BlackRock Funds III

See Notes to Financial Statements.

BLACKROCK RUSSELL 1000^® INDEX FUND

DECEMBER 31, 2012

N-CSR 1 d475387dncsr.htm BLACKROCK FUNDS III BlackRock Funds III

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 and Master Investment Portfolio

BlackRock Funds III

BlackRock Russell 1000® Index Fund

BlackRock ACWI ex-US Index Fund

BlackRock CoreAlpha Bond Fund

BlackRock Bond Index Fund

BlackRock S&P 500 Stock 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 Cash Funds: Institutional

BlackRock Cash Funds: Prime

BlackRock Cash Funds: Government

BlackRock Cash Funds: Treasury

Master Investment Portfolio

Russell 1000® Index Master Portfolio

ACWI ex-US Index Master Portfolio

Bond Index Master Portfolio

S&P 500 Stock 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

Active Stock Master Portfolio

CoreAlpha Bond Master Portfolio

Money Market Master Portfolio

Prime Money Market Master Portfolio

Government Money Market 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: 12/31/2012

Date of reporting period: 12/31/2012

Item 1 – Report to Stockholders

DECEMBER 31, 2012

ANNUAL REPORT

BlackRock Russell 1000^® Index Fund | of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee


Table of Contents


	Page
Dear Shareholder		3
Annual Report:
Fund Summary		4
About Fund Performance		6
Derivative Financial Instruments		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 (Unaudited)		16
Master Portfolio Information		17
Master Portfolio Financial Statements:
Schedule of Investments		18
Statement of Assets and Liabilities		30
Statement of Operations		31
Statements of Changes in Net Assets		32
Master Portfolio Financial Highlights		33
Master Portfolio Notes to Financial Statements		34
Master Portfolio Report of Independent Registered Public Accounting Firm		38
Officers and Trustees		39
Additional Information		42
A World-Class Mutual Fund Family		44



2	BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012

Dear Shareholder

Financial markets substantially improved in 2012 as compared to the prior year, due largely to central bank intervention and considerable relief from the global turmoil seen in 2011. Although 2012 brought its share of headwinds, the strongest returns came from higher-risk asset classes as investors reached for yield in an environment of extremely low interest rates.

The year opened with investor confidence on the rise as global liquidity had been restored and financial news headlines became less daunting. Equity markets moved higher through the first two months of 2012, while climbing US Treasury yields pressured higher-quality fixed income assets. However, markets reversed course in the spring when Europe’s debt crisis boiled over once again. Political instability in Greece and severe deficit and liquidity problems in Spain raised the prospect of a euro collapse. Government borrowing costs in peripheral European countries soared while the region’s finance leaders deliberated over the fiscal integration of the currency bloc. Alongside the drama in Europe, investors were discouraged by gloomy economic reports from various parts of the world. A slowdown in China, a key powerhouse for global growth, emerged as a particular concern. In the United States, disappointing jobs reports signaled that the recovery was losing steam. Risk assets sold off as investors retreated to safe-haven assets.

As the outlook for the global economy worsened, investors grew increasingly optimistic that the world’s largest central banks soon would intervene to stimulate growth. This theme, along with increased cooperation among finance ministers in Europe, fueled a powerful risk-asset rebound in June. In July, the European Central Bank (“ECB”) president stated that the bank would do “whatever it takes” to preserve the euro currency bloc. This assurance along with expectations for policy stimulus from central banks in Europe and the United States drove most asset classes higher through the summer. Early in September, the ECB announced its decision to support the eurozone’s troubled peripheral countries with unlimited purchases of short term sovereign debt. Days later, the US Federal Reserve announced an aggressive stimulus package involving open-ended monthly purchases of agency mortgage-backed securities.

Going into the fall, US stocks slid on lackluster corporate earnings reports and market volatility rose leading up to the US Presidential election. Global trade slowed as many European countries fell into recession and growth continued to decelerate in China, where a once-a-decade leadership change compounded uncertainty. In the United States, automatic tax increases and spending cuts that had been scheduled to take effect at the beginning of 2013 (known as the “fiscal cliff”) threatened to push the nation into recession unless politicians could agree upon alternate measures to reduce the deficit before the end of 2012. Worries that bipartisan gridlock would preclude a budget deal prior to the deadline drove high levels of volatility in financial markets around the world in the months leading up to the last day of the year. Ultimately, the United States averted the worst of the fiscal cliff with a last-minute tax deal. Relief from US fiscal worries, however, was only partial as decisions relating to spending cuts and the debt ceiling remained pending as financial markets closed for the year.

All major asset classes generated positive returns for the 6- and 12-month periods ended December 31, 2012. Riskier assets outperformed higher quality investments as investors sought meaningful returns in a low interest rate environment. International and emerging market equities were the strongest performers. US Treasury yields were volatile, but declined overall, resulting in moderate gains for higher quality fixed income sectors. Tax-exempt municipal bonds benefited from a favorable supply-and-demand environment. Near-zero short term interest rates continued to keep yields on money market securities near their all-time lows.

The New Year brings a host of unknowns, but we believe new opportunities abound. BlackRock was built to provide the global market insight, breadth of capabilities, unbiased investment advice and deep risk management expertise these times require. With access to every asset class, geography and investment style, and extensive market intelligence, we help investors of all sizes build dynamic, diverse portfolios to achieve better, more consistent returns over time. We encourage you to visit www.blackrock.com/newworld for more information.

Sincerely,

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

“Although 2012 brought its share of headwinds, the strongest returns came from higher-risk asset classes as investors reached for yield in an environment of extremely low interest rates.”

Rob Kapito

President, BlackRock Advisors, LLC


Total Returns as of December 31, 2012
	6-month			12-month
US large cap equities (S&P 500^® Index)		5.95	%		16.00	%
US small cap equities (Russell 2000^® Index)		7.20			16.35
International equities (MSCI Europe, Australasia, Far East Index)		13.95			17.32
Emerging market equities (MSCI Emerging Markets Index)		13.75			18.22
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)		0.07			0.11
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		0.71			4.18
US investment grade bonds (Barclays US Aggregate Bond Index)		1.80			4.21
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.15			7.42
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)		7.97			15.78

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 IS NOT PART OF YOUR FUND REPORT				3


Fund Summary as of December 31, 2012		BlackRock Russell 1000 ^® Index Fund


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, 2012, the Fund’s Institutional, Investor A and Class K Shares returned 16.42%, 16.18% and 16.37%, respectively, while the benchmark Russell 1000^® Index returned 16.42%. The Russell 1000^® Index is an unmanaged index that measures the performance of the large-cap segment of the U.S. equity universe. The index includes approximately 1000 of the largest securities in the Russell 3000^® Index based on a combination of their market-capitalization and current index membership. The Russell 1000^® Index represents approximately 92% of the U.S. market.

_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

Following a tumultuous 2011, equity markets began the new year with a strong rally amid lower volatility. The debt situation in Europe had stabilized and global liquidity conditions improved as the European Central Bank (“ECB”) implemented its long-term refinancing operations. Positive economic indicators out of the United States brightened the outlook for the world economy and equities moved higher through the first two months of 2012.

_Ÿ

A flare-up in the European debt crisis halted the rally in the spring. Political instability in Greece caused anxiety about whether the country would continue its membership in the eurozone. Spain faced severe deficit and policymaking issues and a liquidity crisis in the nation’s banks. Alongside the drama in Europe, investors became discouraged by gloomy economic reports from various parts of the world. A slowdown in China, a key powerhouse for global growth, was of particular concern. Many European countries fell into recession. In the United States, disappointing jobs reports signaled that the recovery was losing steam. US equities gave back half of their year-to-date gains by the end of May.

_Ÿ

investor confidence by stating that the ECB was committed to do “whatever it takes” to hold the eurozone together. This assurance along with growing hopes for additional central bank stimulus, overshadowed concerns about the dreary economic landscape and US stocks continued their advance through the third quarter. In September, the ECB announced its decision to backstop eurozone governments with unlimited purchases of short-term sovereign debt. Days later, the US Federal Reserve announced an aggressive stimulus program involving purchases of agency mortgage-backed securities.

_Ÿ

Concerns about the world economy resurfaced in the fall amid political uncertainty in key nations. Global trade slowed as Europe’s recession deepened, US growth remained lackluster and growth continued to decelerate in China, where a once-in-a-decade leadership change compounded uncertainty. In the United States, automatic tax increases and spending cuts set to take effect at the beginning of 2013, known as the “fiscal cliff,” threatened to push the nation into recession unless politicians could agree upon alternate measures to reduce the deficit before the end of 2012. Worries that political gridlock would preclude a budget deal prior to the deadline drove high levels of volatility in equity markets around the world in the months leading up to the last day of the year. Ultimately, the United States averted the fiscal cliff with a last-minute tax deal, spurring relief rallies in stock markets globally. However, relief from US fiscal worries was only partial as decisions relating to spending cuts and the national debt ceiling remained pending as financial markets closed for the year. Despite a downtrodden economic environment and a suspenseful lead-up to the US fiscal cliff deadline, US stock prices moved higher through the final months of 2012 as investors took on more risk to achieve meaningful returns in the low interest rate environment.

Describe recent portfolio activity.

_Ÿ

During the period, as changes were made to the composition of the Russell 1000^® Index, the Master Portfolio purchased and sold securities to maintain its objective of replicating the risks and return of the benchmark index.

Describe portfolio positioning at period end.

_Ÿ

The Master Portfolio remains positioned to match the risk characteristics of its benchmark index, irrespective of the market’s future direction.

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

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



4	BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012


		BlackRock Russell 1000 ^® Index Fund

Total Return Based on a $10,000 Investment

LOGO

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

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.

The unmanaged index measures the performance of the large-cap segment of the U.S. equity universe and covers approximately 1000 of the largest securities based on a combination of their market capitalization and current index membership of the U.S. markets.

⁴

Commencement of operations.

Performance Summary for the Period Ended December 31, 2012


				Average Annual Total Returns⁵
	6-Month Total Returns			1 Year			Since Inception⁶
Institutional		6.32	%		16.42	%		6.09	%
Investor A		6.20			16.18			5.83
Class K		6.25			16.37			6.08
Russell 1000^® Index		6.44			16.42			6.26

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, 2012		Ending Account Value December 31, 2012		Expenses Paid During the Period⁷		Beginning Account Value July 1, 2012		Ending Account Value December 31, 2012		Expenses Paid During the Period⁷		Annualized Expense Ratio
Institutional	$	1,000.00	$	1,063.20	$	1.19	$	1,000.00	$	1,023.98	$	1.17		0.23	%
Investor A	$	1,000.00	$	1,062.00	$	2.38	$	1,000.00	$	1,022.82	$	2.34		0.46	%
Class K	$	1,000.00	$	1,062.50	$	0.93	$	1,000.00	$	1,024.23	$	0.92		0.18	%

⁷

For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period shown). Because the Fund invests significantly in the Master Portfolio, the expense example reflects the net expenses of both the Fund and the Master Portfolio in which it invests.

⁸

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366.

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



BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012	5


About Fund Performance		BlackRock Russell 1000 ^® Index Fund

_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 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.

shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in the performance tables on the previous page assume reinvestment of all dividends and capital gain distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Dividends paid to each class of shares will vary because of the different levels of administration and distribution fees applicable to each class, which are deducted from income available to be paid to shareholders. The Fund’s administrator waived and/or reimbursed a portion of the Fund’s expenses. Without such waiver, the Fund’s performance would have been lower.

Derivative Financial Instruments

instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require the Master Portfolio to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation the Master Portfolio can realize on an investment, may result in lower dividends paid to shareholders or may cause the Master Portfolio to hold an investment that it might otherwise sell. The Master Portfolio’s investments in these instruments are discussed in detail in the Notes to Financial Statements.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) expenses related to transactions, including sales charges and exchange fees; 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, 2012 and held through December 31, 2012) 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 this Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in other funds’ shareholder reports.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges or exchange fees, 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 RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012


Statement of Assets and Liabilities		BlackRock Russell 1000 ^® Index Fund


December 31, 2012


Assets
Investments at value — Master Portfolio (cost — $55,376,148)	$	59,918,194
Capital shares sold receivable		912,365
Receivable from administrator		27,354
Prepaid expenses		4,361

Total assets		60,862,274


Liabilities
Contributions payable to the Master Portfolio		912,243
Capital gain distributions payable		560,668
Income dividends payable		352,465
Professional fees payable		30,319
Printing fees payable		5,524
Transfer agent fees payable		3,444
Administration fees payable		917
Service fees payable		451
Registration fees payable		206
Capital shares redeemed payable		121
Other accrued expenses payable		3,973

Total liabilities		1,870,331

Net Assets	$	58,991,943


Net Assets Consist of
Paid-in capital	$	54,851,772
Undistributed net investment income		8,359
Accumulated net realized loss allocated from the Master Portfolio		(410,234	)
Net unrealized appreciation/depreciation allocated from the Master Portfolio		4,542,046

Net Assets	$	58,991,943


Net Asset Value
Institutional — Based on net assets of $28,056 and 2,643 shares outstanding, unlimited number of shares authorized, no par value	$	10.62

Investor A — Based on net assets of $2,310,020 and 217,776 shares outstanding, unlimited number of shares authorized, no par value	$	10.61

Class K — Based on net assets of $56,653,867 and 5,337,686 shares outstanding, unlimited number of shares authorized, no par value	$	10.61


Statement of Operations		BlackRock Russell 1000 ^® Index Fund


Year Ended December 31, 2012


Investment Income
Net investment income allocated from the Master Portfolio:
Dividends — unaffiliated	$	1,193,338
Dividends — affiliated		11,458
Securities lending — affiliated — net		15,909
Income — affiliated		4,973
Interest		78
Expenses		(59,579	)
Fees waived		1,242

Total income		1,167,419


Fund Expenses
Professional		64,082
Offering		49,107
Administration		42,778
Registration		36,831
Printing		15,028
Service — Investor A		5,548
Transfer agent — Investor A		1,521
Transfer agent — Class K		870
Transfer agent — Institutional		35
Miscellaneous		5,366
Recoupment of past waived fees — Class Specific		3,693

Total expenses		224,859
Less administration fees waived		(41,666	)
Less transfer agent fees waived — Investor A		(20	)
Less transfer agent fees waived — Class K		(199	)
Less transfer agent fees reimbursed — Institutional		(22	)
Less transfer agent fees reimbursed — Investor A		(1,005	)
Less transfer agent fees reimbursed — Class K		(671	)
Less fees waived and/or reimbursed by administrator		(137,338	)

Total expenses after fees waived and/or reimbursed		43,938

Net investment income		1,123,481


Realized and Unrealized Gain (Loss) Allocated from the Master Portfolio
Net realized gain from investments and financial futures contracts		539,039
Net change in unrealized appreciation/depreciation on investments and financial futures contracts		6,380,008

Total realized and unrealized gain		6,919,047

Net Increase in Net Assets Resulting from Operations	$	8,042,528


Statements of Changes in Net Assets		BlackRock Russell 1000 ^® Index Fund


Increase (Decrease) in Net Assets:	Year Ended December 31, 2012			Period March 31, 2011¹ to December 31, 2011


Operations
Net investment income	$	1,123,481		$	475,161
Net realized gain		539,039			(363,500	)
Net change in unrealized appreciation/depreciation		6,380,008			(1,837,962	)

Net increase (decrease) in net assets resulting from operations		8,042,528			(1,726,301	)


Dividends and Distributions to Shareholders From²
Net investment income:
Institutional		(540	)		(305	)
Investor A		(40,671	)		(10,478	)
Class K		(1,082,047	)		(456,242	)
Net realized gain:
Institutional		(282	)		(2	)
Investor A		(22,872	)		(55	)
Class K		(560,171	)		(2,391	)
Tax return of capital:
Institutional		—			(7	)
Investor A		—			(257	)
Class K		—			(11,181	)

Decrease in net assets resulting from dividends and distributions to shareholders		(1,706,583	)		(480,918	)


Capital Share Transactions
Net increase in net assets derived from capital share transactions		3,929,677			50,933,540


Net Assets
Total increase in net assets		10,265,622			48,726,321
Beginning of period		48,726,321			—

End of period	$	58,991,943		$	48,726,321

Undistributed net investment income	$	8,359		$	8,136

Commencement of operations.

Dividends and distributions are determined in accordance with federal income tax regulations.


Financial Highlights		BlackRock Russell 1000 ^® Index Fund


	Institutional
	Year Ended December 31, 2012			Period March 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.40		$	10.00

Net investment income²		0.21			0.13
Net realized and unrealized gain (loss)		1.33			(0.60	)

Net increase (decrease) from investment operations		1.54			(0.47	)

Dividends and distributions from:³
Net investment income		(0.21	)		(0.13	)
Net realized capital gain		(0.11	)		(0.00	)⁴
Tax return of capital		—			(0.00	)⁴

Total dividends and distributions		(0.32	)		(0.13	)

Net asset value, end of period	$	10.62		$	9.40


Total Investment Return⁵
Based on net asset value		16.42%			(4.72	)%⁶


Ratios to Average Net Assets⁷
Total expenses		0.65%	⁸		1.84%	^9,10,11

Total expenses after fees waived and/or reimbursed		0.23%	⁸		0.22%	^9,10

Net investment income		2.07%	⁸		1.86%	^9,10


Supplemental Data
Net assets, end of period (000)	$	28		$	24

Portfolio turnover of the Master Portfolio		16%			10%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns include the reinvestments of dividends and distributions.

⁶

Aggregate total investment return.

⁷

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

⁸

Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.00%.

⁹

Annualized.

¹⁰

Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.24%.

¹¹

Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 1.84%.


Financial Highlights (continued)		BlackRock Russell 1000 ^® Index Fund


	Investor A
	Year Ended December 31, 2012			Period March 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.39		$	10.00

Net investment income²		0.19			0.13
Net realized and unrealized gain (loss)		1.33			(0.62	)

Net increase (decrease) from investment operations		1.52			(0.49	)

Dividends and distributions from:³
Net investment income		(0.19	)		(0.12	)
Net realized capital gain		(0.11	)		(0.00	)⁴
Tax return of capital		—			(0.00	)⁴

Total dividends and distributions		(0.30	)		(0.12	)

Net asset value, end of period	$	10.61		$	9.39


Total Investment Return⁵
Based on net asset value		16.18%			(4.93	)%⁶


Ratios to Average Net Assets⁷
Total expenses		0.83%	⁸		1.40%	^9,10,11

Total expenses after fees waived and/or reimbursed		0.45%	⁸		0.45%	^9,10

Net investment income		1.83%	⁸		1.80%	^9,10


Supplemental Data
Net assets, end of period (000)	$	2,310		$	1,918

Portfolio turnover of the Master Portfolio		16%			10%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestments of dividends and distributions.

⁶

Aggregate total investment return.

⁷

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

⁸

Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.00%.

⁹

Annualized.

¹⁰

Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.24%.

¹¹

Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 1.40%.


Financial Highlights (concluded)		BlackRock Russell 1000 ^® Index Fund


	Class K
	Year Ended December 31, 2012			Period March 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.40		$	10.00

Net investment income²		0.22			0.13
Net realized and unrealized gain (loss)		1.32			(0.60	)

Net increase (decrease) from investment operations		1.54			(0.47	)

Dividends and distributions from:³
Net investment income		(0.22	)		(0.13	)
Net realized capital gain		(0.11	)		(0.00	)⁴
Tax return of capital		—			(0.00	)⁴

Total dividends and distributions		(0.33	)		(0.13	)

Net asset value, end of period	$	10.61		$	9.40


Total Investment Return⁵
Based on net asset value		16.37%			(4.68	)%⁶


Ratios to Average Net Assets⁷
Total expenses		0.52%	⁸		1.11%	^9,10,11

Total expenses after fees waived and/or reimbursed		0.18%	⁸		0.18%	^9,10

Net investment income		2.11%	⁸		2.02%	^9,10


Supplemental Data
Net assets, end of period (000)	$	56,654		$	46,785

Portfolio turnover of the Master Portfolio		16%			10%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns include the reinvestments of dividends and distributions.

⁶

Aggregate total investment return.

⁷

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

⁸

Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.00%.

⁹

Annualized.

¹⁰

Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.24%.

¹¹

Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 1.12%.


