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: 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

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: 12/31/2014

Date of reporting period: 12/31/2014

Item 1 – Report to Stockholders

2

DECEMBER 31, 2014

  ANNUAL REPORT  

BlackRock ACWI ex-U.S. Index Fund  |  of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
The Markets in Review		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		17
Important Tax Information		17
Master Portfolio Information		18
Master Portfolio Financial Statements:
Schedule of Investments		19
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		49
Officers and Trustees		50
Additional Information		53

2 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

The Markets in Review

Dear Shareholder,

After an extended period of calm, market volatility increased over the course of 2014, driven largely by higher valuations in risk assets (such as equities and high yield bonds), rising geopolitical risks and expectations around global central bank policies. Several key trends drove strong performance in U.S. markets, particularly large-cap stocks, Treasuries and municipal bonds, while markets outside the U.S. were more challenged.

Investors began the year in search of relatively safer assets due to heightened risks in emerging markets, slowing growth in China and weakening U.S. economic data. As a result, equities globally declined in January while bond markets strengthened despite the expectation that interest rates would rise as the U.S. Federal Reserve had begun reducing its asset purchase programs. Strong demand for relatively safer assets pushed U.S. Treasury bond prices higher and thus kept rates low in the United States. This surprising development, as well as increasing evidence that the soft patch in U.S. economic data had been temporary and weather-related, brought equity investors racing back to the market in February.

In the months that followed, interest rates trended lower in a modest growth environment and more investors turned to equities in search of yield. Markets remained relatively calm despite rising tensions in Russia and Ukraine and further signs of decelerating growth in China. Strong corporate earnings, increased merger and acquisition activity and signs of a strengthening recovery in the U.S. and other developed economies kept equity prices moving higher. Not all segments benefited from these trends, however, as investors ultimately became wary of high valuations, resulting in a broad rotation into cheaper assets.

Volatility ticked up in the summer as geopolitical tensions escalated and investors feared that better U.S. economic indicators may compel the Fed to increase short-term interest rates sooner than previously anticipated. Global credit markets tightened as the U.S. dollar strengthened, ultimately putting a strain on investor flows, and financial markets broadly weakened in the third quarter.

Several themes dominated the markets in the fourth quarter, resulting in higher levels of volatility and the outperformance of U.S. markets versus other areas of the world. Economic growth strengthened considerably in the United States while the broader global economy showed signs of slowing. The European Central Bank and the Bank of Japan took aggressive measures to stimulate growth while the Fed moved toward tighter policy. This divergence in central bank policy caused further strengthening in the U.S. dollar versus other currencies. Oil prices, which had been falling gradually since the summer, plummeted in the fourth quarter due to a global supply-and-demand imbalance. Energy stocks sold off sharply and oil-exporting economies suffered, resulting in the poor performance of emerging market stocks.

At BlackRock, we believe investors need to think globally, extend their scope across a broad 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 blackrock.com for further insight about investing in today’s markets.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2014
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		6.12	%		13.69	%
U.S. small cap equities (Russell 2000® Index)		1.65			4.89
International equities (MSCI Europe, Australasia, Far East Index)		(9.24	)		(4.90	)
Emerging market equities (MSCI Emerging Markets Index)		(7.84	)		(2.19	)
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.01			0.03
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		4.33			10.72
U.S. investment-grade bonds (Barclays U.S. Aggregate Bond Index)		1.96			5.97
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.00			9.25
U.S. high yield bonds (Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		(2.84	)		2.46
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, 2014

Investment Objective

BlackRock ACWI ex-U.S. Index Fund’s (the “Fund”) investment objective is to match the performance of the MSCI All Country World ex-U.S. Index (the “MSCI ACWI ex-U.S. Index”) in U.S. 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, 2014, the Fund’s Institutional Shares returned (4.78)%, Investor A Shares returned (5.19)% and Class K Shares returned (4.84)%. The benchmark MSCI ACWI ex-U.S. Index returned (3.87)% 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-U.S. Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio.

Describe the market environment.

Ÿ International equities exhibited higher volatility in 2014 amid rising geopolitical risks and uneven growth rates across the global economy. The year got off to a rough start due to heightened risks in emerging markets, slowing growth in China and softer economic data in the United States, while investors were bracing for the impact of the U.S. Federal Reserve scaling back on stimulus. Equity markets around the world declined sharply in January. But the sell-off was short-lived and international equities rebounded in February, particularly in Europe. Signs of a strengthening economic recovery combined with hopes that the European Central Bank (“ECB”) would soon take measures to combat the uncomfortably low level of inflation in the eurozone, fueled a rally in European stocks. The ECB ultimately took policy action in early June, with a bold move to a negative deposit rate.

Ÿ However, high valuations and uncertainty around global central bank policies left equities particularly vulnerable to bad news. Consequently, geopolitical risks took a toll on international equity prices as tensions between Russia and Ukraine mounted and the fragmentation of Iraq led to escalating violence and a spike in oil prices during the summer. A ground war in Gaza, the downing of a civilian airliner over Malaysia, and Scotland’s flirtation with independence from the United Kingdom added to global headwinds, causing many investors to retreat from risk assets.

Ÿ In the latter part of the year, economic growth strengthened in the United States, while the broader global economy showed signs of slowing. In Europe, most developed economies again struggled with sluggish activity and equity prices were tossed about between investors’ concerns about geopolitical turmoil and hopes for central bank stimulus. The continuation of the Russia-Ukraine conflict and a Russian currency crisis, as well as Greece’s failure to successfully elect a new president, drove volatility higher. In the eurozone, inflation rates continued to be dangerously low. Another round of policy easing from the ECB gave international equities a much-needed boost, but the significant depreciation of the euro and other currencies versus the U.S. dollar resulted in negative returns in the MSCI ACWI ex-U.S. Index.

Ÿ Similarly, Asian developed market equities performed well in local currency terms, but generated negative results on a U.S. dollar basis. As the Japanese economy struggled to get on its legs, the nation’s equity market benefited from central bank stimulus and positive sentiment toward structural reform. Strong corporate earnings results also pushed Japanese stocks higher, as did a surge of domestic inflows due to the reallocation of Japan’s Government Pension Investment Fund. However, a weakening yen versus a strengthening U.S. dollar resulted in Japanese equities having the largest negative effect on the performance of the MSCI ACWI ex-U.S. Index.

Ÿ In the latter months of 2014, the divergence in global central bank policies became a major theme in equity markets and the strong appreciation in the U.S. dollar pressured commodity prices. Oil prices in particular plunged as a global supply-and-demand imbalance materialized. While lower prices were harmful to economies that rely heavily on oil exports, most developed markets derived a boost in consumer spending, a positive for equity markets.

Ÿ Stock markets in most countries represented in the MSCI ACWI ex-U.S. Index declined (in U.S. dollar terms) in the 12-month period. U.K. and Japanese stocks, which represent the most significant weightings in the MSCI EAFE Index composition, lost 5.37% and 4.02%, respectively. Negative results came from other markets with notable index weights, including France (-9.92%), Australia (-3.55%) and Switzerland (-0.15%). On an absolute basis (in USD), Israeli stocks (+22.77%) generated stand-out performance and the worst performers included stocks in Portugal (-38.24%), Austria (-29.77%) and Norway (-21.74%).

Describe recent portfolio activity.

Ÿ During the period, as changes were made to the composition of the MSCI ACWI ex-U.S. 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-U.S. INDEX FUND DECEMBER 31, 2014

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 will be substantially invested in securities in the MSCI ACWI ex-U.S. Index, and will invest, under normal circumstances, at least 80% of its assets in securities or other financial instruments that are components of or have economic characteristics similar to the securities included in the MSCI ACWI ex-U.S. Index.

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, 2014

	6-Month Total Returns			Average Annual Total  Returns5
				1 Year			Since  Inception6
Institutional		(9.53	)%		(4.78	)%		1.04	%
Investor A		(9.74	)		(5.19	)		0.74
Class K		(9.58	)		(4.84	)		1.68
MSCI ACWI ex-U.S. Index		(8.93	)		(3.87	)		2.12

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 June 30, 2011.

Past performance is not indicative of future results.

Expense Example

	Actual						Hypothetical7
	Beginning Account Value July 1, 2014		Ending Account Value December 31, 2014		Expenses Paid During the Period6		Beginning Account Value July 1, 2014		Ending Account Value December 31, 2014		Expenses Paid During the Period6		Annualized Expense Ratio
Institutional	$	1,000.00	$	903.70	$	0.86	$	1,000.00	$	1,024.30	$	0.92		0.18	%
Investor A	$	1,000.00	$	902.60	$	2.16	$	1,000.00	$	1,022.94	$	2.29		0.45	%
Class K	$	1,000.00	$	904.20	$	0.72	$	1,000.00	$	1,024.45	$	0.77		0.15	%

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-U.S. INDEX FUND DECEMBER 31, 2014 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. These shares are generally available through financial intermediaries.

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 previous page assume reinvestment of all 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. Distributions 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 Fund’s administrator has contractually agreed to waive and/or reimburse a portion of the Fund’s expenses. Without such waiver and/or reimbursement, the Fund’s performance would have been lower. The administrator is under no obligation to continue waiving and/or reimbursing its fees after the applicable termination date of such agreement. See Note 3 of the Notes to Financial Statements for additional information on 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, 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, 2014 and held through December 31, 2014) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

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

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

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

Derivative Financial Instruments

The Master Portfolio may invest in various derivative financial instruments. 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 manage market, equity or foreign currency exchange rate risks. Derivative financial instruments may give rise to a form of economic leverage. Derivative financial instruments also 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 limit the amount of appreciation the Master Portfolio can realize on an investment, and/or may result in lower distributions paid to shareholders. 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-U.S. INDEX FUND DECEMBER 31, 2014

Statement of Assets and Liabilities BlackRock ACWI ex-U.S. Index Fund

December 31, 2014
Assets
Investments at value — Master Portfolio (cost — $20,165,264)	$	24,131,800
Receivable from administrator		14,076
Capital shares sold receivable		111,364
Prepaid expenses		22,860
Total assets		24,280,100
Liabilities
Capital gain distributions payable		104,473
Contributions payable to Master Portfolio		111,183
Professional fees payable		24,223
Printing fees payable		9,163
Income distributions payable		4,887
Transfer agent fees payable		3,840
Registration fees payable		736
Capital shares redeemed payable		181
Service fees payable		62
Officer’s fees payable		6
Other accrued expenses payable		1,548
Total liabilities		260,302
Net Assets	$	24,019,798
Net Assets Consist of
Paid-in capital	$	23,304,745
Distribution in excess of net investment income		(88,503	)
Accumulated net realized loss allocated from the Master Portfolio		(3,162,980	)
Net unrealized appreciation/depreciation allocated from the Master Portfolio		3,966,536
Net Assets	$	24,019,798
Net Asset Value
Institutional — Based on net assets of $17,380,194 and 2,062,890 shares outstanding, unlimited number of shares authorized, no par value	$	8.43
Investor A — Based on net assets of $372,465 and 44,272 shares outstanding, unlimited number of shares authorized, no par value	$	8.41
Class K — Based on net assets of $6,267,139 and 724,699 shares outstanding, unlimited number of shares authorized, no par value	$	8.65

See Notes to Financial Statements.
	BLACKROCK ACWI ex-U.S. INDEX FUND	DECEMBER 31, 2014	7

Statement of Operations BlackRock ACWI ex-U.S. Index Fund

Year Ended December 31, 2014
Investment Income
Net investment income allocated from the Master Portfolio:
Dividends — unaffiliated	$	597,154
Securities lending — affiliated — net		5,260
Dividends — affiliated		2,191
Income — affiliated		393
Foreign taxes withheld		(62,836	)
Expenses		(25,546	)
Fees waived		5,500
Total income		522,116
Fund Expenses
Administration		7,417
Service — Investor A		365
Transfer agent — Institutional		9,426
Transfer agent — Investor A		412
Transfer agent — Class K		18
Registration		50,354
Professional		29,705
Printing		16,084
Miscellaneous		8,573
Total expenses		122,354
Less administration fees waived		(7,417	)
Less transfer agent fees waived — Institutional		(24	)
Less transfer agent fees waived — Investor A		(64	)
Less transfer agent fees waived — Class K		(1	)
Less transfer agent fees reimbursed — Institutional		(3,331	)
Less transfer agent fees reimbursed — Investor A		(275	)
Less transfer agent fees reimbursed — Class K		(17	)
Less fees reimbursed by administrator		(94,757	)
Total expenses after fees waived and/or reimbursed		16,468
Net investment income		505,648
Realized and Unrealized Gain (Loss) Allocation from the Master Portfolio
Net realized gain from investments, financial futures contracts, foreign capital gain tax and foreign currency transactions		2,081,148
Net change in unrealized appreciation/depreciation on investments, financial futures contracts and foreign currency translations		(3,625,915	)
Net realized and unrealized loss		(1,544,767	)
Net Decrease in Net Assets Resulting from Operations	$	(1,039,119	)

See Notes to Financial Statements.
8	BLACKROCK ACWI ex-U.S. INDEX FUND	DECEMBER 31, 2014

Statements of Changes in Net Assets BlackRock ACWI ex-U.S. Index Fund

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	505,648		$	270,201
Net realized gain		2,081,148			826,856
Net change in unrealized appreciation/depreciation		(3,625,915	)		568,944
Net increase (decrease) in net assets resulting from operations		(1,039,119	)		1,666,001
Distributions to Shareholders From1
Net investment income:
Institutional		(471,088	)		(287,796	)
Investor A		(3,912	)		(1,049	)
Class K		(33,598	)		(1,578	)
Net realized gain:
Institutional		(1,639,808	)		—
Investor A		(31,240	)		—
Class K		(476,304	)		—
Decrease in net assets resulting from distributions to shareholders		(2,655,950	)		(290,423	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		12,556,607			4,091,169
Net Assets
Total increase in net assets		8,861,538			5,466,747
Beginning of year		15,158,260			9,691,513
End of year	$	24,019,798		$	15,158,260
Distributions in excess of net investment income, end of year	$	(88,503	)	$	(85,553	)
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK ACWI ex-U.S. INDEX FUND	DECEMBER 31, 2014	9

Financial Highlights BlackRock ACWI ex-U.S. Index Fund

	Institutional
	Year Ended December 31,									Period from June 30, 20111 to  December 31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.06		$	9.06		$	8.13		$	10.00
Net investment income2		0.30			0.22			0.17			0.08
Net realized and unrealized gain (loss)		(0.75	)		1.02			1.16			(1.89	)
Net increase (decrease) from investment operations		(0.45	)		1.24			1.33			(1.81	)
Distributions from:3
Net investment income		(0.29	)		(0.24	)		(0.40	)		(0.04	)
Net realized gain		(0.89	)		—			—			—
Return of capital		—			—			(0.00	)4		(0.02	)
Total distributions		(1.18	)		(0.24	)		(0.40	)		(0.06	)
Net asset value, end of period	$	8.43		$	10.06		$	9.06		$	8.13
Total Return5
Based on net asset value		(4.78)%			13.94%			16.61%			(18.05)%	6
Ratios to Average Net Assets7
Total expenses8		0.83%	9		1.25%			0.75%			2.04%	10,11
Total expenses after fees waived and/or reimbursed8		0.21%	9		0.35%			0.34%			0.37%	10
Net investment income8		3.00%	9		2.35%			1.95%			1.78%	10
Supplemental Data
Net assets, end of period (000)	$	17,380		$	15,013		$	9,602		$	46
Portfolio turnover rate of the Master Portfolio		49%			36%			42%			4%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 0.03%, 0.01%, 0.08% and 1.14% for the years ended December 31, 2014, December 31, 2013 and December 31, 2012 and the period ended December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01%.

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 2.08%.

See Notes to Financial Statements.
10	BLACKROCK ACWI ex-U.S. INDEX FUND	DECEMBER 31, 2014

Financial Highlights (continued) BlackRock ACWI ex-U.S. Index Fund

	Investor A
	Year Ended December 31,									Period from June 30, 20111 to  December 31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.06		$	9.06		$	8.13		$	10.00
Net investment income2		0.22			0.21			0.19			0.08
Net realized and unrealized gain (loss)		(0.71	)		1.00			1.12			(1.89	)
Net increase (decrease) from investment operations		(0.49	)		1.21			1.31			(1.81	)
Distributions from:3
Net investment income		(0.27	)		(0.21	)		(0.38	)		(0.04	)
Net realized gain		(0.89	)		—			—			—
Return of capital		—			—			(0.00	)4		(0.02	)
Total distributions		(1.16	)		(0.21	)		(0.38	)		(0.06	)
Net asset value, end of period	$	8.41		$	10.06		$	9.06		$	8.13
Total Return5
Based on net asset value		(5.19)%			13.63%			16.31%			(18.11)%	6
Ratios to Average Net Assets7
Total expenses8		1.30%	9		1.91%			1.88%			2.30%	10,11
Total expenses after fees waived and/or reimbursed8		0.46%	9		0.64%			0.63%			0.62%	10
Net investment income8		2.28%	9		2.21%			2.18%			1.74%	10
Supplemental Data
Net assets, end of period (000)	$	372		$	65		$	39		$	20
Portfolio turnover rate of the Master Portfolio		49%			36%			42%			4%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 0.03%, 0.01%, 0.16% and 1.14% for the years ended December 31, 2014, December 31, 2013 and December 31, 2012, and the period ended December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01%.

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 2.36%.

See Notes to Financial Statements.
	BLACKROCK ACWI ex-U.S. INDEX FUND	DECEMBER 31, 2014	11

Financial Highlights (concluded) BlackRock ACWI ex-U.S. Index Fund

	Class K
	Year Ended December 31,									Period from June 30, 20111 to  December 31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.30		$	9.27		$	8.13		$	10.00
Net investment income2		0.19			0.23			0.28			0.09
Net realized and unrealized gain (loss)		(0.65	)		1.04			1.27			(1.90	)
Net increase (decrease) from investment operations		(0.46	)		1.27			1.55			(1.81	)
Distributions from:3
Net investment income		(0.30	)		(0.24	)		(0.41	)		(0.04	)
Net realized gain		(0.89	)		—			—			—
Return of capital		—			—			(0.00	)4		(0.02	)
Total distributions		(1.19	)		(0.24	)		(0.41	)		(0.06	)
Net asset value, end of period	$	8.65		$	10.30		$	9.27		$	8.13
Total Return5
Based on net asset value		(4.84)%			13.96%			19.25%			(18.04)%	6
Ratio to Average Net Assets7
Total expenses8		0.81%	9		1.36%			1.80%			1.73%	10,11
Total expenses after fees waived and/or reimbursed8		0.15%	9		0.34%			0.33%			0.32%	10
Net investment income8		2.02%	9		2.40%			3.31%			2.03%	10
Supplemental Data
Net assets, end of period (000)	$	6,267		$	80		$	50		$	16,224
Portfolio turnover rate of the Master Portfolio		49%			36%			42%			4%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 0.03%, 0.01%, 0.29% and 1.14% for the years ended December 31, 2014, December 31, 2013 and December 31, 2012, and the period ended December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01%.

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 1.79%.

See Notes to Financial Statements.
12	BLACKROCK ACWI ex-U.S. INDEX FUND	DECEMBER 31, 2014

Notes to Financial Statements BlackRock ACWI ex-U.S. Index Fund

1. Organization:

BlackRock ACWI ex-U.S. 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 an 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 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. At December 31, 2014, the percentage of the Master Portfolio owned by the Fund was 4.1%. 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. 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. 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 and generally available through financial intermediaries. 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 (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund:

Valuation: The Fund’s investments are valued at fair value as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund’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.

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

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

3. 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” or the “Administrator”), an indirect, wholly owned subsidiary of BlackRock, to provide administrative services (other than investment advice and related portfolio activities). Effective March 21, 2014, for such services, the Fund pays BAL a monthly fee at an annual rate of 0.03% of the average daily value of the Fund’s net assets. Prior to March 21, 2014, the Fund paid BAL a monthly fee at an annual rate of 0.10% of the average daily net assets of the Fund. The Fund does not pay an investment advisory fee or investment management fee.

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 13

Notes to Financial Statements (continued) BlackRock ACWI ex-U.S. Index Fund

BlackRock Fund Advisors (“BFA”), the investment advisor for the Master Portfolio and BAL contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business. The expense limitation as a percentage of average daily net assets is as follows:

	Institutional		Investor A		Class K
Rate		0.20%		0.45%		0.15%

Prior to March 21, 2014, the expense limitation, as a percentage of average daily net assets was as follows:

	Institutional		Investor A		Class K
Rate		0.40%		0.65%		0.35%

BFA and BAL have agreed not to reduce or discontinue this contractual waiver or reimbursement prior to May 1, 2015, unless approved by the Trust’s Board of Trustees, including a majority of the independent Trustees. 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 or BAL, as applicable, are less than the expense limit for that share class, the share class is required to repay BFA or BAL, up to the lesser of (a) the amount of fees waived or expenses reimbursed during those 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 or BAL, or an affiliate continues to serve 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 or BAL, as applicable, becomes entitled to reimbursement for fees waived or reimbursed, the amount available to reimburse BFA or BAL, as applicable, shall be calculated by reference to the expense limit for that share class in effect at the time BFA or BAL, became entitled to receive such reimbursement, rather than the subsequently changed expense limit for that share class.

For the year ended December 31, 2014, BAL or BTC, the previous administrator, did not recoup any Fund level or class specific waivers and/or reimbursements previously recorded by the Fund.

On December 31, 2014, the fund level and class specific waiver and/or reimbursements subject to possible future recoupment under the expense limitation agreement with BAL are as follows:

	Expiring December 31,
	2015		2016
Fund level	$	102,028	$	102,174
Institutional	$	1,488	$	3,355
Investor A	$	164	$	339
Class K	$	84	$	18

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 and distribution 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 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 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, 2014, 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		Investor A		Class K
$	24	$	64		—

14 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

Notes to Financial Statements (continued) BlackRock ACWI ex-U.S. 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, which is included in officer and directors in the Statement of Operations.

4. Income Tax Information:

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

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns remains open for each of the three years ending with December 31, 2014, 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 that there are any uncertain tax positions that require recognition of a tax liability.

The tax character of distributions paid was as follows:

	12/31/14		12/31/13
Ordinary income	$	602,300	$	290,423
Long-term capital gains		2,053,650		—
Total	$	2,655,950	$	290,423

As of December 31, 2014, the tax components of accumulated net earnings were as follows:

Undistributed ordinary income	$	23,734
Undistributed capital gains		159,561
Net unrealized gains1		531,758
Total	$	715,053

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, 2014						Year Ended December 31, 2013
	Shares			Amount			Shares			Amount
Institutional
Shares sold		489,164		$	4,780,732			601,760		$	5,686,801
Shares issued to shareholders in reinvestment of distributions		236,533			2,110,279			30,674			287,194
Shares redeemed		(154,562	)		(1,526,584	)		(199,954	)		(1,927,201	)
Net increase		571,135		$	5,364,427			432,480		$	4,046,794
Investor A
Shares sold		36,520		$	345,700			4,812		$	47,554
Shares issued to shareholders in reinvestment of distributions		3,748			32,243			55			512
Shares redeemed		(2,444	)		(24,614	)		(2,761	)		(26,703	)
Net increase		37,824		$	353,329			2,106		$	21,363
Class K
Shares sold		697,040		$	6,707,086			2,334		$	22,682
Shares issued to shareholders in reinvestment of distributions		58,087			506,140			85			813
Shares redeemed		(38,209	)		(374,375	)		(49	)		(483	)
Net increase		716,918		$	6,838,851			2,370		$	23,012
Total Net Increase		1,325,877		$	12,556,607			436,956		$	4,091,169

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 15

Notes to Financial Statements (concluded) BlackRock ACWI ex-U.S. Index Fund

At December 31, 2014, shares owned by affiliates were as follows:

	Shares
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.

16 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

Report of Independent Registered Public Accounting Firm BlackRock ACWI ex-U.S. Index  Fund

To the Board of Trustees of BlackRock Funds III and the Shareholders of BlackRock ACWI ex-U.S. 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-U.S. Index Fund (the “Fund”), a series of BlackRock Funds III, at December 31, 2014, 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 23, 2015

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid during the taxable year ended December 31, 2014.

	Payable Dates
Qualified Dividend Income for Individuals1		4/2/14 — 1/2/15	70.28%
Foreign Source Income2		4/2/14 — 1/2/15	73.32%
Foreign Taxes Paid Per Share3		03/31/2014	$0.009112612
		06/30/2014	$0.009523213
		09/30/2014	$0.004913381
		12/31/2014	$0.002852654

¹  The Fund hereby designates 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.

Additionally, the Fund distributed long-term capital gains of $0.189629 and $0.66686 per share to shareholders on record June 27, 2014 and December 30, 2014, respectively.

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 17

Master Portfolio Information ACWI ex-U.S. Index Master  Portfolio

As of December 31, 2014

Ten Largest Holdings Percent of
Long-Term Investments

iShares India 50 ETF	2	%
Nestle SA, Registered Shares	1
Novartis AG, Registered Shares	1
Roche Holding AG	1
HSBC Holdings PLC	1
Toyota Motor Corp	1
Samsung Electronics Co. Ltd.	1
Royal Dutch Shell PLC	1
BP PLC	1
Bayer AG, Registered Shares	1

Geographic Allocation Percent of
Long-Term Investments

Japan	15	%
United Kingdom	13
Canada	8
Switzerland	7
France	7
Germany	6
Australia	5
China	4
Hong Kong	3
Netherlands	3
South Korea	3
Taiwan	3
Spain	3
Sweden	2
Brazil	2
South Africa	2
India	2
Italy	2
Other1	10

¹  Other includes a 1% or less holding in each of the following countries: Austria, Belgium, Chile, Columbia, Czech Republic, Denmark, Egypt, Finland, Greece, Hungary, Indonesia, Ireland, Israel, Luxembourg, Malaysia, Malta, Mexico, New Zealand, Norway, Peru, Philippines, Poland, Portugal, Qatar, Russia, Singapore, Thailand, Turkey and United Arab Emirates.

18 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

Schedule of Investments December 31, 2014 ACWI ex-U.S. Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Australia — 5.1%
AGL Energy, Ltd.		20,068	$	218,884
ALS Ltd.		7,944		34,412
Alumina Ltd. (a)		80,719		116,615
Amcor Ltd.		40,527		445,891
AMP Ltd.		98,075		436,803
APA Group		34,054		205,866
Asciano Ltd.		31,432		153,930
ASX Ltd.		9,130		272,389
Aurizon Holdings Ltd.		75,249		281,602
AusNet Services		34,747		37,540
Australia & New Zealand Banking Group Ltd.		87,399		2,274,117
Bank of Queensland Ltd.		19,847		195,531
Bendigo and Adelaide Bank Ltd. (b)		16,747		174,134
BHP Billiton Ltd.		107,579		2,543,450
Boral Ltd.		17,729		76,081
Brambles Ltd.		52,252		450,111
Caltex Australia Ltd.		4,201		116,565
Coca-Cola Amatil Ltd.		19,681		148,593
Cochlear Ltd.		3,188		201,121
Commonwealth Bank of Australia		51,308		3,564,815
Computershare Ltd.		9,083		86,885
Crown Resorts Ltd.		12,817		131,815
CSL Ltd.		15,087		1,059,797
Dexus Property Group		28,431		160,944
Federation Centres Ltd.		30,631		71,317
Flight Centre Travel Group Ltd.		1,384		36,636
Fortescue Metals Group Ltd. (b)		63,976		140,468
Goodman Group		49,324		227,822
GPT Group		54,780		193,869
Harvey Norman Holdings Ltd.		13,921		37,998
Healthscope Ltd. (a)		26,094		57,648
Iluka Resources Ltd.		9,454		45,403
Incitec Pivot Ltd.		38,140		98,657
Insurance Australia Group Ltd.		78,566		398,920
Leighton Holdings Ltd.		1,949		35,488
Lend Lease Group		18,572		247,358
Macquarie Group Ltd.		9,511		448,509
Medibank Pvt, Ltd. (a)		82,000		161,337
Metcash Ltd.		16,089		24,248
Mirvac Group		140,792		203,663
National Australia Bank Ltd.		76,596		2,088,793
Newcrest Mining Ltd. (a)		27,909		245,569
Novion Property Group		47,881		82,299
Orica Ltd.		11,184		171,379
Origin Energy Ltd.		36,950		349,600
Qantas Airways Ltd. (a)		22,815		44,314
QBE Insurance Group Ltd.		44,598		404,967
Ramsay Health Care Ltd.		4,654		215,751
REA Group Ltd.		1,087		39,854
Common Stocks	Shares		Value
Australia (concluded)
Rio Tinto Ltd.		14,902	$	698,619
Santos Ltd.		33,767		225,556
Scentre Group (a)		175,181		496,318
Seek Ltd.		8,851		123,419
Sonic Healthcare Ltd.		13,392		201,477
Stockland		83,188		278,004
Suncorp Group Ltd.		42,251		482,666
Sydney Airport		37,256		142,634
Tabcorp Holdings Ltd.		17,884		60,371
Tatts Group Ltd.		31,435		88,411
Telstra Corp. Ltd.		139,094		675,277
Toll Holdings Ltd.		15,031		71,600
TPG Telecom Ltd.		4,588		25,098
Transurban Group		60,819		423,831
Treasury Wine Estates Ltd.		43,110		166,395
Wesfarmers Ltd.		37,685		1,275,925
Westfield Corp. (a)		65,762		482,059
Westpac Banking Corp.		98,478		2,648,642
Woodside Petroleum Ltd.		25,151		777,853
Woolworths Ltd.		44,221		1,098,874
WorleyParsons Ltd.		4,265		34,936
				29,937,723
Austria — 0.1%
Andritz AG		2,393		131,558
Erste Group Bank AG		8,935		207,816
IMMOFINANZ AG (a)		35,399		89,153
OMV AG		5,831		154,832
Raiffeisen Bank International AG (b)		4,478		68,424
Vienna Insurance Group AG		832		37,185
Voestalpine AG		3,007		118,816
				807,784
Belgium — 0.9%
Ageas		6,465		229,864
Anheuser-Busch InBev NV		26,199		2,948,470
Belgacom SA		5,694		206,598
Colruyt SA		3,569		165,921
Delhaize Group		3,087		224,812
Groupe Bruxelles Lambert SA		2,908		248,111
KBC Groep NV (a)		8,298		463,111
Solvay SA		2,098		283,891
Telenet Group Holding NV (a)		1,113		62,459
UCB SA		4,329		329,166
Umicore SA		3,627		145,952
				5,308,355
Brazil — 1.8%
AES Tiete SA, Preference Shares		3,700		25,222
AMBEV SA		158,200		973,053

Portfolio Abbreviations

ADR	American Depositary Receipts
CVA	Certificaten Van Aandelen (Dutch Certificate)
ETF	Exchange-Traded Fund
GDR	Global Depositary Receipt
MSCI	Morgan Stanley Capital International
NVDR	Non-voting Depository Receipts
REIT	Real Estate Investment Trust

See Notes to Financial Statements.

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 19

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

Common Stocks	Shares		Value
Brazil (continued)
B2W Cia Digital (a)		4,600	$	38,832
Banco Bradesco SA — ADR		16,230		209,545
Banco Bradesco SA, Preference Shares		71,390		941,590
Banco do Brasil SA		29,600		264,687
Banco do Estado do Rio Grande do Sul, Preference Shares		2,900		15,819
Banco Santander Brasil SA		12,700		64,307
BB Seguridade Participacoes SA		24,300		293,991
BM&FBovespa SA		64,700		239,747
BR Malls Participacoes SA		13,700		84,678
Bradespar SA, Preference Shares		5,000		26,898
Braskem SA, Preference A Shares		11,000		72,417
BRF SA		21,300		508,341
CCR SA		32,500		188,408
Centrais Eletricas Brasileiras SA		48,200		105,169
Centrais Eletricas Brasileiras SA, Preference ‘B’ Shares		1,600		4,924
CETIP SA — Mercados Organizado		5,107		61,863
Cia Brasileira de Distribuicao Grupo Pao de Acucar, Preference Shares		4,300		159,547
Cia Energetica de Minas Gerais, Preference Shares		24,313		120,184
Cia Energetica de Sao Paulo, Preference ‘B’ Shares		4,000		40,343
Cia Paranaense de Energia, Preference B Shares		1,600		21,609
Cielo SA		23,760		372,462
Companhia de Saneamento Basico do Estado de Sao Paulo		7,000		44,793
Companhia Siderurgica Nacional SA		15,900		33,377
Cosan SA Industria e Comercio		1,800		19,536
CPFL Energia SA		3,600		25,041
Cyrela Brazil Realty SA		6,700		27,877
Duratex SA		5,621		16,980
EcoRodovias Infraestrutura e Logistica SA		5,600		22,457
EDP — Energias do Brasil SA		900		3,037
Embraer SA		20,400		187,561
Estacio Participacoes SA		12,400		111,116
Fibria Celulose SA (a)		6,600		80,718
Gerdau SA, Preference Shares		30,600		110,281
Hypermarcas SA (a)		7,700		48,230
Itau Unibanco Holding SA, Preference Shares		87,923		1,144,434
Itausa — Investimentos Itau SA, Preference Shares		106,376		375,770
JBS SA		31,400		132,300
Klabin SA, Preference Shares		22,200		121,849
Kroton Educacional SA		47,568		277,370
Localiza Rent a Car SA		2,940		39,496
Lojas Americanas SA		6,000		29,569
Lojas Americanas SA, Preference Shares		12,320		79,902
Lojas Renner SA		4,300		123,701
M Dias Branco SA		1,500		51,350
Metalurgica Gerdau SA, Preference Shares		7,600		32,308
Multiplan Empreendimentos Imobiliarios SA		1,200		21,416
Natura Cosmeticos SA		3,300		39,540
Odontoprev SA		600		2,226
Oi SA, Preference Shares (a)		22,800		73,849
Petroleo Brasileiro SA		86,800		313,149
Petroleo Brasileiro SA, Preference Shares		152,800		575,975
Porto Seguro SA		4,400		50,320
Qualicorp SA (a)		4,200		43,924
Raia Drogasil SA		4,700		44,822
Souza Cruz SA		22,800		165,712
Sul America SA		1,638		7,955
Suzano Papel e Celulose SA, Preference ‘A’ Shares		4,100		17,352
Common Stocks	Shares		Value
Brazil (concluded)
Telefonica Brasil SA, Preference Shares		7,800	$	137,473
Tim Participacoes SA		23,040		102,103
Totvs SA		3,300		43,450
Tractebel Energia SA		4,600		58,543
Transmissora Alianca de Energia Eletrica SA		3,300		23,389
Ultrapar Participacoes SA		12,900		249,682
Usinas Siderurgicas de Minas Gerais SA, Preference ‘A’ Shares (a)		9,600		18,238
Vale SA		39,300		323,927
Vale SA, Preference Shares		63,000		455,756
Via Varejo SA (a)		2,300		17,971
WEG SA		5,460		62,853
				10,822,314
Canada — 7.2%
Agnico Eagle Mines Ltd.		7,940		197,646
Agrium, Inc.		4,774		452,006
Alimentation Couche Tard, Inc., Class B		14,032		588,069
AltaGas Ltd.		3,525		131,497
ARC Resources Ltd.		7,830		169,567
Atco Ltd. Class I		1,525		62,559
Bank of Montreal		21,967		1,553,837
Bank of Nova Scotia		38,436		2,193,744
Barrick Gold Corp.		31,297		337,268
Baytex Energy Corp. (b)		3,258		54,179
BCE, Inc.		9,265		424,892
BlackBerry Ltd. (a)(b)		17,331		190,047
Bombardier, Inc., Class B		30,594		109,283
Brookfield Asset Management Inc., Class A		19,144		959,342
CAE, Inc.		5,726		74,323
Cameco Corp.		12,619		206,913
Canadian Imperial Bank of Commerce		13,854		1,190,552
Canadian National Railway Co.		27,785		1,913,716
Canadian Natural Resources Ltd.		38,153		1,179,597
Canadian Oil Sands Ltd.		11,879		106,541
Canadian Pacific Railway Ltd.		6,028		1,160,927
Canadian Tire Corp. Ltd., Class A		2,664		281,442
Canadian Utilities Ltd., Class A		2,455		86,447
Catamaran Corp. (a)		7,125		368,699
Cenovus Energy, Inc.		26,444		545,587
CGI Group, Inc., Class A (a)		7,606		289,955
CI Financial Corp.		6,479		180,071
Constellation Software, Inc.		694		206,348
Crescent Point Energy Corp.		13,506		312,831
Dollarama, Inc.		3,982		203,590
Eldorado Gold Corp.		17,582		107,145
Empire Co. Ltd., Class A		2,260		170,443
Enbridge, Inc.		27,498		1,413,953
Encana Corp.		20,277		282,217
Enerplus Corp.		4,790		46,135
Fairfax Financial Holdings Ltd.		712		373,086
Finning International, Inc.		3,927		85,280
First Capital Realty, Inc.		2,654		42,627
First Quantum Minerals Ltd.		16,418		233,311
Fortis, Inc.		9,289		311,499
Franco-Nevada Corp.		5,471		269,406
George Weston Ltd.		2,045		176,636
Gildan Activewear, Inc.		4,180		236,380
Goldcorp, Inc.		25,686		475,560
Great-West Lifeco, Inc.		8,975		259,486
H&R Real Estate Investment Trust		2,945		55,083

See Notes to Financial Statements.

20 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

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

Common Stocks	Shares		Value
Canada (concluded)
Husky Energy, Inc.		14,784	$	349,940
IGM Financial, Inc.		4,062		161,914
Imperial Oil Ltd.		9,817		422,913
Industrial Alliance Insurance & Financial Services, Inc.		2,346		89,717
Intact Financial Corp.		4,581		330,622
Inter Pipeline Ltd.		13,352		413,041
Keyera Corp.		3,057		213,316
Kinross Gold Corp. (a)		25,843		72,515
Loblaw Cos. Ltd.		7,425		397,325
Magna International, Inc.		7,305		791,553
Manulife Financial Corp.		55,754		1,064,403
MEG Energy Corp. (a)		3,405		57,297
Methanex Corp.		3,065		140,798
Metro, Inc.		2,814		225,982
National Bank of Canada		10,788		459,080
New Gold, Inc. (a)		12,456		53,392
Onex Corp.		3,099		179,944
Open Text Corp.		4,421		257,277
Paramount Resources Ltd., Class A (a)(b)		2,674		64,721
Pembina Pipeline Corp.		11,016		401,461
Penn West Petroleum Ltd.		8,639		18,069
Peyto Exploration & Development Corp.		6,142		176,943
Potash Corp. of Saskatchewan, Inc.		27,039		955,837
Power Corp. of Canada		10,682		292,013
Power Financial Corp.		8,583		267,286
PrairieSky Royalty, Ltd.		5,018		132,166
Restaurant Brands International, Inc. (a)		6,698		262,316
RioCan Real Estate Investment Trust		3,112		70,795
Rogers Communications, Inc., Class B		11,748		456,754
Royal Bank of Canada		45,472		3,140,535
Saputo, Inc.		10,940		328,822
Shaw Communications, Inc., Class B		11,012		297,148
Silver Wheaton Corp.		11,005		223,832
SNC-Lavalin Group, Inc.		5,688		216,935
Sun Life Financial, Inc.		20,471		738,633
Suncor Energy, Inc.		48,378		1,536,537
Talisman Energy, Inc.		26,289		205,913
Teck Resources Ltd., Class B		14,751		201,623
TELUS Corp.		5,212		187,925
Thomson Reuters Corp.		12,007		484,393
The Toronto-Dominion Bank		57,877		2,765,323
Tourmaline Oil Corp. (a)		4,874		162,355
TransAlta Corp.		5,518		49,965
TransCanada Corp.		23,462		1,153,107
Turquoise Hill Resources Ltd. (a)(b)		14,761		45,612
Valeant Pharmaceuticals International, Inc. (a)		10,933		1,565,231
Vermilion Energy, Inc.		4,033		197,866
Yamana Gold, Inc.		26,930		108,712
				42,659,579
Chile — 0.3%
AES Gener SA		90,837		48,277
Aguas Andinas SA, Class A		76,400		44,225
Banco de Chile		925,218		107,203
Banco de Credito e Inversiones		721		35,574
Banco Santander Chile SA		2,103,327		105,114
CAP SA		2,694		11,906
Cencosud SA		24,684		61,586
Colbun SA		166,420		44,305
Companhia Cervecerias Unidas SA		4,404		41,658
Common Stocks	Shares		Value
Chile (concluded)
CorpBanca		2,375,874	$	28,531
Embotelladora Andina SA, Preference ‘B’ Shares		9,220		26,084
Empresa Nacional de Electricidad SA		108,791		165,185
Empresa Nacional de Telecomunicaciones SA		2,032		20,412
Empresas CMPC SA		36,023		90,138
Empresas COPEC SA		16,033		180,933
Enersis SA		884,292		289,606
Latam Airlines Group SA (a)		7,853		91,407
SACI Falabella		26,826		179,963
Sociedad Quimica y Minera de Chile SA, Preference ‘B’ Shares		1,850		44,941
Vina Concha y Toro SA		26,443		51,705
				1,668,753
China — 3.4%
AAC Technologies Holdings, Inc. (b)		39,500		210,071
Agricultural Bank of China Ltd., Class H		697,000		350,567
Air China Ltd., Class H		62,000		50,025
Aluminum Corp. of China Ltd., Class H (a)		64,000		29,599
Anhui Conch Cement Co. Ltd., Class H (b)		35,500		131,434
Anta Sports Products Ltd.		81,000		142,388
AviChina Industry & Technology Co. Ltd., Class H		116,000		71,120
Bank of China Ltd., Class H		2,587,000		1,452,003
Bank of Communications Co. Ltd., Class H		321,700		299,107
BBMG Corp., Class H		39,500		32,838
Beijing Capital International Airport Co. Ltd., Class H		28,000		22,320
Byd Co. Ltd., Class H		18,500		71,346
CGN Power Co. Ltd. (a)(c)		365,000		158,621
China Cinda Asset Management Co., Ltd. (a)		186,000		90,071
China Citic Bank Corp. Ltd., Class H		260,000		207,282
China Coal Energy Co. Ltd., Class H (b)		107,000		66,887
China Communications Construction Co. Ltd., Class H		142,000		170,061
China Communications Services Corp. Ltd., Class H		44,000		20,574
China Construction Bank Corp., Class H		2,374,000		1,939,042
China COSCO Holdings Co. Ltd., Class H (a)		33,500		16,454
China Everbright Bank Co. Ltd., Class H		58,000		31,422
China Galaxy Securities Co. Ltd., Class H		48,500		60,441
China Huishan Dairy Holdings Co. Ltd. (b)		107,000		18,525
China International Marine Containers Group Co. Ltd., Class H		12,000		26,459
China Life Insurance Co. Ltd., Class H		239,000		936,436
China Longyuan Power Group Corp., Class H		125,000		128,900
China Medical System Holdings, Ltd.		28,000		46,130
China Merchants Bank Co. Ltd., Class H		143,078		357,144
China Minsheng Banking Corp. Ltd., Class H		186,900		244,338
China National Building Material Co. Ltd., Class H		132,000		127,338
China Oilfield Services Ltd., Class H		38,000		65,613
China Pacific Insurance Group Co. Ltd., Class H		88,200		443,736
China Petroleum & Chemical Corp. Class H		812,400		657,913
China Railway Construction Corp. Ltd., Class H		41,000		52,058
China Railway Group Ltd., Class H		90,000		73,608
China Shenhua Energy Co. Ltd., Class H		109,000		321,649
China Shipping Container Lines Co. Ltd., Class H (a)		122,000		38,327
China Telecom Corp. Ltd., Class H		594,000		344,512
China Vanke Co., Ltd. , Class H, Class H (a)		30,600		67,881
Chongqing Changan Automobile Co., Ltd.		21,400		48,459
Chongqing Rural Commercial Bank, Class H		79,000		49,013
CITIC Securities Co. Ltd., Class H		34,500		128,952
CNOOC Ltd.		564,000		762,623
Country Garden Holdings Co. Ltd.		214,270		85,498

See Notes to Financial Statements.

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 21

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

Common Stocks		Shares		Value
China (concluded)
CSR Corp. Ltd., Class H			29,000	$	39,042
Datang International Power Generation Co. Ltd., Class H			20,000		10,799
Dongfeng Motor Group Co. Ltd., Class H			80,000		111,906
Evergrande Real Estate Group Ltd. (b)			286,000		115,252
Fosun International Ltd.			39,500		51,488
Great Wall Motor Co. Ltd., Class H			32,000		181,007
Guangzhou Automobile Group Co. Ltd., Class H			52,000		47,017
Guangzhou R&F Properties Co. Ltd., Class H (b)			13,200		16,071
Haitian International Holdings Ltd.			39,000		81,740
Haitong Securities Co. Ltd., Class H			28,000		69,885
Hengan International Group Co., Ltd.			26,000		271,081
Huadian Power International Corp., Ltd.			38,000		32,966
Huaneng Power International, Inc., Class H			122,000		164,852
Industrial & Commercial Bank of China Ltd., Class H			2,387,000		1,742,968
Inner Mongolia Yitai Coal Co., Class B			25,300		36,214
Intime Retail Group Co. Ltd.			37,000		26,754
Jiangsu Expressway Co. Ltd., Class H			26,000		30,956
Jiangxi Copper Co. Ltd., Class H			36,000		61,446
Kingsoft Corp. Ltd. (b)			11,000		21,619
Lenovo Group Ltd.			232,000		302,902
Longfor Properties Co. Ltd.			30,000		38,465
New China Life Insurance Co. Ltd., Class H			20,900		104,873
People’s Insurance Co. Group of China Ltd., Class H			123,000		57,167
PetroChina Co. Ltd., Class H			688,000		763,740
PICC Property & Casualty Co. Ltd., Class H			107,532		207,507
Ping An Insurance Group Co. of China Ltd., Class H			83,000		840,420
Semiconductor Manufacturing International Corp. (a)			619,000		56,499
Shandong Weigao Group Medical Polymer Co., Ltd., Class H			44,000		35,519
Shanghai Electric Group Co. Ltd., Class H			104,000		55,222
Shanghai Fosun Pharmaceutical Group Co., Ltd., Class H			7,000		25,013
Shanghai Pharmaceuticals Holding Co., Ltd., Class H			19,100		43,007
Shenzhou International Group Holdings Ltd.			12,000		39,546
Shui On Land Ltd.			76,666		18,030
Sihuan Pharmaceutical Holdings Group Ltd.			110,000		73,167
Sino-Ocean Land Holdings Ltd.			86,000		48,489
Sinopec Engineering Group Co. Ltd.			13,500		9,086
Sinopec Shanghai Petrochemical Co. Ltd., Class H			123,000		35,840
Sinopharm Group Co. Ltd., Class H			47,200		166,090
Sinotrans, Ltd. , Class H			45,000		29,732
SOHO China Ltd.			30,500		21,512
Tencent Holdings Ltd.			164,300		2,377,244
Tingyi Cayman Islands Holding Corp.			64,000		145,442
Tsingtao Brewery Co. Ltd., Class H			14,000		94,431
Uni-President China Holdings Ltd.			135,600		124,852
Want Want China Holdings Ltd.			211,000		277,320
Weichai Power Co. Ltd., Class H			12,200		51,140
Yanzhou Coal Mining Co. Ltd., Class H			36,000		30,500
Zhejiang Expressway Co. Ltd., Class H			28,000		32,426
Zhuzhou CSR Times Electric Co. Ltd., Class H			6,500		37,929
Zijin Mining Group Co. Ltd., Class H			138,000		39,022
ZTE Corp., Class H			12,000		25,964
					19,969,944
Colombia — 0.2%
Almacenes Exito SA			3,923		48,202
Banco Davivienda SA, Preference Shares	��		3,212		37,979
Bancolombia SA			11,536		139,024
Cementos Argos SA			16,730		71,806
Common Stocks		Shares		Value
Colombia (concluded)
Cemex Latam Holdings SA (a)			9,796	$	65,952
Corp. Financiera Colombiana SA			1,406		23,641
Ecopetrol SA			184,080		161,114
Grupo Argos SA			6,618		57,088
Grupo Argos SA, Preference Shares			2,637		22,192
Grupo Aval Acciones y Valores			125,734		67,721
Grupo de Inversiones Suramericana SA			6,592		110,953
Grupo de Inversiones Suramericana SA, Preference Shares			803		13,347
Interconexion Electrica SA			6,953		25,249
Isagen SA ESP			27,340		34,110
Pacific Rubiales Energy Corp.			5,727		35,443
					913,821
Czech Republic — 0.0%
CEZ AS			3,592		92,235
Komercni Banka AS			352		72,442
Telefonica O2 Czech Republic			1,500		15,267
					179,944
Denmark — 1.1%
A.P. Moeller — Maersk A/S, Class A			123		235,376
A.P. Moeller — Maersk A/S, Class B			235		467,403
Carlsberg A/S, Class B			3,703		284,390
Coloplast A/S, Class B			3,847		321,934
Danske Bank A/S			22,564		610,037
DSV A/S			6,487		197,522
ISS A/S (a)			2,356		67,624
Novo Nordisk A/S, Class B			63,042		2,666,661
Novozymes A/S, Class B			7,759		326,604
Pandora A/S			3,606		292,292
TDC A/S			27,771		211,807
Tryg A/S			1,005		112,296
Vestas Wind Systems A/S (a)			9,527		345,989
William Demant Holding A/S (a)			641		48,764
					6,188,699
Egypt — 0.0%
Commercial International Bank			19,759		134,818
Orascom Telecom Holding SAE (a)			69,057		38,834
Talaat Moustafa Group			21,412		29,265
Telecom Egypt			12,924		21,335
					224,252
Finland — 0.6%
Elisa OYJ			5,807		158,502
Fortum OYJ			13,380		290,501
Kone OYJ, Class B (b)			9,344		425,411
Metso OYJ			3,741		112,004
Neste Oil OYJ			5,327		129,305
Nokia OYJ			118,200		934,821
Nokian Renkaat OYJ			4,713		114,967
Orion OYJ, Class B			4,256		132,364
Sampo OYJ, Class A			14,891		697,113
Stora Enso OYJ, Class R			16,242		145,219
UPM-Kymmene OYJ			17,293		283,400
Wartsila OYJ			4,749		212,557
					3,636,164
France — 6.6%
Accor SA			6,151		276,494
Aeroports de Paris			1,132		136,887

See Notes to Financial Statements.

22 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

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

Common Stocks	Shares		Value
France (continued)
Air Liquide SA		11,434	$	1,414,839
Airbus Group NV		20,758		1,026,234
Alcatel-Lucent (a)		114,729		410,411
Alstom SA (a)		7,099		228,961
ArcelorMittal		38,761		424,661
Arkema		2,229		147,419
AtoS		2,605		206,981
AXA SA		56,573		1,303,614
BNP Paribas SA		33,159		1,957,511
Bollore SA		25,400		115,674
Bouygues SA		5,166		186,535
Bureau Veritas SA		7,145		158,304
Cap Gemini SA		4,906		350,863
Carrefour SA		19,759		601,294
Casino Guichard-Perrachon SA		1,776		163,329
Christian Dior SA		1,871		320,199
Cie Generale des Etablissements Michelin		5,829		526,164
CNP Assurances		7,565		134,114
Compagnie de Saint-Gobain		15,392		652,018
Credit Agricole SA		31,403		405,366
Danone SA		17,969		1,174,778
Dassault Systemes SA		4,519		275,570
Edenred		7,704		213,062
EDF		8,410		231,514
Essilor International SA		6,642		740,711
Eurazeo		609		42,652
Eutelsat Communications SA		4,668		150,961
Fonciere Des Regions		673		62,202
GDF Suez		43,367		1,011,276
Gecina SA		595		74,278
Groupe Eurotunnel SA, Registered Shares		14,767		190,644
Hermes International		1,048		373,174
ICADE		419		33,525
Iliad SA		930		223,606
Imerys SA		704		51,794
JCDecaux SA		1,720		59,221
Kering		2,493		479,081
Klepierre		4,001		171,796
L’Oreal SA		7,767		1,299,977
Lafarge SA		5,653		396,841
Lagardere SCA		4,159		108,309
Legrand SA		8,568		449,462
LVMH Moet Hennessy Louis Vuitton SA		8,649		1,370,016
Natixis		34,499		227,646
Numericable-SFR (a)		3,161		156,594
Orange SA		60,797		1,033,957
Pernod Ricard SA		7,140		793,523
Peugeot SA (a)		11,254		137,888
Publicis Groupe SA		6,086		436,460
Remy Cointreau SA		373		24,886
Renault SA		6,259		455,882
Rexel SA		9,904		177,441
Safran SA		10,170		627,438
Sanofi		37,605		3,428,464
Schneider Electric SE (a)		16,539		1,204,522
SCOR SE		6,039		182,984
SES SA		11,801		424,324
Societe BIC SA		705		93,711
Societe Generale SA		22,941		960,085
Sodexo		3,275		320,571
Common Stocks	Shares		Value
France (concluded)
Suez Environnement Co.		9,240	$	160,991
Technip SA		3,245		193,297
Thales SA		3,616		195,652
Total SA		67,743		3,470,609
Unibail-Rodamco SE		3,504		898,901
Valeo SA		2,350		292,411
Vallourec SA		3,788		102,661
Veolia Environnement SA		14,465		256,216
Vinci SA		15,492		845,902
Vivendi SA (a)		42,719		1,063,299
Wendel SA		628		70,364
Zodiac Aerospace		5,927		199,549
				38,768,550
Germany — 6.2%
adidas AG		6,835		474,660
Allianz SE, Registered Shares		14,285		2,365,970
Axel Springer AG		598		36,068
BASF SE		28,765		2,412,834
Bayer AG, Registered Shares		26,182		3,568,826
Bayerische Motoren Werke AG		11,505		1,241,599
Bayerische Motoren Werke AG, Preference Shares		1,166		95,262
Beiersdorf AG		3,531		286,696
Brenntag AG		4,247		237,450
Celesio AG		1,037		33,423
Commerzbank AG (a)		30,631		401,774
Continental AG		3,634		766,493
Daimler AG, Registered Shares		30,191		2,507,485
Deutsche Annington Immobilien SE		8,718		295,991
Deutsche Bank AG, Registered Shares		45,625		1,366,211
Deutsche Boerse AG		6,412		455,649
Deutsche Lufthansa AG, Registered Shares		12,602		208,827
Deutsche Post AG, Registered Shares		33,930		1,101,433
Deutsche Telekom AG, Registered Shares		105,642		1,690,307
Deutsche Wohnen AG		10,427		245,970
E.ON SE		65,794		1,124,531
Fraport AG Frankfurt Airport Services Worldwide		748		43,161
Fresenius Medical Care AG & Co. KGaA		7,118		531,265
Fresenius SE & Co. KGaA		12,202		634,431
GEA Group AG		5,467		240,363
Hannover Rueck SE		1,801		162,471
HeidelbergCement AG		4,816		339,913
Henkel AG & Co. KGaA		3,965		384,083
Henkel AG & Co. KGaA, Preference Shares		5,517		594,279
Hugo Boss AG		1,073		131,262
Infineon Technologies AG		37,034		391,888
K+S AG, Registered Shares		5,435		149,980
Kabel Deutschland Holding AG (a)		984		133,350
Lanxess AG		3,425		158,619
Linde AG		6,471		1,191,973
MAN SE		1,443		160,705
Merck KGaA		4,253		400,243
Metro AG (a)		4,258		130,157
Muenchener Rueckversicherungs AG, Registered Shares		5,625		1,120,148
Osram Licht AG (a)		3,389		133,052
Porsche Automobil Holding SE, Preference Shares		5,120		414,068
ProSiebenSat.1 Media AG, Registered Shares		6,490		271,174
RWE AG		15,853		489,297
SAP AG		29,181		2,037,661
Siemens AG, Registered Shares		24,948		2,799,262

See Notes to Financial Statements.

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 23

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

Common Stocks	Shares		Value
Germany (concluded)
Symrise AG		4,423	$	266,464
Telefonica Deutschland Holding AG (a)		33,908		179,707
ThyssenKrupp AG (a)		14,717		374,898
TUI AG (a)		10,701		176,799
TUI AG		5,886		94,583
United Internet AG, Registered Shares		4,712		212,252
Volkswagen AG		1,298		281,411
Volkswagen AG, Preference Shares		5,047		1,121,723
				36,668,101
Greece — 0.1%
Alpha Bank AE (a)		199,078		111,830
Eurobank Ergasias SA (a)		225,111		50,288
FF Group (a)		440		14,058
Hellenic Telecommunications Organization SA (a)		5,639		61,661
JUMBO SA		1,999		20,326
National Bank of Greece SA (a)		51,085		89,666
OPAP SA		8,833		94,657
Piraeus Bank SA (a)		86,435		94,053
Public Power Corp. SA (a)		2,220		14,496
Titan Cement Co. SA		990		22,965
				574,000
Hong Kong — 3.3%
AIA Group Ltd.		375,200		2,069,402
Alibaba Health Information Technology, Ltd. (a)		76,000		49,564
Alibaba Pictures Group, Ltd. (a)		640,000		113,131
ASM Pacific Technology Ltd.		6,300		59,985
Bank of East Asia Ltd.		59,000		236,945
Beijing Enterprises Holdings Ltd.		17,500		136,862
Beijing Enterprises Water Group Ltd. (a)		232,000		156,764
Belle International Holdings Ltd.		150,000		168,487
BOC Hong Kong Holdings Ltd.		123,500		411,519
Brilliance China Automotive Holdings Ltd.		90,000		144,100
Cathay Pacific Airways Ltd.		32,000		69,739
Cheung Kong Holdings Ltd.		50,000		837,341
Cheung Kong Infrastructure Holdings Ltd.		21,000		154,429
China Agri-Industries Holdings Ltd. (a)		43,100		17,695
China Everbright International Ltd.		107,000		157,975
China Everbright Ltd.		30,000		70,991
China Gas Holdings Ltd.		74,000		115,890
China Mengniu Dairy Co., Ltd.		52,000		214,117
China Merchants Holdings International Co. Ltd.		60,000		201,534
China Mobile Ltd.		197,500		2,313,267
China Overseas Land & Investment Ltd.		138,000		408,236
China Resources Cement Holdings Ltd.		90,000		58,002
China Resources Enterprise Ltd.		26,000		54,316
China Resources Gas Group Ltd.		16,000		41,350
China Resources Land Ltd.		68,000		178,705
China Resources Power Holdings Co., Ltd.		64,000		163,246
China South City Holdings, Ltd.		94,000		42,523
China State Construction International Holdings Ltd.		44,000		61,535
China Taiping Insurance Holdings Co. Ltd. (a)		28,072		79,775
China Unicom Hong Kong Ltd.		208,000		278,749
CITIC Ltd.		82,000		139,792
CLP Holdings Ltd.		61,500		532,554
COSCO Pacific Ltd.		36,000		50,986
CSPC Pharmaceutical Group Ltd.		76,000		66,801
ENN Energy Holdings Ltd.		28,000		158,405
Far East Horizon Ltd.		85,000		83,544
First Pacific Co. Ltd.		62,000		61,225
Common Stocks	Shares		Value
Hong Kong (concluded)
Franshion Properties China Ltd.		130,000	$	37,100
Galaxy Entertainment Group Ltd.		78,000		433,424
GCL-Poly Energy Holdings Ltd. (a)		431,000		100,114
Geely Automobile Holdings Ltd.		235,000		74,301
GOME Electrical Appliances Holding Ltd.		266,000		38,880
Guangdong Investment Ltd.		56,000		72,937
Haier Electronics Group Co. Ltd.		48,000		113,553
Hanergy Thin Film Power Group, Ltd. (a)(b)		442,000		160,165
Hang Lung Properties Ltd.		70,000		195,280
Hang Seng Bank Ltd.		25,600		425,484
Henderson Land Development Co. Ltd.		37,500		260,635
HKT Trust and HKT Ltd.		64,900		84,529
Hong Kong & China Gas Co. Ltd.		201,846		459,874
Hong Kong Exchanges & Clearing Ltd.		33,300		735,155
Hutchison Whampoa Ltd.		76,000		868,798
Hysan Development Co. Ltd.		25,000		110,950
Kerry Properties Ltd.		16,500		59,524
Kingboard Chemical Holdings Ltd.		18,200		30,560
Kunlun Energy Co. Ltd.		134,000		126,462
Lee & Man Paper Manufacturing Ltd.		34,000		18,986
Li & Fung Ltd.		160,000		149,794
The Link REIT		76,500		478,948
MGM China Holdings Ltd.		27,200		68,678
MTR Corp.		47,000		192,289
New World China Land Ltd.		36,000		21,286
New World Development Co. Ltd.		172,666		198,222
Nine Dragons Paper Holdings Ltd.		29,000		25,253
NWS Holdings Ltd.		52,186		95,722
PCCW Ltd.		84,000		57,195
Power Assets Holdings Ltd.		46,000		444,728
Sands China Ltd.		83,600		406,977
Shanghai Industrial Holdings, Ltd.		15,000		44,797
Shangri-La Asia Ltd.		32,000		43,849
Shimao Property Holdings Ltd. (a)		51,000		112,944
Sino Biopharmaceutical Ltd.		132,000		118,946
Sino Land Co., Ltd.		66,800		107,234
SJM Holdings Ltd.		69,000		109,082
Sun Art Retail Group Ltd. (b)		110,000		109,367
Sun Hung Kai Properties Ltd.		55,000		833,274
Swire Pacific Ltd., Class A		27,000		350,473
Swire Properties Ltd.		25,400		74,737
Techtronic Industries Co.		52,500		168,424
WH Group, Ltd. (a)(c)		113,500		64,726
Wharf Holdings Ltd.		48,000		344,596
Wheelock & Co. Ltd.		32,000		148,574
Wynn Macau Ltd.		51,200		142,840
Yue Yuen Industrial Holdings Ltd.		19,000		68,320
Yuexiu Property Co., Ltd.		106,400		20,360
				19,567,827
Hungary — 0.0%
MOL Hungarian Oil & Gas PLC		997		43,757
OTP Bank PLC		4,840		69,814
Richter Gedeon Nyrt		3,173		42,731
				156,302
Indonesia — 0.6%
Adaro Energy Tbk PT		230,400		19,223
Astra Agro Lestari Tbk PT		11,500		22,471
Astra International Tbk PT		685,400		408,762
Bank Central Asia Tbk PT		411,000		435,963

See Notes to Financial Statements.

24 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

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

Common Stocks	Shares		Value
Indonesia (concluded)
Bank Danamon Indonesia Tbk PT		186,600	$	67,905
Bank Mandiri Persero Tbk PT		331,800		288,546
Bank Negara Indonesia Persero Tbk PT		405,600		198,742
Bank Rakyat Indonesia Persero Tbk PT		381,200		358,320
Bumi Serpong Damai Tbk PT		111,800		16,227
Charoen Pokphand Indonesia Tbk PT		116,500		35,461
Global Mediacom Tbk PT		137,600		15,766
Gudang Garam Tbk PT		9,800		48,009
Indo Tambangraya Megah Tbk PT		4,400		5,427
Indocement Tunggal Prakarsa Tbk PT		88,600		178,772
Indofood CBP Sukses Makmur Tbk PT		18,900		19,931
Indofood Sukses Makmur Tbk PT		92,700		50,539
Jasa Marga Persero Tbk PT		71,000		40,291
Kalbe Farma Tbk PT		457,700		67,478
Lippo Karawaci Tbk PT		416,900		34,229
Matahari Department Store Tbk PT		64,300		77,479
Media Nusantara Citra Tbk PT		60,162		12,297
Perusahaan Gas Negara Persero Tbk PT		326,000		157,759
Semen Indonesia Persero Tbk PT		65,500		85,511
Surya Citra Media Tbk PT		84,000		23,705
Tambang Batubara Bukit Asam Persero Tbk PT		29,500		29,548
Telekomunikasi Indonesia Persero Tbk PT		1,707,400		392,410
Tower Bersama Infrastructure Tbk PT		38,000		29,720
Unilever Indonesia Tbk PT		62,700		162,629
United Tractors Tbk PT		33,700		47,065
XL Axiata Tbk PT		82,000		32,155
				3,362,340
Ireland — 0.6%
Bank of Ireland (a)		829,992		311,489
CRH PLC		26,316		632,781
Experian PLC		32,560		548,862
James Hardie Industries SE		13,437		143,443
Kerry Group PLC, Class A		5,274		364,360
Shire PLC		20,324		1,440,973
				3,441,908
Israel — 0.4%
Bank Hapoalim BM		32,698		153,750
Bank Leumi Le-Israel BM (a)		44,483		151,963
Bezeq The Israeli Telecommunication Corp. Ltd.		66,621		118,174
Delek Group Ltd.		69		17,307
Israel Chemicals Ltd.		18,197		130,931
The Israel Corp. Ltd. (a)		40		18,932
Mizrahi Tefahot Bank Ltd. (a)		8,332		87,198
NICE Systems Ltd.		2,571		130,024
Teva Pharmaceutical Industries Ltd.		27,402		1,570,815
				2,379,094
Italy — 1.4%
Assicurazioni Generali SpA		41,966		861,681
Atlantia SpA		14,217		330,431
Banca Monte dei Paschi di Siena SpA (a)		85,851		48,907
Banco Popolare SC (a)		14,013		168,601
Enel Green Power SpA		71,236		149,251
Enel SpA		210,569		938,614
Eni SpA		80,676		1,413,159
Exor SpA		3,768		154,608
Finmeccanica SpA (a)		8,568		79,638
Intesa Sanpaolo SpA		391,964		1,132,150
Luxottica Group SpA		5,894		323,102
Common Stocks	Shares		Value
Italy (concluded)
Mediobanca SpA		19,428	$	157,863
Pirelli & C SpA		5,532		74,612
Prysmian SpA		6,238		113,680
Saipem SpA (a)		10,218		107,112
Snam SpA		69,314		343,050
Telecom Italia SpA (a)		343,644		366,492
Telecom Italia SpA, Non-Convertible Savings Shares		139,244		116,414
Tenaris SA		16,653		251,641
Terna — Rete Elettrica Nazionale SpA		46,233		209,998
UniCredit SpA		141,985		909,501
Unione di Banche Italiane SCpA		27,204		194,570
UnipolSai SpA		18,299		49,267
				8,494,342
Japan — 14.3%
ABC-Mart, Inc.		300		14,516
Acom Co. Ltd. (a)		5,700		17,401
Advantest Corp.		8,000		99,155
Aeon Co. Ltd.		23,500		236,163
AEON Financial Service Co. Ltd.		1,700		33,577
Aeon Mall Co. Ltd.		2,190		38,809
Air Water, Inc.		4,000		63,358
Aisin Seiki Co. Ltd.		6,900		247,906
Ajinomoto Co., Inc.		19,000		353,721
Alfresa Holdings Corp.		4,000		48,304
Amada Co. Ltd.		8,000		68,550
ANA Holdings, Inc.		52,000		128,577
Aozora Bank Ltd.		46,000		142,395
Asahi Glass Co. Ltd. (b)		35,000		170,386
Asahi Group Holdings Ltd.		13,000		402,185
Asahi Kasei Corp.		43,000		392,264
Asics Corp.		6,100		146,859
Astellas Pharma, Inc.		69,000		960,625
The Bank of Kyoto Ltd.		8,000		66,877
The Bank of Yokohama Ltd.		35,000		190,095
Benesse Holdings, Inc.		1,100		32,640
Bridgestone Corp.		21,200		735,257
Brother Industries Ltd.		7,500		135,955
Calbee, Inc.		3,500		120,564
Canon, Inc.		39,400		1,252,280
Casio Computer Co. Ltd.		8,100		123,909
Central Japan Railway Co.		4,500		674,443
The Chiba Bank Ltd.		23,000		150,717
Chiyoda Corp.		9,000		74,565
Chubu Electric Power Co., Inc. (a)		18,200		213,869
Chugai Pharmaceutical Co. Ltd.		7,000		171,873
The Chugoku Bank Ltd.		4,000		54,524
The Chugoku Electric Power Co., Inc.		14,700		192,195
Citizen Holdings Co. Ltd.		4,900		37,703
COLOPL, Inc.		1,500		33,708
Credit Saison Co. Ltd.		7,700		143,192
Dai Nippon Printing Co. Ltd.		26,000		234,170
The Dai-ichi Life Insurance Co. Ltd.		35,300		535,848
Daicel Corp.		7,000		81,763
Daihatsu Motor Co. Ltd. (b)		3,900		50,937
Daiichi Sankyo Co. Ltd.		22,100		309,019
Daikin Industries Ltd.		7,400		474,518
Daito Trust Construction Co. Ltd.		2,500		283,594
Daiwa House Industry Co. Ltd.		19,700		372,157
Daiwa Securities Group, Inc.		55,000		430,657
Denso Corp.		15,600		727,082

See Notes to Financial Statements.

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 25

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

Common Stocks	Shares		Value
Japan (continued)
Dentsu, Inc.		7,600	$	319,515
Don Quijote Co. Ltd.		1,600		109,995
East Japan Railway Co.		10,600		798,931
Eisai Co. Ltd.		8,700		336,456
Electric Power Development Co. Ltd.		2,500		84,477
FamilyMart Co. Ltd.		1,400		52,729
FANUC Corp.		6,500		1,071,722
Fast Retailing Co. Ltd.		1,800		655,011
Fuji Electric Co. Ltd.		13,000		51,829
Fuji Heavy Industries Ltd.		18,700		661,718
FUJIFILM Holdings Corp.		15,200		463,806
Fujitsu Ltd.		63,000		335,895
Fukuoka Financial Group, Inc.		25,000		128,887
GungHo Online Entertainment, Inc.		8,800		31,861
The Gunma Bank Ltd.		8,000		51,916
The Hachijuni Bank Ltd.		10,000		64,236
Hakuhodo DY Holdings, Inc.		5,800		55,506
Hamamatsu Photonics KK		3,200		152,330
Hankyu Hanshin Holdings, Inc.		37,000		198,471
Hikari Tsushin, Inc.		400		24,330
Hino Motors Ltd.		5,300		69,766
Hirose Electric Co. Ltd.		700		81,216
The Hiroshima Bank Ltd.		22,000		104,712
Hisamitsu Pharmaceutical Co., Inc. (b)		1,100		34,686
Hitachi Chemical Co. Ltd.		1,600		28,267
Hitachi Construction Machinery Co. Ltd.		4,600		97,259
Hitachi High-Technologies Corp.		1,600		45,963
Hitachi Ltd.		164,000		1,210,445
Hitachi Metals Ltd.		8,000		135,927
Hokuhoku Financial Group, Inc.		29,000		58,480
Hokuriku Electric Power Co.		7,800		99,609
Honda Motor Co. Ltd.		53,300		1,563,730
Hoya Corp.		13,200		446,488
Hulic Co. Ltd.		4,100		40,988
Ibiden Co. Ltd.		2,300		33,962
Idemitsu Kosan Co. Ltd.		2,400		39,632
IHI Corp.		45,000		227,901
Iida Group Holdings Co. Ltd.		2,500		30,454
Inpex Corp.		29,400		327,309
Isetan Mitsukoshi Holdings Ltd.		11,200		138,591
Isuzu Motors Ltd.		21,200		258,223
ITOCHU Corp.		56,800		606,345
Itochu Techno-Solutions Corp.		1,800		63,512
The Iyo Bank Ltd.		2,400		25,994
J. Front Retailing Co. Ltd.		5,000		57,910
Japan Airlines Co. Ltd.		5,100		151,210
Japan Display, Inc. (a)		12,400		37,845
Japan Exchange Group, Inc.		8,500		198,145
Japan Prime Realty Investment Corp.		17		59,151
Japan Real Estate Investment Corp.		56		269,823
Japan Retail Fund Investment Corp.		80		169,063
Japan Tobacco, Inc.		35,300		971,554
JFE Holdings, Inc.		16,800		374,655
JGC Corp.		7,000		144,108
The Joyo Bank Ltd.		14,000		69,326
JSR Corp.		3,900		66,941
JTEKT Corp.		4,500		75,734
JX Holdings, Inc.		77,200		300,432
Kajima Corp.		31,000		127,482
Kakaku.com, Inc.		3,300		47,212
Kamigumi Co. Ltd.		10,000		89,078
Common Stocks	Shares		Value
Japan (continued)
Kaneka Corp.		7,000	$	37,508
The Kansai Electric Power Co., Inc. (a)		23,100		219,752
Kansai Paint Co. Ltd.		5,000		77,460
Kao Corp.		16,500		650,670
Kawasaki Heavy Industries Ltd.		43,000		195,544
KDDI Corp.		20,200		1,269,046
Keihan Electric Railway Co. Ltd.		15,000		80,269
Keikyu Corp.		10,000		73,988
Keio Corp.		13,000		93,516
Keisei Electric Railway Co. Ltd.		7,000		85,116
Keyence Corp.		1,420		632,744
Kikkoman Corp.		5,000		122,545
Kintetsu Corp.		58,000		190,698
Kirin Holdings Co. Ltd.		28,100		349,167
Kobe Steel Ltd.		93,000		160,192
Koito Manufacturing Co. Ltd.		2,200		67,302
Komatsu Ltd.		34,000		751,670
Konami Corp.		1,900		34,833
Konica Minolta, Inc.		12,600		137,290
Kubota Corp.		42,000		609,620
Kuraray Co. Ltd. (b)		8,100		92,031
Kurita Water Industries Ltd.		2,800		58,386
Kyocera Corp.		10,400		475,900
Kyowa Hakko Kirin Co. Ltd.		5,000		47,083
Kyushu Electric Power Co., Inc. (a)		13,300		133,202
Lawson, Inc.		2,600		157,113
LIXIL Group Corp.		7,800		164,157
M3, Inc.		5,000		83,660
Mabuchi Motor Co. Ltd.		1,000		39,692
Makita Corp.		3,200		144,198
Marubeni Corp.		56,600		338,659
Marui Group Co. Ltd.		3,700		33,373
Maruichi Steel Tube Ltd.		1,400		29,797
Mazda Motor Corp.		17,400		417,871
McDonald’s Holdings Co. Japan Ltd. (b)		1,500		32,832
Medipal Holdings Corp.		3,000		35,039
Meiji Holdings Co. Ltd.		2,100		191,056
Minebea Co., Ltd.		12,000		177,215
Miraca Holdings, Inc.		2,400		103,245
Mitsubishi Chemical Holdings Corp.		41,700		202,265
Mitsubishi Corp.		46,300		847,295
Mitsubishi Electric Corp.		62,000		736,439
Mitsubishi Estate Co. Ltd.		41,000		863,905
Mitsubishi Gas Chemical Co., Inc.		7,000		35,132
Mitsubishi Heavy Industries Ltd.		98,000		540,821
Mitsubishi Logistics Corp.		2,000		29,088
Mitsubishi Materials Corp.		37,000		122,745
Mitsubishi Motors Corp.		21,000		191,845
Mitsubishi Tanabe Pharma Corp.		4,500		65,964
Mitsubishi UFJ Financial Group, Inc.		416,500		2,288,344
Mitsubishi UFJ Lease & Finance Co., Ltd.		11,500		54,083
Mitsui & Co. Ltd.		61,600		825,017
Mitsui Chemicals, Inc.		37,000		104,798
Mitsui Fudosan Co. Ltd.		30,000		804,466
Mitsui OSK Lines Ltd.		47,000		139,249
Mixi, Inc.		1,800		66,366
Mizuho Financial Group, Inc.		741,300		1,242,643
MS&AD Insurance Group Holdings, Inc.		17,100		405,239
Murata Manufacturing Co. Ltd.		6,400		698,374
Nabtesco Corp.		1,800		43,504
Nagoya Railroad Co. Ltd.		31,000		115,420

See Notes to Financial Statements.

26 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

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

Common Stocks	Shares		Value
Japan (continued)
Namco Bandai Holdings, Inc.		6,600	$	139,730
NEC Corp.		58,000		168,548
Nexon Co. Ltd.		1,500		13,983
NGK Insulators Ltd.		8,000		163,986
NGK Spark Plug Co. Ltd.		5,300		161,043
NH Foods Ltd.		5,000		109,391
NHK Spring Co. Ltd.		3,200		27,844
Nidec Corp.		7,200		465,017
Nikon Corp.		13,300		176,716
Nintendo Co. Ltd.		3,500		365,251
Nippon Building Fund, Inc.		35		175,704
Nippon Electric Glass Co. Ltd.		9,000		40,498
Nippon Express Co. Ltd.		18,000		91,220
Nippon Paint Co. Ltd.		4,000		115,912
Nippon Prologis REIT, Inc.		27		58,624
Nippon Steel & Sumitomo Metal		240,475		596,530
Nippon Telegraph & Telephone Corp.		13,800		704,940
Nippon Yusen KK		59,000		166,646
Nissan Motor Co. Ltd.		79,600		694,253
Nisshin Seifun Group, Inc.		3,300		31,947
Nissin Foods Holdings Co. Ltd.		3,500		166,821
Nitori Holdings Co. Ltd.		2,900		155,813
Nitto Denko Corp.		5,200		290,553
NOK Corp.		2,000		50,907
Nomura Holdings, Inc.		132,400		749,256
Nomura Real Estate Holdings, Inc.		2,500		42,781
Nomura Research Institute Ltd.		1,900		58,112
NSK Ltd.		13,000		153,488
NTT Data Corp.		4,900		182,549
NTT DoCoMo, Inc.		47,700		694,657
NTT Urban Development Corp.		2,400		24,169
Obayashi Corp.		23,000		148,262
Odakyu Electric Railway Co. Ltd. (b)		21,000		186,021
Oji Holdings Corp.		16,000		57,246
Olympus Corp. (a)		8,400		294,255
Omron Corp.		6,600		295,254
Ono Pharmaceutical Co. Ltd.		2,900		256,753
Oracle Corp. Japan		700		28,522
Oriental Land Co. Ltd.		1,700		392,044
ORIX Corp.		43,100		542,318
Osaka Gas Co. Ltd.		54,000		201,687
Otsuka Corp.		1,200		38,050
Otsuka Holdings Co. Ltd.		13,000		389,756
Panasonic Corp.		78,600		925,785
Park24 Co. Ltd.		5,500		80,967
Rakuten, Inc.		25,200		350,426
Recruit Holdings Co. Ltd.		4,400		126,365
Resona Holdings, Inc.		74,200		374,821
Ricoh Co. Ltd.		31,300		316,413
Rinnai Corp.		900		60,473
Rohm Co. Ltd.		2,700		162,684
Sankyo Co. Ltd.		700		24,013
Sanrio Co. Ltd. (b)		3,000		74,123
Santen Pharmaceutical Co. Ltd.		1,700		91,519
SBI Holdings, Inc.		4,950		54,082
Secom Co. Ltd.		7,000		402,182
Sega Sammy Holdings, Inc. (b)		6,900		88,280
Seibu Holdings, Inc.		6,200		126,405
Seiko Epson Corp.		3,900		163,192
Sekisui Chemical Co. Ltd.		12,000		144,372
Sekisui House Ltd.		17,900		235,528
Common Stocks	Shares		Value
Japan (continued)
Seven & I Holdings Co. Ltd.		24,200	$	870,506
Seven Bank Ltd.		27,800		116,690
Sharp Corp. (a)		54,000		119,464
Shikoku Electric Power Co., Inc. (a)		8,000		97,037
Shimadzu Corp.		11,000		111,892
Shimamura Co. Ltd.		300		25,889
Shimano, Inc.		2,700		349,708
Shimizu Corp.		19,000		129,049
Shin-Etsu Chemical Co. Ltd.		13,100		852,806
Shinsei Bank Ltd.		61,000		106,165
Shionogi & Co. Ltd.		8,700		224,772
Shiseido Co. Ltd. (b)		10,700		150,061
The Shizuoka Bank Ltd.		13,000		118,876
Showa Shell Sekiyu KK (b)		4,400		43,342
SMC Corp.		1,800		472,003
Softbank Corp.		30,200		1,797,602
Sompo Japan Nipponkoa Holdings Inc.		10,300		259,021
Sony Corp. (a)		33,800		689,833
Sony Financial Holdings, Inc.		3,100		45,648
Stanley Electric Co. Ltd.		2,900		62,621
Sumitomo Chemical Co. Ltd.		47,000		185,026
Sumitomo Corp.		37,900		389,259
Sumitomo Dainippon Pharma Co. Ltd.		3,900		37,767
Sumitomo Electric Industries Ltd.		26,000		324,721
Sumitomo Heavy Industries Ltd.		12,000		64,548
Sumitomo Metal Mining Co. Ltd.		18,000		268,468
Sumitomo Mitsui Financial Group, Inc.		40,400		1,460,569
Sumitomo Mitsui Trust Holdings, Inc.		110,000		421,331
Sumitomo Realty & Development Co. Ltd.		12,000		408,830
Sumitomo Rubber Industries Ltd.		4,300		63,924
Suntory Beverage & Food Ltd.		4,700		162,382
Suruga Bank Ltd.		8,300		152,529
Suzuken Co. Ltd.		1,700		46,960
Suzuki Motor Corp.		12,200		365,602
Sysmex Corp.		4,100		181,968
T&D Holdings, Inc.		16,200		194,203
Taiheiyo Cement Corp.		49,000		153,732
Taisei Corp.		31,000		175,832
Taisho Pharmaceutical Holdings Co. Ltd.		800		48,880
Taiyo Nippon Sanso Corp.		4,000		44,034
Takashimaya Co. Ltd.		4,000		31,939
Takeda Pharmaceutical Co. Ltd.		25,900		1,072,203
TDK Corp.		3,600		212,023
Teijin Ltd.		31,000		82,395
Terumo Corp.		9,700		220,154
THK Co. Ltd.		2,200		52,870
Tobu Railway Co. Ltd.		25,000		106,903
Toho Co. Ltd.		1,900		43,110
Toho Gas Co. Ltd. (b)		18,000		88,063
Tohoku Electric Power Co., Inc.		11,300		131,492
Tokio Marine Holdings, Inc.		23,500		763,225
The Tokyo Electric Power Co., Inc. (a)		50,500		205,399
Tokyo Electron Ltd.		5,800		439,815
Tokyo Gas Co. Ltd.		78,000		420,862
Tokyo Tatemono Co. Ltd.		16,000		116,442
Tokyu Corp.		36,000		223,073
Tokyu Fudosan Holdings Corp.		16,800		116,564
TonenGeneral Sekiyu KK		7,000		59,756
Toppan Printing Co. Ltd.		11,000		71,472
Toray Industries, Inc.		49,000		391,509

See Notes to Financial Statements.

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 27

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

Common Stocks	Shares		Value
Japan (concluded)
Toshiba Corp.		131,000	$	552,466
Toto Ltd.		11,000		127,960
Toyo Seikan Kaisha Ltd.		3,500		43,475
Toyo Suisan Kaisha Ltd.		2,900		93,377
Toyoda Gosei Co. Ltd.		4,300		86,491
Toyota Industries Corp.		4,900		251,133
Toyota Motor Corp.		89,900		5,602,329
Toyota Tsusho Corp.		10,200		236,945
Trend Micro, Inc.		4,200		116,060
Unicharm Corp.		13,100		313,995
United Urban Investment Corp.		49		77,132
USS Co. Ltd.		4,300		66,068
West Japan Railway Co.		4,800		226,935
Yahoo! Japan Corp.		54,500		195,324
Yakult Honsha Co. Ltd.		3,400		179,469
Yamada Denki Co. Ltd.		39,300		131,856
Yamaguchi Financial Group, Inc.		4,000		41,109
Yamaha Corp.		2,700		39,798
Yamaha Motor Co. Ltd.		8,700		174,063
Yamato Holdings Co. Ltd.		12,800		253,462
Yamato Kogyo Co. Ltd.		4,200		117,468
Yamazaki Baking Co. Ltd.		10,000		123,393
Yaskawa Electric Corp.		5,000		63,866
Yokogawa Electric Corp.		4,800		52,671
The Yokohama Rubber Co. Ltd.		10,000		91,053
				84,683,456
Luxembourg — 0.1%
Altice SA (a)		3,302		260,752
RTL Group SA		1,615		154,000
				414,752
Malaysia — 0.7%
AirAsia Bhd		60,100		46,753
Alliance Financial Group Bhd		26,000		34,949
AMMB Holdings Bhd		43,000		80,754
Astro Malaysia Holdings Bhd		29,600		25,586
Axiata Group Bhd		89,900		180,943
Berjaya Sports Toto Bhd		65,138		65,278
British American Tobacco Malaysia Bhd		3,100		57,415
Bumi Armada Bhd (a)		45,600		14,205
CIMB Group Holdings Bhd		175,800		279,015
Dialog Group BHD		42,134		18,040
DiGi.Com Bhd		113,000		199,059
Felda Global Ventures Holdings Bhd		89,900		55,879
Gamuda Bhd		39,600		56,844
Genting Bhd		78,100		197,845
Genting Malaysia Bhd		64,500		74,899
Genting Plantations Bhd		10,000		28,432
Hong Leong Bank Bhd		14,040		56,136
Hong Leong Financial Group Bhd		7,000		32,894
IHH Healthcare Bhd		96,200		132,482
IJM Corp. Bhd		29,100		54,680
IOI Corp. Bhd		61,400		84,266
IOI Properties Group Sdn Bhd		19,949		13,757
Kuala Lumpur Kepong Bhd		9,800		63,904
Lafarge Malayan Cement Bhd		17,500		48,849
Malayan Banking Bhd		176,600		462,484
Malaysia Airports Holdings Bhd		11,300		21,976
Maxis Bhd		66,600		130,059
MISC Bhd		27,400		56,532
Common Stocks	Shares		Value
Malaysia (concluded)
Petronas Chemicals Group Bhd		76,000	$	118,198
Petronas Dagangan Bhd		6,100		29,896
Petronas Gas Bhd		27,300		173,021
PPB Group Bhd		12,600		51,532
Public Bank BHD		89,620		468,201
RHB Capital Bhd		12,900		28,113
Sapurakencana Petroleum Bhd		76,800		50,810
Sime Darby Bhd		89,200		234,630
Telekom Malaysia Bhd		20,200		39,655
Tenaga Nasional Bhd		109,900		432,836
UEM Land Holdings Bhd		54,900		22,003
UMW Holdings Bhd		10,900		34,220
YTL Corp. Bhd		113,160		51,458
YTL Power International Bhd		42,000		17,730
				4,326,218
Malta — 0.0%
Brait SE (a)		6,500		44,002
Mexico — 1.0%
Alfa SAB de CV, Series A		100,500		224,382
America Movil SAB de CV, Series L		1,102,200		1,225,185
Arca Continental SAB de CV (a)		15,972		101,047
Cemex SAB de CV (a)		394,120		401,767
Coca-Cola Femsa SAB de CV, Series L		8,100		69,527
Compartamos SAB de CV (a)		37,100		74,558
Controladora Comercial Mexicana SAB de CV		6,300		22,281
El Puerto de Liverpool SAB de CV, Series C1 (a)		4,400		44,093
Fibra Uno Administracion SA de CV		78,700		231,933
Fomento Economico Mexicano SAB de CV (a)		70,600		626,290
Genomma Lab Internacional SAB de CV, Series B, Series B (a)		21,500		40,891
Gruma SAB de CV		3,400		36,254
Grupo Aeroportuario del Pacifico SAB de CV, Class B		6,700		42,106
Grupo Aeroportuario del Sureste SAB de CV, Class B (a)		3,600		47,591
Grupo Bimbo SAB de CV, Series A (a)		64,700		178,483
Grupo Carso SAB de CV, Series A1		14,900		73,310
Grupo Comercial Chedraui SA de CV (a)		10,900		31,251
Grupo Financiero Banorte SAB de CV, Series O		82,400		453,504
Grupo Financiero Inbursa SAB de CV, Series O		75,100		193,836
Grupo Financiero Santander Mexico SAB de CV, Series B		92,800		193,981
Grupo Lala SAB de CV (a)		9,900		19,077
Grupo Mexico SAB de CV, Series B		122,323		355,020
Grupo Televisa SAB CPO (a)		83,300		567,933
Industrias Penoles SAB de CV		2,850		55,732
Kimberly-Clark de Mexico SAB de CV, Class A		36,900		80,259
Mexichem SAB de CV (a)		17,130		52,027
Minera Frisco SAB de CV, Series A1 (a)		81,100		118,129
OHL Mexico SAB de CV (a)		42,200		78,229
Promotora y Operadora de Infraestructura SAB de CV (a)		5,300		63,724
Wal-Mart de Mexico SAB de CV, Series V		178,200		383,123
				6,085,523
Netherlands — 3.1%
Aegon NV		60,431		454,197
Akzo Nobel NV		7,945		549,715
ASML Holding NV		11,528		1,245,571
CNH Industrial NV		33,775		273,411

See Notes to Financial Statements.

28 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

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

Common Stocks	Shares		Value
Netherlands (concluded)
Corio NV		3,782	$	185,212
Delta Lloyd NV		4,778		105,070
Gemalto NV (b)		2,808		229,168
Heineken Holding NV		3,682		230,499
Heineken NV		7,497		532,345
ING Groep NV CVA (a)		118,977		1,537,142
Koninklijke Ahold NV		29,389		522,326
Koninklijke Boskalis Westminster NV		2,923		159,903
Koninklijke DSM NV		5,859		357,358
Koninklijke KPN NV		109,726		346,443
Koninklijke Philips Electronics NV		33,899		982,597
Koninklijke Vopak NV		2,494		129,394
NN Group NV (a)		5,128		153,089
OCI NV (a)		3,417		118,808
QIAGEN NV (a)		10,835		252,380
Randstad Holding NV		3,781		181,928
Reed Elsevier NV		22,850		545,672
Royal Dutch Shell PLC, A Shares		125,246		4,179,821
Royal Dutch Shell PLC, Class B		76,650		2,648,339
TNT Express NV		9,963		66,417
Unilever NV CVA		50,629		1,980,490
Wolters Kluwer NV		9,112		278,055
				18,245,350
New Zealand — 0.1%
Auckland International Airport Ltd.		23,568		77,548
Contact Energy Ltd.		8,655		42,982
Fletcher Building Ltd.		30,613		197,233
Meridian Energy, Ltd. (b)		22,039		30,107
Mighty River Power, Ltd.		12,773		29,623
Ryman Healthcare Ltd.		7,854		52,098
Telecom Corp. of New Zealand Ltd.		43,878		106,367
				535,958
Norway — 0.5%
DnB NOR ASA		32,504		479,454
Gjensidige Forsikring ASA		7,893		128,793
Norsk Hydro ASA		47,704		268,718
Orkla ASA		29,467		200,596
Seadrill Ltd.		13,047		150,956
Statoil ASA		35,747		629,391
Subsea 7 SA		12,237		125,220
Telenor ASA		24,498		495,561
Yara International ASA		5,860		260,960
				2,739,649
Peru — 0.1%
Compania de Minas Buenaventura SA — ADR		4,924		47,073
Credicorp Ltd.		2,642		423,196
Southern Copper Corp.		6,341		178,816
				649,085
Philippines — 0.2%
Aboitiz Equity Ventures, Inc.		86,410		100,840
Aboitiz Power Corp.		29,200		27,772
Alliance Global Group, Inc.		35,800		17,883
Ayala Corp.		5,080		78,484
Ayala Land, Inc.		269,200		200,736
Bank of the Philippine Islands		15,031		31,444
BDO Unibank, Inc.		28,624		70,022
DMCI Holdings, Inc.		70,000		24,481
Common Stocks	Shares		Value
Philippines (concluded)
Energy Development Corp.		253,900	$	46,167
Globe Telecom, Inc.		845		32,445
International Container Terminal Services, Inc.		9,550		24,405
JG Summit Holdings, Inc.		43,093		63,109
Jollibee Foods Corp.		12,070		57,700
Megaworld Corp.		250,000		25,833
Metro Pacific Investments Corp.		167,000		17,064
Metropolitan Bank & Trust Co.		11,063		20,398
Philippine Long Distance Telephone Co.		3,590		231,678
SM Investments Corp.		6,035		109,046
SM Prime Holdings, Inc.		311,950		118,087
Universal Robina Corp.		17,840		77,780
				1,375,374
Poland — 0.3%
Alior Bank SA (a)		761		16,684
Bank Handlowy w Warszawie SA		502		15,085
Bank Millennium SA		13,346		31,131
Bank Pekao SA		3,562		179,012
Bank Zachodni WBK SA		1,160		122,322
Cyfrowy Polsat SA		2,551		16,852
Enea SA		3,084		13,268
Energa SA		5,000		32,516
Eurocash SA		4,383		46,899
Getin Noble Bank SA (a)		23,753		14,617
Grupa Azoty SA		1,551		27,708
Grupa Lotos SA (a)		1,964		14,145
KGHM Polska Miedz SA		4,863		148,248
LPP SA		22		44,650
Mbank		323		45,278
Orange Polska SA		11,397		26,630
PGE SA		29,504		155,994
Polski Koncern Naftowy Orlen SA		10,039		137,280
Polskie Gornictwo Naftowe i Gazownictwo SA		43,796		54,616
Powszechna Kasa Oszczednosci Bank Polski SA		34,411		345,414
Powszechny Zaklad Ubezpieczen SA		1,985		270,898
Synthos SA		54,162		62,679
Tauron Polska Energia SA		20,989		29,678
				1,851,604
Portugal — 0.1%
Banco Comercial Portugues SA (a)		1,107,426		86,899
EDP — Energias de Portugal SA		75,595		293,130
Galp Energia SGPS SA		13,988		142,048
Jeronimo Martins SGPS SA		8,944		89,623
				611,700
Qatar — 0.2%
Barwa Real Estate Co.		2,548		28,902
The Commercial Bank of Qatar QSC		248		4,618
Doha Bank QSC		2,576		39,947
Gulf International Services OSC		901		24,102
Industries Qatar QSC		4,520		205,821
Masraf Al Rayan		13,978		167,332
Ooredoo QSC		2,666		89,541
Qatar Electricity & Water Co.		177		8,969
Qatar Islamic Bank SAQ		1,671		45,982
Qatar National Bank		7,012		407,307
Vodafone Qatar		7,760		34,493
				1,057,014

See Notes to Financial Statements.

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 29

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

Common Stocks	Shares		Value
Russia — 0.7%
AK Transneft OAO, Preference Shares		32	$	65,143
Alrosa AO		57,800		59,655
Federal Hydrogenerating Co. JSC		6,552,000		56,169
Gazprom OAO		184,890		395,504
Gazprom OAO — ADR		109,445		503,846
Lukoil OAO		8,118		291,820
Lukoil OAO — ADR		9,119		360,791
Magnit OJSC — GDR		7,103		321,005
MegaFon OAO — GDR		2,296		31,289
MMC Norilsk Nickel		1,903		251,665
Mobile Telesystems — ADR		27,500		197,450
Moscow Exchange MICEX-RTS OAO		63,850		62,029
NovaTek OAO — GDR		2,296		178,804
Rosneft Oil Co.		21,260		67,644
Rostelecom OJSC		42,250		59,147
Sberbank of Russia		205,970		181,044
Sberbank of Russia, Preference Shares		25,500		15,403
Severstal OAO		10,830		87,554
Sistema JSFC — GDR		2,940		15,317
Surgutneftegas OAO		119,550		46,330
Surgutneftegas OAO — ADR		11,955		50,601
Surgutneftegas OAO, Preference Shares		268,700		127,438
Tatneft OAO		50,780		188,367
Uralkali OJSC		22,930		47,299
Uralkali PJSC — GDR		4,586		54,069
VTB Bank OJSC		86,510,000		94,292
				3,809,675
Singapore — 1.1%
Ascendas Real Estate Investment Trust		77,000		138,119
CapitaCommercial Trust		80,000		105,620
CapitaLand Ltd.		93,000		231,230
CapitaMall Trust		85,000		130,507
City Developments Ltd.		14,000		108,011
ComfortDelGro Corp. Ltd.		69,000		135,027
DBS Group Holdings Ltd.		52,684		815,618
Genting Singapore PLC		233,000		188,914
Global Logistic Properties Ltd.		90,000		167,796
Golden Agri-Resources Ltd.		270,000		93,447
Hutchison Port Holdings Trust		309,000		212,363
Jardine Cycle & Carriage Ltd.		4,000		128,150
Keppel Corp. Ltd.		46,000		306,607
Keppel Land Ltd.		13,000		33,490
Noble Group Ltd.		131,000		111,761
Oversea-Chinese Banking Corp. Ltd.		96,249		757,285
SembCorp Industries Ltd.		40,000		133,961
SembCorp Marine Ltd. (b)		21,000		51,528
Singapore Airlines Ltd.		18,000		157,022
Singapore Exchange Ltd.		29,000		170,494
Singapore Press Holdings Ltd. (b)		30,876		98,015
Singapore Technologies Engineering Ltd.		57,000		145,897
Singapore Telecommunications Ltd.		257,000		754,373
StarHub Ltd.		12,000		37,492
Suntec Real Estate Investment Trust		86,000		127,221
United Overseas Bank Ltd.		41,000		756,616
UOL Group Ltd.		22,000		115,011
Wilmar International Ltd.		66,000		160,818
Yangzijiang Shipbuilding Holdings Ltd.		44,000		39,873
				6,412,266
Common Stocks	Shares		Value
South Africa — 1.6%
African Bank Investments Ltd. (b)		20,398	$	18
African Rainbow Minerals Ltd.		2,500		25,601
Anglo American Platinum Ltd. (a)		832		24,426
AngloGold Ashanti Ltd. (a)		10,868		94,906
Aspen Pharmacare Holdings Ltd. (a)		10,770		375,723
Assore Ltd.		7,809		100,205
Barclays Africa Group Ltd.		16,075		251,363
Barloworld Ltd.		5,200		42,804
Bidvest Group Ltd.		11,167		291,948
Coronation Fund Managers Ltd.		2,870		28,403
Discovery Holdings Ltd.		7,054		67,539
Exxaro Resources Ltd.		3,809		33,996
FirstRand Ltd.		102,914		447,388
The Foschini Group Ltd.		3,762		43,189
Gold Fields Ltd.		44,433		200,871
Growthpoint Properties Ltd.		40,155		95,408
Impala Platinum Holdings Ltd. (a)		29,321		191,619
Imperial Holdings Ltd.		3,661		58,285
Investec Ltd.		7,549		63,266
Kumba Iron Ore Ltd.		1,303		26,947
Liberty Holdings Ltd.		1,922		20,385
Life Healthcare Group Holdings Ltd.		20,533		75,852
Massmart Holdings Ltd.		4,180		51,226
Mediclinic International Ltd.		7,259		62,834
MMI Holdings Ltd.		20,454		53,046
Mr. Price Group Ltd.		10,819		218,856
MTN Group Ltd.		54,235		1,031,687
Nampak Ltd.		15,329		57,617
Naspers Ltd., Class N		12,541		1,622,243
Nedbank Group Ltd. (b)		7,320		156,760
Netcare Ltd.		21,846		71,395
Pick n Pay Stores Ltd.		7,638		34,543
PPC Ltd.		16,592		39,444
Redefine Properties Ltd.		77,451		71,638
Remgro Ltd.		16,365		358,012
Resilient Property Income Fund, Ltd.		8,562		62,166
RMB Holdings Ltd.		17,898		98,841
RMI Holdings		15,066		53,217
Sanlam Ltd.		62,085		373,583
Sappi Ltd. (a)		10,017		36,319
Sasol Ltd.		17,553		655,128
Shoprite Holdings Ltd.		16,621		240,552
The Spar Group Ltd.		4,305		59,778
Standard Bank Group Ltd.		44,965		554,185
Steinhoff International Holdings Ltd.		71,101		363,739
Telkom SA SOC, Ltd. (a)		5,129		30,827
Tiger Brands Ltd.		7,701		244,073
Truworths International Ltd.		9,001		59,773
Vodacom Group Ltd. (b)		14,966		165,604
Woolworths Holdings Ltd.		31,891		211,492
				9,598,720
South Korea — 3.0%
Amorepacific Corp. (a)		117		236,207
Amorepacific Group (a)		88		79,591
BS Financial Group, Inc. (a)		6,269		82,536
Celltrion, Inc. (a)		1,212		42,570
Cheil Worldwide, Inc. (a)		1,700		26,602
CJ CheilJedang Corp. (a)		189		52,667
CJ Corp. (a)		314		44,456
CJ Korea Express Co., Ltd. (a)		414		73,099

See Notes to Financial Statements.

30 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

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

Common Stocks	Shares		Value
South Korea (continued)
Coway Co., Ltd. (a)		1,699	$	129,551
Daelim Industrial Co., Ltd. (a)		494		29,453
Daewoo Engineering & Construction Co., Ltd. (a)		19,237		102,204
Daewoo International Corp. (a)		1,160		33,150
Daewoo Securities Co., Ltd. (a)		5,560		49,133
Daewoo Shipbuilding & Marine Engineering Co., Ltd. (a)		5,365		90,234
Daum Communications Corp. (a)		704		78,782
DGB Financial Group, Inc. (a)		1,821		18,718
Dongbu Insurance Co., Ltd. (a)		1,160		57,928
Doosan Corp.		436		40,962
Doosan Heavy Industries & Construction Co., Ltd. (a)		776		16,578
Doosan Infracore Co., Ltd. (a)		3,880		34,012
E-Mart Co., Ltd. (a)		644		119,177
GS Engineering & Construction Corp. (a)		969		20,290
GS Holdings (a)		1,216		44,261
Halla Visteon Climate Control Corp. (a)		750		33,043
Hana Financial Group, Inc.		8,714		252,377
Hankook Tire Co., Ltd. (a)		1,750		83,163
Hanwha Chemical Corp. (a)		1,740		18,470
Hanwha Corp. (a)		4,520		127,795
Hanwha Life Insurance Co., Ltd. (a)		7,120		53,794
Hite Jinro Co., Ltd. (a)		2,318		48,698
Hotel Shilla Co., Ltd. (a)		685		56,818
Hyosung Corp. (a)		1,140		70,748
Hyundai Department Store Co., Ltd. (a)		314		34,925
Hyundai Development Co-Engineering & Construction (a)		1,040		36,466
Hyundai Engineering & Construction Co., Ltd. (a)		1,666		63,428
Hyundai Glovis Co., Ltd. (a)		413		109,286
Hyundai Heavy Industries Co., Ltd. (a)		1,622		168,351
Hyundai Marine & Fire Insurance Co., Ltd. (a)		1,200		28,392
Hyundai Merchant Marine Co., Ltd. (a)		11,740		106,810
Hyundai Mipo Dockyard (a)		278		17,458
Hyundai Mobis (a)		2,250		481,380
Hyundai Motor Co. (a)		4,996		763,169
Hyundai Motor Co., Preference Shares (a)		468		53,436
Hyundai Motor Co., Second Preference Shares (a)		1,049		127,599
Hyundai Steel Co. (a)		2,195		125,725
Hyundai Wia Corp. (a)		513		82,015
Industrial Bank of Korea (a)		7,630		97,607
Kangwon Land, Inc. (a)		3,703		102,066
KB Financial Group, Inc. (a)		11,608		379,512
KCC Corp.		266		125,407
KEPCO Plant Service & Engineering Co., Ltd. (a)		707		51,241
Kia Motors Corp. (a)		7,920		376,327
Korea Aerospace Industries Ltd. (a)		530		19,126
Korea Electric Power Corp. (a)		7,719		297,436
Korea Gas Corp. (a)		753		33,861
Korea Investment Holdings Co., Ltd. (a)		1,486		65,342
Korea Zinc Co., Ltd. (a)		205		74,931
Korean Air Lines Co., Ltd. (a)		436		18,702
KT Corp. (a)		1,200		33,933
KT&G Corp. (a)		3,302		229,269
Kumho Petrochemical Co., Ltd. (a)		423		30,885
LG Chem Ltd. (a)		1,622		265,233
LG Chem Ltd., Preference Shares (a)		179		22,855
LG Corp. (a)		3,574		198,509
LG Display Co., Ltd. (a)		7,483		226,955
LG Electronics, Inc. (a)		4,891		261,992
LG Household & Health Care Ltd. (a)		443		251,093
LG Innotek Co., Ltd. (a)		123		12,503
Common Stocks	Shares		Value
South Korea (concluded)
LG Uplus Corp. (a)		5,020	$	52,341
Lotte Chemical Corp. (a)		351		50,534
Lotte Confectionery Co., Ltd. (a)		75		121,513
Lotte Shopping Co., Ltd. (a)		242		59,854
LS Corp. (a)		1,306		64,419
LS Industrial Systems Co., Ltd. (a)		411		22,319
Mirae Asset Securities Co., Ltd. (a)		2,793		108,611
NAVER Corp. (a)		908		581,515
NCSoft Corp.		285		46,738
OCI Co., Ltd. (a)		1,017		71,974
Orion Corp. (a)		77		71,095
Paradise Co., Ltd.		698		14,879
POSCO		1,965		494,973
S-1 Corp. (a)		442		28,517
S-Oil Corp.		1,187		52,157
Samsung C&T Corp. (a)		3,757		209,830
Samsung Card Co., Ltd. (a)		1,210		48,658
Samsung Electro-Mechanics Co., Ltd. (a)		1,375		67,987
Samsung Electronics Co. Ltd.		3,580		4,304,034
Samsung Electronics Co. Ltd., Preference Shares		670		630,182
Samsung Engineering Co., Ltd. (a)		1,563		53,498
Samsung Fire & Marine Insurance Co., Ltd. (a)		1,044		268,325
Samsung Heavy Industries Co. Ltd. (a)		4,858		87,629
Samsung Life Insurance Co., Ltd. (a)		2,202		233,167
Samsung SDI Co., Ltd. (a)		1,654		172,929
Samsung SDS Co., Ltd. (a)		928		247,799
Samsung Securities Co., Ltd. (a)		1,280		51,470
Shinhan Financial Group Co., Ltd. (a)		12,823		515,422
Shinsegae Co., Ltd. (a)		419		68,780
SK C&C Co., Ltd. (a)		1,054		204,132
SK Holdings Co., Ltd. (a)		599		88,908
SK Hynix, Inc. (a)		17,378		742,656
SK Innovation Co., Ltd. (a)		2,314		178,226
SK Networks Co., Ltd. (a)		1,290		10,398
SK Telecom Co. Ltd.		390		95,391
Woori Bank (a)		13,531		123,104
Woori Investment & Securities Co., Ltd. (a)		2,300		21,223
Yuhan Corp. (a)		122		18,748
				17,904,227
Spain — 2.4%
Abertis Infraestructuras SA		14,232		282,218
ACS Actividades de Construccion y Servicios SA		6,501		226,593
Amadeus IT Holding SA, Class A		13,876		552,644
Banco Bilbao Vizcaya Argentaria SA		201,403		1,902,131
Banco de Sabadell SA		118,046		312,345
Banco Popular Espanol SA		61,544		306,786
Banco Santander SA (a)		12,587		113,644
Banco Santander SA		377,986		3,172,479
Bankia SA (a)		163,871		243,173
Bankinter SA		24,963		200,546
CaixaBank SA		77,096		403,972
Distribuidora Internacional de Alimentacion SA (b)		24,444		165,634
Enagas SA		3,839		121,086
Ferrovial SA		14,685		290,295
Gas Natural SDG SA		12,065		303,080
Grifols SA		5,032		200,795
Iberdrola SA		179,669		1,211,103
Inditex SA		34,781		992,141
International Consolidated Airlines Group SA (a)		32,014		238,481
Mapfre SA		39,905		134,878

See Notes to Financial Statements.

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 31

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

Common Stocks	Shares		Value
Spain (concluded)
Red Electrica Corp. SA (b)		2,074	$	182,826
Repsol SA		34,987		654,985
Telefonica SA		134,401		1,929,665
Zardoya Otis SA (b)		4,308		47,774
				14,189,274
Sweden — 2.1%
Alfa Laval AB		10,363		195,962
Assa Abloy AB, Class B		10,841		572,583
Atlas Copco AB, Class A		22,898		637,152
Atlas Copco AB, Class B		10,108		258,743
Boliden AB		8,342		133,345
Electrolux AB, Class B		7,886		230,423
Elekta AB, B Shares		16,131		164,920
Getinge AB, Class B		7,626		173,662
Hennes & Mauritz AB, Class B		29,415		1,222,046
Hexagon AB, Class B		8,973		276,813
Husqvarna AB, Class B		17,215		126,538
ICA Gruppen AB		3,148		122,578
Industrivarden AB, Class C		2,903		50,391
Investment AB Kinnevik, Class B		7,006		227,830
Investor AB, Class B		17,093		621,464
Lundin Petroleum AB (a)		9,142		130,825
Millicom International Cellular SA		3,166		234,585
Nordea Bank AB		98,685		1,142,356
Sandvik AB		36,072		350,731
Securitas AB, Class B		6,647		80,413
Skandinaviska Enskilda Banken AB, Class A		48,987		622,064
Skanska AB, Class B		11,718		251,590
SKF AB, Class B		12,650		266,479
Svenska Cellulosa AB, B Shares		19,525		420,934
Svenska Handelsbanken AB, Class A		15,901		743,973
Swedbank AB, Class A		28,893		716,862
Swedish Match AB		5,557		174,126
Tele2 AB, Class B		7,128		86,375
Telefonaktiebolaget LM Ericsson, Class B		95,816		1,160,150
TeliaSonera AB		77,819		500,327
Volvo AB, Class B		57,585		620,967
				12,517,207
Switzerland — 6.7%
ABB Ltd., Registered Shares (a)		67,911		1,436,870
Actelion Ltd., Registered Shares (a)		3,467		399,125
Adecco SA, Registered Shares (a)		5,742		394,701
Aryzta AG (a)		3,776		290,184
Baloise Holding AG, Registered Shares		2,131		272,366
Barry Callebaut AG, Registered Shares (a)		54		55,362
Cie Financiere Richemont SA, Registered Shares		16,980		1,505,423
Coca-Cola HBC AG (a)		7,960		151,554
Credit Suisse Group AG, Registered Shares (a)		52,829		1,327,130
EMS-Chemie Holding AG, Registered Shares		217		87,847
Geberit AG, Registered Shares		1,262		426,938
Givaudan SA, Registered Shares (a)		303		543,539
Glencore PLC (a)		336,771		1,554,477
Holcim Ltd., Registered Shares (a)		7,471		534,058
Julius Baer Group Ltd. (a)		7,699		351,521
Kuehne & Nagel International AG, Registered Shares		1,947		264,471
Lindt & Spruengli AG		24		118,667
Lindt & Spruengli AG, Registered Shares		3		173,105
Lonza Group AG, Registered Shares (a)		2,224		250,404
Nestle SA, Registered Shares		103,332		7,533,005
Common Stocks	Shares		Value
Switzerland (concluded)
Novartis AG, Registered Shares		73,621	$	6,827,867
Pargesa Holding SA, Bearer Shares		734		56,640
Partners Group Holding AG		526		153,033
Roche Holding AG		22,451		6,082,923
Schindler Holding AG, Participation Certificates		1,323		190,994
Schindler Holding AG, Registered Shares		1,208		173,266
SGS SA, Registered Shares		184		375,723
Sika AG — Bearer Shares		69		203,546
Sonova Holding AG, Registered Shares		1,683		247,250
STMicroelectronics NV		25,065		187,023
Sulzer AG, Registered Shares		486		51,988
The Swatch Group AG, Bearer Shares		982		436,260
The Swatch Group AG, Registered Shares		1,971		170,495
Swiss Life Holding AG, Registered Shares (a)		1,030		243,442
Swiss Prime Site AG, Registered Shares (a)		1,425		104,632
Swiss Re AG (a)		12,415		1,040,025
Swisscom AG, Registered Shares		773		405,622
Syngenta AG, Registered Shares		3,276		1,053,750
Transocean Ltd. (b)		12,621		231,594
UBS Group AG (a)		116,505		2,002,686
Zurich Insurance Group AG (a)		4,758		1,486,886
				39,396,392
Taiwan — 2.6%
Acer, Inc. (a)		64,000		42,900
Advanced Semiconductor Engineering, Inc.		274,097		325,525
Advantech Co., Ltd.		8,795		64,567
Asia Cement Corp.		57,233		70,479
Asia Pacific Telecom Co., Ltd.		33,000		18,160
Asustek Computer, Inc.		25,220		275,175
AU Optronics Corp. (a)		320,000		162,422
Catcher Technology Co., Ltd.		24,000		185,338
Cathay Financial Holding Co. Ltd.		262,935		388,523
Chailease Holding Co., Ltd.		22,880		56,665
Chang Hwa Commercial Bank		123,172		70,416
Cheng Shin Rubber Industry Co. Ltd.		36,436		85,520
Chicony Electronics Co., Ltd.		15,545		43,287
China Airlines Ltd. (a)		103,687		47,429
China Development Financial Holding Corp.		425,765		135,266
China Life Insurance Co., Ltd.		58,637		48,439
China Motor Corp.		116,000		102,460
China Steel Corp.		390,638		324,037
Chunghwa Telecom Co. Ltd.		128,000		379,396
Clevo Co.		6,805		10,556
Compal Electronics, Inc.		192,000		134,068
CTBC Financial Holding Co. Ltd.		303,499		196,348
CTCI Corp.		45,000		71,762
Delta Electronics, Inc.		58,000		342,736
E.Sun Financial Holding Co., Ltd.		200,046		123,953
Eclat Textile Co., Ltd.		4,160		41,810
Epistar Corp.		18,000		35,622
Eva Airways Corp. (a)		59,000		41,125
Evergreen Marine Corp. Taiwan Ltd. (a)		22,000		15,513
Far Eastern Department Stores Ltd.		34,571		30,701
Far Eastern New Century Corp.		84,909		83,981
Far EasTone Telecommunications Co. Ltd.		50,000		115,187
Farglory Land Development Co., Ltd.		35,597		42,324
First Financial Holding Co., Ltd.		233,179		136,731
Formosa Chemicals & Fibre Corp.		92,360		194,689
Formosa International Hotels Corp.		5,331		56,930
Formosa Petrochemical Corp.		36,000		78,096

See Notes to Financial Statements.

32 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

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

Common Stocks	Shares		Value
Taiwan (continued)
Formosa Plastics Corp.		135,040	$	307,675
Formosa Taffeta Co., Ltd.		31,000		30,587
Foxconn Technology Co., Ltd.		42,161		113,281
Fubon Financial Holding Co., Ltd.		211,952		337,370
Giant Manufacturing Co., Ltd.		5,000		44,185
Hermes Microvision, Inc.		1,000		50,011
Highwealth Construction Corp.		3,000		6,016
Hiwin Technologies Corp.		10,555		87,354
Hon Hai Precision Industry Co. Ltd.		435,616		1,202,959
Hotai Motor Co., Ltd.		8,000		119,719
HTC Corp. (a)		27,050		120,734
Hua Nan Financial Holdings Co., Ltd.		154,203		86,240
Innolux Corp.		286,494		138,466
Inotera Memories, Inc. (a)		93,000		145,917
Inventec Co. Ltd.		51,470		34,423
Kinsus Interconnect Technology Corp.		3,000		9,912
Largan Precision Co., Ltd.		3,000		224,569
Lite-On Technology Corp.		98,827		112,898
MediaTek, Inc.		49,255		716,041
Mega Financial Holding Co., Ltd.		299,110		230,761
Merida Industry Co., Ltd.		3,150		21,269
Nan Ya Plastics Corp.		158,790		327,434
Novatek Microelectronics Corp.		14,000		78,233
Pegatron Corp.		67,000		153,144
Phison Electronics Corp.		5,000		34,308
Pou Chen Corp.		42,000		50,646
Powertech Technology, Inc. (a)		46,100		78,442
President Chain Store Corp.		18,000		139,029
Quanta Computer, Inc.		88,000		219,222
Radiant Opto-Electronics Corp.		7,729		24,608
Realtek Semiconductor Corp.		6,240		20,722
Ruentex Development Co., Ltd.		20,109		31,784
Ruentex Industries Ltd.		17,521		36,742
ScinoPharm Taiwan Ltd.		31,617		55,800
Shin Kong Financial Holding Co., Ltd.		140,345		39,754
Siliconware Precision Industries Co.		108,000		162,737
Simplo Technology Co., Ltd.		3,600		17,742
SinoPac Financial Holdings Co., Ltd.		149,795		61,383
Standard Foods Corp.		5,783		12,810
Synnex Technology International Corp.		30,000		43,449
Taishin Financial Holding Co., Ltd.		200,398		82,267
Taiwan Business Bank (a)		118,604		34,360
Taiwan Cement Corp.		105,000		143,541
Taiwan Cooperative Financial Holding Co., Ltd.		152,289		78,286
Taiwan Fertilizer Co., Ltd.		12,000		21,153
Taiwan Glass Industry Corp.		120,720		93,886
Taiwan Mobile Co. Ltd.		52,800		174,597
Taiwan Semiconductor Manufacturing Co. Ltd.		794,000		3,497,944
Teco Electric and Machinery Co., Ltd.		39,000		36,877
TPK Holding Co., Ltd.		13,887		82,368
Transcend Information, Inc.		6,000		18,619
TSRC Corp.		21,210		22,691
U-Ming Marine Transport Corp.		3,000		4,711
Uni-President Enterprises Corp.		140,106		221,565
Unimicron Technology Corp.		27,000		20,450
United Microelectronics Corp. (a)		339,000		157,354
Vanguard International Semiconductor Corp.		11,000		18,000
Walsin Lihwa Corp. (a)		50,000		15,682
Wistron Corp.		118,354		106,624
WPG Holdings Ltd.		28,270		32,820
Yang Ming Marine Transport Corp. (a)		61,000		32,323
Common Stocks	Shares		Value
Taiwan (concluded)
Yuanta Financial Holding Co., Ltd.		211,101	$	102,390
Yulon Motor Co. Ltd.		14,000		20,488
Zhen Ding Technology Holding Ltd.		1,710		4,562
				15,330,070
Thailand — 0.5%
Advanced Info Service PCL — NVDR		32,500		246,453
Airports of Thailand PCL — NVDR		15,200		129,501
Bangkok Bank PCL — NVDR		13,000		76,357
Bangkok Bank PCL, Foreign Registered Shares		22,600		134,269
Bangkok Dusit Medical Services PCL — NVDR		54,300		28,280
Banpu PCL — NVDR (b)		29,500		22,261
BEC World PCL — NVDR		16,900		26,155
BTS Group Holdings PCL		152,700		44,462
Bumrungrad Hospital PCL		8,000		34,135
Central Pattana PCL — NVDR		27,100		37,175
Charoen Pokphand Foods PCL — NVDR		46,200		38,022
CP ALL PCL — NVDR		148,500		190,929
Glow Energy PCL — NVDR		7,600		20,436
Home Product Center PCL (b)		77,655		19,434
Indorama Ventures PCL — NVDR		39,200		23,924
IRPC PCL — NVDR		492,400		45,622
Kasikornbank PCL — NVDR		23,400		161,840
Kasikornbank PCL, Foreign Registered Shares		35,300		244,356
Krung Thai Bank PCL — NVDR		143,775		98,638
Minor International PCL		31,800		31,195
PTT Exploration & Production PCL — NVDR		47,822		161,944
PTT Global Chemical PCL — NVDR		52,168		80,947
PTT PCL — NVDR		32,100		314,457
Siam Cement PCL — NVDR		5,700		77,369
Siam Cement PCL, Foreign Registered Shares		15,800		215,586
Siam Commercial Bank PCL — NVDR		52,500		289,153
Thai Oil PCL — NVDR		17,800		22,650
TMB Bank PCL		271,500		23,976
True Corp. PCL — NVDR (a)		236,083		78,735
				2,918,261
Turkey — 0.4%
Akbank TAS		57,038		210,595
Anadolu Efes Biracilik Ve Malt Sanayii AS (a)		3,889		37,764
Arcelik AS		3,960		25,356
BIM Birlesik Magazalar AS		5,749		122,942
Coca-Cola Icecek AS		823		17,799
Emlak Konut Gayrimenkul Yatirim Ortakligi AS		92,969		109,961
Enka Insaat ve Sanayi AS		14,145		31,919
Eregli Demir ve Celik Fabrikalari TAS		27,352		52,040
Ford Otomotiv Sanayi		2,700		37,540
Haci Omer Sabanci Holding AS		32,457		140,886
KOC Holding AS		17,992		95,149
Petkim Petrokimya Holding		37,514		63,300
TAV Havalimanlari Holding AS		2,171		17,723
Tofas Turk Otomobil Fabrikasi AS		4,704		32,056
Tupras Turkiye Petrol Rafinerileri AS		2,499		59,126
Turk Hava Yollari (a)		26,638		109,455
Turk Telekomunikasyon AS		10,009		31,138
Turkcell Iletisim Hizmetleri AS (a)		33,444		204,092
Turkiye Garanti Bankasi AS		80,412		323,026
Turkiye Halk Bankasi		25,164		149,061
Turkiye Is Bankasi, Class C		58,813		169,112
Turkiye Sise ve Cam Fabrikalari AS		35,591		55,278
Turkiye Vakiflar Bankasi Tao, Class D		29,827		62,037

See Notes to Financial Statements.

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 33

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

Common Stocks	Shares		Value
Turkey (concluded)
Ulker Biskuvi Sanayi		3,956	$	31,314
Yapi ve Kredi Bankasi		16,444		34,244
				2,222,913
United Arab Emirates — 0.1%
Abu Dhabi Commercial Bank PJSC		20,031		37,723
Aldar Properties PJSC		61,586		43,378
Arabtec Holding Co. (a)		73,405		56,694
DP World Ltd.		4,187		87,462
Dubai Financial Market		39,225		20,748
Dubai Islamic Bank PJSC		12,579		23,097
Emaar Properties PJSC		113,019		217,821
First Gulf Bank PJSC		32,077		147,341
National Bank of Abu Dhabi PJSC		9,621		36,315
				670,579
United Kingdom — 12.5%
3i Group PLC		35,640		248,510
Aberdeen Asset Management PLC		29,812		199,202
Admiral Group PLC		8,110		166,377
Aggreko PLC		7,640		178,165
AMEC PLC		12,361		163,249
Anglo American PLC		46,440		859,347
Antofagasta PLC		15,673		182,621
ARM Holdings PLC		45,248		695,117
Ashtead Group PLC		15,936		283,022
Associated British Foods PLC		11,610		567,602
AstraZeneca PLC		39,695		2,803,687
Aviva PLC		94,933		713,267
Babcock International Group PLC		7,644		125,226
BAE Systems PLC		98,954		723,670
Barclays PLC		523,184		1,966,822
BG Group PLC		109,770		1,468,909
BHP Billiton PLC		70,659		1,514,317
BP PLC		583,681		3,704,959
British American Tobacco PLC		58,840		3,188,595
British Land Co. PLC		32,761		395,054
British Sky Broadcasting Group PLC		39,571		552,266
BT Group PLC		277,431		1,725,638
Bunzl PLC		10,243		280,015
Burberry Group PLC		14,014		355,559
Capita PLC		22,492		377,139
Carnival PLC		5,562		251,392
Centrica PLC		156,984		679,966
Cobham PLC		41,466		208,162
Compass Group PLC		51,428		879,053
Croda International PLC		4,442		183,341
Diageo PLC		79,132		2,266,900
Direct Line Insurance Group PLC		45,640		206,457
Dixons Carphone PLC		28,347		204,296
easyJet PLC		4,967		128,541
Fiat Chrysler Automobiles NV		26,927		312,884
Fresnillo PLC		7,153		85,013
Friends Life Group Ltd.		50,248		285,370
G4S PLC		44,431		191,659
GKN PLC		49,160		261,666
GlaxoSmithKline PLC		153,174		3,286,133
Hammerson PLC		28,123		263,370
Hargreaves Lansdown PLC		8,513		133,202
HSBC Holdings PLC		611,548		5,778,982
ICAP PLC		13,188		92,345
Common Stocks	Shares		Value
United Kingdom (concluded)
IMI PLC		8,553	$	167,330
Imperial Tobacco Group PLC		32,956		1,450,707
Inmarsat PLC		16,450		203,971
InterContinental Hotels Group PLC		6,708		269,905
Intertek Group PLC		5,063		183,240
Intu Properties PLC		29,315		151,557
Investec PLC		14,779		123,822
ITV PLC		149,766		499,577
J. Sainsbury PLC		40,957		156,402
Johnson Matthey PLC		7,003		368,433
Kingfisher PLC		80,813		427,189
Land Securities Group PLC		26,146		469,991
Legal & General Group PLC		191,425		739,120
Lloyds Banking Group PLC (a)		1,796,840		2,113,549
London Stock Exchange Group PLC		8,053		277,096
Marks & Spencer Group PLC		54,610		404,354
Meggitt PLC		29,906		240,571
Melrose Industries PLC		40,295		166,799
Merlin Entertainments PLC (c)		19,554		120,993
National Grid PLC		119,582		1,696,783
Next PLC		4,749		503,664
Old Mutual PLC		187,710		553,212
Pearson PLC		25,636		473,449
Persimmon PLC (a)		9,654		235,788
Petrofac Ltd. (b)		7,867		85,703
Prudential PLC		84,422		1,951,792
Randgold Resources Ltd.		3,278		222,544
Reckitt Benckiser Group PLC		21,907		1,774,334
Reed Elsevier PLC		35,004		597,938
Rexam PLC		21,956		154,570
Rio Tinto PLC		40,203		1,853,240
Rolls-Royce Holdings PLC (a)		61,457		825,604
Royal Bank of Scotland Group PLC (a)		83,962		510,841
Royal Mail PLC		22,777		151,785
RSA Insurance Group PLC (a)		33,412		225,580
SABMiller PLC		30,919		1,611,843
The Sage Group PLC		33,423		241,400
Schroders PLC		4,184		173,897
Segro PLC		24,988		143,148
Severn Trent PLC		8,564		267,105
Smith & Nephew PLC		33,580		605,533
Smiths Group PLC		14,211		241,646
Sports Direct International PLC (a)		11,394		125,342
SSE PLC		32,001		808,572
Standard Chartered PLC		82,029		1,226,817
Standard Life PLC (a)		78,606		486,908
Tate & Lyle PLC		18,661		174,844
Tesco PLC		269,220		784,965
Travis Perkins PLC		7,072		203,561
Tullow Oil PLC		32,954		212,367
Unilever PLC		41,571		1,688,954
United Utilities Group PLC		23,561		334,658
Vodafone Group PLC		834,017		2,859,533
The Weir Group PLC		6,278		180,026
Whitbread PLC		5,753		425,758
William Hill PLC		34,609		194,470
WM Morrison Supermarkets PLC		65,871		187,947
Wolseley PLC		8,515		486,818
WPP PLC		46,752		972,053
				74,126,665
Total Common Stocks — 94.3%				557,445,730

See Notes to Financial Statements.

34 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

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

Investment Companies	Shares		Value
India — 1.4%
iShares India 50 ETF (d)		288,798	$	8,635,060
Total Investment Companies — 1.4%				8,635,060

Preferred Stocks
Germany — 0.0%
Fuchs Petrolub SE, Preference Shares, 0.00%		1,552		61,815
Total Preferred Stocks — 0.0%				61,815
Rights
South Korea — 0.0%
DGB Financial Group, Inc. (Expires 01/13/15)		380		398
Spain — 0.0%
Banco Bilbao Vizcaya Argentaria SA (Expires 01/07/15)		174,318		16,663
Repsol SA (Expires 01/08/15)		32,349		17,889
				34,552
Total Rights — 0.0%				34,950
Total Long-Term Investments (Cost — $546,042,112) — 95.7%				566,177,555
Short Term Securities	Shares		Value
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14%, (d)(e)		22,280,035	$	22,280,035
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11%, (d)(e)(f)		2,952,909		2,952,909
Total Short-Term Securities (Cost — $25,232,944) — 4.3%				25,232,944
Total Investments (Cost — $571,275,056) — 100.0%				591,410,499
Liabilities in Excess of Other Assets — (0.0)%				(213,066	)
Net Assets — 100.0%			$	591,197,433

Notes to Schedule of Investments

(a) Non-income producing security.

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

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

(d) Investments in issuers considered to be an affiliate of the Master Portfolio during the year ended December 31, 2014, 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, 2013		Shares Purchased			Shares Sold			Shares Held at December 31, 2014		Value at December 31, 2014		Income		Realized Gain
BlackRock Cash Funds: Institutional, SL Agency Shares		14,568,359		7,711,676	1		—			22,280,035	$	22,280,035	$	9,625		—
BlackRock Cash Funds: Prime, SL Agency Shares		2,067,150		885,759	1		—			2,952,909	$	2,952,909	$	126,397		—
iShares India 50 ETF		314,133		105,100			(130,435	)		288,798	$	8,635,060	$	22,294	$	148,671
1  Represents net shares purchased

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

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

Ÿ As of December 31, 2014, financial futures contracts outstanding were as follows:

Contracts Purchased		Issue	Exchange	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
	116	MSCI Emerging Markets Mini Index	NYSE Liffe U.S.	March 2015	$	5,554,660	$	86,659
	217	E-Mini MSCI EAFE Index	NYSE Liffe U.S.	March 2015	$	19,073,215		(79,216	)
	Total						$	7,443

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. 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

See Notes to Financial Statements.

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 35

Schedule of Investments (continued) ACWI ex-U.S. Index Master Portfolio

entirety. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices 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)

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. For information about the Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

As of December 31, 2014, following tables summarize the Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Common Stocks:
Australia	$	380,221	$	29,557,502		—	$	29,937,723
Austria		—		807,784		—		807,784
Belgium		—		5,308,355		—		5,308,355
Brazil		10,822,314		—		—		10,822,314
Canada		42,659,579		—		—		42,659,579
Chile		1,668,753		—		—		1,668,753
China		444,422		19,525,522		—		19,969,944
Colombia		913,821		—		—		913,821
Czech Republic		15,267		164,677		—		179,944
Denmark		48,764		6,139,935		—		6,188,699
Egypt		—		224,252		—		224,252
Finland		129,305		3,506,859		—		3,636,164
France		898,235		37,870,315		—		38,768,550
Germany		94,583		36,635,333		—		36,729,916
Greece		22,965		551,035		—		574,000
Hong Kong		1,265,271		18,302,556		—		19,567,827
Hungary		—		156,302		—		156,302
Indonesia		—		3,362,340		—		3,362,340
Ireland		—		3,441,908		—		3,441,908
Israel		—		2,379,094		—		2,379,094
Italy		—		8,494,342		—		8,494,342
Japan		126,365		84,557,091		—		84,683,456
Luxembourg		260,752		154,000		—		414,752
Malaysia		631,371		3,694,847		—		4,326,218
Malta		—		44,002		—		44,002
Mexico		6,085,523		—		—		6,085,523
Netherlands		—		18,245,350		—		18,245,350
New Zealand		—		535,958		—		535,958
Norway		—		2,739,649		—		2,739,649
Peru		649,085		—		—		649,085
Philippines		—		1,375,374		—		1,375,374
Poland		14,145		1,837,459		—		1,851,604
Portugal		—		611,700		—		611,700
Qatar		—		1,057,014		—		1,057,014
Russia		266,836		3,542,839		—		3,809,675
Singapore		—		6,412,266		—		6,412,266
South Africa		228,258		9,370,444	$	18		9,598,720
South Korea		1,072,391		16,831,836		—		17,904,227
Spain		113,644		14,075,630		—		14,189,274
Sweden		164,920		12,352,287		—		12,517,207
Switzerland		2,451,079		36,945,313		—		39,396,392
Taiwan		174,597		15,155,473		—		15,330,070
Thailand		—		2,918,261		—		2,918,261
Turkey		—		2,222,913		—		2,222,913

See Notes to Financial Statements.

36 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

Schedule of Investments (concluded) ACWI ex-U.S. Index Master Portfolio

	Level 1			Level 2		Level 3		Total
Assets (concluded):
Investments (concluded):
Common Stocks (concluded):
United Arab Emirates		—		$	670,579		—	$	670,579
United Kingdom	$	204,296			73,922,369		—		74,126,665
Investment Companies		8,635,060			—		—		8,635,060
Rights		34,552			398		—		34,950
Short-Term Securities		25,232,944			—		—		25,232,944
Total	$	105,709,318		$	485,701,163	$	18	$	591,410,499
	Level 1			Level 2		Level 3		Total
Derivative Financial Instruments 1
Assets:
Equity contracts	$	86,659			—		—	$	86,659
Liabilities:
Equity contracts		(79,216	)		—		—		(79,216	)
Total	$	7,443			—		—	$	7,443
1    Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

The Master Portfolio may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of December 31, 2014, 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	$	1,005,000		—			—	$	1,005,000
Foreign currency at value		1,459,466		—			—		1,459,466
Liabilities:
Bank overdraft		—	$	(7,174	)		—		(7,174	)
Collateral on securities loaned at value		—		(2,952,909	)		—		(2,952,909	)
Total	$	2,464,466	$	(2,960,083	)		—	$	(495,617	)

See Notes to Financial Statements.

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 37

Statement of Assets and Liabilities ACWI ex-U.S. Index Master Portfolio

December 31, 2014
Assets
Investments at value — unaffiliated (including securities loaned of $2,767,059) (cost — $538,735,624)	$	557,542,495
Investments at value — affiliated (cost — $32,539,432)		33,868,004
Cash pledged for financial futures contracts		1,005,000
Contributions receivable from investors		16,383,623
Foreign currency at value (cost — $1,470,487)		1,459,466
Dividends receivable		429,072
Securities lending income receivable — affiliated		5,018
Investments sold receivable		3,485
Prepaid expenses		93
Total assets		610,696,256
Liabilities
Investments purchased payable		16,288,097
Collateral on securities loaned at value		2,952,909
Variation margin payable on financial futures contracts		107,353
Custodian fees payable		89,754
Professional fees payable		37,829
Investment advisory fees payable		11,515
Bank overdraft		7,174
Trustees’ fees payable		3,691
Printing fees payable		456
Other accrued expenses payable		45
Total liabilities		19,498,823
Net Assets	$	591,197,433
Net Assets Consist of
Investors’ capital	$	571,115,569
Net unrealized appreciation/depreciation		20,081,864
Net Assets	$	591,197,433

See Notes to Financial Statements.
38	BLACKROCK ACWI ex-U.S. INDEX FUND	DECEMBER 31, 2014

Statement of Operations ACWI ex-U.S. Index Master Portfolio

Year Ended December 31, 2014
Investment Income
Dividends — unaffiliated	$	14,994,033
Securities lending — affiliated — net		126,397
Dividends — affiliated		22,294
Income — affiliated		9,625
Foreign taxes withheld		(1,534,198	)
Total income		13,618,151
Expenses
Investment advisory		288,139
Custodian		280,391
Professional		64,684
Independent Trustees		13,801
Miscellaneous		47
Total expenses		647,062
Less fees waived and/or reimbursed by Manager		(128,920	)
Total expenses after fees waived and/or reimbursed		518,142
Net investment income		13,100,009
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments (including $6,474 in foreign capital gain tax)		23,735,671
Investments — affiliated		148,671
Financial futures contracts		(194,411	)
Foreign currency transactions		(115,165	)
		23,574,766
Net change in unrealized appreciation/depreciation on:
Investments		(64,155,470	)
Financial futures contracts		(221,030	)
Foreign currency translations		(6,462	)
		(64,382,962	)
Total realized and unrealized loss		(40,808,196	)
Net Decrease in Net Assets Resulting from Operations	$	(27,708,187	)

See Notes to Financial Statements.
	BLACKROCK ACWI ex-U.S. INDEX FUND	DECEMBER 31, 2014	39

Statements of Changes in Net Assets ACWI ex-U.S. Index Master Portfolio

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	13,100,009		$	15,848,466
Net realized gain		23,574,766			37,295,312
Net change in unrealized appreciation/depreciation		(64,382,962	)		32,277,225
Net increase (decrease) in net assets resulting from operations		(27,708,187	)		85,421,003
Capital Transactions
Proceeds from contributions		726,393,826			519,148,164
Value of withdrawals		(663,931,697	)		(429,181,596	)
Net increase in net assets derived from capital transactions		62,462,129			89,966,568
Net Assets
Total increase in net assets		34,753,942			175,387,571
Beginning of year		556,443,491			381,055,920
End of year	$	591,197,433		$	556,443,491

Financial Highlights ACWI ex-U.S. Index Master Portfolio

	Year Ended December 31,						Period from June 30, 20111  to December 31, 2011
	2014		2013		2012
Total Return
Total Return		(4.68)%		13.96%		16.65%		(18.04)%	2
Ratios to Average Net Assets
Total expenses		0.15%3		0.25%		0.42%		1.47%	4,5
Total expenses after fees waived and/or reimbursed		0.12%3		0.24%		0.32%		0.33%	4
Net investment income		3.08%3		2.60%		2.23%		1.76%	4
Supplemental Data
Net assets, end of period (000)		$591,197		$556,443		$381,056		$43,554
Portfolio turnover rate		49%		36%		42%		4%

¹  Commencement of operations.

²  Aggregate total return.

³  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01%.

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 1.48%.

See Notes to Financial Statements.
40	BLACKROCK ACWI ex-U.S. INDEX FUND	DECEMBER 31, 2014

Notes to Financial Statements ACWI ex-U.S. Index Master Portfolio

1. Organization:

ACWI ex-U.S. 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.

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

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 (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements 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 Master Portfolio is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Master Portfolio:

Valuation: The Master Portfolio’s investments are valued at fair value as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the 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 are valued at the official close each day, if available. For equity investments traded on more than one exchange, the official close price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price. 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.

Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of business on the NYSE. Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of 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 the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Investments”). When determining the price for Fair Value Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant consistent with the principles of fair value measurement. The pricing of all Fair Value Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

In the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Investments”). When determining the price for Fair Value Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant 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

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 41

Notes to Financial Statements (continued) ACWI ex-U.S. Index Master Portfolio

(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 Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

Foreign Currency: The Master Portfolio’s books and records are maintained in U.S. 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 U.S. 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 U.S. dollars; the opposite effect occurs if the U.S. 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 are generally 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 forward 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 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 date. 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.

Recent Accounting Standard: In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance will require expanded disclosure requirements for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. It is effective for financial statements with fiscal years beginning on or after December 15, 2014 and interim periods within those fiscal years. Management is evaluating the impact, if any, of this guidance on the Master Portfolio’s financial statement disclosures.

Other: Expenses directly related to the Master Portfolio are charged to the Master Portfolio. Other operating expenses shared by several funds are prorated 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 its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Master Portfolio collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. government. The initial collateral received by the Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is

42 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

Notes to Financial Statements (continued) ACWI ex-U.S. Index Master Portfolio

maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. During the term of the loan, the Master Portfolio is entitled to all distributions made on or in respect of the loaned securities. 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 — unaffiliated, and collateral on securities loaned at value, respectively. As of December 31, 2014, any securities on loan were collateralized by cash. 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 (each, an “MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, 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.

As of December 31, 2014, the following table is a summary of the Master Portfolio’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Received1		Net Amount2
Citigroup GlobalMarkets, Inc.	$	31,546	$	31,546	$
Credit Suisse Securities (USA) LLC		653,822		653,822		—
Deutsche Bank Securities, Inc.		83,255		83,255		—
Goldman Sachs & Co.		625,958		625,958		—
JPMorgan Securities LLC		91,895		91,895		—
Merrill Lynch, Pierce, Fenner & Smith Inc.		152,436		152,436		—
Mizuho Securities USA, Inc.		13,634		13,634		—
Morgan Stanley		1,114,513		1,114,513		—
Total	$	2,767,059	$	2,767,059	$

¹  Collateral with a value of $2,952,909 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes.

²  The market value of the loaned securities is determined as of December 31, 2014. 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 include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of securities lent if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Master Portfolio 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.

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 or other 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). 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.

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 43

Notes to Financial Statements (continued) ACWI ex-U.S. Index Master Portfolio

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.

Forward Foreign Currency Exchange Contracts: The Master Portfolio enters into forward 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 forward 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. Forward 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 forward 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, 2014
		Value
	Statement of Assets and Liabilities Location	Derivative Assets		Derivative Liabilities
Equity contracts	Net unrealized appreciation/depreciation1	$	86,659	$	(79,216	)

The Effect of Derivative Financial Instruments in the Statement of Operations Year Ended December 31, 2014
	Net Realized Gain (Loss) From				Net Change in Unrealized Appreciation/Depreciation on
Forward foreign currency exchange contracts:
Forward foreign currency transactions/translations		$	25,885		$	4,173
Equity contracts:
Financial futures contracts			(194,411	)		(221,030	)
Total		$	(168,526	)	$	(216,857	)

For the year ended December 31, 2014, the average quarterly balances of outstanding derivative financial instruments were as follows:

Financial futures contracts:
Average notional value of contracts purchased	$	11,311,531
Forward foreign currency exchange contracts:
Average amounts purchased in U.S.D	$	1,755,609	1

¹  Actual contract amounts for the period are shown due to limited outstanding derivative financial instruments as of each quarter.

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

44 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

Notes to Financial Statements (continued) ACWI ex-U.S. Index Master Portfolio

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 short fall 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 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. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to terminate derivative contracts prior to maturity in the event the Master Portfolio’s net assets decline by a stated percentage or the Master Portfolio fails to meet the terms of its ISDA Master Agreements. The result 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 (typically either $250,000 or $500,000) before a transfer is required, which is determined at the close of business of the Master Portfolio. 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, the Master Portfolio bears the risk of loss from counterparty non-performance. Likewise, to the extent the Master Portfolio has delivered collateral to a counterparty and stands ready to perform under the terms of its agreement with such counterparty, the Master Portfolio bears the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral.

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

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 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. Effective March 21, 2014, 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 0.04%. Prior to March 21, 2014, the Master Portfolio paid the Manager a monthly fee 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, 2014, the Manager waived $70,730, 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, 2015 unless approved by the Board, including a majority of the Independent Trustees.

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 45

Notes to Financial Statements (continued) ACWI ex-U.S. Index Master Portfolio

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, 2014, the amount waived was $53,836.

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 and/or reimbursed by Manager in the Statement of Operations. For the year ended December 31, 2014, the amount waived was $4,354.

The U.S. Securities and Exchange Commission has issued an exemptive order which permits BTC, an affiliate of the Manager, to serve as securities lending agent for the Master Portfolio, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. The Master Portfolio is responsible for expenses in connection with the investment of cash collateral received for securities on loan in a money market fund managed by the Manager or its affiliates, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees the Master Portfolio bears to an annual rate of 0.04% until December 31, 2014 and .05% thereafter (the “collateral investment fees”).

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent. Pursuant to a securities lending agreement effective February 1, 2014, BTC may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the “specials only securities”).

Pursuant to such agreement, the Master Portfolio retains 80% of securities lending income. In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Liquidity Complex in a calendar year exceeds the aggregate securities lending income earned across the Equity-Liquidity Complex through the lending of specials only securities in the calendar year 2013, the Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income. Prior to February 1, 2014, the Master Portfolio retained 65% of securities lending income and paid a fee to BTC equal to 35% of such income.

The share of securities lending income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the year ended December 31, 2014, the Master Portfolio paid BTC $36,327 in total for securities lending agent services and collateral investment fees.

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

6. Purchases and Sales:

For the year ended December 31, 2014, purchases and sales of investments, excluding short-term securities, were $256,731,896 and $207,735,107, respectively.

7. Income Tax Information:

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 U.S. 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 U.S. federal tax returns remains open for the three years ended December 31, 2014 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.

46 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

Notes to Financial Statements (continued) ACWI ex-U.S. Index Master Portfolio

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.

As of December 31, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	574,071,256
Gross unrealized appreciation	$	48,629,457
Gross unrealized depreciation		(31,290,214	)
Net unrealized appreciation	$	17,339,243

8. Bank Borrowings:

The MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), was a party to a 364-day, $1.1 billion credit agreement with a group of lenders, under which the Master Portfolio may borrow to fund shareholder redemptions. Excluding commitments designated for a certain individual fund, the Participating Funds, including the Master Portfolio, could borrow up to an aggregate commitment amount of $650 million, subject to asset coverage and other limitations as specified in the agreement. Effective November 25, 2014, the credit agreement was amended to an aggregate commitment amount of $2.1 billion, of which the Participating Funds, including the Master Portfolio, could borrow up to $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The agreement terminates on April 23, 2015 unless otherwise extended to November 24, 2015 or renewed for a period of 364 days from April 23, 2015. The amended agreement has the following terms: a fee of 0.06% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but in any event, not less less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but in any event not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which are included in miscellaneous expenses in the Statement of Operations, and 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. During the year ended December 31, 2014, the Master Portfolio did not borrow under the credit agreement.

9. Principal Risks:

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 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 U.S. securities. Investment percentages in specific countries are presented in the Schedule of Investments.

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.

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 47

Notes to Financial Statements (concluded) ACWI ex-U.S. Index Master Portfolio

As of December 31, 2014, the Master Portfolio had the following industry classifications:

Industry	Percent of Long-Term Investments
Commercial Banks		16
Pharmaceuticals		7
Oil, Gas & Consumable Fuels		6
Telecommunications		6
Insurance		5
Other1		60

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

10. 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.

48 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

Report of Independent Registered Public Accounting Firm ACWI ex-U.S. Index Master  Portfolio

To the Board of Trustees of Master Investment Portfolio and the Interestholders of ACWI ex-U.S. 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-U.S. Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio, at December 31, 2014, 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, 2014 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 23, 2015

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 49

Officers and Trustees

Name, Address1 and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2
Ronald W. Forbes 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 153 Portfolios	None
Rodney D. Johnson 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 153 Portfolios	None
David O. Beim 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 153 Portfolios	None
Frank J. Fabozzi 1948	Trustee	Since 2014	Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011; Adjunct Professor of Finance and Becton Fellow, Yale University from 1994 to 2006.	112 RICs consisting of 232 Portfolios	None
Dr. Matina S. Horner 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 153 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 1939	Trustee	Since 2007	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 153 Portfolios	None
Ian A. MacKinnon 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None
Cynthia A. Montgomery 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 153 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 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 153 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 1945	Trustee	Since 2007	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 153 Portfolios	None

50 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

Officers and Trustees (continued)

Name, Address1 and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2 (concluded)
Toby Rosenblatt 1938	Trustee	Since 2007	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Futures Foundation (philanthropic Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None
Kenneth L. Urish 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 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 153 Portfolios	None
Frederick W. Winter 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 153 Portfolios	None
	1    The address of each Trustee is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2    Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Trustees on a case-by-case basis, as appropriate.
	3    Date shown is the earliest date a person has served for the Trust covered by this annual report. Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. (“BlackRock”) in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. As a result, although the chart shows certain Trustees as joining the Trust’s board in 2007, those Trustees first became members of the boards of other legacy MLIM or legacy BlackRock funds 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. Frank J. Fabozzi first became a member of the board of other funds advised by BlackRock Advisors, LLC or its affiliates in 1988.
Interested Trustees4
Paul L. Audet 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.	141 RICs consisting of 329 Portfolios	None
Henry Gabbay 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.	29 RICs consisting of 97 Portfolios	None
	4    Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust 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, Dr. Fabozzi 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 75. The Board has determined to extend the terms of Trustees on a case-by-case basis,as appropriate.

BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 51

Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Officers2
John M. Perlowski 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 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.
Jennifer McGovern 1977	Vice President	Since 2014	Director of BlackRock, Inc. since 2011; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal Andrews 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 1970	Treasurer	Since 2007	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Charles Park 1967	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2014	Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Benjamin Archibald 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    The address of each Officer is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2    Officers of the Trust serve at the pleasure of the Board.
	Further information about the Officers and Trustees is available in the Trust’s Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.

Effective September 10, 2014, Brendan Kyne resigned as a Vice President of the Trust/MIP and Jennifer McGovern became a Vice President of the Trust/MIP.

Effective December 31, 2014, Paul L. Audet and Henry Gabbay resigned as Trustees of the Trust/MIP and Ronald W. Forbes resigned as a Trustee of the Trust/MIP and Co-Chair of the Board. Effective January 1, 2015, Collette Chilton, Barbara G. Novick and Mark Stalnecker were appointed to serve as Trustees of the Trust/MIP.

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/MIP 400 Howard Street San Francisco, CA 94105

52 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

Additional Information

General Information

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.

BlackRock’s Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing. Visit BlackRock online at http://www.blackrock.com for more information.

Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM 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 ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014 53

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.

54 BLACKROCK ACWI ex-U.S. INDEX FUND DECEMBER 31, 2014

This report is intended for current holders. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless preceded or accompanied 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.

ACWI-12/14-AR

DECEMBER 31, 2014

  ANNUAL REPORT  

BlackRock Bond Index Fund  |  of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
The Markets in Review		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		40
Statement of Operations		41
Statements of Changes in Net Assets		42
Master Portfolio Financial Highlights		42
Master Portfolio Notes to Financial Statements		43
Master Portfolio Report of Independent Registered Public Accounting Firm		49
Officers and Trustees		50
Additional Information		53

2 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

The Markets in Review

Dear Shareholder,

After an extended period of calm, market volatility increased over the course of 2014, driven largely by higher valuations in risk assets (such as equities and high yield bonds), rising geopolitical risks and expectations around global central bank policies. Several key trends drove strong performance in U.S. markets, particularly large-cap stocks, Treasuries and municipal bonds, while markets outside the U.S. were more challenged.

Investors began the year in search of relatively safer assets due to heightened risks in emerging markets, slowing growth in China and weakening U.S. economic data. As a result, equities globally declined in January while bond markets strengthened despite the expectation that interest rates would rise as the U.S. Federal Reserve had begun reducing its asset purchase programs. Strong demand for relatively safer assets pushed U.S. Treasury bond prices higher and thus kept rates low in the United States. This surprising development, as well as increasing evidence that the soft patch in U.S. economic data had been temporary and weather-related, brought equity investors racing back to the market in February.

In the months that followed, interest rates trended lower in a modest growth environment and more investors turned to equities in search of yield. Markets remained relatively calm despite rising tensions in Russia and Ukraine and further signs of decelerating growth in China. Strong corporate earnings, increased merger and acquisition activity and signs of a strengthening recovery in the U.S. and other developed economies kept equity prices moving higher. Not all segments benefited from these trends, however, as investors ultimately became wary of high valuations, resulting in a broad rotation into cheaper assets.

Volatility ticked up in the summer as geopolitical tensions escalated and investors feared that better U.S. economic indicators may compel the Fed to increase short-term interest rates sooner than previously anticipated. Global credit markets tightened as the U.S. dollar strengthened, ultimately putting a strain on investor flows, and financial markets broadly weakened in the third quarter.

Several themes dominated the markets in the fourth quarter, resulting in higher levels of volatility and the outperformance of U.S. markets versus other areas of the world. Economic growth strengthened considerably in the United States while the broader global economy showed signs of slowing. The European Central Bank and the Bank of Japan took aggressive measures to stimulate growth while the Fed moved toward tighter policy. This divergence in central bank policy caused further strengthening in the U.S. dollar versus other currencies. Oil prices, which had been falling gradually since the summer, plummeted in the fourth quarter due to a global supply-and-demand imbalance. Energy stocks sold off sharply and oil-exporting economies suffered, resulting in the poor performance of emerging market stocks.

At BlackRock, we believe investors need to think globally, extend their scope across a broad 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 blackrock.com for further insight about investing in today’s markets.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2014
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		6.12	%		13.69	%
U.S. small cap equities (Russell 2000�� Index)		1.65			4.89
International equities (MSCI Europe, Australasia, Far East Index)		(9.24	)		(4.90	)
Emerging market equities (MSCI Emerging Markets Index)		(7.84	)		(2.19	)
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.01			0.03
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		4.33			10.72
U.S. investment-grade bonds (Barclays U.S. Aggregate Bond Index)		1.96			5.97
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.00			9.25
U.S. high yield bonds (Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		(2.84	)		2.46
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, 2014

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 U.S. Aggregate Bond Index (the “Index”).

Portfolio Management Commentary

How did the Fund perform?

Ÿ For the 12-month period ended December 31, 2014, the Fund’s Institutional Shares returned 5.88%, Investor A Shares returned 5.63% and Class K Shares returned 5.94%. For the same period, the benchmark Barclays U.S. Aggregate Bond Index (the “Index”) returned 5.97%.

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 After struggling in 2013 and registering losses, fixed income markets kicked off 2014 with respectable first quarter returns. Interest rates declined and credit spreads narrowed as investors sought yield. Uncertainty over U.S. economic growth in the wake of severe winter weather contributed to falling rates and a general flight to quality. Ongoing worries regarding China’s slowdown and the emergence of a political crisis in Ukraine contributed to investor unease and further supported low U.S. Treasury yields. Expectations of weaker economic growth continued into the second quarter of 2014 and led to additional rate declines, while credit spreads tightened further, boosting returns for corporate bonds. The U.S. Federal Reserve (the “Fed”) continued the tapering of its asset purchases initiated at the end of 2013, while the European Central Bank (“ECB”) by contrast moved to an easier monetary policy regime to fight declining inflation expectations and slowing growth within the eurozone.

Ÿ The second half of 2014 saw further evidence of a divergence in monetary policy between the Fed and other major central banks. Stronger economic data in the United States prompted investors to move up their expectations for when the Fed would “normalize” short-term rates. Meanwhile, the ECB continued to take increased measures to battle deflation and tepid eurozone growth, while Japan strove to implement its own extraordinary stimulus and reform measures designed to fend off deflation. Long-term Treasury yields declined as tensions escalated between Russia and Ukraine and drove demand for safer assets. Within the commodities market, crude oil prices began a steep decline.

Ÿ At the end of October, the Fed brought its asset purchase program to a conclusion as signaled, given continued robust U.S. data. This incremental step toward a more normal U.S. policy occurred against the backdrop of sharp sell-offs in global financial markets in mid-October and December amid falling crude oil prices, escalating geopolitical tensions and concerns regarding stalled global growth. European and Japanese yields drifted lower despite extreme measures to reflate economies, and drastically reduced oil prices drove inflation expectations downward and corporate credit spreads wider. By year end, the Treasury yield curve had flattened considerably. Over the 12-month period, two-year Treasury yields rose 28 basis points to 0.66%, 10-year Treasury yields declined 86 basis points to 2.17% and 30-year Treasury yields fell 126 basis points to 2.75%.

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, 2014

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 investment-grade U.S. Government securities and corporate bonds, as well as investment-grade mortgage-backed, asset-backed and commercial mortgage-backed securities.

³  A widely recognized unmanaged market-weighted index, comprised of investment-grade corporate bonds rated BBB or better, mortgages and U.S. Treasury and U.S. Government agency issues with at least one year to maturity.

Performance Summary for the Period Ended December 31, 2014

	Standardized 30-Day  Yields			Unsubsidized 30-Day Yields			6-Month Total Returns			Average Annual Total Returns
										1 Year			5 Years			10 Years
Institutional		1.70	%		1.66	%		1.97	%		5.88	%		4.26	%		4.63	%
Investor A		1.45			1.41			1.84			5.63			4.01			4.42
Class K		1.75			1.71			1.89			5.94			4.31			4.66
Barclays U.S. Aggregate Bond Index		—			—			1.96			5.97			4.45			4.71

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, 2014		Ending Account Value December 31, 2014		Expenses Paid During the Period4		Beginning Account Value July 1, 2014		Ending Account Value December 31, 2014		Expenses Paid During the Period4		Annualized Expense Ratio
Institutional	$	1,000.00	$	1,019.70	$	0.71	$	1,000.00	$	1,024.50	$	0.71		0.14	%
Investor A	$	1,000.00	$	1,018.40	$	1.98	$	1,000.00	$	1,023.24	$	1.99		0.39	%
Class K	$	1,000.00	$	1,018.90	$	0.46	$	1,000.00	$	1,024.75	$	0.46		0.09	%

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 prorating 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, 2014 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 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 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. Distributions paid to each class of shares will vary because of the different levels of services, distribution 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, 2014 and held through December 31, 2014) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

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

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

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

6 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

Statement of Assets and Liabilities BlackRock Bond Index Fund

December 31, 2014
Assets
Investments at value — Master Portfolio (cost — $197,735,726)	$	204,740,776
Contributions receivable from investors		10,682,051
Capital shares sold receivable		179,230
Total assets		215,602,057
Liabilities
Capital shares redeemed payable		10,861,281
Administration fees payable		3,685
Service fees payable		2,239
Professional fees payable		15,900
Total liabilities		10,883,105
Net Assets	$	204,718,952
Net Assets Consist of
Paid-in capital	$	199,041,322
Distributions in excess of net investment income		(585,041	)
Accumulated net realized loss		(742,379	)
Net unrealized appreciation/depreciation		7,005,050
Net Assets	$	204,718,952
Net Asset Value
Institutional — Based on net assets of $34,538,166 and 3,396,552 shares outstanding, unlimited number of shares authorized, no par value	$	10.17
Investor A — Based on net assets of $10,731,750 and 1,055,539 shares outstanding, unlimited number of shares authorized, no par value	$	10.17
Class K — Based on net assets of $159,449,036 and 15,679,576 shares outstanding, unlimited number of shares authorized, no par value	$	10.17

See Notes to Financial Statements.
	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2014	7

Statement of Operations BlackRock Bond Index Fund

Year Ended December 31, 2014
Investment Income
Net investment income allocated from the Master Portfolio:
Interest	$	2,682,133
Securities lending — affiliated — net		4,803
Income — affiliated		66,330
Other income — affiliated		55
Expenses		(129,795	)
Fees waived		32,030
Foreign taxes withheld		(179	)
Total income		2,655,377
Fund Expenses
Administration — Institutional		22,165
Administration — Investor A		5,277
Administration — Class K		45,083
Service — Investor A		16,687
Professional		18,651
Miscellaneous		470
Total expenses		108,333
Less administration fees waived		(18,651	)
Total expenses after fees waived		89,682
Net investment income		2,565,695
Realized and Unrealized Gain Allocated from the Master Portfolio
Net realized gain from investments		2,209,105
Net change in unrealized appreciation/depreciation on investments		3,399,354
Total realized and unrealized gain		5,608,459
Net Increase in Net Assets Resulting from Operations	$	8,174,154

See Notes to Financial Statements.
8	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2014

Statements of Changes in Net Assets BlackRock Bond Index Fund

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	2,565,695		$	1,970,420
Net realized gain (loss)		2,209,105			(438,613	)
Net change in unrealized appreciation/depreciation		3,399,354			(4,774,796	)
Net increase (decrease) in net assets resulting from operations		8,174,154			(3,242,989	)
Distributions to Shareholders From1
Net investment income:
Institutional		(404,342	)		(312,577	)
Investor A		(100,112	)		(50,504	)
Class K		(2,143,878	)		(1,902,456	)
Net realized gain:
Institutional		(203,671	)		(811,199	)
Investor A		(85,653	)		(173,360	)
Class K		(1,462,982	)		(3,537,784	)
Decrease in net assets resulting from distributions to shareholders		(4,400,638	)		(6,787,880	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		78,078,795			4,043,448
Net Assets
Total increase (decrease) in net assets		81,852,311			(5,987,421	)
Beginning of year		122,866,641			128,854,062
End of year	$	204,718,952		$	122,866,641
Distributions in excess of net investment income, end of year	$	(585,041	)	$	(502,404	)

¹  Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2014	9

Financial Highlights BlackRock Bond Index Fund

	Institutional
	Year Ended December 31,									Period March 31, 20111 to December 31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	9.85		$	10.65		$	10.57		$	10.11
Net investment income2		0.17			0.15			0.19			0.25
Net realized and unrealized gain (loss)		0.41			(0.40	)		0.22			0.46
Net increase (decrease) from investment operations		0.58			(0.25	)		0.41			0.71
Distributions from:3
Net investment income		(0.17	)		(0.18	)		(0.22	)		(0.25	)
Net realized gain		(0.09	)		(0.37	)		(0.11	)		(0.00	)4
Total distributions		(0.26	)		(0.55	)		(0.33	)		(0.25	)
Net asset value, end of period	$	10.17		$	9.85		$	10.65		$	10.57
Total Return5
Based on net asset value		5.88%			(2.39)%			3.91%			7.18%	6
Ratios to Average Net Assets7
Total expenses		0.17%	8,9		0.26%	10		0.26%	10		0.27%	11,12
Total expenses after fees waived		0.16%	8,9		0.25%	10		0.25%	10		0.25%	11,12
Net investment income		1.67%	8		1.48%	10		1.71%	10		2.98%	11,12
Supplemental Data
Net assets, end of period (000)	$	34,538		$	22,939		$	11,534		$	53
Portfolio turnover rate of the Master Portfolio13		476%			417%			436%			122%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total return.

