Master Investment Portfolio N-CSR Certified annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-07332 and 811-08162

Name of Fund: BlackRock Funds III

BlackRock ACWI ex-US Index Fund

BlackRock Bond Index Fund

BlackRock Cash Funds: Institutional

BlackRock Cash Funds: Prime

BlackRock Cash Funds: Government

BlackRock Cash Funds: Treasury

BlackRock CoreAlpha Bond Fund

LifePath® Retirement Portfolio

LifePath 2020 Portfolio®

LifePath® 2025 Portfolio

LifePath 2030 Portfolio®

LifePath® 2035 Portfolio

LifePath 2040 Portfolio®

LifePath® 2045 Portfolio

LifePath® 2050 Portfolio

LifePath® 2055 Portfolio

LifePath® Index Retirement Portfolio

LifePath® Index 2020 Portfolio

LifePath® Index 2025 Portfolio

LifePath® Index 2030 Portfolio

LifePath® Index 2035 Portfolio

LifePath® Index 2040 Portfolio

LifePath® Index 2045 Portfolio

LifePath® Index 2050 Portfolio

LifePath® Index 2055 Portfolio

BlackRock Russell 1000® Index Fund

BlackRock S&P 500 Stock Fund

Master Investment Portfolio

Active Stock Master Portfolio

ACWI ex-US Index Master Portfolio

Bond Index Master Portfolio

CoreAlpha Bond Master Portfolio

International TILTS Master Portfolio

LifePath® Retirement Master Portfolio

LifePath 2020 Master Portfolio®

LifePath® 2025 Master Portfolio

LifePath 2030 Master Portfolio®

LifePath® 2035 Master Portfolio

LifePath 2040 Master Portfolio®

LifePath® 2045 Master Portfolio

LifePath® 2050 Master Portfolio

LifePath® 2055 Master Portfolio

LifePath® Index Retirement Master Portfolio

LifePath® Index 2020 Master Portfolio

LifePath® Index 2025 Master Portfolio

LifePath® Index 2030 Master Portfolio

LifePath® Index 2035 Master Portfolio

LifePath® Index 2040 Master Portfolio

LifePath® Index 2045 Master Portfolio

LifePath® Index 2050 Master Portfolio

LifePath® Index 2055 Master Portfolio

Government Money Market Master Portfolio

Money Market Master Portfolio

Prime Money Market Master Portfolio

Russell 1000® Index Master Portfolio

S&P 500 Stock Master Portfolio

Treasury Money Market Master Portfolio

Fund Address:   100 Bellevue Parkway, Wilmington, DE 19809

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

Registrants’ telephone number, including area code: (800) 537-4942

Date of fiscal year end: 12/31/2013

Date of reporting period: 12/31/2013

Item 1 – Report to Stockholders

2

DECEMBER 31, 2013

  ANNUAL REPORT  

BlackRock ACWI ex-US Index Fund  |  of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
Dear Shareholder		3
Annual Report:
Fund Summary		4
About Fund Performance		6
Disclosure of Expenses		6
Derivative Financial Instruments		6
Fund Financial Statements:
Statement of Assets and Liabilities		7
Statement of Operations		8
Statements of Changes in Net Assets		9
Fund Financial Highlights		10
Fund Notes to Financial Statements		13
Fund Report of Independent Registered Public Accounting Firm		16
Important Tax Information		16
Master Portfolio Information		17
Master Portfolio Financial Statements:
Schedule of Investments		18
Statement of Assets and Liabilities		38
Statement of Operations		39
Statements of Changes in Net Assets		40
Master Portfolio Financial Highlights		40
Master Portfolio Notes to Financial Statements		41
Master Portfolio Report of Independent Registered Public Accounting Firm		48
Officers and Trustees		49
Additional Information		52
A World-Class Mutual Fund Family		54

2 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Dear Shareholder

Risk assets (such as equities) powered higher in 2013, for the most part unscathed by ongoing political and economic uncertainty. While monetary policy was the main driving force behind the rally in risk assets, it was also the main culprit for the bouts of volatility during the year.

Equity markets rallied right out of the gate in January with cash pouring back in from the sidelines after a potential US fiscal crisis (i.e., the “fiscal cliff”) was averted with a last-minute tax deal. Key indicators signaling modest but broad-based improvements in the world’s major economies and a calming in Europe’s debt troubles fostered an aura of comfort for investors. Global economic momentum slowed in February, however, and the pace of the rally moderated. In the months that followed, US stocks outperformed international stocks, as the US showed greater stability than most other regions. Slow but positive growth was sufficient to support corporate earnings, while uncomfortably high unemployment reinforced expectations that the Federal Reserve would continue its aggressive monetary stimulus program. International markets experienced higher levels of volatility given a resurgence of political instability in Italy, a banking crisis in Cyprus and a generally poor outlook for European economies. Emerging markets significantly lagged the rest of the world as growth in these economies fell short of expectations.

Financial markets were rattled in May when Fed Chairman Bernanke mentioned the possibility of reducing — or “tapering” — the central bank’s asset purchase programs — comments that were widely misinterpreted as signaling an end to the Fed’s zero-interest-rate policy. US Treasury yields rose sharply, triggering a steep sell-off across fixed income markets. (Bond prices move in the opposite direction of yields.) Equity prices also suffered as investors feared the implications of a potential end of a program that had greatly supported the markets. Risk assets rebounded in late June, however, when the Fed’s tone turned more dovish, and improving economic indicators and better corporate earnings helped extend gains through most of the summer.

The fall was a surprisingly positive period for most asset classes as the Fed defied market expectations with its decision to delay tapering. Easing of political tensions that had earlier surfaced in Egypt and Syria and the re-election of Angela Merkel as Chancellor of Germany also boosted investor sentiment. Higher volatility returned in late September when the US Treasury Department warned that the national debt would soon breach its statutory maximum. The ensuing political brinksmanship led to a partial government shutdown, roiling global financial markets through the first half of October, but the rally quickly resumed when politicians engineered a compromise to reopen the government and extend the debt ceiling, at least temporarily.

The remainder of the year was generally positive for stock markets in the developed world, although investors continued to grapple with uncertainty about when and how much the Fed would scale back on stimulus. On the one hand, persistent weak growth and low inflation provided significant latitude for monetary policy decisions and investors were encouraged by dovish comments from Fed Chair-to-be Janet Yellen. On the other hand, US housing and manufacturing reports had begun to signal fundamental improvement in the economy. The long-awaited taper announcement ultimately came in mid-December. The Fed reduced the amount of its monthly asset purchases, but at the same time, extended its time horizon for maintaining low short-term interest rates. Markets reacted positively as this move signaled the Fed’s perception of real improvement in the economy and investors felt relief from the tenacious anxiety that had gripped them throughout the year.

Accommodative monetary policy and the avoidance of major risks made 2013 a strong year for most equity markets. US stocks were the strongest performers for the six- and 12-month periods ended December 31. In contrast, emerging markets were weighed down by uneven growth and structural imbalances. Rising US Treasury yields led to a rare annual loss in 2013 for Treasury bonds and other high-quality fixed income sectors including tax-exempt municipals and investment grade corporate bonds. High yield bonds, to the contrary, generated gains driven by income-oriented investors seeking yield in the low-rate environment. Short-term interest rates remained near zero, keeping yields on money market securities near historical lows.

At BlackRock, we believe investors need to think globally and extend their scope across a broader array of asset classes and be prepared to move freely as market conditions change over time. We encourage you to talk with your financial advisor and visit www.blackrock.com for further insight about investing in today’s world.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

“While monetary policy was the main driving force behind the rally in risk assets, it was also the main culprit for the bouts of volatility during the year.”

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2013
	6-month			12-month
US large cap equities (S&P 500® Index)		16.31	%		32.39	%
US small cap equities (Russell 2000® Index)		19.82			38.82
International equities (MSCI Europe, Australasia, Far East Index)		17.94			22.78
Emerging market equities (MSCI Emerging Markets Index)		7.70			(2.60	)
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)		0.03			0.07
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		(3.10	)		(7.83	)
US investment grade bonds (Barclays US Aggregate Bond Index)		0.43			(2.02	)
Tax-exempt municipal bonds (S&P Municipal Bond Index)		0.00			(2.55	)
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)		5.94			7.44
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

THIS PAGE NOT PART OF YOUR FUND REPORT 3

Fund Summary as of December 31, 2013

Investment Objective

BlackRock ACWI ex-US Index Fund’s (the “Fund”), investment objective is to match the performance of the MSCI All Country World ex-US Index (the “MSCI ACWI ex-US Index”) in US dollars with net dividends as closely as possible before the deduction of Fund expenses.

Portfolio Management Commentary

How did the Fund perform?

Ÿ For the 12 months ended December 31, 2013, the Fund’s Institutional Shares returned 13.94%, Investor A Shares returned 13.63% and Class K Shares returned 13.96%. The benchmark MSCI ACWI ex-US Index returned 15.29% for the same period.

Ÿ Returns for the Fund’s respective share classes differ from the benchmark index based on individual share-class expenses. The Fund invests all of its assets in the MSCI ACWI ex-US Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio.

Describe the market environment.

Ÿ International equity markets began 2013 with a powerful relief rally after the United States averted the worst of its potential fiscal crisis with a last-minute tax deal. The rally softened in February, however, as global economic momentum slowed. Later in the first quarter, a stalemate presidential election in Italy and a severe banking crisis in Cyprus reminded investors that political and financial instability in Europe continued to pose risks. The ascent of equities persevered as increased global liquidity kept interest rates low and investors turned to riskier asset classes in search of yield.

Ÿ As the year progressed, the direction of equity markets became increasingly dominated by speculation around the future of monetary policy in response to signals from central banks, particularly the US Federal Reserve. Sluggish global growth, ironically, was often conducive to positive stock market performance as weak economic data reinforced investors’ expectations that major central banks would maintain their accommodative stance. Additionally, the modest pace of economic growth contributed to corporate profit margins as the global recovery was strong enough to support revenues while nearly stagnant wage growth kept costs low.

Ÿ After peaking in late May, equity markets around the world recoiled when Fed Chairman Bernanke mentioned the possibility of gradually reducing (or “tapering”) monetary stimulus before the end of 2013. Volatility picked up considerably as many investors misinterpreted the Fed’s remarks as signaling the end of low short-term interest rates. However, equities staged a swift mid-summer rebound when the Fed’s tone turned more dovish. Later in the third quarter, mixed economic data drove high volatility as it made investors increasingly anxious about when and how much the Fed would scale back on its monthly asset purchase program. Also concerning was the escalation of the revolution in Egypt and the civil war in Syria, events that fueled higher oil prices, an additional headwind for global growth.

Ÿ September brought another sharp rally as the Fed defied market expectations with its decision to delay tapering its asset purchase program. On the geopolitical front, the turmoil in Egypt and Syria subsided and the re-election of Angela Merkel as Chancellor of Germany was welcomed as a continuation of the status quo. The equity market advance was interrupted again in late September when the US teetered on breaching the national debt ceiling and political brinksmanship led to a partial government shutdown. The rally quickly resumed in mid-October when politicians engineered a compromise to reopen the government and extend the debt ceiling until early 2014.

Ÿ As economic indicators improved later in the fall, investors around the world grappled with rising uncertainty around the timing of the anticipated Fed taper. This anxiety was ultimately relieved when the central bank announced the commencement of tapering in mid-December. Investors reacted positively to this policy move as it signaled the Fed’s perception of real improvement in US growth. Sentiment was also buoyed by the extension of the Fed’s expected time horizon for maintaining low short-term interest rates.

Ÿ Equity markets in all of the developed countries represented in the MSCI EAFE Index moved higher for the year 2013 (in US dollar terms). Markets in Finland (+46.04%) and Ireland (+41.15%) posted the largest gains in the index, followed by Germany (+31.37%), which has substantial representation in the index composition. Japanese equities (+27.16%) climbed higher as a weakening yen benefited the nation’s exporters, which comprise a large portion of the Japanese stock market. (In local currency terms, Japanese stocks soared +54.58%.) Japanese equities are among the heavier country weightings in the MSCI EAFE Index, as are Swiss (+26.61%), French (+26.33%) and UK equities (+20.67%).

Describe recent portfolio activity.

Ÿ During the period, as changes were made to the composition of the MSCI ACWI ex-US Index, the Master Portfolio purchased and sold securities to maintain its objective of replicating the risks and return of the benchmark index.

Describe portfolio positioning at period end.

Ÿ The Master Portfolio 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.

4 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Total Return Based on a $10,000 Investment

¹  Assuming transaction costs and other operating expense, including administration fees, if any.

²  The Fund invests all of its assets in the Master Portfolio. The Master Portfolio invests primarily in a non-diversified portfolio of equity securities of companies located in developed and emerging market countries excluding the United States.

³ The Index is a free float-adjusted market capitalization index designed to measure the combined equity market performance of developed and emerging market countries, excluding the United States.

⁴ Commencement of operations.

Performance Summary for the Period Ended December 31, 2013

	6-Month Total Returns			Average Annual Total Returns
				1 Year			Since  Inception5
Institutional		15.19	%		13.94	%		3.46	%
Investor A		15.16			13.63			3.21
Class K		15.30			13.96			4.40
MSCI ACWI ex-US Index		15.34			15.29			4.62

⁵  The Fund commenced operations on June 30, 2011.

See “About Fund Performance” on page 6 for a detailed description of share classes, including any related sales charges and fees.

Past performance is not indicative of future results.

Expense Example

	Actual						Hypothetical7
	Beginning Account Value July 1, 2013		Ending Account Value December 31, 2013		Expenses Paid During the Period6		Beginning Account Value July 1, 2013		Ending Account Value December 31, 2013		Expenses Paid During the Period6		Annualized Expense Ratio
Institutional	$	1,000.00	$	1,151.90	$	1.90	$	1,000.00	$	1,023.44	$	1.79		0.35	%
Investor A	$	1,000.00	$	1,151.60	$	3.47	$	1,000.00	$	1,021.98	$	3.26		0.64	%
Class K	$	1,000.00	$	1,153.00	$	1.85	$	1,000.00	$	1,023.49	$	1.73		0.34	%

⁶  For each class of the Fund, expenses are equal to the annualized net expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown). Because the Fund invests all of its assets in the Master Portfolio, the expense example reflects the net expenses of both the Fund and the Master Portfolio in which it invests.

⁷  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

See “Disclosure of Expenses” on page 6 for further information on how expenses were calculated.

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 5

About Fund Performance

Ÿ Institutional and Class K Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors.

Ÿ Investor A Shares are not subject to any sales charge and bear no ongoing distribution fee. These shares are subject to an ongoing service fee of 0.25% per year.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in the performance table on the preceeding page assume reinvestment of all dividends and distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. The Fund’s administrator waived and/or reimbursed a portion of the Fund’s expenses. Without such waiver and/or reimbursement, the Fund’s performance would have been lower. Dividends paid to each class of shares will vary because of the different levels of administration and distribution fees applicable to each class, which are deducted from the income available to be paid to shareholders.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including administration fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses and other Fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2013 and held through December 31, 2013) 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 other funds’ shareholder reports.

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 Master Portfolio may invest in various derivative financial instruments, including financial futures contracts and foreign currency exchange contracts, as specified in Note 4 of the Master Portfolio’s Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market, equity or foreign currency exchange rate risks. Derivative financial instruments 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 derivative financial instrument. The Master Portfolio’s ability to use a derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require the Master Portfolio to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation the Master Portfolio can realize on an investment, may result in lower dividends paid to shareholders or may cause the Master Portfolio to hold an investment that it might otherwise sell. The Master Portfolio’s investments in these instruments are discussed in detail in the Master Portfolio’s Notes to Financial Statements.

6 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Statement of Assets and Liabilities BlackRock ACWI ex-US Index Fund

December 31, 2013
Assets
Investments at value — Master Portfolio (cost — $7,597,276)	$	15,189,727
Capital shares sold receivable		31,533
Receivable from administrator		8,624
Prepaid expenses		21,475
Total assets		15,251,359
Liabilities
Contributions payable to the Master Portfolio		25,632
Capital shares redeemed payable		5,901
Income dividends payable		6,905
Registration fees payable		6,767
Printing fees payable		7,476
Transfer agent fees payable		1,396
Service fees payable		10
Professional fees payable		38,334
Other accrued expenses payable		678
Total liabilities		93,099
Net Assets	$	15,158,260
Net Assets Consist of
Paid-in capital	$	10,748,138
Distributions in excess of net investment income		(85,553	)
Accumulated net realized loss allocated from the Master Portfolio		(3,096,776	)
Net unrealized appreciation/depreciation allocated from the Master Portfolio		7,592,451
Net Assets	$	15,158,260
Net Asset Value
Institutional — Based on net assets of $15,013,239 and 1,491,755 shares outstanding, unlimited number of shares authorized, no par value	$	10.06
Investor A — Based on net assets of $64,871 and 6,448 shares outstanding, unlimited number of shares authorized, no par value	$	10.06
Class K — Based on net assets of $80,150 and 7,781 shares outstanding, unlimited number of shares authorized, no par value	$	10.30

See Notes to Financial Statements.
	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2013	7

Statement of Operations BlackRock ACWI ex-US Index Fund

Year Ended December 31, 2013
Investment Income
Net investment income allocated from the Master Portfolio:
Dividends — unaffiliated	$	340,373
Foreign taxes withheld		(41,982	)
Other income — affiliated		8,916
Dividends — affiliated		1,841
Securities lending — affiliated — net		1,155
Income — affiliated		347
Expenses		(28,773	)
Fees waived		1,412
Total income		283,289
Fund Expenses
Administration		11,477
Service — Investor A		110
Transfer agent — Institutional		2,611
Transfer agent — Investor A		186
Transfer agent — Class K		84
Professional		42,671
Registration		30,236
Printing		21,059
Miscellaneous		8,418
Total expenses		116,852
Less administration fees waived		(11,477	)
Less transfer agent fees waived — Institutional		(14	)
Less transfer agent fees waived — Investor A		(31	)
Less transfer agent fees waived — Class K		(32	)
Less transfer agent fees reimbursed — Institutional		(1,474	)
Less transfer agent fees reimbursed — Investor A		(133	)
Less transfer agent fees reimbursed — Class K		(52	)
Less fees reimbursed by administrator		(90,551	)
Total expenses after fees waived and reimbursed		13,088
Net investment income		270,201
Realized and Unrealized Gain Allocated from the Master Portfolio
Net realized gain from investment, financial futures contracts and foreign currency transactions		826,856
Net change in unrealized appreciation/depreciation on investments, financial futures contracts and foreign currency translations		568,944
Total realized and unrealized gain		1,395,800
Net Increase in Net Assets Resulting from Operations	$	1,666,001

See Notes to Financial Statements.
8	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2013

Statements of Changes in Net Assets BlackRock ACWI ex-US Index Fund

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012
Operations
Net investment income	$	270,201		$	906,395
Net realized gain (loss)		826,856			(3,693,070	)
Net change in unrealized appreciation/depreciation		568,944			10,461,710
Net increase in net assets resulting from operations		1,666,001			7,675,035
Dividends and Distributions to Shareholders From1
Net investment income:
Institutional		(287,796	)		(767,437	)
Investor A		(1,049	)		(1,501	)
Class K		(1,578	)		(182,164	)
Return of capital:
Institutional		—			(175	)
Class K		—			(42	)
Decrease in net assets resulting from dividends and distributions to shareholders		(290,423	)		(951,319	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		4,091,169			(13,322,040	)
Net Assets
Total increase (decrease) in net assets		5,466,747			(6,598,324	)
Beginning of year		9,691,513			16,289,837
End of year	$	15,158,260		$	9,691,513
Distributions in excess of net investment income, end of year	$	(85,553	)	$	(65,331	)

¹  Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2013	9

Financial Highlights BlackRock ACWI ex-US Index Fund

	Institutional
	Year Ended December 31,						Period June 30, 20111 to December 31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	9.06		$	8.13		$	10.00
Net investment income2		0.22			0.17			0.08
Net realized and unrealized gain (loss)		1.02			1.16			(1.89	)
Net increase (decrease) from investment operations		1.24			1.33			(1.81	)
Dividends and distributions from:3
Net investment income		(0.24	)		(0.40	)		(0.04	)
Return of capital		—			(0.00	)4		(0.02	)
Total dividends and distributions		(0.24	)		(0.40	)		(0.06	)
Net asset value, end of period	$	10.06		$	9.06		$	8.13
Total Investment Return5
Based on net asset value		13.94%			16.61%			(18.05)%	6
Ratios to Average Net Assets7
Total expenses8		1.25%			0.75%			2.04%	9,10
Total expenses after fees waived and/or reimbursed8		0.35%			0.34%			0.37%	9
Net investment income8		2.35%			1.95%			1.78%	9
Supplemental Data
Net assets, end of period (000)	$	15,013		$	9,602		$	46
Portfolio turnover of the Master Portfolio		36%			42%			4%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Amount is greater than $(0.005) per share.

⁵  Where applicable, assumes the reinvestment of dividends and distributions.

⁶  Aggregate total investment return.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁸  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.01%, 0.08% and 1.14% for the years ended December 31, 2013 and December 31, 2012, and the period ended December 31, 2011, respectively.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 2.08%.

See Notes to Financial Statements.
10	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2013

Financial Highlights (continued) BlackRock ACWI ex-US Index Fund

	Investor A
	Year Ended December 31,						Period June 30, 20111 to December 31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	9.06		$	8.13		$	10.00
Net investment income2		0.21			0.19			0.08
Net realized and unrealized gain (loss)		1.00			1.12			(1.89	)
Net increase (decrease) from investment operations		1.21			1.31			(1.81	)
Dividends and distributions from:3
Net investment income		(0.21	)		(0.38	)		(0.04	)
Return of capital		—			(0.00	)4		(0.02	)
Total dividends and distributions		(0.21	)		(0.38	)		(0.06	)
Net asset value, end of period	$	10.06		$	9.06		$	8.13
Total Investment Return5
Based on net asset value		13.63%			16.31%			(18.11)%	6
Ratios to Average Net Assets7
Total expenses8		1.91%			1.88%			2.30%	9,10
Total expenses after fees waived and/or reimbursed8		0.64%			0.63%			0.62%	9
Net investment income8		2.21%			2.18%			1.74%	9
Supplemental Data
Net assets, end of period (000)	$	65		$	39		$	20
Portfolio turnover of the Master Portfolio		36%			42%			4%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Amount is greater than $(0.005) per share.

⁵  Where applicable, assumes the reinvestment of dividends and distributions.

⁶  Aggregate total investment return.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁸  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.01%, 0.16% and 1.14% for the years ended December 31, 2013 and December 31, 2012, and the period ended December 31, 2011, respectively.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 2.36%.

See Notes to Financial Statements.
	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2013	11

Financial Highlights (concluded) BlackRock ACWI ex-US Index Fund

	Class K
	Year Ended December 31,						Period June 30, 20111 to December 31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	9.27		$	8.13		$	10.00
Net investment income2		0.23			0.28			0.09
Net realized and unrealized gain (loss)		1.04			1.27			(1.90	)
Net increase (decrease) from investment operations		1.27			1.55			(1.81	)
Dividends and distributions from:3
Net investment income		(0.24	)		(0.41	)		(0.04	)
Return of capital		—			(0.00	)4		(0.02	)
Total dividends and distributions		(0.24	)		(0.41	)		(0.06	)
Net asset value, end of period	$	10.30		$	9.27		$	8.13
Total Investment Return5
Based on net asset value		13.96%			19.25%			(18.04)%	6
Ratios to Average Net Assets7
Total expenses8		1.36%			1.80%			1.73%	9,10
Total expenses after fees waived and/or reimbursed8		0.34%			0.33%			0.32%	9
Net investment income8		2.40%			3.31%			2.03%	9
Supplemental Data
Net assets, end of period (000)	$	80		$	50		$	16,224
Portfolio turnover of the Master Portfolio		36%			42%			4%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Amount is greater than $(0.005) per share.

⁵  Where applicable, assumes the reinvestment of dividends and distributions.

⁶  Aggregate total investment return.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁸  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.01%, 0.29% and 1.14% for the years ended December 31, 2013 and December 31, 2012, and the period ended December 31, 2011, respectively.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 1.79%.

See Notes to Financial Statements.
12	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2013

Notes to Financial Statements BlackRock ACWI ex-US Index Fund

1. Organization:

BlackRock ACWI ex-US Index Fund (the “Fund”), a series of BlackRock Funds III (the “Trust”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a non-diversified, open-end management investment company. The Trust is organized as a Delaware statutory trust. The Fund seeks to achieve its investment objective by investing substantially all of its assets in ACWI ex-US Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), an affiliate of the Fund, which has the same investment objective and strategies as the Fund. The value of the Fund’s investment in the Master Portfolio reflects the Fund’s proportionate interest in the net assets of the Master Portfolio. The performance of the Fund is directly affected by the performance of the Master Portfolio. The percentage of the Master Portfolio owned by the Fund at December 31, 2013 was 2.7%. The financial statements of the Master Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with the Fund’s financial statements. The Fund offers multiple classes of shares. Institutional and Class K Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are sold without a sales charge. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that Investor A Shares also bear certain expenses related to the shareholder servicing of such shares. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing expenditures.

2. Significant Accounting Policies:

The Fund’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in 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 following is a summary of the significant accounting policies followed by the Fund:

Valuation: US 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 policy is to fair value its financial instruments at market value. The Fund records its investment in the Master Portfolio at fair value based on the Fund’s proportionate interest in the net assets of the Master Portfolio. Valuation of securities held by the Master Portfolio is discussed in Note 2 of the Master Portfolio’s Notes to Financial Statements, which are included elsewhere in this report.

Investment Transactions and Investment Income: For financial reporting purposes, contributions to and withdrawals from the Master Portfolio are accounted on a trade date basis. The Fund records daily its proportionate share of the Master Portfolio’s income, expenses and realized and unrealized gains and losses. Realized and unrealized gains and losses are adjusted utilizing partnership tax allocation rules. In addition, the Fund accrues its own expenses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Dividends and Distributions: Dividends and distributions paid by the Fund are recorded on the ex-dividend dates, The portion of distributions that exceeds a Fund’s current and accumulated earnings and profits, which are measured on a tax basis, will 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 and accumulated 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. See Note 4, Income Tax Information, for the tax character of the Fund’s distributions paid during the period.

Income Taxes: 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 US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s US federal tax returns remains open for the years ended December 31, 2013 and December 31, 2012, and the period ended December 31, 2011. 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’s facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

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

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 13

Notes to Financial Statements (continued) BlackRock ACWI ex-US Index Fund

3. Administration Agreement and Other Transactions with Affiliates:

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

The Trust, on behalf of the Fund, entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL”), an indirect, wholly owned subsidiary of BlackRock, to provide administrative services (other than investment advice and related portfolio activities). For such services, the Fund pays BAL a monthly fee at an annual rate of 0.10% of the average daily value of the Fund’s net assets. The Fund does not pay an investment advisory fee or investment management fee. Effective July 1, 2012, BAL replaced BlackRock Institutional Trust Company, N.A. (“BTC”) as the Fund’s administrator.

BlackRock Fund Advisors (“BFA”), the investment advisor for the Master Portfolio, BAL and previously, BTC, 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. The expense limitation as a percentage of average daily net assets is as follows: 0.40% for Institutional Shares, 0.65% for Investor A Shares and 0.35% for Class K Shares. BFA and BAL have agreed not to reduce or discontinue this contractual waiver or reimbursement prior to May 1, 2014, unless approved by the Trust’s Board of Trustees, including a majority of the independent trustees. The Fund may have to repay some of these waivers and reimbursements to BAL and BTC in the following two years. These amounts are shown as or included in administration fees waived, transfer agent fees waived — class specific, transfer agent fees reimbursed — class specific and fees reimbursed by administrator.

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 or reimbursement from BFA, BAL or previously BTC, as applicable, are less than the expense limit for that share class, the share class is required to repay BFA, BAL or previously BTC, as applicable, up to the lesser of (a) the amount of fees waived or expenses reimbursed during the prior two fiscal years under the agreement and (b) the amount by which the expense limit for that share class exceeds the operating expenses of the share class for the current fiscal year, 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) BFA, BAL or previously BTC or an affiliate serves as the Fund’s investment advisor or administrator. In the event the expense limit for a share class is changed subsequent to a fiscal year in which BFA, BAL, or previously BTC, as applicable, becomes entitled to reimbursement for fees waived or reimbursed, the amount available to reimburse BFA, BAL or previously BTC, as applicable, shall be calculated by reference to the expense limit for that share class in effect at the time BFA, BAL or previously BTC became entitled to receive such reimbursement, rather than the subsequently changed expense limit for that share class.

For the year ended December 31, 2013, BAL or previously BTC did not recoup any Fund level or class specific waivers and/or reimbursements previously recorded by the Fund.

On December 31, 2013, the Fund level and class specific waiver and/or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:

	Expiring December 31,
	2014				2015
	BTC		BAL		BAL
Fund level	$	146,981	$	110,878	$	102,028
Institutional	$	9	$	375	$	1,488
Investor A	$	19	$	19	$	164
Class K	$	799	$	20	$	84

The Fund level and class specific waivers and/or reimbursements previously recorded by the Fund, which were subject to recoupment by the Manager, expired on December 31, 2013:

	BTC
Fund level	$	118,427
Investor A	$	31
Class K	$	1,388

The Trust, on behalf of the Fund, entered into a Distribution Agreement and Investor A Shares Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of BlackRock. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing service fees with respect to Investor A Shares. The fees are accrued daily and paid monthly at an annual rate of 0.25% based upon the average daily net assets of the Investor A Shares.

Pursuant to sub-agreements with BRIL, broker-dealers and BRIL provide shareholder servicing to the Fund. The ongoing service fee compensates BRIL and each broker-dealer for providing shareholder servicing related services to Investor A shareholders.

BAL maintains a call center, which is responsible for providing certain shareholder services to the Fund, such as responding to shareholder inquiries and processing transactions based upon instructions from shareholders with respect to the subscription and redemption of Fund shares. For the year ended December 31, 2013, the Fund reimbursed BAL the following amounts for costs incurred in running the call center, which are included in transfer agent — class specific in the Statement of Operations:

Institutional	$	228
Investor A	$	31
Class K	$	32

14 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Notes to Financial Statements (concluded) BlackRock ACWI ex-US Index Fund

Certain officers and/or trustees of the Trust are officers and/or directors of BlackRock or its affiliates. The Fund reimburses the Administrator for a portion of the compensation paid to the Trust’s Chief Compliance Officer.

4. Income Tax Information:

The tax character of distributions paid during the fiscal years ended December 31, 2013 and December 31, 2012 was as follows:

	12/31/13		12/31/12
Ordinary income	$	290,423	$	951,102
Return of capital		—		217
Total	$	290,423	$	951,319

As of December 31, 2013, the tax components of accumulated net earnings were as follows:

Undistributed ordinary income	$	7,699
Undistributed long-term capital gains		314,250
Net unrealized gains1		4,088,173
Total	$	4,410,122

¹  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the timing and recognition of partnership income.

During the year ended December 31, 2013, the Fund utilized $2,253,335 of its capital loss carryforward.

5. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2013						Year Ended December 31, 2012
	Shares			Amount			Shares			Amount
Institutional
Shares sold		601,760		$	5,686,801			9,459,692		$	77,458,398
Shares issued to shareholders in reinvestment of dividends and distributions		30,674			287,194			87,727			766,601
Shares redeemed		(199,954	)		(1,927,201	)		(8,493,801	)		(75,581,211	)
Net increase		432,480		$	4,046,794			1,053,618		$	2,643,788
Investor A
Shares sold		4,812		$	47,554			1,873		$	15,506
Shares issued to shareholders in reinvestment of dividends		55			512			62			548
Shares redeemed		(2,761	)		(26,703	)		(93	)		(797	)
Net increase		2,106		$	21,363			1,842		$	15,257
Class K
Shares sold		2,334		$	22,682			2,170		$	17,451
Shares issued to shareholders in reinvestment of dividends and distributions		85			813			76			689
Shares redeemed		(49	)		(483	)		(1,991,835	)		(15,999,225	)
Net increase (decrease)		2,370		$	23,012			(1,989,589	)	$	(15,981,085	)
Total Net Increase (Decrease)		436,956		$	4,091,169			(934,129	)	$	(13,322,040	)

At December 31, 2013, shares owned by affiliates were as follows:

	Shares
Institutional		2,500
Investor A		2,500
Class K		3,165

6. Subsequent Events:

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

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 15

Report of Independent Registered Public Accounting Firm BlackRock ACWI ex-US Index  Fund

To the Board of Trustees of BlackRock Funds III and

the Shareholders of BlackRock ACWI ex-US Index Fund:

In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock ACWI ex-US Index Fund (the “Fund”), a series of BlackRock Funds III, at December 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2014

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by the Fund during the taxable year ended December 31, 2013.

	Payable Dates
Qualified Dividend Income for Individuals1		3/28/2013	100.00%
		6/28/2013	100.00%
		9/30/2013	100.00%
		12/31/2013	100.00%
Foreign Source Income2		3/28/2013	100.00%
		6/28/2013	100.00%
		9/30/2013	100.00%
		12/31/2013	100.00%
Foreign Taxes Paid Per Share3		3/28/2013	$0.053090000
		6/28/2013	$0.106962000
		9/30/2013	$0.055871000
		12/31/2013	$0.053250000

¹  The Fund hereby designate the percentage indicated above or the maximum amount allowable by law.

²  Expressed as a percentage of distributions grossed up for foreign taxes.

³  The foreign taxes paid represent taxes paid by the Fund on income received by the Fund from foreign sources. Foreign taxes paid may be included in taxable income with an offsetting deduction from gross income or may be taken as a credit for taxes paid to foreign governments. You should consult your tax advisor regarding the appropriate treatment of foreign taxes paid.

16 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Master Portfolio Information ACWI ex-US Index Master  Portfolio

As of December 31, 2013

Ten Largest Holdings Percent of
Long-Term Investments

iShares India 50 ETF	1	%
Nestlé SA, Registered Share	1
HSBC Holdings PLC	1
Roche Holding AG	1
Vodafone Group PLC	1
Novartis AG, Registered Shares	1
Toyota Motor Corp.	1
BP PLC	1
Samsung Electronics Co. Ltd.	1
Royal Dutch Shell PLC	1

Geographic Allocation Percent of
Long-Term Investments

United Kingdom	15	%
Japan	15
France	7
Canada	7
Switzerland	7
Germany	7
Australia	5
China	4
South Korea	3
Hong Kong	2
Spain	2
Taiwan	2
Sweden	2
Brazil	2
Netherlands	2
Italy	2
South Africa	2
Other1	14

¹  Includes holdings within countries that are 1% or less of long-term investments. Please refer to the Schedule of Investments for such countries.

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 17

Schedule of Investments December 31, 2013 ACWI ex-US Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Australia — 5.4%
AGL Energy Ltd. (a)		17,258	$	231,995
ALS Ltd.		11,241		88,685
Alumina Ltd. (b)		74,293		73,759
Amcor Ltd.		36,055		340,568
AMP Ltd.		87,998		345,870
APA Group		24,891		133,594
Asciano Ltd.		29,679		153,009
ASX Ltd.		5,970		196,324
Aurizon Holdings Ltd.		60,946		266,184
Australia & New Zealand Banking Group Ltd.		83,234		2,402,817
Bank of Queensland Ltd.		8,192		89,187
Bendigo and Adelaide Bank Ltd. (a)		12,078		126,966
BHP Billiton Ltd.		97,442		3,322,082
Boral Ltd. (a)		22,726		97,191
Brambles Ltd.		47,351		387,944
Caltex Australia Ltd.		3,697		66,439
CFS Retail Property Trust		61,764		107,511
Coca-Cola Amatil Ltd.		17,129		184,267
Cochlear Ltd. (a)		1,677		88,357
Commonwealth Bank of Australia		48,903		3,407,418
Computershare Ltd.		14,087		143,552
Crown Resorts Ltd.		11,987		180,857
CSL Ltd.		14,830		914,223
Dexus Property Group		149,445		134,408
Echo Entertainment Group Ltd.		31,138		68,591
Federation Centres Ltd.		41,935		87,905
Flight Centre Ltd.		2,028		86,370
Fortescue Metals Group Ltd.		45,797		239,236
Goodman Group		51,911		219,935
GPT Group		51,940		157,957
Harvey Norman Holdings Ltd. (a)		13,921		39,395
Iluka Resources Ltd.		12,412		96,181
Incitec Pivot Ltd.		47,280		113,421
Insurance Australia Group Ltd.		68,861		358,534
Leighton Holdings Ltd. (a)		4,710		68,021
Lend Lease Group		16,969		169,346
Macquarie Group Ltd.		8,780		430,946
Metcash Ltd. (a)		24,966		70,505
Mirvac Group		114,641		172,387
National Australia Bank Ltd.		71,206		2,222,485
Newcrest Mining Ltd.		22,997		161,492
Common Stocks	Shares		Value
Australia (concluded)
Orica Ltd.		11,584	$	247,709
Origin Energy Ltd.		33,045		416,453
Orora Ltd. (b)		39,156		40,556
Qantas Airways Ltd. (b)		22,815		22,380
QBE Insurance Group Ltd.		36,864		380,278
Ramsay Health Care Ltd.		4,015		155,386
REA Group Ltd.		1,783		60,225
Rio Tinto Ltd.		13,165		805,792
Santos Ltd.		29,034		380,516
Seek Ltd. (a)		9,862		118,565
Sonic Healthcare Ltd.		11,504		170,725
SP AusNet		58,496		65,139
Stockland		67,584		218,507
Suncorp Group Ltd.		39,097		458,915
Sydney Airport		34,131		115,999
Tabcorp Holdings Ltd.		26,369		85,616
Tatts Group Ltd.		40,669		112,752
Telstra Corp. Ltd.		132,237		620,668
Toll Holdings Ltd.		19,977		101,606
Transurban Group		42,625		260,669
Treasury Wine Estates Ltd.		18,676		80,550
Wesfarmers Ltd.		30,110		1,185,519
Westfield Group		62,400		563,305
Westfield Retail Trust		95,194		252,896
Westpac Banking Corp.		94,141		2,729,022
Woodside Petroleum Ltd.		19,887		692,634
Woolworths Ltd.		37,893		1,147,451
WorleyParsons Ltd.		6,053		90,042
				29,825,789
Austria — 0.2%
Andritz AG		2,079		130,289
Erste Group Bank AG		7,624		265,776
IMMOFINANZ AG		27,589		127,841
OMV AG		4,701		224,992
Raiffeisen Bank International AG (a)		1,162		41,031
Telekom Austria AG		7,747		58,659
Vienna Insurance Group AG		1,317		65,821
Voestalpine AG		3,392		163,000
				1,077,409

Portfolio Abbreviations

To simplify the listings of portfolio holdings in the Schedule of Investments, the names and descriptions of many of the securities have been abbreviated according to the following list:	ADR	American Depositary Receipts	JPY	Japanese Yen
	AUD	Australian Dollar	KRW	South Korean Won
	BRL	Brazilian Real	MXN	Mexican Peso
	CAD	Canadian Dollar	MYR	Malaysian Ringgit
	CHF	Swiss Franc	NOK	Norwegian Krone
	CVA	Certificaten Van Aandelen (Dutch Certificate)	NVDR	Non-Voting Depository Receipts
	CZK	Czech Koruna	NZD	New Zealand Dollar
	DKK	Danish Krone	PHP	Philippine Peso
	EUR	Euro	PLN	Polish Zloty
	FKA	Formerly Known As	REIT	Real Estate Investment Trust
	GBP	British Pound	SEK	Swedish Krona
	GDR	Global Depositary Receipt	SGD	Singapore Dollar
	HKD	Hong Kong Dollar	TRY	Turkish Lira
	HUF	Hungarian Forint	TWD	Taiwan Dollar
	IDR	Indonesian Rupiah	USD	US Dollar
	ILS	Israeli Shekel	ZAR	South African Rand

See Notes to Financial Statements.

18 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) ACWI ex-US Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Belgium — 0.9%
Ageas		6,464	$	275,648
Anheuser-Busch InBev NV		24,356		2,589,924
Belgacom SA (a)		4,505		133,313
Colruyt SA		2,320		129,626
Delhaize Group (a)		3,056		181,807
Groupe Bruxelles Lambert SA		2,443		224,417
KBC Groep NV		7,555		429,543
Solvay SA		1,776		281,086
Telenet Group Holding NV		1,521		90,760
UCB SA		3,116		232,147
Umicore SA		3,417		159,658
				4,727,929
Brazil — 2.2%
AES Tiete SA, Preference Shares		3,700		29,939
All — America Latina Logistica SA		16,900		46,991
AMBEV SA		142,100		1,043,201
Anhanguera Educacional Participacoes SA		10,600		66,945
Banco Bradesco SA — ADR		21,630		292,923
Banco Bradesco SA, Preference Shares		60,290		743,387
Banco do Brasil SA		17,500		180,990
Banco do Estado do Rio Grande do Sul, Preference Shares		2,900		15,488
Banco Santander Brasil SA		28,700		170,065
BB Seguridade Participacoes SA		18,000		186,924
BM&FBovespa SA		59,200		277,525
BR Malls Participacoes SA		10,800		78,050
BR Properties SA		5,100		40,208
Bradespar SA, Preference Shares		7,900		83,981
Braskem SA, Preference ‘A’ Shares (b)		3,300		29,374
BRF — Brasil Foods SA		19,600		409,155
CCR SA		26,100		196,587
Centrais Eletricas Brasileiras SA		11,400		28,364
Centrais Eletricas Brasileiras SA, Preference ‘B’ Shares		7,500		31,567
CETIP SA — Mercados Organizado		5,104		52,354
Cia Brasileira de Distribuicao Grupo Pao de Acucar, Preference Shares		4,400		195,657
Cia Energetica de Minas Gerais, Preference Shares		24,613		146,160
Cia Energetica de Sao Paulo, Preference ‘B’ Shares		4,000		38,012
Cia Paranaense de Energia, Preference ‘B’ Shares		3,400		43,998
Cielo SA		10,780		299,971
Companhia de Saneamento Basico do Estado de Sao Paulo		9,700		108,790
Companhia de Saneamento de Minas Gerais — COPASA		1,900		29,959
Companhia Hering SA		5,000		63,367
Companhia Siderurgica Nacional SA		21,400		130,436
Cosan SA Industria e Comercio		4,200		70,461
CPFL Energia SA		6,000		48,549
Cyrela Brazil Realty SA		6,700		40,894
Duratex SA		10,010		55,794
EcoRodovias Infraestrutura e Logistica SA		5,600		35,130
EDP — Energias do Brasil SA		9,300		44,741
Embraer SA		18,000		144,122
Estacio Participacoes SA		9,300		80,455
Fibria Celulose SA (b)		6,700		78,523
Gerdau SA, Preference Shares		27,000		209,889
Hypermarcas SA		11,600		86,782
Itau Unibanco Holding SA, Preference Shares		75,530		1,003,652
Itausa — Investimentos Itau SA, Preference Shares		82,483		311,158
Common Stocks	Shares		Value
Brazil (concluded)
JBS SA		21,100	$	78,435
Klabin SA, Preference Shares		13,300		69,114
Kroton Educacional SA		5,500		91,525
Localiza Rent a Car SA		5,040		71,095
Lojas Americanas SA		4,800		27,812
Lojas Americanas SA, Preference Shares		9,856		65,714
Lojas Renner SA		3,300		85,324
M Dias Branco SA		1,200		50,864
Marcopolo SA, Preference Shares		18,200		39,343
Metalurgica Gerdau SA, Preference Shares		7,600		75,380
MRV Engenharia e Participacoes SA		11,900		42,521
Multiplan Empreendimentos Imobiliarios SA		2,800		59,222
Natura Cosmeticos SA		5,000		87,676
Odontoprev SA		9,300		38,749
Oi SA, Preference Shares		13,897		21,147
Petroleo Brasileiro SA		88,700		601,171
Petroleo Brasileiro SA, Preference Shares		128,100		927,391
Porto Seguro SA		4,100		51,701
Qualicorp SA (b)		7,200		68,666
Raia Drogasil SA		4,700		29,444
Souza Cruz SA		10,700		109,347
Sul America SA		5,738		35,971
Suzano Papel e Celulose SA, Preference ‘A’ Shares		10,900		42,690
Telefonica Brasil SA, Preference Shares		8,700		165,316
Tim Participacoes SA		25,640		134,001
Totvs SA		3,300		51,698
Tractebel Energia SA		4,600		70,075
Transmissora Alianca de Energia Eletrica SA		3,300		25,457
Ultrapar Participacoes SA		10,300		244,266
Usinas Siderurgicas de Minas Gerais SA, Preference ‘A’ Shares (b)		9,600		57,822
Vale SA		40,300		609,987
Vale SA, Preference ‘A’ Shares		56,100		778,278
WEG SA		6,200		81,887
				12,259,607
Canada — 7.1%
Agnico Eagle Mines, Ltd.		5,057		133,441
Agrium, Inc.		4,404		402,859
Alimentation Couche Tard, Inc., Class B		4,175		313,955
AltaGas Ltd.		3,476		133,412
ARC Resources, Ltd.		9,377		261,029
Atco Ltd., Class I		2,185		95,977
Athabasca Oil Corp. (b)		11,168		68,128
Bank of Montreal		19,541		1,302,611
Bank of Nova Scotia (a)		36,450		2,279,476
Barrick Gold Corp.		35,436		624,154
Baytex Energy Corp.		3,897		152,762
BCE, Inc.		7,614		329,719
Bell Aliant, Inc. (a)		1,961		49,346
BlackBerry, Ltd. (a)(b)		14,305		106,387
Bombardier, Inc., Class B		45,491		197,424
Brookfield Asset Management Inc., Class A		16,617		644,813
Brookfield Office Properties, Inc.		8,350		160,751
CAE, Inc.		7,564		96,201
Cameco Corp.		11,514		238,897
Canadian Imperial Bank of Commerce		12,079		1,031,590
Canadian National Railway Co.		25,373		1,446,542
Canadian Natural Resources Ltd.		32,770		1,108,735
Canadian Oil Sands Ltd.		14,643		275,422
Canadian Pacific Railway Ltd.		5,267		796,558

See Notes to Financial Statements.

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 19

Schedule of Investments (continued) ACWI ex-US Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Canada (continued)
Canadian Tire Corp. Ltd., Class A		2,176	$	203,803
Canadian Utilities, Ltd., Class A		3,432		115,245
Catamaran Corp. (b)		6,190		293,985
Cenovus Energy, Inc.		22,611		647,093
CGI Group, Inc., Class A (b)		6,466		216,335
CI Financial Corp.		5,090		169,387
Crescent Point Energy Corp.		11,567		449,177
Dollarama, Inc.		2,058		170,898
Eldorado Gold Corp.		22,616		128,383
Empire Co., Ltd., Class A (a)		1,672		114,242
Enbridge, Inc.		23,646		1,033,100
Encana Corp.		22,199		400,825
Enerplus Corp.		6,209		112,811
Fairfax Financial Holdings, Ltd.		318		126,963
Finning International, Inc.		5,061		129,354
First Capital Realty, Inc.		2,654		44,248
First Quantum Minerals Ltd.		16,954		305,483
Fortis, Inc.		6,089		174,545
Franco-Nevada Corp.		4,529		184,571
George Weston Ltd.		1,554		113,377
Gildan Activewear, Inc.		3,492		186,098
Goldcorp, Inc.		24,745		536,714
Great-West Lifeco, Inc.		9,120		281,177
H&R Real Estate Investment Trust		4,412		88,884
Husky Energy, Inc.		10,242		324,929
IGM Financial, Inc.		3,017		159,307
Imperial Oil Ltd.		8,790		389,251
Industrial Alliance Insurance & Financial Services, Inc.		2,981		131,756
Intact Financial Corp.		3,913		255,538
Keyera Corp.		2,323		139,806
Kinross Gold Corp.		36,596		160,199
Loblaw Cos. Ltd. (a)		3,462		138,121
Magna International, Inc.		6,756		553,963
Manulife Financial Corp.		55,739		1,099,825
MEG Energy Corp. (b)		4,348		125,293
Methanex Corp.		2,801		165,647
Metro, Inc.		2,844		173,759
National Bank of Canada (a)		4,870		405,233
New Gold, Inc. (b)		16,854		88,217
Onex Corp.		2,763		149,172
Open Text Corp.		1,949		179,277
Pembina Pipeline Corp.		9,294		327,401
Pengrowth Energy Corp.		15,559		96,232
Penn West Petroleum Ltd.		14,548		121,479
Peyto Exploration & Development Corp.		4,181		127,959
Potash Corp. of Saskatchewan, Inc.		26,156		862,305
Power Corp. of Canada		10,421		313,439
Power Financial Corp.		7,390		250,450
RioCan Real Estate Investment Trust		4,337		101,132
Rogers Communications, Inc., Class B		10,878		492,262
Royal Bank of Canada		43,648		2,934,247
Saputo, Inc.		3,754		171,011
Shaw Communications, Inc., Class B		11,670		283,991
Shoppers Drug Mart Corp.		6,037		330,707
Silver Wheaton Corp. (a)		10,891		219,922
SNC-Lavalin Group, Inc.		4,286		192,825
Sun Life Financial, Inc.		18,336		647,650
Suncor Energy, Inc.		45,301		1,588,147
Talisman Energy, Inc.		31,357		364,565
Teck Resources, Ltd., Class B		16,940		440,942
TELUS Corp.		7,742		266,460
Common Stocks	Shares		Value
Canada (concluded)
Thomson Reuters Corp.		11,183	$	422,896
Tim Hortons, Inc.		4,330		252,687
The Toronto-Dominion Bank		27,916		2,630,897
Tourmaline Oil Corp. (b)		4,469		188,058
TransAlta Corp.		7,644		97,003
TransCanada Corp.		21,304		973,496
Turquoise Hill Resources Ltd. (a)(b)		6,844		22,615
Valeant Pharmaceuticals International, Inc. (b)		9,578		1,123,662
Vermilion Energy, Inc. (a)		2,867		168,282
Yamana Gold, Inc.		20,063		173,007
				39,301,909
Chile — 0.3%
AES Gener SA		87,214		48,273
Aguas Andinas SA, Class A		76,400		49,346
Banco de Chile		514,467		74,705
Banco de Credito e Inversiones		1,165		64,656
Banco Santander Chile SA		1,867,462		108,256
CAP SA		2,694		51,262
Cencosud SA		33,167		119,450
Colbun SA		280,634		64,053
Companhia Cervecerias Unidas SA		4,404		52,761
CorpBanca		4,866,076		67,141
E.CL SA		19,454		25,140
Embotelladora Andina SA, Preference ‘B’ Shares		9,220		42,339
Empresa Nacional de Electricidad SA		93,935		139,847
Empresa Nacional de Telecomunicaciones SA		4,171		56,602
Empresas CMPC SA		34,222		83,756
Empresas COPEC SA		12,488		167,308
Enersis SA		568,594		170,540
Latam Airlines Group SA		7,853		123,366
SACI Falabella		20,417		183,129
Sociedad Quimica y Minera de Chile SA, Preference ‘B’ Shares		2,692		68,569
Vina Concha y Toro SA		22,049		41,393
				1,801,892
China — 3.6%
AAC Technologies Holdings, Inc. (a)		22,500		109,480
Agile Property Holdings Ltd.		32,000		34,409
Agricultural Bank of China Ltd., Class H		638,000		314,721
Air China Ltd., Class H		62,000		46,426
Aluminum Corp. of China Ltd., Class H (a)(b)		136,000		47,460
Anhui Conch Cement Co. Ltd., Class H (a)		37,000		137,661
Anta Sports Products Ltd.		32,000		39,705
AviChina Industry & Technology Co. Ltd., Class H (a)		72,000		42,001
Bank of China Ltd., Class H		2,266,000		1,046,039
Bank of Communications Co. Ltd., Class H (a)		273,700		193,687
BBMG Corp., Class H		39,500		34,471
Beijing Capital International Airport Co. Ltd., Class H		64,000		50,239
Beijing Enterprises Holdings Ltd.		16,000		158,932
Biostime International Holdings, Ltd.		5,000		44,588
Brilliance China Automotive Holdings Ltd.		96,000		156,807
Byd Co. Ltd., Class H (a)(b)		13,000		63,909
China BlueChemical Ltd., Class H		70,000		43,856
China Citic Bank Corp. Ltd., Class H		237,000		129,050
China Coal Energy Co. Ltd., Class H		107,000		60,333
China Communications Construction Co. Ltd., Class H		126,000		101,957

See Notes to Financial Statements.

20 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) ACWI ex-US Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
China (continued)
China Communications Services Corp. Ltd., Class H		92,000	$	57,049
China Construction Bank Corp., Class H		2,171,000		1,643,688
China COSCO Holdings Co. Ltd., Class H (b)		92,500		45,236
China International Marine Containers Group Co. Ltd., Class H		12,000		25,611
China Life Insurance Co. Ltd., Class H		223,000		702,850
China Longyuan Power Group Corp., Class H		89,000		114,779
China Mengniu Dairy Co., Ltd.		41,000		194,998
China Merchants Bank Co. Ltd., Class H		135,578		289,941
China Minsheng Banking Corp. Ltd., Class H (a)		154,500		172,197
China Mobile Ltd.		182,500		1,900,979
China National Building Material Co. Ltd., Class H (a)		76,000		82,028
China Oilfield Services Ltd., Class H		48,000		149,517
China Pacific Insurance Group Co. Ltd., Class H		78,400		308,415
China Petroleum & Chemical Corp., Class H		766,400		628,851
China Railway Construction Corp. Ltd., Class H		71,000		70,880
China Railway Group Ltd., Class H		145,000		75,076
China Shenhua Energy Co. Ltd., Class H		101,000		319,641
China Shipping Container Lines Co. Ltd., Class H (a)(b)		122,000		31,909
China Telecom Corp. Ltd., Class H		396,000		200,065
China Unicom Hong Kong Ltd.		140,000		210,431
China Vanke Co. Ltd., Class B		46,100		71,978
Chongqing Changan Automobile Co., Ltd.		21,400		42,224
Chongqing Rural Commercial Bank, Class H		79,000		38,437
CITIC Securities Co. Ltd., Class H		32,000		87,628
CNOOC Ltd.		538,000		1,000,560
Country Garden Holdings Co. Ltd.		127,129		77,065
CSR Corp. Ltd., Class H		63,000		51,813
Datang International Power Generation Co. Ltd., Class H (a)		106,000		49,021
Dongfeng Motor Group Co. Ltd., Class H		84,000		131,920
Evergrande Real Estate Group Ltd. (a)		171,000		65,510
Fosun International Ltd.		39,500		39,324
GCL-Poly Energy Holdings Ltd. (a)(b)		252,000		78,351
Golden Eagle Retail Group Ltd.		22,000		29,125
Great Wall Motor Co. Ltd., Class H (a)		29,500		163,442
Greentown China Holdings Ltd.		21,000		32,200
Guangzhou Automobile Group Co. Ltd., Class H		78,000		85,602
Guangzhou R&F Properties Co. Ltd., Class H		32,400		47,532
Haitian International Holdings Ltd.		8,000		18,075
Haitong Securities Co. Ltd., Class H		45,600		79,748
Hengan International Group Co., Ltd.		21,500		254,373
Huaneng Power International, Inc., Class H		96,000		87,035
Industrial & Commercial Bank of China Ltd., Class H (a)		2,225,000		1,508,796
Inner Mongolia Yitai Coal Co., Class B		41,600		73,590
Intime Retail Group Co. Ltd.		37,000		38,572
Jiangsu Expressway Co. Ltd., Class H		48,000		58,992
Jiangxi Copper Co. Ltd., Class H		36,000		65,167
Lenovo Group Ltd.		190,000		231,614
Longfor Properties Co. Ltd.		48,500		67,963
New China Life Insurance Co. Ltd., Class H (b)		20,900		70,326
People’s Insurance Co. Group of China Ltd., Class H		123,000		59,674
PetroChina Co. Ltd., Class H		634,000		695,841
PICC Property & Casualty Co. Ltd., Class H		94,800		140,975
Ping An Insurance (Group) Co. of China Ltd., Class H		56,500		507,603
Common Stocks	Shares		Value
China (concluded)
Shandong Weigao Group Medical Polymer Co. Ltd., Class H		44,000	$	59,541
Shanghai Electric Group Co. Ltd., Class H		104,000		37,905
Shanghai Pharmaceuticals Holding Co. Ltd., Class H		19,100		46,809
Shenzhou International Group Holdings, Ltd.		20,000		75,209
Shimao Property Holdings Ltd.		40,500		93,361
Shui On Land, Ltd.		76,666		23,573
Sihuan Pharmaceutical Holdings Group, Ltd.		70,000		64,060
Sino-Ocean Land Holdings Ltd.		104,000		68,440
Sinopec Engineering Group Co. Ltd.		13,500		20,242
Sinopec Shanghai Petrochemical Co. Ltd., Class H		123,000		35,481
Sinopharm Group Co. Ltd., Class H		33,600		96,666
SOHO China Ltd.		65,000		56,117
Tencent Holdings Ltd.		31,000		1,984,850
Tingyi Cayman Islands Holding Corp.		58,000		167,849
Tsingtao Brewery Co. Ltd., Class H		10,000		84,744
Uni-President China Holdings Ltd.		38,000		38,752
Want Want China Holdings Ltd. (a)		175,000		253,286
Weichai Power Co. Ltd., Class H		12,200		49,349
Wumart Stores, Inc., Class H		18,000		29,248
Yantai Changyu Pioneer Wine Co. Ltd., Class B		8,800		29,279
Yanzhou Coal Mining Co. Ltd., Class H (a)		70,000		64,378
Zhejiang Expressway Co. Ltd., Class H		58,000		54,912
Zhongsheng Group Holdings Ltd. (a)		17,500		24,209
Zhuzhou CSR Times Electric Co. Ltd., Class H		17,000		61,317
Zijin Mining Group Co. Ltd., Class H (a)		138,000		29,718
Zoomlion Heavy Industry Science and Technology Co. Ltd., Class H (a)		45,400		42,545
ZTE Corp., Class H (a)(b)		24,400		48,621
				19,770,409
Colombia — 0.2%
Almacenes Exito SA		5,892		91,586
Banco Davivienda SA, Preference Shares		3,212		39,376
Bancolombia SA		5,906		72,892
Bancolombia SA, Preference Shares		9,873		119,908
Cementos Argos SA		14,812		75,211
Corp. Financiera Colombiana SA		2,787		57,184
Ecopetrol SA		139,457		267,353
Grupo Argos SA		6,618		66,660
Grupo Argos SA, Preference Shares		5,485		55,418
Grupo Aval Acciones y Valores		56,581		37,379
Grupo de Inversiones Suramericana SA		6,592		115,104
Grupo de Inversiones Suramericana SA, Preference Shares		3,872		70,177
Interconexion Electrica SA		14,398		67,887
Isagen SA ESP		27,340		46,039
Pacific Rubiales Energy Corp. (a)		8,871		153,160
				1,335,334
Czech Republic — 0.1%
CEZ AS		4,607		120,171
Komercni Banka AS		459		102,380
Telefonica O2 Czech Republic		4,215		62,612
				285,163
Denmark — 0.8%
A.P. Moeller—Maersk A/S, Class A		14		144,215
A.P. Moeller-Maersk A/S, Class B		43		465,344
Carlsberg A/S, Class B		3,176		351,436
Coloplast A/S, Class B		3,381		224,145
Danske Bank A/S (b)		19,715		452,886

See Notes to Financial Statements.

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 21

Schedule of Investments (continued) ACWI ex-US Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Denmark (concluded)
DSV A/S		5,264	$	172,830
Novo Nordisk A/S, Class B		12,049		2,208,604
Novozymes A/S, Class B		6,740		284,699
TDC A/S		24,238		235,106
Tryg A/S		834		80,648
William Demant Holding A/S (b)		641		62,294
				4,682,207
Egypt — 0.0%
Commercial International Bank		26,027		123,322
Orascom Telecom Holding SAE (b)		69,057		47,188
Talaat Moustafa Group (b)		45,960		41,276
Telecom Egypt		12,924		27,582
				239,368
Finland — 0.7%
Elisa OYJ		4,135		109,561
Fortum OYJ		13,556		310,133
Kone OYJ, Class B (a)		9,553		430,827
Metso OYJ (a)		3,885		166,130
Neste Oil OYJ (a)		3,590		70,997
Nokia OYJ (b)		113,514		917,193
Nokian Renkaat OYJ (a)		3,481		166,929
Orion OYJ, Class B		2,619		73,612
Pohjola Bank PLC, Class A		3,789		75,972
Sampo OYJ, Class A		12,914		634,757
Stora Enso OYJ, Class R		16,431		165,111
UPM-Kymmene OYJ		15,909		269,818
Wartsila OYJ		5,323		262,429
				3,653,469
France — 7.2%
Accor SA		4,953		233,929
Aeroports de Paris		1,049		119,114
Air Liquide SA		9,559		1,352,920
Alcatel-Lucent (b)		84,488		374,934
Alstom SA		6,197		225,983
ArcelorMittal		29,461		526,237
Arkema		1,821		212,616
AtoS		2,359		213,734
AXA SA		54,500		1,517,694
BNP Paribas SA		29,986		2,339,125
Bouygues SA		5,837		220,731
Bureau Veritas SA		6,962		203,254
Cap Gemini SA		4,511		305,329
Carrefour SA		18,622		739,169
Casino Guichard-Perrachon SA		1,798		207,464
CGG (b)		4,520		78,444
Christian Dior SA		1,658		313,828
Cie Generale des Etablissements Michelin		5,613		597,227
CNP Assurances		4,633		95,005
Compagnie de Saint-Gobain		12,565		692,168
Credit Agricole SA (b)		30,125		386,170
Danone SA		17,270		1,245,890
Dassault Systemes SA		2,022		250,990
Edenred		6,563		219,745
EDF SA		7,259		256,803
Essilor International SA		6,242		664,194
Eurazeo		895		70,194
European Aeronautic Defence and Space Co. NV		17,883		1,372,881
Eutelsat Communications SA		4,264		133,047
Fonciere Des Regions		988		85,289
Common Stocks	Shares		Value
France (concluded)
GDF Suez		40,163	$	944,610
Gecina SA		595		78,782
Groupe Eurotunnel SA, Registered Shares		17,499		183,972
ICADE		960		89,367
Iliad SA		760		155,717
Imerys SA		980		85,307
JCDecaux SA		2,294		94,703
Kering		2,301		486,386
Klepierre		3,116		144,434
L’Oreal SA		7,397		1,299,008
Lafarge SA		5,614		421,386
Lagardere S.C.A.		3,531		131,260
Legrand SA		8,073		444,923
LVMH Moet Hennessy Louis Vuitton SA		7,705		1,407,657
Natixis		29,406		173,002
Orange SA		56,154		697,159
Pernod- Ricard SA		6,446		734,400
Publicis Groupe SA		5,525		506,229
Remy Cointreau SA		675		56,700
Renault SA		5,781		465,234
Rexel SA		6,517		171,029
Safran SA		8,344		580,145
Sanofi		36,231		3,869,282
Schneider Electric SA		16,139		1,407,990
SCOR SE		4,920		179,956
SES SA		8,496		275,240
Societe BIC SA		914		112,014
Societe Generale SA		21,787		1,266,924
Sodexo		2,826		286,579
Suez Environnement Co.		8,381		150,297
Technip SA		3,054		293,980
Thales SA		2,836		182,762
Total SA		65,039		3,992,055
Unibail-Rodamco SE		2,882		738,539
Valeo SA		2,157		239,042
Vallourec SA		3,230		176,216
Veolia Environnement SA		10,744		175,475
Vinci SA		14,588		958,887
Vivendi SA		36,640		966,468
Wendel SA		996		145,179
Zodiac Aerospace		1,076		190,678
				40,213,081
Germany — 6.8%
Adidas AG		6,315		805,275
Allianz SE, Registered Shares		13,795		2,482,074
Axel Springer AG (a)		1,426		91,807
BASF SE		27,833		2,970,723
Bayer AG, Registered Shares		25,035		3,515,176
Bayerische Motoren Werke AG		9,879		1,160,117
Bayerische Motoren Werke AG, Preference Shares		1,750		149,647
Beiersdorf AG		3,052		309,426
Brenntag AG		1,539		285,632
Celesio AG		2,282		72,355
Commerzbank AG (b)		29,059		469,111
Continental AG		3,293		723,437
Daimler AG, Registered Shares		29,061		2,522,042
Deutsche Bank AG, Registered Shares		30,836		1,481,405
Deutsche Boerse AG		5,867		486,221
Deutsche Lufthansa AG, Registered Shares (b)		6,853		145,260
Deutsche Post AG, Registered Shares		27,486		1,003,925

See Notes to Financial Statements.

22 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) ACWI ex-US Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Germany (concluded)
Deutsche Telekom AG, Registered Shares		87,749	$	1,511,931
Deutsche Wohnen AG		9,162		176,911
E.ON SE		54,172		1,001,526
Fraport AG Frankfurt Airport Services Worldwide		1,067		79,956
Fresenius Medical Care AG & Co. KGaA		6,519		464,973
Fresenius SE & Co. KGaA		3,786		582,190
GEA Group AG		5,334		254,354
Hannover Rueck SE		1,911		164,290
HeidelbergCement AG		4,139		314,296
Henkel AG & Co. KGaA		3,961		412,970
Henkel AG & Co. KGaA, Preference Shares		5,395		627,085
Hochtief AG		830		71,033
Hugo Boss AG		972		138,438
Infineon Technologies AG		32,713		349,424
K+S AG, Registered Shares		5,123		157,853
Kabel Deutschland Holding AG		723		93,714
Lanxess AG		2,476		165,445
Linde AG		5,628		1,178,424
MAN SE		1,038		127,447
Merck KGaA		1,943		348,628
Metro AG		3,863		187,278
Muenchener Rueckversicherungs AG, Registered Shares		5,424		1,196,371
Osram Licht AG (a)(b)		2,581		145,578
Porsche Automobil Holding SE, Preference Shares		4,548		474,772
ProSiebenSat.1 Media AG, Registered Shares		5,585		277,328
RWE AG		14,636		536,248
SAP AG		28,063		2,433,667
Siemens AG, Registered Shares		24,022		3,293,861
Sky Deutschland AG (b)		13,263		146,596
Suedzucker AG (a)		2,213		59,784
Telefonica Deutschland Holding AG		10,129		83,712
ThyssenKrupp AG (b)		12,645		308,349
United Internet AG, Registered Shares		3,565		151,976
Volkswagen AG		818		222,101
Volkswagen AG, Preference Shares		4,414		1,242,182
				37,654,324
Greece — 0.1%
Alpha Bank AE (b)		49,096		42,664
Folli Follie SA (b)		1,180		37,986
Hellenic Petroleum SA		2,918		30,464
Hellenic Telecommunications Organization SA (b)		8,320		110,815
JUMBO SA (b)		3,896		62,122
National Bank of Greece SA (b)		10,416		55,920
OPAP SA		5,547		73,859
Piraeus Bank SA (b)		31,050		65,648
Public Power Corp. SA		4,210		62,576
Titan Cement Co. SA (b)		1,790		48,757
				590,811
Hong Kong — 2.6%
AIA Group Ltd.		367,000		1,847,290
ASM Pacific Technology Ltd.		6,300		52,728
Bank of East Asia Ltd.		38,800		164,707
Beijing Enterprises Water Group, Ltd.		52,000		32,740
Belle International Holdings Ltd.		141,000		163,808
BOC Hong Kong Holdings Ltd.		115,000		369,341
Cathay Pacific Airways Ltd.		32,000		67,804
Cheung Kong Holdings Ltd.		43,000		680,293
Cheung Kong Infrastructure Holdings Ltd.		20,000		126,423
Common Stocks	Shares		Value
Hong Kong (continued)
China Agri-Industries Holdings Ltd.		43,100	$	21,542
China Everbright International, Ltd.		67,000		90,009
China Everbright Ltd.		30,000		47,595
China Gas Holdings Ltd.		58,000		85,383
China Merchants Holdings International Co. Ltd.		32,000		117,234
China Overseas Grand Oceans Group Ltd. (a)		28,000		26,783
China Overseas Land & Investment Ltd.		124,000		350,008
China Resources Cement Holdings Ltd.		64,000		43,120
China Resources Enterprise Ltd.		36,000		119,763
China Resources Gas Group Ltd.		24,000		83,697
China Resources Land Ltd.		60,000		149,277
China Resources Power Holdings Co., Ltd.		58,000		137,660
China State Construction International Holdings Ltd. (a)		60,000		107,843
China Taiping Insurance Holdings Co. Ltd. (b)		23,200		47,500
CITIC Pacific Ltd.		47,000		72,076
CLP Holdings Ltd.		53,500		423,151
COSCO Pacific Ltd.		56,000		77,078
ENN Energy Holdings Ltd.		24,000		177,873
Far East Horizon Ltd.		56,000		47,957
First Pacific Co., Ltd.		62,000		70,692
Franshion Properties China Ltd.		130,000		45,406
Galaxy Entertainment Group Ltd. (b)		65,000		585,212
Geely Automobile Holdings Ltd.		180,000		87,397
GOME Electrical Appliances Holding, Ltd.		266,000		49,185
Guangdong Investment Ltd.		84,000		82,177
Haier Electronics Group Co., Ltd.		25,000		72,657
Hanergy Solar Group, Ltd. (a)(b)		370,000		37,695
Hang Lung Properties Ltd.		62,000		196,533
Hang Seng Bank Ltd.		23,900		388,173
Henderson Land Development Co., Ltd.		33,000		188,659
HKT Trust/HKT Ltd.		81,000		80,146
Hong Kong & China Gas Co., Ltd.		173,860		399,180
Hong Kong Exchanges & Clearing Ltd.		28,100		469,701
Hopewell Holdings Ltd.		14,500		49,167
Hutchison Whampoa Ltd.		66,000		899,300
Hysan Development Co., Ltd.		20,000		86,335
Kerry Properties Ltd.		16,500		57,452
Kingboard Chemical Holdings Ltd.		18,200		47,635
Kunlun Energy Co., Ltd.		96,000		169,694
Lee & Man Paper Manufacturing Ltd.		34,000		22,472
Li & Fung Ltd.		172,000		222,330
The Link REIT		70,500		341,929
MGM China Holdings Ltd.		26,800		114,701
MTR Corp.		42,000		159,189
New World China Land Ltd.		36,000		17,420
New World Development Co., Ltd.		112,000		141,820
Nine Dragons Paper Holdings Ltd.		59,000		51,535
NWS Holdings Ltd.		52,186		79,653
PCCW Ltd.		141,000		63,097
Poly Property Group Co., Ltd.		74,000		39,658
Power Assets Holdings Ltd.		42,000		334,339
Sands China Ltd.		73,600		603,176
Shanghai Industrial Holdings, Ltd.		15,000		54,977
Shangri-La Asia Ltd.		48,000		93,721
Shougang Fushan Resources Group, Ltd. (a)		102,000		35,862
Sino Biopharmaceutical Ltd.		80,000		63,594
Sino Land Co., Ltd.		84,800		116,294
SJM Holdings Ltd.		63,000		211,772
Sun Art Retail Group Ltd.		68,500		96,741
Sun Hung Kai Properties Ltd.		49,000		622,759

See Notes to Financial Statements.

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 23

Schedule of Investments (continued) ACWI ex-US Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Hong Kong (concluded)
Swire Pacific Ltd., Class A		21,500	$	252,618
Swire Properties Ltd.		35,000		88,633
Wharf Holdings Ltd.		47,000		360,027
Wheelock & Co., Ltd.		29,000		133,599
Wynn Macau Ltd.		45,200		205,463
Yingde Gases (a)		44,500		46,684
Yue Yuen Industrial Holdings Ltd.		19,000		63,531
Yuexiu Property Co., Ltd.		200,000		49,421
				14,480,094
Hungary — 0.1%
MOL Hungarian Oil & Gas PLC		1,468		98,363
OTP Bank Rt.		6,190		117,605
Richter Gedeon Nyrt		4,368		88,796
				304,764
Indonesia — 0.5%
Adaro Energy Tbk PT		469,000		42,138
Astra Agro Lestari Tbk PT		11,500		23,741
Astra International Tbk PT		598,500		335,192
Bank Central Asia Tbk PT		368,000		291,109
Bank Danamon Indonesia Tbk PT		126,000		39,155
Bank Mandiri Persero Tbk PT		245,000		158,567
Bank Negara Indonesia Persero Tbk PT		211,500		68,891
Bank Rakyat Indonesia Persero Tbk PT		324,000		193,661
Bumi Serpong Damai PT		302,500		32,089
Charoen Pokphand Indonesia Tbk PT		189,500		52,718
Global Mediacom Tbk PT		304,200		47,542
Gudang Garam Tbk PT		18,000		62,257
Indo Tambangraya Megah Tbk PT		15,500		36,373
Indocement Tunggal Prakarsa Tbk PT		40,500		66,714
Indofood CBP Sukses Makmur Tbk PT		47,500		39,886
Indofood Sukses Makmur Tbk PT		147,500		80,158
Jasa Marga Persero Tbk PT		71,000		27,608
Kalbe Farma Tbk PT		661,000		68,084
Lippo Karawaci Tbk PT		780,000		58,396
Matahari Department Store Tbk PT (b)		51,000		46,154
Media Nusantara Citra Tbk PT		179,062		38,790
Perusahaan Gas Negara Persero Tbk PT		321,000		118,325
Semen Indonesia Persero Tbk PT		85,500		99,702
Surya Citra Media Tbk PT		84,000		18,125
Tambang Batubara Bukit Asam Persero Tbk PT		29,500		24,782
Telekomunikasi Indonesia Persero Tbk PT		1,356,000		239,997
Tower Bersama Infrastructure Tbk PT		38,000		18,135
Unilever Indonesia Tbk PT		45,500		97,476
United Tractors Tbk PT		49,500		77,481
XL Axiata Tbk PT		82,000		35,082
				2,538,328
Ireland — 0.4%
Bank of Ireland (b)		705,067		245,734
CRH PLC		23,032		583,674
James Hardie Industries SE		13,049		151,444
Kerry Group PLC, Class A		5,092		353,755
Perrigo Co. PLC		1,318		202,197
Shire PLC		16,784		790,983
				2,327,787
Israel — 0.3%
Bank Hapoalim BM		33,357		186,902
Bank Leumi Le-Israel (b)		33,909		138,471
Bezeq The Israeli Telecommunication Corp. Ltd.		53,977		91,537
Common Stocks	Shares		Value
Israel (concluded)
Delek Group Ltd.		139	$	53,096
Israel Chemicals Ltd.		13,348		111,338
The Israel Corp. Ltd. (b)		89		46,866
Mizrahi Tefahot Bank Ltd.		4,765		62,370
NICE Systems Ltd.		2,195		89,760
Teva Pharmaceutical Industries Ltd.		25,464		1,018,850
				1,799,190
Italy — 1.6%
Assicurazioni Generali SpA		35,459		833,083
Atlantia SpA		11,826		264,900
Banca Monte dei Paschi di Siena SpA (a)(b)		228,519		55,000
Enel Green Power SpA		51,006		128,322
Enel SpA		199,446		870,262
ENI SpA		77,364		1,869,396
Exor SpA		3,145		125,001
Fiat SpA (b)		24,991		204,549
Finmeccanica SpA (a)(b)		11,127		84,460
Intesa Sanpaolo SpA		352,240		866,405
Luxottica Group SpA		5,139		275,406
Mediobanca SpA (b)		15,181		132,755
Pirelli & C SpA		7,043		121,845
Prysmian SpA		6,221		160,172
Saipem SpA (a)		8,360		179,285
Snam SpA		61,973		346,389
Telecom Italia SpA		281,326		280,526
Telecom Italia SpA, Non-Convertible Savings Shares		210,100		164,852
Tenaris SA		14,320		312,039
Terna — Rete Elettrica Nazionale SpA		48,158		240,505
UniCredit SpA		131,433		969,535
Unione di Banche Italiane ScpA		25,928		175,773
				8,660,460
Japan — 15.1%
ABC-Mart, Inc.		900		39,320
Acom Co., Ltd. (a)(b)		13,800		47,020
Advantest Corp.		3,600		44,858
Aeon Co., Ltd.		17,600		238,597
AEON Financial Service Co., Ltd.		1,700		45,586
Aeon Mall Co., Ltd.		3,090		86,561
Air Water, Inc.		4,000		54,212
Aisin Seiki Co., Ltd.		5,400		219,543
Ajinomoto Co., Inc.		19,000		275,057
Alfresa Holdings Corp.		1,000		49,635
Amada Co., Ltd.		11,000		97,145
ANA Holdings, Inc. (FKA All Nippon Airways Co., Ltd.) (a)		38,000		75,919
Aozora Bank Ltd.		30,000		85,017
Asahi Glass Co., Ltd. (a)		32,000		199,257
Asahi Group Holdings Ltd.		11,700		330,170
Asahi Kasei Corp.		38,000		298,065
Asics Corp.		4,800		82,043
Astellas Pharma, Inc.		13,200		782,586
The Bank of Kyoto Ltd.		8,000		66,878
The Bank of Yokohama Ltd.		36,000		200,852
Benesse Holdings, Inc.		1,900		76,331
Bridgestone Corp.		19,600		742,583
Brother Industries Ltd.		6,500		88,910
Calbee, Inc. (a)		2,400		58,285
Canon, Inc. (a)		34,400		1,097,649
Casio Computer Co., Ltd.		6,400		78,425

See Notes to Financial Statements.

24 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) ACWI ex-US Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Japan (continued)
Central Japan Railway Co.		4,400	$	518,549
The Chiba Bank Ltd.		22,000		148,470
Chiyoda Corp.		4,000		58,066
Chubu Electric Power Co., Inc.		19,000		245,629
Chugai Pharmaceutical Co., Ltd. (a)		6,900		152,732
The Chugoku Bank Ltd.		4,000		50,841
The Chugoku Electric Power Co., Inc.		9,000		140,133
Citizen Holdings Co., Ltd.		7,900		66,653
Coca-Cola West Co., Ltd.		2,200		46,596
Credit Saison Co., Ltd.		4,900		129,174
Dai Nippon Printing Co., Ltd.		18,000		191,199
The Dai-ichi Life Insurance Co., Ltd.		25,700		430,038
Daicel Corp.		7,000		57,049
Daido Steel Co., Ltd.		9,000		44,789
Daihatsu Motor Co., Ltd.		5,500		93,295
Daiichi Sankyo Co., Ltd.		20,300		371,185
Daikin Industries Ltd.		7,200		449,299
Dainippon Sumitomo Pharma Co., Ltd.		3,900		61,086
Daito Trust Construction Co., Ltd.		2,300		215,022
Daiwa House Industry Co., Ltd.		17,000		329,378
Daiwa Securities Group, Inc.		51,000		510,793
Dena Co., Ltd. (a)		2,700		56,917
Denso Corp.		14,700		776,581
Dentsu, Inc.		6,300		257,661
Don Quijote Co., Ltd.		1,500		90,930
East Japan Railway Co.		10,300		820,475
Eisai Co., Ltd.		7,200		279,051
Electric Power Development Co., Ltd.		3,400		99,133
FamilyMart Co., Ltd.		2,000		91,373
FANUC Corp.		5,900		1,081,119
Fast Retailing Co., Ltd.		1,700		702,139
Fuji Electric Co., Ltd.		19,000		89,023
Fuji Heavy Industries Ltd.		17,800		511,553
FUJIFILM Holdings Corp.		14,100		400,229
Fujitsu Ltd. (b)		56,000		290,230
Fukuoka Financial Group, Inc.		20,000		87,789
Gree, Inc. (a)		2,300		22,692
GungHo Online Entertainment, Inc. (a)(b)		13,000		93,638
The Gunma Bank Ltd.		13,000		72,636
The Hachijuni Bank Ltd.		10,000		58,377
Hakuhodo DY Holdings, Inc.		9,000		69,774
Hamamatsu Photonics KK		1,800		72,027
Hankyu Hanshin Holdings, Inc.		36,000		194,525
Hino Motors Ltd.		7,000		110,269
Hirose Electric Co., Ltd.		900		128,296
The Hiroshima Bank Ltd.		12,000		49,725
Hisamitsu Pharmaceutical Co., Inc. (a)		1,700		85,667
Hitachi Chemical Co., Ltd.		3,400		54,224
Hitachi Construction Machinery Co., Ltd.		3,100		66,335
Hitachi High-Technologies Corp.		1,600		40,283
Hitachi Ltd.		147,000		1,114,576
Hitachi Metals Ltd.		6,000		84,896
Hokkaido Electric Power Co., Inc. (b)		5,100		58,689
Hokuhoku Financial Group, Inc.		29,000		57,981
Hokuriku Electric Power Co.		4,500		61,112
Honda Motor Co., Ltd.		49,400		2,039,089
Hoya Corp.		13,100		364,336
Hulic Co., Ltd. (a)		8,000		118,394
Ibiden Co., Ltd.		3,600		67,409
Idemitsu Kosan Co., Ltd.		3,600		81,956
IHI Corp.		40,000		172,986
Common Stocks	Shares		Value
Japan (continued)
Iida Group Holdings Co., Ltd. (b)		4,100	$	81,836
Inpex Corp.		26,400		338,611
Isetan Mitsukoshi Holdings Ltd.		10,900		155,169
Isuzu Motors Ltd.		34,000		212,056
ITOCHU Corp.		45,700		564,972
Itochu Techno-Solutions Corp. (a)		1,000		40,533
The Iyo Bank Ltd.		7,400		72,602
J. Front Retailing Co., Ltd.		14,000		106,208
Japan Airlines Co., Ltd.		2,000		98,663
Japan Exchange Group, Inc.		7,500		213,179
Japan Petroleum Exploration Co.		1,200		45,512
Japan Prime Realty Investment Corp.		28		89,610
Japan Real Estate Investment Corp.		38		203,302
Japan Retail Fund Investment Corp.		70		142,428
The Japan Steel Works Ltd.		11,000		61,639
Japan Tobacco, Inc.		33,400		1,086,794
JFE Holdings, Inc.		14,800		352,684
JGC Corp.		7,000		274,707
The Joyo Bank Ltd.		20,000		102,264
JSR Corp.		5,400		104,668
JTEKT Corp.		6,200		105,790
JX Holdings, Inc.		68,000		350,162
Kajima Corp.		24,000		90,264
Kakaku.com, Inc.		5,200		91,345
Kamigumi Co., Ltd.		7,000		64,228
Kaneka Corp.		7,000		45,963
The Kansai Electric Power Co., Inc. (b)		20,800		239,394
Kansai Paint Co., Ltd. (a)		7,000		103,515
Kao Corp.		15,700		494,264
Kawasaki Heavy Industries Ltd.		45,000		188,990
KDDI Corp. (a)		16,400		1,010,490
Keikyu Corp. (a)		13,000		107,186
Keio Corp.		17,000		113,287
Keisei Electric Railway Co., Ltd.		7,000		64,409
Keyence Corp.		1,420		608,023
Kikkoman Corp.		4,000		75,633
Kinden Corp.		5,000		52,348
Kintetsu Corp.		55,000		192,987
Kirin Holdings Co., Ltd.		27,000		388,839
Kobe Steel Ltd. (b)		75,000		128,579
Koito Manufacturing Co., Ltd.		3,000		57,323
Komatsu Ltd.		28,100		576,929
Konami Corp. (a)		2,900		67,059
Konica Minolta Holdings, Inc.		14,500		144,903
Kubota Corp.		33,000		547,379
Kuraray Co., Ltd.		10,400		124,143
Kurita Water Industries Ltd. (a)		2,800		58,086
Kyocera Corp.		9,900		494,916
Kyowa Hakko Kirin Co., Ltd.		5,000		55,175
Kyushu Electric Power Co., Inc. (b)		12,900		164,756
Lawson, Inc.		1,800		134,705
LIXIL Group Corp.		8,100		222,364
M3, Inc.		23		57,600
Mabuchi Motor Co., Ltd.		500		29,753
Makita Corp.		3,400		178,815
Marubeni Corp.		50,000		359,954
Marui Group Co., Ltd.		6,500		66,114
Maruichi Steel Tube Ltd.		1,400		35,363
Mazda Motor Corp. (b)		82,000		424,929
McDonald’s Holdings Co. Japan Ltd. (a)		2,500		63,841

See Notes to Financial Statements.

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 25

Schedule of Investments (continued) ACWI ex-US Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Japan (continued)
Medipal Holdings Corp.		3,000	$	39,604
Meiji Holdings Co., Ltd.		1,800		115,699
Miraca Holdings, Inc.		2,000		94,353
Mitsubishi Chemical Holdings Corp.		42,500		196,679
Mitsubishi Corp.		42,700		819,751
Mitsubishi Electric Corp.		59,000		741,893
Mitsubishi Estate Co., Ltd.		38,000		1,137,189
Mitsubishi Gas Chemical Co., Inc.		11,000		81,089
Mitsubishi Heavy Industries Ltd.		92,000		569,808
Mitsubishi Logistics Corp.		4,000		63,322
Mitsubishi Materials Corp.		38,000		140,465
Mitsubishi Motors Corp. (b)		13,000		139,858
Mitsubishi Tanabe Pharma Corp.		6,200		86,471
Mitsubishi UFJ Financial Group, Inc.		386,600		2,566,790
Mitsubishi UFJ Lease & Finance Co., Ltd.		16,200		99,595
Mitsui & Co., Ltd.		52,700		734,698
Mitsui Chemicals, Inc.		27,000		65,286
Mitsui Fudosan Co., Ltd.		26,000		937,837
Mitsui OSK Lines Ltd.		33,000		148,935
Mizuho Financial Group, Inc.		698,900		1,517,334
MS&AD Insurance Group Holdings, Inc.		15,300		411,248
Murata Manufacturing Co., Ltd.		6,200		551,386
Nabtesco Corp. (a)		3,000		69,236
Namco Bandai Holdings, Inc.		5,300		117,673
NEC Corp.		89,000		200,891
Nexon Co., Ltd.		4,300		39,732
NGK Insulators Ltd.		8,000		152,247
NGK Spark Plug Co., Ltd.		5,000		118,503
NHK Spring Co., Ltd.		5,600		63,272
Nidec Corp.		3,000		295,544
Nikon Corp.		10,800		206,396
Nintendo Co., Ltd.		3,300		441,717
Nippon Building Fund, Inc.		44		255,649
Nippon Electric Glass Co., Ltd.		9,000		47,278
Nippon Express Co., Ltd.		24,000		116,175
Nippon Meat Packers, Inc.		5,000		85,938
Nippon Paint Co., Ltd.		6,000		99,829
Nippon Prologis REIT, Inc.		8		76,632
Nippon Steel & Sumitomo Metal		230,475		772,968
Nippon Telegraph & Telephone Corp.		11,500		619,395
Nippon Yusen KK		51,000		163,069
The Nishi-Nippon City Bank Ltd.		22,000		59,267
Nissan Motor Co., Ltd.		74,900		627,662
Nisshin Seifun Group, Inc.		5,200		53,780
Nissin Foods Holdings Co., Ltd.		1,500		63,302
Nitori Holdings Co., Ltd.		1,000		94,677
Nitto Denko Corp.		4,800		202,966
NKSJ Holdings, Inc.		9,900		275,553
NOK Corp.		2,000		32,758
Nomura Holdings, Inc.		110,100		850,832
Nomura Real Estate Holdings, Inc.		3,700		83,372
Nomura Real Estate Office Fund, Inc.		12		55,771
Nomura Research Institute Ltd.		3,700		116,930
NSK Ltd.		15,000		186,935
NTT Data Corp.		4,000		147,774
NTT DoCoMo, Inc.		46,500		765,682
NTT Urban Development Corp.		2,400		27,665
Obayashi Corp.		19,000		108,372
Odakyu Electric Railway Co., Ltd.		19,000		171,833
Oji Holdings Corp.		22,000		112,847
Olympus Corp. (b)		7,000		222,017
Common Stocks	Shares		Value
Japan (continued)
Omron Corp.		6,000	$	265,160
Ono Pharmaceutical Co., Ltd.		2,600		227,904
Oracle Corp. Japan		1,400		51,176
Oriental Land Co., Ltd.		1,600		230,742
ORIX Corp.		38,500		676,517
Osaka Gas Co., Ltd.		58,000		227,802
Otsuka Corp.		400		51,102
Otsuka Holdings Co., Ltd.		10,800		311,838
Panasonic Corp.		66,900		779,867
Park24 Co., Ltd.		3,700		69,778
Rakuten, Inc.		22,100		329,808
Resona Holdings, Inc.		54,400		277,574
Ricoh Co., Ltd.		21,000		223,331
Rinnai Corp.		900		70,117
Rohm Co., Ltd.		3,000		146,331
Sankyo Co., Ltd.		1,400		64,570
Sanrio Co., Ltd.		1,500		63,161
Santen Pharmaceutical Co., Ltd.		2,300		107,162
SBI Holdings, Inc.		6,850		104,013
Secom Co., Ltd.		6,400		386,144
Sega Sammy Holdings, Inc.		5,700		145,265
Sekisui Chemical Co., Ltd.		13,000		159,530
Sekisui House Ltd.		17,000		237,884
Seven & I Holdings Co., Ltd.		22,900		911,796
Seven Bank Ltd. (a)		17,100		66,879
Sharp Corp. (b)		43,000		136,908
Shikoku Electric Power Co., Inc. (a)(b)		5,300		79,481
Shimadzu Corp.		6,000		52,236
Shimamura Co., Ltd.		600		56,242
Shimano, Inc.		2,400		206,038
Shimizu Corp.		16,000		80,849
Shin-Etsu Chemical Co., Ltd.		12,500		731,116
Shinsei Bank Ltd.		46,000		112,604
Shionogi & Co., Ltd.		9,100		197,558
Shiseido Co., Ltd.		11,100		178,503
The Shizuoka Bank Ltd.		17,000		181,583
Showa Denko KK (a)		39,000		55,314
Showa Shell Sekiyu KK (a)		7,100		72,171
SMC Corp.		1,600		403,821
Softbank Corp.		29,200		2,562,322
Sojitz Corp.		36,100		64,273
Sony Corp. (a)		30,600		527,492
Sony Financial Holdings, Inc.		4,700		85,614
Stanley Electric Co., Ltd.		4,000		91,703
Sumco Corp.		4,300		37,934
Sumitomo Chemical Co., Ltd.		48,000		188,392
Sumitomo Corp.		34,000		427,316
Sumitomo Electric Industries Ltd.		22,800		381,125
Sumitomo Heavy Industries Ltd.		18,000		82,941
Sumitomo Metal Mining Co., Ltd.		16,000		209,653
Sumitomo Mitsui Financial Group, Inc.		38,700		2,012,531
Sumitomo Mitsui Trust Holdings, Inc.		101,000		534,412
Sumitomo Realty & Development Co., Ltd.		11,000		548,102
Sumitomo Rubber Industries Ltd.		4,300		61,209
Suntory Beverage & Food Ltd.		3,600		114,848
Suruga Bank Ltd.		5,000		89,786
Suzuken Co., Ltd.		2,500		80,982
Suzuki Motor Corp.		10,900		293,718
Sysmex Corp.		2,000		118,130
T&D Holdings, Inc.		17,600		246,340
Taiheiyo Cement Corp.		36,000		138,447

See Notes to Financial Statements.

26 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) ACWI ex-US Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Japan (concluded)
Taisei Corp. (a)		30,000	$	136,527
Taisho Pharmaceutical Holdings Co., Ltd.		800		54,991
Taiyo Nippon Sanso Corp.		8,000		56,964
Takashimaya Co., Ltd.		7,000		69,844
Takeda Pharmaceutical Co., Ltd.		24,000		1,100,761
TDK Corp.		3,800		182,301
Teijin Ltd.		23,000		51,231
Terumo Corp.		4,800		231,742
THK Co., Ltd.		3,300		82,419
Tobu Railway Co., Ltd.		31,000		150,317
Toho Co., Ltd.		3,200		70,399
Toho Gas Co., Ltd. (a)		10,000		48,679
Tohoku Electric Power Co., Inc. (b)		13,800		155,459
Tokio Marine Holdings, Inc.		21,000		702,863
The Tokyo Electric Power Co., Inc. (b)		41,900		206,445
Tokyo Electron Ltd.		5,100		281,024
Tokyo Gas Co., Ltd.		73,000		359,795
Tokyo Tatemono Co., Ltd.		12,000		133,440
Tokyu Corp.		33,000		213,810
Tokyu Fudosan Holdings Corp. (b)		15,900		149,473
TonenGeneral Sekiyu KK (a)		10,000		91,760
Toppan Printing Co., Ltd.		15,000		120,069
Toray Industries, Inc.		43,000		297,861
Toshiba Corp.		122,000		513,597
Toto Ltd.		8,000		126,889
Toyo Seikan Kaisha Ltd.		4,900		105,488
Toyo Suisan Kaisha Ltd.		3,000		90,122
Toyoda Gosei Co., Ltd.		2,300		53,580
Toyota Boshoku Corp.		2,400		30,008
Toyota Industries Corp.		4,600		207,941
Toyota Motor Corp.		83,600		5,097,515
Toyota Tsusho Corp.		6,600		163,673
Trend Micro, Inc.		3,700		129,659
Tsumura & Co.		2,200		58,300
Ube Industries Ltd.		29,000		62,113
Unicharm Corp.		3,500		199,705
United Urban Investment Corp.		66		94,864
USS Co., Ltd.		5,900		80,927
West Japan Railway Co.		5,200		225,308
Yahoo! Japan Corp.		43,800		244,246
Yakult Honsha Co., Ltd.		2,800		141,479
Yamada Denki Co., Ltd.		25,000		81,774
Yamaguchi Financial Group, Inc.		7,000		64,912
Yamaha Corp.		4,500		71,543
Yamaha Motor Co., Ltd.		8,600		129,296
Yamato Holdings Co., Ltd.		10,600		214,367
Yamato Kogyo Co., Ltd.		1,300		41,576
Yamazaki Baking Co., Ltd. (a)		4,000		41,033
Yaskawa Electric Corp.		7,000		110,919
Yokogawa Electric Corp.		6,400		98,399
The Yokohama Rubber Co., Ltd.		7,000		68,835
				84,056,631
Luxembourg — 0.0%
RTL Group SA		1,179		152,602
Malaysia — 0.8%
AirAsia Bhd		44,500		29,928
Alliance Financial Group Bhd		46,400		67,489
AMMB Holdings Bhd		60,300		133,440
Astro Malaysia Holdings Bhd		56,600		51,894
Common Stocks	Shares		Value
Malaysia (concluded)
Axiata Group Bhd		77,800	$	164,057
Berjaya Sports Toto Bhd		14,208		17,568
British American Tobacco Malaysia Bhd		4,500		88,090
Bumi Armada Bhd (b)		43,400		53,397
CIMB Group Holdings Bhd		127,700		297,648
Dialog Group BHD		20,900		22,874
DiGi.Com Bhd		98,000		148,505
Felda Global Ventures Holdings Bhd		44,500		61,049
Gamuda Bhd		59,100		86,699
Genting Bhd		59,600		186,935
Genting Malaysia Bhd		83,500		111,787
Genting Plantations Bhd		10,000		33,762
Hong Leong Bank Bhd		20,540		90,387
Hong Leong Financial Group Bhd		7,000		33,126
IHH Healthcare Bhd (b)		84,300		99,420
IJM Corp. Bhd		29,100		52,297
IOI Corp. Bhd		78,800		113,417
IOI Properties Group Sdn Bhd (b)		51,649		43,994
Kuala Lumpur Kepong Bhd		13,300		101,105
Lafarge Malayan Cement Bhd		15,000		39,246
Malayan Banking Bhd		125,900		382,635
Malaysia Airports Holdings Bhd		20,900		57,426
Maxis Bhd		64,400		143,031
MISC Bhd (b)		41,900		72,991
MMC Corp. Bhd		32,500		28,576
Parkson Holdings Bhd		24,900		20,905
Petronas Chemicals Group Bhd		90,000		190,299
Petronas Dagangan Bhd		8,900		85,499
Petronas Gas Bhd		17,000		126,113
PPB Group Bhd		12,600		62,177
Public Bank Bhd		29,700		177,175
RHB Capital Bhd		12,900		31,146
Sapurakencana Petroleum Bhd (b)		115,900		173,622
Sime Darby Bhd		81,200		236,214
Telekom Malaysia Bhd		35,000		59,326
Tenaga Nasional Bhd		81,600		283,772
UEM Land Holdings Bhd		54,900		39,642
UMW Holdings Bhd		17,800		65,625
YTL Corp. Bhd		168,360		83,345
YTL Power International Bhd		85,100		49,151
				4,496,784
Mexico — 1.1%
Alfa SAB de CV, Series A		85,600		240,085
America Movil SAB de CV, Series L		1,075,600		1,253,830
Arca Continental SAB de CV		7,872		49,228
Cemex SAB de CV (b)		336,300		395,117
Coca-Cola Femsa SAB de CV, Series L		12,800		154,818
Compartamos SAB de CV		30,300		56,671
Controladora Comercial Mexicana SAB de CV		12,600		53,945
El Puerto de Liverpool SAB de CV, Series C1		6,800		77,638
Fibra Uno Administracion SA de CV		41,000		131,323
Fomento Economico Mexicano SAB de CV		58,500		566,339
Genomma Lab Internacional SAB de CV, Series B, Series B (b)		21,500		60,302
Grupo Aeroportuario del Pacifico SAB de CV, Series B		11,400		60,944
Grupo Aeroportuario del Sureste SAB de CV, Series B		5,900		73,765
Grupo Bimbo SAB de CV, Series A		49,000		150,867
Grupo Carso SAB de CV, Series A1		20,000		106,384

See Notes to Financial Statements.

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 27

Schedule of Investments (continued) ACWI ex-US Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Mexico (concluded)
Grupo Comercial Chedraui SA de CV		10,900	$	38,511
Grupo Financiero Banorte SAB de CV, Series O, Series O		75,400		527,595
Grupo Financiero Inbursa SAB de CV, Series O		72,900		206,196
Grupo Financiero Santander Mexico SAB de CV, Series B		55,700		151,446
Grupo Mexico SAB de CV, Series B		114,523		379,185
Grupo Televisa SAB CPO		77,400		466,540
Industrias CH SAB de CV, Series B (b)		6,800		45,868
Industrias Penoles SAB de CV		4,095		101,675
Kimberly-Clark de Mexico SAB de CV, Series A		46,900		133,194
Mexichem SAB de CV		31,330		129,001
Minera Frisco SAB de CV, Series A1 (b)		22,100		45,583
OHL Mexico SAB de CV (b)		21,600		55,305
Promotora y Operadora de Infraestructura SAB de C.V. (b)		7,300		87,232
Wal-Mart de Mexico SAB de CV, Series V		158,300		415,376
				6,213,963
Netherlands — 2.1%
Aegon NV		54,088		512,566
Akzo Nobel NV		7,257		562,751
ASML Holding NV		10,925		1,023,253
CNH Industrial NV (b)		28,563		325,552
Corio NV		1,731		77,682
Delta Lloyd NV		5,502		136,636
Fugro NV CVA		2,114		126,103
Gemalto NV		174		19,150
Gemalto NV (a)		2,205		242,704
Heineken Holding NV		3,119		197,432
Heineken NV		6,962		470,538
ING Groep NV CVA (b)		116,286		1,624,344
Koninklijke Ahold NV		30,502		548,156
Koninklijke Boskalis Westminster NV (a)		2,565		135,672
Koninklijke DSM NV		4,727		372,007
Koninklijke KPN NV (b)		96,531		311,900
Koninklijke Philips Electronics NV		29,647		1,091,637
Koninklijke Vopak NV		2,103		123,114
OCI NV (b)		2,690		121,140
QIAGEN NV (b)		7,100		165,757
Randstad Holding NV		3,629		235,497
Reed Elsevier NV		21,083		448,093
STMicroelectronics NV		18,757		150,575
TNT Express NV		9,963		92,670
Unilever NV CVA		49,340		1,983,727
Wolters Kluwer NV		8,963		255,933
Ziggo NV		4,580		209,434
				11,564,023
New Zealand — 0.1%
Auckland International Airport Ltd.		34,480		100,137
Contact Energy Ltd.		8,655		36,543
Fletcher Building Ltd.		22,652		158,736
Ryman Healthcare Ltd.		11,787		76,149
Telecom Corp. of New Zealand Ltd.		56,516		107,278
				478,843
Norway — 0.6%
Aker Solutions ASA		5,281		94,549
DnB NOR ASA		29,339		526,581
Gjensidige Forsikring ASA		5,917		113,167
Common Stocks	Shares		Value
Norway (concluded)
Norsk Hydro ASA		42,060	$	188,156
Orkla ASA		22,372		174,868
Seadrill Ltd.		11,357		465,460
Statoil ASA		33,790		821,655
Subsea 7 SA		7,706		147,731
Telenor ASA		20,645		493,283
Yara International ASA		5,122		220,903
				3,246,353
Peru — 0.1%
Compania de Minas Buenaventura SA — ADR		4,924		55,247
Credicorp Ltd.		2,029		269,309
Southern Copper Corp.		4,988		143,206
				467,762
Philippines — 0.2%
Aboitiz Equity Ventures, Inc.		67,710		83,380
Aboitiz Power Corp.		66,600		51,110
Alliance Global Group, Inc.		74,700		43,597
Ayala Corp.		5,080		59,455
Ayala Land, Inc.		167,100		93,621
Bank of the Philippine Islands		26,610		51,068
BDO Unibank, Inc.		42,304		65,629
DMCI Holdings, Inc.		29,000		36,650
Energy Development Corp.		253,900		30,568
Globe Telecom, Inc.		845		31,283
International Container Terminal Services, Inc.		25,800		59,393
JG Summit Holdings, Inc.		21,093		18,348
Jollibee Foods Corp.		12,070		47,171
Metro Pacific Investments Corp.		452,000		44,151
Metropolitan Bank & Trust		11,063		18,910
Philippine Long Distance Telephone Co.		1,485		89,329
SM Investments Corp.		4,115		66,114
SM Prime Holdings, Inc.		177,450		58,914
Universal Robina Corp.		25,140		64,220
				1,012,911
Poland — 0.4%
Alior Bank SA (a)(b)		1,575		42,493
Bank Handlowy w Warszawie SA		1,177		40,783
Bank Millennium SA (b)		13,346		31,621
Bank Pekao SA		3,816		226,695
Bank Zachodni WBK SA		797		102,461
BRE Bank SA		487		80,733
Cyfrowy Polsat SA (b)		6,256		41,149
Enea SA		3,084		13,890
Eurocash SA		1,745		27,585
Grupa Azoty SA		1,909		39,446
Grupa Lotos SA (b)		1,964		23,068
Jastrzebska Spolka Weglowa SA		1,221		21,483
Kernel Holding SA (b)		1,689		21,347
KGHM Polska Miedz SA		4,415		172,087
PGE SA (a)		21,950		118,209
Polski Koncern Naftowy Orlen SA		10,191		138,553
Polskie Gornictwo Naftowe i Gazownictwo SA		62,058		105,370
Powszechna Kasa Oszczednosci Bank Polski SA (a)		25,794		336,300
Powszechny Zaklad Ubezpieczen SA		1,648		244,890
Synthos SA		15,178		27,434
Tauron Polska Energia SA		36,373		52,714
Telekomunikacja Polska SA-ADR		18,817		61,041
				1,969,352

See Notes to Financial Statements.

28 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) ACWI ex-US Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks		Shares		Value
Portugal — 0.1%
Banco Espirito Santo SA, Registered Shares (b)			48,015	$	68,571
EDP — Energias de Portugal SA			61,217		224,855
Galp Energia SGPS SA			10,468		171,563
Jeronimo Martins SGPS SA			7,861		153,712
Portugal Telecom SGPS SA, Registered Shares (a)			16,586		72,206
					690,907
Russia — 1.3%
AK Transneft OAO, Preference Shares			44		115,228
Federal Grid Co. Unified Energy System JSC (b)			10,130,000		27,862
Federal Hydrogenerating Co. JSC			2,534,000		43,847
Gazprom OAO			358,750		1,526,113
Lukoil OAO			15,522		963,861
Magnit OJSC — GDR			8,416		558,974
MegaFon OAO — GDR			3,130		105,025
MMC Norilsk Nickel			1,646		270,625
Mobile Telesystems — ADR			15,455		334,292
NovaTek OAO — GDR			2,990		409,878
Rosneft Oil Co.			34,820		266,913
Rostelecom OJSC			29,700		100,213
Sberbank of Russia			328,560		1,013,919
Sberbank of Russia, Preference Shares			25,500		62,445
Severstal OAO			5,710		55,603
Sistema JSFC — GDR			3,974		127,885
Surgutneftegas OAO			199,200		172,149
Surgutneftegas OAO, Preference Shares			207,000		163,101
Tatneft			42,740		271,490
Uralkali OJSC			37,310		195,336
VTB Bank OJSC			154,910,000		234,501
					7,019,260
Singapore — 1.0%
Ascendas Real Estate Investment Trust			57,000		99,758
CapitaCommercial Trust			69,000		79,463
CapitaLand Ltd.			75,000		180,781
CapitaMall Trust			68,000		102,906
CapitaMalls Asia Ltd.			47,000		73,254
City Developments Ltd.			11,000		84,051
ComfortDelGro Corp. Ltd.			57,000		91,143
DBS Group Holdings Ltd.			52,684		715,963
Genting Singapore PLC			186,000		221,189
Global Logistic Properties Ltd.			87,000		199,572
Golden Agri-Resources Ltd.			203,000		87,879
Hutchison Port Holdings Trust			147,000		99,346
Jardine Cycle & Carriage Ltd.			4,000		114,283
Keppel Corp. Ltd.			42,000		373,071
Keppel Land Ltd.			23,000		61,051
Noble Group Ltd.			114,000		97,087
Olam International Ltd. (a)			36,000		43,914
Oversea-Chinese Banking Corp.			79,000		640,313
SembCorp Industries Ltd.			28,000		122,155
SembCorp Marine Ltd. (a)			21,000		74,249
Singapore Airlines Ltd.			15,000		123,896
Singapore Exchange Ltd.			22,000		126,865
Singapore Press Holdings Ltd. (a)			46,876		153,179
Singapore Technologies Engineering Ltd.			46,000		144,776
Singapore Telecommunications Ltd.			242,000		703,764
StarHub Ltd.			20,000		68,176
United Overseas Bank Ltd.			39,000		658,595
UOL Group Ltd.			12,000		59,063
Wilmar International Ltd.			57,000		154,828
Common Stocks		Shares		Value
Singapore (concluded)
Yangzijiang Shipbuilding Holdings Ltd.			72,000	$	67,764
					5,822,334
South Africa — 1.5%
African Bank Investments Ltd. (a)			47,213		54,234
African Rainbow Minerals Ltd.	��		3,893		70,299
Anglo American Platinum Ltd. (b)			2,248		84,647
AngloGold Ashanti Ltd.			11,573		135,852
Aspen Pharmacare Holdings Ltd.			10,228		262,319
Assore Ltd.			1,116		36,275
Barclays Africa Group, Ltd.			9,506		120,016
Barloworld Ltd.			7,909		75,457
Bidvest Group Ltd.			8,892		227,798
Discovery Holdings Ltd.			10,534		84,962
Exxaro Resources Ltd. (a)			3,809		53,265
FirstRand Ltd.			93,614		320,808
The Foschini Group Ltd. (a)			6,626		60,584
Gold Fields Ltd.			19,450		62,179
Growthpoint Properties Ltd.			52,711		122,158
Harmony Gold Mining Co., Ltd.			15,556		39,441
Impala Platinum Holdings Ltd.			16,384		192,619
Imperial Holdings Ltd.			5,259		101,696
Investec Ltd.			7,549		53,720
Kumba Iron Ore Ltd. (a)			2,252		95,339
Liberty Holdings Ltd.			4,153		48,212
Life Healthcare Group Holdings Ltd.			27,590		110,193
Massmart Holdings Ltd.			3,891		48,251
Mediclinic International, Ltd.			11,174		81,026
MMI Holdings Ltd.			32,346		78,106
Mr. Price Group Ltd.			6,758		105,626
MTN Group Ltd.			51,139		1,059,159
Nampak Ltd. (a)			15,329		59,960
Naspers Ltd., Class N			11,947		1,250,545
Nedbank Group Ltd.			5,775		115,791
Netcare Ltd.			34,385		85,347
Northam Platinum Ltd. (b)			13,333		53,577
Pick n Pay Stores Ltd. (a)			7,638		37,925
PPC Ltd.			16,592		49,703
Redefine Properties Ltd.			77,451		71,914
Remgro Ltd.			15,173		300,969
Reunert Ltd.			6,807		44,450
RMB Holdings Ltd.			24,997		115,453
RMI Holdings			25,706		67,316
Sanlam Ltd.			51,140		259,880
Sappi Ltd. (b)			17,974		56,205
Sasol Ltd.			16,639		818,901
Shoprite Holdings Ltd.			13,600		212,967
The Spar Group Ltd.			4,305		54,044
Standard Bank Group Ltd. (a)			36,177		447,009
Steinhoff International Holdings Ltd.			38,723		166,841
Tiger Brands Ltd.			4,628		117,935
Truworths International Ltd.			12,835		94,036
Vodacom Group Ltd. (a)			11,494		145,729
Woolworths Holdings Ltd.			22,746		162,094
					8,572,832
South Korea — 3.3%
Amorepacific Corp.			106		100,494
Amorepacific Group			108		47,647
BS Financial Group, Inc.			4,690		71,254
Celltrion, Inc.			2,227		80,926

See Notes to Financial Statements.

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 29

Schedule of Investments (continued) ACWI ex-US Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
South Korea (continued)
Cheil Industries, Inc.		1,326	$	111,371
Cheil Worldwide, Inc. (b)		2,740		71,525
CJ Cheil Jedang Corp.		189		49,671
CJ Corp.		545		60,280
Coway Co., Ltd.		1,606		101,174
Daelim Industrial Co., Ltd.		786		70,224
Daewoo Engineering & Construction Co., Ltd. (b)		4,240		29,610
Daewoo International Corp.		1,160		45,492
Daewoo Securities Co., Ltd.		5,560		47,027
Daewoo Shipbuilding & Marine Engineering Co., Ltd.		2,660		88,484
DGB Financial Group, Inc.		3,550		55,616
Dongbu Insurance Co., Ltd.		1,160		61,806
Doosan Corp.		275		36,388
Doosan Heavy Industries & Construction Co., Ltd.		1,516		51,001
Doosan Infracore Co., Ltd. (b)		3,880		46,470
E-Mart Co., Ltd.		630		159,331
GS Engineering & Construction Corp.		1,141		33,040
GS Holdings		1,737		94,532
Halla Visteon Climate Control Corp.		1,460		53,744
Hana Financial Group, Inc.		8,201		341,714
Hankook Tire Co., Ltd. (b)		2,179		125,556
Hanwha Chem Corp.		3,100		63,492
Hanwha Corp.		1,510		56,183
Hanwha Life Insurance Co., Ltd.		7,120		51,307
Hite Jinro Co., Ltd.		200		4,184
Hyosung Corp.		772		51,510
Hyundai Department Store Co., Ltd.		499		76,302
Hyundai Development Co-Engineering & Construction		2,140		47,157
Hyundai Engineering & Construction Co., Ltd.		2,127		122,611
Hyundai Glovis Co., Ltd.		380		83,281
Hyundai Heavy Industries Co., Ltd.		1,230		300,360
Hyundai Hysco Co., Ltd.		1,300		51,121
Hyundai Marine & Fire Insurance Co., Ltd.		2,370		73,018
Hyundai Merchant Marine Co., Ltd. (b)		2,004		21,695
Hyundai Mipo Dockyard		278		47,025
Hyundai Mobis		2,048		570,171
Hyundai Motor Co.		4,492		1,008,304
Hyundai Motor Co., Preference Shares		908		107,705
Hyundai Motor Co., Second Preference Shares		1,304		161,494
Hyundai Securities Co., Ltd.		5,100		28,331
Hyundai Steel Co.		1,613		132,247
Hyundai Wia Corp.		430		77,601
Industrial Bank of Korea		4,130		47,637
Kangwon Land, Inc.		3,220		94,547
KB Financial Group, Inc.		11,507		465,112
KCC Corp.		148		65,811
Kia Motors Corp.		7,876		419,409
Korea Aerospace Industries, Ltd.		1,410		38,791
Korea Electric Power Corp. (b)		7,730		255,292
Korea Gas Corp.		753		47,597
Korea Investment Holdings Co., Ltd.		920		35,616
Korea Zinc Co., Ltd.		285		85,972
Korean Air Lines Co., Ltd. (b)		1,216		36,142
KT Corp.		1,200		35,949
KT&G Corp.		3,282		231,800
Kumho Petro chemical Co., Ltd.		423		38,280
LG Chem Ltd.		1,416		402,769
LG Chem Ltd., Preference Shares		179		25,904
LG Corp.		2,708		164,485
LG Display Co., Ltd. (b)		6,960		168,072
Common Stocks	Shares		Value
South Korea (concluded)
LG Electronics, Inc.		3,269	$	211,377
LG Household & Health Care Ltd.		273		141,956
LG Innotek Co., Ltd. (b)		412		32,753
LG Uplus Corp. (b)		7,600		77,486
Lotte Chemical Corp.		480		105,831
Lotte Confectionery Co., Ltd.		24		43,481
Lotte Shopping Co., Ltd.		320		122,582
LS Corp.		426		32,709
LS Industrial Systems Co., Ltd.		411		25,625
Mirae Asset Securities Co., Ltd.		940		34,285
NAVER Corp.		850		585,758
NCSoft Corp.		424		100,049
NHN Corp. (b)		496		45,307
OCI Co., Ltd.		468		84,902
Orion Corp.		108		97,242
POSCO		1,958		609,256
S-Oil Corp.		1,187		83,386
S1 Corp.		442		31,363
Samsung C&T Corp.		3,727		214,453
Samsung Card Co.		1,210		42,917
Samsung Electro-Mechanics Co., Ltd.		1,780		123,380
Samsung Electronics Co., Ltd.		3,341		4,353,480
Samsung Electronics Co., Ltd., Preference Shares		631		606,838
Samsung Engineering Co., Ltd.		913		57,190
Samsung Fire & Marine Insurance Co., Ltd.		1,110		272,763
Samsung Heavy Industries Co., Ltd.		5,000		180,707
Samsung Life Insurance Co., Ltd.		1,796		177,201
Samsung SDI Co., Ltd.		1,037		159,665
Samsung Securities Co., Ltd.		2,130		89,061
Samsung Techwin Co., Ltd.		911		47,036
Shinhan Financial Group Co., Ltd.		12,786		574,025
Shinsegae Co., Ltd.		221		52,933
SK C&C Co., Ltd.		797		102,091
SK Holdings Co., Ltd.		756		137,066
SK Hynix, Inc. (b)		16,160		565,237
SK Innovation Co., Ltd.		1,833		246,456
SK Networks Co., Ltd.		4,560		32,722
SK Telecom Co., Ltd.		354		77,469
Woori Finance Holdings Co., Ltd.		10,510		132,770
Woori Investment & Securities Co., Ltd.		2,300		20,953
Yuhan Corp.		261		46,331
				18,606,753
Spain — 2.4%
Abertis Infraestructuras SA		11,164		248,319
ACS Actividades de Construccion y Servicios SA		4,643		160,051
Amadeus IT Holding SA, Class A		11,773		504,300
Banco Bilbao Vizcaya Argentaria SA		175,015		2,165,029
Banco de Sabadell SA		101,313		264,550
Banco Popular Espanol SA (b)		37,490		226,445
Banco Santander SA		343,590		3,089,730
Bankia SA (b)		121,018		205,442
CaixaBank SA (a)		51,365		267,549
Cemex Latam Holdings SA (b)		6,102		46,793
Distribuidora Internacional de Alimentacion SA		18,381		164,582
Enagas SA (a)		5,609		146,517
Ferrovial SA		11,413		221,090
Gas Natural SDG SA		10,314		265,475
Grifols SA		4,520		216,297
Iberdrola SA		140,287		895,277
Inditex SA		6,599		1,089,568

See Notes to Financial Statements.

30 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) ACWI ex-US Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Spain (concluded)
International Consolidated Airlines Group SA (b)		30,526	$	203,341
Mapfre SA (a)		34,376		147,452
Red Electrica Corp. SA (a)		3,464		231,255
Repsol SA		25,299		638,372
Telefonica SA		123,625		2,021,363
Zardoya Otis SA (a)		5,536		100,228
				13,519,025
Sweden — 2.3%
Alfa Laval AB		9,285		238,561
Assa Abloy AB, Class B		10,145		537,118
Atlas Copco AB, Class A		18,734		520,169
Atlas Copco AB, Class B		13,422		341,205
Boliden AB		7,981		122,361
Electrolux AB, Class B		7,546		197,196
Elekta AB, B Shares		11,814		180,791
Getinge AB, Class B (a)		6,035		206,868
Hennes & Mauritz AB, Class B		28,771		1,325,090
Hexagon AB, Class B		7,152		226,234
Husqvarna AB, Class B		9,926		59,769
Industrivarden AB, Class C		4,247		80,810
Investment AB Kinnevik, Class B		6,904		320,077
Investor AB, Class B		14,124		486,763
Lundin Petroleum AB (b)		7,014		136,496
Millicom International Cellular SA		1,996		198,893
Nordea Bank AB		91,868		1,238,637
Sandvik AB (a)		31,635		446,486
Scania AB, Class B		8,949		175,395
Securitas AB, Class B (a)		10,778		114,682
Skandinaviska Enskilda Banken AB, Class A		45,776		604,759
Skanska AB, Class B		11,847		242,368
SKF AB, Class B		11,812		309,774
Svenska Cellulosa AB, B Shares		17,840		549,612
Svenska Handelsbanken AB, Class A		15,040		739,469
Swedbank AB, Class A		27,351		770,458
Swedish Match AB		6,071		195,189
Tele2 AB, Class B		9,352		106,217
Telefonaktiebolaget LM Ericsson, Class B		92,338		1,127,400
TeliaSonera AB		72,152		601,777
Volvo AB, Class B		45,384		597,180
				12,997,804
Switzerland — 6.8%
ABB Ltd., Registered Shares		66,452		1,756,991
Actelion Ltd., Registered Shares (b)		2,979		252,681
Adecco SA, Registered Shares (b)		3,943		313,022
Aryzta AG		2,629		202,009
Baloise Holding AG, Registered Shares		1,387		176,862
Barry Callebaut AG, Registered Shares		76		95,504
Cie Financiere Richemont SA, Registered Shares		15,793		1,577,679
Coca-Cola HBC AG (b)		5,987		175,226
Credit Suisse Group AG, Registered Shares		45,774		1,412,739
EMS-Chemie Holding AG, Registered Shares		290		103,406
Geberit AG, Registered Shares		1,107		335,843
Givaudan SA, Registered Shares		252		360,502
Glencore Xstrata PLC (b)		321,767		1,674,010
Holcim Ltd., Registered Shares (b)		6,745		504,287
Julius Baer Group Ltd.		6,704		322,167
Kuehne & Nagel International AG, Registered Shares		1,576		207,148
Lindt & Spruengli AG		30		135,228
Lindt & Spruengli AG, Registered Shares		3		161,762
Common Stocks	Shares		Value
Switzerland (concluded)
Lonza Group AG, Registered Shares (b)		1,660	$	157,755
Nestle SA, Registered Shares		97,735		7,163,000
Novartis AG, Registered Shares		69,703		5,586,647
Pargesa Holding SA, Bearer Shares		734		59,119
Partners Group Holding AG		536		142,945
Roche Holding AG		21,294		5,965,007
Schindler Holding AG, Participation Certificates (a)		1,450		213,460
Schindler Holding AG, Registered Shares		510		75,237
SGS SA, Registered Shares		162		372,965
Sika AG		69		245,878
Sonova Holding AG, Registered Shares		1,523		205,368
Sulzer AG, Registered Shares		667		107,775
The Swatch Group AG, Bearer Shares		955		632,977
The Swatch Group AG, Registered Shares		1,154		130,082
Swiss Life Holding AG, Registered Shares (b)		960		199,584
Swiss Prime Site AG, Registered Shares		1,608		124,522
Swiss Re AG (b)		10,652		981,991
Swisscom AG, Registered Shares		694		366,775
Syngenta AG, Registered Shares		2,822		1,125,122
Transocean Ltd.		10,770		527,080
UBS AG, Registered Shares (b)		110,396		2,113,790
Wolseley PLC		8,010		455,394
Zurich Insurance Group AG (b)		4,493		1,303,257
				38,022,796
Taiwan — 2.4%
Acer, Inc. (b)		64,000		39,386
Advanced Semiconductor Engineering, Inc.		186,097		173,851
Advantech Co., Ltd.		8,000		55,504
Asia Cement Corp.		56,111		72,789
Asia Pacific Telecom Co., Ltd.		33,000		17,121
Asustek Computer, Inc.		20,220		182,103
AU Optronics Corp. (b)		246,000		78,511
Catcher Technology Co., Ltd.		20,000		130,234
Cathay Financial Holding Co., Ltd.		231,415		375,791
Chailease Holding Co., Ltd.		20,800		54,928
Chang Hwa Commercial Bank		120,757		74,479
Cheng Shin Rubber Industry Co., Ltd.		47,436		124,267
Cheng Uei Precision Industry Co., Ltd.		15,079		30,311
Chicony Electronics Co., Ltd.		15,468		38,947
China Airlines Ltd. (b)		103,687		38,158
China Development Financial Holding Corp.		381,765		115,590
China Life Insurance Co., Ltd.		53,307		54,207
China Motor Corp.		17,000		16,463
China Petrochemical Development Corp.		53,612		24,496
China Steel Corp.		334,940		303,709
Chunghwa Telecom Co., Ltd.		112,000		349,629
Clevo Co.		19,805		42,882
Compal Electronics, Inc.		119,000		91,250
CTBC Financial Holding Co., Ltd.		413,672		283,072
CTCI Corp.		21,000		34,087
Delta Electronics, Inc.		55,000		314,957
E.Sun Financial Holding Co., Ltd.		162,542		108,232
Eclat Textile Co., Ltd.		4,000		45,166
Epistar Corp. (b)		18,000		34,726
Eva Airways Corp. (b)		59,000		32,940
Evergreen Marine Corp. Taiwan, Ltd. (b)		69,000		42,185
Far Eastern Department Stores Co., Ltd.		33,894		33,595
Far Eastern New Century Corp.		83,245		96,246
Far EasTone Telecommunications Co., Ltd.		47,000		103,253
Farglory Land Development Co., Ltd.		9,597		16,288

See Notes to Financial Statements.

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 31

Schedule of Investments (continued) ACWI ex-US Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Taiwan (continued)
Feng Hsin Iron & Steel Co.		17,000	$	31,188
First Financial Holding Co., Ltd.		192,551		119,893
Formosa Chemicals & Fibre Corp.		95,360		269,288
Formosa International Hotels Corp.		1,210		13,822
Formosa Petrochemical Corp.		31,000		85,016
Formosa Plastics Corp.		123,040		332,952
Formosa Taffeta Co., Ltd.		31,000		37,514
Foxconn Technology Co., Ltd.		29,297		68,560
Fubon Financial Holding Co., Ltd.		210,952		309,389
Giant Manufacturing Co., Ltd.		9,000		62,009
Hermes Microvision, Inc.		1,000		32,564
Highwealth Construction Corp.		15,000		31,784
Hiwin Technologies Corp.		5,394		45,583
Hon Hai Precision Industry Co., Ltd.		333,800		900,359
Hotai Motor Co., Ltd.		8,000		98,857
HTC Corp.		23,050		109,253
Hua Nan Financial Holdings Co., Ltd.		149,712		87,547
Innolux Corp. (b)		188,401		71,987
Inventec Co. Ltd.		79,470		70,371
Kinsus Interconnect Technology Corp.		11,000		36,576
Largan Precision Co., Ltd.		4,000		163,491
LCY Chemical Corp.		22,497		29,282
Lite-On Technology Corp.		59,619		95,811
MediaTek, Inc.		37,000		551,481
Mega Financial Holding Co., Ltd.		280,110		236,170
Merida Industry Co., Ltd.		7,000		50,851
MStar Semiconductor, Inc.		4,100		47,778
Nan Kang Rubber Tire Co., Ltd. (b)		14,819		18,397
Nan Ya Plastics Corp.		141,790		328,519
Novatek Microelectronics Corp.		14,000		57,436
Pegatron Corp.		39,000		50,419
Phison Electronics Corp.		5,000		31,992
Pou Chen Corp.		61,000		91,329
Powertech Technology, Inc.		26,100		39,943
President Chain Store Corp.		17,000		118,032
Quanta Computer, Inc.		75,000		175,395
Radiant Opto-Electronics Corp.		14,729		54,029
Realtek Semiconductor Corp.		15,240		41,017
Ruentex Development Co., Ltd.		20,109		39,082
Ruentex Industries Ltd.		17,521		45,082
ScinoPharm Taiwan, Ltd.		4,440		13,069
Shin Kong Financial Holding Co., Ltd.		239,126		82,826
Siliconware Precision Industries Co.		87,000		103,939
Simplo Technology Co., Ltd.		9,600		42,608
SinoPac Financial Holdings Co., Ltd.		184,490		92,166
Standard Foods Corp.		5,306		16,588
Synnex Technology International Corp.		45,000		71,459
Taishin Financial Holding Co., Ltd.		173,866		85,636
Taiwan Business Bank (b)		114,043		34,773
Taiwan Cement Corp.		91,000		141,497
Taiwan Cooperative Financial Holding		145,038		79,420
Taiwan Fertilizer Co., Ltd.		30,000		68,041
Taiwan Glass Industry Corp.		30,720		34,211
Taiwan Mobile Co., Ltd.		52,800		170,661
Taiwan Semiconductor Manufacturing Co., Ltd.		747,000		2,637,625
Teco Electric and Machinery Co., Ltd.		63,000		72,373
TPK Holding Co., Ltd.		3,887		22,999
Transcend Information, Inc.		6,000		17,278
TSRC Corp.		20,200		29,867
U-Ming Marine Transport Corp.		19,000		34,096
Common Stocks	Shares		Value
Taiwan (concluded)
Uni-President Enterprises Corp.		136,440	$	246,211
Unimicron Technology Corp.		45,000		34,183
United Microelectronics Corp.		374,000		156,218
Vanguard International Semiconductor Corp.		29,000		34,536
Walsin Lihwa Corp. (b)		130,000		41,791
Wan Hai Lines Ltd.		31,000		16,135
Wistron Corp.		79,386		66,853
WPG Holdings Ltd.		54,270		62,541
Yang Ming Marine Transport Corp. (b)		61,000		28,593
Yuanta Financial Holding Co., Ltd.		244,733		146,485
Yulon Motor Co., Ltd.		14,000		25,395
Zhen Ding Technology Holding Ltd.		10,710		25,847
				13,445,321
Thailand — 0.5%
Advanced Info Service PCL — NVDR		34,200		208,571
Airports of Thailand PCL — NVDR		15,000		72,607
Bangkok Bank PCL — NVDR		19,300		105,129
Bangkok Bank PCL, Foreign Registered Shares		30,700		167,082
Bangkok Dusit Medical Services PCL — NVDR		10,800		38,815
Banpu PCL — NVDR		47,000		43,344
BEC World PCL — NVDR		34,200		52,721
BTS Group Holdings PCL		152,700		40,545
Central Pattana PCL — NVDR		45,600		57,241
Charoen Pokphand Foods PCL — NVDR		108,000		105,528
CP ALL PCL — NVDR		137,700		176,555
Glow Energy PCL — NVDR		17,900		38,513
Home Product Center PCL		60,400		17,270
Indorama Ventures PCL — NVDR		39,200		23,966
IRPC PCL — NVDR		287,500		28,614
Kasikornbank PCL — NVDR		24,200		115,677
Kasikornbank PCL, Foreign Registered Shares		41,400		200,939
Krung Thai Bank PCL — NVDR		121,875		61,595
Minor International PCL		31,800		20,111
PTT Exploration & Production PCL — NVDR		46,222		234,780
PTT Global Chemical PCL — NVDR		58,068		140,237
PTT Global Chemical PCL, Foreign Registered Shares		6,300		15,146
PTT PCL — NVDR		28,000		244,218
Siam Cement PCL — NVDR		4,500		54,947
Siam Cement PCL, Foreign Registered Shares		10,000		123,993
Siam Commercial Bank PCL — NVDR (a)		55,200		242,622
Thai Oil PCL — NVDR		33,900		58,228
TMB Bank PCL		271,500		17,119
True Corp. PCL — NVDR (b)		170,000		39,026
				2,745,139
Turkey — 0.3%
Akbank TAS		51,196		159,772
Anadolu Efes Biracilik Ve Malt Sanayii AS		5,871		63,505
Arcelik AS		8,048		45,519
BIM Birlesik Magazalar AS		6,652		134,343
Coca-Cola Icecek AS		2,369		57,064
Emlak Konut Gayrimenkul Yatirim Ortakligi AS		57,596		56,084
Enka Insaat ve Sanayi AS		12,574		35,256
Eregli Demir ve Celik Fabrikalari TAS		44,859		53,893
Ford Otomotiv Sanayi		2,700		28,552
Haci Omer Sabanci Holding AS		22,110		88,963
KOC Holding AS		16,698		68,458
Koza Altin Isletmeleri AS		2,236		23,111
TAV Havalimanlari Holding AS		5,354		38,547
Tofas Turk Otomobil Fabrikasi		4,704		29,365

See Notes to Financial Statements.

32 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) ACWI ex-US Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Turkey (concluded)
Tupras Turkiye Petrol Rafinerileri AS		3,539	$	70,668
Turk Hava Yollari		13,676		41,002
Turk Telekomunikasyon AS (a)		10,009		27,762
Turkcell Iletisim Hizmetleri AS (b)		22,628		119,922
Turkiye Garanti Bankasi AS		69,925		226,664
Turkiye Halk Bankasi		17,575		99,430
Turkiye Is Bankasi, Class C		42,918		92,922
Turkiye Sise ve Cam Fabrikalari		18,931		23,962
Turkiye Vakiflar Bankasi Tao, Class D		24,210		43,085
Ulker Biskuvi Sanayi		3,956		27,984
Yapi ve Kredi Bankasi		27,788		48,148
				1,703,981
United Kingdom — 15.3%
3i Group PLC		30,044		191,979
Aberdeen Asset Management PLC		27,941		232,348
Admiral Group PLC		6,108		132,771
Aggreko PLC		7,746		219,681
AMEC PLC		8,990		162,313
Anglo American PLC		42,108		921,547
Antofagasta PLC		11,729		160,799
ARM Holdings PLC		42,557		773,809
Associated British Foods PLC		10,913		442,584
AstraZeneca PLC		38,025		2,255,907
Aviva PLC		89,313		668,191
Babcock International Group PLC		11,485		258,068
BAE Systems PLC		98,513		710,751
Barclays PLC		462,552		2,091,606
BG Group PLC		103,238		2,221,511
BHP Billiton PLC		64,165		1,991,033
BP PLC		571,991		4,635,480
British American Tobacco PLC		57,795		3,102,094
British Land Co. PLC		28,310		295,146
British Sky Broadcasting Group PLC		31,452		439,580
BT Group PLC		240,536		1,516,805
Bunzl PLC		10,376		249,346
Burberry Group PLC		13,382		337,164
The Capita Group PLC		20,106		346,089
Capital Shopping Centres Group PLC		19,758		101,424
Carnival PLC		5,484		227,027
Centrica PLC		156,200		900,746
Cobham PLC		32,747		149,069
Compass Group PLC		54,877		881,043
Croda International PLC		4,323		176,218
Diageo PLC		76,340		2,529,799
Direct Line Insurance Group PLC		29,128		120,393
easyJet PLC (a)		4,766		121,471
Experian PLC		30,562		564,552
Fresnillo PLC		4,712		58,589
G4S PLC		47,526		206,793
GKN PLC		48,289		299,234
GlaxoSmithKline PLC		148,706		3,973,048
Hammerson PLC		21,922		182,504
Hargreaves Lansdown PLC		6,269		140,813
HSBC Holdings PLC		565,967		6,211,004
ICAP PLC		16,916		126,699
IMI PLC		9,220		233,487
Imperial Tobacco Group PLC		29,442		1,141,411
Inmarsat PLC		13,548		169,868
InterContinental Hotels Group PLC		8,156		272,055
Intertek Group PLC		4,781		249,527
Common Stocks	Shares		Value
United Kingdom (concluded)
Invensys PLC		20,053	$	169,501
Investec PLC		17,179		124,767
ITV PLC		114,164		367,396
J. Sainsbury PLC		36,673		221,953
Johnson Matthey PLC		6,236		339,319
Kingfisher PLC		71,743		458,010
Land Securities Group PLC		23,888		381,599
Legal & General Group PLC		180,251		666,290
Lloyds Banking Group PLC (b)		1,516,714		1,990,211
London Stock Exchange Group PLC		5,529		159,049
Marks & Spencer Group PLC		48,999		351,856
Meggitt PLC		25,051		219,332
Melrose Industries PLC		38,505		195,348
National Grid PLC		113,500		1,484,490
Next PLC		4,813		435,054
Old Mutual PLC		148,536		466,047
Pearson PLC		24,830		553,605
Persimmon PLC (b)		8,693		178,721
Petrofac Ltd.		8,198		166,164
Prudential PLC		77,660		1,735,234
Randgold Resources Ltd.		2,704		170,035
Reckitt Benckiser Group PLC		19,740		1,568,064
Reed Elsevier PLC		35,927		535,801
Resolution Ltd.		42,671		250,469
Rexam PLC		24,374		214,447
Rio Tinto PLC		38,563		2,179,181
Rolls-Royce Holdings PLC (b)		57,229		1,210,472
Royal Bank of Scotland Group PLC (b)		65,034		366,259
Royal Dutch Shell PLC, Class A		115,275		4,131,255
Royal Dutch Shell PLC, Class B		78,028		2,943,229
RSA Insurance Group PLC		111,239		168,364
SABMiller PLC		29,187		1,502,403
The Sage Group PLC		35,185		235,534
Schroders PLC		3,115		134,348
Segro PLC		22,265		123,241
Serco Group PLC		14,937		123,477
Severn Trent PLC		7,224		204,243
Smith & Nephew PLC		27,231		388,932
Smiths Group PLC		11,721		287,816
SSE PLC		29,212		663,819
Standard Chartered PLC		73,367		1,657,137
Standard Life PLC		71,502		427,003
Tate & Lyle PLC		14,169		190,068
Tesco PLC		245,102		1,361,133
Travis Perkins PLC		7,123		221,269
Tui Travel PLC		15,208		104,242
Tullow Oil PLC		27,136		385,130
Unilever PLC		38,922		1,601,477
United Utilities Group PLC		20,632		229,707
Vodafone Group PLC		1,469,649		5,786,287
The Weir Group PLC		6,151		217,783
Whitbread PLC		5,477		340,858
William Hill PLC		27,709		184,717
WM Morrison Supermarkets PLC		67,076		290,360
WPP PLC		40,586		929,579
				85,385,461
Total Common Stocks — 98.8%				549,720,161

See Notes to Financial Statements.

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 33

Schedule of Investments (continued) ACWI ex-US Index Master Portfolio (Percentages shown are based on Net Assets)

Investment Companies — 1.3%	Shares		Value
India — 1.3%
iShares India 50 ETF (c)		314,133	$	7,385,267
Total Investment Companies — 1.3%				7,385,267
Preferred Stocks — 0.0%
Germany — 0.0%
Fuchs Petrolub SE, Preference Shares, 0.00%		1,029		100,807
Total Preferred Stocks — 0.0%				100,807
Rights (b)
Canada — 0.0%
Turquoise Hill Resources, Ltd., (Expires 03/25/14)		14,466		13,618
Spain — 0.0%
Repsol SA, (Expires 02/26/14)		28,740		19,611
Total Rights — 0.0%				33,229
Total Long-Term Investments (Cost — $472,948,551) — 100.1%				557,239,464
Short-Term Securities	Shares		Value
United States
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)(e)		14,568,359	$	14,568,359
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)(e)		2,067,150		2,067,150
Total Short-Term Securities (Cost — $16,635,509) — 3.0%				16,635,509
Total Investments (Cost — $489,584,060*) — 103.1%				573,874,973
Liabilities in Excess of Other Assets — (3.1)%				(17,431,482	)
Net Assets — 100.0%			$	556,443,491

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	494,750,205
Gross unrealized appreciation	$	97,606,304
Gross unrealized depreciation		(18,481,536	)
Net unrealized appreciation	$	79,124,768

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

(b) Non-income producing security.

(c) Investments in issuers considered to be an affiliate of the Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at December 31, 2012		Shares Purchased			Shares Sold			Shares Held at December 31, 2013		Value at December 31, 2013		Income		Realized Gain (Loss)
BlackRock Cash Funds: Institutional, SL Agency Shares		7,988,899		6,579,460	1		—			14,568,359	$	14,568,359	$	68,823		—
BlackRock Cash Funds: Prime, SL Agency Shares		—		2,067,150	1		—			2,067,150	$	2,067,150	$	9,212		—
iShares India 50 ETF		238,211		187,435			(111,513	)		314,133	$	7,385,267	$	67,441	$	185,690

¹  Represents net share activity.

(d) All or a portion of security was purchased with the cash collateral from loaned securities.

(e) Represents the current yield as of report date.

Ÿ Financial futures contracts as of December 31, 2013 were as follows:

Contracts Purchased	Issue	Exchange	Expiration	Notional Value		Unrealized Appreciation
56	E-Mini MSCI EAFE Index	NYSE Liffe U.S.	March 2014	$	5,369,840	$	203,795
34	MSCI Emerging Markets Mini Index	NYSE Liffe U.S.	March 2014	$	1,728,560		24,678
Total						$	228,473

See Notes to Financial Statements.

34 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) ACWI ex-US Index Master  Portfolio

Ÿ Foreign currency exchange contracts as of December 31, 2013 were as follows:

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation/ (Depreciation)
USD	198,790	ILS	690,000	BNP Paribas SA		1/02/14	$	57
USD	4,272,668	CHF	3,800,000	BNP Paribas SA		1/03/14		12,817
USD	4,062,550	HKD	31,500,000	BNP Paribas SA		1/03/14		288
USD	2,178,856	KRW	2,300,000,000	State Street Bank and Trust Co.		1/03/14		(516	)
USD	1,510,292	SEK	9,700,000	BNP Paribas SA		1/03/14		2,172
USD	279,202	TRY	600,000	BNP Paribas SA		1/03/14		2
USD	1,627,135	TWD	48,500,000	State Street Bank and Trust Co.		1/03/14		(382	)
USD	3,757,257	AUD	4,200,000	Citibank NA		1/06/14		7,076
USD	1,524,778	BRL	3,600,000	State Street Bank and Trust Co.		1/06/14		29
USD	4,893,887	CAD	5,200,000	Deutsche Bank AG		1/06/14		(1,382	)
USD	65,443	CZK	1,300,000	BNP Paribas SA		1/06/14		(17	)
USD	554,130	DKK	3,000,000	BNP Paribas SA		1/06/14		905
USD	14,758,123	EUR	10,710,000	Citibank NA		1/06/14		24,383
USD	10,599,814	GBP	6,400,000	BNP Paribas SA		1/06/14		1,735
USD	31,071	HUF	6,700,000	BNP Paribas SA		1/06/14		64
USD	349,026	IDR	4,300,000,000	State Street Bank and Trust Co.		1/06/14		(4,126	)
USD	10,132,715	JPY	1,065,000,000	Westpac Banking Corp.		1/06/14		19,715
USD	740,450	MXN	9,700,000	BNP Paribas SA		1/06/14		(2,475	)
USD	457,457	MYR	1,500,000	State Street Bank and Trust Co.		1/06/14		(489	)
USD	395,553	NOK	2,400,000	BNP Paribas SA		1/06/14		(141	)
USD	61,729	NZD	75,000	BNP Paribas SA		1/06/14		49
USD	168,919	PHP	7,500,000	State Street Bank and Trust Co.		1/06/14		(76	)
USD	633,651	SGD	800,000	BNP Paribas SA		1/06/14		(289	)
USD	331,309	PLN	1,000,000	BNP Paribas SA		1/07/14		298
USD	1,001,989	ZAR	10,500,000	BNP Paribas SA		1/08/14		1,036
Total							$	60,733

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

Ÿ Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Master Portfolio’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.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

See Notes to Financial Statements.

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 35

Schedule of Investments (continued) ACWI ex-US Index Master  Portfolio

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Australia	$	471,502	$	29,354,287		—	$	29,825,789
Austria		283,651		793,758		—		1,077,409
Belgium		90,760		4,637,169		—		4,727,929
Brazil		12,259,607		—		—		12,259,607
Canada		39,301,909		—		—		39,301,909
Chile		1,801,892		—		—		1,801,892
China		251,408		19,519,001		—		19,770,409
Colombia		1,335,334		—		—		1,335,334
Czech Republic		62,612		222,551		—		285,163
Denmark		2,506,004		2,176,203		—		4,682,207
Egypt		—		239,368		—		239,368
Finland		419,694		3,233,775		—		3,653,469
France		250,990		39,962,091		—		40,213,081
Germany		366,739		37,287,585		—		37,654,324
Greece		86,743		504,068		—		590,811
Hong Kong		115,825		14,364,269		—		14,480,094
Hungary		—		304,764		—		304,764
Indonesia		—		2,538,328		—		2,538,328
Ireland		555,952		1,771,835		—		2,327,787
Israel		—		1,799,190		—		1,799,190
Italy		—		8,660,460		—		8,660,460
Japan		254,001		83,802,630		—		84,056,631
Luxembourg		—		152,602		—		152,602
Malaysia		583,488		3,869,302	$	43,994		4,496,784
Mexico		6,213,963		—		—		6,213,963
Netherlands		446,692		11,117,331		—		11,564,023
New Zealand		—		478,843		—		478,843
Norway		—		3,246,353		—		3,246,353
Peru		467,762		—		—		467,762
Philippines		—		1,012,911		—		1,012,911
Poland		61,041		1,908,311		—		1,969,352
Portugal		—		690,907		—		690,907
Russia		434,505		6,584,755		—		7,019,260
Singapore		—		5,822,334		—		5,822,334
South Africa		316,327		8,256,505		—		8,572,832
South Korea		199,324		18,407,429		—		18,606,753
Spain		252,235		13,266,790		—		13,519,025
Sweden		—		12,997,804		—		12,997,804
Switzerland		439,935		37,582,861		—		38,022,796
Taiwan		—		13,445,321		—		13,445,321
Thailand		15,146		2,729,993		—		2,745,139
Turkey		—		1,703,981		—		1,703,981
United Kingdom		1,017,978		84,367,483		—		85,385,461
Investment Companies:
India		7,385,267		—		—		7,385,267
Preferred Stocks:
Germany		—		100,807		—		100,807
Rights:
Canada		13,618		—		—		13,618
Spain		19,611		—		—		19,611
Short-Term Securities		16,635,509		—		—		16,635,509
Total	$	94,917,024	$	478,913,955	$	43,994	$	573,874,973

See Notes to Financial Statements.

36 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Schedule of Investments (concluded) ACWI ex-US Index Master  Portfolio

	Level 1			Level 2			Level 3	Total
Derivative Financial Instruments1
Assets:
Equity contracts	$	228,473			—		—	$	228,473
Foreign currency exchange contracts		70,597		$	29		—		70,626
Liabilities:
Foreign currency exchange contracts		(5,691	)		(4,202	)	—		(9,893	)
Total	$	293,379		$	(4,173	)	—	$	289,206
1   Derivative financial instruments are financial futures contracts and foreign currency exchange contracts. Financial futures contracts and foreign currency exchange contracts are valued at the unrealized appreciation/depreciation on the instrument.

The carry amount for certain of the Master Portfolio’s assets and/or liabilities approximates fair value for financial statement purposes. As of December 31, 2013, such assets and liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2			Level 3		Total
Assets:
Cash pledged for financial futures contracts	$	383,000		—			—	$	383,000
Foreign currency at value		3,187,484		—			—		3,187,484
Liabilities:
Collateral on securities loaned at value		—	$	(13,374,701	)		—		(13,374,701	)
Total	$	3,570,484	$	(13,374,701	)		—	$	(9,804,217	)

Certain foreign securities are fair valued utilizing an external pricing service to reflect any significant market movements between the time the Master Portfolio values such foreign securities and the earlier closing of foreign markets. Such fair valuations are categorized as Level 2 in the disclosure hierarchy. As of December 31, 2012, securities with a value of $10,743,928 were systematically fair valued due to significant market movements, but were not valued using systematic fair values as of December 31, 2013. Therefore, these securities were transferred from Level 2 to Level 1 during the period December 31, 2012 to December 31, 2013.

Certain foreign securities are fair valued utilizing an external pricing service to reflect any significant market movements between the time the Master Portfolio values such securities and the earlier closing of foreign markets. Such fair valuations are categorized as Level 2 in the disclosure hierarchy. As of December 31, 2012, the Master Portfolio did not utilize the external pricing service model adjustments as significant market movements did not occur. As of December 31, 2013, securities with a value of $11,867,165 were systematically fair valued due to significant market movements. Therefore, these securities were transferred from Level 1 to Level 2 during the period December 31, 2012 to December 31, 2013.

See Notes to Financial Statements.

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 37

Statement of Assets and Liabilities ACWI ex-US Index Master Portfolio

December 31, 2013
Assets
Investments at value — unaffiliated (including securities loaned of $12,637,962) (cost — $465,917,593)	$	549,854,197
Investments at value — affiliated (cost — $23,666,467)		24,020,776
Foreign currency at value (cost — $3,194,072)		3,187,484
Cash pledged for financial futures contracts		383,000
Investments sold receivable		67,086,089
Dividends receivable		651,573
Unrealized appreciation on foreign currency exchange contracts		70,626
Other income receivable — affiliated		32,077
Variation margin receivable on financial futures contracts		29,963
Securities lending income receivable — affiliated		8,350
Prepaid expenses		34
Total assets		645,324,169
Liabilities
Withdrawals payable to investors		75,142,365
Collateral on securities loaned at value		13,374,701
Custodian fees payable		135,502
Investment advisory fees payable		72,767
Foreign taxes payable		72,408
Investments purchased payable		34,470
Professional fees payable		26,532
Unrealized depreciation on foreign currency exchange contracts		9,893
Trustees’ fees payable		5,639
Printing fees payable		1,046
Other accrued expenses payable		5,355
Total liabilities		88,880,678
Net Assets	$	556,443,491
Net Assets Consist of
Investors’ capital	$	471,978,665
Net unrealized appreciation/depreciation		84,464,826
Net Assets	$	556,443,491

See Notes to Financial Statements.
38	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2013

Statement of Operations ACWI ex-US Index Master Portfolio

Year Ended December 31, 2013
Investment Income
Dividends — unaffiliated	$	19,090,875
Foreign taxes withheld		(2,390,541	)
Other income — affiliated		460,386
Dividends — affiliated		67,441
Securities lending — affiliated — net		59,604
Income — affiliated		18,431
Total income		17,306,196
Expenses
Investment advisory		914,838
Custodian		542,068
Professional		49,577
Independent Trustees		24,800
Printing		59
Miscellaneous		1,380
Total expenses		1,532,722
Less fees waived and/or reimbursed by Manager		(74,992	)
Total expenses after fees waived and/or reimbursed		1,457,730
Net investment income		15,848,466
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments		37,523,952
Financial futures contracts		(166,632	)
Foreign currency transactions		(62,008	)
		37,295,312
Net change in unrealized appreciation/depreciation on:
Investments		32,221,464
Financial futures contracts		104,718
Foreign currency translations		(48,957	)
		32,277,225
Total realized and unrealized gain		69,572,537
Net Increase in Net Assets Resulting from Operations	$	85,421,003

See Notes to Financial Statements.
	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2013	39

Statements of Changes in Net Assets ACWI ex-US Index Master Portfolio

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012
Operations
Net investment income	$	15,848,466		$	5,606,892
Net realized gain (loss)		37,295,312			(2,325,055	)
Net change in unrealized appreciation/depreciation		32,277,225			55,249,149
Net increase in net assets resulting from operations		85,421,003			58,530,986
Capital Transactions
Proceeds from contributions		519,148,164			568,052,800
Value of withdrawals		(429,181,596	)		(289,082,111	)
Net increase in net assets derived from capital transactions		89,966,568			278,970,689
Net Assets
Total increase in net assets		175,387,571			337,501,675
Beginning of year		381,055,920			43,554,245
End of year	$	556,443,491		$	381,055,920

Financial Highlights ACWI ex-US Index Master Portfolio

	Year Ended December 31,				Period from June 30, 20111 to December 31, 2011
	2013		2012
Total Investment Return
Total investment return		13.96%		16.65%		(18.04	)%2
Ratios to Average Net Assets
Total expenses		0.25%		0.42%		1.47%	3,4
Total expenses after fees waived		0.24%		0.32%		0.33%	3
Net investment income		2.60%		2.23%		1.76%	3
Supplemental Data
Net assets, end of period (000)	$	556,443	$	381,056	$	43,554
Portfolio turnover		36%		42%		4%

¹  Commencement of operations.

²  Aggregate total investment return.

³  Annualized.

⁴  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 1.48%.

See Notes to Financial Statements.
40	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2013

Notes to Financial Statements ACWI ex-US Index Master  Portfolio

1. Organization:

ACWI ex-US Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust.

2. Significant Accounting Policies:

The Master Portfolio’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in 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 following is a summary of the significant accounting policies followed by the Master Portfolio:

Valuation: US GAAP defines fair value as the price the Master Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Master Portfolio determines the fair values of its financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (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 provide oversight of the pricing function for the Master Portfolio for all financial instruments.

Equity investments traded on a recognized securities exchange or the NASDAQ Stock Market (“NASDAQ”) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale 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 are valued at the last available bid (long positions) or ask (short positions) price. Financial futures contracts traded on exchanges are valued at their last sale price. Investments in open-end registered investment companies are valued at NAV each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

Securities and other assets and liabilities denominated in foreign currencies are translated into US dollars using exchange rates determined as of the close of business on the New York Stock Exchange (“NYSE”). Foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of business on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

In the event that 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 Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deem relevant consistent with the principles of fair value measurement, which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. The market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. 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 Master Portfolio’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 Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of business on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of business on the NYSE that may not be reflected in the computation of the Master Portfolio’s net assets. If events (for example, a company announcement, market volatility or a natural disaster) occur during such periods that are expected to affect the value of such instruments materially, those instruments may be Fair Value Assets and valued at their fair value, as determined in good faith by the Global Valuation Committee, or its delegate, using a pricing service and/or policies approved by the Board.

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 41

Notes to Financial Statements (continued) ACWI ex-US Index Master  Portfolio

Each business day, the Master Portfolio uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and OTC options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of business on the NYSE, which follows the close of the local markets.

Foreign Currency: The Master Portfolio’s books and records are maintained in US dollars. Purchases and sales of investment securities are recorded at the rates of exchange prevailing on the respective date of such transactions. Generally, when the US dollar rises in value against a foreign currency, the Master Portfolio’s investments denominated in that currency will lose value because that currency is worth fewer US dollars; the opposite effect occurs if the US dollar falls in relative value.

The Master Portfolio does not isolate the portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in foreign currency 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 Master Portfolio reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components may be treated as ordinary income for federal income tax purposes.

Segregation and Collateralization: In cases where the Master Portfolio enters into certain investments (e.g., financial futures contracts and foreign currency exchange contracts) that would be “senior securities” for 1940 Act purposes, the Master Portfolio may segregate or designate on its books and records cash or liquid securities having a market value at least equal to the amount of the Master Portfolio’s future obligations under such investments. Doing so allows the Master Portfolio to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Master Portfolio 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 Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Master Portfolio 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 the accrual basis.

Income Taxes: The Master Portfolio is classified as a partnership for federal income tax purposes. As such, each investor in the Master Portfolio is treated as the owner of its proportionate share of net assets, income, expenses and realized and unrealized gains and losses of the Master Portfolio. Therefore, no federal income tax provision is required. It is intended that the Master Portfolio’s assets will be managed so an investor in the Master Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

The Master Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolio’s US federal tax returns remains open for the years ended December 31, 2013 and December 31, 2012, and the period ended December 31, 2011. The statutes of limitations on the Master Portfolio’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’s facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

Other: Expenses directly related to the Master Portfolio are charged to the Master Portfolio. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods.

The Master Portfolio has an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statement of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.

3. Securities and Other Investments:

Securities Lending: The Master Portfolio may lend securities to approved borrowers, such as banks, brokers and other financial institutions. The borrower pledges cash, securities issued or guaranteed by the US government or irrevocable letters of credit issued by a bank as collateral. The initial collateral received by the Master Portfolio should have a value of at least 102% of the current value of the loaned securities for securities traded on US exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statement of Operations,

42 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Notes to Financial Statements (continued) ACWI ex-US Index Master  Portfolio

represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the Master Portfolio earns dividend or interest income on the securities loaned but does not receive interest income on the 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 securities on loan and the value of the related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value, and collateral on securities loaned at value, respectively. The cash collateral invested by the securities lending agent BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Master Portfolio under Master Securities Lending Agreements (“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 Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender 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 a MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and the Master Portfolio can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.

The following table is a summary of the Master Portfolio’s securities lending agreements by counterparty which are subject to offset under a MSLA as of December 31, 2013:

Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Citigroup Global Markets, Inc.	$	429,103	$	(429,103	)		—
Credit Suisse Securities (USA) LLC		5,090,533		(5,090,533	)		—
Deutsche Bank Securities, Inc.		381,826		(381,826	)		—
Goldman Sachs & Co.		2,464,368		(2,464,368	)		—
JPMorgan Securities LLC		748,182		(748,182	)		—
Merrill Lynch, Pierce, Fenner & Smith Inc.		346,218		(346,218	)		—
Mizuho Securities USA, Inc.		1,414,312		(1,414,312	)		—
Morgan Stanley		1,622,139		(1,622,139	)		—
Nomura Securities International, Inc.		13,552		(13,552	)		—
SG Americas Securities LLC		127,729		(127,729	)		—
Total	$	12,637,962	$	(12,637,962	)		—

¹  Collateral with a value of $13,374,701 has been received in connection with securities lending agreements. Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

The risks of securities lending also include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate this risk, the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of securities lent. The Master Portfolio also could suffer 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. During the year ended December 31, 2013, any securities on loan were collateralized by cash.

4. Derivative Financial Instruments:

The Master Portfolio engages in various portfolio investment strategies using derivative contracts both to increase the return of the Master Portfolio and/or to economically hedge its exposure to certain risks such as equity or other risks. These contracts may be transacted on an exchange or over-the-counter (“OTC”).

Financial Futures Contracts: The Master Portfolio purchases and/or sells financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in the value of equity securities (equity risk). Financial futures contracts are agreements between the Master Portfolio and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date.

Upon entering into a financial futures contract, the Master Portfolio is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Securities deposited as initial margin are designated on the Schedule of Investments and cash deposited, if any, is recorded on the Statement of Assets and Liabilities as cash pledged for financial futures contracts. Pursuant to the contract, the Master Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin. Variation margin is recorded by the Master Portfolio as unrealized appreciation or depreciation, and if applicable, as a receivable or payable for variation margin in the Statement of Assets and Liabilities.

When the contract is closed, the Master Portfolio records a realized gain or loss equal to the difference between the value of the contract at the

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 43

Notes to Financial Statements (continued) ACWI ex-US Index Master  Portfolio

time it was opened and the value at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest or foreign currency exchange rates and the underlying assets.

Foreign Currency Exchange Contracts: The Master Portfolio enters into foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to, or hedge exposure away from, foreign currencies (foreign currency exchange rate risk). A foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. Foreign currency exchange contracts, when used by the Master Portfolio, help to manage the overall exposure to the currencies in which some of the investments held by the Master Portfolio are denominated. The contract is marked-to-market daily and the change in market value is recorded by the Master Portfolio as an unrealized gain or loss. When the contract is closed, the Master Portfolio records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of foreign currency exchange contracts involves the risk that the value of a foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

The following is a summary of the Master Portfolio’s derivative financial instruments categorized by risk exposure:

Fair Values of Derivative Financial Instruments as of December 31, 2013
	Derivative Assets
	Statement of Assets and Liabilities Location	Value
Equity contracts	Net unrealized appreciation/depreciation1	$	228,473
Foreign currency exchange contracts	Unrealized appreciation on foreign currency exchange contracts		70,626
Total		$	299,099
	Derivative Liabilities
	Statement of Assets and Liabilities Location	Value
Foreign currency exchange contracts	Unrealized depreciation on foreign currency exchange contracts	$	9,893

¹  Includes cumulative appreciation/depreciation on financial futures contracts as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

The Effect of Derivative Financial Instruments in the Statement of Operations Year Ended December 31, 2013
	Net Realized Gain (Loss) From
Equity contracts:
Financial futures contracts		$(166,632)
Foreign currency exchange contracts:
Foreign currency transactions		519,809
Total		$353,177
	Net Change in Unrealized Appreciation/Depreciation on
Equity contracts:
Financial futures contracts		$104,718
Foreign currency exchange contracts:
Foreign currency translations		59,453
Total		$164,171

For the year ended December 31, 2013, the average quarterly balances of outstanding derivative financial instruments were as follows:

Financial futures contracts:
Average number of contracts purchased	158
Average notional value of contracts purchased	$11,538,589
Foreign currency exchange contracts:
Average number of contracts — US dollars purchased	12
Average number of contracts — US dollars sold	11
Average US dollar amounts purchased	$20,785,234
Average US dollar amounts sold	$12,394,058

Counterparty Credit Risk: 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 Master Portfolio’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by the Master Portfolio.

With exchange traded futures, there is less counterparty credit risk to the Master Portfolio 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 Master Portfolio 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) of the clearing broker or clearinghouse. 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

44 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Notes to Financial Statements (continued) ACWI ex-US Index Master  Portfolio

be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Master Portfolio.

In order to better define its contractual rights and to secure rights that will help the Master Portfolio mitigate its counterparty risk, the Master Portfolio may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Master Portfolio 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 Master Portfolio 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. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the Master Portfolio’s net assets decline by a stated percentage or the Master Portfolio fails to meet the terms of its ISDA Master Agreements, which would cause the Master Portfolio to accelerate payment of any net liability owed to the counterparty.

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 Master Portfolio and the counterparty.

Cash collateral that has been pledged to cover obligations of the Master Portfolio 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 Master Portfolio, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount threshold (e.g. $500,000) before a transfer is required, which is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to/pledged by the Master Portfolio on the next business day. Typically, the Master Portfolio and counterparties are not permitted to sell, re-pledge or use the collateral they receive. To the extent amounts due to the Master Portfolio from its counterparties are not fully collateralized, contractually or otherwise, the Master Portfolio bears the risk of loss from counterparty non-performance. The Master Portfolio attempts to mitigate counterparty risk by entering into agreements only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.

For financial reporting purposes, the Master Portfolio does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.

At December 31, 2013, the Master Portfolio’s derivative assets and liabilities (by type) are as follows:

	Assets			Liabilities
Derivative Financial Instruments:
Financial futures contracts	$	29,963			—
Foreign currency exchange contracts		70,626		$	9,893
Total derivative assets and liabilities in the Statement of Assets and Liabilities		100,589			9,893
Derivatives not subject to a master netting agreement or similar agreement (“MNA”)		(29,963	)		—
Total derivative assets and liabilities subject to a MNA	$	70,626		$	9,893

The following table presents the Master Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under a MNA and net of the related collateral received by the Master Portfolio as of December 31, 2013:

Counterparty	Derivative Assets Subject to a MNA  by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets2
BNP Paribas S.A.	$	19,423	$	(2,922	)		—		—	$	16,501
Citibank N.A.		31,459		—			—		—		31,459
State Street Bank and Trust Co.		29		(29	)		—		—		—
Westpac Banking Corp.		19,715		—			—		—		19,715
Total	$	70,626	$	(2,951	)		—		—	$	67,675

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 45

Notes to Financial Statements (continued) ACWI ex-US Index Master  Portfolio

Counterparty	Derivative Liabilities Subject to a MNA  by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities3
BNP Paribas S.A.	$	2,922	$	(2,922	)		—		—		—
Deutsche Bank AG		1,382		—			—		—	$	1,382
State Street Bank and Trust Co.		5,589		(29	)		—		—		5,560
Total	$	9,893	$	(2,951	)		—		—	$	6,942

¹ The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to a MNA.

² Net amount represents the net amount receivable from the counterparty in the event of default.

³ Net amount represents the net amount payable from the counterparty in the event of default.

5. Investment Advisory Agreement and Other Transactions with Affiliates:

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

MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement with BlackRock Fund Advisors (the “Manager”), the Master Portfolio’s investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration

services. The Manager is responsible for the management of the Master Portfolio’s portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Master Portfolio. For such services, the Master Portfolio pays the Manager a monthly fee based on a percentage of the Master Portfolio’s average daily net assets at an annual rate of 0.15%.

The Manager contractually agreed to waive and/or reimburse fees or 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 Master Portfolio’s business, in order to limit expenses of certain feeder funds, which invest their assets in the Master Portfolio. For the year ended December 31, 2013, the Manager waived $145, which is included in fees waived and/or reimbursed by Manager in the Statement of Operations. The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to May 1, 2014 unless approved by the Board, including a majority of the Independent Trustees.

The Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Master Portfolio pays to the Manager indirectly through its investment in the iShares India 50 ETF. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with the Master Portfolio’s investment in other affiliated investment companies, if any. This amount is included in fees waived and/or reimbursed by Manager in the Statement of Operations. For the year ended December 31, 2013, the amount waived was $74,847.

The Master Portfolio received an exemptive order from the SEC permitting it, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BTC as the securities lending agent. BTC may, on behalf of the Master Portfolio, invest cash collateral received by the Master Portfolio for such loans in a private investment company managed by the Manager or in registered money market funds advised by the Manager or its affiliates. The market value of securities on loan and the value of the related collateral, if applicable, is shown in the Statement of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC, if any, is disclosed in the Schedule of Investments. Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of rebates paid to, or fees paid by, borrowers of securities. The Master Portfolio retains 65% of securities lending income and pays a fee to BTC equal to 35% of such income. The Master Portfolio benefits from a borrower default indemnity provided by BlackRock. As securities lending agent, BTC bears all operational costs directly related to securities lending as well as the cost of borrower default indemnification. BTC does not receive any fees for managing the cash collateral. The share of income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the year ended December 31, 2013, BTC received $31,910 in securities lending agent fees related to securities lending activities for the Master Portfolio.

During the year ended December 31, 2013, the Fund received a payment from an affiliate to compensate for foregone securities lending revenue, which is shown as Other income – affiliated in the Statement of Operations.

Certain officers and/or trustees of MIP are officers and/or directors of BlackRock or its affiliates.

6. Purchases and Sales:

Purchases and sales of investments, excluding short-term securities, for the year ended December 31, 2013 were $322,003,372 and $206,428,396, respectively.

7. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a

46 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Notes to Financial Statements (concluded) ACWI ex-US Index Master  Portfolio

party to a 364-day, $800 million credit agreement with a group of lenders, under which the Master Portfolio may borrow to fund shareholder redemptions. The agreement expires in April 2014. Excluding commitments designated for a certain individual fund, other Participating Funds, including the Master Portfolio, can borrow up to an aggregate commitment amount of $500 million, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.065% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. Participating Funds paid administration and arrangement fees, which, along with commitment fees, were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. The Master Portfolio did not borrow under the credit agreement during the year ended December 31, 2013.

8. Concentration, Market and Credit Risk:

In the normal course of business, the Master Portfolio invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Master Portfolio may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Master Portfolio; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Master Portfolio may be exposed to counterparty credit risk, or the risk that an entity with which the Master Portfolio have unsettled or open transactions may fail to or be unable to perform on its commitments. The Master Portfolio manages counterparty credit risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Master Portfolio to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Master Portfolio’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Master Portfolio.

The Master Portfolio invests a substantial amount of its assets in issuers located in a single country or a limited number of countries. When the Master Portfolio concentrates its investments in this manner, it assumes the risk that economic, political and social conditions in those countries may have a significant impact on their investment performance. Foreign issuers may not be subject to the same uniform accounting, auditing and financial reporting standards and practices as used in the United States. Foreign securities markets may also be less liquid, more volatile, and less subject to governmental supervision not typically associated with investing in US securities. Please see the Schedule of Investments for concentrations in specific countries.

The Master Portfolio 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 Master Portfolio’s investments.

As of December 31, 2013, the Master Portfolio had the following industry classifications:

Industry Allocation Percent of
Long-Term Investments

Commercial Banks	15	%
Oil, Gas & Consumable Fuels	8	%
Pharmaceuticals	6	%
Insurance	5	%
Other1	66	%

¹  All other industries held were each less than 5% of long-term investments.

9. Subsequent Events:

Management has evaluated the impact of all subsequent events on the Master Portfolio 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.

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 47

Report of Independent Registered Public Accounting Firm ACWI ex-US Index Master  Portfolio

To the Board of Trustees of Master Investment Portfolio and the Interestholders of ACWI ex-US Index Master Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of ACWI ex-US Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio, at December 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2014

48 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Officers and Trustees

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment  Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 107 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 107 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy from 2002 to 2012; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 107 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President, Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 107 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	President, London Center for Policy Research since 2012; Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and Professor thereof from 1980 to 2005; President Emeritus, Hudson Institute (policy research organization) from 2011 to 2012, President thereof from 1997 to 2011 and Trustee from 1980 to 2012; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (global internet services) since 2005; Director, Cerego, LLC (educational software) since 2005; Director, Cybersettle (online adjudication) since 2009; Director, AIMS Worldwide, Inc. (marketing) from 2007 to 2012.	33 RICs consisting of 107 Portfolios	None
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 107 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Director, The West Penn Allegheny Health System (a not-for-profit health system) from 2008 to 2013; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 107 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 107 Portfolios	None

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 49

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1 (concluded)
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Immediate past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	33 RICs consisting of 107 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Director, Alkon Corporation (pneumatics) since 1992; Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh from 2005 to 2013 and Dean thereof from 1997 to 2005; Director, Tippman Sports (recreation) from 2005 to 2013; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 107 Portfolios	None
	1   Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved extensions in terms of Trustees who turn 72 prior to December 31, 2013.
	2   Date shown is the earliest date a person has served for the Trust/MIP covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the Trust’s/MIP’s Board. As a result, although the chart shows certain Trustees as joining the Trust’s/MIP’s board in 2009, those Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees3
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	144 RICs consisting of 278 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	144 RICs consisting of 278 Portfolios	None
	3   Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

50 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Officers and Trustees (concluded)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers1
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock since 2000; Head of the Global Cash Group since 2013; Co-head of the Global Cash and Securities Lending Group from 2010 to 2013; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009; and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2009	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2009	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Managing Director of BlackRock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary of the BlackRock-advised funds from 2010 to 2012; General Counsel and Chief Operating Officer of Uhuru Capital Management from 2009 to 2010; Executive Director and Counsel of Goldman Sachs Asset Management from 2005 to 2009.
	1   Officers of the Trust/MIP serve at the pleasure of the Board.

Investment Advisor BlackRock Fund Advisors San Francisco, CA 94105	Custodian and Accounting Agent State Street Bank and Trust Company Boston, MA 02110	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Sidley Austin LLP New York, NY 10019
Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP Philadelphia, PA 19103	Address of the Trust 400 Howard Street San Francisco, CA 94105

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 51

Additional Information

General Information

Electronic Delivery

Electronic copies of most financial reports and prospectuses are available on the Fund’s website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Fund’s electronic delivery program.

To enroll:

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:

Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.

Shareholders Who Hold Accounts Directly with BlackRock:

1) Access the BlackRock website at

http://www.blackrock.com/edelivery

2) Select “eDelivery” under the “More Information” section

3) Log into your account

Householding

The Fund 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 Fund at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Fund/Master Portfolio 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 Fund’s/Master Portfolio’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Fund’s/Master Portfolio’s 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/Master Portfolio use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Fund/Master Portfolio voted proxies relating to securities held in the Fund’s/Master Portfolio’s portfolio during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM EST 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/funds.

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.

52 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

Additional Information (concluded)

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.

BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013 53

A World-Class 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.

Equity Funds

BlackRock ACWI ex-US Index Fund

BlackRock All-Cap Energy & Resources Portfolio

BlackRock Basic Value Fund

BlackRock Capital Appreciation Fund

BlackRock Commodity Strategies Fund

BlackRock Disciplined Small Cap Core Fund

BlackRock Emerging Markets Fund

BlackRock Emerging Markets Dividend Fund

BlackRock Emerging Markets Long/Short Equity Fund

BlackRock Energy & Resources Portfolio

BlackRock Equity Dividend Fund

BlackRock EuroFund

BlackRock Flexible Equity Fund

BlackRock Focus Growth Fund

BlackRock Global Dividend Portfolio

BlackRock Global Long/Short Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Global SmallCap Fund

BlackRock Health Sciences Opportunities Portfolio

BlackRock International Fund

BlackRock International Index Fund

BlackRock International Opportunities Portfolio

BlackRock Large Cap Core Fund

BlackRock Large Cap Core Plus Fund

BlackRock Large Cap Growth Fund

BlackRock Large Cap Value Fund

BlackRock Latin America Fund

BlackRock Long-Horizon Equity Fund

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Mid Cap Value Opportunities Fund

BlackRock Natural Resources Trust

BlackRock Pacific Fund

BlackRock Real Estate Securities Fund

BlackRock Russell 1000^® Index Fund

BlackRock Science & Technology Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock Small Cap Growth Fund II

BlackRock Small Cap Index Fund

BlackRock S&P 500 Stock Fund

BlackRock U.S. Opportunities Portfolio

BlackRock Value Opportunities Fund

Taxable Fixed Income Funds

BlackRock Bond Index Fund

BlackRock Core Bond Portfolio

BlackRock CoreAlpha Bond Fund

BlackRock CoRI Funds

2015	2021
2017	2023
2019

BlackRock Emerging Markets Flexible Dynamic Bond Portfolio

BlackRock Floating Rate Income Portfolio

BlackRock Global Long/Short Credit Fund

BlackRock GNMA Portfolio

BlackRock High Yield Bond Portfolio

BlackRock Inflation Protected Bond Portfolio

BlackRock International Bond Portfolio

BlackRock Investment Grade Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Secured Credit Portfolio

BlackRock Short Obligations Fund

BlackRock Short-Term Treasury Fund

BlackRock Strategic Income Opportunities

    Portfolio

BlackRock Total Return Fund

BlackRock U.S. Government Bond Portfolio

BlackRock U.S. Mortgage Portfolio

BlackRock Ultra-Short Obligations Fund

BlackRock World Income Fund

Municipal Fixed Income Funds

BlackRock California Municipal Bond Fund

BlackRock High Yield Municipal Fund

BlackRock National Municipal Fund

BlackRock New Jersey Municipal Bond Fund

BlackRock New York Municipal Bond Fund

BlackRock Pennsylvania Municipal Bond Fund

BlackRock Short-Term Municipal Fund

BlackRock Strategic Municipal Opportunities Fund

Mixed Asset Funds

BlackRock Balanced Capital Fund	LifePath Active Portfolios			LifePath Index Portfolios
BlackRock Emerging Market Allocation Portfolio		2015	2040		Retirement	2040
BlackRock Global Allocation Fund		2020	2045		2020	2045
BlackRock Managed Volatility Portfolio		2025	2050		2025	2050
BlackRock Multi-Asset Income Portfolio		2030	2055		2030	2055
BlackRock Multi-Asset Real Return Fund		2035			2035
BlackRock Strategic Risk Allocation Fund
	LifePath Portfolios
BlackRock Prepared Portfolios		Retirement	2040
Conservative Prepared Portfolio		2020	2045
Moderate Prepared Portfolio		2025	2050
Growth Prepared Portfolio		2030	2055
Aggressive Growth Prepared Portfolio		2035

BlackRock mutual funds are currently distributed by BlackRock Investments, LLC. You should consider the investment objectives, risks, charges and expenses of the funds under consideration carefully before investing. Each fund’s prospectus contains this and other information and is available at www.blackrock.com or by calling (800) 441-7762 or from your financial advisor. The prospectus should be read carefully before investing.

54 BLACKROCK ACWI ex-US INDEX FUND DECEMBER 31, 2013

This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless accompanied or preceded by the Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change. Please see the Fund’s current prospectus for a description of risks associated with global investments.

ACWI-12/13-AR

DECEMBER 31, 2013

  ANNUAL REPORT  

BlackRock Bond Index Fund  |  of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
Dear Shareholder		3
Annual Report:
Fund Summary		4
About Fund Performance		6
Disclosure of Expenses		6
Fund Financial Statements:
Statement of Assets and Liabilities		7
Statement of Operations		8
Statements of Changes in Net Assets		9
Fund Financial Highlights		10
Fund Notes to Financial Statements		13
Fund Report of Independent Registered Public Accounting Firm		16
Important Tax Information		16
Master Portfolio Information		17
Master Portfolio Financial Statements:
Schedule of Investments		18
Statement of Assets and Liabilities		37
Statement of Operations		38
Statements of Changes in Net Assets		39
Master Portfolio Financial Highlights		39
Master Portfolio Notes to Financial Statements		40
Master Portfolio Report of Independent Registered Public Accounting Firm		45
Officers and Trustees		46
Additional Information		49
A World-Class Mutual Fund Family		51

2 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Dear Shareholder

Risk assets (such as equities) powered higher in 2013, for the most part unscathed by ongoing political and economic uncertainty. While monetary policy was the main driving force behind the rally in risk assets, it was also the main culprit for the bouts of volatility during the year.

Equity markets rallied right out of the gate in January with cash pouring back in from the sidelines after a potential US fiscal crisis (i.e., the “fiscal cliff”) was averted with a last-minute tax deal. Key indicators signaling modest but broad-based improvements in the world’s major economies and a calming in Europe’s debt troubles fostered an aura of comfort for investors. Global economic momentum slowed in February, however, and the pace of the rally moderated. In the months that followed, US stocks outperformed international stocks, as the US showed greater stability than most other regions. Slow but positive growth was sufficient to support corporate earnings, while uncomfortably high unemployment reinforced expectations that the Federal Reserve would continue its aggressive monetary stimulus program. International markets experienced higher levels of volatility given a resurgence of political instability in Italy, a banking crisis in Cyprus and a generally poor outlook for European economies. Emerging markets significantly lagged the rest of the world as growth in these economies fell short of expectations.

Financial markets were rattled in May when Fed Chairman Bernanke mentioned the possibility of reducing — or “tapering” — the central bank’s asset purchase programs — comments that were widely misinterpreted as signaling an end to the Fed’s zero-interest-rate policy. US Treasury yields rose sharply, triggering a steep sell-off across fixed income markets. (Bond prices move in the opposite direction of yields.) Equity prices also suffered as investors feared the implications of a potential end of a program that had greatly supported the markets. Risk assets rebounded in late June, however, when the Fed’s tone turned more dovish, and improving economic indicators and better corporate earnings helped extend gains through most of the summer.

The fall was a surprisingly positive period for most asset classes as the Fed defied market expectations with its decision to delay tapering. Easing of political tensions that had earlier surfaced in Egypt and Syria and the re-election of Angela Merkel as Chancellor of Germany also boosted investor sentiment. Higher volatility returned in late September when the US Treasury Department warned that the national debt would soon breach its statutory maximum. The ensuing political brinksmanship led to a partial government shutdown, roiling global financial markets through the first half of October, but the rally quickly resumed when politicians engineered a compromise to reopen the government and extend the debt ceiling, at least temporarily.

The remainder of the year was generally positive for stock markets in the developed world, although investors continued to grapple with uncertainty about when and how much the Fed would scale back on stimulus. On the one hand, persistent weak growth and low inflation provided significant latitude for monetary policy decisions and investors were encouraged by dovish comments from Fed Chair-to-be Janet Yellen. On the other hand, US housing and manufacturing reports had begun to signal fundamental improvement in the economy. The long-awaited taper announcement ultimately came in mid-December. The Fed reduced the amount of its monthly asset purchases, but at the same time, extended its time horizon for maintaining low short-term interest rates. Markets reacted positively as this move signaled the Fed’s perception of real improvement in the economy and investors felt relief from the tenacious anxiety that had gripped them throughout the year.

Accommodative monetary policy and the avoidance of major risks made 2013 a strong year for most equity markets. US stocks were the strongest performers for the six- and 12-month periods ended December 31. In contrast, emerging markets were weighed down by uneven growth and structural imbalances. Rising US Treasury yields led to a rare annual loss in 2013 for Treasury bonds and other high-quality fixed income sectors including tax-exempt municipals and investment grade corporate bonds. High yield bonds, to the contrary, generated gains driven by income-oriented investors seeking yield in the low-rate environment. Short-term interest rates remained near zero, keeping yields on money market securities near historical lows.

At BlackRock, we believe investors need to think globally and extend their scope across a broader array of asset classes and be prepared to move freely as market conditions change over time. We encourage you to talk with your financial advisor and visit www.blackrock.com for further insight about investing in today’s world.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

“While monetary policy was the main driving force behind the rally in risk assets, it was also the main culprit for the bouts of volatility during the year.”

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2013
	6-month			12-month
US large cap equities (S&P 500® Index)		16.31	%		32.39	%
US small cap equities (Russell 2000® Index)		19.82			38.82
International equities (MSCI Europe, Australasia, Far East Index)		17.94			22.78
Emerging market equities (MSCI Emerging Markets Index)		7.70			(2.60	)
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)		0.03			0.07
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		(3.10	)		(7.83	)
US investment grade bonds (Barclays US Aggregate Bond Index)		0.43			(2.02	)
Tax-exempt municipal bonds (S&P Municipal Bond Index)		0.00			(2.55	)
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)		5.94			7.44
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

THIS PAGE NOT PART OF YOUR FUND REPORT 3

Fund Summary as of December 31, 2013

Investment Objective

BlackRock Bond Index Fund’s (the “Fund”) investment objective is to seek to provide investment results that correspond to the total return performance of fixed-income securities in the aggregate, as represented by the Barclays US Aggregate Bond Index.

Portfolio Management Commentary

How did the Fund perform?

Ÿ For the 12-month period ended December 31, 2013, the Fund’s Institutional Shares returned (2.39)%, Investor A Shares returned (2.63)% and Class K Shares returned (2.35)%. For the same period, the benchmark Barclays US Aggregate Bond Index (the “Index”) returned (2.02)%.

Ÿ Returns for the Fund’s respective share classes differ from the Index based on individual share-class expenses. The Fund invests all of its assets in Bond Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio.

Describe the market environment.

Ÿ Improving economic data led to rising optimism in January. As investors were compelled to increase the level of risk in their portfolios, equity markets soared while higher-quality fixed income assets sold off broadly. However, bond markets rebounded in February amid concerns about the fiscal negotiations playing out in Washington, D.C. In early March, a more positive outlook for the US labor market drove another bond sell-off. Yields on 10-year US Treasury bonds moved higher in the first half of the month (bond prices fall as yields rise) before reversing sharply in the latter half when the announcement of a bailout package for the banking system in Cyprus drove fearful investors back to the relative safety of the US Treasury market.

Ÿ Fixed income markets continued to perform well amid mixed US economic data until late May, when the US Federal Reserve indicated the possibility of tapering its asset purchase program earlier than anticipated. Fixed income markets broadly declined as US Treasury yields moved higher. Interest rate volatility increased dramatically after the June meeting of the Fed as additional rhetoric regarding the tapering of monetary stimulus incited fear among investors. Yields surged and bond prices continued to fall. The fact that bond markets materially weakened even as economic reports and inflation remained tame (conditions that are typically conducive to positive performance among fixed income assets) illustrated the degree to which financial market performance can be influenced by central bank policy decisions.

Ÿ Most fixed income sectors rebounded in July as the tone of the Fed turned more accommodative. However, August was a volatile month for the markets as investors became transfixed on whether or not the Fed would begin tapering stimulus in September. The surprising withdrawal of former Secretary Larry Summers from consideration to become the next Fed Chair and the Fed’s decision to delay tapering resulted in a strong bond market rally in September. Fixed income assets continued to find support in October as the US budget stalemate lowered quarterly estimates for GDP growth and clouded the integrity of upcoming economic data releases. Interest rates moved back up in November as investors took cues from the Fed and economic indicators. Mounting expectations that tapering was imminent pressured higher-quality fixed income assets, while spread sectors remained in positive territory given the improving economic environment. The Fed ultimately announced the commencement of tapering in mid-December. Effective in January 2014, the central bank’s asset purchase program would be reduced from $85 billion to $75 billion per month, with the $10 billion reduction allocated equally to the US Treasury and agency MBS purchase programs. Fixed income markets declined following the taper announcement as the 10-year Treasury yield moved higher, closing above 3.00% for the first time since 2011.

Describe recent portfolio activity.

Ÿ During the period, the Master Portfolio maintained its objective of seeking to provide investment results that correspond to the total return performance of the Index by selecting securities in accordance with their relative proportion within the Index. Other factors considered in security selection included credit quality, industry, maturity structure, coupon rates and call features.

Ÿ The Master Portfolio held cash committed for pending transactions. The cash balance did not have a material impact on performance.

Describe portfolio positioning at period end.

Ÿ The Master Portfolio remains positioned to attempt to match the risk characteristics of the 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.

4 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Total Return Based on a $10,000 Investment

¹ Assuming transaction costs and other operating expenses, including administration fees, if any.

²  The Fund invests all of its assets in the Master Portfolio. The Master Portfolio invests primarily in long-term, fixed income securities that are rated in the four highest categories of the recognized rating agencies (Baa or better by Moody’s Investors Service, Inc., or BBB or better by Standard & Poor’s).

³  This index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the US investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis.

Performance Summary for the Period Ended December 31, 2013

	Standardized 30-Day  Yields			Unsubsidized 30-Day Yields			6-Month Total Returns			Average Annual Total Returns
										1 Year			5 Years			10 Years
Institutional		1.64	%		1.62	%		0.32	%		(2.39	)%		4.12	%		4.45	%
Investor A		1.38			1.36			0.27			(2.63	)		3.89			4.25
Class K		1.69			1.67			0.34			(2.35	)		4.17			4.48
Barclays US Aggregate Bond Index		—			—			0.43			(2.02	)		4.44			4.55

See “About Fund Performance” on page 6 for further information on how performance was calculated.

Past performance is not indicative of future results.

Expense Example

	Actual						Hypothetical5
	Beginning Account Value July 1, 2013		Ending Account Value December 31, 2013		Expenses Paid During the Period4		Beginning Account Value July 1, 2013		Ending Account Value December 31, 2013		Expenses Paid During the Period4		Annualized Expense Ratio
Institutional	$	1,000.00	$	1,003.20	$	1.26	$	1,000.00	$	1,023.95	$	1.28		0.25	%
Investor A	$	1,000.00	$	1,002.70	$	2.52	$	1,000.00	$	1,022.68	$	2.55		0.50	%
Class K	$	1,000.00	$	1,003.40	$	1.01	$	1,000.00	$	1,024.20	$	1.02		0.20	%

⁴  For each class of the Fund, expenses are equal to the annualized net expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown). Because the Fund invests all of its assets in the Master Portfolio, the expense example reflects the net expenses of both the Fund and the Master Portfolio.

⁵  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

See “Disclosure of Expenses” on page 6 for further information on how expenses were calculated.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 5

About Fund Performance

Ÿ Institutional and Class K Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors. Prior to March 31, 2011, Institutional Shares’ performance results are those of Class K Shares restated to reflect Institutional Shares’ fees.

Ÿ Investor A Shares are not subject to any sales charge and bear no ongoing distribution fee. These shares are subject to an ongoing service fee of 0.25% per year. Prior to March 31, 2011, Investor A Shares’ performance results are those of Class K Shares restated to reflect Investor A Shares’ fees.

Performance information reflects past performance and does not guarantee future results. Current performance data may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in the performance table on the previous page assume reinvestment of all dividends and capital gain distributions, if any, at net asset value on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Dividends paid to each class of shares will vary because of the different levels of services and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders. The Fund’s administrator waived a portion of the Fund’s expenses. Without such waiver, the Fund’s performance would have been lower. 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.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including administration fees, service and/or distribution fees, including 12b-1 fees, and other Fund expenses. The expense example shown on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2013 and held through December 31, 2013) 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 other funds’ shareholder reports.

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.

6 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Statement of Assets and Liabilities BlackRock Bond Index Fund

December 31, 2013
Assets
Investments at value — Master Portfolio (cost — $119,285,925)	$	122,891,621
Capital shares sold receivable		232,409
Withdrawals receivable from the Master Portfolio		511
Total assets		123,124,541
Liabilities
Capital shares redeemed payable		232,920
Administration fees payable		12,065
Service fees payable		919
Professional fees payable		11,996
Total liabilities		257,900
Net Assets	$	122,866,641
Net Assets Consist of
Paid-in capital	$	120,962,527
Distributions in excess of net investment income		(502,404	)
Accumulated net realized loss allocated from the Master Portfolio		(1,199,178	)
Net unrealized appreciation/depreciation allocated from the Master Portfolio		3,605,696
Net Assets	$	122,866,641
Net Asset Value
Institutional — Based on net assets of $22,938,612 and 2,329,305 shares outstanding, unlimited number of shares authorized, no par value	$	9.85
Investor A — Based on net assets of $3,735,308 and 379,223 shares outstanding, unlimited number of shares authorized, no par value	$	9.85
Class K — Based on net assets of $96,192,721 and 9,765,104 shares outstanding, unlimited number of shares authorized, no par value	$	9.85

See Notes to Financial Statements.
	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2013	7

Statement of Operations BlackRock Bond Index Fund

Year Ended December 31, 2013
Investment Income
Net investment income allocated from the Master Portfolio:
Interest	$	2,175,729
Securities lending — affiliated — net		30,422
Income — affiliated		42,399
Other Income — affiliated		2,118
Expenses		(116,174	)
Fees waived		11,450
Total income		2,145,944
Fund Expenses
Administration — Institutional		29,458
Administration — Investor A		5,212
Administration — Class K		132,826
Service — Investor A		7,703
Professional		19,317
Miscellaneous		325
Total expenses		194,841
Less fees waived by administrator		(19,317	)
Total expenses after fees waived		175,524
Net investment income		1,970,420
Realized and Unrealized Gain (Loss) Allocated from the Master Portfolio
Net realized loss from investments		(438,613	)
Net change in unrealized appreciation/depreciation on investments		(4,774,796	)
Total realized and unrealized loss		(5,213,409	)
Net Decrease in Net Assets Resulting from Operations	$	(3,242,989	)

See Notes to Financial Statements.
8	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2013

Statements of Changes in Net Assets BlackRock Bond Index Fund

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012
Operations
Net investment income	$	1,970,420		$	2,735,801
Net realized gain (loss)		(438,613	)		1,702,108
Net change in unrealized appreciation/depreciation		(4,774,796	)		1,011,040
Net increase (decrease) in net assets resulting from operations		(3,242,989	)		5,448,949
Dividends and Distributions to Shareholders From:1
Net investment income:
Institutional		(312,577	)		(172,553	)
Investor A		(50,504	)		(15,435	)
Class K		(1,902,456	)		(2,676,865	)
Net realized gain:
Institutional		(811,199	)		(120,228	)
Investor A		(173,360	)		(16,757	)
Class K		(3,537,784	)		(1,213,805	)
Decrease in net assets resulting from dividends and distributions to shareholders		(6,787,880	)		(4,215,643	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		4,043,448			5,351,333
Net Assets
Total increase (decrease) in net assets		(5,987,421	)		6,584,639
Beginning of year		128,854,062			122,269,423
End of year	$	122,866,641		$	128,854,062
Distributions in excess of net investment income, end of year	$	(502,404	)	$	(314,256	)

¹  Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2013	9

Financial Highlights BlackRock Bond Index Fund

	Institutional
	Year Ended December 31,						Period March 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.65		$	10.57		$	10.11
Net investment income2		0.15			0.19			0.25
Net realized and unrealized gain (loss)		(0.40	)		0.22			0.46
Net increase (decrease) from investment operations		(0.25	)		0.41			0.71
Dividends and distributions from:3
Net investment income		(0.18	)		(0.22	)		(0.25	)
Net realized gain		(0.37	)		(0.11	)		(0.00	)4
Total dividends and distributions		(0.55	)		(0.33	)		(0.25	)
Net asset value, end of period	$	9.85		$	10.65		$	10.57
Total Investment Return5
Based on net asset value		(2.39)%			3.91%			7.18%	6
Ratios to Average Net Assets7
Total expenses		0.26%	9		0.26%	9		0.27%	8,10
Total expenses after fees waived		0.25%	9		0.25%	9		0.25%	8,10
Net investment income		1.48%	9		1.71%	9		2.98%	8,10
Supplemental Data
Net assets, end of period (000)	$	22,939		$	11,534		$	53
Portfolio turnover of the Master Portfolio		417%			436%			122%	11

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Amount is less than $(0.005) per share.

⁵  Where applicable, assumes the reinvestment of dividends and distributions.

⁶  Aggregate total investment return.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated gross expenses and/or net investment income.

⁸  Annualized.

⁹  Includes the Fund’s share of the Master Portfolio’s allocated fees waived at 0.01%.

¹⁰  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.05%.

¹¹  Includes mortgage dollar roll transactions. Excluding these transactions the portfolio turnover rate would have been 121%.

