaware, Series 2018, RB, 4.22%, 11/01/58 | | | | | | | 75 | | | | 77,330 | |
University of Houston; | | | | | | | | | | | | |
Series 2017A, RB, 5.00%, 02/15/33 | | | | | | | 30 | | | | 34,255 | |
Series 2017A, RB, 5.00%, 02/15/34 | | | | | | | 30 | | | | 34,123 | |
Series 2017A, RB, 5.00%, 02/15/35 | | | | | | | 70 | | | | 79,416 | |
Series 2017A, RB, 5.00%, 02/15/36 | | | | | | | 90 | | | | 101,845 | |
University of Oregon, Series 2016A, RB, 5.00%, 04/01/46 | | | | | | | 40 | | | | 45,520 | |
Upper Arlington City School District, Series 2018A, GO, 5.00%, 12/01/48 | | | | | | | 80 | | | | 92,606 | |
Virginia Small Business Financing Authority (Transform 66 P3 Project), Series 2017, RB, 5.00%, 12/31/56 | | | | | | | 80 | | | | 87,190 | |
Weld County School District No. 4, Series 2016, GO, 5.25%, 12/01/41 | | | | | | | 50 | | | | 58,429 | |
West Virginia Hospital Finance Authority (West Virginia United Health System Obligated Group); | | | | | | | | | | | | |
Series 2016A, RB, 5.00%, 06/01/19 | | | | | | | 25 | | | | 25,759 | |
Series 2016A, RB, 5.00%, 06/01/20 | | | | | | | 30 | | | | 31,673 | |
Series 2016A, RB, 5.00%, 06/01/21 | | | | | | | 30 | | | | 32,338 | |
Series 2016A, RB, 5.00%, 06/01/22 | | | | | | | 30 | | | | 33,001 | |
Series 2016A, RB, 5.00%, 06/01/23 | | | | | | | 25 | | | | 27,957 | |
Series 2016A, RB, 5.00%, 06/01/24 | | | | | | | 25 | | | | 28,311 | |
Wisconsin Health & Educational Facilities Authority (Thedacare, Inc.), Series 2015, RB, 5.00%, 12/15/44 | | | | | | | 30 | | | | 32,308 | |
| | | | | | | | | | | | |
Total Municipal Bonds — 5.4% (Cost: $23,689,111) | | | | 23,598,916 | |
| | | | | | | | | | | | |
|
Non-Agency Mortgage-Backed Securities — 6.5% | |
|
Collateralized Mortgage Obligations — 2.6% | |
Ajax Mortgage Loan Trust: | | | | | | | | | | | | |
Series 2016-A, Class A, 4.25%, 08/25/64(b)(c) | | | | | | | 107 | | | | 107,648 | |
Series 2018-B, Class A, 3.75%, 02/26/57 | | | | | | | 440 | | | | 440,000 | |
Series 2018-B, Class B, 0.00%, 02/26/57 | | | | | | | 140 | | | | 61,093 | |
Alternative Loan Trust: | | | | | | | | | | | | |
Series 2005-22T1, Class A1, 2.44%, 06/25/35(e) | | | | | | | 174 | | | | 157,815 | |
Series 2005-72, Class A3, 2.39%, 01/25/36(e) | | | | | | | 90 | | | | 78,649 | |
Series 2005-76, Class 2A1, 2.56%, 02/25/36(e) | | | | | | | 29 | | | | 26,739 | |
Series 2006-11CB, Class 3A1, 6.50%, 05/25/36 | | | | | | | 72 | | | | 54,770 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Collateralized Mortgage Obligations (continued) | |
Series 2006-15CB, Class A1, 6.50%, 06/25/36 | | | USD | | | | 12 | | | $ | 9,404 | |
Series 2006-OA14, Class 1A1, 3.29%, 11/25/46(e) | | | | | | | 110 | | | | 94,705 | |
Series 2006-OA16, Class A4C, 2.43%, 10/25/46(e) | | | | | | | 161 | | | | 95,513 | |
Series 2006-OA6, Class 1A2, 2.30%, 07/25/46(e) | | | | | | | 49 | | | | 48,545 | |
Series 2006-OA8, Class 1A1, 2.28%, 07/25/46(e) | | | | | | | 17 | | | | 15,996 | |
Series 2006-OC10, Class 2A3, 2.32%, 11/25/36(e) | | | | | | | 59 | | | | 46,733 | |
Series 2006-OC7, Class 2A3, 2.34%, 07/25/46(e) | | | | | | | 89 | | | | 70,925 | |
Series 2007-3T1, Class 1A1, 6.00%, 04/25/37 | | | | | | | 16 | | | | 11,866 | |
Series 2007-OA2, Class 1A1, 2.40%, 03/25/47(e) | | | | | | | 349 | | | | 286,824 | |
Series 2007-OA3, Class 1A1, 2.23%, 04/25/47(e) | | | | | | | 27 | | | | 26,071 | |
American Home Mortgage Assets Trust(e): | | | | | | | | | | | | |
Series 2006-3, Class 2A11, 2.50%, 10/25/46 | | | | | | | 75 | | | | 68,165 | |
Series 2006-4, Class 1A12, 2.30%, 10/25/46 | | | | | | | 91 | | | | 66,387 | |
Series 2006-5, Class A1, 2.48%, 11/25/46 | | | | | | | 138 | | | | 75,621 | |
Series 2007-1, Class A1, 2.26%, 02/25/47 | | | | | | | 73 | | | | 47,228 | |
APS Resecuritization Trust(b)(e): | | | | | | | | | | | | |
Series 2016-1, Class 1MZ, 5.39%, 07/31/57 | | | | | | | 231 | | | | 68,253 | |
Series 2016-3, Class 3A, 4.94%, 09/27/46(d) | | | | | | | 251 | | | | 252,153 | |
Series 2016-3, Class 4A, 4.69%, 04/27/47(d) | | | | | | | 67 | | | | 65,506 | |
Banc of America Funding Trust(b)(d)(e): | | | | | | | | | | | | |
Series 2014-R2, Class 1C, 0.00%, 11/26/36 | | | | | | | 156 | | | | 31,177 | |
Series 2016-R2, Class 1A1, 4.70%, 05/01/33 | | | | | | | 98 | | | | 100,533 | |
Bear Stearns Mortgage Funding Trust(e): | | | | | | | | | | | | |
Series 2006-SL1, Class A1, 2.37%, 08/25/36 | | | | | | | 75 | | | | 74,901 | |
Series 2007-AR2, Class A1, 2.26%, 03/25/37 | | | | | | | 187 | | | | 167,461 | |
Series 2007-AR3, Class 1A1, 2.23%, 03/25/37 | | | | | | | 20 | | | | 19,280 | |
Series 2007-AR4, Class 1A1, 2.29%, 09/25/47 | | | | | | | 83 | | | | 77,852 | |
Series 2007-AR4, Class 2A1, 2.30%, 06/25/37 | | | | | | | 27 | | | | 25,711 | |
Chase Mortgage Finance Trust, Series 2007-S6, Class 1A1, 6.00%, 12/25/37 | | | | | | | 1,048 | | | | 812,488 | |
CHL Mortgage Pass-Through Trust: | | | | | | | | | | | | |
Series 2006-OA4, Class A1, 2.52%, 04/25/46(e) | | | | | | | 166 | | | | 84,752 | |
Series 2006-OA5, Class 3A1, 2.29%, 04/25/46(e) | | | | | | | 30 | | | | 27,316 | |
Series 2007-15, Class 2A2, 6.50%, 09/25/37 | | | | | | | 275 | | | | 206,022 | |
CIM Trust, Series 2017-6, Class A1, 3.02%, 06/25/57(b)(e) | | | | | | | 601 | | | | 589,175 | |
Citicorp Mortgage Securities Trust, Series 2008-2, Class 1A1, 6.50%, 06/25/38 | | | | | | | 127 | | | | 110,638 | |
COLT LLC, Series 2015-1, Class A1V, 5.09%, 12/26/45(b)(e) | | | | | | | 4 | | | | 4,016 | |
Credit Suisse Mortgage Capital Certificates, Series 2009-12R, Class 3A1, 6.50%, 10/27/37(b) | | | | | | | 281 | | | | 175,516 | |
CSFB Mortgage-Backed Pass-Through Certificates, Series 2005-10, Class 10A1, 3.44%, 11/25/35(e) | | | | | | | 51 | | | | 19,846 | |
CSMC Trust(b)(e): | | | | | | | | | | | | |
Series 2014-11R, Class 16A1, 3.64%, 09/27/47 | | | | | | | 57 | | | | 57,445 | |
Series 2015-6R, Class 5A1, 2.14%, 03/27/36 | | | | | | | 10 | | | | 9,989 | |
Series 2015-6R, Class 5A2, 2.14%, 03/27/36 | | | | | | | 60 | | | | 38,822 | |
Deephaven Residential Mortgage Trust, Series 2016-1A, Class A1, 4.00%, 07/25/46(b) | | | | | | | 73 | | | | 73,561 | |
Deutsche Alt-A Securities Mortgage Loan Trust, Series 2007-OA4, Class A2A, 2.26%, 08/25/47(e) | | | | | | | 207 | | | | 137,673 | |
Deutsche ALT-A Securities Mortgage Loan Trust, Series 2007-RMP1, Class A2, 2.24%, 12/25/36(e) | | | | | | | 141 | | | | 129,947 | |
Deutsche Alt-B Securities Mortgage Loan Trust, Series 2006-AB3, Class A8, 6.36%, 07/25/36(e) | | | | | | | 16 | | | | 14,373 | |
Federal Home Loan Mortgage Corp. Structured Agency Credit Risk Debt Notes(e): | | | | | | | | | | | | |
Series 2016-DNA4, Class M3, 5.89%, 03/25/29 | | | | | | | 250 | | | | 278,279 | |
Series 2017-DNA1, Class M2, 5.34%, 07/25/29 | | | | | | | 250 | | | | 269,418 | |
Series 2017-DNA2, Class M2, 5.54%, 10/25/29 | | | | | | | 250 | | | | 273,311 | |
Series 2017-DNA3, Class B1, 6.54%, 03/25/30 | | | | | | | 250 | | | | 269,865 | |
Series 2017-DNA3, Class M2, 4.59%, 03/25/30 | | | | | | | 280 | | | | 288,445 | |
| | |
22 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Collateralized Mortgage Obligations (continued) | |
Series 2018-DNA1, Class B1, 5.24%, 07/25/30 | | | USD | | | | 150 | | | $ | 143,450 | |
Series 2018-DNA1, Class M2, 3.89%, 07/25/30 | | | | | | | 90 | | | | 88,507 | |
Series 2018-SPI2, Class M2, 3.82%, 05/25/48(b) | | | | | | | 60 | | | | 54,936 | |
Federal National Mortgage Association(e): | | | | | | | | | | | | |
Series 2016-C02, Class 1M2, 8.09%, 09/25/28 | | | | | | | 20 | | | | 23,656 | |
Series 2016-C04, Class 1M2, 6.34%, 01/25/29 | | | | | | | 142 | | | | 160,816 | |
Series 2017-C01, Class 1B1, 7.84%, 07/25/29 | | | | | | | 62 | | | | 73,465 | |
Series 2017-C01, Class 1M2, 5.64%, 07/25/29 | | | | | | | 117 | | | | 126,562 | |
Series 2017-C05, Class 1B1, 5.69%, 01/25/30 | | | | | | | 130 | | | | 133,250 | |
Series 2017-C05, Class 1M2, 4.29%, 01/25/30 | | | | | | | 76 | | | | 77,065 | |
Series 2017-C07, Class 1B1, 6.09%, 05/25/30 | | | | | | | 120 | | | | 124,699 | |
GreenPoint Mortgage Funding Trust, Series 2006-AR2, Class 4A1, 3.56%, 03/25/36(e) | | | | | | | 29 | | | | 27,159 | |
GSMPS Mortgage Loan Trust(b)(e): | | | | | | | | | | | | |
Series 2005-RP1, Class 1AF, 2.44%, 01/25/35 | | | | | | | 57 | | | | 53,091 | |
Series 2005-RP2, Class 1AF, 2.44%, 03/25/35 | | | | | | | 68 | | | | 63,511 | |
Series 2006-RP1, Class 1AF1, 2.44%, 01/25/36 | | | | | | | 51 | | | | 45,104 | |
HarborView Mortgage Loan Trust(e): | | | | | | | | | | | | |
Series 2007-3, Class 2A1B, 2.31%, 05/19/47 | | | | | | | 218 | | | | 176,668 | |
Series 2007-4, Class 2A2, 2.33%, 07/19/47 | | | | | | | 206 | | | | 178,704 | |
Impac Secured Assets Corp., Series 2004-3, Class 1A4, 2.89%, 11/25/34(e) | | | | | | | 18 | | | | 17,671 | |
IndyMac IMJA Mortgage Loan Trust, Series 2007-A2, Class 3A1, 7.00%, 10/25/37 | | | | | | | 148 | | | | 98,898 | |
IndyMac INDX Mortgage Loan Trust(e): | | | | | | | | | | | | |
Series 2007-AR19, Class 3A1, 3.48%, 09/25/37 | | | | | | | 93 | | | | 65,955 | |
Series 2007-FLX5, Class 2A2, 2.33%, 08/25/37 | | | | | | | 189 | | | | 170,429 | |
JPMorgan Mortgage Trust, Series 2017-2, Class A6, 3.00%, 05/25/47(b)(e) | | | | | | | 76 | | | | 74,213 | |
Lehman XS Trust, Series 2007-20N, Class A1, 3.24%, 12/25/37(e) | | | | | | | 39 | | | | 39,181 | |
LSTAR Securities Investment Ltd., Series 2018-1, Class A, 3.53%, 02/01/23(b)(e) | | | | | | | 366 | | | | 367,415 | |
MASTR Resecuritization Trust, Series 2008-3, Class A1, 2.39%, 08/25/37(b)(d)(e) | | | | | | | 34 | | | | 26,740 | |
MCM Capital Partners I LP, 4.00%, 06/01/57(d) | | | | | | | 240 | | | | 240,000 | |
Merrill Lynch Alternative Note Asset Trust, Series 2007-OAR2, Class A2, 2.30%, 04/25/37(e) | | | | | | | 224 | | | | 187,037 | |
Mortgage Loan Resecuritization Trust, Series 2009-RS1, Class A85, 2.26%, 04/16/36(b)(e) | | | | | | | 465 | | | | 396,616 | |
Nomura Asset Acceptance Corp. Alternative Loan Trust, Series 2007-2, Class A4, 2.51%, 04/25/47(e) | | | | | | | 20 | | | | 16,340 | |
Nomura Resecuritization Trust, Series 2014-3R, Class 3A9, 2.48%, 11/26/35(b)(e) | | | | | | | 93 | | | | 91,478 | |
RALI Trust(e): | | | | | | | | | | | | |
Series 2007-QH1, Class A1, 2.25%, 02/25/37 | | | | | | | 82 | | | | 78,030 | |
Series 2007-QH6, Class A1, 2.28%, 07/25/37 | | | | | | | 44 | | | | 42,783 | |
Series 2007-QH9, Class A1, 2.82%, 11/25/37 | | | | | | | 46 | | | | 40,080 | |
RBSSP Resecuritization Trust, Series 2013-2, Class 1A2, 2.16%, 12/26/36(b)(e) | | | | | | | 258 | | | | 248,716 | |
Reperforming Loan REMIC Trust, Series 2005-R3, Class AF, 2.49%, 09/25/35(b)(e) | | | | | | | 8 | | | | 6,828 | |
Seasoned Credit Risk Transfer Trust: | | | | | | | | | | | | |
Series 2017-3, Class B, 0.00%, 07/25/56(b)(i) | | | | | | | 120 | | | | 9,605 | |
Series 2017-3, Class M2, 4.75%, 07/25/56(b)(e) | | | | | | | 100 | | | | 97,956 | |
Series 2018-1, Class BX, 6.41%, 05/25/57(d)(e) | | | | | | | 20 | | | | 10,964 | |
Series 2018-1, Class M, 4.75%, 05/25/57(d)(e) | | | | | | | 20 | | | | 19,752 | |
STACR Trust(b)(e): | | | | | | | | | | | | |
Series 2018-DNA2, Class M2, 4.21%, 12/25/30 | | | | | | | 110 | | | | 109,400 | |
Series 2018-HRP1, Class M2, 3.74%, 04/25/43 | | | | | | | 145 | | | | 145,808 | |
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-3, Class 4A, 3.69%, 04/25/36(e) | | | | | | | 90 | | | | 79,409 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Collateralized Mortgage Obligations (continued) | |
Structured Asset Mortgage Investments II Trust(e): | | | | | | | | | | | | |
Series 2006-AR4, Class 3A1, 2.28%, 06/25/36(d) | | | USD | | | | 111 | | | $ | 96,844 | |
Series 2006-AR5, Class 2A1, 2.30%, 05/25/46 | | | | | | | 68 | | | | 56,874 | |
Structured Asset Securities Corp. Mortgage Loan Trust, Series 2006-RF4, Class 2A1, 6.00%, 10/25/36(b) | | | | | | | 49 | | | | 41,350 | |
WaMu Mortgage Pass-Through Certificates Trust, Series 2005-AR2, Class B1, 2.62%, 01/25/45(e) | | | | | | | 109 | | | | 72,344 | |
Washington Mutual Mortgage Pass-Through Certificates Trust: | | | | | | | | | | | | |
Series 2006-4, Class 1A1, 6.00%, 04/25/36 | | | | | | | 99 | | | | 90,868 | |
Series 2006-4, Class 3A1, 6.50%, 05/25/36(c) | | | | | | | 53 | | | | 46,618 | |
Series 2006-8, Class A4, 4.59%, 10/25/36(c) | | | | | | | 70 | | | | 43,419 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 11,324,685 | |
Commercial Mortgage-Backed Securities — 3.6% | |
245 Park Avenue Trust, Series 2017-245P, Class E, 3.78%, 06/05/37(b)(e) | | | | | | | 400 | | | | 359,876 | |
280 Park Avenue Mortgage Trust, Series 2017-280P, Class E, 4.19%, 09/15/34(b)(e) | | | | | | | 360 | | | | 357,631 | |
AOA Mortgage Trust, Series 2015-1177, Class C, 3.11%, 12/13/29(b)(e) | | | | | | | 100 | | | | 97,135 | |
AREIT Trust, Series 2018-CRE1, Class A, 2.92%, 02/15/35(b)(d)(e) | | | | | | | 200 | | | | 200,120 | |
Ashford Hospitality Trust, Series 2018-ASHF, Class D, 4.17%, 04/15/35(b)(e) | | | | | | | 70 | | | | 70,053 | |
BAMLL Commercial Mortgage Securities Trust(b)(e): | | | | | | | | | | | | |
Series 2013-DSNY, Class A, 3.12%, 09/15/26 | | | | | | | 550 | | | | 549,867 | |
Series 2013-DSNY, Class E, 4.67%, 09/15/26 | | | | | | | 100 | | | | 99,956 | |
Series 2013-DSNY, Class F, 5.57%, 09/15/26 | | | | | | | 104 | | | | 103,837 | |
Series 2015-200P, Class F, 3.72%, 04/14/33 | | | | | | | 300 | | | | 278,871 | |
Series 2016-ISQ, Class E, 3.73%, 08/14/34(d) | | | | | | | 200 | | | | 186,260 | |
Series 2017-SCH, Class CL, 3.57%, 11/15/32 | | | | | | | 100 | | | | 100,000 | |
Series 2017-SCH, Class DL, 4.07%, 11/15/32 | | | | | | | 100 | | | | 100,000 | |
Banc of America Commercial Mortgage Trust, Series 2007-1, Class AMFX, 5.48%, 01/15/49(e) | | | | | | | 12 | | | | 12,017 | |
Bancorp Commercial Mortgage Trust (The), Series 2018-CR3, Class A, 2.92%, 01/15/33(b)(e) | | | | | | | 100 | | | | 99,964 | |
Bayview Commercial Asset Trust(b)(e): | | | | | | | | | | | | |
Series 2005-2A, Class A1, 2.40%, 08/25/35 | | | | | | | 64 | | | | 61,012 | |
Series 2005-4A, Class A1, 2.39%, 01/25/36 | | | | | | | 60 | | | | 55,980 | |
Series 2005-4A, Class M1, 2.54%, 01/25/36 | | | | | | | 44 | | | | 40,793 | |
Series 2006-1A, Class A2, 2.45%, 04/25/36 | | | | | | | 16 | | | | 15,162 | |
Series 2006-3A, Class A1, 2.34%, 10/25/36 | | | | | | | 28 | | | | 26,372 | |
Series 2006-3A, Class A2, 2.39%, 10/25/36 | | | | | | | 23 | | | | 22,028 | |
Series 2007-2A, Class A1, 2.36%, 07/25/37 | | | | | | | 41 | | | | 40,453 | |
Series 2007-4A, Class A1, 2.54%, 09/25/37 | | | | | | | 222 | | | | 211,783 | |
Series 2007-5A, Class A3, 3.09%, 10/25/37 | | | | | | | 51 | | | | 50,925 | |
BBCMS Mortgage Trust, Series 2018-TALL, Class A, 2.80%, 03/15/37(b)(e) | | | | | | | 35 | | | | 34,945 | |
BBCMS Trust, Series 2015-SRCH, Class A1, 3.31%, 08/10/35(b) | | | | | | | 100 | | | | 98,524 | |
BHMS Mortgage Trust, Series 2014-ATLS, Class AFL, 3.48%, 07/05/33(b)(e) | | | | | | | 581 | | | | 581,733 | |
BSPRT Issuer Ltd., Series 2017-FL2, Class A, 2.89%, 10/15/34(b)(e) | | | | | | | 100 | | | | 99,972 | |
BWAY Mortgage Trust(b): | | | | | | | | | | | | |
Series 2013-1515, Class A2, 3.45%, 03/10/33 | | | | | | | 150 | | | | 148,446 | |
Series 2013-1515, Class C, 3.45%, 03/10/33 | | | | | | | 105 | | | | 101,154 | |
Series 2013-1515, Class F, 4.06%, 03/10/33(e) | | | | | | | 100 | | | | 95,166 | |
BXP Trust(b)(e): | | | | | | | | | | | | |
Series 2017-CC, Class D, 3.67%, 08/13/37 | | | | | | | 60 | | | | 56,036 | |
Series 2017-CC, Class E, 3.67%, 08/13/37(d) | | | | | | | 110 | | | | 98,570 | |
Series 2017-GM, Class E, 3.54%, 06/13/39 | | | | | | | 50 | | | | 44,917 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 23 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Commercial Mortgage-Backed Securities (continued) | |
Caesars Palace Las Vegas Trust, Series 2017-VICI, Class D, 4.50%, 10/15/34(b)(e) | | | USD | | | | 100 | | | $ | 100,616 | |
CCRESG Commercial Mortgage Trust, Series 2016-HEAT, Class D, 5.67%, 04/10/29(b)(e) | | | | | | | 20 | | | | 20,423 | |
CCUBS Commercial Mortgage Trust, Series 2017-C1, Class A4, 3.54%, 11/15/50 | | | | | | | 32 | | | | 31,347 | |
CD Mortgage Trust: | | | | | | | | | | | | |
Series 2006-CD3, Class AM, 5.65%, 10/15/48 | | | | | | | 26 | | | | 27,322 | |
Series 2017-CD3, Class A4, 3.63%, 02/10/50 | | | | | | | 30 | | | | 29,873 | |
CFCRE Commercial Mortgage Trust, Series 2016-C3, Class A3, 3.87%, 01/10/48 | | | | | | | 10 | | | | 10,105 | |
CGBAM Commercial Mortgage Trust, Series 2015-SMRT, Class E, 3.91%, 04/10/28(b)(e) | | | | | | | 100 | | | | 99,380 | |
CGDBB Commercial Mortgage Trust(b)(e): | | | | | | | | | | | | |
Series 2017-BIOC, Class A, 2.86%, 07/15/32 | | | | | | | 190 | | | | 190,059 | |
Series 2017-BIOC, Class D, 3.67%, 07/15/32 | | | | | | | 110 | | | | 110,138 | |
Series 2017-BIOC, Class E, 4.22%, 07/15/32 | | | | | | | 170 | | | | 169,684 | |
Citigroup Commercial Mortgage Trust: | | | | | | | | | | | | |
Series 2016-C1, Class C, 5.12%, 05/10/49(e) | | | | | | | 40 | | | | 40,651 | |
Series 2016-GC37, Class AS, 3.57%, 04/10/49 | | | | | | | 20 | | | | 20,532 | |
Series 2016-P3, Class C, 5.00%, 04/15/49(e) | | | | | | | 10 | | | | 10,210 | |
CLNS Trust, Series 2017-IKPR, Class E, 5.55%, 06/11/32(b)(e) | | | | | | | 125 | | | | 125,352 | |
Commercial Mortgage Pass-Through Certificates, Series 2014-CR14, Class A4, 4.24%, 02/10/47(e) | | | | | | | 30 | | | | 31,116 | |
Commercial Mortgage Trust: | | | | | | | | | | | | |
Series 2005-C6, Class F, 5.85%, 06/10/44(b)(e) | | | | | | | 100 | | | | 101,463 | |
Series 2014-CR16, Class A4, 4.05%, 04/10/47 | | | | | | | 177 | | | | 181,962 | |
Series 2014-CR17, Class A5, 3.98%, 05/10/47 | | | | | | | 59 | | | | 60,448 | |
Series 2014-CR19, Class A5, 3.80%, 08/10/47 | | | | | | | 50 | | | | 50,680 | |
Series 2014-LC15, Class A4, 4.01%, 04/10/47 | | | | | | | 50 | | | | 51,243 | |
Series 2014-TWC, Class E, 5.30%, 02/13/32(b)(e) | | | | | | | 50 | | | | 50,648 | |
Series 2015-CR23, Class CMD, 3.81%, 05/10/48(b)(e) | | | | | | | 350 | | | | 346,633 | |
Series 2015-CR25, Class A4, 3.76%, 08/10/48 | | | | | | | 100 | | | | 100,787 | |
Series 2015-LC19, Class A4, 3.18%, 02/10/48 | | | | | | | 59 | | | | 57,592 | |
Series 2015-LC19, Class C, 4.40%, 02/10/48(e) | | | | | | | 20 | | | | 19,744 | |
Series 2015-LC19, Class D, 2.87%, 02/10/48(b) | | | | | | | 50 | | | | 41,554 | |
Series 2015-LC21, Class C, 4.45%, 07/10/48(e) | | | | | | | 150 | | | | 146,964 | |
Series 2016-667M, Class D, 3.28%, 10/10/36(b)(e) | | | | | | | 100 | | | | 91,055 | |
Series 2017-DLTA, Class E, 4.04%, 08/15/35(b)(e) | | | | | | | 110 | | | | 108,897 | |
Series 2017-DLTA, Class F, 4.65%, 08/15/35(b)(e) | | | | | | | 100 | | | | 98,856 | |
Core Industrial Trust, Series 2015-TEXW, Class A, 3.08%, 02/10/34(b) | | | | | | | 100 | | | | 99,350 | |
Credit Suisse First Boston Mortgage Securities Corp., Series 2004-C4, Class F, 5.23%, 10/15/39(b)(e) | | | | | | | 330 | | | | 332,160 | |
Credit Suisse Mortgage Capital Certificates, Series 2015-GLPB, Class A, 3.64%, 11/15/34(b) | | | | | | | 100 | | | | 101,064 | |
CSMC Trust(b): | | | | | | | | | | | | |
Series 2017-PFHP, Class A, 3.02%, 12/15/20(e) | | | | | | | 60 | | | | 60,029 | |
Series 2017-TIME, Class A, 3.65%, 11/13/39 | | | | | | | 100 | | | | 98,393 | |
DBJPM Mortgage Trust, Series 2016-C3, Class D, 3.63%, 09/10/49(b)(e) | | | | | | | 59 | | | | 49,359 | |
DBUBS Mortgage Trust(b): | | | | | | | | | | | | |
Series 2017-BRBK, Class A, 3.45%, 10/10/34 | | | | | | | 140 | | | | 139,021 | |
Series 2017-BRBK, Class E, 3.65%, 10/10/34(e) | | | | | | | 310 | | | | 285,542 | |
Series 2017-BRBK, Class F, 3.65%, 10/10/34(d)(e) | | | | | | | 80 | | | | 71,947 | |
Eleven Madison Trust Mortgage Trust, Series 2015-11MD, Class A, 3.67%, 09/10/35(b)(e) | | | | | | | 100 | | | | 99,476 | |
Exantas Capital Corp. Ltd., Series 2018-RSO6, Class A, 2.79%, 06/15/35(b)(e) | | | | | | | 160 | | | | 159,892 | |
GAHR Commercial Mortgage Trust(b)(e): | | | | | | | | | | | | |
Series 2015-NRF, Class AFL1, 3.37%, 12/15/34 | | | | | | | 14 | | | | 14,340 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Commercial Mortgage-Backed Securities (continued) | |
Series 2015-NRF, Class EFX, 3.49%, 12/15/34 | | | USD | | | | 210 | | | $ | 207,591 | |
Series 2015-NRF, Class FFX, 3.49%, 12/15/34 | | | | | | | 160 | | | | 157,172 | |
GPMT Ltd., Series 2018-FL1, Class A, 2.98%, 11/21/35(b)(e) | | | | | | | 100 | | | | 99,814 | |
GRACE Mortgage Trust, Series 2014-GRCE, Class F, 3.71%, 06/10/28(b)(e) | | | | | | | 330 | | | | 322,449 | |
GS Mortgage Securities Corp. II(b): | | | | | | | | | | | | |
Series 2005-ROCK, Class A, 5.37%, 05/03/32 | | | | | | | 100 | | | | 110,633 | |
Series 2013-KING, Class D, 3.55%, 12/10/27(e) | | | | | | | 124 | | | | 122,813 | |
Series 2013-KING, Class E, 3.55%, 12/10/27(e) | | | | | | | 460 | | | | 451,954 | |
GS Mortgage Securities Corp. Trust(b): | | | | | | | | | | | | |
Series 2017-500K, Class D, 3.37%, 07/15/32(e) | | | | | | | 10 | | | | 9,994 | |
Series 2017-500K, Class E, 3.57%, 07/15/32(e) | | | | | | | 20 | | | | 19,994 | |
Series 2017-500K, Class F, 3.87%, 07/15/32(e) | | | | | | | 110 | | | | 110,000 | |
Series 2017-500K, Class G, 4.57%, 07/15/32(e) | | | | | | | 100 | | | | 100,031 | |
Series 2017-GPTX, Class A, 2.86%, 05/10/34 | | | | | | | 100 | | | | 98,039 | |
Series 2018-CHLL, Class E, 4.42%, 02/15/37(e) | | | | | | | 100 | | | | 99,882 | |
GS Mortgage Securities Trust: | | | | | | | | | | | | |
Series 2014-GC22, Class D, 4.80%, 06/10/47(b)(e) | | | | | | | 110 | | | | 93,633 | |
Series 2015-GC32, Class C, 4.56%, 07/10/48(e) | | | | | | | 30 | | | | 29,630 | |
Series 2015-GC32, Class D, 3.35%, 07/10/48 | | | | | | | 90 | | | | 72,814 | |
Series 2017-GS7, Class D, 3.00%, 08/10/50(b) | | | | | | | 20 | | | | 16,435 | |
Hilton Orlando Trust, Series 2018-ORL, Class E, 4.72%, 12/15/34(b)(e) | | | | | | | 100 | | | | 100,250 | |
HMH Trust, Series 2017-NSS, Class A, 3.06%, 07/05/31(b) | | | | | | | 110 | | | | 106,769 | |
IMT Trust(b): | | | | | | | | | | | | |
Series 2017-APTS, Class AFX, 3.48%, 06/15/34 | | | | | | | 100 | | | | 98,438 | |
Series 2017-APTS, Class EFX, 3.61%, 06/15/34(e) | | | | | | | 100 | | | | 91,520 | |
JPMBB Commercial Mortgage Securities Trust: | | | | | | | | | | | | |
Series 2014-C21, Class A5, 3.77%, 08/15/47 | | | | | | | 50 | | | | 50,693 | |
Series 2015-C28, Class B, 3.99%, 10/15/48 | | | | | | | 80 | | | | 78,901 | |
Series 2015-C33, Class D1, 4.27%, 12/15/48(b)(e) | | | | | | | 100 | | | | 93,590 | |
JPMCC Commercial Mortgage Securities Trust: | | | | | | | | | | | | |
Series 2017-JP5, Class D, 4.80%, 03/15/50(b)(e) | | | | | | | 100 | | | | 95,016 | |
Series 2017-JP7, Class B, 4.05%, 09/15/50 | | | | | | | 10 | | | | 9,941 | |
JPMDB Commercial Mortgage Securities Trust, Series 2017-C5, Class D, 4.73%, 03/15/50(b)(e) | | | | | | | 121 | | | | 113,881 | |
JPMorgan Chase Commercial Mortgage Securities Trust: | | | | | | | | | | | | |
Series 2012-CBX, Class A4FL, 3.37%, 06/15/45(b)(e) | | | | | | | 100 | | | | 102,588 | |
Series 2014-C20, Class A5, 3.80%, 07/15/47 | | | | | | | 70 | | | | 70,881 | |
Series 2015-JP1, Class C, 4.90%, 01/15/49(e) | | | | | | | 140 | | | | 142,204 | |
Series 2015-JP1, Class D, 4.40%, 01/15/49(e) | | | | | | | 50 | | | | 46,796 | |
Series 2015-JP1, Class E, 4.40%, 01/15/49(b)(e) | | | | | | | 190 | | | | 164,971 | |
Series 2015-SGP, Class A, 3.77%, 07/15/36(b)(e) | | | | | | | 155 | | | | 155,476 | |
Series 2015-UES, Class D, 3.74%, 09/05/32(b)(e) | | | | | | | 130 | | | | 129,429 | |
Series 2015-UES, Class E, 3.74%, 09/05/32(b)(e) | | | | | | | 100 | | | | 98,582 | |
Series 2016-NINE, Class A, 2.95%, 10/06/38(b)(e) | | | | | | | 150 | | | | 141,205 | |
Series 2017-MAUI, Class E, 5.00%, 07/15/34(b)(e) | | | | | | | 100 | | | | 100,250 | |
Series 2018-ASH8, Class E, 5.07%, 02/15/35(b)(e) | | | | | | | 100 | | | | 100,094 | |
Lehman Brothers Small Balance Commercial Mortgage Trust, Series 2007-1A, Class 1A, 2.34%, 03/25/37(b)(e) | | | | | | | 56 | | | | 53,347 | |
Lone Star Portfolio Trust, Series 2015-LSP, Class A1A2, 3.87%, 09/15/28(b)(e) | | | | | | | 18 | | | | 17,884 | |
Madison Avenue Trust, Series 2013-650M, Class D, 4.17%, 10/12/32(b)(e) | | | | | | | 101 | | | | 100,970 | |
Merrill Lynch Mortgage Trust, Series 2005-MKB2, Class F, 6.53%, 09/12/42(b)(e) | | | | | | | 100 | | | | 103,643 | |
| | |
24 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Commercial Mortgage-Backed Securities (continued) | |
Morgan Stanley Bank of America Merrill Lynch Trust: | | | | | | | | | | | | |
Series 2014-C16, Class A5, 3.89%, 06/15/47 | | | USD | | | | 140 | | | $ | 142,446 | |
Series 2015-C26, Class D, 3.06%, 10/15/48(b) | | | | | | | 110 | | | | 88,059 | |
Morgan Stanley Capital I Trust: | | | | | | | | | | | | |
Series 2015-MS1, Class D, 4.16%, 05/15/48(b)(e) | | | | | | | 100 | | | | 84,957 | |
Series 2017-CLS, Class F, 4.67%, 11/15/34(b)(e) | | | | | | | 211 | | | | 211,067 | |
Series 2017-H1, Class A5, 3.53%, 06/15/50 | | | | | | | 100 | | | | 98,505 | |
Series 2017-H1, Class C, 4.28%, 06/15/50(e) | | | | | | | 100 | | | | 97,542 | |
Series 2017-H1, Class D, 2.55%, 06/15/50(b) | | | | | | | 140 | | | | 108,402 | |
Morgan Stanley Capital I, Inc.: | | | | | | | | | | | | |
Series 2017-JWDR, Class D, 4.02%, 11/15/34(b)(e) | | | | | | | 30 | | | | 30,085 | |
Series 2017-JWDR, Class E, 5.12%, 11/15/34(b)(e) | | | | | | | 60 | | | | 60,284 | |
Series 2018-H3, Class A5, 4.18%, 07/15/51 | | | | | | | 50 | | | | 51,497 | |
Olympic Tower Mortgage Trust, Series 2017-OT, Class E, 4.08%, 05/10/39(b)(e) | | | | | | | 190 | | | | 174,268 | |
Prima Capital CRE Securitization Ltd., Series 2015-4A, Class C, 4.00%, 08/24/49(b)(d) | | | | | | | 100 | | | | 97,039 | |
Resource Capital Corp. Ltd.(b)(e): | | | | | | | | | | | | |
Series 2017-CRE5, Class A, 2.87%, 07/15/34 | | | | | | | 85 | | | | 84,754 | |
Series 2017-CRE5, Class B, 4.07%, 07/15/34 | | | | | | | 38 | | | | 37,932 | |
Velocity Commercial Capital Loan Trust(e): | | | | | | | | | | | | |
Series 2015-1, Class AFL, 4.52%, 06/25/45(b) | | | | | | | 25 | | | | 25,660 | |
Series 2016-2, Class AFL, 3.89%, 10/25/46 | | | | | | | 76 | | | | 77,205 | |
Series 2016-2, Class M4, 7.23%, 10/25/46 | | | | | | | 100 | | | | 103,906 | |
Series 2017-2, Class M3, 4.24%, 11/25/47(b) | | | | | | | 190 | | | | 185,924 | |
Series 2017-2, Class M4, 5.00%, 11/25/47(b) | | | | | | | 95 | | | | 92,847 | |
Waldorf Astoria Boca Raton Trust, Series 2016-BOCA, Class A, 3.42%, 06/15/29(b)(e) | | | | | | | 120 | | | | 120,036 | |
Wells Fargo Commercial Mortgage Trust: | | | | | | | | | | | | |
Series 2015-C27, Class C, 3.89%, 02/15/48 | | | | | | | 20 | | | | 18,615 | |
Series 2015-C31, Class A4, 3.70%, 11/15/48 | | | | | | | 140 | | | | 140,131 | |
Series 2015-NXS2, Class A5, 3.77%, 07/15/58(e) | | | | | | | 110 | | | | 111,121 | |
Series 2015-NXS4, Class A4, 3.72%, 12/15/48 | | | | | | | 20 | | | | 20,124 | |
Series 2015-P2, Class A4, 3.81%, 12/15/48 | | | | | | | 70 | | | | 70,757 | |
Series 2017-C38, Class A5, 3.45%, 07/15/50 | | | | | | | 42 | | | | 41,084 | |
Series 2017-C39, Class C, 4.12%, 09/15/50 | | | | | | | 20 | | | | 19,011 | |
Series 2017-C39, Class D, 4.50%, 09/15/50(b)(e) | | | | | | | 20 | | | | 18,412 | |
Series 2017-HSDB, Class A, 2.90%, 12/13/31(b)(e) | | | | | | | 151 | | | | 150,945 | |
WFRBS Commercial Mortgage Trust: | | | | | | | | | | | | |
Series 2011-C3, Class A3FL, 3.02%, 03/15/44(b)(e) | | | | | | | 6 | | | | 5,787 | |
Series 2014-C21, Class A5, 3.68%, 08/15/47 | | | | | | | 60 | | | | 60,527 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 15,654,591 | |
Interest Only Commercial Mortgage-Backed Securities — 0.3%(e) | |
Banc of America Commercial Mortgage Trust, Series 2017-BNK3, Class XB, 0.78%, 02/15/50(d) | | | | | | | 1,000 | | | | 46,200 | |
BBCMS Trust, Series 2015-SRCH, Class XA, 1.12%, 08/10/35(b) | | | | | | | 1,030 | | | | 69,237 | |
BB-UBS Trust, Series 2012-SHOW, Class XA, 0.73%, 11/05/36(b) | | | | | | | 3,475 | | | | 123,843 | |
CFCRE Commercial Mortgage Trust: | | | | | | | | | | | | |
Series 2016-C4, Class XA, 1.90%, 05/10/58 | | | | | | | 179 | | | | 18,056 | |
Series 2016-C4, Class XB, 0.89%, 05/10/58 | | | | | | | 170 | | | | 8,255 | |
Commercial Mortgage Trust: | | | | | | | | | | | | |
Series 2015-3BP, Class XA, 0.17%, 02/10/35(b) | | | | | | | 1,916 | | | | 11,381 | |
Series 2015-CR25, Class XA, 1.08%, 08/10/48 | | | | | | | 975 | | | | 47,781 | |
Series 2017-COR2, Class XA, 1.33%, 09/10/50 | | | | | | | 269 | | | | 23,084 | |
CSAIL Commercial Mortgage Trust, Series 2017-CX10, Class XB, 0.22%, 11/15/50 | | | | | | | 1,430 | | | | 24,220 | |
JPMBB Commercial Mortgage Securities Trust: | | | | | | | | | | | | |
Series 2014-C22, Class XA, 1.05%, 09/15/47 | | | | | | | 1,278 | | | | 53,833 | |
Series 2014-C23, Class XA, 0.94%, 09/15/47 | | | | | | | 1,662 | | | | 44,585 | |
JPMDB Commercial Mortgage Securities Trust, Series 2016-C4, Class XC, 0.75%, 12/15/49(b) | | | | | | | 1,800 | | | | 92,330 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Interest Only Commercial Mortgage-Backed Securities (continued) | |
JPMorgan Chase Commercial Mortgage Securities Trust, Series 2016-JP3, Class XC, 0.75%, 08/15/49(b) | | | USD | | | | 900 | | | $ | 44,397 | |
Morgan Stanley Bank of America Merrill Lynch Trust: | | | | | | | | | | | | |
Series 2014-C19, Class XF, 1.34%, 12/15/47(b) | | | | | | | 130 | | | | 7,345 | |
Series 2015-C22, Class XA, 1.27%, 04/15/48 | | | | | | | 38 | | | | 2,057 | |
Series 2015-C26, Class XD, 1.50%, 10/15/48(b) | | | | | | | 120 | | | | 10,003 | |
Series 2016-C29, Class XB, 1.12%, 05/15/49 | | | | | | | 1,020 | | | | 67,164 | |
Series 2016-C31, Class XA, 1.59%, 11/15/49 | | | | | | | 983 | | | | 83,697 | |
Morgan Stanley Capital I Trust(b)(d): | | | | | | | | | | | | |
Series 2016-UBS9, Class XD, 1.69%, 03/15/49 | | | | | | | 1,000 | | | | 97,620 | |
Series 2017-H1, Class XD, 2.36%, 06/15/50 | | | | | | | 110 | | | | 17,600 | |
One Market Plaza Trust(b): | | | | | | | | | | | | |
Series 2017-1MKT, Class XCP, 0.22%, 02/10/32 | | | | | | | 1,880 | | | | 9,419 | |
Series 2017-1MKT, Class XNCP, 0.00%, 02/10/32(d) | | | | | | | 376 | | | | — | |
Wells Fargo Commercial Mortgage Trust: | | | | | | | | | | | | |
Series 2016-BNK1, Class XD, 1.41%, 08/15/49(b) | | | | | | | 1,000 | | | | 79,250 | |