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

⁸  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.02%.

⁹  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.02%.

¹⁰ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.01%.

¹¹ Annualized.

¹² Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.05%.

¹³ Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,						Period March 31, 20111 to  December 31, 2011
	2014		2013		2012
Portfolio turnover rate (excluding MDRs)		244%		214%		231%		121%

See Notes to Financial Statements.
10	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2014

Financial Highlights (continued) BlackRock Bond Index Fund

	Investor A
	Year Ended December 31,									Period March 31, 20111 to December 31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	9.85		$	10.65		$	10.57		$	10.11
Net investment income2		0.15			0.11			0.16			0.22
Net realized and unrealized gain (loss)		0.41			(0.39	)		0.22			0.48
Net increase (decrease) from investment operations		0.56			(0.28	)		0.38			0.70
Distributions from:3
Net investment income		(0.15	)		(0.15	)		(0.19	)		(0.24	)
Net realized gain		(0.09	)		(0.37	)		(0.11	)		(0.00	)4
Total distributions		(0.24	)		(0.52	)		(0.30	)		(0.24	)
Net asset value, end of period	$	10.17		$	9.85		$	10.65		$	10.57
Total Return5
Based on net asset value		5.63%			(2.63)%			3.66%			7.01%	6
Ratios to Average Net Assets7
Total expenses		0.41%	8,9		0.51%	10		0.51%	10		0.53%	11,12
Total expenses after fees waived		0.40%	8,9		0.50%	10		0.50%	10		0.50%	11,12
Net investment income		1.44%	8		1.10%	10		1.45%	10		2.65%	11,12
Supplemental Data
Net assets, end of period (000)	$	10,732		$	3,735		$	1,805		$	202
Portfolio turnover rate of the Master Portfolio13		476%			417%			436%			122%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total return.

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

⁸  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.02%.

⁹  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.02%.

¹⁰ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.01%.

¹¹ Annualized.

¹² Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.05%.

¹³ Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,						Period March 31, 20111 to  December 31, 2011
	2014		2013		2012
Portfolio turnover rate (excluding MDRs)		244%		214%		231%		121%

See Notes to Financial Statements.
	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2014	11

Financial Highlights (concluded) BlackRock Bond Index Fund

	Class K
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	9.85		$	10.65		$	10.57		$	10.17		$	9.90
Net investment income1		0.17			0.16			0.22			0.35			0.37
Net realized and unrealized gain (loss)		0.41			(0.41	)		0.19			0.40			0.30
Net increase (decrease) from investment operations		0.58			(0.25	)		0.41			0.75			0.67
Distributions from:2
Net investment income		(0.17	)		(0.18	)		(0.22	)		(0.35	)		(0.40	)
Net realized gain		(0.09	)		(0.37	)		(0.11	)		(0.00	)3		—
Total distributions		(0.26	)		(0.55	)		(0.33	)		(0.35	)		(0.40	)
Net asset value, end of year	$	10.17		$	9.85		$	10.65		$	10.57		$	10.17
Total Return4
Based on net asset value		5.94%			(2.35)%			3.94%			7.55%			6.79%
Ratios to Average Net Assets5
Total expenses		0.12%	6,7		0.21%	8		0.21%	6		0.23%	9		0.26%
Total expenses after fees waived		0.10%	6,7		0.20%	8		0.20%	6		0.20%	9		0.23%
Net investment income		1.72%	6		1.52%	8		1.96%	6		3.19%	9		3.65%
Supplemental Data
Net assets, end of year (000)	$	159,449		$	96,193		$	115,516		$	122,015		$	98,559
Portfolio turnover rate of the Master Portfolio10		476%			417%			436%			122%			59%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁴  Where applicable, assumes the reinvestment of 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 of 0.02%.

⁷  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.02%.

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 0.05%.

¹⁰ Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,
	2014		2013		2012		2011
Portfolio turnover rate (excluding MDRs)		244%		214%		231%		121%

See Notes to Financial Statements.
12	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2014

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. At December 31, 2014, the percentage of the Master Portfolio owned by the Fund was 17.2%. 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 an initial 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 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 (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund:

Valuation: The Fund’s investments are valued at fair value as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of the Trust (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 Fund for all financial instruments. 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 for 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.

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

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

3. 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 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

BLACKROCK BOND INDEX FUND DECEMBER 31, 2014 13

Notes to Financial Statements (continued) BlackRock Bond Index Fund

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 0.02% based on the average daily net assets of Class K Shares and 0.07% of the average daily net assets of Institutional and Investor A Shares. Prior to March 21, 2014, the Fund paid BAL a monthly fee at an annual rate of 0.12% of 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 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. 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, 2015.

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 and distribution fees. The fees are accrued daily and paid monthly at annual rates 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 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 shareholders.

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

4. Income Tax Information:

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

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns remains open for each of the four years ended December 31, 2014. 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 that there are any uncertain tax positions that require recognition of a tax liability.

The tax character of distributions paid was as follows:

	12/31/14		12/31/13
Ordinary income	$	4,362,707	$	5,871,518
Long-term capital gains		37,931		916,362
Total	$	4,400,638	$	6,787,880

As of December 31, 2014, the tax components of accumulated net earnings were as follows:

Undistributed ordinary income	$	413,352
Net unrealized gains1		5,264,278
Total	$	5,677,630

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

14 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

Notes to Financial Statements (concluded) BlackRock Bond Index Fund

5. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2014						Year Ended December 31, 2013
	Shares			Amount			Shares			Amount
Institutional
Shares sold		1,738,605		$	17,601,977			1,201,037		$	12,438,502
Shares issued to shareholders in reinvestment of distributions		60,060			608,013			112,203			1,122,420
Shares redeemed		(731,418	)		(7,404,180	)		(66,980	)		(687,152	)
Net increase		1,067,247		$	10,805,810			1,246,260		$	12,873,770
Investor A
Shares sold		953,418		$	9,634,368			969,890		$	9,949,210
Shares issued to shareholders in reinvestment of distributions		18,313			185,765			22,293			222,574
Shares redeemed		(295,415	)		(2,963,720	)		(782,506	)		(8,007,010	)
Net increase		676,316		$	6,856,413			209,677		$	2,164,774
Class K
Shares sold		10,203,581		$	103,895,691			4,728,706		$	49,201,378
Shares issued to shareholders in reinvestment of distributions		354,853			3,596,678			398,466			4,009,029
Shares redeemed		(4,643,962	)		(47,075,797	)		(6,208,312	)		(64,205,503	)
Net increase (decrease)		5,914,472		$	60,416,572			(1,081,140	)	$	(10,995,096	)
Total Net Increase		7,658,035		$	78,078,795			374,797		$	4,043,448

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, 2014 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, 2014, 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 23, 2015

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions during the fiscal year ended December 31, 2014.

	January — December 2014
Interest-Related Dividends for Non-U.S. Residents and Qualified Short-Term Capital Gains1		91.14%
Federal Obligation Interest2		3.44%

¹  Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. 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 $0.002797 to shareholders of record on June 27, 2014.

16 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

Master Portfolio Information Bond Index Master Portfolio

As of December 31, 2014

Portfolio Composition Percent of
Long-Term  Investments

U.S. Treasury Obligations	36	%
U.S. Government Sponsored Agency Securities	33
Corporate Bonds	25
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	5
A	11
BBB/Baa	11

¹ For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s or Moody’s Investors Service. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

²  The investment advisor evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors, individual investments and/or issuer. Using this approach, the investment advisor has deemed U.S. Government Sponsored Agency Securities and U.S. Treasury Obligations as AAA/Aaa.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2014 17

Schedule of Investments December 31, 2014 Bond Index Master Portfolio (Percentages shown are based on Net Assets)

Asset-Backed Securities — 0.5%	Par   (000)		Value
Ally Auto Receivables Trust, Series 2012-4, Class A8, 0.80%, 10/16/17	$	500	$	499,390
BMW Vehicle Owner Trust, Series 2014-A, Class A4, 1.50%, 2/25/21		200		199,315
Capital Auto Receivables Asset Trust, Series 2013-4, Class A3, 1.09%, 3/20/18		1,000		999,905
Capital One Multi-Asset Execution Trust, Series 2014-A5, Class A, 1.48%, 7/15/20		400		400,090
Chase Issuance Trust, Series 2014-A1, Class A, 1.15%, 1/15/19		1,000		999,509
Citibank Credit Card Issuance Trust:
Series 2006-A3, Class A3, 5.30%, 3/15/18		100		105,400
Series 2008-A1, Class A1, 5.35%, 2/07/20		170		189,017
Discover Card Execution Note Trust, Series 2014-A3, Class A3, 1.22%, 10/15/19		1,000		998,294
GE Capital Credit Card Master Note Trust, Series 2013-1, Class A, 1.35%, 3/15/21		750		738,239
Nissan Auto Lease Trust, Series 2014-B, Class A4, 1.29%, 3/16/20		200		199,858
Toyota Auto Receivables Owner Trust, Series 2014-C, Class A4, 1.44%, 4/15/20		200		200,012
Total Asset-Backed Securities — 0.5%				5,529,029
Corporate Bonds
Aerospace & Defense — 0.4%
The Boeing Co.:
2.35%, 10/30/21		75		74,504
6.13%, 2/15/33		100		132,651
Crane Co., 4.45%, 12/15/23		125		131,784
Eaton Corp.:
2.75%, 11/02/22		250		245,599
4.00%, 11/02/32		200		203,432
General Dynamics Corp., 3.88%, 7/15/21		50		53,694
Honeywell International, Inc., 5.30%, 3/01/18		100		110,928
Ingersoll-Rand Luxembourg Finance SA, 4.65%, 11/01/44		30		30,503
L-3 Communications Corp.:
3.95%, 11/15/16		250		260,849
1.50%, 5/28/17		250		247,541
4.95%, 2/15/21		250		271,722
Lockheed Martin Corp.:
3.35%, 9/15/21		250		258,968
4.07%, 12/15/42		100		100,908
Northrop Grumman Corp.:
1.75%, 6/01/18		250		248,204
4.75%, 6/01/43		125		139,557
Parker-Hannifin Corp., 4.20%, 11/21/34		250		264,303
Precision Castparts Corp.:
1.25%, 1/15/18		75		74,100
2.50%, 1/15/23		150		144,437
Raytheon Co.:
4.88%, 10/15/40		250		284,726
4.70%, 12/15/41		100		111,556
Corporate Bonds	Par   (000)		Value
Aerospace & Defense (concluded)
Textron, Inc., 3.65%, 3/01/21	$	350	$	359,305
Tyco Electronics Group SA, 3.45%, 8/01/24		75		76,448
United Technologies Corp.:
1.80%, 6/01/17		250		253,268
3.10%, 6/01/22		100		102,033
5.70%, 4/15/40		50		62,737
4.50%, 6/01/42		450		489,955
				4,733,712
Agriculture, Fishing & Ranching — 0.0%
Bunge Ltd. Finance Corp., 3.20%, 6/15/17		150		154,236
Air Freight & Logistics — 0.0%
FedEx Corp.:
4.00%, 1/15/24		250		266,096
3.88%, 8/01/42		50		48,187
United Parcel Service, Inc.:
5.13%, 4/01/19		50		56,175
6.20%, 1/15/38		100		132,983
				503,441
Airlines — 0.1%
American Airlines Pass-Through Trust, Series 2013-2, Class A, 4.95%, 1/15/23		189		202,245
Continental Airlines Pass Through Trust, Series 2012-1, Class A, 4.15%, 10/11/25		46		47,582
Delta Air Lines Pass Through Trust, Series 2012-1, Class A, 4.75%, 11/07/21		86		92,105
Southwest Airlines Co., 2.75%, 11/06/19		75		75,345
United Airlines Pass-Through Trust, Series 2013-1, Class A, 4.30%, 2/15/27		200		207,000
				624,277
Auto Components — 0.1%
Delphi Corp., 5.00%, 2/15/23		250		266,870
Johnson Controls, Inc.:
1.40%, 11/02/17		500		495,459
3.63%, 7/02/24		80		80,698
				843,027
Automobiles — 0.1%
Daimler Finance North America LLC, 8.50%, 1/18/31		100		152,949
Ford Motor Co.:
7.45%, 7/16/31		150		203,639
4.75%, 1/15/43		350		369,292
Toyota Motor Credit Corp.:
2.10%, 1/17/19		250		251,049
2.13%, 7/18/19		350		351,038
				1,327,967
Banks — 2.9%
Abbey National Treasury Services PLC:
4.00%, 4/27/16		150		155,437
1.38%, 3/13/17		250		249,699
1.65%, 9/29/17		250		249,262

Portfolio Abbreviations

COP	Certificates of Participation	NPFGC	National Public Finance Guarantee Corp.
EDA	Economic Development Authority	RB	Revenue Bonds
GO	General Obligation Bonds

See Notes to Financial Statements.

18 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

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

Corporate Bonds	Par   (000)		Value
Banks (continued)
Asian Development Bank:
1.75%, 9/11/18	$	500	$	504,397
1.88%, 4/12/19		500		505,168
Australia & New Zealand Banking Group Ltd.:
1.25%, 6/13/17		250		249,338
2.25%, 6/13/19		250		251,198
Bancolombia SA, 5.95%, 6/03/21		100		107,250
Bank of Montreal, 2.50%, 1/11/17		150		153,624
The Bank of New York Mellon Corp.:
2.30%, 7/28/16		50		51,093
1.35%, 3/06/18		250		247,724
2.20%, 5/15/19		250		250,699
2.30%, 9/11/19		500		502,475
3.55%, 9/23/21		50		52,273
Bank of Nova Scotia:
2.90%, 3/29/16		100		102,585
1.38%, 7/15/16		250		251,672
1.10%, 12/13/16		500		500,345
1.30%, 7/21/17		250		249,186
1.38%, 12/18/17		100		99,362
2.05%, 10/30/18		250		250,306
Barclays Bank PLC:
5.00%, 9/22/16		175		186,479
5.13%, 1/08/20		200		224,246
3.75%, 5/15/24		250		257,688
BB&T Corp.:
5.25%, 11/01/19		100		111,400
2.45%, 1/15/20		250		248,982
BNP Paribas SA:
2.38%, 9/14/17		250		254,276
5.00%, 1/15/21		100		113,102
3.25%, 3/03/23		250		254,871
BPCE SA:
2.50%, 12/10/18		250		253,408
4.00%, 4/15/24		250		261,291
Branch Banking & Trust Co.:
2.30%, 10/15/18		250		252,601
3.80%, 10/30/26		250		254,884
Commonwealth Bank of Australia, New York, 2.25%, 3/13/19		250		251,165
Compass Bank, 2.75%, 9/29/19		250		250,256
Cooperatieve Centrale Raiffeisen-Boerenleenbank BA:
1.70%, 3/19/18		250		249,563
2.25%, 1/14/19		250		251,862
4.63%, 12/01/23		500		530,357
5.25%, 5/24/41		25		29,900
Credit Suisse, New York:
2.30%, 5/28/19		600		598,970
5.40%, 1/14/20		150		167,743
3.00%, 10/29/21		250		248,833
Discover Bank/Greenwood Delaware, 7.00%, 4/15/20		500		589,271
Export-Import Bank of Korea:
4.00%, 1/11/17		400		419,332
1.75%, 2/27/18		500		497,230
Fifth Third Bancorp:
3.63%, 1/25/16		50		51,233
1.45%, 2/28/18		200		197,757
2.88%, 10/01/21		200		199,980
Corporate Bonds	Par   (000)		Value
Banks (continued)
Fifth Third Bancorp (concluded):
3.50%, 3/15/22	$	100	$	102,508
4.30%, 1/16/24		250		262,039
HSBC Bank USA NA, 4.88%, 8/24/20		500		551,894
HSBC Holdings PLC:
4.88%, 1/14/22		150		167,197
4.25%, 3/14/24		500		520,291
6.50%, 5/02/36		200		256,867
6.80%, 6/01/38		250		331,543
5.25%, 3/14/44		250		280,039
HSBC USA, Inc., 2.25%, 6/23/19		250		249,618
The Huntington National Bank, 1.38%, 4/24/17		250		247,882
Intesa Sanpaolo SpA:
3.13%, 1/15/16		250		253,951
3.88%, 1/16/18		200		208,231
5.25%, 1/12/24		250		270,824
KeyCorp:
2.30%, 12/13/18		340		341,174
5.10%, 3/24/21		100		112,860
KFW:
0.50%, 4/19/16		1,000		999,980
2.00%, 6/01/16		500		510,224
0.50%, 7/15/16		1,500		1,497,960
2.13%, 1/17/23		200		199,634
The Korea Development Bank:
3.25%, 3/09/16		100		102,356
1.50%, 1/22/18		200		197,432
3.00%, 3/17/19		350		360,505
Landwirtschaftliche Rentenbank, 2.13%, 7/15/16		1,000		1,022,740
Lloyds Bank PLC, 2.35%, 9/05/19		350		349,748
Lloyds TSB Bank PLC, 4.20%, 3/28/17		50		52,879
Manufacturers & Traders Trust Co.:
1.40%, 7/25/17		250		249,634
1.45%, 3/07/18		250		247,319
MUFG Union Bank NA, 2.63%, 9/26/18		250		253,686
Oesterreichische Kontrollbank AG:
2.00%, 6/03/16		100		101,940
1.63%, 3/12/19		500		499,990
PNC Bank NA (a):
2.20%, 1/28/19		500		500,263
2.25%, 7/02/19		350		349,462
2.95%, 1/30/23		250		244,298
PNC Funding Corp. (a):
5.63%, 2/01/17		150		161,885
3.30%, 3/08/22		150		154,263
Rabobank Nederland:
3.38%, 1/19/17		300		312,956
3.88%, 2/08/22		150		159,566
Regions Financial Corp., 2.00%, 5/15/18		250		247,547
Royal Bank of Canada:
0.85%, 3/08/16		250		250,094
1.45%, 9/09/16		250		251,771
1.25%, 6/16/17		250		248,917
1.40%, 10/13/17		225		224,264
2.20%, 7/27/18		250		252,775
Santander Holdings USA, Inc., 3.45%, 8/27/18		250		259,574
Sumitomo Mitsui Banking Corp.:
1.35%, 7/11/17		250		247,667
1.80%, 7/18/17		250		250,364
2.45%, 1/10/19		250		251,132

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2014 19

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

Corporate Bonds		Par   (000)		Value
Banks (concluded)
SunTrust Banks, Inc.:
3.50%, 1/20/17		$	50	$	52,123
2.35%, 11/01/18			250		251,536
Svenska Handelsbanken AB, 1.63%, 3/21/18			250		249,613
The Toronto-Dominion Bank:
2.38%, 10/19/16			50		51,158
1.40%, 4/30/18			250		248,434
2.25%, 11/05/19			300		300,596
US Bancorp:
1.65%, 5/15/17			250		251,866
1.95%, 11/15/18			225		225,684
4.13%, 5/24/21			50		54,661
US Bank NA, 2.13%, 10/28/19			250		249,190
Wachovia Corp., 5.63%, 10/15/16			250		268,850
Wells Fargo & Co.:
1.25%, 7/20/16			250		250,829
2.63%, 12/15/16			100		102,742
2.10%, 5/08/17			150		152,543
5.63%, 12/11/17			250		278,077
1.50%, 1/16/18			250		248,632
2.15%, 1/15/19			250		250,661
2.13%, 4/22/19			350		349,908
3.00%, 1/22/21			250		254,697
3.45%, 2/13/23			450		456,072
4.48%, 1/16/24			250		266,551
4.10%, 6/03/26			520		531,470
5.38%, 11/02/43			150		170,657
5.61%, 1/15/44			306		360,227
4.65%, 11/04/44			95		98,027
Westpac Banking Corp.:
1.50%, 12/01/17			250		249,710
1.60%, 1/12/18			250		249,985
2.25%, 1/17/19			350		353,290
4.88%, 11/19/19			50		55,788
					34,243,093
Beverages — 0.6%
Anheuser-Busch Cos. LLC, 6.45%, 9/01/37			100		131,519
Anheuser-Busch InBev Finance, Inc.:
0.80%, 1/15/16			250		250,403
2.15%, 2/01/19			500		502,015
4.63%, 2/01/44			150		163,151
Anheuser-Busch InBev Worldwide, Inc.:
1.38%, 7/15/17			500		499,556
7.75%, 1/15/19			250		302,810
2.50%, 7/15/22			200		194,376
8.20%, 1/15/39			150		231,573
3.75%, 7/15/42			50		47,006
Beam, Inc., 1.88%, 5/15/17			100		100,406
The Coca-Cola Co.:
1.80%, 9/01/16			50		50,834
1.15%, 4/01/18			250		247,109
1.65%, 11/01/18			500		500,253
4.88%, 3/15/19			150		168,177
2.45%, 11/01/20			350		354,538
Coca-Cola Femsa SAB de CV, 2.38%, 11/26/18			250		254,553
Diageo Capital PLC:
1.50%, 5/11/17			200		200,266
5.75%, 10/23/17			100		111,361
3.88%, 4/29/43			125		123,079
Corporate Bonds		Par   (000)		Value
Beverages (concluded)
Diageo Investment Corp., 2.88%, 5/11/22		$	100	$	99,940
Dr Pepper Snapple Group, Inc.:
3.20%, 11/15/21			25		25,439
2.70%, 11/15/22	��		100		97,679
Molson Coors Brewing Co., 3.50%, 5/01/22			75		75,752
PepsiCo, Inc.:
0.70%, 2/26/16			500		500,261
1.25%, 8/13/17			500		499,031
2.25%, 1/07/19			250		252,857
2.75%, 3/05/22			250		249,610
2.75%, 3/01/23			300		295,163
3.60%, 3/01/24			250		261,168
4.88%, 11/01/40			100		112,345
3.60%, 8/13/42			100		93,419
					6,995,649
Biotechnology — 0.2%
Amgen, Inc.:
2.13%, 5/15/17			300		303,936
1.25%, 5/22/17			250		248,028
2.20%, 5/22/19			250		248,949
3.45%, 10/01/20			100		103,900
5.15%, 11/15/41			550		619,932
Celgene Corp.:
3.25%, 8/15/22			150		150,966
5.25%, 8/15/43			145		163,773
Gilead Sciences, Inc.:
3.05%, 12/01/16			150		155,648
3.70%, 4/01/24			500		524,415
3.50%, 2/01/25			170		174,488
5.65%, 12/01/41			50		61,909
					2,755,944
Building Products — 0.0%
Owens Corning, 4.20%, 12/15/22			150		152,232
Capital Markets — 1.1%
Ameriprise Financial, Inc., 4.00%, 10/15/23			150		158,890
Ares Capital Corp., 3.88%, 1/15/20			300		299,139
The Charles Schwab Corp.:
2.20%, 7/25/18			75		75,965
4.45%, 7/22/20			100		109,840
FMS Wertmanagement AoeR, 1.13%, 10/14/16			250		251,693
Franklin Resources, Inc., 2.80%, 9/15/22			150		149,751
The Goldman Sachs Group, Inc.:
3.63%, 2/07/16			400		410,423
5.95%, 1/18/18			300		333,290
2.38%, 1/22/18			250		252,525
2.90%, 7/19/18			500		512,940
2.63%, 1/31/19			500		503,053
7.50%, 2/15/19			150		178,419
2.55%, 10/23/19			755		752,243
5.75%, 1/24/22			350		404,875
3.63%, 1/22/23			150		151,893
4.00%, 3/03/24			425		441,213
6.13%, 2/15/33			400		490,284
6.75%, 10/01/37			650		817,294
Invesco Finance PLC, 4.00%, 1/30/24			250		262,135
Lazard Group LLC, 4.25%, 11/14/20			150		158,093
Legg Mason, Inc., 5.63%, 1/15/44			125		142,982

See Notes to Financial Statements.

20 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

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

Corporate Bonds	Par   (000)		Value
Capital Markets (concluded)
Morgan Stanley:
1.75%, 2/25/16	$	750	$	754,068
5.75%, 10/18/16		225		241,585
6.63%, 4/01/18		500		569,517
2.38%, 7/23/19		500		498,156
5.63%, 9/23/19		250		282,198
5.50%, 7/28/21		100		113,488
4.88%, 11/01/22		500		531,039
4.10%, 5/22/23		250		253,110
5.00%, 11/24/25		250		266,779
4.35%, 9/08/26		500		502,987
7.25%, 4/01/32		50		68,451
6.38%, 7/24/42		50		66,402
Series F, 3.88%, 4/29/24		250		256,509
Murray Street Investment Trust I, 4.65%, 3/09/17 (b)		200		211,079
The NASDAQ OMX Group, Inc., 4.25%, 6/01/24		250		256,220
Nomura Holdings, Inc.:
2.00%, 9/13/16		250		252,017
2.75%, 3/19/19		250		252,738
Raymond James Financial, Inc., 4.25%, 4/15/16		100		103,681
State Street Corp.:
2.88%, 3/07/16		100		102,446
3.10%, 5/15/23		250		246,478
3.30%, 12/16/24		155		157,316
				12,843,204
Chemicals — 0.6%
Agrium, Inc.:
3.15%, 10/01/22		50		48,808
3.50%, 6/01/23		250		246,520
Airgas, Inc., 2.38%, 2/15/20		250		245,603
Albemarle Corp., 4.15%, 12/01/24		250		254,002
CF Industries, Inc.:
6.88%, 5/01/18		200		227,366
5.15%, 3/15/34		250		261,500
Cytec Industries, Inc.:
3.50%, 4/01/23		250		250,475
3.95%, 5/01/25		250		253,034
The Dow Chemical Co.:
8.55%, 5/15/19		100		124,325
4.25%, 11/15/20		300		320,739
4.13%, 11/15/21		50		52,830
3.00%, 11/15/22		250		244,266
5.25%, 11/15/41		100		107,852
E.I. du Pont de Nemours & Co.:
6.00%, 7/15/18		325		370,124
2.80%, 2/15/23		250		245,910
Eastman Chemical Co.:
3.60%, 8/15/22		200		202,535
3.80%, 3/15/25		300		305,394
Ecolab, Inc., 4.35%, 12/08/21		150		163,438
LYB International Finance BV:
4.00%, 7/15/23		200		204,588
5.25%, 7/15/43		75		81,498
LyondellBasell Industries NV, 6.00%, 11/15/21		250		287,740
Methanex Corp., 3.25%, 12/15/19		250		247,897
Monsanto Co.:
4.20%, 7/15/34		50		52,100
4.40%, 7/15/44		150		155,631
Corporate Bonds	Par   (000)		Value
Chemicals (concluded)
The Mosaic Co.:
3.75%, 11/15/21	$	50	$	52,040
5.45%, 11/15/33		250		282,852
Potash Corp. of Saskatchewan, Inc.:
3.25%, 12/01/17		250		260,776
3.63%, 3/15/24		250		256,511
PPG Industries, Inc., 2.30%, 11/15/19		350		348,459
Praxair, Inc., 1.25%, 11/07/18		250		244,227
Rohm & Haas Co., 7.85%, 7/15/29		250		345,007
The Sherwin-Williams Co., 1.35%, 12/15/17		200		198,620
				6,942,667
Commercial Services & Supplies — 0.1%
3M Co., 1.63%, 6/15/19		350		345,824
Republic Services, Inc.:
5.25%, 11/15/21		50		56,614
3.55%, 6/01/22		250		256,654
Vanderbilt University, 5.25%, 4/01/19		100		113,097
Waste Management, Inc.:
4.60%, 3/01/21		100		110,738
2.90%, 9/15/22		200		197,900
				1,080,827
Communications Equipment — 0.1%
Cisco Systems, Inc.:
2.13%, 3/01/19		500		502,353
2.90%, 3/04/21		125		127,286
5.50%, 1/15/40		350		426,502
Motorola Solutions, Inc.:
3.75%, 5/15/22		150		152,177
3.50%, 3/01/23		250		246,088
				1,454,406
Construction & Engineering — 0.0%
ABB Finance USA, Inc.:
1.63%, 5/08/17		150		150,494
2.88%, 5/08/22		100		100,500
Fluor Corp., 3.50%, 12/15/24		250		248,662
				499,656
Consumer Finance — 0.3%
American Express Co.:
1.55%, 5/22/18		250		247,623
3.63%, 12/05/24		300		302,501
4.05%, 12/03/42		67		67,608
Capital One Bank USA NA:
1.30%, 6/05/17		250		247,849
2.25%, 2/13/19		250		248,190
Capital One Financial Corp.:
2.45%, 4/24/19		250		249,427
3.50%, 6/15/23		110		111,172
Caterpillar Financial Services Corp.:
0.70%, 2/26/16		700		700,286
3.30%, 6/09/24		250		255,003
HSBC Finance Corp.:
5.50%, 1/19/16		500		522,753
6.68%, 1/15/21		161		191,019
MasterCard, Inc., 3.38%, 4/01/24		250		256,614
Synchrony Financial, 3.75%, 8/15/21		500		510,745
				3,910,790

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2014 21

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

Corporate Bonds	Par   (000)		Value
Containers & Packaging — 0.0%
Packaging Corp. of America, 4.50%, 11/01/23	$	250	$	261,878
Diversified Financial Services — 2.8%
Air Lease Corp.:
2.13%, 1/15/18		175		171,938
3.38%, 1/15/19		250		253,125
3.88%, 4/01/21		175		175,875
American Express Credit Corp.:
2.38%, 3/24/17		100		102,265
1.13%, 6/05/17		500		498,426
1.55%, 9/22/17		105		105,205
2.13%, 3/18/19		400		399,498
2.25%, 8/15/19		250		250,040
American Honda Finance Corp., 1.55%, 12/11/17		250		251,066
Bank of America Corp.:
3.63%, 3/17/16		150		154,214
6.05%, 5/16/16		500		529,463
3.75%, 7/12/16		350		362,516
3.88%, 3/22/17		300		313,889
1.70%, 8/25/17		250		250,057
2.00%, 1/11/18		1,050		1,049,202
6.88%, 4/25/18		400		459,432
2.60%, 1/15/19		500		503,888
5.63%, 7/01/20		150		170,789
5.00%, 5/13/21		100		111,585
5.70%, 1/24/22		100		115,844
4.13%, 1/22/24		500		525,077
4.20%, 8/26/24		500		509,362
4.25%, 10/22/26		290		289,349
6.11%, 1/29/37		100		118,075
7.75%, 5/14/38		200		282,461
5.88%, 2/07/42		100		125,136
4.88%, 4/01/44		175		193,338
Series L, 2.65%, 4/01/19		500		503,667
BNP Paribas SA, 4.25%, 10/15/24		250		252,573
Boeing Capital Corp., 4.70%, 10/27/19		250		278,289
Capital One Bank USA NA, 3.38%, 2/15/23		350		348,054
Citigroup, Inc.:
3.95%, 6/15/16		150		155,711
1.70%, 7/25/16		250		251,712
4.45%, 1/10/17		400		422,833
1.35%, 3/10/17		250		248,821
2.50%, 9/26/18		350		354,089
8.50%, 5/22/19		250		311,517
2.50%, 7/29/19		250		250,201
4.05%, 7/30/22		250		258,665
3.38%, 3/01/23		500		504,471
3.50%, 5/15/23		250		243,373
4.30%, 11/20/26		150		149,664
6.63%, 6/15/32		100		124,578
6.13%, 8/25/36		250		298,018
6.88%, 3/05/38		100		136,246
8.13%, 7/15/39		75		114,820
6.68%, 9/13/43		250		323,263
Deutsche Bank AG, London:
3.25%, 1/11/16		300		306,509
1.40%, 2/13/17		500		498,957
2.50%, 2/13/19		250		253,061
3.70%, 5/30/24		215		218,175
Corporate Bonds	Par   (000)		Value
Diversified Financial Services (continued)
Ford Motor Credit Co. LLC:
4.25%, 2/03/17	$	250	$	262,517
1.72%, 12/06/17		250		247,416
2.38%, 1/16/18		250		251,449
2.38%, 3/12/19		500		496,519
2.60%, 11/04/19		250		248,655
4.38%, 8/06/23		220		235,190
General Electric Capital Corp.:
1.00%, 1/08/16		1,000		1,003,640
1.50%, 7/12/16		250		252,585
2.90%, 1/09/17		100		103,483
5.63%, 5/01/18		300		337,570
6.00%, 8/07/19		100		116,317
4.38%, 9/16/20		50		54,762
4.63%, 1/07/21		250		278,648
4.65%, 10/17/21		200		225,426
3.45%, 5/15/24		300		309,986
6.75%, 3/15/32		500		682,941
5.88%, 1/14/38		750		949,021
6.88%, 1/10/39		250		353,627
6.38%, 11/15/67 (c)		250		268,125
IntercontinentalExchange Group, Inc., 2.50%, 10/15/18		250		254,555
Jefferies Group LLC:
8.50%, 7/15/19		125		149,788
5.13%, 1/20/23		150		152,478
John Deere Capital Corp.:
0.75%, 1/22/16		250		249,948
1.95%, 12/13/18		500		499,882
2.25%, 4/17/19		100		100,892
2.80%, 3/04/21		250		252,984
3.90%, 7/12/21		50		54,189
JPMorgan Chase & Co.:
3.15%, 7/05/16		300		308,381
1.35%, 2/15/17		750		749,983
2.00%, 8/15/17		250		252,378
1.80%, 1/25/18		250		249,806
1.63%, 5/15/18		500		494,502
2.35%, 1/28/19		500		503,262
2.20%, 10/22/19		500		495,688
4.50%, 1/24/22		300		327,526
3.25%, 9/23/22		200		201,165
3.20%, 1/25/23		150		150,169
3.38%, 5/01/23		250		247,329
3.88%, 9/10/24		300		300,255
6.40%, 5/15/38		100		130,654
5.50%, 10/15/40		125		149,639
5.60%, 7/15/41		50		60,535
5.63%, 8/16/43		500		581,451
4.85%, 2/01/44		100		110,930
JPMorgan Chase Bank NA, 6.00%, 10/01/17		250		277,471
Leucadia National Corp., 5.50%, 10/18/23		150		153,618
Moody’s Corp.:
2.75%, 7/15/19		40		40,329
4.50%, 9/01/22		50		53,627
National Rural Utilities Cooperative Finance Corp.:
3.05%, 3/01/16		50		51,394
2.30%, 11/15/19		250		249,698
3.40%, 11/15/23		350		361,985
NCUA Guaranteed Notes, 3.00%, 6/12/19		1,000		1,053,600

See Notes to Financial Statements.

22 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

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

Corporate Bonds	Par   (000)		Value
Diversified Financial Services (concluded)
ORIX Corp., 3.75%, 3/09/17	$	100	$	104,115
PACCAR Financial Corp., 2.20%, 9/15/19		250		250,150
Royal Bank of Scotland Group PLC:
1.88%, 3/31/17		175		174,861
6.40%, 10/21/19		250		290,373
The Royal Bank of Scotland PLC, 4.38%, 3/16/16		250		258,466
Toyota Motor Credit Corp.:
0.80%, 5/17/16		500		500,787
1.38%, 1/10/18		200		198,937
UBS AG/Stamford CT:
5.75%, 4/25/18		300		337,482
2.38%, 8/14/19		800		799,953
				33,941,474
Diversified Telecommunication Services — 1.2%
AT&T, Inc.:
0.80%, 12/01/15		500		499,808
0.90%, 2/12/16		500		499,868
1.70%, 6/01/17		500		501,985
6.30%, 1/15/38		200		241,986
5.35%, 9/01/40		463		501,346
5.55%, 8/15/41		200		222,860
4.30%, 12/15/42		151		143,558
4.35%, 6/15/45		759		715,550
British Telecommunications PLC:
1.63%, 6/28/16		500		503,600
2.35%, 2/14/19		250		249,641
9.63%, 12/15/30		50		78,503
CC Holdings GS V LLC/Crown Castle GS III Corp., 2.38%, 12/15/17		325		327,882
Deutsche Telekom International Finance BV, 8.75%, 6/15/30		400		590,863
Embarq Corp.:
7.08%, 6/01/16		250		269,404
8.00%, 6/01/36		100		111,750
Orange SA:
2.75%, 9/14/16		200		204,381
4.13%, 9/14/21		150		160,692
5.38%, 1/13/42		225		255,772
Qwest Corp.:
6.50%, 6/01/17		150		163,992
6.75%, 12/01/21		50		57,815
Telefonaktiebolaget LM Ericsson, 4.13%, 5/15/22		100		104,599
Telefonica Emisiones SAU:
3.99%, 2/16/16		350		359,972
3.19%, 4/27/18		250		257,085
5.46%, 2/16/21		50		55,750
4.57%, 4/27/23		200		214,129
7.05%, 6/20/36		75		98,661
Telefonica Europe BV, 8.25%, 9/15/30		50		69,504
Verizon Communications, Inc.:
2.50%, 9/15/16		172		175,814
1.35%, 6/09/17		250		248,843
1.10%, 11/01/17		250		246,220
3.65%, 9/14/18		500		528,363
2.55%, 6/17/19		500		503,963
2.63%, 2/21/20 (d)		250		247,142
3.50%, 11/01/21		400		408,918
4.15%, 3/15/24		250		258,809
7.75%, 12/01/30		100		137,945
Corporate Bonds	Par   (000)		Value
Diversified Telecommunication Services (concluded)
Verizon Communications, Inc. (concluded):
6.40%, 9/15/33	$	500	$	615,891
5.05%, 3/15/34		500		533,362
4.40%, 11/01/34		500		496,991
6.40%, 2/15/38		200		246,772
6.00%, 4/01/41		250		294,658
3.85%, 11/01/42		250		222,870
6.55%, 9/15/43		750		960,862
5.01%, 8/21/54 (d)		250		258,637
				13,847,016
Electric Utilities — 1.4%
Alabama Power Co., 5.50%, 10/15/17		100		110,597
Ameren Illinois Co.:
2.70%, 9/01/22		100		98,473
4.30%, 7/01/44		250		267,633
American Electric Power Co., Inc.:
1.65%, 12/15/17		200		200,051
Series F, 2.95%, 12/15/22		500		490,467
Berkshire Hathaway Energy Co.:
1.10%, 5/15/17		500		494,896
2.00%, 11/15/18		500		498,958
3.50%, 2/01/25 (d)		110		110,699
6.13%, 4/01/36		250		314,083
5.15%, 11/15/43		250		282,882
CenterPoint Energy Houston Electric LLC, 3.55%, 8/01/42		100		96,321
Commonwealth Edison Co.:
2.15%, 1/15/19		500		503,735
3.10%, 11/01/24		250		249,389
5.90%, 3/15/36		50		65,223
The Connecticut Light & Power Co., 2.50%, 1/15/23		150		145,586
Consolidated Edison Co. of New York, Inc., 3.30%, 12/01/24		250		254,574
Dominion Gas Holdings LLC, 3.60%, 12/15/24		250		254,312
DTE Electric Co., 4.00%, 4/01/43		150		154,750
Duke Energy Carolinas LLC, 6.05%, 4/15/38		100		130,034
Duke Energy Corp.:
2.15%, 11/15/16		500		509,234
1.63%, 8/15/17		250		250,167
3.95%, 10/15/23		250		265,046
Duke Energy Indiana, Inc.:
4.20%, 3/15/42		150		159,963
4.90%, 7/15/43		250		294,453
Duke Energy Progress, Inc.:
4.10%, 5/15/42		150		159,046
4.10%, 3/15/43		250		265,336
4.38%, 3/30/44		100		109,801
Entergy Corp., 4.70%, 1/15/17		150		157,964
Entergy Louisiana LLC, 4.05%, 9/01/23		250		268,017
Exelon Generation Co. LLC, 6.25%, 10/01/39		150		180,161
Florida Power & Light Co.:
2.75%, 6/01/23		250		247,607
5.95%, 2/01/38		50		66,458
Georgia Power Co., 4.30%, 3/15/42		200		210,032
Great Plains Energy, Inc., 5.29%, 6/15/22 (b)		150		171,979
Indiana Michigan Power Co., 6.05%, 3/15/37		175		220,292
Interstate Power & Light Co., 3.25%, 12/01/24		250		254,371
LG&E and KU Energy LLC, 3.75%, 11/15/20		50		52,148

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2014 23

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

Corporate Bonds	Par   (000)		Value
Electric Utilities (concluded)
Louisville Gas & Electric Co., 4.65%, 11/15/43	$	250	$	285,340
Nevada Power Co., 5.45%, 5/15/41		50		63,118
NextEra Energy Capital Holdings, Inc., 3.63%, 6/15/23		1,000		1,014,624
Nisource Finance Corp.:
5.95%, 6/15/41		50		62,498
5.25%, 2/15/43		75		85,975
Northeast Utilities, 1.45%, 5/01/18		250		246,204
Northern States Power Co., 3.40%, 8/15/42		200		189,488
Oglethorpe Power Corp., 4.55%, 6/01/44		250		263,573
Oncor Electric Delivery Co. LLC:
7.00%, 9/01/22		100		126,665
5.30%, 6/01/42		75		93,081
Pacific Gas & Electric Co.:
3.25%, 6/15/23		500		500,953
6.05%, 3/01/34		250		318,276
4.75%, 2/15/44		250		274,951
PacifiCorp:
2.95%, 2/01/22		100		101,315
2.95%, 6/01/23		300		298,693
PPL Capital Funding, Inc.:
1.90%, 6/01/18		250		249,575
3.40%, 6/01/23		250		250,470
Progress Energy, Inc.:
4.40%, 1/15/21		100		108,994
7.75%, 3/01/31		50		72,408
Public Service Co. of Colorado:
3.95%, 3/15/43		200		211,099
4.30%, 3/15/44		75		80,738
Public Service Electric & Gas Co.:
3.50%, 8/15/20		50		52,345
2.38%, 5/15/23		250		240,427
3.05%, 11/15/24		250		250,971
3.95%, 5/01/42		50		51,737
3.65%, 9/01/42		50		48,927
Series I, 1.80%, 6/01/19		250		247,679
Puget Energy, Inc., 5.63%, 7/15/22		500		578,564
South Carolina Electric & Gas Co., 4.60%, 6/15/43		250		272,175
Southern California Edison Co.:
5.00%, 1/15/16		100		104,433
5.50%, 3/15/40		50		63,268
4.65%, 10/01/43		350		396,381
Series 14-B, 1.13%, 5/01/17		500		498,734
The Toledo Edison Co., 6.15%, 5/15/37		100		123,988
Virginia Electric & Power Co.:
2.95%, 1/15/22		400		403,957
4.00%, 1/15/43		250		253,571
4.45%, 2/15/44		150		163,847
				17,213,780
Electrical Equipment — 0.1%
Amphenol Corp., 2.55%, 1/30/19		350		352,433
Emerson Electric Co.:
5.00%, 4/15/19		100		111,452
2.63%, 2/15/23		350		345,232
Pentair Finance SA, 1.88%, 9/15/17		250		249,698
Roper Industries, Inc., 3.13%, 11/15/22		150		146,021
				1,204,836
Corporate Bonds	Par   (000)		Value
Electronic Equipment, Instruments & Components — 0.1%
Arrow Electronics, Inc., 3.00%, 3/01/18	$	750	$	769,078
Corning, Inc.:
3.70%, 11/15/23		250		257,557
4.75%, 3/15/42		50		53,371
Ingram Micro, Inc., 4.95%, 12/15/24		200		199,934
Jabil Circuit, Inc., 4.70%, 9/15/22		250		248,750
Tyco Electronics Group SA:
6.55%, 10/01/17		50		56,281
3.50%, 2/03/22		100		103,268
				1,688,239
Energy Equipment & Services — 0.2%
Baker Hughes, Inc., 5.13%, 9/15/40		100		109,688
Ensco PLC:
3.25%, 3/15/16		100		101,829
4.70%, 3/15/21		100		100,453
4.50%, 10/01/24		250		242,994
FMC Technologies, Inc., 3.45%, 10/01/22		100		96,407
Halliburton Co.:
6.15%, 9/15/19		100		115,823
4.50%, 11/15/41		50		50,651
4.75%, 8/01/43		250		258,860
National Oilwell Varco, Inc., 3.95%, 12/01/42		150		138,177
Noble Holding International Ltd.:
2.50%, 3/15/17		150		143,496
5.25%, 3/15/42		50		39,442
Transcontinental Gas Pipe Line Co. LLC, 4.45%, 8/01/42		250		233,954
Transocean, Inc.:
5.05%, 12/15/16		250		251,197
2.50%, 10/15/17		250		221,011
6.50%, 11/15/20		250		235,742
3.80%, 10/15/22		100		81,033
6.80%, 3/15/38		50		42,845
				2,463,602
Food & Staples Retailing — 0.4%
Costco Wholesale Corp., 1.13%, 12/15/17		150		149,026
CVS Caremark Corp.:
2.25%, 8/12/19		500		497,911
4.00%, 12/05/23		500		529,136
The Kroger Co.:
6.15%, 1/15/20		100		115,577
3.30%, 1/15/21		500		507,396
3.40%, 4/15/22		100		101,802
5.15%, 8/01/43		125		142,319
Safeway, Inc.:
3.95%, 8/15/20		250		252,739
4.75%, 12/01/21		100		101,250
Sysco Corp., 4.35%, 10/02/34		250		269,146
Wal-Mart Stores, Inc.:
1.13%, 4/11/18		250		247,133
3.63%, 7/08/20		150		160,178
6.20%, 4/15/38		250		334,831
5.63%, 4/15/41		500		638,485
4.00%, 4/11/43		150		155,622
4.75%, 10/02/43		250		291,111
Walgreen Co.:
1.80%, 9/15/17		200		200,098
3.10%, 9/15/22		200		197,580

See Notes to Financial Statements.

24 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

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

Corporate Bonds	Par   (000)		Value
Food & Staples Retailing (concluded)
Walgreens Boots Alliance Inc., 4.50%, 11/18/34	$	155	$	161,417
				5,052,757
Food Products — 0.4%
Archer-Daniels-Midland Co., 4.54%, 3/26/42		75		82,599
ConAgra Foods, Inc.:
3.25%, 9/15/22		200		196,994
4.65%, 1/25/43		165		172,205
Delhaize Group SA, 4.13%, 4/10/19		150		157,523
General Mills, Inc.:
2.20%, 10/21/19		300		297,480
3.15%, 12/15/21		150		154,975
The JM Smucker Co., 3.50%, 10/15/21		50		52,102
Kellogg Co.:
1.88%, 11/17/16		200		202,766
Series B, 7.45%, 4/01/31		100		134,755
Kraft Foods Group, Inc.:
5.38%, 2/10/20		52		59,015
6.50%, 2/09/40		250		321,343
5.00%, 6/04/42		200		220,161
Mead Johnson Nutrition Co., 4.60%, 6/01/44		250		262,522
Mondelez International, Inc.:
4.13%, 2/09/16		150		155,573
2.25%, 2/01/19		250		248,973
5.38%, 2/10/20		48		54,374
6.50%, 2/09/40		350		466,457
Tyson Foods, Inc.:
2.65%, 8/15/19		500		504,555
4.50%, 6/15/22		150		162,403
4.88%, 8/15/34		70		76,788
Unilever Capital Corp.:
2.20%, 3/06/19		200		202,102
4.25%, 2/10/21		200		221,410
				4,407,075
Gas Utilities — 0.0%
AGL Capital Corp., 3.50%, 9/15/21		50		51,752
Atmos Energy Corp., 4.15%, 1/15/43		100		100,403
National Fuel Gas Co., 3.75%, 3/01/23		300		303,432
				455,587
Health Care Equipment & Supplies — 0.3%
Baxter International, Inc.:
1.85%, 6/15/18		250		248,749
4.50%, 6/15/43		250		268,469
Becton Dickinson & Co.:
1.80%, 12/15/17		250		250,922
6.00%, 5/15/39		250		308,302
Boston Scientific Corp.:
6.00%, 1/15/20		100		112,698
4.13%, 10/01/23		100		102,164
CareFusion Corp., 3.30%, 3/01/23		200		196,308
Covidien International Finance SA:
2.95%, 6/15/23		250		245,335
6.55%, 10/15/37		25		32,656
Medtronic, Inc.:
1.38%, 4/01/18		300		296,880
4.13%, 3/15/21		50		53,936
3.15%, 3/15/22 (d)		350		354,437
3.63%, 3/15/24		400		415,215
4.38%, 3/15/35 (d)		350		371,300
Corporate Bonds	Par   (000)		Value
Health Care Equipment & Supplies (concluded)
Medtronic, Inc. (concluded):
4.00%, 4/01/43	$	150	$	143,016
4.63%, 3/15/45 (d)		250		270,997
St. Jude Medical, Inc., 3.25%, 4/15/23		150		149,954
Stryker Corp., 1.30%, 4/01/18		200		197,089
				4,018,427
Health Care Providers & Services — 0.6%
Aetna, Inc.:
1.50%, 11/15/17		250		248,050
4.13%, 6/01/21		250		268,547
2.75%, 11/15/22		250		242,506
3.50%, 11/15/24		70		71,151
6.75%, 12/15/37		50		65,944
4.75%, 3/15/44		25		27,565
AmerisourceBergen Corp., 1.15%, 5/15/17		250		247,888
Cardinal Health, Inc.:
3.20%, 6/15/22		50		50,036
3.50%, 11/15/24		250		249,294
4.60%, 3/15/43		50		52,640
Cigna Corp.:
2.75%, 11/15/16		100		102,687
4.00%, 2/15/22		25		26,343
5.38%, 2/15/42		50		59,128
Dignity Health:
2.64%, 11/01/19		100		100,770
5.27%, 11/01/64		100		108,488
Express Scripts Holding Co.:
2.65%, 2/15/17		350		357,873
2.25%, 6/15/19		350		346,252
4.75%, 11/15/21		300		331,066
3.50%, 6/15/24		250		249,123
Humana, Inc., 4.95%, 10/01/44		250		265,825
Kaiser Foundation Hospitals, 3.50%, 4/01/22		100		103,136
Laboratory Corp. of America Holdings:
3.75%, 8/23/22		100		102,308
4.00%, 11/01/23		100		102,564
McKesson Corp.:
3.25%, 3/01/16		250		255,966
2.85%, 3/15/23		150		143,271
4.88%, 3/15/44		250		275,392
Quest Diagnostics, Inc.:
3.20%, 4/01/16		50		51,229
4.70%, 4/01/21		100		108,274
UnitedHealth Group, Inc.:
1.40%, 10/15/17		250		249,755
1.63%, 3/15/19		550		542,148
2.88%, 3/15/23		250		248,389
6.88%, 2/15/38		100		140,325
5.95%, 2/15/41		100		130,139
3.95%, 10/15/42		150		149,102
WellPoint, Inc.:
1.88%, 1/15/18		450		449,873
2.25%, 8/15/19		225		222,744
3.13%, 5/15/22		200		199,880
3.30%, 1/15/23		100		99,903
4.63%, 5/15/42		50		52,468
5.10%, 1/15/44		150		168,562
4.85%, 8/15/54		150		157,491
				7,424,095

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2014 25

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

Corporate Bonds	Par   (000)		Value
Hotels, Restaurants & Leisure — 0.2%
Carnival Corp.:
1.20%, 2/05/16	$	250	$	249,855
3.95%, 10/15/20		250		261,947
Hyatt Hotels Corp., 3.38%, 7/15/23		190		186,304
Marriott International, Inc.:
3.00%, 3/01/19		100		102,653
3.25%, 9/15/22		100		100,402
McDonald’s Corp.:
1.88%, 5/29/19		100		99,304
3.50%, 7/15/20		50		52,960
3.25%, 6/10/24		400		407,531
3.70%, 2/15/42		100		95,450
Starbucks Corp., 3.85%, 10/01/23		250		266,513
Starwood Hotels & Resorts Worldwide, Inc.:
3.13%, 2/15/23		250		243,015
4.50%, 10/01/34		250		254,979
Wyndham Worldwide Corp., 4.25%, 3/01/22		50		51,069
Yum! Brands, Inc.:
5.30%, 9/15/19		100		110,663
5.35%, 11/01/43		100		109,355
				2,592,000
Household Durables — 0.1%
Leggett & Platt, Inc., 3.80%, 11/15/24		200		203,241
Mohawk Industries, Inc., 3.85%, 2/01/23		125		125,050
Newell Rubbermaid, Inc., 4.00%, 12/01/24		250		255,144
Whirlpool Corp., 5.15%, 3/01/43		200		221,459
				804,894
Household Products — 0.1%
The Clorox Co.:
3.05%, 9/15/22		50		49,579
3.50%, 12/15/24		250		250,535
Energizer Holdings, Inc., 4.70%, 5/19/21		50		51,881
Kimberly-Clark Corp., 3.63%, 8/01/20		50		52,906
The Procter & Gamble Co.:
2.30%, 2/06/22		250		247,994
5.55%, 3/05/37		250		323,293
				976,188
Independent Power and Renewable Electricity Producers — 0.1%
Exelon Generation Co. LLC:
4.25%, 6/15/22		500		519,590
5.60%, 6/15/42		50		55,936
Southern Power Co., 5.25%, 7/15/43		500		576,229
				1,151,755
Industrial Conglomerates — 0.1%
General Electric Co.:
2.70%, 10/09/22		150		150,061
4.50%, 3/11/44		500		549,611
Koninklijke Philips Electronics NV, 3.75%, 3/15/22		250		260,332
				960,004
Insurance — 1.0%
ACE INA Holdings, Inc., 4.15%, 3/13/43		150		157,544
Aflac, Inc.:
2.65%, 2/15/17		250		257,227
3.63%, 6/15/23		250		256,054
3.63%, 11/15/24		250		254,903
Corporate Bonds	Par   (000)		Value
Insurance (continued)
Alleghany Corp., 4.95%, 6/27/22	$	50	$	54,995
The Allstate Corp.:
3.15%, 6/15/23		250		251,218
4.50%, 6/15/43		150		165,503
American International Group, Inc.:
3.38%, 8/15/20		250		259,700
4.88%, 6/01/22		250		280,836
4.13%, 2/15/24		250		266,128
8.18%, 5/15/68 (c)		275		372,625
Aon Corp., 3.13%, 5/27/16		50		51,306
Aon PLC, 4.45%, 5/24/43		200		199,334
Arch Capital Group US, Inc., 5.14%, 11/01/43		125		138,882
Assurant, Inc., 2.50%, 3/15/18		250		252,404
Assured Guaranty US Holdings, Inc., 5.00%, 7/01/24		110		116,044
AXA SA, 8.60%, 12/15/30		50		67,926
Berkshire Hathaway Finance Corp., 4.40%, 5/15/42		100		107,559
Berkshire Hathaway, Inc.:
1.90%, 1/31/17		100		101,443
1.55%, 2/09/18		500		499,754
2.10%, 8/14/19		500		503,150
4.50%, 2/11/43		100		109,361
The Chubb Corp., Series 1, 6.50%, 5/15/38		100		137,703
CNA Financial Corp., 5.75%, 8/15/21		100		113,966
First American Financial Corp., 4.60%, 11/15/24		200		202,778
The Hartford Financial Services Group, Inc.:
4.00%, 10/15/17		250		265,807
6.30%, 3/15/18		250		282,523
6.10%, 10/01/41		100		124,900
Lincoln National Corp.:
4.85%, 6/24/21		50		55,079
4.20%, 3/15/22		100		106,217
4.00%, 9/01/23		200		207,496
Loews Corp., 2.63%, 5/15/23		250		236,195
Markel Corp., 3.63%, 3/30/23		250		251,428
Marsh & McLennan Cos., Inc.:
2.35%, 9/10/19		235		235,344
4.80%, 7/15/21		50		55,571
MetLife, Inc.:
4.75%, 2/08/21		200		223,543
6.40%, 12/15/36		100		111,500
4.13%, 8/13/42		300		300,455
4.88%, 11/13/43		250		282,337
Old Republic International Corp., 4.88%, 10/01/24		250		260,969
Principal Financial Group, Inc., 4.63%, 9/15/42		50		52,483
The Progressive Corp.:
3.75%, 8/23/21		50		53,563
4.35%, 4/25/44		100		108,262
Prudential Financial, Inc.:
3.00%, 5/12/16		150		153,705
2.35%, 8/15/19		350		350,207
5.38%, 6/21/20		350		395,017
8.88%, 6/15/38 (c)		100		116,750
5.63%, 6/15/43 (c)		100		102,230
5.10%, 8/15/43		250		281,590
5.20%, 3/15/44 (c)		100		99,000
The Travelers Cos., Inc.:
3.90%, 11/01/20		250		268,551

See Notes to Financial Statements.

26 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

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

Corporate Bonds	Par   (000)		Value
Insurance (concluded)
The Travelers Cos., Inc. (concluded):
4.60%, 8/01/43	$	100	$	112,261
Travelers Property Casualty Corp., 6.38%, 3/15/33		100		133,661
Voya Financial, Inc., 2.90%, 2/15/18		750		767,815
Willis Group Holdings PLC, 4.13%, 3/15/16		200		206,131
WR Berkley Corp., 4.63%, 3/15/22		200		214,465
XL Group PLC, Series E, 6.50% (c)(e)		150		143,250
XLIT Ltd., 5.75%, 10/01/21		100		116,166
				11,852,814
Internet & Catalog Retail — 0.1%
Amazon.com, Inc.:
1.20%, 11/29/17		250		247,348
2.60%, 12/05/19		350		353,556
4.80%, 12/05/34		250		262,435
				863,339
Internet Software & Services — 0.1%
Baidu, Inc.:
3.25%, 8/06/18		205		209,554
2.75%, 6/09/19		350		348,461
eBay, Inc.:
2.20%, 8/01/19		500		494,916
3.25%, 10/15/20		50		50,859
2.60%, 7/15/22		50		47,447
Expedia, Inc., 4.50%, 8/15/24		250		252,443
Google, Inc., 3.63%, 5/19/21		25		26,823
				1,430,503
IT Services — 0.3%
Alibaba Group Holding Ltd., 3.13%, 11/28/21 (d)		225		222,295
Fidelity National Information Services, Inc.:
1.45%, 6/05/17		250		248,600
2.00%, 4/15/18		250		248,650
3.50%, 4/15/23		25		24,850
Fiserv, Inc., 6.80%, 11/20/17		50		56,619
International Business Machines Corp.:
2.00%, 1/05/16		150		152,201
1.25%, 2/08/18		500		495,843
1.95%, 2/12/19		250		250,921
1.88%, 5/15/19		250		248,325
2.90%, 11/01/21		100		102,785
3.63%, 2/12/24		275		286,502
4.00%, 6/20/42		100		99,576
Total System Services, Inc., 2.38%, 6/01/18		250		247,859
The Western Union Co.:
2.88%, 12/10/17		250		255,215
6.20%, 11/17/36		25		25,647
Xerox Corp.:
5.63%, 12/15/19		100		112,387
2.80%, 5/15/20		500		491,148
				3,569,423
Leisure Products — 0.0%
Hasbro, Inc., 5.10%, 5/15/44		60		62,835
Mattel, Inc., 1.70%, 3/15/18		200		197,489
				260,324
Life Sciences Tools & Services — 0.1%
Agilent Technologies, Inc., 3.88%, 7/15/23		200		198,723
Corporate Bonds	Par   (000)		Value
Life Sciences Tools & Services (concluded)
Life Technologies Corp., 6.00%, 3/01/20	$	100	$	114,247
Thermo Fisher Scientific, Inc.:
2.25%, 8/15/16		50		50,780
2.40%, 2/01/19		500		500,745
3.30%, 2/15/22		55		55,091
3.15%, 1/15/23		250		245,058
				1,164,644
Machinery — 0.2%
Caterpillar, Inc.:
5.70%, 8/15/16		100		107,880
3.90%, 5/27/21		50		54,145
3.40%, 5/15/24		500		513,871
5.20%, 5/27/41		100		118,616
3.80%, 8/15/42		250		245,684
Danaher Corp., 3.90%, 6/23/21		50		53,905
Deere & Co., 3.90%, 6/09/42		50		50,537
Flowserve Corp., 3.50%, 9/15/22		100		100,038
Illinois Tool Works, Inc.:
1.95%, 3/01/19		250		250,135
4.88%, 9/15/41		50		57,320
3.90%, 9/01/42		75		75,555
Ingersoll-Rand Global Holding Co., Ltd.:
6.88%, 8/15/18		50		58,043
2.88%, 1/15/19		500		507,886
Joy Global, Inc., 5.13%, 10/15/21		50		54,628
Stanley Black & Decker, Inc., 2.90%, 11/01/22		150		147,888
Trinity Industries, Inc., 4.55%, 10/01/24		250		242,820
Valmont Industries, Inc., 5.00%, 10/01/44		250		252,845
				2,891,796
Media — 1.1%
21st Century Fox America, Inc.:
4.50%, 2/15/21		100		109,459
3.00%, 9/15/22		650		645,615
6.20%, 12/15/34		100		127,689
6.15%, 2/15/41		150		190,898
4.75%, 9/15/44 (d)		250		273,192
CBS Corp., 4.85%, 7/01/42		325		329,389
Cintas Corp. No 2, 4.30%, 6/01/21		25		26,942
Comcast Corp.:
5.15%, 3/01/20		350		396,382
3.60%, 3/01/24		250		262,558
4.25%, 1/15/33		650		688,303
4.20%, 8/15/34		235		245,727
6.45%, 3/15/37		200		266,084
4.65%, 7/15/42		150		164,177
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc.:
3.13%, 2/15/16		100		102,270
3.50%, 3/01/16		250		256,521
2.40%, 3/15/17		250		254,717
3.80%, 3/15/22		250		254,343
4.45%, 4/01/24		250		261,576
5.15%, 3/15/42		150		155,004
Discovery Communications LLC:
4.38%, 6/15/21		50		52,890
3.25%, 4/01/23		50		48,538
4.95%, 5/15/42		50		51,867
4.88%, 4/01/43		150		154,653

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2014 27

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

Corporate Bonds	Par   (000)		Value
Media (concluded)
Grupo Televisa SAB, 5.00%, 5/13/45	$	200	$	203,448
The Interpublic Group of Cos., Inc., 4.20%, 4/15/24		250		255,702
NBCUniversal Media LLC:
4.38%, 4/01/21		100		109,980
2.88%, 1/15/23		250		249,753
5.95%, 4/01/41		250		321,479
Omnicom Group, Inc.:
3.63%, 5/01/22		125		128,324
3.65%, 11/01/24		70		70,032
Scripps Networks Interactive, Inc., 3.90%, 11/15/24		250		254,545
Thomson Reuters Corp.:
0.88%, 5/23/16		250		248,705
6.50%, 7/15/18		250		284,142
4.30%, 11/23/23		250		265,953
Time Warner Cable, Inc.:
8.25%, 4/01/19		300		367,243
5.00%, 2/01/20		500		550,992
4.13%, 2/15/21		100		107,019
6.55%, 5/01/37		150		193,123
6.75%, 6/15/39		50		65,364
4.50%, 9/15/42		475		488,273
Time Warner, Inc.:
4.88%, 3/15/20		250		275,082
7.70%, 5/01/32		250		353,210
6.25%, 3/29/41		150		186,261
5.35%, 12/15/43		250		283,944
4.65%, 6/01/44		250		260,643
Viacom, Inc.:
2.50%, 9/01/18		500		504,421
3.13%, 6/15/22		150		145,251
3.25%, 3/15/23		200		193,149
3.88%, 4/01/24		250		250,962
4.38%, 3/15/43		70		64,456
5.85%, 9/01/43		100		111,207
The Walt Disney Co.:
3.75%, 6/01/21		50		54,018
2.35%, 12/01/22		300		294,167
WPP Finance 2010:
4.75%, 11/21/21		100		109,340
3.75%, 9/19/24		250		250,923
				12,819,905
Metals & Mining — 0.5%
Barrick Gold Corp.:
3.85%, 4/01/22		350		336,820
4.10%, 5/01/23		500		486,599
Barrick North America Finance LLC, 5.70%, 5/30/41		50		49,090
BHP Billiton Finance USA Ltd.:
1.63%, 2/24/17		100		100,827
2.05%, 9/30/18		175		175,650
2.88%, 2/24/22		250		249,693
5.00%, 9/30/43		350		396,732
Carpenter Technology Corp., 4.45%, 3/01/23		250		254,605
Freeport-McMoRan Copper & Gold, Inc.:
2.15%, 3/01/17		100		100,165
3.55%, 3/01/22		50		47,256
5.45%, 3/15/43		350		330,951
Corporate Bonds	Par   (000)		Value
Metals & Mining (concluded)
Freeport-McMoRan, Inc., 5.40%, 11/14/34	$	100	$	97,491
Goldcorp, Inc.:
2.13%, 3/15/18		150		148,255
3.63%, 6/09/21		250		250,402
Kinross Gold Corp., 5.95%, 3/15/24 (d)		200		187,668
Newmont Mining Corp.:
3.50%, 3/15/22		450		422,886
4.88%, 3/15/42		50		43,549
Reliance Steel & Aluminum Co., 4.50%, 4/15/23		25		24,501
Rio Tinto Finance USA Ltd.:
2.50%, 5/20/16		50		50,943
4.13%, 5/20/21		150		157,736
5.20%, 11/02/40		350		384,581
Rio Tinto Finance USA PLC:
1.63%, 8/21/17		250		249,897
2.88%, 8/21/22		100		96,146
4.75%, 3/22/42		100		102,378
Southern Copper Corp., 6.75%, 4/16/40		100		104,900
Teck Resources Ltd.:
3.00%, 3/01/19		450		438,614
4.75%, 1/15/22		300		292,413
3.75%, 2/01/23		100		89,629
5.20%, 3/01/42		50		40,882
Vale Overseas Ltd.:
4.38%, 1/11/22		250		239,627
6.88%, 11/21/36		200		210,838
Vale SA, 5.63%, 9/11/42		250		232,853
				6,394,577
Multi-Utilities — 0.3%
CMS Energy Corp., 4.70%, 3/31/43		200		213,147
Consolidated Edison Co. of New York, Inc.:
6.65%, 4/01/19		100		117,707
3.95%, 3/01/43		150		149,600
4.45%, 3/15/44		250		270,368
Series 12-A, 4.20%, 3/15/42		150		155,558
Dominion Resources, Inc.:
1.40%, 9/15/17		250		247,832
3.63%, 12/01/24		250		253,240
4.90%, 8/01/41		50		54,592
ONE Gas, Inc., 4.66%, 2/01/44		250		284,880
San Diego Gas & Electric Co.:
3.60%, 9/01/23		250		262,834
4.30%, 4/01/42		100		108,334
SCANA Corp., 4.13%, 2/01/22		100		103,667
Sempra Energy:
2.30%, 4/01/17		250		254,596
4.05%, 12/01/23		250		264,478
3.55%, 6/15/24		250		252,321
				2,993,154
Multiline Retail — 0.1%
Dollar General Corp., 1.88%, 4/15/18		250		241,573
Kohl’s Corp., 4.00%, 11/01/21		50		51,921
Nordstrom, Inc., 4.00%, 10/15/21		100		106,981
Target Corp.:
2.90%, 1/15/22		150		151,774
4.00%, 7/01/42		350		355,539
				907,788

See Notes to Financial Statements.

28 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

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

Corporate Bonds	Par   (000)		Value
Oil, Gas & Consumable Fuels — 2.9%
Alberta Energy Co., Ltd. 7.38%, 11/01/31	$	50	$	59,005
Anadarko Petroleum Corp.:
6.38%, 9/15/17		250		277,950
6.45%, 9/15/36		100		120,169
4.50%, 7/15/44		250		242,619
Apache Corp.:
3.25%, 4/15/22		145		142,466
6.00%, 1/15/37		100		108,820
4.75%, 4/15/43		250		234,449
4.25%, 1/15/44		100		87,394
Boardwalk Pipelines LP, 3.38%, 2/01/23		200		182,194
BP Capital Markets PLC:
3.20%, 3/11/16		100		102,696
1.85%, 5/05/17		250		252,053
1.38%, 5/10/18		250		245,562
2.24%, 9/26/18		300		300,848
2.24%, 5/10/19		500		499,393
2.52%, 1/15/20		115		115,134
4.74%, 3/11/21		50		54,425
3.25%, 5/06/22		100		98,304
3.99%, 9/26/23		250		257,234
Buckeye Partners LP, 4.15%, 7/01/23		250		243,645
Canadian Natural Resources Ltd.:
3.45%, 11/15/21		100		98,651
3.80%, 4/15/24		250		245,692
3.90%, 2/01/25		250		246,442
6.25%, 3/15/38		50		55,610
Cenovus Energy, Inc.:
5.70%, 10/15/19		150		165,246
3.00%, 8/15/22		100		93,595
5.20%, 9/15/43		250		240,769
Chevron Corp.:
1.72%, 6/24/18		500		502,527
2.19%, 11/15/19		55		55,203
2.43%, 6/24/20		550		552,657
CNOOC Finance 2013 Ltd., 3.00%, 5/09/23		300		283,922
CNOOC Nexen Finance 2014 ULC, 4.25%, 4/30/24		500		517,339
ConocoPhillips, 6.50%, 2/01/39		400		531,458
ConocoPhillips Co.:
1.05%, 12/15/17		250		246,803
4.15%, 11/15/34		145		148,782
ConocoPhillips Holding Co., 6.95%, 4/15/29		100		133,218
Continental Resources, Inc.:
5.00%, 9/15/22		250		241,875
4.50%, 4/15/23		300		285,345
DCP Midstream Operating LP:
3.88%, 3/15/23		225		215,311
5.60%, 4/01/44		50		51,119
Devon Energy Corp.:
2.25%, 12/15/18		500		498,198
4.00%, 7/15/21		150		155,104
4.75%, 5/15/42		200		201,336
Diamond Offshore Drilling, Inc., 4.88%, 11/01/43		250		212,979
Ecopetrol SA:
7.63%, 7/23/19		100		114,500
5.88%, 5/28/45		250		231,250
El Paso Pipeline Partners Operating Co. LLC, 5.00%, 10/01/21		200		210,346
Corporate Bonds	Par   (000)		Value
Oil, Gas & Consumable Fuels (continued)
Enable Midstream Partners LP, 2.40%, 5/15/19 (d)	$	350	$	340,411
Enbridge Energy Partners LP, 4.20%, 9/15/21		100		104,450
Enbridge, Inc., 3.50%, 6/10/24		65		61,058
Encana Corp., 3.90%, 11/15/21		700		689,872
Energy Transfer Partners LP:
9.70%, 3/15/19		44		55,225
5.20%, 2/01/22		250		267,389
3.60%, 2/01/23		150		145,150
4.90%, 2/01/24		250		261,967
5.95%, 10/01/43		150		164,520
Enterprise Products Operating LLC:
2.55%, 10/15/19		500		494,966
3.90%, 2/15/24		125		127,311
3.75%, 2/15/25		40		40,152
5.95%, 2/01/41		150		176,354
4.45%, 2/15/43		75		74,101
4.85%, 3/15/44		200		208,544
5.10%, 2/15/45		250		268,798
EOG Resources, Inc.:
2.50%, 2/01/16		50		50,903
5.63%, 6/01/19		150		169,261
EQT Corp., 4.88%, 11/15/21		50		54,015
Exxon Mobil Corp., 3.18%, 3/15/24		250		257,912
Hess Corp.:
8.13%, 2/15/19		200		237,958
5.60%, 2/15/41		300		321,698
Husky Energy, Inc., 3.95%, 4/15/22		150		150,522
Kinder Morgan Energy Partners LP:
2.65%, 2/01/19		245		241,402
3.95%, 9/01/22		225		223,101
4.15%, 2/01/24		250		249,360
4.25%, 9/01/24		155		155,312
6.50%, 2/01/37		100		112,403
5.00%, 8/15/42		75		71,278
5.40%, 9/01/44		250		250,512
Kinder Morgan, Inc., 4.30%, 6/01/25		160		160,075
Marathon Oil Corp.:
5.90%, 3/15/18		100		111,150
2.80%, 11/01/22		400		374,599
Marathon Petroleum Corp.:
3.50%, 3/01/16		250		256,186
5.13%, 3/01/21		150		163,956
3.63%, 9/15/24		115		112,700
Murphy Oil Corp., 4.00%, 6/01/22		100		91,925
Nabors Industries, Inc.:
5.00%, 9/15/20		50		49,109
4.63%, 9/15/21		250		234,886
Nexen, Inc., 6.40%, 5/15/37		100		124,555
Noble Energy, Inc.:
4.15%, 12/15/21		150		152,955
5.25%, 11/15/43		250		253,887
Occidental Petroleum Corp., 4.10%, 2/01/21		50		53,062
ONEOK Partners LP:
2.00%, 10/01/17		250		248,604
3.38%, 10/01/22		500		462,831
6.13%, 2/01/41		50		53,786
Petrobras Global Finance BV:
3.25%, 3/17/17		500		471,250
3.00%, 1/15/19		500		442,035

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2014 29

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)
Petrobras Global Finance BV (concluded):
6.25%, 3/17/24	$	250	$	237,885
5.63%, 5/20/43		200		163,050
7.25%, 3/17/44		125		123,438
Petrobras International Finance Co.:
5.75%, 1/20/20		400		386,284
5.38%, 1/27/21		500		463,285
Petroleos Mexicanos:
3.50%, 7/18/18		350		354,375
3.13%, 1/23/19		250		250,625
4.88%, 1/24/22		400		418,964
3.50%, 1/30/23		400		382,600
6.50%, 6/02/41		300		344,250
6.38%, 1/23/45		500		566,250
Phillips 66:
4.65%, 11/15/34		355		363,874
5.88%, 5/01/42		100		115,160
Pioneer Natural Resources Co., 3.95%, 7/15/22		150		148,470
Plains All American Pipeline LP/PAA Finance Corp.:
2.85%, 1/31/23		250		236,401
5.15%, 6/01/42		50		52,273
4.70%, 6/15/44		250		248,197
Plains Exploration & Production Co.:
6.13%, 6/15/19		162		175,365
6.50%, 11/15/20		162		175,360
Rowan Cos., Inc.:
4.75%, 1/15/24		50		47,193
5.40%, 12/01/42		100		87,114
Shell International Finance BV:
0.63%, 12/04/15		1,050		1,051,134
4.38%, 3/25/20		100		109,579
6.38%, 12/15/38		300		403,146
5.50%, 3/25/40		50		60,885
4.55%, 8/12/43		200		218,794
Southwestern Energy Co., 4.10%, 3/15/22		100		98,139
Spectra Energy Capital LLC, 3.30%, 3/15/23		150		142,481
Spectra Energy Partners LP, 4.75%, 3/15/24		250		267,980
Statoil ASA:
1.95%, 11/08/18		250		249,941
2.65%, 1/15/24		500		485,716
3.70%, 3/01/24		250		258,834
5.10%, 8/17/40		100		115,664
Suncor Energy, Inc.:
6.10%, 6/01/18		200		224,342
3.60%, 12/01/24		165		163,045
6.50%, 6/15/38		250		307,563
Sunoco Logistics Partners Operations LP:
4.95%, 1/15/43		250		239,565
5.30%, 4/01/44		100		100,795
Talisman Energy, Inc.:
3.75%, 2/01/21		300		290,110
5.50%, 5/15/42		50		47,196
Tennessee Gas Pipeline Co. LLC, 7.50%, 4/01/17		100		111,724
Total Capital Canada Ltd., 2.75%, 7/15/23		150		145,502
Total Capital International SA:
0.75%, 1/25/16		400		400,253
1.50%, 2/17/17		100		100,664
2.13%, 1/10/19		350		351,138
2.75%, 6/19/21		250		250,935
Corporate Bonds	Par   (000)		Value
Oil, Gas & Consumable Fuels (concluded)
TransCanada PipeLines Ltd.:
4.63%, 3/01/34	$	250	$	253,630
6.20%, 10/15/37		200		235,867
5.00%, 10/16/43		150		157,157
Valero Energy Corp.:
6.13%, 2/01/20		150		170,116
6.63%, 6/15/37		300		354,198
Weatherford International Ltd.:
6.00%, 3/15/18		150		160,127
9.63%, 3/01/19		250		296,520
5.13%, 9/15/20		50		49,123
5.95%, 4/15/42		350		296,354
The Williams Cos., Inc.:
7.88%, 9/01/21		31		35,810
3.70%, 1/15/23		100		89,809
4.55%, 6/24/24		45		41,849
5.75%, 6/24/44		250		217,464
Williams Partners LP:
4.00%, 11/15/21		250		250,612
4.30%, 3/04/24		250		249,540
3.90%, 1/15/25		250		240,269
				34,637,076
Paper & Forest Products — 0.1%
Celulosa Arauco y Constitucion SA, 4.75%, 1/11/22		50		51,388
Georgia-Pacific LLC, 8.88%, 5/15/31		25		38,744
International Paper Co.:
7.50%, 8/15/21		100		124,657
3.65%, 6/15/24		500		499,641
Westvaco Corp., 8.20%, 1/15/30		100		132,316
				846,746
Personal Products — 0.0%
Colgate-Palmolive Co.:
1.75%, 3/15/19		250		248,281
3.25%, 3/15/24		250		258,361
				506,642
Pharmaceuticals — 0.9%
AbbVie, Inc.:
1.75%, 11/06/17		300		300,652
2.00%, 11/06/18		150		149,497
4.40%, 11/06/42		400		412,668
Actavis Funding SCS, 4.85%, 6/15/44		250		253,684
Actavis, Inc., 3.25%, 10/01/22		150		146,043
Allergan, Inc., 1.35%, 3/15/18		250		243,393
AstraZeneca PLC:
5.90%, 9/15/17		100		112,124
1.95%, 9/18/19		500		498,974
6.45%, 9/15/37		100		134,750
Bristol-Myers Squibb Co.:
1.75%, 3/01/19		250		248,247
2.00%, 8/01/22		250		237,283
Eli Lilly & Co.:
1.95%, 3/15/19		250		251,343
5.50%, 3/15/27		50		60,107
4.65%, 6/15/44		200		224,178
GlaxoSmithKline Capital PLC, 2.85%, 5/08/22		150		150,008
GlaxoSmithKline Capital, Inc.:
0.70%, 3/18/16		250		249,988

See Notes to Financial Statements.

30 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

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

Corporate Bonds	Par   (000)		Value
Pharmaceuticals (concluded)
GlaxoSmithKline Capital, Inc. (concluded):
5.65%, 5/15/18	$	100	$	112,653
6.38%, 5/15/38		300		399,446
Johnson & Johnson:
2.15%, 5/15/16		100		102,051
2.45%, 12/05/21		450		451,174
4.38%, 12/05/33		250		280,025
4.50%, 9/01/40		100		114,156
Merck & Co., Inc.:
3.88%, 1/15/21		250		270,514
4.15%, 5/18/43		250		265,978
Merck Sharp & Dohme Corp., 5.00%, 6/30/19		500		564,449
Mylan, Inc.:
1.80%, 6/24/16		250		251,508
4.20%, 11/29/23		250		259,108
Novartis Capital Corp.:
4.40%, 4/24/20		100		110,641
3.40%, 5/06/24		650		676,183
Perrigo Co. PLC, 2.30%, 11/08/18		250		249,803
Pfizer, Inc.:
1.10%, 5/15/17		350		349,586
1.50%, 6/15/18		500		499,371
4.30%, 6/15/43		500		535,471
Quest Diagnostics, Inc., 4.25%, 4/01/24		250		257,650
Sanofi, 1.25%, 4/10/18		250		247,614
Teva Pharmaceutical Finance Co. BV:
2.40%, 11/10/16		200		204,134
2.95%, 12/18/22		150		146,109
Series 2, 3.65%, 11/10/21		250		256,180
Zoetis, Inc.:
1.15%, 2/01/16		150		149,866
4.70%, 2/01/43		150		152,666
				10,579,275
Real Estate — 0.2%
ARC Properties Operating Partnership LP/Clark Acquisition LLC, 2.00%, 2/06/17		25		23,827
AvalonBay Communities, Inc., 2.95%, 9/15/22		100		97,412
Boston Properties LP:
3.70%, 11/15/18		200		210,886
3.13%, 9/01/23		250		244,109
Brandywine Operating Partnership LP, 3.95%, 2/15/23		250		252,124
Duke Realty LP, 3.63%, 4/15/23		250		250,970
Host Hotels & Resorts LP, 5.25%, 3/15/22		250		272,828
Liberty Property LP, 4.40%, 2/15/24		250		262,287
Simon Property Group LP:
2.80%, 1/30/17		100		102,975
2.15%, 9/15/17		250		254,238
4.13%, 12/01/21		100		108,782
3.38%, 3/15/22		100		102,942
4.25%, 10/01/44		250		258,698
Ventas Realty LP/Ventas Capital Corp.:
2.70%, 4/01/20		250		247,386
4.25%, 3/01/22		100		105,072
				2,794,536
Real Estate Investment Trusts (REITs) — 0.4%
American Tower Corp.:
3.40%, 2/15/19		250		254,455
Corporate Bonds	Par   (000)		Value
Real Estate Investment Trusts (REITs) (concluded)
American Tower Corp. (concluded):
5.05%, 9/01/20	$	25	$	27,123
4.70%, 3/15/22		100		104,849
3.50%, 1/31/23		150		144,931
DDR Corp., 4.63%, 7/15/22		100		106,751
ERP Operating LP:
4.75%, 7/15/20		100		109,863
4.50%, 7/01/44		150		156,329
Essex Portfolio LP, 3.88%, 5/01/24		100		101,771
HCP, Inc.:
6.00%, 1/30/17		100		109,113
2.63%, 2/01/20		250		247,403
3.15%, 8/01/22		100		98,383
Health Care REIT, Inc.:
4.13%, 4/01/19		200		212,679
5.25%, 1/15/22		50		55,559
Healthcare Realty Trust, Inc., 3.75%, 4/15/23		150		147,230
Hospitality Properties Trust, 5.00%, 8/15/22		200		210,756
Kilroy Realty LP, 6.63%, 6/01/20		250		291,427
Kimco Realty Corp., 3.20%, 5/01/21		250		253,396
Mid-America Apartments LP, 4.30%, 10/15/23		200		210,439
Omega Healthcare Investors, Inc., 5.88%, 3/15/24		250		265,625
Prologis LP, 4.50%, 8/15/17		500		532,808
Realty Income Corp., 4.65%, 8/01/23		250		269,218
Simon Property Group LP, 4.75%, 3/15/42		100		110,300
Weyerhaeuser Co., 7.38%, 3/15/32		350		465,972
				4,486,380
Road & Rail — 0.3%
Burlington Northern Santa Fe LLC:
3.75%, 4/01/24		50		51,998
5.40%, 6/01/41		50		59,646
4.40%, 3/15/42		150		157,364
4.45%, 3/15/43		200		208,949
4.90%, 4/01/44		250		281,085	��
4.55%, 9/01/44		250		268,328
Canadian National Railway Co.:
1.45%, 12/15/16		50		50,341
2.95%, 11/21/24		305		304,373
3.50%, 11/15/42		100		95,773
Canadian Pacific Railway Ltd., 5.75%, 1/15/42		25		32,062
CSX Corp.:
3.70%, 10/30/20		100		105,532
4.75%, 5/30/42		100		109,828
4.50%, 8/01/54		250		261,827
Norfolk Southern Corp.:
7.70%, 5/15/17		150		171,387
3.00%, 4/01/22		250		251,037
3.85%, 1/15/24		250		262,864
3.95%, 10/01/42		100		98,084
Union Pacific Corp.:
4.16%, 7/15/22		100		109,857
4.30%, 6/15/42		50		53,138
4.75%, 12/15/43		250		283,261
				3,216,734
Semiconductors & Semiconductor Equipment — 0.1%
Applied Materials, Inc., 5.85%, 6/15/41		50		60,590

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2014 31

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

Corporate Bonds	Par   (000)		Value
Semiconductors & Semiconductor Equipment (concluded)
Intel Corp.:
1.35%, 12/15/17	$	300	$	299,561
4.80%, 10/01/41		300		329,472
KLA-Tencor Corp., 4.65%, 11/01/24		305		315,750
Maxim Integrated Products, Inc., 3.38%, 3/15/23		100		98,535
Seagate HDD Cayman:
3.75%, 11/15/18 (d)		125		128,281
4.75%, 6/01/23		250		259,662
Xilinx, Inc., 3.00%, 3/15/21		75		74,856
				1,566,707
Software — 0.3%
Autodesk, Inc., 1.95%, 12/15/17		75		75,233
CA, Inc., 4.50%, 8/15/23		170		178,158
Microsoft Corp.:
1.63%, 12/06/18		250		250,272
3.00%, 10/01/20		50		52,128
5.30%, 2/08/41		100		122,685
3.75%, 5/01/43		150		149,460
Oracle Corp.:
1.20%, 10/15/17		750		747,331
5.75%, 4/15/18		150		169,570
2.25%, 10/08/19		500		503,572
3.88%, 7/15/20		100		107,452
4.30%, 7/08/34		250		267,668
5.38%, 7/15/40		150		179,941
4.50%, 7/08/44		250		271,544
Symantec Corp., 2.75%, 6/15/17		150		152,212
				3,227,226
Specialty Retail — 0.4%
Advance Auto Parts, Inc., 4.50%, 12/01/23		250		264,907
AutoZone, Inc.:
3.70%, 4/15/22		50		51,422
3.13%, 7/15/23		250		245,878
Bed Bath & Beyond, Inc., 5.17%, 8/01/44		250		261,572
The Home Depot, Inc.:
2.00%, 6/15/19		350		350,858
4.40%, 4/01/21		150		166,872
5.88%, 12/16/36		100		130,600
4.20%, 4/01/43		250		260,655
4.40%, 3/15/45		250		273,229
Lowe’s Cos., Inc.:
1.63%, 4/15/17		200		201,579
4.63%, 4/15/20		100		110,240
3.12%, 4/15/22		100		102,324
5.00%, 9/15/43		150		175,480
4.25%, 9/15/44		250		264,007
Macy’s Retail Holdings, Inc.:
5.90%, 12/01/16		11		11,935
3.88%, 1/15/22		300		311,811
4.38%, 9/01/23		200		214,847
3.63%, 6/01/24		250		252,942
QVC, Inc., 5.45%, 8/15/34		200		195,154
Staples, Inc., 2.75%, 1/12/18		150		149,843
Tiffany & Co., 3.80%, 10/01/24 (d)		150		150,903
				4,147,058
Technology Hardware, Storage & Peripherals — 0.2%
Apple, Inc.:
1.00%, 5/03/18		500		492,580
Corporate Bonds	Par   (000)		Value
Technology Hardware, Storage & Peripherals (concluded)
Apple, Inc. (concluded):
3.85%, 5/04/43	$	250	$	250,181
4.45%, 5/06/44		250		275,492
EMC Corp.:
1.88%, 6/01/18		250		249,150
2.65%, 6/01/20		250		248,797
Hewlett-Packard Co.:
3.30%, 12/09/16		150		154,909
2.75%, 1/14/19		500		500,639
4.65%, 12/09/21		100		107,077
6.00%, 9/15/41		150		168,713
NetApp, Inc.:
2.00%, 12/15/17		350		351,960
3.38%, 6/15/21		105		105,273
				2,904,771
Textiles, Apparel & Luxury Goods — 0.0%
VF Corp., 3.50%, 9/01/21		100		105,738
Tobacco — 0.3%
Altria Group, Inc.:
9.70%, 11/10/18		187		237,454
9.25%, 8/06/19		45		57,836
2.63%, 1/14/20		250		250,726
2.85%, 8/09/22		250		242,924
10.20%, 2/06/39		33		57,458
4.50%, 5/02/43		150		151,058
5.38%, 1/31/44		70		79,682
Lorillard Tobacco Co., 6.88%, 5/01/20		250		294,469
Philip Morris International, Inc.:
1.13%, 8/21/17		250		248,947
1.88%, 1/15/19		250		248,484
4.13%, 5/17/21		50		54,371
2.63%, 3/06/23		250		242,827
3.25%, 11/10/24		125		125,061
4.50%, 3/20/42		50		52,788
3.88%, 8/21/42		100		94,939
4.13%, 3/04/43		200		196,051
Reynolds American, Inc.:
4.75%, 11/01/42		150		145,583
6.15%, 9/15/43		150		173,951
				2,954,609
Trading Companies & Distributors — 0.1%
GATX Corp.:
1.25%, 3/04/17		500		495,146
2.38%, 7/30/18		150		150,967
				646,113
Transportation Infrastructure — 0.1%
Ryder System, Inc.:
2.50%, 3/01/17		150		152,120
2.35%, 2/26/19		500		496,550
				648,670
Water Utilities — 0.0%
United Utilities PLC, 5.38%, 2/01/19		50		54,387
Wireless Telecommunication Services — 0.2%
America Movil SAB de CV:
2.38%, 9/08/16		500		506,860
5.00%, 3/30/20		200		220,548

See Notes to Financial Statements.

32 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

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

Corporate Bonds	Par   (000)		Value
Wireless Telecommunication Services (concluded)
America Movil SAB de CV (concluded):
4.38%, 7/16/42	$	350	$	335,300
Rogers Communications, Inc.:
3.00%, 3/15/23		150		145,279
5.00%, 3/15/44		250		273,392
Vodafone Group PLC:
1.63%, 3/20/17		250		249,885
7.88%, 2/15/30		100		138,383
4.38%, 2/19/43		450		438,564
				2,308,211
Total Corporate Bonds — 25.0%				298,307,881
Foreign Agency Obligations
Brazilian Government International Bond:
8.00%, 1/15/18		97		106,312
5.88%, 1/15/19		250		278,750
4.88%, 1/22/21		650		690,625
2.63%, 1/05/23		250		227,500
4.25%, 1/07/25		500		500,000
5.63%, 1/07/41		300		323,250
5.00%, 1/27/45		250		245,000
Canada Government International Bond, 1.63%, 2/27/19		500		501,530
Colombia Government International Bond:
4.38%, 7/12/21		250		264,375
2.63%, 3/15/23		250		232,125
4.00%, 2/26/24		250		255,625
7.38%, 9/18/37		100		134,750
5.63%, 2/26/44		200		225,000
Corporacion Andina de Fomento, 1.50%, 8/08/17		143		142,115
Council of Europe Development Bank, 1.00%, 3/07/18		250		247,433
European Bank for Reconstruction & Development, 1.00%, 2/16/17		250		250,911
European Investment Bank:
2.50%, 5/16/16		100		102,620
0.50%, 8/15/16		1,250		1,247,312
5.13%, 9/13/16		225		241,778
1.25%, 10/14/16		100		100,950
1.75%, 3/15/17		500		509,529
0.88%, 4/18/17		1,000		998,731
1.63%, 6/15/17		500		507,525
1.00%, 8/17/17		500		499,140
1.00%, 3/15/18		250		247,533
1.00%, 6/15/18		250		246,538
1.88%, 3/15/19		500		505,035
1.75%, 6/17/19		500		501,305
Export Development Canada, 1.75%, 8/19/19		500		501,250
Hydro-Quebec, 2.00%, 6/30/16		350		356,706
Inter-American Development Bank:
1.38%, 10/18/16		250		252,765
1.25%, 1/16/18		1,000		1,000,709
0.88%, 3/15/18		1,000		986,805
1.75%, 10/15/19		500		501,659
International Bank for Reconstruction & Development:
0.50%, 4/15/16		750		749,437
Foreign Agency Obligations	Par   (000)		Value
International Bank for Reconstruction & Development (concluded):
1.00%, 9/15/16	$	75	$	75,375
Series GDIF, 0.50%, 5/16/16		1,000		998,456
Series GDIF, 0.63%, 10/14/16		1,250		1,247,475
International Finance Corp.:
0.63%, 10/03/16		1,000		1,002,207
1.75%, 9/16/19		500		500,360
Israel Government International Bond, 4.50%, 1/30/43		200		204,160
Italian Government International Bond:
6.88%, 9/27/23		100		126,219
5.38%, 6/15/33		250		298,234
Japan Bank for International Cooperation, 2.13%, 2/07/19		200		203,514
KFW:
2.63%, 2/16/16		100		102,431
1.25%, 2/15/17		750		756,105
0.75%, 3/17/17		1,000		996,970
2.75%, 10/01/20		500		522,270
Mexico Government International Bond:
5.63%, 1/15/17		500		542,500
8.13%, 12/30/19		100		127,750
5.13%, 1/15/20		100		110,250
3.63%, 3/15/22		500		510,750
6.75%, 9/27/34		150		195,900
6.05%, 1/11/40		300		366,900
4.75%, 3/08/44		450		469,125
5.55%, 1/21/45		525		610,312
Nordic Investment Bank, 0.50%, 4/14/16		500		499,835
Panama Government International Bond:
5.20%, 1/30/20		350		385,875
6.70%, 1/26/36		350		452,375
Peruvian Government International Bond:
7.35%, 7/21/25		400		531,000
8.75%, 11/21/33		191		297,483
Philippine Government International Bond:
4.00%, 1/15/21		500		542,500
4.20%, 1/21/24		500		542,500
7.75%, 1/14/31		500		720,000
Poland Government International Bond:
6.38%, 7/15/19		250		292,500
3.00%, 3/17/23		200		199,171
4.00%, 1/22/24		250		265,313
Province of Ontario Canada:
2.30%, 5/10/16		100		102,205
1.20%, 2/14/18		750		743,752
2.00%, 9/27/18		500		505,920
2.00%, 1/30/19		500		505,055
4.40%, 4/14/20		200		222,572
Province of Quebec Canada:
5.00%, 3/01/16		350		367,871
2.63%, 2/13/23		250		249,694
Republic of Korea, 4.13%, 6/10/44		250		291,210
South Africa Government International Bond:
4.67%, 1/17/24		200		207,000
5.38%, 7/24/44		200		211,250
Svensk Exportkredit AB:
2.13%, 7/13/16		200		204,398
1.88%, 6/17/19		500		502,440

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2014 33

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

Foreign Agency Obligations	Par   (000)		Value
Turkey Government International Bond:
7.50%, 11/07/19	$	500	$	586,125
5.63%, 3/30/21		500		549,375
3.25%, 3/23/23		750		711,562
5.75%, 3/22/24		700		782,250
6.88%, 3/17/36		250		309,063
6.00%, 1/14/41		500		567,500
Uruguay Government International Bond:
8.00%, 11/18/22		150		197,625
4.50%, 8/14/24		250		262,500
5.10%, 6/18/50		250		253,750
Total Foreign Agency Obligations — 3.2%				37,711,560
Municipal Bonds
American Municipal Power, Inc., RB, Build America Bonds, Combined Hydroelectric Projects, Series B, 7.83%, 2/15/41		150		227,617
Bay Area Toll Authority, RB, Build America Bonds, San Francisco Toll Bridge:
Series S-1, 7.04%, 4/01/50		100		148,875
Series S-1, 6.92%, 4/01/40		100		140,307
Series S-3, 6.91%, 10/01/50		200		295,252
Chicago Transit Authority, RB, Series A, 6.90%, 12/01/40		100		125,996
City & County of Denver Colorado School District No. 1, COP, Refunding, Series B, 4.24%, 12/15/37		50		51,410
City & County of San Francisco California Public Utilities Commission Water Revenue, RB, Build America Bonds, Sub-Series G, 6.95%, 11/01/50		100		148,124
City of New York New York, GO, 5.97%, 3/01/36		100		128,357
City of New York New York Transitional Finance Authority, RB, Build America Bonds, Future Tax Secured, Sub-Series B-1, 5.57%, 11/01/38		100		124,862
City Public Service Board of San Antonio Texas, RB, 4.43%, 2/01/42		100		110,585
Commonwealth of Massachusetts, GO, Build America Bonds, 5.46%, 12/01/39		100		125,500
Commonwealth of Pennsylvania, GO, Build America Bonds, 4.65%, 2/15/26		100		110,590
County of Sonoma California, Refunding RB, Series A, 6.00%, 12/01/29		100		117,643
Dallas Area Rapid Transit, RB, Build America Bonds, Senior Lien, Series B, 5.02%, 12/01/48		160		195,930
District of Columbia, RB, Series E, 5.59%, 12/01/34		200		245,886
East Bay Municipal Utility District, RB, Build America Bonds, 5.87%, 6/01/40		100		133,226
Florida Hurricane Catastrophe Fund Finance Corp., RB, Series A, 3.00%, 7/01/20		100		101,627
Illinois State Toll Highway Authority, RB, Build America Bonds, 5.85%, 12/01/34		100		129,788
JobsOhio Beverage System, Refunding RB, Series B, 4.53%, 1/01/35		100		108,679
Los Angeles Community College District, GO, 6.75%, 8/01/49		100		147,706
Municipal Bonds	Par   (000)		Value
Los Angeles County Metropolitan Transportation Authority, RB, 5.74%, 6/01/39	$	100	$	125,551
Los Angeles Department of Water & Power, RB, Build America Bonds:
5.72%, 7/01/39		100		127,185
6.60%, 7/01/50		90		132,572
Los Angeles Unified School District, GO, 6.76%, 7/01/34		150		209,139
Massachusetts Institute of Technology, 4.68%, 7/01/14		300		346,959
Massachusetts School Building Authority, RB, 5.72%, 8/15/39		100		128,433
Metropolitan Transportation Authority, RB, Build America Bonds, Series C-1, 6.69%, 11/15/40		305		420,503
Metropolitan Water Reclamation District of Greater Chicago, GO, Build America Bonds, 5.72%, 12/01/38		150		186,026
Municipal Electric Authority of Georgia Plant Vogtle Units 3 & 4, Refunding RB, Build America Bonds, Series A, 6.64%, 4/01/57		125		166,876
New Jersey EDA, RB, Series A (NPFGC), 7.43%, 2/15/29		200		254,566
New Jersey EDA, Refunding RB, Series Q, 1.10%, 6/15/16		400		400,124
New Jersey State Turnpike Authority, RB, Build America Bonds, Series F, 7.41%, 1/01/40		400		603,192
New York City Transitional Finance Authority Future Tax Secured Revenue, RB, Future Tax Secured, Build America Bonds, 5.77%, 8/01/36		100		125,318
New York City Water & Sewer System, RB, Build America Bonds, 2nd General Resolution, Fiscal 2020, Series DD, 5.95%, 6/15/42		115		154,513
New York State Dormitory Authority, RB, Build America Bonds, Series H, 5.43%, 3/15/39		135		165,455
New York State Urban Development Corp., RB, 5.77%, 3/15/39		200		246,726
North Texas Tollway Authority, RB, Build America Bonds, Series B, 6.72%, 1/01/49		100		145,285
Ohio State University, RB, Build America Bonds, Series C, 4.91%, 6/01/40		100		122,072
Ohio State Water Development Authority, RB, Build America Bonds, Series B-2, 4.88%, 12/01/34		100		112,237
Port Authority of New York & New Jersey, RB:
158th Series, 5.86%, 12/01/24		100		123,397
159th Series, 6.04%, 12/01/29		200		258,092
182nd Series, 5.31%, 8/01/46		100		109,394
Port Authority of New York & New Jersey, Refunding RB, 174th Series, 4.46%, 10/01/62		100		105,534
San Diego County Water Authority, RB, Build America Bonds, Series B, 6.14%, 5/01/49		100		135,836
Santa Clara Valley Transportation Authority, RB, Build America Bonds, Series A, 5.88%, 4/01/32		100		121,378
State of California, GO, Build America Bonds, Various Purpose:
7.50%, 4/01/34		145		216,992
7.55%, 4/01/39		675		1,040,472
7.35%, 11/01/39		100		147,626
7.60%, 11/01/40		200		316,618
State of Connecticut, GO, Build America Bonds, Series D, 5.09%, 10/01/30		150		170,996

See Notes to Financial Statements.

34 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

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

Municipal Bonds	Par   (000)		Value
State of Illinois, GO:
5.67%, 3/01/18	$	200	$	219,754
Pension, 5.10%, 6/01/33		600		598,722
State of Oregon, GO, Pension, 5.76%, 6/01/23		100		116,742
State of Texas, GO, Build America Bonds, Series A, 5.52%, 4/01/39		100		131,684
State of Washington, GO, Build America Bonds, Series D, 5.48%, 8/01/39		100		125,327
Texas Transportation Commission, RB, 1st Tier, Build America Bonds, Series B, 5.18%, 4/01/30		200		239,958
University of California, RB, Series AD, 4.86%, 5/15/12		300		318,174
University of California, Refunding RB, Series AJ, 4.60%, 5/15/31		150		164,604
University of California Medical Center, RB, Build America Bonds, Series H, 6.55%, 5/15/48		50		68,720
University of North Carolina at Chapel Hill, Refunding RB, 3.85%, 12/01/34		400		422,260
University of Virginia, RB, Build America Bonds, 6.20%, 9/01/39		140		199,749
Virginia Commonwealth Transportation Board, RB, Build America Bonds, Series A-2, 5.35%, 5/15/35		75		89,304
Total Municipal Bonds — 1.0%				12,532,025
Non-Agency Mortgage-Backed Securities
Commercial Mortgage-Backed Securities — 1.6%
Bear Stearns Commercial Mortgage Securities Trust:
Series 2006-PW14, Class A4, 5.20%, 12/11/38		1,350		1,430,646
Series 2007-PW16, Class AM, 5.71%, 6/11/40 (c)		700		762,941
Series 2007-T26, Class A4, 5.47%, 1/12/45 (c)		1,279		1,369,844
Citigroup Commercial Mortgage Trust:
Series 2013-GC17, Class A4, 4.13%, 11/10/46		750		814,143
Series 2014-GC25, Class A4, 3.64%, 10/10/47 (c)		500		520,239
Citigroup/Deutsche Bank Commercial Mortgage Trust, Series 2007-CD4, Class A4, 5.32%, 12/11/49		600		635,257
Commercial Mortgage Trust:
Series 2006-C7, Class AM, 5.78%, 6/10/46 (c)		750		792,232
Series 2013-CR09, Class A4, 4.24%, 7/10/45 (c)		700		768,854
Series 2013-CR12, Class A4, 4.05%, 10/10/46		300		323,442
Series 2014-UBS2, Class A5, 3.96%, 3/10/47		500		535,567
Credit Suisse Commercial Mortgage Trust Series, Series 2006-C4, Class A3, 5.47%, 9/15/39		829		872,550
Greenwich Capital Commercial Funding Corp., Series 2007-GG11, Class A4, 5.74%, 12/10/49		350		379,066
Non-Agency Mortgage-Backed Securities	Par   (000)		Value
GS Mortgage Securities Corp. II, Series 2012-GCJ9, Class A3, 2.77%, 11/10/45	$	250	$	248,531
GS Mortgage Securities Trust (c):
Series 2006-GG6, Class AM, 5.55%, 4/10/38		500		519,261
Series 2007-GG10, Class A4, 5.80%, 8/10/45		271		293,211
JPMorgan Chase Commercial Mortgage Securities Trust:
Series 2006-LDP9, Class A3, 5.34%, 5/15/47		885		940,241
Series 2011-C5, Class A3, 4.17%, 8/15/46		650		702,222
Series 2012-LC9, Class A3, 2.48%, 12/15/47		300		300,539
Series 2013-C16, Class A2, 3.07%, 12/15/46		850		880,999
Series 2014-C19, Class A2, 3.05%, 4/15/47		300		310,796
Series 2014-C20, Class A5, 3.80%, 7/15/47		1,400		1,485,190
LB-UBS Commercial Mortgage Trust, Series 2007-C7, Class A3, 5.87%, 9/15/45 (c)		263		288,996
ML-CFC Commercial Mortgage Trust:
Series 2006-4, Class A3, 5.17%, 12/12/49		484		512,386
Series 2007-9, Class AM, 5.86%, 9/12/49 (c)		675		738,268
Morgan Stanley Capital I Trust, Series 2007-IQ14, Class A4, 5.69%, 4/15/49 (c)		1,500		1,615,077
Wells Fargo Commercial Mortgage Trust, Series 2013-LC12, Class A4, 4.22%, 7/15/46 (c)		200		218,387
WFRBS Commercial Mortgage Trust, Series 2013-C11, Class A5, 3.07%, 3/15/45		500		506,685
Total Non-Agency Mortgage-Backed Securities — 1.6%				18,765,570
U.S. Government Sponsored Agency Securities
Agency Obligations — 2.7%
Fannie Mae:
0.50%, 3/30/16		3,000		3,017,745
0.88%, 12/20/17 - 5/21/18		4,828		4,764,225
1.13%, 4/27/17		2,310		2,322,885
6.25%, 5/15/29		2,850		3,970,771
6.63%, 11/15/30		149		221,243
7.25%, 5/15/30		550		856,033
Federal Home Loan Bank:
0.63%, 12/28/16		5,000		4,987,145
5.50%, 7/15/36		100		137,143
Financing Corp., 8.60%, 9/26/19		200		260,168
Freddie Mac:
0.50%, 5/13/16		5,000		5,001,760
0.88%, 3/07/18		1,500		1,481,930
1.75%, 5/30/19		420		422,328

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2014 35

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

U.S. Government Sponsored Agency Securities	Par   (000)		Value
Agency Obligations (concluded)
Freddie Mac (concluded):
2.00%, 8/25/16	$	750	$	767,908
2.38%, 1/13/22		3,130		3,162,220
4.88%, 6/13/18		250		279,469
Tennessee Valley Authority:
3.50%, 12/15/42		140		138,446
6.25%, 12/15/17		400		458,449
				32,249,868
Commercial Mortgage-Backed Securities — 0.4%
Fannie Mae, Series 2014-M6, Class A2, 2.68%, 5/25/21 (c)		150		152,348
Freddie Mac:
Series K003, Class A5, 5.09%, 3/25/19		300		336,793
Series K004, Class A1, 3.41%, 5/25/19		524		548,292
Series K006, Class A1, 3.40%, 7/25/19		460		481,224
Series K713, Class A2, 2.31%, 3/25/20		300		303,302
Series K014, Class A1, 2.79%, 10/25/20		143		147,810
Series K013, Class A2, 3.97%, 1/25/21 (c)		500		545,546
Series K017, Class A2, 2.87%, 12/25/21		500		515,164
Series K026, Class A2, 2.51%, 11/25/22		200		199,499
Series K031, Class A2, 3.30%, 4/25/23 (c)		100		105,039
Series K033, Class A2, 3.06%, 7/25/23 (c)		100		103,233
Series K034, Class A2, 3.53%, 7/25/23 (c)		1,400		1,494,787
Series K038, Class A1, 2.60%, 10/25/23		244		249,269
Series K037, Class A2, 3.49%, 1/25/24		200		212,814
				5,395,120
Mortgage-Backed Securities — 29.8%
Fannie Mae Mortgage-Backed Securities:
1.92%, 4/01/43 (c)		403		414,422
1.93%, 5/01/43 (c)		1,008		1,036,518
2.07%, 6/01/43 (c)		905		911,123
2.49%, 8/01/42 (c)		326		334,866
2.50%, 9/01/28 - 1/01/45 (f)		13,709		13,900,097
2.78%, 8/01/41 (c)		115		120,866
3.00%, 1/01/27 - 1/01/45 (f)		42,945		43,814,011
3.16%, 11/01/40 (c)		57		60,135
3.50%, 2/01/26 - 1/01/45 (f)		34,506		36,108,357
4.00%, 10/01/25 - 1/01/45 (f)		39,325		41,969,022
4.50%, 5/01/24 - 1/01/45 (f)		17,717		19,188,584
5.00%, 1/01/19 - 1/01/45 (f)		17,526		19,343,427
5.50%, 3/01/34 - 1/01/45 (f)		6,812		7,617,014
6.00%, 3/01/34 - 1/01/45 (f)		8,086		9,169,287
6.50%, 7/01/32		237		273,790
7.00%, 2/01/32		42		45,355
Freddie Mac Mortgage-Backed Securities:
1.76%, 6/01/43 (c)		232		235,844
2.50%, 7/01/28 - 1/01/30 (f)		5,976		6,079,548
3.00%, 3/01/27 - 1/01/45 (f)		15,724		16,062,706
3.23%, 8/01/41 (c)		70		74,229
3.32%, 9/01/40 (c)		81		85,897
3.50%, 1/01/30 - 1/01/45 (f)		23,344		24,358,196
4.00%, 5/01/19 - 1/01/45 (f)		19,355		20,634,618
4.50%, 4/01/18 - 1/01/45 (f)		14,498		15,715,604
5.00%, 10/01/18 - 1/01/45 (f)		2,371		2,612,720
5.50%, 6/01/35 - 1/01/45 (f)		2,869		3,210,148
6.50%, 6/01/31		102		115,396
8.00%, 12/01/24		230		257,846
U.S. Government Sponsored Agency Securities	Par   (000)		Value
Mortgage-Backed Securities (concluded)
Ginnie Mae Mortgage-Backed Securities:
3.00%, 5/15/43 - 1/01/45 (f)	$	9,138	$	9,342,805
3.50%, 9/20/42 - 1/01/45 (f)		24,383		25,614,071
4.00%, 3/15/41 - 1/01/45 (f)		15,407		16,516,248
4.50%, 7/15/39 - 1/01/45 (f)		10,113		11,064,410
5.00%, 11/15/39 - 1/01/45 (f)		6,369		7,021,693
5.50%, 12/15/32 - 7/20/40		810		907,007
6.00%, 3/15/35 - 10/20/38		507		580,279
6.50%, 9/15/36		230		262,856
7.50%, 12/15/23		231		267,887
				355,326,882
Total U.S. Government Sponsored Agency Securities — 32.9%				392,971,870
U.S. Treasury Obligations
U.S. Treasury Bonds:
8.75%, 5/15/17		2,100		2,490,304
8.75%, 5/15/20		500		681,406
8.75%, 8/15/20		400		549,781
6.25%, 8/15/23		50		66,574
7.63%, 2/15/25		375		561,738
6.50%, 11/15/26		400		575,781
6.13%, 11/15/27		2,080		2,958,800
6.13%, 8/15/29		1,000		1,462,109
5.38%, 2/15/31		1,500		2,090,742
4.50%, 2/15/36		3,816		5,089,888
4.75%, 2/15/37		1,000		1,379,453
4.38%, 2/15/38		2,500		3,271,290
4.50%, 5/15/38		1,000		1,332,422
3.50%, 2/15/39		1,300		1,493,071
4.25%, 5/15/39		2,775		3,566,960
4.50%, 8/15/39		1,700		2,265,515
4.38%, 11/15/39		300		393,375
4.63%, 2/15/40		730		992,344
4.38%, 5/15/40		250		328,652
3.88%, 8/15/40		360		439,481
4.25%, 11/15/40		1,428		1,848,590
4.75%, 2/15/41		200		279,484
4.38%, 5/15/41		610		809,108
3.75%, 8/15/41		1,550		1,868,113
3.13%, 11/15/41		400		431,688
3.13%, 2/15/42		4,850		5,220,947
3.00%, 5/15/42		480		504,525
2.75%, 8/15/42		750		749,766
2.75%, 11/15/42		4,200		4,195,733
3.13%, 2/15/43		3,050		3,274,700
2.88%, 5/15/43		250		255,703
3.63%, 8/15/43		2,500		2,940,040
3.75%, 11/15/43		1,700		2,043,585
3.63%, 2/15/44		1,000		1,176,797
3.38%, 5/15/44		1,600		1,801,250
3.00%, 11/15/44		4,900		5,149,596
U.S. Treasury Notes:
0.38%, 1/15/16		5,800		5,803,625
2.00%, 1/31/16		5,400		5,496,185
4.50%, 2/15/16		1,200		1,255,594
0.25%, 2/29/16		8,000		7,990,000

See Notes to Financial Statements.

36 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

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

U.S. Treasury Obligations	Par   (000)		Value
U.S. Treasury Notes (continued):
0.38%, 3/15/16	$	2,500	$	2,500,195
0.25%, 4/15/16		1,000		998,438
2.00%, 4/30/16		6,679		6,819,887
2.63%, 4/30/16		5,000		5,146,095
0.50%, 6/30/16		5,500		5,501,716
1.50%, 6/30/16		500		507,539
0.63%, 8/15/16		5,500		5,509,025
0.63%, 10/15/16		7,000		7,002,184
4.63%, 11/15/16		250		268,594
0.50%, 11/30/16		5,000		4,987,500
2.75%, 11/30/16		5,135		5,338,392
0.63%, 12/15/16		4,000		3,998,124
0.88%, 12/31/16		9,750		9,786,562
3.25%, 12/31/16		4,500		4,726,759
0.88%, 1/31/17		7,600		7,621,972
0.63%, 2/15/17		7,700		7,680,750
4.63%, 2/15/17		650		703,219
0.88%, 2/28/17		2,950		2,957,145
1.00%, 3/31/17		5,000		5,021,095
0.88%, 4/15/17		4,000		4,005,312
0.63%, 5/31/17		22,500		22,371,682
2.50%, 6/30/17		4,790		4,978,606
0.88%, 7/15/17		4,000		3,995,312
0.50%, 7/31/17		900		889,805
4.75%, 8/15/17		3,800		4,172,875
0.63%, 8/31/17		5,521		5,468,379
1.88%, 8/31/17		1,870		1,912,952
1.00%, 9/15/17		9,000		9,004,923
1.88%, 10/31/17		5,000		5,117,580
0.88%, 11/15/17		14,000		13,933,276
2.25%, 11/30/17		7,000		7,238,987
2.63%, 1/31/18		2,000		2,088,594
0.75%, 2/28/18		4,500		4,438,125
2.75%, 2/28/18		1,300		1,362,461
0.63%, 4/30/18		1,500		1,469,532
4.00%, 8/15/18		500		548,321
1.38%, 9/30/18		2,400		2,397,749
1.25%, 10/31/18		700		695,461
1.75%, 10/31/18		2,250		2,278,476
1.38%, 12/31/18		1,030		1,025,977
1.50%, 12/31/18		4,815		4,821,394
1.25%, 1/31/19		6,400		6,338,502
1.63%, 3/31/19		1,500		1,506,680
1.25%, 4/30/19		4,300		4,249,944
1.13%, 5/31/19		1,880		1,846,660
1.00%, 6/30/19		2,000		1,951,718
1.63%, 6/30/19		2,000		2,005,000
0.88%, 7/31/19		1,500		1,453,476
1.00%, 8/31/19		2,300		2,237,288
1.63%, 8/31/19		2,000		2,002,188
3.38%, 11/15/19		3,100		3,358,413
1.50%, 11/30/19		8,500		8,446,212
1.13%, 12/31/19		4,750		4,632,362
1.63%, 12/31/19		11,000		10,983,676
3.63%, 2/15/20		500		548,203
1.25%, 2/29/20		6,200		6,067,766
1.13%, 3/31/20		1,500		1,457,109
1.13%, 4/30/20		2,700		2,619,632
1.38%, 5/31/20		4,400		4,318,186
2.00%, 7/31/20		3,500		3,543,750
U.S. Treasury Notes (concluded):
2.63%, 8/15/20	$	750	$	783,223
2.13%, 8/31/20		4,000		4,070,936
1.75%, 10/31/20		500		497,774
2.00%, 11/30/20		8,300		8,372,625
2.38%, 12/31/20		1,500		1,544,414
2.13%, 1/31/21		2,800		2,842,000
3.63%, 2/15/21		2,310		2,544,608
2.00%, 2/28/21		5,500		5,537,812
2.25%, 3/31/21		7,500		7,657,035
2.00%, 8/31/21		4,500		4,513,712
2.13%, 9/30/21		4,900		4,955,125
2.00%, 11/15/21		3,700		3,713,586
1.88%, 11/30/21		11,000		10,935,551
1.75%, 5/15/22		2,900		2,850,836
1.63%, 11/15/22		1,000		970,078
2.00%, 2/15/23		1,100		1,095,875
1.75%, 5/15/23		1,000		973,672
2.75%, 11/15/23		2,500		2,631,835
2.50%, 5/15/24		2,300		2,369,359
2.38%, 8/15/24		7,500		7,638,870
2.25%, 11/15/24		7,000		7,047,033
Total U.S. Treasury Obligations — 36.0%				429,488,409
Preferred Securities
Capital Trusts — 0.0%
The Chubb Corp., 6.00%, 5/11/37		50		65,336
Total Preferred Securities — 0.0%				65,336
Total Long-Term Investments (Cost — $1,178,323,986) — 100.2%				1,195,371,680
Short-Term Securities	Shares
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15%, 12/31/30 (a)(g)		251,106,435		251,106,435
Total Short-Term Securities (Cost — $251,106,435) — 21.1%				251,106,435
Total Investments Before TBA Sale Commitments (Cost — $1,429,430,421) — 121.3%				1,446,478,115
TBA Sale Commitments	Par   (000)
Fannie Mae Mortgage-Backed Securities, 5.50%, 1/1/45 (f)	$	1,823		(2,038,912	)
Total TBA Sale Commitments (Proceeds — $2,037,772) — 0.2%				(2,038,912	)
Total Investments, Net of TBA Sale Commitments — 121.1%				1,444,439,203
Liabilities in Excess of Other Assets — (21.1)%				(251,946,266	)
Net Assets — 100.0%			$	1,192,492,937

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2014 37

Schedule of Investments (continued) Bond Index Master Portfolio

Notes to Schedule of Investments

(a) During the year ended December 31, 2014, Investments in issuers considered to be an affiliate of the Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/Par Held at December 31, 2013		Shares/Par Purchased		Shares/Par Sold			Shares/Par Held at December 31, 2014		Value at December 31, 2014		Income
BlackRock Cash Funds: Institutional, SL Agency Shares		357,052,651		—		(105,946,216	)1		251,106,435	$	251,106,435	$	359,719
BlackRock Cash Funds: Prime, SL Agency Shares2		33,770,973		—		(33,770,973	)1		—		—	$	38,230
PNC Bank NA, 2.20%, 1/28/19		—	$	500		—		$	500	$	500,263	$	1,955
PNC Bank NA, 2.25%, 7/02/19		—	$	350		—		$	350	$	349,462	$	3,894
PNC Bank NA, 2.95%, 1/30/23	$	250		—		—		$	250	$	244,298	$	7,375
PNC Funding Corp, 5.63%, 2/01/17	$	150		—		—		$	150	$	161,885	$	8,438
PNC Funding Corp, 3.30%, 3/08/22	$	150		—		—		$	150	$	154,263	$	4,950
1   Represents net shares sold.
2   No longer held by Bond Index Master Portfolio as of report date.

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

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

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

(f) Represents or includes a TBA transaction. As of December 31, 2014, unsettled TBA transactions were as follows:

Counterparty	Value		Unrealized Appreciation
Barclays Capital, Inc.	$	3,545,031	$	24,772
Citigroup Global Markets, Inc.	$	26,052,508	$	186,837
Credit Suisse Securities (USA) LLC	$	48,445,774	$	195,233
Deutsche Bank Securities, Inc.	$	64,776,742	$	182,434
Goldman Sachs & Co.	$	13,911,350	$	81,188
J.P. Morgan Securities LLC	$	18,247,127	$	26,190
Merrill Lynch, Pierce, Fenner & Smith, Inc.	$	18,573,742	$	32,012
Morgan Stanley & Co. LLC	$	4,032,339	$	6,817
Nomura Securities International, Inc.	$	31,024,094	$	117,244
RBC Capital Markets, LLC	$	1,705,854	$	16,063
Wells Fargo Securities, LLC	$	6,506,355	$	14,087

(g) 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 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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices 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)

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. For information about the Master Portfolio’s policy regarding valuation of investments, refer to Note 2 of the Notes to Financial Statements.

See Notes to Financial Statements.

38 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

Schedule of Investments (concluded) Bond Index Master Portfolio

As of December 31, 2014, the following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities		—	$	5,529,029			—	$	5,529,029
Corporate Bonds		—		298,307,881			—		298,307,881
Foreign Agency Obligations		—		37,711,560			—		37,711,560
Municipal Bonds		—		12,532,025			—		12,532,025
Non-Agency Mortgage-Backed Securities		—		18,765,570			—		18,765,570
U.S. Government Sponsored Agency Securities		—		392,971,870			—		392,971,870
U.S. Treasury Obligations		—		429,488,409			—		429,488,409
Preferred Securities		—		65,336			—		65,336
Short-Term Securities:
Money Market Funds	$	251,106,435		—			—		251,106,435
Liabilities:
Investments:
TBA Sale Commitments		—		(2,038,912	)		—		(2,038,912	)
Total	$	251,106,435	$	1,193,332,768			—	$	1,444,439,203
1   See above Schedule of Investments for values in each sector and industry
The Master Portfolio may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of December 31, 2014, such liabilities are categorized within the disclosure hierarchy as follows:
	Level 1		Level 2			Level 3		Total
Liabilities:
Cash received as collateral for TBA commitments		—	$	(228,000	)		—	$	(228,000	)

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2014 39

Statement of Assets and Liabilities Bond Index Master Portfolio

December 31, 2014
Assets
Investments at value — unaffiliated (cost — $1,176,918,822)	$	1,193,961,509
Investments at value — affiliated (cost — $252,511,599)		252,516,606
Interest receivable		5,811,948
Investments sold receivable		4,212,614
TBA sale commitments receivable		2,037,772
Principal paydowns receivable		4,785
Securities lending income receivable — affiliated		211
Total assets		1,458,545,445
Liabilities
Investments purchased payable		249,961,790
Withdrawals payable to investors		13,727,567
TBA sale commitments at value (proceeds — $2,037,772)		2,038,912
Cash received as collateral for TBA commitments		228,000
Investment advisory fees payable		56,129
Professional fees payable		30,322
Trustees’ fees payable		9,788
Total liabilities		266,052,508
Net Assets	$	1,192,492,937
Net Assets Consist of
Investors’ capital	$	1,175,446,383
Net unrealized appreciation/depreciation		17,046,554
Net Assets	$	1,192,492,937

See Notes to Financial Statements.
40	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2014

Statement of Operations Bond Index Master Portfolio

Year Ended December 31, 2014
Investment Income
Interest	$	20,930,135
Securities lending — affiliated — net		38,230
Income — affiliated		386,331
Other income — affiliated		372
Foreign taxes withheld		(975	)
Total income		21,354,093
Expenses
Investment advisory		935,981
Independent Trustees		37,584
Professional		35,190
Total expenses		1,008,755
Less fees waived by Manager		(247,856	)
Total expenses after fees waived		760,899
Net investment income		20,593,194
Realized and Unrealized Gain
Net realized gain from:
Investments — unaffiliated		14,296,029
Net change in unrealized appreciation/depreciation on investments		31,803,664
Net realized and unrealized gain		46,099,693
Net Increase in Net Assets Resulting from Operations	$	66,692,887

See Notes to Financial Statements.
	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2014	41

Statements of Changes in Net Assets Bond Index Master Portfolio

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	20,593,194		$	12,224,736
Net realized gain (loss)		14,296,029			(2,104,914	)
Net change in unrealized appreciation/depreciation		31,803,664			(26,604,047	)
Net increase (decrease) in net assets resulting from operations		66,692,887			(16,484,225	)
Capital Transactions
Proceeds from contributions		924,146,923			646,336,811
Value of withdrawals		(732,116,664	)		(177,655,230	)
Net increase in net assets derived from capital transactions		192,030,259			468,681,581
Net Assets
Total increase in net assets		258,723,146			452,197,356
Beginning of year		933,769,791			481,572,435
End of year	$	1,192,492,937		$	933,769,791

Financial Highlights Bond Index Master Portfolio

	Year Ended December 31,
	2014		2013			2012		2011		2010
Total Return
Total return		5.98%		(2.23	)%		4.06%		7.67%		6.94%
Ratios to Average Net Assets
Total expenses		0.09%		0.09%			0.09%		0.13%		0.10%
Total expenses after fees waived		0.07%		0.08%			0.08%		0.08%		0.08%
Net investment income		1.76%		1.63%			1.86%		3.36%		3.80%
Supplemental Data
Net assets, end of year (000)	$	1,192,493	$	933,770		$	481,572	$	127,484	$	98,489
Portfolio turnover rate1,2		476%		417%			436%		122%		59%

¹  Portfolio turnover rates include TBA transactions, if any.

²  Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,
	2014		2013		2012		2011
Portfolio turnover rate (excluding MDRs)		244%		214%		231%		121%

See Notes to Financial Statements.
42	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2014

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.

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

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 (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements 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 Master Portfolio is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Master Portfolio:

Valuation: The Master Portfolio’s investments are valued at fair value as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the 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.

Bond investments are valued 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 net asset value 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 the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant consistent with the principles of fair value measurement. The pricing of all Fair Value Investments 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 sale 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 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.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2014 43

Notes to Financial Statements (continued) Bond Index Master Portfolio

Other: Expenses directly related to the Master Portfolio are charged to the Master Portfolio. Other operating expenses shared by several funds are prorated 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 subsequently have to 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 U.S. government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury.

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, U.S. government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by, 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 prepayments 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.

44 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

Notes to Financial Statements (continued) Bond Index Master Portfolio

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. When entering into TBA commitments, the Master Portfolio may take possession of or deliver the underlying mortgage-backed securities but can extend the settlement or roll the transaction. TBA commitments involve a risk of loss if the value of the security to be purchased or sold declines or increases, respectively, prior to the settlement date.

In order to better define contractual rights and to secure rights that will help the Master Portfolio mitigate their counterparty risk, TBA commitments may be entered into by the Master Portfolio under Master Securities Forward Transaction Agreements (each, an “MSFTA”). An MSFTA typically contains, among other things, collateral posting terms and netting provisions in the event of default and/or termination event. The collateral requirements are typically calculated by netting the mark to market amount for each transaction under such agreement and comparing that amount to the value of the collateral currently pledged by the Master Portfolio and the counterparty. Cash collateral that has been pledged to cover the 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 for TBA commitments or cash received as collateral for TBA commitments, respectively. Non-cash collateral pledged by the Master Portfolio, if any, is noted in the Schedule of Investments. Typically, the Master Portfolio is permitted to sell, repledge or use the collateral it receives; however, the counterparty is not permitted to do so. To the extent amounts due to the Master Portfolio are not fully collateralized, contractually or otherwise, the Master Portfolio bears the risk of loss from counterparty non-performance.

Securities Lending: The Master Portfolio may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Master Portfolio collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. government. The initial collateral received by the Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. During the term of the loan, the Master Portfolio is entitled to all distributions made on or in respect of the loaned securities. 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-unaffiliated and collateral on securities loaned at value, respectively. As of December 31, 2014, any securities on loan were collateralized by cash. 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 (each, an “MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, 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 risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities lent if the collateral received does not cover the value on the securities loaned in the event of a borrower default. The Master Portfolio 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.

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.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2014 45

Notes to Financial Statements (continued) Bond Index Master Portfolio

MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement with 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 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 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) receives investment advisory fees from the Master Portfolio.

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 year ended December 31, 2014, the amount waived was $175,082.

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 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, 2015. The amount of the waiver, if any, is included in fees waived by Manager in the Statement of Operations. For the year ended December 31, 2014, the Manager waived $72,774 pursuant to the agreement.

The U.S. Securities and Exchange Commission has issued an exemptive order which permits BTC, an affiliate of the Manager, to serve as securities lending agent for the Master Portfolio, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. The Master Portfolio is responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by the Manager or its affiliates, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees the Master Portfolio bears to an annual rate of 0.04% until December 31, 2014 and 0.05% thereafter (the “collateral investment fees”).

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent. Pursuant to a securities lending agreement effective February 1, 2014, BTC may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the “specials only securities”).

Pursuant to such agreement, the Master Portfolio retains 80% of securities lending income. In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Liquidity Complex in a calendar year exceeds the aggregate securities lending income earned across the Equity-Liquidity Complex through the lending of specials only securities in the calendar year 2013, the Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income. Prior to February 1, 2014, the Master Portfolio retained 65% of securities lending income and paid a fee to BTC equal to 35% of such income. The share of securities lending income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the year ended December 31, 2014, the Master Portfolio paid BTC $2,221 for securities lending agent services and collateral investment fees.

The Master Portfolio recorded a payment from an affiliate to compensate for foregone securities lending revenue in the amount of $372, which is shown as Other income — affiliated in the Statement of Operations.

46 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

Notes to Financial Statements (continued) Bond Index Master Portfolio

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

5. Purchases and Sales:

For the year ended December 31, 2014, purchases and sales of investments including paydown and mortgage dollar rolls and excluding short-term securities, were as follows:

	Purchases		Sales
Non-U.S. Government Securities	$	5,250,840,917	$	5,098,969,031	*
U.S. Government Securities	$	383,518,988	$	287,755,668

* Including paydowns.

For the year ended December 31, 2014, purchases and sales related to mortgage dollar rolls were $2,625,740,022 and $2,632,028,581, respectively.

6. Income Tax Information:

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 U.S. 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 U.S. federal tax returns remains open for each of the four years ended December 31, 2014. 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 that there are any uncertain tax positions that require recognition of a tax liability.

As of December 31, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Total cost	$	1,429,466,802
Gross unrealized appreciation	$	21,419,362
Gross unrealized depreciation		(4,408,049	)
Net unrealized appreciation	$	17,011,313

7. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), was a party to a 364-day, $1.1 billion credit agreement with a group of lenders, under which the Master Portfolio may borrow to fund shareholder redemptions. Excluding commitments designated for a certain individual fund, the Participating Funds, including the Master Portfolio, could borrow up to an aggregate commitment amount of $650 million, subject to asset coverage and other limitations as specified in the agreement. Effective November 25, 2014, the credit agreement was amended to an aggregate commitment amount of $2.1 billion, of which the Participating Funds, including the Master Portfolio, can borrow up to $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The agreement terminates on April 23, 2015, unless otherwise extended to November 24, 2015 or renewed for a period of 364 days from April 23, 2015. The amended agreement has the following terms: a fee of 0.06% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one month LIBOR (but in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which are included in miscellaneous expenses in the Statement of Operations, and 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. During the year ended December 31, 2014, the Master Portfolio did not borrow under the credit agreement.

8. Principal Risks:

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

BLACKROCK BOND INDEX FUND DECEMBER 31, 2014 47

Notes to Financial Statements (concluded) Bond Index Master Portfolio

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 tied to the fixed income markets. See the Schedule of Investments for these securities. Changes in market interest rates or economic conditions, may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will increase as interest rates fall and decrease as interest rates rise. The 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. Investment percentages in these securities are presented in the Schedule of Investments. Changes in economic conditions, including delinquencies and/or defaults on assets underlying these securities, can affect the value, income and/or liquidity of such positions.

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.

48 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

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, 2014, 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, 2014 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 23, 2015

BLACKROCK BOND INDEX FUND DECEMBER 31, 2014 49

Officers and Trustees

Name, Address1 and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2
Ronald W. Forbes 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 153 Portfolios	None
Rodney D. Johnson 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 153 Portfolios	None
David O. Beim 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 153 Portfolios	None
Frank J. Fabozzi 1948	Trustee	Since 2014	Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011; Adjunct Professor of Finance and Becton Fellow, Yale University from 1994 to 2006.	112 RICs consisting of 232 Portfolios	None
Dr. Matina S. Horner 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 153 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 1939	Trustee	Since 2009	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 153 Portfolios	None
Ian A. MacKinnon 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None
Cynthia A. Montgomery 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 153 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 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 153 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 153 Portfolios	None

50 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

Officers and Trustees (continued)

Name, Address1 and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2 (concluded)
Toby Rosenblatt 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Futures Foundation (philanthropic foundation) since 2009; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None
Kenneth L. Urish 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 153 Portfolios	None
Frederick W. Winter 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 153 Portfolios	None
	1   The address of each Trustee is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2   Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Trustees on a case-by-case basis, as appropriate.
	3   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. Frank J. Fabozzi first became a member of the board of other funds advised by BlackRock Advisors, LLC or its affiliates in 1988.
Interested Trustees4
Paul L. Audet 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.	141 RICs consisting of 329 Portfolios	None
Henry Gabbay 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.	29 RICs consisting of 97 Portfolios	None
	4   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 75. The Board has determined to extend the terms of Directors on a case-by-case basis, as appropriate.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2014 51

Officers and Trustees (concluded)

Name, Address and1 Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers2
John M. Perlowski 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 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.
Jennifer McGovern 1977	Vice President	Since 2014	Director of BlackRock since 2011; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock from 2008 to 2010.
Neal Andrews 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 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.
Charles Park 1967	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2014	Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Benjamin Archibald 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    The address of each Officer is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2    Officers of the Trust/MIP serve at the pleasure of the Board.
	Further information about the Officers and Trustees is available in the Trust’s Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.

Effective September 10, 2014, Brendan Kyne resigned as a Vice President of the Trust/MIP and Jennifer McGovern became a Vice President of the Trust/MIP.

Effective December 31, 2014, Paul L. Audet and Henry Gabbay resigned as Trustees of the Trust/MIP and Ronald W. Forbes resigned as a Trustee of the Trust/MIP and Co-Chair of the Board. Effective January 1, 2015, Collette Chilton, Barbara G. Novick and Mark Stalnecker were appointed to serve as Trustees of the Trust/MIP.

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

52 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

Additional Information

General Information

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.

BlackRock’s Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing. Visit http://www.blackrock.com for more information.

Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM 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, 2014 53

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.

54 BLACKROCK BOND INDEX FUND DECEMBER 31, 2014

This report is intended for current holders. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless preceded or accompanied 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-12/14AR

DECEMBER 31, 2014

  ANNUAL REPORT  

BlackRock Funds III

^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
The Markets in Review		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		8
Statements of Changes in Net Assets		9
Fund Financial Highlights		12
Fund Notes to Financial Statements		31
Fund Report of Independent Registered Public Accounting Firm		36
Important Tax Information		36
Master Portfolio Information		37
Master Portfolio Financial Statements:
Schedules of Investments		38
Statements of Assets and Liabilities		50
Statements of Operations		51
Statements of Changes in Net Assets		52
Master Portfolio Financial Highlights		55
Master Portfolio Notes to Financial Statements		58
Master Portfolio Report of Independent Registered Public Accounting Firm		61
Officers and Trustees		62
Additional Information		65

2 BLACKROCK FUNDS III DECEMBER 31, 2014

The Markets in Review

Dear Shareholder,

After an extended period of calm, market volatility increased over the course of 2014, driven largely by higher valuations in risk assets (such as equities and high yield bonds), rising geopolitical risks and expectations around global central bank policies. Several key trends drove strong performance in U.S. markets, particularly large-cap stocks, Treasuries and municipal bonds, while markets outside the U.S. were more challenged.

Investors began the year in search of relatively safer assets due to heightened risks in emerging markets, slowing growth in China and weakening U.S. economic data. As a result, equities globally declined in January while bond markets strengthened despite the expectation that interest rates would rise as the U.S. Federal Reserve had begun reducing its asset purchase programs. Strong demand for relatively safer assets pushed U.S. Treasury bond prices higher and thus kept rates low in the United States. This surprising development, as well as increasing evidence that the soft patch in U.S. economic data had been temporary and weather-related, brought equity investors racing back to the market in February.

In the months that followed, interest rates trended lower in a modest growth environment and more investors turned to equities in search of yield. Markets remained relatively calm despite rising tensions in Russia and Ukraine and further signs of decelerating growth in China. Strong corporate earnings, increased merger and acquisition activity and signs of a strengthening recovery in the U.S. and other developed economies kept equity prices moving higher. Not all segments benefited from these trends, however, as investors ultimately became wary of high valuations, resulting in a broad rotation into cheaper assets.

Volatility ticked up in the summer as geopolitical tensions escalated and investors feared that better U.S. economic indicators may compel the Fed to increase short-term interest rates sooner than previously anticipated. Global credit markets tightened as the U.S. dollar strengthened, ultimately putting a strain on investor flows, and financial markets broadly weakened in the third quarter.

Several themes dominated the markets in the fourth quarter, resulting in higher levels of volatility and the outperformance of U.S. markets versus other areas of the world. Economic growth strengthened considerably in the United States while the broader global economy showed signs of slowing. The European Central Bank and the Bank of Japan took aggressive measures to stimulate growth while the Fed moved toward tighter policy. This divergence in central bank policy caused further strengthening in the U.S. dollar versus other currencies. Oil prices, which had been falling gradually since the summer, plummeted in the fourth quarter due to a global supply-and-demand imbalance. Energy stocks sold off sharply and oil-exporting economies suffered, resulting in the poor performance of emerging market stocks.

At BlackRock, we believe investors need to think globally, extend their scope across a broad 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 blackrock.com for further insight about investing in today’s markets.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2014
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		6.12	%		13.69	%
U.S. small cap equities (Russell 2000® Index)		1.65			4.89
International equities (MSCI Europe, Australasia, Far East Index)		(9.24	)		(4.90	)
Emerging market equities (MSCI Emerging Markets Index)		(7.84	)		(2.19	)
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.01			0.03
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		4.33			10.72
U.S. investment-grade bonds (Barclays U.S. Aggregate Bond Index)		1.96			5.97
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.00			9.25
U.S. high yield bonds (Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		(2.84	)		2.46
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, 2014

The Federal Open Market Committee (“FOMC”) maintained the federal funds rate in the target range of 0.00% to 0.25% during the 12-month period ended December 31, 2014. U.S. economic performance gained momentum as the year progressed. While the economy contracted by 2.1% in the first quarter of 2014, the factors that were hindering growth proved to be temporary. U.S. gross domestic product rebounded strongly growing at seasonally adjusted rates of 4.6% and 5.0% in the second and third quarters, respectively. The job market improved markedly, with the unemployment rate falling to 5.8% in November, a level not seen since before the financial crisis. In the latter part of 2014, U.S. policymakers became increasingly concerned that tumultuous financial markets, a strengthening dollar and economic weakness overseas, particularly in Europe, would present headwinds to growth in the United States. Despite these reservations, the FOMC decided that enough progress had been made toward attaining its dual objectives of maximum employment within the context of price stability to proceed with its plan to end its asset purchase program in October.

In the eurozone, slow economic growth combined with falling inflation measures continued to disappoint policymakers. In an effort to spur growth and combat deflationary pressures, the European Central Bank (“ECB”) cut its key rates by 0.10% in July, and again by an additional 0.10% in September, boldly taking the deposit rate to a negative 0.20%. The central bank also implemented an asset purchase program focused on asset-backed securities and covered bonds. In December, falling energy prices pushed the consumer price index lower on a year-over-year basis for the first time in five years. Mounting pressure on the ECB to pull out all stops in its battle with deflation raised expectations for large-scale purchases of government bonds in early 2015.

London Interbank Offered Rates (“LIBOR”) remained virtually unchanged over the period amid highly accommodative monetary policy. The benchmark three-month LIBOR ended the period at 0.26%, just one basis point higher than it was at the end of 2013. U.S. Treasury bills outstanding declined by $134 billion over the same period as the federal budget deficit improved and the Treasury Department cut the size of its weekly bill auctions to make room for the issuance of two-year floating rate notes (“FRNs”) – the first new structure issued in nearly 17 years. Treasury FRN issuance totaled $164 billion in 2014. After capping its fixed-rate reverse repurchase agreement program (“RRP”) at $300 billion in September, the Fed offered an additional $300 billion in collateral to facility participants in December through term repo operations that matured on January 5, 2015. These operations were well received by money market participants, who purchased $226 billion at rates ranging from 0.07% to 0.10%.

In the short-term tax-exempt market, conditions remained stable, with strong demand and low supply. During the 12-month period, 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 between a high of 0.12% and an all-time low of 0.03%, averaging just 0.05% for the period. As monetary policy continued to be accommodative and rates on taxable overnight repos remained low by historical measures for much of the period, tax-exempt VRDNs were generally an attractive investment alternative for taxable money funds. This cross-over demand, coupled with the natural demand from tax-exempt money funds, has placed additional downward pressure on VRDN yields as evidenced by the prolonged low levels of the SIFMA Index.

Tax-exempt money funds experienced large outflows in April, which is a seasonal trend driven by shareholders redeeming shares to pay their federal and state income tax bills. Tax season rolls into “note season” in June, when municipalities typically issue one-year tax and revenue anticipation notes. Given the continued austerity measures at state and local municipalities, spending has been limited as well as the need to issue debt. As such, the supply of new-issue, one-year fixed-rate notes has continued to decline year-over-year, keeping rates low. One-year note yields ended 2014 at 0.14%, down three basis points for the year. Generally speaking, municipal money market funds seek to 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. This year, overall note issuance was approximately 16% lower versus 2013. This lower supply contributed not only to lower one-year rates in the tax-exempt space, but also to additional downward pressure on VRDN rates as investors sought to reinvest their maturing 2013 notes. Given expectations that a change to the FOMC’s monetary policy is on the horizon, issuers will soon need to offer greater yield premiums to entice buyers to extend out to the full year maturity, thereby steepening the yield curve.

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, 2014

Fund Information as of December 31, 2014

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		0.03	%		0.07	%
Institutional		0.12	%		0.17	%
Select		0.04	%		0.08	%
SL Agency		0.15	%		0.20	%

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		0.08	%		0.09	%
Institutional		0.10	%		0.11	%
Premium		0.05	%		0.06	%
SL Agency		0.13	%		0.14	%

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	%		0.00	%
Institutional		0.00	%		0.00	%
SL Agency		0.00	%		0.01	%

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, 2014 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, 2014 and held through December 31, 2014) 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: Institutional	Beginning Account Value July 1, 2014		Ending Account Value December 31, 2014		Expenses Paid During the Period1		Beginning Account Value July 1, 2014		Ending Account Value December 31, 2014		Expenses Paid During the Period1		Annualized Expense Ratio
Aon Captives	$	1,000.00	$	1,000.10	$	1.11	$	1,000.00	$	1,024.10	$	1.12		0.22	%
Institutional	$	1,000.00	$	1,000.60	$	0.61	$	1,000.00	$	1,024.60	$	0.61		0.12	%
Select	$	1,000.00	$	1,000.20	$	1.01	$	1,000.00	$	1,024.20	$	1.02		0.20	%
SL Agency	$	1,000.00	$	1,000.80	$	0.45	$	1,000.00	$	1,024.75	$	0.46		0.09	%
BlackRock Cash Funds: Prime
Capital	$	1,000.00	$	1,000.40	$	0.71	$	1,000.00	$	1,024.50	$	0.71		0.14	%
Institutional	$	1,000.00	$	1,000.50	$	0.61	$	1,000.00	$	1,024.60	$	0.61		0.12	%
Premium	$	1,000.00	$	1,000.20	$	0.86	$	1,000.00	$	1,024.35	$	0.87		0.17	%
SL Agency	$	1,000.00	$	1,000.60	$	0.45	$	1,000.00	$	1,024.75	$	0.46		0.09	%
BlackRock Cash Funds: Treasury
Institutional	$	1,000.00	$	1,000.00	$	0.20	$	1,000.00	$	1,025.00	$	0.20		0.04	%
SL Agency	$	1,000.00	$	1,000.00	$	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, 2014

Statements of Assets and Liabilities

December 31, 2014	BlackRock Cash Funds: Institutional		BlackRock Cash Funds: Prime		BlackRock Cash Funds: Treasury
Assets
Investments at value — from the applicable Master Portfolio1,2	$	40,013,208,511	$	22,694,892,590	$	2,386,183,679
Capital shares sold receivable		355		—		3
Withdrawals receivable from the Master Portfolio		352		1,097		—
Total assets		40,013,209,218		22,694,893,687		2,386,183,682
Liabilities
Income dividends payable		2,749,273		1,495,465		—
Capital gains distribution payable		1,690,968		326,037		25,995
Administration fees payable		755,832		738,809		4,174
Capital shares redeemed payable		—		—		176,072
Professional fees payable		10,748		10,759		10,749
Distribution fees payable		678		—		—
Contributions payable to the Master Portfolio		—		—		176,072
Total liabilities		5,207,499		2,571,070		393,062
Net Assets	$	40,008,001,719	$	22,692,322,617	$	2,385,790,620
Net Assets Consist of
Paid-in capital	$	40,006,722,649	$	22,691,970,560	$	2,385,782,962
Undistributed net investment income		—		3,950		0
Accumulated net realized gain		1,279,070		348,107		7,658
Net Assets	$	40,008,001,719	$	22,692,322,617	$	2,385,790,620
1    Investments at cost — affiliated	$	40,013,208,511	$	22,694,892,590	$	2,386,183,679
2    Money Market Master Portfolio, Prime Money Market Master Portfolio, and Treasury Money Market Master Portfolio (each, a “Master Portfolio”), respectively.
Net Asset Value
Aon Captives:
Net assets	$	7,998,878		—		—
Shares outstanding3		7,998,889		—		—
Net asset value	$	1.00		—		—
Capital:
Net assets		—	$	1,747,725,072		—
Shares outstanding3		—		1,747,706,298		—
Net asset value		—	$	1.00		—
Institutional:
Net assets	$	2,251,120,620	$	9,074,064,040	$	3,903
Shares outstanding3		2,251,123,532		9,073,966,625		3,904
Net asset value	$	1.00	$	1.00	$	1.00
Premium:
Net assets		—	$	1,254,768,177		—
Shares outstanding3		—	$	1,254,754,708		—
Net asset value		—	$	1.00		—
Select:
Net assets	$	108,566		—		—
Shares outstanding3		108,566		—		—
Net asset value	$	1.00		—		—
SL Agency:
Net assets	$	37,748,773,655	$	10,615,765,328	$	2,385,786,717
Shares outstanding3		37,748,822,448		10,615,651,306		2,385,779,060
Net asset value	$	1.00	$	1.00	$	1.00
3    Unlimited number of shares authorized, no par value.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	7

Statements of Operations

Year Ended December 31, 2014	BlackRock Cash Funds: Institutional			BlackRock Cash Funds: Prime			BlackRock Cash Funds: Treasury
Investment Income
Net investment income allocated from the applicable Master Portfolio:
Interest	$	94,591,571		$	34,486,074		$	1,091,091
Expenses		(42,596,762	)		(17,025,913	)		(1,807,001	)
Fees waived		13,230,215			5,302,070			738,446
Total income		65,225,024			22,762,231			22,536
Fund Expenses
Administration — class specific		9,084,433			7,225,116			444,553
Professional		13,481			13,511			13,481
Distribution — Aon Captives		8,151			—			—
Miscellaneous		470			470			470
Total expenses		9,106,535			7,239,097			458,504
Less fees waived by administrator — class specific		(760	)		(15,259	)		(422,487	)
Less fees reimbursed by administrator		(13,481	)		(13,511	)		(13,481	)
Total expenses after fees waived and/or reimbursed		9,092,294			7,210,327			22,536
Net investment income		56,132,730			15,551,904			—
Realized Gain Allocated from the Master Portfolios
Net realized gain from investments		3,084,717			728,334			59,659
Net Increase in Net Assets Resulting from Operations	$	59,217,447		$	16,280,238		$	59,659

See Notes to Financial Statements.
8	BLACKROCK FUNDS III	DECEMBER 31, 2014

Statements of Changes in Net Assets

	BlackRock Cash Funds: Institutional
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	56,132,730		$	67,823,689
Net realized gain		3,084,717			4,793,864
Net increase in net assets resulting from operations		59,217,447			72,617,553
Distributions to Shareholders From1
Net investment income:
Aon Captives		(479	)		(4,385	)
Institutional		(2,429,848	)		(4,192,107	)
Select		(62	)		(2,035	)
SL Agency		(53,702,341	)		(63,625,162	)
Net realized gain:
Aon Captives		(667	)		(1,114	)
Institutional		(179,314	)		(339,590	)
Select		(9	)		(503	)
SL Agency		(3,240,008	)		(4,674,107	)
Trust		—			(63	)
Decrease in net assets resulting from distributions to shareholders		(59,552,728	)		(72,839,066	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(675,694,893	)		6,091,103,262
Net Assets
Total increase (decrease) in net assets		(676,030,174	)		6,090,881,749
Beginning of year		40,684,031,893			34,593,150,144
End of year	$	40,008,001,719		$	40,684,031,893
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	9

Statements of Changes in Net Assets

	BlackRock Cash Funds: Prime
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	15,551,904		$	15,340,314
Net realized gain		728,334			2,087,007
Net increase in net assets resulting from operations		16,280,238			17,427,321
Distributions to Shareholders From1
Net investment income:
Capital		(875,180	)		(1,115,190	)
Institutional		(5,326,684	)		(5,031,183	)
Premium		(588,278	)		(1,975,146	)
Select		(74	)		(3,116	)
SL Agency		(8,761,688	)		(7,211,729	)
Net realized gain:
Capital		(66,763	)		(159,493	)
Institutional		(221,109	)		(574,074	)
Premium		(49,476	)		(493,586	)
Select		(42	)		(816	)
SL Agency		(312,573	)		(709,842	)
Trust		(37	)		(1,046	)
Decrease in net assets resulting from distributions to shareholders		(16,201,904	)		(17,275,221	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		5,582,620,700			3,087,468,286
Net Assets
Total increase in net assets		5,582,699,034			3,087,620,386
Beginning of year		17,109,623,583			14,022,003,197
End of year	$	22,692,322,617		$	17,109,623,583
Undistributed net investment income, end of year	$	3,950		$	3,950
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
10	BLACKROCK FUNDS III	DECEMBER 31, 2014

Statements of Changes in Net Assets

	BlackRock Cash Funds: Treasury
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income		—		$	191,370
Net realized gain	$	59,659			130,047
Net increase in net assets resulting from operations		59,659			321,417
Distributions to Shareholders From1
Net investment income:
Capital		—			(2,490	)
Institutional		—			(72	)
Select		—			(1	)
SL Agency		—			(188,793	)
Trust		—			(2	)
Net realized gain:
Capital		(12	)		(91	)
Institutional		—			(272	)
Select		(97	)		(1,141	)
SL Agency		(58,648	)		(155,671	)
Trust		(257	)		(2,824	)
Decrease in net assets resulting from distributions to shareholders		(59,014	)		(351,357	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		800,572,506			(239,731,391	)
Net Assets
Total increase (decrease) in net assets		800,573,151			(239,761,331	)
Beginning of year		1,585,217,469			1,824,978,800
End of year	$	2,385,790,620		$	1,585,217,469
Undistributed net investment income, end of year	$	—		$	324
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	11

Financial Highlights BlackRock Cash Funds: Institutional

	Aon Captives
	Year Ended December 31,
	2014			2013			2012			2011			2010
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		0.0005			0.0012			0.0008			0.0012
Net realized gain		0.0001			0.0000	1		—			—			—
Net increase from investment operations		0.0001			0.0005			0.0012			0.0008			0.0012
Distributions from:2
Net investment income		(0.0000	)3		(0.0005	)		(0.0012	)		(0.0008	)		(0.0012	)
Net realized gain		(0.0001	)		(0.0000	)3		—			—			—
Total distributions		(0.0001	)		(0.0005	)		(0.0012	)		(0.0008	)		(0.0012	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return4
Based on net asset value		0.01%			0.05%			0.12%			0.08%			0.12%
Ratios to Average Net Assets5
Total expenses		0.22%	6		0.22%	6		0.22%	6		0.22%	6		0.25%
Total expenses after fees waived and/or reimbursed		0.22%	6		0.22%	6		0.22%	6		0.22%	6		0.22%
Net investment income		0.01%	6		0.04%	6		0.12%	6		0.07%	6		0.11%
Supplemental Data
Net assets, end of year (000)	$	7,999		$	9,166		$	11,003		$	9,167		$	59,237

¹  Amount is less than $0.00005 per share.

²  �� Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁴  Where applicable, assumes the reinvestment of 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 year ended December 31, 2010, which includes gross expenses.

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

See Notes to Financial Statements.
12	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights (continued) BlackRock Cash Funds: Institutional

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

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, December 31, 2013 and December 31, 2014.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of distributions.

⁴  Aggregate total 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, 2014	13

Financial Highlights (continued) BlackRock Cash Funds: Institutional

	Institutional
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0010			0.0015			0.0022			0.0018			0.0022
Net realized gain		0.0001			0.0000	1		—			—			—
Net increase from investment operations		0.0011			0.0015			0.0022			0.0018			0.0022
Distributions from:2
Net investment income		(0.0010	)		(0.0015	)		(0.0022	)		(0.0018	)		(0.0022	)
Net realized gain		(0.0001	)		(0.0000	)3		—			—			—
Total distributions		(0.0011	)		(0.0015	)		(0.0022	)		(0.0018	)		(0.0022	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return4
Based on net asset value		0.11%			0.15%			0.22%			0.18%			0.22%
Ratios to Average Net Assets5
Total expenses		0.12%	6		0.12%	6		0.12%	6		0.12%	6		0.15%
Total expenses after fees waived and/or reimbursed		0.12%	6		0.12%	6		0.12%	6		0.12%	6		0.12%
Net investment income		0.11%	6		0.14%	6		0.22%	6		0.17%	6		0.22%
Supplemental Data
Net assets, end of year (000)	$	2,251,121		$	2,802,911		$	1,211,912		$	1,089,872		$	1,076,268

¹  Amount is less than $0.00005 per share.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁴  Where applicable, assumes the reinvestment of 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 year ended December 31, 2010, which includes gross expenses.

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

See Notes to Financial Statements.
14	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights (continued) BlackRock Cash Funds: Institutional

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

¹  There were no Premium Shares outstanding during the fiscal years ended December 31, 2012, December 31, 2013 and December 31, 2014, 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  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁶  Where applicable, assumes the reinvestment of distributions.

⁷  Aggregate total 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, which includes 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, 2014	15

Financial Highlights (continued) BlackRock Cash Funds: Institutional

	Select
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0002			0.0007			0.0014			0.0010			0.0014
Net realized gain		0.0001			0.0000	1		—			—			—
Net increase from investment operations		0.0003			0.0007			0.0014			0.0010			0.0014
Distributions from:2
Net investment income		(0.0002	)		(0.0007	)		(0.0014	)		(0.0010	)		(0.0014	)
Net realized gain		(0.0001	)		(0.0000	)3		—			—			—
Total distributions		(0.0003	)		(0.0007	)		(0.0014	)		(0.0010	)		(0.0014	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return4
Based on net asset value		0.03%			0.07%			0.14%			0.10%			0.14%
Ratios to Average Net Assets5
Total expenses		0.22%	6		0.22%	6		0.22%	6		0.22%	6		0.25%
Total expenses after fees waived and/or reimbursed		0.20%	6		0.20%	6		0.20%	6		0.20%	6		0.20%
Net investment income		0.03%	6		0.06%	6		0.14%	6		0.09%	6		0.13%
Supplemental Data
Net assets, end of year (000)	$	109		$	4,324		$	11,459		$	44,788		$	29,944

¹  Amount is less than $0.00005 per share.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁴  Where applicable, assumes the reinvestment of 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 year ended December 31, 2010, which includes 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, 2014

Financial Highlights (continued) BlackRock Cash Funds: Institutional

	SL Agency
	Year Ended December 31,
	2014			2013			2012			2011			2010
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			0.0018			0.0025			0.0021			0.0025
Net realized gain		0.0001			0.0000	1		—			—			—
Net increase from investment operations		0.0014			0.0018			0.0025			0.0021			0.0025
Distributions from:2
Net investment income		(0.0013	)		(0.0018	)		(0.0025	)		(0.0021	)		(0.0025	)
Net realized gain		(0.0001	)		(0.0000	)3		—			—			—
Total distributions		(0.0014	)		(0.0018	)		(0.0025	)		(0.0021	)		(0.0025	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return4
Based on net asset value		0.14%			0.18%			0.25%			0.21%			0.25%
Ratios to Average Net Assets5
Total expenses		0.09%	6		0.09%	6		0.09%	6		0.09%	6		0.12%
Total expenses after fees waived and/or reimbursed		0.09%	6		0.09%	6		0.09%	6		0.09%	6		0.09%
Net investment income		0.14%	6		0.17%	6		0.25%	6		0.20%	6		0.24%
Supplemental Data
Net assets, end of year (000)	$	37,748,773		$	37,867,084		$	33,350,562		$	26,815,279		$	17,938,932

¹  Amount is less than $0.00005 per share.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁴  Where applicable, assumes the reinvestment of 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 year ended December 31, 2010, which includes 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, 2014	17

Financial Highlights (concluded) BlackRock Cash Funds: Institutional

	Trust
	Period January 1, 2014 to November 10, 20141			Year Ended December 31,
				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		0.0000	2		0.0001			0.0000	2		0.0001			0.0001
Net realized gain		0.0000	2		0.0000	2		—			—			—
Net increase from investment operations		0.0000			0.0001			0.0000			0.0001			0.0001
Distributions from:3
Net investment income		(0.0000	)4		(0.0001	)		(0.0000	)4		(0.0001	)		(0.0001	)
Net realized gain		(0.0000	)4		(0.0000	)4		—			—			—
Total distributions		(0.0000	)		(0.0001	)		(0.0000	)		(0.0001	)		(0.0001	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return5
Based on net asset value		0.00%	6		0.01%			—%			0.01%			0.01%
Ratios to Average Net Assets7
Total expenses		0.45%	8,9		0.45%	8		0.45%	8		0.45%	8		0.48%
Total expenses after fees waived and/or reimbursed		0.22%	8,9		0.28%	8		0.34%	8		0.29%	8		0.31%
Net investment income		0.00%	8,9		0.00%	8		0.00%	8		0.00%	8		0.01%
Supplemental Data
Net assets, end of period (000)		—	1	$	547		$	8,215		$	10,640		$	7,776

¹  There were no Trust Shares outstanding from November 11, 2014 through December 31, 2014.