See Notes to Financial Statements.
10	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2013

Financial Highlights (continued) BlackRock Bond Index Fund

	Investor A
	Year Ended December 31,						Period March 31, 20111 to December 31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.65		$	10.57		$	10.11
Net investment income2		0.11			0.16			0.22
Net realized and unrealized gain (loss)		(0.39	)		0.22			0.48
Net increase (decrease) from investment operations		(0.28	)		0.38			0.70
Dividends and distributions from:3
Net investment income		(0.15	)		(0.19	)		(0.24	)
Net realized gain		(0.37	)		(0.11	)		(0.00	)4
Total dividends and distributions		(0.52	)		(0.30	)		(0.24	)
Net asset value, end of period	$	9.85		$	10.65		$	10.57
Total Investment Return5
Based on net asset value		(2.63)%			3.66%			7.01%	6
Ratios to Average Net Assets7
Total expenses		0.51%	9		0.51%	9		0.53%	8,10
Total expenses after fees waived		0.50%	9		0.50%	9		0.50%	8,10
Net investment income		1.10%	9		1.45%	9		2.65%	8,10
Supplemental Data
Net assets, end of period (000)	$	3,735		$	1,805		$	202
Portfolio turnover of the Master Portfolio		417%			436%			122%	11

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Amount is less than $(0.005) per share.

⁵  Where applicable, assumes the reinvestment of dividends and distributions.

⁶  Aggregate total investment return.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁸  Annualized.

⁹  Includes the Fund’s share of the Master Portfolio’s allocated fees waived at 0.01%.

¹⁰  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.05%.

¹¹  Includes mortgage dollar roll transactions. Excluding these transactions the portfolio turnover rate would have been 121%.

See Notes to Financial Statements.
	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2013	11

Financial Highlights (concluded) BlackRock Bond Index Fund

	Class K
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	10.65		$	10.57		$	10.17		$	9.90		$	9.82
Net investment income1		0.16			0.22			0.35			0.37			0.40
Net realized and unrealized gain (loss)		(0.41	)		0.19			0.40			0.30			0.10
Net increase (decrease) from investment operations		(0.25	)		0.41			0.75			0.67			0.50
Dividends and distributions from:2
Net investment income		(0.18	)		(0.22	)		(0.35	)		(0.40	)		(0.42	)
Net realized gain		(0.37	)		(0.11	)		(0.00	)3		—			—
Total dividends and distributions		(0.55	)		(0.33	)		(0.35	)		(0.40	)		(0.42	)
Net asset value, end of year	$	9.85		$	10.65		$	10.57		$	10.17		$	9.90
Total Investment Return4
Based on net asset value		(2.35)%			3.94%			7.55%			6.79%			5.21%
Ratios to Average Net Assets5
Total expenses		0.21%	6		0.21%	7		0.23%	8		0.26%			0.25%
Total expenses after fees waived		0.20%	6		0.20%	7		0.20%	8		0.23%			0.23%
Net investment income		1.52%	6		1.96%	7		3.19%	8		3.65%			4.05%
Supplemental Data
Net assets, end of year (000)	$	96,193		$	115,516		$	122,015		$	98,559		$	156,688
Portfolio turnover of the Master Portfolio		417%			436%			122%	9		59%	10		103%	11

¹  Based on average shares outstanding.

²  Determined in accordance with federal income tax regulations.

³  Amount is less than $(0.005) per share.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated fees waived at 0.01%.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated fees waived at 0.02%.

⁸  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.05%.

⁹  Includes mortgage dollar roll transactions. Excluding these transactions the portfolio turnover rate would have been 121%.

¹⁰  Includes mortgage dollar roll transactions. Excluding these transactions the portfolio turnover rate would have been 54%.

¹¹  Includes mortgage dollar roll transactions. Excluding these transactions the portfolio turnover rate would have been 87%.

See Notes to Financial Statements.
12	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2013

Notes to Financial Statements BlackRock Bond Index Fund

1. Organization:

BlackRock Bond Index Fund (the “Fund”), a series of BlackRock Funds III (the “Trust”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. The Trust is organized as a Delaware statutory trust. The Fund seeks to achieve its investment objective by investing substantially all of its assets in Bond Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), an affiliate of the Fund, which has the same investment objective and strategies as the Fund. The value of the Fund’s investment in the Master Portfolio reflects the Fund’s proportionate interest in the net assets of the Master Portfolio. The performance of the Fund is directly affected by the performance of the Master Portfolio. The percentage of the Master Portfolio owned by the Fund at December 31, 2013 was 13.2%. As such the financial statements of the Master Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with the Fund’s financial statements. The Fund offers multiple classes of shares. Institutional and Class K Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are sold without a sales charge but may be subject to a CDSC for certain redemptions where no initial sales charge was paid at the time of purchase. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Investor A Shares bear certain expenses related to the shareholder servicing of such shares. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing expenditures.

2. Significant Accounting Policies:

The Fund’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in 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 following is a summary of significant accounting policies followed by the Fund:

Valuation: US 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 policy is to fair value its financial instruments at market value. The Fund records its investment in the Master Portfolio at fair value based on the Fund’s proportionate interest in the net assets of the Master Portfolio. Valuation of securities held by the Master Portfolio is discussed in Note 2 of the Master Portfolio’s Notes to Financial Statements, which are included elsewhere in this report.

Investment Transactions and Investment Income: For financial reporting purposes, contributions to and withdrawals from the Master Portfolio are accounted for on a trade date basis. The Fund records daily its proportionate share of the Master Portfolio’s income, expenses and realized and unrealized gains and losses. Realized and unrealized gains and losses are adjusted utilizing partnership tax allocation rules. In addition, the Fund accrues its own expenses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Dividends and Distributions: Dividends from net investment income are declared and paid monthly. Distributions of capital gains paid by the Fund are recorded on the ex-dividend dates. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

Income Taxes: 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 US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s US federal tax returns remains open for each of the four years ended December 31, 2013. 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’s facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

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

The Fund may earn interest on positive cash balances in demand deposit accounts that are maintained by the transfer agent on behalf of the Fund. This amount, if any, is shown as income in the Statement of Operations.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 13

Notes to Financial Statements (continued) BlackRock Bond Index Fund

3. Administration Agreement and Other Transactions with Affiliates:

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

The Trust, on behalf of the Fund, entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL, in consideration thereof, has agreed to bear all of the Fund’s ordinary operating expenses, excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the Fund. BAL is entitled to receive for these administration services an annual fee of 0.12% based on the average daily net assets of Class K Shares and 0.17% of the average daily net assets of Institutional and Investor A Shares.

From time to time, BAL may waive such fees in whole or in part. Any such waiver will reduce the expenses of the Fund and, accordingly, have a favorable impact on its performance. BAL may delegate certain of its administration duties to sub-administrators.

The fees and expenses of the Fund’s trustees who are not “interested persons” of the Trust, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and the Trust’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Fund. The Manager has contractually agreed to provide an offsetting credit against the administration fees paid by the Fund in an amount equal to the independent expenses through April 30, 2014.

The Trust, on behalf of the Fund, entered into a Distribution Agreement and a Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of BlackRock. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing service fees. The fees are accrued daily and paid monthly at an annual rate of 0.25% based upon the average daily net assets of the Investor A Shares.

Pursuant to sub-agreements with BRIL, broker-dealers and BRIL provide shareholder servicing services to the Fund. The ongoing service fee compensates BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to Investor A shareholders.

Certain officers and/or trustees of the Trust are officers and/or directors of BlackRock or its affiliates. The Fund reimburses BAL for a portion of the compensation paid to the Trust’s Chief Compliance Officer.

4. Income Tax Information:

The tax character of distributions paid during the fiscal years ended December 31, 2013 and December 31, 2012 was as follows:

	12/31/13		12/31/12
Ordinary income	$	5,871,518	$	3,909,690
Long-term capital gains		916,362		305,953
Total	$	6,787,880	$	4,215,643

As of December 31, 2013, the tax components of accumulated net earnings were as follows:

Undistributed ordinary income	$	16,754
Undistributed long-term capital gains		37,931
Net unrealized gains1		1,849,429
Total	$	1,904,114

¹ The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the timing and recognition of partnership income.

5. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2013						Year Ended December 31, 2012
	Shares			Amount			Shares			Amount
Institutional
Shares sold		1,201,037		$	12,438,502			1,074,128		$	11,402,994
Shares issued to shareholders in reinvestment of dividends and distributions		112,203			1,122,420			27,318			291,967
Shares redeemed		(66,980	)		(687,152	)		(23,432	)		(251,264	)
Net increase		1,246,260		$	12,873,770			1,078,014		$	11,443,697

14 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Notes to Financial Statements (concluded) BlackRock Bond Index Fund

	Year Ended December 31, 2013						Year Ended December 31, 2012
	Shares			Amount			Shares			Amount
Investor A
Shares sold		969,890		$	9,949,210			180,089		$	1,929,146
Shares issued to shareholders in reinvestment of dividends and distributions		22,293			222,574			2,944			31,441
Shares redeemed		(782,506	)		(8,007,010	)		(32,565	)		(350,706	)
Net increase		209,677		$	2,164,774			150,468		$	1,609,881
Class K
Shares sold		4,728,706		$	49,201,378			4,385,092		$	46,828,468
Shares issued to shareholders in reinvestment of dividends and distributions		398,466			4,009,029			299,276			3,195,475
Shares redeemed		(6,208,312	)		(64,205,503	)		(5,378,321	)		(57,726,188	)
Net decrease		(1,081,140	)	$	(10,995,096	)		(693,953	)	$	(7,702,245	)
Total Net Increase		374,797		$	4,043,448			534,529		$	5,351,333

6. Subsequent Events:

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

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 15

Report of Independent Registered Public Accounting Firm BlackRock Bond Index Fund

To the Board of Trustees of BlackRock Funds III and the Shareholders of BlackRock Bond Index Fund:

In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock Bond Index Fund (the “Fund”), a series of BlackRock Funds III, at December 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2014

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by the Fund during the fiscal year ended December 31, 2013.

	January — December 2013
Interest-Related Dividends for Non-US Residents and Qualified Short-Term Capital Gains1		87.21%
Federal Obligation Interest2		1.85%

¹  Represents the portion of the taxable ordinary income dividends eligible for exemption from US withholding tax for nonresident aliens and foreign corporations.

²  The law varies in each state as to whether and what percentage of dividend income attributable to federal obligations is exempt from state income tax. We recommend that you consult your tax advisor to determine if any portion of the dividends you received is exempt from state income taxes.

Additionally, the Fund distributed long-term capital gains of $0.021066 and $0.052627 to shareholders of record on June 27, 2013 and December 10, 2013, respectively.

16 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Master Portfolio Information Bond Index Master Portfolio

As of December 31, 2013

Portfolio Composition Percent of
Long-Term  Investments

US Treasury Obligations	35	%
US Government Sponsored Agency Securities	35
Corporate Bonds	24
Foreign Agency Obligations	3
Non-Agency Mortgage-Backed Securities	2
Municipal Bonds	1

Credit Quality Allocation¹ Percent of Long-Term  Investments

AAA/Aaa2	73	%
AA/Aa	4
A	11
BBB/Baa	12

¹ Using the higher of Standard & Poor’s or Moody’s Investors Service, Inc. ratings.

² Includes US Government Sponsored Agency Securities and US Treasury Obligations, which were deemed AAA/Aaa by the investment advisor.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 17

Schedule of Investments December 31, 2013 Bond Index Master Portfolio (Percentages shown are based on Net Assets)

Asset-Backed Securities	Par   (000)		Value
Ally Auto Receivables Trust, Series 2012-4, Class A8, 0.80%, 10/16/17	$	500	$	498,956
Chase Issuance Trust, Series 2012-A8, Class A8, 0.54%, 10/16/17		250		249,660
Citibank Credit Card Issuance Trust:
Series 2006-A3, Class A3, 5.30%, 3/15/18		100		109,743
Series 2008-A1, Class A1, 5.35%, 2/07/20		170		193,739
GE Capital Credit Card Master Note Trust, Series 2013-1, Class A, 1.35%, 3/15/21		750		728,427
Mercedes-Benz Auto Lease Trust, Series 2013-A, Class A4, 0.72%, 12/17/18		1,000		1,000,529
Santander Drive Auto Receivables Trust, Series 2012-4, Class C, 2.94%, 12/15/17		1,000		1,029,155
Total Asset-Backed Securities — 0.4%				3,810,209
Corporate Bonds
Aerospace & Defense — 0.3%
The Boeing Co., 6.13%, 2/15/33		100		118,613
Crane Co., 4.45%, 12/15/23		125		123,555
Eaton Corp.:
2.75%, 11/02/22		250		233,215
4.00%, 11/02/32		200		183,682
General Dynamics Corp., 3.88%, 7/15/21		50		51,732
Honeywell International, Inc., 5.30%, 3/01/18		100		113,041
L-3 Communications Corp.:
3.95%, 11/15/16		250		265,276
4.95%, 2/15/21		250		261,486
Lockheed Martin Corp.:
3.35%, 9/15/21		250		248,050
4.07%, 12/15/42		100		87,441
Northrop Grumman Corp.:
1.75%, 6/01/18		250		243,890
4.75%, 6/01/43		125		118,460
Precision Castparts Corp.:
1.25%, 1/15/18		75		73,013
2.50%, 1/15/23		150		135,897
Raytheon Co., 4.70%, 12/15/41		100		97,047
United Technologies Corp.:
1.80%, 6/01/17		250		253,854
3.10%, 6/01/22		100		97,778
5.70%, 4/15/40		50		56,799
4.50%, 6/01/42		200		194,217
				2,957,046
Agriculture, Fishing & Ranching — 0.0%
Bunge Ltd. Finance Corp., 3.20%, 6/15/17		150		154,270
Air Freight & Logistics — 0.0%
FedEx Corp., 3.88%, 8/01/42		50		41,065
United Parcel Service, Inc.:
5.13%, 4/01/19		50		56,870
6.20%, 1/15/38		100		121,547
				219,482
Corporate Bonds	Par   (000)		Value
Airlines — 0.1%
American Airlines Pass-Through Trust, Series 2013-2, Class A, 4.95%, 1/15/23 (a)	$	200	$	208,500
Continental Airlines Pass Through Trust, Series 2012-1, Class A, 4.15%, 10/11/25		49		49,013
Delta Air Lines Pass Through Trust, Series 2012-1, Class A, 4.75%, 11/07/21		93		99,503
United Airlines Pass-Through Trust, Series 2013-1, Class A, 4.30%, 2/15/27		200		203,500
				560,516
Automobiles — 0.0%
Daimler Finance North America LLC, 8.50%, 1/18/31		100		145,193
Ford Motor Co.:
7.45%, 7/16/31		150		183,700
4.75%, 1/15/43		100		90,188
				419,081
Beverages — 0.5%
Anheuser-Busch Cos. LLC, 6.45%, 9/01/37		100		121,804
Anheuser-Busch InBev Finance, Inc.:
0.80%, 1/15/16		250		249,827
1.25%, 1/17/18		250		244,608
4.00%, 1/17/43		150		133,348
Anheuser-Busch InBev Worldwide, Inc.:
7.75%, 1/15/19		250		312,165
2.50%, 7/15/22		200		184,994
8.20%, 1/15/39		150		219,384
3.75%, 7/15/42		50		42,405
Beam, Inc., 1.88%, 5/15/17		100		99,833
The Coca-Cola Co.:
1.80%, 9/01/16		50		51,201
1.15%, 4/01/18		250		242,873
4.88%, 3/15/19		150		168,150
2.45%, 11/01/20		350		339,960
Coca-Cola Femsa SAB de C.V., 2.38%, 11/26/18		250		248,153
Diageo Capital PLC:
1.50%, 5/11/17		200		199,568
5.75%, 10/23/17		100		114,122
3.88%, 4/29/43		125		107,517
Diageo Investment Corp., 2.88%, 5/11/22		100		95,323
Dr Pepper Snapple Group, Inc.:
3.20%, 11/15/21		25		24,110
2.70%, 11/15/22		100		91,034
Molson Coors Brewing Co., 3.50%, 5/01/22 (b)		75		73,636
PepsiCo, Inc.:
0.75%, 3/05/15		100		100,252
0.70%, 2/26/16		500		497,407
1.25%, 8/13/17		500		494,643
2.25%, 1/07/19		250		250,744
2.75%, 3/05/22		250		237,525
4.88%, 11/01/40		100		99,995
				5,044,581

Portfolio Abbreviations

To simplify the listings of portfolio holdings in the Schedule of Investments, the names and descriptions of many of the securities have been abbreviated according to the following list:	AMBAC	American Municipal Bond Assurance Corp.	GO	General Obligation Bonds
	COP	Certificates of Participation	NPFGC	National Public Finance Guarantee Corp.
	EDA	Economic Development Authority	RB	Revenue Bonds
	FKA	Formerly Known As	REIT	Real Estate Investment Trust

18 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

See Notes to Financial Statements.

Schedule of Investments (continued) Bond Index Master Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par   (000)		Value
Biotechnology — 0.2%
Amgen, Inc.:
2.13%, 5/15/17	$	300	$	303,796
3.45%, 10/01/20		100		101,467
5.15%, 11/15/41		550		547,957
Celgene Corp.:
3.25%, 8/15/22		150		142,014
5.25%, 8/15/43		145		146,192
Gilead Sciences, Inc.:
3.05%, 12/01/16		150		158,381
5.65%, 12/01/41		50		55,662
				1,455,469
Building Products — 0.0%
Owens Corning, 4.20%, 12/15/22		150		143,240
Capital Markets — 1.1%
Ameriprise Financial, Inc., 4.00%, 10/15/23		150		149,555
The Charles Schwab Corp.:
2.20%, 7/25/18		75		75,268
4.45%, 7/22/20		100		108,098
FMS Wertmanagement AoR, 1.13%, 10/14/16		250		251,713
Franklin Resources, Inc., 2.80%, 9/15/22		150		139,545
The Goldman Sachs Group, Inc.:
3.30%, 5/03/15		500		515,163
3.70%, 8/01/15		400		416,516
3.63%, 2/07/16		400		419,792
5.95%, 1/18/18		300		341,081
2.38%, 1/22/18		250		250,950
2.90%, 7/19/18		500		508,837
7.50%, 2/15/19		150		182,695
5.75%, 1/24/22		350		393,991
3.63%, 1/22/23		150		145,253
6.13%, 2/15/33		400		449,936
6.75%, 10/01/37		650		723,154
Invesco Finance PLC, 4.00%, 1/30/24		250		247,795
Lazard Group LLC, 4.25%, 11/14/20		150		149,675
Morgan Stanley:
1.75%, 2/25/16 (b)		750		760,069
5.75%, 10/18/16 (b)		225		251,144
4.75%, 3/22/17		350		381,961
6.63%, 4/01/18		500		585,047
5.63%, 9/23/19		250		284,171
5.50%, 7/28/21		100		111,746
3.75%, 2/25/23		450		437,879
4.10%, 5/22/23		250		241,938
5.00%, 11/24/25		250		250,748
7.25%, 4/01/32		50		61,879
6.38%, 7/24/42		50		58,564
Murray Street Investment Trust I, 4.65%, 3/09/17 (c)		200		215,377
Nomura Holdings, Inc.:
5.00%, 3/04/15		50		52,235
2.00%, 9/13/16		250		252,067
Raymond James Financial, Inc., 4.25%, 4/15/16		100		105,783
State Street Corp.:
2.88%, 3/07/16		100		104,063
3.10%, 5/15/23		250		232,452
				9,856,140
Corporate Bonds	Par   (000)		Value
Chemicals — 0.5%
Agrium, Inc.:
3.15%, 10/01/22	$	50	$	45,824
3.50%, 6/01/23 (b)		250		232,885
Airgas, Inc., 2.38%, 2/15/20		250		236,136
CF Industries, Inc.:
6.88%, 5/01/18		200		231,963
3.45%, 6/01/23		250		228,307
Cytec Industries, Inc., 3.50%, 4/01/23		250		229,721
The Dow Chemical Co.:
8.55%, 5/15/19		100		129,119
4.25%, 11/15/20		50		53,257
4.13%, 11/15/21		50		51,648
3.00%, 11/15/22		250		233,160
5.25%, 11/15/41		100		99,632
E.I. du Pont de Nemours & Co.:
6.00%, 7/15/18		325		377,302
2.80%, 2/15/23		250		228,961
Eastman Chemical Co., 3.60%, 8/15/22		200		192,012
Ecolab, Inc., 4.35%, 12/08/21		150		155,540
LYB International Finance BV:
4.00%, 7/15/23		200		197,411
5.25%, 7/15/43		75		75,393
LyondellBasell Industries NV, 6.00%, 11/15/21		250		287,528
Methanex Corp., 3.25%, 12/15/19		250		248,124
The Mosaic Co.:
3.75%, 11/15/21		50		48,944
5.45%, 11/15/33		250		254,712
Potash Corp. of Saskatchewan, Inc., 3.25%, 12/01/17		250		260,871
Praxair, Inc.:
4.63%, 3/30/15		100		105,056
1.25%, 11/07/18		250		238,961
The Sherwin-Williams Co., 1.35%, 12/15/17		200		194,742
				4,637,209
Commercial Banks — 2.6%
Abbey National Treasury Services PLC, 4.00%, 4/27/16		150		159,269
Asian Development Bank, 1.75%, 9/11/18		500		500,082
Bancolombia SA, 5.95%, 6/03/21		100		104,000
Bank of Montreal, 2.50%, 1/11/17		150		154,514
The Bank of New York Mellon Corp.:
0.70%, 10/23/15		350		350,636
2.30%, 7/28/16		50		51,639
1.35%, 3/06/18		250		244,740
3.55%, 9/23/21		50		51,157
Bank of Nova Scotia:
3.40%, 1/22/15		200		206,332
2.90%, 3/29/16		100		104,095
1.38%, 7/15/16		250		252,751
1.38%, 12/18/17		100		98,134
2.05%, 10/30/18		250		247,654
Barclays Bank PLC:
2.75%, 2/23/15		100		102,259
5.00%, 9/22/16		175		192,665
5.13%, 1/08/20		200		221,766
BB&T Corp.:
2.05%, 6/19/18		500		495,018
5.25%, 11/01/19		100		112,080
BBVA US Senior SAU, 4.66%, 10/09/15		250		262,819

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 19

Schedule of Investments (continued) Bond Index Master Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par   (000)		Value
Commercial Banks (continued)
BNP Paribas SA:
3.25%, 3/11/15	$	100	$	103,056
2.38%, 9/14/17		250		255,241
5.00%, 1/15/21		100		109,699
3.25%, 3/03/23		250		236,536
BPCE SA, 2.50%, 12/10/18		250		248,662
Branch Banking & Trust Co., 2.30%, 10/15/18		250		250,372
Commonwealth Bank of Australia, New York, 1.25%, 9/18/15		200		202,195
Cooperatieve Centrale Raiffeisen-Boerenleenbank BA:
1.70%, 3/19/18		250		246,905
4.63%, 12/01/23		500		503,509
5.25%, 5/24/41		25		25,793
Credit Suisse, New York:
3.50%, 3/23/15		800		828,266
5.40%, 1/14/20		150		166,700
Discover Bank/Greenwood Delaware, 2.00%, 2/21/18		600		589,298
Export-Import Bank of Korea:
4.00%, 1/11/17		400		423,756
1.75%, 2/27/18		500		486,531
Fifth Third Bancorp:
3.63%, 1/25/16		50		52,529
0.90%, 2/26/16		500		497,371
1.45%, 2/28/18 (b)		200		194,883
3.50%, 3/15/22		100		97,515
4.30%, 1/16/24		250		244,860
HSBC Holdings PLC:
4.88%, 1/14/22		150		161,868
4.00%, 3/30/22		600		616,709
6.50%, 5/02/36		200		236,906
6.80%, 6/01/38		250		307,538
HSBC USA, Inc., 2.38%, 2/13/15		300		306,110
Intesa Sanpaolo SpA:
3.13%, 1/15/16		250		254,766
3.88%, 1/16/18		200		204,796
KeyCorp:
2.30%, 12/13/18		340		337,533
5.10%, 3/24/21		100		109,291
KFW:
0.50%, 4/19/16		1,000		988,368
2.00%, 6/01/16		500		515,750
2.13%, 1/17/23		200		183,640
The Korea Development Bank:
3.25%, 3/09/16 (b)		100		103,867
1.50%, 1/22/18		200		191,767
3.00%, 3/17/19		350		350,223
Landwirtschaftliche Rentenbank, 3.13%, 7/15/15		200		208,327
Lloyds Bank PLC, 2.30%, 11/27/18		500		498,703
Lloyds TSB Bank PLC, 4.20%, 3/28/17		50		53,956
Manufacturers & Traders Trust Co., 1.45%, 3/07/18		250		243,177
National Australia Bank Ltd., New York, 2.00%, 3/09/15		250		254,437
Oesterreichische Kontrollbank AG, 2.00%, 6/03/16		100		102,968
PNC Bank NA, 2.95%, 1/30/23 (d)		250		230,079
PNC Funding Corp. (d):
5.63%, 2/01/17		150		166,500
3.30%, 3/08/22		150		147,397
Corporate Bonds	Par   (000)		Value
Commercial Banks (concluded)
Rabobank Nederland:
3.38%, 1/19/17	$	300	$	315,867
3.88%, 2/08/22		150		150,818
Regions Financial Corp., 2.00%, 5/15/18		250		242,078
Royal Bank of Canada:
0.85%, 3/08/16		250		249,652
1.45%, 9/09/16		250		253,540
2.20%, 7/27/18		250		251,015
Santander Holdings USA, Inc., 3.45%, 8/27/18		250		256,416
Sumitomo Mitsui Banking Corp., 1.80%, 7/18/17		250		248,117
SunTrust Banks, Inc.:
3.50%, 1/20/17		50		52,576
2.35%, 11/01/18		250		248,676
Svenska Handelsbanken AB, 1.63%, 3/21/18		250		245,255
The Toronto-Dominion Bank:
2.38%, 10/19/16		50		51,911
1.40%, 4/30/18		250		243,243
Union Bank NA, 2.63%, 9/26/18		250		254,488
US Bancorp:
1.65%, 5/15/17		250		250,526
1.95%, 11/15/18		225		223,793
4.13%, 5/24/21		50		53,138
Wachovia Bank NA/Wells Fargo & Co., 5.63%, 10/15/16		250		280,814
Wells Fargo & Co.:
1.25%, 7/20/16		250		251,855
2.63%, 12/15/16		100		104,728
2.10%, 5/08/17		150		152,797
5.63%, 12/11/17		250		286,549
1.50%, 1/16/18 (b)		250		248,385
2.15%, 1/15/19		250		249,217
3.50%, 3/08/22		500		500,132
3.45%, 2/13/23		450		425,446
4.13%, 8/15/23		250		246,462
5.38%, 11/02/43		150		153,601
5.61%, 1/15/44 (a)		56		58,166
Wells Fargo Bank NA, 4.75%, 2/09/15		500		522,465
Westpac Banking Corp.:
3.00%, 8/04/15		250		259,724
1.60%, 1/12/18 (b)		250		246,283
4.88%, 11/19/19		50		55,482
				24,083,178
Commercial Services & Supplies — 0.1%
Republic Services, Inc.:
5.25%, 11/15/21		50		54,512
3.55%, 6/01/22		250		241,058
Vanderbilt University, 5.25%, 4/01/19		100		112,978
Waste Management, Inc.:
4.60%, 3/01/21		100		106,546
2.90%, 9/15/22		200		185,277
				700,371
Communications Equipment — 0.1%
Cisco Systems, Inc., 5.50%, 1/15/40		350		370,312
Motorola Solutions, Inc.:
3.75%, 5/15/22		150		145,214
3.50%, 3/01/23		250		231,286
				746,812

See Notes to Financial Statements.

20 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) Bond Index Master Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par   (000)		Value
Computer Services Software & Systems — 0.0%
Perrigo Co. PLC., 2.30%, 11/08/18 (a)	$	250	$	246,757
Computers & Peripherals — 0.2%
Apple, Inc.:
1.00%, 5/03/18		500		483,473
3.85%, 5/04/43		250		208,856
EMC Corp.:
1.88%, 6/01/18		250		247,160
2.65%, 6/01/20		250		244,845
Hewlett-Packard Co.:
3.30%, 12/09/16		150		156,994
4.65%, 12/09/21		100		102,968
6.00%, 9/15/41		150		150,289
NetApp, Inc., 2.00%, 12/15/17		350		348,203
				1,942,788
Construction & Engineering — 0.0%
ABB Finance USA, Inc.:
1.63%, 5/08/17		150		149,702
2.88%, 5/08/22		100		94,493
URS Corp., 3.85%, 4/01/17 (a)		100		101,872
				346,067
Consumer Finance — 0.2%
American Express Co.:
1.55%, 5/22/18		250		244,100
2.65%, 12/02/22		230		213,365
4.05%, 12/03/42		67		58,948
Capital One Financial Corp.:
1.00%, 11/06/15		200		199,913
3.50%, 6/15/23		110		103,258
Caterpillar Financial Services Corp.:
1.10%, 5/29/15		250		252,014
0.70%, 2/26/16		700		698,890
HSBC Finance Corp., 6.68%, 1/15/21		161		184,995
				1,955,483
Containers & Packaging — 0.0%
Packaging Corp. of America, 4.50%, 11/01/23		250		250,653
Diversified Financial Services — 2.9%
Air Lease Corp., 3.38%, 1/15/19		250		250,000
American Express Credit Corp.:
1.75%, 6/12/15		500		508,068
2.75%, 9/15/15		250		258,714
2.38%, 3/24/17		100		102,788
American Honda Finance Corp., 2.13%, 10/10/18		500		497,941
Bank of America Corp.:
4.50%, 4/01/15		50		52,309
7.75%, 8/15/15 (b)		250		275,054
3.63%, 3/17/16		150		157,810
3.75%, 7/12/16		350		372,091
3.88%, 3/22/17		300		320,195
2.00%, 1/11/18		1,050		1,048,137
2.60%, 1/15/19		250		251,104
5.63%, 7/01/20		150		171,407
5.00%, 5/13/21		100		109,277
5.70%, 1/24/22		100		113,186
3.30%, 1/11/23		250		236,567
5.88%, 2/07/42		100		114,369
Boeing Capital Corp., 4.70%, 10/27/19		250		280,513
Corporate Bonds	Par   (000)		Value
Diversified Financial Services (continued)
Capital One Bank USA NA, 3.38%, 2/15/23	$	350	$	325,388
Citigroup, Inc.:
2.65%, 3/02/15		400		408,113
1.25%, 1/15/16		250		250,830
3.95%, 6/15/16		150		159,585
1.70%, 7/25/16		250		252,356
4.45%, 1/10/17		400		433,520
2.50%, 9/26/18		350		351,766
8.50%, 5/22/19		250		320,397
4.05%, 7/30/22		250		247,214
3.38%, 3/01/23		500		475,257
3.50%, 5/15/23		250		232,948
3.88%, 10/25/23		250		245,765
6.63%, 6/15/32		100		111,264
6.88%, 3/05/38		100		122,970
8.13%, 7/15/39		75		105,202
5.88%, 1/30/42		150		168,581
Deutsche Bank AG, London, 3.25%, 1/11/16		300		313,759
Ford Motor Credit Co. LLC:
7.00%, 4/15/15		250		269,092
2.75%, 5/15/15		500		512,921
1.70%, 5/09/16		750		758,581
4.25%, 2/03/17		250		268,942
2.38%, 1/16/18		250		252,490
4.38%, 8/06/23 (b)		220		221,179
General Electric Capital Corp.:
2.25%, 11/09/15		100		103,061
1.00%, 1/08/16		1,000		1,002,500
1.50%, 7/12/16		250		252,643
2.90%, 1/09/17		100		104,397
5.63%, 5/01/18		300		344,510
6.00%, 8/07/19		100		117,331
4.38%, 9/16/20		50		54,189
4.63%, 1/07/21		250		272,612
4.65%, 10/17/21		200		217,890
3.10%, 1/09/23		500		474,379
6.75%, 3/15/32		250		309,576
5.88%, 1/14/38		750		854,335
6.38%, 11/15/67 (e)		250		271,250
IntercontinentalExchange Group, Inc., 2.50%, 10/15/18		250		251,839
Jefferies Group LLC:
8.50%, 7/15/19		125		152,500
5.13%, 1/20/23		150		151,720
John Deere Capital Corp.:
0.88%, 4/17/15		250		251,416
0.75%, 1/22/16		250		249,368
2.25%, 4/17/19		100		99,787
3.90%, 7/12/21 (b)		50		51,796
JPMorgan Chase & Co.:
1.88%, 3/20/15		350		354,731
5.25%, 5/01/15		250		263,866
1.10%, 10/15/15		250		250,954
3.15%, 7/05/16		300		314,515
2.00%, 8/15/17		250		253,589
1.80%, 1/25/18		250		247,806
1.63%, 5/15/18 (b)		500		489,600
4.50%, 1/24/22		300		317,319
3.25%, 9/23/22		200		191,664

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 21

Schedule of Investments (continued) Bond Index Master Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par   (000)		Value
Diversified Financial Services (concluded)
JPMorgan Chase & Co. (concluded):
3.20%, 1/25/23	$	150	$	142,204
3.38%, 5/01/23		250		233,000
6.40%, 5/15/38		100		119,351
5.50%, 10/15/40		125		135,817
5.60%, 7/15/41		50		54,262
5.40%, 1/06/42		250		269,139
5.63%, 8/16/43		250		264,194
JPMorgan Chase Bank NA, 6.00%, 10/01/17		250		286,030
Leucadia National Corp., 5.50%, 10/18/23		150		149,913
Merrill Lynch & Co., Inc.:
6.05%, 5/16/16		500		550,112
6.88%, 4/25/18		400		472,947
6.11%, 1/29/37		100		107,847
7.75%, 5/14/38		200		258,213
Moody’s Corp., 4.50%, 9/01/22		50		49,237
National Rural Utilities Cooperative Finance Corp.:
1.00%, 2/02/15		200		201,176
3.05%, 3/01/16		50		52,038
3.40%, 11/15/23		350		338,673
NCUA Guaranteed Notes, 3.00%, 6/12/19		1,000		1,046,000
ORIX Corp., 3.75%, 3/09/17		100		103,828
Royal Bank of Scotland Group PLC:
2.55%, 9/18/15		200		204,551
6.40%, 10/21/19		250		288,081
The Royal Bank of Scotland PLC, 4.38%, 3/16/16		250		266,798
Toyota Motor Credit Corp.:
1.00%, 2/17/15		500		503,386
0.80%, 5/17/16		500		500,533
1.38%, 1/10/18		200		196,137
UBS AG/Stamford CT:
7.00%, 10/15/15		150		165,544
5.75%, 4/25/18		300		344,415
				27,502,219
Diversified Telecommunication Services — 1.2%
AT&T, Inc.:
0.80%, 12/01/15		500		498,735
0.90%, 2/12/16		500		497,460
1.70%, 6/01/17		500		496,937
6.30%, 1/15/38		200		221,050
5.35%, 9/01/40		213		210,749
5.55%, 8/15/41		200		202,972
4.30%, 12/15/42		151		128,084
4.35%, 6/15/45		759		642,563
British Telecommunications PLC:
2.00%, 6/22/15		250		254,396
1.63%, 6/28/16		500		504,406
9.63%, 12/15/30		50		74,612
CC Holdings GS V LLC/Crown Castle GS III Corp., 2.38%, 12/15/17		325		321,907
Deutsche Telekom International Finance BV, 8.75%, 6/15/30		400		564,313
Embarq Corp.:
7.08%, 6/01/16		250		279,350
8.00%, 6/01/36		100		101,244
Orange SA:
2.75%, 9/14/16		200		207,690
4.13%, 9/14/21		150		151,862
5.38%, 1/13/42		225		225,975
Corporate Bonds	Par   (000)		Value
Diversified Telecommunication Services (concluded)
Qwest Corp.:
6.50%, 6/01/17 (b)	$	150	$	169,511
6.75%, 12/01/21		50		54,748
Telefonaktiebolaget LM Ericsson, 4.13%, 5/15/22		100		97,197
Telefonica Emisiones SAU:
3.99%, 2/16/16		350		367,639
5.46%, 2/16/21		50		52,757
4.57%, 4/27/23		200		197,217
7.05%, 6/20/36		75		82,676
Telefonica Europe BV, 8.25%, 9/15/30		50		59,542
Verizon Communications, Inc.:
3.00%, 4/01/16		250		260,701
2.50%, 9/15/16		250		258,509
1.10%, 11/01/17		250		243,226
3.65%, 9/14/18		500		529,282
8.75%, 11/01/18		65		83,172
3.50%, 11/01/21		400		397,123
5.15%, 9/15/23		500		536,846
7.75%, 12/01/30		100		127,724
6.40%, 9/15/33		500		575,061
6.40%, 2/15/38		200		224,594
6.00%, 4/01/41		250		274,483
3.85%, 11/01/42		250		204,201
6.55%, 9/15/43		1,000		1,169,959
				11,550,473
Electric Utilities — 0.9%
Alabama Power Co., 5.50%, 10/15/17		100		112,938
Ameren Illinois Co., 2.70%, 9/01/22		100		93,595
American Electric Power Co., Inc., 1.65%, 12/15/17		200		195,963
CenterPoint Energy Houston Electric LLC, 3.55%, 8/01/42		100		82,086
Commonwealth Edison Co., 5.90%, 3/15/36		50		57,123
The Connecticut Light & Power Co., 2.50%, 1/15/23		150		137,090
DTE Electric Co., 4.00%, 4/01/43		150		133,505
Duke Energy Carolinas LLC, 6.05%, 4/15/38		100		118,689
Duke Energy Corp.:
1.63%, 8/15/17		250		248,420
3.95%, 10/15/23		250		250,072
Duke Energy Indiana, Inc.:
4.20%, 3/15/42		150		138,452
4.90%, 7/15/43		250		258,959
Duke Energy Progress, Inc., 4.10%, 5/15/42		150		138,515
Entergy Corp.:
3.63%, 9/15/15		50		51,576
4.70%, 1/15/17		150		161,282
Entergy Louisiana LLC, 4.05%, 9/01/23		250		253,874
Florida Power & Light Co.:
2.75%, 6/01/23 (b)		250		234,003
5.95%, 2/01/38		50		58,591
4.05%, 6/01/42		150		137,100
Georgia Power Co.:
0.63%, 11/15/15		250		249,820
4.30%, 3/15/42		200		179,922
Great Plains Energy, Inc., 5.29%, 6/15/22 (c)		150		160,932
Indiana Michigan Power Co., 6.05%, 3/15/37		175		189,566
LG&E and KU Energy LLC, 3.75%, 11/15/20 (b)		50		50,586

See Notes to Financial Statements.

22 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) Bond Index Master Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par   (000)		Value
Electric Utilities (concluded)
MidAmerican Energy Holdings Co.:
6.13%, 4/01/36	$	250	$	284,016
5.15%, 11/15/43 (a)		250		252,082
Nevada Power Co., 5.45%, 5/15/41		50		54,158
Nisource Finance Corp.:
5.95%, 6/15/41		50		52,098
5.25%, 2/15/43		75		72,888
Northeast Utilities, 1.45%, 5/01/18		250		242,135
Northern States Power Co., 3.40%, 8/15/42		200		160,796
Oncor Electric Delivery Co. LLC:
7.00%, 9/01/22		100		119,299
5.30%, 6/01/42		75		77,984
Pacific Gas & Electric Co.:
3.25%, 6/15/23		500		474,290
6.05%, 3/01/34		250		286,374
PacifiCorp:
2.95%, 2/01/22		100		96,118
2.95%, 6/01/23		300		281,434
PPL Capital Funding, Inc.:
1.90%, 6/01/18		250		244,117
3.40%, 6/01/23		250		232,623
Progress Energy, Inc.:
4.40%, 1/15/21		100		105,530
7.75%, 3/01/31		50		64,388
Public Service Co. of Colorado, 3.95%, 3/15/43 (b)		200		177,897
Public Service Electric & Gas Co.:
3.50%, 8/15/20		50		51,563
2.38%, 5/15/23		250		224,792
3.95%, 5/01/42		50		44,554
3.65%, 9/01/42		50		42,160
Southern California Edison Co.:
5.00%, 1/15/16		100		108,254
5.50%, 3/15/40		50		55,224
4.05%, 3/15/42		150		135,825
The Toledo Edison Co., 6.15%, 5/15/37		100		109,954
Virginia Electric & Power Co.:
2.95%, 1/15/22		400		386,457
4.00%, 1/15/43		250		222,612
				8,352,281
Electrical Equipment — 0.1%
Emerson Electric Co.:
5.00%, 4/15/19		100		112,265
2.63%, 2/15/23		350		326,897
Pentair Finance SA:
1.88%, 9/15/17		250		246,984
3.15%, 9/15/22		300		270,979
Roper Industries, Inc., 3.13%, 11/15/22		150		137,472
				1,094,597
Electronic Equipment, Instruments & Components — 0.2%
Arrow Electronics, Inc., 3.00%, 3/01/18		750		750,386
Corning, Inc.:
3.70%, 11/15/23		250		246,216
4.75%, 3/15/42		50		48,155
Jabil Circuit, Inc., 4.70%, 9/15/22		250		240,000
Tyco Electronics Group SA:
6.55%, 10/01/17		50		57,220
3.50%, 2/03/22		100		95,006
				1,436,983
Corporate Bonds	Par   (000)		Value
Energy Equipment & Services — 0.2%
Baker Hughes, Inc., 5.13%, 9/15/40	$	100	$	105,870
Ensco PLC:
3.25%, 3/15/16		100		104,404
4.70%, 3/15/21		100		105,774
FMC Technologies, Inc., 3.45%, 10/01/22		100		92,093
Halliburton Co.:
6.15%, 9/15/19		100		118,247
4.50%, 11/15/41		50		47,522
4.75%, 8/01/43		250		245,512
National Oilwell Varco, Inc., 3.95%, 12/01/42		150		132,418
Noble Holding International Ltd.:
2.50%, 3/15/17		150		150,475
5.25%, 3/15/42 (b)		50		47,974
Transcontinental Gas Pipe Line Co. LLC, 4.45%, 8/01/42		250		222,422
Transocean, Inc.:
5.05%, 12/15/16		250		276,168
2.50%, 10/15/17		250		252,648
3.80%, 10/15/22		100		94,783
6.80%, 3/15/38		50		55,651
				2,051,961
Food & Staples Retailing — 0.4%
Costco Wholesale Corp., 1.13%, 12/15/17		150		147,361
CVS Caremark Corp.:
2.75%, 12/01/22		400		369,189
6.13%, 9/15/39		50		56,706
The Kroger Co.:
6.15%, 1/15/20		100		113,974
3.40%, 4/15/22		100		96,998
5.15%, 8/01/43		125		121,938
Safeway, Inc.:
6.35%, 8/15/17		250		279,711
4.75%, 12/01/21		100		100,417
Wal-Mart Stores, Inc.:
1.50%, 10/25/15		800		815,223
3.63%, 7/08/20		150		157,178
5.63%, 4/15/41		500		567,737
4.00%, 4/11/43		150		133,497
4.75%, 10/02/43		250		250,973
Walgreen Co.:
1.80%, 9/15/17		200		201,386
3.10%, 9/15/22		200		187,498
				3,599,786
Food Products — 0.3%
Archer-Daniels-Midland Co., 4.54%, 3/26/42		75		70,020
ConAgra Foods, Inc.:
3.25%, 9/15/22		200		187,577
4.65%, 1/25/43		250		229,677
Delhaize Group SA, 4.13%, 4/10/19		150		154,206
General Mills, Inc., 3.15%, 12/15/21		150		146,834
Ingredion, Inc., 3.20%, 11/01/15		50		51,771
The JM Smucker Co., 3.50%, 10/15/21		50		49,642
Kellogg Co.:
1.88%, 11/17/16		200		203,432
3.13%, 5/17/22		100		94,811
Kraft Foods Group, Inc.:
1.63%, 6/04/15		250		253,175
5.38%, 2/10/20		52		58,666
5.00%, 6/04/42		200		197,158

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 23

Schedule of Investments (continued) Bond Index Master Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par   (000)		Value
Food Products (concluded)
Kraft Foods, Inc., 6.50%, 2/09/40	$	350	$	418,250
Mondelez International, Inc.:
4.13%, 2/09/16		150		159,024
5.38%, 2/10/20		48		54,211
Tyson Foods, Inc., 4.50%, 6/15/22		150		152,725
Unilever Capital Corp.:
2.20%, 3/06/19		200		199,743
4.25%, 2/10/21		200		214,481
				2,895,403
Gas Utilities — 0.1%
AGL Capital Corp., 3.50%, 9/15/21		50		49,745
Atmos Energy Corp., 4.15%, 1/15/43		100		89,947
National Fuel Gas Co., 3.75%, 3/01/23		300		283,122
ONEOK, Inc., 4.25%, 2/01/22		100		94,074
				516,888
Health Care Equipment & Supplies — 0.2%
Baxter International, Inc.:
1.85%, 6/15/18		250		246,873
3.20%, 6/15/23		250		238,837
Boston Scientific Corp.:
6.00%, 1/15/20		100		114,803
4.13%, 10/01/23		100		99,191
CareFusion Corp., 3.30%, 3/01/23 (a)		200		182,760
Covidien International Finance SA:
1.35%, 5/29/15		250		251,834
2.95%, 6/15/23		250		231,266
6.55%, 10/15/37		25		30,694
Medtronic, Inc.:
1.38%, 4/01/18		300		294,494
4.13%, 3/15/21		50		52,277
4.00%, 4/01/43		150		132,203
St. Jude Medical, Inc., 3.25%, 4/15/23		150		139,948
Stryker Corp., 1.30%, 4/01/18		200		194,280
				2,209,460
Health Care Providers & Services — 0.6%
Aetna, Inc.:
1.50%, 11/15/17		250		246,323
2.75%, 11/15/22		250		230,288
6.75%, 12/15/37		50		60,976
Cardinal Health, Inc.:
1.70%, 3/15/18		750		733,957
3.20%, 6/15/22		50		47,515
4.60%, 3/15/43 (b)		50		46,689
Cigna Corp.:
2.75%, 11/15/16		100		104,082
4.00%, 2/15/22 (b)		25		25,447
5.38%, 2/15/42		50		51,985
Express Scripts Holding Co.:
3.50%, 11/15/16		100		105,722
2.65%, 2/15/17		350		360,736
4.75%, 11/15/21		300		316,999
Humana, Inc., 3.15%, 12/01/22 (b)		250		231,428
Kaiser Foundation Hospitals, 3.50%, 4/01/22		100		94,786
Laboratory Corp. of America Holdings:
3.75%, 8/23/22		100		96,864
4.00%, 11/01/23		100		96,091
Corporate Bonds	Par   (000)		Value
Health Care Providers & Services (concluded)
McKesson Corp.:
3.25%, 3/01/16	$	250	$	260,546
2.85%, 3/15/23		150		135,683
Medco Health Solutions, Inc., 2.75%, 9/15/15		50		51,614
Quest Diagnostics, Inc.:
3.20%, 4/01/16		50		51,852
4.70%, 4/01/21		100		102,550
UnitedHealth Group, Inc.:
1.63%, 3/15/19		550		529,636
2.88%, 3/15/23		250		232,627
5.95%, 2/15/41		100		113,288
3.95%, 10/15/42		150		127,210
WellPoint, Inc.:
5.25%, 1/15/16		150		162,184
1.88%, 1/15/18 (b)		450		444,965
3.13%, 5/15/22		200		187,576
3.30%, 1/15/23		100		93,321
4.63%, 5/15/42		50		46,211
5.10%, 1/15/44		150		148,747
				5,537,898
Hotels, Restaurants & Leisure — 0.3%
Carnival Corp.:
1.20%, 2/05/16		250		249,309
3.95%, 10/15/20		250		250,193
Darden Restaurants, Inc., 3.35%, 11/01/22		100		86,031
Hyatt Hotels Corp., 3.38%, 7/15/23		190		174,187
Marriott International, Inc.:
3.00%, 3/01/19		100		100,701
3.25%, 9/15/22		100		93,231
McDonald’s Corp.:
0.75%, 5/29/15		250		251,458
1.88%, 5/29/19		100		97,571
3.50%, 7/15/20		50		52,089
3.70%, 2/15/42		100		84,691
Starbucks Corp., 3.85%, 10/01/23		250		251,460
Starwood Hotels & Resorts Worldwide, Inc., 3.13%, 2/15/23		250		227,044
Wyndham Worldwide Corp.:
2.50%, 3/01/18		500		498,303
4.25%, 3/01/22		50		48,799
Yum! Brands, Inc.:
5.30%, 9/15/19		100		111,486
5.35%, 11/01/43		100		97,165
				2,673,718
Household Durables — 0.0%
MDC Holdings, Inc., 6.00%, 1/15/43		100		86,277
Mohawk Industries, Inc., 3.85%, 2/01/23		125		118,750
Whirlpool Corp., 5.15%, 3/01/43 (b)		200		192,829
				397,856
Household Products — 0.1%
The Clorox Co., 3.05%, 9/15/22		50		46,868
Energizer Holdings, Inc., 4.70%, 5/19/21		50		50,507
Kimberly-Clark Corp., 3.63%, 8/01/20 (b)		50		52,138
The Procter & Gamble Co.:
1.80%, 11/15/15		100		102,311
2.30%, 2/06/22		250		234,311
				486,135

See Notes to Financial Statements.

24 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) Bond Index Master Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par   (000)		Value
Independent Power Producers & Energy Traders — 0.1%
Exelon Generation Co. LLC:
6.25%, 10/01/39	$	150	$	152,008
5.60%, 6/15/42		50		46,674
PPL Energy Supply LLC, 4.60%, 12/15/21 (b)		150		144,142
Southern Power Co., 5.25%, 7/15/43		250		248,328
				591,152
Industrial Conglomerates — 0.2%
General Electric Co.:
0.85%, 10/09/15		750		753,502
5.25%, 12/06/17		250		282,986
2.70%, 10/09/22		150		140,400
Koninklijke Philips Electronics N.V., 3.75%, 3/15/22		250		250,135
				1,427,023
Insurance — 1.1%
ACE INA Holdings, Inc.:
2.60%, 11/23/15		300		310,367
4.15%, 3/13/43		150		135,969
Aflac, Inc.:
2.65%, 2/15/17 (b)		250		257,977
3.63%, 6/15/23		250		241,994
Alleghany Corp., 4.95%, 6/27/22		50		51,908
The Allstate Corp.:
3.15%, 6/15/23		250		237,086
4.50%, 6/15/43		150		141,926
American International Group, Inc.:
4.88%, 9/15/16		150		164,749
3.80%, 3/22/17 (b)		350		373,765
8.25%, 8/15/18		100		125,088
3.38%, 8/15/20		250		251,454
4.88%, 6/01/22		250		268,706
4.13%, 2/15/24		250		248,551
8.18%, 5/15/58 (e)		175		211,750
Aon Corp., 3.13%, 5/27/16		50		52,144
Aon PLC, 4.45%, 5/24/43		200		177,665
Arch Capital Group US, Inc., 5.14%, 11/01/43		125		124,986
Assurant, Inc., 2.50%, 3/15/18		250		244,263
AXA SA, 8.60%, 12/15/30		50		61,562
Berkshire Hathaway Finance Corp.:
2.90%, 10/15/20		500		495,844
4.40%, 5/15/42		100		91,448
Berkshire Hathaway, Inc.:
1.90%, 1/31/17		100		102,302
1.55%, 2/09/18		500		494,372
CNA Financial Corp., 5.75%, 8/15/21		100		112,044
Genworth Holdings, Inc.:
8.63%, 12/15/16 (b)		250		296,860
7.70%, 6/15/20 (b)		50		59,530
4.90%, 8/15/23		100		99,950
Hartford Financial Services Group, Inc., 6.10%, 10/01/41		100		114,344
ING US, Inc., 2.90%, 2/15/18		750		767,089
Lincoln National Corp.:
4.85%, 6/24/21		50		53,705
4.20%, 3/15/22		100		101,902
4.00%, 9/01/23		200		197,374
Loews Corp., 2.63%, 5/15/23		250		223,981
Markel Corp., 3.63%, 3/30/23		250		235,300
Marsh & McLennan Cos., Inc., 4.80%, 7/15/21		50		53,302
Corporate Bonds	Par   (000)		Value
Insurance (concluded)
MetLife, Inc.:
5.00%, 6/15/15	$	100	$	106,142
4.75%, 2/08/21		200		216,162
6.40%, 12/15/36		100		102,750
4.13%, 8/13/42		300		260,887
Principal Financial Group, Inc., 4.63%, 9/15/42		50		46,975
The Progressive Corp., 3.75%, 8/23/21		50		50,979
Prudential Financial, Inc.:
3.00%, 5/12/16		150		156,207
5.38%, 6/21/20		350		395,540
8.88%, 6/15/38 (e)		100		121,625
5.63%, 6/15/43 (e)		100		98,000
5.10%, 8/15/43		250		248,289
5.20%, 3/15/44 (e)		100		96,750
The Travelers Cos., Inc., 4.60%, 8/01/43		100		97,706
Travelers Property Casualty Corp., 6.38%, 3/15/33		100		120,384
Willis Group Holdings PLC, 4.13%, 3/15/16		200		209,387
WR Berkley Corp., 4.63%, 3/15/22		200		202,292
XLIT Ltd., 5.75%, 10/01/21		100		112,287
				9,823,619
Internet & Catalog Retail — 0.0%
Amazon.com, Inc., 1.20%, 11/29/17		250		244,773
Internet Software & Services — 0.0%
Baidu, Inc., 3.25%, 8/06/18		205		207,214
eBay, Inc.:
3.25%, 10/15/20		50		50,868
2.60%, 7/15/22		50		45,986
Google, Inc., 3.63%, 5/19/21		25		26,068
				330,136
IT Services — 0.3%
Fidelity National Information Services, Inc.:
2.00%, 4/15/18		250		243,099
3.50%, 4/15/23		25		22,788
Fiserv, Inc., 6.80%, 11/20/17		50		57,610
International Business Machines Corp.:
0.55%, 2/06/15		250		250,370
0.75%, 5/11/15		200		200,881
2.00%, 1/05/16		150		153,954
1.25%, 2/08/18		500		489,453
1.88%, 5/15/19		250		245,207
2.90%, 11/01/21		100		96,214
4.00%, 6/20/42		100		89,292
Total System Services, Inc., 2.38%, 6/01/18		250		243,221
The Western Union Co.:
2.88%, 12/10/17		250		253,810
6.20%, 11/17/36 (b)		25		23,448
				2,369,347
Leisure Equipment & Products — 0.0%
Mattel, Inc., 1.70%, 3/15/18 (b)		200		195,407
Life Sciences Tools & Services — 0.1%
Agilent Technologies, Inc., 3.88%, 7/15/23		200		189,563
Life Technologies Corp., 6.00%, 3/01/20		100		114,902
Thermo Fisher Scientific, Inc.:
2.25%, 8/15/16		50		51,134
3.15%, 1/15/23		250		232,653
				588,252

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 25

Schedule of Investments (continued) Bond Index Master Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par   (000)		Value
Machinery — 0.2%
Caterpillar, Inc.:
5.70%, 8/15/16	$	100	$	111,489
3.90%, 5/27/21		50		51,935
5.20%, 5/27/41		100		103,343
Danaher Corp., 3.90%, 6/23/21		50		51,734
Deere & Co., 3.90%, 6/09/42		50		43,867
Flowserve Corp., 3.50%, 9/15/22		100		94,200
Illinois Tool Works, Inc.:
4.88%, 9/15/41		50		49,250
3.90%, 9/01/42		75		64,182
Ingersoll-Rand Global Holding Co., Ltd.:
6.88%, 8/15/18		50		58,845
2.88%, 1/15/19 (a)		500		492,814
Joy Global, Inc., 5.13%, 10/15/21 (b)		50		51,349
Stanley Black & Decker, Inc., 2.90%, 11/01/22		150		139,354
Trinity Acquisition PLC, 6.13%, 8/15/43		150		151,635
				1,463,997
Media — 1.0%
21st Century Fox America, Inc., 4.00%, 10/01/23 (a)		250		247,090
CBS Corp.:
7.88%, 7/30/30		75		93,314
4.85%, 7/01/42		75		67,579
Cintas Corp. No 2, 4.30%, 6/01/21		25		25,954
Comcast Corp.:
5.15%, 3/01/20		350		390,449
4.25%, 1/15/33		650		603,797
6.45%, 3/15/37		200		232,109
4.65%, 7/15/42		150		139,591
COX Communications, Inc., 5.50%, 10/01/15		100		107,338
DIRECTV Holdings LLC / DIRECTV Financing Co., Inc.:
3.13%, 2/15/16		100		104,022
3.50%, 3/01/16		250		262,422
2.40%, 3/15/17		250		254,515
1.75%, 1/15/18 (b)		750		735,726
3.80%, 3/15/22		250		240,159
5.15%, 3/15/42		150		134,715
Discovery Communications LLC:
4.38%, 6/15/21		50		51,666
3.25%, 4/01/23 (b)		50		46,442
4.95%, 5/15/42		50		46,442
4.88%, 4/01/43		150		138,374
NBCUniversal Media LLC:
3.65%, 4/30/15		250		260,000
4.38%, 4/01/21		100		105,842
2.88%, 1/15/23		250		231,444
News America, Inc.:
4.50%, 2/15/21		100		107,187
3.00%, 9/15/22		400		376,021
6.20%, 12/15/34		100		110,697
6.15%, 2/15/41		150		167,179
Omnicom Group, Inc., 3.63%, 5/01/22		125		121,050
TCI Communications, Inc., 8.75%, 8/01/15		50		56,233
Thomson Reuters Corp.:
0.88%, 5/23/16		250		248,241
6.50%, 7/15/18		250		289,859
4.30%, 11/23/23 (b)		250		251,075
Time Warner Cable, Inc.:
8.25%, 4/01/19		300		351,451
4.13%, 2/15/21		100		94,776
Corporate Bonds	Par   (000)		Value
Media (concluded)
Time Warner Cable, Inc. (concluded):
4.00%, 9/01/21 (b)	$	500	$	464,376
6.55%, 5/01/37		150		138,803
6.75%, 6/15/39		50		47,085
4.50%, 9/15/42		225		170,452
Time Warner, Inc.:
4.88%, 3/15/20		250		274,020
3.40%, 6/15/22		250		243,962
7.70%, 5/01/32		250		320,993
6.25%, 3/29/41		150		166,572
5.35%, 12/15/43		250		253,183
Viacom, Inc.:
3.13%, 6/15/22 (b)		150		138,569
3.25%, 3/15/23		200		185,243
4.38%, 3/15/43		70		59,106
5.85%, 9/01/43		100		105,122
The Walt Disney Co.:
3.75%, 6/01/21		50		51,615
2.35%, 12/01/22		300		272,575
WPP Finance 2010, 4.75%, 11/21/21		100		103,956
				9,688,391
Metals & Mining — 0.7%
Alcoa, Inc.:
5.55%, 2/01/17		200		215,272
5.90%, 2/01/27		100		97,983
Allegheny Technologies, Inc., 5.88%, 8/15/23		150		151,490
Barrick Gold Corp., 3.85%, 4/01/22		350		315,220
Barrick North America Finance LLC, 5.70%, 5/30/41		50		42,955
BHP Billiton Finance USA Ltd.:
1.63%, 2/24/17		100		100,271
2.05%, 9/30/18		175		174,978
2.88%, 2/24/22		250		239,080
5.00%, 9/30/43		350		355,859
Carpenter Technology Corp., 4.45%, 3/01/23		250		239,875
Cliffs Natural Resources, Inc. (b):
3.95%, 1/15/18		200		201,959
4.88%, 4/01/21		50		48,627
Freeport-McMoRan Copper & Gold, Inc.:
2.15%, 3/01/17		100		100,652
3.10%, 3/15/20		200		194,306
3.55%, 3/01/22		50		47,520
5.45%, 3/15/43		100		95,704
Goldcorp, Inc., 2.13%, 3/15/18		150		147,014
Newmont Mining Corp.:
3.50%, 3/15/22		200		170,237
4.88%, 3/15/42		50		37,022
Nucor Corp., 5.20%, 8/01/43		250		243,548
Reliance Steel & Aluminum Co., 4.50%, 4/15/23		25		24,523
Rio Tinto Finance USA Ltd.:
2.50%, 5/20/16		50		51,563
4.13%, 5/20/21		150		155,594
Rio Tinto Finance USA PLC:
1.13%, 3/20/15		250		251,391
1.63%, 8/21/17		250		249,901
2.25%, 12/14/18		1,000		995,066
2.88%, 8/21/22		100		93,203
4.75%, 3/22/42		100		97,193

See Notes to Financial Statements.

26 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) Bond Index Master Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par   (000)		Value
Metals & Mining (concluded)
Southern Copper Corp., 6.75%, 4/16/40	$	100	$	96,826
Teck Resources Ltd.:
3.00%, 3/01/19		450		451,410
4.75%, 1/15/22		50		50,479
3.75%, 2/01/23 (b)		100		93,213
5.20%, 3/01/42		50		44,130
Vale Overseas Ltd., 6.88%, 11/21/36		200		206,551
Vale SA, 5.63%, 9/11/42 (b)		250		226,946
				6,307,561
Multi-Utilities — 0.2%
CMS Energy Corp., 4.70%, 3/31/43		200		186,607
Consolidated Edison Co. of New York, Inc.:
6.65%, 4/01/19		100		119,806
3.95%, 3/01/43		150		132,343
Series 12-A, 4.20%, 3/15/42		150		137,356
Dominion Resources, Inc.:
1.40%, 9/15/17		250		245,498
4.90%, 8/01/41		50		47,991
San Diego Gas & Electric Co.:
3.60%, 9/01/23		250		249,876
4.30%, 4/01/42		100		95,507
SCANA Corp., 4.13%, 2/01/22		100		97,113
Sempra Energy:
2.30%, 4/01/17		250		253,238
4.05%, 12/01/23		250		246,859
				1,812,194
Multiline Retail — 0.1%
Dollar General Corp., 1.88%, 4/15/18		250		241,843
Kohl’s Corp., 4.00%, 11/01/21 (b)		50		49,979
Nordstrom, Inc., 4.00%, 10/15/21		100		103,716
Target Corp.:
2.90%, 1/15/22		150		143,888
4.00%, 7/01/42		100		86,741
				626,167
Office Electronics — 0.0%
Xerox Corp.:
4.25%, 2/15/15		250		259,357
5.63%, 12/15/19		100		110,272
				369,629
Oil, Gas & Consumable Fuels — 2.8%
Alberta Energy Co., Ltd., 7.38%, 11/01/31		50		58,704
Anadarko Petroleum Corp.:
6.38%, 9/15/17		750		861,052
6.45%, 9/15/36		100		112,293
Apache Corp.:
3.25%, 4/15/22		145		142,862
6.00%, 1/15/37		100		113,364
4.25%, 1/15/44		100		89,907
Boardwalk Pipelines LP, 3.38%, 2/01/23		200		179,827
BP Capital Markets PLC:
3.20%, 3/11/16		100		105,008
1.85%, 5/05/17		250		252,510
1.38%, 5/10/18		250		242,637
2.24%, 9/26/18		300		300,866
4.74%, 3/11/21		50		54,693
3.25%, 5/06/22		100		96,926
3.99%, 9/26/23		250		252,568
Corporate Bonds	Par   (000)		Value
Oil, Gas & Consumable Fuels (continued)
Buckeye Partners LP, 4.15%, 7/01/23	$	250	$	240,385
Canadian Natural Resources Ltd.:
3.45%, 11/15/21		100		98,265
6.25%, 3/15/38		50		56,026
Cenovus Energy, Inc.:
5.70%, 10/15/19		150		170,870
3.00%, 8/15/22		100		93,774
Chevron Corp., 2.43%, 6/24/20		550		535,183
CNOOC Finance 2013 Ltd., 3.00%, 5/09/23		300		267,955
ConocoPhillips:
4.60%, 1/15/15		200		208,475
6.50%, 2/01/39		400		501,607
ConocoPhillips Co., 1.05%, 12/15/17		250		243,947
ConocoPhillips Holding Co., 6.95%, 4/15/29		100		126,538
Continental Resources, Inc., 4.50%, 4/15/23		300		304,125
DCP Midstream Operating LP, 3.88%, 3/15/23 (b)		225		207,195
Devon Energy Corp.:
1.88%, 5/15/17		250		251,821
4.00%, 7/15/21 (b)		150		152,607
4.75%, 5/15/42		200		185,462
Diamond Offshore Drilling, Inc., 4.88%, 11/01/43		250		245,362
Ecopetrol SA:
7.63%, 7/23/19		100		118,500
5.88%, 9/18/23		350		369,250
El Paso Pipeline Partners Operating Co. LLC, 5.00%, 10/01/21		200		209,463
Enbridge Energy Partners LP, 4.20%, 9/15/21 (b)		100		100,612
Encana Corp., 3.90%, 11/15/21		200		198,577
Energy Transfer Partners LP:
9.70%, 3/15/19		44		56,969
5.20%, 2/01/22		250		263,198
3.60%, 2/01/23		150		138,906
4.90%, 2/01/24		250		253,794
5.95%, 10/01/43		150		152,177
Enterprise Products Operating LLC:
3.35%, 3/15/23		250		237,478
5.95%, 2/01/41		150		163,358
4.45%, 2/15/43		75		66,249
4.85%, 3/15/44		200		188,080
EOG Resources, Inc.:
2.50%, 2/01/16		50		51,586
5.63%, 6/01/19		150		172,141
EQT Corp., 4.88%, 11/15/21		50		51,276
Hess Corp.:
8.13%, 2/15/19		200		248,423
5.60%, 2/15/41		300		312,635
Husky Energy, Inc., 3.95%, 4/15/22		150		148,055
Kinder Morgan Energy Partners LP:
2.65%, 2/01/19		245		242,283
3.95%, 9/01/22		225		219,253
4.15%, 2/01/24		250		241,868
6.50%, 2/01/37		100		109,581
5.00%, 8/15/42		75		69,267
5.00%, 3/01/43		200		184,591
Marathon Oil Corp.:
5.90%, 3/15/18		100		113,788
2.80%, 11/01/22		150		138,241
Marathon Petroleum Corp.:
3.50%, 3/01/16		250		261,055
5.13%, 3/01/21		150		162,490

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 27

Schedule of Investments (continued) Bond Index Master Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par   (000)		Value
Oil, Gas & Consumable Fuels (continued)
Murphy Oil Corp., 4.00%, 6/01/22	$	100	$	95,141
Nabors Industries, Inc.:
5.00%, 9/15/20		50		52,028
4.63%, 9/15/21		250		250,293
Nexen, Inc., 6.40%, 5/15/37		100		113,831
Noble Energy, Inc.:
4.15%, 12/15/21		150		154,237
5.25%, 11/15/43		250		249,796
Occidental Petroleum Corp., 4.10%, 2/01/21		50		52,487
ONEOK Partners LP:
2.00%, 10/01/17		250		248,778
6.13%, 2/01/41		50		52,948
Pemex Project Funding Master Trust, 5.75%, 3/01/18		350		390,250
Petrobras Global Finance BV:
3.00%, 1/15/19 (b)		500		467,916
5.63%, 5/20/43		200		163,262
Petrobras International Finance Co.:
2.88%, 2/06/15		100		101,500
3.50%, 2/06/17 (b)		500		504,575
5.75%, 1/20/20 (b)		400		411,576
5.38%, 1/27/21		500		496,194
Petrohawk Energy Corp., 7.88%, 6/01/15		50		51,312
Petroleos Mexicanos:
3.50%, 7/18/18		350		359,187
4.88%, 1/24/22		400		411,000
3.50%, 1/30/23		400		366,500
6.50%, 6/02/41		50		52,250
5.50%, 6/27/44		200		182,500
Phillips 66:
1.95%, 3/05/15		250		253,482
5.88%, 5/01/42		100		108,455
Pioneer Natural Resources Co., 3.95%, 7/15/22		150		150,575
Plains All American Pipeline LP / PAA Finance Corp.:
2.85%, 1/31/23		250		227,299
5.15%, 6/01/42		50		49,301
Plains Exploration & Production Co.:
6.13%, 6/15/19		250		273,424
6.50%, 11/15/20		250		276,095
Rowan Cos., Inc., 5.40%, 12/01/42		100		92,514
Shell International Finance BV:
3.10%, 6/28/15		150		155,667
0.63%, 12/04/15		1,050		1,050,223
4.38%, 3/25/20		100		109,625
6.38%, 12/15/38		50		62,099
5.50%, 3/25/40		50		55,547
4.55%, 8/12/43		200		195,069
Southwestern Energy Co., 4.10%, 3/15/22		100		99,131
Spectra Energy Capital LLC, 3.30%, 3/15/23		500		442,808
Spectra Energy Partners LP, 4.75%, 3/15/24		250		254,851
Statoil ASA:
1.95%, 11/08/18		250		247,865
2.65%, 1/15/24		500		451,001
5.10%, 8/17/40		100		103,788
Suncor Energy, Inc.:
6.10%, 6/01/18		200		231,192
6.50%, 6/15/38		250		291,035
Sunoco Logistics Partners Operations LP, 4.95%, 1/15/43		250		222,406
Corporate Bonds	Par   (000)		Value
Oil, Gas & Consumable Fuels (concluded)
Talisman Energy, Inc.:
3.75%, 2/01/21	$	300	$	290,446
5.50%, 5/15/42		50		47,095
Tennessee Gas Pipeline Co. LLC, 7.50%, 4/01/17		100		116,380
Total Capital Canada Ltd., 2.75%, 7/15/23		150		138,573
Total Capital International SA:
0.75%, 1/25/16		400		399,238
1.50%, 2/17/17		100		100,183
TransCanada PipeLines Ltd.:
0.88%, 3/02/15		100		100,291
3.75%, 10/16/23 (b)		350		341,130
6.20%, 10/15/37		200		227,846
5.00%, 10/16/43		150		147,817
Valero Energy Corp.:
6.13%, 2/01/20		150		171,334
6.63%, 6/15/37		100		114,073
Weatherford International Ltd.:
6.00%, 3/15/18		150		168,343
9.63%, 3/01/19		250		321,216
5.13%, 9/15/20		50		53,713
5.95%, 4/15/42		100		100,194
The Williams Cos., Inc.:
7.88%, 9/01/21		31		35,746
3.70%, 1/15/23		100		87,281
Williams Partners LP:
3.80%, 2/15/15		150		154,968
4.00%, 11/15/21		250		246,904
				25,989,742
Paper & Forest Products — 0.1%
Celulosa Arauco y Constitucion SA, 4.75%, 1/11/22		50		48,712
Georgia-Pacific LLC, 8.88%, 5/15/31		25		34,726
International Paper Co.:
7.95%, 6/15/18		475		576,979
7.50%, 8/15/21 (b)		100		122,589
Westvaco Corp., 8.20%, 1/15/30		100		118,494
				901,500
Personal Products — 0.0%
Avon Products, Inc., 4.60%, 3/15/20		250		247,910
Pharmaceuticals — 0.8%
AbbVie, Inc.:
1.75%, 11/06/17		300		299,486
2.00%, 11/06/18		150		148,382
2.90%, 11/06/22		300		280,397
4.40%, 11/06/42		50		46,634
Actavis, Inc. (FKA Watson Pharmaceuticals, Inc.), 3.25%, 10/01/22		150		139,908
Allergan, Inc., 1.35%, 3/15/18		250		243,620
AstraZeneca PLC:
5.90%, 9/15/17		100		114,347
1.95%, 9/18/19		500		485,809
6.45%, 9/15/37		100		119,410
Bristol-Myers Squibb Co.:
1.75%, 3/01/19 (b)		250		244,107
2.00%, 8/01/22		250		221,288
4.50%, 3/01/44		200		191,568
Eli Lilly & Co., 5.50%, 3/15/27		50		57,046

See Notes to Financial Statements.

28 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) Bond Index Master Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par   (000)		Value
Pharmaceuticals (concluded)
GlaxoSmithKline Capital PLC:
0.75%, 5/08/15	$	150	$	150,596
2.85%, 5/08/22		150		141,472
GlaxoSmithKline Capital, Inc.:
0.70%, 3/18/16		250		248,939
5.65%, 5/15/18		100		115,114
6.38%, 5/15/38		50		61,197
Johnson & Johnson:
2.15%, 5/15/16		100		103,363
4.38%, 12/05/33		250		251,627
4.50%, 9/01/40		100		98,393
Merck & Co., Inc.:
1.30%, 5/18/18		500		486,305
3.88%, 1/15/21		250		263,682
5.95%, 12/01/28		100		116,625
4.15%, 5/18/43		250		228,398
Mylan, Inc., 1.80%, 6/24/16 (a)		250		254,864
Novartis Capital Corp., 4.40%, 4/24/20		100		108,914
Pfizer, Inc.:
5.35%, 3/15/15		100		105,665
1.50%, 6/15/18 (b)		500		492,427
7.20%, 3/15/39		200		268,821
4.30%, 6/15/43		250		235,087
Sanofi, 1.25%, 4/10/18 (b)		250		243,403
Teva Pharmaceutical Finance Co. BV:
2.40%, 11/10/16		200		205,774
2.95%, 12/18/22		150		135,806
Warner Chilcott Co. LLC/Warner Chilcott Finance LLC, 7.75%, 9/15/18		250		270,625
Zoetis, Inc.:
1.15%, 2/01/16		150		150,170
4.70%, 2/01/43		150		140,199
				7,469,468
Real Estate — 0.3%
AvalonBay Communities, Inc., 2.95%, 9/15/22 (b)		100		91,820
Boston Properties LP:
3.70%, 11/15/18		200		210,975
3.13%, 9/01/23		250		228,347
Brandywine Operating Partnership LP, 3.95%, 2/15/23		250		234,346
Duke Realty LP, 3.63%, 4/15/23		250		230,742
Host Hotels & Resorts LP, 5.25%, 3/15/22		250		260,616
Liberty Property LP, 4.40%, 2/15/24		250		245,477
Simon Property Group LP:
5.25%, 12/01/16		50		55,343
2.80%, 1/30/17		100		103,431
2.15%, 9/15/17 (b)		250		253,450
3.38%, 3/15/22		100		97,468
2.75%, 2/01/23 (b)		250		228,450
Ventas Realty LP / Ventas Capital Corp.:
2.70%, 4/01/20		250		239,050
4.25%, 3/01/22		100		100,629
				2,580,144
Real Estate Investment Trusts (REITs) — 0.3%
American Tower Corp.:
3.40%, 2/15/19		250		254,513
5.05%, 9/01/20		25		26,437
4.70%, 3/15/22		100		99,955
3.50%, 1/31/23		150		136,762
Corporate Bonds	Par   (000)		Value
Real Estate Investment Trusts (REITs) (concluded)
DDR Corp., 4.63%, 7/15/22	$	100	$	101,998
ERP Operating LP, 4.75%, 7/15/20		100		107,815
HCP, Inc.:
6.00%, 1/30/17		100		112,073
3.15%, 8/01/22		100		91,782
4.25%, 11/15/23		250		244,549
Health Care REIT, Inc.:
4.13%, 4/01/19		200		210,592
5.25%, 1/15/22		50		53,282
Healthcare Realty Trust, Inc., 3.75%, 4/15/23		150		138,775
Hospitality Properties Trust, 5.00%, 8/15/22		200		203,247
Mid-America Apartments LP, 4.30%, 10/15/23		200		194,447
ProLogis LP, 6.63%, 5/15/18		133		155,340
Realty Income Corp., 4.65%, 8/01/23		250		251,775
Weyerhaeuser Co., 7.38%, 3/15/32		350		428,279
				2,811,621
Road & Rail — 0.2%
Burlington Northern Santa Fe LLC:
3.00%, 3/15/23		250		232,815
5.40%, 6/01/41		50		51,861
4.40%, 3/15/42		150		133,661
4.45%, 3/15/43		200		181,342
Canadian National Railway Co.:
1.45%, 12/15/16		50		50,355
3.50%, 11/15/42		100		80,671
Canadian Pacific Railway Ltd., 5.75%, 1/15/42		25		26,882
CSX Corp.:
3.70%, 10/30/20		100		103,005
3.70%, 11/01/23		300		290,221
4.75%, 5/30/42		100		94,991
Norfolk Southern Corp.:
7.70%, 5/15/17		150		178,043
3.00%, 4/01/22		250		236,190
3.85%, 1/15/24		250		245,565
3.95%, 10/01/42		100		84,141
Union Pacific Corp.:
4.16%, 7/15/22		100		102,878
2.75%, 4/15/23 (b)		200		183,020
4.30%, 6/15/42		50		45,244
				2,320,885
Semiconductors & Semiconductor Equipment — 0.1%
Applied Materials, Inc., 5.85%, 6/15/41		50		51,777
Intel Corp.:
1.35%, 12/15/17		300		296,502
2.70%, 12/15/22		200		184,361
4.80%, 10/01/41		50		48,762
Maxim Integrated Products, Inc., 3.38%, 3/15/23		100		91,556
Seagate HDD Cayman (a):
3.75%, 11/15/18		125		126,406
4.75%, 6/01/23		250		233,750
				1,033,114
Software — 0.2%
Autodesk, Inc., 1.95%, 12/15/17		75		74,193
CA, Inc., 4.50%, 8/15/23		170		168,088
Microsoft Corp.:
1.63%, 12/06/18		250		246,594
3.00%, 10/01/20		50		50,962

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 29

Schedule of Investments (continued) Bond Index Master Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par   (000)		Value
Software (concluded)
Microsoft Corp. (concluded):
5.30%, 2/08/41	$	100	$	107,137
3.75%, 5/01/43 (b)		150		127,969
Oracle Corp.:
1.20%, 10/15/17		750		738,043
5.75%, 4/15/18		150		173,335
3.88%, 7/15/20		100		105,546
3.63%, 7/15/23		250		247,992
5.38%, 7/15/40		150		160,168
Symantec Corp., 2.75%, 6/15/17		150		151,611
				2,351,638
Specialty Retail — 0.3%
Advance Auto Parts, Inc., 4.50%, 12/01/23		250		249,878
AutoZone, Inc.:
3.70%, 4/15/22		50		48,244
3.13%, 7/15/23		250		226,381
The Home Depot, Inc.:
4.40%, 4/01/21		150		161,996
3.75%, 2/15/24		350		348,367
5.88%, 12/16/36		100		115,390
4.20%, 4/01/43		250		227,825
Lowe’s Cos., Inc.:
1.63%, 4/15/17		200		199,292
4.63%, 4/15/20		100		110,409
3.12%, 4/15/22		100		96,964
4.65%, 4/15/42		250		241,776
5.00%, 9/15/43		150		153,367
Macy’s Retail Holdings, Inc.:
5.90%, 12/01/16		11		12,338
3.88%, 1/15/22		300		295,703
4.38%, 9/01/23		200		200,753
QVC, Inc., 5.13%, 7/02/22		250		247,277
Staples, Inc., 2.75%, 1/12/18 (b)		150		152,101
				3,088,061
Textiles, Apparel & Luxury Goods — 0.0%
VF Corp., 3.50%, 9/01/21		100		99,958
Tobacco — 0.3%
Altria Group, Inc.:
9.70%, 11/10/18		187		245,792
9.25%, 8/06/19		45		59,279
2.85%, 8/09/22		250		230,180
10.20%, 2/06/39		33		51,487
4.50%, 5/02/43		150		132,537
5.38%, 1/31/44		70		70,290
Lorillard Tobacco Co.:
6.88%, 5/01/20 (b)		100		115,407
3.75%, 5/20/23		250		227,592
Philip Morris International, Inc.:
1.13%, 8/21/17		250		245,075
1.88%, 1/15/19		250		244,313
4.13%, 5/17/21		50		51,995
2.63%, 3/06/23		250		226,405
4.50%, 3/20/42		50		46,704
3.88%, 8/21/42		100		84,649
4.13%, 3/04/43		200		175,084
Reynolds American, Inc.:
4.75%, 11/01/42		150		133,323
6.15%, 9/15/43		150		161,978
				2,502,090
Corporate Bonds	Par   (000)		Value
Trading Companies & Distributors — 0.0%
GATX Corp., 2.38%, 7/30/18	$	150	$	150,248
Transportation Infrastructure — 0.1%
Ryder System, Inc.:
2.50%, 3/01/17		150		152,605
2.35%, 2/26/19		500		489,602
				642,207
Water Utilities — 0.0%
United Utilities PLC, 5.38%, 2/01/19		50		53,162
Wireless Telecommunication Services — 0.3%
America Movil SAB de C.V.:
2.38%, 9/08/16		500		514,585
5.00%, 3/30/20		450		487,378
4.38%, 7/16/42 (b)		100		83,081
Rogers Communications, Inc., 3.00%, 3/15/23		150		138,371
Vodafone Group PLC:
0.90%, 2/19/16		250		250,875
1.63%, 3/20/17		250		249,911
1.50%, 2/19/18		500		487,494
7.88%, 2/15/30		100		125,225
4.38%, 2/19/43		200		172,826
				2,509,746
Total Corporate Bonds — 23.2%				216,613,943
Foreign Agency Obligations
Brazilian Government International Bond:
8.00%, 1/15/18		125		138,750
5.88%, 1/15/19 (b)		250		280,000
4.88%, 1/22/21		650		685,750
2.63%, 1/05/23 (b)		750		645,000
4.25%, 1/07/25		250		238,125
5.63%, 1/07/41		300		291,000
Colombia Government International Bond:
4.38%, 7/12/21		250		257,500
2.63%, 3/15/23		250		219,000
4.00%, 2/26/24		250		241,000
7.38%, 9/18/37 (b)		100		122,750
Council Of Europe Development Bank:
1.50%, 1/15/15		50		50,594
1.00%, 3/07/18		250		243,222
European Bank for Reconstruction & Development, 1.00%, 2/16/17		250		250,590
European Investment Bank:
1.00%, 7/15/15		500		504,870
0.63%, 4/15/16		1,250		1,238,756
2.50%, 5/16/16		100		104,411
5.13%, 9/13/16		225		250,695
1.25%, 10/14/16		100		101,190
1.75%, 3/15/17		500		511,285
1.63%, 6/15/17		500		507,900
1.00%, 3/15/18		250		244,195
1.00%, 6/15/18		250		242,600
Hydro-Quebec, 2.00%, 6/30/16		350		359,380
Inter-American Development Bank, 1.38%, 10/18/16		250		253,968

See Notes to Financial Statements.

30 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) Bond Index Master Portfolio (Percentages shown are based on Net Assets)

Foreign Agency Obligations	Par   (000)		Value
International Bank for Reconstruction & Development:
2.38%, 5/26/15	$	500	$	514,414
0.50%, 4/15/16		750		748,813
1.00%, 9/15/16		75		75,576
International Finance Corp., 0.50%, 5/15/15		500		500,479
Israel Government International Bond:
3.15%, 6/30/23 (b)		250		239,375
4.50%, 1/30/43		200		177,250
Italian Republic:
4.50%, 1/21/15		500		518,853
6.88%, 9/27/23		100		118,538
5.38%, 6/15/33		250		260,250
Japan Bank for International Cooperation, 2.13%, 2/07/19		200		200,028
KFW:
1.00%, 1/12/15		750		755,505
1.25%, 10/26/15		250		253,700
2.63%, 2/16/16		100		104,230
1.25%, 2/15/17		750		757,252
2.75%, 10/01/20		500		503,700
Mexico Government International Bond:
5.63%, 1/15/17		500		558,750
5.95%, 3/19/19		350		404,250
8.13%, 12/30/19		100		132,350
5.13%, 1/15/20		100		110,800
3.63%, 3/15/22		500		500,000
4.00%, 10/02/23		350		346,500
6.75%, 9/27/34		150		177,000
4.75%, 3/08/44		450		405,562
Nordic Investment Bank, 0.50%, 4/14/16		500		498,700
Panama Government International Bond:
5.20%, 1/30/20 (b)		350		381,062
6.70%, 1/26/36		100		111,750
Peruvian Government International Bond, 8.75%, 11/21/33		191		271,698
Philippine Government International Bond:
4.00%, 1/15/21		500		518,750
7.75%, 1/14/31		500		658,125
Poland Government International Bond:
3.88%, 7/16/15		100		104,630
6.38%, 7/15/19		250		292,188
3.00%, 3/17/23 (b)		200		182,100
Province of British Columbia Canada, 2.85%, 6/15/15		150		155,393
Province of Nova Scotia Canada, 2.38%, 7/21/15		200		205,618
Province of Ontario Canada:
2.30%, 5/10/16		100		103,460
1.20%, 2/14/18		750		735,525
2.00%, 9/27/18		500		500,950
4.40%, 4/14/20 (b)		200		219,440
Province of Quebec Canada:
5.00%, 3/01/16		350		381,955
2.63%, 2/13/23		250		229,636
Republic of Korea, 3.88%, 9/11/23 (b)		250		253,815
South Africa Government International Bond:
4.67%, 1/17/24 (b)		200		191,250
5.88%, 9/16/25		350		364,000
Svensk Exportkredit AB, 2.13%, 7/13/16		200		206,300
Turkey Government International Bond:
7.50%, 11/07/19		500		559,250
3.25%, 3/23/23 (b)		500		411,250
Foreign Agency Obligations	Par   (000)		Value
Turkey Government International Bond (concluded):
6.88%, 3/17/36	$	250	$	245,250
6.00%, 1/14/41		500		439,000
Uruguay Government International Bond:
8.00%, 11/18/22 (b)		150		185,250
4.50%, 8/14/24		250		250,000
Total Foreign Agency Obligations — 2.7%				25,002,051
Municipal Bonds
American Municipal Power, Inc., RB, Build America Bonds, Combined Hydroelectric Projects, Series B, 7.83%, 2/15/41		150		189,517
Bay Area Toll Authority, RB, Build America Bonds Series S-1:
6.92%, 4/01/40		100		122,110
San Francisco Toll Bridge, 7.04%, 4/01/50		100		122,923
Chicago Transit Authority, RB, Series A, 6.90%, 12/01/40		100		112,092
City & County of Denver Colorado School District No. 1, COP, Refunding, Series B, 4.24%, 12/15/37		50		44,496
City & County of San Francisco California Public Utilities Commission Water Revenue, RB, Build America Bonds, Sub-Series G, 6.95%, 11/01/50		100		124,400
City of New York New York, GO, 5.97%, 3/01/36		100		112,558
City of New York New York Transitional Finance Authority, RB, Build America Bonds, Sub-Series B-1, 5.57%, 11/01/38		100		110,985
City Public Service Board of San Antonio, RB, 4.43%, 2/01/42		100		93,460
Commonwealth of Massachusetts, GO, 5.46%, 12/01/39		100		108,726
Commonwealth of Pennsylvania, GO, 4.65%, 2/15/26		100		103,180
County of Sonoma California, Refunding RB, Series A, 6.00%, 12/01/29		100		98,804
Dallas Area Rapid Transit, RB, Build America Bonds, 5.02%, 12/01/48		160		163,659
East Bay Municipal Utility District, RB, Build America Bonds, 5.87%, 6/01/40		100		113,510
Florida Hurricane Catastrophe Fund Finance Corp., RB, Series A, 3.00%, 7/01/20		100		94,633
Illinois State Toll Highway Authority, RB, 5.85%, 12/01/34		100		110,957
JobsOhio Beverage System, Refunding RB, Series B, 4.53%, 1/01/35		100		92,616
Los Angeles Community College District, GO, 6.75%, 8/01/49		50		63,147
Los Angeles County Metropolitan Transportation Authority, RB, 5.74%, 6/01/39		100		107,595
Los Angeles Department of Water & Power, RB:
5.72%, 7/01/39		100		110,074
6.60%, 7/01/50		90		111,077
Los Angeles Unified School District, GO, 6.76%, 7/01/34		150		184,992
Massachusetts School Building Authority, RB, 5.72%, 8/15/39		100		112,009
Metropolitan Transportation Authority, RB:
5.87%, 11/15/39		100		107,218

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 31

Schedule of Investments (continued) Bond Index Master Portfolio (Percentages shown are based on Net Assets)

Municipal Bonds	Par   (000)		Value
Metropolitan Transportation Authority, RB (concluded):
Build America Bonds, Series C-1, 6.69%, 11/15/40	$	50	$	58,985
Metropolitan Water Reclamation District of Greater Chicago, GO, 5.72%, 12/01/38		150		162,805
Municipal Electric Authority of Georgia Plant Vogtle Units 3 & 4, Refunding RB, Build America Bonds, 6.64%, 4/01/57		125		131,516
New Jersey EDA, RB, Series A (NPFGC), 7.43%, 2/15/29		200		239,676
New Jersey State Turnpike Authority, RB, Build America Bonds, Series F, 7.41%, 1/01/40		200		266,490
New Jersey State Turnpike Authority, Refunding RB, Series B (AMBAC), 4.25%, 1/01/16		120		123,697
New York City Water & Sewer System, RB, 5.95%, 6/15/42		115		133,069
New York State Dormitory Authority, RB, 5.43%, 3/15/39		135		143,852
North Texas Tollway Authority, RB, 6.72%, 1/01/49		50		60,771
Ohio State University, RB, 4.91%, 6/01/40		100		100,198
Ohio State Water Development Authority, RB, 4.88%, 12/01/34		100		101,429
Port Authority of New York & New Jersey, RB, 5.86%, 12/01/24		100		112,907
Port Authority of New York & New Jersey, Refunding RB, 174th Series, 4.46%, 10/01/62		120		101,741
San Diego County Water Authority, RB, 6.14%, 5/01/49		100		116,951
Santa Clara Valley Transportation Authority, RB, 5.88%, 4/01/32		100		109,271
State of California, GO:
7.50%, 4/01/34		145		184,515
7.35%, 11/01/39		100		127,482
Build America Bonds, Various Purpose, 7.55%, 4/01/39		175		226,798
Build America Bonds, Various Purpose, 7.60%, 11/01/40		200		264,042
State of Connecticut, GO, 5.09%, 10/01/30		150		147,990
State of Illinois, GO:
5.67%, 3/01/18		200		218,036
Pension, 5.10%, 6/01/33		500		465,900
State of Oregon, GO, 5.76%, 6/01/23		100		115,406
State of Texas, GO, Build America Bonds, Series A, 5.52%, 4/01/39		100		112,156
State of Washington, GO, Series D, 5.48%, 8/01/39		100		106,596
Texas Transportation Commission, RB, 5.18%, 4/01/30		100		107,315
University of California, RB, Series H, 6.55%, 5/15/48		50		58,203
University of California, Refunding RB, Series AJ, 4.60%, 5/15/31		150		149,167
University of Virginia, RB, 6.20%, 9/01/39		140		170,393
Virginia Commonwealth Transportation Board, RB, 5.35%, 5/15/35		75		78,817
Total Municipal Bonds — 0.8%				7,210,912
Non-Agency Mortgage-Backed Securities	Par   (000)		Value
Commercial Mortgage-Backed Securities — 1.7%
Bear Stearns Commercial Mortgage Securities Trust:
Series 2005-PWR8, Class A4, 4.67%, 6/11/41	$	1,181	$	1,228,024
Series 2006-PW14, Class A4, 5.20%, 12/11/38		1,350		1,474,654
Series 2007-PW16, Class AM, 5.71%, 6/11/40 (e)		700		784,346
Series 2007-T26, Class A4, 5.47%, 1/12/45 (e)		1,300		1,440,353
Citigroup/Deutsche Bank Commercial Mortgage Trust, Series 2007-CD4, Class A4, 5.32%, 12/11/49		600		657,065
Commercial Mortgage Trust (e):
Series 2006-C7, Class AM, 5.78%, 6/10/46		750		806,074
Series 2013-CR9, Class A4, 4.24%, 7/10/45		700		725,201
GE Capital Commercial Mortgage Corp., Series 2005-C3, Class A7A, 4.97%, 7/10/45 (e)		1,000		1,049,330
Greenwich Capital Commercial Funding Corp., Class A4:
Series 2007-GG11, 5.74%, 12/10/49		350		390,867
Series 2007-GG9, 5.44%, 3/10/39		1,200		1,318,133
GS Mortgage Securities Corp. II:
Series 2006-GG6, Class AM, 5.62%, 4/10/38 (e)		500		541,071
Series 2007-GG10, Class A4, 5.81%, 8/10/45 (e)		300		329,420
Series 2012-GCJ9, Class A3, 2.77%, 11/10/45		250		232,678
JPMorgan Chase Commercial Mortgage Securities Trust:
Series 2005-LDP1, Class A4, 5.04%, 3/15/46 (e)		1,050		1,082,977
Series 2006-LDP9, Class A3, 5.34%, 5/15/47		900		985,230
Series 2011-C5, Class A3, 4.17%, 8/15/46		650		682,588
ML-CFC Commercial Mortgage Trust (e):
Series 2006-4, Class A3, 5.17%, 12/12/49		512		555,088
Series 2007-9, Class AM, 5.86%, 9/12/49		675		755,376
Wells Fargo Commercial Mortgage Trust 2013-LC12, Series 2013-LC12, Class A4, 4.22%, 7/15/46 (e)		200		205,880
WFRBS Commercial Mortgage Trust, Series 2013-C11, Class A5, 3.07%, 3/15/45		500		473,771
Total Non-Agency Mortgage-Backed Securities — 1.7%				15,718,126
US Government Sponsored Agency Securities
Agency Obligations — 4.5%
Fannie Mae:
0.38%, 12/21/15		4,000		3,993,880
0.50%, 7/02/15—3/30/16 (b)		5,000		5,001,557
0.88%, 12/20/17—5/21/18 (b)		4,328		4,215,976
1.13%, 4/27/17 (b)		2,310		2,318,986
1.63%, 10/26/15		350		357,648
2.38%, 7/28/15 (b)		600		618,964
6.63%, 11/15/30		149		193,816
Federal Home Loan Bank:
0.25%, 2/20/15 (b)		5,000		5,001,035

See Notes to Financial Statements.

32 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) Bond Index Master Portfolio (Percentages shown are based on Net Assets)

US Government Sponsored Agency Securities	Par   (000)		Value
Agency Obligations (concluded)
Federal Home Loan Bank (concluded):
0.63%, 12/28/16	$	5,000	$	4,979,040
5.50%, 7/15/36		100		115,684
Federal Home Loan Mortgage Corp., 0.85%, 11/28/16		800		797,643
Financing Corp., 8.60%, 9/26/19		200		264,463
Freddie Mac:
0.50%, 5/13/16 (b)		5,000		4,993,950
0.88%, 3/07/18		1,500		1,457,082
1.25%, 10/02/19		2,200		2,084,141
1.75%, 9/10/15—5/30/19		1,920		1,947,541
2.00%, 8/25/16		750		775,584
2.38%, 1/13/22		920		879,488
4.88%, 6/13/18 (b)		250		284,076
6.25%, 7/15/32		150		189,751
6.75%, 3/15/31		500		661,543
Tennessee Valley Authority:
3.50%, 12/15/42		140		110,371
6.25%, 12/15/17		400		473,343
				41,715,562
Mortgage-Backed Securities — 29.3%
Fannie Mae Mortgage-Backed Securities:
0.75%, 11/25/16		1,700		1,693,698
1.94%, 4/01/43 (e)		527		534,393
1.97%, 5/01/43 (e)		1,357		1,378,577
2.09%, 6/01/43 (e)		1,011		1,005,329
2.49%, 8/01/42 (e)		378		384,713
2.50%, 9/01/28—1/01/44 (f)		11,347		11,149,705
2.78%, 8/01/41 (e)		156		162,746
3.00%, 1/01/27—1/01/44 (f)		32,157		31,110,868
3.16%, 11/01/40 (e)		70		73,498
3.50%, 2/01/26—1/01/44 (f)		26,531		26,713,116
4.00%, 10/01/25—1/01/44 (f)		23,012		23,825,965
4.50%, 5/01/24—1/01/44 (f)		16,894		17,931,422
5.00%, 1/01/19—1/01/44 (f)		16,057		17,419,483
5.50%, 6/01/25—1/01/44 (f)		8,820		9,668,036
6.00%, 3/01/34—1/01/44 (f)		10,365		11,512,507
6.50%, 7/01/32		296		331,892
7.00%, 2/01/32		65		73,139
Freddie Mac Mortgage-Backed Securities:
1.79%, 6/01/43 (e)		261		262,488
2.50%, 1/01/29 (f)		6,000		5,946,562
2.64%, 7/01/38 (e)		119		126,013
3.00%, 3/01/27—1/01/44 (f)		14,745		14,264,292
3.26%, 8/01/41 (e)		98		102,955
3.50%, 1/01/29—1/01/44 (f)		13,064		13,087,067
3.62%, 9/01/40 (e)		111		117,743
4.00%, 5/01/19—1/01/44 (f)		11,388		11,774,682
4.50%, 4/01/18—1/01/44 (f)		9,520		10,091,678
5.00%, 10/01/18—1/01/44 (f)		2,600		2,803,023
5.50%, 6/01/35—1/01/44 (f)		3,020		3,303,270
6.50%, 6/01/31		134		149,427
8.00%, 12/01/24		267		299,315
Ginnie Mae Mortgage-Backed Securities:
3.00%, 5/15/43—1/01/44 (f)		9,186		8,873,885
3.50%, 9/20/42—1/01/44 (f)		16,142		16,295,975
4.00%, 3/15/41—1/01/44 (f)		9,603		9,987,550
4.50%, 7/15/39—1/01/44 (f)		11,079		11,846,073
US Government Sponsored Agency Securities	Par   (000)		Value
Mortgage-Backed Securities (concluded)
Ginnie Mae Mortgage-Backed Securities (concluded):
5.00%, 11/15/39—1/01/44 (f)	$	6,605	$	7,172,838
5.50%, 12/15/32—7/20/40		1,066		1,175,696
6.00%, 3/15/35—10/20/38		693		780,650
6.50%, 9/15/36		301		349,643
7.50%, 12/15/23		275		296,110
				274,076,022
Total US Government Sponsored Agency Securities — 33.8%				315,791,584
US Treasury Obligations
US Treasury Bonds:
8.75%, 5/15/17 (b)		2,100		2,639,274
8.75%, 5/15/20 (b)		500		697,656
8.75%, 8/15/20 (b)		400		561,375
6.25%, 8/15/23		50		64,227
7.63%, 2/15/25 (b)		375		535,723
6.50%, 11/15/26 (b)		1,500		2,003,437
6.13%, 11/15/27 (b)		2,080		2,706,600
6.25%, 5/15/30 (b)		5,600		7,480,374
5.38%, 2/15/31 (b)		1,000		1,225,469
4.50%, 2/15/36 (b)		2,466		2,743,810
5.00%, 5/15/37 (b)		3,050		3,629,500
4.38%, 2/15/38		2,500		2,721,095
3.50%, 2/15/39		3,300		3,107,673
4.25%, 5/15/39		275		293,262
4.38%, 11/15/39 (b)		300		326,016
4.63%, 2/15/40 (b)		730		824,444
4.38%, 5/15/40 (b)		250		271,563
3.88%, 8/15/40 (b)		360		360,112
4.25%, 11/15/40 (b)		1,428		1,519,705
4.75%, 2/15/41		200		230,125
4.38%, 5/15/41 (b)		610		661,850
3.75%, 8/15/41 (b)		1,550		1,511,008
3.13%, 11/15/41 (b)		400		345,500
3.13%, 2/15/42 (b)		3,850		3,319,424
3.00%, 5/15/42 (b)		480		402,525
2.75%, 8/15/42		750		594,258
2.75%, 11/15/42		4,200		3,320,625
3.13%, 2/15/43		3,050		2,611,562
2.88%, 5/15/43		250		202,617
3.63%, 8/15/43 (b)		2,500		2,360,937
3.75%, 11/15/43 (b)		1,500		1,449,843
US Treasury Notes:
0.25%, 1/15/15		700		700,574
0.25%, 1/31/15 (b)		8,000		8,006,560
0.25%, 2/15/15		5,750		5,754,042
2.50%, 4/30/15 (b)		5,690		5,861,810
0.25%, 5/15/15 (b)		17,250		17,260,781
1.88%, 6/30/15		1,000		1,024,219
1.75%, 7/31/15		750		767,490
0.25%, 8/15/15		2,000		1,999,218
0.25%, 9/15/15		1,500		1,498,770
0.25%, 9/30/15 (b)		2,000		1,998,204
1.25%, 9/30/15		6,400		6,503,750
4.50%, 11/15/15 (b)		6,500		7,002,482
0.38%, 1/15/16		1,800		1,799,296

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 33

Schedule of Investments (continued) Bond Index Master Portfolio (Percentages shown are based on Net Assets)

US Treasury Obligations	Par   (000)		Value
US Treasury Notes (continued):
2.00%, 1/31/16 (b)	$	5,400	$	5,577,185
4.50%, 2/15/16		1,200		1,303,781
2.13%, 2/29/16 (b)		8,100		8,395,520
0.38%, 3/15/16		2,500		2,496,095
0.25%, 4/15/16		1,000		994,688
2.00%, 4/30/16 (b)		1,679		1,736,978
2.63%, 4/30/16 (b)		5,000		5,245,310
5.13%, 5/15/16 (b)		8,000		8,865,624
1.75%, 5/31/16 (b)		8,000		8,231,872
0.50%, 6/15/16		7,000		6,992,888
1.50%, 6/30/16		500		511,523
1.50%, 7/31/16 (b)		10,050		10,279,261
0.63%, 8/15/16		5,500		5,501,287
0.63%, 10/15/16 (b)		7,000		6,986,875
0.63%, 11/15/16 (b)		4,500		4,486,288
4.63%, 11/15/16 (b)		250		277,500
2.75%, 11/30/16		850		898,543
0.88%, 12/31/16		9,750		9,771,333
0.88%, 1/31/17		800		800,750
4.63%, 2/15/17		650		724,953
0.88%, 2/28/17		2,950		2,949,770
0.63%, 5/31/17		13,500		13,323,865
2.50%, 6/30/17		2,290		2,403,069
0.50%, 7/31/17		900		881,086
4.75%, 8/15/17 (b)		1,300		1,468,696
1.88%, 8/31/17 (b)		370		379,828
1.88%, 9/30/17 (b)		2,800		2,871,532
2.63%, 1/31/18 (b)		2,000		2,103,124
0.75%, 2/28/18 (b)		4,500		4,381,524
2.75%, 2/28/18 (b)		1,300		1,373,429
0.63%, 4/30/18		1,500		1,446,562
4.00%, 8/15/18		500		554,570
1.38%, 9/30/18 (b)		2,400		2,370,749
1.25%, 10/31/18 (b)		8,700		8,529,402
1.75%, 10/31/18 (b)		250		251,094
1.38%, 12/31/18 (b)		1,030		1,012,860
1.25%, 1/31/19		1,200		1,170,281
1.25%, 4/30/19 (b)		2,800		2,712,718
1.13%, 5/31/19		1,880		1,804,800
0.88%, 7/31/19		1,500		1,412,461
1.00%, 8/31/19		2,300		2,175,117
1.25%, 10/31/19 (b)		600		573,890
3.38%, 11/15/19 (b)		1,100		1,183,187
1.00%, 11/30/19		10,895		10,237,040
1.13%, 12/31/19 (b)		4,750		4,486,152
1.38%, 1/31/20 (b)		11,000		10,521,324
3.63%, 2/15/20 (b)		500		544,219
1.25%, 2/29/20 (b)		6,200		5,869,174
1.13%, 3/31/20 (b)		1,500		1,405,546
1.13%, 4/30/20 (b)		2,700		2,523,444
1.38%, 5/31/20 (b)		4,400		4,170,030
2.00%, 7/31/20 (b)		3,500		3,437,658
US Treasury Obligations	Par   (000)		Value
US Treasury Notes (concluded):
2.63%, 8/15/20 (b)	$	750	$	765,234
2.13%, 8/31/20 (b)		4,000		3,948,752
1.75%, 10/31/20		500		479,688
2.00%, 11/30/20 (b)		5,750		5,597,268
3.63%, 2/15/21 (b)		110		118,706
2.13%, 8/15/21		450		435,938
2.00%, 11/15/21		1,350		1,288,512
1.75%, 5/15/22		900		832,219
1.63%, 11/15/22 (b)		2,000		1,805,312
2.00%, 2/15/23 (b)		1,100		1,020,422
1.75%, 5/15/23 (b)		1,000		901,328
2.75%, 11/15/23 (b)		1,500		1,467,421
Total US Treasury Obligations — 34.3%				320,166,040
Preferred Securities
Capital Trusts — 0.0%
The Chubb Corp., 6.00%, 5/11/37		50		58,408
UBS Preferred Funding Trust V, 6.24% (b)(e)(g)		150		159,937
Total Preferred Securities — 0.0%				218,345
Total Long-Term Investments (Cost — $919,288,320) — 96.9%				904,531,210
Short-Term Securities	Shares
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (d)(h)(i)		357,052,651		357,052,651
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (d)(h)(i)		33,770,973		33,770,973
Total Short-Term Securities (Cost — $390,823,624) — 41.8%				390,823,624
Total Investments Before TBA Sale Commitments (Cost — $1,310,111,944*) — 138.7%				1,295,354,834
TBA Sale Commitments (f)	Par   (000)
Fannie Mae Mortgage-Backed Securities, 4.00%, 1/01/44	$	1,000		(1,032,813	)
Total TBA Sale Commitments (Proceeds — $1,032,813) — (0.1)%				(1,032,813	)
Total Investments, Net of TBA Sale Commitments — 138.6%				1,294,322,021
Liabilities in Excess of Other Assets — (38.6)%				(360,552,230	)
Net Assets — 100.0%			$	933,769,791

See Notes to Financial Statements.

34 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) Bond Index Master Portfolio

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	1,310,131,554
Gross unrealized appreciation	$	5,456,163
Gross unrealized depreciation		(20,232,883	)
Net unrealized depreciation	$	(14,776,720	)

(a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

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

(c) Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date.

(d) Investments in issuers considered to be an affiliate of the Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/Beneficial Interest Held at December 31, 2012		Shares/Beneficial Interest Purchased			Shares/Beneficial Interest Sold		Shares/Beneficial Interest Held at December 31, 2013		Value at December 31, 2013		Income
BlackRock Cash Funds: Institutional, SL Agency Shares		116,012,563		241,040,088	1		—		357,052,651	$	357,052,651	$	392,496
BlackRock Cash Funds: Prime, SL Agency Shares		9,170,036		24,600,937	1		—		33,770,973	$	33,770,973	$	27,990
PNC Bank NA, 2.95%, 1/30/23		—	$	250			—	$	250	$	230,079	$	6,678
PNC Funding Corp., 5.63%, 2/01/17	$	150		—			—	$	150	$	166,500	$	8,438
PNC Funding Corp., 3.30%, 3/08/22	$	150		—			—	$	150	$	147,397	$	4,950

¹  Represents net shares purchased.

(e) Variable rate security. Rate shown is as of report date.

(f) Represents or includes a TBA transaction. Unsettled TBA transactions as of December 31, 2013 were as follows:

Counterparty	Value		Unrealized Appreciation/ (Depreciation)
Barclays Capital, Inc.	$	9,082,984	$	44,284
BNP Paribas S.A.	$	12,508,883	$	(36,740	)
Citigroup Global Markets, Inc.	$	11,100,522	$	(19,630	)
Credit Suisse Securities (USA) LLC	$	27,437,858	$	(104,942	)
Deutsche Bank Securities, Inc.	$	7,579,319	$	(21,152	)
Goldman Sachs & Co.	$	35,638,875	$	(155,102	)
Jefferies LLC	$	950,625	$	(5,127	)
JPMorgan Securities LLC	$	17,350,049	$	(6,850	)
Merrill Lynch, Pierce, Fenner & Smith Inc.	$	7,003,963	$	(17,199	)
Morgan Stanley & Co. LLC	$	25,238,812	$	50,973
Nomura Securities International, Inc.	$	3,420,836	$	(7,351	)
RBS Securities, Inc.	$	6,021,328	$	(18,319	)
Wells Fargo Securities LLC	$	4,560,179	$	(20,051	)

(g) Security is perpetual in nature and has no stated maturity date.

(h) All or a portion of security was purchased with the cash collateral from loaned securities.

(i) Represents the current yield as of report date.

Ÿ For Master Portfolio compliance purposes, the Master Portfolio‘s industry classifications refer to any 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.

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 35

Schedule of Investments (concluded) Bond Index Master Portfolio

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:1
Asset-Backed Securities		—	$	3,810,209			—	$	3,810,209
Corporate Bonds		—		216,613,943			—		216,613,943
Foreign Agency Obligations		—		25,002,051			—		25,002,051
Municipal Bonds		—		7,210,912			—		7,210,912
Non-Agency Mortgage-Backed Securities		—		15,718,126			—		15,718,126
US Government Sponsored Agency Securities		—		315,791,584			—		315,791,584
US Treasury Obligations		—		320,166,040			—		320,166,040
Preferred Securities		—		218,345			—		218,345
Short-Term Securities:
Money Market Funds	$	390,823,624		—			—		390,823,624
Liabilities:
Investments:
TBA Sale Commitments		—		(1,032,813	)		—		(1,032,813	)
Total	$	390,823,624	$	903,498,397			—	$	1,294,322,021
1   See above Schedule of Investments for values in each sector and industry.

The carrying amount for certain of the Master Portfolio’s assets and/or liabilities approximates fair value for financial statement purposes. As of December 31, 2013, collateral on securities loaned at value of $(218,502,147) is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2013.

See Notes to Financial Statements.

36 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Statement of Assets and Liabilities Bond Index Master Portfolio

December 31, 2013
Assets
Investments at value — unaffiliated (including securities loaned at value of $212,577,915) (cost — $918,740,995)	$	903,987,234
Investments at value — affiliated (cost — $391,370,949)		391,367,600
TBA sale commitments receivable		1,032,813
Contributions receivable from investors		34,236,842
Investments sold receivable		7,558,728
Securities lending income receivable — affiliated		41,077
Interest receivable		4,548,502
Interest receivable — affiliated		8,162
Principal paydowns receivable		3,845
Total assets		1,342,784,803
Liabilities
Collateral on securities loaned at value		218,502,147
Investments purchased payable		189,392,617
TBA sale commitments at value (proceeds — $1,032,813)		1,032,813
Investment advisory fees payable		58,658
Professional fees payable		22,342
Trustees’ fees payable		6,435
Total liabilities		409,015,012
Net Assets	$	933,769,791
Net Assets Consist of
Investors’ capital	$	948,526,901
Net unrealized appreciation/depreciation		(14,757,110	)
Net Assets	$	933,769,791

See Notes to Financial Statements.
	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2013	37

Statement of Operations Bond Index Master Portfolio

Year Ended December 31, 2013
Investment Income
Interest	$	12,368,347
Securities lending — affiliated — net		181,096
Income — affiliated		259,456
Other Income — affiliated		15,421
Total income		12,824,320
Expenses
Investment advisory		598,674
Professional		34,946
Independent Trustees		28,615
Miscellaneous		910
Total expenses		663,145
Less fees waived by Manager		(63,561	)
Total expenses after fees waived		599,584
Net investment income		12,224,736
Realized and Unrealized Loss
Net realized loss from:
Investments — unaffiliated		(2,104,914	)
Net change in unrealized appreciation/depreciation on:
Investments		(26,604,047	)
Total realized and unrealized loss		(28,708,961	)
Net Decrease in Net Assets Resulting from Operations	$	(16,484,225	)

See Notes to Financial Statements.
38	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2013

Statements of Changes in Net Assets Bond Index Master Portfolio

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012
Operations
Net investment income	$	12,224,736		$	6,280,476
Net realized gain (loss)		(2,104,914	)		1,632,196
Net change in unrealized appreciation/depreciation		(26,604,047	)		4,372,890
Net increase (decrease) in net assets resulting from operations		(16,484,225	)		12,285,562
Capital Transactions
Proceeds from contributions		646,336,811			400,532,855
Value of withdrawals		(177,655,230	)		(58,730,429	)
Net increase in net assets derived from capital transactions		468,681,581			341,802,426
Net Assets
Total increase in net assets		452,197,356			354,087,988
Beginning of year		481,572,435			127,484,447
End of year	$	933,769,791		$	481,572,435

Financial Highlights Bond Index Master Portfolio

	Year Ended December 31,
	2013		2012		2011		2010		2009
Total Investment Return
Total investment return		(2.23)%		4.06%		7.67%		6.94%		5.36%
Ratios to Average Net Assets
Total expenses		0.09%		0.09%		0.13%		0.10%		0.09%
Total expenses after fees waived		0.08%		0.08%		0.08%		0.08%		0.08%
Net investment income		1.63%		1.86%		3.36%		3.80%		4.20%
Supplemental Data
Net assets, end of year (000)		$933,770		$481,572		$127,484		$98,489		$156,465
Portfolio turnover		417%		436%		122%1		59%2		103%3

¹  Includes mortgage dollar roll transactions. Excluding these transactions the portfolio turnover rate would have been 121%

²  Includes mortgage dollar roll transactions. Excluding these transactions the portfolio turnover rate would have been 54%

³  Includes mortgage dollar roll transactions. Excluding these transactions the portfolio turnover rate would have been 87%.

See Notes to Financial Statements.
	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2013	39

Notes to Financial Statements Bond Index Master Portfolio

1. Organization:

Bond Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust.

2. Significant Accounting Policies:

The Master Portfolio’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reported period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Master Portfolio.

Valuation: US GAAP defines fair value as the price the Master Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Master Portfolio determines the fair values of its financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (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 provide oversight of the pricing function for the Master Portfolio for all financial instruments.

The Master Portfolio values its bond investments on the basis of last available bid prices or current market quotations provided by dealers or pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more brokers or dealers as obtained from a pricing service. 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, various relationships observed in the market between investments and calculated yield measures. Asset-backed and mortgage-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop an estimated tranche—specific spread to the benchmark yield based on the unique attributes of the tranche. To-be-announced (“TBA”) commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services. Investments in open-end registered investment companies are valued at NAV each business day.

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.

In the event that 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 Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deem relevant consistent with the principles of fair value measurement which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. The market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and is adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. 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 Master Portfolio’s pricing vendors, a regular review 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 Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Segregation and Collateralization: In cases where the Master Portfolio enters into certain investments (e.g., TBA commitments), that would be “senior securities” for 1940 Act purposes, the Master Portfolio may segregate or designate on its books and records cash or liquid securities having a market value at least equal to the amount of the Master Portfolio’s future obligations under such investments. Doing so allows the

40 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Notes to Financial Statements (continued) Bond Index Master Portfolio

investment to be excluded from treatment as a “senior security”. Furthermore, if required by an exchange or counterparty agreement, the Master Portfolio 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 Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.

Income Taxes: The Master Portfolio is classified as a partnership for federal income tax purposes. As such, each investor in the Master Portfolio is treated as the owner of its proportionate share of net assets, income, expenses and realized and unrealized gains and losses of the Master Portfolio. Therefore, no federal income tax provision is required. It is intended that the Master Portfolio’s assets will be managed so an investor in the Master Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

The Master Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolio’s US federal tax returns remains open for each of the four years ended December 31, 2013. The statutes of limitations on the Master Portfolio’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 Master Portfolio’s facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

Other: Expenses directly related to the Master Portfolio are charged to the Master Portfolio. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods.

The Master Portfolio has an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statement of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.

3. Securities and Other Investments:

Asset-Backed and Mortgage-Backed Securities: The Master Portfolio may invest in asset-backed securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally 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 subject to such a prepayment feature will have the effect of shortening the maturity of the security. In addition, the Master Portfolio may have to subsequently reinvest the proceeds at lower interest rates. If the Master Portfolio 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.

The Master Portfolio may purchase certain mortgage pass-through securities. There are a number of important differences among the agencies and instrumentalities of the US 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 Treasury.

Multiple Class Pass-Through Securities: The Master Portfolio may invest in multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities. These multiple class securities may be issued by Ginnie Mae, US 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, and multiple class pass-through securities represent direct ownership interests in, a pool of residential or commercial mortgage loans or mortgage pass-through securities (the “Mortgage Assets”), the payments on which are used to make payments on the CMOs or multiple pass-through securities. 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

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 41

Notes to Financial Statements (continued) Bond Index Master Portfolio

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 pre-payments of principal, the Master Portfolio may not fully recoup its initial investment in IOs.

Capital Trusts and Trust Preferred Securities: The Master Portfolio may invest in capital trusts and/or trust preferred securities. These securities are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics, or by an affiliated business trust of a corporation, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured as either fixed or adjustable coupon securities that can have either a perpetual or stated maturity date. For trust preferred securities, the issuing bank or corporation will pay interest to the trust, which will then be distributed to holders of the trust preferred 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. Payments on these securities are treated as interest rather than dividends for federal income tax purposes. These securities generally are rated below that of the issuing company’s senior debt securities and are freely callable at the issuer’s option.

TBA Commitments: The Master Portfolio may enter into 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. The Master Portfolio generally enters into TBA commitments with the intent to 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.

Securities Lending: The Master Portfolio may lend securities to approved borrowers, such as banks, brokers and other financial institutions. The borrower pledges cash, securities issued or guaranteed by the US government or irrevocable letters of credit issued by a bank as collateral. The initial collateral received by the Master Portfolio should have a value of at least 102% of the current value of the loaned securities for securities traded on US exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statement of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the Master Portfolio earns dividend or interest income on the securities loaned but does not receive interest income on the 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 securities on loan and the value of the related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value, and collateral on securities loaned at value, respectively. The cash collateral invested by the securities lending agent, BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Master Portfolio under Master Securities Lending Agreements (“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 Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender 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 a MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities and the Master Portfolio can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.

The following table is a summary of the Master Portfolio’s securities lending agreements by counterparty which are subject to offset under a MSLA as of December 31, 2013:

Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital, Inc.	$	8,872,043	$	(8,872,043	)		—
Citigroup Global Markets, Inc.		24,637,113		(24,637,113	)		—
Credit Suisse Securities (USA) LLC		9,737,294		(9,737,294	)		—
Deutsche Bank Securities, Inc.		6,728,935		(6,728,935	)		—
Goldman Sachs & Co.		59,154,034		(59,154,034	)		—

42 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Notes to Financial Statements (continued) Bond Index Master Portfolio

Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Jefferies LLC	$	85,313	$	(85,313	)		—
JPMorgan Securities LLC		1,752,143		(1,752,143	)		—
Merrill Lynch Pierce, Fenner & Smith Inc.		40,437,994		(40,437,994	)		—
Morgan Stanley		50,690,059		(50,690,059	)		—
RBS Securities Inc.		7,733,009		(7,733,009	)		—
UBS AG		2,012,644		(2,012,644	)		—
Wells Fargo Securities LLC		737,334		(737,334	)		—
Total	$	212,577,915	$	(212,577,915	)		—

¹ Collateral with a value of $218,502,147 has been received in connection with securities lending agreements. Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

The risks of securities lending also include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate this risk, the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities lent. The Master Portfolio also could suffer 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. During the year ended December 31, 2013, any securities on loan were collateralized by cash.

4. Investment Advisory Agreement and Other Transactions with Affiliates:

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

MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement with BlackRock Fund Advisors (the “Manager”), the Master Portfolio’s investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of the Master Portfolio’s portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Master Portfolio. For such services, the Master Portfolio pays the Manager a monthly fee based on a percentage of the Master Portfolio’s average daily net assets at an annual rate of 0.08%.

MIP entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL”) which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL, in consideration thereof, has agreed to bear all of the Master Portfolio’s and MIP’s ordinary operating expenses excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the Master Portfolio. BAL may delegate certain of its administration duties to sub-administrators.

BAL is not entitled to compensation for providing administration services to the Master Portfolio, for so long as BAL is entitled to compensation for providing administration services to corresponding feeder funds that invest substantially all of their assets in the Master Portfolio, or BAL (or an affiliate) receive investment advisory fees from the Master Portfolio.

The fees and expenses of the MIP’s trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolio. BAL has contractually agreed to reimburse or provide an offsetting credit against the investment advisory fees paid by the Master Portfolio in an amount equal to the independent expenses. This contractual waiver is effective through April 30, 2014. The amount of the waiver, if any, is shown as fees waived by Manager in the Statement of Operations.

The Master Portfolio received an exemptive order from the SEC permitting it, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BTC as the securities lending agent. BTC may, on behalf of the Master Portfolio, invest cash collateral received by the Master Portfolio for such loans in a private investment company managed by the Manager or in registered money market funds advised by the Manager or its affiliates. The market value of securities on loan and the value of the related collateral, if applicable, is shown in the Statement of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC, if any, is disclosed in the Schedule of Investments. Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of rebates paid to, or fees paid by, borrowers of securities. The Master Portfolio retains 65% of securities lending income and pays a fee to BTC equal to 35% of such income. The Master Portfolio benefits from a borrower default indemnity provided by BlackRock. As securities lending agent, BTC bears all operational costs directly related to securities lending as well as the cost of borrower default indemnification. BTC does not receive any fees for managing the cash collateral. The share of income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the year ended December 31, 2013, BTC received $97,617 in securities lending agent fees related to securities lending activities for the Master Portfolio.

Bond Index Master Portfolio recorded a payment from an affiliate to compensate for foregone securities lending revenue, which is shown as Other income — affiliated in the Statement of Operations.

Certain officers and/or trustees of MIP are officers and/or directors of BlackRock or its affiliates.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 43

Notes to Financial Statements (concluded) Bond Index Master Portfolio

5. Purchases and Sales:

Purchases and sales of investments including paydowns and TBA transactions and excluding short-term securities and US government securities for the year ended December 31, 2013 were $166,229,385 and $20,526,195, respectively.

Purchases and sales of US government securities for the year ended December 31, 2013 were $3,357,438,368 and $3,044,554,810, respectively.

6. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $800 million credit agreement with a group of lenders, under which the Master Portfolio may borrow to fund shareholder redemptions. The agreement expires in April 2014. Excluding commitments designated for a certain individual fund, other Participating Funds, including the Master Portfolio, can borrow up to an aggregate commitment amount of $500 million, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.065% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. Participating Funds paid administration and arrangement fees, which, along with commitment fees, were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. The Master Portfolio did not borrow under the credit agreement during the year ended December 31, 2013.

7. Concentration, Market and Credit Risk:

In the normal course of business, the Master Portfolio invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Master Portfolio may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Master Portfolio; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Master Portfolio may be exposed to counterparty credit risk, or the risk that an entity with which the Master Portfolio has unsettled or open transactions may fail to or be unable to perform on its commitments. The Master Portfolio manages counterparty credit risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Master Portfolio to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Master Portfolio exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Master Portfolio.

The Master Portfolio invests a significant portion of its assets in fixed-income securities and/or uses derivatives tied to the fixed income markets. See the Schedule of Investments for these securities and derivatives. Changes in market interest rates or economic conditions, including the Federal Reserve’s decision in December to taper its quantitative easing policy, 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 Master Portfolio may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

The Master Portfolio 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. Please see the Schedule of Investments for these securities. 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.

8. Subsequent Events:

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

44 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Report of Independent Registered Public Accounting Firm Bond Index Master Portfolio

To the Board of Trustees of Master Investment Portfolio and the Interestholders of Bond Index Master Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Bond Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio, at December 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2014

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 45

Officers and Trustees

Name, Address and Year of Birth	Position(s) Held with Trst/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 107 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 107 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy from 2002 to 2012; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 107 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President, Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 107 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	President, London Center for Policy Research since 2012; Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and Professor thereof from 1980 to 2005; President Emeritus, Hudson Institute (policy research organization) from 2011 to 2012, President thereof from 1997 to 2011 and Trustee from 1980 to 2012; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (global internet services) since 2005; Director, Cerego, LLC (educational software) since 2005; Director, Cybersettle (online adjudication) since 2009; Director, AIMS Worldwide, Inc. (marketing) from 2007 to 2012.	33 RICs consisting of 107 Portfolios	None
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 107 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Director, The West Penn Allegheny Health System (a not-for-profit health system) from 2008 to 2013; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 107 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 107 Portfolios	None

46 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1 (concluded)
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Immediate past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	33 RICs consisting of 107 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Director, Alkon Corporation (pneumatics) since 1992; Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh from 2005 to 2013 and Dean thereof from 1997 to 2005; Director, Tippman Sports (recreation) from 2005 to 2013; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 107 Portfolios	None
	1   Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved extensions in terms of Trustees who turn 72 prior to December 31, 2013.
	2   Date shown is the earliest date a person has served for the Trust covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the Trust’s/MIP’s Board. As a result, although the chart shows certain Trustees as joining the Trust’s/MIP’s board in 2009, those Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees3
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	144 RICs consisting of 278 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	144 RICs consisting of 278 Portfolios	None
	3   Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 47

Officers and Trustees (concluded)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers1
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock since 2000; Head of the Global Cash Group since 2013; Co-head of the Global Cash and Securities Lending Group from 2010 to 2013; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009; and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2009	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2009	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Managing Director of BlackRock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary of the BlackRock-advised funds from 2010 to 2012; General Counsel and Chief Operating Officer of Uhuru Capital Management from 2009 to 2010; Executive Director and Counsel of Goldman Sachs Asset Management from 2005 to 2009.
	1 Officers of the Trust/MIP serve at the pleasure of the Board.

Investment Advisor BlackRock Fund Advisors San Francisco, CA 94105	Custodian and Accounting Agent State Street Bank and Trust Company Boston, MA 02110	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Sidley Austin LLP New York, NY 10019
Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP Philadelphia, PA 19103	Address of the Trust 400 Howard Street San Francisco, CA 94105

48 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

Additional Information

General Information

Electronic Delivery

Electronic copies of most financial reports and prospectuses are available on the Fund’s website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Fund’s electronic delivery program.

To enroll:

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:

Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.

Shareholders Who Hold Accounts Directly with BlackRock:

1) Access the BlackRock website at

http://www.blackrock.com/edelivery

2) Select “eDelivery” under the “More Information” section

3) Log into your account

Householding

The Fund 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 Fund at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Fund/Master Portfolio 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 Fund’s/Master Portfolio’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Fund’s/Master Portfolio’s 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/Master Portfolio use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Fund/Master Portfolio voted proxies relating to securities held in the Fund’s/Master Portfolio’s portfolio during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM EST 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/funds.

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.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 49

Additional Information (concluded)

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.

50 BLACKROCK BOND INDEX FUND DECEMBER 31, 2013

A World-Class 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.

Equity Funds

BlackRock ACWI ex-US Index Fund

BlackRock All-Cap Energy & Resources Portfolio

BlackRock Basic Value Fund

BlackRock Capital Appreciation Fund

BlackRock Commodity Strategies Fund

BlackRock Disciplined Small Cap Core Fund

BlackRock Emerging Markets Fund

BlackRock Emerging Markets Dividend Fund

BlackRock Emerging Markets Long/Short Equity Fund

BlackRock Energy & Resources Portfolio

BlackRock Equity Dividend Fund

BlackRock EuroFund

BlackRock Flexible Equity Fund

BlackRock Focus Growth Fund

BlackRock Global Dividend Portfolio

BlackRock Global Long/Short Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Global SmallCap Fund

BlackRock Health Sciences Opportunities Portfolio

BlackRock International Fund

BlackRock International Index Fund

BlackRock International Opportunities Portfolio

BlackRock Large Cap Core Fund

BlackRock Large Cap Core Plus Fund

BlackRock Large Cap Growth Fund

BlackRock Large Cap Value Fund

BlackRock Latin America Fund

BlackRock Long-Horizon Equity Fund

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Mid Cap Value Opportunities Fund

BlackRock Natural Resources Trust

BlackRock Pacific Fund

BlackRock Real Estate Securities Fund

BlackRock Russell 1000^® Index Fund

BlackRock Science & Technology Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock Small Cap Growth Fund II

BlackRock Small Cap Index Fund

BlackRock S&P 500 Stock Fund

BlackRock U.S. Opportunities Portfolio

BlackRock Value Opportunities Fund

Taxable Fixed Income Funds

BlackRock Bond Index Fund

BlackRock Core Bond Portfolio

BlackRock CoreAlpha Bond Fund

BlackRock CoRI Funds

2015	2021
2017	2023
2019

BlackRock Emerging Markets Flexible Dynamic Bond Portfolio

BlackRock Floating Rate Income Portfolio

BlackRock Global Long/Short Credit Fund

BlackRock GNMA Portfolio

BlackRock High Yield Bond Portfolio

BlackRock Inflation Protected Bond Portfolio

BlackRock International Bond Portfolio

BlackRock Investment Grade Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Secured Credit Portfolio

BlackRock Short Obligations Fund

BlackRock Short-Term Treasury Fund

BlackRock Strategic Income Opportunities Portfolio

BlackRock Total Return Fund

BlackRock U.S. Government Bond Portfolio

BlackRock U.S. Mortgage Portfolio

BlackRock Ultra-Short Obligations Fund

BlackRock World Income Fund

Municipal Fixed Income Funds

BlackRock California Municipal Bond Fund

BlackRock High Yield Municipal Fund

BlackRock National Municipal Fund

BlackRock New Jersey Municipal Bond Fund

BlackRock New York Municipal Bond Fund

BlackRock Pennsylvania Municipal Bond Fund

BlackRock Short-Term Municipal Fund

BlackRock Strategic Municipal Opportunities Fund

Mixed Asset Funds

BlackRock Balanced Capital Fund	LifePath Active Portfolios			LifePath Index Portfolios
BlackRock Emerging Market Allocation Portfolio		2015	2040		Retirement	2040
BlackRock Global Allocation Fund		2020	2045		2020	2045
BlackRock Managed Volatility Portfolio		2025	2050		2025	2050
BlackRock Multi-Asset Income Portfolio		2030	2055		2030	2055
BlackRock Multi-Asset Real Return Fund		2035			2035
BlackRock Strategic Risk Allocation Fund
	LifePath Portfolios
BlackRock Prepared Portfolios		Retirement	2040
Conservative Prepared Portfolio		2020	2045
Moderate Prepared Portfolio		2025	2050
Growth Prepared Portfolio		2030	2055
Aggressive Growth Prepared Portfolio		2035

BlackRock mutual funds are currently distributed by BlackRock Investments, LLC. You should consider the investment objectives, risks, charges and expenses of the funds under consideration carefully before investing. Each fund’s prospectus contains this and other information and is available at www.blackrock.com or by calling (800) 441-7762 or from your financial advisor. The prospectus should be read carefully before investing.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2013 51

This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless accompanied or preceded by the Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.

BINF-12/13-AR

DECEMBER 31, 2013

  ANNUAL REPORT  

BlackRock Funds III

^Ø   BlackRock Cash Funds: Government

^Ø   BlackRock Cash Funds: Institutional

^Ø   BlackRock Cash Funds: Prime

^Ø   BlackRock Cash Funds: Treasury

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
Dear Shareholder		3
Annual Report:
Money Market Overview		4
Fund Information		5
Disclosure of Expenses		6
Fund Financial Statements:
Statements of Assets and Liabilities		7
Statements of Operations		9
Statements of Changes in Net Assets		10
Fund Financial Highlights		12
Fund Notes to Financial Statements		35
Fund Report of Independent Registered Public Accounting Firm		39
Important Tax Information		39
Master Portfolio Information		40
Master Portfolio Financial Statements:
Schedules of Investments		41
Statements of Assets and Liabilities		56
Statements of Operations		56
Statements of Changes in Net Assets		57
Master Portfolio Financial Highlights		58
Master Portfolio Notes to Financial Statements		60
Master Portfolio Report of Independent Registered Public Accounting Firm		62
Officers and Trustees		63
Additional Information		66

2 BLACKROCK FUNDS III DECEMBER 31, 2013

Dear Shareholder

Risk assets (such as equities) powered higher in 2013, for the most part unscathed by ongoing political and economic uncertainty. While monetary policy was the main driving force behind the rally in risk assets, it was also the main culprit for the bouts of volatility during the year.

Equity markets rallied right out of the gate in January with cash pouring back in from the sidelines after a potential US fiscal crisis (i.e., the “fiscal cliff”) was averted with a last-minute tax deal. Key indicators signaling modest but broad-based improvements in the world’s major economies and a calming in Europe’s debt troubles fostered an aura of comfort for investors. Global economic momentum slowed in February, however, and the pace of the rally moderated. In the months that followed, US stocks outperformed international stocks, as the US showed greater stability than most other regions. Slow but positive growth was sufficient to support corporate earnings, while uncomfortably high unemployment reinforced expectations that the Federal Reserve would continue its aggressive monetary stimulus program. International markets experienced higher levels of volatility given a resurgence of political instability in Italy, a banking crisis in Cyprus and a generally poor outlook for European economies. Emerging markets significantly lagged the rest of the world as growth in these economies fell short of expectations.

Financial markets were rattled in May when Fed Chairman Bernanke mentioned the possibility of reducing — or “tapering” — the central bank’s asset purchase programs — comments that were widely misinterpreted as signaling an end to the Fed’s zero-interest-rate policy. US Treasury yields rose sharply, triggering a steep sell-off across fixed income markets. (Bond prices move in the opposite direction of yields.) Equity prices also suffered as investors feared the implications of a potential end of a program that had greatly supported the markets. Risk assets rebounded in late June, however, when the Fed’s tone turned more dovish, and improving economic indicators and better corporate earnings helped extend gains through most of the summer.

The fall was a surprisingly positive period for most asset classes as the Fed defied market expectations with its decision to delay tapering. Easing of political tensions that had earlier surfaced in Egypt and Syria and the re-election of Angela Merkel as Chancellor of Germany also boosted investor sentiment. Higher volatility returned in late September when the US Treasury Department warned that the national debt would soon breach its statutory maximum. The ensuing political brinksmanship led to a partial government shutdown, roiling global financial markets through the first half of October, but the rally quickly resumed when politicians engineered a compromise to reopen the government and extend the debt ceiling, at least temporarily.

The remainder of the year was generally positive for stock markets in the developed world, although investors continued to grapple with uncertainty about when and how much the Fed would scale back on stimulus. On the one hand, persistent weak growth and low inflation provided significant latitude for monetary policy decisions and investors were encouraged by dovish comments from Fed Chair-to-be Janet Yellen. On the other hand, US housing and manufacturing reports had begun to signal fundamental improvement in the economy. The long-awaited taper announcement ultimately came in mid-December. The Fed reduced the amount of its monthly asset purchases, but at the same time, extended its time horizon for maintaining low short-term interest rates. Markets reacted positively as this move signaled the Fed’s perception of real improvement in the economy and investors felt relief from the tenacious anxiety that had gripped them throughout the year.

Accommodative monetary policy and the avoidance of major risks made 2013 a strong year for most equity markets. US stocks were the strongest performers for the six- and 12-month periods ended December 31. In contrast, emerging markets were weighed down by uneven growth and structural imbalances. Rising US Treasury yields led to a rare annual loss in 2013 for Treasury bonds and other high-quality fixed income sectors including tax-exempt municipals and investment grade corporate bonds. High yield bonds, to the contrary, generated gains driven by income-oriented investors seeking yield in the low-rate environment. Short-term interest rates remained near zero, keeping yields on money market securities near historical lows.

At BlackRock, we believe investors need to think globally and extend their scope across a broader array of asset classes and be prepared to move freely as market conditions change over time. We encourage you to talk with your financial advisor and visit www.blackrock.com for further insight about investing in today’s world.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

“While monetary policy was the main driving force behind the rally in risk assets, it was also the main culprit for the bouts of volatility during the year.”

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2013
	6-month			12-month
US large cap equities (S&P 500® Index)		16.31	%		32.39	%
US small cap equities (Russell 2000® Index)		19.82			38.82
International equities (MSCI Europe, Australasia, Far East Index)		17.94			22.78
Emerging market equities (MSCI Emerging Markets Index)		7.70			(2.60	)
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)		0.03			0.07
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		(3.10	)		(7.83	)
US investment grade bonds (Barclays US Aggregate Bond Index)		0.43			(2.02	)
Tax-exempt municipal bonds (S&P Municipal Bond Index)		0.00			(2.55	)
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)		5.94			7.44
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

THIS PAGE NOT PART OF YOUR FUND REPORT 3

Money Market Overview

For the 12-Month Period Ended December 31, 2013

Given the continuation of moderate economic growth and persistently high unemployment, the Federal Open Market Committee (“FOMC”) maintained its target range for the federal funds rate at 0.00% to 0.25% throughout 2013. Following its regularly scheduled meeting on December 18^th, the FOMC announced it would begin gradually reducing the size of its monthly asset purchase program (a process known as “tapering”) in January 2014. Citing “cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions,” the FOMC decided to reduce the amount of its total asset purchases from a pace of $85 billion to $75 billion per month.

This move had been anticipated since late May when the FOMC made statements suggesting the possibility of beginning to taper its purchase program before the end of 2013. Expectations of less accommodative monetary policy mounted over the summer as many market participants interpreted the FOMC statement to mean that tapering could begin as early as September. However, the FOMC surprised investors when its September 18^th meeting concluded with the announcement that the asset purchase program would not be reduced at that time. This decision had been driven by a tightening in financial conditions caused by a rise in long-term interest rates coupled with drags associated with fiscal policy uncertainty.

In late September, the US Treasury warned that the national debt would breach its statutory maximum soon after October 17^th. As political brinksmanship over fiscal policy ensued in the first half of October, volatility in the Treasury bill market escalated dramatically with investors selling short-dated Treasury bills into thin markets characterized by wide bid/offer spreads. After a last-minute deal was reached, extending the nation’s borrowing authority into the first quarter of 2014, the Treasury bill market quickly normalized.

In Europe, sub-par growth and a weak inflation environment compelled policymakers to employ an increasingly accommodative monetary policy throughout the period. Late in the first quarter of 2013, a severe banking crisis led to drastic measures in Cyprus. To the surprise of many, European leaders and Cypriot officials agreed upon a plan to impose a levy on bank depositors as a condition for the country to preserve its membership in the euro currency bloc. While the reaction in financial markets was short-lived, critics contend the move set a dangerous precedent at a decisive time for the region. Subsequent to these events, the currency bloc received a crucial vote of confidence in September with the decisive re-election of Chancellor Angela Merkel in Germany as this was seen as an endorsement by German voters of her strong support of the euro. Ongoing efforts from the European Central Bank (“ECB”) to resuscitate the eurozone economy with record-low interest rates met only limited success in lifting growth measures. At the same time, inflation measures drifted lower, falling to 0.7% in October, less than half the ECB’s target rate. These conditions prompted the ECB to cut its main rate to 0.25% from 0.50% in November. This unexpectedly swift reaction reinforced the widely held view that ECB president Mario Draghi would do “whatever it takes” to preserve the euro zone.

London Interbank Offered Rates (“LIBOR”) notched lower over the 12 months due in large part to central bank liquidity measures, coupled with decreasing supply in the money market space, with three-month LIBOR falling 0.06% to close at 0.25% as of December 31^st. In the short-term rate market, outstanding US Treasury bills declined by $37 billion as the US Treasury extended the duration of its debt and the budget deficit improved. Yields on 3-month Treasury bills fell by 0.01% to close the period at 0.05%.

Late in the third quarter, the US Federal Reserve introduced a series of daily overnight fixed-rate reverse repurchase agreements (“repos”) with a maximum bid initially set at $500 million per approved counterparty. As year-end drew closer, and the repo market began to display signs of stress due to lack of collateral, the Fed increased the maximum bid per counterparty to $3 billion in mid-December – while at the same time reducing the rate offered on this reverse repo program from 0.05% to 0.03%. This new facility was widely utilized and generated a record $197.8 billion in repo transactions on December 31^st.

In the short-term tax-exempt market, conditions were relatively stable, with money fund industry assets declining by only 1.0%, or $267 billion, during the 12-month period ended December 31, 2013. The benchmark Securities Industry and Financial Markets Association (“SIFMA”) Index, which represents the average rate on seven-day, high-quality, tax-exempt variable rate demand notes (“VRDNs”) (as calculated by Municipal Market Data) ranged widely between a high of 0.23% and a low of 0.05%, averaging 0.09% for the period. The downward trajectory in the level of the SIFMA Index is a reflection of the increasing prevalence of non-traditional buyers in the market and the continued demand for liquidity by money market funds broadly amid a low supply and low rate environment. The SIFMA Index ended the period at 0.06% as of December 31, 2013.

As the FOMC’s easy monetary policy combined with increased regulation served to keep rates on taxable overnight repos low by historical measures, demand for VRDN securities from taxable money funds has remained strong. This put additional supply pressures on an already shrinking VRDN market and allowed the dealer community to maintain yields at lower levels that continued to attract crossover buyers from the taxable market.

VRDN new issuance remained relatively muted during the 12-month period; however, the FOMC’s May statements suggesting a possible reduction in the size of its monthly asset purchases brought positive momentum to new-issue VRDN supply. As long-term municipal yields rose, issuers became enticed to issue VRDNs instead of assuming the increased cost of long-term debt. The year ended with $279 billion in total outstanding VRDNs as of December 31^st, down roughly 12% from the previous year.

State and local municipalities continued to limit spending and reduce debt, causing new-issue supply of one-year, fixed-rate notes to remain diminished throughout the period. Municipalities began their annual issuance of one-year notes in June. Generally speaking, municipal money market funds take advantage of “note season” to extend their weighted average maturity, pick up yield and diversify beyond bank exposure in the form of credit enhancement. As investor demand for municipal notes remained strong, credit spreads tightened year-over-year. The municipal yield curve continued to be extremely flat with one-year municipal notes yielding 0.18% as of December 31^st, representing only a nominal premium for the extension risk over VRDNs. Note issuance totaled $47 billion for the year 2013, approximately 25% lower than the prior year.

Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

4 BLACKROCK FUNDS III DECEMBER 31, 2013

Fund Information as of December 31, 2013

BlackRock Cash Funds: Government

BlackRock Cash Funds: Government’s (the “Fund”) investment objective is to seek a high level of current income consistent with the preservation of capital and liquidity.

	7-Day SEC Yield			7-Day Yield
Select		0.00	%		0.00	%
Trust		0.00	%		0.00	%

BlackRock Cash Funds: Institutional

BlackRock Cash Funds: Institutional’s (the “Fund”) investment objective is to seek a high level of income consistent with liquidity and the preservation of capital.

	7-Day SEC Yield			7-Day Yield
Aon Captives		0.01	%		0.05	%
Institutional		0.11	%		0.15	%
Select		0.03	%		0.07	%
SL Agency		0.14	%		0.18	%
Trust		0.00	%		0.04	%

BlackRock Cash Funds: Prime

BlackRock Cash Funds: Prime’s (the “Fund”) investment objective is to seek a high level of income consistent with liquidity and the preservation of capital.

	7-Day SEC Yield			7-Day Yield
Capital		0.06	%		0.12	%
Institutional		0.08	%		0.14	%
Premium		0.03	%		0.09	%
Select		0.00	%		0.06	%
SL Agency		0.11	%		0.17	%
Trust		0.00	%		0.06	%

BlackRock Cash Funds: Treasury

BlackRock Cash Funds: Treasury’s (the “Fund”) investment objective is to seek a high level of current income consistent with the preservation of capital and liquidity.

	7-Day SEC Yield			7-Day Yield
Capital		0.00	%		0.03	%
Institutional		0.00	%		0.03	%
Select		0.00	%		0.03	%
SL Agency		0.00	%		0.03	%
Trust		0.00	%		0.03	%

The 7-Day SEC Yields may differ from the 7-Day Yields shown due to the fact that the 7-Day SEC Yields exclude distributed capital gains.

Past performance is not indicative of future results.

BLACKROCK FUNDS III DECEMBER 31, 2013 5

Disclosure of Expenses

Shareholders of these Funds may incur the following charges:

(a) transactional expenses, such as sales charges; and (b) operating expenses including administration fees, service and/or distribution fees, including 12b-1 fees, and other Fund expenses. The expense examples shown below (which are based on a hypothetical investment of $1,000 invested on July 1, 2013 and held through December 31, 2013) are intended to assist shareholders both in calculating expenses based on an investment in each Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense examples provide 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 Fund and share class under the heading entitled “Expenses Paid During the Period.”

The expense examples also provide information about hypothetical account values and hypothetical expenses based on a 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 these Funds and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in other funds’ shareholder reports.

The expenses shown in the expense examples 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.

Expense Examples

	Actual						Hypothetical2
BlackRock Cash Funds: Government	Beginning Account Value July 1, 2013		Ending Account Value December 31, 2013		Expenses Paid During the Period1		Beginning Account Value July 1, 2013		Ending Account Value December 31, 2013		Expenses Paid During the Period1		Annualized Expense Ratio
Select	$	1,000.00	$	1,000.00	$	0.20	$	1,000.00	$	1,025.00	$	0.20		0.04	%
Trust	$	1,000.00	$	1,000.00	$	0.20	$	1,000.00	$	1,025.00	$	0.20		0.04	%
BlackRock Cash Funds: Institutional
Aon Captives	$	1,000.00	$	1,000.20	$	1.11	$	1,000.00	$	1,024.10	$	1.12		0.22	%
Institutional	$	1,000.00	$	1,000.70	$	0.61	$	1,000.00	$	1,024.60	$	0.61		0.12	%
Select	$	1,000.00	$	1,000.30	$	1.01	$	1,000.00	$	1,024.20	$	1.02		0.20	%
SL Agency	$	1,000.00	$	1,000.90	$	0.45	$	1,000.00	$	1,024.75	$	0.46		0.09	%
Trust	$	1,000.00	$	1,000.10	$	1.21	$	1,000.00	$	1,024.01	$	1.22		0.24	%
BlackRock Cash Funds: Prime
Capital	$	1,000.00	$	1,000.50	$	0.71	$	1,000.00	$	1,024.50	$	0.71		0.14	%
Institutional	$	1,000.00	$	1,000.60	$	0.61	$	1,000.00	$	1,024.60	$	0.61		0.12	%
Premium	$	1,000.00	$	1,000.30	$	0.86	$	1,000.00	$	1,024.35	$	0.87		0.17	%
Select	$	1,000.00	$	1,000.20	$	1.01	$	1,000.00	$	1,024.20	$	1.02		0.20	%
SL Agency	$	1,000.00	$	1,000.70	$	0.45	$	1,000.00	$	1,024.75	$	0.46		0.09	%
Trust	$	1,000.00	$	1,000.10	$	1.06	$	1,000.00	$	1,024.15	$	1.07		0.21	%
BlackRock Cash Funds: Treasury
Capital	$	1,000.00	$	1,000.10	$	0.15	$	1,000.00	$	1,025.05	$	0.15		0.03	%
Institutional	$	1,000.00	$	1,000.10	$	0.40	$	1,000.00	$	1,024.80	$	0.41		0.08	%
Select	$	1,000.00	$	1,000.10	$	0.30	$	1,000.00	$	1,024.90	$	0.31		0.06	%
SL Agency	$	1,000.00	$	1,000.10	$	0.30	$	1,000.00	$	1,024.90	$	0.31		0.06	%
Trust	$	1,000.00	$	1,000.10	$	0.30	$	1,000.00	$	1,024.90	$	0.31		0.06	%

¹  For each class of a Fund, expenses are equal to the annualized net expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown). Because each Fund invests significantly in its corresponding Master Portfolio, the expense examples reflect the net expenses of both the Fund and the Master Portfolio in which it invests.

²  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

6 BLACKROCK FUNDS III DECEMBER 31, 2013

Statements of Assets and Liabilities

December 31, 2013	BlackRock Cash Funds: Government		BlackRock Cash Funds: Institutional		BlackRock Cash Funds: Prime		BlackRock Cash Funds: Treasury
Assets
Investments at value — from the applicable Master Portfolio1,2	$	9,466,395	$	40,688,725,039	$	17,111,918,893	$	1,585,314,930
Capital shares sold receivable		2		264		5,062		—
Receivable from administrator		1,176		—		—		—
Total assets		9,467,573		40,688,725,303		17,111,923,955		1,585,314,930
Liabilities
Income dividends payable		—		3,873,003		1,522,842		83,412
Administration fees payable		—		809,922		763,045		4,608
Professional fees payable		9,440		9,442		9,423		9,441
Service fees payable		—		779		—		—
Contributions payable to the Master Portfolio		2		264		5,062		—
Total liabilities		9,442		4,693,410		2,300,372		97,461
Net Assets	$	9,458,131	$	40,684,031,893	$	17,109,623,583	$	1,585,217,469
Net Assets Consist of
Paid-in capital	$	9,458,126	$	40,682,417,542	$	17,109,349,860	$	1,585,210,456
Undistributed net investment income		—		—		3,950		324
Accumulated net realized gain		5		1,614,351		269,773		6,689
Net Assets	$	9,458,131	$	40,684,031,893	$	17,109,623,583	$	1,585,217,469
1 Investments at cost	$	9,466,395	$	40,688,725,039	$	17,111,918,893	$	1,585,314,930
2 Government Money Market Master Portfolio, Money Market Master Portfolio, Prime Money Market Master Portfolio, and Treasury Money Market Master Portfolio (each, a “Master Portfolio”).

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	7

Statements of Assets and Liabilities (concluded)

December 31, 2013	BlackRock Cash Funds: Government		BlackRock Cash Funds: Institutional		BlackRock Cash Funds: Prime		BlackRock Cash Funds: Treasury
Net Asset Value
Aon Captives:
Net assets		—	$	9,166,272		—		—
Shares outstanding1		—		9,166,201		—		—
Net asset value		—	$	1.00		—		—
Capital:
Net assets		—		—	$	1,472,925,602	$	715,306
Shares outstanding1		—		—		1,472,910,844		715,303
Net asset value		—		—	$	1.00	$	1.00
Institutional:
Net assets		—	$	2,802,910,985	$	5,269,961,140	$	3,903
Shares outstanding1		—		2,802,891,531		5,269,912,688		3,904
Net asset value		—	$	1.00	$	1.00	$	1.00
Premium:
Net assets		—		—	$	4,669,368,553		—
Shares outstanding1		—		—		4,669,319,639		—
Net asset value		—		—	$	1.00		—
Select:
Net assets	$	6,700,262	$	4,323,708	$	89,834	$	10,397,887
Shares outstanding1		6,700,258		4,323,674		89,833		10,397,840
Net asset value	$	1.00	$	1.00	$	1.00	$	1.00
SL Agency:
Net assets		—	$	37,867,084,303	$	5,689,192,322	$	1,548,186,596
Shares outstanding1		—		37,866,820,325		5,689,139,176		1,548,179,751
Net asset value		—	$	1.00	$	1.00	$	1.00
Trust:
Net assets	$	2,757,869	$	546,625	$	8,086,132	$	25,913,777
Shares outstanding1		2,757,868		546,597		8,086,057		25,913,660
Net asset value	$	1.00	$	1.00	$	1.00	$	1.00
1 Unlimited number of shares authorized; no par value.

See Notes to Financial Statements.
8	BLACKROCK FUNDS III	DECEMBER 31, 2013

Statements of Operations

Year Ended December 31, 2013	BlackRock Cash Funds: Government			BlackRock Cash Funds: Institutional			BlackRock Cash Funds: Prime			BlackRock Cash Funds: Treasury
Investment Income
Net investment income allocated from the applicable Master Portfolio:
Interest	$	31,184		$	105,392,470		$	31,505,577		$	1,417,998
Expenses		(78,007	)		(41,300,931	)		(13,514,166	)		(1,697,016	)
Fees waived		51,084			12,815,572			4,210,006			660,629
Total income		4,261			76,907,111			22,201,417			381,611
Fund Expenses
Administration — class specific		30,448			9,075,191			6,882,222			494,180
Distribution — Aon Captives		—			10,695			—			—
Professional		13,965			13,969			13,946			13,965
Miscellaneous		325			325			325			325
Total expenses		44,738			9,100,180			6,896,493			508,470
Less fees waived by administrator — class specific		(26,607	)		(2,793	)		(21,482	)		(304,264	)
Less fees reimbursed by administrator		(13,965	)		(13,965	)		(13,908	)		(13,965	)
Total expenses after fees waived and/or reimbursed		4,166			9,083,422			6,861,103			190,241
Net investment income		95			67,823,689			15,340,314			191,370
Realized Gain Allocated from the Master Portfolios
Net realized gain from investments		—			4,793,864			2,087,007			130,047
Net Increase in Net Assets Resulting from Operations	$	95		$	72,617,553		$	17,427,321		$	321,417

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	9

Statements of Changes in Net Assets

	BlackRock Cash Funds: Government						BlackRock Cash Funds: Institutional
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	95		$	449		$	67,823,689		$	89,959,659
Net realized gain		—			—			4,793,864			2,285,540
Net increase in net assets resulting from operations		95			449			72,617,553			92,245,199
Dividends and Distributions to Shareholders From1
Net investment income:
Aon Captives		—			—			(4,385	)		(9,492	)
Institutional		—			—			(4,192,107	)		(2,706,645	)
Premium		—			—			—			(3,144	)
Select		(20	)		(449	)		(2,035	)		(29,453	)
SL Agency		(75	)		—			(63,625,162	)		(87,210,925	)
Net realized gain:
Aon Captives		—			—			(1,114	)		(355	)
Institutional		—			—			(339,590	)		(48,899	)
Select		—			(47	)		(503	)		(517	)
SL Agency		—			—			(4,674,107	)		(1,149,985	)
Trust		—			(13	)		(63	)		(245	)
Decrease in net assets resulting from dividends and distributions to shareholders		(95	)		(509	)		(72,839,066	)		(91,159,660	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(8,141,716	)		7,256,739			6,091,103,262			6,622,317,759
Net Assets
Total increase (decrease) in net assets		(8,141,716	)		7,256,679			6,090,881,749			6,623,403,298
Beginning of year		17,599,847			10,343,168			34,593,150,144			27,969,746,846
End of year	$	9,458,131		$	17,599,847		$	40,684,031,893		$	34,593,150,144
1 Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
10	BLACKROCK FUNDS III	DECEMBER 31, 2013

Statements of Changes in Net Assets

	BlackRock Cash Funds: Prime						BlackRock Cash Funds: Treasury
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	15,340,314		$	21,346,655		$	191,370		$	686,720
Net realized gain		2,087,007			1,614,998			130,047			69,189
Net increase in net assets resulting from operations		17,427,321			22,961,653			321,417			755,909
Dividends and Distributions to Shareholders From1
Net investment income:
Capital		(1,115,190	)		(1,244,088	)		(2,490	)		(7,969	)
Institutional		(5,031,183	)		(5,903,654	)		(72	)		(857	)
Premium		(1,975,146	)		(3,598,065	)		—			—
Select		(3,116	)		(39,722	)		(1	)		(16	)
SL Agency		(7,211,729	)		(10,562,560	)		(188,793	)		(677,566	)
Trust		—			—			(2	)		—
Net realized gain:
Capital		(159,493	)		—			(91	)		(1,425	)
Institutional		(574,074	)		—			(272	)		—
Premium		(493,586	)		—			—			—
Select		(816	)		—			(1,141	)		(436	)
SL Agency		(709,842	)		—			(155,671	)		(38,619	)
Trust		(1,046	)		—			(2,824	)		(579	)
Decrease in net assets resulting from dividends and distributions to shareholders		(17,275,221	)		(21,348,089	)		(351,357	)		(727,467	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		3,087,468,286			4,890,678,255			(239,731,391	)		1,078,058,501
Net Assets
Total increase (decrease) in net assets		3,087,620,386			4,892,291,819			(239,761,331	)		1,078,086,943
Beginning of year		14,022,003,197			9,129,711,378			1,824,978,800			746,891,857
End of year	$	17,109,623,583		$	14,022,003,197		$	1,585,217,469		$	1,824,978,800
Undistributed net investment income, end of year	$	3,950			—		$	324		$	312
1   Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	11

Financial Highlights BlackRock Cash Funds: Government

	Institutional
	Period January 1, 2011 to April 18, 20111			Year Ended December 31,
				2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00
Net investment income		0.0001			0.0008			0.0009
Dividends from net investment income2		(0.0001	)		(0.0008	)		(0.0009	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00
Total Investment Return3
Based on net asset value		0.01%	4		0.09%			0.09%
Ratios to Average Net Assets5
Total expenses		0.13%	6,7		0.19%			0.15%
Total expenses after fees waived		0.11%	6,7		0.11%			0.08%
Net investment income		0.05%	6,7		0.09%			0.11%
Supplemental Data
Net assets, end of period (000)		—	1	$	5,663		$	10,496

¹  There were no Institutional Shares outstanding from April 19, 2011 through December 31, 2011 and during the years ended December 31, 2012 and December 31, 2013.

²  Determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of dividends and distributions.

⁴  Aggregate total Investment return.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶  Annualized.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.06%.

See Notes to Financial Statements.
12	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) BlackRock Cash Funds: Government

	Select
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0000	1		0.0001			0.0002			0.0003			0.0008
Dividends from net investment income2		(0.0000	)3		(0.0001	)		(0.0002	)		(0.0003	)		(0.0008	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return4
Based on net asset value		0.00%			0.01%			0.02%			0.03%			0.08%
Ratios to Average Net Assets5
Total expenses		0.27%	6		0.37%	7		0.30%	8		0.29%			0.25%
Total expenses after fees waived		0.09%	6		0.16%	7		0.10%	8		0.13%			0.09%
Net investment income		0.00%	6		0.01%	7		0.00%	8		0.03%			0.08%
Supplemental Data
Net assets, end of year (000)	$	6,700		$	16,655		$	8,973		$	17,263		$	69,139

¹  Amount is less than $0.00005 per share.

²  Determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.00005) per share.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.20%.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.23%.

⁸  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.17%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	13

Financial Highlights (continued) BlackRock Cash Funds: Government

	SL Agency
	Period July 1, 2013 to July 17, 20131			Period June 4, 2013 to June 16, 20131			Period January 1, 2011 to December  14, 20112			Period January 1, 2010 to March 14, 20103			Period February 4, 20094 to December 31, 2009
Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0000	5		0.0000	5		0.0002			0.0002			0.0009
Dividends from net investment income6		—			(0.0000	)7		(0.0002	)		(0.0002	)		(0.0009	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return8,9
Based on net asset value		0.00%			0.00%			0.02%	10		0.02%			0.09%
Ratios to Average Net Assets11,12
Total expenses		0.09%			0.07%			0.10%			0.12%			0.12%
Total expenses after fees waived		0.04%			0.05%			0.09%			0.02%			0.07%
Net investment income		0.00%			0.00%			0.08%			0.08%			0.10%
Supplemental Data
Net assets, end of period (000)		—	1		—	1		—	2		—	3	$	563,288

¹ There were no SL Agency Shares outstanding, except from July 1, 2013 through July 17, 2013 and June 4, 2013 through June 16, 2013, during the year ended December 31, 2013.

² There were no SL Agency Shares outstanding, except from December 2, 2011 through December 14, 2011 and January 1, 2011 through March 30, 2011, during the years ended December 31, 2011 and December 31, 2012.

³ There were no SL Agency Shares outstanding from March 15, 2010 through December 31, 2010.

⁴ Commencement of operations.

⁵ Amount is less than $0.00005 per share.

⁶ Determined in accordance with federal income tax regulations.

⁷ Amount is greater than $(0.00005) per share.

⁸ Where applicable, assumes the reinvestment of dividends and distributions.

⁹ Aggregate total Investment return.

¹⁰  The total investment return does not include the period when no shares were outstanding.

¹¹ Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the periods ended March 14, 2010 and December 31, 2009, which include gross expenses.

¹² Annualized.

See Notes to Financial Statements.
14	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (concluded) BlackRock Cash Funds: Government

	Trust
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0000	1		0.0000	1		0.0002			0.0002			0.0008
Dividends from net investment income2		(0.0000	)3		(0.0000	)3		(0.0002	)		(0.0002	)		(0.0008	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return4
Based on net asset value		0.00%			0.00%			0.02%			0.02%			0.08%
Ratios to Average Net Assets5
Total expenses		0.50%	6		0.62%	7		0.54%	8		0.53%			0.48%
Total expenses after fees waived		0.08%	6		0.17%	7		0.10%	8		0.15%			0.09%
Net investment income		0.00%	6		0.00%	7		0.00%	8		0.03%			0.08%
Supplemental Data
Net assets, end of year (000)	$	2,758		$	945		$	1,370		$	3,532		$	13,462

¹  Amount is less than $0.00005 per share.

²  Determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.00005) per share.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.22%.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.25%.

⁸  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.18%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	15

Financial Highlights BlackRock Cash Funds: Institutional

	Aon Captives
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0005			0.0012			0.0008			0.0012			0.0033
Net realized gain		0.0000	1		—			—			—			—
Net increase from investment operations		0.0005			0.0012			0.0008			0.0012			0.0033
Dividends and distributions from: 2
Net investment income		(0.0005	)		(0.0012	)		(0.0008	)		(0.0012	)		(0.0033	)
Net realized gain		(0.0000	)3		—			—			—			—
Total dividends and distributions		(0.0005	)		(0.0012	)		(0.0008	)		(0.0012	)		(0.0033	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return4
Based on net asset value		0.05%			0.12%			0.08%			0.12%			0.33%
Ratios to Average Net Assets5
Total expenses		0.22%	6		0.22%	6		0.22%	6		0.25%			0.25%
Total expenses after fees waived		0.22%	6		0.22%	6		0.22%	6		0.22%			0.22%
Net investment income		0.04%	6		0.12%	6		0.07%	6		0.11%			0.35%
Supplemental Data
Net assets, end of year (000)	$	9,166		$	11,003		$	9,167		$	59,237		$	72,949

¹  Amount is less than $0.00005 per share.

²  Determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.00005) per share.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.03%.

See Notes to Financial Statements.
16	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) BlackRock Cash Funds: Institutional

	Capital
	Period January 1, 2010 to December  1, 20101			Year Ended December 31, 2009
Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00
Net investment income		0.0018			0.0041
Dividends from net investment income2		(0.0018	)		(0.0041	)
Net asset value, end of period	$	1.00		$	1.00
Total Investment Return3
Based on net asset value		0.18%	4		0.41%
Ratios to Average Net Assets5
Total expenses		0.17%	6,7		0.17%
Total expenses after fees waived		0.14%	6,7		0.14%
Net investment income		0.18%	6,7		0.33%
Supplemental Data
Net assets, end of period (000)		—	1	$	277,382

¹  There were no Capital Shares outstanding from December 2, 2010 through December 31, 2010 and during the fiscal years ended December 31, 2011, December 31, 2012 and December 31, 2013.

²  Determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of dividends and distributions.

⁴  Aggregate total investment return.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated gross expenses and/or net investment income.

⁶  Annualized.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.03%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	17

Financial Highlights (continued) BlackRock Cash Funds: Institutional

	Institutional
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0015			0.0022			0.0018			0.0022			0.0043
Net realized gain		0.0000	1		—			—			—			—
Net increase from investment operations		0.0015			0.0022			0.0018			0.0022			0.0043
Dividends and distributions from: 2
Net investment income		(0.0015	)		(0.0022	)		(0.0018	)		(0.0022	)		(0.0043	)
Net realized gain		(0.0000	)3		—			—			—			—
Total dividends and distributions		(0.0015	)		(0.0022	)		(0.0018	)		(0.0022	)		(0.0043	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return4
Based on net asset value		0.15%			0.22%			0.18%			0.22%			0.43%
Ratios to Average Net Assets5
Total expenses		0.12%	6		0.12%	6		0.12%			0.15%			0.15%
Total expenses after fees waived		0.12%	6		0.12%	6		0.12%			0.12%			0.12%
Net investment income		0.14%	6		0.22%	6		0.17%			0.22%			0.78%
Supplemental Data
Net assets, end of year (000)	$	2,802,911		$	1,211,912		$	1,089,872		$	1,076,268		$	973,221

¹  Amount is less than $0.00005 per share.

²  Determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.00005) per share.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.03%.

See Notes to Financial Statements.
18	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) BlackRock Cash Funds: Institutional

	Premium
	Period October 12, 2012 to October 17, 20121			Period January 1, 2010 to November  11, 20102			Year Ended December 31, 2009
Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00
Net investment income		0.0000	3		0.0003			0.0038
Dividends from net investment income4		(0.0000	)5		(0.0003	)		(0.0038	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00
Total Investment Return6
Based on net asset value		0.00%	7		0.03%	7		0.38%
Ratios to Average Net Assets8
Total expenses		0.17%	9,10		0.20%	9,10		0.20%
Total expenses after fees waived		0.17%	9,10		0.17%	9,10		0.17%
Net investment income		0.19%	9,10		0.10%	9,10		0.48%
Supplemental Data
Net assets, end of period (000)		—	1		—	2	$	97,513

¹  There were no Premium Shares outstanding during the fiscal years ended December 31, 2012 and December 31, 2013, except for the period from October 12, 2012 through October 17, 2012.

²  There were no Premium Shares outstanding from November 12, 2010 through December 31, 2010 and during the fiscal year ended December 31, 2011.

³  Amount is less than $0.00005 per share.

⁴  Determined in accordance with federal income tax regulations.

⁵  Amount is greater than $(0.00005) per share.

⁶  Where applicable, assumes the reinvestment of dividends and distributions.

⁷  Aggregate total investment return.

⁸  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended November 11, 2010 and the year ended December 31, 2009, which include gross expenses.

⁹  Annualized.

¹⁰  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.03%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	19

Financial Highlights (continued) BlackRock Cash Funds: Institutional

	Select
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0007			0.0014			0.0010			0.0014			0.0035
Net realized gain		0.0000	1		—			—			—			—
Net increase from investment operations		0.0007			0.0014			0.0010			0.0014			0.0035
Dividends and distributions from:2
Net investment income		(0.0007	)		(0.0014	)		(0.0010	)		(0.0014	)		(0.0035	)
Net realized gain		(0.0000	)3		—			—			—			—
Total dividends and distributions		(0.0007	)		(0.0014	)		(0.0010	)		(0.0014	)		(0.0035	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return4
Based on net asset value		0.07%			0.14%			0.10%			0.14%			0.35%
Ratios to Average Net Assets5
Total expenses		0.22%	6		0.22%	6		0.22%	6		0.25%			0.23%
Total expenses after fees waived		0.20%	6		0.20%	6		0.20%	6		0.20%			0.20%
Net investment income		0.06%	6		0.14%	6		0.09%	6		0.13%			0.57%
Supplemental Data
Net assets, end of year (000)	$	4,324		$	11,459		$	44,788		$	29,944		$	23,204

¹  Amount is less than $0.00005 per share.

²  Determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.00005) per share.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.03%.

See Notes to Financial Statements.
20	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) BlackRock Cash Funds: Institutional

	SL Agency
	Year Ended December 31,												Period February 4, 20091 to December 31, 2009
	2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0018			0.0025			0.0021			0.0025			0.0035
Net realized gain		0.0000	2		—			—			—			—
Net increase from investment operations		0.0018			0.0025			0.0021			0.0025			0.0035
Dividends and distributions from:3
Net investment income		(0.0018	)		(0.0025	)		(0.0021	)		(0.0025	)		(0.0035	)
Net realized gain		(0.0000	)4		—			—			—			—
Total dividends and distributions		(0.0018	)		(0.0025	)		(0.0021	)		(0.0025	)		(0.0035	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return5
Based on net asset value		0.18%			0.25%			0.21%			0.25%			0.36%	6
Ratios to Average Net Assets7
Total expenses		0.09%	8		0.09%	8		0.09%	8		0.12%			0.12%	9
Total expenses after fees waived		0.09%	8		0.09%	8		0.09%	8		0.09%			0.09%	9
Net investment income		0.17%	8		0.25%	8		0.20%	8		0.24%			0.38%	9
Supplemental Data
Net assets, end of period (000)	$	37,867,084		$	33,350,562		$	26,815,279		$	17,938,932		$	18,832,492

¹  Commencement of operations.

²  Amount is less than $0.00005 per share.

³  Determined in accordance with federal income tax regulations.

⁴  Amount is greater than $(0.00005) per share.

⁵  Where applicable, assumes the reinvestment of dividends and distributions.

⁶  Aggregate total investment return.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the fiscal year ended December 31, 2010 and the period ended December 31, 2009, which include gross expenses.

⁸  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.03%.

⁹  Annualized.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	21

Financial Highlights (concluded) BlackRock Cash Funds: Institutional

	Trust
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0001			0.0000	1		0.0001			0.0001			0.0018
Net realized gain		0.0000	1		—			—			—			—
Net increase from investment operations		0.0001			0.0000			0.0001			0.0001			0.0018
Dividends and distributions from:2
Net investment income		(0.0001	)		(0.0000	)3		(0.0001	)		(0.0001	)		(0.0018	)
Net realized gain		(0.0000	)3		—			—			—			—
Total dividends and distributions		(0.0001	)		(0.0000	)		(0.0001	)		(0.0001	)		(0.0018	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return4
Based on net asset value		0.01%			0.00%			0.01%			0.01%			0.18%
Ratios to Average Net Assets5
Total expenses		0.45%	6		0.45%	6		0.45%	6		0.48%			0.48%
Total expenses after fees waived		0.28%	6		0.34%	6		0.29%	6		0.31%			0.40%
Net investment income		0.00%	6		0.00%	6		0.00%	6		0.01%			0.22%
Supplemental Data
Net assets, end of year (000)	$	547		$	8,215		$	10,640		$	7,776		$	19,713

¹  Amount is less than $0.00005 per share.

²  Determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.00005) per share.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.03%.

See Notes to Financial Statements.
22	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights BlackRock Cash Funds: Prime

	Capital
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0011			0.0018			0.0014			0.0018			0.0030
Net realized gain		0.0000	1		—			—			—			—
Net increase from investment operations		0.0011			0.0018			0.0014			0.0018			0.0030
Dividends and distributions from:2
Net investment income		(0.0011	)		(0.0018	)		(0.0014	)		(0.0018	)		(0.0030	)
Net realized gain		(0.0000	)3		—			—			—			—
Total dividends and distributions		(0.0011	)		(0.0018	)		(0.0014	)		(0.0018	)		(0.0030	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return4
Based on net asset value		0.11%			0.18%			0.14%			0.18%			0.30%
Ratios to Average Net Assets5
Total expenses		0.14%	6		0.14%	6		0.14%	6		0.17%			0.19%
Total expenses after fees waived		0.14%	6		0.14%	6		0.14%	6		0.14%			0.16%
Net investment income		0.10%	6		0.18%	6		0.15%	6		0.17%			0.27%
Supplemental Data
Net assets, end of year (000)	$	1,472,926		$	1,394,794		$	456,657		$	517,988		$	673,375

¹  Amount is less than $0.00005 per share.

²  Determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.00005) per share.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.03%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	23

Financial Highlights (continued) BlackRock Cash Funds: Prime

	Institutional
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0013			0.0020			0.0016			0.0020			0.0032
Net realized gain		0.0000	1		—			—			—			—
Net increase from investment operations		0.0013			0.0020			0.0016			0.0020			0.0032
Dividends and distributions from:2
Net investment income		(0.0013	)		(0.0020	)		(0.0016	)		(0.0020	)		(0.0032	)
Net realized gain		(0.0000	)3		—			—			—			—
Total dividends and distributions		(0.0013	)		(0.0020	)		(0.0016	)		(0.0020	)		(0.0032	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return4
Based on net asset value		0.13%			0.20%			0.16%			0.20%			0.32%
Ratios to Average Net Assets5
Total expenses		0.12%	6		0.12%	6		0.12%	6		0.15%			0.17%
Total expenses after fees		0.12%	6		0.12%	6		0.12%	6		0.12%			0.14%
Net investment income		0.12%	6		0.20%	6		0.16%	6		0.20%			0.39%
Supplemental Data
Net assets, end of year (000)	$	5,269,961		$	3,236,082		$	2,282,923		$	3,570,577		$	3,014,591

¹  Amount is less than $0.00005 per share.

²  Determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.00005) per share.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.03%.

See Notes to Financial Statements.
24	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) BlackRock Cash Funds: Prime

	Premium
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0008			0.0015			0.0011			0.0015			0.0027
Net realized gain		0.0000	1		—			—			—			—
Net increase from investment operations		0.0008			0.0015			0.0011			0.0015			0.0027
Dividends and distributions from:2
Net investment income		(0.0008	)		(0.0015	)		(0.0011	)		(0.0015	)		(0.0027	)
Net realized gain		(0.0000	)3		—			—			—			—
Total dividends and distributions		(0.0008	)		(0.0015	)		(0.0011	)		(0.0015	)		(0.0027	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return4
Based on net asset value		0.08%			0.15%			0.11%			0.15%			0.27%
Ratios to Average Net Assets5
Total expenses		0.17%	6		0.17%	6		0.17%	6		0.20%			0.23%
Total expenses after fees waived		0.17%	6		0.17%	6		0.17%	6		0.17%			0.20%
Net investment income		0.07%	6		0.16%	6		0.11%	6		0.14%			0.34%
Supplemental Data
Net assets, end of year (000)	$	4,669,369		$	3,481,506		$	1,460,178		$	1,232,743		$	1,817,088

¹  Amount is less than $0.00005 per share.

²  Determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.00005) per share.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.03%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	25

Financial Highlights (continued) BlackRock Cash Funds: Prime

	Select
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0005			0.0012			0.0008			0.0012			0.0024
Net realized gain		0.0000	1		—			—			—			—
Net increase from investment operations		0.0005			0.0012			0.0008			0.0012			0.0024
Dividends and distributions from:2
Net investment income		(0.0005	)		(0.0012	)		(0.0008	)		(0.0012	)		(0.0024	)
Net realized gain		(0.0000	)3		—			—			—			—
Total dividends and distributions		(0.0005	)		(0.0012	)		(0.0008	)		(0.0012	)		(0.0024	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return4
Based on net asset value		0.05%			0.12%			0.09%			0.12%			0.24%
Ratios to Average Net Assets5
Total expenses		0.22%	6		0.22%	6		0.22%	6		0.25%			0.27%
Total expenses after fees waived		0.20%	6		0.20%	6		0.20%	6		0.20%			0.22%
Net investment income		0.04%	6		0.12%	6		0.08%	6		0.12%			0.24%
Supplemental Data
Net assets applicable, end of year (000)	$	90		$	10,454		$	69,779		$	80,614		$	73,810

¹  Amount is less than $0.00005 per share.

²  Determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.00005) per share.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.03%.

See Notes to Financial Statements.
26	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) BlackRock Cash Funds: Prime

	SL Agency
	Year Ended December 31,												Period February 4, 20091 to December  31, 2009
	2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0016			0.0023			0.0019			0.0023			0.0028
Net realized gain		0.0000	2		—			—			—			—
Net increase from investment operations		0.0016			0.0023			0.0019			0.0023			0.0028
Dividends and distributions from:3
Net investment income		(0.0016	)		(0.0023	)		(0.0019	)		(0.0023	)		(0.0028	)
Net realized gain		(0.0000	)4		—			—			—			—
Total dividends and distributions		(0.0016	)		(0.0023	)		(0.0019	)		(0.0023	)		(0.0028	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return5
Based on net asset value		0.16%			0.23%			0.19%			0.23%			0.28%	6
Ratios to Average Net Assets7
Total expenses		0.09%	8		0.09%	8		0.09%	8		0.12%			0.14%	9
Total expenses after fees waived		0.09%	8		0.09%	8		0.09%	8		0.09%			0.11%	9
Net investment income		0.15%	8		0.23%	8		0.19%	8		0.22%			0.31%	9
Supplemental Data
Net assets, end of period (000)	$	5,689,192		$	5,877,464		$	4,830,517		$	3,696,051		$	58,600,881

¹  Commencement of operations.

²  Amount is less than $0.00005 per share.

³  Determined in accordance with federal income tax regulations.

⁴  Amount is greater than $(0.00005) per share.

⁵  Where applicable, assumes the reinvestment of dividends and distributions.

⁶  Aggregate total investment return.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the year ended December 31, 2010 and the period ended December 31, 2009, which include gross expenses.

⁸  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.03%.

⁹  Annualized.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	27

Financial Highlights (concluded) BlackRock Cash Funds: Prime

	Trust
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0001			0.0000	1		0.0000	1		0.0001			0.0011
Net realized gain		0.0000	1		—			—			—			—
Net increase from investment operations		0.0001			0.0000	1		0.0000	1		0.0001			0.0011
Dividends and distributions from:2
Net investment income		(0.0001	)		(0.0000	)3		(0.0000	)3		(0.0001	)		(0.0011	)
Net realized gain		(0.0000	)3		—			—			—			—
Total dividends and distributions		(0.0001	)		(0.0000	)		(0.0000	)		(0.0001	)		(0.0011	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return4
Based on net asset value		0.01%			0.00%			0.00%			0.01%			0.11%
Ratios to Average Net Assets5
Total expenses		0.45%	6		0.45%	6		0.45%	6		0.48%			0.51%
Total expenses after fees waived		0.24%	6		0.32%	6		0.28%	6		0.29%			0.36%
Net investment income		0.00%	6		0.00%	6		0.01%	6		0.01%			0.09%
Supplemental Data
Net assets, end of year (000)	$	8,086		$	21,702		$	29,657		$	37,044		$	96,349

¹  Amount is less than $0.00005 per share.

²  Determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.00005) per share.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.03%.

See Notes to Financial Statements.
28	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights BlackRock Cash Funds: Treasury

	Capital
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0001			0.0002			0.0004			0.0007			0.0008
Net realized gain		0.0000	1		—			—			—			—
Net increase from investment operations		0.0001			0.0002			0.0004			0.0007			0.0008
Dividends and distributions from:2
Net investment income		(0.0001	)		(0.0002	)		(0.0004	)		(0.0007	)		(0.0008	)
Net realized gain		(0.0000	)3		—			—			—			—
Total dividends and distributions		(0.0001	)		(0.0002	)		(0.0004	)		(0.0007	)		(0.0008	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return4
Based on net asset value		0.01%			0.02%			0.04%			0.07%			0.08%
Ratios to Average Net Assets5
Total expenses		0.14%	6		0.14%	6		0.14%	7		0.17%			0.17%
Total expenses after fees waived		0.12%	6		0.13%	6		0.10%	7		0.12%			0.08%
Net investment income		0.00%	6		0.02%	6		0.01%	7		0.06%			0.07%
Supplemental Data
Net assets, end of year (000)	$	715		$	273,121		$	18,370		$	139,657		$	32,419

¹  Amount is less than $0.00005 per share.

²  Determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.00005) per share.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.03%.

⁷ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.04%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	29

Financial Highlights (continued) BlackRock Cash Funds: Treasury

	Institutional
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0001			0.0002			0.0004			0.0009			0.0008
Net realized gain		0.0000	1		—			—			—			—
Net increase from investment operations		0.0001			0.0002			0.0004			0.0009			0.0008
Dividends and distributions from:2
Net investment income		(0.0001	)		(0.0002	)		(0.0004	)		(0.0009	)		(0.0008	)
Net realized gain		(0.0000	)3		—			—			—			—
Total dividends and distributions		(0.0001	)		(0.0002	)		(0.0004	)		(0.0009	)		(0.0008	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return4
Based on net asset value		0.01%			0.02%			0.04%			0.09%			0.08%
Ratios to Average Net Assets5
Total expenses		0.12%	6		0.12%	6		0.12%	7		0.16%			0.12%
Total expenses after fees waived		0.10%	6		0.11%	6		0.11%	7		0.11%			0.04%
Net investment income		0.01%	6		0.02%	6		0.03%	7		0.08%			0.09%
Supplemental Data
Net assets, end of year (000)	$	4		$	4		$	8,941		$	124,791		$	30,011

¹  Amount is less than $0.00005 per share.

²  Determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.00005) per share.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.03%.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.04%.

See Notes to Financial Statements.
30	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) BlackRock Cash Funds: Treasury

	Premium
	Period December 20, 20121			Period January 1, 2010 to July 26, 20102			Year Ended December 31, 2009
Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00
Net investment income		0.0000	3		0.0003			0.0007
Net realized gain		0.0000	3		—			—
Net increase from investment operations		0.0000			0.0003			0.0007
Dividends and distributions from:4
Net investment income		(0.0000	)5		(0.0003	)		(0.0007	)
Net realized gain		(0.0000	)5		—			—
Total dividends and distributions		(0.0000	)		(0.0003	)		(0.0007	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00
Total Investment Return6
Based on net asset value		0.00%	7		0.03%	7		0.08%
Ratios to Average Net Assets8
Total expenses		0.00%	9,10		0.20%	9,10		0.19%
Total expenses after fees waived		0.00%	9,10		0.11%	9,10		0.08%
Net investment income		0.00%	9,10		0.05%	9,10		0.09%
Supplemental Data
Net assets, end of period (000)		—	1		—	2	$	2,542

¹  There were no Premium Shares outstanding during the fiscal year ended December 31, 2012 and December 31, 2013, except for December 20, 2012.

²  There were no Premium Shares outstanding from July 27, 2010 through December 31, 2010 and during the fiscal year ended December 31, 2011.

³  Amount is less than $0.00005 per share.

⁴  Determined in accordance with federal income tax regulations.

⁵  Amount is greater than $(0.00005) per share.

⁶  Where applicable, assumes the reinvestment of dividends and distributions.

⁷  Aggregate total investment return.

⁸  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended July 26, 2010 and the year ended December 31, 2009, which includes gross expenses.

⁹  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.03%.

¹⁰  Annualized.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	31

Financial Highlights (continued) BlackRock Cash Funds: Treasury

	Select
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0001			0.0000	1		0.0003			0.0003			0.0007
Net realized gain		0.0000	1		—			—			—			—
Net increase from investment operations		0.0001			0.0000			0.0003			0.0003			0.0007
Dividends and distributions from:2
Net investment income		(0.0001	)		(0.0000	)3		(0.0003	)		(0.0003	)		(0.0007	)
Net realized gain		(0.0000	)3		—			—			—			—
Total dividends and distributions		(0.0001	)		(0.0000	)		(0.0003	)		(0.0003	)		(0.0007	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return4
Based on net asset value		0.01%			0.00%			0.03%			0.03%			0.08%
Ratios to Average Net Assets5
Total expenses		0.21%	6		0.22%	7		0.21%	6		0.25%			0.25%
Total expenses after fees waived		0.09%	6		0.15%	7		0.08%	6		0.12%			0.08%
Net investment income		0.00%	6		0.00%	7		0.00%	6		0.04%			0.08%
Supplemental Data
Net assets applicable, end of year (000)	$	10,398		$	10,543		$	13,119		$	288		$	4,815

¹  Amount is less than $0.00005 per share.

²  Determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.00005) per share.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.04%.

⁷ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.03%.

See Notes to Financial Statements.
32	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) BlackRock Cash Funds: Treasury

	SL Agency
	Year Ended December 31,												Period February 4, 20091 to December 31 2009
	2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0002			0.0006			0.0005			0.0011			0.0008
Net realized gain		0.0000	2		—			—			—			—
Net increase from investment operations		0.0002			0.0006			0.0005			0.0011			0.0008
Dividends and distributions from:3
Net investment income		(0.0002	)		(0.0006	)		(0.0005	)		(0.0011	)		(0.0008	)
Net realized gain		(0.0000	)4		—			—			—			—
Total dividends and distributions		(0.0002	)		(0.0006	)		(0.0005	)		(0.0011	)		(0.0008	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return5
Based on net asset value		0.02%			0.06%			0.05%			0.12%			0.09%	6
Ratios to Average Net Assets7
Total expenses		0.08%	8		0.09%	9		0.09%	8		0.13%			0.12%	10
Total expenses after fees waived		0.07%	8		0.09%	9		0.08%	8		0.08%			0.07%	10
Net investment income (loss)		0.01%	8		0.06%	9		0.03%	8		0.11%			0.08%	10
Supplemental Data
Net assets, end of period (000)	$	1,548,187		$	1,525,904		$	682,865		$	1,457,943		$	4,009,074

¹  Commencement of operations.

²  Amount is less than $0.00005 per share.

³  Determined in accordance with federal income tax regulations.

⁴  Amount is greater than $(0.00005) per share.

⁵  Where applicable, assumes the reinvestment of dividends and distributions.

⁶  Aggregate total investment return.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the year ended December 31, 2010 and the period ended December 31, 2009, which include gross expenses.

⁸  Includes the Fund’s share of the Master’s Portfolio allocated fees waived of 0.04%.

⁹  Includes the Fund’s share of the Master’s Portfolio allocated fees waived of 0.03%.

¹⁰  Annualized

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	33

Financial Highlights (concluded) BlackRock Cash Funds: Treasury

	Trust
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0001			0.0000	1		0.0003			0.0002			0.0007
Net realized gain		0.0000	1		—			—			—			—
Net increase from investment operations		0.0001			0.0000			0.0003			0.0002			0.0007
Dividends and distributions from:2
Net investment income		(0.0001	)		(0.0000	)3		(0.0003	)		(0.0002	)		(0.0007	)
Net realized gain		(0.0000	)3		—			—			—			—
Total dividends and distributions		(0.0001	)		(0.0000	)		(0.0003	)		(0.0002	)		(0.0007	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return4
Based on net asset value		0.01%			0.00%			0.03%			0.02%			0.08%
Ratios to Average Net Assets5
Total expenses		0.44%	6		0.45%	7		0.45%	6		0.48%			0.47%
Total expenses after fees waived		0.09%	6		0.15%	7		0.10%	6		0.16%			0.08%
Net investment income		0.00%	6		0.00%	7		0.00%	6		0.02%			0.08%
Supplemental Data
Net assets, end of year (000)	$	25,914		$	15,407		$	23,597		$	12,999		$	55,618

¹  Amount is less than $0.00005 per share.

²  Determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.00005) per share.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.04%.

⁷ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.03%.

See Notes to Financial Statements.
34	BLACKROCK FUNDS III	DECEMBER 31, 2013

Notes to Financial Statements BlackRock Funds III

1. Organization:

BlackRock Funds III (the “Trust”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Delaware statutory trust. The financial statements and these accompanying notes relate to four series of the Trust: BlackRock Cash Funds: Government (“Government”), BlackRock Cash Funds: Institutional (“Institutional”), BlackRock Cash Funds: Prime (“Prime”) and BlackRock Cash Funds: Treasury (“Treasury”) (each a “Fund” and together, the “Funds”). The Funds are classified as diversified. Each Fund seeks to achieve its investment objective by investing all of its assets in a corresponding series of Master Investment Portfolio (“MIP”): Government Money Market Master Portfolio, Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio (each a “Master Portfolio” and together, the “Master Portfolios”). Each Master Portfolio has the same investment objective and strategies as its corresponding Fund. The value of each Fund’s investment in its corresponding Master Portfolio reflects that Fund’s proportionate interest in the net assets of that Master Portfolio. The percentage of the Master Portfolio owned by the corresponding Fund at December 31, 2013 was 100% for Government, 98.0% for Institutional, 90.5% for Prime and 57.9% for Treasury. The performance of each Fund is directly affected by the performance of its corresponding Master Portfolio. The financial statements of the Master Portfolios, including the Schedules of Investments, are included elsewhere in this report and should be read in conjunction with the Funds’ financial statements. The Funds offer multiple classes of shares although certain share classes may not be outstanding at report date. Each Fund offers the following classes of shares: Institutional Shares, Select Shares, SL Agency Shares and Trust Shares. Institutional, Prime and Treasury also offer Capital Shares and Premium Shares and Institutional also offers Aon Captives Shares. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions and differ principally with respect to administration fees to which the classes are subject. The Aon Captives Shares also bear certain expenses related to the distribution of such shares. The Aon Captives Shares have exclusive voting rights with respect to matters relating to their distribution expenditures.

2. Significant Accounting Policies:

The Fund’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in 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 following is a summary of the significant accounting policies followed by the Trust:

Valuation: US GAAP defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. Each Fund’s policy is to fair value their financial instruments at market value. Each Fund records its investment in its corresponding Master Portfolio at fair value based on the Fund’s proportionate interest in the net assets of the respective Master Portfolio. Valuation of securities held by the Master Portfolios is discussed in Note 2 of the Master Portfolios’ Notes to Financial Statements, which are included elsewhere in this report.

Investment Transactions and Investment Income: For financial reporting purposes, contributions to and withdrawals from the Master Portfolios are accounted on a trade date basis. Each Fund records daily its proportionate share of its Master Portfolio’s income, expenses and realized and unrealized gains and losses. In addition, each Fund accrues its own expenses. Income, expenses and realized gains and losses are allocated daily to each class based on its relative net assets.

Dividends and Distributions: Dividends from net investment income are declared daily and paid monthly. Distributions of capital gains are recorded on the ex-dividend date. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

Income Taxes: It is each 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.

Management has analyzed tax laws and regulations and their application to the Funds’ facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

Other: Expenses directly related to a Fund or its classes are charged to that Fund or class. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to a Fund and other shared expenses pro rated to a Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

The Funds have an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statements of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.

3. Administration Agreement and Other Transactions with Affiliates:

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

The Trust entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL, in consideration thereof, has agreed to bear all of the Funds’ ordinary operating expenses, excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other

BLACKROCK FUNDS III DECEMBER 31, 2013 35

Notes to Financial Statements (continued) BlackRock Funds III

expenses which are borne by the Funds. BAL is entitled to receive for these administration services an annual fee based on the average daily net assets of each class of each Fund as follows:

	Government			Institutional			Prime			Treasury
Aon Captives		N/A			0.05	%		N/A			N/A
Capital		N/A			0.07	%1		0.07	%		0.07	%
Institutional		0.05	%1		0.05	%		0.05	%		0.05	%
Premium		N/A			0.10	%1		0.10	%		0.10	%1
Select		0.15	%		0.15	%		0.15	%		0.15	%
SL Agency		0.02	%1		0.02	%		0.02	%		0.02	%
Trust		0.38	%		0.38	%		0.38	%		0.38	%

¹  There were no shares outstanding as of December 31, 2013.