Notes to Financial Statements		BlackRock Russell 1000 ^® Index Fund

1. Organization and Significant Accounting Policies:

BlackRock Russell 1000^® Index Fund (the “Fund”), a series of BlackRock Funds III (the “Trust”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. The Trust is organized as a Delaware statutory trust. The Fund seeks to achieve its investment objective by investing substantially all of its assets 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. The percentage of the Master Portfolio owned by the Fund at December 31, 2012 was 13.61%. 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’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund offers multiple classes of shares. Institutional and Class K Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are sold without a sales charge. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Investor A Shares bear certain expenses related to the shareholder servicing of such shares. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing expenditures.

The following is a summary of significant accounting policies followed by the Fund:

Valuation: US GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund’s policy is to fair value its financial instruments at market value. The Fund records its investment in the Master Portfolio at fair value based on the Fund’s proportionate interest in the net assets of the Master Portfolio. Valuation of securities held by the Master Portfolio is discussed in Note 1 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.

Dividends and Distributions: Dividends and distributions paid by the Fund are recorded on the ex-dividend dates. The portion of distributions that exceeds the Fund’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a nontaxable return of capital. Distributions in excess of the Fund’s taxable income and net capital gains, but not in excess of the Fund’s earnings and profits, will be taxable to shareholders as ordinary income and will not constitute a nontaxable return of capital. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

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

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

Offering Costs: Offering costs associated with the establishment of the Fund are amortized over a 12-month period beginning with the commencement of operations.

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

2. Administration 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, Inc. (“BlackRock”).

The Trust, on behalf of the Fund, entered into an Administration Agreement with BlackRock Institutional Trust Company, N.A. (“BTC”), an indirect, wholly owned subsidiary of BlackRock, to provide administrative services (other than investment advice and related portfolio activities). For such services, the Fund pays BTC a monthly fee at an



BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012	13


Notes to Financial Statements (continued)		BlackRock Russell 1000 ^® Index Fund

annual rate of 0.08% of the average daily value of the Fund’s net assets. The Fund does not pay an investment advisory fee or investment management fee. Effective July 1, 2012, BlackRock Advisors, LLC (“BAL”) replaced BTC as the Fund’s administrator and entered into an Administration Agreement with the Trust, on behalf of the Fund, on similar terms.

BlackRock Fund Advisors (“BFA”), the investment advisor for the Master Portfolio, BAL and previously BTC, contractually agreed to waive and/or reimburse fees or expenses, excluding interest expense, dividend expense, acquired fund fees and expenses and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business, in order to limit expenses. The expense limitation as a percentage of average daily net assets is as follows: 0.23% for Institutional, 0.48% for Investor A and 0.18% for Class K. BFA, BAL and previously BTC have agreed not to reduce or discontinue this contractual waiver or reimbursement prior to May 1, 2013 unless approved by the Board, 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 periods received a waiver or reimbursement from BFA, BAL or previously BTC as applicable, are less than the expense limit for that share class, the share class is required to repay BFA, BAL or previously BTC, as applicable, up to the lesser of (a) the amount of fees waived or expenses reimbursed during the prior two fiscal periods under the agreement and (b) the amount by which the expense limit for that share class exceeds the operating expenses of the share class for the current fiscal year, provided that: (1) the Fund, of which the share class is a part, has more than $50 million in assets for the fiscal year and (2) BFA, BAL or previously BTC or an affiliate serves as the Fund’s investment advisor or administrator. In the event the expense limit for a share class is changed subsequent to a fiscal year in which BFA, BAL or previously BTC, as applicable, becomes entitled to reimbursement for fees waived or reimbursed, the amount available to reimburse BFA, BAL or previously BTC, as applicable, shall be calculated by reference to the expense limit for that share class in effect at the time BFA, BAL or previously BTC became entitled to receive such reimbursement, rather than the subsequently changed expense limit for that share class.

For the year ended December 31, 2012, BTC and BAL recouped the following Fund level and class specific waivers and/or reimbursements previously recorded by the Fund:


	BTC		BAL
Fund level		—	$	3,220
Investor A	$	48		—
Class K		—	$	425

On December 31, 2012, the Fund level and class specific waivers and/or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:


	Expiring December 31,
	2013		2014
	BTC		BTC		BAL
Fund level	$	208,239	$	111,439	$	64,013
Institutional	$	18	$	14	$	8
Investor A		—		—	$	1,025
Class K	$	2,343	$	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 with respect to Investor A Shares. The fees are accrued daily and paid monthly at an annual rate of 0.25% based upon the average daily net assets of the Investor A Shares.

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

BAL, and previously BTC, 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, 2012, the Fund reimbursed BAL, and previously BTC, the following amounts for costs incurred in running the call center, which are included in transfer agent — class specific in the Statement of Operations:


	BTC		BAL
Institutional	$	12	$	10
Investor A		—	$	1,005
Class K	$	671		—

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.

3. Income Tax Information:

The tax character of distributions paid during the fiscal year ended December 31, 2012 and the period ended December 31, 2011 were as follows:


	12/31/2012		12/31/2011
Ordinary income	$	1,316,285	$	467,025
Long-term capital gains		390,298		2,448
Tax return of capital		—		11,445

Total	$	1,706,583	$	480,918



14	BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012


Notes to Financial Statements (concluded)		BlackRock Russell 1000 ^® Index Fund

As of December 31, 2012, the tax components of accumulated net earnings were as follows:


Undistributed ordinary income	$	71,163
Undistributed long-term capital gains		32,493
Net unrealized gains*		4,036,515

Total	$	4,140,171

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

4. Capital Share Transactions:

Transactions in capital shares for each class were as follows:


	Year Ended December 31, 2012						Period March 31, 2011¹ to December 31, 2011
BlackRock Russell 1000^® Index Fund	Shares			Amount			Shares			Amount
Institutional
Shares sold		141		$	1,500			2,500		$	25,000
Shares issued to shareholders in reinvestment of dividends and distributions		2			24			—			—

Net increase		143		$	1,524			2,500		$	25,000


Investor A
Shares sold		44,913		$	470,413			214,918		$	2,004,613
Shares issued to shareholders in reinvestment of dividends and distributions		5,943			62,803			1,119			10,502
Shares redeemed		(37,196	)		(391,681	)		(11,921	)		(111,943	)

Net increase		13,660		$	141,535			204,116		$	1,903,172


Class K
Shares sold		775,317		$	8,129,202			6,295,842		$	61,804,812
Shares issued to shareholders in reinvestment of dividends and distributions		9			94			—			—
Shares redeemed		(415,103	)		(4,342,678	)		(1,318,379	)		(12,799,444	)

Net increase		360,223		$	3,786,618			4,977,463		$	49,005,368

Total Net Increase		374,026		$	3,929,677			5,184,079		$	50,933,540

¹ Commencement of operations.

At December 31, 2012, shares owned by affiliates were as follows:


	Shares
Institutional		2,500
Investor A		2,500
Class K		2,538

5. Subsequent Events:

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



BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012	15


Report of Independent Registered Public Accounting Firm		BlackRock Russell 1000 ^® Index Fund

To the Shareholders and Board of Trustees of

BlackRock Funds III:

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 audits 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.

PricewaterhouseCoopers LLP

New York, New York

February 22, 2013


Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by the Fund during the taxable year ended December 31, 2012:


		January 2012-December 2012
Qualified Dividend Income for Individuals¹		83.67%
Dividends Qualifying for the Dividend Received Deductions for Corporations¹		81.71%
Interest Related Dividends and Qualified Short-Term Capital Gains for Non-U.S. Residents²		14.66%

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

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 Fund distributed long-term capital gains of $0.071368 per share to shareholders on record December 28, 2012.



16	BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012


Master Portfolio Information as of December 31, 2012		Russell 1000^® Index Master Portfolio


Ten Largest Holdings		Percent of Long-Term Investments


Apple, Inc.	3	%
Exxon Mobil Corp.	3
iShares Russell 1000^® Index Fund	2
General Electric Co.	2
Chevron Corp.	1
International Business Machines Corp.	1
Microsoft Corp.	1
AT&T, Inc.	1
Johnson & Johnson	1
Pfizer, Inc.	1


Sector Allocation		Percent of Long-Term Investments


Information Technology	18	%
Financials	16
Consumer Discretionary	12
Health Care	11
Industrials	11
Energy	10
Consumer Staples	10
Materials	4
Utilities	3
Telecommunication Services	3
Investment Companies	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 Master Portfolio management. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.



BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012	17

Schedule of Investments December 31, 2012

Russell 1000^® Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Aerospace & Defense — 2.2%
Alliant Techsystems, Inc.		955	$	59,172
BE Aerospace, Inc. (a)		2,832		139,901
The Boeing Co.		21,692		1,634,709
Engility Holdings, Inc. (a)(b)		511		9,842
Exelis, Inc.		5,479		61,748
General Dynamics Corp.		9,199		637,215
Honeywell International, Inc.		22,565		1,432,201
Huntington Ingalls Industries, Inc.		1,407		60,979
L-3 Communications Holdings, Inc.		2,820		216,068
Lockheed Martin Corp.		7,549		696,697
Northrop Grumman Corp.		7,282		492,118
Precision Castparts Corp. (b)		4,208		797,079
Raytheon Co.		9,652		555,569
Rockwell Collins, Inc. (b)		4,198		244,198
Spirit Aerosystems Holdings, Inc., Class A (a)		3,410		57,868
Textron, Inc.		8,113		201,121
TransDigm Group, Inc. (b)		1,479		201,677
Triumph Group, Inc.		1,448		94,554
United Technologies Corp.		26,393		2,164,490

				9,757,206
Air Freight & Logistics — 0.7%
C.H. Robinson Worldwide, Inc.		4,708		297,640
Expeditors International of Washington, Inc.		6,149		243,193
FedEx Corp.		9,132		837,587
United Parcel Service, Inc., Class B (b)		20,979		1,546,782
UTi Worldwide, Inc.		2,948		39,503

				2,964,705
Airlines — 0.2%
Copa Holdings SA		961		95,572
Delta Air Lines, Inc. (a)		24,597		291,966
Southwest Airlines Co. (b)		22,222		227,553
United Continental Holdings, Inc. (a)(b)		9,612		224,729

				839,820
Auto Components — 0.4%
Allison Transmission Holdings, Inc.		752		15,356
BorgWarner, Inc. (a)(b)		3,318		237,635
Delphi Automotive Plc (a)		9,503		363,490
Gentex Corp. (b)		4,209		79,213
The Goodyear Tire & Rubber Co. (a)		7,110		98,189
Johnson Controls, Inc. (b)		19,696		604,667
Lear Corp.		2,883		135,040
TRW Automotive Holdings Corp. (a)		2,914		156,220
Visteon Corp. (a)		1,532		82,452

				1,772,262
Automobiles — 0.6%
Ford Motor Co. (b)		108,640		1,406,888
General Motors Co. (a)		22,172		639,219
Harley-Davidson, Inc. (b)		6,703		327,374
Tesla Motors, Inc. (a)(b)		2,071		70,145
Thor Industries, Inc. (b)		1,248		46,713

				2,490,339
Beverages — 2.0%
Beam, Inc.		4,562		278,693
Brown-Forman Corp., Class B		4,335		274,189
The Coca-Cola Co.		112,506		4,078,342
Coca-Cola Enterprises, Inc.		8,686		275,607


Common Stocks	Shares		Value

Beverages (concluded)
Constellation Brands, Inc. (a)		4,270	$	151,115
Dr Pepper Snapple Group, Inc.		6,132		270,912
Molson Coors Brewing Co., Class B		3,707		158,623
Monster Beverage Corp. (a)		4,172		220,615
PepsiCo Inc.		45,294		3,099,468

				8,807,564
Biotechnology — 1.7%
Alexion Pharmaceuticals, Inc. (a)		5,562		521,771
Amgen, Inc.		22,523		1,944,185
Ariad Pharmaceuticals, Inc. (a)		4,809		92,237
Biogen Idec, Inc. (a)		6,937		1,017,450
BioMarin Pharmaceutical, Inc. (a)		3,536		174,148
Celgene Corp. (a)		12,756		1,004,152
Gilead Sciences, Inc. (a)		21,932		1,610,905
Incyte Corp. Ltd. (a)		2,737		45,462
Medivation, Inc. (a)		2,098		107,334
Myriad Genetics, Inc. (a)		2,487		67,771
Onyx Pharmaceuticals, Inc. (a)		1,863		140,712
Regeneron Pharmaceuticals, Inc. (a)		2,236		382,513
United Therapeutics Corp. (a)		1,437		76,765
Vertex Pharmaceuticals, Inc. (a)		6,110		256,253

				7,441,658
Building Products — 0.1%
Armstrong World Industries, Inc. (b)		601		30,489
Fortune Brands Home & Security, Inc. (a)		4,619		134,967
Lennox International, Inc.		1,487		78,097
Masco Corp. (b)		10,335		172,181
Owens Corning (a)		3,520		130,205

				545,939
Capital Markets — 2.0%
Affiliated Managers Group, Inc. (a)		1,487		193,533
American Capital Ltd. (a)		9,455		113,460
Ameriprise Financial, Inc. (b)		6,005		376,093
Ares Capital Corp.		7,176		125,580
The Bank of New York Mellon Corp. (b)		34,539		887,652
BlackRock, Inc. (c)		3,688		762,346
The Charles Schwab Corp. (b)		31,109		446,725
E*TRADE Financial Corp. (a)		8,350		74,733
Eaton Vance Corp. (b)		3,345		106,538
Federated Investors, Inc., Class B (b)		2,618		52,962
Franklin Resources, Inc.		4,031		506,697
The Goldman Sachs Group, Inc.		14,245		1,817,092
Invesco Ltd.		12,977		338,570
Janus Capital Group, Inc. (b)		5,365		45,710
Jefferies Group, Inc. (b)		4,132		76,731
Lazard Ltd, Class A		3,315		98,920
Legg Mason, Inc. (b)		4,014		103,240
LPL Financial Holdings, Inc. (b)		1,446		40,719
Morgan Stanley		44,615		853,039
Northern Trust Corp.		6,241		313,049
Raymond James Financial, Inc. (b)		3,290		126,764
SEI Investments Co.		3,989		93,103
State Street Corp.		14,148		665,097
T Rowe Price Group, Inc.		7,386		481,050
TD Ameritrade Holding Corp. (b)		6,713		112,846
Waddell & Reed Financial, Inc. (b)		2,512		87,468

				8,899,717

See Notes to Financial Statements.



18	BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

Russell 1000^® Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Chemicals — 2.5%
Air Products & Chemicals, Inc.		6,122	$	514,370
Airgas, Inc.		1,988		181,485
Albemarle Corp.		2,581		160,332
Ashland, Inc.		2,271		182,611
Cabot Corp.		1,854		73,771
Celanese Corp.		4,527		201,587
CF Industries Holdings, Inc.		1,900		386,004
Cytec Industries, Inc.		1,336		91,957
The Dow Chemical Co. (b)		34,617		1,118,821
E.I. du Pont de Nemours & Co.		27,136		1,220,306
Eastman Chemical Co. (b)		4,421		300,849
Ecolab, Inc. (b)		7,530		541,407
FMC Corp. (b)		3,970		232,324
Huntsman Corp.		5,560		88,404
International Flavors & Fragrances, Inc.		2,346		156,103
Intrepid Potash, Inc. (b)		1,561		33,234
Kronos Worldwide, Inc. (b)		538		10,491
LyondellBasell Industries NV, Class A		9,301		530,994
Monsanto Co.		15,448		1,462,153
The Mosaic Co.		8,586		486,225
NewMarket Corp. (b)		251		65,812
PPG Industries, Inc.		4,410		596,894
Praxair, Inc.		8,650		946,742
Rockwood Holdings, Inc.		1,993		98,574
RPM International, Inc.		3,807		111,774
The Sherwin-Williams Co. (b)		2,515		386,857
Sigma-Aldrich Corp. (b)		3,500		257,530
The Scotts Miracle-Gro Co., Class A (b)		1,222		53,829
Valspar Corp. (b)		2,695		168,168
Westlake Chemical Corp. (b)		574		45,518
WR Grace & Co. (a)		2,159		145,150

				10,850,276
Commercial Banks — 2.7%
Associated Banc-Corp.		5,095		66,846
Bank of Hawaii Corp. (b)		1,295		57,045
BankUnited, Inc. (b)		1,005		24,562
BB&T Corp.		20,230		588,895
BOK Financial Corp.		735		40,028
CapitalSource, Inc.		6,602		50,043
CIT Group, Inc. (a)		5,813		224,614
City National Corp. (b)		1,366		67,644
Comerica, Inc.		5,692		172,695
Commerce Bancshares, Inc. (b)		2,298		80,568
Cullen/Frost Bankers, Inc. (b)		1,552		84,227
East West Bancorp, Inc. (b)		4,202		90,301
Fifth Third Bancorp (b)		26,639		404,646
First Citizens Bancshares, Inc., Class A		147		24,035
First Horizon National Corp. (b)		7,394		73,275
First Niagara Financial Group, Inc.		10,280		81,520
First Republic Bank		2,960		97,029
Fulton Financial Corp. (b)		5,712		54,892
Huntington Bancshares, Inc.		25,024		159,903
KeyCorp		27,591		232,316
M&T Bank Corp. (b)		3,664		360,794
PNC Financial Services Group, Inc. (c)		15,313		892,901
Popular, Inc. (a)		2,957		61,476
Regions Financial Corp.		40,890		291,137
Signature Bank/New York NY (a)		1,410		100,589
SunTrust Banks, Inc.		15,582		441,750


Common Stocks	Shares		Value

Commercial Banks (concluded)
SVB Financial Group (a)		1,293	$	72,369
Synovus Financial Corp.		3,304		8,095
TCF Financial Corp. (b)		4,637		56,340
U.S. Bancorp		54,856		1,752,101
Valley National Bancorp (b)		5,612		52,192
Wells Fargo & Co.		141,893		4,849,903
Zions BanCorp. (b)		5,329		114,041

				11,728,772
Commercial Services & Supplies — 0.6%
The ADT Corp.		6,700		311,483
Avery Dennison Corp. (b)		3,004		104,900
Cintas Corp. (b)		3,181		130,103
Clean Harbors, Inc. (a)		1,553		85,431
Copart, Inc. (a)		2,963		87,408
Corrections Corp. of America (b)		2,898		102,792
Covanta Holding Corp.		3,096		57,028
Iron Mountain, Inc.		4,815		149,506
KAR Auction Services, Inc.		816		16,516
Pitney Bowes, Inc. (b)		4,910		52,242
R.R. Donnelley & Sons Co. (b)		5,130		46,170
Republic Services, Inc. (b)		8,778		257,459
Rollins, Inc. (b)		1,821		40,135
Stericycle, Inc. (a)		2,463		229,724
Tyco International Ltd.		13,401		391,979
Waste Connections, Inc. (b)		3,569		120,597
Waste Management, Inc. (b)		13,403		452,217

				2,635,690
Communications Equipment — 1.7%
Acme Packet, Inc. (a)		1,657		36,653
Brocade Communications Systems, Inc. (a)		13,410		71,475
Cisco Systems, Inc.		155,139		3,048,481
EchoStar Corp. (a)		1,133		38,771
F5 Networks, Inc. (a)		2,298		223,251
Harris Corp. (b)		3,293		161,225
JDS Uniphase Corp. (a)		6,727		91,084
Juniper Networks, Inc. (a)		15,331		301,561
Motorola Solutions, Inc. (b)		8,456		470,830
Palo Alto Networks, Inc. (a)(b)		222		11,881
Polycom, Inc. (a)		5,148		53,848
QUALCOMM, Inc.		49,647		3,079,107
Riverbed Technology, Inc. (a)		4,508		88,898

				7,677,065
Computers & Peripherals — 4.2%
Apple, Inc.		27,080		14,434,452
Dell, Inc.		42,690		432,450
Diebold, Inc.		1,797		55,006
EMC Corp. (a)		60,807		1,538,417
Fusion-io, Inc. (a)(b)		1,919		44,003
Hewlett-Packard Co.		57,259		815,941
Lexmark International, Inc., Class A (b)		2,024		46,937
NCR Corp. (a)		4,594		117,055
NetApp, Inc. (a)		10,509		352,577
SanDisk Corp. (a)		7,054		307,272
Stratasys Ltd. (a)(b)		856		68,608
Western Digital Corp.		6,417		272,658

				18,485,376

See Notes to Financial Statements.



BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012	19

Schedule of Investments (continued)

Russell 1000^® Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Construction & Engineering — 0.3%
AECOM Technology Corp. (a)		3,305	$	78,659
Chicago Bridge & Iron Co. NV		2,806		130,058
Fluor Corp.		4,896		287,591
Jacobs Engineering Group, Inc. (a)		3,734		158,956
KBR, Inc.		4,294		128,477
Quanta Services, Inc. (a)		6,048		165,050
The Shaw Group, Inc. (a)		1,918		89,398
URS Corp.		2,203		86,490

				1,124,679
Construction Materials — 0.1%
Martin Marietta Materials, Inc.		1,324		124,827
Vulcan Materials Co. (b)		3,745		194,927

				319,754
Consumer Finance — 0.8%
American Express Co.		28,997		1,666,747
Capital One Financial Corp.		16,806		973,572
Discover Financial Services		15,356		591,974
SLM Corp. (b)		13,859		237,405

				3,469,698
Containers & Packaging — 0.3%
Aptargroup, Inc. (b)		1,935		92,338
Ball Corp. (b)		4,535		202,941
Bemis Co., Inc.		2,991		100,079
Crown Holdings, Inc. (a)		4,308		158,578
Greif Inc, Class A		914		40,673
Owens-Illinois, Inc. (a)		4,783		101,734
Packaging Corp. of America (b)		2,840		109,255
Rock-Tenn Co, Class A		2,045		142,966
Sealed Air Corp. (b)		5,634		98,651
Silgan Holdings, Inc.		1,396		58,060
Sonoco Products Co.		2,927		87,020

				1,192,295
Distributors — 0.1%
Genuine Parts Co. (b)		4,514		287,000
LKQ Corp. (a)		8,533		180,046

				467,046
Diversified Consumer Services — 0.1%
Apollo Group, Inc., Class A (a)		2,732		57,153
DeVry, Inc.		1,872		44,423
H&R Block, Inc.		7,941		147,464
ITT Educational Services, Inc. (a)(b)		681		11,788
Service Corp. International		6,311		87,155
Weight Watchers International, Inc. (b)		761		39,846

				387,829
Diversified Financial Services — 3.1%
Bank of America Corp. (b)		312,103		3,620,395
CBOE Holdings, Inc.		2,553		75,211
Citigroup, Inc.		84,918		3,359,356
CME Group, Inc. (b)		9,622		487,932
Interactive Brokers Group, Inc., Class A		1,177		16,101
IntercontinentalExchange, Inc. (a)		2,106		260,744
JPMorgan Chase & Co.		110,246		4,847,516
Leucadia National Corp. (b)		5,711		135,865
Moody’s Corp.		5,679		285,767
MSCI, Inc. (a)		3,519		109,054


Common Stocks	Shares		Value

Diversified Financial Services (concluded)
The NASDAQ OMX Group, Inc.		3,389	$	84,759
NYSE Euronext		7,353		231,914

				13,514,614
Diversified Telecommunication Services — 2.4%
AT&T, Inc.		169,800		5,723,958
CenturyLink, Inc. (b)		17,989		703,730
Frontier Communications Corp. (b)		28,890		123,649
Level 3 Communications, Inc. (a)		4,708		108,802
tw telecom, Inc. (a)		4,357		110,973
Verizon Communications, Inc.		82,279		3,560,212
Windstream Corp. (b)		17,027		140,983

				10,472,307
Electric Utilities — 1.8%
American Electric Power Co., Inc.		14,024		598,544
Duke Energy Corp.		20,382		1,300,372
Edison International		9,433		426,277
Entergy Corp.		5,129		326,974
Exelon Corp.		24,683		734,072
FirstEnergy Corp.		12,109		505,672
Great Plains Energy, Inc.		3,974		80,712
Hawaiian Electric Industries, Inc. (b)		2,826		71,046
ITC Holdings Corp. (b)		1,486		114,288
N.V. Energy, Inc. (b)		6,829		123,878
NextEra Energy, Inc. (b)		12,078		835,677
Northeast Utilities (b)		9,080		354,846
OGE Energy Corp.		2,853		160,652
Pepco Holdings, Inc. (b)		6,605		129,524
Pinnacle West Capital Corp. (b)		3,168		161,505
PPL Corp.		16,794		480,812
Southern Co.		25,156		1,076,928
Westar Energy, Inc. (b)		3,656		104,635
Xcel Energy, Inc.		14,098		376,558

				7,962,972
Electrical Equipment — 0.7%
AMETEK, Inc.		6,980		262,239
The Babcock & Wilcox Co. (b)		3,450		90,390
Eaton Corp. Plc		13,347		723,407
Emerson Electric Co. (b)		21,244		1,125,082
General Cable Corp. (a)(b)		1,446		43,973
GrafTech International Ltd. (a)		3,355		31,503
Hubbell, Inc. Class B		1,714		145,056
Polypore International, Inc. (a)(b)		1,324		61,566
Regal-Beloit Corp.		1,211		85,339
Rockwell Automation, Inc.		4,132		347,047
Roper Industries, Inc.		2,821		314,485

				3,230,087
Electronic Equipment, Instruments & Components — 0.5%
Amphenol Corp., Class A		4,690		303,443
Arrow Electronics, Inc. (a)		3,171		120,752
Avnet, Inc. (a)		4,123		126,205
AVX Corp.		1,380		14,876
Corning, Inc.		43,943		554,561
Dolby Laboratories, Inc., Class A		1,444		42,352
FLIR Systems, Inc.		4,476		99,860
Ingram Micro, Inc., Class A (a)		4,448		75,260
IPG Photonics Corp.		909		60,585
Itron, Inc. (a)		1,137		50,653

See Notes to Financial Statements.



20	BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

Russell 1000^® Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Electronic Equipment, Instruments & Components (concluded)
Jabil Circuit, Inc.		5,366	$	103,510
Molex, Inc.		3,999		109,293
National Instruments Corp. (b)		2,732		70,513
Tech Data Corp. (a)		1,074		48,899
Trimble Navigation Ltd. (a)		3,621		216,463
Vishay Intertechnology, Inc. (a)		3,865		41,085

				2,038,310
Energy Equipment & Services — 1.6%
Atwood Oceanics, Inc. (a)		1,664		76,195
Baker Hughes, Inc. (b)		12,696		518,505
Cameron International Corp. (a)		7,131		402,616
CARBO Ceramics, Inc.		562		44,027
Diamond Offshore Drilling, Inc. (b)		1,991		135,308
Dresser-Rand Group, Inc. (a)		2,188		122,834
FMC Technologies, Inc. (a)		6,922		296,469
Halliburton Co.		26,729		927,229
Helmerich & Payne, Inc. (b)		2,776		155,484
McDermott International, Inc. (a)		6,879		75,807
Nabors Industries Ltd. (a)		8,400		121,380
National Oilwell Varco, Inc.		12,342		843,576
Oceaneering International, Inc. (b)		3,134		168,578
Oil States International, Inc. (a)		1,584		113,319
Patterson-UTI Energy, Inc. (b)		4,545		84,673
Rowan Cos. Plc, Class A (a)		3,593		112,353
RPC, Inc. (b)		1,769		21,653
Schlumberger Ltd. (b)		38,621		2,676,049
SEACOR Holdings, Inc.		611		51,202
Superior Energy Services, Inc. (a)		4,573		94,752
Tidewater, Inc.		1,472		65,769
Unit Corp. (a)		1,424		64,151

				7,171,929
Food & Staples Retailing — 2.0%
Costco Wholesale Corp.		12,546		1,239,169
CVS Caremark Corp.		37,112		1,794,365
The Fresh Market, Inc. (a)		782		37,606
The Kroger Co.		15,276		397,482
Safeway, Inc. (b)		6,956		125,834
Sysco Corp. (b)		16,961		536,985
Wal-Mart Stores, Inc.		48,948		3,339,722
Walgreen Co. (b)		24,984		924,658
Whole Foods Market, Inc. (b)		5,315		485,419

				8,881,240
Food Products — 1.7%
Archer Daniels Midland Co.		19,068		522,272
Bunge Ltd.		4,225		307,115
Campbell Soup Co. (b)		5,056		176,404
ConAgra Foods, Inc.		12,026		354,767
Dean Foods Co. (a)		5,366		88,593
Flowers Foods, Inc. (b)		3,273		76,163
General Mills, Inc.		18,744		757,445
Green Mountain Coffee Roasters, Inc. (a)(b)		3,983		164,737
H.J. Heinz Co.		9,263		534,290
The Hershey Co. (b)		4,345		313,796
Hillshire Brands Co.		3,445		96,942
Hormel Foods Corp. (b)		3,890		121,407
Ingredion, Inc. (b)		2,212		142,519
The J.M. Smucker Co. (b)		3,243		279,676
Kellogg Co.		6,996		390,727


Common Stocks	Shares		Value

Food Products (concluded)
Kraft Foods Group, Inc.		17,114	$	778,173
McCormick & Co., Inc. (b)		3,838		243,828
Mead Johnson Nutrition Co.		5,903		388,949
Mondelez International, Inc.		51,345		1,307,757
Ralcorp Holdings, Inc. (a)		1,598		143,261
Smithfield Foods, Inc. (a)		4,337		93,549
Tyson Foods, Inc., Class A		8,410		163,154
WhiteWave Foods Co. Class A (a)		657		10,210

				7,455,734
Gas Utilities — 0.2%
AGL Resources, Inc.		3,395		135,698
Atmos Energy Corp.		2,616		91,874
National Fuel Gas Co. (b)		2,098		106,347
ONEOK, Inc. (b)		6,017		257,227
Questar Corp.		5,168		102,120
UGI Corp.		3,255		106,471

				799,737
Health Care Equipment & Supplies — 2.4%
Abbott Laboratories (b)		45,567		2,984,638
Alere, Inc. (a)		2,287		42,310
Baxter International, Inc.		15,945		1,062,894
Becton Dickinson & Co. (b)		5,869		458,897
Boston Scientific Corp. (a)		41,374		237,073
C.R. Bard, Inc.		2,429		237,410
CareFusion Corp. (a)		6,423		183,569
The Cooper Cos., Inc.		1,370		126,698
Covidien Plc		13,966		806,397
DENTSPLY International, Inc.		4,102		162,480
Edwards Lifesciences Corp. (a)		3,318		299,184
Hill-Rom Holdings, Inc.		1,766		50,331
Hologic, Inc. (a)		7,657		153,370
IDEXX Laboratories, Inc. (a)		1,593		147,830
Intuitive Surgical, Inc. (a)		1,149		563,435
Medtronic, Inc.		30,036		1,232,077
ResMed, Inc. (b)		4,132		171,767
Sirona Dental Systems, Inc. (a)		1,613		103,974
St. Jude Medical, Inc.		9,086		328,368
Stryker Corp.		8,967		491,571
Teleflex, Inc. (b)		1,189		84,788
Thoratec Corp. (a)		1,722		64,609
Varian Medical Systems, Inc. (a)		3,228		226,735
Zimmer Holdings, Inc.		5,100		339,966

				10,560,371
Health Care Providers & Services — 1.9%
Aetna, Inc. (b)		10,059		465,732
AmerisourceBergen Corp. (b)		7,187		310,335
Brookdale Senior Living, Inc. (a)		2,843		71,985
Cardinal Health, Inc.		10,020		412,624
Catamaran Corp. (a)		5,924		279,080
Cigna Corp. (b)		8,348		446,284
Community Health Systems, Inc.		2,649		81,430
Coventry Health Care, Inc.		3,874		173,671
DaVita HealthCare Partners, Inc. (a)		2,721		300,752
Express Scripts Holding Co. (a)		23,326		1,259,604
HCA Holdings, Inc.		4,774		144,032
Health Management Associates, Inc. (a)		7,360		68,595
Health Net, Inc. (a)		2,385		57,956
Henry Schein, Inc. (a)		2,601		209,276

See Notes to Financial Statements.



BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012	21

Schedule of Investments (continued)

Russell 1000^® Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Health Care Providers & Services (concluded)
Humana, Inc.		4,724	$	324,208
Laboratory Corp. of America Holdings (a)(b)		2,802		242,709
LifePoint Hospitals, Inc. (a)		1,405		53,039
McKesson Corp.		6,816		660,879
MEDNAX, Inc. (a)		1,424		113,236
Omnicare, Inc. (b)		3,269		118,011
Patterson Cos., Inc. (b)		2,709		92,729
Quest Diagnostics Inc. (b)		4,593		267,634
Tenet Healthcare Corp. (a)		3,001		97,442
UnitedHealth Group, Inc.		30,044		1,629,587
Universal Health Services, Inc.		2,589		125,178
VCA Antech, Inc. (a)		2,530		53,257
WellPoint, Inc.		8,673		528,359

				8,587,624
Health Care Technology — 0.1%
Allscripts Healthcare Solutions, Inc. (a)		5,052		47,590
Cerner Corp. (a)		4,195		325,700

				373,290
Hotels, Restaurants & Leisure — 1.8%
Bally Technologies, Inc. (a)		1,190		53,205
Brinker International, Inc. (b)		2,160		66,938
Carnival Corp.		12,033		442,453
Chipotle Mexican Grill, Inc. (a)		918		273,068
Choice Hotels International, Inc. (b)		765		25,719
Darden Restaurants, Inc.		3,723		167,796
Dunkin’ Brands Group, Inc.		2,038		67,621
Hyatt Hotels Corp, Class A (a)		1,286		49,601
International Game Technology		7,727		109,492
Las Vegas Sands Corp.		11,506		531,117
Marriott International, Inc., Class A		7,359		274,270
McDonald’s Corp.		29,431		2,596,109
MGM Resorts International (a)		11,502		133,883
Panera Bread Co., Class A (a)		819		130,082
Penn National Gaming, Inc. (a)		1,915		94,046
Royal Caribbean Cruises Ltd. (b)		4,382		148,988
Starbucks Corp.		21,965		1,177,763
Starwood Hotels & Resorts Worldwide, Inc.		5,722		328,214
The Wendy’s Co.		8,218		38,625
Wyndham Worldwide Corp.		4,224		224,759
Wynn Resorts Ltd.		2,307		259,514
Yum! Brands, Inc.		13,337		885,577

				8,078,840
Household Durables — 0.4%
D.R. Horton, Inc. (b)		8,044		159,110
Garmin Ltd. (b)		3,154		128,746
Harman International Industries, Inc.		2,050		91,512
Jarden Corp. (b)		2,305		119,169
Leggett & Platt, Inc. (b)		4,058		110,459
Lennar Corp., Class A (b)		4,682		181,053
Mohawk Industries, Inc. (a)		1,649		149,185
Newell Rubbermaid, Inc.		8,391		186,868
NVR, Inc. (a)		147		135,240
PulteGroup, Inc. (a)		9,905		179,875
Tempur-Pedic International, Inc. (a)		1,710		53,848
Toll Brothers, Inc. (a)		4,159		134,460
Tupperware Brands Corp.		1,621		103,906
Whirlpool Corp.		2,236		227,513

				1,960,944


Common Stocks	Shares		Value

Household Products — 1.9%
Church & Dwight Co., Inc. (b)		4,021	$	215,405
The Clorox Co.		3,765		275,673
Colgate-Palmolive Co.		13,821		1,444,847
Energizer Holdings, Inc.		1,858		148,603
Kimberly-Clark Corp. (b)		11,355		958,703
The Procter & Gamble Co.		79,357		5,387,547

				8,430,778
Independent Power Producers & Energy Traders — 0.1%
The AES Corp. (b)		18,572		198,720
Calpine Corp. (a)		11,712		212,339
NRG Energy, Inc. (b)		9,312		214,083

				625,142
Industrial Conglomerates — 2.1%
3M Co. (b)		20,095		1,865,821
Carlisle Cos., Inc.		1,800		105,768
Danaher Corp. (b)		16,811		939,735
General Electric Co.		306,855		6,440,886

				9,352,210
Insurance — 3.7%
ACE Ltd.		9,808		782,678
Aflac, Inc.		13,541		719,298
Alleghany Corp. (a)		490		164,356
Allied World Assurance Co. Holdings Ltd.		1,059		83,449
The Allstate Corp.		14,204		570,575
American Financial Group, Inc.		2,429		95,994
American International Group, Inc. (a)		18,669		659,016
American National Insurance Co.		198		13,521
Aon Plc		9,452		525,531
Arch Capital Group Ltd. (a)		3,920		172,558
Arthur J Gallagher & Co.		3,429		118,815
Aspen Insurance Holdings Ltd.		2,096		67,240
Assurant, Inc.		2,363		81,996
Assured Guaranty Ltd.		5,012		71,321
Axis Capital Holdings Ltd.		3,112		107,800
Berkshire Hathaway, Inc., Class B (a)		51,576		4,626,367
Brown & Brown, Inc.		3,402		86,615
The Chubb Corp.		7,817		588,776
Cincinnati Financial Corp.		4,226		165,490
CNA Financial Corp.		726		20,335
Endurance Specialty Holdings Ltd.		1,261		50,049
Erie Indemnity Co., Class A (b)		735		50,877
Everest Re Group Ltd.		1,526		167,784
Fidelity National Financial, Inc.		6,448		151,850
Genworth Financial, Inc., Class A (a)		14,247		106,995
The Hanover Insurance Group, Inc.		1,282		49,665
Hartford Financial Services Group, Inc. (b)		12,763		286,402
HCC Insurance Holdings, Inc. (b)		2,931		109,063
Kemper Corp. (b)		1,405		41,448
Lincoln National Corp. (b)		8,262		213,986
Loews Corp.		9,031		368,013
Markel Corp. (a)		279		120,924
Marsh & McLennan Cos., Inc.		15,818		545,246
MBIA, Inc. (a)		4,050		31,793
Mercury General Corp.		107		4,247
MetLife, Inc.		24,634		811,444
Old Republic International Corp. (b)		7,565		80,567
PartnerRe Ltd.		1,835		147,699
Principal Financial Group, Inc. (b)		8,688		247,782

See Notes to Financial Statements.