²  Amount is less than $0.00005 per share.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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, which includes 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.
18	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights BlackRock Cash Funds: Prime

	Capital
	Year Ended December 31,
	2014			2013			2012			2011			2010
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			0.0011			0.0018			0.0014			0.0018
Net realized gain		0.0000	1		0.0000	1		—			—			—
Net increase from investment operations		0.0007			0.0011			0.0018			0.0014			0.0018
Distributions from:2
Net investment income		(0.0007	)		(0.0011	)		(0.0018	)		(0.0014	)		(0.0018	)
Net realized gain		(0.0000	)3		(0.0000	)3		—			—			—
Total distributions		(0.0007	)		(0.0011	)		(0.0018	)		(0.0014	)		(0.0018	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return4
Based on net asset value		0.07%			0.11%			0.18%			0.14%			0.18%
Ratios to Average Net Assets5
Total expenses		0.14%	6		0.14%	6		0.14%	6		0.14%	6		0.17%
Total expenses after fees waived and/or reimbursed		0.14%	6		0.14%	6		0.14%	6		0.14%	6		0.14%
Net investment income		0.07%	6		0.10%	6		0.18%	6		0.15%	6		0.17%
Supplemental Data
Net assets, end of period (000)	$	1,747,725		$	1,472,926		$	1,394,794		$	456,657		$	517,988

¹  Amount is less than $0.00005 per share.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁴  Where applicable, assumes the reinvestment of 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 year ended December 31, 2010, which includes 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, 2014	19

Financial Highlights (continued) BlackRock Cash Funds: Prime

	Institutional
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0009			0.0013			0.0020			0.0016			0.0020
Net realized gain		0.0000	1		0.0000	1		—			—			—
Net increase from investment operations		0.0009			0.0013			0.0020			0.0016			0.0020
Distributions from:2
Net investment income		(0.0009	)		(0.0013	)		(0.0020	)		(0.0016	)		(0.0020	)
Net realized gain		(0.0000	)3		(0.0000	)3		—			—			—
Total distributions		(0.0009	)		(0.0013	)		(0.0020	)		(0.0016	)		(0.0020	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return4
Based on net asset value		0.09%			0.13%			0.20%			0.16%			0.20%
Ratios to Average Net Assets5
Total expenses		0.12%	6		0.12%	6		0.12%	6		0.12%	6		0.15%
Total expenses after fees waived and/or reimbursed		0.12%	6		0.12%	6		0.12%	6		0.12%	6		0.12%
Net investment income		0.09%	6		0.12%	6		0.20%	6		0.16%	6		0.20%
Supplemental Data
Net assets, end of year (000)	$	9,074,064		$	5,269,961		$	3,236,082		$	2,282,923		$	3,570,577

¹  Amount is less than $0.00005 per share.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁴  Where applicable, assumes the reinvestment of 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 year ended December 31, 2010, which includes 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, 2014

Financial Highlights (continued) BlackRock Cash Funds: Prime

	Premium
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0004			0.0008			0.0015			0.0011			0.0015
Net realized gain		0.0000	1		0.0000	1		—			—			—
Net increase from investment operations		0.0004			0.0008			0.0015			0.0011			0.0015
Distributions from:2
Net investment income		(0.0004	)		(0.0008	)		(0.0015	)		(0.0011	)		(0.0015	)
Net realized gain		(0.0000	)3		(0.0000	)3		—			—			—
Total distributions		(0.0004	)		(0.0008	)		(0.0015	)		(0.0011	)		(0.0015	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return4
Based on net asset value		0.04%			0.08%			0.15%			0.11%			0.15%
Ratios to Average Net Assets5
Total expenses		0.17%	6		0.17%	6		0.17%	6		0.17%	6		0.20%
Total expenses after fees waived and/or reimbursed		0.17%	6		0.17%	6		0.17%	6		0.17%	6		0.17%
Net investment income		0.04%	6		0.07%	6		0.16%	6		0.11%	6		0.14%
Supplemental Data
Net assets, end of year (000)	$	1,254,768		$	4,669,369		$	3,481,506		$	1,460,178		$	1,232,743

¹  Amount is less than $0.00005 per share.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated expenses and/or net investment income, except the total expenses for the year ended December 31, 2010, which includes 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, 2014	21

Financial Highlights (continued) BlackRock Cash Funds: Prime

	Select
	Period January 1, 2014 to December 21, 20141			Year Ended December 31,
				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		0.0000	2		0.0005			0.0012			0.0008			0.0012
Net realized gain		0.0000	2		0.0000	2		—			—			—
Net increase from investment operations		0.0000			0.0005			0.0012			0.0008			0.0012
Distributions from:3
Net investment income		(0.0000	)4		(0.0050	)		(0.0012	)		(0.0008	)		(0.0012	)
Net realized gain		(0.0000	)4		(0.0000	)4		—			—			—
Total distributions		(0.0000	)		(0.0005	)		(0.0012	)		(0.0008	)		(0.0012	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return5
Based on net asset value		0.00%	6		0.05%			0.12%			0.09%			0.12%
Ratios to Average Net Assets8
Total expenses		0.22%	7,9		0.22%	9		0.22%	9		0.22%	9		0.25%
Total expenses after fees waived and/or reimbursed		0.20%	7,9		0.20%	9		0.20%	9		0.20%	9		0.20%
Net investment income		0.00%	7,9		0.04%	9		0.12%	9		0.08%	9		0.12%
Supplemental Data
Net assets, end of period (000)	$	—	1	$	90		$	10,454		$	69,779		$	80,614

¹  There were no Select Shares outstanding from November 11, 2014 through November 17, 2014, November 18, 2014 through December 18, 2014 and December 22, 2014 through December 31, 2014.

²  Amount is less than $0.00005 per share.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total return.

⁷  Annualized.

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

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

See Notes to Financial Statements.
22	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights (continued) BlackRock Cash Funds: Prime

	SL Agency
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0012			0.0016			0.0023			0.0019			0.0023
Net realized gain		0.0000	1		0.0000	1		—			—			—
Net increase from investment operations		0.0012			0.0016			0.0023			0.0019			0.0023
Distributions from:2
Net investment income		(0.0012	)		(0.0016	)		(0.0023	)		(0.0019	)		(0.0023	)
Net realized gain		(0.0000	)3		(0.0000	)3		—			—			—
Total distributions		(0.0012	)		(0.0016	)		(0.0023	)		(0.0019	)		(0.0023	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return4
Based on net asset value		0.12%			0.16%			0.23%			0.19%			0.23%
Ratios to Average Net Assets5
Total expenses		0.09%	6		0.09%	6		0.09%	6		0.09%	6		0.12%
Total expenses after fees waived and/or reimbursed		0.09%	6		0.09%	6		0.09%	6		0.09%	6		0.09%
Net investment income		0.12%	6		0.15%	6		0.23%	6		0.19%	6		0.22%
Supplemental Data
Net assets, end of year (000)	$	10,615,765		$	5,689,192		$	5,877,464		$	4,830,517		$	3,696,051

¹  Amount is less than $0.00005 per share.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated expenses and/or net investment income, except the total expenses for the year ended December 31, 2010, which includes 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, 2014	23

Financial Highlights (concluded) BlackRock Cash Funds: Prime

	Trust
	Period January 1, 2014 to November  10, 20141			Year Ended December 31,
				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		0.0000	2		0.0001			0.0000	2		0.0000	2		0.0001
Net realized gain		0.0000	2		0.0000	2		—			—			—
Net increase from investment operations		0.0000			0.0001			0.0000			0.0000			0.0001
Distributions from:3
Net investment income		(0.0000	)4		(0.0001	)		(0.0000	)4		(0.0000	)4		(0.0001	)
Net realized gain		(0.0000	)4		(0.0000	)4		—			—			—
Total distributions		(0.0000	)		(0.0001	)		(0.0000	)		(0.0000	)		(0.0001	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return5
Based on net asset value		0.00%	6		0.01%			0.00%			0.00%			0.01%
Ratios to Average Net Assets8
Total expenses		0.45%	7,9		0.45%	9		0.45%	9		0.45%	9		0.48%
Total expenses after fees waived and/or reimbursed		0.20%	7,9		0.24%	9		0.32%	9		0.28%	9		0.29%
Net investment income		0.00%	7,9		0.00%	9		0.00%	9		0.01%	9		0.01%
Supplemental Data
Net assets, end of period (000)	$	—	1	$	8,086		$	21,702		$	29,657		$	37,044

¹  There were no Trust Shares outstanding from November 11, 2014 through December 31, 2014.

²  Amount is less than $0.00005 per share.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total return.

⁷  Annualized.

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

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

See Notes to Financial Statements.
24	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights BlackRock Cash Funds: Treasury

	Capital
	Period January 1, 2014 to November  10, 20141			Year Ended December 31,
				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		—			0.0001			0.0002			0.0004			0.0007
Net realized gain		0.0000	2		0.0000	2		—			—			—
Net increase from investment operations		0.0000			0.0001			0.0002			0.0004			0.0007
Distributions from:3
Net investment income		—			(0.0001	)		(0.0002	)		(0.0004	)		(0.0007	)
Net realized gain		(0.0000	)4		(0.0000	)4		—			—			—
Total distributions		(0.0000	)		(0.0001	)		(0.0002	)		(0.0004	)		(0.0007	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return5
Based on net asset value		0.00%	6		0.01%			0.02%			0.04%			0.07%
Ratios to Average Net Assets7
Total expenses		0.13%	8,9		0.14%	10		0.14%	10		0.14%	8		0.17%
Total expenses after fees waived and/or reimbursed		0.06%	8,9		0.12%	10		0.13%	10		0.10%	8		0.12%
Net investment income		0.00%	8,9		0.00%	10		0.02%	10		0.01%	8		0.06%
Supplemental Data
Net assets, end of period (000)		—	1	$	715		$	273,121		$	18,370		$	139,657

¹  There were no outstanding Capital Shares from November 11, 2014 through December 31, 2014.

² Amount is less than $0.00005 per share.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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, which includes gross expenses.

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

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, 2014	25

Financial Highlights (continued) BlackRock Cash Funds: Treasury

	Institutional
	Year Ended December 31,
	2014			2013			2012			2011			2010
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
Net realized gain		0.0000	1		0.0000	1		—			—			—
Net increase from investment operations		0.0000			0.0001			0.0002			0.0004			0.0009
Distributions from:2
Net investment income		—			(0.0001	)		(0.0002	)		(0.0004	)		(0.0009	)
Net realized gain		(0.0000	)3		(0.0000	)3		—			—			—
Total distributions		(0.0000	)		(0.0001	)		(0.0002	)		(0.0004	)		(0.0009	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return4
Based on net asset value		0.00%			0.01%			0.02%			0.04%			0.09%
Ratios to Average Net Assets5
Total expenses		0.17%	6		0.12%	7		0.12%	7		0.12%	6		0.16%
Total expenses after fees waived and/or reimbursed		0.06%	6		0.10%	7		0.11%	7		0.11%	6		0.11%
Net investment income		0.00%	6		0.01%	7		0.02%	7		0.03%	6		0.08%
Supplemental Data
Net assets, end of year (000)	$	4		$	4		$	4		$	8,941		$	124,791

¹  Amount is less than $0.00005 per share.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁴  Where applicable, assumes the reinvestment of 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 year ended December 31, 2010, which includes 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.
26	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights (continued) BlackRock Cash Funds: Treasury

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

¹  There were no Premium Shares outstanding during the fiscal years ended December 31, 2012, December 31, 2013 and December 31, 2014, 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  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁶ Where applicable, assumes the reinvestment of distributions.

⁷ Aggregate total 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, 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, 2014	27

Financial Highlights (continued) BlackRock Cash Funds: Treasury

	Select
	Period January 1, 2014 to December 22, 20141			Year Ended December 31,
				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		—			0.0001			0.0000	2		0.0003			0.0003
Net realized gain		0.0000	2		0.0000	2		—			—			—
Net increase from investment operations		0.0000			0.0001			0.0000			0.0003			0.0003
Distributions from:3
Net investment income		—			(0.0001	)		(0.0000	)4		(0.0003	)		(0.0003	)
Net realized gain		(0.0000	)4		(0.0000	)4		—			—			—
Total distributions		(0.0000	)		(0.0001	)		(0.0000	)		(0.0003	)		(0.0003	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return5
Based on net asset value		0.00%	6		0.01%			0.00%			0.03%			0.03%
Ratios to Average Net Assets7
Total expenses		0.21%	8,9		0.21%	8		0.22%	10		0.21%	8		0.25%
Total expenses after fees waived and/or reimbursed		0.06%	8,9		0.09%	8		0.15%	10		0.08%	8		0.12%
Net investment income		0.00%	8,9		0.00%	8		0.00%	10		0.00%	8		0.04%
Supplemental Data
Net assets applicable, end of year (000)		—	1	$	10,398		$	10,543		$	13,119		$	288

¹  There were no Select Shares outstanding from December 22, 2014 through December 31, 2014.

²  Amount is less than $0.00005 per share.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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, which includes gross expenses.

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

⁹ Annualized.

¹⁰ 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, 2014

Financial Highlights (continued) BlackRock Cash Funds: Treasury

	SL Agency
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		—			0.0002			0.0006			0.0005			0.0011
Net realized gain		0.0000	1		0.0000	1		—			—			—
Net increase from investment operations		0.0000			0.0002			0.0006			0.0005			0.0011
Distributions from:2
Net investment income		—			(0.0002	)		(0.0006	)		(0.0005	)		(0.0011	)
Net realized gain		(0.0000	)3		(0.0000	)3		—			—			—
Total distributions		(0.0000	)		(0.0002	)		(0.0006	)		(0.0005	)		(0.0011	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return4
Based on net asset value		0.00%			0.02%			0.06%			0.05%			0.12%
Ratios to Average Net Assets5
Total expenses		0.08%	6		0.08%	6		0.09%	7		0.09%	6		0.13%
Total expenses after fees waived and/or reimbursed		0.06%	6		0.07%	6		0.09%	7		0.08%	6		0.08%
Net investment income		0.00%	6		0.01%	6		0.06%	7		0.03%	6		0.11%
Supplemental Data
Net assets, end of year (000)	$	2,385,787		$	1,548,187		$	1,525,904		$	682,865		$	1,457,943

¹  Amount is less than $0.00005 per share.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁴  Where applicable, assumes the reinvestment of 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 year ended December 31, 2010, which includes gross expenses.

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

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

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	29

Financial Highlights (concluded) BlackRock Cash Funds: Treasury

	Trust
	Period January 1, 2014 to November 10, 20141			Year Ended December 31,
				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		—			0.0001			0.0000	2		0.0003			0.0002
Net realized gain		0.0000	2		0.0000	2		—			—			—
Net increase from investment operations		0.0000			0.0001			0.0000			0.0003			0.0002
Distributions from:3
Net investment income		—			(0.0001	)		(0.0000	)4		(0.0003	)		(0.0002	)
Net realized gain		(0.0000	)4		(0.0000	)4		—			—			—
Total dividends and distributions		(0.0000	)		(0.0001	)		(0.0000	)		(0.0003	)		(0.0002	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return5
Based on net asset value		0.00%	6		0.01%			0.00%			0.03%			0.02%
Ratios to Average Net Assets7
Total expenses		0.44%	8,9		0.44%	8		0.45%	10		0.45%	8		0.48%
Total expenses after fees waived and/or reimbursed		0.06%	8,9		0.09%	8		0.15%	10		0.10%	8		0.16%
Net investment income		0.00%	8,9		0.00%	8		0.00%	10		0.00%	8		0.02%
Supplemental Data
Net assets, end of year (000)	$	—	1	$	25,914		$	15,407		$	23,597		$	12,999

¹  There were no Trust shares outstanding from November 11, 2014 through December 31, 2014.

²  Amount is less than $0.00005 per share.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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, which includes gross expenses.

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

⁹  Annualized.

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

See Notes to Financial Statements.
30	BLACKROCK FUNDS III	DECEMBER 31, 2014

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 the accompanying notes relate to three series of the Trust: 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 the Master Investment Portfolio (“MIPS”): Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio (each a “Master Portfolio”) and together, (the Master Portfolios”). MIPs is an affiliate of the Trust. Each Master 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 performance of each Fund is directly affected by the performance of its corresponding Master Portfolio. At December 31, 2014, the percentage of the Master Portfolio owned by the corresponding Fund was 98.0% for Institutional, 95.4% for Prime and 61.9% for Treasury. As such, 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.

Each Fund offers the following classes of shares: Institutional Shares, Select Shares, SL Agency Shares, Capital Shares and Premium Shares. 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 Funds’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Trust:

Valuation: U.S. 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. It is each Fund’s policy to fair value its financial instruments at market value. Each Fund records its investment in the 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 and unrealized gains and losses are allocated daily to

each class based on its relative net assets.

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

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

BLACKROCK FUNDS III DECEMBER 31, 2014 31

Notes to Financial Statements (continued) BlackRock Funds III

extraordinary expenses and certain other 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:

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

¹  There were no shares outstanding as of December 31, 2014.

For the year ended December 31, 2014, the administration fees, which are included in administration — class specific in the Statements of Operations, for each class of each Fund are as follows:

	Institutional		Prime		Treasury
Aon Captives	$	4,077		N/A		N/A
Capital		—	$	916,690	$	505
Institutional	$	1,150,939	$	3,102,375	$	4
Premium		—	$	1,669,866		—
Select	$	350	$	1,682	$	14,552
SL Agency	$	7,927,906	$	1,511,245	$	346,066
Trust	$	1,161	$	23,258	$	83,426

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, 2015. 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, 2015. 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, 2014, BAL waived administration fees for the Funds as follows:

	Institutional		Prime		Treasury
Aon Captives	$	20		N/A		N/A
Capital		—		—	$	500
Institutional		—		—	$	4
Premium		—		—		—
Select	$	47	$	230	$	14,433
SL Agency		—		—	$	324,393
Trust	$	693	$	15,029	$	83,157

As of December 31, 2014, 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.

32 BLACKROCK FUNDS III DECEMBER 31, 2014

Notes to Financial Statements (continued) BlackRock Funds III

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

4. Income Tax Information:

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 their taxable income to their shareholders. Therefore, no federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns remains open for the four years ended December 31, 2014. 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 Funds’ facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of December 31, 2014, the following permanent difference attributable to the reclassification of distributions was reclassified to the following accounts:

	Treasury
Undistributed net investment income	$	(324	)
Accumulated net realized gain	$	324

The tax character of distributions paid during the fiscal year ended December 31, 2014 and December 31, 2013 was as follows:

		Institutional		Prime		Treasury
Ordinary income	12/31/14	$	59,552,727	$	16,201,904	$	59,014
	12/31/13	$	72,293,689	$	17,136,363	$	351,357
Long-term capital gains	12/31/13	$	545,377	$	138,858		—
	12/31/14	$	1		—		—
Total	12/31/14	$	59,552,728	$	16,201,904	$	59,014
	12/31/13	$	72,839,066	$	17,275,221	$	351,357

As of December 31 2014, the tax components of accumulated net earnings were as follows:

	Institutional		Prime		Treasury
Undistributed ordinary income	$	1,279,070	$	352,057	$	7,658

5. Principal Risks:

On July 23, 2014, the U.S. Securities and Exchange Commission adopted amendments to money market fund regulations, which structurally change the way certain money market funds will be required to operate. These amendments are generally not effective until sometime in 2016, but when implemented may affect the Funds’ operations and return potential.

6. Capital Share Transactions:

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

Transactions in capital shares for each class were as follows:

	Year Ended December 31,
Institutional	2014			2013
Aon Captives
Shares sold		863			3,789
Shares issued in reinvestment of distributions		9			638
Shares redeemed		(1,168,184	)		(1,839,786	)
Net decrease		(1,167,312	)		(1,835,359	)
Premium
Shares sold		—			—
Shares issued in reinvestment of distributions		—			—
Shares redeemed		—			—
Net increase (decrease)		—			—

BLACKROCK FUNDS III DECEMBER 31, 2014 33

Notes to Financial Statements (continued) BlackRock Funds III

	Year Ended December 31,
Institutional (concluded)	2014			2013
Institutional
Shares sold		24,174,318,747			20,888,926,098
Shares issued in reinvestment of distributions		1,530,102			3,726,894
Shares redeemed		(24,727,616,848	)		(19,301,551,219	)
Net increase (decrease)		(551,767,999	)		1,591,101,773
Select
Shares sold		59,051			7,547,612
Shares issued in reinvestment of distributions		69			2,542
Shares redeemed		(4,274,228	)		(14,685,554	)
Net decrease		(4,215,108	)		(7,135,400	)
SL Agency
Shares sold		75,649,211,014			94,394,053,374
Shares issued in reinvestment of distributions		5,745			661
Shares redeemed and automatic conversion of shares		(75,767,214,636	)		(89,877,412,805	)
Net increase (decrease)		(117,997,877	)		4,516,641,230
Trust
Shares sold		491,932			1,185,699
Shares issued in reinvestment of distributions		—			63
Shares redeemed and automatic conversion of shares		(1,038,529	)		(8,854,744	)
Net decrease		(546,597	)		(7,668,982	)
Total Net Increase (Decrease)		(675,694,893	)		6,091,103,262
Prime
Capital
Shares sold		19,558,369,648			28,341,001,132
Shares issued in reinvestment of distributions		747,799			750,392
Shares redeemed		(19,284,321,993	)		(28,263,633,216	)
Net increase		274,795,454			78,118,308
Institutional
Shares sold		90,953,147,912			43,747,600,396
Shares issued in reinvestment of distributions		2,041,048			1,976,183
Shares redeemed		(87,151,135,023	)		(41,715,898,683	)
Net increase		3,804,053,937			2,033,677,896
Premium
Shares sold		91,004,079,422			26,893,853,413
Shares issued in reinvestment of distributions		289,235			845,551
Shares redeemed		(94,418,933,588	)		(25,706,683,546	)
Net increase (decrease)		(3,414,564,931	)		1,188,015,418
Select
Shares sold		185,549,826			309,691,200
Shares issued in reinvestment of distributions		117			3,782
Shares redeemed		(185,639,776	)		(320,058,938	)
Net decrease		(89,833	)		(10,363,956	)
SL Agency
Shares sold		9,947,000,412			6,019,269,244
Shares issued in reinvestment of distributions		79			188
Shares redeemed and automatic conversion of shares		(5,020,488,361	)		(6,207,632,067	)
Net increase (decrease)		4,926,512,130			(188,362,635	)

34 BLACKROCK FUNDS III DECEMBER 31, 2014

Notes to Financial Statements (concluded) BlackRock Funds III

	Year Ended December 31,
Prime (concluded)	2014			2013
Trust
Shares sold		1,137,434			11,023,331
Shares issued in reinvestment of distributions		37			1,046
Shares redeemed and automatic conversion of shares		(9,223,528	)		(24,641,122	)
Net decrease		(8,086,057	)		(13,616,745	)
Total Net Increase		5,582,620,700			3,087,468,286
Treasury
Capital
Shares sold		20,717,143			374,248,441
Shares issued in reinvestment of distributions		12			2,088
Shares redeemed		(21,432,458	)		(646,660,567	)
Net decrease		(715,303	)		(272,410,038	)
Institutional
Shares sold		—			45,000,000
Shares issued in reinvestment of distributions		—			344
Shares redeemed		—			(45,000,344	)
Net increase (decrease)		—			—
Premium
Shares sold		—			—
Shares issued in reinvestment of distributions		—			—
Shares redeemed		—			—
Net increase (decrease)		—			—
Select
Shares sold		143,550,647			32,535,021
Shares issued in reinvestment of distributions		97			1,143
Shares redeemed		(153,948,584	)		(32,684,337	)
Net decrease		(10,397,840	)		(148,173	)
SL Agency
Shares sold		52,795,170,781			50,235,417,155
Shares issued in reinvestment of distributions		2,784			14,904
Shares redeemed and automatic conversion of shares		(51,957,574,256	)		(50,213,111,304	)
Net increase		837,599,309			22,320,755
Trust
Shares sold		25,872,237			38,558,851
Shares issued in reinvestment of distributions		256			2,827
Shares redeemed and automatic conversion of shares		(51,786,153	)		(28,055,613	)
Net increase (decrease)		(25,913,660	)		10,506,065
Total Net Increase (Decrease)		800,572,506			(239,731,391	)

7. Subsequent Events:

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

BLACKROCK FUNDS III DECEMBER 31, 2014 35

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: 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: Institutional, BlackRock Cash Funds: Prime and BlackRock Cash Funds: Treasury (the “Funds”), each a series of BlackRock Funds III, at December 31, 2014, 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 19, 2015

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by Institutional, Prime and Treasury for the taxable year ended December 31, 2014.

Interest Related Dividends and Qualified Short-Term Capital Gains for Non-US Residents1
	Months Paid
	January —December 2014
Institutional		80.20%
Prime		78.26%
Treasury		100.00%
Federal Obligation Interest2
Institutional		1.68%
Prime		1.02%
Treasury		0.00%

¹  Represents the portion of the taxable ordinary dividends eligible for exemption from U.S. 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.

36 BLACKROCK FUNDS III DECEMBER 31, 2014

Master Portfolio Information as of December 30, 2014 Master Investment Portfolio

Money Market Master Portfolio

Portfolio Composition	Percent of Net Assets
Certificates of Deposit		34	%
Commercial Paper		32
Repurchase Agreements		19
Time Deposits		8
U.S. Government Sponsored Agency Obligations		4
U.S. Treasury Obligations		3
Corporate Notes		1
Liabilities in Excess of Other Assets		(1	)
Total		100	%

Prime Money Market Master Portfolio

Portfolio Composition	Percent of Net Assets
Commercial Paper		40	%
Certificates of Deposit		21
Repurchase Agreements		20
Time Deposits		11
U.S. Government Sponsored Agency Obligations		4
U.S. Treasury Obligations		2
Corporate Notes		1
Other Assets Less Liabilities		1
Total		100	%

Treasury Money Market Master Portfolio

Portfolio Composition	Percent of Net Assets
Repurchase Agreements		61	%
U.S. Treasury Obligations		39
Total		100	%

BLACKROCK FUNDS III DECEMBER 31, 2014 37

Schedule of Investments December 31, 2014 Money Market Master Portfolio (Percentages shown are based on Net Assets)

Certificates of Deposit	Par   (000)		Value
Domestic — 0.9%
State Street Bank & Trust (a):
0.28%, 10/01/15	$	149,000	$	149,000,000
0.28%, 10/23/15		215,250		215,250,000
				364,250,000
Yankee (b) — 32.8%
Australia & New Zealand Banking Group Ltd., 0.24%, 2/25/15 (a)		137,000		137,000,000
Bank of America N.A.:
0.25%, 3/02/15		200,000		200,000,000
0.26%, 5/26/15		186,500		186,500,000
Bank of Montreal, Chicago (a):
0.23%, 1/08/15		177,000		177,000,717
0.24%, 2/20/15		110,000		110,000,000
0.24%, 6/03/15		105,000		105,001,320
0.24%, 7/06/15		100,000		100,002,854
0.25%, 7/21/15		150,000		150,000,000
0.96%, 8/07/15		75,000		75,000,000
0.25%, 10/13/15		100,000		100,000,000
0.27%, 12/10/15		200,000		200,000,000
Bank of Nova Scotia, Houston (a):
0.24%, 7/09/15		150,000		150,000,000
0.68%, 9/11/15		45,885		46,012,449
0.23%, 11/06/15		65,000		65,000,000
Bank of Tokyo-Mitsubishi UFJ Ltd., 0.13%, 1/06/15		325,000		325,000,000
BNP Paribas SA, New York:
0.29%, 1/15/15		200,000		200,000,000
0.29%, 1/26/15		200,000		200,000,000
Canadian Imperial Bank of Commerce, New York:
0.22%, 2/09/15		71,000		70,999,992
0.24%, 5/20/15 (a)		55,000		55,000,000
0.32%, 6/01/15 (a)		553,015		553,015,000
0.23%, 6/17/15 (a)		75,000		75,000,000
0.25%, 8/21/15 (a)		48,685		48,683,453
0.26%, 10/21/15 (a)		150,000		150,000,000
Citibank NA, New York, 0.20%, 1/06/15		300,000		300,002,080
Credit Industriel et Commercial, New York:
0.30%, 4/16/15		152,250		152,250,000
0.30%, 5/15/15		225,000		225,000,000
Mitsubishi UFJ Trust & Banking Corp., New York:
0.25%, 1/07/15		100,000		100,000,000
0.25%, 1/08/15		100,000		100,000,000
0.26%, 3/10/15		500,000		500,000,000
0.25%, 4/02/15		100,000		100,000,000
0.25%, 5/12/15		25,000		25,000,000
Mizuho Bank Ltd., New York:
0.21%, 2/17/15		100,000		100,000,000
0.25%, 2/27/15		100,000		100,000,000
0.25%, 4/14/15		300,000		300,000,000
0.25%, 4/21/15		250,000		250,000,000
0.25%, 4/23/15		150,000		150,000,000
0.25%, 5/11/15		200,000		200,000,000
National Bank of Canada, New York (a):
0.33%, 3/11/15		244,900		244,900,000
0.26%, 6/19/15		218,500		218,500,000
0.30%, 9/24/15		265,000		265,000,000
Natixis, New York:
0.25%, 2/02/15		406,750		406,750,000
0.26%, 3/02/15		230,000		230,000,000
Nordea Bank Finland PLC, New York, 0.24%, 2/17/15		150,000		150,000,000
Rabobank Nederland, New York:
0.29%, 3/17/15 (a)		511,000		511,000,000
0.29%, 6/12/15 (a)		279,000		279,000,000
0.27%, 8/18/15		135,500		135,500,000
Certificates of Deposit	Par   (000)		Value
Yankee (b) — (concluded)
Royal Bank of Canada, New York (a):
0.30%, 1/21/15		82,500		82,500,000
0.24%, 3/13/15		300,000		300,000,000
0.30%, 3/23/15		200,000		200,000,000
0.25%, 10/14/15		127,900		127,900,000
0.25%, 11/10/15		65,000		65,000,000
Societe Generale, New York, 0.25%, 2/02/15		240,000		240,000,000
Sumitomo Mitsui Banking Corp., New York:
0.13%, 1/06/15		325,000		325,000,000
0.25%, 1/16/15		78,000		77,999,350
0.25%, 2/25/15		175,000		175,000,000
0.25%, 3/05/15		400,000		400,000,000
0.25%, 4/02/15		200,000		200,000,000
Sumitomo Mitsui Trust Bank Ltd., New York:
0.25%, 1/05/15		200,000		200,000,000
0.26%, 2/06/15		250,000		250,000,000
0.26%, 2/20/15		200,000		200,000,000
Toronto-Dominion Bank, New York:
0.23%, 1/26/15		200,000		200,000,000
0.24%, 4/22/15		185,000		185,000,000
0.30%, 8/10/15		200,000		200,000,000
0.24%, 10/06/15 (a)		50,000		50,000,000
0.25%, 11/10/15 (a)		135,000		135,000,000
UBS AG, Stamford, 0.28%, 3/05/15 (a)		358,000		358,000,000
Wells Fargo Bank NA (a):
0.30%, 2/12/15		100,000		100,000,000
0.30%, 2/17/15		150,000		150,000,000
0.25%, 7/09/15		134,000		134,000,000
Wells Fargo Bank NA (a)
0.27%, 9/08/15		150,000		150,000,000
0.29%, 11/30/15		132,924		132,924,000
0.29%, 12/08/15		102,750		102,750,000
Westpac Banking Corp., New York, 0.26%, 10/28/15 (a)		150,000		150,000,000
				13,413,191,215
Total Certificates of Deposit — 33.7%				13,777,441,215
Commercial Paper
Alpine Securitization Corp., 0.26%, 4/02/15 (c)		100,000		99,934,278
ANZ New Zealand International Ltd. (a):
0.28%, 9/08/15		142,500		142,500,000
0.27%, 10/01/15 (d)		150,000		150,000,000
0.27%, 11/05/15 (d)		200,000		200,000,000
Australia & New Zealand Banking Group Ltd. (a):
0.23%, 3/05/15		91,000		91,000,000
0.26%, 4/28/15		100,000		100,000,000
0.25%, 5/08/15		75,000		75,000,000
0.25%, 5/12/15 (d)		75,000		75,000,000
0.25%, 11/13/15		100,000		100,000,000
Bank of Nova Scotia (The) (c):
0.25%, 3/24/15		150,000		149,914,583
0.26%, 8/03/15		125,000		124,806,806
0.27%, 8/21/15		75,000		74,871,917
Barclays Bank PLC, 0.25%, 1/06/15 (c)		100,000		99,996,528
Barton Capital LLC., 0.20%, 2/10/15 (c)		75,000		74,983,333
Bedford Row Funding Corp.:
0.26%, 3/12/15 (a)		62,500		62,500,000
0.30%, 8/05/15 (c)(d)		100,000		99,820,000
0.27%, 10/01/15 (a)(d)		7,000		7,000,000
0.29%, 11/20/15 (a)		24,750		24,750,000
BNP Paribas Finance, Inc. (c):
0.26%, 1/05/15		150,000		149,995,667
0.27%, 3/09/15		150,000		149,924,625
0.30%, 4/06/15		113,500		113,410,146

See Notes to Financial Statements.

38 BLACKROCK FUNDS III DECEMBER 31, 2014

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

Commercial Paper	Par   (000)		Value
BPCE, 0.19%, 1/02/15 (c)	$	200,000	$	199,998,944
Chariot Funding LLC (c):
0.27%, 7/02/15 (d)		73,850		73,749,195
0.28%, 8/27/15		40,000		39,925,956
Charta LLC (c):
0.24%, 1/05/15		100,000		99,997,333
0.25%, 2/04/15		50,000		49,988,194
Collateralized Commercial Paper Co. LLC (c):
0.30%, 1/15/15		200,000		199,976,667
0.26%, 2/02/15		150,000		149,965,556
0.29%, 2/20/15		100,000		99,959,722
0.39%, 5/21/15		113,410		113,237,995
0.38%, 6/22/15		100,000		99,818,444
Commonwealth Bank of Australia (a):
0.24%, 3/19/15 (d)		180,000		179,996,290
0.24%, 3/30/15 (d)		150,000		150,000,000
0.24%, 5/18/15		143,000		143,007,592
0.25%, 6/15/15 (d)		210,000		210,000,000
0.24%, 7/20/15		110,000		109,997,427
0.25%, 7/23/15 (d)		100,000		99,997,181
0.25%, 10/23/15		155,000		155,000,000
0.26%, 10/29/15		72,000		71,994,610
CRC Funding LLC (c):
0.25%, 2/04/15		100,000		99,976,389
0.25%, 5/04/15		20,000		19,982,917
0.25%, 5/08/15		25,000		24,977,951
Credit Suisse, New York, 0.26%, 3/03/15 (c)		350,000		349,845,805
DBS Bank, Ltd., 0.23%, 3/25/15 (c)		81,700		81,656,676
DNB Bank ASA (c):
0.23%, 3/03/15		150,000		149,941,542
0.22%, 4/01/15		150,000		149,915,625
0.23%, 4/07/15		175,000		174,892,667
0.23%, 4/28/15		100,000		99,925,250
Electricite de France, 0.16%, 1/02/15 (c)		124,000		123,999,449
Gemini Securitization Corp., 0.21%, 1/02/15 (c)		100,000		99,999,417
General Electric Capital Corp. (c):
0.24%, 6/11/15		101,500		101,391,057
0.24%, 6/12/15		175,000		174,811,000
0.25%, 7/27/15		150,000		149,784,375
HSBC Bank PLC (a):
0.23%, 5/07/15		135,000		135,000,000
0.23%, 5/08/15		66,500		66,500,000
0.23%, 7/06/15		175,000		175,000,000
0.25%, 10/16/15		219,000		219,000,156
0.25%, 10/23/15 (d)		119,500		119,500,000
ING US Funding LLC (c):
0.21%, 3/03/15		200,000		199,928,833
0.22%, 3/05/15		224,100		224,013,721
0.23%, 3/09/15		66,800		66,771,406
0.23%, 4/07/15		250,000		249,846,667
Jupiter Securitization Co. LLC, 0.28%, 8/27/15 (c)		45,000		44,916,700
Kells Funding LLC (a):
0.24%, 1/07/15 (d)		175,000		174,999,949
0.21%, 1/27/15 (d)		100,000		99,999,626
0.24%, 3/25/15		100,000		100,000,000
0.24%, 3/27/15 (d)		78,000		78,000,000
0.24%, 4/10/15 (d)		100,000		100,000,000
0.24%, 4/16/15 (d)		39,250		39,252,213
0.24%, 4/23/15 (d)		165,000		165,000,000
0.24%, 10/09/15 (d)		150,000		149,986,600
LMA Americas LLC (c):
0.18%, 1/05/15		125,000		124,997,500
0.23%, 2/12/15 (d)		100,000		99,973,167
Commercial Paper	Par   (000)		Value
Matchpoint Master Trust, 0.32%, 5/27/15 (c)		184,000		183,761,209
Natexis Banques Populaires, 0.20%, 1/06/15 (c)		200,000		199,994,444
National Austalia Funding Delaware, Inc. (a)(d):
0.23%, 8/11/15		150,000		150,000,000
0.23%, 8/18/15		150,000		149,991,258
National Australia Bank Ltd. (a):
0.24%, 11/04/15 (d)		100,000		100,001,032
0.25%, 11/04/15		200,000		200,000,000
0.25%, 11/09/15 (d)		200,000		200,000,000
Nederlandse Waterschapsbank NV, 0.30%, 12/22/15 (a)		50,000		50,000,000
Nordea Bank AB (c):
0.22%, 4/02/15		75,000		74,957,344
0.22%, 4/16/15 (d)		75,000		74,950,781
0.22%, 4/27/15		50,000		49,965,361
0.24%, 7/06/15		150,000		149,810,125
Old Line Funding LLC (c):
0.22%, 3/06/15		50,000		49,980,444
0.22%, 4/17/15 (d)		99,000		98,935,870
0.27%, 6/24/15		50,000		49,934,750
0.27%, 6/25/15		110,000		109,855,625
Skandinaviska Enskilda Banken AB (c):
0.25%, 2/12/15		150,000		149,956,250
0.25%, 2/13/15		150,000		149,955,208
0.26%, 4/02/15 (d)		100,000		99,935,542
0.26%, 4/07/15		50,000		49,966,000
0.26%, 5/04/15		100,000		99,912,875
Sumitomo Mitsui Trust Bank Ltd., 0.26%, 4/06/15 (c)		100,000		99,931,389
Svenska Handelsbanken, Inc., New York (c):
0.22%, 4/01/15		100,000		99,943,750
0.26%, 7/02/15		150,000		149,802,833
Toyota Credit Canada, Inc. (c):
0.30%, 5/06/15		50,000		49,947,917
0.30%, 5/07/15		50,000		49,947,500
0.27%, 7/30/15		55,000		54,913,375
Toyota Motor Credit Corp. (c):
0.23%, 3/09/15		150,000		149,935,792
0.23%, 6/08/15		150,000		149,848,583
0.25%, 7/30/15		45,000		44,934,375
Versailles Commercial Paper LLC, 0.23%, 1/05/15 (c)		100,000		99,997,444
Westpac Banking Corp., New York (a)(d):
0.24%, 3/13/15		60,000		59,998,941
0.24%, 4/09/15		160,000		160,000,000
0.24%, 4/23/15		300,000		300,000,000
0.25%, 7/30/15		150,000		150,000,000
Westpac Securities NZ Ltd., London (a):
0.26%, 1/29/15		100,000		100,000,000
0.27%, 8/13/15 (d)		175,000		175,000,000
Total Commercial Paper — 32.3%				13,181,871,664
Corporate Notes
Bank of Nova Scotia, 3.40%, 1/22/15		75,750		75,881,881
National Australia Bank Ltd., 3.75%, 3/02/15 (d)		22,982		23,111,465
Svenska Handelsbanken AB, 0.31%, 6/15/15 (a)(d)		295,800		295,800,000
Wells Fargo Bank NA, 0.51%, 7/20/15 (a)		49,000		49,072,451
Total Corporate Notes — 1.1%				443,865,797

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2014 39

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

Time Deposits — 7.7%	Par   (000)		Value
DNB Bank ASA, 0.05%, 1/02/15	$	1,300,000	$	1,300,000,000
Natixis, 0.05%, 1/02/15		825,000		825,000,000
Skandinaviska Enskilda Banken AB, 0.05%, 1/02/15		500,000		500,000,000
Svenska Handelsbanken AB, 0.05%, 1/02/15		500,000		500,000,000
Total Time Deposits — 7.7%				3,125,000,000
U.S. Government Sponsored Agency Obligations
Federal Farm Credit Bank (a):
0.22%, 2/24/16		79,750		79,787,538
0.24%, 3/29/16		100,000		99,987,448
0.21%, 8/01/16		75,000		74,987,995
0.13%, 10/03/16		74,500		74,474,463
0.26%, 11/21/16		32,000		32,052,170
0.18%, 1/30/17		150,000		149,936,652
0.21%, 3/24/17		50,000		50,005,982
0.17%, 10/27/17		145,000		144,914,572
Federal Home Loan Bank:
0.08%, 1/16/15 (c)		200,000		199,993,333
0.08%, 2/11/15 - 2/13/15		363,800		363,764,310
0.13%, 6/05/15 (a)		100,000		100,000,000
0.13%, 9/08/15 (a)		100,000		99,989,605
0.14%, 9/17/15 (a)		100,000		99,988,973
0.13%, 5/20/16 (a)		90,000		89,980,921
0.14%, 5/27/16 (a)		35,000		34,992,552
Total U.S. Government Sponsored Agency Obligations — 4.1%				1,694,856,514
U.S. Treasury Obligations — 3.1%
U.S. Treasury Bill (c):
0.15%, 6/25/15		660,000		659,515,055
0.13%, 7/02/15		400,000		399,735,036
U.S. Treasury Notes, 0.09%, 10/31/16 (a)		200,000		199,792,951
Total U.S. Treasury Obligations — 3.1%				1,259,043,042
Repurchase Agreements
BNP Paribas Securities Corp., 0.15%, 1/02/15 (Purchased on 10/7/14 to be repurchased at $166,060,175, collateralized by various Corporate Debt Obligations and U.S. Government Sponsored Agency Obligations, 0.00% to 5.89%, due 1/22/15 to 7/25/48, original par and fair values of $3,099,778,019 and $186,894,292, respectively)		166,000		166,000,000
Total Value of BNP Paribas Securities Corp (collateral value of $186,894,292)				166,000,000
Citigroup Global Markets, Inc., 0.10%, 1/02/15 (Purchased on 9/29/14 to be repurchased at $100,026,389, collateralized by various U.S. Treasury Obligations, 0.13% to 4.25%, due 4/15/17 to 11/15/18, original par and fair values of $101,373,100 and $102,000,070, respectively)		100,000		100,000,000
Total Value of Citigroup Global Markets, Inc. (collateral value of $102,000,070)				100,000,000
Repurchase Agreements	Par   (000)		Value
Credit Suisse Securities (USA) LLC, 0.48%, 1/06/15 (Purchased on 12/30/14 to be repurchased at $194,018,107, collateralized by various Corporate Debt Obligations, 3.63% to 6.00%, due 1/25/54 to 8/25/57, original par and fair values of $244,195,000 and $242,503,640, respectively)		194,000		194,000,000
Credit Suisse Securities (USA) LLC, 0.40%, 1/02/15 (Purchased on 11/10/14 to be repurchased at $740,435,778, collateralized by various Corporate Debt Obligations and U.S. Government Sponsored Agency Obligations, 0.00% to 19.64%, due 2/25/17 to 8/28/57, original par and fair values of $4,600,688,119 and $922,002,401, respectively)		740,000		740,000,000
Credit Suisse Securities (USA) LLC, 0.50%, 2/04/15 (Purchased on 3/25/13 to be repurchased at $151,418,750, collateralized by various Corporate Debt Obligations, 0.00% to 6.00%, due 3/31/38 to 8/25/57, original par and fair values of $315,829,176 and $187,501,870, respectively) (e)		150,000		150,000,000
Credit Suisse Securities (USA) LLC, 0.50%, 2/04/15 (Purchased on 3/25/13 to be repurchased at $252,364,583, collateralized by various Corporate Debt Obligations, 0.00% to 6.00%, due 3/31/38 to 8/25/57, original par and fair values of $526,381,959 and $312,503,116, respectively) (e)		250,000		250,000,000
Total Value of Credit Suisse Securities (USA) LLC (collateral value of $1,664,511,027)				1,334,000,000
Federal Reserve Bank of New York, 0.05%, 1/02/15 (Purchased on 12/31/14 to be repurchased at $1,400,003,889, collateralized by a U.S. Treasury Obligation, 4.75%, due 2/15/41, original par and fair value of $990,714,500 and $1,400,003,923, respectively)		1,400,000		1,400,000,000
Federal Reserve Bank of New York, 0.10%, 1/06/15 (Purchased on 12/22/14 to be repurchased at $1,000,041,667, collateralized by various U.S. Treasury Obligations, 1.63% to 4.50%, due 10/31/18 to 8/15/20, original par and fair values of $988,253,700 and $1,002,674,665, respectively) (e)		1,000,000		1,000,000,000
Federal Reserve Bank of New York, 0.10%, 1/06/15 (Purchased on 12/29/14 to be repurchased at $500,011,111, collateralized by a U.S. Treasury Obligation, 3.88%, due 5/15/18, original par and fair value of $459,233,900 and $501,140,846, respectively) (e)		500,000		500,000,000
Total Value of Federal Reserve Bank of New York (collateral value of $2,903,819,434)				2,900,000,000
Goldman Sachs & Co., 0.16%, 1/05/15 (Purchased on 12/29/14 to be repurchased at $280,008,711, collateralized by various U.S. Government Sponsored Agency Obligations, 3.21% to 6.51%, due 10/15/35 to 12/15/53, original par and fair values of $1,508,952,650 and $299,600,000, respectively)		280,000		280,000,000

See Notes to Financial Statements.

40 BLACKROCK FUNDS III DECEMBER 31, 2014

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

Repurchase Agreements	Par   (000)		Value
Goldman Sachs & Co., 0.16%, 1/07/15 (Purchased on 12/31/14 to be repurchased at $582,018,107, collateralized by various U.S. Government Sponsored Agency Obligations, 0.00% to 17.13%, due 6/25/18 to 10/15/49, original par and fair values of $14,888,799,376 and $626,185,549, respectively)	$	582,000	$	582,000,000
Total Value of Goldman Sachs & Co. (collateral value of $925,785,549)				862,000,000
HSBC Securities (USA) Inc., 0.17%, 1/02/15 (Purchased on 8/1/14 to be repurchased at $100,072,722, collateralized by various Corporate Debt Obligations, 4.25% to 9.13%, due 2/15/15 to 11/15/24, original par and fair values of $104,400,000 and $105,002,101, respectively)		100,000		100,000,000
HSBC Securities (USA) Inc., 0.25%, 1/02/15 (Purchased on 3/11/14 to be repurchased at $195,402,188, collateralized by various Corporate Debt Obligations, 0.49% to 6.50%, due 1/02/15 to 8/15/34, original par and fair values of $198,879,000 and $204,370,620, respectively)		195,000		195,000,000
Total Value of HSBC Securities (USA) Inc. (collateral value of $309,372,721)				295,000,000
J.P. Morgan Securities LLC, 0.53%, 2/18/15 (Purchased on 11/19/14 to be repurchased at $126,168,805, collateralized by various Corporate Debt Obligations, 0.00% to 7.38%, due 7/2/19 to 9/1/42, original par and fair values of $309,853,899 and $157,501,510, respectively)		126,000		126,000,000
J.P. Morgan Securities LLC, 0.40%, 1/02/15 (Purchased on 3/25/13 to be repurchased at $60,432,000, collateralized by various Corporate Debt Obligations, 0.30% to 5.48%, due 12/25/31 to 9/25/46, original par and fair values of $242,704,500 and $75,003,744, respectively)		60,000		60,000,000
J.P. Morgan Securities LLC, 0.45%, 2/04/15 (Purchased on 6/12/14 to be repurchased at $150,444,375, collateralized by various Corporate Debt Obligations and U.S. Government Sponsored Agency Obligations, 0.00% to 7.48%, due 5/25/19 to 12/20/54, original par and fair values of $1,865,724,128 and $160,504,474, respectively) (e)		150,000		150,000,000
J.P. Morgan Securities LLC, 0.53%, 2/04/15 (Purchased on 9/22/14 to be repurchased at $150,298,125, collateralized by various Corporate Debt Obligations, 0.24% to 7.62%, due 6/15/28 to 3/25/47, original par and fair values of $459,288,952 and $187,500,100, respectively) (e)		150,000		150,000,000
J.P. Morgan Securities LLC, 0.64%, 4/01/15 (Purchased on 9/22/14 to be repurchased at $150,509,333, collateralized by various Corporate Debt Obligations, 0.00% to 9.19%, due 7/2/20 to 9/25/46, original par and fair values of $464,419,417 and $187,500,860, respectively) (e)		150,000		150,000,000
Repurchase Agreements	Par   (000)		Value
J.P. Morgan Securities LLC, 0.76%, 4/01/15 (Purchased on 11/25/14 to be repurchased at $200,536,222, collateralized by various Corporate Debt Obligations, 0.21% to 6.45%, due 11/15/30 to 2/15/51, original par and fair values of $4,487,994,822 and $240,004,160, respectively) (e)		200,000		200,000,000
Total Value of J.P. Morgan Securities LLC (collateral value of $1,008,014,848)				836,000,000
RBC Capital Markets LLC, 0.12%, 1/02/15 (Purchased on 12/31/14 to be repurchased at $200,001,333, collateralized by various Corporate Debt Obligations, 0.00% to 10.00%, due 1/15/15 to 3/15/87, original par and fair values of $211,363,546 and $210,000,000, respectively)		200,000		200,000,000
RBC Capital Markets LLC, 0.13%, 1/02/15 (Purchased on 3/28/14 to be repurchased at $72,072,800, collateralized by various U.S. Government Sponsored Agency Obligations, 0.00% to 5.25%, due 1/26/15 to 9/15/39, original par and fair values of $73,082,207 and $73,451,690, respectively)		72,000		72,000,000
RBC Capital Markets LLC, 0.13%, 1/02/15 (Purchased on 6/12/14 to be repurchased at $51,037,570, collateralized by various Corporate Debt Obligations, 0.00% to 10.20%, due 10/15/16 to 3/15/87, original par and fair values of $49,683,663 and $53,550,000, respectively)		51,000		51,000,000
Total Value of RBC Capital Markets LLC (collateral value of $337,001,690)				323,000,000
Wells Fargo Securities, LLC, 0.46%, 1/15/15 (Purchased on 10/15/14 to be repurchased at $93,124,344, collateralized by various Corporate Debt Obligations, 0.51% to 9.25%, due 9/15/15 to 6/15/67, original par and fair values of $88,069,129 and $97,665,751, respectively)		93,015		93,015,000
Wells Fargo Securities, LLC, 0.39%, 2/03/15 (Purchased on 11/3/14 to be repurchased at $150,149,500, collateralized by various Corporate Debt Obligations, 0.01% to 10.75%, due 1/15/15 to 5/15/97, original par and fair values of $144,705,015 and $157,500,001, respectively)		150,000		150,000,000
Wells Fargo Securities, LLC, 0.40%, 2/04/15 (Purchased on 11/5/14 to be repurchased at $140,141,556, collateralized by various Corporate Debt Obligations, 0.60% to 10.38%, due 1/15/15 to 1/15/87, original par and fair values of $137,735,685 and $147,000,001, respectively)		140,000		140,000,000
Wells Fargo Securities, LLC, 0.49%, 3/16/15 (Purchased on 12/15/14 to be repurchased at $88,108,998, collateralized by various Corporate Debt Obligations, 0.00% to 4.25%, due 1/05/15 to 5/10/32, original par and fair values of $92,534,867 and $92,583,825, respectively)		88,000		88,000,000

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2014 41

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

Repurchase Agreements	Par   (000)		Value
Wells Fargo Securities, LLC, 0.25%, 1/02/15 (Purchased on 8/5/14 to be repurchased at $320,333,333, collateralized by various Corporate Debt Obligations, 0.00% to 8.89%, due 6/1/17 to 8/15/46, original par and fair values of $535,317,614 and $342,400,000, respectively)	$	320,000	$	320,000,000
Total Value of Wells Fargo Securities, LLC (collateral value of $837,149,578)				791,015,000
Total Repurchase Agreements — 18.6%				7,607,015,000
Total Investments (Cost — $41,089,093,232*) — 100.6%				41,089,093,232
Liabilities in Excess of Other Assets — (0.6)%				(242,406,695	)
Net Assets — 100.0%			$	40,846,686,537

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.

(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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices 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)

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. For information about the Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

As of December 31, 2014, the following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Short-Term Securities1		—	$	41,089,093,232		—	$	41,089,093,232
1    See above Schedule of Investments for values in each security type.

The Master Portfolio may hold assets in which the fair value approximates the carrying amount for financial statement purposes. As of December 31, 2014, cash of $151,431,067 is categorized as Level 1 within the disclosure hierarchy.

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

42 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments December 31, 2014 Prime Money Market Master Portfolio (Percentages shown are based on Net Assets)

Certificates of Deposit	Par   (000)		Value
Domestic — 0.2%
State Street Bank & Trust, 0.28%, 10/01/15 (a)	$	50,000	$	50,000,000
Yankee (b) — 21.3%
Australia & New Zealand Banking Group Ltd., 0.22%, 3/09/15 (a)		100,000		99,999,065
Bank of Montreal, Chicago:
0.23%, 1/08/15 (a)		40,000		40,000,162
0.18%, 2/10/15		100,000		100,000,000
0.19%, 2/17/15		100,000		100,000,000
0.24%, 2/20/15 (a)		40,000		40,000,000
0.24%, 6/03/15 (a)		75,000		75,000,943
0.24%, 7/17/15 (a)		87,000		87,000,000
0.96%, 8/07/15 (a)		75,000		75,000,000
Bank of Nova Scotia:
0.24%, 2/17/15		100,000		100,000,000
0.23%, 3/03/15		100,000		100,000,000
0.24%, 3/19/15		110,000		110,000,000
0.24%, 4/08/15 (a)		50,000		50,000,000
0.23%, 11/06/15 (a)		31,000		31,000,000
Bank of Tokyo-Mitsubishi UFJ Ltd, 0.13%, 1/06/15		175,000		175,000,000
BNP Paribas SA, New York, 0.24%, 2/06/15		100,000		100,000,000
Canadian Imperial Bank of Commerce, New York:
0.22%, 2/09/15		75,000		74,999,993
0.32%, 6/01/15 (a)		162,470		162,470,000
0.23%, 6/17/15 (a)		75,000		75,000,000
0.25%, 8/21/15 (a)		25,000		24,999,205
Credit Industriel et Commercial, New York:
0.30%, 1/02/15		60,000		60,000,000
0.30%, 4/16/15		78,750		78,750,000
0.30%, 5/15/15		135,000		135,000,000
Mitsubishi UFJ Trust & Banking Corp., New York:
0.25%, 1/07/15		100,000		100,000,000
0.26%, 3/10/15		50,000		50,000,000
0.25%, 4/02/15		50,000		50,000,000
0.25%, 5/12/15		50,000		50,000,000
Mizuho Bank Ltd., New York:
0.22%, 2/02/15		75,000		75,000,000
0.22%, 3/05/15		125,000		125,000,000
0.23%, 3/26/15		175,000		175,000,000
0.25%, 5/11/15		50,000		50,000,000
National Bank of Canada, New York (a):
0.26%, 6/19/15		60,000		60,000,000
0.30%, 9/24/15		70,000		70,000,000
Oversea-Chinese Banking Corp, 0.19%, 2/02/15		100,000		100,000,000
Rabobank Nederland, New York (a):
0.29%, 6/12/15		50,000		50,000,000
0.26%, 7/17/15		100,000		100,000,000
Royal Bank of Canada, New York (a):
0.30%, 1/21/15		40,000		40,000,000
0.24%, 3/13/15		50,000		50,000,000
0.25%, 9/03/15		100,000		100,000,000
0.26%, 9/10/15		115,000		115,000,000
0.25%, 10/14/15		50,000		50,000,000
0.25%, 11/10/15		70,000		70,000,000
Sumitomo Mitsui Banking Corp.:
0.22%, 1/02/15		100,000		100,000,000
0.13%, 1/06/15		175,000		175,000,000
0.25%, 2/25/15		125,000		125,000,000
0.21%, 3/09/15		150,000		150,000,000
Svenska Handelsbanken, Inc., New York:
0.22%, 1/16/15		75,000		75,000,156
0.19%, 2/10/15		125,000		125,000,694
Certificates of Deposit	Par   (000)		Value
Yankee (b) (concluded)
Toronto-Dominion Bank, New York:
0.23%, 1/22/15		50,000		50,000,000
0.24%, 4/22/15		125,000		125,000,000
0.27%, 6/01/15		75,000		75,000,000
0.30%, 8/10/15		100,000		100,000,000
0.25%, 9/04/15 (a)		100,000		100,000,000
0.24%, 10/06/15 (a)		50,000		50,000,000
UBS AG, Stamford, 0.28%, 3/05/15 (a)		123,000		123,000,000
Wells Fargo Bank NA (a):
0.30%, 2/12/15		50,000		50,000,000
0.25%, 7/01/15		75,000		75,000,000
0.25%, 7/09/15		100,000		100,000,000
0.29%, 12/08/15		100,000		100,000,000
				5,072,220,218
Total Certificates of Deposit — 21.5%				5,122,220,218
Commercial Paper
Alpine Securitization, 0.26%, 4/02/15 (c)		50,000		49,967,139
Antalis US Funding Corp., 0.23%, 1/06/15 (c)		39,600		39,598,735
Australia & New Zealand Banking International Group Ltd., London (a):
0.25%, 5/08/15		25,000		25,000,000
0.25%, 5/12/15 (d)		25,000		25,000,000
0.25%, 6/04/15		100,000		100,000,000
0.28%, 9/08/15		100,000		100,000,000
0.25%, 11/13/15		100,000		100,000,000
Bank of Nederlandse Gemeenten, 0.21%, 2/13/15 (c)(d)		70,235		70,217,383
Bank of Nova Scotia:
0.25%, 3/24/15 (c)		50,000		49,971,528
0.27%, 4/28/15 (c)		75,000		74,934,188
Barton Capital Corp., 0.20%, 1/07/15 (c)		60,000		59,998,000
Bedford Row Funding Corp. (c):
0.30%, 3/17/15		33,700		33,678,938
0.30%, 8/07/15		100,000		99,788,056
BNP Paribas Finance, Inc. (c):
0.26%, 1/22/15		150,000		149,977,687
0.22%, 3/02/15		100,000		99,963,333
BNZ International Funding Ltd., 0.25%, 1/20/15 (a)		50,000		50,001,866
BPCE, 0.19%, 1/02/15 (c)		100,000		99,999,472
Cafco LLC, 0.24%, 1/05/15 (c)		70,150		70,148,129
Caisse Centrale Desjardins du Quebec, 0.18%, 1/26/15 (c)(d)		100,000		99,987,500
Caisse des Depots et Consignations (c):
0.18%, 2/13/15		40,000		39,991,639
0.23%, 4/17/15		75,000		74,949,208
0.23%, 5/05/15		48,196		48,157,818
0.27%, 6/22/15		50,000		49,935,500
0.27%, 7/08/15		70,000		69,901,300
Chariot Funding LLC (c):
0.25%, 6/09/15		97,800		97,692,012
0.27%, 6/22/15		100,000		99,871,000
0.27%, 6/29/15		50,000		49,932,875
Charta LLC (c):
0.25%, 2/04/15		100,000		99,976,388
0.25%, 2/09/15		50,000		49,986,458
0.25%, 2/17/15		43,000		42,985,965
Collateralized Commercial Paper Co. LLC (c):
0.25%, 1/05/15		100,000		99,997,222
0.21%, 2/25/15		70,000		69,977,542
0.30%, 3/16/15		50,000		49,969,167
0.30%, 5/04/15		50,000		49,948,750

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2014 43

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

Commercial Paper	Par   (000)		Value
Commonwealth Bank of Australia (a):
0.24%, 3/30/15 (d)	$	50,000	$	50,000,000
0.24%, 5/07/15 (d)		25,000		25,000,877
0.24%, 6/29/15 (d)		60,000		60,000,000
0.24%, 7/08/15		75,000		75,000,000
0.24%, 7/20/15		45,000		44,998,947
0.26%, 10/27/15 (d)		100,000		99,992,555
0.26%, 11/19/15		100,000		100,000,000
CPPIB Capital, Inc., 0.30%, 3/26/15 (c)		38,550		38,523,015
CRC Funding LLC, 0.25%, 2/04/15 (c)		50,000		49,988,194
Credit Suisse, New York (c):
0.22%, 1/06/15		100,000		99,996,944
0.26%, 3/03/15		75,000		74,966,958
DBS Bank Ltd. (c):
0.23%, 2/23/15		30,000		29,989,842
0.23%, 3/16/15		150,000		149,929,083
0.24%, 4/02/15		95,720		95,661,930
0.23%, 5/19/15 (d)		100,000		99,911,833
DNB NOR Bank ASA, 0.19%, 2/12/15 (c)		150,000		149,965,875
Electricite de France SA, 0.16%, 1/06/15 (c)		80,000		79,998,222
Erste Abwicklungsanstalt (c):
0.17%, 1/14/15		100,000		99,993,861
0.17%, 1/21/15 (d)		100,000		99,990,556
0.18%, 2/24/15		150,000		149,959,500
0.25%, 7/01/15		70,000		69,912,014
HSBC Bank PLC (a):
0.23%, 5/07/15		40,000		40,000,000
0.23%, 5/08/15		75,000		75,000,000
0.23%, 7/06/15		75,000		75,000,000
0.25%, 10/16/15		110,000		110,000,084
0.26%, 11/19/15		92,500		92,500,000
Jupiter Securitization Co. LLC (c):
0.25%, 6/15/15		50,000		49,942,708
0.27%, 6/23/15		100,000		99,870,250
0.27%, 6/29/15		100,000		99,865,750
Kells Funding LLC:
0.24%, 1/07/15 (a)(d)		75,000		74,999,978
0.24%, 1/08/15 (a)(d)		50,000		49,999,942
0.25%, 2/20/15 (a)(d)		75,000		75,000,508
0.17%, 2/26/15 (c)		100,000		99,973,556
0.24%, 3/26/15 (a)		75,000		75,000,000
0.26%, 4/02/15 (a)(d)		65,000		64,999,971
0.22%, 10/30/15 (a)		125,650		125,629,268
LMA Americas LLC, 0.18%, 1/05/15 (c)		75,000		74,998,500
Matchpoint Master Trust, 0.32%, 5/18/15 (c)		25,000		24,969,556
Mitsubishi UFJ Trust & Banking Corp. (c):
0.21%, 1/26/15		25,000		24,996,354
0.20%, 2/06/15		75,000		74,985,000
0.25%, 5/13/15 (d)		100,000		99,908,333
Mont Blanc Capital Corp. (c):
0.22%, 1/07/15		33,188		33,186,783
0.22%, 1/08/15		78,000		77,996,663
National Australia Funding:
0.20%, 1/21/15 (c)		100,000		99,988,889
0.23%, 3/10/15 (a)(d)		40,000		40,000,000
0.23%, 3/11/15 (a)		75,000		74,998,715
0.23%, 3/13/15 (a)		69,000		69,003,593
0.25%, 11/04/15 (a)		50,000		50,000,000
0.25%, 11/09/15 (a)(d)		50,000		50,000,000
Nederlandse Waterschapsbank NV (a):
0.23%, 7/09/15		50,000		50,000,000
0.23%, 10/01/15		120,000		120,000,000
0.30%, 12/22/15		100,000		100,000,000
Nordea Bank AB:
0.17%, 2/13/15		100,000		99,999,403
0.18%, 2/19/15 (c)		75,000		74,982,135
0.18%, 2/23/15 (c)		95,000		94,975,524
Nordea Bank AB: (concluded)
0.23%, 3/17/15 (c)		50,000		49,976,563
0.22%, 4/16/15 (c)(d)		97,250		97,186,180
Old Line Funding LLC (c):
0.22%, 3/06/15		30,000		29,988,267
0.22%, 3/13/15		28,302		28,289,720
0.22%, 3/23/15		40,055		40,035,173
0.22%, 4/21/15		50,000		49,966,389
0.23%, 5/13/15		50,000		49,957,833
0.23%, 5/14/15		50,000		49,957,514
0.27%, 6/22/15		70,333		70,242,270
Oversea Chinese Banking, Corp. Ltd. (c):
0.19%, 2/23/15		100,000		99,972,028
0.19%, 3/02/15		100,000		99,968,333
0.23%, 4/09/15		100,000		99,937,389
PSP Capital, Inc., 0.25%, 6/16/15 (c)		30,000		29,965,417
Rabobank USA Financial Corp. (c):
0.22%, 2/17/15		64,500		64,481,474
0.26%, 4/14/15		100,000		99,927,042
0.24%, 7/14/15		52,000		51,932,747
Skandin Enskilda Banken AG, 0.20%, 2/03/15 (c)		134,000		133,975,433
Starbird Funding Corp., 0.32%, 5/27/15 (c)		50,000		49,935,111
Sumitomo Mitsui Banking Corp. Ltd. (c):
0.22%, 1/12/15		150,000		149,989,917
0.22%, 3/02/15 (d)		50,000		49,981,667
0.25%, 3/20/15		100,000		99,945,833
Svenska Handelsbanken, Inc. (c):
0.18%, 2/17/15		70,103		70,086,983
0.23%, 3/24/15		50,000		49,974,375
0.26%, 7/02/15		100,000		99,868,556
Thunder Bay Funding LLC (c):
0.22%, 2/03/15		56,000		55,988,707
0.22%, 4/13/15		50,000		49,968,833
0.22%, 5/01/15		90,461		90,394,662
0.27%, 6/18/15		35,000		34,955,900
0.27%, 6/24/15		50,000		49,934,750
Toyota Motor Corp. (c):
0.27%, 7/08/15		74,750		74,644,603
0.25%, 7/30/15		50,000		49,927,083
United Overseas Bank Ltd. (c):
0.23%, 1/22/15 (d)		75,000		74,989,938
0.25%, 2/10/15		50,000		49,987,222
Versailles Commercial Paper LLC (c):
0.23%, 1/02/15		100,000		99,999,361
0.22%, 1/07/15		50,000		49,998,167
0.23%, 3/02/15 (d)		75,000		74,971,250
Westpac Banking Corp.:
0.24%, 4/09/15 (a)(d)		40,000		40,000,000
0.25%, 7/02/15 (c)(d)		100,000		99,873,611
0.27%, 11/20/15 (a)		100,000		100,000,000
Westpac Securities NZ Ltd.:
0.26%, 1/29/15 (a)		100,000		100,000,000
0.25%, 4/07/15 (c)		75,000		74,950,000
Total Commercial Paper — 40.2%				9,564,182,768
Corporate Notes
Bank of Montreal, 0.51%, 9/24/15 (a)		25,000		25,044,077
Royal Bank of Canada, 0.55%, 5/01/15		32,000		32,031,553
Svenska Handelsbanken AB, 0.31%, 6/15/15 (a)(d)		108,200		108,200,000
Westpac Banking Corp., 4.20%, 2/27/15		33,750		33,956,535
Total Corporate Notes — 0.8%				199,232,165

See Notes to Financial Statements.

44 BLACKROCK FUNDS III DECEMBER 31, 2014

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

Time Deposits	Par   (000)		Value
Credit Agricole Corporate & Investment Bank, New York, 0.07%, 1/02/15	$	357,000	$	357,000,000
DEN Norske Bank ASA, 0.05%, 1/02/15		700,000		700,000,000
Natixis, 0.05%, 1/02/15		580,000		580,000,000
Skandinaviska Enskilda Banken AB, 0.05%, 1/02/15		500,000		500,000,000
Svenska Handelsbanken, Inc., 0.05%, 1/02/15		500,000		500,000,000
Total Time Deposits — 11.1%				2,637,000,000
U.S. Government Sponsored Agency Obligations
Federal Home Loan Bank:
0.08%, 1/16/15 (c)		255,100		255,091,497
0.08%, 1/28/15 (c)		105,000		104,993,543
0.08%, 2/11/15 (c)		50,000		49,995,160
0.10%, 2/11/15 - 2/13/15 (a)		76,700		76,699,617
0.08%, 2/13/15 (c)		100,000		99,989,847
0.12%, 2/27/15 - 3/25/15 (a)		162,000		161,999,320
0.11%, 5/21/15 (a)		100,000		100,000,000
Total U.S. Government Sponsored Agency Obligations — 3.6%				848,768,984
U.S. Treasury Obligations
U.S. Treasury Bills (c):
0.15%, 6/25/15		340,000		339,749,944
0.13%, 7/02/15		200,000		199,867,518
Total U.S. Treasury Obligations — 2.3%				539,617,462
Repurchase Agreements
BNP Paribas Securities Corp., 0.15%, 1/02/15 (Purchased on 10/07/14 to be repurchased at $84,030,450, collateralized by various Corporate Debt Obligations, 0.31% to 5.75%, due 3/17/17 to 4/25/47, original par and fair value of $271,517,132 and $104,945,815, respectively)		84,000		84,000,000
Total Value of BNP Paribas Securities Corp. (collateral value of $104,945,815)				84,000,000
Citigroup Global Markets, Inc., 0.05%, 1/02/15 (Purchased on 12/31/2014 to be repurchased at $126,684,352, collateralized by various U.S. Treasury Obligations, 0.00% to 3.13%, due 9/30/15 to 5/15/32, original par and fair value of $131,063,745 and $129,217,734, respectively) (e)		126,684		126,684,000
Total Value of Citigroup Global Markets, Inc., (collateral value of $129,217,734)				126,684,000
Credit Suisse Securities (USA) LLC, 0.40%, 1/02/15 (Purchased on 11/10/14 to be repurchased at $405,050,890, collateralized by various Corporate Debt & U.S. Government Sponsored Agency Obligations, 0.00% to 8.28%, due 5/11/15 to 9/25/58, original par and fair values of $871,258,912 and $501,580,849, respectively)		404,813		404,812,500
Credit Suisse Securities (USA) LLC, 0.50%, 2/04/15 (Purchased on 3/25/13 to be repurchased at $50,472,917, collateralized by various Corporate Debt Obligations, 0.00% to 13.00%, due 1/02/16 to 1/30/44, original par and fair value of $88,041,926 and $60,003,418, respectively) (f)		50,000		50,000,000
Repurchase Agreements	Par   (000)		Value
Credit Suisse Securities (USA) LLC, 0.48%, 1/06/15, (Purchased on 12/30/14 to be repurchased at $95,008,867, collateralized by various Corporate Debt Obligations, 0.00% to 13.00%, due 3/11/15 to 1/25/54, original par and fair values of $145,964,952 and $118,069,480, respectively)		95,000		95,000,000
Total Value of Credit Suisse Securities (USA) LLC (collateral value of $679,653,747)				549,812,500
Deutsche Bank Securities, Inc., 0.10%, 1/02/15 (Purchased on 12/31/14 to be repurchased at $123,600,687, collateralized by various U.S. Treasury Obligations, 1.50% to 2.75%, due 1/31/19 to 2/15/24, original par and fair value of $123,951,870 and $126,072,041, respectively) (e)		123,600		123,600,000
Total Value of Deutsche Bank Securities, Inc. (collateral value of $126,072,041)				123,600,000
Federal Reserve Bank of New York, 0.05%, 1/02/15 (Purchased on 12/31/2014 to be repurchased at $1,700,004,722, collateralized by various U.S. Treasury Obligations, 3.75% to 4.75%, due 2/15/41 to 8/15/41, original par and fair value of $1,312,856,400 and $1,700,004,806, respectively)		1,700,000		1,700,000,000
Federal Reserve Bank of New York, 0.10%, 1/05/15 (Purchased on 12/29/14 to be repurchased at $500,009,722, collateralized by various U.S. Treasury Obligations, 1.63% to 4.50%, due 8/15/22 to 5/15/38, original par and fair value of $381,291,300 and $507,513,820, respectively) (f)		500,000		500,000,000
Federal Reserve Bank of New York, 0.10%, 1/05/15 (Purchased on 12/22/14 to be repurchased at $500,019,444, collateralized by various U.S. Treasury Obligations, 3.88%, due 5/15/18, original par and fair value of $459,233,900 and $501,140,846, respectively) (f)		500,000		500,000,000
Total Value of Federal Reserve Bank of New York (collateral value of $2,708,659,472)				2,700,000,000
HSBC Securities (USA), Inc., 0.07%, 1/02/15 (Purchased on 7/01/14 to be repurchased at $15,005,396, collateralized by a U.S. Treasury Obligation, 4.75%, due 2/15/37, original par and fair value of $11,340,000 and $15,303,250, respectively)		15,000		15,000,000
Total Value of HSBC Securities (USA), Inc. (collateral value of $15,303,250)				15,000,000
J.P. Morgan Securities LLC, 0.20%, 1/02/15 (Purchased on 3/25/13 to be repurchased at $50,180,000, collateralized by various Corporate Debt Obligations, 0.00% to 6.81%, due 11/15/28 to 9/25/57, original par and fair values of $1,533,712,000 and $53,501,412, respectively)		50,000		50,000,000
J.P. Morgan Securities LLC, 0.40%, 1/02/15 (Purchased on 3/25/13 to be repurchased at $30,216,000, collateralized by various Corporate Debt Obligations, 0.34% to 8.31%, due 3/01/30 to 5/25/37, original par and fair value of $342,436,452 and $37,500,204, respectively)		30,000		30,000,000

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2014 45

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

Repurchase Agreements	Par   (000)		Value
J.P. Morgan Securities LLC, 0.45%, 1/02/15 (Purchased on 6/12/14 to be repurchased at $125,318,750, collateralized by various U.S. Government Agency Debt Obligations, 0.00% to 5.80%, due 11/25/19 to 4/15/49, original par and fair value of $167,408,010 and $133,750,118, respectively)	$	125,000	$	125,000,000
J.P. Morgan Securities LLC, 0.53%, 1/02/15 (Purchased on 9/22/14 to be repurchased at $45,067,575, collateralized by various Corporate Debt Obligations, 0.31% to 0.41%, due 2/25/36 to 5/15/37, original par and fair values of $212,353,000 and $56,251,322, respectively) (f)		45,000		45,000,000
J.P. Morgan Securities LLC, 0.64%, 1/02/15 (Purchased on 9/22/14 to be repurchased at $45,081,600, collateralized by various Corporate Debt Obligations, 0.31% to 5.84%, due 7/25/27 to 5/25/37, original par and fair value of $185,346,175 and $56,250,352, respectively) (f)		45,000		45,000,000
J.P. Morgan Securities LLC, 0.76%, 1/02/15 (Purchased on 11/25/14 to be repurchased at $50,040,111, collateralized by various Corporate Debt Obligations, 1.01% to 5.90%, due 2/15/40 to 6/11/50, original par and fair value of $72,930,104 and $60,002,011, respectively) (f)		50,000		50,000,000
J.P. Morgan Securities LLC, 0.54%, 1/06/15 (Purchased on 9/22/14 to be repurchased at $100,159,000, collateralized by various Government Agency Obligations, 0.29% to 4.93%, due 4/19/26 to 11/25/36, original par and fair value of $136,371,000 and $125,003,260 respectively)		100,000		100,000,000
J.P. Morgan Securities LLC, 0.53%, 2/18/15 (Purchased on 11/19/14 to be repurchased at $40,053,589, collateralized by various Corporate Debt Obligations, 0.35% to 4.98%, due 12/25/31 to 5/25/37, original par and fair value of $78,300,000 and $50,003,039, respectively)		40,000		40,000,000
Total Value of J.P. Morgan Securities LLC (collateral value of $572,261,718)				485,000,000
RBC Capital Markets LLC, 0.12%, 1/02/15 (Purchased on 12/31/14 to be repurchased at $63,000,420, collateralized by various Corporate Debt Obligations, 0.00% to 9.00%, due 6/04/17 to 3/15/87, original par and fair value of $59,811,273 and $66,150,001, respectively)		63,000		63,000,000
RBC Capital Markets LLC, 0.13%, 1/02/15 (Purchased on 3/28/14 to be repurchased at $25,025,278, collateralized by various U.S. Government Agency Debt Obligations, 0.00% to 2.00%, due 1/02/15 to 3/14/24, original par and fair value of $26,282,456 and $26,250,001, respectively)		25,000		25,000,000
RBC Capital Markets LLC, 0.13%, 1/02/15 (Purchased on 6/13/14 to be repurchased at $16,011,729, collateralized by various Corporate Debt Obligations, 0.00% to 9.00%, due 3/20/15 to 11/18/44, par and fair value of $18,261,610 and $16,800,000, respectively)		16,000		16,000,000
Repurchase Agreements	Par   (000)		Value
RBC Capital Markets LLC, 0.20%, 1/07/15 (Purchased on 12/31/14 to be repurchased at $100,003,889, collateralized by various Corporate Debt Obligations, 0.00% to 10.20%, due 5/18/16 to 3/15/87, original par and fair value of $113,651,952 and $105,000,000, respectively)		100,000		100,000,000
Total Value of RBC Capital Markets LLC (collateral value of $214,200,002)				204,000,000
Wells Fargo Securities LLC, 0.25%, 1/02/15 (Purchased on 8/05/14 to be repurchased at $180,187,500, collateralized by various Corporate Debt Obligations, 0.47% to 11.88%, due 2/15/15 to 3/30/67, original par and fair value of $268,338,349 and $203,827,926, respectively)		180,000		180,000,000
Wells Fargo Securities LLC, 0.46%, 1/12/15 (Purchased on 10/14/14 to be repurchased at $50,057,500, collateralized by various Corporate Debt Obligations, 1.13% to 9.75%, due 9/15/15 to 4/01/34, original par and fair value of $46,759,404 and $51,500,000, respectively)		50,000		50,000,000
Wells Fargo Securities LLC, 0.46%, 1/15/15 (Purchased on 10/15/14 to be repurchased at $36,748,149, collateralized by various Corporate Debt Obligations, 0.91% to 7.13%, due 1/30/15 to 10/31/33, original par and fair value of $35,512,423 and $37,806,151, respectively)		36,705		36,705,000
Wells Fargo Securities LLC, 0.39%, 2/03/15 (Purchased on 11/3/14 to be repurchased at $100,099,667, collateralized by various Corporate Debt Obligations, 0.65% to 12.00%, due 1/15/15 to 12/15/34, original par and fair value of $96,489,425 and $103,000,000, respectively)		100,000		100,000,000
Wells Fargo Securities LLC, 0.40%, 2/04/15 (Purchased on 11/05/14 to be repurchased at $59,059,656, collateralized by various Corporate Debt Obligations, 0.59% to 8.25%, due 1/15/15 to 11/21/24, original par and fair value of $56,753,525 and $60,770,001, respectively)		59,000		59,000,000
Wells Fargo Securities LLC, 0.49%, 3/16/15 (Purchased on 12/15/14 to be repurchased at $42,052,022, collateralized by various Corporate Debt Obligations, 3.70% to 4.63%, due 10/15/20 to 1/15/23, original par and fair value of $48,065,558 and $48,321,990, respectively)		42,000		42,000,000
Total Value of Wells Fargo Securities LLC (collateral value of $505,226,068)				467,705,000
Total Repurchase Agreements — 20.0%				4,755,801,500
Total Investments (Cost — $23,666,823,097*) — 99.5%				23,666,823,097
Other Assets Less Liabilities — 0.5%				127,518,685
Net Assets — 100.0%			$	23,794,341,782

See Notes to Financial Statements.

46 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments (concluded) Prime Money Market Master Portfolio

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 U.S. branch of foreign domiciled bank.

(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) Traded in a joint account.

(f) 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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted price 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)

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. For information about the Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

As of December 31, 2014, the following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Short-Term Securities1		—	$	23,666,823,097		—	$	23,666,823,097
1    See above Schedule of Investments for values in each security type.

The Master Portfolio may hold assets in which the fair value approximates the carrying amount for financial statement purposes. As of December 31, 2014, cash of $324,850,311 is categorized as Level 1 within the disclosure hierarchy.

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2014 47

Schedule of Investments December 31, 2014 Treasury Money Market Master Portfolio (Percentages shown are based on Net Assets)

U.S. Treasury Obligations	Par   (000)		Value
U.S. Treasury Bills (a):
0.00%, 1/02/15	$	43,619	$	43,618,997
0.05%, 2/05/15		150,000		149,992,172
0.06%, 2/19/15		50,000		49,996,325
0.05%, 2/26/15		100,000		99,992,611
0.05%, 3/12/15		90,000		89,991,250
0.05%, 3/19/15		50,000		49,994,920
0.13%, 4/02/15		76,075		76,050,001
0.04%, 4/16/15		100,000		99,989,062
0.05%, 4/23/15		50,000		49,992,222
0.06%, 5/07/15		100,000		99,979,875
0.06%, 5/14/15		25,000		24,994,458
0.07%, 5/21/15		30,000		29,992,067
0.07%, 5/28/15		118,875		118,841,022
0.10%, 6/18/15		50,000		49,976,667
U.S. Treasury Notes:
0.25%, 1/31/15		40,000		40,006,798
0.25%, 2/28/15		32,610		32,620,388
2.50%, 3/31/15		150,000		150,892,496
0.25%, 5/15/15		21,000		21,012,784
0.09%, 1/31/16 (b)		32,900		32,891,347
0.11%, 4/30/16 (b)		62,076		62,076,079
0.11%, 7/31/16 (b)		62,995		63,018,088
0.09%, 10/31/16 (b)		79,563		79,533,574
Total U.S. Treasury Obligations — 39.3%				1,515,453,203
Repurchase Agreements — 60.7%
Barclays Capital, Inc., 0.05%, 1/02/15 (Purchased on 12/31/14 to be repurchased at $43,532,121, collateralized by a U.S. Treasury Obligation, 1.63%, due 12/31/19, original par and fair value of $44,527,900 and $44,402,688, respectively)		43,532		43,532,000
Total Value of Barclays Capital, Inc. (collateral value of $44,402,688)				43,532,000
BNP Paribas Securities Corp., 0.08%, 1/07/15 (Purchased on 12/10/14 to be repurchased at $50,003,111, collateralized by various U.S. Treasury Obligations, 0.00% to 3.63%, due 2/15/15 to 11/15/43, original par and fair values of $74,002,992 and $51,000,094, respectively) (c)		50,000		50,000,000
BNP Paribas Securities Corp., 0.08%, 1/07/15 (Purchased on 12/5/14 to be repurchased at $64,104,701, collateralized by various U.S. Treasury Obligations, 0.00%, due 11/15/15 to 11/15/43, original par and fair values of $100,887,166 and $65,382,025, respectively) (c)		64,100		64,100,000
Total Value of BNP Paribas Securities Corp. (collateral value of $116,382,119)				114,100,000
Citigroup Global Markets, Inc., 0.05%, 1/02/15 (Purchased on 12/31/14 to be repurchased at $48,316,134, collateralized by various U.S. Treasury Obligations, 0.00% to 3.13%, due 9/30/15 to 5/15/32, original par and fair values of $49,986,392 and $49,282,341, respectively) (d)		48,316		48,316,000
Total Value of Citigroup Global Markets, Inc. (collateral value of $49,282,341)				48,316,000
Repurchase Agreements	Par   (000)		Value
Deutsche Bank Securities, Inc., 0.10%, 1/02/15 (Purchased on 12/31/14 to be repurchased at $51,400,286, collateralized by various U.S. Treasury Obligations, 1.50% to 2.75%, due 1/31/19 to 2/15/24, original par and fair values of $51,546,330 and $52,428,018, respectively) (d)	$	51,400	$	51,400,000
Total Value of Deutsche Bank Securities, Inc. (collateral value of $52,428,018)				51,400,000
HSBC Securities (USA), Inc., 0.06%, 1/02/15 (Purchased on 12/31/14 to be repurchased at $80,000,267, collateralized by various U.S. Treasury Obligations, 0.25% to 9.88%, due 1/15/15 to 11/15/44, original par and fair values of $78,633,330 and $81,603,282, respectively)		80,000		80,000,000
HSBC Securities (USA), Inc., 0.06%, 1/02/15 (Purchased on 1/27/14 to be repurchased at $200,113,333, collateralized by various U.S. Treasury Obligations, 0.13% to 9.25%, due 1/15/15 to 11/15/44, original par and fair values of $197,716,533 and $204,002,875, respectively)		200,000		200,000,000
Total Value of HSBC Securities (USA), Inc. (collateral value of $285,606,157)				280,000,000
Merrill Lynch, Pierce, Fenner & Smith, Inc., 0.06%, 1/02/15 (Purchased on 12/31/14 to be repurchased at $814,102,714, collateralized by a U.S. Treasury Obligation, 6.25%, due 5/15/30, original par and fair value of $553,425,000 and $830,382,108, respectively)		814,100		814,100,000
Total Value of Merrill Lynch, Pierce, Fenner & Smith, Inc. (collateral value of $830,382,108)				814,100,000
Morgan Stanley & Co. LLC, 0.07%, 1/02/15 (Purchased on 12/31/14 to be repurchased at $126,000,490, collateralized by various U.S. Treasury Obligations, 3.13%, due 5/15/21 to 8/15/44, original par and fair values of $118,404,700 and $128,520,072, respectively)		126,000		126,000,000
Morgan Stanley & Co. LLC, 0.07%, 1/02/15 (Purchased on 12/31/14 to be repurchased at $500,001,944, collateralized by cash and various U.S. Treasury Obligations, 0.00% to 4.75%, due 1/31/15 to 11/30/21, original par and fair values of $507,740,875 and $508,941,985, respectively)		500,000		500,000,000
Total Value of Morgan Stanley & Co. LLC (collateral value of $637,462,057)				626,000,000
SG Americas Securities LLC, 0.07%, 1/02/15 (Purchased on 12/31/14 to be repurchased at $363,440,413, collateralized by various U.S. Treasury Obligations, 0.13% to 2.13%, due 4/15/18 to 2/15/40, original par and fair values of $268,153,400 and $370,707,902, respectively)		363,439		363,439,000
Total Value of SG Americas Securities LLC (collateral value of $370,707,902)				363,439,000
Total Repurchase Agreements — 60.7%				2,340,887,000
Total Investments (Cost — $3,856,340,203*) — 100.0%				3,856,340,203
Other Assets Less Liabilities — 0.0%				1,213,499
Net Assets — 100.0%			$	3,857,553,702

See Notes to Financial Statements.

48 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments (concluded) Treasury Money Market Master Portfolio

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.

(c) Variable rate security. Rate shown is as of report date and maturity shown is the date the principal owed can be recovered through demand.

(d) Traded in a joint account.

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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices 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)

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. For information about the Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements. As of December 31, 2014, the following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Short-Term Securities1		—	$	3,856,340,203		—	$	3,856,340,203
1    See above Schedule of Investments for values in each security type.

The Master Portfolio may hold assets in which the fair value approximates the carrying amount for financial statement purposes. As of December 31, 2014, cash of $176,367 is categorized as Level 1 within the disclosure hierarchy.

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2014 49

Statements of Assets and Liabilities

December 31, 2014	Money Market Master Portfolio		Prime Money Market Master Portfolio		Treasury Money Market Master Portfolio
Assets
Investments at value — unaffiliated1	$	33,482,078,232	$	18,911,021,597	$	1,515,453,203
Repurchase agreements, at value2		7,607,015,000		4,755,801,500		2,340,887,000
Cash		151,431,067		324,850,311		176,367
Interest receivable		9,708,813		3,926,242		1,081,063
Contributions receivable from investors		—		—		176,072
Total assets		41,250,233,112		23,995,599,650		3,857,773,705
Liabilities
Investments purchased payable		399,735,036		199,867,518		—
Investment advisory fees payable		2,447,870		1,281,314		188,083
Withdrawals payable to investors		1,121,875		1,097		—
Trustees’ fees payable		126,334		61,362		12,662
Professional fees payable		115,460		46,577		19,258
Total liabilities		403,546,575		201,257,868		220,003
Net Assets	$	40,846,686,537	$	23,794,341,782	$	3,857,553,702
Net Assets Consist of
Investors’ capital	$	40,846,686,537	$	23,794,341,782	$	3,857,553,702
1    Investments at cost — unaffiliated	$	33,482,078,232	$	18,911,021,597	$	1,515,453,203
2    Repurchase agreements at cost — unaffiliated	$	7,607,015,000	$	4,755,801,500	$	2,340,887,000

See Notes to Financial Statements.
50	BLACKROCK FUNDS III	DECEMBER 31, 2014

Statements of Operations

Year Ended December 31, 2014	Money Market Master Portfolio			Prime Money Market Master Portfolio			Treasury Money Market Master Portfolio
Investment Income
Interest	$	96,465,625		$	37,168,060		$	1,869,901
Expenses
Investment advisory		42,782,619			18,055,347			3,001,554
Independent Trustees		515,892			243,259			56,663
Professional		141,583			55,654			22,419
Total expenses		43,440,094			18,354,260			3,080,636
Less fees waived by Manager		(13,492,261	)		(5,715,517	)		(1,251,281	)
Total expenses after fees waived		29,947,833			12,638,743			1,829,355
Net investment income		66,517,792			24,529,317			40,546
Realized Gain
Net realized gain from investments		3,145,559			794,518			110,422
Net Increase in Net Assets Resulting from Operations	$	69,663,351		$	25,323,835		$	150,968

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	51

Statements of Changes in Net Assets Master Investment Portfolio

	Money Market Master Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	66,517,792		$	78,288,256
Net realized gain		3,145,559			4,880,770
Net increase in net assets resulting from operations		69,663,351			83,169,026
Capital Transactions
Proceeds from contributions		53,841,747,303			115,690,759,904
Value of withdrawals		(54,589,158,809	)		(109,538,593,100	)
Net increase (decrease) in net assets derived from capital transactions		(747,411,506	)		6,152,166,804
Net Assets
Total increase (decrease) in net assets		(677,748,155	)		6,235,335,830
Beginning of year		41,524,434,692			35,289,098,862
End of year	$	40,846,686,537		$	41,524,434,692

See Notes to Financial Statements.
52	BLACKROCK FUNDS III	DECEMBER 31, 2014

Statements of Changes in Net Assets Master Investment Portfolio

	Prime Money Market Master Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	24,529,317		$	24,781,969
Net realized gain		794,518			2,332,546
Net increase in net assets resulting from operations		25,323,835			27,114,515
Capital Transactions
Proceeds from contributions		128,913,398,407			121,197,162,810
Value of withdrawals		(124,057,023,599	)		(118,246,074,954	)
Net increase in net assets derived from capital transactions		4,856,374,808			2,951,087,856
Net Assets
Total increase in net assets		4,881,698,643			2,978,202,371
Beginning of year		18,912,643,139			15,934,440,768
End of year	$	23,794,341,782		$	18,912,643,139

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	53

Statements of Changes in Net Assets Master Investment Portfolio

	Treasury Money Market Master Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	40,546		$	601,469
Net realized gain		110,422			239,050
Net increase in net assets resulting from operations		150,968			840,519
Capital Transactions
Proceeds from contributions		27,585,996,303			52,488,936,457
Value of withdrawals		(26,466,792,303	)		(52,365,402,628	)
Net increase in net assets derived from capital transactions		1,119,204,000			123,533,829
Net Assets
Total increase in net assets		1,119,354,968			124,374,348
Beginning of year		2,738,198,734			2,613,824,386
End of year	$	3,857,553,702		$	2,738,198,734

See Notes to Financial Statements.
54	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights Master Investment Portfolio

	Money Market Master Portfolio
	Year Ended December 31,
	2014		2013		2012		2011		2010
Total Return
Total return		0.16%		0.20%		0.27%		0.23%		0.27%
Ratio 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		0.16%		0.19%		0.27%		0.22%		0.26%
Supplemental Data
Net assets, end of year (000)		$40,846,687		$41,524,435		$35,289,099		$28,528,047		$20,007,557

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	55

Financial Highlights Master Investment Portfolio

	Prime Money Market Master Portfolio
	Year Ended December 31,
	2014		2013		2012		2011		2010
Total Return
Total return		0.13%		0.17%		0.25%		0.21%		0.25%
Ratio 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		0.14%		0.17%		0.25%		0.21%		0.25%
Supplemental Data
Net assets, end of year (000)		$23,794,342		$18,912,643		$15,934,441		$10,732,297		$10,071,057

See Notes to Financial Statements.
56	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights Master Investment Portfolio

	Treasury Money Market Master Portfolio
	Year Ended December 31,
	2014		2013		2012		2011		2010
Total Return
Total return		0.00%		0.02%		0.06%		0.09%		0.13%
Ratios to Average Net Assets
Total expenses		0.10%		0.10%		0.10%		0.10%		0.10%
Total expenses after fees waived		0.06%		0.06%		0.07%		0.06%		0.06%
Net investment income		0.00%		0.02%		0.08%		0.03%		0.13%
Supplemental Data
Net assets, end of year (000)		$3,857,554		$2,738,199		$2,613,824		$1,602,468		$2,200,634

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	57

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 three series of MIP: 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 (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Master Portfolio is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Master Portfolios:

Valuation: U.S. 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 discounts 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.

Recent Accounting Standard: In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance will require expanded disclosure for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. It is effective for financial statements with fiscal years beginning on or after December 15, 2014 and interim periods within those fiscal years. Management is evaluating the impact, if any, of this guidance on the Fund’s financial statement disclosures.

Other: Expenses directly related to a Master Portfolio are charged to that Master Portfolio. Other operating expenses shared by several funds are prorated 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.

The Master Portfolios, along with other registered investment companies advised by BlackRock Fund Advisors, (the “Manager”), may transfer uninvested cash into a single joint trading account which is then invested in one or more 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.

Repurchase agreements are entered into by the Master Portfolio under Master Repurchase Agreements (each, an “MRA”). The MRA permits the Master Portfolio, under certain circumstances including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables with collateral held by and/or posted to the counterparty. As a result, one single net payment is created. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Based on the terms of the MRA, the Master Portfolio receives securities as collateral with a market value in excess of the repurchase price at maturity. Upon a bankruptcy or insolvency of the MRA counterparty, the Master Portfolio would recognize a liability with respect to such excess collateral. The liability reflects the Master Portfolio’s obligation under bankruptcy law to return the excess to the counterparty.

58 BLACKROCK FUNDS III DECEMBER 31, 2014

Notes to Financial Statements (continued) Master Investment Portfolio

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 the Manager, the Master Portfolios’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of each Master Portfolio 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 based on a percentage of each Master Portfolio’s average daily net assets at the following annual rates:

Money Market Master Portfolio	0.10%
Prime Money Market Master Portfolio	0.10%
Treasury Money Market Master Portfolio	0.10%

The Manager has contractually agreed to waive 0.03% of its investment advisory fees through April 30, 2015. 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, 2014, the amounts included in fees waived by Manager in the Statements of Operations are as follows:

Money Market Master Portfolio	$	12,834,786
Prime Money Market Master Portfolio	$	5,416,604
Treasury Money Market Master Portfolio	$	1,172,199

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 provide an offsetting credit against the administration fees paid by the Master Portfolios in an amount equal to the independent expenses through April 30, 2015. The amounts waived are included in fees waived by Manager in the Statements of Operations. For the year ended December 31, 2014, such waiver amounts are as follows:

Money Market Master Portfolio	$	657,475
Prime Money Market Master Portfolio	$	298,913
Treasury Money Market Master Portfolio	$	79,082

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 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. Income Tax Information:

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 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.

Each of Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio files U.S. 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 U.S. federal tax

returns remains open for each of the four years ended December 31, 2014. 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.

BLACKROCK FUNDS III DECEMBER 31, 2014 59

Notes to Financial Statements (concluded) Master Investment Portfolio

6. Principal Risks:

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 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 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.

On July 23, 2014, the U.S. Securities and Exchange Commission adopted amendments to money market fund regulations, which structurally change the way certain money market funds will be required to operate. These amendments are generally not effective until sometime in 2016, but when implemented may affect the Master Portfolios’ operations and return potential.

7. 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.

60 BLACKROCK FUNDS III DECEMBER 31, 2014

Report of Independent Registered Public Accounting Firm Master Investment Portfolio

To the Board of Trustees of Master Investment Portfolio and the Interestholders of Money Market Master Portfolio, Prime 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 Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio (the “Master Portfolios”), each a series of Master Investment Portfolio, at December 31, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 19, 2015

BLACKROCK FUNDS III DECEMBER 31, 2014 61

Officers and Trustees

Name, Address1 and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2
Ronald W. Forbes 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 153 Portfolios	None
Rodney D. Johnson 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 153 Portfolios	None
David O. Beim 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 153 Portfolios	None
Frank J. Fabozzi 1948	Director	Since 2014	Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011; Adjunct Professor of Finance and Becton Fellow, Yale University from 1994 to 2006.	112 RICs consisting of 232 Portfolios	None
Dr. Matina S. Horner 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 153 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 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 153 Portfolios	None
Ian A. MacKinnon 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None
Cynthia A. Montgomery 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 153 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 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 153 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 153 Portfolios	None
Toby Rosenblatt 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Futures Foundation (philanthropic foundation) since 2009; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None

62 BLACKROCK FUNDS III DECEMBER 31, 2014

Officers and Trustees (continued)

Name, Address1 and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2 (concluded)
Kenneth L. Urish 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 153 Portfolios	None
Frederick W. Winter 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 153 Portfolios	None
	1   The address of each Trustee and Officer is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2   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, 2014.
	3   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 Trustees4
Paul L. Audet 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.	141 RICs consisting of 329 Portfolios	None
Henry Gabbay 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.	29 RICs consisting of 97 Portfolios	None
	4  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, 2014 63

Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers2
John M. Perlowski 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 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.
Jennifer McGovern 1977	Vice President	Since 2014	Director of BlackRock. since 2011; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal Andrews 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 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.
Charles Park 1967	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2014	Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Benjamin Archibald 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    The address of each Trustee and Officer is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2    Officers of the Trust/MIP serve at the pleasure of the Board.
	Further information about the Officers and Trust’s is available in the Trust’s Statements of Additional Information, which can be obtained without charge by calling (888)-204-3956.

Effective September 19, 2014, Brendan Kyne resigned as a Vice President of the Funds and Jennifer McGovern became Vice President of the Funds.

Effective December 31, 2014, Paul L. Audet and Henry Gabbay resigned as Trustees of the Funds and Ronald W. Forbes resigned as a Trustee of the Funds and Co-Chair of the Board. Effective January 1, 2015, Collette Chilton, Barbara G. Novick and Mark Stalnecker were appointed to serve as Trustees of the Funds.

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 100 Bellevue Parkway Wilmington, DE 19809
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

64 BLACKROCK FUNDS III DECEMBER 31, 2014

Additional Information

General Information

Householding

The Funds will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Transfer Agent at (888) 204-3956.

Availability of Quarterly Schedule of Investments

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 (800) 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.

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 FUNDS III DECEMBER 31, 2014 65

Additional Information (concluded)

BlackRock Privacy Principles (concluded)

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.

66 BLACKROCK FUNDS III DECEMBER 31, 2014

This report is intended for current shareholders. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Funds unless preceded or accompanied by the Funds’ 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.

MMF3-12/14-AR

DECEMBER 31, 2014

  ANNUAL REPORT  

BlackRock CoreAlpha Bond Fund  |  of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
The Markets in Review		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		34
Statement of Operations		35
Statements of Changes in Net Assets		36
Master Portfolio Financial Highlights		37
Master Portfolio Notes to Financial Statements		38
Master Portfolio Report of Independent Registered Public Accounting Firm		49
Officers and Trustees		50
Additional Information		53

2 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

The Markets in Review

Dear Shareholder,

After an extended period of calm, market volatility increased over the course of 2014, driven largely by higher valuations in risk assets (such as equities and high yield bonds), rising geopolitical risks and expectations around global central bank policies. Several key trends drove strong performance in U.S. markets, particularly large-cap stocks, Treasuries and municipal bonds, while markets outside the U.S. were more challenged.

Investors began the year in search of relatively safer assets due to heightened risks in emerging markets, slowing growth in China and weakening U.S. economic data. As a result, equities globally declined in January while bond markets strengthened despite the expectation that interest rates would rise as the U.S. Federal Reserve had begun reducing its asset purchase programs. Strong demand for relatively safer assets pushed U.S. Treasury bond prices higher and thus kept rates low in the United States. This surprising development, as well as increasing evidence that the soft patch in U.S. economic data had been temporary and weather-related, brought equity investors racing back to the market in February.

In the months that followed, interest rates trended lower in a modest growth environment and more investors turned to equities in search of yield. Markets remained relatively calm despite rising tensions in Russia and Ukraine and further signs of decelerating growth in China. Strong corporate earnings, increased merger and acquisition activity and signs of a strengthening recovery in the U.S. and other developed economies kept equity prices moving higher. Not all segments benefited from these trends, however, as investors ultimately became wary of high valuations, resulting in a broad rotation into cheaper assets.

Volatility ticked up in the summer as geopolitical tensions escalated and investors feared that better U.S. economic indicators may compel the Fed to increase short-term interest rates sooner than previously anticipated. Global credit markets tightened as the U.S. dollar strengthened, ultimately putting a strain on investor flows, and financial markets broadly weakened in the third quarter.

Several themes dominated the markets in the fourth quarter, resulting in higher levels of volatility and the outperformance of U.S. markets versus other areas of the world. Economic growth strengthened considerably in the United States while the broader global economy showed signs of slowing. The European Central Bank and the Bank of Japan took aggressive measures to stimulate growth while the Fed moved toward tighter policy. This divergence in central bank policy caused further strengthening in the U.S. dollar versus other currencies. Oil prices, which had been falling gradually since the summer, plummeted in the fourth quarter due to a global supply-and-demand imbalance. Energy stocks sold off sharply and oil-exporting economies suffered, resulting in the poor performance of emerging market stocks.

At BlackRock, we believe investors need to think globally, extend their scope across a broad 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 blackrock.com for further insight about investing in today’s markets.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2014
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		6.12	%		13.69	%
U.S. small cap equities (Russell 2000® Index)		1.65			4.89
International equities (MSCI Europe, Australasia, Far East Index)		(9.24	)		(4.90	)
Emerging market equities (MSCI Emerging Markets Index)		(7.84	)		(2.19	)
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.01			0.03
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		4.33			10.72
U.S. investment-grade bonds (Barclays U.S. Aggregate Bond Index)		1.96			5.97
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.00			9.25
U.S. high yield bonds (Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		(2.84	)		2.46
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, 2014

Investment Objective

BlackRock CoreAlpha Bond Fund’s (the “Fund”), 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, 2014, the Fund’s Institutional Shares returned 6.45%, Investor A Shares returned 6.18% and Investor C Shares returned 5.40%. The Fund’s Institutional and Investor A Shares outperformed the benchmark, the Barclays U.S. Aggregate Bond Index (the “Index”), which returned 5.97% for the same period, while the Investor C Shares underperformed the Index.

Ÿ The Fund invests all of its assets in the CoreAlpha Bond Master Portfolio (the “Master Portfolio”), a series of the Master Investment Portfolio.

What factors influenced performance?

Ÿ Asset allocation in the Master Portfolio was the largest positive contributor to performance. Swap contracts and non-benchmark allocations to securitized credits and high yield bonds delivered strong returns. The Master Portfolio’s U.S. interest rate strategies were key contributors as well, particularly as a yield curve flattening position proved beneficial over the 12-month period. We expressed this view by positioning short in the 2-5 year maturity portion of the Treasury curve, and long the 10 and 30 year maturities. Global rate strategies, which trade global government bond futures, also had a positive impact on relative results. This was mainly due to a strong month of December for Australian sovereign bonds, which rallied based on the commodity rout and expectations for rate cuts from the Reserve Bank of Australia. In the second half of 2014, performance dispersion within investment grade credits increased, and the Master Portfolio’s security selection strategies added value. An underweight to the energy sector also contributed, as falling oil prices put significant pressure on credit spreads.

Ÿ Conversely, underweight positioning in select non-corporate sectors such as emerging market sovereign debt hindered results, as these bonds rebounded strongly after coming under pressure in January 2014.

Describe recent portfolio activity.

Ÿ During the 12-month period, the Master Portfolio held swap contracts and non-benchmark allocations to securitized credits and high yield debt. Within U.S. rate strategies, the Master Portfolio was positioned to take advantage of flattening in the U.S. yield curve. The Master Portfolio tactically traded investment grade credits throughout the period, cautiously seeking to take advantage of relative value opportunities in industrials and financials.

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 in U.S. Treasury securities. Within spread sectors, the Master Portfolio was overweight in investment grade corporate credit, agency mortgage-backed securities and asset-backed securities, and underweight in select non-corporate sectors including emerging market sovereign debt. Within the industrials sector of corporate credit, the Master Portfolio remained underweight independent energy and oil field services issuers, as well as metals & mining issuers. The Master Portfolio was overweight financials, primarily in banking issues. The Master Portfolio also held a non-benchmark allocation to high yield debt.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions.

These views are not intended to be a forecast of future events and are no guarantee of future results.

4 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

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 under normal circumstances, at least 80% of its assets in bonds, including obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities; mortgage-backed securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, including U.S. agency mortgage pass-through securities; commercial mortgage-backed securities; debt obligations of U.S. issuers; municipal securities; asset-backed securities; and U.S.-registered dollar-denominated debt obligations of foreign issuers. The Master Portfolio may invest in bonds of any maturity or duration.

³  A widely recognized unmanaged market-weighted index, comprised of investment-grade corporate bonds rated BBB or better, mortgages and U.S. Treasury and U.S. Government agency issues with at least one year to maturity.

Performance Summary for the Period Ended December 31, 2014

										Average Annual Total Returns4
										1 Year						5 Years						10 Years
	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	%		2.26	%		2.05	%		6.45	%		N/A			4.67	%		N/A			4.97	%		N/A
Investor A		1.92			1.90			1.96			6.18			1.98	%		4.36			3.52	%		4.65			4.22	%
Investor C		1.18			1.16			1.48			5.40			4.40			3.55			3.55			3.85			3.85
Barclays U.S. Aggregate Bond Index		—			—			1.96			5.97			N/A			4.45			N/A			4.71			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, 2014		Ending Account Value December 31, 2014		Expenses Paid During the Period5		Beginning Account Value July 1, 2014		Ending Account Value December 31, 2014		Expenses Paid During the Period5		Annualized Expense Ratio
Institutional	$	1,000.00	$	1,064.50	$	1.77	$	1,000.00	$	1,023.49	$	1.73		0.34	%
Investor A	$	1,000.00	$	1,061.80	$	3.59	$	1,000.00	$	1,021.73	$	3.52		0.69	%
Investor C	$	1,000.00	$	1,054.00	$	7.46	$	1,000.00	$	1,017.95	$	7.32		1.44	%

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 all of its assets in the Master Portfolio, the expense example reflects the net expenses of both the Fund and the Master Portfolio.

⁶  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

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

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014 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 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 distributions, if any, at net asset value (“NAV”) 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 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 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, 2014 and held through December 31, 2014) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

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

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

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

Derivative Financial Instruments

The Fund may invest in various derivative financial instruments. 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 manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage. Derivative financial instruments also 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 Fund’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 limit the amount of appreciation a Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Fund’s investments in these instruments are discussed in detail in the Notes to Financial Statements.

6 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

Statement of Assets and Liabilities BlackRock CoreAlpha Bond Fund

December 31, 2014
Assets
Investments at value — Master Portfolio (cost — $183,679,279)	$	185,980,953
Capital shares sold receivable		122,888
Total assets		186,103,841
Liabilities
Contributions payable to the Master Portfolio		106,198
Income dividends payable		41,404
Capital shares redeemed payable		16,690
Professional fees payable		15,897
Administration fees payable		14,465
Service and distribution fees payable		570
Total liabilities		195,224
Net Assets	$	185,908,617
Net Assets Consist of
Paid-in capital	$	182,029,604
Distributions in excess of net investment income		(288,182	)
Accumulated net realized gain allocated from the Master Portfolio		1,865,521
Net unrealized appreciation/depreciation allocated from the Master Portfolio		2,301,674
Net Assets	$	185,908,617
Net Asset Value
Institutional — Based on net assets of $183,879,955 and 17,394,712 shares outstanding, unlimited number of shares authorized, no par value	$	10.57
Investor A — Based on net assets of $1,776,107 and 167,930 shares outstanding, unlimited number of shares authorized, no par value	$	10.58
Investor C — Based on net assets of $252,555 and 23,895 shares outstanding, unlimited number of shares authorized, no par value	$	10.57

See Notes to Financial Statements.
	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2014	7

Statement of Operations BlackRock CoreAlpha Bond Fund

Year Ended December 31, 2014
Investment Income
Net investment income allocated from the Master Portfolio:
Interest	$	4,019,587
Dividends		15,495
Income — affiliated		11,070
Securities lending — affiliated — net		1,496
Expenses		(348,592	)
Fees waived		10,603
Total income		3,709,659
Fund Expenses
Administration — Institutional		140,220
Administration — Investor A		1,535
Administration — Investor C		562
Service — Investor A		1,939
Service and distribution — Investor C		2,807
Professional		18,640
Miscellaneous		469
Total expenses		166,172
Less administration fees waived		(18,640	)
Total expenses after fees waived		147,532
Net investment income		3,562,127
Realized and Unrealized Gain Allocated from the Master Portfolio
Net realized gain from investments, financial futures contracts, swaps, options written and foreign currency transactions		1,664,284
Net change in unrealized appreciation/depreciation on investments, financial futures contracts, swaps, options written and foreign currency translations		3,593,170
Total realized and unrealized gain		5,257,454
Net Increase in Net Assets Resulting from Operations	$	8,819,581

See Notes to Financial Statements.
8	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2014

Statements of Changes in Net Assets BlackRock CoreAlpha Bond Fund

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	3,562,127		$	2,123,589
Net realized gain (loss)		1,664,284			(91,526	)
Net change in unrealized appreciation/depreciation		3,593,170			(4,153,649	)
Net increase (decrease) in net assets resulting from operations		8,819,581			(2,121,586	)
Distributions to Shareholders From1
Net investment income:
Institutional		(3,475,349	)		(2,335,782	)
Investor A		(16,428	)		(3,481	)
Investor C		(4,036	)		(3,461	)
Net realized gain:
Institutional		(151,873	)		(47,630	)
Investor A		(718	)		(75	)
Investor C		(176	)		(128	)
Return of capital:
Institutional		—			(182,680	)
Investor A		—			(319	)
Investor C		—			(509	)
Decrease in net assets resulting from distributions to shareholders		(3,648,580	)		(2,574,065	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		80,653,276			(5,680,828	)
Net Assets
Total increase (decrease) in net assets		85,824,277			(10,376,479	)
Beginning of year		100,084,340			110,460,819
End of year	$	185,908,617		$	100,084,340
Distributions in excess of net investment income, end of period	$	(288,182	)	$	(354,496	)

¹  Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2014	9

Financial Highlights

	Institutional
	Year Ended December 31,									Period February 28, 20111 to December 31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	10.19		$	10.72		$	10.50		$	10.00
Net investment income2		0.26			0.22			0.24			0.25
Net realized and unrealized gain (loss)		0.39			(0.48	)		0.26			0.52
Net increase (decrease) from investment operations		0.65			(0.26	)		0.50			0.77
Distributions from:3
Net investment income		(0.26	)		(0.25	)		(0.25	)		(0.26	)
Net realized gain		(0.01	)		(0.00	)4		—			—
Return of capital		—			(0.02	)		(0.03	)		(0.01	)
Total distributions		(0.27	)		(0.27	)		(0.28	)		(0.27	)
Net asset value, end of period	$	10.57		$	10.19		$	10.72		$	10.50
Total Return5
Based on net asset value		6.45%			(2.44)%			4.82%			7.80%	6
Ratios to Average Net Assets7
Total expenses		0.35%	8		0.36%	8		0.37%	9		0.44%	8,10
Total expenses after fees waived		0.34%	8		0.34%	8		0.34%	9		0.35%	8,10
Net investment income		2.53%	8		2.16%	8		2.22%	9		2.93%	8,10
Supplemental Data
Net assets, end of period (000)	$	183,880		$	99,630		$	110,020		$	59,250
Portfolio turnover rate of the Master Portfolio11		686%			986%			2,128%			1,646%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,						Period February 28, 20111 to December 31, 2011
	2014		2013		2012
Portfolio turnover rate (excluding MDRs)		470%		736%		1,774%		1,510%

See Notes to Financial Statements.
10	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2014

Financial Highlights (continued)

	Investor A
	Year Ended December 31,						Period April 30, 20121 to December 31, 2012
	2014			2013
Per Share Operating Performance
Net asset value, beginning of period	$	10.19		$	10.72		$	10.55
Net investment income2		0.23			0.18			0.12
Net realized and unrealized gain (loss)		0.39			(0.48	)		0.22
Net increase (decrease) from investment operations		0.62	��		(0.30	)		0.34
Distributions from:3
Net investment income		(0.22	)		(0.21	)		(0.15	)
Net realized gain		(0.01	)		(0.00	)4		—
Return of capital		—			(0.02	)		(0.02	)
Total distributions		(0.23	)		(0.23	)		(0.17	)
Net asset value, end of period	$	10.58		$	10.19		$	10.72
Total Return5
Based on net asset value		6.18%			(2.78)%			3.25%	6
Ratios to Average Net Assets7
Total expenses		0.71%	8		0.71%	8		0.72%	8,9
Total expenses after fees waived		0.69%	8		0.69%	8		0.70%	8,9
Net investment income		2.19%	8		1.78%	8		1.80%	8,9
Supplemental Data
Net assets, end of period (000)	$	1,776		$	166		$	168
Portfolio turnover rate of the Master Portfolio10		686%			986%			2,128%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods 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 distributions.

⁶  Aggregate total 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.

¹⁰  Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,				Period April 30, 20121 to December  31, 2012
	2014		2013
Portfolio turnover rate (excluding MDRs)		470%		736%		1,774%

See Notes to Financial Statements.
	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2014	11

Financial Highlights (concluded)

	Investor C
	Year Ended December 31,						Period April 30, 20121 to December 31, 2012
	2014			2013
Per Share Operating Performance
Net asset value, beginning of period	$	10.18		$	10.71		$	10.55
Net investment income2		0.15			0.11			0.06
Net realized and unrealized gain (loss)		0.40			(0.48	)		0.21
Net increase (decrease) from investment operations		0.55			(0.37	)		0.27
Distributions from:3
Net investment income		(0.15	)		(0.14	)		(0.10	)
Net realized gain		(0.01	)		(0.00	)4		—
Return of capital		—			(0.02	)		(0.01	)
Total distributions		(0.16	)		(0.16	)		(0.11	)
Net asset value, end of period	$	10.57		$	10.18		$	10.71
Total Return5
Based on net asset value		5.40%			(3.51)%			2.61%	6
Ratios to Average Net Assets7
Total expenses		1.45%	8		1.46%	8		1.46%	8,9
Total expenses after fees waived		1.44%	8		1.44%	8		1.44%	8,9
Net investment income		1.44%	8		1.04%	8		1.04%	8,9
Supplemental Data
Net assets, end of period (000)	$	253		$	288		$	273
Portfolio turnover rate of the Master Portfolio10		686%			986%			2,128%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods 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 distributions.

⁶  Aggregate total 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.

¹⁰  Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,				Period April 30, 20121 to December 31, 2012
	2014		2013
Portfolio turnover rate (excluding MDRs)		470%		736%		1,774%

See Notes to Financial Statements.
12	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2014

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 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. At December 31, 2014, the percentage of the Master Portfolio owned by the Fund was 6.4%. 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. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that each bears certain expenses and conversion as outlined below. Institutional Shares are sold only to certain eligible investors. Investor A and Investor C Shares are generally available through financial intermediaries. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures. For distribution and service fee breakdown see Note 3.

Share Name	Initial Sales Charge		CDSC			Conversion
Institutional Shares		No		No			None
Investor A Shares		Yes		No	1		None
Investor C Shares		No		Yes			None

¹  Investor A Shares may be subject to a CDSC for certain redemptions where no initial sales charge was paid at the time of purchase.

2. Significant Accounting Policies:

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

Valuation: The Fund’s investments are valued at fair value as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The 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 instruments. 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.

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

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

3. 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 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

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014 13

Notes to Financial Statements (continued) BlackRock CoreAlpha Bond Fund

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 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, 2015.

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 BAL. 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 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.

For the year ended December 31, 2014, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of the Fund’s Investor A Shares, which totaled $34.

For the year ended December 31, 2014, affiliates received CDSCs of $114 for Investor A Shares.

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

4. Income Tax Information:

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

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns remains open for the three years ended December 31, 2014 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 that there are any uncertain tax positions that require recognition of a tax liability.

The tax character of distributions paid was as follows:

	12/31/14		12/31/13
Ordinary income	$	3,648,580	$	2,342,724
Long-term capital gains		—		47,833
Tax return of capital		—		183,508
Total	$	3,648,580	$	2,574,065

As of December 31, 2014, the tax components of accumulated net earnings were as follows:

Undistributed ordinary income	$	816,032
Undistributed capital gains		378,817
Net unrealized gains1		2,684,164
Total	$	3,879,013

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

14 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

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, 2014						Year Ended December 31, 2013
	Shares			Amount			Shares			Amount
Institutional
Shares sold		13,880,886		$	144,664,033			9,415,538		$	97,015,571
Shares issued to shareholders in reinvestment of distributions		305,732			3,201,545			180,850			1,880,555
Shares redeemed		(6,572,695	)		(68,757,052	)		(10,081,298	)		(104,613,000	)
Net increase (decrease)		7,613,923		$	79,108,526			(484,910	)	$	(5,716,874	)
Investor A
Shares sold		171,264		$	1,793,894			5,088		$	53,807
Shares issued to shareholders in reinvestment of distributions		1,582			16,615			309			3,212
Shares redeemed		(21,204	)		(219,796	)		(4,755	)		(49,647	)
Net increase		151,642		$	1,590,713			642		$	7,372
Investor C
Shares sold		2		$	22			15,857		$	168,200
Shares issued to shareholders in reinvestment of distributions		374			3,904			372			3,876
Shares redeemed		(4,777	)		(49,889	)		(13,430	)		(143,402	)
Net increase (decrease)		(4,401	)	$	(45,963	)		2,799		$	28,674
Total Net Increase (Decrease)		7,761,164		$	80,653,276			(481,469	)	$	(5,680,828	)

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 COREALPHA BOND FUND DECEMBER 31, 2014 15

Report of Independent Registered Public Accounting Firm

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, 2014, 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 19, 2015

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, 2014.

Interest-Related Dividends and Qualified Short Term Capital Gains for Non-U.S. Residents1	84.67%
Federal Obligation Interest2	11.18%

¹  Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. 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.

16 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

Master Portfolio Information CoreAlpha Bond Master Portfolio

As of December 31, 2014

Portfolio Composition	Percent of Long-Term Investments
U.S. Government Sponsored Agency Securities		40	%
Corporate Bonds		28
Asset-Backed Securities		11
Non-Agency Mortgage-Backed Securities		10
U.S. Treasury Obligations		7
Foreign Agency Obligations		1
Municipal Bonds		1

Credit Quality Allocation1	Percent of Long-Term Investments
AAA/Aaa2		60	%
AA/Aa		8
A		16
BBB/Baa		13
BB/Ba		1
CCC		—	3
N/R		2

¹  For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”) if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

²  The investment advisor evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors, individual investments and/or issuer. Using this approach, the investment advisor has deemed U.S. Government Sponsored Agency Securities and U.S. Treasury Obligations as AAA/Aaa.

³  Represents less than 1%.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014 17

Schedule of Investments December 31, 2014 CoreAlpha Bond Master Portfolio (Percentages shown are based on Net Assets)

Asset-Backed Securities	Par   (000)			Value
Access Group, Inc., Class A2 (a):
Series 2004-A, 0.49%, 4/25/29		USD	4,846	$	4,813,654
Series 2005-A, 0.45%, 4/27/26			1,243		1,242,501
Series 2007-1, 0.26%, 4/25/17			1,583		1,581,836
ACE Securities Corp. Home Equity Loan Trust (a):
Series 2005-AG1, Class A2D, 0.53%, 8/25/35			1,301		1,262,489
Series 2005-HE2, Class M3, 0.89%, 4/25/35			2,159		2,164,504
Series 2005-HE4, Class M2, 0.69%, 7/25/35			2,818		2,801,877
American Credit Acceptance Receivables Trust, Class A (b):
Series 2014-1, 1.14%, 3/12/18			1,220		1,220,584
Series 2014-3, 0.99%, 8/10/18			2,018		2,011,790
American Express Credit Account Master Trust, Class C (b):
Series 2005-2, 0.65%, 10/16/17 (a)			700		699,840
Series 2012-2, 1.29%, 3/15/18			8,330		8,337,440
AmeriCredit Automobile Receivables Trust:
Series 2010-4, Class D, 4.20%, 11/08/16			2,600		2,616,000
Series 2011-1, Class C, 2.85%, 8/08/16			1,066		1,068,795
Series 2011-2, Class D, 4.00%, 5/08/17			1,700		1,726,015
Series 2011-3, Class C, 2.86%, 1/09/17			1,473		1,481,206
Series 2012-3, Class D, 3.03%, 7/09/18			2,121		2,168,088
Series 2012-5, Class B, 1.12%, 11/08/17			3,040		3,049,536
Series 2013-1, Class C, 1.57%, 1/08/19			700		698,391
Ameriquest Mortgage Securities, Inc. Pass-Through Certificates (a):
Series 2005-R06, Class A2, 0.37%, 8/25/35			20		19,570
Series 2005-R10, Class A2B, 0.39%, 1/25/36			625		623,285
Bear Stearns Asset-Backed Securities I Trust, Series 2006-HE1, Class 1A3, 0.49%, 12/25/35 (a)			2,569		2,545,705
BNC Mortgage Loan Trust, Series 2007-4, Class A3A, 0.42%, 11/25/37 (a)			113		112,805
Carfinance Capital Auto Trust, Class A (b):
Series 2013-1A, 1.65%, 7/17/17			714		714,425
Series 2013-2A, 1.75%, 11/15/17			1,330		1,333,825
Series 2014-1A, 1.46%, 12/17/18			2,837		2,841,173
Centex Home Equity Loan Trust 2006-A, Series 2006-A, Class AV3, 0.33%, 6/25/36 (a)			2,615		2,599,893
CIT Mortgage Loan Trust, Series 2007-1, Class 2A2, 1.42%, 10/25/37 (a)(b)			2,412		2,407,853
Citibank Credit Card Issuance Trust, Series 2014-A6, Class A6, 2.15%, 7/15/21			10,000		10,006,830
Asset-Backed Securities	Par   (000)			Value
College Loan Corp. Trust I, Series 2004-1, Class A4, 0.42%, 4/25/24 (a)		USD	10,200	$	10,153,978
Countrywide Asset-Backed Certificates, Series 2005-8, Class M1, 0.64%, 12/25/35 (a)			1,827		1,823,179
CPS Auto Receivables Trust, Series 2011-B, Class B, 5.68%, 9/17/18 (b)			710		728,904
Credit Suisse Mortgage Capital Certificates, Series 2006-CF3, Class A1, 0.71%, 10/25/36 (a)(b)			1,701		1,672,215
DT Auto Owner Trust, Series 2012-2A, Class D, 7.00%, 3/15/19 (b)			7,709		7,775,802
Exeter Automobile Receivables Trust (b):
Series 2012-2A, Class B, 2.22%, 12/15/17			1,800		1,809,596
Series 2013-1A, Class A, 1.29%, 10/16/17			1,194		1,196,246
Series 2013-1A, Class B, 2.41%, 5/15/18			2,300		2,307,273
Series 2014-1A, Class A, 1.29%, 5/15/18			7,712		7,718,445
Series 2014-2A, Class A, 1.06%, 8/15/18			1,429		1,426,856
First Franklin Mortgage Loan Trust (a):
Series 2005-FF02, Class M2, 0.83%, 3/25/35			569		568,252
Series 2005-FF04, Class M1, 0.60%, 5/25/35			2,305		2,291,087
Series 2005-FF10, Class A4, 0.49%, 11/25/35			926		909,876
First Investors Auto Owner Trust, Class A2 (b):
Series 2013-1A, 0.90%, 10/15/18 USD			1,283		1,283,220
Series 2013-3A, 0.89%, 9/15/17			769		768,576
Series 2014-1A, 0.80%, 2/15/18			3,651		3,648,119
Flagship Credit Auto Trust, Series 2014-1, Class A, 1.21%, 4/15/19 (b)			3,682		3,673,024
HLSS Servicer Advance Receivables Backed Notes (b):
Series 2012-T2, Class A2, 1.99%, 10/15/45			7,215		7,244,004
Series 2012-T2, Class B2, 2.48%, 10/15/45			100		100,630
Series 2012-T2, Class D2, 4.94%, 10/15/45			870		882,354
Series 2013-T1, Class A2, 1.50%, 1/16/46			11,220		11,211,024
Series 2013-T2, Class A2, 1.15%, 5/16/44			8,200		8,191,800
Series 2013-T2, Class C2, 1.84%, 5/16/44			1,000		999,500
Series 2013-T2, Class D2, 2.39%, 5/16/44			1,350		1,349,325
Series 2014-T1, Class A, 1.24%, 1/17/45			1,200		1,200,000
Series 2014-T1, Class B, 1.54%, 1/17/45			2,100		2,100,000
Series 2014-T1, Class C, 1.79%, 1/17/45			2,000		2,000,000
HSI Asset Securitization Corp. Trust, Series 2006-OPT4, Class 2A5, 0.00%, 3/25/36			4,500		4,195,062

Portfolio Abbreviations

ABS	Asset-Backed Security
AUD	Australian Dollar
CAD	Canadian Dollar
ETF	Exchange-Traded Fund
EUR	Euro
EURIBOR	Euro Interbank Offered Rate
GBP	British Pound
GO	General Obligation Bonds
JPY	Japanese Yen
NOK	Norwegian Krone
NZD	New Zealand Dollar
RB	Revenue Bonds
SEK	Swedish Krona
STRIPS	Separate Trading of Registered Interest and Principal Securities
USD	U.S. Dollar

See Notes to Financial Statements.

18 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

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

Asset-Backed Securities	Par   (000)			Value
JPMorgan Mortgage Acquisition Corp. (a):
Series 2005-OPT2, Class A1B, 0.46%, 12/25/35		USD	1,330	$	1,302,284
Series 2007-CH1, Class AV4, 0.29%, 11/25/36			787		783,979
KeyCorp Student Loan Trust, Series 2006-A (a):
Class 2A3, 0.44%, 6/27/29			5,289		5,252,135
Class 2A4, 0.56%, 9/27/35			2,120		2,043,843
Morgan Stanley ABS Capital I, Inc. Trust (a):
Series 2005-HE3, Class M2, 0.95%, 7/25/35			607		606,970
Series 2005-WMC4, Class M4, 1.11%, 4/25/35			4,561		4,571,218
The National Collegiate Student Loan Trust (a):
Series 2004-1, Class A2, 0.51%, 6/25/27			1,918		1,897,136
Series 2004-2, Class A4, 0.48%, 11/27/28			2,637		2,604,310
Series 2005-2, Class A3, 0.36%, 2/25/28			2,050		2,042,279
Series 2005-3, Class A3, 0.41%, 7/25/28			7,507		7,475,302
Series 2005-3, Class A4, 0.45%, 4/25/29			2,258		2,198,730
Series 2006-1, Class A3, 0.36%, 5/25/26			520		517,117
Series 2006-2, Class A2, 0.32%, 7/25/26			5,067		5,042,625
Nationstar Agency Advance Funding Trust, Series 2013-T1A, Class AT1, 1.00%, 2/15/45 (b)			1,650		1,649,406
ORES NPL LLC, Series 2014-LV3, Class A, 3.00%, 3/27/24 (b)			2,625		2,625,027
Park Place Securities, Inc. Asset-Backed Pass-Through Certificates (a):
Series 2004-WWF1, Class M2, 1.19%, 12/25/34			1,082		1,083,402
Series 2005-WCW3, Class A2C, 0.55%, 8/25/35			2,794		2,754,451
RAMP Trust (a):
Series 2004-RS11, Class M1, 1.10%, 11/25/34			1,213		1,197,186
Series 2005-EFC1, Class M2, 0.62%, 5/25/35			2,821		2,800,881
Series 2005-RS6, Class M1, 0.67%, 6/25/35			2,297		2,274,192
Series 2006-NC2, Class A2, 0.36%, 2/25/36			4,501		4,388,015
Series 2006-RZ3, Class A2, 0.33%, 8/25/36			6,300		6,235,287
RASC Trust, Series 2005-AHL3, Class A2, 0.41%, 11/25/35 (a)			2,116		2,075,824
Santander Drive Auto Receivables Trust:
Series 2010-3, Class C, 3.06%, 11/15/17			2,530		2,556,874
Series 2011-1, Class C, 3.11%, 5/16/16			1,122		1,124,700
Series 2011-1, Class D, 4.01%, 2/15/17			14,720		14,965,603
Series 2011-3, Class D, 4.23%, 5/15/17			3,900		4,009,691
Series 2011-4, Class C, 3.82%, 8/15/17			2,636		2,664,807
Series 2011-4, Class D, 4.74%, 9/15/17			1,220		1,266,514
Series 2012-1, Class C, 3.78%, 11/15/17			507		513,815
Series 2012-2, Class B, 2.09%, 8/15/16			415		415,064
Series 2012-2, Class C, 3.20%, 2/15/18			3,648		3,688,668
Series 2012-2, Class D, 3.87%, 2/15/18			2,000		2,059,828
Series 2012-3, Class D, 3.64%, 5/15/18			13,100		13,518,886
Series 2012-4, Class B, 1.83%, 3/15/17			2,013		2,018,339
Series 2012-4, Class D, 3.50%, 6/15/18			1,100		1,129,014
Series 2012-AA, Class C, 1.78%, 11/15/18 (b)			5,600		5,611,418
Series 2013-1, Class C, 1.76%, 1/15/19			2,982		2,989,213
Series 2013-2, Class B, 1.33%, 3/15/18			3,005		3,011,286
Series 2013-2, Class C, 1.95%, 3/15/19			12,500		12,564,550
Series 2013-3 Class C, 1.81%, 4/15/19			4,790		4,787,754
Series 2013-A, Class B, 1.89%, 10/15/19 (b)			2,300		2,320,256
Asset-Backed Securities	Par   (000)			Value
Santander Drive Auto Receivables Trust (concluded):
Series 2013-A, Class C, 3.12%, 10/15/19 (b)		USD	4,100	$	4,197,953
Series 2014-1, Class B, 1.59%, 10/15/18			4,320		4,329,154
Series 2014-1, Class C, 2.36%, 4/15/20			3,020		3,036,924
Series 2014-2, Class C, 2.33%, 11/15/19			2,500		2,510,790
Series 2014-4, Class B, 1.82%, 5/15/19			1,850		1,850,709
Series 2014-4, Class C, 2.60%, 11/16/20			1,770		1,772,970
SLC Private Student Loan Trust 2006-A, Series 2006-A, Class A5, 0.40%, 7/15/36 (a)			15,546		15,421,678
SLM Private Credit Student Loan Trust (a):
Series 2003-A, Class A2, 0.68%, 9/15/20			8,258		8,210,371
Series 2003-B, Class A2, 0.64%, 3/15/22			2,371		2,352,282
Series 2003-C, Class A2, 0.63%, 9/15/20			2,010		1,993,202
Series 2004-A, Class A2, 0.44%, 3/16/20			3,208		3,203,915
Series 2004-B, Class A2, 0.44%, 6/15/21			6,950		6,900,891
Series 2005-A, Class A2, 0.38%, 12/15/20			587		587,928
Series 2005-B, Class A2, 0.42%, 3/15/23			5,387		5,340,007
Series 2006-B, Class A4, 0.42%, 3/15/24			4,733		4,690,969
SLM Private Education Loan Trust (a)(b):
Series 2010-A, Class 1A, 3.20%, 5/16/44			3,742		3,872,537
Series 2011-A, Class A1, 1.16%, 10/15/24			7,732		7,765,461
Series 2011-B, Class A1, 1.01%, 12/16/24			1,014		1,016,761
Series 2011-C, Class A1, 1.56%, 12/15/23			954		958,997
Series 2012-A, Class A1, 1.56%, 8/15/25			1,996		2,016,893
Series 2012-C, Class A1, 1.26%, 8/15/23			2,058		2,069,755
Series 2012-D, Class A1, 1.21%, 6/15/23			1,486		1,492,134
Series 2012-E, Class A1, 0.91%, 10/16/23			4,741		4,754,238
Series 2013-A, Class A1, 0.76%, 8/15/22			5,516		5,521,384
Series 2013-B, Class A1, 0.81%, 7/15/22			8,259		8,272,494
Series 2013-C, Class A1, 1.01%, 2/15/22			4,166		4,180,597
Soundview Home Loan Trust, Series 2005-OPT4, Class 2A3, 0.69%, 12/25/35 (a)			3,438		3,379,025
Terwin Mortgage Trust, Series 2006-5, Class 2A2, 0.38%, 6/25/37 (a)(b)			3,860		3,757,229
Trade MAPS 1 Ltd., Series 2013-1A (a)(b):
Class A, 0.86%, 12/10/18			9,690		9,702,549
Class B, 1.41%, 12/10/18			3,100		3,098,794
Vericrest Opportunity Loan Transferee LLC, Series 2014-NPL4, Class A1, 3.13%, 4/27/54 (b)(c)			5,764		5,730,421
Total Asset-Backed Securities — 14.9%					430,005,148
Corporate Bonds
Aerospace & Defense — 0.5%
Eaton Corp., 0.95%, 11/02/15			3,000		3,002,658
L-3 Communications Corp.:
3.95%, 11/15/16			1,250		1,304,246
1.50%, 5/28/17			520		514,885
4.75%, 7/15/20			2,400		2,577,430
4.95%, 2/15/21			5,468		5,943,114
Lockheed Martin Corp., 4.85%, 9/15/41			2,000		2,233,002
					15,575,335
Air Freight & Logistics — 0.0%
United Parcel Service, Inc., 4.88%, 11/15/40			400		466,709
Airlines — 0.1%
United Airlines Pass-Through Trust, Series 2013-1, Class A, 4.30%, 2/15/27			3,400		3,519,000
Auto Components — 0.6%
Delphi Corp.:
5.00%, 2/15/23			850		907,358
4.15%, 3/15/24			3,200		3,307,798

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014 19

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

Corporate Bonds	Par   (000)			Value
Auto Components (concluded)
Icahn Enterprises LP/Icahn Enterprises Finance Corp.:
4.88%, 3/15/19		USD	1,525	$	1,521,188
6.00%, 8/01/20			1,725		1,777,095
Johnson Controls, Inc., 1.40%, 11/02/17			3,330		3,299,757
Lear Corp.:
4.75%, 1/15/23			1,000		997,500
5.38%, 3/15/24			3,775		3,859,937
Magna International, Inc., 3.63%, 6/15/24			2,700		2,705,519
					18,376,152
Banks — 2.5%
ANZ New Zealand International Ltd., 1.13%, 3/24/16 (b)			2,500		2,508,393
Bank of Nova Scotia:
0.95%, 3/15/16			4,200		4,203,478
1.10%, 12/13/16			5,000		5,003,450
Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, 2.25%, 1/14/19			3,500		3,526,064
Discover Bank/Greenwood Delaware, 2.00%, 2/21/18			2,600		2,593,224
Fifth Third Bancorp, 0.90%, 2/26/16			2,900		2,900,183
HSBC Bank USA NA, 5.88%, 11/01/34			1,200		1,499,113
HSBC Holdings PLC, 6.50%, 9/15/37			1,200		1,541,863
HSBC USA, Inc., 1.50%, 11/13/17			6,345		6,332,462
Rabobank Nederland, 3.88%, 2/08/22			3,800		4,042,349
Royal Bank of Canada, 0.85%, 3/08/16			4,600		4,601,730
U.S. Bancorp, 2.20%, 11/15/16			4,000		4,081,824
Wachovia Bank NA, 6.00%, 11/15/17			5,400		6,052,930
Wells Fargo & Co.:
1.15%, 6/02/17			5,200		5,171,608
2.13%, 4/22/19			8,100		8,097,878
3.00%, 1/22/21			4,700		4,788,313
3.30%, 9/09/24			2,600		2,616,268
4.10%, 6/03/26			1,900		1,941,908
4.65%, 11/04/44			1,930		1,991,492
					73,494,530
Beverages — 0.8%
Anheuser-Busch InBev Worldwide, Inc., 3.75%, 7/15/42			1,500		1,410,168
Bottling Group LLC, 5.13%, 1/15/19			1,100		1,229,761
Diageo Capital PLC, 0.63%, 4/29/16			2,800		2,791,345
Diageo Finance BV, 3.25%, 1/15/15			2,000		2,001,228
Dr Pepper Snapple Group, Inc., 2.90%, 1/15/16			1,250		1,275,190
PepsiCo, Inc.:
7.90%, 11/01/18			2,000		2,433,190
2.75%, 3/01/23			3,400		3,345,185
3.60%, 3/01/24			4,000		4,178,692
4.88%, 11/01/40			1,000		1,123,445
3.60%, 8/13/42			2,000		1,868,382
					21,656,586
Biotechnology — 0.5%
Amgen, Inc.:
2.30%, 6/15/16			3,240		3,291,160
5.38%, 5/15/43			2,100		2,439,658
Celgene Corp., 2.30%, 8/15/18			2,000		2,016,520
Gilead Sciences, Inc.:
3.05%, 12/01/16			1,400		1,452,710
2.05%, 4/01/19			5,000		5,000,715
					14,200,763
Capital Markets — 3.4%
The Bank of New York Mellon Corp., 0.70%, 3/04/16			4,600		4,595,529
The Bear Stearns Cos. LLC, 6.40%, 10/02/17			2,500		2,799,775
Corporate Bonds	Par   (000)			Value
Capital Markets (concluded)
FMS Wertmanagement AoeR, 1.13%, 9/05/17		USD	12,454	$	12,446,789
The Goldman Sachs Group, Inc.:
5.95%, 1/18/18			3,700		4,110,582
6.15%, 4/01/18			1,500		1,683,628
2.90%, 7/19/18			2,700		2,769,876
2.63%, 1/31/19			2,700		2,716,486
7.50%, 2/15/19			1,200		1,427,353
2.55%, 10/23/19			1,510		1,504,485
6.00%, 6/15/20			3,500		4,046,098
5.75%, 1/24/22			1,400		1,619,502
3.63%, 1/22/23			750		759,467
6.75%, 10/01/37			4,350		5,469,581
6.25%, 2/01/41			4,250		5,372,612
4.80%, 7/08/44			2,000		2,142,156
Invesco Finance PLC, 5.38%, 11/30/43			2,400		2,885,976
Legg Mason, Inc., 2.70%, 7/15/19			4,335		4,355,938
Morgan Stanley:
1.75%, 2/25/16			3,000		3,016,272
4.75%, 3/22/17			3,300		3,515,137
6.25%, 8/28/17			1,500		1,666,296
2.50%, 1/24/19			3,800		3,803,447
5.63%, 9/23/19			10,000		11,287,940
3.75%, 2/25/23			4,500		4,616,194
4.10%, 5/22/23			1,900		1,923,632
3.88%, 4/29/24			2,800		2,872,901
4.35%, 9/08/26			2,250		2,263,444
6.38%, 7/24/42			2,200		2,921,675
					98,592,771
Chemicals — 0.8%
Ecolab, Inc., 1.00%, 8/09/15			2,900		2,907,557
LyondellBasell Industries NV:
5.00%, 4/15/19			5,300		5,781,049
6.00%, 11/15/21			5,300		6,100,083
Monsanto Co.:
2.13%, 7/15/19			2,615		2,605,335
2.75%, 7/15/21			1,170		1,166,261
4.40%, 7/15/44			2,155		2,235,905
RPM International, Inc., 6.13%, 10/15/19			2,453		2,787,896
					23,584,086
Communications Equipment — 0.2%
Cisco Systems, Inc., 2.13%, 3/01/19			5,000		5,023,525
Consumer Finance — 1.2%
Capital One Bank USA NA:
2.15%, 11/21/18			2,150		2,138,777
2.95%, 7/23/21			5,900		5,863,084
Capital One NA, 1.50%, 9/05/17			5,000		4,959,715
Caterpillar Financial Services Corp., 0.70%, 2/26/16			3,600		3,601,472
MasterCard, Inc.:
2.00%, 4/01/19			1,955		1,944,242
3.38%, 4/01/24			3,000		3,079,371
Navient Solutions, Inc., 0.00%, 10/03/22 (d)			5,700		4,632,624
Synchrony Financial:
3.00%, 8/15/19			5,200		5,256,903
3.75%, 8/15/21			2,045		2,088,945
					33,565,133
Diversified Financial Services — 4.4%
American Express Credit Corp.:
2.75%, 9/15/15			2,600		2,640,113
2.38%, 3/24/17			3,000		3,067,944
1.55%, 9/22/17			2,865		2,870,604
American Honda Finance Corp., 1.13%, 10/07/16			4,635		4,656,432
Associates Corp. of North America, 6.95%, 11/01/18			964		1,125,942

See Notes to Financial Statements.

20 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

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.:
6.88%, 4/25/18		USD	3,550	$	4,077,459
5.49%, 3/15/19			1,500		1,659,773
5.63%, 7/01/20			2,500		2,846,475
5.70%, 1/24/22			8,000		9,267,496
3.30%, 1/11/23			1,400		1,400,108
4.13%, 1/22/24			2,500		2,625,388
4.25%, 10/22/26			2,770		2,763,781
6.11%, 1/29/37			800		944,603
4.88%, 4/01/44			2,475		2,734,345
Barclays PLC, 2.75%, 11/08/19			3,845		3,821,507
BNP Paribas SA:
1.38%, 3/17/17			5,000		4,985,950
2.40%, 12/12/18			2,000		2,019,042
Citigroup, Inc.:
4.45%, 1/10/17			1,900		2,008,458
2.50%, 9/26/18			3,000		3,035,052
8.50%, 5/22/19			1,600		1,993,707
2.50%, 7/29/19			5,500		5,504,416
6.13%, 8/25/36			800		953,657
5.88%, 1/30/42			1,000		1,257,836
5.30%, 5/06/44			1,100		1,205,236
Ford Motor Credit Co. LLC:
3.88%, 1/15/15			2,900		2,902,195
1.70%, 5/09/16			2,800		2,809,912
3.00%, 6/12/17			5,400		5,540,438
1.72%, 12/06/17			5,100		5,047,292
General Electric Capital Corp.:
2.25%, 11/09/15			2,000		2,027,440
2.30%, 1/14/19			4,000		4,063,832
6.75%, 3/15/32			500		682,941
IntercontinentalExchange Group, Inc., 2.50%, 10/15/18			3,000		3,054,663
JPMorgan Chase & Co.:
1.13%, 2/26/16			4,500		4,511,772
2.00%, 8/15/17			4,100		4,138,991
4.25%, 10/15/20			6,000		6,450,600
3.25%, 9/23/22			2,600		2,615,145
3.20%, 1/25/23			1,900		1,902,143
3.38%, 5/01/23			1,800		1,780,765
5.60%, 7/15/41			1,000		1,210,709
JPMorgan Chase Bank NA, 6.00%, 10/01/17			800		887,907
Leucadia National Corp., 5.50%, 10/18/23			3,500		3,584,427
Private Export Funding Corp., Series U, 4.95%, 11/15/15			3,325		3,457,924
					126,134,420
Diversified Telecommunication Services — 1.7%
AT&T, Inc.:
2.40%, 8/15/16			1,250		1,275,281
2.38%, 11/27/18			5,565		5,608,106
5.35%, 9/01/40			1,231		1,332,953
5.55%, 8/15/41			3,250		3,621,475
4.80%, 6/15/44			1,800		1,834,121
British Telecommunications PLC, 1.25%, 2/14/17			1,550		1,542,283
CC Holdings GS V LLC/Crown Castle GS III Corp., 3.85%, 4/15/23			4,250		4,221,576
Verizon Communications, Inc.:
2.00%, 11/01/16			5,500		5,580,646
1.35%, 6/09/17			5,200		5,175,940
3.65%, 9/14/18			4,500		4,755,271
5.05%, 3/15/34			3,200		3,413,520
4.40%, 11/01/34			4,350		4,323,817
6.90%, 4/15/38			900		1,178,988
7.35%, 4/01/39			1,700		2,306,132
4.75%, 11/01/41			2,100		2,152,857
Corporate Bonds	Par   (000)			Value
Diversified Telecommunication Services (concluded)
Verizon Communications, Inc. (concluded):
6.55%, 9/15/43		USD	1,475	$	1,889,695
					50,212,661
Electric Utilities — 1.6%
Commonwealth Edison Co.:
4.70%, 4/15/15			1,000		1,011,320
5.88%, 2/01/33			2,000		2,510,088
4.70%, 1/15/44			601		684,602
Duke Energy Corp.:
2.15%, 11/15/16			2,100		2,138,785
5.05%, 9/15/19			2,000		2,235,212
Duke Energy Florida, Inc., 3.85%, 11/15/42			2,500		2,521,042
MidAmerican Energy Holdings Co., 5.75%, 4/01/18			6,550		7,340,231
Mississippi Power Co., 4.25%, 3/15/42			1,700		1,723,144
NextEra Energy Capital Holdings, Inc., 2.70%, 9/15/19			3,500		3,536,004
Northern States Power Co., 5.25%, 7/15/35			2,500		3,040,167
Pacific Gas & Electric Co.:
5.63%, 11/30/17			1,500		1,667,195
3.25%, 9/15/21			1,400		1,429,809
3.75%, 8/15/42			1,500		1,433,855
PacifiCorp:
5.50%, 1/15/19			1,300		1,468,869
6.25%, 10/15/37			1,000		1,353,297
Progress Energy, Inc.:
4.88%, 12/01/19			3,100		3,427,868
4.40%, 1/15/21			3,700		4,032,774
Tampa Electric Co., 2.60%, 9/15/22			2,000		1,956,982
Xcel Energy, Inc., 0.75%, 5/09/16			3,200		3,194,282
					46,705,526
Electrical Equipment — 0.3%
Amphenol Corp.:
1.55%, 9/15/17			3,355		3,345,660
2.55%, 1/30/19			2,000		2,013,906
Roper Industries, Inc., 2.05%, 10/01/18			3,500		3,471,111
					8,830,677
Electronic Equipment, Instruments & Components — 0.1%
Tyco Electronics Group SA, 6.55%, 10/01/17			2,900		3,264,324
Energy Equipment & Services — 0.0%
Weatherford International, Ltd., 4.50%, 4/15/22			712		633,698
Food & Staples Retailing — 0.6%
CVS Caremark Corp.:
6.13%, 8/15/16			2,300		2,481,371
2.25%, 12/05/18			3,125		3,152,978
Wal-Mart Stores, Inc.:
1.13%, 4/11/18			2,000		1,977,064
5.63%, 4/01/40			1,500		1,908,641
Walgreens Boots Alliance, Inc.
1.75%, 11/17/17			5,130		5,142,702
2.70%, 11/18/19			2,400		2,412,211
					17,074,967
Food Products — 0.3%
Kellogg Co.:
4.45%, 5/30/16			100		105,168
3.25%, 5/21/18			1,550		1,613,665
Mead Johnson Nutrition Co., 4.90%, 11/01/19			2,000		2,197,990
Mondelez International, Inc.:
4.13%, 2/09/16			2,000		2,074,306
2.25%, 2/01/19			2,000		1,991,786
					7,982,915

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014 21

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

Corporate Bonds	Par   (000)			Value
Gas Utilities — 0.1%
Southern California Gas Co., 3.75%, 9/15/42		USD	1,800	$	1,785,951
Health Care Equipment & Supplies — 1.5%
Baxter International, Inc., 1.85%, 6/15/18			1,650		1,641,745
Becton Dickinson and Co.:
2.68%, 12/15/19			1,045		1,058,743
3.73%, 12/15/24			4,370		4,499,243
Boston Scientific Corp., 2.65%, 10/01/18			2,000		2,002,354
CareFusion Corp.:
1.45%, 5/15/17			650		645,400
3.88%, 5/15/24			1,640		1,692,467
Covidien International Finance SA:
4.20%, 6/15/20			5,045		5,436,174
3.20%, 6/15/22			1,500		1,513,479
6.55%, 10/15/37			2,600		3,396,252
Medtronic, Inc. (b):
2.50%, 3/15/20			2,495		2,501,544
3.15%, 3/15/22			2,995		3,032,965
3.50%, 3/15/25			7,725		7,902,443
4.38%, 3/15/35			1,690		1,792,847
4.63%, 3/15/45			2,795		3,029,752
Stryker Corp., 4.38%, 5/15/44			3,000		3,120,261
					43,265,669
Health Care Providers & Services — 1.0%
Aetna, Inc., 3.50%, 11/15/24			1,450		1,473,840
AmerisourceBergen Corp., 1.15%, 5/15/17			6,000		5,949,312
Cardinal Health, Inc., 1.70%, 3/15/18			2,200		2,185,779
Express Scripts Holding Co., 3.13%, 5/15/16			3,000		3,083,829
HCA, Inc., 3.75%, 3/15/19			3,370		3,374,213
Humana, Inc.:
2.63%, 10/01/19			2,195		2,194,835
4.95%, 10/01/44			2,000		2,126,598
McKesson Corp.:
1.40%, 3/15/18			4,500		4,444,389
4.88%, 3/15/44			800		881,256
UnitedHealth Group, Inc., 4.70%, 2/15/21			3,100		3,488,935
					29,202,986
Hotels, Restaurants & Leisure — 0.4%
McDonald’s Corp., 6.30%, 10/15/37			1,000		1,306,679
Starbucks Corp., 0.88%, 12/05/16			2,450		2,443,091
Wyndham Worldwide Corp.:
4.25%, 3/01/22			1,550		1,583,128
3.90%, 3/01/23			1,550		1,529,286
Yum! Brands, Inc.:
4.25%, 9/15/15			2,000		2,046,648
5.30%, 9/15/19			2,241		2,479,964
6.88%, 11/15/37			465		600,652
					11,989,448
Household Products — 0.1%
Whirlpool Corp., 1.35%, 3/01/17			2,525		2,517,372
Independent Power and Renewable Electricity Producers — 0.2%
Constellation Energy Group, Inc., 5.15%, 12/01/20			1,200		1,328,641
Exelon Generation Co. LLC, 5.75%, 10/01/41			500		564,086
PSEG Power LLC:
2.45%, 11/15/18			400		400,637
4.15%, 9/15/21			1,150		1,211,479
Southern Power Co., 5.15%, 9/15/41			1,000		1,161,193
					4,666,036
Insurance — 1.1%
ACE INA Holdings, Inc., 3.35%, 5/15/24			3,155		3,188,121
Aflac, Inc.:
8.50%, 5/15/19			1,500		1,874,582
3.63%, 11/15/24			5,000		5,098,055
Corporate Bonds	Par   (000)			Value
Insurance (concluded)
Berkshire Hathaway, Inc., 1.90%, 1/31/17		USD	2,400	$	2,434,634
Fidelity National Financial, Inc., 5.50%, 9/01/22			1,225		1,334,604
Markel Corp.:
5.35%, 6/01/21			1,300		1,458,711
3.63%, 3/30/23			1,300		1,307,426
Marsh & McLennan Cos., Inc.:
2.35%, 9/10/19			2,940		2,944,301
4.80%, 7/15/21			1,600		1,778,272
Protective Life Corp., 8.45%, 10/15/39			800		1,205,494
Prudential Financial, Inc., 4.75%, 9/17/15			3,900		4,001,868
Willis Group Holdings PLC:
4.13%, 3/15/16			2,600		2,679,698
5.75%, 3/15/21			1,150		1,284,455
XLIT Ltd., 5.75%, 10/01/21			1,400		1,626,324
					32,216,545
Internet Software & Services — 0.7%
Baidu, Inc.:
3.25%, 8/06/18			7,000		7,155,498
2.75%, 6/09/19			1,072		1,067,285
eBay, Inc.:
2.20%, 8/01/19			5,400		5,345,093
3.45%, 8/01/24			2,200		2,163,144
Equinix, Inc.:
5.38%, 1/01/22			1,855		1,872,437
5.75%, 1/01/25			1,415		1,427,381
VeriSign, Inc., 4.63%, 5/01/23			1,325		1,298,500
					20,329,338
IT Services — 0.6%
Alibaba Group Holding, Ltd. (b):
2.50%, 11/28/19			5,415		5,341,990
3.60%, 11/28/24			1,295		1,284,438
International Business Machines Corp.:
2.00%, 1/05/16			8,600		8,726,196
7.63%, 10/15/18			2,050		2,471,531
					17,824,155
Leisure Products — 0.1%
Royal Caribbean Cruises Ltd., 5.25%, 11/15/22			3,654		3,836,700
Life Sciences Tools & Services — 0.1%
Thermo Fisher Scientific, Inc., 3.20%, 3/01/16			2,800		2,866,850
Machinery — 0.3%
Danaher Corp., 2.30%, 6/23/16			450		460,154
Illinois Tool Works, Inc., 1.95%, 3/01/19			4,000		4,002,160
Ingersoll-Rand Global Holding Co., Ltd.:
2.88%, 1/15/19			400		406,309
5.75%, 6/15/43			1,500		1,767,936
Trinity Acquisition PLC, 6.13%, 8/15/43			1,100		1,260,365
					7,896,924
Media — 1.3%
CBS Outdoor Americas Capital LLC/CBS Outdoor Americas Capital Corp. (b):
5.25%, 2/15/22			800		806,000
5.63%, 2/15/24			800		804,000
Comcast Corp., 5.70%, 5/15/18			2,450		2,758,835
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc.:
3.55%, 3/15/15			3,600		3,621,370
4.45%, 4/01/24			700		732,413
5.15%, 3/15/42			3,750		3,875,100
DISH DBS Corp.:
7.88%, 9/01/19			2,700		3,064,500
6.75%, 6/01/21			1,200		1,290,000
NBCUniversal Enterprise, Inc., 1.66%, 4/15/18 (b)			1,000		992,848

See Notes to Financial Statements.

