BlackRock Capital Appreciation V.I. Fund Annual Report

2020 Annual Report

BlackRock Variable Series Funds, Inc.

? BlackRock Capital Appreciation V.I. Fund

DECEMBER 31, 2020

Not FDIC Insured - May Lose Value - No Bank Guarantee

THIS PAGE INTENTIONALLY LEFT BLANK.

The Markets in Review

Dear Shareholder,

The 12-month reporting period as of December 31, 2020 has been a time of sudden change in global financial markets, as the emergence and spread of the coronavirus (or "COVID-19") led to a vast disruption in the global economy and financial markets. The threat from the coronavirus became increasingly apparent throughout February and March 2020, and countries around the world took economically disruptive countermeasures. Stayat-home orders and closures of non-essential businesses became widespread, many workers were laid off, and unemployment claims spiked, causing a global recession and a sharp fall in equity prices.

After markets hit their lowest point of the reporting period in late March 2020, a steady recovery ensued, as businesses began to re-open and governments learned to adapt to life with the virus. Equity prices continued to rise throughout the summer, fed by strong fiscal and monetary support and improving economic indicators. Many equity indices neared or surpassed all-time highs late in the reporting period following a series of successful vaccine trials and passage of additional stimulus. In the United States, both large- and small-capitalization stocks posted a significant advance. International equities from developed economies grew at a more modest pace, lagging emerging market stocks, which rebounded sharply.

During the market downturn, the performance of different types of fixed-income securities initially diverged due to a reduced investor appetite for risk. U.S. Treasuries benefited from the risk-off environment, and posted solid returns, as the 10-year U.S. Treasury yield (which is inversely related to bond prices) touched an all-time low. In the corporate bond market, support from the U.S. Federal Reserve (the "Fed") assuaged credit concerns and both investment-grade and high-yield bonds recovered to post positive returns.

Following the coronavirus outbreak, the Fed instituted two emergency interest rate cuts, pushing shortterm interest rates, already low as the year began, close to zero. To stabilize credit markets, the Fed also implemented a new bond-buying program, as did several other central banks around the world, including the European Central Bank and the Bank of Japan.

Looking ahead, while coronavirus-related disruptions have clearly hindered worldwide economic growth, we believe that the global expansion is likely to accelerate as vaccination efforts get under way. The results of the U.S. elections also cleared the way for additional stimulus spending in 2021, which is likely to be a solid tailwind for economic growth. Inflation should increase as the expansion continues, but a shift in central bank policy means that moderate inflation is less likely to be followed by interest rate hikes that could threaten the equity expansion.

Overall, we favor a positive stance toward risk, with an overweight in both equities and credit. We see U.S. and Asian equities benefiting from structural growth trends in tech, while emerging markets should be particularly helped by a vaccine-led economic expansion. In credit, rising inflation should provide tailwinds for inflationprotected bonds, and Euro area peripherals and Asian bonds also provide attractive opportunities. We believe that international diversification and a focus on sustainability can help provide portfolio resilience, and the disruption created by the coronavirus appears to be accelerating the shift toward sustainable investments.

In this environment, our view is that 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 for further insight about investing in today's markets.

Sincerely,

Rob Kapito President, BlackRock Advisors, LLC

Total Returns as of December 31, 2020

U.S. large cap equities (S&P 500? Index)

U.S. small cap equities (Russell 2000? Index)

International equities (MSCI Europe, Australasia, Far East Index)

Emerging market equities (MSCI Emerging Markets Index)

3-month Treasury bills (ICE BofA 3-Month U.S. Treasury Bill Index)

U.S. Treasury securities (ICE BofA 10-Year U.S. Treasury Index)

U.S. investment grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index)

Tax-exempt municipal bonds (S&P Municipal Bond Index)

U.S. high yield bonds (Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)

6-Month 12-Month 22.16% 18.40%

37.85 19.96

21.61

7.82

31.14 18.31

0.07

0.67

(1.87) 10.58

1.29

7.51

2.92

4.95

11.32

7.05

Past performance is not an indication of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

Rob Kapito President, BlackRock Advisors, LLC

This Page is not Part of Your Fund Report

Fund Summary as of December 31, 2020

BlackRock Capital Appreciation V.I. Fund

Investment Objective

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

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2020, 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?