For the year ended December 31, 2013, the administration fees, which are included in administration — class specific in the Statements of Operations, for each class of each Fund are as follows:

	Government		Institutional		Prime		Treasury
Aon Captives		N/A	$	5,348		N/A		N/A
Capital		N/A		N/A	$	810,530	$	73,655
Institutional		—	$	1,543,023	$	2,151,482	$	390
Premium		N/A		—	$	2,887,597		—
Select	$	13,908	$	5,297	$	11,616	$	15,857
SL Agency	$	9,590	$	7,517,561	$	984,825	$	302,757
Trust	$	6,950	$	3,962	$	36,172	$	101,521

From time to time, BAL may waive such fees in whole or in part. Any such waiver will reduce the expenses of the Fund and, accordingly, have a favorable impact on its performance. BAL may delegate certain of its administration duties to sub-administrators.

BAL contractually agreed to waive a portion of its administration fees for the Select Shares through April 30, 2014. After giving effect to such contractual waiver, the administration fees for the Select Shares will be 0.13%. These amounts are included in fees waived by administrator — class specific in the Statements of Operations.

The fees and expenses of the Trust’s trustees who are not “interested persons” of the Trust, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and the Trust’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Funds. BAL has contractually agreed to provide an offsetting credit against the administration fees paid by the Funds in an amount equal to the independent expenses through April 30, 2014. These amounts are included in fees reimbursed by administrator in the Statements of Operations.

BAL has voluntarily agreed to waive administration fees to enable each Fund to maintain minimum levels of daily net investment income. These amounts are included in fees waived by administrator — class specific in the Statements of Operations. BAL may discontinue the waiver at any time.

For the year ended December 31, 2013, BAL waived administration fees for the Funds as follows:

	Government		Institutional		Prime		Treasury
Aon Captives		N/A		—		N/A		N/A
Capital		N/A		—	$	27	$	25,276
Institutional		—	$	13	$	105	$	130
Premium		N/A		—	$	67		—
Select	$	10,931	$	706	$	1,556	$	13,298
SL Agency	$	9,168	$	287	$	101	$	169,979
Trust	$	6,508	$	1,787	$	19,626	$	95,581

As of December 31, 2013, the only eligible investors for the SL Agency Shares of the Funds are investment companies for which (i) BlackRock Fund Advisors (“BFA”), the investment advisor to the Master Portfolios, BAL, or an affiliate provides investment advisory or administration services, or (ii) BlackRock Institutional Trust Company, N.A. (“BTC”) acts as securities lending agent and which have directed BTC on their behalf to invest securities lending cash collateral in the Funds. Affiliated shareholders in the SL Agency Shares of the Funds represent a significant portion of the outstanding shares and net assets of Institutional, Prime and Treasury.

The Trust, on behalf of the Funds, entered into a Distribution Agreement with BlackRock Investments, LLC (“BRIL”), an affiliate of BFA, and has adopted a Distribution Plan in accordance with Rule 12b-1 with respect to the Aon Captives Shares. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, Institutional pays BRIL ongoing distribution fees with respect to Aon Captives Shares. The fees are accrued daily and paid monthly at an annual rate of 0.10% based upon the average daily net assets of the Aon Captives Shares. The Capital Shares, Institutional Shares, Premium Shares, Select Shares, SL Agency Shares and Trust Shares of Institutional do not pay any fees for distribution services. The fees paid to BRIL by Institutional are shown as Distribution — Aon Captives in the Statements of Operations.

Certain officers and/or trustees of the trust are officers and/or directors of BlackRock or its affiliates.

4. Income Tax Information:

The tax character of distributions paid during the fiscal years ended December 31, 2013 and December 31, 2012 was as follows:

		Government		Institutional		Prime		Treasury
Ordinary income	12/31/13	$	95	$	72,293,689	$	17,136,363	$	351,357
	12/31/12		509		91,159,660		21,348,089		727,467
Long-term capital gains	12/31/13		—		545,377		138,858		—
Total	12/31/13	$	95	$	72,839,066	$	17,275,221	$	351,357
	12/31/12	$	509	$	91,159,660	$	21,348,089	$	727,467

As of December 31 2013, the tax components of accumulated net earnings were as follows:

	Government		Institutional		Prime		Treasury
Undistributed ordinary income	$	5	$	1,614,351	$	273,723	$	7,013

36 BLACKROCK FUNDS III DECEMBER 31, 2013

Notes to Financial Statements (continued) BlackRock Funds III

5. Capital Share Transactions:

The number of shares sold, reinvested and redeemed corresponds to the net proceeds from the sale of shares, reinvestment of dividends and distributions and cost of shares redeemed, respectively, since shares are sold and redeemed at $1.00 per share.

Transactions in capital shares for each class were as follows:

	Year Ended December 31,
Government	2013			2012
Select
Shares sold		36,617,364			47,947,695
Shares issued in reinvestment of dividends		17			495
Shares redeemed		(46,571,967	)		(40,266,660	)
Net increase (decrease)		(9,954,586	)		7,681,530
SL Agency
Shares sold		1,181,231,625			—
Shares issued in reinvestment of dividends		75			—
Shares redeemed		(1,181,231,700	)		—
Net increase (decrease)		—			—
Trust
Shares sold		7,857,226			6,237,056
Shares issued in reinvestment of dividends		1			13
Shares redeemed		(6,044,357	)		(6,661,860	)
Net increase (decrease)		1,812,870			(424,791	)
Total Net Increase (Decrease)		(8,141,716	)		7,256,739
Institutional
Aon Captives
Shares sold		3,789			5,005,789
Shares issued in reinvestment of dividends		638			2,097
Shares redeemed		(1,839,786	)		(3,172,508	)
Net increase (decrease)		(1,835,359	)		1,835,378
Premium
Shares sold		—			100,000,000
Shares issued in reinvestment of dividends		—			3,144
Shares redeemed		—			(100,003,144	)
Net increase (decrease)		—			—
Institutional
Shares sold		20,888,926,098			12,489,140,833
Shares issued in reinvestment of dividends		3,726,894			1,782,703
Shares redeemed		(19,301,551,219	)		(12,368,911,496	)
Net increase		1,591,101,773			122,012,040
Select
Shares sold		7,547,612			122,130,664
Shares issued in reinvestment of dividends		2,542			33,546
Shares redeemed		(14,685,554	)		(155,494,068	)
Net decrease		(7,135,400	)		(33,329,858	)
SL Agency
Shares sold		94,394,053,374			81,965,578,895
Shares issued in reinvestment of dividends		661			9,232
Shares redeemed		(89,877,412,805	)		(75,431,362,130	)
Net increase		4,516,641,230			6,534,225,997
Trust
Shares sold		1,185,699			13,152,188
Shares issued in reinvestment of dividends		63			480
Shares redeemed		(8,854,744	)		(15,578,466	)
Net decrease		(7,668,982	)		(2,425,798	)
Total Net Increase		6,091,103,262			6,622,317,759
Prime
Capital
Shares sold		28,341,001,132			19,623,999,355
Shares issued in reinvestment of dividends		750,392			802,827
Shares redeemed		(28,263,633,216	)		(18,686,770,627	)
Net increase		78,118,308			938,031,555
Institutional
Shares sold		43,747,600,396			26,679,153,266
Shares issued in reinvestment of dividends		1,976,183			2,281,837
Shares redeemed		(41,715,898,683	)		(25,728,716,808	)
Net increase		2,033,677,896			952,718,295
Premium
Shares sold		26,893,853,413			26,157,658,266
Shares issued in reinvestment of dividends		845,551			1,262,545
Shares redeemed		(25,706,683,546	)		(24,137,961,703	)
Net increase		1,188,015,418			2,020,959,108
Select
Shares sold		309,691,200			459,791,154
Shares issued in reinvestment of dividends		3,782			43,389
Shares redeemed		(320,058,938	)		(519,184,128	)
Net decrease		(10,363,956	)		(59,349,585	)
SL Agency
Shares sold		6,019,269,244			6,080,507,863
Shares issued in reinvestment of dividends		188			—
Shares redeemed		(6,207,632,067	)		(5,034,229,500	)
Net increase (decrease)		(188,362,635	)		1,046,278,363
Trust
Shares sold		11,023,331			39,817,031
Shares issued in reinvestment of dividends		1,046			—
Shares redeemed		(24,641,122	)		(47,776,512	)
Net decrease		(13,616,745	)		(7,959,481	)
Total Net Increase		3,087,468,286			4,890,678,255

BLACKROCK FUNDS III DECEMBER 31, 2013 37

Notes to Financial Statements (concluded) BlackRock Funds III

		Year Ended December 31,
Treasury		2013			2012
Capital
Shares sold			374,248,441			398,815,698
Shares issued in reinvestment of dividends			2,088			10,682
Shares redeemed			(646,660,567	)		(144,076,039	)
Net increase (decrease)			(272,410,038	)		254,750,341
Institutional
Shares sold			45,000,000			—
Shares issued in reinvestment of dividends			344			1,486
Shares redeemed			(45,000,344	)		(8,941,292	)
Net decrease			—			(8,939,806	)
Premium
Shares sold			—			150,000
Shares issued in reinvestment of dividends			—			–
Shares redeemed			—			(150,000	)
Net increase (decrease)			—			—
Select	��
Shares sold			32,535,021			74,096,608
Shares issued in reinvestment of dividends			1,143			1,412
Shares redeemed			(32,684,337	)		(76,674,347	)
Net decrease			(148,173	)		(2,576,327	)
SL Agency
Shares sold			50,235,417,155			34,307,460,448
Shares issued in reinvestment of dividends			14,904			13,032
Shares redeemed			(50,213,111,304	)		(33,464,457,731	)
Net increase			22,320,755			843,015,749
Trust
Shares sold			38,558,851			31,333,371
Shares issued in reinvestment of dividends			2,827			2,199
Shares redeemed			(28,055,613	)		(39,527,026	)
Net increase (decrease)			10,506,065			(8,191,456	)
Total Net Increase (Decrease)			(239,731,391	)		1,078,058,501

6. Subsequent Events:

Management has evaluated the impact of all subsequent events on Funds 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.

38 BLACKROCK FUNDS III DECEMBER 31, 2013

Report of Independent Registered Public Accounting Firm BlackRock Funds III

To the Board of Trustees of BlackRock Funds III and the Shareholders of BlackRock Cash Funds: Government, BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and BlackRock Cash Funds: Treasury:

In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock Cash Funds: Government, BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and BlackRock Cash Funds: Treasury (the “Funds”), each a series of BlackRock Funds III, at December 31, 2013, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 18, 2014

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by Government, Institutional, Prime and Treasury for the taxable year ended December 31, 2013.

Interest Related Dividends and Qualified Short-Term Capital Gains for Non-US Residents1
	Months Paid
	January —December 2013
Government		100.00%
Institutional		54.71%
Prime		62.98%
Treasury		100.00%
Federal Obligation Interest2
Government		0.54%
Institutional		5.25%
Prime		3.18%
Treasury		46.17%

¹  Represents the portion of the taxable ordinary dividends eligible for exemption from US withholding tax for nonresident aliens and foreign corporations.

²  The law varies in each state as to whether and what percentage of dividend income attributable to Federal obligations is exempt from state income tax. We recommend that you consult your tax advisor to determine if any of the dividends you received is exempt from state income taxes.

Additionally, the Funds listed below distributed long-term capital gains per share on the following payable dates:

Payable Dates	9/03/13		12/17/13
Institutional		—		$0.000012441
Prime		$0.000009570		$0.000001049

BLACKROCK FUNDS III DECEMBER 31, 2013 39

Master Portfolio Information as of December 31, 2013 Master Investment Portfolio

Government Money Market Master Portfolio

Portfolio Composition	Percent of Net Assets
Repurchase Agreements		100	%
Total		100%

Prime Money Market Master Portfolio

Portfolio Composition	Percent of Net Assets
Commercial Paper		30	%
Certificates of Deposit		28
Time Deposits		11
US Government Sponsored Agency Obligations		9
US Treasury Obligations		8
Repurchase Agreements		8
Corporate Notes		3
Other Assets Less Liabilities		3
Total		100%

Money Market Master Portfolio

Portfolio Composition	Percent of Net Assets
Certificates of Deposit		41	%
Commercial Paper		29
US Treasury Obligations		13
Repurchase Agreements		8
Time Deposits		5
US Government Sponsored Agency Obligations		3
Corporate Notes		1
Total		100%

Treasury Money Market Master Portfolio

Portfolio Composition	Percent of Net Assets
US Treasury Obligations		64	%
Repurchase Agreements		38
Liabilities in Excess of Other Assets		(2	)
Total		100%

40 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments December 31, 2013 Government Money Market Master Portfolio (Percentages shown are based on Net Assets)

Repurchase Agreements	Par   (000)		Value
Barclays Capital, Inc., 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $1,000,001, collateralized by a US Treasury obligation, 0.75%, due 6/30/17, original par and fair value of $1,030,400 and $1,020,014, respectively)	$	1,000	$	1,000,000
Total Value of Barclays Capital, Inc. (collateral value of $1,020,014)				1,000,000
BNP Paribas Securities Corp., 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $1,000,001, collateralized by a US Treasury obligation, 3.38%, due 4/15/32, original par and fair value of $580,000 and $1,025,840, respectively)		1,000		1,000,000
Total Value of BNP Paribas Securities Corp. (collateral value of $1,025,840)				1,000,000
Citigroup Global Markets, Inc., 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $1,500,001, collateralized by a US Treasury obligation, 3.63%, due 2/15/21, original par and fair value of $1,398,100 and $1,530,045, respectively)		1,500		1,500,000
Total Value of Citigroup Global Markets, Inc. (collateral value of $1,530,045)				1,500,000
Deutsche Bank Securities, Inc., 0.03%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $1,000,002, collateralized by various US Government Agency obligations, 5.00%, due 8/15/41, original par and fair value of $946,059 and $1,020,000, respectively)		1,000		1,000,000
Total Value of Deutsche Bank Securities, Inc. (collateral value of $1,020,000)				1,000,000
Goldman Sachs & Co., 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $991,001, collateralized by a US Government Agency obligation, 0.00%, due 12/15/43, original par and fair value of $1,169,152 and $1,060,371, respectively)		991		991,000
Total Value of Goldman Sachs & Co. (collateral value of $1,060,371)				991,000
Repurchase Agreements	Par   (000)		Value
HSBC Securities (USA) Inc., 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $1,500,001, collateralized by various US Treasury obligations, 3.50% to 4.63%, due 2/15/39 to 2/15/40, original par and fair value of $1,495,000 and $1,531,111, respectively)	$	1,500	$	1,500,000
Total Value of HSBC Securities (USA) Inc. (collateral value of $1,531,111)				1,500,000
Morgan Stanley & Co. LLC, 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $1,000,001, collateralized by various US Treasury obligations, 2.63% to 4.25%, due 11/15/20 to 11/15/40, original par and fair value of $974,100 and $1,020,035, respectively)		1,000		1,000,000
Total Value of Morgan Stanley & Co. LLC (collateral value of $1,020,035)				1,000,000
TD Securities (USA) LLC, 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $1,500,001, collateralized by various US Treasury obligations, 3.63% to 5.38%, due 8/15/19 to 2/15/31, original par and fair value of $1,277,200 and $1,530,054, respectively)		1,500		1,500,000
Total Value of TD Securities (USA) LLC (collateral value of $1,530,054)				1,500,000
Total Investments (Cost — $9,491,000*) — 100.3%				9,491,000
Liabilities in Excess of Other Assets — (0.3)%				(24,605	)
Net Assets — 100.0%			$	9,466,395

Notes to Schedule of Investments

* Cost for federal income tax purposes.

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 41

Schedule of Investments (concluded) Government Money Market Master Portfolio

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Short-Term Securities1		—	$	9,491,000		—	$	9,491,000
1   See above Schedule of Investments for values in each security type.

The carrying amount for certain of the Master Portfolio’s asset approximates fair value for financial statement purposes. As of December 31, 2013, cash of $262 is categorized as Level 1 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2013.

See Notes to Financial Statements.

42 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments December 31, 2013 Money Market Master Portfolio (Percentages shown are based on Net Assets)

Certificates of Deposit	Par   (000)		Value
Euro — 0.8%
National Australia Bank Ltd., London, 0.24%, 10/23/14 (a)	$	340,000	$	340,000,033
Yankee (b) — 40.0%
Bank of Montreal, Chicago (a):
0.34%, 1/10/14		210,000		210,000,000
0.24%, 9/05/14		250,000		250,000,000
0.24%, 10/09/14		100,000		100,000,000
0.23%, 10/21/14		200,000		200,000,000
Bank of Nova Scotia, Houston:
0.26%, 6/19/14		250,000		249,994,143
0.28%, 8/08/14 (a)		185,000		185,000,000
0.25%, 11/10/14 (a)		142,700		142,893,821
0.26%, 11/18/14 (a)		200,000		200,000,000
0.26%, 11/25/14 (a)		75,000		74,999,812
0.26%, 12/05/14 (a)		175,000		175,000,000
Bank of Tokyo-Mitsubishi UFJ Ltd., New York, 0.26%, 1/10/14		200,000		200,000,000
Barclays Bank PLC, New York, 0.25%, 2/03/14		200,000		200,000,000
BNP Paribas SA, New York:
0.33%, 2/03/14 (a)		200,000		200,000,000
0.35%, 3/06/14		196,650		196,650,000
0.31%, 4/21/14		100,000		100,000,000
0.32%, 4/21/14		300,000		300,000,000
Canadian Imperial Bank of Commerce, New York (a):
0.27%, 2/04/14		250,000		250,000,000
0.27%, 3/03/14		300,000		300,000,000
0.29%, 6/02/14		553,015		553,015,000
Credit Industriel et Commercial, New York:
0.25%, 3/11/14		230,000		230,000,000
0.25%, 4/07/14		470,000		470,000,000
Credit Suisse, New York:
0.26%, 3/18/14		202,000		202,000,000
0.26%, 4/22/14		400,000		400,000,000
0.32%, 6/06/14 (a)		162,000		162,000,000
Deutsche Bank AG, New York (a):
0.30%, 2/28/14		270,000		270,000,000
0.25%, 4/30/14		173,000		173,000,000
DNB Bank ASA, New York:
0.16%, 1/15/14		20,000		20,000,000
0.25%, 2/25/14		200,000		200,000,000
Mitsubishi UFJ Trust & Banking Corp., New York:
0.26%, 1/03/14		250,000		250,000,000
0.20%, 2/10/14		50,000		50,000,000
0.26%, 3/12/14		450,000		450,000,000
Mizuho Bank Ltd., New York:
0.24%, 2/24/14		200,000		200,000,000
0.24%, 3/03/14		300,000		300,000,000
0.24%, 3/24/14		200,000		200,000,000
0.26%, 4/21/14		250,000		250,000,000
National Australia Bank Ltd., New York (a):
0.26%, 8/08/14		250,000		250,007,021
0.24%, 8/13/14		190,000		190,000,000
0.23%, 8/14/14		165,000		165,009,919
National Bank of Canada, New York, 0.30%, 3/10/14 (a)		244,900		244,900,000
Natixis, New York:
0.26%, 2/03/14		489,950		489,950,000
0.30%, 2/18/14		26,000		25,997,573
0.30%, 9/08/14 (a)		206,200		206,185,954
Nordea Bank Finland PLC, New York:
0.25%, 1/06/14		230,000		230,000,000
0.25%, 1/07/14		175,000		175,000,000
0.25%, 1/17/14		35,000		35,000,000
Norinchukin Bank, New York, 0.10%, 1/06/14		970,000		970,000,000
Certificates of Deposit	Par   (000)		Value
Yankee (b) (concluded)
Oversea-Chinese Banking Corp. Ltd., New York, 0.23%, 5/07/14	$	100,000	$	100,000,000
Rabobank Nederland, New York (a):
0.29%, 3/12/14		124,500		124,500,000
0.29%, 3/14/14		510,000		510,000,000
0.28%, 8/28/14		329,000		329,000,000
Royal Bank of Canada, New York (a):
0.23%, 1/15/14		150,000		150,000,000
0.24%, 3/19/14		55,000		55,004,669
0.24%, 3/27/14		175,000		175,000,000
0.25%, 4/08/14		405,000		405,000,000
0.25%, 10/31/14		150,000		150,000,000
Societe Generale, New York, 0.34%, 9/19/14 (a)		225,000		225,000,000
Sumitomo Mitsui Banking Corp., New York:
0.25%, 2/24/14		197,000		197,002,930
0.26%, 3/03/14		400,000		400,000,000
0.26%, 3/10/14		400,000		400,000,000
Sumitomo Mitsui Trust Bank Ltd., New York:
0.28%, 1/03/14		200,000		200,000,000
0.26%, 4/21/14		200,000		200,000,000
0.26%, 5/19/14		300,000		300,000,000
Svenska Handelsbanken, New York, 0.16%, 1/07/14		5,000		5,000,004
Toronto-Dominion Bank, New York:
0.32%, 4/02/14		190,000		190,000,000
0.25%, 8/12/14		235,000		235,000,000
0.26%, 9/05/14		225,000		225,000,000
UBS AG, Stamford, 0.29%, 4/30/14 (a)		358,000		358,000,000
Wells Fargo Bank NA (a):
0.18%, 3/12/14		50,000		50,000,000
0.24%, 12/04/14		150,000		150,000,000
Westpac Banking Corp., New York (a):
0.28%, 4/14/14		277,000		277,000,000
0.28%, 4/28/14		300,000		300,000,000
				16,607,110,846
Total Certificates of Deposit — 40.8%				16,947,110,879
Commercial Paper
Australia & New Zealand Banking Group Ltd. (a):
0.24%, 1/17/14		200,000		200,000,000
0.27%, 2/25/14		137,000		137,000,000
0.36%, 5/02/14		300,000		300,000,000
0.24%, 8/15/14		145,000		145,000,000
London, 0.29%, 6/04/14 (c)		200,000		199,751,889
Bank of Nova Scotia (c):
0.27%, 4/04/14		50,000		49,965,771
0.27%, 7/07/14		100,000		99,862,347
Bedford Row Funding Corp. (c):
0.30%, 3/17/14		17,500		17,489,063
0.30%, 3/19/14		26,000		25,983,317
0.30%, 3/24/14		50,000		49,965,833
0.27%, 7/01/14		80,750		80,640,382
0.30%, 8/13/14		50,000		49,906,667
BNP Paribas Finance, Inc. (c):
0.30%, 3/18/14		132,015		131,931,391
0.33%, 6/06/14		111,200		111,040,984
Ciesco LLC, 0.25%, 2/04/14 (c)		38,000		37,991,028
Collateralized Commercial Paper Co. LLC (c):
0.26%, 1/27/14		100,000		99,981,222
0.30%, 2/03/14		150,000		149,958,750
0.30%, 2/05/14		200,000		199,941,667
0.30%, 3/06/14		200,000		199,893,334
0.27%, 3/11/14		45,560		45,536,423
0.28%, 4/17/14		100,000		99,917,556
0.28%, 6/17/14		100,000		99,870,111

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 43

Schedule of Investments (continued) Money Market Master Portfolio (Percentages shown are based on Net Assets)

Commercial Paper	Par   (000)		Value
Commonwealth Bank of Australia (a):
0.27%, 3/28/14	$	200,000	$	200,000,000
0.26%, 4/04/14		250,000		250,000,000
0.24%, 9/11/14		300,000		300,000,000
0.24%, 9/19/14		197,000		197,000,000
0.25%, 9/22/14		100,000		100,000,000
0.24%, 11/14/14		65,000		65,000,000
CRC Funding LLC (c):
0.25%, 2/10/14		83,823		83,799,716
0.25%, 2/12/14		50,000		49,985,417
DBS Bank Ltd.:
0.25%, 2/10/14 (c)		120,300		120,266,583
0.27%, 9/30/14 (a)		100,000		99,989,631
Deutsche Bank Financial LLC, 0.28%, 3/31/14 (c)		200,000		199,861,556
DNB Bank ASA (c):
0.26%, 1/27/14		50,000		49,990,611
0.24%, 3/06/14		124,175		124,123,122
0.24%, 3/13/14		89,131		89,088,811
Govco LLC (c):
0.25%, 2/05/14		198,999		198,950,632
0.25%, 2/06/14		100,000		99,975,000
HSBC Bank PLC (a):
0.29%, 5/02/14		175,000		175,000,000
0.29%, 5/07/14		100,000		100,000,000
0.27%, 6/20/14 (d)		232,500		232,500,000
0.28%, 8/06/14		30,000		30,000,000
0.27%, 9/10/14		66,000		66,000,000
0.26%, 9/19/14 (d)		194,000		194,000,000
0.25%, 10/22/14 (d)		75,000		75,000,000
0.26%, 11/19/14		242,500		242,500,000
ING (US) Funding LLC (c):
0.29%, 1/16/14		26,640		26,636,781
0.29%, 2/11/14		200,000		199,933,944
0.29%, 2/13/14		181,250		181,187,217
0.28%, 2/21/14		112,463		112,418,390
0.28%, 3/12/14		463,500		463,247,650
Kells Funding LLC:
0.22%, 3/18/14 (a)		175,000		175,000,000
0.23%, 3/20/14 (c)		50,000		49,975,083
0.21%, 4/28/14 (a)		100,000		100,000,000
0.24%, 10/22/14 (a)(d)		150,000		150,000,000
LMA Americas LLC, 0.14%, 1/03/14 (c)		400,000		399,996,889
Nederlandse Waterschapsbank NV (a):
0.21%, 6/24/14 (d)		72,000		72,000,000
0.25%, 7/07/14		230,000		230,012,363
0.25%, 7/08/14		100,000		100,006,425
0.26%, 7/28/14		65,000		65,007,503
0.26%, 7/30/14		65,000		65,007,575
0.25%, 10/29/14		50,000		50,000,252
0.25%, 10/31/14		125,000		125,000,000
Nordea Bank AB (c):
0.26%, 2/03/14		150,000		149,964,937
0.25%, 2/05/14		90,000		89,978,125
Northern Pines Funding LLC, 0.26%, 3/06/14 (c)		200,000		199,907,555
Old Line Funding LLC, 0.22%, 3/24/14 (a)		150,000		150,000,000
Oversea-Chinese Banking Corp. Ltd., 0.25%, 6/09/14 (c)		197,000		196,782,479
Skandinaviska Enskilda Banken AB (c):
0.27%, 4/01/14		24,320		24,303,584
0.27%, 4/09/14		200,000		199,850,278
0.27%, 4/16/14		300,000		299,763,750
0.27%, 4/21/14 (d)		100,000		99,917,500
0.26%, 6/13/14		100,000		99,880,014
0.30%, 7/02/14		45,000		44,931,750
Societe Generale North America, Inc. (c):
0.25%, 2/03/14		650,000		649,852,875
0.25%, 3/03/14		325,000		324,862,326
Commercial Paper	Par   (000)		Value
Sumitomo Mitsui Trust Bank Ltd., 0.26%, 5/01/14 (c)	$	200,000	$	199,826,667
Svenska Handelsbanken, Inc., New York (c):
0.25%, 2/03/14		110,000		109,974,792
0.25%, 2/07/14		100,000		99,974,306
0.25%, 2/12/14		100,000		99,970,833
Toyota Credit Canada, Inc., 0.29%, 1/03/14 (c)		50,000		49,999,194
Westpac Banking Corp., New York (a):
0.27%, 7/09/14		273,245		273,245,000
0.24%, 9/19/14 (d)		44,000		43,996,956
0.23%, 9/23/14		150,000		150,001,347
0.23%, 9/26/14 (d)		150,000		150,000,949
Westpac Securities NZ, Ltd. London, 0.31%, 1/30/14 (a)		61,500		61,499,941
Total Commercial Paper — 29.4%				12,208,574,044
Corporate Notes
KFW, Medium Term Note, 0.21%, 2/28/14		90,000		89,992,645
Rabobank Nederland NV, Medium Term Note, 0.59%, 4/14/14 (a)		51,920		51,972,656
Svenska Handelsbanken AB, 0.28%, 6/15/14 (a)(d)		295,800		295,800,000
Toyota Motor Credit Corp., Medium Term Note, 0.32%, 8/22/14 (a)		86,800		86,855,791
Total Corporate Notes — 1.3%				524,621,092
Time Deposits
Credit Agricole Corporate & Investment Bank, 0.03%, 1/02/14		685,000		685,000,000
Natixis, 0.05%, 1/02/14		1,200,000		1,200,000,000
Svenska Handelsbanken AB, 0.01%, 1/02/14		200,000		200,000,000
Total Time Deposits — 5.0%				2,085,000,000
US Government Sponsored Agency Obligations
Fannie Mae, 0.27%, 2/04/16 (a)		50,000		50,093,270
Federal Farm Credit Bank (a):
0.12%, 3/07/14		40,000		39,999,342
0.13%, 5/23/14		50,000		49,997,138
0.14%, 7/17/15		100,000		99,984,389
0.20%, 7/20/15		66,800		66,853,108
0.17%, 2/05/16		100,000		99,978,781
0.19%, 2/16/16		95,800		95,799,942
0.20%, 3/30/16		87,800		87,819,855
Federal Home Loan Bank:
0.15%, 9/18/14 (c)		50,000		49,947,639
0.14%, 11/18/14 (a)		110,000		109,995,133
0.14%, 12/09/14 (a)		200,000		200,000,000
0.15%, 7/16/15 (a)		140,000		140,000,000
Freddie Mac Discount Notes, 0.16%, 1/14/14 (c)		30,000		29,998,267
Total US Government Sponsored Agency Obligations — 2.7%				1,120,466,864
US Treasury Obligations
US Treasury Bills (c):
0.07%, 2/13/14		400,000		399,965,839
0.08%, 2/20/14		425,000		424,952,778
0.08%, 2/27/14		250,000		249,967,146
0.08%, 3/06/14		200,000		199,970,667
0.13%, 4/24/14		200,000		199,918,389
0.10%, 5/29/14		100,000		99,958,889

See Notes to Financial Statements.

44 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments (continued) Money Market Master Portfolio (Percentages shown are based on Net Assets)

US Treasury Obligations	Par   (000)		Value
US Treasury Bills (c) (concluded):
0.11%, 6/05/14	$	200,000	$	199,909,583
0.10%, 6/12/14		200,000		199,912,700
0.09%, 6/26/14		400,000		399,831,822
0.09%, 7/03/14		300,000		299,868,429
US Treasury Notes:
1.00%, 1/15/14		150,000		150,051,356
0.25%, 1/31/14		859,000		859,091,600
1.25%, 2/15/14		379,000		379,524,546
0.25%, 2/28/14		462,000		462,088,009
0.25%, 4/30/14		200,000		200,091,951
0.25%, 5/31/14		200,000		200,111,888
0.75%, 6/15/14		300,000		300,818,403
0.50%, 8/15/14		325,000		325,731,455
Total US Treasury Obligations — 13.4%				5,551,765,450
Repurchase Agreements
BNP Paribas Securities Corp., 0.13%, 1/02/14, (Purchased on 3/25/13 to be repurchased at $165,168,621, collateralized by various Corporate/Debt Obligations, 0.41% to 8.75%, due 10/18/15 to 4/25/40, original par and fair value of $169,547,135 and $172,507,166, respectively)		165,000		165,000,000
BNP Paribas Securities Corp., 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $1,000,001, collateralized by a US Treasury Obligation, 3.63%, due 2/15/21, original par and fair value of $932,100 and $1,020,067, respectively)		1,000		1,000,000
Total Value of BNP Paribas Securities Corp. (collateral value of $173,527,233)				166,000,000
Citigroup Global Markets, Inc., 0.47%, 2/03/14, (Purchased on 3/25/13 to be repurchased at $130,534,625, collateralized by various Corporate/Debt Obligations, a US Treasury Obligation and various US Government Sponsored Agency Obligations, 0.70% to 11.00%, due 8/01/14 to 12/31/49, original par and fair value of $534,687,582 and $137,182,506, respectively) (e)		130,000		130,000,000
Citigroup Global Markets, Inc., 0.38%, 1/02/14, (Purchased on 3/25/13 to be repurchased at $95,283,786, collateralized by various US Government Sponsored Agency Obligations and various US Treasury Obligations, 0.00% to 5.25%, due 5/01/14 to 12/30/33, original par and fair value of $96,657,300 and $96,900,059, respectively)		95,000		95,000,000
Citigroup Global Markets, Inc., 0.02%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $75,000,083, collateralized by various US Government Sponsored Agency Obligations, 2.41% to 5.50%, due 8/01/22 to 10/01/43, original par and fair value of $184,165,981 and $77,351,741, respectively)		75,000		75,000,000
Total Value of Citigroup Global Markets, Inc. (collateral value of $311,434,306)				300,000,000
Repurchase Agreements	Par   (000)		Value
Credit Suisse Securities (USA) LLC, 0.48%, 2/04/14, (Purchased on 3/25/13 to be repurchased at $150,632,000, collateralized by various Corporate/Debt Obligations and various US Government Sponsored Agency Obligations, 0.00% to 14.51%, due 8/25/21 to 12/25/59, original par and fair value of $1,478,404,901 and $166,783,725, respectively) (e)	$	150,000	$	150,000,000
Credit Suisse Securities (USA) LLC, 0.48%, 2/04/14, (Purchased on 3/25/13 to be repurchased at $251,053,333, collateralized by various Corporate/Debt Obligations and various US Government Sponsored Agency Obligations, 0.00% to 8.58%, due 9/25/17 to 8/26/52, original par and fair value of $1,036,677,433 and $280,013,348, respectively) (e)		250,000		250,000,000
Credit Suisse Securities (USA) LLC, 0.41%, 1/16/14, (Purchased on 11/18/13 to be repurchased at $83,055,771, collateralized by various Corporate/Debt Obligations and various US Government Sponsored Agency Obligations, 0.00% to 8.00%, due 4/18/17 to 5/16/51, original par and fair value of $383,546,585 and $88,821,548, respectively)		83,000		83,000,000
Total Value of Credit Suisse Securities (USA) LLC (collateral value of $535,618,621)				483,000,000
Goldman Sachs & Co., 0.13%, 1/03/14, (Purchased on 12/27/13 to be repurchased at $200,005,056, collateralized by various US Government Sponsored Agency Obligations, 5.49% to 6.54%, due 6/25/27 to 11/15/43, original par and fair value of $1,138,480,199 and $214,000,000, respectively)		200,000		200,000,000
Total Value of Goldman Sachs & Co. (collateral value of $214,000,000)				200,000,000
HSBC Securities (USA), Inc., 0.11%, 1/02/14, (Purchased on 8/27/13 to be repurchased at $100,039,111, collateralized by various Corporate/Debt Obligations, 3.50% to 9.50%, due 10/01/14 to 1/15/24, original par and fair value of $101,624,000 and $104,528,233, respectively)		100,000		100,000,000
Total Value of HSBC Securities (USA), Inc. (collateral value of $104,528,233)				100,000,000
J.P. Morgan Securities LLC, 0.28%, 2/14/14, (Purchased on 3/25/13 to be repurchased at $200,507,111, collateralized by various Corporate/Debt Obligations, 0.31% to 8.13%, due 3/7/14 to 7/24/42, original par and fair value of $244,495,493 and $210,366,464, respectively) (e)		200,000		200,000,000
J.P. Morgan Securities LLC, 0.38%, 1/02/14, (Purchased on 3/25/13 to be repurchased at $60,179,233, collateralized by various Corporate/Debt Obligations, 0.00% to 9.00%, due 04/15/14 to 4/10/49, original par and fair value of $419,532,758 and $72,435,177, respectively)		60,000		60,000,000

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 45

Schedule of Investments (continued) Money Market Master Portfolio (Percentages shown are based on Net Assets)

Repurchase Agreements	Par   (000)		Value
J.P. Morgan Securities LLC, 0.61%, 3/24/14, (Purchased on 12/24/13 to be repurchased at $500,762,500, collateralized by various Corporate/Debt Obligations, 0.00% to 7.54%, due 11/25/19 to 2/12/51, original par and fair value of $3,251,463,761 and $625,005,539, respectively)	$	500,000	$	500,000,000
Total Value of J.P. Morgan Securities LLC (collateral value of $907,807,180)				760,000,000
Merrill Lynch, Pierce, Fenner & Smith Inc., 0.18%, 1/02/14, (Purchased on 3/25/13 to be repurchased at $100,141,500, collateralized by various Corporate/Debt Obligations and various US Government Sponsored Agency Obligations, 0.49% to 7.45%, due 1/07/14 to 8/25/44, original par and fair value of $1,555,004,165 and $107,625,655, respectively)		100,000		100,000,000
Merrill Lynch, Pierce, Fenner & Smith Inc., 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $1,000,001, collateralized by a US Treasury Obligation, 2.00% due 09/30/2020, original par and fair value of $1,035,500 and $1,020,035, respectively)		1,000		1,000,000
Total Value of Merrill Lynch, Pierce, Fenner & Smith Inc. (collateral value of $108,645,690)				101,000,000
Morgan Stanley & Co. LLC, 0.11%, 1/02/14, (Purchased on 3/25/13 to be repurchased at $90,077,825, collateralized by various US Government Sponsored Agency Obligations, 2.18% to 6.28%, due 9/01/26 to 9/01/43, original par and fair value of $182,543,999 and $92,700,000, respectively)		90,000		90,000,000
Morgan Stanley & Co. LLC, 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $1,000,001, collateralized by a US Treasury Obligation, 0.38%, due 6/30/15, original par and fair value of $1,018,000 and $1,020,067, respectively)		1,000		1,000,000
Total Value of Morgan Stanley & Co. LLC (collateral value of $93,720,067)				91,000,000
RBC Capital Markets, LLC, 0.10%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $196,001,089, collateralized by various Corporate/Debt Obligations, 0.25% to 12.00%, due 1/15/14 to 12/31/49, original par and fair value of $199,092,637 and $205,800,001, respectively)		196,000		196,000,000
RBC Capital Markets, LLC, 0.13%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $51,000,368, collateralized by various Corporate/Debt Obligations, 0.00% due 2/19/14 to 1/31/18, original par and fair value of $53,806,506 and $53,550,001, respectively)		51,000		51,000,000
Total Value of RBC Capital Markets, LLC (collateral value of $259,350,002)				247,000,000
Repurchase Agreements	Par   (000)		Value
SG Americas Securities, LLC, 0.27%, 1/02/14, (Purchased on 12/16/13 to be repurchased at $50,006,375, collateralized by various Corporate/Debt Obligations, 4.65% to 8.00%, due 1/15/14 to 3/30/67, original par and fair value of $56,537,623 and $57,496,675, respectively)	$	50,000	$	50,000,000
Total Value of SG Americas Securities, LLC (collateral value of $57,496,675)				50,000,000
Wells Fargo Securities, LLC, 0.18%, 1/02/14, (Purchased on 3/25/13 to be repurchased at $320,452,800, collateralized by various Corporate/Debt Obligations and various US Government Sponsored Agency Obligations, 0.00% to 12.00%, due 1/11/14 to 5/10/63, original par and fair value of $1,685,739,366 and $334,584,676, respectively)		320,000		320,000,000
Wells Fargo Securities, LLC, 0.47%, 1/03/14, (Purchased on 9/24/13 to be repurchased at $93,137,651, collateralized by various Corporate/Debt Obligations and various US Government Sponsored Agency Obligations, 0.00% to 9.63%, due 1/28/14 to 5/10/63, original par and fair value of $265,032,667 and $97,079,445, respectively)		93,015		93,015,000
Wells Fargo Securities, LLC, 0.47%, 1/07/14, (Purchased on 10/1/13 to be repurchased at $187,739,896, collateralized by various Corporate/Debt Obligations and various US Government Sponsored Agency Obligations, 0.00% to 9.25%, due 1/11/14 to 2/10/51, original par and fair value of $453,613,749 and $195,765,714, respectively)		187,500		187,500,000
Wells Fargo Securities, LLC, 0.38%, 2/06/14, (Purchased on 11/4/13 to be repurchased at $183,181,577, collateralized by various Corporate/Debt Obligations and various US Government Sponsored Agency Obligations, 0.00% to 10.75%, due 5/14/14 to 8/01/69, original par and fair value of $349,470,294 and $203,716,047, respectively)		183,000		183,000,000
Total Value of Wells Fargo Securities, LLC (collateral value of $831,145,882)				783,515,000
Total Repurchase Agreements — 7.9%				3,281,515,000
Total Investments (Cost — $41,719,053,329*) — 100.5%				41,719,053,329
Liabilities in Excess of Other Assets — (0.5)%				(194,618,637	)
Net Assets — 100.0%			$	41,524,434,692

Notes to Schedule of Investments

* Cost for federal income tax purposes.

(a) Variable rate security. Rate shown is as of report date.

(b) Issuer is a US branch of foreign domiciled bank.

See Notes to Financial Statements.

46 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments (concluded) Money Market Master Portfolio

(c) Rates shown are discount rates or a range of discount rates paid at the time of purchase.

(d) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(e) Variable rate security. Rate shown is as of report date and maturity shown is the date the principal owed can be recovered through demand.

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Short-Term Securities1		—	$	41,719,053,329		—	$	41,719,053,329
1   See above Schedule of Investments for values in each security type.

The carrying amount for certain of the Master Portfolio’s asset approximates fair value for financial statement purposes. As of December 31, 2013, cash of $93,281,849 is categorized as Level 1 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2013.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 47

Schedule of Investments December 31, 2013 Prime Money Market Master Portfolio (Percentages shown are based on Net Assets)

Certificates of Deposit	Par   (000)		Value
Euro — 0.7%
HSBC Bank PLC, 0.30%, 1/15/14	$	90,000	$	90,000,000
National Australia Bank Ltd., London, 0.25%, 3/07/14		50,000		50,000,000
				140,000,000
Yankee (a) — 27.3%
Bank of Montreal, Chicago (b):
0.34%, 1/10/14		80,000		80,000,000
0.24%, 9/05/14		50,000		50,000,000
0.24%, 10/09/14		50,000		50,000,000
Bank of Nova Scotia, Houston:
0.26%, 5/14/14		100,000		100,000,000
0.26%, 6/03/14		100,000		100,000,000
0.28%, 8/08/14 (b)		65,000		65,000,000
Barclays Bank PLC, New York, 0.25%, 2/03/14		150,000		150,000,000
Canadian Imperial Bank of Commerce, New York (b):
0.27%, 2/04/14		100,000		100,000,000
0.28%, 3/21/14		100,000		100,000,000
0.29%, 6/02/14		162,470		162,470,000
Credit Industriel et Commercial, New York:
0.25%, 3/11/14		150,000		150,000,000
0.25%, 4/07/14		127,000		127,000,000
Credit Suisse, New York, 0.32%, 6/06/14 (b)		54,000		54,000,000
Mitsubishi UFJ Trust & Banking Corp., New York:
0.26%, 1/03/14		50,000		50,000,000
0.26%, 1/06/14		100,000		100,000,000
0.24%, 2/06/14		100,000		100,000,000
0.20%, 2/10/14		25,000		25,000,000
0.26%, 3/12/14		100,000		100,000,000
Mizuho Bank Ltd., New York:
0.24%, 3/24/14		100,000		100,000,000
0.22%, 4/24/14		100,000		100,000,000
National Australia Bank Ltd., New York, 0.27%, 8/08/14 (b)		50,000		50,000,000
Natixis, New York:
0.26%, 2/03/14		75,000		75,000,000
0.29%, 9/08/14 (b)		70,000		69,995,232
Nordea Bank Finland PLC, New York:
0.25%, 1/07/14		125,000		125,000,000
0.25%, 2/03/14		47,600		47,600,000
Norinchukin Bank, New York, 0.10%, 1/06/14		700,000		700,000,000
Oversea-Chinese Banking Corp. Ltd., New York:
0.24%, 3/04/14		100,000		99,999,996
0.23%, 5/07/14		100,000		100,000,000
Rabobank Nederland, New York:
0.41%, 1/08/14		15,000		15,000,000
0.24%, 1/27/14 (b)		91,000		91,000,000
0.29%, 3/14/14 (b)		175,000		175,000,000
0.28%, 7/23/14 (b)		75,000		75,000,000
Royal Bank of Canada, New York (b):
0.25%, 10/31/14		53,000		53,000,000
0.25%, 12/05/14		43,000		43,000,000
Skandinaviska Enskilda Banken AB, 0.26%, 6/24/14		50,000		50,000,000
Societe Generale, New York, 0.34%, 9/19/14 (b)		75,000		75,000,000
Sumitomo Mitsui Banking Corp., New York:
0.45%, 2/11/14		42,000		42,010,002
0.26%, 2/24/14		100,000		100,001,487
0.26%, 3/21/14		100,000		100,000,000
0.25%, 5/27/14		100,000		100,000,000
Sumitomo Mitsui Trust Bank Ltd., New York, 0.21%, 2/27/14		150,000		150,000,000
Svenska Handelsbanken, New York:
0.25%, 1/10/14		100,000		100,000,125
0.26%, 1/13/14		50,000		50,000,083
Certificates of Deposit	Par   (000)		Value
Yankee (a) (concluded)
Toronto-Dominion Bank, New York:
0.23%, 1/21/14	$	75,000	$	75,000,000
0.32%, 4/02/14		60,000		60,000,000
0.25%, 8/12/14		75,000		75,000,000
0.24%, 9/04/14		75,000		75,000,000
0.26%, 9/05/14		75,000		75,000,000
UBS AG, Stamford, 0.29%, 4/30/14 (b)		123,000		123,000,000
Wells Fargo Bank NA:
0.22%, 2/10/14		71,265		71,265,000
0.18%, 3/12/14 (b)		50,000		50,000,000
0.24%, 12/04/14 (b)		50,000		50,000,000
Westpac Banking Corp., New York (b):
0.28%, 4/15/14		50,000		50,007,230
0.25%, 9/26/14		100,000		100,000,000
				5,154,349,155
Total Certificates of Deposit — 28.0%				5,294,349,155
Commercial Paper
Antalis US Funding Corp., 0.26%, 2/07/14 (c)		59,500		59,484,100
Atlantic Asset Securitization LLC (c):
0.12%, 1/03/14		63,626		63,625,576
0.12%, 1/06/14		150,000		149,997,500
Australia & New Zealand Banking Group Ltd. (b):
0.24%, 1/17/14		100,000		100,000,000
0.28%, 2/25/14		75,000		75,000,000
Australia & New Zealand Banking International Group Ltd., London, 0.29%, 6/04/14 (c)		100,000		99,875,945
Bank of Nova Scotia, New York (c):
0.26%, 6/27/14		63,700		63,620,136
0.26%, 7/07/14		50,000		49,932,472
Bedford Row Funding Corp. (c):
0.30%, 1/31/14		75,000		74,981,250
0.30%, 2/18/14		85,000		84,966,000
0.27%, 7/01/14		30,000		29,959,275
0.30%, 8/13/14		50,000		49,906,667
0.30%, 11/25/14		25,000		24,931,667
BNZ International Funding Ltd., 0.24%, 2/21/14 (c)		57,500		57,480,450
Caisse Centrale Desjardins du Quebec, 0.23%, 3/14/14 (c)		50,000		49,977,000
Chariot Funding LLC (c):
0.23%, 4/08/14		50,000		49,969,014
0.25%, 4/09/14		50,000		49,965,972
0.24%, 4/15/14		50,000		49,965,333
0.23%, 5/07/14		25,000		24,979,875
0.23%, 6/11/14		45,200		45,153,507
Commonwealth Bank of Australia:
0.24%, 5/15/14		140,000		140,007,578
0.24%, 11/14/14 (b)		85,000		85,000,000
0.24%, 11/24/14 (b)		48,500		48,500,000
Credit Suisse, New York (c):
0.26%, 6/16/14		100,000		99,880,111
0.28%, 7/24/14		75,000		74,881,000
DBS Bank Ltd.:
0.25%, 2/10/14 (c)		50,000		49,986,111
0.23%, 4/01/14 (c)		50,000		49,971,250
0.26%, 4/09/14 (b)		74,900		74,906,134
0.24%, 4/23/14 (c)		50,000		49,962,667
Erste Abwicklungsanstalt, 0.23%, 4/08/14 (c)		50,000		49,969,014
HSBC Bank Plc (b):
0.28%, 8/06/14		70,000		70,000,000
0.26%, 9/19/14 (d)		50,000		50,000,000
0.26%, 10/22/14 (d)		50,000		50,000,000
0.26%, 11/19/14		50,000		50,000,000

See Notes to Financial Statements.

48 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments (continued) Prime Money Market Master Portfolio (Percentages shown are based on Net Assets)

Commercial Paper	Par   (000)		Value
Jupiter Securitization Co. LLC (c):
0.24%, 4/03/14	$	50,000	$	49,969,333
0.23%, 5/05/14		48,500		48,461,577
0.23%, 5/07/14		25,000		24,979,875
0.23%, 6/02/14		42,000		41,959,213
0.23%, 6/17/14		14,700		14,684,316
0.23%, 6/18/14		25,000		24,973,167
Kells Funding LLC:
0.26%, 1/06/14 (c)		100,000		99,996,458
0.25%, 2/04/14 (c)		60,000		59,985,833
0.23%, 3/20/14 (c)		50,000		49,975,083
0.23%, 3/21/14 (c)		20,000		19,989,906
0.20%, 4/07/14 (b)		50,000		49,998,629
0.25%, 4/17/14 (c)		75,000		74,944,792
0.22%, 6/04/14 (b)		75,000		75,000,000
0.24%, 8/22/14 (c)		50,000		49,923,951
LMA Americas LLC, 0.12%, 1/03/14 (c)		150,000		149,999,000
Mont Blanc Capital Corp. (c):
0.24%, 1/06/14		38,954		38,952,702
0.24%, 1/09/14		94,022		94,016,986
0.24%, 1/21/14		45,876		45,869,883
0.24%, 3/10/14		30,396		30,382,220
Nederlandse Waterschapsbank NV (b):
0.27%, 6/02/14		125,000		125,007,882
0.22%, 7/01/14 (d)		50,000		50,000,597
0.28%, 7/28/14		21,000		21,002,424
0.28%, 7/30/14		21,000		21,002,447
0.25%, 10/31/14		50,000		50,000,000
0.25%, 11/03/14		25,000		25,000,000
0.25%, 12/23/14		100,000		100,000,025
Nordea Bank AB (c):
0.26%, 1/10/14		70,000		69,995,538
0.25%, 1/17/14		50,000		49,994,444
0.25%, 2/05/14		59,750		59,735,477
Old Line Funding LLC (c):
0.24%, 3/04/14		70,000		69,971,067
0.24%, 3/20/14		56,568		56,538,585
0.25%, 4/14/14		50,000		49,964,236
Oversea-Chinese Banking Corp., 0.24%, 2/27/14 (c)		50,000		49,981,000
PSP Capital, Inc., 0.25%, 8/14/14 (c)		90,000		89,859,375
Scaldis Capital LLC, 0.27%, 5/19/14 (c)		50,000		49,948,250
Sheffield Receivables Corp. (c):
0.24%, 2/14/14		80,000		79,976,533
0.23%, 3/18/14		30,000		29,985,433
0.23%, 3/19/14		48,000		47,976,387
Skandinaviska Enskilda Banken AB (c):
0.27%, 5/14/14		75,000		74,923,802
0.26%, 6/13/14		75,000		74,910,010
Societe Generale North America, Inc. (c):
0.24%, 1/31/14		200,000		199,959,167
0.25%, 2/03/14		150,000		149,965,625
0.25%, 3/03/14		75,000		74,968,229
Starbird Funding Corp. (c):
0.29%, 2/21/14		50,000		49,979,458
0.32%, 6/16/14		50,000		49,926,222
Svenska Handelsbanken, Inc., New York (c):
0.25%, 2/03/14		50,000		49,988,542
0.25%, 2/12/14		50,000		49,985,417
Thunder Bay Funding LLC:
0.24%, 3/20/14 (c)		20,044		20,033,577
0.23%, 4/04/14 (b)		50,000		50,000,000
0.25%, 4/14/14 (c)		50,000		49,964,236
0.23%, 4/22/14 (c)		34,142		34,117,788
Versailles Com Paper LLC (c):
0.23%, 1/31/14		64,250		64,237,685
0.23%, 2/03/14		83,000		82,982,501
Commercial Paper	Par   (000)		Value
Versailles Com Paper LLC (c) (concluded):
0.23%, 2/14/14	$	50,000	$	49,985,944
0.22%, 3/18/14		50,000		49,976,778
Westpac Banking Corp., New York (b):
0.35%, 1/13/14		25,000		25,000,000
0.29%, 1/24/14		70,000		70,000,000
0.22%, 8/07/14		90,000		90,000,000
0.23%, 9/19/14 (d)		50,000		49,996,541
Total Commercial Paper — 30.4%				5,747,739,750
Corporate Notes
Commonwealth Bank of Australia (d):
0.97%, 3/17/14 (b)		100,000		100,151,957
2.13%, 3/17/14		18,000		18,068,285
KFW, 0.42%, 1/17/14 (b)		24,997		24,999,442
Kommunalbanken, Medium Term Note, 0.36%, 3/10/14 (b)(d)		25,000		25,005,887
National Australia Bank Ltd. (d):
0.97%, 4/11/14 (b)		28,900		28,956,212
2.25%, 4/11/14		12,300		12,366,058
1.19%, 7/25/14 (b)		66,945		67,312,122
0.45%, 10/02/14 (b)		42,725		42,792,877
Nederlandse Waterschapsbank NV, 1.38%, 5/16/14		30,000		30,126,519
Province of Quebec Canada, 4.88%, 5/05/14		24,379		24,760,457
Svenska Handelsbanken AB, 0.27%, 6/15/14 (b)(d)		108,200		108,200,000
Toyota Motor Credit Corp., Medium Term Note, 0.32%, 8/22/14 (b)		50,000		50,032,138
Westpac Banking Corp., New York, 1.49%, 1/30/14 (b)(d)		60,000		60,061,555
Total Corporate Notes — 3.2%				592,833,509
Time Deposits
Bank of Tokyo-Mitsubishi UFJ Ltd.:
0.01%, 1/02/14		150,000		150,000,000
0.03%, 1/02/14		350,000		350,000,000
Credit Agricole Corp., 0.03%, 1/02/14		487,000		487,000,000
Natixis, 0.05%, 1/02/14		700,000		700,000,000
Svenska Handelsbanken, AB, 0.01%, 1/02/14		300,000		300,000,000
Total Time Deposits — 10.5%				1,987,000,000
US Government Sponsored Agency Obligations
Federal Farm Credit Banks, 0.12%, 4/09/14 (b)		120,000		120,005,272
Federal Home Loan Bank (b):
0.09%, 1/15/14 - 1/16/14		335,000		334,997,259
0.08%, 2/14/14		23,500		23,499,459
0.10%, 2/18/14 - 8/22/14		258,300		258,293,600
0.13%, 2/25/14		43,000		43,002,281
0.10%, 3/12/14		250,000		249,998,718
0.11%, 4/25/14 - 11/25/14		195,000		194,982,035
0.12%, 6/09/14		100,000		100,000,000
0.14%, 6/16/14		100,000		100,000,000
0.14%, 8/01/14		50,000		50,000,000
0.13%, 9/11/14		100,000		100,000,000
0.14%, 11/18/14 - 12/09/14		190,000		189,998,230
Total US Government Sponsored Agency Obligations — 9.3%				1,764,776,854

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 49

Schedule of Investments (continued) Prime Money Market Master Portfolio (Percentages shown are based on Net Assets)

US Treasury Obligations	Par   (000)		Value
US Treasury Bills (c):
0.07%, 2/13/14	$	200,000	$	199,982,920
0.08%, 2/20/14		150,000		149,983,333
0.08%, 2/27/14		100,000		99,986,858
0.08%, 3/06/14		75,000		74,989,000
0.13%, 4/24/14		100,000		99,959,195
0.09%, 5/08/14		75,000		74,976,981
0.10%, 5/22/14		75,000		74,970,625
0.10%, 5/29/14		125,000		124,948,302
0.09%, 6/26/14		100,000		99,957,955
0.09%, 7/03/14		100,000		99,956,144
US Treasury Notes:
0.25%, 1/31/14		250,000		250,026,855
0.25%, 2/28/14		100,000		100,017,499
0.25%, 4/30/14		50,000		50,022,897
0.25%, 5/31/14		50,000		50,027,972
Total US Treasury Obligations — 8.2%				1,549,806,536
Repurchase Agreements — 7.5%
Barclays Capital, Inc., 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $49,000,027, collateralized by a US Treasury obligation, 1.25%, due 11/30/18, original par and fair value of $50,960,900 and $49,980,033, respectively)		49,000		49,000,000
Total Value of Barclays Capital, Inc. (collateral value of $49,980,033)				49,000,000
BNP Paribas Securities Corp., 0.13%, 1/02/14, (Purchased on 3/25/13 to be repurchased at $85,086,865, collateralized by various corporate debt obligations, 0.88% to 9.88%, due 9/12/14 to 7/17/24, original par and fair value of $80,680,967 and $89,414,333, respectively)		85,000		85,000,000
BNP Paribas Securities Corp., 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $68,000,038, collateralized by a US Treasury obligation, 3.63%, due 2/15/21, original par and fair value of $63,378,700 and $69,360,049, respectively)		68,000		68,000,000
Total Value of BNP Paribas Securities Corp. (collateral value of $158,774,382)				153,000,000
Credit Suisse Securities (USA) LLC, 0.48%, 2/04/14, (Purchased on 3/25/13 to be repurchased at $50,210,667, collateralized by various Corporate Debt obligations and various US Government Sponsored Agency obligations, 0.30% to 8.58%, due 4/15/20 to 8/15/56, original par and fair value of $278,424,564 and $56,974,768, respectively) (e)		50,000		50,000,000
Credit Suisse Securities (USA) LLC, 0.34%, 1/30/14, (Purchased on 11/01/13 to be repurchased at $102,086,700, collateralized by various corporate debt obligations and various US Government Sponsored Agency obligations, 0.00% to 38.00%, due 5/25/21 to 11/15/43, original par and fair value of $606,156,174 and $109,140,428, respectively)		102,000		102,000,000
Repurchase Agreements	Par   (000)		Value
Credit Suisse Securities (USA) LLC, 0.41%, 1/16/14, (Purchased on 11/18/13 to be repurchased at $30,020,158, collateralized by various US Government Sponsored Agency obligations, 3.27% to 8.00%, due 5/16/29 to 10/16/54, original par and fair value of $32,595,438 and $32,104,139, respectively)	$	30,000	$	30,000,000
Total Value of Credit Suisse Securities (USA) LLC (collateral value of $198,219,335)				182,000,000
HSBC Securities (USA) Inc., 0.02%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $85,000,094, collateralized by various US Government Sponsored Agency obligations, 3.50% to 4.00%, due 11/01/28 to 10/01/31, original par and fair value of $114,630,191 and $86,704,602, respectively)		85,000		85,000,000
Total Value of HSBC Securities (USA) Inc. (collateral value of $86,704,602)				85,000,000
J.P. Morgan Securities LLC, 0.38%, 1/02/14, (Purchased on 3/25/13 to be repurchased at $30,089,617, collateralized by various corporate debt obligations, 0.00% to 13.88%, due 6/15/15 to 7/15/55, original par and fair value of $85,384,099 and $36,003,940, respectively)		30,000		30,000,000
J.P. Morgan Securities LLC, 0.28%, 2/14/14, (Purchased on 3/25/13 to be repurchased at $50,126,778, collateralized by various corporate debt obligations, 0.91% to 6.88%, due 9/29/14 to 6/01/25, original par and fair value of $47,996,405 and $52,500,372, respectively) (e)		50,000		50,000,000
J.P. Morgan Securities LLC, 0.61%, 3/24/14, (Purchased on 12/24/13 to be repurchased at $165,251,625, collateralized by various corporate debt obligations, 0.00% to 6.19%, due 6/20/29 to 2/12/51, original par and fair value of $1,272,346,528 and $204,145,568, respectively)		165,000		165,000,000
J.P. Morgan Securities LLC, 0.18%, 1/02/14, (Purchased on 9/30/13 to be repurchased at $50,023,500, collateralized by various corporate debt obligations and various US Government Sponsored Agency obligations, 0.00% to 7.44%, due 5/25/19 to 10/10/46, original par and fair value of $113,031,316 and $53,502,899, respectively)		50,000		50,000,000
J.P. Morgan Securities LLC, 0.54%, 2/04/14, (Purchased on 9/30/13 to be repurchased at $60,114,300, collateralized by various corporate debt obligations, 4.07% to 5.91%, due 5/15/45 to 11/15/46, original par and fair value of $72,210,000 and $64,204,119, respectively) (e)		60,000		60,000,000
Total Value of J.P. Morgan Securities LLC (collateral value of $410,356,898)				355,000,000
Merrill Lynch, Pierce, Fenner & Smith Inc., 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $24,000,013, collateralized by a US Treasury obligation, 2.00% due 9/30/2020, original par and fair value of $24,875,200 and $24,480,056, respectively)		24,000		24,000,000
Total Value of Merrill Lynch, Pierce, Fenner & Smith Inc. (collateral value of $24,480,056)				24,000,000

See Notes to Financial Statements.

50 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments (continued) Prime Money Market Master Portfolio (Percentages shown are based on Net Assets)

Repurchase Agreements	Par   (000)		Value
Morgan Stanley & Co. LLC, 0.03%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $150,000,250, collateralized by various US Government Sponsored Agency obligations, 0.75% to 4.50%, due 6/27/19 to 12/01/43, original par and fair value of $165,545,980 and $154,257,030, respectively)	$	150,000	$	150,000,000
Morgan Stanley & Co. LLC, 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $49,000,027, collateralized by various US Treasury obligations, 1.88% to 3.13%, due 6/30/15 to 2/15/43, original par and fair value of $55,765,300 and $49,980,054, respectively)		49,000		49,000,000
Total Value of Morgan Stanley & Co. LLC (collateral value of $204,237,084)				199,000,000
RBC Capital Markets, LLC, 0.13%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $16,000,116, collateralized by various corporate debt obligations, 0.00% due 2/03/14 to 2/19/14, original par and fair value of $16,803,053 and $16,800,000, respectively)		16,000		16,000,000
RBC Capital Markets, LLC, 0.10%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $63,000,350, collateralized by various corporate debt obligations, 0.36% to 10.00%, due 1/21/14 to 1/15/44, original par and fair value of $65,199,312 and $66,150,001, respectively)		63,000		63,000,000
Total Value of RBC Capital Markets, LLC (collateral value of $82,950,001)				79,000,000
Repurchase Agreements	Par   (000)		Value
SG Americas Securities, LLC, 0.27%, 1/02/14, (Purchased on 12/16/13 to be repurchased at $18,802,397, collateralized by various corporate debt obligations, 1.50% to 8.00%, due 1/13/14 to 6/01/36, original par and fair value of $20,540,379 and $21,396,368, respectively)	$	18,800	$	18,800,000
Total Value of SG Americas Securities, LLC (collateral value of $21,396,368)				18,800,000
Wells Fargo Securities, LLC, 0.18%, 1/02/14, (Purchased on 3/25/13 to be repurchased at $180,254,700, collateralized by various corporate debt obligations, 0.00% to 10.35%, due 1/09/14 to 12/10/49 par and fair value of $428,250,811 and $187,743,142, respectively)		180,000		180,000,000
Wells Fargo Securities, LLC, 0.47%, 1/03/14, (Purchased on 9/24/13 to be repurchased at $30,059,330, collateralized by various corporate debt obligations, 0.00% to 8.25%, due 2/28/14 to 2/15/51, original par and fair value of $100,480,459 and $31,469,579, respectively)		30,045		30,045,000
Wells Fargo Securities, LLC, 0.38%, 2/06/14, (Purchased on 11/4/13 to be repurchased at $67,066,479, collateralized by various corporate debt obligations, 0.00% to 8.63%, due 4/15/16 to 2/10/51, original par and fair value of $111,071,137 and $70,264,031, respectively)		67,000		67,000,000
Total Value of Wells Fargo Securities, LLC (collateral value of $289,476,752)				277,045,000
Total Repurchase Agreements — 7.5%				1,421,845,000
Total Investments (Cost — $18,358,350,804*) — 97.1%				18,358,350,804
Other Assets Less Liabilities — 2.9%				554,292,335
Net Assets — 100.0%			$	18,912,643,139

Notes to Schedule of Investments

* Cost for federal income tax purposes.

(a) Issuer is a US branch of foreign domiciled bank.

(b) Variable rate security. Rate shown is as of report date.

(c) Rates shown are discount rates or a range of discount rates paid at the time of purchase.

(d) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(e) Variable rate security. Rate shown is as of report date and maturity shown is the date the principal owed can be recovered through demand.

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 51

Schedule of Investments (concluded) Prime Money Market Master Portfolio

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Short-Term Securities1		—	$	18,358,350,804		—	$	18,358,350,804
1   See above Schedule of Investments for values in each security type.

The carrying amount for certain of the Master Portfolio’s asset approximates fair value for financial statement purposes. As of December 31, 2013, cash of $650,707,863 is categorized as Level 1 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2013.

See Notes to Financial Statements.

52 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments December 31, 2013 Treasury Money Market Master Portfolio (Percentages shown are based on Net Assets)

US Treasury Obligations	Par   (000)		Value
US Treasury Bills (a):
0.03%, 1/02/14	$	450,000	$	449,999,469
0.02%, 1/09/14		80,000		79,999,705
0.02%, 1/23/14		300,000		299,997,021
0.07%, 1/30/14		100,000		99,994,764
0.13%, 4/24/14		64,000		63,974,986
0.08%, 5/08/14		85,979		85,954,638
0.09%, 5/15/14		54,000		53,981,407
0.10%, 5/22/14		35,000		34,986,292
0.10%, 6/05/14		74,250		74,218,031
0.09%, 6/19/14		25,000		24,989,438
0.09%, 7/03/14		125,000		124,943,934
US Treasury Notes:
1.00%, 1/15/14		8,000		8,002,468
1.25%, 2/15/14		15,000		15,021,197
0.25%, 2/28/14		113,700		113,717,134
0.25%, 3/31/14		20,000		20,006,729
0.25%, 4/30/14		140,747		140,801,579
0.63%, 7/15/14		47,170		47,288,130
0.50%, 8/15/14		25,000		25,054,014
Total US Treasury Obligations — 64.4%				1,762,930,936
Repurchase Agreements
Barclays Capital, Inc., 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $10,000,006, collateralized by a US Treasury obligation, 0.75%, due 6/30/17, original par and fair value of $10,303,900 and $10,200,037, respectively)		10,000		10,000,000
Barclays Capital, Inc., 0.01%, 1/07/14, (Purchased on 12/31/13 to be repurchased at $35,110,068, collateralized by a US Treasury obligation, 0.25%, due 10/31/15, original par and fair value of $35,847,700 and $35,812,256, respectively)		35,110		35,110,000
Total Value of Barclays Capital, Inc. (collateral value of $46,012,293)				45,110,000
BNP Paribas Securities Corp., 0.05%, 1/07/14, (Purchased on 10/03/13 to be repurchased at $125,016,667, collateralized by various US Treasury obligations, 0.75% to 2.38%, due 1/15/27 to 2/15/42, original par and fair value of $106,619,800 and $128,244,346, respectively) (b)		125,000		125,000,000
BNP Paribas Securities Corp., 0.07%, 1/07/14, (Purchased on 12/04/13 to be repurchased at $75,004,958, collateralized by various US Treasury obligations, 0.00% to 1.00%, due 8/31/16 to 11/15/22, original par and fair value of $99,140,328 and $76,500,086, respectively) (b)		75,000		75,000,000
BNP Paribas Securities Corp., 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $50,000,028, collateralized by a US Treasury obligation, 3.63%, due 2/15/21, original par and fair value of $46,602,000 and $51,000,052, respectively)		50,000		50,000,000
Total Value of BNP Paribas Securities Corp. (collateral value of $255,744,484)				250,000,000
Repurchase Agreements	Par   (000)		Value
Citigroup Global Markets, Inc., 0.03%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $20,020,034, collateralized by various US Treasury obligations, 1.25% to 3.63%, due 11/30/18 to 2/15/21, original par and fair value of $20,761,800 and $20,420,419, respectively)	$	20,020	$	20,020,000
Citigroup Global Markets, Inc., 0.01%, 1/07/14, (Purchased on 12/31/13 to be repurchased at $69,000,134, collateralized by various US Treasury obligations, 0.13% to 1.25%, due 4/30/15 to 11/30/18, original par and fair value of $67,010,300 and $70,380,147, respectively)		69,000		69,000,000
Total Value of Citigroup Global Markets, Inc. (collateral value of $90,800,566)				89,020,000
Credit Suisse Securities (USA) LLC, 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $19,000,011, collateralized by various US Treasury obligations, 1.88% to 3.75%, due 6/30/15 to 11/15/18, original par and fair value of $18,908,100 and $19,380,228, respectively)		19,000		19,000,000
Total Value of Credit Suisse Securities (USA) LLC (collateral value of $18,380,228)				19,000,000
Deutsche Bank Securities, Inc., 0.03%, 1/07/14, (Purchased on 10/02/13 to be repurchased at $40,103,241, collateralized by various US Treasury obligations, 0.00% to 1.75%, due 9/30/17 to 2/15/36, original par and fair value of $68,688,687 and $40,902,012, respectively) (b)		40,100		40,100,000
Deutsche Bank Securities, Inc., 0.08%, 1/07/14, (Purchased on 10/18/13 to be repurchased at $61,921,144, collateralized by various US Treasury obligations, 0.00% to 1.75%, due 5/15/23 to 11/15/40, original par and fair value of $71,875,508 and $63,148,238, respectively) (b)		61,910		61,910,000
Deutsche Bank Securities, Inc., 0.07%, 1/07/14, (Purchased on 12/02/13 to be repurchased at $66,604,662, collateralized by various US Treasury obligations, 0.63% to 4.63%, due 5/31/17 to 2/15/40, original par and fair value of $70,161,000 and $67,997,286, respectively) (b)		66,600		66,600,000
Deutsche Bank Securities, Inc., 0.02%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $21,000,023, collateralized by a US Treasury obligation, 0.00%, due 8/15/40, original par and fair value of $62,922,300 and $21,420,009, respectively)		21,000		21,000,000
Total Value of Deutsche Bank Securities, Inc. (collateral value of $193,467,545)				189,610,000
Goldman Sachs & Co., 0.06%, 1/07/14, (Purchased on 12/03/13 to be repurchased at $127,007,408, collateralized by a US Treasury obligation, 1.25%, due 4/15/14, original par and fair value of $116,312,600 and $129,540,067, respectively) (b)		127,000		127,000,000
Total Value of Goldman Sachs & Co. (collateral value of $129,540,067)				127,000,000

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 53

Schedule of Investments (continued) Treasury Money Market Master Portfolio (Percentages shown are based on Net Assets)

Repurchase Agreements	Par   (000)		Value
HSBC Securities (USA), Inc., 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $96,000,053, collateralized by various US Treasury obligations, 0.38% to 7.25%, due 12/31/14 to 5/15/19, original par and fair value of $93,125,900 and $97,920,691, respectively)	$	96,000	$	96,000,000
HSBC Securities (USA), Inc., 0.02%, 1/07/14, (Purchased on 12/31/13 to be repurchased at $97,800,380, collateralized by various US Treasury obligations, 0.63% to 0.88%, due 7/15/16 to 2/28/17, original par and fair value of $99,390,300 and $99,758,222, respectively)		97,800		97,800,000
Total Value of HSBC Securities (USA), Inc. (collateral value of $197,678,913)				193,800,000
Merrill Lynch, Pierce, Fenner & Smith Inc., 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $35,000,019, collateralized by a US Treasury obligation, 0.38%, due 2/15/16, original par and fair value of $35,683,400 and $35,700,037, respectively)		35,000		35,000,000
Total Value of Merrill Lynch, Pierce, Fenner & Smith Inc. (collateral value of $35,700,037)				35,000,000
Morgan Stanley & Co. LLC, 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $68,000,038, collateralized by various US Treasury obligations, 0.00% to 2.63%, due 2/6/14 to 11/15/20, original par and fair value of $69,806,200 and $69,360,078, respectively)		68,000		68,000,000
Total Value of Morgan Stanley & Co. LLC (collateral value of $69,360,078)				68,000,000
Repurchase Agreements	Par   (000)		Value
RBC Capital Markets, LLC, 0.00%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $5,000,000, collateralized by various US Treasury obligations, 0.63% to 2.75%, due 8/15/16 to 11/15/42, original par and fair value of $5,782,000 and $5,100,078, respectively)	$	5,000	$	5,000,000
Total Value of RBC Capital Markets, LLC (collateral value of $5,100,078)				5,000,000
TD Securities (USA), LLC, 0.01%, 1/02/14, (Purchased on 12/31/13 to be repurchased at $13,000,007, collateralized by various US Treasury obligations, 1.50% to 2.50%, due 6/30/16 to 1/15/29, original par and fair value of $11,888,100 and $13,260,067, respectively)		13,000		13,000,000
Total Value of TD Securities (USA), LLC (collateral value of $13,260,067)				13,000,000
Total Repurchase Agreements — 37.8%				1,034,540,000
Total Investments (Cost — $2,797,470,936*) — 102.2%				2,797,470,936
Liabilities in Excess of Other Assets — (2.2)%				(59,272,202	)
Net Assets — 100.0%			$	2,738,198,734

Notes to Schedule of Investments

* Cost for federal income tax purposes.

(a) Rates shown are discount rates or a range of discount rates paid at the time of purchase.

(b) Variable rate security. Rate shown is as of report date and maturity shown is the date the principal owed can be recovered through demand.

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

See Notes to Financial Statements.

54 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments (concluded) Treasury Money Market Master Portfolio

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Short-Term Securities1		—	$	2,797,470,936		—	$	2,797,470,936
1   See above Schedule of Investments for values in each security type.

The carrying amount for certain of the Master Portfolio’s asset approximates fair value for financial statement purposes. As of December 31, 2013, cash of $356,453 is categorized as level 1 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2013.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 55

Statements of Assets and Liabilities Master Investment Portfolio

December 31, 2013	Government Money Market Master Portfolio		Money Market Master Portfolio		Prime Money Market Master Portfolio		Treasury Money Market Master Portfolio
Assets
Investments at value — unaffiliated1		—	$	38,437,538,329	$	16,936,505,804	$	1,762,930,936
Repurchase agreements — unaffiliated2	$	9,491,000		3,281,515,000		1,421,845,000		1,034,540,000
Cash		262		93,281,849		650,707,863		356,453
Investments sold receivable		—		—		—		64,987,339
Interest receivable		2		14,700,652		4,657,028		504,062
Contributions receivable from investors		2		264		5,062		—
Total assets		9,491,266		41,827,036,094		19,013,720,757		2,863,318,790
Liabilities
Investments purchased payable		—		299,868,429		99,956,143		124,943,934
Investment advisory fees payable		11,326		2,557,196		1,052,860		152,861
Professional fees payable		12,868		50,713		25,055		13,617
Trustees' fees payable		677		125,064		43,560		9,644
Total liabilities		24,871		302,601,402		101,077,618		125,120,056
Net Assets	$	9,466,395	$	41,524,434,692	$	18,912,643,139	$	2,738,198,734
Net Assets Consist of
Investors' capital	$	9,466,395	$	41,524,434,692	$	18,912,643,139	$	2,738,198,734
1 Investments at cost — unaffiliated		—	$	38,437,538,329	$	16,936,505,804	$	1,762,930,936
2 Repurchase agreements at cost — unaffiliated	$	9,491,000	$	3,281,515,000	$	1,421,845,000	$	1,034,540,000

Statements of Operations Master Investment Portfolio

Year Ended December 31, 2013	Government Money Market Master Portfolio			Money Market Master Portfolio			Prime Money Market Master Portfolio			Treasury Money Market Master Portfolio
Investment Income
Interest	$	31,184		$	107,284,027		$	35,165,305		$	2,292,645
Expenses
Investment advisory		59,056			41,422,530			14,833,338			2,695,482
Independent Trustees		2,994			514,007			194,523			44,907
Professional		15,957			104,479			53,496			21,768
Total expenses		78,007			42,041,016			15,081,357			2,762,157
Less fees waived by Manager		(51,084	)		(13,045,245	)		(4,698,021	)		(1,070,981	)
Total expenses after fees waived		26,923			28,995,771			10,383,336			1,691,176
Net investment income		4,261			78,288,256			24,781,969			601,469
Realized Gain
Net realized gain from investments		—			4,880,770			2,332,546			239,050
Net Increase in Net Assets Resulting from Operations	$	4,261		$	83,169,026		$	27,114,515		$	840,519

See Notes to Financial Statements.
56	BLACKROCK FUNDS III	DECEMBER 31, 2013

Statements of Changes in Net Assets Master Investment Portfolio

	Government Money Market Master Portfolio						Money Market Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	4,261		$	9,241		$	78,288,256		$	99,154,852
Net realized gain		—			—			4,880,770			2,320,981
Net increase in net assets resulting from operations		4,261			9,241			83,169,026			101,475,833
Capital Transactions
Proceeds from contributions		44,474,590			51,211,494			115,690,759,904			56,711,226,061
Value of withdrawals		(52,626,282	)		(43,961,715	)		(109,538,593,100	)		(50,051,649,581	)
Net increase (decrease) in net assets derived from capital transactions		(8,151,692	)		7,249,779			6,152,166,804			6,659,576,480
Net Assets
Total increase (decrease) in net assets		(8,147,431	)		7,259,020			6,235,335,830			6,761,052,313
Beginning of year		17,613,826			10,354,806			35,289,098,862			28,528,046,549
End of year	$	9,466,395		$	17,613,826		$	41,524,434,692		$	35,289,098,862

	Prime Money Market Master Portfolio						Treasury Money Market Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	24,781,969		$	30,692,257		$	601,469		$	1,553,173
Net realized gain		2,332,546			1,868,766			239,050			127,929
Net increase in net assets resulting from operations		27,114,515			32,561,023			840,519			1,681,102
Capital Transactions
Proceeds from contributions		121,197,162,810			64,244,951,166			52,488,936,457			20,119,690,374
Value of withdrawals		(118,246,074,954	)		(59,075,368,652	)		(52,365,402,628	)		(19,110,014,931	)
Net increase in net assets derived from capital transactions		2,951,087,856			5,169,582,514			123,533,829			1,009,675,443
Net Assets
Total increase in net assets		2,978,202,371			5,202,143,537			124,374,348			1,011,356,545
Beginning of year		15,934,440,768			10,732,297,231			2,613,824,386			1,602,467,841
End of year	$	18,912,643,139		$	15,934,440,768		$	2,738,198,734		$	2,613,824,386

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	57

Financial Highlights Master Investment Portfolio

	Government Money Market Master Portfolio
	Year Ended December 31,
	2013		2012		2011		2010		2009
Total Investment Return
Total investment return		0.02%		0.10%		0.08%		0.13%		0.12%
Ratios to Average Net Assets
Total expenses		0.13%		0.30%		0.12%		0.11%		0.10%
Total expenses after fees waived		0.05%		0.07%		0.07%		0.02%		0.05%
Net investment income		0.01%		0.10%		0.09%		0.11%		0.12%
Supplemental Data
Net assets, end of year (000)	$	9,466	$	17,614	$	10,355	$	26,474	$	656,444
	Money Market Master Portfolio
	Year Ended December 31,
	2013		2012		2011		2010		2009
Total Investment Return
Total investment return		0.20%		0.27%		0.23%		0.27%		0.48%
Ratios to Average Net Assets
Total expenses		0.10%		0.10%		0.10%		0.10%		0.10%
Total expenses after fees waived		0.07%		0.07%		0.07%		0.07%		0.07%
Net investment income		0.19%		0.27%		0.22%		0.26%		0.48%
Supplemental Data
Net assets, end of year (000)	$	41,524,435	$	35,289,099	$	28,528,047	$	20,007,557	$	21,134,748

See Notes to Financial Statements.
58	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights Master Investment Portfolio

		Prime Money Market Master Portfolio
		Year Ended December 31,
		2013		2012		2011		2010		2009
Total Investment Return
Total investment return			0.17%		0.25%		0.21%		0.25%		0.37%
Ratios to Average Net Assets
Total expenses			0.10%		0.10%		0.10%		0.10%		0.10%
Total expenses after fees waived			0.07%		0.07%		0.07%		0.07%		0.07%
Net investment income			0.17%		0.25%		0.21%		0.25%		0.41%
Supplemental Data
Net assets, end of year (000)		$	18,912,643	$	15,934,441	$	10,732,297	$	10,071,057	$	12,208,516
		Treasury Money Market Master Portfolio
		Year Ended December 31,
		2013		2012		2011		2010		2009
Total Investment Return
Total investment return			0.02%		0.06%		0.09%		0.13%		0.11%
Ratios to Average Net Assets	��
Total expenses			0.10%		0.10%		0.10%		0.10%		0.10%
Total expenses after fees waived			0.06%		0.07%		0.06%		0.06%		0.05%
Net investment income			0.02%		0.08%		0.03%		0.13%		0.10%
Supplemental Data
Net assets, end of year (000)		$	2,738,199	$	2,613,824	$	1,602,468	$	2,200,634	$	4,288,938

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	59

Notes to Financial Statements Master Investment Portfolio

1. Organization:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. MIP is organized as a Delaware statutory trust. The financial statements and these accompanying notes relate to four series of MIP: Government Money Market Master Portfolio, Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio (each a “Master Portfolio” and together, the “Master Portfolios”).

2. Significant Accounting Policies:

The Master Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in 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 following is a summary of the significant accounting policies followed by the Master Portfolios:

Valuation: US GAAP defines fair value as the price the Master Portfolios would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Master Portfolios’ 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 discount and amortization of premiums are recorded until the maturity of the security. Each Master Portfolio seeks to maintain its net asset value per share at $1.00, although there is no assurance that it will be able to do so on a continuing basis.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.

Income Taxes: Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio are each classified as a partnership for federal income tax purposes. As such, each investor in the Master Portfolio is treated as the owner of its proportionate share of net assets, income, expenses and realized gains and losses of the Master Portfolio. Therefore, no federal income tax provision is required. It is intended that the Master Portfolio’s assets will be managed so an investor in the Master Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

Government Money Market Master Portfolio is disregarded as an entity separate from its owner for tax purposes. As such, the owner of the Master Portfolio is treated as the owner of the net assets, income, expenses and realized and unrealized gains and losses of the Master Portfolio. Therefore, no federal income tax provision is required. It is intended that the Master Portfolio’s assets will be managed so the owner of the Master Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

Each of Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio file US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each Master Portfolio’s US federal tax returns remains open for each of the four years ended December 31, 2013. The statutes of limitations on each Master Portfolio’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 Master Portfolios’ facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

Other: Expenses directly related to a Master Portfolio are charged to that Master Portfolio. Other operating expenses shared by several funds are pro-rated among those funds on the basis of relative net assets or other appropriate methods.

The Master Portfolios have an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statements of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.

3. Securities and Other Investments:

Repurchase Agreements: The Master Portfolios may enter into repurchase agreements. In a repurchase agreement, a Master Portfolio purchases 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 repurchase amount. The agreements are conditioned upon the collateral being deposited under the Federal Reserve book entry system or held in a segregated account by the Master Portfolio’s custodian or designated sub-custodians under tri-party repurchase agreements. In the event the counterparty defaults and the fair value of the collateral declines, a Master Portfolio could experience losses, delays and costs in liquidating the collateral.

Master Repurchase Agreements (MRA) permit the Master Portfolio, 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 the Master Portfolio. 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 the MRA counterparty’s bankruptcy or insolvency. Pursuant to the terms of the MRA, the Master Portfolio receives securities as collateral with a market value in excess of the repurchase price to be received by the Master Portfolio upon the maturity of the repurchase transaction. Upon a bankruptcy or insolvency of the MRA counterparty, the Master Portfolio

60 BLACKROCK FUNDS III DECEMBER 31, 2013

Notes to Financial Statements (concluded) Master Investment Portfolio

would recognize a liability with respect to such excess collateral to reflect the Master Portfolio’s obligation under bankruptcy law to return the excess to the counterparty.

4. Investment Advisory Agreement and Other Transactions with Affiliates:

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

MIP, on behalf of the Master Portfolios, entered into an Investment Advisory Agreement (the “Investment Advisory Agreement”) with BlackRock Fund Advisors (the “Manager”), the Master Portfolios’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. Pursuant to the Investment Advisory Agreement with MIP, the Manager is responsible for the management of each Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each Master Portfolio. For such services, each Master Portfolio pays the Manager a monthly fee at an annual rate of 0.10% of the average daily value of the Master Portfolio’s net assets. The Manager has contractually agreed to waive 0.03% of its investment advisory fees through April 30, 2014. The Manager has also voluntarily agreed to waive investment advisory fees to enable the feeders that invest in the Master Portfolios to maintain minimum levels of daily net investment income. The Manager may discontinue the voluntary waiver at any time. For the year ended December 31, 2013, the amounts included in fees waived by Manager in the Statements of Operations are as follows:

Government Money Market Master Portfolio	$	32,133
Money Market Master Portfolio	$	12,426,759
Prime Money Market Master Portfolio	$	4,450,002
Treasury Money Market Master Portfolio	$	1,004,306

The fees and expenses of MIP’s trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolios. The Manager has contractually agreed to cap the expenses of the Master Portfolios at the rate at which the Master Portfolios pay an advisory fee to the Manager by providing an offsetting credit against the investment advisory fees paid by the Master Portfolios in an amount equal to the independent expenses. These contractual waivers are effective through April 30, 2014. The amounts waived are included in fees waived by Manager in the Statements of Operations. For the year ended December 31, 2013, such waiver amounts are as follows:

Government Money Market Master Portfolio	$	18,951
Money Market Master Portfolio	$	618,486
Prime Money Market Master Portfolio	$	248,019
Treasury Money Market Master Portfolio	$	66,675

MIP entered into an administration services arrangement with BlackRock Advisors, LLC (“BAL”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL may delegate certain of its administration duties to sub-administrators. BAL, in consideration thereof, has agreed to bear all of the Master Portfolios’ and MIP’s ordinary operating expenses excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the Master Portfolios.

BAL is not entitled to compensation for providing administration services to the Master Portfolios, for so long as BAL is entitled to compensation for providing administration services to corresponding feeder funds that invest substantially all of their assets in the Master Portfolios, or BAL (or an affiliate) receives investment advisory fees from the Master Portfolios.

Certain officers and/or trustees of MIP are officers and/or directors of BlackRock or its affiliates.

5. Market and Credit Risk:

In the normal course of business, the Master Portfolios invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Master Portfolios may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Master Portfolios; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Master Portfolios may be exposed to counterparty credit risk, or the risk that an entity with which the Master Portfolios have unsettled or open transactions may fail to or be unable to perform on its commitments. The Master Portfolios manage counterparty credit risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Master Portfolios to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Master Portfolios’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Master Portfolios.

6. Subsequent Events:

Management has evaluated the impact of all subsequent events on the Master Portfolios 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.

BLACKROCK FUNDS III DECEMBER 31, 2013 61

Report of Independent Registered Public Accounting Firm Master Investment Portfolio

To the Board of Trustees of Master Investment Portfolio and the Interestholders of Government Money Market Master Portfolio, Prime Money Market Master Portfolio, Money Market Master Portfolio and Treasury Money Market Master Portfolio:

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Government Money Market Master Portfolio, Prime Money Market Master Portfolio, Money Market Master Portfolio and Treasury Money Market Master Portfolio (the “Master Portfolios”), each a series of Master Investment Portfolio, at December 31, 2013, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2013 by correspondence with the custodians and brokers, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 18, 2014

62 BLACKROCK FUNDS III DECEMBER 31, 2013

Officers and Trustees

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 107 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 107 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy from 2002 to 2012; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 107 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President, Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 107 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	President, London Center for Policy Research since 2012; Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and Professor thereof from 1980 to 2005; President Emeritus, Hudson Institute (policy research organization) from 2011 to 2012, President thereof from 1997 to 2011 and Trustee from 1980 to 2012; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (global internet services) since 2005; Director, Cerego, LLC (educational software) since 2005; Director, Cybersettle (online adjudication) since 2009; Director, AIMS Worldwide, Inc. (marketing) from 2007 to 2012.	33 RICs consisting of 107 Portfolios	None
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 107 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Director, The West Penn Allegheny Health System (a not-for-profit health system) from 2008 to 2013; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 107 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 107 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None

BLACKROCK FUNDS III DECEMBER 31, 2013 63

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1 (concluded)
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Immediate past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	33 RICs consisting of 107 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Director, Alkon Corporation (pneumatics) since 1992; Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh from 2005 to 2013 and Dean thereof from 1997 to 2005; Director, Tippman Sports (recreation) from 2005 to 2013; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 107 Portfolios	None
	1   Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved extensions in terms of Trustees who turn 72 prior to December 31, 2013.
	2   Date shown is the earliest date a person has served for the Trust/MIP covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the Trust’s/MIP’s Board. As a result, although the chart shows certain Trustees as joining the Trust’s/MIP’s board in 2009, those Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees3
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of, BlackRock, and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	144 RICs consisting of 278 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	144 RICs consisting of 278 Portfolios	None
	3   Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

64 BLACKROCK FUNDS III DECEMBER 31, 2013

Officers and Trustees (concluded)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers1
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock since 2000; Head of the Global Cash Group since 2013; Co-head of the Global Cash and Securities Lending Group from 2010 to 2013; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009 and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2007	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2007	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Managing Director of BlackRock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary of the BlackRock-advised funds from 2010 to 2012; General Counsel and Chief Operating Officer of Uhuru Capital Management from 2009 to 2010; Executive Director and Counsel of Goldman Sachs Asset Management from 2005 to 2009.
	1   Officers of the Trust/MIP serve at the pleasure of the Board.

Investment Advisor BlackRock Fund Advisors San Francisco, CA 94105	Custodian, Transfer Agent and Accounting Agent State Street Bank and Trust Company Boston, MA 02110	Distributor BlackRock Investments, LLC New York, NY 10022	Address of the Trust 400 Howard Street San Francisco, CA 94105
Administrator BlackRock Advisors LLC Wilmington, DE 19809	Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP Philadelphia, PA 19103	Legal Counsel Sidley Austin LLP New York, NY 10019

BLACKROCK FUNDS III DECEMBER 31, 2013 65

Additional Information

General Information

Electronic Delivery

Electronic copies of most financial reports and prospectuses are available on the Funds’ website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Funds’ electronic delivery program.

To enroll:

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:

Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.

Shareholders Who Hold Accounts Directly with BlackRock:

1) Access the BlackRock website at

http://www.blackrock.com/edelivery

2) Select “eDelivery” under the “More Information” section

3) Log into your account

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 (888) 204-3956.

Availability of Quarterly Portfolio Schedule

The Funds/Master Portfolios file their complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Each Fund’s/Master Portfolio’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (202) SEC-0330. Each Fund’s/Master Portfolio’s Forms N-Q may also be obtained upon request and without charge by calling (888) 204-3956.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Funds/Master Portfolios use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (888) 204-3956; (2) at http://www.blackrock.com; and (3) on the Securities and Exchange Commission’s (the “SEC”) website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how each Fund/Master Portfolio voted proxies relating to securities held in the Fund’s/Master Portfolio’s portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (888) 204-3956 and (2) on the SEC’s website at http://www.sec.gov.

Shareholder Privileges

Account Information

Call us at (888) 204-3956 from 8:30 AM to 6:00 PM EST 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/cash.

Retirement Plans

Shareholders may make investments in conjunction with Traditional, Rollover, Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.

66 BLACKROCK FUNDS III DECEMBER 31, 2013

Additional Information (concluded)

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.

BLACKROCK FUNDS III DECEMBER 31, 2013 67

This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of a Fund unless accompanied or preceded by that Fund’s current prospectus. An investment in a Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a Fund. Performance data quoted represents past performance and does not guarantee future results. Total return information assumes reinvestment of all distributions. Current performance may be higher or lower than the performance data quoted. For current month-end performance information, call (888) 204-3956. Each Fund’s current 7-day yield more closely reflects the current earnings of a Fund than the total returns quoted. Statements and other information herein are as dated and are subject to change.

MMF4-12/13-AR

DECEMBER 31, 2013

  ANNUAL REPORT  

BlackRock CoreAlpha Bond Fund  |  of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
Dear Shareholder		3
Annual Report:
Fund Summary		4
About Fund Performance		6
Disclosure of Expenses		6
Derivative Financial Instruments		7
Fund Financial Statements:
Statement of Assets and Liabilities		8
Statement of Operations		9
Statements of Changes in Net Assets		10
Fund Financial Highlights		11
Fund Notes to Financial Statements		14
Fund Report of Independent Registered Public Accounting Firm		17
Important Tax Information		17
Master Portfolio Information		18
Master Portfolio Financial Statements:
Schedule of Investments		19
Statement of Assets and Liabilities		37
Statement of Operations		38
Statements of Changes in Net Assets		39
Master Portfolio Financial Highlights		40
Master Portfolio Notes to Financial Statements		41
Master Portfolio Report of Independent Registered Public Accounting Firm		52
Officers and Trustees		53
Additional Information		56
A World-Class Mutual Fund Family		58

2 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Dear Shareholder

Risk assets (such as equities) powered higher in 2013, for the most part unscathed by ongoing political and economic uncertainty. While monetary policy was the main driving force behind the rally in risk assets, it was also the main culprit for the bouts of volatility during the year.

Equity markets rallied right out of the gate in January with cash pouring back in from the sidelines after a potential US fiscal crisis (i.e., the “fiscal cliff”) was averted with a last-minute tax deal. Key indicators signaling modest but broad-based improvements in the world’s major economies and a calming in Europe’s debt troubles fostered an aura of comfort for investors. Global economic momentum slowed in February, however, and the pace of the rally moderated. In the months that followed, US stocks outperformed international stocks, as the US showed greater stability than most other regions. Slow but positive growth was sufficient to support corporate earnings, while uncomfortably high unemployment reinforced expectations that the Federal Reserve would continue its aggressive monetary stimulus program. International markets experienced higher levels of volatility given a resurgence of political instability in Italy, a banking crisis in Cyprus and a generally poor outlook for European economies. Emerging markets significantly lagged the rest of the world as growth in these economies fell short of expectations.

Financial markets were rattled in May when Fed Chairman Bernanke mentioned the possibility of reducing — or “tapering” — the central bank’s asset purchase programs — comments that were widely misinterpreted as signaling an end to the Fed’s zero-interest-rate policy. US Treasury yields rose sharply, triggering a steep sell-off across fixed income markets. (Bond prices move in the opposite direction of yields.) Equity prices also suffered as investors feared the implications of a potential end of a program that had greatly supported the markets. Risk assets rebounded in late June, however, when the Fed’s tone turned more dovish, and improving economic indicators and better corporate earnings helped extend gains through most of the summer.

The fall was a surprisingly positive period for most asset classes as the Fed defied market expectations with its decision to delay tapering. Easing of political tensions that had earlier surfaced in Egypt and Syria and the re-election of Angela Merkel as Chancellor of Germany also boosted investor sentiment. Higher volatility returned in late September when the US Treasury Department warned that the national debt would soon breach its statutory maximum. The ensuing political brinksmanship led to a partial government shutdown, roiling global financial markets through the first half of October, but the rally quickly resumed when politicians engineered a compromise to reopen the government and extend the debt ceiling, at least temporarily.

The remainder of the year was generally positive for stock markets in the developed world, although investors continued to grapple with uncertainty about when and how much the Fed would scale back on stimulus. On the one hand, persistent weak growth and low inflation provided significant latitude for monetary policy decisions and investors were encouraged by dovish comments from Fed Chair-to-be Janet Yellen. On the other hand, US housing and manufacturing reports had begun to signal fundamental improvement in the economy. The long-awaited taper announcement ultimately came in mid-December. The Fed reduced the amount of its monthly asset purchases, but at the same time, extended its time horizon for maintaining low short-term interest rates. Markets reacted positively as this move signaled the Fed’s perception of real improvement in the economy and investors felt relief from the tenacious anxiety that had gripped them throughout the year.

Accommodative monetary policy and the avoidance of major risks made 2013 a strong year for most equity markets. US stocks were the strongest performers for the six- and 12-month periods ended December 31. In contrast, emerging markets were weighed down by uneven growth and structural imbalances. Rising US Treasury yields led to a rare annual loss in 2013 for Treasury bonds and other high-quality fixed income sectors including tax-exempt municipals and investment grade corporate bonds. High yield bonds, to the contrary, generated gains driven by income-oriented investors seeking yield in the low-rate environment. Short-term interest rates remained near zero, keeping yields on money market securities near historical lows.

At BlackRock, we believe investors need to think globally and extend their scope across a broader array of asset classes and be prepared to move freely as market conditions change over time. We encourage you to talk with your financial advisor and visit www.blackrock.com for further insight about investing in today’s world.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

“While monetary policy was the main driving force behind the rally in risk assets, it was also the main culprit for the bouts of volatility during the year.”

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2013
	6-month			12-month
US large cap equities (S&P 500® Index)		16.31	%		32.39	%
US small cap equities (Russell 2000® Index)		19.82			38.82
International equities (MSCI Europe, Australasia, Far East Index)		17.94			22.78
Emerging market equities (MSCI Emerging Markets Index)		7.70			(2.60	)
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)		0.03			0.07
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		(3.10	)		(7.83	)
US investment grade bonds (Barclays US Aggregate Bond Index)		0.43			(2.02	)
Tax-exempt municipal bonds (S&P Municipal Bond Index)		0.00			(2.55	)
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)		5.94			7.44
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

THIS PAGE NOT PART OF YOUR FUND REPORT 3

Fund Summary as of December 31, 2013

Investment Objective

BlackRock CoreAlpha Bond Fund’s (the “Fund”), a series of BlackRock Funds III, investment objective is to seek to provide a combination of income and capital growth.

Portfolio Management Commentary

How did the Fund perform?

Ÿ For the 12-month period ended December 31, 2013, the Fund’s Institutional Shares returned (2.44)%, Investor A Shares returned (2.78)% and Investor C Shares returned (3.51)%. All of the Fund’s share classes underperformed the Fund’s benchmark, Barclays US Aggregate Bond Index (the “Index”), which returned (2.02)%.

Ÿ The Fund invests all of its assets in the CoreAlpha Bond Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio.

What factors influenced performance?

Ÿ The Master Portfolio’s positioning in agency mortgage-backed securities (“MBS”) was the primary detractor from performance relative to the Index. An overweight in agency MBS hurt returns as the sector came under pressure in May, when the Chairman of the US Federal Reserve first spoke of tapering the central bank’s bond-buying stimulus program before the end of 2013. Also detracting from results during the period were the Master Portfolio’s global interest rates strategies.

Ÿ Conversely, the Master Portfolio’s overweight and security selection within credit sectors contributed positively to performance as spread assets rallied. Modestly overweight holdings in certain higher-risk names had a positive impact as these names led the rally in credit markets. Exposure to high yield debt and non-agency residential MBS, neither of which are represented in the Index, also benefited performance as those sectors experienced meaningful spread tightening and interest income during the period.

Ÿ As part of its investment strategy, the Master Portfolio uses derivatives to hedge portfolio positions and/or take outright views on interest rates, credit risk and/or foreign currency exchange. Specifically, the Master Portfolio uses financial futures, forward contracts, credit default swaps and interest rate swaps to manage duration and yield curve positioning as an efficient way to express sector views. During the period, the Master Portfolio’s derivatives holdings had a negative impact on returns.

Describe recent portfolio activity.

Ÿ The Master Portfolio actively managed duration (sensitivity to interest rate movements) throughout the period. Relative to the Index, the Master Portfolio maintained a long bias in the earlier part of the period, but moved to a shorter bias in the end of the period. The Master Portfolio tactically traded investment grade credits, cautiously seeking to take advantage of relative value opportunities in industrials and financials. Also during the period, the Master Portfolio maintained an out-of-index allocation to high yield debt.

Ÿ The Master Portfolio tactically traded liquid developed-market currencies, seeking to capture gains on opportunities presented by relative price movements between currencies. In the earlier part of the period, the Master Portfolio held short positions in the Japanese yen and British pound sterling and a long position in the Canadian dollar in light of growth differentials and the respective interest rate environments. Based on short-term valuation signals during the period, the Master Portfolio moved to a long position in the Japanese yen and closed the British pound sterling and Canadian dollar positions. Additionally, the Master Portfolio took a long position in the Australian dollar given high relative growth and an expectation of reversal toward fair value.

Describe portfolio positioning at period end.

Ÿ At period end, the Master Portfolio remained overweight relative to the Index in non-government spread sectors and generally underweight US Treasury securities. Within spread sectors, the Master Portfolio was overweight in investment grade corporate credit, agency MBS and asset-backed securities. The Master Portfolio also held out-of-index positions in high yield debt and non-agency residential MBS. With respect to currency positions, the Master Portfolio was long the Japanese yen and Australian dollar versus the US dollar. The Master Portfolio ended the period with a short duration position as compared to the Index.

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.

4 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including administration fees, if any. Institutional Shares do not have a sales charge.

²  The Fund invests all of its assets in the Master Portfolio. The Master Portfolio invests 80% of its assets in bonds, including obligations issued or guaranteed by the US government, its agencies or instrumentalities; mortgage-backed securities issued or guaranteed by the US government or its agencies or instrumentalities, including US agency mortgage pass-through securities; commercial mortgage-backed securities; debt obligations of US issuers; municipal securities; asset-backed securities; and US-registered dollar-denominated debt obligations of foreign issuers. The Master Portfolio may invest in bonds of any maturity or duration.

³  This index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the US investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis.

⁴  Commencement of operations of the Master Portfolio.

Performance Summary for the Period Ended December 31, 2013

										Average Annual Total Returns5
										1 Year						5 Years						Since Inception6
	Standardized 30-Day Yields			Unsubsidized 30-Day Yields			6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		2.27	%		2.24	%		0.31	%		(2.44	)%		N/A			5.67	%		N/A			4.54	%		N/A
Investor A		1.91			1.89			0.14			(2.78	)		(6.70	)%		5.35			4.49	%		4.21			3.78	%
Investor C		1.17			1.14			(0.34	)		(3.51	)		(4.46	)		4.53			4.53			3.42			3.42
Barclays US Aggregate Bond Index		—			—			0.43			(2.02	)		N/A			4.44			N/A			4.35			N/A

⁵  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 6 for a detailed description of share classes, including any related sales charges and fees.

⁶  The Master Portfolio commenced operations on March 15, 2004.

N/A — Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

Expense Example

	Actual						Hypothetical8
	Beginning Account Value July 1, 2013		Ending Account Value December 31, 2013		Expenses Paid During the Period7		Beginning Account Value July 1, 2013		Ending Account Value December 31, 2013		Expenses Paid During the Period7		Annualized Expense Ratio
Institutional	$	1,000.00	$	1,003.10	$	1.77	$	1,000.00	$	1,023.44	$	1.79		0.35	%
Investor A	$	1,000.00	$	1,001.40	$	3.53	$	1,000.00	$	1,021.68	$	3.57		0.70	%
Investor C	$	1,000.00	$	996.60	$	7.30	$	1,000.00	$	1,017.90	$	7.37		1.45	%

⁷  For each class of the Fund, expenses are equal to the annualized net expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown). Because the Fund invests all of its assets in the Master Portfolio, the expense example reflects the net expenses of both the Fund and the Master Portfolio.

⁸  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

See “Disclosure of Expenses” on page 6 for further information on how expenses are calculated.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 5

About Fund Performance

Ÿ Institutional Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors.

Ÿ Investor A Shares are subject to a maximum initial sales charge (front-end load) of 4.00% and a service fee of 0.25% per year (but no distribution fee). Certain redemptions of these shares may be subject to a contingent deferred sales charge (“CDSC”) where no initial sales charge was paid at the time of purchase.

Ÿ Investor C Shares are subject to a 1.00% CDSC if redeemed within one year of purchase. In addition, these shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year.

Prior to February 28, 2011 for Institutional Shares and prior to April 30, 2012 for Investor A and Investor C Shares, the performance of the classes is based on the returns of the Master Portfolio in which the Fund invests all of its assets for each period since March 15, 2004, the commencement of the Master Portfolio’s operations, adjusted to reflect the estimated annual fund fees and operating expenses of each respective share class of the Fund.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month end. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Figures shown in the performance tables on the previous page assume reinvestment of all dividends and distributions, if any, at net asset value on the payable date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. The Fund’s administrator waived a portion of the Fund’s expenses. Without such waiver, the Fund’s performance would have been lower. The standardized 30-day yield includes the effects of waivers and/or reimbursements. The unsubsidized 30-day yield excludes the effects of waivers and/or reimbursements.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including administration fees, service and distribution fees, including 12b-1 fees and other Fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2013 and held through December 31, 2013) 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 other funds’ shareholder reports.

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.

6 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Derivative Financial Instruments

The Master Portfolio may invest in various derivative financial instruments, including financial futures contracts, foreign currency exchange contracts, options and swaps, as specified in Note 4 of the Master Portfolio’s Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market, credit, interest rate, foreign currency exchange rate and/or other risks. Derivative financial instruments 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 derivative financial instrument. The Master Portfolio’s ability to use a derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require the Master Portfolio to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation the Master Portfolio can realize on an investment, may result in lower dividends paid to shareholders or may cause the Master Portfolio to hold an investment that it might otherwise sell. The Master Portfolio’s investments in these instruments are discussed in detail in the Master Portfolio’s Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 7

Statement of Assets and Liabilities BlackRock CoreAlpha Bond Fund

December 31, 2013
Assets
Investments at value — Master Portfolio (cost — $101,426,759)	$	100,135,263
Withdrawals receivable from the Master Portfolio		5,811,469
Total assets		105,946,732
Liabilities
Capital shares redeemed payable		5,811,469
Income dividends payable		31,094
Professional fees payable		12,003
Administration fees payable		7,545
Service and distribution fees payable		281
Total liabilities		5,862,392
Net Assets	$	100,084,340
Net Assets Consist of
Paid-in capital	$	101,376,328
Distributions in excess of net investment income		(354,496	)
Accumulated net realized gain allocated from the Master Portfolio		354,004
Net unrealized appreciation/depreciation allocated from the Master Portfolio		(1,291,496	)
Net Assets	$	100,084,340
Net Asset Value
Institutional — Based on net assets of $99,630,301 and 9,780,789 shares outstanding, unlimited number of shares authorized, no par value	$	10.19
Investor A — Based on net assets of $165,904 and 16,288 shares outstanding, unlimited number of shares authorized, no par value	$	10.19
Investor C — Based on net assets of $288,135 and 28,296 shares outstanding, unlimited number of shares authorized, no par value	$	10.18

See Notes to Financial Statements.
8	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2013

Statement of Operations BlackRock CoreAlpha Bond Fund

Year Ended December 31, 2013
Investment Income
Net investment income allocated from the Master Portfolio:
Interest	$	2,424,430
Securities lending — affiliated — net		18,665
Dividends		11,722
Income — affiliated		9,940
Other income — affiliated		1,970
Expenses		(245,266	)
Fees waived		4,858
Total income		2,226,319
Fund Expenses
Administration — Institutional		98,361
Administration — Investor A		345
Administration — Investor C		545
Service — Investor A		431
Service and distribution — Investor C		2,723
Professional		19,384
Miscellaneous		325
Total expenses		122,114
Less administration fees waived		(19,384	)
Total expenses after fees waived		102,730
Net investment income		2,123,589
Realized and Unrealized Loss Allocated from the Master Portfolio
Net realized loss from investments, financial futures contracts, swaps, options written and foreign currency transactions		(91,526	)
Net change in unrealized appreciation/depreciation on investments, financial futures contracts, swaps, options written and foreign currency translations		(4,153,649	)
Total realized and unrealized loss		(4,245,175	)
Net Decrease in Net Assets Resulting from Operations	$	(2,121,586	)

See Notes to Financial Statements.
	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2013	9

Statements of Changes in Net Assets BlackRock CoreAlpha Bond Fund

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012
Operations
Net investment income	$	2,123,589		$	1,922,464
Net realized gain (loss)		(91,526	)		203,767
Net change in unrealized appreciation/depreciation		(4,153,649	)		1,922,175
Net increase (decrease) in net assets resulting from operations		(2,121,586	)		4,048,406
Dividends and Distributions to Shareholders From1
Net investment income:
Institutional		(2,335,782	)		(2,083,770	)
Investor A		(3,481	)		(1,007	)
Investor C		(3,461	)		(1,418	)
Net realized gain:
Institutional		(47,630	)		—
Investor A		(75	)		—
Investor C		(128	)		—
Return of capital:
Institutional		(182,680	)		(206,071	)
Investor A		(319	)		(134	)
Investor C		(509	)		(142	)
Decrease in net assets resulting from dividends and distributions to shareholders		(2,574,065	)		(2,292,542	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(5,680,828	)		49,455,150
Net Assets
Total increase (decrease) in net assets		(10,376,479	)		51,211,014
Beginning of year		110,460,819			59,249,805
End of year	$	100,084,340		$	110,460,819
Distributions in excess of net investment income, end of year	$	(354,496	)	$	(135,361	)

¹  Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
10	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2013

Financial Highlights BlackRock CoreAlpha Bond Fund

	Institutional
	Year Ended December 31,						Period February 28, 20111 to December 31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.72		$	10.50		$	10.00
Net investment income2		0.22			0.24			0.25
Net realized and unrealized gain (loss)		(0.48	)		0.26			0.52
Net increase (decrease) from investment operations		(0.26	)		0.50			0.77
Dividends and distributions from:3
Net investment income		(0.25	)		(0.25	)		(0.26	)
Net realized gain		(0.00	)4		—			—
Return of capital		(0.02	)		(0.03	)		(0.01	)
Total dividends and distributions		(0.27	)		(0.28	)		(0.27	)
Net asset value, end of period	$	10.19		$	10.72		$	10.50
Total Investment Return5
Based on net asset value		(2.44)%			4.82%			7.80%	6
Ratios to Average Net Assets7
Total expenses		0.36%	8		0.37%	9		0.44%	8,10
Total expenses after fees waived		0.34%	8		0.34%	9		0.35%	8,10
Net investment income		2.16%	8		2.22%	9		2.93%	8,10
Supplemental Data
Net assets, end of period (000)	$	99,630		$	110,020		$	59,250
Portfolio turnover of the Master Portfolio		986%			2,128%			1,646%	11

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Amount is greater than $(0.005) per share.

⁵  Where applicable, assumes the reinvestment of dividends and distributions.

⁶  Aggregate total investment return.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁸  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.01%.

⁹  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of less than 0.01%.

¹⁰  Annualized.

¹¹  Includes mortgage dollar roll transactions. Excluding these transactions the portfolio turnover rate would have been 1,510%.

See Notes to Financial Statements.
	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2013	11

Financial Highlights (continued) BlackRock CoreAlpha Bond Fund

	Investor A
	Year Ended December 31, 2013			Period April 30, 20121 to December  31, 2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.72		$	10.55
Net investment income2		0.18			0.12
Net realized and unrealized gain (loss)		(0.48	)		0.22
Net increase (decrease) from investment operations		(0.30	)		0.34
Dividends and distributions from:3
Net investment income		(0.21	)		(0.15	)
Net realized gain		(0.00	)4		—
Return of capital		(0.02	)		(0.02	)
Total dividends and distributions		(0.23	)		(0.17	)
Net asset value, end of period	$	10.19		$	10.72
Total Investment Return5
Based on net asset value		(2.78)%			3.25%	6
Ratios to Average Net Assets7
Total expenses		0.71%	8		0.72%	8,9
Total expenses after fees waived		0.69%	8		0.70%	8,9
Net investment income		1.78%	8		1.80%	8,9
Supplemental Data
Net assets, end of period (000)	$	166		$	168
Portfolio turnover of the Master Portfolio		986%			2,128%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Amount is greater than $(0.005) per share.

⁵  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁶  Aggregate total investment return.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁸  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.01%.

⁹  Annualized.

See Notes to Financial Statements.
12	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2013

Financial Highlights (concluded) BlackRock CoreAlpha Bond Fund

	Investor C
	Year Ended December 31, 2013			Period April 30, 20121 to December  31, 2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.71		$	10.55
Net investment income2		0.11			0.06
Net realized and unrealized gain (loss)		(0.48	)		0.21
Net increase (decrease) from investment operations		(0.37	)		0.27
Dividends and distributions from:3
Net investment income		(0.14	)		(0.10	)
Net realized gain		(0.00	)4		—
Return of capital		(0.02	)		(0.01	)
Total dividends and distributions		(0.16	)		(0.11	)
Net asset value, end of period	$	10.18		$	10.71
Total Investment Return5
Based on net asset value		(3.51	)%		2.61%	6
Ratios to Average Net Assets7
Total expenses		1.46%	8		1.46%	8,9
Total expenses after fees waived		1.44%	8		1.44%	8,9
Net investment income		1.04%	8		1.04%	8,9
Supplemental Data
Net assets, end of period (000)	$	288		$	273
Portfolio turnover of the Master Portfolio		986%			2,128%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Amount is greater than $(0.005) per share.

⁵  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁶  Aggregate total investment return.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁸  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.01%.

⁹  Annualized.

See Notes to Financial Statements.
	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2013	13

Notes to Financial Statements BlackRock CoreAlpha Bond Fund

1. Organization:

BlackRock CoreAlpha Bond Fund (the “Fund”), a series of BlackRock Funds III (the “Trust”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. The Trust is organized as a Delaware statutory trust. The Fund seeks to achieve its investment objective by investing all of its assets in CoreAlpha Bond Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), which has the same investment objective and strategies as the Fund. The value of the Fund’s proportionate investment in the Master Portfolio reflects the Fund’s interest in the net assets of the Master Portfolio. The performance of the Fund is directly affected by the performance of the Master Portfolio. The percentage of the Master Portfolio owned by the Fund at December 31, 2013 was 3.0%. As such, the financial statements of the Master Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with the Fund’s financial statements. The Fund offers multiple classes of shares. Institutional Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally sold with an initial sales charge, but may be subject to a CDSC for certain redemptions where no initial sales charge was paid at the time of purchase. Investor C Shares may be subject to a CDSC. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that Investor A and Investor C Shares bear certain expenses related to the shareholder servicing of such shares, and Investor C Shares also bear certain expenses related to the distribution of such shares. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures.

2. Significant Accounting Policies:

The Fund’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in 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 following is a summary of the significant accounting policies followed by the Fund:

Valuation: US 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 BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Fund for all financial statements. The Fund’s policy is to fair value its financial instruments at market value. The Fund records its investment in the Master Portfolio at fair value based on the Fund’s proportionate interest in the net assets of the Master Portfolio. Valuation of securities held by the Master Portfolio is discussed in Note 2 of the Master Portfolio’s Notes to Financial Statements, which are included elsewhere in this report.

Investment Transactions and Investment Income: For financial reporting purposes, contributions to and withdrawals from the Master Portfolio are accounted for on a trade date basis. The Fund records daily its proportionate share of the Master Portfolio’s income, expenses and realized and unrealized gains and losses. Realized and unrealized gains and losses are adjusted utilizing partnership tax allocation rules. In addition, the Fund accrues its own expenses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Dividends and Distributions: Dividends from net investment income are declared daily and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

The character of dividends and distributions is determined in accordance with federal income tax regulations, which may differ from US GAAP. The portion of distributions that exceeds the Fund’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a non-taxable return of capital. Realized net capital gains can be offset by capital losses carried forward from prior years. 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.

Income Taxes: 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 US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s US federal tax returns remains open for the two years ended December 31, 2013 and the period ended December 31, 2011. 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’s facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

14 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Notes to Financial Statements (continued) BlackRock CoreAlpha Bond Fund

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

3. Administration Agreement and Other Transactions with Affiliates:

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

The Trust, on behalf of the Fund, entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL, in consideration thereof, has agreed to bear all of the Fund’s ordinary operating expenses, excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the Fund. BAL is entitled to receive for these administration services an annual fee of 0.10% based on the average daily net assets of Institutional Shares and 0.20% of the average daily net assets of Investor A and Investor C Shares.

From time to time, BAL may waive such fees in whole or in part. Any such waiver will reduce the expenses of the Fund and, accordingly, have a favorable impact on its performance. BAL may delegate certain of its administration duties to sub-administrators.

The fees and expenses of the Fund’s trustees who are not “interested persons” of the Trust, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and the Trust’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Fund. BAL has contractually agreed to provide an offsetting credit against the administration fees paid by the Fund in an amount equal to the independent expenses through April 30, 2014.

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

	Service Fees			Distribution Fees
Investor A		0.25	%		—
Investor C		0.25	%		0.75	%

Pursuant to sub-agreements with BRIL, broker-dealers and BRIL provide shareholder servicing and distribution services to the Fund. The ongoing service and/or distribution fee compensates BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to Investor A and Investor C shareholders.

Certain officers and/or trustees of the Trust are officers and/or directors of BlackRock or its affiliates.

4. Income Tax Information:

The tax character of distributions paid during the fiscal years ended December 31, 2013 and December 31, 2012 was as follows:

	12/31/13		12/31/12
Ordinary income	$	2,342,724	$	2,086,195
Long-term capital gains		47,833		—
Return of capital		183,508		206,347
Total	$	2,574,065	$	2,292,542

As of December 31, 2013, the tax components of accumulated net losses were as follows:

Qualified late-year losses1	$	(728,487	)
Net unrealized losses2		(563,501	)
Total	$	(1,291,988	)

¹  The Fund has elected to defer certain qualified late-year losses and recognize such losses in the year ending December 31, 2014.

²  The difference between book-basis and tax-basis net unrealized losses was attributable primarily to the timing and recognition of partnership income.

During the year ended December 31, 2013, the Fund utilized $39,766 of its capital loss carryforward.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 15

Notes to Financial Statements (concluded) BlackRock CoreAlpha Bond Fund

5. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2013						Year Ended December 31, 2012
	Shares			Amount			Shares			Amount
Institutional
Shares sold		9,415,538		$	97,015,571			5,419,465		$	57,431,644
Shares issued to shareholders in reinvestment of dividends and distributions		180,850			1,880,555			114,425			1,219,007
Shares redeemed		(10,081,298	)		(104,613,000	)		(911,492	)		(9,635,206	)
Net increase (decrease)		(484,910	)	$	(5,716,874	)		4,622,398		$	49,015,445
							Period April 30, 20121 to December 31, 2012
Investor A
Shares sold		5,088		$	53,807			16,140		$	172,594
Shares issued to shareholders in reinvestment of dividends and distributions		309			3,212			99			1,061
Shares redeemed		(4,755	)		(49,647	)		(593	)		(6,347	)
Net increase		642		$	7,372			15,646		$	167,308
Investor C
Shares sold		15,857		$	168,200			30,070		$	321,558
Shares issued to shareholders in reinvestment of dividends and distributions		372			3,876			145			1,558
Shares redeemed		(13,430	)		(143,402	)		(4,718	)		(50,719	)
Net increase		2,799		$	28,674			25,497		$	272,397
Total Net Increase (Decrease)		(481,469	)	$	(5,680,828	)		4,663,541		$	49,455,150

¹  Commencement of operations.

At December 31, 2013, 1,937 Investor A Shares and 1,924 Investor C Shares of the Fund were owned by affiliates.

6. Subsequent Events:

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

16 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Report of Independent Registered Public Accounting Firm BlackRock CoreAlpha Bond Fund

To the Board of Trustees of BlackRock Funds III and the Shareholders of BlackRock CoreAlpha Bond Fund:

In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock CoreAlpha Bond Fund (the “Fund”), a series of BlackRock Funds III, at December 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 18, 2014

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by the Fund for the fiscal year ended December 31, 2013.

	January — December 2013
Qualified Dividend Income for Individuals1		0.473%
Dividends Qualifying for the Dividends Received Deduction for Corporations1		0.473%
Interest-Related Dividends for Non-US Residents2		74.80%
Federal Obligation Interest3		1.91%

¹  The Fund hereby designates the percentage indicated above or the maximum amount allowable by law.

²  Represents the portion of the taxable ordinary income dividends eligible for exemption from US withholding tax for nonresident aliens and foreign corporations.

³  The law varies in each state as to whether and what percentage of dividend income attributable to federal obligations is exempt from state income tax. We recommend that you consult your tax advisor to determine if any portion of the dividends you received is exempt from state income taxes.

Additionally, the Fund distributed long-term capital gains of $0.004532 per share to shareholders of record on December 10, 2013.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 17

Master Portfolio Information CoreAlpha Bond Master Portfolio

As of December 31, 2013

Portfolio Composition Percent of Long-Term  Investments

US Government Sponsored Agency Securities	42	%
Corporate Bonds	25
US Treasury Obligations	13
Asset-Backed Securities	11
Non-Agency Mortgage-Backed Securities	7
Foreign Agency Obligations	1
Taxable Municipal Bonds	1

Credit Quality Allocation¹ Percent of
Long-Term  Investments

AAA/Aaa2	66	%
AA/Aa	5
A	16
BBB/Baa	11
BB/Ba	1
Not Rated	1

¹  Using the higher of Standard & Poor’s (“S&P”) or Moody’s Investors Service ratings.

²  Includes US Government Sponsored Agency Securities and US Treasury Obligations, which were deemed AAA/Aaa by the investment advisor.

18 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Schedule of Investments December 31, 2013 CoreAlpha Bond Master Portfolio (Percentages shown are based on Net Assets)

Asset-Backed Securities	Par   (000)		Value
Access Group, Inc., Class A2 (a):
Series 2005-1, 0.36%, 3/23/20	USD	2,534	$	2,527,233
Series 2005-A, 0.46%, 4/27/26		2,215		2,209,844
ACE Securities Corp. Home Equity Loan Trust (a):
Series 2005-AG1, Class A2D, 0.52%, 8/25/35		2,257		2,116,080
Series 2005-HE2, Class M3, 0.88%, 4/25/35		3,120		3,089,293
American Express Credit Account Master Trust, Series 2005-2, Class C, 0.65%, 10/16/17 (a)(b)		700		699,063
AmeriCredit Automobile Receivables Trust:
Series 2010-1, Class C, 5.19%, 8/17/15		1,358		1,372,773
Series 2010-1, Class D, 6.65%, 7/17/17		1,500		1,533,984
Series 2010-4, Class D, 4.20%, 11/08/16		2,600		2,680,265
Series 2011-1, Class C, 2.85%, 8/08/16		5,100		5,185,986
Series 2011-1, Class D, 4.26%, 2/08/17		3,895		4,049,624
Series 2011-2, Class D, 4.00%, 5/08/17		1,700		1,758,818
Series 2011-3, Class C, 2.86%, 1/09/17		1,900		1,939,153
Series 2012-1, Class D, 4.72%, 3/08/18		3,300		3,500,996
Ameriquest Mortgage Securities, Inc. Pass-Through Certificates, Series 2005-R6, Class A2, 0.36%, 8/25/35 (a)		233		230,331
Bear Stearns Asset-Backed Securities I Trust (a):
Series 2004-BO1, Class 2A1, 0.48%, 10/25/34		2,816		2,805,243
Series 2006-HE1, Class 1A3, 0.49%, 12/25/35		3,565		3,501,860
BNC Mortgage Loan Trust, Series 2007-4, Class A3A, 0.41%, 11/25/37 (a)		580		573,782
Carfinance Capital Auto Trust, Class A (b):
Series 2013-1A, 1.65%, 7/17/17		2,587		2,581,424
Series 2013-2A, 1.75%, 11/15/17		3,091		3,090,552
Asset-Backed Securities	Par   (000)		Value
Chase Funding Mortgage Loan Asset-Backed Certificates, Series 2003-5, Class 1A4, 4.40%, 2/25/30	USD	150		149,541
CIT Mortgage Loan Trust, Series 2007-1, Class 2A2, 1.41%, 10/25/37 (a)(b)		7,998		7,967,141
Citigroup Mortgage Loan Trust, Series 2007-WFH2, Class A2, 0.31%, 3/25/37 (a)		456		455,433
Countrywide Asset-Backed Certificates (a):
Series 2005-4, Class MV1, 0.62%, 10/25/35		994		992,826
Series 2005-8, Class M1, 0.63%, 12/25/35		3,449		3,393,619
Series 2005-14, Class 3A2, 0.40%, 4/25/36		434		432,969
Series 2006-25, Class 2A2, 0.28%, 6/25/47		118		118,299
CPS Auto Receivables Trust,
Series 2011-B, Class B, 5.68%, 9/17/18 (b)		1,343		1,395,961
Credit Suisse Mortgage Capital Certificates, Series 2006-CF3, Class A1, 0.43%, 10/25/36 (a)(b)		2,284		2,236,038
DT Auto Owner Trust, Series 2012-2A (b):
Class C, 2.72%, 4/17/17		2,300		2,318,598
Class D, 4.35%, 3/15/19		3,400		3,505,805
Ellington Loan Acquisition Trust, Series 2007-1, Class A2A1, 1.16%, 5/26/37 (a)(b)		20		19,656
Exeter Automobile Receivables Trust, Series 2013-1A, Class A, 1.29%, 10/16/17 (b)		3,210		3,215,868
First Franklin Mortgage Loan Trust (a):
Series 2004-FF10, Class A3, 1.24%, 9/25/34		58		58,228
Series 2005-FF2, Class M2, 0.82%, 3/25/35		1,269		1,263,146
Series 2005-FF4, Class M1, 0.59%, 5/25/35		3,455		3,397,922
Series 2005-FF10, Class A4, 0.48%, 11/25/35		1,238		1,169,345
First Investors Auto Owner Trust, Class A2 (b):
Series 2013-1A, 0.90%, 10/15/18		2,884		2,884,901
Series 2013-3A, 0.89%, 9/15/17		1,800		1,800,112

Portfolio Abbreviations

To simplify the listings of portfolio holdings in the Schedule of Investments, the names and descriptions of many of the securities have been abbreviated according to the following list:	AUD	Australian Dollar	NOK	Norwegian Krone
	CAD	Canadian Dollar	NZD	New Zealand Dollar
	COP	Certificates of Participation	RB	Revenue Bonds
	EUR	Euro	REMICS	Real Estate Mortgage Investment Conduits
	EURIBOR	Euro Interbank Offered Rate	SEK	Swedish Krona
	GBP	British Pound	STRIPS	Separate Trading of Registered Interest and Principal Securities
	GO	General Obligation Bonds
	JPY	Japanese Yen	USD	US Dollar
	LIBOR	London Interbank Offered Rate

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 19

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio (Percentages shown are based on Net Assets)

Asset-Backed Securities	Par   (000)		Value
Ford Credit Floorplan Master Owner Trust A, Class D:
Series 2011-1, 2.96%, 2/15/16 (b)	USD	3,000	$	3,021,192
Series 2012-1, 2.26%, 1/15/16 (a)		1,070		1,070,534
HLSS Servicer Advance Receivables Backed Notes (b):
Series 2012-T2, Class B2, 2.48%, 10/15/45		100		100,910
Series 2013-T1, Class A1, 0.90%, 1/15/44		12,200		12,200,000
Series 2013-T1, Class B1, 1.25%, 1/15/44		1,900		1,899,430
Series 2013-T2, Class A2, 1.15%, 5/16/44		5,200		5,172,960
Series 2013-T2, Class C2, 1.84%, 5/16/44		1,000		997,700
Series 2013-T2, Class D2, 2.39%, 5/16/44		750		747,225
Series 2013-T6, Class A, 1.29%, 9/15/44		3,000		2,998,200
Series 2013-T6, Class C, 1.73%, 9/15/44		900		899,190
HSI Asset Securitization Corp. Trust, Series 2006-OPT4, Class 2A5, 0.00%, 3/25/36 (c)		4,500		4,075,483
Iowa Student Loan Liquidity Corp., Series 2005-1, Class A2, 0.35%, 3/25/22 (a)		8,023		8,010,379
JPMorgan Mortgage Acquisition Trust, Series 2007-CH1, Class AV4, 0.29%, 11/25/36 (a)		1,439		1,423,202
KeyCorp Student Loan Trust, Class 2A3 (a):
Series 2005-A, 0.48%, 9/28/26		2,428		2,419,870
Series 2006-A, 0.44%, 6/27/29		10,934		10,778,054
Long Beach Mortgage Loan Trust, Series 2005-WL1, Class M2, 0.99%, 6/25/35 (a)		1,273		1,234,555
MASTR Asset-Backed Securities Trust, Series 2006-FRE1, Class A3, 0.34%, 12/25/35 (a)		999		994,226
Morgan Stanley ABS Capital I, Inc. Trust, Series 2005-HE3, Class M2, 0.68%, 7/25/35 (a)		855		845,921
The National Collegiate Student Loan Trust (a):
Series 2004-1, Class A2, 0.51%, 6/25/27		3,251		3,115,116
Series 2005-1, Class A3, 0.30%, 10/26/26		536		534,170
Series 2005-2, Class A3, 0.35%, 2/25/28		4,905		4,802,005
Series 2005-3, Class A3, 0.40%, 7/25/28		8,216		7,995,397
Series 2005-3, Class A4, 0.44%, 4/25/29		2,038		1,860,394
Series 2006-1, Class A3, 0.35%, 5/25/26		1,079		1,056,493
The National Collegiate Student Loan Trust (a) (concluded):
Series 2006-2, Class A2, 0.31%, 7/25/26	USD	10,312	$	10,093,184
Series 2007-4, Class A2A3, 3.67%, 12/26/25		2,600		2,617,053
Nationstar Agency Advance Funding Trust, Series 2013-T1A, Class AT1, 1.00%, 2/15/45 (b)		1,650		1,641,238
Nationstar Mortgage Advance Receivable Trust, Series 2013-T1A, Class A1, 1.08%, 6/20/44 (b)		16,100		16,094,478
New Century Home Equity Loan Trust, Series 2005-3, Class A2D, 0.54%, 7/25/35 (a)		177		176,868
Nomura Home Equity Loan, Inc. Home Equity Loan Trust, Series 2006-WF1, Class A3, 0.30%, 3/25/36 (a)		1,212		1,207,336
Park Place Securities, Inc. Asset-Backed Pass-Through Certificates (a):
Series 2004-MHQ1, Class M1, 1.21%, 12/25/34		232		232,675
Series 2004-WWF1, Class M2, 1.18%, 12/25/34		2,000		1,995,412
Series 2005-WCW3, Class A2C, 0.54%, 8/25/35		4,494		4,366,919
RAAC Trust, Series 2006-SP3, Class A2, 0.33%, 8/25/36 (a)		666		665,883
RAMP Trust (a):
Series 2005-RS6, Class M1, 0.66%, 6/25/35		3,880		3,818,065
Series 2005-RZ4, Class A2, 0.42%, 11/25/35		388		385,371
RASC Trust, Series 2005-AHL3, Class A2, 0.40%, 11/25/35 (a)		3,594		3,476,679
Santander Consumer Acquired Receivables Trust (b):
Series 2011-S1A, Class D, 3.15%, 8/15/16		1,874		1,876,164
Series 2011-WO, Class C, 3.19%, 10/15/15		13,294		13,379,599
Santander Drive Auto Receivables Trust:
Series 2010-2, Class C, 3.89%, 7/17/17		1,188		1,207,536
Series 2010-3, Class C, 3.06%, 11/15/17		4,780		4,868,461
Series 2010-B, Class C, 3.02%, 10/17/16 (b)		7,065		7,117,455
Series 2011-1, Class C, 3.11%, 5/16/16		5,000		5,091,805
Series 2011-1, Class D, 4.01%, 2/15/17		14,720		15,301,234
Series 2011-3, Class B, 2.50%, 12/15/15		864		867,874
Series 2011-3, Class D, 4.23%, 5/15/17		3,900		4,073,070
Series 2011-4, Class C, 3.82%, 8/15/17		3,490		3,589,856

See Notes to Financial Statements.

20 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio (Percentages shown are based on Net Assets)

Asset-Backed Securities	Par   (000)		Value
Santander Drive Auto Receivables Trust: (concluded):
Series 2011-S2A, Class C, 2.86%, 6/15/17 (b)	USD	28	$	27,753
Series 2011-S2A, Class D, 3.35%, 6/15/17 (b)		6		6,236
Series 2012-1, Class C, 3.78%, 11/15/17		300		310,175
Series 2012-2, Class B, 2.09%, 8/15/16		3,400		3,432,416
Series 2012-2, Class D, 3.87%, 2/15/18		2,000		2,099,250
Series 2012-3, Class B, 1.94%, 12/15/16		500		504,599
Series 2012-4, Class B, 1.83%, 3/15/17		2,800		2,826,236
Series 2012-6, Class B, 1.33%, 5/15/17		11,190		11,221,824
Series 2013-3 Class C, 1.81%, 4/15/19		2,590		2,572,714
Series 2013-A, Class B, 1.89%, 10/15/19 (b)		2,300		2,314,904
Series 2013-A, Class C, 3.12%, 10/15/19 (b)		4,100		4,204,997
SLC Private Student Loan Trust, Series 2009-AA, Class A, 4.75%, 6/15/33 (a)(b)		9,480		8,597,984
SLM Private Credit Student Loan Trust (a):
Series 2003-A, Class A2, 0.68%, 9/15/20		11,872		11,705,265
Series 2003-B, Class A2, 0.64%, 3/15/22		3,222		3,151,971
Series 2004-A, Class A2, 0.44%, 3/16/20		6,591		6,529,404
Series 2004-B, Class A2, 0.44%, 6/15/21		10,058		9,938,737
Series 2005-A, Class A2, 0.38%, 12/15/20		2,896		2,882,318
Series 2006-B, Class A3, 0.38%, 12/15/22		352		352,153
Series 2006-C, Class A3, 0.37%, 6/15/21		3,681		3,674,219
SLM Private Education Loan Trust (a)(b):
Series 2009-CT, Class 1A, 2.35%, 4/15/39		1,319		1,320,275
Series 2009-CT, Class 2A, 2.01%, 4/15/39		730		731,428
Series 2010-A, Class 1A, 3.20%, 5/16/44		4,401		4,570,630
Series 2011-A, Class A1, 1.16%, 10/15/24		12,135		12,171,557
Series 2011-B, Class A1, 1.01%, 12/16/24		1,571		1,573,580
Series 2011-C, Class A1, 1.56%, 12/15/23		1,774		1,786,209
Series 2012-A, Class A1, 1.56%, 8/15/25		2,832		2,859,295
Series 2012-B, Class A1, 1.26%, 12/15/21		6,638		6,668,389
SLM Private Education Loan Trust (a)(b) (concluded):
Series 2012-C, Class A1, 1.26%, 8/15/23	USD	3,322	$	3,340,615
Series 2012-D, Class A1, 1.21%, 6/15/23		2,434		2,444,105
Series 2012-E, Class A1, 0.91%, 10/16/23		14,008		14,016,892
Series 2013-A, Class A1, 0.76%, 8/15/22		7,319		7,307,534
Series 2013-B, Class A1, 0.81%, 7/15/22		10,565		10,560,011
Series 2013-C, Class A1, 1.02%, 2/15/22		5,597		5,612,029
Soundview Home Loan Trust, Series 2005-OPT4, Class 2A3, 0.42%, 12/25/35 (a)		4,578		4,408,506
Terwin Mortgage Trust, Series 2006-5, Class 2A2, 0.37%, 6/25/37 (a)(b)		4,825		4,630,049
Trade MAPS 1 Ltd., Series 2013-1A, Class A, 0.86%, 12/10/18 (a)(b)		9,690		9,707,830
Vericrest Opportunity Loan Trust XIX LLC, Series 2013-NPL5, Class A1, 3.63%, 4/25/55 (b)		2,493		2,483,765
Vericrest Opportunity Loan Trust XXI LLC, Series 2013-NPL7, Class A1, 3.63%, 11/25/53 (a)(b)		3,250		3,237,812
Westlake Automobile Receivables Trust, Series 2011-1A, Class B, 2.60%, 10/15/14 (b)		225		225,035
Total Asset-Backed Securities — 13.1%				440,627,234
Corporate Bonds
Aerospace & Defense — 0.7%
Crane Co.:
2.75%, 12/15/18		688		684,645
4.45%, 12/15/23		1,550		1,532,077
Eaton Corp., 0.95%, 11/02/15		3,000		3,011,220
L-3 Communications Corp.:
3.95%, 11/15/16		1,250		1,326,380
4.75%, 7/15/20		1,600		1,660,379
4.95%, 2/15/21 (d)		2,768		2,895,179
Lockheed Martin Corp.:
3.35%, 9/15/21		8,439		8,373,184
4.85%, 9/15/41 (d)		2,000		1,965,476
4.07%, 12/15/42		1,592		1,392,067
Raytheon Co., 4.70%, 12/15/41		2,100		2,037,979
				24,878,586
Air Freight & Logistics — 0.0%
United Parcel Service, Inc., 4.88%, 11/15/40		400		410,913
Airlines — 0.1%
United Airlines Pass-Through Trust, Series 2013-1, Class A, 4.30%, 2/15/27		4,400		4,477,000
Auto Components — 0.0%
Lear Corp., 4.75%, 1/15/23 (b)(d)		1,000		937,500

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 21

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par   (000)		Value
Beverages — 0.5%
Bottling Group LLC, 5.13%, 1/15/19 (d)	USD	1,100	$	1,242,084
Diageo Capital PLC, 0.63%, 4/29/16		2,800		2,784,611
Diageo Finance BV, 3.25%, 1/15/15		2,000		2,057,374
Dr Pepper Snapple Group, Inc., 2.90%, 1/15/16		1,250		1,297,311
PepsiCo, Inc.:
7.90%, 11/01/18		2,000		2,499,960
2.75%, 3/01/23		3,400		3,146,911
4.88%, 11/01/40		1,000		999,952
3.60%, 8/13/42		2,000		1,646,214
				15,674,417
Biotechnology — 0.7%
Amgen, Inc., 2.30%, 6/15/16		3,240		3,340,528
Biogen Idec, Inc., 6.88%, 3/01/18		5,328		6,281,398
Celgene Corp.:
2.30%, 8/15/18		4,700		4,674,192
3.95%, 10/15/20		4,000		4,142,976
3.25%, 8/15/22		1,900		1,798,838
Gilead Sciences, Inc., 3.05%, 12/01/16		1,400		1,478,222
				21,716,154
Capital Markets — 2.4%
The Bank of New York Mellon Corp., 0.70%, 3/04/16		4,600		4,575,896
The Bear Stearns Cos. LLC:
5.70%, 11/15/14		800		835,617
6.40%, 10/02/17		2,500		2,901,402
Credit Suisse First Boston USA, Inc., 5.13%, 1/15/14 (d)		1,400		1,402,328
The Goldman Sachs Group, Inc.:
5.95%, 1/18/18		3,700		4,206,671
6.15%, 4/01/18		1,500		1,720,016
2.90%, 7/19/18		4,700		4,783,068
7.50%, 2/15/19		1,200		1,461,563
6.00%, 6/15/20		3,500		4,013,019
5.75%, 1/24/22		1,400		1,575,963
3.63%, 1/22/23 (d)		11,500		11,136,059
6.75%, 10/01/37		5,350		5,952,116
6.25%, 2/01/41		3,050		3,514,820
Morgan Stanley:
2.88%, 7/28/14		3,400		3,444,016
6.00%, 4/28/15		1,400		1,491,048
1.75%, 2/25/16		3,000		3,040,275
6.25%, 8/28/17		1,500		1,716,344
5.63%, 9/23/19		10,000		11,366,860
3.75%, 2/25/23 (d)		7,500		7,297,987
4.10%, 5/22/23		2,900		2,806,478
6.38%, 7/24/42		2,700		3,162,459
				82,404,005
Chemicals — 0.7%
Ecolab, Inc., 1.00%, 8/09/15		2,900		2,909,022
LYB International Finance BV, 4.00%, 7/15/23		4,150		4,096,278
Chemicals (concluded)
LyondellBasell Industries NV:
5.00%, 4/15/19	USD	5,300	$	5,886,291
6.00%, 11/15/21 (d)		7,300		8,395,818
RPM International, Inc., 6.13%, 10/15/19		2,453		2,751,030
				24,038,439
Commercial Banks — 1.6%
ANZ New Zealand International Ltd., 1.13%, 3/24/16 (b)		2,500		2,495,193
Bank of Nova Scotia:
0.95%, 3/15/16		4,200		4,205,972
1.10%, 12/13/16		5,000		5,023,975
Discover Bank, 4.20%, 8/08/23		290		286,030
Export-Import Bank of Korea, 4.00%, 1/29/21		1,446		1,483,094
Fifth Third Bancorp, 0.90%, 2/26/16		2,900		2,884,752
HSBC Bank USA NA, 5.88%, 11/01/34		1,700		1,868,875
HSBC Holdings PLC, 6.50%, 9/15/37		1,700		2,010,651
Royal Bank of Canada:
0.85%, 3/08/16		4,600		4,593,601
1.13%, 7/21/17		19,650		19,647,465
US Bancorp, 2.20%, 11/15/16		4,000		4,130,796
Wachovia Bank NA, 6.00%, 11/15/17		5,400		6,231,060
				54,861,464
Commercial Services & Supplies — 0.0%
Catholic Health Initiatives, 4.35%, 11/01/42		1,600		1,388,005
Computer Services Software & Systems — 0.0%
Perrigo Co. PLC., 2.30%, 11/08/18 (b)		550		542,865
Computers & Peripherals — 0.3%
Apple, Inc., 2.40%, 5/03/23		4,400		3,956,528
EMC Corp., 2.65%, 6/01/20		4,500		4,407,210
Hewlett-Packard Co., 4.75%, 6/02/14		2,900		2,946,438
				11,310,176
Consumer Finance — 0.2%
Capital One Bank USA NA, 2.15%, 11/21/18		2,150		2,138,497
Caterpillar Financial Services Corp., 0.70%, 2/26/16 (d)		3,600		3,594,294
				5,732,791
Containers & Packaging — 0.1%
Packaging Corp. of America, 4.50%, 11/01/23		2,000		2,005,226
Rock-Tenn Co., 4.90%, 3/01/22		1,900		1,955,799
				3,961,025
Diversified Financial Services — 4.3%
American Express Credit Corp.:
2.75%, 9/15/15		2,600		2,690,628
2.38%, 3/24/17 (d)		3,000		3,083,634
American Honda Finance Corp., 1.13%, 10/07/16		4,635		4,653,943
Associates Corp. of North America, 6.95%, 11/01/18		964		1,146,976

See Notes to Financial Statements.

22 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par   (000)		Value
Diversified Financial Services (concluded)
Bank of America Corp.:
4.50%, 4/01/15 (d)	USD	4,300	$	4,498,557
3.70%, 9/01/15 (d)		1,000		1,045,311
3.75%, 7/12/16		2,400		2,551,481
5.49%, 3/15/19		1,500		1,660,538
5.63%, 7/01/20		4,500		5,142,209
5.70%, 1/24/22		8,000		9,054,840
3.30%, 1/11/23		11,200		10,598,190
5.88%, 2/07/42		750		857,768
BNP Paribas SA, 2.40%, 12/12/18		4,000		4,002,544
Citigroup, Inc.:
6.38%, 8/12/14		712		735,939
4.45%, 1/10/17		4,200		4,551,956
2.50%, 9/26/18		3,000		3,015,141
8.50%, 5/22/19		1,600		2,050,542
5.38%, 8/09/20		5,000		5,688,210
3.38%, 3/01/23 (d)		2,600		2,471,339
3.50%, 5/15/23 (d)		2,700		2,515,836
6.13%, 8/25/36		800		852,936
8.13%, 7/15/39		3,300		4,628,870
5.88%, 1/30/42		350		393,356
Ford Motor Credit Co. LLC:
3.88%, 1/15/15		2,900		2,992,377
1.70%, 5/09/16		2,800		2,832,038
5.88%, 8/02/21		600		680,225
4.25%, 9/20/22		3,700		3,717,005
4.38%, 8/06/23 (d)		2,585		2,598,853
General Electric Capital Corp.:
2.25%, 11/09/15		2,000		2,061,222
4.38%, 9/16/20		4,000		4,335,156
4.63%, 1/07/21		1,600		1,744,715
6.75%, 3/15/32		500		619,153
6.88%, 1/10/39		1,000		1,285,596
IntercontinentalExchange Group, Inc., 2.50%, 10/15/18		3,000		3,022,065
Jefferies Group LLC, 5.13%, 1/20/23 (d)		940		950,778
JPMorgan Chase & Co.:
1.13%, 2/26/16 (d)		4,500		4,507,659
2.00%, 8/15/17 (d)		4,100		4,158,851
4.25%, 10/15/20		6,000		6,360,222
3.25%, 9/23/22 (d)		2,600		2,491,635
3.20%, 1/25/23 (d)		10,900		10,333,483
3.38%, 5/01/23		1,800		1,677,600
5.60%, 7/15/41		1,000		1,085,245
JPMorgan Chase Bank NA, 6.00%, 10/01/17		800		915,295
Leucadia National Corp., 5.50%, 10/18/23		3,375		3,373,032
Merrill Lynch & Co., Inc.:
6.88%, 4/25/18		3,550		4,197,406
6.11%, 1/29/37		1,300		1,402,012
				145,232,367
Diversified Telecommunication Services — 1.4%
Alltel Corp., 7.00%, 3/15/16		2,500		2,804,835
AT&T, Inc.:
2.40%, 8/15/16		1,250		1,285,433
2.38%, 11/27/18		5,565		5,569,775
3.00%, 2/15/22		5,600		5,276,062
5.35%, 9/01/40		1,231		1,217,991
5.55%, 8/15/41		5,000		5,074,300
Diversified Telecommunication Services (concluded)
CC Holdings GS V LLC/Crown Castle GS III Corp., 3.85%, 4/15/23	USD	4,250		3,978,438
Embarq Corp., 8.00%, 6/01/36		1,000		1,012,440
Verizon Communications, Inc.:
3.65%, 9/14/18		4,500		4,763,538
8.75%, 11/01/18		1,300		1,663,446
4.50%, 9/15/20		4,500		4,817,547
6.90%, 4/15/38		900		1,071,059
7.35%, 4/01/39		1,700		2,111,388
4.75%, 11/01/41		2,100		1,963,175
6.55%, 9/15/43		2,675		3,129,640
				45,739,067
Electric Utilities — 1.4%
Commonwealth Edison Co.:
4.70%, 4/15/15		1,000		1,050,293
Series 100, 5.88%, 2/01/33		3,500		3,968,986
Duke Energy Corp.:
2.15%, 11/15/16		2,100		2,152,177
5.05%, 9/15/19 (d)		2,000		2,220,326
Duke Energy Florida, Inc., 3.85%, 11/15/42		2,500		2,189,330
MidAmerican Energy Holdings Co., 5.75%, 4/01/18		6,550		7,476,779
Mississippi Power Co., 4.25%, 3/15/42		1,700		1,474,782
Nisource Finance Corp., 4.80%, 2/15/44		1,125		1,015,048
Northern States Power Co., 5.25%, 7/15/35		2,500		2,686,727
Pacific Gas & Electric Co.:
5.63%, 11/30/17		1,500		1,699,463
3.25%, 9/15/21 (d)		2,900		2,848,305
3.75%, 8/15/42		3,000		2,502,339
PacifiCorp:
5.50%, 1/15/19		1,300		1,492,903
6.25%, 10/15/37		1,000		1,192,270
Progress Energy, Inc.:
4.88%, 12/01/19		3,100		3,406,258
4.40%, 1/15/21		3,700		3,904,621
3.15%, 4/01/22 (d)		950		914,718
PSEG Power LLC, 2.45%, 11/15/18		400		394,810
The Southern Co., 4.15%, 5/15/14		900		912,004
Tampa Electric Co., 2.60%, 9/15/22		2,000		1,843,798
Xcel Energy, Inc., 0.75%, 5/09/16		3,200		3,173,014
				48,518,951
Electrical Equipment — 0.1%
Roper Industries, Inc., 2.05%, 10/01/18		3,500		3,401,380
Electronic Equipment, Instruments & Components — 0.1%
Tyco Electronics Group SA, 6.55%, 10/01/17		2,900		3,318,748
Food & Staples Retailing — 0.8%
CVS Caremark Corp.:
6.13%, 8/15/16		2,300		2,586,805
2.25%, 12/05/18		3,125		3,124,088
The Kroger Co.:
3.30%, 1/15/21		5,000		4,967,045
3.85%, 8/01/23		2,025		1,993,726
Wal-Mart Stores, Inc.:
1.13%, 4/11/18		4,400		4,270,200
5.63%, 4/01/40		3,500		3,953,600
5.63%, 4/15/41		3,800		4,314,801
				25,210,265

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 23

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par   (000)		Value
Food Products — 0.4%
The Hershey Co., 4.13%, 12/01/20	USD	1,550	$	1,657,502
Kellogg Co.:
4.45%, 5/30/16		100		107,879
3.25%, 5/21/18		1,550		1,611,952
Mead Johnson Nutrition Co., 4.90%, 11/01/19		4,500		4,907,061
Mondelez International, Inc., 4.13%, 2/09/16		2,000		2,120,316
Unilever Capital Corp., 2.20%, 3/06/19		3,400		3,395,634
				13,800,344
Gas Utilities — 0.1%
Southern California Gas Co., 3.75%, 9/15/42		1,800		1,587,553
Health Care Equipment & Supplies — 0.5%
Baxter International, Inc., 1.85%, 6/15/18		1,650		1,629,362
Boston Scientific Corp., 2.65%, 10/01/18		2,000		2,013,606
Covidien International Finance SA:
4.20%, 6/15/20		1,700		1,803,865
3.20%, 6/15/22		6,600		6,364,287
2.95%, 6/15/23		4,400		4,070,282
St. Jude Medical, Inc., 3.25%, 4/15/23		2,600		2,425,756
				18,307,158
Health Care Providers & Services — 1.1%
Aetna, Inc., 2.75%, 11/15/22		3,500		3,224,029
AmerisourceBergen Corp.:
5.88%, 9/15/15 (d)		2,000		2,168,744
4.88%, 11/15/19		900		990,834
3.50%, 11/15/21		6,250		6,141,794
Cardinal Health, Inc., 1.70%, 3/15/18		2,200		2,152,942
DaVita HealthCare Partners, Inc., 6.38%, 11/01/18 (d)		3,550		3,727,500
Express Scripts Holding Co., 3.13%, 5/15/16		3,000		3,131,139
Humana, Inc., 6.45%, 6/01/16 (d)		4,100		4,581,406
McKesson Corp., 1.40%, 3/15/18		4,500		4,323,613
UnitedHealth Group, Inc., 4.70%, 2/15/21 (d)		3,100		3,382,261
WellPoint, Inc., 5.25%, 1/15/16		2,890		3,124,737
				36,948,999
Hotels, Restaurants & Leisure — 0.5%
Brinker International, Inc., 2.60%, 5/15/18		1,200		1,181,140
McDonald’s Corp.:
6.30%, 10/15/37		1,000		1,218,587
4.88%, 7/15/40		1,600		1,633,642
3.70%, 2/15/42		1,800		1,524,443
Starbucks Corp., 0.88%, 12/05/16		2,450		2,434,572
Wyndham Worldwide Corp.:
4.25%, 3/01/22 (d)		1,550		1,512,757
3.90%, 3/01/23		1,550		1,460,047
Yum! Brands, Inc.:
4.25%, 9/15/15		2,000		2,111,578
5.30%, 9/15/19		2,241		2,498,397
6.88%, 11/15/37		542		617,131
				16,192,294
Household Durables — 0.1%
MDC Holdings, Inc., 6.00%, 1/15/43 (d)		1,108		955,947
Mohawk Industries, Inc., 3.85%, 2/01/23		1,655		1,572,250
Tupperware Brands Corp., 4.75%, 6/01/21		750		754,270
				3,282,467
Household Products — 0.0%
Kimberly-Clark Corp., 2.40%, 3/01/22	USD	1,250	$	1,161,899
Independent Power Producers & Energy Traders — 0.2%
Constellation Energy Group, Inc., 5.15%, 12/01/20		3,200		3,405,120
Exelon Generation Co. LLC, 5.75%, 10/01/41		500		478,935
PSEG Power LLC, 4.15%, 9/15/21		1,150		1,166,938
Southern Power Co., 5.15%, 9/15/41		1,000		978,991
				6,029,984
Industrial Conglomerates — 0.0%
General Electric Co., 4.13%, 10/09/42 (d)		1,200		1,108,630
Insurance — 0.9%
Aflac, Inc.:
8.50%, 5/15/19		1,500		1,915,802
3.63%, 6/15/23		4,000		3,871,904
American International Group, Inc.:
6.40%, 12/15/20		1,200		1,418,233
8.18%, 5/15/38 (a)		500		605,000
Berkshire Hathaway, Inc.:
1.90%, 1/31/17		2,400		2,455,238
3.00%, 2/11/23		3,500		3,305,291
Fidelity National Financial, Inc., 5.50%, 9/01/22		1,225		1,270,526
Genworth Holdings, Inc., 4.80%, 2/15/24		1,475		1,456,945
Markel Corp.:
5.35%, 6/01/21		1,300		1,411,053
3.63%, 3/30/23 (d)		1,300		1,223,561
Marsh & McLennan Cos., Inc.:
5.75%, 9/15/15		192		207,387
4.80%, 7/15/21		1,600		1,705,651
Protective Life Corp., 8.45%, 10/15/39		800		1,018,353
Prudential Financial, Inc., 4.75%, 9/17/15		3,900		4,156,004
Willis Group Holdings PLC, 4.13%, 3/15/16		2,600		2,722,028
XLIT Ltd., 5.75%, 10/01/21		1,400		1,572,018
				30,314,994
Internet & Catalog Retail — 0.1%
Amazon.com, Inc., 1.20%, 11/29/17		2,600		2,545,642
Internet Software & Services — 0.3%
Baidu, Inc., 3.25%, 8/06/18		7,000		7,075,586
eBay, Inc., 2.60%, 7/15/22		850		781,769
VeriSign, Inc., 4.63%, 5/01/23		1,325		1,265,375
				9,122,730
IT Services — 0.5%
Fiserv, Inc., 3.50%, 10/01/22		4,000		3,714,428
International Business Machines Corp.:
2.00%, 1/05/16		8,600		8,826,705
7.63%, 10/15/18		2,050		2,564,267
				15,105,400
Leisure Equipment & Products — 0.2%
Mattel, Inc.:
2.50%, 11/01/16		750		769,326
5.45%, 11/01/41		1,600		1,598,757

See Notes to Financial Statements.

24 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par   (000)		Value
Leisure Equipment & Products (concluded)
Royal Caribbean Cruises Ltd., 5.25%, 11/15/22	USD	3,654	$	3,654,000
				6,022,083
Life Sciences Tools & Services — 0.2%
Thermo Fisher Scientific, Inc.:
3.25%, 11/20/14		1,600		1,633,979
3.20%, 3/01/16		2,800		2,927,386
2.40%, 2/01/19		325		321,975
				4,883,340
Machinery — 0.2%
Danaher Corp., 2.30%, 6/23/16		450		464,422
Dover Corp., 4.30%, 3/01/21		2,400		2,539,968
Ingersoll-Rand Global Holding Co., Ltd. (b):
2.88%, 1/15/19		400		394,251
5.75%, 6/15/43		1,500		1,522,458
Trinity Acquisition PLC, 6.13%, 8/15/43		1,100		1,111,991
				6,033,090
Media — 0.9%
Comcast Corp.:
5.70%, 5/15/18		2,450		2,813,222
3.13%, 7/15/22		2,550		2,433,470
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc.:
3.55%, 3/15/15		3,600		3,718,678
5.15%, 3/15/42		1,500		1,347,153
DISH DBS Corp.:
7.88%, 9/01/19		2,700		3,091,500
6.75%, 6/01/21		1,200		1,272,000
NBCUniversal Enterprise, Inc., 1.97%, 4/15/19 (b)(d)		2,700		2,641,083
Scripps Networks Interactive, Inc., 2.70%, 12/15/16		2,300		2,391,223
Thomson Reuters Corp.:
0.88%, 5/23/16		1,600		1,588,741
1.30%, 2/23/17		350		348,456
Viacom, Inc.:
4.38%, 9/15/14		1,300		1,333,905
2.50%, 9/01/18		4,300		4,334,662
4.38%, 3/15/43		2,400		2,026,491
Virgin Media Secured Finance PLC, 5.38%, 4/15/21 (b)		1,225		1,225,000
				30,565,584
Metals & Mining — 0.1%
Reliance Steel & Aluminum Co., 4.50%, 4/15/23		2,000		1,961,838
Xstrata Canada Corp., 6.20%, 6/15/35		600		586,758
Xstrata Finance Canada Ltd., 6.00%, 11/15/41 (b)		650		629,047
				3,177,643
Multi-Utilities — 0.3%
Consolidated Edison Co. of New York, Inc., Series 12-A, 4.20%, 3/15/42		2,400		2,197,699
Multi-Utilities (concluded)
Dominion Resources, Inc.:
6.40%, 6/15/18	USD	4,050	$	4,723,086
4.45%, 3/15/21		2,100		2,226,489
4.05%, 9/15/42		1,700		1,440,327
SCANA Corp., 4.13%, 2/01/22		500		485,564
				11,073,165
Multiline Retail — 0.1%
Nordstrom, Inc.:
4.00%, 10/15/21 (d)		1,200		1,244,596
7.00%, 1/15/38		600		769,250
				2,013,846
Oil, Gas & Consumable Fuels — 2.6%
BP Capital Markets PLC:
3.13%, 10/01/15		700		731,324
3.20%, 3/11/16		1,500		1,575,118
3.56%, 11/01/21		1,900		1,914,847
Buckeye Partners LP:
2.65%, 11/15/18		4,900		4,827,999
4.88%, 2/01/21		550		562,841
4.15%, 7/01/23		3,100		2,980,777
Chevron Corp.:
2.43%, 6/24/20		1,050		1,021,713
2.36%, 12/05/22		4,200		3,820,270
CNOOC Finance 2013 Ltd., 1.75%, 5/09/18		875		855,316
ConocoPhillips Canada Funding Co. I, 5.63%, 10/15/16 (d)		500		559,433
DCP Midstream Operating LP, 3.25%, 10/01/15		2,000		2,066,190
Encana Corp., 6.50%, 5/15/19		400		467,259
Energy Transfer Equity LP, 7.50%, 10/15/20		975		1,094,437
Energy Transfer Partners LP:
9.70%, 3/15/19		842		1,090,187
9.00%, 4/15/19		373		471,426
4.15%, 10/01/20		3,950		4,007,595
Enterprise Products Operating LLC:
3.20%, 2/01/16		3,000		3,129,396
5.20%, 9/01/20		500		556,188
5.75%, 3/01/35		1,500		1,586,142
5.95%, 2/01/41		900		980,148
4.45%, 2/15/43		2,100		1,854,964
Husky Energy, Inc.:
3.95%, 4/15/22		5,300		5,231,280
6.80%, 9/15/37		1,000		1,201,774
Kinder Morgan Energy Partners LP, 3.95%, 9/01/22		4,400		4,287,624
Marathon Oil Corp., 0.90%, 11/01/15		1,300		1,301,084
Marathon Petroleum Corp., 6.50%, 3/01/41		1,074		1,224,050
Petrobras Global Finance BV, 4.38%, 5/20/23 (d)		3,200		2,850,854
Petrobras International Finance Co.:
5.38%, 1/27/21		3,100		3,076,403
6.75%, 1/27/41		500		465,216

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 25

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par   (000)		Value
Oil, Gas & Consumable Fuels (concluded)
Petroleos Mexicanos:
5.50%, 1/21/21	USD	1,100	$	1,182,500
4.88%, 1/24/22 (d)		2,600		2,671,500
6.50%, 6/02/41 (d)		4,800		5,016,000
Plains All American Pipeline LP/PAA Finance Corp.:
8.75%, 5/01/19		600		767,434
6.70%, 5/15/36		1,000		1,172,622
Statoil ASA, 1.95%, 11/08/18		2,840		2,815,752
Sunoco Logistics Partners Operations LP:
3.45%, 1/15/23		4,400		4,042,927
6.10%, 2/15/42		900		918,888
4.95%, 1/15/43		900		800,661
TransCanada PipeLines Ltd.:
6.50%, 8/15/18		2,850		3,354,108
3.80%, 10/01/20		4,200		4,347,559
5.00%, 10/16/43		2,200		2,167,977
Williams Partners LP, 3.80%, 2/15/15		800		826,497
				85,876,280
Paper & Forest Products — 0.1%
International Paper Co., 9.38%, 5/15/19		1,600		2,098,680
Pharmaceuticals — 1.2%
AbbVie, Inc., 1.20%, 11/06/15		1,300		1,313,213
Allergan, Inc., 1.35%, 3/15/18		2,950		2,874,716
AstraZeneca PLC:
6.45%, 9/15/37		2,500		2,985,247
4.00%, 9/18/42		3,400		2,956,905
Bristol-Myers Squibb Co., 2.00%, 8/01/22		4,600		4,071,690
Eli Lilly & Co., 5.55%, 3/15/37		1,700		1,865,792
GlaxoSmithKline Capital PLC, 2.85%, 5/08/22		4,500		4,244,157
GlaxoSmithKline Capital, Inc.:
0.70%, 3/18/16		2,500		2,489,387
5.65%, 5/15/18		1,200		1,381,368
6.38%, 5/15/38		500		611,975
Johnson & Johnson, 4.38%, 12/05/33		4,000		4,026,040
Pfizer, Inc., 6.20%, 3/15/19		1,500		1,778,145
Sanofi, 1.25%, 4/10/18		2,900		2,823,481
Sanofi-Aventis SA, 2.63%, 3/29/16		2,400		2,495,650
Teva Pharmaceutical Finance IV BV, 3.65%, 11/10/21		2,800		2,746,296
Zoetis, Inc., 1.15%, 2/01/16		3,000		3,003,405
				41,667,467
Professional Services — 0.0%
The Dun & Bradstreet Corp., 2.88%, 11/15/15 (d)		600		615,305
Real Estate Investment Trusts (REITs) — 0.5%
American Tower Corp.:
4.63%, 4/01/15		4,000		4,183,728
5.05%, 9/01/20		1,300		1,374,716
Real Estate Investment Trusts (REITs) (concluded)
Corrections Corp. of America:
4.13%, 4/01/20 (d)	USD	2,900	$	2,842,000
4.63%, 5/01/23		2,425		2,285,563
Health Care REIT, Inc., 5.25%, 1/15/22		3,100		3,303,469
Host Hotels & Resorts LP, 3.75%, 10/15/23		525		486,770
Simon Property Group LP:
5.65%, 2/01/20		1,000		1,136,977
4.75%, 3/15/42 (d)		1,900		1,838,261
				17,451,484
Road & Rail — 0.3%
Burlington Northern Santa Fe LLC:
3.00%, 3/15/23		2,000		1,862,522
5.40%, 6/01/41		2,700		2,800,483
Canadian Pacific Railway Co., 7.13%, 10/15/31		1,000		1,202,579
Norfolk Southern Corp., 5.75%, 1/15/16		2,425		2,649,337
Union Pacific Corp., 6.13%, 2/15/20		1,300		1,514,710
				10,029,631
Semiconductors & Semiconductor Equipment — 0.8%
Altera Corp., 2.50%, 11/15/18		7,900		7,833,135
Intel Corp.:
3.30%, 10/01/21		2,100		2,086,333
2.70%, 12/15/22		3,000		2,765,421
Maxim Integrated Products, Inc.:
2.50%, 11/15/18		1,220		1,209,691
3.38%, 3/15/23		2,000		1,831,114
Seagate HDD Cayman (b):
3.75%, 11/15/18		7,500		7,584,375
4.75%, 6/01/23		3,100		2,898,500
				26,208,569
Software — 0.2%
Microsoft Corp., 2.13%, 11/15/22		2,700		2,439,153
Oracle Corp.:
5.25%, 1/15/16		1,500		1,637,406
5.75%, 4/15/18		550		635,562
3.63%, 7/15/23		950		942,369
5.38%, 7/15/40		800		854,227
				6,508,717
Specialty Retail — 1.1%
Advance Auto Parts, Inc., 4.50%, 1/15/22		3,100		3,145,700
The Gap, Inc., 5.95%, 4/12/21 (d)		5,635		6,226,523
The Home Depot, Inc.:
5.88%, 12/16/36		2,500		2,884,745
5.40%, 9/15/40		2,000		2,165,170
5.95%, 4/01/41		3,300		3,831,557
L Brands, Inc.:
6.90%, 7/15/17		2,167		2,492,050
8.50%, 6/15/19		4,000		4,800,000
O’Reilly Automotive, Inc., 4.63%, 9/15/21		5,300		5,468,164

See Notes to Financial Statements.

26 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par   (000)		Value
Specialty Retail (concluded)
QVC, Inc., 4.38%, 3/15/23 (d)	USD	4,275	$	3,996,877
The Sherwin-Williams Co., 3.13%, 12/15/14		3,300		3,379,322
				38,390,108
Tobacco — 1.2%
Altria Group, Inc.:
4.13%, 9/11/15		2,600		2,743,634
2.85%, 8/09/22		3,400		3,130,451
5.38%, 1/31/44		3,700		3,715,322
Lorillard Tobacco Co., 3.50%, 8/04/16 (d)		650		683,959
Philip Morris International, Inc.:
5.65%, 5/16/18		4,300		4,938,645
1.88%, 1/15/19		3,550		3,469,248
2.90%, 11/15/21		7,700		7,350,844
2.63%, 3/06/23		4,400		3,984,719
6.38%, 5/16/38		2,500		2,963,213
Reynolds American, Inc.:
1.05%, 10/30/15		2,000		2,006,360
3.25%, 11/01/22		2,300		2,119,947
4.85%, 9/15/23		2,900		2,993,687
6.15%, 9/15/43		1,000		1,079,853
				41,179,882
Wireless Telecommunication Services — 0.2%
American Tower Corp.:
4.50%, 1/15/18		2,100		2,249,652
4.70%, 3/15/22		2,900		2,898,684
Vodafone Group PLC:
2.88%, 3/16/16		1,800		1,866,749
5.63%, 2/27/17		950		1,062,750
				8,077,835
Total Corporate Bonds — 30.3%				1,021,134,921
Foreign Agency Obligations
Brazilian Government International Bond, 5.63%, 1/07/41		1,500		1,455,000
Colombia Government International Bond:
4.38%, 7/12/21		2,000		2,060,000
7.38%, 9/18/37 (d)		800		982,000
6.13%, 1/18/41		1,200		1,284,000
Kreditanstalt für Wiederaufbau, 2.75%, 10/01/20		7,900		7,958,460
Mexico Government International Bond:
5.13%, 1/15/20		2,900		3,213,200
6.75%, 9/27/34		2,400		2,832,000
6.05%, 1/11/40		1,300		1,413,750
Panama Government International Bond, 6.70%, 1/26/36		1,600		1,788,000
Peruvian Government International Bond, 6.55%, 3/14/37		1,100		1,265,000
South Africa Government International Bond, 5.50%, 3/09/20		2,000		2,130,000
Turkey Government International Bond, 3.25%, 3/23/23 (d)		8,800		7,238,000
Total Foreign Agency Obligations — 1.0%				33,619,410
Bay Area Toll Authority, RB, San Francisco Toll Bridge:
Series F-2, 6.26%, 4/01/49	USD	425	$	509,749
Series S-1, 7.04%, 4/01/50		800		983,384
Brazos Higher Education Authority, Series 2004-I, Class A2, 0.41%, 6/27/22 (a)		1,038		1,035,158
City & County of Denver Colorado School District No. 1, COP, Refunding, Series B, 4.24%, 12/15/37		875		778,671
City & County of San Francisco California Public Utilities Commission Water Revenue, RB, Build America Bonds, Sub-Series G, 6.95%, 11/01/50		900		1,119,600
City of Chicago Illinois Transit Authority, RB, Series B, 6.90%, 12/01/40		450		504,414
City of Chicago Illinois Waterworks Transmission, RB, Build America Bonds, 2nd Lien, Series B, 6.74%, 11/01/40		150		166,446
City of Los Angeles California Department of Water & Power, RB, Build America Bonds, Series D, 6.57%, 7/01/45		1,320		1,647,452
City of New York New York Transitional Finance Authority, RB, Build America Bonds, Sub-Series B-1, 5.57%, 11/01/38		450		499,433
City of New York New York Water & Sewer System, Refunding RB, 2nd General Resolution, Build America Bonds, Fiscal 2010, Series EE, 6.01%, 6/15/42		1,000		1,166,100
Commonwealth of Massachusetts, RB, Build America Bonds, Recovery Zone, Series A, 5.73%, 6/01/40		150		170,532
County of Orange California Local Transportation Authority, Refunding RB, Build America Bonds, Series A, 6.91%, 2/15/41		450		557,586
County of San Diego California Regional Transportation Commission, RB, Build America Bonds, Series A, 5.91%, 4/01/48		600		686,580
Florida Hurricane Catastrophe Fund Finance Corp., RB, Series A, 1.30%, 7/01/16		1,725		1,721,291
Metropolitan Water District of Southern California, RB, Build America Bonds, Series A, 6.95%, 7/01/40		1,200		1,339,572
New Jersey State Turnpike Authority, RB, Build America Bonds:
Series A, 7.10%, 1/01/41		700		896,322
Series F, 7.41%, 1/01/40		700		932,715
New York State Dormitory Authority, RB, Build America Bonds, General Purpose, Series H, 5.39%, 3/15/40		675		728,426
Port Authority of New York & New Jersey, RB, 164th Series, 5.65%, 11/01/40		800		872,192
Port Authority of New York & New Jersey, Refunding RB, 174th Series, 4.46%, 10/01/62		700		593,488

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 27

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio (Percentages shown are based on Net Assets)

Municipal Bonds	Par   (000)			Value
State of California, GO, Build America Bonds, Various Purpose:
7.55%, 4/01/39	USD	1,150		$	1,490,389
7.63%, 3/01/40		1,150			1,514,067
7.60%, 11/01/40 (d)		250			330,053
State of Illinois, GO:
Build America Bonds, 7.35%, 7/01/35		650			724,347
Pension, 5.10%, 6/01/33		1,000			931,800
State of Mississippi, GO, Refunding Build America Bonds, Series F, 5.25%, 11/01/34		600			627,228
State of Oregon Department of Transportation, RB, Sub-Lien, Series A, 5.83%, 11/15/34		400			460,468
State of Texas, GO, Build America Bonds, Series A, 5.52%, 4/01/39		1,000			1,121,560
University of California, Refunding RB, Series AJ, 4.60%, 5/15/31		1,000			994,450
University of Missouri, RB, Build America Bonds, Series A, 5.79%, 11/01/41		300			347,970
Total Municipal Bonds — 0.7%					25,451,443
Non-Agency Mortgage-Backed Securities
Collateralized Mortgage Obligations — 1.2%
Citicorp Mortgage Securities Trust, Series 2006-1, Class 2A1, 5.00%, 2/25/21		318			330,785
Credit Suisse First Boston Mortgage Securities Corp., Series 2005-7, Class 1A6, 5.25%, 8/25/35		514			521,583
CSMC Trust (a)(b):
Series 2009-13R, Class 5A1, 0.94%, 1/26/35		8,327			8,231,597
Series 2010-20R, Class 7A6, 3.50%, 3/27/37		5,654			5,707,915
Series 2011-4R, Class 4A6, 4.00%, 8/27/37		2,182			2,196,328
Series 2013-8R, Class 7A1, 0.33%, 4/27/37		1,796			1,701,285
Series 2013-8R, Class 8A1, 0.41%, 5/27/37		6,644			6,294,466
GreenPoint Mortgage Funding Trust, Class A1A (a):
Series 2006-AR4, 0.26%, 9/25/46		—	(e)		20
Series 2006-AR5, 0.24%, 10/25/46		—	(e)		201
HSI Asset Securitization Corp. Trust, Series 2005-NC2, Class 2A4, 0.94%, 8/25/35 (a)		242			239,737
MASTR Asset Securitization Trust, Series 2005-2, Class 1A1, 5.25%, 11/25/35		68			68,200
National RMBS Trust, Series 2006-3, Class A1, 0.31%, 10/20/37 (a)(b)		3,335			3,327,214
Permanent Master Issuer PLC, Series 2011-1A, Class 1A1, 1.64%, 7/15/42 (a)(b)		4,300			4,301,105
Puma Finance Property Ltd., Series G5, Class A1, 0.38%, 2/21/38 (a)(b)		893			885,167
RALI Trust:
Series 2004-QS4, Class A7, 4.00%, 3/25/34		96			97,233
Collateralized Mortgage Obligations (concluded)
RALI Trust (concluded):
Series 2004-QS5, Class A5, 4.75%, 4/25/34		USD 894			904,057
Series 2004-QS9, Class A1, 5.00%, 6/25/19		351			352,293
Structured Agency Credit Risk Debt Notes, Series 2013-DN2, Class M1, 1.62%, 11/25/23 (a)		4,873			4,861,555
Wells Fargo Mortgage-Backed Securities Trust, Series 2006-4, Class 1A8, 5.75%, 4/25/36		132			131,965
					40,152,706
Commercial Mortgage-Backed Securities — 6.6%
Banc of America Commercial Mortgage Trust:
Series 2006-5, Class AM, 5.45%, 9/10/47		1,520			1,626,657
Series 2006-6, Class A4, 5.36%, 10/10/45		3,580			3,854,171
Series 2007-4, Class A4, 5.75%, 2/10/51 (a)		3,810			4,207,806
Banc of America Merrill Lynch Commercial Mortgage, Inc.:
Series 2004-6, Class A3, 4.51%, 12/10/42		34			34,395
Series 2005-6, Class A4, 5.18%, 9/10/47 (a)		2,790			2,970,055
Bear Stearns Commercial Mortgage Securities Trust:
Series 2005-PW10, Class AM, 5.45%, 12/11/40 (a)		2,710			2,893,624
Series 2005-PWR8, Class A4, 4.67%, 6/11/41		492			511,677
CD Commercial Mortgage Trust, Series 2007-CD4, Class AMFX, 5.37%, 12/11/49 (a)		500			516,379
CD Mortgage Trust, Series 2007-CD5, Class A4, 5.89%, 11/15/44 (a)		2,218			2,488,665
Citigroup Commercial Mortgage Trust, Series 2010-RR2, Class CA3A, 5.31%, 12/19/39 (a)(b)		640			696,885
Commercial Mortgage Trust:
Series 2005-GG3, Class A4, 4.80%, 8/10/42 (a)		2,496			2,560,844
Series 2006-C7, Class AM, 5.78%, 6/10/46 (a)		1,870			2,009,811
Series 2007-C9, Class A4, 5.80%, 12/10/49 (a)		3,244			3,657,851
Series 2013-CR7, Class A4, 3.21%, 3/10/46		1,700			1,622,725
Series 2013-CR9, Class A4, 4.24%, 7/10/45 (a)		600			621,601
Series 2013-CR12, Class A3, 3.77%, 10/10/46		990			974,508
Series 2013-CR12, Class A4, 4.05%, 10/10/46		1,600			1,614,814
Series 2013-LC6, Class AM, 3.28%, 1/10/46		1,290			1,216,847
Credit Suisse Commercial Mortgage Trust:
Series 2006-C3, Class A3, 5.79%, 6/15/38 (a)		3,284			3,575,546

See Notes to Financial Statements.

28 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio (Percentages shown are based on Net Assets)

Non-Agency Mortgage-Backed Securities	Par   (000)		Value
Commercial Mortgage-Backed Securities (continued)
Credit Suisse Commercial Mortgage Trust (concluded):
Series 2006-C3, Class AM, 5.79%, 6/15/38 (a)	USD	638	$	691,627
Series 2006-C5, Class A3, 5.31%, 12/15/39		4,485		4,857,807
Series 2007-C1, Class A3, 5.38%, 2/15/40		2,631		2,839,533
Series 2007-C2, Class A3, 5.54%, 1/15/49 (a)		2,250		2,475,009
Series 2007-C2, Class AM, 5.61%, 1/15/49 (a)		950		1,008,511
Credit Suisse First Boston Mortgage Securities Corp. (a):
Series 2004-C1, Class B, 4.86%, 1/15/37		4,410		4,408,824
Series 2005-C5, Class AJ, 5.10%, 8/15/38		4,154		4,375,317
DBRR Trust, Class A (b):
Series 2012-EZ1, 0.95%, 9/25/45		2,752		2,752,354
Series 2013-EZ2, 0.85%, 2/25/45 (a)		6,449		6,415,911
GE Capital Commercial Mortgage Corp. (a):
Series 2005-C2, Class A4, 4.98%, 5/10/43		5,725		5,958,546
Series 2005-C3, Class AJ, 5.07%, 7/10/45		700		738,315
GE Commercial Mortgage Corp. Trust, Series 2007-C1, Class A2, 5.42%, 12/10/49		904		903,170
GMAC Commercial Mortgage Securities, Inc. Trust, Series 2006-C1, Class A4, 5.24%, 11/10/45 (a)		5,570		5,852,310
GS Mortgage Securities Corp. II, Series 2004-GG2, Class A6, 5.40%, 8/10/38		1,588		1,603,432
GS Mortgage Securities Trust:
Series 2012-GCJ7, Class AS, 4.09%, 5/10/45		930		940,276
Series 2013-GC14, Class A5, 4.24%, 8/10/46		1,620		1,667,597
Series 2013-GC16, Class A3, 4.24%, 11/10/46		1,580		1,619,631
GSMS Trust, Series 2009-RR1, Class GGA, 5.79%, 7/12/38 (a)(b)		1,813		1,972,469
JPMBB Commercial Mortgage Securities Trust, Series 2013-C14 (a):
Class A4, 4.13%, 8/15/46		1,400		1,433,673
Class AS, 4.41%, 8/15/46		760		778,335
JPMorgan Chase Commercial Mortgage Securities Trust:
Series 2004-CB8, Class A4, 4.40%, 1/12/39		561		561,181
Series 2004-CB9, Class A4, 5.58%, 6/12/41 (a)		4,267		4,340,830
Series 2005-CB11, Class A4, 5.34%, 8/12/37 (a)		3,569		3,711,189
Series 2005-CB13, Class AM, 5.28%, 1/12/43 (a)		2,060		2,194,098
Commercial Mortgage-Backed Securities (continued)
JPMorgan Chase Commercial Mortgage Securities Trust (concluded):
Series 2005-LDP3, Class AJ, 5.00%, 8/15/42 (a)	USD	7,383		7,700,262
Series 2005-LDP5, Class AM, 5.24%, 12/15/44 (a)		5,070		5,467,305
Series 2006-CB14, Class AM, 5.45%, 12/12/44 (a)		1,750		1,879,069
Series 2006-CB16, Class A4, 5.55%, 5/12/45		856		930,114
Series 2006-LDP8, Class AM, 5.44%, 5/15/45		1,984		2,176,527
Series 2011-C5, Class A3, 4.17%, 8/15/46		1,100		1,155,148
Series 2012-CBX, Class AS, 4.27%, 6/15/45		1,110		1,140,255
LB Commercial Mortgage Trust, Series 2007-C3, Class A4, 5.88%, 7/15/44 (a)		2,059		2,305,967
LB-UBS Commercial Mortgage Trust:
Series 2004-C6, Class C, 5.11%, 8/15/36 (a)		600		614,269
Series 2005-C3, Class AM, 4.79%, 7/15/40		6,770		7,095,109
Series 2006-C1, Class AM, 5.22%, 2/15/31 (a)		740		795,174
Series 2006-C7, Class A2, 5.30%, 11/15/38		3,097		3,211,186
Series 2006-C7, Class AM, 5.38%, 11/15/38		1,000		1,080,039
Series 2007-C1, Class A4, 5.42%, 2/15/40		4,320		4,760,873
Series 2007-C2, Class AM, 5.49%, 2/15/40 (a)		1,800		1,899,445
Series 2007-C7, Class A3, 5.87%, 9/15/45 (a)		3,007		3,334,477
Monty Parent Issuer 1 LLC, Series 2013-LTR1, Class B, 4.25%, 10/20/15 (b)		3,656		3,654,838
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2013-C10, Class A4, 4.08%, 7/15/46 (a)		1,560		1,594,986
Morgan Stanley Capital I Trust:
Series 2005-IQ9, Class A5, 4.70%, 7/15/56		1,963		2,008,315
Series 2005-IQ10, Class AJ, 5.22%, 9/15/42 (a)		1,200		1,258,771
Series 2006-HQ8, Class A4, 5.42%, 3/12/44 (a)		4,500		4,804,537
Series 2006-T21, Class A4, 5.16%, 10/12/52 (a)		1,355		1,444,633
Series 2007-HQ11, Class A4, 5.45%, 2/12/44 (a)		2,961		3,236,589
Series 2007-IQ16, Class A4, 5.81%, 12/12/49		3,680		4,114,008
Series 2007-T25, Class A3, 5.51%, 11/12/49 (a)		3,650		4,033,754
Series 2007-T27, Class A4, 5.65%, 6/11/42 (a)		5,450		6,123,249

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 29

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio (Percentages shown are based on Net Assets)

Non-Agency Mortgage-Backed Securities	Par   (000)		Value
Commercial Mortgage-Backed Securities (concluded)
Morgan Stanley Capital I Trust (concluded):
Series 2007-T27, Class AM, 5.65%, 6/11/42 (a)	USD	2,080	$	2,307,007
Series 2012-C4, Class A4, 3.24%, 3/15/45		2,220		2,166,429
UBS-Barclays Commercial Mortgage Trust, Series 2013-C6, Class A4, 3.24%, 4/10/46		1,880		1,798,308
Wachovia Bank Commercial Mortgage Trust:
Series 2005-C19, Class A6, 4.70%, 5/15/44		2,008		2,090,491
Series 2005-C19, Class B, 4.89%, 5/15/44		3,186		3,291,954
Series 2005-C20, Class A7, 5.12%, 7/15/42 (a)		3,199		3,370,761
Series 2005-C20, Class AJ, 5.16%, 7/15/42 (a)		4,110		4,330,164
Series 2005-C20, Class AMFX, 5.18%, 7/15/42 (a)		3,630		3,852,207
Series 2006-C23, Class A4, 5.42%, 1/15/45 (a)		179		190,705
Series 2006-C27, Class A3, 5.77%, 7/15/45 (a)		4,937		5,302,293
Series 2006-C28, Class AM, 5.60%, 10/15/48 (a)		2,430		2,608,481
Series 2007-C34, Class A3, 5.68%, 5/15/46		3,720		4,139,850
Wachovia Commercial Mortgage Trust Pass-Through Certificates, Series 2004-C10, Class B, 4.81%, 2/15/41		1,558		1,557,800
WF-RBS Commercial Mortgage Trust:
Series 2012-C10, Class A3, 2.88%, 12/15/45		1,870		1,746,356
Series 2013-C15, Class A4, 4.15%, 8/15/46 (a)		1,580		1,616,176
Series 2013-C18, Class A5, 4.16%, 12/15/46 (a)		1,880		1,920,758
				221,863,445
Total Non-Agency Mortgage-Backed Securities — 7.8%				262,016,151
US Government Sponsored Agency Securities
Agency Obligations — 3.5%
Fannie Mae:
0.00%, 6/01/17—5/15/30 (c)		16,000		13,592,449
0.50%, 3/30/16		15,000		14,983,875
0.88%, 5/21/18		49,708		48,083,145
2.32%, 8/01/33 (a)		1,867		1,982,437
Fannie Mae Principal STRIPS, Series 1P, 0.00%, 2/01/19 (c)		2,000		1,740,692
Federal Farm Credit Banks:
1.69%, 4/09/20		8,000		7,504,960
2.00%, 4/04/22		2,977		2,698,775
Federal Home Loan Bank:
2.88%, 9/11/20		3,805		3,845,592
3.38%, 6/12/20—12/08/23		7,800		7,952,268
4.00%, 9/01/28		1,625		1,569,466
Agency Obligations (concluded)
FICO STRIPS, Series 12, 0.00%, 12/06/16 (c)	USD	3,000		2,908,194
Freddie Mac, 0.88%, 10/14/16—3/07/18 (d)		6,136		5,961,335
Sallie Mae, Inc., 0.00%, 10/03/22 (c)		5,700		4,114,990
Tennessee Valley Authority:
3.50%, 12/15/42		250		197,091
5.88%, 4/01/36		1,125		1,303,227
				118,438,496
Collateralized Mortgage Obligations — 0.3%
Fannie Mae REMICS (a):
Series 2007-54, Class PF, 0.38%, 6/25/37		3,358		3,350,443
Series 2010-89, Class CF, 0.61%, 2/25/38		2,553		2,539,489
Series 2010-35, Class EF, 0.71%, 4/25/40		2,444		2,454,063
Freddie Mac REMICS (a):
Series 3667, Class FW, 0.72%, 2/15/38		1,512		1,517,332
Series 3807, Class FN, 0.67%, 2/15/41		1,529		1,535,500
				11,396,827
Mortgage-Backed Securities — 46.0%
Fannie Mae Mortgage-Backed Securities:
1.94%, 4/01/43 (a)		878		890,654
1.97%, 5/01/43 (a)		1,357		1,378,577
2.09%, 6/01/43 (a)		1,470		1,462,296
2.26%, 1/01/36 (a)		950		1,005,120
2.32%, 1/01/35 (a)		1,190		1,254,256
2.35%, 5/01/33 (a)		2,286		2,418,242
2.44%, 2/01/42 (a)		32		33,779
2.50%, 9/01/28—1/01/44 (f)		39,491		38,801,823
2.75%, 1/01/42 (a)		753		773,691
2.78%, 8/01/41 (a)		2,239		2,336,839
3.00%, 1/01/27—1/01/44 (f)		131,587		127,137,873
3.31%, 9/01/41 (a)		1,113		1,159,802
3.34%, 4/01/40 (a)		279		292,869
3.50%, 2/01/26—1/01/44 (f)		109,162		109,700,218
3.62%, 5/01/40 (a)		1,758		1,867,053
4.00%, 8/01/25—1/01/44 (f)		303,345		313,011,746
4.50%, 10/01/24—1/01/44 (f)		218,518		231,805,184
5.00%, 1/01/18—1/01/44 (f)		108,488		117,914,930
5.50%, 9/01/19—1/01/44 (f)		25,468		28,009,640
6.00%, 11/01/22—8/01/38		23,009		25,764,351
6.50%, 12/01/30—12/01/32		9,582		10,792,379
Freddie Mac Mortgage-Backed Securities:
1.80%, 6/01/43 (a)		434		437,479
2.21%, 10/01/33 (a)		1,171		1,237,705
2.48%, 5/01/43 (a)		1,023		1,001,323
2.50%, 1/01/29—4/01/43 (f)		23,969		23,669,061
2.51%, 11/01/36—8/01/43 (a)		2,766		2,881,002
2.62%, 1/01/42 (a)		23		23,627
3.00%, 3/01/27—1/01/44 (f)		59,819		57,862,351
3.26%, 8/01/41 (a)		1,367		1,441,376
3.34%, 7/01/41 (a)		874		912,414
3.40%, 2/01/40 (a)		1,524		1,599,633

See Notes to Financial Statements.

30 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio (Percentages shown are based on Net Assets)

US Government Sponsored Agency Securities	Par   (000)		Value
Mortgage-Backed Securities (concluded)
Freddie Mac Mortgage-Backed Securities (concluded):
3.50%, 12/01/25—1/01/44 (f)	USD	51,568	$	51,689,184
4.00%, 3/01/26—1/01/44 (f)		40,874		42,260,407
4.50%, 8/01/20—1/01/44 (f)		46,227		49,033,612
5.00%, 10/01/20—1/01/44 (f)		24,981		26,920,080
5.50%, 12/01/27—8/01/38		9,727		10,620,670
6.00%, 12/01/28—1/01/38		7,908		8,795,221
6.50%, 5/01/21—1/01/36		2,902		3,280,986
Ginnie Mae Mortgage-Backed Securities:
3.00%, 5/15/43—1/01/44 (f)		34,844		33,660,915
3.50%, 1/15/41—1/01/44 (f)		59,484		60,096,323
4.00%, 9/15/40—1/01/44 (f)		40,410		42,115,421
4.50%, 3/15/39—1/01/44 (f)		62,062		66,427,722
5.00%, 9/15/39—5/20/41		28,960		31,897,121
5.50%, 6/15/34—7/20/40		10,158		11,234,145
6.00%, 9/20/38—10/20/38		3,573		4,022,817
				1,550,931,917
Total US Government Sponsored Agency Securities — 49.8%				1,680,767,240
US Treasury Obligations
US Treasury Bonds (d):
6.38%, 8/15/27 (g)		24,068		31,957,779
6.25%, 5/15/30		26,586		35,512,807
5.00%, 5/15/37		21,563		25,659,970
4.38%, 5/15/40 (g)		11,922		12,950,272
3.88%, 8/15/40		15,149		15,153,726
4.38%, 5/15/41		1		1,085
US Treasury Inflation Indexed Bond, 0.63%, 2/15/43		10,361		7,966,837
US Treasury Inflation Indexed Note, 0.38%, 7/15/23 (d)		66,596		64,228,945
US Treasury Notes (d):
0.25%, 6/30/14		21,258		21,274,602
2.63%, 7/31/14		33,150		33,631,703
2.63%, 12/31/14		48,363		49,538,076
0.88%, 4/30/17		48,051		47,908,337
1.00%, 8/31/19		143,993		136,174,612
1.13%, 3/31/20		51,137		47,916,954
Total US Treasury Obligations — 15.7%				529,875,705
Preferred Securities
Capital Trusts
Capital Markets — 0.0%
The Bank of New York Mellon Corp., Series D, 4.50% (a)(d)(h)		1,264		1,147,080
Diversified Financial Services — 0.1%
JPMorgan Chase & Co., Series Q, 5.15% (a)(h)		1,825		1,637,937
Insurance — 0.1%
The Chubb Corp.,
6.00%, 5/11/37		800		934,524
6.38%, 3/29/67 (a)		2,550		2,760,375
				3,694,899
Media — 0.1%
NBCUniversal Enterprise, Inc., 5.25% (b)(h)	USD	2,200	$	2,178,000
Total Capital Trusts — 0.3%				8,657,916
Preferred Stocks — 0.1%	Shares
Diversified Telecommunication Services — 0.1%
Qwest Corp., 7.38%		196,000		4,533,480
Total Preferred Securities — 0.4%				13,191,396
Total Long-Term Investments (Cost — $4,028,449,604) — 118.8%				4,006,683,500
Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (i)(j)(k)		538,812,448		538,812,448
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (i)(j)(k)		68,186,051		68,186,051
Total Short-Term Securities (Cost — $606,998,499) — 18.0%				606,998,499
Options Purchased (Cost — $214,444) — 0.0%				20,350
Total Investments Before TBA Sale Commitments and Options Written (Cost — $4,635,662,547*) — 136.8%				4,613,702,349
TBA Sale Commitments (f)	Par   (000)
Fannie Mae Mortgage-Backed Securities:
3.00%, 1/01/44	USD	89,300		(84,890,812	)
3.50%, 1/01/44		6,380		(6,345,109	)
4.00%, 1/01/44		82,400		(84,923,500	)
4.50%, 1/01/44		111,500		(118,259,688	)
5.00%, 1/01/44		87,100		(94,666,813	)
6.00%, 1/01/44		13,000		(14,434,062	)
Freddie Mac Mortgage-Backed Securities, 4.50%, 1/01/44		6,400		(6,771,750	)
Ginnie Mae Mortgage-Backed Securities:
4.50%, 1/01/44		17,000		(18,175,397	)
5.00%, 1/01/44		8,000		(8,672,500	)
Total TBA Sale Commitments (Proceeds — $438,193,195) — (13.0)%				(437,139,631	)
Options Written (Premiums Received — $162,031) — (0.0)%				(12,719	)
Total Investments, Net of TBA Sale Commitments and Options Written — 123.8%				4,176,549,999
Liabilities in Excess of Other Assets — (23.8)%				(803,403,038	)
Net Assets — 100.0%			$	3,373,146,961

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 31

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Notes to Schedule of investments

* As of December 31, 2013, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	4,635,925,927
Gross unrealized appreciation	$	44,847,956
Gross unrealized depreciation		(67,071,534	)
Net unrealized depreciation	$	(22,223,578	)

(a) Variable rate security. Rate shown is as of report date.