Series 2017-C41, Class XA, 1.39%, 11/15/50 | | | | | | | 996 | | | | 86,856 | |
Series 2018-C44, Class XA, 0.93%, 05/15/51 | | | | | | | 1,052 | | | | 60,707 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,128,920 | |
| | | | | | | | | | | | |
Total Non-Agency Mortgage-Backed Securities — 6.5% (Cost: $27,989,007) | | | | 28,108,196 | |
| | | | | | | | | | | | |
| | |
| | Beneficial Interest (000) | | | | |
Other Interests — 0.0%(n) | |
|
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% | | | | — | |
| | | | | | | | |
| | | |
| | | | | Par (000) | | | | |
Preferred Securities — 0.3%(j) | |
|
Capital Trusts — 0.2% | |
Capital Markets — 0.1% | |
Bank of New York Mellon Corp. (The), Series F, 4.62%(f) | | | | | | | 270 | | | | 255,488 | |
| | | | | | | | |
Industrial Conglomerates — 0.1% | |
General Electric Co., Series D, 5.00%(f) | | | | | | | 260 | | | | 256,100 | |
| | | | | | | | |
Media — 0.0% | |
NBCUniversal Enterprise, Inc., 5.25%(b)(f) | | | | | | | 200 | | | | 202,000 | |
| | | | | | | | |
Total Capital Trusts — 0.2% (Cost: $727,020) | | | | 713,588 | |
| | | | | | | | |
| | | |
| | | | | Shares | | | | |
Trust Preferreds — 0.1% | |
| | | |
Banks — 0.1% | | | | | | | | | |
Citigroup Capital XIII, 8.73%, 10/30/40 | | | | | | | 13,971 | | | | 378,614 | |
| | | | | | | | |
Total Trust Preferreds — 0.1% (Cost: $381,375) | | | | 378,614 | |
| | | | | | | | |
Total Preferred Securities — 0.3% (Cost: $1,108,395) | | | | 1,092,202 | |
| | | | | | | | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 25 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
U.S. Government Sponsored Agency Securities — 33.1% | |
|
Commercial Mortgage-Backed Securities — 0.1% | |
Federal Home Loan Mortgage Corp., Series K076, Class A2, 3.90%, 04/25/28 | | | USD | | | | 82 | | | $ | 84,863 | |
Finnish Real Estate Management Federation Mortgage Trust:(e) | | | | | | | | | | | | |
Series 2018-K73, Class B, 3.98%, 01/25/28(b) | | | | | | | 120 | | | | 115,932 | |
Series 2018-K732, Class B, 4.05%, 05/25/25(b) | | | | | | | 100 | | | | 97,758 | |
Series 2017-K64, Class B, 4.12%, 03/25/27(b) | | | | | | | 20 | | | | 19,791 | |
Series 2018-K077, 4.16%, 05/25/28 | | | | | | | 20 | | | | 19,794 | |
| | | | | | | | |
| | | | | | | | | | | 338,138 | |
Interest Only Commercial Mortgage-Backed Securities — 0.1% | |
Federal Home Loan Mortgage Corp. Variable Rate Notes(e): | | | | | | | | | | | | |
Series K064, Class X1, 0.74%, 03/25/27 | | | | | | | 916 | | | | 41,468 | |
Series K065, Class X1, 0.82%, 04/25/27 | | | | | | | 389 | | | | 19,623 | |
Series KW03, Class X1, 0.99%, 06/25/27 | | | | | | | 269 | | | | 15,256 | |
Series KIR1, Class X, 1.22%, 03/25/26 | | | | | | | 309 | | | | 20,314 | |
Federal National Mortgage Association ACES Variable Rate Notes(e): | | | | | | | | | | | | |
Series 2014-M13, Class X2, 0.23%, 08/25/24 | | | | | | | 3,455 | | | | 25,673 | |
Series 2017-M12, Class X, 0.43%, 06/25/27 | | | | | | | 561 | | | | 7,503 | |
Series 2013-M5, Class X2, 2.31%, 01/25/22 | | | | | | | 414 | | | | 16,325 | |
Government National Mortgage Association Variable Rate Notes: | | | | | | | | | | | | |
Series 2015-48, 0.68%, 02/16/50(d)(e) | | | | | | | 205 | | | | 9,529 | |
Series 2017-151, 0.71%, 09/16/57(d)(e) | | | | | | | 474 | | | | 30,175 | |
Series 2013-191, 0.75%, 11/16/53(e) | | | | | | | 101 | | | | 3,673 | |
Series 2012-120, 0.78%, 02/16/53(e) | | | | | | | 683 | | | | 31,238 | |
Series 2013-63, 0.79%, 09/16/51(e) | | | | | | | 736 | | | | 38,570 | |
Series 2017-100, 0.81%, 05/16/59(e) | | | | | | | 306 | | | | 20,712 | |
Series 2015-173, 0.89%, 09/16/55(e) | | | | | | | 232 | | | | 15,469 | |
Series 2015-171, 0.89%, 11/16/55(e) | | | | | | | 388 | | | | 24,445 | |
Series 2016-128, 0.94%, 09/16/56(e) | | | | | | | 159 | | | | 12,313 | |
Series 2016-26, 0.97%, 02/16/58(e) | | | | | | | 608 | | | | 42,891 | |
Series 2016-152, 0.98%, 08/15/58(e) | | | | | | | 1,108 | | | | 85,846 | |
Series 2016-87, 1.01%, 08/16/58(e) | | | | | | | 272 | | | | 21,118 | |
Series 2016-110, 1.04%, 05/16/58(e) | | | | | | | 198 | | | | 15,843 | |
Series 2016-125, 1.06%, 12/16/57(e) | | | | | | | 298 | | | | 23,728 | |
Series 2016-119, (Libor USD 1 Month + 0.00%) 1.13%, 04/16/58(a) | | | | | | | 332 | | | | 27,768 | |
Series 2016-113, 1.19%, 02/16/58(e) | | | | | | | 300 | | | | 27,561 | |
| | | | | | | | |
| | | | | | | | | | | 577,041 | |
Mortgage-Backed Securities — 32.9% | |
Federal Home Loan Mortgage Corp.: | | | | | | | | | | | | |
2.50%, 02/01/24 - 04/01/31 | | | | | | | 797 | | | | 775,869 | |
2.50%, 07/15/33(o) | | | | | | | 1,607 | | | | 1,559,934 | |
3.00%, 09/01/27 - 12/01/46 | | | | | | | 4,627 | | | | 4,523,225 | |
3.00%, 07/15/33 - 07/15/48(o) | | | | | | | 5,533 | | | | 5,401,084 | |
3.50%, 09/01/30 - 01/01/48 | | | | | | | 10,586 | | | | 10,628,037 | |
3.50%, 06/15/44(o) | | | | | | | 978 | | | | 972,655 | |
4.00%, 08/01/40 - 08/01/47 | | | | | | | 3,185 | | | | 3,267,521 | |
4.00%, 09/15/43(o) | | | | | | | 2,794 | | | | 2,847,843 | |
4.50%, 02/01/39 - 10/01/45 | | | | | | | 501 | | | | 524,894 | |
4.50%, 11/15/40(o) | | | | | | | 1,653 | | | | 1,719,968 | |
5.00%, 10/01/41 - 11/01/41 | | | | | | | 211 | | | | 225,105 | |
5.50%, 02/01/35 - 06/01/41 | | | | | | | 248 | | | | 267,882 | |
Federal National Mortgage Association: | | | | | | | | | | | | |
2.00%, 10/01/31 - 03/01/32 | | | | | | | 699 | | | | 662,237 | |
2.50%, 09/01/27 - 02/01/33 | | | | | | | 5,000 | | | | 4,876,133 | |
2.50%, 04/25/29(o) | | | | | | | 100 | | | | 97,188 | |
3.00%, 04/01/28 - 03/01/47 | | | | | | | 11,183 | | | | 10,991,288 | |
3.00%, 07/25/33 - 05/25/44(o) | | | | | | | 3,936 | | | | 3,816,087 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Mortgage-Backed Securities (continued) | |
3.50%, 10/25/27 - 04/25/44(o) | | | USD | | | | 8,675 | | | $ | 8,647,540 | |
3.50%, 03/01/29 - 01/01/48 | | | | | | | 12,112 | | | | 12,137,794 | |
4.00%, 02/01/25 - 04/01/48 | | | | | | | 9,543 | | | | 9,815,729 | |
4.00%, 07/25/33 - 09/25/43(o) | | | | | | | 11,631 | | | | 11,859,186 | |
4.50%, 02/01/25 - 09/01/46 | | | | | | | 2,862 | | | | 3,006,248 | |
4.50%, 04/25/41(o) | | | | | | | 920 | | | | 957,958 | |
5.00%, 02/01/35 - 06/01/45 | | | | | | | 1,450 | | | | 1,552,751 | |
5.00%, 04/25/37(o) | | | | | | | 1,019 | | | | 1,079,438 | |
5.50%, 08/25/34(o) | | | | | | | 654 | | | | 701,262 | |
5.50%, 02/01/35 - 03/01/40 | | | | | | | 716 | | | | 775,969 | |
6.00%, 10/25/34(o) | | | | | | | 172 | | | | 188,125 | |
6.00%, 04/01/35 - 06/01/41 | | | | | | | 599 | | | | 656,187 | |
6.50%, 05/01/40 | | | | | | | 165 | | | | 184,077 | |
Government National Mortgage Association: | | | | | | | | | | | | |
3.00%, 02/15/45 - 07/20/47 | | | | | | | 6,055 | | | | 5,951,976 | |
3.00%, 07/15/48(o) | | | | | | | 3,496 | | | | 3,419,787 | |
3.50%, 12/20/41 - 10/20/46(p) | | | | | | | 10,707 | | | | 10,781,779 | |
3.50%, 07/15/48(o) | | | | | | | 3,528 | | | | 3,541,977 | |
4.00%, 04/20/39 - 10/20/46 | | | | | | | 867 | | | | 896,080 | |
4.00%, 07/15/48(o) | | | | | | | 10,230 | | | | 10,484,439 | |
4.50%, 12/20/39 - 02/15/42 | | | | | | | 958 | | | | 1,007,327 | |
4.50%, 10/20/41(o) | | | | | | | 1,807 | | | | 1,878,166 | |
5.00%, 12/15/38 - 07/20/44 | | | | | | | 223 | | | | 237,706 | |
| | | | | | | | |
| | | | | | | | | | | 142,918,451 | |
| | | | | | | | |
| |
Total U.S. Government Sponsored Agency Securities — 33.1% (Cost: $145,402,605) | | | | 143,833,630 | |
| | | | | | | | |
|
U.S. Treasury Obligations — 17.0% | |
U.S. Treasury Bonds: | | | | | | | | | | | | |
4.25%, 05/15/39 | | | | | | | 430 | | | | 518,704 | |
4.50%, 08/15/39 | | | | | | | 417 | | | | 519,963 | |
4.38%, 11/15/39 | | | | | | | 419 | | | | 514,617 | |
3.13%, 02/15/43 - 05/15/48(q) | | | | | | | 6,802 | | | | 6,989,003 | |
2.88%, 05/15/43 - 11/15/46 | | | | | | | 2,106 | | | | 2,067,755 | |
3.63%, 08/15/43 | | | | | | | 1,557 | | | | 1,735,569 | |
3.75%, 11/15/43 | | | | | | | 1,653 | | | | 1,879,190 | |
3.00%, 02/15/47 | | | | | | | 297 | | | | 298,067 | |
U.S. Treasury Notes: | | | | | | | | | | | | |
1.25%, 08/31/19 | | | | | | | 4,183 | | | | 4,127,118 | |
1.00%, 10/15/19 | | | | | | | 4,183 | | | | 4,106,693 | |
2.50%, 05/31/20(q) | | | | | | | 5,963 | | | | 5,960,205 | |
1.63%, 06/30/20 - 10/31/23 | | | | | | | 7,531 | | | | 7,306,394 | |
2.63%, 05/15/21 | | | | | | | 4,906 | | | | 4,906,383 | |
1.13%, 06/30/21 | | | | | | | 2,929 | | | | 2,802,458 | |
2.25%, 07/31/21 - 02/15/27 | | | | | | | 7,971 | | | | 7,758,087 | |
2.13%, 09/30/21 | | | | | | | 2,929 | | | | 2,881,404 | |
1.88%, 04/30/22 | | | | | | | 2,929 | | | | 2,842,160 | |
2.75%, 05/31/23(q) | | | | | | | 5,708 | | | | 5,715,135 | |
2.00%, 04/30/24 - 11/15/26 | | | | | | | 7,797 | | | | 7,419,694 | |
2.88%, 05/31/25 - 05/15/28(q) | | | | | | | 3,428 | | | | 3,439,445 | |
| | | | | | | | | | | | |
Total U.S. Treasury Obligations — 17.0% (Cost: $74,160,283) | | | | 73,788,044 | |
| | | | | | | | | | | | |
Total Long-Term Investments — 108.6% (Cost: $476,950,015) | | | | 471,226,217 | |
| | | | | | | | | | | | |
|
Short-Term Securities — 7.9% | |
|
Certificates of Deposit — 1.3% | |
Yankee — 1.0%(r) | |
BNP Paribas SA, New York, 2.66%, 04/18/19 | | | | | | | 880 | | | | 880,352 | |
Canadian Imperial Bank of Commerce, New York, 2.66%, 04/17/19 | | | | | | | 880 | | | | 880,112 | |
| | |
26 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Yankee (continued) | |
MUFG Bank Ltd., New York, 2.68%, 04/17/19 | | | USD | | | | 890 | | | $ | 890,608 | |
Royal Bank of Canada, New York, (LIBOR USD 3 Month + 0.18%), 2.54%, 04/18/19(a) | | | | | | | 880 | | | | 880,204 | |
Toronto-Dominion Bank (The), New York, (LIBOR USD 3 Month + 0.17%), 2.53%, 04/17/19(a) | | | | | | | 880 | | | | 880,478 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 4,411,754 | |
| | | | | | | | | | | | |
Domestic — 0.3% | | | | | | | | | |
Wells Fargo Bank NA: | | | | | | | | | | | | |
(LIBOR USD 3 Month + 0.21%), 2.56%, 04/16/19(a) | | | | | | | 890 | | | | 890,550 | |
2.70%, 04/16/19 | | | | | | | 430 | | | | 430,237 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,320,787 | |
Total Certificates of Deposit — 1.3% (Cost: $5,729,999) | | | | 5,732,541 | |
| | | | | | | | | | | | |
|
Commercial Paper — 0.9% | |
AT&T, Inc.: | | | | | | | | | | | | |
2.84%, 12/06/18 | | | | | | | 570 | | | | 563,167 | |
2.97%, 03/07/19 | | | | | | | 580 | | | | 568,730 | |
JPMorgan Securities LLC, (LIBOR USD 3 Month + 0.18%), 2.53%, 04/15/19(a) | | | | | | | 890 | | | | 890,205 | |
Societe Generale SA, 2.72%, 04/12/19 | | | | | | | 880 | | | | 861,724 | |
Sumitomo Mitsui Banking Corp., 2.68%, 04/17/19 | | | | | | | 880 | | | | 861,642 | |
| | | | | | | | | | | | |
Total Commercial Paper — 0.9% (Cost: $3,744,398) | | | | 3,745,468 | |
| | | | | | | | | | | | |
|
Foreign Government Obligations — 2.2%(s) | |
|
Egypt — 0.2% | |
Arab Republic of Egypt Treasury Bills: | | | | | | | | | | | | |
17.73%, 10/16/18 | | | EGP | | | | 8,675 | | | | 459,340 | |
17.53%, 11/13/18 | | | | | | | 5,400 | | | | 281,920 | |
17.88%, 11/27/18 | | | | | | | 2,550 | | | | 132,202 | |
16.68%, 12/04/18 | | | | | | | 2,000 | | | | 103,328 | |
16.34%, 03/05/19 | | | | | | | 1,200 | | | | 59,322 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,036,112 | |
Japan — 2.0% | |
Government of Japan Treasury Bills: | | | | | | | | | | | | |
(0.13)%, 08/13/18 | | | JPY | | | | 468,600 | | | | 4,233,094 | |
(0.14)%, 09/03/18 | | | | | | | 477,000 | | | | 4,309,294 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 8,542,388 | |
Nigeria — 0.0% | |
Federal Republic of Nigeria Treasury Bills, 14.75%, 04/04/19 | | | NGN | | | | 15,328 | | | | 38,513 | |
| | | | | | | | | | | | |
Total Foreign Government Obligations — 2.2% (Cost: $9,681,684) | | | | 9,617,013 | |
| | | | | | | | | | | | |
| | | |
| | | | | Shares | | | | |
Money Market Funds — 3.5%(t)(u) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.80% | | | | | | | 15,391,229 | | | | 15,391,229 | |
| | | | | | | | | | | | |
Total Money Market Funds — 3.5% (Cost: $15,391,229) | | | | 15,391,229 | |
| | | | | | | | | | | | |
Total Short-Term Securities — 7.9% (Cost: $34,547,310) | | | | 34,486,251 | |
| | | | | | | | | | | | |
Total Options Purchased — 0.2% (Cost: $944,091) | | | | 883,811 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Money Market Funds (continued) | |
Total Investments Before TBA Sale Commitments and Options Written — 116.7% (Cost: $512,441,416) | | | $ | 506,596,279 | |
| | | | | | | | | | | | |
Total Options Written — 0.0% (Premium Received — $227,705) | | | | (231,246 | ) |
| | | | | | | | | | | | |
|
TBA Sale Commitments — (5.4)%(o) | |
|
Mortgage-Backed Securities — (5.4)% | |
Federal Home Loan Mortgage Corp., 3.50%, 07/15/33 | | | USD | | | | 1,160 | | | | (1,172,993 | ) |
Federal National Mortgage Association: | | | | | | | | | | | | |
2.00%, 02/25/29 | | | | | | | 717 | | | | (678,995 | ) |
2.50%, 04/25/29 | | | | | | | 1,443 | | | | (1,402,128 | ) |
3.50%, 04/25/44 | | | | | | | 8,235 | | | | (8,195,012 | ) |
4.00%, 09/25/43 | | | | | | | 11,260 | | | | (11,479,590 | ) |
5.00%, 04/25/37 | | | | | | | 41 | | | | (43,432 | ) |
Government National Mortgage Association: | | | | | | | | | | | | |
3.00%, 07/15/48 | | | | | | | 177 | | | | (173,166 | ) |
4.50%, 09/15/39 | | | | | | | 100 | | | | (103,939 | ) |
| | | | | | | | | | | | |
Total TBA Sale Commitments — (5.4)% (Proceeds: $23,176,941) | | | | (23,249,255 | ) |
| | | | | | | | | | | | |
| |
Total Investments Net of TBA Sale Commitments and Options Written — 111.3% (Cost: $489,036,770) | | | | 483,115,778 | |
Liabilities in Excess of Other Assets — (11.3)% | | | | (49,011,104 | ) |
| | | | | | | | | | | | |
Net Assets — 100.0% | | | $ | 434,104,674 | |
| | | | | | | | | | | | |
(a) | 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. |
(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 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. |
(f) | Perpetual security with no stated maturity date. |
(g) | Issuer filed for bankruptcy and/or is in default. |
(h) | Non-income producing security. |
(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 rate security. Rate as of period end and maturity is the date the principal owed can be recovered through demand. |
(m) | When-issued security. |
(n) | Other interests represent beneficial interests in liquidation trusts and other reorganizational or private entities. |
(o) | Represents or includes a TBA transaction |
(p) | All or a portion of security has been pledged as collateral in connection with outstanding TBA commitments. |
(q) | All or a portion of security has been pledged as collateral in connection with outstanding reverse repurchase agreements. |
(r) | Issuer is a U.S. branch of a foreign domiciled bank. |
(s) | Rates are discount rates or a range of discount rates at the time of purchase. |
(t) | Annualized 7-day yield as of period end. |
| | | | |
SCHEDULE OF INVESTMENTS | | | 27 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund |
(u) | During the six months ended June 30, 2018, investments in issuers considered to be an affiliate 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 12/31/17 | | | Net Activity | | | Shares Held at 06/30/18 | | | Value at 06/30/18 | | | Income | | | Net Realized Gain (Loss) | | | Change in Unrealized Appreciation (Depreciation) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class | | | 1,809,877 | | | | 13,581,352 | | | | 15,391,229 | | | $ | 15,391,229 | | | $ | 143,781 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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.
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 |
BNP Paribas SA | | | 1.97 | % | | | 06/29/18 | | | | 07/02/18 | | | $ | 5,970,454 | | | $ | 5,971,108 | | | U.S. Treasury Obligations | | Overnight |
BNP Paribas SA | | | 2.07 | % | | | 06/29/18 | | | | 07/02/18 | | | | 919,712 | | | | 919,818 | | | U.S. Treasury Obligations | | Overnight |
Deutsche Bank Securities, Inc. | | | 2.15 | % | | | 06/29/18 | | | | 07/02/18 | | | | 5,729,405 | | | | 5,730,089 | | | U.S. Treasury Obligations | | Overnight |
JP Morgan Securities LLC | | | 2.10 | % | | | 06/29/18 | | | | 07/02/18 | | | | 5,230,775 | | | | 5,231,385 | | | U.S. Treasury Obligations | | Overnight |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | $ | 17,850,346 | | | $ | 17,852,400 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
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 10 Year Ultra Note | | | 38 | | | | 09/19/18 | | | $ | 4,873 | | | $ | 31,432 | |
U.S. Treasury Long Bond | | | 14 | | | | 09/19/18 | | | | 2,030 | | | | 19,450 | |
U.S. Treasury Ultra Bond | | | 89 | | | | 09/19/18 | | | | 14,201 | | | | 294,337 | |
U.S. Treasury 2 Year Note | | | 437 | | | | 09/28/18 | | | | 92,569 | | | | (3,888 | ) |
U.S. Treasury 5 Year Note | | | 243 | | | | 09/28/18 | | | | 27,609 | | | | (115,566 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 225,765 | |
| | | | | | | | | | | | | | | | |
Short Contracts | | | | | | | | | | | | | | | | |
Euro-Bund | | | 104 | | | | 09/06/18 | | | | 19,742 | | | | (211,220 | ) |
U.S. Treasury 10 Year Note | | | 332 | | | | 09/19/18 | | | | 39,902 | | | | (112,779 | ) |
90-Day Eurodollar | | | 2 | | | | 12/14/20 | | | | 485 | | | | 197 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | (323,802 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | (98,037 | ) |
| | | | | | | | | | | | | | | | |
Forward Foreign Currency Exchange Contracts
| | | | | | | | | | | | | | | | | | | | |
Currency Purchased | | | Currency Sold | | | Counterparty | | Settlement Date | | | Unrealized Appreciation (Depreciation) | |
TRY | | | 342,421 | | | USD | | | 73,000 | | | Barclays Bank plc | | | 07/02/18 | | | $ | 1,539 | |
TRY | | | 613,029 | | | USD | | | 131,400 | | | BNP Paribas SA | | | 07/02/18 | | | | 2,045 | |
USD | | | 130,000 | | | ARS | | | 2,792,790 | | | BNP Paribas SA | | | 07/02/18 | | | | 33,447 | |
USD | | | 204,400 | | | TRY | | | 933,732 | | | BNP Paribas SA | | | 07/02/18 | | | | 1,143 | |
EUR | | | 247,000 | | | USD | | | 287,867 | | | Bank of America NA | | | 07/03/18 | | | | 580 | |
USD | | | 215,000 | | | BRL | | | 808,064 | | | Goldman Sachs International | | | 07/03/18 | | | | 6,508 | |
USD | | | 114,000 | | | BRL | | | 423,054 | | | UBS AG | | | 07/03/18 | | | | 4,846 | |
USD | | | 254,071 | | | CLP | | | 159,913,000 | | | JP Morgan Chase Bank NA | | | 07/03/18 | | | | 9,330 | |
USD | | | 303,471 | | | EUR | | | 247,000 | | | Goldman Sachs International | | | 07/03/18 | | | | 15,024 | |
USD | | | 432,686 | | | CLP | | | 274,560,000 | | | Deutsche Bank AG | | | 07/05/18 | | | | 12,478 | |
USD | | | 531,756 | | | EUR | | | 450,000 | | | Goldman Sachs International | | | 07/05/18 | | | | 6,173 | |
| | |
28 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund |
| | | | | | | | | | | | | | | | | | | | |
Currency Purchased | | | Currency Sold | | | Counterparty | | Settlement Date | | | Unrealized Appreciation (Depreciation) | |
USD | | | 109,500 | | | ZAR | | | 1,394,209 | | | BNP Paribas SA | | | 07/05/18 | | | $ | 7,888 | |
USD | | | 109,500 | | | ZAR | | | 1,478,017 | | | Royal Bank of Scotland | | | 07/05/18 | | | | 1,780 | |
USD | | | 853,500 | | | RUB | | | 53,166,222 | | | JP Morgan Chase Bank NA | | | 07/09/18 | | | | 7,452 | |
USD | | | 277,500 | | | ZAR | | | 3,711,656 | | | Barclays Bank plc | | | 07/10/18 | | | | 7,158 | |
USD | | | 106,000 | | | ZAR | | | 1,349,563 | | | BNP Paribas SA | | | 07/10/18 | | | | 7,703 | |
USD | | | 132,500 | | | ZAR | | | 1,678,112 | | | Goldman Sachs International | | | 07/10/18 | | | | 10,273 | |
USD | | | 100,000 | | | ZAR | | | 1,319,210 | | | Morgan Stanley & Co. International plc | | | 07/10/18 | | | | 3,914 | |
RUB | | | 10,802,700 | | | USD | | | 168,977 | | | Morgan Stanley & Co. International plc | | | 07/12/18 | | | | 2,872 | |
RUB | | | 5,957,861 | | | USD | | | 93,012 | | | UBS AG | | | 07/12/18 | | | | 1,766 | |
TWD | | | 3,044,100 | | | USD | | | 100,000 | | | Barclays Bank plc | | | 07/12/18 | | | | 15 | |
USD | | | 100,000 | | | BRL | | | 376,300 | | | Goldman Sachs International | | | 07/12/18 | | | | 3,014 | |
USD | | | 894,749 | | | RUB | | | 52,163,427 | | | BNP Paribas SA | | | 07/12/18 | | | | 64,933 | |
USD | | | 100,000 | | | TWD | | | 3,036,500 | | | BNP Paribas SA | | | 07/12/18 | | | | 235 | |
MXN | | | 2,946,242 | | | USD | | | 146,000 | | | Barclays Bank plc | | | 07/13/18 | | | | 2,111 | |
RUB | | | 6,637,682 | | | USD | | | 105,500 | | | Goldman Sachs International | | | 07/13/18 | | | | 80 | |
USD | | | 88,000 | | | RUB | | | 5,531,680 | | | BNP Paribas SA | | | 07/13/18 | | | | 12 | |
TRY | | | 186,546 | | | USD | | | 40,000 | | | Citibank NA | | | 07/16/18 | | | | 382 | |
TRY | | | 606,194 | | | USD | | | 130,000 | | | JP Morgan Chase Bank NA | | | 07/16/18 | | | | 1,225 | |
TRY | | | 419,760 | | | USD | | | 90,000 | | | Royal Bank of Scotland | | | 07/16/18 | | | | 867 | |
USD | | | 84,277 | | | TRY | | | 371,324 | | | Deutsche Bank AG | | | 07/16/18 | | | | 3,895 | |
USD | | | 175,723 | | | TRY | | | 773,526 | | | Morgan Stanley & Co. International plc | | | 07/16/18 | | | | 8,275 | |
USD | | | 460,000 | | | MXN | | | 9,140,108 | | | Morgan Stanley & Co. International plc | | | 07/17/18 | | | | 814 | |
MXN | | | 5,420,554 | | | USD | | | 264,000 | | | Deutsche Bank AG | | | 07/19/18 | | | | 8,233 | |
USD | | | 264,000 | | | MXN | | | 4,834,896 | | | UBS AG | | | 07/19/18 | | | | 21,180 | |
USD | | | 100,000 | | | COP | | | 287,900,000 | | | UBS AG | | | 07/23/18 | | | | 1,869 | |
SGD | | | 204,366 | | | USD | | | 150,000 | | | Standard Chartered Bank | | | 07/25/18 | | | | 57 | |
USD | | | 75,000 | | | SGD | | | 99,955 | | | Standard Chartered Bank | | | 07/25/18 | | | | 1,607 | |
USD | | | 70,000 | | | ARS | | | 1,500,100 | | | BNP Paribas SA | | | 07/31/18 | | | | 19,725 | |
USD | | | 75,000 | | | ARS | | | 1,607,250 | | | Citibank NA | | | 07/31/18 | | | | 21,133 | |
USD | | | 134,000 | | | ARS | | | 2,912,948 | | | JP Morgan Chase Bank NA | | | 07/31/18 | | | | 36,373 | |
USD | | | 132,000 | | | CLP | | | 82,946,160 | | | Credit Suisse International | | | 07/31/18 | | | | 5,042 | |
USD | | | 33,125 | | | ZAR | | | 421,794 | | | Bank of America NA | | | 07/31/18 | | | | 2,489 | |
USD | | | 82,813 | | | ZAR | | | 1,053,185 | | | Barclays Bank plc | | | 07/31/18 | | | | 6,317 | |
USD | | | 13,250 | | | ZAR | | | 168,662 | | | JP Morgan Chase Bank NA | | | 07/31/18 | | | | 1,000 | |
USD | | | 82,813 | | | ZAR | | | 1,053,595 | | | Royal Bank of Scotland | | | 07/31/18 | | | | 6,287 | |
MXN | | | 4,392,812 | | | USD | | | 219,000 | | | Morgan Stanley & Co. International plc | | | 08/02/18 | | | | 1,118 | |
USD | | | 586,000 | | | BRL | | | 2,190,938 | | | Goldman Sachs International | | | 08/02/18 | | | | 22,777 | |
USD | | | 112,640 | | | CNY | | | 720,170 | | | Standard Chartered Bank | | | 08/03/18 | | | | 4,196 | |
USD | | | 148,039 | | | ZAR | | | 1,841,548 | | | Citibank NA | | | 08/03/18 | | | | 14,336 | |
USD | | | 853,500 | | | RUB | | | 53,443,609 | | | JP Morgan Chase Bank NA | | | 08/07/18 | | | | 5,806 | |
USD | | | 31,000 | | | ARS | | | 850,640 | | | BNP Paribas SA | | | 08/08/18 | | | | 2,718 | |
USD | | | 155,000 | | | ARS | | | 4,094,914 | | | JP Morgan Chase Bank NA | | | 08/08/18 | | | | 18,852 | |
USD | | | 223,777 | | | EUR | | | 190,800 | | | Barclays Bank plc | | | 08/08/18 | | | | 355 | |
MXN | | | 1,461,497 | | | USD | | | 73,000 | | | Barclays Bank plc | | | 08/10/18 | | | | 137 | |
MXN | | | 2,945,863 | | | USD | | | 146,000 | | | Royal Bank of Scotland | | | 08/10/18 | | | | 1,417 | |
USD | | | 73,000 | | | MXN | | | 1,440,859 | | | Goldman Sachs International | | | 08/10/18 | | | | 896 | |
USD | | | 4,250,426 | | | JPY | | | 468,928,256 | | | Royal Bank of Scotland | | | 08/13/18 | | | | 2,854 | |
USD | | | 860,567 | | | ZAR | | | 10,929,434 | | | Barclays Bank plc | | | 08/16/18 | | | | 68,471 | |
ZAR | | | 1,518,074 | | | USD | | | 109,568 | | | HSBC Bank plc | | | 08/16/18 | | | | 452 | |
USD | | | 150,985 | | | IDR | | | 2,114,840,387 | | | BNP Paribas SA | | | 08/20/18 | | | | 4,177 | |
USD | | | 479,332 | | | IDR | | | 6,715,281,784 | | | Deutsche Bank AG | | | 08/20/18 | | | | 13,171 | |
USD | | | 151,006 | | | IDR | | | 2,114,840,397 | | | JP Morgan Chase Bank NA | | | 08/20/18 | | | | 4,198 | |
USD | | | 425,658 | | | TRY | | | 1,728,863 | | | BNP Paribas SA | | | 08/20/18 | | | | 57,221 | |
USD | | | 586,100 | | | TRY | | | 2,362,137 | | | Citibank NA | | | 08/20/18 | | | | 82,708 | |
MXN | | | 2,300,000 | | | USD | | | 109,573 | | | Barclays Bank plc | | | 08/22/18 | | | | 5,295 | |
MXN | | | 72,369 | | | USD | | | 3,520 | | | Goldman Sachs International | | | 08/22/18 | | | | 94 | |
USD | | | 394,600 | | | IDR | | | 5,639,228,600 | | | Deutsche Bank AG | | | 08/31/18 | | | | 3,982 | |
USD | | | 4,424,661 | | | JPY | | | 483,600,000 | | | Barclays Bank plc | | | 09/11/18 | | | | 34,901 | |
RUB | | | 1,107,960 | | | USD | | | 17,500 | | | Barclays Bank plc | | | 09/12/18 | | | | 8 | |
USD | | | 219,000 | | | ARS | | | 4,906,082 | | | BNP Paribas SA | | | 09/14/18 | | | | 61,638 | |
USD | | | 31,000 | | | ARS | | | 937,750 | | | Citibank NA | | | 09/17/18 | | | | 1,010 | |
AUD | | | 440,000 | | | USD | | | 324,537 | | | Goldman Sachs International | | | 09/19/18 | | | | 1,164 | |
AUD | | | 231,000 | | | USD | | | 170,395 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 598 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 29 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund |
| | | | | | | | | | | | | | | | | | | | |
Currency Purchased | | | Currency Sold | | | Counterparty | | Settlement Date | | | Unrealized Appreciation (Depreciation) | |
CAD | | | 816,711 | | | EUR | | | 528,000 | | | JP Morgan Chase Bank NA | | | 09/19/18 | | | $ | 1,767 | |
CAD | | | 582,996 | | | USD | | | 439,000 | | | Barclays Bank plc | | | 09/19/18 | | | | 5,062 | |
CHF | | | 440,000 | | | SEK | | | 3,923,220 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 6,684 | |
CHF | | | 108,888 | | | USD | | | 110,000 | | | Deutsche Bank AG | | | 09/19/18 | | | | 714 | |
CHF | | | 122,503 | | | USD | | | 124,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | 558 | |
EUR | | | 90,000 | | | USD | | | 105,273 | | | Barclays Bank plc | | | 09/19/18 | | | | 462 | |
EUR | | | 50,000 | | | USD | | | 58,255 | | | State Street Bank and Trust Co. | | | 09/19/18 | | | | 487 | |
GBP | | | 220,000 | | | USD | | | 289,819 | | | JP Morgan Chase Bank NA | | | 09/19/18 | | | | 1,557 | |
GBP | | | 22,000 | | | USD | | | 29,086 | | | Royal Bank of Canada | | | 09/19/18 | | | | 52 | |
MXN | | | 5,714,368 | | | CAD | | | 352,000 | | | BNP Paribas SA | | | 09/19/18 | | | | 16,040 | |
NOK | | | 896,196 | | | USD | | | 110,000 | | | Bank of America NA | | | 09/19/18 | | | | 389 | |
NOK | | | 1,862,389 | | | USD | | | 229,000 | | | JP Morgan Chase Bank NA | | | 09/19/18 | | | | 399 | |
SEK | | | 902,390 | | | USD | | | 101,000 | | | Bank of America NA | | | 09/19/18 | | | | 366 | |
USD | | | 29,185 | | | GBP | | | 22,000 | | | Bank of America NA | | | 09/19/18 | | | | 47 | |
USD | | | 102,000 | | | JPY | | | 11,199,916 | | | Goldman Sachs International | | | 09/19/18 | | | | 276 | |
USD | | | 110,000 | | | NOK | | | 890,785 | | | BNP Paribas SA | | | 09/19/18 | | | | 278 | |
USD | | | 19,999 | | | NZD | | | 29,000 | | | Barclays Bank plc | | | 09/19/18 | | | | 356 | |
USD | | | 8,000 | | | SEK | | | 70,461 | | | Bank of America NA | | | 09/19/18 | | | | 85 | |
USD | | | 101,000 | | | SEK | | | 897,645 | | | Goldman Sachs International | | | 09/19/18 | | | | 167 | |
USD | | | 1,504,520 | | | EUR | | | 1,160,000 | | | Deutsche Bank AG | | | 12/13/19 | | | | 86,750 | |
USD | | | 1,514,264 | | | EUR | | | 1,160,000 | | | Deutsche Bank AG | | | 02/25/20 | | | | 86,969 | |
USD | | | 1,543,322 | | | JPY | | | 154,610,000 | | | HSBC Bank plc | | | 03/16/20 | | | | 70,618 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | 1,055,722 | |
| | | | | | | | | | | | | | | | | |
ARS | | | 3,361,826 | | | USD | | | 130,000 | | | BNP Paribas SA | | | 07/02/18 | | | | (13,774 | ) |
BRL | | | 170,397 | | | USD | | | 45,600 | | | Barclays Bank plc | | | 07/03/18 | | | | (1,635 | ) |
BRL | | | 2,061,985 | | | USD | | | 556,620 | | | BNP Paribas SA | | | 07/03/18 | | | | (24,597 | ) |
BRL | | | 259,441 | | | USD | | | 68,400 | | | UBS AG | | | 07/03/18 | | | | (1,460 | ) |
CLP | | | 159,913,000 | | | USD | | | 252,727 | | | JP Morgan Chase Bank NA | | | 07/03/18 | | | | (7,986 | ) |
USD | | | 75,000 | | | BRL | | | 296,250 | | | Deutsche Bank AG | | | 07/03/18 | | | | (1,437 | ) |
USD | | | 195,620 | | | BRL | | | 764,639 | | | Goldman Sachs International | | | 07/03/18 | | | | (1,668 | ) |
USD | | | 71,000 | | | BRL | | | 278,178 | | | UBS AG | | | 07/03/18 | | | | (774 | ) |
CLP | | | 274,560,000 | | | USD | | | 431,050 | | | Deutsche Bank AG | | | 07/05/18 | | | | (10,841 | ) |
ZAR | | | 1,402,958 | | | USD | | | 109,500 | | | BNP Paribas SA | | | 07/05/18 | | | | (7,251 | ) |
ZAR | | | 1,402,686 | | | USD | | | 109,500 | | | Goldman Sachs International | | | 07/05/18 | | | | (7,270 | ) |
RUB | | | 53,284,005 | | | USD | | | 853,500 | | | JP Morgan Chase Bank NA | | | 07/09/18 | | | | (5,578 | ) |
ZAR | | | 2,437,116 | | | USD | | | 188,000 | | | BNP Paribas SA | | | 07/10/18 | | | | (10,491 | ) |
ZAR | | | 1,131,896 | | | USD | | | 83,011 | | | Deutsche Bank AG | | | 07/10/18 | | | | (569 | ) |
ZAR | | | 3,035,289 | | | USD | | | 238,989 | | | Goldman Sachs International | | | 07/10/18 | | | | (17,911 | ) |
ZAR | | | 1,347,981 | | | USD | | | 106,000 | | | Morgan Stanley & Co. International plc | | | 07/10/18 | | | | (7,819 | ) |
BRL | | | 377,300 | | | USD | | | 100,000 | | | BNP Paribas SA | | | 07/12/18 | | | | (2,757 | ) |
RUB | | | 12,885,523 | | | USD | | | 207,196 | | | Bank of America NA | | | 07/12/18 | | | | (2,213 | ) |
RUB | | | 22,517,343 | | | USD | | | 361,623 | | | Citibank NA | | | 07/12/18 | | | | (3,417 | ) |
TWD | | | 3,026,000 | | | USD | | | 100,000 | | | JP Morgan Chase Bank NA | | | 07/12/18 | | | | (580 | ) |
USD | | | 146,000 | | | MXN | | | 2,932,742 | | | Royal Bank of Scotland | | | 07/13/18 | | | | (1,432 | ) |
USD | | | 17,500 | | | RUB | | | 1,101,103 | | | Barclays Bank plc | | | 07/13/18 | | | | (14 | ) |