22 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

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

Corporate Bonds	Par   (000)			Value
Media (concluded)
Scripps Networks Interactive, Inc., 2.70%, 12/15/16		USD	2,300	$	2,362,341
Thomson Reuters Corp., 0.88%, 5/23/16			1,600		1,591,709
Time Warner Cable, Inc.:
5.00%, 2/01/20			2,300		2,534,565
4.50%, 9/15/42			1,700		1,747,503
Time Warner, Inc.:
2.10%, 6/01/19			4,100		4,039,340
4.65%, 6/01/44			1,500		1,563,861
Viacom, Inc., 2.50%, 9/01/18			4,300		4,338,021
					36,122,406
Metals & Mining — 0.1%
Reliance Steel & Aluminum Co., 4.50%, 4/15/23			1,953		1,914,049
Multi-Utilities — 0.3%
Consolidated Edison Co. of New York, Inc., Series 12-A, 4.20%, 3/15/42			2,400		2,488,925
Dominion Resources, Inc.:
6.40%, 6/15/18			1,050		1,198,646
4.45%, 3/15/21			2,100		2,275,281
4.05%, 9/15/42			1,700		1,658,256
SCANA Corp., 4.13%, 2/01/22			500		518,337
					8,139,445
Offshore Drilling & Other Services — 0.0%
KLA-Tencor Corp., 3.38%, 11/01/19			930		947,512
Oil, Gas & Consumable Fuels — 3.6%
BP Capital Markets PLC:
3.13%, 10/01/15			700		712,552
3.20%, 3/11/16			1,500		1,540,434
2.24%, 5/10/19			6,400		6,392,237
3.56%, 11/01/21			1,900		1,941,213
Buckeye Partners LP:
2.65%, 11/15/18			4,900		4,826,181
4.35%, 10/15/24			1,900		1,862,167
CNOOC Finance 2013 Ltd., 1.75%, 5/09/18			875		860,998
CNOOC Nexen Finance 2014 ULC, 1.63%, 4/30/17			6,800		6,766,796
ConocoPhillips Canada Funding Co. I, 5.63%, 10/15/16			500		539,770
DCP Midstream Operating LP, 3.25%, 10/01/15			2,000		2,028,796
Ecopetrol SA, 5.88%, 5/28/45			950		878,750
El Paso Pipeline Partners Operating Co. LLC, 4.30%, 5/01/24			4,500		4,508,712
Energy Transfer Equity LP, 7.50%, 10/15/20			5,998		6,657,780
Energy Transfer Partners LP:
9.70%, 3/15/19			842		1,056,809
9.00%, 4/15/19			373		457,793
4.15%, 10/01/20			3,950		4,049,461
Enterprise Products Operating LLC:
3.20%, 2/01/16			3,000		3,071,046
5.75%, 3/01/35			500		575,297
5.95%, 2/01/41			900		1,058,125
Hess Corp., 1.30%, 6/15/17			1,110		1,093,625
Husky Energy, Inc.:
3.95%, 4/15/22			3,900		3,913,576
6.80%, 9/15/37			1,000		1,219,909
Kinder Morgan Energy Partners LP:
3.50%, 3/01/21			850		836,256
5.63%, 9/01/41			1,895		1,886,922
Kinder Morgan, Inc.:
3.05%, 12/01/19			865		858,123
4.30%, 6/01/25			3,860		3,861,799
5.55%, 6/01/45			2,550		2,611,784
Magellan Midstream Partners LP, 5.15%, 10/15/43			1,350		1,431,139
Corporate Bonds	Par   (000)			Value
Oil, Gas & Consumable Fuels (concluded)
Marathon Oil Corp., 0.90%, 11/01/15		USD	1,300	$	1,296,207
Marathon Petroleum Corp., 4.75%, 9/15/44			1,365		1,289,114
Petrobras International Finance Co.:
3.50%, 2/06/17			5,900		5,633,969
5.38%, 1/27/21			1,850		1,714,154
6.75%, 1/27/41			500		454,785
Petroleos Mexicanos:
5.50%, 1/21/21			1,100		1,190,750
4.88%, 1/24/22			1,300		1,361,633
6.50%, 6/02/41			500		573,750
6.38%, 1/23/45			2,900		3,284,250
Statoil ASA:
1.95%, 11/08/18			2,840		2,839,327
2.75%, 11/10/21			5,680		5,696,881
Sunoco Logistics Partners Operations LP:
6.10%, 2/15/42			900		976,159
4.95%, 1/15/43			900		862,433
5.30%, 4/01/44			300		302,385
Total Capital International SA, 2.10%, 6/19/19			3,300		3,301,452
The Williams Cos., Inc., 4.55%, 6/24/24			6,515		6,058,826
Williams Partners LP, 3.80%, 2/15/15			800		802,286
					105,136,411
Personal Products — 0.1%
The Procter & Gamble Co., 1.90%, 11/01/19			3,270		3,276,556
Pharmaceuticals — 1.4%
AbbVie, Inc., 1.20%, 11/06/15			1,300		1,303,821
Actavis Funding SCS, 3.85%, 6/15/24			5,100		5,126,056
AstraZeneca PLC, 6.45%, 9/15/37			2,400		3,233,998
Bayer US Finance LLC, 1.50%, 10/06/17 (b)			5,590		5,593,583
Eli Lilly & Co.:
5.55%, 3/15/37			1,700		2,058,078
4.65%, 6/15/44			3,700		4,147,293
GlaxoSmithKline Capital, Inc.:
0.70%, 3/18/16			2,500		2,499,880
5.65%, 5/15/18			1,200		1,351,830
Novartis Capital Corp.:
3.40%, 5/06/24			4,600		4,785,297
4.40%, 5/06/44			4,300		4,818,761
Pfizer, Inc., 6.20%, 3/15/19			1,500		1,745,080
Zoetis, Inc., 1.15%, 2/01/16			3,000		2,997,321
					39,660,998
Professional Services — 0.0%
The Dun & Bradstreet Corp., 2.88%, 11/15/15			600		604,353
Real Estate Investment Trusts (REITs) — 1.3%
Alexandria Real Estate Equities, Inc., 2.75%, 1/15/20			4,000		3,961,752
American Tower Corp.:
4.63%, 4/01/15			4,000		4,035,716
4.50%, 1/15/18			2,100		2,230,173
3.40%, 2/15/19			1,768		1,799,504
5.05%, 9/01/20			1,300		1,410,426
3.45%, 9/15/21			2,450		2,408,693
4.70%, 3/15/22			2,900		3,040,627
5.00%, 2/15/24			3,000		3,181,401
Corrections Corp. of America:
4.13%, 4/01/20			2,900		2,820,250
4.63%, 5/01/23			2,425		2,334,062
HCP, Inc., 6.70%, 1/30/18			4,000		4,555,320
Host Hotels & Resorts LP, 3.75%, 10/15/23			525		523,661
Simon Property Group LP, 4.75%, 3/15/42			1,900		2,095,694
WEA Finance LLC/Westfield UK & Europe Finance PLC, 2.70%, 9/17/19 (b)			1,945		1,944,434
					36,341,713

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014 23

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

Corporate Bonds	Par   (000)			Value
Road & Rail — 0.4%
Burlington Northern Santa Fe LLC:
5.40%, 6/01/41		USD	2,700	$	3,220,871
4.55%, 9/01/44			2,110		2,264,690
Canadian Pacific Railway Co., 7.13%, 10/15/31			1,000		1,375,310
Norfolk Southern Corp., 5.75%, 1/15/16			2,425		2,541,276
Union Pacific Corp., 6.13%, 2/15/20			1,300		1,488,279
					10,890,426
Semiconductors & Semiconductor Equipment — 0.7%
Intel Corp.:
3.30%, 10/01/21			2,100		2,202,119
4.80%, 10/01/41			350		384,384
4.25%, 12/15/42			1,100		1,133,673
Maxim Integrated Products, Inc., 2.50%, 11/15/18			1,220		1,217,254
Seagate HDD Cayman:
3.75%, 11/15/18 (b)			7,500		7,696,875
4.75%, 6/01/23			3,100		3,219,809
4.75%, 1/01/25 (b)			4,400		4,532,726
					20,386,840
Software — 0.1%
Oracle Corp.:
5.25%, 1/15/16			1,500		1,571,869
5.75%, 4/15/18			550		621,756
					2,193,625
Specialty Retail — 1.1%
Advance Auto Parts, Inc., 4.50%, 1/15/22			3,100		3,290,662
AutoZone, Inc., 1.30%, 1/13/17			3,850		3,835,609
The Home Depot, Inc.:
5.88%, 12/16/36			2,000		2,611,996
5.40%, 9/15/40			2,000		2,457,682
5.95%, 4/01/41			800		1,044,861
L Brands, Inc.:
6.90%, 7/15/17			2,167		2,383,700
8.50%, 6/15/19			4,000		4,740,000
O’Reilly Automotive, Inc., 4.63%, 9/15/21			5,300		5,778,802
QVC, Inc., 4.45%, 2/15/25			5,300		5,180,029
					31,323,341
Technology Hardware, Storage & Peripherals — 0.6%
Apple, Inc.:
2.85%, 5/06/21			5,500		5,626,275
3.85%, 5/04/43			3,300		3,302,386
Hewlett-Packard Co.:
3.00%, 9/15/16			3,000		3,080,331
2.75%, 1/14/19			4,000		4,005,112
					16,014,104
Tobacco — 1.1%
Altria Group, Inc.:
4.13%, 9/11/15			2,600		2,659,100
5.38%, 1/31/44			7,200		8,195,889
Lorillard Tobacco Co., 3.50%, 8/04/16			650		669,153
Philip Morris International, Inc.:
5.65%, 5/16/18			4,300		4,844,496
1.88%, 1/15/19			3,550		3,528,466
2.90%, 11/15/21			1,400		1,420,653
6.38%, 5/16/38			2,500		3,196,400
4.25%, 11/10/44			600		610,130
Reynolds American, Inc.:
1.05%, 10/30/15			2,000		2,002,178
3.25%, 11/01/22			2,300		2,240,297
4.85%, 9/15/23			900		968,736
4.75%, 11/01/42			1,700		1,649,937
6.15%, 9/15/43			750		869,753
					32,855,188

Corporate Bonds	Par   (000)			Value
Wireless Telecommunication Services — 0.1%
Crown Castle International Corp., 4.88%, 4/15/22		USD	2,800	$	2,828,000
Vodafone Group PLC, 5.63%, 2/27/17			950		1,029,311
					3,857,311
Total Corporate Bonds — 38.0%					1,096,956,030
Foreign Agency Obligations
Brazilian Government International Bond:
5.63%, 1/07/41			1,500		1,616,250
5.00%, 1/27/45			2,500		2,450,000
Colombia Government International Bond, 4.00%, 2/26/24			2,210		2,259,725
Export-Import Bank of Korea:
2.38%, 8/12/19			5,600		5,603,001
4.00%, 1/29/21			1,446		1,546,516
Mexico Government International Bond:
3.50%, 1/21/21			2,915		2,976,215
6.75%, 9/27/34			2,400		3,134,400
6.05%, 1/11/40			3,800		4,647,400
4.75%, 3/08/44			3,100		3,231,750
Tunisia Government AID Bonds, 2.45%, 7/24/21			3,327		3,378,073
Uruguay Government International Bond, 5.10%, 6/18/50			1,600		1,624,000
Total Foreign Agency Obligations — 1.1%					32,467,330
Municipal Bonds
Bay Area Toll Authority, RB, Build America Bonds, San Francisco Toll Bridge, Series S-1, 7.04%, 4/01/50			800		1,191,000
Chicago Transit Authority, RB, Series B, 6.90%, 12/01/40			450		566,982
City & County of San Francisco California Public Utilities Commission Water Revenue, RB, Build America Bonds, Sub-Series G, 6.95%, 11/01/50			400		592,496
City of Chicago Illinois Waterworks Transmission, RB, Build America Bonds, 2nd Lien, Series B, 6.74%, 11/01/40			150		197,664
City of Los Angeles California Department of Water & Power, RB, Build America Bonds, Series D, 6.57%, 7/01/45			320		461,779
City of New York New York Transitional Finance Authority, RB, Build America Bonds, Future Tax Secured, Sub-Series B-1, 5.57%, 11/01/38			450		561,879
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		1,352,210
County of Orange California Local Transportation Authority, Refunding RB, Build America Bonds, Series A, 6.91%, 2/15/41			450		641,727
County of San Diego California Regional Transportation Commission, RB, Build America Bonds, Series A, 5.91%, 4/01/48			600		820,362
Florida Hurricane Catastrophe Fund Finance Corp., RB, Series A, 1.30%, 7/01/16			1,725		1,739,335
Metropolitan Water District of Southern California, RB, Build America Bonds, Series A, 6.95%, 7/01/40			1,200		1,440,132
New Jersey State Turnpike Authority, RB, Build America Bonds, Series A, 7.10%, 1/01/41			700		1,022,756
Port Authority of New York & New Jersey, RB, 164th Series, 5.65%, 11/01/40			800		988,280

See Notes to Financial Statements.

24 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

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

Municipal Bonds	Par   (000)			Value
Port Authority of New York & New Jersey, Refunding RB, 174th Series, 4.46%, 10/01/62		USD	700	$	738,738
State of California, GO, Build America Bonds, Various Purpose:
7.55%, 4/01/39			1,150		1,772,656
7.63%, 3/01/40			1,150		1,765,192
7.60%, 11/01/40			250		395,773
State of Illinois, GO:
Build America Bonds, 7.35%, 7/01/35			650		762,014
Pension, 5.10%, 6/01/33			1,000		997,870
State of Mississippi, GO, Refunding Build America Bonds, Series F, 5.25%, 11/01/34			600		721,206
State of New York Dormitory Authority, RB, Build America Bonds, General Purpose, Series H, 5.39%, 3/15/40			675		852,046
State of Oregon Department of Transportation, RB, Sub-Lien, Series A, 5.83%, 11/15/34			400		519,152
University of California, Refunding RB, Series AJ, 4.60%, 5/15/31			1,000		1,097,360
University of Missouri, RB, Build America Bonds, Series A, 5.79%, 11/01/41			300		401,382
Total Municipal Bonds — 0.7%					21,599,991
Non-Agency Mortgage-Backed Securities
Collateralized Mortgage Obligations — 1.8%
Adjustable Rate Mortgage Trust, Series 2005-3, Class 8A11, 0.39%, 7/25/35 (a)			70		69,916
Citicorp Mortgage Securities Trust, Series 2006-1, Class 2A1, 5.00%, 2/25/21			178		184,699
Citigroup Mortgage Loan Trust, Series 2014-A, Class A, 4.00%, 1/25/35 (a)(b)			1,298		1,349,787
Connecticut Avenue Securities Series, Series 2014-C01, Class M1, 1.77%, 1/25/24 (a)			4,084		4,076,610
Credit Suisse First Boston Mortgage Securities Corp., Series 2005-7, Class 1A6, 5.25%, 8/25/35			313		325,278
CSMC Trust (a)(b):
Series 2009-13R, Class 5A1, 0.95%, 1/26/35			4,164		4,142,448
Series 2010-20R, Class 7A6, 3.50%, 3/27/37			2,110		2,114,603
Series 2011-4R, Class 4A6, 4.00%, 8/27/37			1,066		1,083,388
Series 2013-8R, Class 7A1, 0.33%, 4/27/37			1,296		1,241,989
Series 2013-8R, Class 8A1, 0.39%, 5/27/37			4,409		4,262,682
LB-UBS Commercial Mortgage Trust, Series 2007-C2, Class A3, 5.43%, 2/15/40			7,310		7,819,900
Nomura Resecuritization Trust, Series 2014-1R, Class 5A1, 0.31%, 10/26/36 (a)(b)			4,521		4,407,364
Puma Finance Property Ltd., Series G5, Class A1, 0.37%, 2/21/38 (a)(b)			653		648,359
RALI Trust:
Series 2004-QS4, Class A7, 4.00%, 3/25/34			43		43,812
Series 2004-QS5, Class A5, 4.75%, 4/25/34			577		590,575
Series 2004-QS9, Class A1, 5.00%, 6/25/19			254		254,630
RBSSP Resecuritization Trust, Series 2009-6, Class 13A4, 2.41%, 8/26/35 (a)(b)			1,807		1,820,447
Structured Agency Credit Risk Debt Notes, Class M1 (a):
Series 2013-DN1, 3.57%, 7/25/23			3,219		3,332,553
Series 2013-DN2, 1.61%, 11/25/23			7,661		7,638,002
VFC LLC, Series 2014-2, Class A, 2.75%, 7/20/30 (b)			5,293		5,293,367
				��
					50,700,409
Non-Agency Mortgage-Backed Securities	Par   (000)			Value
Commercial Mortgage-Backed Securities — 11.7%
Banc of America Commercial Mortgage Trust:
Series 2006-1, Class AM, 5.42%, 9/10/45 (a)		USD	2,650	$	2,753,085
Series 2006-4, Class A4, 5.63%, 7/10/46			5,512		5,767,113
Series 2006-5, Class AM, 5.45%, 9/10/47			1,520		1,592,566
Series 2006-6, Class A4, 5.36%, 10/10/45			3,580		3,746,835
Series 2007-4, Class A4, 5.75%, 2/10/51 (a)			2,963		3,229,379
Series 2007-5, Class A4, 5.49%, 2/10/51			3,440		3,671,509
Banc of America Merrill Lynch Commercial Mortgage, Inc. (a):
Series 2005-2, Class A5, 4.86%, 7/10/43			2,496		2,506,210
Series 2005-6, Class A4, 5.15%, 9/10/47			11,555		11,793,050
Bear Stearns Commercial Mortgage Securities Trust:
Series 2005-PW10, Class AM, 5.45%, 12/11/40 (a)			2,710		2,797,687
Series 2005-PWR8, Class A4, 4.67%, 6/11/41			3,821		3,838,379
Series 2005-PWR8, Class AJ, 4.75%, 6/11/41			5,350		5,417,811
Series 2005-PWR9, Class A4B, 4.94%, 9/11/42			2,100		2,142,420
CD Commercial Mortgage Trust, Series 2007-CD4, Class AMFX, 5.37%, 12/11/49 (a)			500		518,527
Citigroup Commercial Mortgage Trust, Series 2010-RR2, Class CA3A, 5.31%, 12/19/39 (a)(b)			629		663,401
Commercial Mortgage Trust:
Series 2006-C7, Class AM, 5.78%, 6/10/46 (a)			3,435		3,628,425
Series 2007-C9, Class A4, 5.80%, 12/10/49 (a)			3,244		3,543,081
Series 2007-C9, Class AJ, 5.65%, 12/10/49 (a)			3,100		3,291,534
Series 2007-GG9, Class AM, 5.48%, 3/10/39			1,980		2,074,571
Series 2013-CR07, Class A4, 3.21%, 3/10/46			1,700		1,736,734
Series 2013-CR09, Class A4, 4.24%, 7/10/45 (a)			600		659,018
Series 2013-CR12, Class A3, 3.77%, 10/10/46			990		1,047,629
Series 2013-CR13, Class A4, 4.19%, 11/10/23 (a)			3,290		3,587,992
Series 2013-LC6, Class AM, 3.28%, 1/10/46			1,290		1,296,008
Series 2014-CR16, Class A4, 4.05%, 4/10/47			260		280,631
Series 2014-CR17, Class A5, 3.98%, 5/10/47			2,240		2,402,944
Series 2014-CR20, Class A4, 3.59%, 11/10/47			3,055		3,177,475
Series 2014-CR21, Class A3, 3.53%, 12/10/47			3,190		3,300,575
Credit Suisse Commercial Mortgage Trust:
Series 2006-C3, Class A3, 5.81%, 6/15/38 (a)			9,679		10,113,294
Series 2006-C3, Class AM, 5.81%, 6/15/38 (a)			2,368		2,499,291
Series 2006-C5, Class A3, 5.31%, 12/15/39			4,428		4,665,906
Series 2007-C1, Class A3, 5.38%, 2/15/40			2,196		2,327,789
Series 2007-C2, Class A3, 5.54%, 1/15/49 (a)			2,250		2,410,274
Series 2007-C2, Class AM, 5.61%, 1/15/49 (a)			950		1,017,041

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014 25

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 Series, Series 2006-C2, Class A3, 5.67%, 3/15/39 (a)		USD	2,082	$	2,158,939
Credit Suisse First Boston Mortgage Securities Corp., Series 2005-C5, Class AJ, 5.10%, 8/15/38 (a)			4,154		4,235,439
DBRR Trust, Series 2013-EZ2, Class A, 0.85%, 2/25/45 (a)(b)			2,248		2,247,398
GE Capital Commercial Mortgage Corp. (a):
Series 2005-C2, Class A4, 4.98%, 5/10/43			3,887		3,894,444
Series 2005-C3, Class AJ, 5.07%, 7/10/45			700		712,089
Series 2006-C1, Class A4, 5.27%, 3/10/44			5,806		5,949,282
GMAC Commercial Mortgage Securities, Inc. Trust, Series 2006-C1, Class A4, 5.24%, 11/10/45 (a)			4,639		4,720,679
GS Mortgage Securities Trust:
Series 2006-GG6, Class AM, 5.55%, 4/10/38 (a)			4,100		4,257,940
Series 2009-RR1, Class GGA, 5.79%, 7/12/38 (a)(b)			1,764		1,853,870
Series 2012-GCJ7, Class AS, 4.09%, 5/10/45			930		991,462
Series 2013-GC14, Class A5, 4.24%, 8/10/46			1,620		1,772,223
Series 2013-GC16, Class A3, 4.24%, 11/10/46			1,580		1,728,371
Series 2014-GC24, Class A5, 3.93%, 9/10/47			2,500		2,666,963
JPMBB Commercial Mortgage Securities Trust:
Series 2013-C14, Class A4, 4.13%, 8/15/46 (a)			1,400		1,523,549
Series 2013-C14, Class AS, 4.41%, 8/15/46 (a)			760		825,713
Series 2013-C15, Class B, 4.93%, 11/15/45			1,730		1,908,780
Series 2014-C22, Class A4, 3.80%, 9/15/47			2,280		2,402,835
JPMorgan Chase Commercial Mortgage Securities Trust:
Series 2004-C1, Class H, 5.89%, 1/15/38 (a)(b)			3,371		3,450,913
Series 2005-CB11, Class A4, 5.34%, 8/12/37 (a)			1,345		1,346,352
Series 2005-CB13, Class AM, 5.28%, 1/12/43 (a)			2,060		2,117,682
Series 2005-LDP1, Class AJFL, 0.36%, 3/15/46 (a)			672		671,477
Series 2005-LDP1, Class C, 5.28%, 3/15/46 (a)			2,300		2,297,468
Series 2005-LDP3, Class AJ, 5.00%, 8/15/42 (a)			7,383		7,517,127
Series 2005-LDP5, Class AJ, 5.36%, 12/15/44 (a)			1,935		2,001,719
Series 2005-LDP5, Class AM, 5.28%, 12/15/44 (a)			5,070		5,232,123
Series 2006-CB14, Class AM, 5.43%, 12/12/44 (a)			6,526		6,767,449
Series 2006-CB16, Class A4, 5.55%, 5/12/45			854		891,825
Series 2006-CB17, Class A4, 5.43%, 12/12/43			8,200		8,623,333
Series 2006-LDP8, Class A1A, 5.40%, 5/15/45			1,393		1,465,662
Series 2006-LDP8, Class AM, 5.44%, 5/15/45			6,171		6,534,114
Series 2011-C5, Class A3, 4.17%, 8/15/46			1,100		1,188,376
Series 2012-CBX, Class AS, 4.27%, 6/15/45			1,110		1,198,943
Series 2012-C6, Class A3, 3.51%, 5/15/45			815		851,405
Non-Agency Mortgage-Backed Securities	Par   (000)			Value
Commercial Mortgage-Backed Securities (continued)
LB Commercial Mortgage Trust, Series 2007-C3, Class A4, 5.90%, 7/15/44 (a)		USD	2,059	$	2,230,725
LB-UBS Commercial Mortgage Trust:
Series 2005-C2, Class AJ, 5.21%, 4/15/30 (a)			1,460		1,470,678
Series 2005-C3, Class AM, 4.79%, 7/15/40			6,770		6,842,344
Series 2006-C1, Class AM, 5.22%, 2/15/31 (a)			740		766,416
Series 2006-C3, Class A1A, 5.64%, 3/15/39 (a)			2,988		3,109,099
Series 2006-C4, Class AM, 5.85%, 6/15/38 (a)			3,376		3,583,627
Series 2006-C7, Class A2, 5.30%, 11/15/38			3,097		3,138,969
Series 2006-C7, Class AM, 5.38%, 11/15/38			1,000		1,059,747
Series 2007-C1, Class A4, 5.42%, 2/15/40			4,196		4,493,430
Series 2007-C2, Class AM, 5.49%, 2/15/40 (a)			1,800		1,897,060
Series 2007-C7, Class A3, 5.87%, 9/15/45 (a)			2,980		3,273,909
Merrill Lynch Mortgage Trust, Series 2005-CIP1, Class AM, 5.11%, 7/12/38 (a)			5,395		5,486,122
ML-CFC Commercial Mortgage Trust, Class A4 (a):
Series 2006-1, 5.47%, 2/12/39			12,832		13,261,225
Series 2006-2, 5.87%, 6/12/46			3,384		3,551,223
Monty Parent Issuer 1 LLC, Series 2013-LTR1, Class B, 4.25%, 11/20/28 (b)			2,397		2,383,951
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2013-C10, Class A4, 4.08%, 7/15/46 (a)			1,560		1,692,999
Morgan Stanley Capital I Trust:
Series 2005-IQ10, Class AJ, 5.19%, 9/15/42 (a)			1,200		1,223,561
Series 2006-HQ8, Class A4, 5.41%, 3/12/44 (a)			4,256		4,362,822
Series 2006-HQ8, Class AM, 5.46%, 3/12/44 (a)			990		1,029,952
Series 2006-T21, Class A4, 5.16%, 10/12/52 (a)			1,355		1,389,322
Series 2007-HQ11, Class A4, 5.45%, 2/12/44 (a)			2,961		3,158,212
Series 2007-IQ16, Class A4, 5.81%, 12/12/49			6,233		6,776,157
Series 2007-T25, Class A3, 5.51%, 11/12/49 (a)			3,586		3,828,512
Series 2007-T27, Class A4, 5.65%, 6/11/42 (a)			5,450		5,932,429
Series 2007-T27, Class AM, 5.65%, 6/11/42 (a)			2,080		2,261,522
Series 2012-C4, Class A4, 3.24%, 3/15/45			2,220		2,285,579
Wachovia Bank Commercial Mortgage Trust:
Series 2005-C19, Class A6, 4.70%, 5/15/44			1,358		1,370,057
Series 2005-C19, Class B, 4.89%, 5/15/44			3,186		3,218,013
Series 2005-C20, Class A7, 5.12%, 7/15/42 (a)			2,862		2,886,157
Series 2005-C20, Class AJ, 5.16%, 7/15/42 (a)			4,110		4,205,792
Series 2005-C20, Class AMFX, 5.18%, 7/15/42 (a)			3,930		4,013,021
Series 2006-C23, Class A4, 5.42%, 1/15/45 (a)			157		160,659
Series 2006-C27, Class A3, 5.77%, 7/15/45 (a)			4,550		4,765,816

See Notes to Financial Statements.

26 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

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)
Wachovia Bank Commercial Mortgage Trust (concluded):
Series 2006-C28, Class AM, 5.60%, 10/15/48 (a)		USD	2,430	$	2,588,771
Series 2007-C34, Class A3, 5.68%, 5/15/46			3,990		4,313,118
Wells Fargo Commercial Mortgage Trust:
Series 2014-LC18, Class A5, 3.41%, 12/15/47			3,400		3,482,175
Series 2014-LC18, Class AS, 3.81%, 12/15/47			1,700		1,744,062
WF-RBS Commercial Mortgage Trust:
Series 2012-C08, Class AS, 3.66%, 8/15/45			2,160		2,240,991
Series 2012-C10, Class A3, 2.88%, 12/15/45			5,370		5,371,896
Series 2012-C10, Class AS, 3.24%, 12/15/45			1,520		1,529,831
Series 2013-C18, Class A5, 4.16%, 12/15/46 (a)			1,880		2,046,506
Series 2014-C20, Class A5, 4.00%, 5/15/47			2,780		2,984,766
Series 2014-C20, Class B, 4.38%, 5/15/47			1,530		1,622,937
					338,538,288
Total Non-Agency Mortgage-Backed Securities — 13.5%					389,238,697
U.S. Government Sponsored Agency Securities
Agency Obligations — 2.6%
Fannie Mae:
0.00%, 10/09/19 - 5/15/30 (d)			39,305		30,558,472
6.32%, 12/20/27			910		1,231,760
Federal Farm Credit Banks:
1.69%, 4/09/20			8,000		7,867,712
2.00%, 4/04/22			2,977		2,922,024
Federal Home Loan Bank:
4.00%, 9/01/28			1,625		1,791,155
5.38%, 8/15/24			4,500		5,521,720
FICO STRIPS, 0.00%, 12/06/16 (d)			3,000		2,949,921
Financing Corp. FICO, 0.00%, 2/8/18 -11/2/18 (d)			19,000		17,941,847
Resolution Funding Corp., 8.13%, 10/15/19			3,500		4,512,809
Tennessee Valley Authority:
3.50%, 12/15/42			250		247,224
5.88%, 4/01/36			1,125		1,534,591
					77,079,235
Collateralized Mortgage Obligations — 0.9%
Fannie Mae, Series 2013-C01, Class M1, 2.17%, 10/25/23 (a)			2,527		2,538,985
Fannie Mae REMICS (a):
Series 2007-54, Class PF, 0.39%, 6/25/37			2,637		2,640,662
Series 2010-89, Class CF, 0.62%, 2/25/38			1,721		1,739,457
Series 2010-35, Class EF, 0.72%, 4/25/40			1,745		1,762,871
Freddie Mac REMICS (a):
Series 3807, Class FN, 0.66%, 2/15/41			1,053		1,063,283
Series 3667, Class FW, 0.71%, 2/15/38			1,045		1,056,981
Ginnie Mae, Series 2014-90, Class FA, 0.56%, 10/20/38 (a)			13,925		14,028,634
					24,830,873
Commercial Mortgage-Backed Securities — 0.7%
Freddie Mac, Class A2:
Series K025, 2.68%, 10/25/22			8,850		8,937,473
Series K040, 3.24%, 9/25/24			8,850		9,236,409
U.S. Government Sponsored Agency Securities	Par   (000)			Value
Commercial Mortgage-Backed Securities (concluded)
Freddie Mac, Class A2 (concluded):
Series K031, 3.30%, 4/25/23 (a)		USD	901	$	946,401
					19,120,283
Mortgage-Backed Securities — 49.0%
Fannie Mae Mortgage-Backed Securities:
1.92%, 4/01/43 (a)			672		690,703
1.93%, 5/01/43 (a)			1,008		1,036,519
2.07%, 6/01/43 (a)			1,317		1,325,270
2.20%, 1/01/36 (a)			855		916,988
2.27%, 1/01/35 (a)			1,006		1,074,285
2.32%, 8/01/33 (a)			1,557		1,666,673
2.34%, 5/01/33 (a)			2,049		2,195,969
2.43%, 2/01/42 (a)			25		26,576
2.50%, 9/01/28 - 1/01/45 (e)			29,868		30,295,236
2.75%, 1/01/42 (a)			686		712,866
2.78%, 8/01/41 (a)			1,658		1,735,483
3.00%, 1/01/27 - 1/01/45 (e)			76,398		78,337,875
3.31%, 9/01/41 (a)			967		1,011,692
3.33%, 4/01/40 (a)			205		217,683
3.50%, 2/01/26 - 1/01/45 (e)			175,984		184,467,689
4.00%, 8/01/25 - 1/01/45 (e)			286,025		305,425,956
4.50%, 10/01/24 - 1/01/45 (e)			192,633		209,147,186
5.00%, 1/01/18 - 1/01/45 (e)			65,791		72,717,529
5.50%, 9/01/19 - 1/01/45 (e)			14,041		15,716,737
6.00%, 11/01/22 - 8/01/38			17,569		20,050,017
6.50%, 12/01/30 - 12/01/32			7,745		8,915,206
Freddie Mac Mortgage-Backed Securities:
1.76%, 6/01/43 (a)			386		393,073
2.21%, 10/01/33 (a)			1,026		1,088,296
2.26%, 4/01/38 (a)			1,202		1,287,811
2.48%, 5/01/43 (a)			964		973,806
2.50%, 1/01/30 - 4/01/43 (e)			18,908		19,195,039
2.51%, 11/01/36 (a)			1,054		1,104,574
2.51%, 8/01/43 (a)			348		351,700
2.61%, 1/01/42 (a)			18		19,243
3.00%, 3/01/27 - 6/01/43 (e)			53,683		54,803,358
3.23%, 8/01/41 (a)			983		1,039,199
3.32%, 2/01/40 (a)			1,102		1,175,420
3.35%, 7/01/41 (a)			700		736,193
3.50%, 12/01/25 - 1/01/45 (e)			47,216		49,293,718
4.00%, 3/01/26 - 1/01/45 (e)			45,690		48,724,186
4.50%, 8/01/20 - 1/01/45 (e)			23,800		25,970,359
5.00%, 10/01/20 - 8/01/40			8,427		9,284,025
5.50%, 5/01/34 - 8/01/38			6,697		7,503,440
6.00%, 12/01/28 - 1/01/38			5,668		6,459,861
6.50%, 5/01/21 - 7/01/32			2,389		2,774,397
Ginnie Mae Mortgage-Backed Securities:
3.00%, 5/15/43 - 1/01/45 (e)			34,654		35,428,049
3.50%, 1/15/41 - 1/01/45 (e)			86,330		90,783,315
4.00%, 9/15/40 - 1/01/45 (e)			47,219		50,750,748
4.50%, 3/15/39 - 1/01/45 (e)			33,276		36,493,104
5.00%, 10/20/39 - 5/20/41			18,869		21,030,324
5.50%, 6/15/34 - 7/20/40			7,761		8,756,404
6.00%, 9/20/38 - 10/20/38			2,485		2,807,165
					1,415,910,945
Total U.S. Government Sponsored Agency Securities — 53.2%					1,536,941,336
U.S. Treasury Obligations
U.S. Treasury Bonds:
6.38%, 8/15/27			12,068		17,433,541
6.13%, 11/15/27			12,000		17,070,000
6.25%, 5/15/30			26,586		39,720,834

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014 27

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

U.S. Treasury Obligations	Par   (000)				Value
U.S. Treasury Bonds (concluded):
4.50%, 8/15/39		USD		19,675	$	26,220,007
3.88%, 8/15/40				15,149		18,493,611
3.38%, 5/15/44				7,100		7,993,045
U.S. Treasury Inflation Indexed Bonds, 0.13%, 7/15/24				16,049		15,456,131
U.S. Treasury Notes:
0.88%, 4/15/17				250		250,332
0.88%, 4/30/17				3,051		3,054,576
0.88%, 6/15/17				55,088		55,057,867
0.63%, 8/31/17				24,000		23,771,256
1.63%, 4/30/19				13,500		13,546,413
1.50%, 5/31/19				875		872,813
1.63%, 6/30/19				6,270		6,285,675
2.00%, 8/31/21				9,030		9,057,514
Total U.S. Treasury Obligations — 8.8%						254,283,615
Investment Companies (g)			Shares
iShares 0-5 Year TIPS Bond ETF				1		99
iShares 1-3 Year Treasury Bond ETF				1		85
iShares 10-20 Year Treasury Bond ETF				1		135
iShares 20+ Year Treasury Bond ETF				181,108		22,805,120
iShares 3-7 Year Treasury Bond ETF				1		122
iShares 7-10 Year Treasury Bond ETF				1		106
iShares Agency Bond ETF				1		113
iShares Core US Treasury Bond ETF				1		25
iShares Short Treasury Bond ETF				1		110
iShares TIPS Bond ETF				1		112
Total Investment Companies — 0.8%						22,806,027
Preferred Securities
Capital Trusts			Par (000)
Capital Markets — 0.0%
The Bank of New York Mellon Corp., Series D, 4.50% (a)(f)		USD		1,264		1,165,250
Diversified Financial Services — 0.1%
JPMorgan Chase & Co., Series Q, 5.15% (a)(f)				1,325		1,248,150
Insurance — 0.1%
The Chubb Corp.:
6.00%, 5/11/37				800		1,045,373
6.38%, 3/29/67 (a)				2,550		2,733,727
						3,779,100
Media — 0.1%
NBCUniversal Enterprise, Inc., 5.25% (b)(f)				2,200		2,282,500
Total Capital Trusts — 0.3%						8,475,000
Preferred Stock — 0.2%			Shares		Value
Diversified Telecommunication Services — 0.2%
Qwest Corp., 7.38%				196,000	$	5,252,800
Total Preferred Securities — 0.5%						13,727,800
Total Long-Term Investments (Cost — $3,739,903,873) — 131.5%						3,798,025,974
Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (g)(h)				39,979,776		39,979,776
Total Short-Term Securities (Cost — $39,979,776) — 1.4%						39,979,776
Options Purchased (Cost — $1,782,609) — 0.1%						1,523,625
Total Investments Before TBA Sale Commitments and Options Written (Cost — $3,781,666,258) — 133.0%						3,839,529,375
TBA Sale Commitments (e)			Par (000)
Fannie Mae Mortgage-Backed Securities:
2.50%, 1/20/30		USD		17,550		(17,873,578	)
3.00%, 1/20/30				59,905		(62,254,682	)
3.50%, 1/20/30				54,800		(57,891,063	)
4.00%, 1/20/30				100		(105,969	)
3.00%, 1/14/45				66,191		(66,987,427	)
3.50%, 1/14/45				57,700		(60,161,266	)
4.00%, 1/14/45				51,000		(54,434,531	)
4.50%, 1/14/45				57,900		(62,848,641	)
5.00%, 1/14/45				4,000		(4,418,750	)
6.00%, 1/14/45				10,000		(11,334,375	)
Ginnie Mae Mortgage-Backed Securities, 5.00%, 1/21/45				2,700		(2,971,687	)
Total TBA Sale Commitments (Proceeds — $400,217,264) — (13.9)%						(401,281,969	)
Options Written (Premiums Received — $1,156,129) — (0.0)%						(956,000	)
Total Investments, Net of TBA Sale Commitments and Options Written (Cost — $3,380,292,865) — 119.1%						3,437,291,406
Liabilities in Excess of Other Assets — (19.1)%						(549,910,712	)
Net Assets — 100.0%					$	2,887,380,694

Notes to Schedule of Investments

(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) 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) Zero-coupon bond.

See Notes to Financial Statements.

28 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

(e) Represents or includes a TBA transaction. As of December 31, 2014, Unsettled TBA transactions were as follows:

Counterparty	Value			Unrealized Appreciation (Depreciation)
Barclays Capital, Inc.	$	8,518,813		$	73,668
Bank of America N.A.	$	436,110		$	(15,018	)
Citigroup Global Markets, Inc.	$	57,879,098		$	375,608
Credit Suisse Securities (USA) LLC	$	274,554,455		$	611,224
Deutsche Bank Securities, Inc.	$	57,627,927		$	257,183
Goldman Sachs & Co.	$	5,290,412		$	25,918
J.P. Morgan Securities LLC	$	17,535,031		$	24,777
Morgan Stanley & Co. LLC	$	32,944,547		$	81,609
Nomura Securities International, Inc.	$	96,106,503		$	333,115
RBC Capital Markets, LLC	$	(3,227,297	)	$	(6,755	)
S.G. America	$	(213,469	)	$	(400	)
Wells Fargo Securities, LLC	$	10,295,313		$	(8,090	)

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

(g) During the year ended December 31, 2014, investments in issuers considered to be an affiliate of the Master Portfolio 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, 2013		Shares Purchased		Shares Sold			Shares Held at December 31, 2014		Value at December 31, 2014		Income		Realized Gain (Loss)
BlackRock Cash Funds: Institutional, SL Agency Shares		538,812,448		—		(498,832,672	)1		39,979,776	$	39,979,776	$	216,649		—
BlackRock Cash Funds: Prime, SL Agency Shares		68,186,051		—		(68,186,051	)1		—		—	$	50,377		—
iShares 0-5 Year TIPS Bond ETF		—		1		—			1	$	99		—		—
iShares 1-3 Year Treasury Bond ETF		—		1		—			1	$	85		—		—
iShares 10-20 Year Treasury Bond ETF		—		1		—			1	$	135		—		—
iShares 20+ Year Treasury Bond ETF		—		181,108		—			181,108	$	22,805,120	$	47,322		—
iShares 3-7 Year Treasury Bond ETF		—		1		—			1	$	122		—		—
iShares 7-10 Year Treasury Bond ETF		—		1		—			1	$	106		—		—
iShares Agency Bond ETF		—		1		—			1	$	113		—		—
iShares Core US Treasury Bond ETF		—		1		—			1	$	25		—		—
iShares Short Treasury Bond ETF		—		1		—			1	$	110		—		—
iShares TIPS Bond ETF		—		1		—			1	$	112		—		—
1   Represents net shares sold.

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

Ÿ As of December 31, 2014, financial futures contracts outstanding were as follows:

Contracts Purchased (Sold)			Issue	Exchange	Expiration	Notional Value			Unrealized Appreciation (Depreciation)
	(626	)	Euro-Bund Future	Eurex	March 2015		USD	118,070,188	$	(670,255	)
	(132	)	2- Year U.S. Treasury Note	Chicago Board of Trade	March 2015		USD	28,854,375		(17,467	)
	(111	)	UK Long Gilt Bond	NYSE Liffe	March 2015		USD	20,679,254		(372,719	)
	61		U.S. Long Bond	Chicago Board of Trade	March 2015		USD	8,818,313		9,822
	243		90-Day Euro Dollar Future	Chicago Mercantile	March 2015		USD	60,576,862		(3,353	)
	374		10-Year Canada Bond Future	Montreal	March 2015		USD	44,591,565		177,296
	401		Ultra Long U.S. Treasury Bond	Chicago Board of Trade	March 2015		USD	66,240,187		672,977
	513		5-Year U.S. Treasury Note	Chicago Board of Trade	March 2015		USD	61,010,930		142,865
	913		10-Year U.S. Treasury Note	Chicago Board of Trade	March 2015		USD	115,765,547		(110,313	)
	1,716		10-Year Australian T-Bond	Sydney Futures Exchange	March 2015		USD	179,523,743		1,767,365
	(242	)	90-Day Euro-Dollar	Chicago Mercantile	March 2016		USD	59,786,100		26,910
	1,460		90-Day Euro Dollar Future	Chicago Mercantile	June 2016		USD	359,780,500		216,492
	(1,460	)	90-Day Euro Dollar Future	Chicago Mercantile	June 2017		USD	357,043,000		(904,863	)
	Total								$	934,757

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014 29

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Ÿ As of December 31, 2014, forward foreign currency exchange contracts outstanding were as follows:

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
AUD	868,000	USD	714,580	HSBC Bank PLC		3/12/15	$	(7,644	)
AUD	533,055	USD	438,837	HSBC Bank PLC		3/12/15		(4,695	)
AUD	2,693,000	USD	2,179,943	HSBC Bank PLC		3/12/15		13,349
AUD	891,000	USD	722,299	JPMorgan Chase Bank N.A.		3/12/15		3,369
AUD	11,226,945	USD	9,291,420	Westpac Banking Corp.		3/12/15		(147,724	)
CAD	2,295,807	USD	1,984,928	Goldman Sachs International		3/12/15		(5,826	)
CAD	2,759,193	USD	2,385,188	HSBC Bank PLC		3/12/15		(6,624	)
CAD	783,000	USD	673,434	HSBC Bank PLC		3/12/15		1,551
CAD	2,037,000	USD	1,757,879	JPMorgan Chase Bank N.A.		3/12/15		(1,881	)
CAD	4,973,000	USD	4,320,854	Royal Bank Of Canada		3/12/15		(33,875	)
CAD	3,935,000	USD	3,372,321	Royal Bank Of Canada		3/12/15		19,848
EUR	1,059,000	USD	1,299,849	BNP Paribas S.A.		3/12/15		(17,622	)
EUR	738,722	USD	912,982	BNP Paribas S.A.		3/12/15		(18,544	)
EUR	1,238,527	USD	1,530,687	BNP Paribas S.A.		3/12/15		(31,091	)
EUR	3,965,205	USD	4,900,839	Citibank N.A.		3/12/15		(99,807	)
EUR	2,365,056	USD	2,923,117	Citibank N.A.		3/12/15		(59,530	)
EUR	3,693,611	USD	4,565,876	Goldman Sachs International		3/12/15		(93,688	)
EUR	6,192,634	USD	7,655,055	Goldman Sachs International		3/12/15		(157,075	)
EUR	2,210,000	USD	2,734,053	HSBC Bank PLC		3/12/15		(58,207	)
EUR	3,705,000	USD	4,583,559	HSBC Bank PLC		3/12/15		(97,582	)
EUR	1,200,000	USD	1,486,315	HSBC Bank PLC		3/12/15		(33,367	)
EUR	2,155,000	USD	2,665,386	JPMorgan Chase Bank N.A.		3/12/15		(56,133	)
EUR	1,285,000	USD	1,589,337	JPMorgan Chase Bank N.A.		3/12/15		(33,471	)
EUR	3,693,611	USD	4,565,924	UBS AG		3/12/15		(93,736	)
EUR	6,192,634	USD	7,655,136	UBS AG		3/12/15		(157,156	)
GBP	481,000	USD	746,191	Deutsche Bank AG		3/12/15		3,412
GBP	470,000	USD	737,679	Goldman Sachs International		3/12/15		(5,219	)
GBP	8,376,000	USD	13,055,671	HSBC Bank PLC		3/12/15		(2,290	)
GBP	515,000	USD	800,206	HSBC Bank PLC		3/12/15		2,384
GBP	4,214,000	USD	6,602,778	HSBC Bank PLC		3/12/15		(35,568	)
GBP	466,000	USD	727,668	HSBC Bank PLC		3/12/15		(1,442	)
GBP	468,000	USD	729,375	HSBC Bank PLC		3/12/15		(31	)
GBP	468,000	USD	735,322	JPMorgan Chase Bank N.A.		3/12/15		(5,978	)
GBP	470,000	USD	736,681	JPMorgan Chase Bank N.A.		3/12/15		(4,221	)
GBP	926,000	USD	1,450,212	UBS AG		3/12/15		(7,109	)
GBP	930,000	USD	1,456,287	UBS AG		3/12/15		(6,950	)
JPY	87,000,000	USD	728,954	Deutsche Bank AG		3/12/15		(2,904	)
JPY	798,000,000	USD	6,851,114	HSBC Bank PLC		3/12/15		(191,483	)
JPY	433,700,000	USD	3,723,469	HSBC Bank PLC		3/12/15		(104,068	)
JPY	86,100,000	USD	720,387	HSBC Bank PLC		3/12/15		(1,848	)
NOK	35,996,000	USD	5,024,748	BNP Paribas S.A.		3/12/15		(232,682	)
NOK	11,010,000	USD	1,530,585	Credit Suisse International		3/12/15		(64,848	)
NOK	39,955,000	USD	5,364,912	JPMorgan Chase Bank N.A.		3/12/15		(45,794	)
NOK	32,192,000	USD	4,340,095	JPMorgan Chase Bank N.A.		3/12/15		(54,447	)
NZD	4,579,000	USD	3,503,878	HSBC Bank PLC		3/12/15		52,333
NZD	1,550,000	USD	1,192,113	HSBC Bank PLC		3/12/15		11,671
NZD	2,807,000	USD	2,184,966	HSBC Bank PLC		3/12/15		(4,952	)
NZD	535,000	USD	415,267	Westpac Banking Corp.		3/12/15		233
NZD	534,000	USD	414,491	Westpac Banking Corp.		3/12/15		232
NZD	920,000	USD	716,652	Westpac Banking Corp.		3/12/15		(2,148	)
NZD	916,000	USD	713,353	Westpac Banking Corp.		3/12/15		(1,956	)
SEK	19,610,000	USD	2,566,187	BNP Paribas S.A.		3/12/15		(60,556	)
SEK	33,540,000	USD	4,396,092	BNP Paribas S.A.		3/12/15		(110,581	)
SEK	16,853,000	USD	2,186,567	BNP Paribas S.A.		3/12/15		(33,206	)
SEK	21,437,000	USD	2,823,658	JPMorgan Chase Bank N.A.		3/12/15		(84,585	)
SEK	11,325,000	USD	1,463,417	JPMorgan Chase Bank N.A.		3/12/15		(16,387	)
SEK	34,160,000	USD	4,369,554	JPMorgan Chase Bank N.A.		3/12/15		(4,824	)
SEK	34,159,000	USD	4,372,111	JPMorgan Chase Bank N.A.		3/12/15		(7,508	)
SEK	44,333,000	USD	5,743,576	JPMorgan Chase Bank N.A.		3/12/15		(79,009	)
SEK	19,607,000	USD	2,563,392	State Street Bank and Trust Co.		3/12/15		(58,144	)
USD	2,187,497	AUD	2,693,000	Deutsche Bank AG		3/12/15		(5,795	)
USD	731,061	AUD	900,000	Deutsche Bank AG		3/12/15		(1,937	)
USD	720,168	AUD	870,000	HSBC Bank PLC		3/12/15		11,603
USD	732,925	AUD	892,000	HSBC Bank PLC		3/12/15		6,443

See Notes to Financial Statements.

30 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Ÿ As of December 31, 2014, forward foreign currency exchange contracts outstanding were as follows (continued):

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	735,041	AUD	894,000	HSBC Bank PLC		3/12/15	$	6,930
USD	9,651,103	AUD	11,760,000	HSBC Bank PLC		3/12/15		73,265
USD	3,626,365	CAD	4,223,000	BNP Paribas S.A.		3/12/15		(14,075	)
USD	2,192,266	CAD	2,543,000	Citibank N.A.		3/12/15		71
USD	2,193,128	CAD	2,544,000	Citibank N.A.		3/12/15		71
USD	309,325	CAD	359,216	Credit Suisse International		3/12/15		(337	)
USD	309,599	CAD	359,534	Credit Suisse International		3/12/15		(338	)
USD	2,189,078	CAD	2,518,000	Goldman Sachs International		3/12/15		18,434
USD	9,499,031	CAD	10,875,061	HSBC Bank PLC		3/12/15		124,177
USD	771,926	CAD	897,000	JPMorgan Chase Bank N.A.		3/12/15		(1,334	)
USD	2,910,466	CAD	3,383,000	Royal Bank Of Canada		3/12/15		(5,852	)
USD	2,607,955	CAD	3,031,466	Royal Bank Of Canada		3/12/15		(5,323	)
USD	2,605,648	CAD	3,028,784	Royal Bank Of Canada		3/12/15		(5,318	)
USD	1,455,940	CAD	1,672,000	Royal Bank Of Canada		3/12/15		14,591
USD	3,644,301	EUR	2,997,000	Citibank N.A.		3/12/15		15,563
USD	8,717,773	EUR	7,040,000	Credit Suisse International		3/12/15		193,810
USD	31,775,346	EUR	25,827,000	Goldman Sachs International		3/12/15		504,268
USD	8,699,898	EUR	7,042,000	Goldman Sachs International		3/12/15		173,514
USD	1,491,964	EUR	1,211,000	HSBC Bank PLC		3/12/15		25,697
USD	7,491,093	EUR	6,153,000	HSBC Bank PLC		3/12/15		41,101
USD	5,188,040	EUR	4,268,000	HSBC Bank PLC		3/12/15		20,387
USD	7,033,271	EUR	5,786,000	HSBC Bank PLC		3/12/15		27,639
USD	1,465,470	EUR	1,183,000	HSBC Bank PLC		3/12/15		33,105
USD	1,027,984	EUR	826,000	HSBC Bank PLC		3/12/15		27,871
USD	11,488,871	EUR	9,205,000	HSBC Bank PLC		3/12/15		343,547
USD	2,211,654	EUR	1,772,000	HSBC Bank PLC		3/12/15		66,134
USD	1,435,548	EUR	1,151,000	HSBC Bank PLC		3/12/15		41,928
USD	884,333	EUR	720,000	UBS AG		3/12/15		12,564
USD	17,783,401	EUR	14,451,000	UBS AG		3/12/15		286,272
USD	7,890,564	EUR	6,390,000	UBS AG		3/12/15		153,614
USD	8,316,691	GBP	5,361,000	Deutsche Bank AG		3/12/15		(38,034	)
USD	4,047,818	GBP	2,579,000	Goldman Sachs International		3/12/15		28,636
USD	2,175,945	GBP	1,396,000	HSBC Bank PLC		3/12/15		382
USD	741,539	GBP	476,000	HSBC Bank PLC		3/12/15		(272	)
USD	14,664,308	GBP	9,359,000	HSBC Bank PLC		3/12/15		78,994
USD	4,036,073	GBP	2,575,000	JPMorgan Chase Bank N.A.		3/12/15		23,125
USD	406,895	GBP	260,000	Westpac Banking Corp.		3/12/15		1,704
USD	1,471,081	GBP	940,000	Westpac Banking Corp.		3/12/15		6,160
USD	699,035	JPY	84,100,000	BNP Paribas S.A.		3/12/15		(2,813	)
USD	2,144,484	JPY	258,000,000	BNP Paribas S.A.		3/12/15		(8,630	)
USD	3,644,606	JPY	435,600,000	HSBC Bank PLC		3/12/15		9,348
USD	1,680,876	JPY	197,000,000	HSBC Bank PLC		3/12/15		36,832
USD	1,464,556	JPY	173,500,000	JPMorgan Chase Bank N.A.		3/12/15		16,629
USD	774,062	JPY	91,700,000	JPMorgan Chase Bank N.A.		3/12/15		8,789
USD	687,146	JPY	82,000,000	JPMorgan Chase Bank N.A.		3/12/15		2,823
USD	694,688	JPY	82,900,000	JPMorgan Chase Bank N.A.		3/12/15		2,854
USD	3,417,068	NOK	24,479,000	BNP Paribas S.A.		3/12/15		158,235
USD	2,190,483	NOK	16,249,000	JPMorgan Chase Bank N.A.		3/12/15		27,290
USD	1,444,990	NOK	10,718,000	JPMorgan Chase Bank N.A.		3/12/15		18,127
USD	1,091,453	NOK	8,131,000	UBS AG		3/12/15		8,992
USD	3,641,351	NZD	4,678,000	HSBC Bank PLC		3/12/15		8,252
USD	1,333,523	NZD	1,735,000	HSBC Bank PLC		3/12/15		(13,939	)
USD	2,507,126	NZD	3,230,000	Westpac Banking Corp.		3/12/15		(1,405	)
USD	2,507,126	NZD	3,230,000	Westpac Banking Corp.		3/12/15		(1,405	)
USD	2,149,957	NZD	2,760,000	Westpac Banking Corp.		3/12/15		6,445
USD	2,149,405	NZD	2,760,000	Westpac Banking Corp.		3/12/15		5,893
USD	6,431,767	NZD	8,417,001	Westpac Banking Corp.		3/12/15		(105,170	)
USD	737,731	SEK	5,579,000	Barclays Bank PLC		3/12/15		24,885
USD	373,609	SEK	2,855,000	BNP Paribas S.A.		3/12/15		8,816
USD	737,925	SEK	5,630,000	BNP Paribas S.A.		3/12/15		18,562
USD	3,305,222	SEK	24,886,000	BNP Paribas S.A.		3/12/15		125,460
USD	733,800	SEK	5,525,000	BNP Paribas S.A.		3/12/15		27,854
USD	2,187,861	SEK	16,591,000	Credit Suisse International		3/12/15		67,977
USD	1,359,409	SEK	10,600,000	JPMorgan Chase Bank N.A.		3/12/15		5,013

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014 31

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Ÿ As of December 31, 2014, forward foreign currency exchange contracts outstanding were as follows (concluded):

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	1,126,925	SEK	8,810,000	JPMorgan Chase Bank N.A.		3/12/15	$	1,244
USD	1,127,746	SEK	8,811,000	JPMorgan Chase Bank N.A.		3/12/15		1,937
USD	2,928,667	SEK	22,608,000	JPMorgan Chase Bank N.A.		3/12/15		39,972
USD	2,148,545	SEK	16,584,000	JPMorgan Chase Bank N.A.		3/12/15		29,556
USD	723,076	SEK	5,455,000	JPMorgan Chase Bank N.A.		3/12/15		26,074
USD	734,697	SEK	5,525,000	JPMorgan Chase Bank N.A.		3/12/15		28,751
USD	3,309,794	SEK	24,890,000	JPMorgan Chase Bank N.A.		3/12/15		129,521
USD	372,867	SEK	2,852,000	State Street Bank and Trust Co.		3/12/15		8,458
Total							$	666,578

Ÿ As of December 31, 2014, exchange-traded options purchased were as follows:

Description	Put/ Call	Strike Price			Expiration Date		Contracts		Market Value
Eurodollar 2-Year Mid-Curve Options	Put		USD	96.75		6/12/15		2,390	$	119,500
Eurodollar 2-Year Mid-Curve Options	Put		USD	97.75		6/12/15		2,390		1,404,125
Total									$	1,523,625

Ÿ As of December 31, 2014, exchange-traded options written were as follows:

Description	Put/ Call	Strike Price			Expiration Date		Contracts		Market Value
Eurodollar 2-Year Mid-Curve Options	Put		USD	97.25		6/12/15		4,780	$	(956,000	)

Ÿ As of December 31, 2014, centrally cleared credit default swaps — sold protection outstanding were as follows:

Issuer	Receive Fixed Rate			Clearinghouse	Expiration Date	Credit Rating1	Notional Amount (000)2		Unrealized Appreciation
Dow Jones CDX North America High Yield Series 23, Version 1		5.00	%	Chicago Mercantile	12/20/19	B+		37,500	$	148,490
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 As of December 31, 2014, centrally cleared interest rate swaps outstanding were as follows:

Fixed Rate	Floating Rate	Clearinghouse	Effective Date	Expiration Date		Notional Amount (000)		Unrealized Appreciation (Depreciation)
2.17%3	3-Month LIBOR	Chicago Mercantile	12/31/145		10/31/21		USD    87,050	$	(445,793	)
2.17%3	3-Month LIBOR	Chicago Mercantile	12/31/145		10/31/21		USD    65,000		(336,935	)
0.99%4	6-Month Euribor	Chicago Mercantile	12/31/145		8/15/23		EUR    10,370		323,175
0.97%4	6-Month Euribor	Chicago Mercantile	12/10/145		8/15/23		EUR    24,180		708,250
3.46%3	3-Month LIBOR	Chicago Mercantile	12/31/145		5/14/44		USD      7,035		(1,132,018	)
Total								$	(883,321	)
3    Master Portfolio pays the fixed rate and receives the floating rate.
4    Master Portfolio pays the floating rate and receives the fixed rate.
5    Forward Swap.

Ÿ As of December 31, 2014, OTC credit default swaps — sold protection outstanding were as follows:

Issuer	Receive Fixed Rate			Counterparty	Expiration Date	Credit Rating1		Notional Amount (000)		Market Value			Premiums Paid (Received)			Unrealized Depreciation
Markit CMBX North America AM Index, Series 3		0.08	%	Goldman Sachs International	12/13/49		BB+		USD    13,936	$	(98,223	)	$	(93,017	)	$	(5,206	)

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. 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. 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. The three levels of the fair value hierarchy are as follows:

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

See Notes to Financial Statements.

32 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

Schedule of Investments (concluded) CoreAlpha Bond Master Portfolio

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)

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. For information about the MIP’s policy regarding valuation of investments and derivative financial instruments, refer to Note 2 of the Notes to Financial Statements.

As of December 31, 2014, the following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1			Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities		—		$	427,993,358		$	2,011,790	$	430,005,148
Corporate Bonds		—			1,096,956,030			—		1,096,956,030
Foreign Agency Obligations		—			32,467,330			—		32,467,330
Municipal Bonds		—			21,599,991			—		21,599,991
Non-Agency Mortgage-Backed Securities		—			386,991,299			2,247,398		389,238,697
U.S. Government Sponsored Agency Securities		—			1,536,941,336			—		1,536,941,336
U.S. Treasury Obligations		—			254,283,615			—		254,283,615
Investment Companies	$	22,806,027			—	��		—		22,806,027
Preferred Securities		5,252,800			8,475,000			—		13,727,800
Short-Term Securities		39,979,776			—			—		39,979,776
Options Purchased:
Interest Rate Contracts		1,523,625			—			—		1,523,625
Liabilities:
Investments:
TBA Sale Commitments		—			(401,281,969	)		—		(401,281,969	)
Total	$	69,562,228		$	3,364,425,990		$	4,259,188	$	3,438,247,406
	Level 1			Level 2			Level 3		Total
Derivative Financial Instruments 1
Assets:
Credit contracts		—		$	148,490			—	$	148,490
Foreign currency exchange contracts		—			3,324,571			—		3,324,571
Interest rate contracts	$	3,013,727			1,031,425			—		4,045,152
Liabilities:
Credit contracts					(5,206	)		—		(5,206	)
Foreign currency exchange contracts		—			(2,657,993	)		—		(2,657,993	)
Interest rate contracts		(2,078,970	)		(2,870,746	)		—		(4,949,716	)
Total	$	934,757		$	(1,029,459	)		—	$	(94,702	)

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 Master Portfolio may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of December 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2			Level 3	Total
Assets:
Cash	$	933		—		—	$	933
Cash pledged for centrally cleared swaps		5,820,000		—		—		5,820,000
Cash pledged for financial futures contracts		7,868,000		—		—		7,868,000
Foreign currency at value		4,147,644		—		—		4,147,644
Liabilities:
Cash received as collateral for TBA commitments		—	$	(935,000	)	—		(935,000	)
Total	$	17,836,577	$	(935,000	)	—	$	16,901,577
Duringthe year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014 33

Statement of Assets and Liabilities CoreAlpha Bond Master Portfolio

December 31, 2014
Assets
Investments at value — (cost — $ 3,719,760,005)	$	3,776,743,572
Investments at value — affiliated (cost — $ 61,906,253)		62,785,803
Cash		933
Foreign currency at value (cost — $ 4,137,538)		4,147,644
Cash pledged for financial futures contracts		7,868,000
Cash pledged for centrally cleared swaps		5,820,000
TBA sale commitments receivable		400,217,264
Interest receivable		16,556,109
Investments sold receivable		6,327,281
Unrealized appreciation on forward foreign currency exchange contracts		3,324,571
Variation margin receivable on financial futures contracts		675,529
Principal paydowns receivable		168,181
Contributions receivable from investors		106,198
Swaps receivable		3,016
Total assets		4,284,744,101
Liabilities
Cash received as collateral for TBA commitments		935,000
Investments purchased payable		957,631,433
TBA sale commitments at value (proceeds — $400,217,264)		401,281,969
Unrealized depreciation on forward foreign currency exchange contracts		2,657,993
Options written at value (proceeds — $1,156,129)		956,000
Investment advisory fees payable		592,575
Variation margin payable on financial futures contracts		154,811
Swap premiums received		93,017
Variation margin payable on centrally cleared swaps		77,424
Professional fees payable		49,296
Trustees’ fees payable		25,418
Unrealized depreciation on OTC swaps		5,206
Swap payable		675
Withdrawals payable to investors		32,902,590
Total liabilities		1,397,363,407
Net Assets	$	2,887,380,694
Net Assets Consist of
Investors’ capital	$	2,829,510,749
Net unrealized appreciation/depreciation		57,869,945
Net Assets	$	2,887,380,694

See Notes to Financial Statements.
34	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2014

Statement of Operations CoreAlpha Bond Master Portfolio

Year Ended December 31, 2014
Investment Income
Interest	$	94,173,586
Dividends		361,368
Income — affiliated		263,971
Securities lending — affiliated — net		50,377
Total income		94,849,302
Expenses
Investment advisory		8,295,781
Independent Trustees		101,618
Professional		50,993
Total expenses		8,448,392
Less fees waived by Manager		(254,341	)
Total expenses after fees waived		8,194,051
Net investment income		86,655,251
		��
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments		51,638,289
Financial futures contracts		20,440,244
Options written		434,507
Swaps		(16,356,154	)
Foreign currency transactions		(36,736	)
		56,120,150
Net change in unrealized appreciation/depreciation on:
Investments		77,705,046
Financial futures contracts		2,280,534
Options written		50,817
Swaps		(5,438,648	)
Foreign currency translations		2,057,279
		76,655,028
Total realized and unrealized gain		132,775,178
Net Increase in Net Assets Resulting from Operations	$	219,430,429

See Notes to Financial Statements.
	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2014	35

Statements of Changes in Net Assets CoreAlpha Bond Master Portfolio

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	86,655,251		$	67,797,721
Net realized gain (loss)		56,120,150			(4,800,193	)
Net change in unrealized appreciation/depreciation		76,655,028			(134,724,125	)
Net increase (decrease) in net assets resulting from operations		219,430,429			(71,726,597	)
Capital Transactions
Proceeds from contributions		1,468,046,895			1,313,533,374
Value of withdrawals		(2,173,243,591	)		(658,300,198	)
Net increase (decrease) in net assets derived from capital transactions		(705,196,696	)		655,233,176
Net Assets
Total increase (decrease) in net assets		(485,766,267	)		583,506,579
Beginning of year		3,373,146,961			2,789,640,382
End of year	$	2,887,380,694		$	3,373,146,961

See Notes to Financial Statements.
36	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2014

Financial Highlights CoreAlpha Bond Master Portfolio

	Year Ended December 31,
	2014		2013		2012		2011		2010
Total Return
Total return		6.64%		(2.39)%		4.95%		8.38%		6.56%
Ratios to Average Net Assets
Total expenses		0.25%		0.25%		0.25%		0.27%		0.36%
Total expenses after fees waived		0.24%		0.24%		0.24%		0.26%		0.35%
Net investment income		2.52%		2.23%		2.36%		3.22%		3.19%
Supplemental Data
Net assets, end of year (000)		$2,887,381		$3,373,147		$2,789,640		$2,362,453		$2,150,563
Portfolio turnover rate1,2		686%		986%		2,128%		1,646%		621%3

¹  Portfolio turnover rates include TBA transactions, if any.

²  Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,
	2014		2013		2012		2011
Portfolio turnover rate (excluding MDRs) . . . . . . .		470%		736%		1,774%		1,510%

³  Excluding TBA transactions, the portfolio turnover rate would have been 170%.

See Notes to Financial Statements.
	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2014	37

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.

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

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 (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements 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 Master Portfolio is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Master Portfolio:

Valuation: The Master Portfolio’s investments are valued at fair value as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the 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.

Bond investments are valued 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 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.

Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of business on the NYSE. Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of 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 the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Investments”). When determining the price for Fair Value Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant 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

38 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

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 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 Investments 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 (e.g., a company announcement, market volatility or a natural disaster) occur during such periods that are expected to materially affect the value of such instruments, those instruments may be Fair Value Investments and be 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.

Foreign Currency: The Master Portfolio’s books and records are maintained in U.S. 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 U.S. 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 U.S. dollars; the opposite effect occurs if the U.S. 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 are generally treated as ordinary income for federal income tax purposes.

Segregation and Collateralization: In cases where a Master Portfolio enters into certain investments (e.g., dollar rolls, TBA sale commitments, financial futures contracts, forward foreign currency exchange contracts, options written, 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 date. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.

Recent Accounting Standard: In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance will require expanded disclosure for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. It is effective for financial statements with fiscal years beginning on or after December 15, 2014 and interim periods within those fiscal years. Management is evaluating the impact, if any, of this guidance on the Master Portfolio’s financial statement disclosures.

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

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

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014 39

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

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 subsequently have to 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 U.S. government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury.

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 U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal.

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, U.S. government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by, 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 prepayments 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 U.S. government, its agencies and instrumentalities. Stripped mortgage-backed securities are usually structured with two classes that receive different proportions of the interest (IOs) and principal (POs) distributions on a pool of Mortgage Assets. 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 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

40 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

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. When entering into TBA commitments, the Master Portfolio may take possession of or deliver the underlying mortgage-backed securities but can extend the settlement or roll the transaction. TBA commitments involve a risk of loss if the value of the security to be purchased or sold declines or increases, respectively, prior to settlement date.

In order to better define contractual rights and to secure rights that will help the Master Portfolio mitigate its counterparty risk, TBA commitments may be entered into by the Master Portfolio under Master Securities Forward Transaction Agreements (each, an “MSFTA”). An MSFTA typically contains, among other things, collateral posting terms and netting provisions in the event of default and/or termination event. The collateral requirements are typically calculated by netting the mark to market amount for each transaction under such agreement and comparing that amount to the value of the collateral currently pledged by the Master Portfolio and the counterparty. Cash collateral that has been pledged to cover the 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 for TBA commitments or cash received as collateral for TBA commitments, respectively. Non-cash collateral pledged by the Master Portfolio, if any, is noted in the Schedule of Investments. Typically, the Master Portfolio is permitted to sell, repledge or use the collateral they receive; however, the counterparty is not permitted to do so. To the extent amounts due to the Master Portfolio are not fully collateralized, contractually or otherwise, the Master Portfolio bears the risk of loss from counterparty non-performance.

Mortgage Dollar Roll Transactions: The Master Portfolio may sell TBA mortgage-backed securities and simultaneously contract to repurchase substantially similar (i.e., same type, coupon and maturity) securities on a specific future date at an agreed upon price. During the period between the sale and repurchase, 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 its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Master Portfolio collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. government. The initial collateral received by the Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. During the term of the loan, the Master Portfolio is entitled to all distributions made on or in respect of the loaned securities. 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. During the year ended December 31, 2014, the Master Portfolio did not have any outstanding securities on loan.

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-unaffiliated, and collateral on securities loaned at value, respectively. As of December 31, 2014, any securities on loan were collateralized by cash. 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 (each, an “MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, 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 risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014 41

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

indemnity allows for full replacement of the securities lent if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Master Portfolio 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.

4. Derivative Financial Instruments:

The Master Portfolio engage 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 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.

Forward Foreign Currency Exchange Contracts: The Master Portfolio enters into forward 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 forward 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. Forward 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 forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

Options: The 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 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.

42 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

For the year ended December 31, 2014, transactions in options written were as follows:

	Calls						Puts
	Contracts			Premiums Received			Contracts			Premiums Received
Outstanding options, beginning of year		_			_			407		$	162,031
Options written		720		$	66,492			6,192			1,464,371
Options exercised		_			_			_			_
Options expired		_			_			(1,819	)		(470,273	)
Options closed		(720	)		(66,492	)		_			_
Outstanding options, end of year		_			_			4,780		$	1,156,129

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 contract 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.

Ÿ Total return swaps — The Master Portfolio enters into total return swaps to obtain exposure to a security or market without owning such security or investing directly in that market or to transfer the risk/return of one market (e.g., fixed income) to another market (e.g., equity or commodity prices) (interest rate risk). Total return swaps are agreements in which there is an exchange of cash flows whereby one party commits to make payments based on the total return (coupons plus capital gains/losses) of an underlying instrument in exchange for fixed or floating rate interest payments. To the extent the total return of the instrument or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Master Portfolio will receive a payment from or make a payment to the counterparty.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014 43

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 interest rate 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, 2014
		Value
	Statement of Assets and Liabilities Location	Derivative Assets		Derivative Liabilities
Interest rate contracts	Net unrealized appreciation/depreciation1; Unrealized depreciation on  OTC swaps; Swap premiums received; Investments at value — unaffiliated2; Options written at value	$	5,568,777	$	(4,949,716	)
Foreign currency exchange contracts	Unrealized appreciation/depreciation on forward foreign currency exchange contracts		3,324,571		(2,657,993	)
Credit contracts	Unrealized appreciation/depreciation on OTC swaps; Swap premiums received		148,490		(98,223	)
Total		$	9,041,838	$	(7,705,932	)

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 Schedules of Investments.

The Effect of Derivative Financial Instruments in the Statement of Operations Year Ended December 31, 2014
	Net Realized Gain (Loss) From			Net Change in Unrealized Appreciation/Depreciation on
Interest rate contracts:
Financial futures contracts	$	20,440,244		$	2,280,534
Swaps		(17,512,407	)		(4,516,653	)
Options3		(1,190,061	)		(14,073	)
Foreign currency exchange contracts :
Foreign currency transactions/ translations		(47,968	)		2,101,274
Credit contracts :
Swaps		65,846			(921,995	)
Other contracts :
Swaps		1,090,407			—
Total	$	2,846,061		$	(1,070,913	)

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, 2014, the average quarterly balances of outstanding derivative financial instruments were as follows:

Financial futures contracts:
Average notional value of contracts purchased	$	844,737,839
Average notional value of contracts sold	$	427,039,855
Foreign currency exchange contracts:
Average U.S. dollar amounts purchased	$	445,088,479
Average U.S. dollar amounts sold	$	412,856,984
Options:
Average market value of option contracts purchased	$	739,042
Average market value of option contracts written	$	293,698
Credit default swaps:
Average notional amount — buy protection	$	9,037,382
Average notional amount — sell protection	$	64,830,532
Interest rate swaps:
Average notional amount — pays fixed rate	$	294,394,076
Average notional amount — receives fixed rate	$	85,411,379
Total return swaps:
Average notional amount	$	16,050,000

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.

44 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

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 options purchased 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. Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the 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 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. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to terminate derivative contracts prior to maturity in the event the Master Portfolio’s net assets decline by a stated percentage or the Master Portfolio fails to meet the terms of its ISDA Master Agreements. The result 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 (typically either $250,000 or $500,000) before a transfer is required, which is determined at the close of business of the Master Portfolio. 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, the Master Portfolio bears the risk of loss from counterparty non-performance. Likewise, to the extent the Master Portfolio has delivered collateral to a counterparty and stands ready to perform under the terms of its agreement with such counterparty, the Master Portfolio bears the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral.

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

As of December 31, 2014, the Master Portfolio’s derivative assets and liabilities (by type) are as follows:

	Assets			Liabilities
Derivative Financial Instruments:
Financial futures contracts	$	675,529		$	154,811
Forward foreign currency exchange contracts		3,324,571			2,657,993
Options		1,523,625	1		956,000
Swaps — Centrally cleared		—			77,424
Swaps — OTC2		—			98,223
Total derivative assets and liabilities in the Statement of Assets and Liabilities	$	5,523,725		$	3,944,451
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(2,199,154	)		(1,188,235	)
Total derivative assets and liabilities subject to an MNA	$	3,324,571		$	2,756,216

¹  Includes options purchased at value which is included in Investments at value — unaffiliated in the Statement of Assets and Liabilities and reported in the Schedule of Investments.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014 45

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

²  Includes unrealized appreciation/depreciation on OTC swaps and swap premiums paid/received in the Statement of Assets and Liabilities and reported in the Schedule of Investments.

As of December 31, 2014, the following table presents the Master Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Master Portfolio:

Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivatives Available for Offset3			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets4
Barclays Bank PLC	$	24,885		—			—		—	$	24,885
BNP Paribas S.A.		338,927	$	(338,927	)		—		—		—
Citibank N.A.		15,705		(15,705	)		—		—		—
Credit Suisse International		261,787		(65,523	)		—		—		196,264
Deutsche Bank AG		3,412		(3,412	)		—		—		—
Goldman Sachs International		724,852		(360,031	)		—		—		364,821
HSBC Bank PLC		1,064,923		(564,012	)		—		—		500,911
JPMorgan Chase Bank N.A.		365,074		(365,074	)		—		—		—
Royal Bank of Canada		34,439		(34,439	)		—		—		—
State Street Bank and Trust Co.		8,458		(8,458	)		—		—		—
UBS AG		461,442		(264,951	)		—		—		196,491
Westpac Banking Corp.		20,667		(20,667	)		—		—		—
Total	$	3,324,571	$	(2,041,199	)		—		—	$	1,283,372

Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset3			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities5
BNP Paribas S.A.	$	529,800	$	(338,927	)		—		—	$	190,873
Citibank N.A.		159,337		(15,705	)		—		—		143,632
Credit Suisse International		65,523		(65,523	)		—		—		—
Deutsche Bank AG		48,670		(3,412	)		—		—		45,258
Goldman Sachs International		360,031		(360,031	)		—		—		—
HSBC Bank PLC		564,012		(564,012	)		—		—		—
JPMorgan Chase Bank N.A.		395,572		(365,074	)		—		—		30,498
Royal Bank of Canada		50,368		(34,439	)		—		—		15,929
State Street Bank and Trust Co.		58,144		(8,458	)		—		—		49,686
UBS AG		264,951		(264,951	)		—		—		—
Westpac Banking Corp.		259,808		(20,667	)		—		—		239,141
Total	$	2,756,216	$	(2,041,199	)		—		—	$	715,017

³ The amount of derivatives available for offset is limited to the amount of the assets and/or liabilities that are subject to an MNA.

⁴ Net amount represents the net amount receivable from the counterparty in the event of default.

⁵ 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, Inc. (“BlackRock”).

MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement with 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 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 BlackRock International Limited (“BIL”) and BlackRock Fund Advisors (“BFA”), both affiliates of the Manager. The Manager pays BIL and BFA, for services they provide, a monthly fee that is a percentage of the investment advisory fees paid by the Master Portfolio to the Manager.

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 provide an offsetting credit against the administration fees paid by the Master Portfolio in an amount

46 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

equal to the independent expenses through April 30, 2015. The amount is included in fees waived by Manager in the Statement of Operations. For the year ended December 31, 2014, the Manager waived $152,611 pursuant to this agreement.

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 year ended December 31, 2014, the amount waived was $101,730.

The U.S. Securities and Exchange Commission has issued an exemptive order which permits BTC, an affiliate of the Manager, to serve as securities lending agent for the Master Portfolio, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. The Master Portfolio is responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by the Manager or its affiliates, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees the Master Portfolio bears to an annual rate of 0.04% until December 31, 2014 and 0.05% thereafter (the “collateral investment fees”).

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent. Pursuant to a securities lending agreement effective February 1, 2014, BTC may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the “specials only securities”).

Pursuant to such agreement, the Master Portfolio retains 80% of securities lending income. In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Liquidity Complex in a calendar year exceeds the aggregate securities lending income earned across the Equity-Liquidity Complex through the lending of specials only securities in the calendar year 2013, the Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income. Prior to February 1, 2014, the Master Portfolio retained 65% of securities lending income and paid a fee to BTC equal to 35% of such income. The share of securities lending income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the year ended December 31, 2014, the Master Portfolio paid BTC $12,617 in total for securities lending agent services and collateral investment fees.

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

6. Purchases and Sales:

For the year ended December 31, 2014, purchases and sales of investments, including paydown and mortgage dollar rolls and excluding short-term securities, were as follows:

	Non-U.S. Government Securities		U.S. Government Securities
Purchases	$	23,575,824,425	$	1,756,711,340
Sales	$	23,607,241,540	$	2,019,012,341

For the year ended December 31, 2014, purchases and sales related to mortgage dollar rolls were $7,979,203,390 and $7,991,251,711, respectively.

7. 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 U.S. federal and various state and local tax returns. No other income tax returns are currently under examination. The statute of limitations on the Master Portfolio’s U.S. federal tax returns remains open for each of the four years ended December 31, 2014. 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 that there are any uncertain tax positions that require recognition of a tax liability.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014 47

Notes to Financial Statements (concluded) CoreAlpha Bond Master Portfolio

As of December 31, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	3,781,863,278
Gross unrealized appreciation	$	74,533,285
Gross unrealized depreciation		(16,867,188	)
Net unrealized appreciation	$	57,666,097

8. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), was a party to a 364-day, $1.1 billion credit agreement with a group of lenders, under which the Master Portfolio may borrow to fund shareholder redemptions. Excluding commitments designated for a certain individual fund, the Participating Funds, including the Master Portfolio, could borrow up to an aggregate commitment amount of $650 million, subject to asset coverage and other limitations as specified in the agreement. Effective November 25, 2014, the credit agreement was amended to an aggregate commitment amount of $2.1 billion, of which the Participating Funds, including the Master Portfolio, can borrow up to $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement The agreement terminates on April 23, 2015, unless otherwise extended to November 24, 2015 or renewed for a period of 364 days from April 23, 2015. The amended agreement has the following terms: a fee of 0.06% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one month LIBOR (but in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which are included in miscellaneous expenses in the Statement of Operations, and 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. During the year ended December 31, 2014, the Master Portfolio did not borrow under the credit agreement.

9. Principal Risks:

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/or derivatives. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will increase as interest rates fall and decrease as interest rates rise. The 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. Investment percentages in these securities are presented in the Schedule of Investments. Changes in economic conditions, including delinquencies and/or defaults on assets underlying these securities, can affect the value, income and/or liquidity of such positions.

10. 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.

48 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

Report of Independent Registered Public Accounting Firm

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, 2014, 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, 2014 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 19, 2015

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014 49

Officers and Trustees

Name, Address and Year of Birth1	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2
Ronald W. Forbes 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 153 Portfolios	None
Rodney D. Johnson 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 153 Portfolios	None
David O. Beim 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 153 Portfolios	None
Frank J. Fabozzi 1948	Trustee	Since 2014	Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011; Adjunct Professor of Finance and Becton Fellow, Yale University from 1994 to 2006.	112 RICs consisting of 232 Portfolios	None
Dr. Matina S. Horner 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 153 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 1939	Trustee	Since 2009	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 153 Portfolios	None
Ian A. MacKinnon 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None
Cynthia A. Montgomery 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 153 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 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 153 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 153 Portfolios	None
Toby Rosenblatt 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Futures Foundation (philanthropic foundation) since 2009; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None
Kenneth L. Urish 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 153 Portfolios	None

50 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

Officers and Trustees (continued)

Name, Address and Year of Birth1	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2 (concluded)
Frederick W. Winter 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 153 Portfolios	None
	1   The address of each Trustee is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2   Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Trustees on a case-by-case basis, as appropriate.
	3   Date shown is the earliest date a person has served for the Trust/MIP. 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. Frank J. Fabozzi first became a member of the board of other funds advised by BlackRock Advisors, LLC or its affiliates in 1988.
Interested Trustees4
Paul L. Audet 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.	141 RICs consisting of 329 Portfolios	None
Henry Gabbay 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.	29 RICs consisting of 97 Portfolios	None
	4   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, Dr. Fabozzi 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 75. The Board has determined to extend the terms of Directors on a case-by-case basis, as appropriate.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014 51

Officers and Trustees (concluded)

Name, Address and Year of Birth1	Position(s) Held with the Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers2
John M. Perlowski 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 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.
Jennifer McGovern 1977	Vice President	Since 2014	Director of BlackRock, Inc. since 2011; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal Andrews 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 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.
Charles Park 1967	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2014	Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary to the 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    The address of each Officer is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2    Officers of the Trust/MIP serve at the pleasure of the Board.

Effective September 10, 2014, Brendan Kyne resigned as a Vice President of the Fund and Jennifer McGovern became a Vice President of the Fund.

Effective December 31, 2014, Paul L. Audet and Henry Gabbay resigned as Trustees of the Fund and Ronald W. Forbes resigned as a Trustee of the Fund and Co-Chair of the Board. Effective January 1, 2015, Collette Chilton, Barbara G. Novick and Mark Stalnecker were appointed to serve as Trustees of the Fund.

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 8BL 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/MIP 400 Howard Street San Francisco, CA 94105

52 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

Additional Information

General Information

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.

BlackRock’s Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax exempt investing. Visit http://www.blackrock.com for more information.

Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM 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 COREALPHA BOND FUND DECEMBER 31, 2014 53

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.

54 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2014

This report is intended for current holders. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless preceded or accompanied 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-12/14-AR

DECEMBER 31, 2014

  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
The Markets in Review		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		17
Statements of Changes in Net Assets		18
Portfolio Financial Highlights		20
Portfolio Notes to Financial Statements		40
Portfolio Report of Independent Registered Public Accounting Firm		45
Important Tax Information		45
Master Portfolio Information		46
Master Portfolio Financial Statements:
Schedules of Investments		48
Statements of Assets and Liabilities		55
Statements of Operations		56
Statements of Changes in Net Assets		57
Master Portfolio Financial Highlights		59
Master Portfolio Notes to Financial Statements		63
Master Portfolio Report of Independent Registered Public Accounting Firm		68
Officers and Trustees		69
Additional Information		72

2 BLACKROCK FUNDS III DECEMBER 31, 2014

The Markets in Review

Dear Shareholder,

After an extended period of calm, market volatility increased over the course of 2014, driven largely by higher valuations in risk assets (such as equities and high yield bonds), rising geopolitical risks and expectations around global central bank policies. Several key trends drove strong performance in U.S. markets, particularly large-cap stocks, Treasuries and municipal bonds, while markets outside the U.S. were more challenged.

Investors began the year in search of relatively safer assets due to heightened risks in emerging markets, slowing growth in China and weakening U.S. economic data. As a result, equities globally declined in January while bond markets strengthened despite the expectation that interest rates would rise as the U.S. Federal Reserve had begun reducing its asset purchase programs. Strong demand for relatively safer assets pushed U.S. Treasury bond prices higher and thus kept rates low in the United States. This surprising development, as well as increasing evidence that the soft patch in U.S. economic data had been temporary and weather-related, brought equity investors racing back to the market in February.

In the months that followed, interest rates trended lower in a modest growth environment and more investors turned to equities in search of yield. Markets remained relatively calm despite rising tensions in Russia and Ukraine and further signs of decelerating growth in China. Strong corporate earnings, increased merger and acquisition activity and signs of a strengthening recovery in the U.S. and other developed economies kept equity prices moving higher. Not all segments benefited from these trends, however, as investors ultimately became wary of high valuations, resulting in a broad rotation into cheaper assets.

Volatility ticked up in the summer as geopolitical tensions escalated and investors feared that better U.S. economic indicators may compel the Fed to increase short-term interest rates sooner than previously anticipated. Global credit markets tightened as the U.S. dollar strengthened, ultimately putting a strain on investor flows, and financial markets broadly weakened in the third quarter.

Several themes dominated the markets in the fourth quarter, resulting in higher levels of volatility and the outperformance of U.S. markets versus other areas of the world. Economic growth strengthened considerably in the United States while the broader global economy showed signs of slowing. The European Central Bank and the Bank of Japan took aggressive measures to stimulate growth while the Fed moved toward tighter policy. This divergence in central bank policy caused further strengthening in the U.S. dollar versus other currencies. Oil prices, which had been falling gradually since the summer, plummeted in the fourth quarter due to a global supply-and-demand imbalance. Energy stocks sold off sharply and oil-exporting economies suffered, resulting in the poor performance of emerging market stocks.

At BlackRock, we believe investors need to think globally, extend their scope across a broad 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 blackrock.com for further insight about investing in today’s markets.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2014
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		6.12	%		13.69	%
U.S. small cap equities (Russell 2000® Index)		1.65			4.89
International equities (MSCI Europe, Australasia, Far East Index)		(9.24	)		(4.90	)
Emerging market equities (MSCI Emerging Markets Index)		(7.84	)		(2.19	)
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.01			0.03
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		4.33			10.72
U.S. investment-grade bonds (Barclays U.S. Aggregate Bond Index)		1.96			5.97
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.00			9.25
U.S. high yield bonds (Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		(2.84	)		2.46
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, 2014 LifePath Portfolios

Portfolio Management Commentary

How did each Portfolio perform?

Ÿ The LifePath Portfolios with target dates of 2025, 2035, 2045 and 2055 (altogether, the “LifePath Portfolios”) invest in their corresponding LifePath Master Portfolio.

Ÿ For the 12-month period ended December 31, 2014, the LifePath Portfolios underperformed their respective custom benchmarks. The returns for the LifePath Portfolios include portfolio expenses. The custom benchmarks have no expenses associated with performance.

What factors influenced performance?

Ÿ Equity markets broadly 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 In the shorter-dated funds, investment in Active Stock Master Portfolio (“Active Stock”) was the primary detractor from the LifePath Portfolios’ relative performance, although the strategy had more of an impact on relative performance in the longer-dated funds (2045 and 2055). 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. The Equity Dividend strategy was one of the more significant detractors from performance largely due to the strategy’s underweight and stock selection in information technology. In addition, an underweight in the managed care industry detracted from performance, as health care providers benefited from improving sentiment and rising enrollments under the Affordable Care Act.

Ÿ Fundamental Large Cap Growth also detracted from Active Stock’s performance. While the results were stronger in the second half of the year, the performance was not enough to offset the weakness experienced in March and April. At the sector level, consumer discretionary was the largest detractor in the period. Selection weakness in telecommunication services and industrials also weighed on results.

Ÿ A negative fair value event in the International Tilts Master Portfolio as well as other international assets detracted from performance during the period, with a larger impact in the longer-dated funds.

Ÿ Conversely, the LifePath Portfolios benefited from their investment in CoreAlpha Bond Master Portfolio (“CoreAlpha Bond”), where asset allocation had the largest impact on relative results during the period, though the strategy had a greater impact on relative performance in the shorter-dated funds. In addition, securitized credit assets outperformed due to strong demand for short-duration, high-quality assets. The strategy with respect to U.S. interest rates also benefited returns, as CoreAlpha Bond was positioned to take advantage of the yield curve flattening throughout the 12-month period.

Ÿ The LifePath Portfolios’ investment in the Commodity Strategies Fund also contributed positively across all of the LifePath strategies. The Commodity Strategies’ agricultural equity exposure was the largest driver of relative returns. Agricultural equities finished the year in positive territory, with holdings that benefited from low grain prices as key contributors. In addition, energy-related equities were more resilient than the underlying oil price, and exposure to the sector also generated outperformance.

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 The LifePath Portfolios had begun investing in the International Tilts Master Portfolio and BlackRock Emerging Markets Fund in October 2013, and completed this implementation at the end of March 2014. This additional international equity exposure was offset by a reduction in passive international equity holdings such as the ACWI ex-US Index Master Portfolio, iShares MSCI EAFE Index Fund and iShares Emerging Markets Index Fund. In addition, exposure to Active Stock was reduced in order to move the active risk from the U.S. 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 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, 2014

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, 2014 5

LifePath^® 2025  Portfolio

Investment Objective

Effective through June 30, 2014, LifePath^® 2025 Portfolio (“LifePath 2025 Portfolio” or the “LifePath Portfolio”) was managed for investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2025. Effective July 1, 2014, the investment objective of LifePath 2025 Portfolio is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, LifePath 2025 Portfolio will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

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 to 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  Commencement of operations.

LifePath Portfolio’s custom benchmark consists of the following:

Period	Barclays U.S. Aggregate Bond Index			Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index			Bloomberg Commodity Index4			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex- U.S. 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
1/01/14 to 12/31/14		34.3			5.3			3.8			4.5			17.3			31.5			3.3			N/A			N/A			N/A

⁴  Prior to July 1, 2014, the Bloomberg Commodity Index was known as the Dow Jones-UBS Commodity Index.

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

6 BLACKROCK FUNDS III DECEMBER 31, 2014

LifePath^® 2025  Portfolio

Performance Summary for the Period Ended December 31, 2014

				Average Annual Total Returns
				1 Year						Since  Inception1
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		(0.09	)%		5.23	%		N/A			10.31	%		N/A
Investor A		(0.25	)		4.95			(0.56	)%		10.02			8.71	%
Investor C		(0.63	)		4.08			3.11			9.19			9.19
Class K		0.05			5.51			N/A			10.51			N/A
Class R		(0.39	)		4.69			N/A			9.74			N/A
LifePath 2025 Portfolio Custom Benchmark		(0.19	)		5.67			N/A			10.52			N/A
Barclays U.S. Aggregate Bond Index		1.96			5.97			N/A			3.75			N/A
Barclays U.S. TIPS Index		(2.07	)		3.64			N/A			3.58			N/A
Bloomberg Commodity Index		(22.50	)		(17.01	)		N/A			(3.99	)		N/A
FTSE EPRA/NAREIT Developed Real Estate Index		2.93			15.02			N/A			13.75			N/A
MSCI ACWI ex-U.S. IMI Index		(9.13	)		(3.89	)		N/A			7.84			N/A
Russell 1000® Index		5.57			13.24			N/A			19.24			N/A
Russell 2000® Index		1.65			4.89			N/A			17.91			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, 2014 7

LifePath^® 2035  Portfolio

Investment Objective

Effective through June 30, 2014, LifePath^® 2035 Portfolio (“LifePath 2035 Portfolio” or the “LifePath Portfolio”) was managed for investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2035. Effective July 1, 2014, the investment objective of LifePath 2035 Portfolio is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, LifePath 2035 Portfolio will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

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 to 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 Commencement of operations.

The LifePath Portfolio’s custom benchmark consists of the following:

Period	Barclays U.S. Aggregate Bond Index			Barclays  U.S. Treasury Inflation Protected Securities (TIPS) Index			Bloomberg Commodity Index4			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex- U.S.  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
1/01/14 to 12/31/14		21.4			2.8			3.9			7.6			22.2			39.6			2.5			N/A			N/A			N/A

⁴  Prior to July 1, 2014, the Bloomberg Commodity Index was known as the Dow Jones-UBS Commodity Index.

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

8 BLACKROCK FUNDS III DECEMBER 31, 2014

LifePath^® 2035  Portfolio

Performance Summary for the Period Ended December 31, 2014

				Average Annual Total Returns
				1 Year						Since  Inception1
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		(0.18	)%		5.51	%		N/A			11.81	%		N/A
Investor A		(0.35	)		5.17			(0.35	)%		11.52			10.20	%
Investor C		(0.71	)		4.43			3.45			10.69			10.69
Class K		(0.16	)		5.73			N/A			12.31			N/A
Class R		(0.48	)		4.96			N/A			11.25			N/A
LifePath 2035 Portfolio Custom Benchmark		(0.38	)		5.97			N/A			12.02			N/A
Barclays U.S. Aggregate Bond Index		1.96			5.97			N/A			3.75			N/A
Barclays U.S. TIPS Index		(2.07	)		3.64			N/A			3.58			N/A
Bloomberg Commodity Index		(22.50	)		(17.01	)		N/A			(3.99	)		N/A
FTSE EPRA/NAREIT Developed Real Estate Index		2.93			15.02			N/A			13.75			N/A
MSCI ACWI ex-U.S. IMI Index		(9.13	)		(3.89	)		N/A			7.84			N/A
Russell 1000® Index		5.57			13.24			N/A			19.24			N/A
Russell 2000® Index		1.65			4.89			N/A			17.91			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, 2014 9

LifePath^® 2045  Portfolio

Investment Objective

Effective through June 30, 2014, LifePath^® 2045 Portfolio (“LifePath 2045 Portfolio” or the “LifePath Portfolio”) was managed for investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2045. Effective July 1, 2014, the investment objective of LifePath 2045 Portfolio is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, LifePath 2045 Portfolio will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

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 to 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  Commencement of operations.

The LifePath Portfolio’s custom benchmark consists of the following:

Period	Barclays U.S. Aggregate Bond Index			Bloomberg Commodity Index4			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex- U.S. 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
1/01/14 to 12/31/14		12.5			3.9			10.1			25.9			45.6			2.0			N/A			N/A			N/A

⁴  Prior to July 1, 2014, the Bloomberg Commodity Index was known as the Dow Jones-UBS Commodity Index.

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

10 BLACKROCK FUNDS III DECEMBER 31, 2014

LifePath^® 2045  Portfolio

Performance Summary for the Period Ended December 31, 2014

				Average Annual Total Returns
				1 Year						Since  Inception1
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		(0.34	)%		5.66	%		N/A			13.17	%		N/A
Investor A		(0.51	)		5.37			(0.16	)%		12.90			11.56	%
Investor C		(0.85	)		4.63			3.66			12.05			12.05
Class K		(0.35	)		5.80			N/A			13.56			N/A
Class R		(0.66	)		5.08			N/A			12.60			N/A
LifePath 2045 Portfolio Custom Benchmark		(0.45	)		6.28			N/A			13.28			N/A
Barclays U.S. Aggregate Bond Index		1.96			5.97			N/A			3.75			N/A
Bloomberg Commodity Index		(22.50	)		(17.01	)		N/A			(3.99	)		N/A
FTSE EPRA/NAREIT Developed Real Estate Index		2.93			15.02			N/A			13.75			N/A
MSCI ACWI ex-U.S. IMI Index		(9.13	)		(3.89	)		N/A			7.84			N/A
Russell 1000® Index		5.57			13.24			N/A			19.24			N/A
Russell 2000® Index		1.65			4.89			N/A			17.91			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, 2014 11

LifePath^® 2055  Portfolio

Investment Objective

Effective through June 30, 2014, LifePath^® 2055 Portfolio (“LifePath 2055 Portfolio” or the “LifePath Portfolio”) was managed for investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2055. Effective July 1, 2014, the investment objective of LifePath 2055 Portfolio is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, LifePath 2055 Portfolio will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

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 to 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  Commencement of operations.

The LifePath Portfolio’s custom benchmark consists of the following:

Period	Barclays U.S. Aggregate Bond Index			Bloomberg Commodity Index4			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex- U.S.  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
1/01/14 to 12/31/14		4.0			4.0			12.2			28.6			49.4			1.8		N/A			N/A			N/A

⁴  Prior to July 1, 2014, the Bloomberg Commodity Index was known as the Dow Jones-UBS Commodity Index.

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

12 BLACKROCK FUNDS III DECEMBER 31, 2014

LifePath^® 2055  Portfolio

Performance Summary for the Period Ended December 31, 2014

				Average Annual Total Returns
				1 Year						Since Inception1
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		(0.41	)%		5.90	%		N/A			13.91	%		N/A
Investor A		(0.53	)		5.60			0.06	%		13.60			12.24	%
Investor C		(0.89	)		4.85			3.87			12.77			12.77
Class K		(0.26	)		6.26			N/A			14.37			N/A
Class R		(0.60	)		5.37			N/A			13.33			N/A
LifePath 2055 Portfolio Custom Benchmark		(0.54	)		6.59			N/A			14.14			N/A
Barclays U.S. Aggregate Bond Index		1.96			5.97			N/A			3.75			N/A
Bloomberg Commodity Index		(22.50	)		(17.01	)		N/A			(3.99	)		N/A
FTSE EPRA/NAREIT Developed Real Estate Index		2.93			15.02			N/A			13.75			N/A
MSCI ACWI ex-U.S. IMI Index		(9.13	)		(3.89	)		N/A			7.84			N/A
Russell 1000® Index		5.57			13.24			N/A			19.24			N/A
Russell 2000® Index		1.65			4.89			N/A			17.91			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, 2014 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. These shares are generally available through financial intermediaries.

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. These shares are generally available through financial intermediaries.

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. 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 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. Distributions 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.

BlackRock Advisors, LLC (“BAL” or the “Administrator”), each 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 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, 2014, the following indexes are used to calculate the LifePath Portfolios’ custom benchmarks: Barclays U.S. Aggregate Bond Index, Barclays U.S. TIPS Index, Bloomberg Commodity Index, FTSE EPRA/NAREIT Developed Real Estate Index, MSCI ACWI ex-U.S. IMI Index, Russell 1000^® Index and Russell 2000^® Index.

The Barclays U.S. Aggregate Bond Index is a widely recognized unmanaged market-weighted index, comprised of investment-grade corporate bonds rated BBB or better, mortgages and U.S. Treasury and U.S. Government agency issues with at least one year to maturity. Barclays U.S. TIPS Index is an unmanaged index that measures the performance of the inflation-protected public obligations of the U.S. Treasury. The Bloomberg Commodity Index 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 a global market capitalization weighted index composed of listed real estate securities from developed market countries in North America, Europe and Asia. The MSCI ACWI ex-U.S. IMI Index is a free float-adjusted market capitalization weighted index that measures the equity market performance of the developed (excluding the U.S.) and emerging investable market universe. The Russell 1000^® Index is an index that measures the performance of the large cap segment of the U.S. equity universe. It is a subset of the Russell 3000^® Index and includes approximately 1,000 of the largest securities based on a combination of their market capitalization and current index membership. The index represents approximately 92% of the total market capitalization of the Russell 3000^® Index. The Russell 2000^® Index is an unmanaged index that is a subset of the Russell 3000^® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.

14 BLACKROCK FUNDS III DECEMBER 31, 2014

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, 2014 and held through December 31, 2014) 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 shareholder reports of other funds.

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, 2014		Ending Account Value December 31, 2014		Expenses Paid During the Period1		Beginning Account Value July 1, 2014		Ending Account Value December 31, 2014		Expenses Paid During the Period1		Annualized Expense Ratio
LifePath 2025 Portfolio
Institutional	$	1,000.00	$	999.10	$	3.78	$	1,000.00	$	1,021.42	$	3.82		0.75	%
Investor A	$	1,000.00	$	997.50	$	4.93	$	1,000.00	$	1,020.27	$	4.99		0.98	%
Investor C	$	1,000.00	$	993.70	$	8.69	$	1,000.00	$	1,016.48	$	8.79		1.73	%
Class K	$	1,000.00	$	1,000.50	$	1.82	$	1,000.00	$	1,023.39	$	1.84		0.36	%
Class R	$	1,000.00	$	996.10	$	6.29	$	1,000.00	$	1,018.90	$	6.36		1.25	%
LifePath 2035 Portfolio
Institutional	$	1,000.00	$	998.20	$	3.63	$	1,000.00	$	1,021.58	$	3.67		0.72	%
Investor A	$	1,000.00	$	996.50	$	4.88	$	1,000.00	$	1,020.32	$	4.94		0.97	%
Investor C	$	1,000.00	$	992.90	$	8.64	$	1,000.00	$	1,016.53	$	8.74		1.72	%
Class K	$	1,000.00	$	998.40	$	1.76	$	1,000.00	$	1,023.44	$	1.79		0.35	%
Class R	$	1,000.00	$	995.20	$	6.09	$	1,000.00	$	1,019.11	$	6.16		1.21	%
LifePath 2045 Portfolio
Institutional	$	1,000.00	$	996.60	$	3.57	$	1,000.00	$	1,021.63	$	3.62		0.71	%
Investor A	$	1,000.00	$	994.90	$	4.78	$	1,000.00	$	1,020.42	$	4.84		0.95	%
Investor C	$	1,000.00	$	991.50	$	8.58	$	1,000.00	$	1,016.59	$	8.69		1.71	%
Class K	$	1,000.00	$	996.50	$	1.66	$	1,000.00	$	1,023.54	$	1.68		0.33	%
Class R	$	1,000.00	$	993.40	$	6.08	$	1,000.00	$	1,019.11	$	6.16		1.21	%
LifePath 2055 Portfolio
Institutional	$	1,000.00	$	995.90	$	3.47	$	1,000.00	$	1,021.73	$	3.52		0.69	%
Investor A	$	1,000.00	$	994.70	$	4.73	$	1,000.00	$	1,020.47	$	4.79		0.94	%
Investor C	$	1,000.00	$	991.10	$	8.48	$	1,000.00	$	1,016.69	$	8.59		1.69	%
Class K	$	1,000.00	$	997.40	$	1.61	$	1,000.00	$	1,023.59	$	1.63		0.32	%
Class R	$	1,000.00	$	994.00	$	5.93	$	1,000.00	$	1,019.26	$	6.01		1.18	%

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 prorating the number of days in the most recent fiscal half year divided by 365.

BLACKROCK FUNDS III DECEMBER 31, 2014 15

Statements of Assets and Liabilities BlackRock Funds III

December 31, 2014	LifePath 2025 Portfolio			LifePath 2035 Portfolio			LifePath 2045 Portfolio			LifePath 2055 Portfolio
Assets
Investments at value — from the applicable LifePath Master Portfolio1	$	64,058,564		$	55,745,753		$	34,723,982		$	13,038,622
Capital shares sold receivable		261,153			127,082			166,879			52,134
Receivable from administrator		—			—			—			8,528
Total assets		64,319,717			55,872,835			34,890,861			13,099,284
Liabilities
Contributions payable to the LifePath Master Portfolio		222,613			58,203			153,043			43,172
Capital shares redeemed payable		38,540			68,879			13,836			8,962
Income dividends payable		10,491			6,292			6,190			2,164
Administration fees payable		14,031			10,316			933			—
Capital gains distributions payable		211,346			119,350			106,664			36,781
Service and distribution fees payable		10,569			8,416			5,031			1,674
Professional fees payable		15,910			15,910			15,910			15,892
Total liabilities		523,500			287,366			301,607			108,645
Net Assets	$	63,796,217		$	55,585,469		$	34,589,254		$	12,990,639
Net Assets Consist of
Paid-in capital	$	61,200,384		$	53,148,169		$	33,045,779		$	12,384,465
Distributions in excess of net investment income		(57,915	)		(40,909	)		(20,484	)		(7,903	)
Accumulated net realized gain allocated from the LifePath Master Portfolio		20,817			(78,545	)		(83,604	)		(65,600	)
Net unrealized appreciation/depreciation allocated from the LifePath Master Portfolio		2,632,931			2,556,754			1,647,563			679,677
Net Assets	$	63,796,217		$	55,585,469		$	34,589,254		$	12,990,639
Net Asset Value
Institutional:
Net assets	$	23,624,909		$	22,003,617		$	15,677,701		$	6,772,517
Shares outstanding2		1,846,170			1,638,996			1,115,859			472,651
Net asset value	$	12.80		$	13.43		$	14.05		$	14.33
Investor A:
Net assets	$	35,323,995		$	31,048,329		$	16,813,590		$	5,542,579
Shares outstanding2		2,763,387			2,315,208			1,197,388			387,501
Net asset value	$	12.78		$	13.41		$	14.04		$	14.30
Maximum offering price per share (100/94.75 of net asset value)	$	13.49		$	14.15		$	14.82		$	15.09
Investor C:
Net assets	$	2,849,091		$	1,816,195		$	1,549,239		$	528,067
Shares outstanding2		223,921			136,376			111,484			37,244
Net asset value	$	12.72		$	13.32		$	13.90		$	14.18
Class K:
Net assets	$	316,627		$	137,878		$	28,401		$	29,001
Shares outstanding2		24,774			10,137			2,003			2,001
Net asset value	$	12.78		$	13.60		$	14.18		$	14.49
Class R:
Net assets	$	1,681,595		$	579,450		$	520,323		$	118,475
Shares outstanding2		131,436			43,115			37,049			8,275
Net asset value	$	12.79		$	13.44		$	14.04		$	14.32
1    Cost — from the applicable LifePath Master Portfolio	$	61,425,633		$	53,188,999		$	33,076,419		$	12,358,945
2   No par value, unlimited number of shares authorized.

See Notes to Financial Statements.
16	BLACKROCK FUNDS III	DECEMBER 31, 2014

Statements of Operations BlackRock Funds III

Year Ended December 31, 2014	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	$	863,994		$	903,771		$	614,517		$	252,639
Securities lending — affiliated — net		987			843			725			451
Interest — affiliated		656,567			371,191			130,495			16,329
Income — affiliated		230			85			239			49
Expenses		(420,709	)		(359,180	)		(222,367	)		(100,244	)
Fees waived		269,989			244,136			160,427			80,056
Total income		1,371,058			1,160,846			684,036			249,280
Portfolio Expenses
Administration — Institutional		142,486			128,299			81,064			32,233
Administration — Investor A		168,682			141,292			73,209			24,853
Administration — Investor C		12,188			7,111			6,095			2,337
Administration — Class K		789			352			160			101
Administration — Class R		8,826			3,187			3,114			801
Service — Investor A		84,497			70,845			36,716			12,463
Service and distribution — Investor C		24,408			14,270			12,221			4,685
Service and distribution — Class R		8,867			3,198			3,121			806
Professional		18,640			18,640			18,640			18,640
Miscellaneous		470			470			470			470
Total expenses		469,853			387,664			234,810			97,389
Less fees reimbursed by administrator		(18,640	)		(18,640	)		(18,640	)		(18,640	)
Total expenses after fees reimbursed		451,213			369,024			216,170			78,749
Net investment income		919,845			791,822			467,866			170,531
Realized and Unrealized Gain (Loss) Allocation from the LifePath Master Portfolios
Net realized gain from investments, financial futures contracts, swaps and foreign currency transactions		3,053,636			2,767,003			1,650,581			592,753
Net change in unrealized appreciation/depreciation on investments, financial futures contracts, swaps and foreign currency translations		(942,332	)		(906,421	)		(522,584	)		(124,640	)
Net realized and unrealized gain		2,111,304			1,860,582			1,127,997			468,113
Net Increase in Net Assets Resulting from Operations	$	3,031,149		$	2,652,404		$	1,595,863		$	638,644

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	17

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:	2014			2013			2014			2013
Operations
Net investment income	$	919,845		$	644,066		$	791,822		$	580,239
Net realized gain		3,053,636			2,052,857			2,767,003			2,015,545
Net change in unrealized appreciation/depreciation		(942,332	)		2,358,894			(906,421	)		2,465,781
Net increase in net assets resulting from operations		3,031,149			5,055,817			2,652,404			5,061,565
Distributions to Shareholders From1
Net investment income:
Institutional		(420,027	)		(326,646	)		(381,547	)		(316,781	)
Investor A		(467,797	)		(313,424	)		(401,365	)		(266,566	)
Investor C		(16,080	)		(10,617	)		(10,392	)		(7,339	)
Class K		(11,572	)		(1,496	)		(4,870	)		(1,500	)
Class R		(19,809	)		(14,168	)		(6,233	)		(4,933	)
Net realized gain:
Institutional		(1,420,337	)		(602,476	)		(1,405,216	)		(655,024	)
Investor A		(2,069,079	)		(701,166	)		(1,927,115	)		(650,724	)
Investor C		(166,033	)		(47,862	)		(110,090	)		(32,301	)
Class K		(26,416	)		(2,423	)		(12,538	)		(2,782	)
Class R		(97,886	)		(34,886	)		(36,835	)		(13,958	)
Decrease in net assets resulting from distributions to shareholders		(4,715,036	)		(2,055,164	)		(4,296,201	)		(1,951,908	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		6,965,153			21,501,701			11,943,495			16,466,684
Net Assets
Total increase in net assets		5,281,266			24,502,354			10,299,698			19,576,341
Beginning of year		58,514,951			34,012,597			45,285,771			25,709,430
End of year	$	63,796,217		$	58,514,951		$	55,585,469		$	45,285,771
Distributions in excess of net investment income, end of year	$	(57,915	)	$	(42,475	)	$	(40,909	)	$	(28,324	)

¹  Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
18	BLACKROCK FUNDS III	DECEMBER 31, 2014

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:	2014			2013			2014			2013
Operations
Net investment income	$	467,866		$	339,687		$	170,531		$	124,282
Net realized gain		1,650,581			1,201,851			592,753			453,478
Net change in unrealized appreciation/depreciation		(522,584	)		1,641,004			(124,640	)		628,740
Net increase in net assets resulting from operations		1,595,863			3,182,542			638,644			1,206,500
Distributions to Shareholders From1
Net investment income:
Institutional		(250,163	)		(191,221	)		(100,701	)		(69,370	)
Investor A		(207,777	)		(143,023	)		(68,668	)		(52,832	)
Investor C		(8,768	)		(7,603	)		(3,091	)		(2,600	)
Class K		(2,386	)		(506	)		(1,462	)		(525	)
Class R		(5,926	)		(6,459	)		(1,505	)		(1,208	)
Net realized gain:
Institutional		(982,819	)		(380,791	)		(417,600	)		(148,647	)
Investor A		(1,031,608	)		(336,834	)		(341,066	)		(136,279	)
Investor C		(94,176	)		(28,074	)		(32,641	)		(10,611	)
Class K		(5,442	)		(889	)		(3,653	)		(999	)
Class R		(33,305	)		(16,696	)		(8,089	)		(3,525	)
Decrease in net assets resulting from distributions to shareholders		(2,622,370	)		(1,112,096	)		(978,476	)		(426,596	)
Capital Share Transactions
Net increase in net assets derived from capital transactions		10,215,915			11,169,123			4,383,495			4,405,039
Net Assets
Total increase in net assets		9,189,408			13,239,569			4,043,663			5,184,943
Beginning of year		25,399,846			12,160,277			8,946,976			3,762,033
End of year	$	34,589,254		$	25,399,846		$	12,990,639		$	8,946,976
Distributions in excess of net investment income, end of year	$	(20,484	)	$	(13,330	)	$	(7,903	)	$	(3,007	)

¹  Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	19

Financial Highlights LifePath 2025 Portfolio

	Institutional
	Year Ended December 31,												Period June 30, 20101 to December 31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	13.11		$	12.19		$	11.07		$	11.21		$	10.00
Net investment income2		0.21			0.21			0.22			0.25			0.11
Net realized and unrealized gain (loss)		0.48			1.22			1.11			(0.19	)		1.63
Net increase from investment operations		0.69			1.43			1.33			0.06			1.74
Distributions from:3
Net investment income		(0.21	)		(0.19	)		(0.21	)		(0.20	)		(0.11	)
Net realized gain		(0.79	)		(0.32	)		(0.00	)4		(0.00	)4		(0.42	)
Total distributions		(1.00	)		(0.51	)		(0.21	)		(0.20	)		(0.53	)
Net asset value, end of period	$	12.80		$	13.11		$	12.19		$	11.07		$	11.21
Total Return5
Based on net asset value		5.23%			11.84%			12.07%			0.49%			17.40%	6
Ratios to Average Net Assets7
Total expenses		0.75%	8,9		0.79%	8,9		0.86%	8,9		1.06%	8,9		24.41%	10
Total expenses after fees waived and/or reimbursed		0.73%	8,9		0.75%	8,9		0.76%	8,9		0.74%	8,9		0.73%	10
Net investment income		1.53%	8,9		1.60%	8,9		1.85%	8,9		2.25%	8,9		1.93%	10
Supplemental Data
Net assets, end of period (000)	$	23,625		$	25,882		$	15,816		$	3,233		$	22
Portfolio turnover rate of the LifePath Master Portfolio		50%	11		30%	11		4%	12		24%	12		2%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 include gross expenses.

⁸  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.40%, 0.40%, 0.48% and 0.82% for the years ended December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.13%, 0.10%, 0.10% and 0.12% for the years ended December 31, 2014, 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.

¹⁰ Annualized.

¹¹ 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.

¹² Excludes the LifePath Master Portfolio’s purchases or sales of 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, the portfolio turnover rate would have been 17% and 58% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
20	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights (continued) LifePath 2025 Portfolio

	Investor A
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	13.10		$	12.19		$	11.06		$	11.21		$	10.00
Net investment income2		0.17			0.18			0.18			0.21			0.09
Net realized and unrealized gain (loss)		0.48			1.22			1.12			(0.19	)		1.63
Net increase from investment operations		0.65			1.40			1.30			0.02			1.72
Distributions from:3
Net investment income		(0.18	)		(0.17	)		(0.17	)		(0.17	)		(0.09	)
Net realized gain		(0.79	)		(0.32	)		(0.00	)4		(0.00	)4		(0.42	)
Total distributions		(0.97	)		(0.49	)		(0.17	)		(0.17	)		(0.51	)
Net asset value, end of period	$	12.78		$	13.10		$	12.19		$	11.06		$	11.21
Total Return5
Based on net asset value		4.95%			11.52%			11.84%			0.18%			17.26%	6
Ratios to Average Net Assets7
Total expenses		1.00%	8,9		1.05%	8,9		1.11%	8,9		1.32%	8,9		24.68%	10
Total expenses after fees waived and/or reimbursed		0.98%	8,9		1.00%	8,9		1.01%	8,9		0.99%	8,9		0.98%	10
Net investment income		1.31%	8,9		1.37%	8,9		1.54%	8,9		1.87%	8,9		1.67%	10
Supplemental Data
Net assets, end of period (000)	$	35,324		$	29,049		$	13,981		$	7,076		$	22
Portfolio turnover rate of the LifePath Master Portfolio		50%	11		30%	11		4%	12		24%	12		2%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods 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 distributions.

⁶  Aggregate total 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 include gross expenses.

⁸  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.40%, 0.40%, 0.48% and 0.86% for the years ended December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.13%, 0.10%, 0.10% and 0.12% for the years ended December 31, 2014, 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.

¹⁰ Annualized.

¹¹ 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.

¹² Excludes the LifePath Master Portfolio’s purchases or sales of 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, the portfolio turnover rate 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, 2014	21

Financial Highlights (continued) LifePath 2025 Portfolio

	Investor C
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	13.06		$	12.15		$	11.05		$	11.21		$	10.00
Net investment income2		0.07			0.07			0.10			0.14			0.05
Net realized and unrealized gain (loss)		0.47			1.23			1.11			(0.20	)		1.63
Net increase (decrease) from investment operations		0.54			1.30			1.21			(0.06	)		1.68
Distributions from:3
Net investment income		(0.09	)		(0.07	)		(0.11	)		(0.10	)		(0.05	)
Net realized gain		(0.79	)		(0.32	)4		(0.00	)4		(0.00	)		(0.42	)
Total distributions		(0.88	)		(0.39	)		(0.11	)		(0.10	)		(0.47	)
Net asset value, end of period	$	12.72		$	13.06		$	12.15		$	11.05		$	11.21
Total Return5
Based on net asset value		4.08%			10.73%			10.99%			(0.54)%			16.84%	6
Ratios to Average Net Assets7
Total expenses		1.75%	8,9		1.80%	8,9		1.85%	8,9		2.10%	8,9		25.46%	10
Total expenses after fees waived and/or reimbursed		1.73%	8,9		1.76%	8,9		1.76%	8,9		1.75%	8,9		1.72%	10
Net investment income		0.56%	8,9		0.57%	8,9		0.87%	8,9		1.25%	8,9		0.95%	10
Supplemental Data
Net assets, end of period (000)	$	2,849		$	1,997		$	992		$	245		$	22
Portfolio turnover rate of the LifePath Master Portfolio		50%	11		30%	11		4%	12		24%	12		2%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods 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 distributions.

⁶  Aggregate total 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 include gross expenses.

⁸  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.40%, 0.40%, 0.48% and 0.82% for the years ended December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.13%, 0.10%, 0.10% and 0.12% for the years ended December 31, 2014, 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.

¹⁰ Annualized.

¹¹ 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.

¹² Excludes the LifePath Master Portfolio’s purchases or sales of 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, the portfolio turnover rate 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, 2014

Financial Highlights (continued) LifePath 2025 Portfolio

	Class K
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	13.10		$	12.22		$	11.09		$	11.21		$	10.00
Net investment income2		0.26			0.20			0.26			0.26			0.13
Net realized and unrealized gain (loss)		0.46			1.20			1.11			(0.16	)		1.63
Net increase from investment operations		0.72			1.40			1.37			0.10			1.76
Distributions from:3
Net investment income		(0.25	)		(0.20	)		(0.24	)		(0.22	)		(0.13	)
Net realized gain		(0.79	)		(0.32	)		(0.00	)4		(0.00	)4		(0.42	)
Total distributions		(1.04	)		(0.52	)		(0.24	)		(0.22	)		(0.55	)
Net asset value, end of period	$	12.78		$	13.10		$	12.22		$	11.09		$	11.21
Total Return5
Based on net asset value		5.51%			11.47%			12.44%			0.87%			17.60%	6
Ratios to Average Net Assets7
Total expenses		0.40%	8,9		0.44%	8,9		0.51%	8,9		0.71%	8,9		24.05%	10
Total expenses after fees waived and/or reimbursed		0.37%	8,9		0.40%	8,9		0.41%	8,9		0.38%	8,9		0.38%	10
Net investment income		1.91%	8,9		1.57%	8,9		2.20%	8,9		2.31%	8,9		2.29%	10
Supplemental Data
Net assets, end of period (000)	$	317		$	102		$	1,941		$	1,590		$	22
Portfolio turnover rate of the LifePath Master Portfolio		50%	11		30%	11		4%	12		24%	12		2%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 include gross expenses.

⁸  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.40%, 0.40%, 0.49% and 0.89% for the years ended December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.13%, 0.10%, 0.10% and 0.12% for the years ended December 31, 2014, 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.

¹⁰ Annualized.

¹¹ 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.

¹² Excludes the LifePath Master Portfolio’s purchases or sales of 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, the portfolio turnover rate 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, 2014	23

Financial Highlights (concluded) LifePath 2025 Portfolio

	Class R
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	13.11		$	12.19		$	11.09		$	11.21		$	10.00
Net investment income2		0.14			0.13			0.18			0.17			0.08
Net realized and unrealized gain (loss)		0.48			1.24			1.08			(0.17	)		1.63
Net increase from investment operations		0.62			1.37			1.26			—			1.71
Distributions from:3
Net investment income		(0.15	)		(0.13	)		(0.16	)		(0.12	)		(0.08	)
Net realized gain		(0.79	)		(0.32	)4		(0.00	)4		(0.00	)		(0.42	)
Total distributions		(0.94	)		(0.45	)		(0.16	)		(0.12	)		(0.50	)
Net asset value, end of period	$	12.79		$	13.11		$	12.19		$	11.09		$	11.21
Total Return5
Based on net asset value		4.69%			11.26%			11.45%			0.02%			17.12%	6
Ratios to Average Net Assets7
Total expenses		1.26%	8,9		1.30%	8,9		1.35%	8,9		1.57%	8,9		24.94%	10
Total expenses after fees waived and/or reimbursed		1.23%	8,9		1.25%	8,9		1.26%	8,9		1.23%	8,9		1.23%	10
Net investment income		1.04%	8,9		1.05%	8,9		1.54%	8,9		1.46%	8,9		1.43%	10
Supplemental Data
Net assets, end of period (000)	$	1,682		$	1,484		$	1,282		$	22		$	22
Portfolio turnover rate of the LifePath Master Portfolio		50%	11		30%	11		4%	12		24%	12		2%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 include gross expenses.

⁸  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.40%, 0.40%, 0.48% and 0.91% for the years ended December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.13%, 0.10%, 0.10% and 0.12% for the years ended December 31, 2014, 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.

¹⁰ Annualized.

¹¹ 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.

¹² Excludes the LifePath Master Portfolio’s purchases or sales of 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, the portfolio turnover rate 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, 2014

Financial Highlights LifePath 2035 Portfolio

	Institutional
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	13.77		$	12.51		$	11.18		$	11.52		$	10.00
Net investment income2		0.22			0.24			0.24			0.24			0.11
Net realized and unrealized gain (loss)		0.54			1.67			1.30			(0.39	)		1.99
Net increase (decrease) from investment operations		0.76			1.91			1.54			(0.15	)		2.10
Distributions from:3
Net investment income		(0.22	)		(0.23	)		(0.21	)		(0.19	)		(0.10	)
Net realized gain		(0.88	)		(0.42	)		—			(0.00	)4		(0.48	)
Return of capital		—			—			(0.00	)4		—			—
Total distributions		(1.10	)		(0.65	)		(0.21	)		(0.19	)		(0.58	)
Net asset value, end of period	$	13.43		$	13.77		$	12.51		$	11.18		$	11.52
Total Return5
Based on net asset value		5.51%			15.33%			13.85%			(1.32)%			20.96%	6
Ratios to Average Net Assets7
Total expenses		0.74%	8,9		0.80%	8,9		0.89%	8,9		1.22%	8,9		24.07%	10
Total expenses after fees waived and/or reimbursed		0.71%	8,9		0.75%	8,9		0.75%	8,9		0.72%	8,9		0.71%	10
Net investment income		1.55%	8,9		1.78%	8,9		1.98%	8,9		2.13%	8,9		1.88%	10
Supplemental Data
Net assets, end of period (000)	$	22,004		$	22,266		$	12,853		$	2,033		$	23
Portfolio turnover rate of the LifePath Master Portfolio		54%	11		39%	11		4%	12		21%	12		1%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 include gross expenses.

⁸  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.43%, 0.43%, 0.56% and 1.10% for the years ended December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.15%, 0.11%, 0.11% and 0.14% for the years ended December 31, 2014, 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.

¹⁰ Annualized.

¹¹ 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.

¹² Excludes the LifePath Master Portfolio’s purchases or sales of 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, the portfolio turnover rate 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, 2014	25

Financial Highlights (continued) LifePath 2035 Portfolio

	Investor A
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	13.77		$	12.51		$	11.17		$	11.51		$	10.00
Net investment income2		0.19			0.21			0.20			0.20			0.10
Net realized and unrealized gain (loss)		0.52			1.67			1.32			(0.37	)		1.98
Net increase (decrease) from investment operations		0.71			1.88			1.52			(0.17	)		2.08
Distributions from:3
Net investment income		(0.19	)		(0.20	)		(0.18	)		(0.17	)		(0.09	)
Net realized gain		(0.88	)		(0.42	)		—			(0.00	)4		(0.48	)
Return of capital		—			—			(0.00	)4		—			—
Total distributions		(1.07	)		(0.62	)		(0.18	)		(0.17	)		(0.57	)
Net asset value, end of period	$	13.41		$	13.77		$	12.51		$	11.17		$	11.51
Total Return5
Based on net asset value		5.17%			15.08%			13.63%			(1.55)%			20.74%	6
Ratios to Average Net Assets7
Total expenses		0.99%	8,9		1.05%	8,9		1.14%	8,9		1.48%	8,9		22.59%	10
Total expenses after fees waived and/or reimbursed		0.96%	8,9		1.00%	8,9		1.00%	8,9		0.97%	8,9		0.96%	10
Net investment income		1.33%	8,9		1.55%	8,9		1.63%	8,9		1.77%	8,9		1.71%	10
Supplemental Data
Net assets, end of period (000)	$	31,048		$	21,423		$	9,966		$	4,121		$	27
Portfolio turnover rate of the LifePath Master Portfolio		54%	11		39%	11		4%	12		21%	12		1%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods 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 distributions.

⁶  Aggregate total 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 include gross expenses.

⁸  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.43%, 0.43%, 0.56% and 1.15% for the years ended December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.15%, 0.11%, 0.11% and 0.14% for the years ended December 31, 2014, 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.

¹⁰ Annualized.

¹¹ 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.

¹² Excludes the LifePath Master Portfolio’s purchases or sales of 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, the portfolio turnover rate 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, 2014

Financial Highlights (continued) LifePath 2035 Portfolio

	Investor C
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	13.69		$	12.45		$	11.14		$	11.49		$	10.00
Net investment income2		0.08			0.11			0.11			0.09			0.05
Net realized and unrealized gain (loss)		0.53			1.66			1.30			(0.35	)		1.98
Net increase (decrease) from investment operations		0.61			1.77			1.41			(0.26	)		2.03
Distributions from:3
Net investment income		(0.10	)		(0.11	)		(0.10	)		(0.09	)		(0.06	)
Net realized gain		(0.88	)		(0.42	)		—			(0.00	)4		(0.48	)
Return of capital		—			—			(0.00	)4		—			—
Total distributions		(0.98	)		(0.53	)		(0.10	)		(0.09	)		(0.54	)
Net asset value, end of period	$	13.32		$	13.69		$	12.45		$	11.14		$	11.49
Total Return5
Based on net asset value		4.43%			14.22%			12.70%			(2.28)%			20.30%	6
Ratios to Average Net Assets7
Total expenses		1.74%	8,9		1.81%	8,9		1.89%	8,9		2.24%	8,9		25.11%	10
Total expenses after fees waived and/or reimbursed		1.71%	8,9		1.75%	8,9		1.75%	8,9		1.72%	8,9		1.70%	10
Net investment income		0.58%	8,9		0.81%	8,9		0.92%	8,9		0.80%	8,9		0.89%	10
Supplemental Data
Net assets, end of period (000)	$	1,816		$	1,028		$	533		$	190		$	30
Portfolio turnover rate of the LifePath Master Portfolio		54%	11		39%	11		4%	12		21%	12		1%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods 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 sale charges and assumes the reinvestment of distributions.

⁶  Aggregate total 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 include gross expenses.

⁸  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.43%, 0.43%, 0.56% and 1.09% for the years ended December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.15%, 0.11%, 0.11% and 0.14% for the years ended December 31, 2014, 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.

¹⁰ Annualized.

¹¹ 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.

¹² Excludes the LifePath Master Portfolio’s purchases or sales of 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, the portfolio turnover rate 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, 2014	27

Financial Highlights (continued) LifePath 2035 Portfolio

	Class K
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	13.94		$	12.55		$	11.20		$	11.52		$	10.00
Net investment income2		0.27			0.22			0.27			0.25			0.13
Net realized and unrealized gain (loss)		0.53			1.82			1.32			(0.35	)		1.99
Net increase (decrease) from investment operations		0.80			2.04			1.59			(0.10	)		2.12
Distributions from:3
Net investment income		(0.26	)		(0.23	)		(0.24	)		(0.22	)		(0.12	)
Net realized gain		(0.88	)		(0.42	)		—			(0.00	)4		(0.48	)
Return of capital		—			—			(0.00	)4		—			—
Total distributions		(1.14	)		(0.65	)		(0.24	)		(0.22	)		(0.60	)
Net asset value, end of period	$	13.60		$	13.94		$	12.55		$	11.20		$	11.52
Total Return5
Based on net asset value		5.73%			16.32%			14.30%			(0.94)%			21.16%	6
Ratios to Average Net Assets7
Total expenses		0.38%	8,9		0.45%	8,9		0.55%	8,9		0.87%	8,9		23.70%	10
Total expenses after fees waived and/or reimbursed		0.35%	8,9		0.38%	8,9		0.40%	8,9		0.36%	8,9		0.36%	10
Net investment income		1.91%	8,9		1.65%	8,9		2.26%	8,9		2.17%	8,9		2.23%	10
Supplemental Data
Net assets, end of period (000)	$	138		$	95		$	1,999		$	1,050		$	23
Portfolio turnover rate of the LifePath Master Portfolio		54%	11		39%	11		4%	12		21%	12		1%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 include gross expenses.

⁸  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.43%, 0.43%, 0.57% and 1.20% for the years ended December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.15%, 0.11%, 0.11% and 0.14% for the years ended December 31, 2014, 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.

¹⁰ Annualized.

¹¹ 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.

¹² Excludes the LifePath Master Portfolio’s purchases or sales of 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, the portfolio turnover rate 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, 2014

Financial Highlights (concluded) LifePath 2035 Portfolio

	Class R
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	13.78		$	12.52		$	11.19		$	11.52		$	10.00
Net investment income2		0.14			0.17			0.21			0.15			0.08
Net realized and unrealized gain (loss)		0.54			1.67			1.28			(0.36	)		1.99
Net increase (decrease) from investment operations		0.68			1.84			1.49			(0.21	)		2.07
Distributions from:3
Net investment income		(0.14	)		(0.16	)		(0.16	)		(0.12	)		(0.07	)
Net realized gain		(0.88	)		(0.42	)		—			(0.00	)4		(0.48	)
Return of capital		—			—			(0.00	)4		—			—
Total distributions		(1.02	)		(0.58	)		(0.16	)		(0.12	)		(0.55	)
Net asset value, end of period	$	13.44		$	13.78		$	12.52		$	11.19		$	11.52
Total Return5
Based on net asset value		4.96%			14.74%			13.37%			(1.85)%			20.67%	6
Ratios to Average Net Assets7
Total expenses		1.24%	8,9		1.30%	8,9		1.38%	8,9		1.72%	8,9		24.60%	10
Total expenses after fees waived and/or reimbursed		1.21%	8,9		1.25%	8,9		1.25%	8,9		1.21%	8,9		1.22%	10
Net investment income		1.03%	8,9		1.25%	8,9		1.71%	8,9		1.31%	8,9		1.39%	10
Supplemental Data
Net assets, end of period (000)	$	579		$	474		$	359		$	22		$	23
Portfolio turnover rate of the LifePath Master Portfolio		54%	11		39%	11		4%	12		21%	12		1%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 include gross expenses.

⁸  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.43%, 0.43%, 0.55% and 1.19% for the years ended December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.15%, 0.11%, 0.11% and 0.14% for the years ended December 31, 2014, 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.

¹⁰ Annualized.

¹¹ 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.

¹² Excludes the LifePath Master Portfolio’s purchases or sales of 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, the portfolio turnover rate 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, 2014	29

Financial Highlights LifePath 2045 Portfolio

	Institutional
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	14.39		$	12.74		$	11.24		$	11.70		$	10.00
Net investment income2		0.23			0.27			0.25			0.23			0.10
Net realized and unrealized gain (loss)		0.58			2.07			1.47			(0.51	)		2.30
Net increase (decrease) from investment operations		0.81			2.34			1.72			(0.28	)		2.40
Distributions from:3
Net investment income		(0.23	)		(0.25	)		(0.22	)		(0.18	)		(0.10	)
Net realized gain		(0.92	)		(0.44	)		—			—			(0.60	)
Return of capital		—			—			(0.00	)4		—			—
Total distributions		(1.15	)		(0.69	)		(0.22	)		(0.18	)		(0.70	)
Net asset value, end of period	$	14.05		$	14.39		$	12.74		$	11.24		$	11.70
Total Return5
Based on net asset value		5.66%			18.49%			15.34%			(2.46)%			24.01%	6
Ratios to Average Net Assets7
Total expenses		0.75%	8,9		0.85%	8,9		1.06%	8,9		2.00%	8,9		23.73%	10
Total expenses after fees waived and/or reimbursed		0.69%	8,9		0.74%	8,9		0.75%	8,9		0.70%	8,9		0.68%	10
Net investment income		1.57%	8,9		1.94%	8,9		2.04%	8,9		2.02%	8,9		1.81%	10
Supplemental Data
Net assets, end of period (000)	$	15,678		$	12,832		$	7,066		$	1,646		$	23
Portfolio turnover rate of the LifePath Master Portfolio		54%	11		38%	11		4%	12		35%	12		1%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 include gross expenses.

⁸  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.49%, 0.51%, 0.83% and 2.51% for the years ended December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.16%, 0.11%, 0.11% and 0.16% for the years ended December 31, 2014, 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.

¹⁰ Annualized.

¹¹ 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.

¹² Excludes the LifePath Master Portfolio’s purchases or sales of 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, the portfolio turnover rate would have been 15% and 71% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
30	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights (continued) LifePath 2045 Portfolio

	Investor A
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	14.39		$	12.75		$	11.25		$	11.70		$	10.00
Net investment income2		0.20			0.25			0.21			0.19			0.09
Net realized and unrealized gain (loss)		0.57			2.05			1.47			(0.49	)		2.29
Net increase (decrease) from investment operations		0.77			2.30			1.68			(0.30	)		2.38
Distributions from:3
Net investment income		(0.20	)		(0.22	)		(0.18	)		(0.15	)		(0.08	)
Net realized gain		(0.92	)		(0.44	)		—			(0.00	)4		(0.60	)
Return of capital		—			—			(0.00	)4		—			—
Total distributions		(1.12	)		(0.66	)		(0.18	)		(0.15	)		(0.68	)
Net asset value, end of period	$	14.04		$	14.39		$	12.75		$	11.25		$	11.70
Total Return5
Based on net asset value		5.37%			18.17%			15.03%			(2.61)%			23.86%	6
Ratios to Average Net Assets7
Total expenses		1.00%	8,9		1.10%	8,9		1.31%	8,9		2.20%	8,9		24.00%	10
Total expenses after fees waived and/or reimbursed		0.94%	8,9		0.99%	8,9		0.99%	8,9		0.95%	8,9		0.93%	10
Net investment income		1.35%	8,9		1.77%	8,9		1.75%	8,9		1.65%	8,9		1.56%	10
Supplemental Data
Net assets, end of period (000)	$	16,814		$	11,044		$	3,512		$	1,228		$	23
Portfolio turnover rate of the LifePath Master Portfolio		54%	11		38%	11		4%	12		35%	12		1%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods 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 distributions.

⁶  Aggregate total 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 include gross expenses.

⁸  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.49%, 0.51%, 0.83% and 2.23% for the years ended December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.16%, 0.11%, 0.11% and 0.16% for the years ended December 31, 2014, 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.

¹⁰ Annualized.

¹¹ 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.

¹² Excludes the LifePath Master Portfolio’s purchases or sales of 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, the portfolio turnover rate 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, 2014	31

Financial Highlights (continued) LifePath 2045 Portfolio

	Investor C
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	14.26		$	12.65		$	11.18		$	11.67		$	10.00
Net investment income2		0.09			0.13			0.13			0.11			0.05
Net realized and unrealized gain (loss)		0.57			2.05			1.45			(0.50	)		2.28
Net increase (decrease) from investment operations		0.66			2.18			1.58			(0.39	)		2.33
Distributions from:3
Net investment income		(0.10	)		(0.13	)		(0.11	)		(0.10	)		(0.06	)
Net realized gain		(0.92	)		(0.44	)		—			(0.00	)4		(0.60	)
Return of capital		—			—			(0.00	)4		—			—
Total distributions		(1.02	)		(0.57	)		(0.11	)		(0.10	)		(0.66	)
Net asset value, end of period	$	13.90		$	14.26		$	12.65		$	11.18		$	11.67
Total Return5
Based on net asset value		4.63%			17.31%			14.15%			(3.37)%			23.33%	6
Ratios to Average Net Assets7
Total expenses		1.75%	8,9		1.85%	8,9		2.04%	8,9		2.99%	8,9		24.78%	10
Total expenses after fees waived and/or reimbursed		1.69%	8,9		1.74%	8,9		1.75%	8,9		1.70%	8,9		1.69%	10
Net investment income		0.61%	8,9		0.97%	8,9		1.07%	8,9		0.94%	8,9		0.81%	10
Supplemental Data
Net assets, end of period (000)	$	1,549		$	935		$	463		$	95		$	23
Portfolio turnover rate of the LifePath Master Portfolio		54%	11		38%	11		4%	12		35%	12		1%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods 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 distributions.

⁶  Aggregate total 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 include gross expenses.

⁸  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.49%, 0.51%, 0.81% and 2.41% for the years ended December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.16%, 0.11%, 0.11% and 0.16% for the years ended December 31, 2014, 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.

¹⁰ Annualized.

¹¹ 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.

¹² Excludes the LifePath Master Portfolio’s purchases or sales of 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, the portfolio turnover rate 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, 2014

Financial Highlights (continued) LifePath 2045 Portfolio

	Class K
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	14.50		$	12.77		$	11.26		$	11.70		$	10.00
Net investment income2		0.29			0.21			0.30			0.24			0.12
Net realized and unrealized gain (loss)		0.55			2.21			1.46			(0.48	)		2.30
Net increase (decrease) from investment operations		0.84			2.42			1.76			(0.24	)		2.42
Distributions from:3
Net investment income		(0.24	)		(0.25	)		(0.25	)		(0.20	)		(0.12	)
Net realized gain		(0.92	)		(0.44	)		—			(0.00	)4		(0.60	)
Return of capital		—			—			(0.00	)4		—			—
Total distributions		(1.16	)		(0.69	)		(0.25	)		(0.20	)		(0.72	)
Net asset value, end of period	$	14.18		$	14.50		$	12.77		$	11.26		$	11.70
Total Return5
Based on net asset value		5.80%			19.11%			15.72%			(2.08)%			24.22%	6
Ratios to Average Net Assets7
Total expenses		0.38%	8,9		0.49%	8,9		0.70%	8,9		1.72%	8,9		23.37%	10
Total expenses after fees waived and/or reimbursed		0.33%	8,9		0.38%	8,9		0.39%	8,9		0.35%	8,9		0.33%	10
Net investment income		1.92%	8,9		1.60%	8,9		2.41%	8,9		2.04%	8,9		2.17%	10
Supplemental Data
Net assets, end of period (000)	$	28		$	29		$	697		$	259		$	23
Portfolio turnover rate of the LifePath Master Portfolio		54%	11		38%	11		4%	12		35%	12		1%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 include gross expenses.

⁸  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.48%, 0.55%, 0.83% and 2.71% for the years ended December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.16%, 0.11%, 0.11% and 0.16% for the years ended December 31, 2014, 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.

¹⁰ Annualized.

¹¹ 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.

¹² Excludes the LifePath Master Portfolio’s purchases or sales of 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, the portfolio turnover rate 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, 2014	33

Financial Highlights (concluded) LifePath 2045 Portfolio

	Class R
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	14.38		$	12.73		$	11.24		$	11.69		$	10.00
Net investment income2		0.15			0.19			0.23			0.14			0.07
Net realized and unrealized gain (loss)		0.58			2.08			1.42			(0.48	)		2.30
Net increase (decrease) from investment operations		0.73			2.27			1.65			(0.34	)		2.37
Distributions from:3
Net investment income		(0.15	)		(0.18	)		(0.16	)		(0.11	)		(0.08	)
Net realized gain		(0.92	)		(0.44	)		—			(0.00	)4		(0.60	)
Return of capital		—			—			(0.00	)4		—			—
Total distributions		(1.07	)		(0.62	)		(0.16	)		(0.11	)		(0.68	)
Net asset value, end of period	$	14.04		$	14.38		$	12.73		$	11.24		$	11.69
Total Return5
Based on net asset value		5.08%			17.91%			14.77%			(2.93)%			23.68%	6
Ratios to Average Net Assets7
Total expenses		1.25%	8,9		1.35%	8,9		1.55%	8,9		2.57%	8,9		24.26%	10
Total expenses after fees waived and/or reimbursed		1.19%	8,9		1.24%	8,9		1.25%	8,9		1.19%	8,9		1.19%	10
Net investment income		1.04%	8,9		1.36%	8,9		1.84%	8,9		1.17%	8,9		1.31%	10
Supplemental Data
Net assets, end of period (000)	$	520		$	560		$	423		$	22		$	23
Portfolio turnover rate of the LifePath Master Portfolio		54%	11		38%	11		4%	12		35%	12		1%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 include gross expenses.

⁸  Includes the LifePath Portfolio’s share of the LifePath Master Portfolio’s allocated fees waived of 0.49%, 0.52%, 0.82% and 2.71% for the years ended December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁹  Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds of approximately 0.16%, 0.11%, 0.11% and 0.16% for the years ended December 31, 2014, 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.

¹⁰ Annualized.

¹¹ 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.

¹² Excludes the LifePath Master Portfolio’s purchases or sales of 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, the portfolio turnover rate 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, 2014

Financial Highlights LifePath 2055 Portfolio

	Institutional
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	14.64		$	12.74		$	11.13		$	11.85		$	10.00
Net investment income2		0.23			0.30			0.27			0.23			0.10
Net realized and unrealized gain (loss)		0.63			2.36			1.56			(0.70	)		2.45
Net increase (decrease) from investment operations		0.86			2.66			1.83			(0.47	)		2.55
Distributions from:3
Net investment income		(0.23	)		(0.26	)		(0.21	)		(0.16	)		(0.09	)
Net realized gain		(0.94	)		(0.50	)		(0.01	)		(0.09	)		(0.61	)
Total distributions		(1.17	)		(0.76	)		(0.22	)		(0.25	)		(0.70	)
Net asset value, end of period	$	14.33		$	14.64		$	12.74		$	11.13		$	11.85
Total Return4
Based on net asset value		5.90%			20.99%			16.46%			(4.02)%			25.58%	5
Ratios to Average Net Assets6
Total expenses		0.82%	7,8		1.05%	7,8		2.00%	7,8		9.82%	7,8		23.56%	9
Total expenses after fees waived and/or reimbursed		0.67%	7,8		0.74%	7,8		0.75%	7,8		0.69%	7,8		0.66%	9
Net investment income		1.54%	7,8		2.11%	7,8		2.17%	7,8		1.94%	7,8		1.78%	9
Supplemental Data
Net assets, end of period (000)	$	6,773		$	4,546		$	1,981		$	164		$	24
Portfolio turnover rate of the LifePath Master Portfolio		48%	10		67%	10		7%	11		51%	11		1%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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 0.66%, 0.83%, 2.22% and 15.11% for the years ended December 31, 2014, 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 0.18%, 0.12%, 0.11% and 0.17% for the years ended December 31, 2014, 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 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, the portfolio turnover rate 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, 2014	35

Financial Highlights (continued) LifePath 2055 Portfolio

	Investor A
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	14.62		$	12.73		$	11.13		$	11.85		$	10.00
Net investment income2		0.20			0.28			0.23			0.16			0.09
Net realized and unrealized gain (loss)		0.62			2.34			1.56			(0.67	)		2.46
Net increase (decrease) from investment operations		0.82			2.62			1.79			(0.51	)		2.55
Distributions from:3
Net investment income		(0.20	)		(0.23	)		(0.18	)		(0.12	)		(0.09	)
Net realized gain		(0.94	)		(0.50	)		(0.01	)		(0.09	)		(0.61	)
Total distributions		(1.14	)		(0.73	)		(0.19	)		(0.21	)		(0.70	)
Net asset value, end of period	$	14.30		$	14.62		$	12.73		$	11.13		$	11.85
Total Return4
Based on net asset value		5.60%			20.71%			16.09%			(4.35)%			25.50%	5
Ratios to Average Net Assets6
Total expenses		1.08%	7,8		1.30%	7,8		2.29%	7,8		8.94%	7,8		23.83%	9
Total expenses after fees waived and/or reimbursed		0.92%	7,8		0.99%	7,8		1.00%	7,8		0.94%	7,8		0.91%	9
Net investment income		1.32%	7,8		1.98%	7,8		1.88%	7,8		1.43%	7,8		1.53%	9
Supplemental Data
Net assets, end of period (000)	$	5,543		$	3,951		$	1,043		$	163		$	24
Portfolio turnover rate of the LifePath Master Portfolio		48%	10		67%	10		7%	11		51%	11		1%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁵  Aggregate total 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 0.66%, 0.82%, 2.28% and 12.56% for the years ended December 31, 2014, 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 0.18%, 0.12%, 0.11% and 0.17% for the years ended December 31, 2014, 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 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, the portfolio turnover rate 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, 2014

Financial Highlights (continued) LifePath 2055 Portfolio

	Investor C
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	14.51		$	12.64		$	11.06		$	11.82		$	10.00
Net investment income2		0.08			0.15			0.13			0.10			0.04
Net realized and unrealized gain (loss)		0.62			2.35			1.56			(0.69	)		2.45
Net increase (decrease) from investment operations		0.70			2.50			1.69			(0.59	)		2.49
Distributions from:3
Net investment income		(0.09	)		(0.13	)		(0.10	)		(0.08	)		(0.06	)
Net realized gain		(0.94	)		(0.50	)		(0.01	)		(0.09	)		(0.61	)
Total distributions		(1.03	)		(0.63	)	��	(0.11	)		(0.17	)		(0.67	)
Net asset value, end of period	$	14.18		$	14.51		$	12.64		$	11.06		$	11.82
Total Return4
Based on net asset value		4.85%			19.81%			15.27%			(5.01)%			24.98%	5
Ratios to Average Net Assets6
Total expenses		1.83%	7,8		2.06%	7,8		3.12%	7,8		11.00%	7,8		24.62%	9
Total expenses after fees waived and/or reimbursed		1.67%	7,8		1.75%	7,8		1.75%	7,8		1.69%	7,8		1.67%	9
Net investment income		0.56%	7,8		1.07%	7,8		1.05%	7,8		0.88%	7,8		0.78%	9
Supplemental Data
Net assets, end of period (000)	$	528		$	313		$	231		$	109		$	24
Portfolio turnover rate of the LifePath Master Portfolio		48%	10		67%	10		7%	11		51%	11		1%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁵  Aggregate total 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 0.66%, 0.83%, 2.42% and 14.29% for the years ended December 31, 2014, 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 0.18%, 0.12%, 0.11% and 0.17% for the years ended December 31, 2014, 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 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, the portfolio turnover rate 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, 2014	37

Financial Highlights (continued) LifePath 2055 Portfolio

	Class K
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	14.77		$	12.77		$	11.15		$	11.86		$	10.00
Net investment income2		0.30			0.22			0.35			0.23			0.12
Net realized and unrealized gain (loss)		0.62			2.54			1.52			(0.66	)		2.46
Net increase (decrease) from investment operations		0.92			2.76			1.87			(0.43	)		2.58
Distributions from:3
Net investment income		(0.26	)		(0.26	)		(0.24	)		(0.19	)		(0.11	)
Net realized gain		(0.94	)		(0.50	)		(0.01	)		(0.09	)		(0.61	)
Total distributions		(1.20	)		(0.76	)		(0.25	)		(0.28	)		(0.72	)
Net asset value, end of period	$	14.49		$	14.77		$	12.77		$	11.15		$	11.86
Total Return4
Based on net asset value		6.26%			21.74%			16.83%			(3.71)%			25.84%	5
Ratios to Average Net Assets6
Total expenses		0.46%	7,8		0.75%	7,8		1.27%	7,8		9.68%	7,8		23.20%	9
Total expenses after fees waived and/or reimbursed		0.32%	7,8		0.38%	7,8		0.40%	7,8		0.33%	7,8		0.31%	9
Net investment income		1.93%	7,8		1.61%	7,8		2.80%	7,8		1.99%	7,8		2.14%	9
Supplemental Data
Net assets, end of period (000)	$	29		$	30		$	448		$	22		$	24
Portfolio turnover rate of the LifePath Master Portfolio		48%	10		67%	10		7%	11		51%	11		1%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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 0.65%, 0.95%, 1.71% and 16.23% for the years ended December 31, 2014, 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 0.18%, 0.12%, 0.11% and 0.17% for the years ended December 31, 2014, 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 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, the portfolio turnover rate 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, 2014

Financial Highlights (concluded) LifePath 2055 Portfolio

	Class R
	Year Ended December 31,												Period June 30, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	14.62		$	12.72		$	11.12		$	11.84		$	10.00
Net investment income2		0.15			0.22			0.19			0.13			0.07
Net realized and unrealized gain (loss)		0.63			2.37			1.56			(0.66	)		2.46
Net increase (decrease) from investment operations		0.78			2.59			1.75			(0.53	)		2.53
Distributions from:3
Net investment income		(0.14	)		(0.19	)		(0.14	)		(0.10	)		(0.08	)
Net realized gain		(0.94	)		(0.50	)		(0.01	)		(0.09	)		(0.61	)
Total distributions		(1.08	)		(0.69	)		(0.15	)		(0.19	)		(0.69	)
Net asset value, end of period	$	14.32		$	14.62		$	12.72		$	11.12		$	11.84
Total Return4
Based on net asset value		5.37%			20.44%			15.75%			(4.54)%			25.33%	5
Ratios to Average Net Assets6
Total expenses		1.32%	7,8		1.56%	7,8		2.75%	7,8		10.53%	7,8		24.09%	9
Total expenses after fees waived and/or reimbursed		1.17%	7,8		1.25%	7,8		1.25%	7,8		1.18%	7,8		1.16%	9
Net investment income		0.98%	7,8		1.58%	7,8		1.53%	7,8		1.14%	7,8		1.29%	9
Supplemental Data
Net assets, end of period (000)	$	118		$	106		$	59		$	22		$	24
Portfolio turnover rate of the LifePath Master Portfolio		48%	10		67%	10		7%	11		51%	11		1%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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 0.65%, 0.84%, 2.60% and 16.23% for the years ended December 31, 2014, 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 0.18%, 0.12%, 0.11% and 0.17% for the years ended December 31, 2014, 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 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, the portfolio turnover rate 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, 2014	39

Notes to Financial Statements

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, LifePath^® 2025 Portfolio, LifePath^® 2035 Portfolio, LifePath^® 2045 Portfolio and LifePath^® 2055 Portfolio (each, a “LifePath Portfolio” and collectively, the “LifePath Portfolios”). 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 the 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 (99.98%, 99.97%, 99.95%, and 99.86%, for LifePath^® 2025 Portfolio, LifePath^® 2035 Portfolio, LifePath^® 2045 Portfolio and LifePath^® 2055 Portfolio, respectively, as of December 31, 2014). 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. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that each bears certain expenses and has a right of conversion as outlined below. Institutional and Class K Shares are sold only to certain eligible investors. Investor A and Investor C Shares are generally available through financial intermediaries. Class R Shares are available only to certain employer-sponsored retirement plans. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures. For distribution and service fee breakdown see Note 3.

Share Name	Initial Sales Charge		CDSC		Conversion
Institutional, Class K and Class R		No		No		None
Investor A		Yes		No		None
Investor C		No		Yes		None

2. Significant Accounting Policies:

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

Valuation: The LifePath Portfolios’ investments are valued at fair value as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the 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 its financial instruments at market value. Each LifePath Portfolio records its investment in the LifePath Master Portfolio at fair value based on the LifePath Portfolio’s proportionate interest in the net assets of the LifePath Master Portfolio. Valuation of securities held by the 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 the 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.

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

Other: Expenses directly related to a LifePath Portfolio or its classes are charged to that LifePath Portfolio or the applicable class. Other operating expenses shared by several funds are prorated 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 prorated 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

40 BLACKROCK FUNDS III DECEMBER 31, 2014

Notes to Financial Statements (continued)

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 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 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, 2024. 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 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, 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 relevant share class of each LifePath Portfolio as follows:

	Investor A		Investor C		Class R
Service Fee		0.25%		0.25%		0.25%
Distribution Fee		—		0.75%		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, 2014, 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 2025 Portfolio	$	525
LifePath 2035 Portfolio	$	1,185
LifePath 2045 Portfolio	$	741
LifePath 2055 Portfolio	$	256

For the year ended December 31, 2014, affiliates received CDSCs relating to transactions in Investor C Shares as follows:

	Investor C
LifePath 2025 Portfolio	$	139
LifePath 2035 Portfolio	$	107
LifePath 2045 Portfolio	$	35
LifePath 2055 Portfolio	$	14

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

4. Income Tax Information:

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 U.S. 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 U.S. federal tax returns remains open for each of the four years ended December 31, 2014. 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 that there are any uncertain tax positions that require recognition of a tax liability.

The tax character of distributions paid was as follows:

		LifePath 2025 Portfolio		LifePath 2035 Portfolio		LifePath 2045 Portfolio		LifePath 2055 Portfolio
Ordinary income	12/31/14	$	1,673,511	$	1,429,966	$	821,156	$	302,050
	12/31/13	$	988,685	$	946,846	$	558,184	$	212,120
Long-term capital gains	12/31/14	$	3,041,525	$	2,866,235	$	1,801,214	$	676,426
	12/31/13	$	1,066,479	$	1,005,062	$	553,912	$	214,476
Total	12/31/14	$	4,715,036	$	4,296,201	$	2,622,370	$	978,476
	12/31/13	$	2,055,164	$	1,951,908	$	1,112,096	$	426,596

BLACKROCK FUNDS III DECEMBER 31, 2014 41

Notes to Financial Statements (continued)

As of December 31, 2014, 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		$	161,600	$	96,926	$	37,715	$	3,439
Undistributed long-term capital gains			267,767		282,846		223,272		80,235
Net unrealized gains1			2,166,466		2,057,528		1,282,488		522,500
Total		$	2,595,833	$	2,437,300	$	1,543,475	$	606,174

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, 2014						Year Ended December 31, 2013
LifePath 2025 Portfolio	Shares			Amount			Shares			Amount
Institutional
Shares sold		901,653		$	12,046,203			910,890		$	11,678,883
Shares issued to shareholders in reinvestment of distributions		141,562			1,840,363			71,520			929,057
Shares redeemed		(1,171,103	)		(15,610,001	)		(305,527	)		(3,902,687	)
Net increase (decrease)		(127,888	)	$	(1,723,435	)		676,883		$	8,705,253
Investor A
Shares sold		1,249,072		$	16,755,157			1,379,851		$	17,654,190
Shares issued to shareholders in reinvestment of distributions		195,900			2,536,696			78,021			1,014,304
Shares redeemed		(898,439	)		(12,003,995	)		(387,778	)		(4,980,463	)
Net increase		546,533		$	7,287,858			1,070,094		$	13,688,031
Investor C
Shares sold		155,070		$	2,059,006			116,081		$	1,459,235
Shares issued to shareholders in reinvestment of distributions		14,181			182,113			4,488			58,322
Shares redeemed		(98,326	)		(1,304,067	)		(49,266	)		(624,070	)
Net increase		70,925		$	937,052			71,303		$	893,487
Class K
Shares sold		98,832		$	1,339,988			19,099		$	238,039
Shares issued to shareholders in reinvestment of distributions		2,723			35,904			223			2,890
Shares redeemed		(84,601	)		(1,143,088	)		(170,353	)		(2,127,170	)
Net increase (decrease)		16,954		$	232,804			(151,031	)	$	(1,886,241	)
Class R
Shares sold		79,505		$	1,064,199			27,356		$	348,501
Shares issued to shareholders in reinvestment of distributions		8,934			115,827			3,703			48,160
Shares redeemed		(70,180	)		(949,152	)		(23,003	)		(295,490	)
Net increase		18,259		$	230,874			8,056		$	101,171
Total Net Increase		524,783		$	6,965,153			1,675,305		$	21,501,701
LifePath 2035 Portfolio
Institutional
Shares sold		698,213		$	9,795,954			740,049		$	9,845,867
Shares issued to shareholders in reinvestment of distributions		130,961			1,786,762			71,222			971,741
Shares redeemed		(806,981	)		(11,297,194	)		(221,883	)		(2,983,707	)
Net increase		22,193		$	285,522			589,388		$	7,833,901

42 BLACKROCK FUNDS III DECEMBER 31, 2014

Notes to Financial Statements (continued)

	Year Ended December 31, 2014						Year Ended December 31, 2013
LifePath 2035 Portfolio (concluded)	Shares			Amount			Shares			Amount
Investor A
Shares sold		1,234,302		$	17,374,827			1,082,238		$	14,392,856
Shares issued to shareholders in reinvestment of distributions		171,287			2,328,481			67,127			917,237
Shares redeemed		(646,590	)		(9,069,583	)		(389,781	)		(5,222,768	)
Net increase		758,999		$	10,633,725			759,584		$	10,087,325
Investor C
Shares sold		102,383		$	1,438,909			49,884		$	658,815
Shares issued to shareholders in reinvestment of distributions		8,787			118,207			2,819			38,417
Shares redeemed		(49,907	)		(702,265	)		(20,393	)		(271,810	)
Net increase		61,263		$	854,851			32,310		$	425,422
Class K
Shares sold		38,968		$	566,459			10,830		$	140,226
Shares issued to shareholders in reinvestment of distributions		1,074			15,129			216			2,987
Shares redeemed		(36,710	)		(531,744	)		(163,508	)		(2,100,718	)
Net increase (decrease)		3,332		$	49,844			(152,462	)	$	(1,957,505	)
Class R
Shares sold		40,609		$	573,114			8,771		$	117,450
Shares issued to shareholders in reinvestment of distributions		3,008			41,022			1,295			17,735
Shares redeemed		(34,879	)		(494,583	)		(4,357	)		(57,644	)
Net increase		8,738		$	119,553			5,709		$	77,541
Total Net Increase		854,525		$	11,943,495			1,234,529		$	16,466,684
LifePath 2045 Portfolio
Institutional
Shares sold		568,413		$	8,346,244			396,631		$	5,456,579
Shares issued to shareholders in reinvestment of distributions		86,364			1,232,981			40,187			571,955
Shares redeemed		(430,563	)		(6,275,685	)		(99,645	)		(1,374,380	)
Net increase		224,214		$	3,303,540			337,173		$	4,654,154
Investor A
Shares sold		607,385		$	8,947,428			628,813		$	8,648,688
Shares issued to shareholders in reinvestment of distributions		87,027			1,239,384			33,636			479,804
Shares redeemed		(264,546	)		(3,908,096	)		(170,437	)		(2,394,296	)
Net increase		429,866		$	6,278,716			492,012		$	6,734,196
Investor C
Shares sold		60,642		$	879,755			42,933		$	585,924
Shares issued to shareholders in reinvestment of distributions		7,168			100,693			2,435			34,513
Shares redeemed		(21,880	)		(319,032	)		(16,372	)		(224,050	)
Net increase		45,930		$	661,416			28,996		$	396,387
Class K
Shares sold		23,669		$	360,858			4,602		$	60,397
Shares issued to shareholders in reinvestment of distributions		365			5,506			—			—
Shares redeemed		(24,034	)		(362,768	)		(57,204	)		(754,045	)
Net increase (decrease)		—		$	3,596			(52,602	)	$	(693,648	)

BLACKROCK FUNDS III DECEMBER 31, 2014 43

Notes to Financial Statements (concluded)

	Year Ended December 31, 2014						Year Ended December 31, 2013
LifePath 2045 Portfolio (concluded)	Shares			Amount			Shares			Amount
Class R
Shares sold		22,356		$	328,462			15,097		$	206,233
Shares issued to shareholders in reinvestment of distributions		2,594			37,089			1,538			21,914
Shares redeemed		(26,829	)		(396,904	)		(10,897	)		(150,113	)
Net increase (decrease)		(1,879	)	$	(31,353	)		5,738		$	78,034
Total Net Increase		698,131		$	10,215,915			811,317		$	11,169,123
LifePath 2055 Portfolio
Institutional
Shares sold		348,366		$	5,205,213			222,162		$	3,099,013
Shares issued to shareholders in reinvestment of distributions		35,626			518,300			15,051			217,965
Shares redeemed		(221,931	)		(3,307,959	)		(82,107	)		(1,170,226	)
Net Increase		162,061		$	2,415,554			155,106		$	2,146,752
Investor A
Shares sold		247,660		$	3,708,400			283,425		$	3,951,050
Shares issued to shareholders in reinvestment of distributions		28,241			409,734			13,033			189,060
Shares redeemed		(158,705	)		(2,392,815	)		(108,060	)		(1,525,606	)
Net increase		117,196		$	1,725,319			188,398		$	2,614,504
Investor C
Shares sold		28,126		$	413,363			14,909		$	204,036
Shares issued to shareholders in reinvestment of distributions		2,346			33,663			826			11,931
Shares redeemed		(14,822	)		(219,461	)		(12,437	)		(164,529	)
Net increase		15,650		$	227,565			3,298		$	51,438
Class K
Shares sold		11,181		$	174,276			9,086		$	119,761
Shares issued to shareholders in reinvestment of distributions		176			2,712			—			—
Shares redeemed		(11,357	)		(175,350	)		(42,186	)		(563,906	)
Net increase (decrease)		—		$	1,638			(33,100	)	$	(444,145	)
Class R
Shares sold		8,973		$	134,484			2,885		$	40,466
Shares issued to shareholders in reinvestment of distributions		507			7,425			231			3,355
Shares redeemed		(8,476	)		(128,490	)		(519	)		(7,331	)
Net increase		1,004		$	13,419			2,597		$	36,490
Total Net Increase		295,911		$	4,383,495			316,299		$	4,405,039

At December 31, 2014, shares owned by affiliates were as follows:

	LifePath 2025 Portfolio		LifePath 2035 Portfolio		LifePath 2045 Portfolio		LifePath 2055 Portfolio
Investor C		—		2,000		2,000		2,000
Class K		2,006		2,004		2,003		2,001
Class R		2,002		2,000		2,000		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.