(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) Zero-coupon bond.

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

(e) Amount is less than $500.

(f) Represents or includes a TBA transaction. Unsettled TBA transactions as of December 31, 2013 were as follows:

Counterparty	Value			Unrealized Appreciation (Depreciation)
Barclays Capital, Inc.	$	2,092,438		$	84,775
BNP Paribas Securities Corp.	$	19,524,250		$	(42,840	)
Citigroup Global Markets, Inc.	$	40,798,534		$	(34,134	)
Credit Suisse Securities (USA) LLC	$	80,265,431		$	(177,375	)
Deutsche Bank Securities Inc.	$	43,572,097		$	(73,276	)
Goldman Sachs & Co.	$	127,688,613		$	(276,500	)
Jefferies LLC	$	4,753,125		$	(8,739	)
J.P. Morgan Securities LLC	$	(52,938,522	)	$	(94,059	)
Merrill Lynch, Pierce, Fenner & Smith Inc.	$	25,580,138		$	(24,164	)
Morgan Stanley & Co. LLC	$	27,380,294		$	(146,807	)
Nomura Securities International, Inc.	$	98,179,094		$	(40,764	)
RBC Capital Markets LLC	$	(7,925,938	)	$	8,363
RBS Securities Inc.	$	14,288,297		$	(58,737	)
Wells Fargo Securities, LLC	$	16,070,172		$	(51,053	)

(g) All or a portion of security has been pledged in connection with outstanding financial futures contracts.

(h) Security is perpetual in nature and has no stated maturity date.

(i) Investments in issuers considered to be an affiliate of the Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at December 31, 2012		Net Activity			Shares Held at December 31, 2013		Income
BlackRock Cash Funds: Institutional, SL Agency Shares		598,803,477		(59,991,029	)		538,812,448	$	773,827
BlackRock Cash Funds: Prime, SL Agency Shares		116,380,753		(48,194,702	)		68,186,051	$	89,501

(j) Represents the current yield as of report date.

(k) All or a portion of security was purchased with the cash collateral from loaned securities.

Ÿ For Master Portfolio compliance purposes, the Master Portfolio‘s industry classifications refer to any 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.

See Notes to Financial Statements.

32 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Ÿ Financial futures contracts outstanding as of December 31, 2013 were as follows:

Contracts Purchased (Sold)			Issue	Exchange	Expiration	Notional Value			Unrealized Appreciation (Depreciation)
	1,401		2-Year US Treasury Note	Chicago Board of Trade	March 2014		USD	307,957,312	$	(614,465	)
	1,331		5-Year US Treasury Note	Chicago Board of Trade	March 2014		USD	158,804,938		(988,509	)
	167		10-Year Australian T-Bond	Sydney Futures Exchange	March 2014		USD	17,097,937		111,142
	559		Euro-Bund Future	Eurex	March 2014		USD	107,023,950		(700,544	)
	714		Ultra Long-Term US Treasury Bond	Chicago Board of Trade	March 2014		USD	97,282,500		(1,740,920	)
	(778	)	10-Year Canada Bond Future	Montreal	March 2014		USD	92,825,342		927,610
	(101	)	10-Year Japan Bond	Tokyo Stock Exchange	March 2014		USD	137,454,373		448,760
	(1,716	)	10-Year US Treasury Note	Chicago Board of Trade	March 2014		USD	211,148,438		487,057
	(409	)	UK Long Gilt Bond	NYSE Liffe	March 2014		USD	72,171,331		620,760
	(110	)	US Long Bond	Chicago Board of Trade	March 2014		USD	14,114,375		103,332
	Total								$	(1,345,777	)

Ÿ Foreign currency exchange contracts outstanding as of December 31, 2013 were as follows:

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
GBP	19,208,700	USD	31,099,462	Barclays Bank PLC		1/02/14	$	709,183
USD	30,842,584	GBP	19,208,700	BNP Paribas S.A.		1/02/14		(966,061	)
AUD	5,358,000	USD	4,745,538	Citibank N.A.		3/12/14		17,263
AUD	1,144,000	USD	1,017,165	Deutsche Bank AG		3/12/14		(247	)
AUD	5,355,000	USD	4,737,569	Deutsche Bank AG		3/12/14		22,566
AUD	1,634,000	USD	1,481,661	Royal Bank of Canada		3/12/14		(29,175	)
AUD	10,682,000	USD	9,514,340	UBS AG		3/12/14		(18,961	)
AUD	27,975,000	USD	25,440,045	Westpac Banking Corp.		3/12/14		(572,678	)
AUD	22,795,000	USD	20,729,431	Westpac Banking Corp.		3/12/14		(466,638	)
CAD	16,652,000	USD	15,502,317	Citibank N.A.		3/12/14		147,470
CAD	516,000	USD	483,732	HSBC Bank PLC		3/12/14		1,212
CAD	25,556,000	USD	24,033,366	Royal Bank of Canada		3/12/14		(15,472	)
CAD	5,027,000	USD	4,731,388	Royal Bank of Canada		3/12/14		(6,941	)
EUR	6,843,000	USD	9,388,623	BNP Paribas S.A.		3/12/14		25,082
EUR	13,645,000	USD	18,720,995	BNP Paribas S.A.		3/12/14		50,014
EUR	24,428,000	USD	33,634,644	Credit Suisse International		3/12/14		(29,793	)
EUR	11,002,000	USD	15,148,533	Credit Suisse International		3/12/14		(13,418	)
EUR	6,881,000	USD	9,449,436	JPMorgan Chase Bank N.A.		3/12/14		16,544
GBP	1,075,000	USD	1,762,645	Barclays Bank PLC		3/12/14		16,648
GBP	7,231,000	USD	11,801,990	Barclays Bank PLC		3/12/14		166,448
GBP	7,715,000	USD	12,607,159	Barclays Bank PLC		3/12/14		162,375
GBP	2,744,000	USD	4,532,594	Barclays Bank PLC		3/12/14		9,156
GBP	7,719,000	USD	12,618,357	BNP Paribas S.A.		3/12/14		157,797
GBP	1,133,000	USD	1,854,564	Citibank N.A.		3/12/14		20,729
GBP	5,732,000	USD	9,489,502	HSBC Bank PLC		3/12/14		(2,144	)
GBP	278,000	USD	455,768	Royal Bank of Scotland PLC		3/12/14		4,366
GBP	20,435,000	USD	33,570,414	Royal Bank of Scotland PLC		3/12/14		252,713
GBP	5,788,000	USD	9,458,865	State Street Bank and Trust Co.		3/12/14		121,181
JPY	191,400,000	USD	1,862,991	Barclays Bank PLC		3/12/14		(44,919	)
JPY	729,850,000	USD	7,093,981	BNP Paribas S.A.		3/12/14		(161,272	)
JPY	145,550,000	USD	1,412,553	Citibank N.A.		3/12/14		(30,001	)
JPY	729,850,000	USD	7,096,843	Credit Suisse International		3/12/14		(164,135	)
JPY	145,550,000	USD	1,415,425	Deutsche Bank AG		3/12/14		(32,873	)
JPY	195,100,000	USD	1,904,230	Goldman Sachs International		3/12/14		(51,012	)
JPY	238,500,000	USD	2,327,826	Goldman Sachs International		3/12/14		(62,359	)
JPY	3,063,900,000	USD	29,833,496	UBS AG		3/12/14		(730,084	)
NOK	12,044,000	USD	1,962,778	Barclays Bank PLC		3/12/14		17,909
NOK	75,232,000	USD	12,218,896	Credit Suisse International		3/12/14		153,331
NZD	1,735,000	USD	1,410,277	Goldman Sachs International		3/12/14		9,916
NZD	4,680,000	USD	3,824,730	HSBC Bank PLC		3/12/14		6,108

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 33

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Foreign currency exchange contracts outstanding as of December 31, 2013 were as follows (concluded):

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
NZD	4,645,000	USD	3,807,572	Westpac Banking Corp.		3/12/14	$	(5,383	)
NZD	2,280,000	USD	1,880,608	Westpac Banking Corp.		3/12/14		(14,302	)
NZD	567,000	USD	468,743	Westpac Banking Corp.		3/12/14		(4,622	)
SEK	21,810,000	USD	3,302,794	Bank of America N.A.		3/12/14		84,158
SEK	21,812,000	USD	3,334,679	BNP Paribas S.A.		3/12/14		52,583
SEK	103,567,000	USD	15,767,969	Credit Suisse International		3/12/14		315,317
SEK	18,714,000	USD	2,847,201	HSBC Bank PLC		3/12/14		58,962
USD	2,776,823	AUD	3,126,000	Citibank N.A.		3/12/14		(1,922	)
USD	5,268,501	AUD	5,931,000	Citibank N.A.		3/12/14		(3,647	)
USD	11,595,284	AUD	13,045,750	Credit Suisse International		3/12/14		(1,265	)
USD	7,081,143	AUD	7,966,931	Credit Suisse International		3/12/14		(772	)
USD	904,896	AUD	1,022,000	Deutsche Bank AG		3/12/14		(3,574	)
USD	5,947,727	AUD	6,689,250	Royal Bank of Canada		3/12/14		1,559
USD	3,632,227	AUD	4,085,069	Royal Bank of Canada		3/12/14		952
USD	31,195,300	CAD	33,095,000	Citibank N.A.		3/12/14		92,146
USD	1,871,226	CAD	2,010,000	Citibank N.A.		3/12/14		(17,801	)
USD	1,418,153	CAD	1,508,000	Royal Bank of Canada		3/12/14		913
USD	5,690,257	CAD	6,069,000	Royal Bank of Canada		3/12/14		(13,476	)
USD	34,172,815	EUR	24,797,500	BNP Paribas S.A.		3/12/14		59,654
USD	34,173,504	EUR	24,798,000	BNP Paribas S.A.		3/12/14		59,655
USD	9,394,337	EUR	6,817,000	Citibank N.A.		3/12/14		16,399
USD	4,924,554	EUR	3,570,000	Credit Suisse International		3/12/14		13,415
USD	2,372,614	EUR	1,720,000	Credit Suisse International		3/12/14		6,463
USD	9,364,336	EUR	6,810,000	Deutsche Bank AG		3/12/14		(3,973	)
USD	9,436,906	EUR	6,881,000	Deutsche Bank AG		3/12/14		(29,075	)
USD	4,823,657	EUR	3,539,000	Deutsche Bank AG		3/12/14		(44,837	)
USD	9,177,959	EUR	6,661,000	Deutsche Bank AG		3/12/14		14,625
USD	9,440,196	EUR	6,864,000	HSBC Bank PLC		3/12/14		(2,398	)
USD	9,450,084	EUR	6,877,000	HSBC Bank PLC		3/12/14		(10,394	)
USD	9,435,743	EUR	6,899,000	HSBC Bank PLC		3/12/14		(55,000	)
USD	9,372,269	EUR	6,810,000	Royal Bank of Canada		3/12/14		3,961
USD	2,814,340	EUR	2,058,000	Royal Bank of Scotland PLC		3/12/14		(16,788	)
USD	24,323,753	GBP	14,903,000	Barclays Bank PLC		3/12/14		(343,047	)
USD	3,928,466	GBP	2,400,000	Citibank N.A.		3/12/14		(43,910	)
USD	11,348,393	GBP	6,908,000	Royal Bank of Scotland PLC		3/12/14		(85,429	)
USD	8,484,164	GBP	5,175,000	Royal Bank of Scotland PLC		3/12/14		(81,272	)
USD	7,970,660	JPY	821,300,000	Citibank N.A.		3/12/14		169,285
USD	7,986,868	JPY	821,300,000	Deutsche Bank AG		3/12/14		185,493
USD	5,682,571	JPY	583,600,000	UBS AG		3/12/14		139,064
USD	17,084,827	NOK	104,601,000	Barclays Bank PLC		3/12/14		(117,259	)
USD	4,271,166	NOK	26,150,000	Barclays Bank PLC		3/12/14		(29,314	)
USD	3,861,770	NOK	23,777,000	Credit Suisse International		3/12/14		(48,460	)
USD	1,398,410	NOK	8,617,000	HSBC Bank PLC		3/12/14		(18,693	)
USD	3,337,622	NZD	4,056,000	Citibank N.A.		3/12/14		17,562
USD	466,297	NZD	567,000	Royal Bank of Canada		3/12/14		2,177
USD	2,820,455	SEK	18,434,000	JPMorgan Chase Bank N.A.		3/12/14		(42,226	)
USD	25,383,636	SEK	165,903,000	JPMorgan Chase Bank N.A.		3/12/14		(380,028	)
Total							$	(1,434,696	)

Ÿ Exchange-traded options purchased as of December 31, 2013 were as follows:

Description	Put/ Call	Strike Price			Expiration Date		Contracts	Market Value
Eurodollar 1-Year Mid-Curve Options	Put		USD	98.50		6/13/14	407	$	20,350

See Notes to Financial Statements.

34 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Ÿ Exchange-traded options written as of December 31, 2013 were as follows:

Description	Put/ Call	Strike Price			Expiration Date		Contracts	Market Value
Eurodollar 1-Year Mid-Curve Options	Put		USD	98.25		6/13/14	407	$	(12,719	)

Ÿ Centrally cleared credit default swaps — sold protection outstanding as of December 31, 2013 were as follows:

Index	Receive Fixed Rate			Clearinghouse	Expiration Date	Credit Rating1		Notional Amount (000)2		Unrealized Appreciation
Dow Jones CDX North America High Yield Series 20, Version 1		5.00	%	Chicago Mercantile	6/20/18		B+		USD    16,200	$	968,279
Dow Jones CDX North America High Yield Series 21, Version 1		5.00	%	Chicago Mercantile	12/20/18		B+		USD    56,700		97,000
Total										$	1,065,279
1   Using S&P’s rating of the underlying securities of the index.
2   The maximum potential amount the Master Portfolio may pay should a negative credit event take place as defined under the terms of the agreement.

Ÿ Centrally cleared interest rate swaps outstanding as of December 31, 2013 were as follows:

Fixed Rate	Floating Rate	Clearinghouse	Effective Date	Expiration Date		Notional Amount (000)		Unrealized Appreciation (Depreciation)
2.27%3	3-Month LIBOR	Chicago Mercantile	N/A		8/31/20		USD      22,700	$	(138,800	)
2.37%4	3-Month LIBOR	Chicago Mercantile	3/31/145		2/15/21		USD    101,430		1,355,046
2.91%4	6-Month EURIBOR	Chicago Mercantile	3/31/145		3/07/25		GBP      54,230		2,103,367
3.66%4	3-Month LIBOR	Chicago Mercantile	N/A		8/15/39		USD        8,360		313,719
Total								$	3,633,332
3   Master Portfolio pays the floating rate and receives the fixed rate.
4   Master Portfolio pays the fixed rate and receives the floating rate.
5   Forward swap.

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

Ÿ Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Master Portfolio’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.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 35

Schedule of Investments (concluded) CoreAlpha Bond Master Portfolio

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1			Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities		—		$	437,389,422		$	3,237,812	$	440,627,234
Corporate Bonds		—			1,021,134,921			—		1,021,134,921
Foreign Agency Obligations		—			33,619,410			—		33,619,410
Municipal Bonds		—			25,451,443			—		25,451,443
Non-Agency Mortgage-Backed Securities		—			262,016,151			—		262,016,151
US Government Sponsored Agency Securities		—			1,680,767,240			—		1,680,767,240
US Treasury Obligations		—			529,875,705			—		529,875,705
Preferred Securities	$	4,533,480			8,657,916			—		13,191,396
Short-Term Securities		606,998,499			—			—		606,998,499
Options Purchased:
Interest Rate Contracts		20,350			—			—		20,350
Liabilities:
Investments:
TBA Sale Commitments		—			(437,139,631	)		—		(437,139,631	)
Total	$	611,552,329		$	3,561,772,577		$	3,237,812	$	4,176,562,718
	Level 1			Level 2			Level 3		Total
Derivative Financial Instruments1
Assets:
Credit contracts		—		$	1,065,279			—	$	1,065,279
Interest rate contracts	$	2,698,661			3,772,132			—		6,470,793
Foreign currency exchange contracts		—			3,382,354			—		3,382,354
Liabilities:
Foreign currency exchange contracts		—			(4,817,050	)		—		(4,817,050	)
Interest rate contracts		(4,057,157	)		(138,800	)		—		(4,195,957	)
Total	$	(1,358,496	)	$	3,263,915			—	$	1,905,419
1   Derivative financial instruments are swaps, financial futures contracts, foreign currency exchange contracts and options written. Swaps, financial futures contracts and foreign currency exchange contracts are valued at the unrealized appreciation/depreciation on the instrument and options written are shown at value.
The carrying amount for certain of the Master Portfolio’s assets and/or liabilities approximates fair value for financial statement purposes. As of December 31, 2013, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:
	Level 1			Level 2			Level 3		Total
Assets:
Cash	$	286,711			—			—	$	286,711
Foreign currency at value		3,764,854			—			—		3,764,854
Cash pledged for centrally cleared swaps		7,520,000			—			—		7,520,000
Liabilities:
Collateral on securities loaned at value		—		$	(441,171,726	)		—		(441,171,726	)
Due to broker		—			(110,000	)		—		(110,000	)
Total	$	11,571,565		$	(441,281,726	)		—	$	(429,710,161	)

There were no transfers between levels during the year ended December 31, 2013.

See Notes to Financial Statements.

			��
36	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2013

Statement of Assets and Liabilities CoreAlpha Bond Master Portfolio

December 31, 2013
Assets
Investments at value — unaffiliated (including securities loaned at value of $427,998,147) (cost — $4,028,664,048)	$	4,006,703,850
Investments at value — affiliated (cost — $606,998,499)		606,998,499
Cash		286,711
Foreign currency at value (cost — $3,710,753)		3,764,854
Cash pledged for centrally cleared swaps		7,520,000
TBA sale commitments receivable		438,193,195
Contributions receivable from investors		59,653,246
Interest receivable		18,212,460
Unrealized appreciation on foreign currency exchange contracts		3,382,354
Variation margin receivable on centrally cleared swaps		931,618
Principal paydowns receivable		98,004
Securities lending income receivable — affiliated		58,352
Other income receivable — affiliated		61,204
Total assets		5,145,864,347
Liabilities
Collateral on securities loaned at value		441,171,726
Due to broker		110,000
Investments purchased payable		882,860,499
TBA sale commitments at value (proceeds — $438,193,195)		437,139,631
Withdrawals payable to investors		5,811,469
Unrealized depreciation on foreign currency exchange contracts		4,817,050
Investment advisory fees payable		667,937
Variation margin payable on financial futures contracts		67,431
Professional fees payable		36,339
Trustees’ fees payable		22,585
Options written at value (premiums received — $162,031)		12,719
Total liabilities		1,772,717,386
Net Assets	$	3,373,146,961
Net Assets Consist of
Investors’ capital	$	3,391,932,044
Net unrealized appreciation/depreciation		(18,785,083	)
Net Assets	$	3,373,146,961

See Notes to Financial Statements.
	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2013	37

Statement of Operations CoreAlpha Bond Master Portfolio

Year Ended December 31, 2013
Investment Income
Interest	$	73,906,166
Securities lending — affiliated — net		579,082
Dividends		361,411
Income — affiliated		284,246
Other income — affiliated		61,204
Total income		75,192,109
Expenses
Investment advisory		7,393,778
Independent Trustees		96,546
Professional		53,476
Miscellaneous		610
Total expenses		7,544,410
Less fees waived by Manager		(150,022	)
Total expenses after fees waived		7,394,388
Net investment income		67,797,721
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments		(12,175,934	)
Financial futures contracts		(14,092,028	)
Options written		558,424
Swaps		16,919,783
Foreign currency transactions		3,989,562
		(4,800,193	)
Net change in unrealized appreciation/depreciation on:
Investments		(133,167,667	)
Financial futures contracts		(1,729,479	)
Options written		149,312
Swaps		2,231,449
Foreign currency translations		(2,207,740	)
		(134,724,125	)
Total realized and unrealized loss		(139,524,318	)
Net Decrease in Net Assets Resulting from Operations	$	(71,726,597	)

See Notes to Financial Statements.
38	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2013

Statements of Changes in Net Assets CoreAlpha Bond Master Portfolio

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012
Operations
Net investment income	$	67,797,721		$	60,933,108
Net realized gain (loss)		(4,800,193	)		49,324,984
Net change in unrealized appreciation/depreciation		(134,724,125	)		13,288,577
Net increase (decrease) in net assets resulting from operations		(71,726,597	)		123,546,669
Capital Transactions
Proceeds from contributions		1,313,533,374			4,690,973,134
Value of withdrawals		(658,300,198	)		(4,387,331,971	)
Net increase in net assets derived from capital transactions		655,233,176			303,641,163
Net Assets
Total increase in net assets		583,506,579			427,187,832
Beginning of year		2,789,640,382			2,362,452,550
End of year	$	3,373,146,961		$	2,789,640,382

See Notes to Financial Statements.
	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2013	39

Financial Highlights CoreAlpha Bond Master Portfolio

	Year Ended December 31,
	2013		2012		2011			2010			2009
Total Investment Return
Total investment return		(2.39)%		4.95%		8.38%			6.56%			11.67%
Ratios to Average Net Assets
Total expenses		0.25%		0.25%		0.27%			0.36%			0.35%
Total expenses after fees waived		0.24%		0.24%		0.26%			0.35%			0.35%
Net investment income		2.23%		2.36%		3.22%			3.19%			4.33%
Supplemental Data
Net assets, end of year (000)		$  3,373,147		$  2,789,640		$  2,362,453			$  2,150,563			$  1,633,960
Portfolio turnover1		986%		2,128%		1,646%	2		621%	3		278%	4

¹  Includes TBA transactions, if any.

²  Includes mortgage dollar roll transactions. Excluding these transactions the portfolio turnover rate would have been 1,510%.

³  Excluding TBA transactions, the portfolio turnover rate would have been 170%.

⁴  Excluding TBA transactions, the portfolio turnover rate would have been 199%.

See Notes to Financial Statements.
40	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2013

Notes to Financial Statements CoreAlpha Bond Master Portfolio

1. Organization:

CoreAlpha Bond Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust.

2. Significant Accounting Policies:

The Master Portfolio’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates. The following is a summary of the significant accounting policies followed by the Master Portfolio:

Valuation: US GAAP defines fair value as the price the Master Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Master Portfolio determines the fair values of its financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (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 provide oversight of the pricing function for the Master Portfolio for all financial instruments.

The Master Portfolio values its bond investments on the basis of last available bid prices or current market quotations provided by dealers or pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more brokers or dealers as obtained from a pricing service. 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, various relationships observed in the market between investments and calculated yield measures. Asset-backed and mortgage-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop an estimated tranche-specific spread to the benchmark yield based on the unique attributes of the tranche. Financial futures contracts traded on exchanges are valued at their last sale price. To-be-announced (“TBA”) commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services. Swap agreements are valued utilizing quotes received daily by the Master Portfolio’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. Certain centrally cleared swaps are valued at the price determined by the relevant exchange or clearinghouse. Investments in open-end registered investment companies are valued at net asset value each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

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.

Securities and other assets and liabilities denominated in foreign currencies are translated into US dollars using exchange rates determined as of the close of business on the New York Stock Exchange (“NYSE”). Foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of business 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. Over-the-counter (“OTC”) options are valued by an independent pricing service using a mathematical model, which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.

In the event that 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 Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deem relevant consistent with the principles of fair value measurement, which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. The market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and is adjusted for liquidity as appropriate. These factors

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 41

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. 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 Master Portfolio’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 Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of business on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of business on the NYSE that may not be reflected in the computation of the Master Portfolio’s net assets. If events (for example, a company announcement, market volatility or a natural disaster) occur during such periods that are expected to affect the value of such instruments materially, those instruments may be Fair Value Assets and be valued at their fair value, as determined in good faith by the Global Valuation Committee using a pricing service and/or policies approved by the Board.

Foreign Currency: The Master Portfolio’s books and records are maintained in US dollars. Purchases and sales of investment securities are recorded at the rates of exchange prevailing on the respective date of such transactions. Generally, when the US dollar rises in value against a foreign currency, the Master Portfolio’s investments denominated in that currency will lose value because that currency is worth fewer US dollars; the opposite effect occurs if the US dollar falls in relative value.

The Master Portfolio does not isolate the portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in foreign currency exchange rates on investments are not segregated on 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 Master Portfolio 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 treated as ordinary income for federal income tax purposes.

Segregation and Collateralization: In cases where the Master Portfolio enters into certain investments (e.g., dollar rolls, TBA sale commitments, financial futures contracts, foreign currency exchange contracts, options written and swaps) that would be “senior securities” for 1940 Act purposes, the Master Portfolio may segregate or designate on its books and records cash or liquid securities having a market value at least equal to the amount of the Master Portfolio’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 Master Portfolio 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 Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.

Income Taxes: The Master Portfolio is classified as a partnership for federal income tax purposes. As such, each investor in the Master Portfolio is treated as the owner of its proportionate share of net assets, income, expenses and realized and unrealized gains and losses of the Master Portfolio. Therefore, no federal income tax provision is required. It is intended that the Master Portfolio’s assets will be managed so an investor in the Master Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

The Master Portfolio files US federal and various state and local tax returns. The statute of limitations on the Master Portfolio’s US federal tax returns remains open for each of the four years ended December 31, 2013. The Master Portfolio’s 2011 federal tax return is currently under examination. No other income tax returns are currently under examination. The statutes of limitations on the Master Portfolio’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 Master Portfolio’s facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

Other: Expenses directly related to the Master Portfolio are charged to the Master Portfolio. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods.

42 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

3. Securities and Other Investments:

Asset-Backed and Mortgage-Backed Securities: The Master Portfolio may invest in asset-backed securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally 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 subject to such a prepayment feature will have the effect of shortening the maturity of the security. In addition, the Master Portfolio may have to subsequently reinvest the proceeds at lower interest rates. If the Master Portfolio 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.

The Master Portfolio may purchase certain mortgage pass-through securities. There are a number of important differences among the agencies and instrumentalities of the US 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 Treasury.

Inflation-Indexed Bonds: The Master Portfolio may invest in inflation-indexed bonds. 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 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 US 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.

Multiple Class Pass-Through Securities: The Master Portfolio may invest in multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities. These multiple class securities may be issued by Ginnie Mae, US 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, and multiple class pass-through securities represent direct ownership interests in, a pool of residential or commercial mortgage loans or mortgage pass-through securities (the “Mortgage Assets”), the payments on which are used to make payments on the CMOs or multiple pass-through securities. 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 pre-payments of principal, the Master Portfolio may not fully recoup its initial investment in IOs.

Stripped Mortgage-Backed Securities: The Master Portfolio may invest in stripped mortgage-backed securities issued by the US 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. The Master Portfolio also may invest in stripped mortgage-backed securities that are privately issued.

Zero-Coupon Bonds: The Master Portfolio may invest in zero-coupon bonds, which are normally issued at a significant discount from face value and do not provide for periodic interest payments. Zero-coupon bonds may experience greater volatility in market value than similar maturity debt obligations which provide for regular interest payments.

Capital Trusts and Trust Preferred Securities: The Master Portfolio may invest in capital trusts and/or trust preferred securities. These securities are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics, or by an affiliated business trust of a corporation, generally in the form of beneficial

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 43

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

interests in subordinated debentures or similarly structured securities. The securities can be structured as either fixed or adjustable coupon securities that can have either a perpetual or stated maturity date. For trust preferred securities, the issuing bank or corporation will pay interest to the trust, which will then be distributed to holders of the trust preferred 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. Payments on these securities are treated as interest rather than dividends for federal income tax purposes. 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 Stock: The Master Portfolio may invest in preferred stock. 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.

TBA Commitments: The Master Portfolio may enter into 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. The Master Portfolio generally enters into TBA commitments with the intent to 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.

Mortgage Dollar Roll Transactions: The Master Portfolio may sell TBA mortgage-backed securities and simultaneously contract to repurchase substantially similar (same type, coupon and maturity) securities on a specific future date at an agreed upon price. During the period between the sale and repurchase, the Master Portfolio will not be entitled to receive interest and principal payments on the securities sold. The Master Portfolio accounts for mortgage dollar roll transactions as purchases and sales and realizes gains and losses on these transactions. These transactions may increase the Master Portfolio’s portfolio turnover rate. Mortgage dollar rolls involve the risk that the market value of the securities that the Master Portfolio is required to purchase may decline below the agreed upon repurchase price of those securities.

Securities Lending: The Master Portfolio may lend securities to approved borrowers, such as banks, brokers and other financial institutions. The borrower pledges cash, securities issued or guaranteed by the US government or irrevocable letters of credit issued by a bank as collateral. The initial collateral received by the Master Portfolio should have a value of at least 102% of the current value of the loaned securities for securities traded on US exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statement of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the Master Portfolio earns dividend or interest income on the securities loaned but does not receive interest income on the 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 securities on loan and the value of the related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value, and collateral on securities loaned at value, respectively. The cash collateral invested by the securities lending agent, BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Master Portfolio under Master Securities Lending Agreements (“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 Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender 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 a MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and the Master Portfolio can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.

44 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

The following table is a summary of the Master Portfolio’s securities lending agreements by counterparty which are subject to offset under a MSLA as of December 31, 2013:

Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital, Inc.	$	2,845,571	$	(2,845,571	)		—
Citigroup Global Markets, Inc.		154,190,290		(154,190,290	)		—
Credit Suisse Securities (USA) LLC		9,303,493		(9,303,493	)		—
Deutsche Bank Securities Inc.		50,326,014		(50,326,014	)		—
Goldman Sachs & Co.		41,630,215		(41,630,215	)		—
Jefferies LLC		163,660		(163,660	)
JP Morgan Securities LLC		12,226,905		(12,226,905	)		—
Merrill Lynch, Pierce, Fenner & Smith Inc.		92,742,144		(92,742,144	)		—
Morgan Stanley		57,320,395		(57,320,395	)		—
RBS Securities Inc.		3,146,816		(3,146,816	)		—
Wells Fargo Securities LLC		4,102,644		(4,102,644	)		—
Total	$	427,998,147	$	(427,998,147	)		—

¹  Collateral with a value of $441,171,726 has been received in connection with securities lending agreements. Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

The risks of securities lending also include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate this risk, the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities lent. The Master Portfolio also could suffer 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. During the year ended December 31, 2013, any securities on loan were collateralized by cash.

4. Derivative Financial Instruments:

The Master Portfolio engages in various portfolio investment strategies using derivative contracts both to increase the return of the Master Portfolio and/or to economically hedge its exposure to certain risks such as credit risk, interest rate risk or foreign currency exchange rate risk. These contracts may be transacted on an exchange or OTC.

Financial Futures Contracts: The Master Portfolio purchases and/or sells financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in interest rates (interest rate risk). Financial futures contracts are agreements between the Master Portfolio and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date.

Upon entering into a financial futures contract, the Master Portfolio is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Securities deposited as initial margin are designated on the Schedule of Investments and cash deposited, if any, is recorded on the Statement of Assets and Liabilities as cash pledged for financial futures contracts. Pursuant to the contract, the Master Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin. Variation margin is recorded by the Master Portfolio as unrealized appreciation or depreciation, and if applicable, as a receivable or payable for variation margin in the Statement of Assets and Liabilities.

When the contract is closed, the Master Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest or foreign currency exchange rates and the underlying assets.

Foreign Currency Exchange Contracts: The Master Portfolio enters into foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to, or hedge exposure away from, foreign currencies (foreign currency exchange rate risk). A foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. Foreign currency exchange contracts, when used by the Master Portfolio, help to manage the overall exposure to the currencies in which some of the investments held by the Master Portfolio are denominated. The contract is marked-to-market daily and the change in market value is recorded by the Master Portfolio as an unrealized gain or loss. When the contract is closed, the Master Portfolio records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of foreign currency exchange contracts involves the risk that the value of a foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

Options: The Master Portfolio purchases and writes call and put options to increase or decrease its exposure to underlying instruments (including interest rate 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

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 45

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

option period. When the Master Portfolio purchases (writes) an option, an amount equal to the premium paid (received) by the Master Portfolio is reflected as an asset (liability). The amount of the asset (liability) is subsequently marked-to-market to reflect the current market value of the option purchased (written). When an instrument is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the instrument acquired or deducted from (or added to) the proceeds of the instrument sold. When an option expires (or the Master Portfolio enters into a closing transaction), the Master Portfolio realizes a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premiums received or paid). When the Master Portfolio writes a call option, such option is “covered,” meaning that the Master Portfolio holds the underlying instrument subject to being called by the option counterparty. When the Master Portfolio writes a put option, such option is covered by cash in an amount sufficient to cover the obligation.

In purchasing and writing options, the Master Portfolio bears the risk of an unfavorable change in the value of the underlying instrument or the risk that the Master Portfolio may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Master Portfolio purchasing or selling a security when it otherwise would not, or at a price different from the current market value.

Swaps: The Master Portfolio enters into swap agreements in which the Master Portfolio and a counterparty agree either 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”). Swaps are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation).

For OTC swaps, any upfront premiums paid are recorded as assets and any upfront fees received are recorded as liabilities and 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 OTC swap. Payments received or made by the Master Portfolio for OTC swaps are recorded in the Statement of Operations as realized gains or losses, respectively. When an OTC swap is terminated, the Master Portfolio will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Master Portfolio’s basis in the contract, if any. Generally, the basis of the contracts is the premium received or paid.

In a centrally cleared swap, immediately following execution of the swap agreement, the swap agreement is novated to a central counterparty (the “CCP”) and the Master Portfolio’s counterparty on the swap agreement becomes the CCP. The Master Portfolio is required to interface with the CCP through a broker. Upon entering into a centrally cleared swap, the Master Portfolio 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 on the Schedule of Investments and cash deposited is recorded on the Statement of Assets and Liabilities as cash pledged for centrally cleared swaps. The daily change in valuation of centrally cleared swaps is recorded as a receivable or payable for variation margin in the Statement of Assets and Liabilities. Payments received from (paid to) the counterparty, including at termination, are recorded as realized gain (loss) in the Statement of Operations.

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.

Ÿ Credit default swaps — The Master Portfolio enters into credit default swaps to manage its 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 it is not otherwise exposed (credit risk). The Master Portfolio 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 on single-name issuers are agreements in which the protection buyer pays fixed periodic payments to the seller in consideration for a guarantee 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 accelerators, repudiation, moratorium or restructuring). Credit default swaps on traded indexes are agreements in which the buyer pays fixed periodic payments to the seller in consideration for a guarantee from the seller to make a specific payment should a write-down, principal or interest shortfall or default of all or individual underlying securities included in the index occur. As a buyer, if an underlying credit event occurs, the Master Portfolio 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 Master Portfolio 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.

46 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

Ÿ Interest rate swaps — The Master Portfolio enters into interest rate swaps to gain or reduce exposure to interest rates or to manage duration, the yield curve or interest rate risk by economically hedging the value of the fixed rate bonds, which may decrease when interest rates rise (interest rate risk). Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating, for another party’s stream of interest payments, either fixed or floating, on the same notional amount for a specified period of time.

Ÿ Forward swaps — The Master Portfolio may enter into forward interest rate swaps and forward total return swaps. In a forward swap, the Master Portfolio and the counterparty agree to make either periodic net payments beginning on a specified future effective date or a net payment at termination, unless terminated earlier.

The following is a summary of the Master Portfolio’s derivative financial instruments categorized by risk exposure:

Fair Values of Derivative Financial Instruments as of December 31, 2013
	Derivative Assets
	Statement of Assets and Liabilities Location	Value
Interest rate contracts	Net unrealized appreciation/depreciation1; Unrealized appreciation on centrally cleared swaps1; Investments at value — unaffiliated2	$	6,491,143
Foreign currency exchange contracts	Unrealized appreciation on foreign currency exchange contracts		3,382,354
Credit contracts	Unrealized appreciation on centrally cleared swaps1		1,065,279
Total		$	10,938,776
	Derivative Liabilities
	Statement of Assets and Liabilities Location	Value
Interest rate contracts	Net unrealized appreciation/depreciation1; Unrealized depreciation on centrally cleared swaps1; Options written at value2	$	4,195,957
Foreign currency exchange contracts	Unrealized depreciation on foreign currency exchange contracts		4,817,050
Total		$	9,013,007

¹  Includes cumulative appreciation/depreciation on financial 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.

²  Includes options purchased at value as reported in the Schedule of Investments.

The Effect of Derivative Financial Instruments in the Statement of Operations Year Ended December 31, 2013
	Net Realized Gain (Loss) From
Interest rate contracts:
Financial futures contracts	$	(14,092,028)
Swaps		8,281,442
Options3		(208,248)
Foreign currency exchange contracts:
Foreign currency transactions		3,908,263
Credit contracts:
Swaps		8,638,341
Total	$	6,527,770
	Net Change in Unrealized Appreciation/Depreciation on
Interest rate contracts:
Financial futures contracts	$	(1,729,479)
Swaps		2,742,426
Options3		379,024
Foreign currency exchange contracts:
Foreign currency translations		(2,259,790)
Credit contracts:
Swaps		(510,977)
Total	$	(1,378,796)

³  Options purchased are included in the net realized gain (loss) from investments and net change in unrealized appreciation/depreciation on investments.

For the year ended December 31, 2013, the average quarterly balances of outstanding derivative financial instruments were as follows:

Financial futures contracts:
Average number of contracts purchased	7,436
Average number of contracts sold	1,262
Average notional value of contracts purchased	$1,152,594,863
Average notional value of contracts sold	$353,561,736
Options:
Average number of option contracts purchased	481
Average number of option contracts written	482
Average notional value of options contracts purchased	$302,462
Average notional value of options contracts written	$210,250
Foreign currency exchange contracts:
Average number of contracts — US dollars purchased	100
Average number of contracts — US dollars sold	97
Average US dollar amounts purchased	$457,918,804
Average US dollar amounts sold	$452,957,208
Credit default swaps:
Average number of contracts — buy protection	1
Average number of contracts — sell protection	3
Average notional value — buy protection	$34,490,000
Average notional value — sell protection	$77,675,000
Interest rate swaps:
Average number of contracts — pays fixed rate	5
Average number of contracts — receives fixed rate	1
Average notional value — pays fixed rate	$384,743,505
Average notional value — receives fixed rate	$15,233,175

Counterparty Credit Risk: 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.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 47

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

The Master Portfolio’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by the Master Portfolio. For OTC options purchased, the Master Portfolio 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 the Master Portfolio should the counterparty fail to perform under the contracts. Options written by the Master Portfolio do not typically give rise to counterparty credit risk, as options written generally obligate the Master Portfolio, and not the counterparty to perform.

With exchange traded purchased options and futures and centrally cleared swaps, there is less counterparty credit risk to the Master Portfolio 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 Master Portfolio 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) of the clearing broker or clearinghouse. 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 Master Portfolio.

In order to better define its contractual rights and to secure rights that will help the Master Portfolio mitigate its counterparty risk, the Master Portfolio may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Master Portfolio 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 Master Portfolio 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. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the Master Portfolio’s net assets decline by a stated percentage or the Master Portfolio fails to meet the terms of its ISDA Master Agreements, which would cause the Master Portfolio to accelerate payment of any net liability owed to the counterparty.

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 Master Portfolio and the counterparty.

Cash collateral that has been pledged to cover obligations of the Master Portfolio 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 Master Portfolio, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount threshold (e.g. $500,000) before a transfer is required, which is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to/pledged by the Master Portfolio on the next business day. Typically, the Master Portfolio and counterparties are not permitted to sell, re-pledge or use the collateral they receive. To the extent amounts due to the Master Portfolio from its counterparties are not fully collateralized, contractually or otherwise, the Master Portfolio bears the risk of loss from counterparty non-performance. The Master Portfolio attempts to mitigate counterparty risk by entering into agreements only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.

For financial reporting purposes, the Master Portfolio does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.

At December 31, 2013, the Master Portfolio’s derivative assets and liabilities (by type) are as follows:

	Assets			Liabilities
Derivative Financial Instruments:
Financial futures contracts		—		$	67,431
Foreign currency exchange contracts	$	3,382,354			4,817,050
Swaps		931,618			—
Options		20,350	1		12,719
Total derivative assets and liabilities in the Statement of Assets and Liabilities		4,334,322			4,897,200
Derivatives not subject to a master netting agreement or similar agreement (“MNA”)		(951,968	)		(80,150	)
Total assets and liabilities subject to a MNA	$	3,382,354		$	4,817,050

¹  Includes options purchased at value, which is included in Investments at value — unaffiliated and reported in the Schedule of Investments.

48 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

The following table presents the Master Portfolio’s derivative assets by counterparty net of amounts available for offset under a MNA and net of the related collateral received by the Master Portfolio as of December 31, 2013:

Counterparty	Derivative Assets Subject to a MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets2
Bank of America N.A.	$	84,158		—			—		—	$	84,158
Barclays Bank PLC		1,081,719	$	(534,539	)		—		—		547,180
BNP Paribas S.A.		404,785		(404,785	)		—		—		—
Citibank N.A.		480,854		(97,281	)		—		—		383,573
Credit Suisse International		488,526		(257,843	)		—		—		230,683
Deutsche Bank AG		222,684		(114,579	)		—		—		108,105
Goldman Sachs International		9,916		(9,916	)		—		—		—
HSBC Bank PLC		66,282		(66,282	)		—		—		—
JPMorgan Chase Bank N.A.		16,544		(16,544	)		—		—		—
Royal Bank of Canada		9,562		(9,562	)		—		—		—
Royal Bank of Scotland PLC		257,079		(183,489	)		—		—		73,590
State Street Bank and Trust Co.		121,181		—			—		—		121,181
UBS AG		139,064		(139,064	)		—		—		—
Total	$	3,382,354	$	(1,833,884	)		—		—	$	1,548,470

The following table presents the Master Portfolio’s derivative liabilities by counterparty net of amounts available for offset under a MNA and net of the related collateral pledged by the Master Portfolio as of December 31, 2013:

Counterparty	Derivative Liabilities Subject to a MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities3
Barclays Bank PLC	$	534,539	$	(534,539	)		—		—		—
BNP Paribas S.A.		1,127,333		(404,785	)		—		—	$	722,548
Citibank N.A.		97,281		(97,281	)		—		—		—
Credit Suisse International		257,843		(257,843	)		—		—		—
Deutsche Bank AG		114,579		(114,579	)		—		—		—
Goldman Sachs International		113,371		(9,916	)		—		—		103,455
HSBC Bank PLC		88,629		(66,282	)		—		—		22,347
JPMorgan Chase Bank N.A.		422,254		(16,544	)		—		—		405,710
Royal Bank of Canada		65,064		(9,562	)		—		—		55,502
Royal Bank of Scotland PLC		183,489		(183,489	)		—		—		—
UBS AG		749,045		(139,064	)		—		—		609,981
Westpac Banking Corp.		1,063,623		—			—		—		1,063,623
Total	$	4,817,050	$	(1,833,884	)		—		—	$	2,983,166

¹ The amount of derivatives available for offset is limited to the amount of the assets and/or liabilities that are subject to a MNA.

² Net amount represents the net amount receivable from the counterparty in the event of default.

³ Net amount represents the net amount payable due to the counterparty in the event of default.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 49

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

5. Investment Advisory Agreement and Other Transactions with Affiliates:

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

MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement with BlackRock Advisors, LLC (the “Manager”), the Master Portfolio’s investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory services. The Manager is responsible for the management of the Master Portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Master Portfolio. For such services, the Master Portfolio pays the Manager a monthly fee based on a percentage of the Master Portfolio’s average daily net assets at the following annual rates:

Average Daily Net Assets	Investment Advisory Fee
First $1 Billion		0.25	%
$1 Billion — $3 Billion		0.24	%
$3 Billion — $5 Billion		0.23	%
$5 Billion — $10 Billion		0.22	%
Greater than $10 Billion		0.21	%

The Manager entered into a sub-advisory agreement with each of BlackRock International Limited (“BIL”) and BlackRock Fund Advisors (“BFA”), both affiliates of the Manager. The Manager pays BIL and BFA, for services they provide with respect to the Master Portfolio, a monthly fee that is a percentage of the investment advisory fees paid by the Master Portfolio to BAL.

The fees and expenses of MIP’s trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolio. The Manager has contractually agreed to cap the expenses of the Master Portfolio at the rate at which the Master Portfolio pays an advisory fee to the Manager, as applicable, by providing an offsetting credit against the investment advisory fees paid by the Master Portfolio in an amount equal to the independent expenses. This contractual waiver is effective through April 30, 2014. The amount of the waiver, if any, is shown as fees waived by Manager in the Statement of Operations.

The Master Portfolio received an exemptive order from the Securities and Exchange Commission permitting it, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BTC, an affiliate of the Manager, as the securities lending agent. BTC may, on behalf of the Master Portfolio, invest cash collateral received by the Master Portfolio for such loans, among other things, in a private investment company managed by BTC or in registered money market funds advised by BTC or its affiliates. The market value of securities on loan and the value of the related collateral, if applicable, is shown in the Statement of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC, if any, is disclosed in the Schedule of Investments. Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of rebates paid to, or fees paid by, borrowers of securities. The Master Portfolio retains 65% of securities lending income and pays a fee to BTC equal to 35% of such income. The Master Portfolio benefits from a borrower default indemnity provided by BlackRock. As securities lending agent, BTC bears all operational costs directly related to securities lending as well as the cost of borrower default indemnification. BTC does not receive any fees for managing the cash collateral. The share of income earned by the Master Portfolio is shown as securities lending – affiliated – net in the Statement of Operations. For the year ended December 31, 2013, BTC received $311,611 in securities lending agent fees related to securities lending activities for the Master Portfolio.

The Master Portfolio recorded a payment from an affiliate to compensate for foregone securities lending revenue, which is shown as Other income – affiliated in the Statement of Operations.

Certain officers and/or trustees of MIP are officers and/or directors of BlackRock or its affiliates.

6. Purchases and Sales:

Purchases and sales of investments including paydowns, mortgage dollar rolls and TBA transactions and excluding short-term securities and US government securities for the year ended December 31, 2013, were $27,889,678,191 and $27,446,804,520, respectively.

Purchases and sales of US government securities for the Master Portfolio for the year ended December 31, 2013, were $4,850,464,292 and $4,756,199,351, respectively.

Transactions in options written for the year ended December 31, 2013, were as follow:

	Calls
	Contracts			Premiums Received
Outstanding options, beginning of year		—			—
Options written		1,171		$	278,511
Options exercised		—			—
Options expired		(98	)		(25,875	)
Options closed		(1,073	)		(252,636	)
Outstanding options, end of year		—			—

	Puts
	Contracts			Premiums Received
Outstanding options, beginning of year		—			—
Options written		1,829		$	707,379
Options exercised		—			—
Options expired		(1,129	)		(449,738	)
Options closed		(293	)		(95,610	)
Outstanding options, end of year		407		$	162,031

50 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Notes to Financial Statements (concluded) CoreAlpha Bond Master Portfolio

7. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $800 million credit agreement with a group of lenders, under which the Master Portfolio may borrow to fund shareholder redemptions. The agreement expires in April 2014. Excluding commitments designated for a certain individual fund, other Participating Funds, including the Master Portfolio, can borrow up to an aggregate commitment amount of $500 million, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.065% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. Participating Funds paid administration and arrangement fees, which, along with commitment fees, were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. The Master Portfolio did not borrow under the credit agreement during the year ended December 31, 2013.

8. Concentration, Market and Credit Risk:

In the normal course of business, the Master Portfolio invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Master Portfolio may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Master Portfolio; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Master Portfolio may be exposed to counterparty credit risk, or the risk that an entity with which the Master Portfolio has unsettled or open transactions may fail to or be unable to perform on its commitments. The Master Portfolio manages counterparty credit risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Master Portfolio to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Master Portfolio’s

exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Master Portfolio.

The Master Portfolio invests a significant portion of its assets in fixed-income securities and/or uses derivatives tied to the fixed income markets. See the Schedule of Investments for these securities and derivatives. Changes in market interest rates or economic conditions, including the Federal Reserve’s decision in December to taper its quantitative easing policy, 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 Master Portfolio may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

The Master Portfolio 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. Please see the Schedule of Investments for these securities. 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.

9. Subsequent Events:

Management has evaluated the impact of all subsequent events on the Master Portfolio 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.

	��
BLACKROCK COREALPHA BOND FUND		DECEMBER 31, 2013	51

Report of Independent Registered Public Accounting Firm CoreAlpha Bond Master Portfolio

To the Board of Trustees of Master Investment Portfolio and the Interestholders of CoreAlpha Bond Master Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of CoreAlpha Bond Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio, at December 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 18, 2014

52 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Officers and Trustees

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 107 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 107 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy from 2002 to 2012; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 107 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President, Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 107 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	President, London Center for Policy Research since 2012; Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and Professor thereof from 1980 to 2005; President Emeritus, Hudson Institute (policy research organization) from 2011 to 2012, President thereof from 1997 to 2011 and Trustee from 1980 to 2012; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (global internet services) since 2005; Director, Cerego, LLC (educational software) since 2005; Director, Cybersettle (online adjudication) since 2009; Director, AIMS Worldwide, Inc. (marketing) from 2007 to 2012.	33 RICs consisting of 107 Portfolios	None
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 107 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Director, The West Penn Allegheny Health System (a not-for-profit health system) from 2008 to 2013; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 107 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 107 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 53

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1 (concluded)
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Immediate past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	33 RICs consisting of 107 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Director, Alkon Corporation (pneumatics) since 1992; Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh from 2005 to 2013 and Dean thereof from 1997 to 2005; Director, Tippman Sports (recreation) from 2005 to 2013; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 107 Portfolios	None
	1   Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved extensions in terms of Trustees who turn 72 prior to December 31, 2013.
	2   Date shown is the earliest date a person has served for the Trust/MIP covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the Trust’s/MIP’s Board. As a result, although the chart shows certain Trustees as joining the Trust’s/MIP’s board in 2009, those Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees3
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	144 RICs consisting of 278 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	144 RICs consisting of 278 Portfolios	None
	3   Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

54 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Officers and Trustees (concluded)

Name, Address and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers1
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock since 2000; Head of the Global Cash Group since 2013; Co-head of the Global Cash and Securities Lending Group from 2010 to 2013; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009; and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2009	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2009	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Managing Director of BlackRock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary of the BlackRock-advised funds from 2010 to 2012; General Counsel and Chief Operating Officer of Uhuru Capital Management from 2009 to 2010; Executive Director and Counsel of Goldman Sachs Asset Management from 2005 to 2009.
	1   Officers of the Trust/MIP serve at the pleasure of the Board.

Investment Advisor and Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Custodian and Accounting Agent State Street Bank and Trust Company Boston, MA 02110	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Sidley Austin LLP New York, NY 10019
Sub-Advisors BlackRock Fund Advisors San Francisco, CA 94105 BlackRock International Limited Edinburgh, EH3 8JB United Kingdom	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP Philadelphia, PA 19103	Address of the Trust 400 Howard Street San Francisco, CA 94105

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 55

Additional Information

General Information

Electronic Delivery

Electronic copies of most financial reports and prospectuses are available on the Fund’s website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Fund’s electronic delivery program.

To enroll:

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:

Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.

Shareholders Who Hold Accounts Directly with BlackRock:

1) Access the BlackRock website at

http://www.blackrock.com/edelivery

2) Select “eDelivery” under the “More Information” section

3) Log into your account

Householding

The Fund 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 Fund at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Fund/Master Portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s/Master Portfolio’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Fund’s/Master Portfolio’s 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/Master Portfolio uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Fund/Master Portfolio voted proxies relating to securities held in the Fund’s/Master Portfolio’s portfolio during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM EST 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/funds.

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.

56 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

Additional Information (concluded)

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.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013 57

A World-Class 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.

Equity Funds

BlackRock ACWI ex-US Index Fund

BlackRock All-Cap Energy & Resources Portfolio

BlackRock Basic Value Fund

BlackRock Capital Appreciation Fund

BlackRock Commodity Strategies Fund

BlackRock Disciplined Small Cap Core Fund

BlackRock Emerging Markets Fund

BlackRock Emerging Markets Dividend Fund

BlackRock Emerging Markets Long/Short Equity Fund

BlackRock Energy & Resources Portfolio

BlackRock Equity Dividend Fund

BlackRock EuroFund

BlackRock Flexible Equity Fund

BlackRock Focus Growth Fund

BlackRock Global Dividend Income Portfolio

BlackRock Global Long/Short Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Global SmallCap Fund

BlackRock Health Sciences Opportunities Portfolio

BlackRock International Fund

BlackRock International Index Fund

BlackRock International Opportunities Portfolio

BlackRock Large Cap Core Fund

BlackRock Large Cap Core Plus Fund

BlackRock Large Cap Growth Fund

BlackRock Large Cap Value Fund

BlackRock Latin America Fund

BlackRock Long-Horizon Equity Fund

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Mid Cap Value Opportunities Fund

BlackRock Natural Resources Trust

BlackRock Pacific Fund

BlackRock Real Estate Securities Fund

BlackRock Russell 1000^® Index Fund

BlackRock Science & Technology Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock Small Cap Growth Fund II

BlackRock Small Cap Index Fund

BlackRock S&P 500 Stock Fund

BlackRock U.S. Opportunities Portfolio

BlackRock Value Opportunities Fund

Taxable Fixed Income Funds

BlackRock Bond Index Fund

BlackRock Core Bond Portfolio

BlackRock CoreAlpha Bond Fund

BlackRock CoRI Funds

2015	2021
2017	2023
2019

BlackRock Emerging Markets Flexible Dynamic Bond Portfolio

BlackRock Floating Rate Income Portfolio

BlackRock Global Long/Short Credit Fund

BlackRock GNMA Portfolio

BlackRock High Yield Bond Portfolio

BlackRock Inflation Protected Bond Portfolio

BlackRock International Bond Portfolio

BlackRock Investment Grade Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Secured Credit Portfolio

BlackRock Short Obligations Fund

BlackRock Short-Term Treasury Fund

BlackRock Strategic Income Opportunities Portfolio

BlackRock Total Return Fund

BlackRock U.S. Government Bond Portfolio

BlackRock U.S. Mortgage Portfolio

BlackRock Ultra-Short Obligations Fund

BlackRock World Income Fund

Municipal Fixed Income Funds

BlackRock California Municipal Bond Fund

BlackRock High Yield Municipal Fund

BlackRock National Municipal Fund

BlackRock New Jersey Municipal Bond Fund

BlackRock New York Municipal Bond Fund

BlackRock Pennsylvania Municipal Bond Fund

BlackRock Short-Term Municipal Fund

BlackRock Strategic Municipal Opportunities Fund

Mixed Asset Funds

BlackRock Balanced Capital Fund	LifePath Active Portfolios			LifePath Index Portfolios
BlackRock Emerging Market Allocation Portfolio		2015	2040		Retirement	2040
BlackRock Global Allocation Fund		2020	2045		2020	2045
BlackRock Managed Volatility Portfolio		2025	2050		2025	2050
BlackRock Multi-Asset Income Portfolio		2030	2055		2030	2055
BlackRock Multi-Asset Real Return Fund		2035			2035
BlackRock Strategic Risk Allocation Fund
	LifePath Portfolios
BlackRock Prepared Portfolios		Retirement	2040
Conservative Prepared Portfolio		2020	2045
Moderate Prepared Portfolio		2025	2050
Growth Prepared Portfolio		2030	2055
Aggressive Growth Prepared Portfolio		2035

BlackRock mutual funds are currently distributed by BlackRock Investments, LLC. You should consider the investment objectives, risks, charges and expenses of the funds under consideration carefully before investing. Each fund’s prospectus contains this and other information and is available at www.blackrock.com or by calling (800) 441-7762 or from your financial advisor. The prospectus should be read carefully before investing.

58 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2013

This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless accompanied or preceded by the Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.

CAB-12/13-AR

DECEMBER 31, 2013

  ANNUAL REPORT  

BlackRock Funds III

^Ø   LifePath^® 2025 Portfolio

^Ø   LifePath^® 2035 Portfolio

^Ø   LifePath^® 2045 Portfolio

^Ø   LifePath^® 2055 Portfolio

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
Dear Shareholder		3
Annual Report:
Portfolio Summaries		4
About Portfolio Performance		14
Disclosure of Expenses		15
Portfolio Financial Statements:
Statements of Assets and Liabilities		16
Statements of Operations		18
Statements of Changes in Net Assets		19
Portfolio Financial Highlights		21
Portfolio Notes to Financial Statements		41
Portfolio Report of Independent Registered Public Accounting Firm		47
Important Tax Information		47
Master Portfolio Information		48
Master Portfolio Financial Statements:
Schedules of Investments		50
Statements of Assets and Liabilities		58
Statements of Operations		59
Statements of Changes in Net Assets		60
Master Portfolio Financial Highlights		61
Master Portfolio Notes to Financial Statements		65
Master Portfolio Report of Independent Registered Public Accounting Firm		70
Officers and Trustees		71
Additional Information		74
A World-Class Mutual Fund Family		76

2 BLACKROCK FUNDS III DECEMBER 31, 2013

Dear Shareholder

Risk assets (such as equities) powered higher in 2013, for the most part unscathed by ongoing political and economic uncertainty. While monetary policy was the main driving force behind the rally in risk assets, it was also the main culprit for the bouts of volatility during the year.

Equity markets rallied right out of the gate in January with cash pouring back in from the sidelines after a potential US fiscal crisis (i.e., the “fiscal cliff”) was averted with a last-minute tax deal. Key indicators signaling modest but broad-based improvements in the world’s major economies and a calming in Europe’s debt troubles fostered an aura of comfort for investors. Global economic momentum slowed in February, however, and the pace of the rally moderated. In the months that followed, US stocks outperformed international stocks, as the US showed greater stability than most other regions. Slow but positive growth was sufficient to support corporate earnings, while uncomfortably high unemployment reinforced expectations that the Federal Reserve would continue its aggressive monetary stimulus program. International markets experienced higher levels of volatility given a resurgence of political instability in Italy, a banking crisis in Cyprus and a generally poor outlook for European economies. Emerging markets significantly lagged the rest of the world as growth in these economies fell short of expectations.

Financial markets were rattled in May when Fed Chairman Bernanke mentioned the possibility of reducing — or “tapering” — the central bank’s asset purchase programs — comments that were widely misinterpreted as signaling an end to the Fed’s zero-interest-rate policy. US Treasury yields rose sharply, triggering a steep sell-off across fixed income markets. (Bond prices move in the opposite direction of yields.) Equity prices also suffered as investors feared the implications of a potential end of a program that had greatly supported the markets. Risk assets rebounded in late June, however, when the Fed’s tone turned more dovish, and improving economic indicators and better corporate earnings helped extend gains through most of the summer.

The fall was a surprisingly positive period for most asset classes as the Fed defied market expectations with its decision to delay tapering. Easing of political tensions that had earlier surfaced in Egypt and Syria and the re-election of Angela Merkel as Chancellor of Germany also boosted investor sentiment. Higher volatility returned in late September when the US Treasury Department warned that the national debt would soon breach its statutory maximum. The ensuing political brinksmanship led to a partial government shutdown, roiling global financial markets through the first half of October, but the rally quickly resumed when politicians engineered a compromise to reopen the government and extend the debt ceiling, at least temporarily.

The remainder of the year was generally positive for stock markets in the developed world, although investors continued to grapple with uncertainty about when and how much the Fed would scale back on stimulus. On the one hand, persistent weak growth and low inflation provided significant latitude for monetary policy decisions and investors were encouraged by dovish comments from Fed Chair-to-be Janet Yellen. On the other hand, US housing and manufacturing reports had begun to signal fundamental improvement in the economy. The long-awaited taper announcement ultimately came in mid-December. The Fed reduced the amount of its monthly asset purchases, but at the same time, extended its time horizon for maintaining low short-term interest rates. Markets reacted positively as this move signaled the Fed’s perception of real improvement in the economy and investors felt relief from the tenacious anxiety that had gripped them throughout the year.

Accommodative monetary policy and the avoidance of major risks made 2013 a strong year for most equity markets. US stocks were the strongest performers for the six- and 12-month periods ended December 31. In contrast, emerging markets were weighed down by uneven growth and structural imbalances. Rising US Treasury yields led to a rare annual loss in 2013 for Treasury bonds and other high-quality fixed income sectors including tax-exempt municipals and investment grade corporate bonds. High yield bonds, to the contrary, generated gains driven by income-oriented investors seeking yield in the low-rate environment. Short-term interest rates remained near zero, keeping yields on money market securities near historical lows.

At BlackRock, we believe investors need to think globally and extend their scope across a broader array of asset classes and be prepared to move freely as market conditions change over time. We encourage you to talk with your financial advisor and visit www.blackrock.com for further insight about investing in today’s world.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

“While monetary policy was the main driving force behind the rally in risk assets, it was also the main culprit for the bouts of volatility during the year.”

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2013
	6-month			12-month
US large cap equities (S&P 500® Index)		16.31	%		32.39	%
US small cap equities (Russell 2000® Index)		19.82			38.82
International equities (MSCI Europe, Australasia, Far East Index)		17.94			22.78
Emerging market equities (MSCI Emerging Markets Index)		7.70			(2.60	)
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)		0.03			0.07
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		(3.10	)		(7.83	)
US investment grade bonds (Barclays US Aggregate Bond Index)		0.43			(2.02	)
Tax-exempt municipal bonds (S&P Municipal Bond Index)		0.00			(2.55	)
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)		5.94			7.44
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

THIS PAGE NOT PART OF YOUR FUND REPORT 3

Portfolio Summary as of December 31, 2013 LifePath Portfolios

Portfolio Management Commentary

How did each Portfolio perform?

Ÿ All share classes of the LifePath Portfolios with target dates of 2025, 2035, 2045 and 2055 (collectively, the “LifePath Portfolios”) invest in their respective LifePath Master Portfolio.

Ÿ Effective April 30, 2013, the LifePath Portfolios’ primary benchmark, the Russell 3000^® Index, was replaced by the Russell 1000^® Index, because BlackRock Fund Advisors (“BFA”) believes that the Russell 1000^® Index more closely reflects the LifePath Portfolios’ holdings based on its position in the glidepath.

Ÿ For the 12-month period ended December 31, 2013, the LifePath Portfolios with target dates of 2025 and 2045 underperformed their respective custom benchmarks. In the LifePath Portfolios with target dates of 2035 and 2055, the Class K Shares outperformed their respective custom benchmarks, while all other share classes underperformed. The returns for the LifePath Portfolios include LifePath Portfolio expenses. The custom benchmarks have no expenses associated with performance.

What factors influenced performance?

Ÿ Equity markets largely outperformed fixed income markets during the period. As a result, the LifePath Portfolios with longer time horizons generated higher returns on an absolute basis given their larger allocations to equity investments.

Ÿ On the last trading day of 2012, the market rallied at the U.S. close. The timing of the rally came after Asian and European markets had already closed. As a result, when the market opened on the first trading day of 2013, there was a corresponding increase in the returns of the international benchmark indices; therefore causing a negative fair value reversal that was an impact throughout the one year period of 2013. In the shorter-dated LifePath Portfolios, the most significant detractor from relative performance was exposure to CoreAlpha Bond Master Portfolio (“CoreAlpha Bond”). CoreAlpha Bond’s positioning in mortgage-backed securities and its sector allocation strategies were negatively impacted by high interest rate volatility following the US Federal Reserve’s initial discussion about tapering its bond-buying stimulus program in May of 2013. CoreAlpha Bond reduced risk in the months that followed. Additionally, CoreAlpha Bond’s global interest rate strategies detracted from results due to country selection.

Ÿ Contributing positively to relative performance was the LifePath Portfolios’ investment in Active Stock Master Portfolio (“Active Stock”), which is held in larger proportions and therefore had a greater positive impact on overall results in the longer-dated LifePath Portfolios. Active Stock invests in BlackRock’s Scientific Active Large Cap Equity strategy and four fundamental active large cap equity strategies including Large Cap Growth, Fundamental Large Cap Growth, Basic Value and Equity Dividend. During the period, Active Stock’s outperformance was driven by its allocations to the Basic Value and Large Cap Growth strategies. The Basic Value strategy performed well due to stock selection, particularly in the financials and consumer discretionary sectors, and sector allocation, with the greatest benefit coming from its significant underweights in utilities, materials and telecommunications services. In the Large Cap Growth strategy, stock selection within industrials and materials drove strong performance, as did maintaining underweights in the consumer staples and telecommunication services sectors.

Describe recent portfolio activity.

Ÿ Each LifePath Portfolio has its own time horizon, which affects its acceptable level of risk and, in turn, the strategic allocation of its holdings across asset classes. On a quarterly basis, the strategic allocation of each LifePath Portfolio is systematically adjusted to reflect the shareholders’ remaining investment time horizon. During the period, the LifePath Portfolios were rebalanced in accordance with their updated strategic allocations, and daily cash flows were allocated to the underlying funds and instruments as appropriate.

Ÿ In the latter half of the period, the LifePath Portfolios began investing in International Tilts Master Portfolio and BlackRock Emerging Markets Fund, Inc. This additional international equity exposure was offset by a reduction in passive international equity holdings such as ACWI ex-US Index Master Portfolio, iShares MSCI EAFE ETF and iShares MSCI Emerging Markets ETF. In addition, exposure to Active Stock was reduced in order to move the active risk from US large cap exposure to the international exposure while maintaining the LifePath Portfolios’ overall risk profile.

Describe portfolio positioning at period end.

Ÿ At period end, each of the LifePath Portfolios was invested according to its respective benchmark within tolerance limits.

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.

4 BLACKROCK FUNDS III DECEMBER 31, 2013

LifePath Portfolios

Glide Path Evolution

Under normal circumstances, the asset allocation of each LifePath Portfolio will change over time according to a “glide path” as each LifePath Portfolio approaches its respective target date. The glide path represents the shifting of asset classes over time. Each LifePath Portfolio’s asset mix becomes more conservative prior to retirement as time elapses. This reflects the need for reduced investment risks as retirement approaches and the need for lower volatility of each LifePath Portfolio, which may be a primary source of income after retirement. As each LifePath Portfolio approaches its target date, its asset allocation will shift so that each LifePath Portfolio invests a greater percentage of its assets in fixed income funds. The asset allocation targets are established by a committee of BlackRock investment professionals that includes the portfolio managers. The investment team, including the portfolio managers and this investment committee, meets regularly to assess market conditions, review the asset allocation targets of each LifePath Portfolio, and determine whether any changes are required to enable each LifePath Portfolio to achieve its investment objective.

Although the asset allocation targets listed for the glide path are general, long-term targets, BlackRock investment professionals may periodically adjust the proportion of equity and fixed income funds in each LifePath Portfolio, based on an assessment of the current market conditions, the potential contribution of each asset class to the expected risk and return characteristics of each LifePath Portfolio, reallocations of each LifePath Portfolio’s composition to reflect intra-year movement along the glide path and other factors. In general, such adjustments will be limited, however, BlackRock investment professionals may determine that a greater degree of variation is warranted to protect each LifePath Portfolio or achieve each LifePath Portfolio’s investment objective.

BLACKROCK FUNDS III DECEMBER 31, 2013 5

LifePath^® 2025  Portfolio

Investment Objective

LifePath^® 2025 Portfolio is managed for investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2025.

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

²  The LifePath Portfolio compares its performance to that of a customized weighted index (the “LifePath 2025 Portfolio Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment advisor’s changes of the benchmark’s weightings over time. The investment advisor adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

³  Effective April 30, 2013, the LifePath Portfolio’s primary benchmark, the Russell 3000^® Index, which is comprised of the Russell 1000^® Index and Russell 2000^® Index, was replaced by the Russell 1000^® Index, because BFA believes that the Russell 1000^® Index more closely reflects the LifePath Portfolio’s holdings based on its position in the glide path.

⁴  Commencement of operations.

Period	Barclays US Aggregate Bond Index			Barclays US Treasury Inflation Protected Securities (TIPS) Index (Series L)			Dow Jones- UBS Commodity Index5			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex- US IMI Index			Russell 1000® Index			Russell 2000® Index			S&P MidCap 400® Index			S&P 500® Index			S&P SmallCap 600® Index
6/30/10 to 12/31/10		28.5	%		4.4	%		N/A			4.9	%		18.8	%		N/A			N/A			5.9	%		34.9	%		2.6	%
1/01/11 to 12/31/11		29.8			4.6			N/A			4.8			18.9			15.2	%		1.4	%		3.5			20.3			1.5
1/01/12 to 12/31/12		31.9			5.0			1.0	%		4.7			18.2			35.9			3.3			N/A			N/A			N/A
1/01/13 to 12/31/13		33.7			5.2			3.8			4.3			17.1			32.6			3.3			N/A			N/A			N/A

⁵  As of October 1, 2012, each LifePath Portfolio added a new component, the Dow Jones — UBS Commodity Index, to the composite benchmark against which it measures its performance.

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

6 BLACKROCK FUNDS III DECEMBER 31, 2013

LifePath^® 2025  Portfolio

Performance Summary for the Period Ended December 31, 2013

					Average Annual Total Returns
				1 Year						Since Inception1
	6 Month w/o sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		9.40	%		11.84	%		N/A			11.80	%		N/A
Investor A		9.29			11.52			5.67	%		11.50			9.80	%
Investor C		8.89			10.73			9.73			10.70			10.70
Class K		9.68			11.47			N/A			11.97			N/A
Class R		9.12			11.26			N/A			11.23			N/A
LifePath 2025 Portfolio Custom Benchmark		8.71			12.45			N/A			11.94			N/A
Barclays US Aggregate Bond Index		0.43			(2.02	)		N/A			3.12			N/A
Barclays US TIPS Index (Series L)		(1.31	)		(8.61	)		N/A			3.56			N/A
MSCI ACWI ex-US IMI Index		15.61			15.82			N/A			11.44			N/A
FTSE EPRA/NAREIT Developed Real Estate Index		1.61			3.67			N/A			13.39			N/A
Dow Jones — UBS Commodity Index		1.06			(9.52	)		N/A			0.08			N/A
Russell 1000® Index		16.86			33.11			N/A			21.01			N/A
Russell 2000® Index		19.82			38.82			N/A			21.92			N/A

¹  The LifePath Portfolio commenced operations on June 30, 2010.

Past performance is not indicative of future results.

N/A — Not applicable as share class and index do not have a sales charge.

BLACKROCK FUNDS III DECEMBER 31, 2013 7

LifePath^® 2035  Portfolio

Investment Objective

LifePath^® 2035 Portfolio is managed for investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2035.

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

²  The LifePath Portfolio compares its performance to that of a customized weighted index (the “LifePath 2035 Portfolio Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment advisor’s changes of the benchmark’s weightings over time. The investment advisor adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

³  Effective April 30, 2013, the LifePath Portfolio’s primary benchmark, the Russell 3000^® Index, which is comprised of the Russell 1000^® Index and Russell 2000^® Index, was replaced by the Russell 1000^® Index, because BFA believes that the Russell 1000^® Index more closely reflects the LifePath Portfolio’s holdings based on its position in the glide path.

⁴  Commencement of operations.

Period	Barclays US Aggregate Bond Index			Barclays  US Treasury Inflation Protected Securities (TIPS) Index (Series L)			Dow Jones- UBS Commodity Index5			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex- US  IMI Index			Russell 1000® Index			Russell 2000® Index			S&P MidCap 400® Index			S&P 500® Index			S&P SmallCap 600® Index
6/30/10 to 12/31/10		16.6	%		2.2	%		N/A			6.8	%		22.7	%		N/A			N/A			6.4	%		42.5	%		2.8	%
1/01/11 to 12/31/11		17.8			2.3			N/A			7.0			22.8			18.6	%		1.2	%		3.9			24.7			1.7
1/01/12 to 12/31/12		20.3			2.6			1.0	%		7.2			21.1			44.1			2.7			N/A			N/A			N/A
1/01/13 to 12/31/13		22.1			2.9			3.9			6.9			21.3			40.3			2.6			N/A			N/A			N/A

⁵  As of October 1, 2012, each LifePath Portfolio added a new component, the Dow Jones — UBS Commodity Index, to the composite benchmark against which it measures its performance.

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

8 BLACKROCK FUNDS III DECEMBER 31, 2013

LifePath^® 2035  Portfolio

Performance Summary for the Period Ended December 31, 2013

					Average Annual Total Returns
	6 Month w/o sales charge			1 Year						Since Inception1
				w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		11.49	%		15.33	%		N/A			13.67	%		N/A
Investor A		11.37			15.08			9.04	%		13.40			11.67	%
Investor C		10.95			14.22			13.22			12.54			12.54
Class K		11.69			16.32			N/A			14.26			N/A
Class R		11.21			14.74			N/A			13.12			N/A
LifePath 2035 Portfolio Custom Benchmark		10.57			16.03			N/A			13.81			N/A
Barclays US Aggregate Bond Index		0.43			(2.02	)		N/A			3.12			N/A
Barclays US TIPS Index (Series L)		(1.31	)		(8.61	)		N/A			3.56			N/A
MSCI ACWI ex-US IMI Index		15.61			15.82			N/A			11.44			N/A
FTSE EPRA/NAREIT Developed Real Estate Index		1.61			3.67			N/A			13.39			N/A
Dow Jones — UBS Commodity Index		1.06			(9.52	)		N/A			0.08			N/A
Russell 1000® Index		16.86			33.11			N/A			21.01			N/A
Russell 2000® Index		19.82			38.82			N/A			21.92			N/A

¹  The LifePath Portfolio commenced operations on June 30, 2010.

Past performance is not indicative of future results.

N/A — Not applicable as share class and index do not have a sales charge.

BLACKROCK FUNDS III DECEMBER 31, 2013 9

LifePath^® 2045  Portfolio

Investment Objective

LifePath^® 2045 Portfolio is managed for investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2045.

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

²  The LifePath Portfolio compares its performance to that of a customized weighted index (the “LifePath 2045 Portfolio Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment advisor’s changes of the benchmark’s weightings over time. The investment advisor adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

³  Effective April 30, 2013, the LifePath Portfolio’s primary benchmark, the Russell 3000^® Index, which is comprised of the Russell 1000^® Index and Russell 2000^® Index, was replaced by the Russell 1000^® Index, because BFA believes that the Russell 1000^® Index more closely reflects the LifePath Portfolio’s holdings based on its position in the glide path.

⁴  Commencement of operations.

Period	Barclays US Aggregate Bond Index			Dow Jones- UBS Commodity Index5			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex- US IMI Index			Russell 1000® Index			Russell 2000® Index			S&P MidCap 400® Index			S&P 500® Index			S&P SmallCap 600® Index
6/30/10 to 12/31/10		6.8	%		N/A			8.5	%		25.9	%		N/A			N/A			6.8	%		49.0	%		3.0	%
1/01/11 to 12/31/11		8.2			N/A			8.7			26.1			21.5	%		1.1	%		4.2			28.4			1.8
1/01/12 to 12/31/12		11.2			1.0	%		9.2			25.3			51.0			2.3			N/A			N/A			N/A
1/01/13 to 12/31/13		13.5			3.9			9.1			24.8			46.7			2.0			N/A			N/A			N/A

⁵  As of October 1, 2012, each LifePath Portfolio added a new component, the Dow Jones — UBS Commodity Index, to the composite benchmark against which it measures its performance.

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

10 BLACKROCK FUNDS III DECEMBER 31, 2013

LifePath^® 2045  Portfolio

Performance Summary for the Period Ended December 31, 2013

					Average Annual Total Returns
	6 Month w/o sales charge			1 Year						Since Inception1
				w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		13.21	%		18.49	%		N/A			15.41	%		N/A
Investor A		13.09			18.17			11.97	%		15.14			13.39	%
Investor C		12.72			17.31			16.31			14.26			14.26
Class K		13.46			19.11			N/A			15.88			N/A
Class R		13.00			17.91			N/A			14.84			N/A
LifePath 2045 Portfolio Custom Benchmark		12.15			19.17			N/A			15.36			N/A
Barclays US Aggregate Bond Index		0.43			(2.02	)		N/A			3.12			N/A
MSCI ACWI ex-US IMI Index		15.61			15.82			N/A			11.44			N/A
FTSE EPRA/NAREIT Developed Real Estate Index		1.61			3.67			N/A			13.39			N/A
Dow Jones — UBS Commodity Index		1.06			(9.52	)		N/A			0.08			N/A
Russell 1000® Index		16.86			33.11			N/A			21.01			N/A
Russell 2000® Index		19.82			38.82			N/A			21.92			N/A

¹  The LifePath Portfolio commenced operations on June 30, 2010.

Past performance is not indicative of future results.

N/A — Not applicable as share class and index do not have a sales charge.

BLACKROCK FUNDS III DECEMBER 31, 2013 11

LifePath^® 2055  Portfolio

Investment Objective

LifePath^® 2055 Portfolio is managed for investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2055.

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

²  The LifePath Portfolio compares its performance to that of a customized weighted index (the “LifePath 2055 Portfolio Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment advisor’s changes of the benchmark’s weightings over time. The investment advisor adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

³  Effective April 30, 2013, the LifePath Portfolio’s primary benchmark, the Russell 3000^® Index, which is comprised of the Russell 1000^® Index and Russell 2000^® Index, was replaced by the Russell 1000^® Index, because BFA believes that the Russell 1000^® Index more closely reflects the LifePath Portfolio’s holdings based on its position in the glide path.

⁴  Commencement of operations.

Period	Barclays US Aggregate Bond Index			Dow Jones- UBS Commodity Index5			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex- US IMI  Index			Russell 1000® Index			Russell 2000® Index			S&P MidCap 400® Index			S&P 500® Index			S&P SmallCap 600® Index
6/30/10 to 12/31/10		1.0	%		N/A			9.0	%		28.2	%		N/A			N/A			8.1	%		50.1	%		3.6	%
1/01/11 to 12/31/11		1.0			N/A			9.7			28.8			22.0	%		2.0	%		4.9			29.5			2.1
1/01/12 to 12/31/12		1.3			1.0	%		11.3			28.6			54.5			3.3			N/A			N/A			N/A
1/01/13 to 12/31/13		3.1			4.1			11.5			27.8			51.7			1.8			N/A			N/A			N/A

⁵  As of October 1, 2012, each LifePath Portfolio added a new component, the Dow Jones — UBS Commodity Index, to the composite benchmark against which it measures its performance.

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

12 BLACKROCK FUNDS III DECEMBER 31, 2013

LifePath^® 2055  Portfolio

Performance Summary for the Period Ended December 31, 2013

					Average Annual Total Returns
				1 Year						��	Since Inception1
	6 Month w/o sales charge			w/o sales charge			w/sales charge				w/o sales charge			w/sales charge
Institutional		14.77	%		20.99	%		N/A				16.30	%		N/A
Investor A		14.61			20.71			14.37	%			15.98			14.21	%
Investor C		14.20			19.81			18.81				15.14			15.14
Class K		14.90			21.74			N/A				16.79			N/A
Class R		14.45			20.44			N/A				15.71			N/A
LifePath 2055 Portfolio Custom Benchmark		13.44			21.66			N/A				16.39			N/A
Barclays US Aggregate Bond Index		0.43			(2.02	)		N/A				3.12			N/A
MSCI ACWI ex-US IMI Index		15.61			15.82			N/A				11.44			N/A
FTSE EPRA/NAREIT Developed Real Estate Index		1.61			3.67			N/A				13.39			N/A
Dow Jones — UBS Commodity Index		1.06			(9.52	)		N/A				0.08			N/A
Russell 1000® Index		16.86			33.11			N/A				21.01			N/A
Russell 2000® Index		19.82			38.82			N/A				21.92			N/A

¹  The LifePath Portfolio commenced operations on June 30, 2010.

Past performance is not indicative of future results.

N/A — Not applicable as share class and index do not have a sales charge.

BLACKROCK FUNDS III DECEMBER 31, 2013 13

About Portfolio Performance LifePath Portfolios

Ÿ Institutional Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors.

Ÿ Investor A Shares are subject to a maximum initial sales charge (front-end load) of 5.25% and a service fee of 0.25% per year (but no distribution fee). Certain redemptions of these shares may be subject to a contingent deferred sales charge (“CDSC”) where no initial sales charge was paid at the time of purchase.

Ÿ Investor C Shares are subject to a 1.00% CDSC if redeemed within one year of purchase. In addition, these shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year.

Ÿ Class K Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors.

Ÿ Class R Shares are not subject to any sales charge (front-end load) or deferred sales charge. These shares are subject to a distribution fee of 0.25% per year and a service fee of 0.25% per year. These shares are available only to certain employer-sponsored retirement plans.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. Figures shown in each of the performance tables on the previous pages assume reinvestment of all dividends and distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.

Dividends paid to each class of shares will vary because of the different levels of administration and distribution fees applicable to each class, which are deducted from the income available to be paid to shareholders. The LifePath Portfolios’ administrator waived and/or reimbursed a portion

of each LifePath Portfolio’s expenses. Without such waiver, each LifePath Portfolio’s performance would have been lower.

The Barclays US Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis. Barclays US TIPS Index (Series L) is a rules-based, market value-weighted index that tracks inflation-protected securities issued by the US Treasury. The Dow Jones-UBS Commodity Index (DJ-UBSCI) is a broadly diversified index that allows investors to track commodity futures through a single, simple measure. The FTSE EPRA/NAREIT Developed Real Estate Index is designed to track the performance of listed real estate companies and real estate investment trusts (“REITs”) worldwide. By making the index constituents free-float adjusted, liquidity, size and revenue screened, the index is suitable for use as the basis for investment products, such as derivatives and exchange traded funds (ETFs). The MSCI ACWI ex-US IMI Index is a free float-adjusted market capitalization weighted index that measures the equity market performance of the developed (excluding the US) and emerging investable market universe. The Russell 1000^® Index is an unmanaged broad-based index that measures the performance of the large cap segment of the US equity universe, representing approximately 92% of the Russell 3000^® Index. The Russell 2000^® Index is an unmanaged index comprised of the 2,000 largest US companies as determined by total market capitalization.

The LifePath Portfolios’ custom benchmarks are hypothetical representations of the performance of the respective LifePath Portfolio’s asset classes according to their weightings as of the most recent quarter-end. The weightings of the various indexes that are included in the LifePath Portfolios’ custom benchmarks are adjusted quarterly to reflect the LifePath Portfolios’ changing asset allocations over time. As of December 31, 2013, the following indexes are used to calculate the LifePath Portfolios’ custom benchmarks: Barclays US Aggregate Bond Index, Dow Jones-UBS Commodity Index, FTSE EPRA/NAREIT Developed Real Estate Index, MSCI ACWI ex-US IMI Index, Russell 1000^® Index and Russell 2000^® Index.

14 BLACKROCK FUNDS III DECEMBER 31, 2013

Disclosure of Expenses

Shareholders of each LifePath Portfolio may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including administration fees, service and distribution fees, including 12b-1 fees, and other portfolio expenses. The expense examples shown below (which are based on a hypothetical investment of $1,000 invested on July 1, 2013 and held through December 31, 2013) are intended to assist shareholders both in calculating expenses based on an investment in a LifePath Portfolio and in comparing these expenses with similar costs of investing in other mutual funds.

The expense examples provide 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 LifePath Portfolio and their share class under the heading entitled “Expenses Paid During the Period.”

The expense examples also provide information about hypothetical account values and hypothetical expenses based on each LifePath Portfolio’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 a LifePath Portfolio and other funds, compare the 5% hypothetical examples with the 5% hypothetical examples that appear in other funds’ shareholder reports.

The expenses shown in the expense examples 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.

Expense Examples

	Actual						Hypothetical2
	Beginning Account Value July 1, 2013		Ending Account Value December 31, 2013		Expenses Paid During the Period1		Beginning Account Value July 1, 2013		Ending Account Value December 31, 2013		Expenses Paid During the Period1		Annualized Expense Ratio
LifePath® 2025 Portfolio
Institutional	$	1,000.00	$	1,094.00	$	3.96	$	1,000.00	$	1,021.42	$	3.82		0.75	%
Investor A	$	1,000.00	$	1,092.90	$	5.28	$	1,000.00	$	1,020.16	$	5.09		1.00	%
Investor C	$	1,000.00	$	1,088.90	$	9.27	$	1,000.00	$	1,016.33	$	8.94		1.76	%
Class K	$	1,000.00	$	1,096.80	$	2.17	$	1,000.00	$	1,023.14	$	2.09		0.41	%
Class R	$	1,000.00	$	1,091.20	$	6.64	$	1,000.00	$	1,018.85	$	6.41		1.26	%
LifePath® 2035 Portfolio
Institutional	$	1,000.00	$	1,114.90	$	4.00	$	1,000.00	$	1,021.42	$	3.82		0.75	%
Investor A	$	1,000.00	$	1,113.70	$	5.33	$	1,000.00	$	1,020.16	$	5.09		1.00	%
Investor C	$	1,000.00	$	1,109.50	$	9.36	$	1,000.00	$	1,016.33	$	8.94		1.76	%
Class K	$	1,000.00	$	1,116.90	$	2.13	$	1,000.00	$	1,023.19	$	2.04		0.40	%
Class R	$	1,000.00	$	1,112.10	$	6.65	$	1,000.00	$	1,018.90	$	6.36		1.25	%
LifePath® 2045 Portfolio
Institutional	$	1,000.00	$	1,132.10	$	3.98	$	1,000.00	$	1,021.48	$	3.77		0.74	%
Investor A	$	1,000.00	$	1,130.90	$	5.32	$	1,000.00	$	1,020.21	$	5.04		0.99	%
Investor C	$	1,000.00	$	1,127.20	$	9.38	$	1,000.00	$	1,016.38	$	8.89		1.75	%
Class K	$	1,000.00	$	1,134.60	$	2.15	$	1,000.00	$	1,023.19	$	2.04		0.40	%
Class R	$	1,000.00	$	1,130.00	$	6.66	$	1,000.00	$	1,018.95	$	6.31		1.24	%
LifePath® 2055 Portfolio
Institutional	$	1,000.00	$	1,147.70	$	3.95	$	1,000.00	$	1,021.53	$	3.72		0.73	%
Investor A	$	1,000.00	$	1,146.10	$	5.30	$	1,000.00	$	1,020.27	$	4.99		0.98	%
Investor C	$	1,000.00	$	1,142.00	$	9.39	$	1,000.00	$	1,016.43	$	8.84		1.74	%
Class K	$	1,000.00	$	1,149.00	$	2.17	$	1,000.00	$	1,023.19	$	2.04		0.40	%
Class R	$	1,000.00	$	1,144.50	$	6.70	$	1,000.00	$	1,018.95	$	6.31		1.24	%

¹  For each class of the LifePath Portfolio, expenses are equal to the annualized net expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown). Because each LifePath Portfolio invests significantly in a LifePath Master Portfolio, the expense examples reflect the net expenses of both the LifePath Portfolio and the LifePath Master Portfolio in which it invests.

²  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

BLACKROCK FUNDS III DECEMBER 31, 2013 15

Statements of Assets and Liabilities BlackRock Funds III

December 31, 2013	LifePath 2025 Portfolio			LifePath 2035 Portfolio			LifePath 2045 Portfolio			LifePath 2055 Portfolio
Assets
Investments at value — from the applicable LifePath Master Portfolio1	$	58,646,628		$	45,346,729		$	25,462,096		$	8,960,763
Capital shares sold receivable		330,710			63,963			96,773			26,427
Receivable from adminstrator		—			—			8,047			14,877
Withdrawals receivable from the LifePath Master Portfolio		522,056			742,610			214,511			195,859
Total assets		59,499,394			46,153,302			25,781,427			9,197,926
Liabilities
Capital shares redeemed payable		852,766			806,573			311,284			222,286
Income dividends payable		11,477			4,925			8,165			2,390
Administration fees payable		5,425			235			—			—
Capital gain distributions payable		94,437			38,210			46,804			13,162
Service and distribution fees payable		8,322			5,572			3,312			1,118
Professional fees payable		12,016			12,016			12,016			11,994
Total liabilities		984,443			867,531			381,581			250,950
Net Assets	$	58,514,951		$	45,285,771		$	25,399,846		$	8,946,976
Net Assets Consist of
Paid-in capital	$	54,235,231		$	41,204,674		$	22,829,864		$	8,000,970
Distributions in excess of net investment income		(42,475	)		(28,324	)		(13,330	)		(3,007	)
Accumulated net realized gain allocated from the LifePath Master Portfolio		746,932			646,246			413,165			144,696
Net unrealized appreciation/depreciation allocated from the LifePath Master Portfolio		3,575,263			3,463,175			2,170,147			804,317
Net Assets	$	58,514,951		$	45,285,771		$	25,399,846		$	8,946,976

See Notes to Financial Statements.
16	BLACKROCK FUNDS III	DECEMBER 31, 2013

Statements of Assets and Liabilities (concluded) BlackRock Funds III

December 31, 2013	LifePath 2025 Portfolio		LifePath 2035 Portfolio		LifePath 2045 Portfolio		LifePath 2055 Portfolio
Net Asset Value
Institutional:
Net assets	$	25,881,601	$	22,265,964	$	12,831,749	$	4,546,443
Shares outstanding2		1,974,058		1,616,803		891,645		310,590
Net asset value	$	13.11	$	13.77	$	14.39	$	14.64
Investor A:
Net assets	$	29,049,241	$	21,422,882	$	11,044,414	$	3,951,398
Shares outstanding2		2,216,854		1,556,209		767,522		270,305
Net asset value	$	13.10	$	13.77	$	14.39	$	14.62
Maximum offering price per share (100/94.75 of net asset value)	$	13.83	$	14.53	$	15.19	$	15.43
Investor C:
Net assets	$	1,997,471	$	1,028,187	$	934,870	$	313,309
Shares outstanding2		152,996		75,113		65,554		21,594
Net asset value	$	13.06	$	13.69	$	14.26	$	14.51
Class K:
Net assets	$	102,447	$	94,870	$	29,051	$	29,555
Shares outstanding2		7,820		6,805		2,003		2,001
Net asset value	$	13.10	$	13.94	$	14.50	$	14.77
Class R:
Net assets	$	1,484,191	$	473,868	$	559,762	$	106,271
Shares outstanding2		113,177		34,377		38,928		7,271
Net asset value	$	13.11	$	13.78	$	14.38	$	14.62
1 Cost — from the applicable LifePath Master Portfolio	$	55,071,365	$	41,883,554	$	23,291,949	$	8,156,446
2 No par value, unlimited number of shares authorized.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	17

Statements of Operations BlackRock Funds III

Year Ended December 31, 2013	LifePath 2025 Portfolio			LifePath 2035 Portfolio			LifePath 2045 Portfolio			LifePath 2055 Portfolio
Investment Income
Net investment income allocated from the applicable LifePath Master Portfolio:
Dividends — affiliated	$	666,132		$	680,985		$	432,598		$	169,463
Securities lending — affiliated — net		2,230			1,258			735			351
Income — affiliated		170			112			96			24
Other income — affiliated		270			194			97			28
Interest — affiliated		390,818			210,818			73,394			9,273
Expenses		(291,253	)		(237,211	)		(140,984	)		(66,134	)
Fees waived		178,550			150,680			95,922			51,442
Total income		946,917			806,836			461,858			164,447
Portfolio Expenses
Administration — Institutional		100,396			87,485			49,003			16,457
Administration — Investor A		107,244			81,424			38,160			12,550
Administration — Investor C		8,842			4,022			3,461			1,192
Administration — Class K		361			289			129			137
Administration — Class R		6,964			1,999			2,449			391
Service — Investor A		53,923			40,946			19,221			6,320
Service and distribution — Investor C		17,797			8,099			6,964			2,400
Service and distribution — Class R .		6,999			2,008			2,459			393
Professional		19,345			19,345			19,345			19,307
Miscellaneous		325			325			325			325
Total expenses		322,196			245,942			141,516			59,472
Less fees waived by administrator		(19,345	)		(19,345	)		(19,345	)		(19,307	)
Total expenses after fees waived		302,851			226,597			122,171			40,165
Net investment income		644,066			580,239			339,687			124,282
Realized and Unrealized Gain (Loss) Allocated from the LifePath Master Portfolios
Net realized gain from investments, financial futures contracts, swaps, options written and foreign currency transactions		2,052,857			2,015,545			1,201,851			453,478
Net change in unrealized appreciation/depreciation on investments, financial futures contracts, swaps, options written and foreign currency translations		2,358,894			2,465,781			1,641,004			628,740
Total realized and unrealized gain		4,411,751			4,481,326			2,842,855			1,082,218
Net Increase in Net Assets Resulting from Operations	$	5,055,817		$	5,061,565		$	3,182,542		$	1,206,500

See Notes to Financial Statements.
18	BLACKROCK FUNDS III	DECEMBER 31, 2013

Statements of Changes in Net Assets BlackRock Funds III

	LifePath 2025 Portfolio						LifePath 2035 Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	644,066		$	315,771		$	580,239		$	243,606
Net realized gain		2,052,857			262,772			2,015,545			129,046
Net change in unrealized appreciation/depreciation		2,358,894			1,467,212			2,465,781			1,257,035
Net increase in net assets resulting from operations		5,055,817			2,045,755			5,061,565			1,629,687
Dividends and Distributions to Shareholders From1
Net investment income:
Institutional		(326,646	)		(136,096	)		(316,781	)		(105,235	)
Investor A		(313,424	)		(160,757	)		(266,566	)		(114,757	)
Investor C		(10,617	)		(5,950	)		(7,339	)		(3,003	)
Class K		(1,496	)		(30,293	)		(1,500	)		(30,232	)
Class R		(14,168	)		(9,096	)		(4,933	)		(2,781	)
Net realized gain:
Institutional		(602,476	)		—			(655,024	)		—
Investor A		(701,166	)		—			(650,724	)		—
Investor C		(47,862	)		—			(32,301	)		—
Class K		(2,423	)		—			(2,782	)		—
Class R		(34,886	)		—			(13,958	)		—
Return of capital:
Institutional		—			—			—			(790	)
Investor A		—			—			—			(862	)
Investor C		—			—			—			(23	)
Class K		—			—			—			(227	)
Class R		—			—			—			(21	)
Decrease in net assets resulting from dividends and distributions to shareholders		(2,055,164	)		(342,192	)		(1,951,908	)		(257,931	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		21,501,701			20,142,253			16,466,684			16,920,364
Net Assets
Total increase in net assets		24,502,354			21,845,816			19,576,341			18,292,120
Beginning of year		34,012,597			12,166,781			25,709,430			7,417,310
End of year	$	58,514,951		$	34,012,597		$	45,285,771		$	25,709,430
Distributions in excess of net investment income, end of year	$	(42,475	)	$	(20,190	)	$	(28,324	)	$	(11,444	)
1 Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	19

Statements of Changes in Net Assets BlackRock Funds III

	LifePath 2045 Portfolio						LifePath 2055 Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	339,687		$	119,075		$	124,282		$	30,246
Net realized gain (loss)		1,201,851			51,373			453,478			(4,751	)
Net change in unrealized appreciation/depreciation		1,641,004			644,573			628,740			175,681
Net increase in net assets resulting from operations		3,182,542			815,021			1,206,500			201,176
Dividends and Distributions to Shareholders From1
Net investment income:
Institutional		(191,221	)		(67,201	)		(69,370	)		(14,245	)
Investor A		(143,023	)		(40,414	)		(52,832	)		(10,527	)
Investor C		(7,603	)		(2,621	)		(2,600	)		(1,373	)
Class K		(506	)		(9,255	)		(525	)		(4,435	)
Class R		(6,459	)		(4,033	)		(1,208	)		(584	)
Net realized gain:
Institutional		(380,791	)		—			(148,647	)		(226	)
Investor A		(336,834	)		—			(136,279	)		(220	)
Investor C		(28,074	)		—			(10,611	)		(44	)
Class K		(889	)		—			(999	)		(11	)
Class R		(16,696	)		—			(3,525	)		(19	)
Return of capital:
Institutional		—			(334	)		—			—
Investor A		—			(201	)		—			—
Investor C		—			(13	)		—			—
Class K		—			(46	)		—			—
Class R		—			(20	)		—			—
Decrease in net assets resulting from dividends and distributions to shareholders		(1,112,096	)		(124,138	)		(426,596	)		(31,684	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		11,169,123			8,218,742			4,405,039			3,112,252
Net Assets
Total increase in net assets		13,239,569			8,909,625			5,184,943			3,281,744
Beginning of year		12,160,277			3,250,652			3,762,033			480,289
End of year	$	25,399,846		$	12,160,277		$	8,946,976		$	3,762,033
Distributions in excess of net investment income, end of year	$	(13,330	)	$	(4,205	)	$	(3,007	)	$	(754	)
1 Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
20	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights LifePath 2025 Portfolio

	Institutional
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.19		$	11.07		$	11.21		$	10.00
Net investment income2		0.21			0.22			0.25			0.11
Net realized and unrealized gain (loss)		1.22			1.11			(0.19	)		1.63
Net increase from investment operations		1.43			1.33			0.06			1.74
Dividends and distributions from:3
Net investment income		(0.19	)		(0.21	)		(0.20	)		(0.11	)
Net realized gain		(0.32	)		(0.00	)4		(0.00	)4		(0.42	)
Total dividends and distributions		(0.51	)		(0.21	)		(0.20	)		(0.53	)
Net asset value, end of period	$	13.11		$	12.19		$	11.07		$	11.21
Total Investment Return5
Based on net asset value		11.84%			12.07%			0.49%			17.40%	6
Ratios to Average Net Assets7
Total expenses		0.79%	8,9		0.86%	9,10		1.06%	11,12		24.41%	13
Total expenses after fees waived		0.75%	8,9		0.76%	9,10		0.74%	11,12		0.73%	13
Net investment income		1.60%	8,9		1.85%	9,10		2.25%	11,12		1.93%	13
Supplemental Data
Net assets, end of period (000)	$	25,882		$	15,816		$	3,233		$	22
Portfolio turnover of the LifePath Master Portfolio		30%	14		4%	15		24%	15		2%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Amount is greater than $(0.005) per share.

⁵ Where applicable, assumes the reinvestment of dividends and distributions.

⁶ Aggregate total investment return.

⁷ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁸ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.40%.

⁹ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.10%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹⁰ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.48%.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.82%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.12%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 17% and 58% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	21

Financial Highlights (continued) LifePath 2025 Portfolio

	Investor A
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.19		$	11.06		$	11.21		$	10.00
Net investment income2		0.18			0.18			0.21			0.09
Net realized and unrealized gain (loss)		1.22			1.12			(0.19	)		1.63
Net increase from investment operations		1.40			1.30			0.02			1.72
Dividends and distributions from:3
Net investment income		(0.17	)		(0.17	)		(0.17	)		(0.09	)
Net realized gain		(0.32	)		(0.00	)4		(0.00	)4		(0.42	)
Total dividends and distributions		(0.49	)		(0.17	)		(0.17	)		(0.51	)
Net asset value, end of period	$	13.10		$	12.19		$	11.06		$	11.21
Total Investment Return5
Based on net asset value		11.52%			11.84%			0.18%			17.26%	6
Ratios to Average Net Assets7
Total expenses		1.05%	8,9		1.11%	9,10		1.32%	11,12		24.68%	13
Total expenses after fees waived		1.00%	8,9		1.01%	9,10		0.99%	11,12		0.98%	13
Net investment income		1.37%	8,9		1.54%	9,10		1.87%	11,12		1.67%	13
Supplemental Data
Net assets, end of period (000)	$	29,049		$	13,981		$	7,076		$	22
Portfolio turnover of the LifePath Master Portfolio		30%	14		4%	15		24%	15		2%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Amount is greater than $(0.005) per share.

⁵ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁶ Aggregate total investment return.

⁷ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁸ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.40%.

⁹ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.10%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹⁰ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.48%.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.86%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.12%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 17% and 58% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
22	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) LifePath 2025 Portfolio

	Investor C
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.15		$	11.05		$	11.21		$	10.00
Net investment income2		0.07			0.10			0.14			0.05
Net realized and unrealized gain (loss)		1.23			1.11			(0.20	)		1.63
Net increase (decrease) from investment operations		1.30			1.21			(0.06	)		1.68
Dividends and distributions from:3
Net investment income		(0.07	)		(0.11	)		(0.10	)		(0.05	)
Net realized gain		(0.32	)		(0.00	)4		(0.00	)4		(0.42	)
Total dividends and distributions		(0.39	)		(0.11	)		(0.10	)		(0.47	)
Net asset value, end of period	$	13.06		$	12.15		$	11.05		$	11.21
Total Investment Return5
Based on net asset value		10.73%			10.99%			(0.54)%			16.84%	6
Ratios to Average Net Assets7
Total expenses		1.80%	8,9		1.85%	9,10		2.10%	11,12		25.46%	13
Total expenses after fees waived		1.76%	8,9		1.76%	9,10		1.75%	11,12		1.72%	13
Net investment income		0.57%	8,9		0.87%	9,10		1.25%	11,12		0.95%	13
Supplemental Data
Net assets, end of period (000)	$	1,997		$	992		$	245		$	22
Portfolio turnover of the LifePath Master Portfolio		30%	14		4%	15		24%	15		2%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Amount is greater than $(0.005) per share.

⁵ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁶ Aggregate total investment return.

⁷ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁸ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.40%.

⁹ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.10%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹⁰ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.48%.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.82%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.12%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 17% and 58% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	23

Financial Highlights (continued) LifePath 2025 Portfolio

	Class K
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.22		$	11.09		$	11.21		$	10.00
Net investment income2		0.20			0.26			0.26			0.13
Net realized and unrealized gain (loss)		1.20			1.11			(0.16	)		1.63
Net increase from investment operations		1.40			1.37			0.10			1.76
Dividends and distributions from:3
Net investment income		(0.20	)		(0.24	)		(0.22	)		(0.13	)
Net realized gain		(0.32	)		(0.00	)4		(0.00	)4		(0.42	)
Total dividends and distributions		(0.52	)		(0.24	)		(0.22	)		(0.55	)
Net asset value, end of period	$	13.10		$	12.22		$	11.09		$	11.21
Total Investment Return5
Based on net asset value		11.47%			12.44%			0.87%			17.60%	6
Ratios to Average Net Assets7
Total expenses		0.44%	8,9		0.51%	9,10		0.71%	11,12		24.05%	13
Total expenses after fees waived		0.40%	8,9		0.41%	9,10		0.38%	11,12		0.38%	13
Net investment income		1.57%	8,9		2.20%	9,10		2.31%	11,12		2.29%	13
Supplemental Data
Net assets, end of period (000)	$	102		$	1,941		$	1,590		$	22
Portfolio turnover of the LifePath Master Portfolio		30%	14		4%	15		24%	15		2%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Amount is greater than $(0.005) per share.

⁵ Where applicable, assumes the reinvestment of dividends and distributions.

⁶ Aggregate total investment return.

⁷ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁸ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.40%.

⁹ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.10%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹⁰ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.49%.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.89%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.12%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 17% and 58% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
24	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (concluded) LifePath 2025 Portfolio

	Class R
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.19		$	11.09		$	11.21		$	10.00
Net investment income2		0.13			0.18			0.17			0.08
Net realized and unrealized gain (loss)		1.24			1.08			(0.17	)		1.63
Net increase from investment operations		1.37			1.26			—			1.71
Dividends and distributions from:3
Net investment income		(0.13	)		(0.16	)		(0.12	)		(0.08	)
Net realized gain		(0.32	)		(0.00	)4		(0.00	)4		(0.42	)
Total dividends and distributions		(0.45	)		(0.16	)		(0.12	)		(0.50	)
Net asset value, end of period	$	13.11		$	12.19		$	11.09		$	11.21
Total Investment Return5
Based on net asset value		11.26%			11.45%			0.02%			17.12%	6
Ratios to Average Net Assets7
Total expenses		1.30%	8,9		1.35%	9,10		1.57%	11,12		24.94%	13
Total expenses after fees waived		1.25%	8,9		1.26%	9,10		1.23%	11,12		1.23%	13
Net investment income		1.05%	8,9		1.54%	9,10		1.46%	11,12		1.43%	13
Supplemental Data
Net assets, end of period (000)	$	1,484		$	1,282		$	22		$	22
Portfolio turnover of the LifePath Master Portfolio		30%	14		4%	15		24%	15		2%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Amount is greater than $(0.005) per share.

⁵ Where applicable, assumes the reinvestment of dividends and distributions.

⁶ Aggregate total investment return.

⁷ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁸ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.40%.

⁹ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.10%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹⁰ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.48%.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.91%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.12%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 17% and 58% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	25

Financial Highlights LifePath 2035 Portfolio

	Institutional
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.51		$	11.18		$	11.52		$	10.00
Net investment income2		0.24			0.24			0.24			0.11
Net realized and unrealized gain (loss)		1.67			1.30			(0.39	)		1.99
Net increase (decrease) from investment operations		1.91			1.54			(0.15	)		2.10
Dividends and distributions from:3
Net investment income		(0.23	)		(0.21	)		(0.19	)		(0.10	)
Net realized gain		(0.42	)		—			(0.00	)4		(0.48	)
Return of capital		—			(0.00	)4		—			—
Total dividends and distributions		(0.65	)		(0.21	)		(0.19	)		(0.58	)
Net asset value, end of period	$	13.77		$	12.51		$	11.18		$	11.52
Total Investment Return5
Based on net asset value		15.33%			13.85%			(1.32)%			20.96%	6
Ratios to Average Net Assets7
Total expenses		0.80%	8,9		0.89%	9,10		1.22%	11,12		24.07%	13
Total expenses after fees waived		0.75%	8,9		0.75%	9,10		0.72%	11,12		0.71%	13
Net investment income		1.78%	8,9		1.98%	9,10		2.13%	11,12		1.88%	13
Supplemental Data
Net assets, end of period (000)	$	22,266		$	12,853		$	2,033		$	23
Portfolio turnover of the LifePath Master Portfolio		39%	14		4%	15		21%	15		1%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Amount is greater than $(0.005) per share.

⁵ Where applicable, assumes the reinvestment of dividends and distributions.

⁶ Aggregate total investment return.

⁷ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁸ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.43%.

⁹ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹⁰ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.56%.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 1.10%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.14%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 13% and 47% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
26	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) LifePath 2035 Portfolio

	Investor A
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.51		$	11.17		$	11.51		$	10.00
Net investment income2		0.21			0.20			0.20			0.10
Net realized and unrealized gain (loss)		1.67			1.32			(0.37	)		1.98
Net increase (decrease) from investment operations		1.88			1.52			(0.17	)		2.08
Dividends and distributions from:3
Net investment income		(0.20	)		(0.18	)		(0.17	)		(0.09	)
Net realized gain		(0.42	)		—			(0.00	)4		(0.48	)
Return of capital		—			(0.00	)4		—			—
Total dividends and distributions		(0.62	)		(0.18	)		(0.17	)		(0.57	)
Net asset value, end of period	$	13.77		$	12.51		$	11.17		$	11.51
Total Investment Return5
Based on net asset value		15.08%			13.63%			(1.55)%			20.74%	6
Ratios to Average Net Assets7
Total expenses		1.05%	8,9		1.14%	9,10		1.48%	11,12		22.59%	13
Total expenses after fees waived		1.00%	8,9		1.00%	9,10		0.97%	11,12		0.96%	13
Net investment income		1.55%	8,9		1.63%	9,10		1.77%	11,12		1.71%	13
Supplemental Data
Net assets, end of period (000)	$	21,423		$	9,966		$	4,121		$	27
Portfolio turnover of the LifePath Master Portfolio		39%	14		4%	15		21%	15		1%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Amount is greater than $(0.005) per share.

⁵ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁶ Aggregate total investment return.

⁷ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁸ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.43%.

⁹ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹⁰ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.56%.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 1.15%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.14%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 13% and 47% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	27

Financial Highlights (continued) LifePath 2035 Portfolio

	Investor C
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.45		$	11.14		$	11.49		$	10.00
Net investment income2		0.11			0.11			0.09			0.05
Net realized and unrealized gain (loss)		1.66			1.30			(0.35	)		1.98
Net increase (decrease) from investment operations		1.77			1.41			(0.26	)		2.03
Dividends and distributions from:3
Net investment income		(0.11	)		(0.10	)		(0.09	)		(0.06	)
Net realized gain		(0.42	)		—			(0.00	)4		(0.48	)
Return of capital		—			(0.00	)4		—			—
Total dividends and distributions		(0.53	)		(0.10	)		(0.09	)		(0.54	)
Net asset value, end of period	$	13.69		$	12.45		$	11.14		$	11.49
Total Investment Return5
Based on net asset value		14.22%			12.70%			(2.28)%			20.30%	6
Ratios to Average Net Assets7
Total expenses		1.81%	8,9		1.89%	9,10		2.24%	11,12		25.11%	13
Total expenses after fees waived		1.75%	8,9		1.75%	9,10		1.72%	11,12		1.70%	13
Net investment income		0.81%	8,9		0.92%	9,10		0.80%	11,12		0.89%	13
Supplemental Data
Net assets, end of period (000)	$	1,028		$	533		$	190		$	30
Portfolio turnover of the LifePath Master Portfolio		39%	14		4%	15		21%	15		1%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Amount is greater than $(0.005) per share.

⁵ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁶ Aggregate total investment return.

⁷ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁸ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.43%.

⁹ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹⁰ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.56%.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 1.09%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.14%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 13% and 47% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
28	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) LifePath 2035 Portfolio

	Class K
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.55		$	11.20		$	11.52		$	10.00
Net investment income2		0.22			0.27			0.25			0.13
Net realized and unrealized gain (loss)		1.82			1.32			(0.35	)		1.99
Net increase (decrease) from investment operations		2.04			1.59			(0.10	)		2.12
Dividends and distributions from:3
Net investment income		(0.23	)		(0.24	)		(0.22	)		(0.12	)
Net realized gain		(0.42	)		—			(0.00	)4		(0.48	)
Return of capital		—			(0.00	)4		—			—
Total dividends and distributions		(0.65	)		(0.24	)		(0.22	)		(0.60	)
Net asset value, end of period	$	13.94		$	12.55		$	11.20		$	11.52
Total Investment Return5
Based on net asset value		16.32%			14.30%			(0.94)%			21.16%	6
Ratios to Average Net Assets7
Total expenses		0.45%	8,9		0.55%	9,10		0.87%	11,12		23.70%	13
Total expenses after fees waived		0.38%	8,9		0.40%	9,10		0.36%	11,12		0.36%	13
Net investment income		1.65%	8,9		2.26%	9,10		2.17%	11,12		2.23%	13
Supplemental Data
Net assets, end of period (000)	$	95		$	1,999		$	1,050		$	23
Portfolio turnover of the LifePath Master Portfolio		39%	14		4%	15		21%	15		1%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Amount is greater than $(0.005) per share.

⁵ Where applicable, assumes the reinvestment of dividends and distributions.

⁶ Aggregate total investment return.

⁷ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁸ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.43%.

⁹ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹⁰ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.57%.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 1.20%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.14%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 13% and 47% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	29

Financial Highlights (concluded) LifePath 2035 Portfolio

	Class R
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.52		$	11.19		$	11.52		$	10.00
Net investment income2		0.17			0.21			0.15			0.08
Net realized and unrealized gain (loss)		1.67			1.28			(0.36	)		1.99
Net increase (decrease) from investment operations		1.84			1.49			(0.21	)		2.07
Dividends and distributions from:3
Net investment income		(0.16	)		(0.16	)		(0.12	)		(0.07	)
Net realized gain		(0.42	)		—			(0.00	)4		(0.48	)
Return of capital		—			(0.00	)4		—			—
Total dividends and distributions		(0.58	)		(0.16	)		(0.12	)		(0.55	)
Net asset value, end of period	$	13.78		$	12.52		$	11.19		$	11.52
Total Investment Return5
Based on net asset value		14.74%			13.37%			(1.85)%			20.67%	6
Ratios to Average Net Assets7
Total expenses		1.30%	8,9		1.38%	9,10		1.72%	11,12		24.60%	13
Total expenses after fees waived		1.25%	8,9		1.25%	9,10		1.21%	11,12		1.22%	13
Net investment income		1.25%	8,9		1.71%	9,10		1.31%	11,12		1.39%	13
Supplemental Data
Net assets, end of period (000)	$	474		$	359		$	22		$	23
Portfolio turnover of the LifePath Master Portfolio		39%	14		4%	15		21%	15		1%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Amount is greater than $(0.005) per share.

⁵ Where applicable, assumes the reinvestment of dividends and distributions.

⁶ Aggregate total investment return.

⁷ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁸ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.43%.

⁹ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹⁰ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.55%.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 1.19%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.14%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 13% and 47% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
30	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights LifePath 2045 Portfolio

	Institutional
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.74		$	11.24		$	11.70		$	10.00
Net investment income2		0.27			0.25			0.23			0.10
Net realized and unrealized gain (loss)		2.07			1.47			(0.51	)		2.30
Net increase (decrease) from investment operations		2.34			1.72			(0.28	)		2.40
Dividends and distributions from:3
Net investment income		(0.25	)		(0.22	)		(0.18	)		(0.10	)
Net realized gain		(0.44	)		—			(0.00	)4		(0.60	)
Return of capital		—			(0.00	)4		—			—
Total dividends and distributions		(0.69	)		(0.22	)		(0.18	)		(0.70	)
Net asset value, end of period	$	14.39		$	12.74		$	11.24		$	11.70
Total Investment Return5
Based on net asset value		18.49%			15.34%			(2.46)%			24.01%	6
Ratios to Average Net Assets7
Total expenses		0.85%	8,9		1.06%	9,10		2.00%	11,12		23.73%	13
Total expenses after fees waived		0.74%	8,9		0.75%	9,10		0.70%	11,12		0.68%	13
Net investment income		1.94%	8,9		2.04%	9,10		2.02%	11,12		1.81%	13
Supplemental Data
Net assets, end of period (000)	$	12,832		$	7,066		$	1,646		$	23
Portfolio turnover of the LifePath Master Portfolio		38%	14		4%	15		35%	15		1%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Amount is greater than $(0.005) per share.

⁵ Where applicable, assumes the reinvestment of dividends and distributions.

⁶ Aggregate total investment return.

⁷ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁸ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.51%.

⁹ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹⁰ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.83%.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 2.51%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.16%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15% and 71% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	31

Financial Highlights (continued) LifePath 2045 Portfolio

	Investor A
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.75		$	11.25		$	11.70		$	10.00
Net investment income2		0.25			0.21			0.19			0.09
Net realized and unrealized gain (loss)		2.05			1.47			(0.49	)		2.29
Net increase (decrease) from investment operations		2.30			1.68			(0.30	)		2.38
Dividends and distributions from:3
Net investment income		(0.22	)		(0.18	)		(0.15	)		(0.08	)
Net realized gain		(0.44	)		—			(0.00	)4		(0.60	)
Return of capital		—			(0.00	)4		—			—
Total dividends and distributions		(0.66	)		(0.18	)		(0.15	)		(0.68	)
Net asset value, end of period	$	14.39		$	12.75		$	11.25		$	11.70
Total Investment Return5
Based on net asset value		18.17%			15.03%			(2.61)%			23.86%	6
Ratios to Average Net Assets7
Total expenses		1.10%	8,9		1.31%	9,10		2.20%	11,12		24.00%	13
Total expenses after fees waived		0.99%	8,9		0.99%	9,10		0.95%	11,12		0.93%	13
Net investment income		1.77%	8,9		1.75%	9,10		1.65%	11,12		1.56%	13
Supplemental Data
Net assets, end of period (000)	$	11,044		$	3,512		$	1,228		$	23
Portfolio turnover of the LifePath Master Portfolio		38%	14		4%	15		35%	15		1%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Amount is greater than $(0.005) per share.

⁵ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁶ Aggregate total investment return.

⁷ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁸ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.51%.

⁹ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹⁰ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.83%.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 2.23%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.16%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15% and 71% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
32	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) LifePath 2045 Portfolio

	Investor C
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.65		$	11.18		$	11.67		$	10.00
Net investment income2		0.13			0.13			0.11			0.05
Net realized and unrealized gain (loss)		2.05			1.45			(0.50	)		2.28
Net increase (decrease) from investment operations		2.18			1.58			(0.39	)		2.33
Dividends and distributions from:3
Net investment income		(0.13	)		(0.11	)		(0.10	)		(0.06	)
Net realized gain		(0.44	)		—			(0.00	)4		(0.60	)
Return of capital		—			(0.00	)4		—			—
Total dividends and distributions		(0.57	)		(0.11	)		(0.10	)		(0.66	)
Net asset value, end of period	$	14.26		$	12.65		$	11.18		$	11.67
Total Investment Return5
Based on net asset value		17.31%			14.15%			(3.37)%			23.33%	6
Ratios to Average Net Assets7
Total expenses		1.85%	8,9		2.04%	9,10		2.99%	11,12		24.78%	13
Total expenses after fees waived		1.74%	8,9		1.75%	9,10		1.70%	11,12		1.69%	13
Net investment income		0.97%	8,9		1.07%	9,10		0.94%	11,12		0.81%	13
Supplemental Data
Net assets, end of period (000)	$	935		$	463		$	95		$	23
Portfolio turnover of the LifePath Master Portfolio		38%	14		4%	15		35%	15		1%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Amount is greater than $(0.005) per share.

⁵ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁶ Aggregate total investment return.

⁷ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁸ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.51%.

⁹ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹⁰ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.81%.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 2.41%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.16%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15% and 71% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	33

Financial Highlights (continued) LifePath 2045 Portfolio

	Class K
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.77		$	11.26		$	11.70		$	10.00
Net investment income2		0.21			0.30			0.24			0.12
Net realized and unrealized gain (loss)		2.21			1.46			(0.48	)		2.30
Net increase (decrease) from investment operations		2.42			1.76			(0.24	)		2.42
Dividends and distributions from:3
Net investment income		(0.25	)		(0.25	)		(0.20	)		(0.12	)
Net realized gain		(0.44	)		—			(0.00	)4		(0.60	)
Return of capital		—			(0.00	)4		—			—
Total dividends and distributions		(0.69	)		(0.25	)		(0.20	)		(0.72	)
Net asset value, end of period	$	14.50		$	12.77		$	11.26		$	11.70
Total Investment Return5
Based on net asset value		19.11%			15.72%			(2.08)%			24.22%	6
Ratios to Average Net Assets7
Total expenses		0.49%	8,9		0.70%	9,10		1.72%	11,12		23.37%	13
Total expenses after fees waived		0.38%	8,9		0.39%	9,10		0.35%	11,12		0.33%	13
Net investment income		1.60%	8,9		2.41%	9,10		2.04%	11,12		2.17%	13
Supplemental Data
Net assets, end of period (000)	$	29		$	697		$	259		$	23
Portfolio turnover of the LifePath Master Portfolio		38%	14		4%	15		35%	15		1%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Amount is greater than $(0.005) per share.

⁵ Where applicable, assumes the reinvestment of dividends and distributions.

⁶ Aggregate total investment return.

⁷ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁸ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.55%.

⁹ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹⁰ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.83%.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 2.71%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.16%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15% and 71% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
34	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (concluded) LifePath 2045 Portfolio

	Class R
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.73		$	11.24		$	11.69		$	10.00
Net investment income2		0.19			0.23			0.14			0.07
Net realized and unrealized gain (loss)		2.08			1.42			(0.48	)		2.30
Net increase (decrease) from investment operations		2.27			1.65			(0.34	)		2.37
Dividends and distributions from:3
Net investment income		(0.18	)		(0.16	)		(0.11	)		(0.08	)
Net realized gain		(0.44	)		—			(0.00	)4		(0.60	)
Return of capital		—			(0.00	)4		—			—
Total dividends and distributions		(0.62	)		(0.16	)		(0.11	)		(0.68	)
Net asset value, end of period	$	14.38		$	12.73		$	11.24		$	11.69
Total Investment Return5
Based on net asset value		17.91%			14.77%			(2.93)%			23.68%	6
Ratios to Average Net Assets7
Total expenses		1.35%	8,9		1.55%	9,10		2.57%	11,12		24.26%	13
Total expenses after fees waived		1.24%	8,9		1.25%	9,10		1.19%	11,12		1.19%	13
Net investment income		1.36%	8,9		1.84%	9,10		1.17%	11,12		1.31%	13
Supplemental Data
Net assets, end of period (000)	$	560		$	423		$	22		$	23
Portfolio turnover of the LifePath Master Portfolio		38%	14		4%	15		35%	15		1%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Amount is greater than $(0.005) per share.

⁵ Where applicable, assumes the reinvestment of dividends and distributions.

⁶ Aggregate total investment return.

⁷ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁸ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.52%.

⁹ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹⁰ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.82%.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 2.71%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.16%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15% and 71% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	35

Financial Highlights LifePath 2055 Portfolio

	Institutional
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.74		$	11.13		$	11.85		$	10.00
Net investment income2		0.30			0.27			0.23			0.10
Net realized and unrealized gain (loss)		2.36			1.56			(0.70	)		2.45
Net increase (decrease) from investment operations		2.66			1.83			(0.47	)		2.55
Dividends and distributions from:3
Net investment income		(0.26	)		(0.21	)		(0.16	)		(0.09	)
Net realized gain		(0.50	)		(0.01	)		(0.09	)		(0.61	)
Total dividends and distributions		(0.76	)		(0.22	)		(0.25	)		(0.70	)
Net asset value, end of period	$	14.64		$	12.74		$	11.13		$	11.85
Total Investment Return4
Based on net asset value		20.99%			16.46%			(4.02)%			25.58%	5
Ratios to Average Net Assets6
Total expenses		1.05%	7,8		2.00%	9,10		9.82%	11,12		23.56%	13
Total expenses after fees waived		0.74%	7,8		0.75%	9,10		0.69%	11,12		0.66%	13
Net investment income		2.11%	7,8		2.17%	9,10		1.94%	11,12		1.78%	13
Supplemental Data
Net assets, end of period (000)	$	4,546		$	1,981		$	164		$	24
Portfolio turnover of the LifePath Master Portfolio		67%	14		7%	15		51%	15		1%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Where applicable, assumes the reinvestment of dividends and distributions.

⁵ Aggregate total investment return.

⁶ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁷ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.83%.

⁸ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.12%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 2.22%.

¹⁰ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 15.11%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.17%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 27% and 95% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
36	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) LifePath 2055 Portfolio

	Investor A
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.73		$	11.13		$	11.85		$	10.00
Net investment income2		0.28			0.23			0.16			0.09
Net realized and unrealized gain (loss)		2.34			1.56			(0.67	)		2.46
Net increase (decrease) from investment operations		2.62			1.79			(0.51	)		2.55
Dividends and distributions from:3
Net investment income		(0.23	)		(0.18	)		(0.12	)		(0.09	)
Net realized gain		(0.50	)		(0.01	)		(0.09	)		(0.61	)
Total dividends and distributions		(0.73	)		(0.19	)		(0.21	)		(0.70	)
Net asset value, end of period	$	14.62		$	12.73		$	11.13		$	11.85
Total Investment Return4
Based on net asset value		20.71%			16.09%			(4.35)%			25.50%	5
Ratios to Average Net Assets6
Total expenses		1.30%	7,8		2.29%	9,10		8.94%	11,12		23.83%	13
Total expenses after fees waived		0.99%	7,8		1.00%	9,10		0.94%	11,12		0.91%	13
Net investment income		1.98%	7,8		1.88%	9,10		1.43%	11,12		1.53%	13
Supplemental Data
Net assets, end of period (000)	$	3,951		$	1,043		$	163		$	24
Portfolio turnover of the LifePath Master Portfolio		67%	14		7%	15		51%	15		1%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵ Aggregate total investment return.

⁶ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁷ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.82%.

⁸ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.12%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 2.28%.

¹⁰ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 12.56%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.17%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 27% and 95% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	37

Financial Highlights (continued) LifePath 2055 Portfolio

	Investor C
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.64		$	11.06		$	11.82		$	10.00
Net investment income2		0.15			0.13			0.10			0.04
Net realized and unrealized gain (loss)		2.35			1.56			(0.69	)		2.45
Net increase (decrease) from investment operations		2.50			1.69			(0.59	)		2.49
Dividends and distributions from:3
Net investment income		(0.13	)		(0.10	)		(0.08	)		(0.06	)
Net realized gain		(0.50	)		(0.01	)		(0.09	)		(0.61	)
Total dividends and distributions		(0.63	)		(0.11	)		(0.17	)		(0.67	)
Net asset value, end of period	$	14.51		$	12.64		$	11.06		$	11.82
Total Investment Return4
Based on net asset value		19.81%			15.27%			(5.01)%			24.98%	5
Ratios to Average Net Assets6
Total expenses		2.06%	7,8		3.12%	9,10		11.00%	11,12		24.62%	13
Total expenses after fees waived		1.75%	7,8		1.75%	9,10		1.69%	11,12		1.67%	13
Net investment income		1.07%	7,8		1.05%	9,10		0.88%	11,12		0.78%	13
Supplemental Data
Net assets, end of period (000)	$	313		$	231		$	109		$	24
Portfolio turnover of the LifePath Master Portfolio		67%	14		7%	15		51%	15		1%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵ Aggregate total investment return.

⁶ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁷ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.83%.

⁸ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.12%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 2.42%.

¹⁰ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 14.29%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.17%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 27% and 95% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
38	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) LifePath 2055 Portfolio

	Class K
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.77		$	11.15		$	11.86		$	10.00
Net investment income2		0.22			0.35			0.23			0.12
Net realized and unrealized gain (loss)		2.54			1.52			(0.66	)		2.46
Net increase (decrease) from investment operations		2.76			1.87			(0.43	)		2.58
Dividends and distributions from:3
Net investment income		(0.26	)		(0.24	)		(0.19	)		(0.11	)
Net realized gain		(0.50	)		(0.01	)		(0.09	)		(0.61	)
Total dividends and distributions		(0.76	)		(0.25	)		(0.28	)		(0.72	)
Net asset value, end of period	$	14.77		$	12.77		$	11.15		$	11.86
Total Investment Return4
Based on net asset value		21.74%			16.83%			(3.71)%			25.84%	5
Ratios to Average Net Assets6
Total expenses		0.75%	7,8		1.27%	9,10		9.68%	11,12		23.20%	13
Total expenses after fees waived		0.38%	7,8		0.40%	9,10		0.33%	11,12		0.31%	13
Net investment income		1.61%	7,8		2.80%	9,10		1.99%	11,12		2.14%	13
Supplemental Data
Net assets, end of period (000)	$	30		$	448		$	22		$	24
Portfolio turnover of the LifePath Master Portfolio		67%	14		7%	15		51%	15		1%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Where applicable, assumes the reinvestment of dividends and distributions.

⁵ Aggregate total investment return.

⁶ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁷ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.95%.

⁸ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.12%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 1.71%.

¹⁰ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 16.23%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.17%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 27% and 95% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	39

Financial Highlights (concluded) LifePath 2055 Portfolio

	Class R
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.72		$	11.12		$	11.84		$	10.00
Net investment income2		0.22			0.19			0.13			0.07
Net realized and unrealized gain (loss)		2.37			1.56			(0.66	)		2.46
Net increase (decrease) from investment operations		2.59			1.75			(0.53	)		2.53
Dividends and distributions from:3
Net investment income		(0.19	)		(0.14	)		(0.10	)		(0.08	)
Net realized gain		(0.50	)		(0.01	)		(0.09	)		(0.61	)
Total dividends and distributions		(0.69	)		(0.15	)		(0.19	)		(0.69	)
Net asset value, end of period	$	14.62		$	12.72		$	11.12		$	11.84
Total Investment Return4
Based on net asset value		20.44%			15.75%			(4.54)%			25.33%	5
Ratios to Average Net Assets6
Total expenses		1.56%	7,8		2.75%	9,10		10.53%	11,12		24.09%	13
Total expenses after fees waived		1.25%	7,8		1.25%	9,10		1.18%	11,12		1.16%	13
Net investment income		1.58%	7,8		1.53%	9,10		1.14%	11,12		1.29%	13
Supplemental Data
Net assets, end of period (000)	$	106		$	59		$	22		$	24
Portfolio turnover of the LifePath Master Portfolio		67%	14		7%	15		51%	15		1%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Where applicable, assumes the reinvestment of dividends and distributions.

⁵ Aggregate total investment return.

⁶ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁷ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.84%.

⁸ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.12%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 2.60%.

¹⁰ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹¹ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 16.23%.

¹² Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.17%, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

¹³ Annualized.

¹⁴ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Master Portfolios.

¹⁵ Excludes the LifePath Master Portfolio’s purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 27% and 95% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
40	BLACKROCK FUNDS III	DECEMBER 31, 2013

Notes to Financial Statements BlackRock Funds III

1. Organization:

BlackRock Funds III (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Delaware statutory trust. LifePath^® 2025 Portfolio, LifePath^® 2035 Portfolio, LifePath^® 2045 Portfolio and LifePath^® 2055 Portfolio (each, a “LifePath Portfolio” and collectively, the “LifePath Portfolios”) are each a series of the Trust. Each LifePath Portfolio seeks to achieve its investment objective by investing all of its assets in a separate series of Master Investment Portfolio (“MIP”): LifePath^® 2025 Master Portfolio, LifePath^® 2035 Master Portfolio, LifePath^® 2045 Master Portfolio and LifePath^® 2055 Master Portfolio (each, a “LifePath Master Portfolio” and collectively, the “LifePath Master Portfolios”). Each LifePath Master Portfolio has the same or substantially similar investment objective as its corresponding LifePath Portfolio. The performance of a LifePath Portfolio is directly affected by the performance of its corresponding LifePath Master Portfolio.

The value of each LifePath Portfolio’s investment in its corresponding LifePath Master Portfolio reflects that LifePath Portfolio’s proportionate interest in the net assets of that LifePath Master Portfolio (99.97%, 99.97%, 99.93% and 99.81% for the LifePath 2025 Portfolio, LifePath 2035 Portfolio, LifePath 2045 Portfolio and LifePath 2055 Portfolio, respectively, as of December 31, 2013).

As such, the financial statements of each corresponding LifePath Master Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with each LifePath Portfolio’s financial statements.

Each LifePath Portfolio offers multiple classes of shares. Institutional and Class K Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally sold with an initial sales charge, but may be subject to a CDSC for certain redemptions where no initial sales charge was paid at the time of purchase. Investor C Shares may be subject to a CDSC. Class R Shares are sold without a sales charge and only to certain employer-sponsored retirement plans. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that Investor A, Investor C and Class R Shares bear certain expenses related to the shareholder servicing of such shares, and Investor C and Class R Shares also bear certain expenses related to the distribution of such shares. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures.

2. Significant Accounting Policies:

The LifePath Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in 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 following is a summary of significant accounting policies followed by the LifePath Portfolios:

Valuation: US GAAP defines fair value as the price the LifePath Portfolios would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The LifePath Portfolios’ policy is to fair value their financial instruments at market value. Each LifePath Portfolio records its investments in the applicable LifePath Master Portfolio at fair value based on the LifePath Portfolio’s proportionate interest in the net assets of the applicable LifePath Master Portfolio. Valuation of securities held by each applicable LifePath Master Portfolio is discussed in Note 2 of the LifePath Master Portfolios’ Notes to Financial Statements, which are included elsewhere in this report.

Investment Transactions and Investment Income: For financial reporting purposes, contributions to and withdrawals from each LifePath Master Portfolio are accounted on a trade date basis. Each LifePath Portfolio records daily its proportionate share of its LifePath Master Portfolio’s income, expenses and realized and unrealized gains and losses. In addition, each LifePath Portfolio accrues its own expenses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Dividends and Distributions: Dividends from net investment income are declared and paid quarterly. Distributions of capital gains are recorded on the ex-dividend dates. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

The character of dividends and distributions is determined in accordance with federal income tax regulations, which may differ from US GAAP. The portion of distributions that exceeds the LifePath Portfolio’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a non-taxable return of capital. Realized net capital gains can be offset by capital losses carried forward from prior years. Consequently, if distributions in any tax year are less than the LifePath Portfolio’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.

Income Taxes: It is each LifePath Portfolio’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.

Each LifePath Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each LifePath Portfolio’s US federal tax returns remains open for each of the three years ended December 31, 2013 and the period ended December 31, 2010. The statutes of limitations on each LifePath Portfolio’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 LifePath Portfolios’ facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

BLACKROCK FUNDS III DECEMBER 31, 2013 41

Notes to Financial Statements (continued) BlackRock Funds III

Other: Expenses directly related to a LifePath Portfolio or its classes are charged to that LifePath Portfolio or class. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the LifePath Portfolios and other shared expenses pro rated to the LifePath Portfolios are allocated daily to each class based on its relative net assets or other appropriate methods.

3. Administration Agreement and Other Transactions with Affiliates:

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

The Trust, on behalf of the LifePath Portfolios, entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL” or the “Administrator”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL, in consideration thereof, has agreed to bear all of the LifePath Portfolios’ ordinary operating expenses, excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the LifePath Portfolios. BAL is entitled to receive for these administration services an annual fee of 0.50% based on the average daily net assets of each LifePath Portfolio’s Institutional, Investor A, Investor C and Class R Shares and 0.15% based on the average daily net assets of the Class K Shares.

From time to time, BAL may waive such fees in whole or in part. Any such waiver will reduce the expenses of a LifePath Portfolio and, accordingly, have a favorable impact on its performance. BAL may delegate certain of its administration duties to sub-administrators.

The fees and expenses of the LifePath Portfolios’ trustees who are not “interested persons” of the Trust, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and the Trust’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the LifePath Portfolios. BAL has contractually agreed to provide an offsetting credit against the administration fees paid by the LifePath Portfolios in an amount equal to the independent expenses through April 30, 2023. These amounts are included in fees waived by administrator in the Statements of Operations.

The Trust, on behalf of the LifePath Portfolios, entered into a Distribution Agreement and Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of BlackRock. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, each LifePath Portfolio pays BRIL ongoing service and distribution fees. The fees are accrued daily and paid monthly at an annual rate based upon the average daily net assets of the share classes as follows:

	Service Fee			Distribution Fee
Investor A		0.25	%		—
Investor C		0.25	%		0.75	%
Class R		0.25	%		0.25	%

Pursuant to sub-agreements with BRIL, broker-dealers and BRIL provide shareholder servicing and distribution services to each LifePath Portfolio. The ongoing service and/or distribution fee compensates BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to Investor A, Investor C and Class R shareholders.

For the year ended December 31, 2013, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of each LifePath Portfolio’s Investor A Shares as follows:

	Investor A
LifePath 2025 Portfolio	$	663
LifePath 2035 Portfolio	$	511
LifePath 2045 Portfolio	$	299
LifePath 2055 Portfolio	$	558

For the year ended December 31, 2013, affiliates received CDSCs relating to transactions in Investor A and Investor C Shares as follows:

	Investor A		Investor C
LifePath 2025 Portfolio		—	$	75
LifePath 2035 Portfolio		—	$	34
LifePath 2045 Portfolio		—	$	15
LifePath 2055 Portfolio	$	5	$	10

Certain officers and/or trustees of the Trust are officers and/or directors of BlackRock or its affiliates.

42 BLACKROCK FUNDS III DECEMBER 31, 2013

Notes to Financial Statements (continued) BlackRock Funds III

4. Income Tax Information:

The tax character of distributions paid during the fiscal years ended December 31, 2013 and December 31, 2012 were as follows:

		LifePath 2025 Portfolio		LifePath 2035 Portfolio		LifePath 2045 Portfolio		LifePath 2055 Portfolio
Ordinary Income	12/31/13	$	988,685	$	946,846	$	558,184	$	212,120
	12/31/12	$	338,117	$	256,008	$	123,524	$	31,164
Long-term capital gains	12/31/13		1,066,479		1,005,062		553,912		214,476
	12/31/12		4,075		—		—		520
Return of capital	12/31/13		—		—		—		—
	12/31/12		—		1,923		614		—
Total	12/31/13	$	2,055,164	$	1,951,908	$	1,112,096	$	426,596
	12/31/12	$	342,192	$	257,931	$	124,138	$	31,684

As of December 31, 2013, the tax components of accumulated net earnings were as follows:

	LifePath 2025 Portfolio		LifePath 2035 Portfolio		LifePath 2045 Portfolio		LifePath 2055 Portfolio
Undistributed ordinary income	$	155,100	$	157,636	$	98,346	$	37,866
Undistributed long-term capital gains		433,791		410,114		283,727		107,033
Net unrealized gains1		3,690,829		3,513,347		2,187,909		801,107
Total	$	4,279,720	$	4,081,097	$	2,569,982	$	946,006

¹  The differences between book-basis and tax-basis net unrealized gains were attributable primarily to the timing and recognition of partnership income.

During the year ended December 31, 2013, the LifePath Portfolios listed below utilized the following amounts of their respective capital loss carryforwards:

LifePath 2035 Portfolio	$	33,935
LifePath 2045 Portfolio	$	22,438

5. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2013						Year Ended December 31, 2012
LifePath 2025 Portfolio	Shares			Amount			Shares			Amount
Institutional
Shares sold		910,890		$	11,678,883			1,045,339		$	12,568,837
Shares issued to shareholders in reinvestment of dividends and distributions		71,520			929,057			11,282			135,315
Shares redeemed		(305,527	)		(3,902,687	)		(51,418	)		(613,325	)
Net increase		676,883		$	8,705,253			1,005,203		$	12,090,827
Investor A
Shares sold		1,379,851		$	17,654,190			646,048		$	7,555,703
Shares issued to shareholders in reinvestment of dividends and distributions		78,021			1,014,304			12,936			154,187
Shares redeemed		(387,778	)		(4,980,463	)		(151,744	)		(1,805,319	)
Net increase		1,070,094		$	13,688,031			507,240		$	5,904,571
Investor C
Shares sold		116,081		$	1,459,235			62,648		$	742,048
Shares issued to shareholders in reinvestment of dividends and distributions		4,488			58,322			149			1,762
Shares redeemed		(49,266	)		(624,070	)		(3,317	)		(39,041	)
Net increase		71,303		$	893,487			59,480		$	704,769

BLACKROCK FUNDS III DECEMBER 31, 2013 43

Notes to Financial Statements (continued) BlackRock Funds III

	Year Ended December 31, 2013						Year Ended December 31, 2012
LifePath 2025 Portfolio (concluded)	Shares			Amount			Shares			Amount
Class K
Shares sold		19,099		$	238,039			91,635		$	1,104,068
Shares issued to shareholders in reinvestment of dividends and distributions		223			2,890			2,493			29,808
Shares redeemed		(170,353	)		(2,127,170	)		(78,700	)		(919,978	)
Net increase (decrease)		(151,031	)	$	(1,886,241	)		15,428		$	213,898
Class R
Shares sold		27,356		$	348,501			139,022		$	1,661,296
Shares issued to shareholders in reinvestment of dividends and distributions		3,703			48,160			554			6,692
Shares redeemed		(23,003	)		(295,490	)		(36,457	)		(439,800	)
Net increase		8,056		$	101,171			103,119		$	1,228,188
Total Net Increase		1,675,305		$	21,501,701			1,690,470		$	20,142,253
LifePath 2035 Portfolio
Institutional
Shares sold		740,049		$	9,845,867			876,904		$	10,802,927
Shares issued to shareholders in reinvestment of dividends and distributions		71,222			971,741			8,560			105,118
Shares redeemed		(221,883	)		(2,983,707	)		(39,959	)		(481,433	)
Net increase		589,388		$	7,833,901			845,505		$	10,426,612
Investor A
Shares sold		1,082,238		$	14,392,856			510,399		$	6,061,025
Shares issued to shareholders in reinvestment of dividends and distributions		67,127			917,237			9,088			111,016
Shares redeemed		(389,781	)		(5,222,768	)		(91,669	)		(1,110,992	)
Net increase		759,584		$	10,087,325			427,818		$	5,061,049
Investor C
Shares sold		49,884		$	658,815			32,228		$	392,026
Shares issued to shareholders in reinvestment of dividends and distributions		2,819			38,417			72			866
Shares redeemed		(20,393	)		(271,810	)		(6,576	)		(79,864	)
Net increase		32,310		$	425,422			25,724		$	313,028
Class K
Shares sold		10,830		$	140,226			76,743		$	935,081
Shares issued to shareholders in reinvestment of dividends and distributions		216			2,987			2,443			29,971
Shares redeemed		(163,508	)		(2,100,718	)		(13,680	)		(166,794	)
Net increase (decrease)		(152,462	)	$	(1,957,505	)		65,506		$	798,258
Class R
Shares sold		8,771		$	117,450			37,010		$	450,432
Shares issued to shareholders in reinvestment of dividends and distributions		1,295			17,735			181			2,236
Shares redeemed		(4,357	)		(57,644	)		(10,523	)		(131,251	)
Net increase		5,709		$	77,541			26,668		$	321,417
Total Net Increase		1,234,529		$	16,466,684			1,391,221		$	16,920,364
LifePath 2045 Portfolio	Shares			Amount			Shares			Amount
Institutional
Shares sold		396,631		$	5,456,579			441,838		$	5,521,233
Shares issued to shareholders in reinvestment of dividends and distributions		40,187			571,955			5,378			67,095
Shares redeemed		(99,645	)		(1,374,380	)		(39,114	)		(481,867	)
Net increase		337,173		$	4,654,154			408,102		$	5,106,461

44 BLACKROCK FUNDS III DECEMBER 31, 2013

Notes to Financial Statements (continued) BlackRock Funds III

	Year Ended December 31, 2013						Year Ended December 31, 2012
LifePath 2045 Portfolio (concluded)	Shares			Amount			Shares			Amount
Investor A
Shares sold		628,813		$	8,648,688			195,093		$	2,350,475
Shares issued to shareholders in reinvestment of dividends and distributions		33,636			479,804			3,199			39,754
Shares redeemed		(170,437	)		(2,394,296	)		(31,994	)		(392,545	)
Net increase		492,012		$	6,734,196			166,298		$	1,997,684
Investor C
Shares sold		42,933		$	585,924			33,075		$	404,882
Shares issued to shareholders in reinvestment of dividends and distributions		2,435			34,513			14			166
Shares redeemed		(16,372	)		(224,050	)		(5,053	)		(60,278	)
Net increase		28,996		$	396,387			28,036		$	344,770
Class K
Shares sold		4,602		$	60,397			35,316		$	437,850
Shares issued to shareholders in reinvestment of dividends and distributions		—			—			702			8,798
Shares redeemed		(57,204	)		(754,045	)		(4,420	)		(53,615	)
Net increase (decrease)		(52,602	)	$	(693,648	)		31,598		$	393,033
Class R
Shares sold		15,097		$	206,233			50,526		$	620,689
Shares issued to shareholders in reinvestment of dividends and distributions		1,538			21,914			261			3,242
Shares redeemed		(10,897	)		(150,113	)		(19,597	)		(247,137	)
Net increase		5,738		$	78,034			31,190		$	376,794
Total Net Increase		811,317		$	11,169,123			665,224		$	8,218,742
LifePath 2055 Portfolio
Institutional
Shares sold		222,162		$	3,099,013			150,947		$	1,883,358
Shares issued to shareholders in reinvestment of dividends and distributions		15,051			217,965			1,120			13,978
Shares redeemed		(82,107	)		(1,170,226	)		(11,328	)		(140,748	)
Net increase		155,106		$	2,146,752			140,739		$	1,756,588
Investor A
Shares sold		283,425		$	3,951,050			83,690		$	1,011,785
Shares issued to shareholders in reinvestment of dividends and distributions		13,033			189,060			804			9,984
Shares redeemed		(108,060	)		(1,525,606	)		(17,242	)		(210,120	)
Net increase		188,398		$	2,614,504			67,252		$	811,649
Investor C
Shares sold		14,909		$	204,036			14,051		$	171,394
Shares issued to shareholders in reinvestment of dividends and distributions		826			11,931			35			433
Shares redeemed		(12,437	)		(164,529	)		(5,611	)		(68,197	)
Net increase		3,298		$	51,438			8,475		$	103,630
Class K
Shares sold		9,086		$	119,761			35,037		$	433,079
Shares issued to shareholders in reinvestment of dividends and distributions		—			—			311			3,951
Shares redeemed		(42,186	)		(563,906	)		(2,248	)		(28,304	)
Net increase (decrease)		(33,100	)	$	(444,145	)		33,100		$	408,726

BLACKROCK FUNDS III DECEMBER 31, 2013 45

Notes to Financial Statements (concluded) BlackRock Funds III

	Year Ended December 31, 2013						Year Ended December 31, 2012
LifePath 2055 Portfolio (concluded)	Shares			Amount			Shares			Amount
Class R
Shares sold		2,885		$	40,466			2,667		$	31,573
Shares issued to shareholders in reinvestment of dividends and distributions		231			3,355			24			293
Shares redeemed		(519	)		(7,331	)		(17	)		(207	)
Net increase		2,597		$	36,490			2,674		$	31,659
Total Net Increase		316,299		$	4,405,039			252,240		$	3,112,252

At December 31, 2013, shares owned by affiliates were as follows:

	Investor C		Class K		Class R
LifePath 2025 Portfolio		—		2,006		2,002
LifePath 2035 Portfolio		2,000		2,004		2,000
LifePath 2045 Portfolio		2,000		2,003		2,000
LifePath 2055 Portfolio		2,000		2,001		2,000

6. Subsequent Events:

Management has evaluated the impact of all subsequent events on the LifePath Portfolios 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.

46 BLACKROCK FUNDS III DECEMBER 31, 2013

Report of Independent Registered Public Accounting Firm BlackRock Funds III

To the Board of Trustees of BlackRock Funds III and the Shareholders of LifePath 2025 Portfolio, LifePath 2035 Portfolio, LifePath 2045 Portfolio and LifePath 2055 Portfolio:

In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of LifePath 2025 Portfolio, LifePath 2035 Portfolio, LifePath 2045 Portfolio and LifePath 2055 Portfolio (the “Funds”), each a series of BlackRock Funds III, at December 31, 2013, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2014

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid during the taxable year ended December 31, 2013.

	Payable Dates		LifePath 2025 Portfolio		LifePath 2035 Portfolio		LifePath 2045 Portfolio		LifePath 2055 Portfolio
Qualified Dividend Income for Individuals1		4/02/13 —1/02/14		46.04%		49.19%		49.49%		48.50%
Dividends Qualifying for the Dividend Received Deduction for Corporations1		4/02/13 —1/02/14		23.54%		23.23%		24.00%		22.97%
Interest-Related Dividends and Qualified Short-Term Capital Gains for Non-US Residents2		4/02/13 —1/02/14		50.04%		53.53%		43.22%		41.96%

¹  The LifePath Portfolios hereby designates the percentage indicated above or the maximum amount allowable by law.

² Represents the portion of the taxable ordinary income dividends eligible for exemption from US withholding tax for nonresident aliens and foreign corporations.

Additionally, the LifePath Portfolios distributed long-term capital gains per share to shareholders of record on the following dates:

Record Dates	June 27, 2013		December 30, 2013
LifePath 2025 Portfolio	$	0.000859	$	0.242283
LifePath 2035 Portfolio		—	$	0.311117
LifePath 2045 Portfolio		—	$	0.322083
LifePath 2055 Portfolio		—	$	0.356748

BLACKROCK FUNDS III DECEMBER 31, 2013 47

Master Portfolio Information as of December 31, 2013 Master Investment Portfolio

LifePath 2025 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds	59	%
Fixed Income Funds	40
Short-Term Securities	1

Ten Largest Holdings Percent of
Affiliated Investment Companies

CoreAlpha Bond Master Portfolio	35	%
Active Stock Master Portfolio	27
International Tilts Master Portfolio	6
ACWI ex-US Index Master Portfolio	6
iShares TIPS Bond ETF	5
Master Small Cap Index Series	4
BlackRock Commodity Strategies Fund	4
Russell 1000® Index Master Portfolio	3
iShares International Developed Real Estate ETF	2
iShares Cohen & Steers REIT ETF	2

LifePath 2035 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds	73	%
Fixed Income Funds	26
Short-Term Securities	1

Ten Largest Holdings Percent of
Affiliated Investment Companies

Active Stock Master Portfolio	34	%
CoreAlpha Bond Master Portfolio	24
ACWI ex-US Index Master Portfolio	8
International Tilts Master Portfolio	7
Russell 1000® Index Master Portfolio	4
BlackRock Commodity Strategies Fund	4
iShares International Developed Real Estate ETF	4
iShares Cohen & Steers REIT ETF	3
Master Small Cap Index Series	3
BlackRock Emerging Markets Fund, Inc.	2

The Master Portfolios’ allocation and holdings listed above are current as of the report date. However, the Master Portfolios are regularly monitored and their composition may vary throughout various periods.

48 BLACKROCK FUNDS III DECEMBER 31, 2013

Master Portfolio Information as of December 31, 2013 (concluded) Master Investment Portfolio

LifePath 2045 Master Portfolio

Portfolio Composition Percent of Affiliated Investment Companies

Equity Funds	84	%
Fixed Income Funds	15
Short-Term Securities	1

Ten Largest Holdings Percent of Affiliated Investment Companies

Active Stock Master Portfolio	38	%
CoreAlpha Bond Master Portfolio	15
ACWI ex-US Index Master Portfolio	9
International Tilts Master Portfolio	9
Russell 1000® Index Master Portfolio	7
iShares International Developed Real Estate ETF	5
iShares Cohen & Steers REIT ETF	4
BlackRock Commodity Strategies Fund	4
BlackRock Emerging Markets Fund, Inc.	3
Master Small Cap Index Series	2

LifePath 2055 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds	95	%
Fixed Income Funds	5

Ten Largest Holdings Percent of
Affiliated Investment Companies

Active Stock Master Portfolio	40	%
International Tilts Master Portfolio	11
ACWI ex-US Index Master Portfolio	10
Russell 1000® Index Master Portfolio	9
iShares International Developed Real Estate ETF	6
iShares Cohen & Steers REIT ETF	5
CoreAlpha Bond Master Portfolio	5
BlackRock Commodity Strategies Fund	4
BlackRock Emerging Markets Fund, Inc.	3
iShares MSCI EAFE Small-Cap ETF	3

The Master Portfolios’ allocation and holdings listed above are current as of the report date. However, the Master Portfolios are regularly monitored and their composition may vary throughout various periods.

BLACKROCK FUNDS III DECEMBER 31, 2013 49

Schedule of Investments December 31, 2013 LifePath 2025 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 59.7%
Active Stock Master Portfolio	$	16,200,209	$	16,200,209
ACWI ex-US Index Master Portfolio	$	3,441,408		3,441,408
BlackRock Commodity Strategies Fund		230,922		2,177,591
BlackRock Emerging Markets Fund, Inc.		51,487		1,026,141
International Tilts Master Portfolio	$	3,511,357		3,511,357
iShares Cohen & Steers REIT ETF (b)		15,153		1,132,232
iShares International Developed Real Estate ETF		41,657		1,287,618
iShares MSCI Canada ETF		20,187		588,653
iShares MSCI EAFE ETF		4,629		310,421
iShares MSCI EAFE Small-Cap ETF		18,607		948,585
iShares MSCI Emerging Markets ETF		3,183		132,954
Master Small Cap Index Series	$	2,253,163		2,253,163
Russell 1000 Index Master Portfolio	$	1,991,780		1,991,780
				35,002,112
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 40.1%
CoreAlpha Bond Master Portfolio	$	20,623,592	$	20,623,592
iShares TIPS Bond ETF		26,539		2,916,636
				23,540,228
Short-Term Securities — 1.7%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)		878,780		878,780
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)		139,240		139,240
				1,018,020
Total Affiliated Investment Companies (Cost — $55,961,994*) — 101.5%				59,560,360
Liabilities in Excess of Other Assets — (1.5)%				(898,749	)
Net Assets — 100.0%			$	58,661,611

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	55,979,085
Gross unrealized appreciation	$	5,156,255
Gross unrealized depreciation		(1,574,980	)
Net unrealized appreciation	$	3,581,275

(a) Investments in issuers considered to be an affiliate of the Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at December 31, 2012		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2013		Value at December 31, 2013		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	11,459,746	$	4,740,463	1		—		$	16,200,209	$	16,200,209	$	261,983	$	1,936,776
ACWI ex-US Index Master Portfolio	$	3,575,376		—		$	(133,968	)2	$	3,441,408	$	3,441,408	$	146,773	$	271,793
BlackRock Cash Funds: Institutional, SL Agency Shares		333,964		544,816	1		—			878,780	$	878,780	$	2,050		—
BlackRock Cash Funds: Prime, SL Agency Shares		74,872		64,368	1		—			139,240	$	139,240	$	345		—
BlackRock Commodity Strategies Fund		106,996		123,926			—			230,922	$	2,177,591		—		—
BlackRock Emerging Markets Fund, Inc.		—		51,487			—			51,487	$	1,026,141	$	3,510		—
CoreAlpha Bond Master Portfolio	$	11,181,905	$	9,441,687	1		—		$	20,623,592	$	20,623,592	$	369,290	$	(301,563	)
International Tilts Master Portfolio		—	$	3,511,357	1		—		$	3,511,357	$	3,511,357	$	3,458	$	(4,632	)
iShares Cohen & Steers REIT ETF		8,050		8,073			(970	)		15,153	$	1,132,232	$	31,242	$	4,061
iShares International Developed Real Estate ETF		22,926		21,412			(2,681	)		41,657	$	1,287,618	$	130,848	$	3,846
iShares MSCI Canada ETF		6,086		16,842			(2,741	)		20,187	$	588,653	$	9,148	$	(12,698	)
iShares MSCI EAFE ETF		20,271		—			(15,642	)		4,629	$	310,421	$	21,431	$	104,765
iShares MSCI EAFE Small-Cap ETF		8,871		10,549			(813	)		18,607	$	948,585	$	19,376	$	2,215
iShares MSCI Emerging Markets ETF		10,613		—			(7,430	)		3,183	$	132,954	$	6,376	$	(25,734	)
iShares TIPS Bond ETF		12,725		15,066			(1,252	)		26,539	$	2,916,636	$	25,446	$	(7,437	)
Master Small Cap Index Series	$	1,135,224	$	1,117,939	1		—		$	2,253,163	$	2,253,163	$	23,973	$	82,287
Russell 1000 Index Master Portfolio		—	$	1,991,780	1		—		$	1,991,780	$	1,991,780	$	4,413	$	(187	)
1   Represents net shares/beneficial interest purchased.
2   Represents net beneficial interest sold.

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

(c) Represents the current yield as of report date.

(d) All or a portion of security was purchased with the cash collateral from loaned securities.

See Notes to Financial Statements.

50 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments (concluded) LifePath 2025 Master Portfolio

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	11,538,851	$	48,021,509		—	$	59,560,360

The carrying amount for certain of the Master Portfolio’s liabilities approximates fair value for financial reporting purposes. As of December 31, 2013, collateral on securities loaned at value of $(900,900) is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ending December 31, 2013.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 51

Schedule of Investments December 31, 2013 LifePath 2035 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 73.7%
Active Stock Master Portfolio	$	15,692,296	$	15,692,296
ACWI ex-US Index Master Portfolio	$	3,491,240		3,491,240
BlackRock Commodity Strategies Fund		185,770		1,751,810
BlackRock Emerging Markets Fund, Inc.		49,659		989,703
International Tilts Master Portfolio	$	3,382,020		3,382,020
iShares Cohen & Steers REIT ETF		19,728		1,474,076
iShares International Developed Real Estate ETF		55,507		1,715,721
iShares MSCI Canada ETF (b)		19,860		579,118
iShares MSCI EAFE ETF		2,162		144,984
iShares MSCI EAFE Small-Cap ETF		17,921		913,613
iShares MSCI Emerging Markets ETF		2,166		90,474
Master Small Cap Index Series	$	1,350,347		1,350,347
Russell 1000 Index Master Portfolio	$	1,842,488		1,842,488
				33,417,890
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 26.2%
CoreAlpha Bond Master Portfolio	$	10,906,911	$	10,906,911
iShares TIPS Bond ETF		8,983		987,232
				11,894,143
Short-Term Securities — 0.5%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)		197,195		197,195
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)		22,990		22,990
				220,185
Total Affiliated Investment Companies (Cost — $42,064,723*) — 100.4%				45,532,218
Liabilities in Excess of Other Assets — (0.4)%				(169,616	)
Net Assets — 100.0%			$	45,362,602

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	42,083,025
Gross unrealized appreciation	$	4,607,089
Gross unrealized depreciation		(1,157,896	)
Net unrealized appreciation	$	3,449,193

(a) Investments in issuers considered to be an affiliate of the Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at December 31, 2012		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2013		Value at December 31, 2013		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	10,655,052	$	5,037,244	1		—		$	15,692,296	$	15,692,296	$	253,274	$	1,826,796
ACWI ex-US Index Master Portfolio	$	3,668,078		—		$	(176,838	)2	$	3,491,240	$	3,491,240	$	155,106	$	282,437
BlackRock Cash Funds: Institutional, SL Agency Shares		79,543		117,652	1		—			197,195	$	197,195	$	1,176		—
BlackRock Cash Funds: Prime, SL Agency Shares		—		22,990	1		—			22,990	$	22,990	$	194		—
BlackRock Commodity Strategies Fund		79,015		106,755			—			185,770	$	1,751,810		—		—
BlackRock Emerging Markets Fund, Inc.		—		49,659			—			49,659	$	989,703	$	3,367		—
CoreAlpha Bond Master Portfolio	$	5,500,575	$	5,406,336	1		—		$	10,906,911	$	10,906,911	$	190,439	$	(166,734	)
International Tilts Master Portfolio		—	$	3,382,020	1		—		$	3,382,020	$	3,382,020	$	3,549	$	(4,452	)
iShares Cohen & Steers REIT ETF		8,780		12,415			(1,467	)		19,728	$	1,474,076	$	39,777	$	5,907
iShares International Developed Real Estate ETF		26,170		34,710			(5,373	)		55,507	$	1,715,721	$	169,421	$	9,669
iShares MSCI Canada ETF		4,319		17,729			(2,188	)		19,860	$	579,118	$	8,640	$	(10,572	)
iShares MSCI EAFE ETF		14,984		—			(12,822	)		2,162	$	144,984	$	14,684	$	63,827
iShares MSCI EAFE Small-Cap ETF		7,903		10,877			(859	)		17,921	$	913,613	$	19,144	$	1,888
iShares MSCI Emerging Markets ETF		7,858		—			(5,692	)		2,166	$	90,474	$	4,695	$	(26,322	)
iShares TIPS Bond ETF		5,167		6,586			(2,770	)		8,983	$	987,232	$	10,543	$	(16,333	)
Master Small Cap Index Series	$	660,486	$	689,861	1		—		$	1,350,347	$	1,350,347	$	15,123	$	50,531
Russell 1000 Index Master Portfolio		—	$	1,842,488	1		—		$	1,842,488	$	1,842,488	$	4,400	$	(267	)
1   Represents net shares/beneficial interest purchased.
2   Represents net beneficial interest sold.

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

(c) Represents the current yield as of report date.

(d) All or a portion of security was purchased with the cash collateral from loaned securities.

See Notes to Financial Statements.

52 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments (concluded) LifePath 2035 Master Portfolio

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	8,866,916	$	36,665,302		—	$	45,532,218

The carrying amount for certain of the Master Portfolio’s liabilities approximates fair value for financial reporting purposes. As of December 31, 2013, collateral on securities loaned at value of $(148,750) is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ending December 31, 2013.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 53

Schedule of Investments December 31, 2013 LifePath 2045 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 84.9%
Active Stock Master Portfolio	$	9,802,020	$	9,802,020
ACWI ex-US Index Master Portfolio	$	2,401,366		2,401,366
BlackRock Commodity Strategies Fund		104,395		984,443
BlackRock Emerging Markets Fund, Inc.		32,449		646,709
International Tilts Master Portfolio	$	2,238,771		2,238,771
iShares Cohen & Steers REIT ETF (b)		14,280		1,067,002
iShares International Developed Real Estate ETF		40,655		1,256,646
iShares MSCI Canada ETF (b)		12,795		373,102
iShares MSCI EAFE ETF		966		64,780
iShares MSCI EAFE Small-Cap ETF		10,610		540,898
iShares MSCI Emerging Markets ETF		855		35,713
Master Small Cap Index Series	$	585,447		585,447
Russell 1000 Index Master Portfolio	$	1,631,516		1,631,516
				21,628,413
Fixed Income Fund — 14.8%
CoreAlpha Bond Master Portfolio	$	3,788,075	$	3,788,075
Short-Term Securities — 1.2%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)		265,609		265,609
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)		35,707		35,707
				301,316
Total Affiliated Investment Companies (Cost — $23,542,230*) — 100.9%				25,717,804
Liabilities in Excess of Other Assets — (0.9)%				(238,960	)
Net Assets — 100.0%			$	25,478,844

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	23,546,131
Gross unrealized appreciation	$	2,336,103
Gross unrealized depreciation		(164,430	)
Net unrealized appreciation	$	2,171,673

(a) Investments in issuers considered to be an affiliate of the Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at December 31, 2012		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2013		Value at December 31, 2013		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	5,836,507	$	3,965,513	1		—		$	9,802,020	$	9,802,020	$	155,159	$	1,042,168
ACWI ex-US Index Master Portfolio	$	2,144,403	$	256,963	1		—		$	2,401,366	$	2,401,366	$	97,201	$	164,361
BlackRock Cash Funds: Institutional, SL Agency Shares		46,211		219,398	1		—			265,609	$	265,609	$	725		—
BlackRock Cash Funds: Prime, SL Agency Shares		6,820		28,887	1		—			35,707	$	35,707	$	107		—
BlackRock Commodity Strategies Fund		38,377		66,837			(819	)		104,395	$	984,443		—	$	(885	)
BlackRock Emerging Markets Fund, Inc.		—		32,778			(329	)		32,449	$	646,709	$	2,297	$	(92	)
CoreAlpha Bond Master Portfolio	$	1,516,825	$	2,271,250	1		—		$	3,788,075	$	3,788,075	$	60,820	$	(57,108	)
International Tilts Master Portfolio		—	$	2,238,771	1		—		$	2,238,771	$	2,238,771	$	3,817	$	(3,015	)
iShares Cohen & Steers REIT ETF		5,575		9,159			(454	)		14,280	$	1,067,002	$	27,737	$	2,028
iShares International Developed Real Estate ETF		16,215		25,278			(838	)		40,655	$	1,256,646	$	122,812	$	1,086
iShares MSCI Canada ETF		2,208		11,311			(724	)		12,795	$	373,102	$	5,528	$	(3,704	)
iShares MSCI EAFE ETF		6,929		—			(5,963	)		966	$	64,780	$	7,909	$	43,122
iShares MSCI EAFE Small-Cap ETF		4,341		6,695			(426	)		10,610	$	540,898	$	11,729	$	2,008
iShares MSCI Emerging Markets ETF		3,786		—			(2,931	)		855	$	35,713	$	2,102	$	(8,878	)
Master Small Cap Index Series	$	280,483	$	304,964	1		—		$	585,447	$	585,447	$	6,172	$	21,299
Russell 1000 Index Master Portfolio		—	$	1,631,516	1		—		$	1,631,516	$	1,631,516	$	3,103	$	320
1   Represents net shares/beneficial interest purchased.

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

(c) Represents the current yield as of report date.

(d) All or a portion of security was purchased with the cash collateral from loaned securities.

See Notes to Financial Statements.

54 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments (concluded) LifePath 2045 Master Portfolio

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	5,270,609	$	20,447,195		—	$	25,717,804

The carrying amount for certain of the Master Portfolio’s liabilities approximates fair value for financial reporting purposes. As of December 31, 2013, collateral on securities loaned at value of $(231,025) is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the period ending December 31, 2013.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 55

Schedule of Investments LifePath 2055 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 95.0%
Active Stock Master Portfolio	$	3,613,769	$	3,613,769
ACWI ex-US Index Master Portfolio	$	873,314		873,314
BlackRock Commodity Strategies Fund		39,004		367,810
BlackRock Emerging Markets Fund, Inc.		14,149		281,991
International Tilts Master Portfolio	$	941,978		941,978
iShares Cohen & Steers REIT ETF		6,422		479,852
iShares International Developed Real Estate ETF		18,191		562,284
iShares MSCI Canada ETF (b)		4,965		144,779
iShares MSCI EAFE Small-Cap ETF		4,611		235,069
Master Small Cap Index Series	$	185,783		185,783
Russell 1000 Index Master Portfolio	$	843,407		843,407
				8,530,036
Fixed Income Fund — 4.5%
CoreAlpha Bond Master Portfolio	$	405,498	$	405,498
Short-Term Securities — 0.3%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)		25,487		25,487
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)		460		460
				25,947
Total Affiliated Investment Companies (Cost — $8,151,986*) — 99.8%				8,961,481
Other Assets Less Liabilities — 0.2%				16,458
Net Assets — 100.0%			$	8,977,939

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	8,154,766
Gross unrealized appreciation	$	918,344
Gross unrealized depreciation		(111,629	)
Net unrealized appreciation	$	806,715

(a) Investments in issuers considered to be an affiliate of the Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at December 31, 2012		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2013		Value at December 31, 2013		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	2,007,359	$	1,606,410	1		—		$	3,613,769	$	3,613,769	$	56,704	$	358,412
ACWI ex-US Index Master Portfolio	$	905,861		—		$	(32,547	)2	$	873,314	$	873,314	$	40,555	$	68,885
BlackRock Cash Funds: Institutional, SL Agency Shares		5,841		19,646	1		—			25,487	$	25,487	$	322		—
BlackRock Cash Funds: Prime, SL Agency Shares		—		460	1		—			460	$	460	$	54		—
BlackRock Commodity Strategies Fund		11,669		28,817			(1,482	)		39,004	$	367,810		—	$	(1,675	)
BlackRock Emerging Markets Fund, Inc.		—		14,149			—			14,149	$	281,991	$	1,012		—
CoreAlpha Bond Master Portfolio	$	72,942	$	332,556	1		—		$	405,498	$	405,498	$	4,526	$	(4,231	)
International Tilts Master Portfolio		—	$	941,978	1		—		$	941,978	$	941,978	$	1,620	$	(1,259	)
iShares Cohen & Steers REIT ETF		1,929		5,623			(1,130	)		6,422	$	479,852	$	11,699	$	4,736
iShares International Developed Real Estate ETF		5,735		15,555			(3,099	)		18,191	$	562,284	$	53,618	$	15,246
iShares MSCI Canada ETF		211		5,055			(301	)		4,965	$	144,779	$	1,912	$	256
iShares MSCI EAFE ETF		552		—			(552	)		—	$	—	$	23	$	6,593
iShares MSCI EAFE Small-Cap ETF		1,544		3,197			(130	)		4,611	$	235,069	$	4,383	$	836
iShares MSCI Emerging Markets ETF		314		—			(314	)		—		—	$	53	$	1,100
Master Small Cap Index Series	$	73,491	$	112,292	1		—		$	185,783	$	185,783	$	1,840	$	6,311
Russell 1000 Index Master Portfolio		—	$	843,407	1		—		$	843,407	$	843,407	$	1,209	$	(615	)
1   Represents net shares/beneficial interest purchased. 2   Represents net beneficial interest sold.

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

(c) Represents the current yield as of report date.

(d) All or a portion of security was purchased with the cash collateral from loaned securities.

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

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

See Notes to Financial Statements.

56 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments (concluded) LifePath 2055 Master Portfolio (Percentages shown are based on Net Assets)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements. The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	2,097,732	$	6,863,749		—	$	8,961,481

The carrying amount for certain of the Master Portfolio’s liabilities approximates fair value for financial reporting purposes. As of December 31, 2013, collateral on securities loaned at value of $(2,975) is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ending December 31, 2013.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 57

Statements of Assets and Liabilities Master Investment Portfolio

December 31, 2013	LifePath 2025 Master Portfolio		LifePath 2035 Master Portfolio		LifePath 2045 Master Portfolio		LifePath 2055 Master Portfolio
Assets
Investments at value — affiliated1,2	$	59,560,360	$	45,532,218	$	25,717,804	$	8,961,481
Investments sold receivable		2,292,821		2,495,245		1,326,981		639,721
Securities lending income receivable		166		40		37		38
Receivable from Manager		24,318		24,415		25,295		25,865
Other income receivable — affiliated		270		194		97		28
Total assets		61,877,935		48,052,112		27,070,214		9,627,133
Liabilities
Collateral on securities loaned at value		900,900		148,750		231,025		2,975
Investments purchased payable		1,776,221		1,781,071		1,128,818		433,518
Trustees’ fees payable		1,016		946		823		706
Professional fees payable		16,131		16,133		16,193		16,136
Withdrawals payable to investors		522,056		742,610		214,511		195,859
Total liabilities		3,216,324		2,689,510		1,591,370		649,194
Net Assets	$	58,661,611	$	45,362,602	$	25,478,844	$	8,977,939
Net Assets Consist of
Investors’ capital	$	55,063,245	$	41,895,107	$	23,303,270	$	8,168,444
Net unrealized appreciation/depreciation		3,598,366		3,467,495		2,175,574		809,495
Net Assets	$	58,661,611	$	45,362,602	$	25,478,844	$	8,977,939
1 Investments at cost — affiliated	$	55,961,994	$	42,064,723	$	23,542,230	$	8,151,986
2 Securities loaned at value	$	874,224	$	145,800	$	225,072	$	2,916

See Notes to Financial Statements.
58	BLACKROCK FUNDS III	DECEMBER 31, 2013

Statements of Operations Master Investment Portfolio

Year Ended December 31, 2013	LifePath 2025 Master Portfolio			LifePath 2035 Master Portfolio			LifePath 2045 Master Portfolio			LifePath 2055 Master Portfolio
Investment Income
Dividends — affiliated	$	247,377		$	270,271		$	180,114		$	72,700
Securities lending — affiliated — net		2,231			1,258			736			352
Income — affiliated		170			112			96			24
Other income – affiliated		270			194			97			28
Net investment income allocated from the applicable Master Portfolios:
Dividends		418,951			410,987			252,821			97,160
Interest		390,939			210,904			73,451			9,294
Expenses		(103,682	)		(84,130	)		(46,174	)		(15,595	)
Fees waived		17,522			16,574			10,026			3,638
Total income		973,778			826,170			471,167			167,601
Expenses
Investment advisory		157,404			123,251			65,541			21,791
Professional		25,984			25,960			25,935			25,875
Independent Trustees		4,272			3,969			3,450			3,040
Total expenses		187,660			153,180			94,926			50,706
Less fees waived by Manager		(161,083	)		(134,169	)		(85,975	)		(47,935	)
Total expenses after fees waived		26,577			19,011			8,951			2,771
Net investment income		947,201			807,159			462,216			164,830
Realized and Unrealized Gain (Loss)
Net realized gain from:
Investments — affiliated		69,018			28,064			34,795			27,092
Allocations from the applicable underlying Master Portfolios from investments, financial futures contracts, swaps, options written and foreign currency transactions		1,984,474			1,988,311			1,168,025			427,503
		2,053,492			2,016,375			1,202,820			454,595
Net change in unrealized appreciation/depreciation on:
Investments — affiliated		(270,923	)		(179,590	)		(101,505	)		(66,128	)
Allocated from the applicable underlying Master Portfolios from investments, financial futures contracts, swaps, options written and foreign currency translations		2,630,547			2,646,395			1,744,072			696,420
		2,359,624			2,466,805			1,642,567			630,292
Total realized and unrealized gain		4,413,116			4,483,180			2,845,387			1,084,887
Net Increase in Net Assets Resulting from Operations	$	5,360,317		$	5,290,339		$	3,307,603		$	1,249,717

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	59

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath 2025 Master Portfolio						LifePath 2035 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	947,201		$	439,536		$	807,159		$	328,868
Net realized gain		2,053,492			243,108			2,016,375			128,926
Net change in unrealized appreciation/depreciation		2,359,624			1,488,086			2,466,805			1,258,584
Net increase in net assets resulting from operations		5,360,317			2,170,730			5,290,339			1,716,378
Capital Transactions
Proceeds from contributions		26,299,937			22,086,137			20,962,294			17,596,211
Value of withdrawals		(7,042,315	)		(2,391,310	)		(6,621,900	)		(1,006,455	)
Net increase in net assets derived from capital transactions		19,257,622			19,694,827			14,340,394			16,589,756
Net Assets
Total increase in net assets		24,617,939			21,865,557			19,630,733			18,306,134
Beginning of year		34,043,672			12,178,115			25,731,869			7,425,735
End of year	$	58,661,611		$	34,043,672		$	45,362,602		$	25,731,869
	LifePath 2045 Master Portfolio						LifePath 2055 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	462,216		$	158,595		$	164,830		$	40,811
Net realized gain (loss)		1,202,820			51,159			454,595			(5,527	)
Net change in unrealized appreciation/depreciation		1,642,567			646,402			630,292			178,186
Net increase in net assets resulting from operations		3,307,603			856,156			1,249,717			213,470
Capital Transactions
Proceeds from contributions		13,176,225			8,633,024			6,971,548			3,328,354
Value of withdrawals		(3,182,692	)		(560,000	)		(3,018,127	)		(260,669	)
Net increase in net assets derived from capital transactions		9,993,533			8,073,024			3,953,421			3,067,685
Net Assets
Total increase in net assets		13,301,136			8,929,180			5,203,138			3,281,155
Beginning of year		12,177,708			3,248,528			3,774,801			493,646
End of year	$	25,478,844		$	12,177,708		$	8,977,939		$	3,774,801

See Notes to Financial Statements.
60	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights Master Investment Portfolio

	LifePath 2025 Master Portfolio
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Total Investment Return
Total investment return		12.34%			12.57%			0.99%			17.65%	2
Ratios to Average Net Assets
Total expenses		0.61%	3,4,5		0.69%	6,7,8		1.07%	6,9,10		13.61%	6,11
Total expenses after fees waived		0.25%	3,4,5		0.26%	6,7,8		0.24%	6,9,10		0.22%	6,11
Net investment income12		2.11%	3,4,5		2.32%	6,7,8		2.62%	6,9,10		2.37%	6,11
Supplemental Data
Net assets, end of period (000)		$58,662			$34,044			$12,178			$134
Portfolio turnover		30%	13		4%	14		24%	14		2%

¹ Commencement of operations.

² Aggregate total investment return.

³ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio, except the total expenses for the period ended December 31, 2010, which include gross expenses. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁴ Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio allocated fees waived of 0.04%.

⁵ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.10%, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio allocated expenses and/or net investment income.

⁶  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, except the total expenses for the period ended December 31, 2010, which include gross expenses. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange traded funds.

⁷  Includes the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series’ allocated fees waived of 0.04%.

⁸  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.10%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁹  Includes the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series’ allocated fees waived of 0.03%.

¹⁰ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.12%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

¹¹ Annualized.

¹² Includes the LifePath Master Portfolio’s share of the allocated net investment income from the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, and Master Small Cap Index Series, except for the year ended December 31, 2013, which also includes International Tilts Master Portfolio and Russell 1000^® Index Master Portfolio.

¹³ Includes the purchases and sales of the underlying funds and the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

¹⁴ Excludes purchases and sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 17% and 58% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	61

Financial Highlights Master Investment Portfolio

	LifePath 2035 Master Portfolio
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Total Investment Return
Total investment return		15.83%			14.35%			(0.82)%			21.21%	2
Ratios to Average Net Assets
Total expenses		0.63%	3,4,5		0.76%	6,7,8		1.34%	6,9,10		13.23%	6,11
Total expenses after fees waived		0.25%	3,4,5		0.25%	6,7,8		0.22%	6,9,10		0.19%	6,11
Net investment income12		2.29%	3,4,5		2.42%	6,7,8		2.50%	6,9,10		2.33%	6,11
Supplemental Data
Net assets, end of period (000)		$45,363			$25,732			$7,426			$149
Portfolio turnover		39%	13		4%	14		21%	14		1%

¹ Commencement of operations.

² Aggregate total investment return.

³ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio, except the total expenses for the period ended December 31, 2010, which include gross expenses. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁴ Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio allocated fees waived of 0.05%.

⁵ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio allocated expenses and/or net investment income.

⁶  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, except the total expenses for the period ended December 31, 2010, which include gross expenses. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange traded funds.

⁷  Includes the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series’ allocated fees waived of 0.05%.

⁸  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁹  Includes the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series’ allocated fees waived of 0.04%.

¹⁰ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.14%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

¹¹ Annualized.

¹² Includes the LifePath Master Portfolio’s share of the allocated net investment income from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, except for the year ended December 31, 2013, which also includes International Tilts Master Portfolio and Russell 1000^® Index Master Portfolio.

¹³ Includes the purchases and sales of the underlying funds and the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

¹⁴ Excludes purchases and sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 13% and 47% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
62	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights Master Investment Portfolio

	LifePath 2045 Master Portfolio
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Total Investment Return
Total investment return		18.99%			15.84%			(1.96)%			24.26%	2
Ratios to Average Net Assets
Total expenses		0.70%	3,4,5		1.01%	6,7,8		2.58%	6,9,10		13.23%	6,11
Total expenses after fees waived		0.24%	3,4,5		0.24%	6,7,8		0.20%	6,9,10		0.17%	6,11
Net investment income12		2.47%	3,4,5		2.54%	6,7,8		2.43%	6,9,10		2.25%	6,11
Supplemental Data
Net assets, end of period (000)		$25,479			$12,178			$3,249			$142
Portfolio turnover		38%	13		4%	14		35%	14		1%

¹ Commencement of operations.

² Aggregate total investment return.

³ Includes the Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio, except the total expenses for the period ended December 31, 2010, which include gross expenses. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁴ Includes the Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio, Series allocated fees waived of 0.05%.

⁵ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio allocated expenses and/or net investment income.

⁶  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, except the total expenses for the period ended December 31, 2010, which include gross expenses. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange traded funds.

⁷ Includes the Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series allocated fees waived of 0.06%.

⁸ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁹ Includes the Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series allocated fees waived of 0.03%.

¹⁰ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.16%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

¹¹ Annualized.

¹² Includes the LifePath Master Portfolio’s share of the allocated net investment income from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, except for the year ended December 31, 2013, which also includes International Tilts Master Portfolio and Russell 1000^® Index Master Portfolio.

¹³ Includes purchases or sales of the underlying funds and the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

¹⁴ Excludes purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15% and 71% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	63

Financial Highlights Master Investment Portfolio

	LifePath 2055 Master Portfolio
	Year Ended December 31,									Period June 30, 20101 to December  31, 2010
	2013			2012			2011
Total Investment Return
Total investment return		21.49%			16.96%			(3.52)%			25.83%	2
Ratios to Average Net Assets
Total expenses		1.01%	3,4,5		2.41%	6,7,8		14.66%	6,9,10		13.13%	6,11
Total expenses after fees waived		0.24%	3,4,5		0.25%	6,7,8		0.19%	6,9,10		0.16%	6,11
Net investment income12		2.65%	3,4,5		2.66%	6,7,8		2.30%	6,9,10		2.21%	6,11
Supplemental Data
Net assets, end of period (000)		$8,978			$3,775			$494			$144
Portfolio turnover		67%	13		7%	14		51%	14		1%

¹  Commencement of operations.

²  Aggregate total investment return.

³  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio, except the total expenses for the period ended December 31, 2010, which include gross expenses. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁴  Includes the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio allocated fees waived of 0.06%.

⁵  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.12%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio allocated expenses and/or net investment income.

⁶  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, except the total expenses for the period ended December 31, 2010, which include gross expenses. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange traded funds.

⁷  Includes the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series allocated fees waived of 0.07%.

⁸  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁹  Includes the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series allocated fees waived of 0.06%.

¹⁰ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.17%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

¹¹ Annualized.

¹² Includes the LifePath Master Portfolio’s share of the allocated net investment income from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, except for the year ended December 31, 2013, which also includes International Tilts Master Portfolio and Russell 1000^® Index Master Portfolio.

¹³ Includes purchases or sales of the underlying funds and the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

¹⁴ Excludes purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 27% and 95% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
64	BLACKROCK FUNDS III	DECEMBER 31, 2013

Notes to Financial Statements Master Investment Portfolio

1. Organization:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust. The financial statements and these accompanying notes relate to four series of MIP: LifePath^® 2025 Master Portfolio, LifePath^® 2035 Master Portfolio, LifePath^® 2045 Master Portfolio and LifePath^® 2055 Master Portfolio (each, a “Master Portfolio” and collectively, the “Master Portfolios”).

As of December 31, 2013, the investment of LifePath 2025 Master Portfolio, LifePath 2035 Master Portfolio, LifePath 2045 Master Portfolio and LifePath 2055 Master Portfolio in Active Stock Master Portfolio represented 27.6%, 34.6%, 38.5% and 40.3%, respectively, of net assets. Active Stock Master Portfolio’s financial statements, included in filings under MIP, are available, without charge, on the US Securities and Exchange Commissions (“SEC’s”) website at http://www.sec.gov.

As of December 31, 2013, the investment of LifePath 2025 Master Portfolio and LifePath 2035 Master Portfolio in CoreAlpha Bond Master Portfolio represented 35.2% and 24.0%, respectively, of net assets. The financial statements of CoreAlpha Bond Master Portfolio, including the Schedule of Investments, can be read in conjunction with the LifePath 2025 Master Portfolio and LifePath 2030 Master Portfolio’s financial statements. CoreAlpha Bond Master Portfolio’s financial statements, included in filings under MIP, are available, without charge, on the SEC’s website at http://www.sec.gov.

LifePath 2025 Master Portfolio, LifePath 2035 Master Portfolio, LifePath 2045 Master Portfolio and LifePath 2055 Master Portfolio (each, a “LifePath Master Portfolio” and collectively, the “LifePath Master Portfolios”) will each generally invest in other registered investment companies (each an “Underlying Fund” and collectively the “Underlying Funds”) that are managed by subsidiaries of BlackRock, Inc. (“BlackRock”) and its affiliates and affiliates of the LifePath Master Portfolios. The LifePath Master Portfolios may also invest in other master portfolios (“Underlying Master Portfolios”) that are managed by subsidiaries of BlackRock.

The value of a LifePath Master Portfolio’s investment in each of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Russell 1000 Index Master Portfolio and Master Small Cap Index Series reflects that LifePath Master Portfolio’s proportionate interest in the net assets of that underlying Master Portfolio. As of December 31, 2013, the LifePath Master Portfolios held interests in Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio as follows:

	Active Stock Master Portfolio			ACWI ex-US Index Master Portfolio			CoreAlpha Bond Master Portfolio			International Tilts Master Portfolio			Master Small Cap Index Series			Russell 1000 Index Master Portfolio
LifePath 2025 Master Portfolio		0.55	%		0.62	%		0.61	%		0.64	%		0.26	%		0.18	%
LifePath 2035 Master Portfolio		0.53	%		0.63	%		0.32	%		0.61	%		0.16	%		0.16	%
LifePath 2045 Master Portfolio		0.33	%		0.43	%		0.11	%		0.40	%		0.07	%		0.14	%
LifePath 2055 Master Portfolio		0.12	%		0.16	%		0.01	%		0.17	%		0.02	%		0.07	%

2. Significant Accounting Policies:

The Master Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates. The following is a summary of significant accounting policies followed by the Master Portfolios:

Valuation: US GAAP defines fair value as the price the Master Portfolios would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Master Portfolios determine the fair values of their financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (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 provide oversight of the pricing function for the Master Portfolio for all financial instruments. Investments in open-end registered investment companies are valued at net asset value each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value. Equity investments traded on a recognized securities exchange or the NASDAQ Stock Market (“NASDAQ”) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale 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 are valued at the last available bid price. If no bid price is available, the prior day’s price will be used, unless it is determined that such prior day’s price no longer reflects the fair value of the security. The market value of the LifePath Master Portfolio’s investments in the Underlying Funds is based on the published NAV of each Underlying Fund computed as of the close of regular trading on the New York Stock Exchange (“NYSE”) on days when the NYSE is open. The LifePath Master Portfolios record their proportionate investment in the Underlying Master Portfolios at fair value which is based upon their pro rata ownership in the net assets of the Underlying Master Portfolios.

BLACKROCK FUNDS III DECEMBER 31, 2013 65

Notes to Financial Statements (continued) Master Investment Portfolio

In the event that 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 Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that each Master Portfolio might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deem relevant consistent with the principles of fair value measurement, which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. The market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and is adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. 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 Master Portfolios’ pricing vendors, a regular review 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 Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-divided dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Master Portfolio 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 the accrual basis.

Each LifePath Master Portfolio records daily its proportionate share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Russell 1000 Index Master Portfolio and Master Small Cap Index Series income, expenses and realized and unrealized gains and losses.

Income Taxes: Each Master Portfolio is classified as a partnership for federal income tax purposes. As such, each investor in a Master Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Master Portfolio. Therefore, no federal income tax provision is required. It is intended that each Master Portfolio’s assets will be managed so an investor in the Master Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

Each Master Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each Master Portfolio’s US federal tax returns remains open for each of the three years ended December 31, 2013 and period ended December 31, 2010. The statutes of limitations on each Master Portfolio’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 each LifePath Master Portfolio’s facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

Other: Expenses directly related to a Master Portfolio are charged to that Master Portfolio. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods.

3. Securities and Other Investments:

Securities Lending: The LifePath Master Portfolios may lend securities to approved borrowers, such as banks, brokers and other financial institutions. The borrower pledges cash, securities issued or guaranteed by the US government or irrevocable letters of credit issued by a bank as collateral. The initial collateral received by the LifePath Master Portfolios should 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 in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the LifePath Master Portfolio and any additional required collateral is delivered to the LifePath Master Portfolio on the next business day. Securities lending income, as disclosed in the Statements of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, a LifePath Master Portfolio earns dividend or interest income on the securities loaned but does not receive interest income on the 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 securities on loan and the value of the related collateral are shown separately in the Statements of Assets and Liabilities as a component of investments at value, and collateral on securities loaned at value, respectively. The cash collateral invested by the securities lending

66 BLACKROCK FUNDS III DECEMBER 31, 2013

Notes to Financial Statements (continued) Master Investment Portfolio

agent, BlackRock Institutional Trust Co., N.A. (“BTC”), if any, is disclosed in the Schedules of Investments. BTC is an affiliate of BlackRock.

Securities lending transactions are entered into by the Master Portfolios under Master Securities Lending Agreements (“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 LifePath Master Portfolios, as lenders, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender 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 a MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the LifePath Master Portfolios can resell or re-pledge the collateral and the borrower can resell or re-pledge the loaned securities.

The following table is a summary of the LifePath Master Portfolios’ open securities lending agreements by counterparty, which are subject to a MSLA on a net payment basis as of December 31, 2013:

LifePath 2025 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
JP Morgan Clearing Corp.	$	874,224	$	(874,224	)		—
LifePath 2035 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
UBS Securities LLC	$	145,800	$	(145,800	)		—
LifePath 2045 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital, Inc.	$	23,328	$	(23,328	)		—
Morgan Stanley & Co. LLC		201,744		(201,744	)		—
Total	$	225,072	$	(225,072	)		—
LifePath 2055 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
UBS Securities LLC	$	2,916	$	(2,916	)		—

¹  Excess of collateral received from the individual counterparty is not shown for financial reporting purposes. Collateral has been received in connection with securities lending transactions as follows:

LifePath 2025 Master Portfolio	$	900,900
LifePath 2035 Master Portfolio	$	148,750
LifePath 2045 Master Portfolio	$	231,025
LifePath 2055 Master Portfolio	$	2,975

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 this risk, the LifePath Master Portfolios benefit from a borrower default indemnity provided by BlackRock. BlackRock’s indemnity allows for full replacement of the securities lent. A LifePath Master Portfolio also could suffer 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. During the year ended December 31, 2013, any securities on loan were collateralized by cash.