The largest contributors to the Fund's relative performance over the period were stock selection in the communication services sector and positioning in consumer staples and consumer discretionary. In communication services, selection in interactive media & services, specifically an out-of-benchmark position in Snap, Inc., drove relative performance. Selective positioning across consumer staples sub-sectors also added to relative results. Lastly, an overweight to the consumer discretionary sector proved advantageous, notably to the internet & direct marketing retail sub-sector with an out-of-benchmark position in Argentine ecommerce company MercadoLibre, Inc. and overweight to ecommerce and cloud computing company , Inc.

The largest detractors from relative performance were selection within health care and positioning in financials. In health care, selection in the health care equipment & supplies sub-sector, most notably an overweight to Boston Scientific Corp., led detractors. Within financials, an out-of-benchmark position in CME Group, Inc. in capital markets was the biggest constraint on performance.

Describe recent portfolio activity.

During the period, the Fund's exposure to information technology ("IT") increased with an allocation to semiconductors & semiconductor equipment. Exposure to the consumer discretionary sector was also increased. Conversely, exposure to health care decreased as the investment adviser trimmed within health care equipment & supplies. Exposure to the industrials sector was also decreased.

Describe portfolio positioning at period end.

As of period end, the Fund's largest overweight position relative to the Russell 1000? Growth Index was to the consumer discretionary sector, followed by IT and materials. Conversely, the consumer staples sector was the largest underweight, followed by health care 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.

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Fund Summary as of December 31, 2020 (continued)

$ 60,000 55,000 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 Dec 10

Dec 11

Dec 12

TOTAL RETURN BASED ON A $10,000 INVESTMENT

Dec 13

Dec 14

Dec 15

Dec 16

Dec 17

BlackRock Capital Appreciation V.I. Fund

$48,929 $41,308 $40,240 $36,699

Dec 18

Dec 19

Dec 20

CClalasssI(aI)((ab))(b)

CClalasssIII (IaI)((ab))(b)

RRuusssseelll1l 01000?0? GGrorowwththInInddexe(xc)(c)

SS&&PP55000??InIdnedxe(dx)(d)

(a) Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance-related fees and expenses. (b) The Fund invests primarily in a diversified portfolio consisting primarily of common stock of U.S. companies that the investment adviser believes have exhibited above-average growth rates in

earnings over the long-term. (c) An unmanaged index that measures the performance of the large cap growth segment of the U.S. equity universe and consists of those Russell 1000? securities with higher price-to-book ratios

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

Performance Summary for the Period Ended December 31, 2020

Class I (b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Class III (b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Russell 1000? Growth Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S&P 500? Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6-Month Total Returns (a) 25.01% 24.73 26.12 22.16

Average Annual Total Returns (a)

1 Year 41.91% 41.52 38.49 18.40

5 Years 20.66% 20.34 21.00 15.22

10 Years 15.24% 14.94 17.21 13.88

(a) 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. (b) 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. Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Fund Summary

3

Fund Summary as of December 31, 2020 (continued)

Portfolio Information

SECTOR ALLOCATION

Sector

Information Technology.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consumer Discretionary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Communication Services.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Health Care. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Industrials.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financials.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real Estate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short-Term Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities in Excess of Other Assets. . . . . . . . . . . . . . . . . . . . . .

Percent of Net Assets

47 % 19 13 9 4 3 2 2 5 (4)

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

BlackRock Capital Appreciation V.I. Fund

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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, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example shown below (which is based on a hypothetical investment of $1,000 invested on July 1, 2020 and held through December 31, 2020) 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 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.