22	BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

Russell 1000^® Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Insurance (concluded)
ProAssurance Corp.		1,792	$	75,604
The Progressive Corp.		17,695		373,365
Protective Life Corp. (b)		2,373		67,820
Prudential Financial, Inc.		13,527		721,395
Reinsurance Group of America, Inc.		2,133		114,158
RenaissanceRe Holdings Ltd.		1,471		119,533
StanCorp Financial Group, Inc. (b)		1,277		46,828
Torchmark Corp.		2,849		147,208
The Travelers Cos., Inc.		11,266		809,124
Unum Group		8,273		172,244
Validus Holdings Ltd.		2,996		103,602
White Mountains Insurance Group Ltd.		173		89,095
WR Berkley Corp.		3,210		121,145
XL Group Plc		9,023		226,116

				16,494,802
Internet & Catalog Retail — 1.0%
Amazon.com, Inc. (a)		10,477		2,631,194
Expedia, Inc.		2,530		155,468
Groupon, Inc. (a)(b)		1,410		6,881
HomeAway, Inc. (a)		891		19,602
Liberty Interactive Corp. Series A (a)		16,173		318,285
Liberty Ventures, Series A (a)		1,090		73,858
NetFlix, Inc. (a)(b)		1,607		149,097
priceline.com, Inc. (a)		1,441		895,149
TripAdvisor, Inc. (a)		2,511		105,362

				4,354,896
Internet Software & Services — 2.1%
Akamai Technologies, Inc. (a)		5,187		212,200
AOL, Inc. (a)(b)		2,352		69,643
eBay, Inc. (a)		33,542		1,711,313
Equinix, Inc. (a)		1,392		287,030
Facebook, Inc. (a)		12,194		324,726
Google, Inc., Class A (a)		7,496		5,317,438
IAC/InterActiveCorp		2,276		107,655
LinkedIn Corp. (a)		1,791		205,643
Rackspace Hosting, Inc. (a)		3,157		234,470
VeriSign, Inc. (a)		4,572		177,485
Yahoo!, Inc. (a)		35,290		702,271

				9,349,874
IT Services — 3.6%
Accenture Plc, Class A		18,646		1,239,959
Alliance Data Systems Corp. (a)		1,458		211,060
Amdocs Ltd.		4,883		165,973
Automatic Data Processing, Inc. (b)		14,163		807,433
Booz Allen Hamilton Holding Corp. (b)		718		9,994
Broadridge Financial Solutions, Inc.		3,637		83,214
Cognizant Technology Solutions Corp., Class A (a)		8,817		652,899
Computer Sciences Corp.		4,492		179,905
CoreLogic, Inc. (a)		2,825		76,049
DST Systems, Inc.		962		58,297
Fidelity National Information Services, Inc.		7,263		252,825
Fiserv, Inc. (a)		3,951		312,247
FleetCor Technologies, Inc. (a)		1,424		76,398
Gartner, Inc. (a)		2,699		124,208
Genpact Ltd.		3,601		55,815
Global Payments, Inc.		2,277		103,148
International Business Machines Corp.		31,569		6,047,042
Jack Henry & Associates, Inc. (b)		2,533		99,446


Common Stocks	Shares		Value

IT Services (concluded)
Lender Processing Services, Inc.		2,482	$	61,107
MasterCard, Inc., Class A		3,140		1,542,619
NeuStar Inc, Class A (a)		1,900		79,667
Paychex, Inc. (b)		9,383		292,187
SAIC, Inc. (b)		8,246		93,345
Teradata Corp. (a)		4,884		302,271
Total System Services, Inc.		4,699		100,652
Vantiv Inc, Class A (a)		1,104		22,544
VeriFone Systems, Inc. (a)		3,128		92,839
Visa, Inc., Class A		15,134		2,294,012
The Western Union Co.		17,743		241,482

				15,678,637
Leisure Equipment & Products — 0.1%
Hasbro, Inc. (b)		3,339		119,870
Mattel, Inc.		9,861		361,110
Polaris Industries, Inc. (b)		1,872		157,529

				638,509
Life Sciences Tools & Services — 0.6%
Agilent Technologies, Inc.		10,065		412,061
Bio-Rad Laboratories, Inc., Class A (a)		595		62,505
Bruker Corp. (a)		2,719		41,519
Charles River Laboratories International, Inc. (a)		1,400		52,458
Covance, Inc. (a)		1,611		93,067
Illumina, Inc. (a)		3,573		198,623
Life Technologies Corp. (a)		5,170		253,744
Mettler-Toledo International, Inc. (a)		910		175,903
PerkinElmer, Inc.		3,301		104,774
QIAGEN NV (a)(b)		6,814		123,674
Techne Corp.		1,076		73,534
Thermo Fisher Scientific, Inc.		10,636		678,364
Waters Corp. (a)		2,573		224,160

				2,494,386
Machinery — 2.1%
AGCO Corp. (a)		2,813		138,175
Caterpillar, Inc.		18,896		1,692,704
CNH Global NV (a)		805		32,433
Colfax Corp. (a)		1,241		50,074
Crane Co.		1,437		66,504
Cummins, Inc.		5,565		602,968
Deere & Co. (b)		11,518		995,386
Donaldson Co., Inc.		4,309		141,508
Dover Corp.		5,317		349,380
Flowserve Corp.		1,480		217,264
Gardner Denver, Inc.		1,451		99,393
Graco, Inc.		1,757		90,468
Harsco Corp.		2,292		53,862
IDEX Corp. (b)		2,432		113,161
Illinois Tool Works, Inc. (b)		12,330		749,787
Ingersoll-Rand Plc		8,649		414,806
ITT Corp.		2,631		61,723
Joy Global, Inc.		3,063		195,358
Kennametal, Inc. (b)		2,326		93,040
Lincoln Electric Holdings, Inc.		2,422		117,903
Navistar International Corp. (a)		2,019		43,954
Nordson Corp.		1,861		117,466
Oshkosh Corp. (a)		2,674		79,284
PACCAR, Inc.		10,328		466,929
Pall Corp. (b)		3,352		201,992

See Notes to Financial Statements.



BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012	23

Schedule of Investments (continued)

Russell 1000^® Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Machinery (concluded)
Parker Hannifin Corp.		4,373	$	371,967
Pentair Ltd. (b)		6,083		298,979
Snap-on, Inc. (b)		1,681		132,782
SPX Corp.		1,471		103,191
Stanley Black & Decker, Inc.		4,948		366,004
Terex Corp. (a)		3,214		90,346
The Manitowoc Co., Inc.		3,815		59,819
Timken Co.		2,528		120,914
Toro Co.		1,749		75,172
Trinity Industries, Inc. (b)		2,338		83,747
Valmont Industries, Inc. (b)		678		92,581
WABCO Holdings, Inc. (a)		1,864		121,514
Wabtec Corp.		1,394		122,031
Xylem, Inc.		5,366		145,419

				9,369,988
Marine — 0.0%
Kirby Corp. (a)		1,622		100,385
Matson, Inc.		1,205		29,788

				130,173
Media — 3.7%
AMC Networks, Inc., Class A (a)		1,665		82,417
Cablevision Systems Corp., New York Group, Class A (b)		5,855		87,474
CBS Corp., Class B		18,768		714,122
Charter Communications, Inc. (a)		1,415		107,880
Cinemark Holdings, Inc.		3,343		86,851
Clear Channel Outdoor Holdings, Inc., Class A (b)		1,325		9,302
Comcast Corp, Class A		77,771		2,907,080
DIRECTV (a)		17,254		865,461
Discovery Communications, Inc., Class A (a)		7,243		459,786
DISH Network Corp.		5,911		215,160
DreamWorks Animation SKG, Inc. (a)(b)		1,965		32,560
Gannett Co., Inc. (b)		6,798		122,432
The Interpublic Group of Cos., Inc.		12,821		141,287
John Wiley & Sons, Inc., Class A (b)		1,335		51,972
Lamar Advertising Co. (a)		2,241		86,839
Liberty Global, Inc. (a)		7,596		478,472
Liberty Media Corp. — Liberty Capital (a)		3,143		364,619
Madison Square Garden, Inc. (a)		1,769		78,455
The McGraw-Hill Cos., Inc.		8,098		442,718
Morningstar, Inc. (b)		694		43,604
News Corp., Class A		60,661		1,549,282
Omnicom Group, Inc. (b)		7,893		394,334
Pandora Media, Inc. (a)(b)		2,830		25,979
Regal Entertainment Group (b)		2,409		33,606
Scripps Networks Interactive, Inc., Class A (b)		2,458		142,367
Sirius XM Radio, Inc. (b)		110,045		318,030
Thomson Reuters Corp.		10,748		312,337
Time Warner Cable, Inc.		9,049		879,472
Time Warner, Inc. (b)		27,799		1,329,626
Viacom, Inc., Class B		15,284		806,078
Virgin Media, Inc. (b)		8,041		295,507
The Walt Disney Co.		51,763		2,577,280
The Washington Post Co., Class B (b)		123		44,921

				16,087,310
Metals & Mining — 0.8%
Alcoa, Inc.		30,880		268,038
Allegheny Technologies, Inc.		3,113		94,511
Allied Nevada Gold Corp. (a)		2,625		79,091


Common Stocks	Shares		Value

Metals & Mining (concluded)
Carpenter Technology Corp. (b)		1,302	$	67,222
Cliffs Natural Resources, Inc. (b)		4,123		158,983
Commercial Metals Co. (b)		3,300		49,038
Compass Minerals International, Inc. (b)		969		72,394
Freeport-McMoRan Copper & Gold, Inc.		27,485		939,987
Molycorp, Inc. (a)(b)		2,096		19,786
Newmont Mining Corp.		14,206		659,727
Nucor Corp.		9,180		396,392
Reliance Steel & Aluminum Co.		2,174		135,005
Royal Gold, Inc.		1,854		150,749
Southern Copper Corp. (b)		4,697		177,829
Steel Dynamics, Inc.		6,375		87,529
Tahoe Resources, Inc. (a)(b)		2,304		42,209
United States Steel Corp. (b)		4,176		99,681
Walter Energy, Inc.		1,778		63,795

				3,561,966
Multi-Utilities — 1.1%
Alliant Energy Corp. (b)		3,211		140,995
Ameren Corp.		7,023		215,747
Centerpoint Energy, Inc.		12,369		238,103
CMS Energy Corp.		7,572		184,606
Consolidated Edison, Inc. (b)		8,481		471,035
Dominion Resources, Inc.		16,549		857,238
DTE Energy Co.		4,925		295,746
Integrys Energy Group, Inc.		2,265		118,278
MDU Resources Group, Inc.		5,463		116,034
NiSource, Inc. (b)		8,966		223,164
PG&E Corp.		12,228		491,321
Public Service Enterprise Group, Inc. (b)		14,648		448,229
SCANA Corp. (b)		3,391		154,765
Sempra Energy		6,978		495,019
TECO Energy, Inc. (b)		6,249		104,733
Vectren Corp.		2,399		70,531
Wisconsin Energy Corp.		6,671		245,826

				4,871,370
Multiline Retail — 0.7%
Big Lots, Inc. (a)		1,737		49,435
Dillard’s Inc, Class A		862		72,210
Dollar General Corp. (a)		5,347		235,749
Dollar Tree, Inc. (a)		6,715		272,361
Family Dollar Stores, Inc.		2,797		177,358
J.C. Penney Co., Inc. (b)		4,637		91,395
Kohl’s Corp.		6,911		297,035
Macy’s, Inc.		12,004		468,396
Nordstrom, Inc. (b)		4,552		243,532
Sears Holdings Corp. (a)(b)		1,053		43,552
Target Corp.		19,148		1,132,987

				3,084,010
Office Electronics — 0.1%
Xerox Corp.		36,839		251,242
Zebra Technologies Corp., Class A (a)		1,483		58,252

				309,494
Oil, Gas & Consumable Fuels — 8.2%
Alpha Natural Resources, Inc. (a)		6,267		61,041
Anadarko Petroleum Corp.		14,467		1,075,043
Apache Corp.		11,318		888,463
Cabot Oil & Gas Corp.		6,075		302,171

See Notes to Financial Statements.



24	BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012

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)
Cheniere Energy, Inc. (a)		6,204	$	116,511
Chesapeake Energy Corp. (b)		19,176		318,705
Chevron Corp. (b)		57,131		6,178,146
Cimarex Energy Co. (b)		2,481		143,228
Cobalt International Energy, Inc. (a)		5,324		130,757
Concho Resources, Inc. (a)		3,011		242,566
ConocoPhillips		36,622		2,123,710
CONSOL Energy, Inc.		6,587		211,443
Continental Resources, Inc. (a)		1,226		90,099
Denbury Resources, Inc. (a)		11,306		183,157
Devon Energy Corp. (b)		11,710		609,388
Energen Corp. (b)		2,096		94,509
EOG Resources, Inc.		7,807		943,008
EQT Corp.		3,810		224,714
EXCO Resources, Inc. (b)		3,537		23,945
Exxon Mobil Corp.		135,429		11,721,380
Golar LNG Ltd.		1,237		45,497
Hess Corp.		8,813		466,736
HollyFrontier Corp.		5,987		278,695
Kinder Morgan, Inc.		14,146		499,778
Kosmos Energy Ltd. (a)		1,963		24,243
Laredo Petroleum Holdings, Inc. (a)(b)		593		10,769
Marathon Oil Corp.		20,424		626,200
Marathon Petroleum Corp.		9,866		621,558
Murphy Oil Corp. (b)		5,622		334,790
Newfield Exploration Co. (a)		3,907		104,629
Noble Energy, Inc. (b)		5,148		523,758
Occidental Petroleum Corp.		23,489		1,799,492
Peabody Energy Corp.		7,884		209,793
Phillips 66		18,107		961,482
Pioneer Natural Resources Co.		3,562		379,674
Plains Exploration & Production Co. (a)		3,731		175,133
QEP Resources, Inc.		5,162		156,254
Range Resources Corp. (b)		4,695		294,987
SandRidge Energy, Inc. (a)(b)		14,239		90,418
SM Energy Co. (b)		1,862		97,215
Southwestern Energy Co. (a)		10,108		337,708
Spectra Energy Corp.		18,900		517,482
Teekay Corp.		1,064		34,154
Tesoro Corp. (b)		4,062		178,931
Ultra Petroleum Corp. (a)		4,452		80,715
Valero Energy Corp. (b)		16,009		546,227
Whiting Petroleum Corp. (a)		3,404		147,631
The Williams Cos., Inc.		19,519		639,052
World Fuel Services Corp. (b)		2,092		86,128
WPX Energy, Inc. (a)		5,780		86,006

				36,037,119
Paper & Forest Products — 0.2%
Domtar Corp.		1,051		87,780
International Paper Co.		12,663		504,494
MeadWestvaco Corp.		5,004		159,477

				751,751
Personal Products — 0.2%
Avon Products, Inc. (b)		12,498		179,471
The Estee Lauder Cos., Inc., Class A		6,663		398,847
Herbalife Ltd. (b)		3,321		109,394
Nu Skin Enterprises, Inc. (b)		1,526		56,539

				744,251


Common Stocks	Shares		Value

Pharmaceuticals — 4.6%
Allergan, Inc.		8,788	$	806,123
Bristol-Myers Squibb Co.		48,915		1,594,140
Eli Lilly & Co. (b)		29,673		1,463,472
Endo Health Solutions, Inc. (a)		3,409		89,554
Forest Laboratories, Inc. (a)		7,691		271,646
Hospira, Inc. (a)		4,779		149,296
Johnson & Johnson		79,538		5,575,614
Merck & Co., Inc.		88,087		3,606,282
Mylan, Inc. (a)		11,751		322,918
Perrigo Co.		2,704		281,297
Pfizer, Inc.		216,866		5,438,999
Salix Pharmaceuticals Ltd. (a)		1,655		66,994
Warner Chilcott Plc, Class A		4,766		57,383
Watson Pharmaceuticals, Inc. (a)		3,689		317,254

				20,040,972
Professional Services — 0.2%
The Dun & Bradstreet Corp. (b)		1,301		102,324
Equifax, Inc. (b)		3,484		188,554
IHS Inc, Class A (a)		1,457		139,872
Manpower, Inc. (b)		2,327		98,758
Nielsen Holdings NV (a)		3,521		107,707
Robert Half International, Inc. (b)		4,137		131,639
Towers Watson & Co., Class A		1,762		99,042
Verisk Analytics, Inc., Class A (a)		4,254		216,954

				1,084,850
Real Estate Investment Trusts (REITs) — 3.1%
Alexandria Real Estate Equities, Inc.		1,796		124,499
American Campus Communities, Inc.		2,991		137,975
American Capital Agency Corp.		9,890		286,217
American Tower Corp.		11,426		882,887
Annaly Capital Management, Inc. (b)		28,218		396,181
Apartment Investment & Management Co., Class A		4,154		112,407
AvalonBay Communities, Inc.		3,312		449,074
BioMed Realty Trust, Inc.		4,486		86,714
Boston Properties, Inc.		4,338		459,004
Brandywine Realty Trust		4,076		49,687
BRE Properties, Inc.		2,220		112,843
Camden Property Trust		2,324		158,520
CBL & Associates Properties, Inc.		4,320		91,627
Chimera Investment Corp.		29,965		78,209
CommonWealth REIT		2,384		37,763
Corporate Office Properties Trust		2,295		57,329
DDR Corp. (b)		6,880		107,741
Digital Realty Trust, Inc.		3,525		239,312
Douglas Emmett, Inc.		4,056		94,505
Duke Realty Corp.		7,719		107,063
Equity Lifestyle Properties, Inc.		1,204		81,017
Equity Residential		9,397		532,528
Essex Property Trust, Inc.		1,019		149,436
Extra Space Storage, Inc. (b)		3,191		116,121
Federal Realty Investment Trust (b)		1,850		192,437
General Growth Properties, Inc.		15,287		303,447
Hatteras Financial Corp.		2,861		70,981
HCP, Inc.		13,090		591,406
Health Care REIT, Inc.		7,500		459,675
Home Properties, Inc.		1,482		90,861
Hospitality Properties Trust		3,600		84,312
Host Hotels & Resorts, Inc.		20,820		326,249
Kilroy Realty Corp.		2,166		102,603

See Notes to Financial Statements.



BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012	25

Schedule of Investments (continued)

Russell 1000^® Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Real Estate Investment Trusts (REITs) (concluded)
Kimco Realty Corp.		11,779	$	227,570
Liberty Property Trust		3,001		107,346
Mack-Cali Realty Corp.		2,520		65,797
MFA Financial, Inc.		10,388		84,247
Mid-America Apartment Communities, Inc. (b)		1,195		77,376
National Retail Properties, Inc. (b)		3,108		96,970
Piedmont Office Realty Trust, Inc.		5,022		90,647
Plum Creek Timber Co., Inc.		4,674		207,385
Post Properties, Inc. (b)		1,579		78,871
Prologis, Inc.		13,331		486,448
Public Storage		4,131		598,830
Rayonier, Inc.		3,544		183,686
Realty Income Corp. (b)		3,861		155,251
Regency Centers Corp.		2,602		122,606
Retail Properties of America, Inc. (b)		2,493		29,841
Senior Housing Properties Trust (b)		5,106		120,706
Simon Property Group, Inc.		8,780		1,388,030
SL Green Realty Corp.		2,594		198,830
Tanger Factory Outlet Centers		2,694		92,135
Taubman Centers, Inc.		1,481		116,584
The Macerich Co. (b)		3,837		223,697
UDR, Inc. (b)		7,159		170,241
Ventas, Inc.		8,369		541,642
Vornado Realty Trust		5,375		430,430
Weingarten Realty Investors (b)		3,520		94,230
Weyerhaeuser Co.		15,561		432,907

				13,592,933
Real Estate Management & Development — 0.1%
Alexander & Baldwin, Inc. (a)		1,188		34,892
CBRE Group, Inc., Class A (a)		9,495		188,950
Forest City Enterprises, Inc., Class A (a)		4,329		69,913
The Howard Hughes Corp. (a)		793		57,905
Jones Lang LaSalle, Inc.		1,268		106,436
Realogy Holdings Corp. (a)		1,402		58,828
The St Joe Co. (a)(b)		1,886		43,529

				560,453
Road & Rail — 0.8%
Con-way, Inc.		1,588		44,178
CSX Corp.		30,090		593,676
Hertz Global Holdings, Inc. (a)		7,189		116,965
JB Hunt Transport Services, Inc.		2,599		155,186
Kansas City Southern		3,184		265,800
Landstar System, Inc.		1,374		72,080
Norfolk Southern Corp.		9,433		583,337
Ryder System, Inc.		1,498		74,795
Union Pacific Corp.		13,791		1,733,805

				3,639,822
Semiconductors & Semiconductor Equipment — 2.0%
Advanced Micro Devices, Inc. (a)		17,885		42,924
Altera Corp.		9,341		321,704
Analog Devices, Inc.		8,638		363,314
Applied Materials, Inc. (b)		36,415		416,588
Atmel Corp. (a)		12,943		84,777
Avago Technologies Ltd.		7,060		223,520
Broadcom Corp., Class A		15,954		529,832
Cree, Inc. (a)		3,361		114,207
Cypress Semiconductor Corp. (b)		4,335		46,991
Fairchild Semiconductor International, Inc. (a)		3,622		52,157


Common Stocks	Shares		Value

Semiconductors & Semiconductor Equipment (concluded)
Freescale Semiconductor Holdings I Ltd. (a)(b)		1,537	$	16,922
Intel Corp.		145,702		3,005,832
KLA-Tencor Corp.		4,844		231,349
Lam Research Corp. (a)		5,184		187,298
Linear Technology Corp. (b)		6,664		228,575
LSI Corp. (a)		16,460		116,537
Marvell Technology Group Ltd.		13,357		96,972
Maxim Integrated Products, Inc.		8,459		248,695
Microchip Technology, Inc. (b)		5,603		182,602
Micron Technology, Inc. (a)		28,644		181,889
NVIDIA Corp.		17,912		220,138
ON Semiconductor Corp. (a)		13,200		93,060
PMC - Sierra, Inc. (a)		6,013		31,328
Silicon Laboratories, Inc. (a)		1,240		51,844
Skyworks Solutions, Inc. (a)		5,490		111,447
Teradyne, Inc. (a)(b)		5,427		91,662
Texas Instruments, Inc.		33,139		1,025,321
Xilinx, Inc.		7,640		274,276

				8,591,761
Software — 3.4%
Activision Blizzard, Inc. (b)		12,256		130,159
Adobe Systems, Inc. (a)		14,366		541,311
ANSYS, Inc. (a)		2,696		181,549
Autodesk, Inc. (a)		6,689		236,456
BMC Software, Inc. (a)(b)		4,662		184,895
CA, Inc.		10,271		225,757
Cadence Design Systems, Inc. (a)		7,957		107,499
Citrix Systems, Inc. (a)		5,391		354,458
Compuware Corp. (a)		6,380		69,351
Concur Technologies, Inc. (a)		1,325		89,464
Electronic Arts, Inc. (a)		9,197		133,632
FactSet Research Systems, Inc. (b)		1,300		114,478
Fortinet, Inc. (a)		3,807		80,213
Informatica Corp. (a)		3,143		95,296
Intuit, Inc.		8,503		505,928
MICROS Systems, Inc. (a)		2,331		98,928
Microsoft Corp.		217,997		5,827,060
NetSuite, Inc. (a)		907		61,041
Nuance Communications, Inc. (a)		6,993		156,084
Oracle Corp.		110,656		3,687,058
Red Hat, Inc. (a)		5,583		295,676
Rovi Corp. (a)		3,158		48,728
Salesforce.com, Inc. (a)		4,017		675,258
ServiceNow, Inc. (a)		441		13,243
SolarWinds, Inc. (a)		1,789		93,833
Solera Holdings, Inc. (b)		2,013		107,635
Splunk, Inc. (a)		461		13,378
Symantec Corp. (a)		20,868		392,527
Synopsys, Inc. (a)		4,219		134,333
TIBCO Software, Inc. (a)		4,787		105,362
VMware, Inc., Class A (a)		2,560		240,998
Workday Inc, Class A (a)		729		39,730
Zynga Inc, Class A (a)		4,343		10,293

				15,051,611
Specialty Retail — 2.2%
Aaron’s, Inc. (b)		2,163		61,170
Abercrombie & Fitch Co., Class A		2,412		115,704
Advance Auto Parts, Inc.		2,127		153,888
American Eagle Outfitters, Inc.		5,670		116,292

See Notes to Financial Statements.