4. Investment Advisory Agreement and Other Transactions with Affiliates:

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

MIP, on behalf of the LifePath Master Portfolios, entered into an Investment Advisory Agreement with BlackRock Fund Advisors (“BFA” or the “Manager”), the LifePath Master Portfolios’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory services. The Manager is responsible for the management of each LifePath Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each LifePath Master Portfolio. For such services, each LifePath Master Portfolio pays BFA a monthly fee based on a percentage of such LifePath Master Portfolio’s average daily net assets. Each LifePath Master Portfolio pays BFA at an annual rate of 0.35% of the average daily net assets of each respective LifePath Master Portfolio.

MIP, on behalf of the LifePath Master Portfolios, entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL”) (the “Administrator”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL, in consideration thereof, has agreed to bear all of the LifePath Master Portfolios’ and MIP’s ordinary operating expenses excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the LifePath Master Portfolios.

From time to time, BAL may waive such fees in whole or in part. Any such waiver will reduce the expenses of the LifePath Master Portfolio and, accordingly, have a favorable impact on its performance. BAL may delegate certain of its administration duties to sub-administrators.

BAL is not entitled to compensation for providing administration services to the LifePath Master Portfolios, for so long as BAL is entitled to compensation for providing administration services to corresponding feeder funds that invest substantially all of their assets in the LifePath Master Portfolios, or BAL (or an affiliate) receives investment advisory fees from the LifePath Master Portfolios.

BLACKROCK FUNDS III DECEMBER 31, 2013 67

Notes to Financial Statements (continued) Master Investment Portfolio

The fees and expenses of MIP’s trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the LifePath Master Portfolios. BFA has contractually agreed to waive investment advisory fees charged to each LifePath Master Portfolio in an amount equal to investment advisory fees and administration fees, if any, received by BFA, BAL or previous affiliates, from each affiliated investment company in which the LifePath Master Portfolios invest through April 30, 2014. BFA has also contractually agreed to cap the expenses of the LifePath Master Portfolios at the rate at which the Master Portfolios pay an advisory fee to BFA by providing an offsetting credit against the investment advisory fees paid by the LifePath Master Portfolios in an amount equal to the independent expenses. These contractual waivers are effective through April 30, 2023. The amounts of the waivers, if any, are shown as fees waived by Manager in the Statements of Operations.

The LifePath Master Portfolios received an exemptive order from the Securities and Exchange Commission permitting them, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BTC as the securities lending agent. BTC may, on behalf of a LifePath Master Portfolio, invest cash collateral received by the LifePath Master Portfolio for such loans, in a private investment company managed by the Manager, or its affiliates, or in registered money market funds advised by the Manager or its affiliates. The market value of securities on loan and the value of the related collateral, if applicable, are shown in the Statements of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC, if any, is disclosed in the Schedules of Investments. Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of rebates paid to, or fees paid by, borrowers of securities. The LifePath Master Portfolios retain 65% of securities lending income and pays a fee to BTC equal to 35% of such income. The Master Portfolios benefit from a borrower default indemnity provided by BlackRock. As securities lending agent, BTC bears all operational costs directly related to securities lending as well as the cost of borrower default indemnification. BTC does not receive any fees for managing the cash collateral. The share of income earned by each Master Portfolio is shown as securities lending — affiliated — net in the Statements of Operations. For the year ended December 31, 2013, BTC received securities lending agent fees related to securities lending activities for the LifePath Master Portfolios as follows:

LifePath 2025 Master Portfolio	$	1,201
LifePath 2035 Master Portfolio	$	678
LifePath 2045 Master Portfolio	$	396
LifePath 2055 Master Portfolio	$	188

Each LifePath Master Portfolio may invest its positive cash balances in certain money market funds managed by BFA or an affiliate. The income earned on these temporary cash investments is included in income-affiliated in the Statements of Operations.

During the year ended December 31, 2013, the LifePath Master Portfolios received payments from an affiliate to compensate for foregone securities lending revenue, which is shown as other income — affiliated in the Statements of Operations.

Certain officers and/or trustees of MIP are officers and/or directors of BlackRock or its affiliates.

5. Purchases and Sales:

Purchases and sales of investments in the underlying Funds and underlying Master Portfolios and excluding short-term securities for the year ended December 31, 2013 were as follows:

	Purchases		Sales
LifePath 2025 Master Portfolio	$	33,435,340	$	13,560,844
LifePath 2035 Master Portfolio	$	28,788,222	$	13,627,574
LifePath 2045 Master Portfolio	$	17,511,228	$	7,173,783
LifePath 2055 Master Portfolio	$	8,260,933	$	4,138,401

6. Bank Borrowings:

MIP, on behalf of the LifePath Master Portfolios, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”) is a party to a 364-day, $800 million credit agreement with a group of lenders, under which a LifePath Master Portfolio may borrow to fund shareholder redemptions. The agreement expires in April 2014. Excluding commitments designated for a certain individual fund, other Participating Funds, including the LifePath Master Portfolios, can borrow up to an aggregate commitment amount of $500 million, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.065% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. Participating Funds paid administration and arrangement fees, which, along with commitment fees, were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. The LifePath Master Portfolios did not borrow under the credit agreement during the year ended December 31, 2013.

7. Market and Credit Risk:

In the normal course of business, the LifePath Master Portfolios invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the LifePath Master Portfolios may decline in response to certain events, including those directly involving the issuers whose securities are owned by the LifePath Master Portfolios; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the LifePath Master Portfolios may be exposed to counterparty credit risk, or the risk that an entity with which the LifePath Master Portfolios have unsettled or open transactions may fail to or be unable to perform on its commitments. The LifePath Master Portfolios

68 BLACKROCK FUNDS III DECEMBER 31, 2013

Notes to Financial Statements (concluded) Master Investment Portfolio

manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the LifePath Master Portfolios to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the LifePath Master Portfolios’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statements of Assets and Liabilities, less any collateral held by the LifePath Master Portfolios.

8. Subsequent Events:

Management has evaluated the impact of all subsequent events on the LifePath Master Portfolios 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.

BLACKROCK FUNDS III DECEMBER 31, 2013 69

Report of Independent Registered Public Accounting Firm Master Investment Portfolio

To the Board of Trustees of Master Investment Portfolio and the Interestholders of LifePath 2025 Master Portfolio, LifePath 2035 Master Portfolio, LifePath 2045 Master Portfolio and LifePath 2055 Master Portfolio:

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of LifePath 2025 Master Portfolio, LifePath 2035 Master Portfolio, LifePath 2045 Master Portfolio and LifePath 2055 Master Portfolio (the “Master Portfolios”), each a series of Master Investment Portfolio, at December 31, 2013, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolios’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2014

70 BLACKROCK FUNDS III DECEMBER 31, 2013

Officers and Trustees

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 107 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 107 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy from 2002 to 2012; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 107 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President, Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 107 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	President, London Center for Policy Research since 2012; Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and Professor thereof from 1980 to 2005; President Emeritus, Hudson Institute (policy research organization) from 2011 to 2012, President thereof from 1997 to 2011 and Trustee from 1980 to 2012; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (global internet services) since 2005; Director, Cerego, LLC (educational software) since 2005; Director, Cybersettle (online adjudication) since 2009; Director, AIMS Worldwide, Inc. (marketing) from 2007 to 2012.	33 RICs consisting of 107 Portfolios	None
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 107 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Director, The West Penn Allegheny Health System (a not-for-profit health system) from 2008 to 2013; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 107 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 107 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None

BLACKROCK FUNDS III DECEMBER 31, 2013 71

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1 (concluded)
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Immediate past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	33 RICs consisting of 107 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Director, Alkon Corporation (pneumatics) since 1992; Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh from 2005 to 2013 and Dean thereof from 1997 to 2005; Director, Tippman Sports (recreation) from 2005 to 2013; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 107 Portfolios	None
	1   Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved extensions in terms of Trustees who turn 72 prior to December 31, 2013.
	2   Date shown is the earliest date a person has served for the Trust/MIP covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the Trust’s/MIP’s Board. As a result, although the chart shows certain Trustees as joining the Trust’s/MIP’s board in 2009, those Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees3
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	144 RICs consisting of 278 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	144 RICs consisting of 278 Portfolios	None
	3   Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

72 BLACKROCK FUNDS III DECEMBER 31, 2013

Officers and Trustees (concluded)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers1
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock since 2000; Head of the Global Cash Group since 2013; Co-head of the Global Cash and Securities Lending Group from 2010 to 2013; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009; and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2009	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2009	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Managing Director of BlackRock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary of the BlackRock-advised funds from 2010 to 2012; General Counsel and Chief Operating Officer of Uhuru Capital Management from 2009 to 2010; Executive Director and Counsel of Goldman Sachs Asset Management from 2005 to 2009.
	1   Officers of the Trust/MIP serve at the pleasure of the Board.

Investment Advisor BlackRock Fund Advisors San Francisco, CA 94105	Custodian and Accounting Agent State Street Bank and Trust Company Boston, MA 02110	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Sidley Austin LLP New York, NY 10019
Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP Philadelphia, PA 19103	Address of the Trust 400 Howard Street San Francisco, CA 94105

BLACKROCK FUNDS III DECEMBER 31, 2013 73

Additional Information

General Information

Electronic Delivery

Electronic copies of most financial reports and prospectuses are available on the LifePath Portfolios’ website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the LifePath Portfolio’s electronic delivery program.

To enroll:

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:

Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.

Shareholders Who Hold Accounts Directly with BlackRock:

1) Access the BlackRock website at

http://www.blackrock.com/edelivery

2) Select “eDelivery” under the “More Information” section

3) Log into your account

Householding

The LifePath Portfolios 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 LifePath Portfolios at (800) 441-7762.

Availability of Quarterly Schedule of Investments

Each LifePath Portfolio/LifePath Master Portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Each LifePath Portfolio’s/LifePath Master Portfolio’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. Each LifePath Portfolio’s/LifePath Master Portfolio’s 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 each LifePath Portfolio/LifePath Master Portfolio use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how each LifePath Portfolio/LifePath Master Portfolio voted proxies relating to securities held in each LifePath Portfolio’s/LifePath Master Portfolio’s portfolio during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM EST 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/funds.

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.

74 BLACKROCK FUNDS III DECEMBER 31, 2013

Additional Information (concluded)

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.

BLACKROCK FUNDS III DECEMBER 31, 2013 75

A World-Class 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.

Equity Funds

BlackRock ACWI ex-US Index Fund

BlackRock All-Cap Energy & Resources Portfolio

BlackRock Basic Value Fund

BlackRock Capital Appreciation Fund

BlackRock Commodity Strategies Fund

BlackRock Disciplined Small Cap Core Fund

BlackRock Emerging Markets Fund

BlackRock Emerging Markets Dividend Fund

BlackRock Emerging Markets Long/Short Equity Fund

BlackRock Energy & Resources Portfolio

BlackRock Equity Dividend Fund

BlackRock EuroFund

BlackRock Flexible Equity Fund

BlackRock Focus Growth Fund

BlackRock Global Dividend Portfolio

BlackRock Global Long/Short Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Global SmallCap Fund

BlackRock Health Sciences Opportunities Portfolio

BlackRock International Fund

BlackRock International Index Fund

BlackRock International Opportunities Portfolio

BlackRock Large Cap Core Fund

BlackRock Large Cap Core Plus Fund

BlackRock Large Cap Growth Fund

BlackRock Large Cap Value Fund

BlackRock Latin America Fund

BlackRock Long-Horizon Equity Fund

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Mid Cap Value Opportunities Fund

BlackRock Natural Resources Trust

BlackRock Pacific Fund

BlackRock Real Estate Securities Fund

BlackRock Russell 1000^® Index Fund

BlackRock Science & Technology Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock Small Cap Growth Fund II

BlackRock Small Cap Index Fund

BlackRock S&P 500 Stock Fund

BlackRock U.S. Opportunities Portfolio

BlackRock Value Opportunities Fund

Taxable Fixed Income Funds

BlackRock Bond Index Fund

BlackRock Core Bond Portfolio

BlackRock CoreAlpha Bond Fund

BlackRock CoRI Funds

2015

2017

2019

2021

2023

BlackRock Emerging Markets Flexible Dynamic Bond Portfolio

BlackRock Floating Rate Income Portfolio

BlackRock Global Long/Short Credit Fund

BlackRock GNMA Portfolio

BlackRock High Yield Bond Portfolio

BlackRock Inflation Protected Bond Portfolio

BlackRock International Bond Portfolio

BlackRock Investment Grade Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Secured Credit Portfolio

BlackRock Short Obligations Fund

BlackRock Short-Term Treasury Fund

BlackRock Strategic Income Opportunities Portfolio

BlackRock Total Return Fund

BlackRock U.S. Government Bond Portfolio

BlackRock U.S. Mortgage Portfolio

BlackRock Ultra-Short Obligations Fund

BlackRock World Income Fund

Municipal Fixed Income Funds

BlackRock California Municipal Bond Fund

BlackRock High Yield Municipal Fund

BlackRock National Municipal Fund

BlackRock New Jersey Municipal Bond Fund

BlackRock New York Municipal Bond Fund

BlackRock Pennsylvania Municipal Bond Fund

BlackRock Short-Term Municipal Fund

BlackRock Strategic Municipal Opportunities Fund

Mixed Asset Funds

BlackRock Balanced Capital Fund	LifePath Active Portfolios			LifePath Index Portfolios
BlackRock Emerging Market Allocation Portfolio		2015	2040		Retirement	2040
BlackRock Global Allocation Fund		2020	2045		2020	2045
BlackRock Managed Volatility Portfolio		2025	2050		2025	2050
BlackRock Multi-Asset Income Portfolio		2030	2055		2030	2055
BlackRock Multi-Asset Real Return Fund		2035			2035
BlackRock Strategic Risk Allocation Fund
BlackRock Prepared Portfolios	LifePath Portfolios
Conservative Prepared Portfolio		Retirement	2040
Moderate Prepared Portfolio		2020	2045
Growth Prepared Portfolio		2025	2050
Aggressive Growth Prepared Portfolio		2030	2055
		2035

BlackRock mutual funds are currently distributed by BlackRock Investments, LLC. You should consider the investment objectives, risks, charges and expenses of the funds under consideration carefully before investing. Each fund’s prospectus contains this and other information and is available at www.blackrock.com or by calling (800) 441-7762 or from your financial advisor. The prospectus should be read carefully before investing.

76 BLACKROCK FUNDS III DECEMBER 31, 2013

This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the LifePath Portfolios unless accompanied or preceded by that LifePath Portfolio’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.

Investment in foreign securities involves special risks including fluctuating foreign exchange rates, foreign government regulations, differing degrees of liquidity and the possibility of substantial volatility due to adverse political, economic or other developments.

LPincre-12/13-AR

DECEMBER 31, 2013

  ANNUAL REPORT  

BlackRock Funds III

^Ø   LifePath^® Retirement Portfolio

^Ø   LifePath 2020 Portfolio^®

^Ø   LifePath 2030 Portfolio^®

^Ø   LifePath 2040 Portfolio^®

^Ø   LifePath^® 2050 Portfolio

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
Dear Shareholder		3
Annual Report:
Portfolio Summaries		4
About Portfolio Performance		16
Disclosure of Expenses		17
Portfolio Financial Statements:
Statements of Assets and Liabilities		18
Statements of Operations		19
Statements of Changes in Net Assets		20
Portfolio Financial Highlights		23
Portfolio Notes to Financial Statements		48
Portfolio Report of Independent Registered Public Accounting Firm		54
Important Tax Information		54
Master Portfolio Information		55
Master Portfolio Financial Statements:
Schedules of Investments		57
Statements of Assets and Liabilities		67
Statements of Operations		68
Statements of Changes in Net Assets		69
Master Portfolio Financial Highlights		71
Master Portfolio Notes to Financial Statements		76
Master Portfolio Report of Independent Registered Public Accounting Firm		81
Officers and Trustees		82
Additional Information		85
A World-Class Mutual Fund Family		87

2 BLACKROCK FUNDS III DECEMBER 31, 2013

Dear Shareholder

Risk assets (such as equities) powered higher in 2013, for the most part unscathed by ongoing political and economic uncertainty. While monetary policy was the main driving force behind the rally in risk assets, it was also the main culprit for the bouts of volatility during the year.

Equity markets rallied right out of the gate in January with cash pouring back in from the sidelines after a potential US fiscal crisis (i.e., the “fiscal cliff”) was averted with a last-minute tax deal. Key indicators signaling modest but broad-based improvements in the world’s major economies and a calming in Europe’s debt troubles fostered an aura of comfort for investors. Global economic momentum slowed in February, however, and the pace of the rally moderated. In the months that followed, US stocks outperformed international stocks, as the US showed greater stability than most other regions. Slow but positive growth was sufficient to support corporate earnings, while uncomfortably high unemployment reinforced expectations that the Federal Reserve would continue its aggressive monetary stimulus program. International markets experienced higher levels of volatility given a resurgence of political instability in Italy, a banking crisis in Cyprus and a generally poor outlook for European economies. Emerging markets significantly lagged the rest of the world as growth in these economies fell short of expectations.

Financial markets were rattled in May when Fed Chairman Bernanke mentioned the possibility of reducing — or “tapering” — the central bank’s asset purchase programs — comments that were widely misinterpreted as signaling an end to the Fed’s zero-interest-rate policy. US Treasury yields rose sharply, triggering a steep sell-off across fixed income markets. (Bond prices move in the opposite direction of yields.) Equity prices also suffered as investors feared the implications of a potential end of a program that had greatly supported the markets. Risk assets rebounded in late June, however, when the Fed’s tone turned more dovish, and improving economic indicators and better corporate earnings helped extend gains through most of the summer.

The fall was a surprisingly positive period for most asset classes as the Fed defied market expectations with its decision to delay tapering. Easing of political tensions that had earlier surfaced in Egypt and Syria and the re-election of Angela Merkel as Chancellor of Germany also boosted investor sentiment. Higher volatility returned in late September when the US Treasury Department warned that the national debt would soon breach its statutory maximum. The ensuing political brinksmanship led to a partial government shutdown, roiling global financial markets through the first half of October, but the rally quickly resumed when politicians engineered a compromise to reopen the government and extend the debt ceiling, at least temporarily.

The remainder of the year was generally positive for stock markets in the developed world, although investors continued to grapple with uncertainty about when and how much the Fed would scale back on stimulus. On the one hand, persistent weak growth and low inflation provided significant latitude for monetary policy decisions and investors were encouraged by dovish comments from Fed Chair-to-be Janet Yellen. On the other hand, US housing and manufacturing reports had begun to signal fundamental improvement in the economy. The long-awaited taper announcement ultimately came in mid-December. The Fed reduced the amount of its monthly asset purchases, but at the same time, extended its time horizon for maintaining low short-term interest rates. Markets reacted positively as this move signaled the Fed’s perception of real improvement in the economy and investors felt relief from the tenacious anxiety that had gripped them throughout the year.

Accommodative monetary policy and the avoidance of major risks made 2013 a strong year for most equity markets. US stocks were the strongest performers for the six- and 12-month periods ended December 31. In contrast, emerging markets were weighed down by uneven growth and structural imbalances. Rising US Treasury yields led to a rare annual loss in 2013 for Treasury bonds and other high-quality fixed income sectors including tax-exempt municipals and investment grade corporate bonds. High yield bonds, to the contrary, generated gains driven by income-oriented investors seeking yield in the low-rate environment. Short-term interest rates remained near zero, keeping yields on money market securities near historical lows.

At BlackRock, we believe investors need to think globally and extend their scope across a broader array of asset classes and be prepared to move freely as market conditions change over time. We encourage you to talk with your financial advisor and visit www.blackrock.com for further insight about investing in today’s world.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

“While monetary policy was the main driving force behind the rally in risk assets, it was also the main culprit for the bouts of volatility during the year.”

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2013
	6-month			12-month
US large cap equities (S&P 500® Index)		16.31	%		32.39	%
US small cap equities (Russell 2000® Index)		19.82			38.82
International equities (MSCI Europe, Australasia, Far East Index)		17.94			22.78
Emerging market equities (MSCI Emerging Markets Index)		7.70			(2.60	)
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)		0.03			0.07
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		(3.10	)		(7.83	)
US investment grade bonds (Barclays US Aggregate Bond Index)		0.43			(2.02	)
Tax-exempt municipal bonds (S&P Municipal Bond Index)		0.00			(2.55	)
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)		5.94			7.44
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

THIS PAGE NOT PART OF YOUR FUND REPORT 3

Portfolio Summary as of December 31, 2013 LifePath Portfolios

Portfolio Management Commentary

How did each Portfolio perform?

Ÿ All share classes of the LifePath Portfolios with target dates of 2020, 2030, 2040 and 2050 and the LifePath Retirement Portfolio (together, the “LifePath Portfolios”) invest in their respective LifePath Master Portfolio.

Ÿ Effective April 30, 2013, the LifePath Retirement Portfolio’s primary benchmark, the Russell 3000^® Index, was replaced by the Barclays US Aggregate Bond Index because BlackRock Fund Advisors (“BFA”), the LifePath Master Portfolios’ investment advisor, believes that the Barclays US Aggregate Bond Index more closely reflects the LifePath Retirement Portfolio’s holdings based on its position in the glide path. Effective April 30, 2013, the primary benchmark of the LifePath Portfolios with target dates of 2020, 2030, 2040 and 2050, the Russell 3000^® Index, was replaced by the Russell 1000^® Index because BFA believes that the Russell 1000^® Index more closely reflects the LifePath Portfolios’ holdings based on their position in the glide path.

Ÿ For the 12-month period ended December 31, 2013, all of the LifePath Portfolios underperformed their respective custom benchmarks. The returns for the LifePath Portfolios include LifePath Portfolio expenses. The custom benchmarks have no expenses associated with performance.

What factors influenced performance?

Ÿ Equity markets largely outperformed fixed income markets during the period. As a result, the LifePath Portfolios with longer time horizons generated higher returns on an absolute basis given their larger allocations to equity investments.

Ÿ On the last trading day of 2012, the market rallied at the U.S. close. The timing of the rally came after Asian and European markets had already closed. As a result, when the market opened on the first trading day of 2013, there was a corresponding increase in the returns of the international benchmark indices; therefore causing a negative fair value reversal that was an impact throughout the one year period of 2013. In the shorter-dated LifePath Portfolios, the most significant detractor from relative performance was exposure to CoreAlpha Bond Master Portfolio (“CoreAlpha Bond”). CoreAlpha Bond’s positioning in mortgage-backed securities and its sector allocation strategies were negatively impacted by high interest rate volatility following the US Federal Reserve’s initial discussion about tapering its bond-buying stimulus program in May of 2013. CoreAlpha Bond reduced risk in the months that followed. Additionally, CoreAlpha Bond’s global interest rate strategies detracted from results due to country selection.

Ÿ Contributing positively to relative performance was the LifePath Portfolios’ investment in Active Stock Master Portfolio (“Active Stock”), which is held in larger proportions and therefore had a greater positive impact on overall results in the longer-dated LifePath Portfolios. Active Stock invests in BlackRock’s Scientific Active Large Cap Equity strategy and four fundamental active large cap equity strategies, including Large Cap Growth, Fundamental Large Cap Growth, Basic Value and Equity Dividend. During the period, Active Stock’s outperformance was driven by its allocations to the Basic Value and Large Cap Growth strategies. The Basic Value strategy performed well due to stock selection, particularly in the financials and consumer discretionary sectors, and sector allocation, with the greatest benefit coming from its significant underweights in utilities, materials and telecommunications services. In the Large Cap Growth strategy, stock selection within industrials and materials drove strong performance, as did maintaining underweights in the consumer staples and telecommunication services sectors.

Describe recent portfolio activity.

Ÿ Each LifePath Portfolio has its own time horizon, which affects its acceptable level of risk and, in turn, the strategic allocation of its holdings across asset classes. On a quarterly basis, the strategic allocation of each LifePath Portfolio is systematically adjusted to reflect the shareholders’ remaining investment time horizon. During the period, the LifePath Portfolios were rebalanced in accordance with their updated strategic allocations, and daily cash flows were allocated to the underlying funds and instruments as appropriate.

Ÿ In the latter half of the period, the LifePath Portfolios began investing in International Tilts Master Portfolio and BlackRock Emerging Markets Fund, Inc. This additional international equity exposure was offset by the reduction of passive international equity holdings such as ACWI ex-US Index Master Portfolio, iShares MSCI EAFE ETF and iShares MSCI Emerging Markets ETF. In addition, exposure to Active Stock was reduced in order to move the active risk from US large cap exposure to international exposure while maintaining the LifePath Portfolios’ overall risk profile.

Describe portfolio positioning at period end.

Ÿ At period end, each of the LifePath Portfolios was invested according to its respective strategic allocation benchmark within tolerance limits.

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.

4 BLACKROCK FUNDS III DECEMBER 31, 2013

LifePath Portfolios

Glide Path Evolution

Under normal circumstances, the asset allocation of each LifePath Portfolio will change over time according to a “glide path” as each LifePath Portfolio approaches its respective target date. The glide path represents the shifting of asset classes over time. Each LifePath Portfolio’s asset mix becomes more conservative prior to retirement as time elapses. This reflects the need for reduced investment risks as retirement approaches and the need for lower volatility of each LifePath Portfolio, which may be a primary source of income after retirement. As each LifePath Portfolio approaches its target date, its asset allocation will shift so that each LifePath Portfolio invests a greater percentage of its assets in fixed income funds. The asset allocation targets are established by a committee of BlackRock investment professionals that includes the portfolio managers. The investment team, including the portfolio managers and this investment committee, meets regularly to assess market conditions, review the asset allocation targets of each LifePath Portfolio, and determine whether any changes are required to enable each LifePath Portfolio to achieve its investment objective.

Although the asset allocation targets listed for the glide path are general, long-term targets, BlackRock investment professionals may periodically adjust the proportion of equity and fixed income funds in each LifePath Portfolio, based on an assessment of the current market conditions, the potential contribution of each asset class to the expected risk and return characteristics of each LifePath Portfolio, reallocations of each LifePath Portfolio’s composition to reflect intra-year movement along the glide path and other factors. In general, such adjustments will be limited, however, BlackRock investment professionals may determine that a greater degree of variation is warranted to protect each LifePath Portfolio or achieve each LifePath Portfolio’s investment objective.

BLACKROCK FUNDS III DECEMBER 31, 2013 5

LifePath^® Retirement  Portfolio

Investment Objective

LifePath^® Retirement Portfolio is managed for investors seeking income and moderate long-term growth of capital.

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

²  The LifePath Portfolio compares its performance to that of a customized weighted index (the “LifePath Retirement Portfolio Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment advisor’s changes of the benchmark’s weightings over time. The investment advisor adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

³  Effective April 30, 2013, the LifePath Portfolio’s primary benchmark, the Russell 3000^® Index, which is comprised of the Russell 1000^® Index and Russell 2000^® Index, was replaced by the Barclays US Aggregate Bond Index, because BFA believes that the Barclays US Aggregate Bond Index more closely reflects the LifePath Portfolio’s holdings based on its position in the glide path.

Period	Barclays US Aggregate Bond Index			Barclays US  Treasury Inflation Protected Securities (TIPS) Index (Series L)			Cohen & Steers Realty Majors Index			Dow Jones-UBS Commodity Index4			FTSE EPRA/NAREIT Developed Real  Estate Index			MSCI ACWI  ex-US IMI Index			MSCI EAFE Index			Russell 1000® Index			Russell 2000® Index			S&P MidCap 400® Index			S&P 500® Index			S&P SmallCap 600® Index
1/01/04 to 12/31/04		65.0	%		N/A			N/A			N/A			N/A			N/A			8.7	%		N/A			N/A			2.3	%		21.7	%		2.3	%
1/01/05 to 12/31/05		65.0			N/A			N/A			N/A			N/A			N/A			8.7			N/A			N/A			3.2			20.9			2.2
1/01/06 to 12/31/06		52.0			10.2	%		2.7	%		N/A			N/A			N/A			9.9			N/A			N/A			3.3			20.2			1.7
1/01/07 to 12/31/07		52.6			9.6			2.8			N/A			N/A			2.7	%		7.7			N/A			N/A			3.6			19.2			1.8
1/01/08 to 12/31/08		53.0			9.0			1.3			N/A			1.3	%		11.4			N/A			N/A			N/A			4.1			18.0			1.9
1/01/09 to 12/31/09		52.9			9.1			N/A			N/A			1.6			10.8			N/A			N/A			N/A			4.7			18.7			2.2
1/01/10 to 12/31/10		52.9			9.1			N/A			N/A			1.1			10.8			N/A			N/A			N/A			5.0			18.9			2.2
1/01/11 to 12/31/11		52.9			9.1			N/A			N/A			0.8			11.3			N/A			8.6	%		1.7	%		2.8			11.6			1.2
1/01/12 to 12/31/12		52.9			9.1			N/A			1.0	%		0.3			11.3			N/A			21.2			4.2			N/A			N/A			N/A
1/01/13 to 12/31/13		52.9			9.1			N/A			3.7			0.1			10.1			N/A			19.7			4.4			N/A			N/A			N/A

⁴  As of October 1, 2012, each LifePath Portfolio added a new component, the Dow Jones-UBS Commodity Index, to the composite benchmark against which it measures its performance.

See “About Portfolio Performance” on page 16 for descriptions of the indexes.

6 BLACKROCK FUNDS III DECEMBER 31, 2013

LifePath^® Retirement  Portfolio

Performance Summary for the Period Ended December 31, 2013

				Average Annual Total Returns
				1 Year						5 Years						10 Years
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		6.08	%		6.25	%		N/A			9.17	%		N/A			5.21	%		N/A
Investor A		5.96			5.94			0.38	%		8.91			7.74	%		4.95			4.38	%
Investor C		5.57			5.12			4.13			8.05			8.05			4.27			4.27
Class K		6.20			6.54			N/A			9.53			N/A			5.50			N/A
Class R		5.79			5.61			N/A			8.58			N/A			4.73			N/A
LifePath Retirement Portfolio Custom Benchmark		5.74			6.70			N/A			9.38			N/A			5.84			N/A
Barclays US Aggregate Bond Index		0.43			(2.02	)		N/A			4.44			N/A			4.55			N/A
Barclays US TIPS Index (Series L)		(1.31	)		(8.61	)		N/A			5.63			N/A			4.85			N/A
Dow Jones-UBS Commodity Index		1.06			(9.52	)		N/A			1.51			N/A			0.87			N/A
FTSE EPRA/NAREIT Developed Real Estate Index		1.61			3.67			N/A			15.24			N/A			N/A			N/A
MSCI ACWI ex-US IMI Index		15.61			15.82			N/A			13.46			N/A			7.91			N/A
Russell 1000® Index		16.86			33.11			N/A			18.59			N/A			7.78			N/A
Russell 2000® Index		19.82			38.82			N/A			20.08			N/A			9.07			N/A

N/A — Not applicable as share class and index do not have a sales charge or the index does not have a return for the period.

Past performance is not indicative of future results.

BLACKROCK FUNDS III DECEMBER 31, 2013 7

LifePath 2020  Portfolio^®

Investment Objective

LifePath 2020 Portfolio^® is managed for investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2020.

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

²  The LifePath Portfolio compares its performance to that of a customized weighted index (the “LifePath 2020 Portfolio Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment advisor’s changes of the benchmark’s weightings over time. The investment advisor adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

³  Effective April 30, 2013, the LifePath Portfolio’s primary benchmark, the Russell 3000^® Index, which is comprised of the Russell 1000^® Index and Russell 2000^® Index, was replaced by the Russell 1000^® Index, because BFA believes that the Russell 1000^® Index more closely reflects the LifePath Portfolio’s holdings based on its position in the glide path.

Period	Barclays US Aggregate Bond Index			Barclays US  Treasury Inflation Protected Securities (TIPS) Index (Series L)			Cohen & Steers Realty Majors Index			Dow Jones-UBS Commodity Index4			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI Index			MSCI EAFE Index			Russell 1000® Index			Russell 2000® Index			S&P MidCap 400® Index			S&P 500® Index			S&P SmallCap 600® Index
1/01/04 to 12/31/04		34.2	%		N/A			N/A			N/A			N/A			N/A			16.2	%		N/A			N/A			3.0	%		43.8	%		2.8	%
1/01/05 to 12/31/05		35.4			N/A			N/A			N/A			N/A			N/A			15.9			N/A			N/A			4.3			41.4			3.0
1/01/06 to 12/31/06		28.5			5.2	%		4.3	%		N/A			N/A			N/A			16.8			N/A			N/A			5.1			37.5			2.6
1/01/07 to 12/31/07		29.7			5.0			4.5			N/A			N/A			17.2	%		N/A			N/A			N/A			5.4			35.4			2.8
1/01/08 to 12/31/08		31.6			5.1			2.2			N/A			2.2	%		18.4			N/A			N/A			N/A			5.8			32.0			2.7
1/01/09 to 12/31/09		33.8			5.5			N/A			N/A			4.8			16.9			N/A			N/A			N/A			5.8			30.4			2.8
1/01/10 to 12/31/10		35.2			5.7			N/A			N/A			4.0			16.5			N/A			N/A			N/A			5.8			30.2			2.6
1/01/11 to 12/31/11		36.9			6.0			N/A			N/A			3.6			16.6			N/A			13.1	%		1.5	%		3.3			17.6			1.4
1/01/12 to 12/31/12		39.0			6.3			N/A			1.0	%		3.2			15.9			N/A			31.0			3.6			N/A			N/A			N/A
1/01/13 to 12/31/13		40.8			6.6			N/A			3.8			2.8			14.5			N/A			27.8			3.7			N/A			N/A			N/A

⁴  As of October 1, 2012, each LifePath Portfolio added a new component, the Dow Jones-UBS Commodity Index, to the composite benchmark against which it measures its performance.

See “About Portfolio Performance” on page 16 for descriptions of the indexes.

8 BLACKROCK FUNDS III DECEMBER 31, 2013

LifePath 2020  Portfolio^®

Performance Summary for the Period Ended December 31, 2013

				Average Annual Total Returns
				1 Year						5 Years						10 Years
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		8.18	%		9.67	%		N/A			10.94	%		N/A			5.48	%		N/A
Investor A		8.02			9.39			3.65	%		10.66			9.47	%		5.22			4.65	%
Investor C		7.61			8.58			7.58			9.77			9.77			4.50			4.50
Class K		8.39			10.11			N/A			11.33			N/A			5.77			N/A
Class R		7.93			9.20			N/A			10.30			N/A			4.97			N/A
LifePath 2020 Portfolio Custom Benchmark		7.59			10.32			N/A			11.57			N/A			6.22			N/A
Barclays US Aggregate Bond Index		0.43			(2.02	)		N/A			4.44			N/A			4.55			N/A
Barclays US TIPS Index (Series L)		(1.31	)		(8.61	)		N/A			5.63			N/A			4.85			N/A
Dow Jones-UBS Commodity Index		1.06			(9.52	)		N/A			1.51			N/A			0.87			N/A
FTSE EPRA/NAREIT Developed Real Estate Index		1.61			3.67			N/A			15.24			N/A			N/A			N/A
MSCI ACWI ex-US IMI Index		15.61			15.82			N/A			13.46			N/A			7.91			N/A
Russell 1000® Index		16.86			33.11			N/A			18.59			N/A			7.78			N/A
Russell 2000® Index		19.82			38.82			N/A			20.08			N/A			9.07			N/A

N/A — Not applicable as share class and index do not have a sales charge or the index does not have a return for the period.

Past performance is not indicative of future results.

BLACKROCK FUNDS III DECEMBER 31, 2013 9

LifePath 2030  Portfolio^®

Investment Objective

LifePath 2030 Portfolio^® is managed for investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2030.

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

²  The LifePath Portfolio compares its performance to that of a customized weighted index (the “LifePath 2030 Portfolio Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment advisor’s changes of the benchmark’s weightings over time. The investment advisor adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

³  Effective April 30, 2013, the LifePath Portfolio’s primary benchmark, the Russell 3000^® Index, which is comprised of the Russell 1000^® Index and Russell 2000^® Index, was replaced by the Russell 1000^® Index, because BFA believes that the Russell 1000^® Index more closely reflects the LifePath Portfolio’s holdings based on its position in the glide path.

Period	Barclays US Aggregate Bond Index			Barclays US  Treasury Inflation Protected Securities (TIPS) Index (Series L)			Cohen & Steers Realty Majors Index			Dow Jones-UBS Commodity Index4			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI  Index			MSCI EAFE Index			Russell 1000® Index			Russell 2000® Index			S&P MidCap 400® Index			S&P 500® Index			S&P SmallCap 600® Index
1/01/04 to 12/31/04		21.0	%		N/A			N/A			N/A			N/A			N/A			19.4	%		N/A			N/A			3.2	%		53.3	%		3.1	%
1/01/05 to 12/31/05		21.8			N/A			N/A			N/A			N/A			N/A			19.2			N/A			N/A			4.8			50.9			3.3
1/01/06 to 12/31/06		16.7			2.7	%		5.1	%		N/A			N/A			N/A			20.3			N/A			N/A			6.0			46.2			3.0
1/01/07 to 12/31/07		17.4			2.6			5.4			N/A			N/A			20.9	%		N/A			N/A			N/A			6.4			44.1			3.2
1/01/08 to 12/31/08		19.0			2.8			5.5			N/A			N/A			22.4			N/A			N/A			N/A			6.9			40.2			3.2
1/01/09 to 12/31/09		21.0			3.1			N/A			N/A			7.0	%		21.0			N/A			N/A			N/A			6.6			38.2			3.1
1/01/10 to 12/31/10		22.0			3.2			N/A			N/A			6.3			20.7			N/A			N/A			N/A			6.4			38.6			2.8
1/01/11 to 12/31/11		23.5			3.4			N/A			N/A			6.0			20.9			N/A			17.0	%		1.3	%		3.7			22.6			1.6
1/01/12 to 12/31/12		25.8			3.8			N/A			1.0	%		6.0			20.2			N/A			40.2			3.0			N/A			N/A			N/A
1/01/13 to 12/31/13		27.6			4.0			N/A			3.9			5.7			19.3			N/A			36.6			2.9			N/A			N/A			N/A

⁴  As of October 1, 2012, each LifePath Portfolio added a new component, the Dow Jones-UBS Commodity Index, to the composite benchmark against which it measures its performance.

See “About Portfolio Performance” on page 16 for descriptions of the indexes.

10 BLACKROCK FUNDS III DECEMBER 31, 2013

LifePath 2030  Portfolio^®

Performance Summary for the Period Ended December 31, 2013

				Average Annual Total Returns
				1 Year						5 Years						10 Years
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		10.50	%		13.66	%		N/A			12.44	%		N/A			5.73	%		N/A
Investor A		10.42			13.44			7.49	%		12.16			10.96	%		5.47			4.91	%
Investor C		10.03			12.59			11.59			11.22			11.22			4.73			4.73
Class K		10.71			14.05			N/A			12.85			N/A			6.02			N/A
Class R		10.29			13.14			N/A			11.73			N/A			5.19			N/A
LifePath 2030 Portfolio Custom Benchmark		9.69			14.32			N/A			13.36			N/A			6.54			N/A
Barclays US Aggregate Bond Index		0.43			(2.02	)		N/A			4.44			N/A			4.55			N/A
Barclays US TIPS Index (Series L)		(1.31	)		(8.61	)		N/A			5.63			N/A			4.85			N/A
Dow Jones-UBS Commodity Index		1.06			(9.52	)		N/A			1.51			N/A			0.87			N/A
FTSE EPRA/NAREIT Developed Real Estate Index		1.61			3.67			N/A			15.24			N/A			N/A			N/A
MSCI ACWI ex-US IMI Index		15.61			15.82			N/A			13.46			N/A			7.91			N/A
Russell 1000® Index		16.86			33.11			N/A			18.59			N/A			7.78			N/A
Russell 2000® Index		19.82			38.82			N/A			20.08			N/A			9.07			N/A

N/A — Not applicable as share class and index do not have a sales charge or the index does not have a return for the period.

Past performance is not indicative of future results.

BLACKROCK FUNDS III DECEMBER 31, 2013 11

LifePath 2040  Portfolio^®

Investment Objective

LifePath 2040 Portfolio^® is managed for investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2040.

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

²  The LifePath Portfolio compares its performance to that of a customized weighted index (the “LifePath 2040 Portfolio Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment advisor’s changes of the benchmark’s weightings over time. The investment advisor adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

³  Effective April 30, 2013, the LifePath Portfolio’s primary benchmark, the Russell 3000^® Index, which is comprised of the Russell 1000^® Index and Russell 2000^® Index, was replaced by the Russell 1000^® Index, because BFA believes that the Russell 1000^® Index more closely reflects the LifePath Portfolio’s holdings based on its position in the glide path.

Period	Barclays US Aggregate Bond Index			Barclays US  Treasury Inflation Protected Securities (TIPS) Index (Series L)			Cohen & Steers Realty Majors Index			Dow Jones-UBS Commodity Index4			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI  Index			MSCI EAFE Index			Russell 1000® Index			Russell 2000® Index			S&P MidCap 400® Index			S&P 500® Index			S&P SmallCap 600® Index
1/01/04 to 12/31/04		10.0	%		N/A			N/A			N/A			N/A			N/A			20.0	%		N/A			N/A			3.7	%		62.8	%		3.5	%
1/01/05 to 12/31/05		10.6			N/A			N/A			N/A			N/A			N/A			20.0			N/A			N/A			5.5			60.1			3.8
1/01/06 to 12/31/06		7.4			N/A			5.8	%		N/A			N/A			N/A			23.2			N/A			N/A			6.8			53.4			3.4
1/01/07 to 12/31/07		7.7			N/A			5.9			N/A			N/A			N/A			23.5			N/A			N/A			7.2			51.9			3.7
1/01/08 to 12/31/08		9.1			0.5	%		3.2			N/A			3.2	%		25.8	%		N/A			N/A			N/A			7.7			46.9			3.6
1/01/09 to 12/31/09		10.4			1.1			N/A			N/A			8.8			24.5			N/A			N/A			N/A			7.2			44.6			3.4
1/01/10 to 12/31/10		11.2			1.1			N/A			N/A			8.1			24.2			N/A			N/A			N/A			6.9			45.5			3.0
1/01/11 to 12/31/11		12.7			1.3			N/A			N/A			7.9			24.5			N/A			20.1	%		1.2	%		4.0			26.6			1.7
1/01/12 to 12/31/12		15.3			1.6			N/A			1.0	%		8.2			23.7			N/A			47.7			2.5			N/A			N/A			N/A
1/01/13 to 12/31/13		17.3			1.7			N/A			3.9			8.1			23.1			N/A			43.6			2.3			N/A			N/A			N/A

⁴  As of October 1, 2012, each LifePath Portfolio added a new component, the Dow Jones-UBS Commodity Index, to the composite benchmark against which it measures its performance.

See “About Portfolio Performance” on page 16 for descriptions of the indexes.

12 BLACKROCK FUNDS III DECEMBER 31, 2013

LifePath 2040  Portfolio^® 

Performance Summary for the Period Ended December 31, 2013

				Average Annual Total Returns
				1 Year						5 Years						10 Years
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		12.46	%		16.92	%		N/A			13.58	%		N/A			5.80	%		N/A
Investor A		12.33			16.70			10.57	%		13.31			12.09	%		5.54			4.97	%
Investor C		11.87			15.80			14.80			12.31			12.31			4.76			4.76
Class K		12.65			17.41			N/A			14.02			N/A			6.10			N/A
Class R		12.12			16.33			N/A			12.83			N/A			5.23			N/A
LifePath 2040 Portfolio Custom Benchmark		11.38			17.62			N/A			14.79			N/A			6.71			N/A
Barclays US Aggregate Bond Index		0.43			(2.02	)		N/A			4.44			N/A			4.55			N/A
Barclays US TIPS Index (Series L)		(1.31	)		(8.61	)		N/A			5.63			N/A			4.85			N/A
Dow Jones-UBS Commodity Index		1.06			(9.52	)		N/A			1.51			N/A			0.87			N/A
FTSE EPRA/NAREIT Developed Real Estate Index		1.61			3.67			N/A			15.24			N/A			N/A			N/A
MSCI ACWI ex-US IMI Index		15.61			15.82			N/A			13.46			N/A			7.91			N/A
Russell 1000® Index		16.86			33.11			N/A			18.59			N/A			7.78			N/A
Russell 2000® Index		19.82			38.82			N/A			20.08			N/A			9.07			N/A

N/A — Not applicable as share class and index do not have a sales charge or the index does not have a return for the period.

Past performance is not indicative of future results.

BLACKROCK FUNDS III DECEMBER 31, 2013 13

LifePath^® 2050  Portfolio

Investment Objective

LifePath^® 2050 Portfolio is managed for investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2050.

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

²  The LifePath Portfolio compares its performance to that of a customized weighted index (the “LifePath 2050 Portfolio Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment advisor’s changes of the benchmark’s weightings over time. The investment advisor adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

³  Effective April 30, 2013, the LifePath Portfolio’s primary benchmark, the Russell 3000^® Index, which is comprised of the Russell 1000^® Index and Russell 2000^® Index, was replaced by the Russell 1000^® Index, because BFA believes that the Russell 1000^® Index more closely reflects the LifePath Portfolio’s holdings based on its position in the glide path.

⁴  Commencement of operations.

Period	Barclays US Aggregate Bond Index			Dow Jones-UBS Commodity Index5			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI  Index			Russell 1000® Index			Russell 2000® Index			S&P MidCap 400® Index			S&P 500® Index			S&P SmallCap 600® Index
6/30/08 to 12/31/08		1.0	%		N/A			3.6	%		30.4	%		N/A			N/A			10.5	%		49.7	%		4.8	%
1/01/09 to 12/31/09		1.0			N/A			9.1			28.3			N/A			N/A			9.5			47.5			4.6
1/01/10 to 12/31/10		1.1			N/A			9.8			27.4			N/A			N/A			7.6			50.7			3.4
1/01/11 to 12/31/11		2.7			N/A			9.7			27.6			22.8	%		1.1	%		4.4			29.9			1.8
1/01/12 to 12/31/12		5.9			1.0	%		10.2			26.8			54.0			2.1			N/A			N/A			N/A
1/01/13 to 12/31/13		8.2			4.0			10.1			26.3			49.6			1.8			N/A			N/A			N/A

⁵  As of October 1, 2012, each LifePath Portfolio added a new component, the Dow Jones-UBS Commodity Index, to the composite benchmark against which it measures its performance.

See “About Portfolio Performance” on page 16 for descriptions of the indexes.

14 BLACKROCK FUNDS III DECEMBER 31, 2013

LifePath^® 2050  Portfolio 

Performance Summary for the Period Ended December 31, 2013

				Average Annual Total Returns
				1 Year						5 Years						Since Inception
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		14.09	%		19.82	%		N/A			14.62	%		N/A			5.48	%		N/A
Investor A		13.90			19.48			13.21	%		14.33			13.11	%		5.22			4.19	%
Investor C		13.53			18.60			17.60			13.31			13.31			4.20			4.20
Class K		14.29			20.19			N/A			15.02			N/A			5.84			N/A
Class R		13.83			19.19			N/A			13.84			N/A			4.74			N/A
LifePath 2050 Portfolio Custom Benchmark		12.83			20.49			N/A			16.10			N/A			6.64			N/A
Barclays US Aggregate Bond Index		0.43			(2.02	)		N/A			4.44			N/A			4.79			N/A
Dow Jones-UBS Commodity Index		1.06			(9.52	)		N/A			1.51			N/A			(10.44	)		N/A
FTSE EPRA/NAREIT Developed Real Estate Index		1.61			3.67			N/A			15.24			N/A			3.76			N/A
MSCI ACWI ex-US IMI Index		15.61			15.82			N/A			13.46			N/A			2.29			N/A
Russell 1000® Index		16.86			33.11			N/A			18.59			N/A			9.50			N/A
Russell 2000® Index		19.82			38.82			N/A			20.08			N/A			11.54			N/A

N/A — Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

BLACKROCK FUNDS III DECEMBER 31, 2013 15

About Portfolio Performance

Ÿ Institutional Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors.

Ÿ Investor A Shares are subject to a maximum initial sales charge (front-end load) of 5.25% and a service fee of 0.25% per year (but no distribution fee). Certain redemptions of these shares may be subject to a contingent deferred sales charge (“CDSC”) where no initial sales charge was paid at the time of purchase.

Ÿ Investor C Shares are subject to a 1.00% CDSC if redeemed within one year of purchase. In addition, these shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. Prior to May 3, 2010, Investor C Shares’ performance results are those of Institutional Shares restated to reflect Investor C Shares’ fees.

Ÿ Class K Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors. Prior to May 30, 2008 for LifePath Retirement, LifePath 2020, LifePath 2030 and LifePath 2040 Portfolios, Class K Shares’ performance results are those of Institutional Shares restated to reflect Class K Shares’ fees.

Ÿ Class R Shares are not subject to any sales charge (front-end load) or deferred sales charge. These shares are subject to a distribution fee of 0.25% per year and a service fee of 0.25% per year. These shares are available only to certain employer-sponsored retirement plans. Prior to May 3, 2010, Class R Shares’ performance results are those of Institutional Shares restated to reflect Class R Shares’ fees.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. Figures shown in each of the performance tables on the previous pages assume reinvestment of all dividends and distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.

Dividends paid to each class of shares will vary because of the different levels of administration and distribution fees applicable to each class, which are deducted from the income available to be paid to shareholders. The LifePath Portfolios’ administrator waived and/or reimbursed a portion of each LifePath Portfolio’s expenses. Without such waiver, each LifePath Portfolio’s performance would have been lower.

The Barclays US Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis. Barclays US TIPS Index (Series L) is a rules-based, market value-weighted index that tracks inflation-protected securities issued by the US Treasury. The Dow Jones-UBS Commodity Index (DJ-UBSCI) is a broadly diversified index that allows investors to track commodity futures through a single, simple measure. The FTSE EPRA/NAREIT Developed Real Estate Index is designed to track the performance of listed real estate companies and real estate investment trusts (“REITs”) worldwide. By making the index constituents free-float adjusted, liquidity, size and revenue screened, the index is suitable for use as the basis for investment products, such as derivatives and exchange traded funds (ETFs). The MSCI ACWI ex-US IMI Index is a free float-adjusted market capitalization weighted index that measures the equity market performance of the developed (excluding the US) and emerging investable market universe. The Russell 3000^® Index is comprised of the Russell 1000^® Index and the Russell 2000^® Index, which together represent approximately 98% of the total US equity market. The Russell 1000^® Index is an unmanaged index that measures the performance of the large-cap segment of the US equity universe and covers approximately 1000 of the largest securities based on a combination of their market capitalization and current index membership of the US markets. The Russell 2000^® Index is an unmanaged index comprised of the 2,000 largest US companies as determined by total market capitalization.

The LifePath Portfolios’ custom benchmarks are hypothetical representations of the performance of the respective LifePath Portfolio’s asset classes according to their weightings as of the most recent quarter-end. The weightings of the various indexes that are included in the LifePath Portfolios’ custom benchmarks are adjusted quarterly to reflect the LifePath Portfolios’ changing asset allocations over time. As of December 31, 2013, the following indexes are used to calculate the LifePath Portfolios’ custom benchmarks: Barclays US Aggregate Bond Index, Barclays US TIPS Index (Series L), Dow Jones-UBS Commodity Index, FTSE EPRA/NAREIT Developed Real Estate Index, MSCI ACWI ex-US IMI Index, Russell 1000^® Index and Russell 2000^® Index.

16 BLACKROCK FUNDS III DECEMBER 31, 2013

Disclosure of Expenses

Shareholders of each LifePath Portfolio may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including administration fees, service and distribution fees, including 12b-1 fees, and other portfolio expenses. The expense examples shown below (which are based on a hypothetical investment of $1,000 invested on July 1, 2013 and held through December 31, 2013) are intended to assist shareholders both in calculating expenses based on an investment in a LifePath Portfolio and in comparing these expenses with similar costs of investing in other mutual funds.

The expense examples provide 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 LifePath Portfolio and their share class under the heading entitled “Expenses Paid During the Period.”

The expense examples also provide information about hypothetical account values and hypothetical expenses based on each LifePath Portfolio’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 a LifePath Portfolio and other funds, compare the 5% hypothetical examples with the 5% hypothetical examples that appear in other funds’ shareholder reports.

The expenses shown in the expense examples 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.

Expense Examples

	Actual						Hypothetical2
	Beginning Account Value July 1, 2013		Ending Account Value December 31, 2013		Expenses Paid During the Period1		Beginning Account Value July 1, 2013		Ending Account Value December 31, 2013		Expenses Paid During the Period1		Annualized Expense Ratio
LifePath® Retirement Portfolio
Institutional		$1,000.00		$1,060.80		$3.90		$1,000.00		$1,021.42		$3.82		0.75%
Investor A		$1,000.00		$1.059.60		$5.19		$1,000.00		$1,020.16		$5.09		1.00%
Investor C		$1,000.00		$1,055.70		$9.17		$1,000.00		$1,016.28		$9.00		1.77%
Class K		$1,000.00		$1,062.90		$2.08		$1,000.00		$1,023.19		$2.04		0.40%
Class R		$1,000.00		$1,057.90		$6.54		$1,000.00		$1.018.85		$6.41		1.26%
LifePath 2020 Portfolio®
Institutional		$1,000.00		$1,081.80		$3.83		$1,000.00		$1,021.53		$3.72		0.73%
Investor A		$1,000.00		$1,080.80		$5.14		$1,000.00		$1,020.27		$4.99		0.98%
Investor C		$1,000.00		$1,076.10		$9.11		$1,000.00		$1,016.43		$8.84		1.74%
Class K		$1,000.00		$1,083.90		$2.00		$1,000.00		$1,023.29		$1.94		0.38%
Class R		$1,000.00		$1,079.30		$6.45		$1,000.00		$1,019.00		$6.26		1.23%
LifePath 2030 Portfolio®
Institutional		$1,000.00		$1,105.00		$3.71		$1,000.00		$1,021.68		$3.57		0.70%
Investor A		$1,000.00		$1,104.20		$5.09		$1,000.00		$1,020.37		$4.89		0.96%
Investor C		$1,000.00		$1,100.30		$9.11		$1,000.00		$1,016.53		$8.74		1.72%
Class K		$1,000.00		$1,107.10		$1.91		$1,000.00		$1,023.39		$1.84		0.36%
Class R		$1,000.00		$1,102.90		$6.41		$1,000.00		$1,019.11		$6.16		1.21%
LifePath 2040 Portfolio®
Institutional		$1,000.00		$1,125.10		$3.70		$1,000.00		$1,021.73		$3.52		0.69%
Investor A		$1,000.00		$1,123.30		$5.03		$1,000.00		$1,020.47		$4.79		0.94%
Investor C		$1,000.00		$1,118.70		$9.08		$1,000.00		$1,016.64		$8.64		1.70%
Class K		$1,000.00		$1,126.50		$1.77		$1,000.00		$1,023.54		$1.68		0.33%
Class R		$1,000.00		$1,121.80		$6.36		$1,000.00		$1,019.21		$6.06		1.19%
LifePath® 2050 Portfolio
Institutional		$1,000.00		$1,140.90		$3.78		$1,000.00		$1,021.68		$3.57		0.70%
Investor A		$1,000.00		$1,139.50		$5.12		$1,000.00		$1,020.42		$4.84		0.95%
Investor C		$1,000.00		$1,135.30		$9.20		$1,000.00		$1,016.59		$8.69		1.71%
Class K		$1,000.00		$1,142.90		$1.89		$1,000.00		$1,023.44		$1.79		0.35%
Class R		$1,000.00		$1,138.30		$6.47		$1,000.00		$1,019.16		$6.11		1.20%

¹  For each class of the LifePath Portfolio, expenses are equal to the annualized net expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown). Because each LifePath Portfolio invests significantly in a LifePath Master Portfolio, the expense examples reflect the net expenses of both the LifePath Portfolio and the LifePath Master Portfolio in which it invests.

²  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

BLACKROCK FUNDS III DECEMBER 31, 2013 17

Statements of Assets and Liabilities

December 31, 2013	LifePath Retirement Portfolio			LifePath 2020 Portfolio			LifePath 2030 Portfolio			LifePath 2040 Portfolio			LifePath 2050 Portfolio
Assets
Investments at value — from the applicable LifePath Master Portfolio1	$	505,189,465		$	1,102,042,377		$	1,046,400,832		$	888,306,848		$	232,009,403
Capital shares sold receivable		987,707			1,476,443			1,559,240			1,223,268			360,882
Withdrawals receivable from the LifePath Master Portfolio		12,984,950			28,730,344			26,955,506			21,492,846			2,952,542
Total assets		519,162,122			1,132,249,164			1,074,915,578			911,022,962			235,322,827
Liabilities
Capital shares redeemed payable		13,972,657			30,206,787			28,514,746			22,716,114			3,313,424
Income dividends payable		24,023			54,255			55,479			38,276			13,057
Administration fees payable		214,979			470,490			443,851			375,084			94,789
Capital gain distributions payable		641,472			929,218			782,984			436,651			99,512
Service and distribution fees payable		34,047			85,678			78,802			57,541			13,988
Professional fees payable		11,995			11,996			11,994			11,995			11,994
Total liabilities		14,899,173			31,758,424			29,887,856			23,635,661			3,546,764
Net Assets	$	504,262,949		$	1,100,490,740		$	1,045,027,722		$	887,387,301		$	231,776,063
Net Assets Consist of
Paid-in capital	$	444,749,702		$	945,150,667		$	913,643,164		$	732,046,482		$	201,008,814
Distributions in excess of net investment income		(736,328	)		(1,749,049	)		(338,570	)		(130,407	)		(82,403	)
Accumulated net realized gain (loss) allocated from the LifePath Master Portfolio		1,714,789			(12,588,620	)		(16,424,056	)		(9,227,872	)		5,293,954
Net unrealized appreciation/depreciation allocated from the LifePath Master Portfolio		58,534,786			169,677,742			148,147,184			164,699,098			25,555,698
Net Assets	$	504,262,949		$	1,100,490,740		$	1,045,027,722		$	887,387,301		$	231,776,063
Net Asset Value
Institutional:
Net assets	$	342,614,637		$	698,251,191		$	674,558,019		$	615,698,818		$	166,384,703
Shares outstanding2		29,243,671			41,678,340			42,129,515			30,685,657			7,787,668
Net asset value	$	11.72		$	16.75		$	16.01		$	20.06		$	21.37
Investor A:
Net assets	$	155,401,870		$	390,379,787		$	356,117,025		$	262,573,191		$	62,890,733
Shares outstanding2		14,541,835			24,747,197			22,803,346			13,833,897			2,945,183
Net asset value	$	10.69		$	15.77		$	15.62		$	18.98		$	21.35
Investor C:
Net assets	$	511,172		$	2,192,908		$	2,531,404		$	1,944,445		$	553,410
Shares outstanding2		43,927			131,918			159,748			97,761			26,072
Net asset value	$	11.64		$	16.62		$	15.85		$	19.89		$	21.23
Class K:
Net assets	$	3,674,902		$	6,499,517		$	8,666,076		$	5,732,990		$	821,473
Shares outstanding2		314,234			388,570			541,188			284,382			38,315
Net asset value	$	11.69		$	16.73		$	16.01		$	20.16		$	21.44
Class R:
Net assets	$	2,060,368		$	3,167,337		$	3,155,198		$	1,437,857		$	1,125,744
Shares outstanding2		176,871			189,660			198,186			71,948			52,834
Net asset value	$	11.65		$	16.70		$	15.92		$	19.98		$	21.31
1   Cost — from the applicable LifePath Master Portfolio	$	446,654,679		$	932,364,635		$	898,253,648		$	723,607,750		$	206,453,705
2   No par value, unlimited number of shares authorized.

See Notes to Financial Statements.
18	BLACKROCK FUNDS III	DECEMBER 31, 2013

Statements of Operations

Year Ended December 31, 2013	LifePath Retirement Portfolio			LifePath 2020 Portfolio			LifePath 2030 Portfolio			LifePath 2040 Portfolio			LifePath 2050 Portfolio
Investment Income
Net investment income allocated from the applicable LifePath Master Portfolio:
Dividends — affiliated	$	4,189,859		$	13,028,407		$	16,528,837		$	16,683,420		$	4,643,763
Securities lending — affiliated — net		26,515			69,218			77,731			70,822			16,194
Other income — affiliated		7,845			20,144			21,074			19,624			3,957
Interest — affiliated		7,342,415			11,591,486			7,362,539			3,982,021			498,566
Expenses		(3,039,857	)		(6,117,363	)		(5,560,714	)		(4,573,322	)		(1,095,028	)
Fees waived		1,645,945			3,574,313			3,464,654			3,009,754			710,046
Total income		10,172,722			22,166,205			21,894,121			19,192,319			4,777,498
Portfolio Expenses
Administration — Institutional		1,875,185			3,574,610			3,347,454			2,950,356			686,027
Administration — Investor A		862,359			2,010,788			1,762,457			1,279,301			276,620
Administration — Investor C		1,356			9,123			8,765			7,596			1,776
Administration — Class K		6,457			9,690			11,681			8,328			1,065
Administration — Class R		11,752			16,567			14,633			9,065			5,203
Service — Investor A		431,622			1,006,733			882,844			640,913			138,837
Service and distribution — Investor C		2,735			18,351			17,656			15,272			3,573
Service and distribution — Class R		11,828			16,613			14,705			9,088			5,227
Professional		19,317			19,317			19,317			19,317			19,317
Miscellaneous		325			325			325			325			325
Total expenses		3,222,936			6,682,117			6,079,837			4,939,561			1,137,970
Less fees waived by administrator		(19,317	)		(19,317	)		(19,317	)		(19,317	)		(19,317	)
Total expenses after fees waived		3,203,619			6,662,800			6,060,520			4,920,244			1,118,653
Net investment income		6,969,103			15,503,405			15,833,601			14,272,075			3,658,845
Realized and Unrealized Gain (Loss) Allocated from the LifePath Master Portfolios
Net realized gain from investments, financial futures contracts, swaps and foreign currency transactions		28,025,721			74,310,992			80,596,565			73,746,453			16,594,775
Net change in unrealized appreciation/depreciation on investments, financial futures contracts, swaps and foreign currency translations		(2,922,588	)		13,363,911			35,370,954			45,539,813			15,066,645
Total realized and unrealized gain		25,103,133			87,674,903			115,967,519			119,286,266			31,661,420
Net Increase in Net Assets Resulting from Operations	$	32,072,236		$	103,178,308		$	131,801,120		$	133,558,341		$	35,320,265

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	19

Statements of Changes in Net Assets

	LifePath Retirement Portfolio						LifePath 2020 Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	6,969,103		$	9,835,049		$	15,503,405		$	19,205,866
Net realized gain		28,025,721			15,257,913			74,310,992			30,732,921
Net change in unrealized appreciation/depreciation		(2,922,588	)		24,790,525			13,363,911			67,082,398
Net increase in net assets resulting from operations		32,072,236			49,883,487			103,178,308			117,021,185
Dividends and Distributions to Shareholders From1
Net investment income:
Institutional		(4,891,958	)		(7,061,121	)		(10,742,367	)		(12,211,664	)
Investor A		(2,089,247	)		(3,293,448	)		(5,427,027	)		(7,043,476	)
Investor C		(1,459	)		(1,233	)		(12,173	)		(8,645	)
Class K		(64,347	)		(117,736	)		(108,690	)		(166,928	)
Class R		(21,189	)		(20,400	)		(31,831	)		(20,272	)
Net realized gain:
Institutional		(18,894,125	)		(11,364,330	)		(40,223,779	)		(7,257,094	)
Investor A		(9,134,784	)		(6,014,985	)		(23,303,145	)		(4,611,046	)
Investor C		(25,780	)		(3,909	)		(122,005	)		(13,355	)
Class K		(198,180	)		(203,574	)		(358,772	)		(122,014	)
Class R		(113,066	)		(68,274	)		(176,614	)		(30,133	)
Decrease in net assets resulting from dividends and distributions to shareholders		(35,434,135	)		(28,149,010	)		(80,506,403	)		(31,484,627	)
Capital Share Transactions
Net decrease in net assets derived from capital share transactions		(82,545,369	)		(51,918,696	)		(37,384,842	)		(130,588,457	)
Net Assets
Total decrease in net assets		(85,907,268	)		(30,184,219	)		(14,712,937	)		(45,051,899	)
Beginning of year		590,170,217			620,354,436			1,115,203,677			1,160,255,576
End of year	$	504,262,949		$	590,170,217		$	1,100,490,740		$	1,115,203,677
Distributions in excess of net investment income, end of year	$	(736,328	)	$	(637,231	)	$	(1,749,049	)	$	(930,366	)

¹  Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
20	BLACKROCK FUNDS III	DECEMBER 31, 2013

Statements of Changes in Net Assets

	LifePath 2030 Portfolio						LifePath 2040 Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	15,833,601		$	17,521,315		$	14,272,075		$	14,573,172
Net realized gain		80,596,565			26,368,726			73,746,453			22,151,518
Net change in unrealized appreciation/depreciation		35,370,954			76,597,723			45,539,813			69,895,877
Net increase in net assets resulting from operations		131,801,120			120,487,764			133,558,341			106,620,567
Dividends and Distributions to Shareholders From1
Net investment income:
Institutional		(10,930,956	)		(11,440,006	)		(10,033,258	)		(10,133,572	)
Investor A		(4,993,601	)		(5,788,603	)		(3,932,132	)		(4,504,447	)
Investor C		(16,687	)		(6,480	)		(13,996	)		(10,309	)
Class K		(149,990	)		(184,947	)		(107,619	)		(145,679	)
Class R		(35,099	)		(16,375	)		(18,190	)		(18,527	)
Net realized gain:
Institutional		(42,504,851	)		(16,713,997	)		(39,693,037	)		(13,696,639	)
Investor A		(22,577,586	)		(9,442,859	)		(17,529,239	)		(6,725,889	)
Investor C		(154,148	)		(26,887	)		(122,565	)		(30,449	)
Class K		(523,522	)		(291,452	)		(356,573	)		(203,784	)
Class R		(194,194	)		(55,472	)		(91,998	)		(46,822	)
Decrease in net assets resulting from dividends and distributions to shareholders		(82,080,634	)		(43,967,078	)		(71,898,607	)		(35,516,117	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		7,116,508			(77,236,509	)		30,368,590			(43,134,663	)
Net Assets
Total increase (decrease) in net assets		56,836,994			(715,823	)		92,028,324			27,969,787
Beginning of year		988,190,728			988,906,551			795,358,977			767,389,190
End of year	$	1,045,027,722		$	988,190,728		$	887,387,301		$	795,358,977
Distributions in excess of net investment income, end of year	$	(338,570	)	$	(45,838	)	$	(130,407	)	$	(297,287	)

¹  Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	21

Statements of Changes in Net Assets

	LifePath 2050 Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012
Operations
Net investment income	$	3,658,845		$	2,476,477
Net realized gain		16,594,775			2,825,307
Net change in unrealized appreciation/depreciation		15,066,645			12,639,299
Net increase in net assets resulting from operations		35,320,265			17,941,083
Dividends and Distributions to Shareholders From1
Net investment income:
Institutional		(2,749,774	)		(1,805,634	)
Investor A		(932,887	)		(701,770	)
Investor C		(4,679	)		(1,169	)
Class K		(15,132	)		(18,331	)
Class R		(15,084	)		(6,558	)
Net realized gain:
Institutional		(8,808,385	)		(1,865,783	)
Investor A		(3,323,417	)		(834,250	)
Investor C		(28,955	)		(2,137	)
Class K		(42,609	)		(17,918	)
Class R		(59,367	)		(13,904	)
Decrease in net assets resulting from dividends and distributions to shareholders		(15,980,289	)		(5,267,454	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		57,501,027			38,372,478
Net Assets
Total increase in net assets		76,841,003			51,046,107
Beginning of year		154,935,060			103,888,953
End of year	$	231,776,063		$	154,935,060
Distributions in excess of net investment income, end of year	$	(82,403	)	$	(23,692	)

¹  Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
22	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights LifePath Retirement Portfolio

	Institutional
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	11.80		$	11.39		$	11.55		$	10.80		$	9.42
Net investment income1		0.16			0.20			0.27			0.23			0.32
Net realized and unrealized gain		0.57			0.77			0.18			0.76			1.37
Net increase from investment operations		0.73			0.97			0.45			0.99			1.69
Dividends and distributions from2
Net investment income		(0.16	)		(0.21	)		(0.26	)		(0.22	)		(0.31	)
Net realized gain		(0.65	)		(0.35	)		(0.35	)		(0.02	)		(0.00	)3
Total dividends and distributions		(0.81	)		(0.56	)		(0.61	)		(0.24	)		(0.31	)
Net asset value, end of year	$	11.72		$	11.80		$	11.39		$	11.55		$	10.80
Total Investment Return4
Based on net asset value		6.25%			8.61%			3.96%			9.33%			18.25%
Ratios to Average Net Assets5
Total expenses		0.76%	6,7		0.78%	6,7		0.77%	6,7		1.11%			1.10%
Total expenses after fees waived		0.75%	6,7		0.78%	6,7		0.77%	6,7		0.76%			0.76%
Net investment income		1.34%	6,7		1.70%	6,7		2.27%	6,7		2.10%			3.13%
Supplemental Data
Net assets, end of year (000)	$	342,615		$	390,150		$	431,982		$	490,419		$	438,987
Portfolio turnover of the LifePath Master Portfolio		17%	8		4%	9		4%	9		4%	9		6%	9

¹ Based on average shares outstanding.

² Determined in accordance with federal income tax regulations.

³ Amount is greater than $(0.005) per share.

⁴ Where applicable, assumes the reinvestment of dividends and distributions.

⁵ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.30%, 0.29% and 0.30% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁷ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.10%, 0.08% and 0.08% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁸ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

⁹ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 13%, 20%, 14%, and 18% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	23

Financial Highlights (continued) LifePath Retirement Portfolio

	Investor A
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	10.84		$	10.50		$	10.71		$	10.03		$	8.77
Net investment income1		0.12			0.16			0.22			0.19			0.27
Net realized and unrealized gain		0.51			0.72			0.16			0.71			1.28
Net increase from investment operations		0.63			0.88			0.38			0.90			1.55
Dividends and distributions from2
Net investment income		(0.13	)		(0.19	)		(0.24	)		(0.20	)		(0.29	)
Net realized gain		(0.65	)		(0.35	)		(0.35	)		(0.02	)		(0.00	)3
Total dividends and distributions		(0.78	)		(0.54	)		(0.59	)		(0.22	)		(0.29	)
Net asset value, end of year	$	10.69		$	10.84		$	10.50		$	10.71		$	10.03
Total Investment Return4
Based on net asset value		5.94%			8.46%			3.60%			9.12%			17.96%
Ratios to Average Net Assets5
Total expenses		1.01%	6,7		1.03%	6,7		1.02%	6,7		1.37%			1.34%
Total expenses after fees waived		1.00%	6,7		1.03%	6,7		1.02%	6,7		1.02%			1.00%
Net investment income		1.08%	6,7		1.47%	6,7		2.03%	6,7		1.86%			2.83%
Supplemental Data
Net assets, end of year (000)	$	155,402		$	189,898		$	183,967		$	181,297		$	147,741
Portfolio turnover of the LifePath Master Portfolio		17%	8		4%	9		4%	9		4%	9		6%	9

¹ Based on average shares outstanding.

² Determined in accordance with federal income tax regulations.

³ Amount is greater than $(0.005) per share.

⁴ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.30%, 0.29% and 0.30% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁷ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.10%, 0.08% and 0.08% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁸ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

⁹ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 13%, 20%, 14%, and 18% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
24	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) LifePath Retirement Portfolio

	Investor C
	Year Ended December 31,									Period May 3, 20101 to December 31,
	2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of period	$	11.76		$	11.36		$	11.55		$	11.22
Net investment income2		0.04			0.08			0.17			0.09
Net realized and unrealized gain		0.56			0.77			0.16			0.37
Net increase from investment operations		0.60			0.85			0.33			0.46
Dividends and distributions from3
Net investment income		(0.07	)		(0.10	)		(0.17	)		(0.11	)
Net realized gain		(0.65	)		(0.35	)		(0.35	)		(0.02	)
Total dividends and distributions		(0.72	)		(0.45	)		(0.52	)		(0.13	)
Net asset value, end of period	$	11.64		$	11.76		$	11.36		$	11.55
Total Investment Return4
Based on net asset value		5.12%			7.55%			2.86%			4.22%	5
Ratios to Average Net Assets6
Total expenses		1.77%	7,8		1.78%	7,8		1.78%	7,8		2.11%	9
Total expenses after fees waived		1.76%	7,8		1.78%	7,8		1.78%	7,8		1.77%	9
Net investment income		0.33%	7,8		0.70%	7,8		1.42%	7,8		1.23%	9
Supplemental Data
Net assets, end of period (000)	$	511		$	135		$	55		$	21
Portfolio turnover of the LifePath Master Portfolio		17%	10		4%	11		4%	11		4%	11

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵ Aggregate total investment return.

⁶ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which include gross expenses.

⁷ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.30%, 0.29% and 0.30% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁸ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.10%, 0.08% and 0.08% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁹ Annualized.

¹⁰ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

¹¹ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 13%, 20% and 14%, for the years ended December 31, 2012, December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	25

Financial Highlights (continued) LifePath Retirement Portfolio

	Class K
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	11.78		$	11.37		$	11.54		$	10.78		$	9.44
Net investment income1		0.20			0.25			0.32			0.28			0.35
Net realized and unrealized gain		0.56			0.77			0.17			0.76			1.33
Net increase from investment operations		0.76			1.02			0.49			1.04			1.68
Dividends and distributions from2
Net investment income		(0.20	)		(0.26	)		(0.31	)		(0.26	)		(0.34	)
Net realized gain		(0.65	)		(0.35	)		(0.35	)		(0.02	)		(0.00	)3
Total dividends and distributions		(0.85	)		(0.61	)		(0.66	)		(0.28	)		(0.34	)
Net asset value, end of year	$	11.69		$	11.78		$	11.37		$	11.54		$	10.78
Total Investment Return4
Based on net asset value		6.54%			9.03%			4.27%			9.82%			18.53%
Ratios to Average Net Assets5
Total expenses		0.40%	6,7		0.43%	6,7		0.44%	6,7		0.76%			0.74%
Total expenses after fees waived		0.40%	6,7		0.43%	6,7		0.43%	6,7		0.41%			0.40%
Net investment income		1.67%	6,7		2.07%	6,7		2.69%	6,7		2.49%			3.43%
Supplemental Data
Net assets, end of year (000)	$	3,675		$	7,378		$	4,309		$	769		$	292
Portfolio turnover of the LifePath Master Portfolio		17%	8		4%	9		4%	9		4%	9		6%	9

¹ Based on average shares outstanding.

² Determined in accordance with federal income tax regulations.

³ Amount is greater than $(0.005) per share.

⁴ Where applicable, assumes the reinvestment of dividends and distributions.

⁵ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.30%, 0.30% and 0.29% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁷ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.10%, 0.08% and 0.08% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁸ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

⁹ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 13%, 20%, 14%, and 18% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
26	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (concluded) LifePath Retirement Portfolio

	Class R
	Year Ended December 31,									Period May 3, 20101 to December 31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	11.75		$	11.36		$	11.54		$	11.22
Net investment income2		0.10			0.17			0.21			0.14
Net realized and unrealized gain		0.55			0.76			0.17			0.36
Net increase from investment operations		0.65			0.93			0.38			0.50
Dividends and distributions from3
Net investment income		(0.10	)		(0.19	)		(0.21	)		(0.16	)
Net realized gain		(0.65	)		(0.35	)		(0.35	)		(0.02	)
Total dividends and distributions		(0.75	)		(0.54	)		(0.56	)		(0.18	)
Net asset value, end of period	$	11.65		$	11.75		$	11.36		$	11.54
Total Investment Return4
Based on net asset value		5.61%			8.26%			3.32%			4.55%	5
Ratios to Average Net Assets6
Total expenses		1.26%	7,8		1.27%	7,8		1.28%	7,8		1.61%	9
Total expenses after fees waived		1.25%	7,8		1.26%	7,8		1.27%	7,8		1.26%	9
Net investment income		0.85%	7,8		1.38%	7,8		1.76%	7,8		1.84%	9
Supplemental Data
Net assets, end of period (000)	$	2,060		$	2,609		$	41		$	33
Portfolio turnover of the LifePath Master Portfolio		17%	10		4%	11		4%	11		4%	11

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Where applicable, assumes the reinvestment of dividends and distributions.

⁵ Aggregate total investment return.

⁶ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which include gross expenses.

⁷ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.30%, 0.32% and 0.29% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁸ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.10%, 0.08% and 0.08% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁹ Annualized.

¹⁰ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

¹¹ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 13%, 20% and 14% for the years ended December 31, 2012, December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	27

Financial Highlights LifePath 2020 Portfolio

	Institutional
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	16.42		$	15.22		$	15.92		$	14.62		$	12.32
Net investment income1		0.25			0.29			0.33			0.29			0.35
Net realized and unrealized gain (loss)		1.32			1.38			(0.09	)		1.28			2.38
Net increase from investment operations		1.57			1.67			0.24			1.57			2.73
Dividends and distributions from2
Net investment income		(0.26	)		(0.29	)		(0.33	)		(0.27	)		(0.43	)
Net realized gain		(0.98	)		(0.18	)		(0.61	)		—			—
Tax return of capital		—			—			—			—			(0.00	)3
Total dividends and distributions		(1.24	)		(0.47	)		(0.94	)		(0.27	)		(0.43	)
Net asset value, end of year	$	16.75		$	16.42	��	$	15.22		$	15.92		$	14.62
Total Investment Return4
Based on net asset value		9.67%			10.99%			1.46%			10.90%			22.71%
Ratios to Average Net Assets5
Total expenses		0.73%	6,7		0.75%	6,7		0.75%	6,7		1.08%			1.08%
Total expenses after fees waived		0.73%	6,7		0.75%	6,7		0.74%	6,7		0.73%			0.72%
Net investment income		1.47%	6,7		1.77%	6,7		2.05%	6,7		1.95%			2.65%
Supplemental Data
Net assets, end of year (000)	$	698,251		$	688,545		$	752,092		$	843,339		$	663,890
Portfolio turnover of the LifePath Master Portfolio		19%	8		5%	9		5%	9		4%	9		6%	9

¹  Based on average shares outstanding.

²  Determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.005) per share.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.32% for each of the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁷  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.12%, 0.11% and 0.11% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁸  Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

⁹  Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15%, 23%, 13% and 16% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
28	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) LifePath 2020 Portfolio

	Investor A
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	15.53		$	14.43		$	15.14		$	13.93		$	11.75
Net investment income1		0.19			0.24			0.28			0.24			0.30
Net realized and unrealized gain (loss)		1.25			1.30			(0.09	)		1.21			2.28
Net increase from investment operations		1.44			1.54			0.19			1.45			2.58
Dividends and distributions from2
Net investment income		(0.22	)		(0.26	)		(0.29	)		(0.24	)		(0.40	)
Net realized gain		(0.98	)		(0.18	)		(0.61	)		—			—
Tax return of capital		—			—			—			—			(0.00	)3
Total dividends and distributions		(1.20	)		(0.44	)		(0.90	)		(0.24	)		(0.40	)
Net asset value, end of year	$	15.77		$	15.53		$	14.43		$	15.14		$	13.93
Total Investment Return4
Based on net asset value		9.39%			10.67%			1.26%			10.56%			22.42%
Ratios to Average Net Assets5
Total expenses		0.98%	6,7		1.00%	6,7		1.00%	6,7		1.34%			1.33%
Total expenses after fees waived		0.98%	6,7		1.00%	6,7		1.00%	6,7		0.99%			0.97%
Net investment income		1.21%	6,7		1.55%	6,7		1.82%	6,7		1.71%			2.42%
Supplemental Data
Net assets, end of year (000)	$	390,380		$	410,926		$	401,477		$	376,851		$	268,514
Portfolio turnover of the LifePath Master Portfolio		19%	8		5%	9		5%	9		4%	9		6%	9

¹ Based on average shares outstanding.

² Determined in accordance with federal income tax regulations.

³ Amount is greater than $(0.005) per share.

⁴ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.32% for each of the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁷ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.12%, 0.11% and 0.11% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁸ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

⁹ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15%, 23%, 13% and 16% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	29

Financial Highlights (continued) LifePath 2020 Portfolio

	Investor C
	Year Ended December 31,									Period May 3, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	16.32		$	15.16		$	15.89		$	15.29
Net investment income2		0.09			0.14			0.17			0.12
Net realized and unrealized gain (loss)		1.30			1.36			(0.09	)		0.64
Net increase from investment operations		1.39			1.50			0.08			0.76
Dividends and distributions from3
Net investment income		(0.11	)		(0.16	)		(0.20	)		(0.16	)
Net realized gain		(0.98	)		(0.18	)		(0.61	)		—
Total dividends and distributions		(1.09	)		(0.34	)		(0.81	)		(0.16	)
Net asset value, end of period	$	16.62		$	16.32		$	15.16		$	15.89
Total Investment Return4
Based on net asset value		8.58%			9.87%			0.47%			5.03%	5
Ratios to Average Net Assets6
Total expenses		1.73%	7,8		1.75%	7,8		1.75%	7,8		2.09%	9
Total expenses after fees waived		1.73%	7,8		1.75%	7,8		1.75%	7,8		1.74%	9
Net investment income		0.51%	7,8		0.87%	7,8		1.05%	7,8		1.23%	9
Supplemental Data
Net assets, end of period (000)	$	2,193		$	1,262		$	301		$	116
Portfolio turnover of the LifePath Master Portfolio		19%	10		5%	11		5%	11		4%	11

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵ Aggregate total investment return.

⁶ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which include gross expenses.

⁷ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.32% for each of the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁸ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.12%, 0.11% and 0.11% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁹ Annualized.

¹⁰ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

¹¹ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15%, 23% and 13% for the years ended December 31, 2012, December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
30	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) LifePath 2020 Portfolio

	Class K
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	16.39		$	15.20		$	15.91		$	14.61		$	12.33
Net investment income1		0.30			0.35			0.40			0.34			0.40
Net realized and unrealized gain (loss)		1.33			1.37			(0.12	)		1.28			2.35
Net increase from investment operations		1.63			1.72			0.28			1.62			2.75
Dividends and distributions from2
Net investment income		(0.31	)		(0.35	)		(0.38	)		(0.32	)		(0.47	)
Net realized gain		(0.98	)		(0.18	)		(0.61	)		—			—
Tax return of capital		—			—			—			—			(0.00	)3
Total dividends and distributions		(1.29	)		(0.53	)		(0.99	)		(0.32	)		(0.47	)
Net asset value, end of year	$	16.73		$	16.39		$	15.20		$	15.91		$	14.61
Total Investment Return4
Based on net asset value		10.11%			11.36%			1.78%			11.28%			23.15%
Ratios to Average Net Assets5
Total expenses		0.38%	6,7		0.40%	6,7		0.40%	6,7		0.74%			0.73%
Total expenses after fees waived		0.37%	6,7		0.40%	6,7		0.40%	6,7		0.39%			0.37%
Net investment income		1.77%	6,7		2.18%	6,7		2.47%	6,7		2.29%			3.05%
Supplemental Data
Net assets, end of year (000)	$	6,500		$	11,609		$	6,224		$	2,485		$	967
Portfolio turnover of the LifePath Master Portfolio		19%	8		5%	9		5%	9		4%	9		6%	9

¹ Based on average shares outstanding.

² Determined in accordance with federal income tax regulations.

³ Amount is greater than $(0.005) per share.

⁴ Where applicable, assumes the reinvestment of dividends and distributions.

⁵ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.32% for each of the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁷ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.12%, 0.11% and 0.11% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁸ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

⁹ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15%, 23%, 13% and 16% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	31

Financial Highlights (concluded) LifePath 2020 Portfolio

	Class R
	Year Ended December 31,									Period May 3, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	16.36		$	15.20		$	15.88		$	15.29
Net investment income2		0.16			0.25			0.24			0.23
Net realized and unrealized gain (loss)		1.33			1.32			(0.07	)		0.57
Net increase from investment operations		1.49			1.57			0.17			0.80
Dividends and distributions from3
Net investment income		(0.17	)		(0.23	)		(0.24	)		(0.21	)
Net realized gain		(0.98	)		(0.18	)		(0.61	)		—
Total dividends and distributions		(1.15	)		(0.41	)		(0.85	)		(0.21	)
Net asset value, end of period	$	16.70		$	16.36		$	15.20		$	15.88
Total Investment Return4
Based on net asset value		9.20%			10.36%			1.06%			5.34%	5
Ratios to Average Net Assets6
Total expenses		1.23%	7,8		1.25%	7,8		1.25%	7,8		1.58%	9
Total expenses after fees waived		1.23%	7,8		1.25%	7,8		1.25%	7,8		1.23%	9
Net investment income		0.94%	7,8		1.53%	7,8		1.51%	7,8		2.29%	9
Supplemental Data
Net assets, end of period (000)	$	3,167		$	2,862		$	161		$	81
Portfolio turnover of the LifePath Master Portfolio		19%	10		5%	11		5%	11		4%	11

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which include gross expenses.

⁷  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.32%, 0.33% and 0.32% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.12%, 0.11% and 0.11% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

¹¹  Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15%, 23% and 13% for the years ended December 31, 2012, December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
32	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights LifePath 2030 Portfolio

	Institutional
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	15.25		$	14.11		$	14.63		$	13.31		$	10.92
Net investment income1		0.26			0.28			0.28			0.25			0.29
Net realized and unrealized gain (loss)		1.80			1.56			(0.37	)		1.31			2.46
Net increase (decrease) from investment operations		2.06			1.84			(0.09	)		1.56			2.75
Dividends and distributions from2
Net investment income		(0.26	)		(0.28	)		(0.27	)		(0.24	)		(0.36	)
Net realized gain		(1.04	)		(0.42	)		(0.16	)		—			—
Tax return of capital		—			—			—			—			(0.00	)3
Total dividends and distributions		(1.30	)		(0.70	)		(0.43	)		(0.24	)		(0.36	)
Net asset value, end of year	$	16.01		$	15.25		$	14.11		$	14.63		$	13.31
Total Investment Return4
Based on net asset value		13.66%			13.09%			(0.63)%			11.86%			25.77%
Ratios to Average Net Assets5
Total expenses		0.70%	6,7		0.73%	6,7		0.73%	6,7		1.07%			1.06%
Total expenses after fees waived		0.70%	6,7		0.73%	6,7		0.72%	6,7		0.70%			0.70%
Net investment income		1.62%	6,7		1.84%	6,7		1.88%	6,7		1.85%			2.47%
Supplemental Data
Net assets, end of year (000)	$	674,558		$	630,131		$	642,867		$	696,817		$	517,817
Portfolio turnover of the LifePath Master Portfolio		22%	8		5%	9		7%	9		3%	9		7%	9

¹  Based on average shares outstanding.

²  Determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.005) per share.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.33%, 0.34% and 0.34% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁷  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.15%, 0.13% and 0.13% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁸  Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

⁹  Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 16%, 20%, 10% and 13% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	33

Financial Highlights (continued) LifePath 2030 Portfolio

	Investor A
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	14.90		$	13.81		$	14.33		$	13.05		$	10.71
Net investment income1		0.21			0.24			0.24			0.21			0.26
Net realized and unrealized gain (loss)		1.77			1.52			(0.36	)		1.28			2.41
Net increase (decrease) from investment operations		1.98			1.76			(0.12	)		1.49			2.67
Dividends and distributions from2
Net investment income		(0.22	)		(0.25	)		(0.24	)		(0.21	)		(0.33	)
Net realized gain		(1.04	)		(0.42	)		(0.16	)		—			—
Tax return of capital		—			—			—			—			(0.00	)3
Total dividends and distributions		(1.26	)		(0.67	)		(0.40	)		(0.21	)		(0.33	)
Net asset value, end of year	$	15.62		$	14.90		$	13.81		$	14.33		$	13.05
Total Investment Return4
Based on net asset value		13.44%			12.75%			(0.87)%			11.53%			25.51%
Ratios to Average Net Assets5
Total expenses		0.95%	6,7		0.98%	6,7		0.98%	6,7		1.32%			1.31%
Total expenses after fees waived		0.95%	6,7		0.98%	6,7		0.97%	6,7		0.96%			0.95%
Net investment income		1.36%	6,7		1.62%	6,7		1.65%	6,7		1.60%			2.23%
Supplemental Data
Net assets, end of year (000)	$	356,117		$	343,885		$	339,249		$	307,189		$	210,372
Portfolio turnover of the LifePath Master Portfolio		22%	8		5%	9		7%	9		3%	9		7%	9

¹ Based on average shares outstanding.

² Determined in accordance with federal income tax regulations.

³ Amount is greater than $(0.005) per share.

⁴ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.33%, 0.34% and 0.34% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁷ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.15%, 0.13% and 0.13% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁸ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

⁹ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 16%, 20%, 10% and 13% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
34	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) LifePath 2030 Portfolio

	Investor C
	Year Ended December 31,									Period May 3, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	15.13		$	14.05		$	14.62		$	13.97
Net investment income2		0.13			0.16			0.14			0.10
Net realized and unrealized gain (loss)		1.76			1.51			(0.38	)		0.67
Net increase (decrease) from investment operations		1.89			1.67			(0.24	)		0.77
Dividends and distributions from3
Net investment income		(0.13	)		(0.17	)		(0.17	)		(0.12	)
Net realized gain		(1.04	)		(0.42	)		(0.16	)		—
Total dividends and distributions		(1.17	)		(0.59	)		(0.33	)		(0.12	)
Net asset value, end of period	$	15.85		$	15.13		$	14.05		$	14.62
Total Investment Return4
Based on net asset value		12.59%			11.92%			(1.63)%			5.64%	5
Ratios to Average Net Assets6
Total expenses		1.71%	7,8		1.72%	7,8		1.74%	7,8		2.07%	9
Total expenses after fees waived		1.71%	7,8		1.72%	7,8		1.74%	7,8		1.71%	9
Net investment income		0.79%	7,8		1.05%	7,8		1.01%	7,8		1.09%	9
Supplemental Data
Net assets, end of period (000)	$	2,531		$	1,010		$	154		$	21
Portfolio turnover of the LifePath Master Portfolio		22%	10		5%	11		7%	11		3%	11

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵ Aggregate total investment return.

⁶ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which include gross expenses.

⁷ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.34%, 0.35% and 0.34% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁸ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.15%, 0.13% and 0.13% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁹ Annualized.

¹⁰ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

¹¹ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 16%, 20% and 10% for the years ended December 31, 2012, December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	35

Financial Highlights (continued) LifePath 2030 Portfolio

	Class K
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	15.25		$	14.12		$	14.63		$	13.30		$	10.92
Net investment income1		0.31			0.34			0.35			0.29			0.38
Net realized and unrealized gain (loss)		1.81			1.55			(0.37	)		1.32			2.40
Net increase (decrease) from investment operations		2.12			1.89			(0.02	)		1.61			2.78
Dividends and distributions from2
Net investment income		(0.32	)		(0.34	)		(0.33	)		(0.28	)		(0.40	)
Net realized gain		(1.04	)		(0.42	)		(0.16	)		—			—
Tax return of capital		—			—			—			—			(0.00	)3
Total dividends and distributions		(1.36	)		(0.76	)		(0.49	)		(0.28	)		(0.40	)
Net asset value, end of year	$	16.01		$	15.25		$	14.12		$	14.63		$	13.30
Total Investment Return4
Based on net asset value		14.05%			13.43%			(0.20)%			12.32%			26.23%
Ratios to Average Net Assets5
Total expenses		0.35%	6,7		0.38%	6,7		0.38%	6,7		0.72%			0.71%
Total expenses after fees waived		0.35%	6,7		0.38%	6,7		0.38%	6,7		0.35%			0.35%
Net investment income		1.95%	6,7		2.26%	6,7		2.41%	6,7		2.17%			3.19%
Supplemental Data
Net assets, end of year (000)	$	8,666		$	11,077		$	6,448		$	1,849		$	396
Portfolio turnover of the LifePath Master Portfolio		22%	8		5%	9		7%	9		3%	9		7%	9

¹ Based on average shares outstanding.

² Determined in accordance with federal income tax regulations.

³ Amount is greater than $(0.005) per share.

⁴ Where applicable, assumes the reinvestment of dividends and distributions.

⁵ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁶ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.34%, 0.35% and 0.34% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁷ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.15%, 0.13% and 0.13% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁸ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

⁹ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 16%, 20%, 10% and 13% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
36	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (concluded) LifePath 2030 Portfolio

	Class R
	Year Ended December 31,									Period May 3, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	15.17		$	14.08		$	14.60		$	13.97
Net investment income2		0.18			0.28			0.20			0.22
Net realized and unrealized gain (loss)		1.80			1.47			(0.36	)		0.60
Net increase (decrease) from investment operations		1.98			1.75			(0.16	)		0.82
Dividends and distributions from3
Net investment income		(0.19	)		(0.24	)		(0.20	)		(0.19	)
Net realized gain		(1.04	)		(0.42	)		(0.16	)		—
Total dividends and distributions		(1.23	)		(0.66	)		(0.36	)		(0.19	)
Net asset value, end of period	$	15.92		$	15.17		$	14.08		$	14.60
Total Investment Return4
Based on net asset value		13.14%			12.48%			(1.12)%			5.96%	5
Ratios to Average Net Assets6
Total expenses		1.21%	7,8		1.22%	7,8		1.23%	7,8		1.56%	9
Total expenses after fees waived		1.21%	7,8		1.22%	7,8		1.23%	7,8		1.20%	9
Net investment income		1.15%	7,8		1.84%	7,8		1.41%	7,8		2.39%	9
Supplemental Data
Net assets, end of period (000)	$	3,155		$	2,088		$	188		$	75
Portfolio turnover of the LifePath Master Portfolio		22%	10		5%	11		7%	11		3%	11

¹ Commencement of opeartions.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Where applicable, assumes the reinvestment of dividends and distributions.

⁵ Aggregate total investment return.

⁶ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which include gross expenses.

⁷ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.34%, 0.35% and 0.34% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁸ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.15%, 0.13% and 0.13% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁹ Annualized.

¹⁰ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

¹¹ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 16%, 20% and 10% for the years ended December 31, 2012, December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	37

Financial Highlights LifePath 2040 Portfolio

	Institutional
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	18.62		$	16.98		$	17.78		$	16.04		$	12.88
Net investment income1		0.35			0.35			0.31			0.28			0.32
Net realized and unrealized gain (loss)		2.77			2.14			(0.73	)		1.73			3.22
Net increase (decrease) from investment operations		3.12			2.49			(0.42	)		2.01			3.54
Dividends and distributions from2
Net investment income		(0.34	)		(0.36	)		(0.30	)		(0.27	)		(0.38	)
Net realized gain		(1.34	)		(0.49	)		(0.08	)		—			—
Total dividends and distributions		(1.68	)		(0.85	)		(0.38	)		(0.27	)		(0.38	)
Net asset value, end of year	$	20.06		$	18.62		$	16.98		$	17.78		$	16.04
Total Investment Return3
Based on net asset value		16.92%			14.73%			(2.38)%			12.71%			28.08%
Ratios to Average Net Assets4
Total expenses		0.69%	5,6		0.71%	5,6		0.71%	5,6		1.06%			1.05%
Total expenses after fees waived		0.68%	5,6		0.71%	5,6		0.70%	5,6		0.69%			0.69%
Net investment income		1.75%	5,6		1.91%	5,6		1.73%	5,6		1.75%			2.33%
Supplemental Data
Net assets, end of year (000)	$	615,699		$	536,902		$	528,655		$	556,626		$	435,317
Portfolio turnover of the LifePath Master Portfolio		26%	7		4%	8		8%	8		4%	8		6%	8

¹ Based on average shares outstanding.

² Determined in accordance with federal income tax regulations.

³ Where applicable, assumes the reinvestment of dividends and distributions.

⁴ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁵ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.35%, 0.36% and 0.35% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁶ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.17%, 0.15% and 0.15% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁷ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

⁸ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 14%, 20%, 9% and 9% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
38	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) LifePath 2040 Portfolio

	Investor A
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	17.69		$	16.18		$	16.97		$	15.33		$	12.32
Net investment income1		0.28			0.30			0.25			0.23			0.28
Net realized and unrealized gain (loss)		2.64			2.02			(0.70	)		1.65			3.08
Net increase (decrease) from investment operations		2.92			2.32			(0.45	)		1.88			3.36
Dividends and distributions from2
Net investment income		(0.29	)		(0.32	)		(0.26	)		(0.24	)		(0.35	)
Net realized gain		(1.34	)		(0.49	)		(0.08	)		—			—
Total dividends and distributions		(1.63	)		(0.81	)		(0.34	)		(0.24	)		(0.35	)
Net asset value, end of year	$	18.98		$	17.69		$	16.18		$	16.97		$	15.33
Total Investment Return3
Based on net asset value		16.70%			14.41%			(2.65)%			12.40%			27.85%
Ratios to Average Net Assets4
Total expenses		0.94%	5,6		0.96%	5,6		0.96%	5,6		1.31%			1.30%
Total expenses after fees waived		0.93%	5,6		0.96%	5,6		0.95%	5,6		0.94%			0.94%
Net investment income		1.48%	5,6		1.69%	5,6		1.50%	5,6		1.50%			2.08%
Supplemental Data
Net assets, end of year (000)	$	262,573		$	247,317		$	233,427		$	224,164		$	156,564
Portfolio turnover of the LifePath Master Portfolio		26%	7		4%	8		8%	8		4%	8		6%	8

¹ Based on average shares outstanding.

² Determined in accordance with federal income tax regulations.

³ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁴ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁵ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.35%, 0.36% and 0.35% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁶ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.17%, 0.15% and 0.15% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁷ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

⁸ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 14%, 20%, 9% and 9% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	39

Financial Highlights (continued) LifePath 2040 Portfolio

	Investor C
	Year Ended December 31,									Period May 3, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	18.49		$	16.92		$	17.77		$	16.89
Net investment income2		0.17			0.21			0.13			0.12
Net realized and unrealized gain (loss)		2.73			2.08			(0.73	)		0.90
Net increase (decrease) from investment operations		2.90			2.29			(0.60	)		1.02
Dividends and distributions from3
Net investment income		(0.16	)		(0.23	)		(0.17	)		(0.14	)
Net realized gain		(1.34	)		(0.49	)		(0.08	)		—
Total dividends and distributions		(1.50	)		(0.72	)		(0.25	)		(0.14	)
Net asset value, end of period	$	19.89		$	18.49		$	16.92		$	17.77
Total Investment Return4
Based on net asset value		15.80%			13.59%			(3.39)%			6.15%	5
Ratios to Average Net Assets6							��
Total expenses		1.69%	7,8		1.71%	7,8		1.72%	7,8		2.06%	9
Total expenses after fees waived		1.69%	7,8		1.71%	7,8		1.71%	7,8		1.69%	9
Net investment income		0.85%	7,8		1.12%	7,8		0.72%	7,8		1.11%	9
Supplemental Data
Net assets, end of period (000)	$	1,944		$	1,185		$	98		$	21
Portfolio turnover of the LifePath Master Portfolio		26%	10		4%	11		8%	11		4%	11

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵ Aggregate total investment return.

⁶ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁷ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.35%, 0.36% and 0.35% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁸ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.17%, 0.15% and 0.15% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁹ Annualized.

¹⁰ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

¹¹ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 14%, 20% and 9% for the years ended December 31, 2012, December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
40	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) LifePath 2040 Portfolio

	Class K
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	18.69		$	17.05		$	17.84		$	16.03		$	12.87
Net investment income1		0.41			0.44			0.46			0.39			0.38
Net realized and unrealized gain (loss)		2.81			2.12			(0.80	)		1.70			3.21
Net increase (decrease) from investment operations		3.22			2.56			(0.34	)		2.09			3.59
Dividends and distributions from2
Net investment income		(0.41	)		(0.43	)		(0.37	)		(0.28	)		(0.43	)
Net realized gain		(1.34	)		(0.49	)		(0.08	)		—			—
Total dividends and distributions		(1.75	)		(0.92	)		(0.45	)		(0.28	)		(0.43	)
Net asset value, end of year	$	20.16		$	18.69		$	17.05		$	17.84		$	16.03
Total Investment Return3
Based on net asset value		17.41%			15.08%			(1.95)%			13.18%			28.52%
Ratios to Average Net Assets4
Total expenses		0.33%	5,6		0.36%	5,6		0.37%	5,6		0.70%			0.70%
Total expenses after fees waived		0.33%	5,6		0.36%	5,6		0.36%	5,6		0.33%			0.34%
Net investment income		2.05%	5,6		2.36%	5,6		2.60%	5,6		2.34%			2.73%
Supplemental Data
Net assets, end of year (000)	$	5,733		$	8,038		$	4,749		$	144		$	11
Portfolio turnover of the LifePath Master Portfolio		26%	7		4%	8		8%	8		4%	8		6%	8

¹ Based on average shares outstanding.

² Determined in accordance with federal income tax regulations.

³ Where applicable, assumes the reinvestment of dividends and distributions.

⁴ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁵ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.35%, 0.36% and 0.35% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁶ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.17%, 0.15% and 0.15% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁷ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

⁸ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 14%, 20%, 9% and 9% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	41

Financial Highlights (concluded) LifePath 2040 Portfolio

	Class R
	Year Ended December 31,									Period May 3, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	18.54		$	16.93		$	17.74		$	16.89
Net investment income2		0.22			0.34			0.23			0.34
Net realized and unrealized gain (loss)		2.78			2.05			(0.74	)		0.73
Net increase (decrease) from investment operations		3.00			2.39			(0.51	)		1.07
Dividends and distributions from3
Net investment income		(0.22	)		(0.29	)		(0.22	)		(0.22	)
Net realized gain		(1.34	)		(0.49	)		(0.08	)		—
Total dividends and distributions		(1.56	)		(0.78	)		(0.30	)		(0.22	)
Net asset value, end of period	$	19.98		$	18.54		$	16.93		$	17.74
Total Investment Return4
Based on net asset value		16.33%			14.19%			(2.88)%			6.47%	5
Ratios to Average Net Assets6
Total expenses		1.19%	7,8		1.21%	7,8		1.22%	7,8		1.55%	9
Total expenses after fees waived		1.18%	7,8		1.21%	7,8		1.22%	7,8		1.19%	9
Net investment income		1.12%	7,8		1.83%	7,8		1.35%	7,8		3.13%	9
Supplemental Data
Net assets, end of period (000)	$	1,438		$	1,917		$	460		$	126
Portfolio turnover of the LifePath Master Portfolio		26%	10		4%	11		8%	11		4%	11

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Where applicable, assumes the reinvestment of dividends and distributions.

⁵ Aggregate total investment return.

⁶ Includes the LifePath Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁷ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.35%, 0.37% and 0.35% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁸ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.17%, 0.15% and 0.15% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁹ Annualized.

¹⁰ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

¹¹ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 14%, 20% and 9% for the years ended December 31, 2012, December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
42	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights LifePath 2050 Portfolio

	Institutional
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	19.18		$	17.16		$	18.58		$	16.81		$	13.46
Net investment income1		0.41			0.37			0.31			0.31			0.38
Net realized and unrealized gain (loss)		3.36			2.37			(0.99	)		1.91			3.68
Net increase (decrease) from investment operations		3.77			2.74			(0.68	)		2.22			4.06
Dividends and distributions from2
Net investment income		(0.39	)		(0.37	)		(0.29	)		(0.28	)		(0.16	)
Net realized gain		(1.19	)		(0.35	)		(0.45	)		(0.17	)		(0.55	)
Total dividends and distributions		(1.58	)		(0.72	)		(0.74	)		(0.45	)		(0.71	)
Net asset value, end of year	$	21.37		$	19.18		$	17.16		$	18.58		$	16.81
Total Investment Return3
Based on net asset value		19.82%			16.05%			(3.78)%			13.43%			30.35%
Ratios to Average Net Assets4
Total expenses		0.71%	5,6		0.72%	5,6		0.71%	5,6		1.09%			1.27%
Total expenses after fees waived		0.70%	5,6		0.71%	5,6		0.68%	5,6		0.67%			0.67%
Net investment income		1.97%	5,6		1.99%	5,6		1.69%	5,6		1.83%			2.39%
Supplemental Data
Net assets, end of year (000)	$	166,385		$	106,813		$	70,555		$	50,613		$	13,992
Portfolio turnover of the LifePath Master Portfolio		28%	7		5%	8		13%	8		5%	8		12%	8

¹  Based on average shares outstanding.

²  Determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of dividends and distributions.

⁴  Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the two years ended December 31, 2010, which include gross expenses.

⁵  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.36%, 0.39% and 0.40% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁶  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.15%, 0.15% and 0.17% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁷  Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

⁸  Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15%, 19%, 12% and 17% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	43

Financial Highlights (continued) LifePath 2050 Portfolio

	Investor A
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	19.17		$	17.15		$	18.58		$	16.82		$	13.47
Net investment income1		0.35			0.33			0.26			0.28			0.41
Net realized and unrealized gain (loss)		3.36			2.36			(0.99	)		1.90			3.63
Net increase (decrease) from investment operations		3.71			2.69			(0.73	)		2.18			4.04
Dividends and distributions from2
Net investment income		(0.34	)		(0.32	)		(0.25	)		(0.25	)		(0.14	)
Net realized gain		(1.19	)		(0.35	)		(0.45	)		(0.17	)		(0.55	)
Total dividends and distributions		(1.53	)		(0.67	)		(0.70	)		(0.42	)		(0.69	)
Net asset value, end of year	$	21.35		$	19.17		$	17.15		$	18.58		$	16.82
Total Investment Return3
Based on net asset value		19.48%			15.80%			(4.06	)%		13.14%			30.08%
Ratios to Average Net Assets4
Total expenses		0.96%	5,6		0.97%	5,6		0.96%	5,6		1.34%			1.35%
Total expenses after fees waived		0.95%	5,6		0.96%	5,6		0.94%	5,6		0.92%			0.84%
Net investment income		1.67%	5,6		1.77%	5,6		1.44%	5,6		1.67%			2.45%
Supplemental Data
Net assets, end of year (000)	$	62,891		$	46,189		$	32,617		$	18,809		$	3,056
Portfolio turnover of the LifePath Master Portfolio		28%	7		5%	8		13%	8		5%	8		12%	8

¹ Based on average shares outstanding.

² Determined in accordance with federal income tax regulations.

³ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁴ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the two years ended December 31, 2010, which include gross expenses.

⁵ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.36%, 0.39% and 0.40% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁶ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.15%, 0.15% and 0.17% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁷ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

⁸ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15%, 19%, 12% and 17% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
44	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) LifePath 2050 Portfolio

	Investor C
	Year Ended December 31,									Period May 3, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	19.10		$	17.10		$	18.57		$	17.75
Net investment income2		0.24			0.17			0.12			0.12
Net realized and unrealized gain (loss)		3.30			2.37			(0.99	)		1.02
Net increase (decrease) from investment operations		3.54			2.54			(0.87	)		1.14
Dividends and distributions from3
Net investment income		(0.22	)		(0.19	)		(0.15	)		(0.15	)
Net realized gain		(1.19	)		(0.35	)		(0.45	)		(0.17	)
Total dividends and distributions		(1.41	)		(0.54	)		(0.60	)		(0.32	)
Net asset value, end of period	$	21.23		$	19.10		$	17.10		$	18.57
Total Investment Return4
Based on net asset value		18.60%			14.93%			(4.76)%			6.55%	5
Ratios to Average Net Assets6
Total expenses		1.72%	7,8		1.72%	7,8		1.71%	7,8		2.07%	9
Total expenses after fees waived		1.71%	7,8		1.70%	7,8		1.69%	7,8		1.64%	9
Net investment income		1.14%	7,8		0.91%	7,8		0.63%	7,8		1.04%	9
Supplemental Data
Net assets, end of period (000)	$	553		$	118		$	39		$	21
Portfolio turnover of the LifePath Master Portfolio		28%	10		5%	11		13%	11		5%	11

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵ Aggregate total investment return.

⁶ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁷ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.36%, 0.39% and 0.40% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁸ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.15%, 0.15% and 0.17% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁹ Annualized.

¹⁰ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

¹¹ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15%, 19% and 12% for the years ended December 31, 2012, December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	45

Financial Highlights (continued) LifePath 2050 Portfolio

	Class K
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	19.24		$	17.20		$	18.63		$	16.85		$	13.46
Net investment income1		0.46			0.45			0.47			0.37			0.64
Net realized and unrealized gain (loss)		3.39			2.37			(1.10	)		1.91			3.49
Net increase (decrease) from investment operations		3.85			2.82			(0.63	)		2.28			4.13
Dividends and distributions from2
Net investment income		(0.46	)		(0.43	)		(0.35	)		(0.33	)		(0.19	)
Net realized gain		(1.19	)		(0.35	)		(0.45	)		(0.17	)		(0.55	)
Total dividends and distributions		(1.65	)		(0.78	)		(0.80	)		(0.50	)		(0.74	)
Net asset value, end of year	$	21.44		$	19.24		$	17.20		$	18.63		$	16.85
Total Investment Return3
Based on net asset value		20.19%			16.53%			(3.48)%			13.79%			30.89%
Ratios to Average Net Assets4
Total expenses		0.36%	5,6		0.37%	5,6		0.36%	5,6		0.76%			1.37%
Total expenses after fees waived		0.35%	5,6		0.36%	5,6		0.34%	5,6		0.33%			0.58%
Net investment income		2.22%	5,6		2.38%	5,6		2.56%	5,6		2.19%			4.34%
Supplemental Data
Net assets, end of year (000)	$	821		$	1,018		$	625		$	86		$	55
Portfolio turnover of the LifePath Master Portfolio		28%	7		5%	8		13%	8		5%	8		12%	8

¹ Based on average shares outstanding.

² Determined in accordance with federal income tax regulations.

³ Where applicable, assumes the reinvestment of dividends and distributions.

⁴ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010, which include gross expenses.

⁵ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.36%, 0.39% and 0.40% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁶ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.15%, 0.15% and 0.17% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁷ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

⁸ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15%, 19%, 12% and 17% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
46	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (concluded) LifePath 2050 Portfolio

	Class R
	Year Ended December 31,									Period May 3, 20101 to December  31, 2010
	2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	19.14		$	17.13		$	18.56		$	17.75
Net investment income2		0.30			0.37			0.22			0.22
Net realized and unrealized gain (loss)		3.35			2.29			(1.00	)		0.97
Net increase (decrease) from investment operations		3.65			2.66			(0.78	)		1.19
Dividends and distributions from3
Net investment income		(0.29	)		(0.30	)		(0.20	)		(0.21	)
Net realized gain		(1.19	)		(0.35	)		(0.45	)		(0.17	)
Total dividends and distributions		(1.48	)		(0.65	)		(0.65	)		(0.38	)
Net asset value, end of period	$	21.31		$	19.14		$	17.13		$	18.56
Total Investment Return4
Based on net asset value		19.19%			15.59%			(4.29)%			6.87%	5
Ratios to Average Net Assets6
Total expenses		1.21%	7,8		1.22%	7,8		1.21%	7,8		1.57%	9
Total expenses after fees waived		1.20%	7,8		1.20%	7,8		1.19%	7,8		1.16%	9
Net investment income		1.42%	7,8		1.98%	7,8		1.18%	7,8		1.99%	9
Supplemental Data
Net assets, end of period (000)	$	1,126		$	796		$	53		$	40
Portfolio turnover of the LifePath Master Portfolio		28%	10		5%	11		13%	11		5%	11

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Where applicable, assumes the reinvestment of dividends and distributions.

⁵ Aggregate total investment return.

⁶ Includes the LifePath Portfolio’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the period ended December 31, 2010, which includes gross expenses.

⁷ Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.36%, 0.39% and 0.40% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁸ Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.15%, 0.15% and 0.17% for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated expenses and/or net investment income.

⁹ Annualized.

¹⁰ Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

¹¹ Excludes the LifePath Master Portfolio’s purchases or sales of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15%, 19% and 12% for the years ended December 31, 2012, December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	47

Notes to Financial Statements BlackRock Funds III

1. Organization:

BlackRock Funds III (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Delaware statutory trust. LifePath^® Retirement Portfolio, LifePath 2020 Portfolio^®, LifePath 2030 Portfolio^®, LifePath 2040 Portfolio^® and LifePath^® 2050 Portfolio (each, a “LifePath Portfolio” and collectively, the “LifePath Portfolios”) are each a series of the Trust. Each LifePath Portfolio seeks to achieve its investment objective by investing substantially all of its assets in a separate series of Master Investment Portfolio (“MIP”): LifePath^® Retirement Master Portfolio, LifePath 2020 Master Portfolio^®, LifePath 2030 Master Portfolio^®, LifePath 2040 Master Portfolio^® and LifePath^® 2050 Master Portfolio (each, a “LifePath Master Portfolio” and collectively, the “LifePath Master Portfolios”). Each LifePath Master Portfolio has the same or substantially similar investment objective as its corresponding LifePath Portfolio. The performance of a LifePath Portfolio is directly affected by the performance of its corresponding LifePath Master Portfolio.

The value of each LifePath Portfolio’s investment in its corresponding LifePath Master Portfolio reflects that LifePath Portfolio’s proportionate interest in the net assets of that LifePath Master Portfolio (31.8%, 38.9%, 39.5%, 43.0% and 55.9% for the LifePath Retirement Portfolio, LifePath 2020 Portfolio, LifePath 2030 Portfolio, LifePath 2040 Portfolio and LifePath 2050 Portfolio, respectively, as of December 31, 2013). As such, the financial statements of each corresponding LifePath Master Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with each LifePath Portfolio’s financial statements.

Each LifePath Portfolio offers multiple classes of shares. Institutional and Class K Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally sold with an initial sales charge, but may be subject to a CDSC for certain redemptions where no initial sales charge was paid at the time of purchase. Investor C Shares may be subject to a CDSC. Class R Shares are sold without a sales charge and only to certain employer-sponsored retirement plans. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that Investor A, Investor C and Class R Shares bear certain expenses related to the shareholder servicing of such shares, and Investor C and Class R Shares also bear certain expenses related to the distribution of such shares. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures.

2. Significant Accounting Policies:

The LifePath Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in 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 following is a summary of significant accounting policies followed by the LifePath Portfolios:

Valuation: US GAAP defines fair value as the price the LifePath Portfolios would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The LifePath Portfolios’ policy is to fair value their financial instruments at market value. Each LifePath Portfolio records its investments in the applicable LifePath Master Portfolio at fair value based on the LifePath Portfolio’s proportionate interest in the net assets of the applicable LifePath Master Portfolio. Valuation of securities held by the applicable LifePath Master Portfolio is discussed in Note 2 of the Master Portfolios’ Notes to Financial Statements, which are included elsewhere in this report.

Investment Transactions and Investment Income: For financial reporting purposes, contributions to and withdrawals from each LifePath Master Portfolio are accounted on a trade date basis. Each LifePath Portfolio records daily its proportionate share of its LifePath Master Portfolio’s income, expenses and realized and unrealized gains and losses. In addition, each LifePath Portfolio accrues its own expenses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Dividends and Distributions: Dividends from net investment income are declared and paid quarterly. Distributions of capital gains are recorded on the ex-dividend dates. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

Income Taxes: It is each LifePath Portfolio’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.

Each LifePath Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each LifePath Portfolio’s US federal tax returns remains open for each of the four years ended December 31, 2013. The statutes of limitations on each LifePath Portfolio’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 each LifePath Portfolio’s facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

Other: Expenses directly related to a LifePath Portfolio or its classes are charged to that LifePath Portfolio or class. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the LifePath Portfolios and other shared expenses pro rated to the LifePath Portfolios are allocated daily to each class based on its relative net assets or other appropriate methods.

3. Administration Agreement and Other Transactions with Affiliates:

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

48 BLACKROCK FUNDS III DECEMBER 31, 2013

Notes to Financial Statements (continued) BlackRock Funds III

The Trust, on behalf of the LifePath Portfolios, entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL” or the “Administrator”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL, in consideration thereof, has agreed to bear all of the LifePath Portfolios’ ordinary operating expenses, excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the LifePath Portfolios. BAL is entitled to receive for these administration services an annual fee of 0.50% based on the average daily net assets of each LifePath Portfolio’s Institutional, Investor A, Investor C and Class R Shares and 0.15% based on the average net assets of the Class K Shares.

From time to time, BAL may waive such fees in whole or in part. Any such waiver will reduce the expenses of a LifePath Portfolio and, accordingly, have a favorable impact on its performance. BAL may delegate certain of its administration duties to sub-administrators.

The fees and expenses of the LifePath Portfolios’ trustees who are not “interested persons” of the Trust, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and the Trust’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the LifePath Portfolios. BAL has contractually agreed to provide an offsetting credit against the administration fees paid by the LifePath Portfolios in an amount equal to these independent expenses through April 30, 2023. These amounts are included in fees waived by administrator in the Statements of Operations.

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

	Service Fee			Distribution Fee
Investor A		0.25	%		—
Investor C		0.25	%		0.75	%
Class R		0.25	%		0.25	%

Pursuant to sub-agreements with BRIL, broker-dealers and BRIL provide shareholder servicing and distribution services to each LifePath Portfolio. The ongoing service and/or distribution fee compensates BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to Investor A, Investor C and Class R shareholders.

For the year ended December 31, 2013, affiliates earned underwriting discounts, direct commissions and/or dealer concessions on sales of each LifePath Portfolio’s Investor A Shares as follows:

	Investor A
LifePath Retirement Portfolio	$	593
LifePath 2020 Portfolio	$	652
LifePath 2030 Portfolio	$	3,484
LifePath 2040 Portfolio	$	757
LifePath 2050 Portfolio	$	293

For the year ended December 31, 2013, affiliates received CDSCs as follows:

	Investor A		Investor C
LifePath Retirement Portfolio	$	4	$	3
LifePath 2030 Portfolio		—	$	20
LifePath 2040 Portfolio		—	$	125
LifePath 2050 Portfolio		—	$	18

Certain officers and/or trustees of the Trust are officers and/or directors of BlackRock or its affiliates.

BLACKROCK FUNDS III DECEMBER 31, 2013 49

Notes to Financial Statements (continued) BlackRock Funds III

4. Income Tax Information:

The tax character of distributions paid during the fiscal years ended December 31, 2013 and December 31, 2012 was as follows:

		LifePath Retirement Portfolio		LifePath 2020 Portfolio		LifePath 2030 Portfolio		LifePath 2040 Portfolio		LifePath 2050 Portfolio
Ordinary income	12/31/13	$	15,218,241	$	36,244,798	$	36,948,875	$	33,340,833	$	7,647,321
	12/31/12		17,326,571		31,484,627		27,100,631		21,470,498		2,727,793
Long-term capital gains	12/31/13		20,215,894		44,261,605		45,131,759		38,557,774		8,332,968
	12/31/12		10,822,439		—		16,866,447		14,045,619		2,539,661
Total	12/31/13	$	35,434,135	$	80,506,403	$	82,080,634	$	71,898,607	$	15,980,289
	12/31/12	$	28,149,010	$	31,484,627	$	43,967,078	$	35,516,117	$	5,267,454

As of December 31, 2013, the tax components of accumulated net earnings were as follows:

	LifePath Retirement Portfolio		LifePath 2020 Portfolio		LifePath 2030 Portfolio		LifePath 2040 Portfolio		LifePath 2050 Portfolio
Undistributed ordinary income	$	1,398,899	$	3,870,670	$	5,182,962	$	4,927,752	$	1,154,274
Undistributed long-term capital gains		4,775,446		14,975,382		14,141,559		13,159,601		3,504,998
Net unrealized gains1		53,338,902		136,494,021		112,060,037		137,253,466		26,107,977
Total	$	59,513,247	$	155,340,073	$	131,384,558	$	155,340,819	$	30,767,249

¹  The differences between book-basis and tax-basis net unrealized gains were attributable primarily to the timing and recognition of partnership income.

5. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2013						Year Ended December 31, 2012
LifePath Retirement Portfolio	Shares			Amount			Shares			Amount
Institutional
Shares sold		5,754,942		$	69,133,616			7,203,102		$	85,592,549
Shares issued to shareholders in reinvestment of dividends and distributions		2,025,766			23,782,749			1,507,204			17,797,116
Shares redeemed		(11,587,751	)		(138,829,774	)		(13,597,881	)		(160,901,524	)
Net decrease		(3,807,043	)	$	(45,913,409	)		(4,887,575	)	$	(57,511,859	)
Investor A
Shares sold		2,099,976		$	23,169,542			4,380,445		$	47,915,846
Shares issued to shareholders in reinvestment of dividends and distributions		1,047,063			11,224,034			836,200			9,076,610
Shares redeemed		(6,125,072	)		(67,169,112	)		(5,211,832	)		(57,077,393	)
Net increase (decrease)		(2,978,033	)	$	(32,775,536	)		4,813		$	(84,937	)
Investor C
Shares sold		30,761		$	366,522			13,899		$	163,679
Shares issued to shareholders in reinvestment of dividends and distributions		2,230			25,977			55			656
Shares redeemed		(537	)		(6,351	)		(7,293	)		(87,306	)
Net increase		32,454		$	386,148			6,661		$	77,029
Class K
Shares sold		135,948		$	1,639,652			317,052		$	3,794,750
Shares issued to shareholders in reinvestment of dividends and distributions		22,396			262,527			27,237			321,310
Shares redeemed		(470,427	)		(5,625,111	)		(97,137	)		(1,155,740	)
Net increase (decrease)		(312,083	)	$	(3,722,932	)		247,152		$	2,960,320

50 BLACKROCK FUNDS III DECEMBER 31, 2013

Notes to Financial Statements (continued) BlackRock Funds III

	Year Ended December 31, 2013						Year Ended December 31, 2012
LifePath Retirement Portfolio (concluded)	Shares			Amount			Shares			Amount
Class R
Shares sold		76,366		$	913,862			225,054		$	2,722,159
Shares issued to shareholders in reinvestment of dividends and distributions		11,490			134,000			7,344			86,513
Shares redeemed		(133,069	)		(1,567,502	)		(13,938	)		(167,921	)
Net increase (decrease)		(45,213	)	$	(519,640	)		218,460		$	2,640,751
Total Net Decrease		(7,109,918	)	$	(82,545,369	)		(4,410,489	)	$	(51,918,696	)
LifePath 2020 Portfolio
Institutional
Shares sold		8,511,753		$	144,336,416			8,994,910		$	145,159,817
Shares issued to shareholders in reinvestment of dividends and distributions		3,047,166			50,958,124			1,173,906			19,103,123
Shares redeemed		(11,824,424	)		(200,561,646	)		(17,638,178	)		(281,874,592	)
Net decrease		(265,505	)	$	(5,267,106	)		(7,469,362	)	$	(117,611,652	)
Investor A
Shares sold		2,956,608		$	47,519,740			5,549,681		$	84,086,546
Shares issued to shareholders in reinvestment of dividends and distributions		1,822,504			28,730,172			739,699			11,383,520
Shares redeemed		(6,496,963	)		(104,174,457	)		(7,652,194	)		(116,942,104	)
Net decrease		(1,717,851	)	$	(27,924,545	)		(1,362,814	)	$	(21,472,038	)
Investor C
Shares sold		87,370		$	1,468,984			74,820		$	1,200,698
Shares issued to shareholders in reinvestment of dividends and distributions		8,069			133,905			260			4,219
Shares redeemed		(40,854	)		(689,488	)		(17,627	)		(281,170	)
Net increase		54,585		$	913,401			57,453		$	923,747
Class K
Shares sold		165,581		$	2,808,655			549,632		$	8,932,356
Shares issued to shareholders in reinvestment of dividends and distributions		27,980			467,462			17,709			288,942
Shares redeemed		(513,349	)		(8,608,694	)		(268,332	)		(4,315,947	)
Net increase (decrease)		(319,788	)	$	(5,332,577	)		299,009		$	4,905,351
Class R
Shares sold		94,473		$	1,584,703			180,610		$	2,928,160
Shares issued to shareholders in reinvestment of dividends and distributions		12,487			208,183			1,926			31,462
Shares redeemed		(92,246	)		(1,566,901	)		(18,190	)		(293,487	)
Net increase		14,714		$	225,985			164,346		$	2,666,135
Total Net Decrease		(2,233,845	)	$	(37,384,842	)		(8,311,368	)	$	(130,588,457	)
LifePath 2030 Portfolio
Institutional
Shares sold		8,971,289		$	143,757,958			9,273,586		$	140,201,895
Shares issued to shareholders in reinvestment of dividends and distributions		3,348,359			53,396,307			1,820,970			27,685,332
Shares redeemed		(11,517,152	)		(185,042,343	)		(15,315,478	)		(229,512,146	)
Net increase (decrease)		802,496		$	12,111,922			(4,220,922	)	$	(61,624,919	)
Investor A
Shares sold		2,838,723		$	44,394,903			3,938,089		$	58,029,122
Shares issued to shareholders in reinvestment of dividends and distributions		1,771,483			27,571,118			1,013,951			15,060,863
Shares redeemed		(4,883,680	)		(76,553,017	)		(6,439,448	)		(95,545,782	)
Net decrease		(273,474	)	$	(4,586,996	)		(1,487,408	)	$	(22,455,797	)

BLACKROCK FUNDS III DECEMBER 31, 2013 51

Notes to Financial Statements (continued) BlackRock Funds III

	Year Ended December 31, 2013							Year Ended December 31, 2012
LifePath 2030 Portfolio (concluded)	Shares				Amount			Shares			Amount
Investor C
Shares sold		99,483			$	1,588,437			60,165		$	907,743
Shares issued to shareholders in reinvestment of dividends and distributions		10,794				170,582			436			6,588
Shares redeemed		(17,275	)			(276,553	)		(4,799	)		(73,160	)
Net increase		93,002			$	1,482,466			55,802		$	841,171
Class K
Shares sold		245,066			$	3,922,659			425,609		$	6,502,787
Shares issued to shareholders in reinvestment of dividends and distributions		42,216				673,513			31,276			476,399
Shares redeemed		(472,474	)			(7,435,361	)		(187,293	)		(2,875,344	)
Net increase (decrease)		(185,192	)		$	(2,839,189	)		269,592		$	4,103,842
Class R
Shares sold		95,045			$	1,511,193			139,417		$	2,135,295
Shares issued to shareholders in reinvestment of dividends and distributions		13,681				216,995			2,999			45,483
Shares redeemed		(48,141	)			(779,883	)		(18,189	)		(281,584	)
Net increase		60,585			$	948,305			124,227		$	1,899,194
Total Net Increase (Decrease)		497,417			$	7,116,508			(5,258,709	)	$	(77,236,509	)
LifePath 2040 Portfolio
Institutional
Shares sold		6,546,885			$	129,765,463			6,993,899		$	128,496,383
Shares issued to shareholders in reinvestment of dividends and distributions		2,491,667				49,725,474			1,265,800			23,458,949
Shares redeemed		(7,192,721	)			(143,607,155	)		(10,561,602	)		(192,115,160	)
Net increase (decrease)		1,845,831			$	35,883,782			(2,301,903	)	$	(40,159,828	)
Investor A
Shares sold		1,882,175			$	35,624,614			2,623,486		$	45,761,560
Shares issued to shareholders in reinvestment of dividends and distributions		1,136,217				21,461,369			632,205			11,133,070
Shares redeemed		(3,161,989	)			(59,848,652	)		(3,707,289	)		(65,175,564	)
Net decrease		(143,597	)		$	(2,762,669	)		(451,598	)	$	(8,280,934	)
Investor C				��
Shares sold		44,950			$	889,572			63,252		$	1,165,821
Shares issued to shareholders in reinvestment of dividends and distributions		6,881				136,348			221			4,086
Shares redeemed		(18,180	)			(357,229	)		(5,158	)		(95,847	)
Net increase		33,651			$	668,691			58,315		$	1,074,060
Class K
Shares sold		92,075			$	1,809,615			210,956		$	3,925,377
Shares issued to shareholders in reinvestment of dividends and distributions		23,165				464,192			18,754			349,463
Shares redeemed		(260,804	)			(5,061,839	)		(78,326	)		(1,451,253	)
Net increase (decrease)		(145,564	)		$	(2,788,032	)		151,384		$	2,823,587
Class R
Shares sold		31,423			$	618,463			89,816		$	1,667,551
Shares issued to shareholders in reinvestment of dividends and distributions		5,454				108,333			3,382			62,557
Shares redeemed		(68,343	)			(1,359,978	)		(16,971	)		(321,656	)
Net increase (decrease)		(31,466	)		$	(633,182	)		76,227		$	1,408,452
Total Net Increase (Decrease)		1,558,855			$	30,368,590			(2,467,575	)	$	(43,134,663	)

52 BLACKROCK FUNDS III DECEMBER 31, 2013

Notes to Financial Statements (concluded) BlackRock Funds III

	Year Ended December 31, 2013						Year Ended December 31, 2012
LifePath 2050 Portfolio	Shares			Amount			Shares			Amount
Institutional
Shares sold		3,070,828		$	63,732,279			3,031,733		$	56,719,389
Shares issued to shareholders in reinvestment of dividends and distributions		544,951			11,556,896			191,190			3,633,778
Shares redeemed		(1,395,997	)		(29,208,921	)		(1,767,377	)		(32,562,240	)
Net increase		2,219,782		$	46,080,254			1,455,546		$	27,790,927
Investor A
Shares sold		898,304		$	18,596,979			1,058,449		$	19,843,274
Shares issued to shareholders in reinvestment of dividends and distributions		200,755			4,256,315			80,463			1,528,213
Shares redeemed		(562,818	)		(11,779,445	)		(631,981	)		(11,903,692	)
Net increase		536,241		$	11,073,849			506,931		$	9,467,795
Investor C
Shares sold		21,865		$	448,245			6,912		$	125,986
Shares issued to shareholders in reinvestment of dividends and distributions		1,514			32,019			12			227
Shares redeemed		(3,501	)		(73,007	)		(2,990	)		(56,952	)
Net increase		19,878		$	407,257			3,934		$	69,261
Class K
Shares sold		19,268		$	399,508			39,215		$	744,972
Shares issued to shareholders in reinvestment of dividends and distributions		2,716			57,740			1,897			36,249
Shares redeemed		(36,583	)		(736,281	)		(24,510	)		(466,954	)
Net increase (decrease)		(14,599	)	$	(279,033	)		16,602		$	314,267
Class R
Shares sold		25,203		$	518,393			42,723		$	811,331
Shares issued to shareholders in reinvestment of dividends and distributions		3,441			72,784			993			18,961
Shares redeemed		(17,419	)		(372,477	)		(5,219	)		(100,064	)
Net increase		11,225		$	218,700			38,497		$	730,228
Total Net Increase		2,772,527		$	57,501,027			2,021,510		$	38,372,478

At December 31, 2013 the following shares of the LifePath Portfolios were owned by affiliates:

	Investor C		Class R
LifePath Retirement Portfolio		1,783		—
LifePath 2040 Portfolio		—		1,184
LifePath 2050 Portfolio		1,127		1,127

6. Subsequent Events:

Management has evaluated the impact of all subsequent events on the LifePath Portfolios 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.

BLACKROCK FUNDS III DECEMBER 31, 2013 53

Report of Independent Registered Public Accounting Firm BlackRock Funds III

To the Board of Trustees of BlackRock Funds III and the Shareholders of LifePath Retirement Portfolio, LifePath 2020 Portfolio, LifePath 2030 Portfolio, LifePath 2040 Portfolio and LifePath 2050 Portfolio:

In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of LifePath Retirement Portfolio, LifePath 2020 Portfolio, LifePath 2030 Portfolio, LifePath 2040 Portfolio and LifePath 2050 Portfolio (the “Funds”), each a series of BlackRock Funds III, at December 31, 2013, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 18, 2014

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid during the tax year ended December 31, 2013.

	Payable Dates		LifePath Retirement Portfolio		LifePath 2020 Portfolio		LifePath 2030 Portfolio		LifePath 2040 Portfolio		LifePath 2050 Portfolio
Qualified Dividend Income for Individuals1		4/02/13–1/02/14		20.75%		24.77%		29.34%		31.89%		37.21%
Dividends Qualifying for the Dividend Received Deduction for Corporations1		4/02/13–1/02/14		12.33%		14.05%		16.04%		17.17%		19.15%
Interest Related Dividends and Short-Term Capital Gains for Non-U.S. Residents2		4/02/13–1/02/14		76.49%		67.75%		66.06%		66.04%		57.47%

¹  The LifePath Portfolios hereby designate the percentages indicated above or the maximum amount allowable by law.

²  Represents the portion of the taxable ordinary income dividends eligible for exemption from US withholding tax for nonresident aliens and foreign corporations.

Additionally, the LifePath Portfolios distributed long-term capital gains per share to shareholders of record on the following dates:

Record Dates	June 27, 2013		December 30, 2013
LifePath Retirement Portfolio	$	0.035917	$	0.428280
LifePath 2020 Portfolio	$	0.042711	$	0.635348
LifePath 2030 Portfolio	$	0.044520	$	0.666347
LifePath 2040 Portfolio	$	0.048050	$	0.847627
LifePath 2050 Portfolio	$	0.038167	$	0.770395

54 BLACKROCK FUNDS III DECEMBER 31, 2013

Master Portfolio Information as of December 31, 2013 Master Investment Portfolio

LifePath^® Retirement Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Fixed Income Funds	61	%
Equity Funds	37
Short-Term Securities	2

Ten Largest Holdings Percent of
Affiliated Investment Companies

CoreAlpha Bond Master Portfolio	51	%
Active Stock Master Portfolio	19
iShares Barclays TIPS Bond ETF	9
Master Small Cap Index Series	5
BlackRock Commodity Strategies Fund	4
International Tilts Master Portfolio	3
iShares MSCI EAFE ETF	2
BlackRock Cash Funds: Institutional, SL Agency Shares	2
ACWI ex-US Index Master Portfolio	1
iShares MSCI EAFE Small-Cap ETF	1

LifePath 2020 Master Portfolio^®

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds	50	%
Fixed Income Funds	48
Short-Term Securities	2

Ten Largest Holdings Percent of
Affiliated Investment Companies

CoreAlpha Bond Master Portfolio	41	%
Active Stock Master Portfolio	26
iShares Barclays TIPS Bond ETF	7
International Tilts Master Portfolio	5
Master Small Cap Index Series	4
iShares MSCI EAFE ETF	4
BlackRock Commodity Strategies Fund	4
BlackRock Cash Funds: Institutional, SL Agency Shares	1
BlackRock Emerging Markets Fund, Inc.	1
iShares MSCI EAFE Small-Cap ETF	1

LifePath 2030 Master Portfolio^®

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds	65	%
Fixed Income Funds	32
Short-Term Securities	3

Ten Largest Holdings Percent of
Affiliated Investment Companies

Active Stock Master Portfolio	33	%
CoreAlpha Bond Master Portfolio	29
International Tilts Master Portfolio	6
iShares MSCI EAFE ETF	5
BlackRock Commodity Strategies Fund	4
iShares Barclays TIPS Bond ETF	3
Master Small Cap Index Series	3
iShares International Developed Real Estate ETF	3
iShares Cohen & Steers Realty Majors ETF	3
BlackRock Cash Funds: Institutional, SL Agency Shares	2

The Master Portfolios’ allocation and holdings listed above are current as of the report date. However, the Master Portfolios are regularly monitored and their composition may vary throughout various periods.

BLACKROCK FUNDS III DECEMBER 31, 2013 55

Master Portfolio Information as of December 31, 2013 (concluded) Master Investment Portfolio

LifePath 2040 Master Portfolio^®

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds	78	%
Fixed Income Funds	20
Short-Term Securities	2

Ten Largest Holdings Percent of
Affiliated Investment Companies

Active Stock Master Portfolio	38	%
CoreAlpha Bond Master Portfolio	19
International Tilts Master Portfolio	7
iShares MSCI EAFE ETF	6
iShares Cohen & Steers REIT ETF	4
BlackRock Commodity Strategies Fund	4
iShares International Developed Real Estate ETF	4
Russell 1000® Index Master Portfolio	3
Master Small Cap Index Series	3
BlackRock Emerging Markets Fund, Inc.	2

LifePath^® 2050 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds	89	%
Fixed Income Funds	9
Short-Term Securities	2

Ten Largest Holdings Percent of
Affiliated Investment Companies

Active Stock Master Portfolio .	42	%
CoreAlpha Bond Master Portfolio	10
International Tilts Master Portfolio	9
ACWI ex-US Index Master Portfolio	7
iShares International Developed Real Estate ETF	5
Russell 1000® Index Master Portfolio	5
iShares Cohen & Steers REIT ETF	5
BlackRock Commodity Strategies Fund	4
iShares MSCI EAFE ETF	4
BlackRock Emerging Markets Fund, Inc.	3

The Master Portfolios’ allocation and holdings listed above are current as of the report date. However, the Master Portfolios are regularly monitored and their composition may vary throughout various periods.

56 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments December 31, 2013 LifePath Retirement Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 38.2%
Active Stock Master Portfolio	$	301,116,371	$	301,116,371
ACWI ex-US Index Master Portfolio	$	21,332,804		21,332,804
BlackRock Commodity Strategies Fund		6,117,587		57,688,841
BlackRock Emerging Markets Fund, Inc.		779,979		15,544,975
International Tilts Master Portfolio	$	52,994,384		52,994,384
iShares MSCI Canada ETF (b)		300,512		8,762,930
iShares MSCI EAFE ETF (b)		515,589		34,575,398
iShares MSCI EAFE Small-Cap ETF		316,636		16,142,103
iShares MSCI Emerging Markets ETF (b)		282,562		11,802,615
Master Small Cap Index Series	$	74,174,910		74,174,910
Russell 1000® Index Master Portfolio	$	11,344,510		11,344,510
				605,479,841
Fixed Income Funds — 61.7%
CoreAlpha Bond Master Portfolio	$	829,309,521	$	829,309,521
iShares TIPS Bond ETF		1,368,622		150,411,558
				979,721,079
Short-Term Securities — 1.8%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)		24,241,785		24,241,785
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)		3,861,905		3,861,905
				28,103,690
Total Affiliated Investment Companies (Cost — $1,502,232,523*) — 101.7%				1,613,304,610
Liabilities in Excess of Other Assets — (1.7)%				(26,896,602	)
Net Assets — 100.0%			$	1,586,408,008

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	1,503,768,175
Gross unrealized appreciation	$	142,118,819
Gross unrealized depreciation		(32,582,384	)
Net unrealized appreciation	$	109,536,435

(a) Investments in issuers considered to be an affiliate of the Master Portfolio during the period ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at December 31,  2012		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2013		Value at December 31, 2013		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	298,793,488	$	2,322,883	1		—		$	301,116,371	$	301,116,371	$	5,546,517	$	53,766,379
ACWI ex-US Index Master Portfolio	$	27,699,413		—		$	(6,366,609	)2	$	21,332,804	$	21,332,804	$	1,029,373	$	2,491,349
BlackRock Cash Funds: Institutional, SL Agency Shares		7,529,155		16,712,630	1		—			24,241,785	$	24,241,785	$	68,443		—
BlackRock Cash Funds: Prime, SL Agency Shares		1,254,994		2,606,911	1		—			3,861,905	$	3,861,905	$	10,230
BlackRock Commodity Strategies Fund		5,285,130		885,767			(53,310	)		6,117,587	$	57,688,841		—	$	(63,404	)
BlackRock Emerging Markets Fund, Inc.		—		779,979			—			779,979	$	15,544,975	$	56,458		—
CoreAlpha Bond Master Portfolio	$	778,624,808	$	50,684,713	1		—		$	829,309,521	$	829,309,521	$	20,465,555	$	521,250
International Tilts Master Portfolio		—	$	52,994,384	1		—		$	52,994,384	$	52,994,384	$	12,536	$	(72,493	)
iShares Cohen & Steers REIT ETF		28,264		87			(28,351	)		—		—	$	33,336	$	657,026
iShares International Developed Real Estate ETF		91,497		489			(91,986	)		—		—	$	38,010	$	442,197
iShares MSCI Canada ETF		350,676		1,919			(52,083	)		300,512	$	8,762,930	$	216,932	$	(86,491	)
iShares MSCI EAFE ETF		1,310,595		—			(795,006	)		515,589	$	34,575,398	$	1,785,443	$	14,117,926
iShares MSCI EAFE Small-Cap ETF		344,187		7,146			(34,697	)		316,636	$	16,142,103	$	396,193	$	115,153
iShares MSCI Emerging Markets ETF		662,040		—			(379,478	)		282,562	$	11,802,615	$	451,482	$	1,386,222
iShares TIPS Bond ETF		1,074,113		330,977			(36,468	)		1,368,622	$	150,411,558	$	1,526,625	$	(224,164	)
Master Small Cap Index Series	$	64,132,281	$	10,042,629	1		—		$	74,174,910	$	74,174,910	$	1,066,320	$	3,823,210
Russell 1000® Index Master Portfolio		—	$	11,344,510	1		—		$	11,344,510	$	11,344,510	$	69,545	$	(37,447	)

¹ Represents net shares/beneficial interest purchased.

² Represents net shares sold.

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

(c) Represents the current yield as of report date.

(d) All or a portion of security was purchased with the cash collateral from loaned securities.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 57

Schedule of Investments (concluded) LifePath Retirement Master Portfolio

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements. The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	323,032,110	$	1,290,272,500		—	$	1,613,304,610

The carrying amount for certain of the Master Portfolio’s liabilities approximates fair value for financial reporting purposes. As of December 31, 2013, collateral on securities loaned at value of $(24,986,975) is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the period ending December 31, 2013.

See Notes to Financial Statements.

58 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments December 31, 2013 LifePath 2020 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 51.2%
Active Stock Master Portfolio	$	734,517,624	$	734,517,624
ACWI ex-US Index Master Portfolio	$	31,390,459		31,390,459
BlackRock Commodity Strategies Fund		11,033,370		104,044,675
BlackRock Emerging Markets Fund, Inc.		1,998,897		39,838,017
International Tilts Master Portfolio	$	133,430,820		133,430,820
iShares Cohen & Steers REIT ETF (b)		440,037		32,879,565
iShares International Developed Real Estate ETF		1,210,918		37,429,475
iShares MSCI Canada ETF (b)		851,740		24,836,738
iShares MSCI EAFE ETF		1,555,425		104,306,801
iShares MSCI EAFE Small-Cap ETF		754,858		38,482,661
iShares MSCI Emerging Markets ETF (b)		811,846		33,910,807
Master Small Cap Index Series	$	115,162,753		115,162,753
Russell 1000® Index Master Portfolio	$	18,841,005		18,841,005
				1,449,071,400
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 48.7%
CoreAlpha Bond Master Portfolio	$	1,188,795,466	$	1,188,795,466
iShares TIPS Bond ETF		1,738,491		191,060,161
				1,379,855,627
Short-Term Securities — 1.7%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)		40,527,090		40,527,090
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)		6,350,735		6,350,735
				46,877,825
Total Affiliated Investment Companies (Cost — $2,616,377,292*) — 101.6%				2,875,804,852
Liabilities in Excess of Other Assets — (1.6)%				(44,535,117	)
Net Assets — 100.0%			$	2,831,269,735

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

Total cost	$	2,631,350,491
Gross unrealized appreciation	$	333,481,425
Gross unrealized depreciation		(89,027,064	)
Net unrealized appreciation	$	244,454,361

(a) Investments in issuers considered to be an affiliate of the Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at December 31,  2012		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2013		Value at December 31, 2013		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	725,539,622	$	8,978,002	1		—		$	734,517,624	$	734,517,624	$	13,539,099	$	130,930,237
ACWI ex-US Index Master Portfolio	$	42,040,829		—		$	(10,650,370	)2	$	31,390,459	$	31,390,459	$	1,581,135	$	3,812,251
BlackRock Cash Funds: Institutional, SL Agency Shares		18,545,337		21,981,753	1		—			40,527,090	$	40,527,090	$	150,011		—
BlackRock Cash Funds: Prime, SL Agency Shares		4,104,742		2,245,993	1		—			6,350,735	$	6,350,735	$	22,351		—
BlackRock Emerging Markets Fund, Inc.		—		1,998,897			—			1,998,897	$	39,838,017	$	143,699		—
BlackRock Commodity Strategies Fund		9,023,154		2,010,216			—			11,033,370	$	104,044,675		—		—
CoreAlpha Bond Master Portfolio	$	997,874,524	$	190,920,942	1		—		$	1,188,795,466	$	1,188,795,466	$	27,340,812	$	(1,345,089	)
International Tilts Master Portfolio		—	$	133,430,820	1		—		$	133,430,820	$	133,430,820	$	28,686	$	(181,763	)
iShares Cohen & Steers REIT ETF		450,679		14,910			(25,552	)		440,037	$	32,879,565	$	1,123,573	$	131,432
iShares International Developed Real Estate ETF		1,375,939		60,387			(225,408	)		1,210,918	$	37,429,475	$	4,388,160	$	1,186,092
iShares MSCI Canada ETF		951,620		7,904			(107,784	)		851,740	$	24,836,738	$	605,885	$	(467,567	)
iShares MSCI EAFE ETF		3,472,019		—			(1,916,594	)		1,555,425	$	104,306,801	$	5,064,890	$	35,555,914
iShares MSCI EAFE Small-Cap ETF		772,687		17,485			(35,314	)		754,858	$	38,482,661	$	917,048	$	(11,366	)
iShares MSCI Emerging Markets ETF		1,801,391		—			(989,545	)		811,846	$	33,910,807	$	1,269,582	$	(55,034	)
iShares TIPS Bond ETF		1,297,149		462,701			(21,359	)		1,738,491	$	191,060,161	$	1,914,733	$	(128,668	)
Master Small Cap Index Series	$	91,038,885	$	24,123,868	1		—		$	115,162,753	$	115,162,753	$	1,546,651	$	5,546,260
Russell 1000® Index Master Portfolio		—	$	18,841,005	1		—		$	18,841,005	$	18,841,005	$	174,643	$	(67,929	)

¹  Represents net shares/beneficial interest purchased.

²  Represents net beneficial interest sold.

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

(c) Represents the current yield as of report date.

(d) All or a portion of security was purchased with the cash collateral from loaned securities.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 59

Schedule of Investments (concluded) LifePath 2020 Master Portfolio

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements. The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	653,666,725	$	2,222,138,127		—	$	2,875,804,852

The carrying amount for certain of the Master Portfolio’s liabilities approximates fair value for financial reporting purposes. As of December 31, 2013, collateral on securities loaned at value of $(41,090,000) is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the period ending December 31, 2013.

See Notes to Financial Statements.

60 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments December 31, 2013 LifePath 2030 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 67.1%
Active Stock Master Portfolio	$	883,697,843	$	883,697,843
ACWI ex-US Index Master Portfolio	$	52,940,137		52,940,137
BlackRock Commodity Strategies Fund		10,830,777		102,134,225
BlackRock Emerging Markets Fund, Inc.		2,516,085		50,145,576
International Tilts Master Portfolio	$	165,412,631		165,412,631
iShares Cohen & Steers REIT ETF (b)		951,541		71,099,144
iShares International Developed Real Estate ETF (b)		2,422,429		74,877,280
iShares MSCI Canada ETF (b)		1,012,839		29,534,385
iShares MSCI EAFE ETF		1,843,415		123,619,410
iShares MSCI EAFE Small-Cap ETF (b)		973,793		49,643,967
iShares MSCI Emerging Markets ETF		954,459		39,867,752
Master Small Cap Index Series	$	87,580,909		87,580,909
Russell 1000® Index Master Portfolio	$	48,110,697		48,110,697
				1,778,663,956
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 32.9%
CoreAlpha Bond Master Portfolio	$	777,088,211	$	777,088,211
iShares TIPS Bond ETF		863,157		94,860,954
				871,949,165
Short-Term Securities — 2.6%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)		59,018,753		59,018,753
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)		9,641,041		9,641,041
				68,659,794
Total Affiliated Investment Companies (Cost — $2,421,944,020*) — 102.6%				2,719,272,915
Liabilities in Excess of Other Assets — (2.6)%				(67,791,997	)
Net Assets — 100.0%			$	2,651,480,918

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	2,440,237,402
Gross unrealized appreciation	$	379,756,364
Gross unrealized depreciation		(100,720,851	)
Net unrealized appreciation	$	279,035,513

(a) Investments in issuers considered to be an affiliate of the Master Portfolio during the period ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at December 31,  2012		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2013		Value at December 31, 2013		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	841,283,578	$	42,414,265	1		—		$	883,697,843	$	883,697,843	$	16,116,615	$	151,746,359
ACWI ex-US Index Master Portfolio	$	48,830,798	$	4,109,339	1		—		$	52,940,137	$	52,940,137	$	2,117,805	$	4,767,084
BlackRock Cash Funds: Institutional, SL Agency Shares		39,402,527		19,616,226	1		—			59,018,753	$	59,018,753	$	164,788		—
BlackRock Cash Funds: Prime, SL Agency Shares		9,624,087		16,954	1		—			9,641,041	$	9,641,041	$	25,753		—
BlackRock Commodity Strategies Fund		7,981,436		2,849,341			—			10,830,777	$	102,134,225		—		—
BlackRock Emerging Markets Fund, Inc.		—		2,516,085			—			2,516,085	$	50,145,576	$	179,353		—
CoreAlpha Bond Master Portfolio	$	593,095,629	$	183,992,582	1		—		$	777,088,211	$	777,088,211	$	16,831,212	$	(2,171,208	)
International Tilts Master Portfolio		—	$	165,412,631	1		—		$	165,412,631	$	165,412,631	$	68,544	$	(224,014	)
iShares Cohen & Steers REIT ETF		750,700		209,293			(8,452	)		951,541	$	71,099,144	$	2,120,036	$	(6,464	)
iShares International Developed Real Estate ETF		2,215,546		270,259			(63,376	)		2,422,429	$	74,877,280	$	8,307,903	$	238,026
iShares MSCI Canada ETF		1,114,324		10,190			(111,675	)		1,012,839	$	29,534,385	$	718,064	$	(491,922	)
iShares MSCI EAFE ETF		4,026,402		—			(2,182,987	)		1,843,415	$	123,619,410	$	5,931,501	$	33,405,113
iShares MSCI EAFE Small-Cap ETF		889,363		140,086			(55,656	)		973,793	$	49,643,967	$	1,139,758	$	(75,958	)
iShares MSCI Emerging Markets ETF		2,093,140		—			(1,138,681	)		954,459	$	39,867,752	$	1,474,358	$	(1,650,221	)
iShares TIPS Bond ETF		707,463		252,770			(97,076	)		863,157	$	94,860,954	$	1,044,709	$	(134,887	)
Master Small Cap Index Series	$	64,557,533	$	23,023,376	1		—		$	87,580,909	$	87,580,909	$	1,124,857	$	4,015,360
Russell 1000® Index Master Portfolio		—	$	48,110,697	1		—		$	48,110,697	$	48,110,697	$	215,222	$	(47,243	)

¹  Represents net shares/beneficial interest purchased.

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

(c) Represents the current yield as of report date.

(d) All or a portion of security was purchased with the cash collateral from loaned securities.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 61

Schedule of Investments (concluded) LifePath 2030 Master Portfolio

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements. The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	704,442,487	$	2,014,830,428		—	$	2,719,272,915

The carrying amount for certain of the Master Portfolio’s liabilities approximates fair value for financial reporting purposes. As of December 31, 2013, collateral on securities loaned at value of $(62,378,665) is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the period ending December 31, 2013.

See Notes to Financial Statements.

62 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments December 31, 2013 LifePath 2040 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 78.2%
Active Stock Master Portfolio	$	799,127,066	$	799,127,066
ACWI ex-US Index Master Portfolio	$	46,818,008		46,818,008
BlackRock Commodity Strategies Fund		8,674,420		81,799,783
BlackRock Emerging Markets Fund, Inc.		2,360,437		47,043,512
International Tilts Master Portfolio	$	154,522,993		154,522,993
iShares Cohen & Steers REIT ETF (b)		1,112,408		83,119,126
iShares International Developed Real Estate ETF		2,633,592		81,404,329
iShares MSCI Canada ETF (b)		958,137		27,939,275
iShares MSCI EAFE ETF		1,749,865		117,345,947
iShares MSCI EAFE Small-Cap ETF		901,955		45,981,666
iShares MSCI Emerging Markets ETF		896,775		37,458,292
Master Small Cap Index Series	$	54,999,126		54,999,126
Russell 1000® Index Master Portfolio	$	66,301,350		66,301,350
				1,643,860,473
Fixed Income Funds — 20%
CoreAlpha Bond Master Portfolio	$	401,864,037	$	401,864,037
iShares TIPS Bond ETF		165,134		18,148,227
				420,012,264
Short-Term Securities — 1.8%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)		33,479,740		33,479,740
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)		5,267,073		5,267,073
				38,746,813
Total Affiliated Investment Companies (Cost — $1,836,504,211*) — 101.8%				2,102,619,550
Liabilities in Excess of Other Assets — (1.8)%				(37,926,290	)
Net Assets — 100.0%			$	2,064,693,260

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	1,858,537,803
Gross unrealized appreciation	$	336,018,508
Gross unrealized depreciation		(91,936,761	)
Net unrealized appreciation	$	244,081,747

(a) Investments in issuers considered to be an affiliate of the Master Portfolio during the period ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at December 31,  2012		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2013		Value at December 31, 2013		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	760,695,544	$	38,431,522	1		—		$	799,127,066	$	799,127,066	$	14,727,875	$	137,035,578
ACWI ex-US Index Master Portfolio	$	38,541,025	$	8,276,983	1		—		$	46,818,008	$	46,818,008	$	1,836,546	$	3,976,323
BlackRock Cash Funds: Institutional, SL Agency Shares		26,972,214		6,507,526	1		—			33,479,740	$	33,479,740	$	140,526		—
BlackRock Cash Funds: Prime, SL Agency Shares		6,555,513		—			(1,288,440	)2		5,267,073	$	5,267,073	$	21,254		—
BlackRock Commodity Strategies Fund		6,060,504		2,649,142			(35,226	)		8,674,420	$	81,799,783	$	—	$	(40,158	)
BlackRock Emerging Markets Fund, Inc.		—		2,360,437			—			2,360,437	$	47,043,512	$	168,061		—
CoreAlpha Bond Master Portfolio	$	272,301,743	$	129,562,294	1		—		$	401,864,037	$	401,864,037	$	8,133,549	$	(1,767,107	)
International Tilts Master Portfolio		—	$	154,522,993	1		—		$	154,522,993	$	154,522,993	$	105,166	$	(209,151	)
iShares Cohen & Steers REIT ETF		807,851		358,386			(53,829	)		1,112,408	$	83,119,126	$	2,342,175	$	319,502
iShares International Developed Real Estate ETF		2,340,965		423,060			(130,433	)		2,633,592	$	81,404,329	$	9,012,051	$	(354,895	)
iShares MSCI Canada ETF		1,023,835		11,083			(76,781	)		958,137	$	27,939,275	$	669,824	$	(335,022	)
iShares MSCI EAFE ETF		3,712,248		—			(1,962,383	)		1,749,865	$	117,345,947	$	5,527,027	$	23,383,205
iShares MSCI EAFE Small-Cap ETF		797,837		136,181			(32,063	)		901,955	$	45,981,666	$	1,067,764	$	(18,175	)
iShares MSCI Emerging Markets ETF		1,924,980		—			(1,028,205	)		896,775	$	37,458,292	$	1,368,389	$	(2,802,782	)
iShares TIPS Bond ETF		238,933		65,595			(139,394	)		165,134	$	18,148,227	$	320,448	$	496,753
Master Small Cap Index Series	$	39,498,574	$	15,500,552	1		—		$	54,999,126	$	54,999,126	$	685,793	$	2,446,655
Russell 1000® Index Master Portfolio		—	$	66,301,350	1		—		$	66,301,350	$	66,301,350	$	202,260	$	(40,758	)

¹  Represents net shares/beneficial interest purchased.

²  Represents net shares sold.

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

(c) Represents the current yield as of report date.

(d) All or a portion of security was purchased with the cash collateral from loaned securities.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 63

Schedule of Investments (concluded) LifePath 2040 Master Portfolio

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	578,986,970	$	1,523,632,580		—	$	2,102,619,550

The carrying amount for certain of the Master Portfolio’s liabilities approximates fair value for financial reporting purposes. As of December 31, 2013, collateral on securities loaned at value of $(34,078,580) is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the period ending December 31, 2013.

See Notes to Financial Statements.

64 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments December 31, 2013 LifePath 2050 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 90.3%
Active Stock Master Portfolio	$	176,775,516	$	176,775,516
ACWI ex-US Index Master Portfolio	$	27,522,238		27,522,238
BlackRock Commodity Strategies Fund		1,705,352		16,081,467
BlackRock Emerging Markets Fund, Inc.		539,560		10,753,429
International Tilts Master Portfolio	$	36,382,911		36,382,911
iShares Cohen & Steers REIT ETF		260,332		19,452,007
iShares International Developed Real Estate ETF		725,825		22,435,251
iShares MSCI Canada ETF (b)		209,515		6,109,457
iShares MSCI EAFE ETF		211,392		14,175,948
iShares MSCI EAFE Small-Cap ETF		203,079		10,352,967
iShares MSCI Emerging Markets ETF		113,169		4,727,069
Master Small Cap Index Series	$	8,543,922		8,543,922
Russell 1000® Index Master Portfolio	$	21,543,179	$	21,543,179
				374,855,361
Fixed Income Fund — 9.7%
CoreAlpha Bond Master Portfolio	$	40,230,315	$	40,230,315
Short-Term Securities — 1.6%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)		5,872,036		5,872,036
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)		859,378		859,378
				6,731,414
Total Affiliated Investment Companies (Cost — $375,079,377*) — 101.6%				421,817,090
Liabilities in Excess of Other Assets — (1.6)%				(6,553,772	)
Net Assets — 100.0%			$	415,263,318

Notes to Schedule of investments

* As of December 31, 2013, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

Total cost	$	376,228,826
Gross unrealized appreciation	$	60,732,547
Gross unrealized depreciation		(15,144,283	)
Net unrealized appreciation	$	45,588,264

(a) Investments in issuers considered to be an affiliate of the Master Portfolio during the period ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at December  31, 2012		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December  31, 2013		Value at December 31, 2013		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	136,546,567	$	40,228,949	1		—		$	176,775,516	$	176,775,516	$	3,021,420	$	24,703,268
ACWI ex-US Index Master Portfolio	$	23,074,195	$	4,448,043	1		—		$	27,522,238	$	27,522,238	$	1,078,652	$	2,135,184
BlackRock Cash Funds: Institutional, SL Agency Shares		3,548,844		2,323,192	1		—			5,872,036	$	5,872,036	$	26,083		—
BlackRock Cash Funds: Prime, SL Agency Shares		907,096		—			(47,718	)2		859,378	$	859,378	$	3,633		—
BlackRock Commodity Strategies Fund		969,991		735,361			—			1,705,352	$	16,081,467		—	$	—
BlackRock Emerging Markets Fund, Inc.		—		539,560			—			539,560	$	10,753,429	$	37,592		—
CoreAlpha Bond Master Portfolio	$	18,868,890	$	21,361,425	1		—		$	40,230,315	$	40,230,315	$	691,725	$	(458,253	)
International Tilts Master Portfolio		—	$	36,382,911	1		—		$	36,382,911	$	36,382,911	$	39,264	$	(48,595	)
iShares Cohen & Steers REIT ETF		154,447		107,015			(1,130	)		260,332	$	19,452,007	$	544,426	$	(5,930	)
iShares International Developed Real Estate ETF		444,626		283,801			(2,602	)		725,825	$	22,435,251	$	2,304,395	$	5,845
iShares MSCI Canada ETF		130,967		87,947			(9,399	)		209,515	$	6,109,457	$	118,651	$	(35,341	)
iShares MSCI EAFE ETF		471,857		—			(260,465	)		211,392	$	14,175,948	$	692,776	$	2,672,320
iShares MSCI EAFE Small-Cap ETF		134,998		68,081			—			203,079	$	10,352,967	$	227,538		—
iShares MSCI Emerging Markets ETF		245,849		—			(132,680	)		113,169	$	4,727,069	$	174,907	$	(134,261	)
Master Small Cap Index Series	$	4,938,307	$	3,605,615	1		—		$	8,543,922	$	8,543,922	$	97,416	$	342,249
Russell 1000® Index Master Portfolio		—	$	21,543,179	1		—		$	21,543,179	$	21,543,179	$	46,673	$	(1,202	)

¹  Represents net shares/beneficial interest purchased.

²  Represents net shares sold.

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

(c) Represents the current yield as of report date.

(d) All or a portion of security was purchased with the cash collateral from loaned securities.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 65

Schedule of Investments (concluded) LifePath 2050 Master Portfolio

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	110,819,009	$	310,998,081		—	$	421,817,090

The carrying amount for certain of the Master Portfolio’s liabilities approximates fair value for financial reporting purposes. As of December 31, 2013, collateral on securities loaned at value of $(5,560,275) is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the period ending December 31, 2013.

See Notes to Financial Statements.

66 BLACKROCK FUNDS III DECEMBER 31, 2013

Statements of Assets and Liabilities Master Investment Portfolio

December 31, 2013	LifePath Retirement Master Portfolio		LifePath 2020 Master Portfolio		LifePath 2030 Master Portfolio		LifePath 2040 Master Portfolio			LifePath 2050 Master Portfolio
Assets
Investments at value — affiliated1,2	$	1,613,304,610	$	2,875,804,852	$	2,719,272,915	$	2,102,619,550		$	421,817,090
Investments sold receivable		48,517,080		117,668,021		135,475,816		124,725,857			25,393,534
Contributions receivable from investors		854,573		312,002		763,537		1,231,985			280,920
Securities lending income receivable — affiliated		3,602		8,153		7,755		8,219			1,473
Other income receivable — affiliated		19,492		43,017		44,991		39,313			5,764
Total assets		1,662,699,357		2,993,836,045		2,855,565,014		2,228,624,924			447,498,781
Liabilities
Collateral on securities loaned at value		24,986,975		41,090,000		62,378,665		34,078,580			5,560,275
Investments purchased payable		38,203,402		92,588,879		114,638,715		108,292,945	��		23,697,157
Accrued trustees’ fees		11,857		20,203		18,554		14,491			3,296
Investment advisory fees payable		84,943		115,751		72,168		33,444			5,681
Professional fees payable		19,222		21,133		20,488		19,358			16,512
Withdrawals payable to investors		12,984,950		28,730,344		26,955,506		21,492,846			2,952,542
Total liabilities		76,291,349		162,566,310		204,084,096		163,931,664			32,235,463
Net Assets	$	1,586,408,008	$	2,831,269,735	$	2,651,480,918	$	2,064,693,260		$	415,263,318
Net Assets Consist of
Investors’ capital	$	1,475,335,921	$	2,571,842,175	$	2,354,152,023	$	1,798,577,921		$	368,525,605
Net unrealized appreciation/depreciation		111,072,087		259,427,560		297,328,895		266,115,339			46,737,713
Net Assets	$	1,586,408,008	$	2,831,269,735	$	2,651,480,918	$	2,064,693,260		$	415,263,318
1 Investments at cost — affiliated	$	1,502,232,523	$	2,616,377,292	$	2,421,944,020	$	1,836,504,211		$	375,079,377
2 Securities loaned at value	$	24,346,591	$	40,169,375	$	61,145,092	$	33,305,524		$	5,450,004

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	67

Statements of Operations Master Investment Portfolio

Year Ended December 31, 2013	LifePath Retirement Master Portfolio			LifePath 2020 Master Portfolio			LifePath 2030 Master Portfolio			LifePath 2040 Master Portfolio			LifePath 2050 Master Portfolio
Investment Income
Dividends — affiliated	$	4,504,478		$	15,427,572		$	20,915,682		$	20,475,739		$	4,100,272
Securities lending — affiliated — net		74,447			164,985			183,402			156,352			28,460
Income — affiliated		4,226			7,377			7,139			5,428			1,255
Other income — affiliated		19,492			43,017			44,991			39,313			5,764
Net investment income allocated from the applicable Underlying Master Portfolios:
Dividends		7,300,281			15,989,993			18,659,287			16,697,885			4,075,000
Interest		20,513,737			27,682,293			17,462,806			8,811,187			881,918
Expenses		(3,254,418	)		(5,592,446	)		(5,101,886	)		(3,925,907	)		(770,404	)
Fees waived		397,491			925,658			1,070,373			963,542			195,143
Total income		29,559,734			54,648,449			53,241,794			43,223,539			8,517,408
Expenses
Investment advisory		5,440,189			9,442,251			8,586,084			6,614,229			1,198,435
Professional		29,755			32,465			31,730			30,330			26,591
Independent Trustees		50,915			86,049			78,448			61,053			13,600
Total expenses		5,520,859			9,560,765			8,696,262			6,705,612			1,238,626
Less fees waived by Manager		(4,469,741	)		(8,149,933	)		(7,758,207	)		(6,212,582	)		(1,137,098	)
Total expenses after fees waived		1,051,118			1,410,832			938,055			493,030			101,528
Net investment income		28,508,616			53,237,617			52,303,739			42,730,509			8,415,880
Realized and Unrealized Gain (Loss)
Net realized gain from:
Investments — unaffiliated		2,438			7,740			2,825			2,446			—
Investments — affiliated		16,344,465			36,362,219			31,284,138			20,661,119			2,502,633
Allocations from the applicable Underlying Master Portfolios from investments, financial futures contracts, swaps and foreign currency transactions		60,650,668			138,921,060			158,234,783			141,518,307			26,680,336
		76,997,571			175,291,019			189,521,746			162,181,872			29,182,969
Net change in unrealized appreciation/depreciation on:
Investments — affiliated		(20,518,656	)		(27,331,844	)		(11,065,995	)		3,592,431			(47,132	)
Allocated from the applicable Underlying Master Portfolios from investments, financial futures contracts, swaps and foreign currency translations		15,428,054			62,716,338			97,215,460			98,086,868			26,472,278
		(5,090,602	)		35,384,494			86,149,465			101,679,299			26,425,146
Total realized and unrealized gain		71,906,969			210,675,513			275,671,211			263,861,171			55,608,115
Net Increase in Net Assets Resulting from Operations	$	100,415,585		$	263,913,130		$	327,974,950		$	306,591,680		$	64,023,995

See Notes to Financial Statements.
68	BLACKROCK FUNDS III	DECEMBER 31, 2013

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath Retirement Master Portfolio						LifePath 2020 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	28,508,616		$	31,654,087		$	53,237,617		$	55,887,731
Net realized gain		76,997,571			37,988,999			175,291,019			70,282,877
Net change in unrealized appreciation/depreciation		(5,090,602	)		55,122,353			35,384,494			135,234,770
Net increase in net assets resulting from operations		100,415,585			124,765,439			263,913,130			261,405,378
Capital Transactions
Proceeds from contributions		200,566,162			203,555,243			298,075,510			280,792,493
Value of withdrawals		(206,149,443	)		(223,777,527	)		(255,035,339	)		(376,464,121	)
Net increase (decrease) in net assets derived from capital transactions		(5,583,281	)		(20,222,284	)		43,040,171			(95,671,628	)
Net Assets
Total increase in net assets		94,832,304			104,543,155			306,953,301			165,733,750
Beginning of year		1,491,575,704			1,387,032,549			2,524,316,434			2,358,582,684
End of year	$	1,586,408,008		$	1,491,575,704		$	2,831,269,735		$	2,524,316,434

	LifePath 2030 Master Portfolio						LifePath 2040 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	52,303,739		$	50,451,841		$	42,730,509		$	39,418,092
Net realized gain		189,521,746			61,313,076			162,181,872			48,434,526
Net change in unrealized appreciation/depreciation		86,149,465			155,165,763			101,679,299			137,661,928
Net increase in net assets resulting from operations		327,974,950			266,930,680			306,591,680			225,514,546
Capital Transactions
Proceeds from contributions		287,895,384			257,202,657			203,577,910			182,726,933
Value of withdrawals		(201,833,907	)		(300,799,718	)		(146,733,461	)		(216,740,612	)
Net increase (decrease) in net assets derived from capital transactions		86,061,477			(43,597,061	)		56,844,449			(34,013,679	)
Net Assets
Total increase in net assets		414,036,427			223,333,619			363,436,129			191,500,867
Beginning of year		2,237,444,491			2,014,110,872			1,701,257,131			1,509,756,264
End of year	$	2,651,480,918		$	2,237,444,491		$	2,064,693,260		$	1,701,257,131

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	69

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath 2050 Master Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012
Operations
Net investment income	$	8,415,880		$	5,493,750
Net realized gain		29,182,969			5,074,837
Net change in unrealized appreciation/depreciation		26,425,146			21,179,304
Net increase in net assets resulting from operations		64,023,995			31,747,891
Capital Transactions
Proceeds from contributions		110,404,463			102,543,769
Value of withdrawals		(27,016,387	)		(46,527,191	)
Net increase in net assets derived from capital transactions		83,388,076			56,016,578
Net Assets
Total increase in net assets		147,412,071			87,764,469
Beginning of year		267,851,247			180,086,778
End of year	$	415,263,318		$	267,851,247

See Notes to Financial Statements.
70	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights Master Investment Portfolio

	LifePath Retirement Master Portfolio
	Year Ended December 31,
	2013			2012			2011			2010		2009
Total Investment Return
Total investment return		6.75%			9.11%			4.46%			9.83%		18.75%
Ratios to Average Net Assets
Total expenses		0.54%	1,2,3		0.55%	4,5,6		0.55%	4,5,6		0.61%4		0.59%	4
Total expenses after fees waived		0.25%	1,2,3		0.28%	4,5,6		0.27%	4,5,6		0.26%4		0.26%	4
Net investment income7		1.83%	1,2,3		2.22%	4,5,6		2.77%	4,5,6		2.60%4		3.61%	4
Supplemental Data
Net assets, end of year (000)		$1,586,408			$1,491,576			$1,387,033			$1,380,141		$1,165,307
Portfolio turnover		17%	8		4%	9		4%	9		4%9		6%	9,10

¹  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

²  Includes the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master allocated fees waived of 0.03%.

³  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.10%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master allocated expenses and/or net investment income.

⁴  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, except the total expenses for the two years ended December 31, 2010, which include gross expenses. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund and iShares exchange-traded funds.

⁵  Includes the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series’ allocated fees waived of 0.03% and 0.02%, for the years ended December 31, 2012 and December 31, 2011, respectively.

⁶  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.08% for each of the years ended December 31, 2012 and December 31, 2011, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series’ allocated expenses and/or net investment income.

⁷  Includes the LifePath Master Portfolio’s share of the allocated net investment income from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, except the year ended December 31, 2013, which also includes International Tilts Master Portfolio and Russell 1000^® Index Master Portfolio.

⁸  Includes the purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

⁹  Excludes purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 13%, 20%, 14%, and 18% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

¹⁰ Excludes in-kind contribution of portfolio securities received in a tax-free reorganization on November 20, 2009.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	71

Financial Highlights Master Investment Portfolio

	LifePath 2020 Master Portfolio
	Year Ended December 31,
	2013			2012			2011			2010			2009
Total Investment Return
Total investment return		10.17%			11.49%			1.96%			11.40%			23.21%
Ratios to Average Net Assets
Total expenses		0.53%	1,2,3		0.53%	4,5,6		0.53%	4,5,6		0.59%	4		0.58%	4
Total expenses after fees waived		0.23%	1,2,3		0.25%	4,5,6		0.25%	4,5,6		0.23%	4		0.23%	4
Net investment income7		1.97%	1,2,3		2.30%	4,5,6		2.56%	4,5,6		2.45%	4		3.15%	4
Supplemental Data
Net assets, end of year (000)		$2,831,270			$2,524,316			$2,358,583			$2,343,961			$1,779,673
Portfolio turnover		19%	8		5%	9		5%	9		4%	9		6%	9

¹  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

²  Includes the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master allocated fees waived of 0.03%.

³  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.12%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master allocated expenses and/or net investment income.

⁴  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, except the total expenses for the two years ended December 31, 2010, which include gross expenses. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund and iShares exchange-traded funds.

⁵  Includes the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series’ allocated fees waived of 0.03% for each of the years ended December 31, 2012 and December 31, 2011.

⁶  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11% for each of the years ended December 31, 2012 and December 31, 2011, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series’ allocated expenses and/or net investment income.

⁷  Includes the LifePath Master Portfolio’s share of the allocated net investment income from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, except the year ended December 31, 2013, which also includes International Tilts Master Portfolio and Russell 1000^® Index Master Portfolio.

⁸  Includes the purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

⁹  Excludes purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15%, 23%, 13%, and 16% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
72	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights Master Investment Portfolio

	LifePath 2030 Master Portfolio
	Year Ended December 31,
	2013			2012			2011			2010			2009
Total Investment Return
Total investment return		14.16%			13.59%			(0.13)%			12.36%			26.27%
Ratios to Average Net Assets
Total expenses		0.52%	1,2,3		0.53%	4,5,6		0.52%	4,5,6		0.57%	4		0.56%	4
Total expenses after fees waived		0.20%	1,2,3		0.23%	4,5,6		0.22%	4,5,6		0.21%	4		0.20%	4
Net investment income7		2.13%	1,2,3		2.37%	4,5,6		2.39%	4,5,6		2.34%	4		2.97%	4
Supplemental Data
Net assets, end of year (000)		$2,651,481			$2,237,444			$2,014,111			$1,972,075			$1,433,256
Portfolio turnover		22%	8		5%	9		7%	9		3%	9		7%	9

¹  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

²  Includes the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master allocated fees waived of 0.04%.

³  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.15%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master allocated expenses and/or net investment income.

⁴  Includes the Lifepath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, except the total expenses for the two years ended December 31, 2010, which include gross expenses. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund and iShares exchange-traded funds.

⁵  Includes the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series’ allocated fees waived of 0.04% for each of the years ended December 31, 2012 and December 31, 2011.

⁶  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.13% for each of the years ended December 31, 2012 and December 31, 2011, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series’ allocated expenses and/or net investment income.

⁷  Includes the LifePath Master Portfolio’s share of the allocated net investment income from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, except the year ended December 31, 2013, which also includes International Tilts Master Portfolio and Russell 1000^® Index Master Portfolio.

⁸  Includes the purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

⁹  Excludes purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 16%, 20%, 10%, and 13% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	73

Financial Highlights Master Investment Portfolio

	LifePath 2040 Master Portfolio
	Year Ended December 31,
	2013			2012			2011			2010			2009
Total Investment Return
Total investment return		17.42%			15.23%			(1.88)%			13.21%			28.58%
Ratios to Average Net Assets
Total expenses		0.51%	1,2,3		0.52%	4,5,6		0.52%	4,5,6		0.55%	4		0.55%	4
Total expenses after fees waived		0.18%	1,2,3		0.21%	4,5,6		0.20%	4,5,6		0.19%	4		0.18%	4
Net investment income7		2.26%	1,2,3		2.44%	4,5,6		2.24%	4,5,6		2.24%	4		2.82%	4
Supplemental Data
Net assets, end of year (000)		$2,064,693			$1,701,257			$1,509,756			$1,519,203			$1,133,675
Portfolio turnover		26%	8		4%	9		8%	9		4%	9		6%	9

¹  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

²  Includes the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master allocated fees waived of 0.05%.

³  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.17%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master allocated expenses and/or net investment income.

⁴  Includes the Lifepath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, except the total expenses for the two years ended December 31, 2010, which include gross expenses. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund and iShares exchange-traded funds.

⁵  Includes the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series’ allocated fees waived of 0.05% and 0.04%, for the years ended December 31, 2012 and December 31, 2011, respectively.

⁶  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.15% for each of the years ended December 31, 2012 and December 31, 2011, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series’ allocated expenses and/or net investment income.

⁷  Includes the LifePath Master Portfolio’s share of the allocated net investment income from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, except the year ended December 31, 2013, which also includes International Tilts Master Portfolio and Russell 1000^® Index Master Portfolio.

⁸  Includes the purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master.

⁹  Excludes purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 14%, 20%, 9%, and 9% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
74	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights Master Investment Portfolio

	LifePath 2050 Master Portfolio
	Year Ended December 31,
	2013			2012			2011			2010			2009
Total Investment Return
Total investment return		20.32%			16.55%			(3.28)%			13.93%			30.85%
Ratios to Average Net Assets
Total expenses		0.53%	1,2,3		0.54%	4,5,6		0.53%	4,5,6		0.56%	4		0.59%	4
							��
Total expenses after fees waived		0.20%	1,2,3		0.21%	4,5,6		0.18%	4,5,6		0.17%	4		0.16%	4
Net investment income7		2.46%	1,2,3		2.51%	4,5,6		2.18%	4,5,6		2.31%	4		2.84%	4
Supplemental Data
Net assets, end of period (000)		$415,263			$267,851			$180,087			$119,391			$40,164
Portfolio turnover		28%	8		5%	9		13%	9		5%	9		12%	9

¹  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

²  Includes the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master allocated fees waived of 0.06%.

³  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.15%, although the ratio does include the LifePath Master Portfolio’s share of the allocated expenses and/or net investment income.

⁴  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, except the two years ended December 31, 2010, which include gross expenses. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund and iShares exchange-traded funds.

⁵  Includes the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series’ allocated fees waived of 0.06% and 0.05%, for the years ended December 31, 2012 and December 31, 2011, respectively.

⁶  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.15% and 0.17% for the years ended December 31, 2012 and December 31, 2011, respectively, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series’ allocated expenses and/or net investment income.

⁷  Includes the LifePath Master Portfolio’s share of the allocated net investment income from Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, except the year ended December 31, 2013, which also includes International Tilts Master Portfolio and Russell 1000^® Index Master Portfolio.

⁸  Includes the purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master.

⁹  Excludes purchases or sales of the underlying funds and Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15%, 19%, 12%, and 17% for the years ended December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	75

Notes to Financial Statements Master Investment Portfolio

1. Organization:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust. The financial statements and these accompanying notes relate to six series of MIP: LifePath^® Retirement Master Portfolio, LifePath 2020 Master Portfolio^®, LifePath 2030 Master Portfolio^®, LifePath 2040 Master Portfolio^® and LifePath^® 2050 Master Portfolio (each, a “LifePath Master Portfolio” and collectively, the “LifePath Master Portfolios”).

As of December 31, 2013, LifePath 2020 Master Portfolio, LifePath 2030 Master Portfolio, LifePath 2040 Master Portfolio and LifePath 2050 Master Portfolio’s investment in the Active Stock Master Portfolio’s represented 25.9%, 33.3%, 38.7% and 42.6%, respectively, of its net assets. LifePath Retirement Master Portfolio, LifePath 2020 Master Portfolio and LifePath 2030 Master Portfolio’s investment in CoreAlpha Bond Master Portfolio represented 52.3%, 42.0% and 29.3%, respectively, of its net assets. As such, financial statements of Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio, including the Schedule of Investments, should be read in conjunction with each respective LifePath Master Portfolio’s financial statements. Active Stock Master Portfolio’s and CoreAlpha Bond Master Portfolio’s financial statements are available, without charge, on the US Securities and Exchange Commission’s (“SEC’s”) website at http://www.sec.gov.

The LifePath Master Portfolios will each generally invest in other registered investment companies (each, an “Underlying Fund” and collectively, the “Underlying Funds”) that are managed by subsidiaries of BlackRock, Inc. (“BlackRock”) and its affiliates and affiliates of the LifePath Master Portfolios. The LifePath Master Portfolios may also invest in other master portfolios (“Underlying Master Porfolios”) that are managed by subsidiaries of BlackRock.

The value of a LifePath Master Portfolio’s investment in each of Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio reflects that LifePath Master Portfolio’s proportionate interest in the net assets of that master portfolio. As of December 31, 2013, the LifePath Master Portfolios held interests in Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio as follows:

	Active Stock Master Portfolio			ACWI ex-US Index  Master Portfolio			CoreAlpha Bond Master Portfolio			International Tilts Master Portfolio			Master Small Cap Index Series			Russell 1000®  Index Master Portfolio
LifePath Retirement Master Portfolio		10.24	%		3.83	%		24.59	%		9.58	%		8.63	%		1.00	%
LifePath 2020 Master Portfolio		24.98	%		5.64	%		35.24	%		24.14	%		13.40	%		1.66	%
LifePath 2030 Master Portfolio		30.05	%		9.51	%		23.04	%		29.92	%		10.19	%		4.25	%
LifePath 2040 Master Portfolio		27.18	%		8.41	%		11.91	%		27.95	%		6.40	%		5.85	%
LifePath 2050 Master Portfolio		6.01	%		4.95	%		1.19	%		6.58	%		0.99	%		1.90	%

2. Significant Accounting Policies:

The LifePath Master Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in 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 following is a summary of significant accounting policies followed by the LifePath Master Portfolios:

Valuation: US GAAP defines fair value as the price the LifePath Master Portfolios would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The LifePath Master Portfolios determine the fair values of their financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (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 provide oversight of the pricing function for the LifePath Master Portfolio for all financial instruments. Investments in open-end registered investment companies are valued at net asset value (“NAV”) each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value. The market value of the LifePath Master Portfolios’ investments in the Underlying Funds is based on the published NAV of each Underlying Fund computed as of the close of regular trading on the New York Stock Exchange (“NYSE”) on days when the NYSE is open. The LifePath Master Portfolios record their proportionate investment in the Underlying LifePath Master Portfolios at fair value which is based upon their pro rata ownership in the net assets of the Underlying LifePath Master Portfolios.

In the event that 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 Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that each LifePath Master Portfolio might reasonably expect to receive from the current sale of that asset 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 consistent with the principles of fair value measurement which include the market approach, income approach and/or in the case of recent

76 BLACKROCK FUNDS III DECEMBER 31, 2013

Notes to Financial Statements (continued) Master Investment Portfolio

investments, the cost approach, as appropriate. The market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. 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 LifePath Master Portfolios’ pricing vendors, a regular review 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 Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-divided dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the LifePath Master Portfolio 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 the accrual basis.

Each LifePath Master Portfolio records daily its proportionate share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio income, expenses and realized and unrealized gains and losses.

Income Taxes: Each LifePath Master Portfolio is classified as a partnership for federal income tax purposes. As such, each investor in a LifePath Master Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the LifePath Master Portfolio. Therefore, no federal income tax provision is required. It is intended that each LifePath Master Portfolio’s assets will be managed so an investor in the LifePath Master Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

Each LifePath Master Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each LifePath Master Portfolio’s US federal tax returns remains open for each of the four years ended December 31, 2013. The statutes of limitations on each LifePath Master Portfolio’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 each LifePath Master Portfolio’s facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

Other: Expenses directly related to a LifePath Master Portfolio are charged to that LifePath Master Portfolio. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods.

3. Securities and Other Investments:

Securities Lending: The LifePath Master Portfolios may lend securities to approved borrowers, such as banks, brokers and other financial institutions. The borrower pledges cash, securities issued or guaranteed by the US government or irrevocable letters of credit issued by a bank as collateral. The initial collateral received by the LifePath Master Portfolios should 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 in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the LifePath Master Portfolio and any additional required collateral is delivered to the LifePath Master Portfolio on the next business day. Securities lending income, as disclosed in the Statements of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, a LifePath Master Portfolio earns dividend or interest income on the securities loaned but does not receive interest income on the 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 securities on loan and the value of the related collateral are shown separately in the Statements of Assets and Liabilities as a component of investments at value, and collateral on securities loaned at value, respectively. The cash collateral investment, by the securities lending agent, BlackRock Institutional Trust Co., N.A. (“BTC), if any, is disclosed in the Schedules of Investments. BTC is an affiliate of BlackRock.

Securities lending transactions are entered into by the LifePath Master Portfolios under Master Securities Lending Agreements (“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 LifePath Master Portfolios, as lenders, would offset the market value of the collateral

BLACKROCK FUNDS III DECEMBER 31, 2013 77

Notes to Financial Statements (continued) Master Investment Portfolio

received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender 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 a MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and the LifePath Master Portfolio can reinvest cash collateral, or, upon an event of default, resell or repledge the collateral.

The following table is a summary of the LifePath Master Portfolios’ securities lending agreements by counterparty which are subject to offset under a MSLA as of December 31, 2013:

LifePath Retirement Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital, Inc.	$	6,960,492	$	(6,960,492	)		—
Jefferies LLC		16,972,576		(16,972,576	)		—
UBS Securities LLC		413,523		(413,523	)		—
Total	$	24,346,591	$	(24,346,591	)		—
LifePath 2020 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital, Inc.	$	12,699,180	$	(12,699,180	)		—
Goldman Sachs & Co.		6,724,800		(6,724,800	)		—
Jefferies LLC		5,158,595		(5,158,595	)		—
Morgan Stanley		3,922,800		(3,922,800	)		—
UBS Securities LLC		11,664,000		(11,664,000	)		—
Total	$	40,169,375	$	(40,169,375	)		—
LifePath 2030 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital, Inc.	$	12,783,744	$	(12,783,744	)		—
Goldman Sachs & Co.		10,490,688		(10,490,688	)		—
Jefferies LLC		1,227,636		(1,227,636	)		—
JP Morgan Securities LLC		2,130,635		(2,130,635	)		—
UBS Securities LLC		34,512,389		(34,512,389			—
Total	$	61,145,092	$	(61,145,092	)		—
LifePath 2040 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital, Inc.	$	12,906,216	$	(12,906,216	)		—
Citigroup Global Markets, Inc.		166,212		(166,212	)		—
UBS Securities LLC		20,233,096		(20,233,096	)		—
Total	$	33,305,524	$	(33,305,524	)		—
LifePath 2050 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital, Inc.	$	5,450,004	$	(5,450,004	)		—

¹  Excess of collateral received from the individual counterparty is not shown for financial reporting purposes. Collateral has been received in connection with securities lending agreements as follows:

LifePath Retirement Master Portfolio	$	24,986,975
LifePath 2020 Master Portfolio	$	41,090,000
LifePath 2030 Master Portfolio	$	62,378,665
LifePath 2040 Master Portfolio	$	34,078,580
LifePath 2050 Master Portfolio	$	5,560,275

The risks of securities lending also include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate this risk the LifePath Master Portfolios benefit from a borrower default indemnity provided by BlackRock. Blackrock’s indemnity allows for full replacement of the securities lent. A LifePath Master Portfolio also could suffer 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. During the year ended December 31, 2013, any securities on loan were collateralized by cash.

4. Investment Advisory Agreement and Other Transactions with Affiliates:

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

MIP, on behalf of the LifePath Master Portfolios, entered into an Investment Advisory Agreement with BlackRock Fund Advisors (“BFA” or the “Manager”), the LifePath Master Portfolios’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory services. The Manager is responsible for the management of each LifePath Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each LifePath Master Portfolio. For such services, each LifePath Master Portfolio paid BFA a monthly fee based on a percentage of such LifePath Master Portfolio’s average daily net assets. Each LifePath Master Portfolio pays BFA at an annual rate of 0.35% of the average daily net assets of each respective LifePath Master Portfolio.

MIP, on behalf of the LifePath Master Portfolios, entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL” or the “Administrator”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL, in consideration thereof, has agreed to bear all of the LifePath Master Portfolios’ and MIP’s ordinary operating expenses excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the LifePath Master Portfolios.

From time to time, BAL may waive such fees in whole or in part. Any such waiver will reduce the expenses of the LifePath Master Portfolio and, accordingly, have a favorable impact on its performance. BAL may delegate certain of its administration duties to sub-administrators.

BAL is not entitled to compensation for providing administration services to the LifePath Master Portfolios, for so long as BAL is entitled to

78 BLACKROCK FUNDS III DECEMBER 31, 2013

Notes to Financial Statements (continued) Master Investment Portfolio

compensation for providing administration services to corresponding feeder funds that invest substantially all of their assets in the LifePath Master Portfolios, or BAL (or an affiliate) receives investment advisory fees from the LifePath Master Portfolios.

The fees and expenses of MIP’s trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the LifePath Master Portfolios. BFA had contractually agreed to waive investment advisory fees charged to each LifePath Master Portfolio in an amount equal to investment advisory fees and administration fees, if any, received by BFA, BAL or previous affiliates, from each affiliated investment company in which the LifePath Master Portfolios invest through April 30, 2014. BFA has also contractually agreed to cap the expenses of the LifePath Master Portfolios at the rate at which the LifePath Master Portfolios pay an advisory fee to BFA by providing an offsetting credit against the investment advisory fees paid by the LifePath Master Portfolios in an amount equal to the independent expenses. These contractual waivers are effective through April 30, 2023. The amounts of the waivers, if any, are shown as fees waived by Manager in the Statements of Operations.

The LifePath Master Portfolios received an exemptive order from the SEC permitting them, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and have retained BTC as the securities lending agent. BTC may, on behalf of the LifePath Master Portfolios, invest cash collateral received by the LifePath Master Portfolios for such loans, in a private investment company managed by the Manager or in registered money market funds advised by the Manager or its affiliates. The market value of securities on loan and the value of the related collateral, if applicable, are shown in the Statements of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC, if any, is disclosed in the Schedules of Investments. Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of rebates paid to, or fees paid by, borrowers of securities. The LifePath Master Portfolios retain 65% of securities lending income and pay a fee to BTC equal to 35% of such income. The LifePath Master Portfolios benefit from a borrower default indemnity provided by BlackRock. As securities lending agent, BTC bears all operational costs directly related to securities lending as well as the cost of borrower default indemnification. BTC does not receive any fees for managing the cash collateral. The share of income earned by each LifePath Master Portfolio is shown as securities lending — affiliated — net in the Statements of Operations. For the year ended December 31, 2013, BTC received securities lending agent fees related to securities lending activities for the LifePath Master Portfolios as follows:

LifePath Retirement Master Portfolio	$	40,131
LifePath 2020 Master Portfolio	$	88,825
LifePath 2030 Master Portfolio	$	99,108
LifePath 2040 Master Portfolio	$	84,148
LifePath 2050 Master Portfolio	$	15,318

Each LifePath Master Portfolio may invest its positive cash balances in certain money market funds managed by the Manager or an affiliate. The income earned on these temporary cash investments is included in income-affiliated in the Statements of Operations.