44 BLACKROCK FUNDS III DECEMBER 31, 2014

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, 2014, 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 23, 2015

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid during the taxable year ended December 31, 2014:

	Payable Dates		LifePath 2025 Portfolio		LifePath 2035 Portfolio		LifePath 2045 Portfolio		LifePath 2055 Portfolio
Qualified Dividend Income for Individuals1		4/02/14 - 01/02/15		40.01%		49.35%		58.62%		65.50%
Dividends Qualifying for the Dividend Received Deduction for Corporations1		4/02/14 - 01/02/15		20.37%		24.50%		28.59%		31.22%
Federal Obligation Interest2		4/02/14 - 01/02/15		2.76%		1.87%		1.14%		—
Interest-Related Dividends and Qualified Short-Term Capital Gains for Non-U.S. Residents3		4/02/14 - 01/02/15		68.56%		62.06%		55.80%		50.55%

¹  The LifePath Portfolios hereby designate the percentage 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 U.S. 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, 2014		December 30, 2014
LifePath 2025 Portfolio	$	0.081761	$	0.552450
LifePath 2035 Portfolio	$	0.095825	$	0.627686
LifePath 2045 Portfolio	$	0.122015	$	0.652923
LifePath 2055 Portfolio	$	0.127168	$	0.664182

BLACKROCK FUNDS III DECEMBER 31, 2014 45

Master Portfolio Information as of December 31, 2014 Master Investment Portfolio

LifePath^® 2025 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds	65	%
Fixed Income Funds	35

Ten Largest Holdings Percent of
Affiliated Investment Companies

CoreAlpha Bond Master Portfolio	31	%
Active Stock Master Portfolio	25
International Tilts Master Portfolio	12
Russell 1000® Index Master Portfolio	9
iShares TIPS Bond ETF	5
BlackRock Emerging Markets Fund, Inc.	4
BlackRock Commodity Strategies Fund	4
Master Small Cap Index Series	3
iShares Cohen & Steers REIT ETF	3
iShares International Developed Real Estate ETF	3

LifePath^® 2035 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds	86	%
Fixed Income Funds	14

Ten Largest Holdings Percent of
Affiliated Investment Companies

Active Stock Master Portfolio	28	%
International Tilts Master Portfolio	16
Russell 1000® Index Master Portfolio	16
CoreAlpha Bond Master Portfolio	14
iShares Cohen & Steers REIT ETF	5
BlackRock Emerging Markets Fund, Inc.	5
iShares International Developed Real Estate ETF	5
BlackRock Commodity Strategies Fund	4
iShares MSCI EAFE Small-Cap ETF	2
Master Small Cap Index Series	2

The LifePath Master Portfolios’ allocation and holdings listed above are current as of the report date. However, the LifePath Master Portfolios are regularly monitored and their composition may vary throughout various periods.

46 BLACKROCK FUNDS III DECEMBER 31, 2014

Master Portfolio Information as of December 31, 2014 (concluded) Master Investment Portfolio

LifePath^® 2045 Master Portfolio

Portfolio Composition Percent of Affiliated Investment Companies

Equity Funds	99	%
Fixed Income Funds	1

Ten Largest Holdings Percent of Affiliated Investment Companies

Active Stock Master Portfolio	31	%
International Tilts Master Portfolio	18
Russell 1000® Index Master Portfolio	18
iShares Cohen & Steers REIT ETF	7
BlackRock Emerging Markets Fund, Inc.	6
iShares International Developed Real Estate ETF	6
BlackRock Commodity Strategies Fund	4
Master Small Cap Index Series	3
iShares MSCI EAFE Small-Cap ETF	3
CoreAlpha Bond Master Portfolio	2

LifePath^® 2055 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds 100 % 

Ten Largest Holdings Percent of
Affiliated Investment Companies

Active Stock Master Portfolio	36	%
International Tilts Master Portfolio	19
Russell 1000® Index Master Portfolio	13
iShares Cohen & Steers REIT ETF	7
iShares International Developed Real Estate ETF	6
BlackRock Emerging Markets Fund, Inc.	6
BlackRock Commodity Strategies Fund	4
iShares MSCI EAFE Small-Cap ETF	3
Master Small Cap Index Series	3
iShares MSCI Canada ETF	2

The LifePath Master Portfolios’ allocation and holdings listed above are current as of the report date. However, the LifePath Master Portfolios are regularly monitored and their composition may vary throughout various periods.

BLACKROCK FUNDS III DECEMBER 31, 2014 47

Schedule of Investments December 31, 2014 LifePath 2025 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 64.4%
Active Stock Master Portfolio	$	15,992,282	$	15,992,282
BlackRock Commodity Strategies Fund		297,619		2,410,714
BlackRock Emerging Markets Fund, Inc.		125,241		2,440,953
International Tilts Master Portfolio	$	7,554,212		7,554,212
iShares Cohen & Steers REIT ETF		19,497		1,888,089
iShares International Developed Real Estate ETF		53,688		1,612,788
iShares MSCI Canada ETF		27,681		798,874
iShares MSCI EAFE Small-Cap ETF		24,879		1,162,098
Master Small Cap Index Series	$	1,907,031		1,907,031
Russell 1000® Index Master Portfolio	$	5,483,712		5,483,712
				41,250,753
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 35.2%
CoreAlpha Bond Master Portfolio	$	19,692,253	$	19,692,253
iShares TIPS Bond ETF		25,680		2,876,417
				22,568,670
Short-Term Securities — 0.1%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (b)		39,034		39,034
Total Affiliated Investment Companies (Cost — $61,202,914) — 99.7%				63,858,457
Other Assets Less Liabilities — 0.3%				215,948
Net Assets — 100.0%			$	64,074,405

Notes to Schedule of Investments

(a) During the year ended December 31, 2014, investments in issuers considered to be an affiliate of LifePath Master Portfolio 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,  2013		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2014		Value at December 31, 2014		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	16,200,209		—		$	(207,927	)1	$	15,992,282	$	15,992,282	$	272,630	$	2,520,405
ACWI ex-US Index Master Portfolio2	$	3,441,408		—		$	(3,441,408	)1		—		—	$	20,276	$	194,776
BlackRock Cash Funds: Institutional, SL Agency Shares		878,780		—			(839,746	)1		39,034	$	39,034	$	230		—
BlackRock Cash Funds: Prime, SL Agency Shares2		139,240		—			(139,240	)1		—		—	$	987		—
BlackRock Commodity Strategies Fund		230,922		94,863			(28,166	)		297,619	$	2,410,714	$	561	$	(22,842	)
BlackRock Emerging Markets Fund, Inc.		51,487		89,468			(15,714	)		125,241	$	2,440,953	$	13,952	$	3,010
CoreAlpha Bond Master Portfolio	$	20,623,592		—		$	(931,339	)1	$	19,692,253	$	19,692,253	$	592,046	$	373,800
International Tilts Master Portfolio	$	3,511,358	$	4,042,854	3		—		$	7,554,212	$	7,554,212	$	193,226	$	(114,403	)
iShares Cohen & Steers REIT ETF		15,153		9,701			(5,357	)		19,497	$	1,888,089	$	52,778	$	51,146
iShares International Developed Real Estate ETF		41,657		28,859			(16,828	)		53,688	$	1,612,788	$	52,909	$	(47,584	)
iShares MSCI Canada ETF		20,187		9,864			(2,370	)		27,681	$	798,874	$	16,135	$	3,773
iShares MSCI EAFE ETF2		4,629		—			(4,629	)		—		—		—	$	77,882
iShares MSCI EAFE Small-Cap ETF		18,607		9,445			(3,173	)		24,879	$	1,162,098	$	29,803	$	1,178
iShares MSCI Emerging Markets ETF2		3,183		—			(3,183	)		—		—		—	$	3,782
iShares TIPS Bond ETF		26,539		10,776			(11,635	)		25,680	$	2,876,417	$	57,248	$	(85,946	)
Master Small Cap Index Series	$	2,253,163		—		$	(346,132	)1	$	1,907,031	$	1,907,031	$	31,579	$	97,551
Russell 1000® Index Master  Portfolio	$	1,991,780	$	3,491,932	3		—		$	5,483,712	$	5,483,712	$	66,228	$	(1,860	)
1   Represents net shares/beneficial interest sold.
2   No longer held by the LifePath Mater Portfolio as of report date.
3   Represents net shares/beneficial interest purchased.

(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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that LifePath 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 LifePath Master Portfolio’s own assumptions used in determining the fair value of investments)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with LifePath 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. For information about LifePath Master Portfolio’s policy regarding valuation of investments, refer to Note 2 of the Notes to Financial Statements.

See Notes to Financial Statements.

48 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments (concluded) LifePath 2025 Master Portfolio

As of December 31, 2014, the following table summarizes LifePath Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	13,228,967	$	50,629,490		—	$	63,858,457

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2014 49

Schedule of Investments December 31, 2014 LifePath 2035 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 85.3%
Active Stock Master Portfolio	$	15,858,279	$	15,858,279
BlackRock Commodity Strategies Fund		266,087		2,155,307
BlackRock Emerging Markets Fund, Inc.		147,219		2,869,298
International Tilts Master Portfolio	$	8,798,849		8,798,849
iShares Cohen & Steers REIT ETF		30,677		2,970,761
iShares International Developed Real Estate ETF		84,556		2,540,062
iShares MSCI Canada ETF		32,043		924,761
iShares MSCI EAFE Small-Cap ETF		28,911		1,350,433
Master Small Cap Index Series	$	1,338,461		1,338,461
Russell 1000® Index Master Portfolio	$	8,787,621		8,787,621
				47,593,832
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 14.4%
CoreAlpha Bond Master Portfolio	$	7,576,096	$	7,576,096
iShares TIPS Bond ETF		3,848		431,014
				8,007,110
Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (b)		105,615		105,615
				105,615
Total Affiliated Investment Companies (Cost — $53,146,212) — 99.9%				55,706,557
Other Assets Less Liabilities — 0.1%				56,018
Net Assets — 100.0%			$	55,762,575

Notes to Schedule of Investments

(a) During the year ended December 31, 2014, investments in issuers considered to be an affiliate of the Master Portfolio 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,  2013		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2014		Value at December 31, 2014		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	15,692,296	$	165,983	1		—		$	15,858,279	$	15,858,279	$	272,129	$	2,436,781
ACWI ex-US Index Master Portfolio3	$	3,491,240		—			(3,491,240	)2		—		—	$	21,011	$	204,108
BlackRock Cash Funds: Institutional, SL Agency Shares		197,195		—			(91,580	)2		105,615	$	105,615	$	85		—
BlackRock Cash Funds: Prime, SL Agency Shares3		22,990		—			(22,990	)2		—		—	$	843		—
BlackRock Commodity Strategies Fund		185,770		104,950			(24,633	)		266,087	$	2,155,307	$	501	$	(23,487	)
BlackRock Emerging Markets Fund, Inc.		49,659		111,549			(13,989	)		147,219	$	2,869,298	$	16,127	$	(403	)
CoreAlpha Bond Master Portfolio	$	10,906,911		—		$	(3,330,815	)2	$	7,576,096	$	7,576,096	$	332,631	$	218,221
International Tilts Master Portfolio	$	3,382,020	$	5,416,829	1		—		$	8,798,849	$	8,798,849	$	201,782	$	(139,334	)
iShares Cohen & Steers REIT ETF		19,728		17,813			(6,864	)		30,677	$	2,970,761	$	76,101	$	64,885
iShares International Developed Real Estate ETF		55,507		49,840			(20,791	)		84,556	$	2,540,062	$	76,615	$	(64,801	)
iShares MSCI Canada ETF		19,860		13,305			(1,122	)		32,043	$	924,761	$	18,148	$	530
iShares MSCI EAFE ETF3		2,162		—			(2,162	)		—		—		—	$	36,763
iShares MSCI EAFE Small-Cap ETF		17,921		13,442			(2,452	)		28,911	$	1,350,433	$	33,179	$	2,797
iShares MSCI Emerging Markets ETF3		2,166		—			(2,166	)		—		—		—	$	3,010
iShares TIPS Bond ETF		8,983		3,492			(8,627	)		3,848	$	431,014	$	20,392	$	(27,590	)
Master Small Cap Index Series	$	1,350,347		—		$	(11,886	)2	$	1,338,461	$	1,338,461	$	21,135	$	59,739
Russell 1000 Index Master Portfolio	$	1,842,488	$	6,945,133	1		—		$	8,787,621	$	8,787,621	$	86,870	$	(2,875	)
1   Represents net shares/beneficial interest purchased.
2   Represents net shares/beneficial interest sold.
3   No longer held by the LifePath Master Portfolio as of report date.

(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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that LifePath 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 LifePath Master Portfolio’s own assumptions used in determining the fair value of investments)

See Notes to Financial Statements.

50 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments (concluded) LifePath 2035 Master Portfolio

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with LifePath 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. For information about the LifePath Master Portfolio’s policy regarding valuation of investments, refer to Note 2 of the Notes to Financial Statements.

As of December 31, 2014, the following table summarizes LifePath Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	13,347,251	$	42,359,306		—	$	55,706,557

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2014 51

Schedule of Investments December 31, 2014 LifePath 2045 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 97.7%
Active Stock Master Portfolio	$	10,880,891	$	10,880,891
BlackRock Commodity Strategies Fund		178,939		1,449,403
BlackRock Emerging Markets Fund, Inc.		104,984		2,046,134
International Tilts Master Portfolio	$	6,367,614		6,367,614
iShares Cohen & Steers REIT ETF		25,214		2,441,724
iShares International Developed Real Estate ETF		69,082		2,075,223
iShares MSCI Canada ETF		23,208		669,783
iShares MSCI EAFE Small-Cap ETF		20,569		960,778
Master Small Cap Index Series	$	865,739		865,739
Russell 1000® Index Master Portfolio	$	6,174,176		6,174,176
				33,931,465
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 1.8%
CoreAlpha Bond Master Portfolio	$	644,004	$	644,004
Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (a)(b)		75,058		75,058
Total Affiliated Investment Companies (Cost — $32,998,490) — 99.7%				34,650,527
Other Assets Less Liabilities — 0.3%				91,237
Net Assets — 100.0%			$	34,741,764

Notes to Schedule of Investments

(a) During the year ended December 31, 2014, investments in issuers considered to be an affiliate of LifePath Master Portfolio, 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,  2013		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2014		Value at December 31, 2014		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	9,802,020	$	1,078,871	1				$	10,880,891	$	10,880,891	$	178,882	$	1,511,700
ACWI ex-US Index Master Portfolio2	$	2,401,366		—		$	(2,401,366	)3		—		—	$	15,850	$	128,671
BlackRock Cash Funds: Institutional, SL Agency Shares		265,609		—			(190,551	)3		75,058	$	75,058	$	239		—
BlackRock Cash Funds: Prime, SL Agency Shares2		35,707		—			(35,707	)3		—		—	$	725		—
BlackRock Commodity Strategies Fund		104,395		87,920			(13,376	)		178,939	$	1,449,403	$	337	$	(13,734	)
BlackRock Emerging Markets Fund, Inc.		32,449		82,214			(9,679	)		104,984	$	2,046,134	$	11,728	$	(2,526	)
CoreAlpha Bond Master Portfolio	$	3,788,075		—		$	(3,144,071	)3	$	644,004	$	644,004	$	115,389	$	84,044
International Tilts Master Portfolio	$	2,238,771	$	4,128,843	1		—		$	6,367,614	$	6,367,614	$	137,115	$	(105,096	)
iShares Cohen & Steers REIT ETF		14,280		16,390			(5,456	)		25,214	$	2,441,724	$	59,510	$	51,959
iShares International Developed Real Estate ETF		40,655		43,561			(15,134	)		69,082	$	2,075,223	$	58,741	$	(46,351	)
iShares MSCI Canada ETF		12,795		11,517			(1,104	)		23,208	$	669,783	$	12,804	$	573
iShares MSCI EAFE ETF2		966		—			(966	)		—		—		—	$	15,564
iShares MSCI EAFE Small-Cap ETF		10,610		12,419			(2,460	)		20,569	$	960,778	$	22,985	$	3,526
iShares MSCI Emerging Markets ETF2		855		—			(855	)		—		—		—	$	1,640
Master Small Cap Index Series	$	585,447	$	280,292	1		—		$	865,739	$	865,739	$	10,392	$	23,193
Russell 1000® Index Master Portfolio	$	1,631,516	$	4,542,660	1		—		$	6,174,176	$	6,174,176	$	65,684	$	(951	)
1   Represents net sharers/beneficial interest purchased. 2   No longer held by the LifePath Master Portfolio as of report date.
3   Represents net shares/beneficial interest 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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that LifePath 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 LifePath Master Portfolio’s own assumptions used in determining the fair value of investments and derivative financial instruments)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with LifePath 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. For information about LifePath Master Portfolio’s policy regarding valuation of investments, refer to Note 2 of the Notes to Financial Statements.

See Notes to Financial Statements.

52 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments (concluded) LifePath 2045 Master Portfolio

As of December 31, 2014, the following table summarizes LifePath Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	9,718,103	$	24,932,424		—	$	34,650,527

Durning the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2014 53

Schedule of Investments December 31, 2014 LifePath 2055 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 98.6%
Active Stock Master Portfolio	$	4,678,399	$	4,678,399
BlackRock Commodity Strategies Fund		68,577		555,475
BlackRock Emerging Markets Fund, Inc.		40,487		789,089
International Tilts Master Portfolio	$	2,416,757		2,416,757
iShares Cohen & Steers REIT ETF		9,602		929,858
iShares International Developed Real Estate ETF		26,550		797,562
iShares MSCI Canada ETF		8,714		251,486
iShares MSCI EAFE Small-Cap ETF		7,943		371,018
Master Small Cap Index Series	$	342,105		342,105
Russell 1000® Index Master Portfolio	$	1,751,127		1,751,127
				12,882,876
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 0.9%
CoreAlpha Bond Master Portfolio	$	115,070	$	115,070
Short-Term Securities — 0.2%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (b)		25,991		25,991
Total Affiliated Investment Companies (Cost — $12,340,383) — 99.7%				13,023,937
Other Assets Less Liabilities — 0.3%				32,960
Net Assets — 100.0%			$	13,056,897

Notes to Schedule of Investments

(a) During the year ended December 31, 2014, Investments in issuers considered to be an affiliate of the LifePath Master Portfolio 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,  2013		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2014		Value at December 31, 2014		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	3,613,769	$	1,064,630	1		—		$	4,678,399	$	4,678,399	$	71,438	$	565,660
ACWI ex-US Index Master Portfolio3	$	873,314		—		$	(873,314	)2		—		—	$	4,988	$	56,493
BlackRock Cash Funds: Institutional, SL Agency Shares		25,947		44	1		—			25,991	$	25,991	$	49		—
BlackRock Cash Funds: Prime, SL Agency Shares3		460		—			(460	)2		—		—	$	451		—
BlackRock Commodity Strategies Fund		39,004		35,792			(6,219	)		68,577	$	555,475	$	130	$	(7,709	)
BlackRock Emerging Markets Fund, Inc.		14,149		31,865			(5,527	)		40,487	$	789,089	$	4,539	$	(569	)
CoreAlpha Bond Master Portfolio	$	405,498		—		$	(290,428	)2	$	115,070	$	115,070	$	13,466	$	9,647
International Tilts Master Portfolio	$	941,978	$	1,474,779	1				$	2,416,757	$	2,416,757	$	57,549	$	(36,804	)
iShares Cohen & Steers REIT ETF		6,422		5,477			(2,297	)		9,602	$	929,858	$	25,840	$	23,609
iShares International Developed Real Estate ETF		18,191		15,839			(7,480	)		26,550	$	797,562	$	26,321	$	(23,763	)
iShares MSCI Canada ETF		4,965		4,444			(695	)		8,714	$	251,486	$	5,144	$	(44	)
iShares MSCI EAFE Small-Cap ETF		4,611		4,064			(732	)		7,943	$	371,018	$	9,256	$	1,371
Master Small Cap Index Series	$	185,783	$	156,322	1		—		$	342,105	$	342,105	$	3,542	$	6,840
Russell 1000® Index Master Portfolio	$	843,407	$	907,720	1		—		$	1,751,127	$	1,751,127	$	27,577	$	61
1   Represents net shares/beneficial interest purchased.
2   Represents net shares/beneficial interest sold.
3   No longer held by the LifePath Master Portfolio as of report date.

(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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that LifePath 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 LifePath Master Portfolio’s own assumptions used in determining the fair value of investments)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with LifePath 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. For information about LifePath Master Portfolio’s policy regarding valuation of investments, refer to Note 2 of the Notes to Financial Statements.

The following table summarizes LifePath Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2014:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	3,720,479	$	9,303,458		—	$	13,023,937

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

54 BLACKROCK FUNDS III DECEMBER 31, 2014

Statements of Assets and Liabilities Master Investment Portfolio

December 31, 2014	LifePath 2025 Master Portfolio		LifePath 2035 Master Portfolio		LifePath 2045 Master Portfolio		LifePath 2055 Master Portfolio
Assets
Investments at value — affiliated1	$	63,858,457	$	55,706,557	$	34,650,527	$	13,023,937
Contributions receivable from investors		222,613		58,203		153,043		43,172
Investments sold receivable		718,575		357,681		188,822		122,604
Receivable from Manager		21,206		22,406		23,285		23,327
Total assets		64,820,851		56,144,847		35,015,677		13,213,040
Liabilities
Investments purchased payable		722,343		358,280		250,116		132,513
Trustees’ fees payable		1,189		1,098		931		781
Professional fees payable		22,914		22,894		22,866		22,849
Total liabilities		746,446		382,272		273,913		156,143
Net Assets	$	64,074,405	$	55,762,575	$	34,741,764	$	13,056,897
Net Assets Consist of
Investors’ capital	$	61,418,862	$	53,202,230	$	33,089,727	$	12,373,343
Net unrealized appreciation/depreciation		2,655,543		2,560,345		1,652,037		683,554
Net Assets	$	64,074,405	$	55,762,575	$	34,741,764	$	13,056,897
1    Investments at cost — affiliated	$	61,202,914	$	53,146,212	$	32,998,490	$	12,340,383

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	55

Statements of Operations Master Investment Portfolio

Year Ended December 31, 2014	LifePath 2025 Master Portfolio			LifePath 2035 Master Portfolio			LifePath 2045 Master Portfolio			LifePath 2055 Master Portfolio
Investment Income
Dividends — affiliated	$	223,386		$	241,063		$	166,105		$	71,230
Securities lending — affiliated — net		987			843			725			451
Income — affiliated		230			85			239			49
Net investment income allocated from the applicable Master Portfolios:
Dividends		640,808			662,971			448,736			181,777
Interest		656,719			371,297			130,562			16,352
Expenses		(154,364	)		(130,862	)		(76,815	)		(27,833	)
Fees waived		32,822			32,152			20,829			8,264
Total income		1,400,588			1,177,549			690,381			250,290
Expenses
Investment advisory		234,619			196,967			114,967			42,485
Professional		26,214			26,175			26,115			26,076
Independent Trustees		5,604			5,269			4,577			3,986
Total expenses		266,437			228,411			145,659			72,547
Less fees waived by manager		(237,224	)		(212,045	)		(139,671	)		(71,898	)
Total expenses after fees waived		29,213			16,366			5,988			649
Net investment income		1,371,375			1,161,183			684,393			249,641
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — affiliated		(15,601	)		(8,296	)		10,651			(7,105	)
Allocations from the applicable underlying Master Portfolios from investments, financial futures contracts, swaps and foreign currency transactions		3,070,269			2,776,640			1,641,561			601,897
		3,054,668			2,768,344			1,652,212			594,792
Net change in unrealized appreciation/depreciation on:
Investments — affiliated		319,010			(68,174	)		52,583			25,787
Allocated from the applicable underlying Master Portfolios from investments, financial futures contracts, swaps and foreign currency translations		(1,261,833	)		(838,976	)		(576,121	)		(151,728	)
		(942,823	)		(907,150	)		(523,538	)		(125,941	)
Net realized and unrealized gain		2,111,845			1,861,194			1,128,674			468,851
Net Increase in Net Assets Resulting from Operations	$	3,483,220		$	3,022,377		$	1,813,067		$	718,492

See Notes to Financial Statements.
56	BLACKROCK FUNDS III	DECEMBER 31, 2014

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 (Decrease) in Net Assets:	2014			2013			2014			2013
Operations
Net investment income	$	1,371,375		$	947,201		$	1,161,183		$	807,159
Net realized gain		3,054,668			2,053,492			2,768,344			2,016,375
Net change in unrealized appreciation/depreciation		(942,823	)		2,359,624			(907,150	)		2,466,805
Net increase in net assets resulting from operations		3,483,220			5,360,317			3,022,377			5,290,339
Capital Transactions
Proceeds from contributions		26,135,006			26,299,937			24,161,049			20,962,294
Value of withdrawals		(24,205,432	)		(7,042,315	)		(16,783,453	)		(6,621,900	)
Net increase in net assets derived from capital transactions		1,929,574			19,257,622			7,377,596			14,340,394
Net Assets
Total increase in net assets		5,412,794			24,617,939			10,399,973			19,630,733
Beginning of year		58,661,611			34,043,672			45,362,602			25,731,869
End of year	$	64,074,405		$	58,661,611		$	55,762,575		$	45,362,602

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	57

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath 2045 Master Portfolio						LifePath 2055 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013			2014			2013
Operations
Net investment income	$	684,393		$	462,216		$	249,641		$	164,830
Net realized gain		1,652,212			1,202,820			594,792			454,595
Net change in unrealized appreciation/depreciation		(523,538	)		1,642,567			(125,941	)		630,292
Net increase in net assets resulting from operations		1,813,067			3,307,603			718,492			1,249,717
Capital Transactions
Proceeds from contributions		15,976,732			13,176,225			7,680,460			6,971,548
Value of withdrawals		(8,526,879	)		(3,182,692	)		(4,319,994	)		(3,018,127	)
Net increase in net assets derived from capital transactions		7,449,853			9,993,533			3,360,466			3,953,421
Net Assets
Total increase in net assets		9,262,920			13,301,136			4,078,958			5,203,138
Beginning of year		25,478,844			12,177,708			8,977,939			3,774,801
End of year	$	34,741,764		$	25,478,844		$	13,056,897		$	8,977,939

See Notes to Financial Statements.
58	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights Master Investment Portfolio

	LifePath 2025 Master Portfolio
	Year Ended December 31,								Period June 30, 20101 to December  31, 2010
	2014		2013		2012		2011
Total Return
Total return		5.73%		12.34%		12.57%		0.99%		17.65%2
Ratios to Average Net Assets
Total expenses		0.58%3,4,5		0.61%3,4,5		0.69%6,7,8		1.07%6,7,8		13.61%6,9
Total expenses after fees waived and/or reimbursed		0.22%3,4,5		0.25%3,4,5		0.26%6,7,8		0.24%6,7,8		0.22%6,9
Net investment income10		2.05%3,4,5		2.11%3,4,5		2.32%6,7,8		2.62%6,7,8		2.37%6,9
Supplemental Data
Net assets, end of period (000)		$64,074		$58,662		$34,044		$12,178		$134
Portfolio turnover rate		50%11		30%11		4%12		24%12		2%

¹  Commencement of operations.

²  Aggregate total 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. 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% and 0.04%, for the years ended December 31, 2014 and December 31, 2013, respectively.

⁵  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.13% and 0.10%, for the years ended December 31, 2014 and December 31, 2013, respectively, 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 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% and 0.03% for the years ended December 31, 2012 and December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.10% and 0.12% for 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.

⁹  Annualized.

¹⁰ 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 years ended December 31, 2014 and December 31, 2013, which also include International Tilts Master Portfolio and Russell 1000^® Index Master Portfolio.

¹¹ Includes the purchases and 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.

¹² Excludes purchases and sales of 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, the portfolio turnover rate 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, 2014	59

Financial Highlights Master Investment Portfolio

	LifePath 2035 Master Portfolio
	Year Ended December 31,								Period June 30, 20101 to December 31, 2010
	2014		2013		2012		2011
Total Return
Total return		6.01%		15.83%		14.35%		(0.82)%		21.21%2
Ratios to Average Net Assets
Total expenses		0.58%3,4,5		0.63%3,4,5		0.76%6,7,8		1.34%6,7,8		13.23%6,9
Total expenses after fees waived and/or reimbursed		0.20%3,4,5		0.25%3,4,5		0.25%6,7,8		0.22%6,7,8		0.19%6,9
Net investment income10		2.06%3,4,5		2.29%3,4,5		2.42%6,7,8		2.50%6,7,8		2.33%6,9
Supplemental Data
Net assets, end of period (000)		$55,763		$45,363		$25,732		$7,426		$149
Portfolio turnover rate		54%11		39%11		4%12		21%12		1%

¹  Commencement of operations.

²  Aggregate total 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. 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 0.06% and 0.05% for the years ended December 31, 2014 and December 31, 2013, respectively.

⁵  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.15% and 0.11% for the years ended December 31, 2014 and December 31, 2013, respectively, 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 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.

⁸  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11% and 0.14% for 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.

⁹  Annualized.

¹⁰ 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 years ended December 31, 2014 and December 31, 2013, which also include International Tilts Master Portfolio and Russell 1000^® Index Master Portfolio.

¹¹ Includes the purchases and 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.

¹² Excludes purchases and sales of 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, the portfolio turnover rate would have been 13% and 47% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
60	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights Master Investment Portfolio

	LifePath 2045 Master Portfolio
	Year Ended December 31,								Period June 30, 20101 to December  31, 2010
	2014		2013		2012		2011
Total Return
Total return		6.16%		18.99%		15.84%		(1.96)%		24.26%2
Ratios to Average Net Assets
Total expenses		0.61%3,4,5		0.70%3,4,5		1.01%6,7,8		2.58%6,7,8		13.23%6,9
Total expenses after fees waived and/or reimbursed		0.19%3,4,5		0.24%3,4,5		0.24%6,7,8		0.20%6,7,8		0.17%6,9
Net investment income10		2.08%3,4,5		2.47%3,4,5		2.54%6,7,8		2.43%6,7,8		2.25%6,9
Supplemental Data
Net assets, end of period (000)		$34,742		$25,479		$12,178		$3,249		$142
Portfolio turnover rate		54%10		38%10		4%11		35%11		1%

¹  Commencement of operations.

²  Aggregate total 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. 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 0.06% and 0.05%, for the years ended December 31, 2014 and December 31, 2013, respectively.

⁵  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.16% and 0.11%, for the years ended December 31, 2014 and December 31, 2013, respectively, 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 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 0.03% for the years ended December 31, 2012 and December 31, 2011, respectively.

⁸  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11% and 0.16% for 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.

⁹  Annualized.

¹⁰ 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 years ended December 31, 2014 and December 31, 2013, which also include International Tilts Master Portfolio and Russell 1000^® Index Master Portfolio.

¹¹ Includes 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.

¹² Excludes purchases or sales of 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, the portfolio turnover rate 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, 2014	61

Financial Highlights Master Investment Portfolio

	LifePath 2055 Master Portfolio
	Year Ended December 31,								Period June 30, 20101 to December  31, 2010
	2014		2013		2012		2011
Total Return
Total return		6.40%		21.49%		16.96%		(3.52)%		25.83%	2
Ratios to Average Net Assets
Total expenses		0.76%3,4,5		1.01%3,4,5		2.41%6,7,8		14.66%6,7,8		13.13%6,9
Total expenses after fees waived and/or reimbursed		0.17%3,4,5		0.24%3,4,5		0.25%6,7,8		0.19%6,7,8		0.16%6,9
Net investment income10		2.06%3,4,5		2.65%3,4,5		2.66%6,7,8		2.30%6,7,8		2.21%6,9
Supplemental Data
Net assets, end of period (000)		$13,057		$8,978		$3,775		$494		$144
Portfolio turnover rate		48%11		67%11		7%12		51%12		1%

¹  Commencement of operations.

²  Aggregate total 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. 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 0.07% and 0.06% for the years ended December 31, 2014 and December 31, 2013, respectively.

⁵  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.18% and 0.12% for the years ended December 31, 2014 and December 31, 2013, respectively, 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  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11% 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.

⁸  Includes the LifePath Master Portfolio’s share of 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% and 0.06% for the years ended December 31, 2012 and December 31, 2011, respectively.

⁹  Annualized.

¹⁰ 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 years ended December 31, 2014 and December 31, 2013, which also include International Tilts Master Portfolio and Russell 1000^® Index Master Portfolio.

¹¹ Includes the purchases and 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.

¹² Excludes purchases and sales of 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, the portfolio turnover rate would have been 27% and 95% for the years ended December 31, 2012 and December 31, 2011, respectively.

See Notes to Financial Statements.
62	BLACKROCK FUNDS III	DECEMBER 31, 2014

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 “LifePath Master Portfolio” and collectively, the “LifePath Master Portfolios”).

As of December 31, 2014, 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 25.0%, 28.4%, 31.3% and 35.8%, respectively, of net assets. The investment of LifePath 2025 Master Portfolio Master Portfolio in CoreAlpha Bond Master Portfolio represented 30.7% of its net assets. The financial statements of the CoreAlpha Bond Master Portfolio, including the Schedule of Investments, can be read in conjunction with the LifePath 2025 Master Portfolio’s financial statements. Active Stock Master Portfolio’s and 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.

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 the Active Stock 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, 2014, the LifePath Master Portfolios held interests in Active Stock 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			CoreAlpha Bond Master Portfolio			International Tilts Master Portfolio			Master Small Cap Index Series			Russell 1000® Index Master Portfolio
LifePath 2025 Master Portfolio		0.66	%		0.68	%		0.60	%		0.27	%		0.20	%
LifePath 2035 Master Portfolio		0.65	%		0.26	%		0.70	%		0.19	%		0.32	%
LifePath 2045 Master Portfolio		0.45	%		0.02	%		0.51	%		0.12	%		0.22	%
LifePath 2055 Master Portfolio		0.19	%		0.00	%		0.19	%		0.05	%		0.06	%

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

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 (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each LifePath Master Portfolio is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the LifePath Master Portfolios:

Valuation: The LifePath Master Portfolios’ investments are valued at fair value as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the 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 Portfolios for all financial instruments. Investments in open-end registered investment companies are valued at net asset value (“NAV”) each business day. 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 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.

In the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Investments”). When determining the price for Fair Value Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each LifePath Master Portfolio might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant consistent with the principles of fair value measurement. The pricing of all Fair Value Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

BLACKROCK FUNDS III DECEMBER 31, 2014 63

Notes to Financial Statements (continued) Master Investment Portfolio

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the 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.

Recent Accounting Standard: In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance will require expanded disclosure for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. It is effective for financial statements with fiscal years beginning on or after December 15, 2014 and interim periods within those fiscal years. Management is evaluating the impact, if any, of this guidance on the LifePath Master Portfolios’ financial statement disclosures.

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

The LifePath 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: Each LifePath Master Portfolio may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with each LifePath Master Portfolio collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. government. The initial collateral received by each LifePath Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the LifePath Master Portfolio and any additional required collateral is delivered to the LifePath Master Portfolio on the next business day. During the term of the loan, each LifePath Master Portfolio is entitled to all distributions made on or in respect of the loaned securities. 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-unaffiliated, and collateral on securities loaned at value, respectively. As of December 31, 2014, any securities on loan were collateralized by cash. 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.

Securities lending transactions are entered into by the LifePath Master Portfolios under Master Securities Lending Agreements (each, an “MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, each LifePath Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and the LifePath Master Portfolios can reinvest cash collateral, or, upon an event of default, resell or re-pledge 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 these risks, the LifePath Master Portfolios benefit from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities lent if the collateral received does not cover the value on the securities loaned in the event of borrower default. The LifePath Master Portfolio 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.

64 BLACKROCK FUNDS III DECEMBER 31, 2014

Notes to Financial Statements (continued) Master Investment Portfolio

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. For such services, each LifePath Master Portfolio pays BFA a monthly fee based 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’ 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.

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 BTC, the previous administrator, from each affiliated investment company in which the LifePath Master Portfolios invest through April 30, 2015. 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, 2024. The amounts of the waivers, if any, are shown as fees waived by the Manager in the Statements of Operations.

The U.S. Securities and Exchange Commission has issued an exemptive order which permits BTC, an affiliate of the Manager, to serve as securities lending agent for the LifePath Master Portfolios, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. The LifePath Master Portfolios are responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by the Manager or its affiliates, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees each LifePath Master Portfolio bears to an annual rate of 0.04% until December 31, 2014 and 0.05% thereafter (the “collateral investment fees”).

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. Each LifePath Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent. Pursuant to a securities lending agreement effective February 1, 2014, BTC may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the “specials only securities”).

Pursuant to such agreement, each LifePath Master Portfolio retains 80% of securities lending income. In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Liquidity Complex in a calendar year exceeds the aggregate securities lending income earned across the Equity-Liquidity Complex through the lending of specials only securities in the calendar year 2013, each LifePath Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income. Prior to February 1, 2014, each LifePath Master Portfolio retained 65% of securities lending income and paid a fee to BTC equal to 35% of such income. The share of securities lending 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, 2014, each LifePath Master Portfolio paid BTC the following amounts in total for securities lending agent services and collateral investment fees:

	LifePath 2025 Master Portfolio		LifePath 2035 Master Portfolio		LifePath 2045 Master Portfolio		LifePath 2055 Master Portfolio
Securities lending agent services and collateral investment fees	$	265	$	236	$	257	$	159

BLACKROCK FUNDS III DECEMBER 31, 2014 65

Notes to Financial Statements (continued) Master Investment Portfolio

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 shown as 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:

For the year ended December 31, 2014, purchases and sales of investments in the Underlying Funds and Underlying Master Portfolios, excluding short-term securities, were as follows:

	LifePath 2025 Master Portfolio		LifePath 2035 Master Portfolio		LifePath 2045 Master Portfolio		LifePath 2055 Master Portfolio
Purchases	$	35,337,769	$	37,532,623	$	25,077,484	$	9,265,699
Sales	$	33,348,519	$	30,040,465	$	17,570,487	$	5,850,697

6. Income Tax Information:

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 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 U.S. 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 U.S. federal tax returns remains open for each of the four years ended December 31, 2014. 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 that there are any uncertain tax positions that require recognition of a tax liability.

As of December 31, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

	LifePath 2025 Master Portfolio			LifePath 2035 Master Portfolio			LifePath 2045 Master Portfolio			LifePath 2055 Master Portfolio
Tax cost	$	61,366,467		$	53,274,382		$	33,094,215		$	12,388,645
Gross unrealized appreciation	$	6,621,952		$	3,100,186		$	4,138,516		$	903,427
Gross unrealized depreciation		(4,129,962	)		(668,011	)		(2,582,204	)		(268,135	)
Net unrealized appreciation	$	2,491,990		$	2,432,175		$	1,556,312		$	635,292

7. Bank Borrowings:

MIP, on behalf of the LifePath Master Portfolios, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), was a party to a 364-day, $1.1 billion credit agreement with a group of lenders, under which a LifePath Master Portfolio may borrow to fund shareholder redemptions. Excluding commitments designated for a certain individual fund, the Participating Funds, including a LifePath Master Portfolio, could borrow up to an aggregate commitment amount of $650 million, subject to asset coverage and other limitations as specified in the agreement. Effective November 25, 2014, the credit agreement was amended to an aggregate commitment amount of $2.1 billion, of which the Participating Funds, including the LifePath Master Portfolios, can borrow up to $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The agreement terminates on April 23, 2015, unless otherwise extended to November 24, 2015 or renewed for a period of 364 days from April 23, 2015. The amended agreement has the following terms: a fee of 0.06% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one month LIBOR (but in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which are included in miscellaneous expenses in the Statements of Operations, and 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. During the year ended December 31, 2014, the LifePath Master Portfolios did not borrow under the credit agreement.

8. Principal Risks:

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

66 BLACKROCK FUNDS III DECEMBER 31, 2014

Notes to Financial Statements (concluded) Master Investment Portfolio

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.

9. 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, 2014 67

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, 2014, 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, 2014 by correspondence with the custodian and transfer agent, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 23, 2015

68 BLACKROCK FUNDS III DECEMBER 31, 2014

Officers and Trustees

Name, Address1 and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2
Ronald W. Forbes 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 153 Portfolios	None
Rodney D. Johnson 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 153 Portfolios	None
David O. Beim 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 153 Portfolios	None
Frank J. Fabozzi 1948	Trustee	Since 2014	Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011; Adjunct Professor of Finance and Becton Fellow, Yale University from 1994 to 2006.	112 RICs consisting of 232 Portfolios	None
Dr. Matina S. Horner 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 153 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 1939	Trustee	Since 2009	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 153 Portfolios	None
Ian A. MacKinnon 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None
Cynthia A. Montgomery 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 153 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 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 153 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 153 Portfolios	None
Toby Rosenblatt 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Futures Foundation (philanthropic foundation) since 2009; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None

BLACKROCK FUNDS III DECEMBER 31, 2014 69

Officers and Trustees (continued)

Name, Address1 and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2 (concluded)
Kenneth L. Urish 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 153 Portfolios	None
Frederick W. Winter 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 153 Portfolios	None
	1    The address of each Trustee is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2    Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Trustees on a case-by-case basis, as appropriate.
	3    Date shown is the earliest date a person has served for the Trust/MIP. 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. Frank J. Fabozzi first became a member of the board of other funds advised by BlackRock Advisors, LLC or its affiliates in 1988.
Interested Trustees4
Paul L. Audet 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.	141 RICs consisting of 329 Portfolios	None
Henry Gabbay 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.	29 RICs consisting of 97 Portfolios	None
	4    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, Dr. Fabozzi 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 75. The Board has determined to extend the terms of Directors on a case-by-case basis, as appropriate.

70 BLACKROCK FUNDS III DECEMBER 31, 2014

Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers2
John M. Perlowski 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 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.
Jennifer McGovern 1977	Vice President	Since 2014	Director of BlackRock, Inc. since 2011; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal Andrews 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 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.
Charles Park 1967	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2014	Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary to the 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    The address of each Officer is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2    Officers of the Trust/MIP serve at the pleasure of the Board.

Effective September 10, 2014, Brendan Kyne resigned as a Vice President of the Trust/MIP and Jennifer McGovern became a Vice President of the Trust/MIP.

Effective December 31, 2014, Paul L. Audet and Henry Gabbay resigned as Trustees of the Trust/MIP and Ronald W. Forbes resigned as a Trustee of the Trust/MIP and Co-Chair of the Board. Effective January 1, 2015, Collette Chilton, Barbara G. Novick and Mark Stalnecker were appointed to serve as Trustees of the Trust/MIP.

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/MIP 400 Howard Street San Francisco, CA 94105

BLACKROCK FUNDS III DECEMBER 31, 2014 71

Additional Information

General Information

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 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 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.

BlackRock’s Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed-income and tax-exempt investing. Visit http://www.blackrock.com for more information.

Shareholder Privileges

Account Information

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

72 BLACKROCK FUNDS III DECEMBER 31, 2014

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, 2014 73

This report is intended for current holders. 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 preceded or accompanied 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.

LPincre-12/14-AR

DECEMBER 31, 2014

  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
The Markets in Review		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		25
Portfolio Notes to Financial Statements		50
Portfolio Report of Independent Registered Public Accounting Firm		56
Important Tax Information		56
Master Portfolio Information		57
Master Portfolio Financial Statements:
Schedules of Investments		59
Statements of Assets and Liabilities		69
Statements of Operations		70
Statements of Changes in Net Assets		71
Master Portfolio Financial Highlights		76
Master Portfolio Notes to Financial Statements		81
Master Portfolio Report of Independent Registered Public Accounting Firm		86
Officers and Trustees		87
Additional Information		90

2 BLACKROCK FUNDS III DECEMBER 31, 2014

The Markets in Review

Dear Shareholder,

After an extended period of calm, market volatility increased over the course of 2014, driven largely by higher valuations in risk assets (such as equities and high yield bonds), rising geopolitical risks and expectations around global central bank policies. Several key trends drove strong performance in U.S. markets, particularly large-cap stocks, Treasuries and municipal bonds, while markets outside the U.S. were more challenged.

Investors began the year in search of relatively safer assets due to heightened risks in emerging markets, slowing growth in China and weakening U.S. economic data. As a result, equities globally declined in January while bond markets strengthened despite the expectation that interest rates would rise as the U.S. Federal Reserve had begun reducing its asset purchase programs. Strong demand for relatively safer assets pushed U.S. Treasury bond prices higher and thus kept rates low in the United States. This surprising development, as well as increasing evidence that the soft patch in U.S. economic data had been temporary and weather-related, brought equity investors racing back to the market in February.

In the months that followed, interest rates trended lower in a modest growth environment and more investors turned to equities in search of yield. Markets remained relatively calm despite rising tensions in Russia and Ukraine and further signs of decelerating growth in China. Strong corporate earnings, increased merger and acquisition activity and signs of a strengthening recovery in the U.S. and other developed economies kept equity prices moving higher. Not all segments benefited from these trends, however, as investors ultimately became wary of high valuations, resulting in a broad rotation into cheaper assets.

Volatility ticked up in the summer as geopolitical tensions escalated and investors feared that better U.S. economic indicators may compel the Fed to increase short-term interest rates sooner than previously anticipated. Global credit markets tightened as the U.S. dollar strengthened, ultimately putting a strain on investor flows, and financial markets broadly weakened in the third quarter.

Several themes dominated the markets in the fourth quarter, resulting in higher levels of volatility and the outperformance of U.S. markets versus other areas of the world. Economic growth strengthened considerably in the United States while the broader global economy showed signs of slowing. The European Central Bank and the Bank of Japan took aggressive measures to stimulate growth while the Fed moved toward tighter policy. This divergence in central bank policy caused further strengthening in the U.S. dollar versus other currencies. Oil prices, which had been falling gradually since the summer, plummeted in the fourth quarter due to a global supply-and-demand imbalance. Energy stocks sold off sharply and oil-exporting economies suffered, resulting in the poor performance of emerging market stocks.

At BlackRock, we believe investors need to think globally, extend their scope across a broad 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 blackrock.com for further insight about investing in today’s markets.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2014
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		6.12	%		13.69	%
U.S. small cap equities (Russell 2000® Index)		1.65			4.89
International equities (MSCI Europe, Australasia, Far East Index)		(9.24	)		(4.90	)
Emerging market equities (MSCI Emerging Markets Index)		(7.84	)		(2.19	)
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.01			0.03
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		4.33			10.72
U.S. investment-grade bonds (Barclays U.S. Aggregate Bond Index)		1.96			5.97
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.00			9.25
U.S. high yield bonds (Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		(2.84	)		2.46
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, 2014 LifePath Portfolios

Portfolio Management Commentary

How did each Portfolio perform?

Ÿ The LifePath Portfolios with target dates of 2020, 2030, 2040 and 2050 and the LifePath Retirement Portfolio (altogether, the “LifePath Portfolios”) invest in their corresponding LifePath Master Portfolio.

Ÿ For the 12-month period ended December 31, 2014, the LifePath Portfolios with target dates of 2020, 2030, 2040 and 2050 underperformed their respective custom benchmarks. The LifePath Retirement Portfolio’s Class K Shares outperformed the custom benchmark, while all other LifePath Retirement Portfolio share classes underperformed. The returns for the LifePath Portfolios include portfolio expenses. The custom benchmarks have no expenses associated with performance.

What factors influenced performance?

Ÿ Equity markets broadly 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 In the shorter-dated portfolios, investment in Active Stock Master Portfolio (“Active Stock”) was the primary detractor from the LifePath portfolios’ relative performance, although the strategy had more of an impact on relative performance in the longer-dated portfolios (2040-2050). 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. The Equity Dividend strategy was one of the more significant detractors largely due to the strategy’s underweight and stock selection in information technology. In addition, an underweight in the managed care industry detracted, as health care providers benefited from improving sentiment and rising enrollments under the Affordable Care Act.

Ÿ Fundamental Large Cap Growth also detracted from Active Stock’s performance. While the results were stronger in the second half of the year, the performance was not enough to offset the weakness experienced in March and April. At the sector level, consumer discretionary was the largest detractor in the period. Selection weakness in telecommunication services and industrials also weighed on results.

Ÿ A negative fair value event in the International Tilts Master Portfolio, as well as other international assets, detracted from performance during the period, with a larger impact in the longer-dated portfolios.

Ÿ Conversely, the LifePath Portfolios benefited from their investment in CoreAlpha Bond Master Portfolio (“CoreAlpha Bond”), where asset allocation had the largest impact on relative results during the period, though the strategy had a greater impact on relative performance in the shorter-dated funds. In addition, securitized credit assets outperformed due to strong demand for short-duration, high-quality assets. The U.S interest rate movement during the period positively contributed to the relative performance as CoreAlpha Bond was positioned to take advantage of the yield curve flattening throughout the 12-month period.

Ÿ The Commodity Strategies Fund also contributed positively across all of the LifePath Portfolio strategies. The Commodity Strategies Fund’s agricultural equity exposure was the largest driver of relative returns. Agricultural equities finished the year in positive territory, with holdings that benefited from low grain prices as key contributors. In addition, energy-related equities were more resilient than the underlying oil price, and exposure to the sector also generated outperformance.

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 The LifePath Portfolios had begun investing in the International Tilts Master Portfolio and BlackRock Emerging Markets Fund, Inc. in October 2013, and completed this implementation at the end of March 2014. This additional international equity exposure was offset by a reduction in passive international equity holdings such as the ACWI ex-US Index Master Portfolio, iShares MSCI EAFE Index Fund and iShares Emerging Markets Index Fund. In addition, exposure to Active Stock was reduced in order to move the active risk from the U.S. 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 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, 2014

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, 2014 5

LifePath Retirement Portfolio

Investment Objective

The investment objective of LifePath^® Retirement Portfolio (“LifePath Retirement Portfolio” or the “LifePath Portfolio”) is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, LifePath Retirement Portfolio will be broadly diversified across global asset classes. Prior to July 1, 2014, LifePath Retirement Portfolio was 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 to 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.

LifePath Portfolio’s custom benchmark consists of the following:

Period	Barclays U.S. Aggregate Bond Index			Barclays U.S.  Treasury Inflation Protected Securities (TIPS) Index			Cohen & Steers Realty Majors Index			Bloomberg Commodity Index3			FTSE EPRA/NAREIT Developed Real  Estate Index			MSCI ACWI ex-U.S. 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
1/01/05 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
1/01/14 to 12/31/14		52.6			9.0			N/A			3.8			0.2			10.2			N/A			19.9			4.3			N/A			N/A			N/A

³  Prior to July 1, 2014, the Bloomberg Commodity Index was known as the Dow Jones-UBS Commodity Index.

See “About Portfolio Performance” on page 16 for descriptions of the indexes.

6 BLACKROCK FUNDS III DECEMBER 31, 2014

LifePath Retirement Portfolio

Performance Summary for the Period Ended December 31, 2014

				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		(0.01	)%		4.75	%		N/A			6.56	%		N/A			5.05	%		N/A
Investor A		(0.10	)		4.56			(0.93	)%		6.31			5.17	%		4.79			4.23	%
Investor C		(0.51	)		3.70			2.76			5.41			5.41			4.06			4.06
Class K		0.27			5.24			N/A			6.96			N/A			5.36			N/A
Class R		(0.28	)		4.25			N/A			5.96			N/A			4.54			N/A
LifePath Retirement Portfolio Custom Benchmark		0.07			5.16			N/A			7.12			N/A			5.58			N/A
Barclays U.S. Aggregate Bond Index		1.96			5.97			N/A			4.45			N/A			4.71			N/A
Barclays U.S. TIPS Index		(2.07	)		3.64			N/A			4.11			N/A			4.37			N/A
Bloomberg Commodity Index		(22.50	)		(17.01	)		N/A			(5.53	)		N/A			(1.86	)		N/A
FTSE EPRA/NAREIT Developed Real Estate Index		2.93			15.02			N/A			11.26			N/A			N/A			N/A
MSCI ACWI ex-U.S. IMI Index		(9.13	)		(3.89	)		N/A			4.71			N/A			5.37			N/A
Russell 1000® Index		5.57			13.24			N/A			15.64			N/A			7.96			N/A
Russell 2000® Index		1.65			4.89			N/A			15.55			N/A			7.77			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, 2014 7

LifePath 2020 Portfolio

Investment Objective

The investment objective of LifePath^® 2020 Portfolio (“LifePath 2020 Portfolio” or the “LifePath Portfolio”) is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, LifePath 2020 Portfolio will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time. Prior to July 1, 2014, LifePath 2020 Portfolio was 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 to 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.

LifePath Portfolio’s custom benchmark consists of the following:

Period	Barclays U.S. Aggregate Bond Index			Barclays U.S.  Treasury Inflation Protected Securities (TIPS) Index			Cohen & Steers Realty Majors Index			Bloomberg Commodity Index3			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-U.S. 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
1/01/05 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
1/01/14 to 12/31/14		42.0			6.8			N/A			3.8			2.6			14.4			N/A		26.7			3.7			N/A			N/A			N/A

³  Prior to July 1, 2014, the Bloomberg Commodity Index was known as the Dow Jones-UBS Commodity Index.

See “About Portfolio Performance” on page 16 for descriptions of the indexes.

8 BLACKROCK FUNDS III DECEMBER 31, 2014

LifePath 2020 Portfolio

Performance Summary for the Period Ended December 31, 2014

				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		(0.04	)%		5.06	%		N/A			7.55	%		N/A			5.06	%		N/A
Investor A		(0.20	)		4.79			(0.71	)%		7.27			6.12	%		4.80			4.24	%
Investor C		(0.58	)		3.98			3.05			6.35			6.35			4.03			4.03
Class K		0.10			5.35			N/A			7.91			N/A			5.36			N/A
Class R		(0.33	)		4.49			N/A			6.89			N/A			4.52			N/A
LifePath 2020 Portfolio Custom Benchmark		(0.09	)		5.46			N/A			8.21			N/A			5.71			N/A
Barclays U.S. Aggregate Bond Index		1.96			5.97			N/A			4.45			N/A			4.71			N/A
Barclays U.S. TIPS Index		(2.07	)		3.64			N/A			4.11			N/A			4.37			N/A
Bloomberg Commodity Index		(22.50	)		(17.01	)		N/A			(5.53	)		N/A			(1.86	)		N/A
FTSE EPRA/NAREIT Developed Real Estate Index		2.93			15.02			N/A			11.26			N/A			N/A			N/A
MSCI ACWI ex-U.S. IMI Index		(9.13	)		(3.89	)		N/A			4.71			N/A			5.37			N/A
Russell 1000® Index		5.57			13.24			N/A			15.64			N/A			7.96			N/A
Russell 2000® Index		1.65			4.89			N/A			15.55			N/A			7.77			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, 2014 9

LifePath 2030 Portfolio

Investment Objective

The investment objective of LifePath^® 2030 Portfolio (“LifePath 2030 Portfolio” or the “LifePath Portfolio”) is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, LifePath 2030 Portfolio will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time. Prior to July 1, 2014, LifePath 2030 Portfolio was 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 to 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.

LifePath Portfolio’s custom benchmark consists of the following:

Period	Barclays U.S. Aggregate Bond Index			Barclays U.S.  Treasury Inflation Protected Securities (TIPS) Index			Cohen & Steers Realty Majors Index			Bloomberg Commodity Index3			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI   ex-U.S. 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
1/01/05 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			1.00	%		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
1/01/14 to 12/31/14		27.5			4.0			N/A			3.9			6.1			19.8			N/A			35.8			2.9			N/A			N/A			N/A

³  Prior to July 1, 2014, the Bloomberg Commodity Index was known as the Dow Jones-UBS Commodity Index.

See “About Portfolio Performance” on page 16 for descriptions of the indexes.

10 BLACKROCK FUNDS III DECEMBER 31, 2014

LifePath 2030 Portfolio

Performance Summary for the Period Ended December 31, 2014

				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		(0.20	)%		5.32	%		N/A			8.52	%		N/A			5.20	%		N/A
Investor A		(0.36	)		4.98			(0.53	)%		8.22			7.06	%		4.93			4.37	%
Investor C		(0.66	)		4.23			3.31			7.27			7.27			4.13			4.13
Class K		0.00			5.66			N/A			8.91			N/A			5.51			N/A
Class R		(0.45	)		4.73			N/A			7.79			N/A			4.62			N/A
LifePath 2030 Portfolio Custom Benchmark		(0.29	)		5.83			N/A			9.30			N/A			5.95			N/A
Barclays U.S. Aggregate Bond Index		1.96			5.97			N/A			4.45			N/A			4.71			N/A
Barclays U.S. TIPS Index		(2.07	)		3.64			N/A			4.11			N/A			4.37			N/A
Bloomberg Commodity Index		(22.50	)		(17.01	)		N/A			(5.53	)		N/A			(1.86	)		N/A
FTSE EPRA/NAREIT Developed Real Estate Index		2.93			15.02			N/A			11.26			N/A			N/A			N/A
MSCI ACWI ex-U.S. IMI Index		(9.13	)		(3.89	)		N/A			4.71			N/A			5.37			N/A
Russell 1000® Index		5.57			13.24			N/A			15.64			N/A			7.96			N/A
Russell 2000® Index		1.65			4.89			N/A			15.55			N/A			7.77			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, 2014 11

LifePath 2040 Portfolio

Investment Objective

The investment objective of LifePath^® 2040 Portfolio (“LifePath 2040 Portfolio” or the “LifePath Portfolio”) is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, LifePath 2040 Portfolio will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time. Prior to July 1, 2014, LifePath 2040 Portfolio was 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 to 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.

LifePath Portfolio’s custom benchmark consists of the following:

Period	Barclays U.S. Aggregate Bond Index			Barclays U.S.  Treasury Inflation Protected Securities (TIPS) Index			Cohen & Steers Realty Majors Index			Bloomberg Commodity Index3			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-U.S. 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
1/01/05 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
1/01/14 to 12/31/14		16.1			1.6			N/A			3.9			9.0			24.2			N/A			42.9			2.3			N/A			N/A			N/A

³  Prior to July 1, 2014, the Bloomberg Commodity Index was known as the Dow Jones-UBS Commodity Index.

See “About Portfolio Performance” on page 16 for descriptions of the indexes.

12 BLACKROCK FUNDS III DECEMBER 31, 2014

LifePath 2040 Portfolio

Performance Summary for the Period Ended December 31, 2014

				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		(0.37	)%		5.48	%		N/A			9.26	%		N/A			5.22	%		N/A
Investor A		(0.43	)		5.23			(0.29	)%		8.98			7.81	%		4.97			4.40	%
Investor C		(0.85	)		4.49			3.57			7.97			7.97			4.13			4.13
Class K		(0.13	)		5.85			N/A			9.68			N/A			5.54			N/A
Class R		(0.61	)		4.96			N/A			8.50			N/A			4.62			N/A
LifePath 2040 Portfolio Custom Benchmark		(0.45	)		6.10			N/A			10.13			N/A			6.07			N/A
Barclays U.S. Aggregate Bond Index		1.96			5.97			N/A			4.45			N/A			4.71			N/A
Barclays U.S. TIPS Index		(2.07	)		3.64			N/A			4.11			N/A			4.37			N/A
Bloomberg Commodity Index		(22.50	)		(17.01	)		N/A			(5.53	)		N/A			(1.86	)		N/A
FTSE EPRA/NAREIT Developed Real Estate Index		2.93			15.02			N/A			11.26			N/A			N/A			N/A
MSCI ACWI ex-U.S. IMI Index		(9.13	)		(3.89	)		N/A			4.71			N/A			5.37			N/A
Russell 1000® Index		5.57			13.24			N/A			15.64			N/A			7.96			N/A
Russell 2000® Index		1.65			4.89			N/A			15.55			N/A			7.77			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, 2014 13

LifePath 2050 Portfolio

Investment Objective

The investment objective of LifePath^® 2050 Portfolio (“LifePath 2050 Portfolio” or the “LifePath Portfolio”) is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, LifePath 2050 Portfolio will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time. Prior to July 1, 2014, LifePath 2050 Portfolio was 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 to 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  Commencement of operations.

LifePath Portfolio’s custom benchmark consists of the following:

Period	Barclays U.S. Aggregate Bond Index			Bloomberg Commodity Index4			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-U.S. 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
1/01/14 to 12/31/14		8.2			3.9			11.0			27.3			47.8			1.8			N/A			N/A			N/A

⁴  Prior to July 1, 2014, the Bloomberg Commodity Index was known as the Dow Jones-UBS Commodity Index.

See “About Portfolio Performance” on page 16 for descriptions of the indexes.

14 BLACKROCK FUNDS III DECEMBER 31, 2014

LifePath 2050 Portfolio

Performance Summary for the Period Ended December 31, 2014

				Average Annual Total Returns
				1 Year						5 Years						Since Inception1
	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		(0.33	)%		5.73	%		N/A			9.92	%		N/A			5.52	%		N/A
Investor A		(0.53	)		5.47			(0.07	)%		9.64			8.46	%		5.25			4.39	%
Investor C		(0.84	)		4.67			3.75			8.59			8.59			4.27			4.27
Class K		(0.18	)		6.12			N/A			10.30			N/A			5.89			N/A
Class R		(0.62	)		5.21			N/A			9.14			N/A			4.81			N/A
LifePath 2050 Portfolio Custom Benchmark		(0.47	)		6.45			N/A			10.86			N/A			6.61			N/A
Barclays U.S. Aggregate Bond Index		1.96			5.97			N/A			4.45			N/A			4.96			N/A
Bloomberg Commodity Index		(22.50	)		(17.01	)		N/A			(5.53	)		N/A			(11.48	)		N/A
FTSE EPRA/NAREIT Developed Real Estate Index		2.93			15.02			N/A			11.26			N/A			5.42			N/A
MSCI ACWI ex-U.S. IMI Index		(9.13	)		(3.89	)		N/A			4.71			N/A			1.31			N/A
Russell 1000® Index		5.57			13.24			N/A			15.64			N/A			10.07			N/A
Russell 2000® Index		1.65			4.89			N/A			15.55			N/A			10.49			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.

¹  The LifePath Portfolio commenced operations on June 30, 2008.

BLACKROCK FUNDS III DECEMBER 31, 2014 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. These shares are generally available through financial intermediaries.

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. These shares are generally available through financial intermediaries. 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. 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 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. Distributions 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.

BlackRock Advisors, LLC (the “Administrator”), each 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 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, 2014, the following indexes are used to calculate the LifePath Portfolios’ custom benchmarks: Barclays U.S. Aggregate Bond Index, Barclays U.S. TIPS Index, Bloomberg Commodity Index, FTSE EPRA/NAREIT Developed Real Estate Index, MSCI ACWI ex-U.S. IMI Index, Russell 1000^® Index and Russell 2000^® Index.

The Barclays U.S. Aggregate Bond Index is a widely recognized unmanaged market-weighted index, comprised of investment-grade corporate bonds rated BBB or better, mortgages and U.S. Treasury and U.S. Government agency issues with at least one year to maturity. The Barclays U.S. TIPS Index is an unmanaged index that measures the performance of the inflation-protected public obligations of the U.S. Treasury. The Bloomberg Commodity Index 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 a global market capitalization weighted index composed of listed real estate securities from developed market countries in North America, Europe, and Asia. The MSCI ACWI ex-U.S. IMI 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. The Russell 1000^® Index is an index that measures the performance of the large cap segment of the U.S. equity universe. It is a subset of the Russell 3000^® Index and includes approximately 1,000 of the largest securities based on a combination of their market capitalization and current index membership. The index represents approximately 92% of the total market capitalization of the Russell 3000^® Index. The Russell 2000^® Index is an unmanaged index that is a subset of the Russell 3000^® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.

16 BLACKROCK FUNDS III DECEMBER 31, 2014

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, 2014 and held through December 31, 2014) 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, 2014		Ending Account Value December 31, 2014		Expenses Paid During the Period1		Beginning Account Value July 1, 2014		Ending Account Value December 31, 2014		Expenses Paid During the Period1		Annualized Expense Ratio
LifePath Retirement Portfolio
Institutional		$1,000.00		$999.90		$3.78		$1,000.00		$1,021.42		$3.82		0.75%
Investor A		$1,000.00		$999.00		$5.04		$1,000.00		$1,020.16		$5.09		1.00%
Investor C		$1,000.00		$994.90		$8.60		$1,000.00		$1,016.59		$8.69		1.71%
Class K		$1,000.00		$1,002.70		$1.87		$1,000.00		$1,023.34		$1.89		0.37%
Class R		$1,000.00		$997.20		$6.14		$1,000.00		$1,019.06		$6.21		1.22%
LifePath 2020 Portfolio
Institutional		$1,000.00		$999.60		$3.73		$1,000.00		$1,021.48		$3.77		0.74%
Investor A		$1,000.00		$998.00		$4.99		$1,000.00		$1,020.21		$5.04		0.99%
Investor C		$1,000.00		$994.20		$8.60		$1,000.00		$1,016.59		$8.69		1.71%
Class K		$1,000.00		$1,001.00		$1.71		$1,000.00		$1,023.49		$1.73		0.34%
Class R		$1,000.00		$996.70		$6.14		$1,000.00		$1,019.06		$6.21		1.22%
LifePath 2030 Portfolio
Institutional		$1,000.00		$998.00		$3.63		$1,000.00		$1,021.58		$3.67		0.72%
Investor A		$1,000.00		$996.40		$4.83		$1,000.00		$1,020.37		$4.89		0.96%
Investor C		$1,000.00		$993.40		$8.59		$1,000.00		$1,016.59		$8.69		1.71%
Class K		$1,000.00		$1,000.00		$1.66		$1,000.00		$1,023.54		$1.68		0.33%
Class R		$1,000.00		$995.50		$6.09		$1,000.00		$1,019.11		$6.16		1.21%
LifePath 2040 Portfolio
Institutional		$1,000.00		$996.30		$3.52		$1,000.00		$1,021.68		$3.57		0.70%
Investor A		$1,000.00		$995.70		$4.78		$1,000.00		$1,020.42		$4.84		0.95%
Investor C		$1,000.00		$991.50		$8.53		$1,000.00		$1,016.64		$8.64		1.70%
Class K		$1,000.00		$998.70		$1.56		$1,000.00		$1,023.64		$1.58		0.31%
Class R		$1,000.00		$993.90		$5.98		$1,000.00		$1,019.21		$6.06		1.19%
LifePath 2050 Portfolio
Institutional		$1,000.00		$996.70		$3.52		$1,000.00		$1,021.68		$3.57		0.70%
Investor A		$1,000.00		$994.70		$4.73		$1,000.00		$1,020.47		$4.79		0.94%
Investor C		$1,000.00		$991.60		$8.53		$1,000.00		$1,016.64		$8.64		1.70%
Class K		$1,000.00		$998.20		$1.56		$1,000.00		$1,023.64		$1.58		0.31%
Class R		$1,000.00		$993.80		$5.93		$1,000.00		$1,019.26		$6.01		1.18%

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, 2014 17

Statements of Assets and Liabilities

December 31, 2014		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		$	380,089,753		$	874,671,437		$	816,875,437		$	707,831,261		$	182,440,174
Withdrawals receivable from the LifePath Master Portfolio			2,214,231			12,856,963			13,062,821			10,387,604			1,113,242
Capital shares sold receivable			851,352			1,791,440			1,736,163			2,745,758			838,251
Total assets			383,155,336			889,319,840			831,674,421			720,964,623			184,391,667
Liabilities
Capital shares redeemed payable			3,065,583			14,648,403			14,798,984			13,133,362			1,951,493
Administration fees payable			164,039			379,777			353,192			305,334			76,996
Service and distribution fees payable			31,727			82,046			79,231			59,193			16,096
Income dividends payable			19,277			44,707			39,739			21,301			6,347
Professional fees payable			15,900			15,900			15,900			15,900			15,900
Capital gains distributions payable			517,830			1,315,581			1,218,312			649,963			188,410
Total liabilities			3,814,356			16,486,414			16,505,358			14,185,053			2,255,242
Net Assets		$	379,340,980		$	872,833,426		$	815,169,063		$	706,779,570		$	182,136,425
Net Assets Consist of
Paid-in capital		$	340,357,667		$	776,441,241		$	750,489,354		$	612,673,350		$	168,166,570
Distributions in excess of net investment income			(1,120,017	)		(2,253,283	)		(1,206,249	)		(687,772	)		(135,428	)
Accumulated net realized loss allocated from the LifePath Master Portfolio			(2,543,731	)		(22,293,230	)		(25,938,113	)		(15,695,309	)		811,881
Net unrealized appreciation/depreciation allocated from the LifePath Master Portfolio			42,647,061			120,938,698			91,824,071			110,489,301			13,293,402
Net Assets		$	379,340,980		$	872,833,426		$	815,169,063		$	706,779,570		$	182,136,425
Net Asset Value
Institutional:
Net assets		$	234,280,088		$	490,447,107		$	449,353,771		$	434,049,075		$	108,741,010
Shares outstanding2			21,156,754			31,341,679			30,553,252			23,624,562			5,551,449
Net asset value		$	11.07		$	15.65		$	14.71		$	18.37		$	19.59
Investor A:
Net assets		$	139,852,970		$	367,280,881		$	350,200,652		$	264,312,076		$	70,441,628
Shares outstanding2			14,003,182			25,138,324			24,518,747			15,351,207			3,600,581
Net asset value		$	9.99		$	14.61		$	14.28		$	17.22		$	19.56
Investor C:	��
Net assets		$	1,294,639		$	2,980,567		$	3,052,865		$	2,276,536		$	605,274
Shares outstanding2			117,982			192,392			210,277			125,155			31,155
Net asset value		$	10.97		$	15.49		$	14.52		$	18.19		$	19.43
Class K:
Net assets		$	3,018,651		$	9,545,043		$	9,517,689		$	4,980,367		$	1,257,488
Shares outstanding2			273,186			611,327			647,390			269,695			63,963
Net asset value		$	11.05		$	15.61		$	14.70		$	18.47		$	19.66
Class R:
Net assets		$	894,632		$	2,579,828		$	3,044,086		$	1,161,516		$	1,091,025
Shares outstanding2			81,260			165,478			208,440			63,499			55,872
Net asset value		$	11.01		$	15.59		$	14.60		$	18.29		$	19.53
1    Cost — from the applicable LifePath Master Portfolio		$	337,442,692		$	753,732,739		$	725,051,366		$	597,341,960		$	169,146,772
2   No par value, unlimited number of shares authorized.

See Notes to Financial Statements.
18	BLACKROCK FUNDS III	DECEMBER 31, 2014

Statements of Operations

Year Ended December 31, 2014	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:
Interest — affiliated	$	6,509,137		$	11,760,294		$	7,636,296		$	4,210,488		$	507,413
Dividends — affiliated		3,675,226			10,645,895			13,206,989			13,423,375			3,662,606
Securities lending — affiliated — net		4,806			18,432			23,082			32,906			8,143
Expenses		(2,577,045	)		(5,813,339	)		(5,503,506	)		(4,690,042	)		(1,128,802	)
Fees waived		1,433,563			3,449,701			3,507,291			3,151,376			785,702
Total income		9,045,687			20,060,983			18,870,152			16,128,103			3,835,062
Portfolio Expenses
Administration — Institutional		1,461,454			3,020,287			2,841,955			2,622,854			600,022
Administration — Investor A		749,897			1,901,183			1,776,257			1,326,448			335,318
Administration — Investor C		5,597			13,066			13,666			10,521			2,652
Administration — Class K		5,845			13,863			14,989			8,180			1,630
Administration — Class R		7,874			17,373			16,815			7,665			7,610
Service — Investor A		374,906			950,688			888,535			663,677			167,904
Service and distribution — Investor C		11,228			26,151			27,386			21,074			5,295
Service and distribution — Class R		7,869			17,395			16,818			7,673			7,627
Professional		18,651			18,651			18,651			18,651			18,651
Miscellaneous		470			470			470			470			470
Total expenses		2,643,791			5,979,127			5,615,542			4,687,213			1,147,179
Less fees waived by administrator		(18,651	)		(18,651	)		(18,651	)		(18,651	)		(18,651	)
Total expenses after fees waived		2,625,140			5,960,476			5,596,891			4,668,562			1,128,528
Net investment income		6,420,547			14,100,507			13,273,261			11,459,541			2,706,534
Realized and Unrealized Gain (Loss) Allocation from the LifePath Master Portfolio
Net realized gain from investments, financial futures contracts, swaps and foreign currency transactions		30,328,592			82,240,605			89,981,059			84,054,967			18,096,514
Net change in unrealized appreciation/depreciation on investments, financial futures contracts, swaps and foreign currency translations		(15,887,725	)		(48,739,044	)		(56,323,113	)		(54,209,797	)		(12,262,296	)
Net realized and unrealized gain		14,440,867			33,501,561			33,657,946			29,845,170			5,834,218
Net Increase in Net Assets Resulting from Operations	$	20,861,414		$	47,602,068		$	46,931,207		$	41,304,711		$	8,540,752

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	19

Statements of Changes in Net Assets

	LifePath Retirement Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	6,420,547		$	6,969,103
Net realized gain		30,328,592			28,025,721
Net change in unrealized appreciation/depreciation		(15,887,725	)		(2,922,588	)
Net increase in net assets resulting from operations		20,861,414			32,072,236
Distributions to Shareholders From1
Net investment income:
Institutional		(4,404,816	)		(4,891,958	)
Investor A		(2,300,181	)		(2,089,247	)
Investor C		(8,193	)		(1,459	)
Class K		(75,012	)		(64,347	)
Class R		(16,034	)		(21,189	)
Net realized gain:
Institutional		(20,795,931	)		(18,894,125	)
Investor A		(13,315,477	)		(9,134,784	)
Investor C		(110,551	)		(25,780	)
Class K		(275,163	)		(198,180	)
Class R		(89,990	)		(113,066	)
Decrease in net assets resulting from distributions to shareholders		(41,391,348	)		(35,434,135	)
Capital Share Transactions
Net decrease in net assets derived from capital share transactions		(104,392,035	)		(82,545,369	)
Net Assets
Total decrease in net assets		(124,921,969	)		(85,907,268	)
Beginning of year		504,262,949			590,170,217
End of year	$	379,340,980		$	504,262,949
Distributions in excess of net investment income, end of year	$	(1,120,017	)	$	(736,328	)
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
20	BLACKROCK FUNDS III	DECEMBER 31, 2014

Statements of Changes in Net Assets

	LifePath 2020 Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	14,100,507		$	15,503,405
Net realized gain		82,240,605			74,310,992
Net change in unrealized appreciation/depreciation		(48,739,044	)		13,363,911
Net increase in net assets resulting from operations		47,602,068			103,178,308
Distributions to Shareholders From1
Net investment income:
Institutional		(8,895,767	)		(10,742,367	)
Investor A		(5,462,819	)		(5,427,027	)
Investor C		(17,875	)		(12,173	)
Class K		(191,706	)		(108,690	)
Class R		(36,574	)		(31,831	)
Net realized gain:
Institutional		(51,643,775	)		(40,223,779	)
Investor A		(38,760,115	)		(23,303,145	)
Investor C		(293,404	)		(122,005	)
Class K		(973,553	)		(358,772	)
Class R		(274,368	)		(176,614	)
Decrease in net assets resulting from distributions to shareholders		(106,549,956	)		(80,506,403	)
Capital Share Transactions
Net decrease in net assets derived from capital share transactions		(168,709,426	)		(37,384,842	)
Net Assets
Total decrease in net assets		(227,657,314	)		(14,712,937	)
Beginning of year		1,100,490,740			1,115,203,677
End of year	$	872,833,426		$	1,100,490,740
Distributions in excess of net investment income, end of year	$	(2,253,283	)	$	(1,749,049	)
1   Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	21

Statements of Changes in Net Assets

	LifePath 2030 Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	13,273,261		$	15,833,601
Net realized gain		89,981,059			80,596,565
Net change in unrealized appreciation/depreciation		(56,323,113	)		35,370,954
Net increase in net assets resulting from operations		46,931,207			131,801,120
Distributions to Shareholders From1
Net investment income:
Institutional		(8,716,567	)		(10,930,956	)
Investor A		(5,155,801	)		(4,993,601	)
Investor C		(19,700	)		(16,687	)
Class K		(210,259	)		(149,990	)
Class R		(38,613	)		(35,099	)
Net realized gain:
Institutional		(55,632,148	)		(42,504,851	)
Investor A		(42,009,267	)		(22,577,586	)
Investor C		(348,719	)		(154,148	)
Class K		(1,143,468	)		(523,522	)
Class R		(361,514	)		(194,194	)
Decrease in net assets resulting from distributions to shareholders		(113,636,056	)		(82,080,634	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(163,153,810	)		7,116,508
Net Assets
Total increase (decrease) in net assets		(229,858,659	)		56,836,994
Beginning of year		1,045,027,722			988,190,728
End of year	$	815,169,063		$	1,045,027,722
Distributions in excess of net investment income, end of year	$	(1,206,249	)	$	(338,570	)
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
22	BLACKROCK FUNDS III	DECEMBER 31, 2014

Statements of Changes in Net Assets

	LifePath 2040 Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	11,459,541		$	14,272,075
Net realized gain		84,054,967			73,746,453
Net change in unrealized appreciation/depreciation		(54,209,797	)		45,539,813
Net increase in net assets resulting from operations		41,304,711			133,558,341
Distributions to Shareholders From1
Net investment income:
Institutional		(7,938,976	)		(10,033,258	)
Investor A		(3,937,683	)		(3,932,132	)
Investor C		(13,501	)		(13,996	)
Class K		(110,778	)		(107,619	)
Class R		(15,968	)		(18,190	)
Net realized gain:
Institutional		(55,495,147	)		(39,693,037	)
Investor A		(33,978,812	)		(17,529,239	)
Investor C		(269,943	)		(122,565	)
Class K		(629,230	)		(356,573	)
Class R		(149,272	)		(91,998	)
Decrease in net assets resulting from distributions to shareholders		(102,539,310	)		(71,898,607	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(119,373,132	)		30,368,590
Net Assets
Total increase (decrease) in net assets		(180,607,731	)		92,028,324
Beginning of year		887,387,301			795,358,977
End of year	$	706,779,570		$	887,387,301
Distributions in excess of net investment income, end of year	$	(687,772	)	$	(130,407	)
1   Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	23

Statements of Changes in Net Assets

	LifePath 2050 Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	2,706,534		$	3,658,845
Net realized gain		18,096,514			16,594,775
Net change in unrealized appreciation/depreciation		(12,262,296	)		15,066,645
Net increase in net assets resulting from operations		8,540,752			35,320,265
Distributions to Shareholders From1
Net investment income:
Institutional		(1,788,582	)		(2,749,774	)
Investor A		(928,790	)		(932,887	)
Investor C		(3,293	)		(4,679	)
Class K		(22,890	)		(15,132	)
Class R		(16,004	)		(15,084	)
Net realized gain:
Institutional		(13,592,448	)		(8,808,385	)
Investor A		(8,614,787	)		(3,323,417	)
Investor C		(72,196	)		(28,955	)
Class K		(152,131	)		(42,609	)
Class R		(147,025	)		(59,367	)
Decrease in net assets resulting from distributions to shareholders		(25,338,146	)		(15,980,289	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(32,842,244	)		57,501,027
Net Assets
Total increase (decrease) in net assets		(49,639,638	)		76,841,003
Beginning of year		231,776,063			154,935,060
End of year	$	182,136,425		$	231,776,063
Distributions in excess of net investment income, end of year	$	(135,428	)	$	(82,403	)
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
24	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights LifePath Retirement Portfolio

	Institutional
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	11.72		$	11.80		$	11.39		$	11.55		$	10.80
Net investment income1		0.18			0.16			0.20			0.27			0.23
Net realized and unrealized gain		0.38			0.57			0.77			0.18			0.76
Net increase from investment operations		0.56			0.73			0.97			0.45			0.99
Distributions from:2
Net investment income		(0.19	)		(0.16	)		(0.21	)		(0.26	)		(0.22	)
Net realized gain		(1.02	)		(0.65	)		(0.35	)		(0.35	)		(0.02	)
Total distributions		(1.21	)		(0.81	)		(0.56	)		(0.61	)		(0.24	)
Net asset value, end of year	$	11.07		$	11.72		$	11.80		$	11.39		$	11.55
Total Return3
Based on net asset value		4.75%			6.25%			8.61%			3.96%			9.33%
Ratios to Average Net Assets4
Total expenses		0.75%	5,6		0.76%	5,6		0.78%	5,6		0.77%	5,6		1.11%
Total expenses after fees waived		0.75%	5,6		0.75%	5,6		0.78%	5,6		0.77%	5,6		0.76%
Net investment income		1.52%	5,6		1.34%	5,6		1.70%	5,6		2.27%	5,6		2.10%
Supplemental Data
Net assets, end of year (000)	$	234,280		$	342,615		$	390,150		$	431,982		$	490,419
Portfolio turnover rate of the LifePath Master Portfolio		14%	7		17%	7		4%	8		4%	8		4%	8

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of 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 year 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 0.31%, 0.30%, 0.29% and 0.30% for the years ended December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

⁶  Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.10%, 0.10%, 0.08% and 0.08% for the years ended December 31, 2014, 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 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 December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	25

Financial Highlights (continued) LifePath Retirement Portfolio

	Investor A
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	10.69		$	10.84		$	10.50		$	10.71		$	10.03
Net investment income1		0.14			0.12			0.16			0.22			0.19
Net realized and unrealized gain		0.35			0.51			0.72			0.16			0.71
Net increase from investment operations		0.49			0.63			0.88			0.38			0.90
Distributions from:2
Net investment income		(0.17	)		(0.13	)		(0.19	)		(0.24	)		(0.20	)
Net realized gain		(1.02	)		(0.65	)		(0.35	)		(0.35	)		(0.02	)
Total distributions		(1.19	)		(0.78	)		(0.54	)		(0.59	)		(0.22	)
Net asset value, end of year	$	9.99		$	10.69		$	10.84		$	10.50		$	10.71
Total Return3
Based on net asset value		4.56%			5.94%			8.46%			3.60%			9.12%
Ratios to Average Net Assets4
Total expenses		1.01%	5,6		1.01%	5,6		1.03%	5,6		1.02%	5,6		1.37%
Total expenses after fees waived		1.00%	5,6		1.00%	5,6		1.03%	5,6		1.02%	5,6		1.02%
Net investment income		1.27%	5,6		1.08%	5,6		1.47%	5,6		2.03%	5,6		1.86%
Supplemental Data
Net assets, end of year (000)	$	139,853		$	155,402		$	189,898		$	183,967		$	181,297
Portfolio turnover rate of the LifePath Master Portfolio		14%	7		17%	7		4%	8		4%	8		4%	8

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of 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 year 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 0.33%, 0.30%, 0.29% and 0.30% for the years ended December 31, 2014, 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 0.10%, 0.10%, 0.08% and 0.08% for the years ended December 31, 2014, 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 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 December 31, 2010, respectively.

See Notes to Financial Statements.
26	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights (continued) LifePath Retirement Portfolio

	Investor C
	Year Ended December 31,												Period May 3, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	11.64		$	11.76		$	11.36		$	11.55		$	11.22
Net investment income2		0.07			0.04			0.08			0.17			0.09
Net realized and unrealized gain		0.36			0.56			0.77			0.16			0.37
Net increase from investment operations		0.43			0.60			0.85			0.33			0.46
Distributions from:3
Net investment income		(0.08	)		(0.07	)		(0.10	)		(0.17	)		(0.11	)
Net realized gain		(1.02	)		(0.65	)		(0.35	)		(0.35	)		(0.02	)
Total distributions		(1.10	)		(0.72	)		(0.45	)		(0.52	)		(0.13	)
Net asset value, end of period	$	10.97		$	11.64		$	11.76		$	11.36		$	11.55
Total Return4
Based on net asset value		3.70%			5.12%			7.55%			2.86%			4.22%	5
Ratios to Average Net Assets6
Total expenses		1.76%	7,8		1.77%	7,8		1.78%	7,8		1.78%	7,8		2.11%	9
Total expenses after fees waived		1.75%	7,8		1.76%	7,8		1.78%	7,8		1.78%	7,8		1.77%	9
Net investment income		0.56%	7,8		0.33%	7,8		0.70%	7,8		1.42%	7,8		1.23%	9
Supplemental Data
Net assets, end of period (000)	$	1,295		$	511		$	135		$	55		$	21
Portfolio turnover rate of the LifePath Master Portfolio		14%	10		17%	10		4%	11		4%	11		4%	11

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁵  Aggregate total 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 0.33%, 0.30%, 0.29% and 0.30% for the years ended December 31, 2014, 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%, 0.10%, 0.08% and 0.08% for the years ended December 31, 2014, 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 and December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	27

Financial Highlights (continued) LifePath Retirement Portfolio

	Class K
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	11.69		$	11.78		$	11.37		$	11.54		$	10.78
Net investment income1		0.22			0.20			0.25			0.32			0.28
Net realized and unrealized gain		0.39			0.56			0.77			0.17			0.76
Net increase from investment operations		0.61			0.76			1.02			0.49			1.04
Distributions from:2
Net investment income		(0.23	)		(0.20	)		(0.26	)		(0.31	)		(0.26	)
Net realized gain		(1.02	)		(0.65	)		(0.35	)		(0.35	)		(0.02	)
Total distributions		(1.25	)		(0.85	)		(0.61	)		(0.66	)		(0.28	)
Net asset value, end of year	$	11.05		$	11.69		$	11.78		$	11.37		$	11.54
Total Return3
Based on net asset value		5.24%			6.54%			9.03%			4.27%			9.82%
Ratios to Average Net Assets4
Total expenses		0.40%	5,6		0.40%	5,6		0.43%	5,6		0.44%	5,6		0.76%
Total expenses after fees waived		0.40%	5,6		0.40%	5,6		0.43%	5,6		0.43%	5,6		0.41%
Net investment income		1.86%	5,6		1.67%	5,6		2.07%	5,6		2.69%	5,6		2.49%
Supplemental Data
Net assets, end of year (000)	$	3,019		$	3,675		$	7,378		$	4,309		$	769
Portfolio turnover rate of the LifePath Master Portfolio		14%	7		17%	7		4%	8		4%	8		4%	8

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of 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 year 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 0.33%, 0.30%, 0.30%, and 0.29% for the years ended December 31, 2014, 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 0.10%, 0.10%, 0.08% and 0.08% for the years ended December 31, 2014, 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 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 December 31, 2010, respectively.

See Notes to Financial Statements.
28	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights (concluded) LifePath Retirement Portfolio

	Class R
	Year Ended December 31,												Period May 3, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	11.65		$	11.75		$	11.36		$	11.54		$	11.22
Net investment income2		0.12			0.10			0.17			0.21			0.14
Net realized and unrealized gain		0.38			0.55			0.76			0.17			0.36
Net increase from investment operations		0.50			0.65			0.93			0.38			0.50
Distributions from:3
Net investment income		(0.12	)		(0.10	)		(0.19	)		(0.21	)		(0.16	)
Net realized gain		(1.02	)		(0.65	)		(0.35	)		(0.35	)		(0.02	)
Total distributions		(1.14	)		(0.75	)		(0.54	)		(0.56	)		(0.18	)
Net asset value, end of period	$	11.01		$	11.65		$	11.75		$	11.36		$	11.54
Total Return4
Based on net asset value		4.25%			5.61%			8.26%			3.32%			4.55%	5
Ratios to Average Net Assets6
Total expenses		1.25%	7,8		1.26%	7,8		1.27%	7,8		1.28%	7,8		1.61%	9
Total expenses after fees waived		1.25%	7,8		1.25%	7,8		1.26%	7,8		1.27%	7,8		1.26%	9
Net investment income		0.98%	7,8		0.85%	7,8		1.38%	7,8		1.76%	7,8		1.84%	9
Supplemental Data
Net assets, end of period (000)	$	895		$	2,060		$	2,609		$	41		$	33
Portfolio turnover rate of the LifePath Master Portfolio		14%	10		17%	10		4%	11		4%	11		4%	11

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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 0.31%, 0.30%, 0.32% and 0.29% for the years ended December 31, 2014, 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%, 0.10%, 0.08% and 0.08% for the years ended December 31, 2014, 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 and December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	29

Financial Highlights LifePath 2020 Portfolio

	Institutional
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	16.75		$	16.42		$	15.22		$	15.92		$	14.62
Net investment income1		0.26			0.25			0.29			0.33			0.29
Net realized and unrealized gain (loss)		0.58			1.32			1.38			(0.09	)		1.28
Net increase from investment operations		0.84			1.57			1.67			0.24			1.57
Distributions from:2
Net investment income		(0.26	)		(0.26	)		(0.29	)		(0.33	)		(0.27	)
Net realized gain		(1.68	)		(0.98	)		(0.18	)		(0.61	)		—
Total distributions		(1.94	)		(1.24	)		(0.47	)		(0.94	)		(0.27	)
Net asset value, end of year	$	15.65		$	16.75		$	16.42		$	15.22		$	15.92
Total Return3
Based on net asset value		5.06%			9.67%			10.99%			1.46%			10.90%
Ratios to Average Net Assets4
Total expenses		0.74%	5,6		0.73%	5,6		0.75%	5,6		0.75%	5,6		1.08%
Total expenses after fees waived		0.74%	5,6		0.73%	5,6		0.75%	5,6		0.74%	5,6		0.73%
Net investment income		1.50%	5,6		1.47%	5,6		1.77%	5,6		2.05%	5,6		1.95%
Supplemental Data
Net assets, end of year (000)	$	490,447		$	698,251		$	688,545		$	752,092		$	843,339
Portfolio turnover rate of the LifePath Master Portfolio		21%	7		19%	7		5%	8		5%	8		4%	8

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of 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 year 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 0.34% for the year ended December 31, 2014 and 0.32% for each of 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 0.11%, 0.12%, 0.11% and 0.11% for the years ended December 31, 2014, 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%, 23% and 13% for the years ended December 31, 2012, December 31, 2011 and December 31, 2010, respectively.

See Notes to Financial Statements.
30	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights (continued) LifePath 2020 Portfolio

	Investor A
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	15.77		$	15.53		$	14.43		$	15.14		$	13.93
Net investment income1		0.20			0.19			0.24			0.28			0.24
Net realized and unrealized gain (loss)		0.55			1.25			1.30			(0.09	)		1.21
Net increase from investment operations		0.75			1.44			1.54			0.19			1.45
Distributions from:2
Net investment income		(0.23	)		(0.22	)		(0.26	)		(0.29	)		(0.24	)
Net realized gain		(1.68	)		(0.98	)		(0.18	)		(0.61	)		—
Total distributions		(1.91	)		(1.20	)		(0.44	)		(0.90	)		(0.24	)
Net asset value, end of year	$	14.61		$	15.77		$	15.53		$	14.43		$	15.14
Total Return3
Based on net asset value		4.79%			9.39%			10.67%			1.26%			10.56%
Ratios to Average Net Assets4
Total expenses		0.99%	5,6		0.98%	5,6		1.00%	5,6		1.00%	5,6		1.34%
Total expenses after fees waived		0.98%	5,6		0.98%	5,6		1.00%	5,6		1.00%	5,6		0.99%
Net investment income		1.26%	5,6		1.21%	5,6		1.55%	5,6		1.82%	5,6		1.71%
Supplemental Data
Net assets, end of year (000)	$	367,281		$	390,380		$	410,926		$	401,477		$	376,851
Portfolio turnover rate of the LifePath Master Portfolio		21%	7		19%	7		5%	8		5%	8		4%	8

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of 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 year 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% for the year ended December 31, 2014 and 0.32% for each of 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 0.11%, 0.12%, 0.11% and 0.11% for the years ended December 31, 2014, 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%, 23% and 13% for the years ended December 31, 2012, December 31, 2011 and December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	31

Financial Highlights (continued) LifePath 2020 Portfolio

		Investor C
		Year Ended December 31,												Period May 3, 20101 to December  31, 2010
		2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period		$	16.62		$	16.32		$	15.16		$	15.89		$	15.29
Net investment income2			0.09			0.09			0.14			0.17			0.12
Net realized and unrealized gain (loss)			0.57			1.30			1.36			(0.09	)		0.64
Net increase from investment operations			0.66			1.39			1.50			0.08			0.76
Distributions from:3
Net investment income			(0.11	)		(0.11	)		(0.16	)		(0.20	)		(0.16	)
Net realized gain			(1.68	)		(0.98	)		(0.18	)		(0.61	)		—
Total distributions			(1.79	)		(1.09	)		(0.34	)		(0.81	)		(0.16	)
Net asset value, end of period		$	15.49		$	16.62		$	16.32		$	15.16		$	15.89
Total Return4
Based on net asset value			3.98%			8.58%			9.87%			0.47%			5.03%	5
Ratios to Average Net Assets6
Total expenses			1.74%	7,8		1.73%	7,8		1.75%	7,8		1.75%	7,8		2.09%	9
Total expenses after fees waived			1.73%	7,8		1.73%	7,8		1.75%	7,8		1.75%	7,8		1.74%	9
Net investment income			0.54%	7,8		0.51%	7,8		0.87%	7,8		1.05%	7,8		1.23%	9
Supplemental Data
Net assets, end of period (000)	��	$	2,981		$	2,193		$	1,262		$	301		$	116
Portfolio turnover rate of the LifePath Master Portfolio			21%	10		19%	10		5%	11		5%	11		4%	11

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁵  Aggregate total 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 0.36% for the year ended December 31, 2014 and 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 0.11%, 0.12%, 0.11% and 0.11% for the years ended December 31, 2014, 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 and December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
32	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights (continued) LifePath 2020 Portfolio

	Class K
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	16.73		$	16.39		$	15.20		$	15.91		$	14.61
Net investment income1		0.32			0.30			0.35			0.40			0.34
Net realized and unrealized gain (loss)		0.57			1.33			1.37			(0.12	)		1.28
Net increase from investment operations		0.89			1.63			1.72			0.28			1.62
Distributions from:2
Net investment income		(0.33	)		(0.31	)		(0.35	)		(0.38	)		(0.32	)
Net realized gain		(1.68	)		(0.98	)		(0.18	)		(0.61	)		—
Total distributions		(2.01	)		(1.29	)		(0.53	)		(0.99	)		(0.32	)
Net asset value, end of year	$	15.61		$	16.73		$	16.39		$	15.20		$	15.91
Total Return3
Based on net asset value		5.35%			10.11%			11.36%			1.78%			11.28%
Ratios to Average Net Assets4
Total expenses		0.39%	5,6		0.38%	5,6		0.40%	5,6		0.40%	5,6		0.74%
Total expenses after fees waived		0.38%	5,6		0.37%	5,6		0.40%	5,6		0.40%	5,6		0.39%
Net investment income		1.90%	5,6		1.77%	5,6		2.18%	5,6		2.47%	5,6		2.29%
Supplemental Data
Net assets, end of year (000)	$	9,545		$	6,500		$	11,609		$	6,224		$	2,485
Portfolio turnover rate of the LifePath Master Portfolio		21%	7		19%	7		5%	8		5%	8		4%	8

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of 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 year 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% for the year ended December 31, 2014 and 0.32% for each of 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 0.11%, 0.12%, 0.11% and 0.11% for the years ended December 31, 2014, 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%, 23% and 13% for the years ended December 31, 2012, December 31, 2011 and December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	33

Financial Highlights (concluded) LifePath 2020 Portfolio

	Class R
	Year Ended December 31,												Period May 3, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	16.70		$	16.36		$	15.20		$	15.88		$	15.29
Net investment income2		0.17			0.16			0.25			0.24			0.23
Net realized and unrealized gain (loss)		0.58			1.33			1.32			(0.07	)		0.57
Net increase from investment operations		0.75			1.49			1.57			0.17			0.80
Distributions from:3
Net investment income		(0.18	)		(0.17	)		(0.23	)		(0.24	)		(0.21	)
Net realized gain		(1.68	)		(0.98	)		(0.18	)		(0.61	)		—
Total distributions		(1.86	)		(1.15	)		(0.41	)		(0.85	)		(0.21	)
Net asset value, end of period	$	15.59		$	16.70		$	16.36		$	15.20		$	15.88
Total Return4
Based on net asset value		4.49%			9.20%			10.36%			1.06%			5.34%	5
Ratios to Average Net Assets6
Total expenses		1.24%	7,8		1.23%	7,8		1.25%	7,8		1.25%	7,8		1.58%	9
Total expenses after fees waived		1.23%	7,8		1.23%	7,8		1.25%	7,8		1.25%	7,8		1.23%	9
Net investment income		1.01%	7,8		0.94%	7,8		1.53%	7,8		1.51%	7,8		2.29%	9
Supplemental Data
Net assets, end of period (000)	$	2,580		$	3,167		$	2,862		$	161		$	81
Portfolio turnover rate of the LifePath Master Portfolio		21%	10		19%	10		5%	11		5%	11		4%	11

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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 0.35%, 0.32%, 0.33% and 0.32% for the years ended December 31, 2014, 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 0.11%, 0.12%, 0.11% and 0.11% for the years ended December 31, 2014, 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 and December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
34	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights LifePath 2030 Portfolio

	Institutional
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	16.01		$	15.25		$	14.11		$	14.63		$	13.31
Net investment income1		0.24			0.26			0.28			0.28			0.25
Net realized and unrealized gain (loss)		0.61			1.80			1.56			(0.37	)		1.31
Net increase (decrease) from investment operations		0.85			2.06			1.84			(0.09	)		1.56
Distributions from:2
Net investment income		(0.26	)		(0.26	)		(0.28	)		(0.27	)		(0.24	)
Net realized gain		(1.89	)		(1.04	)		(0.42	)		(0.16	)		—
Total distributions		(2.15	)		(1.30	)		(0.70	)		(0.43	)		(0.24	)
Net asset value, end of year	$	14.71		$	16.01		$	15.25		$	14.11		$	14.63
Total Return3
Based on net asset value		5.32%			13.66%			13.09%			(0.63)%			11.86%
Ratios to Average Net Assets4
Total expenses		0.71%	5,6		0.70%	5,6		0.73%	5,6		0.73%	5,6		1.07%
Total expenses after fees waived		0.71%	5,6		0.70%	5,6		0.73%	5,6		0.72%	5,6		0.70%
Net investment income		1.50%	5,6		1.62%	5,6		1.84%	5,6		1.88%	5,6		1.85%
Supplemental Data
Net assets, end of year (000)	$	449,354		$	674,558		$	630,131		$	642,867		$	696,817
Portfolio turnover rate of the LifePath Master Portfolio		33%	7		22%	7		5%	8		7%	8		3%	8

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of 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 year 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 0.37%, 0.33%, 0.34% and 0.34% for the years ended December 31, 2014, 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 0.14%, 0.15%, 0.13% and 0.13% for the years ended December 31, 2014, 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 16%, 20% and 10% for the years ended December 31, 2012, December 31, 2011 and December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	35

Financial Highlights (continued) LifePath 2030 Portfolio

	Investor A
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	15.62		$	14.90		$	13.81		$	14.33		$	13.05
Net investment income1		0.20			0.21			0.24			0.24			0.21
Net realized and unrealized gain (loss)		0.58			1.77			1.52			(0.36	)		1.28
Net increase (decrease) from investment operations		0.78			1.98			1.76			(0.12	)		1.49
Distributions from:2
Net investment income		(0.23	)		(0.22	)		(0.25	)		(0.24	)		(0.21	)
Net realized gain		(1.89	)		(1.04	)		(0.42	)		(0.16	)		—
Total distributions		(2.12	)		(1.26	)		(0.67	)		(0.40	)		(0.21	)
Net asset value, end of year	$	14.28		$	15.62		$	14.90		$	13.81		$	14.33
Total Return3
Based on net asset value		4.98%			13.44%			12.75%			(0.87)%			11.53%
Ratios to Average Net Assets4
Total expenses		0.96%	5,6		0.95%	5,6		0.98%	5,6		0.98%	5,6		1.32%
Total expenses after fees waived		0.96%	5,6		0.95%	5,6		0.98%	5,6		0.97%	5,6		0.96%
Net investment income		1.28%	5,6		1.36%	5,6		1.62%	5,6		1.65%	5,6		1.60%
Supplemental Data
Net assets, end of year (000)	$	350,201		$	356,117		$	343,885		$	339,249		$	307,189
Portfolio turnover rate of the LifePath Master Portfolio		33%	7		22%	7		5%	8		7%	8		3%	8

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of 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 year 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 0.37%, 0.33%, 0.34% and 0.34% for the years ended December 31, 2014, 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 0.14%, 0.15%, 0.13% and 0.13% for the years ended December 31, 2014, 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 16%, 20% and 10% for the years ended December 31, 2012, December 31, 2011 and December 31, 2010, respectively.

See Notes to Financial Statements.
36	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights (continued) LifePath 2030 Portfolio

	Investor C
	Year Ended December 31,												Period May 3, 20101 to December 31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	15.85		$	15.13		$	14.05		$	14.62		$	13.97
Net investment income2		0.09			0.13			0.16			0.14			0.10
Net realized and unrealized gain (loss)		0.58			1.76			1.51			(0.38	)		0.67
Net increase (decrease) from investment operations		0.67			1.89			1.67			(0.24	)		0.77
Distributions from:3
Net investment income		(0.11	)		(0.13	)		(0.17	)		(0.17	)		(0.12	)
Net realized gain		(1.89	)		(1.04	)		(0.42	)		(0.16	)		—
Total distributions		(2.00	)		(1.17	)		(0.59	)		(0.33	)		(0.12	)
Net asset value, end of period	$	14.52		$	15.85		$	15.13		$	14.05		$	14.62
Total Return4
Based on net asset value		4.23%			12.59%			11.92%			(1.63)%			5.64%	5
Ratios to Average Net Assets6
Total expenses		1.71%	7,8		1.71%	7,8		1.72%	7,8		1.74%	7,8		2.07%	9
Total expenses after fees waived		1.71%	7,8		1.71%	7,8		1.72%	7,8		1.74%	7,8		1.71%	9
Net investment income		0.55%	7,8		0.79%	7,8		1.05%	7,8		1.01%	7,8		1.09%	9
Supplemental Data
Net assets, end of period (000)	$	3,053		$	2,531		$	1,010		$	154		$	21
Portfolio turnover rate of the LifePath Master Portfolio		33%	10		22%	10		5%	11		7%	11		3%	11

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁵  Aggregate total 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 0.38%, 0.34%, 0.35% and 0.34% for the years ended December 31, 2014, 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 0.14%, 0.15%, 0.13% and 0.13% for the years ended December 31, 2014, 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 and December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	37

Financial Highlights (continued) LifePath 2030 Portfolio

	Class K
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	16.01		$	15.25		$	14.12		$	14.63		$	13.30
Net investment income1		0.31			0.31			0.34			0.35			0.29
Net realized and unrealized gain (loss)		0.60			1.81			1.55			(0.37	)		1.32
Net increase (decrease) from investment operations		0.91			2.12			1.89			(0.02	)		1.61
Distributions from:2
Net investment income		(0.33	)		(0.32	)		(0.34	)		(0.33	)		(0.28	)
Net realized gain		(1.89	)		(1.04	)		(0.42	)		(0.16	)		—
Total distributions		(2.22	)		(1.36	)		(0.76	)		(0.49	)		(0.28	)
Net asset value, end of year	$	14.70		$	16.01		$	15.25		$	14.12		$	14.63
Total Return3
Based on net asset value		5.66%			14.05%			13.43%			(0.20	)%		12.32%
Ratios to Average Net Assets4
Total expenses		0.36%	5,6		0.35%	5,6		0.38%	5,6		0.38%	5,6		0.72%
Total expenses after fees waived		0.36%	5,6		0.35%	5,6		0.38%	5,6		0.38%	5,6		0.35%
Net investment income		1.89%	5,6		1.95%	5,6		2.26%	5,6		2.41%	5,6		2.17%
Supplemental Data
Net assets, end of year (000)	$	9,518		$	8,666		$	11,077		$	6,448		$	1,849
Portfolio turnover rate of the LifePath Master Portfolio		33%	7		22%	7		5%	8		7%	8		3%	8

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of 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 year 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%, 0.34%, 0.35% and 0.34% for the years ended December 31, 2014, 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 0.14%, 0.15%, 0.13% and 0.13% for the years ended December 31, 2014, 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 16%, 20% and 10% for the years ended December 31, 2012, December 31, 2011 and December 31, 2010, respectively.

See Notes to Financial Statements.
38	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights (concluded) LifePath 2030 Portfolio

	Class R
	Year Ended December 31,												Period May 3, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	15.92		$	15.17		$	14.08		$	14.60		$	13.97
Net investment income2		0.17			0.18			0.28			0.20			0.22
Net realized and unrealized gain (loss)		0.59			1.80			1.47			(0.36	)		0.60
Net increase (decrease) from investment operations		0.76			1.98			1.75			(0.16	)		0.82
Distributions from:3
Net investment income		(0.19	)		(0.19	)		(0.24	)		(0.20	)		(0.19	)
Net realized gain		(1.89	)		(1.04	)		(0.42	)		(0.16	)		—
Total distributions		(2.08	)		(1.23	)		(0.66	)		(0.36	)		(0.19	)
Net asset value, end of period	$	14.60		$	15.92		$	15.17		$	14.08		$	14.60
Total Return4
Based on net asset value		4.73%			13.14%			12.48%			(1.12	)%		5.96%	5
Ratios to Average Net Assets6
Total expenses		1.21%	7,8		1.21%	7,8		1.22%	7,8		1.23%	7,8		1.56%	9
Total expenses after fees waived		1.21%	7,8		1.21%	7,8		1.22%	7,8		1.23%	7,8		1.20%	9
Net investment income		1.02%	7,8		1.15%	7,8		1.84%	7,8		1.41%	7,8		2.39%	9
Supplemental Data
Net assets, end of period (000)	$	3,044		$	3,155		$	2,088		$	188		$	75
Portfolio turnover rate of the LifePath Master Portfolio		33%	10		22%	10		5%	11		7%	11		3%	11

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.34%, 0.35% and 0.34% for the years ended December 31, 2014, 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 0.14%, 0.15%, 0.13% and 0.13% for the years ended December 31, 2014, 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 and December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	39

Financial Highlights LifePath 2040 Portfolio

	Institutional
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	20.06		$	18.62		$	16.98		$	17.78		$	16.04
Net investment income1		0.31			0.35			0.35			0.31			0.28
Net realized and unrealized gain (loss)		0.79			2.77			2.14			(0.73	)		1.73
Net increase (decrease) from investment operations		1.10			3.12			2.49			(0.42	)		2.01
Distributions from:2
Net investment income		(0.32	)		(0.34	)		(0.36	)		(0.30	)		(0.27	)
Net realized gain		(2.47	)		(1.34	)		(0.49	)		(0.08	)		—
Total distributions		(2.79	)		(1.68	)		(0.85	)		(0.38	)		(0.27	)
Net asset value, end of year	$	18.37		$	20.06		$	18.62		$	16.98		$	17.78
Total Return3
Based on net asset value		5.48%			16.92%			14.73%			(2.38)%			12.71%
Ratios to Average Net Assets4
Total expenses		0.69%	5,6		0.69%	5,6		0.71%	5,6		0.71%	5,6		1.06%
Total expenses after fees waived		0.69%	5,6		0.68%	5,6		0.71%	5,6		0.70%	5,6		0.69%
Net investment income		1.51%	5,6		1.75%	5,6		1.91%	5,6		1.73%	5,6		1.75%
Supplemental Data
Net assets, end of year (000)	$	434,049		$	615,699		$	536,902		$	528,655		$	556,626
Portfolio turnover rate of the LifePath Master Portfolio		42%	7		26%	7		4%	8		8%	8		4%	8

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of 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 year 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 0.39%, 0.35%, 0.36% and 0.35% for the years ended December 31, 2014, 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 0.16%, 0.17%, 0.15% and 0.15% for the years ended December 31, 2014, 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 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 December 31, 2010, respectively.

See Notes to Financial Statements.
40	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights (continued) LifePath 2040 Portfolio

	Investor A
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	18.98		$	17.69		$	16.18		$	16.97		$	15.33
Net investment income1		0.25			0.28			0.30			0.25			0.23
Net realized and unrealized gain (loss)		0.75			2.64			2.02			(0.70	)		1.65
Net increase (decrease) from investment operations		1.00			2.92			2.32			(0.45	)		1.88
Distributions from:2
Net investment income		(0.29	)		(0.29	)		(0.32	)		(0.26	)		(0.24	)
Net realized gain		(2.47	)		(1.34	)		(0.49	)		(0.08	)		—
Total distributions		(2.76	)		(1.63	)		(0.81	)		(0.34	)		(0.24	)
Net asset value, end of year	$	17.22		$	18.98		$	17.69		$	16.18		$	16.97
Total Return3
Based on net asset value		5.23%			16.70%			14.41%			(2.65	)%		12.40%
Ratios to Average Net Assets4
Total expenses		0.94%	5,6		0.94%	5,6		0.96%	5,6		0.96%	5,6		1.31%
Total expenses after fees waived		0.94%	5,6		0.93%	5,6		0.96%	5,6		0.95%	5,6		0.94%
Net investment income		1.30%	5,6		1.48%	5,6		1.69%	5,6		1.50%	5,6		1.50%
Supplemental Data
Net assets, end of year (000)	$	264,312		$	262,573		$	247,317		$	233,427		$	224,164
Portfolio turnover rate of the LifePath Master Portfolio		42%	7		26%	7		4%	8		8%	8		4%	8

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of 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 year 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 0.40%, 0.35%, 0.36% and 0.35% for the years ended December 31, 2014, 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 0.16%, 0.17%, 0.15% and 0.15% for the years ended December 31, 2014, 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 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 December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	41

Financial Highlights (continued) LifePath 2040 Portfolio

	Investor C
	Year Ended December 31,												Period May 3, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	19.89		$	18.49		$	16.92		$	17.77		$	16.89
Net investment income2		0.11			0.17			0.21			0.13			0.12
Net realized and unrealized gain (loss)		0.79			2.73			2.08			(0.73	)		0.90
Net increase (decrease) from investment operations		0.90			2.90			2.29			(0.60	)		1.02
Distributions from:3
Net investment income		(0.13	)		(0.16	)		(0.23	)		(0.17	)		(0.14	)
Net realized gain		(2.47	)		(1.34	)		(0.49	)		(0.08	)		—
Total distributions		(2.60	)		(1.50	)		(0.72	)		(0.25	)		(0.14	)
Net asset value, end of period	$	18.19		$	19.89		$	18.49		$	16.92		$	17.77
Total Return4
Based on net asset value		4.49%			15.80%			13.59%			(3.39	)%		6.15%	5
Ratios to Average Net Assets6
Total expenses		1.69%	7,8		1.69%	7,8		1.71%	7,8		1.72%	7,8		2.06%	9
Total expenses after fees waived		1.69%	7,8		1.69%	7,8		1.71%	7,8		1.71%	7,8		1.69%	9
Net investment income		0.55%	7,8		0.85%	7,8		1.12%	7,8		0.72%	7,8		1.11%	9
Supplemental Data
Net assets, end of period (000)	$	2,277		$	1,944		$	1,185		$	98		$	21
Portfolio turnover rate of the LifePath Master Portfolio		42%	10		26%	10		4%	11		8%	11		4%	11

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁵  Aggregate total 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 0.41%, 0.35%, 0.36% and 0.35% for the years ended December 31, 2014, 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 0.16%, 0.17%, 0.15% and 0.15% for the years ended December 31, 2014, 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 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 and December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
42	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights (continued) LifePath 2040 Portfolio

	Class K
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	20.16		$	18.69		$	17.05		$	17.84		$	16.03
Net investment income1		0.39			0.41			0.44			0.46			0.39
Net realized and unrealized gain (loss)		0.79			2.81			2.12			(0.80	)		1.70
Net increase (decrease) from investment operations		1.18			3.22			2.56			(0.34	)		2.09
Distributions from:2
Net investment income		(0.40	)		(0.41	)		(0.43	)		(0.37	)		(0.28	)
Net realized gain		(2.47	)		(1.34	)		(0.49	)		(0.08	)		—
Total distributions		(2.87	)		(1.75	)		(0.92	)		(0.45	)		(0.28	)
Net asset value, end of year	$	18.47		$	20.16		$	18.69		$	17.05		$	17.84
Total Return3
Based on net asset value		5.85%			17.41%			15.08%			(1.95	)%		13.18%
Ratios to Average Net Assets4
Total expenses		0.34%	5,6		0.33%	5,6		0.36%	5,6		0.37%	5,6		0.70%
Total expenses after fees waived		0.34%	5,6		0.33%	5,6		0.36%	5,6		0.36%	5,6		0.33%
Net investment income		1.90%	5,6		2.05%	5,6		2.36%	5,6		2.60%	5,6		2.34%
Supplemental Data
Net assets, end of year (000)	$	4,980		$	5,733		$	8,038		$	4,749		$	144
Portfolio turnover rate of the LifePath Master Portfolio		42%	7		26%	7		4%	8		8%	8		4%	8

¹  Based on average shares outstanding.

² Distributions for annual periods determined in accordance with federal income tax regulations.

³ Where applicable, assumes the reinvestment of 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 year 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 0.40%, 0.35%, 0.36% and 0.35% for the years ended December 31, 2014, 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 0.16%, 0.17%, 0.15% and 0.15% for the years ended December 31, 2014, 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 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 December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	43

Financial Highlights (concluded) LifePath 2040 Portfolio

	Class R
	Year Ended December 31,												Period May 3, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	19.98		$	18.54		$	16.93		$	17.74		$	16.89
Net investment income2		0.20			0.22			0.34			0.23			0.34
Net realized and unrealized gain (loss)		0.80			2.78			2.05			(0.74	)		0.73
Net increase (decrease) from investment operations		1.00			3.00			2.39			(0.51	)		1.07
Distributions from:3
Net investment income		(0.22	)		(0.22	)		(0.29	)		(0.22	)		(0.22	)
Net realized gain		(2.47	)		(1.34	)		(0.49	)		(0.08	)		—
Total distributions		(2.69	)		(1.56	)		(0.78	)		(0.30	)		(0.22	)
Net asset value, end of period	$	18.29		$	19.98		$	18.54		$	16.93		$	17.74
Total Return4
Based on net asset value		4.96%			16.33%			14.19%			(2.88)%			6.47%	5
Ratios to Average Net Assets6
Total expenses		1.19%	7,8		1.19%	7,8		1.21%	7,8		1.22%	7,8		1.55%	9
Total expenses after fees waived		1.19%	7,8		1.18%	7,8		1.21%	7,8		1.22%	7,8		1.19%	9
Net investment income		1.01%	7,8		1.12%	7,8		1.83%	7,8		1.35%	7,8		3.13%	9
Supplemental Data
Net assets, end of period (000)	$	1,162		$	1,438		$	1,917		$	460		$	126
Portfolio turnover rate of the LifePath Master Portfolio		42%	10		26%	10		4%	11		8%	11		4%	11

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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 0.39%, 0.35%, 0.37% and 0.35% for the years ended December 31, 2014, 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 0.16%, 0.17%, 0.15% and 0.15% for the years ended December 31, 2014, 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 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 and December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
44	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights LifePath 2050 Portfolio

	Institutional
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	21.37		$	19.18		$	17.16		$	18.58		$	16.81
Net investment income1		0.33			0.41			0.37			0.31			0.31
Net realized and unrealized gain (loss)		0.89			3.36			2.37			(0.99	)		1.91
Net increase (decrease) from investment operations		1.22			3.77			2.74			(0.68	)		2.22
Distributions from:2
Net investment income		(0.34	)		(0.39	)		(0.37	)		(0.29	)		(0.28	)
Net realized gain		(2.66	)		(1.19	)		(0.35	)		(0.45	)		(0.17	)
Total distributions		(3.00	)		(1.58	)		(0.72	)		(0.74	)		(0.45	)
Net asset value, end of year	$	19.59		$	21.37		$	19.18		$	17.16		$	18.58
Total Return3
Based on net asset value		5.73%			19.82%			16.05%			(3.78)%			13.43%
Ratios to Average Net Assets4
Total expenses		0.68%	5,6		0.71%	5,6		0.72%	5,6		0.71%	5,6		1.09%
Total expenses after fees waived		0.67%	5,6		0.70%	5,6		0.71%	5,6		0.68%	5,6		0.67%
Net investment income		1.51%	5,6		1.97%	5,6		1.99%	5,6		1.69%	5,6		1.83%
Supplemental Data
Net assets, end of year (000)	$	108,741		$	166,385		$	106,813		$	70,555		$	50,613
Portfolio turnover rate of the LifePath Master Portfolio		48%	7		28%	7		5%	8		13%	8		5%	8

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of 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 year 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 0.41%, 0.36%, 0.39%, and 0.40% for the years ended December 31, 2014, 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%, 0.15% and 0.17% for the year ended December 31, 2014, 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 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 December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	45

Financial Highlights (continued) LifePath 2050 Portfolio

	Investor A
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	21.35		$	19.17		$	17.15		$	18.58		$	16.82
Net investment income1		0.28			0.35			0.33			0.26			0.28
Net realized and unrealized gain (loss)		0.89			3.36			2.36			(0.99	)		1.90
Net increase (decrease) from investment operations		1.17			3.71			2.69			(0.73	)		2.18
Distributions from:2
Net investment income		(0.30	)		(0.34	)		(0.32	)		(0.25	)		(0.25	)
Net realized gain		(2.66	)		(1.19	)		(0.35	)		(0.45	)		(0.17	)
Total distributions		(2.96	)		(1.53	)		(0.67	)		(0.70	)		(0.42	)
Net asset value, end of year	$	19.56		$	21.35		$	19.17		$	17.15		$	18.58
Total Return3
Based on net asset value		5.47%			19.48%			15.80%			(4.06)%			13.14%
Ratios to Average Net Assets4
Total expenses		0.93%	5,6		0.96%	5,6		0.97%	5,6		0.96%	5,6		1.34%
Total expenses after fees waived		0.92%	5,6		0.95%	5,6		0.96%	5,6		0.94%	5,6		0.92%
Net investment income		1.30%	5,6		1.67%	5,6		1.77%	5,6		1.44%	5,6		1.67%
Supplemental Data
Net assets, end of year (000)	$	70,442		$	62,891		$	46,189		$	32,617		$	18,809
Portfolio turnover rate of the LifePath Master Portfolio		48%	7		28%	7		5%	8		13%	8		5%	8

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of 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 year 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 0.42%, 0.36%, 0.39% and 0.40% for the years ended December 31, 2014, 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%, 0.15% and 0.17% for the years ended December 31, 2014, 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 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 December 31, 2010, respectively.

See Notes to Financial Statements.
46	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights (continued) LifePath 2050 Portfolio

	Investor C
	Year Ended December 31,												Period May 3, 20101 to December  31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	21.23		$	19.10		$	17.10		$	18.57		$	17.75
Net investment income2		0.12			0.24			0.17			0.12			0.12
Net realized and unrealized gain (loss)		0.87			3.30			2.37			(0.99	)		1.02
Net increase (decrease) from investment operations		0.99			3.54			2.54			(0.87	)		1.14
Distributions from:3
Net investment income		(0.13	)		(0.22	)		(0.19	)		(0.15	)		(0.15	)
Net realized gain		(2.66	)		(1.19	)		(0.35	)		(0.45	)		(0.17	)
Total distributions		(2.79	)		(1.41	)		(0.54	)		(0.60	)		(0.32	)
Net asset value, end of period	$	19.43		$	21.23		$	19.10		$	17.10		$	18.57
Total Return4
Based on net asset value		4.67%			18.60%			14.93%			(4.76)%			6.55%	5
Ratios to Average Net Assets6
Total expenses		1.69%	7,8		1.72%	7,8		1.72%	7,8		1.71%	7,8		2.07%	9
Total expenses after fees waived		1.68%	7,8		1.71%	7,8		1.70%	7,8		1.69%	7,8		1.64%	9
Net investment income		0.55%	7,8		1.14%	7,8		0.91%	7,8		0.63%	7,8		1.04%	9
Supplemental Data
Net assets, end of period (000)	$	605		$	553		$	118		$	39		$	21
Portfolio turnover rate of the LifePath Master Portfolio		48%	10		28%	10		5%	11		13%	11		5%	11

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁵  Aggregate total 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 0.42%, 0.36%, 0.39% and 0.40% for the years ended December 31, 2014, 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%, 0.15% and 0.17% for the years ended December 31, 2014, 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 and December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	47

Financial Highlights (continued) LifePath 2050 Portfolio

	Class K
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	21.44		$	19.24		$	17.20		$	18.63		$	16.85
Net investment income1		0.42			0.46			0.45			0.47			0.37
Net realized and unrealized gain (loss)		0.89			3.39			2.37			(1.10	)		1.91
Net increase (decrease) from investment operations		1.31			3.85			2.82			(0.63	)		2.28
Distributions from:2
Net investment income		(0.43	)		(0.46	)		(0.43	)		(0.35	)		(0.33	)
Net realized gain		(2.66	)		(1.19	)		(0.35	)		(0.45	)		(0.17	)
Total distributions		(3.09	)		(1.65	)		(0.78	)		(0.80	)		(0.50	)
Net asset value, end of year	$	19.66		$	21.44		$	19.24		$	17.20		$	18.63
Total Return3
Based on net asset value		6.12%			20.19%			16.53%			(3.48)%			13.79%
Ratios to Average Net Assets4
Total expenses		0.33%	5,6		0.36%	5,6		0.37%	5,6		0.36%	5,6		0.76%
Total expenses after fees waived		0.32%	5,6		0.35%	5,6		0.36%	5,6		0.34%	5,6		0.33%
Net investment income		1.95%	5,6		2.22%	5,6		2.38%	5,6		2.56%	5,6		2.19%
Supplemental Data
Net assets, end of year (000)	$	1,257		$	821		$	1,018		$	625		$	86
Portfolio turnover rate of the LifePath Master Portfolio		48%	7		28%	7		5%	8		13%	8		5%	8

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of distributions.

⁴  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 year 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 0.43%, 0.36%, 0.39%, and 0.40% for the years ended December 31, 2014, 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%, 0.15% and 0.17% for the years ended December 31, 2014, 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 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 December 31, 2010, respectively.

See Notes to Financial Statements.
48	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights (concluded) LifePath 2050 Portfolio

	Class R
	Year Ended December 31,												Period May 3, 20101 to December 31, 2010
	2014			2013			2012			2011
Per Share Operating Performance
Net asset value, beginning of period	$	21.31		$	19.14		$	17.13		$	18.56		$	17.75
Net investment income2		0.22			0.30			0.37			0.22			0.22
Net realized and unrealized gain (loss)		0.89			3.35			2.29			(1.00	)		0.97
Net increase (decrease) from investment operations		1.11			3.65			2.66			(0.78	)		1.19
Distributions from:3
Net investment income		(0.23	)		(0.29	)		(0.30	)		(0.20	)		(0.21	)
Net realized gain		(2.66	)		(1.19	)		(0.35	)		(0.45	)		(0.17	)
Total distributions		(2.89	)		(1.48	)		(0.65	)		(0.65	)		(0.38	)
Net asset value, end of period	$	19.53		$	21.31		$	19.14		$	17.13		$	18.56
Total Return4
Based on net asset value		5.21%			19.19%			15.59%			(4.29)%			6.87%	5
Ratios to Average Net Assets6
Total expenses		1.18%	7,8		1.21%	7,8		1.22%	7,8		1.21%	7,8		1.57%	9
Total expenses after fees waived		1.17%	7,8		1.20%	7,8		1.20%	7,8		1.19%	7,8		1.16%	9
Net investment income		1.01%	7,8		1.42%	7,8		1.98%	7,8		1.18%	7,8		1.99%	9
Supplemental Data
Net assets, end of period (000)	$	1,091		$	1,126		$	796		$	53		$	40
Portfolio turnover rate of the LifePath Master Portfolio		48%	10		28%	10		5%	11		13%	11		5%	11

¹ Commencement of operations.

² Based on average shares outstanding.

³ Distributions for annual periods determined in accordance with federal income tax regulations.

⁴ Where applicable, assumes the reinvestment of distributions.

⁵ Aggregate total 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 0.40%, 0.36%, 0.39% and 0.40% for the years ended December 31, 2014, 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%, 0.15% and 0.17% for the years ended December 31, 2014, 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 and December 31, 2011 and the period ended December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	49

Notes to Financial Statements

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 (23.9%, 30.4%, 30.2%, 33.9% and 41.5% for LifePath Retirement Portfolio, LifePath 2020 Portfolio, LifePath 2030 Portfolio, LifePath 2040 Portfolio and LifePath 2050 Portfolio, respectively, as of December 31, 2014). 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. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that each bear certain expenses and conversion as outlined below. Institutional and Class K Shares are sold only to certain eligible investors. Investor A and Investor C Shares are generally available through financial intermediaries. Class R Shares are available only to certain employer-sponsored retirement plans. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures. For distribution and service fee breakdown see Note 3.

Share Name	Initial Sales Charge		CDSC		Conversion
Institutional, Class K and Class R		No		No		None
Investor A		Yes		No		None
Investor C		No		Yes		None

2. Significant Accounting Policies:

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

Valuation: The LifePath Portfolios’ investments are valued at fair value as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the 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 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.

Distributions: Distributions 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 distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.

Other: Expenses directly related to a LifePath Portfolio or its classes are charged to that LifePath Portfolio or the applicable class. Other operating expenses shared by several funds are prorated 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 prorated 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”).

50 BLACKROCK FUNDS III DECEMBER 31, 2014

Notes to Financial Statements (continued)

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 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 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, 2024. These amounts are shown as 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, 2014, affiliates earned underwriting discounts, direct commissions and/or dealer concessions on sales of each LifePath Portfolio’s Investor A Shares as follows:

	LifePath Retirement Portfolio		LifePath 2020 Portfolio		LifePath 2030 Portfolio		LifePath 2040 Portfolio		LifePath 2050 Portfolio
Investor A	$	1,103	$	1,079	$	1,845	$	735	$	732

For the year ended December 31, 2014, affiliates received CDSCs as follows:

	LifePath Retirement Portfolio		LifePath 2020 Portfolio		LifePath 2030 Portfolio		LifePath 2040 Portfolio		LifePath 2050 Portfolio
Investor C	$	169	$	62	$	8	$	54	$	82

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

4. Income Tax Information:

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 U.S. 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 U.S. federal tax returns remains open for each of the four years ended December 31, 2014. 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.

BLACKROCK FUNDS III DECEMBER 31, 2014 51

Notes to Financial Statements (continued)

The tax character of distributions paid were as follows:

		LifePath Retirement Portfolio		LifePath 2020 Portfolio		LifePath 2030 Portfolio		LifePath 2040 Portfolio		LifePath 2050 Portfolio
Ordinary Income	12/31/14	$	14,474,026	$	33,847,124	$	34,515,112	$	30,444,900	$	7,024,025
	12/31/13	$	15,218,241	$	36,244,798	$	36,948,875	$	33,340,833	$	7,647,321
Long-term capital gains	12/31/14	$	26,917,322	$	72,702,832	$	79,120,944	$	72,094,410	$	18,314,121
	12/31/13	$	20,215,894	$	44,261,605	$	45,131,759	$	38,557,774	$	8,332,968
Total	12/31/14	$	41,391,348	$	106,549,956	$	113,636,056	$	102,539,310	$	25,338,146
	12/31/13	$	35,434,135	$	80,506,403	$	82,080,634	$	71,898,607	$	15,980,289

As of December 31, 2014, the tax components of accumulated net earnings was as follows:

	LifePath Retirement Portfolio			LifePath 2020 Portfolio		LifePath 2030 Portfolio		LifePath 2040 Portfolio		LifePath 2050 Portfolio
Undistributed ordinary income		$	2,188,893	$	4,440,550	$	3,442,318	$	2,332,917	$	366,301
Undistributed long-term capital gains			1,788,731		4,525,156		5,177,409		4,804,453		1,099,126
Net unrealized gains1			35,005,689		87,426,479		56,059,981		86,968,850		12,504,428
Total		$	38,983,313	$	96,392,185	$	64,679,708	$	94,106,220	$	13,969,855

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, 2014						Year Ended December 31, 2013
LifePath Retirement Portfolio	Shares			Amount			Shares			Amount
Institutional
Shares sold		3,901,030		$	46,463,867			5,754,942		$	69,133,616
Shares issued to shareholders in reinvestment of distributions		2,226,827			25,197,554			2,025,766			23,782,749
Shares redeemed		(14,214,774	)		(168,660,124	)		(11,587,751	)		(138,829,774	)
Net decrease		(8,086,917	)	$	(96,998,703	)		(3,807,043	)	$	(45,913,409	)
Investor A
Shares sold		2,530,337		$	27,559,878			2,099,976		$	23,169,542
Shares issued to shareholders in reinvestment of distributions		1,531,174			15,615,397			1,047,063			11,224,034
Shares redeemed		(4,600,164	)		(49,794,241	)		(6,125,072	)		(67,169,112	)
Net decrease		(538,653	)	$	(6,618,966	)		(2,978,033	)	$	(32,775,536	)
Investor C
Shares sold		93,516		$	1,101,560			30,761		$	366,522
Shares issued to shareholders in reinvestment of distributions		10,491			116,780			2,230			25,977
Shares redeemed		(29,952	)		(354,613	)		(537	)		(6,351	)
Net increase		74,055		$	863,727			32,454		$	386,148
Class K
Shares sold		244,334		$	2,914,944			135,948		$	1,639,652
Shares issued to shareholders in reinvestment of distributions		30,903			350,175			22,396			262,527
Shares redeemed		(316,285	)		(3,759,750	)		(470,427	)		(5,625,111	)
Net decrease		(41,048	)	$	(494,631	)		(312,083	)	$	(3,722,932	)
Class R
Shares sold		9,270		$	109,704			76,366		$	913,862
Shares issued to shareholders in reinvestment of distributions		9,360			106,023			11,490			134,000
Shares redeemed		(114,241	)		(1,359,189	)		(133,069	)		(1,567,502	)
Net decrease		(95,611	)	$	(1,143,462	)		(45,213	)	$	(519,640	)
Total Net Decrease		(8,688,174	)	$	(104,392,035	)		(7,109,918	)	$	(82,545,369	)

52 BLACKROCK FUNDS III DECEMBER 31, 2014

Notes to Financial Statements (continued)

	Year Ended December 31, 2014						Year Ended December 31, 2013
LifePath 2020 Portfolio	Shares			Amount			Shares			Amount
Institutional
Shares sold		5,490,343		$	93,369,522			8,511,753		$	144,336,416
Shares issued to shareholders in reinvestment of distributions		3,770,681			60,533,779			3,047,166			50,958,124
Shares redeemed		(19,597,685	)		(330,407,643	)		(11,824,424	)		(200,561,646	)
Net decrease		(10,336,661	)	$	(176,504,342	)		(265,505	)	$	(5,267,106	)
Investor A
Shares sold		2,783,548		$	44,566,411			2,956,608		$	47,519,740
Shares issued to shareholders in reinvestment of distributions		2,956,438			44,222,933			1,822,504			28,730,172
Shares redeemed		(5,348,859	)		(85,352,258	)		(6,496,963	)		(104,174,457	)
Net increase (decrease)		391,127		$	3,437,086			(1,717,851	)	$	(27,924,545	)
Investor C
Shares sold		92,681		$	1,568,498			87,370		$	1,468,984
Shares issued to shareholders in reinvestment of distributions		19,730			311,205			8,069			133,905
Shares redeemed		(51,937	)		(874,902	)		(40,854	)		(689,488	)
Net increase		60,474		$	1,004,801			54,585		$	913,401
Class K
Shares sold		460,561		$	7,894,629			165,581		$	2,808,655
Shares issued to shareholders in reinvestment of distributions		72,788			1,165,258			27,980			467,462
Shares redeemed		(310,592	)		(5,281,867	)		(513,349	)		(8,608,694	)
Net increase (decrease)		222,757		$	3,778,020			(319,788	)	$	(5,332,577	)
Class R
Shares sold		91,690		$	1,556,487			94,473		$	1,584,703
Shares issued to shareholders in reinvestment of distributions		19,412			310,941			12,487			208,183
Shares redeemed		(135,284	)		(2,292,419	)		(92,246	)		(1,566,901	)
Net increase (decrease)		(24,182	)	$	(424,991	)		14,714		$	225,985
Total Net Decrease		(9,686,485	)	$	(168,709,426	)		(2,233,845	)	$	(37,384,842	)
LifePath 2030 Portfolio
Institutional
Shares sold		6,018,990		$	97,829,378			8,971,289		$	143,757,958
Shares issued to shareholders in reinvestment of distributions		4,245,327			64,286,433			3,348,359			53,396,307
Shares redeemed		(21,840,580	)		(351,719,418	)		(11,517,152	)		(185,042,343	)
Net increase (decrease)		(11,576,263	)	$	(189,603,607	)		802,496		$	12,111,922
Investor A
Shares sold		3,382,841		$	53,696,141			2,838,723		$	44,394,903
Shares issued to shareholders in reinvestment of distributions		3,223,542			47,165,061			1,771,483			27,571,118
Shares redeemed		(4,890,982	)		(77,053,211	)		(4,883,680	)		(76,553,017	)
Net increase (decrease)		1,715,401		$	23,807,991			(273,474	)	$	(4,586,996	)
Investor C
Shares sold		66,719		$	1,073,462			99,483		$	1,588,437
Shares issued to shareholders in reinvestment of distributions		24,897			368,390			10,794			170,582
Shares redeemed		(41,087	)		(653,792	)		(17,275	)		(276,553	)
Net increase		50,529		$	788,060			93,002		$	1,482,466

BLACKROCK FUNDS III DECEMBER 31, 2014 53

Notes to Financial Statements (continued)

	Year Ended December 31, 2014						Year Ended December 31, 2013
LifePath 2030 Portfolio (concluded)	Shares			Amount			Shares			Amount
Class K
Shares sold		490,402		$	8,085,095			245,066		$	3,922,659
Shares issued to shareholders in reinvestment of distributions		89,431			1,353,726			42,216			673,513
Shares redeemed		(473,631	)		(7,722,039	)		(472,474	)		(7,435,361	)
Net increase (decrease)		106,202		$	1,716,782			(185,192	)	$	(2,839,189	)
Class R
Shares sold		56,386		$	909,776			95,045		$	1,511,193
Shares issued to shareholders in reinvestment of distributions		26,690			399,574			13,681			216,995
Shares redeemed		(72,822	)		(1,172,386	)		(48,141	)		(779,883	)
Net increase		10,254		$	136,964			60,585		$	948,305
Total Net Increase (Decrease)		(9,693,877	)	$	(163,153,810	)		497,417		$	7,116,508
LifePath 2040 Portfolio
Institutional
Shares sold		4,547,603		$	92,415,386			6,546,885		$	129,765,463
Shares issued to shareholders in reinvestment of distributions		3,351,708			63,432,704			2,491,667			49,725,474
Shares redeemed		(14,960,406	)		(301,406,787	)		(7,192,721	)		(143,607,155	)
Net increase (decrease)		(7,061,095	)	$	(145,558,697	)		1,845,831		$	35,883,782
Investor A
Shares sold		2,109,212		$	40,550,132			1,882,175		$	35,624,614
Shares issued to shareholders in reinvestment of distributions		2,145,088			37,916,491			1,136,217			21,461,369
Shares redeemed		(2,736,990	)		(52,332,409	)		(3,161,989	)		(59,848,652	)
Net increase (decrease)		1,517,310		$	26,134,214			(143,597	)	$	(2,762,669	)
Investor C
Shares sold		45,298		$	908,758			44,950		$	889,572
Shares issued to shareholders in reinvestment of distributions		15,261			283,251			6,881			136,348
Shares redeemed		(33,165	)		(673,789	)		(18,180	)		(357,229	)
Net increase		27,394		$	518,220			33,651		$	668,691
Class K
Shares sold		209,407		$	4,362,508			92,075		$	1,809,615
Shares issued to shareholders in reinvestment of distributions		38,807			740,009			23,165			464,192
Shares redeemed		(262,901	)		(5,382,812	)		(260,804	)		(5,061,839	)
Net decrease		(14,687	)	$	(280,295	)		(145,564	)	$	(2,788,032	)
Class R
Shares sold		46,362		$	942,164			31,423		$	618,463
Shares issued to shareholders in reinvestment of distributions		8,593			162,063			5,454			108,333
Shares redeemed		(63,404	)		(1,290,801	)		(68,343	)		(1,359,978	)
Net decrease		(8,449	)	$	(186,574	)		(31,466	)	$	(633,182	)
Total Net Increase (Decrease)		(5,539,527	)	$	(119,373,132	)		1,558,855		$	30,368,590
LifePath 2050 Portfolio
Institutional
Shares sold		2,138,402		$	46,251,744			3,070,828		$	63,732,279
Shares issued to shareholders in reinvestment of distributions		762,452			15,338,372			544,951			11,556,896
Shares redeemed		(5,137,073	)		(108,715,541	)		(1,395,997	)		(29,208,921	)
Net increase (decrease)		(2,236,219	)	$	(47,125,425	)		2,219,782		$	46,080,254

54 BLACKROCK FUNDS III DECEMBER 31, 2014

Notes to Financial Statements (concluded)

	Year Ended December 31, 2014						Year Ended December 31, 2013
LifePath 2050 Portfolio (concluded)	Shares			Amount			Shares			Amount
Investor A
Shares sold		890,323		$	19,351,097			898,304		$	18,596,979
Shares issued to shareholders in reinvestment of distributions		475,626			9,543,129			200,755			4,256,315
Shares redeemed		(710,551	)		(15,312,160	)		(562,818	)		(11,779,445	)
Net increase		655,398		$	13,582,066			536,241		$	11,073,849
Investor C
Shares sold		17,404		$	372,119			21,865		$	448,245
Shares issued to shareholders in reinvestment of distributions		3,648			72,339			1,514			32,019
Shares redeemed		(15,969	)		(341,292	)		(3,501	)		(73,007	)
Net increase		5,083		$	103,166			19,878		$	407,257
Class K
Shares sold		37,882		$	794,194			19,268		$	399,508
Shares issued to shareholders in reinvestment of distributions		8,661			214,902			2,716			57,740
Shares redeemed		(20,895	)		(453,493	)		(36,583	)		(736,281	)
Net increase (decrease)		25,648		$	555,603			(14,599	)	$	(279,033	)
Class R
Shares sold		41,449		$	891,512			25,203		$	518,393
Shares issued to shareholders in reinvestment of distributions		7,899			159,772			3,441			72,784
Shares redeemed		(46,310	)		(1,008,938	)		(17,419	)		(372,477	)
Net increase		3,038		$	42,346			11,225		$	218,700
Total Net Increase (Decrease)		(1,547,052	)	$	(32,842,244	)		2,772,527		$	57,501,027

At December 31, 2014, the following shares of the LifePath Portfolios were owned by affiliates:

	Investor C		Class R
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, 2014 55

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, 2014, 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 19, 2015

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid during the tax year ended December 31, 2014.

	Payable Dates	LifePath Retirement Portfolio		LifePath 2020 Portfolio		LifePath 2030 Portfolio		LifePath 2040 Portfolio		LifePath 2050 Portfolio
Qualified Dividend Income for Individuals1	4/02/14 - 1/02/15		18.96%		24.45%		29.98%		34.64%		40.78%
Dividends Qualifying for the Dividend Received Deduction for Corporations1	4/02/14 - 1/02/15		10.71%		12.95%		15.36%		17.46%		20.03%
Federal Obligation Interest2	4/02/14 - 1/02/15		3.56%		2.58%		1.70%		1.06%		—
Interest Related Dividends and Short-Term Capital Gains for Non-U.S. Residents3	4/02/14 - 1/02/15		74.96%		75.59%		72.22%		70.46%		68.04%

¹  The LifePath 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 U.S. 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, 2014		December 30, 2014
LifePath Retirement Portfolio		$	0.119934	$	0.669781
LifePath 2020 Portfolio		$	0.245514	$	1.083028
LifePath 2030 Portfolio		$	0.234985	$	1.266285
LifePath 2040 Portfolio		$	0.320126	$	1.646246
LifePath 2050 Portfolio		$	0.399289	$	1.760349

56 BLACKROCK FUNDS III DECEMBER 31, 2014

Master Portfolio Information as of December 31, 2014 Master Investment Portfolio

LifePath^® Retirement Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Fixed Income Funds .	60	%
Equity Funds	40

Ten Largest Holdings Percent of
Affiliated Investment Companies

CoreAlpha Bond Master Portfolio	51	%
Active Stock Master Portfolio	16
iShares TIPS Bond ETF	9
International Tilts Master Portfolio	7
Russell 1000® Index Master Portfolio	5
Master Small Cap Index Series	4
BlackRock Commodity Strategies Fund	3
BlackRock Emerging Markets Fund, Inc.	2
iShares MSCI Canada ETF	1
iShares Cohen & Steers REIT ETF	1

LifePath^® 2020 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds .	53	%
Fixed Income Funds	46
Short-Term Securities .	1

Ten Largest Holdings Percent of
Affiliated Investment Companies

CoreAlpha Bond Master Portfolio	40	%
Active Stock Master Portfolio	22
International Tilts Master Portfolio	10
iShares TIPS Bond ETF.	7
Russell 1000® Index Master Portfolio.	6
BlackRock Commodity Strategies Fund.	4
Master Small Cap Index Series	3
BlackRock Emerging Markets Fund, Inc. .	3
iShares Cohen & Steers REIT ETF.	2
iShares International Developed Real Estate ETF.	1

LifePath^® 2030 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds .	75	%
Fixed Income Funds	24
Short-Term Securities .	1

Ten Largest Holdings Percent of
Affiliated Investment Companies

Active Stock Master Portfolio.	27	%
CoreAlpha Bond Master Portfolio.	22
International Tilts Master Portfolio.	14
Russell 1000® Index Master Portfolio.	12
BlackRock Emerging Markets Fund, Inc. .	4
iShares Cohen & Steers REIT ETF.	4
BlackRock Commodity Strategies Fund.	4
iShares International Developed Real Estate ETF.	4
Master Small Cap Index Series	3
iShares TIPS Bond ETF.	2

The LifePath Master Portfolios’ allocation and holdings listed above are current as of the report date. However, the LifePath Master Portfolios are regularly monitored and their composition may vary throughout various periods.

BLACKROCK FUNDS III DECEMBER 31, 2014 57

Master Portfolio Information as of December 31, 2014 (concluded) Master Investment Portfolio

LifePath^® 2040 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds .	93	%
Fixed Income Funds	6
Short-Term Securities .	1

Ten Largest Holdings Percent of
Affiliated Investment Companies

Active Stock Master Portfolio.	30	%
Russell 1000® Index Master Portfolio.	18
International Tilts Master Portfolio.	18
iShares Cohen & Steers REIT ETF.	7
CoreAlpha Bond Master Portfolio.	6
BlackRock Emerging Markets Fund, Inc. .	5
iShares International Developed Real Estate ETF.	5
BlackRock Commodity Strategies Fund.	4
iShares MSCI EAFE Small-Cap ETF.	2
Master Small Cap Index Series.	2

LifePath^® 2050 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds	98	%
Fixed Income Funds.	1
Short-Term Securities.	1

Ten Largest Holdings Percent of
Affiliated Investment Companies

Active Stock Master Portfolio	33	%
International Tilts Master Portfolio.	18
Russell 1000® Index Master Portfolio.	16
iShares Cohen & Steers REIT ETF.	7
iShares International Developed Real Estate ETF	6
BlackRock Emerging Markets Fund, Inc.	6
BlackRock Commodity Strategies Fund	4
iShares MSCI EAFE Small-Cap ETF	3
Master Small Cap Index Series.	3
iShares MSCI Canada ETF	2

The LifePath Master Portfolios’ allocation and holdings listed above are current as of the report date. However, the LifePath Master Portfolios are regularly monitored and their composition may vary throughout various periods.

58 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments December 31, 2014 LifePath Retirement Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 39.5%
Active Stock Master Portfolio	$	261,549,322	$	261,549,322
BlackRock Commodity Strategies Fund		6,449,996		52,244,966
BlackRock Emerging Markets Fund, Inc.		1,751,608		34,138,845
International Tilts Master Portfolio	$	113,464,710		113,464,710
iShares Cohen & Steers REIT ETF		45,789		4,434,207
iShares International Developed Real Estate ETF		71,776		2,156,151
iShares MSCI Canada ETF		369,599		10,666,627
iShares MSCI EAFE Small-Cap ETF		338,648		15,818,248
Master Small Cap Index Series	$	61,149,952		61,149,952
Russell 1000® Index Master Portfolio	$	71,857,425		71,857,425
				627,480,453
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 60.2%
CoreAlpha Bond Master Portfolio	$	808,534,591	$	808,534,591
iShares TIPS Bond ETF		1,328,000		148,749,280
				957,283,871
Short-Term Securities — 0.2%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (b)		3,367,223		3,367,223
Total Affiliated Investment Companies (Cost — $1,510,858,022) — 99.9%				1,588,131,547
Other Assets Less Liabilities — 0.1%				2,063,782
Net Assets — 100.0%			$	1,590,195,329

Notes to Schedule of Investments

(a) During the year ended December 31, 2014, investments in issuers considered to be an affiliate of LifePath Master Portfolio 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, 2013		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2014		Value at December 31, 2014		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	301,116,371		—		$	(39,567,049	)1	$	261,549,322	$	261,549,322	$	4,122,995	$	50,016,113
ACWI ex-US Index Master Portfolio	$	21,332,804		—		$	(21,332,804	)1		—		—	$	130,286	$	1,757,367
BlackRock Cash Funds: Institutional, SL Agency Shares		24,241,785		—			(20,874,562	)1		3,367,223	$	3,367,223	$	3,519		—
BlackRock Cash Funds: Prime, SL Agency Shares		3,861,905		—			(3,861,905	)1		—		—	$	16,092		—
BlackRock Commodity Strategies Fund		6,117,587		887,157			(554,748	)		6,449,996	$	52,244,966	$	12,272	$	(600,228	)
BlackRock Emerging Markets Fund, Inc.		779,979		1,037,356			(65,727	)		1,751,608	$	34,138,845	$	182,516	$	26,752
CoreAlpha Bond Master Portfolio	$	829,309,521		—		$	(20,774,930	)1	$	808,534,591	$	808,534,591	$	20,902,577	$	13,180,841
International Tilts Master Portfolio	$	52,994,384	$	60,470,326	2		—		$	113,464,710	$	113,464,710	$	2,746,895	$	(1,565,940	)
iShares Cohen & Steers REIT ETF		—		46,500			(711	)		45,789	$	4,434,207	$	43,789	$	8,419
iShares International Developed Real Estate ETF		—		73,061			(1,285	)		71,776	$	2,156,151	$	15,931	$	(1,498	)
iShares MSCI Canada ETF		300,512		82,327			(13,240	)		369,599	$	10,666,627	$	214,221	$	10,563
iShares MSCI EAFE ETF		515,589		—			(515,589	)		—		—		—	$	12,246,932
iShares MSCI EAFE Small-Cap ETF		316,636		46,558			(24,546	)		338,648	$	15,818,248	$	396,907	$	148,095
iShares MSCI Emerging Markets ETF		282,562		—			(282,562	)		—		—		—	$	3,708,467
iShares TIPS Bond ETF		1,368,622		52,015			(92,637	)		1,328,000	$	148,749,280	$	2,494,027	$	(552,696	)
Master Small Cap Index Series	$	74,174,910		—		$	(13,024,958	)1	$	61,149,952	$	61,149,952	$	938,971	$	5,553,693
Russell 1000® Index Master Portfolio	$	11,344,510	$	60,512,915	2		—		$	71,857,425	$	71,857,425	$	998,873	$	(88,271	)
1   Represents net shares/beneficial interest sold.
2   Represents net shares/beneficial interest purchased.

(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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that LifePath 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 LifePath Master Portfolio’s own assumptions used in determining the fair value of investments)

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2014 59

Schedule of Investments (concluded) LifePath Retirement Master Portfolio

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with LifePath 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. For information about LifePath Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes LifePath Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2014:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	271,575,547	$	1,316,556,000		—	$	1,588,131,547

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

60 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments December 31, 2014 LifePath 2020 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 53.4%
Active Stock Master Portfolio	$	627,945,748	$	627,945,748
BlackRock Commodity Strategies Fund		12,567,336		101,795,418
BlackRock Emerging Markets Fund, Inc.		4,505,579		87,813,742
International Tilts Master Portfolio	$	282,798,820		282,798,820
iShares Cohen & Steers REIT ETF (b)		498,805		48,304,276
iShares International Developed Real Estate ETF		1,382,421		41,527,927
iShares MSCI Canada ETF (b)		967,873		27,932,815
iShares MSCI EAFE Small-Cap ETF		881,531		41,176,313
Master Small Cap Index Series	$	99,172,892		99,172,892
Russell 1000® Index Master Portfolio	$	176,865,168		176,865,168
				1,535,333,119
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 46.3%
CoreAlpha Bond Master Portfolio	$	1,143,592,277	$	1,143,592,277
iShares TIPS Bond ETF		1,673,332		187,429,917
				1,331,022,194
Short-Term Securities — 0.4%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (c)		5,279,010		5,279,010
BlackRock Cash Funds: Prime, SL Agency Shares, 0.13% (c)(d)		6,776,550		6,776,550
				12,055,560
Total Affiliated Investment Companies (Cost — $2,713,634,291) — 100.1%				2,878,410,873
Liabilities in Excess of Other Assets — (0.1)%				(2,916,412	)
Net Assets — 100.0%			$	2,875,494,461

Notes to Schedule of Investments

(a) During the year ended December 31, 2014, investments in issuers considered to be an affiliate of LifePath Master Portfolio 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,  2013		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2014		Value at December 31, 2014		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	734,517,624		—		$	(106,571,876	)1	$	627,945,748	$	627,945,748	$	10,257,724	$	122,571,692
ACWI ex-US Index Master Portfolio	$	31,390,459		—		$	(31,390,459	)1		—		—	$	189,579	$	2,750,343
BlackRock Cash Funds: Institutional, SL Agency Shares		40,527,090		—			(35,248,080	)1		5,279,010	$	5,279,010	$	6,678		—
BlackRock Cash Funds: Prime, SL Agency Shares		6,350,735		425,815	2		—			6,776,550	$	6,776,550	$	51,345		—
BlackRock Commodity Strategies Fund		11,033,370		2,656,443			(1,122,477	)		12,567,336	$	101,795,418	$	21,986	$	(1,136,942	)
BlackRock Emerging Markets Fund, Inc.		1,998,897		2,715,402			(208,720	)		4,505,579	$	87,813,742	$	469,038	$	91,326
CoreAlpha Bond Master Portfolio	$	1,188,795,466		—		$	(45,203,189	)1	$	1,143,592,277	$	1,143,592,277	$	30,433,847	$	19,356,620
International Tilts Master Portfolio	$	133,430,820	$	149,368,000	2		—		$	282,798,820	$	282,798,820	$	6,916,333	$	(3,810,784	)
iShares Cohen & Steers REIT ETF		440,037		125,420			(66,652	)		498,805	$	48,304,276	$	1,304,982	$	1,151,062
iShares International Developed Real Estate ETF		1,210,918		312,758			(141,255	)		1,382,421	$	41,527,927	$	1,323,065	$	485,128
iShares MSCI Canada ETF		851,740		169,153			(53,020	)		967,873	$	27,932,815	$	556,616	$	(152,734	)
iShares MSCI EAFE ETF		1,555,425		—			(1,555,425	)		—		—		—	$	34,762,048
iShares MSCI EAFE Small-Cap ETF		754,858		174,605			(47,932	)		881,531	$	41,176,313	$	997,495	$	255,176	��
iShares MSCI Emerging Markets ETF		811,846		—			(811,846	)		—		—		—	$	6,723,393
iShares TIPS Bond ETF		1,738,491		174,358			(239,517	)		1,673,332	$	187,429,917	$	3,210,185	$	(1,726,580	)
Master Small Cap Index Series	$	115,162,753		—		$	(15,989,861	)1	$	99,172,892	$	99,172,892	$	1,489,194	$	7,912,051
Russell 1000 Index Master Portfolio	$	18,841,005	$	158,024,163	2		—		$	176,865,168	$	176,865,168	$	1,946,379	$	(80,931	)
1   Represents net shares/beneficial interest sold.
2   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, 2014 61

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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that LifePath 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 LifePath Master Portfolio’s own assumptions used in determining the fair value of investments)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with LifePath 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. For information about LifePath Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes LifePath Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2014:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	548,035,968	$	2,330,374,905		—	$	2,878,410,873

LifePath Master Portfolio may hold liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of December 31, 2014, collateral on securities loaned at value of $6,776,550 are categorized as Level 2 within the disclosure hierarchy.

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

62 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments December 31, 2014 LifePath 2030 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 75.4%
Active Stock Master Portfolio	$	732,007,711	$	732,007,711
BlackRock Commodity Strategies Fund		12,540,270		101,576,184
BlackRock Emerging Markets Fund, Inc.		6,115,000		119,181,356
International Tilts Master Portfolio	$	378,538,181		378,538,181
iShares Cohen & Steers REIT ETF		1,164,738		112,793,228
iShares International Developed Real Estate ETF		3,234,964		97,178,319
iShares MSCI Canada ETF (b)		1,320,806		38,118,461
iShares MSCI EAFE Small-Cap ETF		1,198,374		55,976,049
Master Small Cap Index Series	$	75,431,704		75,431,704
Russell 1000® Index Master Portfolio	$	325,759,398		325,759,398
				2,036,560,591
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 24.3%
CoreAlpha Bond Master Portfolio	$	591,843,692	$	591,843,692
iShares TIPS Bond ETF		587,067		65,757,375
				657,601,067
Short-Term Securities — 0.5%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (c)		5,873,387	$	5,873,387
BlackRock Cash Funds: Prime, SL Agency Shares, 0.13% (c)(d)		8,407,500		8,407,500
				14,280,887
Total Affiliated Investment Companies (Cost — $2,525,334,356) — 100.2%				2,708,442,545
Liabilities in Excess of Other Assets — (0.2)%				(5,646,777	)
			$	2,702,795,768

Notes to Schedule of Investments

(a) During the year ended December 31, 2014, investments in issuers considered to be an affiliate of LifePath Master Portfolio 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,  2013		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2014		Value at December 31, 2014		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	883,697,843		—		$	(151,690,132	)1		732,007,711	$	732,007,711	$	12,250,820	$	146,004,155
ACWI ex-US Index Master Portfolio	$	52,940,137		—		$	(52,940,137	)1		—		—	$	311,550	$	3,313,169
BlackRock Cash Funds: Institutional, SL Agency Shares		59,018,753		—			(53,145,366	)1		5,873,387	$	5,873,387	$	7,179		—
BlackRock Cash Funds: Prime, SL Agency Shares		9,624,041		—			(1,216,541	)1		8,407,500	$	8,407,500	$	65,198		—
BlackRock Commodity Strategies Fund		10,830,777		3,069,120			(1,359,627	)		12,540,270	$	101,576,184	$	21,832	$	(1,289,688	)
BlackRock Emerging Markets Fund, Inc.		2,516,085		4,069,759			(470,844	)		6,115,000	$	119,181,356	$	636,237	$	394,284
CoreAlpha Bond Master Portfolio	$	777,088,211		—		$	(185,244,519	)1	$	591,843,692	$	591,843,692	$	19,580,079	$	13,105,801
International Tilts Master Portfolio	$	165,412,631	$	213,125,550	2		—		$	378,538,181	$	378,538,181	$	8,716,504	$	(5,157,220	)
iShares Cohen & Steers REIT ETF		951,541		372,162			(158,965	)		1,164,738	$	112,793,228	$	2,902,017	$	993,454
iShares International Developed Real Estate ETF		2,422,429		1,009,532			(196,997	)		3,234,964	$	97,178,319	$	2,838,652	$	(263,857	)
iShares MSCI Canada ETF		1,012,839		407,410			(99,443	)		1,320,806	$	38,118,461	$	731,454	$	(215,111	)
iShares MSCI EAFE ETF		1,843,415		—			(1,843,415	)		—		—		—	$	40,466,651
iShares MSCI EAFE Small-Cap ETF		973,793		306,041			(81,460	)		1,198,374	$	55,976,049	$	1,332,819	$	462,355
iShares MSCI Emerging Markets ETF		954,459		—			(954,459	)		—		—		—	$	6,364,747
iShares TIPS Bond ETF		863,157		93,803			(369,893	)		587,067	$	65,757,375	$	1,596,802	$	(293,610	)
Master Small Cap Index Series	$	87,580,909		—		$	(12,149,205	)1	$	75,431,704	$	75,431,704	$	1,112,983	$	5,656,527
Russell 1000 Index Master Portfolio	$	48,110,697	$	277,648,701	2		—		$	325,759,398	$	325,759,398	$	3,109,746	$	(257,048	)
1   Represents net shares/beneficial interest sold.
2  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) Security was purchased with the cash collateral from loaned securities.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2014 63

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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that LifePath 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 LifePath Master Portfolio’s own assumptions used in determining the fair value of investments)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with LifePath 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. For information about LifePath Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes LifePath Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2014:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	604,861,859	$	2,103,580,686		—	$	2,708,442,545

LifePath Master Portfolio may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of December 31, 2014, collateral on securities loaned at value of $8,407,500 is categorized as Level 2 within the disclosure hierarchy.