26	BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

Russell 1000^® Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Specialty Retail (concluded)
Ascena Retail Group, Inc. (a)		3,600	$	66,564
AutoNation, Inc. (a)		998		39,621
AutoZone, Inc. (a)		1,102		390,582
Bed Bath & Beyond, Inc. (a)		6,731		376,330
Best Buy Co., Inc. (b)		7,825		92,726
CarMax, Inc. (a)		6,606		247,989
Chico’s FAS, Inc.		4,874		89,974
Dick’s Sporting Goods, Inc. (b)		2,686		122,186
DSW Inc, Class A		948		62,274
Foot Locker, Inc.		4,396		141,199
GameStop Corp., Class A (b)		3,617		90,751
The Gap, Inc.		8,770		272,221
GNC Holdings Inc, Class A		1,966		65,428
Guess?, Inc. (b)		1,745		42,822
The Home Depot, Inc.		44,329		2,741,749
Limited Brands, Inc.		6,989		328,902
Lowe’s Cos., Inc.		32,121		1,140,938
O’Reilly Automotive, Inc. (a)		3,442		307,784
PetSmart, Inc.		3,138		214,451
Ross Stores, Inc.		6,559		355,170
Sally Beauty Holdings, Inc. (a)		4,485		105,711
Sears Hometown & Outlet Stores, Inc. (a)		206		6,707
Signet Jewelers Ltd.		2,463		131,524
Staples, Inc. (b)		19,950		227,430
Tiffany & Co.		3,668		210,323
The TJX Cos., Inc.		21,457		910,850
Tractor Supply Co.		2,085		184,231
Ulta Salon Cosmetics & Fragrance, Inc. (b)		1,820		178,833
Urban Outfitters, Inc. (a)		3,080		121,229
Williams-Sonoma, Inc.		2,560		112,051

				9,825,604
Textiles, Apparel & Luxury Goods — 0.7%
Carter’s, Inc. (a)		1,413		78,633
Coach, Inc.		8,321		461,899
Deckers Outdoor Corp. (a)(b)		1,095		44,096
Fossil, Inc. (a)		1,581		147,191
Hanesbrands, Inc. (a)		2,829		101,335
Michael Kors Holdings Ltd. (a)		2,453		125,176
NIKE, Inc., Class B		20,946		1,080,814
PVH Corp.		2,037		226,127
Ralph Lauren Corp.		1,785		267,607
Under Armour Inc, Class A (a)		2,251		109,241
VF Corp. (b)		2,538		383,162

				3,025,281
Thrifts & Mortgage Finance — 0.1%
Capitol Federal Financial, Inc.		4,695		54,884
Hudson City Bancorp, Inc.		15,282		124,242
New York Community Bancorp, Inc. (b)		12,709		166,488
People’s United Financial, Inc.		9,720		117,515
TFS Financial Corp. (a)		2,411		23,194
Washington Federal, Inc.		3,041		51,302

				537,625
Tobacco — 1.5%
Altria Group, Inc.		58,929		1,851,549
Lorillard, Inc.		3,779		440,896
Philip Morris International, Inc.		49,395		4,131,398
Reynolds American, Inc. (b)		9,531		394,869

				6,818,712


Common Stocks	Shares		Value

Trading Companies & Distributors — 0.3%
Air Lease Corp. (a)		1,919	$	41,258
Fastenal Co. (b)		8,572		400,227
GATX Corp.		1,344		58,195
MRC Global, Inc. (a)(b)		644		17,890
MSC Industrial Direct Co., Inc.		1,323		99,728
United Rentals, Inc. (a)		2,712		123,450
W.W. Grainger, Inc.		1,691		342,208
WESCO International, Inc. (a)(b)		1,269		85,569

				1,168,525
Water Utilities — 0.1%
American Water Works Co., Inc.		5,100		189,363
Aqua America, Inc. (b)		4,035		102,570

				291,933
Wireless Telecommunication Services — 0.4%
Clearwire Corp, Class A (a)		10,295		29,753
Crown Castle International Corp. (a)		8,484		612,205
MetroPCS Communications, Inc. (a)		8,833		87,800
NII Holdings, Inc. (a)(b)		5,006		35,693
SBA Communications Corp, Class A (a)		3,511		249,351
Sprint Nextel Corp. (a)		86,830		492,326
Telephone & Data Systems, Inc.		2,787		61,704
United States Cellular Corp. (a)		415		14,625

				1,583,457
Investment Companies — 1.5%
iShares Russell 1000^® Index Fund (b)(c)		86,286		6,829,537
Total Long-Term Investments (Cost — $398,116,643) — 97.2%				427,955,431


Short-Term Securities
Money Market Funds — 11.4%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)(e)		42,319,496		42,319,496
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)(e)		7,785,846		7,785,846

				50,105,342
	Par (000)
US Treasury Obligations — 0.2%
U.S. Treasury Bill, 0.00%, 3/21/13 (f)(g)	$	723		722,946
Total Short-Term Securities (Cost — $50,828,288) — 11.6%				50,828,288
Total Investments (Cost — $448,944,931*) — 108.8%				478,783,719
Liabilities in Excess of Other Assets — (8.8)%				(38,691,433	)

Net Assets — 100.0%			$	440,092,286

See Notes to Financial Statements.



BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012	27


Schedule of Investments (continued)		Russell 1000^® Index Master Portfolio

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	452,183,347

Gross unrealized appreciation		36,667,439
Gross unrealized depreciation		(10,067,067	)

Net unrealized appreciation	$	26,600,372

(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, 2012, 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, 2011		Shares Purchased			Shares Sold			Shares Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
BlackRock Cash Funds: Institutional, SL Agency Shares		5,774,817		36,544,679	¹		—			42,319,496	$	42,319,496	$	88,339		—
BlackRock Cash Funds: Prime, SL Agency Shares		1,293,201		6,492,645	¹		—			7,785,846	$	7,785,846	$	17,162		—
BlackRock, Inc.		364		3,546			(222	)		3,688	$	762,346	$	14,277	$	(6,421	)
iShares Russell 1000^® Index Fund		1		181,285			(95,000	)		86,286	$	6,829,537	$	56,389	$	177,125
PNC Financial Services Group, Inc.		2,272		13,932			(891	)		15,313	$	892,901	$	13,495	$	(1,779	)

Represents net share activity.

(d)

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

(e)

Represents the current yield as of report date.

(f)

All or a portion of security has been pledged as collateral in connection with open financial futures contracts.

(g)

Rate shown is the yield to maturity as of the date of purchase.

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 ratings group indexes, and/or as defined by Master Portfolio management. This definition may not apply for purposes of this report, which may combine sector and industry sub-classifications for reporting ease.

_Ÿ

Financial futures contracts as of December 31, 2012 were as follows:


Contracts Purchased		Issue	Exchange	Expiration	Notional Value		Unrealized Appreciation
	15	S&P 400 MIDCAP INDEX	Chicago Mercantile	March 2013	$	1,527,150	$	13,753
	134	S&P 500 INDEX	Chicago Mercantile	March 2013	$	9,514,670		37,470
							$	51,223

_Ÿ

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

_Ÿ

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

_Ÿ

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

_Ÿ

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

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

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

For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

See Notes to Financial Statements.



28	BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012


Schedule of Investments (concluded)		Russell 1000^® Index Master Portfolio

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3	Total


Assets:
Investments:
Long-Term Investments¹:
Common Stocks	$	421,125,894		—	—	$	421,125,894
Investment Companies		6,829,537		—	—		6,829,537
Short-Term Securities:
Money Market Funds		50,105,342		—	—		50,105,342
U.S. Treasury Obligations		—	$	722,946	—		722,946

Total	$	478,060,773	$	722,946	—	$	478,783,719

¹ See above Schedule of Investments for values in each industry.

	Level 1		Level 2		Level 3	Total
Derivative Financial Instruments²
Assets:
Equity Contracts	$	51,223		—	—	$	51,223

Derivative financial instruments are financial futures contracts. Financial futures contracts are valued at the unrealized appreciation/depreciation on the instrument.

Certain of the Master Portfolio’s assets and/or liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $36,187,920 is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012	29


Statement of Assets and Liabilities		Russell 1000^® Index Master Portfolio


December 31, 2012

Assets
Investments at value — unaffiliated (including securities loaned of $35,849,152) (cost — $390,682,926)	$	420,193,593
Investments at value — affiliated (cost — $58,262,005)		58,590,126
Contributions receivable from investors		1,397,243
Investments sold receivable		477
Dividends receivable		464,025
Securities lending income receivable — affiliated — net		11,679
Interest receivable		2,564
Variation margin receivable		264,868
Prepaid expenses		296

Total assets		480,924,871


Liabilities
Collateral on securities loaned at value		36,187,920
Investments purchased payable		4,566,864
Professional fees payable		43,129
Investment advisory fees payable		17,451
Custodian fees payable		12,756
Trustees’ fees payable		1,045
Printing fees payable		1,002
Other accrued expenses payable		2,418

Total liabilities		40,832,585

Net Assets	$	440,092,286


Net Assets Consist of
Investors’ capital	$	410,202,274
Net unrealized appreciation/depreciation		29,890,012

Net Assets	$	440,092,286


Statement of Operations		Russell 1000^® Index Master Portfolio


Year Ended December 31, 2012

Investment Income
Dividends — unaffiliated	$	6,258,596
Foreign taxes withheld		(7,394	)
Dividends — affiliated		84,161
Securities lending — affiliated		79,769
Income — affiliated		25,732
Interest		407

Total income		6,441,271


Expenses
Investment advisory		134,686
Professional		21,518
Custodian		77,415
Independent Trustees		4,537
Offering		1,673
Miscellaneous		379

Total expenses		240,208
Less fees waived and/or reimbursed by Manager		(2,297	)

Total expenses after fees waived and/or reimbursed		237,911

Net investment income		6,203,360


Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — unaffiliated		(688,913	)
Investments — affiliated		168,925
Financial futures contracts		770,718

		250,730

Net change in unrealized appreciation/depreciation on:
Investments		32,236,185
Financial futures contracts		29,188

		32,265,373

Total realized and unrealized gain		32,516,103

Net Increase in Net Assets Resulting from Operations	$	38,719,463


Statements of Changes in Net Assets		Russell 1000^® Index Master Portfolio


Increase (Decrease) in Net Assets:	Year Ended December 31, 2012			Period March 31, 2011¹ to December 31, 2011


Operations
Net investment income	$	6,203,360		$	573,634
Net realized gain (loss)		250,730			(464,335	)
Net change in unrealized appreciation/depreciation		32,265,373			(2,375,361	)

Net increase (decrease) in net assets resulting from operations		38,719,463			(2,266,062	)


Capital Transactions
Proceeds from contributions		418,927,430			72,436,022
Value of withdrawals		(74,435,787	)		(13,288,780	)

Net increase in net assets derived from capital transactions		344,491,643			59,147,242


Net Assets
Total increase in net assets		383,211,106			56,881,180
Beginning of period		56,881,180			—

End of period	$	440,092,286		$	56,881,180

Commencement of operations.


Financial Highlights		Russell 1000^® Index Master Portfolio


	Year Ended December 31, 2012		Period March 31, 2011¹ to December 31, 2011


Total Investment Return
Total investment return		16.39%		(4.68	)%²


Ratios to Average Net Assets
Total expenses		0.09%		0.40%	^3,4

Total expenses after fees waived		0.09%		0.16%	³

Net investment income		2.30%		2.04%	³

Supplemental Data
Net assets, end of period (000)	$	440,092	$	56,881

Portfolio turnover		16%		10%

Commencement of operations.

Aggregate total investment return.

Annualized.

⁴

Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 0.40%.


Notes to Financial Statements		Russell 1000^® Index Master Portfolio

1. Organization and Significant Accounting Policies:

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

The following is a summary of significant accounting policies followed by the Master Portfolio:

Valuation: US GAAP defines fair value as the price the Master Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Master Portfolio determines the fair values of its financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Master Portfolio for all financial instruments.

Equity investments traded on a recognized securities exchange or the NASDAQ Global Market System (“NASDAQ”) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that such prior day’s price no longer reflects the fair value of the security. Financial futures contracts traded on exchanges are valued at their last sale price. Investments in open-end registered investment companies are valued at NAV each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

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 investment advisor and/or sub-advisor deem relevant consistent with the principles of fair value measurement which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. A market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and adjusted for liquidity as appropriate. These factors include but are not limited to (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Master Portfolio’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”) require that the Master Portfolio either deliver collateral or segregate assets in connection with certain investments (e.g., financial futures contracts), the Master Portfolio will, consistent with SEC rules and/or certain interpretive letters issued by the SEC, segregate collateral or designate on its books and records cash or liquid securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, the Master Portfolio engaging in such transactions may have requirements to deliver/deposit securities to/with an exchange or broker-dealer as collateral for certain investments.



34	BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012


Notes to Financial Statements (continued)		Russell 1000^® Index Master Portfolio

from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Master Portfolio is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis. Income and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets. Consent fees are compensation for agreeing to changes in the terms of debt instruments and are included in interest income in the Statement of Operations.

Securities Lending: The Master Portfolio may lend securities to approved borrowers, such as banks, brokers and other financial institutions. The borrower pledges cash, securities issued or guaranteed by the US government or irrevocable letters of credit issued by a bank as collateral. The initial collateral received by the Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statement of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the Master Portfolio earns dividend or interest income on the securities loaned but does not receive interest income on the securities received as collateral. Loans of securities are 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 risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate this risk the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. BlackRock’s indemnity allows for full replacement of securities lent. The Master Portfolio also could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received. During the year ended December 31, 2012, any securities on loan were collateralized by cash.

income, expenses and realized and unrealized gains and losses of the Master Portfolio. Therefore, no federal income tax provision is required. It is intended that the Master Portfolio’s assets will be managed so an investor in the Master Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

The Master Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolio’s US federal tax returns remains open for the year ended December 31, 2012 and period ended December 31, 2011. The statutes of limitations on the Master Portfolio’s state and local tax returns may remain open for an additional year depending upon the jurisdiction. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

Recent Accounting Standards: In December 2011, the Financial Accounting Standards Board (the “FASB”) issued guidance that will expand current disclosure requirements on the offsetting of certain assets and liabilities. The new disclosures will be required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset in the Statement of Assets and Liabilities and will require an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarifies which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting will be limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions. The guidance is effective for financial statements with fiscal years beginning on or after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the Master Portfolio’s financial statement disclosures.

Offering Costs: Offering costs associated with the establishment of the Master Portfolio are amortized over a 12-month period beginning with the commencement of operations.

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.



BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012	35


Notes to Financial Statements (continued)		Russell 1000^® Index Master Portfolio

2. Derivative Financial Instruments:

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

Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. Counterparty risk related to exchange-traded financial futures contracts is deemed to be minimal due to the protection against defaults provided by the exchange on which these contracts trade.

Financial Futures Contracts: The Master Portfolio purchases 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. 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 and are recorded by the Master Portfolio as unrealized appreciation or depreciation. 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.

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, 2012
	Net Realized Gain From
	Equity Contracts
Financial futures contracts		$	770,718


	Net Change in Unrealized Appreciation/Depreciation on
	Equity Contracts
Financial futures contracts		$	29,188

For the year ended December 31, 2012, the average quarterly balances of outstanding derivative financial instruments were as follows:


Financial futures contracts:
Average number of contracts purchased		117
Average notional value of contracts purchased	$	8,533,018

3. 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, Inc. (“BlackRock”).

MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement with BlackRock Fund Advisors (the “Manager”), the Master Portfolio’s investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory 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, 2013 unless approved by the Board, including a majority of the independent trustees. For the year ended December 31, 2012, the Manager waived $1,821, which is included in fees waived and/or reimbursed by the Manager in the Statement of Operations.



36	BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012


Notes to Financial Statements (concluded)		Russell 1000^® Index Master Portfolio

received by the Master Portfolio for such loans, among other things, in a private investment company managed by BTC or in registered money market funds advised by BTC or its affiliates. The market value of securities on loan and the value of the related collateral, if applicable, are shown in the Statement of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC is disclosed in the Schedule of Investments, if any. Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of rebates paid to, or fees paid by, borrowers of securities. The Master Portfolio retains 65% of securities lending income and pays a fee to BTC equal to 35% of such income. The Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. As securities lending agent, BTC bears all operational costs directly related to securities lending as well as the cost of borrower default indemnification. BTC does not receive any fees for managing the cash collateral. The share of income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the year ended December 31, 2012, BTC received $42,953 in securities lending agent fees related to securities lending activities for the Master Portfolio.

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

4. Investments:

Purchases and sales of investments, excluding short-term securities, for the year ended December 31, 2012, were $383,776,562 and $43,233,462, respectively.

5. Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates, is a party to a $500 million credit agreement with a group of lenders. The Master Portfolio may borrow under the credit agreement to fund shareholder redemptions. Effective November 2011 to November 2012, the credit agreement had the following terms: a commitment fee of 0.065% per annum based on the Master Portfolio’s pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month London Interbank Offered Rate (“LIBOR”) plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Master Portfolio paid administration and arrangement fees which were allocated to the Master Portfolio based on its net assets as of October 31, 2011. The credit agreement, which expired in

November 2012, was renewed with the same terms until November 2013. Effective November 2012 to November 2013, the credit agreement has the following terms: a commitment fee of 0.065% per annum based on the Master Portfolio’s pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Master Portfolio paid administration and arrangement fees which were allocated to the Master Portfolio based on its net assets as of October 31, 2012. The Master Portfolio did not borrow under the credit agreement during the year ended December 31, 2012.