MXN | | | 3,080,059 | | | USD | | | 155,000 | | | Goldman Sachs International | | | 07/17/18 | | | | (262 | ) |
USD | | | 512,600 | | | MXN | | | 10,234,982 | | | Citibank NA | | | 07/23/18 | | | | (1,092 | ) |
SGD | | | 303,700 | | | USD | | | 225,000 | | | Standard Chartered Bank | | | 07/25/18 | | | | (2,007 | ) |
JPY | | | 13,897,997 | | | USD | | | 126,700 | | | Standard Chartered Bank | | | 07/27/18 | | | | (965 | ) |
USD | | | 98,400 | | | TRY | | | 467,518 | | | Deutsche Bank AG | | | 07/27/18 | | | | (2,321 | ) |
USD | | | 230,000 | | | KRW | | | 257,600,000 | | | JP Morgan Chase Bank NA | | | 07/30/18 | | | | (1,441 | ) |
ARS | | | 5,627,315 | | | USD | | | 211,236 | | | BNP Paribas SA | | | 07/31/18 | | | | (22,637 | ) |
CLP | | | 82,962,000 | | | USD | | | 132,000 | | | Royal Bank of Scotland | | | 07/31/18 | | | | (5,017 | ) |
ZAR | | | 1,117,803 | | | USD | | | 82,812 | | | Deutsche Bank AG | | | 07/31/18 | | | | (1,623 | ) |
BRL | | | 1,372,030 | | | USD | | | 367,000 | | | JP Morgan Chase Bank NA | | | 08/02/18 | | | | (14,293 | ) |
USD | | | 73,000 | | | TRY | | | 346,816 | | | Barclays Bank plc | | | 08/02/18 | | | | (1,521 | ) |
CNY | | | 721,684 | | | USD | | | 112,640 | | | Deutsche Bank AG | | | 08/03/18 | | | | (3,968 | ) |
USD | | | 288,536 | | | EUR | | | 247,000 | | | Bank of America NA | | | 08/03/18 | | | | (581 | ) |
ZAR | | | 297,899 | | | USD | | | 21,900 | | | Royal Bank of Scotland | | | 08/03/18 | | | | (271 | ) |
RUB | | | 22,974,200 | | | USD | | | 367,000 | | | BNP Paribas SA | | | 08/07/18 | | | | (2,596 | ) |
ARS | | | 1,303,500 | | | USD | | | 55,000 | | | BNP Paribas SA | | | 08/08/18 | | | | (11,661 | ) |
ARS | | | 1,283,333 | | | USD | | | 55,000 | | | JP Morgan Chase Bank NA | | | 08/08/18 | | | | (12,332 | ) |
USD | | | 130,000 | | | IDR | | | 1,879,800,000 | | | JP Morgan Chase Bank NA | | | 08/09/18 | | | | (776 | ) |
| | |
30 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund |
| | | | | | | | | | | | | | | | | | | | |
Currency Purchased | | | Currency Sold | | | Counterparty | | Settlement Date | | | Unrealized Appreciation (Depreciation) | |
COP | | | 283,209,000 | | | USD | | | 100,000 | | | Goldman Sachs International | | | 08/10/18 | | | $ | (3,543 | ) |
TWD | | | 3,032,100 | | | USD | | | 100,000 | | | BNP Paribas SA | | | 08/10/18 | | | | (230 | ) |
ZAR | | | 2,800,643 | | | USD | | | 205,700 | | | Barclays Bank plc | | | 08/10/18 | | | | (2,559 | ) |
ZAR | | | 3,013,883 | | | USD | | | 220,152 | | | Bank of America NA | | | 08/16/18 | | | | (1,725 | ) |
TRY | | | 4,091,000 | | | USD | | | 1,052,307 | | | BNP Paribas SA | | | 08/20/18 | | | | (180,477 | ) |
RUB | | | 20,185,198 | | | USD | | | 321,656 | | | Bank of America NA | | | 08/21/18 | | | | (1,986 | ) |
RUB | | | 13,249,158 | | | USD | | | 211,344 | | | Credit Suisse International | | | 08/21/18 | | | | (1,519 | ) |
USD | | | 118,430 | | | MXN | | | 2,372,369 | | | Deutsche Bank AG | | | 08/22/18 | | | | (52 | ) |
USD | | | 110,000 | | | COP | | | 325,996,000 | | | Royal Bank of Scotland | | | 08/27/18 | | | | (940 | ) |
USD | | | 102,850 | | | ZAR | | | 1,430,545 | | | Goldman Sachs International | | | 08/27/18 | | | | (670 | ) |
IDR | | | 4,621,051,000 | | | USD | | | 330,500 | | | Deutsche Bank AG | | | 08/31/18 | | | | (10,409 | ) |
CLP | | | 35,662,000 | | | USD | | | 55,000 | | | JP Morgan Chase Bank NA | | | 09/05/18 | | | | (419 | ) |
CLP | | | 35,755,500 | | | USD | | | 55,000 | | | UBS AG | | | 09/05/18 | | | | (276 | ) |
ARS | | | 1,790,325 | | | USD | | | 65,700 | | | BNP Paribas SA | | | 09/14/18 | | | | (8,275 | ) |
ARS | | | 1,892,100 | | | USD | | | 70,000 | | | Citibank NA | | | 09/14/18 | | | | (9,311 | ) |
ARS | | | 2,251,599 | | | USD | | | 83,300 | | | JP Morgan Chase Bank NA | | | 09/14/18 | | | | (11,080 | ) |
ARS | | | 863,350 | | | USD | | | 31,000 | | | BNP Paribas SA | | | 09/17/18 | | | | (3,390 | ) |
CAD | | | 352,000 | | | MXN | | | 5,649,424 | | | Bank of America NA | | | 09/19/18 | | | | (12,810 | ) |
JPY | | | 11,168,898 | | | USD | | | 102,000 | | | Bank of America NA | | | 09/19/18 | | | | (557 | ) |
NZD | | | 29,000 | | | USD | | | 19,774 | | | Royal Bank of Scotland | | | 09/19/18 | | | | (131 | ) |
SEK | | | 3,962,956 | | | CHF | | | 440,000 | | | Deutsche Bank AG | | | 09/19/18 | | | | (2,220 | ) |
SEK | | | 70,810 | | | USD | | | 8,000 | | | Deutsche Bank AG | | | 09/19/18 | | | | (46 | ) |
USD | | | 325,340 | | | AUD | | | 440,000 | | | Citibank NA | | | 09/19/18 | | | | (360 | ) |
USD | | | 170,346 | | | AUD | | | 231,000 | | | Royal Bank of Canada | | | 09/19/18 | | | | (646 | ) |
USD | | | 439,000 | | | CAD | | | 583,099 | | | Goldman Sachs International | | | 09/19/18 | | | | (5,140 | ) |
USD | | | 124,000 | | | CHF | | | 122,500 | | | Goldman Sachs International | | | 09/19/18 | | | | (555 | ) |
USD | | | 110,000 | | | CHF | | | 108,594 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (415 | ) |
USD | | | 104,948 | | | EUR | | | 90,000 | | | Morgan Stanley & Co. International plc | | | 09/19/18 | | | | (787 | ) |
USD | | | 288,534 | | | GBP | | | 220,000 | | | UBS AG | | | 09/19/18 | | | | (2,842 | ) |
USD | | | 229,000 | | | NOK | | | 1,872,135 | | | Barclays Bank plc | | | 09/19/18 | | | | (1,600 | ) |
MXN | | | 9,638,195 | | | USD | | | 495,000 | | | HSBC Bank plc | | | 11/26/18 | | | | (20,830 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | (502,638 | ) |
| | | | | | | | | | | | | | | | | |
| | | Net Unrealized Appreciation | | | $ | 553,084 | |
| | | | | | | | | | | | | | | | | | | | |
OTC Barrier Options Purchased
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Description | �� | Type of Option | | Counterparty | | Expiration Date | | | Exercise Price | | | Barrier Price/Range | | | Notional Amount (000) | | | Value | |
Put | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
USD Currency | | Down and Out | | Deutsche Bank AG | | | 07/19/18 | | | | BRL | | | | 3.68 | | | | BRL | | | | 3.55 | | | | USD | | | | 220 | | | $ | 117 | |
USD Currency | | One-Touch | | Deutsche Bank AG | | | 07/20/18 | | | | TRY | | | | 4.30 | | | | TRY | | | | 4.30 | | | | USD | | | | 11 | | | | 105 | |
USD Currency | | One-Touch | | BNP Paribas SA | | | 07/20/18 | | | | ZAR | | | | 11.60 | | | | ZAR | | | | 11.60 | | | | USD | | | | 18 | | | | — | |
USD Currency | | One-Touch | | Morgan Stanley & Co. International plc | | | 07/24/18 | | | | TRY | | | | 4.30 | | | | TRY | | | | 4.30 | | | | USD | | | | 18 | | | | 838 | |
USD Currency | | Down and Out | | Morgan Stanley & Co. International plc | | | 08/10/18 | | | | TRY | | | | 4.65 | | | | TRY | | | | 4.38 | | | | USD | | | | 176 | | | | 3,575 | |
USD Currency | | One-Touch | | Deutsche Bank AG | | | 08/20/18 | | | | BRL | | | | 3.50 | | | | BRL | | | | 3.50 | | | | USD | | | | 11 | | | | 345 | |
USD Currency | | One-Touch | | Morgan Stanley & Co. International plc | | | 10/25/18 | | | | MXN | | | | 16.50 | | | | MXN | | | | 16.50 | | | | USD | | | | 22 | | | | 517 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 5,497 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 31 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund |
OTC Currency Options Purchased
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Description | | Counterparty | | Expiration Date | | | Exercise Price | | | Notional Amount (000) | | | Value | |
Call | | | | | | | | | | | | | | | | | | | | | | | | | | |
EUR Currency | | Citibank NA | | | 07/03/18 | | | | ZAR | | | | 15.00 | | | | EUR | | | | 66 | | | $ | 5,043 | |
USD Currency | | Morgan Stanley & Co. International plc | | | 07/06/18 | | | | ZAR | | | | 13.10 | | | | USD | | | | 220 | | | | 10,408 | |
USD Currency | | Deutsche Bank AG | | | 07/09/18 | | | | TWD | | | | 30.15 | | | | USD | | | | 200 | | | | 2,196 | |
USD Currency | | Deutsche Bank AG | | | 07/19/18 | | | | MXN | | | | 21.50 | | | | USD | | | | 88 | | | | 67 | |
USD Currency | | JP Morgan Chase Bank NA | | | 07/19/18 | | | | MXN | | | | 20.00 | | | | USD | | | | 146 | | | | 1,951 | |
USD Currency | | JP Morgan Chase Bank NA | | | 07/19/18 | | | | ZAR | | | | 12.70 | | | | USD | | | | 190 | | | | 14,979 | |
USD Currency | | Nomura International PLC | | | 07/20/18 | | | | TWD | | | | 30.27 | | | | USD | | | | 181 | | | | 1,586 | |
USD Currency | | Bank of America NA | | | 07/23/18 | | | | SGD | | | | 1.35 | | | | USD | | | | 300 | | | | 3,646 | |
JPY Currency | | HSBC Bank plc | | | 07/25/18 | | | | KRW | | | | 10.30 | | | | JPY | | | | 20,000 | | | | 756 | |
USD Currency | | Barclays Bank plc | | | 07/27/18 | | | | CAD | | | | 1.34 | | | | USD | | | | 181 | | | | 401 | |
USD Currency | | Barclays Bank plc | | | 07/27/18 | | | | CAD | | | | 1.30 | | | | USD | | | | 181 | | | | 2,534 | |
USD Currency | | Deutsche Bank AG | | | 08/09/18 | | | | BRL | | | | 3.75 | | | | USD | | | | 176 | | | | 7,243 | |
USD Currency | | Deutsche Bank AG | | | 08/13/18 | | | | MXN | | | | 21.00 | | | | USD | | | | 440 | | | | 2,616 | |
USD Currency | | Deutsche Bank AG | | | 08/16/18 | | | | MXN | | | | 21.00 | | | | USD | | | | 440 | | | | 2,859 | |
JPY Currency | | HSBC Bank plc | | | 08/24/18 | | | | KRW | | | | 10.45 | | | | JPY | | | | 32,850 | | | | 1,789 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | 58,074 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Put | | | | | | | | | | | | | | | | | | | | | | | | | | |
EUR Currency | | Citibank NA | | | 07/03/18 | | | | ZAR | | | | 14.60 | | | | EUR | | | | 66 | | | | — | |
USD Currency | | HSBC Bank plc | | | 07/05/18 | | | | IDR | | | | 14,000.00 | | | | USD | | | | 108 | | | | 17 | |
USD Currency | | Deutsche Bank AG | | | 07/20/18 | | | | RUB | | | | 61.00 | | | | USD | | | | 365 | | | | 574 | |
USD Currency | | Goldman Sachs International | | | 07/20/18 | | | | BRL | | | | 3.50 | | | | USD | | | | 1,095 | | | | 21 | |
USD Currency | | JP Morgan Chase Bank NA | | | 07/20/18 | | | | IDR | | | | 14,020.00 | | | | USD | | | | 365 | | | | 473 | |
EUR Currency | | BNP Paribas SA | | | 07/23/18 | | | | PLN | | | | 4.25 | | | | EUR | | | | 292 | | | | 72 | |
USD Currency | | Deutsche Bank AG | | | 07/23/18 | | | | BRL | | | | 3.60 | | | | USD | | | | 219 | | | | 87 | |
USD Currency | | Morgan Stanley & Co. International plc | | | 07/24/18 | | | | TRY | | | | 4.75 | | | | USD | | | | 146 | | | | 4,694 | |
USD Currency | | Morgan Stanley & Co. International plc | | | 07/24/18 | | | | MXN | | | | 20.00 | | | | USD | | | | 329 | | | | 7,040 | |
USD Currency | | Deutsche Bank AG | | | 07/27/18 | | | | TRY | | | | 4.70 | | | | USD | | | | 152 | | | | 3,720 | |
USD Currency | | JP Morgan Chase Bank NA | | | 08/01/18 | | | | KRW | | | | 1,095.00 | | | | USD | | | | 200 | | | | 880 | |
USD Currency | | Morgan Stanley & Co. International plc | | | 08/03/18 | | | | MXN | | | | 19.50 | | | | USD | | | | 657 | | | | 7,094 | |
USD Currency | | Deutsche Bank AG | | | 08/13/18 | | | | MXN | | | | 18.50 | | | | USD | | | | 440 | | | | 929 | |
USD Currency | | Deutsche Bank AG | | | 08/16/18 | | | | INR | | | | 68.00 | | | | USD | | | | 220 | | | | 820 | |
USD Currency | | Deutsche Bank AG | | | 08/16/18 | | | | MXN | | | | 18.50 | | | | USD | | | | 440 | | | | 986 | |
USD Currency | | Morgan Stanley & Co. International plc | | | 08/20/18 | | | | MXN | | | | 19.50 | | | | USD | | | | 8,821 | | | | 112,217 | |
USD Currency | | BNP Paribas SA | | | 08/22/18 | | | | ZAR | | | | 12.45 | | | | USD | | | | 365 | | | | 255 | |
USD Currency | | JP Morgan Chase Bank NA | | | 08/27/18 | | | | ZAR | | | | 12.45 | | | | USD | | | | 365 | | | | 321 | |
USD Currency | | Deutsche Bank AG | | | 09/04/18 | | | | ZAR | | | | 12.55 | | | | USD | | | | 219 | | | | 351 | |
USD Currency | | Goldman Sachs International | | | 09/12/18 | | | | TRY | | | | 4.48 | | | | USD | | | | 146 | | | | 1,089 | |
USD Currency | | Citibank NA | | | 09/13/18 | | | | MXN | | | | 19.50 | | | | USD | | | | 155 | | | | 2,282 | |
USD Currency | | Deutsche Bank AG | | | 09/13/18 | | | | MXN | | | | 19.50 | | | | USD | | | | 155 | | | | 2,288 | |
USD Currency | | JP Morgan Chase Bank NA | | | 09/13/18 | | | | IDR | | | | 13,800.00 | | | | USD | | | | 180 | | | | 258 | |
USD Currency | | Goldman Sachs International | | | 09/18/18 | | | | MXN | | | | 20.50 | | | | USD | | | | 230 | | | | 9,593 | |
USD Currency | | Morgan Stanley & Co. International plc | | | 09/26/18 | | | | ZAR | | | | 12.90 | | | | USD | | | | 1,545 | | | | 9,128 | |
USD Currency | | Morgan Stanley & Co. International plc | | | 09/26/18 | | | | TRY | | | | 4.52 | | | | USD | | | | 1,579 | | | | 15,329 | |
USD Currency | | Morgan Stanley & Co. International plc | | | 10/04/18 | | | | MXN | | | | 18.00 | | | | USD | | | | 657 | | | | 1,368 | |
USD Currency | | HSBC Bank plc | | | 10/18/18 | | | | ZAR | | | | 12.63 | | | | USD | | | | 2,585 | | | | 11,026 | |
USD Currency | | Citibank NA | | | 10/19/18 | | | | TRY | | | | 4.50 | | | | USD | | | | 2,001 | | | | 17,872 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | 210,784 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | $ | 268,858 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
OTC Interest Rate Caps Purchased
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Description | | Exercise Rate | | | Counterparty | | Expiration Date | | | Notional Amount (000) | | | Value | | | Premiums Paid | | | Unrealized Appreciation/ (Depreciation) | |
2Y-10 CMS Index Cap | | | 0.44 | % | | Citibank NA | | | 07/23/18 | | | | USD | | | | 134,835 | | | $ | 14 | | | $ | 67,418 | | | $ | (67,404 | ) |
2Y-10 CMS Index Cap | | | 0.34 | % | | Citibank NA | | | 08/28/18 | | | | USD | | | | 33,850 | | | | 256 | | | | 22,172 | | | | (21,916 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | $ | 270 | | | $ | 89,590 | | | $ | (89,320 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
32 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund |
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 | | | | | |
Call | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
10-Year Interest Rate Swap | | | 3 month LIBOR | | | Quarterly | | | 3.04 | % | | Semi-Annual | | JP Morgan Chase Bank NA | | | 04/27/38 | | | | 3.04 | % | | | USD | | | | 5,980 | | | $ | 337,585 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Put | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
10-Year Interest Rate Swap | | | 3.04 | % | | Semi-Annual | | | 3 month LIBOR | | | Quarterly | | JP Morgan Chase Bank NA | | | 04/27/38 | | | | 3.04 | | | | USD | | | | 5,980 | | | | 271,601 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 609,186 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
OTC Currency Options Written
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Description | | Counterparty | | Expiration Date | | | Exercise Price | | | Notional Amount (000) | | | Value | |
Call | | | | | | | | | | | | | | | | | | | | | | | | | | |
EUR Currency | | Deutsche Bank AG | | | 07/03/18 | | | | ZAR | | | | 15.00 | | | | EUR | | | | 66 | | | $ | (5,053 | ) |
USD Currency | | Deutsche Bank AG | | | 07/09/18 | | | | TWD | | | | 30.85 | | | | USD | | | | 300 | | | | (226 | ) |
USD Currency | | JP Morgan Chase Bank NA | | | 07/19/18 | | | | MXN | | | | 20.00 | | | | USD | | | | 73 | | | | (998 | ) |
USD Currency | | JP Morgan Chase Bank NA | | | 07/19/18 | | | | MXN | | | | 22.50 | | | | USD | | | | 146 | | | | (9 | ) |
USD Currency | | JP Morgan Chase Bank NA | | | 07/19/18 | | | | ZAR | | | | 12.70 | | | | USD | | | | 190 | | | | (14,849 | ) |
JPY Currency | | HSBC Bank plc | | | 07/25/18 | | | | KRW | | | | 10.60 | | | | JPY | | | | 20,000 | | | | (220 | ) |
USD Currency | | Barclays Bank plc | | | 07/27/18 | | | | CAD | | | | 1.30 | | | | USD | | | | 181 | | | | (2,571 | ) |
USD Currency | | Barclays Bank plc | | | 07/27/18 | | | | CAD | | | | 1.36 | | | | USD | | | | 272 | | | | (185 | ) |
USD Currency | | Deutsche Bank AG | | | 08/09/18 | | | | BRL | | | | 3.95 | | | | USD | | | | 264 | | | | (3,838 | ) |
USD Currency | | Deutsche Bank AG | | | 08/13/18 | | | | MXN | | | | 21.00 | | | | USD | | | | 440 | | | | (2,610 | ) |
USD Currency | | Deutsche Bank AG | | | 08/16/18 | | | | MXN | | | | 21.00 | | | | USD | | | | 440 | | | | (2,857 | ) |
USD Currency | | JP Morgan Chase Bank NA | | | 08/23/18 | | | | ZAR | | | | 13.70 | | | | USD | | | | 190 | | | | (5,882 | ) |
USD Currency | | Goldman Sachs International | | | 09/18/18 | | | | MXN | | | | 22.00 | | | | USD | | | | 230 | | | | (1,195 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | (40,493 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Put | | | | | | | | | | | | | | | | | | | | | | | | | | |
EUR Currency | | Deutsche Bank AG | | | 07/03/18 | | | | ZAR | | | | 14.60 | | | | EUR | | | | 66 | | | | — | |
USD Currency | | Morgan Stanley & Co. International plc | | | 07/06/18 | | | | ZAR | | | | 12.20 | | | | USD | | | | 220 | | | | — | |
USD Currency | | Deutsche Bank AG | | | 07/12/18 | | | | MXN | | | | 19.50 | | | | USD | | | | 155 | | | | (1,149 | ) |
USD Currency | | Goldman Sachs International | | | 07/12/18 | | | | TRY | | | | 4.42 | | | | USD | | | | 146 | | | | (154 | ) |
USD Currency | | Deutsche Bank AG | | | 07/20/18 | | | | RUB | | | | 59.50 | | | | USD | | | | 548 | | | | (84 | ) |
USD Currency | | Morgan Stanley & Co. International plc | | | 07/24/18 | | | | TRY | | | | 4.45 | | | | USD | | | | 146 | | | | (464 | ) |
USD Currency | | JP Morgan Chase Bank NA | | | 08/01/18 | | | | KRW | | | | 1,060.00 | | | | USD | | | | 300 | | | | (78 | ) |
USD Currency | | Morgan Stanley & Co. International plc | | | 08/03/18 | | | | MXN | | | | 19.00 | | | | USD | | | | 986 | | | | (4,356 | ) |
USD Currency | | Citibank NA | | | 08/13/18 | | | | MXN | | | | 19.20 | | | | USD | | | | 155 | | | | (1,151 | ) |
USD Currency | | Morgan Stanley & Co. International plc | | | 08/20/18 | | | | MXN | | | | 18.50 | | | | USD | | | | 8,821 | | | | (21,424 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | (28,860 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | $ | (69,353 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
OTC Interest Rate Swaptions Written
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Description | | Paid by the Fund | | Received by the Fund | | Counterparty | | Expiration Date | | | Exercise Rate | | | Notional Amount (000) | | | Value | |
| Rate | | | Frequency | | Rate | | | Frequency | | | | | |
Call | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2-Year Interest Rate Swap | | | 3 month LIBOR | | | Quarterly | | | 2.74 | % | | Semi-Annual | | JP Morgan Chase Bank NA | | | 12/27/18 | | | | 2.74 | % | | | USD | | | | 55,666 | | | $ | (88,172 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Put | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2-Year Interest Rate Swap | | | 3.14 | % | | Semi-Annual | | | 3 month LIBOR | | | Quarterly | | JP Morgan Chase Bank NA | | | 12/27/18 | | | | 3.14 | | | | USD | | | | 55,666 | | | | (73,721 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | (161,893 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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.30.V1 | | | 1.00 | % | | | Quarterly | | | | 06/20/23 | | | | USD 2,132 | | | $ | (32,192 | ) | | $ | (36,365 | ) | | $ | 4,173 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 33 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund |
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 | | | | | | |
7.36% | | Monthly | | 28 day MXIBTIIE | | Monthly | | | N/A | | | | 01/28/19 | | | MXN | | | 25,421 | | | $ | 6,637 | | | $ | — | | | $ | 6,637 | |
28 day MXIBTIIE | | Monthly | | 7.66% | | Monthly | | | N/A | | | | 02/22/21 | | | MXN | | | 11,810 | | | | (5,033 | ) | | | — | | | | (5,033 | ) |
7.11% | | Monthly | | 28 day MXIBTIIE | | Monthly | | | N/A | | | | 10/14/22 | | | MXN | | | 3,855 | | | | 5,547 | | | | — | | | | 5,547 | |
7.11% | | Monthly | | 28 day MXIBTIIE | | Monthly | | | N/A | | | | 10/14/22 | | | MXN | | | 5,081 | | | | 7,358 | | | | — | | | | 7,358 | |
28 day MXIBTIIE | | Monthly | | 7.94% | | Monthly | | | N/A | | | | 06/19/23 | | | MXN | | | 10,429 | | | | 1,406 | | | | — | | | | 1,406 | |
28 day MXIBTIIE | | Monthly | | 6.32% | | Monthly | | | N/A | | | | 07/17/25 | | | MXN | | | 1,733 | | | | (7,644 | ) | | | — | | | | (7,644 | ) |
3 month LIBOR | | Quarterly | | 2.13% | | Semi-Annual | | | N/A | | | | 08/25/25 | | | USD | | | 60 | | | | (2,683 | ) | | | — | | | | (2,683 | ) |
2.27% | | Semi-Annual | | 3 month LIBOR | | Quarterly | | | N/A | | | | 09/11/25 | | | USD | | | 91 | | | | 3,208 | | | | — | | | | 3,208 | |
6 month EURIBOR | | Semi-Annual | | 0.94% | | Annual | | | 09/10/18 | (a) | | | 08/15/27 | | | EUR | | | 10,570 | | | | 149,770 | | | | — | | | | 149,770 | |
2.96% | | Annual | | 6 month WIBOR | | Semi-Annual | | | N/A | | | | 03/06/28 | | | PLN | | | 835 | | | | (1,679 | ) | | | — | | | | (1,679 | ) |
7.64% | | Quarterly | | 3 month JIBAR | | Quarterly | | | N/A | | | | 03/06/28 | | | ZAR | | | 3,505 | | | | 10,726 | | | | — | | | | 10,726 | |
7.66% | | Quarterly | | 3 month JIBAR | | Quarterly | | | N/A | | | | 03/06/28 | | | ZAR | | | 3,560 | | | | 10,543 | | | | — | | | | 10,543 | |
2.94% | | Semi-Annual | | 3 month LIBOR | | Quarterly | | | N/A | | | | 03/14/28 | | | USD | | | 70 | | | | (633 | ) | | | — | | | | (633 | ) |
2.89% | | Semi-Annual | | 3 month LIBOR | | Quarterly | | | N/A | | | | 03/19/28 | | | USD | | | 30 | | | | (140 | ) | | | — | | | | (140 | ) |
7.90% | | Quarterly | | 3 month JIBAR | | Quarterly | | | N/A | | | | 06/20/28 | | | ZAR | | | 2,448 | | | | 4,806 | | | | — | | | | 4,806 | |
7.92% | | Quarterly | | 3 month JIBAR | | Quarterly | | | N/A | | | | 06/20/28 | | | ZAR | | | 2,920 | | | | 5,397 | | | | — | | | | 5,397 | |
7.93% | | Quarterly | | 3 month JIBAR | | Quarterly | | | N/A | | | | 06/20/28 | | | ZAR | | | 2,945 | | | | 5,340 | | | | — | | | | 5,340 | |
7.94% | | Quarterly | | 3 month JIBAR | | Quarterly | | | N/A | | | | 06/20/28 | | | ZAR | | | 2,945 | | | | 5,194 | | | | — | | | | 5,194 | |
7.94% | | Quarterly | | 3 month JIBAR | | Quarterly | | | N/A | | | | 06/20/28 | | | ZAR | | | 4,235 | | | | 7,362 | | | | — | | | | 7,362 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | $ | 205,482 | | | $ | — | | | $ | 205,482 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | | | | | |
Eurostat HICP Ex. Tobacco All Items Monthly | | At Termination | | 1.63% | | At Termination | | | 06/15/28 | | | | EUR | | | 1,710 | | $ | 1,348 | | | $ | — | | | $ | 1,348 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | | | $ | (982 | ) | | $ | 483 | | | $ | (1,465 | ) |
United Mexican States | | | 1.00 | % | | | Quarterly | | | Bank of America NA | | | 09/20/20 | | | USD | | | 135 | | | | (924 | ) | | | 770 | | | | (1,694 | ) |
Federative Republic of Brazil | | | 1.00 | % | | | Quarterly | | | Barclays Bank plc | | | 06/20/23 | | | USD | | | 49 | | | | 3,515 | | | | 1,424 | | | | 2,091 | |
Federative Republic of Brazil | | | 1.00 | % | | | Quarterly | | | BNP Paribas SA | | | 06/20/23 | | | USD | | | 85 | | | | 6,099 | | | | 3,395 | | | | 2,704 | |
Federative Republic of Brazil | | | 1.00 | % | | | Quarterly | | | BNP Paribas SA | | | 06/20/23 | | | USD | | | 85 | | | | 6,098 | | | | 3,395 | | | | 2,703 | |
Federative Republic of Brazil | | | 1.00 | % | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 60 | | | | 4,305 | | | | 1,695 | | | | 2,610 | |
Federative Republic of Brazil | | | 1.00 | % | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 84 | | | | 6,027 | | | | 6,602 | | | | (575 | ) |
Federative Republic of Brazil | | | 1.00 | % | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 85 | | | | 6,098 | | | | 6,663 | | | | (565 | ) |
Federative Republic of Brazil | | | 1.00 | % | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 77 | | | | 5,525 | | | | 3,141 | | | | 2,384 | |
Federative Republic of Brazil | | | 1.00 | % | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 84 | | | | 6,027 | | | | 6,568 | | | | (541 | ) |
Federative Republic of Brazil | | | 1.00 | % | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 88 | | | | 6,315 | | | | 5,131 | | | | 1,184 | |
Federative Republic of Brazil | | | 1.00 | % | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 132 | | | | 9,471 | | | | 10,321 | | | | (850 | ) |
Federative Republic of Brazil | | | 1.00 | % | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 84 | | | | 6,027 | | | | 6,635 | | | | (608 | ) |
Federative Republic of Brazil | | | 1.00 | % | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 87 | | | | 6,215 | | | | 5,014 | | | | 1,201 | |
Federative Republic of Brazil | | | 1.00 | % | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 88 | | | | 6,315 | | | | 5,131 | | | | 1,184 | |
Federative Republic of Brazil | | | 1.00 | % | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 97 | | | | 6,987 | | | | 5,840 | | | | 1,147 | |
Federative Republic of Brazil | | | 1.00 | % | | | Quarterly | | | Deutsche Bank AG | | | 06/20/23 | | | USD | | | 42 | | | | 3,013 | | | | 1,143 | | | | 1,870 | |
Federative Republic of Brazil | | | 1.00 | % | | | Quarterly | | | Goldman Sachs International | | | 06/20/23 | | | USD | | | 90 | | | | 6,458 | | | | 5,135 | | | | 1,323 | |
Federative Republic of Brazil | | | 1.00 | % | | | Quarterly | | | HSBC Bank plc | | | 06/20/23 | | | USD | | | 92 | | | | 6,601 | | | | 3,488 | | | | 3,113 | |
Federative Republic of Brazil | | | 1.00 | % | | | Quarterly | | | HSBC Bank plc | | | 06/20/23 | | | USD | | | 113 | | | | 8,108 | | | | 4,260 | | | | 3,848 | |
Republic of Argentina | | | 5.00 | % | | | Quarterly | | | Bank of America NA | | | 06/20/23 | | | USD | | | 27 | | | | (729 | ) | | | (1,078 | ) | | | 349 | |
Republic of Argentina | | | 5.00 | % | | | Quarterly | | | HSBC Bank plc | | | 06/20/23 | | | USD | | | 50 | | | | (1,352 | ) | | | (2,220 | ) | | | 868 | |
Republic of Argentina | | | 5.00 | % | | | Quarterly | | | HSBC Bank plc | | | 06/20/23 | | | USD | | | 36 | | | | (974 | ) | | | (1,599 | ) | | | 625 | |
Republic of Argentina | | | 5.00 | % | | | Quarterly | | | HSBC Bank plc | | | 06/20/23 | | | USD | | | 37 | | | | (1,000 | ) | | | (1,722 | ) | | | 722 | |
Republic of South Africa | | | 1.00 | % | | | Quarterly | | | Morgan Stanley & Co. International plc | | | 06/20/23 | | | USD | | | 209 | | | | 10,374 | | | | 5,368 | | | | 5,006 | |
| | |
34 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | | | 06/20/23 | | | USD | | | 646 | | | $ | (1,548 | ) | | $ | (7,629 | ) | | $ | 6,081 | |
Republic of Turkey | | | 1.00 | % | | | Quarterly | | | Deutsche Bank AG | | | 06/20/23 | | | USD | | | 35 | | | | 3,005 | | | | 2,543 | | | | 462 | |
Republic of Turkey | | | 1.00 | % | | | Quarterly | | | Goldman Sachs International | | | 06/20/23 | | | USD | | | 35 | | | | 3,005 | | | | 2,417 | | | | 588 | |
Republic of Turkey | | | 1.00 | % | | | Quarterly | | | HSBC Bank plc | | | 06/20/23 | | | USD | | | 65 | | | | 5,581 | | | | 4,489 | | | | 1,092 | |
Republic of Turkey | | | 1.00 | % | | | Quarterly | | | HSBC Bank plc | | | 06/20/23 | | | USD | | | 35 | | | | 3,005 | | | | 2,346 | | | | 659 | |
Republic of Turkey | | | 1.00 | % | | | Quarterly | | | Morgan Stanley & Co. International plc | | | 06/20/23 | | | USD | | | 29 | | | | 2,490 | | | | 2,166 | | | | 324 | |
United Mexican States | | | 1.00 | % | | | Quarterly | | | Barclays Bank plc | | | 06/20/23 | | | USD | | | 127 | | | | 1,744 | | | | 1,006 | | | | 738 | |
United Mexican States | | | 1.00 | % | | | Quarterly | | | Barclays Bank plc | | | 06/20/23 | | | USD | | | 83 | | | | 1,140 | | | | 1,618 | | | | (478 | ) |
United Mexican States | | | 1.00 | % | | | Quarterly | | | Barclays Bank plc | | | 06/20/23 | | | USD | | | 66 | | | | 907 | | | | 1,287 | | | | (380 | ) |
United Mexican States | | | 1.00 | % | | | Quarterly | | | Barclays Bank plc | | | 06/20/23 | | | USD | | | 83 | | | | 1,140 | | | | 1,563 | | | | (423 | ) |
United Mexican States | | | 1.00 | % | | | Quarterly | | | Barclays Bank plc | | | 06/20/23 | | | USD | | | 82 | | | | 1,126 | | | | 1,580 | | | | (454 | ) |
United Mexican States | | | 1.00 | % | | | Quarterly | | | Barclays Bank plc | | | 06/20/23 | | | USD | | | 83 | | | | 1,140 | | | | 1,489 | | | | (349 | ) |
United Mexican States | | | 1.00 | % | | | Quarterly | | | Barclays Bank plc | | | 06/20/23 | | | USD | | | 60 | | | | 824 | | | | 488 | | | | 336 | |
United Mexican States | | | 1.00 | % | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 117 | | | | 1,607 | | | | 957 | | | | 650 | |
United Mexican States | | | 1.00 | % | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 81 | | | | 1,113 | | | | 638 | | | | 475 | |
United Mexican States | | | 1.00 | % | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 73 | | | | 1,003 | | | | 689 | | | | 314 | |
United Mexican States | | | 1.00 | % | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 85 | | | | 1,167 | | | | 1,638 | | | | (471 | ) |
United Mexican States | | | 1.00 | % | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 146 | | | | 2,004 | | | | 1,203 | | | | 801 | |
United Mexican States | | | 1.00 | % | | | Quarterly | | | Deutsche Bank AG | | | 06/20/23 | | | USD | | | 101 | | | | 1,387 | | | | 507 | | | | 880 | |
CMBX.NA.9.A | | | 2.00 | % | | | Monthly | | | Citigroup Global Markets, Inc. | | | 09/17/58 | | | USD | | | 60 | | | | 1,184 | | | | 1,125 | | | | 59 | |
CMBX.NA.9.A | | | 2.00 | % | | | Monthly | | | Credit Suisse International | | | 09/17/58 | | | USD | | | 100 | | | | 1,973 | | | | 1,725 | | | | 248 | |
CMBX.NA.9.A | | | 2.00 | % | | | Monthly | | | Credit Suisse International | | | 09/17/58 | | | USD | | | 196 | | | | 3,867 | | | | 3,102 | | | | 765 | |
CMBX.NA.9.A | | | 2.00 | % | | | Monthly | | | Credit Suisse International | | | 09/17/58 | | | USD | | | 60 | | | | 1,184 | | | | 1,051 | | | | 133 | |
CMBX.NA.9.A | | | 2.00 | % | | | Monthly | | | Goldman Sachs International | | | 09/17/58 | | | USD | | | 30 | | | | 592 | | | | 560 | | | | 32 | |
CMBX.NA.9.AAA | | | 0.50 | % | | | Monthly | | | Credit Suisse International | | | 09/17/58 | | | USD | | | 150 | | | | 59 | | | | 1,797 | | | | (1,738 | ) |
CMBX.NA.9.AAA | | | 0.50 | % | | | Monthly | | | Deutsche Bank AG | | | 09/17/58 | | | USD | | | 120 | | | | 46 | | | | 1,456 | | | | (1,410 | ) |