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

64 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments December 31, 2014 LifePath 2040 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 93.8%
Active Stock Master Portfolio	$	617,793,419	$	617,793,419
BlackRock Commodity Strategies Fund		10,188,103		82,523,638
BlackRock Emerging Markets Fund, Inc.		5,989,668		116,738,633
International Tilts Master Portfolio	$	367,981,472		367,981,472
iShares Cohen & Steers REIT ETF (b)		1,402,976		135,864,196
iShares International Developed Real Estate ETF		3,883,740		116,667,550
iShares MSCI Canada ETF (b)		1,285,655		37,104,003
iShares MSCI EAFE Small-Cap ETF		1,170,755		54,685,966
Master Small Cap Index Series	$	50,915,660		50,915,660
Russell 1000® Index Master Portfolio	$	379,569,351		379,569,351
				1,959,843,888
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 5.9%
CoreAlpha Bond Master Portfolio	$	124,444,002	$	124,444,002
Short-Term Securities — 1.0%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (c)		4,210,819		4,210,819
BlackRock Cash Funds: Prime, SL Agency Shares, 0.13% (c)(d)		16,314,800		16,314,800
				20,525,619
Total Affiliated Investment Companies (Cost — $1,946,307,898) — 100.7%				2,104,813,509
Liabilities in Excess of Other Assets — (0.7)%				(15,500,144	)
Net Assets — 100.0%			$	2,089,313,365

Notes to Schedule of Investments

(a) During the year ended December 31, 2014, investments in issuers considered to be an affiliate of LifePath Master Portfolio 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, 2013		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2014		Value at December 31, 2014		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	799,127,066		—		$	(181,333,647	)1	$	617,793,419	$	617,793,419	$	10,831,005	$	132,762,819
ACWI ex-US Index Master Portfolio	$	46,818,008		—		$	(46,818,008	)1		—		—	$	282,728	$	2,743,780
BlackRock Cash Funds: Institutional, SL Agency Shares		33,479,740		—			(29,268,921	)1		4,210,819	$	4,210,819	$	5,668		—
BlackRock Cash Funds: Prime, SL Agency Shares		5,267,073		11,047,727	2		—			16,314,800	$	16,314,800	$	84,728		—
BlackRock Commodity Strategies Fund		8,674,420		2,448,345			(934,662	)		10,188,103	$	82,523,638	$	18,022	$	(915,288	)
BlackRock Emerging Markets Fund, Inc.		2,360,437		4,086,676			(457,445	)		5,989,668	$	116,738,633	$	621,783	$	479,508
CoreAlpha Bond Master Portfolio	$	401,864,037		—		$	(277,420,035	)1	$	124,444,002	$	124,444,002	$	9,716,388	$	7,286,207
International Tilts Master Portfolio	$	154,522,993	$	213,458,479	2		—		$	367,981,472	$	367,981,472	$	8,114,290	$	(4,786,525	)
iShares Cohen & Steers REIT ETF		1,112,408		537,872			(247,304	)		1,402,976	$	135,864,196	$	3,317,203	$	1,264,675
iShares International Developed Real Estate ETF		2,633,592		1,554,859			(304,711	)		3,883,740	$	116,667,550	$	3,271,760	$	(537,382	)
iShares MSCI Canada ETF		958,137		419,953			(92,435	)		1,285,655	$	37,104,003	$	697,582	$	(230,445	)
iShares MSCI EAFE ETF		1,749,865		—			(1,749,865	)		—	$	—	$	—	$	37,379,682
iShares MSCI EAFE Small-Cap ETF		901,955		334,664			(65,864	)		1,170,755	$	54,685,966	$	1,273,018	$	400,062
iShares MSCI Emerging Markets ETF		896,775		—			(896,775	)		—		—		—	$	5,281,800
iShares TIPS Bond ETF		165,134		8,717			(173,851	)		—		—	$	290,162	$	368,045
Master Small Cap Index Series	$	54,999,126		—		$	(4,083,466	)1	$	50,915,660	$	50,915,660	$	701,730	$	3,499,325
Russell 1000 Index Master Portfolio	$	66,301,350	$	313,268,001	2		—		$	379,569,351	$	379,569,351	$	3,501,743	$	(180,994	)
1  Represents net shares/beneficial interest sold.
2  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, 2014 65

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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that LifePath 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 LifePath Master Portfolio’s own assumptions used in determining the fair value of investments)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with LifePath 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. For information about LifePath Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements. The following table summarizes LifePath Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2014:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	564,109,605	$	1,540,703,904		—	$	2,104,813,509

LifePath Master Portfolio may hold liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of December 31, 2014, collateral on securities loaned at value of $16,314,800 is categorized as Level 2 within the disclosure hierarchy.

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

66 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments December 31, 2014 LifePath 2050 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 98.6%
Active Stock Master Portfolio	$	147,719,967	$	147,719,967
BlackRock Commodity Strategies Fund		2,193,346		17,766,099
BlackRock Emerging Markets Fund, Inc.		1,329,101		25,904,173
International Tilts Master Portfolio	$	81,873,561		81,873,561
iShares Cohen & Steers REIT ETF		327,853		31,749,285
iShares International Developed Real Estate ETF		901,660		27,085,866
iShares MSCI Canada ETF (b)		285,386		8,236,240
iShares MSCI EAFE Small-Cap ETF		260,026		12,145,814
Master Small Cap Index Series	$	11,565,177		11,565,177
Russell 1000® Index Master Portfolio	$	69,086,943		69,086,943
				433,133,125
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 1.1%
CoreAlpha Bond Master Portfolio	$	4,957,761	$	4,957,761
Short-Term Securities — 0.9%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15%, (c)		1,215,707		1,215,707
BlackRock Cash Funds: Prime, SL Agency Shares, 0.13% (c)(d)		2,950,000		2,950,000
				4,165,707
Total Affiliated Investment Companies (Cost — $413,634,780) — 100.6%				442,256,593
Liabilities in Excess of Other Assets — (0.6)%				(2,812,942	)
Net Assets — 100.0%			$	439,443,651

Notes to Schedule of Investments

(a) During the year ended December 31, 2014, investments in issuers considered to be an affiliate of LifePath Master Portfolio 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,  2013		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2014		Value at December 31, 2014		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	176,775,516		—		$	(29,055,549	)1		147,719,967	$	147,719,967	$	2,339,620	$	26,922,577
ACWI ex-US Index Master Portfolio	$	27,522,238		—		$	(27,522,238	)1		—		—	$	159,298	$	1,476,519
BlackRock Cash Funds: Institutional, SL Agency Shares		5,872,036		—			(4,656,329	)1		1,215,707	$	1,215,707	$	1,375		—
BlackRock Cash Funds: Prime, SL Agency Shares		859,378		2,090,622	2		—			2,950,000	$	2,950,000	$	17,363		—
BlackRock Commodity Strategies Fund		1,705,352		800,541			(312,547	)		2,193,346	$	17,766,099	$	3,940	$	(387,080	)
BlackRock Emerging Markets Fund, Inc.		539,560		851,504			(61,963	)		1,329,101	$	25,904,173	$	138,441	$	11,541
CoreAlpha Bond Master Portfolio	$	40,230,315		—			(35,272,554	)1	$	4,957,761	$	4,957,761	$	944,570	$	728,781
International Tilts Master Portfolio	$	36,382,911	$	45,490,650	2		—		$	81,873,561	$	81,873,561	$	1,813,792	$	(1,166,605	)
iShares Cohen & Steers REIT ETF		260,332		156,260			(88,739	)		327,853	$	31,749,285	$	789,597	$	167,145
iShares International Developed Real Estate ETF		725,825		338,093			(162,258	)		901,660	$	27,085,866	$	792,505	$	(453,885	)
iShares MSCI Canada ETF		209,515		115,848			(39,977	)		285,386	$	8,236,240	$	157,306	$	(32,046	)
iShares MSCI EAFE ETF		211,392		—			(211,392	)		—		—		—	$	3,846,398
iShares MSCI EAFE Small-Cap ETF		203,079		93,063			(36,116	)		260,026	$	12,145,814	$	284,894	$	248,710
iShares MSCI Emerging Markets ETF		113,169		—			(113,169	)		—		—		—	$	452,035
Master Small Cap Index Series	$	8,543,922	$	3,021,255	2		—		$	11,565,177	$	11,565,177	$	116,971	$	443,632
Russell 1000 Index Master Portfolio	$	21,543,179	$	47,543,764	2		—		$	69,086,943	$	69,086,943	$	844,711	$	1,265
1  Represents net shares/beneficial interest sold.
2  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, 2014 67

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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that LifePath 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 LifePath Master Portfolio’s own assumptions used in determining the fair value of investments)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with LifePath 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. For information about LifePath Master Portfolio’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements. The following table summarizes LifePath Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2014:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	127,053,184	$	315,203,409		—	$	442,256,593

LifePath Master Portfolio may hold liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of December 31, 2014, collateral on securities loaned at value of $2,950,000 is categorized as Level 2 within the disclosure hierarchy.

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

68 BLACKROCK FUNDS III DECEMBER 31, 2014

Statements of Assets and Liabilities Master Investment Portfolio

December 31, 2014	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	$	1,588,131,547	$	2,878,410,873	$	2,708,442,545	$	2,104,813,509	$	442,256,593
Investments sold receivable		8,304,501		36,169,173		36,011,433		28,969,956		4,549,285
Investment advisor receivable		—		—		—		—		1,986
Contributions receivable from investors		1,969,476		1,938,934		3,618,743		1,288,507		443,977
Dividends receivable — affiliated		76		—		—		—		—
Securities lending income receivable — affiliated		—		3,326		2,752		11,688		950
Total assets		1,598,405,600		2,916,522,306		2,748,075,473		2,135,083,660		447,252,791
Liabilities
Collateral on securities loaned at value		—		6,776,550		8,407,500		16,314,800		2,950,000
Investments purchased payable		5,868,690		21,232,100		23,704,909		19,016,127		3,718,787
Trustees’ fees payable		11,838		20,740		19,352		15,089		3,589
Investment advisory fees payable		88,380		111,688		56,143		9,163		—
Professional fees payable		27,132		29,804		28,980		27,512		23,522
Withdrawals payable to investors		2,214,231		12,856,963		13,062,821		10,387,604		1,113,242
Total liabilities		8,210,271		41,027,845		45,279,705		45,770,295		7,809,140
Net Assets	$	1,590,195,329	$	2,875,494,461	$	2,702,795,768	$	2,089,313,365	$	439,443,651
Net Assets Consist of
Investors’ capital	$	1,512,921,804	$	2,710,717,879	$	2,519,687,579	$	1,930,807,754	$	410,821,838
Net unrealized appreciation/depreciation		77,273,525		164,776,582		183,108,189		158,505,611		28,621,813
Net Assets	$	1,590,195,329	$	2,875,494,461	$	2,702,795,768	$	2,089,313,365	$	439,443,651
1   Investments at cost — affiliated	$	1,510,858,022	$	2,713,634,291	$	2,525,334,356	$	1,946,307,898	$	413,634,780
2   Securities loaned at value		—	$	6,626,574	$	8,225,100	$	15,872,664	$	2,886,000

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	69

Statements of Operations Master Investment Portfolio

Year Ended December 31, 2014	LifePath Retirement Master Portfolio			LifePath 2020 Master Portfolio			LifePath 2030 Master Portfolio			LifePath 2040 Master Portfolio			LifePath 2050 Master Portfolio
Investment Income
Dividends — affiliated	$	3,359,663		$	7,882,976		$	10,059,813		$	9,489,113		$	2,166,569
Securities lending — affiliated — net		16,092			51,345			65,198			84,728			17,363
Income — affiliated		3,519			6,678			7,179			5,668			1,375
Net investment income allocated from the applicable Underlying Master Portfolios:
Dividends		9,724,677			22,824,575			28,081,316			25,821,759			5,813,893
Interest		23,082,996			33,674,703			21,765,973			10,892,947			1,085,420
Expenses		(3,492,556	)		(6,511,381	)		(6,203,852	)		(4,815,389	)		(949,723	)
Fees waived		525,480			1,245,159			1,438,245			1,248,567			269,372
Total income		33,219,871			59,174,055			55,213,872			42,727,393			8,404,269
Expenses
Investment advisory		5,577,351			10,029,021			9,401,718			7,281,306			1,434,290
Professional		27,984			29,589			29,308			28,738			26,652
Independent Trustees		48,009			83,892			79,179			62,170			15,265
Total expenses		5,653,344			10,142,502			9,510,205			7,372,214			1,476,207
Less fees waived by Manager		(4,565,145	)		(8,642,209	)		(8,587,353	)		(6,956,180	)		(1,423,923	)
Total expenses after fees waived		1,088,199			1,500,293			922,852			416,034			52,284
Net investment income		32,131,672			57,673,762			54,291,020			42,311,359			8,351,985
Realized and Unrealized Gain (Loss)
Net realized gain from:
Investments — unaffiliated		1,776			2,777			1,450			2,298			—
Investments — affiliated		14,993,030			40,451,876			46,617,775			43,490,657			3,852,817
Allocations from the applicable Underlying Master Portfolios from investments, financial futures contracts, swaps and foreign currency transactions		68,853,803			148,698,991			162,665,384			141,324,612			28,406,169
		83,848,609			189,153,644			209,284,609			184,817,567			32,258,986
Net change in unrealized appreciation/depreciation on:
Investments — affiliated		(22,521,163	)		(50,383,218	)		(50,601,414	)		(132,277,953	)		(4,030,057	)
Allocated from the applicable Underlying Master Portfolios from investments, financial futures contracts, swaps and foreign currency translations		(11,277,399	)		(44,267,760	)		(63,619,292	)		24,668,225			(14,085,843	)
		(33,798,562	)		(94,650,978	)		(114,220,706	)		(107,609,728	)		(18,115,900	)
Net realized and unrealized gain		50,050,047			94,502,666			95,063,903			77,207,839			14,143,086
Net Increase in Net Assets Resulting from Operations	$	82,181,719		$	152,176,428		$	149,354,923		$	119,519,198		$	22,495,071

See Notes to Financial Statements.
70	BLACKROCK FUNDS III	DECEMBER 31, 2014

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath Retirement Master Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	32,131,672		$	28,508,616
Net realized gain		83,848,609			76,997,571
Net change in unrealized appreciation/depreciation		(33,798,562	)		(5,090,602	)
Net increase in net assets resulting from operations		82,181,719			100,415,585
Capital Transactions
Proceeds from contributions		175,047,598			200,566,162
Value of withdrawals		(253,441,996	)		(206,149,443	)
Net decrease in net assets derived from capital transactions		(78,394,398	)		(5,583,281	)
Net Assets
Total increase in net assets		3,787,321			94,832,304
Beginning of year		1,586,408,008			1,491,575,704
End of year	$	1,590,195,329		$	1,586,408,008

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	71

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath 2020 Master Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	57,673,762		$	53,237,617
Net realized gain		189,153,644			175,291,019
Net change in unrealized appreciation/depreciation		(94,650,978	)		35,384,494
Net increase in net assets resulting from operations		152,176,428			263,913,130
Capital Transactions
Proceeds from contributions		288,154,878			298,075,510
Value of withdrawals		(396,106,580	)		(255,035,339	)
Net increase (decrease) in net assets derived from capital transactions		(107,951,702	)		43,040,171
Net Assets
Total increase in net assets		44,224,726			306,953,301
Beginning of year		2,831,269,735			2,524,316,434
End of year	$	2,875,494,461		$	2,831,269,735

See Notes to Financial Statements.
72	BLACKROCK FUNDS III	DECEMBER 31, 2014

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath 2030 Master Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	54,291,020		$	52,303,739
Net realized gain		209,284,609			189,521,746
Net change in unrealized appreciation/depreciation		(114,220,706	)		86,149,465
Net increase in net assets resulting from operations		149,354,923			327,974,950
Capital Transactions
Proceeds from contributions		299,751,622			287,895,384
Value of withdrawals		(397,791,695	)		(201,833,907	)
Net increase (decrease) in net assets derived from capital transactions		(98,040,073	)		86,061,477
Net Assets
Total increase in net assets		51,314,850			414,036,427
Beginning of year		2,651,480,918			2,237,444,491
End of year	$	2,702,795,768		$	2,651,480,918

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	73

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath 2040 Master Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	42,311,359		$	42,730,509
Net realized gain		184,817,567			162,181,872
Net change in unrealized appreciation/depreciation		(107,609,728	)		101,679,299
Net increase in net assets resulting from operations		119,519,198			306,591,680
Capital Transactions
Proceeds from contributions		231,414,329			203,577,910
Value of withdrawals		(326,313,422	)		(146,733,461	)
Net increase (decrease) in net assets derived from capital transactions		(94,899,093	)		56,844,449
Net Assets
Total increase in net assets		24,620,105			363,436,129
Beginning of year		2,064,693,260			1,701,257,131
End of year	$	2,089,313,365		$	2,064,693,260

See Notes to Financial Statements.
74	BLACKROCK FUNDS III	DECEMBER 31, 2014

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath 2050 Master Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	8,351,985		$	8,415,880
Net realized gain		32,258,986			29,182,969
Net change in unrealized appreciation/depreciation		(18,115,900	)		26,425,146
Net increase in net assets resulting from operations		22,495,071			64,023,995
Capital Transactions
Proceeds from contributions		110,692,340			110,404,463
Value of withdrawals		(109,007,078	)		(27,016,387	)
Net increase in net assets derived from capital transactions		1,685,262			83,388,076
Net Assets
Total increase in net assets		24,180,333			147,412,071
Beginning of year		415,263,318			267,851,247
End of year	$	439,443,651		$	415,263,318

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	75

Financial Highlights Master Investment Portfolio

	LifePath Retirement Master Portfolio
	Year Ended December 31,
	2014		2013		2012		2011		2010
Total Return
Total return		5.25%		6.75%		9.11%		4.46%		9.83%
Ratios to Average Net Assets
Total expenses		0.54%1,2,3		0.54%1,2,3		0.55%4,5,6		0.55%4,5,6		0.61%4
Total expenses after fees waived		0.25%1,2,3		0.25%1,2,3		0.28%4,5,6		0.27%4,5,6		0.26%4
Net investment income7		2.02%1,2,3		1.83%1,2,3		2.22%4,5,6		2.77%4,5,6		2.60%4
Supplemental Data
Net assets, end of year (000)		$1,590,195		$1,586,408		$1,491,576		$1,387,033		$1,380,141
Portfolio turnover rate		14%8		17%8		4%9		4%9		4%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 Portfolio allocated fees waived of 0.03% for each of the years ended December 31, 2014 and December 31, 2013, respectively.

³  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.10% for each of the years ended December 31, 2014 and December 31, 2013, 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.

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 year 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, 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 years ended December 31, 2014 and December 31, 2013, which also include 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% and 14% for the years ended December 31, 2012, December 31, 2011 and December 31, 2010, respectively.

See Notes to Financial Statements.
76	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights Master Investment Portfolio

	LifePath 2020 Master Portfolio
	Year Ended December 31,
	2014		2013		2012		2011		2010
Total Return
Total return		5.56%		10.17%		11.49%		1.96%		11.40%
Ratios to Average Net Assets
Total expenses		0.54%1,2,3		0.53%1,2,3		0.53%4,5,6		0.53%4,5,6		0.59%4
Total expenses after fees waived		0.24%1,2,3		0.23%1,2,3		0.25%4,5,6		0.25%4,5,6		0.23%4
Net investment income7		2.01%1,2,3		1.97%1,2,3		2.30%4,5,6		2.56%4,5,6		2.45%4
Supplemental Data
Net assets, end of year (000)		$2,875,494		$2,831,270		$2,524,316		$2,358,583		$2,343,961
Portfolio turnover rate		21%8		19%8		5%9		5%9		4%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 Portfolio allocated fees waived of 0.04% and 0.03% for the years ended December 31, 2014 and December 31, 2013, respectively.

³  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11% and 0.12%, for the years ended December 31, 2014 and December 31, 2013, 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, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio 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 year 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 0.03% 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 0.11% 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 years ended December 31, 2014 and December 31, 2013, which also include 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% and 13% for the years ended December 31, 2012, December 31, 2011 and December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	77

Financial Highlights Master Investment Portfolio

	LifePath 2030 Master Portfolio
	Year Ended December 31,
	2014		2013		2012		2011		2010
Total Return
Total return		5.82%		14.16%		13.59%		(0.13)%		12.36%
Ratios to Average Net Assets
Total expenses		0.53%1,2,3		0.52%1,2,3		0.53%4,5,6		0.52%4,5,6		0.57%4
Total expenses after fees waived		0.21%1,2,3		0.20%1,2,3		0.23%4,5,6		0.22%4,5,6		0.21%4
Net investment income7		2.02%1,2,3		2.13%1,2,3		2.37%4,5,6		2.39%4,5,6		2.34%4
Supplemental Data
Net assets, end of year (000)		$2,702,796		$2,651,481		$2,237,444		$2,014,111		$1,972,075
Portfolio turnover rate		33%8		22%8		5%9		7%9		3%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 Portfolio allocated fees waived of 0.05% and 0.04% for each of the years ended December 31, 2014 and December 31, 2013, respectively.

³  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.14% and 0.15% for the years ended December 31, 2014 and December 31, 2013, 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, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio 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 year 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 years ended December 31, 2014 and December 31, 2013, which also include 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% and 10% for the years ended December 31, 2012, December 31, 2011 and December 31, 2010, respectively.

See Notes to Financial Statements.
78	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights Master Investment Portfolio

	LifePath 2040 Master Portfolio
	Year Ended December 31,
	2014		2013		2012		2011		2010
Total Return
Total return		5.98%		17.42%		15.23%		(1.88)%		13.21%
Ratios to Average Net Assets
Total expenses		0.53%1,2,3		0.51%1,2,3		0.52%4,5,6		0.52%4,5,6		0.55%4
Total expenses after fees waived		0.19%1,2,3		0.18%1,2,3		0.21%4,5,6		0.20%4,5,6		0.19%4
Net investment income7		2.03%1,2,3		2.26%1,2,3		2.44%4,5,6		2.24%4,5,6		2.24%4
Supplemental Data
Net assets, end of year (000)		$2,089,313		$2,064,693		$1,701,257		$1,509,756		$1,519,203
Portfolio turnover rate		42%8		26%8		4%9		8%9		4%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 Portfolio allocated fees waived of 0.06% and 0.05%, for the years ended December 31 2014 and December 31, 2013, respectively.

³  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.16% and 0.17% for the years ended December 31, 2014 and December 31, 2013, 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, International Tilts Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio 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 year 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 years ended December��31, 2014 and December 31, 2013, which also include 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 14%, 20% and 9% for the years ended December 31, 2012, December 31, 2011 and December 31, 2010, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	79

Financial Highlights Master Investment Portfolio

	LifePath 2050 Master Portfolio
	Year Ended December 31,
	2014		2013		2012		2011		2010
Total Return
Total return		6.23%		20.32%		16.55%		(3.28)%		13.93%
Ratios to Average Net Assets
Total expenses		0.53%1,2,3		0.53%1,2,3		0.54%4,5,6		0.53%4,5,6		0.56%4
Total expenses after fees waived		0.18%1,2,3		0.20%1,2,3		0.21%4,5,6		0.18%4,5,6		0.17%4
Net investment income7		2.04%1,2,3		2.46%1,2,3		2.51%4,5,6		2.18%4,5,6		2.31%4
Supplemental Data
Net assets, end of year (000)		$439,444		$415,263		$267,851		$180,087		$119,391
Portfolio turnover rate		48%8		28%8		5%9		13%9		5%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 Portfolio allocated fees waived of 0.07% and 0.06% for the years ended December 31, 2014 and December 31, 2013, respectively.

³  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.17% and 0.15% for the years ended December 31, 2014 and December 31, 2013, respectively, 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 total expenses for the year 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 years ended December 31, 2014 and December 31, 2013, which also include 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%, 19% and 12% for the years ended December 31, 2012, December 31, 2011 and December 31, 2010, respectively.

See Notes to Financial Statements.
80	BLACKROCK FUNDS III	DECEMBER 31, 2014

Notes to Financial Statements

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 five 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, 2014, the investment of LifePath 2030 Master Portfolio and LifePath 2040 Master Portfolio in the Active Stock Master Portfolio represented 27.1%, and 29.6%, respectively, of net assets. The investment of LifePath Retirement Master Portfolio and LifePath 2020 Master Portfolio in CoreAlpha Bond Master Portfolio represented 50.9% and 39.8%, respectively, of 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 the 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 SEC’s website at http://www.sec.gov.

The LifePath Master Portfolios will 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 Active Stock 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, 2014, the LifePath Master Portfolios held interests in Active Stock 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		CoreAlpha Bond Master Portfolio		International Tilts Master Portfolio		Master Small Cap Index Series		Russell 1000® Index Master Portfolio
LifePath Retirement Master Portfolio		10.7%		28.0%		9.1%		8.7%		2.6%
LifePath 2020 Master Portfolio		25.8%		39.6%		22.6%		14.1%		6.4%
LifePath 2030 Master Portfolio		30.1%		20.5%		30.3%		10.8%		11.8%
LifePath 2040 Master Portfolio		25.4%		4.3%		29.4%		7.3%		13.7%
LifePath 2050 Master Portfolio		6.1%		0.2%		6.6%		1.7%		2.5%

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

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 (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each LifePath Master Portfolio is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the LifePath Master Portfolios:

Valuation: The LifePath Master Portfolios’ investments are valued at fair value as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the 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 Portfolios for all financial instruments. Investments in open-end registered investment companies are valued at net asset value (“NAV”) each business day. 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 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.

In the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Investments”). When determining the price for Fair Value Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each LifePath Master Portfolio might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the

BLACKROCK FUNDS III DECEMBER 31, 2014 81

Notes to Financial Statements (continued)

Global Valuation Committee, or its delegate, deems relevant consistent with the principles of fair value measurement. The pricing of all Fair Value Investments 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.

Recent Accounting Standard: In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance will require expanded disclosure for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. It is effective for financial statements with fiscal years beginning on or after December 15, 2014 and interim periods within those fiscal years. Management is evaluating the impact, if any, of this guidance on the LifePath Master Portfolios’ financial statement disclosures.

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

3. Securities and Other Investments:

Securities Lending: Each LifePath Master Portfolio may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with each LifePath Master Portfolio collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. government. The initial collateral received by each LifePath Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the LifePath Master Portfolio and any additional required collateral is delivered to the LifePath Master Portfolio on the next business day. During the term of the loan, each LifePath Master Portfolio is entitled to all distributions made on or in respect of the loaned securities. 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-unaffiliated, and collateral on securities loaned at value, respectively. As of December 31, 2014, any securities on loan were collateralized by cash. 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.

Securities lending transactions are entered into by the LifePath Master Portfolio under Master Securities Lending Agreements (each, an “MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, each LifePath Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and the LifePath Master Portfolios can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.

As of December 31, 2014, the following table is a summary of each LifePath Master Portfolio’s securities lending agreements by counterparty, which are subject to offset under an MSLA:

LifePath 2020 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital Inc	$	6,432,894	$	(6,432,894	)		—
UBS AG.		193,680		(193,680	)		—
Total	$	6,626,574	$	(6,626,574	)		—

82 BLACKROCK FUNDS III DECEMBER 31, 2014

Notes to Financial Statements (continued)

LifePath 2030 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital Inc	$	8,225,100	$	(8,225,100	)		—
LifePath 2040 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital Inc	$	10,101,000	$	(10,101,000	)		—
Goldman Sachs & Co.		5,771,664		(5,771,664	)		—
Total	$	15,872,664	$	(15,872,664	)		—
LifePath 2050 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital Inc	$	2,886,000	$	(2,886,000	)		—

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 2020 Master Portfolio	$	6,776,550
LifePath 2030 Master Portfolio	$	8,407,500
LifePath 2040 Master Portfolio	$	16,314,800
LifePath 2050 Master Portfolio	$	2,950,000

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the LifePath Master Portfolios benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities lent if the collateral received does not cover the value on the securities loaned in the event of borrower default. Each LifePath Master Portfolio 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.

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 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 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 the MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the LifePath Master Portfolio. 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 or BAL, from each affiliated investment company in which the LifePath Master Portfolios invest through April 30, 2015. BFA has also contractually agreed to cap the expenses of the LifePath Master Portfolios at the rate at which the LifePath

BLACKROCK FUNDS III DECEMBER 31, 2014 83

Notes to Financial Statements (continued)

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, 2024. The amounts of the waivers, if any, are shown as fees waived by Manager in the Statements of Operations.

The U.S. Securities and Exchange Commission has issued an exemptive order which permits BTC, an affiliate of the Manager, to serve as securities lending agent for the LifePath Master Portfolios, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. The LifePath Master Portfolios are responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by the Manager or its affiliates, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees the LifePath Master Portfolio bears to an annual rate of 0.04% until December 31, 2014 and 0.05% thereafter (the “collateral investment fees”).

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. Each LifePath Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent. Pursuant to a securities lending agreement effective February 1, 2014, BTC may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the “specials only securities”).

Pursuant to such agreement, each LifePath Master Portfolio retains 80% of securities lending income. In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Liquidity Complex in a calendar year exceeds the aggregate securities lending income earned across the Equity-Liquidity Complex through the lending of specials only securities in the calendar year 2013, each LifePath Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income. Prior to February 1, 2014, each LifePath Master Portfolio retained 65% of securities lending income and paid a fee to BTC equal to 35% of such income. The share of securities lending 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, 2014 each LifePath Master Portfolio paid BTC the following amounts in total for securities lending agent services and collateral investment fees:

LifePath Retirement Master Portfolio	LifePath 2020 Master Portfolio	LifePath 2030 Master Portfolio	LifePath 2040 Master Portfolio	LifePath 2050 Master Portfolio
$5,460	$15,508	$17,947	$22,900	$4,599

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 shown as 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:

For the year ended December 31, 2014, purchases and sales of investments in the Underlying Funds and LifePath Master Portfolios, excluding short-term securities, were as follows:

	LifePath Retirement Master Portfolio		LifePath 2020 Master Portfolio		LifePath 2030 Master Portfolio		LifePath 2040 Master Portfolio		LifePath 2050 Master Portfolio
Purchases	$	229,927,746	$	601,697,643	$	876,709,448	$	874,417,702	$	201,864,848
Sales	$	310,253,211	$	710,002,301	$	973,305,047	$	964,355,972	$	199,221,687

6. Income Tax Information:

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 U.S. 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, 2014. 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 that there are any uncertain tax positions that require recognition of a tax liability.

84 BLACKROCK FUNDS III DECEMBER 31, 2014

Notes to Financial Statements (concluded)

As of December 31, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

	LifePath Retirement Master Portfolio			LifePath 2020 Master Portfolio			LifePath 2030 Master Portfolio			LifePath 2040 Master Portfolio			LifePath 2050 Master Portfolio
Tax cost	$	1,511,718,784		$	2,719,373,712		$	2,532,823,891		$	1,951,131,622		$	414,606,449
Gross unrealized appreciation	$	94,617,924		$	368,573,680		$	229,021,695		$	307,940,473		$	35,136,902
Gross unrealized depreciation		(18,205,161	)		(209,536,519	)		(53,403,041	)		(154,258,586	)		(7,486,758	)
Net unrealized appreciation	$	76,412,763		$	159,037,161		$	175,618,654		$	153,681,887		$	27,650,144

7. Bank Borrowings:

MIP, on behalf of the LifePath Master Portfolios, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), was a party to a 364-day, $1.1 billion credit agreement with a group of lenders, under which the LifePath Master Portfolios may borrow to fund shareholder redemptions. Excluding commitments designated for a certain individual fund, the Participating Funds, including the LifePath Master Portfolios, could borrow up to an aggregate commitment amount of $650 million, subject to asset coverage and other limitations as specified in the agreement. Effective November 25, 2014, the credit agreement was amended to an aggregate commitment amount of $2.1 billion, of which the Participating Funds, including the LifePath Master Portfolios, can borrow up to $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The agreement terminates on April 23, 2015, unless otherwise extended to November 24, 2015 or renewed for a period of 364 days from April 23, 2015. The amended agreement has the following terms: a fee of 0.06% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one month LIBOR (but in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which are included in miscellaneous expenses in the Statements of Operations, and 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. During the year ended December 31, 2014, the LifePath Master Portfolios did not borrow under the credit agreement.

8. Principal Risks:

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 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 Portfolio.

9. 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, 2014 85

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, 2014, 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, 2014 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 19, 2015

86 BLACKROCK FUNDS III DECEMBER 31, 2014

Officers and Trustees

Name, Address1 and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment  Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2
Ronald W. Forbes 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 153 Portfolios	None
Rodney D. Johnson 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 153 Portfolios	None
David O. Beim 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 153 Portfolios	None
Frank J. Fabozzi 1948	Trustee	Since 2014	Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011; Adjunct Professor of Finance and Becton Fellow, Yale University from 1994 to 2006.	112 RICs consisting of 232 Portfolios	None
Dr. Matina S. Horner 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 153 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 1939	Trustee	Since 2009	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 153 Portfolios	None
Ian A. MacKinnon 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None
Cynthia A. Montgomery 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 153 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 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 153 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 153 Portfolios	None
Toby Rosenblatt 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Futures Foundation (philanthropic foundation) since 2009; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None

BLACKROCK FUNDS III DECEMBER 31, 2014 87

Officers and Trustees (continued)

Name, Address1 and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2 (concluded)
Kenneth L. Urish 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 153 Portfolios	None
Frederick W. Winter 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 153 Portfolios	None
	1   The address of each Trustee is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2   Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend terms of the Trustees on a case-by-case basis, as appropriate.
	3   Date shown is the earliest date a person has served for the Trust/MIP. 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. Frank J. Fabozzi first became a member of the board of other funds advised by BlackRock Advisors, LLC or its affiliates in 1988.
Interested Trustees4
Paul L. Audet 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.	141 RICs consisting of 329 Portfolios	None
Henry Gabbay 1947	Trustee	Since 2009	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.	29 RICs consisting of 97 Portfolios	None
	4   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, Dr. Fabozzi 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 75. The Board has determined to extend the terms of Directors on a case-by-case basis, as appropriate.

88 BLACKROCK FUNDS III DECEMBER 31, 2014

Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers2
John M. Perlowski 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 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.
Jennifer McGovern 1977	Vice President	Since 2014	Director of BlackRock, Inc. since 2011; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal Andrews 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 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.
Charles Park 1967	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2014	Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary to the 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   The address of each Officer is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2   Officers of the Trust/MIP serve at the pleasure of the Board.

Effective September 10, 2014, Brendan Kyne resigned as a Vice President of the Trust/MIP and Jennifer McGovern became a Vice President of the Trust/MIP.

Effective December 31, 2014, Paul L. Audet and Henry Gabbay resigned as Trustees of the Trust/MIP and Ronald W. Forbes resigned as a Trustee of the Trust/MIP and Co-Chair of the Board. Effective January 1, 2015, Collette Chilton, Barbara G. Novick and Mark Stalnecker were appointed to serve as Trustees of the Trust/MIP.

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/MIP 400 Howard Street San Francisco, CA 94105

BLACKROCK FUNDS III DECEMBER 31, 2014 89

Additional Information

General Information

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/LifePath 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’/LifePath 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’/LifePath 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/LifePath 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/LifePath Master Portfolios voted proxies relating to securities held in the LifePath Portfolios’/LifePath 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.

BlackRock’s Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing. Visit BlackRock online at http://www.blackrock.com for more information.

Shareholder Privileges

Account Information

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

90 BLACKROCK FUNDS III DECEMBER 31, 2014

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, 2014 91

This report are intended for current holders. 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 preceded or accompanied 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.

LifePath-12/14-AR

DECEMBER 31, 2014

  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
The Markets in Review		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		61
Important Tax Information		61
Master Portfolio Information		62
Master Portfolio Financial Statements:
Schedules of Investments		65
Statements of Assets and Liabilities		80
Statements of Operations		82
Statements of Changes in Net Assets		84
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

2 BLACKROCK FUNDS III DECEMBER 31, 2014

The Markets in Review

Dear Shareholder,

After an extended period of calm, market volatility increased over the course of 2014, driven largely by higher valuations in risk assets (such as equities and high yield bonds), rising geopolitical risks and expectations around global central bank policies. Several key trends drove strong performance in U.S. markets, particularly large-cap stocks, Treasuries and municipal bonds, while markets outside the U.S. were more challenged.

Investors began the year in search of relatively safer assets due to heightened risks in emerging markets, slowing growth in China and weakening U.S. economic data. As a result, equities globally declined in January while bond markets strengthened despite the expectation that interest rates would rise as the U.S. Federal Reserve had begun reducing its asset purchase programs. Strong demand for relatively safer assets pushed U.S. Treasury bond prices higher and thus kept rates low in the United States. This surprising development, as well as increasing evidence that the soft patch in U.S. economic data had been temporary and weather-related, brought equity investors racing back to the market in February.

In the months that followed, interest rates trended lower in a modest growth environment and more investors turned to equities in search of yield. Markets remained relatively calm despite rising tensions in Russia and Ukraine and further signs of decelerating growth in China. Strong corporate earnings, increased merger and acquisition activity and signs of a strengthening recovery in the U.S. and other developed economies kept equity prices moving higher. Not all segments benefited from these trends, however, as investors ultimately became wary of high valuations, resulting in a broad rotation into cheaper assets.

Volatility ticked up in the summer as geopolitical tensions escalated and investors feared that better U.S. economic indicators may compel the Fed to increase short-term interest rates sooner than previously anticipated. Global credit markets tightened as the U.S. dollar strengthened, ultimately putting a strain on investor flows, and financial markets broadly weakened in the third quarter.

Several themes dominated the markets in the fourth quarter, resulting in higher levels of volatility and the outperformance of U.S. markets versus other areas of the world. Economic growth strengthened considerably in the United States while the broader global economy showed signs of slowing. The European Central Bank and the Bank of Japan took aggressive measures to stimulate growth while the Fed moved toward tighter policy. This divergence in central bank policy caused further strengthening in the U.S. dollar versus other currencies. Oil prices, which had been falling gradually since the summer, plummeted in the fourth quarter due to a global supply-and-demand imbalance. Energy stocks sold off sharply and oil-exporting economies suffered, resulting in the poor performance of emerging market stocks.

At BlackRock, we believe investors need to think globally, extend their scope across a broad 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 blackrock.com for further insight about investing in today’s markets.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2014
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		6.12	%		13.69	%
U.S. small cap equities (Russell 2000® Index)		1.65			4.89
International equities (MSCI Europe, Australasia, Far East Index)		(9.24	)		(4.90	)
Emerging market equities (MSCI Emerging Markets Index)		(7.84	)		(2.19	)
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.01			0.03
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		4.33			10.72
U.S. investment-grade bonds (Barclays U.S. Aggregate Bond Index)		1.96			5.97
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.00			9.25
U.S. high yield bonds (Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		(2.84	)		2.46
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, 2014 LifePath Index Portfolios

Portfolio Management Commentary

How did each Portfolio perform?

Ÿ Each 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, 2014, the LifePath Index Portfolios underperformed their respective custom benchmarks. 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 The largest detractor from the LifePath Index Portfolios’ relative performance was the fair value pricing impact on one of the underlying funds in which the LifePath Index Portfolios invest, ACWI ex-US Master Portfolio, which affected the funds with longer time horizons more significantly than the shorter-dated funds.

Ÿ The longer-dated LifePath Index Portfolios (2030 to 2055) experienced positive performance differences relative to their custom benchmarks due to asset class misweights within each fund’s respective tolerance bounds. In addition, the underlying funds and instruments held in order to obtain appropriate index exposure were in some cases intentionally mismatched to the asset class benchmark, and this added to performance over the 12 months.

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 to a more comprehensive glidepath framework whereby the risk was increased in the farther dated funds and the equity landing point was increased slightly from 38% equity and equity-like asset classes to 40%.

Describe portfolio positioning at period end.

Ÿ At period end, each of the LifePath Index 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.

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, 2014

LifePath Index Retirement Portfolio

Investment Objective

LifePath^® Index Retirement Portfolio’s (“LifePath Index Retirement Portfolio” or the “LifePath Index Portfolio”) 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.

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 to 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.

LifePath Index Portfolio’s custom benchmark consists of the following:

Period3	Barclays U.S. Aggregate Bond Index			Barclays U.S.  Treasury Inflation Protected Securities (TIPS) Index (Series L)			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-U.S. 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
1/01/14 to 12/31/14		52.6			9.0			0.3			12.3			21.5			4.3

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2014

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since  Inception3
Institutional		0.70	%		5.73	%		6.06	%
Investor A		0.69			5.50			5.81
Class K		0.82			5.78			6.10
LifePath Index Retirement Portfolio Custom Benchmark		0.92			6.04			6.24
Barclays U.S. Aggregate Bond Index		1.96			5.97			3.53
Barclays U.S. TIPS Index (Series L)		(2.07	)		3.64			2.60
FTSE EPRA/NAREIT Developed Real Estate Index		2.93			15.02			7.91
MSCI ACWI ex-U.S. IMI Index		(9.13	)		(3.89	)		1.69
Russell 1000® Index		5.57			13.24			14.90
Russell 2000® Index		1.65			4.89			11.83

³  The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.

BLACKROCK FUNDS III DECEMBER 31, 2014 5

LifePath Index 2020 Portfolio

Investment Objective

LifePath^® Index 2020 Portfolio’s (“LifePath Index 2020 Portfolio” or the “LifePath Index Portfolio”) 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.

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 to 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.

LifePath Index Portfolio’s custom benchmark consists of the following:

Period3	Barclays U.S. Aggregate Bond Index			Barclays U.S.  Treasury Inflation Protected Securities (TIPS) Index (Series L)			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-U.S. 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
1/01/14 to 12/31/14		42.1			6.8			3.0			16.0			28.4			3.7

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2014

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since  Inception3
Institutional		0.68	%		6.10	%		6.80	%
Investor A		0.48			5.87			6.50
Class K		0.71			6.15			6.83
LifePath Index 2020 Portfolio Custom Benchmark		0.83			6.42			6.97
Barclays U.S. Aggregate Bond Index		1.96			5.97			3.53
Barclays U.S. TIPS Index (Series L)		(2.07	)		3.64			2.60
FTSE EPRA/NAREIT Developed Real Estate Index		2.93			15.02			7.91
MSCI ACWI ex-U.S. IMI Index		(9.13	)		(3.89	)		1.69
Russell 1000® Index		5.57			13.24			14.90
Russell 2000® Index		1.65			4.89			11.83

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, 2014

LifePath Index 2025 Portfolio

Investment Objective

LifePath^® Index 2025 Portfolio’s (“LifePath Index 2025 Portfolio” or the “LifePath Index Portfolio”) 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.

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 to 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.

LifePath Index Portfolio’s custom benchmark consists of the following:

Period3	Barclays U.S. Aggregate Bond Index			Barclays U.S.  Treasury Inflation Protected Securities (TIPS) Index (Series L)			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-U.S. 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			8.0			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
1/01/14 to 12/31/14		34.5			5.4			4.9			18.5			33.4			3.3

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2014

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since Inception3
Institutional		0.60	%		6.33	%		7.26	%
Investor A		0.49			6.10			7.01
Class K		0.71			6.47			7.31
LifePath Index 2025 Portfolio Custom Benchmark		0.77			6.68			7.48
Barclays U.S. Aggregate Bond Index		1.96			5.97			3.53
Barclays U.S. TIPS Index (Series L)		(2.07	)		3.64			2.60
FTSE EPRA/NAREIT Developed Real Estate Index		2.93			15.02			7.91
MSCI ACWI ex-U.S. IMI Index		(9.13	)		(3.89	)		1.69
Russell 1000® Index		5.57			13.24			14.90
Russell 2000® Index		1.65			4.89			11.83

³  The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.

BLACKROCK FUNDS III DECEMBER 31, 2014 7

LifePath Index 2030 Portfolio

Investment Objective

LifePath^® Index 2030 Portfolio’s (“LifePath Index 2030 Portfolio” or the “LifePath Index Portfolio”) 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.

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 to 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.

LifePath Index Portfolio’s custom benchmark consists of the following:

Period3	Barclays U.S. Aggregate Bond Index			Barclays U.S.  Treasury Inflation Protected Securities (TIPS) Index (Series L)			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-U.S. 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
1/01/14 to 12/31/14		27.7			4.1			6.6			20.9			37.8			2.9

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2014

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since Inception3
Institutional		0.60	%		6.58	%		7.72	%
Investor A		0.40			6.26			7.45
Class K		0.63			6.64			7.73
LifePath Index 2030 Portfolio Custom Benchmark		0.71			6.88			7.91
Barclays U.S. Aggregate Bond Index		1.96			5.97			3.53
Barclays U.S. TIPS Index (Series L)		(2.07	)		3.64			2.60
FTSE EPRA/NAREIT Developed Real Estate Index		2.93			15.02			7.91
MSCI ACWI ex-U.S. IMI Index		(9.13	)		(3.89	)		1.69
Russell 1000® Index		5.57			13.24			14.90
Russell 2000® Index		1.65			4.89			11.83

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, 2014

LifePath Index 2035 Portfolio

Investment Objective

LifePath^® Index 2035 Portfolio’s (“LifePath Index 2035 Portfolio” or the “LifePath Index Portfolio”) 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.

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 to 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.

LifePath Index Portfolio’s custom benchmark consists of the following:

Period3	Barclays U.S. Aggregate Bond Index			Barclays U.S.  Treasury Inflation Protected Securities (TIPS) Index (Series L)			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-U.S. 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
1/01/14 to 12/31/14		21.6			2.9			8.1			23.0			41.8			2.6

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2014

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since  Inception3
Institutional		0.41	%		6.68	%		8.04	%
Investor A		0.30			6.37			7.75
Class K		0.52			6.82			8.07
LifePath Index 2035 Portfolio Custom Benchmark		0.65			7.06			8.28
Barclays U.S. Aggregate Bond Index		1.96			5.97			3.53
Barclays U.S. TIPS Index (Series L)		(2.07	)		3.64			2.60
FTSE EPRA/NAREIT Developed Real Estate Index		2.93			15.02			7.91
MSCI ACWI ex-U.S. IMI Index		(9.13	)		(3.89	)		1.69
Russell 1000® Index		5.57			13.24			14.90
Russell 2000® Index		1.65			4.89			11.83

³  The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.

BLACKROCK FUNDS III DECEMBER 31, 2014 9

LifePath Index 2040 Portfolio

Investment Objective

LifePath^® Index 2040 Portfolio’s (“LifePath Index 2040 Portfolio” or the “LifePath Index Portfolio”) 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.

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 to 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.

LifePath Index Portfolio’s custom benchmark consists of the following:

Period3	Barclays U.S. Aggregate Bond Index			Barclays U.S.  Treasury Inflation Protected Securities (TIPS) Index (Series L)			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-U.S. 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
1/01/14 to 12/31/14		16.3			1.6			9.5			24.9			45.3			2.4

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2014

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since  Inception3
Institutional		0.44	%		6.94	%		8.40	%
Investor A		0.32			6.62			8.11
Class K		0.38			6.90			8.41
LifePath Index 2040 Portfolio Custom Benchmark		0.61			7.24			8.62
Barclays U.S. Aggregate Bond Index		1.96			5.97			3.53
Barclays U.S. TIPS Index (Series L)		(2.07	)		3.64			2.60
FTSE EPRA/NAREIT Developed Real Estate Index		2.93			15.02			7.91
MSCI ACWI ex-U.S. IMI Index		(9.13	)		(3.89	)		1.69
Russell 1000® Index		5.57			13.24			14.90
Russell 2000® Index		1.65			4.89			11.83

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, 2014

LifePath Index 2045 Portfolio

Investment Objective

LifePath^® Index 2045 Portfolio’s (“LifePath Index 2045 Portfolio” or the “LifePath Index Portfolio”) 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.

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 to 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.

LifePath Index Portfolio’s custom benchmark consists of the following:

Period3	Barclays U.S. Aggregate Bond Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-U.S. 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
1/01/14 to 12/31/14		12.6			10.7			26.4			48.1			2.2

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2014

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since  Inception3
Institutional		0.42	%		7.07	%		8.63	%
Investor A		0.31			6.74			8.35
Class K		0.53			7.10			8.69
LifePath Index 2045 Portfolio Custom Benchmark		0.64			7.45			8.95
Barclays U.S. Aggregate Bond Index		1.96			5.97			3.53
FTSE EPRA/NAREIT Developed Real Estate Index		2.93			15.02			7.91
MSCI ACWI ex-U.S. IMI Index		(9.13	)		(3.89	)		1.69
Russell 1000® Index		5.57			13.24			14.90
Russell 2000® Index		1.65			4.89			11.83

³  The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.

BLACKROCK FUNDS III DECEMBER 31, 2014 11

LifePath Index 2050 Portfolio

Investment Objective

LifePath^® Index 2050 Portfolio’s (“LifePath Index 2050 Portfolio” or the “LifePath Index Portfolio”) 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.

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 to 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.

LifePath Index Portfolio’s custom benchmark consists of the following:

Period3	Barclays U.S. Aggregate Bond Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-U.S. 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
1/01/14 to 12/31/14		8.3			11.7			27.7			50.4			1.9

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2014

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since  Inception3
Institutional		0.45	%		7.23	%		8.94	%
Investor A		0.33			7.01			8.66
Class K		0.47			7.28			8.97
LifePath Index 2050 Portfolio Custom Benchmark		0.63			7.65			9.24
Barclays U.S. Aggregate Bond Index		1.96			5.97			3.53
FTSE EPRA/NAREIT Developed Real Estate Index		2.93			15.02			7.91
MSCI ACWI ex-U.S. IMI Index		(9.13	)		(3.89	)		1.69
Russell 1000® Index		5.57			13.24			14.90
Russell 2000® Index		1.65			4.89			11.83

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, 2014

LifePath Index 2055 Portfolio

Investment Objective

LifePath^® Index 2055 Portfolio’s (“LifePath Index 2055 Portfolio” or the “LifePath Index Portfolio”) 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.

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 to 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.

LifePath Index Portfolio’s custom benchmark consists of the following:

Period3	Barclays U.S. Aggregate Bond Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-U.S. 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
1/01/14 to 12/31/14		4.2			12.8			29.0			52.1			1.9

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2014

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since  Inception3
Institutional		0.40	%		7.46	%		9.23	%
Investor A		0.28			7.13			8.95
Class K		0.42			7.50			9.28
LifePath Index 2055 Portfolio Custom Benchmark		0.61			7.83			9.48
Barclays U.S. Aggregate Bond Index		1.96			5.97			3.53
FTSE EPRA/NAREIT Developed Real Estate Index		2.93			15.02			7.91
MSCI ACWI ex-U.S. IMI Index		(9.13	)		(3.89	)		1.69
Russell 1000® Index		5.57			13.24			14.90
Russell 2000® Index		1.65			4.89			11.83

³  The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.

BLACKROCK FUNDS III DECEMBER 31, 2014 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 LifePath Index Portfolio distributions or the redemption of LifePath Index Portfolio shares. Figures shown in each of the performance tables on the previous pages assume reinvestment of all 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. Distributions 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 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, 2014, the following indexes are used to calculate the LifePath Index Portfolios’ custom benchmarks: Barclays U.S. Aggregate Bond Index, Barclays U.S. TIPS Index (Series L), FTSE EPRA/NAREIT Developed Real Estate Index, MSCI ACWI ex-U.S. IMI Index, Russell 1000^® Index and Russell 2000^® Index.

The Barclays U.S. Aggregate Bond Index is a widely recognized unmanaged market-weighted index comprised of investment-grade corporate bonds rated BBB or better, mortgages and U.S. Treasury and U.S. Government agency issues with at least one year to maturity. Barclays U.S. TIPS Index (Series L) is a market value-weighted index that tracks inflation-protected securities issued by the U.S. Treasury. The FTSE EPRA/NAREIT Developed Real Estate Index a global market capitalization weighted index composed of listed real estate securities from developed market countries in North America, Europe, and Asia. The MSCI ACWI ex-U.S. IMI Index is a free float-adjusted market capitalization weighted index that measures the equity market performance of the developed (excluding the U.S.) and emerging investable market universe. The Russell 1000^® Index is an index that measures the performance of the large cap segment of the U.S. equity universe. It is a subset of the Russell 3000^® Index and includes approximately 1,000 of the largest securities based on a combination of their market capitalization and current index membership. The Index represents approximately 92% of the total market capitalization of the Russell 3000^® Index. The Russell 2000^® Index is an unmanaged index that is a subset of the Russell 3000^® Index representing approximately 10% of the total market capitalization of that Index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.

14 BLACKROCK FUNDS III DECEMBER 31, 2014

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, 2014 and held through December 31, 2014) 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 shareholder reports of other funds.

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, 2014		Ending Account Value December 31, 2014		Expenses Paid During the Period1		Beginning Account Value July 1, 2014		Ending Account Value December 31, 2014		Expenses Paid During the Period1		Annualized Expense Ratio
LifePath Index Retirement Portfolio
Institutional		$1,000.00		$1,007.00		$0.81		$1,000.00		$1,024.40		$0.82		0.16%
Investor A		$1,000.00		$1,006.90		$2.07		$1,000.00		$1,023.14		$2.09		0.41%
Class K		$1,000.00		$1,008.20		$0.56		$1,000.00		$1,024.65		$0.56		0.11%
LifePath Index 2020 Portfolio
Institutional		$1,000.00		$1,006.80		$0.81		$1,000.00		$1,024.40		$0.82		0.16%
Investor A		$1,000.00		$1,004.80		$2.07		$1,000.00		$1,023.14		$2.09		0.41%
Class K		$1,000.00		$1,007.10		$0.56		$1,000.00		$1,024.65		$0.56		0.11%
LifePath Index 2025 Portfolio
Institutional		$1,000.00		$1,006.00		$0.76		$1,000.00		$1,024.45		$0.77		0.15%
Investor A		$1,000.00		$1,004.90		$2.02		$1,000.00		$1,023.19		$2.04		0.40%
Class K		$1,000.00		$1,007.10		$0.51		$1,000.00		$1,024.70		$0.51		0.10%
LifePath Index 2030 Portfolio
Institutional		$1,000.00		$1,006.00		$0.81		$1,000.00		$1,024.40		$0.82		0.16%
Investor A		$1,000.00		$1,004.00		$2.07		$1,000.00		$1,023.14		$2.09		0.41%
Class K		$1,000.00		$1,006.30		$0.51		$1,000.00		$1,024.70		$0.51		0.10%
LifePath Index 2035 Portfolio
Institutional		$1,000.00		$1,004.10		$0.76		$1,000.00		$1,024.45		$0.77		0.15%
Investor A		$1,000.00		$1,003.00		$2.02		$1,000.00		$1,023.19		$2.04		0.40%
Class K		$1,000.00		$1,005.20		$0.51		$1,000.00		$1,024.70		$0.51		0.10%
LifePath Index 2040 Portfolio
Institutional		$1,000.00		$1,004.40		$0.76		$1,000.00		$1,024.45		$0.77		0.15%
Investor A		$1,000.00		$1,003.20		$2.02		$1,000.00		$1,023.19		$2.04		0.40%
Class K		$1,000.00		$1,003.80		$0.51		$1,000.00		$1,024.70		$0.51		0.10%
LifePath Index 2045 Portfolio
Institutional		$1,000.00		$1,004.20		$0.76		$1,000.00		$1,024.45		$0.77		0.15%
Investor A		$1,000.00		$1,003.10		$2.02		$1,000.00		$1,023.19		$2.04		0.40%
Class K		$1,000.00		$1,005.30		$0.51		$1,000.00		$1,024.70		$0.51		0.10%
LifePath Index 2050 Portfolio
Institutional		$1,000.00		$1,004.50		$0.71		$1,000.00		$1,024.50		$0.71		0.14%
Investor A		$1,000.00		$1,003.30		$1.97		$1,000.00		$1,023.24		$1.99		0.39%
Class K		$1,000.00		$1,004.70		$0.45		$1,000.00		$1,024.75		$0.46		0.09%
LifePath Index 2055 Portfolio
Institutional		$1,000.00		$1,004.00		$0.66		$1,000.00		$1,024.55		$0.66		0.13%
Investor A		$1,000.00		$1,002.80		$1.97		$1,000.00		$1,023.24		$1.99		0.39%
Class K		$1,000.00		$1,004.20		$0.45		$1,000.00		$1,024.75		$0.46		0.09%

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 prorating the number of days in the most recent fiscal half year divided by 365.

BLACKROCK FUNDS III DECEMBER 31, 2014 15

Statements of Assets and Liabilities

December 31, 2014	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	$	431,782,724		$	881,310,861		$	518,181,534		$	818,282,113		$	410,026,909
Capital shares sold receivable		734,537			1,450,237			494,265			1,751,129			363,721
Withdrawals receivable from the LifePath Index Master Portfolio		—			139,166			575,200			—			698,762
Receivable from advisor		10,354			9,439			17,411			15,187			7,123
Prepaid expenses		23,189			23,461			21,928			23,615			20,611
Total assets		432,550,804			882,933,164			519,290,338			820,072,044			411,117,126
Liabilities
Capital shares redeemed payable		702,147			1,589,403			1,069,465			635,409			1,062,483
Income dividends payable		86,326			63,479			—			62,928			—
Professional fees payable		19,717			18,028			19,480			18,240			19,777
Service fees payable		11,665			21,355			19,208			23,506			17,755
Transfer agent fees payable		14,794			17,116			11,199			14,995			—
Trustees’ fees payable		7			—			21			23			19
Contributions payable to the LifePath Index Master Portfolio		32,390			—			—			1,115,720			—
Capital gains distributions payable		179,004			113,819			—			93,414			—
Registration fees payable		9,245			22,132			22,521			25,766			19,399
Printing fees payable		6,490			10,232			6,437			9,337			5,584
Other accrued expenses payable		2,919			5,196			3,334			6,024			1,122
Total liabilities		1,064,704			1,860,760			1,151,665			2,005,362			1,126,139
Net Assets	$	431,486,100		$	881,072,404		$	518,138,673		$	818,066,682		$	409,990,987
Net Assets Consist of
Paid-in capital	$	401,430,177		$	810,013,430		$	482,048,968		$	744,177,140		$	378,472,594
Distributions in excess of net investment income		(532,256	)		(818,051	)		(316,382	)		(543,941	)		(173,353	)
Accumulated net realized gain (loss) allocated from the LifePath Index Master Portfolio		(200,225	)		(981,718	)		(918,569	)		(2,360,175	)		(1,170,852	)
Net unrealized appreciation/depreciation allocated from the LifePath Index Master Portfolio		30,788,404			72,858,743			37,324,656			76,793,658			32,862,598
Net Assets	$	431,486,100		$	881,072,404		$	518,138,673		$	818,066,682		$	409,990,987
Net Asset Value
Institutional:
Net assets	$	68,384,566		$	81,485,363		$	53,760,094		$	73,640,273		$	37,072,806
Shares outstanding2		6,033,236			7,041,599			4,577,910			6,209,978			3,093,474
Net asset value	$	11.33		$	11.57		$	11.74		$	11.86		$	11.98
Investor A:
Net assets	$	55,155,775		$	99,790,141		$	89,982,660		$	111,333,438		$	83,586,909
Shares outstanding2		4,869,292			8,636,641			7,669,850			9,394,063			6,987,679
Net asset value	$	11.33		$	11.55		$	11.73		$	11.85		$	11.96
Class K:
Net assets	$	307,945,759		$	699,796,900		$	374,395,919		$	633,092,971		$	289,331,272
Shares outstanding2		27,179,671			60,485,851			31,873,073			53,441,000			24,161,070
Net asset value	$	11.33		$	11.57		$	11.75		$	11.85		$	11.98
1    Cost — from the applicable LifePath Index Master Portfolio	$	400,994,320		$	808,452,118		$	480,856,878		$	741,488,455		$	377,164,311
2   No par value, unlimited number of shares authorized.

See Notes to Financial Statements.
16	BLACKROCK FUNDS III	DECEMBER 31, 2014

Statements of Assets and Liabilities

December 31, 2014	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	$	546,488,088		$	226,782,754		$	232,894,077		$	61,861,999
Capital shares sold receivable		2,478,641			415,436			1,203,391			195,735
Withdrawals receivable from the LifePath Index Master Portfolio		—			1,078,834			2,311,847			—
Receivable from advisor		15,179			13,666			14,182			9,178
Prepaid expenses		24,411			20,805			21,063			19,897
Total assets		549,006,319			228,311,495			236,444,560			62,086,809
Liabilities
Capital shares redeemed payable		1,961,728			1,494,270			3,515,238			45,370
Income dividends payable		50,194			5,193			5,982			—
Professional fees payable		19,496			20,421			20,177			21,027
Service fees payable		12,700			7,420			5,186			1,852
Transfer agent fees payable		10,498			5,306			7,269			2,419
Trustees’ fees payable		5			—			2			—
Contributions payable to the LifePath Index Master Portfolio		516,913			—			—			150,365
Capital gains distributions payable		57,147			4,188			4,248			—
Registration fees payable		19,981			11,526			12,159			3,325
Printing fees payable		6,836			4,162			4,136			3,028
Other accrued expenses payable		3,323			1,330			1,344			1,101
Total liabilities		2,658,821			1,553,816			3,575,741			228,487
Net Assets	$	546,347,498		$	226,757,679		$	232,868,819		$	61,858,322
Net Assets Consist of
Paid-in capital	$	495,606,114		$	209,551,608		$	215,432,579		$	57,879,758
Distributions in excess of net investment income		(240,676	)		(59,342	)		(45,077	)		(5,462	)
Accumulated net realized gain (loss) allocated from the LifePath Index Master Portfolio		(1,739,845	)		(511,694	)		(486,774	)		(920,355	)
Net unrealized appreciation/depreciation allocated from the LifePath Index Master Portfolio		52,721,905			17,777,107			17,968,091			4,904,381
Net Assets	$	546,347,498		$	226,757,679		$	232,868,819		$	61,858,322
Net Asset Value
Institutional:
Net assets	$	50,054,168		$	27,964,408		$	24,617,903		$	7,874,289
Shares outstanding2		4,134,357			2,283,062			1,983,186			624,914
Net asset value	$	12.11		$	12.25		$	12.41		$	12.60
Investor A:
Net assets	$	58,951,654		$	33,858,836		$	22,052,654		$	8,945,478
Shares outstanding2		4,875,609			2,768,248			1,779,464			710,841
Net asset value	$	12.09		$	12.23		$	12.39		$	12.58
Class K:
Net assets	$	437,341,676		$	164,934,435		$	186,198,262		$	45,038,555
Shares outstanding2		36,129,216			13,456,929			15,001,892			3,574,315
Net asset value	$	12.10		$	12.26		$	12.41		$	12.60
1    Cost — from the applicable LifePath Index Master Portfolio	$	493,766,183		$	209,005,647		$	214,925,986		$	56,957,618
2   No par value, unlimited number of shares authorized.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	17

Statements of Operations

Year Ended December 31, 2014	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	$	3,692,248		$	9,765,562		$	6,016,974		$	11,546,440		$	5,808,657
Interest — affiliated		3,596,605			5,890,548			2,578,318			3,600,873			1,305,022
Securities lending — affiliated — net		12,488			14,926			23,461			13,010			19,241
Income — affiliated		—			2,805			1,859			—			—
Other income — affiliated		—			—			—			—			—
Expenses		(506,551	)		(979,954	)		(510,512	)		(866,386	)		(394,805	)
Fees waived		98,445			148,819			89,209			123,809			70,854
Total income		6,893,235			14,842,706			8,199,309			14,417,746			6,808,969
Fund Expenses
Administration		110,283			223,822			118,367			202,035			91,991
Registration		74,810			93,689			79,375			97,757			74,638
Service — Investor A		93,290			193,225			166,071			214,649			144,748
Transfer agent — Institutional		29,220			34,957			21,891			30,139			15,044
Transfer agent — Investor A		20,153			41,923			37,304			45,388			31,081
Transfer agent — Class K		38,754			34,474			18,069			35,945			20,256
Professional		33,128			33,533			32,723			32,876			30,885
Printing		11,056			19,548			13,426			20,011			12,279
Independent Trustees		149			314			164			275			127
Miscellaneous		7,926			8,484			7,900			7,900			7,902
Recoupment of past waived fees — class specific		3,029			6,149			4,436			7,165			2,923
Total expenses		421,798			690,118			499,726			694,140			431,874
Less administration fees waived		(110,283	)		(223,822	)		(118,367	)		(202,035	)		(91,991	)
Less transfer agent fees waived — Institutional		(16	)		(75	)		(48	)		(59	)		(101	)
Less transfer agent fees waived — Investor A		(131	)		(205	)		(357	)		(268	)		(217	)
Less transfer agent fees waived — Class K		(754	)		(1,570	)		(124	)		(2,252	)		(323	)
Less transfer agent fees reimbursed — Institutional		(4,287	)		(6,791	)		(4,458	)		(5,874	)		(3,783	)
Less transfer agent fees reimbursed — Investor A		(3,038	)		(5,757	)		(6,896	)		(6,581	)		(4,918	)
Less transfer agent fees reimbursed — Class K		(38,000	)		(32,904	)		(17,945	)		(33,693	)		(19,933	)
Less fees reimbursed by administrator		(126,598	)		(155,094	)		(133,115	)		(158,345	)		(125,358	)
Total expenses after fees waived		138,691			263,900			218,416			285,033			185,250
Net investment income		6,754,544			14,578,806			7,980,893			14,132,713			6,623,719
Realized and Unrealized Gain (Loss) Allocated from the LifePath Index Master Portfolio
Net realized gain from investments, financial futures contracts, and foreign currency transactions		5,266,766			9,750,563			4,243,950			7,450,237			2,777,692
Net change in unrealized appreciation/depreciation on investments, financial futures contracts and foreign currency translations		8,358,774			19,682,605			11,493,129			20,621,536			9,904,332
Total realized and unrealized gain		13,625,540			29,433,168			15,737,079			28,071,773			12,682,024
Net Increase in Net Assets Resulting from Operations	$	20,380,084		$	44,011,974		$	23,717,972		$	42,204,486		$	19,305,743

See Notes to Financial Statements.
18	BLACKROCK FUNDS III	DECEMBER 31, 2014

Statements of Operations

Year Ended December 31, 2014	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	$	8,824,604		$	3,568,808		$	3,744,286		$	982,944
Interest — affiliated		1,434,000			430,068			289,421			38,130
Securities lending — affiliated — net		21,023			13,185			15,438			3,641
Income — affiliated		2,141			990			1,118			331
Other income — affiliated		40			—			—			—
Expenses		(553,232	)		(221,452	)		(218,268	)		(79,579	)
Fees waived		84,103			52,559			52,236			41,122
Total income		9,812,679			3,844,158			3,884,231			986,589
Fund Expenses
Administration		129,695			49,303			49,036			12,053
Registration		90,564			65,101			72,073			51,523
Service — Investor A		112,212			59,698			44,116			15,951
Transfer agent — Institutional		20,443			10,156			10,838			3,752
Transfer agent — Investor A		25,043			13,830			11,474			4,749
Transfer agent — Class K		35,930			21,337			35,913			17,947
Professional		31,316			30,570			30,600			31,110
Printing		15,632			9,028			8,699			2,424
Independent Trustees		163			69			69			—
Miscellaneous		7,899			7,899			7,900			7,899
Recoupment of past waived fees — class specific		3,813			842			740			—
Total expenses		472,710			267,833			271,458			147,408
Less administration fees waived		(129,695	)		(49,303	)		(49,036	)		(12,053	)
Less transfer agent fees waived — Institutional		(93	)		(98	)		(139	)		(107	)
Less transfer agent fees waived — Investor A		(279	)		(220	)		(218	)		(149	)
Less transfer agent fees waived — Class K		(2,630	)		(461	)		(2,453	)		(287	)
Less transfer agent fees reimbursed — Institutional		(3,985	)		(2,878	)		(2,930	)		(1,645	)
Less transfer agent fees reimbursed — Investor A		(4,282	)		(2,533	)		(3,029	)		(1,559	)
Less transfer agent fees reimbursed — Class K		(33,300	)		(20,876	)		(33,460	)		(17,660	)
Less fees reimbursed by administrator		(145,101	)		(112,195	)		(118,868	)		(92,484	)
Total expenses after fees waived		153,345			79,269			61,325			21,464
Net investment income		9,659,334			3,764,889			3,822,906			965,125
Realized and Unrealized Gain (Loss) Allocated from the LifePath Index Master Portfolio
Net realized gain from investments, financial futures contracts, and foreign currency transactions		4,084,987			1,288,242			1,120,653			249,732
Net change in unrealized appreciation/depreciation on investments, financial futures contracts and foreign currency translations		14,271,549			5,861,300			6,166,502			1,523,881
Total realized and unrealized gain		18,356,536			7,149,542			7,287,155			1,773,613
Net Increase in Net Assets Resulting from Operations	$	28,015,870		$	10,914,431		$	11,110,061		$	2,738,738

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	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:	2014			2013			2014			2013
Operations
Net investment income	$	6,754,544		$	4,801,312		$	14,578,806		$	9,966,194
Net realized gain		5,266,766			1,607,897			9,750,563			3,827,927
Net change in unrealized appreciation/depreciation		8,358,774			14,093,568			19,682,605			38,379,432
Net increase in net assets resulting from operations		20,380,084			20,502,777			44,011,974			52,173,553
Distributions to Shareholders From1
Net investment income:
Institutional		(1,003,476	)		(591,166	)		(1,290,937	)		(709,518	)
Investor A		(645,501	)		(288,108	)		(1,371,308	)		(814,616	)
Class K		(5,189,643	)		(4,229,020	)		(12,046,964	)		(8,956,056	)
Net realized gain:
Institutional		(831,394	)		(186,385	)		(946,287	)		(242,768	)
Investor A		(642,610	)		(121,148	)		(1,151,106	)		(343,083	)
Class K		(3,851,560	)		(1,188,064	)		(8,329,236	)		(2,917,112	)
Decrease in net assets resulting from distributions to shareholders		(12,164,184	)		(6,603,891	)		(25,135,838	)		(13,983,153	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		101,799,062			105,714,712			246,310,875			290,809,095
Net Assets
Total increase in net assets		110,014,962			119,613,598			265,187,011			328,999,495
Beginning of year		321,471,138			201,857,540			615,885,393			286,885,898
End of year	$	431,486,100		$	321,471,138		$	881,072,404		$	615,885,393
Distributions in excess of net investment income, end of year	$	(532,256	)	$	(448,180	)	$	(818,051	)	$	(687,648	)
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
20	BLACKROCK FUNDS III	DECEMBER 31, 2014

Statements of Changes in Net Assets BlackRock Funds IIII

	LifePath Index 2025 Portfolio						LifePath Index 2030 Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013			2014			2013
Operations
Net investment income	$	7,980,893		$	4,397,838		$	14,132,713		$	9,460,778
Net realized gain		4,243,950			1,990,873			7,450,237			4,334,854
Net change in unrealized appreciation/depreciation		11,493,129			19,108,674			20,621,536			43,158,499
Net increase in net assets resulting from operations		23,717,972			25,497,385			42,204,486			56,954,131
Distributions to Shareholders From1
Net investment income:
Institutional		(813,427	)		(345,320	)		(1,216,088	)		(608,036	)
Investor A		(1,216,103	)		(606,228	)		(1,658,504	)		(958,624	)
Class K		(5,998,530	)		(3,644,059	)		(11,318,329	)		(8,262,758	)
Net realized gain:
Institutional		(508,503	)		(144,825	)		(827,120	)		(259,759	)
Investor A		(853,702	)		(320,906	)		(1,251,411	)		(487,570	)
Class K		(3,603,809	)		(1,410,399	)		(7,287,063	)		(3,413,491	)
Decrease in net assets resulting from distributions to shareholders		(12,994,074	)		(6,471,737	)		(23,558,515	)		(13,990,238	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		228,806,845			137,165,472			271,075,569			279,465,769
Net Assets
Total increase in net assets		239,530,743			156,191,120			289,721,540			322,429,662
Beginning of year		278,607,930			122,416,810			528,345,142			205,915,480
End of year	$	518,138,673		$	278,607,930		$	818,066,682		$	528,345,142
Distributions in excess of net investment income, end of year	$	(316,382	)	$	(269,215	)	$	(543,941	)	$	(483,733	)
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	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:	2014			2013			2014			2013
Operations
Net investment income	$	6,623,719		$	3,634,141		$	9,659,334		$	6,226,878
Net realized gain		2,777,692			1,823,947			4,084,987			2,945,488
Net change in unrealized appreciation/depreciation		9,904,332			17,701,984			14,271,549			31,072,917
Net increase in net assets resulting from operations		19,305,743			23,160,072			28,015,870			40,245,283
Distributions to Shareholders From1
Net investment income:
Institutional		(576,033	)		(181,196	)		(851,152	)		(378,244	)
Investor A		(1,172,332	)		(582,811	)		(918,989	)		(517,339	)
Class K		(4,885,446	)		(2,990,310	)		(7,898,009	)		(5,513,352	)
Net realized gain:
Institutional		(326,421	)		(93,322	)		(501,303	)		(175,307	)
Investor A		(731,035	)		(332,522	)		(597,551	)		(283,194	)
Class K		(2,643,917	)		(1,376,315	)		(4,405,145	)		(2,438,058	)
Decrease in net assets resulting from distributions to shareholders		(10,335,184	)		(5,556,476	)		(15,172,149	)		(9,305,494	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		193,854,314			107,834,467			206,933,374			188,037,183
Net Assets
Total increase in net assets		202,824,873			125,438,063			219,777,095			218,976,972
Beginning of year		207,166,114			81,728,051			326,570,403			107,593,431
End of year	$	409,990,987		$	207,166,114		$	546,347,498		$	326,570,403
Distributions in excess of net investment income, end of year	$	(173,353	)	$	(163,261	)	$	(240,676	)	$	(231,860	)
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
22	BLACKROCK FUNDS III	DECEMBER 31, 2014

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:	2014			2013			2014			2013
Operations
Net investment income	$	3,764,889		$	1,894,505		$	3,822,906		$	1,910,442
Net realized gain		1,288,242			877,526			1,120,653			759,303
Net change in unrealized appreciation/depreciation		5,861,300			9,779,105			6,166,502			10,062,728
Net increase in net assets resulting from operations		10,914,431			12,551,136			11,110,061			12,732,473
Distributions to Shareholders From1
Net investment income:
Institutional		(414,254	)		(63,879	)		(394,456	)		(140,616	)
Investor A		(497,652	)		(259,142	)		(371,110	)		(184,926	)
Class K		(2,855,754	)		(1,612,901	)		(3,060,125	)		(1,617,186	)
Net realized gain:
Institutional		(196,532	)		(34,121	)		(161,182	)		(54,352	)
Investor A		(250,858	)		(139,081	)		(169,181	)		(83,209	)
Class K		(1,230,202	)		(709,566	)		(1,223,613	)		(582,607	)
Decrease in net assets resulting from distributions to shareholders		(5,445,252	)		(2,818,690	)		(5,379,667	)		(2,662,896	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		116,729,238			61,684,078			123,424,472			67,640,283
Net Assets
Total increase in net assets		122,198,417			71,416,524			129,154,866			77,709,860
Beginning of year		104,559,262			33,142,738			103,713,953			26,004,093
End of year	$	226,757,679		$	104,559,262		$	232,868,819		$	103,713,953
Distributions in excess of net investment income, end of year	$	(59,342	)	$	(56,571	)	$	(45,077	)	$	(42,292	)
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	23

Statements of Changes in Net Assets BlackRock Funds III

	LifePath Index 2055 Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	965,125		$	428,074
Net realized gain		249,732			135,948
Net change in unrealized appreciation/depreciation		1,523,881			2,276,006
Net increase in net assets resulting from operations		2,738,738			2,840,028
Distributions to Shareholders From1
Net investment income:
Institutional		(107,419	)		(14,616	)
Investor A		(133,343	)		(75,486	)
Class K		(723,754	)		(342,853	)
Net realized gain:
Institutional		(39,649	)		—
Investor A		(48,206	)		—
Class K		(236,207	)		—
Decrease in net assets resulting from distributions to shareholders		(1,288,578	)		(432,955	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		36,470,547			16,670,913
Net Assets
Total increase in net assets		37,920,707			19,077,986
Beginning of year		23,937,615			4,859,629
End of year	$	61,858,322		$	23,937,615
Distributions in excess of net investment income, end of year	$	(5,462	)	$	(6,071	)
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
24	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights LifePath Index Retirement Portfolio

	Institutional
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.05		$	10.49		$	9.77		$	10.00
Net investment income2		0.21			0.18			0.21			0.16
Net realized and unrealized gain (loss)		0.42			0.62			0.68			(0.22	)
Net increase (decrease) from investment operations		0.63			0.80			0.89			(0.06	)
Distributions from:3
Net investment income		(0.21	)		(0.19	)		(0.15	)		(0.16	)
Net realized gain		(0.14	)		(0.05	)		(0.02	)		—
Return of capital		—			—			—			(0.01	)
Total distributions		(0.35	)		(0.24	)		(0.17	)		(0.17	)
Net asset value, end of period	$	11.33		$	11.05		$	10.49		$	9.77
Total Return4
Based on net asset value		5.73%			7.68%			9.16%			(0.61)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.23%			0.26%			0.38%			6.81%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.16%			0.18%			0.16%			0.18%	9
Net investment income7,8		1.82%			1.70%			2.00%			2.84%	9
Supplemental Data
Net assets, end of period (000)	$	68,385		$	39,793		$	20,223		$	24
Portfolio turnover rate of the LifePath Index Master Portfolio		15%	11		18%	11		1%	12		1%	12

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.02%, 0.06%, and 3.37% for the years ended December 31, 2014, 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%, 0.02%, 0.02% and 0.04% for the years ended December 31, 2014, 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 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, 2014	25

Financial Highlights (continued) LifePath Index Retirement Portfolio

	Investor A
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.05		$	10.49		$	9.77		$	10.00
Net investment income2		0.17			0.16			0.18			0.15
Net realized and unrealized gain (loss)		0.43			0.62			0.69			(0.23	)
Net increase (decrease) from investment operations		0.60			0.78			0.87			(0.08	)
Distributions from:3
Net investment income		(0.18	)		(0.17	)		(0.13	)		(0.14	)
Net realized gain		(0.14	)		(0.05	)		(0.02	)		—
Return of capital		—			—			—			(0.01	)
Total distributions		(0.32	)		(0.22	)		(0.15	)		(0.15	)
Net asset value, end of period	$	11.33		$	11.05		$	10.49		$	9.77
Total Return4
Based on net asset value		5.50%			7.44%			8.88%			(0.76)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.48%			0.51%			0.81%			7.16%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.41%			0.43%			0.41%			0.43%	9
Net investment income7,8		1.55%			1.45%			1.71%			2.58%	9
Supplemental Data
Net assets, end of period (000)	$	55,156		$	28,215		$	7,967		$	24
Portfolio turnover rate of the LifePath Index Master Portfolio		15%	11		18%	11		1%	12		1%	12

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.02%, 0.13%, and 3.37% for the years ended December 31, 2014, 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%, 0.02%, 0.02% and 0.04% for the years ended December 31, 2014, 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 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.
26	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights (concluded) LifePath Index Retirement Portfolio

	Class K
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.05		$	10.49		$	9.77		$	10.00
Net investment income2		0.21			0.19			0.21			0.16
Net realized and unrealized gain (loss)		0.42			0.61			0.69			(0.22	)
Net increase (decrease) from investment operations		0.63			0.80			0.90			(0.06	)
Distributions from:3
Net investment income		(0.21	)		(0.19	)		(0.16	)		(0.16	)
Net realized gain		(0.14	)		(0.05	)		(0.02	)		—
Return of capital		—			—			—			(0.01	)
Total distributions		(0.35	)		(0.24	)		(0.18	)		(0.17	)
Net asset value, end of period	$	11.33		$	11.05		$	10.49		$	9.77
Total Return4
Based on net asset value		5.78%			7.72%			9.17%			(0.59)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.19%			0.22%			0.28%			6.71%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.11%			0.14%			0.15%			0.15%	9
Net investment income7,8		1.87%			1.74%			2.02%			2.87%	9
Supplemental Data
Net assets, end of period (000)	$	307,946		$	253,463		$	173,667		$	1,905
Portfolio turnover rate of the LifePath Index Master Portfolio		15%	11		18%	11		1%	12		1%	12

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.02%, 0.04%, and 3.38% for the years ended December 31, 2014, 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%, 0.02%, 0.02% and 0.04% for the years ended December 31, 2014, 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 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, 2014	27

Financial Highlights LifePath Index 2020 Portfolio

	Institutional
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.25		$	10.36		$	9.48		$	10.00
Net investment income2		0.22			0.22			0.22			0.15
Net realized and unrealized gain (loss)		0.46			0.94			0.85			(0.53	)
Net increase (decrease) from investment operations		0.68			1.16			1.07			(0.38	)
Distributions from:3
Net investment income		(0.22	)		(0.21	)		(0.16	)		(0.13	)
Net realized gain		(0.14	)		(0.06	)		(0.03	)		—
Return of capital		—			—			—			(0.01	)
Total distributions		(0.36	)		(0.27	)		(0.19	)		(0.14	)
Net asset value, end of period	$	11.57		$	11.25		$	10.36		$	9.48
Total Return4
Based on net asset value		6.10%			11.32%			11.35%			(3.72)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.22%			0.26%			0.36%			6.91%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.16%			0.18%			0.17%			0.20%	9
Net investment income7,8		1.93%			1.98%			2.14%			2.66%	9
Supplemental Data
Net assets, end of period (000)	$	81,485		$	42,447		$	19,786		$	24
Portfolio turnover rate of the LifePath Index Master Portfolio		12%	11		12%	11		1%	12		1%	12

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.01%, 0.06%, and 3.48% for the years ended December 31, 2014, 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%, 0.03% and 0.05% for the years ended December 31, 2014, 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 Portfolios’ 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 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, 2014

Financial Highlights (continued) LifePath Index 2020 Portfolio

	Investor A
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.23		$	10.35		$	9.48		$	10.00
Net investment income2		0.19			0.19			0.19			0.13
Net realized and unrealized gain (loss)		0.46			0.94			0.85			(0.52	)
Net increase (decrease) from investment operations		0.65			1.13			1.04			(0.39	)
Distributions from:3
Net investment income		(0.19	)		(0.19	)		(0.14	)		(0.12	)
Net realized gain		(0.14	)		(0.06	)		(0.03	)		—
Return of capital		—			—			—			(0.01	)
Total distributions		(0.33	)		(0.25	)		(0.17	)		(0.13	)
Net asset value, end of period	$	11.55		$	11.23		$	10.35		$	9.48
Total Return4
Based on net asset value		5.87%			10.99%			10.98%			(3.87)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.47%			0.51%			0.68%			7.16%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.41%			0.44%			0.42%			0.46%	9
Net investment income7,8		1.68%			1.75%			1.85%			2.42%	9
Supplemental Data
Net assets, end of period (000)	$	99,790		$	61,996		$	17,944		$	24
Portfolio turnover rate of the LifePath Index Master Portfolio		12%	11		12%	11		1%	12		1%	12

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.01%, 0.06%, and 3.48% for the years ended December 31, 2014, 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%, 0.03% and 0.05% for the years ended December 31, 2014, 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 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, 2014	29

Financial Highlights (concluded) LifePath Index 2020 Portfolio

	Class K
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.25		$	10.36		$	9.48		$	10.00
Net investment income2		0.23			0.22			0.22			0.15
Net realized and unrealized gain (loss)		0.46			0.94			0.85			(0.52	)
Net increase (decrease) from investment operations		0.69			1.16			1.07			(0.37	)
Distributions from:3
Net investment income		(0.23	)		(0.21	)		(0.16	)		(0.14	)
Net realized gain		(0.14	)		(0.06	)		(0.03	)		—
Return of capital		—			—			—			(0.01	)
Total distributions		(0.37	)		(0.27	)		(0.19	)		(0.15	)
Net asset value, end of period	$	11.57		$	11.25		$	10.36		$	9.48
Total Return4
Based on net asset value		6.15%			11.36%			11.36%			(3.71)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.17%			0.21%			0.28%			6.81%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.11%			0.14%			0.16%			0.18%	9
Net investment income7,8		1.98%			2.00%			2.20%			2.70%	9
Supplemental Data
Net assets, end of period (000)	$	699,797		$	511,443		$	249,157		$	1,848
Portfolio turnover rate of the LifePath Index Master Portfolio		12%	11		12%	11		1%	12		1%	12

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.01%, 0.04%, and 3.48% for the years ended December 31, 2014, 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%, 0.03% and 0.05% for the years ended December 31, 2014, 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 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, 2014

Financial Highlights LifePath Index 2025 Portfolio

	Institutional
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.37		$	10.30		$	9.35		$	10.00
Net investment income2		0.24			0.25			0.23			0.14
Net realized and unrealized gain (loss)		0.47			1.12			0.92			(0.65	)
Net increase (decrease) from investment operations		0.71			1.37			1.15			(0.51	)
Distributions from:3
Net investment income		(0.22	)		(0.22	)		(0.16	)		(0.13	)
Net realized gain		(0.12	)		(0.08	)		(0.04	)		—
Return of capital		—			—			—			(0.01	)
Total distributions		(0.34	)		(0.30	)		(0.20	)		(0.14	)
Net asset value, end of period	$	11.74		$	11.37		$	10.30		$	9.35
Total Return4
Based on net asset value		6.33%			13.46%			12.34%			(5.12)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.23%			0.27%			0.51%			6.97%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.16%			0.17%			0.18%			0.21%	9
Net investment income7,8		2.03%			2.25%			2.26%			2.55%	9
Supplemental Data
Net assets, end of period (000)	$	53,760		$	21,097		$	4,844		$	23
Portfolio turnover rate of the LifePath Index Master Portfolio		15%	11		13%	11		0%	12,13		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.02%, 0.12% and 3.53% for the years ended December 31, 2014, 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%, 0.03%, and 0.06% for the years ended December 31, 2014, 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, 2014	31

Financial Highlights (continued) LifePath Index 2025 Portfolio

	Investor A
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.36		$	10.30		$	9.35		$	10.00
Net investment income2		0.21			0.23			0.22			0.13
Net realized and unrealized gain (loss)		0.48			1.11			0.91			(0.66	)
Net increase (decrease) from investment operations		0.69			1.34			1.13			(0.53	)
Distributions from:3
Net investment income		(0.20	)		(0.20	)		(0.14	)		(0.11	)
Net realized gain		(0.12	)		(0.08	)		(0.04	)		—
Return of capital		—			—			—			(0.01	)
Total distributions		(0.32	)		(0.28	)		(0.18	)		(0.12	)
Net asset value, end of period	$	11.73		$	11.36		$	10.30		$	9.35
Total Return4
Based on net asset value		6.10%			13.13%			12.12%			(5.26)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.48%			0.52%			0.85%			7.22%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.41%			0.43%			0.44%			0.46%	9
Net investment income7,8		1.77%			2.04%			2.21%			2.30%	9
Supplemental Data
Net assets, end of period (000)	$	89,983		$	49,232		$	3,918		$	23
Portfolio turnover rate of the LifePath Index Master Portfolio		15%	11		13%	11		0%	12,13		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.02%, 0.13% and 3.53% for the years ended December 31, 2014, 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%, 0.03%, and 0.06% for the years ended December 31, 2014, 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, 2014

Financial Highlights (concluded) LifePath Index 2025 Portfolio

	Class K
	Year Ended December 31,									Period May 31, 20111 to December 31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.37		$	10.30		$	9.35		$	10.00
Net investment income2		0.24			0.24			0.23			0.14
Net realized and unrealized gain (loss)		0.49			1.14			0.92			(0.65	)
Net increase (decrease) from investment operations		0.73			1.38			1.15			(0.51	)
Distributions from:3
Net investment income		(0.23	)		(0.23	)		(0.16	)		(0.13	)
Net realized gain		(0.12	)		(0.08	)		(0.04	)		—
Return of capital		—			—			—			(0.01	)
Total distributions		(0.35	)		(0.31	)		(0.20	)		(0.14	)
Net asset value, end of period	$	11.75		$	11.37		$	10.30		$	9.35
Total Return4
Based on net asset value		6.47%			13.48%			12.34%			(5.10)%	5
Ratio to Average Net Assets6
Total expenses7,8		0.18%			0.23%			0.37%			6.87%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.11%			0.14%			0.16%			0.18%	9
Net investment income7,8		2.08%			2.16%			2.26%			2.58%	9
Supplemental Data
Net assets, end of period (000)	$	374,396		$	208,280		$	113,655		$	1,823
Portfolio turnover rate of the LifePath Index Master Portfolio		15%	11		13%	11		0%	12,13		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.02%, 0.07% and 3.53% for the years ended December 31, 2014, 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%, 0.03%, and 0.06% for the years ended December 31, 2014, 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, 2014	33

Financial Highlights LifePath Index 2030 Portfolio

	Institutional
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.49		$	10.26		$	9.24		$	10.00
Net investment income2		0.25			0.25			0.23			0.13
Net realized and unrealized gain (loss)		0.51			1.31			1.00			(0.76	)
Net increase (decrease) from investment operations		0.76			1.56			1.23			(0.63	)
Distributions from:3
Net investment income		(0.24	)		(0.24	)		(0.17	)		(0.12	)
Net realized gain		(0.15	)		(0.09	)		(0.04	)		—
Tax return of capital		—			—			—			(0.01	)
Total distributions		(0.39	)		(0.33	)		(0.21	)		(0.13	)
Net asset value, end of period	$	11.86		$	11.49		$	10.26		$	9.24
Total Return4
Based on net asset value		6.58%			15.34%			13.38%			(6.30)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.22%			0.27%			0.41%			7.04%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.16%			0.19%			0.18%			0.22%	9
Net investment income7,8		2.10%			2.30%			2.27%			2.47%	9
Supplemental Data
Net assets, end of period (000)	$	73,640		$	32,538		$	16,158		$	23
Portfolio turnover rate of the LifePath Index Master Portfolio		20%	11		12%	11		2%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.01%, 0.07%, and 3.57% for the years ended December 31, 2014, 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%, 0.04% and 0.06% for the years ended December 31, 2014, 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 presentation, 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, 2014

Financial Highlights (continued) LifePath Index 2030 Portfolio

	Investor A
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.49		$	10.26		$	9.24		$	10.00
Net investment income2		0.22			0.23			0.20			0.12
Net realized and unrealized gain (loss)		0.50			1.30			1.01			(0.77	)
Net increase (decrease) from investment operations		0.72			1.53			1.21			(0.65	)
Distributions from:3
Net investment income		(0.21	)		(0.21	)		(0.15	)		(0.10	)
Net realized gain		(0.15	)		(0.09	)		(0.04	)		—
Tax return of capital		—			—			—			(0.01	)
Total distributions		(0.36	)		(0.30	)		(0.19	)		(0.11	)
Net asset value, end of period	$	11.85		$	11.49		$	10.26		$	9.24
Total Return4
Based on net asset value		6.26%			15.09%			13.11%			(6.44)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.47%			0.52%			0.72%			7.29%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.41%			0.45%			0.44%			0.47%	9
Net investment income7,8		1.84%			2.10%			1.99%			2.22%	9
Supplemental Data
Net assets, end of period (000)	$	111,333		$	62,487		$	13,908		$	23
Portfolio turnover rate of the LifePath Index Master Portfolio		20%	11		12%	11		2%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.01%, 0.07%, and 3.57% for the years ended December 31, 2014, 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%, 0.04% and 0.06% for the years ended December 31, 2014, 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 presentation, 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, 2014	35

Financial Highlights (concluded) LifePath Index 2030 Portfolio

	Class K
	Year Ended December 31,									Period May 31, 20111 to December 31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.48		$	10.25		$	9.24		$	10.00
Net investment income2		0.25			0.26			0.24			0.14
Net realized and unrealized gain (loss)		0.51			1.30			0.98			(0.77	)
Net increase (decrease) from investment operations		0.76			1.56			1.22			(0.63	)
Distributions from:3
Net investment income		(0.24	)		(0.24	)		(0.17	)		(0.12	)
Net realized gain		(0.15	)		(0.09	)		(0.04	)		—
Tax return of capital		—			—			—			(0.01	)
Total distributions		(0.39	)		(0.33	)		(0.21	)		(0.13	)
Net asset value, end of period	$	11.85		$	11.48		$	10.25		$	9.24
Total Return4
Based on net asset value		6.64%			15.40%			13.28%			(6.28)%	5
Ratio to Average Net Assets6
Total expenses7,8		0.17%			0.22%			0.31%			6.94%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.11%			0.15%			0.17%			0.19%	9
Net investment income7,8		2.14%			2.32%			2.37%			2.50%	9
Supplemental Data
Net assets, end of period (000)	$	633,093		$	433,320		$	175,849		$	1,802
Portfolio turnover rate of the LifePath Index Master Portfolio		20%	11		12%	11		2%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.01%, 0.09%, and 3.57% for the years ended December 31, 2014, 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%, 0.04% and 0.06% for the years ended December 31, 2014, 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 presentation, 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, 2014

Financial Highlights LifePath Index 2035 Portfolio

	Institutional
	Year Ended December 31,									Period May 31, 20111 to December 31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.57		$	10.21		$	9.14		$	10.00
Net investment income2		0.26			0.29			0.25			0.13
Net realized and unrealized gain (loss)		0.51			1.43			1.04			(0.87	)
Net increase (decrease) from investment operations		0.77			1.72			1.29			(0.74	)
Distributions from:3
Net investment income		(0.24	)		(0.25	)		(0.17	)		(0.11	)
Net realized gain		(0.12	)		(0.11	)		(0.05	)		—
Tax return of capital		—			—			—			(0.01	)
Total distributions		(0.36	)		(0.36	)		(0.22	)		(0.12	)
Net asset value, end of period	$	11.98		$	11.57		$	10.21		$	9.14
Total Return4
Based on net asset value		6.68%			16.98%			14.16%			(7.37)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.24%			0.28%			0.86%			7.12%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.15%			0.18%			0.20%			0.23%	9
Net investment income7,8		2.18%			2.59%			2.52%			2.40%	9
Supplemental Data
Net assets, end of period (000)	$	37,073		$	10,605		$	1,835		$	23
Portfolio turnover of the LifePath Index 2035 Portfolio		25%	11		12%	11		1%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.03%, 0.21%, and 3.61% for the years ended December 31, 2014, 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%, 0.04% and 0.06% for the years ended December 31, 2014, 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 presentation, 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, 2014	37

Financial Highlights (continued) LifePath Index 2035 Portfolio

	Investor A
	Year Ended December 31,									Period May 31, 20111 to December 31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.56		$	10.20		$	9.14		$	10.00
Net investment income2		0.23			0.25			0.26			0.12
Net realized and unrealized gain (loss)		0.51			1.45			1.00			(0.87	)
Net increase (decrease) from investment operations		0.74			1.70			1.26			(0.75	)
Distributions from:3
Net investment income		(0.22	)		(0.23	)		(0.15	)		(0.10	)
Net realized gain		(0.12	)		(0.11	)		(0.05	)		—
Tax return of capital		—			—			—			(0.01	)
Total distributions		(0.34	)		(0.34	)		(0.20	)		(0.11	)
Net asset value, end of period	$	11.96		$	11.56		$	10.20		$	9.14
Total Return4
Based on net asset value		6.37%			16.74%			13.83%			(7.52)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.48%			0.54%			0.89%			7.47%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.41%			0.44%			0.45%			0.48%	9
Net investment income7,8		1.91%			2.29%			2.59%			2.14%	9
Supplemental Data
Net assets, end of period (000)	$	83,587		$	38,107		$	3,798		$	23
Portfolio turnover of the LifePath Index 2035 Portfolio		25%	11		12%	11		1%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.03%, 0.09%, and 3.61% for the years ended December 31, 2014, 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%, 0.04% and 0.06% for the years ended December 31, 2014, 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 presentation, 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, 2014

Financial Highlights (concluded) LifePath Index 2035 Portfolio

	Class K
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.56		$	10.20		$	9.14		$	10.00
Net investment income2		0.26			0.27			0.24			0.13
Net realized and unrealized gain (loss)		0.53			1.45			1.04			(0.87	)
Net increase (decrease) from investment operations		0.79			1.72			1.28			(0.74	)
Distributions from:3
Net investment income		(0.25	)		(0.25	)		(0.17	)		(0.11	)
Net realized gain		(0.12	)		(0.11	)		(0.05	)		—
Tax return of capital		—			—			—			(0.01	)
Total distributions		(0.37	)		(0.36	)		(0.22	)		(0.12	)
Net asset value, end of period	$	11.98		$	11.56		$	10.20		$	9.14
Total Return4
Based on net asset value		6.82%			17.02%			14.07%			(7.35)%	5
Ratio to Average Net Assets6
Total expenses7,8		0.19%			0.25%			0.48%			7.02%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.11%			0.15%			0.17%			0.19%	9
Net investment income7,8		2.22%			2.44%			2.43%			2.43%	9
Supplemental Data
Net assets, end of period (000)	$	289,331		$	158,455		$	76,095		$	1,782
Portfolio turnover of the LifePath Index 2035 Portfolio		25%	11		12%	11		1%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.03%, 0.10%, and 3.61% for the years ended December 31, 2014, 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%, 0.04% and 0.06% for the years ended December 31, 2014, 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 presentation, 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, 2014	39

Financial Highlights LifePath Index 2040 Portfolio

	Institutional
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.69		$	10.18		$	9.04		$	10.00
Net investment income2		0.27			0.28			0.23			0.13
Net realized and unrealized gain (loss)		0.54			1.60			1.12			(0.98	)
Net increase (decrease) from investment operations		0.81			1.88			1.35			(0.85	)
Distributions from:3
Net investment income		(0.26	)		(0.26	)		(0.18	)		(0.10	)
Net realized gain		(0.13	)		(0.11	)		(0.03	)		—
Return of capital		—			—			—			(0.01	)
Total distributions		(0.39	)		(0.37	)		(0.21	)		(0.11	)
Net asset value, end of period	$	12.11		$	11.69		$	10.18		$	9.04
Total Return4
Based on net asset value		6.94%			18.61%			15.01%			(8.44)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.23%			0.29%			0.53%			7.17%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.16%			0.20%			0.19%			0.23%	9
Net investment income7,8		2.23%			2.55%			2.36%			2.34%	9
Supplemental Data
Net assets, end of period (000)	$	50,054		$	19,346		$	9,554		$	23
Portfolio turnover rate of the LifePath Index Master Portfolio		29%	11		12%	11		3%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.02%, 0.11%, and 3.65% for the years ended December 31, 2014, 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%, 0.04% and 0.07% for the years ended December 31, 2014, 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 Portfolios’ 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 presentation, 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, 2014

Financial Highlights (continued) LifePath Index 2040 Portfolio

	Investor A
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.68		$	10.17		$	9.04		$	10.00
Net investment income2		0.24			0.27			0.21			0.11
Net realized and unrealized gain (loss)		0.53			1.58			1.11			(0.97	)
Net increase (decrease) from investment operations		0.77			1.85			1.32			(0.86	)
Distributions from:3
Net investment income		(0.23	)		(0.23	)		(0.16	)		(0.09	)
Net realized gain		(0.13	)		(0.11	)		(0.03	)		—
Return of capital		—			—			—			(0.01	)
Total distributions		(0.36	)		(0.34	)		(0.19	)		(0.10	)
Net asset value, end of period	$	12.09		$	11.68		$	10.17		$	9.04
Total Return4
Based on net asset value		6.62%			18.38%			14.63%			(8.58)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.48%			0.53%			0.85%			7.42%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.41%			0.45%			0.45%			0.48%	9
Net investment income7,8		1.98%			2.39%			2.13%			2.08%	9
Supplemental Data
Net assets, end of period (000)	$	58,952		$	31,753		$	7,563		$	23
Portfolio turnover rate of the LifePath Index Master Portfolio		29%	11		12%	11		3%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.02%, 0.14%, and 3.65% for the years ended December 31, 2014, 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%, 0.04% and 0.07% for the years ended December 31, 2014, 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 Portfolios’ 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 presentation, 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, 2014	41

Financial Highlights (concluded) LifePath Index 2040 Portfolio

	Class K
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.69		$	10.18		$	9.04		$	10.00
Net investment income2		0.27			0.29			0.25			0.13
Net realized and unrealized gain (loss)		0.53			1.59			1.10			(0.97	)
Net increase (decrease) from investment operations		0.80			1.88			1.35			(0.84	)
Distributions from:3
Net investment income		(0.26	)		(0.26	)		(0.18	)		(0.11	)
Net realized gain		(0.13	)		(0.11	)		(0.03	)		—
Return of capital		—			—			—			(0.01	)
Total distributions		(0.39	)		(0.37	)		(0.21	)		(0.12	)
Net asset value, end of period	$	12.10		$	11.69		$	10.18		$	9.04
Total Return4
Based on net asset value		6.90%			18.66%			15.03%			(8.42)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.18%			0.24%			0.39%			7.06%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.11%			0.15%			0.18%			0.20%	9
Net investment income7,8		2.27%			2.58%			2.52%			2.36%	9
Supplemental Data
Net assets, end of period (000)	$	437,342		$	275,471		$	90,476		$	1,763
Portfolio turnover rate of the LifePath Index Master Portfolio		29%	11		12%	11		3%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.02%, 0.07%, and 3.65% for the years ended December 31, 2014, 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%, 0.04% and 0.07% for the years ended December 31, 2014, 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 presentation, 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, 2014

Financial Highlights LifePath Index 2045 Portfolio

	Institutional
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.78		$	10.13		$	8.94		$	10.00
Net investment income2		0.29			0.34			0.26			0.12
Net realized and unrealized gain (loss)		0.54			1.69			1.13			(1.07	)
Net increase (decrease) from investment operations		0.83			2.03			1.39			(0.95	)
Distributions from:3
Net investment income		(0.26	)		(0.27	)		(0.18	)		(0.10	)
Net realized gain		(0.10	)		(0.11	)		(0.02	)		—
Return of capital		—			—			—			(0.01	)
Total distributions		(0.36	)		(0.38	)		(0.20	)		(0.11	)
Net asset value, end of period	$	12.25		$	11.78		$	10.13		$	8.94
Total Return4
Based on net asset value		7.07%			20.18%			15.58%			(9.51)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.26%			0.35%			1.35%			7.23%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.15%			0.20%			0.22%			0.24%	9
Net investment income7,8		2.35%			3.01%			2.64%			2.26%	9
Supplemental Data
Net assets, end of period (000)	$	27,964		$	4,117		$	532		$	22
Portfolio turnover rate of the LifePath Index Master Portfolio		30%	11		12%	11		2%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.05%, 0.36%, and 3.69% for the years ended December 31, 2014, 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 0.07%, 0.05%, 0.04% and 0.07% for the years ended December 31, 2014, 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 presentation, 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, 2014	43

Financial Highlights (continued) LifePath Index 2045 Portfolio

	Investor A
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.77		$	10.12		$	8.94		$	10.00
Net investment income2		0.25			0.29			0.27			0.11
Net realized and unrealized gain (loss)		0.54			1.72			1.09			(1.08	)
Net increase (decrease) from investment operations		0.79			2.01			1.36			(0.97	)
Distributions from:3
Net investment income		(0.23	)		(0.25	)		(0.16	)		(0.08	)
Net realized gain		(0.10	)		(0.11	)		(0.02	)		—
Return of capital		—			—			—			(0.01	)
Total distributions		(0.33	)		(0.36	)		(0.18	)		(0.09	)
Net asset value, end of period	$	12.23		$	11.77		$	10.12		$	8.94
Total Return4
Based on net asset value		6.74%			19.96%			15.27%			(9.64)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.51%			0.58%			1.39%			7.48%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.40%			0.44%			0.46%			0.49%	9
Net investment income7,8		2.04%			2.61%			2.75%			2.00%	9
Supplemental Data
Net assets, end of period (000)	$	33,859		$	16,428		$	887		$	22
Portfolio turnover rate of the LifePath Index Master Portfolio		30%	11		12%	11		2%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.06%, 0.25%, and 3.69% for the years ended December 31, 2014, 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 0.07%, 0.05%, 0.04% and 0.07% for the years ended December 31, 2014, 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 presentation, 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, 2014

Financial Highlights (concluded) LifePath Index 2045 Portfolio

	Class K
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.79		$	10.13		$	8.94		$	10.00
Net investment income2		0.28			0.30			0.26			0.12
Net realized and unrealized gain (loss)		0.55			1.74			1.13			(1.07	)
Net increase (decrease) from investment operations		0.83			2.04			1.39			(0.95	)
Distributions from:3
Net investment income		(0.26	)		(0.27	)		(0.18	)		(0.10	)
Net realized gain		(0.10	)		(0.11	)		(0.02	)		—
Return of capital		—			—			—			(0.01	)
Total distributions		(0.36	)		(0.38	)		(0.20	)		(0.11	)
Net asset value, end of period	$	12.26		$	11.79		$	10.13		$	8.94
Total Return4
Based on net asset value		7.10%			20.32%			15.61%			(9.49)%	5
Ratio to Average Net Assets6
Total expenses7,8		0.22%			0.31%			0.89%			7.12%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.10%			0.15%			0.18%			0.21%	9
Net investment income7,8		2.33%			2.73%			2.60%			2.29%	9
Supplemental Data
Net assets, end of period (000)	$	164,934		$	84,015		$	31,724		$	1,744
Portfolio turnover rate of the LifePath Index Master Portfolio		30%	11		12%	11		2%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.06%, 0.24%, and 3.69% for the years ended December 31, 2014, 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 0.07%, 0.05%, 0.04% and 0.07% for the years ended December 31, 2014, 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 presentation, 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, 2014	45

Financial Highlights LifePath Index 2050 Portfolio

	Institutional
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.91		$	10.11		$	8.86		$	10.00
Net investment income2		0.29			0.34			0.24			0.12
Net realized and unrealized gain		0.57			1.82			1.21			(1.16	)
Net increase (decrease) from investment operations		0.86			2.16			1.45			(1.04	)
Distributions from:3
Net investment income		(0.26	)		(0.27	)		(0.19	)		(0.09	)
Net realized gain		(0.10	)		(0.09	)		(0.01	)		—
Return of capital		—			—			—			(0.01	)
Total distributions		(0.36	)		(0.36	)		(0.20	)		(0.10	)
Net asset value, end of period	$	12.41		$	11.91		$	10.11		$	8.86
Total Return4
Based on net asset value		7.23%			21.56%			16.35%			(10.36)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.27%			0.34%			1.55%			7.27%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.15%			0.20%			0.21%			0.24%	9
Net investment income7,8		2.33%			3.03%			2.44%			2.22%	9
Supplemental Data
Net assets, end of period (000)	$	24,618		$	7,679		$	1,573		$	22
Portfolio turnover rate of the LifePath Index Master Portfolio		22%	11		12%	11		3%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.06%, 0.47%, and 3.71% for the years ended December 31, 2014, 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 0.08%, 0.06%, 0.05 % and 0.07 % for the years ended December 31, 2014, 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, 2014

Financial Highlights (continued) LifePath Index 2050 Portfolio

	Investor A
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.89		$	10.10		$	8.86		$	10.00
Net investment income2		0.26			0.32			0.28			0.10
Net realized and unrealized gain (loss)		0.57			1.81			1.14			(1.15	)
Net increase (decrease) from investment operations		0.83			2.13			1.42			(1.05	)
Distributions from:3
Net investment income		(0.23	)		(0.25	)		(0.17	)		(0.08	)
Net realized gain		(0.10	)		(0.09	)		(0.01	)		—
Return of capital		—			—			—			(0.01	)
Total distributions		(0.33	)		(0.34	)		(0.18	)		(0.09	)
Net asset value, end of period	$	12.39		$	11.89		$	10.10		$	8.86
Total Return4
Based on net asset value		7.01%			21.25%			16.00%			(10.49)%	5
Ratios to Average Net Assets6
Total expenses7,8		0.52%			0.59%			1.33%			7.69%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.40%			0.45%			0.47%			0.49%	9
Net investment income7,8		2.08%			2.85%			2.86%			1.97%	9
Supplemental Data
Net assets, end of period (000)	$	22,053		$	12,103		$	1,090		$	25
Portfolio turnover rate of the LifePath Index Master Portfolio		22%	11		12%	11		3%	12		0%	12,13

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total 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%, 0.06%, 0.22%, and 3.71% for the years ended December 31, 2014, 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 0.08%, 0.06%, 0.05% and 0.07% for the years ended December 31, 2014, 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, 2014	47

Financial Highlights (concluded) LifePath Index 2050 Portfolio

	Class K
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	11.91		$	10.11		$	8.86		$	10.00
Net investment income2		0.29			0.32			0.26			0.12
Net realized and unrealized gain (loss)		0.58			1.85			1.19			(1.16	)
Net increase (decrease) from investment operations		0.87			2.17			1.45			(1.04	)
Distributions from:3
Net investment income		(0.27	)		(0.28	)		(0.19	)		(0.09	)
Net realized gain		(0.10	)		(0.09	)		(0.01	)		—
Return of capital		—			—			—			(0.01	)
Total distributions		(0.37	)		(0.37	)		(0.20	)		(0.10	)
Net asset value, end of period	$	12.41		$	11.91		$	10.11		$	8.86
Total Return4
Based on net asset value		7.28%			21.61%			16.37%			(10.34)%	5
Ratio to Average Net Assets6
Total expenses7,8		0.23%			0.33%			0.99%			7.17%	9,10
Total expenses after fees waived and/or reimbursed7,8		0.10%			0.15%			0.19%			0.21%	9
Net investment income7,8		2.37%			2.88%			2.67%			2.25%	9
Supplemental Data
Net assets, end of period (000)	$	186,198		$	83,933		$	23,342		$	1,727
Portfolio turnover rate of the LifePath Index Master Portfolio		22%	11		12%	11		3%	12		0%	11,13

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 distributions.

⁵  Aggregate total 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%, 0.06%, 0.27%, and 3.71% for the years ended December 31, 2014, 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 0.08%, 0.06%, 0.05% and 0.07% for the years ended December 31, 2014, 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 presentation, 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, 2014

Financial Highlights LifePath Index 2055 Portfolio

	Institutional
	Year Ended December 31,									Period May 31, 20111 to December 31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	12.05		$	10.05		$	8.80		$	10.00
Net investment income2		0.31			0.37			0.24			0.12
Net realized and unrealized gain (loss)		0.58			1.91			1.23			(1.22	)
Net increase (decrease) from investment operations		0.89			2.28			1.47			(1.10	)
Distributions from:3
Net investment income		(0.27	)		(0.28	)		(0.22	)		(0.09	)
Net realized gain		(0.07	)		—			—			—
Return of capital		—			—			(0.00	)4		(0.01	)
Total distributions		(0.34	)		(0.28	)		(0.22	)		(0.10	)
Net asset value, end of period	$	12.60		$	12.05		$	10.05		$	8.80
Total Return5
Based on net asset value		7.46%			22.91%			16.78%			(10.98)%	6
Ratios to Average Net Assets7
Total expenses8,9		0.43%			0.75%			4.43%			7.32%	10,11
Total expenses after fees waived and/or reimbursed8,9		0.13%			0.20%			0.24%			0.24%	10
Net investment income8,9		2.50%			3.25%			2.46%			2.21%	10
Supplemental Data
Net assets, end of period (000)	$	7,874		$	896		$	25		$	22
Portfolio turnover rate of the LifePath Index Master Portfolio		22%	12		15%	12		8%	13		0%	13,14

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 0.10%, 0.26%, 1.36% and 3.73% for the years ended December 31, 2014, 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 0.09%, 0.06%, 0.05% and 0.08% for the years ended December 31, 2014, 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 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.

¹³ 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 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, 2014	49

Financial Highlights (continued) LifePath Index 2055 Portfolio

	Investor A
	Year Ended December 31,									Period May 31, 20111 to December 31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	12.04		$	10.05		$	8.80		$	10.00
Net investment income2		0.27			0.33			0.25			0.10
Net realized and unrealized gain (loss)		0.58			1.92			1.20			(1.21	)
Net increase (decrease) from investment operations		0.85			2.25			1.45			(1.11	)
Distributions from:3
Net investment income		(0.24	)		(0.26	)		(0.20	)		(0.08	)
Net realized gain		(0.07	)		—			—			—
Return of capital		—			—			(0.00	)4		(0.01	)
Total distributions		(0.31	)		(0.26	)		(0.20	)		(0.09	)
Net asset value, end of period	$	12.58		$	12.04		$	10.05		$	8.80
Total Return5
Based on net asset value		7.13%			22.55%			16.55%			(11.11)%	6
Ratios to Average Net Assets7
Total expenses8,9		0.69%			0.91%			3.98%			7.57%	10,11
Total expenses after fees waived and/or reimbursed8,9		0.40%			0.44%			0.49%			0.49%	10
Net investment income8,9		2.14%			2.87%			2.60%			1.95%	10
Supplemental Data
Net assets, end of period (000)	$	8,945		$	4,696		$	129		$	22
Portfolio turnover rate of the LifePath Index Master Portfolio		22%	12		15%	12		8%	13		0%	13,14

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 0.10%, 0.27%, 1.05% and 3.74% for the years ended December 31, 2014, 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 0.09%, 0.06%, 0.05% and 0.08% for the years ended December 31, 2014, 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 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.

¹³ 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 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, 2014

Financial Highlights (concluded) LifePath Index 2055 Portfolio

	Class K
	Year Ended December 31,									Period May 31, 20111 to December 31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	12.05		$	10.05		$	8.80		$	10.00
Net investment income2		0.30			0.34			0.26			0.12
Net realized and unrealized gain (loss)		0.60			1.95			1.21			(1.22	)
Net increase (decrease) from investment operations		0.90			2.29			1.47			(1.10	)
Distributions from:3
Net investment income		(0.28	)		(0.29	)		(0.22	)		(0.09	)
Net realized gain		(0.07	)		—			—			—
Return of capital		—			—			(0.00	)4		(0.01	)
Total distributions		(0.35	)		(0.29	)		(0.22	)		(0.10	)
Net asset value, end of period	$	12.60		$	12.05		$	10.05		$	8.80
Total Return5
Based on net asset value		7.50%			22.95%			16.83%			(10.96)%	6
Ratio to Average Net Assets7
Total expenses8,9		0.42%			0.70%			3.71%			7.21%	10,11
Total expenses after fees waived and/or reimbursed8,9		0.10%			0.15%			0.19%			0.21%	10
Net investment income8,9		2.44%			3.05%			2.71%			2.24%	10
Supplemental Data
Net assets, end of period (000)	$	45,039		$	18,345		$	4,706		$	1,716
Portfolio turnover rate of the LifePath Index Master Portfolio		22%	12		15%	12		8%	13		0%	13,14

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 0.10%, 0.28%, 0.18%, and 3.74% for the years ended December 31, 2014, 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 0.09%, 0.06%, 0.05% and 0.08% for the years ended December 31, 2014, 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 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.

¹³ 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 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, 2014	51

Notes to Financial Statements

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 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% for each of the LifePath Index Portfolios as of December 31, 2014). As such, the financial statements of each corresponding LifePath Index Master Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with each LifePath Index Portfolio’s financial statements.

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 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 and distribution expenditures.

Share Name	Initial Sales Charge		CDSC		Conversion
Institutional and Class K		No		No		None
Investor A		Yes		No		None

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 (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each LifePath Index Portfolio is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the LifePath Index Portfolios:

Valuation: The LifePath Index Portfolios’ investments are valued at fair value as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the 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.

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

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 prorated 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 prorated 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, 2014

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). For such services, the LifePath Index Portfolios pay the Administrator a monthly fee at an annual rate of 0.03% of the average daily value of the LifePath Index Portfolio’s net assets. 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, tax expense, acquired fund fees and expenses and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the LifePath Index Portfolio’s business. 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, 2015. 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 of the LifePath Index Portfolio.

These amounts waived or reimbursed are included in fees waived by administrator, and shown as transfer agent fees reimbursed — class specific, in the Statements of Operations. For the year ended December 31, 2014, the amounts included in transfer agent fee reimbursed for each class 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
$45,325	$	45,452	$	29,299	$	46,148	$	28,634	$	41,567	$	26,287	$	39,419	$	20,864

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 years 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 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 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, 2014, the BAL recouped the following Portfolio level and class specific waivers and/or reimbursements previously recorded by the the LifePath Index Portfolios:

	BAL
LifePath Index Retirement Portfolio
Institutional	$	2,020
Investor A	$	1,009
LifePath Index 2020 Portfolio
Institutional	$	4,347
Investor A	$	1,802
LifePath Index 2025 Portfolio
Institutional	$	2,404
Investor A	$	2,032
LifePath Index 2030 Portfolio
Institutional	$	3,810
Investor A	$	3,355
LifePath Index 2035 Portfolio
Institutional	$	935
Investor A	$	1,988
LifePath Index 2040 Portfolio
Institutional	$	2,424
Investor A	$	1,389
LifePath Index 2045 Portfolio
Institutional	$	362
Investor A	$	480
LifePath Index 2050 Portfolio
Institutional	$	400
Investor A	$	340

BLACKROCK FUNDS III DECEMBER 31, 2014 53

Notes to Financial Statements (continued)

On December 31, 2014, the LifePath Index 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,
	2015		2016
	BAL		BAL
LifePath Index Retirement Portfolio
Portfolio level	$	189,439	$	236,881
Institutional	$	922	$	4,303
Investor A	$	276	$	3,169
Class K	$	40,265	$	38,754
LifePath Index 2020 Portfolio
Portfolio level	$	292,083	$	378,916
Institutional	$	675	$	6,866
Investor A	$	2,631	$	5,962
Class K	$	33,435	$	34,474
LifePath Index 2025 Portfolio
Portfolio level	$	163,135	$	251,482
Institutional		—	$	4,506
Investor A		—	$	7,253
Class K	$	15,552	$	18,069
LifePath Index 2030 Portfolio
Portfolio level	$	250,300	$	360,380
Institutional		—	$	5,933
Investor A	$	1,903	$	6,849
Class K	$	31,714	$	35,945
LifePath Index 2035 Portfolio
Portfolio level	$	127,727	$	217,349
Institutional		—	$	3,884
Investor A	$	476	$	5,135
Class K	$	15,042	$	20,256
LifePath Index 2040 Portfolio
Portfolio level	$	173,008	$	274,796
Institutional	$	33	$	4,078
Investor A	$	443	$	4,561
Class K	$	29,287	$	35,930
LifePath Index 2045 Portfolio
Portfolio level	$	90,363	$	161,498
Institutional		—	$	2,976
Investor A	$	552	$	2,753
Class K	$	14,331	$	21,337
LifePath Index 2050 Portfolio
Portfolio level	$	88,935	$	167,904
Institutional		—	$	3,069
Investor A	$	516	$	3,247
Class K	$	26,822	$	35,913
LifePath Index 2055 Portfolio
Portfolio level	$	67,183	$	104,537
Institutional	$	355	$	1,752
Investor A	$	322	$	1,708
Class K	$	8,027	$	17,947

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, 2014:

	Expired December 31,
	2014
	BAL		BTC
LifePath Index Retirement Portfolio
Portfolio level	$	109,815	$	63,411
Class K	$	5,558	$	162
LifePath Index 2020 Portfolio
Portfolio level	$	134,993	$	66,273
Class K	$	9,239	$	162
LifePath Index 2025 Portfolio
Portfolio level	$	62,960	$	58,004
Class K	$	6,422	$	159
LifePath Index 2030 Portfolio
Portfolio level	$	109,790	$	63,227
Class K	$	8,398	$	162

54 BLACKROCK FUNDS III DECEMBER 31, 2014

Notes to Financial Statements (continued)

	Expired December 31,
	2014
	BAL		BTC
LifePath Index 2035 Portfolio
Portfolio level	$	62,145	$	57,339
Class K	$	6,472	$	160
LifePath Index 2040 Portfolio
Portfolio level	$	75,994	$	59,087
Class K	$	7,192	$	155
LifePath Index 2045 Portfolio
Portfolio level	$	49,596	$	55,569
Class K	$	6,009	$	160
LifePath Index 2050 Portfolio
Portfolio level	$	48,051	$	55,597
Class K	$	6,605	$	163
LifePath Index 2055 Portfolio
Portfolio level	$	42,507	$	55,312
Institutional	$	64	$	19
Investor A	$	89	$	23
Class K	$	2,512	$	139

The Trust, on behalf of the LifePath Index Portfolios, entered into a Distribution Agreement and a Distribution and Service 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, each LifePath Index Portfolio pays BRIL ongoing service fees with respect to Investor A Shares. The fees are accrued daily and paid monthly at annual rates 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 and distribution 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 asset-based fee or an annual fee per shareholder account, which will vary depending on share class and/or net assets. For the year ended December 31, 2014, the the LifePath Index Portfolios paid the following amounts to affiliates of BlackRock in return for these services, which are included in transfer agent in the Statements of Operations:

	Institutional		Investor A
LifePath Index Retirement Portfolio	$	27,173	$	18,467
LifePath Index 2020 Portfolio	$	32,399	$	38,884
LifePath Index 2025 Portfolio	$	19,708	$	34,506
LifePath Index 2030 Portfolio	$	27,645	$	42,066
LifePath Index 2035 Portfolio	$	12,615	$	28,043
LifePath Index 2040 Portfolio	$	17,727	$	22,567
LifePath Index 2045 Portfolio	$	7,692	$	11,591
LifePath Index 2050 Portfolio	$	7,734	$	8,935
LifePath Index 2055 Portfolio	$	1,418	$	3,359

The Administrator maintains a call center, which is responsible for providing certain shareholder services to the 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 the LifePath Index Portfolio shares. For the year ended December 31, 2014, each LifePath Index Portfolio reimbursed the Administrator the following amounts for costs incurred in running the call center, which are included in transfer agent — class specific in the Statements of Operations:

	Institutional		Investor A		Class K
LifePath Index Retirement Portfolio	$	74	$	195	$	754
LifePath Index 2020 Portfolio	$	180	$	391	$	1,570
LifePath Index 2025 Portfolio	$	146	$	549	$	124
LifePath Index 2030 Portfolio	$	125	$	483	$	2,252
LifePath Index 2035 Portfolio	$	113	$	391	$	323
LifePath Index 2040 Portfolio	$	110	$	400	$	2,629
LifePath Index 2045 Portfolio	$	101	$	262	$	461
LifePath Index 2050 Portfolio	$	150	$	235	$	2,453
LifePath Index 2055 Portfolio	$	106	$	149	$	287

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, which is included in independent trustees in the Statements of Operations.

BLACKROCK FUNDS III DECEMBER 31, 2014 55

Notes to Financial Statements (continued)

4. Income Tax Information:

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 U.S. 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 U.S. federal tax returns remains open for each of the three years ended December 31, 2014 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 each LifePath Index Portfolio’s facts and circumstances and does not believe that there are any uncertain tax positions that require recognition of a tax liability.

The tax character of distributions paid was 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	12/31/14	$	8,530,813	$	17,809,658	$	9,565,301	$	16,487,776	$	7,559,023	$	10,814,066	$	4,153,223	$	4,115,966	$	1,021,949
	12/31/13	$	5,108,294	$	10,480,190	$	4,595,607	$	9,833,017	$	3,768,047	$	6,431,632		1,942,931	$	1,949,543	$	432,955
Long-term capital gains	12/31/14		3,633,371		7,326,180		3,428,773		7,070,739		2,776,161		4,358,083		1,292,029		1,263,701		266,629
	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		—
Total	12/31/14	$	12,164,184	$	25,135,838	$	12,994,074	$	23,558,515	$	10,335,184	$	15,172,149	$	5,445,252	$	5,379,667	$	1,288,578
	12/31/13	$	6,603,891	$	13,983,153	$	6,471,737	$	13,990,238	$	5,556,476	$	9,305,504	$	2,818,690	$	2,662,896	$	432,955

As of December 31, 2014, 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	$	592,595	$	933,460	$	392,615	$	498,314		$	160,464		$	125,173	$	40,528	$	11,952	$	1,213
Undistributed long-term capital gains		387,423		666,884		146,261		—			—			10,444		61,318		56,484		20,734
Net unrealized gains1		29,075,905		69,458,630		35,550,829		73,435,317			31,392,277			50,605,767		17,104,225		17,367,804		3,956,617
Qualified late-year losses2		—		—		—		(44,089	)		(34,348	)		—		—				—
	$	30,055,923	$	71,058,974	$	36,089,705	$	73,889,542		$	31,518,393		$	50,741,384	$	17,206,071	$	17,436,240	$	3,978,564

¹  The difference between book-basis and tax-basis net unrealized gains was 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 next taxable year.

5. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2014						Year Ended December 31, 2013
LifePath Index Retirement Portfolio	Shares			Amount			Shares			Amount
Institutional
Shares sold		3,680,315		$	41,628,878			2,061,585		$	22,268,556
Shares issued to shareholders in reinvestment of distributions		161,743			1,834,869			71,735			777,468
Shares redeemed		(1,409,237	)		(15,988,870	)		(460,130	)		(4,987,149	)
Net increase		2,432,821		$	27,474,877			1,673,190		$	18,058,875
Investor A
Shares sold		3,144,759		$	35,707,200			2,236,821		$	23,994,734
Shares issued to shareholders in reinvestment of distributions		113,626			1,288,110			37,556			409,184
Shares redeemed		(943,159	)		(10,647,862	)		(479,752	)		(5,171,689	)
Net increase		2,315,226		$	26,347,448			1,794,625		$	19,232,229

56 BLACKROCK FUNDS III DECEMBER 31, 2014

Notes to Financial Statements (continued)

	Year Ended December 31, 2014						Year Ended December 31, 2013
LifePath Index Retirement Portfolio (concluded)	Shares			Amount			Shares			Amount
Class K
Shares sold		10,318,651		$	116,653,376			11,425,875		$	122,818,985
Shares issued to shareholders in reinvestment of distributions		797,307			9,041,203			500,292			5,417,084
Shares redeemed		(6,882,045	)		(77,717,842	)		(5,538,787	)		(59,812,461	)
Net increase		4,233,913		$	47,976,737			6,387,380		$	68,423,608
Total Net Increase		8,981,960		$	101,799,062			9,855,195		$	105,714,712
LifePath Index 2020 Portfolio
Institutional
Shares sold		4,344,770		$	49,739,175			2,268,934		$	24,548,722
Shares issued to shareholders in reinvestment of distributions		193,240			2,237,224			86,698			952,206
Shares redeemed		(1,270,121	)		(14,589,341	)		(491,339	)		(5,379,818	)
Net increase		3,267,889		$	37,387,058			1,864,293		$	20,121,110
Investor A
Shares sold		4,963,332		$	57,313,622			4,963,916		$	53,555,955
Shares issued to shareholders in reinvestment of distributions		218,196			2,522,414			105,165			1,157,628
Shares redeemed		(2,063,570	)		(23,746,201	)		(1,283,795	)		(13,988,126	)
Net increase		3,117,958		$	36,089,835			3,785,286		$	40,725,457
Class K
Shares sold		21,822,723		$	251,347,326			25,772,057		$	277,156,664
Shares issued to shareholders in reinvestment of distributions		1,759,878			20,376,195			1,081,632			11,873,168
Shares redeemed		(8,577,771	)		(98,889,539	)		(5,424,726	)		(59,067,304	)
Net increase		15,004,830		$	172,833,982			21,428,963		$	229,962,528
Total Net Increase		21,390,677		$	246,310,875			27,078,542		$	290,809,095
LifePath Index 2025 Portfolio
Institutional
Shares sold		3,451,831		$	40,074,916			1,559,589		$	16,934,310
Shares issued to shareholders in reinvestment of distributions		114,546			1,344,727			44,185			490,054
Shares redeemed		(843,810	)		(9,833,029	)		(218,487	)		(2,404,992	)
Net increase		2,722,567		$	31,586,614			1,385,287		$	15,019,372
Investor A
Shares sold		4,393,893		$	51,408,558			4,228,219		$	45,937,401
Shares issued to shareholders in reinvestment of distributions		176,444			2,069,805			83,179			927,051
Shares redeemed		(1,233,065	)		(14,379,037	)		(359,213	)		(3,951,841	)
Net increase		3,337,272		$	39,099,326			3,952,185		$	42,912,611
Class K
Shares sold		15,841,657		$	184,774,389			8,954,681		$	97,254,162
Shares issued to shareholders in reinvestment of distributions		817,457			9,602,335			456,592			5,054,458
Shares redeemed		(3,099,720	)		(36,255,819	)		(2,126,879	)		(23,075,131	)
Net increase		13,559,394		$	158,120,905			7,284,394		$	79,233,489
Total Net Increase		19,619,233		$	228,806,845			12,621,866		$	137,165,472
LifePath Index 2030 Portfolio
Institutional
Shares sold		4,296,619		$	50,359,784			1,711,760		$	18,674,361
Shares issued to shareholders in reinvestment of distributions		172,177			2.043,207			77,613			867,715
Shares redeemed		(1,090,427	)		(12,831,665	)		(531,836	)		(5,900,825	)
Net increase		3,378,369		$	39,571,326			1,257,537		$	13,641,251

BLACKROCK FUNDS III DECEMBER 31, 2014 57

Notes to Financial Statements (continued)

	Year Ended December 31, 2014						Year Ended December 31, 2013
LifePath Index 2030 Portfolio (concluded)	Shares			Amount			Shares			Amount
Investor A
Shares sold		5,239,806		$	61,954,488			4,680,562		$	50,614,445
Shares issued to shareholders in reinvestment of distributions		245,328			2,909,916			128,842			1,446,121
Shares redeemed		(1,530,517	)		(18,097,416	)		(725,124	)		(8,002,658	)
Net increase		3,954,617		$	46,766,988			4,084,280		$	44,057,908
Class K
Shares sold		20,550,362		$	242,092,570			23,872,297		$	257,291,468
Shares issued to shareholders in reinvestment of distributions		1,569,510			18,605,392			1,045,931			11,676,250
Shares redeemed		(6,426,671	)		(75,960,707	)		(4,320,087	)		(47,201,108	)
Net increase		15,693,201		$	184,737,255			20,598,141		$	221,766,610
Total Net Increase		23,026,187		$	271,075,569			25,939,958		$	279,465,769
LifePath Index 2035 Portfolio
Institutional
Shares sold		2,631,466		$	31,076,921			852,167		$	9,318,039
Shares issued to shareholders in reinvestment of distributions		76,492			916,573			24,307			274,425
Shares redeemed		(530,896	)		(6,296,111	)		(139,901	)		(1,556,378	)
Net increase		2,177,062		$	25,697,383			736,573		$	8,036,086
Investor A
Shares sold		4,907,537		$	58,434,539			3,439,059		$	37,238,638
Shares issued to shareholders in reinvestment of distributions		159,130			1,903,367			81,114			915,248
Shares redeemed		(1,376,664	)		(16,362,815	)		(594,854	)		(6,571,070	)
Net increase		3,690,003		$	43,975,091			2,925,319		$	31,582,816
Class K
Shares sold		11,510,397		$	136,714,611			7,500,759		$	81,709,781
Shares issued to shareholders in reinvestment of distributions		628,820			7,529,364			388,965			4,366,624
Shares redeemed		(1,681,236	)		(20,062,135	)		(1,646,242	)		(17,860,840	)
Net increase		10,457,981		$	124,181,840			6,243,482		$	68,215,565
Total Net Increase		16,325,046		$	193,854,314			9,905,374		$	107,834,467
LifePath Index 2040 Portfolio
Institutional
Shares sold		3,174,100		$	37,944,455			901,800		$	9,876,849
Shares issued to shareholders in reinvestment of distributions		111,639			1,352,455			48,758			553,471
Shares redeemed		(805,573	)		(9,703,017	)		(234,630	)		(2,606,252	)
Net increase		2,480,166		$	29,593,893			715,928		$	7,824,068
Investor A
Shares sold		2,806,932		$	33,761,979			2,321,806		$	25,313,385
Shares issued to shareholders in reinvestment of distributions		125,531			1,518,489			70,043			798,511
Shares redeemed		(775,110	)		(9,342,082	)		(416,965	)		(4,642,256	)
Net increase		2,157,353		$	25,938,386			1,974,884		$	21,469,640
Class K
Shares sold		16,070,240		$	193,551,976			16,955,303		$	183,667,563
Shares issued to shareholders in reinvestment of distributions		1,016,216			12,303,154			701,374			7,951,411
Shares redeemed		(4,518,856	)		(54,454,035	)		(2,984,116	)		(32,875,499	)
Net increase		12,567,600		$	151,401,095			14,672,561		$	158,743,475
Total Net Increase		17,205,119		$	206,933,374			17,363,373		$	188,037,183

58 BLACKROCK FUNDS III DECEMBER 31, 2014

Notes to Financial Statements (continued)

	Year Ended December 31, 2014						Year Ended December 31, 2013
LifePath Index 2045 Portfolio	Shares			Amount			Shares			Amount
Institutional
Shares sold		2,193,560		$	26,589,302			343,414		$	3,823,504
Shares issued to shareholders in reinvestment of distributions		49,880			610,784			8,462			97,612
Shares redeemed		(309,729	)		(3,769,663	)		(54,989	)		(615,334	)
Net increase		1,933,711		$	23,430,423			296,887		$	3,305,782
Investor A
Shares sold		1,838,204		$	22,364,142			1,480,551		$	16,147,082
Shares issued to shareholders in reinvestment of distributions		61,245			748,510			34,703			398,136
Shares redeemed		(527,081	)		(6,393,801	)		(207,027	)		(2,301,344	)
Net increase		1,372,368		$	16,718,851			1,308,227		$	14,243,874
Class K
Shares sold		7,172,251		$	86,831,243			4,783,028		$	52,552,916
Shares issued to shareholders in reinvestment of distributions		333,676			4,085,944			203,509			2,322,467
Shares redeemed		(1,176,328	)		(14,337,223	)		(989,675	)		(10,740,961	)
Net increase		6,329,599		$	76,579,964			3,996,862		$	44,134,422
Total Net Increase		9,635,678		$	116,729,238			5,601,976		$	61,684,078
LifePath Index 2050 Portfolio
Institutional
Shares sold		1,612,987		$	19,820,608			598,979		$	6,603,417
Shares issued to shareholders in reinvestment of distributions		44,843			555,638			16,846			194,543
Shares redeemed		(319,364	)		(3,930,861	)		(126,664	)		(1,428,717	)
Net increase		1,338,466		$	16,445,385			489,161		$	5,369,243
Investor A
Shares sold		1,256,520		$	15,457,000			998,186		$	11,046,284
Shares issued to shareholders in reinvestment of distributions		43,657			540,292			23,111			268,058
Shares redeemed		(538,221	)		(6,623,380	)		(111,643	)		(1,265,967	)
Net increase		761,956		$	9,373,912			909,654		$	10,048,375
Investor K
Shares sold		9,378,798		$	115,111,348			5,525,950		$	60,832,043
Shares issued to shareholders in reinvestment of distributions		345,755			4,283,737			191,249			2,199,792
Shares redeemed		(1,770,664	)		(21,789,910	)		(978,011	)		(10,809,170	)
Net increase		7,953,889		$	97,605,175			4,739,188		$	52,222,665
Total Net Increase		10,054,311		$	123,424,472			6,138,003		$	67,640,283
LifePath Index 2055 Portfolio
Institutional
Shares sold		675,790		$	8,495,924			93,708		$	1,041,888
Shares issued to shareholders in reinvestment of distributions		11,760			148,088			1,195			13,909
Shares redeemed		(136,992	)		(1,726,858	)		(23,050	)		(260,510	)
Net increase		550,558		$	6,917,154			71,853		$	795,287
Investor A
Shares sold		400,459		$	4,995,206			421,203		$	4,610,527
Shares issued to shareholders in reinvestment of distributions		14,457			181,549			6,513			75,402
Shares redeemed		(94,087	)		(1,171,515	)		(50,533	)		(559,905	)
Net increase		320,829		$	4,005,240			377,183		$	4,126,024

BLACKROCK FUNDS III DECEMBER 31, 2014 59

Notes to Financial Statements (concluded)

	Year Ended December 31, 2014						Year Ended December 31, 2013
LifePath Index 2055 Portfolio (concluded)	Shares			Amount			Shares			Amount
Class K
Shares sold		2,641,658		$	32,875,468			1,229,481		$	13,659,652
Shares issued to shareholders in reinvestment of distributions		75,550			950,127			24,873			286,855
Shares redeemed		(664,905	)		(8,277,442	)		(200,454	)		(2,196,905	)
Net increase		2,052,303		$	25,548,153			1,053,900		$	11,749,602
Total Net Increase		2,923,690		$	36,470,547			1,502,936		$	16,670,913

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.

60 BLACKROCK FUNDS III DECEMBER 31, 2014

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, 2014, 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 23, 2015

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid during the tax year ended December 31, 2014:

	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		4/02/14-01/02/15		32.10%		41.12%		44.31%		52.76%		57.65%		61.43%		64.96%		68.78%		72.56%
Dividends Qualifying for the Dividend Received Deduction for Corporations1		4/02/14-01/02/15		17.46%		21.33%		25.01%		27.29%		30.09%		31.65%		33.73%		35.64%		36.97%
Federal Obligation Interest2		4/02/14-01/02/15		2.25%		1.76%		1.43%		1.15%		—		—		—		—		—
Interest-Related Dividends and Qualified Short-Term Capital Gain for Non-U.S. Residents3		4/02/14-01/02/15		53.10%		43.29%		37.22%		30.63%		25.41%		20.52%		17.14%		12.35%		8.43%

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 U.S. 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 Dates	June 27, 2014		December 30, 2014
LifePath Index Retirement Portfolio			$0.034925		$0.067334
LifePath Index 2020 Portfolio			$0.039027		$0.064301
LifePath Index 2025 Portfolio			$0.037476		$0.050529
LifePath Index 2030 Portfolio			$0.045702		$0.065972
LifePath Index 2035 Portfolio			$0.042078		$0.050768
LifePath Index 2040 Portfolio			$0.048218		$0.059886
LifePath Index 2045 Portfolio			$0.037499		$0.043405
LifePath Index 2050 Portfolio			$0.038502		$0.041350
LifePath Index 2055 Portfolio			$0.023147		$0.040354

BLACKROCK FUNDS III DECEMBER 31, 2014 61

Master Portfolio Information as of December 31, 2014 Master Investment Portfolio

LifePath^® Index Retirement Master Portfolio

Portfolio Composition Percent of
Affiliated Investment  Companies

Fixed Income Funds	60	%
Equity Funds	40

Portfolio Holdings Percent of
Affiliated Investment  Companies

Bond Index Master Portfolio	51	%
Russell 1000® Index Master Portfolio	23
iShares® TIPS Bond ETF	9
ACWI ex-US Index Master Portfolio	9
Master Small Cap Index Series	4
iShares® Core MSCI Total International Stock ETF	3
iShares® MSCI EAFE Small-Cap ETF	1

LifePath^® Index 2020 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment  Companies

Equity Funds	54	%
Fixed Income Funds	46

Ten Largest Holdings Percent of
Affiliated Investment Companies

Bond Index Master Portfolio	40	%
Russell 1000® Index Master Portfolio	30
ACWI ex-US Index Master Portfolio	11
iShares® TIPS Bond ETF	7
iShares® Core MSCI Total International Stock ETF	4
Master Small Cap Index Series	3
iShares® Cohen & Steers REIT ETF	2
iShares® International Developed Real Estate ETF	2
iShares® MSCI EAFE Small-Cap ETF	1

LifePath^® Index 2025 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds	65	%
Fixed Income Funds	35

Ten Largest Holdings Percent of
Affiliated Investment Companies

Russell 1000® Index Master Portfolio	36	%
Bond Index Master Portfolio	30
ACWI ex-US Index Master Portfolio	11
iShares® Core MSCI Total International Stock ETF	7
iShares® TIPS Bond ETF	5
Master Small Cap Index Series	3
iShares® Cohen & Steers REIT ETF	3
iShares® International Developed Real Estate ETF	3
iShares® MSCI EAFE Small-Cap 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, 2014

Master Portfolio Information as of December 31, 2014 (continued) Master Investment Portfolio

LifePath^® Index 2030 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment  Companies

Equity Funds	76	%
Fixed Income Funds	24

Ten Largest Holdings Percent of
Affiliated Investment Companies

Russell 1000® Index Master Portfolio	42	%
Bond Index Master Portfolio	21
ACWI ex-US Index Master Portfolio	16
iShares® Core MSCI Total International Stock ETF	5
iShares® International Developed Real Estate ETF	4
iShares® Cohen & Steers REIT ETF	4
iShares® TIPS Bond ETF	3
Master Small Cap Index Series	3
iShares® MSCI EAFE Small-Cap ETF	2

LifePath^® Index 2035 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment  Companies

Equity Funds	86	%
Fixed Income Funds	14

Ten Largest Holdings Percent of
Affiliated Investment  Companies

Russell 1000® Index Master Portfolio	47	%
ACWI ex-US Index Master Portfolio	15
Bond Index Master Portfolio	13
iShares® Core MSCI Total International Stock ETF	8
iShares® Cohen & Steers REIT ETF	6
iShares® International Developed Real Estate ETF	5
iShares® TIPS Bond ETF	2
Master Small Cap Index Series	2
iShares® MSCI EAFE Small-Cap ETF	2

LifePath^® Index 2040 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment  Companies

Equity Funds	94	%
Fixed Income Funds	6

Ten Largest Holdings Percent of
Affiliated Investment  Companies

Russell 1000® Index Master Portfolio	51	%
ACWI ex-US Index Master Portfolio	18
iShares® Core MSCI Total International Stock ETF	7
iShares® Cohen & Steers REIT ETF	7
iShares® International Developed Real Estate ETF	6
Bond Index Master Portfolio	5
iShares® MSCI EAFE Small-Cap ETF	3
Master Small Cap Index Series	2
iShares® TIPS Bond ETF	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, 2014 63

Master Portfolio Information as of December 31, 2014 (concluded) Master Investment Portfolio

LifePath^® Index 2045 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment  Companies

Equity Funds	98	%
Fixed Income Funds	2

Ten Largest Holdings Percent of
Affiliated Investment Companies

Russell 1000® Index Master Portfolio	52	%
ACWI ex-US Index Master Portfolio	16
iShares® Core MSCI Total International Stock ETF	11
iShares® Cohen & Steers REIT ETF	8
iShares® International Developed Real Estate ETF	6
iShares® MSCI EAFE Small-Cap ETF	3
Master Small Cap Index Series	2
Bond Index Master Portfolio	2

LifePath^® Index 2050 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds	99	%
Fixed Income Funds	1

Ten Largest Holdings Percent of
Affiliated Investment Companies

Russell 1000® Index Master Portfolio	53	%
ACWI ex-US Index Master Portfolio	16
iShares® Core MSCI Total International Stock ETF	11
iShares® Cohen & Steers REIT ETF	8
iShares® International Developed Real Estate ETF	6
iShares® MSCI EAFE Small-Cap ETF	3
Master Small Cap Index Series	2
Bond Index Master Portfolio	1

LifePath^® Index 2055 Master Portfolio

Portfolio Composition Percent of
Affiliated Investment Companies

Equity Funds	99	%
Fixed Income Funds	1

Ten Largest Holdings Percent of
Affiliated Investment Companies

Russell 1000® Index Master Portfolio	53	%
iShares® Core MSCI Total International Stock ETF	15
ACWI ex-US Index Master Portfolio	12
iShares® Cohen & Steers REIT ETF	8
iShares® International Developed Real Estate ETF	6
iShares® MSCI EAFE Small-Cap ETF	3
Master Small Cap Index Series	2
Bond Index Master Portfolio	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.

64 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments December 31, 2014 LifePath Index Retirement Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 39.6%
ACWI ex-US Index Master Portfolio	$	35,792,647	$	35,792,647
iShares Cohen & Steers REIT ETF		12,463		1,206,917
iShares Core MSCI Total International Stock ETF		252,688		13,460,690
iShares International Developed Real Estate ETF		34,882		1,047,855
iShares MSCI EAFE Small-Cap ETF		107,873		5,038,748
Master Small Cap Index Series	$	16,529,780		16,529,780
Russell 1000® Index Master Portfolio	$	98,004,312		98,004,312
				171,080,949

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 60.2%
Bond Index Master Portfolio	$	221,316,244	$	221,316,244
iShares TIPS Bond ETF		342,094		38,317,949
				259,634,193
Short-Term Securities — 0.2%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (b)		984,033		984,033
Total Affiliated Investment Companies (Cost — $400,849,444) — 100.0%				431,699,175
Other Assets Less Liabilities — 0.0%				95,926
Net Assets — 100.0%			$	431,795,101

See Notes to Financial Statements.

Notes to Schedule of Investments

(a) Investments in issuers considered to be an affiliate of LifePath Index Master Portfolio during the year ended December 31, 2014, 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, 2013		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2014		Value at December 31, 2014		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	30,353,814	$	5,438,833	1		—		$	35,792,647	$	35,792,647	$	910,451	$	1,358,775
BlackRock Cash Funds: Institutional, SL Agency Shares		893,396		90,637	1		—			984,033	$	984,033	$	1,291		—
BlackRock Cash Funds: Prime, SL Agency Shares2		—		—			—			—		—	$	12,488		—
Bond Index Master Portfolio	$	169,273,201	$	52,043,043	1		—		$	221,316,244	$	221,316,244	$	3,412,152	$	2,041,675
iShares Cohen & Steers REIT ETF		3,384		9,079			—			12,463	$	1,206,917	$	18,842		—
iShares Core MSCI Total International Stock ETF		83,874		187,875			(19,061	)		252,688	$	13,460,690	$	347,976	$	34,083
iShares International Developed Real Estate ETF		11,591		23,442			(151	)		34,882	$	1,047,855	$	18,126	$	(561	)
iShares MSCI EAFE Small-Cap ETF		68,691		43,282			(4,100	)		107,873	$	5,038,748	$	110,905	$	24,774
iShares TIPS Bond ETF		257,137		108,764			(23,807	)		342,094	$	38,317,949	$	531,344	$	(206,570	)
Master Small Cap Index Series	$	14,746,591	$	1,783,189	1		—		$	16,529,780	$	16,529,780	$	218,299	$	805,312
Russell 1000® Index Master Portfolio	$	68,706,189	$	29,298,123	1		—		$	98,004,312	$	98,004,312	$	1,496,477	$	1,209,686
1   Represents net shares/beneficial interest purchased.
2  No longer held by the LifePath Index Master Portfolio as of report date.

(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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that 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 LifePath Index Master Portfolio’s own assumptions used in determining the fair value of investments)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with 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. For information about 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 LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2014:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	60,056,192	$	371,642,983		—	$	431,699,175

During the year ended December 31, 2014, there were no transfers between levels.

BLACKROCK FUNDS III DECEMBER 31, 2014 65

Schedule of Investments December 31, 2014 LifePath Index 2020 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 53.6%
ACWI ex-US Index Master Portfolio	$	100,829,252	$	100,829,252
iShares Cohen & Steers REIT ETF		170,731		16,533,590
iShares Core MSCI Total International Stock ETF (b)		607,955		32,385,763
iShares International Developed Real Estate ETF		473,539		14,225,111
iShares MSCI EAFE Small-Cap ETF		288,452		13,473,593
Master Small Cap Index Series	$	29,854,120		29,854,120
Russell 1000® Index Master Portfolio	$	264,872,726		264,872,726
				472,174,155

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 46.2%
Bond Index Master Portfolio	$	349,364,622	$	349,364,622
iShares TIPS Bond ETF		517,118		57,922,387
				407,287,009
Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (c)		2,109,818		2,109,818
BlackRock Cash Funds: Prime, SL Agency Shares, 0.13% (c)(d)		1,079,100		1,079,100
Total Investments (Cost — $809,789,350) — 100.2%				882,650,082
Liabilities in Excess of Other Assets — (0.2)%				(1,326,539	)
Net Assets — 100.0%			$	881,323,543

Notes to Schedule of Investments

(a) Investments in issuers considered to be an affiliate of the LifePath Index Master Portfolio during the year ended December 31, 2014, 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,  2013		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2014		Value at December 31, 2014		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	77,124,004	$	23,705,248	1		—		$	100,829,252	$	100,829,252	$	2,466,802	$	2,472,288
BlackRock Cash Funds: Institutional, SL Agency Shares		9,967,374		—			(7,857,556	)2		2,109,818	$	2,109,818	$	2,805		—
BlackRock Cash Funds: Prime, SL Agency Shares		1,438,693		—			(359,593	)2		1,079,100	$	1,079,100	$	14,927		—
Bond Index Master Portfolio	$	257,871,235	$	91,493,387	1		—		$	349,364,622	$	349,364,622	$	5,561,529	$	3,461,844
iShares Cohen & Steers REIT ETF		108,921		72,243			(10,433	)		170,731	$	16,533,590	$	407,181	$	71,870
iShares Core MSCI Total International Stock ETF		193,241		414,714			—			607,955	$	32,385,763	$	837,397		—
iShares International Developed Real Estate ETF		289,005		211,064			(26,530	)		473,539	$	14,225,111	$	395,270	$	(71,941	)
iShares MSCI EAFE Small-Cap ETF		178,968		110,299			(815	)		288,452	$	13,473,593	$	295,304	$	4,259
iShares TIPS Bond ETF		369,942		178,529			(31,353	)		517,118	$	57,922,387	$	829,477	$	(264,577	)
Master Small Cap Index Series	$	24,216,498	$	5,637,622	1		—		$	29,854,120	$	29,854,120	$	385,103	$	1,148,611
Russell 1000® Index Master Portfolio	$	176,902,400	$	87,970,326	1		—		$	264,872,726	$	264,872,726	$	4,020,268	$	2,928,404
1   Represents net shares/beneficial interest purchased.
2   Represents net shares/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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that 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)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with 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 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.

66 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments (concluded) LifePath Index 2020 Master Portfolio

As of December 31, 2014, the following table summarizes LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2014:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	137,729,362	$	744,920,720		—	$	882,650,082

LifePath Index Master Portfolio may hold liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of December 31, 2014, collateral on securities loaned at value of $1,079,100 is categorized as Level 2 within the disclosure hierarchy.

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2014 67

Schedule of Investments December 31, 2014 LifePath Index 2025 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 64.8%
ACWI ex-US Index Master Portfolio	$	59,342,333	$	59,342,333
iShares Cohen & Steers REIT ETF		169,929		16,455,924
iShares Core MSCI Total International Stock ETF		639,667		34,075,061
iShares International Developed Real Estate ETF		471,056		14,150,522
iShares MSCI EAFE Small-Cap ETF		202,339		9,451,255
Master Small Cap Index Series	$	15,639,897		15,639,897
Russell 1000® Index Master Portfolio	$	186,587,207		186,587,207
				335,702,199
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 35.1%
Bond Index Master Portfolio	$	156,945,766	$	156,945,766
iShares TIPS Bond ETF		224,311		25,125,075
				182,070,841
Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (b)		746,905		746,905
Total Affiliated Investment Companies (Cost — $481,193,464) — 100.1%				518,519,945
Liabilities in Excess of Other Assets — (0.1)%				(325,527	)
Net Assets — 100.0%			$	518,194,418

Notes to Schedule of Investments

(a) During the year ended December 31, 2014, investments in issuers considered to be an affiliate of the LifePath Index Master Portfolio 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,  2013		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2014		Value at December 31, 2014		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	34,070,416	$	25,271,917	1		—		$	59,342,333	$	59,342,333	$	1,106,282	$	1,038,460
BlackRock Cash Funds: Institutional, SL Agency Shares		1,693,531		—			(946,626	)2		746,905	$	746,905	$	1,859		—
BlackRock Cash Funds: Prime, SL Agency Shares3		152,872		—			(152,872	)2		—		—	$	23,462		—
Bond Index Master Portfolio	$	97,116,958	$	59,828,808	1		—		$	156,945,766	$	156,945,766	$	2,425,158	$	1,719,482
iShares Cohen & Steers REIT ETF		75,900		97,190			(3,161	)		169,929	$	16,455,924	$	369,693	$	(6,902	)
iShares Core MSCI Total International Stock ETF		203,485		436,182			—			639,667	$	34,075,061	$	891,204		—
iShares International Developed Real Estate ETF		212,927		273,052			(14,923	)		471,056	$	14,150,522	$	352,408	$	(52,319	)
iShares MSCI EAFE Small-Cap ETF		91,119		111,741			(521	)		202,339	$	9,451,255	$	196,486	$	2,421
iShares TIPS Bond ETF		133,346		121,700			(30,735	)		224,311	$	25,125,075	$	343,930	$	(255,962	)
Master Small Cap Index Series	$	9,807,944	$	5,831,953	1		—		$	15,639,897	$	15,639,897	$	182,878	$	403,367
Russell 1000® Index Master Portfolio	$	93,120,930	$	93,466,277	1		—		$	186,587,207	$	186,587,207	$	2,503,513	$	1,395,725
1   Represents net beneficial interest purchased.
2   Represents net shares sold
3   No longer held by the LifePath Index Master Portfolio as of report date.

(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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that 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)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with 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. For information about LifePath Index Master Portfolio’s policy regarding valuation of investments, refer to Note 2 of the Notes to Financial Statements.

See Notes to Financial Statements.

68 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments (concluded) LifePath Index 2025 Master Portfolio

As of December 31, 2014, the following table summarizes LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	100,004,742	$	418,515,203		—	$	518,519,945

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2014 69

Schedule of Investments December 31, 2014 LifePath Index 2030 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies	Shares/ Beneficial Interest		Value
Equity Funds — 75.5%
ACWI ex-US Index Master Portfolio	$	126,495,470	$	126,495,470
iShares Cohen & Steers REIT ETF		372,716		36,093,817
iShares Core MSCI Total International Stock ETF		805,065		42,885,812
iShares International Developed Real Estate ETF		1,033,666		31,051,327
iShares MSCI EAFE Small-Cap ETF		368,703		17,222,117
Master Small Cap Index Series	$	21,723,664		21,723,664
Russell 1000® Index Master Portfolio	$	342,118,889		342,118,889
				617,591,096
Affiliated Investment Companies	Shares/ Beneficial Interest		Value
Fixed Income Funds — 24.3%
Bond Index Master Portfolio	$	173,164,163	$	173,164,163
iShares TIPS Bond ETF		230,520		25,820,545
				198,984,708
Short-Term Securities — 0.2%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (b)	$	1,973,808		1,973,808
Total Affiliated Investment Companies (Cost — $741,754,030) — 100.0%				818,549,612
Liabilities in Excess of Other Assets — (0.0)%				(254,419	)
Net Assets — 100.0%			$	818,295,193

Notes to Schedule of Investments

(a) Investments in issuers considered to be an affiliate of LifePath Index Master Portfolio during the year ended December 31, 2014, 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,  2013		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2014		Value at December 31, 2014		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	83,164,979	$	43,330,491	1		—		$	126,495,470	$	126,495,470	$	2,737,847	$	1,968,236
BlackRock Cash Funds: Institutional, SL Agency Shares		7,986,051					(6,012,243	)2		1,973,808	$	1,973,808	$	3,045		—
BlackRock Cash Funds: Prime, SL Agency Shares3		1,186,223		—			(1,186,223	)2		—		—	$	13,011		—
Bond Index Master Portfolio	$	151,754,457	$	21,409,706	1		—		$	173,164,163	$	173,164,163	$	3,355,868	$	2,267,028
iShares Cohen & Steers REIT ETF		191,736		199,760			(18,780	)		372,716	$	36,093,817	$	828,404	$	145,564
iShares Core MSCI Total International Stock ETF		233,547		571,518			—			805,065	$	42,885,812	$	1,112,973		—
iShares International Developed Real Estate ETF		541,466		533,969			(41,769	)		1,033,666	$	31,051,327	$	802,966	$	(104,939	)
iShares MSCI EAFE Small-Cap ETF		196,792		171,911			—			368,703	$	17,222,117	$	365,411		—
iShares TIPS Bond ETF		195,508		112,712			(77,700	)		230,520	$	25,820,545	$	454,852	$	(628,067	)
Master Small Cap Index Series	$	16,591,741	$	5,131,923	1		—		$	21,723,664	$	21,723,664	$	276,153	$	729,050
Russell 1000® Index Master Portfolio	$	198,522,223	$	143,596,666	1		—		$	342,118,889	$	342,118,889	$	4,804,294	$	3,073,689
1   Represents net beneficial interest purchased.
2   Represents net shares sold.
3   No longer held by the LifePath Index Master Portfolio as of report date.

(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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that 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 LifePath Index Master Portfolio’s own assumptions used in determining the fair value of investments)

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 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.