Class I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Class III.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Actual

Beginning

Ending

Expenses

Account Value Account Value Paid During

(07/01/20)

(12/31/20) the Period (b)

$ 1,000.00 $ 1,250.10 $

4.58

1,000.00

1,247.30

6.04

Beginning Account Value

(07/01/20) $ 1,000.00

1,000.00

Hypothetical (a)

Ending Account Value

(12/31/20) $ 1,021.06

1,019.76

Expenses

Paid During

the Period (b)

$

4.12

5.43

Annualized Expense Ratio 0.81% 1.07

(a) Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366. (b) For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the

one-half year period shown).

Disclosure of Expenses

5

Schedule of Investments

December 31, 2020

Security

Common Stocks -- 99.3%

Automobiles -- 0.3% Ferrari NV. . . . . . . . . . . . . . . . . . . . . . . . .

Capital Markets -- 2.6% S&P Global, Inc.. . . . . . . . . . . . . . . . . . . . .

Chemicals -- 2.2% International Flavors & Fragrances, Inc.. . . . . Linde plc. . . . . . . . . . . . . . . . . . . . . . . . . . Sherwin-Williams Co. (The). . . . . . . . . . . . . .

Shares Shares

3,536 $

18,916

8,686 3,635 4,440

Containers & Packaging -- 0.7% Ball Corp. . . . . . . . . . . . . . . . . . . . . . . . . .

18,633

Electronic Equipment, Instruments & Components -- 1.0%

Keysight Technologies, Inc.(a). . . . . . . . . . . . .

18,180

Entertainment -- 3.1% Netflix, Inc.(a). . . . . . . . . . . . . . . . . . . . . . . .

13,344

Equity Real Estate Investment Trusts (REITs) -- 1.7% Prologis, Inc.. . . . . . . . . . . . . . . . . . . . . . . SBA Communications Corp.. . . . . . . . . . . . .

5,778 11,806

Health Care Equipment & Supplies -- 2.6%(a) Boston Scientific Corp.. . . . . . . . . . . . . . . . . Intuitive Surgical, Inc.. . . . . . . . . . . . . . . . . .

99,862 3,181

Health Care Providers & Services -- 3.5% Humana, Inc.. . . . . . . . . . . . . . . . . . . . . . . UnitedHealth Group, Inc.. . . . . . . . . . . . . . .

7,942 14,274

Hotels, Restaurants & Leisure -- 0.3% Domino's Pizza, Inc.. . . . . . . . . . . . . . . . . .

Industrial Conglomerates -- 1.3% Roper Technologies, Inc.. . . . . . . . . . . . . . .

Interactive Media & Services -- 9.1%(a) Alphabet, Inc., Class A. . . . . . . . . . . . . . . . . Facebook, Inc., Class A. . . . . . . . . . . . . . . . Snap, Inc., Class A.. . . . . . . . . . . . . . . . . . .

2,086

6,822

4,772 26,707 114,395

Internet & Direct Marketing Retail -- 13.3%(a) Alibaba Group Holding Ltd., ADR. . . . . . . . . . , Inc.. . . . . . . . . . . . . . . . . . . . MercadoLibre, Inc. . . . . . . . . . . . . . . . . . . .

14,206 6,655 3,786

IT Services -- 13.0% Fidelity National Information Services, Inc. . . . Mastercard, Inc., Class A.. . . . . . . . . . . . . . . PayPal Holdings, Inc.(a). . . . . . . . . . . . . . . . . Shopify, Inc., Class A(a). . . . . . . . . . . . . . . . . Snowflake, Inc., Class A(a). . . . . . . . . . . . . . . Visa, Inc., Class A(b). . . . . . . . . . . . . . . . . . . Ltd.(a)(b). . . . . . . . . . . . . . . . . . . . .