CMBX.NA.9.AAA | | | 0.50 | % | | | Monthly | | | Morgan Stanley & Co. International plc | | | 09/17/58 | | | USD | | | 100 | | | | 38 | | | | 1,198 | | | | (1,160 | ) |
CMBX.NA.9.AAA | | | 0.50 | % | | | Monthly | | | Morgan Stanley & Co. International plc | | | 09/17/58 | | | USD | | | 230 | | | | 89 | | | | 2,970 | | | | (2,881 | ) |
CMBX.NA.9.AAA | | | 0.50 | % | | | Monthly | | | Morgan Stanley & Co. International plc | | | 09/17/58 | | | USD | | | 90 | | | | 35 | | | | 1,079 | | | | (1,044 | ) |
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 | | | | (1,291 | ) | | | (148 | ) | | | (1,143 | ) |
CMBX.NA.6.AAA | | | 0.50 | % | | | Monthly | | | Deutsche Bank AG | | | 05/11/63 | | | USD | | | 230 | | | | (1,484 | ) | | | — | | | | (1,484 | ) |
CMBX.NA.6.BBB- | | | 3.00 | % | | | Monthly | | | JP Morgan Securities LLC | | | 05/11/63 | | | USD | | | 30 | | | | 3,102 | | | | 2,879 | | | | 223 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | $ | 153,947 | | | $ | 124,752 | | | $ | 29,195 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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) | |
United Mexican States | | | 1.00 | % | | | Quarterly | | | | Bank of America NA | | | | 06/20/20 | | | BBB+ | | | USD | | | | 135 | | | $ | 982 | | | $ | (557 | ) | | $ | 1,539 | |
United Mexican States | | | 1.00 | % | | | Quarterly | | | | JP Morgan Chase Bank NA | | | | 09/20/20 | | | BBB+ | | | USD | | | | 135 | | | | 924 | | | | (673 | ) | | | 1,597 | |
CMBX.NA.3.AM | | | 0.50 | % | | | Monthly | | | | Credit Suisse International | | | | 12/13/49 | | | NR | | | USD | | | | 390 | | | | (99 | ) | | | (2,238 | ) | | | 2,139 | |
CMBX.NA.4.AM | | | 0.50 | % | | | Monthly | | | | Deutsche Bank AG | | | | 02/17/51 | | | NR | | | USD | | | | 95 | | | | (21 | ) | | | (526 | ) | | | 505 | |
CMBX.NA.8.A | | | 2.00 | % | | | Monthly | | | | Goldman Sachs International | | | | 10/17/57 | | | NR | | | USD | | | | 60 | | | | (1,394 | ) | | | (5,946 | ) | | | 4,552 | |
CMBX.NA.8.A | | | 2.00 | % | | | Monthly | | | | Goldman Sachs International | | | | 10/17/57 | | | NR | | | USD | | | | 60 | | | | (1,394 | ) | | | (3,283 | ) | | | 1,889 | |
CMBX.NA.9.BBB- | | | 3.00 | % | | | Monthly | | | | Credit Suisse International | | | | 09/17/58 | | | NR | | | USD | | | | 4 | | | | (413 | ) | | | (403 | ) | | | (10 | ) |
CMBX.NA.9.BBB- | | | 3.00 | % | | | Monthly | | | | Credit Suisse International | | | | 09/17/58 | | | NR | | | USD | | | | 150 | | | | (15,479 | ) | | | (13,154 | ) | | | (2,325 | ) |
CMBX.NA.9.BBB- | | | 3.00 | % | | | Monthly | | | | Deutsche Bank AG | | | | 09/17/58 | | | NR | | | USD | | | | 37 | | | | (3,819 | ) | | | (4,478 | ) | | | 659 | |
CMBX.NA.9.BBB- | | | 3.00 | % | | | Monthly | | | | Deutsche Bank AG | | | | 09/17/58 | | | NR | | | USD | | | | 80 | | | | (8,255 | ) | | | (8,585 | ) | | | 330 | |
CMBX.NA.9.BBB- | | | 3.00 | % | | | Monthly | | | | Morgan Stanley & Co. International plc | | | | 09/17/58 | | | NR | | | USD | | | | 45 | | | | (4,644 | ) | | | (4,643 | ) | | | (1 | ) |
CMBX.NA.9.BBB- | | | 3.00 | % | | | Monthly | | | | Morgan Stanley & Co. International plc | | | | 09/17/58 | | | NR | | | USD | | | | 69 | | | | (7,120 | ) | | | (6,764 | ) | | | (356 | ) |
CMBX.NA.9.BBB- | | | 3.00 | % | | | Monthly | | | | Morgan Stanley & Co. International plc | | | | 09/17/58 | | | NR | | | USD | | | | 30 | | | | (3,096 | ) | | | (3,656 | ) | | | 560 | |
CMBX.NA.9.BBB- | | | 3.00 | % | | | Monthly | | | | Morgan Stanley & Co. International plc | | | | 09/17/58 | | | NR | | | USD | | | | 2 | | | | (206 | ) | | | (238 | ) | | | 32 | |
CMBX.NA.9.BBB- | | | 3.00 | % | | | Monthly | | | | Morgan Stanley & Co. International plc | | | | 09/17/58 | | | NR | | | USD | | | | 30 | | | | (3,096 | ) | | | (2,821 | ) | | | (275 | ) |
CMBX.NA.10.A | | | 2.00 | % | | | Monthly | | | | Deutsche Bank AG | | | | 11/17/59 | | | A- | | | USD | | | | 120 | | | | (2,487 | ) | | | (5,200 | ) | | | 2,713 | |
CMBX.NA.10.A | | | 2.00 | % | | | Monthly | | | | Deutsche Bank AG | | | | 11/17/59 | | | A- | | | USD | | | | 60 | | | | (1,244 | ) | | | (2,646 | ) | | | 1,402 | |
CMBX.NA.10.BBB- | | | 3.00 | % | | | Monthly | | | | JP Morgan Securities LLC | | | | 11/17/59 | | | NR | | | USD | | | | 10 | | | | (901 | ) | | | (862 | ) | | | (39 | ) |
CMBX.NA.6.BBB- | | | 3.00 | % | | | Monthly | | | | Credit Suisse International | | | | 05/11/63 | | | NR | | | USD | | | | 30 | | | | (3,102 | ) | | | (2,380 | ) | | | (722 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | (54,864 | ) | | $ | (69,053 | ) | | $ | 14,189 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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. | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 35 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund |
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 |
4.85% | | Monthly | | 28 day MXIBTIIE | | Monthly | | Bank of America NA | | | 11/01/18 | | | | MXN | | | | 716 | | | $ | 452 | | | $ | — | | | $ | 452 | |
28 day MXIBTIIE | | Monthly | | 7.07% | | Monthly | | Citibank NA | | | 11/21/18 | | | | MXN | | | | 8,086 | | | | (2,022 | ) | | | — | | | | (2,022 | ) |
28 day MXIBTIIE | | Monthly | | 7.06% | | Monthly | | JP Morgan Chase Bank NA | | | 11/21/18 | | | | MXN | | | | 9,703 | | | | (2,449 | ) | | | — | | | | (2,449 | ) |
28 day MXIBTIIE | | Monthly | | 6.98% | | Monthly | | Citibank NA | | | 11/28/18 | | | | MXN | | | | 13,800 | | | | (3,781 | ) | | | — | | | | (3,781 | ) |
28 day MXIBTIIE | | Monthly | | 6.98% | | Monthly | | JP Morgan Chase Bank NA | | | 11/28/18 | | | | MXN | | | | 7,828 | | | | (2,145 | ) | | | — | | | | (2,145 | ) |
3.27% | | Semi-Annual | | 3 month LIBOR | | Quarterly | | Deutsche Bank AG | | | 05/16/21 | | | | USD | | | | 470 | | | | (6,030 | ) | | | — | | | | (6,030 | ) |
5.73% | | Monthly | | 28 day MXIBTIIE | | Monthly | | Bank of America NA | | | 01/03/25 | | | | MXN | | | | 672 | | | | 3,798 | | | | — | | | | 3,798 | |
28 day MXIBTIIE | | Monthly | | 6.43% | | Monthly | | Bank of America NA | | | 06/06/25 | | | | MXN | | | | 541 | | | | (2,217 | ) | | | — | | | | (2,217 | ) |
28 day MXIBTIIE | | Monthly | | 6.33% | | Monthly | | Citibank NA | | | 06/09/25 | | | | MXN | | | | 271 | | | | (1,177 | ) | | | — | | | | (1,177 | ) |
28 day MXIBTIIE | | Monthly | | 6.33% | | Monthly | | Citibank NA | | | 07/17/25 | | | | MXN | | | | 864 | | | | (3,797 | ) | | | — | | | | (3,797 | ) |
6.31% | | Monthly | | 28 day MXIBTIIE | | Monthly | | Deutsche Bank AG | | | 08/11/25 | | | | MXN | | | | 3,395 | | | | 15,247 | | | | — | | | | 15,247 | |
28 day MXIBTIIE | | Monthly | | 6.27% | | Monthly | | Bank of America NA | | | 12/05/25 | | | | MXN | | | | 122 | | | | (580 | ) | | | — | | | | (580 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | $ | (4,701 | ) | | $ | — | | | $ | (4,701 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
OTC Total Return — Volatility Swaps
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reference Entity | | Volatility Strike Price (a) | | | Counterparty | | | Termination Date | | | Notional Amount (000) | | | Value | | | Premiums Paid (Received) | | | Unrealized Appreciation (Depreciation) | |
USD Currency | | | 8.90 | % | | | Deutsche Bank AG | | | | 02/26/19 | | | | USD | | | | 718 | | | $ | (2,374 | ) | | $ | — | | | $ | (2,374 | ) |
USD Currency | | | 8.90 | % | | | Deutsche Bank AG | | | | 02/26/19 | | | | USD | | | | 1,430 | | | | (4,728 | ) | | | — | | | | (4,728 | ) |
USD Currency | | | 8.73 | % | | | Deutsche Bank AG | | | | 04/03/19 | | | | USD | | | | 1,430 | | | | (2,348 | ) | | | — | | | | (2,348 | ) |
USD Currency | | | 8.90 | % | | | Deutsche Bank AG | | | | 04/03/19 | | | | USD | | | | 706 | | | | (1,842 | ) | | | — | | | | (1,842 | ) |
USD Currency | | | 8.90 | % | | | Deutsche Bank AG | | | | 04/03/19 | | | | USD | | | | 706 | | | | (1,843 | ) | | | — | | | | (1,843 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | $ | (13,135 | ) | | $ | — | | | $ | (13,135 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | At expiration, the Fund receives the difference between the realized volatility and predefined volatility strike price multiplied by the notional amount. | |
The following reference rates, and their values as of period end, are used for security descriptions:
| | | | | | |
Reference Index | | | | Reference Rate | |
28 day MXIBTIIE | | Mexico Interbank TIIE 28-Day | | | 8.10 | % |
3 month JIBAR | | Johannesburg Interbank Average Rate | | | 6.96 | |
3 month LIBOR | | London Interbank Offered Rate | | | 2.34 | |
6 month EURIBOR | | Euro Interbank Offered Rate | | | (0.27 | ) |
6 month WIBOR | | Warsaw Interbank Offered Rate | | | 1.68 | |
Balances Reported in the Statement of Assets and Liabilities for Centrally Cleared Swaps, OTC Derivatives and Options Written
| | | | | | | | | | | | | | | | | | | | |
| | Swap Premiums Paid | | | Swap Premiums Received | | | Unrealized Appreciation | | | Unrealized Depreciation | | | Value | |
Centrally Cleared Swaps(a) | | $ | — | | | $ | (36,365 | ) | | $ | 228,815 | | | $ | (17,812 | ) | | $ | — | |
OTC Swaps | | | 139,168 | | | | (83,469 | ) | | | 87,206 | | | | (61,658 | ) | | | — | |
OTC Options Written | | | N/A | | | | N/A | | | | 26,112 | | | | (29,653 | ) | | | (231,246 | ) |
| (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. | |
| | |
36 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return 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) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 345,416 | | | $ | — | | | $ | 345,416 | |
Forward foreign currency exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized appreciation on forward foreign currency exchange contracts | | | — | | | | — | | | | — | | | | 1,055,722 | | | | — | | | | — | | | | 1,055,722 | |
Options purchased | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Investments at value — unaffiliated(b) | | | — | | | | — | | | | — | | | | 274,355 | | | | 609,456 | | | | — | | | | 883,811 | |
Swaps — centrally cleared | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized appreciation(a) | | | — | | | | 4,173 | | | | — | | | | — | | | | 223,294 | | | | 1,348 | | | | 228,815 | |
Swaps — OTC | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized appreciation on OTC swaps; Swap premiums paid | | | — | | | | 206,877 | | | | — | | | | — | | | | 19,497 | | | | — | | | | 226,374 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | 211,050 | | | $ | — | | | $ | 1,330,077 | | | $ | 1,197,663 | | | $ | 1,348 | | | $ | 2,740,138 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Liabilities — Derivative Financial Instruments | | | | | | | | | | | | | | | | | | | | | |
Futures contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized depreciation(a) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 443,453 | | | $ | — | | | $ | 443,453 | |
Forward foreign currency exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized depreciation on forward foreign currency exchange contracts | | | — | | | | — | | | | — | | | | 502,638 | | | | — | | | | — | | | | 502,638 | |
Options written | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Options written, at value | | | — | | | | — | | | | — | | | | 69,353 | | | | 161,893 | | | | — | | | | 231,246 | |
Swaps — centrally cleared | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized depreciation(a) | | | — | | | | — | | | | — | | | | — | | | | 17,812 | | | | — | | | | 17,812 | |
Swaps — OTC | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized depreciation on OTC swaps; Swap premiums received | | | — | | | | 107,794 | | | | — | | | | 13,135 | | | | 24,198 | | | | — | | | | 145,127 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | 107,794 | | | $ | — | | | $ | 585,126 | | | $ | 647,356 | | | $ | — | | | $ | 1,340,276 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 six months ended June 30, 2018, the effect of derivative financial instruments in the Statement of Operations were 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 | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 511,739 | | | $ | — | | | $ | 511,739 | |
Forward foreign currency exchange contracts | | | — | | | | — | | | | — | | | | 260,645 | | | | — | | | | — | | | | 260,645 | |
Options purchased(a) | | | — | | | | — | | | | — | | | | (552,215 | ) | | | (74,581 | ) | | | — | | | | (626,796 | ) |
Options written | | | — | | | | 5,134 | | | | — | | | | 360,327 | | | | 451,599 | | | | — | | | | 817,060 | |
Swaps | | | — | | | | 42,130 | | | | — | | | | — | | | | (304,825 | ) | | | (34,928 | ) | | | (297,623 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | 47,264 | | | $ | — | | | $ | 68,757 | | | $ | 583,932 | | | $ | (34,928 | ) | | $ | 665,025 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Change in Unrealized Appreciation (Depreciation) on: | | | | | | | | | | | | | | | | | | | | | |
Futures contracts | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (147,751 | ) | | $ | — | | | $ | (147,751 | ) |
Forward foreign currency exchange contracts | | | — | | | | — | | | | — | | | | 575,656 | | | | — | | | | — | | | | 575,656 | |
Options purchased(b) | | | — | | | | — | | | | — | | | | 244,654 | | | | 205,287 | | | | — | | | | 449,941 | |
Options written | | | — | | | | — | | | | — | | | | (172,317 | ) | | | (141,494 | ) | | | — | | | | (313,811 | ) |
Swaps | | | — | | | | 73,928 | | | | (41,716 | ) | | | (13,135 | ) | | | 424,001 | | | | (7,555 | ) | | | 435,523 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | 73,928 | | | $ | (41,716 | ) | | $ | 634,858 | | | $ | 340,043 | | | $ | (7,555 | ) | | $ | 999,558 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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. | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 37 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund |
Average Quarterly Balances of Outstanding Derivative Financial Instruments
| | | | |
Futures contracts: | | | | |
Average notional value of contracts — long | | $ | 142,209,230 | |
Average notional value of contracts — short | | $ | 50,322,962 | |
Forward foreign currency exchange contracts: | | | | |
Average amounts purchased — in USD | | $ | 32,732,859 | |
Average amounts sold — in USD | | $ | 13,260,698 | |
Options: | | | | |
Average value of option contracts purchased | | $ | 595,168 | |
Average value of option contracts written | | $ | 119,475 | |
Average notional value of swaption contracts purchased | | | | |
Average notional value of swaption contracts written | | $ | 103,556,000 | |
Average value of interest rate caps purchased | | $ | 135 | |
Credit default swaps: | | | | |
Average notional value — buy protection | | $ | 7,042,048 | |
Average notional value — sell protection | | $ | 1,842,259 | |
Interest rate swaps: | | | | |
Average notional value — pays fixed rate | | $ | 35,938,983 | |
Average notional value — receives fixed rate | | $ | 44,818,414 | |
Inflation Swaps: | | | | |
Average notional value — receives fixed rate | | $ | 855,000 | |
Total return swaps: | | | | |
Average notional value | | $ | 5,759,000 | |
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 | | $ | — | | | $ | 115 | |
Forward foreign currency exchange contracts | | | 1,055,722 | | | | 502,638 | |
Options(a) | | | 883,811 | | | | 231,246 | |
Swaps — Centrally cleared | | | 6,987 | | | | — | |
Swaps — OTC(b) | | | 226,374 | | | | 145,127 | |
| | | | | | | | |
Total derivative assets and liabilities in the Statement of Assets and Liabilities | | $ | 2,172,894 | | | $ | 879,126 | |
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”) | | | (6,987 | ) | | | (115 | ) |
| | | | | | | | |
Total derivative assets and liabilities subject to an MNA | | $ | 2,165,907 | | | $ | 879,011 | |
| | | | | | | | |
| (a) | Includes options purchased at value which is included in Investments at value – unaffiliated in the Statement 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 an 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 | | $ | 14,510 | | | $ | (14,510 | ) | | $ | — | | | $ | — | | | $ | — | |
Barclays Bank plc | | | 148,742 | | | | (12,169 | ) | | | — | | | | — | | | | 136,573 | |
BNP Paribas SA | | | 291,727 | | | | (288,136 | ) | | | — | | | | — | | | | 3,591 | |
Citibank NA | | | 224,852 | | | | (29,718 | ) | | | — | | | | — | | | | 195,134 | |
Citigroup Global Markets, Inc. | | | 1,184 | | | | — | | | | — | | | | — | | | | 1,184 | |
Credit Suisse International | | | 16,002 | | | | (16,002 | ) | | | — | | | | — | | | | — | |
Deutsche Bank AG | | | 271,212 | | | | (94,992 | ) | | | — | | | | — | | | | 176,220 | |
Goldman Sachs International | | | 93,645 | | | | (47,597 | ) | | | — | | | | — | | | | 46,048 | |
HSBC Bank plc | | | 110,168 | | | | (26,591 | ) | | | — | | | | — | | | | 83,577 | |
JP Morgan Chase Bank NA | | | 724,168 | | | | (252,555 | ) | | | — | | | | (471,613 | ) | | | — | |
JP Morgan Securities LLC | | | 3,102 | | | | (901 | ) | | | — | | | | — | | | | 2,201 | |
Morgan Stanley & Co. International plc | | | 215,744 | | | | (59,104 | ) | | | — | | | | — | | | | 156,640 | |
Nomura International PLC | | | 1,586 | | | | — | | | | — | | | | — | | | | 1,586 | |
| | |
38 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund |
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative Assets Subject to an MNA by Counterparty | | | Derivatives Available for Offset (a) | | | Non-cash Collateral Received | | | Cash Collateral Received (b) | | | Net Amount of Derivative Assets (c) | |
Royal Bank of Canada | | $ | 52 | | | $ | (52 | ) | | $ | — | | | $ | — | | | | — | |
Royal Bank of Scotland | | | 13,205 | | | | (7,791 | ) | | | — | | | | — | | | $ | 5,414 | |
Standard Chartered Bank | | | 5,860 | | | | (2,972 | ) | | | — | | | | — | | | | 2,888 | |
State Street Bank and Trust Co. | | | 487 | | | | — | | | | — | | | | — | | | | 487 | |
UBS AG | | | 29,661 | | | | (5,352 | ) | | | — | | | | — | | | | 24,309 | |
| | | | | | | | | | | | | | | | | | | | |
| | $ | 2,165,907 | | | $ | (858,442 | ) | | $ | — | | | $ | (471,613 | ) | | $ | 835,852 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
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 (d) | |
Bank of America NA | | $ | 25,998 | | | $ | (14,510 | ) | | $ | — | | | $ | — | | | $ | 11,488 | |
Barclays Bank plc | | | 12,169 | | | | (12,169 | ) | | | — | | | | — | | | | — | |
BNP Paribas SA | | | 288,136 | | | | (288,136 | ) | | | — | | | | — | | | | — | |
Citibank NA | | | 29,718 | | | | (29,718 | ) | | | — | | | | — | | | | — | |
Credit Suisse International | | | 24,489 | | | | (16,002 | ) | | | — | | | | — | | | | 8,487 | |
Deutsche Bank AG | | | 94,992 | | | | (94,992 | ) | | | — | | | | — | | | | — | |
Goldman Sachs International | | | 47,597 | | | | (47,597 | ) | | | — | | | | — | | | | — | |
HSBC Bank plc | | | 26,591 | | | | (26,591 | ) | | | — | | | | — | | | | — | |
JP Morgan Chase Bank NA | | | 252,555 | | | | (252,555 | ) | | | — | | | | — | | | | — | |
JP Morgan Securities LLC | | | 901 | | | | (901 | ) | | | — | | | | — | | | | — | |
Morgan Stanley & Co. International plc | | | 59,104 | | | | (59,104 | ) | | | — | | | | — | | | | — | |
Royal Bank of Canada | | | 646 | | | | (52 | ) | | | — | | | | — | | | | 594 | |
Royal Bank of Scotland | | | 7,791 | | | | (7,791 | ) | | | — | | | | — | | | | — | |
Standard Chartered Bank | | | 2,972 | | | | (2,972 | ) | | | — | | | | — | | | | — | |
UBS AG | | | 5,352 | | | | (5,352 | ) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
| | $ | 879,011 | | | $ | (858,442 | ) | | $ | — | | | $ | — | | | $ | 20,569 | |
| | | | | | | | | | | | | | | | | | | | |
| (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) | 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 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 table summarizes 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 | | $ | — | | | $ | 50,705,707 | | | $ | 3,614,437 | | | $ | 54,320,144 | |
Corporate Bonds: | | | | | | | | | | | | | | | | |
Aerospace & Defense | | | — | | | | 2,964,312 | | | | — | | | | 2,964,312 | |
Air Freight & Logistics | | | — | | | | 390,538 | | | | — | | | | 390,538 | |
Airlines | | | — | | | | 1,733,208 | | | | — | | | | 1,733,208 | |
Auto Components | | | — | | | | 443,878 | | | | — | | | | 443,878 | |
Automobiles | | | — | | | | 2,319,916 | | | | — | | | | 2,319,916 | |
Banks | | | — | | | | 30,642,806 | | | | — | | | | 30,642,806 | |
Beverages | | | — | | | | 1,712,080 | | | | — | | | | 1,712,080 | |
Biotechnology | | | — | | | | 2,241,260 | | | | — | | | | 2,241,260 | |
Building Products | | | — | | | | 608,907 | | | | — | | | | 608,907 | |
Capital Markets | | | — | | | | 5,044,058 | | | | 4,000,000 | | | | 9,044,058 | |
Chemicals | | | — | | | | 403,579 | | | | — | | | | 403,579 | |
Commercial Services & Supplies | | | — | | | | 343,570 | | | | — | | | | 343,570 | |
Communications Equipment | | | — | | | | 62,926 | | | | — | | | | 62,926 | |
Consumer Finance | | | — | | | | 6,809,108 | | | | — | | | | 6,809,108 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 39 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund |
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Containers & Packaging | | $ | — | | | $ | 285,865 | | | $ | — | | | $ | 285,865 | |
Diversified Consumer Services | | | — | | | | 641,997 | | | | — | | | | 641,997 | |
Diversified Financial Services | | | — | | | | 1,388,369 | | | | 967,239 | | | | 2,355,608 | |
Diversified Telecommunication Services | | | — | | | | 5,373,246 | | | | — | | | | 5,373,246 | |
Electric Utilities | | | — | | | | 5,994,802 | | | | — | | | | 5,994,802 | |
Electrical Equipment | | | — | | | | 114,566 | | | | — | | | | 114,566 | |
Electronic Equipment, Instruments & Components | | | — | | | | 478,963 | | | | — | | | | 478,963 | |
Energy Equipment & Services | | | — | | | | 862,553 | | | | — | | | | 862,553 | |
Equity Real Estate Investment Trusts (REITs) | | | — | | | | 1,735,959 | | | | — | | | | 1,735,959 | |
Food & Staples Retailing | | | — | | | | 482,911 | | | | — | | | | 482,911 | |
Food Products | | | — | | | | 424,949 | | | | — | | | | 424,949 | |
Health Care Equipment & Supplies | | | — | | | | 2,382,633 | | | | — | | | | 2,382,633 | |
Health Care Providers & Services | | | — | | | | 4,726,231 | | | | — | | | | 4,726,231 | |
Hotels, Restaurants & Leisure | | | — | | | | 313,504 | | | | — | | | | 313,504 | |
Household Durables | | | — | | | | 247,996 | | | | — | | | | 247,996 | |
Industrial Conglomerates | | | — | | | | 296,506 | | | | — | | | | 296,506 | |
Insurance | | | — | | | | 894,119 | | | | — | | | | 894,119 | |
IT Services | | | — | | | | 1,082,755 | | | | — | | | | 1,082,755 | |
Life Sciences Tools & Services | | | — | | | | 388,569 | | | | — | | | | 388,569 | |
Media | | | — | | | | 4,757,853 | | | | — | | | | 4,757,853 | |
Metals & Mining | | | — | | | | 856,049 | | | | — | | | | 856,049 | |
Multi-Utilities | | | — | | | | 653,429 | | | | — | | | | 653,429 | |
Oil, Gas & Consumable Fuels | | | — | | | | 10,849,619 | | | | — | | | | 10,849,619 | |
Paper & Forest Products | | | — | | | | 118,150 | | | | — | | | | 118,150 | |
Pharmaceuticals | | | — | | | | 2,757,970 | | | | — | | | | 2,757,970 | |
Road & Rail | | | — | | | | 948,867 | | | | — | | | | 948,867 | |
Semiconductors & Semiconductor Equipment | | | — | | | | 3,792,233 | | | | — | | | | 3,792,233 | |
Software | | | — | | | | 3,287,928 | | | | — | | | | 3,287,928 | |
Specialty Retail | | | — | | | | 228,335 | | | | — | | | | 228,335 | |
Technology Hardware, Storage & Peripherals | | | — | | | | 1,676,628 | | | | — | | | | 1,676,628 | |
Thrifts & Mortgage Finance | | | — | | | | 318,733 | | | | — | | | | 318,733 | |
Tobacco | | | — | | | | 921,692 | | | | — | | | | 921,692 | |
Trading Companies & Distributors | | | — | | | | 468,415 | | | | — | | | | 468,415 | |
Wireless Telecommunication Services | | | — | | | | 2,375,767 | | | | — | | | | 2,375,767 | |
Floating Rate Loan Interests: | | | | | | | | | | | | | | | | |
Aerospace & Defense | | | — | | | | 212,921 | | | | — | | | | 212,921 | |
Air Freight & Logistics | | | — | | | | 190,766 | | | | — | | | | 190,766 | |
Building Products | | | — | | | | 108,069 | | | | — | | | | 108,069 | |
Chemicals | | | — | | | | 191,727 | | | | — | | | | 191,727 | |
Construction & Engineering | | | — | | | | 254,204 | | | | — | | | | 254,204 | |
Construction Materials | | | — | | | | 298,478 | | | | — | | | | 298,478 | |
Containers & Packaging | | | — | | | | 300,472 | | | | — | | | | 300,472 | |
Diversified Financial Services | | | — | | | | 299,623 | | | | — | | | | 299,623 | |
Diversified Telecommunication Services | | | — | | | | 301,964 | | | | — | | | | 301,964 | |
Electric Utilities | | | — | | | | 276,211 | | | | — | | | | 276,211 | |
Hotels, Restaurants & Leisure | | | — | | | | 447,271 | | | | — | | | | 447,271 | |
IT Services | | | — | | | | 300,827 | | | | — | | | | 300,827 | |
Machinery | | | — | | | | 256,933 | | | | — | | | | 256,933 | |
Media | | | — | | | | 537,574 | | | | — | | | | 537,574 | |
Oil, Gas & Consumable Fuels | | | — | | | | — | | | | 129,350 | | | | 129,350 | |
Specialty Finance | | | — | | | | — | | | | 1,416,859 | | | | 1,416,859 | |
Thrifts and Mortgage Finance | | | — | | | | 519,720 | | | | — | | | | 519,720 | |
Trading Companies & Distributors | | | — | | | | 463,807 | | | | — | | | | 463,807 | |
Foreign Agency Obligations | | | — | | | | 888,544 | | | | — | | | | 888,544 | |
Foreign Government Obligations | | | — | | | | 16,274,219 | | | | — | | | | 16,274,219 | |
Municipal Bonds | | | — | | | | 23,598,916 | | | | — | | | | 23,598,916 | |
Non-Agency Mortgage-Backed Securities | | | — | | | | 26,449,171 | | | | 1,659,025 | | | | 28,108,196 | |
Preferred Securities: | | | | | | | | | | | | | | | | |
Banks | | | 378,614 | | | | — | | | | — | | | | 378,614 | |
Capital Markets | | | — | | | | 255,488 | | | | — | | | | 255,488 | |
Industrial Conglomerates | | | — | | | | 256,100 | | | | — | | | | 256,100 | |
Media | | | — | | | | 202,000 | | | | — | | | | 202,000 | |
U.S. Government Sponsored Agency Securities | | | — | | | | 143,793,926 | | | | 39,704 | | | | 143,833,630 | |
U.S. Treasury Obligations | | | — | | | | 73,788,044 | | | | — | | | | 73,788,044 | |
| | |
40 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock Total Return V.I. Fund |
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Short-Term Securities: | | | | | | | | | | | | | | | | |
Certificates of Deposit | | $ | — | | | $ | 5,732,541 | | | $ | — | | | $ | 5,732,541 | |
Commercial Paper | | | — | | | | 3,745,468 | | | | — | | | | 3,745,468 | |
Foreign Government Obligations | | | — | | | | 9,617,013 | | | | — | | | | 9,617,013 | |
Money Market Funds | | | 15,391,229 | | | | — | | | | — | | | | 15,391,229 | |
Options Purchased: | | | | | | | | | | | | | | | | |
Foreign currency exchange contracts | | | 880 | | | | 273,475 | | | | — | | | | 274,355 | |
Interest rate contracts | | | — | | | | 609,456 | | | | — | | | | 609,456 | |
Liabilities: | | | | | | | | | | | | | | | | |
TBA Sale Commitments | | | — | | | | (23,249,255 | ) | | | — | | | | (23,249,255 | ) |
| | | | | | | | | | | | | | | | |
| | $ | 15,770,723 | | | $ | 455,749,687 | | | $ | 11,826,614 | | | $ | 483,347,024 | |
| | | | | | | | | | | | | | | | |
Derivative Financial Instruments(a) | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Credit contracts | | $ | — | | | $ | 71,882 | | | $ | — | | | $ | 71,882 | |
Foreign currency exchange contracts | | | — | | | | 1,055,722 | | | | — | | | | 1,055,722 | |
Interest rate contracts | | | 345,416 | | | | 242,791 | | | | — | | | | 588,207 | |
Other Contracts | | | — | | | | 1,348 | | | | — | | | | 1,348 | |
Liabilities: | | | | | | | | | | | | | | | | |
Credit contracts | | | — | | | | (24,325 | ) | | | — | | | | (24,325 | ) |
Foreign currency exchange contracts | | | (78 | ) | | | (585,048 | ) | | | — | | | | (585,126 | ) |
Interest rate contracts | | | (443,453 | ) | | | (203,903 | ) | | | — | | | | (647,356 | ) |
| | | | | | | | | | | | | | | | |
| | $ | (98,115 | ) | | $ | 558,467 | | | $ | — | | | $ | 460,352 | |
| | | | | | | | | | | | | | | | |
| (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 | | | U.S. Government Sponsored Agency Securities | | | Total | |
Investments: | | | | | | | | | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
Opening Balance, as of December 31, 2017 | | $ | 2,576,403 | | | $ | 1,000,000 | | | $ | 1,599,976 | | | $ | 2,319,947 | | | $ | — | | | $ | 7,496,326 | |
Transfers into Level 3 | | | 113,721 | | | | — | | | | — | | | | 306,954 | | | | 43,867 | | | | 464,542 | |
Transfers out of Level 3(a) | | | (1,554,640 | ) | | | — | | | | — | | | | (590,519 | ) | | | — | | | | (2,145,159 | ) |
Other(b) | | | 408,303 | | | | — | | | | 129,350 | | | | (537,653 | ) | | | — | | | | — | |
Accrued discounts/premiums | | | 5,206 | | | | — | | | | 1,145 | | | | 2,097 | | | | (74 | ) | | | 8,374 | |
Net realized gain (loss) | | | (16,841 | ) | | | — | | | | 9,561 | | | | 4,560 | | | | (1,398 | ) | | | (4,118 | ) |
Net change in unrealized appreciation (depreciation)(c)(d) | | | (6,749 | ) | | | — | | | | 4,850 | | | | (15,027 | ) | | | (2,691 | ) | | | (19,617 | ) |
Purchases | | | 2,462,558 | | | | 4,000,000 | | | | 1,367,922 | | | | 696,539 | | | | — | | | | 8,527,019 | |
Sales | | | (373,524 | ) | | | (32,761 | ) | | | (1,566,595 | ) | | | (527,873 | ) | | | — | | | | (2,500,753 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Closing Balance, as of June 30, 2018 | | $ | 3,614,437 | | | $ | 4,967,239 | | | $ | 1,546,209 | | | $ | 1,659,025 | | | $ | 39,704 | | | $ | 11,826,614 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net change in unrealized appreciation (depreciation) on investments still held at June 30, 2018(d) | | $ | (6,749 | ) | | $ | — | | | $ | — | | | $ | (5,138 | ) | | $ | (2,691 | ) | | $ | (14,578 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | As of December 31, 2017, the Fund used significant unobservable inputs in determining the value of certain investments. As of June 30, 2018, 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, Floating Rate Loan Interests 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 June 30, 2018 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 six months ended June 30, 2018, there were no transfers between Level 1 and Level 2.