70 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments (concluded) LifePath Index 2030 Master Portfolio

The following table summarizes the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2014:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	155,047,426	$	663,502,186		—	$	818,549,612

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2014 71

Schedule of Investments December 31, 2014 LifePath Index 2035 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 85.6%
ACWI ex-US Index Master Portfolio	$	63,367,924	$	63,367,924
iShares Cohen & Steers REIT ETF		236,670		22,919,123
iShares Core MSCI Total International Stock ETF		601,151		32,023,314
iShares International Developed Real Estate ETF		656,946		19,734,658
iShares MSCI EAFE Small-Cap ETF		208,872		9,756,411
Master Small Cap Index Series	$	9,587,520		9,587,520
Russell 1000® Index Master Portfolio	$	193,467,131		193,467,131
				350,856,081
Fixed Income Funds — 14.4%
Bond Index Master Portfolio	$	51,838,842		51,838,842
iShares TIPS Bond ETF		64,925		7,272,249
				59,111,091
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (b)		1,029,104	$	1,029,104
BlackRock Cash Funds: Prime, SL Agency Shares, 0.13%, (b)(c)		9,300		9,300
Total Short-Term Securities (Cost — $1,038,404) — 0.2%				1,038,404
Total Affiliated Investment Companies (Cost — $378,138,602) — 100.2%				411,005,576
Liabilities in Excess of Other Assets — (0.2)%				(965,446	)
Net Assets — 100.0%			$	410,040,130

Notes to Schedule of Investments

(a) During the year ended December 31, 2014, investments in issuers considered to be an affiliate of the LifePath Index Master Portfolio , 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,  2013		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2014		Value at December 31, 2014		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	31,482,192	$	31,885,732	1		—		$	63,367,924	$	63,367,924	$	1,061,467	$	614,137
BlackRock Cash Funds: Institutional, SL Agency Shares3		2,983,691		—			(1,954,587	)2		1,029,104	$	1,029,104	$	1,661		—
BlackRock Cash Funds: Prime, SL Agency Shares		422,661					(413,361	)2		9,300		9,300	$	19,242		—
Bond Index Master Portfolio	$	48,306,107	$	3,532,735	1		—		$	51,838,842	$	51,838,842	$	1,206,603	$	955,753
iShares Cohen & Steers REIT ETF		91,219		155,829			(10,378	)		236,670	$	22,919,123	$	486,986	$	53,743
iShares Core MSCI Total International Stock ETF		174,457		430,324			(3,630	)		601,151	$	32,023,314	$	843,378	$	(10,122	)
iShares International Developed Real Estate ETF		255,720		415,183			(13,957	)		656,946	$	19,734,658	$	458,508	$	(57,220	)
iShares MSCI EAFE Small-Cap ETF		79,972		129,321			(421	)		208,872	$	9,756,411	$	198,018	$	(1,435	)
iShares TIPS Bond ETF		54,523		58,900			(48,498	)		64,925	$	7,272,249	$	146,786	$	(237,794	)
Master Small Cap Index Series	$	5,780,864	$	3,806,656	1		—		$	9,587,520	$	9,587,520	$	113,737	$	230,992
Russell 1000 Index Master Portfolio	$	85,615,886	$	107,851,245	1		—		$	193,467,131	$	193,467,131	$	2,426,231	$	1,229,988
1   Represents net beneficial interest purchased.
2   Represents net shares sold.
3   No longer held by the LifePath Index Master Portfolio as of report date.

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

(c) 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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that 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 and derivative financial instruments)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with 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. For information about LifePath Index Master Portfolio’s policy regarding valuation of investments, refer to Note 2 of the Notes to Financial Statements.

See Notes to Financial Statements.

72 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments (concluded) LifePath Index 2035 Master Portfolio

As of December 31, 2014, the following table summarizes LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	92,744,159	$	318,261,417		—	$	411,005,576

LifePath Index Master Portfolio may hold liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of December 31, 2014, collateral on securities loaned at value of $9,300 is categorized as Level 2 within the disclosure hierarchy.

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2014 73

Schedule of Investments December 31, 2014 LifePath Index 2040 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 93.9%
ACWI ex-US Index Master Portfolio	$	100,880,849	$	100,880,849
iShares Cohen & Steers REIT ETF		380,890		36,885,388
iShares Core MSCI Total International Stock ETF		722,933		38,510,641
iShares International Developed Real Estate ETF		1,053,806		31,656,332
iShares MSCI EAFE Small-Cap ETF		304,945		14,243,981
Master Small Cap Index Series	$	12,158,465		12,158,465
Russell 1000® Index Master Portfolio	$	278,797,165		278,797,165
				513,132,821

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 5.9%
Bond Index Master Portfolio	$	28,589,605	$	28,589,605
iShares TIPS Bond ETF		32,531		3,643,797
				32,233,402
Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (b)		1,301,475		1,301,475
Total Investments (Cost — $493,942,509) — 100.0%				546,667,698
Liabilities in Excess of Other Assets — (0.0)%				(166,233	)
Net Assets — 100.0%			$	546,501,465

Notes to Schedule of Investments

(a) Investments in issuers considered to be an affiliate of the LifePath Index Master Portfolio during the year ended December 31, 2014, 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,  2013		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2014		Value at December 31, 2014		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	58,103,694	$	42,777,155	1		—		$	100,880,849	$	100,880,849	$	1,923,681	$	864,075
BlackRock Cash Funds: Institutional, SL Agency Shares		9,901,805		—			(8,600,330	)2		1,301,475	$	1,301,475	$	2,141		—
BlackRock Cash Funds: Prime, SL Agency Shares3		1,601,109		—			(1,601,109	)2		—		—	$	21,023		—
Bond Index Master Portfolio	$	60,291,643		—		$	(31,702,038	)2	$	28,589,605	$	28,589,605	$	1,306,955	$	1,021,940
iShares Cohen & Steers REIT ETF		168,092		230,216			(17,418	)		380,890	$	36,885,388	$	794,684	$	106,221
iShares Core MSCI Total International Stock ETF		219,153		503,780			—			722,933	$	38,510,641	$	977,210		—
iShares International Developed Real Estate ETF		473,164		612,731			(32,089	)		1,053,806	$	31,656,332	$	752,535	$	(103,573	)
iShares MSCI EAFE Small-Cap ETF		136,704		168,241			—			304,945	$	14,243,981	$	289,900		—
iShares TIPS Bond ETF		52,135		39,550			(59,154	)		32,531	$	3,643,797	$	124,320	$	(248,632	)
Master Small Cap Index Series	$	8,099,953	$	4,058,512	1		—		$	12,158,465	$	12,158,465	$	145,393	$	337,156
Russell 1000® Index Master Portfolio	$	146,029,644	$	132,767,521	1		—		$	278,797,165	$	278,797,165	$	3,691,286	$	2,107,996
1  Represents net shares/beneficial interest purchased.
2  Represents net shares/beneficial interest sold.
3  No longer held by the LifePath Index Master Portfolio as of report date.

(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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that 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 LifePath Index Master Portfolio’s own assumptions used in determining the fair value of investments)

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. For information about 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.

74 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments (concluded) LifePath Index 2040 Master Portfolio

As of December 31, 2014, the following table summarizes LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	126,241,614	$	420,426,084		—	$	546,667,698

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2014 75

Schedule of Investments December 31, 2014 LifePath Index 2045 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 98.3%
ACWI ex-US Index Master Portfolio	$	36,608,413	$	36,608,413
iShares Cohen & Steers REIT ETF		175,568		17,002,005
iShares Core MSCI Total International Stock ETF		453,977		24,183,355
iShares International Developed Real Estate ETF		481,318		14,458,793
iShares MSCI EAFE Small-Cap ETF		133,177		6,220,698
Master Small Cap Index Series	$	5,195,235		5,195,235
Russell 1000® Index Master Portfolio	$	119,219,041		119,219,041
				222,887,540
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 1.7%
Bond Index Master Portfolio	$	3,452,564	$	3,452,564
iShares TIPS Bond ETF		3,400		380,834
				3,833,398
Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (b)		745,850		745,850
Total Affiliated Investment Companies (Cost — $209,686,009) — 100.3%				227,466,788
Liabilities in Excess of Other Assets — (0.3)%				(670,548	)
Net Assets — 100.0%			$	226,796,240

Notes to Schedule of Investments

(a) Investments in issuers considered to be an affiliate of the LifePath Index Master Portfolio during the year ended December 31, 2014, 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,  2013		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2014		Value at December 31, 2014		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	16,417,020	$	20,191,393	1		—		$	36,608,413	$	36,608,413	$	554,465	$	213,630
BlackRock Cash Funds: Institutional, SL Agency Shares		1,287,557		—			(541,707	)2		745,850	$	745,850	$	990		—
BlackRock Cash Funds: Prime, SL Agency Shares3		130,390		—			(130,390	)2		—		—		13,186		—
Bond Index Master Portfolio	$	15,395,190		—			(11,942,626	)2	$	3,452,564	$	3,452,564	$	387,623	$	357,797
iShares Cohen & Steers REIT ETF		60,986		121,293			(6,711	)		175,568	$	17,002,005	$	349,385	$	28,482
iShares Core MSCI Total International Stock ETF		135,389		318,588			—			453,977	$	24,183,355	$	619,601		—
iShares International Developed Real Estate ETF		171,773		321,044			(11,499	)		481,318	$	14,458,793	$	327,952	$	(45,821	)
iShares MSCI EAFE Small-Cap ETF		45,315		87,862			—			133,177	$	6,220,698	$	122,421		—
iShares TIPS Bond ETF		—		3,400			—			3,400	$	380,834		—		—
Master Small Cap Index Series	$	2,236,711	$	2,958,524	1		—		$	5,195,235	$	5,195,235	$	50,102	$	82,305
Russell 1000® Index Master Portfolio	$	50,080,549	$	69,138,492	1		—		$	119,219,041	$	119,219,041	$	1,500,931	$	652,223
1   Represents net beneficial interest purchased.
2   Represents net shares/beneficial interest sold
3   No longer held by the LifePath Index Master Portfolio as of report date.

(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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted price in active markets/exchanges for identical assets or liabilities that 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 LifePath Index Master Portfolio’s own assumptions used in determining the fair value of investments)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with 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. For information about 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.

76 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments (concluded) LifePath Index 2045 Master Portfolio

As of December 31, 2014, the following table summarizes LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	62,991,535	$	164,475,253		—	$	227,466,788

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2014 77

Schedule of Investments December 31, 2014 LifePath Index 2050 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 99.1%
ACWI ex-US Index Master Portfolio	$	36,389,565	$	36,389,565
iShares Cohen & Steers REIT ETF		182,681		17,690,828
iShares Core MSCI Total International Stock ETF		503,636		26,828,690
iShares International Developed Real Estate ETF		506,059		15,202,012
iShares MSCI EAFE Small-Cap ETF		138,356		6,462,609
Master Small Cap Index Series	$	5,410,116		5,410,116
Russell 1000® Index Master Portfolio	$	122,826,821		122,826,821
				230,810,641
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Fund — 1.0%
Bond Index Master Portfolio	$	2,376,518	$	2,376,518
Short-Term Securities — 0.3%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15%, (a)		654,907		654,907
Total Affiliated Investment Companies (Cost — $215,866,850) — 100.4%				233,842,066
Liabilities in Excess of Other Assets — (0.4)%				(934,373	)
Net Assets — 100.0%			$	232,907,693

Notes to Schedule of Investments

(a) Investments in issuers considered to be an affiliate of LifePath Index Master Portfolio during the year ended December 31, 2014, 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,  2013		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31,  2014		Value at December 31, 2014		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	16,802,884	$	19,586,681	1		—		$	36,389,565	$	36,389,565	$	571,677	$	176,718
BlackRock Cash Funds: Institutional, SL Agency Shares		6,512,071		—			(5,857,164	)2		654,907	$	654,907	$	1,118		—
BlackRock Cash Funds: Prime, SL Agency Shares3		1,066,024		—			(1,066,024	)2		—		—	$	15,438		—
Bond Index Master Portfolio	$	9,824,212		—		$	(7,447,694	)	$	2,376,518	$	2,376,518	$	251,952	$	231,475
iShares Cohen & Steers REIT ETF		67,415		122,790			(7,524	)		182,681	$	17,690,828	$	374,566	$	53,518
iShares Core MSCI Total International Stock ETF		150,119		356,108			(2,591	)		503,636	$	26,828,690	$	656,254	$	(5,440	)
iShares International Developed Real Estate ETF		189,671		331,491			(15,103	)		506,059	$	15,202,012	$	351,051	$	(57,204	)
iShares MSCI EAFE Small-Cap ETF		47,447		90,909			—			138,356	$	6,462,609	$	125,985		—
Master Small-Cap Index Series	$	1,960,716	$	3,449,400	1		—		$	5,410,116	$	5,410,116	$	45,332	$	69,088
Russell 1000® Index Master Portfolio	$	52,721,354	$	70,105,467	1		—		$	122,826,821	$	122,826,821	$	1,572,902	$	652,878
1   Represents net shares/beneficial interest purchased.
2   Represent net shares sold.
3   No longer held by LifePath Index Master Portfolio as of report date.

(a) 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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that 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 LifePath Index Master Portfolio’s own assumptions used in determining the fair value of investments)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with 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 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 Lifepath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2014:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	66,839,046	$	167,003,020		—	$	233,842,066

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

78 BLACKROCK FUNDS III DECEMBER 31, 2014

Schedule of Investments December 31, 2014 LifePath Index 2055 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 98.7%
ACWI ex-US Index Master Portfolio	$	7,348,791	$	7,348,791
iShares Cohen & Steers REIT ETF		48,162		4,664,008
iShares Core MSCI Total International Stock ETF		175,107		9,327,950
iShares International Developed Real Estate ETF		132,547		3,981,712
iShares MSCI EAFE Small-Cap ETF		36,496		1,704,728
Master Small Cap Index Series	$	1,436,584		1,436,584
Russell 1000® Index Master Portfolio	$	32,623,835		32,623,835
				61,087,608
Fixed Income Fund — 1.1%
Bond Index Master Portfolio	$	703,501		703,501
Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (b)	$	231,529	$	231,529
Total Short-Term Securities (Cost — $231,501) — 0.4%				231,529
Total Affiliated Investment Companies (Cost — $57,112,083) — 100.2%				62,022,638
Liabilities in Excess of Other Assets — (0.2)%				(146,880	)
Net Assets — 100.0%			$	61,875,758

Notes to Schedule of Investments

(a) During the year ended December 31, 2014, investments in issuers considered to be an affiliate of LifePath Index Master Portfolio 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, 2013		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2014		Value at December 31, 2014		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	3,512,892	$	3,835,899	1				$	7,348,791	$	7,348,791	$	102,884	$	73,669
BlackRock Cash Funds: Institutional, SL Agency Shares		692,770		—			(461,241	)2		231,529	$	231,529	$	331		—
BlackRock Cash Funds: Prime, SL Agency Shares3		95,386		—			(95,386	)2		—		—	$	3,642		—
Bond Index Master Portfolio	$	1,044,823		—		$	(341,322	)2	$	703,501	$	703,501	$	30,410	$	29,653
iShares Cohen & Steers REIT ETF		17,432		34,737			(4,007	)		48,162	$	4,664,008	$	100,916	$	18,708
iShares Core MSCI Total International Stock ETF		46,664		128,443			—			175,107	$	9,327,950	$	227,933		—
iShares International Developed Real Estate ETF		49,144		96,064			(12,661	)		132,547	$	3,981,712	$	94,750	$	(31,215	)
iShares MSCI EAFE Small-Cap ETF		11,583		24,970			(57	)		36,496	$	1,704,728	$	33,280	$	360
Master Small Cap Index Series	$	445,733	$	990,851	1		—		$	1,436,584	$	1,436,584	$	11,106	$	15,353
Russell 1000® Index Master Portfolio	$	12,722,972	$	19,900,863	1		—		$	32,623,835	$	32,623,835	$	401,744	$	143,592
1   Represents net shares/beneficial interest purchased.
2   Represents net shares/beneficial interest sold.
3   No longer held by the LifePath Index Master Portfolio as of report date.

(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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that 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 LifePath Index Master Portfolio’s own assumptions used in determining the fair value of investments)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with 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. For information about LifePath Index Master Portfolio’s policy regarding valuation of investments, refer to Note 2 of the Notes to Financial Statements.

As of December 31, 2014, the following table summarizes LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	19,909,927	$	42,112,711		—	$	62,022,638

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2014 79

Statements of Assets and Liabilities Master Investment Portfolio

December 31, 2014	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	$	431,699,175	$	882,650,082	$	518,519,945	$	818,549,612	$	411,005,576
Investments sold receivable		1,022,498		3,994,283		3,570,596		3,992,812		2,259,097
Contributions receivable from investors		32,390		—		—		1,115,720		—
Securities lending income receivable — affiliated		2		457		—		578		2
Prepaid expenses		2,069		3,809		2,400		3,900		1,896
Total assets		432,756,134		886,648,631		522,092,941		823,662,622		413,266,571
Liabilities
Investments purchased payable		918,086		4,043,580		3,276,799		5,306,571		2,475,938
Professional fees payable		24,571		25,051		24,453		24,964		24,273
Investment advisory fees payable		13,517		30,498		16,249		27,293		12,552
Trustees’ fees payable		3,492		6,396		3,863		5,921		3,199
Custodian fees payable		1,126		1,297		1,949		2,466		2,100
Printing fees payable		5		—		7		—		317
Collateral on securities loaned at value		—		1,079,100		—		—		9,300
Withdrawals payable to investors		—		139,166		575,200		—		698,762
Other accrued expenses payable		236		—		3		214		—
Total liabilities		961,033		5,325,088		3,898,523		5,367,429		3,226,441
Net Assets	$	431,795,101	$	881,323,543	$	518,194,418	$	818,295,193	$	410,040,130
Net Assets Consist of
Investors’ capital	$	400,945,370	$	808,462,811	$	480,867,937	$	741,499,611	$	377,173,156
Net unrealized appreciation/depreciation		30,849,731		72,860,732		37,326,481		76,795,582		32,866,974
Net Assets	$	431,795,101	$	881,323,543	$	518,194,418	$	818,295,193	$	410,040,130
1    Investments at cost — affiliated	$	400,849,444	$	809,789,350	$	481,193,464	$	741,754,030	$	378,138,602
2    Securities loaned at value		—	$	1,054,746		—		—	$	9,012

See Notes to Financial Statements.
80	BLACKROCK FUNDS III	DECEMBER 31, 2014

Statements of Assets and Liabilities Master Investment Portfolio

December 31, 2014	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	$	546,667,698	$	227,466,788	$	233,842,066	$	62,022,638
Investments sold receivable		3,521,056		2,586,190		3,039,221		327,601
Contributions receivable from investors		516,913		—		—		150,365
Securities lending income receivable — affiliated		1,256		993		529		—
Receivable from Manager		—		—		—		376
Prepaid expenses		2,589		1,049		1,085		92
Total assets		550,709,512		230,055,020		236,882,901		62,501,072
Liabilities
Investments purchased payable		4,159,671		2,144,746		1,628,003		579,586
Professional fees payable		25,081		24,486		24,517		24,225
Investment advisory fees payable		16,637		6,001		5,619		—
Trustees’ fees payable		4,104		2,043		2,035		1,037
Custodian fees payable		2,469		1,995		2,470		2,224
Printing fees payable		—		637		643		733
Withdrawals payable to investors		—		1,078,834		2,311,847		16,577
Other accrued expenses payable		85		38		74		932
Total liabilities		4,208,047		3,258,780		3,975,208		625,314
Net Assets	$	546,501,465	$	226,796,240	$	232,907,693	$	61,875,758
Net Assets Consist of
Investors’ capital	$	493,776,276	$	209,015,461	$	214,932,477	$	56,965,203
Net unrealized appreciation/depreciation		52,725,189		17,780,779		17,975,216		4,910,555
Net Assets	$	546,501,465	$	226,796,240	$	232,907,693	$	61,875,758
1    Investments at cost — affiliated	$	493,942,509	$	209,686,009	$	215,866,850	$	57,112,083

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	81

Statements of Operations Master Investment Portfolio

Year Ended December 31, 2014	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	$	1,026,193		$	2,764,629		$	2,153,721		$	3,564,606		$	2,133,676
Securities lending — affiliated — net		12,488			14,927			23,462			13,011			19,242
Income — affiliated		1,291			2,805			1,859			3,045			1,661
Net investment income allocated from the applicable Underlying Master Portfolios:
Dividends		2,666,176			7,001,094			3,863,441			7,982,050			3,675,219
Interest		3,595,431			5,890,642			2,578,398			3,597,895			1,303,415
Expenses		(269,969	)		(537,736	)		(259,488	)		(460,581	)		(191,109	)
Fees waived		45,741			79,702			35,480			54,798			20,513
Total income		7,077,351			15,216,063			8,396,873			14,754,824			6,962,617
Expenses
Investment advisory		183,830			373,094			197,310			336,781			153,343
Professional		28,482			29,769			26,755			29,470			26,319
Independent Trustees		14,395			25,166			15,485			23,268			13,071
Custodian		6,383			6,708			8,319			9,875			8,800
Printing		210			747			210			697			—
Miscellaneous		3,296			6,747			2,960			5,728			2,178
Total expenses		236,596			442,231			251,039			405,819			203,711
Less fees waived by Manager		(52,706	)		(69,117	)		(53,730	)		(69,011	)		(50,343	)
Total expenses after fees waived		183,890			373,114			197,309			336,808			153,368
Net investment income		6,893,461			14,842,949			8,199,564			14,418,016			6,809,249
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — affiliated		(148,274	)		(260,389	)		(312,762	)		(587,442	)		(252,829	)
Allocations from the applicable Underlying Master Portfolios from investments, financial futures contracts and foreign currency transactions		5,415,448			10,011,147			4,557,034			8,038,003			3,030,870
		5,267,174			9,750,758			4,244,272			7,450,561			2,778,041
Net change in unrealized appreciation/depreciation on:
Investments — affiliated		42,601,093			(247,736	)		(866,252	)		831,048			(337,884	)
Allocations from the applicable Underlying Master Portfolios from investments, financial futures contracts and foreign currency translations		(34,242,275	)		19,930,640			12,359,580			19,790,706			10,242,425
		8,358,818			19,682,904			11,493,328			20,621,754			9,904,541
Net realized and unrealized gain		13,625,992			29,433,662			15,737,600			28,072,315			12,682,582
Net Increase in Net Assets Resulting from Operations	$	20,519,453		$	44,276,611		$	23,937,164		$	42,490,331		$	19,491,831

See Notes to Financial Statements.
82	BLACKROCK FUNDS III	DECEMBER 31, 2014

Statements of Operations Master Investment Portfolio

Year Ended December 31, 2014	LifePath Index 2040 Master Portfolio			LifePath Index 2045 Master Portfolio			LifePath Index 2050 Master Portfolio			LifePath Index 2055 Master Portfolio
Investment Income
Dividends — affiliated	$	2,938,649		$	1,419,359		$	1,507,856		$	456,879
Securities lending — affiliated — net		21,023			13,186			15,438			3,642
Income — affiliated		2,141			990			1,118			331
Other income — affiliated		40			—			—			—
Net investment income allocated from the applicable Underlying Master Portfolios:
Dividends		5,886,216			2,149,723			2,236,724			526,377
Interest		1,434,043			430,101			289,444			38,140
Expenses		(278,973	)		(94,686	)		(90,800	)		(19,459	)
Fees waived		26,029			7,983			6,495			1,087
Total income		10,029,168			3,926,656			3,966,275			1,006,997
Expenses
Investment advisory		216,190			82,181			81,734			20,088
Professional		27,834			25,995			26,133			25,956
Independent Trustees		16,517			8,935			8,884			5,048
Custodian		9,757			9,080			10,139			8,981
Printing		507			—			—			—
Miscellaneous		3,469			590			595			74
Total expenses		274,274			126,781			127,485			60,147
Less fees waived by Manager		(58,075	)		(44,580	)		(45,745	)		(40,050	)
Total expenses after fees waived		216,199			82,201			81,740			20,097
Net investment income		9,812,969			3,844,455			3,884,535			986,900
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — affiliated		(245,984	)		(17,339	)		(9,126	)		(12,147	)
Allocations from the applicable Underlying Master Portfolios from investments, financial futures contracts and foreign currency transactions		4,331,167			1,305,955			1,130,159			262,267
		4,085,183			1,288,616			1,121,033			250,120
Net change in unrealized appreciation/depreciation on:
Investments — affiliated		272,765			(689,661	)		(878,373	)		(433,896	)
Allocations from the applicable Underlying Master Portfolios from investments, financial futures contracts and foreign currency translations		13,999,164			6,551,179			7,045,119			1,958,037
		14,271,929			5,861,518			6,166,746			1,524,141
Net realized and unrealized gain		18,357,112			7,150,134			7,287,779			1,774,261
Net Increase in Net Assets Resulting from Operations	$	28,170,081		$	10,994,589		$	11,172,314		$	2,761,161

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	83

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 (Decrease) in Net Assets:	2014			2013			2014			2013
Operations				��
Net investment income	$	6,893,461		$	4,867,104		$	14,842,949		$	10,104,416
Net realized gain		5,267,174			1,607,960			9,750,758			3,828,007
Net change in unrealized appreciation/depreciation		8,358,818			14,094,143			19,682,904			38,380,342
Net increase in net assets resulting from operations		20,519,453			20,569,207			44,276,611			52,312,765
Capital Transactions
Proceeds from contributions		143,397,604			144,647,039			277,711,443			318,705,787
Value of withdrawals		(53,715,954	)		(45,593,905	)		(56,667,691	)		(41,988,538	)
Net increase in net assets derived from capital transactions		89,681,650			99,053,134			221,043,752			276,717,249
Net Assets
Total increase in net assets		110,201,103			119,622,341			265,320,363			329,030,014
Beginning of year		321,593,998			201,971,657			616,003,180			286,973,166
End of year	$	431,795,101		$	321,593,998		$	881,323,543		$	616,003,180

See Notes to Financial Statements.
84	BLACKROCK FUNDS III	DECEMBER 31, 2014

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath Index 2025 Master Portfolio						LifePath Index 2030 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013			2014			2013
Operations
Net investment income	$	8,199,564		$	4,475,644		$	14,418,016		$	9,597,272
Net realized gain		4,244,272			1,990,965			7,450,561			4,334,962
Net change in unrealized appreciation/depreciation		11,493,328			19,109,774			20,621,754			43,159,767
Net increase in net assets resulting from operations		23,937,164			25,576,383			42,490,331			57,092,001
Capital Transactions
Proceeds from contributions		243,638,235			145,933,393			282,820,961			293,938,444
Value of withdrawals		(27,988,660	)		(15,350,255	)		(35,497,084	)		(28,556,445	)
Net increase in net assets derived from capital transactions		215,649,575			130,583,138			247,323,877			265,381,999
Net Assets
Total increase in net assets		239,586,739			156,159,521			289,814,208			322,474,000
Beginning of year		278,607,679			122,448,158			528,480,985			206,006,985
End of year	$	518,194,418		$	278,607,679		$	818,295,193		$	528,480,985

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	85

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 (Decrease) in Net Assets:	2014			2013			2014			2013
Operations
Net investment income	$	6,809,249		$	3,705,666		$	9,812,969		$	6,295,044
Net realized gain		2,778,041			1,824,068			4,085,183			2,945,613
Net change in unrealized appreciation/depreciation		9,904,541			17,703,398			14,271,929			31,074,476
Net increase in net assets resulting from operations		19,491,831			23,233,132			28,170,081			40,315,133
Capital Transactions
Proceeds from contributions		198,363,584			111,267,543			215,183,238			197,281,684
Value of withdrawals		(14,990,358	)		(9,088,154	)		(23,545,222	)		(18,574,323	)
Net increase in net assets derived from capital transactions		183,373,226			102,179,389			191,638,016			178,707,361
Net Assets
Total increase in net assets		202,865,057			125,412,521			219,808,097			219,022,494
Beginning of year		207,175,073			81,762,552			326,693,368			107,670,874
End of year	$	410,040,130		$	207,175,073		$	546,501,465		$	326,693,368

See Notes to Financial Statements.
86	BLACKROCK FUNDS III	DECEMBER 31, 2014

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath Index 2045 Master Portfolio						LifePath Index 2050 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013			2014			2013
Operations
Net investment income	$	3,844,455		$	1,923,460		$	3,884,535		$	1,931,263
Net realized gain		1,288,616			877,646			1,121,033			759,409
Net change in unrealized appreciation/depreciation		5,861,518			9,780,807			6,166,746			10,064,564
Net increase in net assets resulting from operations		10,994,589			12,581,913			11,172,314			12,755,236
Capital Transactions
Proceeds from contributions		117,709,595			62,561,233			127,679,053			70,124,735
Value of withdrawals		(6,474,693	)		(3,753,224	)		(9,666,042	)		(5,194,644	)
Net increase in net assets derived from capital transactions		111,234,902			58,808,009			118,013,011			64,930,091
Net Assets
Total increase in net assets		122,229,491			71,389,922			129,185,325			77,685,327
Beginning of year		104,566,749			33,176,827			103,722,368			26,037,041
End of year	$	226,796,240		$	104,566,749		$	232,907,693		$	103,722,368

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2014	87

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath Index 2055 Master Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	986,900		$	436,743
Net realized gain		250,120			136,021
Net change in unrealized appreciation/depreciation		1,524,141			2,277,997
Net increase in net assets resulting from operations		2,761,161			2,850,761
Capital Transactions
Proceeds from contributions		40,430,983			17,371,497
Value of withdrawals		(5,284,411	)		(1,162,211	)
Net increase in net assets derived from capital transactions		35,146,572			16,209,286
Net Assets
Total increase in net assets		37,907,733			19,060,047
Beginning of year		23,968,025			4,907,978
End of year	$	61,875,758		$	23,968,025

See Notes to Financial Statements.
88	BLACKROCK FUNDS III	DECEMBER 31, 2014

Financial Highlights Master Investment Portfolio

	LifePath Index Retirement Master Portfolio
	Year Ended December 31,									Period May 31, 20111 to December 31, 2011
	2014			2013			2012
Total Return
Total return		5.78%			7.72%			9.17%			(0.59)%	2
Ratio to Average Net Assets
Total expenses3,4,5		0.13%			0.16%			0.18%			3.44%	6,7
Total expenses after fees waived3,4,5		0.11%			0.14%			0.15%			0.15%	6
Net investment income4,5,8		1.87%			1.74%			2.02%			2.87%	6
Supplemental Data
Net assets, end of period (000)		$431,795			$321,594			$201,972			$1,968
Portfolio turnover rate		15%	9		18%	9		1%	10		1%	10

¹  Commencement of operations.

²  Aggregate total 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 “Underlying 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 Underlying Master Portfolios’ allocated fees waived of 0.01%, 0.00%, 0.02% and 0.08% for the years ended December 31, 2013, 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%, 0.02%, 0.02% and 0.04% for the years ended December 31, 2014, 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 Underlying 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 Underlying Master Portfolios.

⁹  Includes the purchases or sales of the underlying funds and the Underlying Master Portfolios.

¹⁰ Excludes purchases or sales of the Underlying 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, 2014	89

Financial Highlights Master Investment Portfolio

	LifePath Index 2020 Master Portfolio
	Year Ended December 31,									Period May 31, 20111 to December 31, 2011
	2014			2013			2012
Total Return
Total return		6.15%			11.36%			11.36%			(3.71)%	2
Ratios to Average Net Assets
Total expenses3,4,5		0.12%			0.16%			0.19%			3.55%	6,7
Total expenses after fees waived3,4,5		0.11%			0.14%			0.16%			0.18%	6
Net investment income4,5,8		1.99%			2.01%			2.19%			2.70%	6
Supplemental Data
Net assets, end of period (000)		$881,324			$616,003			$286,973			$1,908
Portfolio turnover rate		12%	9		12%	9		1%	10		1%	10

¹  Commencement of operations.

²  Aggregate total 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 “Underlying 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 Underlying Master Portfolios’ allocated fees waived of 0.01%, 0.00%, 0.02% and 0.10% for the years ended December 31, 2014, 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%, 0.03% and 0.05% for the years ended December 31, 2014, 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 Underlying 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 Underlying Master Portfolios.

⁹  Includes the purchases or sales of the underlying funds and the Underlying Master Portfolios.

¹⁰ Excludes purchases or sales of the Underlying 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, 2014

Financial Highlights Master Investment Portfolio

	LifePath Index 2025 Master Portfolio
	Year Ended December 31,									Period May 31, 20111 to December 31 2011
	2014			2013			2012
Total Return
Total return		6.47%			13.48%			12.34%			(5.10)%	2
Ratio to Average Net Assets
Total expenses3,4,5		0.12%			0.17%			0.23%			3.59%	6,7
Total expenses after fees waived3,4,5		0.11%			0.14%			0.16%			0.18%	6
Net investment income4,5,8		2.08%			2.19%			2.27%			2.58%	6
Supplemental Data
Net assets, end of period (000)		$518,194			$278,608			$122,448			$1,882
Portfolio turnover rate		15%	9		13%	9		0%	10,11		0%	10,11

¹  Commencement of operations.

²  Aggregate total 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 “Underlying 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 0.01%, 0.00%, 0.02% and 0.11% for the years ended December 31, 2014, 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%, 0.03% and 0.06% for the years ended December 31, 2014, 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 Underlying Master Portfolios.

⁹  Includes the purchases or sales of the underlying funds and the Underlying Master Portfolios.

¹⁰ Excludes purchases or sales of the Underlying 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, 2014	91

Financial Highlights Master Investment Portfolio

	LifePath Index 2030 Master Portfolio
	Year Ended December 31,									Period May 31, 20111 to December 31, 2011
	2014			2013			2012
Total Return
Total return		6.64%			15.40%			13.28%			(6.28)%	2
Ratio to Average Net Assets
Total expenses3,4,5		0.12%			0.16%			0.21%			3.63%	6,7
Total expenses after fees waived3,4,5		0.11%			0.15%			0.17%			0.19%	6
Net investment income4,5,8		2.14%			2.33%			2.36%			2.50%	6
Supplemental Data
Net assets, end of period (000)		$818,295			$528,481			$206,007			$1,859
Portfolio turnover rate		20%	9		12%	9		2%	10		0%	10,11

¹  Commencement of operations.

²  Aggregate total 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 “Underlying 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 Underlying Master Portfolios’ allocated fees waived of 0.01%, 0.00%, 0.02% and 0.12% for the years ended December 31, 2014, 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%, 0.04% and 0.06% for the years ended December 31, 2014, 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 Underlying 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 Underlying Master Portfolios.

⁹  Includes the purchases or sales of the underlying funds and the Underlying Master Portfolios.

¹⁰ Excludes purchases or sales of the Underlying 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. 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, 2014

Financial Highlights Master Investment Portfolio

	LifePath Index 2035 Master Portfolio
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Total Return
Total return		6.82%			17.02%			14.07%			(7.35)%	2
Ratio to Average Net Assets
Total expenses3,4,5		0.12%			0.18%			0.26%			3.67%	6,7
Total expenses after fees waived3,4,5		0.11%			0.15%			0.17%			0.19%	6
Net investment income4,5,8		2.22%			2.47%			2.44%			2.43%	6
Supplemental Data
Net assets, end of period (000)		$410,040			$207,175			$81,763			$1,838
Portfolio turnover rate		25%	9		12%	9		1%	10		0%	10,11

¹  Commencement of operations.

²  Aggregate total 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 “Underlying 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 Underlying Master Portfolios’ allocated fees waived of 0.01%, 0.00%, 0.02% and 0.13% for the years ended December 31, 2014, 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%, 0.04% and 0.06% for the years ended December 31, 2014, 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 Underlying 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 expense ratio would have been 3.68%.

⁸  Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Underlying Master Portfolios.

⁹  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.

¹⁰ Excludes the purchases or sales of the Underlying 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, 2014	93

Financial Highlights Master Investment Portfolio

	LifePath Index 2040 Master Portfolio
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Total Return
Tota return		6.90%			18.66%			15.03%			(8.42)%	2
Ratios to Average Net Assets
Total expenses3,4,5		0.12%			0.17%			0.24%			3.70%	6,7
Total expenses after fees waived3,4,5		0.11%			0.15%			0.18%			0.20%	6
Net investment income4,5,8		2.27%			2.59%			2.50%			2.36%	6
Supplemental Data
Net assets, end of period (000)		$546,501			$326,693			$107,671			$1,819
Portfolio turnover rate		29%	9		12%	9		3%	10		0%	10,11

¹  Commencement of operations.

²  Aggregate total 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 “Underlying 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 Underlying Master Portfolios’ allocated fees waived of 0.01%, 0.00%, 0.02% and 0.14% for the years ended December 31, 2014, 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%, 0.04% and 0.07% for the years ended December 31, 2014, 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 Underlying 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 Underlying Master Portfolios.

⁹  Includes the purchases or sales of the underlying funds and the Underlying Master Portfolios.

¹⁰ Excludes purchases or sales of the Underlying 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, 2014

Financial Highlights Master Investment Portfolio

	LifePath Index 2045 Master Portfolio
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Total Return
Total return		7.10%			20.33%			15.61%			(9.49)%	2
Ratio to Average Net Assets
Total expenses3,4,5		0.13%			0.21%			0.41%			3.74%	6,7
Total expenses after fees waived3,4,5		0.10%			0.15%			0.17%			0.21%	6
Net investment income4,5,8		2.34%			2.77%			2.62%			2.29%	6
Supplemental Data
Net assets, end of period (000)		$226,796			$104,567			$33,177			$1,799
Portfolio turnover rate		30%	9		12%	9		2%	10		0%	10,11

¹  Commencement of operations.

²  Aggregate total return.

³  Includes the LifePath Index Master Portfolio’s prorata 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 “Underlying 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 Underlying Master Portfolios’ allocated fees waived of 0.00%, 0.00%, 0.02% and 0.15% for the years ended December 31, 2014, 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 0.07%, 0.05%, 0.04% and 0.07% for the years ended December 31, 2014, 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 Underlying 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 Underlying Master Portfolios.

⁹  Includes the purchases or sales of the underlying funds and the Underlying Master Portfolios.

¹⁰ Excludes purchases or sales of the Underlying 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, 2014	95

Financial Highlights Master Investment Portfolio

	LifePath Index 2050 Master Portfolio
	Year Ended December 31,									Period May 31, 20111 to December  31, 2011
	2014			2013			2012
Total Return
Total return		7.28%			21.62%			16.37%			(10.34)%	2
Ratio to Average Net Assets
Total expenses3,4,5		0.13%			0.21%			0.46%			3.76%	6,7
Total expenses after fees waived3,4,5		0.10%			0.15%			0.18%			0.21%	6
Net investment income4,5,8		2.38%			2.91%			2.67%			2.25%	6
Supplemental Data
Net assets, end of period (000)		$232,908			$103,722			$26,037			$1,784
Portfolio turnover rate		22%	9		12%	9		3%	10		0%	10,11

¹  Commencement of operations.

²  Aggregate total 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 “Underlying 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 Underlying Master Portfolios’ allocated fees waived of 0.00%, 0.00%, 0.02% and 0.15% for the years ended December 31, 2014, 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 0.08%, 0.06%, 0.05% and 0.07% for the years ended December 31, 2014, 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 Underlying 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 Underlying Master Portfolios.

⁹  Includes the purchases or sales of the underlying funds and the Underlying Master Portfolios.

¹⁰ Excludes purchases or sales of the Underlying 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, 2014

Financial Highlights Master Investment Portfolio

	LifePath Index 2055 Master Portfolio
	Year Ended December 31,									Period May 31, 20111 to December 31, 2011
	2014			2013			2012
Total Return
Total return		7.50%			22.99%			16.83%			(10.96)%	2
Ratio to Average Net Assets
Total expenses3,4,5		0.20%			0.42%			1.39%			3.79%	6,7
Total expenses after fees waived3,4,5		0.10%			0.15%			0.15%			0.21%	6
Net investment income4,5,8		2.46%			3.09%			2.76%			2.24%	6
Supplemental Data
Net assets, end of period (000)		$61,856			$23,968			$4,908			$1,769
Portfolio turnover rate		22%	9		15%	9		8%	10		0%	10,11

¹  Commencement of operations.

²  Aggregate total 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 “Underlying 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 Underlying Master Portfolios’ allocated fees waived of 0.00%, 0.00%,0.02% and 0.15% for the years ended December 31, 2014, 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 0.09%, 0.06%, 0.05% and 0.08% for the years ended December 31, 2014, 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 Underlying 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 Underlying Master Portfolios.

⁹  Includes the purchases or sales of the underlying funds and the Underlying Master Portfolios.

¹⁰ Excludes purchases or sales of the Underlying 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, 2014	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. The financial statements and these accompanying notes relate to nine series of 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”).

As of December 31, 2014, the investment of LifePath Index Retirement Master Portfolio, LifePath Index 2020 Master Portfolio and LifePath Index 2025 Master Portfolio, in the Bond Index Master Portfolio represented 51.3%, 39.6%, and 30.3%, respectively, of net assets. The investment of 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 the Russell 1000^® Index Master Portfolio represented 30.1%, 36.0%, 41.8%, 47.2%, 51.0%, 52.6%, 52.7% and 52.7%, respectively, of net assets. As such, the financial statements of Bond Index Master Portfolio and Russell 1000^® Index Master Portfolio, including the Schedules of Investments, should be read in conjunction with each respective LifePath Index Master Portfolio’s financial statements. The financial statements of ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000^® Index Master Portfolio, included in filings by MIP, except the financial statements of Master Small Cap Index Series, which are included in filings by Quantitative Master Series LLC, are available, without charge, on the U.S. Securities and Exchange Commission’s (“SEC’s”) website at http://www.sec.gov.

The LifePath Index Master Portfolios will 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 Index Master Portfolios. The LifePath Index Master Portfolios may also invest in other master portfolios (“Underlying Master Portfolios”) that are managed by subsidiaries of BlackRock.

The value of a LifePath Index Master Portfolio’s investment in each of 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, 2014, each LifePath Index Master Portfolio held interests in 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		6.1%		18.6%		2.4%		3.5%
LifePath Index 2020 Master Portfolio		17.1%		29.3%		4.3%		9.6%
LifePath Index 2025 Master Portfolio		10.0%		13.2%		2.2%		6.7%
LifePath Index 2030 Master Portfolio		21.4%		14.5%		3.1%		12.3%
LifePath Index 2035 Master Portfolio		10.7%		4.3%		1.4%		7.0%
LifePath Index 2040 Master Portfolio		17.1%		2.4%		1.7%		10.1%
LifePath Index 2045 Master Portfolio		6.2%		0.3%		0.7%		4.3%
LifePath Index 2050 Master Portfolio		6.2%		0.2%		0.8%		4.4%
LifePath Index 2055 Master Portfolio		1.2%		0.1%		0.2%		1.2%

The LifePath Index Master Portfolios, together with certain other registered investment companies advised by BlackRock Fund Advisors (“BFA” or the

“Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Liquidity Complex.

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 (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates. Each LifePath Index Master Portfolio is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the LifePath Index Master Portfolios:

Valuation: The LifePath Index Master Portfolios’ investments are valued at fair value as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the 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.

98 BLACKROCK FUNDS III DECEMBER 31, 2014

Notes to Financial Statements (continued) Master Investment Portfolio

Investments in open-end registered investment companies are valued at net asset value (“NAV”) each business day. The market value of the LifePath Index 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 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 Investments”). When determining the price for Fair Value Investments, 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. 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. The pricing of all Fair Value Investments 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-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the LifePath Index 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 Index Master Portfolio records daily its proportionate share of the Underlying Master Portfolios’ income, expenses and realized and unrealized gains and losses.

Recent Accounting Standard: In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance will require expanded disclosure for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. It is effective for financial statements with fiscal years beginning on or after December 15, 2014 and interim periods within those fiscal years. Management is evaluating the impact, if any, of this guidance on the LifePath Index Master Portfolios’ financial statement disclosures.

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: Each LifePath Index Master Portfolio may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the LifePath Index Master Portfolio collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. government. The initial collateral received by each LifePath Index Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the LifePath Index Master Portfolio and any additional required collateral is delivered to the LifePath Index Master Portfolio on the next business day. During the term of the loan, each LifePath Index Master Portfolio is entitled to all distributions made on or in respect of the loaned securities. 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 — affiliated, and collateral on securities loaned at value, respectively. As of December 31, 2014, any securities on loan were collateralized by cash. 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.

Securities lending transactions are entered into by the LifePath Index Master Portfolios under Master Securities Lending Agreements (each, an “MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a

net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, each LifePath Index Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than

BLACKROCK FUNDS III DECEMBER 31, 2014 99

Notes to Financial Statements (continued) Master Investment Portfolio

that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency

laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy

or insolvency. Under the MSLA, the borrower 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.

As of December 31, 2014, the following table is a summary of each LifePath Index Master Portfolio’s securities lending agreements by counterparty, which are subject to offset under an MSLA:

LifePath Index 2020 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Citigroup Global Markets, Inc.	$	1,054,746	$	(1,054,746	)		—

LifePath Index 2035 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
UBS Securities LLC	$	9,012	$	(9,012	)		—

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	LifePath Index 2035 Master Portfolio
$1,079,100	$9,300

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the LifePath Index Master Portfolios benefit from a borrower default indemnity provided by BTC. BTC’s indemnity allows for full replacement of the securities lent if the collateral received does not cover the value on the securities loaned in the event of borrower default. Each LifePath Index Master Portfolio 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.

4. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”) 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 BFA, the LifePath Index Master Portfolios’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory services. Pursuant to the Investment Advisory Agreement with MIP, the Manager 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%.

MIP, on behalf of the LifePath Index 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 Index 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 Index 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 Index 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 Index 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 Index Master Portfolios, or BAL (or an affiliate) receives investment advisory fees from the LifePath Index Master Portfolios.

The Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Master Portfolios pay to the Manager indirectly through their investments in affiliated money market funds. However, the Manager does not waive its investment advisory fees by the amount of

100 BLACKROCK FUNDS III DECEMBER 31, 2014

Notes to Financial Statements (continued) Master Investment Portfolio

investment advisory fees paid in connection with the LifePath Index Master Portfolios’ investment in other affiliated investment companies, if any. These amounts are included in fees waived by Manager in the Statements of Operations. For the year ended December 31, 2014, the amounts waived were as follows:

LifePath Index Retirement Master Portfolio	$	611
LifePath Index 2020 Master Portfolio	$	1,294
LifePath Index 2025 Master Portfolio	$	884
LifePath Index 2030 Master Portfolio	$	1,411
LifePath Index 2035 Master Portfolio	$	791
LifePath Index 2040 Master Portfolio	$	1,029
LifePath Index 2045 Master Portfolio	$	468
LifePath Index 2050 Master Portfolio	$	298
LifePath Index 2055 Master Portfolio	$	158

The U.S. Securities and Exchange Commission has issued an exemptive order which permits BTC, an affiliate of the Manager, to serve as securities lending agent for the LifePath Index Master Portfolios, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. The LifePath Index Master Portfolios are responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by the Manager or its affiliates, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees the LifePath Index Master Portfolios bear to an annual rate of 0.04% until December 31, 2014 and 0.05% thereafter (the “collateral investment fees”).

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. Each LifePath Index Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent. Pursuant to a securities lending agreement effective February 1, 2014, BTC may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the “specials only securities”).

Pursuant to such agreement, each LifePath Index Master Portfolio retains 80% of securities lending income. In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Liquidity Complex in a calendar year exceeds the aggregate securities lending income earned across the Equity-Liquidity Complex through the lending of specials only securities in the calendar year 2013, each LifePath Index Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income. Prior to February 1, 2014, each LifePath Index Master Portfolio retained 65% of securities lending income and paid a fee to BTC equal to 35% of such income. The share of securities lending 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, 2014, each LifePath Index Master Portfolio paid BTC the following amounts in total for securities lending agent services and collateral investment fees:

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
$3,523	$4,051	$6,193	$3,764	$4,831	$4,710	$3,426	$3,982	$1,026

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.

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

5. Purchases and Sales:

For the year ended December 31, 2014, purchases and sales of investments in the Underlying Funds and LifePath Index Master Portfolios and excluding short-term securities were as follows:

	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
Purchases	$	144,730,671	$	311,072,119	$	278,576,505	$	383,221,226	$	262,133,600	$	321,778,822	$	161,903,870	$	155,987,582	$	44,401,539
Sales	$	53,966,386	$	87,584,938	$	60,158,849	$	131,971,297	$	75,688,781	$	126,880,271	$	48,937,371	$	35,812,419	$	8,759,493

6. Income Tax Information:

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.

BLACKROCK FUNDS III DECEMBER 31, 2014 101

Notes to Financial Statements (concluded) Master Investment Portfolio

Each LifePath Index Master Portfolio files U.S. 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 U.S. federal tax returns remains open for the three years ended December 31, 2014 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.

As of December 31, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

	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
Tax Cost	$	401,205,129		$	810,181,728		$	481,460,789		$	742,045,613		$	378,295,013		$	494,102,312		$	209,757,052		$	215,953,265		$	57,152,337
Gross unrealized appreciation	$	43,999,831		$	98,699,240		$	50,431,648		$	80,914,947		$	41,722,769		$	64,112,760		$	19,842,446		$	22,851,188		$	4,984,130
Gross unrealized depreciation		(13,505,785	)		(26,230,886	)		(13,372,492	)		(4,410,948	)		(9,012,206	)		(11,547,374	)		(2,132,710	)		(4,962,387	)		(113,829	)
	$	30,494,046		$	72,468,354		$	37,059,156		$	76,503,999		$	32,710,563		$	52,565,386		$	17,709,736		$	17,888,801		$	4,870,301

7. Bank Borrowings:

MIP, on behalf of the LifePath Index Master Portfolios, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), was a party to a 364-day, $1.1 billion credit agreement with a group of lenders, under which a LifePath Index Master Portfolio may borrow to fund shareholder redemptions. Excluding commitments designated for a certain individual fund, the Participating Funds, including the LifePath Index Master Portfolios, could borrow up to an aggregate commitment amount of $650 million, subject to asset coverage and other limitations as specified in the agreement. Effective November 25, 2014, the credit agreement was amended to an aggregate commitment amount of $2.1 billion, of which the Participating Funds, including the LifePath Index Master Portfolios, can borrow up to $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The agreement terminates on April 23, 2015, unless otherwise extended to November 24, 2015 or renewed for a period of 364 days from April 23, 2015. The amended agreement has the following terms: a fee of 0.06% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one month LIBOR (but in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which are included in miscellaneous expenses in the Statements of Operations, and 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. During the year ended December 31, 2014, the LifePath Index Master Portfolios did not borrow under the credit agreement.

8. Principal Risks:

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 and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the LifePath Index 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 Index Master Portfolio.

9. 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, 2014

Report of Independent Registered Public Accounting Firm

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, 2014, 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, 2014 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 23, 2015

BLACKROCK FUNDS III DECEMBER 31, 2014 103

Officers and Trustees

Name, Address1 and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2
Ronald W. Forbes 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 153 Portfolios	None
Rodney D. Johnson 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 153 Portfolios	None
David O. Beim 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 153 Portfolios	None
Frank J. Fabozzi 1948	Trustee	Since 2014	Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011; Adjunct Professor of Finance and Becton Fellow, Yale University from 1994 to 2006.	112 RICs consisting of 232 Portfolios	None
Dr. Matina S. Horner 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 153 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 1939	Trustee	Since 2009	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 153 Portfolios	None
Ian A. MacKinnon 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None
Cynthia A. Montgomery 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 153 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 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 153 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 153 Portfolios	None
Toby Rosenblatt 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Futures Foundation (philanthropic foundation) since 2009; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None

104 BLACKROCK FUNDS III DECEMBER 31, 2014

Officers and Trustees (continued)

Name, Address1 and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2 (concluded)
Kenneth L. Urish 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 153 Portfolios	None
Frederick W. Winter 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 153 Portfolios	None
	1   The address of each Trustee is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2  Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 75. The Board determined to extend the terms of Trustees on a case-by-case basis, as appropriate.
	3  Date shown is the earliest date a person has served for the Trust/MIP. 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. Frank J. Fabozzi first became a member of the board of other funds advised by BlackRock Advisors, LLC or its affiliates in 1988.
Interested Trustees5
Paul L. Audet 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.	141 RICs consisting of 329 Portfolios	None
Henry Gabbay 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.	29 RICs consisting of 97 Portfolios	None
	5  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, Dr. Fabozzi 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 75. The Board has determined to extend the terms of Directors on a case-by-case basis, as appropriate.

BLACKROCK FUNDS III DECEMBER 31, 2014 105

Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as an Officer	Principal Occupation(s) During Past Five Years
Trust/MIP Officers2
John M. Perlowski 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 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.
Jennifer McGovern 1977	Vice President	Since 2014	Director of BlackRock, Inc. since 2011; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal Andrews 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 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.
Charles Park 1967	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2014	Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary to the 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    The address of each officer is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2 Officers of the Trust/MIP serve at the pleasure of the Board.

Effective September 10, 2014, Brendan Kyne resigned as a Vice President of the Trust\MIP and Jennifer McGovern became a Vice President of the Trust\MIP.

Effective December 31, 2014, Paul L. Audet and Henry Gabbay resigned as Trustees of the Trust\MIP and Ronald W. Forbes resigned as a Trustee of the Trust\MIP and Co-Chair of the Board. Effective January 1, 2015, Collette Chilton, Barbara G. Novick and Mark Stalnecker were appointed to serve as Trustees of the Trust\MIP.

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\MIP 400 Howard Street San Francisco, CA 94105

106 BLACKROCK FUNDS III DECEMBER 31, 2014

Additional Information

General Information

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.

BlackRock’s Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing. Visit http://www.blackrock.com for more information.

Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM 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, 2014 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, 2014

This report is intended for current holders. 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 preceded or accompanied 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.

LPindex-12/14-AR

DECEMBER 31, 2014

  ANNUAL REPORT  

BlackRock Russell 1000^® Index Fund  |  of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
The Markets in Review		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		17
Important Tax Information		17
Master Portfolio Information		18
Master Portfolio Financial Statements:
Schedule of Investments		19
Statement of Assets and Liabilities		31
Statement of Operations		32
Statements of Changes in Net Assets		33
Master Portfolio Financial Highlights		34
Master Portfolio Notes to Financial Statements		35
Master Portfolio Report of Independent Registered Public Accounting Firm		41
Officers and Trustees		42
Additional Information		45

2 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014

The Markets in Review

Dear Shareholder,

After an extended period of calm, market volatility increased over the course of 2014, driven largely by higher valuations in risk assets (such as equities and high yield bonds), rising geopolitical risks and expectations around global central bank policies. Several key trends drove strong performance in U.S. markets, particularly large-cap stocks, Treasuries and municipal bonds, while markets outside the U.S. were more challenged.

Investors began the year in search of relatively safer assets due to heightened risks in emerging markets, slowing growth in China and weakening U.S. economic data. As a result, equities globally declined in January while bond markets strengthened despite the expectation that interest rates would rise as the U.S. Federal Reserve had begun reducing its asset purchase programs. Strong demand for relatively safer assets pushed U.S. Treasury bond prices higher and thus kept rates low in the United States. This surprising development, as well as increasing evidence that the soft patch in U.S. economic data had been temporary and weather-related, brought equity investors racing back to the market in February.

In the months that followed, interest rates trended lower in a modest growth environment and more investors turned to equities in search of yield. Markets remained relatively calm despite rising tensions in Russia and Ukraine and further signs of decelerating growth in China. Strong corporate earnings, increased merger and acquisition activity and signs of a strengthening recovery in the U.S. and other developed economies kept equity prices moving higher. Not all segments benefited from these trends, however, as investors ultimately became wary of high valuations, resulting in a broad rotation into cheaper assets.

Volatility ticked up in the summer as geopolitical tensions escalated and investors feared that better U.S. economic indicators may compel the Fed to increase short-term interest rates sooner than previously anticipated. Global credit markets tightened as the U.S. dollar strengthened, ultimately putting a strain on investor flows, and financial markets broadly weakened in the third quarter.

Several themes dominated the markets in the fourth quarter, resulting in higher levels of volatility and the outperformance of U.S. markets versus other areas of the world. Economic growth strengthened considerably in the United States while the broader global economy showed signs of slowing. The European Central Bank and the Bank of Japan took aggressive measures to stimulate growth while the Fed moved toward tighter policy. This divergence in central bank policy caused further strengthening in the U.S. dollar versus other currencies. Oil prices, which had been falling gradually since the summer, plummeted in the fourth quarter due to a global supply-and-demand imbalance. Energy stocks sold off sharply and oil-exporting economies suffered, resulting in the poor performance of emerging market stocks.

At BlackRock, we believe investors need to think globally, extend their scope across a broad 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 blackrock.com for further insight about investing in today’s markets.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2014
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		6.12	%		13.69	%
U.S. small cap equities (Russell 2000® Index)		1.65			4.89
International equities (MSCI Europe, Australasia, Far East Index)		(9.24	)		(4.90	)
Emerging market equities (MSCI Emerging Markets Index)		(7.84	)		(2.19	)
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.01			0.03
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		4.33			10.72
U.S. investment-grade bonds (Barclays U.S. Aggregate Bond Index)		1.96			5.97
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.00			9.25
U.S. high yield bonds (Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		(2.84	)		2.46
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, 2014

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, 2014, the Fund’s Institutional Shares returned 13.07%, Investor A Shares returned 12.79% and Class K Shares returned 13.17%. The benchmark Russell 1000^® Index returned 13.24% 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 U.S. equities moved higher in 2014 as domestic economic growth picked up momentum and interest rates continued to be low. Although volatility increased, levels generally remained below the historical norm. The year got off to a rough start, however, due to heightened risks in emerging markets, slowing growth in China and softer economic data in the United States, while investors were bracing for the impact of the U.S. Federal Reserve (the “Fed”) scaling back on stimulus. Equity markets around the world declined sharply in January. But the sell-off was short-lived and equities rebounded as uncertainty abated. Notably, relief came in the form of long-term interest rates remaining low even as the Fed reduced its open-market purchases. Additionally, investors were comforted by the Fed’s dovish stance on short-term rates and increasing evidence that the recent weakness in U.S. economic data had been temporary and weather-related.

Ÿ Equity valuations were relatively high in the aftermath of the strong rally in 2013. Nevertheless, investors continued to favor equities in 2014 as bond yields were persistently low. Improving U.S. economic data, strong corporate earnings and increased merger and acquisition activity propelled market gains, pushing major U.S. stock indexes to all-time highs.

Ÿ However, the combination of high valuations and expectations of higher interest rates left equities particularly vulnerable to bad news. Volatility increased as tensions between Russia and Ukraine mounted and investors considered the potential implications of economic sanctions. The fragmentation of Iraq led to escalating violence and a spike in oil prices during the summer. A ground war in Gaza, the downing of a civilian airliner over Malaysia, and Scotland’s flirtation with independence from the United Kingdom added to global headwinds, resulting in a challenging third quarter for equity markets.

Ÿ U.S. economic growth strengthened considerably in the latter part of 2014. Initially, the good news was bad for stocks, spurring a sell-off in September as investors feared the Fed would raise short-term rates earlier than previously expected. But calm was restored when the Fed reaffirmed its anticipation that short-term rates would likely continue to be warranted for some time after its target employment and inflation levels are realized. U.S. stocks rebounded in October and continued their climb through year end as U.S. economic data continued to impress investors and help fuel a positive corporate earnings season.

Ÿ While the pace of U.S. economic growth strengthened, the broader global economy showed signs of slowing. This drove volatility higher as the divergence in global central bank policies became a major theme in equity markets. While the Fed moved toward tightening policy, the European Central Bank and Bank of Japan implemented easing measures to stimulate their economies and support their currencies. However, the U.S. equity market absorbed much of the increased liquidity flowing from foreign central banks as global investors sought relative stability in a world of rising geopolitical tensions and uneven economic growth.

Ÿ As the U.S. economy strengthened, so did the U.S. dollar, which put downward pressure on commodity prices. Oil prices in particular plunged in the latter months of 2014 as a global supply-and-demand imbalance materialized. Lower oil prices led to a pickup in consumer spending in the United States, a positive for U.S. stocks.

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.

4 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014

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

⁴  Commencement of operations.

Performance Summary for the Period Ended December 31, 2014

				Average Annual Total Returns5
	6-Month Total Returns			1 Year			Since Inception6
Institutional		5.47	%		13.07	%		14.61	%
Investor A		5.37			12.79			14.24
Class K		5.59			13.17			14.57
Russell 1000® Index		5.57			13.24			14.76

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, 2014		Ending Account Value December 31, 2014		Expenses Paid During the Period7		Beginning Account Value July 1, 2014		Ending Account Value December 31, 2014		Expenses Paid During the Period7		Annualized Expense Ratio
Institutional	$	1,000.00	$	1,054.70	$	0.78	$	1,000.00	$	1,024.45	$	0.77		0.15	%
Investor A	$	1,000.00	$	1,053.70	$	2.07	$	1,000.00	$	1,023.19	$	2.04		0.40	%
Class K	$	1,000.00	$	1,055.90	$	0.52	$	1,000.00	$	1,024.70	$	0.51		0.10	%

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 in which it invests.

⁸  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

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

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014 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. These shares are generally available through financial intermediaries.

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 previous page assume reinvestment of all 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. Distributions 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 Fund’s administrator has contractually agreed to waive and/or reimburse a portion of the Fund’s expenses. Without such waiver and/or reimbursement, the Fund’s performance would have been lower. The administrator is under no obligation to continue waiving and/or reimbursing its fees after the applicable termination date of such agreement. See Note 3 of the Notes to Financial Statements for additional information on 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, 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, 2014 and held through December 31, 2014) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

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

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

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

Derivative Financial Instruments

The Master Portfolio may invest in various derivative financial instruments. 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 manage market and interest rate risks. Derivative financial instruments may give rise to a form of economic leverage. Derivative financial instruments also 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 limit the amount of appreciation the Master Portfolio can realize on an investment and/or may result in lower distributions paid to shareholders. 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, 2014

Statement of Assets and Liabilities BlackRock Russell 1000^® Index Fund

December 31, 2014
Assets
Investments at value — Master Portfolio (cost — $61,539,543)	$	89,545,560
Capital shares sold receivable		1,542,303
Receivable from administrator		10,792
Prepaid expenses		15,770
Total assets		91,114,425
Liabilities
Contributions payable to Master Portfolio		1,525,807
Income dividends payable		1,312,689
Capital shares redeemed payable		16,497
Service fees payable		3,450
Administration fees payable		731
Officer’s fees payable		5
Other accrued expenses payable		36,862
Total liabilities		2,896,041
Net Assets	$	88,218,384
Net Assets Consist of
Paid-in capital	$	61,362,048
Undistributed net investment income		5,339
Accumulated net realized loss allocated from the Master Portfolio		(1,155,020	)
Net unrealized appreciation/depreciation allocated from the Master Portfolio		28,006,017
Net Assets	$	88,218,384
Net Asset Value
Institutional — Based on net assets of $363,414 and 24,691 shares outstanding, unlimited number of shares authorized, no par value	$	14.72
Investor A — Based on net assets of $17,506,981 and 1,195,258 shares outstanding, unlimited number of shares authorized, no par value	$	14.65
Class K — Based on net assets of $70,347,989 and 4,796,724 shares outstanding, unlimited number of shares authorized, no par value	$	14.67

See Notes to Financial Statements.
	BLACKROCK RUSSELL 1000® INDEX FUND	DECEMBER 31, 2014	7

Statement of Operations BlackRock Russell 1000^® Index Fund

Year Ended December 31, 2014
Investment Income
Net investment income allocated from the Master Portfolio:
Dividends — unaffiliated	$	1,571,682
Dividends — affiliated		23,932
Foreign taxes withheld		(437	)
Securities lending — affiliated — net		12,382
Income — affiliated		2,945
Expenses		(50,124	)
Fees waived		1,436
Total income		1,561,816
Fund Expenses
Administration		20,026
Service — Investor A		31,258
Transfer agent — Institutional		883
Transfer agent — Investor A		10,673
Transfer agent — Class K		90
Registration		56,866
Professional		42,066
Printing		20,263
Miscellaneous		8,452
Recoupment of past waived fees — class specific		173
Total expenses		190,750
Less administration fees waived		(20,026	)
Less transfer agent fees waived — Institutional		(205	)
Less transfer agent fees waived — Investor A		(759	)
Less transfer agent fees waived — Class K		(45	)
Less transfer agent fees reimbursed — Institutional		(553	)
Less transfer agent fees reimbursed — Investor A		(4,226	)
Less transfer agent fees reimbursed — Class K		(45	)
Less fees waived and/or reimbursed by administrator		(79,912	)
Total expenses after fees waived and/or reimbursed		84,979
Net investment income		1,476,837
Realized and Unrealized Gain Allocated from the Master Portfolio
Net realized gain from investments and financial futures contracts		1,393,663
Net change in unrealized appreciation on investments and financial futures contracts		7,399,707
Total realized and unrealized gain		8,793,370
Net Increase in Net Assets Resulting from Operations	$	10,270,207

See Notes to Financial Statements.
8	BLACKROCK RUSSELL 1000® INDEX FUND	DECEMBER 31, 2014

Statements of Changes in Net Assets BlackRock Russell 1000^® Index Fund

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	1,476,837		$	1,216,767
Net realized gain		1,393,663			1,501,144
Net change in unrealized appreciation/depreciation		7,399,707			16,064,264
Net increase in net assets resulting from operations		10,270,207			18,782,175
Distributions to Shareholders From1
Net investment income:
Institutional		(4,929	)		(2,078	)
Investor A		(210,349	)		(72,388	)
Class K		(1,260,548	)		(1,146,332	)
Net realized gain:
Institutional		(6,123	)		(4,993	)
Investor A		(296,423	)		(179,276	)
Class K		(1,259,884	)		(1,892,894	)
Decrease in net assets resulting from distributions to shareholders		(3,038,256	)		(3,297,961	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		7,103,413			(593,137	)
Net Assets
Total increase in net assets		14,335,364			14,891,077
Beginning of year		73,883,020			58,991,943
End of year	$	88,218,384		$	73,883,020
Undistributed net investment income, end of year	$	5,339		$	4,328

¹   Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK RUSSELL 1000® INDEX FUND	DECEMBER 31, 2014	9

Financial Highlights BlackRock Russell 1000^® Index Fund

	Institutional
	Year Ended December 31,									Period March 31, 20111 to December 31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	13.49		$	10.62		$	9.40		$	10.00
Net investment income2		0.26			0.23			0.21			0.13
Net realized and unrealized gain (loss)		1.49			3.26			1.33			(0.60	)
Net increase (decrease) from investment operations		1.75			3.49			1.54			(0.47	)
Distributions from:3
Net investment income		(0.25	)		(0.23	)		(0.21	)		(0.13	)
Net realized gain		(0.27	)		(0.39	)		(0.11	)		(0.00	)4
Return of capital		—			—			—			(0.00	)4
Total distributions		(0.52	)		(0.62	)		(0.32	)		(0.13	)
Net asset value, end of period	$	14.72		$	13.49		$	10.62		$	9.40
Total Return5
Based on net asset value		13.07%			33.09%			16.42%			(4.72	)%6
Ratios to Average Net Assets7
Total expenses		0.59%			0.56%	8		0.65%	9		1.84%	10,11,12
Total expenses after fees waived and/or reimbursed		0.16%			0.23%	8		0.23%	9		0.22%	10,11
Net investment income		1.81%			1.80%	8		2.07%	9		1.86%	10,11
Supplemental Data
Net assets, end of period (000)	$	363		$	183		$	28		$	24
Portfolio turnover rate of the Master Portfolio		6%			14%			16%			10%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Amount is greater than $(0.0005) per share.

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 ended 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, 2014

Financial Highlights (continued) BlackRock Russell 1000^® Index Fund

	Investor A
	Year Ended December 31,									Period March 31, 20111 to December 31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	13.43		$	10.61		$	9.39		$	10.00
Net investment income		0.22			0.19			0.19			0.13
Net realized and unrealized gain (loss)		1.49			3.22			1.33			(0.62	)
Net increase (decrease) from investment operations		1.71			3.41			1.52			(0.49	)
Distributions from:
Net investment income		(0.22	)		(0.20	)		(0.19	)		(0.12	)
Net realized gain		(0.27	)		(0.39	)		(0.11	)		(0.00	)4
Return of capital		—			—			—			(0.00	)4
Total distributions		(0.49	)		(0.59	)		(0.30	)		(0.12	)
Net asset value, end of period	$	14.65		$	13.43		$	10.61		$	9.39
Total Return5
Based on net asset value		12.79%			32.35%			16.18%			(4.93	)%6
Ratios to Average Net Assets7
Total expenses		0.57%			0.66%	8		0.83%	9		1.40%	10,11,12
Total expenses after fees waived and/or reimbursed		0.41%			0.48%	8		0.45%	9		0.45%	10,11
Net investment income		1.56%			1.56%	8		1.83%	9		1.80%	10,11
Supplemental Data
Net assets, end of period (000)	$	17,507		$	6,454		$	2,310		$	1,918
Portfolio turnover rate of the Master Portfolio		6%			14%			16%			10%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Amount is greater than $(0.0005) per share.

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 ended 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, 2014	11

Financial Highlights (concluded) BlackRock Russell 1000^® Index Fund

	Class K
	Year Ended December 31,									Period March 31, 20111 to December 31, 2011
	2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	13.44		$	10.61		$	9.40		$	10.00
Net investment income2		0.26			0.23			0.22			0.13
Net realized and unrealized gain (loss)		1.50			3.22			1.32			(0.60	)
Net increase (decrease) from investment operations		1.76			3.45			1.54			(0.47	)
Distributions from:3
Net investment income		(0.27	)		(0.23	)		(0.22	)		(0.13	)
Net realized gain		(0.26	)		(0.39	)		(0.11	)		(0.00	)4
Return of capital		—			—			—			(0.00	)4
Total distributions		(0.53	)		(0.62	)		(0.33	)		(0.13	)
Net asset value, end of period	$	14.67		$	13.44		$	10.61		$	9.40
Total Return5
Based on net asset value		13.17%			32.80%			16.37%			(4.68	)%6
Ratio to Average Net Assets7
Total expenses		0.24%			0.33%	8		0.52%	9		1.11%	10,11,12
Total expenses after fees waived and/or reimbursed		0.12%			0.18%	8		0.18%	9		0.18%	10,11
Net investment income		1.83%			1.85%	8		2.11%	9		2.02%	10,11
Supplemental Data
Net assets, end of period (000)	$	70,348		$	6,746		$	56,654		$	46,785
Portfolio turnover rate of the Master Portfolio		6%			14%			16%			10%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Amount is greater than $(0.0005) per share.

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total 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 ended 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, 2014

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 all of its assets in Russell 1000 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. At December 31, 2014 the percentage of the Master Portfolio owned by the Fund was 3.2%. 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. 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. 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 and are generally available through financial intermediaries. 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 (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund:

Valuation: The Fund’s investments are valued at fair value as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund’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.

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

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds 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 prorated 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” or the “Administrator”), an indirect, wholly owned subsidiary of BlackRock, to provide administrative services (other than investment advice and related portfolio activities). Effective March 21, 2014, for such services, the Fund pays BAL a monthly fee at an annual rate of 0.01% of the average daily value of the Fund’s net assets. Prior to March 21, 2014, the Fund paid the Administrator a monthly fee at an annual rate of 0.08% of the average daily net assets of the Fund. The Fund does not pay an investment advisory fee or investment management fee.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014 13

Notes to Financial Statements (continued) BlackRock Russell 1000^® Index Fund

BlackRock Fund Advisors (“BFA”), the investment advisor for the Master Portfolio and BAL contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business. The expense limitation as a percentage of average daily net assets is as follows:

	Institutional		Investor A		Class K
Rate		0.15%		0.40%		0.10%

Prior to March 21, 2014, the expense limitations as a percentage of average daily net assets was as follows:

	Institutional		Investor A		Class K
Rate		0.23%		0.48%		0.18%

BAF and BAL agreed not to reduce or discontinue this contractual waiver or reimbursement prior to May 1, 2015 unless approved by the Trust’s Board of Trustees, including a majority of the independent Trustees. These amounts are included in administration fees waived, transfer agent fees waived-class specific, transfer agent fees reimbursed — class specific and fees reimbursed by administrator, respectively, 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 or BAL, as applicable, are less than the expense limit for that share class, the share class is required to repay up to the lesser of (a) the amount of fees waived or expenses reimbursed during those 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 or BAL, as applicable, or an affiliate continues to serve 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 or BAL, as applicable, becomes entitled to reimbursement for fees waived or reimbursed, the amount available to reimburse BFA or BAL, as applicable, shall be calculated by reference to the expense limit for that share class in effect at the time BFA or BAL, as applicable, became entitled to receive such reimbursement, rather than the subsequently changed expense limit for that share class.

For the year ended December 31, 2014, BAL recouped class specific waivers and/or reimbursements of $173, which is included in Recoupment of past waived fees — class specific in the Statement of Operations.

On December 31, 2014, the Fund level and class specific waivers and/or reimbursements subject to possible future recoupment under the expense limitation agreement with BAL are as follows:

	Expiring December 31,
	2015		2016
Fund level	$	100,089	$	99,938
Institutional	$	186	$	758
Investor A	$	981	$	4,985
Class K	$	143	$	90

The following Fund level and class specific waivers and/or reimbursements previously recorded by the Fund, expired on December 31, 2014:

Institutional	Investor A	Class K
$111,439	$14	$870

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. 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 and distributions 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 shareholders.

The Manager 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, 2014, 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	Investor A	Class K
$205	$759	$45

14 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014

Notes to Financial Statements (continued) BlackRock Russell 1000^® 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, which is included in officer and directors in the Statement of Operations.

4. Income Tax Information:

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

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns remains open for each of the three years ended December 31, 2014 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 that there are any uncertain tax positions that require recognition of a tax liability.

The tax character of distributions paid was as follows:

	12/31/14		12/31/13
Ordinary income	$	1,852,288	$	1,540,824
Long-term capital gains		1,185,968		1,757,137
Total	$	3,038,256	$	3,297,961

As of December 31, 2014, the tax components of accumulated net earnings were as follows:

Undistributed ordinary income	$	43,840
Undistributed long-term capital gains		116,982
Net unrealized gains1		26,695,514
Total	$	26,856,336

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, 2014						Year Ended December 31, 2013
	Shares			Amount			Shares			Amount
Institutional
Shares sold		12,718		$	182,477			11,914		$	146,566
Shares issued to shareholders in reinvestment of distributions		649			9,418			416			5,533
Shares redeemed		(2,256	)		(32,808	)		(1,393	)		(17,962	)
Net increase		11,111		$	159,087			10,937		$	134,137
Investor A
Shares sold		915,164		$	12,739,622			303,478		$	3,788,551
Shares issued to shareholders in reinvestment of distributions		35,002			505,651			19,062			250,199
Shares redeemed		(235,628	)		(3,301,283	)		(59,596	)		(765,167	)
Net increase		714,538		$	9,943,990			262,944		$	3,273,583
Class K
Shares sold		626,336		$	8,676,816			218,553		$	2,722,196
Shares issued to shareholders in reinvestment of distributions		175,001			2,519,103			233,924			3,037,651
Shares redeemed		(1,008,042	)		(14,195,583	)		(786,734	)		(9,760,704	)
Net decrease		(206,705	)	$	(2,999,664	)		(334,257	)	$	(4,000,857	)
Total Net Increase (Decrease)		518,944		$	7,103,413			(60,376	)	$	(593,137	)

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014 15

Notes to Financial Statements (concluded) BlackRock Russell 1000^® Index Fund

At December 31, 2014, shares owned by affiliates were as follows:

	Shares
Institutional		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.

16 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014

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, 2014, 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 23, 2015

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid during the taxable year ended December 31, 2014.

	January —December 2014
Qualified Dividend Income for Individuals1		78.99%
Dividends Qualifying for the Dividend Received Deductions for Corporations1		74.38%

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 $0.036374 and $0.165163 per share to shareholders on record June 27, 2014 and December 30, 2014, respectively.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014 17

Master Portfolio Information Russell 1000^®  Index Master Portfolio

As of December 31, 2014

Top Ten Holdings Percent of
Long-Term  Investments

Apple, Inc.	3	%
Exxon Mobil Corp.	2
Microsoft Corp.	2
Johnson & Johnson	1
Berkshire Hathway, Inc., Class B	1
Wells Fargo & Co.	1
General Electric Co.	1
The Proctor & Gamble Co.	1
JPMorgan Chase & Co.	1
Chevron Corp.	1

Sector Allocation Percent of
Long-Term  Investments

Information Technology	19	%
Financials	17
Health Care	14
Consumer Discretionary	13
Industrials	11
Consumer Staples	9
Energy	8
Materials	3
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.

18 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014

Schedule of Investments December 31, 2014 Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Aerospace & Defense — 2.5%
Alliant Techsystems, Inc.		4,065	$	472,556
B/E Aerospace, Inc. (a)		13,432		779,325
The Boeing Co.		93,062		12,096,199
Exelis, Inc.		24,191		424,068
General Dynamics Corp.		39,028		5,371,033
Hexcel Corp. (a)		12,479		517,754
Honeywell International, Inc.		99,940		9,986,005
Huntington Ingalls Industries, Inc.		6,267		704,787
KLX, Inc. (a)		6,735		277,819
L-3 Communications Holdings, Inc.		11,005		1,388,941
Lockheed Martin Corp.		34,582		6,659,456
Northrop Grumman Corp.		25,779		3,799,567
Precision Castparts Corp.		18,474		4,450,017
Raytheon Co.		39,926		4,318,795
Rockwell Collins, Inc.		17,292		1,460,828
Spirit Aerosystems Holdings, Inc., Class A (a)		15,377		661,826
Textron, Inc.		35,623		1,500,084
TransDigm Group, Inc.		6,754		1,326,148
Triumph Group, Inc.		6,655		447,349
United Technologies Corp.		116,991		13,453,965
Vectrus, Inc. (a)		1,317		36,086
				70,132,608
Air Freight & Logistics — 0.7%
C.H. Robinson Worldwide, Inc.		18,942		1,418,566
Expeditors International of Washington, Inc.		25,188		1,123,637
FedEx Corp.		37,713		6,549,239
United Parcel Service, Inc., Class B		90,333		10,042,320
				19,133,762
Airlines — 0.7%
Alaska Air Group, Inc.		17,539		1,048,131
American Airlines Group, Inc.		91,910		4,929,133
Copa Holdings SA, Class A (b)		4,258		441,299
Delta Air Lines, Inc.		108,210		5,322,850
Southwest Airlines Co.		88,291		3,736,475
Spirit Airlines, Inc. (a)		9,283		701,609
United Continental Holdings, Inc. (a)		47,666		3,188,379
				19,367,876
Auto Components — 0.4%
Allison Transmission Holdings, Inc.		17,230		584,097
BorgWarner, Inc.		29,176		1,603,221
Gentex Corp.		18,620		672,741
The Goodyear Tire & Rubber Co.		35,134		1,003,778
Johnson Controls, Inc.		84,758		4,097,202
Lear Corp.		10,376		1,017,678
TRW Automotive Holdings Corp. (a)		14,135		1,453,785
Visteon Corp. (a)		5,613		599,805
				11,032,307
Automobiles — 0.7%
Ford Motor Co.		495,595		7,681,723
General Motors Co.		204,663		7,144,785
Harley-Davidson, Inc.		27,867		1,836,714
Tesla Motors, Inc. (a)		12,129		2,697,611
Thor Industries, Inc.		5,974		333,767
				19,694,600
Banks — 5.5%
Associated Banc-Corp		20,662		384,933
Bank of America Corp.		1,341,984		24,008,094
Common Stocks	Shares		Value
Banks (concluded)
Bank of Hawaii Corp.		5,768	$	342,100
BankUnited, Inc.		13,171		381,564
BB&T Corp.		91,693		3,565,941
BOK Financial Corp.		3,568		214,223
CIT Group, Inc.		23,351		1,116,878
Citigroup, Inc.		387,675		20,977,094
Citizens Financial Group, Inc.		20,776		516,491
City National Corp.		6,074		490,840
Comerica, Inc.		23,185		1,085,985
Commerce Bancshares, Inc.		11,038		480,043
Cullen/Frost Bankers, Inc.		6,757		477,315
East West Bancorp, Inc.		18,299		708,354
Fifth Third Bancorp		108,540		2,211,503
First Horizon National Corp.		30,192		410,007
First Niagara Financial Group, Inc.		46,038		388,100
First Republic Bank		17,562		915,331
Fulton Financial Corp.		24,576		303,759
Huntington Bancshares, Inc.		105,638		1,111,312
JPMorgan Chase & Co.		482,996		30,225,890
KeyCorp		112,724		1,566,864
M&T Bank Corp. (b)		16,780		2,107,904
PacWest Bancorp		8,903		404,730
The PNC Financial Services Group, Inc. (c)		68,164		6,218,602
Popular, Inc. (a)		13,205		449,630
Regions Financial Corp.		175,985		1,858,402
Signature Bank (a)		6,421		808,789
SunTrust Banks, Inc.		68,000		2,849,200
SVB Financial Group (a)		6,434		746,794
Synovus Financial Corp.		17,736		480,468
TCF Financial Corp.		21,632		343,733
US Bancorp		219,224		9,854,119
Wells Fargo & Co.		609,454		33,410,268
Zions Bancorporation		25,878		737,782
				152,153,042
Beverages — 1.8%
Brown-Forman Corp., Class B		19,635		1,724,738
The Coca-Cola Co.		506,713		21,393,423
Coca-Cola Enterprises, Inc.		32,086		1,418,843
Constellation Brands, Inc., Class A (a)		20,474		2,009,933
Dr Pepper Snapple Group, Inc.		25,061		1,796,372
Molson Coors Brewing Co., Class B		17,346		1,292,624
Monster Beverage Corp. (a)		18,271		1,979,663
PepsiCo, Inc.		193,475		18,294,996
				49,910,592
Biotechnology — 2.8%
Alexion Pharmaceuticals, Inc. (a)		25,242		4,670,527
Alkermes PLC (a)		18,443		1,080,022
Alnylam Pharmaceuticals, Inc. (a)		8,478		822,366
Amgen, Inc.		96,609		15,388,848
Biogen Idec, Inc. (a)		30,271		10,275,491
BioMarin Pharmaceutical, Inc. (a)		18,623		1,683,519
Celgene Corp. (a)		102,201		11,432,204
Cubist Pharmaceuticals, Inc. (a)		9,610		967,246
Gilead Sciences, Inc. (a)		195,980		18,473,075
Incyte Corp. Ltd. (a)		18,456		1,349,318
Intercept Pharmaceuticals, Inc. (a)		1,631		254,436
Medivation, Inc. (a)		9,766		972,791
Myriad Genetics, Inc. (a)(b)		9,715		330,893
Pharmacyclics, Inc. (a)		7,768		949,716

See Notes to Financial Statements.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014 19

Schedule of Investments (continued) Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Biotechnology (concluded)
Regeneron Pharmaceuticals, Inc. (a)		10,064	$	4,128,756
Seattle Genetics, Inc. (a)(b)		12,904		414,606
United Therapeutics Corp. (a)		6,125		793,126
Vertex Pharmaceuticals, Inc. (a)		30,142		3,580,870
				77,567,810
Building Products — 0.2%
Allegion PLC		12,319		683,212
AO Smith Corp.		9,643		543,962
Armstrong World Industries, Inc. (a)		5,892		301,199
Fortune Brands Home & Security, Inc.		21,191		959,316
Lennox International, Inc.		6,272		596,279
Masco Corp.		45,501		1,146,625
Owens Corning		15,027		538,117
USG Corp. (a)		12,097		338,595
				5,107,305
Capital Markets — 2.2%
Affiliated Managers Group, Inc. (a)		7,055		1,497,353
Ameriprise Financial, Inc.		24,232		3,204,682
Artisan Partners Asset Management, Inc., Class A		3,623		183,070
The Bank of New York Mellon Corp.		145,532		5,904,233
BlackRock, Inc. (c)		16,270		5,817,501
The Charles Schwab Corp.		143,461		4,331,088
E*Trade Financial Corp. (a)		36,822		893,118
Eaton Vance Corp.		15,355		628,480
Federated Investors, Inc., Class B		12,149		400,067
Franklin Resources, Inc.		50,633		2,803,549
The Goldman Sachs Group, Inc.		57,068		11,061,490
Invesco Ltd.		55,217		2,182,176
Lazard Ltd., Class A		11,481		574,394
Legg Mason, Inc.		13,249		707,099
LPL Financial Holdings, Inc.		11,159		497,134
Morgan Stanley		195,738		7,594,634
Northern Trust Corp.		30,179		2,034,065
NorthStar Asset Management Group, Inc.		23,426		528,725
Raymond James Financial, Inc.		15,935		912,916
SEI Investments Co.		16,951		678,718
State Street Corp.		54,929		4,311,927
T. Rowe Price Group, Inc.		33,529		2,878,800
TD Ameritrade Holding Corp.		34,305		1,227,433
Waddell & Reed Financial, Inc., Class A		10,876		541,842
				61,394,494
Chemicals — 2.4%
Air Products & Chemicals, Inc.		27,090		3,907,191
Airgas, Inc.		9,481		1,092,022
Albemarle Corp. (b)		10,151		610,380
Ashland, Inc.		8,827		1,057,121
Axalta Coating Systems, Ltd. (a)		7,549		196,425
Cabot Corp.		8,365		366,889
Celanese Corp., Series A		19,900		1,193,204
CF Industries Holdings, Inc.		6,646		1,811,301
Cytec Industries, Inc.		9,152		422,548
The Dow Chemical Co.		153,659		7,008,387
E.I. du Pont de Nemours & Co.		117,197		8,665,546
Eastman Chemical Co.		19,173		1,454,464
Ecolab, Inc.		34,019		3,555,666
FMC Corp.		16,994		969,168
Huntsman Corp.		25,736		586,266
International Flavors & Fragrances, Inc.		10,374		1,051,509
LyondellBasell Industries NV, Class A		53,428		4,241,649
Common Stocks	Shares		Value
Chemicals (concluded)
Monsanto Co.		61,716	$	7,373,210
The Mosaic Co.		42,705		1,949,483
NewMarket Corp.		1,150		464,059
Platform Specialty Products Corp. (a)		12,416		288,299
PPG Industries, Inc.		17,644		4,078,411
Praxair, Inc.		37,384		4,843,471
Rayonier Advanced Materials, Inc. (b)		5,628		125,504
Rockwood Holdings, Inc.		9,260		729,688
RPM International, Inc.		17,005		862,324
The Scotts Miracle-Gro Co., Class A		5,810		362,079
The Sherwin-Williams Co.		10,988		2,890,283
Sigma-Aldrich Corp.		15,166		2,081,837
The Valspar Corp.		10,798		933,811
Westlake Chemical Corp.		5,341		326,282
WR Grace & Co. (a)		9,737		928,812
				66,427,289
Commercial Services & Supplies — 0.5%
The ADT Corp. (b)		22,237		805,646
Cintas Corp. (b)		12,838		1,007,013
Clean Harbors, Inc. (a)		7,868		378,057
Copart, Inc. (a)		14,359		523,960
Covanta Holding Corp.		14,037		308,954
Iron Mountain, Inc.		23,671		915,121
KAR Auction Services, Inc.		17,841		618,191
Pitney Bowes, Inc.		25,860		630,208
Republic Services, Inc.		33,891		1,364,113
Rollins, Inc.		8,272		273,803
RR Donnelley & Sons Co. (b)		25,472		428,057
Stericycle, Inc. (a)		10,808		1,416,713
Tyco International PLC		53,403		2,342,256
Waste Connections, Inc.		15,818		695,834
Waste Management, Inc.		59,388		3,047,792
				14,755,718
Communications Equipment — 1.6%
Arista Networks, Inc. (a)(b)		770		46,785
ARRIS Group, Inc. (a)		16,053		484,640
Brocade Communications Systems, Inc.		55,539		657,582
Cisco Systems, Inc.		653,746		18,183,945
CommScope Holding Co., Inc. (a)		8,208		187,389
EchoStar Corp., Class A (a)		5,610		294,525
F5 Networks, Inc. (a)		9,664		1,260,814
Harris Corp.		13,591		976,106
JDS Uniphase Corp. (a)		29,515		404,946
Juniper Networks, Inc.		55,203		1,232,131
Knowles Corp. (a)		11,141		262,370
Motorola Solutions, Inc.		25,456		1,707,588
Palo Alto Networks, Inc. (a)		6,990		856,764
QUALCOMM, Inc.		215,403		16,010,905
Riverbed Technology, Inc. (a)		20,488		418,160
				42,984,650
Construction & Engineering — 0.2%
AECOM Technology Corp. (a)		19,126		580,857
Chicago Bridge & Iron Co. NV		12,576		527,940
Fluor Corp.		20,309		1,231,335
Jacobs Engineering Group, Inc. (a)		16,879		754,323
KBR, Inc.		19,132		324,287
Quanta Services, Inc. (a)		27,241		773,372
				4,192,114

See Notes to Financial Statements.

20 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014

Schedule of Investments (continued) Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Construction Materials — 0.1%
Eagle Materials, Inc.		6,387	$	485,603
Martin Marietta Materials, Inc.		7,884		869,763
Vulcan Materials Co.		16,693		1,097,231
				2,452,597
Consumer Finance — 0.8%
American Express Co.		115,767		10,770,962
Capital One Financial Corp.		72,944		6,021,527
Discover Financial Services		59,505		3,896,982
Navient Corp.		53,949		1,165,838
Santander Consumer USA Holdings, Inc.		11,481		225,142
SLM Corp.		53,953		549,781
Synchrony Financial (a)		16,398		487,841
				23,118,073
Containers & Packaging — 0.4%
Aptargroup, Inc.		8,353		558,315
Avery Dennison Corp.		12,150		630,342
Ball Corp.		17,791		1,212,812
Bemis Co., Inc.		12,870		581,853
Crown Holdings, Inc. (a)		17,688		900,319
Greif, Inc., Class A		4,174		197,138
MeadWestvaco Corp.		21,422		950,923
Owens-Illinois, Inc. (a)		21,066		568,571
Packaging Corp. of America		12,547		979,293
Rock-Tenn Co., Class A		18,319		1,117,093
Sealed Air Corp.		27,556		1,169,201
Silgan Holdings, Inc.		5,675		304,180
Sonoco Products Co.		13,024		569,149
				9,739,189
Distributors — 0.1%
Genuine Parts Co.		19,603		2,089,092
LKQ Corp. (a)		38,522		1,083,238
				3,172,330
Diversified Consumer Services — 0.1%
Apollo Education Group, Inc. (a)		12,370		421,941
DeVry Education Group, Inc.		8,103		384,649
H&R Block, Inc.		34,995		1,178,632
Service Corp. International		27,250		618,575
ServiceMaster Global Holdings, Inc. (a)		5,476		146,592
				2,750,389
Diversified Financial Services — 1.9%
Ally Financial, Inc. (a)		34,502		814,937
Berkshire Hathaway, Inc., Class B (a)		233,568		35,070,235
CBOE Holdings, Inc.		10,973		695,908
CME Group, Inc.		40,686		3,606,814
Equity Commonwealth		16,445		422,143
FNFV Group (a)		12,169		191,540
Interactive Brokers Group, Inc., Class A		7,084		206,569
IntercontinentalExchange Group, Inc.		14,696		3,222,686
Leucadia National Corp.		47,035		1,054,525
McGraw-Hill Financial, Inc.		34,737		3,090,898
Moody’s Corp.		24,128		2,311,704
MSCI, Inc.		14,893		706,524
The NASDAQ OMX Group, Inc.		14,909		715,036
				52,109,519
Diversified Telecommunication Services — 1.9%
AT&T, Inc.		662,401		22,250,050
Common Stocks	Shares		Value
Diversified Telecommunication Services (concluded)
CenturyLink, Inc.		73,092	$	2,892,981
Frontier Communications Corp.		127,908		853,146
Level 3 Communications, Inc. (a)		35,307		1,743,460
Verizon Communications, Inc.		528,484		24,722,482
Windstream Holdings, Inc. (b)		76,909		633,730
Zayo Group Holdings, Inc. (a)		3,269		99,933
				53,195,782
Electric Utilities — 1.7%
American Electric Power Co., Inc.		62,288		3,782,127
Duke Energy Corp.		90,256		7,539,986
Edison International		41,579		2,722,593
Entergy Corp.		22,892		2,002,592
Exelon Corp.		109,588		4,063,523
FirstEnergy Corp.		53,588		2,089,396
Great Plains Energy, Inc.		19,657		558,455
Hawaiian Electric Industries, Inc. (b)		12,950		433,566
ITC Holdings Corp.		20,116		813,290
NextEra Energy, Inc.		55,656		5,915,676
Northeast Utilities		40,325		2,158,194
OGE Energy Corp.		25,413		901,653
Pepco Holdings, Inc.		32,035		862,703
Pinnacle West Capital Corp.		14,083		962,010
PPL Corp.		84,787		3,080,312
The Southern Co.		113,769		5,587,196
Westar Energy, Inc. (b)		16,449		678,357
Xcel Energy, Inc.		64,060		2,301,035
				46,452,664
Electrical Equipment — 0.6%
Acuity Brands, Inc.		5,514		772,346
AMETEK, Inc.		31,305		1,647,582
The Babcock & Wilcox Co.		14,074		426,442
Eaton Corp. PLC		60,835		4,134,347
Emerson Electric Co.		89,555		5,528,230
Hubbell, Inc., Class B		7,552		806,780
Regal-Beloit Corp.		5,759		433,077
Rockwell Automation, Inc.		17,668		1,964,682
SolarCity Corp. (a)(b)		5,530		295,744
				16,009,230
Electronic Equipment, Instruments & Components — 0.5%
Amphenol Corp., Class A		40,107		2,158,158
Arrow Electronics, Inc. (a)		12,715		736,072
Avnet, Inc.		17,662		759,819
AVX Corp.		5,982		83,748
CDW Corp.		11,254		395,803
Corning, Inc.		166,984		3,828,943
Dolby Laboratories, Inc., Class A		6,232		268,724
FLIR Systems, Inc.		18,073		583,939
Ingram Micro, Inc., Class A (a)		19,805		547,410
IPG Photonics Corp. (a)		4,325		324,029
Jabil Circuit, Inc.		25,941		566,292
Keysight Technologies, Inc. (a)		21,275		718,457
National Instruments Corp.		12,689		394,501
Tech Data Corp. (a)		4,966		314,000
Trimble Navigation Ltd. (a)		33,293		883,596
Vishay Intertechnology, Inc.		17,681		250,186
				12,813,677

See Notes to Financial Statements.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014 21

Schedule of Investments (continued) Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Energy Equipment & Services — 1.2%
Atwood Oceanics, Inc. (a)		8,406	$	238,478
Baker Hughes, Inc.		55,638		3,119,623
Cameron International Corp. (a)		26,058		1,301,597
Diamond Offshore Drilling, Inc. (b)		8,700		319,377
Dresser-Rand Group, Inc. (a)		9,761		798,450
Dril-Quip, Inc. (a)		5,211		399,840
FMC Technologies, Inc. (a)		30,014		1,405,856
Frank’s International NV		4,407		73,288
Halliburton Co.		107,775		4,238,791
Helmerich & Payne, Inc.		12,330		831,289
Nabors Industries Ltd.		37,958		492,695
National Oilwell Varco, Inc.		54,754		3,588,030
Oceaneering International, Inc.		13,783		810,578
Oil States International, Inc. (a)		6,113		298,926
Patterson-UTI Energy, Inc.		18,789		311,709
Rowan Cos. PLC, Class A		16,126		376,058
RPC, Inc.		7,871		102,638
Schlumberger Ltd.		165,972		14,175,668
Seadrill Ltd.		45,074		538,183
Seventy Seven Energy, Inc. (a)		4,952		26,790
Superior Energy Services, Inc.		20,268		408,400
Tidewater, Inc.		6,529		211,605
Unit Corp. (a)		6,496		221,514
				34,289,383
Food & Staples Retailing — 2.2%
Costco Wholesale Corp.		56,136		7,957,278
CVS Health Corp.		149,214		14,370,800
The Kroger Co.		65,028		4,175,448
Rite Aid Corp. (a)		124,481		936,097
Safeway, Inc.		29,390		1,032,177
Sprouts Farmers Market, Inc. (a)		12,471		423,764
Sysco Corp.		74,601		2,960,914
Wal-Mart Stores, Inc.		203,323		17,461,379
Walgreens Boots Alliance, Inc.		121,789		9,280,322
Whole Foods Market, Inc.		46,909		2,365,152
				60,963,331
Food Products — 1.6%
Archer-Daniels-Midland Co.		83,521		4,343,092
Bunge Ltd.		18,787		1,707,926
Campbell Soup Co. (b)		22,172		975,568
ConAgra Foods, Inc.		53,746		1,949,905
Flowers Foods, Inc.		21,933		420,894
General Mills, Inc.		78,420		4,182,139
The Hain Celestial Group, Inc. (a)		12,790		745,529
The Hershey Co.		19,080		1,982,984
Hormel Foods Corp.		17,075		889,608
Ingredion, Inc.		9,509		806,744
The J.M. Smucker Co.		13,232		1,336,167
Kellogg Co.		32,775		2,144,796
Keurig Green Mountain, Inc.		18,048		2,389,465
Kraft Foods Group, Inc.		75,971		4,760,343
McCormick & Co., Inc. (b)		16,654		1,237,392
Mead Johnson Nutrition Co.		25,792		2,593,128
Mondelez International, Inc., Class A		215,861		7,841,151
Pilgrim’s Pride Corp. (a)(b)		8,247		270,419
Pinnacle Foods, Inc.		7,107		250,877
Tyson Foods, Inc., Class A		36,912		1,479,802
WhiteWave Foods Co. (a)		22,190		776,428
				43,084,357
Common Stocks	Shares		Value
Gas Utilities — 0.1%
AGL Resources, Inc.		15,219	$	829,588
Atmos Energy Corp.		12,785		712,636
National Fuel Gas Co. (b)		10,721		745,431
Questar Corp.		22,351		565,033
UGI Corp.		22,029		836,661
				3,689,349
Health Care Equipment & Supplies — 2.1%
Abbott Laboratories		191,674		8,629,163
Alere, Inc. (a)		10,540		400,520
Align Technology, Inc. (a)		10,418		582,470
Baxter International, Inc.		69,245		5,074,966
Becton Dickinson & Co.		24,656		3,431,129
Boston Scientific Corp. (a)		168,796		2,236,547
C.R. Bard, Inc.		9,732		1,621,546
CareFusion Corp. (a)		26,457		1,569,958
The Cooper Cos., Inc.		6,107		989,884
Covidien PLC		57,540		5,885,191
DENTSPLY International, Inc.		18,095		963,921
Edwards Lifesciences Corp. (a)		13,463		1,714,917
Halyard Health, Inc. (a)		6,156		279,913
Hill-Rom Holdings, Inc.		7,428		338,865
Hologic, Inc. (a)		30,663		819,929
IDEXX Laboratories, Inc. (a)		6,085		902,223
Intuitive Surgical, Inc. (a)		4,588		2,426,777
Medtronic, Inc.		127,490		9,204,778
ResMed, Inc. (b)		17,909		1,003,979
Sirona Dental Systems, Inc. (a)		7,357		642,781
St. Jude Medical, Inc.		36,272		2,358,768
Stryker Corp.		42,901		4,046,851
Teleflex, Inc. (b)		5,279		606,135
Varian Medical Systems, Inc. (a)		13,266		1,147,642
Zimmer Holdings, Inc.		21,417		2,429,116
				59,307,969
Health Care Providers & Services — 2.4%
Aetna, Inc.		45,610		4,051,536
AmerisourceBergen Corp.		28,821		2,598,501
Anthem Inc.		35,691		4,485,288
Brookdale Senior Living, Inc. (a)		21,912		803,513
Cardinal Health, Inc.		43,416		3,504,974
Catamaran Corp. (a)		26,398		1,366,097
Centene Corp. (a)		7,361		764,440
Cigna Corp.		34,285		3,528,269
Community Health Systems, Inc. (a)		14,710		793,163
DaVita HealthCare Partners, Inc. (a)		22,682		1,717,935
Envision Healthcare Holdings, Inc. (a)		10,519		364,904
Express Scripts Holding Co. (a)		93,660		7,930,192
HCA Holdings, Inc. (a)		41,659		3,057,354
Health Net, Inc. (a)		10,235		547,880
Henry Schein, Inc. (a)		10,894		1,483,218
Humana, Inc.		19,753		2,837,123
Laboratory Corp. of America Holdings (a)		10,822		1,167,694
LifePoint Hospitals, Inc. (a)		5,676		408,161
McKesson Corp.		29,426		6,108,249
MEDNAX, Inc. (a)		12,787		845,349
Patterson Cos., Inc.		10,963		527,320
Premier, Inc., Class A (a)		4,306		144,380
Quest Diagnostics, Inc.		18,439		1,236,519
Tenet Healthcare Corp. (a)		12,462		631,450
UnitedHealth Group, Inc.		125,048		12,641,102

See Notes to Financial Statements.

22 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014

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)
Universal Health Services, Inc., Class B		11,340	$	1,261,689
VCA, Inc. (a)		11,269		549,589
				65,355,889
Health Care Technology — 0.1%
Athenahealth, Inc. (a)		4,829		703,585
Cerner Corp. (a)		38,024		2,458,632
IMS Health Holdings, Inc. (a)		9,762		250,298
Veeva Systems, Inc., Class A (a)		5,038		133,053
				3,545,568
Hotels, Restaurants & Leisure — 1.8%
ARAMARK		5,585		173,973
Brinker International, Inc.		8,289		486,481
Carnival Corp.		54,222		2,457,883
Chipotle Mexican Grill, Inc. (a)		3,967		2,715,451
Choice Hotels International, Inc.		4,547		254,723
Darden Restaurants, Inc.		16,883		989,850
Domino’s Pizza, Inc.		7,099		668,513
Dunkin’ Brands Group, Inc.		13,571		578,803
Hilton Worldwide Holdings, Inc. (a)		17,265		450,444
Hyatt Hotels Corp., Class A (a)		5,389		324,472
International Game Technology		31,521		543,737
Las Vegas Sands Corp.		47,989		2,791,040
Marriott International, Inc., Class A		28,273		2,206,142
McDonald’s Corp.		126,139		11,819,224
MGM Resorts International (a)		47,586		1,017,389
Norwegian Cruise Line Holdings Ltd. (a)		11,553		540,218
Panera Bread Co., Class A (a)		3,126		546,425
Restaurant Brands International, Inc. (a)		27,298		1,065,714
Royal Caribbean Cruises Ltd.		21,193		1,746,939
SeaWorld Entertainment, Inc.		9,033		161,691
Six Flags Entertainment Corp.		9,299		401,252
Starbucks Corp.		96,071		7,882,626
Starwood Hotels & Resorts Worldwide, Inc.		22,789		1,847,504
The Wendy’s Co.		35,741		322,741
Wyndham Worldwide Corp.		16,246		1,393,257
Wynn Resorts Ltd.		10,342		1,538,476
Yum! Brands, Inc.		56,328		4,103,495
				49,028,463
Household Durables — 0.5%
D.R. Horton, Inc.		41,114		1,039,773
Garmin Ltd. (b)		15,584		823,303
GoPro, Inc., Class A (a)(b)		2,707		171,136	��
Harman International Industries, Inc.		8,691		927,417
Jarden Corp. (a)		24,697		1,182,492
Leggett & Platt, Inc. (b)		17,695		753,984
Lennar Corp., Class A		22,704		1,017,366
Mohawk Industries, Inc. (a)		7,836		1,217,401
Newell Rubbermaid, Inc.		35,312		1,345,034
NVR, Inc. (a)		535		682,302
PulteGroup, Inc.		48,322		1,036,990
Taylor Morrison Home Corp., Class A (a)		4,175		78,866
Tempur Sealy International, Inc. (a)		7,759		426,047
Toll Brothers, Inc. (a)		22,677		777,141
Tupperware Brands Corp.		6,439		405,657
Whirlpool Corp.		9,921		1,922,094
				13,807,003
Common Stocks	Shares		Value
Household Products — 1.8%
Church & Dwight Co., Inc.		17,345	$	1,366,959
The Clorox Co.		16,410		1,710,086
Colgate-Palmolive Co.		116,819		8,082,707
Energizer Holdings, Inc.		7,870		1,011,767
Kimberly-Clark Corp.		48,085		5,555,741
The Procter & Gamble Co.		345,328		31,455,928
Spectrum Brands Holdings, Inc.		2,768		264,842
				49,448,030
Independent Power and Renewable Electricity Producers — 0.1%
The AES Corp.		92,565		1,274,620
Calpine Corp. (a)		49,716		1,100,215
NRG Energy, Inc.		43,038		1,159,874
				3,534,709
Industrial Conglomerates — 2.0%
3M Co.		83,497		13,720,227
Carlisle Cos., Inc.		8,178		737,983
Danaher Corp.		77,538		6,645,782
General Electric Co.		1,279,720		32,338,524
Roper Industries, Inc.		12,735		1,991,117
				55,433,633
Insurance — 3.0%
ACE Ltd.		43,096		4,950,868
Aflac, Inc.		57,957		3,540,593
Alleghany Corp. (a)		2,101		973,814
Allied World Assurance Co. Holdings AG		12,577		476,920
The Allstate Corp.		55,385		3,890,796
American Financial Group, Inc.		9,250		561,660
American International Group, Inc.		184,618		10,340,454
American National Insurance Co.		934		106,719
Aon PLC		37,862		3,590,453
Arch Capital Group Ltd. (a)		17,113		1,011,378
Arthur J Gallagher & Co.		20,048		943,860
Aspen Insurance Holdings Ltd.		8,483		371,301
Assurant, Inc.		9,143		625,655
Assured Guaranty Ltd.		21,594		561,228
Axis Capital Holdings Ltd.		13,043		666,367
Brown & Brown, Inc.		15,396		506,682
The Chubb Corp.		31,201		3,228,367
Cincinnati Financial Corp.		20,868		1,081,588
CNA Financial Corp.		3,532		136,724
Endurance Specialty Holdings Ltd.		5,798		346,952
Erie Indemnity Co., Class A		3,182		288,830
Everest Re Group Ltd.		5,884		1,002,045
FNF Group		35,344		1,217,601
Genworth Financial, Inc., Class A (a)		63,333		538,331
The Hanover Insurance Group, Inc.		5,622		400,961
Hartford Financial Services Group, Inc.		57,388		2,392,506
HCC Insurance Holdings, Inc.		12,749		682,326
Lincoln National Corp.		33,659		1,941,115
Loews Corp.		41,560		1,746,351
Markel Corp. (a)		1,783		1,217,504
Marsh & McLennan Cos., Inc.		70,139		4,014,756
MBIA, Inc. (a)		18,678		178,188
Mercury General Corp.		1,182		66,984
MetLife, Inc.		119,404		6,458,562
Old Republic International Corp.		33,250		486,448
PartnerRe Ltd.		6,447		735,796
Principal Financial Group, Inc.		37,549		1,950,295

See Notes to Financial Statements.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014 23

Schedule of Investments (continued) Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Insurance (concluded)
ProAssurance Corp.		7,698	$	347,565
The Progressive Corp.		75,550		2,039,094
Protective Life Corp.		10,062		700,818
Prudential Financial, Inc.		58,707		5,310,635
Reinsurance Group of America, Inc.		8,815		772,370
RenaissanceRe Holdings Ltd.		5,175		503,114
StanCorp Financial Group, Inc.		5,666		395,827
Torchmark Corp.		16,809		910,544
The Travelers Cos., Inc.		44,343		4,693,707
Unum Group		32,850		1,145,808
Validus Holdings Ltd.		11,586		481,514
Voya Financial, Inc.		17,433		738,811
W.R. Berkley Corp.		12,806		656,436
White Mountains Insurance Group Ltd.		788		496,527
XL Group PLC		34,648		1,190,852
				83,614,600
Internet & Catalog Retail — 1.1%
Amazon.com, Inc. (a)		47,945		14,879,731
Expedia, Inc.		12,911		1,102,083
Groupon, Inc. (a)		61,396		507,131
HomeAway, Inc. (a)		12,132		361,291
Liberty Interactive Corp., Series A (a)		62,637		1,842,781
Liberty TripAdvisor Holdings, Inc., Series A (a)		9,623		258,859
Liberty Ventures, Series A (a)		18,309		690,615
Netflix, Inc. (a)		7,650		2,613,316
The Priceline Group, Inc. (a)		6,582		7,504,862
TripAdvisor, Inc. (a)		14,214		1,061,217
zulily, Inc., Class A (a)		1,724		40,342
				30,862,228
Internet Software & Services — 3.1%
Akamai Technologies, Inc. (a)		22,716		1,430,199
AOL, Inc. (a)		10,201		470,980
eBay, Inc. (a)		161,735		9,076,568
Equinix, Inc.		6,788		1,539,043
Facebook, Inc., Class A (a)		251,980		19,659,480
Google, Inc., Class A (a)		35,821		19,008,772
Google, Inc., Class C (a)		36,245		19,079,368
IAC/InterActiveCorp		9,500		577,505
LinkedIn Corp. (a)		13,313		3,058,129
Pandora Media, Inc. (a)		26,219		467,485
Rackspace Hosting, Inc. (a)		14,969		700,699
Twitter, Inc. (a)		65,923		2,364,658
VeriSign, Inc. (a)		14,170		807,690
Yahoo!, Inc. (a)		120,899		6,106,609
Yelp, Inc. (a)		6,595		360,944
				84,708,129
IT Services — 3.1%
Accenture PLC, Class A		80,728		7,209,818
Alliance Data Systems Corp. (a)		7,506		2,147,091
Amdocs Ltd.		20,416		952,509
Automatic Data Processing, Inc.		61,525		5,129,339
Booz Allen Hamilton Holding Corp.		9,711		257,633
Broadridge Financial Solutions, Inc.		15,399		711,126
Cognizant Technology Solutions Corp., Class A (a)		77,649		4,088,996
Computer Sciences Corp.		18,488		1,165,668
CoreLogic, Inc. (a)		11,901		375,953
DST Systems, Inc.		3,920		369,068
Fidelity National Information Services, Inc.		36,728		2,284,482
Common Stocks	Shares		Value
IT Services (concluded)
Fiserv, Inc. (a)		31,806	$	2,257,272
FleetCor Technologies, Inc. (a)		10,584		1,573,947
Gartner, Inc. (a)		11,514		969,594
Genpact Ltd. (a)		20,712		392,078
Global Payments, Inc.		8,702		702,512
International Business Machines Corp.		120,721		19,368,477
Jack Henry & Associates, Inc.		10,790		670,491
Leidos Holdings, Inc.		8,325		362,304
Mastercard, Inc., Class A		128,298		11,054,156
Paychex, Inc.		41,539		1,917,856
Sabre Corp.		5,782		117,201
Teradata Corp. (a)		20,125		879,060
Total System Services, Inc.		21,394		726,540
Vantiv, Inc., Class A (a)		15,897		539,226
VeriFone Systems, Inc. (a)		14,225		529,170
Visa, Inc., Class A (b)		63,992		16,778,702
The Western Union Co.		68,776		1,231,778
Xerox Corp.		148,970		2,064,724
				86,826,771
Leisure Products — 0.1%
Hasbro, Inc.		14,768		812,092
Mattel, Inc.		43,294		1,339,733
Polaris Industries, Inc.		8,409		1,271,777
				3,423,602
Life Sciences Tools & Services — 0.6%
Agilent Technologies, Inc.		42,550		1,741,997
Bio-Rad Laboratories, Inc., Class A (a)		2,695		324,909
Bio-Techne Corp.		4,721		436,220
Bruker Corp. (a)		14,355		281,645
Charles River Laboratories International, Inc. (a)		6,172		392,786
Covance, Inc. (a)		7,327		760,836
Illumina, Inc. (a)		17,790		3,283,678
Mettler-Toledo International, Inc. (a)		3,729		1,127,873
PerkinElmer, Inc.		14,449		631,855
QIAGEN NV (a)		29,797		699,038
Quintiles Transnational Holdings, Inc. (a)		6,849		403,201
Thermo Fisher Scientific, Inc.		50,911		6,378,639
VWR Corp. (a)		4,000		103,480
Waters Corp. (a)		10,820		1,219,631
				17,785,788
Machinery — 1.8%
AGCO Corp. (b)		11,986		541,767
Caterpillar, Inc.		79,663		7,291,554
Colfax Corp. (a)		12,167		627,452
Crane Co.		6,318		370,867
Cummins, Inc.		23,467		3,383,237
Deere & Co.		46,426		4,107,308
Donaldson Co., Inc.		18,249		704,959
Dover Corp.		21,247		1,523,835
Flowserve Corp.		17,526		1,048,580
Graco, Inc.		7,736		620,272
IDEX Corp.		10,288		800,818
Illinois Tool Works, Inc.		41,298		3,910,921
Ingersoll-Rand PLC		34,503		2,187,145
ITT Corp.		11,702		473,463
Joy Global, Inc.		12,779		594,479
Kennametal, Inc.		10,191		364,736
Lincoln Electric Holdings, Inc.		10,264		709,140

See Notes to Financial Statements.

24 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014

Schedule of Investments (continued) Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Machinery (concluded)
The Manitowoc Co., Inc.		17,579	$	388,496
The Middleby Corp. (a)		7,309		724,322
Navistar International Corp. (a)		7,167		239,951
Nordson Corp.		8,212		640,207
Oshkosh Corp.		9,970		485,040
PACCAR, Inc.		45,265		3,078,473
Pall Corp.		14,009		1,417,851
Parker Hannifin Corp.		19,007		2,450,953
Pentair PLC		24,704		1,640,840
Snap-on, Inc.		7,432		1,016,252
SPX Corp.		5,241		450,307
Stanley Black & Decker, Inc.		19,916		1,913,529
Terex Corp.		14,076		392,439
The Timken Co.		10,401		443,915
The Toro Co.		7,198		459,304
Trinity Industries, Inc.		19,770		553,758
Valmont Industries, Inc. (b)		3,140		398,780
WABCO Holdings, Inc. (a)		7,231		757,664
Wabtec Corp.		12,308		1,069,442
Xylem, Inc.		23,453		892,856
				48,674,912
Marine — 0.0%
Kirby Corp. (a)		7,272		587,141
Media — 3.6%
AMC Networks, Inc., Class A (a)		7,616		485,672
Cablevision Systems Corp., New York Group, Class A (b)		24,954		515,051
CBS Corp., Class B		66,817		3,697,653
Charter Communications, Inc., Class A (a)		10,126		1,687,194
Cinemark Holdings, Inc.		14,725		523,916
Clear Channel Outdoor Holdings, Inc., Class A		5,309		56,222
Comcast Corp., Class A		330,574		19,176,598
DIRECTV (a)		59,693		5,175,383
Discovery Communications, Inc., Class A (a)		29,291		1,009,075
Discovery Communications, Inc., Class C (a)		29,291		987,693
DISH Network Corp., Class A (a)		27,217		1,983,847
DreamWorks Animation SKG, Inc., Class A (a)		9,801		218,856
Gannett Co., Inc.		28,942		924,118
Graham Holdings Co., Class B		444		383,487
The Interpublic Group of Cos., Inc.		54,065		1,122,930
John Wiley & Sons, Inc., Class A		5,724		339,090
Liberty Broadband Corp. (a)		7,990		325,244
Liberty Broadband Corp., Class A (a)		3,144		157,483
Liberty Media Corp., Class A (a)		12,109		427,084
Liberty Media Corp., Class C (a)		24,218		848,357
Lions Gate Entertainment Corp.		10,445		334,449
Live Nation Entertainment, Inc. (a)		18,440		481,468
The Madison Square Garden Co., Class A (a)		7,882		593,199
Morningstar, Inc.		2,553		165,205
News Corp., Class A (a)		63,471		995,860
Omnicom Group, Inc.		32,982		2,555,116
Regal Entertainment Group, Class A (b)		10,797		230,624
Scripps Networks Interactive, Inc., Class A (b)		13,483		1,014,865
Sirius XM Holdings, Inc. (a)		330,847		1,157,964
Starz, Class A (a)		12,146		360,736
Thomson Reuters Corp.		45,347		1,829,298
Time Warner Cable, Inc.		35,556		5,406,645
Time Warner, Inc.		112,571		9,615,815
Twenty-First Century Fox, Inc., Class A		243,021		9,333,222
Common Stocks	Shares		Value
Media (concluded)
Viacom, Inc., Class B		54,853	$	4,127,688
The Walt Disney Co.		221,014		20,817,309
				99,064,416
Metals & Mining — 0.5%
Alcoa, Inc.		149,604		2,362,247
Allegheny Technologies, Inc.		13,856		481,773
Carpenter Technology Corp.		6,893		339,480
Cliffs Natural Resources, Inc. (b)		20,427		145,849
Compass Minerals International, Inc.		4,344		377,190
Freeport-McMoRan Copper & Gold, Inc.		132,558		3,096,555
Newmont Mining Corp.		63,621		1,202,437
Nucor Corp.		40,642		1,993,490
Reliance Steel & Aluminum Co.		9,917		607,615
Royal Gold, Inc.		8,224		515,645
Southern Copper Corp. (b)		18,608		524,746
Steel Dynamics, Inc.		30,633		604,695
Tahoe Resources, Inc.		11,167		154,886
TimkenSteel Corp.		5,376		199,073
United States Steel Corp.		18,466		493,781
				13,099,462
Multi-Utilities — 1.1%
Alliant Energy Corp.		14,157		940,308
Ameren Corp.		30,964		1,428,369
CenterPoint Energy, Inc.		54,843		1,284,971
CMS Energy Corp.		34,391		1,195,087
Consolidated Edison, Inc.		37,378		2,467,322
Dominion Resources, Inc.		74,223		5,707,749
DTE Energy Co.		22,590		1,951,098
Integrys Energy Group, Inc.		10,205		794,459
MDU Resources Group, Inc.		24,456		574,716
NiSource, Inc.		40,184		1,704,605
PG&E Corp.		59,311		3,157,718
Public Service Enterprise Group, Inc.		64,565		2,673,637
SCANA Corp. (b)		18,069		1,091,368
Sempra Energy		31,321		3,487,907
TECO Energy, Inc.		29,772		610,028
Vectren Corp.		10,524		486,525
Wisconsin Energy Corp.		28,780		1,517,857
				31,073,724
Multiline Retail — 0.7%
Big Lots, Inc.		6,821		272,976
Dillard’s, Inc., Class A		3,067		383,927
Dollar General Corp. (a)		39,558		2,796,751
Dollar Tree, Inc. (a)		26,393		1,857,539
Family Dollar Stores, Inc.		12,208		966,996
JC Penney Co., Inc. (a)(b)		39,747		257,561
Kohl’s Corp.		26,616		1,624,641
Macy’s, Inc.		46,172		3,035,809
Nordstrom, Inc.		17,693		1,404,647
Sears Holdings Corp. (a)(b)		3,404		112,264
Target Corp.		80,872		6,138,993
				18,852,104
Office Electronics — 0.0%
Zebra Technologies Corp., Class A (a)		6,443		498,753
Oil, Gas & Consumable Fuels — 6.4%
Anadarko Petroleum Corp.		64,454		5,317,455
Antero Resources Corp. (a)		6,898		279,921

See Notes to Financial Statements.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014 25

Schedule of Investments (continued) Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Oil, Gas & Consumable Fuels (concluded)
Apache Corp.		49,223	$	3,084,805
Cabot Oil & Gas Corp.		53,253		1,576,821
California Resources Corp. (a)		32,672		180,023
Cheniere Energy, Inc. (a)		30,360		2,137,344
Chesapeake Energy Corp.		67,214		1,315,378
Chevron Corp.		242,941		27,253,121
Cimarex Energy Co.		11,107		1,177,342
Cobalt International Energy, Inc. (a)		45,468		404,211
Concho Resources, Inc. (a)		14,383		1,434,704
ConocoPhillips		156,677		10,820,114
CONSOL Energy, Inc.		29,340		991,985
Continental Resources, Inc. (a)		11,134		427,100
CVR Energy, Inc.		2,005		77,614
Denbury Resources, Inc. (b)		45,666		371,265
Devon Energy Corp.		52,055		3,186,287
Energen Corp.		9,288		592,203
EOG Resources, Inc.		69,744		6,421,330
EP Energy Corp., Class A (a)		4,318		45,080
EQT Corp.		19,366		1,466,006
Exxon Mobil Corp.		548,038		50,666,113
Golar LNG Ltd.		6,638		242,088
Gulfport Energy Corp. (a)		10,902		455,050
Hess Corp.		35,462		2,617,805
HollyFrontier Corp.		25,355		950,305
Kinder Morgan, Inc.		173,452		7,338,754
Kosmos Energy Ltd. (a)		13,511		113,357
Laredo Petroleum, Inc. (a)(b)		9,939		102,869
Marathon Oil Corp.		86,279		2,440,833
Marathon Petroleum Corp.		32,089		2,896,353
Memorial Resource Development Corp. (a)		6,718		121,126
Murphy Oil Corp.		22,900		1,156,908
Murphy USA, Inc. (a)		6,055		416,947
Newfield Exploration Co. (a)		17,399		471,861
Noble Energy, Inc.		46,037		2,183,535
Oasis Petroleum, Inc. (a)		13,271		219,502
Occidental Petroleum Corp.		100,258		8,081,797
ONEOK, Inc.		26,528		1,320,829
PBF Energy, Inc.		9,027		240,479
Peabody Energy Corp.		35,332		273,470
Phillips 66		72,212		5,177,600
Pioneer Natural Resources Co.		18,255		2,717,257
QEP Resources, Inc.		22,980		464,656
Range Resources Corp.		20,914		1,117,853
SandRidge Energy, Inc. (a)(b)		65,918		119,971
SM Energy Co.		8,705		335,839
Southwestern Energy Co. (a)		45,058		1,229,633
Spectra Energy Corp.		85,591		3,106,953
Targa Resources Corp.		4,817		510,843
Teekay Corp.		5,923		301,421
Tesoro Corp.		16,504		1,227,072
Ultra Petroleum Corp. (a)(b)		19,923		262,187
Valero Energy Corp.		68,100		3,370,950
Whiting Petroleum Corp. (a)		21,201		699,633
The Williams Cos., Inc.		95,329		4,284,085
World Fuel Services Corp.		9,185		431,052
WPX Energy, Inc. (a)		26,269		305,509
				176,532,604
Paper & Forest Products — 0.1%
Domtar Corp.		8,322		334,711
International Paper Co.		55,282		2,962,009
				3,296,720
Common Stocks	Shares		Value
Personal Products — 0.1%
Avon Products, Inc.		55,442	$	520,600
Coty, Inc., Class A (a)		8,665		179,019
The Estee Lauder Cos., Inc., Class A		29,267		2,230,146
Herbalife Ltd. (b)		9,860		371,722
Nu Skin Enterprises, Inc., Class A		7,666		335,004
				3,636,491
Pharmaceuticals — 5.4%
AbbVie, Inc.		202,920		13,279,085
Actavis PLC (a)		32,408		8,342,143
Allergan, Inc.		37,974		8,072,893
Bristol-Myers Squibb Co.		211,485		12,483,960
Eli Lilly & Co.		125,552		8,661,832
Endo International PLC (a)		19,432		1,401,436
Hospira, Inc. (a)		21,330		1,306,462
Jazz Pharmaceuticals PLC (a)		7,579		1,240,910
Johnson & Johnson		361,043		37,754,267
Mallinckrodt PLC (a)		14,435		1,429,498
Merck & Co., Inc.		372,947		21,179,660
Mylan, Inc. (a)		47,695		2,688,567
Omnicare, Inc.		12,637		921,616
Perrigo Co. PLC		18,001		3,009,047
Pfizer, Inc.		814,037		25,357,253
Salix Pharmaceuticals Ltd. (a)		8,092		930,094
Zoetis, Inc.		63,939		2,751,295
				150,810,018
Professional Services — 0.3%
CoStar Group, Inc. (a)		4,122		756,923
The Dun & Bradstreet Corp.		4,724		571,415
Equifax, Inc.		15,573		1,259,389
IHS, Inc., Class A (a)		8,685		989,048
Manpowergroup, Inc.		10,161		692,675
Nielsen Holdings NV		35,965		1,608,714
Robert Half International, Inc.		17,545		1,024,277
Towers Watson & Co., Class A		8,288		937,953
Verisk Analytics, Inc., Class A (a)		21,234		1,360,038
				9,200,432
Real Estate Investment Trusts (REITs) — 3.2%
Alexandria Real Estate Equities, Inc.		9,144		811,439
American Campus Communities, Inc.		13,388		553,728
American Capital Agency Corp.		45,022		982,830
American Homes 4 Rent, Class A		19,410		330,552
American Realty Capital Properties, Inc.		115,875		1,048,669
American Tower Corp.		50,504		4,992,320
Annaly Capital Management, Inc.		120,917		1,307,113
Apartment Investment & Management Co., Class A		18,645		692,662
AvalonBay Communities, Inc.		16,537		2,701,980
BioMed Realty Trust, Inc.		24,567		529,173
Boston Properties, Inc.		19,531		2,513,444
Brandywine Realty Trust		23,194		370,640
Brixmor Property Group, Inc.		7,086		176,016
Camden Property Trust		10,920		806,333
CBL & Associates Properties, Inc.		21,260		412,869
Chimera Investment Corp.		131,129		416,990
Columbia Property Trust, Inc.		15,948		404,282
Corporate Office Properties Trust		12,100		343,277
Corrections Corp. of America		14,850		539,649
Crown Castle International Corp.		42,643		3,356,004
DDR Corp.		38,462		706,162

See Notes to Financial Statements.

26 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014

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)
Digital Realty Trust, Inc.		17,272	$	1,145,134
Douglas Emmett, Inc.		18,336		520,742
Duke Realty Corp.		42,048		849,370
Equity Lifestyle Properties, Inc.		10,634		548,183
Equity Residential		46,096		3,311,537
Essex Property Trust, Inc.		7,978		1,648,255
Extra Space Storage, Inc.		14,796		867,637
Federal Realty Investment Trust		8,585		1,145,754
Gaming and Leisure Properties, Inc.		10,958		321,508
General Growth Properties, Inc.		72,357		2,035,402
HCP, Inc.		58,474		2,574,610
Health Care REIT, Inc.		41,623		3,149,612
Healthcare Trust of America, Inc., Class A		15,407		415,065
Home Properties, Inc.		7,291		478,290
Hospitality Properties Trust		19,110		592,410
Host Hotels & Resorts, Inc.		96,598		2,296,135
Kilroy Realty Corp.		10,492		724,682
Kimco Realty Corp.		52,415		1,317,713
Lamar Advertising Co., Class A		7,525		403,641
Liberty Property Trust		18,847		709,213
The Macerich Co.		20,225		1,686,967
MFA Financial, Inc.		46,788		373,836
Mid-America Apartment Communities, Inc.		9,572		714,837
National Retail Properties, Inc.		16,975		668,306
NorthStar Realty Finance Corp.		27,635		485,823
Omega Healthcare Investors, Inc.		16,085		628,441
Outfront Media, Inc.		16,619		446,054
Paramount Group, Inc. (a)		19,534		363,137
Piedmont Office Realty Trust, Inc., Class A (b)		19,992		376,649
Plum Creek Timber Co., Inc.		22,601		967,097
Post Properties, Inc.		6,934		407,511
Prologis, Inc.		63,769		2,743,980
Public Storage		18,328		3,387,931
Rayonier, Inc.		16,139		450,924
Realty Income Corp.		28,260		1,348,285
Regency Centers Corp.		11,784		751,584
Retail Properties of America, Inc., Class A		30,189		503,854
Senior Housing Properties Trust		25,999		574,838
Simon Property Group, Inc.		39,646		7,219,933
SL Green Realty Corp.		12,186		1,450,378
Spirit Realty Capital, Inc.		50,888		605,058
Starwood Property Trust, Inc.		28,252		656,577
Tanger Factory Outlet Centers		11,604		428,884
Taubman Centers, Inc.		7,970		609,067
Two Harbors Investment Corp.		46,714		468,074
UDR, Inc.		32,087		988,921
Ventas, Inc.		37,077		2,658,421
Vornado Realty Trust		23,917		2,815,270
Washington Prime Group, Inc.		20,160		347,155
Weingarten Realty Investors		15,590		544,403
Weyerhaeuser Co.		67,151		2,410,049
WP Carey, Inc.		12,679		888,798
				88,022,067
Real Estate Management & Development — 0.2%
CBRE Group, Inc., Class A (a)		35,752		1,224,506
Forest City Enterprises, Inc., Class A (a)		20,987		447,023
The Howard Hughes Corp. (a)		5,058		659,664
Jones Lang LaSalle, Inc.		5,687		852,652
Realogy Holdings Corp. (a)		18,648		829,650
Zillow, Inc. Class A (a)		3,967		420,066
				4,433,561
Common Stocks	Shares		Value
Road & Rail — 1.1%
AMERCO, Inc.		955	$	271,468
Avis Budget Group, Inc. (a)		13,450		892,139
Con-way, Inc.		7,403		364,080
CSX Corp.		128,174		4,643,744
Genesee & Wyoming, Inc., Class A (a)		6,646		597,608
Hertz Global Holdings, Inc. (a)		57,133		1,424,897
JB Hunt Transport Services, Inc.		11,742		989,263
Kansas City Southern		14,079		1,718,060
Landstar System, Inc.		5,737		416,105
Norfolk Southern Corp.		39,516		4,331,349
Old Dominion Freight Line, Inc. (a)		8,027		623,216
Ryder System, Inc.		6,787		630,173
Union Pacific Corp.		115,599		13,771,309
				30,673,411
Semiconductors & Semiconductor Equipment — 2.3%
Advanced Micro Devices, Inc. (a)(b)		81,023		216,331
Altera Corp.		39,977		1,476,750
Analog Devices, Inc.		40,090		2,225,797
Applied Materials, Inc.		155,362		3,871,621
Atmel Corp. (a)		53,721		450,988
Avago Technologies Ltd.		31,883		3,207,111
Broadcom Corp., Class A		68,263		2,957,836
Cree, Inc. (a)(b)		15,561		501,375
First Solar, Inc. (a)		9,351		417,008
Freescale Semiconductor Ltd. (a)		13,658		344,591
Intel Corp.		635,281		23,054,348
KLA-Tencor Corp.		21,162		1,488,112
Lam Research Corp.		20,691		1,641,624
Linear Technology Corp.		30,188		1,376,573
Marvell Technology Group Ltd.		51,792		750,984
Maxim Integrated Products, Inc.		36,079		1,149,838
Microchip Technology, Inc. (b)		25,560		1,153,012
Micron Technology, Inc. (a)		136,599		4,782,331
NVIDIA Corp.		71,206		1,427,680
ON Semiconductor Corp. (a)		56,277		570,086	��
Skyworks Solutions, Inc.		24,195		1,759,218
SunEdison, Inc. (a)		34,177		666,793
SunPower Corp. (a)		6,071		156,814
Teradyne, Inc.		26,120		516,915
Texas Instruments, Inc.		137,744		7,364,483
Xilinx, Inc.		34,239		1,482,206
				65,010,425
Software — 3.8%
Activision Blizzard, Inc.		63,222		1,273,923
Adobe Systems, Inc. (a)		63,519		4,617,831
Allscripts Healthcare Solutions, Inc. (a)		23,362		298,333
ANSYS, Inc. (a)		11,825		969,650
Autodesk, Inc. (a)		29,030		1,743,542
CA, Inc.		40,825		1,243,121
Cadence Design Systems, Inc. (a)		36,946		700,866
CDK Global, Inc.		20,508		835,906
Citrix Systems, Inc. (a)		20,912		1,334,186
Electronic Arts, Inc. (a)		40,141		1,887,229
FactSet Research Systems, Inc.		5,403		760,472
FireEye, Inc. (a)		11,136		351,675
Fortinet, Inc. (a)		17,490		536,243
Informatica Corp. (a)		14,011		534,309
Intuit, Inc.		36,229		3,339,952
Microsoft Corp.		1,054,175		48,966,429

See Notes to Financial Statements.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014 27

Schedule of Investments (continued) Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Software (concluded)
NetSuite, Inc. (a)		5,300	$	578,601
Nuance Communications, Inc. (a)		33,482		477,788
Oracle Corp.		419,161		18,849,670
PTC, Inc. (a)		15,138		554,808
Red Hat, Inc. (a)		24,164		1,670,699
Rovi Corp. (a)		12,358		279,167
Salesforce.com, Inc. (a)		78,357		4,647,354
ServiceNow, Inc. (a)		18,384		1,247,354
SolarWinds, Inc. (a)		8,384		417,775
Solera Holdings, Inc.		8,780		449,360
Splunk, Inc. (a)		15,086		889,320
Symantec Corp.		88,272		2,264,618
Synopsys, Inc. (a)		19,747		858,402
Tableau Software, Inc., Class A (a)		4,862		412,103
VMware, Inc., Class A (a)		11,182		922,739
Workday, Inc., Class A (a)		11,952		975,403
Zynga, Inc., Class A (a)		94,549		251,500
				105,140,328
Specialty Retail — 2.4%
Aaron’s, Inc.		8,441		258,041
Abercrombie & Fitch Co., Class A (b)		9,492		271,851
Advance Auto Parts, Inc.		9,310		1,482,897
Ascena Retail Group, Inc. (a)		17,068		214,374
AutoNation, Inc. (a)		8,797		531,427
AutoZone, Inc. (a)		4,162		2,576,736
Bed Bath & Beyond, Inc. (a)		23,640		1,800,659
Best Buy Co., Inc.		36,649		1,428,578
Cabela’s, Inc. (a)		6,496		342,404
CarMax, Inc. (a)		28,132		1,873,029
Chico’s FAS, Inc.		19,911		322,757
CST Brands, Inc.		9,650		420,836
Dick’s Sporting Goods, Inc.		12,323		611,837
DSW, Inc., Class A		9,742		363,377
Foot Locker, Inc.		18,609		1,045,454
GameStop Corp., Class A (b)		13,848		468,062
The Gap, Inc.		32,011		1,347,983
GNC Holdings, Inc., Class A		11,618		545,581
The Home Depot, Inc.		174,532		18,320,624
Kate Spade & Co. (a)		16,149		516,929
L Brands, Inc.		31,019		2,684,694
Lowe’s Cos., Inc.		130,014		8,944,963
The Michaels Cos., Inc. (a)		3,568		88,237
O’Reilly Automotive, Inc. (a)		13,538		2,607,690
Penske Automotive Group, Inc.		5,556		272,633
PetSmart, Inc.		12,661		1,029,276
Ross Stores, Inc.		27,108		2,555,200
Sally Beauty Holdings, Inc. (a)		20,661		635,119
Signet Jewelers Ltd.		10,252		1,348,856
Staples, Inc.		82,520		1,495,262
Tiffany & Co.		14,395		1,538,250
TJX Cos., Inc.		89,372		6,129,132
Tractor Supply Co.		17,674		1,393,065
Ulta Salon Cosmetics & Fragrance, Inc. (a)		8,208		1,049,311
Urban Outfitters, Inc. (a)		13,655		479,700
Williams-Sonoma, Inc.		12,012		909,068
				67,903,892
Technology Hardware, Storage & Peripherals — 4.0%
3D Systems Corp. (a)(b)		14,027		461,067
Apple, Inc.		769,492		84,936,527
Common Stocks	Shares		Value
Technology Hardware, Storage & Peripherals (concluded)
Diebold, Inc.		8,409	$	291,288
EMC Corp.		261,271		7,770,200
Hewlett-Packard Co.		241,851		9,705,481
Lexmark International, Inc., Class A		8,039		331,769
NCR Corp. (a)		21,427		624,383
NetApp, Inc.		39,777		1,648,757
SanDisk Corp.		28,868		2,828,487
Stratasys Ltd. (a)		6,302		523,759
Western Digital Corp.		28,409		3,144,876
				112,266,594
Textiles, Apparel & Luxury Goods — 0.8%
Carter’s, Inc.		6,852		598,248
Coach, Inc.		34,989		1,314,187
Deckers Outdoor Corp. (a)		4,419		402,306
Fossil Group, Inc. (a)		5,948		658,682
Hanesbrands, Inc.		12,708		1,418,467
Michael Kors Holdings Ltd. (a)		26,071		1,957,932
NIKE, Inc., Class B		89,140		8,570,811
PVH Corp.		10,500		1,345,785
Ralph Lauren Corp.		7,536		1,395,366
Under Armour, Inc., Class A (a)		22,077		1,499,028
VF Corp.		44,027		3,297,622
				22,458,434
Thrifts & Mortgage Finance — 0.1%
Hudson City Bancorp, Inc.		67,476		682,857
Nationstar Mortgage Holdings, Inc. (a)(b)		2,705		76,254
New York Community Bancorp, Inc. (b)		56,490		903,840
Ocwen Financial Corp. (a)		12,663		191,211
People’s United Financial, Inc. (b)		39,581		600,840
TFS Financial Corp.		10,010		148,999
				2,604,001
Tobacco — 1.2%
Altria Group, Inc.		253,507		12,490,290
Lorillard, Inc.		46,266		2,911,982
Philip Morris International, Inc.		200,727		16,349,214
Reynolds American, Inc.		39,399		2,532,174
				34,283,660
Trading Companies & Distributors — 0.3%
Air Lease Corp.		13,006		446,236
Fastenal Co. (b)		37,873		1,801,240
GATX Corp.		5,978		343,974
HD Supply Holdings, Inc. (a)		13,744		405,311
MRC Global, Inc. (a)		13,396		202,949
MSC Industrial Direct Co., Inc., Class A (b)		6,052		491,725
NOW, Inc. (a)(b)		13,912		357,956
United Rentals, Inc. (a)		12,413		1,266,250
Veritiv Corp. (a)		1,075		55,760
W.W. Grainger, Inc.		7,439		1,896,127
WESCO International, Inc. (a)		5,671		432,187
				7,699,715
Water Utilities — 0.1%
American Water Works Co., Inc.		22,846		1,217,692
Aqua America, Inc.		22,596		603,313
				1,821,005
Wireless Telecommunication Services — 0.1%
SBA Communications Corp., Class A (a)		16,438		1,820,673

See Notes to Financial Statements.

28 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014

Schedule of Investments (continued) Russell 1000^® Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Wireless Telecommunication Services (concluded)
Sprint Corp. (a)		92,962	$	385,792
T-Mobile U.S., Inc. (a)		33,885		912,862
Telephone & Data Systems, Inc.		11,221		283,330
United States Cellular Corp. (a)		1,674		66,676
				3,469,333
Total Common Stocks — 96.8%				2,685,489,622
Investments Companies — 0.8%
iShares Russell 1000 ETF (b)(c)		191,542		21,956,459
Total Long-Term Investments (Cost — $2,306,952,998) — 97.6%				2,707,446,081
Short-Term Securities	Shares		Value
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.14%, (c)(d)		79,872,532	$	79,872,532
BlackRock Cash Funds: Prime, SL Agency Shares, 0.11%, (c)(d)(e)		33,734,031		33,734,031
Total Short-Term Securities (Cost — $113,606,563) — 4.1%				113,606,563
Total Investments (Cost — $2,420,559,561) — 101.7%				2,821,052,644
Liabilities in Excess of Other Assets — (1.7)%				(47,655,041	)
Net Assets — 100.0%			$	2,773,397,603

Notes to Schedule of Investments

(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, 2014, 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, 2013		Shares Purchased			Shares Sold			Shares Held at December 31, 2014		Value at December 31, 2014		Income		Realized Gain
BlackRock Cash Funds: Institutional, SL Agency Shares		94,674,911		—			(14,802,379	)1		79,872,532	$	79,872,532	$	64,602		—
BlackRock Cash Funds: Prime, SL Agency Shares		10,668,379		23,065,652	2		—			33,734,031	$	33,734,031	$	271567		—
BlackRock, Inc.		7,512		9,061			(303	)		16,270	$	5,817,501	$	89,234	$	10,999
The PNC Financial Services Group, Inc.		30,459		37,750			(45	)		68,164	$	6,218,602	$	81,457	$	664
iShares Russell 1000 ETF		99,042		592,500			(500,000	)		191,542	$	21,956,459	$	359,661	$	1,458,154
1        Represents net shares sold.
2        Represents net shares purchased.

(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.

Portfolio Abbreviations

CBOE	Chicago Board Options Exchange
CME	Chicago Mercantile Exchange
ETF	Exchange-Traded Fund
MBIA	Municipal Bond Investors Assurance (National Public Finance Guaranty Corp.)
MSCI	Morgan Stanley Capital International
REIT	Real Estate Investment Trust
S&P	Standard and Poor’s

Ÿ As of December 31, 2014, financial futures contracts outstanding were as follows:

Contracts Sold		Issue	Exchange	Expiration	Notional Value			Unrealized Appreciation
	54	S&P MidCap 400 E-Mini Index	Chicago Mercantile	March 2015		USD	7,822,440	$	141,696
	571	S&P 500 E-Mini Index	Chicago Mercantile	March 2015		USD	58,596,020		560,258
	Total							$	701,954

See Notes to Financial Statements.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014 29

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 reporting] purposes. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted price 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)

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 policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, please refer Note 2 of the Notes to Financial Statements.

As of December 31, 2014, the following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2	Level 3	Total
Assets:
Investments:
Long-Term Investments:1
Common Stocks	$	2,685,489,622	—	—	$	2,685,489,622
Investment Companies		21,956,459	—	—		21,956,459
Short-Term Securities:
Short-Term Securities		113,606,563	—	—		113,606,563
Total	$	2,821,052,644	—	—	$	2,821,052,644
1   See above Schedule of Investments for values in each industry.
	Level 1		Level 2	Level 3	Total
Derivative Financial Instruments 2
Assets:
Equity contracts	$	701,954	—	—	$	701,954
2   Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

The Master Portfolio may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial reporting purposes. As of December 31, 2014, 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	$	3,598,000		—		—	$	3,598,000
Collateral on securities loaned at value		—	$	(33,734,031	)	—		(33,734,031	)
Total	$	3,598,000		$(33,734,031)		—	$	(30,136,031	)

There were no transfers between levels during the year ended December 31, 2014.

See Notes to Financial Statements.

30 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014

Statement of Assets and Liabilities Russell 1000^® Index Master Portfolio

December 31, 2014
Assets
Investments at value — unaffiliated (including securities loaned of $32,650,171) (cost — $2,277,585,522)	$	2,673,453,519
Investments at value — affiliated (cost — $142,974,039)		147,599,125
Cash pledged for financial futures contracts		3,598,000
Contributions receivable from investors		1,525,807
Dividends receivable		3,489,473
Securities lending income receivable — affiliated		32,603
Investments sold receivable		4,988
Prepaid expenses		428
Total assets		2,829,703,943
Liabilities
Collateral on securities loaned at value		33,734,031
Variation margin payable on financial futures contracts		1,000,808
Investment advisory fees payable		111,560
Trustees’ fees payable		14,622
Withdrawals payable to investors		21,372,730
Other accrued expenses payable		72,589
Total liabilities		56,306,340
Net Assets	$	2,773,397,603
Net Assets Consist of
Investors’ capital	$	2,372,202,566
Net unrealized appreciation/depreciation		401,195,037
Net Assets	$	2,773,397,603

See Notes to Financial Statements.
	BLACKROCK RUSSELL 1000® INDEX FUND	DECEMBER 31, 2014	31

Statement of Operations Russell 1000^® Index Master Portfolio

Year Ended December 31, 2014
Investment Income
Dividends — unaffiliated	$	34,829,409
Dividends — affiliated		530,352
Securities lending — affiliated — net		271,567
Income — affiliated		64,602
Other income — affiliated		93
Foreign taxes withheld		(9,589	)
Total income		35,686,434
Expenses
Investment advisory		903,731
Custodian		98,091
Independent Trustees		50,803
Professional		36,504
Printing		638
Miscellaneous		416
Total expenses		1,090,183
Less fees waived and/or reimbursed by advisor		(31,069	)
Total expenses after fees waived and/or reimbursed		1,059,114
Net investment income		34,627,320
Realized and Unrealized Gain
Net realized gain from:
Investments — unaffiliated		9,045,909
Investments — affiliated		1,469,817
Financial futures contracts		3,663,367
		14,179,093
Net change in unrealized appreciation/depreciation on:
Investments		187,335,997
Financial futures contracts		219,530
		187,555,527
Net realized and unrealized gain		201,734,620
Net Increase in Net Assets Resulting from Operations	$	236,361,940

See Notes to Financial Statements.
32	BLACKROCK RUSSELL 1000® INDEX FUND	DECEMBER 31, 2014

Statements of Changes in Net Assets Russell 1000^® Index Master Portfolio

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	34,627,320		$	15,224,602
Net realized gain		14,179,093			17,280,916
Net change in unrealized appreciation/depreciation		187,555,527			183,749,499
Net increase in net assets resulting from operations		236,361,940			216,255,017
Capital Share Transactions
Proceeds from contributions		3,160,600,185			728,973,047
Value of withdrawals		(1,756,436,556	)		(252,448,316	)
Net increase in net assets derived from capital share transactions		1,404,163,629			476,524,731
Net Assets
Total increase in net assets		1,640,525,569			692,779,748
Beginning of year		1,132,872,034			440,092,286
End of year	$	2,773,397,603		$	1,132,872,034

See Notes to Financial Statements.
	BLACKROCK RUSSELL 1000® INDEX FUND	DECEMBER 31, 2014	33

Financial Highlights Russell 1000^® Index Master Portfolio

	Year Ended December 31,						Period March 31, 20111 to December 31, 2011
	2014		2013		2012
Total Return
Total return		13.27%		32.88%		16.39%		(4.68)%2
Ratio to Average Net Assets
Total expenses		0.06%		0.08%3		0.09%		0.40%4,5
Total expenses after fees waived and/or reimbursed		0.06%		0.08%3		0.09%		0.16%4
Net investment income		1.92%		1.96%3		2.30%		2.04%4
Supplemental Data
Net assets, end of year (000)		$2,773,398		$1,132,872		$440,092		$56,881
Portfolio turnover rate		6%		14%		16%		9%

¹  Commencement of operations.

²  Aggregate total 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.

See Notes to Financial Statements.
34	BLACKROCK RUSSELL 1000® INDEX FUND	DECEMBER 31, 2014

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.

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

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 (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements 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 Master Portfolio is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Master Portfolio:

Valuation: The Master Portfolio’s investments are valued at fair value as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the 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 are valued at the official close each day, if available. For equity investments traded on more than one exchange, the official close price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price. 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.

In the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Investments”). When determining the price for Fair Value Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant consistent with the principles of fair value measurement. The pricing of all Fair Value Investments 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. 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 date. 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.

Recent Accounting Standard: In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance will require expanded disclosure requirements for entities that enter into reverse

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014 35

Notes to Financial Statements (continued) Russell 1000^® Index Master Portfolio

repurchase agreements and similar transactions accounted for as secured borrowings. It is effective for financial statements with fiscal years beginning on or after December 15, 2014 and interim periods within those fiscal years. Management is evaluating the impact, if any, of this guidance on the Master Portfolio’s financial statement disclosures.

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 its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Master Portfolio collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. government. The initial collateral received by the Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. During the term of the loan, the Master Portfolio is entitled to all distributions made on or in respect of the loaned securities. 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-unaffiliated, and collateral on securities loaned at value, respectively. As of December 31, 2014, any securities on loan were collateralized by cash. 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 (each, an “MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, 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.

As of December 31, 2014, the following table is a summary of the Master Portfolio’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital, Inc.	$	855,898	$	(855,898	)		—
BNP Paribas S.A.		379,036		(379,036	)		—
Credit Suisse Securities (USA) LLC		1,228,615		(1,228,615	)		—
Deutsche Bank Securities, Inc.		233,737		(233,737	)		—
Goldman Sachs & Co.		2,396,669		(2,396,669	)		—
HSBC Bank PLC		257,261		(257,261	)		—
Jefferies LLC		46,000		(46,000	)		—
JP Morgan Securities LLC		3,482,631		(3,482,631	)		—
Merrill Lynch, Pierce, Fenner & Smith, Inc.		15,207,440		(15,207,440	)		—
Morgan Stanley		3,305,038		(3,305,038	)		—
Scotia Capital (USA) Inc.		4,434		(4,434	)		—
SG Americas Securities LLC		128,536		(128,536	)		—
UBS Securities LLC		5,124,876		(5,124,876	)		—
Total	$	32,650,171	$	(32,650,171	)		—

¹  Collateral with a value of $33,734,031 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes.

36 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014

Notes to Financial Statements (continued) Russell 1000^® Index Master Portfolio

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities lent if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Master Portfolio 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.

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 such as equity 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). 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.

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, 2014
	Statement of Assets and Liabilities Location	Value
Equity contracts	Net unrealized appreciation/depreciation1	$	701,954

¹  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, 2014
	Net Realized Gain From	Net Change in Unrealized Appreciation/Depreciation on
Equity contracts:
Financial futures contracts	$3,663,367	$	219,530

For the year ended December 31, 2014, the average quarterly balances of outstanding derivative financial instruments were as follows:

Financial futures contracts:
Average notional value of contracts purchased	$44,176,638
Average notional value of contracts sold	—

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.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014 37

Notes to Financial Statements (continued) Russell 1000^® Index 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.

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 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, 2015 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 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 year ended December 31, 2014, the amount waived was $31,069.

The Master Portfolio recorded a payment from an affiliate to compensate for foregone securities lending revenue in the amount of $93, which is included in other income — affiliated in the Statement of Operations.

The U.S. Securities and Exchange Commission has issued an exemptive order which permits BTC, an affiliate of the Manager, to serve as securities lending agent for the Master Portfolio, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. The Master Portfolio is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment expenses the Master Portfolio bears to an annual rate of 0.04% until December 31, 2014 and 0.05% thereafter (“the collateral investment fees”).

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent. Pursuant to a securities lending agreement effective February 1, 2014, BTC may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the “specials only securities”).

Pursuant to such agreement, the Master Portfolio retains 80% of securities lending income. In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Liquidity Complex in a calendar year exceeds the aggregate securities lending income earned across the Equity-Liquidity Complex through the lending of specials only securities in the calendar year 2013, the Master Portfolio, pursuant to securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income. Prior to February 1, 2014, the Master Portfolio retained 65% of securities lending income and paid a fee to BTC

38 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014

Notes to Financial Statements (continued) Russell 1000^® Index Master Portfolio

equal to 35% of such income. The share of securities lending income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the year ended December 31, 2014, the Master Portfolio paid BTC $63,907 for securities lending agent services.

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

6. Purchases and Sales:

For the year ended December 31, 2014, purchases and sales of investments excluding short-term securities were $1,521,782,663 and $107,729,461, respectively.

7. Income Tax Information:

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 U.S. 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 U.S. federal tax returns remains open for each of the three years ended December 31, 2014 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 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.

As of December 31, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	2,426,051,849
Gross unrealized appreciation	$	424,917,164
Gross unrealized depreciation		(29,916,369	)
Net unrealized appreciation	$	395,000,795

8. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), was a party to a 364-day, $1.1 billion credit agreement with a group of lenders, under which the Master Portfolio may borrow to fund shareholder redemptions. Excluding commitments designated for a certain individual fund, the Participating Funds, including the Master Portfolio, could borrow up to an aggregate commitment amount of $650 million, subject to asset coverage and other limitations as specified in the agreement. Effective November 25, 2014, the credit agreement was amended to an aggregate commitment amount of $2.1 billion, of which the Participating Funds, including the Master Portfolio, could borrow up to $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The agreement terminates on April 23, 2015, unless otherwise extended to November 24, 2015 or renewed for a period of 364 days from April 23, 2015. The amended agreement has the following terms: a fee of 0.06% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one month LIBOR (but in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which are included in miscellaneous expenses in the Statement of Operations, and 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. During the year ended December 31, 2014, the Master Portfolio did not borrow under the credit agreement.

9. Principal Risks:

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

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014 39

Notes to Financial Statements (concluded) Russell 1000^® Index Master Portfolio

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.

10. 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.

40 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014

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, 2014, 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, 2014 by correspondence with the custodian, transfer agent and broker, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 23, 2015

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014 41

Officers and Trustees

Name, Address1 and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment  Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2
Ronald W. Forbes 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 153 Portfolios	None
Rodney D. Johnson 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 153 Portfolios	None
David O. Beim 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 153 Portfolios	None
Frank J. Fabozzi 1948	Trustee	Since 2014	Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011; Adjunct Professor of Finance and Becton Fellow, Yale University from 1994 to 2006.	112 RICs consisting of 232 Portfolios	None
Dr. Matina S. Horner 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 153 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 1939	Trustee	Since 2009	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 153 Portfolios	None
Ian A. MacKinnon 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None
Cynthia A. Montgomery 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 153 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 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 153 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 153 Portfolios	None

42 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014

Officers and Trustees (continued)

Name, Address and Year of Birth1	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 Trustees2 (concluded)
Toby Rosenblatt 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Futures Foundation of California (philanthropic foundation) since 2009; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None
Kenneth L. Urish 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 153 Portfolios	None
Frederick W. Winter 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 153 Portfolios	None
	1   The address of each Trustee is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2   Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Trustees on a case-by-case basis, as appropriate.
	3   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. Frank J. Fabozzi first became a member of the board of other funds advised by BlackRock Advisors, LLC or its affiliates in 1988.
Interested Trustees4
Paul L. Audet 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.	141 RICs consisting of 329 Portfolios	None
Henry Gabbay 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.	29 RICs consisting of 97 Portfolios	None
	4   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 75. The Board has determined to extended the terms of Directors on a case-by-case basis, as appropriate.

BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014 43

Officers and Trustees (concluded)

Name, Address and Year of Birth1	Position(s) Held with Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers2
John M. Perlowski 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 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.
Jennifer McGovern 1977	Vice President	Since 2014	Director of BlackRock, Inc. since 2011; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal Andrews 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 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.
Charles Park 1967	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2014	Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Benjamin Archibald 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    The address of each Officer is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2    Officers of the Trust/MIP serve at the pleasure of the Board.
	Further information about the Officers and Trustees is available in the Trust’s Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.

Effective September 10, 2014, Brendan Kyne resigned as a Vice President of the Trust/MIP and Jennifer McGovern became a Vice President of the Trust/MIP.

Effective December 31, 2014, Paul L. Audet and Henry Gabbay resigned as Trustees of the Trust/MIP and Ronald W. Forbes resigned as a Trustee of the Trust/MIP and Co-Chair of the Board. Effective January 1, 2015, Collette Chilton, Barbara G. Novick and Mark Stalnecker were appointed to serve as a Trustee of the Trust/MIP.

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

44 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014

Additional Information

General Information

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.

BlackRock’s Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing. Visit http://www.blackrock.com for more information.

Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM 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, 2014 45

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.

46 BLACKROCK RUSSELL 1000^® INDEX FUND DECEMBER 31, 2014

This report is intended for current holders. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless preceded or accompanied 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.

R1000-12/14-AR

DECEMBER 31, 2014

  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
The Markets in Review		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		15
Fund Report of Independent Registered Public Accounting Firm		20
Important Tax Information		20
Master Portfolio Information		21
Master Portfolio Financial Statements:
Schedule of Investments		22
Statement of Assets and Liabilities		29
Statement of Operations		30
Statements of Changes in Net Assets		31
Master Portfolio Financial Highlights		31
Master Portfolio Notes to Financial Statements		32
Master Portfolio Report of Independent Registered Public Accounting Firm		38
Officers and Trustees		39
Additional Information		42

2 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014

The Markets in Review

Dear Shareholder,

After an extended period of calm, market volatility increased over the course of 2014, driven largely by higher valuations in risk assets (such as equities and high yield bonds), rising geopolitical risks and expectations around global central bank policies. Several key trends drove strong performance in U.S. markets, particularly large-cap stocks, Treasuries and municipal bonds, while markets outside the U.S. were more challenged.

Investors began the year in search of relatively safer assets due to heightened risks in emerging markets, slowing growth in China and weakening U.S. economic data. As a result, equities globally declined in January while bond markets strengthened despite the expectation that interest rates would rise as the U.S. Federal Reserve had begun reducing its asset purchase programs. Strong demand for relatively safer assets pushed U.S. Treasury bond prices higher and thus kept rates low in the United States. This surprising development, as well as increasing evidence that the soft patch in U.S. economic data had been temporary and weather-related, brought equity investors racing back to the market in February.

In the months that followed, interest rates trended lower in a modest growth environment and more investors turned to equities in search of yield. Markets remained relatively calm despite rising tensions in Russia and Ukraine and further signs of decelerating growth in China. Strong corporate earnings, increased merger and acquisition activity and signs of a strengthening recovery in the U.S. and other developed economies kept equity prices moving higher. Not all segments benefited from these trends, however, as investors ultimately became wary of high valuations, resulting in a broad rotation into cheaper assets.

Volatility ticked up in the summer as geopolitical tensions escalated and investors feared that better U.S. economic indicators may compel the Fed to increase short-term interest rates sooner than previously anticipated. Global credit markets tightened as the U.S. dollar strengthened, ultimately putting a strain on investor flows, and financial markets broadly weakened in the third quarter.

Several themes dominated the markets in the fourth quarter, resulting in higher levels of volatility and the outperformance of U.S. markets versus other areas of the world. Economic growth strengthened considerably in the United States while the broader global economy showed signs of slowing. The European Central Bank and the Bank of Japan took aggressive measures to stimulate growth while the Fed moved toward tighter policy. This divergence in central bank policy caused further strengthening in the U.S. dollar versus other currencies. Oil prices, which had been falling gradually since the summer, plummeted in the fourth quarter due to a global supply-and-demand imbalance. Energy stocks sold off sharply and oil-exporting economies suffered, resulting in the poor performance of emerging market stocks.

At BlackRock, we believe investors need to think globally, extend their scope across a broad 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 blackrock.com for further insight about investing in today’s markets.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2014
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		6.12	%		13.69	%
U.S. small cap equities (Russell 2000® Index)		1.65			4.89
International equities (MSCI Europe, Australasia, Far East Index)		(9.24	)		(4.90	)
Emerging market equities (MSCI Emerging Markets Index)		(7.84	)		(2.19	)
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.01			0.03
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		4.33			10.72
U.S. investment-grade bonds (Barclays U.S. Aggregate Bond Index)		1.96			5.97
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.00			9.25
U.S. high yield bonds (Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		(2.84	)		2.46
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, 2014

Investment Objective

BlackRock S&P 500 Stock Fund’s (the “Fund”) 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

How did the Fund perform?

Ÿ For the 12 months ended December 31, 2014, the Fund’s Institutional Shares returned 13.53%, Service Shares returned 13.39%, Investor A Shares returned 13.25%, Investor C1 Shares returned 12.42% and Class K Shares returned 13.61%. The benchmark S&P 500^® Index returned 13.69% 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 U.S. equities moved higher in 2014 as domestic economic growth picked up momentum and interest rates continued to be low. Although volatility increased, levels generally remained below the historical norm. The year got off to a rough start, however, due to heightened risks in emerging markets, slowing growth in China and softer economic data in the United States, while investors were bracing for the impact of the U.S. Federal Reserve (the “Fed”) scaling back on stimulus. Equity markets around the world declined sharply in January. But the sell-off was short-lived and equities rebounded as uncertainty abated. Notably, relief came in the form of long-term interest rates remaining low even as the Fed reduced its open-market purchases. Additionally, investors were comforted by the Fed’s dovish stance on short-term rates and increasing evidence that the recent weakness in U.S. economic data had been temporary and weather-related.