6. Market and Credit Risk:

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

7. 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 RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012	37


Report of Independent Registered Public Accounting Firm		Russell 1000^® Index Master Portfolio

To the Interestholders and Board of Trustees of

Master Investment Portfolio:

conducted our audits of these financial statements in accordance with 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, 2012 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 22, 2013



38	BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012


Officers and Trustees


Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees¹
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 106 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. since 1987; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of Seventy (civic) since 2006; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 106 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy since 2002; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 106 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President of Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 106 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 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) since 2011, President thereof from 1997 to 2011 and Trustee since 1980; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (strategic solutions company) since 2005; Director, Cerego, LLC (software development and design) since 2005; Director, Cybersettle (dispute resolution technology) since 2009.	33 RICs consisting of 106 Portfolios	AIMS Worldwide, Inc. (marketing)
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1999 to 2008.	33 RICs consisting of 106 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital since 2005; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 106 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, The West Penn Allegheny Health System (a not-for-profit health system) since 2008; 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; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 106 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 106 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 106 Portfolios	None



BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012	39


Officers and Trustees (continued)


Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees¹ (concluded)
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Chairman Elect 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; 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 106 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh since 2005 and Dean thereof from 1997 to 2005; Director, Alkon Corporation (pneumatics) since 1992; Director, Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 106 Portfolios	None
	¹ Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year extensions in terms of Trustees who turn 72 prior to December 31, 2013. ² Date shown is the earliest date a person has served for the Trust/MIP covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the Trust’s Board. As a result, although the chart shows certain Trustees as joining the Trust’s board in 2009, each Trustee first became a member of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees³
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	155 RICs consisting of 278 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	155 RICs consisting of 278 Portfolios	None
	³ Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.



40	BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012


Officers and Trustees (concluded)


Name, Address and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers*
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock since 2000; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2002; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009; and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Simon Mendelson 55 East 52nd Street New York, NY 10055 1964	Vice President	Since 2009	Managing Director of BlackRock since 2005; Co-head of the Global Cash and Securities Lending Group since 2010; Chief Operating Officer and Head of the Global Client Group for BlackRock’s Global Cash Management Business from 2007 to 2010; Head of BlackRock’s Strategy and Development Group from 2005 to 2007; Partner of McKinsey & Co. from 1997 to 2005.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2009	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2009	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Director of BlackRock since 2010; 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.
	* Officers of the Trust/MIP serve at the pleasure of the Board of Trustees.


Investment Advisor BlackRock Fund Advisors San Francisco, CA 94105	Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Custodian and Accounting Agent State Street Bank and Trust Company Boston, MA 02110	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Sidley Austin LLP New York, NY 10019

				Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP New York, NY 10017	Address of the Trust/MIP 400 Howard Street San Francisco, CA 94105



BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012	41


Additional Information

General Information

Electronic Delivery

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

To enroll:

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

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

Shareholders Who Hold Accounts Directly with BlackRock:

1)	Access the BlackRock website at http://www.blackrock.com/edelivery

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

3)	Log into your account

Householding

The Fund’s/Master Portfolio’s 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’s/Master Portfolio’s at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Fund/Master Portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s/Master Portfolio’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Fund’s/Master Portfolio’s Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Fund/Master Portfolio uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

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

Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM EST on any business day to get information about your account balances, recent transactions and share prices. You can also reach us on the Web at http://www.blackrock.com/funds.

Automatic Investment Plans

Investor Class shareholders who want to invest regularly can arrange to have $50 or more automatically deducted from their checking or savings account and invested in any of the BlackRock funds.

Systematic Withdrawal Plans

Investor Class shareholders can establish a systematic withdrawal plan and receive periodic payments of $50 or more from their BlackRock funds, as long as their account balance is at least $10,000.

Retirement Plans

Shareholders may make investments in conjunction with Traditional, Rollover, Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.



42	BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012


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.

(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 RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012	43


A World-Class Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing.


Equity Funds

BlackRock ACWI ex-US Index Fund

BlackRock All-Cap Energy & Resources Portfolio

BlackRock Basic Value Fund

BlackRock Capital Appreciation Fund

BlackRock China Fund

BlackRock Commodity Strategies Fund

BlackRock Emerging Markets Fund

BlackRock Emerging Markets Long/Short Equity Fund

BlackRock Energy & Resources Portfolio

BlackRock Equity Dividend Fund

BlackRock EuroFund

BlackRock Flexible Equity Fund

BlackRock Focus Growth Fund

BlackRock Global Dividend Income Portfolio

BlackRock Global Long/Short Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Global SmallCap Fund

BlackRock Health Sciences Opportunities Portfolio

BlackRock Index Equity Portfolio

BlackRock India Fund

BlackRock International Fund

BlackRock International Index Fund

BlackRock International Opportunities Portfolio

BlackRock Large Cap Core Fund

BlackRock Large Cap Core Plus Fund

BlackRock Large Cap Growth Fund

BlackRock Large Cap Value Fund

BlackRock Latin America Fund

BlackRock Long-Horizon Equity Fund

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Mid Cap Value Opportunities Fund

BlackRock Natural Resources Trust

BlackRock Pacific Fund

BlackRock Real Estate Securities Fund

BlackRock Russell 1000^® Index Fund

BlackRock Science & Technology Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock Small Cap Growth Fund II

BlackRock Small Cap Index Fund

BlackRock S&P 500 Index Fund

BlackRock S&P 500 Stock Fund

BlackRock U.S. Opportunities Portfolio

BlackRock Value Opportunities Fund

BlackRock World Gold Fund


Taxable Fixed Income Funds

BlackRock Bond Index Fund

BlackRock Core Bond Portfolio

BlackRock CoreAlpha Bond Fund

BlackRock Emerging Market Local Debt Portfolio

BlackRock Floating Rate Income Portfolio

BlackRock Global Long/Short Credit Fund

BlackRock GNMA Portfolio

BlackRock High Yield Bond Portfolio

BlackRock Inflation Protected Bond Portfolio

BlackRock International Bond Portfolio

BlackRock Long Duration Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Secured Credit Portfolio

BlackRock Strategic Income Opportunities Portfolio

BlackRock Total Return Fund

BlackRock U.S. Government Bond Portfolio

BlackRock U.S. Mortgage Portfolio

BlackRock World Income Fund


Municipal Fixed Income Funds

BlackRock California Municipal Bond Fund

BlackRock High Yield Municipal Fund

BlackRock Intermediate Municipal Fund

BlackRock National Municipal Fund

BlackRock New Jersey Municipal Bond Fund

BlackRock New York Municipal Bond Fund

BlackRock Pennsylvania Municipal Bond Fund

BlackRock Short-Term Municipal Fund


Mixed Asset Funds


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

BlackRock Prepared Portfolios	LifePath Portfolios
Conservative Prepared Portfolio		Retirement	2040
Moderate Prepared Portfolio		2020	2045
Growth Prepared Portfolio		2025	2050
Aggressive Growth Prepared Portfolio		2030	2055
		2035

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



44	BLACKROCK RUSSELL 1000^® INDEX FUND	DECEMBER 31, 2012

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

LOGO


# R1000-12/12-AR

DECEMBER 31, 2012

ANNUAL REPORT

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

Not FDIC Insured • May Lose Value • No Bank Guarantee


Table of Contents


	Page
Dear Shareholder		3
Annual Report:
Fund Summary		4
About Fund Performance		6
Derivative Financial Instruments		6
Disclosure of Expenses		6
Fund Financial Statements:
Statement of Assets and Liabilities		7
Statement of Operations		8
Statements of Changes in Net Assets		9
Fund Financial Highlights		10
Fund Notes to Financial Statements		13
Fund Report of Independent Registered Public Accounting Firm		16
Important Tax Information		16
Master Portfolio Information		17
Master Portfolio Financial Statements:
Schedule of Investments		18
Statement of Assets and Liabilities		37
Statement of Operations		38
Statements of Changes in Net Assets		39
Master Portfolio Financial Highlights		40
Master Portfolio Notes to Financial Statements		41
Master Portfolio Report of Independent Registered Public Accounting Firm		46
Officers and Trustees		47
Additional Information		50
A World-Class Mutual Fund Family		52



2	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012

Dear Shareholder

Sincerely,

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

“Although 2012 brought its share of headwinds, the strongest returns came from higher-risk asset classes as investors reached for yield in an environment of extremely low interest rates.”

Rob Kapito

President, BlackRock Advisors, LLC


Total Returns as of December 31, 2012
	6-month			12-month
US large cap equities (S&P 500^® Index)		5.95	%		16.00	%
US small cap equities (Russell 2000^® Index)		7.20			16.35
International equities (MSCI Europe, Australasia, Far East Index)		13.95			17.32
Emerging market equities (MSCI Emerging Markets Index)		13.75			18.22
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)		0.07			0.11
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		0.71			4.18
US investment grade bonds (Barclays US Aggregate Bond Index)		1.80			4.21
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.15			7.42
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)		7.97			15.78

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 IS NOT PART OF YOUR FUND REPORT				3


Fund Summary as of December 31, 2012		BlackRock ACWI ex-US Index Fund


Investment Objective

BlackRock ACWI ex-US Index Fund’s (the “Fund”), investment objective is to match the performance of the MSCI All Country World ex-US Index (the “MSCI ACWI ex-US Index”) in 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, 2012, the Fund’s Institutional, Investor A and Class K Shares returned 16.61%, 16.31% and 19.25%, respectively, while the benchmark MSCI ACWI ex-US Index returned 16.83%. The MSCI ACWI ex-US Index is a free float-adjusted market capitalization-weighted index designed to measure the equity market performance of developed and emerging countries, excluding the United States.

_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 ACWI ex-US Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio.

Describe the market environment.

_Ÿ

Following a tumultuous 2011, equity markets began the new year with a strong rally amid lower volatility. The debt situation in Europe had stabilized and global liquidity conditions improved as the ECB implemented its long-term refinancing operations. Positive economic indicators out of the United States brightened the outlook for the world economy and equities moved higher through the first two months of 2012.

_Ÿ

A flare-up in the European debt crisis halted the rally in the spring. Political instability in Greece caused anxiety about whether the country would continue its membership in the eurozone. Spain faced severe deficit and policymaking issues and a liquidity crisis in the nation’s banks. Alongside the drama in Europe, investors became discouraged by gloomy economic reports from various parts of the world. A slowdown in China, a key powerhouse for global growth, was of particular concern. Many European countries fell into recession. In the United States, disappointing jobs reports signaled that the recovery was losing steam. International equities gave back all of their year-to-date gains by the end of May.

_Ÿ

do “whatever it takes” to hold the eurozone together. This assurance, along with growing hopes for additional central bank stimulus, overshadowed concerns about the dreary economic landscape and international stock markets continued their advance through the third quarter. In September, the ECB announced its decision to backstop eurozone governments with unlimited purchases of short-term sovereign debt. Days later, the US Federal Reserve announced an aggressive stimulus program involving purchases of agency mortgage-backed securities.

_Ÿ

Concerns about the world economy resurfaced in the fall amid political uncertainty in key nations. Global trade slowed as Europe’s recession deepened, US growth remained lackluster and growth continued to decelerate in China, where a once-in-a-decade leadership change compounded uncertainty. In the United States, automatic tax increases and spending cuts set to take effect at the beginning of 2013, known as the “fiscal cliff,” threatened to push the nation into recession unless politicians could agree upon alternate measures to reduce the deficit before the end of 2012. Worries that political gridlock would preclude a budget deal prior to the deadline drove high levels of volatility in equity markets around the world in the months leading up to the last day of the year. Ultimately, the United States averted the fiscal cliff with a last-minute tax deal, spurring relief rallies in stock markets globally. However, relief from US fiscal worries was only partial as decisions relating to spending cuts and the national debt ceiling remained pending as financial markets closed for the year. Despite a downtrodden economic environment and a suspenseful lead-up to the US fiscal cliff deadline, international stock prices moved higher through the final months of 2012 as investors took on more risk to achieve meaningful returns in the low interest rate environment.

Describe recent portfolio activity.

_Ÿ

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

Describe portfolio positioning at period end.

_Ÿ

The Master Portfolio remains positioned to match the risk characteristics of its benchmark index, irrespective of the market’s future direction.

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



4	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012


		BlackRock ACWI ex-US Index Fund


Total Return Based on a $10,000 Investment

LOGO

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

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

The Index is a free float-adjusted market capitalization-weighted 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, 2012


				Average Annual Total Return
	6-Month Total Returns			1 Year			Since Inception⁵
Institutional		13.35	%		16.61	%		(2.97	)%
Investor A		13.33			16.31			(3.18	)
Class K		16.04			19.25			(1.51	)
MSCI ACWI ex-US Index		13.68			16.83			(1.92	)

⁵

The Fund commenced operations on June 30, 2011.

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

Past performance is not indicative of future results.


Expense Example


	Actual						Hypothetical⁷
	Beginning Account Value July 1, 2012		Ending Account Value December 31, 2012		Expenses Paid During the Period⁶		Beginning Account Value July 1, 2012		Ending Account Value December 31, 2012		Expenses Paid During the Period⁶		Annualized Expense Ratio
Institutional	$	1,000.00	$	1,133.50	$	1.82	$	1,000.00	$	1,023.43	$	1.73		0.34	%
Investor A	$	1,000.00	$	1,133.30	$	3.38	$	1,000.00	$	1,021.97	$	3.20		0.63	%
Class K	$	1,000.00	$	1,160.40	$	1.68	$	1,000.00	$	1,023.58	$	1.58		0.31	%

⁶

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 366.

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



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	5


About Fund Performance		BlackRock ACWI ex-US Index Fund

_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 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.

deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in the performance table on the preceeding page assume reinvestment of all dividends and distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. The Fund’s administrator waived and/or reimbursed a portion of the Fund’s expenses. Without such waiver and/or reimbursement, the Fund’s performance would have been lower. Dividends paid to each class of shares will vary because of the different levels of administration and distribution fees applicable to each class, which are deducted from the income available to be paid to shareholders.


Derivative Financial Instruments

The Master Portfolio may invest in various derivative financial instruments, including financial futures contracts and foreign currency exchange contracts, as specified in Note 2 of the Master Portfolio’s Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market, equity or foreign currency exchange rate risks. Derivative financial instruments involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative financial instrument. The Master Portfolio’s ability to use a

derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require the Master Portfolio to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation the Master Portfolio can realize on an investment, may result in lower dividends paid to shareholders or may cause the Master Portfolio to hold an investment that it might otherwise sell. The Master Portfolio’s investments in these instruments are discussed in detail in the Master Portfolio’s Notes to Financial Statements.


Disclosure of Expenses

“Expenses Paid During the Period.”



6	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012


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


December 31, 2012

Assets
Investments at value — MSCI ACWI ex-US Index Master Portfolio (cost — $2,693,810)	$	9,717,317
Capital shares sold receivable		461
Receivable from administrator		25,769
Withdrawals receivable from the Master Portfolio		771
Prepaid expenses		4,522

Total assets		9,748,840


Liabilities
Capital shares redeemed payable		1,232
Income dividends payable		1,833
Registration fees payable		6,505
Printing fees payable		6,823
Transfer agent fees payable		1,878
Service fees payable		8
Professional fees payable		38,733
Other accrued expenses payable		315

Total liabilities		57,327

Net Assets	$	9,691,513


Net Assets Consist of
Paid-in capital	$	6,656,969
Accumulated net investment loss		(65,331	)
Accumulated net realized loss allocated from the Master Portfolio		(3,923,632	)
Net unrealized appreciation/depreciation allocated from the Master Portfolio		7,023,507

Net Assets	$	9,691,513


Net Asset Value
Institutional — Based on net assets of $9,602,017 and 1,059,275 shares outstanding, unlimited number of shares authorized, no par value	$	9.06

Investor A — Based on net assets of $39,328 and 4,342 shares outstanding, unlimited number of shares authorized, no par value	$	9.06

Class K — Based on net assets of $50,168 and 5,411 shares outstanding, unlimited number of shares authorized, no par value	$	9.27


Statement of Operations		BlackRock ACWI ex-US Index Fund


Year Ended December 31, 2012

Investment Income
Net investment income allocated from the Master Portfolio:
Dividends — unaffiliated	$	1,157,841
Foreign taxes withheld		(122,929	)
Dividends — affiliated		3,524
Income — affiliated		3,276
Interest — unaffiliated		138
Expenses		(183,474	)
Fees waived		51,403

Total income		909,779


Fund Expenses
Administration		40,541
Service — Investor A		73
Transfer agent — Institutional		543
Transfer agent — Investor A		53
Transfer agent — Class K		824
Offering		101,420
Professional		69,741
Registration		44,228
Miscellaneous		5,033
Recoupment of past waived fees — class specific		28

Total expenses		262,484
Less administration fees waived		(40,541	)
Less transfer agent fees waived — Institutional		(34	)
Less transfer agent fees waived — Investor A		(5	)
Less transfer agent fees waived — Class K		(134	)
Less transfer agent fees reimbursed — Institutional		(350	)
Less transfer agent fees reimbursed — Investor A		(33	)
Less transfer agent fees reimbursed — Class K		(685	)
Less fees reimbursed by administrator		(217,318	)

Total expenses after fees waived and reimbursed		3,384

Net investment income		906,395


Realized and Unrealized Gain (Loss) Allocated from the Master Portfolio
Net realized loss from investments, financial futures contracts and foreign currency transactions		(3,693,070	)
Net change in unrealized appreciation/depreciation on investments, financial futures contracts and foreign currency translations		10,461,710

Total realized and unrealized gain		6,768,640

Net Increase in Net Assets Resulting from Operations	$	7,675,035


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


Increase (Decrease) in Net Assets:	Year Ended December 31, 2012			Period June 30, 2011¹ to December 31, 2011


Operations
Net investment income	$	906,395		$	176,245
Net realized loss		(3,693,070	)		(345,155	)
Net change in unrealized appreciation/depreciation		10,461,710			(3,438,203	)

Net increase (decrease) in net assets resulting from operations		7,675,035			(3,607,113	)


Dividends and Distributions to Shareholders From²
Net investment income:
Institutional		(767,437	)		(102	)
Investor A		(1,501	)		(93	)
Class K		(182,164	)		(82,081	)
Tax return of capital:
Institutional		(175	)		(56	)
Investor A		—			(51	)
Class K		(42	)		(45,667	)

Decrease in net assets resulting from dividends and distributions to shareholders		(951,319	)		(128,050	)


Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(13,322,040	)		20,025,000


Net Assets
Total increase (decrease) in net assets		(6,598,324	)		16,289,837
Beginning of period		16,289,837			—

End of period	$	9,691,513		$	16,289,837

Accumulated net investment loss	$	(65,331	)	$	(20,624	)

Commencement of operations.

Dividends and distributions are determined in accordance with federal income tax regulations.


Financial Highlights		BlackRock ACWI ex-US Index Fund


	Institutional
	Year Ended December 31, 2012			Period June 30, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	8.13		$	10.00

Net investment income²		0.17			0.08
Net realized and unrealized gain (loss)		1.16			(1.89	)

Net increase (decrease) from investment operations		1.33			(1.81	)

Dividends and distributions from:³
Net investment income		(0.40	)		(0.04	)
Tax return of capital		(0.00	)⁴		(0.02	)

Total dividends and distributions		(0.40	)		(0.06	)

Net asset value, end of period	$	9.06		$	8.13


Total Investment Return⁵
Based on net asset value		16.61%			(18.05	)%⁶


Ratios to Average Net Assets⁷
Total expenses		0.75%	⁸		2.04%	^9,10,11

Total expenses after fees waived		0.34%	⁸		0.37%	^9,11

Net investment income		1.95%	⁸		1.78%	^9,11


Supplemental Data
Net assets, end of period (000)	$	9,602		$	46

Portfolio turnover of the Master Portfolio		42%			4%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.01) per share.

⁵

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

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

⁸

Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.08%.

⁹

Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 1.14%.

¹⁰

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

¹¹

Annualized.


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


	Investor A
	Year Ended December 31, 2012			Period June 30, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	8.13		$	10.00

Net investment income²		0.19			0.08
Net realized and unrealized gain (loss)		1.12			(1.89	)

Net increase (decrease) from investment operations		1.31			(1.81	)

Dividends and distributions from:³
Net investment income		(0.38	)		(0.04	)
Tax return of capital		(0.00	)⁴		(0.02	)

Total dividends and distributions		(0.38	)		(0.06	)

Net asset value, end of period	$	9.06		$	8.13


Total Investment Return⁵
Based on net asset value		16.31%			(18.11	)%⁶


Ratios to Average Net Assets⁷
Total expenses		1.88%	⁸		2.30%	^9,10,11

Total expenses after fees waived		0.63%	⁸		0.62%	^9,11

Net investment income		2.18%	⁸		1.74%	^9,11


Supplemental Data
Net assets, end of period (000)	$	39		$	20

Portfolio turnover of the Master Portfolio		42%			4%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.01) per share.