See notes to financial statements.
| | | | |
SCHEDULE OF INVESTMENTS | | | 41 | |
Statement of Assets and Liabilities (unaudited)
June 30, 2018
| | | | |
| | BlackRock Total Return V.I. Fund | |
| |
ASSETS | | | | |
Investments at value — unaffiliated (cost — $497,050,187) | | $ | 491,205,050 | |
Investments at value — affiliated (cost — $15,391,229) | | | 15,391,229 | |
Cash pledged: | | | | |
Futures contracts | | | 800,050 | |
Centrally cleared swaps | | | 429,090 | |
Foreign currency at value (cost — $3,018,335) | | | 3,009,015 | |
Receivables: | | | | |
Investments sold | | | 12,413,551 | |
TBA sale commitments | | | 23,176,941 | |
Capital shares sold | | | 91,241 | |
Dividends — affiliated | | | 28,133 | |
Dividends — unaffiliated | | | 8,147 | |
Interest — unaffiliated | | | 2,582,342 | |
From the Manager | | | 59,024 | |
Variation margin on centrally cleared swaps | | | 6,987 | |
Swap premiums paid | | | 139,168 | |
Unrealized appreciation on: | | | | |
Forward foreign currency exchange contracts | | | 1,055,722 | |
OTC swaps | | | 87,206 | |
Prepaid expenses | | | 918 | |
Other assets | | | 13,609 | |
| | | | |
Total assets | | | 550,497,423 | |
| | | | |
| |
LIABILITIES | | | | |
Bank overdraft | | | 494,375 | |
Cash received: | | | | |
Collateral — OTC derivatives | | | 620,000 | |
Options written at value (premium received $227,705) | | | 231,246 | |
TBA sale commitments at value (proceeds $23,176,941) | | | 23,249,255 | |
Reverse repurchase agreements at value | | | 17,852,400 | |
Payables: | | | | |
Investments purchased | | | 71,623,189 | |
Capital shares redeemed | | | 330,578 | |
Income dividend distributions | | | 831,360 | |
Distribution fees | | | 56,334 | |
Variation margin on futures contracts | | | 115 | |
Board realignment and consolidation | | | 59,024 | |
Investment advisory fees | | | 144,716 | |
Directors’ and Officer’s fees | | | 2,804 | |
Other affiliates | | | 1,469 | |
Other accrued expenses | | | 248,119 | |
Swap premiums received | | | 83,469 | |
Unrealized depreciation on: | | | | |
Forward foreign currency exchange contracts | | | 502,638 | |
OTC swaps | | | 61,658 | |
| | | | |
Total liabilities | | | 116,392,749 | |
| | | | |
| |
NET ASSETS | | $ | 434,104,674 | |
| | | | |
| |
NET ASSETS CONSIST OF | | | | |
Paid-in capital | | $ | 447,873,788 | |
Distributions in excess of net investment income | | | (189,545 | ) |
Accumulated net realized loss | | | (8,351,985 | ) |
Net unrealized appreciation (depreciation) | | | (5,227,584 | ) |
| | | | |
NET ASSETS | | $ | 434,104,674 | |
| | | | |
| |
NET ASSET VALUE | | | | |
Class I — Based on net assets of $142,705,708 and 12,327,613 shares outstanding, 600 million shares authorized, $0.10 par value. | | $ | 11.58 | |
| | | | |
Class III — Based on net assets of $291,398,966 and 25,473,321 shares outstanding, 100 million shares authorized, $0.10 par value. | | $ | 11.44 | |
| | | | |
See notes to financial statements.
| | |
42 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statement of Operations (unaudited)
Six Months Ended June 30, 2018
| | | | |
| | BlackRock Total Return V.I. Fund | |
| |
INVESTMENT INCOME | | | | |
Dividends — affiliated | | $ | 143,781 | |
Dividends — unaffiliated | | | 15,327 | |
Interest — unaffiliated | | | 7,089,391 | |
Foreign taxes withheld | | | (23,278 | ) |
| | | | |
Total investment income | | | 7,225,221 | |
| | | | |
| |
EXPENSES | | | | |
Investment advisory | | | 927,594 | |
Transfer agent — class specific | | | 384,491 | |
Distribution — class specific | | | 351,600 | |
Board realignment and consolidation | | | 59,024 | |
Accounting services | | | 57,591 | |
Professional | | | 44,346 | |
Custodian | | | 36,646 | |
Printing | | | 35,391 | |
Directors and Officer | | | 10,290 | |
Transfer agent | | | 2,480 | |
Miscellaneous | | | 63,270 | |
| | | | |
Total expenses excluding interest expense | | | 1,972,723 | |
Interest expense | | | 107,684 | |
| | | | |
Total expenses | | | 2,080,407 | |
Less: | | | | |
Fees waived and/or reimbursed by the Manager | | | (65,857 | ) |
Transfer agent fees waived and/or reimbursed — class specific | | | (300,573 | ) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 1,713,977 | |
| | | | |
Net investment income | | | 5,511,244 | |
| | | | |
| |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain (loss) from: | | | | |
Investments — unaffiliated | | | (7,183,709 | ) |
Borrowed bonds | | | (17,524 | ) |
Forward foreign currency exchange contracts | | | 260,645 | |
Foreign currency transactions | | | 109,456 | |
Futures contracts | | | 511,739 | |
Options written | | | 817,060 | |
Swaps | | | (297,623 | ) |
| | | | |
| | | (5,799,956 | ) |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | |
Investments — unaffiliated | | | (7,036,470 | ) |
Borrowed bonds | | | 45,199 | |
Forward foreign currency exchange contracts | | | 575,656 | |
Foreign currency translations | | | (22,692 | ) |
Futures contracts | | | (147,751 | ) |
Options written | | | (313,811 | ) |
Swaps | | | 435,523 | |
| | | | |
| | | (6,464,346 | ) |
| | | | |
Net realized and unrealized loss | | | (12,264,302 | ) |
| | | | |
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | (6,753,058 | ) |
| | | | |
See notes to financial statements.
Statements of Changes in Net Assets
| | | | | | | | |
| | BlackRock Total Return V.I. Fund | |
| | Six Months Ended 06/30/2018 (Unaudited) | | | Year Ended 12/31/2017 | |
| | |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | |
| | |
OPERATIONS | | | | | | | | |
Net investment income | | $ | 5,511,244 | | | $ | 8,577,067 | |
Net realized gain (loss) | | | (5,799,956 | ) | | | 186,051 | |
Net change in unrealized appreciation (depreciation) | | | (6,464,346 | ) | | | 3,365,524 | |
| | | | | | | | |
Net increase (decrease) in net assets resulting from operations | | | (6,753,058 | ) | | | 12,128,642 | |
| | | | | | | | |
| | |
DISTRIBUTIONS TO SHAREHOLDERS(a) | | | | | | | | |
From net investment income: | | | | | | | | |
Class I | | | (1,942,765 | ) | | | (3,931,362 | ) |
Class III | | | (3,320,589 | ) | | | (4,976,227 | ) |
| | | | | | | | |
Decrease in net assets resulting from distributions to shareholders | | | (5,263,354 | ) | | | (8,907,589 | ) |
| | | | | | | | |
| | |
CAPITAL SHARE TRANSACTIONS | | | | | | | | |
Net increase in net assets derived from capital share transactions | | | 26,331,768 | | | | 83,969,566 | |
| | | | | | | | |
| | |
NET ASSETS | | | | | | | | |
Total increase in net assets | | | 14,315,356 | | | | 87,190,619 | |
Beginning of period | | | 419,789,318 | | | | 332,598,699 | |
| | | | | | | | |
End of period | | $ | 434,104,674 | | | $ | 419,789,318 | |
| | | | | | | | |
Distributions in excess of net investment income, end of period | | $ | (189,545 | ) | | $ | (437,435 | ) |
| | | | | | | | |
(a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements
| | |
44 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Financial Highlights
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Total Return V.I. Fund | |
| | Class I | |
| | Six Months Ended 06/30/2018 (Unaudited) | | | | | | Year Ended December 31, | |
| | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 11.91 | | | | | | | $ | 11.79 | | | $ | 11.71 | | | $ | 11.93 | | | $ | 11.51 | | | $ | 12.01 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.16 | | | | | | | | 0.29 | | | | 0.23 | | | | 0.22 | | | | 0.32 | | | | 0.32 | |
Net realized and unrealized gain (loss) | | | (0.34 | ) | | | | | | | 0.13 | | | | 0.09 | | | | (0.19 | ) | | | 0.44 | | | | (0.45 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | (0.18 | ) | | | | | | | 0.42 | | | | 0.32 | | | | 0.03 | | | | 0.76 | | | | (0.13 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions(b) | | | | | | | | | | | | | | | | | | | | | |
From net investment income | | | (0.15 | ) | | | | | | | (0.30 | ) | | | (0.24 | ) | | | (0.25 | ) | | | (0.34 | ) | | | (0.37 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | $ | 11.58 | | | | | | | $ | 11.91 | | | $ | 11.79 | | | $ | 11.71 | | | $ | 11.93 | | | $ | 11.51 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(c) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | (1.48 | )%(d) | | | | | | | 3.60 | %(e) | | | 2.76 | % | | | 0.26 | % | | | 6.66 | % | | | (1.14 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets(f) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 0.83 | %(g)(h) | | | | | | | 0.94 | % | | | 0.82 | % | | | 0.92 | % | | | 0.88 | % | | | 0.87 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed and paid indirectly | | | 0.60 | %(g) | | | | | | | 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 | | | 0.55 | %(g) | | | | | | | 0.62 | % | | | 0.59 | % | | | 0.69 | % | | | 0.66 | % | | | 0.65 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 2.79 | %(g) | | | | | | | 2.43 | % | | | 1.92 | % | | | 1.89 | % | | | 2.68 | % | | | 2.75 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 142,706 | | | | | | | $ | 152,138 | | | $ | 157,445 | | | $ | 154,046 | | | $ | 130,765 | | | $ | 135,943 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate(i) | | | 237 | % | | | | | | | 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) | Aggregate total return. |
(e) | 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%. |
(f) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (Unaudited) | | | | | | Year Ended December 31, | |
| 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | 2013 | | | | |
Investments in underlying funds | | | 0.01 | % | | | | | | | — | % | | | | | | | 0.01 | % | | | | | | | 0.01 | % | | | | | | | — | % | | | | | | | — | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(h) | Board realignment consolidation costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses would have been 0.84%. |
(i) | Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (Unaudited) | | | | | | Year Ended December 31, | |
| 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | 2013 | | | | |
Portfolio turnover rate (excluding MDRs) | | | 158 | % | | | | | | | 389 | % | | | | | | | 396 | % | | | | | | | 625 | % | | | | | | | 560 | % | | | | | | | 498 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See notes to financial statements.
Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock Total Return V.I. Fund (continued) | |
| | Class III | |
| | Six Months Ended 06/30/2018 (Unaudited) | | | | | | Year Ended December 31, | |
| 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 11.76 | | | | | | | $ | 11.65 | | | $ | 11.57 | | | $ | 11.79 | | | $ | 11.38 | | | $ | 11.86 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.14 | | | | | | | | 0.25 | | | | 0.19 | | | | 0.18 | | | | 0.27 | | | | 0.28 | |
Net realized and unrealized gain (loss) | | | (0.33 | ) | | | | | | | 0.12 | | | | 0.10 | | | | (0.19 | ) | | | 0.44 | | | | (0.42 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | (0.19 | ) | | | | | | | 0.37 | | | | 0.29 | | | | (0.01 | ) | | | 0.71 | | | | (0.14 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions(b) | | | | | | | | | | | | | | | | | | | | | |
From net investment income | | | (0.13 | ) | | | | | | | (0.26 | ) | | | (0.21 | ) | | | (0.21 | ) | | | (0.30 | ) | | | (0.34 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | $ | 11.44 | | | | | | | $ | 11.76 | | | $ | 11.65 | | | $ | 11.57 | | | $ | 11.79 | | | $ | 11.38 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(c) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | (1.58 | )%(d) | | | | | | | 3.21 | %(e) | | | 2.46 | % | | | (0.08 | )% | | | 6.28 | % | | | (1.30 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets(f) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.02 | %(g) | | | | | | | 1.16 | % | | | 1.01 | % | | | 1.06 | % | | | 1.11 | % | | | 1.06 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed and paid indirectly | | | 0.91 | %(g) | | | | | | | 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 | | | 0.86 | %(g) | | | | | | | 0.94 | % | | | 0.89 | % | | | 0.98 | % | | | 0.98 | % | | | 0.94 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 2.48 | %(g) | | | | | | | 2.15 | % | | | 1.61 | % | | | 1.54 | % | | | 2.31 | % | | | 2.45 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 291,399 | | | | | | | $ | 267,651 | | | $ | 175,153 | | | $ | 68,844 | | | $ | 7,300 | | | $ | 2,750 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate(h) | | | 237 | % | | | | | | | 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) | Aggregate total return. |
(e) | Includes payment received from an affiliate, which had no impact on the Fund’s total return. |
(f) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (Unaudited) | | | | | | Year Ended December 31, | |
| | 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | 2013 | | | | |
Investments in underlying funds | | | 0.01 | % | | | | | | | — | % | | | | | | | 0.01 | % | | | | | | | 0.01 | % | | | | | | | — | % | | | | | | | — | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(h) | Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (Unaudited) | | | | | | Year Ended December 31, | |
| | 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | 2013 | | | | |
Portfolio turnover rate (excluding MDRs) | | | 158 | % | | | | | | | 389 | % | | | | | | | 396 | % | | | | | | | 625 | % | | | | | | | 560 | % | | | | | | | 498 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See notes to financial statements.
| | |
46 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited)
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 19 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 | | | 47 | |
Notes to Financial Statements (unaudited) (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.
| | |
48 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (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 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
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 49 | |
Notes to Financial Statements (unaudited) (continued)
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.
| | |
50 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (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 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: 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 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.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 51 | |
Notes to Financial Statements (unaudited) (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 six months ended June 30, 2018, the average amount of reverse repurchase agreements outstanding and the daily weighted average interest rate for the Fund were $16,701,946 and 1.35%, 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 reverse repurchase agreements by counterparty which are subject to offset under an MRA on a net basis:
Reverse Repurchase Agreements
| | | | | | | | | | | | | | | | |
Counterparty | | Reverse Repurchase Agreements | | | Fair Value of Non-cash Collateral Pledged Including Accrued Interest (a) | | | Cash Collateral Received | | | Net Amount | |
BNP Paribas SA | | $ | (6,890,926 | ) | | $ | 6,890,926 | | | $ | — | | | $ | — | |
Deutsche Bank Securities, Inc. | | | (5,730,089 | ) | | | 5,728,430 | | | | — | | | | (1,659 | ) |
J.P. Morgan Securities LLC | | | (5,231,385 | ) | | | 5,220,299 | | | | — | | | | (11,086 | ) |
| | | | | | | | | | | | | | | | |
| | $ | (17,852,400 | ) | | $ | 17,839,655 | | | $ | — | | | $ | (12,745 | ) |
| | | | | | | | | | | | | | | | |
| (a) | Net collateral with a value of $17,840,738 has been pledged in connection with open reverse repurchase agreements. Excess of net collateral pledged to the individual counterparty is not shown for financial reporting purposes. | |
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.
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
| | |
52 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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) and 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. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts on the Statement of Assets and Liabilities.
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. Cash amounts pledged for forward foreign currency exchange contracts are considered restricted and are included in cash pledged as collateral for OTC derivatives on the Statement of Assets and Liabilities.
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. These amounts, which are considered restricted, are included in cash pledged as collateral for options written on the Statement of Assets and Liabilities.
| • | | 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. |
| • | | 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. |
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 53 | |
Notes to Financial Statements (unaudited) (continued)
| • | | 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. Amounts pledged, which are considered restricted cash, are included in cash pledged for centrally cleared swaps on 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.
| • | | 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. |
| | |
54 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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 and BlackRock High Yield V.I. Fund, 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 six months ended June 30, 2018, the aggregate average daily net assets of the Fund and the Company’s BlackRock High Yield V.I. Fund were approximately $889,341,646.
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 six months ended June 30, 2018, the class specific distribution fees borne directly by Class III were $351,600.
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 six months ended June 30, 2018, 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.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 55 | |
Notes to Financial Statements (unaudited) (continued)
For the six months ended June 30, 2018, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:
| | | | | | | | | | | | | | |
Class I | | | | | Class III | | | | | Total | |
$ | 154,365 | | | | | $ | 230,126 | | | | | $ | 384,491 | |
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 six months ended June 30, 2018, the amount waived was $6,833.
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, 2020. The contractual agreement may be terminated upon 90 days’ notice by a majority of the 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 six months ended June 30, 2018, there were no fees waived by the Manager.
The Fund has begun to incur expenses in connection with a potential realignment and consolidation of the boards of directors of certain BlackRock-advised funds. The Manager has voluntarily agreed to reimburse the Fund for all or a portion of such expenses, which amounts are included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the six months ended June 30, 2018, the amount reimbursed was $59,024.
For the six months ended June 30, 2018, the Fund reimbursed the Manager $2,395 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, 2020 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 waived and/or reimbursed — class specific in the Statement of Operations. For the six months ended June 30, 2018, class specific waivers and/or reimbursements were as follows:
| | | | | | | | | | | | |
| | Class I | | | Class III | | | Total | |
Transfer Agent Fees Waived and/or Reimbursed | | $ | 154,365 | | | $ | 146,208 | | | $ | 300,573 | |
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, 2020 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 six months ended June 30, 2018, there were no fees waived and/or reimbursed by the Manager.
Directors and Officers: 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 six months ended June 30, 2018, the Fund has not received any reimbursement from an affiliate, 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 six months ended June 30, 2018, 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 | | $ | 277,530 | |
Sales | | | 120,735 | |
Net Realized Loss | | | (2,256 | ) |
| | |
56 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
For the six months ended June 30, 2018, 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 | | $ | 957,270,610 | | | $ | 918,281,775 | |
U.S Government Securities | | | 116,201,248 | | | | 177,839,129 | |
For the six months ended June 30, 2018, purchases and sales related to mortgage dollar rolls were $357,125,439 and $357,386,291, respectively.
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 June 30, 2018, 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.
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 June 30, 2018, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
| | | | |
Tax cost | | $ | 512,530,938 | |
| | | | |
Gross unrealized appreciation | | $ | 3,780,239 | |
Gross unrealized depreciation | | | (9,099,156 | ) |
| | | | |
Net unrealized appreciation (depreciation) | | $ | (5,318,917 | ) |
| | | | |
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Although the Act does not amend any provisions directly related to the qualification or taxation of regulated investment companies (“RICs”), the Act does change the taxation of entities in which some RICs invest, the tax treatment of income derived from those entities and the taxation of RIC shareholders. While management does not anticipate significant impact to the Fund or to its shareholders, there is uncertainty in the application of certain provisions in the Act. Specifically, provisions in the Act may increase the amount of or accelerate the recognition of taxable income and may limit the deductibility of certain expenses by RICs. Until full clarity around these provisions is obtained, the impact on the Fund’s financial statements, if any, cannot be fully determined.
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, $2.25 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 $1.75 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 0.10% 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 2019 unless extended or renewed. Prior to April 19, 2018, the aggregate commitment amount was $2.1 billion and the fee was 0.12% per annum. Participating Funds paid an upfront commitment fee of 0.02% on the total commitment amounts, in addition to administration, legal and arrangement fees, which 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 six months ended June 30, 2018, the Fund did not borrow under the credit agreement.
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
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 57 | |
Notes to Financial Statements (unaudited) (continued)
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.
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.
| | |
58 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
11. | CAPITAL SHARE TRANSACTIONS |
Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 | | | Year Ended 12/31/2017 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
Class I | | | | | | | | | | | | | | | | |
Shares sold | | | 470,408 | | | $ | 5,513,589 | | | | 738,932 | | | $ | 8,778,869 | |
Shares issued in reinvestment of distributions | | | 164,417 | | | | 1,920,781 | | | | 330,876 | | | | 3,939,184 | |
Shares redeemed | | | (1,086,003 | ) | | | (12,660,598 | ) | | | (1,644,712 | ) | | | (19,574,644 | ) |
| | | | | | | | | | | | | | | | |
Net decrease | | | (451,178 | ) | | $ | (5,226,228 | ) | | | (574,904 | ) | | $ | (6,856,591 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Class III | | | | | | | | | | | | | | | | |
Shares sold | | | 3,395,944 | | | $ | 39,340,920 | | | | 7,912,809 | | | $ | 93,125,910 | |
Shares issued in reinvestment of distributions | | | 277,609 | | | | 3,202,827 | | | | 409,818 | | | | 4,824,507 | |
Shares redeemed | | | (950,212 | ) | | | (10,985,751 | ) | | | (606,082 | ) | | | (7,124,260 | ) |
| | | | | | | | | | | | | | | | |
Net increase | | | 2,723,341 | | | $ | 31,557,996 | | | | 7,716,545 | | | $ | 90,826,157 | |
| | | | | | | | | | | | | | | | |
Total Net Increase | | | 2,272,163 | | | $ | 26,331,768 | | | | 7,141,641 | | | $ | 83,969,566 | |
| | | | | | | | | | | | | | | | |
Management’s evaluation of the impact of all subsequent events on the Fund’s financial statements was completed through the date the financial statements were issued and the following items were noted:
The Board has approved an Agreement and Plan of Reorganization (the “Plan”) with respect to the Fund, pursuant to which the Fund will reorganize into a newly created series (the “New Fund”) of a newly organized Maryland corporation. This reorganization with respect to the Fund (the “Reorganization”) is expected to close in the third quarter of 2018. The Reorganization is not subject to approval by shareholders of the Fund.
The New Fund will have the same investment objective, strategies and policies, investment adviser, portfolio management team and service providers as the Fund. The Fund will be the performance and accounting survivor of its Reorganization, meaning that the New Fund will assume the performance and financial history of the Fund at the completion of the Reorganization. In addition, the New Fund will be subject to the same contractual arrangements, including the same contractual fees and expenses, as those of the Fund. The Reorganization is intended to be tax-free meaning that the Fund’s shareholders will become shareholders of the New Fund without realizing any gain or loss for federal income tax purposes.
Upon the consummation of the Reorganization, shareholders of the Fund will become shareholders of the New Fund. If you are a shareholder of the Fund, the cash value of your investment will not change. You will receive New Fund shares with a total dollar value equal to the Fund shares that you own at the time of the Reorganization.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 59 | |
Glossary of Terms Used in this Report
| | |
Currency |
| |
ARS | | Argentine Peso |
AUD | | Australian Dollar |
BRL | | Brazilian Real |
CAD | | Canadian Dollar |
CHF | | Swiss Franc |
CLP | | Chilean Peso |
CNY | | Chinese Yuan |
COP | | Columbian Peso |
EGP | | Egyptian Pound |
EUR | | Euro |
GBP | | British Pound |
IDR | | Indonesian Rupiah |
INR | | Indian Rupee |
JPY | | Japanese Yen |
KRW | | South Korean Won |
MXN | | Mexican Peso |
NGN | | Nigerian Naira |
NOK | | Norwegian Krone |
NZD | | New Zealand Dollar |
PLN | | Polish Zloty |
RUB | | New Russian Ruble |
SEK | | Swedish Krona |
SGD | | Singapore Dollar |
TRY | | Turkish Lira |
TWD | | New Taiwan Dollar |
USD | | United States Dollar |
ZAR | | South African Rand |
| | |
Portfolio Abbreviations |
| |
ABS | | Asset-Backed Security |
CDX | | Credit Default Swap Index |
CLO | | Collateralized Loan Obligation |
CSMC | | Credit Suisse Mortgage Capital |
CWABS | | Countrywide Asset-Backed Certificates |
DAC | | Designated Activity Company |
EURIBOR | | Euro Interbank Offered Rate |
GO | | General Obligation Bonds |
JIBAR | | Johannesburg Interbank Agreed Rate |
LIBOR | | London Interbank Offered Rate |
MXIBTIIE | | Mexico Interbank TIIE 28-Day |
OTC | | Over-The-Counter |
RB | | Revenue Bonds |
REMIC | | Real Estate Mortgage Investment Conduit |
TBA | | To-be-announced |
WIBOR | | WIBOR |
| | |
60 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
JUNE 30, 2018
| | |
SEMI-ANNUAL REPORT (UNAUDITED) | | |
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 June 30, 2018 | | 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 six-month period ended June 30, 2018, the Fund performed in line with its benchmark, the Bloomberg Barclays U.S. Government/Mortgage Index.
What factors influenced performance?
Positive contributors to performance relative to the benchmark included the Fund’s stance with respect to U.S. interest rates. A below-benchmark stance with respect to duration and corresponding interest rate sensitivity aided return as rates rose. In addition, the Fund’s positioning along the U.S. Treasury yield curve added to performance. Allocations to securitized sectors including commercial mortgage-backed securities (“CMBS”), collateralized loan obligations (“CLOs”) and residential mortgage-backed securities (“MBS”) also contributed positively. These segments continued to benefit from favorable fundamentals around the U.S. consumer, housing and commercial real estate. The Fund’s strategies with respect to both global interest rates and currencies added to relative performance as well.
Detractors from relative performance included security selection within 30-year agency MBS and the Fund’s weighting to 15-year MBS.
Describe recent portfolio activity.
During the six-month period, the Fund decreased its allocation to U.S. government securities, while adding exposures in agency MBS, primarily in pass-throughs with a smaller increase to collateralized mortgage obligations (“CMOs”). The Fund kept its out-of-benchmark allocation to securitized assets roughly unchanged during the period, adding some exposures in CMBS while trimming exposures in CLOs. The Fund maintained an underweight stance with respect to duration, with the degree of underweight decreasing over the period.
The Fund employed derivatives, primarily through options and futures contracts, as a means to manage allocations in MBS and securitized assets. Over the period, the use of derivatives contributed positively to Fund performance.
Describe portfolio positioning at period end.
The Fund maintained an overweight to agency MBS on a positive view with respect to demand, valuations and prepayment risk, with a tilt toward 15-year relative to 30-year MBS. The Fund continued to hold a core allocation to CMBS and agency CMOs for incremental income. The Fund was modestly underweight U.S. duration. Outside of the U.S., the Fund held a short position in German interest rates on the view that bond valuations are stretched in that market. The Fund was long a basket of emerging market currencies through the use of options in order to benefit from any rebound 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.
Portfolio Information
PORTFOLIO COMPOSITION
| | | | |
Asset Type | | Percent of Total Investments (a) | |
U.S. Government Sponsored Agency Obligations | | | 53 | % |
U.S. Treasury Obligations | | | 40 | |
Asset-Backed Securities | | | 4 | |
Non-Agency Mortgage-Backed Securities | | | 3 | |
| (a) | Total investments exclude short-term securities, options purchased, options written and TBA sale commitments. | |
| | |
2 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Fund Summary as of June 30, 2018 (continued) | | BlackRock U.S. Government Bond V.I. Fund |
Performance Summary for the Period Ended June 30, 2018
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Standardized 30-Day Yields (c) | | | Unsubsidized 30-Day Yields (c) | | | 6-Month Total Returns (d) | | | | | | Average Annual Total Returns | |
| | | | | 1 Year (d) | | | 5 Years (d) | | | 10 Years (d) | |
Class I(a)(b) | | | 2.32 | % | | | 1.96 | % | | | (0.98 | )% | | | | | | | (0.92 | )% | | | 1.56 | % | | | 2.69 | % |
Class III(a)(b) | | | 2.04 | | | | 1.78 | | | | (1.03 | ) | | | | | | | (1.12 | ) | | | 1.28 | (e) | | | 2.42 | (e) |
Bloomberg Barclays U.S. Government/Mortgage Index(f) | | | — | | | | — | | | | (1.01 | ) | | | | | | | (0.30 | ) | | | 1.80 | | | | 3.20 | |
Bloomberg Barclays U.S. Mortgage-Backed Securities Index(g) | | | — | | | | — | | | | (0.95 | ) | | | | | | | 0.15 | | | | 2.25 | | | | 3.54 | |
| (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) | 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 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) | 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. | |
| (d) | 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. | |
| (e) | 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 (12b-1) fees applicable to Class III Shares. | |
| (f) | 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. | |
| (g) | An unmanaged index that includes the mortgaged-backed pass-through securities of Ginnie Mae, Fannie Mae and Freddie Mac that meet certain maturity and liquidity criteria. | |
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 (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | Expenses Paid During the Period (c) | | | | | | Beginning Account Value (01/01/18) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (b) | | | Ending Account Value (06/30/18) | | | Expenses Paid During the Period (c) | |
Class I | | $ | 1,000.00 | | | $ | 990.20 | | | $ | 5.58 | | | $ | 4.00 | | | | | | | $ | 1,000.00 | | | $ | 1,019.19 | | | $ | 5.66 | | | $ | 1,020.78 | | | $ | 4.06 | |
Class III | | | 1,000.00 | | | | 989.70 | | | | 7.01 | | | | 5.48 | | | | | | | | 1,000.00 | | | | 1,017.75 | | | | 7.10 | | | | 1,019.29 | | | | 5.56 | |
| (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 (1.13% for Class I and 1.42% for Class III ), multiplied by the average account value over the period, multiplied by 181/365 (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 (0.81% for Class I and 1.11% for Class III ), multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown). | |
See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.