Ÿ Equity valuations were relatively high in the aftermath of the strong rally in 2013. Nevertheless, investors continued to favor equities in 2014 as bond yields were persistently low. Improving U.S. economic data, strong corporate earnings and increased merger and acquisition activity propelled market gains, pushing major U.S. stock indexes to all-time highs.

Ÿ However, the combination of high valuations and expectations of higher interest rates left equities particularly vulnerable to bad news. Volatility increased as tensions between Russia and Ukraine mounted and investors considered the potential implications of economic sanctions. The fragmentation of Iraq led to escalating violence and a spike in oil prices during the summer. A ground war in Gaza, the downing of a civilian airliner over Malaysia, and Scotland’s flirtation with independence from the United Kingdom added to global headwinds, resulting in a challenging third quarter for equity markets.

Ÿ U.S. economic growth strengthened considerably in the latter part of 2014. Initially, the good news was bad for stocks, spurring a sell-off in September as investors feared the Fed would raise short-term rates earlier than previously expected. But calm was restored when the Fed reaffirmed its anticipation that short-term rates would likely continue to be warranted for some time after its target employment and inflation levels are realized. U.S. stocks rebounded in October and continued their climb through year end as U.S. economic data continued to impress investors and help fuel a positive corporate earnings season.

Ÿ While the pace of U.S. economic growth strengthened, the broader global economy showed signs of slowing. This drove volatility higher as the divergence in global central bank policies became a major theme in equity markets. While the Fed moved toward tightening policy, the European Central Bank and Bank of Japan implemented easing measures to stimulate their economies and support their currencies. However, the U.S. equity market absorbed much of the increased liquidity flowing from foreign central banks as global investors sought relative stability in a world of rising geopolitical tensions and uneven economic growth.

Ÿ As the U.S. economy strengthened, so did the U.S. dollar, which put downward pressure on commodity prices. Oil prices in particular plunged in the latter months of 2014 as a global supply-and-demand imbalance materialized. Lower oil prices led to a pickup in consumer spending in the United States, a positive for U.S. stocks.

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, 2014

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 leading companies and captures approximately 80% coverage of available market capitalization.

Performance Summary for the Period Ended December 31, 2014

	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		6.07	%		13.53	%		N/A			15.23	%		N/A			7.49	%		N/A
Service		6.00			13.39			N/A			15.09			N/A			7.36			N/A
Investor A		5.94			13.25			N/A			14.95			N/A			7.22			N/A
Investor C1		5.55			12.42			11.42	%		14.12			14.12	%		6.45			6.45	%
Class K		6.10			13.61			N/A			15.32			N/A			7.56			N/A
S&P 500® Index		6.12			13.69			N/A			15.45			N/A			7.67			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, 2014		Ending Account Value December 31, 2014		Expenses Paid During the Period5		Beginning Account Value July 1, 2014		Ending Account Value December 31, 2014		Expenses Paid During the Period5		Annualized Expense Ratio
Institutional	$	1,000.00	$	1,060.70	$	0.62	$	1,000.00	$	1,024.60	$	0.61		0.12	%
Service	$	1,000.00	$	1,060.00	$	1.25	$	1,000.00	$	1,024.00	$	1.22		0.24	%
Investor A	$	1,000.00	$	1,059.40	$	1.92	$	1,000.00	$	1,023.34	$	1.89		0.37	%
Investor C1	$	1,000.00	$	1,055.50	$	5.65	$	1,000.00	$	1,019.71	$	5.55		1.09	%
Class K	$	1,000.00	$	1,061.00	$	0.26	$	1,000.00	$	1,024.95	$	0.26		0.05	%

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 prorating 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, 2014 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). These shares are generally available through financial intermediaries.

Ÿ Investor C1 Shares are subject to a 1.00% contingent deferred sales charge (“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. These shares are only available through distribution reinvestments by current holders.

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. 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 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. Distributions 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, acquired fund fees and expenses and other Fund expenses. The expense example on previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2014 and held through December 31, 2014) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

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

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

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

Derivative Financial Instruments

The Fund may invest in various derivative financial instruments. 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 manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage. Derivative financial instruments also 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 Fund’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 limit the amount of appreciation a Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Fund’s investments in these instruments are discussed in detail in the Notes to Financial Statements.

6 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014

Statement of Assets and Liabilities BlackRock S&P 500 Stock Fund

December 31, 2014
Assets
Investments at value — Master Portfolio (cost — $2,621,951,883)	$	4,339,949,753
Withdrawals receivable from the Master Portfolio		33,705,062
Capital shares sold receivable		16,347,020
Total assets		4,390,001,835
Liabilities
Capital shares redeemed payable		50,052,082
Service and distribution fees payable		338,563
Administration fees payable		199,503
Professional fees payable		15,900
Other accrued expenses payable		300
Total liabilities		50,606,348
Net Assets	$	4,339,395,487
Net Assets Consist of
Paid-in capital	$	2,524,749,187
Undistributed net investment income		648,830
Accumulated net realized gain		95,999,600
Net unrealized appreciation/depreciation		1,717,997,870
Net Assets	$	4,339,395,487
Net Asset Value
Institutional — Based on net assets of $1,909,077,199 and 7,717,841 shares outstanding, unlimited number of shares authorized, no par value	$	247.36
Service — Based on net assets of $277,856,484 and 1,123,328 shares outstanding, unlimited number of shares authorized, no par value	$	247.35
Investor A — Based on net assets of $1,149,713,993 and 4,648,189 shares outstanding, unlimited number of shares authorized, no par value	$	247.35
Investor C1 — Based on net assets of $79,476,446 and 321,302 shares outstanding, unlimited number of shares authorized, no par value	$	247.36
Class K — Based on net assets of $923,271,365 and 3,732,094 shares outstanding, unlimited number of shares authorized, no par value	$	247.39

See Notes to Financial Statements.
	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2014	7

Statement of Operations BlackRock S&P 500 Stock Fund

Year Ended December 31, 2014
Investment Income
Net investment income allocated from the Master Portfolio:
Dividends — unaffiliated	$	80,333,086
Dividends — affiliated		470,220
Securities lending — affiliated — net		173,266
Income — affiliated		83,953
Foreign taxes withheld		(9,144	)
Expenses		(2,154,927	)
Fees waived		196,287
Total income		79,092,741
Fund Expenses
Administration — Institutional		1,570,777
Administration — Service		165,431
Administration — Investor A		1,006,986
Administration — Investor C1		126,310
Administration — Class K		195,104
Service — Service		410,124
Service — Investor A		2,718,985
Service and distribution — Investor C1		704,486
Professional		18,651
Miscellaneous		570
Total expenses		6,917,424
Less fees waived by administrator		(18,651	)
Total expenses after fees waived		6,898,773
Net investment income		72,193,968
Realized and Unrealized Gain Allocated from the Master Portfolio
Net realized gain from investments and financial futures contracts		57,400,988
Net change in unrealized appreciation/depreciation on investments and financial futures contracts		382,247,974
Net realized and unrealized gain		439,648,962
Net Increase in Net Assets Resulting from Operations	$	511,842,930

See Notes to Financial Statements.
8	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2014

Statements of Changes in Net Assets BlackRock S&P 500 Stock Fund

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	72,193,968		$	46,880,109
Net realized gain		57,400,988			4,132,473
Net change in unrealized appreciation/depreciation		382,247,974			624,104,063
Net increase in net assets resulting from operations		511,842,930			675,116,645
Distributions to Shareholders From1
Net investment income:
Institutional		(32,595,160	)		(19,390,400	)
Service		(4,674,737	)		(2,904,493	)
Investor A		(17,698,998	)		(10,732,874	)
Investor C1		(685,660	)		(473,608	)
Class K		(16,857,221	)		(12,805,036	)
Decrease in net assets resulting from distributions to shareholders		(72,511,776	)		(46,306,411	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		127,074,885			2,764,113,191
Net Assets
Total increase in net assets		566,406,039			3,392,923,425
Beginning of year		3,772,989,448			380,066,023
End of year	$	4,339,395,487		$	3,772,989,448
Undistributed net investment income, end of year	$	648,830		$	966,638
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2014	9

Financial Highlights BlackRock S&P 500 Stock Fund

	Institutional
	Year Ended December 31, 2014			Period April 10, 20131 to December 31, 2013
Per Share Operating Performance
Net asset value, beginning of period	$	221.97		$	190.60
Net investment income2		4.28			2.89
Net realized and unrealized gain		25.50			31.21
Net increase from investment operations		29.78			34.10
Distributions from net investment income3		(4.39	)		(2.73	)
Net asset value, end of period	$	247.36		$	221.97
Total Return4
Based on net asset value		13.53%			18.03%	5
Ratios to Average Net Assets6
Total expenses7		0.14%			0.23%	8
Total expenses after fees waived7		0.14%			0.23%	8
Net investment income7		1.84%			1.93%	8
Supplemental Data
Net assets, end of period (000)	$	1,909,077		$	1,570,760
Portfolio turnover rate of the Master Portfolio		3%			2%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total return.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of less than 0.01%.

⁸  Annualized.

See Notes to Financial Statements.
10	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2014

Financial Highlights (continued) BlackRock S&P 500 Stock Fund

	Service
	Year Ended December 31, 2014			Period April 19, 20131 to December  31, 2013
Per Share Operating Performance
Net asset value, beginning of period	$	221.97		$	186.71
Net investment income2		3.98			2.59
Net realized and unrealized gain		25.50			35.22
Net increase from investment operations		29.48			37.81
Distributions from net investment income3		(4.10	)		(2.55	)
Net asset value, end of period	$	247.35		$	221.97
Total Return4
Based on net asset value		13.39%			20.39%	5
Ratios to Average Net Assets6
Total expenses7		0.27%			0.35%	8
Total expenses after fees waived7		0.27%			0.35%	8
Net investment income7		1.71%			1.81%	8
Supplemental Data
Net assets, end of period (000)	$	277,856		$	252,419
Portfolio turnover rate of the Master Portfolio		3%			2%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total return.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of less than 0.01%.

⁸  Annualized.

See Notes to Financial Statements.
	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2014	11

Financial Highlights (continued) BlackRock S&P 500 Stock Fund

	Investor A
	Year Ended December 31, 2014			Period April 10, 20131 to December  31, 2013
Per Share Operating Performance
Net asset value, beginning of period	$	221.96		$	190.60
Net investment income2		3.68			2.50
Net realized and unrealized gain		25.51			31.23
Net increase from investment operations		29.19			33.73
Distributions from net investment income3		(3.80	)		(2.37	)
Net asset value, end of period	$	247.35		$	221.96
Total Return4
Based on net asset value		13.25%			17.82%	5
Ratios to Average Net Assets6
Total expenses7		0.39%			0.48%	8
Total expenses after fees waived7		0.39%			0.48%	8
Net investment income7		1.59%			1.67%	8
Supplemental Data
Net assets, end of period (000)	$	1,149,714		$	1,046,428
Portfolio turnover rate of the Master Portfolio		3%			2%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total return.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of less than 0.01%.

⁸  Annualized.

See Notes to Financial Statements.
12	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2014

Financial Highlights (continued) BlackRock S&P 500 Stock Fund

	Investor C1
	Year Ended December 31, 2014			Period April 19, 20131 to December  31, 2013
Per Share Operating Performance
Net asset value, beginning of period	$	221.98		$	186.71
Net investment income2		1.98			1.38
Net realized and unrealized gain		25.48			35.22
Net increase from investment operations		27.46			36.60
Distributions from net investment income3		(2.08	)		(1.33	)
Net asset value, end of period	$	247.36		$	221.98
Total Return4
Based on net asset value		12.42%			19.68%	5
Ratios to Average Net Assets6
Total expenses7		1.12%			1.19%	8
Total expenses after fees waived7		1.12%			1.19%	8
Net investment income7		0.85%			0.97%	8
Supplemental Data
Net assets, end of period (000)	$	79,476		$	77,040
Portfolio turnover rate of the Master Portfolio		3%			2%

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁵  Aggregate total return.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of less than 0.01%.

⁸  Annualized.

See Notes to Financial Statements.
	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2014	13

Financial Highlights (concluded) BlackRock S&P 500 Stock Fund

	Class K
	Year Ended December 31,
	2014			2013			2012			2011			2010
Per Share Operating Performance
Net asset value, beginning of year	$	221.99		$	171.12		$	150.57		$	150.60		$	133.49
Net investment income1		4.44			3.91			3.57			2.97			2.55
Net realized and unrealized gain (loss)		25.51			50.74			20.23			(0.05	)		17.10
Net increase from investment operations		29.95			54.65			23.80			2.92			19.65
Distributions from:2
Net investment income		(4.55	)		(3.78	)		(3.25	)		(2.92	)		(2.54	)
Return of capital		—			—			—			(0.03	)		—
Total distributions		(4.55	)		(3.78	)		(3.25	)		(2.95	)		(2.54	)
Net asset value, end of year	$	247.39		$	221.99		$	171.12		$	150.57		$	150.60
Total Return3
Based on net asset value		13.61%			32.21%			15.85%			2.00%			14.91%
Ratios to Average Net Assets4
Total expenses		0.07%	5		0.17%	5		0.26%	6		0.19%	5		0.21%
Total expenses after fees waived		0.07%	5		0.16%	5		0.18%	6		0.18%	5		0.20%
Net investment income		1.91%	5		1.96%	5		2.15%	6		1.95%	5		1.87%
Supplemental Data
Net assets, end of year (000)	$	923,271		$	826,342		$	380,066		$	255,280		$	277,661
Portfolio turnover rate of the Master Portfolio		3%			2%			10%			5%			9%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of 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 four years ended December 31, 2014, 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.
14	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2014

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 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. At December 31, 2014, the percentage of the Master Portfolio owned by the Fund was 75.5%. 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. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that each bears certain expenses and conversion as outlined below. Institutional, Service and Class K Shares are sold only to certain eligible investors. Investor A Shares are generally available through financial intermediaries. Investor C1 Shares are only available through distribution reinvestments by current holders. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures. For distribution and service fee breakdown see Note 3.

Share Name	Initial Sales Charge	CDSC	Conversion
Institutional Shares	No	No	None
Service Shares	No	Yes	None
Investor A Shares	No	Yes	None
Investor C1 Shares	No	Yes	None
Class K Shares	No	No	None

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, 2014 15

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 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 — 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 Advisors (“BFA” or the “Manager”) or its affiliates 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: $1,305,029,538

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” or the “Administrator”).

2. Significant Accounting Policies:

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

Valuation: The Fund’s investments are valued at fair value as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The 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 instruments. 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.

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

16 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014

Notes to Financial Statements (continued) BlackRock S&P 500 Stock Fund

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

3. 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. Effective March 21, 2014, BAL is entitled to receive for these administration services an annual fee based on the average daily net assets attributed to each share class of the Fund as follows:

	Institutional		Service		Investor A		Investor C1		Class K
Rate		0.07%		0.04%		0.07%		0.14%		0.00%

Prior to March 21, 2014, BAL was entitled to receive an administration fee as a percentage of average daily net assets of each share class of the Fund as follows:

	Institutional		Service		Investor A		Investor C1		Class K
Rate		0.18%		0.15%		0.18%		0.25%		0.11%

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 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. 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, 2015.

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 relevant share class of the Fund as follows:

	Service		Investor A		Investor C1
Service Fee		0.15%		0.25%		0.15%
Distribution Fee		—		—		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 Service, Investor A and Investor C1 shareholders.

For the year ended December 31, 2014, affiliates received CDSCs of $1,371 for Investor C1 Shares.

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

4. Income Tax Information:

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

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns remains open for each of the four years ended December 31, 2014. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014 17

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 that there are any uncertain tax positions that require recognition of a tax liability.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of December 31, 2014, the following permanent difference attributable to the expiration of capital loss carryforwards was reclassified to the following accounts:

Paid-in capital	$	(15,670,593	)
Accumulated net realized gain	$	15,670,593

The tax character of distributions paid was as follows:

	Ordinary Income
12/31/14	$	72,511,776
12/31/13	$	46,306,411

As of December 31, 2014, the tax components of accumulated net earnings were as follows:

Undistributed ordinary income	$	518,988
Capital loss carryforwards		(148,461,022	)
Net unrealized gains1		1,962,588,334
Total	$	1,814,646,300

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, 2014, the Fund had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:

Expires December 31,
2015	$	18,209,355
2016		79,804,537
2017		21,080,621
2018		29,366,509
Total	$	148,461,022

During the year ended December 31, 2014, the Fund utilized $63,224,962 of its capital loss carryforward.

5. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2014						Period April 10, 20131 to December 31, 2013
	Shares			Amount			Shares			Amount
Institutional
Shares sold		3,533,974		$	824,534,139			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 distributions		134,268			31,617,898			92,169			18,730,219
Shares redeemed		(3,026,858	)		(706,662,787	)		(2,168,757	)		(442,435,143	)
Net increase		641,384		$	149,489,250			7,076,457		$	1,321,196,194

18 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014

Notes to Financial Statements (concluded) BlackRock S&P 500 Stock Fund

	Year Ended December 31, 2014						Period April 19, 20131 to December 31, 2013
	Shares			Amount			Shares			Amount
Service
Shares sold		171,454		$	40,125,114			95,553		$	19,504,317
Shares issued resulting from reorganization		—			—			1,180,369			220,384,347
Shares issued to shareholders in reinvestment of distributions		19,512			4,591,617			14,036			2,850,673
Shares redeemed		(204,834	)		(47,833,460	)		(152,762	)		(30,909,655	)
Net increase (decrease)		(13,868	)	$	(3,116,729	)		1,137,196		$	211,829,682
	Year Ended December 31, 2014						Period April 10, 20131 to December 31, 2013
	Shares			Amount			Shares			Amount
Investor A
Shares sold		1,367,982		$	318,342,711			2,019,105		$	397,655,245
Shares issued resulting from reorganization		—			—			3,434,053			641,163,884
Shares issued to shareholders in reinvestment of distributions		71,007			16,706,046			49,479			10,061,015
Shares redeemed		(1,505,189	)		(350,176,620	)		(788,248	)		(159,333,939	)
Net increase (decrease)		(66,200	)	$	(15,127,863	)		4,714,389		$	889,546,205
	Year Ended December 31, 2014						Period April 19, 20131 to December 31, 2013
	Shares			Amount			Shares			Amount
Investor C1
Shares sold		44		$	10,057			—			—
Shares issued resulting from reorganization		—			—			368,943		$	68,884,568
Shares issued to shareholders in reinvestment of distributions		2,574			605,881			2,111			427,276
Shares redeemed		(28,378	)		(6,561,824	)		(23,992	)		(4,877,874	)
Net increase (decrease)		(25,760	)	$	(5,945,886	)		347,062		$	64,433,970
	Year Ended December 31, 2014						Year Ended December 31, 2013
	Shares			Amount			Shares			Amount
Class K
Shares sold		931,025		$	217,851,261			955,258		$	188,585,120
Shares issued resulting from reorganization		—			—			1,497,783			279,664,361
Shares issued to shareholders in reinvestment of distributions		54,585			12,850,253			51,231			10,230,673
Shares redeemed		(975,948	)		(228,925,401	)		(1,002,888	)		(201,373,014	)
Net increase		9,662		$	1,776,113			1,501,384		$	277,107,140
Total Net Increase		545,218		$	127,074,885			14,776,488		$	2,764,113,191

¹  Commencement of operations.

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, 2014 19

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, 2014, 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 19, 2015

Important Tax Information (Unaudited)

During the fiscal year ended December 31, 2014, the following information is provided with respect to the ordinary income distributions paid by the Fund.

	January 2014 — December 2014
Qualified Dividend Income for Individuals1		100.00%
Dividends Qualifying for the Dividends Received Deduction for Corporations1		100.00%

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

20 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014

Master Portfolio Information S&P 500 Stock Master Portfolio

As of December 31, 2014

Ten Largest Holdings Percent of Long-Term  Investments

Apple, Inc.	4	%
Exxon Mobil Corp.	2
Microsoft Corp.	2
Johnson & Johnson	2
Berkshire Hathaway, Inc. — Class B	2
Wells Fargo & Co.	1
General Electric Co.	1
The Procter & Gamble Co.	1
JPMorgan Chase & Co.	1
Chevron Corp.	1

Sector Allocation Percent of Long-Term  Investments

Information Technology	20	%
Financials	17
Health Care	14
Consumer Discretionary	12
Industrials	10
Consumer Staples	10
Energy	9
Utilities	3
Materials	3
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, 2014 21

Schedule of Investments December 31, 2014 S&P 500 Stock Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Aerospace & Defense — 2.6%
The Boeing Co.		206,939	$	26,897,931
General Dynamics Corp.		98,264		13,523,092
Honeywell International, Inc.		244,308		24,411,256
L-3 Communications Holdings, Inc.		26,580		3,354,662
Lockheed Martin Corp.		83,821		16,141,410
Northrop Grumman Corp.		63,052		9,293,234
Precision Castparts Corp.		44,490		10,716,751
Raytheon Co.		96,253		10,411,687
Rockwell Collins, Inc.		41,506		3,506,427
Textron, Inc.		86,183		3,629,166
United Technologies Corp.		264,606		30,429,690
				152,315,306
Air Freight & Logistics — 0.8%
C.H. Robinson Worldwide, Inc.		45,692		3,421,874
Expeditors International of Washington, Inc.		60,272		2,688,734
FedEx Corp.		82,220		14,278,325
United Parcel Service, Inc., Class B		217,552		24,185,256
				44,574,189
Airlines — 0.4%
Delta Air Lines, Inc.		261,234		12,850,100
Southwest Airlines Co.		211,864		8,966,085
				21,816,185
Auto Components — 0.4%
BorgWarner, Inc.		70,922		3,897,164
Delphi Automotive PLC		92,422		6,720,928
The Goodyear Tire & Rubber Co.		85,485		2,442,307
Johnson Controls, Inc.		207,904		10,050,079
				23,110,478
Automobiles — 0.7%
Ford Motor Co.		1,201,252		18,619,406
General Motors Co.		421,197		14,703,987
Harley-Davidson, Inc.		66,891		4,408,786
				37,732,179
Banks — 6.0%
Bank of America Corp.		3,282,141		58,717,502
BB&T Corp.		224,788		8,742,005
Citigroup, Inc.		945,489		51,160,410
Comerica, Inc.		56,146		2,629,879
Fifth Third Bancorp		257,231		5,241,082
Huntington Bancshares, Inc.		253,679		2,668,703
JPMorgan Chase & Co.		1,166,705		73,012,399
KeyCorp		270,465		3,759,464
M&T Bank Corp.		41,228		5,179,061
The PNC Financial Services Group, Inc. (a)		164,243		14,983,889
Regions Financial Corp.		429,537		4,535,911
SunTrust Banks, Inc.		162,775		6,820,272
US Bancorp		558,492		25,104,215
Wells Fargo & Co.		1,473,360		80,769,595
Zions Bancorporation		63,329		1,805,510
				345,129,897
Beverages — 2.1%
Brown-Forman Corp., Class B		48,843		4,290,369
The Coca-Cola Co.		1,230,312		51,943,773
Coca-Cola Enterprises, Inc.		69,436		3,070,460
Constellation Brands, Inc., Class A (b)		52,364		5,140,574
Dr Pepper Snapple Group, Inc.		60,587		4,342,876
Common Stocks	Shares		Value
Beverages (concluded)
Molson Coors Brewing Co., Class B		49,725	$	3,705,507
Monster Beverage Corp. (b)		44,990		4,874,666
PepsiCo, Inc.		467,102		44,169,165
				121,537,390
Biotechnology — 2.9%
Alexion Pharmaceuticals, Inc. (b)		61,882		11,450,026
Amgen, Inc.		237,401		37,815,605
Biogen Idec, Inc. (b)		73,702		25,018,144
Celgene Corp. (b)		249,270		27,883,342
Gilead Sciences, Inc. (b)		470,847		44,382,038
Regeneron Pharmaceuticals, Inc. (b)		23,162		9,502,211
Vertex Pharmaceuticals, Inc. (b)		75,062		8,917,366
				164,968,732
Building Products — 0.1%
Allegion PLC		29,833		1,654,538
Masco Corp.		111,164		2,801,333
				4,455,871
Capital Markets — 2.3%
Affiliated Managers Group, Inc. (b)		17,342		3,680,666
Ameriprise Financial, Inc.		57,602		7,617,864
The Bank of New York Mellon Corp.		351,360		14,254,675
BlackRock, Inc. (a)		39,755		14,214,798
The Charles Schwab Corp.		358,605		10,826,285
E*Trade Financial Corp. (b)		90,112		2,185,667
Franklin Resources, Inc.		122,316		6,772,637
The Goldman Sachs Group, Inc.		126,425		24,504,958
Invesco Ltd.		134,346		5,309,354
Legg Mason, Inc.		31,362		1,673,790
Morgan Stanley		476,489		18,487,773
Northern Trust Corp.		69,082		4,656,127
State Street Corp.		130,315		10,229,727
T. Rowe Price Group, Inc.		80,969		6,951,998
				131,366,319
Chemicals — 2.4%
Air Products & Chemicals, Inc.		60,025		8,657,406
Airgas, Inc.		20,978		2,416,246
CF Industries Holdings, Inc.		15,520		4,229,821
The Dow Chemical Co.		345,784		15,771,208
E.I. du Pont de Nemours & Co.		282,762		20,907,422
Eastman Chemical Co.		46,305		3,512,697
Ecolab, Inc.		84,294		8,810,409
FMC Corp.		41,582		2,371,421
International Flavors & Fragrances, Inc.		25,300		2,564,408
LyondellBasell Industries NV, Class A		129,710		10,297,677
Monsanto Co.		151,074		18,048,811
The Mosaic Co.		98,531		4,497,940
PPG Industries, Inc.		42,843		9,903,159
Praxair, Inc.		90,933		11,781,280
The Sherwin-Williams Co.		25,472		6,700,155
Sigma-Aldrich Corp.		37,166		5,101,777
				135,571,837
Commercial Services & Supplies — 0.5%
The ADT Corp. (c)		54,451		1,972,760
Cintas Corp.		30,294		2,376,261
Iron Mountain, Inc.		58,178		2,249,161
Pitney Bowes, Inc.		62,973		1,534,652
Republic Services, Inc.		78,769		3,170,452

See Notes to Financial Statements.

22 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014

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. (b)		26,500	$	3,473,620
Tyco International PLC		130,631		5,729,476
Waste Management, Inc.		132,936		6,822,276
				27,328,658
Communications Equipment — 1.7%
Cisco Systems, Inc.		1,595,924		44,390,626
F5 Networks, Inc. (b)		23,003		3,001,086
Harris Corp.		32,674		2,346,647
Juniper Networks, Inc.		120,208		2,683,043
Motorola Solutions, Inc.		66,132		4,436,135
QUALCOMM, Inc.		518,913		38,570,803
				95,428,340
Construction & Engineering — 0.1%
Fluor Corp.		48,735		2,954,803
Jacobs Engineering Group, Inc. (b)		40,774		1,822,190
Quanta Services, Inc. (b)		67,916		1,928,135
				6,705,128
Construction Materials — 0.1%
Martin Marietta Materials, Inc.		19,310		2,130,279
Vulcan Materials Co.		41,095		2,701,175
				4,831,454
Consumer Finance — 0.9%
American Express Co.		277,726		25,839,627
Capital One Financial Corp.		173,533		14,325,149
Discover Financial Services		141,549		9,270,044
Navient Corp.		128,083		2,767,874
				52,202,694
Containers & Packaging — 0.2%
Avery Dennison Corp.		28,456		1,476,297
Ball Corp.		42,751		2,914,336
MeadWestvaco Corp.		52,058		2,310,855
Owens-Illinois, Inc. (b)		51,591		1,392,441
Sealed Air Corp.		65,833		2,793,294
				10,887,223
Distributors — 0.1%
Genuine Parts Co.		47,701		5,083,496
Diversified Consumer Services — 0.1%
H&R Block, Inc.		85,861		2,891,798
Diversified Financial Services — 2.1%
Berkshire Hathaway, Inc., Class B (b)		569,124		85,453,969
CME Group, Inc.		98,813		8,759,772
IntercontinentalExchange Group, Inc.		35,178		7,714,184
Leucadia National Corp.		98,871		2,216,688
McGraw-Hill Financial, Inc.		84,728		7,539,097
Moody’s Corp.		57,303		5,490,200
The NASDAQ OMX Group, Inc.		36,675		1,758,933
				118,932,843
Diversified Telecommunication Services — 2.3%
AT&T, Inc.		1,618,840		54,376,836
CenturyLink, Inc.		178,101		7,049,237
Frontier Communications Corp.		312,679		2,085,569
Level 3 Communications, Inc. (b)		87,015		4,296,801
Verizon Communications, Inc.		1,295,113		60,585,386
Windstream Holdings, Inc. (c)		188,254		1,551,213
				129,945,042
Common Stocks	Shares		Value
Electric Utilities — 1.8%
American Electric Power Co., Inc.		152,681	$	9,270,790
Duke Energy Corp.		220,738		18,440,453
Edison International		101,676		6,657,744
Entergy Corp.		56,321		4,926,961
Exelon Corp.		268,222		9,945,672
FirstEnergy Corp.		131,313		5,119,894
NextEra Energy, Inc.		136,220		14,478,824
Northeast Utilities		98,861		5,291,041
Pepco Holdings, Inc.		78,597		2,116,617
Pinnacle West Capital Corp.		34,462		2,354,099
PPL Corp.		207,551		7,540,328
The Southern Co.		280,818		13,790,972
Xcel Energy, Inc.		157,807		5,668,427
				105,601,822
Electrical Equipment — 0.6%
AMETEK, Inc.		76,743		4,038,984
Eaton Corp. PLC		148,113		10,065,760
Emerson Electric Co.		216,502		13,364,668
Rockwell Automation, Inc.		42,385		4,713,212
				32,182,624
Electronic Equipment, Instruments & Components — 0.4%
Amphenol Corp., Class A		96,606		5,198,369
Corning, Inc.		400,118		9,174,706
FLIR Systems, Inc.		44,007		1,421,866
TE Connectivity Ltd.		126,914		8,027,310
				23,822,251
Energy Equipment & Services — 1.3%
Baker Hughes, Inc.		135,081		7,573,992
Cameron International Corp. (b)		61,647		3,079,268
Diamond Offshore Drilling, Inc. (c)		20,866		765,991
Ensco PLC, Class A		73,106		2,189,525
FMC Technologies, Inc. (b)		72,923		3,415,713
Halliburton Co.		264,476		10,401,841
Helmerich & Payne, Inc.		33,777		2,277,245
Nabors Industries Ltd.		89,849		1,166,240
National Oilwell Varco, Inc.		134,372		8,805,397
Noble Corp. PLC		78,948		1,308,168
Schlumberger Ltd.		401,621		34,302,450
Transocean Ltd. (c)		106,260		1,947,746
				77,233,576
Food & Staples Retailing — 2.5%
Costco Wholesale Corp.		136,621		19,366,027
CVS Health Corp.		357,798		34,459,525
The Kroger Co.		153,259		9,840,760
Safeway, Inc.		71,890		2,524,777
Sysco Corp.		183,463		7,281,646
Wal-Mart Stores, Inc.		492,911		42,331,197
Walgreens Boots Alliance, Inc.		271,498		20,688,148
Whole Foods Market, Inc.		112,166		5,655,410
				142,147,490
Food Products — 1.6%
Archer-Daniels-Midland Co.		200,914		10,447,528
Campbell Soup Co.		55,898		2,459,512
ConAgra Foods, Inc.		132,572		4,809,712
General Mills, Inc.		188,451		10,050,092
The Hershey Co.		46,197		4,801,254
Hormel Foods Corp.		41,923		2,184,188

See Notes to Financial Statements.

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014 23

Schedule of Investments (continued) S&P 500 Stock Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Food Products (concluded)
The J.M. Smucker Co.		31,771	$	3,208,236
Kellogg Co.		78,690		5,149,474
Keurig Green Mountain, Inc.		37,918		5,020,154
Kraft Foods Group, Inc.		183,791		11,516,344
McCormick & Co., Inc.		40,307		2,994,810
Mead Johnson Nutrition Co.		63,047		6,338,745
Mondelez International, Inc., Class A		524,286		19,044,689
Tyson Foods, Inc., Class A		91,436		3,665,669
				91,690,407
Gas Utilities — 0.0%
AGL Resources, Inc.		37,307		2,033,605
Health Care Equipment & Supplies — 2.2%
Abbott Laboratories		469,943		21,156,834
Baxter International, Inc.		169,143		12,396,490
Becton Dickinson & Co.		59,912		8,337,354
Boston Scientific Corp. (b)		413,950		5,484,838
C.R. Bard, Inc.		23,373		3,894,409
CareFusion Corp. (b)		63,632		3,775,923
Covidien PLC		141,308		14,452,982
DENTSPLY International, Inc.		44,211		2,355,120
Edwards Lifesciences Corp. (b)		33,382		4,252,199
Intuitive Surgical, Inc. (b)		11,314		5,984,427
Medtronic, Inc.		307,196		22,179,551
St. Jude Medical, Inc.		89,224		5,802,237
Stryker Corp.		93,272		8,798,348
Varian Medical Systems, Inc. (b)		31,217		2,700,583
Zimmer Holdings, Inc.		52,850		5,994,247
				127,565,542
Health Care Providers & Services — 2.3%
Aetna, Inc.		109,779		9,751,669
AmerisourceBergen Corp.		64,854		5,847,237
Anthem Inc.		84,258		10,588,703
Cardinal Health, Inc.		103,307		8,339,974
Cigna Corp.		81,650		8,402,601
DaVita HealthCare Partners, Inc. (b)		53,648		4,063,300
Express Scripts Holding Co. (b)		229,067		19,395,103
Humana, Inc.		47,896		6,879,302
Laboratory Corp. of America Holdings (b)		26,361		2,844,352
McKesson Corp.		72,368		15,022,149
Patterson Cos., Inc.		26,660		1,282,346
Quest Diagnostics, Inc.		45,099		3,024,339
Tenet Healthcare Corp. (b)		30,661		1,553,593
UnitedHealth Group, Inc.		299,562		30,282,723
Universal Health Services, Inc., Class B		28,421		3,162,120
				130,439,511
Health Care Technology — 0.1%
Cerner Corp. (b)		94,840		6,132,354
Hotels, Restaurants & Leisure — 1.6%
Carnival Corp.		140,560		6,371,585
Chipotle Mexican Grill, Inc. (b)		9,679		6,625,372
Darden Restaurants, Inc.		41,388		2,426,579
Marriott International, Inc., Class A		66,343		5,176,744
McDonald’s Corp.		303,749		28,461,281
Royal Caribbean Cruises Ltd.		52,115		4,295,840
Starbucks Corp.		233,536		19,161,629
Starwood Hotels & Resorts Worldwide, Inc.		55,748		4,519,490
Wyndham Worldwide Corp.		38,484		3,300,388
Wynn Resorts Ltd.		25,278		3,760,355
Common Stocks	Shares		Value
Hotels, Restaurants & Leisure (concluded)
Yum! Brands, Inc.		136,511	$	9,944,826
				94,044,089
Household Durables — 0.4%
D.R. Horton, Inc.		103,521		2,618,046
Garmin Ltd.		37,679		1,990,582
Harman International Industries, Inc.		21,378		2,281,246
Leggett & Platt, Inc.		42,938		1,829,588
Lennar Corp., Class A		55,715		2,496,589
Mohawk Industries, Inc. (b)		19,335		3,003,886
Newell Rubbermaid, Inc.		84,642		3,224,014
PulteGroup, Inc.		104,201		2,236,153
Whirlpool Corp.		24,301		4,708,076
				24,388,180
Household Products — 2.0%
The Clorox Co.		40,381		4,208,104
Colgate-Palmolive Co.		267,371		18,499,399
Kimberly-Clark Corp.		116,238		13,430,139
The Procter & Gamble Co.		843,323		76,818,292
				112,955,934
Independent Power and Renewable Electricity Producers — 0.1%
The AES Corp.		204,826		2,820,454
NRG Energy, Inc.		105,501		2,843,252
				5,663,706
Industrial Conglomerates — 2.3%
3M Co.		200,007		32,865,150
Danaher Corp.		190,792		16,352,782
General Electric Co.		3,134,136		79,199,617
Roper Industries, Inc.		31,256		4,886,876
				133,304,425
Insurance — 2.8%
ACE Ltd.		103,546		11,895,365
Aflac, Inc.		140,671		8,593,591
The Allstate Corp.		130,922		9,197,271
American International Group, Inc.		436,933		24,472,617
Aon PLC		89,003		8,440,155
Assurant, Inc.		21,944		1,501,628
The Chubb Corp.		73,609		7,616,323
Cincinnati Financial Corp.		45,930		2,380,552
Genworth Financial, Inc., Class A (b)		155,456		1,321,376
Hartford Financial Services Group, Inc.		134,693		5,615,351
Lincoln National Corp.		81,063		4,674,903
Loews Corp.		93,445		3,926,559
Marsh & McLennan Cos., Inc.		168,834		9,664,058
MetLife, Inc.		354,546		19,177,393
Principal Financial Group, Inc.		85,225		4,426,587
The Progressive Corp.		167,123		4,510,650
Prudential Financial, Inc.		142,946		12,930,895
Torchmark Corp.		40,171		2,176,063
The Travelers Cos., Inc.		103,440		10,949,124
Unum Group		78,681		2,744,393
XL Group PLC		80,573		2,769,294
				158,984,148
Internet & Catalog Retail — 1.2%
Amazon.com, Inc. (b)		118,492		36,773,992
Expedia, Inc.		30,804		2,629,430
Netflix, Inc. (b)		18,801		6,422,610

See Notes to Financial Statements.

24 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014

Schedule of Investments (continued) S&P 500 Stock Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Internet & Catalog Retail (concluded)
The Priceline Group, Inc. (b)		16,340	$	18,631,031
TripAdvisor, Inc. (b)		34,785		2,597,048
				67,054,111
Internet Software & Services — 3.2%
Akamai Technologies, Inc. (b)		55,542		3,496,924
eBay, Inc. (b)		352,834		19,801,044
Facebook, Inc., Class A (b)		652,557		50,912,497
Google, Inc., Class A (b)		88,962		47,208,575
Google, Inc., Class C (b)		88,880		46,786,432
VeriSign, Inc. (b)		34,033		1,939,881
Yahoo!, Inc. (b)		274,994		13,889,947
				184,035,300
IT Services — 3.3%
Accenture PLC, Class A		195,857		17,491,989
Alliance Data Systems Corp. (b)		19,948		5,706,125
Automatic Data Processing, Inc.		150,442		12,542,350
Cognizant Technology Solutions Corp., Class A (b)		190,031		10,007,033
Computer Sciences Corp.		43,866		2,765,751
Fidelity National Information Services, Inc.		88,622		5,512,288
Fiserv, Inc. (b)		76,158		5,404,933
International Business Machines Corp.		287,259		46,087,834
Mastercard, Inc., Class A		305,827		26,350,054
Paychex, Inc.		101,902		4,704,815
Teradata Corp. (b)		47,779		2,086,987
Total System Services, Inc.		51,618		1,752,947
Visa, Inc., Class A		152,441		39,970,030
The Western Union Co. (c)		163,178		2,922,518
Xerox Corp.		334,988		4,642,934
				187,948,588
Leisure Products — 0.1%
Hasbro, Inc.		35,323		1,942,412
Mattel, Inc.		105,728		3,271,753
				5,214,165
Life Sciences Tools & Services — 0.4%
Agilent Technologies, Inc.		104,074		4,260,790
PerkinElmer, Inc.		35,298		1,543,582
Thermo Fisher Scientific, Inc.		124,843		15,641,579
Waters Corp. (b)		25,982		2,928,691
				24,374,642
Machinery — 1.5%
Caterpillar, Inc.		188,957		17,295,234
Cummins, Inc.		53,036		7,646,200
Deere & Co.		111,856		9,895,900
Dover Corp.		51,572		3,698,744
Flowserve Corp.		42,478		2,541,459
Illinois Tool Works, Inc.		112,262		10,631,211
Ingersoll-Rand PLC		82,872		5,253,256
Joy Global, Inc.		30,701		1,428,210
PACCAR, Inc.		110,507		7,515,581
Pall Corp.		33,268		3,367,054
Parker Hannifin Corp.		46,388		5,981,733
Pentair PLC		58,316		3,873,349
Snap-on, Inc.		18,131		2,479,233
Stanley Black & Decker, Inc.		48,885		4,696,871
Xylem, Inc.		56,722		2,159,407
				88,463,442
Common Stocks	Shares		Value
Media — 3.5%
Cablevision Systems Corp., New York Group, Class A (c)		68,289	$	1,409,485
CBS Corp., Class B		148,834		8,236,474
Comcast Corp., Class A		804,049		46,642,882
DIRECTV (b)		156,740		13,589,358
Discovery Communications, Inc., Class A (b)		46,326		1,595,931
Discovery Communications, Inc., Class C (b)		85,271		2,875,338
Gannett Co., Inc.		70,462		2,249,852
The Interpublic Group of Cos., Inc.		130,333		2,707,016
News Corp., Class A (b)		155,655		2,442,227
Omnicom Group, Inc.		77,472		6,001,756
Scripps Networks Interactive, Inc., Class A		31,681		2,384,629
Time Warner Cable, Inc.		87,539		13,311,180
Time Warner, Inc.		261,705		22,354,841
Twenty-First Century Fox, Inc., Class A		578,746		22,226,740
Viacom, Inc., Class B		115,312		8,677,228
The Walt Disney Co.		486,904		45,861,488
				202,566,425
Metals & Mining — 0.4%
Alcoa, Inc.		367,869		5,808,651
Allegheny Technologies, Inc.		33,758		1,173,766
Freeport-McMoRan Copper & Gold, Inc.		324,280		7,575,181
Newmont Mining Corp.		155,641		2,941,615
Nucor Corp.		99,547		4,882,780
				22,381,993
Multi-Utilities — 1.2%
Ameren Corp.		75,712		3,492,595
CenterPoint Energy, Inc.		134,112		3,142,244
CMS Energy Corp.		85,827		2,982,488
Consolidated Edison, Inc.		91,401		6,033,380
Dominion Resources, Inc.		182,230		14,013,487
DTE Energy Co.		55,231		4,770,301
Integrys Energy Group, Inc.		24,961		1,943,214
NiSource, Inc.		98,515		4,179,006
PG&E Corp.		148,263		7,893,522
Public Service Enterprise Group, Inc.		157,921		6,539,509
SCANA Corp.		44,479		2,686,532
Sempra Energy		72,134		8,032,842
TECO Energy, Inc.		73,216		1,500,196
Wisconsin Energy Corp. (c)		70,372		3,711,419
				70,920,735
Multiline Retail — 0.7%
Dollar General Corp. (b)		94,690		6,694,583
Dollar Tree, Inc. (b)		64,176		4,516,707
Family Dollar Stores, Inc.		29,971		2,374,003
Kohl’s Corp.		63,067		3,849,610
Macy’s, Inc.		107,782		7,086,666
Nordstrom, Inc.		43,953		3,489,429
Target Corp.		198,788		15,089,997
				43,100,995
Oil, Gas & Consumable Fuels — 7.0%
Anadarko Petroleum Corp.		158,055		13,039,537
Apache Corp.		117,519		7,364,916
Cabot Oil & Gas Corp.		128,940		3,817,913
Chesapeake Energy Corp.		161,880		3,167,992
Chevron Corp.		589,995		66,185,639
Cimarex Energy Co.		27,225		2,885,850

See Notes to Financial Statements.

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014 25

Schedule of Investments (continued) S&P 500 Stock Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Oil, Gas & Consumable Fuels (concluded)
ConocoPhillips		384,158	$	26,529,951
CONSOL Energy, Inc.		71,822		2,428,302
Denbury Resources, Inc.		109,386		889,308
Devon Energy Corp.		120,009		7,345,751
EOG Resources, Inc.		171,027		15,746,456
EQT Corp.		47,277		3,578,869
Exxon Mobil Corp.		1,321,606		122,182,475
Hess Corp.		79,329		5,856,067
Kinder Morgan, Inc.		530,280		22,436,147
Marathon Oil Corp.		210,612		5,958,213
Marathon Petroleum Corp.		87,462		7,894,320
Murphy Oil Corp.		52,059		2,630,021
Newfield Exploration Co. (b)		42,819		1,161,251
Noble Energy, Inc.		112,458		5,333,883
Occidental Petroleum Corp.		242,074		19,513,585
ONEOK, Inc.		64,966		3,234,657
Phillips 66		172,768		12,387,466
Pioneer Natural Resources Co.		46,467		6,916,613
QEP Resources, Inc.		51,445		1,040,218
Range Resources Corp.		52,642		2,813,715
Southwestern Energy Co. (b)		110,187		3,007,003
Spectra Energy Corp.		209,401		7,601,256
Tesoro Corp.		39,416		2,930,580
Valero Energy Corp.		162,704		8,053,848
The Williams Cos., Inc.		209,940		9,434,704
				403,366,506
Paper & Forest Products — 0.1%
International Paper Co.		132,231		7,084,937
Personal Products — 0.1%
Avon Products, Inc.		136,022		1,277,246
The Estee Lauder Cos., Inc., Class A		69,854		5,322,875
				6,600,121
Pharmaceuticals — 6.2%
AbbVie, Inc.		497,248		32,539,909
Actavis PLC (b)		82,724		21,293,985
Allergan, Inc.		92,972		19,764,917
Bristol-Myers Squibb Co.		517,693		30,559,418
Eli Lilly & Co.		305,792		21,096,590
Hospira, Inc. (b)		52,798		3,233,878
Johnson & Johnson		873,612		91,353,607
Mallinckrodt PLC (b)		36,284		3,593,205
Merck & Co., Inc.		889,775		50,530,322
Mylan, Inc. (b)		116,800		6,584,016
Perrigo Co. PLC		43,929		7,343,172
Pfizer, Inc.		1,966,468		61,255,478
Zoetis, Inc.		156,448		6,731,957
				355,880,454
Professional Services — 0.2%
The Dun & Bradstreet Corp.		11,206		1,355,478
Equifax, Inc.		37,650		3,044,755
Nielsen Holdings NV		101,079		4,521,264
Robert Half International, Inc.		42,442		2,477,764
				11,399,261
Real Estate Investment Trusts (REITs) — 2.3%
American Tower Corp.		123,730		12,230,711
Apartment Investment & Management Co., Class A		45,641		1,695,563
Common Stocks	Shares		Value
Real Estate Investment Trusts (REITs) (concluded)
AvalonBay Communities, Inc.		41,196	$	6,731,015
Boston Properties, Inc.		47,778		6,148,551
Crown Castle International Corp.		104,189		8,199,674
Equity Residential		113,085		8,124,026
Essex Property Trust, Inc.		19,954		4,122,496
General Growth Properties, Inc.		195,825		5,508,557
HCP, Inc.		143,322		6,310,468
Health Care REIT, Inc. (c)		102,259		7,737,939
Host Hotels & Resorts, Inc.		236,333		5,617,635
Kimco Realty Corp.		128,381		3,227,498
The Macerich Co.		43,910		3,662,533
Plum Creek Timber Co., Inc.		54,997		2,353,322
Prologis, Inc.		156,032		6,714,057
Public Storage		45,280		8,370,008
Simon Property Group, Inc.		96,992		17,663,213
Ventas, Inc.		91,391		6,552,735
Vornado Realty Trust		54,486		6,413,547
Weyerhaeuser Co.		163,687		5,874,726
				133,258,274
Real Estate Management & Development — 0.1%
CBRE Group, Inc., Class A (b)		87,247		2,988,210
Road & Rail — 1.0%
CSX Corp.		310,647		11,254,741
Kansas City Southern		34,438		4,202,469
Norfolk Southern Corp.		96,571		10,585,147
Ryder System, Inc.		16,591		1,540,474
Union Pacific Corp.		277,498		33,058,337
				60,641,168
Semiconductors & Semiconductor Equipment — 2.4%
Altera Corp.		95,164		3,515,358
Analog Devices, Inc.		97,147		5,393,602
Applied Materials, Inc.		380,235		9,475,456
Avago Technologies Ltd.		78,924		7,938,965
Broadcom Corp., Class A		168,120		7,284,640
First Solar, Inc. (b)		23,332		1,040,491
Intel Corp.		1,509,032		54,762,771
KLA-Tencor Corp.		51,347		3,610,721
Lam Research Corp.		49,626		3,937,327
Linear Technology Corp.		74,432		3,394,099
Microchip Technology, Inc.		62,707		2,828,713
Micron Technology, Inc. (b)		335,007		11,728,595
NVIDIA Corp.		161,125		3,230,556
Texas Instruments, Inc.		329,692		17,626,983
Xilinx, Inc.		82,563		3,574,152
				139,342,429
Software — 3.8%
Adobe Systems, Inc. (b)		147,865		10,749,786
Autodesk, Inc. (b)		70,998		4,264,140
CA, Inc.		99,955		3,043,630
Citrix Systems, Inc. (b)		50,258		3,206,460
Electronic Arts, Inc. (b)		97,066		4,563,558
Intuit, Inc.		89,106		8,214,682
Microsoft Corp.		2,572,575		119,496,109
Oracle Corp.		1,009,523		45,398,249
Red Hat, Inc. (b)		58,714		4,059,486
Salesforce.com, Inc. (b)		183,139		10,861,974
Symantec Corp.		215,370		5,525,317
				219,383,391

See Notes to Financial Statements.

26 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014

Schedule of Investments (continued) S&P 500 Stock Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Specialty Retail — 2.4%
AutoNation, Inc. (b)		23,326	$	1,409,124
AutoZone, Inc. (b)		10,002		6,192,338
Bed Bath & Beyond, Inc. (b)		57,805		4,403,007
Best Buy Co., Inc.		90,845		3,541,138
CarMax, Inc. (b)		67,244		4,477,105
GameStop Corp., Class A (c)		33,903		1,145,921
The Gap, Inc.		83,313		3,508,310
The Home Depot, Inc.		411,305		43,174,686
L Brands, Inc.		76,723		6,640,376
Lowe’s Cos., Inc.		303,662		20,891,946
O’Reilly Automotive, Inc. (b)		31,667		6,099,697
PetSmart, Inc.		31,019		2,521,690
Ross Stores, Inc.		65,482		6,172,333
Staples, Inc.		200,024		3,624,435
Tiffany & Co.		35,118		3,752,709
TJX Cos., Inc.		215,005		14,745,043
Tractor Supply Co.		42,441		3,345,200
Urban Outfitters, Inc. (b)		31,260		1,098,164
				136,743,222
Technology Hardware, Storage & Peripherals — 4.7%
Apple, Inc.		1,830,423		202,042,091
EMC Corp.		635,072		18,887,041
Hewlett-Packard Co.		582,447		23,373,598
NetApp, Inc.		97,307		4,033,375
SanDisk Corp.		68,877		6,748,568
Seagate Technology PLC		102,122		6,791,113
Western Digital Corp.		68,141		7,543,209
				269,418,995
Textiles, Apparel & Luxury Goods — 0.8%
Coach, Inc.		85,994		3,229,934
Fossil Group, Inc. (b)		14,041		1,554,900
Michael Kors Holdings Ltd. (b)		64,257		4,825,701
NIKE, Inc., Class B		217,802		20,941,662
PVH Corp.		25,710		3,295,251
Ralph Lauren Corp.		18,898		3,499,154
Under Armour, Inc., Class A (b)		52,013		3,531,683
VF Corp.		107,821		8,075,793
				48,954,078
Common Stocks	Shares		Value
Thrifts & Mortgage Finance — 0.1%
Hudson City Bancorp, Inc.		150,441	$	1,522,463
People’s United Financial, Inc.		96,350		1,462,593
				2,985,056
Tobacco — 1.4%
Altria Group, Inc.		616,843		30,391,854
Lorillard, Inc.		112,352		7,071,435
Philip Morris International, Inc.		484,918		39,496,571
Reynolds American, Inc.		96,162		6,180,332
				83,140,192
Trading Companies & Distributors — 0.2%
Fastenal Co.		85,104		4,047,546
United Rentals, Inc. (b)		31,144		3,177,000
W.W. Grainger, Inc.		18,942		4,828,126
				12,052,672
Total Long-Term Investments (Cost — $3,006,458,952) — 99.1%				5,694,304,085
Short-Term Securities
Money Market Funds — 1.4%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (a)(d)		76,063,771		76,063,771
BlackRock Cash Funds: Prime, SL Agency Shares, 0.13% (a)(d)(e)		6,710,893		6,710,893
Total Short-Term Securities (Cost — $82,774,664) — 1.4%				82,774,664
Total Investments (Cost — $3,089,233,616) — 100.5%				5,777,078,749
Liabilities in Excess of Other Assets — (0.5)%				(28,500,463	)
Net Assets — 100.0%			$	5,748,578,286

Notes to Schedule of Investments

(a) During the year ended December 31, 2014, investments in issuers considered to be an affiliate of the Master Portfolio 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, 2013		Shares Purchased		Shares Sold			Shares Held at December 31, 2014		Value at December 31, 2014		Income		Realized Gain
BlackRock, Inc.		40,465		941		(1,651	)		39,755	$	14,214,798	$	306,154	$	115,636
BlackRock Cash Funds: Institutional, SL Agency Shares		92,138,359		—		(16,074,588	)1		76,063,771	$	76,063,771	$	114,991		—
BlackRock Cash Funds: Prime, SL Agency Shares		11,657,294		—		(4,946,401	)1		6,710,893	$	6,710,893	$	236,557		—
The PNC Financial Services Group, Inc.		169,461		4,152		(9,370	)		164,243	$	14,983,889	$	316,687	$	182,136
1   Represents net shares sold.

(b) Non-income producing security.

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

(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.

See Notes to Financial Statements.

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014 27

Schedule of Investments (concluded) S&P 500 Stock Master Portfolio

Ÿ As of December 31, 2014, financial futures contracts outstanding were as follows:

Contracts Purchased		Issue	Exchange	Expiration	Notional Value		Unrealized Appreciation
	830	S&P 500 E-Mini Index	Chicago Mercantile	March 2015	$	85,174,600	$	609,987

Ÿ For Master Portfolio compliance purposes, the Master Portfolio’s sector and industry classifications refer to any one or more of the sector and 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 sector and industry sub-classifications for reporting ease.

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. 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. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices 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)

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. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, refer to Note 2 of Notes to Financial Statements.

As of December 31, 2014, the following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks1	$	5,694,304,085		—		—	$	5,694,304,085
Short-Term Securities:
Money Market Funds		82,774,664		—		—		82,774,664
Total	$	5,777,078,749		—		—	$	5,777,078,749
1    See above Schedule of Investments for values in each industry.

	Level 1		Level 2	Level 3	Total
Derivative Financial Instruments2
Assets:
Equity contracts	$	609,987	—	—	$	609,987
2    Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

The Master Portfolio may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of December 31, 2014, 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	$	4,570,000		—		—	$	4,570,000
Liabilities:
Collateral on securities loaned at value		—	$	(6,710,893	)	—		(6,710,893	)
Total	$	4,570,000	$	(6,710,893	)	—	$	(2,140,893	)

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

28 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014

Statement of Assets and Liabilities S&P 500 Stock Master Portfolio

December 31, 2014
Assets
Investments at value — unaffiliated (including securities loaned at value of $6,420,154) (cost — $2,990,305,097)	$	5,665,105,398
Investments at value — affiliated (cost — $98,928,519)		111,973,351
Dividends receivable		7,621,075
Cash pledged for financial futures contracts		4,570,000
Contributions receivable from investors		1,040,092
Securities lending income receivable — affiliated		17,925
Total assets		5,790,327,841
Liabilities
Withdrawals payable to investors		33,705,062
Collateral on securities loaned at value		6,710,893
Variation margin payable on financial futures contracts		1,038,673
Investment advisory fees payable		219,938
Officer’s and Trustees’ fees payable		39,807
Professional fees payable		35,182
Total liabilities		41,749,555
Net Assets	$	5,748,578,286
Net Assets Consist of
Investors’ capital	$	3,060,123,166
Net unrealized appreciation/depreciation		2,688,455,120
Net Assets	$	5,748,578,286

See Notes to Financial Statements.
	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2014	29

Statement of Operations S&P 500 Stock Master Portfolio

Year Ended December 31, 2014
Investment Income
Dividends — unaffiliated	$	110,628,628
Dividends — affiliated		622,841
Securities lending — affiliated — net		236,557
Income — affiliated		114,991
Foreign taxes withheld		(12,900	)
Total income		111,590,117
Expenses
Investment advisory		2,752,257
Trustees		160,928
Professional		54,722
Total expenses		2,967,907
Less fees waived by Manager		(270,108	)
Total expenses after fees reimbursed		2,697,799
Net investment income		108,892,318
Realized and Unrealized Gain (Loss)
Net realized gain from:
Investments — unaffiliated		56,968,322
Investments — affiliated		297,772
Financial futures contracts		19,467,250
		76,733,344
Net change in unrealized appreciation/depreciation on:
Investments		527,636,489
Financial futures contracts		(67,373	)
		527,569,116
Net realized and unrealized gain		604,302,460
Net Increase in Net Assets Resulting from Operations	$	713,194,778

See Notes to Financial Statements.
30	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2014

Statements of Changes in Net Assets S&P 500 Stock Master Portfolio

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	108,892,318		$	82,885,589
Net realized gain		76,733,344			8,349,909
Net change in unrealized appreciation/depreciation		527,569,116			992,927,582
Net increase in net assets resulting from operations		713,194,778			1,084,163,080
Capital Transactions
Proceeds from contributions		539,481,303			3,187,732,511
Value of withdrawals		(775,228,002	)		(718,697,605	)
Net increase (decrease) in net assets derived from capital transactions		(235,746,699	)		2,469,034,906
Net Assets
Total increase in net assets		477,448,079			3,553,197,986
Beginning of year		5,271,130,207			1,717,932,221
End of year	$	5,748,578,286		$	5,271,130,207

Financial Highlights S&P 500 Stock Master Portfolio

	Year Ended December 31,
	2014		2013		2012		2011		2010
Total Return
Total Return		13.63%		32.33%		15.98%		2.13%		15.06%
Ratio to Average Net Assets
Total expenses		0.05%		0.05%		0.06%		0.06%		0.05%
Total expenses after fees waived and paid indirectly		0.05%		0.05%		0.05%		0.05%		0.05%
Net investment income		1.98%		2.08%		2.22%		2.08%		2.01%
Supplemental Data
Net assets, end of year (000)		$5,748,578		$5,271,130		$1,717,932		$2,108,316		$2,158,717
Portfolio turnover rate		3%		2%		10%		5%		9%

See Notes to Financial Statements.
	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2014	31

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.

The Master Portfolio, together with certain other registered investment companies advised by the Manager or its affiliates, is included in a complex of open-end funds referred to as the Equity-Liquidity Complex.

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”) or its affiliates 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 (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results

32 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014

Notes to Financial Statements (continued) S&P 500 Stock Master Portfolio

could differ from those estimates. The Master Portfolio is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Master Portfolio:

Valuation: The Master Portfolio’s investments are valued at fair value as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the 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. Investments in open-end registered investment companies are valued at NAV each business day. Equity investments traded on a recognized securities exchange are valued at the official close each day, if available. For equity investments traded on more than one exchange, the official close price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price. Financial futures contracts traded on exchanges are valued at their last sale price.

In the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Investments”). When determining the price for Fair Value Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant consistent with the principles of fair value measurement. The pricing of all Fair Value Investments 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 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 date. 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.

Recent Accounting Standard: In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance will require expanded disclosure for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. It is effective for financial statements with fiscal years beginning on or after December 15, 2014 and interim periods within those fiscal years. Management is evaluating the impact, if any, of this guidance on the Master Portfolio’s financial statement disclosures.

Other: Expenses directly related to the Master Portfolio are charged to the Master Portfolio. Other operating expenses shared by several funds are prorated 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:

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

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014 33

Notes to Financial Statements (continued) S&P 500 Stock Master Portfolio

preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Securities Lending: The Master Portfolio may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Master Portfolio collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. government. The initial collateral received by the Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. During the term of the loan, the Master Portfolio is entitled to all distributions made on or in respect of the loaned securities. 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. As of December 31, 2014, any securities on loan were collateralized by cash. 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 (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, 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.

As of December 31, 2014, the following table is a summary of the Master Portfolio’s securities lending agreements by counterparty, which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Citigroup Global Markets, Inc.	$	793,888	$	(793,888	)		—
Credit Suisse Securities (USA) LLC		262,046		(262,046	)		—
Deutsche Bank Securities Inc.		1,501,193		(1,501,193	)		—
Goldman Sachs & Co.		6,269		(6,269	)		—
JP Morgan Securities LLC		1,997,848		(1,997,848	)		—
Merrill Lynch, Pierce, Fenner & Smith, Inc.		4,399		(4,399	)		—
Morgan Stanley		27,100		(27,100	)		—
National Financial Services LLC		231,209		(231,209	)		—
State Street Bank & Trust Co.		1,596,202		(1,596,202	)		—
Total	$	6,420,154	$	(6,420,154	)		—

¹ Collateral with a value of $6,710,893 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities lent if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Master Portfolio 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.

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 OTC.

34 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014

Notes to Financial Statements (continued) S&P 500 Stock Master Portfolio

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, 2014
		Value
	Statement of Assets and Liabilities Location	Derivative Assets
Equity contracts	Net unrealized appreciation/depreciation1	$	609,987

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, 2014
	Net Realized Gain From		Net Change in Unrealized Appreciation/Depreciation on
Equity contracts:
Financial futures contracts	$	19,467,250	$	(67,373	)

For the year ended December 31, 2014, the average quarterly balances of outstanding derivative financial instruments were as follows:

Financial futures contracts:
Average notional value of contracts purchased	$	68,679,546

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 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 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, Inc, (“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

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014 35

Notes to Financial Statements (continued) S&P 500 Stock Master Portfolio

management of the Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services 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 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 year ended December 31, 2014, the amount waived was $54,437.

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. 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, 2015. The amount of the waiver, if any, is shown as fees reimbursed in the Statement of Operations.

The U.S. Securities and Exchange Commission has issued an exemptive order which permits BTC, an affiliate of the Manager, to serve as securities lending agent for the Master Portfolio, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. The Master Portfolio is responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by the Manager or its affiliates, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees the Master Portfolio bears to an annual rate of 0.04% until December 31, 2014 and 0.05% thereafter (the “collateral investment fees”).

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent. Pursuant to a securities lending agreement effective February 1, 2014, BTC may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the “specials only securities”).

Pursuant to such agreement, the Master Portfolio retains 80% of securities lending income. In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Liquidity Complex in a calendar year exceeds the aggregate securities lending income earned across the Equity-Liquidity Complex through the lending of specials only securities in the calendar year 2013, the Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income. Prior to February 1, 2014, the Master Portfolio retained 65% of securities lending income and paid a fee to BTC equal to 35% of such income. The share of securities lending income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the year ended December 31, 2014, the Master Portfolio paid BTC $51,988 in total for securities lending agent services and collateral investment fees.

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

6. Purchases and Sales:

For the year ended December 31, 2014, purchases and sales of investments, excluding short-term securities were $183,690,825 and $312,716,349, respectively.

36 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014

Notes to Financial Statements (concluded) S&P 500 Stock Master Portfolio

7. Income Tax Information:

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 U.S. 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 U.S. federal tax returns remains open for each of the four years ended December 31, 2014. 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.

As of December 31, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	2,743,339,714
Gross unrealized appreciation	$	3,458,563,818
Gross unrealized depreciation		(424,824,783	)
Net unrealized appreciation	$	3,033,739,035

8. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), was a party to a 364-day, $1.1 billion credit agreement with a group of lenders, under which the Master Portfolio may borrow to fund shareholder redemptions. Excluding commitments designated for a certain individual fund, the Participating Funds, including the Master Portfolio, could borrow up to an aggregate commitment amount of $650 million, subject to asset coverage and other limitations as specified in the agreement. Effective November 25, 2014, the credit agreement was amended to an aggregate commitment amount of $2.1 billion, of which the Participating Funds, including the Master Portfolio can borrow up to $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The agreement terminates on April 23, 2015, unless otherwise extended to November 24, 2015 or renewed for a period of 364 days from April 23, 2015. The amended agreement has the following terms: a fee of 0.06% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one month LIBOR (but in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which are included in miscellaneous expenses in the Statement of Operations, and 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. During the year ended December 31, 2014, the Master Portfolio did not borrow under the credit agreement.

9. Principal Risks:

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.

10. 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 S&P 500 STOCK FUND DECEMBER 31, 2014 37

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, 2014, 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, 2014 by correspondence with the custodian, transfer agent and broker, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 19, 2015

38 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014

Officers and Trustees

Name, Address and Year of Birth1	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2
Ronald W. Forbes 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 153 Portfolios	None
Rodney D. Johnson 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 153 Portfolios	None
David O. Beim 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 153 Portfolios	None
Frank J. Fabozzi 1948	Trustee	Since 2014	Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011; Adjunct Professor of Finance and Becton Fellow, Yale University from 1994 to 2006.	112 RICs consisting of 232 Portfolios	None
Dr. Matina S. Horner 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 153 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 1939	Trustee	Since 2009	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 153 Portfolios	None
Ian A. MacKinnon 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None
Cynthia A. Montgomery 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 153 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 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 153 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 153 Portfolios	None

BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014 39

Officers and Trustees (continued)

Name, Address and Year of Birth1	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2 (concluded)
Toby Rosenblatt 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Futures Foundation (philanthropic foundation) since 2009; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None
Kenneth L. Urish 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 153 Portfolios	None
Frederick W. Winter 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 153 Portfolios	None
	1   The address of each Trustee is c/o BlackRock Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2   Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Trustees on a case-by-case basis, as appropriate.
	3   Date shown is the earliest date a person has served for the Trust/MIP. 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. Frank J. Fabozzi first became a member of the board of other funds advised by BlackRock Advisors, LLC or its affiliates in 1988.
Interested Trustees4
Paul L. Audet 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.	141 RICs consisting of 329 Portfolios	None
Henry Gabbay 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.	29 RICs consisting of 97 Portfolios	None
	4  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, Dr. Fabozzi 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 75. The Board has determined to extend the terms of Directors on a case-by-case basis, as appropriate.

40 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014

Officers and Trustees (concluded)

Name, Address and Year of Birth1	Position(s) Held with Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers2
John M. Perlowski 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 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.
Jennifer McGovern 1977	Vice President	Since 2014	Director of BlackRock, Inc. since 2011; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal Andrews 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 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.
Charles Park 1967	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2014	Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary to the 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    The address of each Officer is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2    Officers of the Trust/MIP serve at the pleasure of the Board.

Effective September 10, 2014, Brendan Kyne resigned as a Vice President of the Fund and Jennifer McGovern became a Vice President of the Fund.

Effective December 31, 2014, Paul L. Audet and Henry Gabbay resigned as Trustees of the Fund and Ronald W. Forbes resigned as a Trustee of the Fund and Co-Chair of the Board. Effective January 1, 2015, Collette Chilton, Barbara G. Novick and Mark Stalnecker were appointed to serve as Trustees of the Fund.

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 S&P 500 STOCK FUND DECEMBER 31, 2014 41

Additional Information

General Information

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.

BlackRock’s Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax exempt investing. Visit http://www.blackrock.com for more information.

Shareholder Privileges

Account Information

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

42 BLACKROCK S&P 500 STOCK FUND DECEMBER 31, 2014

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 S&P 500 STOCK FUND DECEMBER 31, 2014 43

This report is intended for current holders. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless preceded or accompanied 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-12/14-AR

Portfolio Information as of December 31, 2014

Ten Largest Holdings Percent of Long-Term  Investments

Microsoft Corp.	3	%
JPMorgan Chase & Co.	2
Apple, Inc.	2
Pfizer, Inc.	2
Wells Fargo & Co.	2
Union Pacific Corp.	2
Citigroup, Inc.	2
Qualcomm, Inc.	1
Intel Corp.	1
Google, Inc	1

Sector Allocation Percent of Long-Term  Investments

Information Technology	21	%
Financials	18
Health Care	15
Consumer Discretionary	13
Industrials	11
Energy	8
Consumer Staples	6
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 sector sub-classifications for reporting ease.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014 1

Portfolio Information as of December 31, 2014

Derivative Financial Instruments

The Master Portfolio may invest in various derivative financial instruments. 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 manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage. Derivative financial instruments also 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 limit the amount of appreciation the Master Portfolio can realize on an investment and/or may result in lower distributions paid to shareholders. The Master Portfolio’s investments in these instruments are discussed in detail in the Notes to Financial Statements.

2 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014

Schedule of Investments December 31, 2014 (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Aerospace & Defense — 3.3%
The Boeing Co.		82,484	$	10,721,270
General Dynamics Corp.		56,621		7,792,182
Honeywell International, Inc.		74,850		7,479,012
Lockheed Martin Corp.		29,280		5,638,450
Northrop Grumman Corp.		96,770		14,262,930
Precision Castparts Corp.		20,430		4,921,179
Raytheon Co.		171,660		18,568,462
Rockwell Collins, Inc.		33,130		2,798,822
Spirit Aerosystems Holdings, Inc., Class A (a)		39,600		1,704,384
United Technologies Corp.		62,920		7,235,800
				81,122,491
Air Freight & Logistics — 0.4%
FedEx Corp.		61,409		10,664,287
Airlines — 1.2%
American Airlines Group, Inc.		7,720		414,024
Delta Air Lines, Inc.		187,687		9,232,323
Southwest Airlines Co.		97,160		4,111,811
Spirit Airlines, Inc. (a)		60,002		4,534,951
United Continental Holdings, Inc. (a)		162,758		10,886,883
				29,179,992
Auto Components — 0.8%
Delphi Automotive PLC		24,114		1,753,570
Johnson Controls, Inc.		194,420		9,398,263
Lear Corp.		77,625		7,613,460
				18,765,293
Automobiles — 0.2%
General Motors Co.		135,900		4,744,269
Banks — 7.7%
Bank of America Corp.		888,660		15,898,127
CIT Group, Inc.		63,442		3,034,431
Citigroup, Inc.		672,150		36,370,037
Citizens Financial Group, Inc.		82,398		2,048,414
Comerica, Inc.		2,550		119,442
Fifth Third Bancorp		459,910		9,370,666
JPMorgan Chase & Co.		877,408		54,908,193
KeyCorp		126,670		1,760,713
Regions Financial Corp.		268,300		2,833,248
SunTrust Banks, Inc.		223,160		9,350,404
US Bancorp		243,100		10,927,345
Wells Fargo & Co.		737,213		40,414,017
				187,035,037
Beverages — 1.7%
The Coca-Cola Co.		135,055		5,702,022
Coca-Cola Enterprises, Inc.		161,799		7,154,752
Constellation Brands, Inc., Class A (a)		15,202		1,492,380
Common Stocks	Shares		Value
Beverages (concluded)
Diageo PLC		286,580	$	8,209,676
Dr Pepper Snapple Group, Inc.		182,944		13,113,426
Monster Beverage Corp. (a)		55,568		6,020,793
				41,693,049
Biotechnology — 2.6%
Amgen, Inc.		152,439		24,282,008
Biogen Idec, Inc. (a)		4,518		1,533,635
Celgene Corp. (a)		47,906		5,358,765
Cubist Pharmaceuticals, Inc. (a)		2,514		253,034
Forward Pharma A/S, ADR (a)		22,920		477,424
Gilead Sciences, Inc. (a)		142,860		13,465,984
Regeneron Pharmaceuticals, Inc. (a)		11,199		4,594,390
United Therapeutics Corp. (a)		54,760		7,090,872
Vertex Pharmaceuticals, Inc. (a)		53,099		6,308,161
				63,364,273
Capital Markets — 1.5%
Affiliated Managers Group, Inc. (a)		10,026		2,127,918
Ameriprise Financial, Inc.		28,705		3,796,236
The Goldman Sachs Group, Inc.		53,969		10,460,812
KKR & Co. LP		3,200		74,272
Morgan Stanley		450,405		17,475,714
State Street Corp.		10,700		839,950
Waddell & Reed Financial, Inc., Class A		13,221		658,670
				35,433,572
Chemicals — 2.2%
Akzo Nobel NV — ADR		164,900		3,759,720
Axalta Coating Systems, Ltd. (a)		22,801		593,282
Cabot Corp.		39,234		1,720,803
Celanese Corp., Series A		39,717		2,381,431
Cytec Industries, Inc.		14,948		690,149
The Dow Chemical Co.		155,170		7,077,304
E.I. du Pont de Nemours & Co.		169,420		12,526,915
Eastman Chemical Co.		22,629		1,716,636
Ecolab, Inc.		14,084		1,472,060
LyondellBasell Industries NV, Class A		30,390		2,412,662
Monsanto Co.		2,834		338,578
NewMarket Corp.		479		193,291
PolyOne Corp.		9,322		353,397
PPG Industries, Inc.		73,585		17,009,173
Sigma-Aldrich Corp.		3,794		520,802
				52,766,203
Communications Equipment — 2.7%
Cisco Systems, Inc.		772,620		21,490,425
CommScope Holding Co., Inc. (a)		61,791		1,410,689
Harris Corp.		26,519		1,904,595
Motorola Solutions, Inc.		93,010		6,239,111

See Notes to Financial Statements.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014 3

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Communications Equipment (concluded)
QUALCOMM, Inc.		419,010	$	31,145,013
Telefonaktiebolaget LM Ericsson — ADR		369,780		4,474,338
				66,664,171
Construction & Engineering — 0.1%
AECOM Technology Corp. (a)		93,320		2,834,129
Jacobs Engineering Group, Inc. (a)		5,470		244,454
				3,078,583
Consumer Finance — 2.3%
American Express Co.		116,230		10,814,039
Capital One Financial Corp.		145,450		12,006,898
Discover Financial Services		347,911		22,784,691
SLM Corp.		728,053		7,418,860
Synchrony Financial (a)		137,237		4,082,801
				57,107,289
Containers & Packaging — 0.6%
Crown Holdings, Inc. (a)		17,790		905,511
MeadWestvaco Corp.		84,137		3,734,841
Packaging Corp. of America		48,713		3,802,050
Rock-Tenn Co., Class A		113,795		6,939,219
				15,381,621
Diversified Consumer Services — 0.1%
ServiceMaster Global Holdings, Inc. (a)		92,819		2,484,765
Diversified Financial Services — 1.2%
Ally Financial, Inc. (a)		31,066		733,779
Berkshire Hathaway, Inc., Class B (a)		79,147		11,883,922
CME Group, Inc.		38,570		3,419,230
FNFV Group (a)		185,615		2,921,580
IntercontinentalExchange Group, Inc.		2,300		504,367
Moody’s Corp.		33,081		3,169,491
The NASDAQ OMX Group, Inc.		135,270		6,487,549
				29,119,918
Diversified Telecommunication Services — 1.1%
BCE, Inc.		28,750		1,318,475
Verizon Communications, Inc.		529,352		24,763,087
				26,081,562
Electric Utilities — 0.5%
American Electric Power Co., Inc.		51,605		3,133,455
Duke Energy Corp.		20,566		1,718,084
Edison International		12,966		849,014
FirstEnergy Corp.		9,410		366,896
ITC Holdings Corp.		26,110		1,055,627
NextEra Energy, Inc.		34,170		3,631,929
Common Stocks	Shares		Value
Electric Utilities (concluded)
Northeast Utilities		20,140	$	1,077,893
				11,832,898
Electrical Equipment — 0.4%
The Babcock & Wilcox Co.		63,284		1,917,505
Rockwell Automation, Inc.		53,980		6,002,576
SolarCity Corp. (a)(b)		32,760		1,752,005
				9,672,086
Electronic Equipment, Instruments & Components — 0.6%
Avnet, Inc.		43,090		1,853,732
Corning, Inc.		37,800		866,754
Flextronics International Ltd. (a)		318,443		3,560,193
FLIR Systems, Inc.		13,876		448,334
Ingram Micro, Inc., Class A (a)		204,144		5,642,540
Keysight Technologies, Inc. (a)		35,052		1,183,706
TE Connectivity Ltd.		31,150		1,970,237
				15,525,496
Energy Equipment & Services — 1.2%
Baker Hughes, Inc.		15,094		846,321
Cameron International Corp. (a)		21,978		1,097,801
Dresser-Rand Group, Inc. (a)		2,517		205,891
Halliburton Co.		74,060		2,912,780
Noble Corp. PLC (b)		5,230		86,661
Oceaneering International, Inc.		49,210		2,894,040
Schlumberger Ltd.		250,706		21,412,799
				29,456,293
Food & Staples Retailing — 1.8%
Costco Wholesale Corp.		48,706		6,904,076
CVS Health Corp.		195,590		18,837,273
The Kroger Co.		209,350		13,442,363
Wal-Mart Stores, Inc.		25,400		2,181,352
Whole Foods Market, Inc.		40,444		2,039,186
				43,404,250
Food Products — 1.0%
The Hershey Co.		20,188		2,098,139
Kellogg Co.		2,700		176,688
Kraft Foods Group, Inc.		64,540		4,044,076
Mondelez International, Inc., Class A		119,503		4,340,946
Tyson Foods, Inc., Class A		177,417		7,112,648
Unilever NV — NY Shares		150,580		5,878,643
				23,651,140
Gas Utilities — 0.1%
UGI Corp.		40,390		1,534,012
Health Care Equipment & Supplies — 1.8%
Abbott Laboratories		71,030		3,197,771

See Notes to Financial Statements.

4 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Health Care Equipment & Supplies (concluded)
Baxter International, Inc.		131,784	$	9,658,449
Becton Dickinson & Co.		27,200		3,785,152
CareFusion Corp. (a)		6,927		411,048
Covidien PLC		14,406		1,473,446
Edwards Lifesciences Corp. (a)		16,709		2,128,393
Halyard Health, Inc. (a)		50,475		2,295,098
Hologic, Inc. (a)		94,350		2,522,919
Intuitive Surgical, Inc. (a)		3,312		1,751,849
Medtronic, Inc.		129,779		9,370,044
St. Jude Medical, Inc.		85,145		5,536,979
Zimmer Holdings, Inc.		19,410		2,201,482
				44,332,630
Health Care Providers & Services — 3.9%
Aetna, Inc.		153,019		13,592,678
AmerisourceBergen Corp.		17,343		1,563,645
Anthem Inc.		16,440		2,066,015
Cardinal Health, Inc.		54,132		4,370,076
Catamaran Corp. (a)		144,775		7,492,106
Centene Corp. (a)		68,111		7,073,327
Cigna Corp.		64,430		6,630,491
Community Health Systems, Inc. (a)		99,340		5,356,413
Express Scripts Holding Co. (a)		58,392		4,944,051
HCA Holdings, Inc. (a)		57,204		4,198,202
Humana, Inc.		15,404		2,212,477
Laboratory Corp. of America Holdings (a)		25,820		2,785,978
McKesson Corp.		42,280		8,776,482
Quest Diagnostics, Inc. (b)		193,980		13,008,299
UnitedHealth Group, Inc.		16,400		1,657,876
Universal Health Services, Inc., Class B		77,207		8,590,051
VCA, Inc. (a)		5,603		273,258
				94,591,425
Health Care Technology — 0.1%
Athenahealth, Inc. (a)		14,141		2,060,344
Hotels, Restaurants & Leisure — 1.3%
ARAMARK		37,708		1,174,604
Chipotle Mexican Grill, Inc. (a)		141		96,516
Hyatt Hotels Corp., Class A (a)		24,097		1,450,880
Jack in the Box, Inc.		7,142		571,074
Las Vegas Sands Corp.		260,531		15,152,483
SeaWorld Entertainment, Inc.		60,220		1,077,938
Six Flags Entertainment Corp.		61,661		2,660,672
Starbucks Corp.		54,531		4,474,269
Wyndham Worldwide Corp.		32,015		2,745,607
Wynn Resorts Ltd.		13,161		1,957,830
				31,361,873
Household Durables — 0.3%
Newell Rubbermaid, Inc.		143,810		5,477,723
Common Stocks	Shares		Value
Household Durables (concluded)
Tupperware Brands Corp.		15,370	$	968,310
				6,446,033
Household Products — 0.9%
Energizer Holdings, Inc.		12,030		1,546,577
Kimberly-Clark Corp.		21,292		2,460,078
The Procter & Gamble Co.		188,113		17,135,213
				21,141,868
Independent Power and Renewable Electricity Producers — 0.3%
The AES Corp.		390,550		5,377,873
Dynegy, Inc. (a)		45,274		1,374,066
				6,751,939
Industrial Conglomerates — 1.8%
3M Co.		89,195		14,656,522
Danaher Corp.		105,071		9,005,635
General Electric Co.		771,047		19,484,358
				43,146,515
Insurance — 3.5%
ACE Ltd.		15,020		1,725,498
Aflac, Inc.		2,800		171,052
American Financial Group, Inc.		10,669		647,822
American International Group, Inc.		56,680		3,174,647
AmTrust Financial Services, Inc. (b)		3,399		191,194
Aspen Insurance Holdings Ltd.		2,532		110,826
Assured Guaranty Ltd.		46,143		1,199,256
CNA Financial Corp.		113,342		4,387,469
CNO Financial Group, Inc.		47,100		811,062
Genworth Financial, Inc., Class A (a)		314,300		2,671,550
The Hanover Insurance Group, Inc.		103,010		7,346,673
Hartford Financial Services Group, Inc.		106,406		4,436,066
Lincoln National Corp.		92,162		5,314,982
MetLife, Inc.		236,426		12,788,282
Protective Life Corp.		2,538		176,772
Prudential Financial, Inc.		141,374		12,788,692
The Travelers Cos., Inc.		152,016		16,090,894
Voya Financial, Inc.		178,098		7,547,793
Willis Group Holdings PLC		17,284		774,496
XL Group PLC		95,250		3,273,742
				85,628,768
Internet & Catalog Retail — 1.2%
Alibaba Group Holding Ltd.		56,835		5,907,430
Alibaba Group Holding Ltd. — SP ADR (a)		1,400		145,516
Expedia, Inc.		14,990		1,279,546
Liberty Interactive Corp., Series A (a)		81,480		2,397,142

See Notes to Financial Statements.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014 5

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Internet & Catalog Retail (concluded)
Liberty TripAdvisor Holdings, Inc., Series A (a)		101,605	$	2,733,175
Netflix, Inc. (a)		14,543		4,968,034
The Priceline Group, Inc. (a)		4,910		5,598,431
TripAdvisor, Inc. (a)		84,426		6,303,245
				29,332,519
Internet Software & Services — 4.2%
Akamai Technologies, Inc. (a)		22,416		1,411,311
Baidu, Inc. — ADR (a)		26,082		5,945,914
eBay, Inc. (a)		77,608		4,355,361
Facebook, Inc., Class A (a)		339,954		26,523,211
Google, Inc., Class A (a)		56,250		29,849,625
Google, Inc., Class C (a)		31,140		16,392,096
IAC/InterActiveCorp		53,361		3,243,815
LendingClub Corp. (a)(b)		68,106		1,723,082
LinkedIn Corp. (a)		27,654		6,352,400
Yahoo!, Inc. (a)		145,607		7,354,610
				103,151,425
IT Services — 3.1%
Alliance Data Systems Corp. (a)		55,405		15,848,600
Amdocs Ltd.		120,807		5,636,251
Broadridge Financial Solutions, Inc.		89,956		4,154,168
Computer Sciences Corp.		115,455		7,279,438
DST Systems, Inc.		61,640		5,803,406
International Business Machines Corp.		10,280		1,649,323
Mastercard, Inc., Class A		150,440		12,961,911
Total System Services, Inc.		129,441		4,395,816
Visa, Inc., Class A (b)		53,185		13,945,107
The Western Union Co. (b)		79,980		1,432,442
Xerox Corp.		196,070		2,717,530
				75,823,992
Life Sciences Tools & Services — 0.1%
Illumina, Inc. (a)		11,416		2,107,165
Machinery — 1.1%
Crane Co.		23,458		1,376,985
Dover Corp.		18,110		1,298,849
Illinois Tool Works, Inc.		5,696		539,411
Ingersoll-Rand PLC		12,003		760,870
ITT Corp.		18,215		736,979
Parker Hannifin Corp.		49,840		6,426,868
Stanley Black & Decker, Inc.		71,182		6,839,166
WABCO Holdings, Inc. (a)		77,469		8,117,202
				26,096,330
Media — 4.0%
Cablevision Systems Corp., New York Group, Class A		48,570		1,002,485
CBS Corp., Class B		51,817		2,867,553
Common Stocks	Shares		Value
Media (concluded)
Comcast Corp., Class A		302,979	$	17,575,812
Comcast Corp., Special Class A (b)		276,540		15,919,025
DIRECTV (a)		86,558		7,504,579
Discovery Communications, Inc., Class C (a)		7,264		244,942
The Interpublic Group of Cos., Inc.		113,970		2,367,157
Liberty Global PLC, Class A (a)		153,741		7,718,567
Lions Gate Entertainment Corp.		16,142		516,867
Markit Ltd. (a)		13,875		366,716
Omnicom Group, Inc.		55,770		4,320,502
Time Warner Cable, Inc.		16,014		2,435,089
Time Warner, Inc.		60,475		5,165,774
Twenty-First Century Fox, Inc., Class A		233,023		8,949,248
Viacom, Inc., Class B		186,888		14,063,322
The Walt Disney Co.		67,542		6,361,781
				97,379,419
Metals & Mining — 0.2%
BHP Billiton Ltd.		228,020		5,390,991
Newmont Mining Corp.		13,795		260,725
				5,651,716
Multi-Utilities — 0.9%
CenterPoint Energy, Inc.		332,740		7,796,098
CMS Energy Corp.		183,242		6,367,660
Dominion Resources, Inc.		52,970		4,073,393
Sempra Energy		18,840		2,098,022
Wisconsin Energy Corp.		21,050		1,110,177
				21,445,350
Multiline Retail — 0.7%
Dollar General Corp. (a)		178,408		12,613,446
Family Dollar Stores, Inc.		3,194		252,997
Macy’s, Inc.		59,030		3,881,222
				16,747,665
Office Electronics — 0.1%
Zebra Technologies Corp., Class A (a)		27,810		2,152,772
Oil, Gas & Consumable Fuels — 6.8%
Anadarko Petroleum Corp.		76,555		6,315,788
Apache Corp.		118,850		7,448,330
California Resources Corp. (a)		42,684		235,189
Chevron Corp.		114,130		12,803,103
Concho Resources, Inc. (a)		41,099		4,099,625
ConocoPhillips		68,020		4,697,461
Devon Energy Corp.		130,828		8,007,982
EnLink Midstream LLC		87,767		3,120,995
Exxon Mobil Corp.		69,834		6,456,153
Gulfport Energy Corp. (a)		76,920		3,210,641
Marathon Oil Corp.		947,739		26,811,536
Marathon Petroleum Corp.		208,790		18,845,385

See Notes to Financial Statements.

6 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Oil, Gas & Consumable Fuels (concluded)
Occidental Petroleum Corp.		106,710	$	8,601,893
PBF Energy, Inc.		44,697		1,190,728
Phillips 66		49,509		3,549,795
Pioneer Natural Resources Co.		11,696		1,740,950
Range Resources Corp.		18,183		971,881
Rice Energy, Inc. (a)		9,714		203,703
Spectra Energy Corp.		111,090		4,032,567
Suncor Energy, Inc.		405,900		12,899,502
Total SA — ADR		255,877		13,100,902
Valero Energy Corp.		320,728		15,876,036
Whiting Petroleum Corp. (a)		14,434		476,322
				164,696,467
Paper & Forest Products — 0.3%
International Paper Co.		161,430		8,649,419
Personal Products — 0.0%
Herbalife Ltd. (b)		2,540		95,758
Nu Skin Enterprises, Inc., Class A (b)		15,500		677,350
				773,108
Pharmaceuticals — 6.6%
AbbVie, Inc.		211,144		13,817,263
Allergan, Inc.		7,553		1,605,692
Bristol-Myers Squibb Co.		163,890		9,674,427
Catalent, Inc. (a)		55,528		1,548,121
Hospira, Inc. (a)		117,140		7,174,825
Johnson & Johnson		275,752		28,835,387
Mallinckrodt PLC (a)		20,468		2,026,946
Merck & Co., Inc.		364,873		20,721,138
Perrigo Co. PLC		32,693		5,464,962
Pfizer, Inc.		1,298,628		40,452,262
Shire PLC, ADR		23,100		4,909,674
Teva Pharmaceutical Industries Ltd. — ADR		281,589		16,194,183
Valeant Pharmaceuticals International, Inc. (a)		53,811		7,700,892
				160,125,772
Professional Services — 0.3%
Manpowergroup, Inc.		61,636		4,201,726
Nielsen Holdings NV		51,100		2,285,703
				6,487,429
Real Estate Investment Trusts (REITs) — 1.6%
American Campus Communities, Inc.		30,305		1,253,415
American Tower Corp.		37,450		3,701,933
Columbia Property Trust, Inc.		56,815		1,440,260
Crown Castle International Corp.		31,136		2,450,403
DuPont Fabros Technology, Inc.		78,875		2,621,805
Geo Group, Inc.		33,788		1,363,684
Host Hotels & Resorts, Inc.		252,233		5,995,578
Common Stocks	Shares		Value
Real Estate Investment Trusts (REITs) (concluded)
Outfront Media, Inc.		228,734	$	6,139,221
RLJ Lodging Trust		6,482		217,341
Simon Property Group, Inc.		39,983		7,281,304
Weingarten Realty Investors		28,424		992,566
Weyerhaeuser Co.		126,680		4,546,545
				38,004,055
Real Estate Management & Development — 0.0%
Jones Lang LaSalle, Inc.		5,356		803,025
Road & Rail — 1.9%
Norfolk Southern Corp.		73,850		8,094,698
Union Pacific Corp.		312,605		37,240,634
				45,335,332
Semiconductors & Semiconductor Equipment — 2.5%
Broadcom Corp., Class A		11,153		483,259
Intel Corp.		832,420		30,208,522
Marvell Technology Group Ltd.		132,853		1,926,369
Micron Technology, Inc. (a)		443,092		15,512,651
NXP Semiconductor NV (a)		34,863		2,663,533
Samsung Electronics Co., Ltd., — GDR		11,000		6,602,718
Skyworks Solutions, Inc.		18,975		1,379,672
Teradyne, Inc.		139,800		2,766,642
				61,543,366
Software — 4.3%
CDK Global, Inc.		55,952		2,280,604
Microsoft Corp.		1,345,253		62,487,002
Oracle Corp.		444,962		20,009,941
Salesforce.com, Inc. (a)		113,793		6,749,063
Symantec Corp.		114,700		2,942,628
Synopsys, Inc. (a)		103,795		4,511,969
VMware, Inc., Class A (a)		34,659		2,860,061
Workday, Inc., Class A (a)		28,335		2,312,419
				104,153,687
Specialty Retail — 3.2%
Best Buy Co., Inc.		29,038		1,131,901
The Gap, Inc.		48,590		2,046,125
GNC Holdings, Inc., Class A		128,900		6,053,144
The Home Depot, Inc.		278,686		29,253,670
Lowe’s Cos., Inc.		308,156		21,201,133
The Michaels Cos., Inc. (a)		40,986		1,013,584
Penske Automotive Group, Inc.		50,845		2,494,964
Ross Stores, Inc.		73,880		6,963,929
Sears Hometown and Outlet Stores, Inc. (a)		23,661		311,142
TJX Cos., Inc.		108,530		7,442,987
				77,912,579
Technology Hardware, Storage & Peripherals — 3.2%
Apple, Inc.		485,630		53,603,839

See Notes to Financial Statements.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014 7

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Technology Hardware, Storage & Peripherals (concluded)
EMC Corp.		308,930	$	9,187,578
Hewlett-Packard Co.		180,478		7,242,582
SanDisk Corp.		35,460		3,474,371
Western Digital Corp.		34,141		3,779,409
				77,287,779
Textiles, Apparel & Luxury Goods — 1.5%
Lululemon Athletica, Inc. (a)		59,766		3,334,345
Michael Kors Holdings Ltd. (a)		44,872		3,369,887
NIKE, Inc., Class B		138,258		13,293,507
VF Corp.		218,940		16,398,606
				36,396,345
Tobacco — 0.5%
Lorillard, Inc.		115,077		7,242,946
Reynolds American, Inc.		96,150		6,179,561
				13,422,507
Trading Companies & Distributors — 0.2%
MRC Global, Inc. (a)		183,562		2,780,964
Veritiv Corp. (a)		8,584		445,252
WESCO International, Inc. (a)		16,854		1,284,444
				4,510,660
Water Utilities — 0.1%
American Water Works Co., Inc.		52,310		2,788,123
Wireless Telecommunication Services — 0.2%
T-Mobile U.S., Inc. (a)		34,115		919,058
Telephone & Data Systems, Inc.		139,950		3,533,738
United States Cellular Corp. (a)(b)		29,041		1,156,703
				5,609,499
Total Common Stocks — 98.0%				2,383,611,450
Preferred Stocks	Shares		Value
Food Products — 0.0%
Tyson Foods, Inc. (a)		19,229	$	967,988
Machinery — 0.0%
Stanley Black & Decker, Inc., 6.25% (a)(c)		2,500		294,350
Software — 0.1%
Palantir Technologies, Inc., Series I, (Acquired 2/7/14, cost $2,465,106), 0.00% (a)(d)		402,138		3,044,185
Total Preferred Stocks — 0.1%				4,306,523
Total Long-Term Investments (Cost — $2,071,903,542) — 98.1%				2,387,917,973
Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15%, (e)(f)		60,987,578		60,987,578
BlackRock Cash Funds: Prime, SL Agency Shares, 0.13%, (e)(f)(g)		5,562,536		5,562,536
Total Short-Term Securities (Cost — $66,550,114) — 2.7%				66,550,114
Total Investments (Cost — $2,138,453,656) — 100.8%				2,454,468,087
Liabilities in Excess of Other Assets — (0.8)%				(20,042,101	)
Net Assets — 100.0%			$	2,434,425,986

Notes to Schedule of Investments

(a) Non-income producing security.

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

(c) Convertible Security.

(d) Restricted security as to resale. As of report date, the Master Portfolio held 0.1% of its net assets, with a current value of $3,044,185 and an original cost of $2,465,106 in these securities.

(e) Investments in issuers considered to be an affiliate of the Master Portfolio during the year ended December 31, 2014, 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, 2013		Net Activity			Shares Held at December 31, 2014		Income
BlackRock Cash Funds: Institutional, SL Agency Shares		226,864,969		(165,877,391	)		60,987,578	$	69,107
BlackRock Cash Funds: Prime, SL Agency Shares		31,618,522		(26,055,986	)		5,562,536	$	131,145

See Notes to Financial Statements.

8 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014

Schedule of Investments (continued)

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

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

Portfolio Abbreviations

ADR	American Depositary Receipts
GDR	Global Depositary Receipt
S&P	Standard and Poor’s
USD	U.S. Dollar

Ÿ As of December 31, 2014 financial futures contracts outstanding were as follows:

Contracts Purchased		Issue	Exchange	Expiration	Notional Value			Unrealized Appreciation
	169	S&P 500 E-Mini Index	Chicago Mercantile	March 2015		USD	17,342,780	$	234,388

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 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. 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. 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. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices 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)

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. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, refer to Note 2 of the Notes to Financial Statements. As of December 31, 2014, the following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks1	$	2,363,408,065	$	20,203,385		—	$	2,383,611,450
Preferred Stocks 1		1,262,338		—	$	3,044,185		4,306,523
Short-Term Securities		66,550,114		—		—		66,550,114
Total	$	2,431,220,517	$	20,203,385	$	3,044,185	$	2,454,468,087
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	$	234,388		—		—	$	234,388
2    Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

See Notes to Financial Statements.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014 9

Schedule of Investments (continued)

The Master Portfolio may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of December 31, 2014, 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	$	822,000		—		—	$	822,000
Foreign currency at value		919		—		—		919
Liabilities:
Bank overdraft		—	$	(302,108	)	—		(302,108	)
Collateral on securities loaned at value		—		(5,562,536	)	—		(5,562,536	)
Total	$	822,919	$	(5,864,644	)	—	$	(5,041,725	)

For the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

10 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014

Statement of Assets and Liabilities

December 31, 2014
Assets
Investments at value — unaffiliated (including securities loaned of $5,373,316) ( cost — $2,071,903,542)	$	2,387,917,973
Investments at value — affiliated (cost — $66,550,114)		66,550,114
Cash pledged for financial futures contracts		822,000
Investments sold receivable		53,808,897
Dividends receivable		2,409,579
Securities lending income receivable — affiliated		8,351
Foreign currency at value (cost — $954)		919
Prepaid expenses		7,694
Total assets		2,511,525,527
Liabilities
Bank overdraft		302,108
Collateral on securities loaned at value		5,562,536
Investments purchased payable		13,102,011
Variation margin payable on financial futures contracts		214,145
Administration fees payable		211,010
Investment advisory fees payable		99,774
Trustees’ fees payable		18,551
Withdrawals payable		57,544,110
Other accrued expenses payable		45,296
Total liabilities		77,099,541
Net Assets	$	2,434,425,986
Net Assets Consist of
Investors’ capital	$	2,118,184,577
Net unrealized appreciation/depreciation		316,241,409
Net Assets	$	2,434,425,986

See Notes to Financial Statements.
	ACTIVE STOCK MASTER PORTFOLIO	DECEMBER 31, 2014	11

Statements of Operations

Year Ended December 31, 2014
Investment Income
Dividends	$	45,523,459
Securities lending — affiliated — net		131,145
Interest — affiliated		69,107
Foreign taxes withheld		(643,355	)
Total income		45,080,356
Expenses
Investment advisory		6,327,985
Administration		2,595,023
Trustees		75,907
Professional		51,567
Total expenses		9,050,482
Less fees waived by administrator		(4,567,368	)
Total expenses after fees waived		4,483,114
Net investment income		40,597,242
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments		482,649,568
Financial futures contracts		2,821,402
Foreign currency transactions		(152,198	)
		485,318,772
Net change in unrealized appreciation/depreciation on:
Investments		(245,815,140	)
Financial futures contracts		(235,942	)
Foreign currency translations		(272,255	)
		(246,323,337	)
Net realized and unrealized gain		238,995,435
Net Increase in Net Assets Resulting from Operations	$	279,592,677

See Notes to Financial Statements.
12	ACTIVE STOCK MASTER PORTFOLIO	DECEMBER 31, 2014

Statements of Changes in Net Assets

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2014			2013
Operations
Net investment income	$	40,597,242		$	46,659,463
Net realized gain		485,318,772			503,346,606
Net change in unrealized appreciation/depreciation		(246,323,337	)		332,415,045
Net increase in net assets resulting from operations		279,592,677			882,421,114
Capital Transactions
Proceeds from contributions		998,522,489			704,884,041
Value of withdrawals		(1,784,231,951	)		(1,439,579,901	)
Net decrease in net assets derived from capital transactions		(785,709,462	)		(734,695,860	)
Net Assets
Total increase (decrease) in net assets		(506,116,785	)		147,725,254
Beginning of year		2,940,542,771			2,792,817,517
End of year	$	2,434,425,986		$	2,940,542,771

See Notes to Financial Statements.
	ACTIVE STOCK MASTER PORTFOLIO	DECEMBER 31, 2014	13

Financial Highlights

	Year Ended December 31,
	2014		2013		2012		2011		2010
Total Return
Total return		11.74%		34.02%		15.55%		2.20%		11.04%
Ratios to Average Net Assets
Total expenses		0.35%		0.35%		0.35%		0.35%		0.35%
Total expenses after fees waived		0.17%		0.23%		0.26%		0.27%		0.29%
Net investment income		1.56%		1.55%		2.03%		1.70%		1.50%
Supplemental Data
Net assets, end of year (000)	$	2,434,426	$	2,940,543	$	2,792,818	$	2,717,250	$	2,513,424
Portfolio turnover rate		119%		153%		120%		275%		120%

See Notes to Financial Statements.
14	ACTIVE STOCK MASTER PORTFOLIO	DECEMBER 31, 2014

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.

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

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 (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements 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 Master Portfolio is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Master Portfolio:

Valuation: The Master Portfolio’s investments are valued at fair value as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the 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 are valued at the official close price each day, if available. For equity investments traded on more than one exchange, the official close price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price. 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 (“NAV��) each business day.

Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of business on the NYSE. Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of 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 the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Investments, 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. The pricing of all Fair Value Investments 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 (e.g., a company announcement, market volatility or a natural disaster) occur during such periods that are expected to materially affect the value of such instruments, those instruments may be Fair Value Investments and be 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 U.S. 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 U.S. 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 U.S. dollars; the opposite effect occurs if the U.S. dollar falls in relative value.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014 15

Notes to Financial Statements (continued)

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 are generally 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), 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 date. 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.

Recent Accounting Standard: In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance will require expanded disclosure for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. It is effective for financial statements with fiscal years beginning on or after December 15, 2014 and interim periods within those fiscal years. Management is evaluating the impact, if any, of this guidance on the Master Portfolio’s financial statement disclosures.

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

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.

Securities Lending: The Master Portfolio may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. government. The initial collateral received by the Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. 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. As of December 31, 2014, any securities on loan were collateralized by cash. 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 an 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.

16 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014

Notes to Financial Statements (continued)

As of December 31, 2014 the following table is a summary of the Master Portfolio’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital, Inc.	$	11,296	$	(11,296	)		—
Citigroup Global Markets, Inc.		770,669		(770,669	)		—
Credit Suisse Securities (USA) LLC		1,353,579		(1,353,579	)		—
Goldman Sachs & Co.		3,845		(3,845	)		—
JP Morgan Clearing Corp.		657,884		(657,884	)		—
Merrill Lynch, Pierce, Fenner & Smith, Inc.		798,747		(798,747	)		—
Morgan Stanley & Co. LLC		263,293		(263,293	)		—
State Street Bank & Trust Co.		1,514,003		(1,514,003	)		—
Total	$	5,373,316	$	(5,373,316	)		—

¹ Collateral with a value of $5,562,536 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 include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the 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 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.

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 credit risk, equity risk, interest rate risk, foreign exchange rate risk, commodity price risk, or other risk (e.g., inflation 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 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.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014 17

Notes to Financial Statements (continued)

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, 2014
		Value
	Statement of Assets and Liabilities Location	Derivative Assets		Derivative Liabilities
Equity contracts	Net unrealized appreciation/depreciation1	$	275,038	$	40,650

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

The Effect of Derivative Financial Instruments in the Statement of Operations Year Ended December 31, 2014
	Net Realized Gain (Loss) From				Net Change in Unrealized Appreciation/Depreciation on
Foreign currency exchange contracts:
Forward foreign currency transactions/translations		$	(121,635	)	$	(265,578	)
Equity contracts:
Financial futures contracts			2,821,402			(235,942	)
Total		$	2,699,767		$	(501,520	)

For the year ended December 31, 2014, the average quarterly balances of outstanding derivative financial instruments were as follows:

Financial futures contracts:
Average notional value of contracts purchased	$	16,905,790
Forward foreign currency exchange contracts:
Average USD amounts purchased	$	1,634,219
Average USD amounts sold	$	4,695,418	2

²  Actual amounts for the period are shown due to limited outstanding derivative financial instruments as of each quarter.

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 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 insolvency of the counterparty. 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 Agreement, which would cause the Master Portfolio to accelerate payment of any net liability owed to the counterparty.

18 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014

Notes to Financial Statements (continued)

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 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%

MIP, on behalf of the Master Portfolio, entered into an Administration Agreement with BlackRock Advisors, LLC (the “Administrator”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). The Administrator, 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 Administrator 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, the Administrator 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 Administrator 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. The Administrator voluntarily agreed to waive a portion of its administration 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 the Administrator at any time. With respect to the independent expenses discussed above, the Administrator 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, 2015. The amounts of the waivers and offsetting credits are shown as fees waived by administrator in the Statement of Operations.

The U.S. Securities and Exchange Commission has issued an exemptive order which permits BTC, an affiliate of the Manager, to serve as securities lending agent for the Master Portfolio subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. The Master Portfolio is responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by the Manager or its affiliates, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees the Master Portfolio bears to an annual rate of 0.04% until December 31, 2014 and 0.05% thereafter (the “collateral investment fees”).

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent. Pursuant to the securities lending agreement effective February 1, 2014, BTC may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the “specials only securities”).

Pursuant to such agreement, the Master Portfolio retains 80% of securities lending income. In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Liquidity Complex in a calendar year exceeds the aggregate securities lending income earned across the Equity-Liquidity Complex through the lending of specials only securities in the calendar year 2013, the Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income. Prior to February 1, 2014, the Master Portfolio retained 65% of securities lending income and paid a fee to BTC equal to 35% of such income.

The share of securities lending income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the year ended December 31, 2014, the Master Portfolio paid BTC $40,277 for securities lending agent services.

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

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014 19

Notes to Financial Statements (continued)

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, 2014, the purchase and sale transactions with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were $464,127 and $4,619,664, respectively.

6. Purchases and Sales:

For the year ended December 31, 2014, purchases and sales of investments, excluding short-term securities, were $3,022,284,056 and $3,828,627,065, respectively.

7. Income Tax Information:

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 U.S. 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 U.S. federal tax returns remains open for each of the four years ended December 31, 2014. 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 required recognition of a tax liability.

As of December 31, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	2,168,539,680
Gross unrealized appreciation	$	386,091,383
Gross unrealized depreciation		(100,162,976	)
Net unrealized appreciation	$	285,928,407

8. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), was a party to a 364-day, $1.1 billion credit agreement with a group of lenders, under which the Master Portfolio may borrow to fund shareholder redemptions. Excluding commitments designated for a certain individual fund, the Participating Funds, including the Master Portfolio, could borrow up to an aggregate commitment amount of $650 million, subject to asset coverage and other limitations as specified in the agreement. Effective November 25, 2014, the credit agreement was amended to an aggregate commitment amount of $2.1 billion, of which the Participating Funds, including the Master Portfolio, can borrow up to $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The agreement terminates on April 23, 2015, unless otherwise extended to November 24, 2015 or renewed for a period of 364 days from April 23, 2015. The amended agreement has the following terms: a fee of 0.06% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one month LIBOR (but in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which are included in miscellaneous expenses in the Statement of Operations, and 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. During the year ended December 31, 2014, the Master Portfolio did not borrow under the credit agreement.

9. Principal Risks:

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.

20 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014

Notes to Financial Statements (concluded)

As of December 31, 2014, the Master Portfolio invested a significant portion of its assets in securities in the IT sector. Changes in economic conditions affecting such sectors would have a greater impact on the Master Portfolio and could affect the value, income and/or liquidity of positions in such securities.

10. 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, 2014 21

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, 2014, 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, 2014 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 19, 2015

22 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014

Officers and Trustees

Name, Address1 and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2
Ronald W. Forbes 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 153 Portfolios	None
Rodney D. Johnson 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from1987 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 153 Portfolios	None
David O. Beim 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 153 Portfolios	None
Frank J. Fabozzi 1948	Trustee	Since 2014	Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011; Adjunct Professor of Finance and Becton Fellow, Yale University from 1994 to 2006.	112 RICs consisting of 232 Portfolios	None

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014 23

Officers and Trustees (continued)

Name, Address1 and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2
Dr. Matina S. Horner 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 153 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 1939	Trustee	Since 2009	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 153 Portfolios	None
Ian A. MacKinnon 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None
Cynthia A. Montgomery 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 153 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 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 153 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)

24 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014

Officers and Trustees (continued)

Name, Address1 and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 153 Portfolios	None
Toby Rosenblatt 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Futures Foundation (philanthropic foundation) since 2009; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None
Kenneth L. Urish 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 153 Portfolios	None
Frederick W. Winter 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 2005-2013; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 153 Portfolios	None
	1    The address of each Trustee c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055
	2    Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Trustees on a case-by-case basis, as appropriate.
	3    Date shown is the earliest date a person has served for the MIP. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the MIP Board. As a result, although the chart shows certain Trustees as joining the MIP 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. Frank J. Fabozzi first became a member of the board of other funds advised by BlackRock Advisors, LLC or its affiliates in 1988.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014 25

Officers and Trustees (continued)

Name, Address1 and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Interested Trustees4 (concluded)
Paul L. Audet 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.	141 RICs consisting of 329 Portfolios	None
Henry Gabbay 1947	Trustee	Since 2009	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.	29 RICs consisting of 97 Portfolios	None
	4    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, Dr. Fabozzi 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 75. The Board has determined to extend the terms of Trustees on a case-by-case basis, as appropriate.

26 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014

Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Officers2
John M. Perlowski 1964	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 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.
Jennifer McGovern 1977	Vice President	Since 2014	Director of BlackRock, Inc. since 2011; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal Andrews 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 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.
Charles Park 1967	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2014	Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary to the 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    The address of each Officer c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055
	2    Officers of MIP serve at the pleasure of the board.

Effective September 10, 2014, Brendan Kyne resigned as a Vice President of MIP and Jennifer McGovern became a Vice President of MIP.

Effective December 31, 2014, Paul L. Audet and Henry Gabbay resigned as Trustees of MIP and Ronald W. Forbes resigned as a Director of MIP and Co-Chair of the Board. Effective January 1, 2015, Collette Chilton, Barbara G. Novick and Mark Stalnecker were appointed to serve as Trustees of MIP.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014 27

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.

28 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2014

Additional Information (concluded)

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 June 30 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, 2014 29

Portfolio Information as of December 31, 2014

Ten Largest Holdings Percent of
Long-Term Investments

Roche Holding AG	3	%
HSBC Holdings PLC	2
Novo Nordisk A/S, Class B	2
Telefonica SA	1
CSL Ltd.	1
Telefonaktiebolaget LM Ericsson, Class B	1
Iberdrola SA	1
Swiss Re AG	1
Hennes & Mauritz AB, Class B	1
Amadeus IT Holding SA	1

Geographic Allocation   Percent of
Long-Term Investments

Japan	24	%
United Kingdom	17
Germany	9
France	7
Spain	7
Switzerland	7
Sweden	6
Australia	5
Netherlands	4
Denmark	3
Hong Kong	3
Belgium	2
Other1	6

¹ Other includes a 1% or less investment in each of the following countries: Finland, Ireland, Italy, Norway, Singapore, Portugal, Bermuda, Isle of Man, Israel and New Zealand.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014 1

Portfolio Information as of December 31, 2014

Derivative Financial Instruments

The Master Portfolio may invest in various derivative financial instruments. 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 manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage. Derivative financial instruments also 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 limit the amount of appreciation the Master Portfolio can realize on an investment and/or may result in lower distributions paid to shareholders. 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, 2014

Schedule of Investments December 31, 2014 (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Australia — 5.0%
Aristocrat Leisure Ltd.		4,548	$	24,152
AusNet Services		32,831		35,470
Australia & New Zealand Banking Group Ltd.		351,455		9,144,838
BHP Billiton Ltd.		143,898		3,402,126
Caltex Australia Ltd.		1,153		31,992
CSL Ltd.		233,254		16,385,089
CSR Ltd.		26,141		82,591
Dexus Property Group		29,853		168,993
Fairfax Media, Ltd.		32,787		23,259
Flight Centre Travel Group Ltd.		1,727		45,715
iiNET, Ltd.		5,640		36,039
JB Hi-Fi Ltd. (a)		85,899		1,102,355
Macquarie Group Ltd.		40,991		1,933,006
National Australia Bank Ltd.		293,032		7,991,059
Orora Ltd.		10,449		16,508
Qantas Airways Ltd. (b)		270,683		525,751
Ramsay Health Care Ltd.		14,732		682,949
Santos Ltd.		11,849		79,149
Scentre Group (b)		13,812		39,132
Sonic Healthcare Ltd.		1,699		25,561
Telstra Corp. Ltd.		1,940,743		9,421,968
Transpacific Industries Group, Ltd.		22,207		15,591
Wesfarmers Ltd.		3,118		105,568
Westfield Corp. (b)		133,856		981,213
Westpac Banking Corp.		300,825		8,090,920
Woodside Petroleum Ltd.		53,531		1,655,570
Woolworths Ltd.		3,465		86,104
				62,132,668
Belgium — 1.7%
Ageas		151,830		5,398,344
Anheuser-Busch InBev NV		495		55,708
Belgacom SA		626		22,713
bpost SA		345,299		8,674,087
Colruyt SA		682		31,706
Delhaize Group		11,006		801,515
Groupe Bruxelles Lambert SA		7,842		669,081
Solvay SA		43,763		5,921,792
				21,574,946
Bermuda — 0.0%
Catlin Group Ltd.		48,393		504,103
Denmark — 2.7%
A.P. Moeller — Maersk A/S, Class A		26		49,754
A.P. Moeller — Maersk A/S, Class B		1,756		3,492,596
Carlsberg A/S, Class B		8,010		615,167
Coloplast A/S, Class B		47,312		3,959,278
Danske Bank A/S		15,473		418,326
Novo Nordisk A/S, Class B		458,353		19,388,222
Novozymes A/S, Class B		7,584		319,238
Pandora A/S		670		54,308
Common Stocks	Shares		Value
Denmark (concluded)
Vestas Wind Systems A/S (b)		142,546	$	5,176,800
				33,473,689
Finland — 1.1%
Fortum OYJ		13,453		292,085
Kesko OYJ, Class B		53,543		1,947,282
Orion OYJ, Class B		8,589		267,122
Sampo OYJ, Class A		241,384		11,300,245
				13,806,734
France — 7.0%
Aeroports de Paris		2,301		278,248
Alstom SA (b)		20,700		667,629
AtoS		17,044		1,354,238
AXA SA		189,905		4,375,988
BNP Paribas SA		108,581		6,409,978
Carrefour SA		930		28,301
Casino Guichard-Perrachon SA		311		28,601
Cie Generale des Etablissements Michelin		83,304		7,519,575
CNP Assurances		45,648		809,255
Credit Agricole SA		179,873		2,321,894
Danone SA		9,357		611,743
EDF		161,430		4,443,908
Euler Hermes SA		741		76,731
Eutelsat Communications SA		983		31,790
Faurecia		651		24,164
Fonciere Des Regions		926		85,586
GDF Suez		39,290		916,204
Havas SA (b)		15,361		125,433
ICADE		8,425		674,106
Iliad SA		12,904		3,102,599
Imerys SA		591		43,480
Ipsen SA		1,224		63,356
L’Oreal SA		359		60,087
Lagardere SCA		109,835		2,860,320
Metropole Television SA		185,201		3,490,958
Orange SA		21,059		358,144
Pernod Ricard SA		431		47,900
Plastic Omnium SA		11,479		311,515
Renault SA		725		52,806
Safran SA		94,575		5,834,800
Sanofi		113,339		10,333,167
SCOR SE		30,545		925,524
Societe Generale SA		61,187		2,560,686
Solocal Group (b)		1,118,769		784,523
Technicolor SA, Registered Shares (b)		160,214		894,321
Technip SA		34,462		2,052,816
Teleperformance		333		22,667
Thales SA		121,301		6,563,254
Total SA		197,329		10,109,559
Valeo SA		25,465		3,168,614

See Notes to Financial Statements.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014 3

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
France (concluded)
Vinci SA		51,843	$	2,830,758
Wendel SA		4,414		494,562
				87,749,788
Germany — 8.8%
Aareal Bank AG		710		28,360
Allianz SE, Registered Shares		71,883		11,905,706
BASF SE		9,214		772,879
Bayer AG, Registered Shares		18,044		2,459,548
Bayerische Motoren Werke AG		11,916		1,285,953
Beiersdorf AG		2,497		202,741
Commerzbank AG (b)		75,342		988,230
Continental AG		23,384		4,932,216
Daimler AG, Registered Shares		89,712		7,450,946
Deutsche Annington Immobilien SE		4,569		155,125
Deutsche Post AG, Registered Shares		53,384		1,732,946
Deutsche Telekom AG, Registered Shares		313,538		5,016,711
Deutz AG		76,395		365,723
Duerr AG		79,434		6,980,664
E.ON SE		381,614		6,522,428
Fresenius SE & Co. KGaA		149,574		7,776,957
Gerresheimer AG		4,170		227,151
Henkel AG & Co. KGaA		506		49,015
Henkel AG & Co. KGaA, Preference Shares		1,833		197,447
Hochtief AG		11,344		800,301
Hugo Boss AG		12,164		1,488,042
Infineon Technologies AG		147,036		1,555,913
K+S AG, Registered Shares		105,269		2,904,914
Kloeckner & Co. SE (b)		24,120		258,249
KUKA AG		5,458		386,056
LEG Immobilien AG		441		32,852
Linde AG		1,618		298,039
Merck KGaA		14,905		1,402,685
MorphoSys AG (b)		10,452		973,676
Muenchener Rueckversicherungs AG, Registered Shares		1,288		256,489
Nordex SE (b)		145,845		2,602,008
Porsche Automobil Holding SE, Preference Shares		1,006		81,358
ProSiebenSat.1 Media AG, Registered Shares		8,965		374,587
RWE AG		16,926		522,415
Salzgitter AG		1,733		48,495
SAP AG		86,177		6,017,599
Siemens AG, Registered Shares		84,762		9,510,624
Symrise AG		68,047		4,099,497
Talanx AG		16,813		512,249
Telefonica Deutschland Holding AG (b)		1,180,325		6,255,542
TUI AG (b)		82,896		1,332,071
Common Stocks	Shares		Value
Germany (concluded)
TUI AG		291,945	$	4,840,526
United Internet AG, Registered Shares		66,955		3,015,981
Volkswagen AG		2,853		618,541
Volkswagen AG, Preference Shares		1,450		322,270
				109,561,725
Hong Kong — 2.7%
AIA Group Ltd.		33,600		185,320
BOC Hong Kong Holdings Ltd.		80,500		268,237
Champion REIT		55,000		25,533
Cheung Kong Holdings Ltd.		476,000		7,971,485
Cheung Kong Infrastructure Holdings Ltd.		8,000		58,830
China Liquified Natural Gas Group, Ltd. (a)		2,260,000		432,398
CLP Holdings Ltd.		7,000		60,616
Galaxy Entertainment Group Ltd.		207,000		1,150,239
HK Electric Investments & HK Electric Investments, Ltd. (c)		121,500		80,244
Hongkong Land Holdings Ltd.		9,000		60,638
Hutchison Whampoa Ltd.		846,000		9,671,099
Kerry Properties Ltd.		90,000		324,674
MGM China Holdings Ltd.		235,600		594,869
Orient Overseas International Ltd.		5,000		29,111
Power Assets Holdings Ltd.		436,000		4,215,252
Sands China Ltd.		1,198,800		5,835,932
Sino Land Co., Ltd.		16,000		25,685
SJM Holdings Ltd.		796,000		1,258,393
Techtronic Industries Co.		59,000		189,277
Truly International Holdings		842,000		336,762
Wheelock & Co. Ltd.		248,000		1,151,449
				33,926,043
Ireland — 0.7%
DCC PLC		71,119		3,915,316
Glanbia PLC		5,079		77,911
James Hardie Industries SE		149,789		1,599,036
Kerry Group PLC, Class A		2,287		158,000
Paddy Power PLC		380		31,686
Shire PLC		47,068		3,337,125
				9,119,074
Isle of Man — 0.0%
Playtech PLC		13,864		147,939
Israel — 0.0%
Azrieli Group		2,567		84,437
Osem Investments Ltd.		1,553		27,551
Strauss Group Ltd.		1,575		23,662

See Notes to Financial Statements.

4 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Israel (concluded)
Teva Pharmaceutical Industries Ltd.		671	$	38,465
				174,115
Italy — 1.3%
Ansaldo STS SpA		8,302		83,568
Assicurazioni Generali SpA		9,884		202,947
Autogrill SpA (b)		3,497		26,373
Banca Popolare di Milano Scarl (b)		56,234		36,633
Davide Campari-Milano SpA		4,908		30,635
Enel SpA		165,855		739,301
Intesa Sanpaolo SpA		2,021,244		5,863,428
Mediobanca SpA		152,170		1,236,460
Moncler SpA		22,057		294,718
Parmalat SpA		281,680		814,624
Prada SpA (a)		54,200		306,086
Recordati SpA		2,383		36,944
Snam SpA		298,296		1,476,332
UniCredit SpA		745,681		4,776,544
				15,924,593
Japan — 23.7%
ABC-Mart, Inc.		1,600		77,421
ANA Holdings, Inc.		134,000		331,332
Aozora Bank Ltd.		8,000		24,764
Asahi Group Holdings Ltd.		345,000		10,673,371
Asahi Kasei Corp.		353,000		3,220,216
Astellas Pharma, Inc.		888,300		12,367,002
Benesse Holdings, Inc.		6,500		192,874
Calbee, Inc.		55,200		1,901,462
Casio Computer Co. Ltd.		16,900		258,525
Central Japan Railway Co.		1,700		254,790
Chubu Electric Power Co., Inc. (b)		32,400		380,733
COLOPL, Inc.		4,700		105,620
COMSYS Holdings Corp.		83,700		1,144,997
Credit Saison Co. Ltd.		24,700		459,331
CyberAgent, Inc.		5,800		217,445
Daicel Corp.		211,000		2,464,582
Daifuku Co. Ltd.		2,000		22,378
Dainippon Screen Manufacturing Co., Ltd.		54,000		317,324
Daito Trust Construction Co. Ltd.		34,200		3,879,572
Daiwa House Industry Co. Ltd.		395,600		7,473,372
Daiwa Securities Group, Inc.		47,000		368,016
Disco Corp.		51,800		4,143,093
Dowa Holdings Co., Ltd.		137,000		1,088,467
East Japan Railway Co.		46,800		3,527,356
Electric Power Development Co. Ltd.		1,000		33,791
Enplas Corp.		11,300		381,631
FANUC Corp.		62,000		10,222,577
Frontier Real Estate Investment Corp.		77		352,804
Common Stocks	Shares		Value
Japan (continued)
Fuji Heavy Industries Ltd.		320,900	$	11,355,358
Fuji Media Holdings, Inc.		3,400		41,931
Fujitsu General Ltd.		139,000		1,339,229
GungHo Online Entertainment, Inc. (a)		38,200		138,307
Hankyu Hanshin Holdings, Inc.		159,000		852,891
Haseko Corp.		324,600		2,610,712
Hazama Ando Corp.		122,500		787,486
Heiwa Corp.		21,000		418,423
Hitachi Capital Corp.		5,300		116,650
Hitachi Ltd.		39,000		287,850
Hitachi Metals Ltd.		21,000		356,808
Hoya Corp.		244,500		8,270,168
Inpex Corp.		148,900		1,657,698
Isuzu Motors Ltd.		8,800		107,187
ITOCHU Corp.		19,500		208,164
Japan Airport Terminal Co., Ltd.		700		27,527
Japan Aviation Electronics Industry, Ltd.		1,000		21,847
Japan Petroleum Exploration Co.		4,700		147,661
Japan Real Estate Investment Corp.		152		732,378
Japan Tobacco, Inc.		333,600		9,181,595
JGC Corp.		36,000		741,125
The Kansai Electric Power Co., Inc. (b)		33,800		321,543
Kao Corp.		92,900		3,663,468
Kawasaki Kisen Kaisha Ltd.		11,000		29,386
KDDI Corp.		114,700		7,205,918
Keyence Corp.		23,800		10,605,154
Kikkoman Corp.		63,000		1,544,068
Kose Corp.		600		23,454
Kuraray Co. Ltd.		2,000		22,724
KYB Co., Ltd.		122,000		518,684
Kyushu Electric Power Co., Inc. (b)		7,400		74,112
Laox Co., Ltd. (b)		31,000		66,021
Lawson, Inc.		28,700		1,734,287
Lintec Corp.		54,700		1,209,139
M3, Inc.		3,300		55,216
Maeda Road Construction Co., Ltd.		5,000		74,166
Makita Corp.		6,900		310,927
Marubeni Corp.		11,800		70,604
Mazda Motor Corp.		75,500		1,813,175
Micronics Japan Co., Ltd. (a)		2,800		79,677
Minebea Co., Ltd.		24,000		354,429
Miraca Holdings, Inc.		4,800		206,491
MISUMI Group, Inc.		2,400		79,140
Mitsubishi Chemical Holdings Corp.		5,900		28,618
Mitsubishi Corp.		576,000		10,540,866
Mitsubishi Electric Corp.		726,000		8,623,463
Mitsubishi Estate Co. Ltd.		79,000		1,664,598
Mitsubishi Gas Chemical Co., Inc.		42,000		210,793

See Notes to Financial Statements.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014 5

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Japan (continued)
Mitsubishi Materials Corp.		57,000	$	189,093
Mitsubishi Motors Corp.		35,000		319,741
Mitsubishi UFJ Financial Group, Inc.		8,100		44,503
Mitsui & Co. Ltd.		105,400		1,411,636
Mitsui Fudosan Co. Ltd.		1,000		26,816
Mitsui Mining & Smelting Co. Ltd.		12,000		28,953
Mixi, Inc.		3,600		132,733
Mizuho Financial Group, Inc.		5,611,200		9,406,066
Murata Manufacturing Co. Ltd.		86,000		9,384,398
Nabtesco Corp.		11,200		270,689
Nexon Co. Ltd.		227,800		2,123,576
NH Foods Ltd.		355,000		7,766,792
Nidec Corp.		68,800		4,443,493
Nifco, Inc.		6,400		207,018
Nihon M&A Center, Inc.		3,300		99,416
Nippo Corp.		34,000		552,665
Nippon Kayaku Co., Ltd.		10,000		124,366
Nippon Shokubai Co. Ltd.		4,000		52,400
Nippon Steel & Sumitomo Metal		411,000		1,019,539
Nippon Telegraph & Telephone Corp.		165,200		8,438,845
Nippon Television Network Corp.		2,000		29,356
Nissan Chemical Industries Ltd.		87,600		1,588,773
Nissan Motor Co. Ltd.		1,595,600		13,916,453
Nitori Holdings Co. Ltd.		1,700		91,338
Nomura Holdings, Inc.		631,500		3,573,681
Nomura Real Estate Holdings, Inc.		151,300		2,589,118
NSK Ltd.		22,000		259,748
NTT DoCoMo, Inc.		9,800		142,718
Obic Co., Ltd.		78,600		2,550,546
Oki Electric Industry Co. Ltd.		425,000		810,157
Omron Corp.		50,400		2,254,667
Oriental Land Co. Ltd.		34,400		7,933,118
ORIX Corp.		401,900		5,057,023
OSG Corp.		21,600		348,558
Otsuka Holdings Co. Ltd.		47,100		1,412,115
Panasonic Corp.		59,700		703,172
Pigeon Corp.		1,500		87,459
Resona Holdings, Inc.		458,600		2,316,618
Resorttrust, Inc.		1,100		24,084
Rohto Pharmaceutical Co. Ltd.		2,000		24,988
Sanken Electric Co., Ltd. (b)		3,000		23,856
Santen Pharmaceutical Co. Ltd.		2,400		129,203
Secom Co. Ltd.		4,400		252,800
Seibu Holdings, Inc.		5,500		112,133
Seiko Holdings Corp.		5,000		27,876
Sekisui Chemical Co. Ltd.		5,000		60,155
Senshu Ikeda Holdings, Inc.		77,900		353,276
Seven & I Holdings Co. Ltd.		1,400		50,360
Shimano, Inc.		1,600		207,235
Shin-Etsu Chemical Co. Ltd.		15,600		1,015,556
Shinsei Bank Ltd.		201,000		349,824
Common Stocks	Shares		Value
Japan (concluded)
Shionogi & Co. Ltd.		148,900	$	3,846,955
Shiseido Co. Ltd.		6,500		91,159
SHO-BOND Holdings Co., Ltd.		2,200		86,020
Showa Shell Sekiyu KK (a)		175,300		1,726,784
Sojitz Corp.		48,100		67,171
Sotetsu Holdings, Inc.		14,000		57,694
Start Today Co., Ltd.		1,700		35,324
Sumitomo Corp.		20,300		208,495
Sumitomo Dainippon Pharma Co. Ltd.		35,300		341,841
Sumitomo Mitsui Trust Holdings, Inc.		1,884,000		7,216,260
Tadano Ltd.		214,000		2,643,575
Taiheiyo Cement Corp.		438,000		1,374,172
Taisei Corp.		40,000		226,880
Takata Corp. (a)		20,600		248,355
Takeda Pharmaceutical Co. Ltd.		98,900		4,094,241
Temp Holdings Co., Ltd.		1,400		43,931
Tohoku Electric Power Co., Inc.		11,800		137,310
Tokio Marine Holdings, Inc.		350,300		11,376,931
The Tokyo Electric Power Co., Inc. (b)		139,500		567,390
Topcon Corp.		1,200		25,450
Toshiba Corp.		73,000		307,863
Tosoh Corp.		52,000		250,061
Toyota Industries Corp.		500		25,626
Toyota Motor Corp.		59,600		3,714,114
Trend Micro, Inc. (b)		68,900		1,903,930
TS Tech Co., Ltd.		35,000		818,604
Unicharm Corp.		9,400		225,309
United Arrows Ltd.		6,300		175,941
West Japan Railway Co.		30,600		1,446,714
Yamaha Motor Co. Ltd.		17,600		352,128
Zeon Corp.		204,000		1,829,974
				296,220,866
Netherlands — 4.8%
Aegon NV		1,118,885		8,409,505
Arcadis NV		63,380		1,900,932
ASM International NV		9,223		390,581
CNH Industrial NV		90,408		731,860
Heineken Holding NV		10,557		660,884
Heineken NV		32,924		2,337,857
ING Groep NV CVA (b)		27,494		355,213
Koninklijke Ahold NV		75,506		1,341,957
Reed Elsevier NV		69,034		1,648,574
Royal Dutch Shell PLC, A Shares		457,934		15,275,717
Royal Dutch Shell PLC, Class B		240,833		8,321,036
Unilever NV CVA		233,197		9,122,131
Wereldhave NV		3,210		221,403

See Notes to Financial Statements.

6 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Netherlands (concluded)
Wolters Kluwer NV		317,155	$	9,678,049
				60,395,699
New Zealand — 0.0%
Auckland International Airport Ltd.		12,753		41,962
Contact Energy Ltd.		10,113		50,223
Kiwi Property Group, Ltd.		35,696		34,527
Ryman Healthcare Ltd.		7,086		47,004
Vector Ltd.		27,948		60,764
				234,480
Norway — 1.2%
BW LPG Ltd. (c)		24,239		168,817
Fred Olsen Energy ASA		122,246		1,118,616
Orkla ASA		4,103		27,931
Statoil ASA		534,737		9,415,027
Telenor ASA		74,070		1,498,333
Yara International ASA		55,711		2,480,945
				14,709,669
Portugal — 0.4%
CTT — Correios de Portugal SA		115,206		1,112,674
EDP — Energias de Portugal SA		848,462		3,290,031
				4,402,705
Singapore — 1.0%
Ascendas Real Estate Investment Trust		57,000		102,244
CapitaCommercial Trust		110,000		145,228
CapitaLand Ltd.		281,000		698,664
CapitaMall Trust		177,000		271,761
City Developments Ltd.		7,000		54,005
ComfortDelGro Corp. Ltd.		1,417,000		2,772,954
DBS Group Holdings Ltd.		27,000		417,996
Jardine Cycle & Carriage Ltd.		1,000		32,037
Keppel Land Ltd.		16,000		41,218
M1, Ltd.		20,000		54,358
Noble Group Ltd.		1,122,000		957,220
Oversea-Chinese Banking Corp. Ltd.		269,000		2,116,485
Singapore Airlines Ltd.		154,000		1,343,411
Singapore Telecommunications Ltd.		657,000		1,928,494
United Overseas Bank Ltd.		25,000		461,351
UOL Group Ltd.		52,000		271,845
Wilmar International Ltd.		38,000		92,592
Yangzijiang Shipbuilding Holdings Ltd.		836,000		757,595
				12,519,458
Spain — 6.6%
Abengoa SA, -B Shares		22,730		49,950
Abertis Infraestructuras SA		53,360		1,058,118
Common Stocks	Shares		Value
Spain (concluded)
Acerinox SA		4,142	$	62,489
ACS Actividades de Construccion y Servicios SA		165,829		5,779,980
Amadeus IT Holding SA, Class A		375,151		14,941,263
Banco Bilbao Vizcaya Argentaria SA		151,862		1,434,246
Banco Popular Espanol SA		215,004		1,071,758
Banco Santander SA		172,204		1,445,328
Bankinter SA		105,904		850,802
CaixaBank SA		324,106		1,698,269
Distribuidora Internacional de Alimentacion SA (a)		24,791		167,986
Ebro Foods SA		9,205		152,157
EDP Renovaveis SA		12,578		81,853
Gamesa Corp. Tecnologica SA (b)		479,987		4,332,777
Gas Natural SDG SA		143,082		3,594,303
Grifols SA		62,498		2,493,891
Iberdrola SA		2,357,234		15,889,512
Inmobiliaria Colonial SA (b)		87,924		58,071
International Consolidated Airlines Group SA (b)		8,683		64,682
Mediaset Espana Comunicacion SA (b)		2,343		29,456
Repsol SA		489,521		9,164,237
Sacyr SA (b)		155,663		532,300
Telefonica SA		1,209,292		17,362,434
Viscofan SA		1,095		58,097
				82,373,959
Sweden — 5.7%
Castellum AB		61,889		964,221
Hennes & Mauritz AB, Class B		362,426		15,056,991
Husqvarna AB, Class B		47,534		349,397
Intrum Justitia AB		305,721		9,054,704
Investment AB Kinnevik, Class B		22,718		738,772
Investor AB, Class B		44,859		1,630,975
Meda AB, A Shares (a)		5,196		74,513
Nordea Bank AB		404,116		4,677,960
Skandinaviska Enskilda Banken AB, Class A		1,120,999		14,235,067
Svenska Cellulosa AB, B Shares		2,086		44,971
Swedbank AB, Class A		258,220		6,406,677
Swedish Match AB		981		30,739
Swedish Orphan Biovitrum AB (b)		32,992		335,409
Telefonaktiebolaget LM Ericsson, Class B		1,337,630		16,196,165
Trelleborg AB, B Shares		58,405		983,232
				70,779,793
Switzerland — 7.3%
Actelion Ltd., Registered Shares (b)		23,984		2,761,063
Aryzta AG (b)		12,185		936,412

See Notes to Financial Statements.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014 7

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Switzerland (concluded)
Baloise Holding AG, Registered Shares		49,924	$	6,380,865
Barry Callebaut AG, Registered Shares (b)		45		46,135
BB Biotech AG (b)		128		30,116
DKSH Holding AG		279		21,240
EMS-Chemie Holding AG, Registered Shares		2,956		1,196,657
Flughafen Zuerich AG, Registered Shares		53		35,444
Geberit AG, Registered Shares		973		329,168
Georg Fischer AG, Registered Shares (b)		1,371		865,005
Givaudan SA, Registered Shares (b)		789		1,415,353
Kuehne & Nagel International AG, Registered Shares		9,215		1,251,723
Lindt & Spruengli AG		12		59,334
Lindt & Spruengli AG, Registered Shares		1		57,702
Lonza Group AG, Registered Shares (b)		7,353		827,886
Nestle SA, Registered Shares		155,160		11,311,317
Novartis AG, Registered Shares		85,690		7,947,188
Pargesa Holding SA, Bearer Shares		182		14,044
Roche Holding AG		111,831		30,299,736
Sika AG — Bearer Shares		170		501,490
Swiss Life Holding AG, Registered Shares (b)		26,402		6,240,158
Swiss Re AG (b)		188,526		15,793,136
Swisscom AG, Registered Shares		2,064		1,083,058
Syngenta AG, Registered Shares		1,044		335,811
Zurich Insurance Group AG (b)		2,663		832,194
				90,572,235
United Kingdom — 15.3%
Admiral Group PLC		668		13,704
African Barrick Gold PLC		18,894		74,854
Ashtead Group PLC		1		18
Associated British Foods PLC		494		24,151
AstraZeneca PLC		124,669		8,805,463
Aviva PLC		41,407		311,106
Babcock International Group PLC		275,407		4,511,792
Barclays PLC		1,040,879		3,913,009
BG Group PLC		156,325		2,091,894
BHP Billiton PLC		223,011		4,779,425
BP PLC		1,176,493		7,467,879
British American Tobacco PLC		54,316		2,943,435
British Sky Broadcasting Group PLC		684,808		9,557,401
Britvic PLC		573,995		6,003,161
BT Group PLC		1,852,042		11,519,813
Capita PLC		123,265		2,066,869
Common Stocks	Shares		Value
United Kingdom (concluded)
Centrica PLC		2,511,489	$	10,878,347
Close Brothers Group PLC		65,968		1,524,393
Daily Mail & General Trust PLC, Non-Voting A Shares		9,368		119,765
Derwent London PLC		9,592		447,790
Diageo PLC		163,590		4,686,374
Dixons Carphone PLC		191,411		1,379,494
easyJet PLC		141,540		3,662,924
Fiat Chrysler Automobiles NV (a)(b)		851,890		9,898,725
Friends Life Group Ltd.		10,769		61,160
GlaxoSmithKline PLC		148,411		3,183,950
Greene King PLC		7,240		83,699
Hammerson PLC		97,210		910,363
Henderson Group PLC		46,817		153,715
Hikma Pharmaceuticals PLC		1,046		32,093
Howden Joinery Group PLC		314,962		1,964,966
HSBC Holdings PLC		2,198,243		20,772,871
IG Group Holdings PLC		26,948		301,132
Imperial Tobacco Group PLC		12,548		552,357
Indivior PLC (b)		9,229		21,490
Intermediate Capital Group PLC		54,683		390,650
ITV PLC		2,359,880		7,871,887
J. Sainsbury PLC		1,044,539		3,988,767
Jazztel PLC (b)		1,923		29,062
Land Securities Group PLC		1,459		26,226
Legal & General Group PLC		565,716		2,184,313
Lloyds Banking Group PLC (b)		10,143,579		11,931,477
Mondi PLC		2,400		38,989
National Grid PLC		19,928		282,764
Paragon Group of Cos. PLC		178,220		1,150,525
Provident Financial PLC		33,324		1,272,036
Qinetiq Group PLC		169,036		492,784
Reckitt Benckiser Group PLC		9,944		805,404
Rightmove PLC		26,773		933,659
Rio Tinto PLC		57,003		2,627,671
Rolls-Royce Holdings PLC (b)		2,183		29,326
SABMiller PLC		49,476		2,579,241
Schroders PLC		38,154		1,585,767
Smith & Nephew PLC		21,923		395,327
Spirax-Sarco Engineering PLC		19,834		882,947
SSE PLC		506,600		12,800,305
Standard Chartered PLC		163,249		2,441,535
Standard Life PLC		414,799		2,569,384
Tate & Lyle PLC		314,703		2,948,598
Thomas Cook Group PLC (b)		284,390		562,768
Unilever PLC		5,574		226,461
United Utilities Group PLC		7,361		104,555
Vedanta Resources PLC		43,038		381,760
Vodafone Group PLC		1,547,382		5,305,394
				191,559,164
Total Common Stocks — 97.0%				1,211,863,445

See Notes to Financial Statements.

8 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014

Schedule of Investments (continued) (Percentages shown are based on Net Assets)

Rights	Shares		Value
Spain — 0.0%
Banco Bilbao Vizcaya Argentaria SA (Expires 01/07/15) (b)		148,757	$	14,220
Repsol SA (Expires 01/08/15) (b)		480,387		265,651
Total Rights — 0.0%				279,871
Total Long-Term Investments (Cost — $1,267,108,443) — 97.0%				1,212,143,316
Short-Term Securities	Shares		Value
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.15% (d)(e)		5,215,771	$	5,215,771
BlackRock Cash Funds: Prime, SL Agency Shares, 0.13% (d)(e)(f)		3,749,270		3,749,270
Total Short-Term Securities (Cost — $8,965,041) — 0.7%				8,965,041
Total Investments (Cost — $1,276,073,484) — 97.7%				1,221,108,357
Other Assets Less Liabilities — 2.3%				28,685,792
Net Assets — 100.0%			$	1,249,794,149

Notes to Schedule of Investments

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

(b) Non-income producing security.

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

(d) Investments in issuers considered to be an affiliate of the Master Portfolio during the year ended December 31, 2014, 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, 2013		Net Activity			Shares Held at December 31, 2014		Income
BlackRock Cash Funds: Institutional, SL Agency Shares		6,130,217		(914,446	)		5,215,771	$	9,991
BlackRock Cash Funds: Prime, SL Agency Shares		—		3,749,270			3,749,270	$	199,405

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

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

Ÿ As of December 31, 2014, financial futures contracts outstanding were as follows:

Contracts Purchased		Issue	Exchange	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
	27	SPI 200 Index	Australian Securities Exchange	March 2015	USD	2,966,409	$	104,808
	79	FTSE 100 Index	Euronext Life	March 2015	USD	8,031,121		261,635
	108	Nikkei 225 Index	Chicago Mercantile	March 2015	USD	7,803,807		(215,301	)
	378	Euro Stoxx 50 Index	Eurex Mercantile	March 2015	USD	14,330,310		220,846
	Total						$	371,988

See Notes to Financial Statements.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014 9

Schedule of Investments (continued)

Portfolio Abbreviations

CVA	Certificaten Van Aandelen (Dutch Certificate)
FTSE	Financial Times Stock Exchange
REIT	Real Estate Investment Trust
USD	U.S. Dollar

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. 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. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities. The three levels of the fair value hierarchy are as follows:

Ÿ Level 1 — unadjusted quoted prices 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)

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. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, refer to Note 2 of the Notes to Financial Statements.

As of December 31, 2014, the following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3	Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Australia	$	15,592	$	62,117,076	—	$	62,132,668
Belgium		—		21,574,946	—		21,574,946
Bermuda		—		504,103	—		504,103
Denmark		—		33,473,689	—		33,473,689
Finland		—		13,806,734	—		13,806,734
France		3,102,599		84,647,189	—		87,749,788
Germany		1,332,071		108,229,654	—		109,561,725
Hong Kong		25,533		33,900,510	—		33,926,043
Ireland		31,686		9,087,388	—		9,119,074
Isle of Man		—		147,939	—		147,939
Israel		108,099		66,016	—		174,115
Italy		814,624		15,109,969	—		15,924,593
Japan		—		296,220,866	—		296,220,866
Netherlands		221,403		60,174,296	—		60,395,699
New Zealand		34,527		199,953	—		234,480
Norway		—		14,709,669	—		14,709,669
Portugal		—		4,402,705	—		4,402,705	��
Singapore		—		12,519,458	—		12,519,458
Spain		—		82,373,959	—		82,373,959
Sweden		—		70,779,793	—		70,779,793
Switzerland		—		90,572,235	—		90,572,235
United Kingdom		1,400,984		190,158,180	—		191,559,164
Rights		279,871		—	—		279,871
Short-Term Securities		8,965,041		—	—		8,965,041
Total	$	16,332,030	$	1,204,776,327	—	$	1,221,108,357

See Notes to Financial Statements.

10 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014

Schedule of Investments (concluded)

	Level 1			Level 2	Level 3	Total
Derivative Financial Instruments 1
Assets:
Equity contracts	$	587,289		—	—	$	587,289
Liabilities:
Equity contracts		(215,301	)	—	—		(215,301	)
Total	$	371,988				$	371,988

¹ Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

The Master Portfolio may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of December 31, 2014, 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	$	1,920,000		—		—	$	1,920,000
Foreign currency at value		29,734,465		—		—		29,734,465
Liabilities:
Collateral on securities loaned at value		—	$	(3,749,270	)	—		(3,749,270	)
Total	$	31,654,465	$	(3,749,270	)	—	$	27,905,195

During the year ended December 31, 2014, there were no transfers between levels.

See Notes to Financial Statements.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014 11

Statement of Assets and Liabilities

December 31, 2014
Assets
Investments at value — unaffiliated (including securities loaned of $3,471,160) (cost — $1,267,108,443)	$	1,212,143,316
Investments at value — affiliated (cost — $8,965,041)		8,965,041
Cash pledged for financial futures contracts		1,920,000
Foreign currency at value (cost — $31,051,243)		29,734,465
Contributions receivable from investors		22,348,371
Investments sold receivable		6,976,243
Dividends receivable		841,623
Variation margin receivable on financial futures contracts		22,809
Securities lending income receivable — affiliated		12,071
Total assets		1,282,963,939
Liabilities
Collateral on securities loaned at value		3,749,270
Investments purchased payable		28,916,552
Investment advisory fees payable		408,265
Administration fees payable		52,636
Directors’ fees payable		8,147
Other accrued expenses payable		34,920
Total liabilities		33,169,790
Net Assets	$	1,249,794,149
Net Assets Consist of
Investors’ capital	$	1,305,953,600
Net unrealized appreciation/depreciation		(56,159,451	)
Net Assets	$	1,249,794,149

See Notes to Financial Statements.
12	INTERNATIONAL TILTS MASTER PORTFOLIO	DECEMBER 31, 2014

Statement of Operations

Year Ended December 31, 2014
Investment Income
Dividends	$	37,891,994
Securities lending — affiliated — net		199,405
Interest — affiliated		9,991
Foreign taxes withheld		(4,642,632	)
Total income		33,458,758
Expenses
Investment advisory		4,057,358
Administration		509,452
Professional		43,120
Trustees		34,600
Total expenses		4,644,530
Less fees waived by Manager		(82,394	)
Total expenses after fees waived		4,562,136
Net investment income		28,896,622
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments		(16,093,907	)
Financial futures contracts		1,268,185
Foreign currency transactions		(1,846,551	)
		(16,672,273	)
Net change in unrealized appreciation/depreciation on:
Investments		(60,662,682	)
Financial futures contracts		(74,475	)
Foreign currency translations		(1,719,915	)
		(62,457,072	)
Net realized and unrealized loss		(79,129,345	)
Net Decrease in Net Assets Resulting from Operations	$	(50,232,723	)

See Notes to Financial Statements.
	INTERNATIONAL TILTS MASTER PORTFOLIO	DECEMBER 31, 2014	13

Statements of Changes in Net Assets

Increase (Decrease) in Net Assets:	Year Ended December 31, 2014			Period October 31, 20131 to December 31, 2013
Operations
Net investment income	$	28,896,622		$	518,167
Net realized loss		(16,672,273	)		(752,148	)
Net change in unrealized appreciation/depreciation		(62,457,072	)		6,297,621
Net increase (decrease) in net assets resulting from operations		(50,232,723	)		6,063,640
Capital Transactions
Proceeds from contributions		1,877,904,975			903,389,676
Value of withdrawals		(1,130,695,994	)		(356,635,425	)
Net increase in net assets derived from capital transactions		747,208,981			546,754,251
Net Assets
Total increase in net assets		696,976,258			552,817,891
Beginning of year		552,817,891			–
End of year	$	1,249,794,149		$	552,817,891

¹ Commencement of operations.

See Notes to Financial Statements.
14	INTERNATIONAL TILTS MASTER PORTFOLIO	DECEMBER 31, 2014

Financial Highlights

	Year Ended December 31, 2014		Period October 31, 20131 to December 31, 2013
Total Return
Total Return		(3.94)%		1.60%	2
Ratios to Average Net Assets
Total expenses		0.46%		0.53%	3
Total expenses after fees waived		0.45%		0.45%	3
Net investment income		2.84%		1.17%	3
Supplemental Data
Net assets, end of year (000)	$	1,249,794	$	552,818
Portfolio turnover rate		120%		15%

¹  Commencement of operations.

²  Aggregate total return.

³  Annualized.

See Notes to Financial Statements.
	INTERNATIONAL TILTS MASTER PORTFOLIO	DECEMBER 31, 2014	15

Notes to Financial Statements

1. Organization:

International Tilts Master Portfolio (the “Master Portfolio”) is a series of Master Investment Portfolio (“MIP”), which 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 Master Portfolio, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Liquidity Complex.

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 (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements 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 Master Portfolio is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Master Portfolio:

Valuation: The Master Portfolio’s investments are valued at fair value as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the 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 are valued at the official close each day, if available. For equity investments traded on more than one exchange, the official close price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price. 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 (“NAV”) each business day.

Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of business on the 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 the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair 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. 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 (e.g., a company announcement, market volatility or a natural disaster) occur during such periods that are expected to materially affect the value of such instruments, 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 U.S. 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 U.S. 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 U.S. dollars; the opposite effect occurs if the U.S. 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), that would be “senior securities” for 1940 Act purposes, the Master Portfolio may segregate or designate on its books and records cash or liquid

16 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014

Notes to Financial Statements (continued)

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 date. 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.

Recent Accounting Standard: In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance includes expanded disclosure requirements for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. The guidance is effective for financial statements with fiscal years beginning on or after December 15, 2014 and interim periods within those fiscal years. Management is evaluating the impact, if any, of this guidance on the Master Portfolio’s financial statement disclosures.

Other: Expenses directly related to the Master Portfolio are charged to the Master Portfolio. Other operating expenses shared by several funds are prorated 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 its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. government. The initial collateral received by the Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. 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 any 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. As of December 31, 2014, any securities on loan were collateralized by cash. 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 (each, an “MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, 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.

As of December 31, 2014, the following table is a summary of the Master Portfolio’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
BNP Paribas SA	$	89,417	$	(89,417	)		—
Credit Suisse Securities (USA) LLC		701,578		(701,578	)		—
Deutsche Bank Securities, Inc.		2,209,817		(2,209,817	)		—
Merrill Lynch, Pierce, Fenner & Smith, Inc.		470,348		(470,348	)		—
Total	$	3,471,160	$	(3,471,160	)		—

¹  Collateral with a value of $3,749,270 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 include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities lent if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Master Portfolio 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.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014 17

Notes to Financial Statements (continued)

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 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). 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.

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, 2014
		Value
	Statement of Assets and Liabilities Location	Derivative Assets		Derivative Liabilities
Equity contracts	Net unrealized appreciation/depreciation1	$	587,289	$	215,301

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

The Effect of Derivative Financial Instruments in the Statement of Operations for the year ended December 31, 2014
	Net Realized Gain From		Net Change in Unrealized Appreciation/Depreciation on
Equity contracts:
Financial futures contracts		1,268,185		(74,475	)

For the year ended December 31, 2014, the average quarterly balances of outstanding derivative financial instruments were as follows:

Financial futures contracts:
Average notional value of contracts purchased	$	31,219,775

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

18 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014

Notes to Financial Statements (continued)

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. (“PNC”) 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 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		0.40%
$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, a monthly fee that is a percentage of the investment advisory fees paid by the Master Portfolio to the Manager.

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 year ended December 31, 2014, the amount waived was $4,675.

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 provide an offsetting credit against the investment advisory fees paid by the Master Portfolio in an amount equal to the independent expenses through April 30, 2015. The amount of the waiver, if any, is included in fees waived by Manager in the Statement of Operations. For the year ended December 31, 2014, the Manager waived $77,719 pursuant to the agreement.

The U.S. Securities and Exchange Commission has issued an exemptive order which permits BTC, an affiliate of the Manager, to serve as securities lending agent for the Master Portfolio, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. The Master Portfolio is responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by the Manager or its affiliates, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees the Master Portfolio bears to an annual rate of 0.04% until December 31, 2014 and 0.05% thereafter (the “collateral investment fees”).

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent. Pursuant to a securities lending agreement effective February 1, 2014, BTC may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the “specials only securities”).

Pursuant to such agreement, the Master Portfolio retains 80% of securities lending income. In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Liquidity Complex in a calendar year exceeds the aggregate securities lending income earned across the Equity-Liquidity Complex through the lending of specials only securities in the calendar year 2013, the Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income. Prior to February 1, 2014, the Master Portfolio retained 65% of securities lending income and paid a fee to BTC equal to 35% of such income.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014 19

Notes to Financial Statements (continued)

The share of securities lending income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the year ended December 31, 2014, the Master Portfolio paid BTC $45,085 in total for securities lending agent services and collateral investment fees.

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

6. Purchases and Sales:

For the year ended December 31, 2014, purchases and sales of investments, excluding short-term securities were $1,960,129,336 and $1,207,626,080, respectively.

7. Income Tax Information:

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 U.S. 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 U.S. federal tax returns remains open for the fiscal year ended December 31, 2014 and the period ended on 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.

As of December 31, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	1,285,576,141
Gross unrealized appreciation	$	30,378,788
Gross unrealized depreciation		(94,846,572	)
Net unrealized depreciation	$	(64,467,784	)

8. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), was a party to a 364-day, $1.1 billion credit agreement with a group of lenders, under which the Master Portfolio may borrow to fund shareholder redemptions. Excluding commitments designated for a certain individual fund, the Participating Funds, including the Master Portfolio, could borrow up to an aggregate commitment amount of $650 million, subject to asset coverage and other limitations as specified in the agreement. Effective November 25, 2014, the credit agreement was amended to an aggregate commitment amount of $2.1 billion, of which the Participating Funds, including the Master Portfolio, can borrow up to $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The agreement terminates on April 23, 2015, unless otherwise extended to November 24, 2015 or renewed for a period of 364 days from April 23, 2015. The amended agreement has the following terms: a fee of 0.06% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one month LIBOR (but in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which are included in miscellaneous expenses in the Statement of Operations, and 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. During the year ended December 31, 2014, the Master Portfolio did not borrow under the credit agreement.

9. Principal Risks:

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.

20 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31,2014

Notes to Financial Statements (concluded)

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 its investment performance. Foreign issuers may not be subject to the same uniform accounting, auditing and financial reporting standards and practices as used in the United States. Foreign securities markets may also be less liquid, more volatile, and less subject to governmental supervision not typically associated with investing in U.S. securities. 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, 2014, the Master Portfolio had the following industry classifications:

Industry Percent of
Long-Term  Investments

Banks	12	%
Pharmaceuticals	9
Insurance	7
Oil, Gas & Consumable Fuels	6
Other1	66

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

10. 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 31,2014 21

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, 2014, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year then ended and 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 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, 2014 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 19, 2015

22 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31,2014

Officers and Trustees

Name, Address1 and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2
Ronald W. Forbes 1940	Co-Chairman of the Board and Director	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 153 Portfolios	None
Rodney D. Johnson 1941	Co-Chairman of the Board and Director	Since 2009	President, Fairmount Capital Advisors, Inc. from1987 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 153 Portfolios	None
David O. Beim 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 153 Portfolios	None
Frank J. Fabozzi 1948	Trustee	Since 2014	Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011; Adjunct Professor of Finance and Becton Fellow, Yale University from 1994 to 2006.	112 RICs consisting of 232 Portfolios	None

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014 23

Officers and Trustees (continued)

Name, Address1 and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2
Dr. Matina S. Horner 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 153 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 1939	Trustee	Since 2009	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 153 Portfolios	None
Ian A. MacKinnon 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None
Cynthia A. Montgomery 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 153 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 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 153 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)

24 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014

Officers and Trustees (continued)

Name, Address1 and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees2
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 153 Portfolios	None
Toby Rosenblatt 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Futures Foundation (philanthropic foundation) since 2009; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 153 Portfolios	None
Kenneth L. Urish 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 153 Portfolios	None
Frederick W. Winter 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 2005-2013; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 153 Portfolios	None
	1    The address of each Trustee is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055
	2    Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Trustees on a case-by-case basis, as appropriate.
	3    Date shown is the earliest date a person has served for the MIP. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the MIP Board. As a result, although the chart shows certain Trustees as joining the MIP 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. Frank J. Fabozzi first became a member of the board of other funds advised by BlackRock Advisors, LLC or its affiliates in 1988.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014 25

Officers and Trustees (continued)

Name, Address1 and Year of Birth	Position(s) Held with MIP	Length of Time Served as a Trustee3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Interested Trustees4 (concluded)
Paul L. Audet 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.	141 RICs consisting of 329 Portfolios	None
Henry Gabbay 1947	Trustee	Since 2009	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.	29 RICs consisting of 97 Portfolios	None
	4   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, Dr. Fabozzi 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 75. The Board has determined to extend the terms of Directors on a case-by-case basis, as appropriate.

26 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014

Officers and Trustees (concluded)

Name, Address 1 and Year of Birth	Position(s) Held with MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Officers2
John M. Perlowski 1964	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 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.
Jennifer McGovern 1977	Vice President	Since 2014	Director of BlackRock, Inc. since 2011; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal Andrews 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 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.
Charles Park 1967	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2014	Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary to the 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    The address of each Officer is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
	2    Officers of MIP serve at the pleasure of the board.

Effective September 10, 2014, Brendan Kyne resigned as a Vice President of MIP and Jennifer McGovern became a Vice President of MIP.

Effective December 31, 2014, Paul L. Audet and Henry Gabbay resigned as Trustees of MIP and Ronald W. Forbes resigned as a Director of MIP and Co-Chair of the Board. Effective January 1, 2015, Collette Chilton, Barbara G. Novick and Mark Stalnecker were appointed to serve as Trustees of MIP.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014 27

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.

28 INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014

Additional Information (concluded)

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 June 30 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.

INTERNATIONAL TILTS MASTER PORTFOLIO DECEMBER 31, 2014 29

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, the code of ethics was amended to update certain information and to make other non-material changes. During the period covered by this report, there have been no 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 PricewaterhouseCoopers 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: 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 Master 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	$20,640	$18,580	$0	$0	$15,126	$15,126	$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
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

4

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”):

	Current Fiscal Year End	Previous Fiscal Year End
(b) Audit-Related Fees1	$602,463	$668,000
(c) Tax Fees2	$12,495,765	$10,319,000
(d) All Other Fees3	$558,341	$113,000

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: Treasury		$2,425		$2,425
BlackRock CoreAlpha Bond Fund		$7,566		$7,566

5

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 Master 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	$15,126
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
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

6

	(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
	(a)(3) – Not Applicable
	(b)    – Certifications – Attached hereto

7

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, 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
Date: February 27, 2015

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 27, 2015
By:	/s/ Neal J. Andrews
	Neal J. Andrews
	Chief Financial Officer (principal financial officer) of
	BlackRock Funds III and Master Investment Portfolio
Date: February 27, 2015

8