During the year ended December 31, 2013, the LifePath Master Portfolios received payments from an affiliate to compensate for foregone securities lending revenue, which is shown as Other income – affiliated in the Statement of Operations.

Certain officers and/or trustees of MIP are officers and/or directors of BlackRock or its affiliates.

5. Purchases and Sales:

Purchases and sales of investments in the Underlying Funds and Underlying Master Portfolios and excluding short-term securities for the year ended December 31, 2013 were as follows:

	Purchases		Sales
LifePath Retirement Master Portfolio	$	267,549,052	$	265,561,732
LifePath 2020 Master Portfolio	$	556,642,058	$	499,561,618
LifePath 2030 Master Portfolio	$	647,555,300	$	541,153,733
LifePath 2040 Master Portfolio	$	572,118,669	$	495,028,844
LifePath 2050 Master Portfolio	$	184,787,380	$	96,746,230

6. Bank Borrowings:

MIP, on behalf of the LifePath Master Portfolios, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $800 million credit agreement with a group of lenders, under which a LifePath Master Portfolio may borrow to fund shareholder redemptions. The agreement expires in April 2014. Excluding commitments designated for a certain individual fund, other Participating Funds, including the Lifepath Master Portfolios, can borrow up to an aggregate commitment amount of $500 million, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.065% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) the one-month London Interbank Offered Rate plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. Participating Funds paid administration and arrangement fees, which, along with commitment fees, were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. The Lifepath Master Portfolios did not borrow under the credit agreement during the year ended December 31, 2013.

7. Market and Credit Risk:

In the normal course of business, the LifePath Master Portfolios invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the LifePath Master Portfolios may decline in response to certain events, including those directly involving the issuers whose securities are owned by the LifePath Master Portfolios; conditions affecting the general economy; overall market changes; local, regional or global political, social

BLACKROCK FUNDS III DECEMBER 31, 2013 79

Notes to Financial Statements (concluded) Master Investment Portfolio

or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the LifePath Master Portfolios may be exposed to counterparty credit risk, or the risk that an entity with which the LifePath Master Portfolios have unsettled or open transactions may fail to or be unable to perform on its commitments. The LifePath Master Portfolios manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the LifePath Master Portfolios to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the LifePath Master Portfolios’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statements of Assets and Liabilities, less any collateral held by the LifePath Master Portfolios.

8. Subsequent Events:

Management has evaluated the impact of all subsequent events on the LifePath Master Portfolios 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.

80 BLACKROCK FUNDS III DECEMBER 31, 2013

Report of Independent Registered Public Accounting Firm Master Investment Portfolio

To the Board of Trustees of Master Investment Portfolio and the Interestholders of LifePath Retirement Master Portfolio, LifePath 2020 Master Portfolio, LifePath 2030 Master Portfolio, LifePath 2040 Master Portfolio and LifePath 2050 Master Portfolio:

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of LifePath Retirement Master Portfolio, LifePath 2020 Master Portfolio, LifePath 2030 Master Portfolio, LifePath 2040 Master Portfolio and LifePath 2050 Master Portfolio (the “Master Portfolios”), each a series of Master Investment Portfolio, at December 31, 2013, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolios’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 18, 2014

BLACKROCK FUNDS III DECEMBER 31, 2013 81

Officers and Trustees

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment  Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 107 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 107 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy from 2002 to 2012; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 107 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President, Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 107 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	President, London Center for Policy Research since 2012; Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and Professor thereof from 1980 to 2005; President Emeritus, Hudson Institute (policy research organization) from 2011 to 2012, President thereof from 1997 to 2011 and Trustee from 1980 to 2012; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (global internet services) since 2005; Director, Cerego, LLC (educational software) since 2005; Director, Cybersettle (online adjudication) since 2009; Director, AIMS Worldwide, Inc. (marketing) from 2007 to 2012.	33 RICs consisting of 107 Portfolios	None
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 107 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Director, The West Penn Allegheny Health System (a not-for-profit health system) from 2008 to 2013; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 107 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 107 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None

82 BLACKROCK FUNDS III DECEMBER 31, 2013

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1 (concluded)
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Immediate past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	33 RICs consisting of 107 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Director, Alkon Corporation (pneumatics) since 1992; Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh from 2005 to 2013 and Dean thereof from 1997 to 2005; Director, Tippman Sports (recreation) from 2005 to 2013; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 107 Portfolios	None
	1   Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved extensions in terms of Trustees who turn 72 prior to December 31, 2013.
	2   Date shown is the earliest date a person has served for the Trust/MIP covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the Trust’s/MIP’s Board. As a result, although the chart shows certain Trustees as joining the Trust’s/MIP’s board in 2009, those Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees3
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	144 RICs consisting of 278 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	144 RICs consisting of 278 Portfolios	None
	3   Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

BLACKROCK FUNDS III DECEMBER 31, 2013 83

Officers and Trustees (concluded)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers1
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock since 2000; Head of the Global Cash Group since 2013; Co-head of the Global Cash and Securities Lending Group from 2010 to 2013; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009; and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2009	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2009	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Managing Director of BlackRock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary of the BlackRock-advised funds from 2010 to 2012; General Counsel and Chief Operating Officer of Uhuru Capital Management from 2009 to 2010; Executive Director and Counsel of Goldman Sachs Asset Management from 2005 to 2009.
	1   Officers of the Trust/MIP serve at the pleasure of the Board.

Investment Advisor BlackRock Fund Advisors San Francisco, CA 94105	Custodian and Accounting Agent State Street Bank and Trust Company Boston, MA 02110	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Sidley Austin LLP New York, NY 10019
Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP Philadelphia, PA 19103	Address of the Trust 400 Howard Street San Francisco, CA 94105

84 BLACKROCK FUNDS III DECEMBER 31, 2013

Additional Information

General Information

Electronic Delivery

Electronic copies of most financial reports and prospectuses are available on the LifePath Portfolios’ website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the LifePath Portfolio’s electronic delivery program.

To enroll:

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:

Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.

Shareholders Who Hold Accounts Directly with BlackRock:

1) Access the BlackRock website at

http://www.blackrock.com/edelivery

2) Select “eDelivery” under the “More Information” section

3) Log into your account

Householding

The LifePath Portfolios 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 LifePath Portfolios at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The LifePath Portfolios/Master Portfolios 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 LifePath Portfolios’/Master Portfolios’ Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The LifePath Portfolios’/Master Portfolios’ 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 LifePath Portfolios/Master Portfolios use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the LifePath Portfolios/Master Portfolios voted proxies relating to securities held in the LifePath Portfolios’/Master Portfolios’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM EST 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/funds.

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.

BLACKROCK FUNDS III DECEMBER 31, 2013 85

Additional Information (concluded)

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.

86 BLACKROCK FUNDS III DECEMBER 31, 2013

A World-Class 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.

Equity Funds

BlackRock ACWI ex-US Index Fund

BlackRock All-Cap Energy & Resources Portfolio

BlackRock Basic Value Fund

BlackRock Capital Appreciation Fund

BlackRock Commodity Strategies Fund

BlackRock Disciplined Small Cap Core Fund

BlackRock Emerging Markets Fund

BlackRock Emerging Markets Dividend Fund

BlackRock Emerging Markets Long/Short Equity Fund

BlackRock Energy & Resources Portfolio

BlackRock Equity Dividend Fund

BlackRock EuroFund

BlackRock Flexible Equity Fund

BlackRock Focus Growth Fund

BlackRock Global Dividend Income Portfolio

BlackRock Global Long/Short Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Global SmallCap Fund

BlackRock Health Sciences Opportunities Portfolio

BlackRock International Fund

BlackRock International Index Fund

BlackRock International Opportunities Portfolio

BlackRock Large Cap Core Fund

BlackRock Large Cap Core Plus Fund

BlackRock Large Cap Growth Fund

BlackRock Large Cap Value Fund

BlackRock Latin America Fund

BlackRock Long-Horizon Equity Fund

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Mid Cap Value Opportunities Fund

BlackRock Natural Resources Trust

BlackRock Pacific Fund

BlackRock Real Estate Securities Fund

BlackRock Russell 1000^® Index Fund

BlackRock Science & Technology Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock Small Cap Growth Fund II

BlackRock Small Cap Index Fund

BlackRock S&P 500 Stock Fund

BlackRock U.S. Opportunities Portfolio

BlackRock Value Opportunities Fund

Taxable Fixed Income Funds

BlackRock Bond Index Fund

BlackRock Core Bond Portfolio

BlackRock CoreAlpha Bond Fund

BlackRock CoRI Funds

2015

2017

2019

2021

2023

BlackRock Emerging Markets Flexible Dynamic Bond Portfolio

BlackRock Floating Rate Income Portfolio

BlackRock Global Long/Short Credit Fund

BlackRock GNMA Portfolio

BlackRock High Yield Bond Portfolio

BlackRock Inflation Protected Bond Portfolio

BlackRock International Bond Portfolio

BlackRock Investment Grade Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Secured Credit Portfolio

BlackRock Short Obligations Fund

BlackRock Short-Term Treasury Fund

BlackRock Strategic Income Opportunities Portfolio

BlackRock Total Return Fund

BlackRock U.S. Government Bond Portfolio

BlackRock U.S. Mortgage Portfolio

BlackRock Ultra-Short Obligations Fund

BlackRock World Income Fund

Municipal Fixed Income Funds

BlackRock California Municipal Bond Fund

BlackRock High Yield Municipal Fund

BlackRock National Municipal Fund

BlackRock New Jersey Municipal Bond Fund

BlackRock New York Municipal Bond Fund

BlackRock Pennsylvania Municipal Bond Fund

BlackRock Short-Term Municipal Fund

BlackRock Strategic Municipal Opportunities Fund

Mixed Asset Funds

BlackRock Balanced Capital Fund	LifePath Active Portfolios			LifePath Index Portfolios
BlackRock Emerging Market Allocation Portfolio		2015	2040		Retirement	2040
BlackRock Global Allocation Fund		2020	2045		2020	2045
BlackRock Managed Volatility Portfolio		2025	2050		2025	2050
BlackRock Multi-Asset Income Portfolio		2030	2055		2030	2055
BlackRock Multi-Asset Real Return Fund		2035			2035
BlackRock Strategic Risk Allocation Fund
BlackRock Prepared Portfolios	LifePath Portfolios
Conservative Prepared Portfolio		Retirement	2040
Moderate Prepared Portfolio		2020	2045
Growth Prepared Portfolio		2025	2050
Aggressive Growth Prepared Portfolio		2030	2055
		2035

BlackRock mutual funds are currently distributed by BlackRock Investments, LLC. You should consider the investment objectives, risks, charges and expenses of the funds under consideration carefully before investing. Each fund’s prospectus contains this and other information and is available at www.blackrock.com or by calling (800) 441-7762 or from your financial advisor. The prospectus should be read carefully before investing.

BLACKROCK FUNDS III DECEMBER 31, 2013 87

This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the LifePath Portfolios unless accompanied or preceded by that LifePath Portfolio’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.

Investment in foreign securities involves special risks including fluctuating foreign exchange rates, foreign government regulations, differing degrees of liquidity and the possibility of substantial volatility due to adverse political, economic or other developments.

LifePath-12/13-AR

DECEMBER 31, 2013

  ANNUAL REPORT  

BlackRock Funds III

^Ø   LifePath^® Index Retirement Portfolio

^Ø   LifePath^® Index 2020 Portfolio

^Ø   LifePath^® Index 2025 Portfolio

^Ø   LifePath^® Index 2030 Portfolio

^Ø   LifePath^® Index 2035 Portfolio

^Ø   LifePath^® Index 2040 Portfolio

^Ø   LifePath^® Index 2045 Portfolio

^Ø   LifePath^® Index 2050 Portfolio

^Ø   LifePath^® Index 2055 Portfolio

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
Dear Shareholder		3
Annual Report:
Portfolio Summaries		4
About Portfolio Performance		14
Disclosure of Expenses		15
Portfolio Financial Statements:
Statements of Assets and Liabilities		16
Statements of Operations		18
Statements of Changes in Net Assets		20
Portfolio Financial Highlights		25
Portfolio Notes to Financial Statements		52
Portfolio Report of Independent Registered Public Accounting Firm		60
Important Tax Information		60
Master Portfolio Information		61
Master Portfolio Financial Statements:
Schedules of Investments		64
Statements of Assets and Liabilities		82
Statements of Operations		84
Statements of Changes in Net Assets		86
Master Portfolio Financial Highlights		89
Master Portfolio Notes to Financial Statements		98
Master Portfolio Report of Independent Registered Public Accounting Firm		103
Officers and Trustees		104
Additional Information		107
A World-Class Mutual Fund Family		109

2 BLACKROCK FUNDS III DECEMBER 31, 2013

Dear Shareholder

Risk assets (such as equities) powered higher in 2013, for the most part unscathed by ongoing political and economic uncertainty. While monetary policy was the main driving force behind the rally in risk assets, it was also the main culprit for the bouts of volatility during the year.

Equity markets rallied right out of the gate in January with cash pouring back in from the sidelines after a potential US fiscal crisis (i.e., the “fiscal cliff”) was averted with a last-minute tax deal. Key indicators signaling modest but broad-based improvements in the world’s major economies and a calming in Europe’s debt troubles fostered an aura of comfort for investors. Global economic momentum slowed in February, however, and the pace of the rally moderated. In the months that followed, US stocks outperformed international stocks, as the US showed greater stability than most other regions. Slow but positive growth was sufficient to support corporate earnings, while uncomfortably high unemployment reinforced expectations that the Federal Reserve would continue its aggressive monetary stimulus program. International markets experienced higher levels of volatility given a resurgence of political instability in Italy, a banking crisis in Cyprus and a generally poor outlook for European economies. Emerging markets significantly lagged the rest of the world as growth in these economies fell short of expectations.

Financial markets were rattled in May when Fed Chairman Bernanke mentioned the possibility of reducing — or “tapering” — the central bank’s asset purchase programs — comments that were widely misinterpreted as signaling an end to the Fed’s zero-interest-rate policy. US Treasury yields rose sharply, triggering a steep sell-off across fixed income markets. (Bond prices move in the opposite direction of yields.) Equity prices also suffered as investors feared the implications of a potential end of a program that had greatly supported the markets. Risk assets rebounded in late June, however, when the Fed’s tone turned more dovish, and improving economic indicators and better corporate earnings helped extend gains through most of the summer.

The fall was a surprisingly positive period for most asset classes as the Fed defied market expectations with its decision to delay tapering. Easing of political tensions that had earlier surfaced in Egypt and Syria and the re-election of Angela Merkel as Chancellor of Germany also boosted investor sentiment. Higher volatility returned in late September when the US Treasury Department warned that the national debt would soon breach its statutory maximum. The ensuing political brinksmanship led to a partial government shutdown, roiling global financial markets through the first half of October, but the rally quickly resumed when politicians engineered a compromise to reopen the government and extend the debt ceiling, at least temporarily.

The remainder of the year was generally positive for stock markets in the developed world, although investors continued to grapple with uncertainty about when and how much the Fed would scale back on stimulus. On the one hand, persistent weak growth and low inflation provided significant latitude for monetary policy decisions and investors were encouraged by dovish comments from Fed Chair-to-be Janet Yellen. On the other hand, US housing and manufacturing reports had begun to signal fundamental improvement in the economy. The long-awaited taper announcement ultimately came in mid-December. The Fed reduced the amount of its monthly asset purchases, but at the same time, extended its time horizon for maintaining low short-term interest rates. Markets reacted positively as this move signaled the Fed’s perception of real improvement in the economy and investors felt relief from the tenacious anxiety that had gripped them throughout the year.

Accommodative monetary policy and the avoidance of major risks made 2013 a strong year for most equity markets. US stocks were the strongest performers for the six- and 12-month periods ended December 31. In contrast, emerging markets were weighed down by uneven growth and structural imbalances. Rising US Treasury yields led to a rare annual loss in 2013 for Treasury bonds and other high-quality fixed income sectors including tax-exempt municipals and investment grade corporate bonds. High yield bonds, to the contrary, generated gains driven by income-oriented investors seeking yield in the low-rate environment. Short-term interest rates remained near zero, keeping yields on money market securities near historical lows.

At BlackRock, we believe investors need to think globally and extend their scope across a broader array of asset classes and be prepared to move freely as market conditions change over time. We encourage you to talk with your financial advisor and visit www.blackrock.com for further insight about investing in today’s world.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

“While monetary policy was the main driving force behind the rally in risk assets, it was also the main culprit for the bouts of volatility during the year.”

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2013
	6-month			12-month
US large cap equities (S&P 500® Index)		16.31	%		32.39	%
US small cap equities (Russell 2000® Index)		19.82			38.82
International equities (MSCI Europe, Australasia, Far East Index)		17.94			22.78
Emerging market equities (MSCI Emerging Markets Index)		7.70			(2.60	)
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)		0.03			0.07
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		(3.10	)		(7.83	)
US investment grade bonds (Barclays US Aggregate Bond Index)		0.43			(2.02	)
Tax-exempt municipal bonds (S&P Municipal Bond Index)		0.00			(2.55	)
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)		5.94			7.44
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

THIS PAGE NOT PART OF YOUR FUND REPORT 3

Portfolio Summary as of December 31, 2013 LifePath Index Portfolios

Portfolio Management Commentary

How did each Portfolio perform?

Ÿ All share classes of the LifePath Index Portfolios with target dates of 2020, 2025, 2030, 2035, 2040, 2045, 2050, 2055 and LifePath Index Retirement Portfolio (together, the “LifePath Index Portfolios”) invest in their respective LifePath Index Master Portfolio.

Ÿ For the 12-month period ended December 31, 2013, all of the LifePath Index Portfolios underperformed their respective custom benchmarks based on share class expenses. The returns for the LifePath Index Portfolios include fund expenses. The custom benchmarks have no expenses associated with performance.

What factors influenced performance?

Ÿ Equity markets largely outperformed fixed income markets during the period. As a result, the LifePath Index Portfolios with longer time horizons generated higher returns on an absolute basis given their larger allocations to equity investments.

Ÿ On the last trading day of 2012, the market rallied at the U.S. close. The timing of the rally came after Asian and European markets had already closed. As a result, when the market opened on the first trading day of 2013, there was a corresponding increase in the returns of the international benchmark indices; therefore causing a negative fair value reversal that was an impact throughout the one year period of 2013. In the shorter-dated LifePath Index Portfolios, the most significant detractor from performance relative to their respective custom benchmarks was exposure to the Bond Index Master Portfolio, in which transaction costs associated with large inflows from shareholder contributions and portfolio rebalancing detracted from results for the period. In the longer-dated LifePath Index Portfolios, a negative fair value pricing adjustment in the underlying international equity funds was the largest source of underperformance.

Ÿ Contributing positively to relative performance in the LifePath Index Portfolios was the effect of “gap risk,”’ which results from price movement in the underlying funds in which the LifePath Index Portfolios invest from the time their official net asset value is determined at the close of the market and the time at which the LifePath Index Portfolios invest their daily cash flows from shareholder contributions on the following day. The effect of gap risk was amplified due to significant asset growth in the LifePath Index Portfolios during the period. An additional source of outperformance was the LifePath Index Portfolios’ investment in Master Small Cap Index Series in which securities lending activity had a positive impact on returns.

Describe recent portfolio activity.

Ÿ Each LifePath Index Portfolio has its own time horizon, which affects its acceptable level of risk and, in turn, the strategic allocation of its holdings across asset classes. On a quarterly basis, the strategic allocation of each LifePath Index Portfolio is systematically adjusted to reflect the shareholders’ remaining investment time horizon. During the period, the LifePath Index Portfolios were rebalanced in accordance with their updated strategic allocations, and daily cash flows were allocated to the underlying funds and instruments as appropriate.

Ÿ During the period, the LifePath Index Portfolios increased exposure to international equities through their investment in an exchange-traded fund, iShares Core MSCI Total International Stock ETF.

Describe portfolio positioning at period end.

Ÿ At period end, each of the LifePath Index Portfolios was invested according to its respective benchmark within tolerance limits.

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.

Glide Path Evolution

Under normal circumstances, the asset allocation of each LifePath Index Portfolio will change over time according to a “glide path” as each LifePath Index Portfolio approaches its respective target date. The glide path represents the shifting of asset classes over time. Each LifePath Index Portfolio’s asset mix becomes more conservative prior to retirement as time elapses. This reflects the need for reduced investment risks as retirement approaches and the need for lower volatility of each LifePath Index Portfolio, which may be a primary source of income after retirement. The asset allocation targets are established by a committee of BlackRock investment professionals that includes the portfolio managers. The investment team, including the portfolio managers and this investment committee, meets regularly to assess market conditions, review the asset allocation targets of each LifePath Index Portfolio, and determine whether any changes are required to enable each LifePath Index Portfolio to achieve its investment objective.

Although the asset allocation targets listed for the glide path are general, long-term targets, BlackRock investment professionals may periodically adjust the proportion of equity and fixed income funds in each LifePath Index Portfolio, based on an assessment of the current market conditions, the potential contribution of each asset class to the expected risk and return characteristics of each LifePath Index Portfolio, reallocations of each LifePath Index Portfolio’s composition to reflect intra-year movement along the glide path and other factors. In general, such adjustments will be limited, however, BlackRock investment professionals may determine that a greater degree of variation is warranted to protect each LifePath Index Portfolio or achieve each LifePath Index Portfolio’s investment objective.

4 BLACKROCK FUNDS III DECEMBER 31, 2013

LifePath^® Index  Retirement Portfolio

Investment Objective

LifePath^® Index Retirement Portfolio’s investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Portfolio will be broadly diversified across global asset classes.

The Board of Trustees (“the Board”) of BlackRock Funds III approved a change to the LifePath Index Retirement Portfolio’s investment objective effective December 3, 2013. Prior to December 3, 2013, the LifePath Index Retirement Portfolio had an investment objective “to seek to maximize return consistent with the quantitatively measured risk that investors planning to retire (or begin to withdraw substantial portions of their investment) now or in the near future may be willing to accept.”

Total Return Based on a $10,000 Investment

¹  The LifePath Index Portfolio compares its performance to that of a customized weighted index (the “LifePath Index Retirement Portfolio Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment advisor’s changes of the benchmark’s weightings over time. The investment advisor adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

Period	Barclays US Aggregate Bond Index			Barclays US  Treasury Inflation Protected Securities (TIPS) Index (Series L)			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI  Index			Russell 1000® Index			Russell 2000® Index
5/31/11 to 12/31/11		52.9	%		9.1	%		N/A			10.9	%		23.2	%		3.9	%
1/01/12 to 12/31/12		52.9			9.1			0.2	%		11.3			22.5			4.0
1/01/13 to 12/31/13		52.9			9.0			0.3			12.0			21.4			4.4

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2013

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since  Inception3
Institutional		6.26	%		7.68	%		6.19	%
Investor A		6.14			7.44			5.93
Class K		6.29			7.72			6.22
LifePath Index Retirement Portfolio Custom Benchmark		6.27			7.90			6.32
Barclays US Aggregate Bond Index		0.43			(2.02	)		2.61
Barclays US TIPS Index (Series L)		(1.31	)		(8.61	)		2.20
FTSE EPRA/NAREIT Developed Real Estate Index		1.61			3.67			5.28
MSCI ACWI ex-US IMI Index		15.61			15.82			3.93
Russell 1000® Index		16.86			33.11			15.54
Russell 2000® Index		19.82			38.82			14.64

³  The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.

BLACKROCK FUNDS III DECEMBER 31, 2013 5

LifePath^® Index  2020 Portfolio

Investment Objective

LifePath^® Index 2020 Portfolio’s investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Portfolio will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

The Board approved a change to the LifePath Index 2020 Portfolio’s investment objective effective December 3, 2013. Prior to December 3, 2013, the LifePath Index 2020 Portfolio had an investment objective “to seek to maximize return consistent with the quantitatively measured risk that investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2020 may be willing to accept.”

Total Return Based on a $10,000 Investment

¹  The LifePath Index Portfolio compares its performance to that of a customized weighted index (the “LifePath Index 2020 Portfolio Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment advisor’s changes of the benchmark’s weightings over time. The investment advisor adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

Period	Barclays US Aggregate Bond Index			Barclays US  Treasury Inflation Protected Securities (TIPS) Index (Series L)			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI  Index			Russell 1000® Index			Russell 2000® Index
5/31/11 to 12/31/11		37.1	%		6.0	%		N/A			17.5	%		35.7	%		3.7	%
1/01/12 to 12/31/12		39.0			6.3			1.6	%		16.6			32.9			3.6
1/01/13 to 12/31/13		40.9			6.6			3.1			16.0			29.7			3.7

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2013

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since  Inception3
Institutional		8.08	%		11.32	%		7.07	%
Investor A		7.86			10.99			6.74
Class K		8.10			11.36			7.09
LifePath Index 2020 Portfolio Custom Benchmark		8.09			11.57			7.19
Barclays US Aggregate Bond Index		0.43			(2.02	)		2.61
Barclays US TIPS Index (Series L)		(1.31	)		(8.61	)		2.20
FTSE EPRA/NAREIT Developed Real Estate Index		1.61			3.67			5.28
MSCI ACWI ex-US IMI Index		15.61			15.82			3.93
Russell 1000® Index		16.86			33.11			15.54
Russell 2000® Index		19.82			38.82			14.64

³  The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.

6 BLACKROCK FUNDS III DECEMBER 31, 2013

LifePath^® Index  2025 Portfolio

Investment Objective

LifePath^® Index 2025 Portfolio’s investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Portfolio will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

The Board approved a change to the LifePath Index 2025 Portfolio’s investment objective effective December 3, 2013. Prior to December 3, 2013, the LifePath Index 2025 Portfolio had an investment objective “to seek to maximize return consistent with the quantitatively measured risk that investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2025 may be willing to accept.”

Total Return Based on a $10,000 Investment

¹  The LifePath Index Portfolio compares its performance to that of a customized weighted index (the “LifePath Index 2025 Portfolio Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment advisor’s changes of the benchmark’s weightings over time. The investment advisor adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

Period	Barclays US Aggregate Bond Index			Barclays US  Treasury Inflation Protected Securities (TIPS) Index (Series L)			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI Index			Russell 1000® Index			Russell 2000® Index
5/31/11 to 12/31/11		30.0	%		4.7	%		N/A			20.5	%		41.2	%		3.6	%
1/01/12 to 12/31/12		31.9			5.0			2.4	%		19.3			38.1			3.3
1/01/13 to 12/31/13		33.7			5.3			4.8			18.3			34.6			3.3

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2013

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since  Inception3
Institutional		9.21	%		13.46	%		7.62	%
Investor A		9.09			13.13			7.36
Class K		9.22			13.48			7.64
LifePath Index 2025 Portfolio Custom Benchmark		9.21			13.77			7.79
Barclays US Aggregate Bond Index		0.43			(2.02	)		2.61
Barclays US TIPS Index (Series L)		(1.31	)		(8.61	)		2.20
FTSE EPRA/NAREIT Developed Real Estate Index		1.61			3.67			5.28
MSCI ACWI ex-US IMI Index		15.61			15.82			3.93
Russell 1000® Index		16.86			33.11			15.54
Russell 2000® Index		19.82			38.82			14.64

³  The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.

BLACKROCK FUNDS III DECEMBER 31, 2013 7

LifePath^® Index  2030 Portfolio

Investment Objective

LifePath^® Index 2030 Portfolio’s investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Portfolio will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

The Board approved a change to the LifePath Index 2030 Portfolio’s investment objective effective December 3, 2013. Prior to December 3, 2013, the LifePath Index 2030 Portfolio had an investment objective “to seek to maximize return consistent with the quantitatively measured risk that investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2030 may be willing to accept.”

Total Return Based on a $10,000 Investment

¹  The LifePath Index Portfolio compares its performance to that of a customized weighted index (the “LifePath Index 2030 Portfolio Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment advisor’s changes of the benchmark’s weightings over time. The investment advisor adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

Period	Barclays US Aggregate Bond Index			Barclays US  Treasury Inflation Protected Securities (TIPS) Index (Series L)			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI Index			Russell 1000® Index			Russell 2000® Index
5/31/11 to 12/31/11		23.8	%		3.5	%		N/A			23.1	%		46.1	%		3.5	%
1/01/12 to 12/31/12		25.8			3.8			3.1	%		21.6			42.6			3.1
1/01/13 to 12/31/13		27.6			4.0			6.2			20.3			38.9			3.0

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2013

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since  Inception3
Institutional		10.21	%		15.34	%		8.16	%
Investor A		10.08			15.09			7.91
Class K		10.25			15.40			8.16
LifePath Index 2030 Portfolio Custom Benchmark		10.19			15.72			8.31
Barclays US Aggregate Bond Index		0.43			(2.02	)		2.61
Barclays US TIPS Index (Series L)		(1.31	)		(8.61	)		2.20
FTSE EPRA/NAREIT Developed Real Estate Index		1.61			3.67			5.28
MSCI ACWI ex-US IMI Index		15.61			15.82			3.93
Russell 1000® Index		16.86			33.11			15.54
Russell 2000® Index		19.82			38.82			14.64

³  The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.

8 BLACKROCK FUNDS III DECEMBER 31, 2013

LifePath^® Index  2035 Portfolio

Investment Objective

LifePath^® Index 2035 Portfolio’s investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Portfolio will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

The Board approved a change to the LifePath Index 2035 Portfolio’s investment objective effective December 3, 2013. Prior to December 3, 2013, the LifePath Index 2035 Portfolio had an investment objective “to seek to maximize return consistent with the quantitatively measured risk that investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2035 may be willing to accept.”

Total Return Based on a $10,000 Investment

¹  The LifePath Index Portfolio compares its performance to that of a customized weighted index (the “LifePath Index 2035 Portfolio Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment advisor’s changes of the benchmark’s weightings over time. The investment advisor adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

Period	Barclays US Aggregate Bond Index			Barclays US  Treasury Inflation Protected Securities (TIPS) Index (Series L)			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI  Index			Russell 1000® Index			Russell 2000® Index
5/31/11 to 12/31/11		18.2	%		2.4	%		N/A			25.4	%		50.5	%		3.5	%
1/01/12 to 12/31/12		20.3			2.6			3.7	%		23.7			46.7			3.0
1/01/13 to 12/31/13		22.1			2.9			7.5			22.2			42.7			2.6

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2013

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since  Inception3
Institutional		11.13	%		16.98	%		8.56	%
Investor A		11.00			16.74			8.29
Class K		11.05			17.02			8.55
LifePath Index 2035 Portfolio Custom Benchmark		11.08			17.49			8.76
Barclays US Aggregate Bond Index		0.43			(2.02	)		2.61
Barclays US TIPS Index (Series L)		(1.31	)		(8.61	)		2.20
FTSE EPRA/NAREIT Developed Real Estate Index		1.61			3.67			5.28
MSCI ACWI ex-US IMI Index		15.61			15.82			3.93
Russell 1000® Index		16.86			33.11			15.54
Russell 2000® Index		19.82			38.82			14.64

³  The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.

BLACKROCK FUNDS III DECEMBER 31, 2013 9

LifePath^® Index  2040 Portfolio

Investment Objective

LifePath^® Index 2040 Portfolio’s investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Portfolio will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

The Board approved a change to the LifePath Index 2040 Portfolio’s investment objective effective December 3, 2013. Prior to December 3, 2013, the LifePath Index 2040 Portfolio had an investment objective “to seek to maximize return consistent with the quantitatively measured risk that investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2040 may be willing to accept.”

Total Return Based on a $10,000 Investment

¹  The LifePath Index Portfolio compares its performance to that of a customized weighted index (the “LifePath Index 2040 Portfolio Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment advisor’s changes of the benchmark’s weightings over time. The investment advisor adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

Period	Barclays US Aggregate Bond Index			Barclays US  Treasury Inflation Protected Securities (TIPS) Index (Series L)			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI Index			Russell 1000® Index			Russell 2000® Index
5/31/11 to 12/31/11		13.1	%		1.3	%		N/A			27.6	%		54.6	%		3.4	%
1/01/12 to 12/31/12		15.3			1.6			4.2	%		25.6			50.5			2.8
1/01/13 to 12/31/13		17.1			1.7			8.7			23.9			46.2			2.4

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2013

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since  Inception3
Institutional		11.89	%		18.61	%		8.97	%
Investor A		11.78			18.38			8.69
Class K		11.92			18.66			9.00
LifePath Index 2040 Portfolio Custom Benchmark		11.90			19.14			9.17
Barclays US Aggregate Bond Index		0.43			(2.02	)		2.61
Barclays US TIPS Index (Series L)		(1.31	)		(8.61	)		2.20
FTSE EPRA/NAREIT Developed Real Estate Index		1.61			3.67			5.28
MSCI ACWI ex-US IMI Index		15.61			15.82			3.93
Russell 1000® Index		16.86			33.11			15.54
Russell 2000® Index		19.82			38.82			14.64

³  The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.

10 BLACKROCK FUNDS III DECEMBER 31, 2013

LifePath^® Index  2045 Portfolio

Investment Objective

LifePath^® Index 2045 Portfolio’s investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Portfolio will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

The Board approved a change to the LifePath Index 2045 Portfolio’s investment objective effective December 3, 2013. Prior to December 3, 2013, the LifePath Index 2045 Portfolio had an investment objective “to seek to maximize return consistent with the quantitatively measured risk that investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2045 may be willing to accept.”

Total Return Based on a $10,000 Investment

¹  The LifePath Index Portfolio compares its performance to that of a customized weighted index (the “LifePath Index 2045 Portfolio Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment advisor’s changes of the benchmark’s weightings over time. The investment advisor adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

Period	Barclays US Aggregate Bond Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI  Index			Russell 1000® Index			Russell 2000® Index
5/31/11 to 12/31/11		8.7	%		N/A			29.6	%		58.3	%		3.4	%
1/01/12 to 12/31/12		11.2			4.8	%		27.4			54.0			2.6
1/01/13 to 12/31/13		13.2			9.8			25.4			49.5			2.1

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2013

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since  Inception3
Institutional		12.73	%		20.18	%		9.23	%
Investor A		12.62			19.96			8.98
Class K		12.74			20.32			9.31
LifePath Index 2045 Portfolio Custom Benchmark		12.68			20.75			9.54
Barclays US Aggregate Bond Index		0.43			(2.02	)		2.61
FTSE EPRA/NAREIT Developed Real Estate Index		1.61			3.67			5.28
MSCI ACWI ex-US IMI Index		15.61			15.82			3.93
Russell 1000® Index		16.86			33.11			15.54
Russell 2000® Index		19.82			38.82			14.64

³  The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.

BLACKROCK FUNDS III DECEMBER 31, 2013 11

LifePath^® Index  2050 Portfolio

Investment Objective

LifePath^® Index 2050 Portfolio’s investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Portfolio will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

The Board approved a change to the LifePath Index 2050 Portfolio’s investment objective effective December 3, 2013. Prior to December 3, 2013, the LifePath Index 2050 Portfolio had an investment objective “to seek to maximize return consistent with the quantitatively measured risk that investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2050 may be willing to accept.”

Total Return Based on a $10,000 Investment

¹  The LifePath Index Portfolio compares its performance to that of a customized weighted index (the “LifePath Index 2050 Portfolio Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment advisor’s changes of the benchmark’s weightings over time. The investment advisor adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

Period	Barclays US Aggregate Bond Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI Index			Russell 1000® Index			Russell 2000® Index
5/31/11 to 12/31/11		3.3	%		N/A			31.6	%		61.7	%		3.4	%
1/01/12 to 12/31/12		5.8			5.3	%		29.2			57.1			2.6
1/01/13 to 12/31/13		7.9			10.8			26.9			52.5			1.9

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2013

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since  Inception3
Institutional		13.45	%		21.56	%		9.60	%
Investor A		13.25			21.25			9.30
Class K		13.48			21.61			9.63
LifePath Index 2050 Portfolio Custom Benchmark		13.37			22.13			9.86
Barclays US Aggregate Bond Index		0.43			(2.02	)		2.61
FTSE EPRA/NAREIT Developed Real Estate Index		1.61			3.67			5.28
MSCI ACWI ex-US IMI Index		15.61			15.82			3.93
Russell 1000® Index		16.86			33.11			15.54
Russell 2000® Index		19.82			38.82			14.64

³  The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.

12 BLACKROCK FUNDS III DECEMBER 31, 2013

LifePath^® Index  2055 Portfolio

Investment Objective

LifePath^® Index 2055 Portfolio’s investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Portfolio will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

The Board approved a change to the LifePath Index 2055 Portfolio’s investment objective effective December 3, 2013. Prior to December 3, 2013, the LifePath Index 2055 Portfolio had an investment objective “to seek to maximize return consistent with the quantitatively measured risk that investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2055 may be willing to accept.”

Total Return Based on a $10,000 Investment

¹  The LifePath Index Portfolio compares its performance to that of a customized weighted index (the “LifePath Index 2055 Portfolio Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment advisor’s changes of the benchmark’s weightings over time. The investment advisor adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

Period	Barclays US Aggregate Bond Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI  Index			Russell 1000® Index			Russell 2000® Index
5/31/11 to 12/31/11		1.0	%		N/A			33.2	%		59.8	%		6.0	%
1/01/12 to 12/31/12		1.1			5.9	%		31.4			57.4			4.2
1/01/13 to 12/31/13		2.7			12.2			28.4			54.8			1.9

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2013

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since  Inception3
Institutional		14.08	%		22.91	%		9.93	%
Investor A		13.96			22.55			9.66
Class K		14.10			22.95			9.97
LifePath Index 2055 Portfolio Custom Benchmark		14.00			23.38			10.13
Barclays US Aggregate Bond Index		0.43			(2.02	)		2.61
FTSE EPRA/NAREIT Developed Real Estate Index		1.61			3.67			5.28
MSCI ACWI ex-US IMI Index		15.61			15.82			3.93
Russell 1000® Index		16.86			33.11			15.54
Russell 2000® Index		19.82			38.82			14.64

³  The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.

BLACKROCK FUNDS III DECEMBER 31, 2013 13

About Portfolio Performance

Ÿ Institutional Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors.

Ÿ Investor A Shares are not subject to any sales charge and bear no ongoing distribution fee. These shares are subject to an ongoing service fee of 0.25% per year.

Ÿ Class K Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. Figures shown in each of the performance tables on the previous pages assume reinvestment of all dividends and distributions, if any, at net asset value (“NAV”) on the ex-dividend dates. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.

The LifePath Index Portfolios’ administrator waived and/or reimbursed a portion of each LifePath Index Portfolio’s expenses. Without such waiver and/or reimbursement, each LifePath Index Portfolio’s performance would have been lower. Dividends paid to each class of shares will vary because of the different levels of administration and service fees applicable to each class, which are deducted from the income available to be paid to shareholders.

The Barclays US Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis. Barclays US TIPS Index (Series L) is a rules-based, market value-weighted index that tracks inflation-protected securities issued by the US Treasury. The FTSE EPRA/NAREIT Developed Real Estate Index is designed to track the performance of listed real estate companies and real estate investment trusts (“REITs”) worldwide. By making the index constituents free-float adjusted, liquidity, size and revenue screened, the index is suitable for use as the basis for investment products, such as derivatives and exchange traded funds (ETFs). The MSCI ACWI ex-US IMI Index is a free float-adjusted market capitalization weighted index that measures the equity market performance of the developed (excluding the US) and emerging investable market universe. The Russell 1000^® Index is an unmanaged broad-based index that measures the performance of the large cap segment of the US equity universe, representing approximately 92% of the Russell 3000^® Index. The Russell 2000^® Index is an unmanaged index comprised of the 2,000 largest US companies as determined by total market capitalization.

The LifePath Index Portfolios’ custom benchmarks are hypothetical representations of the performance of the respective LifePath Index Portfolio’s asset classes according to their weightings as of the most recent quarter-end. The weightings of the various indexes that are included in the LifePath Index Portfolios’ custom benchmarks are adjusted quarterly to reflect the LifePath Index Portfolio’s changing asset allocations over time. As of December 31, 2013, the following indexes are used to calculate the LifePath Index Portfolios’ custom benchmarks: Barclays US Aggregate Bond Index, Barclays US TIPS Index (Series L), FTSE EPRA/NAREIT Developed Real Estate Index, MSCI ACWI ex-US IMI Index, Russell 1000^® Index and Russell 2000^® Index.

14 BLACKROCK FUNDS III DECEMBER 31, 2013

Disclosure of Expenses

Shareholders of each LifePath Index Portfolio may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including administration fees, service and distribution fees, including 12b-1 fees, and other portfolio expenses. The expense examples shown below (which are based on a hypothetical investment of $1,000 invested on July 1, 2013 and held through December 31, 2013) are intended to assist shareholders both in calculating expenses based on an investment in a LifePath Index Portfolio and in comparing these expenses with similar costs of investing in other mutual funds.

The expense examples provide 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 LifePath Index Portfolio and their share class under the heading entitled “Expenses Paid During the Period.”

The expense examples also provide information about hypothetical account values and hypothetical expenses based on each LifePath Index Portfolio’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 a LifePath Index Portfolio and other funds, compare the 5% hypothetical examples with the 5% hypothetical examples that appear in other funds’ shareholder reports.

The expenses shown in the expense examples 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.

Expense Examples
	Actual						Hypothetical2
	Beginning Account Value July 1, 2013		Ending Account Value December 31, 2013		Expenses Paid During the Period1		Beginning Account Value July 1, 2013		Ending Account Value December 31, 2013		Expenses Paid During the Period1		Annualized Expense Ratio
LifePath Index Retirement Portfolio
Institutional		$1,000.00		$1,062.60		$0.94		$1,000.00		$1,024.30		$0.92		0.18%
Investor A		$1,000.00		$1,061.40		$2.23		$1,000.00		$1,023.04		$2.19		0.43%
Class K		$1,000.00		$1,062.90		$0.68		$1,000.00		$1,024.55		$0.66		0.13%
LifePath Index 2020 Portfolio
Institutional		$1,000.00		$1,080.80		$0.89		$1,000.00		$1,024.35		$0.87		0.17%
Investor A		$1,000.00		$1,078.60		$2.31		$1,000.00		$1,022.99		$2.24		0.44%
Class K		$1,000.00		$1,081.00		$0.73		$1,000.00		$1,024.50		$0.71		0.14%
LifePath Index 2025 Portfolio
Institutional		$1,000.00		$1,092.10		$0.90		$1,000.00		$1,024.35		$0.87		0.17%
Investor A		$1,000.00		$1,090.90		$2.27		$1,000.00		$1,023.04		$2.19		0.43%
Class K		$1,000.00		$1,092.20		$0.74		$1,000.00		$1,024.50		$0.71		0.14%
LifePath Index 2030 Portfolio
Institutional		$1,000.00		$1,102.10		$1.01		$1,000.00		$1,024.25		$0.97		0.19%
Investor A		$1,000.00		$1,100.80		$2.33		$1,000.00		$1,022.99		$2.24		0.44%
Class K		$1,000.00		$1,102.50		$0.79		$1,000.00		$1,024.45		$0.77		0.15%
LifePath Index 2035 Portfolio
Institutional		$1,000.00		$1,111.30		$0.96		$1,000.00		$1,024.30		$0.92		0.18%
Investor A		$1,000.00		$1,110.00		$2.34		$1,000.00		$1,022.99		$2.24		0.44%
Class K		$1,000.00		$1,110.50		$0.74		$1,000.00		$1,024.50		$0.71		0.14%
LifePath Index 2040 Portfolio
Institutional		$1,000.00		$1,118.90		$1.07		$1,000.00		$1,024.20		$1.02		0.20%
Investor A		$1,000.00		$1,117.80		$2.40		$1,000.00		$1,022.94		$2.29		0.45%
Class K		$1,000.00		$1,119.20		$0.80		$1,000.00		$1,024.45		$0.77		0.15%
LifePath Index 2045 Portfolio
Institutional		$1,000.00		$1,127.30		$1.07		$1,000.00		$1,024.20		$1.02		0.20%
Investor A		$1,000.00		$1,126.20		$2.36		$1,000.00		$1,022.99		$2.24		0.44%
Class K		$1,000.00		$1,127.40		$0.75		$1,000.00		$1,024.50		$0.71		0.14%
LifePath Index 2050 Portfolio
Institutional		$1,000.00		$1,134.50		$1.02		$1,000.00		$1,024.25		$0.97		0.19%
Investor A		$1,000.00		$1,132.50		$2.37		$1,000.00		$1,022.99		$2.24		0.44%
Class K		$1,000.00		$1,034.80		$0.75		$1,000.00		$1,024.50		$0.71		0.14%
LifePath Index 2055 Portfolio
Institutional		$1,000.00		$1,140.80		$1.03		$1,000.00		$1,024.25		$0.97		0.19%
Investor A		$1,000.00		$1,139.60		$2.37		$1,000.00		$1,022.99		$2.24		0.44%
Class K		$1,000.00		$1,141.00		$0.76		$1,000.00		$1,024.50		$0.71		0.14%

¹  For each class of the LifePath Index Portfolio, expenses are equal to the annualized net expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown). Because each LifePath Index Portfolio invests significantly in a LifePath Index Master Portfolio, the expense examples reflect the net expenses of both the LifePath Index Portfolio and the LifePath Index Master Portfolio in which it invests.

²  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

BLACKROCK FUNDS III DECEMBER 31, 2013 15

Statements of Assets and Liabilities BlackRock Funds III

December 31, 2013	LifePath Index Retirement Portfolio			LifePath Index 2020 Portfolio			LifePath Index 2025 Portfolio			LifePath Index 2030 Portfolio			LifePath Index 2035 Portfolio
Assets
Investments at value — from the applicable LifePath Index Master Portfolio1	$	321,582,301		$	615,991,237		$	278,595,570		$	528,468,717		$	207,162,687
Capital shares sold receivable		3,210,260			3,859,681			3,472,936			8,197,101			5,877,512
Receivable from administrator		31,394			36,882			32,193			30,507			18,709
Prepaid expenses		20,479			20,479			20,479			20,480			20,230
Total assets		324,844,434			619,908,279			282,121,178			536,716,805			213,079,138
Liabilities
Contributions payable to the LifePath Index Master Portfolio		3,058,104			3,642,202			3,437,817			8,120,056			5,753,337
Capital shares redeemed payable		152,156			217,479			35,119			77,045			124,175
Income dividends payable		67,541			54,710			—			58,101			—
Capital gain distributions payable		45,274			40,680			—			54,164			—
Registration fees payable		11,641			31,545			12,661			29,192			9,911
Printing fees payable		6,820			7,081			2,859			4,197			1,605
Transfer agent fees payable		8,388			761			—			—			—
Service fees payable		5,873			12,530			10,103			12,752			7,883
Professional fees payable		14,235			14,253			14,046			14,556			15,475
Other accrued expenses payable		3,264			1,645			643			1,600			638
Total liabilities		3,373,296			4,022,886			3,513,248			8,371,663			5,913,024
Net Assets	$	321,471,138		$	615,885,393		$	278,607,930		$	528,345,142		$	207,166,114
Net Assets Consist of
Paid-in capital	$	299,631,115		$	563,702,555		$	253,242,123		$	473,101,571		$	184,618,280
Distributions in excess of net investment income		(448,180	)		(687,648	)		(269,215	)		(483,733	)		(163,261	)
Accumulated net realized loss allocated from the LifePath Index Master Portfolio		(141,427	)		(305,652	)		(196,505	)		(444,818	)		(247,171	)
Net unrealized appreciation/depreciation allocated from the LifePath Index Master Portfolio		22,429,630			53,176,138			25,831,527			56,172,122			22,958,266
Net Assets	$	321,471,138		$	615,885,393		$	278,607,930		$	528,345,142		$	207,166,114
Net Asset Value
Institutional:
Net assets	$	39,792,734		$	42,446,650		$	21,096,543		$	32,538,437		$	10,604,861
Shares outstanding2		3,600,415			3,773,710			1,855,343			2,831,609			916,412
Net asset value	$	11.05		$	11.25		$	11.37		$	11.49		$	11.57
Investor A:
Net assets	$	28,215,169		$	61,996,011		$	49,231,851		$	62,487,001		$	38,106,693
Shares outstanding2		2,554,066			5,518,683			4,332,578			5,439,446			3,297,676
Net asset value	$	11.05		$	11.23		$	11.36		$	11.49		$	11.56
Class K:
Net assets	$	253,463,235		$	511,442,732		$	208,279,536		$	433,319,704		$	158,454,560
Shares outstanding2		22,945,758			45,481,021			18,313,679			37,747,799			13,703,089
Net asset value	$	11.05		$	11.25		$	11.37		$	11.48		$	11.56
1 Cost — from the applicable LifePath Index Master Portfolio	$	299,152,671		$	562,815,099		$	252,764,043		$	472,296,595		$	184,204,421

² No par value, unlimited number of shares authorized.

See Notes to Financial Statements.
16	BLACKROCK FUNDS III	DECEMBER 31, 2013

Statements of Assets and Liabilities BlackRock Funds III

December 31, 2013	LifePath Index 2040 Portfolio			LifePath Index 2045 Portfolio			LifePath Index 2050 Portfolio			LifePath Index 2055 Portfolio
Assets
Investments at value — from the applicable LifePath Index Master Portfolio1	$	326,680,857		$	104,554,153		$	103,709,677		$	23,955,224
Capital shares sold receivable		8,536,634			2,586,971			2,690,812			669,846
Receivable from administrator		22,017			10,538			15,915			9,216
Prepaid expenses		20,479			19,961			19,073			18,575
Total assets		335,259,987			107,171,623			106,435,477			24,652,861
Liabilities
Contributions payable to the LifePath Index Master Portfolio		8,219,978			2,565,129			2,625,177			636,857
Capital shares redeemed payable		316,656			21,842			65,635			32,989
Income dividends payable		55,736			—			398			23,528
Capital gain distributions payable		53,439			—			279			—
Registration fees payable		18,736			5,274			6,088			1,449
Printing fees payable		1,720			980			1,168			4,416
Transfer agent fees payable		—			—			4,109			—
Service fees payable		6,446			3,340			2,432			953
Professional fees payable		15,460			15,143			15,346			14,433
Other accrued expenses payable		1,413			653			892			621
Total liabilities		8,689,584			2,612,361			2,721,524			715,246
Net Assets	$	326,570,403		$	104,559,262		$	103,713,953		$	23,937,615
Net Assets Consist of
Paid-in capital	$	288,672,740		$	92,822,370		$	92,008,107		$	21,409,211
Distributions in excess of net investment income		(231,860	)		(56,571	)		(42,292	)		(6,071	)
Accumulated net realized loss allocated from the LifePath Index Master Portfolio		(320,833	)		(122,344	)		(53,451	)		(846,025	)
Net unrealized appreciation/depreciation allocated from the LifePath Index Master Portfolio		38,450,356			11,915,807			11,801,589			3,380,500
Net Assets	$	326,570,403		$	104,559,262		$	103,713,953		$	23,937,615
Net Asset Value
Institutional:
Net assets	$	19,345,539		$	4,116,547		$	7,678,654		$	896,216
Shares outstanding2		1,654,191			349,351			644,720			74,356
Net asset value	$	11.69		$	11.78		$	11.91		$	12.05
Investor A:
Net assets	$	31,753,431		$	16,427,511		$	12,102,636		$	4,696,396
Shares outstanding2		2,718,256			1,395,880			1,017,508			390,012
Net asset value	$	11.68		$	11.77		$	11.89		$	12.04
Class K:
Net assets	$	275,471,433		$	84,015,204		$	83,932,663		$	18,345,003
Shares outstanding2		23,561,616			7,127,330			7,048,003			1,522,012
Net asset value	$	11.69		$	11.79		$	11.91		$	12.05
1 Cost — from the applicable LifePath Index Master Portfolio	$	288,230,501		$	92,638,346		$	91,908,088		$	20,574,724

² No par value, unlimited number of shares authorized.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	17

Statements of Operations BlackRock Funds III

Year Ended December 31, 2013	LifePath Index Retirement Portfolio			LifePath Index 2020 Portfolio			LifePath Index 2025 Portfolio			LifePath Index 2030 Portfolio			LifePath Index 2035 Portfolio
Investment Income
Net investment income allocated from the applicable LifePath Index Master Portfolio:
Dividends — affiliated	$	2,664,826		$	7,182,287		$	3,531,867		$	8,132,488		$	3,310,733
Securities lending — affiliated — net		9,394			26,255			9,818			27,415			8,682
Income — affiliated		1,064			2,155			1,052			1,929			804
Other income — affiliated		767			2,343			817			2,103			691
Interest — affiliated		2,577,813			3,614,935			1,227,038			2,047,765			608,291
Expenses		(445,013	)		(798,076	)		(345,541	)		(676,744	)		(268,941	)
Fees waived		58,052			74,294			50,351			62,059			45,137
Total income		4,866,903			10,104,193			4,475,402			9,597,015			3,705,397
Portfolio Expenses
Administration		83,934			150,800			61,296			123,657			45,049
Service — Investor A		44,054			105,291			66,801			105,897			60,178
Registration		43,155			64,445			44,541			61,029			40,861
Transfer agent — Institutional		12,904			14,608			5,450			11,748			2,747
Transfer agent — Investor A		7,162			19,395			9,092			20,155			10,522
Transfer agent — Class K		40,271			33,437			15,596			31,717			15,073
Professional		25,317			24,881			33,471			24,666			24,451
Printing		29,098			44,366			16,355			33,383			9,938
Miscellaneous		8,260			7,919			7,812			7,892			7,795
Recoupment of past waived fees — class specific		5,374			7,465			272			7,176			811
Total expenses		299,529			472,607			260,686			427,320			217,425
Less administration fees waived		(83,934	)		(150,800	)		(61,296	)		(123,657	)		(45,049	)
Less transfer agent fees waived — Institutional		(5	)		(4	)		(29	)		(4	)		(25	)
Less transfer agent fees waived — Investor A		(136	)		(19	)		(11	)		(32	)		(114	)
Less transfer agent fees waived — Class K		(2,848	)		(3,760	)		(1,501	)		(2,641	)		(996	)
Less transfer agent fees reimbursed — Institutional		(2,938	)		(5,018	)		(2,375	)		(3,806	)		(911	)
Less transfer agent fees reimbursed — Investor A		(1,150	)		(4,047	)		(2,021	)		(5,226	)		(2,350	)
Less transfer agent fees reimbursed — Class K		(37,422	)		(29,676	)		(14,050	)		(29,074	)		(14,047	)
Less fees reimbursed by administrator		(105,505	)		(141,284	)		(101,839	)		(126,643	)		(82,677	)
Total expenses after fees waived and reimbursed		65,591			137,999			77,564			136,237			71,256
Net investment income		4,801,312			9,966,194			4,397,838			9,460,778			3,634,141
Realized and Unrealized Gain (Loss) Allocated from the LifePath Index Master Portfolios
Net realized gain from investments, financial futures contracts and foreign currency transactions		1,607,897			3,827,927			1,990,873			4,334,854			1,823,947
Net change in unrealized appreciation/depreciation on investments, financial futures contracts and foreign currency translations		14,093,568			38,379,432			19,108,674			43,158,499			17,701,984
Total realized and unrealized gain		15,701,465			42,207,359			21,099,547			47,493,353			19,525,931
				��
Net Increase in Net Assets Resulting from Operations	$	20,502,777		$	52,173,553		$	25,497,385		$	56,954,131		$	23,160,072

See Notes to Financial Statements.
18	BLACKROCK FUNDS III	DECEMBER 31, 2013

Statements of Operations BlackRock Funds III

Year Ended December 31, 2013	LifePath Index 2040 Portfolio			LifePath Index 2045 Portfolio			LifePath Index 2050 Portfolio			LifePath Index 2055 Portfolio
Investment Income
Net investment income allocated from the applicable LifePath Index Master Portfolio:
Dividends — affiliated	$	5,859,808		$	1,842,406		$	1,910,357		$	442,386
Securities lending — affiliated — net		18,085			5,752			6,897			2,674
Income — affiliated		1,263			437			458			120
Other income — affiliated		1,371			466			442			208
Interest — affiliated		785,474			179,502			113,077			11,915
Expenses		(420,550	)		(145,503	)		(141,004	)		(59,724	)
Fees waived		49,306			40,098			40,727			38,841
Total income		6,294,757			1,923,158			1,930,954			436,420
Portfolio Expenses
Administration		72,855			20,857			19,878			4,244
Service — Investor A		51,451			23,839			15,551			6,601
Registration		50,223			35,703			35,079			29,691
Transfer agent — Institutional		7,185			1,244			1,978			568
Transfer agent — Investor A		9,168			4,221			3,138			1,339
Transfer agent — Class K		29,289			14,333			26,825			8,051
Professional		24,573			24,472			24,296			24,368
Printing		17,861			1,989			2,338			1,624
Miscellaneous		7,831			7,750			7,752			7,752
Recoupment of past waived fees — class specific		3,232			269			690			—
Total expenses		273,668			134,677			137,525			84,238
Less administration fees waived		(72,855	)		(20,857	)		(19,878	)		(4,244	)
Less transfer agent fees waived — Institutional		(5	)		(59	)		(24	)		(34	)
Less transfer agent fees waived — Investor A		(4	)		(106	)		(90	)		(75	)
Less transfer agent fees waived — Class K		(1,334	)		(386	)		(337	)		(107	)
Less transfer agent fees reimbursed — Institutional		(1,655	)		(238	)		(377	)		(321	)
Less transfer agent fees reimbursed — Investor A		(1,829	)		(927	)		(765	)		(251	)
Less transfer agent fees reimbursed — Class K		(27,954	)		(13,945	)		(26,486	)		(7,920	)
Less fees reimbursed by administrator		(100,153	)		(69,506	)		(69,056	)		(62,940	)
Total expenses after fees waived and reimbursed		67,879			28,653			20,512			8,346
Net investment income		6,226,878			1,894,505			1,910,442			428,074
Realized and Unrealized Gain (Loss) Allocated from the LifePath Index Master Portfolios
Net realized gain from investments, financial futures contracts and foreign currency transactions		2,945,488			877,526			759,303			135,948
Net change in unrealized appreciation/depreciation on investments, financial futures contracts and foreign currency translations		31,072,917			9,779,105			10,062,728			2,276,006
Total realized and unrealized gain		34,018,405			10,656,631			10,822,031			2,411,954
Net Increase in Net Assets Resulting from Operations	$	40,245,283		$	12,551,136		$	12,732,473		$	2,840,028

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	19

Statements of Changes in Net Assets BlackRock Funds III

	LifePath Index Retirement Portfolio						LifePath Index 2020 Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	4,801,312		$	2,403,911		$	9,966,194		$	3,552,083
Net realized gain		1,607,897			152,180			3,827,927			234,038
Net change in unrealized appreciation/depreciation		14,093,568			8,357,319			38,379,432			14,866,430
Net increase in net assets resulting from operations		20,502,777			10,913,410			52,173,553			18,652,551
Dividends and Distributions to Shareholders From1
Net investment income:
Institutional		(591,166	)		(261,808	)		(709,518	)		(253,123	)
Investor A		(288,108	)		(71,384	)		(814,616	)		(199,661	)
Class K		(4,229,020	)		(2,258,479	)		(8,956,056	)		(3,321,958	)
Net realized gain:
Institutional		(186,385	)		(33,512	)		(242,768	)		(53,825	)
Investor A		(121,148	)		(13,220	)		(343,083	)		(49,061	)
Class K		(1,188,064	)		(288,093	)		(2,917,112	)		(678,055	)
Decrease in net assets resulting from dividends and distributions to shareholders		(6,603,891	)		(2,926,496	)		(13,983,153	)		(4,555,683	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		105,714,712			191,916,753			290,809,095			270,893,880
Net Assets
Total increase in net assets		119,613,598			199,903,667			328,999,495			284,990,748
Beginning of year		201,857,540			1,953,873			286,885,898			1,895,150
End of year	$	321,471,138		$	201,857,540		$	615,885,393		$	286,885,898
Distributions in excess of net investment income, end of year	$	(448,180	)	$	(141,198	)	$	(687,648	)	$	(173,652	)

¹  Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
20	BLACKROCK FUNDS III	DECEMBER 31, 2013

Statements of Changes in Net Assets BlackRock Funds III

	LifePath Index 2025 Portfolio						LifePath Index 2030 Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	4,397,838		$	1,388,333		$	9,460,778		$	2,775,133
Net realized gain		1,990,873			207,730			4,334,854			229,918
Net change in unrealized appreciation/depreciation		19,108,674			6,815,755			43,158,499			13,125,390
Net increase in net assets resulting from operations		25,497,385			8,411,818			56,954,131			16,130,441
Dividends and Distributions to Shareholders From1
Net investment income:
Institutional		(345,320	)		(46,532	)		(608,036	)		(233,456	)
Investor A		(606,228	)		(29,124	)		(958,624	)		(167,955	)
Class K		(3,644,059	)		(1,395,326	)		(8,262,758	)		(2,515,902	)
Net realized gain:
Institutional		(144,825	)		(18,637	)		(259,759	)		(61,189	)
Investor A		(320,906	)		(15,089	)		(487,570	)		(52,788	)
Class K		(1,410,399	)		(437,200	)		(3,413,491	)		(667,736	)
Decrease in net assets resulting from dividends and distributions to shareholders		(6,471,737	)		(1,941,908	)		(13,990,238	)		(3,699,026	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		137,165,472			114,077,071			279,465,769			191,636,248
Net Assets
Total increase in net assets		156,191,120			120,546,981			322,429,662			204,067,663
Beginning of year		122,416,810			1,869,829			205,915,480			1,847,817
End of year	$	278,607,930		$	122,416,810		$	528,345,142		$	205,915,480
Distributions in excess of net investment income, end of year	$	(269,215	)	$	(71,446	)	$	(483,733	)	$	(115,093	)

¹  Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	21

Statements of Changes in Net Assets BlackRock Funds III

	LifePath Index 2035 Portfolio						LifePath Index 2040 Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	3,634,141		$	988,307		$	6,226,878		$	1,516,238
Net realized gain		1,823,947			175,707			2,945,488			43,112
Net change in unrealized appreciation/depreciation		17,701,984			5,385,714			31,072,917			7,521,044
Net increase in net assets resulting from operations		23,160,072			6,549,728			40,245,283			9,080,394
Dividends and Distributions to Shareholders From1
Net investment income:
Institutional		(181,196	)		(18,375	)		(378,244	)		(155,822	)
Investor A		(582,811	)		(27,832	)		(517,339	)		(91,979	)
Class K		(2,990,310	)		(988,293	)		(5,513,352	)		(1,325,612	)
Net realized gain:
Institutional		(93,322	)		(8,944	)		(175,307	)		(31,671	)
Investor A		(332,522	)		(18,524	)		(283,194	)		(25,153	)
Class K		(1,376,315	)		(371,207	)		(2,438,058	)		(300,713	)
Decrease in net assets resulting from dividends and distributions to shareholders		(5,556,476	)		(1,433,175	)		(9,305,494	)		(1,930,950	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		107,834,467			74,784,086			188,037,183			98,636,038
Net Assets
Total increase in net assets		125,438,063			79,900,639			218,976,972			105,785,482
Beginning of year		81,728,051			1,827,412			107,593,431			1,807,949
End of year	$	207,166,114		$	81,728,051		$	326,570,403		$	107,593,431
Distributions in excess of net investment income, end of year	$	(163,261	)	$	(43,085	)	$	(231,860	)	$	(49,803	)

¹  Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
22	BLACKROCK FUNDS III	DECEMBER 31, 2013

Statements of Changes in Net Assets BlackRock Funds III

	LifePath Index 2045 Portfolio						LifePath Index 2050 Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	1,894,505		$	405,513		$	1,910,442		$	348,087
Net realized gain (loss)		877,526			11,177			759,303			(14,447	)
Net change in unrealized appreciation/depreciation		9,779,105			2,293,873			10,062,728			1,912,161
Net increase in net assets resulting from operations		12,551,136			2,710,563			12,732,473			2,245,801
Dividends and Distributions to Shareholders From1
Net investment income:
Institutional		(63,879	)		(6,138	)		(140,616	)		(23,821	)
Investor A		(259,142	)		(7,644	)		(184,926	)		(9,234	)
Class K		(1,612,901	)		(407,126	)		(1,617,186	)		(325,463	)
Net realized gain:
Institutional		(34,121	)		(1,196	)		(54,352	)		(1,299	)
Investor A		(139,081	)		(1,999	)		(83,209	)		(966	)
Class K		(709,566	)		(71,398	)		(582,607	)		(20,664	)
Decrease in net assets resulting from dividends and distributions to shareholders		(2,818,690	)		(495,501	)		(2,662,896	)		(381,447	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		61,684,078			29,138,778			67,640,283			22,365,225
Net Assets
Total increase in net assets		71,416,524			31,353,840			77,709,860			24,229,579
Beginning of year		33,142,738			1,788,898			26,004,093			1,774,514
End of year	$	104,559,262		$	33,142,738		$	103,713,953		$	26,004,093
Distributions in excess of net investment income, end of year	$	(56,571	)	$	(15,154	)	$	(42,292	)	$	(10,006	)

¹  Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	23

Statements of Changes in Net Assets BlackRock Funds III

	LifePath Index 2055 Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012
Operations
Net investment income	$	428,074		$	77,358
Net realized gain (loss)		135,948			(920,352	)
Net change in unrealized appreciation/depreciation		2,276,006			1,282,849
Net increase in net assets resulting from operations		2,840,028			439,855
Dividends and Distributions to Shareholders From1
Net investment income:
Institutional		(14,616	)		(539	)
Investor A		(75,486	)		(1,556	)
Class K		(342,853	)		(76,957	)
Return of capital:
Institutional		—			(7	)
Investor A		—			(20	)
Class K		—			(970	)
Decrease in net assets resulting from dividends and distributions to shareholders		(432,955	)		(80,049	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		16,670,913			2,739,829
Net Assets
Total increase in net assets		19,077,986			3,099,635
Beginning of year		4,859,629			1,759,994
End of year	$	23,937,615		$	4,859,629
Distributions in excess of net investment income, end of year	$	(6,071	)	$	(1,190	)

¹  Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
24	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights LifePath Index Retirement Portfolio

	Institutional
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.49		$	9.77		$	10.00
Net investment income2		0.18			0.21			0.16
Net realized and unrealized gain (loss)		0.62			0.68			(0.22	)
Net increase (decrease) from investment operations		0.80			0.89			(0.06	)
Dividends and distributions from:3
Net investment income		(0.19	)		(0.15	)		(0.16	)
Net realized gain		(0.05	)		(0.02	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.24	)		(0.17	)		(0.17	)
Net asset value, end of period	$	11.05		$	10.49		$	9.77
Total Investment Return4
Based on net asset value		7.68%			9.16%			(0.61)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.26%			0.38%			6.81%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.18%			0.16%			0.18%	9
Net investment income7,8		1.70%			2.00%			2.84%	9
Supplemental Data
Net assets, end of period (000)	$	39,793		$	20,223		$	24
Portfolio turnover of the LifePath Index Master Portfolio		18%	11		1%	12		1%	12

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.02%, 0.06% and 3.37% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.02%, 0.02% and 0.04% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 6.84%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 15% and 9% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	25

Financial Highlights (continued) LifePath Index Retirement Portfolio

	Investor A
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.49		$	9.77		$	10.00
Net investment income2		0.16			0.18			0.15
Net realized and unrealized gain (loss)		0.62			0.69			(0.23	)
Net increase (decrease) from investment operations		0.78			0.87			(0.08	)
Dividends and distributions from:3
Net investment income		(0.17	)		(0.13	)		(0.14	)
Net realized gain		(0.05	)		(0.02	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.22	)		(0.15	)		(0.15	)
Net asset value, end of period	$	11.05		$	10.49		$	9.77
Total Investment Return4
Based on net asset value		7.44%			8.88%			(0.76)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.51%			0.81%			7.06%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.43%			0.41%			0.43%	9
Net investment income7,8		1.45%			1.71%			2.58%	9
Supplemental Data
Net assets, end of period (000)	$	28,215		$	7,967		$	24
Portfolio turnover of the LifePath Index Master Portfolio		18%	11		1%	12		1%	12

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.02%, 0.13% and 3.37% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.02%, 0.02% and 0.04% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.10%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 15% and 9% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

See Notes to Financial Statements.
26	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (concluded) LifePath Index Retirement Portfolio

	Class K
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.49		$	9.77		$	10.00
Net investment income2		0.19			0.21			0.16
Net realized and unrealized gain (loss)		0.61			0.69			(0.22	)
Net increase (decrease) from investment operations		0.80			0.90			(0.06	)
Dividends and distributions from:3
Net investment income		(0.19	)		(0.16	)		(0.16	)
Net realized gain		(0.05	)		(0.02	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.24	)		(0.18	)		(0.17	)
Net asset value, end of period	$	11.05		$	10.49		$	9.77
Total Investment Return4
Based on net asset value		7.72%			9.17%			(0.59)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.22%			0.28%			6.71%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.14%			0.15%			0.15%	9
Net investment income7,8		1.74%			2.02%			2.87%	9
Supplemental Data
Net assets, end of period (000)	$	253,463		$	173,667		$	1,905
Portfolio turnover of the LifePath Index Master Portfolio		18%	11		1%	12		1%	12

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.02%, 0.04% and 3.38% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.02%, 0.02% and 0.04% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 6.74%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 15% and 9% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	27

Financial Highlights LifePath Index 2020 Portfolio

	Institutional
	Year Ended December 31,						Period May 31, 20111 to December 31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.36		$	9.48		$	10.00
Net investment income2		0.22			0.22			0.15
Net realized and unrealized gain (loss)		0.94			0.85			(0.53	)
Net increase (decrease) from investment operations		1.16			1.07			(0.38	)
Dividends and distributions from: 3
Net investment income		(0.21	)		(0.16	)		(0.13	)
Net realized gain		(0.06	)		(0.03	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.27	)		(0.19	)		(0.14	)
Net asset value, end of period	$	11.25		$	10.36		$	9.48
Total Investment Return4
Based on net asset value		11.32%			11.35%			(3.72)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.26%			0.36%			6.91%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.18%			0.17%			0.20%	9
Net investment income7,8		1.98%			2.14%			2.66%	9
Supplemental Data
Net assets, end of period (000)	$	42,447		$	19,786		$	24
Portfolio turnover of the LifePath Index Master Portfolio		12%	11		1%	12		1%	12

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.01%, 0.06% and 3.48% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.03%, 0.03% and 0.05% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 6.94%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 13% and 8% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

See Notes to Financial Statements.
28	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) LifePath Index 2020 Portfolio

	Investor A
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.35		$	9.48		$	10.00
Net investment income2		0.19			0.19			0.13
Net realized and unrealized gain (loss)		0.94			0.85			(0.52	)
Net increase (decrease) from investment operations		1.13			1.04			(0.39	)
Dividends and distributions from: 3
Net investment income		(0.19	)		(0.14	)		(0.12	)
Net realized gain		(0.06	)		(0.03	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.25	)		(0.17	)		(0.13	)
Net asset value, end of period	$	11.23		$	10.35		$	9.48
Total Investment Return4
Based on net asset value		10.99%			10.98%			(3.87)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.51%			0.68%			7.16%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.44%			0.42%			0.46%	9
Net investment income7,8		1.75%			1.85%			2.42%	9
Supplemental Data
Net assets, end of period (000)	$	61,996		$	17,944		$	24
Portfolio turnover of the LifePath Index Master Portfolio		12%	11		1%	12		1%	12

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.01%, 0.08% and 3.48% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.03%, 0.03% and 0.05% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.19%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 13% and 8% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	29

Financial Highlights (concluded) LifePath Index 2020 Portfolio

	Class K
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.36		$	9.48		$	10.00
Net investment income2		0.22			0.22			0.15
Net realized and unrealized gain (loss)		0.94			0.85			(0.52	)
Net increase (decrease) from investment operations		1.16			1.07			(0.37	)
Dividends and distributions from: 3
Net investment income		(0.21	)		(0.16	)		(0.14	)
Net realized gain		(0.06	)		(0.03	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.27	)		(0.19	)		(0.15	)
Net asset value, end of period	$	11.25		$	10.36		$	9.48
Total Investment Return4
Based on net asset value		11.36%			11.36%			(3.71)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.21%			0.28%			6.81%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.14%			0.16%			0.18%	9
Net investment income7,8		2.00%			2.20%			2.70%	9
Supplemental Data
Net assets, end of period (000)	$	511,443		$	249,157		$	1,848
Portfolio turnover of the LifePath Index Master Portfolio		12%	11		1%	12		1%	12

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.01%, 0.04% and 3.48% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.03%, 0.03% and 0.05% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 6.84%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 13% and 8% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

See Notes to Financial Statements.
30	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights LifePath Index 2025 Portfolio

	Institutional
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.30		$	9.35		$	10.00
Net investment income2		0.25			0.23			0.14
Net realized and unrealized gain (loss)		1.12			0.92			(0.65	)
Net increase (decrease) from investment operations		1.37			1.15			(0.51	)
Dividends and distributions from:3
Net investment income		(0.22	)		(0.16	)		(0.13	)
Net realized gain		(0.08	)		(0.04	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.30	)		(0.20	)		(0.14	)
Net asset value, end of period	$	11.37		$	10.30		$	9.35
Total Investment Return4
Based on net asset value		13.46%			12.34%			(5.12)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.27%			0.51%			6.97%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.17%			0.18%			0.21%	9
Net investment income7,8		2.25%			2.26%			2.55%	9
Supplemental Data
Net assets, end of period (000)	$	21,097		$	4,844		$	23
Portfolio turnover of the LifePath Index Master Portfolio		13%	11		0%	12,13		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.02%, 0.12% and 3.53% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.04%, 0.03%, and 0.06% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 6.99%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 14% and 8% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹³  Rounds to less than 1%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	31

Financial Highlights (continued) LifePath Index 2025 Portfolio

	Investor A
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.30		$	9.35		$	10.00
Net investment income2		0.23			0.22			0.13
Net realized and unrealized gain (loss)		1.11			0.91			(0.66	)
Net increase (decrease) from investment operations		1.34			1.13			(0.53	)
Dividends and distributions from:3
Net investment income		(0.20	)		(0.14	)		(0.11	)
Net realized gain		(0.08	)		(0.04	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.28	)		(0.18	)		(0.12	)
Net asset value, end of period	$	11.36		$	10.30		$	9.35
Total Investment Return4
Based on net asset value		13.13%			12.12%			(5.26)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.52%			0.85%			7.22%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.43%			0.44%			0.46%	9
Net investment income7,8		2.04%			2.21%			2.30%	9
Supplemental Data
Net assets, end of period (000)	$	49,232		$	3,918		$	23
Portfolio turnover of the LifePath Index Master Portfolio		13%	11		0%	12,13		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.02%, 0.13% and 3.53% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.04%, 0.03%, and 0.06% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.24%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 14% and 8% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹³  Rounds to less than 1%.

See Notes to Financial Statements.
32	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (concluded) LifePath Index 2025 Portfolio

	Class K
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.30		$	9.35		$	10.00
Net investment income2		0.24			0.23			0.14
Net realized and unrealized gain (loss)		1.14			0.92			(0.65	)
Net increase (decrease) from investment operations		1.38			1.15			(0.51	)
Dividends and distributions from:3
Net investment income		(0.23	)		(0.16	)		(0.13	)
Net realized gain		(0.08	)		(0.04	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.31	)		(0.20	)		(0.14	)
Net asset value, end of period	$	11.37		$	10.30		$	9.35
Total Investment Return4
Based on net asset value		13.48%			12.34%			(5.10)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.23%			0.37%			6.87%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.14%			0.16%			0.18%	9
Net investment income7,8		2.16%			2.26%			2.58%	9
Supplemental Data
Net assets, end of period (000)	$	208,280		$	113,655		$	1,823
Portfolio turnover of the LifePath Index Master Portfolio		13%	11		0%	12,13		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.02%, 0.07% and 3.53% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.04%, 0.03% and 0.06% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 6.89%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 14% and 8% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹³  Rounds to less than 1%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	33

Financial Highlights LifePath Index 2030 Portfolio

	Institutional
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.26		$	9.24		$	10.00
Net investment income2		0.25			0.23			0.13
Net realized and unrealized gain (loss)		1.31			1.00			(0.76	)
Net increase (decrease) from investment operations		1.56			1.23			(0.63	)
Dividends and distributions from:3
Net investment income		(0.24	)		(0.17	)		(0.12	)
Net realized gain		(0.09	)		(0.04	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.33	)		(0.21	)		(0.13	)
Net asset value, end of period	$	11.49		$	10.26		$	9.24
Total Investment Return4
Based on net asset value		15.34%			13.38%			(6.30)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.27%			0.41%			7.04%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.19%			0.18%			0.22%	9
Net investment income7,8		2.30%			2.27%			2.47%	9
Supplemental Data
Net assets, end of period (000)	$	32,538		$	16,158		$	23
Portfolio turnover of the LifePath Index Master Portfolio		12%	11		2%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.01%, 0.07% and 3.57% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.04%, 0.04% and 0.06% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.06%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 18% and 6% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹³  Rounds to less than 1%.

See Notes to Financial Statements.
34	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) LifePath Index 2030 Portfolio

	Investor A
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.26		$	9.24		$	10.00
Net investment income2		0.23			0.20			0.12
Net realized and unrealized gain (loss)		1.30			1.01			(0.77	)
Net increase (decrease) from investment operations		1.53			1.21			(0.65	)
Dividends and distributions from:3
Net investment income		(0.21	)		(0.15	)		(0.10	)
Net realized gain		(0.09	)		(0.04	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.30	)		(0.19	)		(0.11	)
Net asset value, end of period	$	11.49		$	10.26		$	9.24
Total Investment Return4
Based on net asset value		15.09%			13.11%			(6.44)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.52%			0.72%			7.29%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.45%			0.44%			0.47%	9
Net investment income7,8		2.10%			1.99%			2.22%	9
Supplemental Data
Net assets, end of period (000)	$	62,487		$	13,908		$	23
Portfolio turnover of the LifePath Index Master Portfolio		12%	11		2%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.01%, 0.09% and 3.57% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.04%, 0.04% and 0.06% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.32%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 18% and 6% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹³  Rounds to less than 1%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	35

Financial Highlights (concluded) LifePath Index 2030 Portfolio

	Class K
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.25		$	9.24		$	10.00
Net investment income2		0.26			0.24			0.14
Net realized and unrealized gain (loss)		1.30			0.98			(0.77	)
Net increase (decrease) from investment operations		1.56			1.22			(0.63	)
Dividends and distributions from:3
Net investment income		(0.24	)		(0.17	)		(0.12	)
Net realized gain		(0.09	)		(0.04	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.33	)		(0.21	)		(0.13	)
Net asset value, end of period	$	11.48		$	10.25		$	9.24
Total Investment Return4
Based on net asset value		15.40%			13.28%			(6.28)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.22%			0.31%			6.94%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.15%			0.17%			0.19%	9
Net investment income7,8		2.32%			2.37%			2.50%	9
Supplemental Data
Net assets, end of period (000)	$	433,320		$	175,849		$	1,802
Portfolio turnover of the LifePath Index Master Portfolio		12%	11		2%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.01%, 0.05% and 3.57% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.04%, 0.04% and 0.06% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 6.96%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 18% and 6% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹³  Rounds to less than 1%.

See Notes to Financial Statements.
36	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights LifePath Index 2035 Portfolio

	Institutional
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.21		$	9.14		$	10.00
Net investment income2		0.29			0.25			0.13
Net realized and unrealized gain (loss)		1.43			1.04			(0.87	)
Net increase (decrease) from investment operations		1.72			1.29			(0.74	)
Dividends and distributions from:3
Net investment income		(0.25	)		(0.17	)		(0.11	)
Net realized gain		(0.11	)		(0.05	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.36	)		(0.22	)		(0.12	)
Net asset value, end of period	$	11.57		$	10.21		$	9.14
Total Investment Return4
Based on net asset value		16.98%			14.16%			(7.37)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.28%			0.86%			7.12%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.18%			0.20%			0.23%	9
Net investment income7,8		2.59%			2.52%			2.40%	9
Supplemental Data
Net assets, end of period (000)	$	10,605		$	1,835		$	23
Portfolio turnover of the LifePath Index Master Portfolio		12%	11		1%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.03%, 0.21% and 3.61% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.05%, 0.04% and 0.06% for the years ended December 31, 2013 and December 31, 2012, and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.15%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 24% and 7%, for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹³  Rounds to less than 1%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	37

Financial Highlights (continued) LifePath Index 2035 Portfolio

	Investor A
	Year Ended December 31,						Period May 31, 20111 to December 31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.20		$	9.14		$	10.00
Net investment income2		0.25			0.26			0.12
Net realized and unrealized gain (loss)		1.45			1.00			(0.87	)
Net increase (decrease) from investment operations		1.70			1.26			(0.75	)
Dividends and distributions from:3
Net investment income		(0.23	)		(0.15	)		(0.10	)
Net realized gain		(0.11	)		(0.05	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.34	)		(0.20	)		(0.11	)
Net asset value, end of period	$	11.56		$	10.20		$	9.14
Total Investment Return4
Based on net asset value		16.74%			13.83%			(7.52)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.54%			0.89%			7.47%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.44%			0.45%			0.48%	9
Net investment income7,8		2.29%			2.59%			2.14%	9
Supplemental Data
Net assets, end of period (000)	$	38,107		$	3,798		$	23
Portfolio turnover of the LifePath Index Master Portfolio		12%	11		1%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.03%, 0.09% and 3.61% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.05%, 0.04% and 0.06% for the years ended December 31, 2013 and December 31, 2012, and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.50%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 24% and 7%, for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹³  Rounds to less than 1%.

See Notes to Financial Statements.
38	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (concluded) LifePath Index 2035 Portfolio

	Class K
	Year Ended December 31,						Period May 31, 20111 to December 31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.20		$	9.14		$	10.00
Net investment income2		0.27			0.24			0.13
Net realized and unrealized gain (loss)		1.45			1.04			(0.87	)
Net increase (decrease) from investment operations		1.72			1.28			(0.74	)
Dividends and distributions from:3
Net investment income		(0.25	)		(0.17	)		(0.11	)
Net realized gain		(0.11	)		(0.05	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.36	)		(0.22	)		(0.12	)
Net asset value, end of period	$	11.56		$	10.20		$	9.14
Total Investment Return4
Based on net asset value		17.02%			14.07%			(7.35)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.25%			0.48%			7.02%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.15%			0.17%			0.19%	9
Net investment income7,8		2.44%			2.43%			2.43%	9
Supplemental Data
Net assets, end of period (000)	$	158,455		$	76,095		$	1,782
Portfolio turnover of the LifePath Index Master Portfolio	��	12%	11		1%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.03%, 0.10% and 3.61% for the years ended December 31, 2013 and December 31, 2012, and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.05%, 0.04% and 0.06% for the years ended December 31, 2013 and December 31, 2012, and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.05%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 24% and 7%, for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹³  Rounds to less than 1%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	39

Financial Highlights LifePath Index 2040 Portfolio

	Institutional
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.18		$	9.04		$	10.00
Net investment income2		0.28			0.23			0.13
Net realized and unrealized gain (loss)		1.60			1.12			(0.98	)
Net increase (decrease) from investment operations		1.88			1.35			(0.85	)
Dividends and distributions from:3
Net investment income		(0.26	)		(0.18	)		(0.10	)
Net realized gain		(0.11	)		(0.03	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.37	)		(0.21	)		(0.11	)
Net asset value, end of period	$	11.69		$	10.18		$	9.04
Total Investment Return4
Based on net asset value		18.61%			15.01%			(8.44)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.29%			0.53%			7.17%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.20%			0.19%			0.23%	9
Net investment income7,8		2.55%			2.36%			2.34%	9
Supplemental Data
Net assets, end of period (000)	$	19,346		$	9,554		$	23
Portfolio turnover of the LifePath Index Master Portfolio		12%	11		3%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.02%, 0.11%, and 3.65% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.05%, 0.04% and 0.07% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.19%

¹¹ Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹² Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 21% and 5% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹³  Rounds to less than 1%.

See Notes to Financial Statements.
40	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) LifePath Index 2040 Portfolio

	Investor A
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.17		$	9.04		$	10.00
Net investment income2		0.27			0.21			0.11
Net realized and unrealized gain (loss)		1.58			1.11			(0.97	)
Net increase (decrease) from investment operations		1.85			1.32			(0.86	)
Dividends and distributions from:3
Net investment income		(0.23	)		(0.16	)		(0.09	)
Net realized gain		(0.11	)		(0.03	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.34	)		(0.19	)		(0.10	)
Net asset value, end of period	$	11.68		$	10.17		$	9.04
Total Investment Return4
Based on net asset value		18.38%			14.63%			(8.58)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.53%			0.85%			7.42%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.45%			0.45%			0.48%	9
Net investment income7,8		2.39%			2.13%			2.08%	9
Supplemental Data
Net assets, end of period (000)	$	31,753		$	7,563		$	23
Portfolio turnover of the LifePath Index Master Portfolio		12%	11		3%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.02%, 0.14%, and 3.65% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.05%, 0.04% and 0.07% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.45%

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 21% and 5% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹³  Rounds to less than 1%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	41

Financial Highlights (concluded) LifePath Index 2040 Portfolio

	Class K
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.18		$	9.04		$	10.00
Net investment income2		0.29			0.25			0.13
Net realized and unrealized gain (loss)		1.59			1.10			(0.97	)
Net increase (decrease) from investment operations		1.88			1.35			(0.84	)
Dividends and distributions from:3
Net investment income		(0.26	)		(0.18	)		(0.11	)
Net realized gain		(0.11	)		(0.03	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.37	)		(0.21	)		(0.12	)
Net asset value, end of period	$	11.69		$	10.18		$	9.04
Total Investment Return4
Based on net asset value		18.66%			15.03%			(8.42)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.24%			0.39%			7.06%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.15%			0.18%			0.20%	9
Net investment income7,8		2.58%			2.52%			2.36%	9
Supplemental Data
Net assets, end of period (000)	$	275,471		$	90,476		$	1,763
Portfolio turnover of the LifePath Index Master Portfolio		12%	11		3%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.02%, 0.07%, and 3.65% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.05%, 0.04% and 0.07% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.09%

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 21% and 5% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹³  Rounds to less than 1%.

See Notes to Financial Statements.
42	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights LifePath Index 2045 Portfolio

	Institutional
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.13		$	8.94		$	10.00
Net investment income2		0.34			0.26			0.12
Net realized and unrealized gain (loss)		1.69			1.13			(1.07	)
Net increase (decrease) from investment operations		2.03			1.39			(0.95	)
Dividends and distributions from:3
Net investment income		(0.27	)		(0.18	)		(0.10	)
Net realized gain		(0.11	)		(0.02	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.38	)		(0.20	)		(0.11	)
Net asset value, end of period	$	11.78		$	10.13		$	8.94
Total Investment Return4
Based on net asset value		20.18%			15.58%			(9.51)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.35%			1.35%			7.23%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.20%			0.22%			0.24%	9
Net investment income7,8		3.01%			2.64%			2.26%	9
Supplemental Data
Net assets, end of period (000)	$	4,117		$	532		$	22
Portfolio turnover of the LifePath Index Master Portfolio		12%	11		2%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.05%, 0.36% and 3.69% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.05%, 0.04% and 0.07% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.25%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 22% and 6% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹³  Rounds to less than 1%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	43

Financial Highlights (continued) LifePath Index 2045 Portfolio

	Investor A
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.12		$	8.94		$	10.00
Net investment income2		0.29			0.27			0.11
Net realized and unrealized gain (loss)		1.72			1.09			(1.08	)
Net increase (decrease) from investment operations		2.01			1.36			(0.97	)
Dividends and distributions from:3
Net investment income		(0.25	)		(0.16	)		(0.08	)
Net realized gain		(0.11	)		(0.02	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.36	)		(0.18	)		(0.09	)
Net asset value, end of period	$	11.77		$	10.12		$	8.94
Total Investment Return4
Based on net asset value		19.96%			15.27%			(9.64)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.58%			1.39%			7.48%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.44%			0.46%			0.49%	9
Net investment income7,8		2.61%			2.75%			2.00%	9
Supplemental Data
Net assets, end of period (000)	$	16,428		$	887		$	22
Portfolio turnover of the LifePath Index Master Portfolio		12%	11		2%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.06%, 0.25% and 3.69% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.05%, 0.04% and 0.07% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.50%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 22% and 6% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹³  Rounds to less than 1%.

See Notes to Financial Statements.
44	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (concluded) LifePath Index 2045 Portfolio

	Class K
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.13		$	8.94		$	10.00
Net investment income2		0.30			0.26			0.12
Net realized and unrealized gain (loss)		1.74			1.13			(1.07	)
Net increase (decrease) from investment operations		2.04			1.39			(0.95	)
Dividends and distributions from:3
Net investment income		(0.27	)		(0.18	)		(0.10	)
Net realized gain		(0.11	)		(0.02	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.38	)		(0.20	)		(0.11	)
Net asset value, end of period	$	11.79		$	10.13		$	8.94
Total Investment Return4
Based on net asset value		20.32%			15.61%			(9.49)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.31%			0.89%			7.12%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.15%			0.18%			0.21%	9
Net investment income7,8		2.73%			2.60%			2.29%	9
Supplemental Data
Net assets, end of period (000)	$	84,015		$	31,724		$	1,744
Portfolio turnover of the LifePath Index Master Portfolio		12%	11		2%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.06%, 0.24% and 3.69% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.05%, 0.04% and 0.07% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.15%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 22% and 6% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹³  Rounds to less than 1%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	45

Financial Highlights LifePath Index 2050 Portfolio

	Institutional
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.11		$	8.86		$	10.00
Net investment income2		0.34			0.24			0.12
Net realized and unrealized gain (loss)		1.82			1.21			(1.16	)
Net increase (decrease) from investment operations		2.16			1.45			(1.04	)
Dividends and distributions from:3
Net investment income		(0.27	)		(0.19	)		(0.09	)
Net realized gain		(0.09	)		(0.01	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.36	)		(0.20	)		(0.10	)
Net asset value, end of period	$	11.91		$	10.11		$	8.86
Total Investment Return4
Based on net asset value		21.56%			16.35%			(10.36)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.34%			1.55%			7.27%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.20%			0.21%			0.24%	9
Net investment income7,8		3.03%			2.44%			2.22%	9
Supplemental Data
Net assets, end of period (000)	$	7,679		$	1,573		$	22
Portfolio turnover of the LifePath Index Master Portfolio		12%	11		3%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.06%, 0.47% and 3.71% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.06%, 0.05% and 0.07% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.30%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 26% and 5% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹³  Rounds to less than 1%.

See Notes to Financial Statements.
46	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (continued) LifePath Index 2050 Portfolio

	Investor A
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.10		$	8.86		$	10.00
Net investment income2		0.32			0.28			0.10
Net realized and unrealized gain (loss)		1.81			1.14			(1.15	)
Net increase (decrease) from investment operations		2.13			1.42			(1.05	)
Dividends and distributions from:3
Net investment income		(0.25	)		(0.17	)		(0.08	)
Net realized gain		(0.09	)		(0.01	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.34	)		(0.18	)		(0.09	)
Net asset value, end of period	$	11.89		$	10.10		$	8.86
Total Investment Return4
Based on net asset value		21.25%			16.00%			(10.49)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.59%			1.33%			7.69%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.45%			0.47%			0.49%	9
Net investment income7,8		2.85%			2.86%			1.97%	9
Supplemental Data
Net assets, end of period (000)	$	12,103		$	1,090		$	25
Portfolio turnover of the LifePath Index Master Portfolio		12%	11		3%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.06%, 0.22% and 3.71% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.06%, 0.05% and 0.07% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.71%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 26% and 5% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹³  Rounds to less than 1%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	47

Financial Highlights (concluded) LifePath Index 2050 Portfolio

	Class K
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.11		$	8.86		$	10.00
Net investment income2		0.32			0.26			0.12
Net realized and unrealized gain (loss)		1.85			1.19			(1.16	)
Net increase (decrease) from investment operations		2.17			1.45			(1.04	)
Dividends and distributions from:3
Net investment income		(0.28	)		(0.19	)		(0.09	)
Net realized gain		(0.09	)		(0.01	)		—
Return of capital		—			—			(0.01	)
Total dividends and distributions		(0.37	)		(0.20	)		(0.10	)
Net asset value, end of period	$	11.91		$	10.11		$	8.86
Total Investment Return4
Based on net asset value		21.61%			16.37%			(10.34)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.33%			0.99%			7.17%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.15%			0.19%			0.21%	9
Net investment income7,8		2.88%			2.67%			2.25%	9
Supplemental Data
Net assets, end of period (000)	$	83,933		$	23,342		$	1,727
Portfolio turnover of the LifePath Index Master Portfolio		12%	11		3%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.06%, 0.27% and 3.71% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.06%, 0.05% and 0.07% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

¹⁰  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.19%.

¹¹  Includes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio.

¹²  Excludes the LifePath Index Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio, if these transactions had been included to conform to the current year presentations, portfolio turnover would have been 26% and 5% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹³  Rounds to less than 1%.

See Notes to Financial Statements.
48	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights LifePath Index 2055 Portfolio

	Institutional
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.05		$	8.80		$	10.00
Net investment income2		0.37			0.24			0.12
Net realized and unrealized gain (loss)		1.91			1.23			(1.22	)
Net increase (decrease) from investment operations		2.28			1.47			(1.10	)
Dividends and distributions from:3
Net investment income		(0.28	)		(0.22	)		(0.09	)
Return of capital		—			(0.00	)4		(0.01	)
Total dividends and distributions		(0.28	)		(0.22	)		(0.10	)
Net asset value, end of period	$	12.05		$	10.05		$	8.80
Total Investment Return5
Based on net asset value		22.91%			16.78%			(10.98)%	6
Ratios to Average Net Assets7
Total expenses8,9		0.75%			4.43%			7.32%	10,11
Total expenses after fees waived and/or reimbursed8,9		0.20%			0.24%			0.24%	10
Net investment income8,9		3.25%			2.46%			2.21%	10
Supplemental Data
Net assets, end of period (000)	$	896		$	25		$	22
Portfolio turnover of the LifePath Index Master Portfolio		15%	12		8%	13		0%	13,14

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Amount is greater than $(0.005) per share.

⁵  Where applicable, assumes the reinvestment of dividends and distributions.

⁶  Aggregate total investment return.

⁷  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁸  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.26%, 1.36% and 3.73% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.06%, 0.05% and 0.08% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

¹⁰  Annualized.

¹¹  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.34%.

¹²  Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹³  Excludes the LifePath Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 53% and 13% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹⁴  Rounds to less than 1%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	49

Financial Highlights (continued) LifePath Index 2055 Portfolio

	Investor A
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.05		$	8.80		$	10.00
Net investment income2		0.33			0.25			0.10
Net realized and unrealized gain (loss)		1.92			1.20			(1.21	)
Net increase (decrease) from investment operations		2.25			1.45			(1.11	)
Dividends and distributions from:3
Net investment income		(0.26	)		(0.20	)		(0.08	)
Return of capital		—			(0.00	)4		(0.01	)
Total dividends and distributions		(0.26	)		(0.20	)		(0.09	)
Net asset value, end of period	$	12.04		$	10.05		$	8.80
Total Investment Return5
Based on net asset value		22.55%			16.55%			(11.11)%	6
Ratios to Average Net Assets7
Total expenses8,9		0.91%			3.98%			7.57%	10,11
Total expenses after fees waived and/or reimbursed8,9		0.44%			0.49%			0.49%	10
Net investment income8,9		2.87%			2.60%			1.95%	10
Supplemental Data
Net assets, end of period (000)	$	4,696		$	129		$	22
Portfolio turnover of the LifePath Index Master Portfolio		15%	12		8%	13		0%	13,14

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Amount is greater than $(0.005) per share.

⁵  Where applicable, assumes the reinvestment of dividends and distributions.

⁶  Aggregate total investment return.

⁷  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁸  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.27%, 1.05% and 3.73% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.06%, 0.05% and 0.08% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

¹⁰  Annualized.

¹¹  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.59%.

¹²  Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹³  Excludes the LifePath Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 53% and 13% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹⁴  Rounds to less than 1%.

See Notes to Financial Statements.
50	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights (concluded) LifePath Index 2055 Portfolio

	Class K
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.05		$	8.80		$	10.00
Net investment income2		0.34			0.26			0.12
Net realized and unrealized gain (loss)		1.95			1.21			(1.22	)
Net increase (decrease) from investment operations		2.29			1.47			(1.10	)
Dividends and distributions from:3
Net investment income		(0.29	)		(0.22	)		(0.09	)
Return of capital		—			(0.00	)4		(0.01	)
Total dividends and distributions		(0.29	)		(0.22	)		(0.10	)
Net asset value, end of period	$	12.05		$	10.05		$	8.80
Total Investment Return5
Based on net asset value		22.95%			16.83%			(10.96)%	6
Ratios to Average Net Assets7
Total expenses8,9		0.70%			3.71%			7.21%	10,11
Total expenses after fees waived and/or reimbursed8,9		0.15%			0.19%			0.21%	10
Net investment income8,9		3.05%			2.71%			2.24%	10
Supplemental Data
Net assets, end of period (000)	$	18,345		$	4,706		$	1,716
Portfolio turnover of the LifePath Index Master Portfolio		15%	12		8%	13		0%	13,14

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Amount is greater than $(0.005) per share.

⁵  Where applicable, assumes the reinvestment of dividends and distributions.

⁶  Aggregate total investment return.

⁷  Includes the LifePath Index Portfolio’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁸  Includes the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated fees waived of 0.28%, 1.18% and 3.74% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds of approximately 0.06%, 0.05% and 0.08% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Portfolio’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income.

¹⁰  Annualized.

¹¹  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.22%.

¹²  Includes the LifePath Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio.

¹³  Excludes the LifePath Master Portfolio’s purchases or sales of the underlying funds and ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 53% and 13% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹⁴  Rounds to less than 1%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	51

Notes to Financial Statements BlackRock Funds III

1. Organization:

BlackRock Funds III (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Delaware statutory trust. LifePath^® Index Retirement Portfolio, LifePath^® Index 2020 Portfolio, LifePath^® Index 2025 Portfolio, LifePath^® Index 2030 Portfolio, LifePath^® Index 2035 Portfolio, LifePath^® Index 2040 Portfolio, LifePath^® Index 2045 Portfolio, LifePath^® Index 2050 Portfolio and LifePath^® Index 2055 Portfolio (each, a “LifePath Index Portfolio” and collectively, the “LifePath Index Portfolios”) are each a series of the Trust. Each LifePath Index Portfolio seeks to achieve its investment objective by investing all of its assets in a separate series of Master Investment Portfolio (“MIP”): LifePath Index Retirement Master Portfolio, LifePath Index 2020 Master Portfolio, LifePath Index 2025 Master Portfolio, LifePath Index 2030 Master Portfolio, LifePath Index 2035 Master Portfolio, LifePath Index 2040 Master Portfolio, LifePath Index 2045 Master Portfolio, LifePath Index 2050 Master Portfolio and LifePath Index 2055 Master Portfolio (each, a “LifePath Index Master Portfolio” and collectively, the “LifePath Index Master Portfolios”). Each LifePath Index Master Portfolio has the same or a substantially similar investment objective as its corresponding LifePath Index Portfolio. The performance of a LifePath Index Portfolio is directly affected by the performance of its corresponding LifePath Index Master Portfolio.

The value of each LifePath Index Portfolio’s investment in its corresponding LifePath Index Master Portfolio reflects that LifePath Index Portfolio’s proportionate interest in the net assets of its corresponding LifePath Index Master Portfolio (100.0%, 100.0%, 100.0%, 100.0%, 100.0%, 100.0%, 100.0%, 100.0% and 99.9% for the LifePath Index Retirement Portfolio, LifePath Index 2020 Portfolio, LifePath Index 2025 Portfolio, LifePath Index 2030 Portfolio, LifePath Index 2035 Portfolio, LifePath Index 2040 Portfolio, LifePath Index 2045 Portfolio, LifePath Index 2050 Portfolio and LifePath Index 2055 Portfolio, respectively, as of December 31, 2013).

Each LifePath Index Portfolio offers multiple classes of shares. Institutional, Investor A and Class K Shares are sold without a sales charge. Institutional and Class K Shares are available only to certain eligible investors. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Investor A Shares bear certain expenses related to the shareholder servicing of such shares. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures.

2. Significant Accounting Policies:

The LifePath Index Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in 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 following is a summary of the significant accounting policies followed by the LifePath Index Portfolios:

Valuation: US GAAP defines fair value as the price the LifePath Index Portfolios would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The LifePath Index Portfolios’ policy is to fair value their financial instruments at market value. Each LifePath Index Portfolio records its investments in the applicable LifePath Index Master Portfolio at fair value based on the LifePath Index Portfolio’s proportionate interest in the net assets of the applicable LifePath Index Master Portfolio. Valuation of securities held by the applicable LifePath Index Master Portfolio is discussed in Note 2 of the LifePath Index Master Portfolios’ Notes to Financial Statements, which are included elsewhere in this report.

Investment Transactions and Investment Income: For financial reporting purposes, contributions to and withdrawals from each LifePath Index Master Portfolio are accounted on a trade date basis. Each LifePath Index Portfolio records daily its proportionate share of its LifePath Index Master Portfolio’s income, expenses and realized and unrealized gains and losses. In addition, each LifePath Index Portfolio accrues its own expenses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Dividends and Distributions: Dividends from net investment income are declared and paid quarterly. Distributions of capital gains are recorded on the ex-dividend dates. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

Income Taxes: It is each LifePath Index Portfolio’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.

Each LifePath Index Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each LifePath Index Portfolio’s US federal tax returns remains open for each of the two years ended December 31, 2013 and the period ended December 31, 2011. The statutes of limitations on each LifePath Index Portfolio’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 LifePath Index Portfolios’ facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

Other: Expenses directly related to a LifePath Index Portfolio or its classes are charged to that LifePath Index Portfolio or class. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the LifePath Index Portfolios and other shared expenses pro rated to the LifePath Index Portfolios are allocated daily to each class based on its relative net assets or other appropriate methods.

3. Administration Agreement and Other Transactions with Affiliates:

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

52 BLACKROCK FUNDS III DECEMBER 31, 2013

Notes to Financial Statements (continued)

The Trust, on behalf of the LifePath Index Portfolios, entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL” or the “Administrator”), an indirect, wholly owned subsidiary of BlackRock, to provide general administration services (other than investment advice and related portfolio activities). BAL is entitled to receive for these administration services an annual fee of 0.03% based on the average daily net assets of each LifePath Index Portfolio. The LifePath Index Portfolios do not pay an investment advisory fee or investment management fee.

From time to time, BAL may waive such fees in whole or in part. Any such waiver will reduce the expenses of a LifePath Index Portfolio and, accordingly, have a favorable impact on its performance. BAL may delegate certain of its administration duties to sub-administrators.

BlackRock Fund Advisors (“BFA” or the “Manager”) and BAL 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. The expense limitations as a percentage of average daily net assets are as follows: 0.10% for Institutional, 0.35% for Investor A and 0.05% for Class K until May 1, 2014. A LifePath Index Portfolio may have to repay some of these waivers and reimbursements to BFA and BAL in the following two years. The agreement may be terminated upon 90 days notice by a majority of the non-interested trustees of the Trust or by a vote of majority of the outstanding voting shares.

These amounts waived or reimbursed are included in fees reimbursed by administrator, and shown as transfer agent fees reimbursed — class specific, respectively, in the Statements of Operations. For the year ended December 31, 2013, the amounts included in fees reimbursed by administrator were as follows:

LifePath Index Retirement Portfolio	$	41,510
LifePath Index 2020 Portfolio	$	38,741
LifePath Index 2025 Portfolio	$	18,446
LifePath Index 2030 Portfolio	$	38,106
LifePath Index 2035 Portfolio	$	17,308
LifePath Index 2040 Portfolio	$	31,438
LifePath Index 2045 Portfolio	$	15,110
LifePath Index 2050 Portfolio	$	27,628
LifePath Index 2055 Portfolio	$	8,492

If during a LifePath Index Portfolio’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal periods received a waiver or reimbursement from BAL or BlackRock Institutional Trust Company, N.A. (“BTC”), the LifePath Index Portfolios’ former administrator, are less than the expense limit for that share class, BAL or BTC is entitled to be reimbursed by such share class up to the lesser of (a) the amount of fees waived or expenses reimbursed during the prior two fiscal periods under the agreement and (b) the amount by which the expense limit for that share class exceeds the operating expenses of the share class for the current fiscal year, provided that: (1) the LifePath Index Portfolio, of which the share class is a part, has more than $50 million in assets for the fiscal year and (2) BAL or BTC or an affiliate continues to serve as the LifePath Index Portfolio’s investment advisor or administrator. In the event the expense limit for a share class is changed subsequent to a fiscal year in which BAL or BTC becomes entitled to reimbursement for fees waived or reimbursed, the amount available to reimburse BAL or BTC shall be calculated by reference to the expense limit for that share class in effect at the time BAL or BTC became entitled to receive such reimbursement, rather than the subsequently changed expense limit for that share class.

For the year ended December 31, 2013, BAL and BTC recouped the following Portfolio level and class specific waivers and/or reimbursements previously recorded by the LifePath Index Portfolios:

	BAL		BTC
LifePath Index Retirement Portfolio
Institutional	$	3,931	$	1
Investor A	$	1,441	$	1
LifePath Index 2020 Portfolio
Institutional	$	3,073	$	1
Investor A	$	4,391		—
LifePath Index 2025 Portfolio
Institutional	$	31	$	3
Investor A	$	237	$	1
LifePath Index 2030 Portfolio
Institutional	$	3,268	$	1
Investor A	$	3,906	$	1
LifePath Index 2035 Portfolio
Institutional	$	46	$	3
Investor A	$	732	$	30
LifePath Index 2040 Portfolio
Institutional	$	1,737	$	1
Investor A	$	1,493	$	1
LifePath Index 2045 Portfolio
Institutional	$	34	$	10
Investor A	$	194	$	31
LifePath Index 2050 Portfolio
Institutional	$	409	$	19
Investor A	$	239	$	23

On December 31, 2013, the Portfolio level and class specific waivers and/or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:

	Expiring December 31,
	2014				2015
	BAL		BTC		BAL
LifePath Index Retirement Portfolio
Portfolio level	$	109,815	$	63,411	$	189,439
Institutional		—		—	$	2,943
Investor A		—		—	$	1,286
Class K	$	5,558	$	162	$	40,270
LifePath Index 2020 Portfolio
Portfolio level	$	134,993	$	66,273	$	292,083
Institutional		—		—	$	5,022
Investor A	$	366		—	$	4,066
Class K	$	9,239	$	162	$	33,436
LifePath Index 2025 Portfolio
Portfolio level	$	62,960	$	58,004	$	163,135
Institutional		—		—	$	2,404
Investor A		—		—	$	2,032
Class K	$	6,422	$	159	$	15,552
LifePath Index 2030 Portfolio
Portfolio level	$	109,790	$	63,227	$	250,300
Institutional		—		—	$	3,810
Investor A		—		—	$	5,258
Class K	$	8,398	$	162	$	31,715
LifePath Index 2035 Portfolio
Portfolio level	$	62,145	$	57,339	$	127,727
Institutional		—		—	$	936
Investor A		—		—	$	2,464
Class K	$	6,472	$	160	$	15,043

BLACKROCK FUNDS III DECEMBER 31, 2013 53

Notes to Financial Statements (continued)

	Expiring December 31,
	2014				2015
	BAL		BTC		BAL
LifePath Index 2040 Portfolio
Portfolio level	$	75,994	$	59,087	$	173,008
Institutional	$	797		—	$	1,660
Investor A		—		—	$	1,833
Class K	$	7,192	$	155	$	29,288
LifePath Index 2045 Portfolio
Portfolio level	$	49,596	$	55,569	$	90,363
Institutional	$	65		—	$	297
Investor A		—		—	$	1,032
Class K	$	6,009	$	160	$	14,331
LifePath Index 2050 Portfolio
Portfolio level	$	48,051	$	55,597	$	88,935
Institutional	$	66		—	$	401
Investor A		—		—	$	855
Class K	$	6,605	$	163	$	26,823
LifePath Index 2055 Portfolio
Portfolio level	$	42,507	$	55,312	$	67,183
Institutional	$	64	$	19	$	355
Investor A	$	89	$	23	$	326
Class K	$	2,512	$	139	$	8,027

The following Portfolio level and class specific waivers and/or reimbursements previously recorded by the LifePath Index Portfolios, which were subject to recoupment by the Manager, expired on December 31, 2013:

	BTC
LifePath Index Retirement Portfolio
Portfolio level	$	74,386
Class K	$	346
LifePath Index 2020 Portfolio
Portfolio level	$	73,478
Class K	$	346
LifePath Index 2025 Portfolio
Portfolio level	$	73,205
Class K	$	346
LifePath Index 2030 Portfolio
Portfolio level	$	73,292
Class K	$	345
LifePath Index 2035 Portfolio
Portfolio level	$	73,331
Class K	$	345
LifePath Index 2040 Portfolio
Portfolio level	$	73,077
Class K	$	345
LifePath Index 2045 Portfolio
Portfolio level	$	73,053
Class K	$	345
LifePath Index 2050 Portfolio
Portfolio level	$	73,040
Class K	$	346
LifePath Index 2055 Portfolio
Portfolio level	$	73,040
Institutional	$	15
Investor A	$	14
Class K	$	345

The Trust, on behalf of the LifePath Index Portfolios, entered into a Distribution Agreement and Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of BFA. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, each LifePath Index Portfolio pays BRIL ongoing service fees with respect to Investor A Shares. The fees are accrued daily and paid monthly at an annual rate of 0.25% based upon the average daily net assets of the Investor A Shares.

Pursuant to sub-agreements with BRIL, broker-dealers and BRIL provide shareholder servicing services to each LifePath Index Portfolio. The ongoing service fee compensates BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to Investor A shareholders.

Pursuant to written agreements, certain financial intermediaries, some of which may be affiliates, provide the LifePath Index Portfolios with sub-accounting, recordkeeping, sub-transfer agency and other administrative services with respect to sub-accounts they service. For these services, these entities receive an annual fee per shareholder account, which will vary depending on share class and/or net assets. For the year ended December 31, 2013, the LifePath Index Portfolios paid the following to affiliates in return for these services, which is included in transfer agent in the Statements of Operations:

LifePath Index Retirement Portfolio
Institutional	$	11,748
Investor A	$	6,432
LifePath Index 2020 Portfolio
Institutional	$	13,276
Investor A	$	17,444
LifePath Index 2025 Portfolio
Institutional	$	4,533
Investor A	$	8,252
LifePath Index 2030 Portfolio
Institutional	$	10,660
Investor A	$	18,189
LifePath Index 2035 Portfolio
Institutional	$	1,951
Investor A	$	9,104
LifePath Index 2040 Portfolio
Institutional	$	6,296
Investor A	$	8,159
LifePath Index 2045 Portfolio
Institutional	$	474
Investor A	$	3,217
LifePath Index 2050 Portfolio
Institutional	$	1,285
Investor A	$	1,956
LifePath Index 2055 Portfolio
Institutional	$	86
Investor A	$	793

The Administrator maintains a call center, which is responsible for providing certain shareholder services to the LifePath Index Portfolios, such as responding to shareholder inquiries and processing transactions based upon instructions from shareholders with respect to the subscription and redemption of LifePath Index Portfolio shares. For the year ended December 31, 2013, each LifePath Index Portfolio reimbursed the Manager the following amounts for costs incurred in running the call center, which are included in transfer agent — class specific in the Statements of Operations:

LifePath Index Retirement Portfolio
Institutional	$	248
Investor A	$	171
Class K	$	2,848
LifePath Index 2020 Portfolio
Institutional	$	202
Investor A	$	407
Class K	$	3,760

54 BLACKROCK FUNDS III DECEMBER 31, 2013

Notes to Financial Statements (continued)

LifePath Index 2025 Portfolio
Institutional	$	98
Investor A	$	136
Class K	$	1,501
LifePath Index 2030 Portfolio
Institutional	$	194
Investor A	$	349
Class K	$	2,641
LifePath Index 2035 Portfolio
Institutional	$	77
Investor A	$	165
Class K	$	996
LifePath Index 2040 Portfolio
Institutional	$	189
Investor A	$	154
Class K	$	1,334
LifePath Index 2045 Portfolio
Institutional	$	90
Investor A	$	168
Class K	$	386
LifePath Index 2050 Portfolio
Institutional	$	54
Investor A	$	156
Class K	$	337
LifePath Index 2055 Portfolio
Institutional	$	37
Investor A	$	98
Class K	$	107

Certain officers and/or trustees of the Trust are officers and/or directors of BlackRock or its affiliates. The LifePath Index Portfolios reimburse BAL for a portion of the compensation paid to the Trust’s Chief Compliance Officer.

4. Income Tax Information:

The tax character of distributions paid during the fiscal years ended December 31, 2013 and December 31, 2012 were as follows:

		LifePath Index Retirement Portfolio		LifePath Index 2020 Portfolio		LifePath Index 2025 Portfolio		LifePath Index 2030 Portfolio		LifePath Index 2035 Portfolio		LifePath Index 2040 Portfolio		LifePath Index 2045 Portfolio		LifePath Index 2050 Portfolio		LifePath Index 2055 Portfolio
Ordinary income	12/31/13	$	5,108,294	$	10,480,190	$	4,595,607	$	9,833,017	$	3,768,047	$	6,431,632	$	1,942,941	$	1,949,553	$	432,955
	12/31/12	$	2,692,796	$	4,107,098	$	1,696,755	$	3,316,768	$	1,243,349	$	1,750,697	$	456,733	$	368,966	$	79,053
Long-term capital gains	12/31/13		1,495,597		3,502,963		1,876,130		4,157,221		1,788,429		2,873,872		875,759		713,353		—
	12/31/12		233,700		448,585		245,153		382,258		189,826		180,253		38,768		12,481		—
Return of capital	12/31/12		—		—		—		—		—		—		—		—		996
Total	12/31/13	$	6,603,891	$	13,983,153	$	6,471,737	$	13,990,238	$	5,556,476	$	9,305,504	$	2,818,700	$	2,662,906	$	432,955
	12/31/12	$	2,926,496	$	4,555,683	$	1,941,908	$	3,699,026	$	1,433,175	$	1,930,950	$	495,501	$	381,447	$	80,049

As of December 31, 2013, the tax components of accumulated net earnings were as follows:

	LifePath Index Retirement Portfolio			LifePath Index 2020 Portfolio			LifePath Index 2025 Portfolio		LifePath Index 2030 Portfolio		LifePath Index 2035 Portfolio		LifePath Index 2040 Portfolio		LifePath Index 2045 Portfolio		LifePath Index 2050 Portfolio		LifePath Index 2055 Portfolio
Undistributed ordinary income		—			—			—		—	$	3,112	$	6,153	$	14,725	$	10,970	$	2,632
Undistributed long-term capital gains	$	1,103,987		$	2,494,081		$	1,224,215	$	2,582,484		1,055,503		1,691,170		493,777		488,278		70,917
Net unrealized gains1		20,769,722			49,705,620			24,141,592		52,661,087		21,489,219		36,200,340		11,228,390		11,206,598		2,454,855
Qualified late-year losses2		(33,686	)		(16,863	)		—		—		—		—		—		—		—
	$	21,840,023		$	52,182,838		$	25,365,807	$	55,243,571	$	22,547,834	$	37,897,663	$	11,736,892	$	11,705,846	$	2,528,404

¹  The differences between book-basis and tax-basis net unrealized gains were attributable primarily to the timing and recognition of partnership income.

²  The LifePath Index Portfolios have elected to defer certain qualified late-year losses and recognize such losses in the year ending December 31, 2014.

During the year ended December 31, 2013, the LifePath Index 2055 Portfolio utilized $145,270 of its capital loss carryforward.

BLACKROCK FUNDS III DECEMBER 31, 2013 55

Notes to Financial Statements (continued)

5. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2013						Year Ended December 31, 2012
LifePath Index Retirement Portfolio	Shares			Amount			Shares			Amount
Institutional
Shares sold		2,061,585		$	22,268,556			2,346,217		$	24,115,637
Shares issued to shareholders in reinvestment of dividends and distributions		71,735			777,468			9,339			97,595
Shares redeemed		(460,130	)		(4,987,149	)		(430,831	)		(4,418,911	)
Net increase		1,673,190		$	18,058,875			1,924,725		$	19,794,321
Investor A
Shares sold		2,236,821		$	23,994,734			975,316		$	9,874,184
Shares issued to shareholders in reinvestment of dividends and distributions		37,556			409,184			8,071			84,239
Shares redeemed		(479,752	)		(5,171,689	)		(226,446	)		(2,319,458	)
Net increase		1,794,625		$	19,232,229			756,941		$	7,638,965
Class K
Shares sold		11,425,875		$	122,818,985			17,830,262		$	179,573,432
Shares issued to shareholders in reinvestment of dividends and distributions		500,292			5,417,084			244,068			2,543,045
Shares redeemed		(5,538,787	)		(59,812,461	)		(1,710,952	)		(17,633,010	)
Net increase		6,387,380		$	68,423,608			16,363,378		$	164,483,467
Total Net Increase		9,855,195		$	105,714,712			19,045,044		$	191,916,753
LifePath Index 2020 Portfolio
Institutional
Shares sold		2,268,934		$	24,548,722			2,239,380		$	22,661,709
Shares issued to shareholders in reinvestment of dividends and distributions		86,698			952,206			16,463			169,675
Shares redeemed		(491,339	)		(5,379,818	)		(348,926	)		(3,544,273	)
Net increase		1,864,293		$	20,121,110			1,906,917		$	19,287,111
Investor A
Shares sold		4,963,916		$	53,555,955			1,961,732		$	19,270,872
Shares issued to shareholders in reinvestment of dividends and distributions		105,165			1,157,628			24,164			248,301
Shares redeemed		(1,283,795	)		(13,988,126	)		(254,999	)		(2,571,734	)
Net increase		3,785,286		$	40,725,457			1,730,897		$	16,947,439
Class K
Shares sold		25,772,057		$	277,156,664			24,558,594		$	241,633,100
Shares issued to shareholders in reinvestment of dividends and distributions		1,081,632			11,873,168			388,823			3,995,761
Shares redeemed		(5,424,726	)		(59,067,304	)		(1,090,359	)		(10,969,531	)
Net increase		21,428,963		$	229,962,528			23,857,058		$	234,659,330
Total Net Increase		27,078,542		$	290,809,095			27,494,872		$	270,893,880
LifePath Index 2025 Portfolio
Institutional
Shares sold		1,559,589		$	16,934,310			509,320		$	5,193,652
Shares issued to shareholders in reinvestment of dividends and distributions		44,185			490,054			6,295			64,669
Shares redeemed		(218,487	)		(2,404,992	)		(48,059	)		(494,153	)
Net increase		1,385,287		$	15,019,372			467,556		$	4,764,168
Investor A
Shares sold		4,228,219		$	45,937,401			447,523		$	4,530,663
Shares issued to shareholders in reinvestment of dividends and distributions		83,179			927,051			4,256			43,760
Shares redeemed		(359,213	)		(3,951,841	)		(73,886	)		(743,353	)
Net increase		3,952,185		$	42,912,611			377,893		$	3,831,070

56 BLACKROCK FUNDS III DECEMBER 31, 2013

Notes to Financial Statements (continued)

	Year Ended December 31, 2013						Year Ended December 31, 2012
LifePath Index 2025 Portfolio (concluded)	Shares			Amount			Shares			Amount
Class K
Shares sold		8,954,681		$	97,254,162			11,248,567		$	109,513,473
Shares issued to shareholders in reinvestment of dividends and distributions		456,592			5,054,458			178,559			1,827,580
Shares redeemed		(2,126,879	)		(23,075,131	)		(592,841	)		(5,859,220	)
Net increase		7,284,394		$	79,233,489			10,834,285		$	105,481,833
Total Net Increase		12,621,866		$	137,165,472			11,679,734		$	114,077,071
LifePath Index 2030 Portfolio
Institutional
Shares sold		1,711,760		$	18,674,361			1,823,622		$	18,049,163
Shares issued to shareholders in reinvestment of dividends and distributions		77,613			867,715			16,321			166,238
Shares redeemed		(531,836	)		(5,900,825	)		(268,371	)		(2,679,649	)
Net increase		1,257,537		$	13,641,251			1,571,572		$	15,535,752
Investor A
Shares sold		4,680,562		$	50,614,445			1,655,996		$	15,974,496
Shares issued to shareholders in reinvestment of dividends and distributions		128,842			1,446,121			21,635			220,272
Shares redeemed		(725,124	)		(8,002,658	)		(324,965	)		(3,221,856	)
Net increase		4,084,280		$	44,057,908			1,352,666		$	12,972,912
Class K
Shares sold		23,872,297		$	257,291,468			17,538,954		$	168,834,753
Shares issued to shareholders in reinvestment of dividends and distributions		1,045,931			11,676,250			312,964			3,179,242
Shares redeemed		(4,320,087	)		(47,201,108	)		(897,260	)		(8,886,411	)
Net increase		20,598,141		$	221,766,610			16,954,658		$	163,127,584
Total Net Increase		25,939,958		$	279,465,769			19,878,896		$	191,636,248
LifePath Index 2035 Portfolio
Institutional
Shares sold		852,167		$	9,318,039			197,391		$	1,981,173
Shares issued to shareholders in reinvestment of dividends and distributions		24,307			274,425			2,629			26,767
Shares redeemed		(139,901	)		(1,556,378	)		(22,681	)		(228,034	)
Net increase		736,573		$	8,036,086			177,339		$	1,779,906
Investor A
Shares sold		3,439,059		$	37,238,638			420,557		$	4,229,470
Shares issued to shareholders in reinvestment of dividends and distributions		81,114			915,248			4,498			45,854
Shares redeemed		(594,854	)		(6,571,070	)		(55,211	)		(558,563	)
Net increase		2,925,319		$	31,582,816			369,844		$	3,716,761
Class K
Shares sold		7,500,759		$	81,709,781			7,790,296		$	74,282,072
Shares issued to shareholders in reinvestment of dividends and distributions		388,965			4,366,624			133,587			1,353,590
Shares redeemed		(1,646,242	)		(17,860,840	)		(659,276	)		(6,348,243	)
Net increase		6,243,482		$	68,215,565			7,264,607		$	69,287,419
Total Net Increase		9,905,374		$	107,834,467			7,811,790		$	74,784,086
LifePath Index 2040 Portfolio
Institutional
Shares sold		901,800		$	9,876,849			1,010,208		$	9,828,924
Shares issued to shareholders in reinvestment of dividends and distributions		48,758			553,471			8,927			89,803
Shares redeemed		(234,630	)		(2,606,252	)		(83,372	)		(818,531	)
Net increase		715,928		$	7,824,068			935,763		$	9,100,196

BLACKROCK FUNDS III DECEMBER 31, 2013 57

Notes to Financial Statements (continued)

	Year Ended December 31, 2013						Year Ended December 31, 2012
LifePath Index 2040 Portfolio (concluded)	Shares			Amount			Shares			Amount
Investor A
Shares sold		2,321,806		$	25,313,385			854,797		$	8,138,845
Shares issued to shareholders in reinvestment of dividends and distributions		70,043			798,511			11,575			116,658
Shares redeemed		(416,965	)		(4,642,256	)		(125,500	)		(1,238,170	)
Net increase		1,974,884		$	21,469,640			740,872		$	7,017,333
Class K
Shares sold		16,955,303		$	183,667,563			9,146,340		$	86,822,641
Shares issued to shareholders in reinvestment of dividends and distributions		701,374			7,951,411			161,135			1,621,956
Shares redeemed		(2,984,116	)		(32,875,499	)		(613,420	)		(5,926,088	)
Net increase		14,672,561		$	158,743,475			8,694,055		$	82,518,509
Total Net Increase		17,363,373		$	188,037,183			10,370,690		$	98,636,038
LifePath Index 2045 Portfolio
Institutional
Shares sold		343,414		$	3,823,504			62,540		$	612,746
Shares issued to shareholders in reinvestment of dividends and distributions		8,462			97,612			674			6,787
Shares redeemed		(54,989	)		(615,334	)		(13,250	)		(134,377	)
Net increase		296,887		$	3,305,782			49,964		$	485,156
Investor A
Shares sold		1,480,551		$	16,147,082			87,783		$	859,010
Shares issued to shareholders in reinvestment of dividends and distributions		34,703			398,136			908			9,169
Shares redeemed		(207,027	)		(2,301,344	)		(3,538	)		(35,843	)
Net increase		1,308,227		$	14,243,874			85,153		$	832,336
Class K
Shares sold		4,783,028		$	52,552,916			3,212,318		$	30,377,207
Shares issued to shareholders in reinvestment of dividends and distributions		203,509			2,322,467			47,023			471,885
Shares redeemed		(989,675	)		(10,740,961	)		(323,873	)		(3,027,806	)
Net increase		3,996,862		$	44,134,422			2,935,468		$	27,821,286
Total Net Increase		5,601,976		$	61,684,078			3,070,585		$	29,138,778
LifePath Index 2050 Portfolio
Institutional
Shares sold		598,979		$	6,603,417			196,023		$	1,849,878
Shares issued to shareholders in reinvestment of dividends and distributions		16,846			194,543			2,434			24,218
Shares redeemed		(126,664	)		(1,428,717	)		(45,398	)		(441,494	)
Net increase		489,161		$	5,369,243			153,059		$	1,432,602
Investor A
Shares sold		998,186		$	11,046,284			115,220		$	1,129,917
Shares issued to shareholders in reinvestment of dividends and distributions		23,111			268,058			969			9,763
Shares redeemed		(111,643	)		(1,265,967	)		(11,166	)		(110,000	)
Net increase		909,654		$	10,048,375			105,023		$	1,029,680
Class K
Shares sold		5,525,950		$	60,832,043			2,383,199		$	22,379,083
Shares issued to shareholders in reinvestment of dividends and distributions		191,249			2,199,792			34,096			339,984
Shares redeemed		(978,011	)		(10,809,170	)		(303,480	)		(2,816,124	)
Net increase		4,739,188		$	52,222,665			2,113,815		$	19,902,943
Total Net Increase		6,138,003		$	67,640,283			2,371,897		$	22,365,225

58 BLACKROCK FUNDS III DECEMBER 31, 2013

Notes to Financial Statements (concluded)

	Year Ended December 31, 2013						Year Ended December 31, 2012
LifePath Index 2055 Portfolio	Shares			Amount			Shares			Amount
Institutional
Shares sold		93,708		$	1,041,888			3		$	30
Shares issued to shareholders in reinvestment of dividends and distributions		1,195			13,909			—			—
Shares redeemed		(23,050	)		(260,510	)		—			—
Net increase		71,853		$	795,287			3		$	30
Investor A
Shares sold		421,203		$	4,610,527			11,793		$	113,668
Shares issued to shareholders in reinvestment of dividends and distributions		6,513			75,402			108			1,077
Shares redeemed		(50,533	)		(559,905	)		(1,572	)		(15,055	)
Net increase		377,183		$	4,126,024			10,329		$	99,690
Class K
Shares sold		1,229,481		$	13,659,652			332,227		$	3,221,558
Shares issued to shareholders in reinvestment of dividends and distributions		24,873			286,855			3,472			34,476
Shares redeemed		(200,454	)		(2,196,905	)		(62,587	)		(615,925	)
Net increase		1,053,900		$	11,749,602			273,112		$	2,640,109
Total Net Increase		1,502,936		$	16,670,913			283,444		$	2,739,829

At December 31, 2013, shares owned by affiliates were as follows:

	Institutional		Class K
LifePath Index 2055 Portfolio		2,500		195,000

6. Subsequent Events:

Management has evaluated the impact of all subsequent events on the LifePath Index Portfolios 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.

BLACKROCK FUNDS III DECEMBER 31, 2013 59

Report of Independent Registered Public Accounting Firm BlackRock Funds III

To the Board of Trustees of BlackRock Funds III and the Shareholders of LifePath Index Retirement Portfolio, LifePath Index 2020 Portfolio, LifePath Index 2025 Portfolio, LifePath Index 2030 Portfolio, LifePath Index 2035 Portfolio, LifePath Index 2040 Portfolio, LifePath Index 2045 Portfolio, LifePath Index 2050 Portfolio and LifePath Index 2055 Portfolio:

In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of LifePath Index Retirement Portfolio, LifePath Index 2020 Portfolio, LifePath Index 2025 Portfolio, LifePath Index 2030 Portfolio, LifePath Index 2035 Portfolio, LifePath Index 2040 Portfolio, LifePath Index 2045 Portfolio, LifePath Index 2050 Portfolio and LifePath Index 2055 Portfolio (the “Funds”), each a series of BlackRock Funds III, at December 31, 2013, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2014

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid during the tax year ended December 31, 2013.

	Payable Dates		LifePath Index Retirement Portfolio			LifePath Index 2020 Portfolio			LifePath Index 2025 Portfolio			LifePath Index 2030 Portfolio			LifePath Index 2035 Portfolio			LifePath Index 2040 Portfolio			LifePath Index 2045 Portfolio			LifePath Index 2050 Portfolio			LifePath Index 2055 Portfolio
Qualified Dividend Income for Individuals1		4/02/13—1/02/14		40.26	%		49.02	%		52.59	%		56.09	%		58.16	%		59.94	%		60.12	%		60.85	%		60.70	%
Dividends Qualifying for the Dividend Received Deduction for Corporations1		4/02/13—1/02/14		22.65	%		26.91	%		28.94	%		30.31	%		31.61	%		32.14	%		32.54	%		32.64	%		32.84	%
Federal Obligation Interest2		4/02/13—1/02/14		2.26	%		—			—			—			—			—			—			—			—
Interest-Related Dividends and Qualified Short-Term Capital Gain for Non-US Residents3		4/02/13—1/02/14		24.97	%		39.08	%		21.09	%		18.42	%		15.78	%		8.94	%		7.05	%		10.25	%		3.39	%

¹  The LifePath Index Portfolios hereby designate the percentages indicated above or the maximum amount allowable by law.

²  The law varies in each state as to whether and what percentage of dividend income attributable to federal obligations is exempt from state income tax. We recommend that you consult your tax advisor to determine if any portion of the dividends you received is exempt from state income taxes.

³  Represents the portion of the taxable ordinary income dividends eligible for exemption from US withholding tax for nonresident aliens and foreign corporations.

Additionally, the LifePath Index Portfolios distributed long-term capital gains per share to shareholders of record on the following dates:

	Record Date	June 27, 2013		December 31, 2013
LifePath Index Retirement Portfolio			$0.008839		$0.039480
LifePath Index 2020 Portfolio			$0.009246		$0.054095
LifePath Index 2025 Portfolio			$0.011655		$0.068639
LifePath Index 2030 Portfolio			$0.010890		$0.082645
LifePath Index 2035 Portfolio			$0.013060		$0.093847
LifePath Index 2040 Portfolio			$0.010327		$0.098502
LifePath Index 2045 Portfolio			$0.011460		$0.094584
LifePath Index 2050 Portfolio			$0.009099		$0.078800

60 BLACKROCK FUNDS III DECEMBER 31, 2013

Master Portfolio Information as of December 31, 2013 Master Investment Portfolio

LifePath Index Retirement Master Portfolio

Portfolio Composition Percent of
Affiliated Investment  Companies

Fixed Income Funds	62	%
Equity Funds	38

Portfolio Holdings Percent of
Affiliated Investment  Companies

Bond Index Master Portfolio	53	%
Russell 1000® Index Master Portfolio	21
ACWI ex-US Index Master Portfolio	9
iShares TIPS Bond ETF	9
Master Small Cap Index Series	5
iShares MSCI EAFE Small-Cap ETF	2
iShares Core MSCI Total International Stock ETF	1

LifePath Index 2020 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment  Companies

Equity Funds	50	%
Fixed Income Funds	48
Short-Term Securities	2

Ten Largest Holdings Percent of
Affiliated Investment Companies

Bond Index Master Portfolio	41	%
Russell 1000® Index Master Portfolio	28
ACWI ex-US Index Master Portfolio	12
iShares TIPS Bond ETF	7
Master Small Cap Index Series	4
iShares Core MSCI Total International Stock ETF	2
BlackRock Cash Funds: Institutional, SL Agency Shares	2
iShares MSCI EAFE Small-Cap ETF	2
iShares International Developed Real Estate ETF	1
iShares Cohen & Steers REIT ETF	1

LifePath Index 2025 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds	59	%
Fixed Income Funds	40
Short-Term Securities	1

Ten Largest Holdings Percent of
Affiliated Investment Companies

Bond Index Master Portfolio	35	%
Russell 1000® Index Master Portfolio	33
ACWI ex-US Index Master Portfolio	12
iShares TIPS Bond ETF	5
iShares Core MSCI Total International Stock ETF	4
Master Small Cap Index Series	4
iShares International Developed Real Estate ETF	2
iShares Cohen & Steers REIT ETF	2
iShares MSCI EAFE Small-Cap ETF	2
BlackRock Cash Funds: Institutional, SL Agency Shares	1

The LifePath Index Master Portfolios’ allocation and holdings listed above are current as of the report date. However, the LifePath Index Master Portfolios are regularly monitored and their composition may vary throughout various periods.

BLACKROCK FUNDS III DECEMBER 31, 2013 61

Master Portfolio Information as of December 31, 2013 (continued) Master Investment Portfolio

LifePath Index 2030 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment  Companies

Equity Funds	66	%
Fixed Income Funds	32
Short-Term Securities	2

Ten Largest Holdings Percent of
Affiliated Investment Companies

Russell 1000® Index Master Portfolio	37	%
Bond Index Master Portfolio	28
ACWI ex-US Index Master Portfolio	16
iShares TIPS Bond ETF	4
iShares International Developed Real Estate ETF	3
Master Small Cap Index Series	3
iShares Cohen & Steers REIT ETF	3
iShares Core MSCI Total International Stock ETF	3
iShares MSCI EAFE Small-Cap ETF	2
BlackRock Cash Funds: Institutional, SL Agency Shares	1

LifePath Index 2035 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment  Companies

Equity Funds	72	%
Fixed Income Funds	26
Short-Term Securities	2

Ten Largest Holdings Percent of
Affiliated Investment  Companies

Russell 1000® Index Master Portfolio	41	%
Bond Index Master Portfolio	23
ACWI ex-US Index Master Portfolio	15
iShares Core MSCI Total International Stock ETF	5
iShares International Developed Real Estate ETF	4
iShares Cohen & Steers REIT ETF	3
iShares TIPS Bond ETF	3
Master Small Cap Index Series	3
iShares MSCI EAFE Small-Cap ETF	2
BlackRock Cash Funds: Institutional, SL Agency Shares	1

LifePath Index 2040 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment  Companies

Equity Funds	77	%
Fixed Income Funds	20
Short-Term Securities	3

Ten Largest Holdings Percent of
Affiliated Investment  Companies

Russell 1000® Index Master Portfolio	43	%
Bond Index Master Portfolio	18
ACWI ex-US Index Master Portfolio	17
iShares International Developed Real Estate ETF	4
iShares Core MSCI Total International Stock ETF	4
iShares Cohen & Steers REIT ETF	4
BlackRock Cash Funds: Institutional, SL Agency Shares	3
Master Small Cap Index Series	3
iShares MSCI EAFE Small-Cap ETF	2
iShares TIPS Bond ETF	2

The LifePath Index Master Portfolios’ allocation and holdings listed above are current as of the report date. However, the LifePath Index Master Portfolios are regularly monitored and their composition may vary throughout various periods.

62 BLACKROCK FUNDS III DECEMBER 31, 2013

Master Portfolio Information as of December 31, 2013 (concluded) Master Investment Portfolio

LifePath Index 2045 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment  Companies

Equity Funds	84	%
Fixed Income Funds	15
Short-Term Securities	1

Ten Largest Holdings Percent of
Affiliated Investment Companies

Russell 1000® Index Master Portfolio	47	%
ACWI ex-US Index Master Portfolio	16
Bond Index Master Portfolio	15
iShares Core MSCI Total International Stock ETF	8
iShares International Developed Real Estate ETF	5
iShares Cohen & Steers REIT ETF	4
iShares MSCI EAFE Small-Cap ETF	2
Master Small Cap Index Series	2
BlackRock Cash Funds: Institutional, SL Agency Shares	1

LifePath Index 2050 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds	84	%
Fixed Income Funds	9
Short-Term Securities	7

Ten Largest Holdings Percent of
Affiliated Investment Companies

Russell 1000® Index Master Portfolio	48	%
ACWI ex-US Index Master Portfolio	15
Bond Index Master Portfolio	9
iShares Core MSCI Total International Stock ETF	8
BlackRock Cash Funds: Institutional, SL Agency Shares	6
iShares International Developed Real Estate ETF	5
iShares Cohen & Steers REIT ETF	4
iShares MSCI EAFE Small-Cap ETF	2
Master Small Cap Index Series	2
BlackRock Cash Funds: Prime, SL Agency Shares	1

LifePath Index 2055 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds	93	%
Fixed Income Funds	4
Short-Term Securities	3

Ten Largest Holdings Percent of
Affiliated Investment Companies

Russell 1000® Index Master Portfolio	52	%
ACWI ex-US Index Master Portfolio	14
iShares Core MSCI Total International Stock ETF	11
iShares International Developed Real Estate ETF	6
iShares Cohen & Steers REIT ETF	5
Bond Index Master Portfolio	4
BlackRock Cash Funds: Institutional, SL Agency Shares	3
iShares MSCI EAFE Small-Cap ETF	3
Master Small Cap Index Series	2

The LifePath Index Master Portfolios’ allocation and holdings listed above are current as of the report date. However, the LifePath Index Master Portfolios are regularly monitored and their composition may vary throughout various periods.

BLACKROCK FUNDS III DECEMBER 31, 2013 63

Schedule of Investments December 31, 2013 LifePath Index Retirement Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 38.2%
ACWI ex-US Index Master Portfolio	$	30,353,814	$	30,353,814
iShares Cohen & Steers REIT ETF		3,384		252,853
iShares Core MSCI Total International Stock ETF		83,874		4,835,336
iShares International Developed Real Estate ETF		11,591		358,278
iShares MSCI EAFE Small-Cap ETF		68,691		3,501,867
Master Small Cap Index Series	$	14,746,591		14,746,591
Russell 1000 Index Master Portfolio	$	68,706,189		68,706,189
				122,754,928
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 61.4%
Bond Index Master Portfolio	$	169,273,201	$	169,273,201
iShares TIPS Bond ETF		257,137		28,259,356
				197,532,557
Short-Term Securities — 0.3%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (b)		893,396		893,396
Total Affiliated Investment Companies (Cost — $298,689,968*) — 99.9%				321,180,881
Other Assets in Excess of Liabilities — 0.1%				413,117
Net Assets — 100.0%			$	321,593,998

Notes to Schedule of investments

* As of December 31, 2013, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	298,829,098
Gross unrealized appreciation	$	25,953,023
Gross unrealized depreciation		(3,601,240	)
Net unrealized appreciation	$	22,351,783

(a) Investments in issuers considered to be an affiliate of the LifePath Index Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at December 31,  2012		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2013		Value at December 31, 2013		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	22,294,444	$	8,059,370	1		—		$	30,353,814	$	30,353,814	$	836,972	$	1,888,990
BlackRock Cash Funds: Institutional, SL Agency Shares		1,669,412		—			(776,016	)2		893,396	$	893,396	$	10,458		—
BlackRock Cash Funds: Prime, SL Agency Shares		238,171		—			(238,171	)2		—		—		—		—
Bond Index Master Portfolio	$	105,813,216	$	63,459,985	1		—		$	169,273,201	$	169,273,201	$	2,513,016	$	(1,432,150	)
iShares Cohen & Steers REIT ETF		4,489		3,791			(4,896	)		3,384	$	252,853	$	13,021	$	(3,705	)
iShares Core MSCI Total International Stock ETF		—		83,874			—			83,874	$	4,835,336	$	49,697		—
iShares International Developed Real Estate ETF		13,560		9,040			(11,009	)		11,591	$	358,278	$	47,329	$	32,184
iShares MSCI EAFE Small-Cap ETF		47,290		26,798			(5,397	)		68,691	$	3,501,867	$	82,048	$	36,857
iShares TIPS Bond ETF		148,963		132,131			(23,957	)		257,137	$	28,259,356	$	277,236	$	(102,023	)
Master Small Cap Index Series	$	8,712,697	$	6,033,894	1		—		$	14,746,591	$	14,746,591	$	193,284	$	691,329
Russell 1000 Index Master Portfolio	$	44,045,813	$	24,660,376	1		—		$	68,706,189	$	68,706,189	$	1,230,247	$	496,478

¹ Represents net shares/beneficial interest purchased.

² Represents net shares sold.

(b) Represents the current yield as of report date.

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the LifePath Index Master Portfolio has the ability to access

Ÿ 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)

Ÿ Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the LifePath Index Master Portfolio’s own assumptions used in determining the fair value of investments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the LifePath Index Master Portfolio’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value

See Notes to Financial Statements.

64 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments (concluded) LifePath Index Retirement Master Portfolio

determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	38,101,086	$	283,079,795		—	$	321,180,881

There were no transfers between levels during the year ended December 31, 2013.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 65

Schedule of Investments December 31, 2013 LifePath Index 2020 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 51.2%
ACWI ex-US Index Master Portfolio	$	77,124,004	$	77,124,004
iShares Cohen & Steers REIT ETF (b)		108,921		8,138,577
iShares Core MSCI Total International Stock ETF		193,241		11,140,344
iShares International Developed Real Estate ETF (b)		289,005		8,933,144
iShares MSCI EAFE Small-Cap ETF (b)		178,968		9,123,789
Master Small Cap Index Series	$	24,216,498		24,216,498
Russell 1000 Index Master Portfolio	$	176,902,400		176,902,400
				315,578,756
Fixed Income Funds — 48.5%
Bond Index Master Portfolio	$	257,871,235		257,871,235
iShares TIPS Bond ETF		369,942		40,656,626
				298,527,861

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Short-Term Securities — 1.8%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)		9,967,374	$	9,967,374
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)		1,438,693		1,438,693
				11,406,067
Total Affiliated Investment Companies (Cost — $572,334,856*) — 101.5%				625,512,684
Liabilities in Excess of Other Assets — (1.5)%				(9,509,504	)
Net Assets — 100.0%			$	616,003,180

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	572,421,606
Gross unrealized appreciation	$	64,247,156
Gross unrealized depreciation		(11,156,078	)
Net unrealized appreciation	$	53,091,078

(a) Investments in issuers considered to be an affiliate of the LifePath Index Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at December 31,  2012		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2013		Value at December 31, 2013		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	42,893,092	$	34,230,912	1		—		$	77,124,004	$	77,124,004	$	2,042,324	$	3,959,356
BlackRock Cash Funds: Institutional, SL Agency Shares		2,276,225		7,691,149	1		—			9,967,374	$	9,967,374	$	24,352		—
BlackRock Cash Funds: Prime, SL Agency Shares		262,580		1,176,113	1		—			1,438,693	$	1,438,693	$	4,058		—
Bond Index Master Portfolio	$	113,315,788	$	144,555,447	1		—		$	257,871,235	$	257,871,235	$	3,474,442	$	(2,232,854	)
iShares Cohen & Steers REIT ETF		53,789		58,899			(3,767	)		108,921	$	8,138,577	$	252,294	$	(10,226	)
iShares Core MSCI Total International Stock ETF		—		193,241			—			193,241	$	11,140,344	$	77,878		—
iShares International Developed Real Estate ETF		161,704		133,950			(6,649	)		289,005	$	8,933,144	$	1,005,355	$	5,934
iShares MSCI EAFE Small-Cap ETF		95,698		86,991			(3,721	)		178,968	$	9,123,789	$	209,076	$	27,270
iShares TIPS Bond ETF		145,848		232,081			(7,987	)		369,942	$	40,656,626	$	371,559	$	(65,288	)
Master Small Cap Index Series	$	10,236,679	$	13,979,819	1		—		$	24,216,498	$	24,216,498	$	297,088	$	1,057,889
Russell 1000 Index Master Portfolio	$	88,699,522	$	88,202,878	1		—		$	176,902,400	$	176,902,400	$	3,067,443	$	1,085,926

¹  Represents net shares/beneficial interest purchased.

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

(c) All or a portion of security was purchased with the cash collateral from loaned securities.

(d) Represents the current yield as of report date.

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the LifePath Index Master Portfolio has the ability to access

Ÿ 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)

Ÿ Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the LifePath Index Master Portfolio’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

See Notes to Financial Statements.

66 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments (concluded) LifePath Index 2020 Master Portfolio

used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the LifePath Index Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	89,398,547	$	536,114,137		—	$	625,512,684

The carrying amount for certain of the LifePath Index Master Portfolio’s liabilities approximates fair value for financial statement purposes. As of December 31, 2013, collateral on securities loaned at value of $(9,308,510) is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2013.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 67

Schedule of Investments December 31, 2013 LifePath Index 2025 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 59.4%
ACWI ex-US Index Master Portfolio	$	34,070,416	$	34,070,416
iShares Cohen & Steers REIT ETF		75,900		5,671,248
iShares Core MSCI Total International Stock ETF		203,485		11,730,910
iShares International Developed Real Estate ETF (b)		212,927		6,581,573
iShares MSCI EAFE Small-Cap ETF		91,119		4,645,247
Master Small Cap Index Series	$	9,807,944		9,807,944
Russell 1000 Index Master Portfolio	$	93,120,930		93,120,930
				165,628,268
Fixed Income Funds — 40.1%
Bond Index Master Portfolio	$	97,116,958		97,116,958
iShares TIPS Bond ETF		133,346		14,654,726
				111,771,684
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Short-Term Securities — 0.7%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)		1,693,531	$	1,693,531
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)		152,872		152,872
				1,846,403
Total Affiliated Investment Companies (Cost — $253,413,202*) — 100.2%				279,246,355
Liabilities in Excess of Other Assets — (0.2)%				(638,676	)
Net Assets — 100.0%			$	278,607,679

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	253,439,777
Gross unrealized appreciation	$	31,062,334
Gross unrealized depreciation		(5,255,756	)
Net unrealized appreciation	$	25,806,578

(a) Investments in issuers considered to be an affiliate of the LifePath Index Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at December 31,  2012		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2013		Value at December 31, 2013		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	20,765,746	$	13,304,670	1		—		$	34,070,416	$	34,070,416	$	881,656	$	1,833,222
BlackRock Cash Funds: Institutional, SL Agency Shares		1,510,674		182,857	1		—			1,693,531	$	1,693,531	$	9,353		—
BlackRock Cash Funds: Prime, SL Agency Shares		267,696		—			(114,824	)2		152,872	$	152,872	$	1,517		—
Bond Index Master Portfolio	$	39,762,329	$	57,354,629	1		—		$	97,116,958	$	97,116,958	$	1,166,259	$	(708,436	)
iShares Cohen & Steers REIT ETF		33,031		44,169			(1,300	)		75,900	$	5,671,248	$	159,481	$	(4,121	)
iShares Core MSCI Total International Stock ETF		—		203,485			—			203,485	$	11,730,910	$	86,345		—
iShares International Developed Real Estate ETF		99,285		116,747			(3,105	)		212,927	$	6,581,573	$	689,009	$	179
iShares MSCI EAFE Small-Cap ETF		45,918		46,659			(1,458	)		91,119	$	4,645,247	$	99,517	$	7,020
iShares TIPS Bond ETF		50,099		85,384			(2,137	)		133,346	$	14,654,726	$	116,397	$	(15,531	)
Master Small Cap Index Series	$	3,915,122	$	5,892,822	1		—		$	9,807,944	$	9,807,944	$	108,896	$	382,100
Russell 1000 Index Master Portfolio	$	43,964,878	$	49,156,052	1		—		$	93,120,930	$	93,120,930	$	1,451,604	$	496,532

¹  Represents net shares/beneficial interest purchased.

²  Represents net shares sold.

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

(c) All or a portion of security was purchased with the cash collateral from loaned securities.

(d) Represents the current yield as of report date.

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the LifePath Index Master Portfolio has the ability to access

Ÿ 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)

Ÿ Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the LifePath Index Master Portfolio’s own assumptions used in determining the fair value of investments)

See Notes to Financial Statements.

68 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments (concluded) LifePath Index 2025 Master Portfolio

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the LifePath Index Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	45,130,107	$	234,116,248		—	$	279,246,355

The carrying amount for certain of the LifePath Index Master Portfolio’s liabilities approximates fair value for financial statement purposes. As of December 31, 2013, collateral on securities loaned at value of $(989,100) is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2013.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 69

Schedule of Investments December 31, 2013 LifePath Index 2030 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 66.8%
ACWI ex-US Index Master Portfolio	$	83,164,979	$	83,164,979
iShares Cohen & Steers REIT ETF (b)		191,736		14,326,514
iShares Core MSCI Total International Stock ETF		233,547		13,463,984
iShares International Developed Real Estate ETF		541,466		16,736,714
iShares MSCI EAFE Small-Cap ETF		196,792		10,032,456
Master Small Cap Index Series	$	16,591,741		16,591,741
Russell 1000 Index Master Portfolio	$	198,522,223		198,522,223
				352,838,611
Fixed Income Funds — 32.8%
Bond Index Master Portfolio	$	151,754,457		151,754,457
iShares TIPS Bond ETF		195,508		21,486,329
				173,240,786

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Short-Term Securities — 1.7%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)		7,986,051	$	7,986,051
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)		1,186,223		1,186,223
				9,172,274
Total Affiliated Investment Companies (Cost — $479,077,843*) — 101.3%				535,251,671
Liabilities in Excess of Other Assets — (1.3)%				(6,770,686	)
Net Assets — 100.0%			$	528,480,985

Notes to Schedule of investments

* As of December 31, 2013, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	479,134,244
Gross unrealized appreciation	$	60,281,248
Gross unrealized depreciation		(4,163,821	)
Net unrealized appreciation	$	56,117,427

(a) Investments in issuers considered to be an affiliate of the LifePath Index Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at December 31,  2012		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2013		Value at December 31, 2013		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	38,837,788	$	44,327,191	1		—		$	83,164,979	$	83,164,979	$	2,110,478	$	3,789,025
BlackRock Cash Funds: Institutional, SL Agency Shares		2,647,522		5,338,529	1		—			7,986,051	$	7,986,051	$	25,108		—
BlackRock Cash Funds: Prime, SL Agency Shares		545,622		640,601	1		—			1,186,223	$	1,186,223	$	4,237		—
Bond Index Master Portfolio	$	54,069,158	$	97,685,299	1		—		$	151,754,457	$	151,754,457	$	1,914,109	$	(1,211,190	)
iShares Cohen & Steers REIT ETF		72,621		127,115			(8,000	)		191,736	$	14,326,514	$	423,826	$	(6,316	)
iShares Core MSCI Total International Stock ETF		—		233,547			—			233,547	$	13,463,984	$	96,562		—
iShares International Developed Real Estate ETF		212,626		333,946			(5,106	)		541,466	$	16,736,714	$	1,748,027	$	(7,701	)
iShares MSCI EAFE Small-Cap ETF		84,848		113,831			(1,887	)		196,792	$	10,032,456	$	223,697	$	14,928
iShares TIPS Bond ETF		63,925		133,392			(1,809	)		195,508	$	21,486,329	$	187,135	$	(17,678	)
Master Small Cap Index Series	$	6,096,821	$	10,494,920	1		—		$	16,591,741	$	16,591,741	$	194,144	$	693,728
Russell 1000 Index Master Portfolio	$	82,627,626	$	115,894,597	1		—		$	198,522,223	$	198,522,223	$	3,282,549	$	1,080,166

¹ Represents net shares/beneficial interest purchased.

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

(c) All or a portion of security was purchased with the cash collateral from loaned securities.

(d) Represents the current yield as of report date.

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the LifePath Index Master Portfolio has the ability to access

Ÿ 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)

Ÿ Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the LifePath Index Master Portfolio’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

See Notes to Financial Statements.

70 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments (concluded) LifePath Index 2030 Master Portfolio

used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the LifePath Index Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	85,218,271	$	450,033,400		—	$	535,251,671

The carrying amount for certain of the LifePath Index Master Portfolio’s liabilities approximates fair value for financial statement purposes. As of December 31, 2013, collateral on securities loaned at value of $(7,675,000) is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2013.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 71

Schedule of Investments December 31, 2013 LifePath Index 2035 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 73.2%
ACWI ex-US Index Master Portfolio	$	31,482,192	$	31,482,192
iShares Cohen & Steers REIT ETF (b)		91,219		6,815,884
iShares Core MSCI Total International Stock ETF		174,457		10,057,446
iShares International Developed Real Estate ETF (b)		255,720		7,904,305
iShares MSCI EAFE Small-Cap ETF (b)		79,972		4,076,973
Master Small Cap Index Series	$	5,780,864		5,780,864
Russell 1000 Index Master Portfolio	$	85,615,886		85,615,886
				151,733,550
Fixed Income Funds — 26.2%
Bond Index Master Portfolio	$	48,306,107		48,306,107
iShares TIPS Bond ETF		54,523		5,992,078
				54,298,185
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Short-Term Securities — 1.7%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)		2,983,691	$	2,983,691
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)		422,661		422,661
				3,406,352
Total Affiliated Investment Companies (Cost — $186,475,654*) — 101.1%				209,438,087
Liabilities in Excess of Other Assets — (1.1)%				(2,263,014	)
Net Assets — 100.0%			$	207,175,073

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	186,496,982
Gross unrealized appreciation	$	24,343,331
Gross unrealized depreciation		(1,402,226	)
Net unrealized appreciation	$	22,941,105

(a) Investments in issuers considered to be an affiliate of the LifePath Index Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at December 31,  2012		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2013		Value at December 31, 2013		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	16,824,732	$	14,657,460	1		—		$	31,482,192	$	31,482,192	$	786,415	$	1,518,262
BlackRock Cash Funds: Institutional, SL Agency Shares		1,154,498		1,829,193	1		—			2,983,691	$	2,983,691	$	8,144		—
BlackRock Cash Funds: Prime, SL Agency Shares		255,760		166,901	1		—			422,661	$	422,661	$	1,342		—
Bond Index Master Portfolio	$	17,070,724	$	31,235,383	1		—		$	48,306,107	$	48,306,107	$	558,098	$	(345,108	)
iShares Cohen & Steers REIT ETF		34,614		57,557			(952	)		91,219	$	6,815,884	$	185,836	$	(3,289	)
iShares Core MSCI Total International Stock ETF		—		174,457			—			174,457	$	10,057,446	$	75,716	$	—
iShares International Developed Real Estate ETF		101,338		156,899			(2,517	)		255,720	$	7,904,305	$	798,329	$	(704	)
iShares MSCI EAFE Small-Cap ETF		36,174		44,593			(795	)		79,972	$	4,076,973	$	88,367	$	5,757
iShares TIPS Bond ETF		17,877		37,125			(479	)		54,523	$	5,992,078	$	47,069	$	(3,122	)
Master Small Cap Index Series	$	2,152,436	$	3,628,428	1		—		$	5,780,864	$	5,780,864	$	63,554	$	224,303
Russell 1000 Index Master Portfolio	$	35,937,620	$	49,678,266	1		—		$	85,615,886	$	85,615,886	$	1,315,928	$	427,969

¹ Represents net shares/beneficial interest purchased.

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

(c) All or a portion of security was purchased with the cash collateral from loaned securities.

(d) Represents the current yield as of report date.

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the LifePath Index Master Portfolio has the ability to access

Ÿ 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)

Ÿ Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the LifePath Index Master Portfolio’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

See Notes to Financial Statements.

72 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments (concluded) LifePath Index 2035 Master Portfolio

used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the LifePath Index Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	38,253,038	$	171,185,049		—	$	209,438,087

The carrying amount for certain of the LifePath Index Master Portfolio’s liabilities approximates fair value for financial statement purposes. As of December 31, 2013, collateral on securities loaned at value of $(2,734,665) is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2013.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 73

Schedule of Investments December 31, 2013 LifePath Index 2040 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 79.3%
ACWI ex-US Index Master Portfolio	$	58,103,694	$	58,103,694
iShares Cohen & Steers REIT ETF (b)		168,092		12,559,834
iShares Core MSCI Total International Stock ETF		219,153		12,634,170
iShares International Developed Real Estate ETF		473,164		14,625,499
iShares MSCI EAFE Small-Cap ETF		136,704		6,969,170
Master Small Cap Index Series	$	8,099,953		8,099,953
Russell 1000 Index Master Portfolio	$	146,029,644		146,029,644
				259,021,964
Fixed Income Funds — 20.2%
Bond Index Master Portfolio	$	60,291,643		60,291,643
iShares TIPS Bond ETF		52,135		5,729,637
				66,021,280

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Short-Term Securities — 3.5%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)		9,901,805	$	9,901,805
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)		1,601,109		1,601,109
				11,502,914
Total Affiliated Investment Companies (Cost — $298,092,898*) — 103.0%				336,546,158
Liabilities in Excess of Other Assets — (3.0)%				(9,852,790	)
Net Assets — 100.0%			$	326,693,368

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	298,134,127
Gross unrealized appreciation	$	40,568,721
Gross unrealized depreciation		(2,156,690	)
Net unrealized appreciation	$	38,412,031

(a) Investments in issuers considered to be an affiliate of the LifePath Index Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at December 31,  2012		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2013		Value at December 31, 2013		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	23,746,745	$	34,356,949	1		—		$	58,103,694	$	58,103,694	$	1,437,784	$	2,357,639
BlackRock Cash Funds: Institutional, SL Agency Shares		1,549,972		8,351,833	1		—			9,901,805	$	9,901,805	$	16,553		—
BlackRock Cash Funds: Prime, SL Agency Shares		352,933		1,248,176	1		—			1,601,109	$	1,601,109	$	2,795		—
Bond Index Master Portfolio	$	17,074,832	$	43,216,811	1		—		$	60,291,643	$	60,291,643	$	698,349	$	(443,960	)
iShares Cohen & Steers REIT ETF		51,870		120,356			(4,134	)		168,092	$	12,559,834	$	351,326	$	(6,739	)
iShares Core MSCI Total International Stock ETF		—		219,153			—			219,153	$	12,634,170	$	89,404		—
iShares International Developed Real Estate ETF		153,492		326,868			(7,196	)		473,164	$	14,625,499	$	1,481,729	$	(687	)
iShares MSCI EAFE Small-Cap ETF		50,893		87,234			(1,423	)		136,704	$	6,969,170	$	154,592	$	10,225
iShares TIPS Bond ETF		13,522		39,102			(489	)		52,135	$	5,729,637	$	46,889	$	(4,514	)
Master Small Cap Index Series	$	2,607,129	$	5,492,824	1		—		$	8,099,953	$	8,099,953	$	91,919	$	329,560
Russell 1000 Index Master Portfolio	$	51,135,950	$	94,893,694	1		—		$	146,029,644	$	146,029,644	$	2,293,595	$	704,089

¹ Represents net shares/beneficial interest purchased.

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

(c) All or a portion of security was purchased with the cash collateral from loaned securities.

(d) Represents the current yield as of report date.

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the LifePath Index Master Portfolio has the ability to access

Ÿ 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)

Ÿ Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the LifePath Index Master Portfolio’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

See Notes to Financial Statements.

74 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments (concluded) LifePath Index 2040 Master Portfolio

used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the LifePath Index Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	64,021,224	$	272,524,934		—	$	336,546,158

The carrying amount for certain of the LifePath Index Master Portfolio’s liabilities approximates fair value for financial statement purposes. As of December 31, 2013, collateral on securities loaned at value of $(10,359,365) is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2013.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 75

Schedule of Investments December 31, 2013 LifePath Index 2045 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 84.8%
ACWI ex-US Index Master Portfolio	$	16,417,020	$	16,417,020
iShares Cohen & Steers REIT ETF (b)		60,986		4,556,874
iShares Core MSCI Total International Stock ETF (b)		135,389		7,805,176
iShares International Developed Real Estate ETF (b)		171,773		5,309,503
iShares MSCI EAFE Small-Cap ETF		45,315		2,310,159
Master Small Cap Index Series	$	2,236,711		2,236,711
Russell 1000 Index Master Portfolio	$	50,080,549		50,080,549
				88,715,992
Fixed Income Fund — 14.7%
Bond Index Master Portfolio	$	15,395,190		15,395,190
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Short-Term Securities — 1.4%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)		1,287,557	$	1,287,557
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)		130,390		130,390
				1,417,947
Total Affiliated Investment Companies (Cost — $93,609,868*) — 100.9%				105,529,129
Liabilities in Excess of Other Assets — (0.9)%				(962,380	)
Net Assets — 100.0%			$	104,566,749

Notes to Schedule of investments

* As of December 31, 2013, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	93,634,553
Gross unrealized appreciation	$	13,684,567
Gross unrealized depreciation		(1,789,991	)
Net unrealized appreciation	$	11,894,576

(a) Investments in issuers considered to be an affiliate of the LifePath Index Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at December 31,  2012		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2013		Value at December 31, 2013		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	7,793,079	$	8,623,941	1		—		$	16,417,020	$	16,417,020	$	403,262	$	689,436
BlackRock Cash Funds: Institutional, SL Agency Shares		998,543		289,014	1		—			1,287,557	$	1,287,557	$	5,302		—
BlackRock Cash Funds: Prime, SL Agency Shares		225,760		—			(95,370	)2		130,390	$	130,390	$	889		—
Bond Index Master Portfolio	$	3,838,900	$	11,556,290	1		—		$	15,395,190	$	15,395,190	$	154,387	$	(90,867	)
iShares Cohen & Steers REIT ETF		18,719		44,289			(2,022	)		60,986	$	4,556,874	$	115,581	$	(9,315	)
iShares Core MSCI Total International Stock ETF		—		135,389			—			135,389	$	7,805,176	$	54,620		—
iShares International Developed Real Estate ETF		53,482		121,118			(2,827	)		171,773	$	5,309,503	$	517,675	$	(1,398	)
iShares MSCI EAFE Small-Cap ETF		16,457		29,273			(415	)		45,315	$	2,310,159	$	48,093	$	2,639
Master Small Cap Index Series	$	715,705	$	1,521,006	1		—		$	2,236,711	$	2,236,711	$	23,549	$	82,585
Russell 1000 Index Master Portfolio	$	16,907,725	$	33,172,824	1		—		$	50,080,549	$	50,080,549	$	705,056	$	204,566

¹ Represents net shares/beneficial interest purchased.

² Represents net shares sold.

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

(c) All or a portion of security was purchased with the cash collateral from loaned securities.

(d) Represents the current yield as of report date.

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the LifePath Index Master Portfolio has the ability to access

Ÿ 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)

Ÿ Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the LifePath Index Master Portfolio’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.

See Notes to Financial Statements.

76 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments (concluded) LifePath Index 2045 Master Portfolio

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the LifePath Index Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	21,399,659	$	84,129,470		—	$	105,529,129

The carrying amount for certain of the LifePath Index Master Portfolio’s liabilities approximates fair value for financial statement purposes. As of December 31, 2013, collateral on securities loaned at value of $(843,635) is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2013.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 77

Schedule of Investments December 31, 2013 LifePath Index 2050 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 90.1%
ACWI ex-US Index Master Portfolio	$	16,802,884	$	16,802,884
iShares Cohen & Steers REIT ETF		67,415		5,037,249
iShares Core MSCI Total International Stock ETF		150,119		8,654,360
iShares International Developed Real Estate ETF (b)		189,671		5,862,731
iShares MSCI EAFE Small-Cap ETF (b)		47,447		2,418,848
Master Small Cap Index Series	$	1,960,716		1,960,716
Russell 1000 Index Master Portfolio	$	52,721,354		52,721,354
				93,458,142
Fixed Income Fund — 9.5%
Bond Index Master Portfolio	$	9,824,212		9,824,212
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Short-Term Securities — 7.3%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)		6,512,071	$	6,512,071
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)		1,066,024		1,066,024
				7,578,095
Total Affiliated Investment Companies (Cost — $99,051,979*) — 106.9%				110,860,449
Liabilities in Excess of Other Assets — (6.9)%				(7,138,081	)
Net Assets — 100.0%			$	103,722,368

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	99,071,089
Gross unrealized appreciation	$	13,184,427
Gross unrealized depreciation		(1,395,067	)
Net unrealized appreciation	$	11,789,360

(a) Investments in issuers considered to be an affiliate of the LifePath Index Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at December 31,  2012		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2013		Value at December 31, 2013		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	6,419,258	$	10,383,626	1		—		$	16,802,884	$	16,802,884	$	402,004	$	554,900
BlackRock Cash Funds: Institutional, SL Agency Shares		779,019		5,733,052	1		—			6,512,071	$	6,512,071	$	6,289		—
BlackRock Cash Funds: Prime, SL Agency Shares		199,493		866,531	1		—			1,066,024	$	1,066,024	$	1,067		—
Bond Index Master Portfolio	$	1,679,463	$	8,144,749	1		—		$	9,824,212	$	9,824,212	$	88,202	$	(49,566	)
iShares Cohen & Steers REIT ETF		15,578		52,726			(889	)		67,415	$	5,037,249	$	124,606	$	(4,664	)
iShares Core MSCI Total International Stock ETF		—		150,119			—			150,119	$	8,654,360	$	63,556		—
iShares International Developed Real Estate ETF		46,871		145,158			(2,358	)		189,671	$	5,862,731	$	563,614	$	(3,288	)
iShares MSCI EAFE Small-Cap ETF		13,638		34,529			(720	)		47,447	$	2,418,848	$	49,951	$	2,036
Master Small Cap Index Series	$	519,112	$	1,441,604	1		—		$	1,960,716	$	1,960,716	$	20,034	$	71,203
Russell 1000 Index Master Portfolio	$	14,070,835	$	38,650,519	1		—		$	52,721,354	$	52,721,354	$	711,794	$	188,788

¹  Represents net shares/beneficial interest purchased.

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

(c) All or a portion of security was purchased with the cash collateral from loaned securities.

(d) Represents the current yield as of report date.

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the LifePath Index Master Portfolio has the ability to access

Ÿ 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)

Ÿ Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the LifePath Index Master Portfolio’s own assumptions used in determining the fair value of investments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the LifePath Index Master Portfolio’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value

See Notes to Financial Statements.

78 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments (concluded) LifePath Index 2050 Master Portfolio

determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	29,551,283	$	81,309,166		—	$	110,860,449

The carrying amount for certain of the LifePath Index Master Portfolio’s liabilities approximates fair value for financial statement purposes. As of December 31, 2013, collateral on securities loaned at value of $(6,897,300) is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2013.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 79

Schedule of Investments December 31, 2013 LifePath Index 2055 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 95.1%
ACWI ex-US Index Master Portfolio	$	3,512,892	$	3,512,892
iShares Cohen & Steers REIT ETF		17,432		1,302,519
iShares Core MSCI Total International Stock ETF (b)		46,664		2,690,180
iShares International Developed Real Estate ETF (b)		49,144		1,519,041
iShares MSCI EAFE Small-Cap ETF (b)		11,583		590,501
Master Small Cap Index Series	$	445,733		445,733
Russell 1000 Index Master Portfolio	$	12,722,972		12,722,972
				22,783,838
Fixed Income Fund — 4.3%
Bond Index Master Portfolio	$	1,044,823		1,044,823

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Short-Term Securities — 3.3%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)		692,770	$	692,770
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)		95,386		95,386
				788,156
Total Affiliated Investment Companies (Cost — $21,230,403*) — 102.7%				24,616,817
Liabilities in Excess of Other Assets — (2.7)%				(648,792	)
Net Assets — 100.0%			$	23,968,025

Notes to Schedule of investments

* As of December 31, 2013, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	21,238,777
Gross unrealized appreciation	$	3,528,223
Gross unrealized depreciation		(150,183	)
Net unrealized appreciation	$	3,378,040

(a) Investments in issuers considered to be an affiliate of the LifePath Index Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at December 31,  2012		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2013		Value at December 31, 2013		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	1,274,171	$	2,238,721	1		—		$	3,512,892	$	3,512,892	$	84,623	$	88,388
BlackRock Cash Funds: Institutional, SL Agency Shares		65,649		627,121	1		—			692,770	$	692,770	$	2,383		—
BlackRock Cash Funds: Prime, SL Agency Shares		15,346		80,040	1		—			95,386	$	95,386	$	414		—
Bond Index Master Portfolio	$	62,439	$	982,384	1		—		$	1,044,823	$	1,044,823	$	6,537	$	(1,973	)
iShares Cohen & Steers REIT ETF		3,345		14,891			(804	)		17,432	$	1,302,519	$	29,926	$	(1,248	)
iShares Core MSCI Total International Stock ETF		—		46,664			—			46,664	$	2,690,180	$	16,026		—
iShares International Developed Real Estate ETF		9,792		40,242			(890	)		49,144	$	1,519,041	$	142,630	$	(1,927	)
iShares MSCI EAFE Small-Cap ETF		2,800		8,952			(169	)		11,583	$	590,501	$	11,275	$	(237	)
Master Small Cap Index Series	$	98,795	$	346,938	1		—		$	445,733	$	445,733	$	4,219	$	14,258
Russell 1000 Index Master Portfolio	$	2,784,118	$	9,938,854	1		—		$	12,722,972	$	12,722,972	$	159,402	$	38,760

¹ Represents net shares/beneficial interest purchased.

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

(c) All or a portion of security was purchased with the cash collateral from loaned securities.

(d) Represents the current yield as of report date.

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the LifePath Index Master Portfolio has the ability to access

Ÿ 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)

Ÿ Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the LifePath Index Master Portfolio’s own assumptions used in determining the fair value of investments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the LifePath Index Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

See Notes to Financial Statements.

80 BLACKROCK FUNDS III DECEMBER 31, 2013

Schedule of Investments (concluded) LifePath Index 2055 Master Portfolio

The following table summarizes the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	6,890,397	$	17,726,420		—	$	24,616,817

The carrying amount for certain of the LifePath Index Master Portfolio’s liabilities approximates fair value for financial statement purposes. As of December 31, 2013, collateral on securities loaned at value of $(617,160) is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2013.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2013 81

Statements of Assets and Liabilities Master Investment Portfolio

December 31, 2013	LifePath Index Retirement Master Portfolio		LifePath Index 2020 Master Portfolio		LifePath Index 2025 Master Portfolio		LifePath Index 2030 Master Portfolio		LifePath Index 2035 Master Portfolio
Assets
Investments at value — affiliated1,2	$	321,180,881	$	625,512,684	$	279,246,355	$	535,251,671	$	209,438,087
Contributions receivable from investors		3,058,104		3,642,202		3,437,817		8,120,056		5,753,337
Investments sold receivable — affiliated		1,485,367		5,599,048		2,811,636		5,559,652		2,310,072
Dividends receivable — affiliated		—		—		—		6,477		—
Securities lending income receivable — affiliated		486		2,021		671		2,738		1,319
Receivable from Manager		—		—		—		—		—
Prepaid expenses		1,599		3,144		1,297		2,543		942
Other income receivable — affiliated		767		2,343		817		2,103		691
Total assets		325,727,204		634,761,442		285,498,593		548,945,240		217,504,448
Liabilities
Collateral on securities loaned at value		—		9,308,510		989,100		7,675,000		2,734,665
Investments purchased payable — affiliated		4,102,394		9,408,479		5,872,223		12,750,902		7,567,126
Trustees’ fees payable		2,231		4,013		1,766		3,378		1,310
Investment advisory fees payable		9,712		18,374		7,182		16,225		4,768
Custodian fees payable		883		1,313		1,442		1,303		1,695
Printing fees payable		300		—		306		—		774
Professional fees payable		17,482		17,573		18,895		17,447		19,018
Other accrued expenses payable		204		—		—		—		19
Total liabilities		4,133,206		18,758,262		6,890,914		20,464,255		10,329,375
Net Assets	$	321,593,998	$	616,003,180	$	278,607,679	$	528,480,985	$	207,175,073
Net Assets Consist of
Investors’ capital	$	299,103,085	$	562,825,352	$	252,774,526	$	472,307,157	$	184,212,640
Net unrealized appreciation/depreciation		22,490,913		53,177,828		25,833,153		56,173,828		22,962,433
Net Assets	$	321,593,998	$	616,003,180	$	278,607,679	$	528,480,985	$	207,175,073
1 Investments at cost — affiliated	$	298,689,968	$	572,334,856	$	253,413,202	$	479,077,843	$	186,475,654
2 Securities loaned at value		—	$	9,083,172	$	970,574	$	7,472,000	$	2,677,674

See Notes to Financial Statements.
82	BLACKROCK FUNDS III	DECEMBER 31, 2013

Statements of Assets and Liabilities Master Investment Portfolio

December 31, 2013	LifePath Index 2040 Master Portfolio		LifePath Index 2045 Master Portfolio		LifePath Index 2050 Master Portfolio		LifePath Index 2055 Master Portfolio
Assets
Investments at value — affiliated1,2	$	336,546,158	$	105,529,129	$	110,860,449	$	24,616,817
Contributions receivable from investors		8,219,978		2,565,129		2,625,177		636,857
Investments sold receivable — affiliated		3,747,159		1,255,315		1,262,245		293,526
Dividends receivable — affiliated		—		—		—		—
Securities lending income receivable — affiliated		2,408		686		2,196		274
Receivable from Manager		—		—		—		2,477
Prepaid expenses		1,523		449		449		61
Other income receivable — affiliated		1,371		466		442		208
Total assets		348,518,597		109,351,174		114,750,958		25,550,220
Liabilities
Collateral on securities loaned at value		10,359,365		843,635		6,897,300		617,160
Investments purchased payable — affiliated		11,434,903		3,917,398		4,107,858		942,223
Trustees’ fees payable		2,055		693		683		534
Investment advisory fees payable		8,657		738		719		—
Custodian fees payable		1,610		1,192		1,424		1,539
Printing fees payable		20		1,018		1,019		1,048
Professional fees payable		18,618		19,179		18,976		18,630
Other accrued expenses payable		1		572		611		1,061
Total liabilities		21,825,229		4,784,425		11,028,590		1,582,195
Net Assets	$	326,693,368	$	104,566,749	$	103,722,368	$	23,968,025
Net Assets Consist of
Investors’ capital	$	288,240,108	$	92,647,488	$	91,913,898	$	20,581,611
Net unrealized appreciation/depreciation		38,453,260		11,919,261		11,808,470		3,386,414
Net Assets	$	326,693,368	$	104,566,749	$	103,722,368	$	23,968,025
1 Investments at cost — affiliated	$	298,092,898	$	93,609,868	$	99,051,979	$	21,230,403
2 Securities loaned at value	$	10,102,144	$	825,273	$	6,766,552	$	605,602

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	83

Statements of Operations Master Investment Portfolio

Year Ended December 31, 2013	LifePath Index Retirement Master Portfolio			LifePath Index 2020 Master Portfolio			LifePath Index 2025 Master Portfolio			LifePath Index 2030 Master Portfolio			LifePath Index 2035 Master Portfolio
Investment Income
Dividends — affiliated	$	469,331		$	1,916,162		$	1,150,749		$	2,679,247		$	1,195,317
Securities lending — affiliated — net		9,394			26,255			9,818			27,416			8,682
Income — affiliated		1,064			2,155			1,052			1,929			804
Other income — affiliated		767			2,343			817			2,103			691
Net investment income allocated from the applicable underlying Master Portfolios:
Dividends		2,195,602			5,266,282			2,381,309			5,453,459			2,115,658
Interest		2,577,917			3,615,015			1,227,106			2,047,821			608,337
Expenses		(259,582	)		(489,632	)		(198,700	)		(417,958	)		(151,452	)
Fees waived		12,548			17,231			5,673			9,414			2,708
Total income		5,007,041			10,355,811			4,577,824			9,803,431			3,780,745
Expenses
Investment advisory		139,910			251,372			102,171			206,129			75,097
Professional		26,808			26,860			26,590			26,714			26,554
Printing		61			62			60			99			60
Independent Trustees		11,337			18,661			8,933			15,798			7,157
Custodian		5,615			7,093			8,100			7,454			7,917
Miscellaneous		1,714			4,414			1,008			2,611			726
Total expenses		185,445			308,462			146,862			258,805			117,511
Less fees waived/reimbursed by Manager		(45,508	)		(57,067	)		(44,682	)		(52,646	)		(42,432	)
Total expenses after fees waived		139,937			251,395			102,180			206,159			75,079
Net investment income		4,867,104			10,104,416			4,475,644			9,597,272			3,705,666
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — affiliated		(36,687	)		(42,310	)		(12,453	)		(16,767	)		(1,358	)
Allocations from the applicable underlying Master Portfolios from investments, financial futures contracts and foreign currency transactions		1,644,647			3,870,317			2,003,418			4,351,729			1,825,426
		1,607,960			3,828,007			1,990,965			4,334,962			1,824,068
Net change in unrealized appreciation/depreciation on:
Investments — affiliated		(1,520,134	)		(2,226,138	)		(938,281	)		(1,199,424	)		(48,191	)
Allocated from the applicable underlying Master Portfolios from investments, financial futures contracts and foreign currency transactions		15,614,277			40,606,480			20,048,055			44,359,191			17,751,589
		14,094,143			38,380,342			19,109,774			43,159,767			17,703,398
Total realized and unrealized gain		15,702,103			42,208,349			21,100,739			47,494,729			19,527,466
Net Increase in Net Assets Resulting from Operations	$	20,569,207		$	52,312,765		$	25,576,383		$	57,092,001		$	23,233,132

See Notes to Financial Statements.
84	BLACKROCK FUNDS III	DECEMBER 31, 2013

Statements of Operations Master Investment Portfolio

Year Ended December 31, 2013	LifePath Index 2040 Master Portfolio			LifePath Index 2045 Master Portfolio			LifePath Index 2050 Master Portfolio			LifePath Index 2055 Master Portfolio
Investment Income
Dividends — affiliated	$	2,123,940		$	735,969		$	801,727		$	199,857
Securities lending — affiliated — net		18,085			5,754			6,898			2,677
Income — affiliated		1,263			437			458			120
Other income — affiliated		1,371			466			442			208
Net investment income allocated from the applicable underlying Master Portfolios:
Dividends		3,736,135			1,106,723			1,108,939			242,858
Interest		785,512			179,531			113,095			11,923
Expenses		(253,247	)		(71,445	)		(67,649	)		(14,003	)
Fees waived		3,420			735			420			30
Total income		6,416,479			1,958,170			1,964,330			443,670
Expenses
Investment advisory		121,444			34,770			33,138			7,076
Professional		26,637			26,546			26,562			26,594
Printing		59			59			59			59
Independent Trustees		10,265			4,577			4,502			3,078
Custodian		7,900			7,745			8,777			8,663
Miscellaneous		1,019			383			343			303
Total expenses		167,324			74,080			73,381			45,773
Less fees waived/reimbursed by Manager		(45,889	)		(39,370	)		(40,314	)		(38,846	)
Total expenses after fees waived		121,435			34,710			33,067			6,927
Net investment income		6,295,044			1,923,460			1,931,263			436,743
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — affiliated		(1,715	)		(8,074	)		(5,916	)		(3,412	)
Allocations from the applicable underlying Master Portfolios from investments, financial futures contracts and foreign currency transactions		2,947,328			885,720			765,325			139,433
		2,945,613			877,646			759,409			136,021
Net change in unrealized appreciation/depreciation on:
Investments — affiliated		(310,766	)		215,684			234,035			79,453
Allocated from the applicable underlying Master Portfolios from investments, financial futures contracts and foreign currency transactions		31,385,242			9,565,123			9,830,529			2,198,544
		31,074,476			9,780,807			10,064,564			2,277,997
Total realized and unrealized gain		34,020,089			10,658,453			10,823,973			2,414,018
Net Increase in Net Assets Resulting from Operations	$	40,315,133		$	12,581,913		$	12,755,236		$	2,850,761

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	85

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath Index Retirement Master Portfolio						LifePath Index 2020 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	4,867,104		$	2,418,764		$	10,104,416		$	3,587,073
Net realized gain		1,607,960			92,106			3,828,007			233,814
Net change in unrealized appreciation		14,094,143			8,418,132			38,380,342			14,867,554
Net increase in net assets resulting from operations		20,569,207			10,929,002			52,312,765			18,688,441
Capital Transactions
Proceeds from contributions		144,647,039			208,844,687			318,705,787			275,399,935
Value of withdrawals		(45,593,905	)		(19,770,291	)		(41,988,538	)		(9,022,795	)
Net increase in net assets derived from capital transactions		99,053,134			189,074,396			276,717,249			266,377,140
Net Assets
Total increase in net assets		119,622,341			200,003,398			329,030,014			285,065,581
Beginning of year		201,971,657			1,968,259			286,973,166			1,907,585
End of year	$	321,593,998		$	201,971,657		$	616,003,180		$	286,973,166

	LifePath Index 2025 Master Portfolio						LifePath Index 2030 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	4,475,644		$	1,391,660		$	9,597,272		$	2,802,945
Net realized gain		1,990,965			207,762			4,334,962			229,969
Net change in unrealized appreciation/depreciation		19,109,774			6,816,739			43,159,767			13,126,383
Net increase in net assets resulting from operations		25,576,383			8,416,161			57,092,001			16,159,297
Capital Transactions
Proceeds from contributions		145,933,393			115,843,506			293,938,444			194,909,784
Value of withdrawals		(15,350,255	)		(3,693,827	)		(28,556,445	)		(6,921,266	)
Net increase in net assets derived from capital transactions		130,583,138			112,149,679			265,381,999			187,988,518
Net Assets
Total increase in net assets		156,159,521			120,565,840			322,474,000			204,147,815
Beginning of year		122,448,158			1,882,318			206,006,985			1,859,170
End of year	$	278,607,679		$	122,448,158		$	528,480,985		$	206,006,985

See Notes to Financial Statements.
86	BLACKROCK FUNDS III	DECEMBER 31, 2013

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath Index 2035 Master Portfolio						LifePath Index 2040 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	3,705,666		$	991,416		$	6,295,044		$	1,530,703
Net realized gain		1,824,068			173,427			2,945,613			41,882
Net change in unrealized appreciation/depreciation		17,703,398			5,389,111			31,074,476			7,523,410
Net increase in net assets resulting from operations		23,233,132			6,553,954			40,315,133			9,095,995
Capital Transactions
Proceeds from contributions		111,267,543			77,260,091			197,281,684			99,615,956
Value of withdrawals		(9,088,154	)		(3,889,454	)		(18,574,323	)		(2,859,861	)
Net increase in net assets derived from capital transactions		102,179,389			73,370,637			178,707,361			96,756,095
Net Assets
Total increase in net assets		125,412,521			79,924,591			219,022,494			105,852,090
Beginning of year		81,762,552			1,837,961			107,670,874			1,818,784
End of year	$	207,175,073		$	81,762,552		$	326,693,368		$	107,670,874
	LifePath Index 2045 Master Portfolio						LifePath Index 2050 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase in Net Assets:	2013			2012			2013			2012
Operations
Net investment income	$	1,923,460		$	407,398		$	1,931,263		$	350,211
Net realized gain (loss)		877,646			9,826			759,409			(19,132	)
Net change in unrealized appreciation/depreciation		9,780,807			2,296,403			10,064,564			1,918,069
Net increase in net assets resulting from operations		12,581,913			2,713,627			12,755,236			2,249,148
Capital Transactions
Proceeds from contributions		62,561,233			29,648,308			70,124,735			22,862,252
Value of withdrawals		(3,753,224	)		(984,231	)		(5,194,644	)		(858,634	)
Net increase in net assets derived from capital transactions		58,808,009			28,664,077			64,930,091			22,003,618
Net Assets
Total increase in net assets		71,389,922			31,377,704			77,685,327			24,252,766
Beginning of year		33,176,827			1,799,123			26,037,041			1,784,275
End of year	$	104,566,749		$	33,176,827		$	103,722,368		$	26,037,041

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	87

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath Index 2055 Master Portfolio
	Year Ended December 31,
Increase in Net Assets:	2013			2012
Operations
Net investment income	$	436,743		$	79,089
Net realized gain (loss)		136,021			(923,918	)
Net change in unrealized appreciation/depreciation		2,277,997			1,287,660
Net increase in net assets resulting from operations		2,850,761			442,831
Capital Transactions
Proceeds from contributions		17,371,497			3,370,271
Value of withdrawals		(1,162,211	)		(674,310	)
Net increase in net assets derived from capital transactions		16,209,286			2,695,961
Net Assets
Total increase in net assets		19,060,047			3,138,792
Beginning of year		4,907,978			1,769,186
End of year	$	23,968,025		$	4,907,978

See Notes to Financial Statements.
88	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights Master Investment Portfolio

	LifePath Index Retirement Master Portfolio
	Year Ended December 31,						Period May 31, 20111 to December 31, 2011
	2013			2012
Total Investment Return
Total investment return		7.72%			9.17%			(0.59)%	2
Ratios to Average Net Assets
Total expenses3,4,5		0.16%			0.18%			3.44%	6,7
Total expenses after fees waived3,4,5		0.14%			0.15%			0.15%	6
Net investment income4,5,8		1.74%			2.02%			2.87%	6
Supplemental Data
Net assets, end of period (000)		$ 321,594			$ 201,972			$   1,968
Portfolio turnover		18%	9		1%	10		1%	10

¹ Commencement of operations.

² Aggregate total investment return.

³ Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio (collectively, the “Master Portfolios”). These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

⁴ Includes the LifePath Index Master Portfolio’s share of the Master Portfolios’ allocated fees waived of 0.00%, 0.02% and 0.08% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁵ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.02%, 0.02% and 0.04% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Master Portfolio’s share of the Master Portfolios allocated expenses and/or net investment income.

⁶ Annualized.

⁷ Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 3.45%.

⁸ Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Master Portfolios.

⁹ Includes the purchases or sales of the underlying funds and the Master Portfolios.

¹⁰  Excludes purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15% and 9% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	89

Financial Highlights Master Investment Portfolio

	LifePath Index 2020 Master Portfolio
	Year Ended December 31,						Period May 31, 20111 to December 31, 2011
	2013			2012
Total Investment Return
Total investment return		11.36%			11.36%			(3.71)%	2
Ratios to Average Net Assets
Total expenses3,4,5		0.16%			0.19%			3.55%	6,7
Total expenses after fees waived3,4,5		0.14%			0.16%			0.18%	6
Net investment income4,5,8		2.01%			2.19%			2.70%	6
Supplemental Data
Net assets, end of period (000)		$ 616,003			$ 286,973			$     1,908
Portfolio turnover		12%	9		1%	10		1%	10

¹ Commencement of operations.

² Aggregate total investment return.

³ Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio (collectively, the “Master Portfolios”), as applicable. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

⁴ Includes the LifePath Index Master Portfolio’s share of the Master Portfolios’ allocated fees waived of 0.00%, 0.02% and 0.10% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁵ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.03%, 0.03% and 0.05% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Master Portfolio’s share of the Master Portfolios allocated expenses and/or net investment income.

⁶ Annualized.

⁷ Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 3.56%.

⁸ Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Master Portfolios.

⁹ Includes the purchases or sales of the underlying funds and the Master Portfolios.

¹⁰ Excludes purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 13% and 8% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

See Notes to Financial Statements.
90	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights Master Investment Portfolio

	LifePath Index 2025 Master Portfolio
	Year Ended December 31,						Period May 31, 20111 to December 31, 2011
	2013			2012
Total Investment Return
Total investment return		13.48%			12.34%			(5.10)%	2
Ratios to Average Net Assets
Total expenses3,4,5		0.17%			0.23%			3.59%	6,7
Total expenses after fees waived3,4,5		0.14%			0.16%			0.18%	6
Net investment income4,5,8		2.19%			2.27%			2.58%	6
Supplemental Data
Net assets, end of period (000)		$ 278,608			$ 122,448			$     1,882
Portfolio turnover		13%	9		0%	10,11		0%	10,11

¹ Commencement of operations.

² Aggregate total investment return.

³ Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio (collectively, the “Master Portfolios”), as applicable. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

⁴ Includes the LifePath Index Master Portfolio’s share of the Master Portfolios’ allocated fees waived of 0.00%, 0.02% and 0.11% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁵  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.04%, 0.03% and 0.06% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Master Portfolio’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁶ Annualized.

⁷ Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 3.60%.

⁸  Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Master Portfolios.

⁹  Includes the purchases or sales of the underlying funds and the Master Portfolios.

¹⁰  Excludes purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 14% and 8% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹¹ Rounds to less than 1%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	91

Financial Highlights Master Investment Portfolio

	LifePath Index 2030 Master Portfolio
	Year Ended December 31,						Period May 31, 20111 to December 31, 2011
	2013			2012
Total Investment Return
Total investment return		15.40%			13.28%			(6.28)%	2
Ratios to Average Net Assets
Total expenses3,4,5		0.16%			0.21%			3.63%	6,7
Total expenses after fees waived3,4,5		0.15%			0.17%			0.19%	6
Net investment income4,5,8		2.33%			2.36%			2.50%	6
Supplemental Data
Net assets, end of period (000)		$ 528,481			$ 206,007			$     1,859
Portfolio turnover		12%	9		2%	10		0%	10,11

¹ Commencement of operations.

² Aggregate total investment return.

³ Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio (collectively, the “Master Portfolios”) as applicable. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

⁴ Includes the LifePath Index Master Portfolio’s share of the Master Portfolios’ allocated fees waived of 0.00%, 0.02% and 0.12% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁵ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.04%, 0.04% and 0.06% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Master Portfolio’s share of the Master Portfolios allocated expenses and/or net investment income.

⁶ Annualized.

⁷ Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 3.64%.

⁸ Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Master Portfolios.

⁹  Includes the purchases or sales of the underlying funds and the Master Portfolios.

¹⁰  Excludes purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 18% and 6% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹¹  Rounds to less than 1%.

See Notes to Financial Statements.
92	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights Master Investment Portfolio

	LifePath Index 2035 Master Portfolio
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Total Investment Return
Total investment return		17.02%			14.07%			(7.35)%	2
Ratios to Average Net Assets
Total expenses3,4,5		0.18%			0.26%			3.67%	6,7
Total expenses after fees waived3,4,5		0.15%			0.17%			0.19%	6
Net investment income4,5,8		2.47%			2.44%			2.43%	6
Supplemental Data
Net assets, end of period (000)		$ 207,175			$   81,763			$     1,838
Portfolio turnover		12%	9		1%	10		0%	10,11

¹ Commencement of operations.

² Aggregate total investment return.

³ Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio (collectively, the “Master Portfolios”), as applicable. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

⁴ Includes the LifePath Index Master Portfolio’s share of the Master Portfolios’ allocated fees waived of 0.00%, 0.02% and 0.13% for the years ended December 31, 2013 and December 31, 2012, and the period ended December 31, 2011, respectively.

⁵ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.05%, 0.04% and 0.06% for the years ended December 31, 2013 and December 31, 2012, and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Master Portfolio’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁶ Annualized.

⁷ Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 3.68%.

⁸ Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Master Portfolios.

⁹  Includes the purchases or sales of the underlying funds and the Master Portfolios.

¹⁰  Excludes purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 24% and 7%, for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹¹ Rounds to less than 1%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	93

Financial Highlights Master Investment Portfolio

	LifePath Index 2040 Master Portfolio
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Total Investment Return
Total investment return		18.66%			15.03%			(8.42)%	2
Ratios to Average Net Assets
Total expenses3,4,5		0.17%			0.24%			3.70%	6,7
Total expenses after fees waived3,4,5		0.15%			0.18%			0.20%	6
Net investment income4,5,8		2.59%			2.50%			2.36%	6
Supplemental Data
Net assets, end of period (000)		$ 326,693			$ 107,671			$     1,819
Portfolio turnover		12%	9		3%	10		0%	10,11

¹ Commencement of operations.

² Aggregate total investment return.

³ Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio (collectively, the “Master Portfolios”). These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

⁴ Includes the LifePath Index Master Portfolio’s share of the Master Portfolios’ allocated fees waived of 0.00%, 0.02% and 0.14% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁵ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.05%, 0.04% and 0.07% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Master Portfolio’s share of the Master Portfolios allocated expenses and/or net investment income.

⁶ Annualized.

⁷ Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 3.71%.

⁸  Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Master Portfolios.

⁹  Includes the purchases or sales of the underlying funds and the Master Portfolios.

¹⁰ Excludes purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 21% and 5% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹¹ Rounds to less than 1%.

See Notes to Financial Statements.
94	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights Master Investment Portfolio

	LifePath Index 2045 Master Portfolio
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Total Investment Return
Total investment return		20.33%			15.61%			(9.49)%	2
Ratios to Average Net Assets
Total expenses3,4,5		0.21%			0.41%			3.74%	6,7
Total expenses after fees waived3,4,5		0.15%			0.17%			0.21%	6
Net investment income4,5,8		2.77%			2.62%			2.29%	6
Supplemental Data
Net assets, end of period (000)		$ 104,567			$   33,177			$     1,799
Portfolio turnover		12%	9		2%	10		0%	10,11

¹ Commencement of operations.

² Aggregate total investment return.

³ Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio (collectively, the “Master Portfolios”), as applicable. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

⁴ Includes the LifePath Index Master Portfolio’s share of the Master Portfolios’ allocated fees waived of 0.00%, 0.02%, and 0.15%, for the years ending December 31, 2013 and December 31, 2012 and the period ending December 31, 2011, respectively.

⁵ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.05%, 0.04% and 0.07% for the years ended December 31, 2013 and December 31, 2012 and the period ending December 31, 2011, respectively, although the ratio does include the LifePath Index Master Portfolio’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁶ Annualized.

⁷ Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 3.75%.

⁸  Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Master Portfolios.

⁹  Includes the purchases or sales of the underlying funds and the Master Portfolios.

¹⁰  Excludes purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 22% and 6% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹¹ Rounds to less than 1%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	95

Financial Highlights Master Investment Portfolio

	LifePath Index 2050 Master Portfolio
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Total Investment Return
Total investment return		21.62%			16.37%			(10.34)%	2
Ratios to Average Net Assets
Total expenses3,4,5		0.21%			0.46%			3.76%	6,7
Total expenses after fees waived3,4,5		0.15%			0.18%			0.21%	6
Net investment income4,5,8		2.91%			2.67%			2.25%	6
Supplemental Data
Net assets, end of period (000)		$ 103,722			$   26,037			$     1,784
Portfolio turnover		12%	9		3%	10		0%	10,11

¹ Commencement of operations.

² Aggregate total investment return.

³ Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio (collectively, the “Master Portfolios”), as applicable. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

⁴ Includes the LifePath Index Master Portfolio’s share of the Master Portfolios’ allocated fees waived of 0.00%, 0.02% and 0.15% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁵ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.06%, 0.05% and 0.07% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Master Portfolio’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁶ Annualized.

⁷ Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 3.77%.

⁸ Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Master Portfolios.

⁹ Includes the purchases or sales of the underlying funds and the Master Portfolios.

¹⁰ Excludes purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 26% and 5% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹¹ Rounds to less than 1%.

See Notes to Financial Statements.
96	BLACKROCK FUNDS III	DECEMBER 31, 2013

Financial Highlights Master Investment Portfolio

	LifePath Index 2055 Master Portfolio
	Year Ended December 31,						Period May 31, 20111 to December  31, 2011
	2013			2012
Total Investment Return
Total investment return		22.99%			16.83%			(10.96)%	2
Ratios to Average Net Assets
Total expenses3,4,5		0.42%			1.39%			3.79%	6,7
Total expenses after fees waived3,4,5		0.15%			0.15%			0.21%	6
Net investment income4,5,8		3.09%			2.76%			2.24%	6
Supplemental Data
Net assets, end of period (000)		$ 23,968			$   4,908			$   1,769
Portfolio turnover		15%	9		8%	10		0%	10,11

¹ Commencement of operations.

² Aggregate total investment return.

³ Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master Small Cap Index Series and Russell 1000 Index Master Portfolio (collectively, the “Master Portfolios”). These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

⁴ Includes the LifePath Index Master Portfolio’s share of the Master Portfolios’ allocated fees waived of 0.00%, 0.02% and 0.15% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁵ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.06%, 0.05% and 0.08% for the years ended December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively, although the ratio does include the LifePath Index Master Portfolio’s share of the Master Portfolios allocated expenses and/or net investment income.

⁶ Annualized.

⁷ Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 3.79%.

⁸  Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Master Portfolios.

⁹  Includes the purchases or sales of the underlying funds and the Master Portfolios.

¹⁰ Excludes purchases or sales of the Master Portfolios, if these transactions had been included to conform to the current year presentation, portfolio turnover would have been 53% and 13% for the year ended December 31, 2012 and the period ended December 31, 2011, respectively.

¹¹ Rounds to less than 1%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2013	97

Notes to Financial Statements Master Investment Portfolio

1. Organization:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust. LifePath^® Index Retirement Master Portfolio, LifePath^® Index 2020 Master Portfolio, LifePath^® Index 2025 Master Portfolio, LifePath^® Index 2030 Master Portfolio, LifePath^® Index 2035 Master Portfolio, LifePath^® Index 2040 Master Portfolio, LifePath^® Index 2045 Master Portfolio, LifePath^® Index 2050 Master Portfolio and LifePath^® Index 2055 Master Portfolio (each, a “LifePath Index Master Portfolio” and collectively, the “LifePath Index Master Portfolios”) are each a series of MIP.

As of December 31, 2013, LifePath Index 2055 Master Portfolio’s investment in the ACWI ex-US Index Master Portfolio was 14.3% of its net assets, LifePath Index Retirement, LifePath Index 2020, LifePath Index 2025, and LifePath Index 2030 Master Portfolios’ investment in the Bond Index Master Portfolio represented 52.6%, 41.9%, 34.9% and 28.7%, respectively, of net assets. LifePath Index 2020, LifePath Index 2025, LifePath Index 2030, LifePath Index 2035, LifePath Index 2040, LifePath Index 2045, LifePath Index 2050 and LifePath Index 2055 Master Portfolios’ investment in the Russell 1000 Index Master Portfolio was 28.7%, 33.4%, 37.6%, 41.3%, 44.7%, 47.9%, 50.8% and 53.1%, respectively, of net assets. As such, the financial statements of the ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series Portfolio and Russell 1000 Index Master Portfolio, including the Schedules of Investments, can be read in conjunction with the LifePath Index Master Portfolios’ financial statements. ACWI ex-US Index Master Portfolio’s, Bond Index Master Portfolio’s, Master Small Cap Index Series’ and Russell 1000 Index Master Portfolio’s financial statements, included in filings by MIP, are available, without charge, on the US Securities and Exchange Commission’s (“SEC’s”) website at http://www.sec.gov.

LifePath Index Master Portfolios will each generally invest in other registered investment companies (each an “Underlying Fund” and collectively the “Underying Funds”) that are managed by subsidiaries of BlackRock, Inc. (“BlackRock”) and its affiliates and affiliates of the LifePath Index Master Portfolios. The LifePath Index Master Porfolios may also invest in other master portfolios (“Underlying Master Portolios”) that are managed by subsidiaries of BlackRock.

The value of a LifePath Index Master Portfolio’s investment in each of the ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio reflects that LifePath Index Master Portfolio’s proportionate interest in the net assets of that Underlying Master Portfolio. As of December 31, 2013, each LifePath Index Master Portfolio held the percentage of interests in the ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio as follows:

	ACWI ex-US Index  Master Portfolio			Bond Index Master Portfolio			Master Small Cap Index Series			Russell 1000 Index Master Portfolio
LifePath Index Retirement Master Portfolio		5.5	%		18.1	%		1.7	%		6.1	%
LifePath Index 2020 Master Portfolio		13.9	%		27.6	%		2.8	%		15.6	%
LifePath Index 2025 Master Portfolio		6.1	%		10.4	%		1.1	%		8.2	%
LifePath Index 2030 Master Portfolio		14.9	%		16.2	%		1.9	%		17.5	%
LifePath Index 2035 Master Portfolio		5.7	%		5.2	%		0.7	%		7.5	%
LifePath Index 2040 Master Portfolio		10.4	%		6.5	%		0.9	%		12.9	%
LifePath Index 2045 Master Portfolio		2.9	%		1.6	%		0.3	%		4.4	%
LifePath Index 2050 Master Portfolio		3.0	%		1.0	%		0.2	%		4.6	%
LifePath Index 2055 Master Portfolio		0.6	%		0.1	%		0.1	%		1.1	%

2. Significant Accounting Policies:

The LifePath Index Master Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in 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 following is a summary of the significant accounting policies followed by the LifePath Index Master Portfolios:

Valuation: US GAAP defines fair value as the price the LifePath Index Master Portfolios would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The LifePath Index Master Portfolios determine the fair values of their financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (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 provide oversight of the pricing function for the LifePath Index Master Portfolios for all financial instruments. Investments in open-end registered investment companies are valued at NAV each business day. The market value of a LifePath Index Master Portfolios’ investments in the Underlying Funds is based on the published NAV of each Underlying Fund computed as of the close of regular trading on the New York Stock Exchange (“NYSE”) on days when the NYSE is open. The LifePath Index Master Portfolios record their proportionate investment in the Underlying Master Portfolios at fair value which is based upon their pro rata ownership in the net assets of the Underlying Master Portfolios.

In the event that 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 Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that each LifePath Index Master Portfolio might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction.

98 BLACKROCK FUNDS III DECEMBER 31, 2013

Notes to Financial Statements (continued) Master Investment Portfolio

Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deem relevant consistent with the principles of fair value measurement, which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. The market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and is adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. 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 LifePath Index Master Portfolios’ 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 Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-divided dates. 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 the accrual basis.

Each LifePath Index Master Portfolio records daily its proportionate share of the Underlying Master Portfolios income, expenses and realized and unrealized gains and losses.

Income Taxes: Each LifePath Index Master Portfolio is classified as a partnership for federal income tax purposes. As such, each investor in a LifePath Index Master Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the LifePath Index Master Portfolio. Therefore, no federal income tax provision is required. It is intended that each LifePath Index Master Portfolio’s assets will be managed so an investor in the LifePath Index Master Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

Each LifePath Index Master Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each LifePath Index Master Portfolio’s US federal tax return remains open for each of the two years ended December 31, 2013 and for the period ended December 31, 2011. The statutes of limitations on each LifePath Index Master Portfolio’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 LifePath Index Master Portfolios’ facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

Other: Expenses directly related to a LifePath Index Master Portfolio are charged to that LifePath Index Master Portfolio. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods.

The LifePath Index Master Portfolios have an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statements of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.

3. Securities and Other Investments:

Securities Lending: The LifePath Index Master Portfolios may lend securities to approved borrowers, such as banks, brokers and other financial institutions. The borrower pledges cash, securities issued or guaranteed by the US government or irrevocable letters of credit issued by a bank as collateral. The initial collateral received by the LifePath Index Master Portfolios should have a value of at least 102% of the current value of the loaned securities for securities traded on US exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the LifePath Index Master Portfolios and any additional required collateral is delivered to the LifePath Index Master Portfolios on the next business day. Securities lending income, as disclosed in the Statements of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the LifePath Index Master Portfolios earn dividend or interest income on the securities loaned but do not receive interest income on the 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 securities on loan and the value of the related collateral are shown separately in the Statements of Assets and Liabilities as a component of investments at value, and collateral on securities loaned at value, respectively. The cash collateral invested by the securities lending agent BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedules of Investments.

BLACKROCK FUNDS III DECEMBER 31, 2013 99

Notes to Financial Statements (continued) Master Investment Portfolio

Securities lending transactions are entered into by the LifePath Index Master Portfolios under Master Securities Lending Agreements (“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 LifePath Index Master Portfolios, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender 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 a MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the LifePath Index Master Portfolios can resell or re-pledge the loaned securities, and the LifePath Index Master Portfolios can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.

The following table is a summary of the LifePath Index Master Portfolios’ securities lending agreements by counterparty which are subject to a MSLA as of December 31, 2013:

LifePath Index 2020 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Goldman Sachs & Co.	$	7,459,536	$	(7,459,536	)		—
JP Morgan Clearing Corp.		383,284		(383,284	)		—
Morgan Stanley & Co. LLC		1,240,352		(1,240,352	)		—
Total	$	9,083,172	$	(9,083,172	)
LifePath Index 2025 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
JP Morgan Clearing Corp.	$	970,574	$	(970,574	)		—

LifePath Index 2030 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Morgan Stanley & Co. LLC	$	7,472,000	$	(7,472,000	)		—

LifePath Index 2035 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Credit Suisse Securities (USA) LLC	$	769,616	$	(769,616	)		—
Goldman Sachs & Co.		1,870,966		(1,870,966	)		—
UBS Securities LLC		37,092		(37,092	)		—
Total	$	2,677,674	$	(2,677,674	)

LifePath Index 2040 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Goldman Sachs & Co.	$	8,585,328	$	(8,585,328	)		—
Morgan Stanley & Co. LLC		1,516,816		(1,516,816	)		—
Total	$	10,102,144	$	(10,102,144	)

LifePath Index 2045 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Citigroup Global Markets, Inc.	$	485,680	$	(485,680	)		—
Goldman Sachs & Co.		5,765		(5,765	)		—
JP Morgan Clearing Corp.		333,828		(333,828	)		—
Total	$	825,273	$	(825,273	)

LifePath Index 2050 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Goldman Sachs & Co.	$	1,728,222	$	(1,728,222	)		—
JP Morgan Clearing Corp.		5,038,330		(5,038,330	)		—
Total	$	6,766,552	$	(6,766,552	)

LifePath Index 2055 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Citigroup Global Markets, Inc.	$	15,294	$	(15,294	)		—
JP Morgan Clearing Corp.		503,833		(503,833	)		—
UBS Securities LLC		86,475		(86,475	)		—
Total	$	605,602	$	(605,602	)

¹ Collateral has been received in connection with securities lending agreements as follows. Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

LifePath Index 2020 Master Portfolio	$	9,308,510
LifePath Index 2025 Master Portfolio	$	989,100
LifePath Index 2030 Master Portfolio	$	7,675,000
LifePath Index 2035 Master Portfolio	$	2,734,665
LifePath Index 2040 Master Portfolio	$	10,359,365
LifePath Index 2045 Master Portfolio	$	843,635
LifePath Index 2050 Master Portfolio	$	6,897,300
LifePath Index 2055 Master Portfolio	$	617,160

The risks of securities lending also include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate this risk, the LifePath Index Master Portfolios benefit from a borrower default indemnity provided by BlackRock. BlackRock’s indemnity allows for full replacement of the securities lent. The LifePath Index Master Portfolios also could suffer 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. During the year ended December 31, 2013, any securities on loan were collateralized by cash.

4. Investment Advisory Agreement and Other Transactions with Affiliates:

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

MIP, on behalf of the LifePath Index Master Portfolios, entered into an Investment Advisory Agreement with BlackRock Fund Advisors (“BFA” or the “Manager”), the LifePath Index Master Portfolios’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment

100 BLACKROCK FUNDS III DECEMBER 31, 2013

Notes to Financial Statements (continued) Master Investment Portfolio

advisory services. Pursuant to the Investment Advisory Agreement with MIP, BFA is responsible for the management of each LifePath Index Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each LifePath Index Master Portfolio. For such services, each LifePath Index Master Portfolio pays BFA a monthly fee based on a percentage of each LifePath Index Master Portfolio’s average daily net assets at an annual rate of 0.05%.

The LifePath Index Master Portfolios received an exemptive order from the SEC permitting them, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BTC, an affiliate of BFA, as the securities lending agent. BTC may, on behalf of a LifePath Index Master Portfolio, invest cash collateral received by the LifePath Index Master Portfolio for such loans in a private investment company managed by BTC or in registered money market funds advised by BTC or its affiliates. The market value of securities on loan and the value of the related collateral, if applicable, are shown in the Statements of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC, if any, is disclosed in the Schedules of Investments. Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of rebates paid to, or fees paid by, borrowers of securities. The LifePath Index Master Portfolios retain 65% of securities lending income and pay a fee to BTC equal to 35% of such income. The LifePath Index Master Portfolios benefit from a borrower default indemnity provided by BlackRock. As securities lending agent, BTC bears all operational costs directly related to securities lending as well as the cost of borrower default indemnification. BTC does not receive any fees for managing the cash collateral. The share of income earned by each LifePath Index Master Portfolio is shown as securities lending — affiliated — net in the Statements of Operations. For the year ended December 31, 2013, BTC received securities lending agent fees related to securities lending activities for each LifePath Index Master Portfolio as follows:

LifePath Index Retirement Master Portfolio	$	5,136
LifePath Index 2020 Master Portfolio	$	14,133
LifePath Index 2025 Master Portfolio	$	5,286
LifePath Index 2030 Master Portfolio	$	14,759
LifePath Index 2035 Master Portfolio	$	4,646
LifePath Index 2040 Master Portfolio	$	9,734
LifePath Index 2045 Master Portfolio	$	3,226
LifePath Index 2050 Master Portfolio	$	3,712
LifePath Index 2055 Master Portfolio	$	1,441

Each LifePath Index Master Portfolio may invest its positive cash balances in certain money market funds managed by BFA or an affiliate. The income earned on these temporary cash investments is included in income-affiliated in the Statements of Operations.

During the year ended December 31, 2013, the LifePath Index Master Portfolios received payments from an affiliate to compensate for foregone securities lending revenue, which is included in other income – affiliated in the Statements of Operations.

Certain officers and/or trustees of MIP are officers and/or directors of BlackRock or its affiliates.

5. Purchases and Sales:

Purchases and sales of investments in the Underlying Funds and Underlying Master Portfolios and excluding short-term securities for the year ended December 31, 2013 were as follows:

	Purchases		Sales
LifePath Index Retirement Master Portfolio	$	149,098,383	$	50,717,966
LifePath Index 2020 Master Portfolio	$	338,336,803	$	61,174,391
LifePath Index 2025 Master Portfolio	$	157,078,326	$	26,435,997
LifePath Index 2030 Master Portfolio	$	313,365,477	$	47,463,933
LifePath Index 2035 Master Portfolio	$	120,211,473	$	17,984,940
LifePath Index 2040 Master Portfolio	$	207,996,042	$	28,678,912
LifePath Index 2045 Master Portfolio	$	67,133,770	$	8,062,939
LifePath Index 2050 Master Portfolio	$	73,041,620	$	7,757,309
LifePath Index 2055 Master Portfolio	$	18,310,004	$	2,056,610

6. Bank Borrowings:

MIP, on behalf of the LifePath Index Master Portfolios, along with certain other funds managed by BFA and its affiliates (“Participating Funds”), is a party to a 364-day, $800 million credit agreement with a group of lenders, under which the LifePath Index Master Portfolios may borrow to fund shareholder redemptions. The agreement expires in April 2014. Excluding commitments designated for a certain individual fund, other Participating Funds, including the LifePath Index Master Portfolios, can borrow up to an aggregate commitment amount of $500 million, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.065% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. Participating Funds paid administration and arrangement fees, which, along with commitment fees, were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. The LifePath Index Master Portfolios did not borrow under the credit agreement during the year ended December 31, 2013.

7. Market and Credit Risk:

In the normal course of business, the LifePath Index Master Portfolios invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the LifePath Index Master Portfolios may decline in response to certain events, including those directly involving the issuers whose securities are owned by the LifePath Index Master Portfolios; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the LifePath Index Master Portfolios may be exposed to counterparty credit risk, or the risk that an entity with which the LifePath Index Master Portfolios have unsettled or open transactions may fail to or be unable to perform on its commitments. The LifePath Index Master Portfolios manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the LifePath Index Master Portfolios to market, issuer

BLACKROCK FUNDS III DECEMBER 31, 2013 101

Notes to Financial Statements (concluded) Master Investment Portfolio

and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of a LifePath Index Master Portfolio’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statements of Assets and Liabilities, less any collateral held by the LifePath Index Master Portfolio.

8. Subsequent Events:

Management has evaluated the impact of all subsequent events on the LifePath Index Master Portfolios 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.

102 BLACKROCK FUNDS III DECEMBER 31, 2013

Report of Independent Registered Public Accounting Firm Master Investment Portfolio

To the Board of Trustees of Master Investment Portfolio and the Interestholders of LifePath Index Retirement Master Portfolio, LifePath Index 2020 Master Portfolio, LifePath Index 2025 Master Portfolio, LifePath Index 2030 Master Portfolio, LifePath Index 2035 Master Portfolio, LifePath Index 2040 Master Portfolio, LifePath Index 2045 Master Portfolio, LifePath Index 2050 Master Portfolio and LifePath Index 2055 Master Portfolio:

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of LifePath Index Retirement Master Portfolio, LifePath Index 2020 Master Portfolio, LifePath Index 2025 Master Portfolio, LifePath Index 2030 Master Portfolio, LifePath Index 2035 Master Portfolio, LifePath Index 2040 Master Portfolio, LifePath Index 2045 Master Portfolio, LifePath Index 2050 Master Portfolio and LifePath Index 2055 Master Portfolio (the “Master Portfolios”), each a series of Master Investment Portfolio, at December 31, 2013, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolios’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2014

BLACKROCK FUNDS III DECEMBER 31, 2013 103

Officers and Trustees

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 107 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 107 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy from 2002 to 2012; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 107 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President, Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 107 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	President, London Center for Policy Research since 2012; Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and Professor thereof from 1980 to 2005; President Emeritus, Hudson Institute (policy research organization) from 2011 to 2012, President thereof from 1997 to 2011 and Trustee from 1980 to 2012; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (global internet services) since 2005; Director, Cerego, LLC (educational software) since 2005; Director, Cybersettle (online adjudication) since 2009; Director, AIMS Worldwide, Inc. (marketing) from 2007 to 2012.	33 RICs consisting of 107 Portfolios	None
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 107 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Director, The West Penn Allegheny Health System (a not-for-profit health system) from 2008 to 2013; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 107 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 107 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None

104 BLACKROCK FUNDS III DECEMBER 31, 2013

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1 (concluded)
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Immediate past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	33 RICs consisting of 107 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Director, Alkon Corporation (pneumatics) since 1992; Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh from 2005 to 2013 and Dean thereof from 1997 to 2005; Director, Tippman Sports (recreation) from 2005 to 2013; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 107 Portfolios	None
	1   Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved extensions in terms of Trustees who turn 72 prior to December 31, 2013.
	2   Date shown is the earliest date a person has served for the Trust/MIP covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the Trust’s/MIP’s Board. As a result, although the chart shows certain Trustees as joining the Trust’s/MIP’s board in 2009, those Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees3
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	144 RICs consisting of 278 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	144 RICs consisting of 278 Portfolios	None
	3   Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

BLACKROCK FUNDS III DECEMBER 31, 2013 105

Officers and Trustees (concluded)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers1
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock since 2000; Head of the Global Cash Group since 2013; Co-head of the Global Cash and Securities Lending Group from 2010 to 2013; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009; and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2009	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2009	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Managing Director of BlackRock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary of the BlackRock-advised funds from 2010 to 2012; General Counsel and Chief Operating Officer of Uhuru Capital Management from 2009 to 2010; Executive Director and Counsel of Goldman Sachs Asset Management from 2005 to 2009.
	1 Officers of the Trust/MIP serve at the pleasure of the Board.

Investment Advisor BlackRock Fund Advisors San Francisco, CA 94105	Custodian and Accounting Agent State Street Bank and Trust Company Boston, MA 02110	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Sidley Austin LLP New York, NY 10019
Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP Philadelphia, PA 19103	Address of the Trust 400 Howard Street San Francisco, CA 94105

106 BLACKROCK FUNDS III DECEMBER 31, 2013

Additional Information

General Information

Electronic Delivery

Electronic copies of most financial reports and prospectuses are available on the LifePath Index Portfolios’ website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the LifePath Index Portfolios’ electronic delivery program.

To enroll:

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:

Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.

Shareholders Who Hold Accounts Directly with BlackRock:

1) Access the BlackRock website at http://www.blackrock.com/edelivery

2) Select “eDelivery” under the “More Information” section

3) Log into your account

Householding

The LifePath Index Portfolios 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 LifePath Index Portfolios at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The LifePath Index Portfolios/LifePath Index Master Portfolios 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 LifePath Index Portfolios’/LifePath Index Master Portfolios’ Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The LifePath Index Portfolios’/LifePath Index Master Portfolios’ 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 LifePath Index Portfolios/LifePath Index Master Portfolios use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the LifePath Index Portfolios/LifePath Index Master Portfolios voted proxies relating to securities held in the LifePath Index Portfolios’/LifePath Index Master Portfolios’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM EST 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/funds.

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.

BLACKROCK FUNDS III DECEMBER 31, 2013 107

Additional Information (concluded)

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.

108 BLACKROCK FUNDS III DECEMBER 31, 2013

A World-Class 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.

Equity Funds

BlackRock ACWI ex-US Index Fund

BlackRock All-Cap Energy & Resources Portfolio

BlackRock Basic Value Fund

BlackRock Capital Appreciation Fund

BlackRock Commodity Strategies Fund

BlackRock Disciplined Small Cap Core Fund

BlackRock Emerging Markets Fund

BlackRock Emerging Markets Dividend Fund

BlackRock Emerging Markets Long/Short Equity Fund

BlackRock Energy & Resources Portfolio

BlackRock Equity Dividend Fund

BlackRock EuroFund

BlackRock Flexible Equity Fund

BlackRock Focus Growth Fund

BlackRock Global Dividend Portfolio

BlackRock Global Long/Short Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Global SmallCap Fund

BlackRock Health Sciences Opportunities Portfolio

BlackRock International Fund

BlackRock International Index Fund

BlackRock International Opportunities Portfolio

BlackRock Large Cap Core Fund

BlackRock Large Cap Core Plus Fund

BlackRock Large Cap Growth Fund

BlackRock Large Cap Value Fund

BlackRock Latin America Fund

BlackRock Long-Horizon Equity Fund

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Mid Cap Value Opportunities Fund

BlackRock Natural Resources Trust

BlackRock Pacific Fund

BlackRock Real Estate Securities Fund

BlackRock Russell 1000^® Index Fund

BlackRock Science & Technology Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock Small Cap Growth Fund II

BlackRock Small Cap Index Fund

BlackRock S&P 500 Stock Fund

BlackRock U.S. Opportunities Portfolio

BlackRock Value Opportunities Fund

Taxable Fixed Income Funds

BlackRock Bond Index Fund

BlackRock Core Bond Portfolio

BlackRock CoreAlpha Bond Fund

BlackRock CoRI Funds

2015

2017

2019

2021

2023

BlackRock Emerging Markets Flexible Dynamic Bond Portfolio

BlackRock Floating Rate Income Portfolio

BlackRock Global Long/Short Credit Fund

BlackRock GNMA Portfolio

BlackRock High Yield Bond Portfolio

BlackRock Inflation Protected Bond Portfolio

BlackRock International Bond Portfolio

BlackRock Investment Grade Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Secured Credit Portfolio

BlackRock Short Obligations Fund

BlackRock Short-Term Treasury Fund

BlackRock Strategic Income Opportunities Portfolio

BlackRock Total Return Fund

BlackRock U.S. Government Bond Portfolio

BlackRock U.S. Mortgage Portfolio

BlackRock Ultra-Short Obligations Fund

BlackRock World Income Fund

Municipal Fixed Income Funds

BlackRock California Municipal Bond Fund

BlackRock High Yield Municipal Fund

BlackRock National Municipal Fund

BlackRock New Jersey Municipal Bond Fund

BlackRock New York Municipal Bond Fund

BlackRock Pennsylvania Municipal Bond Fund

BlackRock Short-Term Municipal Fund

BlackRock Strategic Municipal Opportunities Fund

Mixed Asset Funds

BlackRock Balanced Capital Fund	LifePath Active Portfolios			LifePath Index Portfolios
BlackRock Emerging Market Allocation Portfolio		2015	2040		Retirement	2040
BlackRock Global Allocation Fund		2020	2045		2020	2045
BlackRock Managed Volatility Portfolio		2025	2050		2025	2050
BlackRock Multi-Asset Income Portfolio		2030	2055		2030	2055
BlackRock Multi-Asset Real Return Fund		2035			2035
BlackRock Strategic Risk Allocation Fund
BlackRock Prepared Portfolios	LifePath Portfolios
Conservative Prepared Portfolio		Retirement	2040
Moderate Prepared Portfolio		2020	2045
Growth Prepared Portfolio		2025	2050
Aggressive Growth Prepared Portfolio		2030	2055
		2035

BlackRock mutual funds are currently distributed by BlackRock Investments, LLC. You should consider the investment objectives, risks, charges and expenses of the funds under consideration carefully before investing. Each fund’s prospectus contains this and other information and is available at www.blackrock.com or by calling (800) 441-7762 or from your financial advisor. The prospectus should be read carefully before investing.

BLACKROCK FUNDS III DECEMBER 31, 2013 109

This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the LifePath Index Portfolios unless accompanied or preceded by that LifePath Index Portfolio’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.

Investment in foreign securities involves special risks including fluctuating foreign exchange rates, foreign government regulations, differing degrees of liquidity and the possibility of substantial volatility due to adverse political, economic or other developments.

LPindex-12/13-AR

DECEMBER 31, 2013

  ANNUAL REPORT  

BlackRock Russell 1000^® Index Fund  |  of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
Dear Shareholder		3
Annual Report:
Fund Summary		4
About Fund Performance		6
Disclosure of Expenses		6
Derivative Financial Instruments		6
Fund Financial Statements:
Statement of Assets and Liabilities		7
Statement of Operations		8
Statements of Changes in Net Assets		9
Fund Financial Highlights		10
Fund Notes to Financial Statements		13
Fund Report of Independent Registered Public Accounting Firm		16
Important Tax Information		16
Master Portfolio Information		17
Master Portfolio Financial Statements:
Schedule of Investments		18
Statement of Assets and Liabilities		30
Statement of Operations		31
Statements of Changes in Net Assets		32
Master Portfolio Financial Highlights		33
Master Portfolio Notes to Financial Statements		34
Master Portfolio Report of Independent Registered Public Accounting Firm		39
Officers and Trustees		40
Additional Information		43
A World-Class Mutual Fund Family		45

2 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013

Dear Shareholder

Risk assets (such as equities) powered higher in 2013, for the most part unscathed by ongoing political and economic uncertainty. While monetary policy was the main driving force behind the rally in risk assets, it was also the main culprit for the bouts of volatility during the year.

Equity markets rallied right out of the gate in January with cash pouring back in from the sidelines after a potential US fiscal crisis (i.e., the “fiscal cliff”) was averted with a last-minute tax deal. Key indicators signaling modest but broad-based improvements in the world’s major economies and a calming in Europe’s debt troubles fostered an aura of comfort for investors. Global economic momentum slowed in February, however, and the pace of the rally moderated. In the months that followed, US stocks outperformed international stocks, as the US showed greater stability than most other regions. Slow but positive growth was sufficient to support corporate earnings, while uncomfortably high unemployment reinforced expectations that the Federal Reserve would continue its aggressive monetary stimulus program. International markets experienced higher levels of volatility given a resurgence of political instability in Italy, a banking crisis in Cyprus and a generally poor outlook for European economies. Emerging markets significantly lagged the rest of the world as growth in these economies fell short of expectations.

Financial markets were rattled in May when Fed Chairman Bernanke mentioned the possibility of reducing — or “tapering” — the central bank’s asset purchase programs — comments that were widely misinterpreted as signaling an end to the Fed’s zero-interest-rate policy. US Treasury yields rose sharply, triggering a steep sell-off across fixed income markets. (Bond prices move in the opposite direction of yields.) Equity prices also suffered as investors feared the implications of a potential end of a program that had greatly supported the markets. Risk assets rebounded in late June, however, when the Fed’s tone turned more dovish, and improving economic indicators and better corporate earnings helped extend gains through most of the summer.

The fall was a surprisingly positive period for most asset classes as the Fed defied market expectations with its decision to delay tapering. Easing of political tensions that had earlier surfaced in Egypt and Syria and the re-election of Angela Merkel as Chancellor of Germany also boosted investor sentiment. Higher volatility returned in late September when the US Treasury Department warned that the national debt would soon breach its statutory maximum. The ensuing political brinksmanship led to a partial government shutdown, roiling global financial markets through the first half of October, but the rally quickly resumed when politicians engineered a compromise to reopen the government and extend the debt ceiling, at least temporarily.

The remainder of the year was generally positive for stock markets in the developed world, although investors continued to grapple with uncertainty about when and how much the Fed would scale back on stimulus. On the one hand, persistent weak growth and low inflation provided significant latitude for monetary policy decisions and investors were encouraged by dovish comments from Fed Chair-to-be Janet Yellen. On the other hand, US housing and manufacturing reports had begun to signal fundamental improvement in the economy. The long-awaited taper announcement ultimately came in mid-December. The Fed reduced the amount of its monthly asset purchases, but at the same time, extended its time horizon for maintaining low short-term interest rates. Markets reacted positively as this move signaled the Fed’s perception of real improvement in the economy and investors felt relief from the tenacious anxiety that had gripped them throughout the year.

Accommodative monetary policy and the avoidance of major risks made 2013 a strong year for most equity markets. US stocks were the strongest performers for the six- and 12-month periods ended December 31. In contrast, emerging markets were weighed down by uneven growth and structural imbalances. Rising US Treasury yields led to a rare annual loss in 2013 for Treasury bonds and other high-quality fixed income sectors including tax-exempt municipals and investment grade corporate bonds. High yield bonds, to the contrary, generated gains driven by income-oriented investors seeking yield in the low-rate environment. Short-term interest rates remained near zero, keeping yields on money market securities near historical lows.

At BlackRock, we believe investors need to think globally and extend their scope across a broader array of asset classes and be prepared to move freely as market conditions change over time. We encourage you to talk with your financial advisor and visit www.blackrock.com for further insight about investing in today’s world.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

“While monetary policy was the main driving force behind the rally in risk assets, it was also the main culprit for the bouts of volatility during the year.”

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2013
	6-month			12-month
US large cap equities (S&P 500® Index)		16.31	%		32.39	%
US small cap equities (Russell 2000® Index)		19.82			38.82
International equities (MSCI Europe, Australasia, Far East Index)		17.94			22.78
Emerging market equities (MSCI Emerging Markets Index)		7.70			(2.60	)
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)		0.03			0.07
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		(3.10	)		(7.83	)
US investment grade bonds (Barclays US Aggregate Bond Index)		0.43			(2.02	)
Tax-exempt municipal bonds (S&P Municipal Bond Index)		0.00			(2.55	)
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)		5.94			7.44
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

THIS PAGE NOT PART OF YOUR FUND REPORT 3

Fund Summary as of December 31, 2013

Investment Objective

BlackRock Russell 1000^® Index Fund’s (the “Fund”) investment objective is to match the performance of the Russell 1000^® Index as closely as possible before the deduction of Fund expenses.

Portfolio Management Commentary

How did the Fund perform?

Ÿ For the 12 months ended December 31, 2013, the Fund’s Institutional Shares returned 33.09%, Investor A Shares returned 32.35% and Class K Shares returned 32.80%. The benchmark Russell 1000^® Index returned 33.11% for the same period.

Ÿ Returns for the Fund’s respective share classes differ from the benchmark index based on individual share-class expenses. The Fund invests all of its assets in Russell 1000^® Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio.

Describe the market environment.

Ÿ US equity markets began 2013 with a powerful relief rally after the United States averted the worst of its potential fiscal crisis with a last-minute tax deal. The rally softened in February, however, as economic momentum slowed. Later in the first quarter, a stalemate presidential election in Italy and a severe banking crisis in Cyprus reminded investors that political and financial instability in Europe continued to pose risks. The ascent of equities persevered as increased global liquidity kept interest rates low and investors turned to riskier asset classes in search of yield.

Ÿ As the year progressed, the direction of stock markets became increasingly dominated by speculation around the future of monetary policy. Sluggish US growth, ironically, was often conducive to positive stock market performance as weak economic data reinforced investors’ expectations that the US Federal Reserve (the “Fed”) would maintain its accommodative stance. Additionally, the modest pace of economic growth contributed to corporate profit margins as the US recovery was strong enough to support revenues while nearly stagnant wage growth kept costs low.

Ÿ After peaking in late May, stock markets recoiled when Fed Chairman Bernanke mentioned the possibility of gradually reducing (or “tapering”) monetary stimulus before the end of 2013. Volatility picked up considerably as many investors misinterpreted the Fed’s remarks as signaling the end of low short-term interest rates. However, equities staged a swift mid-summer rebound when the Fed’s tone turned more dovish. Later in the third quarter, mixed economic data drove high volatility as it made investors increasingly anxious about when and how much the Fed would scale back on its monthly asset purchase program.

Ÿ September brought another sharp rally as the Fed defied market expectations with its decision to delay tapering its asset purchases. But the equity market advance was interrupted again in late September when the US teetered on breaching the national debt ceiling and political brinksmanship led to a partial government shutdown. The rally quickly resumed in mid-October when politicians engineered a compromise to reopen the government and extend the debt ceiling until early 2014.

Ÿ As economic indicators improved later in the fall, investors grappled with rising uncertainty around the timing of the anticipated Fed taper. This anxiety was ultimately relieved when the central bank announced the commencement of tapering in mid-December. Investors reacted positively to this policy move as it signaled the Fed’s perception of real improvement in US growth. Sentiment was also buoyed by the extension of the Fed’s expected time horizon for maintaining low short-term interest rates.

Describe recent portfolio activity.

Ÿ During the period, as changes were made to the composition of the Russell 1000^® Index, the Master Portfolio purchased and sold securities to maintain its objective of replicating the risks and return of the benchmark index.

Describe portfolio positioning at period end.

Ÿ The Master Portfolio 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.

4 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013

Total Return Based on a $10,000 Investment

¹  Assuming transaction costs and other operating expenses, including administration fees, if any.

²  The Fund invests all of its assets in the Master Portfolio. The Master Portfolio will be substantially invested in equity securities in the Russell 1000^® Index and will invest, under normal circumstances, at least 80% of its assets in securities or other financial instruments whose price is linked to the value of common stock.

³  The index measures the performance of the large cap segment of the US 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.

⁴  Commencement of operations.

Performance Summary for the Period Ended December 31, 2013

				Average Annual Total  Returns5
	6-Month Total Returns			1 Year			Since Inception6
Institutional		17.12	%		33.09	%		15.18	%
Investor A		16.58			32.35			14.77
Class K		16.73			32.80			15.09
Russell 1000® Index		16.86			33.11			15.32

⁵  See “About Fund Performance” on Page 6 for a detailed description of share classes, including any related sales charges and fees.

⁶  The Fund commenced operations on March 31, 2011.

Past performance is not indicative of future results.

Expense Example

	Actual						Hypothetical8
	Beginning Account Value July 1, 2013		Ending Account Value December 31, 2013		Expenses Paid During the Period7		Beginning Account Value July 1, 2013		Ending Account Value December 31, 2013		Expenses Paid During the Period7		Annualized Expense Ratio
Institutional	$	1,000.00	$	1,171.20	$	1.26	$	1,000.00	$	1,024.05	$	1.17		0.23	%
Investor A	$	1,000.00	$	1,165.80	$	2.62	$	1,000.00	$	1,022.79	$	2.45		0.48	%
Class K	$	1,000.00	$	1,167.30	$	0.98	$	1,000.00	$	1,024.30	$	0.92		0.18	%

⁷  For each class of the Fund, expenses are equal to the annualized net expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown). Because the Fund invests significantly in the Master Portfolio, the expense example reflects the net expenses of both the Fund and the Master Portfolio in which it invests.

⁸  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

See “Disclosure of Expenses” on page 6 for further information on how expenses were calculated.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013 5

About Fund Performance

Ÿ Institutional and Class K Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors.

Ÿ Investor A Shares are not subject to any sales charge and bear no ongoing distribution fee. These shares are subject to an ongoing service fee of 0.25% per year.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in the performance tables on the previous page assume reinvestment of all dividends and capital gain distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Dividends paid to each class of shares will vary because of the different levels of administration and distribution fees applicable to each class, which are deducted from income available to be paid to shareholders. The Fund’s administrator waived and/or reimbursed a portion of the Fund’s expenses. Without such waiver, the Fund’s performance would have been lower.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including administration fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses and other Fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2013 and held through December 31, 2013) 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 other funds’ shareholder reports.

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 Master Portfolio may invest in various derivative financial instruments, including financial futures contracts, as specified in Note 4 of the Master Portfolio’s Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market, and/or equity risks. Derivative financial instruments 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 derivative financial instrument. The Master Portfolio’s ability to use a derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require the Master Portfolio to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation the Master Portfolio can realize on an investment, may result in lower dividends paid to shareholders or may cause the Master Portfolio to hold an investment that it might otherwise sell. The Master Portfolio’s investments in these instruments are discussed in detail in the Master Portfolio’s Notes to Financial Statements.

6 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013

Statement of Assets and Liabilities BlackRock Russell 1000^® Index Fund

December 31, 2013
Assets
Investments at value — Master Portfolio (cost — $55,393,664)	$	75,999,974
Capital shares sold receivable		2,121,792
Receivable from administrator		9,839
Prepaid expenses		20,218
Total assets		78,151,823
Liabilities
Contributions payable to the Master Portfolio		2,103,821
Capital gain distributions payable		1,799,214
Income dividends payable		308,100
Professional fees payable		27,370
Capital shares redeemed payable		17,971
Printing fees payable		3,647
Administration fees payable		4,911
Service fees payable		1,325
Transfer agent fees payable		1,749
Other accrued expenses payable		695
Total liabilities		4,268,803
Net Assets	$	73,883,020
Net Assets Consist of
Paid-in capital	$	54,258,635
Undistributed net investment income		4,328
Accumulated net realized loss allocated from the Master Portfolio		(986,253	)
Net unrealized appreciation/depreciation allocated from the Master Portfolio		20,606,310
Net Assets	$	73,883,020
Net Asset Value
Institutional — Based on net assets of $183,164 and 13,580 shares outstanding, unlimited number of shares authorized, no par value	$	13.49
Investor A — Based on net assets of $6,454,194 and 480,720 shares outstanding, unlimited number of shares authorized, no par value	$	13.43
Class K — Based on net assets of $67,245,662 and 5,003,429 shares outstanding, unlimited number of shares authorized, no par value	$	13.44

See Notes to Financial Statements.
	BLACKROCK RUSSELL 1000® INDEX FUND	DECEMBER 31, 2013	7

Statement of Operations BlackRock Russell 1000^® Index Fund

Year Ended December 31, 2013
Investment Income
Net investment income allocated from the Master Portfolio:
Dividends — unaffiliated	$	1,313,176
Foreign taxes withheld		(500	)
Dividends — affiliated		16,212
Securities lending — affiliated — net		15,860
Income — affiliated		3,193
Other income — affiliated		1,184
Interest		31
Expenses		(52,029	)
Total income		1,297,127
Fund Expenses
Administration		53,191
Professional		43,320
Printing		31,646
Registration		31,627
Service — Investor A		10,368
Transfer agent — Investor A		2,928
Transfer agent — Institutional		237
Transfer agent — Class K		149
Miscellaneous		8,277
Recoupment of past waived fees — class specific		22
Total expenses		181,765
Less administration fees waived		(53,191	)
Less transfer agent fees waived — Institutional		(19	)
Less transfer agent fees waived — Investor A		(147	)
Less transfer agent fees waived — Class K		(121	)
Less transfer agent fees reimbursed — Institutional		(166	)
Less transfer agent fees reimbursed — Investor A		(834	)
Less transfer agent fees reimbursed — Class K		(28	)
Less fees waived and/or reimbursed by administrator		(46,899	)
Total expenses after fees waived and/or reimbursed		80,360
Net investment income		1,216,767
Realized and Unrealized Gain (Loss) Allocated from the Master Portfolio
Net realized gain from investment and financial futures contracts		1,501,144
Net change in unrealized appreciation/depreciation on investments and financial futures contracts		16,064,264
Total realized and unrealized gain		17,565,408
Net Increase in Net Assets Resulting from Operations	$	18,782,175

See Notes to Financial Statements.
8	BLACKROCK RUSSELL 1000® INDEX FUND	DECEMBER 31, 2013

Statements of Changes in Net Assets BlackRock Russell  1000^® Index Fund

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012
Operations
Net investment income	$	1,216,767		$	1,123,481
Net realized gain		1,501,144			539,039
Net change in unrealized appreciation/depreciation		16,064,264			6,380,008
Net increase in net assets resulting from operations		18,782,175			8,042,528
Dividends and Distributions to Shareholders From1
Net investment income:
Institutional		(2,078	)		(540	)
Investor A		(72,388	)		(40,671	)
Class K		(1,146,332	)		(1,082,047	)
Net realized gain:
Institutional		(4,993	)		(282	)
Investor A		(179,276	)		(22,872	)
Class K		(1,892,894	)		(560,171	)
Decrease in net assets resulting from dividends and distributions to shareholders		(3,297,961	)		(1,706,583	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(593,137	)		3,929,677
Net Assets
Total increase in net assets		14,891,077			10,265,622
Beginning of year		58,991,943			48,726,321
End of year	$	73,883,020		$	58,991,943
Undistributed net investment income, end of year	$	4,328		$	8,359

¹  Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK RUSSELL 1000® INDEX FUND	DECEMBER 31, 2013	9

Financial Highlights BlackRock Russell 1000^® Index Fund

	Institutional
	Year Ended December 31,						Period March 31, 20111 to December 31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.62		$	9.40		$	10.00
Net investment income2		0.23			0.21			0.13
Net realized and unrealized gain (loss)		3.26			1.33			(0.60	)
Net increase (decrease) from investment operations		3.49			1.54			(0.47	)
Dividends and distributions from:3
Net investment income		(0.23	)		(0.21	)		(0.13	)
Net realized capital gain		(0.39	)		(0.11	)		(0.00	)4
Return of capital		—			—			(0.00	)4
Total dividends and distributions		(0.62	)		(0.32	)		(0.13	)
Net asset value, end of period	$	13.49		$	10.62		$	9.40
Total Investment Return5
Based on net asset value		33.09%			16.42%			(4.72)%	6
Ratios to Average Net Assets7
Total expenses		0.56%	8		0.65%	9		1.84%	10,11,12
Total expenses after fees waived and/or reimbursed		0.23%	8		0.23%	9		0.22%	10,11
Net investment income		1.80%	8		2.07%	9		1.86%	10,11
Supplemental Data
Net assets, end of period (000)	$	183		$	28		$	24
Portfolio turnover of the Master Portfolio		14%			16%			10%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Amount is greater than ($0.005) per share.

⁵  Where applicable, assumes the reinvestment of dividends and distributions.

⁶  Aggregate total investment return.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁸  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01% for the year ending December 31, 2013.

⁹  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of less than 0.01%.

¹⁰  Annualized.

¹¹  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.24%.

¹²  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 1.84%.

See Notes to Financial Statements.
10	BLACKROCK RUSSELL 1000® INDEX FUND	DECEMBER 31, 2013

Financial Highlights (continued) BlackRock Russell 1000^® Index Fund

	Investor A
	Year Ended December 31,						Period March 31, 20111 to December 31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.61		$	9.39		$	10.00
Net investment income2		0.19			0.19			0.13
Net realized and unrealized gain (loss)		3.22			1.33			(0.62	)
Net increase (decrease) from investment operations		3.41			1.52			(0.49	)
Dividends and distributions from:3
Net investment income		(0.20	)		(0.19	)		(0.12	)
Net realized capital gain		(0.39	)		(0.11	)		(0.00	)4
Return of capital		—			—			(0.00	)4
Total dividends and distributions		(0.59	)		(0.30	)		(0.12	)
Net asset value, end of period	$	13.43		$	10.61		$	9.39
Total Investment Return5
Based on net asset value		32.35%			16.18%			(4.93)%	6
Ratios to Average Net Assets7
Total expenses		0.66%	8		0.83%	9		1.40%	10,11,12
Total expenses after fees waived and/or reimbursed		0.48%	8		0.45%	9		0.45%	10,11
Net investment income		1.56%	8		1.83%	9		1.80%	10,11
Supplemental Data
Net assets, end of period (000)	$	6,454		$	2,310		$	1,918
Portfolio turnover of the Master Portfolio		14%			16%			10%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Amount is greater than ($0.005) per share.

⁵  Where applicable, assumes the reinvestment of dividends and distributions.

⁶  Aggregate total investment return.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁸  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01% for the year ending December 31, 2013.

⁹  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of less than 0.01%.

¹⁰  Annualized.

¹¹  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.24%.

¹²  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 1.40%.

See Notes to Financial Statements.
	BLACKROCK RUSSELL 1000® INDEX FUND	DECEMBER 31, 2013	11

Financial Highlights (concluded) BlackRock Russell 1000^® Index Fund

	Class K
	Year Ended December 31,						Period March 31, 20111 to December 31, 2011
	2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.61		$	9.40		$	10.00
Net investment income2		0.23			0.22			0.13
Net realized and unrealized gain (loss)		3.22			1.32			(0.60	)
Net increase (decrease) from investment operations		3.45			1.54			(0.47	)
Dividends and distributions from:3
Net investment income		(0.23	)		(0.22	)		(0.13	)
Net realized capital gain		(0.39	)		(0.11	)		(0.00	)4
Return of capital		—			—			(0.00	)4
Total dividends and distributions		(0.62	)		(0.33	)		(0.13	)
Net asset value, end of period	$	13.44		$	10.61		$	9.40
Total Investment Return5
Based on net asset value		32.80%			16.37%			(4.68)%	6
Ratios to Average Net Assets7
Total expenses		0.33%	8		0.52%	9		1.11%	10,11,12
Total expenses after fees waived and/or reimbursed		0.18%	8		0.18%	9		0.18%	10,11
Net investment income		1.85%	8		2.11%	9		2.02%	10,11
Supplemental Data
Net assets, end of period (000)	$	67,246		$	56,654		$	46,785
Portfolio turnover of the Master Portfolio		14%			16%			10%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Determined in accordance with federal income tax regulations.

⁴  Amount is greater than ($0.005) per share.

⁵  Where applicable, assumes the reinvestment of dividends and distributions.

⁶  Aggregate total investment return.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated gross expenses and/or net investment income.

⁸  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01% for the year ending December 31, 2013.

⁹  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of less than 0.01%.

¹⁰  Annualized.

¹¹  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.24%.

¹²  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 1.12%.

See Notes to Financial Statements.
12	BLACKROCK RUSSELL 1000® INDEX FUND	DECEMBER 31, 2013

Notes to Financial Statements BlackRock Russell  1000^® Index Fund

1. Organization:

BlackRock Russell 1000^® Index Fund (the “Fund”), a series of BlackRock Funds III (the “Trust”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. The Trust is organized as a Delaware statutory trust. The Fund seeks to achieve its investment objective by investing substantially all of its assets the Master Portfolio, a series of Master Investment Portfolio (“MIP”), an affiliate of the Fund, which has the same investment objective and strategies as the Fund. The value of the Fund’s investment in the Master Portfolio reflects the Fund’s proportionate interest in the net assets of the Master Portfolio. The performance of the Fund is directly affected by the performance of the Master Portfolio. The percentage of the Master Portfolio owned by the Fund at December 31, 2013 was 6.7%. As such, the financial statements of the Master Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with the Fund’s financial statements. The Fund offers multiple classes of shares. Institutional and Class K Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are sold without a sales charge. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that Investor A Shares bear certain expenses related to the shareholder servicing of such shares. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing expenditures.

2. Significant Accounting Policies:

The Fund’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in 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 following is a summary of the significant accounting policies followed by the Fund:

Valuation: US 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 policy is to fair value its financial instruments at market value. The Fund records its investment in the Master Portfolio at fair value based on the Fund’s proportionate interest in the net assets of the Master Portfolio. Valuation of securities held by the Master Portfolio is discussed in Note 2 of the Master Portfolio’s Notes to Financial Statements, which are included elsewhere in this report.

Investment Transactions and Investment Income: For financial reporting purposes, contributions to and withdrawals from the Master Portfolio are accounted on a trade date basis. The Fund records daily its proportionate share of the Master Portfolio’s income, expenses and realized and unrealized gains and losses. Realized and unrealized gains and losses are adjusted utilizing partnership tax allocation rules. In addition, the Fund accrues its own expenses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

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

Income Taxes: 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 US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s US federal tax returns remains open for each of the two years ended December 31, 2013 and period ended December 31, 2011. 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 the tax laws and regulations and their application to the Fund’s facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

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

3. Investment Advisory Agreement and Other Transactions with Affiliates:

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

The Trust, on behalf of the Fund, entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL”), an indirect, wholly owned subsidiary of BlackRock, to provide administrative services (other than investment advice and related portfolio activities). For such services, the Fund pays BAL a monthly fee at an annual rate of 0.08% of the average daily value of the Fund’s net assets. The Fund does not pay an investment advisory fee or investment management fee. Effective July 1, 2012, BAL replaced BlackRock Institutional Trust Company, N.A. (“BTC”) as the Fund’s administrator.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013 13

Notes to Financial Statements (continued) BlackRock Russell  1000^® Index Fund

BlackRock Fund Advisors (“BFA”), the investment advisor for the Master Portfolio, BAL and previously, BTC, contractually agreed to waive and/or reimburse fees or expenses, in order to limit expenses, excluding interest expense, dividend expense, income 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. The expense limitation as a percentage of average daily net assets is as follows: 0.23% for Institutional Shares, 0.48% for Investor A Shares and 0.18% for Class K Shares. BFA and BAL have agreed not to reduce or discontinue this contractual waiver or reimbursement prior to May 1, 2014 unless approved by the Board, including a majority of the independent Trustees. The Fund may have to repay some of these waivers and reimbursements to BAL and BTC in the following two years. These amounts are shown as or included in administration fees waived, transfer agent fees waived — class specific, transfer agent fees reimbursed — class specific and fees reimbursed by administrator in the Statement of Operations.

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 or reimbursement from BFA, BAL or previously BTC, as applicable, are less than the expense limit for that share class, the share class is required to repay BFA, BAL or previously BTC, as applicable, up to the lesser of (a) the amount of fees waived or expenses reimbursed during the prior two fiscal years under the agreement and (b) the amount by which the expense limit for that share class exceeds the operating expenses of the share class for the current fiscal year, 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) BFA, BAL or previously BTC or an affiliate serves as the Fund’s investment advisor or administrator. In the event the expense limit for a share class is changed subsequent to a fiscal year in which BFA, BAL or previously BTC, as applicable, becomes entitled to reimbursement for fees waived or reimbursed, the amount available to reimburse BFA, BAL or previously BTC, as applicable, shall be calculated by reference to the expense limit for that share class in effect at the time BFA, BAL or previously BTC became entitled to receive such reimbursement, rather than the subsequently changed expense limit for that share class.

For the year ended December 31, 2013, BAL recouped class specific waivers and/or reimbursements of $22, which is included in Recoupment of past fees waived — class specific in the Statement of Operations.

On December 31, 2013, 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,
	2014				2015
	BTC		BAL		BAL
Fund level	$	111,439	$	64,013	$	100,090
Institutional	$	14	$	8	$	185
Investor A		—	$	1,004	$	981
Class K	$	870		—	$	149

The following Fund level and class specific waivers and/or reimbursements previously recorded by the Fund, which were subject to recoupment by the Manager, expired on December 31, 2013:

	BTC
Fund level	$	208,239
Institutional	$	18
Class K	$	2,343

The Trust, on behalf of the Fund, entered into a separate Distribution Agreement and Investor A Shares Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of BlackRock. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing service fees with respect to Investor A Shares. The fees are accrued daily and paid monthly at an annual rate of 0.25% based upon the average daily net assets of the Investor A Shares.

Pursuant to sub-agreements with BRIL, broker-dealers and BRIL provide shareholder servicing to the Fund. The ongoing service fee compensates BRIL and each broker-dealer for providing shareholder servicing related services to Investor A shareholders.

BAL maintains a call center, which is responsible for providing certain shareholder services to the Fund, such as responding to shareholder inquiries and processing transactions based upon instructions from shareholders with respect to the subscription and redemption of Fund shares. For the year ended December 31, 2013, the Fund reimbursed BAL the following amounts for costs incurred in running the call center, which are included in transfer agent — class specific in the Statement of Operations:

Institutional	$	166
Investor A	$	834
Class K	$	28

Certain officers and/or trustees of the Trust are officers and/or directors of BlackRock or its affiliates. The Fund reimburses the Administrator for a portion of the compensation paid to the Trust’s Chief Compliance Officer.

14 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013

Notes to Financial Statements (concluded) BlackRock Russell  1000^® Index Fund

4. Income Tax Information:

The tax character of distributions paid during fiscal years ended December 31, 2013 and December 31, 2012 was as follows:

	12/31/13		12/31/12
Ordinary income	$	1,540,824	$	1,316,285
Long-term capital gains		1,757,137		390,298
Total	$	3,297,961	$	1,706,583

As of December 31, 2013, the tax components of accumulated net earnings were as follows:

Undistributed ordinary income	$	77,502
Undistributed long-term capital gains		213,513
Qualified late-year losses1		(531	)
Net unrealized gains2		19,333,901
Total	$	19,624,385

¹  The Fund has elected to defer certain qualified late-year losses and recognize such losses in the year ending December 31, 2014.

²  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the timing and recognition of partnership income.

5. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2013						Year Ended December 31, 2012
	Shares			Amount			Shares			Amount
Institutional
Shares sold		11,914		$	146,566			141		$	1,500
Shares issued to shareholders in reinvestment of dividends and distributions		416			5,533			2			24
Shares redeemed		(1,393	)		(17,962	)		—			—
Net increase		10,937		$	134,137			143		$	1,524
Investor A
Shares sold		303,478		$	3,788,551			44,913		$	470,413
Shares issued to shareholders in reinvestment of dividends and distributions		19,062			250,199			5,943			62,803
Shares redeemed		(59,596	)		(765,167	)		(37,196	)		(391,681	)
Net increase		262,944		$	3,273,583			13,660		$	141,535
Class K
Shares sold		218,553		$	2,722,196			775,317		$	8,129,202
Shares issued to shareholders in reinvestment of dividends and distributions		233,924			3,037,651			9			94
Shares redeemed		(786,734	)		(9,760,704	)		(415,103	)		(4,342,678	)
Net increase (decrease)		(334,257	)	$	(4,000,857	)		360,223		$	3,786,618
Total Net Increase (Decrease)		(60,376	)	$	(593,137	)		374,026		$	3,929,677

At December 31, 2013, shares owned by affiliates were as follows:

	Shares
Institutional		2,500
Investor A		2,500
Class K		2,538

6. Subsequent Events:

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

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013 15

Report of Independent Registered Public Accounting Firm BlackRock Russell  1000^® Index Fund

To the Board of Trustees of BlackRock Funds III and the Shareholders of BlackRock Russell 1000^® Index Fund:

In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock Russell 1000^® Index Fund (the “Fund”), a series of BlackRock Funds III, at December 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2014

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by the Fund during the taxable year ended December 31, 2013.

	January — December 2013
Qualified Dividend Income for Individuals1		78.98%
Dividends Qualifying for the Dividend Received Deductions for Corporations1		76.99%

¹  The Fund hereby designates the percentage indicated above or the maximum amount allowable by law.

Additionally, the Fund distributed long-term capital gains of $0.006118 and $0.323765 per share to shareholders on record June 27, 2013 and December 30, 2013, respectively.

16 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013

Master Portfolio Information Russell 1000^®  Index Master Portfolio

As of December 31, 2013

Top Ten Holdings Percent of
Long-Term  Investments

Apple, Inc.	3	%
Exxon Mobil Corp.	2
Microsoft Corp.	2
Google, Inc.	2
General Electric Co.	2
Johnson & Johnson	1
Chevron Corp.	1
Procter & Gamble Co.	1
JPMorgan Chase & Co.	1
Wells Fargo & Co.	1

Sector Allocation Percent of
Long-Term  Investments

Information Technology	18	%
Financials	17
Consumer Discretionary	13
Health Care	12
Industrials	11
Energy	10
Consumer Staples	9
Materials	4
Utilities	3
Telecommunication Services	2
Investment Companies	1

For Master Portfolio compliance purposes, the Master Portfolio’s sector classifications refer to any 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 advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013 17

Schedule of Investments December 31, 2013 Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Aerospace & Defense — 2.6%
Alliant Techsystems, Inc.		1,856	$	225,838
BE Aerospace, Inc. (a)		5,686		494,853
The Boeing Co.		43,643		5,956,833
Exelis, Inc.		10,852		206,839
General Dynamics Corp.		17,186		1,642,122
Hexcel Corp. (a)		5,779		258,264
Honeywell International, Inc.		45,262		4,135,589
Huntington Ingalls Industries, Inc.		2,891		260,219
L-3 Communications Holdings, Inc.		5,182		553,749
Lockheed Martin Corp.		14,936		2,220,386
Northrop Grumman Corp.		12,774		1,464,028
Precision Castparts Corp.		8,419		2,267,237
Raytheon Co. (b)		18,678		1,694,095
Rockwell Collins, Inc. (b)		7,812		577,463
Spirit Aerosystems Holdings, Inc., Class A (a)		6,886		234,675
Textron, Inc.		15,998		588,086
TransDigm Group, Inc.		3,018		485,958
Triumph Group, Inc.		2,975		226,308
United Technologies Corp.		52,883		6,018,085
				29,510,627
Air Freight & Logistics — 0.7%
C.H. Robinson Worldwide, Inc. (b)		8,732		509,425
Expeditors International of Washington, Inc.		11,897		526,442
FedEx Corp.		18,230		2,620,927
United Parcel Service, Inc., Class B		41,670		4,378,684
				8,035,478
Airlines — 0.3%
Alaska Air Group, Inc.		4,052		297,295
American Airlines Group, Inc. (a)(b)		11,353		286,663
Copa Holdings SA, Class A		1,917		306,931
Delta Air Lines, Inc. (b)		49,282		1,353,777
Southwest Airlines Co.		41,577		783,311
United Continental Holdings, Inc. (a)		20,487		775,023
				3,803,000
Auto Components — 0.5%
Allison Transmission Holdings, Inc.		1,992		54,999
BorgWarner, Inc. (b)		13,304		743,827
Delphi Automotive PLC (b)		17,993		1,081,919
Gentex Corp.		8,276		273,025
The Goodyear Tire & Rubber Co.		14,157		337,644
Johnson Controls, Inc.		39,412		2,021,836
Lear Corp.		4,646		376,187
TRW Automotive Holdings Corp. (a)		6,198		461,069
Visteon Corp. (a)		2,870		235,024
				5,585,530
Automobiles — 0.6%
Ford Motor Co.		222,081		3,426,710
General Motors Co.		47,912		1,958,163
Harley-Davidson, Inc.		12,901		893,265
Tesla Motors, Inc. (a)(b)		4,813		723,779
Common Stocks	Shares		Value
Automobiles (concluded)
Thor Industries, Inc.		2,551		140,892
				7,142,809
Beverages — 1.8%
Beam, Inc.		9,263		630,440
Brown-Forman Corp., Class B		8,707		657,988
The Coca-Cola Co.		220,017		9,088,902
Coca-Cola Enterprises, Inc.		14,948		659,655
Constellation Brands, Inc., Class A (a)		8,854		623,145
Dr Pepper Snapple Group, Inc.		11,749		572,411
Molson Coors Brewing Co., Class B (b)		8,047		451,839
Monster Beverage Corp. (a)		7,727		523,659
PepsiCo, Inc.		88,956		7,378,011
				20,586,050
Biotechnology — 2.3%
Alexion Pharmaceuticals, Inc. (a)		11,229		1,494,131
Alkermes PLC (a)		7,285		296,208
Amgen, Inc.		43,143		4,925,205
Ariad Pharmaceuticals, Inc. (a)(b)		9,366		63,876
Biogen Idec, Inc. (a)		13,656		3,820,266
BioMarin Pharmaceutical, Inc. (a)		8,004		562,441
Celgene Corp. (a)		23,996		4,054,364
Cubist Pharmaceuticals, Inc. (a)		3,759		258,882
Gilead Sciences, Inc. (a)		87,745		6,594,037
Incyte Corp. Ltd. (a)		5,931		300,287
Medivation, Inc. (a)		4,321		275,766
Myriad Genetics, Inc. (a)(b)		4,381		91,913
Pharmacyclics, Inc. (a)		3,368		356,267
Regeneron Pharmaceuticals, Inc. (a)		4,609		1,268,581
Seattle Genetics, Inc. (a)		5,789		230,923
Theravance, Inc. (a)		4,546		162,065
United Therapeutics Corp. (a)		2,681		303,168
Vertex Pharmaceuticals, Inc. (a)		13,399		995,546
				26,053,926
Building Products — 0.2%
Allegion, Inc. (a)		5,744		253,827
AO Smith Corp. (b)		4,460		240,572
Armstrong World Industries, Inc. (a)		1,459		84,053
Fortune Brands Home & Security, Inc. (b)		9,504		434,333
Lennox International, Inc.		2,905		247,099
Masco Corp.		20,553		467,992
Owens Corning (a)		6,852		279,014
				2,006,890
Capital Markets — 2.3%
Affiliated Managers Group, Inc. (a)		3,036		658,448
American Capital Ltd. (a)		16,285		254,697
Ameriprise Financial, Inc.		11,597		1,334,235
Ares Capital Corp.		17,033		302,676
Artisan Partners Asset Management, Inc.		749		48,827
The Bank of New York Mellon Corp.		66,776		2,333,153
BlackRock, Inc. (b)(c)		7,512		2,377,323
The Charles Schwab Corp.		63,173		1,642,498

Portfolio Abbreviations

To simplify the listings of portfolio holdings in the Schedule of Investments, the names and descriptions of many of the securities have been abbreviated according to the following list: S&P Standard and Poor’s

See Notes to Financial Statements.

18 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Capital Markets (concluded)
E*Trade Financial Corp. (a)		16,528	$	324,610
Eaton Vance Corp. (b)		6,917		295,978
Federated Investors, Inc., Class B (b)		5,357		154,282
Franklin Resources, Inc.		23,641		1,364,795
The Goldman Sachs Group, Inc. (b)		26,376		4,675,410
Invesco Ltd.		25,592		931,549
Lazard Ltd., Class A		7,382		334,552
Legg Mason, Inc. (b)		6,406		278,533
LPL Financial Holdings, Inc.		3,270		153,788
Morgan Stanley		87,605		2,747,293
Northern Trust Corp.		13,770		852,225
Raymond James Financial, Inc.		7,024		366,583
SEI Investments Co.		8,308		288,537
State Street Corp.		26,241		1,925,827
T Rowe Price Group, Inc. (b)		14,924		1,250,184
TD Ameritrade Holding Corp.		13,414		411,005
Waddell & Reed Financial, Inc., Class A		4,952		322,474
				25,629,482
Chemicals — 2.5%
Air Products & Chemicals, Inc.		11,988		1,340,019
Airgas, Inc.		3,772		421,898
Albemarle Corp.		4,690		297,299
Ashland, Inc.		4,551		441,629
Cabot Corp.		3,682		189,255
Celanese Corp., Series A		9,194		508,520
CF Industries Holdings, Inc.		3,413		795,366
Cytec Industries, Inc.		2,105		196,102
The Dow Chemical Co.		69,588		3,089,707
E.I. du Pont de Nemours & Co.		52,954		3,440,421
Eastman Chemical Co.		8,914		719,360
Ecolab, Inc.		15,088		1,573,226
FMC Corp.		7,838		591,456
Huntsman Corp.		11,138		273,995
International Flavors & Fragrances, Inc.		4,694		403,590
Kronos Worldwide, Inc.		1,253		23,870
LyondellBasell Industries NV, Class A		23,358		1,875,180
Monsanto Co.		30,711		3,579,367
The Mosaic Co.		17,272		816,447
NewMarket Corp. (b)		547		182,780
PPG Industries, Inc.		8,208		1,556,729
Praxair, Inc.		17,016		2,212,591
Rockwood Holdings, Inc.		4,217		303,287
RPM International, Inc.		7,636		316,970
The Scotts Miracle-Gro Co., Class A		2,480		154,306
The Sherwin-Williams Co.		5,098		935,483
Sigma-Aldrich Corp.		6,928		651,301
The Valspar Corp. (b)		5,134		366,003
Westlake Chemical Corp.		1,177		143,676
WR Grace & Co. (a)		4,374		432,457
				27,832,290
Commercial Banks — 2.7%
Associated Banc-Corp		9,680		168,432
Bank of Hawaii Corp. (b)		2,589		153,114
BankUnited, Inc.		3,720		122,462
BB&T Corp.		40,376		1,506,832
BOK Financial Corp.		1,531		101,536
CapitalSource, Inc.		11,317		162,625
CIT Group, Inc.		11,587		604,030
City National Corp. (b)		2,693		213,340
Common Stocks	Shares		Value
Commercial Banks (concluded)
Comerica, Inc.		10,748		510,960
Commerce Bancshares, Inc.		4,659		209,236
Cullen/Frost Bankers, Inc. (b)		3,001		223,364
East West Bancorp, Inc.		7,849		274,480
Fifth Third Bancorp		50,337		1,058,587
First Citizens BancShares, Inc., Class A		437		97,289
First Horizon National Corp. (b)		13,925		162,226
First Niagara Financial Group, Inc.		20,414		216,797
First Republic Bank		6,707		351,112
Fulton Financial Corp. (b)		11,268		147,385
Huntington Bancshares, Inc. (b)		48,305		466,143
KeyCorp		52,990		711,126
M&T Bank Corp. (b)		7,425		864,419
The PNC Financial Services Group, Inc. (c)		30,459		2,363,009
Popular, Inc. (a)		5,959		171,202
Regions Financial Corp.		81,355		804,601
Signature Bank (a)		2,724		292,612
SunTrust Banks, Inc.		31,086		1,144,276
SVB Financial Group (a)		2,598		272,426
Synovus Financial Corp.		56,432		203,155
TCF Financial Corp.		9,461		153,741
US Bancorp		106,404		4,298,722
Valley National Bancorp (b)		11,517		116,552
Wells Fargo & Co.		277,715		12,608,261
Zions BanCorporation		10,598		317,516
				31,071,568
Commercial Services & Supplies — 0.4%
The ADT Corp. (b)		11,619		470,221
Cintas Corp. (b)		5,936		353,726
Clean Harbors, Inc. (a)		3,492		209,380
Copart, Inc. (a)		6,441		236,063
Covanta Holding Corp.		6,133		108,861
Iron Mountain, Inc. (b)		9,818		297,976
KAR Auction Services, Inc.		4,387		129,636
Pitney Bowes, Inc.		11,613		270,583
Republic Services, Inc.		15,570		516,924
Rollins, Inc.		3,681		111,497
RR Donnelley & Sons Co.		10,469		212,311
Stericycle, Inc. (a)		4,968		577,133
Waste Connections, Inc. (b)		7,112		310,297
Waste Management, Inc. (b)		26,876		1,205,926
				5,010,534
Communications Equipment — 1.6%
Brocade Communications Systems, Inc. (a)		25,592		227,001
Cisco Systems, Inc.		307,429		6,901,781
CommScope Holding Co., Inc. (a)		2,429		45,957
EchoStar Corp., Class A (a)		2,344		116,544
F5 Networks, Inc. (a)		4,539		412,413
Harris Corp.		6,311		440,571
JDS Uniphase Corp. (a)		13,422		174,217
Juniper Networks, Inc. (a)		29,145		657,803
Motorola Solutions, Inc.		13,935		940,612
Palo Alto Networks, Inc. (a)		1,927		110,745
Polycom, Inc. (a)(b)		9,976		112,030
QUALCOMM, Inc.		99,392		7,379,856
Riverbed Technology, Inc. (a)		9,433		170,549
				17,690,079

See Notes to Financial Statements.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013 19

Schedule of Investments (continued) Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Computers & Peripherals — 3.6%
3D Systems Corp. (a)(b)		5,793	$	538,344
Apple, Inc.		53,991		30,294,890
Diebold, Inc. (b)		3,679		121,444
EMC Corp.		120,862		3,039,679
Hewlett-Packard Co.		111,839		3,129,255
Lexmark International, Inc., Class A (b)		3,641		129,328
NCR Corp. (a)		9,473		322,650
NetApp, Inc.		19,576		805,357
SanDisk Corp.		13,001		917,091
Stratasys Ltd. (a)		2,034		273,980
Western Digital Corp.		12,159		1,020,140
				40,592,158
Construction & Engineering — 0.2%
AECOM Technology Corp. (a)		5,949		175,079
Chicago Bridge & Iron Co. NV		5,792		481,547
Fluor Corp.		9,376		752,799
Jacobs Engineering Group, Inc. (a)		7,533		474,504
KBR, Inc.		8,521		271,735
Quanta Services, Inc. (a)		12,042		380,045
URS Corp.		4,377		231,937
				2,767,646
Construction Materials — 0.1%
Eagle Materials, Inc. (b)		2,855		221,062
Martin Marietta Materials, Inc. (b)		2,655		265,341
Vulcan Materials Co.		7,485		444,759
				931,162
Consumer Finance — 0.9%
American Express Co.		54,505		4,945,238
Capital One Financial Corp.		33,608		2,574,709
Discover Financial Services		28,220		1,578,909
SLM Corp.		25,574		672,085
				9,770,941
Containers & Packaging — 0.3%
Aptargroup, Inc.		3,845		260,729
Avery Dennison Corp.		5,739		288,040
Ball Corp.		8,568		442,623
Bemis Co., Inc.		5,933		243,016
Crown Holdings, Inc. (a)		8,287		369,352
Greif, Inc., Class A		1,824		95,578
MeadWestvaco Corp.		10,194		376,464
Owens-Illinois, Inc. (a)		9,478		339,123
Packaging Corp. of America		5,649		357,469
Rock-Tenn Co., Class A		4,144		435,161
Sealed Air Corp.		11,282		384,152
Silgan Holdings, Inc. (b)		2,546		122,259
Sonoco Products Co.		5,837		243,520
				3,957,486
Distributors — 0.1%
Genuine Parts Co.		8,920		742,055
LKQ Corp. (a)		17,193		565,650
				1,307,705
Diversified Consumer Services — 0.1%
Apollo Education Group, Inc., Class A (a)		5,628		153,757
DeVry Education Group, Inc. (b)		3,634		129,007
H&R Block, Inc.		15,684		455,463
Service Corp. International		12,207		221,313
Common Stocks	Shares		Value
Diversified Consumer Services (concluded)
Weight Watchers International, Inc. (b)		1,568		51,634
				1,011,174
Diversified Financial Services — 3.4%
Bank of America Corp.		620,116		9,655,206
CBOE Holdings, Inc.		5,031		261,411
Citigroup, Inc.		175,036		9,121,126
CME Group, Inc.		18,236		1,430,797
ING US, Inc.		4,329		152,164
Interactive Brokers Group, Inc., Class A		2,716		66,107
IntercontinentalExchange Group, Inc.		6,569		1,477,499
JPMorgan Chase & Co.		217,414		12,714,371
Leucadia National Corp.		17,037		482,829
McGraw-Hill Financial, Inc.		15,774		1,233,527
Moody’s Corp.		11,193		878,315
MSCI, Inc. (a)		6,957		304,160
The NASDAQ OMX Group, Inc.		6,424		255,675
				38,033,187
Diversified Telecommunication Services — 1.9%
AT&T, Inc.		309,470		10,880,965
CenturyLink, Inc. (b)		35,050		1,116,342
Frontier Communications Corp. (b)		57,513		267,435
Intelsat SA (a)		1,314		29,618
Level 3 Communications, Inc. (a)		9,353		310,239
tw telecom, Inc. (a)		8,665		264,023
Verizon Communications, Inc.		164,574		8,087,166
Windstream Holdings, Inc. (b)		34,166		272,645
				21,228,433
Electric Utilities — 1.4%
American Electric Power Co., Inc.		27,969		1,307,271
Duke Energy Corp.		40,602		2,801,944
Edison International		18,753		868,264
Entergy Corp. (b)		10,258		649,024
Exelon Corp.		49,249		1,348,930
FirstEnergy Corp.		24,073		793,927
Great Plains Energy, Inc.		8,866		214,912
Hawaiian Electric Industries, Inc. (b)		5,690		148,281
ITC Holdings Corp.		3,016		288,993
NextEra Energy, Inc.		24,432		2,091,868
Northeast Utilities		18,110		767,683
OGE Energy Corp.		11,419		387,104
Pepco Holdings, Inc. (b)		14,329		274,114
Pinnacle West Capital Corp.		6,335		335,248
PPL Corp.		36,354		1,093,892
The Southern Co.		50,078		2,058,707
Westar Energy, Inc. (b)		7,332		235,870
Xcel Energy, Inc.		28,622		799,699
				16,465,731
Electrical Equipment — 0.7%
AMETEK, Inc.		14,019		738,381
The Babcock & Wilcox Co. (b)		6,471		221,244
Eaton Corp. PLC		27,220		2,071,986
Emerson Electric Co.		41,357		2,902,434
Hubbell, Inc., Class B		3,419		372,329
Regal-Beloit Corp.		2,595		191,303
Rockwell Automation, Inc.		8,038		949,770
Roper Industries, Inc.		5,700		790,476
SolarCity Corp. (a)		1,358		77,162
				8,315,085

See Notes to Financial Statements.

20 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Electronic Equipment, Instruments & Components — 0.4%
Amphenol Corp., Class A		9,199	$	820,367
Arrow Electronics, Inc. (a)		6,031		327,182
Avnet, Inc.		7,896		348,292
AVX Corp.		2,691		37,486
CDW Corp. (b)		1,563		36,512
Corning, Inc.		84,879		1,512,544
Dolby Laboratories, Inc., Class A (a)(b)		2,608		100,564
FLIR Systems, Inc.		8,181		246,248
Ingram Micro, Inc., Class A (a)		8,787		206,143
IPG Photonics Corp. (a)(b)		1,872		145,286
Jabil Circuit, Inc.		11,690		203,874
National Instruments Corp.		5,556		177,903
Tech Data Corp. (a)		2,183		112,643
Trimble Navigation Ltd. (a)		14,730		511,131
Vishay Intertechnology, Inc. (a)		7,606		100,855
				4,887,030
Energy Equipment & Services — 1.7%
Atwood Oceanics, Inc. (a)		3,307		176,561
Baker Hughes, Inc.		25,424		1,404,930
Cameron International Corp. (a)		14,277		849,910
Diamond Offshore Drilling, Inc. (b)		3,970		225,973
Dresser-Rand Group, Inc. (a)		4,391		261,835
Dril-Quip, Inc. (a)		2,340		257,236
FMC Technologies, Inc. (a)		13,654		712,875
Frank’s International NV		2,006		54,162
Halliburton Co.		48,801		2,476,651
Helmerich & Payne, Inc. (b)		5,463		459,329
McDermott International, Inc. (a)		13,667		125,190
Nabors Industries Ltd.		16,981		288,507
National Oilwell Varco, Inc.		24,584		1,955,166
Oceaneering International, Inc.		6,231		491,501
Oil States International, Inc. (a)		3,167		322,147
Patterson-UTI Energy, Inc.		8,471		214,486
Rowan Cos. PLC, Class A (a)		7,160		253,178
RPC, Inc. (b)		3,656		65,260
Schlumberger Ltd.		76,475		6,891,162
Seadrill Ltd.		20,342		835,649
Superior Energy Services, Inc. (a)		9,200		244,812
Tidewater, Inc.		2,857		169,334
Unit Corp. (a)		2,834		146,291
				18,882,145
Food & Staples Retailing — 2.0%
Costco Wholesale Corp.		25,105		2,987,746
CVS Caremark Corp.		70,434		5,040,961
The Fresh Market, Inc. (a)		2,376		96,228
The Kroger Co.		29,928		1,183,054
Safeway, Inc. (b)		13,880		452,072
Sprouts Farmers Market, Inc. (a)		1,193		45,847
Sysco Corp.		34,153		1,232,923
Wal-Mart Stores, Inc.		92,633		7,289,291
Walgreen Co.		54,509		3,130,997
Whole Foods Market, Inc.		21,344		1,234,323
				22,693,442
Food Products — 1.5%
Archer-Daniels-Midland Co.		37,920		1,645,728
Bunge Ltd.		8,468		695,307
Campbell Soup Co. (b)		10,103		437,258
ConAgra Foods, Inc.		23,992		808,530
Common Stocks	Shares		Value
Food Products (concluded)
Dean Foods Co. (a)		5,399		92,809
Flowers Foods, Inc.		9,862		211,737
General Mills, Inc.		37,092		1,851,262
Green Mountain Coffee Roasters, Inc. (a)(b)		8,589		649,157
The Hershey Co. (b)		8,633		839,387
Hillshire Brands Co.		7,096		237,290
Hormel Foods Corp. (b)		7,726		348,983
Ingredion, Inc.		4,465		305,674
The J.M. Smucker Co.		6,175		639,854
Kellogg Co.		14,953		913,180
Kraft Foods Group, Inc.		34,204		1,844,280
McCormick & Co., Inc. (b)		7,595		523,447
Mead Johnson Nutrition Co.		11,653		976,055
Mondelez International, Inc., Class A		102,657		3,623,792
Pinnacle Foods, Inc. (b)		1,945		53,410
Tyson Foods, Inc., Class A (b)		16,127		539,609
WhiteWave Foods Co., Class A (a)		7,997		183,451
				17,420,200
Gas Utilities — 0.2%
AGL Resources, Inc.		6,810		321,636
Atmos Energy Corp.		5,221		237,138
National Fuel Gas Co. (b)		4,240		302,736
ONEOK, Inc. (b)		11,865		737,766
Questar Corp.		10,094		232,061
UGI Corp.		6,562		272,060
				2,103,397
Health Care Equipment & Supplies — 1.9%
Abbott Laboratories		89,680		3,437,434
Alere, Inc. (a)		4,692		169,850
Baxter International, Inc.		31,181		2,168,638
Becton Dickinson & Co. (b)		11,178		1,235,057
Boston Scientific Corp. (a)		77,647		933,317
C.R. Bard, Inc.		4,634		620,678
CareFusion Corp. (a)		12,658		504,042
The Cooper Cos., Inc.		2,784		344,771
Covidien PLC		27,070		1,843,467
DENTSPLY International, Inc.		8,254		400,154
Edwards Lifesciences Corp. (a)		6,506		427,835
Hill-Rom Holdings, Inc.		3,451		142,664
Hologic, Inc. (a)		15,516		346,783
IDEXX Laboratories, Inc. (a)		3,117		331,555
Intuitive Surgical, Inc. (a)		2,191		841,519
Medtronic, Inc.		58,450		3,354,445
ResMed, Inc. (b)		8,207		386,386
Sirona Dental Systems, Inc. (a)		3,168		222,394
St. Jude Medical, Inc.		16,308		1,010,281
Stryker Corp.		19,098		1,435,024
Teleflex, Inc. (b)		2,371		222,542
Varian Medical Systems, Inc. (a)		6,244		485,096
Zimmer Holdings, Inc.		9,690		903,011
				21,766,943
Health Care Providers & Services — 2.1%
Aetna, Inc.		21,765		1,492,861
AmerisourceBergen Corp.		13,290		934,420
Brookdale Senior Living, Inc. (a)		5,738		155,959
Cardinal Health, Inc.		19,670		1,314,153
Catamaran Corp. (a)		11,856		562,923
Cigna Corp.		16,418		1,436,247

See Notes to Financial Statements.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013 21

Schedule of Investments (continued) Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Health Care Providers & Services (concluded)
Community Health Systems, Inc. (a)(b)		5,437	$	213,511
DaVita HealthCare Partners, Inc. (a)		10,604		671,975
Envision Healthcare Holdings, Inc. (a)		2,795		99,278
Express Scripts Holding Co. (a)		47,032		3,303,528
HCA Holdings, Inc. (a)		15,405		734,973
Health Management Associates, Inc. (a)		14,961		195,989
Health Net, Inc. (a)		4,584		136,007
Henry Schein, Inc. (a)		5,017		573,242
Humana, Inc. (b)		9,065		935,689
Laboratory Corp. of America Holdings (a)		5,034		459,957
LifePoint Hospitals, Inc. (a)		2,737		144,623
McKesson Corp.		13,038		2,104,333
MEDNAX, Inc. (a)(b)		5,788		308,963
Patterson Cos., Inc.		5,043		207,772
Premier, Inc., Class A (a)		1,877		68,999
Quest Diagnostics, Inc. (b)		8,376		448,451
Tenet Healthcare Corp. (a)		5,967		251,330
UnitedHealth Group, Inc.		58,678		4,418,453
Universal Health Services, Inc.		5,225		424,584
VCA Antech, Inc. (a)		5,111		160,281
WellPoint, Inc.		17,283		1,596,776
				23,355,277
Health Care Technology — 0.1%
Cerner Corp. (a)		17,068		951,370
Veeva Systems, Inc., Class A (a)		881		28,280
				979,650
Hotels, Restaurants & Leisure — 1.9%
Bally Technologies, Inc. (a)		2,229		174,865
Brinker International, Inc.		3,822		177,111
Burger King Worldwide, Inc.		5,798		132,542
Carnival Corp.		24,042		965,767
Chipotle Mexican Grill, Inc. (a)		1,779		947,816
Choice Hotels International, Inc. (b)		1,601		78,625
Darden Restaurants, Inc. (b)		7,477		406,525
Domino’s Pizza, Inc.		3,244		225,945
Dunkin’ Brands Group, Inc. (b)		6,144		296,141
Hyatt Hotels Corp., Class A (a)		2,585		127,854
International Game Technology (b)		15,011		272,600
Las Vegas Sands Corp.		22,491		1,773,865
Marriott International, Inc., Class A		13,406		661,720
McDonald’s Corp.		57,672		5,595,914
MGM Resorts International (a)		21,407		503,493
Norwegian Cruise Line Holdings Ltd. (a)		1,573		55,794
Panera Bread Co., Class A (a)		1,620		286,238
Penn National Gaming, Inc. (a)		3,948		56,575
Royal Caribbean Cruises Ltd.		9,407		446,080
SeaWorld Entertainment, Inc. (b)		1,773		51,009
Six Flags Entertainment Corp.		3,815		140,468
Starbucks Corp.		43,072		3,376,414
Starwood Hotels & Resorts Worldwide, Inc.		11,198		889,681
The Wendy’s Co.		16,351		142,581
Wyndham Worldwide Corp.		7,823		576,477
Wynn Resorts Ltd. (b)		4,640		901,134
Yum! Brands, Inc.		25,882		1,956,938
				21,220,172
Household Durables — 0.5%
D.R. Horton, Inc. (a)(b)		16,247		362,633
Garmin Ltd. (b)		7,066		326,590
Common Stocks	Shares		Value
Household Durables (concluded)
Harman International Industries, Inc.		3,916		320,524
Jarden Corp. (a)		7,322		449,205
Leggett & Platt, Inc. (b)		8,238		254,884
Lennar Corp., Class A (b)		9,525		376,809
Mohawk Industries, Inc. (a)		3,492		519,959
Newell Rubbermaid, Inc. (b)		16,612		538,395
NVR, Inc. (a)		271		278,049
PulteGroup, Inc. (b)		22,318		454,618
Taylor Morrison Home Corp., Class A (a)		1,852		41,577
Tempur Sealy International, Inc. (a)		3,482		187,889
Toll Brothers, Inc. (a)		9,746		360,602
Tupperware Brands Corp. (b)		3,048		288,127
Whirlpool Corp.		4,557		714,811
				5,474,672
Household Products — 1.8%
Church & Dwight Co., Inc.		7,957		527,390
The Clorox Co. (b)		7,579		703,028
Colgate-Palmolive Co. (b)		53,659		3,499,103
Energizer Holdings, Inc.		3,585		388,041
Kimberly-Clark Corp.		22,128		2,311,491
The Procter & Gamble Co.		157,654		12,834,612
				20,263,665
Independent Power Producers & Energy Traders — 0.1%
The AES Corp.		35,752		518,762
Calpine Corp. (a)		22,729		443,443
NRG Energy, Inc. (b)		18,570		533,330
				1,495,535
Industrial Conglomerates — 2.2%
3M Co.		39,704		5,568,486
Carlisle Cos., Inc.		3,665		291,001
Danaher Corp.		34,439		2,658,691
General Electric Co.		594,777		16,671,599
				25,189,777
Insurance — 4.2%
ACE Ltd.		19,572		2,026,289
Aflac, Inc.		26,826		1,791,977
Alleghany Corp. (a)		967		386,761
Allied World Assurance Co. Holdings AG		1,994		224,943
The Allstate Corp.		26,967		1,470,780
American Financial Group, Inc.		4,480		258,586
American International Group, Inc.		84,930		4,335,676
American National Insurance Co.		425		48,680
Aon PLC		17,788		1,492,235
Arch Capital Group Ltd. (a)		7,665		457,524
Arthur J Gallagher & Co.		7,303		342,730
Aspen Insurance Holdings Ltd.		3,827		158,093
Assurant, Inc.		4,191		278,157
Assured Guaranty Ltd.		9,721		229,318
Axis Capital Holdings Ltd.		6,870		326,806
Berkshire Hathaway, Inc., Class B (a)		103,520		12,273,331
Brown & Brown, Inc.		6,800		213,452
The Chubb Corp.		12,554		1,213,093
Cincinnati Financial Corp. (b)		9,412		492,906
CNA Financial Corp.		1,531		65,665
Endurance Specialty Holdings Ltd.		2,488		145,971
Erie Indemnity Co., Class A (b)		1,436		105,000
Everest Re Group Ltd.		2,878		448,594

See Notes to Financial Statements.

22 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Insurance (concluded)
Fidelity National Financial, Inc., Class A (b)		14,382	$	466,696
Genworth Financial, Inc., Class A (a)		28,400		441,052
The Hanover Insurance Group, Inc.		2,541		151,723
Hartford Financial Services Group, Inc.		26,238		950,603
HCC Insurance Holdings, Inc.		5,788		267,058
Kemper Corp.		2,752		112,502
Lincoln National Corp.		15,453		797,684
Loews Corp.		17,676		852,690
Markel Corp. (a)		794		460,798
Marsh & McLennan Cos., Inc.		31,722		1,534,076
MBIA, Inc. (a)		8,200		97,908
Mercury General Corp.		1,182		58,757
MetLife, Inc.		51,435		2,773,375
Old Republic International Corp.		14,965		258,446
PartnerRe Ltd.		3,117		328,625
Principal Financial Group, Inc.		16,889		832,797
ProAssurance Corp.		3,568		172,977
The Progressive Corp.		34,715		946,678
Protective Life Corp.		4,524		229,186
Prudential Financial, Inc.		26,696		2,461,905
Reinsurance Group of America, Inc.		4,178		323,419
RenaissanceRe Holdings Ltd.		2,566		249,774
StanCorp Financial Group, Inc. (b)		2,555		169,269
Torchmark Corp.		5,327		416,305
The Travelers Cos., Inc.		21,651		1,960,282
Unum Group		15,370		539,180
Validus Holdings Ltd.		6,017		242,425
White Mountains Insurance Group Ltd.		356		214,696
WR Berkley Corp.		6,250		271,187
XL Group PLC		16,807		535,135
				47,903,775
Internet & Catalog Retail — 1.4%
Amazon.com, Inc. (a)		21,150		8,434,409
Expedia, Inc.		6,139		427,643
Groupon, Inc. (a)		24,198		284,810
HomeAway, Inc. (a)		3,506		143,325
Liberty Interactive Corp., Series A (a)		30,488		894,823
Liberty Ventures, Series A (a)		2,121		260,013
Netflix, Inc. (a)		2,891		1,064,380
priceline.com, Inc. (a)		2,968		3,450,003
TripAdvisor, Inc. (a)		6,453		534,502
zulily, Inc., Class A (a)		775		32,108
				15,526,016
Internet Software & Services — 2.9%
Akamai Technologies, Inc. (a)		10,234		482,840
AOL, Inc. (a)		4,468		208,298
eBay, Inc. (a)		74,659		4,098,033
Equinix, Inc. (a)		2,842		504,313
Facebook, Inc. (a)		98,006		5,357,008
Google, Inc., Class A (a)		15,512		17,384,454
IAC/InterActiveCorp		4,304		295,642
LinkedIn Corp. (a)		5,571		1,207,960
Pandora Media, Inc. (a)		8,179		217,561
Rackspace Hosting, Inc. (a)		6,513		254,854
Twitter, Inc. (a)		4,639		295,272
VeriSign, Inc. (a)		7,467		446,377
Yahoo!, Inc. (a)		51,459		2,081,002
				32,833,614
Common Stocks	Shares		Value
IT Services — 3.5%
Accenture PLC, Class A		36,972		3,039,838
Alliance Data Systems Corp. (a)(b)		2,831		744,355
Amdocs Ltd.		9,273		382,419
Automatic Data Processing, Inc.		27,917		2,255,973
Booz Allen Hamilton Holding Corp. (b)		1,848		35,389
Broadridge Financial Solutions, Inc.		6,987		276,126
Cognizant Technology Solutions Corp., Class A (a)		17,355		1,752,508
Computer Sciences Corp.		8,651		483,418
CoreLogic, Inc. (a)		5,509		195,735
DST Systems, Inc.		1,954		177,306
Fidelity National Information Services, Inc.		16,871		905,635
Fiserv, Inc. (a)		15,329		905,177
FleetCor Technologies, Inc. (a)		3,910		458,135
Gartner, Inc. (a)		5,401		383,741
Genpact Ltd. (a)		9,700		178,189
Global Payments, Inc.		4,394		285,566
International Business Machines Corp. (b)		59,882		11,232,067
Jack Henry & Associates, Inc.		4,963		293,859
Leidos Holdings, Inc.		4,215		195,955
Lender Processing Services, Inc.		5,019		187,610
Mastercard, Inc., Class A		6,722		5,615,962
NeuStar, Inc., Class A (a)		2,856		142,400
Paychex, Inc. (b)		18,725		852,549
Science Applications International Corp.		2,419		79,996
Teradata Corp. (a)		9,412		428,152
Total System Services, Inc.		9,414		313,298
Vantiv, Inc., Class A (a)		5,049		164,648
VeriFone Systems, Inc. (a)		6,273		168,242
Visa, Inc., Class A		30,054		6,692,425
The Western Union Co. (b)		32,078		553,346
				39,380,019
Leisure Equipment & Products — 0.2%
Hasbro, Inc. (b)		6,612		363,726
Mattel, Inc. (b)		19,879		945,843
Polaris Industries, Inc.		3,729		543,092
				1,852,661
Life Sciences Tools & Services — 0.7%
Agilent Technologies, Inc.		19,978		1,142,542
Bio-Rad Laboratories, Inc., Class A (a)		1,183		146,231
Bruker Corp. (a)		6,323		125,006
Charles River Laboratories International, Inc. (a)		2,831		150,156
Covance, Inc. (a)		3,221		283,641
Illumina, Inc. (a)(b)		7,159		791,928
Life Technologies Corp. (a)		9,905		750,799
Mettler-Toledo International, Inc. (a)		1,739		421,864
PerkinElmer, Inc.		6,453		266,057
QIAGEN NV (a)(b)		13,486		321,102
Quintiles Transnational Holdings, Inc. (a)		1,579		73,171
Techne Corp.		2,125		201,174
Thermo Fisher Scientific, Inc.		20,650		2,299,377
Waters Corp. (a)		4,935		493,500
				7,466,548
Machinery — 2.0%
AGCO Corp.		5,607		331,878
Caterpillar, Inc.		37,837		3,435,978
Colfax Corp. (a)		4,934		314,246
Crane Co.		2,798		188,166
Cummins, Inc.		10,918		1,539,110

See Notes to Financial Statements.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013 23

Schedule of Investments (continued) Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Machinery (concluded)
Deere & Co. (b)		22,326	$	2,039,034
Donaldson Co., Inc.		8,456		367,498
Dover Corp.		9,848		950,726
Flowserve Corp.		8,232		648,929
Graco, Inc.		3,531		275,842
Harsco Corp.		4,660		130,620
IDEX Corp.		4,738		349,901
Illinois Tool Works, Inc.		21,732		1,827,227
Ingersoll-Rand PLC		17,202		1,059,643
ITT Corp.		5,184		225,089
Joy Global, Inc. (b)		6,122		358,076
Kennametal, Inc. (b)		4,540		236,398
Lincoln Electric Holdings, Inc.		4,786		341,433
The Manitowoc Co., Inc.		7,704		179,657
Navistar International Corp. (a)(b)		3,228		123,277
Nordson Corp.		3,701		274,984
Oshkosh Corp.		5,073		255,578
PACCAR, Inc.		20,356		1,204,465
Pall Corp. (b)		6,408		546,923
Parker Hannifin Corp.		8,589		1,104,889
Pentair Ltd., Registered Shares		11,759		913,322
Snap-on, Inc.		3,357		367,659
SPX Corp.		2,697		268,648
Stanley Black & Decker, Inc.		9,320		752,031
Terex Corp.		6,410		269,156
Timken Co.		4,978		274,138
The Toro Co.		3,337		212,233
Trinity Industries, Inc. (b)		4,566		248,938
Valmont Industries, Inc. (b)		1,543		230,092
WABCO Holdings, Inc. (a)		3,364		314,231
Wabtec Corp. (b)		5,541		411,530
Xylem, Inc.		10,675		369,355
				22,940,900
Marine — 0.0%
Kirby Corp. (a)		3,270		324,548
Media — 3.9%
AMC Networks, Inc., Class A (a)		3,464		235,933
Cablevision Systems Corp., New York Group, Class A (b)		11,240		201,533
CBS Corp., Class B		35,302		2,250,149
Charter Communications, Inc., Class A (a)		3,812		521,329
Cinemark Holdings, Inc.		6,650		221,644
Clear Channel Outdoor Holdings, Inc., Class A		2,518		25,533
Comcast Corp., Class A		150,939		7,843,545
DIRECTV (a)		28,258		1,952,345
Discovery Communications, Inc., Class A (a)		14,082		1,273,294
DISH Network Corp., Class A (a)		12,003		695,214
DreamWorks Animation SKG, Inc., Class A (a)		4,261		151,266
Gannett Co., Inc.		13,185		390,012
Graham Holdings Co., Class B (a)(b)		252		167,157
The Interpublic Group of Cos., Inc.		24,674		436,730
John Wiley & Sons, Inc., Class A		2,627		145,010
Lamar Advertising Co., Class A (a)		4,543		237,372
Liberty Global PLC, Class A (a)		22,539		2,005,746
Liberty Media Corp., Class A (a)		5,509		806,793
Lions Gate Entertainment Corp. (b)		4,665		147,694
Madison Square Garden Co., Class A (a)		3,527		203,085
Morningstar, Inc.		1,197		93,474
News Corp., Class A (a)		28,609		515,534
Common Stocks	Shares		Value
Media (concluded)
Omnicom Group, Inc.		14,881		1,106,700
Regal Entertainment Group, Class A		4,754		92,465
Scripps Networks Interactive, Inc., Class A (b)		6,314		545,593
Sirius XM Holdings, Inc. (a)		177,580		619,754
Starz, Class A (a)		6,224		181,990
Thomson Reuters Corp. (b)		21,489		812,714
Time Warner Cable, Inc.		16,740		2,268,270
Time Warner, Inc.		53,626		3,738,805
Twenty-First Century Fox, Inc., Class A (b)		114,323		4,021,883
Viacom, Inc., Class B		25,659		2,241,057
The Walt Disney Co.		103,597		7,914,811
				44,064,434
Metals & Mining — 0.6%
Alcoa, Inc. (b)		61,565		654,436
Allegheny Technologies, Inc. (b)		6,226		221,832
Carpenter Technology Corp. (b)		2,671		166,136
Cliffs Natural Resources, Inc. (b)		8,828		231,382
Compass Minerals International, Inc.		1,923		153,936
Freeport-McMoRan Copper & Gold, Inc.		59,509		2,245,870
Newmont Mining Corp. (b)		28,342		652,716
Nucor Corp.		18,289		976,267
Reliance Steel & Aluminum Co.		4,419		335,137
Royal Gold, Inc. (b)		3,706		170,735
Southern Copper Corp. (b)		9,100		261,261
Steel Dynamics, Inc.		12,707		248,295
Tahoe Resources, Inc. (a)(b)		4,926		81,969
United States Steel Corp. (b)		8,318		245,381
				6,645,353
Multi-Utilities — 1.0%
Alliant Energy Corp.		6,391		329,776
Ameren Corp.		13,972		505,228
CenterPoint Energy, Inc.		24,674		571,943
CMS Energy Corp.		15,369		411,428
Consolidated Edison, Inc.		16,858		931,910
Dominion Resources, Inc. (b)		33,236		2,150,037
DTE Energy Co.		10,014		664,829
Integrys Energy Group, Inc.		4,562		248,218
MDU Resources Group, Inc.		10,880		332,384
NiSource, Inc.		17,966		590,722
PG&E Corp.		25,448		1,025,045
Public Service Enterprise Group, Inc.		29,121		933,037
SCANA Corp.		8,036		377,129
Sempra Energy		14,017		1,258,166
TECO Energy, Inc. (b)		12,549		216,345
Vectren Corp.		4,749		168,590
Wisconsin Energy Corp. (b)		13,170		544,448
				11,259,235
Multiline Retail — 0.7%
Big Lots, Inc. (a)		3,367		108,721
Dillard’s, Inc., Class A (b)		1,559		151,550
Dollar General Corp. (a)		18,831		1,135,886
Dollar Tree, Inc. (a)		11,980		675,912
Family Dollar Stores, Inc.		5,547		360,389
JC Penney Co., Inc. (a)(b)		13,688		125,245
Kohl’s Corp. (b)		12,780		725,265
Macy’s, Inc.		22,081		1,179,125
Nordstrom, Inc. (b)		8,351		516,092
Sears Holdings Corp. (a)(b)		2,505		122,845

See Notes to Financial Statements.

24 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Multiline Retail (concluded)
Target Corp.		36,920	$	2,335,928
				7,436,958
Office Electronics — 0.1%
Xerox Corp.		70,676		860,127
Zebra Technologies Corp., Class A (a)		2,940		158,995
				1,019,122
Oil, Gas & Consumable Fuels — 7.6%
Anadarko Petroleum Corp.		28,852		2,288,541
Antero Resources Corp. (a)		2,176		138,045
Apache Corp.		22,546		1,937,603
Cabot Oil & Gas Corp.		24,259		940,279
Cheniere Energy, Inc. (a)		13,894		599,109
Chesapeake Energy Corp. (b)		33,347		905,038
Chevron Corp.		111,506		13,928,214
Cimarex Energy Co.		4,978		522,242
Cobalt International Energy, Inc. (a)		15,874		261,127
Concho Resources, Inc. (a)		6,029		651,132
ConocoPhillips		70,335		4,969,168
CONSOL Energy, Inc. (b)		13,166		500,835
Continental Resources, Inc. (a)		2,462		277,024
CVR Energy, Inc. (b)		913		39,652
Denbury Resources, Inc. (a)		21,499		353,229
Devon Energy Corp.		23,362		1,445,407
Energen Corp.		4,162		294,461
EOG Resources, Inc.		15,653		2,627,200
EQT Corp.		8,659		777,405
Exxon Mobil Corp.		255,758		25,882,710
Golar LNG Ltd. (b)		2,532		91,886
Gulfport Energy Corp. (a)		4,902		309,561
Hess Corp.		17,655		1,465,365
HollyFrontier Corp. (b)		11,694		581,075
Kinder Morgan, Inc.		38,111		1,371,996
Kosmos Energy Ltd. (a)		5,866		65,582
Laredo Petroleum Holdings, Inc. (a)		2,475		68,533
Marathon Oil Corp.		40,787		1,439,781
Marathon Petroleum Corp.		17,321		1,588,855
Murphy Oil Corp.		10,994		713,291
Newfield Exploration Co. (a)		7,814		192,459
Noble Energy, Inc.		20,637		1,405,586
Oasis Petroleum, Inc. (a)		5,804		272,614
Occidental Petroleum Corp.		46,346		4,407,505
PBF Energy, Inc. (b)		1,375		43,257
Peabody Energy Corp.		15,539		303,477
Phillips 66		35,626		2,747,833
Pioneer Natural Resources Co.		7,859		1,446,606
QEP Resources, Inc.		10,330		316,614
Range Resources Corp. (b)		9,387		791,418
SandRidge Energy, Inc. (a)(b)		28,531		173,183
SM Energy Co.		3,819		317,397
Southwestern Energy Co. (a)		20,234		795,803
Spectra Energy Corp.		38,508		1,371,655
Teekay Corp.		2,195		105,382
Tesoro Corp.		7,822		457,587
Ultra Petroleum Corp. (a)(b)		8,823		191,018
Valero Energy Corp.		31,381		1,581,602
Whiting Petroleum Corp. (a)		6,787		419,912
The Williams Cos., Inc.		39,283		1,515,145
World Fuel Services Corp. (b)		4,191		180,884
WPX Energy, Inc. (a)		11,545		235,287
				86,306,570
Common Stocks	Shares		Value
Paper & Forest Products — 0.1%
Domtar Corp.		1,905		179,718
International Paper Co.		25,599		1,255,119
				1,434,837
Personal Products — 0.2%
Avon Products, Inc.		24,945		429,553
Coty, Inc., Class A (b)		3,324		50,691
The Estee Lauder Cos., Inc., Class A		13,330		1,004,015
Herbalife Ltd. (b)		4,911		386,496
Nu Skin Enterprises, Inc., Class A		3,364		464,972
				2,335,727
Pharmaceuticals — 5.1%
AbbVie, Inc.		91,106		4,811,308
Actavis PLC (a)		9,980		1,676,640
Allergan, Inc.		17,054		1,894,358
Bristol-Myers Squibb Co.		94,489		5,022,090
Eli Lilly & Co.		57,028		2,908,428
Endo Health Solutions, Inc. (a)(b)		6,465		436,129
Forest Laboratories, Inc. (a)		15,348		921,341
Hospira, Inc. (a)		9,533		393,522
Jazz Pharmaceuticals PLC (a)		2,987		378,035
Johnson & Johnson		161,571		14,798,288
Mallinckrodt PLC (a)		3,394		177,370
Merck & Co., Inc.		173,698		8,693,585
Mylan, Inc. (a)		21,934		951,936
Omnicare, Inc. (b)		6,045		364,876
Perrigo Co. PLC		7,255		1,113,352
Pfizer, Inc.		384,714		11,783,790
Salix Pharmaceuticals Ltd. (a)		3,533		317,758
Zoetis, Inc.		28,775		940,655
				57,583,461
Professional Services — 0.3%
The Dun & Bradstreet Corp. (b)		2,302		282,570
Equifax, Inc.		6,942		479,623
IHS, Inc., Class A (a)		3,786		453,184
Manpower, Inc.		4,443		381,476
Nielsen Holdings NV		12,576		577,113
Robert Half International, Inc.		8,040		337,600
Towers Watson & Co., Class A		3,754		479,048
Verisk Analytics, Inc., Class A (a)		8,714		572,684
				3,563,298
Real Estate Investment Trusts (REITs) — 2.6%
Alexandria Real Estate Equities, Inc.		4,118		261,987
American Campus Communities, Inc.		6,044		194,677
American Capital Agency Corp.		22,834		440,468
American Homes 4 Rent, Class A		2,954		47,855
American Tower Corp.		22,755		1,816,304
Annaly Capital Management, Inc.		54,551		543,873
Apartment Investment & Management Co., Class A		8,415		218,033
AvalonBay Communities, Inc.		7,447		880,459
BioMed Realty Trust, Inc.		10,748		194,754
Boston Properties, Inc.		8,734		876,632
Brandywine Realty Trust		9,047		127,472
BRE Properties, Inc.		4,443		243,077
Brixmor Property Group, Inc. (a)		2,758		56,070
Camden Property Trust		4,890		278,143
CBL & Associates Properties, Inc.		9,413		169,057
Chimera Investment Corp.		59,295		183,815
CommonWealth REIT		6,830		159,207

See Notes to Financial Statements.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013 25

Schedule of Investments (continued) Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Real Estate Investment Trusts (REITs) (concluded)
Corporate Office Properties Trust		4,957	$	117,431
Corrections Corp. of America		6,644		213,073
DDR Corp.		17,087		262,627
Digital Realty Trust, Inc. (b)		7,398		363,390
Douglas Emmett, Inc.		8,225		191,560
Duke Realty Corp.		18,541		278,857
Equity Lifestyle Properties, Inc.		4,809		174,230
Equity Residential		20,727		1,075,110
Essex Property Trust, Inc.		2,190		314,287
Extra Space Storage, Inc.		6,397		269,506
Federal Realty Investment Trust		3,758		381,099
Gaming and Leisure Properties, Inc. (a)(b)		4,438		225,495
General Growth Properties, Inc.		32,256		647,378
Hatteras Financial Corp.		5,720		93,465
HCP, Inc.		26,158		950,059
Health Care REIT, Inc. (b)		16,378		877,369
Healthcare Trust of America, Inc., Class A		6,468		63,645
Home Properties, Inc.		3,280		175,874
Hospitality Properties Trust		8,605		232,593
Host Hotels & Resorts, Inc. (b)		42,866		833,315
Kilroy Realty Corp.		4,696		235,645
Kimco Realty Corp.		23,540		464,915
Liberty Property Trust		7,467		252,907
The Macerich Co.		7,919		466,350
Mack-Cali Realty Corp.		5,084		109,204
MFA Financial, Inc.		20,862		147,286
Mid-America Apartment Communities, Inc.		4,302		261,303
National Retail Properties, Inc. (b)		6,827		207,063
Omega Healthcare Investors, Inc. (b)		7,045		209,941
Piedmont Office Realty Trust, Inc., Class A (b)		9,678		159,881
Plum Creek Timber Co., Inc.		10,188		473,844
Post Properties, Inc.		3,152		142,565
Prologis, Inc.		28,673		1,059,467
Public Storage		8,239		1,240,134
Rayonier, Inc.		7,263		305,772
Realty Income Corp. (b)		8,570		319,918
Regency Centers Corp.		5,281		244,510
Retail Properties of America, Inc., Class A		7,749		98,567
Senior Housing Properties Trust		10,844		241,062
Simon Property Group, Inc.		17,838		2,714,230
SL Green Realty Corp. (b)		3,823		353,169
Spirit Realty Capital, Inc.		21,352		209,890
Starwood Property Trust, Inc.		11,243		311,431
Tanger Factory Outlet Centers		5,449		174,477
Taubman Centers, Inc.		3,668		234,459
Two Harbors Investment Corp.		21,072		195,548
UDR, Inc.		14,447		337,337
Ventas, Inc.		16,863		965,913
Vornado Realty Trust		10,759		955,292
Weingarten Realty Investors		7,027		192,680
Weyerhaeuser Co.		33,510		1,057,911
WP Carey, Inc.		3,312		203,191
				28,978,108
Real Estate Management & Development — 0.1%
CBRE Group, Inc., Class A (a)		16,072		422,694
Forest City Enterprises, Inc., Class A (a)		9,113		174,058
The Howard Hughes Corp. (a)		2,277		273,468
Jones Lang LaSalle, Inc.		2,542		260,275
Realogy Holdings Corp. (a)		6,921		342,382
Common Stocks	Shares		Value
Real Estate Management & Development (concluded)
The St. Joe Co. (a)(b)		2,168		41,604
				1,514,481
Road & Rail — 1.0%
Amerco, Inc.		423		100,606
Avis Budget Group, Inc. (a)		6,212		251,089
Con-way, Inc.		3,255		129,256
CSX Corp.		58,803		1,691,762
Genesee & Wyoming, Inc., Class A (a)		2,496		239,741
Hertz Global Holdings, Inc. (a)		19,943		570,769
JB Hunt Transport Services, Inc.		5,267		407,139
Kansas City Southern		6,342		785,330
Landstar System, Inc.		2,688		154,426
Norfolk Southern Corp.		18,130		1,683,008
Old Dominion Freight Line, Inc. (a)		4,094		217,064
Ryder System, Inc.		2,994		220,897
Union Pacific Corp.		26,852		4,511,136
				10,962,223
Semiconductors & Semiconductor Equipment — 2.0%
Advanced Micro Devices, Inc. (a)(b)		35,007		135,477
Altera Corp.		18,432		599,593
Analog Devices, Inc.		17,737		903,345
Applied Materials, Inc.		69,148		1,223,228
Atmel Corp. (a)		24,729		193,628
Avago Technologies Ltd.		14,166		749,240
Broadcom Corp., Class A		32,863		974,388
Cree, Inc. (a)		6,792		424,975
Fairchild Semiconductor International, Inc. (a)		7,361		98,269
First Solar, Inc. (a)		3,909		213,588
Freescale Semiconductor Ltd. (a)(b)		3,283		52,692
Intel Corp.		285,951		7,423,288
KLA-Tencor Corp.		9,551		615,658
Lam Research Corp. (a)		9,370		510,197
Linear Technology Corp.		13,429		611,691
LSI Corp.		31,663		348,926
Marvell Technology Group Ltd.		22,737		326,958
Maxim Integrated Products, Inc.		16,763		467,855
Microchip Technology, Inc. (b)		11,352		508,002
Micron Technology, Inc. (a)		59,278		1,289,889
NVIDIA Corp.		33,278		533,114
ON Semiconductor Corp. (a)		25,998		214,224
Silicon Laboratories, Inc. (a)		2,455		106,326
Skyworks Solutions, Inc. (a)		11,018		314,674
Teradyne, Inc. (a)(b)		10,999		193,802
Texas Instruments, Inc.		63,811		2,801,941
Xilinx, Inc.		15,190		697,525
				22,532,493
Software — 3.5%
Activision Blizzard, Inc.		15,341		273,530
Adobe Systems, Inc. (a)		28,881		1,729,394
Allscripts Healthcare Solutions, Inc. (a)		10,267		158,728
ANSYS, Inc. (a)		5,368		468,090
Autodesk, Inc. (a)		12,919		650,213
CA, Inc.		18,879		635,278
Cadence Design Systems, Inc. (a)		16,319		228,792
Citrix Systems, Inc. (a)		10,773		681,392
Compuware Corp.		12,327		138,186
Concur Technologies, Inc. (a)		2,690		277,554
Electronic Arts, Inc. (a)		17,432		399,890

See Notes to Financial Statements.

26 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013

Schedule of Investments (continued) Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Software (concluded)
FactSet Research Systems, Inc. (b)		2,535	$	275,250
FireEye, Inc. (a)		1,017		44,351
Fortinet, Inc. (a)		7,833		149,845
Informatica Corp. (a)		6,231		258,586
Intuit, Inc. (b)		17,087		1,304,080
MICROS Systems, Inc. (a)		4,535		260,173
Microsoft Corp.		480,365		17,980,062
NetSuite, Inc. (a)		2,021		208,203
Nuance Communications, Inc. (a)(b)		15,074		229,125
Oracle Corp.		204,234		7,813,993
Red Hat, Inc. (a)		10,916		611,733
Rovi Corp. (a)		5,979		117,727
Salesforce.com, Inc. (a)		33,943		1,873,314
ServiceNow, Inc. (a)		4,552		254,958
SolarWinds, Inc. (a)		3,783		143,111
Solera Holdings, Inc.		3,971		280,988
Splunk, Inc. (a)		5,911		405,908
Symantec Corp.		40,095		945,440
Synopsys, Inc. (a)		8,859		359,410
Tableau Software, Inc., Class A (a)		553		38,118
TIBCO Software, Inc. (a)		9,464		212,751
VMware, Inc., Class A (a)(b)		4,925		441,822
Workday, Inc., Class A (a)		2,137		177,713
Zynga, Inc., Class A (a)		33,697		128,049
				40,155,757
Specialty Retail — 2.3%
Aaron’s, Inc. (b)		4,380		128,772
Abercrombie & Fitch Co., Class A (b)		4,521		148,786
Advance Auto Parts, Inc.		4,202		465,077
American Eagle Outfitters, Inc.		11,122		160,157
Ascena Retail Group, Inc. (a)		7,369		155,928
AutoNation, Inc. (a)		2,934		145,790
AutoZone, Inc. (a)		2,041		975,476
Bed Bath & Beyond, Inc. (a)		12,580		1,010,174
Best Buy Co., Inc.		15,722		626,993
Cabela’s, Inc. (a)		2,743		182,848
CarMax, Inc. (a)		12,929		607,922
Chico’s FAS, Inc.		9,362		176,380
CST Brands, Inc. (b)		3,485		127,969
Dick’s Sporting Goods, Inc. (b)		5,693		330,763
DSW, Inc., Class A (b)		4,109		175,578
Foot Locker, Inc.		8,649		358,415
GameStop Corp., Class A (b)		6,848		337,333
The Gap, Inc. (b)		16,074		628,172
GNC Holdings, Inc., Class A		5,665		331,119
Guess?, Inc. (b)		3,432		106,632
The Home Depot, Inc.		84,031		6,919,113
L Brands, Inc. (b)		13,815		854,458
Lowe’s Cos., Inc.		62,622		3,102,920
Murphy USA, Inc. (a)		2,760		114,706
O’Reilly Automotive, Inc. (a)		6,359		818,467
PetSmart, Inc.		5,951		432,935
Ross Stores, Inc.		12,651		947,939
Sally Beauty Holdings, Inc. (a)		9,785		295,801
Signet Jewelers Ltd.		4,659		366,663
Staples, Inc. (b)		38,225		607,395
Tiffany & Co.		6,432		596,761
TJX Cos., Inc.		41,410		2,639,059
Tractor Supply Co.		8,036		623,433
Ulta Salon Cosmetics & Fragrance, Inc. (a)		3,668		354,035
Common Stocks	Shares		Value
Specialty Retail (concluded)
Urban Outfitters, Inc. (a)		6,207		230,280
Williams-Sonoma, Inc. (b)		5,629		328,058
				26,412,307
Textiles, Apparel & Luxury Goods — 0.8%
Carter’s, Inc. (b)		3,144		225,708
Coach, Inc.		16,173		907,790
Deckers Outdoor Corp. (a)(b)		1,989		167,991
Fossil Group, Inc. (a)		2,788		334,393
Hanesbrands, Inc.		5,677		398,923
Michael Kors Holdings Ltd. (a)		11,597		941,560
NIKE, Inc., Class B (b)		40,749		3,204,501
PVH Corp.		4,666		634,669
Ralph Lauren Corp.		3,454		609,873
Under Armour, Inc., Class A (a)(b)		4,823		421,048
VF Corp.		20,155		1,256,463
				9,102,919
Thrifts & Mortgage Finance — 0.1%
Hudson City Bancorp, Inc. (b)		30,456		287,200
Nationstar Mortgage Holdings, Inc. (a)(b)		1,248		46,126
New York Community Bancorp, Inc. (b)		25,392		427,855
Ocwen Financial Corp. (a)		5,971		331,092
People’s United Financial, Inc. (b)		17,846		269,831
TFS Financial Corp. (a)		4,580		55,487
Washington Federal, Inc. (b)		6,017		140,136
				1,557,727
Tobacco — 1.3%
Altria Group, Inc.		115,552		4,436,041
Lorillard, Inc. (b)		21,740		1,101,783
Philip Morris International, Inc.		94,080		8,197,190
Reynolds American, Inc.		18,140		906,819
				14,641,833
Trading Companies & Distributors — 0.3%
Air Lease Corp.		4,050		125,874
Fastenal Co. (b)		17,076		811,281
GATX Corp.		2,703		141,015
HD Supply Holdings, Inc. (a)		3,561		85,500
MRC Global, Inc. (a)		4,794		154,654
MSC Industrial Direct Co., Inc., Class A (b)		2,726		220,452
United Rentals, Inc. (a)		5,428		423,113
W.W. Grainger, Inc.		3,394		866,895
WESCO International, Inc. (a)		2,543		231,591
				3,060,375
Water Utilities — 0.1%
American Water Works Co., Inc.		10,235		432,531
Aqua America, Inc.		10,143		239,273
				671,804
Wireless Telecommunication Services — 0.3%
Crown Castle International Corp. (a)		19,224		1,411,618
SBA Communications Corp., Class A (a)		7,346		659,965
Sprint Communications, Inc. (a)		48,997		526,718
T-Mobile US, Inc. (a)		10,964		368,829
Telephone & Data Systems, Inc.		5,442		140,295
United States Cellular Corp.		758		31,699
				3,139,124
Total Common Stocks — 96.5%				1,092,677,103

See Notes to Financial Statements.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013 27

Schedule of Investments (continued) Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Investment Companies — 0.9%	Shares		Value
iShares Russell 1000® Index Fund (c)		99,042	$	10,218,163
Total Long-Term Investments (Cost — $889,738,180) — 97.4%				1,102,895,266
Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)(e)		94,674,911		94,674,911
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)(e)		10,668,379		10,668,379
Total Short-Term Securities (Cost — $105,343,290) — 9.3%				105,343,290
Total Investments (Cost — $995,081,470*) — 106.7%				1,208,238,556
Liabilities in Excess of Other Assets — (6.7)%				(75,366,522	)
Net Assets — 100.0%			$	1,132,872,034

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	999,871,991
Gross unrealized appreciation	$	218,714,131
Gross unrealized depreciation		(10,347,566	)
Net unrealized appreciation	$	208,366,565

(a) Non-income producing security.

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

(c) Investments in issuers considered to be an affiliate of the Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at December 31, 2012		Shares Purchased			Shares Sold			Shares Held at December 31, 2013		Value at December 31, 2013		Income		Realized Gain
BlackRock Cash Funds: Institutional, SL Agency Shares		42,319,496		52,355,415	1		—			94,674,911	$	94,674,911	$	191,020		—
BlackRock Cash Funds: Prime, SL Agency Shares		7,785,846		2,882,533	1		—			10,668,379	$	10,668,379	$	28,328		—
BlackRock, Inc.		3,688		4,214			(390	)		7,512	$	2,377,323	$	40,028	$	31,271
iShares Russell 1000® Index Fund		86,286		182,756			(170,000	)		99,042	$	10,218,163	$	112,068	$	970,539
The PNC Financial Services Group, Inc.		15,313		16,993			(1,847	)		30,459	$	2,363,009	$	38,497	$	14,261
1   Represents net shares activity.

(d) All or a portion of security was purchased with the cash collateral from loaned securities.

(e) Represents the current yield as of report date.

Ÿ For Master Portfolio compliance purposes, the Master Portfolio‘s industry classifications refer to any 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.

Ÿ Financial futures contracts outstanding as of December 31, 2013 were as follows:

Contracts Purchased		Issue	Exchange	Expiration	Notional Value		Unrealized Appreciation
	161	S&P 500 E-Mini Index	Chicago Mercantile	March 2014	$	14,820,855	$	393,718
	19	S&P MidCap 400 E-Mini	Chicago Mercantile	March 2014	$	2,544,860		88,706
	Total						$	482,424

See Notes to Financial Statements.

28 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013

Schedule of Investments (concluded) Russell 1000^® Index Master Portfolio

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

Ÿ Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Master Portfolio’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.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments1:
Common Stocks	$	1,092,677,103		—			—	$	1,092,677,103
Investment Companies		10,218,163		—			—		10,218,163
Short-Term Securities:
Short-Term securities		105,343,290		—			—		105,343,290
Total	$	1,208,238,556		—			—	$	1,208,238,556
1  See above Schedule of Investments for values in each industry.
	Level 1		Level 2			Level 3		Total
Derivative Financial Instruments2
Assets:
Equity contracts	$	482,424		—			—	$	482,424
2  Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.
Certain of the Master Portfolio’s assets and/or liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2013, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:
	Level 1		Level 2			Level 3		Total
Assets:
Cash pledged for financial futures contracts	$	1,338,000		—			—	$	1,338,000
Liabilities:
Collateral on securities loaned at value		—	$	(69,025,661	)		—		(69,025,661	)
Total	$	1,338,000	$	(69,025,661	)		—	$	(67,687,661	)

There were no transfers between levels during the year ended December 31, 2013.

See Notes to Financial Statements.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013 29

Statement of Assets and Liabilities Russell 1000^® Index Master Portfolio

December 31, 2013
Assets
Investments at value — unaffiliated (including securities loaned at value of $67,684,734) (cost—$876,850,142)	$	1,087,936,771
Investments at value — affiliated (cost — $118,231,328)		120,301,785
Cash received for financial futures contracts		1,338,000
Contributions receivable from investors		35,345,340
Investments sold receivable		14,956,127
Dividends receivable		1,365,160
Variation margin receivable for other derivative contracts		117,745
Securities lending income receivable — affiliated		20,457
Other income receivable — affiliated		17,211
Prepaid expenses		358
Total assets		1,261,398,954
Liabilities
Collateral on securities loaned at value		69,025,661
Investments purchased payable		59,371,990
Professional fees payable		44,474
Investment advisory fees payable		44,017
Custodian fees payable		26,018
Trustees’ fees payable		11,355
Printing fees payable		1,021
Other accrued expenses payable		2,384
Total liabilities		128,526,920
Net Assets	$	1,132,872,034
Net Assets Consist of
Investors’ capital	$	919,232,524
Net unrealized appreciation/depreciation		213,639,510
Net Assets	$	1,132,872,034

See Notes to Financial Statements.
30	BLACKROCK RUSSELL 1000® INDEX FUND	DECEMBER 31, 2013

Statement of Operations Russell 1000^® Index Master Portfolio

Year Ended December 31, 2013
Investment Income
Dividends — unaffiliated	$	15,415,858
Foreign taxes withheld		(5,580	)
Dividends — affiliated		190,593
Securities lending — affiliated — net		183,284
Income — affiliated		36,064
Other income — affiliated		17,211
Interest		346
Total income		15,837,776
Expenses
Investment advisory		388,578
Custodian		111,119
Professional		78,333
Independent Trustees		34,643
Printing		60
Miscellaneous		441
Total expenses		613,174
Net investment income		15,224,602
Realized and Unrealized Gain (Loss)
Net realized gain from:
Investments — unaffiliated		12,084,892
Investments — affiliated		1,016,071
Financial futures contracts		4,179,953
		17,280,916
Net change in unrealized appreciation/depreciation on:
Investments		183,318,298
Financial futures contracts		431,201
		183,749,499
Total realized and unrealized gain		201,030,415
Net Increase in Net Assets Resulting from Operations	$	216,255,017

See Notes to Financial Statements.
	BLACKROCK RUSSELL 1000® INDEX FUND	DECEMBER 31, 2013	31

Statements of Changes in Net Assets Russell 1000^®  Index Master Portfolio

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012
Operations
Net investment income	$	15,224,602		$	6,203,360
Net realized gain		17,280,916			250,730
Net change in unrealized appreciation/depreciation		183,749,499			32,265,373
Net increase in net assets resulting from operations		216,255,017			38,719,463
Capital Transactions
Proceeds from contributions		728,973,047			418,927,430
Value of withdrawals		(252,448,316	)		(74,435,787	)
Net increase in net assets derived from capital transactions		476,524,731			344,491,643
Net Assets
Total increase in net assets		692,779,748			383,211,106
Beginning of year		440,092,286			56,881,180
End of year	$	1,132,872,034		$	440,092,286

See Notes to Financial Statements.
32	BLACKROCK RUSSELL 1000® INDEX FUND	DECEMBER 31, 2013

Financial Highlights Russell 1000^® Index Master Portfolio

	Year Ended December 31,				Period March 31, 20111 to December 31, 2011
	2013		2012
Total Investment Return
Total investment return		32.88%		16.39%		(4.68)%	2
Ratios to Average Net Assets
Total expenses		0.08%3		0.09%		0.40%	4,5
Total expenses after fees waived		0.08%3		0.09%		0.16%	4
Net investment income		1.96%3		2.30%		2.04%	4
Supplemental Data
Net assets, end of period (000)		$1,132,872		$440,092		$   56,881
Portfolio turnover		14%		16%		9%

¹  Commencement of operations.

²  Aggregate total investment return.

³  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01% for the year ending December 31, 2013.

⁴  Annualized.

⁵  Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 0.40%.

See Notes to Financial Statements.
	BLACKROCK RUSSELL 1000® INDEX FUND	DECEMBER 31, 2013	33

Notes to Financial Statements Russell 1000^® Index Master Portfolio

1. Organization:

Russell 1000^® Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust.

2. Significant Accounting Policies:

The Master Portfolio’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in 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 following is a summary of the significant accounting policies followed by the Master Portfolio:

Valuation: US GAAP defines fair value as the price the Master Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Master Portfolio determines the fair values of its financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (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 provide oversight of the pricing function for the Master Portfolio for all financial instruments.

Equity investments traded on a recognized securities exchange or the NASDAQ Stock Market (“NASDAQ”) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale 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 are valued at the last available bid (long positions) or ask (short positions) price. Financial futures contracts traded on exchanges are valued at their last sale price. Investments in open-end registered investment companies are valued at NAV each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

In the event that 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 Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that each Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deem relevant consistent with the principles of fair value measurement, which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. The market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and is adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. 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 Master Portfolio’s pricing vendors, regular review 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 Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Segregation and Collateralization: In cases where the Master Portfolio enters into certain investments (e.g., financial futures contracts), that would be “senior securities” for 1940 Act purposes, the Master Portfolio may segregate or designate on its books and records cash or liquid securities having a market value at least equal to the amount of the Master Portfolio’s future obligations under such investments or borrowings. Doing so allows the investment to be excluded as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Master Portfolio 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 Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Master Portfolio is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax

34 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013

Notes to Financial Statements (continued) Russell 1000^® Index Master Portfolio

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 the accrual basis.

Income Taxes: The Master Portfolio is classified as a partnership for federal income tax purposes. As such, each investor in the Master Portfolio is treated as the owner of its proportionate share of net assets, income, expenses and realized and unrealized gains and losses of the Master Portfolio. Therefore, no federal income tax provision is required. It is intended that the Master Portfolio’s assets will be managed so an investor in the Master Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

The Master Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolio’s US federal tax returns remains open for each of the two years ended December 31, 2013 and period ended December 31, 2011. The statutes of limitations on the Master Portfolio’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed the tax laws and regulations and their application to the Master Portfolio’s facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

Other: Expenses directly related to the Master Portfolio are charged to the Master Portfolio. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods.

The Master Portfolio has an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statement of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.

3. Securities and Other Investments:

Securities Lending: The Master Portfolio may lend securities to approved borrowers, such as banks, brokers and other financial institutions. The borrower pledges cash, securities issued or guaranteed by the US government or irrevocable letters of credit issued by a bank as collateral. The initial collateral received by the Master Portfolio should have a value of at least 102% of the current value of the loaned securities for securities traded on US exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statement of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the Master Portfolio earns dividend or interest income on the securities loaned but does not receive interest income on the 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 securities on loan and the value of the related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value, and collateral on securities loaned at value, respectively. The cash collateral invested by the securities lending agent, BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Master Portfolio under Master Securities Lending Agreements (“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 Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender 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 a MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or repledge the loaned securities, and the Master Portfolio can reinvest cash collateral, or, upon an event of default, resell or repledge the collateral.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013 35

Notes to Financial Statements (continued) Russell 1000^® Index Master Portfolio

The following table is a summary of the Master Portfolio’s securities lending agreements by counterparty which are subject to offset under a MSLA as of December 31, 2013:

Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital, Inc.	$	459,559	$	(459,559	)		—
BNP Paribas S.A.		326,528		(326,528	)		—
Credit Suisse Securities (USA) LLC		3,848,055		(3,848,055	)		—
Deutsche Bank Securities, Inc.		213,125		(213,125	)		—
Goldman Sachs & Co.		7,105,761		(7,105,761	)		—
HSBC Bank PLC		35,369,606		(35,369,606	)		—
Jefferies LLC		444,982		(444,982	)		—
JP Morgan Securities LLC		7,217,023		(7,217,023	)		—
Merrill Lynch, Pierce, Fenner & Smith, Inc.		2,018,632		(2,018,632	)		—
Mizuho Securities USA, Inc.		129,635		(129,635	)		—
Morgan Stanley		9,465,778		(9,465,778	)		—
Nomura Securities International, Inc.		231,821		(231,821	)
UBS Securities LLC		854,229		(854,229	)		—
Total	$	67,684,734	$	(67,684,734	)		—

¹  Collateral with a value of $69,025,661 has been received in connection with securities lending agreements. Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

The risks of securities lending also include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate this risk, the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities lent. The Master Portfolio also could suffer 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. During the year ended December 31, 2013, any securities on loan were collateralized by cash.

4. Derivative Financial Instruments:

The Master Portfolio engages in various portfolio investment strategies using derivative contracts both to increase the return of the Master Portfolio and/or to economically hedge its exposure to certain risks such as equity or other risks. These contracts may be transacted on an exchange or over-the-counter (“OTC”).

Financial Futures Contracts: The Master Portfolio purchases and/or sells financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in the value of equity securities (equity risk). Financial futures contracts are agreements between the Master Portfolio and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date.

Upon entering into a financial futures contract, the Master Portfolio is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Securities deposited as initial margin are designated on the Schedule of Investments and cash deposited, if any, is recorded on the Statement of Assets and Liabilities as cash pledged for other derivative contracts. Pursuant to the contract, the Master Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin. Variation margin is recorded by the Master Portfolio as unrealized appreciation or depreciation, and if applicable, as a receivable or payable for variation margin in the Statement of Assets and Liabilities.

When the contract is closed, the Master Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest or foreign currency exchange rates and the underlying assets.

The following is a summary of the Master Portfolio’s derivative financial instruments categorized by risk exposure:

Fair Values of Derivative Financial Instruments as of December 31, 2013
	Statements of Assets and Liabilities Location	Value
Equity contracts	Net unrealized appreciation/depreciation2	$	482,424

²  Includes cumulative appreciation/depreciation on financial futures contracts as reported in the Schedule of Investments. Only current day’s margin variation is reported within the Statement of Assets and Liabilities.

The Effect of Derivative Financial Instruments in the Statement of Operations Year Ended December 31, 2013
	Net Realized Gain From
Equity Contracts:
Financial futures contracts		$4,179,953

	Net Change in Unrealized Appreciation/Depreciation  on
Equity Contracts:
Financial futures contracts		$431,201

For the year ended December 31, 2013, the average quarterly balances of outstanding derivative financial instruments were as follows:

Financial futures contracts:
Average number of contracts purchased	162
Average notional value of contracts purchased	$14,065,985

36 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013

Notes to Financial Statements (continued) Russell 1000^® Index Master Portfolio

Counterparty Credit Risk: 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.

A Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by such Fund.

With exchange traded futures, there is less counterparty credit risk to the Master Portfolio 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, a 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) of the clearing broker or clearinghouse. 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 Master Portfolio.

5. Investment Advisory Agreement and Other Transactions with Affiliates:

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

MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement with BlackRock Advisors LLC (the “Manager”), the Master Portfolio’s investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of the Master Portfolio’s portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Master Portfolio. For such services, the Master Portfolio pays the Manager a monthly fee based on a percentage of the Master Portfolio’s average daily net assets at an annual rate of 0.05%.

The Manager contractually agreed to waive and/or reimburse fees or 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 Master Portfolio’s business, in order to limit expenses of certain feeder funds, which invest their assets in the Master Portfolio. The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to May 1, 2014 unless approved by the Board, including a majority of the Independent Trustees.

The Master Portfolio received an exemptive order from the SEC permitting it, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BTC as the securities lending agent. BTC may, on behalf of the Master Portfolio, invest cash collateral received by the Master Portfolio for such loans in a private investment company managed by the Manager or in registered money market funds advised by the Manager or its affiliates. The market value of securities on loan and the value of the related collateral, if applicable, is shown in the Statement of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC, if any, is disclosed in the Schedule of Investments. Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of rebates paid to, or fees paid by, borrowers of securities. The Master Portfolio retains 65% of securities lending income and pays a fee to BTC equal to 35% of such income. The Master Portfolio benefits from a borrower default indemnity provided by BlackRock. As securities lending agent, BTC bears all operational costs directly related to securities lending as well as the cost of borrower default indemnification. BTC does not receive any fees for managing the cash collateral. The share of income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the year ended December 31, 2013, BTC received $98,664 in securities lending agent fees related to securities lending activities for the Master Portfolio.

During the year ended December 31 2013, the Master Portfolio received a payment of $17,211 from an affiliate to compensate for foregone securities lending revenue, which is included in Other income — affiliated in the Statement of Operations.

Certain officers and/or trustees of MIP are officers and/or directors of BlackRock or its affiliates.

The Master Portfolio may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is solely due to having a common investment adviser, common officers, or common trustees. For the year ended December 31, 2013, the purchase and sale transactions with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were $30,233,878 and $46,860, respectively.

6. Purchases and Sales:

Purchases and sales of investments excluding short-term securities, for the year ended December 31, 2013 were $583,248,632 and $103,606,561, respectively.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013 37

Notes to Financial Statements (concluded) Russell 1000^® Index Master Portfolio

7. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $800 million credit agreement with a group of lenders, under which the Master Portfolio may borrow to fund shareholder redemptions. The agreement expires in April 2014. Excluding commitments designated for a certain individual fund, other Participating Funds, including the Master Portfolio, can borrow up to an aggregate commitment amount of $500 million, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.065% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. Participating Funds paid administration and arrangement fees, which, along with commitment fees, were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. The Master Portfolio did not borrow under the credit agreement during the year ended December 31, 2013.

8. Concentration, Market and Credit Risk:

In the normal course of business, the Master Portfolio invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Master Portfolio may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Master Portfolio; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Master Portfolio may be exposed to counterparty credit risk, or the risk that an entity with which the Master Portfolio have unsettled or open transactions may fail to or be unable to perform on its commitments. The Master Portfolio manages counterparty credit risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Master Portfolio to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Master Portfolio exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Master Portfolio.

9. Subsequent Events:

Management has evaluated the impact of all subsequent events on the Master Portfolio 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.

38 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013

Report of Independent Registered Public Accounting Firm Russell 1000^®  Index Master Portfolio

To the Board of Trustees of Master Investment Portfolio and the Interestholders of Russell 1000^® Index Master Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Russell 1000^® Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio, at December 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2014

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013 39

Officers and Trustees

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment  Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 107 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 107 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy from 2002 to 2012; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 107 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President, Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 107 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	President, London Center for Policy Research since 2012; Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and Professor thereof from 1980 to 2005; President Emeritus, Hudson Institute (policy research organization) from 2011 to 2012, President thereof from 1997 to 2011 and Trustee from 1980 to 2012; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (global internet services) since 2005; Director, Cerego, LLC (educational software) since 2005; Director, Cybersettle (online adjudication) since 2009; Director, AIMS Worldwide, Inc. (marketing) from 2007 to 2012.	33 RICs consisting of 107 Portfolios	None
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 107 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Director, The West Penn Allegheny Health System (a not-for-profit health system) from 2008 to 2013; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 107 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 107 Portfolios	None

40 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1 (concluded)
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Immediate past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	33 RICs consisting of 107 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Director, Alkon Corporation (pneumatics) since 1992; Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh from 2005 to 2013 and Dean thereof from 1997 to 2005; Director, Tippman Sports (recreation) from 2005 to 2013; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 107 Portfolios	None
	1   Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved extensions in terms of Trustees who turn 72 prior to December 31, 2013.
	2   Date shown is the earliest date a person has served for the Trust/MIP covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the Trust’s/MIP’s Board. As a result, although the chart shows certain Trustees as joining the Trust’s/MIP’s board in 2009, those Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees3
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	144 RICs consisting of 278 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	144 RICs consisting of 278 Portfolios	None
	3   Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013 41

Officers and Trustees (concluded)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers1
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock since 2000; Head of the Global Cash Group since 2013; Co-head of the Global Cash and Securities Lending Group from 2010 to 2013; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009; and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2009	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2009	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Managing Director of BlackRock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary of the BlackRock-advised funds from 2010 to 2012; General Counsel and Chief Operating Officer of Uhuru Capital Management from 2009 to 2010; Executive Director and Counsel of Goldman Sachs Asset Management from 2005 to 2009.
	1   Officers of the Trust/MIP serve at the pleasure of the Board.

Investment Advisor BlackRock Fund Advisors San Francisco, CA 94105	Custodian and Accounting Agent State Street Bank and Trust Company Boston, MA 02110	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Sidley Austin LLP New York, NY 10019
Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP Philadelphia, PA 19103	Address of the Trust 400 Howard Street San Francisco, CA 94105

42 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013

Additional Information

General Information

Electronic Delivery

Electronic copies of most financial reports and prospectuses are available on the Fund’s website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Fund’s electronic delivery program.

To enroll:

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:

Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.

Shareholders Who Hold Accounts Directly with BlackRock:

1) Access the BlackRock website at

http://www.blackrock.com/edelivery

2) Select “eDelivery” under the “More Information” section

3) Log into your account

Householding

The Fund 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 Fund at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Fund/Master Portfolio 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 Fund’s/Master Portfolio’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Fund’s/Master Portfolio’s 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/Master Portfolio uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Fund/Master Portfolio voted proxies relating to securities held in the Fund’s/Master Portfolio’s portfolio during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM EST 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/funds.

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.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013 43

Additional Information (concluded)

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.

44 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013

A World-Class 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.

Equity Funds

BlackRock ACWI ex-US Index Fund

BlackRock All-Cap Energy & Resources Portfolio

BlackRock Basic Value Fund

BlackRock Capital Appreciation Fund

BlackRock Commodity Strategies Fund

BlackRock Disciplined Small Cap Core Fund

BlackRock Emerging Markets Fund

BlackRock Emerging Markets Dividend Fund

BlackRock Emerging Markets Long/Short Equity Fund

BlackRock Energy & Resources Portfolio

BlackRock Equity Dividend Fund

BlackRock EuroFund

BlackRock Flexible Equity Fund

BlackRock Focus Growth Fund

BlackRock Global Dividend Portfolio

BlackRock Global Long/Short Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Global SmallCap Fund

BlackRock Health Sciences Opportunities Portfolio

BlackRock International Fund

BlackRock International Index Fund

BlackRock International Opportunities Portfolio

BlackRock Large Cap Core Fund

BlackRock Large Cap Core Plus Fund

BlackRock Large Cap Growth Fund

BlackRock Large Cap Value Fund

BlackRock Latin America Fund

BlackRock Long-Horizon Equity Fund

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Mid Cap Value Opportunities Fund

BlackRock Natural Resources Trust

BlackRock Pacific Fund

BlackRock Real Estate Securities Fund

BlackRock Russell 1000^® Index Fund

BlackRock Science & Technology Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock Small Cap Growth Fund II

BlackRock Small Cap Index Fund

BlackRock S&P 500 Stock Fund

BlackRock U.S. Opportunities Portfolio

BlackRock Value Opportunities Fund

Taxable Fixed Income Funds

BlackRock Bond Index Fund

BlackRock Core Bond Portfolio

BlackRock CoreAlpha Bond Fund

BlackRock CoRI Funds

2015	2021
2017	2023
2019

BlackRock Emerging Markets Flexible Dynamic Bond Portfolio

BlackRock Floating Rate Income Portfolio

BlackRock Global Long/Short Credit Fund

BlackRock GNMA Portfolio

BlackRock High Yield Bond Portfolio

BlackRock Inflation Protected Bond Portfolio

BlackRock International Bond Portfolio

BlackRock Investment Grade Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Secured Credit Portfolio

BlackRock Short Obligations Fund

BlackRock Short-Term Treasury Fund

BlackRock Strategic Income Opportunities Portfolio

BlackRock Total Return Fund

BlackRock U.S. Government Bond Portfolio

BlackRock U.S. Mortgage Portfolio

BlackRock Ultra-Short Obligations Fund

BlackRock World Income Fund

Municipal Fixed Income Funds

BlackRock California Municipal Bond Fund

BlackRock High Yield Municipal Fund

BlackRock National Municipal Fund

BlackRock New Jersey Municipal Bond Fund

BlackRock New York Municipal Bond Fund

BlackRock Pennsylvania Municipal Bond Fund

BlackRock Short-Term Municipal Fund

BlackRock Strategic Municipal Opportunities Fund

Mixed Asset Funds

BlackRock Balanced Capital Fund	LifePath Active Portfolios			LifePath Index Portfolios
BlackRock Emerging Market Allocation Portfolio		2015	2040		Retirement	2040
BlackRock Global Allocation Fund		2020	2045		2020	2045
BlackRock Managed Volatility Portfolio		2025	2050		2025	2050
BlackRock Multi-Asset Income Portfolio		2030	2055		2030	2055
BlackRock Multi-Asset Real Return Fund		2035			2035
BlackRock Strategic Risk Allocation Fund
	LifePath Portfolios
BlackRock Prepared Portfolios		Retirement	2040
Conservative Prepared Portfolio		2020	2045
Moderate Prepared Portfolio		2025	2050
Growth Prepared Portfolio		2030	2055
Aggressive Growth Prepared Portfolio		2035

BlackRock mutual funds are currently distributed by BlackRock Investments, LLC. You should consider the investment objectives, risks, charges and expenses of the funds under consideration carefully before investing. Each fund’s prospectus contains this and other information and is available at www.blackrock.com or by calling (800) 441-7762 or from your financial advisor. The prospectus should be read carefully before investing.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2013 45

This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless accompanied or preceded by the Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.

R1000-12/13-AR

DECEMBER 31, 2013

  ANNUAL REPORT  

BlackRock S&P 500 Stock Fund  |  of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
Dear Shareholder		3
Annual Report:
Fund Summary		4
About Fund Performance		6
Disclosure of Expenses		6
Derivative Financial Instruments		7
Fund Financial Statements:
Statement of Assets and Liabilities		8
Statement of Operations		9
Statements of Changes in Net Assets		10
Fund Financial Highlights		11
Fund Notes to Financial Statements		13
Fund Report of Independent Registered Public Accounting Firm		18
Important Tax Information		18
Master Portfolio Information		19
Master Portfolio Financial Statements:
Schedule of Investments		20
Statement of Assets and Liabilities		28
Statement of Operations		29
Statements of Changes in Net Assets		30
Master Portfolio Financial Highlights		30
Master Portfolio Notes to Financial Statements		31
Master Portfolio Report of Independent Registered Public Accounting Firm		37
Officers and Trustees		38
Additional Information		41
A World-Class Mutual Fund Family		43

2 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013

Dear Shareholder

Risk assets (such as equities) powered higher in 2013, for the most part unscathed by ongoing political and economic uncertainty. While monetary policy was the main driving force behind the rally in risk assets, it was also the main culprit for the bouts of volatility during the year.

Equity markets rallied right out of the gate in January with cash pouring back in from the sidelines after a potential US fiscal crisis (i.e., the “fiscal cliff”) was averted with a last-minute tax deal. Key indicators signaling modest but broad-based improvements in the world’s major economies and a calming in Europe’s debt troubles fostered an aura of comfort for investors. Global economic momentum slowed in February, however, and the pace of the rally moderated. In the months that followed, US stocks outperformed international stocks, as the US showed greater stability than most other regions. Slow but positive growth was sufficient to support corporate earnings, while uncomfortably high unemployment reinforced expectations that the Federal Reserve would continue its aggressive monetary stimulus program. International markets experienced higher levels of volatility given a resurgence of political instability in Italy, a banking crisis in Cyprus and a generally poor outlook for European economies. Emerging markets significantly lagged the rest of the world as growth in these economies fell short of expectations.

Financial markets were rattled in May when Fed Chairman Bernanke mentioned the possibility of reducing — or “tapering” — the central bank’s asset purchase programs — comments that were widely misinterpreted as signaling an end to the Fed’s zero-interest-rate policy. US Treasury yields rose sharply, triggering a steep sell-off across fixed income markets. (Bond prices move in the opposite direction of yields.) Equity prices also suffered as investors feared the implications of a potential end of a program that had greatly supported the markets. Risk assets rebounded in late June, however, when the Fed’s tone turned more dovish, and improving economic indicators and better corporate earnings helped extend gains through most of the summer.

The fall was a surprisingly positive period for most asset classes as the Fed defied market expectations with its decision to delay tapering. Easing of political tensions that had earlier surfaced in Egypt and Syria and the re-election of Angela Merkel as Chancellor of Germany also boosted investor sentiment. Higher volatility returned in late September when the US Treasury Department warned that the national debt would soon breach its statutory maximum. The ensuing political brinksmanship led to a partial government shutdown, roiling global financial markets through the first half of October, but the rally quickly resumed when politicians engineered a compromise to reopen the government and extend the debt ceiling, at least temporarily.

The remainder of the year was generally positive for stock markets in the developed world, although investors continued to grapple with uncertainty about when and how much the Fed would scale back on stimulus. On the one hand, persistent weak growth and low inflation provided significant latitude for monetary policy decisions and investors were encouraged by dovish comments from Fed Chair-to-be Janet Yellen. On the other hand, US housing and manufacturing reports had begun to signal fundamental improvement in the economy. The long-awaited taper announcement ultimately came in mid-December. The Fed reduced the amount of its monthly asset purchases, but at the same time, extended its time horizon for maintaining low short-term interest rates. Markets reacted positively as this move signaled the Fed’s perception of real improvement in the economy and investors felt relief from the tenacious anxiety that had gripped them throughout the year.

Accommodative monetary policy and the avoidance of major risks made 2013 a strong year for most equity markets. US stocks were the strongest performers for the six- and 12-month periods ended December 31. In contrast, emerging markets were weighed down by uneven growth and structural imbalances. Rising US Treasury yields led to a rare annual loss in 2013 for Treasury bonds and other high-quality fixed income sectors including tax-exempt municipals and investment grade corporate bonds. High yield bonds, to the contrary, generated gains driven by income-oriented investors seeking yield in the low-rate environment. Short-term interest rates remained near zero, keeping yields on money market securities near historical lows.

At BlackRock, we believe investors need to think globally and extend their scope across a broader array of asset classes and be prepared to move freely as market conditions change over time. We encourage you to talk with your financial advisor and visit www.blackrock.com for further insight about investing in today’s world.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

“While monetary policy was the main driving force behind the rally in risk assets, it was also the main culprit for the bouts of volatility during the year.”

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2013
	6-month			12-month
US large cap equities (S&P 500® Index)		16.31	%		32.39	%
US small cap equities (Russell 2000® Index)		19.82			38.82
International equities (MSCI Europe, Australasia, Far East Index)		17.94			22.78
Emerging market equities (MSCI Emerging Markets Index)		7.70			(2.60	)
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)		0.03			0.07
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		(3.10	)		(7.83	)
US investment grade bonds (Barclays US Aggregate Bond Index)		0.43			(2.02	)
Tax-exempt municipal bonds (S&P Municipal Bond Index)		0.00			(2.55	)
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)		5.94			7.44
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

THIS PAGE NOT PART OF YOUR FUND REPORT 3

Fund Summary as of December 31, 2013

Investment Objective

BlackRock S&P 500 Stock Fund’s (the “Fund”), a series of BlackRock Funds III (the “Trust”), investment objective is to provide investment results that correspond to the total return performance of publicly-traded common stocks in the aggregate, as represented by the Standard & Poor’s (“S&P”) 500^® Index.

Portfolio Management Commentary

Ÿ On April 19, 2013, the Trust acquired substantially all of the assets and assumed substantially all of the liabilities of BlackRock S&P 500 Index Fund, a series of BlackRock Index Funds, Inc., and BlackRock Index Equity Portfolio, a series of BlackRock Funds^SM, in exchange for newly issued shares of the Fund. Shareholders of BlackRock Index Equity Portfolio and BlackRock S&P 500 Index Fund approved the plan of reorganization at meetings held on November 9, 2012 and March 15, 2013, respectively.

How did the Fund perform?

Ÿ For the 12 months ended December 31, 2013, the Fund’s Institutional Shares returned 32.13%, Service Shares returned 31.98%, Investor A Shares returned 31.78%, Investor C1 Shares returned 30.86% and Class K Shares returned 32.21%. The benchmark S&P 500^® Index returned 32.39% for the same period.

Ÿ Returns for the Fund’s respective share classes differ from the benchmark index based on individual share-class expenses. The Fund invests all of its assets in S&P 500^® Stock Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio.

Describe the market environment.

Ÿ US equity markets began 2013 with a powerful relief rally after the United States averted the worst of its potential fiscal crisis with a last-minute tax deal. The rally softened in February, however, as economic momentum slowed. Later in the first quarter, a stalemate presidential election in Italy and a severe banking crisis in Cyprus reminded investors that political and financial instability in Europe continued to pose risks. The ascent of equities persevered as increased global liquidity kept interest rates low and investors turned to riskier asset classes in search of yield.

Ÿ As the year progressed, the direction of stock markets became increasingly dominated by speculation around the future of monetary policy. Sluggish US growth, ironically, was often conducive to positive stock market performance as weak economic data reinforced investors’ expectations that the US Federal Reserve would maintain its accommodative stance. Additionally, the modest pace of economic growth contributed to corporate profit margins as the US recovery was strong enough to support revenues while nearly stagnant wage growth kept costs low.

Ÿ After peaking in late May, stock markets recoiled when Fed Chairman Bernanke mentioned the possibility of gradually reducing (or “tapering”) monetary stimulus before the end of 2013. Volatility picked up considerably as many investors misinterpreted the Fed’s remarks as signaling the end of low short-term interest rates. However, equities staged a swift mid-summer rebound when the Fed’s tone turned more dovish. Later in the third quarter, mixed economic data drove high volatility as it made investors increasingly anxious about when and how much the Fed would scale back on its monthly asset purchase program.

Ÿ September brought another sharp rally as the Fed defied market expectations with its decision to delay tapering its asset purchases. But the equity market advance was interrupted again in late September when the US teetered on breaching the national debt ceiling and political brinksmanship led to a partial government shutdown. The rally quickly resumed in mid-October when politicians engineered a compromise to reopen the government and extend the debt ceiling until early 2014.

Ÿ As economic indicators improved later in the fall, investors grappled with rising uncertainty around the timing of the anticipated Fed taper. This anxiety was ultimately relieved when the central bank announced the commencement of tapering in mid-December. Investors reacted positively to this policy move as it signaled the Fed’s perception of real improvement in US growth. Sentiment was also buoyed by the extension of the Fed’s expected time horizon for maintaining low short-term interest rates.

Describe recent portfolio activity.

Ÿ During the period, as changes were made to the composition of the S&P 500^® Index, the Master Portfolio purchased and sold securities to maintain its objective of replicating the risks and return of the benchmark index.

Describe portfolio positioning at period end.

Ÿ The Master Portfolio 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.

4 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013

Total Return Based on a $10,000 Investment

¹  Assuming transaction costs and other operating expenses, including administration fees, if any.

²  The Fund invests all of its assets in the Master Portfolio. The Master Portfolio invests primarily in a diversified portfolio of equity securities of large companies located in the United States.

³  This unmanaged index covers 500 industrial, utility, transportation and financial companies of the US markets (mostly New York Stock Exchange (the “NYSE”) issues), representing about 75% of NYSE market capitalization and 30% of NYSE issues.

Performance Summary for the Period Ended December 31, 2013

	6-Month Total Returns			Average Annual Total Returns4
				1 Year						5 Years						10 Years
				w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		16.19	%		32.13	%		N/A			17.74	%		N/A			7.21	%		N/A
Service		16.13			31.98			N/A			17.60			N/A			7.08			N/A
Investor A		16.05			31.78			N/A			17.44			N/A			6.94			N/A
Investor C1		15.63			30.86			29.86	%		16.61			16.61	%		6.18			6.18	%
Class K		16.23			32.21			N/A			17.82			N/A			7.28			N/A
S&P 500® Index		16.31			32.39			N/A			17.94			N/A			7.41			N/A

⁴  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 6 for a detailed description of share classes, including any related sales charges and fees.

N/A — Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

Expense Example

	Actual						Hypothetical6
	Beginning Account Value July 1, 2013		Ending Account Value December 31, 2013		Expenses Paid During the Period5		Beginning Account Value July 1, 2013		Ending Account Value December 31, 2013		Expenses Paid During the Period5		Annualized Expense Ratio
Institutional	$	1,000.00	$	1,161.90	$	1.25	$	1,000.00	$	1,024.05	$	1.17		0.23	%
Service	$	1,000.00	$	1,161.30	$	1.91	$	1,000.00	$	1,023.44	$	1.79		0.35	%
Investor A	$	1,000.00	$	1,160.50	$	2.61	$	1,000.00	$	1,022.79	$	2.45		0.48	%
Investor C1	$	1,000.00	$	1,156.30	$	6.47	$	1,000.00	$	1,019.21	$	6.06		1.19	%
Class K	$	1,000.00	$	1,162.30	$	0.87	$	1,000.00	$	1,024.40	$	0.82		0.16	%

⁵  For each class of the Fund, expenses are equal to the annualized net expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown). Because the Fund invests significantly in the Master Portfolio, the expense example reflects the net expenses of both the Fund and the Master Portfolio in which it invests.

⁶  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

See “Disclosure of Expenses” on page 6 for further information on how expenses were calculated.

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013 5

About Fund Performance

Ÿ Institutional and Class K Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors. Prior to April 11, 2013, Class K Shares were an undesignated share class of the Fund.

Ÿ Service Shares are not subject to any sales charge. These shares are subject to a service fee of 0.15% per year (but no distribution fee) and are available only to certain eligible investors.

Ÿ Investor A Shares are not subject to any sales charge. These shares are subject to a service fee of 0.25% per year (but no distribution fee).

Ÿ Investor C1 Shares are subject to a 1.00% contingent deferred sales charges (“CDSC”) if redeemed within one year of purchase. In addition, these shares are subject to a distribution fee of 0.75% per year and a service fee of 0.15% per year.

Prior to the inception date of April 10, 2013 for Institutional and Investor A Shares and prior to the inception date of April 19, 2013 for Service and Investor C1 Shares, the performance of the classes is based on the returns of the Class K Shares, adjusted to reflect the estimated annual fund fees and operating expenses of each respective share class of the Fund.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Call toll free, (800) 441-7762, to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in the performance table on the preceding page assume reinvestment of all dividends and capital gain distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Dividends paid to each class of shares will vary because of the different levels of administration, service and distribution fees applicable to each class, which are deducted from the income available to be paid to shareholders. The Fund’s administrator waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including administration fees, service and distribution fees, including 12b-1 fees, and other Fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2013 and held through December 31, 2013) 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 other funds’ shareholder reports.

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.

6 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013

Derivative Financial Instruments

The Master Portfolio may invest in various derivative financial instruments, including financial futures contracts, as specified in Note 4 of the Master Portfolio’s Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to an index and/or market without owning or taking physical custody of securities or to hedge market and/or equity risks. Derivative financial instruments 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 derivative financial instrument. The Master Portfolio’s ability to use a derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require the Master Portfolio to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation the Master Portfolio can realize on an investment, may result in lower dividends paid to shareholders or may cause the Master Portfolio to hold an investment that it might otherwise sell. The Master Portfolio’s investments in these instruments are discussed in detail in the Master Portfolio’s Notes to Financial Statements.

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013 7

Statement of Assets and Liabilities BlackRock S&P 500 Stock Fund

December 31, 2013
Assets
Investments at value — Master Portfolio (cost — $2,438,049,606)	$	3,773,799,502
Withdrawals receivable from the Master Portfolio		18,832,530
Capital shares sold receivable		6,164,057
Total assets		3,798,796,089
Liabilities
Capital shares redeemed payable		24,996,587
Administration fees payable		514,252
Service and distribution fees payable		274,339
Professional fees payable		11,994
Other accrued expenses payable		9,469
Total liabilities		25,806,641
Net Assets	$	3,772,989,448
Net Assets Consist of
Paid-in capital	$	2,413,344,895
Undistributed net investment income		966,638
Accumulated net realized gain		22,928,019
Net unrealized appreciation/depreciation		1,335,749,896
Net Assets	$	3,772,989,448
Net Asset Value
Institutional — Based on net assets of $1,570,760,113 and 7,076,457 shares outstanding, unlimited number of shares authorized, no par value	$	221.97
Service — Based on net assets of $252,419,470 and 1,137,196 shares outstanding, unlimited number of shares authorized, no par value	$	221.97
Investor A — Based on net assets of $1,046,428,436 and 4,714,389 shares outstanding, unlimited number of shares authorized, no par value	$	221.96
Investor C1 — Based on net assets of $77,039,513 and 347,062 shares outstanding, unlimited number of shares authorized, no par value	$	221.98
Investor K — Based on net assets of $826,341,916 and 3,722,432 shares outstanding, unlimited number of shares authorized, no par value	$	221.99

See Notes to Financial Statements.
8	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2013

Statement of Operations BlackRock S&P 500 Stock Fund

Year Ended December 31, 2013
Investment Income
Net investment income allocated from the Master Portfolio:
Dividends — unaffiliated	$	54,022,800
Dividends — affiliated		345,848
Securities lending — affiliated — net		125,176
Other income — affiliated		70,804
Income — affiliated		44,266
Interest		982
Foreign taxes withheld		(9,743	)
Expenses		(1,374,820	)
Fees reimbursed		101,915
Total income		53,327,228
Fund Expenses
Administration — Institutional		1,823,347
Administration — Service		245,338
Administration — Investor A		1,170,107
Administration — Investor C1		127,612
Administration — Class K		756,845
Service — Service		243,556
Service — Investor A		1,623,717
Service and distribution — Investor C1		456,272
Professional		19,317
Miscellaneous		325
Total expenses		6,466,436
Less fees waived by administrator		(19,317	)
Total expenses after fees waived		6,447,119
Net investment income		46,880,109
Realized and Unrealized Gain Allocated from the Master Portfolio
Net realized gain from investments, short sales and financial futures contracts		4,132,473
Net change in unrealized appreciation/depreciation on investments and financial futures contracts		624,104,063
Total realized and unrealized gain		628,236,536
Net Increase in Net Assets Resulting from Operations	$	675,116,645

See Notes to Financial Statements.
	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2013	9

Statements of Changes in Net Assets BlackRock S&P 500 Stock Fund

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012
Operations
Net investment income	$	46,880,109		$	7,311,088
Net realized gain		4,132,473			79,014,593
Net change in unrealized appreciation/depreciation		624,104,063			(42,974,624	)
Net increase in net assets resulting from operations		675,116,645			43,351,057
Dividends to Shareholders From1
Net investment income:
Institutional		(19,390,400	)		—
Service		(2,904,493	)		—
Investor A		(10,732,874	)		—
Investor C1		(473,608	)		—
Class K		(12,805,036	)		(6,997,048	)
Decrease in net assets resulting from dividends to shareholders		(46,306,411	)		(6,997,048	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		2,764,113,191			88,431,939
Net Assets
Total increase in net assets		3,392,923,425			124,785,948
Beginning of year		380,066,023			255,280,075
End of year	$	3,772,989,448		$	380,066,023
Undistributed net investment income, end of year	$	966,638		$	392,940

¹ Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
10	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2013

Financial Highlights BlackRock S&P 500 Stock Fund

	Institutional			Service			Investor A			Investor C1
	Period April 10, 20131 to December  31, 2013			Period April 19, 20131 to December 31, 2013			Period April 10, 20131 to December  31, 2013			Period April 19, 20131 to December 31, 2013
Per Share Operating Performance
Net asset value, beginning of period	$	190.60		$	186.71		$	190.60		$	186.71
Net investment income2		2.89			2.59			2.50			1.38
Net realized and unrealized gain		31.21			35.22			31.23			35.22
Net increase from investment operations		34.10			37.81			33.73			36.60
Dividends from net investment income3		(2.73	)		(2.55	)		(2.37	)		(1.33	)
Net asset value, end of period	$	221.97		$	221.97		$	221.96		$	221.98
Total Investment Return4
Based on net asset value5		18.03%			20.39%			17.82%			19.68%
Ratios to Average Net Assets6
Total expenses7,8		0.23%			0.35%			0.48%			1.19%
Total expenses after fees waived7,8		0.23%			0.35%			0.48%			1.19%
Net investment income7,8		1.93%			1.81%			1.67%			0.97%
Supplemental Data
Net assets, end of period (000)	$	1,570,760		$	252,419		$	1,046,428		$	77,040
Portfolio turnover of the Master Portfolio		2%			2%			2%			2%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Determined in accordance with federal income tax regulations.

⁴ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁷ Annualized.

⁸ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of less than 0.01%.

See Notes to Financial Statements.
	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2013	11

Financial Highlights (concluded) BlackRock S&P 500 Stock Fund

	Class K
	Year Ended December 31,
	2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of year	$	171.12		$	150.57		$	150.60		$	133.49		$	107.85
Net investment income1		3.91			3.57			2.97			2.55			2.50
Net realized and unrealized gain (loss)		50.74			20.23			(0.05	)		17.10			25.60
Net increase from investment operations		54.65			23.80			2.92			19.65			28.10
Dividends and distributions from:2
Net investment income		(3.78	)		(3.25	)		(2.92	)		(2.54	)		(2.46	)
Return of capital		—			—			(0.03	)		—			—
Total dividends and distributions		(3.78	)		(3.25	)		(2.95	)		(2.54	)		(2.46	)
Net asset value, end of year	$	221.99		$	171.12		$	150.57		$	150.60		$	133.49
Total Investment Return3
Based on net asset value		32.21%			15.85%			2.00%			14.91%			26.48%
Ratios to Average Net Assets4
Total expenses		0.17%	5		0.26%	6		0.19%	5		0.21%			0.21%
Total expenses after fees waived		0.16%	5		0.18%	6		0.18%	5		0.20%			0.20%
Net investment income		1.96%	5		2.15%	6		1.95%	5		1.87%			2.20%
Supplemental Data
Net assets, end of year (000)	$	826,342		$	380,066		$	255,280		$	277,661		$	215,333
Portfolio turnover of the Master Portfolio		2%			10%			5%			9%			5%

¹ Based on average shares outstanding.

² Determined in accordance with federal income tax regulations.

³ Where applicable, assumes the reinvestment of dividends and distributions.

⁴  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the three years ended December 31, 2010, which include gross expenses.

⁵ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of less than 0.01%.

⁶ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.01%

See Notes to Financial Statements.
12	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2013

Notes to Financial Statements BlackRock S&P 500 Stock Fund

1. Organization:

BlackRock S&P 500 Stock Fund (the “Fund”), a series of BlackRock Funds III (the “Trust”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. The Trust is organized as a Delaware statutory trust. The Fund seeks to achieve its investment objective by investing substantially all of its assets in S&P 500 Stock Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), an affiliate of the Fund, which has the same investment objective and strategies as the Fund. The value of the Fund’s investment in the Master Portfolio reflects the Fund’s proportionate interest in the net assets of the Master Portfolio. The performance of the Fund is directly affected by the performance of the Master Portfolio. The percentage of the Master Portfolio owned by the Fund at December 31, 2013 was 71.6%. As such, the financial statements of the Master Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with the Fund’s financial statements. The Fund offers multiple classes of shares. Institutional and Class K Shares are sold without a sales charge and only to eligible investors. Service and Investor A Shares are sold without a sales charge. Investor C1 Shares may be subject to a CDSC. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that Service, Investor A and Investor C1 Shares bear certain expenses related to the shareholder servicing of such shares, and Investor C1 Shares also bear certain expenses related to the distribution of such shares. Investor C1 Shares are only available through exchanges and dividend reinvestments by existing shareholders and for purchase by certain employer-sponsored retirement plans. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures.

Reorganization: The Board of Trustees of MIP (the “Board”), and the respective Boards and shareholders of each of BlackRock S&P 500 Index Fund (“S&P 500 Index Fund”), a series of BlackRock Index Funds, Inc., and BlackRock Index Equity Portfolio (“Index Equity Portfolio”), a series of BlackRock Funds^SM (individually, a “Target Fund” and collectively, the “Target Funds”), approved the reorganization of each Target Fund into the Fund pursuant to which the Fund acquired substantially all of the assets and assumed substantially all of the liabilities of each Target Fund in exchange for an equal aggregate value of newly–issued shares of the Fund.

Each shareholder of a Target Fund received shares of the Fund in an amount equal to the aggregate net asset value of such shareholder’s Target Fund shares, as determined at the close of business on April 19, 2013, less the costs of the Target Fund’s reorganization. In connection with the reorganization, the Fund issued newly created Institutional, Service, Investor A and Investor C1 shares. The then outstanding class of Fund shares was re-designated Class K.

The reorganizations were accomplished by a tax-free exchange of shares of the Fund in the following amounts and at the following conversion ratios:

Target Fund	Target Fund’s Share Class	Shares Prior to Reorganization		Conversion Ratio		Fund’s Share Class	Shares of the Fund
S&P 500 Index Fund	Institutional		68,741,124		0.10163775	Institutional		6,986,693
S&P 500 Index Fund	Investor A		33,831,894		0.10150342	Investor A		3,434,053
Index Equity Portfolio	Institutional		9,362,068		0.15998417	Class K		1,497,783
Index Equity Portfolio	Service		2,054,381		0.15881537	Service		326,267
Index Equity Portfolio	Investor A		5,363,591		0.15870182	Service		851,212
Index Equity Portfolio	Investor B		18,331		0.15763385	Service		2,890
Index Equity Portfolio	Investor C		2,368,143		0.15579407	Investor C1		368,943

Each Target Fund’s net assets and composition of net assets on April 19, 2013, the valuation date of the reorganization, were as follows:

Target Fund	Net Assets		Paid-in Capital		Accumulated Net Realized Gain (Loss)			Net Unrealized Appreciation
S&P 500 Index Fund	$	1,945,674,388	$	1,443,196,899	$	(139,324,052	)	$	641,801,541
Index Equity Portfolio	$	568,933,275	$	89,368,279	$	392,716,977		$	86,848,019

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013 13

Notes to Financial Statements (continued) BlackRock S&P 500 Stock Fund

For financial reporting purposes, assets received and shares issued by the Fund were recorded at fair value. However, the cost basis of the investments being received from the Target Funds were 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 acquisition were $655,959,610. The aggregate net assets of the Fund immediately after the acquisition amounted to $3,170,567,273. Each Target Fund’s fair value and cost of investments — Master prior to the reorganization were as follows:

Target Funds	Fair Value of Investments		Cost of Investments
S&P 500 Index Fund	$	1,946,602,630	$	1,304,801,089
Index Equity Portfolio	$	569,177,682	$	482,329,663

The purpose of these transactions was to combine three funds managed by BlackRock Fund Advisor (“BFA” or the “Manager”) with the same or substantially similar (but not identical) investment objectives, investment policies, strategies, risks and restrictions. Each reorganization was a tax-free event and was effective on April 22, 2013.

Assuming the acquisition had been completed on January 1, 2013, the beginning of the fiscal reporting period of the Fund, the pro forma results of operations for the year ended December 31, 2013, are as follows:

Ÿ Net investment income: $59,870,697

Ÿ Net realized and change in unrealized gain on investments: $1,245,158,841

Ÿ Net increase in net assets resulting from operations: $1,305,029,539

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 Target Funds that have been included in the Fund’s Statement of Operations since April 22, 2013.

Reorganization costs incurred in connection with the reorganization were expensed by the Fund and reimbursed by BlackRock Advisors, LLC (“BAL”).

2. Significant Accounting Policies:

The Fund’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in 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 following is a summary of the significant accounting policies followed by the Fund:

Valuation: US 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 policy is to fair value its financial instruments at market value. The Fund records its investment in the Master Portfolio at fair value based on the Fund’s proportionate interest in the net assets of the Master Portfolio. Valuation of securities held by the Master Portfolio is discussed in Note 2 of the Master Portfolio’s Notes to Financial Statements, which are included elsewhere in this report.

Investment Transactions and Investment Income: For financial reporting purposes, contributions to and withdrawals from the Master Portfolio are accounted on a trade date basis. The Fund records daily its proportionate share of the Master Portfolio’s income, expenses and realized and unrealized gains and losses. Realized and unrealized gains and losses are adjusted utilizing partnership tax allocation rules. In addition, the Fund accrues its own expenses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

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

Income Taxes: 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 US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s US federal tax returns remains open for each of the four years ended December 31, 2013. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

14 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013

Notes to Financial Statements (continued) BlackRock S&P 500 Stock Fund

Management has analyzed tax laws and regulations and their application to the Fund’s facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

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

3. Administration Agreement and Other Transactions with Affiliates:

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

The Trust entered into an Administration Agreement with BAL, which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL, in consideration thereof, has agreed to bear all of the Fund’s ordinary operating expenses, excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the Fund. BAL is entitled to receive for these administration services an annual fee based on the average daily net assets of the Fund. Prior to April 22, 2013, the Fund paid BAL a monthly fee at an annual rate of 0.13% based upon the average daily net assets of the shares of the Fund.

Effective April 22, 2013, the Fund pays the Administrator a monthly fee at annual rates based upon the average daily net assets of the shares of the Fund as follows:

	Rate
Institutional		0.18%
Service		0.15%
Investor A		0.18%
Investor C1		0.25%
Class K		0.11%

From time to time, the Administrator may waive such fees in whole or in part. Any such waiver will reduce the expenses of the Fund and, accordingly, have a favorable impact on its performance. The Administrator may delegate certain of its administration duties to sub-administrators.

The fees and expenses of the Trust’s trustees who are not “interested persons” of the Trust, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and the Trust’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Fund. The Administrator has contractually agreed to provide an offsetting credit against the administration fees paid by the Fund in an amount equal to the independent expenses through April 30, 2014.

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

	Service Fee			Distribution Fee
Service		0.15	%		—
Investor A		0.25	%		—
Investor C1		0.15	%		0.75	%

Pursuant to sub-agreements with BRIL, broker-dealers and BRIL provide shareholder servicing and distribution services to the Fund. The ongoing service and/or distribution fees compensate BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to Service, Investor A and Investor C1 shareholders.

Certain officers and/or trustees of the Trust are officers and/or directors of BlackRock or its affiliates.

4. Income Tax Information:

US GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. The following permanent differences as of December 31, 2013 attributable to the expiration of capital loss carryforwards were reclassified to the following accounts:

Paid-in capital	$	(39,139,478	)
Accumulated net realized gain	$	39,139,478

The tax character of distributions paid during the fiscal years ended December 31, 2013 and December 31, 2012 was as follows:

	12/31/13		12/31/12
Ordinary income	$	46,306,411	$	6,997,048

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013 15

Notes to Financial Statements (continued) BlackRock S&P 500 Stock Fund

As of December 31, 2013, the tax components of accumulated net earnings were as follows:

Undistributed ordinary income	$	836,804
Capital loss carryforwards		(227,356,577	)
Net unrealized gains1		1,586,164,326
Total	$	1,359,644,553

¹  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the timing and recognition of partnership income.

As of December 31, 2013, the Fund had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:

Expires December 31,
2014	$	31,394,394
2015		50,355,635
2016		82,681,799
2017		21,080,621
2018		29,366,509
No expiration date2		12,477,619
Total	$	227,356,577

² Must be utilized prior to losses subject to expiration.

During the year ended December 31, 2013, the Fund utilized $16,464,248 of its capital loss carryforward.

5. Capital Share Transactions:

Transactions in capital shares for the Fund were as follows:

	Period April 10,  20133 to December 31, 2013
	Shares			Amount
Institutional
Shares sold		2,166,352		$	440,390,615
Shares issued resulting from reorganization		6,986,693			1,304,510,503
Shares issued to shareholders in reinvestment of dividends		92,169			18,730,219
Shares redeemed		(2,168,757	)		(442,435,143	)
Net increase		7,076,457		$	1,321,196,194
	Period April 19,  20133 to December 31, 2013
Service
Shares sold		95,553		$	19,504,317
Shares issued resulting from reorganization		1,180,369			220,384,347
Shares issued to shareholders in reinvestment of dividends		14,036			2,850,673
Shares redeemed		(152,762	)		(30,909,655	)
Net increase		1,137,196		$	211,829,682
	Period April 10,  20133 to December 31, 2013
Investor A
Shares sold		2,019,105		$	397,655,245
Shares issued resulting from reorganization		3,434,053			641,163,884
Shares issued to shareholders in reinvestment of dividends		49,479			10,061,015
Shares redeemed		(788,248	)		(159,333,939	)
Net increase		4,714,389		$	889,546,205

³  Commencement of operations.

16 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013

Notes to Financial Statements (concluded) BlackRock S&P 500 Stock Fund

	Period April 19,  20131 to December 31, 2013
	Shares			Amount
Investor C1
Shares issued resulting from reorganization		368,943		$	68,884,568
Shares issued to shareholders in reinvestment of dividends		2,111			427,276
Shares redeemed		(23,992	)		(4,877,874	)
Net increase		347,062		$	64,433,970

¹ Commencement of operations.

	Year Ended December 31,  2013						Year Ended December 31, 2012
	Shares			Amount			Shares			Amount
Class K
Shares sold		955,258		$	188,585,120			1,418,484		$	234,352,984
Shares issued resulting from reorganization		1,497,783			279,664,361			—			—
Shares issued to shareholders in reinvestment of dividends		51,231			10,230,673			23,353			3,950,755
Shares redeemed		(1,002,888	)		(201,373,014	)		(916,170	)		(149,871,800	)
Net increase		1,501,384		$	277,107,140			525,667		$	88,431,939
Total Net Increase		14,776,488		$	2,764,113,191			525,667		$	88,431,939

6. Subsequent Events:

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

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013 17

Report of Independent Registered Public Accounting Firm BlackRock S&P 500 Stock Fund

To the Board of Trustees of BlackRock Funds III and the Shareholders of BlackRock S&P 500 Stock Fund:

In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock S&P 500 Stock Fund (the “Fund”), a series of BlackRock Funds III, at December 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2014

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by the Fund during the taxable year ended December 31, 2013.

	January 2013 — December 2013
Qualified Dividend Income for Individuals1		94.31%
Dividends Qualifying for the Dividend Received Deductions for Corporations1		91.88%

¹  The Fund hereby designates the percentage indicated above or the maximum amount allowable by law.

18 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013

Master Portfolio Information S&P 500 Stock Master Portfolio

As of December 31, 2013

Ten Largest Holdings Percent of Long-Term  Investments

Apple, Inc.	3	%
Exxon Mobile Corp.	3
Google, Inc., Class A	2
Microsoft Corp.	2
General Electric Co.	2
Johnson & Johnson	2
Chevron Corp.	2
The Procter & Gamble Co.	1
JPMorgan Chase & Co.	1
Wells Fargo & Co.	1

Sector Allocation Percent of Long-Term  Investments

Information Technology	19	%
Financials	16
Health Care	13
Consumer Discretionary	13
Industrials	11
Energy	10
Consumer Staples	10
Materials	4
Utilities	2
Telecommunication Services	2

For Master Portfolio compliance purposes, the Master Portfolio’s sector classifications refer to any 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 advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013 19

Schedule of Investments December 31, 2013 S&P 500 Stock Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Aerospace & Defense — 2.8%
The Boeing Co.		220,171	$	30,051,140
General Dynamics Corp.		106,557		10,181,521
Honeywell International, Inc.		249,896		22,832,998
L-3 Communications Holdings, Inc.		28,225		3,016,123
Lockheed Martin Corp.		85,687		12,738,229
Northrop Grumman Corp.		70,698		8,102,698
Precision Castparts Corp.		46,260		12,457,818
Raytheon Co.		101,743		9,228,090
Rockwell Collins, Inc.		43,031		3,180,852
Textron, Inc.		89,538		3,291,417
United Technologies Corp.		268,846		30,594,675
				145,675,561
Air Freight & Logistics — 0.8%
C.H. Robinson Worldwide, Inc.		48,291		2,817,297
Expeditors International of Washington, Inc.		65,471		2,897,092
FedEx Corp.		94,791		13,628,102
United Parcel Service, Inc., Class B		227,653		23,921,777
				43,264,268
Airlines — 0.2%
Delta Air Lines, Inc.		272,467		7,484,669
Southwest Airlines Co.		221,886		4,180,332
				11,665,001
Auto Components — 0.4%
BorgWarner, Inc.		72,471		4,051,854
Delphi Automotive PLC		89,180		5,362,393
The Goodyear Tire & Rubber Co.		78,630		1,875,325
Johnson Controls, Inc.		218,153		11,191,249
				22,480,821
Automobiles — 0.7%
Ford Motor Co.		1,256,192		19,383,042
General Motors Co. (a)		362,726		14,824,612
Harley-Davidson, Inc.		70,417		4,875,673
				39,083,327
Beverages — 2.2%
Beam, Inc.		51,933		3,534,560
Brown-Forman Corp., Class B		51,602		3,899,563
The Coca-Cola Co.		1,209,459		49,962,751
Coca-Cola Enterprises, Inc.		76,901		3,393,641
Constellation Brands, Inc., Class A (a)		53,062		3,734,504
Dr Pepper Snapple Group, Inc.		63,899		3,113,159
Molson Coors Brewing Co., Class B		50,355		2,827,433
Monster Beverage Corp. (a)(b)		43,254		2,931,324
PepsiCo, Inc.		488,408		40,508,560
				113,905,495
Biotechnology — 2.4%
Alexion Pharmaceuticals, Inc. (a)		62,454		8,310,129
Amgen, Inc.		240,168		27,417,579
Biogen Idec, Inc. (a)		75,227		21,044,753
Celgene Corp. (a)		131,233		22,173,128
Gilead Sciences, Inc. (a)(b)		488,329		36,697,924
Regeneron Pharmaceuticals, Inc. (a)(b)		25,013		6,884,578
Vertex Pharmaceuticals, Inc. (a)(b)		74,445		5,531,264
				128,059,355
Common Stocks	Shares		Value
Building Products — 0.1%
Allegion PLC (a)		28,442	$	1,256,852
Masco Corp.		113,690		2,588,721
				3,845,573
Capital Markets — 2.2%
Ameriprise Financial, Inc.		61,956		7,128,038
The Bank of New York Mellon Corp.		365,772		12,780,074
BlackRock, Inc. (c)		40,465		12,805,958
The Charles Schwab Corp.		369,521		9,607,546
E*Trade Financial Corp. (a)		91,464		1,796,353
Franklin Resources, Inc.		128,578		7,422,808
The Goldman Sachs Group, Inc.		134,237		23,794,851
Invesco Ltd.		141,172		5,138,661
Legg Mason, Inc.		33,808		1,469,972
Morgan Stanley		441,227		13,836,879
Northern Trust Corp.		71,543		4,427,796
State Street Corp.		139,809		10,260,582
T. Rowe Price Group, Inc.		83,082		6,959,779
				117,429,297
Chemicals — 2.5%
Air Products & Chemicals, Inc.		67,285		7,521,117
Airgas, Inc.		21,143		2,364,845
CF Industries Holdings, Inc.		18,253		4,253,679
The Dow Chemical Co.		386,264		17,150,122
E.I. du Pont de Nemours & Co.		294,938		19,162,122
Eastman Chemical Co.		49,019		3,955,833
Ecolab, Inc.		86,360		9,004,757
FMC Corp.		42,444		3,202,824
International Flavors & Fragrances, Inc.		25,960		2,232,041
LyondellBasell Industries NV, Class A		139,124		11,168,875
Monsanto Co.		167,465		19,518,046
The Mosaic Co.		108,530		5,130,213
PPG Industries, Inc.		45,230		8,578,322
Praxair, Inc.		93,746		12,189,792
The Sherwin-Williams Co.		27,431		5,033,588
Sigma-Aldrich Corp.		38,110		3,582,721
				134,048,897
Commercial Banks — 2.8%
BB&T Corp.		224,499		8,378,302
Comerica, Inc.		58,252		2,769,300
Fifth Third Bancorp		281,158		5,912,753
Huntington Bancshares, Inc.		264,638		2,553,757
KeyCorp		285,565		3,832,282
M&T Bank Corp.		41,474		4,828,403
The PNC Financial Services Group, Inc. (c)		169,461		13,146,784
Regions Financial Corp.		438,712		4,338,862
SunTrust Banks, Inc.		170,469		6,274,964
US Bancorp		581,627		23,497,731
Wells Fargo & Co.		1,526,600		69,307,640
Zions Bancorporation		58,747		1,760,060
				146,600,838
Commercial Services & Supplies — 0.4%
The ADT Corp. (b)		63,692		2,577,615
Cintas Corp.		32,072		1,911,170
Iron Mountain, Inc.		54,213		1,645,365
Pitney Bowes, Inc.		64,329		1,498,866
Republic Services, Inc.		86,010		2,855,532

See Notes to Financial Statements.

20 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013

Schedule of Investments (continued) S&P 500 Stock Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Commercial Services & Supplies (concluded)
Stericycle, Inc. (a)(b)		27,296	$	3,170,976
Waste Management, Inc.		138,963		6,235,270
				19,894,794
Communications Equipment — 1.7%
Cisco Systems, Inc.		1,702,747		38,226,670
F5 Networks, Inc. (a)(b)		24,716		2,245,696
Harris Corp.		34,036		2,376,053
Juniper Networks, Inc. (a)		160,830		3,629,933
Motorola Solutions, Inc.		73,330		4,949,775
QUALCOMM, Inc.		538,038		39,949,322
				91,377,449
Computers & Peripherals — 4.1%
Apple, Inc.		286,541		160,781,020
EMC Corp.		655,366		16,482,455
Hewlett-Packard Co.		612,047		17,125,075
NetApp, Inc.		108,528		4,464,842
SanDisk Corp.		71,940		5,074,648
Seagate Technology PLC		103,867		5,833,171
Western Digital Corp.		67,041		5,624,740
				215,385,951
Construction & Engineering — 0.2%
Fluor Corp.		52,013		4,176,124
Jacobs Engineering Group, Inc. (a)		41,929		2,641,108
Quanta Services, Inc. (a)		68,745		2,169,592
				8,986,824
Construction Materials — 0.0%
Vulcan Materials Co.		41,398		2,459,869
Consumer Finance — 1.0%
American Express Co.		293,406		26,620,726
Capital One Financial Corp.		183,617		14,066,898
Discover Financial Services		152,548		8,535,061
SLM Corp.		138,938		3,651,291
				52,873,976
Containers & Packaging — 0.2%
Avery Dennison Corp.		30,769		1,544,296
Ball Corp.		46,062		2,379,563
Bemis Co., Inc.		32,809		1,343,856
MeadWestvaco Corp.		56,617		2,090,866
Owens-Illinois, Inc. (a)		52,546		1,880,096
Sealed Air Corp.		62,475		2,127,274
				11,365,951
Distributors — 0.1%
Genuine Parts Co.		49,158		4,089,454
Diversified Consumer Services — 0.1%
H&R Block, Inc.		87,027		2,527,264
Diversified Financial Services — 3.9%
Bank of America Corp.		3,396,864		52,889,173
Citigroup, Inc.		965,926		50,334,404
CME Group, Inc.		100,393		7,876,835
IntercontinentalExchange Group, Inc.		36,636		8,240,169
JPMorgan Chase & Co.		1,197,196		70,012,022
Leucadia National Corp.		99,842		2,829,522
McGraw-Hill Financial, Inc.		86,242		6,744,124
Moody’s Corp.		60,283		4,730,407
The NASDAQ OMX Group, Inc.		36,797		1,464,521
				205,121,177
Common Stocks	Shares		Value
Diversified Telecommunication Services — 2.1%
AT&T, Inc.		1,677,710	$	58,988,284
CenturyLink, Inc.		188,239		5,995,412
Frontier Communications Corp.		318,328		1,480,225
Verizon Communications, Inc.		911,387		44,785,557
Windstream Holdings, Inc. (b)		189,832		1,514,859
				112,764,337
Electric Utilities — 1.6%
American Electric Power Co., Inc.		155,188		7,253,487
Duke Energy Corp.		224,839		15,516,140
Edison International		103,762		4,804,181
Entergy Corp.		56,790		3,593,103
Exelon Corp.		272,900		7,474,731
FirstEnergy Corp.		133,194		4,392,738
NextEra Energy, Inc.		137,160		11,743,639
Northeast Utilities		100,349		4,253,794
Pepco Holdings, Inc.		79,526		1,521,332
Pinnacle West Capital Corp.		35,046		1,854,634
PPL Corp.		200,717		6,039,575
The Southern Co.		280,810		11,544,099
Xcel Energy, Inc.		158,484		4,428,043
				84,419,496
Electrical Equipment — 0.8%
AMETEK, Inc.		77,947		4,105,468
Eaton Corp. PLC		151,115		11,502,874
Emerson Electric Co.		224,193		15,733,865
Rockwell Automation, Inc.		44,162		5,218,182
Roper Industries, Inc.		31,627		4,386,032
				40,946,421
Electronic Equipment, Instruments & Components — 0.4%
Amphenol Corp., Class A		50,408		4,495,386
Corning, Inc.		460,893		8,213,113
FLIR Systems, Inc.		45,113		1,357,901
Jabil Circuit, Inc.		58,801		1,025,490
TE Connectivity Ltd.		130,693		7,202,491
				22,294,381
Energy Equipment & Services — 1.9%
Baker Hughes, Inc.		141,155		7,800,225
Cameron International Corp. (a)		75,755		4,509,695
Diamond Offshore Drilling, Inc.		22,166		1,261,689
Ensco PLC, Class A		74,392		4,253,735
FMC Technologies, Inc. (a)		75,347		3,933,867
Halliburton Co.		270,136		13,709,402
Helmerich & Payne, Inc.		34,122		2,868,978
Nabors Industries Ltd.		82,769		1,406,245
National Oilwell Varco, Inc.		136,338		10,842,961
Noble Corp. PLC		80,703		3,023,941
Rowan Cos. PLC, Class A (a)		39,603		1,400,362
Schlumberger Ltd.		419,413		37,793,306
Transocean Ltd.		107,948		5,334,790
				98,139,196
Food & Staples Retailing — 2.3%
Costco Wholesale Corp.		139,147		16,559,885
CVS Caremark Corp.		379,062		27,129,467
The Kroger Co.		165,738		6,551,623
Safeway, Inc.		78,599		2,559,969
Sysco Corp.		185,216		6,686,298
Wal-Mart Stores, Inc.		515,251		40,545,101

See Notes to Financial Statements.