| | |
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 January 1, 2018 and held through June 30, 2018) 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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) June 30, 2018 | | BlackRock U.S. Government Bond V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Asset-Backed Securities — 4.8% | |
Arbor Realty Commercial Real Estate Notes Ltd., Series 2016-FL1A, Class A, (LIBOR USD 1 Month + 1.70%), 3.77%, 09/15/26(a)(b) | | | USD | | | | 210 | | | $ | 210,892 | |
BSPRT Issuer Ltd., Series 2017-FL1, Class A, (LIBOR USD 1 Month + 1.35%), 3.42%, 06/15/27(a)(b) | | | | | | | 200 | | | | 200,168 | |
CIFC Funding Ltd., Series 2014-V, (LIBOR USD 3 Month + 1.40%), 3.75%, 01/17/27(a) | | | | | | | 400 | | | | 400,496 | |
Dryden XXVIII Senior Loan Fund, Series 2013-28A, Class A1LR, (LIBOR USD 3 Month + 1.20%), 3.54%, 08/15/30(a)(b) | | | | | | | 700 | | | | 700,977 | |
OCP CLO Ltd., Series 2012-2A, Class A1R, (LIBOR USD 3 Month + 1.40%), 3.73%, 11/22/25(a)(b) | | | | | | | 556 | | | | 556,892 | |
OHA Credit Partners VIII Ltd., Series 2013-8A, Class A, (LIBOR USD 3 Month + 1.12%), 3.48%, 04/20/25(a)(b) | | | | | | | 299 | | | | 298,934 | |
Progress Residential Trust, Series 2017-SFR1, Class A, 2.77%, 08/17/34(b) | | | | | | | 100 | | | | 96,421 | |
Romark WM-R Ltd., Series 2018-1A, Class A1, (LIBOR USD 3 Month + 1.03%), 2.78%, 04/20/31(a)(b) | | | | | | | 500 | | | | 500,391 | |
| | | | | | | | | | | | |
Total Asset-Backed Securities — 4.8% (Cost: $2,960,885) | | | | 2,965,171 | |
| | | | | | | | | | | | |
|
Non-Agency Mortgage-Backed Securities — 4.1% | |
|
Collateralized Mortgage Obligations — 0.2% | |
Seasoned Credit Risk Transfer Trust, Series 2018-2, Class MA, 3.50%, 11/25/57 | | | | | | | 135 | | | | 134,376 | |
| | | | | | | | | | | | |
Commercial Mortgage-Backed Securities — 3.5%(b) | |
AREIT Trust, Series 2018-CRE1, Class A, 2.92%, 02/15/35(c)(d) | | | | | | | 160 | | | | 160,096 | |
BHMS Mortgage Trust, Series 2014-ATLS, Class AFL, 3.48%, 07/05/33(c) | | | | | | | 700 | | | | 700,401 | |
Commercial Mortgage Trust, Series 2017-PANW, Class A, 3.24%, 10/10/29 | | | | | | | 440 | | | | 429,158 | |
CSMC Trust: | | | | | | | | | | | | |
Series 2016-MFF, Class A, 3.67%, 11/15/33(c) | | | | | | | 69 | | | | 69,659 | |
Series 2017-CALI, Class A, 3.43%, 11/10/32 | | | | | | | 120 | | | | 119,007 | |
DBUBS Mortgage Trust, Series 2017-BRBK, Class A, 3.45%, 10/10/34 | | | | | | | 180 | | | | 178,741 | |
GAHR Commercial Mortgage Trust, Series 2015-NRF, Class AFL1, 3.37%, 12/15/34(c) | | | | | | | 143 | | | | 143,400 | |
LMREC, Inc., Series 2016-CRE2, Class A, 3.78%, 11/24/31(c) | | | | | | | 100 | | | | 100,500 | |
RAIT Trust, Series 2017-FL7, Class A, 3.02%, 06/15/37(c) | | | | | | | 248 | | | | 247,975 | |
| | | | | | | | | | | | |
| | | | 2,148,937 | |
| | | | | | | | | | | | |
Interest Only Commercial Mortgage-Backed Securities — 0.4%(c) | |
CFCRE Commercial Mortgage Trust, Series 2016-C4, Class XA, 1.90%, 05/10/58 | | | | | | | 844 | | | | 85,204 | |
Core Industrial Trust(b): | | | | | | | | | | | | |
Series 2015-TEXW, Class XA, 0.90%, 02/10/34 | | | | | | | 3,300 | | | | 79,817 | |
Series 2015-WEST, Class XA, 1.08%, 02/10/37 | | | | | | | 1,600 | | | | 87,272 | |
| | | | | | | | | | | | |
| | | | 252,293 | |
| | | | | |
Total Non-Agency Mortgage-Backed Securities — 4.1% (Cost: $2,569,678) | | | | 2,535,606 | |
| | | | | | | | | | | | |
|
U.S. Government Sponsored Agency Securities — 72.4% | |
|
Agency Obligations — 0.9% | |
Federal Home Loan Bank, 4.00%, 04/10/28 | | | | | | | 500 | | | | 530,952 | |
| | | | | | | | | | | | |
Collateralized Mortgage Obligations — 1.8% | |
Federal National Mortgage Association: | | | | | | | | | | | | |
Series 2017-69, Class HA, 3.00%, 06/25/46 | | | | | | | 648 | | | | 637,965 | |
Series 2011-8, Class ZA, 4.00%, 02/25/41 | | | | | | | 269 | | | | 274,239 | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Collateralized Mortgage Obligations (continued) | |
Government National Mortgage Association Variable Rate Notes, Series 2014-107, Class WX, 6.80%, 07/20/39(c) | | | USD | | | | 175 | | | $ | 193,737 | |
| | | | | | | | | | | | |
| | | | 1,105,941 | |
Interest Only Commercial Mortgage-Backed Securities — 2.6% | |
Federal Home Loan Mortgage Corp. Variable Rate Notes, Series K064, Class X1, 0.74%, 03/25/27(c) | | | | | | | 1,395 | | | | 63,104 | |
Federal National Mortgage Association ACES Variable Rate Notes:(c) | | | | | | | | | | | | |
Series 2015-M1, Class X2, 0.65%, 09/25/24 | | | | | | | 5,062 | | | | 145,149 | |
Series 2016-M4, Class X2, 2.68%, 01/25/39 | | | | | | | 391 | | | | 40,482 | |
Finnish Real Estate Management Federation Mortgage Trust, Series 2015-K718, Class X2A, 0.10%, 02/25/22(b)(c) | | | | | | | 22,503 | | | | 64,094 | |
Government National Mortgage Association Variable Rate Notes: | | | | | | | | | | | | |
Series 2002-83, 0.00%, 10/16/42(c) | | | | | | | 942 | | | | 1 | |
Series 2003-17, 0.00%, 03/16/43(c) | | | | | | | 2,210 | | | | – | |
Series 2003-109, 0.00%, 11/16/43(c) | | | | | | | 1,996 | | | | 379 | |
Series 2017-54, 0.65%, 12/16/58(c) | | | | | | | 182 | | | | 11,349 | |
Series 2017-168, 0.66%, 12/16/59(c) | | | | | | | 735 | | | | 46,865 | |
Series 2017-72, 0.68%, 04/16/57(c) | | | | | | | 1,346 | | | | 85,039 | |
Series 2017-53, 0.69%, 11/16/56(c) | | | | | | | 2,057 | | | | 122,320 | |
Series 2017-44, 0.70%, 04/17/51(c) | | | | | | | 763 | | | | 44,763 | |
Series 2017-64, 0.72%, 11/16/57(c) | | | | | | | 358 | | | | 23,575 | |
Series 2017-30, 0.76%, 08/16/58(c) | | | | | | | 763 | | | | 47,509 | |
Series 2017-61, 0.77%, 05/16/59(c) | | | | | | | 514 | | | | 39,489 | |
Series 2016-22, 0.77%, 11/16/55(c) | | | | | | | 2,608 | | | | 142,577 | |
Series 2016-45, 1.01%, 02/16/58(c) | | | | | | | 3,517 | | | | 272,884 | |
Series 2016-119, (LIBOR USD 1 Month + 0.00%), 1.13%, 04/16/58(a) | | | | | | | 3,793 | | | | 317,701 | |
Series 2016-113, 1.19%, 02/16/58(c) | | | | | | | 1,560 | | | | 143,142 | |
| | | | | | | | | | | | |
| | | | 1,610,422 | |
| | | | | | | | | | | | |
Mortgage-Backed Securities — 67.1% | |
Federal Home Loan Mortgage Corp.: | | | | | | | | | | | | |
2.50%, 09/01/27 - 02/01/32 | | | | | | | 437 | | | | 425,684 | |
2.50%, 07/15/33(e) | | | | | | | 234 | | | | 227,147 | |
3.00%, 09/01/27 - 12/01/46 | | | | | | | 627 | | | | 616,998 | |
3.00%, 07/15/33 - 07/15/48(e) | | | | | | | 1,469 | | | | 1,428,071 | |
3.50%, 04/01/31 - 01/01/48 | | | | | | | 2,633 | | | | 2,639,934 | |
3.50%, 06/15/44(e) | | | | | | | 358 | | | | 356,121 | |
4.00%, 08/01/40 - 08/01/47 | | | | | | | 578 | | | | 594,063 | |
4.00%, 09/15/43(e) | | | | | | | 830 | | | | 845,995 | |
4.50%, 02/01/39 - 12/01/43 | | | | | | | 185 | | | | 193,937 | |
4.50%, 11/15/40(e) | | | | | | | 266 | | | | 276,777 | |
5.00%, 10/01/41 - 11/01/41 | | | | | | | 211 | | | | 225,105 | |
5.50%, 06/01/41 | | | | | | | 141 | | | | 152,625 | |
8.00%, 12/01/29 - 07/01/30 | | | | | | | 33 | | | | 38,606 | |
Federal National Mortgage Association: | | | | | | | | | | | | |
2.00%, 10/01/31 - 03/01/32 | | | | | | | 150 | | | | 142,159 | |
2.50%, 06/01/28 - 02/01/33 | | | | | | | 1,080 | | | | 1,052,467 | |
2.50%, 04/25/29(e) | | | | | | | 13 | | | | 12,634 | |
3.00%, 04/01/29 - 03/01/47 | | | | | | | 4,709 | | | | 4,618,872 | |
3.00%, 07/25/33(e) | | | | | | | 1,538 | | | | 1,528,971 | |
3.50%, 10/25/27 - 04/25/44(e) | | | | | | | 2,619 | | | | 2,608,496 | |
3.50%, 04/01/29 - 01/01/48 | | | | | | | 4,056 | | | | 4,069,079 | |
4.00%, 01/01/26 - 04/01/48 | | | | | | | 3,412 | | | | 3,509,797 | |
4.00%, 09/25/43(e) | | | | | | | 1,116 | | | | 1,137,764 | |
4.50%, 05/01/24 - 10/01/47 | | | | | | | 2,051 | | | | 2,153,891 | |
4.50%, 04/25/41(e) | | | | | | | 382 | | | | 397,761 | |
5.00%, 09/01/35 - 08/01/41 | | | | | | | 287 | | | | 306,981 | |
5.50%, 05/01/34 - 12/01/39 | | | | | | | 279 | | | | 301,978 | |
6.00%, 04/01/35 - 06/01/41 | | | | | | | 320 | | | | 353,138 | |
6.50%, 05/01/40 | | | | | | | 59 | | | | 65,415 | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 5 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock U.S. Government Bond V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Mortgage-Backed Securities (continued) | |
Government National Mortgage Association: | | | | | | | | | | | | |
3.00%, 02/15/45 - 07/20/47 | | | USD | | | | 2,015 | | | $ | 1,980,140 | |
3.00%, 07/15/48(e) | | | | | | | 53 | | | | 51,852 | |
3.50%, 12/20/41 - 10/20/46 | | | | | | | 3,777 | | | | 3,801,573 | |
4.00%, 09/20/40 - 04/20/48 | | | | | | | 582 | | | | 599,541 | |
4.00%, 07/15/48(e) | | | | | | | 1,589 | | | | 1,628,088 | |
4.50%, 12/20/39 - 02/15/42 | | | | | | | 1,881 | | | | 1,978,650 | |
4.50%, 10/20/41(e) | | | | | | | 62 | | | | 64,442 | |
5.00%, 12/15/38 - 07/20/42 | | | | | | | 134 | | | | 142,045 | |
5.50%, 01/15/34 | | | | | | | 656 | | | | 721,916 | |
| | | | | | | | | | | | |
| | | | 41,248,713 | |
| | | | | |
Total U.S. Government Sponsored Agency Securities — 72.4% (Cost: $45,105,197) | | | | 44,496,028 | |
| | | | | |
|
U.S. Treasury Obligations — 54.4% | |
U.S. Treasury Bonds: | | | | | | | | | | | | |
4.25%, 05/15/39 | | | | | | | 203 | | | | 244,877 | |
4.50%, 08/15/39 | | | | | | | 197 | | | | 245,642 | |
4.38%, 11/15/39 | | | | | | | 198 | | | | 243,184 | |
3.13%, 02/15/43 | | | | | | | 771 | | | | 791,510 | |
3.13%, 05/15/48(f) | | | | | | | 1,054 | | | | 1,083,273 | |
2.88%, 05/15/43 - 11/15/46 | | | | | | | 994 | | | | 975,949 | |
3.63%, 08/15/43 | | | | | | | 736 | | | | 820,410 | |
3.75%, 11/15/43 | | | | | | | 781 | | | | 887,869 | |
3.00%, 02/15/47 | | | | | | | 140 | | | | 140,503 | |
U.S. Treasury Notes: | | | | | | | | | | | | |
1.25%, 08/31/19(f) | | | | | | | 1,976 | | | | 1,949,602 | |
1.00%, 10/15/19(f) | | | | | | | 1,976 | | | | 1,939,954 | |
2.50%, 05/31/20(f) | | | | | | | 3,053 | | | | 3,051,569 | |
1.63%, 06/30/20 - 10/31/23 | | | | | | | 3,557 | | | | 3,450,908 | |
2.63%, 05/15/21(f) | | | | | | | 2,388 | | | | 2,388,187 | |
1.13%, 06/30/21(f) | | | | | | | 1,383 | | | | 1,323,250 | |
2.25%, 07/31/21 - 02/15/27 | | | | | | | 3,765 | | | | 3,664,419 | |
2.13%, 09/30/21 | | | | | | | 1,383 | | | | 1,360,526 | |
1.88%, 04/30/22 | | | | | | | 1,383 | | | | 1,341,996 | |
2.75%, 05/31/23(f) | | | | | | | 2,068 | | | | 2,070,585 | |
2.00%, 04/30/24 - 08/15/25 | | | | | | | 2,866 | | | | 2,739,139 | |
2.00%, 11/15/26(f) | | | | | | | 818 | | | | 766,588 | |
2.88%, 05/31/25 | | | | | | | 1,285 | | | | 1,289,919 | |
2.88%, 05/15/28(f) | | | | | | | 616 | | | | 617,227 | |
| | | | | | | | | | | | |
Total U.S. Treasury Obligations — 54.4% (Cost: $33,622,696) | | | | 33,387,086 | |
| | | | | | | | | | | | |
Total Long-Term Investments — 135.7% (Cost: $84,258,456) | | | | 83,383,891 | |
| | | | | | | | | | | | |
|
Short-Term Securities — 4.8% | |
|
Certificates of Deposit — 1.2% | |
Yankee — 0.9%(g) | | | | | | | |
BNP Paribas SA, New York, 2.66%, 04/18/19 | | | | 140 | | | | 140,056 | |
Canadian Imperial Bank of Commerce, New York, 2.66%, 04/17/19 | | | | 140 | | | | 140,018 | |
MUFG Bank Ltd., New York, 2.68%, 04/17/19(b) | | | | 130 | | | | 130,089 | |
Royal Bank of Canada, New York, (LIBOR USD 3 Month + 0.18%), 2.54%, 04/18/19(a) | | | | 130 | | | | 130,030 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 540,193 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
Certificates of Deposit (continued) | | | | | | | | | |
Domestic — 0.3% | | | | | | | | | |
Wells Fargo Bank NA: | | | | | | | | | | | | |
(LIBOR USD 3 Month + 0.21%), 2.56%, 04/16/19(a) | | | USD | | | | 130 | | | $ | 130,080 | |
2.70%, 04/16/19 | | | | | | | 60 | | | | 60,033 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 190,113 | |
| | | | | | | | | | | | |
Total Certificates of Deposit — 1.2% (Cost: $730,000) | | | | 730,306 | |
| | | | | | | | | | | | |
Commercial Paper — 0.2% | |
JPMorgan Securities LLC, (LIBOR USD 3 Month + 0.18%), 2.53%, 04/15/19(a) | | | | | | | 130 | | | | 130,030 | |
| | | | | | | | | | | | |
Total Commercial Paper — 0.2% (Cost: $130,000) | | | | 130,030 | |
| | | | | | | | | | | | |
|
Foreign Government Obligations — 2.0% | |
Japan — 2.0% | |
Government of Japan Treasury Bills:(h) | | | | | | | | | | | | |
(0.14)%, 08/13/18 | | | JPY | | | | 68,300 | | | | 616,987 | |
(0.14)%, 09/03/18 | | | | | | | 67,000 | | | | 605,289 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,222,276 | |
| | | | | | | | | | | | |
Total Foreign Government Obligations — 2.0% (Cost: $1,227,900) | | | | 1,222,276 | |
| | | | | | | | | | | | |
| | | |
| | | | | Shares | | | | |
Money Market Funds — 1.4% | |
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.80%(i)(j) | | | | | | | 883,374 | | | | 883,374 | |
| | | | | | | | | | | | |
Total Money Market Funds — 1.4% (Cost: $883,374) | | | | 883,374 | |
| | | | | | | | | | | | |
Total Short-Term Securities — 4.8% (Cost: $2,971,274) | | | | 2,965,986 | |
| | | | | | | | | | | | |
Total Options Purchased — 0.2% (Cost: $132,255) | | | | 111,271 | |
| | | | | |
Total Investments Before Options Written and TBA Sale Commitments — 140.7% (Cost: $87,361,985) | | | | 86,461,148 | |
| | | | | | | | | | | | |
Total Options Written — 0.0% (Premium Received — $34,271) | | | | (25,600 | ) |
| | | | | |
| | | |
| | | | | Par (000) | | | | |
TBA Sale Commitments — (14.0)%(e) | |
| |
Mortgage-Backed Securities — (14.0)% | | | | |
Federal Home Loan Mortgage Corp.: | | | | | | | | | | | | |
3.00%, 07/15/48 | | | USD | | | | 26 | | | | (25,165 | ) |
3.50%, 07/15/33 - 06/15/44 | | | | | | | 833 | | | | (831,340 | ) |
4.00%, 09/15/43 | | | | | | | 157 | | | | (160,025 | ) |
Federal National Mortgage Association: | | | | | | | | | | | | |
2.00%, 02/25/29 | | | | | | | 147 | | | | (139,208 | ) |
2.50%, 04/25/29 | | | | | | | 281 | | | | (273,098 | ) |
3.00%, 02/25/29 - 05/25/44 | | | | | | | 1,086 | | | | (1,051,903 | ) |
3.50%, 04/25/44 | | | | | | | 1,574 | | | | (1,566,114 | ) |
4.00%, 07/25/33 - 09/25/43 | | | | | | | 2,469 | | | | (2,517,729 | ) |
5.00%, 04/25/37 | | | | | | | 181 | | | | (191,735 | ) |
6.00%, 10/25/34 | | | | | | | 160 | | | | (175,000 | ) |
| | |
6 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock U.S. Government Bond V.I. Fund (Percentages shown are based on Net Assets) |
| | | | | | | | | | | | |
Security | | | | | Par (000) | | | Value | |
| |
Mortgage-Backed Securities (continued) | | | | |
Government National Mortgage Association: | | | | | | | | | | | | |
3.00%, 02/20/45 - 07/15/48 | | | USD | | | | 188 | | | $ | (183,882 | ) |
3.50%, 07/15/48 | | | | | | | 707 | | | | (709,482 | ) |
4.00%, 07/15/48 | | | | | | | 55 | | | | (56,371 | ) |
4.50%, 10/20/41 | | | | | | | 723 | | | | (751,474 | ) |
| | | | | | | | | | | | |
Total TBA Sale Commitments — (14.0)% (Proceeds: $8,604,762) | | | | (8,632,526 | ) |
| | | | | | | | | | | | |
| |
Total Investments Net of Options Written and TBA Sale Commitments — 126.7% (Cost: $78,722,952) | | | | 77,803,022 | |
Liabilities in Excess of Other Assets — (26.7)% | | | | (16,373,961 | ) |
| | | | | | | | | | | | |
Net Assets — 100.0% | | | $ | 61,429,061 | |
| | | | | | | | | | | | |
(a) | 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. |
(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) | 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. |
(d) | Security is valued using significant unobservable inputs and is classified as Level 3 in the fair value hierarchy. |
(e) | Represents or includes a TBA transaction. |
(f) | All or a portion of security has been pledged as collateral in connection with outstanding reverse repurchase agreements. |
(g) | Issuer is a U.S. branch of a foreign domiciled bank. |
(h) | Rates are discount rates or a range of discount rates at the time of purchase. |
(i) | Annualized 7-day yield as of period end. |
(j) | During the six months ended June 30, 2018, investments in issuers considered to be an affiliate 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 12/31/17 | | | Net Activity | | | Shares Held at 06/30/18 | | | Value at 06/30/18 | | | Income | | | Net Realized Gain (Loss) | | | Change in Unrealized Appreciation (Depreciation) | |
BlackRock Liquidity Funds, T-Fund, Institutional Class | | | 1,793,803 | | | | (910,429 | ) | | | 883,374 | | | $ | 883,374 | | | $ | 16,088 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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.
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 |
BNP Paribas SA | | | 1.97 | % | | | 06/29/18 | | | | 07/02/18 | | | $ | 3,056,816 | | | $ | 3,057,151 | | | U.S. Treasury Obligations | | Overnight |
BNP Paribas SA | | | 2.07 | | | | 06/29/18 | | | | 07/02/18 | | | | 619,850 | | | | 619,921 | | | U.S. Treasury Obligations | | Overnight |
Deutsche Bank Securities, Inc. | | | 2.15 | | | | 06/29/18 | | | | 07/02/18 | | | | 2,678,005 | | | | 2,678,325 | | | U.S. Treasury Obligations | | Overnight |
JP Morgan Securities LLC | | | 2.10 | | | | 06/29/18 | | | | 07/02/18 | | | | 1,089,573 | | | | 1,089,700 | | | U.S. Treasury Obligations | | Overnight |
Merrill Lynch, Pierce, Fenner & Smith Inc. | | | 2.30 | | | | 06/29/18 | | | | 07/02/18 | | | | 1,331,138 | | | | 1,331,308 | | | U.S. Treasury Obligations | | Overnight |
Merrill Lynch, Pierce, Fenner & Smith Inc. | | | 2.30 | | | | 06/29/18 | | | | 07/02/18 | | | | 768,920 | | | | 769,018 | | | U.S. Treasury Obligations | | Overnight |
Merrill Lynch, Pierce, Fenner & Smith Inc. | | | 2.30 | | | | 06/29/18 | | | | 07/02/18 | | | | 2,396,955 | | | | 2,397,261 | | | U.S. Treasury Obligations | | Overnight |
Merrill Lynch, Pierce, Fenner & Smith Inc. | | | 2.30 | | | | 06/29/18 | | | | 07/02/18 | | | | 1,943,890 | | | | 1,944,138 | | | U.S. Treasury Obligations | | Overnight |
Merrill Lynch, Pierce, Fenner & Smith Inc. | | | 2.30 | | | | 06/29/18 | | | | 07/02/18 | | | | 1,958,710 | | | | 1,958,960 | | | U.S. Treasury Obligations | | Overnight |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | 15,843,857 | | | $ | 15,845,782 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
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 | | | 5 | | | | 09/19/18 | | | $ | 725 | | | $ | 4,634 | |
U.S. Treasury 2 Year Note | | | 50 | | | | 09/28/18 | | | | 10,591 | | | | (7,332 | ) |
U.S. Treasury 5 Year Note | | | 8 | | | | 09/28/18 | | | | 909 | | | | 89 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | (2,609 | ) |
| | | | | | | | | | | | | | | | |
Short Contracts | | | | | | | | | | | | | | | | |
Euro-Bund | | | 15 | | | | 09/06/18 | | | | 2,847 | | | | (29,978 | ) |
U.S. Treasury 10 Year Note | | | 102 | | | | 09/19/18 | | | | 12,259 | | | | (48,304 | ) |
U.S. Treasury 10 Year Ultra Note | | | 1 | | | | 09/19/18 | | | | 128 | | | | (1,079 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | (79,361 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | (81,970 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 7 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock U.S. Government Bond V.I. Fund |
Forward Foreign Currency Exchange Contracts
| | | | | | | | | | | | | | | | | | | | |
Currency Purchased | | | Currency Sold | | | Counterparty | | Settlement Date | | | Unrealized Appreciation (Depreciation) | |
EUR | | | 20,000 | | | USD | | | 23,309 | | | Bank of America NA | | | 07/03/18 | | | $ | 47 | |
USD | | | 7,220 | | | BRL | | | 27,853 | | | Citibank NA | | | 07/03/18 | | | | 34 | |
USD | | | 4,000 | | | BRL | | | 15,054 | | | Goldman Sachs International | | | 07/03/18 | | | | 116 | |
USD | | | 10,000 | | | BRL | | | 37,110 | | | UBS AG | | | 07/03/18 | | | | 425 | |
USD | | | 3,000 | | | CLP | | | 1,835,100 | | | JP Morgan Chase Bank NA | | | 07/03/18 | | | | 191 | |
USD | | | 24,572 | | | EUR | | | 20,000 | | | Goldman Sachs International | | | 07/03/18 | | | | 1,217 | |
USD | | | 82,718 | | | EUR | | | 70,000 | | | Goldman Sachs International | | | 07/05/18 | | | | 960 | |
USD | | | 39,000 | | | RUB | | | 2,429,388 | | | JP Morgan Chase Bank NA | | | 07/09/18 | | | | 341 | |
RUB | | | 503,331 | | | USD | | | 8,000 | | | Goldman Sachs International | | | 07/13/18 | | | | 6 | |
USD | | | 7,000 | | | RUB | | | 440,020 | | | BNP Paribas SA | | | 07/13/18 | | | | 1 | |
MXN | | | 184,792 | | | USD | | | 9,000 | | | Deutsche Bank AG | | | 07/19/18 | | | | 281 | |
USD | | | 9,000 | | | MXN | | | 164,826 | | | UBS AG | | | 07/19/18 | | | | 722 | |
USD | | | 52,000 | | | BRL | | | 191,547 | | | Goldman Sachs International | | | 08/02/18 | | | | 2,759 | |
USD | | | 8,320 | | | CNY | | | 53,194 | | | Standard Chartered Bank | | | 08/03/18 | | | | 310 | |
USD | | | 39,000 | | | RUB | | | 2,442,063 | | | JP Morgan Chase Bank NA | | | 08/07/18 | | | | 265 | |
USD | | | 10,000 | | | ARS | | | 264,188 | | | JP Morgan Chase Bank NA | | | 08/08/18 | | | | 1,216 | |
USD | | | 17,944 | | | EUR | | | 15,300 | | | Barclays Bank plc | | | 08/08/18 | | | | 28 | |
USD | | | 619,514 | | | JPY | | | 68,347,883 | | | Royal Bank of Scotland | | | 08/13/18 | | | | 416 | |
USD | | | 94,629 | | | TRY | | | 358,000 | | | BNP Paribas SA | | | 08/20/18 | | | | 18,336 | |
USD | | | 36,800 | | | IDR | | | 525,908,800 | | | Deutsche Bank AG | | | 08/31/18 | | | | 371 | |
USD | | | 621,712 | | | JPY | | | 67,951,000 | | | Barclays Bank plc | | | 09/11/18 | | | | 4,904 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | 32,946 | |
| | | | | | | | | | | | | | | | | |
BRL | | | 14,947 | | | USD | | | 4,000 | | | Barclays Bank plc | | | 07/03/18 | | | | (143 | ) |
BRL | | | 40,936 | | | USD | | | 11,220 | | | BNP Paribas SA | | | 07/03/18 | | | | (657 | ) |
BRL | | | 22,758 | | | USD | | | 6,000 | | | UBS AG | | | 07/03/18 | | | | (128 | ) |
CLP | | | 1,855,200 | | | USD | | | 3,000 | | | JP Morgan Chase Bank NA | | | 07/03/18 | | | | (161 | ) |
RUB | | | 2,434,770 | | | USD | | | 39,000 | | | JP Morgan Chase Bank NA | | | 07/09/18 | | | | (255 | ) |
USD | | | 1,000 | | | RUB | | | 62,920 | | | Barclays Bank plc | | | 07/13/18 | | | | (1 | ) |
USD | | | 37,800 | | | MXN | | | 754,745 | | | Citibank NA | | | 07/23/18 | | | | (81 | ) |
ARS | | | 410,088 | | | USD | | | 15,394 | | | BNP Paribas SA | | | 07/31/18 | | | | (1,650 | ) |
BRL | | | 94,939 | | | USD | | | 26,000 | | | BNP Paribas SA | | | 08/02/18 | | | | (1,594 | ) |
BRL | | | 97,201 | | | USD | | | 26,000 | | | JP Morgan Chase Bank NA | | | 08/02/18 | | | | (1,013 | ) |
CNY | | | 53,306 | | | USD | | | 8,320 | | | Deutsche Bank AG | | | 08/03/18 | | | | (293 | ) |
USD | | | 23,363 | | | EUR | | | 20,000 | | | Bank of America NA | | | 08/03/18 | | | | (47 | ) |
RUB | | | 1,878,000 | | | USD | | | 30,000 | | | BNP Paribas SA | | | 08/07/18 | | | | (212 | ) |
TRY | | | 358,000 | | | USD | | | 88,552 | | | HSBC Bank plc | | | 08/20/18 | | | | (12,258 | ) |
RUB | | | 1,439,095 | | | USD | | | 22,932 | | | Bank of America NA | | | 08/21/18 | | | | (142 | ) |
RUB | | | 944,593 | | | USD | | | 15,068 | | | Credit Suisse International | | | 08/21/18 | | | | (108 | ) |
IDR | | | 384,505,000 | | | USD | | | 27,500 | | | Deutsche Bank AG | | | 08/31/18 | | | | (866 | ) |
MXN | | | 720,431 | | | USD | | | 37,000 | | | HSBC Bank plc | | | 11/26/18 | | | | (1,558 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | (21,167 | ) |
| | | | | | | | | | | | | | | | | |
| | | Net Unrealized Appreciation | | | $ | 11,779 | |
| | | | | | | | |
OTC Barrier Options Purchased
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Description | | Type of Option | | Counterparty | | Expiration Date | | | Exercise Price | | | Barrier Price/Range | | | Notional Amount (000) | | | Value | |
Put | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
USD Currency | | Down and Out | | Deutsche Bank AG | | | 07/19/18 | | | | BRL | | | | 3.68 | | | | BRL | | | | 3.55 | | | | USD | | | | 19 | | | $ | 10 | |
USD Currency | | One-Touch | | BNP Paribas SA | | | 07/20/18 | | | | ZAR | | | | 11.60 | | | | ZAR | | | | 11.60 | | | | USD | | | | 2 | | | | — | |
USD Currency | | One-Touch | | Morgan Stanley & Co. International plc | | | 07/24/18 | | | | TRY | | | | 4.30 | | | | TRY | | | | 4.30 | | | | USD | | | | 2 | | | | 76 | |
USD Currency | | Down and Out | | Morgan Stanley & Co. International plc | | | 08/10/18 | | | | TRY | | | | 4.65 | | | | TRY | | | | 4.38 | | | | USD | | | | 16 | | | | 325 | |
USD Currency | | One-Touch | | Deutsche Bank AG | | | 08/20/18 | | | | BRL | | | | 3.50 | | | | BRL | | | | 3.50 | | | | USD | | | | 1 | | | | 31 | |
USD Currency | | One-Touch | | Morgan Stanley & Co. International plc | | | 10/25/18 | | | | MXN | | | | 16.50 | | | | MXN | | | | 16.50 | | | | USD | | | | 2 | | | | 48 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 490 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
8 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock U.S. Government Bond V.I. Fund |
OTC Currency Options Purchased
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Description | | Counterparty | | | | | Expiration Date | | | Exercise Price | | | Notional Amount (000) | | | Value | |
Put | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
USD Currency | | HSBC Bank USA NA | | | | | | | 07/05/18 | | | | IDR | | | | 14,000.00 | | | | USD | | | | 9 | | | $ | 1 | |
USD Currency | | Deutsche Bank AG | | | | | | | 08/13/18 | | | | MXN | | | | 18.50 | | | | USD | | | | 30 | | | | 63 | |
USD Currency | | Morgan Stanley & Co. International plc | | | | | | | 08/20/18 | | | | MXN | | | | 19.50 | | | | USD | | | | 932 | | | | 11,857 | |
USD Currency | | Morgan Stanley & Co. International plc | | | | | | | 09/26/18 | | | | ZAR | | | | 12.90 | | | | USD | | | | 217 | | | | 1,282 | |
USD Currency | | Morgan Stanley & Co. International plc | | | | | | | 09/26/18 | | | | TRY | | | | 4.52 | | | | USD | | | | 221 | | | | 2,146 | |
USD Currency | | HSBC Bank USA NA | | | | | | | 10/18/18 | | | | ZAR | | | | 12.63 | | | | USD | | | | 362 | | | | 1,544 | |
USD Currency | | Citibank NA | | | | | | | 10/19/18 | | | | TRY | | | | 4.50 | | | | USD | | | | 281 | | | | 2,510 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 19,403 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 |
Call | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
10-Year Interest Rate Swap | | | 3 month LIBOR | | | Quarterly | | | 3.04% | | | Semi-Annual | | JP Morgan Chase Bank NA | | | 04/27/38 | | | | 3.04 | % | | | USD | | | | 860 | | | $ | 48,549 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Put | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
10-Year Interest Rate Swap | | | 3.35% | | | Semi-Annual | | | 3 month LIBOR | | | Quarterly | | Bank of America NA | | | 11/16/18 | | | | 3.35 | | | | USD | | | | 1,200 | | | | 3,728 | |
10-Year Interest Rate Swap | | | 3.04% | | | Semi-Annual | | | 3 month LIBOR | | | Quarterly | | JP Morgan Chase Bank NA | | | 04/27/38 | | | | 3.04 | | | | USD | | | | 860 | | | | 39,060 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 42,788 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 91,337 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
OTC Interest Rate Swaptions Written
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Description | | Paid by the Fund | | Received by the Fund | | Counterparty | | Expiration Date | | | Exercise Rate | | | Notional Amount (000) | | | Value | |
| Rate | | | Frequency | | Rate | | | Frequency |
Call | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2-Year Interest Rate Swap | | | 3 month LIBOR | | | Quarterly | | | 2.50% | | | Semi-Annual | | Bank of America NA | | | 11/16/18 | | | | 2.50 | % | | | USD | | | | 2,250 | | | $ | (980 | ) |
2-Year Interest Rate Swap | | | 3 month LIBOR | | | Quarterly | | | 2.50% | | | Semi-Annual | | Bank of America NA | | | 11/26/18 | | | | 2.50 | | | | USD | | | | 2,250 | | | | (1,097 | ) |
2-Year Interest Rate Swap | | | 3 month LIBOR | | | Quarterly | | | 2.74% | | | Semi-Annual | | JP Morgan Chase Bank NA | | | 12/27/18 | | | | 2.74 | | | | USD | | | | 7,808 | | | | (12,367 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (14,444 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Put | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2-Year Interest Rate Swap | | | 3.25% | | | Semi-Annual | | | 3 month LIBOR | | | Quarterly | | Barclays Bank plc | | | 10/19/18 | | | | 3.25 | | | | USD | | | | 3,300 | | | | (815 | ) |
2-Year Interest Rate Swap | | | 3.14% | | | Semi-Annual | | | 3 month LIBOR | | | Quarterly | | JP Morgan Chase Bank NA | | | 12/27/18 | | | | 3.14 | | | | USD | | | | 7,808 | | | | (10,341 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (11,156 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | (25,600 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest Rate Caps Purchased
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Description | | Exercise Rate | | | Counterparty | | Expiration Date | | | Notional Amount (000) | | | Value | | | Premiums Paid | | | Unrealized Appreciation/ (Depreciation) | |
2Y-10 CMS Index Cap | | | 0.44 | % | | Citibank NA | | | 07/23/18 | | | | USD | | | | 20,825 | | | $ | 2 | | | $ | 10,412 | | | $ | (10,410 | ) |
30Y-5Y CMS Index Cap | | | 0.30 | | | Barclays Bank plc | | | 07/30/18 | | | | USD | | | | 12,500 | | | | 1 | | | | 7,125 | | | | (7,124 | ) |
2Y-10 CMS Index Cap | | | 0.34 | | | Citibank NA | | | 08/28/18 | | | | USD | | | | 5,015 | | | | 38 | | | | 3,285 | | | | (3,247 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | $ | 41 | | | $ | 20,822 | | | $ | (20,781 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 9 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | 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.30.V1 | | | 1.00 | % | | | Quarterly | | | | 06/20/23 | | | USD | 239 | | | $ | (3,609 | ) | | $ | (4,043 | ) | | $ | 434 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | | | 06/20/23 | | | USD | | | 46 | | | $ | (110 | ) | | $ | (543 | ) | | $ | 433 | |
United Mexican States | | | 1.00 | | | | Quarterly | | | Barclays Bank plc | | | 06/20/23 | | | USD | | | 6 | | | | 83 | | | | 108 | | | | (25 | ) |
United Mexican States | | | 1.00 | | | | Quarterly | | | Barclays Bank plc | | | 06/20/23 | | | USD | | | 6 | | | | 82 | | | | 116 | | | | (34 | ) |
United Mexican States | | | 1.00 | | | | Quarterly | | | Barclays Bank plc | | | 06/20/23 | | | USD | | | 5 | | | | 69 | | | | 94 | | | | (25 | ) |
United Mexican States | | | 1.00 | | | | Quarterly | | | Barclays Bank plc | | | 06/20/23 | | | USD | | | 5 | | | | 69 | | | | 97 | | | | (28 | ) |
United Mexican States | | | 1.00 | | | | Quarterly | | | Barclays Bank plc | | | 06/20/23 | | | USD | | | 6 | | | | 82 | | | | 117 | | | | (35 | ) |
United Mexican States | | | 1.00 | | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 6 | | | | 82 | | | | 116 | | | | (34 | ) |
United Mexican States | | | 1.00 | | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 6 | | | | 82 | | | | 47 | | | | 35 | |
United Mexican States | | | 1.00 | | | | Quarterly | | | Citibank NA | | | 06/20/23 | | | USD | | | 5 | | | | 69 | | | | 47 | | | | 22 | |
United Mexican States | | | 1.00 | | | | Quarterly | | | Deutsche Bank AG | | | 06/20/23 | | | USD | | | 14 | | | | 192 | | | | 70 | | | | 122 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | $ | 700 | | | $ | 269 | | | $ | 431 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 |
Eurostat HICP Ex. Tobacco All Items Monthly | | At Termination | | 1.63% | | At Termination | | 06/15/28 | | EUR | 240 | | | $ | 189 | | | $ | — | | | $ | 189 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
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 |
7.36% | | Monthly | | 28 day MXIBTIIE | | Monthly | | | N/A | | | | 01/28/19 | | | MXN | | | 2,947 | | | $ | 770 | | | $ | — | | | $ | 770 | |
1 day Fed Funds | | At Termination | | 1.47% | | At Termination | | | 12/19/18 | (a) | | | 03/20/19 | | | USD | | | 28,245 | | | | (56,028 | ) | | | (9,131 | ) | | | (46,897 | ) |
1.47% | | At Termination | | 1 day Fed Funds | | At Termination | | | 12/19/18 | (a) | | | 03/20/19 | | | USD | | | 28,245 | | | | 56,028 | | | | — | | | | 56,028 | |
1.37% | | Semi-Annual | | 3 month LIBOR | | Quarterly | | | N/A | | | | 11/30/20 | | | USD | | | 2,470 | | | | 85,520 | | | | — | | | | 85,520 | |
3 month LIBOR | | Quarterly | | 1.37% | | Semi-Annual | | | N/A | | | | 11/30/20 | | | USD | | | 1,350 | | | | (46,742 | ) | | | 6,443 | | | | (53,185 | ) |
28 day MXIBTIIE | | Monthly | | 7.66% | | Monthly | | | N/A | | | | 02/22/21 | | | MXN | | | 879 | | | | (375 | ) | | | — | | | | (375 | ) |
7.11% | | Monthly | | 28 day MXIBTIIE | | Monthly | | | N/A | | | | 10/14/22 | | | MXN | | | 321 | | | | 463 | | | | — | | | | 463 | |
7.11% | | Monthly | | 28 day MXIBTIIE | | Monthly | | | N/A | | | | 10/14/22 | | | MXN | | | 424 | | | | 613 | | | | — | | | | 613 | |
2.50% | | Semi-Annual | | 3 month LIBOR | | Quarterly | | | N/A | | | | 01/29/23 | | | USD | | | 1,035 | | | | 10,006 | | | | — | | | | 10,006 | |
28 day MXIBTIIE | | Monthly | | 7.94% | | Monthly | | | N/A | | | | 06/19/23 | | | MXN | | | 736 | | | | 99 | | | | — | | | | 99 | |
3 month LIBOR | | Quarterly | | 2.13% | | Semi-Annual | | | N/A | | | | 08/25/25 | | | USD | | | 15 | | | | (671 | ) | | | — | | | | (671 | ) |
6 month EURIBOR | | Semi-Annual | | 0.94% | | Annual | | | 09/10/18 | (a) | | | 08/15/27 | | | EUR | | | 1,495 | | | | 21,183 | | | | — | | | | 21,183 | |
2.96 | | Annual | | 6 month WIBOR | | Semi-Annual | | | N/A | | | | 03/06/28 | | | PLN | | | 61 | | | | (123 | ) | | $ | — | | | | (123 | ) |
3 month LIBOR | | Quarterly | | 3.13% | | Semi-Annual | | | N/A | | | | 05/22/28 | | | USD | | | 200 | | | | 3,728 | | | | — | | | | 3,728 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | $ | 74,471 | | | $ | (2,688 | ) | | $ | 77,159 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
10 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock U.S. Government Bond V.I. Fund |
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 |
28 day MXIBTIIE | | Monthly | | | 7.07% | | | Monthly | | Citibank NA | | | 11/21/18 | | | | MXN | | | | 938 | | | $ | (235 | ) | | $ | — | | | $ | (235 | ) |
28 day MXIBTIIE | | Monthly | | | 7.06% | | | Monthly | | JP Morgan Chase Bank NA | | | 11/21/18 | | | | MXN | | | | 1,125 | | | | (284 | ) | | | — | | | | (284 | ) |
28 day MXIBTIIE | | Monthly | | | 6.98% | | | Monthly | | Citibank NA | | | 11/28/18 | | | | MXN | | | | 1,600 | | | | (439 | ) | | | — | | | | (439 | ) |
28 day MXIBTIIE | | Monthly | | | 6.98% | | | Monthly | | JP Morgan Chase Bank NA | | | 11/28/18 | | | | MXN | | | | 908 | | | | (248 | ) | | | — | | | | (248 | ) |
28 day MXIBTIIE | | Monthly | | | 6.32% | | | Monthly | | Goldman Sachs International | | | 08/06/25 | | | | MXN | | | | 640 | | | | (2,848 | ) | | | — | | | | (2,848 | ) |
6.31% | | Monthly | | | 28 day MXIBTIIE | | | Monthly | | Deutsche Bank AG | | | 08/11/25 | | | | MXN | | | | 810 | | | | 3,639 | | | | — | | | | 3,639 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | $ | (415 | ) | | $ | — | | | $ | (415 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following reference rates, and their values as of period end, are used for security descriptions:
| | | | | | |
Reference Index | | | | Reference Rate | |
1 day Fed Funds | | 1 day Fed Funds | | | 1.91 | % |
28 day MXIBTIIE | | Mexico Interbank TIIE 28-Day | | | 8.10 | |
3 month LIBOR | | London Interbank Offered Rate | | | 2.34 | |
6 month EURIBOR | | Euro Interbank Offered Rate | | | (0.27 | ) |
6 month WIBOR | | Warsaw Interbank Offered Rate | | | 1.68 | |
Balances Reported in the Statement of Assets and Liabilities for Centrally Cleared Swaps, OTC Derivatives and Options Written
| | | | | | | | | | | | | | | | | | | | |
| | Swap Premiums Paid | | | Swap Premiums Received | | | Unrealized Appreciation | | | Unrealized Depreciation | | | Value | |
Centrally Cleared Swaps(a) | | $ | 6,443 | | | $ | (13,174 | ) | | $ | 179,033 | | | $ | (101,251 | ) | | $ | — | |
OTC Swaps | | | 812 | | | | (543 | ) | | | 4,251 | | | | (4,235 | ) | | | — | |
OTC Option Written | | | N/A | | | | N/A | | | | 8,838 | | | | (167 | ) | | | 25,600 | |
| (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 Statements 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 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Future contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized appreciation(a) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 4,723 | | | $ | — | | | $ | 4,723 | |
Forward foreign currency exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized appreciation on forward foreign currency exchange contracts | | | — | | | | — | | | | — | | | | 32,946 | | | | — | | | | — | | | | 32,946 | |
Options purchased | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Investments at value — unaffiliated(b) | | | — | | | | — | | | | — | | | | 19,893 | | | | 91,378 | | | | — | | | | 111,271 | |
Swaps — centrally cleared | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized appreciation(a) | | | — | | | | 434 | | | | — | | | | — | | | | 178,410 | | | | 189 | | | | 179,033 | |
Swaps — OTC | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized appreciation on OTC swaps; Swap premiums paid | | | — | | | | 1,424 | | | | — | | | | — | | | | 3,639 | | | | — | | | | 5,063 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | 1,858 | | | $ | — | | | $ | 52,839 | | | $ | 278,150 | | | $ | 189 | | | $ | 333,036 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
SCHEDULE OF INVESTMENTS | | | 11 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock U.S. Government Bond V.I. Fund |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 86,693 | | | $ | — | | | $ | 86,693 | |
Forward foreign currency exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized depreciation on forward foreign currency exchange contracts | | | — | | | | — | | | | — | | | | 21,167 | | | | — | | | | — | | | | 21,167 | |
Options written | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Options written, at value | | | — | | | | — | | | | — | | | | — | | | | 25,600 | | | | — | | | | 25,600 | |
Swaps — centrally cleared | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized depreciation(a) | | | — | | | | — | | | | — | | | | — | | | | 101,251 | | | | — | | | | 101,251 | |
Swaps — OTC | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized depreciation on OTC swaps; Swap premiums received | | | — | | | | 724 | | | | — | | | | — | | | | 4,054 | | | | — | | | | 4,778 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | 724 | | | $ | — | | | $ | 21,167 | | | $ | 217,598 | | | $ | — | | | $ | 239,489 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 six months ended June 30, 2018, the effect of derivative financial instruments in the Statement of Operations were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commodity Contracts | | | Credit Contracts | | | Equity Contracts | | | Foreign Currency Exchange Contracts | | | Interest Rate Contracts | | | Other Contracts | | | Total | |
Net Realized Gain (Loss) from: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Future contracts | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 187,600 | | | $ | — | | | $ | 187,600 | |
Forward foreign currency exchange contracts | | | — | | | | — | | | | — | | | | 84,572 | | | | — | | | | — | | | | 84,572 | |
Options purchased(a) | | | — | | | | — | | | | — | | | | (20,523 | ) | | | 139,896 | | | | — | | | | 119,373 | |
Options written | | | — | | | | — | | | | — | | | | 782 | | | | 25,178 | | | | — | | | | 25,960 | |
Swaps | | | — | | | | (1,758 | ) | | | — | | | | — | | | | (124,861 | ) | | | (5,304 | ) | | | (131,923 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | (1,758 | ) | | $ | — | | | $ | 64,831 | | | $ | 227,813 | | | $ | (5,304 | ) | | $ | 285,582 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Change in Unrealized Appreciation (Depreciation) on: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Future contracts | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (71,538 | ) | | $ | (39 | ) | | $ | (71,577 | ) |
Forward foreign currency exchange contracts | | | — | | | | — | | | | — | | | | (32,341 | ) | | | — | | | | — | | | | (32,341 | ) |
Options purchased(b) | | | — | | | | — | | | | — | | | | 13,177 | | | | 17,189 | | | | — | | | | 30,366 | |
Options written | | | — | | | | — | | | | — | | | | — | | | | (14,357 | ) | | | — | | | | (14,357 | ) |
Swaps | | | — | | | | 3,829 | | | | — | | | | — | | | | 97,210 | | | | (1,965 | ) | | | 99,074 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | | $ | 3,829 | | | $ | — | | | $ | (19,164 | ) | | $ | 28,504 | | | $ | (2,004 | ) | | $ | 11,165 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 | | $ | 13,993,057 | |
Average notional value of contracts — short | | $ | 14,873,325 | |
Forward foreign currency exchange contracts: | | | | |
Average amounts purchased — in USD | | $ | 2,031,248 | |
Average amounts sold — in USD | | $ | 675,462 | |
Options: | | | | |
Average value of option contracts purchased | | $ | 19,177 | |
Average notional value of swaption contracts purchased | | $ | 1,460,000 | |
Average notional value of swaption contracts written | | $ | 23,138,000 | |
Credit default swaps: | | | | |
Average notional value — buy protection | | $ | 544,250 | |
Interest rate swaps: | | | | |
Average notional value — pays fixed rate | | $ | 33,995,866 | |
Average notional value — receives fixed rate | | $ | 34,300,182 | |
Inflation Swaps: | | | | |
Average notional value — receives fixed rate | | $ | 533,028 | |
For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.