17,518 25,215 16,434 2,146

940 47,658 9,189

Life Sciences Tools & Services -- 0.7% Lonza Group AG (Registered). . . . . . . . . . . .

2,547

Value

811,583

6,218,257

945,384 957,859 3,263,000 5,166,243

1,736,223

2,401,396

7,215,501

575,835 3,330,827 3,906,662

3,590,039 2,602,376 6,192,415

3,258,365 5,005,606 8,263,971

799,898

2,940,896

8,363,598 7,295,284 5,727,758 21,386,640

3,306,162 21,674,869 6,342,383 31,323,414

2,478,096 9,000,242 3,848,843 2,429,165

264,516 10,424,234 2,296,883 30,741,979

1,640,693

BlackRock Capital Appreciation V.I. Fund

(Percentages shown are based on Net Assets)

Security

Shares Shares

Value

Pharmaceuticals -- 2.3% AstraZeneca plc, ADR(b). . . . . . . . . . . . . . . . Zoetis, Inc.. . . . . . . . . . . . . . . . . . . . . . . . .

39,759 $ 21,323

Professional Services -- 3.3% CoStar Group, Inc.(a.). . . . . . . . . . . . . . . . . . TransUnion.. . . . . . . . . . . . . . . . . . . . . . . .

5,735 23,826

Semiconductors & Semiconductor Equipment -- 7.0% Analog Devices, Inc.. . . . . . . . . . . . . . . . . . ASML Holding NV (Registered), NYRS. . . . . . Marvell Technology Group Ltd. . . . . . . . . . . . NVIDIA Corp.. . . . . . . . . . . . . . . . . . . . . . .

29,399 13,056 74,497 4,524

Software -- 22.7% Adobe, Inc.(a.). . . . . . . . . . . . . . . . . . . . . . . Autodesk, Inc.(a.). . . . . . . . . . . . . . . . . . . . . Coupa Software, Inc.(a). . . . . . . . . . . . . . . . . Intuit, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . Microsoft Corp.. . . . . . . . . . . . . . . . . . . . . . Palantir Technologies, Inc., Series I (Acquired

02/11/14, cost $1,152,906)(a)(c). . . . . . . . . . RingCentral, Inc., Class A(a). . . . . . . . . . . . . . ServiceNow, Inc.(a). . . . . . . . . . . . . . . . . . . .

11,953 12,207 4,094 14,690 78,419

372,988 9,360 13,333

Specialty Retail -- 2.4% Lowe's Cos., Inc.. . . . . . . . . . . . . . . . . . . . . TJX Cos., Inc. (The). . . . . . . . . . . . . . . . . . .

18,081 39,064

Technology Hardware, Storage & Peripherals -- 3.5% Apple, Inc.. . . . . . . . . . . . . . . . . . . . . . . . .

Textiles, Apparel & Luxury Goods -- 2.7% LVMH Moet Hennessy Louis Vuitton SE.. . . . . NIKE, Inc., Class B(b). . . . . . . . . . . . . . . . . .

62,784

2,944 32,498

Total Common Stocks -- 99.3% (Cost: $128,620,743).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Preferred Stocks -- 0.5%

Media -- 0.5%

ByteDance Ltd. Series E-1 (Acquired 11/11/20,

cost $1,100,015)(c)(d). . . . . . . . . . . . . . . . .

10,039

Total Preferred Stocks -- 0.5%

(Cost: $1,100,015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Long-Term Investments -- 99.8%

(Cost: $129,720,758).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,987,552 3,528,957 5,516,509

5,300,746 2,364,015 7,664,761

4,343,114 6,367,672 3,541,588 2,362,433 16,614,807

5,977,934 3,727,285 1,387,498 5,579,997 17,441,954

8,569,151 3,547,159 7,338,883 53,569,861

2,902,181 2,667,681 5,569,862

8,330,809

1,842,948 4,597,492 6,440,440

234,452,820

1,099,973

1,099,973

235,552,793

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