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013 21

Schedule of Investments (continued) S&P 500 Stock Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Food & Staples Retailing (concluded)
Walgreen Co.		277,347	$	15,930,812
Whole Foods Market, Inc.		118,515		6,853,722
				122,816,877
Food Products — 1.6%
Archer-Daniels-Midland Co.		209,545		9,094,253
Campbell Soup Co.		57,184		2,474,923
ConAgra Foods, Inc.		134,357		4,527,831
General Mills, Inc.		201,995		10,081,570
The Hershey Co.		47,710		4,638,843
Hormel Foods Corp.		42,868		1,936,348
The J.M. Smucker Co.		33,483		3,469,508
Kellogg Co.		81,898		5,001,511
Kraft Foods Group, Inc.		189,768		10,232,291
McCormick & Co., Inc.		42,055		2,898,431
Mead Johnson Nutrition Co.		64,327		5,388,029
Mondelez International, Inc., Class A		558,532		19,716,180
Tyson Foods, Inc., Class A		86,502		2,894,357
				82,354,075
Gas Utilities — 0.1%
AGL Resources, Inc.		37,807		1,785,625
ONEOK, Inc.		65,697		4,085,039
				5,870,664
Health Care Equipment & Supplies — 2.0%
Abbott Laboratories		492,417		18,874,344
Baxter International, Inc.		172,834		12,020,605
Becton Dickinson & Co.		61,813		6,829,718
Boston Scientific Corp. (a)		425,230		5,111,264
C.R. Bard, Inc.		24,806		3,322,516
CareFusion Corp. (a)		67,306		2,680,125
Covidien PLC		146,496		9,976,377
DENTSPLY International, Inc.		45,431		2,202,495
Edwards Lifesciences Corp. (a)(b)		34,843		2,291,276
Intuitive Surgical, Inc. (a)		12,122		4,655,818
Medtronic, Inc.		317,946		18,246,921
St. Jude Medical, Inc.		92,934		5,757,261
Stryker Corp.		94,002		7,063,310
Varian Medical Systems, Inc. (a)(b)		33,669		2,615,745
Zimmer Holdings, Inc.		54,453		5,074,475
				106,722,250
Health Care Providers & Services — 2.0%
Aetna, Inc.		117,038		8,027,636
AmerisourceBergen Corp.		73,259		5,150,840
Cardinal Health, Inc.		108,751		7,265,654
Cigna Corp.		88,029		7,700,777
DaVita HealthCare Partners, Inc. (a)(b)		56,223		3,562,852
Express Scripts Holding Co. (a)		256,625		18,025,340
Humana, Inc.		49,654		5,125,286
Laboratory Corp. of America Holdings (a)(b)		27,834		2,543,193
McKesson Corp.		73,156		11,807,378
Patterson Cos., Inc.		26,553		1,093,984
Quest Diagnostics, Inc. (b)		46,314		2,479,652
Tenet Healthcare Corp. (a)(b)		31,601		1,331,034
UnitedHealth Group, Inc.		320,624		24,142,987
WellPoint, Inc.		94,082		8,692,236
				106,948,849
Health Care Technology — 0.1%
Cerner Corp. (a)(b)		94,015		5,240,396
Common Stocks	Shares		Value
Hotels, Restaurants & Leisure — 1.7%
Carnival Corp.		139,498	$	5,603,635
Chipotle Mexican Grill, Inc. (a)		9,854		5,250,014
Darden Restaurants, Inc.		41,546		2,258,856
International Game Technology		79,268		1,439,507
Marriott International, Inc., Class A		71,546		3,531,510
McDonald’s Corp.		316,889		30,747,740
Starbucks Corp.		240,000		18,813,600
Starwood Hotels & Resorts Worldwide, Inc.		60,991		4,845,735
Wyndham Worldwide Corp.		41,499		3,058,061
Wynn Resorts Ltd.		25,724		4,995,858
Yum! Brands, Inc.		141,825		10,723,388
				91,267,904
Household Durables — 0.4%
D.R. Horton, Inc.		90,506		2,020,094
Garmin Ltd.		39,169		1,810,391
Harman International Industries, Inc.		21,513		1,760,839
Leggett & Platt, Inc.		44,972		1,391,434
Lennar Corp., Class A		53,248		2,106,491
Mohawk Industries, Inc. (a)		19,428		2,892,829
Newell Rubbermaid, Inc.		91,465		2,964,381
PulteGroup, Inc.		109,794		2,236,504
Whirlpool Corp.		24,998		3,921,186
				21,104,149
Household Products — 2.0%
The Clorox Co.		41,097		3,812,158
Colgate-Palmolive Co.		279,920		18,253,583
Kimberly-Clark Corp.		121,541		12,696,173
The Procter & Gamble Co.		865,680		70,475,009
				105,236,923
Independent Power Producers & Energy Traders — 0.1%
The AES Corp.		209,120		3,034,331
NRG Energy, Inc.		103,006		2,958,333
				5,992,664
Industrial Conglomerates — 2.7%
3M Co.		203,697		28,568,504
Danaher Corp.		190,953		14,741,572
General Electric Co.		3,222,097		90,315,379
Tyco International Ltd.		148,186		6,081,553
				139,707,008
Insurance — 4.3%
ACE Ltd.		108,301		11,212,403
Aflac, Inc.		148,447		9,916,260
The Allstate Corp.		144,856		7,900,446
American International Group, Inc.		468,901		23,937,396
Aon PLC		95,875		8,042,954
Assurant, Inc.		23,158		1,536,996
Berkshire Hathaway, Inc., Class B (a)		573,259		67,965,587
The Chubb Corp.		80,178		7,747,600
Cincinnati Financial Corp.		46,958		2,459,191
Genworth Financial, Inc., Class A (a)		157,408		2,444,546
Hartford Financial Services Group, Inc.		142,383		5,158,536
Lincoln National Corp.		83,550		4,312,851
Loews Corp.		97,407		4,698,914
Marsh & McLennan Cos., Inc.		174,770		8,451,877
MetLife, Inc.		357,025		19,250,788
Principal Financial Group, Inc.		87,186		4,299,142
The Progressive Corp.		175,795		4,793,930

See Notes to Financial Statements.

22 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013

Schedule of Investments (continued) S&P 500 Stock Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Insurance (concluded)
Prudential Financial, Inc.		147,452	$	13,598,023
Torchmark Corp.		28,796		2,250,407
The Travelers Cos., Inc.		115,945		10,497,660
Unum Group		83,173		2,917,709
XL Group PLC		90,067		2,867,733
				226,260,949
Internet & Catalog Retail — 1.5%
Amazon.com, Inc. (a)		118,078		47,088,326
Expedia, Inc.		32,796		2,284,569
Netflix, Inc. (a)(b)		18,872		6,948,104
priceline.com, Inc. (a)		16,378		19,037,787
TripAdvisor, Inc. (a)(b)		35,289		2,922,988
				78,281,774
Internet Software & Services — 3.2%
Akamai Technologies, Inc. (a)		56,999		2,689,213
eBay, Inc. (a)		371,064		20,367,703
Facebook, Inc. (a)		523,802		28,631,017
Google, Inc., Class A (a)		89,374		100,162,335
VeriSign, Inc. (a)(b)		41,028		2,452,654
Yahoo!, Inc. (a)		300,456		12,150,441
				166,453,363
IT Services — 3.6%
Accenture PLC, Class A		202,463		16,646,508
Alliance Data Systems Corp. (a)		15,514		4,079,096
Automatic Data Processing, Inc.		153,320		12,389,789
Cognizant Technology Solutions Corp., Class A (a)		96,337		9,728,110
Computer Sciences Corp.		46,883		2,619,822
Fidelity National Information Services, Inc.		92,718		4,977,102
Fiserv, Inc. (a)(b)		82,146		4,850,721
International Business Machines Corp.		325,065		60,972,442
Mastercard, Inc., Class A		32,970		27,545,116
Paychex, Inc.		103,511		4,712,856
Teradata Corp. (a)(b)		52,038		2,367,209
Total System Services, Inc.		53,187		1,770,064
Visa, Inc., Class A		162,178		36,113,797
The Western Union Co.		175,876		3,033,861
				191,806,493
Leisure Equipment & Products — 0.1%
Hasbro, Inc.		36,816		2,025,248
Mattel, Inc.		107,782		5,128,268
				7,153,516
Life Sciences Tools & Services — 0.5%
Agilent Technologies, Inc.		105,348		6,024,852
Life Technologies Corp. (a)		54,988		4,168,090
PerkinElmer, Inc.		35,825		1,477,065
Thermo Fisher Scientific, Inc.		115,085		12,814,715
Waters Corp. (a)(b)		27,112		2,711,200
				27,195,922
Machinery — 1.8%
Caterpillar, Inc.		202,661		18,403,646
Cummins, Inc.		55,493		7,822,848
Deere & Co.		121,926		11,135,502
Dover Corp.		54,257		5,237,971
Flowserve Corp.		44,417		3,501,392
Illinois Tool Works, Inc.		130,042		10,933,931
Ingersoll-Rand PLC		85,325		5,256,020
Common Stocks	Shares		Value
Machinery (concluded)
Joy Global, Inc.		33,847	$	1,979,711
PACCAR, Inc.		112,768		6,672,483
Pall Corp.		35,283		3,011,404
Parker Hannifin Corp.		47,527		6,113,873
Pentair Ltd., Registered Shares		63,482		4,930,647
Snap-on, Inc.		18,519		2,028,201
Stanley Black & Decker, Inc.		49,432		3,988,668
Xylem, Inc.		58,754		2,032,888
				93,049,185
Media — 3.7%
Cablevision Systems Corp., New York Group, Class A		68,178		1,222,431
CBS Corp., Class B		177,732		11,328,638
Comcast Corp., Class A		829,932		43,127,416
DIRECTV (a)(b)		155,625		10,752,131
Discovery Communications, Inc., Class A (a)(b)		71,870		6,498,485
Gannett Co., Inc.		72,578		2,146,857
Graham Holdings Co., Class B		1,387		920,025
The Interpublic Group of Cos., Inc.		132,561		2,346,330
News Corp., Class A (a)		158,539		2,856,873
Omnicom Group, Inc.		81,962		6,095,514
Scripps Networks Interactive, Inc., Class A		34,890		3,014,845
Time Warner Cable, Inc.		89,774		12,164,377
Time Warner, Inc.		288,129		20,088,354
Twenty-First Century Fox, Inc., Class A		624,954		21,985,882
Viacom, Inc., Class B		129,249		11,288,608
The Walt Disney Co.		520,469		39,763,831
				195,600,597
Metals & Mining — 0.6%
Alcoa, Inc.		340,638		3,620,982
Allegheny Technologies, Inc.		34,429		1,226,705
Cliffs Natural Resources, Inc. (b)		48,825		1,279,703
Freeport-McMoRan Copper & Gold, Inc.		330,623		12,477,712
Newmont Mining Corp.		158,558		3,651,591
Nucor Corp.		101,341		5,409,583
United States Steel Corp. (b)		46,072		1,359,124
				29,025,400
Multi-Utilities — 1.1%
Ameren Corp.		77,272		2,794,155
CenterPoint Energy, Inc.		136,510		3,164,302
CMS Energy Corp.		84,714		2,267,794
Consolidated Edison, Inc.		93,277		5,156,352
Dominion Resources, Inc.		184,853		11,958,141
DTE Energy Co.		56,305		3,738,089
Integrys Energy Group, Inc.		25,416		1,382,885
NiSource, Inc.		99,776		3,280,635
PG&E Corp.		143,088		5,763,585
Public Service Enterprise Group, Inc.		161,103		5,161,740
SCANA Corp.		44,743		2,099,789
Sempra Energy		72,386		6,497,367
TECO Energy, Inc.		65,052		1,121,496
Wisconsin Energy Corp.		72,140		2,982,268
				57,368,598
Multiline Retail — 0.7%
Dollar General Corp. (a)		93,833		5,660,007
Dollar Tree, Inc. (a)		66,272		3,739,066
Family Dollar Stores, Inc.		30,792		2,000,556
Kohl’s Corp.		64,106		3,638,016

See Notes to Financial Statements.

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013 23

Schedule of Investments (continued) S&P 500 Stock Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Multiline Retail (concluded)
Macy’s, Inc.		117,351	$	6,266,543
Nordstrom, Inc.		45,568		2,816,102
Target Corp.		201,302		12,736,378
				36,856,668
Office Electronics — 0.1%
Xerox Corp.		368,551		4,485,266
Oil, Gas & Consumable Fuels — 8.4%
Anadarko Petroleum Corp.		160,276		12,713,092
Apache Corp.		127,145		10,926,841
Cabot Oil & Gas Corp.		134,125		5,198,685
Chesapeake Energy Corp.		160,979		4,368,970
Chevron Corp.		612,477		76,504,502
ConocoPhillips		390,160		27,564,804
CONSOL Energy, Inc.		72,912		2,773,573
Denbury Resources, Inc. (a)		116,780		1,918,695
Devon Energy Corp.		121,542		7,519,804
EOG Resources, Inc.		86,935		14,591,171
EQT Corp.		47,999		4,309,350
Exxon Mobil Corp.		1,391,249		140,794,399
Hess Corp.		90,587		7,518,721
Kinder Morgan, Inc.		214,428		7,719,408
Marathon Oil Corp.		221,858		7,831,587
Marathon Petroleum Corp.		95,869		8,794,063
Murphy Oil Corp.		55,976		3,631,723
Newfield Exploration Co. (a)		43,381		1,068,474
Noble Energy, Inc.		114,420		7,793,146
Occidental Petroleum Corp.		256,707		24,412,836
Peabody Energy Corp.		85,934		1,678,291
Phillips 66		190,935		14,726,817
Pioneer Natural Resources Co.		45,420		8,360,460
QEP Resources, Inc.		57,157		1,751,862
Range Resources Corp.		52,045		4,387,914
Southwestern Energy Co. (a)		111,686		4,392,610
Spectra Energy Corp.		213,389		7,600,916
Tesoro Corp.		42,304		2,474,784
Valero Energy Corp.		171,835		8,660,484
The Williams Cos., Inc.		217,653		8,394,876
WPX Energy, Inc. (a)(b)		63,952		1,303,342
				441,686,200
Paper & Forest Products — 0.1%
International Paper Co.		141,281		6,927,007
Personal Products — 0.2%
Avon Products, Inc.		138,143		2,378,823
The Estee Lauder Cos., Inc., Class A		81,544		6,141,894
				8,520,717
Pharmaceuticals — 5.8%
AbbVie, Inc.		506,645		26,755,922
Actavis PLC (a)		55,429		9,312,072
Allergan, Inc.		94,638		10,512,389
Bristol-Myers Squibb Co.		524,378		27,870,691
Eli Lilly & Co.		315,750		16,103,250
Forest Laboratories, Inc. (a)		75,471		4,530,524
Hospira, Inc. (a)(b)		52,827		2,180,698
Johnson & Johnson		898,549		82,298,103
Merck & Co., Inc.		930,552		46,574,128
Mylan, Inc. (a)		121,958		5,292,977
Perrigo Co. PLC		42,373		6,502,561
Common Stocks	Shares		Value
Pharmaceuticals (concluded)
Pfizer, Inc.		2,064,039	$	63,221,515
Zoetis, Inc.		159,238		5,205,490
				306,360,320
Professional Services — 0.2%
The Dun & Bradstreet Corp.		12,153		1,491,781
Equifax, Inc.		38,754		2,677,514
Nielsen Holdings NV		80,589		3,698,229
Robert Half International, Inc.		44,139		1,853,396
				9,720,920
Real Estate Investment Trusts (REITs) — 1.8%
American Tower Corp.		125,682		10,031,937
Apartment Investment & Management Co., Class A		46,525		1,205,463
AvalonBay Communities, Inc.		38,742		4,580,467
Boston Properties, Inc.		48,673		4,885,309
Equity Residential (b)		106,746		5,536,915
General Growth Properties, Inc.		171,209		3,436,165
HCP, Inc. (b)		145,310		5,277,659
Health Care REIT, Inc. (b)		91,934		4,924,904
Host Hotels & Resorts, Inc. (b)		240,855		4,682,221
Kimco Realty Corp.		130,475		2,576,881
The Macerich Co. (b)		44,758		2,635,799
Plum Creek Timber Co., Inc. (b)		56,341		2,620,420
Prologis, Inc. (b)		158,830		5,868,768
Public Storage		46,031		6,928,586
Simon Property Group, Inc.		98,830		15,037,973
Ventas, Inc. (b)		93,657		5,364,673
Vornado Realty Trust (b)		55,400		4,918,966
Weyerhaeuser Co.		185,591		5,859,108
				96,372,214
Real Estate Management & Development — 0.0%
CBRE Group, Inc., Class A (a)		88,653		2,331,574
Road & Rail — 0.9%
CSX Corp.		322,827		9,287,733
Kansas City Southern		35,098		4,346,185
Norfolk Southern Corp.		98,379		9,132,522
Ryder System, Inc.		16,747		1,235,594
Union Pacific Corp.		146,678		24,641,904
				48,643,938
Semiconductors & Semiconductor Equipment — 2.0%
Altera Corp.		102,271		3,326,876
Analog Devices, Inc.		99,059		5,045,075
Applied Materials, Inc.		383,498		6,784,080
Broadcom Corp., Class A		171,847		5,095,263
First Solar, Inc. (a)(b)		22,485		1,228,580
Intel Corp.		1,583,124		41,097,899
KLA-Tencor Corp.		53,073		3,421,086
Lam Research Corp. (a)		51,717		2,815,991
Linear Technology Corp.		74,574		3,396,846
LSI Corp.		173,547		1,912,488
Microchip Technology, Inc.		63,175		2,827,081
Micron Technology, Inc. (a)		334,986		7,289,295
NVIDIA Corp.		184,267		2,951,957
Texas Instruments, Inc.		348,588		15,306,499
Xilinx, Inc.		85,450		3,923,864
				106,422,880

See Notes to Financial Statements.

24 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013

Schedule of Investments (continued) S&P 500 Stock Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Software — 3.4%
Adobe Systems, Inc. (a)		148,056	$	8,865,593
Autodesk, Inc. (a)		71,847		3,616,060
CA, Inc.		103,477		3,482,001
Citrix Systems, Inc. (a)		59,362		3,754,646
Electronic Arts, Inc. (a)(b)		98,447		2,258,374
Intuit, Inc.		90,718		6,923,598
Microsoft Corp.		2,419,320		90,555,148
Oracle Corp.		1,117,595		42,759,185
Red Hat, Inc. (a)(b)		60,350		3,382,014
Salesforce.com, Inc. (a)(b)		176,675		9,750,693
Symantec Corp.		221,667		5,226,908
				180,574,220
Specialty Retail — 2.2%
AutoNation, Inc. (a)		20,561		1,021,676
AutoZone, Inc. (a)(b)		10,838		5,179,914
Bed Bath & Beyond, Inc. (a)		68,390		5,491,717
Best Buy Co., Inc.		87,053		3,471,674
CarMax, Inc. (a)(b)		71,129		3,344,486
GameStop Corp., Class A		37,228		1,833,851
The Gap, Inc.		84,362		3,296,867
The Home Depot, Inc.		448,481		36,927,925
L Brands, Inc.		77,655		4,802,962
Lowe’s Cos., Inc.		333,067		16,503,470
O’Reilly Automotive, Inc. (a)(b)		34,180		4,399,308
PetSmart, Inc.		33,035		2,403,296
Ross Stores, Inc.		69,007		5,170,694
Staples, Inc.		210,349		3,342,446
Tiffany & Co.		35,071		3,253,887
TJX Cos., Inc.		226,497		14,434,654
Urban Outfitters, Inc. (a)		34,763		1,289,707
				116,168,534
Textiles, Apparel & Luxury Goods — 0.8%
Coach, Inc.		89,320		5,013,532
Fossil Group, Inc. (a)		15,647		1,876,701
Michael Kors Holdings Ltd. (a)(b)		57,130		4,638,385
NIKE, Inc., Class B		237,971		18,714,039
PVH Corp.		25,979		3,533,663
Ralph Lauren Corp.		18,989		3,352,888
Common Stocks	Shares		Value
Textiles, Apparel & Luxury Goods (concluded)
VF Corp.		112,180	$	6,993,301
				44,122,509
Thrifts & Mortgage Finance — 0.1%
Hudson City Bancorp, Inc.		151,578		1,429,381
People’s United Financial, Inc.		101,211		1,530,310
				2,959,691
Tobacco — 1.5%
Altria Group, Inc.		636,949		24,452,472
Lorillard, Inc.		117,314		5,945,473
Philip Morris International, Inc.		510,245		44,457,647
Reynolds American, Inc.		99,829		4,990,452
				79,846,044
Trading Companies & Distributors — 0.2%
Fastenal Co. (b)		86,944		4,130,708
W.W. Grainger, Inc.		19,674		5,025,133
				9,155,841
Wireless Telecommunication Services — 0.2%
Crown Castle International Corp. (a)		106,392		7,812,365
Total Long-Term Investments (Cost — $3,092,920,793) — 99.6%				5,253,129,437
Short-Term Securities
Money Market Funds — 2.0%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)(e)		92,138,359		92,138,359
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)(e)		11,657,294		11,657,294
Total Short-Term Securities (Cost — $103,795,653) — 2.0%				103,795,653
Total Investments (Cost — $3,196,716,446*) — 101.6%				5,356,925,090
Liabilities in Excess of Other Assets — (1.6)%				(85,794,883	)
Net Assets — 100.0%			$	5,271,130,207

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	2,842,601,670
Gross unrealized appreciation	$	2,681,943,062
Gross unrealized depreciation		(167,619,642	)
Net unrealized appreciation	$	2,514,323,420

(a) Non-income producing security.

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

See Notes to Financial Statements.

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013 25

Schedule of Investments (continued) S&P 500 Stock Master Portfolio

(c) Investments in issuers considered to be an affiliate of the Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at December 31, 2012		Shares Purchased		Shares Sold			Shares Held at December 31, 2013		Value at December 31, 2013		Income		Realized Gain
BlackRock, Inc.		16,465		24,958		(958	)		40,465	$	12,805,958	$	230,088	$	72,468
BlackRock Cash Funds Institutional, SL Agency Shares		132,083,169		—		(39,944,810	)1		92,138,359	$	92,138,359	$	310,375		—
BlackRock Cash Funds: Prime, SL Agency Shares		22,497,136		—		(10,839,842	)1		11,657,294	$	11,657,294	$	40,178		—
The PNC Financial Services Group, Inc.		69,347		103,655		(3,541	)		169,461	$	13,146,784	$	252,982	$	41,227
1   Represents net shares sold.

(d) Represents the current yield as of report date.

(e) All or a portion of security was purchased with the cash collateral from loaned securities.

Ÿ For Master Portfolio compliance purposes, the Master Portfolio’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating 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.

Ÿ Financial futures contracts outstanding as of December 31, 2013 were as follows:

Contracts Purchased		Issue	Exchange	Expiration	Notional Value		Unrealized Appreciation
	380	S&P 500 E-Mini Index	Chicago Mercantile	March 2014	$	34,980,900	$	677,360

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

Ÿ Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Master Portfolio’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.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks2	$	5,253,129,437		—		—	$	5,253,129,437
Short-Term Securities:
Money Market Funds		103,795,653		—		—		103,795,653
Total	$	5,356,925,090		—		—	$	5,356,925,090
2   See above Schedule of Investments for values in each industry.
	Level 1		Level 2		Level 3		Total
Derivative Financial Instruments 3
Assets:
Equity contracts	$	677,360		—		—	$	677,360
3  Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

See Notes to Financial Statements.

26 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013

Schedule of Investments (concluded) S&P 500 Stock Master Portfolio

The carrying amount for certain of the Master Portfolio’s assets and/or liabilities approximates fair value for financial statement purposes. As of December 31, 2013, such assets and liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2			Level 3		Total
Assets:
Cash	$	117		—			—	$	117
Cash pledged for financial futures contracts		1,557,000		—			—		1,557,000
Liabilities:
Collateral on securities loaned at value			$	(75,424,060	)				(75,424,060	)
Total	$	1,557,117	$	(75,424,060	)		—	$	(73,866,943	)

There were no transfers between levels during the year ended December 31, 2013.

See Notes to Financial Statements.

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013 27

Statement of Assets and Liabilities S&P 500 Stock Master Portfolio

December 31, 2013
Assets
Investments at value — unaffiliated (including securities loaned of $73,818,587) (cost — $3,076,437,679)	$	5,227,176,695
Investments at value — affiliated (cost — $120,278,767)		129,748,395
Cash		117
Dividends receivable		7,084,560
Cash pledged for financial futures contracts		1,557,000
Variation margin receivable on financial futures contracts		117,503
Other income receivable — affiliated		98,781
Securities lending income receivable — affiliated		19,884
Prepaid expenses		4,493
Total assets		5,365,807,428
Liabilities
Collateral on securities loaned at value		75,424,060
Investment advisory fees payable		199,850
Trustees’ fees payable		34,393
Professional fees payable		21,994
Withdrawals payable to investors		18,996,924
Total liabilities		94,677,221
Net Assets	$	5,271,130,207
Net Assets Consist of
Investors’ capital	$	3,110,244,203
Net unrealized appreciation/depreciation		2,160,886,004
Net Assets	$	5,271,130,207

See Notes to Financial Statements.
28	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2013

Statement of Operations S&P 500 Stock Master Portfolio

Year Ended December 31, 2013
Investment Income
Dividends — unaffiliated	$	83,961,530
Dividends — affiliated		483,070
Securities lending — affiliated — net		259,954
Other income — affiliated		98,781
Income — affiliated		90,599
Interest		1,766
Foreign taxes withheld		(16,215	)
Total income		84,879,485
Expenses
Investment advisory		1,993,896
Trustees		123,517
Professional		39,442
Total expenses		2,156,855
Less fees reimbursed by Manager		(162,959	)
Total expenses after fees reimbursed		1,993,896
Net investment income		82,885,589
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — unaffiliated		(6,818,010	)
Investments — affiliated		113,695
Short sales		145,294
Financial futures contracts		14,908,930
		8,349,909
Net change in unrealized appreciation/depreciation on:
Investments		992,641,860
Financial futures contracts		285,722
		992,927,582
Total realized and unrealized gain		1,001,277,491
Net Increase in Net Assets Resulting from Operations	$	1,084,163,080

See Notes to Financial Statements.
	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2013	29

Statements of Changes in Net Assets S&P 500 Stock Master Portfolio

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012
Operations
Net investment income	$	82,885,589		$	42,606,880
Net realized gain		8,349,909			213,322,470
Net change in unrealized appreciation/depreciation		992,927,582			27,276,473
Net increase in net assets resulting from operations		1,084,163,080			283,205,823
Capital Transactions
Proceeds from contributions		3,187,732,511			392,443,684
Value of withdrawals		(718,697,605	)		(1,066,033,494	)
Net increase (decrease) in net assets derived from capital transactions		2,469,034,906			(673,589,810	)
Net Assets
Total increase (decrease) in net assets		3,553,197,986			(390,383,987	)
Beginning of year		1,717,932,221			2,108,316,208
End of year	$	5,271,130,207		$	1,717,932,221

Financial Highlights S&P 500 Stock Master Portfolio

	Year Ended December 31,
	2013		2012			2011		2010		2009
Total Investment Return
Total investment return		32.33%		15.98%			2.13%		15.06%		26.63%
Ratios to Average Net Assets
Total expenses		0.05%		0.06%			0.06%		0.05%		0.05%
Total expenses after fees reimbursed		0.05%		0.05%			0.05%		0.05%		0.05%
Net investment income		2.08%		2.22%			2.08%		2.01%		2.35%
Supplemental Data
Net assets, end of year (000)		$5,271,130		$1,717,932	��		$2,108,316		$2,158,717		$2,049,062
Portfolio turnover		2%		10%			5%		9%		5%

See Notes to Financial Statements.
30	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2013

Notes to Financial Statements S&P 500 Stock Master Portfolio

1. Organization:

S&P 500 Stock Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust.

Reorganization: The Board of Trustees of MIP (the “Board”) and the Board of Master S&P 500 Index Series, a series of Quantitative Master Series LLC (the “Target Master Portfolio”), approved the reorganization of the Target Master Portfolio into the Master Portfolio pursuant to which the Master Portfolio acquired substantially all of the assets and substantially all of the liabilities of the Target Master Portfolio in exchange for beneficial interests of the Master Portfolio (the “Master Reorganization”). The Master Reorganization was approved by the shareholders of each feeder fund that invests its assets in the Target Master Portfolio. The Target Master Portfolio is the surviving entity for tax purposes.

The Target Master Portfolio’s net assets and composition of net assets on April 19, 2013, the valuation date of the reorganization, were as follows:

Net assets	$	2,515,780,312
Investors’ capital	$	1,709,840,605
Net unrealized appreciation	$	805,939,707

For financial reporting purposes, assets received by the Master Portfolio were recorded at fair value. However, the cost basis of the investments being received from the Target Master Portfolio were carried forward to align ongoing reporting of the Master Portfolio’s realized and unrealized gains and losses for tax purposes.

The net assets of the Master Portfolio before the acquisition were $2,116,282,511. The aggregate net assets of the Master Portfolio immediately after the acquisition amounted to $4,632,062,823. The Target Master Portfolio’s fair value and cost of investments prior to the reorganization were as follows:

	Fair Value of Investments		Cost of Investments
Target Master Portfolio	$	2,451,677,239	$	1,645,737,532

The purpose of this transaction was to combine two portfolios managed by BlackRock Fund Advisors (“BFA” or the “Manager”) 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 22, 2013.

Assuming the acquisition had been completed on January 1, 2013, the beginning of the fiscal reporting period of the Master Portfolio, the pro forma results of operations for the year ended December 31, 2013 are as follows:

Ÿ Net investment income: $98,196,994

Ÿ Net realized and change in unrealized gain on investments: $1,618,199,797

Ÿ Net increase in net assets resulting from operations: $1,716,396,791

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 Target Master Portfolio that have been included in the Master Portfolio’s Statement of Operations since April 22, 2013.

Reorganization costs incurred in connection with the reorganization were expensed by the Master Portfolio and reimbursed by BFA.

2. Significant Accounting Policies:

The Master Portfolio’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in 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 following is a summary of the significant accounting policies followed by the Master Portfolio:

Valuation: US GAAP defines fair value as the price the Master Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Master Portfolio determines the fair values of its financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (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 provide oversight of the pricing function for the Master Portfolio for all financial instruments.

Equity investments traded on a recognized securities exchange or the NASDAQ Stock Market (“NASDAQ”) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale 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 are valued at the last available bid (long positions) or ask (short positions) price. Financial futures contracts traded on exchanges are valued at their last sale price. Investments in open-end registered investment companies are valued at NAV each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013 31

Notes to Financial Statements (continued) S&P 500 Stock Master Portfolio

In the event that 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 Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that Master Portfolio might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee or its delegate deem relevant consistent with the principles of fair value measurement which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. The market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and is adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. 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 Master Portfolio’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 Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Segregation and Collateralization: In cases where a Master Portfolio enters into certain investments (e.g., financial futures contracts) that would be “senior securities” for 1940 Act purposes, the Master Portfolio may segregate or designate on its books and records cash or liquid securities having a market value at least equal to the amount of the Master Portfolio’s future obligations under such investments. Doing so allows the Master Portfolio to not treat the investment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Master Portfolio 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 Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Master Portfolio 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 the accrual basis.

Income Taxes: The Target Master Portfolio is classified as a partnership for federal income tax purposes. As such, each investor in the Target Master Portfolio is treated as the owner of its proportionate share of net assets, income, expenses and realized and unrealized gains and losses of the Target Master Portfolio. Therefore, no federal income tax provision is required. It is intended that the Target Master Portfolio’s assets will be managed so an investor in the Target Master Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

The Target Master Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Target Master Portfolio’s US federal tax returns remains open for each of the four years ended December 31, 2013. The statutes of limitations on the Target Master Portfolio’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 Target Master Portfolio’s facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

Other: Expenses directly related to the Master Portfolio are charged to the Master Portfolio. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods.

The Master Portfolio has an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statement of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.

32 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013

Notes to Financial Statements (continued) S&P 500 Stock Master Portfolio

3. Securities and Other Investments:

Preferred Stock: The Master Portfolio may invest in preferred stock. 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.

Short Sales: The Master Portfolio may enter into short sale transactions in which the Master Portfolio sells a security it does not hold in anticipation of a decline in the market price of that security. When the Master Portfolio makes a short sale, it will borrow the security sold short and deliver the security to the counterparty to which it sold the security short. An amount equal to the proceeds received by the Master Portfolio 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. The Master Portfolio is required to repay the counterparty any dividends received on the security sold short, which is shown as dividend expense in the Statement of Operations. The Master Portfolio may pay a fee on the assets borrowed from the counterparty, which is shown as stock loan fees in the Statement of Operations. The Master Portfolio maintains a segregated account of securities or deposits cash with the broker-dealer as collateral for the short sales. The Master Portfolio may receive interest on the cash collateral deposited with the broker-dealer. The Master Portfolio 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 a theoretically unlimited loss since there is a theoretically unlimited potential for the market price of the security sold short to increase. A gain, limited to the price at which the Master Portfolio sold the security short, or a loss, unlimited as to the dollar amount, will be 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 the Master Portfolio will be able to close out a short position at a particular time or at an acceptable price.

Securities Lending: The Master Portfolio may lend securities to approved borrowers, such as banks, brokers and other financial institutions. The borrower pledges cash, securities issued or guaranteed by the US government or irrevocable letters of credit issued by a bank as collateral. The initial collateral received by the Master Portfolio should have a value of at least 102% of the current value of the loaned securities for securities traded on US exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statement of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the Master Portfolio earns dividend or interest income on the securities loaned but does not receive interest income on the 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 securities on loan and the value of the related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value, and collateral on securities loaned at value, respectively. The cash collateral invested by the securities lending agent, BlackRock Institutional Trust Company, N.A. (“BTC”), is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Master Portfolio under Master Securities Lending Agreements (“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 Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender 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 a MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and the Master Portfolio can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013 33

Notes to Financial Statements (continued) S&P 500 Stock Master Portfolio

The following table is a summary of the Master Portfolio’s securities lending agreements by counterparty which are subject to offset under a MSLA as of December 31, 2013:

Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital, Inc.	$	3,148,785	$	(3,148,785	)		—
Citigroup Global Markets, Inc.		265,005		(265,005	)		—
Credit Suisse Securities (USA) LLC		5,052,347		(5,052,347	)		—
Deutsche Bank Securities, Inc.		5,188,082		(5,188,082	)		—
Goldman Sachs & Co.		25,081,633		(25,081,633	)		—
HSBC Bank PLC		631,800		(631,800	)		—
IBG LLC		198,003		(198,003	)		—
JP Morgan Securities LLC		19,292,046		(19,292,046	)		—
Merrill Lynch, Pierce, Fenner & Smith Inc.		1,286,790		(1,286,790	)		—
Morgan Stanley		1,359,368		(1,359,368	)		—
National Financial Services LLC		2,651,800		(2,651,800	)		—
State Street Bank & Trust Co.		762,620		(762,620	)		—
UBS Securities LLC		8,900,308		(8,900,308	)		—
Total	$	73,818,587	$	(73,818,587	)		—

¹  Collateral with a value of $75,424,060 has been received in connection with securities lending agreements. Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

The risks of securities lending also include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate this risk the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities lent. The Master Portfolio also could suffer 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. During the year ended December 31, 2013, any securities on loan were collateralized by cash.

4. Derivative Financial Instruments:

The Master Portfolio engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Master Portfolio and/or to economically hedge its exposure to certain risks such as equity risk. These contracts may be transacted on an exchange or over-the-counter (“OTC”).

Financial Futures Contracts: The Master Portfolio purchases and/or sells financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in the value of equity securities (equity risk). Financial futures contracts are agreements between the Master Portfolio and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date.

Upon entering into a financial futures contract, the Master Portfolio is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Securities deposited as initial margin are designated on the Schedule of Investments and cash deposited, if any, is recorded on the Statement of Assets and Liabilities as cash pledged for financial futures contracts. Pursuant to the contract, the Master Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin. Variation margin is recorded by the Master Portfolio as unrealized appreciation or depreciation, and if applicable, as a receivable or payable for variation margin in the Statement of Assets and Liabilities.

When the contract is closed, the Master Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest rates and the underlying assets.

The following is a summary of the Master Portfolio’s derivative financial instruments categorized by risk exposure:

Fair Values of Derivative Financial Instruments as of December 31, 2013
	Derivative Assets
	Statement of Assets and Liabilities Location	Value
Equity contracts	Net unrealized appreciation/depreciation2	$	677,360

²  Includes cumulative appreciation/depreciation on financial futures contracts as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

The Effect of Derivative Financial Instruments in the Statement of Operations Year Ended December 31, 2013
	Net Realized Gain (Loss) From
Equity contracts:
Financial futures contracts	$	14,908,930
	Net Change in Unrealized Appreciation/Depreciation on
Equity contracts:
Financial futures contracts	$	285,722

34 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013

Notes to Financial Statements (continued) S&P 500 Stock Master Portfolio

For the year ended December 31, 2013, the average quarterly balances of outstanding derivative financial instruments were as follows:

Financial futures contracts:
Average number of contracts purchased		590
Average notional value of contracts purchased	$	48,322,384

Counterparty Credit Risk: 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 Master Portfolio’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by such Master Portfolio. With exchanged traded futures, there is less counterparty credit risk to the Master Portfolio 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, a Master Portfolio 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) of the clearing broker or clearinghouse. 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 Master Portfolio.

5. Investment Advisory Agreement and Other Transactions with Affiliates:

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

MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement (the “Investment Advisory Agreement”) with BFA, the Master Portfolio’s investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory services. BFA is responsible for the management of the Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Master Portfolio. For such services, the Master Portfolio pays BFA a monthly fee based on a percentage of the Master Portfolio’s average daily net assets at an annual rate of 0.05%.

MIP entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL may delegate certain of its administration duties to sub-administrators.

BAL, in consideration thereof, has agreed to bear all of the Master Portfolio’s and MIP’s ordinary operating expenses excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the Master Portfolio.

BAL is not entitled to compensation for providing administration services to the Master Portfolio, for so long as BAL is entitled to compensation for providing administration services to corresponding feeder funds that invest substantially all of their assets in the Master Portfolio, or BAL (or an affiliate) receives investment advisory fees from the Master Portfolio.

The fees and expenses of MIP’s trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolio. BFA has contractually agreed to cap the expenses of the Master Portfolio at the rate at which the Master Portfolio pays an advisory fee to BFA by providing an offsetting credit against the investment advisory fees paid by the Master Portfolio in an amount equal to the independent expenses. This contractual waiver is effective through April 30, 2014. The amount of the waiver, if any, is shown as fees reimbursed in the Statement of Operations.

MIP, on behalf of the Master Portfolio, received an exemptive order from the Securities and Exchange Commission permitting it, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BTC, an affiliate of BFA as the securities lending agent. BTC may, on behalf of the Master Portfolio, invest cash collateral received by the Master Portfolio for such loans, in a private investment company managed by the BFA or in registered money market funds advised by the Manager or its affiliates. The market value of securities on loan and the value of the related collateral, if applicable, is shown in the Statement of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC, if any, is disclosed in the Schedule of Investments. Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of rebates paid to, or fees paid by, borrowers of securities. The Master Portfolio retains 65% of securities lending income and pays a fee to BTC equal to 35% of such income. The Master Portfolio benefits from a borrower default indemnity provided by BlackRock. As securities lending agent, BTC bears all operational costs directly related to securities lending as well as the cost of borrower default indemnification. BTC does not receive any fees

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013 35

Notes to Financial Statements (concluded) S&P 500 Stock Master Portfolio

for managing the cash collateral. The share of income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the year ended December 31, 2013, BTC received $139,417 in securities lending agent fees related to securities lending activities for the Master Portfolio.

During the year ended December 31. 2013, the Master Portfolio received a payment from an affiliate to compensate for foregone securities lending revenue, which is shown as Other income — affiliated in the Statement of Operations.

Certain officers and/or trustees of MIP are officers and/or directors of BlackRock or its affiliates.

The Master Portfolio 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 trustees. For the year ended December 31, 2013, the purchase and sale transactions from an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were $27,052,195 and $8,651,416, respectively.

6. Purchases and Sales:

Purchases and sales of investments, excluding short-term securities for the year ended December 31, 2013, were $91,415,528 and $205,021,342, respectively.

7. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $800 million credit agreement with a group of lenders, under which the Master Portfolio may borrow to fund shareholder redemptions. The agreement expires in April 2014. Excluding commitments designated for a certain individual fund, other Participating Funds, including the Master Portfolio, can borrow up to an aggregate commitment amount of $500 million, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.065% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. Participating Funds paid administration and arrangement fees which, along with commitment fees, were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. The Master Portfolio did not borrow under the credit agreement during the year ended December 31, 2013.

8. Market and Credit Risk:

In the normal course of business, the Master Portfolio invest in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Master Portfolio may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Master Portfolio; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Master Portfolio may be exposed to counterparty credit risk, or the risk that an entity with which the Master Portfolio has unsettled or open transactions may fail to or be unable to perform on its commitments. The Master Portfolio manages counterparty credit risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Master Portfolio to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Master Portfolio’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Master Portfolio.

9. Subsequent Events:

Management has evaluated the impact of all subsequent events on the Master Portfolio 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.

36 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013

Report of Independent Registered Public Accounting Firm S&P 500 Stock Master Portfolio

To the Board of Trustees of Master Investment Portfolio and the Interestholders of S&P 500 Stock Master Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of S&P 500 Stock Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio, at December 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2013 by correspondence with the custodian, transfer agent and broker, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2014

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013 37

Officers and Trustees

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 107 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 107 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy from 2002 to 2012; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 107 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President, Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 107 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	President, London Center for Policy Research since 2012; Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and Professor thereof from 1980 to 2005; President Emeritus, Hudson Institute (policy research organization) from 2011 to 2012, President thereof from 1997 to 2011 and Trustee from 1980 to 2012; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (global internet services) since 2005; Director, Cerego, LLC (educational software) since 2005; Director, Cybersettle (online adjudication) since 2009; Director, AIMS Worldwide, Inc. (marketing) from 2007 to 2012.	33 RICs consisting of 107 Portfolios	None
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 107 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Director, The West Penn Allegheny Health System (a not-for-profit health system) from 2008 to 2013; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 107 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 107 Portfolios	None

38 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1 (concluded)
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Immediate past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	33 RICs consisting of 107 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Director, Alkon Corporation (pneumatics) since 1992; Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh from 2005 to 2013 and Dean thereof from 1997 to 2005; Director, Tippman Sports (recreation) from 2005 to 2013; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 107 Portfolios	None
	1   Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved extensions in terms of Trustees who turn 72 prior to December 31, 2013.
	2   Date shown is the earliest date a person has served for the Trust/MIP covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the Trust’s/MIP’s Board. As a result, although the chart shows certain Trustees as joining the Trust’s/MIP’s board in 2009, those Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees3
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock, and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	144 RICs consisting of 278 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	144 RICs consisting of 278 Portfolios	None
	3   Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013 39

Officers and Trustees (concluded)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers1
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock since 2000; Head of the Global Cash Group since 2013; Co-head of the Global Cash and Securities Lending Group from 2010 to 2013; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009 and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2007	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2007	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Managing Director of BlackRock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary of the BlackRock-advised funds from 2010 to 2012; General Counsel and Chief Operating Officer of Uhuru Capital Management from 2009 to 2010; Executive Director and Counsel of Goldman Sachs Asset Management from 2005 to 2009.
	1 Officers of the Trust/MIP serve at the pleasure of the Board.

Investment Advisor BlackRock Fund Advisors San Francisco, CA 94105	Custodian and Accounting Agent State Street Bank and Trust Company Boston, MA 02110	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Sidley Austin LLP New York, NY 10019
Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP Philadelphia, PA 19103	Address of the Trust 400 Howard Street San Francisco, CA 94105

40 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013

Additional Information

General Information

Electronic Delivery

Electronic copies of most financial reports and prospectuses are available on the Fund’s website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Fund’s electronic delivery program.

To enroll:

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:

Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.

Shareholders Who Hold Accounts Directly with BlackRock:

1) Access the BlackRock website at http://www.blackrock.com/edelivery

2) Select “eDelivery” under the “More Information” section

3) Log into your account

Householding

The Fund 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 Fund at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Fund/Master Portfolio 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 Fund’s/Master Portfolio’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Fund’s/Master Portfolio’s 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/Master Portfolio use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling toll-free (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Fund/Master Portfolio voted proxies relating to securities held in the Fund’s/Master Portfolio’s portfolio during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM EST 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/funds.

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.

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013 41

Additional Information (concluded)

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.

42 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013

A World-Class 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.

Equity Funds

BlackRock ACWI ex-US Index Fund

BlackRock All-Cap Energy & Resources Portfolio

BlackRock Basic Value Fund

BlackRock Capital Appreciation Fund

BlackRock Commodity Strategies Fund

BlackRock Disciplined Small Cap Core Fund

BlackRock Emerging Markets Fund

BlackRock Emerging Markets Dividend Fund

BlackRock Emerging Markets Long/Short Equity Fund

BlackRock Energy & Resources Portfolio

BlackRock Equity Dividend Fund

BlackRock EuroFund

BlackRock Flexible Equity Fund

BlackRock Focus Growth Fund

BlackRock Global Dividend Portfolio

BlackRock Global Long/Short Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Global SmallCap Fund

BlackRock Health Sciences Opportunities Portfolio

BlackRock International Fund

BlackRock International Index Fund

BlackRock International Opportunities Portfolio

BlackRock Large Cap Core Fund

BlackRock Large Cap Core Plus Fund

BlackRock Large Cap Growth Fund

BlackRock Large Cap Value Fund

BlackRock Latin America Fund

BlackRock Long-Horizon Equity Fund

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Mid Cap Value Opportunities Fund

BlackRock Natural Resources Trust

BlackRock Pacific Fund

BlackRock Real Estate Securities Fund

BlackRock Russell 1000^® Index Fund

BlackRock Science & Technology Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock Small Cap Growth Fund II

BlackRock Small Cap Index Fund

BlackRock S&P 500 Stock Fund

BlackRock U.S. Opportunities Portfolio

BlackRock Value Opportunities Fund

Taxable Fixed Income Funds

BlackRock Bond Index Fund

BlackRock Core Bond Portfolio

BlackRock CoreAlpha Bond Fund

BlackRock CoRI Funds

2015	2021
2017	2023
2019

BlackRock Emerging Markets Flexible Dynamic Bond Portfolio

BlackRock Floating Rate Income Portfolio

BlackRock Global Long/Short Credit Fund

BlackRock GNMA Portfolio

BlackRock High Yield Bond Portfolio

BlackRock Inflation Protected Bond Portfolio

BlackRock International Bond Portfolio

BlackRock Investment Grade Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Secured Credit Portfolio

BlackRock Short Obligations Fund

BlackRock Short-Term Treasury Fund

BlackRock Strategic Income Opportunities Portfolio

BlackRock Total Return Fund

BlackRock U.S. Government Bond Portfolio

BlackRock U.S. Mortgage Portfolio

BlackRock Ultra-Short Obligations Fund

BlackRock World Income Fund

Municipal Fixed Income Funds

BlackRock California Municipal Bond Fund

BlackRock High Yield Municipal Fund

BlackRock National Municipal Fund

BlackRock New Jersey Municipal Bond Fund

BlackRock New York Municipal Bond Fund

BlackRock Pennsylvania Municipal Bond Fund

BlackRock Short-Term Municipal Fund

BlackRock Strategic Municipal Opportunities Fund

Mixed Asset Funds

BlackRock Balanced Capital Fund	LifePath Active Portfolios			LifePath Index Portfolios
BlackRock Emerging Market Allocation Portfolio		2015	2040		Retirement	2040
BlackRock Global Allocation Fund		2020	2045		2020	2045
BlackRock Managed Volatility Portfolio		2025	2050		2025	2050
BlackRock Multi-Asset Income Portfolio		2030	2055		2030	2055
BlackRock Multi-Asset Real Return Fund		2035			2035
BlackRock Strategic Risk Allocation Fund
	LifePath Portfolios
BlackRock Prepared Portfolios		Retirement	2040
Conservative Prepared Portfolio		2020	2045
Moderate Prepared Portfolio		2025	2050
Growth Prepared Portfolio		2030	2055
Aggressive Growth Prepared Portfolio		2035

BlackRock mutual funds are currently distributed by BlackRock Investments, LLC. You should consider the investment objectives, risks, charges and expenses of the funds under consideration carefully before investing. Each fund’s prospectus contains this and other information and is available at www.blackrock.com or by calling (800) 441-7762 or from your financial advisor. The prospectus should be read carefully before investing.

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2013 43

This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless accompanied or preceded by the Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.

SPSF-12/13-AR

Active Stock Master Portfolio

Ten Largest Holdings Percent of
Long-Term  Investments

Google, Inc., Class A	3	%
Microsoft Corp.	3
JPMorgan Chase & Co.	2
Comcast Corp, Class A	2
Mastercard, Inc.	2
Wells Fargo & Co.	2
Apple, Inc.	2
Citigroup, Inc.	2
Schlumberger Ltd.	1
AbbVie, Inc.	1

Sector Allocation Percent of
Long-Term Investments

Information Technology	21	%
Consumer Discretionary	15
Health Care	15
Financials	14
Industrials	12
Energy	10
Consumer Staples	5
Materials	5
Telecommunication Services	2
Utilities	1

For Master Portfolio compliance purposes, the Master Portfolio’s sector classifications refer to any 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 advisor. These definitions may not apply for purposes of this report, which may combine sector sub-classifications for reporting ease.

See Notes to Financial Statements.
	ACTIVE STOCK MASTER PORTFOLIO	DECEMBER 31, 2013	1

Active Stock Master Portfolio

Derivative Financial Instruments

The Master Portfolio may invest in various derivative financial instruments, including financial futures contracts and foreign currency exchange contracts, as specified in Note 4 of the Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market and/or equity risks. Derivative financial instruments 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 derivative financial instrument. The Master Portfolio’s ability to use a derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require the Master Portfolio to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation the Master Portfolio can realize on an investment or may cause the Master Portfolio to hold an investment that it might otherwise sell. The Master Portfolio’s investments in these instruments are discussed in detail in the Notes to Financial Statements.

See Notes to Financial Statements.
2	ACTIVE STOCK MASTER PORTFOLIO	DECEMBER 31, 2013

Schedule of Investments December 31, 2013 (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Aerospace & Defense — 4.0%
The Boeing Co.		179,665	$	24,522,476
Exelis, Inc.		259,892		4,953,541
Honeywell International, Inc.		34,980		3,196,123
Northrop Grumman Corp.		189,577		21,727,420
Precision Castparts Corp.		47,166		12,701,804
Raytheon Co. (a)		239,929		21,761,560
Rockwell Collins, Inc. (a)		80,700		5,965,344
Spirit Aerosystems Holdings, Inc., Class A (b)		86,801		2,958,178
United Technologies Corp.		173,482		19,742,252
				117,528,698
Airlines — 0.9%
Copa Holdings SA, Class A		24,326		3,894,836
Delta Air Lines, Inc.		43,610		1,197,967
United Continental Holdings, Inc. (a)(b)		543,586		20,563,858
				25,656,661
Auto Components — 1.2%
BorgWarner, Inc. (a)		183,060		10,234,885
Delphi Automotive PLC		65,054		3,911,697
Johnson Controls, Inc.		199,970		10,258,461
Lear Corp. (a)		129,338		10,472,498
TRW Automotive Holdings Corp. (b)		25,768		1,916,881
				36,794,422
Automobiles — 0.2%
Ford Motor Co.		52,120		804,212
General Motors Co. (b)		123,700		5,055,619
				5,859,831
Beverages — 1.1%
The Coca-Cola Co. (a)		504,265		20,831,187
Diageo PLC		319,340		10,576,221
				31,407,408
Biotechnology — 3.2%
Amgen, Inc.		221,763		25,316,464
Biogen Idec, Inc. (b)		39,740		11,117,265
Celgene Corp. (b)		77,801		13,145,257
Gilead Sciences, Inc. (a)(b)		334,141		25,110,696
Myriad Genetics, Inc. (a)(b)		8,943		187,624
Regeneron Pharmaceuticals, Inc. (b)		24,999		6,880,725
United Therapeutics Corp. (b)		115,365		13,045,474
				94,803,505
Capital Markets — 0.6%
The Bank of New York Mellon Corp.		6		210
The Goldman Sachs Group, Inc.		33,390		5,918,711
Common Stocks	Shares		Value
Capital Markets (concluded)
Morgan Stanley		321,743	$	10,089,860
State Street Corp. (a)		14,100		1,034,799
T. Rowe Price Group, Inc.		1,343		112,503
Waddell & Reed Financial, Inc., Class A (a)		32,031		2,085,859
				19,241,942
Chemicals — 2.7%
Akzo Nobel NV — ADR (a)		83,700		2,165,319
Ashland, Inc.		16,200		1,572,048
Celanese Corp., Series A		500		27,655
CF Industries Holdings, Inc.		25,190		5,870,278
The Dow Chemical Co.		213,040		9,458,976
E.I. du Pont de Nemours & Co.		174,220		11,319,073
Eastman Chemical Co.		87,420		7,054,794
LyondellBasell Industries NV, Class A		102,473		8,226,532
Monsanto Co.		49,994		5,826,801
PPG Industries, Inc.		140,544		26,655,575
The Valspar Corp.		31,395		2,238,150
Westlake Chemical Corp.		387		47,241
				80,462,442
Commercial Banks — 3.0%
BOK Financial Corp.		15,451		1,024,710
Fifth Third Bancorp		328,300		6,904,149
Regions Financial Corp.		269,600		2,666,344
SunTrust Banks, Inc.		229,620		8,452,312
US Bancorp (a)		577,119		23,315,608
Wells Fargo & Co.		1,039,224		47,180,770
				89,543,893
Communications Equipment — 1.5%
Cisco Systems, Inc.		920,388		20,662,710
Motorola Solutions, Inc.		95,440		6,442,200
QUALCOMM, Inc.		209,703		15,570,448
Telefonaktiebolaget LM Ericsson — ADR (a)		190,900		2,336,616
				45,011,974
Computers & Peripherals — 2.6%
Apple, Inc.		83,869		47,059,735
EMC Corp.		785,350		19,751,552
Lexmark International, Inc., Class A (a)		2,630		93,418
NetApp, Inc. (a)		226,642		9,324,052
				76,228,757
Construction & Engineering — 0.2%
KBR, Inc.		164,500		5,245,905
Consumer Finance — 1.9%
American Express Co.		119,510		10,843,143

See Notes to Financial Statements.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013 3

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Consumer Finance (concluded)
Capital One Financial Corp.		151,523	$	11,608,177
Discover Financial Services		582,915		32,614,094
				55,065,414
Containers & Packaging — 0.9%
Avery Dennison Corp. (a)		16,847		845,551
MeadWestvaco Corp.		111,070		4,101,815
Packaging Corp. of America		322,407		20,401,915
Rock-Tenn Co., Class A (a)		10,171		1,068,057
				26,417,338
Distributors — 0.0%
Genuine Parts Co. (a)		8,841		735,483
Diversified Consumer Services — 0.1%
Apollo Group, Inc., Class A (b)		3,080		84,145
Service Corp. International		116,667		2,115,173
Weight Watchers International, Inc. (a)		1,425		46,925
				2,246,243
Diversified Financial Services — 4.3%
Bank of America Corp.		714,790		11,129,280
Citigroup, Inc.		877,931		45,748,984
ING US, Inc.		79,633		2,799,100
IntercontinentalExchange Group, Inc.		18,420		4,143,026
JPMorgan Chase & Co.		882,387		51,601,992
Moody’s Corp.		59,476		4,667,082
The NASDAQ OMX Group, Inc. (a)		203,301		8,091,380
				128,180,844
Diversified Telecommunication Services — 1.0%
AT&T, Inc.		135,660		4,769,805
BCE, Inc.		29,540		1,278,787
Verizon Communications, Inc. (a)		345,363		16,971,138
Vivendi SA		223,159		5,880,579
				28,900,309
Electric Utilities — 0.6%
American Electric Power Co., Inc. (a)		143,765		6,719,576
Duke Energy Corp.		21,086		1,455,145
Edison International		54,920		2,542,796
FirstEnergy Corp. (a)		44,140		1,455,737
ITC Holdings Corp.		8,990		861,422
NextEra Energy, Inc.		35,280		3,020,674
Northeast Utilities		20,880		885,103
				16,940,453
Electrical Equipment — 0.8%
Eaton Corp. PLC		135,285		10,297,894
Rockwell Automation, Inc.		55,600		6,569,696
Common Stocks	Shares		Value
Electrical Equipment (concluded)
Roper Industries, Inc.		27,041	$	3,750,046
SolarCity Corp. (b)		57,824		3,285,560
				23,903,196
Electronic Equipment, Instruments & Components — 0.3%
Corning, Inc.		66,700		1,188,594
TE Connectivity Ltd.		118,900		6,552,579
				7,741,173
Energy Equipment & Services — 2.8%
FMC Technologies, Inc. (b)		78,119		4,078,593
Halliburton Co.		389,082		19,745,912
Oceaneering International, Inc.		172,500		13,606,800
Schlumberger Ltd.		488,774		44,043,425
				81,474,730
Food & Staples Retailing — 1.6%
CVS Caremark Corp.		479,525		34,319,604
The Kroger Co. (a)		310,184		12,261,574
Walgreen Co.		9,300		534,192
				47,115,370
Food Products — 1.1%
Bunge Ltd.		1,001		82,192
Kraft Foods Group, Inc.		180,972		9,758,010
Mead Johnson Nutrition Co.		27,011		2,262,442
Mondelez International, Inc., Class A		321,300		11,341,890
Unilever NV		194,540		7,826,344
WhiteWave Foods Co., Class A (b)		57,437		1,317,605
				32,588,483
Gas Utilities — 0.1%
AGL Resources, Inc. (a)		12,692		599,443
UGI Corp. (a)		53,400		2,213,964
				2,813,407
Health Care Equipment & Supplies — 2.2%
Abbott Laboratories		511,110		19,590,846
Baxter International, Inc.		111,822		7,777,220
Boston Scientific Corp. (b)		89,093		1,070,898
Edwards Lifesciences Corp. (b)		22,135		1,455,598
Hologic, Inc. (b)		17,300		386,655
Intuitive Surgical, Inc. (b)		19,566		7,514,909
Medtronic, Inc.		158,181		9,078,007
Sirona Dental Systems, Inc. (b)		82,368		5,782,234
St. Jude Medical, Inc.		100,800		6,244,560
Zimmer Holdings, Inc.		65,000		6,057,350
				64,958,277
Health Care Providers & Services — 2.7%
Aetna, Inc.		190,000		13,032,100

See Notes to Financial Statements.

4 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Health Care Providers & Services (concluded)
Cardinal Health, Inc. (a)		69,032	$	4,612,028
Catamaran Corp (b)		25,120		1,192,698
Envision Healthcare Holdings, Inc. (b)		23,500		834,720
Health Net, Inc. (b)		36,308		1,077,258
McKesson Corp.		174,790		28,211,106
Quest Diagnostics, Inc. (a)		144,900		7,757,946
Universal Health Services, Inc.		137,647		11,185,195
VCA Antech, Inc. (b)		170,256		5,339,228
WellPoint, Inc.		63,594		5,875,450
				79,117,729
Hotels, Restaurants & Leisure — 1.3%
Domino’s Pizza, Inc. (a)		76,408		5,321,817
Las Vegas Sands Corp.		119,110		9,394,206
McDonald’s Corp.		49,173		4,771,256
Melco Crown Entertainment Ltd. — ADR (a)(b)		84,797		3,325,738
Starbucks Corp.		138,459		10,853,801
Starwood Hotels & Resorts Worldwide, Inc.		2		159
Wynn Resorts Ltd.		31,003		6,021,093
				39,688,070
Household Durables — 0.3%
Garmin Ltd. (a)		8,246		381,130
Newell Rubbermaid, Inc. (a)		130,900		4,242,469
PulteGroup, Inc.		19,011		387,254
Whirlpool Corp.		20,111		3,154,612
				8,165,465
Household Products — 0.4%
Energizer Holdings, Inc. (a)		37,100		4,015,704
Kimberly-Clark Corp.		630		65,810
The Procter & Gamble Co.		96,003		7,815,604
				11,897,118
Independent Power Producers & Energy Traders — 0.2%
The AES Corp.		383,700		5,567,487
Industrial Conglomerates — 2.1%
3M Co.		238,000		33,379,500
General Electric Co.		977,660		27,403,810
				60,783,310
Insurance — 3.3%
ACE Ltd.		109,473		11,333,740
Aflac, Inc.		57,492		3,840,466
The Allstate Corp.		125,492		6,844,334
American International Group, Inc.		86,624		4,422,155
Aspen Insurance Holdings Ltd.		12,927		534,014
Berkshire Hathaway, Inc., Class B (b)		5,790		686,462
Common Stocks	Shares		Value
Insurance (concluded)
CNA Financial Corp.		77,850	$	3,338,986
Genworth Financial, Inc., Class A (a)(b)		266,300		4,135,639
Hartford Financial Services Group, Inc.		129,726		4,699,973
Kemper Corp.		3		123
Lincoln National Corp.		82,962		4,282,498
MetLife, Inc.		126,786		6,836,301
PartnerRe Ltd.		2,900		305,747
Prudential Financial, Inc.		247,280		22,804,162
The Travelers Cos., Inc. (a)		216,969		19,644,373
XL Group PLC		90,900		2,894,256
				96,603,229
Internet & Catalog Retail — 1.3%
Amazon.com, Inc. (b)		36,707		14,638,384
Expedia, Inc.		82,232		5,728,281
priceline.com, Inc. (b)		14,447		16,793,193
				37,159,858
Internet Software & Services — 4.9%
AOL, Inc. (b)		57,600		2,685,312
eBay, Inc. (b)		88,993		4,884,826
Facebook, Inc. (b)		48,315		2,640,898
Google, Inc., Class A (b)		75,079		84,141,786
IAC/InterActiveCorp		25,656		1,762,311
LinkedIn Corp. (b)		38,665		8,383,732
SINA Corp. (a)(b)		79,077		6,662,237
VeriSign, Inc. (b)		57,033		3,409,433
Yahoo!, Inc. (b)		341,775		13,821,381
Yandex NV (b)		109,768		4,736,489
Yelp, Inc. (a)(b)		106,229		7,324,489
Youku Tudou, Inc. - ADR (a)(b)		104,252		3,158,836
				143,611,730
IT Services — 4.8%
Alliance Data Systems Corp. (a)(b)		110,834		29,141,584
Amdocs Ltd.		9,532		393,100
Automatic Data Processing, Inc.		3,941		318,472
Broadridge Financial Solutions, Inc.		12,130		479,378
Cognizant Technology Solutions Corp., Class A (b)		61,700		6,230,466
DST Systems, Inc.		126,510		11,479,517
International Business Machines Corp. (a)		67,660		12,690,986
Lender Processing Services, Inc.		2,749		102,758
Mastercard, Inc., Class A (a)		56,522		47,221,870
Science Applications International Corp.		5,813		192,236
Teradata Corp. (b)		140,070		6,371,784
Visa, Inc., Class A		102,130		22,742,308

See Notes to Financial Statements.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013 5

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
IT Services (concluded)
The Western Union Co. (a)		167,680	$	2,892,480
				140,256,939
Leisure Equipment & Products — 0.0%
Polaris Industries, Inc.		4,463		649,991
Life Sciences Tools & Services — 0.7%
Agilent Technologies, Inc.		313,010		17,901,042
Life Technologies Corp. (b)		5,420		410,836
Quintiles Transnational Holdings, Inc. (b)		4,121		190,967
Waters Corp. (b)		13,715		1,371,500
				19,874,345
Machinery — 2.4%
AGCO Corp. (a)		33,781		1,999,497
CNH Industrial NV (a)(b)		133,743		1,517,983
Cummins, Inc.		99,570		14,036,383
Deere & Co.		149,120		13,619,130
Ingersoll-Rand PLC		215,190		13,255,704
Parker Hannifin Corp. (a)		92,700		11,924,928
Stanley Black & Decker, Inc. (b)		2,000		206,400
Timken Co.		10,375		571,351
Valmont Industries, Inc. (a)		41,476		6,184,901
WABCO Holdings, Inc. (a)(b)		91,390		8,536,740
				71,853,017
Marine — 0.1%
Matson, Inc.		77,594		2,025,979
Media — 5.8%
CBS Corp., Class B		89,715		5,718,434
Comcast Corp., Class A		951,665		49,453,272
Comcast Corp., Special Class A		370,100		18,460,588
DIRECTV (b)		95,214		6,578,335
Liberty Global PLC, Class A (b)		124,269		11,058,698
Lions Gate Entertainment Corp. (a)		43,491		1,376,925
Omnicom Group, Inc.		8,152		606,264
Regal Entertainment Group, Class A		100,011		1,945,214
Sirius XM Holdings, Inc. (a)(b)		2,024,420		7,065,226
Time Warner, Inc.		189,539		13,214,659
Twenty-First Century Fox, Inc., Class A		498,539		17,538,602
Viacom, Inc., Class B		166,821		14,570,146
The Walt Disney Co. (a)		302,929		23,143,776
				170,730,139
Metals & Mining — 0.5%
BHP Billiton Ltd. (a)		375,620		12,741,511
Reliance Steel & Aluminum Co.		13,400		1,016,256
				13,757,767
Common Stocks	Shares		Value
Multi-Utilities — 0.3%
Dominion Resources, Inc.		54,570	$	3,530,133
DTE Energy Co.		8,764		581,842
Public Service Enterprise Group, Inc.		61,070		1,956,683
Sempra Energy		19,210		1,724,289
Wisconsin Energy Corp.		21,620		893,771
				8,686,718
Multiline Retail — 0.1%
JC Penney Co., Inc. (a)(b)		3		27
Kohl’s Corp. (a)		32,400		1,838,700
Macy’s, Inc.		5,800		309,720
				2,148,447
Office Electronics — 0.3%
Xerox Corp. (a)		636,390		7,744,866
Oil, Gas & Consumable Fuels — 7.5%
Anadarko Petroleum Corp.		47,630		3,778,012
Antero Resources Corp. (b)		19,200		1,218,048
Apache Corp.		34,400		2,956,336
Cabot Oil & Gas Corp.		76,828		2,977,853
Chevron Corp.		134,375		16,784,781
Cimarex Energy Co.		4,659		488,776
Cobalt International Energy, Inc. (b)		142,500		2,344,125
Concho Resources, Inc. (b)		24,674		2,664,792
ConocoPhillips		120,920		8,542,998
Devon Energy Corp.		59,617		3,688,504
EOG Resources, Inc.		32,594		5,470,577
Exxon Mobil Corp.		189,091		19,136,009
Gulfport Energy Corp. (b)		52,800		3,334,320
Laredo Petroleum, Inc. (a)(b)		127,653		3,534,711
Marathon Oil Corp. (a)		656,972		23,191,112
Marathon Petroleum Corp. (a)		358,216		32,859,154
Occidental Petroleum Corp.		172,037		16,360,719
PBF Energy, Inc. (a)		231,933		7,296,612
Phillips 66		110,010		8,485,071
SM Energy Co. (a)		17,533		1,457,168
Spectra Energy Corp.		114,360		4,073,503
Suncor Energy, Inc.		665,220		23,315,961
Tesoro Corp.		6,128		358,488
Total SA — ADR		286,770		17,570,398
Valero Energy Corp.		202,026		10,182,110
				222,070,138
Paper & Forest Products — 0.6%
Domtar Corp.		5,215		491,983
International Paper Co.		338,078		16,575,964
				17,067,947

See Notes to Financial Statements.

6 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Personal Products — 0.4%
The Estee Lauder Cos., Inc., Class A		70,457	$	5,306,821
Herbalife Ltd. (a)		2,691		211,782
Nu Skin Enterprises, Inc., Class A		45,540		6,294,539
				11,813,142
Pharmaceuticals — 6.1%
AbbVie, Inc.		687,714		36,318,176
Actavis PLC (b)		47,650		8,005,200
Allergan, Inc.		36,308		4,033,093
AstraZeneca PLC — ADR (a)		90,900		5,396,733
Bristol-Myers Squibb Co.		108,830		5,784,315
Eli Lilly & Co. (a)		409,146		20,866,446
Hospira, Inc. (b)		26,100		1,077,408
Johnson & Johnson		300,560		27,528,290
Merck & Co., Inc.		599,010		29,980,451
Pfizer, Inc.		761,119		23,313,075
Teva Pharmaceutical Industries Ltd. — ADR (a)		55,100		2,208,408
Valeant Pharmaceuticals International, Inc. (b)		75,345		8,845,503
Zoetis, Inc.		177,083		5,788,843
				179,145,941
Professional Services — 0.2%
Manpower, Inc.		18,610		1,597,855
Verisk Analytics, Inc., Class A (b)		59,535		3,912,640
				5,510,495
Real Estate Investment Trusts (REITs) — 0.8%
American Tower Corp.		38,540		3,076,263
Camden Property Trust		5,867		333,715
CBL & Associates Properties, Inc.		162,567		2,919,703
Equity Lifestyle Properties, Inc.		37,856		1,371,523
Equity One, Inc. (a)		6,230		139,801
Host Hotels & Resorts, Inc. (a)		347,252		6,750,579
Kimco Realty Corp. (a)		49,027		968,283
Potlatch Corp. (a)		52,711		2,200,157
Simon Property Group, Inc.		12,839		1,953,582
Ventas, Inc.		9,163		524,857
Weyerhaeuser Co.		130,310		4,113,887
WP Carey, Inc.		12,086		741,476
				25,093,826
Real Estate Management & Development — 0.1%
CBRE Group, Inc., Class A (b)		22,500		591,750
Jones Lang LaSalle, Inc. (a)		21,800		2,232,102
				2,823,852
Road & Rail — 1.0%
Canadian Pacific Railway Ltd.		19,561		2,959,970
Common Stocks	Shares		Value
Road & Rail (concluded)
Union Pacific Corp.		153,459	$	25,781,112
				28,741,082
Semiconductors & Semiconductor Equipment — 1.4%
Altera Corp.		135,760		4,416,273
Applied Materials, Inc.		357,050		6,316,215
Intel Corp.		597,150		15,502,014
KLA-Tencor Corp.		3,400		219,164
Maxim Integrated Products, Inc. (a)		223,208		6,229,735
NXP Semiconductor NV (b)		131,766		6,052,012
Skyworks Solutions, Inc. (b)		39,196		1,119,438
Teradyne, Inc. (a)(b)		88,200		1,554,084
				41,408,935
Software — 5.0%
Activision Blizzard, Inc.		180,573		3,219,616
Autodesk, Inc. (b)		193,754		9,751,639
Citrix Systems, Inc. (b)		46,527		2,942,833
Electronic Arts, Inc. (b)		16,787		385,094
Fortinet, Inc. (b)		34,844		666,566
Microsoft Corp. (a)		2,003,927		75,006,988
Nuance Communications, Inc. (a)(b)		86,151		1,309,495
Oracle Corp.		843,020		32,253,945
Rovi Corp. (b)		77,997		1,535,761
Splunk, Inc. (b)		81,131		5,571,266
Symantec Corp.		416,990		9,832,624
TIBCO Software, Inc. (b)		65,436		1,471,001
VMware, Inc., Class A (a)(b)		47,707		4,279,795
				148,226,623
Specialty Retail — 3.6%
CarMax, Inc. (b)		60,805		2,859,051
GameStop Corp., Class A (a)		119,847		5,903,663
The Home Depot, Inc.		120,450		9,917,853
Lowe’s Cos., Inc. (a)		615,179		30,482,119
Lumber Liquidators Holdings, Inc. (a)(b)		20,160		2,074,262
Murphy USA, Inc. (a)(b)		112,608		4,679,989
Ross Stores, Inc.		296,650		22,227,985
Sears Hometown and Outlet Stores, Inc. (b)		30,724		783,462
TJX Cos., Inc. (a)		375,775		23,948,141
Urban Outfitters, Inc. (b)		108,917		4,040,821
				106,917,346
Textiles, Apparel & Luxury Goods — 1.4%
Michael Kors Holdings Ltd. (b)		85,226		6,919,499
NIKE, Inc., Class B (a)		206,813		16,263,774
VF Corp.		293,180		18,276,841
				41,460,114

See Notes to Financial Statements.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013 7

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Tobacco — 0.9%
Lorillard, Inc. (a)		129,313	$	6,553,583
Philip Morris International, Inc.		154,085		13,425,426
Reynolds American, Inc.		130,108		6,504,099
				26,483,108
Trading Companies & Distributors — 0.3%
Air Lease Corp. (a)		193,734		6,021,253
MRC Global, Inc. (b)		119,393		3,851,618
United Rentals, Inc. (b)		6,021		469,337
				10,342,208
Water Utilities — 0.2%
American Water Works Co., Inc.		115,900		4,897,934
Wireless Telecommunication Services — 0.7%
Softbank Corp.		187,200		16,354,003
Telephone & Data Systems, Inc. (a)		160,548		4,138,927
				20,492,930
Total Long-Term Investments (Cost — $2,397,854,412) — 100.6%				2,959,683,983
Short-Term Securities	Shares		Value
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (c)(d)(e)		226,864,969	$	226,864,969
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11% (c)(d)(e)		31,618,522		31,618,522
Total Short-Term Securities (Cost — $258,483,491) — 8.8%				258,483,491
Total Investments (Cost — $2,656,337,903*) — 109.4%				3,218,167,474
Liabilities in Excess of Other Assets — (9.4)%				(277,624,703	)
Net Assets — 100.0%			$	2,940,542,771

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	2,691,844,697
Gross unrealized appreciation	$	569,393,379
Gross unrealized depreciation		(43,070,602	)
Net unrealized appreciation	$	526,322,777

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

(b) Non-income producing security.

(c) All or a portion of security was purchased with the cash collateral from loaned securities.

(d) Investments in issuers considered to be an affiliate of the Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at December 31, 2012		Net Activity1		Shares Held at December 31, 2013		Income
BlackRock Cash Funds: Prime, SL Agency Shares		9,485,001		22,133,521		31,618,522	$	34,065
BlackRock Cash Funds: Institutional, SL Agency Shares		138,527,226		88,337,743		226,864,969	$	301,510
1   Represents net shares purchased.

(e) Represents the current yield as of report date.

For Master Portfolio compliance purposes, the Master Portfolio‘s industry classifications refer to any 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.

See Notes to Financial Statements.

8 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013

Schedule of Investments (continued)

Portfolio Abbreviations

To simplify the listings of portfolio holdings in the Schedules of Investments, the names and descriptions of many of the securities have been abbreviated according to the following list:	ADR	American Depositary Receipts
	JPY	Japanese Yen
	USD	US Dollar

Ÿ Financial futures contracts as of December 31, 2013 were as follows:

Contracts Purchased		Issue	Exchange	Expiration	Notional Value		Unrealized Appreciation
	147	S&P 500 E-Mini Index	Chicago Mercantile	March 2014	$	13,532,085	$	469,687

Ÿ Foreign currency exchange contracts as of December 31, 2013 were as follows:

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation
USD	5,874,737	JPY	606,575,419	Citibank NA		2/28/14	$	113,363
USD	1,243,098	JPY	129,317,652	JPMorgan Chase Bank NA		2/28/14		14,814
USD	5,005,326	JPY	512,510,346	UBS AG		2/28/14		137,401
Total							$	265,578

See Notes to Financial Statements.
	ACTIVE STOCK MASTER PORTFOLIO	DECEMBER 31, 2013	9

Schedule of Investments (continued)

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

Ÿ Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Master Portfolio’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.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments1	$	2,914,131,669	$	45,552,314		—	$	2,959,683,983
Short-Term Securities		258,483,491		—		—		258,483,491
Total	$	3,172,615,160	$	45,552,314		—	$	3,218,167,474
1   See above Schedule of Investments for values in each sector.
	Level 1		Level 2		Level 3		Total
Derivative Financial Instruments 2
Assets:
Equity contracts	$	469,687		—		—	$	469,687
Foreign currency exchange contracts		—	$	265,578		—		265,578
Total	$	469,687	$	265,578		—	$	735,265
2   Derivative financial instruments are financial futures contracts and foreign currency exchange contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

See Notes to Financial Statements.
10	ACTIVE STOCK MASTER PORTFOLIO	DECEMBER 31, 2013

Schedule of Investments (concluded)

The carrying amount for certain of the Master Portfolio’s assets and/or liabilities approximates fair value for financial statement purposes. As of December 31, 2013, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2			Level 3		Total
Assets:
Cash	$	493,829		—			—	$	493,829
Cash pledged for financial future contracts		740,000		—			—		740,000
Foreign currency at value		3,215		—			—		3,215
Liabilities:
Collateral on securities loaned at value		—	$	(204,575,541	)		—		(204,575,541	)
Total	$	1,237,044	$	(204,575,541	)		—	$	(203,338,497	)

There were no transfers between Level 1 and Level 2 during the year ended December 31, 2013.

See Notes to Financial Statements.
	ACTIVE STOCK MASTER PORTFOLIO	DECEMBER 31, 2013	11

Statement of Assets and Liabilities

December 31, 2013
Assets
Investments at value — unaffiliated1,2	$	2,959,683,983
Investments at value — affiliated3		258,483,491
Foreign currency at value (cost — $3,143)		3,215
Investments sold receivable		125,259,825
Cash		493,829
Cash pledged for financial future contracts		740,000
Dividends receivable		3,512,393
Unrealized appreciation on foreign currency exchange contracts		265,578
Securities lending income receivable — affiliated		228,041
Interest receivable		4,068
Variation margin receivable on financial future contracts		45,930
Prepaid expenses		10,748
Total assets		3,348,731,101
Liabilities
Collateral on securities loaned at value		204,575,541
Investments purchased payable		17,794,856
Trustees’ fees payable		22,526
Investment advisory fees payable		304,958
Administration fees payable		259,164
Professional fees payable		28,789
Withdrawals payable to investors		185,114,575
Foreign taxes payable		87,921
Total liabilities		408,188,330
Net Assets	$	2,940,542,771
Net Assets Consist of
Investors’ capital	$	2,377,978,025
Net unrealized appreciation/depreciation		562,564,746
Net Assets	$	2,940,542,771
1 Investments at cost — unaffiliated	$	2,397,854,412
2 Securities loaned at value	$	200,666,325
3 Investments at cost — affiliated	$	258,483,491

See Notes to Financial Statements
12	ACTIVE STOCK MASTER PORTFOLIO	DECEMBER 31, 2013

Statement of Operations

Year Ended December 31, 2013
Investment Income
Dividends	$	51,894,367
Foreign taxes withheld		(818,648	)
Securities lending — affiliated — net		220,406
Interest — affiliated		115,170
Other income — affiliated		2,267,346
Total income		53,678,641
Expenses
Investment advisory		7,320,195
Administration		3,010,168
Professional		48,871
Independent Trustees		94,687
Total expenses		10,473,921
Less fees waived by Manager		(3,454,743	)
Total expenses after fees waived		7,019,178
Net investment income		46,659,463
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments		497,807,519
Financial futures contracts		5,598,435
Foreign currency transactions		(59,348	)
		503,346,606
Net change in unrealized appreciation/depreciation on:
Investments		331,652,372
Financial futures contracts		496,893
Foreign currency translations		265,780
		332,415,045
Total realized and unrealized gain		835,761,651
Net Increase in Net Assets Resulting from Operations	$	882,421,114

See Notes to Financial Statements
	ACTIVE STOCK MASTER PORTFOLIO	DECEMBER 31, 2013	13

Statements of Changes in Net Assets

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2013			2012
Operations
Net investment income	$	46,659,463		$	57,010,755
Net realized gain		503,346,606			210,331,039
Net change in unrealized appreciation/depreciation		332,415,045			147,479,020
Net increase in net assets resulting from operations		882,421,114			414,820,814
Capital Transactions
Proceeds from contributions		704,884,041			3,136,934,911
Value of withdrawals		(1,439,579,901	)		(3,476,187,910	)
Net decrease in net assets derived from capital transactions		(734,695,860	)		(339,252,999	)
Net Assets
Total increase in net assets		147,725,254			75,567,815
Beginning of year		2,792,817,517			2,717,249,702
End of year	$	2,940,542,771		$	2,792,817,517

See Notes to Financial Statements
14	ACTIVE STOCK MASTER PORTFOLIO	DECEMBER 31, 2013

Financial Highlights

	Year Ended December 31,
	2013		2012		2011		2010		2009
Total Investment Return
Total investment return		34.02%		15.55%		2.20%		11.04%		24.86%
Ratios to Average Net Assets
Total expenses		0.35%		0.35%		0.35%		0.35%		0.35%
Total expenses after fees waived		0.23%		0.26%		0.27%		0.29%		0.30%
Net investment income		1.55%		2.03%		1.70%		1.50%		1.99%
Supplemental Data
Net assets, end of year (000)	$	2,940,543	$	2,792,818	$	2,717,250	$	2,513,424	$	1,838,453
Portfolio turnover		153%		120%		275%		120%		149%

See Notes to Financial Statements
	ACTIVE STOCK MASTER PORTFOLIO	DECEMBER 31, 2013	15

Notes to Financial Statements

1. Organization:

Active Stock Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust.

2. Significant Accounting Policies:

The Master Portfolio’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in 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 following is a summary of significant accounting policies followed by the Master Portfolio:

Valuation: US GAAP defines fair value as the price the Master Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Master Portfolio determines the fair value of its financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (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 provide oversight of the pricing function for the Master Portfolio for all financial instruments.

Equity investments traded on a recognized securities exchange or the NASDAQ Stock Market (“NASDAQ”) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale 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 are valued at the last available bid (long positions) or ask (short positions) price. Financial futures contracts traded on exchanges are valued at their last sale price. Investments in open-end registered investment companies are valued at NAV each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

Securities and other assets and liabilities denominated in foreign currencies are translated into US dollars using exchange rates determined as of the close of business on the New York Stock Exchange (“NYSE”). Foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of business on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

In the event that application of these methods of valuation result 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 Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive from the current sale of that asset 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 consistent with the principles of fair value measurement which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. The market approach generally consists of using comparable market transactions. The

16 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013

Notes to Financial Statements

income approach generally is used to discount future cash flows to present value and adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. 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 Master Portfolio’s pricing vendors, a regular review 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 Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of business on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of business on the NYSE that may not be reflected in the computation of the Master Portfolio’s net assets. If events (for example, a company announcement, market volatility or a natural disaster) occur during such periods that are expected to affect the value of such instruments materially, those instruments may be Fair Value Assets and valued at their fair value, as determined in good faith by the Global Valuation Committee, or its delegate, using a pricing service and/or policies approved by the Board. Each business day, the Master Portfolio uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of business on the NYSE, which follows the close of the local markets.

Foreign Currency: The Master Portfolio’s books and records are maintained in US dollars. Purchases and sales of investment securities are recorded at the rates of exchange prevailing on the respective date of such transactions. Generally, when the US dollar rises in value against a foreign currency, the Master Portfolio investments denominated in that currency will lose value because that currency is worth fewer US dollars; the opposite effect occurs if the US dollar falls in relative value.

The Master Portfolio does not isolate the portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in foreign currency 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 Master Portfolio reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components may be treated as ordinary income for federal income tax purposes.

Segregation and Collateralization: In cases where the Master Portfolio enters into certain investments (e.g., financial futures and foreign currency contracts), that would be “senior securities” for 1940 Act purposes, the Master Portfolio may segregate or designate on its books and records cash or liquid securities having a market value at least equal to the amount of the Master Portfolio’s future obligations under such investments. Doing so allows the investment to be

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013 17

Notes to Financial Statements

excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Master Portfolio may 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 Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-divided dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Master Portfolio 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 the accrual basis.

Income Taxes: The Master Portfolio is classified as a partnership for federal income tax purposes. As such, the investor in the Master Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Master Portfolio. Therefore, no federal income tax provision is required. It is intended that the Master Portfolio’s assets will be managed so an investor in the Master Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

The Master Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolio’s US federal tax returns remains open for each of the four years ended December 31, 2013. The statutes of limitations on the Master Portfolio’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 Master Portfolio’s facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

Other: Expenses directly related to the Master Portfolio are charged to the Master Portfolio. Other operating expenses shared by several funds are pro-rated among those funds on the basis of relative net assets or other appropriate methods.

3. Securities and Other Investments:

Securities Lending: The Master Portfolio may lend securities to approved borrowers, such as banks, brokers and other financial institutions. The borrower pledges cash, securities issued or guaranteed by the US government or irrevocable letters of credit issued by a bank as collateral. The initial collateral received by the Master Portfolio should 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 in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statement of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the Master Portfolio earns dividend or interest income on the securities loaned but does not receive interest income on the securities received as collateral. Loans of securities are

18 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013

Notes to Financial Statements

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 securities on loan and the value of the related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value, and collateral on securities loaned at value, respectively. The cash collateral invested by the securities lending agent, BlackRock Institutional Trust Co., N.A. (“BTC”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Master Portfolio under Master Securities Lending Agreements (“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 Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender 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 a MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and the Master Portfolio can reinvest cash collateral, or, upon an event of default, resell or repledge the collateral.

The following table is a summary of the Master Portfolio’s securities lending agreements by counterparty which are subject to offset under a MSLA as of December 31, 2013:

Counterparty	Securities Loaned at Value		Cash Collateral Received1			Fair Value of Non- cash Collateral Received		Net Amount2
Barclays Capital Inc.	$	2,344,443	$	(2,344,443	)		—		—
BNP Paribas S.A.		144,976		(144,976	)		—		—
Citigroup Global Markets, Inc.		21,386,657		(21,386,657	)		—		—
Credit Suisse Securities (USA) LLC	$	11,039,900	$	(11,039,900	)		—		—
Deutsche Bank Securities, Inc.		14,958,965		(14,958,965	)		—		—
Goldman Sachs & Co.		19,922,886		(19,922,886	)		—		—
Jefferies LLC		7,958,911		(7,958,911	)		—		—
JP Morgan Securities LLC		80,374,379		(80,374,379	)		—		—
Merrill Lynch, Pierce, Fenner & Smith Inc.		26,950,084		(26,950,084	)		—		—
Mizuho Securities USA, Inc.		145,120		(145,120	)		—		—
Morgan Stanley		13,667,034		(13,667,034	)		—		—
Nomura Securities International, Inc.		330,228		(327,600	)		—	$	2,628
State Street Bank & Trust Co.		22,412		(22,412	)		—		—
UBS Securities LLC		1,420,330		(1,420,330	)		—		—
Total	$	200,666,325	$	(200,663,697	)		—	$	2,628

¹  Collateral with a value of $204,575,541 has been received in connection with securities lending agreements. Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013 19

Notes to Financial Statements

²  The market value of loaned securities is determined as of 12/31/13. Additional collateral is delivered to the Master Portfolio on the next business day in accordance with the MSLA. The net amount would be subject to the borrower default indemnity in the event of default by the counterparty.

The risks of securities lending also include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate this risk the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities lent. The Master Portfolio also could suffer 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. During the year ended December 31, 2013, any securities on loan were collateralized by cash.

4. Derivative Financial Instruments:

The Master Portfolio engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Master Portfolio and/or to economically hedge its exposure to certain risks such as equity risk or foreign currency exchange rate risk. These contracts may be transacted on an exchange or OTC.

Financial Futures Contracts: The Master Portfolio purchases and/or sells financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk). Financial futures contracts are agreements between the Master Portfolio and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date.

Upon entering into a financial futures contract, the Master Portfolio is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Securities deposited as initial margin are designated on the Schedule of Investments and cash deposited, if any, is recorded on the Statement of Assets and Liabilities as cash pledged for financial futures contracts. Pursuant to the contract, the Master Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin. Variation margin is recorded by the Master Portfolio as unrealized appreciation or depreciation and, if applicable, as a receivable or payable for variation margin in the Statement of Asset and Liabilities.

When the contract is closed, the Master Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest or foreign currency exchange rates and the underlying assets.

Foreign Currency Exchange Contracts: The Master Portfolio enters into foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to, or hedge exposure away from, foreign currencies (foreign currency exchange rate risk). A foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. Foreign currency exchange contracts, when used by the Master Portfolio, help to manage the overall exposure to the currencies in which

20 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013

Notes to Financial Statements

some of the investments held by the Master Portfolio are denominated. The contract is marked-to-market daily and the change in market value is recorded by the Master Portfolio as an unrealized gain or loss. When the contract is closed, the Master Portfolio records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of foreign currency exchange contracts involves the risk that the value of a foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

The following is a summary of the Master Portfolio’s derivative financial instruments categorized by risk exposure:

Fair Values of Derivative Financial Instruments as of December 31, 2013
	Derivative Assets
	Statement of Assets and Liabilities Location	Value
Equity contracts	Net unrealized appreciation/depreciation1	$	469,687
Foreign currency exchange contracts	Unrealized appreciation on foreign currency exchange contracts		265,578
Total		$	735,265

¹  Includes cumulative appreciation/depreciation on financial futures contracts as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

The Effect of Derivative Financial Instruments in the Statement of Operations Year Ended December 31, 2013
	Net Realized Gain from
Equity contracts:
Financial futures contracts		$5,598,435
Foreign currency exchange contracts:
Foreign currency transactions		90,190
Total		$5,688,625
	Net Change in Unrealized Appreciation/Depreciation on
Equity Contracts:
Financial futures contracts		$496,893
Foreign currency exchange contracts:
Foreign currency transactions		265,570
Total		$762,463

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013 21

Notes to Financial Statements

For the year ended December 31, 2013, the average quarterly balances of outstanding derivative financial instruments were as follows:

Financial futures contracts:
Average number of contracts purchased	313
Average notional value of contracts purchased	$25,672,159
Foreign currency exchange contracts:
Average number of contracts — US dollars purchased	1
Average number of contracts — US dollars sold	1
Average US dollar amounts purchased	$3,033,675
Average US dollar amounts sold	$302,243

Counterparty Credit Risk: 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 Master Portfolio’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by the Master Portfolio.

With exchange traded futures, there is less counterparty credit risk to the Master Portfolio 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. Credit risk still 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 pro rata across all the clearing broker’s customers, potentially resulting in losses to the Master Portfolio.

In order to better define its contractual rights and to secure rights that will help the Master Portfolio mitigate its counterparty risk, the Master Portfolio may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Master Portfolio 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 Master Portfolio 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

22 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013

Notes to Financial Statements

insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the Master Portfolio’s net assets decline by a stated percentage or the Master Portfolio fails to meet the terms of its ISDA Master Agreements, which would cause the Master Portfolio to accelerate payment of any net liability owed to the counterparty.

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 Master Portfolio and the counterparty.

Cash collateral that has been pledged to cover obligations of the Master Portfolio 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 Master Portfolio, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount threshold (e.g. $500,000) before a transfer is required, which is determined at the close of business of the Master Portfolio and additional required collateral is delivered to/pledged by the Master Portfolio on the next business day. Typically, the Master Portfolio and counterparties are permitted to sell, re-pledge or use the collateral they receive. To the extent amounts due to the Master Portfolio from its counterparties are not fully collateralized, contractually or otherwise, the Master Portfolio bears the risk of loss from counterparty non-performance. The Master Portfolio attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.

For financial reporting purposes, the Master Portfolio does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.

At December 31, 2013, the Master Portfolio’s derivative assets and liabilities (by type) are as follows:

	Assets			Liabilities
Derivative Financial Instruments:
Financial futures contracts	$	45,930			—
Foreign currency exchange contracts		265,578			—
Total derivative assets and liabilities in the Statement of Assets and Liabilities		311,508			—
Derivatives not subject to a master netting agreement or similar agreement (“MNA”)		(45,930	)		—
Total assets and liabilities subject to a MNA		265,578			—

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013 23

Notes to Financial Statements

The following table presents the Master Portfolio’s derivative assets by counterparty net of amounts available for offset under a MNA and net of the related collateral received by the Master Portfolio as of December 31, 2013:

Counterparty	Derivative Assets Subject to a MNA  by Counterparty		Derivatives Available for Offset1		Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets2
Citibank N.A.	$	113,363	$	—		—		—	$	113,363
JP Morgan Chase Bank N.A		14,814		—		—		—		14,814
UBS AG		137,401		—		—		—		137,401
Total	$	265,578		—		—		—	$	265,578

¹  The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to MNA.

²  Net amount represents the net amount receivable from the counterparty in the event of default.

5. Investment Advisory Agreement and Other Transactions with Affiliates:

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

MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement with BlackRock Fund Advisors (“BFA” or the “Manager”), the Master Portfolio’s investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory services. The Manager is responsible for the management of the Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Master Portfolio. For such services, the Master Portfolio pays the Manager a monthly fee based on a percentage of the Master Portfolio’s average daily net assets at the following annual rates:

Average Daily Net Assets	Investment Advisory Fee
First $1 Billion		0.25	%
$1 Billion — $3 Billion		0.24	%
$3 Billion — $5 Billion		0.23	%
$5 Billion — $10 Billion		0.22	%
Greater than $10 Billion		0.21	%

24 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013

Notes to Financial Statements

MIP, on behalf of the Master Portfolio, entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL” or the “Administrator”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL, in consideration thereof, has agreed to bear all of the Master Portfolio’s and MIP’s ordinary operating expenses excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the Master Portfolio. BAL is entitled to receive for these administration services an annual fee of 0.10% based on the average daily net assets of the Master Portfolio.

From time to time, BAL may waive such fees in whole or in part. Any such waiver will reduce the expenses of the Master Portfolio and, accordingly, have a favorable impact on its performance. BAL may delegate certain of its administration duties to sub-administrators.

The fees and expenses of MIP’s trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolio. BAL voluntarily agreed to waive a portion of its administration and advisory fees paid by the Master Portfolio in an amount sufficient to maintain the advisory fee payable by each of the LifePath Master Portfolios at an annual rate of 0.35% based on the average daily net assets. This arrangement is voluntary and may be terminated by BAL at any time. With respect to the independent expenses discussed above, BAL has contractually agreed to provide an offsetting credit against the administration fees paid by the Master Portfolio in an amount equal to the independent expenses, through April 30, 2014. The amounts of the waivers and offsetting credits are shown as fees waived by the Manager in the Statement of Operations.

The Master Portfolio received an exemptive order from the SEC permitting it, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BTC as the securities lending agent. BTC may, on behalf of the Master Portfolio, invest cash collateral received by the Master Portfolio for such loans, in a private investment company managed by the Manager or in registered money market funds advised by the Manager or its affiliates. The market value of securities on loan and the value of the related collateral, if applicable, are shown in the Statement of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC, if any, is disclosed in the Schedule of Investments. Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of rebates paid to, or fees paid by, borrowers of securities. The Master Portfolio retains 65% of securities lending income and pays a fee to BTC equal to 35% of such income. The Master Portfolio benefits from a borrower default indemnity provided by BlackRock. As securities lending agent, BTC bears all operational costs directly related to securities lending as well as the cost of borrower default indemnification. BTC does not receive any fees for managing the cash collateral. The share of income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the year ended December 31, 2013, BTC received $51,423 in securities lending agent fees related to securities lending activities for the Master Portfolio.

During the year ended December 31, 2013, the Master Portfolio recorded a payment from an affiliate to compensate for foregone securities lending revenue, which is shown as Other income — affiliated in the Statement of Operations.

The Master Portfolio may invest its positive cash balances in certain money market funds managed by the Manager or an affiliate. The income earned on these temporary cash investments is included in income-affiliated in the Statement of Operations.

Certain officers and/or trustees of MIP are officers and/or directors of BlackRock or its affiliates.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013 25

Notes to Financial Statements

The Master Portfolio may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers or common trustees. For the year ended December 31, 2013, the purchase and sale transactions with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were $650,422 and $1,682,488, respectively.

6. Purchases and Sales:

Purchases and sales of investments excluding short-term securities for the year ended December 31, 2013, were $4,424,560,465 and $4,996,139,705, respectively.

7. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $800 million credit agreement with a group of lenders, under which the Master Portfolio may borrow to fund shareholder redemptions. The agreement expires in April 2014. Excluding commitments designated for a certain individual fund, other Participating Funds, including the Master Portfolio, can borrow up to an aggregate commitment amount of $500 million, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.065% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) the one-month London Interbank Offered Rate plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. Participating Funds paid administration and arrangement fees, which, along with commitment fees, were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. The Master Portfolio did not borrow under the credit agreement during the year ended December 31, 2013.

8. Concentration, Market and Credit Risk:

In the normal course of business, the Master Portfolio invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Master Portfolio may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Master Portfolio; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Master Portfolio may be exposed to counterparty credit risk, or the risk that an entity with which the Master Portfolio has unsettled or open transactions may fail to or be unable to perform on its commitments. The Master Portfolio manages counterparty credit risk by entering into transactions only with counterparties that it believes has the financial resources to honor its obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Master Portfolio to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Master Portfolio’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by its value recorded in the Statement of Assets and Liabilities, less any collateral held by the Master Portfolio.

As of December 31, 2013, the Master Portfolio invested a significant portion of its assets in securities in the Information Technology sector. Changes in economic conditions affecting the Information Technology sector would have a greater impact on the Master Portfolio and could affect the value, income and/or liquidity of positions in such securities.

26 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013

Notes to Financial Statements (concluded) Master Investment Portfolio

9. Subsequent Events:

Management has evaluated the impact of all subsequent events on the Master Portfolio 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.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013 27

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Master Investment Portfolio and the Interestholders of Active Stock Master Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Active Stock Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio, at December 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 18, 2014

28 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013

Officers and Trustees

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2007	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 107 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2007	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 107 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2007	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy from 2002 to 2012; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 107 Portfolios	None

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013 29

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2007	Executive Vice President, Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 107 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2007	President, London Center for Policy Research since 2012; Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and Professor thereof from 1980 to 2005; President Emeritus, Hudson Institute (policy research organization) from 2011 to 2012, President thereof from 1997 to 2011 and Trustee from 1980 to 2012; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (global internet service) since 2005; Director, Cerego, LLC (educational software) since 2005; Director, Cybersettle (online adjudication) since 2009; Director, AIMS Worldwide, Inc. (marketing) from 2007 to 2012.	33 RICs consisting of 107 Portfolios

30 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2007	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 107 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Director, The West Penn Allegheny Health System (a not-for-profit health system) from 2008 to 2013; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 107 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013 31

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2007	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 107 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2007	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2007	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Immediate past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The	33 RICs consisting of 107 Portfolios	None

32 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
			Pennsylvania State University Accounting Department since 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2007	Director, Alkon Corporation (pneumatics) since 1992; Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh from 2005 to 2013 and Dean thereof from 1997 to 2005; Director, Tippman Sports (recreation) from 2005 to 2013; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 107 Portfolios	None
	1    Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved extensions in terms of Directors/Trustees who turn 72 prior to December 31, 2013.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013 33

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1 (concluded)
	2    Date shown is the earliest date a person has served for the MIP covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the MIP’s Board. As a result, although the chart shows certain Trustees as joining the MIP’s board in 2009, those Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.

34 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Interested Trustees3
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	143 RICs consisting of 273 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock, from 2007 to 2008; Managing Director, BlackRock, from 1989 to 2007;	143 RICs consisting of 273 Portfolios	None

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013 35

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Interested Trustees3 (concluded)
			Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.
	3    Mr. Audet is an “interested person”, as defined in the 1940 Act, of MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Trustees of the BlackRock registered closed-end funds and Trustees of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

36 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
MIP Officers1
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock, since 2009; Global Head of BlackRock Fund Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock, since 2000; Head of the Global Cash Group since 2013; Co-head of the Global Cash and Securities Lending Group from 2010 to 2013; Menber of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009 and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Christopher Stavrakos 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2007	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013 37

Officers and Trustees (concluded)

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
MIP Officers1 (concluded)
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2007	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Managing Director of Blackrock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary of the BlackRock-advised funds from 2010 to 2012; General Counsel and Chief Operating Officer of Uhuru Capital Management from 2009 to 2010; Executive Director and Counsel of Goldman Sachs Asset Management from 2005 to 2009.
	1   Officers of MIP serve at the pleasure of the Board.

38 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2013

Additional Information

Investment Advisor

BlackRock Fund Advisors

San Francisco, CA 94105

Administrator

BlackRock Advisors, LLC

Wilmington, DE 19809

Custodian

State Street Bank and Trust Company

Boston, MA 02110

Accounting Agent

State Street Bank and Trust Company

Boston, MA 02110

Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP

Philadelphia, PA 19103

Legal Counsel

Sidley Austin LLP

New York, NY 10019

Address of MIP

400 Howard Street

San Francisco, CA 94105

Availability of Quarterly Schedule of Investments

The Master Portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Master Portfolio’s 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 how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Master Portfolio’s 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 Master Portfolio uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Master Portfolio voted proxies relating to securities held in the Master Portfolio’s portfolio during the most recent period ended December 31 is available upon request and without charge (1) at http://www.blackrock.com; and (2) on the SEC’s website at http://www.sec.gov.

Active Stock Master Portfolio December 31, 2013 39

Portfolio Information as of December 31, 2013

Ten Largest Holdings Percent of
Long-Term  Investments

Roche Holding AG	2	%
Toyota Motor Corp.	2
Anheuser-Busch InBev NV	2
ING Groep NV CVA	1
Commonwealth Bank of Australia	1
Mitsubishi UFJ Financial Group, Inc.	1
Statoil ASA	1
Skandinaviska Enskilda Banken AB, Class A	1
Centrica PLC	1
Nippon Telegraph & Telephone Corp.	1

Geographic Allocation Percent of
Long-Term  Investments

Japan	24	%
United Kingdom	17
Australia	9
Switzerland	7
France	6
Germany	6
Netherlands	5
Norway	5
Spain	4
Sweden	4
Belgium	3
Italy	3
Finland	2
Hong Kong	2
China	2
Other1	1

¹  Other includes a 1% or less investment in each of the following countries: Austria, Singapore, Ireland, Denmark, Israel, Bermuda, Portugal, Cyprus, Mauritius and Luxembourg.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013 1

Portfolio Information as of December 31, 2013

Derivative Financial Instruments

The Master Portfolio may invest in various derivative financial instruments, including financial futures contracts and foreign currency exchange contracts, as specified in Note 4 of the Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market and/or equity risks. Derivative financial instruments 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 derivative financial instrument. The Master Portfolio’s ability to use a derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require the Master Portfolio to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation the Master Portfolio can realize on an investment or may cause the Master Portfolio to hold an investment that it might otherwise sell. The Master Portfolio’s investments in these instruments are discussed in detail in the Notes to Financial Statements.

2 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013

Schedule of Investments December 31, 2013 (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Australia — 8.4%
Amcor Ltd.		180,728	$	1,707,118
Ansell Ltd.		29,523		544,884
Aristocrat Leisure Ltd.		161,495		678,533
Aurora Oil & Gas Ltd. (a)		3,489		9,440
Australia & New Zealand Banking Group Ltd.		97,559		2,816,355
BHP Billiton Ltd.		58,238		1,985,503
BlueScope Steel Ltd. (a)		219,841		1,147,005
Brambles Ltd.		13,705		112,284
Caltex Australia Ltd.		45,613		819,709
carsales.com Ltd.		92,761		846,209
Challenger Ltd.		2,716		15,084
Commonwealth Bank of Australia		106,836		7,444,020
Crown Resorts Ltd.		13,445		202,855
CSL Ltd.		45,710		2,817,878
CSR Ltd.		5,891		13,975
DuluxGroup Ltd.		3,013		14,448
Fortescue Metals Group Ltd.		285,775		1,492,839
Goodman Group		52,654		223,082
Iluka Resources Ltd.		16,630		128,867
Incitec Pivot Ltd.		56,472		135,472
IOOF Holdings Ltd.		1,123		9,007
Mirvac Group		159,986		240,573
National Australia Bank Ltd.		19,107		596,369
Newcrest Mining Ltd.		70,187		492,873
Origin Energy Ltd.		9,251		116,587
Orora Ltd. (a)		121,513		125,859
PanAust Ltd.		50,136		81,335
Perpetual Ltd.		241		10,421
Platinum Asset Management, Ltd.		19,045		117,577
Primary Health Care Ltd.		40,612		179,926
Qantas Airways Ltd. (a)		571,132		560,231
QBE Insurance Group Ltd.		41,477		427,865
Recall Holdings, Ltd. (a)		1,464		5,306
Regis Resources, Ltd.		32,344		84,879
Rio Tinto Ltd.		11,180		684,296
Santos Ltd.		71,382		935,524
Seek Ltd.		621		7,466
Seven West Media, Ltd.		5,813		12,249
Sonic Healthcare Ltd.		11,831		175,578
Stockland		27,916		90,256
Super Retail Group, Ltd.		5,467		64,996
Telstra Corp. Ltd.		1,124,101		5,276,085
Westfield Group		355,913		3,212,940
Westpac Banking Corp.		194,607		5,641,398
Woolworths Ltd.		129,755		3,929,156
WorleyParsons Ltd.		4,408		65,571
				46,299,883
Austria — 0.8%
OMV AG		23,372		1,118,597

Common Stocks	Shares		Value
Austria (concluded)
Voestalpine AG		62,616	$	3,008,967
				4,127,564
Belgium — 3.0%
Ageas		118,394		5,048,735
Anheuser-Busch InBev NV		83,920		8,923,731
bpost SA		46,224		905,402
Delhaize Group		25,976		1,545,363
Nyrstar NV (a)		24,637		78,408
				16,501,639
Bermuda — 0.0%
Catlin Group, Ltd.		21,019		202,344
China — 2.1%
Air China Ltd., Class H		498,000		372,907
Anta Sports Products Ltd.		5,000		6,204
Anton Oilfield Services Group		60,000		36,652
Bank of China Ltd., Class H		885,000		408,537
Bank of Communications Co. Ltd., Class H		217,000		153,562
Biostime International Holdings, Ltd.		17,000		151,826
China Citic Bank Corp. Ltd., Class H		178,000		96,923
China Coal Energy Co. Ltd., Class H		515,000		290,387
China Communications Construction Co. Ltd., Class H		773,000		625,497
China Construction Bank Corp., Class H		2,744,000		2,077,513
China Minsheng Banking Corp. Ltd., Class H		750,000		835,908
China National Building Material Co. Ltd., Class H		120,000		129,517
China Oilfield Services Ltd., Class H		16,000		49,839
China Pacific Insurance Group Co. Ltd., Class H		62,600		246,260
China Railway Construction Corp. Ltd., Class H		325,500		324,948
China Railway Group Ltd., Class H		556,000		287,878
China Shenhua Energy Co. Ltd., Class H		10,000		31,648
China Telecom Corp. Ltd., Class H		320,000		161,669
China Unicom Hong Kong Ltd.		72,000		108,222
Chongqing Rural Commercial Bank, Class H		16,000		7,785
CNOOC Ltd.		199,000		370,096
Country Garden Holdings Co. Ltd.		161,000		97,598
CSR Corp. Ltd., Class H		49,000		40,299
Dongfeng Motor Group Co. Ltd., Class H		366,000		574,795
FIH Mobile, Ltd. (a)		236,000		127,215

See Notes to Financial Statements.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013 3

Schedule of Investments (continued)   (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
China (concluded)
Great Wall Motor Co. Ltd., Class H		100,000	$	554,040
Guangzhou Baiyunshan Pharmaceutical Holdings Co., Ltd. (a)		12,000		42,106
Hilong Holding, Ltd.		11,000		9,448
Huaneng Power International, Inc., Class H		18,000		16,319
Industrial & Commercial Bank of China Ltd., Class H		809,000		548,591
Jiangxi Copper Co. Ltd., Class H		85,000		153,866
Kingsoft Corp., Ltd.		7,000		20,239
Lenovo Group Ltd.		50,000		60,951
Longfor Properties Co. Ltd.		5,500		7,707
People’s Insurance Co. Group of China Ltd., Class H		156,000		75,684
PetroChina Co. Ltd., Class H		44,000		48,292
Shimao Property Holdings Ltd.		23,000		53,020
Sinopec Shanghai Petrochemical Co. Ltd., Class H		184,000		53,077
Sunac China Holdings, Ltd.		106,000		63,711
Tencent Holdings Ltd.		27,100		1,735,143
Want Want China Holdings Ltd.		279,000		403,809
Zhuzhou CSR Times Electric Co. Ltd., Class H		4,000		14,428
ZTE Corp., Class H (a)		84,000		167,384
				11,641,500
Cyprus — 0.0%
Prosafe SE		19,664		152,128
Denmark — 0.1%
A.P. Moeller-Maersk A/S, Class B		39		422,056
Vestas Wind Systems A/S (a)		1,128		33,402
				455,458
Finland — 2.4%
Kesko OYJ, Class B		1,426		52,605
Konecranes OYJ		2,985		105,905
Neste Oil OYJ		260,864		5,158,964
Nokia OYJ (a)		151,484		1,223,991
Pohjola Bank PLC, Class A		31,969		641,000
Sampo OYJ, Class A		115,125		5,658,694
Stora Enso OYJ, -R Shares		13,444		135,193
Stora Enso OYJ, Class R		5,511		55,379
UPM-Kymmene OYJ		2,242		38,025
Wartsila OYJ		7,811		385,090
				13,454,846
France — 5.9%
Air Liquide SA		2,140		302,882
AtoS		5,684		514,991
AXA SA		72,103		2,007,895
BNP Paribas SA		32,168		2,509,337

Common Stocks	Shares		Value
France (concluded)
Bouygues SA		5,545	$	209,689
Cap Gemini SA		23,664		1,601,707
Cie Generale des Etablissements Michelin		32,280		3,434,612
CNP Assurances		33,359		684,064
Credit Agricole SA (a)		145,582		1,866,204
Dassault Systemes SA		1,174		145,728
Eiffage SA		4,952		285,410
Euler Hermes SA		430		59,214
Eurofins Scientific SE		270		73,078
Fonciere Des Regions		1,996		172,304
GDF Suez		40,169		944,751
Havas SA		18,938		156,093
ICADE		1,594		148,387
Iliad SA		9,731		1,993,790
Ingenico		11,904		955,580
JCDecaux SA		2,635		108,781
L’Oreal SA		3,124		548,615
Lagardere S.C.A.		46,433		1,726,081
Metropole Television SA		78,197		1,790,861
Natixis		128,523		756,130
Nexans SA		1,541		78,206
Orange SA		36,444		452,457
Plastic Omnium SA		10,161		284,258
Rexel SA		8,757		229,815
Safran SA		29,555		2,054,912
Sanofi		398		42,504
Schneider Electric SA		3,621		315,901
Societe Generale SA		9,965		579,469
Societe Television Francaise 1		4,815		92,793
Technicolor SA, Registered Shares (a)		29,953		158,693
Teleperformance		2,542		155,032
Thales SA		29,466		1,898,892
Total SA		25,330		1,554,741
Valeo SA		5,224		578,931
Vallourec SA		3,432		187,237
Vinci SA		1,063		69,872
Wendel SA		2,341		341,229
Zodiac Aerospace		1,392		246,676
				32,317,802
Germany — 5.4%
Aareal Bank AG (a)		3,018		119,749
Adidas AG		10,317		1,315,601
Aurubis AG		6,803		415,133
BASF SE		13,238		1,412,943
Bayer AG, Registered Shares		10,917		1,532,861
Bayerische Motoren Werke AG		16,179		1,899,943
Continental AG		26,240		5,764,647
Daimler AG, Registered Shares		30,630		2,658,207
Deutsche Lufthansa AG, Registered Shares (a)		5,279		111,897

See Notes to Financial Statements.

4 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Germany (concluded)
Deutsche Post AG, Registered Shares		47,308	$	1,727,923
Deutsche Telekom AG, Registered Shares		114,957		1,980,729
Deutz AG (a)		54,888		491,247
Dialog Semiconductor PLC (a)		4,469		96,364
DMG MORI SEIKI AG		2,770		88,395
Drillisch AG		1,440		41,787
Duerr AG		7,429		663,854
Freenet AG (a)		65,623		1,971,707
Hannover Rueck SE		3,777		324,712
Henkel AG & Co. KGaA, Preference Shares		7,610		884,544
Kloeckner & Co. SE (a)		9,694		133,005
KUKA AG		3,878		182,003
LEG Immobilien AG (a)		3,657		216,298
Merck KGaA		10,318		1,851,336
Morphosys AG (a)		166		12,798
ProSiebenSat.1 Media AG, Registered Shares		31,233		1,550,902
Rheinmetall AG		5,461		336,914
Stada Arzneimittel AG		12,532		620,458
Suedzucker AG		4,807		129,861
Symrise AG		10,365		478,219
TUI AG (a)		36,872		608,300
United Internet AG, Registered Shares		8,599		366,576
Volkswagen AG		172		46,701
				30,035,614
Hong Kong — 2.4%
AIA Group Ltd.		32,200		162,078
Belle International Holdings Ltd.		8,000		9,294
BOC Hong Kong Holdings Ltd.		4,000		12,847
China Agri-Industries Holdings Ltd.		221,000		110,456
China Lumena New Materials Corp.		34,000		6,683
China Resources Land Ltd.		80,000		199,036
China Resources Power Holdings Co., Ltd.		6,000		14,241
Galaxy Entertainment Group Ltd. (a)		102,000		918,332
Geely Automobile Holdings Ltd.		3,915,000		1,900,891
Guangdong Investment Ltd.		46,000		45,002
Hanergy Solar Group, Ltd. (a)		88,000		8,965
Hongkong Land Holdings, Ltd.		508,000		3,001,567
Jardine Strategic Holdings, Ltd.		2,500		80,109
MGM China Holdings Ltd.		11,600		49,646
PCCW Ltd.		80,000		35,799
Poly Property Group Co., Ltd.		86,000		46,089
Power Assets Holdings Ltd.		237,000		1,886,629
Sands China Ltd.		124,800		1,022,777
Sino Biopharmaceutical Ltd.		428,000		340,229
Common Stocks	Shares		Value
Hong Kong (concluded)
SJM Holdings Ltd.		298,000	$	1,001,717
Sun Hung Kai Properties Ltd.		55,000		699,015
Swire Properties Ltd.		18,800		47,608
Techtronic Industries Co.		18,500		52,694
Truly International Holdings		654,000		352,208
Wheelock & Co., Ltd.		134,000		617,321
Xinyi Glass Holdings, Ltd.		392,000		346,765
Yuexiu Property Co., Ltd.		494,000		122,071
				13,090,069
Ireland — 0.3%
Kentz Corp., Ltd.		1,841		19,271
Shire PLC		28,455		1,341,004
				1,360,275
Israel — 0.1%
Bank Hapoalim BM		1,202		6,735
Teva Pharmaceutical Industries Ltd.		7,274		291,043
				297,778
Italy — 2.6%
A2A SpA		72,653		85,030
Banca Monte dei Paschi di Siena SpA (a)		731,832		176,137
Banca Popolare dell’Emilia Romagna (a)		4,837		46,153
Banca Popolare di Milano Scarl (a)		1,866,209		1,150,041
Banco Popolare (a)		7,091		13,580
Brembo SpA		11,719		315,256
Fiat SpA (a)		220,613		1,805,701
Finmeccanica SpA (a)		876		6,649
Fondiaria-Sai SpA (a)		140,344		452,518
Gtech SpA		18,169		553,729
Intesa Sanpaolo SpA		2,041,133		5,020,574
Mediobanca SpA (a)		2,143		18,740
Mediolanum SpA		10,341		89,610
Parmalat SpA		121,958		415,364
Prysmian SpA		20,728		533,685
Salvatore Ferragamo SpA		4,617		175,627
Telecom Italia SpA, Non-Convertible Savings Shares		7,421		5,823
UniCredit SpA		422,588		3,117,282
Yoox SpA (a)		3,587		160,830
				14,142,329
Japan — 23.3%
Adastria Holdings Co., Ltd.		3,200		115,477
ADEKA Corp.		3,100		34,162
AEON Financial Service Co., Ltd.		300		8,045
Aiful Corp. (a)		149,700		627,108
Air Water, Inc.		3,000		40,659

See Notes to Financial Statements.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013 5

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Japan (continued)
Amada Co., Ltd.		5,000	$	44,157
Anritsu Corp.		42,000		462,829
Aozora Bank Ltd.		408,000		1,156,226
Asahi Group Holdings Ltd.		36,400		1,027,196
Astellas Pharma, Inc.		1,900		112,645
Autobacs Seven Co., Ltd.		500		7,788
Avex Group Holdings, Inc.		12,400		267,050
Calbee, Inc.		13,600		330,279
Canon, Inc.		87,300		2,785,603
Capcom Co., Ltd.		900		16,140
Central Japan Railway Co.		15,800		1,862,062
Century Tokyo Leasing Corp.		1,700		56,144
Chubu Electric Power Co., Inc.		14,400		186,161
The Chugoku Electric Power Co., Inc.		1,000		15,570
COLOPL, Inc. (a)		20,400		574,487
COMSYS Holdings Corp.		5,800		91,192
COOKPAD, Inc.		600		18,786
Cosmos Pharmaceutical Corp.		700		75,952
The Dai-ichi Life Insurance Co., Ltd.		33,100		553,863
Daicel Corp.		100,000		814,982
Daido Steel Co., Ltd.		12,000		59,719
Daifuku Co., Ltd.		7,000		89,602
Daikyo, Inc.		77,000		209,678
Dainippon Screen Manufacturing Co., Ltd.		16,000		90,668
Daito Trust Construction Co., Ltd.		5,200		486,137
Daiwa House Industry Co., Ltd.		78,000		1,511,265
Daiwa Securities Group, Inc.		57,000		570,886
Dena Co., Ltd.		64,600		1,361,796
Denso Corp.		41,200		2,176,541
Digital Garage, Inc.		11,600		301,974
Disco Corp.		100		6,637
DMG Mori Seiki Co., Ltd.		7,600		136,961
Dowa Holdings Co., Ltd.		12,000		117,408
Ebara Corp.		2,000		12,875
Eisai Co., Ltd.		6,600		255,797
Electric Power Development Co., Ltd.		1,300		37,904
Enplas Corp.		4,500		309,264
Exedy Corp.		1,200		35,153
F@N Communications, Inc.		1,300		38,681
FamilyMart Co., Ltd.		4,100		187,315
Fuji Heavy Industries Ltd.		25,100		721,348
Fuji Oil Co. Ltd/Osaka		700		10,424
FUJIFILM Holdings Corp.		14,900		422,937
Fujikura, Ltd.		159,000		746,364
Fujitsu General, Ltd.		25,000		267,013
Furukawa Electric Co. Ltd.		7,000		17,597
GLP J-REIT		18		17,581
GMO internet, Inc.		8,900		117,198
Common Stocks	Shares		Value
Japan (continued)
GungHo Online Entertainment, Inc. (a)		13,900	$	100,121
Hakuhodo DY Holdings, Inc.		6,000		46,516
Hankyu Hanshin Holdings, Inc.		69,000		372,839
Haseko Corp. (a)		43,400		330,663
Hikari Tsushin, Inc.		1,100		82,979
Hino Motors Ltd.		19,000		299,302
Hitachi Capital Corp.		3,700		107,926
Hitachi Kokusai Electric, Inc.		8,000		112,747
Hitachi Ltd.		184,000		1,395,116
Hitachi Zosen Corp.		6,000		45,979
Honda Motor Co., Ltd.		70,600		2,914,163
Horiba, Ltd.		1,000		34,170
Hoshizaki Electric Co., Ltd.		1,100		39,117
House Foods Group, Inc.		8,100		122,345
Ichigo Group Holdings Co., Ltd.		9,600		36,005
Inpex Corp.		23,700		303,980
IT Holdings Corp.		3,300		52,117
Ito En, Ltd.		9,000		188,328
ITOCHU Corp.		241,000		2,979,394
Izumi Co., Ltd.		9,500		297,657
J. Front Retailing Co., Ltd.		38,000		288,278
Japan Airlines Co., Ltd.		18,400		907,695
Japan Aviation Electronics Industry, Ltd.		7,000		90,024
Japan Exchange Group, Inc.		8,900		252,973
Japan Petroleum Exploration Co.		200		7,585
Japan Real Estate Investment Corp.		13		69,551
Japan Retail Fund Investment Corp.		68		138,359
The Japan Steel Works Ltd.		16,000		89,656
Japan Tobacco, Inc.		123,100		4,005,520
JFE Holdings, Inc.		3,500		83,405
K’s Holdings Corp.		2,600		75,135
Kajima Corp.		4,000		15,044
Kakaku.com, Inc.		25,600		449,700
Kaken Pharmaceutical Co., Ltd.		9,000		135,100
Kanamoto Co., Ltd.		2,000		50,914
Kaneka Corp.		2,000		13,132
The Kansai Electric Power Co., Inc. (a)		15,300		176,093
Kao Corp.		1,600		50,371
Kawasaki Kisen Kaisha Ltd.		50,000		126,640
Kenedix, Inc. (a)		89,000		460,619
Kewpie Corp.		4,200		58,332
Kikkoman Corp.		21,000		397,076
Kissei Pharmaceutical Co., Ltd.		3,200		78,814
Komatsu Ltd.		297,700		6,112,160
Konica Minolta Holdings, Inc.		5,000		49,966
Kubota Corp.		23,000		381,506
Kuraray Co., Ltd.		55,400		661,298
KYB Co., Ltd.		65,000		342,334

See Notes to Financial Statements.

6 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Japan (continued)
Kyocera Corp.		13,700	$	684,884
Kyowa Exeo Corp.		27,000		357,055
Kyushu Electric Power Co., Inc. (a)		5,100		65,136
Leopalace21 Corp. (a)		3,600		19,073
Lintec Corp.		27,200		504,282
M3, Inc.		35		87,653
Mabuchi Motor Co., Ltd.		900		53,556
Maeda Corp.		1,000		6,625
Marubeni Corp.		241,000		1,734,976
Maruichi Steel Tube Ltd.		6,200		156,608
Matsui Securities Co., Ltd.		5,800		74,494
Mazda Motor Corp. (a)		67,000		347,198
Miraca Holdings, Inc.		4,200		198,140
Mitsubishi Chemical Holdings Corp.		2,500		11,569
Mitsubishi Corp.		11,700		224,616
Mitsubishi Electric Corp.		35,000		440,106
Mitsubishi Gas Chemical Co., Inc.		32,000		235,896
Mitsubishi Heavy Industries Ltd.		105,000		650,325
Mitsubishi Materials Corp.		199,000		735,593
Mitsubishi Tanabe Pharma Corp.		13,400		186,890
Mitsubishi UFJ Financial Group, Inc.		1,031,800		6,850,527
Mitsui & Co., Ltd.		123,700		1,724,518
Mitsui Chemicals, Inc.		99,000		239,383
Mizuho Financial Group, Inc.		1,782,300		3,869,430
Mochida Pharmaceutical Co., Ltd.		700		41,613
Monex Group, Inc.		112,500		505,108
Mori Trust Sogo REIT, Inc.		12		95,576
MS&AD Insurance Group Holdings, Inc.		59,600		1,601,986
Murata Manufacturing Co., Ltd.		1,300		115,613
NEC Corp.		4,000		9,029
Nexon Co., Ltd.		102,000		942,482
Nihon M&A Center, Inc.		200		13,516
Nikkiso Co., Ltd.		7,000		88,262
Nippo Corp.		5,000		83,122
Nippon Kayaku Co., Ltd.		5,000		71,104
Nippon Meat Packers, Inc.		7,000		120,313
Nippon Paint Co., Ltd.		10,000		166,381
Nippon Paper Industries Co., Ltd.		8,200		152,298
Nippon Prologis REIT, Inc.		2		19,158
Nippon Steel & Sumitomo Metal		184,000		617,100
Nippon Telegraph & Telephone Corp.		114,600		6,172,402
Nippon Television Network Corp.		4,200		75,832
Nissan Chemical Industries, Ltd.		8,200		130,310
Nitto Denko Corp.		19,800		837,235
Nomura Holdings, Inc.		533,700		4,124,334
Nomura Real Estate Holdings, Inc.		52,500		1,182,976
North Pacific Bank, Ltd.		3,800		15,474
NTT DoCoMo, Inc.		30,300		498,928
NTT Urban Development Corp.		3,400		39,192
Common Stocks	Shares		Value
Japan (continued)
Nuflare Technology, Inc.		1,500	$	187,439
Obayashi Corp.		20,000		114,075
Obic Co., Ltd.		33,600		992,800
Okasan Securities Group, Inc.		13,000		132,861
Orient Corp. (a)		18,100		42,509
Oriental Land Co., Ltd.		9,500		1,370,033
ORIX Corp.		46,000		808,306
OSG Corp.		2,900		49,246
Otsuka Holdings Co., Ltd.		100,800		2,910,490
Pacific Metals Co., Ltd.		10,000		36,537
Pigeon Corp.		13,300		645,044
Renesas Electronics Corp. (a)		8,800		51,921
Resona Holdings, Inc.		340,800		1,738,920
Resorttrust, Inc.		2,500		45,581
Ricoh Co., Ltd.		217,000		2,307,754
Rohto Pharmaceutical Co., Ltd.		12,000		183,108
Sankyo Co., Ltd.		4,500		207,545
Sanrio Co., Ltd.		12,700		534,762
Santen Pharmaceutical Co., Ltd.		7,200		335,464
Sanwa Holdings Corp.		1,000		6,784
Sapporo Holdings, Ltd.		27,000		113,561
Sawai Pharmaceutical Co., Ltd.		11,300		729,641
SBI Holdings, Inc.		19,000		288,503
Sekisui House Ltd.		148,400		2,076,590
Senshu Ikeda Holdings, Inc.		35,900		167,272
Seven & I Holdings Co., Ltd.		2,500		99,541
Shikoku Electric Power Co., Inc. (a)		1,100		16,496
Shin-Etsu Chemical Co., Ltd.		7,200		421,123
Shinko Electric Industries Co., Ltd.		28,800		239,669
Shionogi & Co., Ltd.		19,500		423,339
SHO-BOND Holdings Co., Ltd.		700		32,158
Showa Shell Sekiyu KK		53,700		545,854
Softbank Corp.		4,800		421,204
Sony Corp.		276,700		4,769,838
Start Today Co., Ltd.		10,700		266,061
Sumitomo Corp.		17,200		216,172
Sumitomo Electric Industries Ltd.		5,300		88,595
Sumitomo Metal Mining Co., Ltd.		1,000		13,103
Sumitomo Mitsui Construction Co., Ltd. (a)		580,900		708,676
Sumitomo Mitsui Trust Holdings, Inc.		43,000		227,522
Sumitomo Osaka Cement Co. Ltd.		19,000		73,042
Sumitomo Rubber Industries Ltd.		5,500		78,291
Sundrug Co. Ltd.		5,100		227,808
Tadano, Ltd.		88,000		1,182,226
Taiheiyo Cement Corp.		122,000		469,181
Taisei Corp.		84,000		382,276
Taiyo Nippon Sanso Corp.		7,000		49,844
Taiyo Yuden Co., Ltd.		8,200		107,169
Takeda Pharmaceutical Co., Ltd.		28,500		1,307,154
THK Co., Ltd.		1,500		37,463
Toho Co., Ltd.		3,000		65,999

See Notes to Financial Statements.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013 7

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Japan (concluded)
Tohoku Electric Power Co., Inc. (a)		4,600	$	51,820
Tokai Rika Co., Ltd.		16,300		324,545
Tokai Tokyo Financial Holdings, Inc.		15,000		145,116
Tokio Marine Holdings, Inc.		47,900		1,603,197
Tokuyama Corp.		4,000		15,207
Tokyo Dome Corp.		1,000		6,633
The Tokyo Electric Power Co., Inc. (a)		58,900		290,205
Tokyo Electron Ltd.		100		5,510
Tokyo Gas Co., Ltd.		19,000		93,645
Tokyo Ohka Kogyo Co., Ltd.		2,000		42,827
Tokyo Seimitsu Co., Ltd.		19,400		408,925
Tokyotokeiba Co., Ltd.		19,000		77,020
Tokyu Corp.		56,000		362,830
Topcon Corp.		4,100		62,247
Toshiba Corp.		137,000		576,744
Toshiba Plant Systems & Services Corp.		9,000		134,324
Toshiba TEC Corp.		7,000		48,566
Toyota Industries Corp.		3,400		153,695
Toyota Motor Corp.		159,500		9,725,523
TS Tech Co., Ltd.		8,800		297,008
Tsuruha Holdings, Inc.		100		9,182
TV Asahi Corp.		500		11,091
United Arrows, Ltd.		2,400		89,808
UNY Group Holdings Co., Ltd.		15,700		96,312
Yahoo! Japan Corp.		109,900		612,846
Yakult Honsha Co., Ltd.		2,300		116,215
Yamazaki Baking Co., Ltd.		7,000		71,807
Yaskawa Electric Corp.		17,000		269,375
Zeon Corp.		62,000		581,059
				129,037,739
Luxembourg — 0.0%
L’Occitane International SA		27,000		57,517
Mauritius — 0.0%
Essar Energy PLC (a)		77,025		92,648
Netherlands — 5.0%
Aegon NV		128,874		1,221,277
ASML Holding NV		17,163		1,607,515
CNH Industrial NV (a)		37,978		432,861
Eurocommercial Properties NV		1,382		58,619
Heineken Holding NV		4,059		256,934
ING Groep NV CVA (a)		550,463		7,689,156
Koninklijke Ahold NV		271,565		4,880,331
Koninklijke BAM Groep NV		12,294		64,104
Nutreco NV		57,087		2,838,616
Randstad Holding NV		8,111		526,348
Reed Elsevier NV		28,102		597,273
Royal Dutch Shell PLC, A Shares		152,968		5,461,377
Common Stocks	Shares		Value
Netherlands (concluded)
SBM Offshore NV (a)		110,867	$	2,258,860
				27,893,271
Norway — 4.6%
DnB NOR ASA		109,352		1,962,665
Fred Olsen Energy ASA		41,456		1,691,634
Orkla ASA		167,534		1,309,509
Petroleum Geo-Services ASA		251,602		2,972,072
REC Silicon ASA (a)		511,669		207,495
Statoil ASA		273,791		6,657,639
Storebrand ASA (a)		189,591		1,188,470
Subsea 7 SA		10,190		195,351
Telenor ASA		251,911		6,019,056
TGS Nopec Geophysical Co. ASA		92,195		2,449,775
Yara International ASA		13,883		598,749
				25,252,415
Portugal — 0.0%
Banco Espirito Santo SA, Registered Shares (a)		137,340		196,139
Singapore — 0.3%
CapitaMall Trust		174,000		263,319
ComfortDelGro Corp. Ltd.		245,000		391,753
Keppel Corp. Ltd.		6,000		53,296
SembCorp Industries Ltd.		84,000		366,465
Singapore Technologies Engineering Ltd.		132,000		415,444
Yangzijiang Shipbuilding Holdings Ltd.		273,000		256,939
				1,747,216
Spain — 4.0%
Abertis Infraestructuras SA		20,315		451,863
ACS Actividades de Construccion y Servicios SA		65,851		2,269,977
Amadeus IT Holding SA, Class A		76,275		3,267,262
Banco Bilbao Vizcaya Argentaria SA		218,709		2,705,546
Banco Popular Espanol SA (a)		2,148		12,974
Bankinter SA		172,437		1,184,926
CaixaBank SA		48,821		254,298
Distribuidora Internacional de Alimentacion SA		16,472		147,489
Duro Felguera SA		2,966		19,994
Ebro Foods SA		13,577		318,288
EDP Renovaveis SA		10,983		58,338
Ferrovial SA		57,421		1,112,348
Gamesa Corp. Tecnologica SA (a)		163,730		1,709,502
Gas Natural SDG SA		1,647		42,393
Grifols SA		4,713		225,533
Iberdrola SA		338,470		2,160,032
Inditex SA		11,024		1,820,184

See Notes to Financial Statements.

8 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013

Schedule of Investments (continued)   (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Spain (concluded)
Mapfre SA		152,719	$	655,070
Mediaset Espana Comunicacion SA (a)		7,588		87,668
Repsol SA		120,947		3,051,868
Sacyr SA (a)		3,538		18,381
Telefonica SA		46,507		760,425
				22,334,359
Sweden — 3.6%
Holmen AB, B Shares		2,108		76,682
Intrum Justitia AB		43,521		1,218,308
JM AB		11,841		334,548
Meda AB, A Shares		6,481		82,306
Nordea Bank AB		209,651		2,826,682
Skandinaviska Enskilda Banken AB, Class A		482,566		6,375,310
Skanska AB, Class B		37,210		761,247
Svenska Cellulosa AB, B Shares		449		13,833
Svenska Handelsbanken AB, Class A		1,412		69,424
Swedish Match AB		33,937		1,091,111
Tele2 AB, Class B		27,205		308,986
Telefonaktiebolaget LM Ericsson, Class B		362,655		4,427,832
TeliaSonera AB		96,890		808,102
Trelleborg AB, B Shares		85,100		1,694,709
				20,089,080
Switzerland — 6.4%
Actelion Ltd., Registered Shares (a)		7,631		647,267
Baloise Holding AG, Registered Shares		11,693		1,491,022
Cie Financiere Richemont SA, Registered Shares		6,407		640,043
Flughafen Zuerich AG, Registered Shares		584		341,479
GAM Holding AG (a)		10,121		197,060
Georg Fischer AG, Registered Shares (a)		971		683,616
Glencore Xstrata PLC (a)		116,708		607,180
Lonza Group AG, Registered Shares (a)		10,097		959,549
Nestle SA, Registered Shares		56,751		4,159,282
Novartis AG, Registered Shares		62,170		4,982,882
OC Oerlikon Corp. AG, Registered Shares (a)		139,673		2,092,373
Roche Holding AG		47,406		13,279,661
Schmolz + Bickenbach AG, Registered Shares (a)		26,316		32,660
Swiss Life Holding AG, Registered Shares (a)		795		165,280
Swiss Re AG (a)		26,137		2,409,528
Common Stocks	Shares		Value
Switzerland (concluded)
UBS AG, Registered Shares (a)		108,249	$	2,072,680
Wolseley PLC		11,164		634,709
				35,396,271
United Kingdom — 16.3%
Anglo American PLC		38,086		833,524
ASOS PLC (a)		1,119		114,013
AstraZeneca PLC		33,097		1,963,544
Babcock International Group PLC		127,304		2,860,524
Barclays PLC		606,773		2,743,756
Barratt Developments PLC		64,107		371,096
BHP Billiton PLC		1,491		46,266
Blinkx PLC (a)		43,687		148,592
Bodycote PLC		4,664		51,746
BP PLC		83,961		680,429
British Sky Broadcasting Group PLC		298,861		4,176,946
Britvic PLC		165,123		1,895,725
BT Group PLC		606,873		3,826,904
Burberry Group PLC		87,451		2,203,354
The Capita Group PLC		51,634		888,786
Centrica PLC		1,100,246		6,344,703
Close Brothers Group PLC		25,284		575,747
Cobham PLC		52,420		238,623
Daily Mail & General Trust PLC, Non-Voting A Shares		6,178		98,412
Debenhams PLC		276,499		334,948
Derwent London PLC		4,337		179,269
Dixons Retail PLC (a)		930,276		747,463
Domino’s Pizza Group PLC		4,520		38,453
Drax Group PLC		33,200		440,513
easyJet PLC		117,002		2,982,030
GlaxoSmithKline PLC		52,797		1,410,602
Great Portland Estates PLC		23,358		232,078
Greene King PLC		6,757		98,706
Halma PLC		18,135		181,443
Hammerson PLC		40,279		335,330
Howden Joinery Group PLC		184,303		1,054,533
HSBC Holdings PLC		265,814		2,917,082
IG Group Holdings PLC		17,555		179,347
IMI PLC		16,661		421,922
Inchcape PLC		10,805		110,339
Inmarsat PLC		8,377		105,033
InterContinental Hotels Group PLC		4,346		144,967
Intermediate Capital Group PLC		35,685		248,815
ITV PLC		1,054,872		3,394,727
J. Sainsbury PLC		446,962		2,705,115
Jazztel PLC (a)		114,646		1,228,444
Kingfisher PLC		81,935		523,076
Legal & General Group PLC		253,780		938,087
Lloyds Banking Group PLC (a)		4,344,656		5,700,998
Lonmin PLC (a)		7,359		37,727
Man Group PLC		92,751		131,028

See Notes to Financial Statements.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013 9

Schedule of Investments (continued)   (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
United Kingdom (continued)
Mondi PLC		3,555	$	61,709
Next PLC		3,004		271,536
Pace PLC		9,650		50,954
Paragon Group of Cos. PLC		120,022		738,340
Provident Financial PLC		25,792		695,022
Qinetiq Group PLC		108,853		391,546
Reckitt Benckiser Group PLC		5,714		453,897
Rightmove PLC		11,203		508,779
Rio Tinto PLC		15,109		853,804
Royal Dutch Shell PLC, Class A		59,031		2,115,568
Royal Dutch Shell PLC, Class B		101,603		3,832,482
SABMiller PLC		2,335		120,194
Schroders PLC		17,519		755,582
Smith & Nephew PLC		40,825		583,090
Spirax-Sarco Engineering PLC		9,101		451,690
Spirent Communications PLC		33,253		57,340
SSE PLC		213,962		4,862,114
St. James’s Place PLC		7,873		95,160
Standard Life PLC		208,558		1,245,487
Tate & Lyle PLC		108,681		1,457,889
Taylor Wimpey PLC		148,034		274,158
Telecity Group PLC		47,402		570,235
Common Stocks	Shares		Value
United Kingdom (concluded)
Thomas Cook Group PLC (a)		263,371	$	731,009
Tui Travel PLC		163,667		1,121,841
UBM PLC		17,788		193,703
Vedanta Resources PLC		69,073		1,072,245
Vodafone Group PLC		1,415,956		5,574,888
William Hill PLC		544,197		3,627,796
WM Morrison Supermarkets PLC		56,074		242,734
				89,895,557
Total Common Stocks (Cost — $530,373,886) — 97.0%				536,071,441
Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14% (b)(c)		6,130,217		6,130,217
Total Short-Term Securities (Cost — $6,130,217) — 1.1%				6,130,217
Total Investments (Cost — $536,504,103*) — 98.1%				542,201,658
Other Assets Less Liabilities — 1.9%				10,616,233
Net Assets — 100.0%			$	552,817,891

Notes to Schedule of Investments

* As of December 31, 2013, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	537,340,403
Gross unrealized appreciation	$	10,420,971
Gross unrealized depreciation		(5,559,716	)
Net unrealized appreciation	$	4,861,255

(a) Non-income producing security.

(b) Investments in issuers considered to be an affiliate of the Master Portfolio during the year ended December 31, 2013, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Purchased			Shares Held at December 31, 2013		Income
BlackRock Cash Funds: Institutional, SL Agency Shares		6,130,217	1		6,130,217	$	1,508

¹ Represents net shares purchased.

(c) Represents the current yield as of report date.

See Notes to Financial Statements.

10 INTERNATIOANAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013

Schedule of Investments (continued)

Portfolio Abbreviations

To simplify the listings of portfolio holdings in the Schedule of Investments, the names and descriptions of many of the securities have been abbreviated according to the following list:	AUD	Australian Dollar
	CHF	Swiss Franc
	DKK	Danish Krone
	EUR	Euro
	FTSE	Financial Times Stock Exchange
	GBP	British Pound
	HKD	Hong Kong Dollar
	ILS	Israeli New Shekel
	JPY	Japanese Yen
	NOK	Norwegian Krone
	REIT	Real Estate Investment Trust
	SEK	Swedish Krona
	SGD	Singapore Dollar
	USD	US Dollar

Ÿ Financial futures contracts outstanding as of December 31, 2013 were as follows:

Contracts Purchased		Issue	Exchange	Expiration	Notional Value			Unrealized Appreciation
	46	Nikkei 225 Index	Chicago Mercantile	March 2014		USD	3,568,702	$	126,484
	11	SPI 200 Index	Australian Securities Exchange	March 2014		USD	1,305,822		32,833
	109	Euro Stoxx 50 Index	Eurex Mercantile	March 2014		USD	4,660,484		158,672
	30	FTSE 100 Index	Euronext Liffe	March 2014		USD	3,327,217		88,655
	15	Swiss Market Index	Eurex	March 2014		USD	1,364,049		39,819
	Total							$	446,463

Ÿ Foreign currency exchange contracts outstanding as of December 31, 2013 were as follows:

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
AUD	17,050,878	USD	15,253,460	Citibank N.A.		1/06/14	$	(28,727	)
CHF	10,093,751	USD	11,349,582	BNP Paribas S.A.		1/06/14		(34,352	)
DKK	816,095	USD	150,741	BNP Paribas S.A.		1/06/14		(246	)
EUR	39,077,019	USD	53,847,195	Citibank N.A.		1/06/14		(88,964	)
GBP	18,169,276	USD	30,092,336	BNP Paribas S.A.		1/06/14		(4,926	)
HKD	55,575,880	USD	7,167,687	BNP Paribas S.A.		1/06/14		(582	)
ILS	343,089	USD	98,838	BNP Paribas S.A.		1/06/14		(22	)
JPY	4,431,594,469	USD	42,163,458	Westpac Banking Corp.		1/06/14		(82,037	)
NOK	51,101,184	USD	8,422,168	BNP Paribas S.A.		1/06/14		3,002
SGD	720,911	USD	571,007	BNP Paribas S.A.		1/06/14		260
SEK	42,584,037	USD	6,629,913	BNP Paribas S.A.		1/07/14		(9,106	)
Total							$	(245,700	)

See Notes to Financial Statements.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013 11

Schedule of Investments (continued)

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

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access

Ÿ 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)

Ÿ Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Master Portfolio’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.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure 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 investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy as of December 31, 2013:

	Level 1		Level 2		Level 3	Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Australia	$	676,049	$	45,623,834	—	$	46,299,883
Austria		1,118,597		3,008,967	—		4,127,564
Belgium		—		16,501,639	—		16,501,639
Bermuda		—		202,344	—		202,344
China		—		11,641,500	—		11,641,500
Cyprus		—		152,128	—		152,128
Denmark		—		455,458	—		455,458
Finland		—		13,454,846	—		13,454,846
France		204,942		32,112,860	—		32,317,802
Germany		—		30,035,614	—		30,035,614
Hong Kong		35,799		13,054,270	—		13,090,069
Ireland		—		1,360,275	—		1,360,275
Israel		—		297,778	—		297,778
Italy		—		14,142,329	—		14,142,329
Japan		—		129,037,739	—		129,037,739
Luxembourg		—		57,517	—		57,517
Mauritius		—		92,648	—		92,648
Netherlands		432,861		27,460,410	—		27,893,271
Norway		—		25,252,415	—		25,252,415
Portugal		—		196,139	—		196,139

See Notes to Financial Statements.

12 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013

Schedule of Investments (concluded)

	Level 1			Level 2		Level 3	Total
Assets (concluded):
Singapore		—			1,747,216	—		1,747,216
Spain		19,994			22,314,365	—		22,334,359
Sweden		—			20,089,080	—		20,089,080
Switzerland		—			35,396,271	—		35,396,271
United Kingdom		4,228,692			85,666,865	—		89,895,557
Short-Term Securities		6,130,217			—	—		6,130,217
Total	$	12,847,151		$	529,354,507	—	$	542,201,658
	Level 1			Level 2		Level 3	Total
Derivative Financial Instruments1
Assets:
Equity contracts	$	446,463			—	—	$	446,463
Foreign currency exchange contracts		3,262			—	—		3,262
Liabilities:
Foreign currency exchange contracts		(248,962	)		—	—		(248,962	)
Total	$	200,763			—	—	$	200,763
1   Derivative financial instruments are financial futures contracts and foreign currency exchange contracts. Financial futures contracts and foreign currency exchange contracts are valued at the unrealized appreciation/depreciation on the instrument. The carrying amount for certain of the Master Portfolio’s assets approximates fair value for financial statement purposes. As of December 31, 2013, such assets are categorized within the disclosure hierarchy as follows:
	Level 1			Level 2		Level 3	Total
Assets:
Foreign currency at value	$	9,347,654			—	—	$	9,347,654
Cash pledged for financial futures contracts		850,000			—	—		850,000
Total	$	10,197,654			—	—	$	10,197,654

See Notes to Financial Statements.
	INTERNATIONAL TILTS MASTER PORTFOLIO	DECEMBER 31, 2013	13

Statement of Assets and Liabilities

December 31, 2013
Assets
Investments at value — unaffiliated (cost — $530,373,886)	$	536,071,441
Investments at value — affiliated (cost — $6,130,217)		6,130,217
Foreign currency at value (cost — $9,296,306)		9,347,654
Cash pledged for financial futures contracts		850,000
Contributions receivable from investors		176,739,502
Investments sold receivable		55,028
Dividends receivable		256,639
Unrealized appreciation on foreign currency exchange contracts		3,262
Securities lending income receivable — affiliated		753
Variation margin receivable on financial futures contracts		10,897
Total assets		729,465,393
Liabilities
Investments purchased payable		176,249,007
Trustees’ fees payable		1,162
Investment advisory fees payable		99,848
Administration fees payable		14,768
Professional fees payable		33,755
Unrealized depreciation on foreign currency exchange contracts		248,962
Total liabilities		176,647,502
Net Assets	$	552,817,891
Net Assets Consist of
Investors’ capital	$	546,520,270
Net unrealized appreciation/depreciation		6,297,621
Net Assets	$	552,817,891

See Notes to Financial Statements.
14	INTERNATIONAL TILTS MASTER PORTFOLIO	DECEMBER 31, 2013

Statement of Operations

Period October 31, 20131 to December 31, 2013
Investment Income
Dividends	$	782,488
Securities lending — affiliated — net		753
Income — affiliated		755
Foreign taxes withheld		(67,299	)
Total income		716,697
Expenses
Investment advisory		176,961
Administration		22,120
Professional		33,755
Trustees		1,162
Total expenses		233,998
Less fees waived by Manager		(35,468	)
Total expenses after fees waived		198,530
Net investment income		518,167
Realized and Unrealized Gain (Loss)
Net realized loss from:
Investments		(563,882	)
Financial futures contracts		(157,836	)
Foreign currency transactions		(30,430	)
		(752,148	)
Net change in unrealized appreciation/depreciation on:
Investments		5,697,555
Financial futures contracts		446,463
Foreign currency translations		153,603
		6,297,621
Total realized and unrealized gain		5,545,473
Net Increase in Net Assets Resulting from Operations	$	6,063,640
1 Commencement of operations.

See Notes to Financial Statements.
	INTERNATIONAL TILTS MASTER PORTFOLIO	DECEMBER 31, 2013	15

Statement of Changes in Net Assets

	Period October 31, 20131 to December 31,
Increase (Decrease) in Net Assets:	2013
Operations
Net investment income	$	518,167
Net realized loss		(752,148	)
Net change in unrealized appreciation/depreciation		6,297,621
Net increase in net assets resulting from operations		6,063,640
Capital Transactions
Proceeds from contributions		903,389,676
Value of withdrawals		(356,635,425	)
Net increase in net assets derived from capital transactions		546,754,251
Net Assets
Total increase in net assets		552,817,891
Beginning of period		—
End of period	$	552,817,891
1 Commencement of operations.

See Notes to Financial Statements.
16	INTERNATIONAL TILTS MASTER PORTFOLIO	SEPTEMBER 30, 2012

Financial Highlights

	Period October 31, 20131 to December  31, 2013
Total Investment Return
Total investment return		1.60%	2
Ratios to Average Net Assets
Total expenses		0.53%	3
Total expenses after fees waived		0.45%	3
Net investment income		1.17%	3
Supplemental Data
Net assets applicable, end of period (000)	$	552,818
Portfolio turnover		15%

¹  Commencement of operations.

²  Aggregate total investment return.

³  Annualized.

See Notes to Financial Statements.
	INTERNATIONAL TILTS MASTER PORTFOLIO	SEPTEMBER 30, 2012	17

Notes to Financial Statements

1. Organization:

International Tilts Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust.

2. Significant Accounting Policies:

The Master Portfolio’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates. The following is a summary of significant accounting policies followed by the Master Portfolio:

Valuation: US GAAP defines fair value as the price the Master Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Master Portfolio determines the fair values of its financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (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 provide oversight of the pricing function for the Master Portfolio for all financial instruments.

Equity investments traded on a recognized securities exchange or the NASDAQ Stock Market (“NASDAQ”) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale 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 are valued at the last available bid price. Financial futures contracts traded on exchanges are valued at their last sale price. Investments in open-end registered investment companies are valued at net asset value each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

Securities and other assets and liabilities denominated in foreign currencies are translated into US dollars using exchange rates determined as of the close of business on the New York Stock Exchange (“NYSE”). Foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of business on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

In the event that 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 Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deem relevant consistent with the principles of fair value measurement which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. A market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and is adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. 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 Master Portfolio’s pricing vendors, a regular review 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 Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of business on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of business on the NYSE that may not be reflected in the computation of the Master Portfolio’s net assets. If events (for example, a company announcement, market volatility or a natural disaster) occur during such periods that are expected to affect the value of such instruments materially, those instruments may be Fair Value Assets and valued at their fair value, as determined in good faith by the Global Valuation Committee, or its delegate, using a pricing service and/or policies approved by the Board. Each business day, the Master Portfolio 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 at fair value as of the close of business on the NYSE, which follows the close of the local markets.

Foreign Currency: The Master Portfolio’s books and records are maintained in US dollars. Purchases and sales of investment securities are recorded at the rates of exchange prevailing on the respective date of such transactions. Generally, when the US dollar rises in value against a foreign currency, the Master Portfolio’s investments denominated in that currency will lose value because that currency is worth fewer US dollars; the opposite effect occurs if the US dollar falls in relative value.

The Master Portfolio does not isolate the portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in foreign currency exchange rates on investments are not segregated on 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 Master Portfolio reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components may be treated as ordinary income for federal income tax purposes.

Segregation and Collateralization: In cases where the Master Portfolio enters into certain investments (e.g., financial futures contracts and foreign currency exchange contracts), that would be “senior securities” for 1940 Act purposes, the Master Portfolio may segregate or

18 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013

Notes to Financial Statements (continued)

designate on its books and records cash or liquid securities having a market value at least equal to the amount of the Master Portfolio���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 Master Portfolio may 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 Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Master Portfolio 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 the accrual basis.

Income Taxes: The Master Portfolio is classified as a partnership for federal income tax purposes. As such, each investor in the Master Portfolio is treated as the owner of its proportionate share of net assets, income, expenses and realized and unrealized gains and losses of the Master Portfolio. Therefore, no federal income tax provision is required. It is intended that the Master Portfolio’s assets will be managed so an investor in the Master Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

The Master Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolio’s US federal tax returns remains open for the period ended December 31, 2013. The statutes of limitations on the Master Portfolio’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 Master Portfolio’s facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

Other: Expenses directly related to the Master Portfolio are charged to the Master Portfolio. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods.

3. Securities and Other Investments:

Securities Lending: The Master Portfolio may lend securities to approved borrowers, such as banks, brokers and other financial institutions. The borrower pledges cash, securities issued or guaranteed by the US government or irrevocable letters of credit issued by a bank as collateral. The initial collateral received by the Master Portfolio should have a value of at least 102% of the current value of the loaned securities for securities traded on US exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statement of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the Master Portfolio earns dividend or interest income on the securities loaned but does not receive interest income on the 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 securities on loan and the value of the related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value, and collateral on securities loaned at value, respectively. The cash collateral invested by the securities lending agent, BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Master Portfolio under Master Securities Lending Agreements (“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 Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender 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 a MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and the Master Portfolio can reinvest cash collateral or upon an event of default, resell or repledge the collateral.

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 this risk, the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities lent. The Master Portfolio also could suffer 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. During the period ended December 31, 2013, any securities on loan were collateralized by cash.

4. Derivative Financial Instruments:

The Master Portfolio engages in various portfolio investment strategies using derivative contracts both to increase the return of the Master Portfolio and/or to economically hedge, or protect, its exposure to certain risks such as equity risk and foreign currency exchange rate risk. These contracts may be transacted on an exchange or OTC.

Financial Futures Contracts: The Master Portfolio purchases and/or sells financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in interest rates (interest rate risk) and changes in the values of equity securities (equity risk). Financial futures contracts are agreements between the Master Portfolio and counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date.

Upon entering into a financial futures contract, the Master Portfolio is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Securities deposited as

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013 19

Notes to Financial Statements (continued)

initial margin are designated on the Schedule of Investments and cash deposited, if any, is recorded on the Statement of Assets and Liabilities as cash pledged for financial futures contracts. Pursuant to the contract, the Master Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin. Variation margin is recorded by the Master Portfolio as unrealized appreciation or depreciation, and if applicable, as a receivable or payable for variation margin in the Statement of Assets and Liabilities.

When the contract is closed, the Master Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest or foreign currency exchange rates and the underlying assets.

Foreign Currency Exchange Contracts: The Master Portfolio enters into foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to, or hedge exposure away from, foreign currencies (foreign currency exchange rate risk). A foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. Foreign currency exchange contracts, when used by the Master Portfolio, help to manage the overall exposure to the currencies in which some of the investments held by the Master Portfolio are denominated. The contract is marked-to-market daily and the change in market value is recorded by the Master Portfolio as an unrealized gain or loss. When the contract is closed, the Master Portfolio records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of foreign currency exchange contracts involves the risk that the value of a foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

The following is a summary of the Master Portfolio’s derivative financial instruments categorized by risk exposure:

Fair Values of Derivative Financial Instruments as of December 31, 2013
	Derivative Assets
	Statements of Assets and Liabilities Location	Value
Equity contracts	Net unrealized appreciation/depreciation1	$	446,463
Foreign currency exchange contracts	Unrealized appreciation on foreign currency exchange contracts		3,262
Total		$	449,725
	Derivative Liabilities
	Statement of Assets and Liabilities Location	Value
Foreign currency exchange contracts	Unrealized depreciation on foreign currency exchange contracts	$	248,962
Total		$	248,962

The Effect of Derivative Financial Instruments in the Statements of Operations Period Ended December 31, 2013
	Net Realized Gain (Loss) From
Equity contracts:
Financial futures contracts		$(157,836)
Foreign currency exchange contracts:
Foreign currency transactions		(1,564,470)
Total		$(1,722,306)
	Net Change in Unrealized Appreciation/Depreciation on
Equity contracts:
Financial futures contracts		$446,463
Foreign currency exchange contracts:
Foreign currency translations		(245,700)
Total		$200,763

For the period ended December 31, 2013, the average quarterly balances of outstanding derivative financial instruments were as follows:

Financial futures contracts:
Average number of contracts purchased	211
Average notional value of contracts purchased	$14,226,275
Foreign currency exchange contracts:
Average number of contracts — US dollars purchased	401
Average number of contracts — US dollars sold	11
Average US dollar amounts purchased	$14,952,6571
Average US dollar amounts sold	$175,746,385

¹  Actual contract amount shown due to limited activity,

Counterparty Credit Risk: 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 Master Portfolio’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by the Master Portfolio.

With exchange traded futures, there is less counterparty credit risk to the Master Portfolio 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 Master Portfolio 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) of the clearing broker or clearinghouse. 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 Master Portfolio.

In order to better define its contractual rights and to secure rights that will help the Master Portfolio mitigate its counterparty risk, the Master Portfolio may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Master Portfolio 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 Master Portfolio 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

20 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013

Notes to Financial Statements (continued)

event of default (close-out netting) including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the Master Portfolio’s net assets decline by a stated percentage or the Master Portfolio fails to meet the terms of its ISDA Master Agreements, which would cause the Master Portfolio to accelerate payment of any net liability owed to the counterparty.

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 Master Portfolio and the counterparty.

Cash collateral that has been pledged to cover obligations of the Master Portfolio 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 Master Portfolio, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount threshold (e.g. $500,000) before a transfer is required, which is determined at the close of business of the Master Portfolio and additional required collateral is delivered to/pledged by the Master Portfolio on the next business day. To the extent amounts due to the Master Portfolio from its counterparties are not fully collateralized, contractually or otherwise, the Master Portfolio bears the risk of loss from counterparty non-performance. The Master Portfolio attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.

For financial reporting purposes, the Master Portfolio does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.

At December 31, 2013, the Master Portfolio’s derivative assets and liabilities (by type) are as follows:

	Assets			Liabilities
Derivative Financial Instruments:
Financial futures contracts	$	10,897			—
Foreign currency exchange contracts		3,262		$	248,962
Total derivative assets and liabilities in the Statement of Assets and Liabilities		14,159			248,962
Derivatives not subject to a master netting agreement or similar agreement (“MNA”)		(10,897	)		—
Total assets and liabilities subject to a MNA	$	3,262		$	248,962

The following tables present the Master Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under a MNA and net of the related collateral received by the Master Portfolio as of December 31, 2013:

Counterparty	Derivative Assets Subject to a MNA  by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets
BNP Paribas S.A.	$	3,262	$	(3,262	)		—		—		—
Counterparty	Derivative Liabilities Subject to a MNA  by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities2
BNP Paribas S.A.	$	49,234	$	(3,262	)		—		—	$	45,972
Citibank N.A.		117,691		—			—		—		117,691
Westpac Banking Corp.		82,037		—			—		—		82,037
Total	$	248,962	$	(3,262	)		—		—	$	245,700

¹ The amount of derivatives available for offset is limited to the amount of assets and/or liabilities that are subject to a MNA.

² Net amount represents the net amount payable due to the counterparty in the event of default.

5. Investment Advisory Agreement and Other Transactions with Affiliates:

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

MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement with BlackRock Advisors, LLC (the “Manager”), the Master Portfolio’s investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory services. The

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013 21

Notes to Financial Statements (continued)

Manager is responsible for the management of the Master Portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Master Portfolio. For such services, the Master Portfolio pays the Manager a monthly fee based on a percentage of the Master Portfolio’s average daily net assets at the following annual rates:

Average Daily Net Assets	Investment Advisory Fee
First $1 Billion		0.40	%
$1 Billion — $3 Billion		0.38	%
$3 Billion — $5 Billion		0.36	%
$5 Billion — $10 Billion		0.35	%
Greater than $10 Billion		0.34	%

The Manager entered into a sub-advisory agreement with BlackRock Fund Advisors (“BFA”), an affiliate of the Manager. The Manager pays BFA, for services it provides with respect to the Master Portfolio, a monthly fee that is a percentage of the investment advisory fees paid by the Master Portfolio to BAL.

MIP, on behalf of the Master Portfolio, entered into an Administration Agreement with the Manager which has agreed to provide general administration services (other than investment advice and related portfolio activities). The Manager, in consideration thereof, has agreed to bear all of the Master Portfolio’s and MIP’s ordinary operating expenses excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the Master Portfolio. The Manager is entitled to receive for these administration services an annual fee of 0.05% based on the average daily net assets of the Master Portfolio.

From time to time, the Manager may waive such fees in whole or in part. Any such waiver will reduce the expenses of the Master Portfolio and, accordingly, have a favorable impact on its performance. The Manager may delegate certain of its administration duties to sub-administrators.

The Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Master Portfolio pays to the Manager indirectly through its investment in affiliated money market funds. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with the Master Portfolio’s investment in other affiliated investment companies, if any. This amount is included in fees waived by Manager in the Statement of Operations. For the period ended December 31, 2013, $551 was waived.

The fees and expenses of the MIP’s trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolio. The Manager has contractually agreed to cap the expenses of the Master Portfolio at the rate at which the Master Portfolio pays an advisory fee to the Manager, as applicable, by providing an offsetting credit against the investment advisory fees paid by the Master Portfolio in an amount equal to the independent expenses. This contractual waiver is effective through April 30, 2014. The amount of the waiver, if any, is included in fees waived by Manager in the Statement of Operations. For the period ended December 31, 2013, the Manager waived $34,917 pursuant to the agreement.

The Master Portfolio received an exemptive order from the Securities and Exchange Commission permitting it, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BTC, an affiliate of the Manager, as the securities lending agent. BTC may, on behalf of the Master Portfolio, invest cash collateral received by the Master Portfolio for such loans, among other things, in a private investment company managed by BTC or in registered money market funds advised by BTC or its affiliates. The market value of securities on loan and the value of the related collateral, if applicable, is shown in the Statement of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC, if any, is disclosed in the Schedule of Investments. Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of rebates paid to, or fees paid by, borrowers of securities. The Master Portfolio retains 65% of securities lending income and pays a fee to BTC equal to 35% of such income. The Master Portfolio benefits from a borrower default indemnity provided by BlackRock. As securities lending agent, BTC bears all operational costs directly related to securities lending as well as the cost of borrower default indemnification. BTC does not receive any fees for managing the cash collateral. The share of income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the period ended December 31, 2013, BTC received $406 in securities lending agent fees related to securities lending activities for the Master Portfolio.

Certain officers and/or trustees of MIP are officers and/or directors of BlackRock or its affiliates.

6. Purchases and Sales:

Purchases and sales of investments, excluding short-term securities, for the period ended December 31, 2013, were $584,470,234 and $53,532,465, respectively.

7. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $800 million credit agreement with a group of lenders, under which the Master Portfolio may borrow to fund shareholder redemptions. The agreement expires in April 2014. Excluding commitments designated for a certain individual fund, other Participating Funds, including the Master Portfolio, can borrow up to an aggregate commitment amount of $500 million, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.065% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. Participating Funds paid administration and arrangement fees, which, along with commitment fees, were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. The Master Portfolio did not borrow under the credit agreement during the period ended December 31, 2013.

8. Concentration, Market and Credit Risk:

In the normal course of business, the Master Portfolio invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Master Portfolio may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Master Portfolio; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Master Portfolio

22 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013

Notes to Financial Statements (concluded)

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

The Master Portfolio invests a substantial amount of its assets in issuers located in a single country or a limited number of countries. When the Master Portfolio concentrates its investments in this manner, it assumes the risk that economic, political and social conditions in those countries may have a significant impact on their investment performance. Foreign issuers may not be subject to the same uniform accounting, auditing and financial reporting standards and practices as used in the United States. Foreign securities markets may also be less liquid, more volatile, and less subject to governmental supervision not typically associated with investing in US securities. Please see the Schedule of Investments for concentrations in specific countries.

The Master Portfolio 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, including countries that do not use the euro and affect the value and liquidity of certain of the Master Portfolio’s investments.

As of December 31, 2013, the Master Portfolio had the following industry classifications:

Industry	Percent of Long-Term Investments
Commercial Banks		14	%
Pharmaceuticals		6	%
Oil, Gas & Consumable Fuels		6	%
Diversified Telecommunication Services		5	%
Insurance		5	%
Other1		64	%

¹  All other industries held were less than 5% of long-term investments.

9. Subsequent Events:

Management has evaluated the impact of all subsequent events on the Master Portfolio 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.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013 23

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Master Investment Portfolio and the Interestholders of International Tilts Master Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of International Tilts Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio, at December 31, 2013, and the results of its operations, the changes in its net assets and the financial highlights for the period October 31, 2013 (commencement of operations) through December 31, 2013, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at December 31, 2013 by correspondence with the custodian, transfer agent and brokers, provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 18, 2014

24 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013

Disclosure of Investment Advisory Agreement

The Board of Trustees (the “Board,” and the members of which are referred to as “Board Members”) of Master Investment Portfolio (the “Master Fund”) met in person on September 18-20, 2013 (the “September Meeting”) to consider the approval of the Master Fund’s proposed investment advisory agreement (the “Agreement”) with BlackRock Advisors, LLC (the “Manager” or “BlackRock”) on behalf of International Tilts Master Portfolio (the “Master Portfolio”), a series of the Master Fund. The Agreement was the same agreement that had previously been approved by the Board with respect to each of the other series of the Master Fund. The Master Portfolio commenced operations in October 2013.

Activities and Composition of the Board

The Board consists of fourteen individuals, twelve of whom are not “interested persons” of the Master Fund 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 Master Portfolio 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 Co-Chairs of the Board are each Independent Board Members. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight and Contract Committee and an Executive Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Executive Committee, which also has one interested Board Member).

The Agreement

Pursuant to the 1940 Act, the Board is required to consider the initial approval of the Agreement. In connection with this process, the Board assessed, among other things, the nature, scope and quality of the services to be provided to the Master Portfolio by BlackRock, its personnel and its affiliates, including investment management, administrative and shareholder services, oversight of fund accounting and custody, marketing services, risk oversight, compliance and assistance in meeting applicable legal and regulatory requirements.

Board Considerations in Approving the Agreement

The Approval Process: At the September Meeting, the Board reviewed materials relating to its consideration of the Agreement. The Board considered all factors it believed relevant with respect to the Master Fund and the Master Portfolio, including, among other factors: (a) the nature, extent and quality of the services to be provided by BlackRock; (b) the investment performance of BlackRock portfolio management; (c) the advisory fee and the cost of the services to be provided and profits to be realized by BlackRock and its affiliates from their relationship with the Master Portfolio; (d) economies of scale; (e) fall out benefits to BlackRock as a result of its relationship with the Master Portfolio; (f) possible alternatives to the proposed Agreement; (g) the policies and practices of BlackRock with respect to portfolio transactions for the Master Portfolio; and (h) other factors deemed relevant by the Board Members.

In determining to approve the Agreement, the Board met with the relevant investment advisory personnel from BlackRock and considered all information it deemed reasonably necessary to evaluate the terms of the Agreement. The Board received materials in advance of the September meeting relating to its consideration of the Agreement, including the fees and estimated expense ratio of the Master Portfolio as compared with the fees and expense ratios of a peer group of funds. Both the peer group and the funds within the peer group (collectively, “Peers”) were selected by Lipper, Inc. (“Lipper”)¹ which is not affiliated with BlackRock. The Board also received (a) information regarding BlackRock’s economic outlook for the Master Portfolio and its general investment outlook for the markets; (b) information regarding fees paid to service providers that are affiliates of BlackRock; and (c) information outlining the legal duties of the Board under the 1940 Act with respect to the consideration and approval of the Agreement. The Board also noted information received at prior Board meetings concerning compliance records and regulatory matters relating to BlackRock.

The Board also considered other matters it deemed important to the approval process, such as services related to the valuation and pricing of the Master Portfolio’s portfolio holdings, direct and indirect benefits to BlackRock and its affiliates from their relationship with the Master Portfolio 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: The Board, including the Independent Board Members, reviewed the nature, extent and quality of services to be provided by BlackRock, including the investment advisory services to be provided to the Master Portfolio. The Board received information concerning the investment philosophy and investment process to be used by BlackRock in managing the Master Portfolio, as well as a description of the capabilities, personnel and services of BlackRock. In connection with this review, the Board considered BlackRock’s in-house research capabilities as well as other resources available to its personnel. The Board considered the scope of the services provided by BlackRock to the Master Portfolio under the Agreement relative to services typically provided by third parties to other funds. The Board noted that the standard of care applicable under the Agreement was comparable to that found generally in investment company advisory agreements. The Board concluded that the scope of BlackRock’s services to be provided to the Master Portfolio was consistent with the Master Portfolio’s operational requirements, including, in addition to seeking to meet its investment objective, compliance with investment restrictions, tax and reporting requirements and related shareholder services.

The Board, including the Independent Board Members, also considered the quality of the administrative and non-investment advisory services to be provided by BlackRock and its affiliates to the Master Portfolio. The Board evaluated the procedures of BlackRock designed to fulfill its fiduciary duty to the Master Portfolio with respect to possible conflicts of interest, including BlackRock’s code of ethics (regulating the personal trading of BlackRock’s officers and employees), the procedures by which BlackRock allocates trades among its various investment advisory clients, the integrity of the systems in place to ensure compliance with the foregoing and the record of BlackRock in these matters. The Board also noted information received at prior Board meetings concerning standards of BlackRock with respect to the execution of portfolio transactions.

¹  Lipper ranks funds in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013 25

Disclosure of Investment Advisory Agreement (continued)

The Board considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and the Master Portfolio’s portfolio management team; 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 reviewed BlackRock’s compensation structure with respect to the Master Portfolio’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives. The Board also considered the business reputation of BlackRock and its financial resources and concluded that BlackRock would be able to meet any reasonably foreseeable obligation under the Agreement.

In addition to advisory services, the Board considered the quality of the administrative and non-investment advisory services to be provided to the Master Portfolio. The Board noted that BlackRock and its affiliates will provide the Master Portfolio with certain administrative, shareholder and other services (in addition to any such services provided to the Master Portfolio by third parties) and officers and other personnel as are necessary for the operations of the Master Portfolio. In particular, BlackRock and its affiliates will provide the Master Portfolio with the following administrative services, including, among others: (i) preparing disclosure documents, such as the prospectus, the summary prospectus, the statement of additional information and periodic shareholder reports; (ii) assisting with daily accounting and pricing; (iii) overseeing and coordinating the activities of other service providers; (iv) organizing Board meetings and preparing the materials for such Board meetings; (v) providing legal and compliance support; (vi) furnishing analytical and other support to assist the Board in its consideration of strategic issues such as the merger or consolidation of certain open-end funds; and (vii) performing other administrative functions necessary for the operation of the Master Portfolio, such as tax reporting, fulfilling regulatory filing requirements and call center services. The Board reviewed the structure and duties of BlackRock’s fund administration, shareholder services, legal and compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Master Portfolio and BlackRock: The Board, including the Independent Board Members, previously received and considered information about BlackRock’s investment performance for other funds. The Board, however, did not consider the performance history of the Master Portfolio because the Master Portfolio was newly organized and had not yet commenced operations as of the September Meeting.

C. Consideration of the Advisory Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Master Portfolio: In connection with the initial approval of the Agreement, the Board, including the Independent Board Members, reviewed the Master Portfolio’s contractual advisory fee rate compared with the other funds in the Master Portfolio’s Lipper category. The Board also compared the Master Portfolio’s estimated total net operating expense ratio, as well as the Master Portfolio’s actual advisory fee rate, to those of other funds in its Lipper category. The total net operating expense ratio and actual advisory fee rate both give effect to any expense reimbursements or fee waivers that benefit the funds. Additionally, the Board noted information received at prior Board meetings concerning the services provided and the fees charged by BlackRock to other types of clients with similar investment mandates, including institutional accounts.

The Board noted that the Master Portfolio’s contractual advisory fee rate ranked in the second quartile relative to the Master Portfolio’s Peers. The Board also noted that the Master Portfolio has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Master Portfolio increases above certain contractually specified levels. The Board noted that BlackRock and its affiliates have agreed to provide an offsetting credit against certain additional expenses incurred by the Master Portfolio.

Following consideration of this information, the Board, including the independent Board Members, concluded that the fees to be paid pursuant to the Agreement were fair and reasonable in light of the services provided.

As the Master Portfolio had not commenced operations as of the date of the September Meeting, BlackRock was not able to provide the Board with specific information concerning the expected profits to be realized by BlackRock and its affiliates from their relationships with the Master Portfolio. BlackRock, however, will provide the Board with such information at future meetings.

D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized in respect of the management of the Master Portfolio. The Board also considered the extent to which the Master Portfolio may benefit from such economies and noted the use of breakpoints in the advisory fee based upon the asset level of the Master Portfolio.

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 their respective relationships with the Master Portfolio, 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 the Master Portfolio, 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 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. The Board further noted that it had considered the investment by BlackRock’s funds in ETFs without any offset against the management fees payable by the funds to BlackRock.

The Board, including all of the Independent Board Members, concluded that these ancillary benefits that BlackRock and its affiliates could receive with regard to providing investment advisory and other services to the Master Portfolio were consistent with those generally available to other mutual fund sponsors.

26 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013

Disclosure of Investment Advisory Agreement (concluded)

Conclusion

The Board, including the Independent Board Members, unanimously approved the Agreement between the Manager and the Master Fund on behalf of the Master Portfolio for a two-year term ending September 17, 2015. Based upon its evaluation of all of the aforementioned factors in their totality, the Board, including the Independent Board Members, was satisfied that the terms of the Agreement were fair and reasonable and in the best interest of the Master Portfolio and its shareholders. In arriving at a decision to approve the Agreement, 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.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013 27

Officers and Trustees

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2007	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 107 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2007	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 107 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2007	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy from 2002 to 2012; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 107 Portfolios	None

28 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2007	Executive Vice President, Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 107 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2007	President, London Center for Policy Research since 2012; Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and Professor thereof from 1980 to 2005; President Emeritus, Hudson Institute (policy research organization) from 2011 to 2012, President thereof from 1997 to 2011 and Trustee from 1980 to 2012; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (global internet service) since 2005; Director, Cerego, LLC (educational software) since 2005; Director, Cybersettle (online adjudication) since 2009; Director, AIMS Worldwide, Inc. (marketing) from 2007 to 2012.	33 RICs consisting of 107 Portfolios

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013 29

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2007	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 107 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Director, The West Penn Allegheny Health System (a not-for-profit health system) from 2008 to 2013; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 107 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)

30 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2007	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 107 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2007	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2007	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Immediate past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The	33 RICs consisting of 107 Portfolios	None

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013 31

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
			Pennsylvania State University Accounting Department since 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2007	Director, Alkon Corporation (pneumatics) since 1992; Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh from 2005 to 2013 and Dean thereof from 1997 to 2005; Director, Tippman Sports (recreation) from 2005 to 2013; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 107 Portfolios	None
	1    Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved extensions in terms of Directors/Trustees who turn 72 prior to December 31, 2013.

32 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1 (concluded)
	2   Date shown is the earliest date a person has served for the MIP covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the MIP’s Board. As a result, although the chart shows certain Trustees as joining the MIP’s board in 2009, those Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013 33

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Interested Trustees3
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	143 RICs consisting of 273 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock, from 2007 to 2008; Managing Director, BlackRock, from 1989 to 2007;	143 RICs consisting of 273 Portfolios	None

34 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Interested Trustees3 (concluded)
			Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.
	3    Mr. Audet is an “interested person”, as defined in the 1940 Act, of MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Trustees of the BlackRock registered closed-end funds and Trustees of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013 35

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
MIP Officers1
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock, since 2009; Global Head of BlackRock Fund Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock, since 2000; Head of the Global Cash Group since 2013; Co-head of the Global Cash and Securities Lending Group from 2010 to 2013; Menber of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009 and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Christopher Stavrakos 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2007	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.

36 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013

Officers and Trustees (concluded)

Name, Address and Year of Birth	Position(s) Held with MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
MIP Officers1 (concluded)
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2007	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Managing Director of Blackrock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary of the BlackRock-advised funds from 2010 to 2012; General Counsel and Chief Operating Officer of Uhuru Capital Management from 2009 to 2010; Executive Director and Counsel of Goldman Sachs Asset Management from 2005 to 2009.
	1   Officers of the MIP serve at the pleasure of the Board.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013 37

Additional Information

Investment Advisor and Administrator

BlackRock Advisors, LLC

Wilmington, DE 19809

Sub-Advisor

BlackRock Fund Advisors

San Francisco, CA 94105

Custodian

State Street Bank and Trust Company

Boston, MA 02110

Accounting Agent

State Street Bank and Trust Company

Boston, MA 02110

Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP

Philadelphia, PA 19103

Legal Counsel

Sidley Austin LLP

New York, NY 10019

Address of MIP

400 Howard Street

San Francisco, CA 94105

Availability of Quarterly Schedule of Investments

The Master Portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Master Portfolio’s 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 how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Master Portfolio’s 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 Master Portfolio uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Master Portfolio voted proxies relating to securities held in the Master Portfolio’s portfolio during the most recent period ended December 31 is available upon request and without charge (1) at http://www.blackrock.com; and (2) on the SEC’s website at http://www.sec.gov.

38 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2013

Item 2 –	Code of Ethics – Each registrant (or “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. During the period covered by this report, there have been no amendments to or waivers granted under the code of ethics. A copy of the code of ethics is available without charge at www.blackrock.com.
Item 3 –	Audit Committee Financial Expert – Each registrant’s board of directors (the “board of directors”), has determined that (i) the registrant has the following audit committee financial expert serving on its audit committee and (ii) each audit committee financial expert is independent: Kenneth L. Urish
	Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification.
Item 4 –	Principal Accountant Fees and Services
	The following table presents fees billed by PricewaterhoueCoopers LLP (“PwC”) in each of the last two fiscal years for the services rendered to the Funds:

	(a) Audit Fees		(b) Audit-Related Fees1		(c) Tax Fees2		(d) All Other Fees3
Entity Name	Current Fiscal Year End	Previous Fiscal Year End	Current Fiscal Year End	Previous Fiscal Year End	Current Fiscal Year End	Previous Fiscal Year End	Current Fiscal Year End	Previous Fiscal Year End
BlackRock ACWI ex-US Index Fund	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock Bond Index Fund	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock Cash Funds: Institutional	$10,962	$10,962	$0	$0	$2,425	$2,425	$0	$0
BlackRock Cash Funds: Prime	$10,962	$10,962	$0	$0	$2,425	$2,425	$0	$0
BlackRock Cash Funds: Government	$10,962	$10,962	$0	$0	$2,425	$2,425	$0	$0
BlackRock Cash Funds: Treasury	$10,962	$10,962	$0	$0	$2,425	$2,425	$0	$0
BlackRock CoreAlpha Bond Fund	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
LifePath Retirement Portfolio	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
LifePath 2020 Portfolio	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
LifePath 2025 Portfolio	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
LifePath 2030 Portfolio	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
LifePath 2035 Portfolio	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
LifePath 2040 Portfolio	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
LifePath 2045 Portfolio	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
LifePath 2050 Portfolio	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
LifePath 2055 Portfolio	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
LifePath Index Retirement Portfolio	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
LifePath Index 2020 Portfolio	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
LifePath Index 2025 Portfolio	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0

3

LifePath Index 2030 Portfolio	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
LifePath Index 2035 Portfolio	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
LifePath Index 2040 Portfolio	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
LifePath Index 2045 Portfolio	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
LifePath Index 2050 Portfolio	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
LifePath Index 2055 Portfolio	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock Russell 1000 Index Fund	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock S&P 500 Stock Fund	$10,962	$10,962	$0	$0	$7,566	$7,566	$0	$0
Active Stock Master Portfolio	$20,640	$20,640	$0	$0	$20,161	$20,161	$0	$0
BlackRock ACWI ex-US Index Portfolio	$20,640	$20,640	$0	$0	$15,126	$15,126	$0	$0
Bond Index Master Portfolio	$19,463	$19,463	$0	$0	$15,126	$15,126	$0	$0
CoreAlpha Bond Master Portfolio	$27,805	$27,805	$0	$0	$20,161	$20,161	$0	$0
International Tilts Master Portfolio	$18,580	$0	$0	$0	$15,126	$0	$0	$0
LifePath Retirement Master Portfolio	$12,790	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath 2020 Master Portfolio	$12,790	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath 2025 Master Portfolio	$12,790	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath 2030 Master Portfolio	$12,790	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath 2035 Master Portfolio	$12,790	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath 2040 Master Portfolio	$12,790	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath 2045 Master Portfolio	$12,790	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath 2050 Master Portfolio	$12,790	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath 2055 Master Portfolio	$12,790	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index Retirement Master Portfolio	$12,790	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index 2020 Master Portfolio	$12,790	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index 2025 Master Portfolio	$12,790	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index 2030 Master Portfolio	$12,790	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index 2035 Master Portfolio	$12,790	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index 2040 Master Portfolio	$12,790	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index 2045 Master Portfolio	$12,790	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index 2050 Master Portfolio	$12,790	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index 2055 Master Portfolio	$12,790	$12,790	$0	$0	$13,119	$13,119	$0	$0
Government Money Market Master Portfolio	$12,298	$12,298	$0	$0	$3,633	$3,633	$0	$0
Money Market Master Portfolio	$12,298	$12,298	$0	$0	$3,633	$3,633	$0	$0
Prime Money Market Master Portfolio	$12,298	$12,298	$0	$0	$3,633	$3,633	$0	$0
Russell 1000 Index Master Portfolio	$20,640	$20,640	$0	$0	$15,126	$15,126	$0	$0
S&P 500 Index Master Portfolio	$20,640	$20,640	$0	$0	$15,126	$15,126	$0	$0
Treasury Money Market Master Portfolio	$12,298	$12,298	$0	$0	$3,633	$3,633	$0	$0

The following table presents fees billed by PwC that were required to be approved by each registrant’s audit committee (each a “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock Advisors, LLC (“Investment Adviser” or “BlackRock”) and entities controlling, controlled by, or under common control with BlackRock (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund (“Fund Service Providers”):

4

	Current Fiscal Year End	Previous Fiscal Year End
(b) Audit-Related Fees1	$668,000	$0
(c) Tax Fees2	$10,319,000	$0
(d) All Other Fees3	$113,000	$2,970,000

¹ The nature of the services includes assurance and related services reasonably related to the performance of the audit of financial statements not included in Audit Fees.

² The nature of the services includes tax compliance, tax advice and tax planning.

³ Aggregate fees borne by BlackRock in connection with administrative compliance advice performed by PwC with respect to an affiliated entity of BlackRock.

(e)(1) Audit Committee Pre-Approval Policies and Procedures:

Each Committee has adopted policies and procedures with regard to the pre-approval of services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the registrant’s Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the Investment Adviser and Fund Service Providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are (a) consistent with the SEC’s auditor independence rules and (b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis (“general pre-approval”). The term of any general pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other non-audit services provided to the registrant which have a direct impact on the operations or financial reporting of the registrant will only be deemed pre-approved provided that any individual project does not exceed $10,000 attributable to the registrant or $50,000 per project. For this purpose, multiple projects will be aggregated to determine if they exceed the previously mentioned cost levels.

Any proposed services exceeding the pre-approved cost levels will require specific pre-approval by the registrant’s Committee, as will any other services not subject to general pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. At this meeting, an analysis of such services is presented to the Committee for ratification. The Committee may delegate to the Committee Chairman the authority to approve the provision of and fees for any specific engagement of permitted non-audit services, including services exceeding pre-approved cost levels.

(e)(2) None of the services described in each of Items 4(b) through (d) were approved by either Committee pursuant to the de minimus exception in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not Applicable

(g) The aggregate non-audit fees paid to the accountant for services rendered by the accountant to the registrant, the Investment Adviser and the Fund Service Providers were:

Entity Name	Current Fiscal Year End		Previous Fiscal Year End
BlackRock ACWI ex-US Index Fund		$7,566		$7,566
Bond Index Fund		$7,566		$7,566
BlackRock Cash Funds: Institutional		$2,425		$2,425
BlackRock Cash Funds: Prime		$2,425		$2,425
BlackRock Cash Funds: Government		$2,425		$2,425

5

	BlackRock Cash Funds: Treasury	$2,425	$2,425
	BlackRock CoreAlpha Bond Fund	$7,566	$7,566
	LifePath Retirement Portfolio	$7,566	$7,566
	LifePath 2020 Portfolio	$7,566	$7,566
	LifePath 2025 Portfolio	$7,566	$7,566
	LifePath 2030 Portfolio	$7,566	$7,566
	LifePath 2035 Portfolio	$7,566	$7,566
	LifePath 2040 Portfolio	$7,566	$7,566
	LifePath 2045 Portfolio	$7,566	$7,566
	LifePath 2050 Portfolio	$7,566	$7,566
	LifePath 2055 Portfolio	$7,566	$7,566
	LifePath Index Retirement Portfolio	$7,566	$7,566
	LifePath Index 2020 Portfolio	$7,566	$7,566
	LifePath Index 2025 Portfolio	$7,566	$7,566
	LifePath Index 2030 Portfolio	$7,566	$7,566
	LifePath Index 2035 Portfolio	$7,566	$7,566
	LifePath Index 2040 Portfolio	$7,566	$7,566
��	LifePath Index 2045 Portfolio	$7,566	$7,566
	LifePath Index 2050 Portfolio	$7,566	$7,566
	LifePath Index 2055 Portfolio	$7,566	$7,566
	BlackRock Russell 1000 Index Fund	$7,566	$7,566
	BlackRock S&P 500 Stock Fund	$7,566	$7,566
	Active Stock Master Portfolio	$20,161	$20,161
	BlackRock ACWI ex-US Index Portfolio	$15,126	$15,126
	Bond Index Master Portfolio	$15,126	$15,126
	CoreAlpha Bond Master Portfolio	$20,161	$20,161
	International TILTS Master Portfolio	$15,126	$0
	LifePath Retirement Master Portfolio	$13,119	$13,119
	LifePath 2020 Master Portfolio	$13,119	$13,119
	LifePath 2025 Master Portfolio	$13,119	$13,119
	LifePath 2030 Master Portfolio	$13,119	$13,119
	LifePath 2035 Master Portfolio	$13,119	$13,119
	LifePath 2040 Master Portfolio	$13,119	$13,119
	LifePath 2045 Master Portfolio	$13,119	$13,119
	LifePath 2050 Master Portfolio	$13,119	$13,119
	LifePath 2055 Master Portfolio	$13,119	$13,119
	LifePath Index Retirement Master Portfolio	$13,119	$13,119
	LifePath Index 2020 Master Portfolio	$13,119	$13,119
	LifePath Index 2025 Master Portfolio	$13,119	$13,119
	LifePath Index 2030 Master Portfolio	$13,119	$13,119
	LifePath Index 2035 Master Portfolio	$13,119	$13,119
	LifePath Index 2040 Master Portfolio	$13,119	$13,119
	LifePath Index 2045 Master Portfolio	$13,119	$13,119
	LifePath Index 2050 Master Portfolio	$13,119	$13,119
	LifePath Index 2055 Master Portfolio	$13,119	$13,119

6

Government Money Market Master Portfolio	$3,633	$3,633
Money Market Master Portfolio	$3,633	$3,633
Prime Money Market Master Portfolio	$3,633	$3,633
Russell 1000 Index Master Portfolio	$15,126	$15,126
S&P 500 Index Master Portfolio	$15,126	$15,126
Treasury Money Market Master Portfolio	$3,633	$3,633

	(h) Each Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser and the Fund Service Providers that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
Item 5 –	Audit Committee of Listed Registrants – Not Applicable
Item 6 –	Investments
	(a) The registrants’ Schedules of Investments are 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 registrants’ principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrants�� 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 15(d)-15(b) under the Securities Exchange Act of 1934, as amended.
	(b) – There were no changes in the registrants’ 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 registrants’ internal control over financial reporting.
Item 12 –	Exhibits attached hereto
	(a)(1) – Code of Ethics – See Item 2
	(a)(2) – Certifications – Attached hereto

7

(a)(3) – Not Applicable

(b) –   Certifications – Attached hereto

8

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, each registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BlackRock Funds III and Master Investment Portfolio
By:	/s/ John M. Perlowski
	John M. Perlowski
	Chief Executive Officer (principal executive officer) of
	BlackRock Funds III and Master Investment Portfolio
Date: February 28, 2014

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 each 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 Funds III and Master Investment Portfolio
Date: February 28, 2014
By:	/s/ Neal J. Andrews
	Neal J. Andrews
	Chief Financial Officer (principal financial officer) of
	BlackRock Funds III and Master Investment Portfolio
Date: February 28, 2014

9