| | |
12 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock U.S. Government Bond 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 | | $ | 21 | | | $ | — | |
Forward foreign currency exchange contracts | | | 32,946 | | | | 21,167 | |
Options(a) | | | 111,271 | | | | 25,600 | |
Swaps — Centrally cleared | | | 1,086 | | | | — | |
Swaps — OTC(b) | | | 5,063 | | | | 4,778 | |
| | | | | | | | |
Total derivative assets and liabilities in the Statement of Assets and Liabilities | | $ | 150,387 | | | $ | 51,545 | |
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”) | | | (1,107 | ) | | | — | |
| | | | | | | | |
Total derivative assets and liabilities subject to an MNA | | $ | 149,280 | | | $ | 51,545 | |
| | | | | | | | |
| (a) | Includes options purchased at value which is included in Investments at value — unaffiliated in the Statement 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 an 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 | | $ | 3,775 | | | $ | (2,266 | ) | | $ | — | | | $ | — | | | $ | 1,509 | |
Barclays Bank plc | | | 5,465 | | | | (1,106 | ) | | | — | | | | — | | | | 4,359 | |
BNP Paribas SA | | | 18,337 | | | | (4,113 | ) | | | — | | | | — | | | | 14,224 | |
Citibank NA | | | 2,851 | | | | (789 | ) | | | — | | | | — | | | | 2,062 | |
Deutsche Bank AG | | | 4,587 | | | | (1,159 | ) | | | — | | | | — | | | | 3,428 | |
Goldman Sachs International | | | 5,058 | | | | (2,848 | ) | | | — | | | | — | | | | 2,210 | |
HSBC Bank USA NA | | | 1,545 | | | | | | | | — | | | | — | | | | 1,545 | |
JP Morgan Chase Bank NA | | | 90,055 | | | | (25,212 | ) | | | — | | | | — | | | | 64,843 | |
Morgan Stanley & Co. International plc | | | 15,734 | | | | | | | | — | | | | — | | | | 15,734 | |
Royal Bank of Scotland | | | 416 | | | | | | | | — | | | | — | | | | 416 | |
Standard Chartered Bank | | | 310 | | | | | | | | — | | | | — | | | | 310 | |
UBS AG | | | 1,147 | | | | (128 | ) | | | — | | | | — | | | | 1,019 | |
| | | | | | | | | | | | | | | | | | | | |
| | $ | 149,280 | | | $ | (37,621 | ) | | $ | — | | | $ | — | | | $ | 111,659 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
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) | |
Bank of America NA | | $ | 2,266 | | | $ | (2,266 | ) | | $ | — | | | $ | — | | | $ | — | |
Barclays Bank plc | | | 1,106 | | | | (1,106 | ) | | | — | | | | — | | | | — | |
BNP Paribas SA | | | 4,113 | | | | (4,113 | ) | | | — | | | | — | | | | — | |
Citibank NA | | | 789 | | | | (789 | ) | | | — | | | | — | | | | — | |
Credit Suisse International | | | 108 | | | | | | | | — | | | | — | | | | 108 | |
Deutsche Bank AG | | | 1,159 | | | | (1,159 | ) | | | — | | | | — | | | | — | |
Goldman Sachs International | | | 2,848 | | | | (2,848 | ) | | | — | | | | — | | | | — | |
HSBC Bank plc | | | 13,816 | | | | | | | | — | | | | — | | | | 13,816 | |
JP Morgan Chase Bank NA | | | 25,212 | | | | (25,212 | ) | | | — | | | | — | | | | — | |
UBS AG | | | 128 | | | | (128 | ) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
| | $ | 51,545 | | | $ | (37,621 | ) | | $ | — | | | $ | — | | | $ | 13,924 | |
| | | | | | | | | | | | | | | | | | | | |
| (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. | |
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.
| | | | |
SCHEDULE OF INVESTMENTS | | | 13 | |
| | |
Schedule of Investments (unaudited) (continued) June 30, 2018 | | BlackRock U.S. Government Bond V.I. Fund |
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 | | $ | — | | | $ | 2,965,171 | | | $ | — | | | $ | 2,965,171 | |
Non-Agency Mortgage-Backed Securities | | | — | | | | 2,375,510 | | | | 160,096 | | | | 2,535,606 | |
U.S. Government Sponsored Agency Securities | | | — | | | | 44,496,028 | | | | — | | | | 44,496,028 | |
U.S. Treasury Obligations | | | — | | | | 33,387,086 | | | | — | | | | 33,387,086 | |
Short-Term Securities: | | | | | | | | | | | | | | | | |
Certificates of Deposit | | | — | | | | 730,306 | | | | — | | | | 730,306 | |
Commercial Paper | | | — | | | | 130,030 | | | | — | | | | 130,030 | |
Foreign Government Obligations | | | — | | | | 1,222,276 | | | | — | | | | 1,222,276 | |
Money Market Funds | | | 883,374 | | | | — | | | | — | | | | 883,374 | |
Options Purchased: | | | | | | | | | | | | | | | | |
Foreign currency exchange contracts | | | — | | | | 19,893 | | | | — | | | | 19,893 | |
Interest rate contracts | | | — | | | | 91,378 | | | | — | | | | 91,378 | |
Liabilities: | | | | | | | | | | | | | | | | |
TBA Sale Commitments | | | — | | | | (8,632,526 | ) | | | — | | | | (8,632,526 | ) |
| | | | | | | | | | | | | | | | |
| | $ | 883,374 | | | $ | 76,785,152 | | | $ | 160,096 | | | $ | 77,828,622 | |
| | | | | | | | | | | | | | | | |
Derivative Financial Instruments(a) | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Credit contracts | | $ | — | | | $ | 1,046 | | | $ | — | | | $ | 1,046 | |
Foreign currency exchange contracts | | | — | | | | 32,946 | | | | — | | | | 32,946 | |
Interest rate contracts | | | 4,723 | | | | 182,049 | | | | — | | | | 186,772 | |
Other Contracts | | | — | | | | 189 | | | | — | | | | 189 | |
Liabilities: | | | | | | | | | | | | | | | | |
Credit contracts | | | — | | | | (181 | ) | | | — | | | | (181 | ) |
Foreign currency exchange contracts | | | — | | | | (21,167 | ) | | | — | | | | (21,167 | ) |
Interest rate contracts | | | (86,693 | ) | | | (130,905 | ) | | | — | | | | (217,598 | ) |
| | | | | | | | | | | | | | | | |
| | $ | (81,970 | ) | | $ | 63,977 | | | $ | — | | | $ | (17,993 | ) |
| | | | | | | | | | | | | | | | |
| (a) | Derivative financial instruments are swaps, futures contracts, forward foreign currency exchange contracts and options written. Swaps, futures contracts, 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 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 $15,845,782 are categorized as level 2 within the disclosure hierarchy.
During the six months ended June 30, 2018, there were no transfers between levels.
See notes to financial statements.
| | |
14 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statement of Assets and Liabilities (unaudited)
June 30, 2018
| | | | |
| | BlackRock U.S. Government Bond V.I. Fund | |
| |
ASSETS | | | | |
Investments at value — unaffiliated (cost — $86,478,611) | | $ | 85,577,774 | |
Investments at value — affiliated (cost — $883,374) | | | 883,374 | |
Cash | | | 10,789 | |
Cash pledged: | | | | |
Futures contracts | | | 135,710 | |
Centrally cleared swaps | | | 138,000 | |
Foreign currency at value (cost — $268,519) | | | 268,841 | |
Receivables: | | | | |
Investments sold | | | 4,838,631 | |
TBA sale commitments | | | 8,604,762 | |
Capital shares sold | | | 45,894 | |
Dividends — affiliated | | | 3,760 | |
Dividends — unaffiliated | | | 6,068 | |
Interest — unaffiliated | | | 313,589 | |
From the Manager | | | 53,131 | |
Variation margin on futures contracts | | | 21 | |
Variation margin on centrally cleared swaps | | | 1,086 | |
Swap premiums paid | | | 812 | |
Unrealized appreciation on: | | | | |
Forward foreign currency exchange contracts | | | 32,946 | |
OTC swaps | | | 4,251 | |
Prepaid expenses | | | 148 | |
Other assets | | | 11,726 | |
| | | | |
Total assets | | | 100,931,313 | |
| | | | |
| |
LIABILITIES | | | | |
Options written at value (premium received $34,271) | | | 25,600 | |
TBA sale commitments at value (proceeds $8,604,762) | | | 8,632,526 | |
Reverse repurchase agreements at value | | | 15,845,782 | |
Payables: | | | | |
Investments purchased | | | 14,671,495 | |
Capital shares redeemed | | | 169 | |
Income dividend distributions | | | 103,832 | |
Distribution fees | | | 384 | |
Board realignment and consolidation | | | 53,131 | |
Investment advisory fees | | | 42,603 | |
Directors’ and Officer’s fees | | | 1,990 | |
Other affiliates | | | 527 | |
Other accrued expenses | | | 98,268 | |
Swap premiums received | | | 543 | |
Unrealized depreciation on: | | | | |
Forward foreign currency exchange contracts | | | 21,167 | |
OTC swaps | | | 4,235 | |
| | | | |
Total liabilities | | | 39,502,252 | |
| | | | |
| |
NET ASSETS | | $ | 61,429,061 | |
| | | | |
| |
NET ASSETS CONSIST OF | | | | |
Paid-in capital | | $ | 67,171,845 | |
Undistributed net investment income | | | 143,936 | |
Accumulated net realized loss | | | (4,986,138 | ) |
Net unrealized appreciation (depreciation) | | | (900,582 | ) |
| | | | |
NET ASSETS | | $ | 61,429,061 | |
| | | | |
| |
NET ASSET VALUE | | | | |
Class I — Based on net assets of $58,812,002 and 5,921,048 shares outstanding, 300 million shares authorized, $0.10 par value. | | $ | 9.93 | |
| | | | |
Class III — Based on net assets of $2,617,059 and 263,648 shares outstanding, 100 million shares authorized, $0.10 par value. | | $ | 9.93 | |
| | | | |
See notes to financial statements.
Statement of Operations (unaudited)
Six Months Ended June 30, 2018
| | | | |
| | BlackRock U.S. Government Bond V.I. Fund | |
| |
INVESTMENT INCOME | | | | |
Dividends — affiliated | | $ | 16,088 | |
Dividends — unaffiliated | | | 211 | |
Interest — unaffiliated | | | 942,459 | |
| | | | |
Total investment income | | | 958,758 | |
| | | | |
| |
EXPENSES | | | | |
Investment advisory | | | 156,304 | |
Transfer agent — class specific | | | 67,111 | |
Board realignment and consolidation | | | 53,131 | |
Professional | | | 35,580 | |
Accounting services | | | 31,069 | |
Custodian | | | 18,153 | |
Printing | | | 14,516 | |
Directors and Officer | | | 8,202 | |
Transfer agent | | | 2,480 | |
Distribution — class specific | | | 2,420 | |
Miscellaneous | | | 20,125 | |
| | | | |
Total expenses excluding interest expense | | | 409,091 | |
| | | | |
Interest expense | | | 98,201 | |
| | | | |
Total expenses | | | 507,292 | |
| | | | |
Less: | | | | |
Fees waived and/or reimbursed by the Manager | | | (85,315 | ) |
Transfer agent fees waived and/or reimbursed — class specific | | | (66,698 | ) |
| | | | |
Total expenses after fees waived and/or reimbursed | | | 355,279 | |
| | | | |
Net investment income | | | 603,479 | |
| | | | |
| |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain (loss) from: | | | | |
Investments — unaffiliated | | | (732,234 | ) |
Forward foreign currency exchange contracts | | | 84,572 | |
Foreign currency transactions | | | 15,299 | |
Futures contracts | | | 187,600 | |
Options written | | | 25,960 | |
Swaps . . . . . | | | (131,923 | ) |
| | | | |
| | | (550,726 | ) |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | |
Investments — unaffiliated | | | (688,317 | ) |
Forward foreign currency exchange contracts | | | (32,341 | ) |
Foreign currency translations | | | (297 | ) |
Futures contracts | | | (71,577 | ) |
Options written | | | (14,357 | ) |
Swaps . . . . . | | | 99,074 | |
| | | | |
| | | (707,815 | ) |
| | | | |
Net realized and unrealized loss | | | (1,258,541 | ) |
| | | | |
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | (655,062 | ) |
| | | | |
See notes to financial statements.
| | |
16 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Statements of Changes in Net Assets
| | | | | | | | |
| | BlackRock U.S. Government Bond V.I. Fund | |
| | Six Months Ended 06/30/2018 (unaudited) | | | Year Ended 12/31/2017 | |
| | |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | |
| | |
OPERATIONS | | | | | | | | |
Net investment income | | $ | 603,479 | | | $ | 1,103,111 | |
Net realized loss | | | (550,726 | ) | | | (1,238,264 | ) |
Net change in unrealized appreciation (depreciation) | | | (707,815 | ) | | | 1,196,592 | |
| | | | | | | | |
Net increase (decrease) in net assets resulting from operations | | | (655,062 | ) | | | 1,061,439 | |
| | | | | | | | |
| | |
DISTRIBUTIONS TO SHAREHOLDERS(a) | | | | | | | | |
From net investment income: | | | | | | | | |
Class I | | | (552,904 | ) | | | (1,434,556 | ) |
Class III | | | (14,839 | ) | | | (34,383 | ) |
| | | | | | | | |
Decrease in net assets resulting from distributions to shareholders | | | (567,743 | ) | | | (1,468,939 | ) |
| | | | | | | | |
| | |
CAPITAL SHARE TRANSACTIONS | | | | | | | | |
Net decrease in net assets derived from capital share transactions | | | (4,232,938 | ) | | | (7,899,331 | ) |
| | | | | | | | |
| | |
NET ASSETS | | | | | | | | |
Total decrease in net assets | | | (5,455,743 | ) | | | (8,306,831 | ) |
Beginning of period | | | 66,884,804 | | | | 75,191,635 | |
| | | | | | | | |
End of period | | $ | 61,429,061 | | | $ | 66,884,804 | |
| | | | | | | | |
Undistributed net investment income, end of period | | $ | 143,936 | | | $ | 108,200 | |
| | | | | | | | |
(a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
Statement of Cash Flows (unaudited)
Six Months Ended June 30, 2018
| | | | | | | | |
| | | | | BlackRock U.S. Government Bond V.I. Fund | |
| | |
CASH USED FOR OPERATING ACTIVITIES | | | | | | | | |
Net decrease in net assets resulting from operations | | | $ | (655,062 | ) |
Adjustments to reconcile net decrease in net assets resulting from operations to net cash used by operating activities: | | | | |
Proceeds from sales of long-term investments and principal paydowns | | | | 300,313,070 | |
Purchases of long term investments | | | | (301,759,496 | ) |
Net purchases of short-term securities | | | | (1,175,672 | ) |
Amortization of premium and accretion of discount on investments | | | | 29,963 | |
Premiums received from options written | | | | 280,324 | |
Premiums paid on closing options written | | | | (283,566 | ) |
Net realized (gain) loss on investments and options written | | | | 706,274 | |
Net unrealized (appreciation) depreciation on investments, options written and swaps | | | | 736,726 | |
(Increase) Decrease in Assets: | | | |
Receivables: | | | | |
Dividends — unaffiliated | | | | (46 | ) |
Dividends — affiliated | | | | (1,350 | ) |
Interest — unaffiliated | | | | (28,246 | ) |
From the Manager | | | | (53,131 | ) |
Variation margin on futures contracts | | | | (21 | ) |
Variation margin on centrally cleared swaps | | | | 2,535 | |
Swap premiums paid | | | | (694 | ) |
Prepaid expenses | | | | 145 | |
Other assets | | | | 3,927 | |
Increase (Decrease) in Liabilities: | | | |
Payables: | | | | |
Investment advisory fees | | | | (2,745 | ) |
Directors’ and Officer’s fees | | | | (1,976 | ) |
Other accrued expenses | | | | (70,790 | ) |
Other affiliates | | | | (32 | ) |
Distribution fees | | | | 38 | |
Board realignment and consolidation | | | | 53,131 | |
Variation margin on futures contracts | | | | (2,731 | ) |
Interest expense and fees | | | | 1,253 | |
Swap premiums received | | | | (3,941 | ) |
| | | | | | | | |
Net cash used for financing activities | | | | (1,912,113 | ) |
| | | | | | | | |
| |
CASH PROVIDED BY FINANCING ACTIVITIES | | | | |
Cash dividends paid to shareholders | | | | (140 | ) |
Payments on redemption of capital shares | | | | (7,341,307 | ) |
Proceeds from issuance of capital shares | | | | 2,663,460 | |
Net borrowing of reverse repurchase agreements | | | | 6,720,714 | |
| | | | | | | | |
Net cash provided by financing activities | | | | 2,042,727 | |
| | | | | | | | |
| |
CASH AND FOREIGN CURRENCY | | | | |
Net increase in unrestricted and restricted cash and foreign currency | | | | 130,614 | |
Unrestricted and restricted cash and foreign currency at beginning of period | | | | 422,726 | |
| | | | | | | | |
Unrestricted and restricted cash and foreign currency at end of period | | | $ | 553,340 | |
| | | | | | | | |
| |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | | | | |
Cash paid during the period for interest expense | | | $ | 96,948 | |
| | | | | | | | |
| |
NON-CASH FINANCING ACTIVITIES | | | | |
Capital shares issued in reinvestment of dividends and distributions paid to shareholders | | | $ | 550,005 | |
| | | | | | | | |
| | |
RECONCILIATION OF UNRESTRICTED AND RESTRICTED CASH TO THE STATEMENT OF ASSETS AND LIABILITIES: | |
| Year Ended December 31, 2017 | | |
| Six Months Ended June 30, 2018 | |
| | | | |
Cash | | $ | 1,256 | | | $ | 10,789 | |
Cash pledged: | | | | | | | | |
Futures contracts | | | 118,710 | | | | 135,710 | |
Centrally cleared swaps | | | 167,000 | | | | 138,000 | |
Foreign currency at value | | | 135,760 | | | | 268,841 | |
| | | | |
| | $ | 422,726 | | | $ | 553,340 | |
| | | | |
See notes to financial statements.
| | |
18 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Financial Highlights
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock U.S. Government Bond V.I. Fund | |
| | Class I | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Net asset value, beginning of period | | $ | 10.12 | | | | | | | $ | 10.18 | | | $ | 10.23 | | | $ | 10.39 | | | $ | 10.04 | | | $ | 10.71 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | 0.10 | | | | | | | | 0.16 | | | | 0.15 | | | | 0.15 | | | | 0.19 | | | | 0.13 | |
Net realized and unrealized gain (loss) | | | (0.20 | ) | | | | | | | (0.01 | ) | | | (0.01 | ) | | | (0.10 | ) | | | 0.39 | | | | (0.48 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | (0.10 | ) | | | | | | | 0.15 | | | | 0.14 | | | | 0.05 | | | | 0.58 | | | | (0.35 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions(b) | | | | | | | | | | | | | | | | | | | | | |
From net investment income | | | (0.09 | ) | | | | | | | (0.21 | ) | | | (0.19 | ) | | | (0.21 | ) | | | (0.23 | ) | | | (0.25 | ) |
From net realized gain | | | — | | | | | | | | — | | | | — | | | | — | | | | — | | | | (0.07 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total distributions | | | (0.09 | ) | | | | | | | (0.21 | ) | | | (0.19 | ) | | | (0.21 | ) | | | (0.23 | ) | | | (0.32 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | $ | 9.93 | | | | | | | $ | 10.12 | | | $ | 10.18 | | | $ | 10.23 | | | $ | 10.39 | | | $ | 10.04 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total Return(c) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | (0.98 | )%(d) | | | | | | | 1.52 | % | | | 1.33 | % | | | 0.45 | % | | | 5.87 | % | | | (3.25 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Ratios to Average Net Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.53 | %(e)(f)(g) | | | | | | | 1.31 | % | | | 1.02 | % | | | 0.96 | % | | | 0.89 | % | | | 0.90 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 1.13 | %(e)(f) | | | | | | | 1.01 | % | | | 0.76 | % | | | 0.73 | % | | | 0.69 | % | | | 0.69 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed excluding interest expense | | | 0.81 | %(e)(f) | | | | | | | 0.87 | % | | | 0.70 | % | | | 0.70 | % | | | 0.66 | % | | | 0.68 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.94 | %(e)(f) | | | | | | | 1.58 | % | | | 1.43 | % | | | 1.41 | % | | | 1.88 | % | | | 1.24 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 58,812 | | | | | | | $ | 65,100 | | | $ | 72,433 | | | $ | 83,016 | | | $ | 92,975 | | | $ | 103,218 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate(h) | | | 392 | % | | | | | | | 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) | Aggregate total return. |
(f) | Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%. |
(g) | Board consolidation costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses would have been 1.62%. |
(h) | Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | |
| | 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | 2013 | | | | |
Portfolio turnover rate (excluding MDRs) | | | 240 | % | | | | | | | 681 | % | | | | | | | 705 | % | | | | | | | 991 | % | | | | | | | 956 | % | | | | | | | 1,415 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See notes to financial statements.
Financial Highlights (continued)
(For a share outstanding throughout each period)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | BlackRock U.S. Government Bond V.I. Fund (continued) | |
| | Class III | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | | | | | | Period 07/15/2013 (a) to 12/31/2013 | | | | | | Period from 01/01/2013 to 07/09/2013 (b) | |
| | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | | | | | |
Net asset value, beginning of period | | $ | 10.11 | | | | | | | $ | 10.18 | | | $ | 10.22 | | | $ | 10.39 | | | $ | 10.04 | | | | | | | $ | 10.19 | | | | | | | $ | 10.71 | |
Net investment income(c) | | | 0.08 | | | | | | | | 0.13 | | | | 0.11 | | | | 0.13 | | | | 0.17 | | | | | | | | 0.11 | | | | | | | | 0.01 | |
Net realized and unrealized gain (loss) | | | (0.18 | ) | | | | | | | (0.02 | ) | | | — | | | | (0.12 | ) | | | 0.38 | | | | | | | | (0.09 | ) | | | | | | | (0.38 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) from investment operations | | | (0.10 | ) | | | | | | | 0.11 | | | | 0.11 | | | | 0.01 | | | | 0.55 | | | | | | | | 0.02 | | | | | | | | (0.37 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions(d) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
From net investment income | | | (0.08 | ) | | | | | | | (0.18 | ) | | | (0.15 | ) | | | (0.18 | ) | | | (0.20 | ) | | | | | | | (0.10 | ) | | | | | | | (0.15 | ) |
From net realized gain | | | — | | | | | | | | — | | | | — | | | | — | | | | — | | | | | | | | (0.07 | ) | | | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total distributions | | | (0.08 | ) | | | | | | | (0.18 | ) | | | (0.15 | ) | | | (0.18 | ) | | | (0.20 | ) | | | | | | | (0.17 | ) | | | | | | | (0.15 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | $ | 9.93 | | | | | | | $ | 10.11 | | | $ | 10.18 | | | $ | 10.22 | | | $ | 10.39 | | | | | | | $ | 10.04 | | | | | | | $ | 10.19 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
Total Return(e) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on net asset value | | | (1.03 | )%(f) | | | | | | | 1.10 | % | | | 1.08 | % | | | 0.08 | % | | | 5.56 | % | | | | | | | 0.26 | %(f) | | | | | | | (3.60 | )%(f) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
Ratios to Average Net Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 1.67 | %(g)(h)(i) | | | | | | | 1.45 | % | | | 1.27 | % | | | 1.11 | % | | | 1.09 | % | | | | | | | 0.86 | %(g) | | | | | | | 1.66 | %(g) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed | | | 1.42 | %(g)(h) | | | | | | | 1.30 | % | | | 1.08 | % | | | 1.00 | % | | | 1.00 | % | | | | | | | 0.85 | %(g) | | | | | | | 0.85 | %(g) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses after fees waived and/or reimbursed excluding interest expense | | | 1.11 | %(g)(h) | | | | | | | 1.17 | % | | | 1.01 | % | | | 0.97 | % | | | 0.98 | % | | | | | | | 0.84 | %(g) | | | | | | | 0.85 | %(g) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.66 | %(g)(h) | | | | | | | 1.30 | % | | | 1.09 | % | | | 1.27 | % | | | 1.63 | % | | | | | | | 2.30 | %(g) | | | | | | | 0.25 | %(g) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000) | | $ | 2,617 | | | | | | | $ | 1,785 | | | $ | 2,758 | | | $ | 1,894 | | | $ | 750 | | | | | | | $ | 225 | | | | | | | $ | — | (b) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate(j) | | | 392 | % | | | | | | | 1,052 | % | | | 1,140 | % | | | 1,581 | % | | | 1,388 | % | | | | | | | 1,956 | % | | | | | | | 1,956 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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. |
(h) | Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%. |
(i) | Board consolidation costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses would have been 1.72%. |
(j) | Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 (unaudited) | | | | | | Year Ended December 31, | | | | | | Period 07/15/2013 to 12/31/2013 | | | | | | Period from 01/01/2013 to 07/09/2013 | | | | |
| | | | | 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | 2014 | | | | | | | | | | |
Portfolio turnover rate (excluding MDRs) | | | 240 | % | | | | | | | 681 | % | | | | | | | 705 | % | | | | | | | 991 | % | | | | | | | 956 | % | | | | | | | 1,415 | % | | | | | | | 1,415 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See notes to financial statements.
| | |
20 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited)
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 19 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 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 (unaudited) (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. 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. |
| • | | 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 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (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 (unaudited) (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.
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
| | |
24 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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 six months ended June 30, 2018, the average amount of reverse repurchase agreements outstanding and the daily weighted average interest rate for the Fund were $11,875,467 and 1.59%, respectively.
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 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:
Reverse Repurchase Agreements
| | | | | | | | | | | | | | | | |
Counterparty | | Reverse Repurchase Agreements | | | Fair Value of Non-cash Collateral Pledged Including Accrued Interest (a) | | | Cash Collateral Received | | | Net Amount | |
BNP Paribas SA | | $ | (3,677,072 | ) | | $ | 3,677,072 | | | $ | — | | | $ | — | |
Deutsche Bank Securities, Inc. | | | (2,678,325 | ) | | | 2,677,549 | | | | — | | | | (776 | ) |
JP Morgan Securities LLC | | | (1,089,700 | ) | | | 1,087,480 | | | | — | | | | (2,220 | ) |
Merrill Lynch, Pierce, Fenner & Smith Inc. | | | (8,400,685 | ) | | | 8,390,130 | | | | — | | | | (10,555 | ) |
| | | | | | | | | | | | | | | | |
| | $ | (15,845,782 | ) | | $ | 15,832,231 | | | $ | — | | | $ | (13,551 | ) |
| | | | | | | | | | | | | | | | |
| (a) | Net collateral including accrued interest with a value of $15,832,682 has been pledged in connection with open reverse repurchase agreements. Excess of net collateral pledged to the individual counterparty is not shown for financial reporting purposes. | |
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) and 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. Amounts pledged, which are considered restricted, are included in Cash pledged: Futures contracts on the Statement of Assets and Liabilities.
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.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 25 | |
Notes to Financial Statements (unaudited) (continued)
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. Cash amounts pledged for forward foreign currency contracts are considered restricted and are included in Cash pledged: Collateral — OTC derivatives on the Statement of Assets and Liabilities.
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. These amounts, which are considered restricted, are included in Cash pledged: Collateral — option written on the Statement of Assets and Liabilities.
| • | | 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 — Interest rate caps are entered into to gain or reduce exposure to interest rates and interest rate 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.” The maximum potential amount of future payments that the Fund would be required to make under an interest rate cap would be the notional amount times the percentage increase in interest rates determined by the difference between the interest rate index current value and the value at the time the cap was entered into. |
| • | | 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: 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.
| | |
26 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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. Amounts pledged, which are considered restricted, are included in Cash pledged: centrally cleared swaps on 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. |
| • | | Inflation swaps — Inflation swaps are entered into to gain or reduce exposure to inflation (inflation risk). In an inflation swap, one party makes fixed interest payments on a notional principal amount in exchange for another party’s variable payments based on an inflation index, such as the Consumer Price 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
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 27 | |
Notes to Financial Statements (unaudited) (continued)
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 | | | 0.50 | % |
$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 six months ended June 30, 2018, the class specific distribution fees borne directly by Class III were $2,420.
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 six months ended June 30, 2018, 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 six months ended June 30, 2018, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:
| | | | | | | | | | | | | | |
Class I | | | | | Class III | | | | | Total | |
$ | 65,787 | | | | | $ | 1,324 | | | | | $ | 67,111 | |
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 six months ended June 30, 2018, the amount waived was $31,261.
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 six months ended June 30, 2018, the amount waived was $923.
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, 2020. The contractual agreement may be terminated upon 90 days’ notice by a majority of 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 six months ended June 30, 2018, there were no fees waived by the Manager.
For the six months ended June 30, 2018, the Fund reimbursed the Manager $322 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 | % |
| | |
28 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2020, 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 waived and/or reimbursed — class specific in the Statement of Operations. For the six months ended June 30, 2018, class specific expense waivers and/or reimbursements were as follows:
| | | | | | | | | | | | |
| | Class I | | | Class III | | | Total | |
Transfer Agent Fees Waived and/or Reimbursed | | $ | 65,787 | | | $ | 911 | | | $ | 66,698 | |
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, 2020 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 six months ended June 30, 2018, there were no fees waived and/or reimbursed by the Manager.
The Fund has begun to incur expenses in connection with a potential realignment and consolidation of the boards of directors of certain BlackRock-advised funds. The Manager has voluntarily agreed to reimburse the Funds for all or a portion of such expenses, which amounts are included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the six months ended June 30, 2018, the amount waived and/or reimbursed was $53,131.
During the six months ended June 30, 2018, the Fund did not participate in the Interfund Lending Program.
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 six months ended June 30, 2018, the Fund did not participate in the lnterfund Lending Program.
Directors and Officers: 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.
For the six months ended June 30, 2018, 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 | | $ | 253,070,783 | | | $ | 248,959,004 | |
U.S Government Securities | | | 39,932,207 | | | | 42,792,016 | |
For the six months ended June 30, 2018, purchases and sales related to mortgage dollar rolls were $112,828,099 and $112,850,743, respectively.
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 June 30, 2018, 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 (unaudited) (continued)
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 June 30, 2018, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
| | | | |
Tax cost | | $ | 87,374,625 | |
| | | | |
Gross unrealized appreciation | | $ | 467,076 | |
Gross unrealized depreciation | | | (1,392,037 | ) |
| | | | |
Net unrealized appreciation (depreciation) | | $ | (924,961 | ) |
| | | | |
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Although the Act does not amend any provisions directly related to the qualification or taxation of regulated investment companies (“RICs”), the Act does change the taxation of entities in which some RICs invest, the tax treatment of income derived from those entities and the taxation of RIC shareholders. While management does not anticipate significant impact to the Fund or to its shareholders, there is uncertainty in the application of certain provisions in the Act. Specifically, provisions in the Act may increase the amount of or accelerate the recognition of taxable income and may limit the deductibility of certain expenses by RICs. Until full clarity around these provisions is obtained, the impact on the Fund’s financial statements, if any, cannot be fully determined.
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, $2.25 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 $1.75 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 0.10% 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 2019 unless extended or renewed. Prior to April 19, 2018, the aggregate commitment amount was $2.1 billion and the fee was 0.12% per annum. Participating Funds paid an upfront commitment fee of 0.02% on the total commitment amounts, in addition to administration, legal and arrangement fees, which 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 six months ended June 30, 2018, the Fund did not borrow under the credit agreement.
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 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.
| | |
30 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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 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 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:
| | | | | | | | | | | | | | | | |
| | Six Months Ended 06/30/2018 | | | Year Ended 12/31/2017 | |
| | Shares | | | Amount | | | Shares | | | Amount | |
Class I | | | | | | | | | | | | | | | | |
Shares sold | | | 106,866 | | | $ | 1,060,833 | | | | 191,307 | | | $ | 1,952,213 | |
Shares issued in reinvestment of distributions | | | 53,882 | | | | 536,474 | | | | 143,198 | | | | 1,460,104 | |
Shares redeemed | | | (674,395 | ) | | | (6,700,939 | ) | | | (1,014,221 | ) | | | (10,349,406 | ) |
| | | | | | | | | | | | | | | | |
Net decrease | | | (513,647 | ) | | $ | (5,103,632 | ) | | | (679,716 | ) | | $ | (6,937,089 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Class III | | | | | | | | | | | | | | | | |
Shares sold | | | 150,410 | | | $ | 1,497,520 | | | | 98,593 | | | $ | 1,004,254 | |
Shares issued in reinvestment of distributions | | | 1,360 | | | | 13,531 | | | | 3,378 | | | | 34,390 | |
Shares redeemed | | | (64,645 | ) | | | (640,357 | ) | | | (196,442 | ) | | | (2,000,886 | ) |
| | | | | | | | | | | | | | | | |
Net increase (decrease) | | | 87,125 | | | $ | 870,694 | | | | (94,471 | ) | | $ | (962,242 | ) |
| | | | | | | | | | | | | | | | |
Total Net Decrease | | | (426,522 | ) | | $ | (4,232,938 | ) | | | (774,187 | ) | | $ | (7,899,331 | ) |
| | | | | | | | | | | | | | | | |
As of June 30, 2018, BlackRock HoldCo 2, Inc, an affiliate of the Fund, owned 1,963 Class III shares of the Fund.
Management’s evaluation of the impact of all subsequent events on the Fund’s financial statements was completed through the date the financial statements were issued and the following items were noted:
The Board has approved an Agreement and Plan of Reorganization (the “Plan”) with respect to the Fund, pursuant to which the Fund will reorganize into a newly created series (the “New Fund”) of a newly organized Maryland corporation. This reorganization with respect to the Fund (the “Reorganization”) is expected to close in the third quarter of 2018. The Reorganization is not subject to approval by shareholders of the Fund.
The New Fund will have the same investment objective, strategies and policies, investment adviser, portfolio management team and service providers as the corresponding Fund. The Fund will be the performance and accounting survivor of its Reorganization, meaning that the New Fund will assume the performance and financial history of the Fund at the completion of the Reorganization. In addition, the New Fund will be subject to the same contractual arrangements, including the same contractual fees and expenses, as those of the Fund. The Reorganization is intended to be tax-free meaning that the Fund’s shareholders will become shareholders of the New Fund without realizing any gain or loss for federal income tax purposes.
Upon the consummation of the Reorganization, shareholders of the Fund will become shareholders of the New Fund. If you are a shareholder of the Fund, the cash value of your investment will not change. You will receive New Fund shares with a total dollar value equal to the Fund shares that you own at the time of the Reorganization.
| | | | |
NOTESTO FINANCIAL STATEMENTS | | | 31 | |
Glossary of Terms Used in this Report
| | |
Currency |
| |
ARS | | Argentine Peso |
BRL | | Brazilian Real |
CLP | | Chilean Peso |
CNY | | Chinese Yuan |
EUR | | Euro |
IDR | | Indonesian Rupiah |
JPY | | Japanese Yen |
MXN | | Mexican Peso |
PLN | | Polish Zloty |
RUB | | New Russian Ruble |
TRY | | Turkish Lira |
USD | | United States Dollar |
ZAR | | South African Rand |
| | |
Portfolio Abbreviations |
| |
CDX | | Credit Default Swap Index |
CLO | | Collateralized Loan Obligation |
CSMC | | Credit Suisse Mortgage Capital |
EURIBOR | | European Interbank Offered Rate |
LIBOR | | London Interbank Offered Rate |
MXIBTIIE | | Mexico Interbank TIIE 28-Day |
OTC | | Over-the-counter |
TBA | | To-be-announced |
WIBOR | | Warsaw Interbank Offered Rate |
| | |
32 | | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements
The Board of Directors (the “Board,” the members of which are referred to as “Board Members”) of BlackRock Variable Series Fund, Inc. (the “Corporation”) met in person on April 10, 2018 (the “April Meeting”) and May 8, 2018 (the “May Meeting”) to consider the approval of the investment advisory agreements (collectively, the “Advisory Agreements”) between the Corporation, on behalf of BlackRock Advantage Large Cap Core V.I. Fund (the “Advantage Large Cap Core V.I. Fund”), BlackRock Advantage Large Cap Value V.I. Fund (the “Advantage Large Cap Value V.I. Fund”), BlackRock Advantage U.S. Total Market V.I. Fund (the “Advantage U.S. Total Market V.I. Fund”), BlackRock Basic Value V.I. Fund (the “Basic Value V.I. Fund”), BlackRock Capital Appreciation V.I. Fund (the “Capital Appreciation V.I. Fund”), BlackRock Equity Dividend V.I. Fund (the “Equity Dividend V.I. Fund”), BlackRock Global Allocation V.I. Fund (the “Global Allocation V.I. Fund”), BlackRock Government Money Market V.I. Fund (the “Government Money Market V.I. Fund”), BlackRock High Yield V.I. Fund (the “High Yield V.I. Fund”), BlackRock International V.I. Fund (the “International V.I. Fund”), BlackRock iShares Alternative Strategies V.I. Fund (the “iShares Alternative Strategies V.I. Fund”), BlackRock iShares Dynamic Allocation V.I. Fund (the “iShares Dynamic Allocation V.I. Fund”), BlackRock Large Cap Focus Growth V.I. Fund (the “Large Cap Focus Growth V.I. Fund”), BlackRock Managed Volatility V.I. Fund (the “Managed Volatility V.I. Fund”), BlackRock S&P 500 Index V.I. Fund (the “S&P 500 Index V.I. Fund”), BlackRock Total Return V.I. Fund (the “Total Return V.I. Fund”) and BlackRock U.S. Government Bond V.I. Fund (the “U.S. Government Bond V.I. Fund”) (each, a “Fund,” and collectively, the “Funds”), each a series of the Corporation, and BlackRock Advisors, LLC (the “Manager”), each Fund’s investment advisor. The Board also considered the approval of the sub-advisory agreements (collectively, the “Sub-Advisory Agreements”) between the Manager and (a) BlackRock International Limited; (b) BlackRock Asset Management North Asia Limited; and (c) BlackRock (Singapore) Limited (collectively, the “Sub-Advisors”), respectively with respect to the Funds, as applicable. The Manager and the Sub-Advisors are referred to herein as “BlackRock.” The Advisory Agreements and the Sub-Advisory Agreements are referred to herein as the “Agreements.”