⁵

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

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

⁸

Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.16%.

⁹

Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 1.14%.

¹⁰

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

¹¹

Annualized.


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


	Class K
	Year Ended December 31, 2012			Period June 30, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	8.13		$	10.00

Net investment income²		0.28			0.09
Net realized and unrealized gain (loss)		1.27			(1.90	)

Net increase (decrease) from investment operations		1.55			(1.81	)

Dividends and distributions from:³
Net investment income		(0.41	)		(0.04	)
Tax return of capital		(0.00	)⁴		(0.02	)

Total dividends and distributions		(0.41	)		(0.06	)

Net asset value, end of period	$	9.27		$	8.13


Total Investment Return⁵
Based on net asset value		19.25%			(18.04	)%⁶


Ratios to Average Net Assets⁷
Total expenses		1.80%	⁸		1.73%	^9,10,11

Total expenses after fees waived		0.33%	⁸		0.32%	^9,11

Net investment income		3.31%	⁸		2.03%	^9,11


Supplemental Data
Net assets, end of period (000)	$	50		$	16,224

Portfolio turnover of the Master Portfolio		42%			4%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.01) per share.

⁵

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

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

⁸

Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.29%.

⁹

Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 1.14%.

¹⁰

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

¹¹

Annualized.


Notes to Financial Statements		BlackRock ACWI ex-US Index Fund

1. Organization and Significant Accounting Policies:

BlackRock ACWI ex-US Index Fund (the “Fund”), a series of BlackRock Funds III (the “Trust”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a non-diversified, open-end management investment company. The Trust is organized as a Delaware statutory trust. The Fund seeks to achieve its investment objective by investing substantially all of its assets in ACWI ex-US Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), an affiliate of the Fund, which has the same investment objective and strategies as the Fund. The value of the Fund’s investment in the Master Portfolio reflects the Fund’s proportionate interest in the net assets of the Master Portfolio. The performance of the Fund is directly affected by the performance of the Master Portfolio. The percentage of the Master Portfolio owned by the Fund at December 31, 2012 was 2.55%. 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’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund offers multiple classes of shares. Institutional and Class K Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are sold without a sales charge. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Investor A Shares bear certain expenses related to the shareholder servicing of such shares. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing expenditures.

The following is a summary of significant accounting policies followed by the Fund:

Offering Costs: Offering costs associated with the establishment of the Fund are amortized over a 12-month period beginning with the commencement of operations.

2. Administration 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, Inc. (“BlackRock”).



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	13


Notes to Financial Statements (continued)

annual rate of 0.10% of the average daily value of the Fund’s net assets. The Fund does not pay an investment advisory fee or investment management fee. Effective July 1, 2012, BlackRock Advisors, LLC (“BAL”) replaced BTC as the Fund’s administrator and entered into an Administration Agreement with the Trust, on behalf of the Fund, on similar terms.

BlackRock Fund Advisors (“BFA”), the investment advisor for the Master Portfolio, BAL and previously BTC, contractually agreed to waive and/or reimburse fees or expenses, excluding interest expense, dividend expense, acquired fund fees and expenses and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business, in order to limit expenses. The expense limitation as a percentage of average daily net assets is as follows: 0.40% for Institutional, 0.65% for Investor A and 0.35% for Class K. BFA, BAL and previously BTC have agreed not to reduce or discontinue this contractual waiver or reimbursement prior to May 1, 2013 unless approved by the Board, 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, BAL or previously BTC, as applicable, are less than the expense limit for that share class, the share class is required to repay BFA, BAL or previously BTC, as applicable, up to the lesser of (a) the amount of fees waived or expenses reimbursed during the two prior fiscal periods under the agreement and (b) the amount by which the expense limit for that share class exceeds the operating expenses of the share class for the current fiscal year, provided that: (1) the Fund, of which the share class is a part, has more than $50 million in assets for the fiscal year and (2) BFA, BAL or previously BTC or an affiliate serves as the Fund’s investment advisor or administrator. In the event the expense limit for a share class is changed subsequent to a fiscal year in which BFA, BAL or previously BTC, as applicable, becomes entitled to reimbursement for fees waived or reimbursed, the amount available to reimburse BFA, BAL or previously BTC, as applicable, shall be calculated by reference to the expense limit for that share class in effect at the time BFA, BAL or previously BTC became entitled to receive such reimbursement, rather than the subsequently changed expense limit for that share class.

For the year ended December 31, 2012, BAL recouped the following Fund Level and class specific waivers and/or reimbursements previously recorded by the Fund:


	BAL
Institutional	$	28

On December 31, 2012, the Fund Level and class specific waiver and/or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:


	Expiring December 31,
	2013		2014
	BTC		BTC		BAL
Fund level	$	118,427	$	146,981	$	110,878
Institutional	$	—	$	9	$	375
Investor A	$	31	$	19	$	19
Class K	$	1,388	$	799	$	20

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 distribution services to the Fund. The ongoing service and/or distribution fee compensates BRIL and each broker-dealer for providing shareholder servicing related services to Investor A shareholders.


	BTC		BAL
Institutional	$	8	$	342
Investor A	$	17	$	16
Class K	$	665	$	20



14	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012


Notes to Financial Statements (concluded)

3. Income Tax Information:

The tax character of distributions paid during the fiscal years ended December 31, 2012 and December 31, 2011 was as follows:


	12/31/2012		12/31/2011
Ordinary income	$	951,102	$	82,276
Tax return of capital		217		45,774

Total	$	951,319	$	128,050

As of December 31, 2012, the tax components of accumulated net earnings were as follows:


Capital loss carryforwards	$	(2,253,335	)
Net unrealized gains¹		5,288,596
Qualified late-year losses²		(717	)

Total	$	3,034,544

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

The Fund has elected to defer certain qualified late-year losses and recognize such losses in the year ending December 31, 2013.

As of December 31, 2012, the Fund had a capital loss carryforward of $2,253,335 available to offset future realized capital gains. The capital loss carryforward has no expiration date.

4. Capital Share Transactions:

Transactions in capital shares for each class were as follows:


	Year Ended December 31, 2012						Period June 30, 2011¹ to December 31, 2011
	Shares			Amount			Shares		Amount
Institutional
Shares sold		9,459,692		$	77,458,398			5,657	$	50,000
Shares issued to shareholders in reinvestment of dividends		87,727			766,601			—		—
Shares redeemed		(8,493,801	)		(75,581,211	)		—		—

Net increase		1,053,618		$	2,643,788			5,657	$	50,000


Investor A
Shares sold		1,873		$	15,506			2,500	$	25,000
Shares issued to shareholders in reinvestment of dividends		62			548			—		—
Shares redeemed		(93	)		(797	)		—		—

Net increase		1,842		$	15,257			2,500	$	25,000


Class K
Shares sold		2,170		$	17,451			1,995,000	$	19,950,000
Shares issued to shareholders in reinvestment of dividends		76			689			—		—
Shares redeemed		(1,991,835	)		(15,999,225	)		—		—

Net increase (decrease)		(1,989,589	)	$	(15,981,085	)		1,995,000	$	19,950,000

Total Net Increase (Decrease)		(934,129	)	$	(13,322,040	)		2,003,157	$	20,025,000

Commencement of operations.

At December 31, 2012, shares owned by affiliated were as follows:


			Shares
Institutional			2,250
Investor A			2,500
Class K			3,165

5. Subsequent Events:



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	15


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

To the Shareholders and Board of Trustees of

BlackRock Funds III:

statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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.

PricewaterhouseCoopers LLP

New York, New York

February 22, 2013


Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by the Fund during the taxable year ended December 31, 2012:



Qualified Dividend Income for Individuals¹			88.39%
Foreign Source Income¹			100%
Foreign Taxes Paid Per Share²			$0.052152

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

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



16	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012


Master Portfolio Information as of December 31, 2012		BlackRock ACWI ex-US Index Fund


Ten Largest Holdings		Percent of Long-Term Investments


iShares S&P India Nifty 50 Index Fund	2	%
Nestle SA, Registered Shares	1
HSBC Holdings Plc	1
Samsung Electronics Co. Ltd.	1
Novartis AG, Registered Shares	1
Roche Holding AG	1
BP Plc	1
Royal Dutch Shell Plc, Class A	1
Toyota Motor Corp.	1
BHP Billiton Ltd.	1


Geographic Allocation		Percent of Long-Term Investments


United Kingdom	15	%
Japan	14
Canada	8
France	6
Australia	6
Switzerland	6
Germany	6
China	4
South Korea	3
Brazil	3
Taiwan	3
Hong Kong	2
Sweden	2
Spain	2
South Africa	2
Netherlands	2
India	2
Italy	2
Other¹	12

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



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	17

Schedule of Investments December 31, 2012

ACWI ex-US Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Australia — 5.9%
AGL Energy Ltd.		12,338	$	198,346
ALS Ltd.		7,413		84,563
Alumina Ltd.		60,854		58,404
Amcor Ltd.		29,731		251,279
AMP Ltd.		69,893		354,523
APA Group		18,761		108,308
Asciano Ltd.		21,706		106,186
ASX Ltd.		3,790		123,684
Aurizon Holdings Ltd.		41,449		162,993
Australia & New Zealand Banking Group Ltd.		62,108		1,635,706
Bendigo and Adelaide Bank Ltd.		9,383		83,585
BHP Billiton Ltd.		73,357		2,863,888
Boral Ltd.		17,007		78,036
Brambles Ltd.		38,203		302,922
Caltex Australia Ltd.		2,775		55,971
Centro Retail Australia		30,562		72,350
CFS Retail Property Trust		43,987		87,995
Coca-Cola Amatil Ltd.		14,298		200,934
Cochlear Ltd.		1,290		106,940
Commonwealth Bank of Australia		36,256		2,361,222
Computershare Ltd.		9,931		93,685
Crown Ltd.		10,816		120,879
CSL Ltd.		11,863		669,753
Dexus Property Group		103,186		109,594
Echo Entertainment Group Ltd.		17,948		64,822
Flight Centre Ltd.		1,246		35,257
Fortescue Metals Group Ltd.		31,525		157,103
Goodman Group		38,905		177,272
GPT Group		31,721		122,100
Harvey Norman Holdings Ltd.		8,907		17,731
Iluka Resources Ltd.		9,373		90,580
Incitec Pivot Ltd.		36,541		124,582
Insurance Australia Group Ltd.		47,286		232,900
Leighton Holdings Ltd.		3,620		68,335
Lend Lease Group		12,255		119,680
Macquarie Group Ltd.		7,816		292,795
Metcash Ltd.		19,644		68,100
Mirvac Group		77,332		120,347
National Australia Bank Ltd.		52,011		1,368,049
Newcrest Mining Ltd.		18,222		426,261
Orica Ltd.		8,262		217,341
Origin Energy Ltd.		26,260		322,806
OZ Minerals Ltd.		7,368		52,324
Qantas Airways Ltd. (a)		23,375		36,603
QBE Insurance Group Ltd.		28,050		321,394
Ramsay Health Care Ltd.		3,118		88,932
Rio Tinto Ltd.		10,012		703,934
Santos Ltd.		21,517		252,107
Sims Metal Management Ltd.		4,321		42,697


Common Stocks	Shares		Value

Australia (concluded)
Sonic Healthcare Ltd.		8,393	$	117,155
SP AusNet		33,931		39,431
Stockland		49,806		184,159
Suncorp Group Ltd.		30,711		327,958
Sydney Airport		4,553		16,038
Tabcorp Holdings Ltd.		18,044		57,633
Tatts Group Ltd.		29,460		92,792
Telstra Corp. Ltd.		98,912		450,715
Toll Holdings Ltd.		16,165		77,478
Transurban Group		29,985		190,602
Treasury Wine Estates Ltd.		14,622		71,969
Wesfarmers Ltd.		23,480		905,885
Westfield Group		50,693		559,846
Westfield Retail Trust		65,902		207,918
Westpac Banking Corp.		70,643		1,935,602
Whitehaven Coal Ltd.		11,321		42,191
Woodside Petroleum Ltd.		15,307		545,465
Woolworths Ltd.		28,742		881,757
WorleyParsons Ltd.		4,626		113,952

				22,634,344
Austria — 0.2%
Andritz AG		1,682		108,083
Erste Group Bank AG (a)		4,927		156,652
IMMOFINANZ AG		27,369		115,218
OMV AG		3,307		119,833
Raiffeisen Bank International AG		1,141		47,464
Telekom Austria AG		4,159		31,580
Verbund AG		1,361		33,804
Vienna Insurance Group AG		746		39,817
Voestalpine AG		2,329		85,575

				738,026
Belgium — 0.8%
Ageas		5,258		155,359
Anheuser-Busch InBev NV		18,130		1,578,843
Belgacom SA		3,874		113,940
Colruyt SA		1,922		95,135
Delhaize Group		2,249		90,587
Groupe Bruxelles Lambert SA		2,032		162,065
KBC Groep NV		5,591		194,859
Solvay SA		1,343		195,423
Telenet Group Holding NV		1,397		65,738
UCB SA		2,490		142,648
Umicore SA		2,576		142,641

				2,937,238
Brazil — 2.9%
AES Tiete SA, Preference Shares		2,400		27,651
All America Latina Logistica SA		11,400		46,268


Portfolio Abbreviations

To simplify the listings of portfolio holdings in the Schedule of Investments, the names and descriptions of many of the securities have been abbreviated according to the following list:

ADR American Depositary Receipts

AUD Australian Dollar

BRL Brazilian Real

CAD Canadian Dollar

CHF Swiss Franc

DKK Danish Krone

EUR Euro

GBP British Pound

HKD Hong Kong Dollar

JPY Japanese Yen

KRW South Korean Won

MXN Mexican Peso

NOK Norwegian Krone

NVDR Non-Voting Depositary Receipts

SEK Swedish Krona

SGD Singapore Dollar

TWD New Taiwan Dollar

USD US Dollar

See Notes to Financial Statements.



18	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

ACWI ex-US Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Brazil (continued)
Amil Participacoes SA		2,500	$	37,668
Anhanguera Educacional Participacoes SA		2,500		42,210
Arteris SA		2,900		26,840
Banco Bradesco SA		13,200		218,807
Banco Bradesco SA, Preference Shares		43,900		754,072
Banco do Brasil SA		12,800		160,039
Banco do Estado do Rio Grande do Sul, Preference Shares		4,200		31,815
Banco Santander (Brasil) SA		16,900		123,562
BM&F Bovespa SA		40,200		274,872
BR Malls Participacoes SA		9,100		120,089
BR Properties SA		4,600		57,289
Bradespar SA, Preference Shares		4,900		78,567
Braskem SA, Preference ‘A’ Shares		4,300		26,882
BRF — Brasil Foods SA		14,800		304,963
CCR SA		20,000		189,988
Centrais Eletricas Brasileiras SA		7,400		22,878
Centrais Eletricas Brasileiras SA, Preference ‘B’ Shares		5,300		27,128
CETIP SA — Mercados Organizados		4,900		60,762
Cia de Bebidas das Americas		3,400		138,989
Cielo SA		6,600		183,704
Companhia Brasileira de Distribuicao Grupo Pao de Acucar, Preference Shares		2,200		97,241
Companhia de Bebidas das Americas, Preference Shares		17,900		748,172
Companhia de Saneamento Basico do Estado de Sao Paulo		2,600		110,311
Companhia de Saneamento de Minas Gerais-COPASA		1,300		27,778
Companhia Energetica de Minas Gerais, Preference Shares		10,800		119,209
Companhia Energetica de Sao Paulo, Preference ‘B’ Shares		3,700		35,039
Companhia Hering SA		3,400		69,727
Companhia Paranaense de Energia, Preference ‘B’ Shares		2,500		38,706
Companhia Siderurgica Nacional SA		16,200		93,837
Cosan SA Industria e Comercio		2,600		53,016
CPFL Energia SA		5,300		55,394
Cyrela Brazil Realty SA		6,100		53,299
Diagnosticos da America SA		5,100		32,854
Duratex SA		5,700		41,341
EcoRodovias Infraestrutura e Logistica SA		4,000		33,797
EDP — Energias do Brasil SA		4,600		28,061
Eletropaulo Metropolitana Eletricidade de Sao Paulo SA, Preference Shares		2,600		21,333
Embraer SA		12,200		86,100
Fibria Celulose SA (a)		5,300		58,423
Gerdau SA, Preference Shares		19,300		169,010
Hypermarcas SA (a)		8,600		69,808
Itau Unibanco Holding SA, Preference Shares		54,400		887,138
Itausa — Investimentos Itau SA, Preference Shares		57,040		269,948
JBS SA (a)		10,100		29,597
Klabin SA, Preference Shares		9,300		58,094
Kroton Educacional SA (a)		2,600		58,730
Light SA		1,300		14,171
Localiza Rent a Car SA		3,300		60,440
Lojas Americanas SA		3,300		28,721
Lojas Americanas SA, Preference Shares		8,756		78,387
Lojas Renner SA		2,800		109,060
Marcopolo SA, Preference Shares		4,700		29,612


Common Stocks	Shares		Value

Brazil (concluded)
Metalurgica Gerdau SA, Preference Shares		6,500	$	72,698
MPX Energia SA (a)		3,900		21,238
MRV Engenharia e Participacoes SA		6,600		38,617
Multiplan Empreendimentos Imobiliarios SA		1,700		49,983
Multiplus SA		1,200		27,968
Natura Cosmeticos SA		3,800		108,831
Odontoprev SA		5,800		30,395
OGX Petroleo e Gas Participacoes SA (a)		28,200		60,325
Oi SA		7,005		31,339
Oi SA, Preference Shares		20,297		82,477
PDG Realty SA Empreendimentos e Participacoes		28,600		46,235
Petroleo Brasileiro SA		69,600		664,557
Petroleo Brasileiro SA, Preference Shares		97,400		928,570
Porto Seguro SA		2,000		22,945
Qualicorp SA (a)		3,200		33,149
Raia Drogasil SA		4,900		55,210
Souza Cruz SA		8,600		129,409
Sul America SA		3,308		28,597
Telefonica Brasil SA, Preference Shares		6,600		157,949
Tim Participacoes SA		17,840		71,447
Totvs SA		2,800		55,234
Tractebel Energia SA		3,800		61,895
Ultrapar Participacoes SA		7,400		167,300
Usinas Siderurgicas de Minas Gerais SA, Preference ‘A’ Shares		8,300		51,888
Vale SA		30,800		636,007
Vale SA, Preference ‘A’ Shares		46,200		922,195
WEG SA		4,800		63,297

				11,241,152
Canada — 7.6%
Agnico-Eagle Mines Ltd.		3,884		203,552
Agrium, Inc.		3,334		332,294
Alimentation Couche Tard, Inc.		2,901		142,702
ARC Resources Ltd.		6,674		163,982
Athabasca Oil Corp. (a)		6,978		73,309
Bank of Montreal		14,735		901,550
Bank of Nova Scotia		26,214		1,514,282
Barrick Gold Corp.		23,476		821,790
Baytex Energy Corp.		2,704		116,538
BCE, Inc.		6,035		258,643
Bell Aliant, Inc.		1,880		49,745
Bombardier, Inc.		34,067		128,774
Bonavista Energy Corp.		3,851		57,376
Brookfield Asset Management Inc., Class A		13,364		489,579
Brookfield Office Properties, Inc.		6,247		106,514
CAE, Inc.		5,631		57,006
Cameco Corp.		8,945		176,166
Canadian Imperial Bank of Commerce		9,010		724,369
Canadian National Railway Co.		9,754		885,773
Canadian Natural Resources Ltd.		25,417		731,821
Canadian Oil Sands Ltd.		11,066		224,390
Canadian Pacific Railway Ltd.		3,828		388,303
Canadian Tire Corp. Ltd., Class A		1,729		120,597
Canadian Utilities Ltd.		1,249		90,332
Catamaran Corp. (a)		4,660		219,156
Cenovus Energy, Inc.		17,729		593,343
Centerra Gold, Inc.		3,697		34,602
CGI Group Inc., Class A (a)		4,665		107,585
CI Financial Corp.		3,483		87,294

See Notes to Financial Statements.