Activities and Composition of the Board
On the date of the May Meeting, the Board consisted of eleven individuals, nine of whom were not “interested persons” of the Corporation as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of the Funds and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Board Member. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee and an Executive Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Performance Oversight Committee and the Executive Committee, each of which also has one interested Board Member).
The Agreements
Pursuant to the 1940 Act, the Board is required to consider the continuation of the Agreements on an annual basis. The Board has four quarterly meetings per year, each typically extending for two days, and additional in-person and telephonic meetings throughout the year, as needed. The Board also has a fifth one-day meeting to consider specific information surrounding the consideration of renewing the Agreements. The Board’s consideration of the Agreements is a year-long deliberative process, during which the Board assessed, among other things, the nature, extent and quality of the services provided to each Fund by BlackRock, BlackRock’s personnel and affiliates, including (as applicable): investment management; accounting, administrative and shareholder services; oversight of each Fund’s service providers; marketing and promotional services; risk management and oversight; legal and compliance services; and ability to meet applicable legal and regulatory requirements.
The Board, acting directly and through its committees, considers at each of its meetings, and from time to time as appropriate, factors that are relevant to its annual consideration of the renewal of the Agreements, including the services and support provided by BlackRock to each Fund and its shareholders. BlackRock also furnished additional information to the Board in response to specific questions from the Board. This additional information is discussed further below in the section titled “Board Considerations in Approving the Agreements.” Among the matters the Board considered were: (a) investment performance for one-year, three-year, five-year, ten-year, and/or since inception periods, as applicable, against peer funds, applicable benchmark, and performance metrics, as applicable, as well as senior management’s and portfolio managers’ analysis of the reasons for any over-performance or underperformance relative to its peers, benchmarks, and other performance metrics, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by each Fund for services; (c) Fund operating expenses and how BlackRock allocates expenses to each Fund; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of each Fund’s investment objective(s), policies and restrictions, and meeting regulatory requirements; (e) each Fund’s adherence to its compliance policies and procedures; (f) the nature, character and scope of non-investment management services provided by BlackRock and its affiliates and the estimated cost of such services; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Board; (i) the use of brokerage commissions and execution quality of portfolio transactions; (j) BlackRock’s implementation of each Fund’s valuation and liquidity procedures; (k) an analysis of management fees for products with similar investment mandates across the open-end fund, exchange-traded fund (“ETF”), closed-end fund, sub-advised mutual fund, separately managed account, collective investment trust, and institutional separate account product channels, as applicable, and the similarities and differences between these products and the services provided as compared to each Fund; (l) BlackRock’s compensation methodology for its investment professionals and the incentives and accountability it creates, along with investment professionals’ investments in the fund(s) they manage; and (m) periodic updates on BlackRock’s business.
Board Considerations in Approving the Agreements
The Approval Process: Prior to the April Meeting, the Board requested and received materials specifically relating to the Agreements. The Board is continuously engaged in a process with its independent legal counsel and BlackRock to review the nature and scope of the information provided to better assist its deliberations. The materials provided in connection with the April Meeting included, among other things: (a) information independently compiled and prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), based on either a Lipper classification or Morningstar category, regarding each Fund’s fees and expenses as compared with a peer group of funds as determined by Broadridge (“Expense Peers”), the investment performance of each Fund as compared with a peer group of funds (“Performance Peers”) and other metrics, as applicable; (b) information on the composition of the Expense Peers and Performance Peers, and a description of Broadridge’s methodology; (c) information on the estimated profits realized by BlackRock and its affiliates pursuant to the Agreements and a discussion of fall-out benefits to BlackRock and its affiliates; (d) a general
| | | | |
DISCLOSUREOF INVESTMENT ADVISORY AGREEMENTSAND SUB-ADVISORY AGREEMENTS | | | | |
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)
analysis provided by BlackRock concerning investment management fees received in connection with other types of investment products, such as institutional accounts, sub-advised mutual funds, ETFs, closed-end funds, open-end funds, and separately managed accounts, under similar investment mandates, as well as the performance of such other products, as applicable; (e) review of non-management fees; (f) the existence and impact of potential economies of scale, if any, and the sharing of potential economies of scale with each Fund; (g) a summary of aggregate amounts paid by each Fund to BlackRock; (h) sales and redemption data regarding each Fund’s shares; and (i) various additional information requested by the Board as appropriate regarding BlackRock’s and each Fund’s operations.
At the April Meeting, the Board reviewed materials relating to its consideration of the Agreements. As a result of the discussions that occurred during the April Meeting, and as a culmination of the Board’s year-long deliberative process, the Board presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the May Meeting.
At the May Meeting, the Board considered, among other things: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of each Fund as compared with Performance Peers and other metrics, as applicable; (c) the advisory fee and the estimated cost of the services and estimated profits realized by BlackRock and its affiliates from their relationship with each Fund; (d) each Fund’s fees and expenses compared to Expense Peers; (e) the sharing of potential economies of scale; (f) fall-out benefits to BlackRock and its affiliates as a result of BlackRock’s relationship with each Fund; and (g) other factors deemed relevant by the Board Members.
The Board also considered other matters it deemed important to the approval process, such as other payments made to BlackRock or its affiliates, securities lending and cash management, services related to the valuation and pricing of Fund portfolio holdings, and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review. The Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. The Board did not identify any particular information as determinative, and each Board Member may have attributed different weights to the various items considered.
A. Nature, Extent and Quality of the Services Provided by BlackRock: The Board, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of each Fund. Throughout the year, the Board compared Fund performance to the performance of a comparable group of mutual funds, a relevant benchmark, and performance metrics, as applicable. The Board met with BlackRock’s senior management personnel responsible for investment activities, including the senior investment officers. The Board also reviewed the materials provided by each Fund’s portfolio management team discussing each Fund’s performance and each Fund’s investment objective(s), strategies and outlook.
The Board considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and each Fund’s portfolio management team; BlackRock’s research capabilities; investments by portfolio managers in the funds they manage; portfolio trading capabilities; use of technology; commitment to compliance; credit analysis capabilities; risk analysis and oversight capabilities; and the approach to training and retaining portfolio managers and other research, advisory and management personnel. The Board also considered BlackRock’s overall risk management program, including the continued efforts of BlackRock and its affiliates to address cybersecurity risks and the role of BlackRock’s Risk & Quantitative Analysis Group. The Board engaged in a review of BlackRock’s compensation structure with respect to each Fund’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.
In addition to investment advisory services, the Board considered the quality of the administrative and other non-investment advisory services provided to each Fund. BlackRock and its affiliates provide each Fund with certain administrative, shareholder and other services (in addition to any such services provided to each Fund by third parties) and officers and other personnel as are necessary for the operations of each Fund. In particular, BlackRock and its affiliates provide each Fund with administrative services including, among others: (i) responsibility for disclosure documents, such as the prospectus, the summary prospectus (as applicable), the statement of additional information and periodic shareholder reports; (ii) oversight of daily accounting and pricing; (iii) responsibility for periodic filings with regulators; (iv) overseeing and coordinating the activities of other service providers including, among others, each Fund’s custodian, fund accountant, transfer agent, and auditor; (v) organizing Board meetings and preparing the materials for such Board meetings; (vi) providing legal and compliance support; (vii) furnishing analytical and other support to assist the Board in its consideration of strategic issues such as the merger, consolidation or repurposing of certain open-end funds; and (viii) performing administrative functions necessary for the operation of each Fund, such as tax reporting, expense management, fulfilling regulatory filing requirements, overseeing each Fund’s distribution partners, and shareholder call center and other services. The Board reviewed the structure and duties of BlackRock’s fund administration, shareholder services, and legal & compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.
B. The Investment Performance of each Fund and BlackRock: The Board, including the Independent Board Members, also reviewed and considered the performance history of each Fund. In preparation for the April Meeting, the Board was provided with reports independently prepared by Broadridge, which included a comprehensive analysis of each Fund’s performance as of December 31, 2017. Broadridge ranks funds in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable. In connection with its review, the Board received and reviewed information regarding the investment performance of each Fund as compared to its Performance Peers, and, with respect to Advantage Large Cap Core V.I. Fund, Advantage Large Cap Value V.I. Fund, Advantage U.S. Total Market V.I. Fund, Basic Value V.I. Fund, Capital Appreciation V.I. Fund, International V.I. Fund, and Large Cap Focus Growth V.I. Fund, a custom peer group of funds as defined by BlackRock (“Customized Peer Group”). The Board and its Performance Oversight Committee regularly review, and meet with Fund management to discuss, the performance of each Fund throughout the year.
In evaluating performance, the Board recognized that the performance data reflects a snapshot of a period as of a particular date and that selecting a different performance period could produce significantly different results. Further, the Board recognized that it is possible that long-term performance can be impacted by even one period of significant outperformance or underperformance, so that a single investment theme has the ability to affect long-term performance disproportionately.
The Board noted that for the one-, three- and five-year periods reported, the Advantage Large Cap Core V.I. Fund ranked in the first, second, and second quartiles, respectively, against its Customized Peer Group. BlackRock believes that the Customized Peer Group is an appropriate performance metric for the Advantage Large Cap Core V.I. Fund. The Board noted that effective June 12, 2017, the Advantage Large Cap Core V.I. Fund had undergone changes in its investment strategy and portfolio management team, and in connection with such changes, the Fund changed its name from BlackRock Large Cap Core V.I. Fund to BlackRock Advantage Large Cap Core V.I. Fund.
| | |
| | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)
The Board noted that for each of the one-, three- and five-year periods reported, the Advantage Large Cap Value V.I. Fund ranked in the second quartile against its Customized Peer Group. BlackRock believes that the Customized Peer Group is an appropriate performance metric for the Advantage Large Cap Value V.I. Fund. The Board noted that effective June 12, 2017, the Advantage Large Cap Value V.I. Fund had undergone changes in its investment objective, investment strategy and portfolio management team, and in connection with such changes, the Fund changed its name from BlackRock Large Cap Value V.I. Fund to BlackRock Advantage Large Cap Value V.I. Fund.
The Board noted that for the one-, three- and five-year periods reported, the Advantage U.S. Total Market V.I. Fund ranked in the second, second, and first quartiles, respectively against its Customized Peer Group. BlackRock believes that the Customized Peer Group is an appropriate performance metric for the Advantage U.S. Total Market V.I. Fund. The Board noted that effective June 12, 2017, the Advantage U.S. Total Market V.I. Fund had undergone changes in its investment strategy and portfolio management team, and in connection with such changes, the Fund changed its name from BlackRock Value Opportunities V.I. Fund to BlackRock Advantage U.S. Total Market V.I. Fund.
The Board noted that for the one-, three- and five-year periods reported, the Basic Value V.I. Fund ranked in the fourth, fourth, and third quartiles, respectively, against its Customized Peer Group. BlackRock believes that the Customized Peer Group is an appropriate performance metric for the Basic Value V.I. Fund. The Board and BlackRock reviewed the Basic Value V.I. Fund’s underperformance during the applicable periods.
The Board and BlackRock discussed BlackRock’s strategy for improving the Basic Value V.I. Fund’s investment performance. Discussions covered topics such as performance attribution, the Basic Value V.I. Fund’s investment personnel, and the resources appropriate to support the Basic Value V.I. Fund’s investment processes. BlackRock and the Board previously had discussed changes within the portfolio management team, which occurred in March of 2017. Both BlackRock and the Board expect these changes to result in improved performance going forward, although there can be no assurance that will be the case. The Board will continue to monitor the Basic Value V.I. Fund’s performance.
The Board noted that for the one-, three- and five-year periods reported, the Capital Appreciation V.I. Fund ranked in the first, second, and second quartiles, respectively, against its Customized Peer Group. BlackRock believes that the Customized Peer Group is an appropriate performance metric for the Capital Appreciation V.I. Fund.
The Board noted that for the one-, three- and five-year periods reported, the Equity Dividend V.I. Fund ranked in the first, first and second quartiles, respectively, against its Performance Peers.
The Board noted that for the one-, three- and five-year periods reported, the Global Allocation V.I. Fund ranked in the second, second and third quartiles, respectively, against its Performance Peers. The Board and BlackRock reviewed the Global Allocation V.I. Fund’s underperformance during the applicable period. The Board noted the risk profile of the Global Allocation V.I. Fund over the one-, three-, and five-year periods.
The Board noted that for each of the one-, three- and five-year periods reported, the Government Money Market V.I. Fund ranked in the first quartile against its Performance Peers. The Board reviewed the Government Money Market V.I. Fund’s performance within the context of the low yield environment that has existed over the past few years.
The quartile standing of the Government Money Market V.I. Fund against its Performance Peers takes into account the Government Money Market V.I. Fund’s current yield only. BlackRock has reviewed with the Board that a money market fund can only be understood holistically, accounting for current yield and risk. While the Board reviews the Government Money Market V.I. Fund’s current yield performance, it also examines the liquidity, duration, and credit quality of the Government Money Market V.I. Fund’s portfolio. In the Board’s view, BlackRock’s money market funds have performed well over the one-, three- and five-year periods given BlackRock’s emphasis on preserving capital and seeking as high a level of current income as is consistent with liquidity while simultaneously managing risk.
The Board noted that for the one-, three- and five-year periods reported, the High Yield V.I. Fund ranked in the second, third and first quartiles, respectively, against its Performance Peers. The Board and BlackRock reviewed the High Yield V.I. Fund’s underperformance during the applicable period.
The Board noted that for the one-, three- and five-year periods reported, the International V.I. Fund ranked in the first, second, and first quartiles, respectively, against its Customized Peer Group. BlackRock believes that the Customized Peer Group is an appropriate performance metric for the International V.I. Fund.
The Board noted that for the one-year, three-year, and since-inception periods reported, the iShares Alternative Strategies V.I. Fund ranked in the second, first and first quartiles, respectively, against its Performance Peers.
The Board noted that for the one-year, three-year and since-inception periods reported, the iShares Dynamic Allocation V.I. Fund ranked in the second, second and third quartiles, respectively, against its Performance Peers. The Board and BlackRock reviewed the iShares Dynamic Allocation V.I. Fund’s underperformance during the applicable period.
The Board noted that for the one-, three- and five-year periods reported, the Large Cap Focus Growth V.I. Fund ranked in the second, second and first quartiles, respectively, against its Customized Peer Group. BlackRock believes that the Customized Peer Group is an appropriate performance metric for the Large Cap Focus Growth V.I. Fund. The Board noted that effective June 12, 2017 the Large Cap Focus Growth V.I. Fund had undergone changes in its investment strategy and portfolio management team, and in connection with such changes, the Fund changed its name from BlackRock Large Cap Growth V.I. Fund to BlackRock Large Cap Focus Growth V.I. Fund.
The Board noted that for each of the one-, three- and five-year periods reported, the Managed Volatility V.I. Fund ranked in the third quartile against its Performance Peers. The Board and BlackRock reviewed the Managed Volatility V.I. Fund’s underperformance during the applicable periods.
The Board and BlackRock discussed BlackRock’s strategy for improving the Managed Volatility V.I. Fund’s investment performance. Discussions covered topics such as performance attribution, the Managed Volatility V.I. Fund’s investment personnel, and the resources appropriate to support the Managed Volatility V.I. Fund’s investment processes.
| | | | |
DISCLOSUREOF INVESTMENT ADVISORY AGREEMENTSAND SUB-ADVISORY AGREEMENTS | | | | |
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)
The Board noted that for each of the one-, three-, and five-year periods reported, the S&P 500 Index V.I. Fund ranked in the second quartile against its Performance Peers.
The Board noted that for the one-, three- and five-year periods reported, the Total Return V.I. Fund ranked in the third, third, and second quartiles, respectively, against its Performance Peers. The Board and BlackRock reviewed the Total Return V.I. Fund’s underperformance during the applicable periods.
The Board noted that for the one-, three- and five-year periods reported, the U.S. Government Bond V.I. Fund ranked in the third, second and second quartiles, respectively, against its Performance Peers. The Board and BlackRock reviewed the U.S. Government Bond V.I. Fund’s underperformance during the applicable period.
C. Consideration of the Advisory/Management Fees and the Estimated Cost of the Services and Estimated Profits Realized by BlackRock and its Affiliates from their Relationship with each Fund: The Board, including the Independent Board Members, reviewed each Fund’s contractual management fee rate compared with those of its Expense Peers. The contractual management fee rate represents a combination of the advisory fee and any administrative fees, before taking into account any reimbursements or fee waivers. The Board also compared each Fund’s total expense ratio, as well as its actual management fee rate, to those of its Expense Peers. The total expense ratio represents a fund’s total net operating expenses, including any 12b-1 or non 12b-1 service fees. The total expense ratio gives effect to any expense reimbursements or fee waivers that benefit a fund, and the actual management fee rate gives effect to any management fee reimbursements or waivers that benefit a fund. The Board considered the services provided and the fees charged by BlackRock and its affiliates to other types of clients with similar investment mandates, as applicable, including institutional accounts and sub-advised mutual funds (including mutual funds sponsored by third parties).
The Board received and reviewed statements relating to BlackRock’s financial condition. The Board reviewed BlackRock’s profitability methodology and was also provided with an estimated profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to each Fund. The Board reviewed BlackRock’s estimated profitability with respect to each Fund and other funds the Board currently oversees for the year ended December 31, 2017 compared to available aggregate estimated profitability data provided for the prior two years. The Board reviewed BlackRock’s estimated profitability with respect to certain other U.S. fund complexes managed by the Manager and/or its affiliates. The Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the estimated profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, precision of expense allocations and business mix. As a result, calculating and comparing profitability at individual fund levels is difficult.
The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Board reviewed BlackRock’s overall operating margin, in general, compared to that of certain other publicly-traded asset management firms. The Board considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.
In addition, the Board considered the estimated cost of the services provided to each Fund by BlackRock, and BlackRock’s and its affiliates’ estimated profits relating to the management and distribution of each Fund and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Board reviewed BlackRock’s methodology in allocating its costs of managing each Fund, to each Fund. The Board considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreements and to continue to provide the high quality of services that is expected by the Board. The Board further considered factors including but not limited to BlackRock’s commitment of time, assumption of risk, and liability profile in servicing each Fund in contrast to what is required of BlackRock with respect to other products with similar investment mandates across the open-end fund, ETF, closed-end fund, sub-advised mutual fund, separately managed account, collective investment trust, and institutional separate account product channels, as applicable.
The Board noted that the Advantage Large Cap Core V.I. Fund’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the Advantage Large Cap Core V.I. Fund’s Expense Peers. The Board also noted that the Advantage Large Cap Core V.I. Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Advantage Large Cap Core V.I. Fund increases above certain contractually specified levels. The Board further noted that BlackRock and the Board have contractually agreed to a cap on the Advantage Large Cap Core V.I. Fund’s total expenses as a percentage of the Advantage Large Cap Core V.I. Fund’s average daily net assets on a class-by-class basis. Additionally, the Board noted that BlackRock and the Board have contractually agreed to a cap on certain operational and recordkeeping fees for the Advantage Large Cap Core V.I. Fund on a class-by-class basis.
The Board noted that the Advantage Large Cap Value V.I. Fund’s contractual management fee rate ranked in the second quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the Advantage Large Cap Value V.I. Fund’s Expense Peers. The Board also noted that the Advantage Large Cap Value V.I. Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Advantage Large Cap Value V.I. Fund increases above certain contractually specified levels. Additionally, the Board noted that BlackRock had voluntarily agreed to waive a portion of the advisory fee payable by the Advantage Large Cap Value V.I. Fund. The Board further noted that BlackRock and the Board have contractually agreed to a cap on the Advantage Large Cap Value V.I. Fund’s total expenses as a percentage of the Advantage Large Cap Value V.I. Fund’s average daily net assets on a class-by-class basis. In addition, the Board noted that, in connection with the changes to the Advantage Large Cap Value V.I. Fund’s investment strategy, BlackRock proposed, and the Board agreed to, a lower contractual expense cap on a class-by-class basis. This contractual expense cap reduction was implemented on June 12, 2017. Finally, the Board noted that BlackRock and the Board have contractually agreed to a cap on certain operational and recordkeeping fees for the Advantage Large Cap Value V.I. Fund on a class-by-class basis.
The Board noted that the Advantage U.S. Total Market V.I. Fund’s contractual management fee rate ranked in the second quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the Advantage U.S. Total Market V.I. Fund’s Expense Peers. The Board also noted that the Advantage U.S. Total Market V.I. Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Advantage U.S. Total Market V.I. Fund increases above certain contractually specified levels. The Board further noted that BlackRock and the Board have contractually agreed to a cap on the Advantage U.S. Total Market V.I. Fund’s total expenses as a percentage of the Advantage U.S. Total Market V.I. Fund’s average daily net assets on a class-by-class basis. In addition, the Board noted that, in connection with the changes to the Advantage U.S. Total Market V.I. Fund’s investment strategy, BlackRock proposed, and the Board agreed to, a lower contractual expense cap on a class-by-class basis. This contractual expense cap reduction was implemented on June 12, 2017. Additionally, the
| | |
| | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)
Board noted that BlackRock and the Board have contractually agreed to a cap on certain operational and recordkeeping fees for the Advantage U.S. Total Market V.I. Fund on a class-by-class basis.
The Board noted that the Basic Value V.I. Fund’s contractual management fee rate ranked in the second quartile, and that the actual management fee rate and total expense ratio ranked in the second and third quartiles, respectively, relative to the Basic Value V.I. Fund’s Expense Peers. The Board also noted that the Basic Value V.I. Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Basic Value V.I. Fund increases above certain contractually specified levels. The Board further noted that BlackRock and the Board have contractually agreed to a cap on the Basic Value V.I. Fund’s total expenses as a percentage of the Basic Value V.I. Fund’s average daily net assets on a class-by-class basis. Additionally, the Board noted that BlackRock and the Board have contractually agreed to a cap on certain operational and recordkeeping fees for the Basic Value V.I. Fund on a class-by-class basis.
The Board noted that the Capital Appreciation V.I. Fund’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio ranked in the first and third quartiles, respectively, relative to the Capital Appreciation V.I. Fund’s Expense Peers. The Board also noted that the Capital Appreciation V.I. Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Capital Appreciation V.I. Fund increases above certain contractually specified levels. The Board further noted that BlackRock and the Board have contractually agreed to a cap on the Capital Appreciation V.I. Fund’s total expenses as a percentage of the Capital Appreciation V.I. Fund’s average daily net assets on a class-by-class basis. Additionally, the Board noted that BlackRock and the Board have contractually agreed to a cap on certain operational and recordkeeping fees for the Capital Appreciation V.I. Fund on a class-by-class basis.
The Board noted that the Equity Dividend V.I. Fund’s contractual management fee rate ranked in the second quartile, and that the actual management fee rate and total expense ratio each ranked in the second quartile, relative to the Equity Dividend V.I. Fund’s Expense Peers. The Board also noted that the Equity Dividend V.I. Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Equity Dividend V.I. Fund increases above certain contractually specified levels. The Board further noted that BlackRock and the Board have contractually agreed to a cap on the Equity Dividend V.I. Fund’s total expenses as a percentage of the Equity Dividend V.I. Fund’s average daily net assets on a class-by-class basis. Additionally, the Board noted that BlackRock and the Board have contractually agreed to a cap on certain operational and recordkeeping fees for the Equity Dividend V.I. Fund on a class-by-class basis.
The Board noted that the Global Allocation V.I. Fund’s contractual management fee rate ranked in the second quartile, and that the actual management fee rate and total expense ratio ranked in the fourth and second quartiles, respectively, relative to the Global Allocation V.I. Fund’s Expense Peers. The Board also noted that the Global Allocation V.I. Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Global Allocation V.I. Fund increases above certain contractually specified levels. The Board further noted that BlackRock and the Board have contractually agreed to a cap on the Global Allocation V.I. Fund’s total expenses as a percentage of the Global Allocation V.I. Fund’s average daily net assets on a class-by-class basis. Additionally, the Board noted that BlackRock and the Board have contractually agreed to a cap on certain operational and recordkeeping fees for the Global Allocation V.I. Fund on a class-by-class basis.
The Board noted that the Government Money Market V.I. Fund’s contractual management fee rate ranked in the third quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the Government Money Market V.I. Fund’s Expense Peers. The Board reviewed the Government Money Market V.I. Fund’s expenses within the context of the low yield environment and consequent expense waivers and reimbursements. The Board also noted that the Government Money Market V.I. Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Government Money Market V.I. Fund increases above certain contractually specified levels. The Board further noted that BlackRock and the Board have contractually agreed to a cap on the Government Money Market V.I. Fund’s total expenses as a percentage of the Government Money Market V.I. Fund’s average daily net assets on a class-by-class basis. Finally, the Board noted that, to enable the Government Money Market V.I. Fund to maintain minimum levels of daily net investment income, BlackRock has voluntarily agreed to waive a portion of its fees and/or reimburse the Government Money Market V.I. Fund’s operating expenses as necessary.
The Board noted that the High Yield V.I. Fund’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the High Yield V.I. Fund’s Expense Peers. The Board also noted that the High Yield V.I. Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the aggregate assets of the High Yield V.I. Fund, combined with the assets of Total Return V.I. Fund, increase above certain contractually specified levels. The Board further noted that BlackRock and the Board have contractually agreed to a cap on the High Yield V.I. Fund’s total expenses as a percentage of the High Yield V.I. Fund’s average daily net assets on a class-by-class basis. Additionally, the Board noted that BlackRock and the Board have contractually agreed to a cap on certain operational and recordkeeping fees for the High Yield V.I. Fund on a class-by-class basis.
The Board noted that the International V.I. Fund’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio ranked in the second and fourth quartiles, respectively, relative to the International V.I. Fund’s Expense Peers. The Board also noted that the International V.I. Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the International V.I. Fund increases above certain contractually specified levels. The Board further noted that BlackRock and the Board have contractually agreed to a cap on the International V.I. Fund’s total expenses as a percentage of the International V.I. Fund’s average daily net assets on a class-by-class basis. Additionally, the Board noted that BlackRock and the Board have contractually agreed to a cap on certain operational and recordkeeping fees for the International V.I. Fund on a class-by-class basis.
BlackRock has reviewed with the Board that the varying fee structure for fund of funds can limit the value of management fee comparisons. The Board noted that the iShare Alternative Strategies V.I. Fund’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio ranked in the second and first quartiles, respectively, relative to the iShare Alternative Strategies V.I. Fund’s Expense Peers. The Board further noted that the iShare Alternative Strategies V.I. Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the iShare Alternative Strategies V.I. Fund increases above certain contractually specified levels. Additionally, the Board noted that BlackRock and the Board have contractually agreed to a cap on the iShare Alternative Strategies V.I. Fund’s total expenses as a percentage of the iShare Alternative Strategies V.I. Fund’s average daily net assets on a class-by-class basis.
BlackRock has reviewed with the Board that the varying fee structure for fund of funds can limit the value of management fee comparisons. The Board noted that the iShares Dynamic Allocation V.I. Fund’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio
| | | | |
DISCLOSUREOF INVESTMENT ADVISORY AGREEMENTSAND SUB-ADVISORY AGREEMENTS | | | | |
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)
ranked in the second and first quartiles, respectively, relative to the iShares Dynamic Allocation V.I. Fund’s Expense Peers. The Board further noted that the iShares Dynamic Allocation V.I. Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the iShares Dynamic Allocation V.I. Fund increases above certain contractually specified levels. Additionally, the Board noted that BlackRock and the Board have contractually agreed to a cap on the iShares Dynamic Allocation V.I. Fund’s total expenses as a percentage of the iShares Dynamic Allocation V.I. Fund’s average daily net assets on a class-by-class basis.
The Board noted that the Large Cap Focus Growth V.I. Fund’s contractual management fee rate ranked in the third quartile, and that the actual management fee rate and total expense ratio ranked in the third and fourth quartiles, respectively, relative to the Large Cap Focus Growth V.I. Fund’s Expense Peers. The Board also noted that the Large Cap Focus Growth V.I. Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Large Cap Focus Growth V.I. Fund increases above certain contractually specified levels. The Board further noted that BlackRock and the Board have contractually agreed to a cap on the Large Cap Focus Growth V.I. Fund’s total expenses as a percentage of the Large Cap Focus Growth V.I. Fund’s average daily net assets on a class-by-class basis. Additionally, the Board noted that BlackRock and the Board have contractually agreed to a cap on certain operational and recordkeeping fees for the Large Cap Focus Growth V.I. Fund on a class-by-class basis.
The Board noted that the Managed Volatility V.I. Fund’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the Managed Volatility V.I. Fund’s Expense Peers. The Board also noted that the Managed Volatility V.I. Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Managed Volatility V.I. Fund increases above certain contractually specified levels. The Board further noted that BlackRock and the Board have contractually agreed to a cap on the Managed Volatility V.I. Fund’s total expenses as a percentage of the Managed Volatility V.I. Fund’s average daily net assets on a class-by-class basis. The Board also noted that the Managed Volatility V.I. Fund was the acquiring fund in a reorganization with a non-BlackRock fund, which closed on April 23, 2018. In connection with this reorganization, the Board noted that BlackRock proposed, and the Board agreed to, a lower contractual expense cap on a class by class basis. The contractual expense cap reduction was implemented on April 23, 2018. Finally, the Board noted that BlackRock and the Board have contractually agreed to a cap on certain operational and recordkeeping fees for the Managed Volatility V.I. Fund on a class-by-class basis.
The Board noted that the S&P 500 Index V.I. Fund’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the S&P 500 Index V.I. Fund’s Expense Peers. The Board also noted that BlackRock and the Board have contractually agreed to a cap on the S&P 500 Index V.I. Fund’s total expenses as a percentage of the S&P 500 Index V.I. Fund’s average daily net assets on a class-by-class basis. The Board also noted that the S&P 500 Index V.I. Fund was the acquiring fund in a reorganization with a non-BlackRock fund, which closed on April 23, 2018. In connection with this merger, the Board noted that BlackRock proposed, and the Board agreed to, a lower contractual advisory fee rate and a lower contractual expense cap on a class by class basis. These expense reductions were implemented on April 23, 2018. Finally, the Board noted that BlackRock and the Board have contractually agreed to a cap on certain operational and recordkeeping fees for the S&P 500 Index V.I. Fund on a class-by-class basis.
The Board noted that the Total Return V.I. Fund’s contractual management fee rate ranked in the second quartile, and that the actual management fee rate and total expense ratio ranked in the third and first quartiles, respectively, relative to the Total Return V.I. Fund’s Expense Peers. The Board also noted that the Total Return V.I. Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the aggregate assets of the Total Return V.I. Fund, combined with the assets of High Yield V.I. Fund, increase above certain contractually specified levels. The Board further noted that BlackRock and the Board have contractually agreed to a cap on the Total Return V.I. Fund’s total expenses as a percentage of the Total Return V.I. Fund’s average daily net assets on a class-by-class basis. Additionally, the Board noted that BlackRock and the Board have contractually agreed to a cap on certain operational and recordkeeping fees for the Total Return V.I. Fund on a class-by-class basis.
The Board noted that the U.S. Government Bond V.I. Fund’s contractual management fee rate ranked in the second quartile, and that the actual management fee rate and total expense ratio ranked in the first and fourth quartiles, respectively, relative to the U.S. Government Bond V.I. Fund’s Expense Peers. The Board also noted that the U.S. Government Bond V.I. Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the U.S. Government Bond V.I. Fund increases above certain contractually specified levels. The Board further noted that BlackRock and the Board have contractually agreed to a cap on the U.S. Government Bond V.I. Fund’s total expenses as a percentage of the U.S. Government Bond V.I. Fund’s average daily net assets on a class-by-class basis. Additionally, the Board noted that BlackRock and the Board have contractually agreed to a cap on certain operational and recordkeeping fees for the U.S. Government Bond V.I. Fund on a class-by-class basis. In addition, the Board noted that BlackRock has voluntarily agreed to waive a portion of the advisory fee payable by the U.S. Government Bond V.I. Fund. After discussion between the Board, including the Independent Board Members, and BlackRock, the Board and BlackRock agreed to a continuation of the voluntary advisory fee waiver.
D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of each Fund increase, including the existence of fee waivers and/or expense caps, as applicable, noting that any contractual fee waivers and expense caps had been approved by the Board. The Board also considered the extent to which each Fund benefits from such economies in a variety of ways, and whether there should be changes in the advisory fee rate or breakpoint structure in order to enable each Fund to more fully participate in these economies of scale. The Board considered each Fund’s asset levels and whether the current fee schedule was appropriate. In its consideration, the Board Members took into account the existence of any expense caps and further considered the continuation and/or implementation, as applicable, of such caps.
E. Other Factors Deemed Relevant by the Board Members: The Board, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates may derive from BlackRock’s respective relationships with each Fund, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to each Fund, including for administrative, distribution, securities lending and cash management services. The Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Board also noted that, subject to applicable law, BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts.
In connection with its consideration of the Agreements, the Board also received information regarding BlackRock’s brokerage and soft dollar practices. The Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.
| | |
| | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)
The Board noted the competitive nature of the open-end fund marketplace, and that shareholders are able to redeem their Fund shares if they believe that each Fund’s fees and expenses are too high or if they are dissatisfied with the performance of each Fund.
Conclusion
The Board, including the Independent Board Members, approved the continuation of the Advisory Agreements between the Manager and the Corporation, on behalf of each Fund, for a one-year term ending June 30, 2019, and the Sub-Advisory Agreements between the Manager and the Sub-Advisors, with respect to each Fund, as applicable, for a one-year term ending June 30, 2019. Based upon its evaluation of all of the aforementioned factors in their totality, as well as other information, the Board, including the Independent Board Members, was satisfied that the terms of the Agreements were fair and reasonable and in the best interest of each Fund and its shareholders. In arriving at its decision to approve the Agreements, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination.
| | | | |
DISCLOSUREOF INVESTMENT ADVISORY AGREEMENTSAND SUB-ADVISORY AGREEMENTS | | | | |
Director and Officer Information
Robert M. Hernandez, Chair of the Board and Director
James H. Bodurtha, Director
Bruce R. Bond, Director
Honorable Stuart E. Eizenstat, Director
Henry Gabbay, Director
Lena G. Goldberg, Director
Henry R. Keizer, Director
John F. O’Brien, Director
Donald C. Opatrny, Director
Robert Fairbairn, Director
John M. Perlowski, Director, President and Chief Executive Officer
Jennifer McGovern, Vice President
Neal J. Andrews, Chief Financial Officer
Jay M. Fife, Treasurer
Charles Park, Chief Compliance Officer
John MacKessy, Anti-Money Laundering Compliance Officer
Benjamin Archibald, Secretary
Effective May 08, 2018, John MacKessy replaced Fernanda Piedra as the Anti-Money Laundering Compliance Officer of the Company.
Investment Adviser and Administrator
BlackRock Advisors, LLC
Wilmington, DE 19809
Accounting Agent
JPMorgan Chase Bank, N.A.
New York, NY 10179
Transfer Agent
BNY Mellon Investment Servicing (US) Inc.
Wilmington, DE 19809
Custodians
JPMorgan Chase Bank, N.A.(c)
New York, NY 10179
Brown Brothers Harriman & Co.(d)
Boston, MA 02109
Sub-Advisers
BlackRock International Limited(a)
Edinburgh, Scotland EH3 8BL
BlackRock Asset Management
North Asia Limited(b)
Hong Kong
BlackRock (Singapore) Limited(b)
079912 Singapore
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Boston, MA 02116
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 Focus Growth V.I. Fund. |
(d) | For BlackRock Global Allocation V.I. Fund, BlackRock International V.I. Fund and BlackRock Large Cap Focus Growth V.I. Fund. |
| | |
| | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
Additional Information
General Information
Householding
The Funds will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Funds at (800) 441-7762.
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, D.C. 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 Fund 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’s Mutual Fund Family
BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed-income and tax-exempt investing. Visit http://www.blackrock.com for more information.
Shareholder Privileges
Account Information
Call us at (800) 441-7762 from 8:00 AM to 6:00 PM ET on any business day to get information about your account balances, recent transactions and share prices. You can also reach us on the Web at http://www.blackrock.com.
Automatic Investment Plans
Investor Class shareholders who want to invest regularly can arrange to have $50 or more automatically deducted from their checking or savings account and invested in any of the BlackRock funds.
Systematic Withdrawal Plans
Investor Class shareholders can establish a systematic withdrawal plan and receive periodic payments of $50 or more from their BlackRock funds, as long as their account balance is at least $10,000.
Retirement Plans
Shareholders may make investments in conjunction with Traditional, Rollover, Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.
Additional Information (continued)
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their 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 law or 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.
| | |
| | 2018 BLACKROCK SEMI-ANNUAL REPORTTO SHAREHOLDERS |
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-6/18-SAR | | |
Item 2 – | Code of Ethics – Not Applicable to this semi-annual report |
Item 3 – | Audit Committee Financial Expert – Not Applicable to this semi-annual report |
Item 4 – | Principal Accountant Fees and Services – Not Applicable to this semi-annual report |
Item 5 – | Audit Committee of Listed Registrants – Not Applicable |
| (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 |
Item 13 – | Exhibits attached hereto |
| (a)(1) – Code of Ethics – Not Applicable to this semi-annual report |
| (a)(2) – Certifications – Attached hereto |
| (b) – Certifications – Attached hereto |
2
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: August 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: August 28, 2018
| | |
By: | | /s/ Neal J. Andrews |
| | Neal J. Andrews |
| | Chief Financial Officer (principal financial officer) of |
| | BlackRock Variable Series Funds, Inc. |
Date: August 28, 2018
3