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	19

Schedule of Investments (continued)

ACWI ex-US Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Canada (continued)
Crescent Point Energy Corp.		7,857	$	297,155
Dollarama, Inc.		1,568		92,958
Eldorado Gold Corp.		15,518		199,689
Empire Co. Ltd.		643		38,107
Enbridge, Inc.		17,640		762,916
Encana Corp.		16,746		330,981
Enerplus Corp.		4,584		59,449
Finning International, Inc.		3,863		95,420
First Quantum Minerals Ltd.		10,843		238,836
Fortis, Inc.		4,221		145,212
Franco-Nevada Corp.		3,303		188,544
George Weston Ltd.		1,141		81,076
Gildan Activewear, Inc.		2,618		95,619
Goldcorp, Inc.		19,085		701,657
Great-West Lifeco, Inc.		6,464		158,237
H&R Real Estate Investment Trust		2,175		52,697
Husky Energy, Inc.		7,780		229,951
IAMGOLD Corp.		8,655		99,106
IGM Financial, Inc.		2,756		115,260
Imperial Oil Ltd.		6,986		300,102
Industrial Alliance Insurance & Financial Services, Inc.		2,207		69,625
Inmet Mining Corp.		1,102		81,994
Intact Financial Corp.		2,909		189,420
Kinross Gold Corp.		26,166		254,110
Loblaw Cos. Ltd.		2,537		106,943
Magna International Inc., Class A		5,318		265,606
Manulife Financial Corp.		41,516		563,870
MEG Energy Corp. (a)		2,845		87,063
Metro Inc., Class A		2,179		138,731
National Bank of Canada		3,721		288,941
New Gold, Inc. (a)		10,567		116,963
Nexen, Inc.		12,026		321,233
Onex Corp.		2,102		88,480
Open Text Corp. (a)		1,318		73,711
Osisko Mining Corp. (a)		8,495		68,322
Pacific Rubiales Energy Corp.		6,707		155,825
Pan American Silver Corp.		3,677		68,904
Pembina Pipeline Corp.		6,539		187,092
Pengrowth Energy Corp.		11,060		55,039
Penn West Petroleum Ltd.		10,574		114,808
Potash Corp. of Saskatchewan, Inc.		20,095		817,780
Power Corp. of Canada		7,904		201,672
Power Financial Corp.		5,545		151,851
Research In Motion Ltd. (a)		10,677		126,660
RioCan Real Estate Investment Trust		3,049		84,478
Ritchie Bros Auctioneers, Inc.		2,243		46,790
Rogers Communications, Inc., Class B		8,995		408,379
Royal Bank of Canada		33,077		1,991,204
Saputo, Inc.		2,885		145,918
Shaw Communications, Inc., Class B		8,850		203,211
Shoppers Drug Mart Corp.		4,693		201,931
Silver Wheaton Corp.		8,533		307,624
SNC-Lavalin Group, Inc.		3,400		137,818
Sun Life Financial, Inc.		14,022		371,730
Suncor Energy, Inc.		35,940		1,181,861
Talisman Energy, Inc.		23,593		266,835
Teck Resources Ltd., Class B		13,649		496,040
TELUS Corp.		3,411		221,799
Thomson Reuters Corp.		9,158		264,972


Common Stocks	Shares		Value

Canada (concluded)
Tim Hortons, Inc.		4,021	$	197,392
The Toronto-Dominion Bank		20,485		1,724,760
Tourmaline Oil Corp. (a)		2,912		91,426
TransAlta Corp.		5,920		89,987
TransCanada Corp.		16,366		773,630
Turquoise Hill Resources Ltd. (a)		10,256		78,361
Valeant Pharmaceuticals International, Inc. (a)		6,795		405,364
Vermilion Energy, Inc.		2,091		109,248
Yamana Gold, Inc.		17,269		297,047

				28,776,787
Chile — 0.4%
AES Gener SA		49,161		31,571
Aguas Andinas SA		59,765		42,410
Banco de Chile		401,293		64,869
Banco de Chile (a)		22,524		3,330
Banco de Credito e Inversiones		797		54,847
Banco Santander Chile		1,436,925		101,208
CAP SA		1,918		64,321
Cencosud SA		22,156		120,117
Colbun SA (a)		186,444		51,425
Companhia Cervecerias Unidas SA		2,835		44,636
CorpBanca		2,564,714		34,435
E.CL SA, Class S		13,422		31,515
Embotelladora Andina SA, Preference ‘B’ Shares		4,632		29,139
Empresa Nacional de Electricidad SA		70,263		114,198
Empresas CMPC SA		25,626		94,630
Empresas COPEC SA		10,071		142,847
Enersis SA		286,177		105,098
ENTEL Chile SA		2,744		56,739
LATAM Airlines Group SA		5,940		139,595
SACI Falabella		10,690		110,113
Sociedad Quimica y Minera de Chile SA, Preference ‘B’ Shares		2,025		116,373
Vina Concha y Toro SA		7,977		15,539

				1,568,955
China — 4.2%
Agile Property Holdings Ltd.		32,000		45,941
Agricultural Bank of China Ltd., Class H		486,000		245,258
Air China Ltd., Class H		44,000		37,677
Airtac International Group		2,000		11,655
Aluminum Corp. of China Ltd., Class H (a)		104,000		48,905
Angang Steel Co. Ltd. (a)		26,000		19,540
Anhui Conch Cement Co. Ltd., Class H		28,000		104,590
AviChina Industry & Technology Co. Ltd.		40,000		17,983
Bank of China Ltd., Class H		1,758,000		796,168
Bank of Communications Co. Ltd., Class H		157,700		120,601
BBMG Corp.		24,500		22,820
Beijing Capital International Airport Co. Ltd.		48,000		34,842
Beijing Enterprises Holdings Ltd.		11,500		75,432
Belle International Holdings Ltd.		105,000		232,215
Brilliance China Automotive Holdings Ltd. (a)		62,000		77,915
Byd Co. Ltd., Class H (a)		14,000		42,908
China Agri-Industries Holdings Ltd.		61,100		34,720
China BlueChemical Ltd., Class H		48,000		32,744
China Citic Bank Corp. Ltd., Class H		166,000		100,599
China Coal Energy Co. Ltd., Class H		92,000		102,246
China Communications Construction Co. Ltd., Class H		100,000		98,466
China Communications Services Corp. Ltd.		50,000		29,219

See Notes to Financial Statements.



20	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

ACWI ex-US Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

China (continued)
China Construction Bank Corp., Class H		1,665,000	$	1,360,658
China COSCO Holdings Co. Ltd., Class H (a)		67,500		33,907
China Foods Ltd.		18,000		16,753
China International Marine Containers Group Co. Ltd. (a)		11,300		17,320
China Life Insurance Co. Ltd., Class H		177,000		586,235
China Longyuan Power Group Corp., Class H		54,000		37,999
China Mengniu Dairy Co. Ltd.		28,000		80,034
China Merchants Bank Co. Ltd., Class H		88,500		198,979
China Merchants Holdings International Co. Ltd.		26,000		84,909
China Minsheng Banking Corp. Ltd., Class H		117,500		138,029
China Mobile Ltd.		139,000		1,635,709
China National Building Material Co. Ltd., Class H		64,000		96,095
China Oilfield Services Ltd., Class H		34,000		71,290
China Overseas Land & Investment Ltd.		100,000		304,043
China Pacific Insurance Group Co. Ltd., Class H		53,400		201,345
China Petroleum & Chemical Corp., Class H		398,000		458,207
China Railway Construction Corp. Ltd.		44,000		50,901
China Railway Group Ltd.		90,000		53,516
China Resources Cement Holdings Ltd.		42,000		28,222
China Resources Enterprise Ltd.		28,000		102,473
China Resources Land Ltd.		46,000		127,452
China Resources Power Holdings Co. Ltd.		42,000		108,210
China Shanshui Cement Group Ltd.		40,000		29,933
China Shenhua Energy Co. Ltd., Class H		77,000		344,908
China Shipping Container Lines Co. Ltd. (a)		76,000		22,493
China Shipping Development Co. Ltd.		26,000		15,283
China Southern Airlines Co. Ltd.		44,000		22,496
China Taiping Insurance Holdings Co. Ltd. (a)		19,400		39,766
China Telecom Corp. Ltd., Class H		316,000		178,681
China Unicom Hong Kong Ltd.		106,000		172,348
China Vanke Co. Ltd.		32,500		52,414
Chongqing Rural Commercial Bank		49,000		27,353
Citic Pacific Ltd.		27,000		40,850
CITIC Securities Co. Ltd.		23,500		60,465
CNOOC Ltd.		417,000		918,656
COSCO Pacific Ltd.		36,000		52,199
Country Garden Holdings Co. Ltd. (a)		114,129		60,975
CSR Corp. Ltd.		46,000		40,958
Daphne International Holdings Ltd.		16,000		22,274
Datang International Power Generation Co. Ltd.		60,000		23,070
Dongfang Electric Corp. Ltd.		6,600		13,585
Dongfeng Motor Group Co. Ltd., Class H		60,000		94,464
ENN Energy Holdings Ltd.		16,000		70,110
Evergrande Real Estate Group Ltd.		126,000		71,071
GCL-Poly Energy Holdings Ltd.		204,000		42,230
Golden Eagle Retail Group Ltd.		15,000		37,360
GOME Electrical Appliances Holding Ltd. (a)		283,000		34,243
Great Wall Motor Co. Ltd.		22,500		72,367
Guangzhou Automobile Group Co. Ltd., Class H		44,000		39,670
Guangzhou R&F Properties Co. Ltd.		23,600		39,997
Haitong Securities Co. Ltd. (a)		19,600		34,170
Hengan International Group Co. Ltd.		16,500		150,691
Huabao International Holdings Ltd.		56,000		28,029
Huaneng Power International, Inc., Class H		66,000		61,656
Industrial & Commercial Bank of China Ltd., Class H		1,515,000		1,093,491
Inner Mongolia Yitai Coal Co.		14,900		85,071
Intime Department Store Group Co. Ltd.		20,000		23,933
Jiangsu Expressway Co. Ltd.		34,000		35,399
Jiangxi Copper Co. Ltd., Class H		31,000		83,508


Common Stocks	Shares		Value

China (concluded)
Kingboard Chemical Holdings Ltd.		14,000	$	50,555
Kunlun Energy Co. Ltd.		72,000		152,232
Lenovo Group Ltd.		140,000		129,088
Longfor Properties Co. Ltd.		32,500		64,619
Parkson Retail Group Ltd.		29,500		23,977
PetroChina Co. Ltd., Class H		498,000		718,448
PICC Property & Casualty Co. Ltd., Class H		64,800		92,552
Ping An Insurance (Group) Co. of China Ltd., Class H		44,000		375,307
Shandong Weigao Group Medical Polymer Co. Ltd., Class H		32,000		32,109
Shanghai Electric Group Co. Ltd., Class H		68,000		29,619
Shanghai Industrial Holdings Ltd.		12,000		42,787
Shanghai Pharmaceuticals Holding Co. Ltd.		14,100		27,153
Shimao Property Holdings Ltd.		29,000		55,982
Shougang Fushan Resources Group Ltd.		70,000		26,273
Sinopec Shanghai Petrochemical Co. Ltd.		48,000		17,356
Sinopharm Group Co. Ltd., Class H		16,400		52,079
Soho China Ltd.		47,500		38,624
Tencent Holdings Ltd.		24,000		787,121
Tingyi Cayman Islands Holding Corp.		44,000		123,792
Tsingtao Brewery Co. Ltd.		6,000		35,762
Uni-President China Holdings Ltd.		27,000		28,757
Want Want China Holdings Ltd.		136,000		190,591
Weichai Power Co. Ltd., Class H		10,200		46,101
Wumart Stores, Inc.		11,000		23,792
Yanzhou Coal Mining Co. Ltd., Class H		40,000		68,186
Zhaojin Mining Industry Co. Ltd., Class H		21,500		34,413
Zhejiang Expressway Co. Ltd.		40,000		31,641
Zhongsheng Group Holdings Ltd.		9,500		14,584
Zhuzhou CSR Times Electric Co. Ltd.		12,000		45,544
Zijin Mining Group Co. Ltd., Class H		122,000		49,119
Zoomlion Heavy Industry Science and Technology Co. Ltd., Class H		26,600		40,054
ZTE Corp., Class H		16,200		27,815

				15,836,929
Colombia — 0.3%
Almacenes Exito SA		4,840		97,238
Banco Davivienda SA, Preference Shares		2,215		29,433
Bancolombia SA		6,122		103,939
Bancolombia SA, Preference Shares		6,899		116,428
Cementos Argos SA		9,593		54,833
Corp. Financiera Colombiana SA		1,443		29,791
Ecopetrol SA		112,084		346,338
Grupo Argos SA		6,004		71,355
Grupo Argos SA, Preference Shares		243		2,932
Grupo Aval Acciones y Valores SA, Preference Shares		37,834		27,835
Grupo de Inversiones Suramericana SA		5,550		119,355
Grupo de Inversiones Suramericana SA, Preference Shares		1,298		28,648
Interconexion Electrica SA		9,289		50,466
Isagen SA ESP		18,177		25,769

				1,104,360
Czech Republic — 0.1%
CEZ AS		3,736		133,651
Komercni Banka AS		352		74,412
Telefonica Czech Republic AS		2,608		44,399

				252,462

See Notes to Financial Statements.



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	21

Schedule of Investments (continued)

ACWI ex-US Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Denmark — 0.8%
A.P. Moller — Maersk A/S, Class A		29	$	219,607
A.P. Moller — Maersk A/S, Class B		14		99,712
Carlsberg A/S, Class B		2,444		240,774
Coloplast A/S, Class B		2,580		126,524
Danske Bank A/S (a)		14,982		254,457
DSV A/S		4,188		108,354
Novo Nordisk A/S, Class B		9,199		1,497,934
Novozymes A/S, Class B		5,484		155,672
TDC A/S		13,617		96,478
Tryg A/S		532		40,264
William Demant Holding A/S (a)		657		56,444

				2,896,220
Egypt — 0.1%
Commercial International Bank SAE		13,700		74,467
Egyptian Financial Group-Hermes Holding (a)		7,477		12,944
Egyptian Kuwaiti Holding Co. SAE		13,196		16,891
National Societe Generale Bank SAE		2,696		14,926
Orascom Construction Industries (a)		2,172		86,183
Orascom Telecom Holding SAE (a)		62,500		39,013
Talaat Moustafa Group (a)		21,069		14,675
Telecom Egypt Co.		6,786		15,098

				274,197
Finland — 0.5%
Elisa OYJ		3,134		69,480
Fortum OYJ		9,000		168,488
Kesko OYJ, Class B		1,440		47,275
Kone OYJ, Class B		3,553		262,779
Metso OYJ		2,853		121,800
Neste Oil OYJ		3,153		40,876
Nokia OYJ		84,921		335,583
Nokian Renkaat OYJ		2,524		101,104
Orion OYJ, Class B		2,153		63,391
Pohjola Bank Plc, Class A		3,212		48,095
Sampo OYJ, Class A		9,987		323,435
Stora Enso OYJ, Class R		12,244		85,701
UPM-Kymmene OYJ		11,806		138,895
Wartsila OYJ		3,809		165,828

				1,972,730
France — 6.2%
Accor SA		3,339		119,092
Aeroports de Paris		736		56,983
Air Liquide SA		7,258		916,959
ALSTOM SA		4,665		187,924
ArcelorMittal		19,952		347,872
Arkema		1,423		149,413
AtoS		1,253		87,994
AXA SA		41,019		736,528
BNP Paribas SA		21,459		1,221,662
Bouygues SA		4,211		125,307
Bureau Veritas SA		1,257		140,947
Cap Gemini SA		3,360		146,924
Carrefour SA		13,709		352,970
Casino Guichard-Perrachon SA		1,273		121,931
Christian Dior SA		1,245		212,215
CNP Assurances		3,333		51,304
Compagnie de Saint-Gobain		9,502		408,052
Compagnie Generale de Geophysique-Veritas (a)		3,651		110,940


Common Stocks	Shares		Value

France (concluded)
Compagnie Generale des Etablissements Michelin, Class B		4,136	$	396,307
Credit Agricole SA (a)		22,714		184,984
Danone SA		13,519		890,526
Dassault Systemes SA		1,428		159,661
Edenred		3,867		119,600
EDF SA		5,397		100,009
Essilor International SA		4,808		484,921
Eurazeo		638		30,890
Eutelsat Communications SA		3,032		100,845
Fonciere Des Regions		664		55,878
France Telecom SA		43,537		482,991
GDF Suez		29,861		615,019
Gecina SA		555		62,850
Groupe Eurotunnel SA		12,711		98,774
Icade		505		45,088
Iliad SA		522		89,606
Imerys SA		880		56,442
JC Decaux SA		1,359		32,438
Klepierre		2,342		93,608
L’Oreal SA		5,596		778,641
Lafarge SA		4,265		275,401
Lagardere S.C.A.		2,719		91,456
Legrand SA		5,385		228,518
LVMH Moet Hennessy Louis Vuitton SA		5,916		1,091,841
Natixis		19,626		67,084
Pernod-Ricard SA		4,979		577,668
Peugeot SA (a)		5,748		41,946
PPR SA		1,716		322,283
Publicis Groupe		4,078		245,345
Remy Cointreau SA		536		58,531
Renault SA		4,344		235,914
Rexel SA		2,756		56,368
Safran SA		5,216		225,889
Sanofi		27,547		2,612,278
Schneider Electric SA		12,288		899,982
SCOR SE		3,712		100,330
SES SA		7,753		223,292
Societe BIC SA		663		79,472
Societe Generale SA (a)		16,366		622,276
Sodexo		2,139		180,743
Suez Environnement Co.		6,712		80,966
Technip SA		2,325		268,854
Thales SA		2,052		71,497
Total SA		49,046		2,552,006
Unibail-Rodamco SE		2,175		527,444
Vallourec SA		2,326		122,097
Veolia Environnement SA		7,600		92,135
Vinci SA		10,966		527,981
Vivendi SA		30,241		683,929
Wendel SA		814		83,908
Zodiac Aerospace		775		85,801

				23,707,330
Germany — 5.8%
Adidas AG		4,992		445,532
Allianz AG, Registered Shares		10,454		1,457,256
Axel Springer AG		1,064		45,550
BASF SE		21,004		1,986,136
Bayer AG, Registered Shares		18,979		1,800,941

See Notes to Financial Statements.



22	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

ACWI ex-US Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Germany (concluded)
Bayerische Motoren Werke AG		7,472	$	727,108
Bayerische Motoren Werke AG, Preference Shares		1,361		88,164
Beiersdorf AG		2,429		198,888
Brenntag AG		1,164		153,352
Celesio AG		1,907		33,031
Commerzbank AG (a)		85,213		163,247
Continental AG		2,609		304,088
Daimler AG, Registered Shares		20,723		1,140,916
Deutsche Bank AG, Registered Shares		21,389		941,005
Deutsche Boerse AG		4,632		284,043
Deutsche Lufthansa AG, Registered Shares		5,283		99,871
Deutsche Post AG, Registered Shares		21,441		472,249
Deutsche Telekom AG, Registered Shares		62,855		715,472
E.ON AG		41,305		774,718
Fraport AG		942		54,953
Fresenius Medical Care AG & Co. KGaA		5,090		351,271
Fresenius SE & Co. KGaA		2,977		342,558
GEA Group AG		3,948		128,372
Hannover Rueckversicherung AG, Registered Shares		1,383		108,322
HeidelbergCement AG		3,158		193,244
Henkel AG & Co. KGaA		3,003		206,099
Henkel AG & Co. KGaA, Preference Shares		4,179		343,811
Hochtief AG (a)		734		42,934
Hugo Boss AG		508		53,988
Infineon Technologies AG		24,372		198,545
K+S AG		3,875		179,969
Kabel Deutschland Holding AG		2,046		153,993
Lanxess AG		1,889		166,571
Linde AG		4,228		739,681
MAN SE		942		101,190
Merck KGaA		1,477		194,661
Metro AG		2,897		80,482
Muenchener Rueckversicherungs AG, Registered Shares		4,160		750,995
Porsche Automobil Holding SE, Preference Shares		3,638		299,461
ProSiebenSat.1 Media AG, Preference Shares		1,886		53,721
RWE AG		11,165		463,096
RWE AG, Non-Voting Preference Shares		1,340		50,668
Salzgitter AG		767		40,197
SAP AG		21,071		1,694,374
Siemens AG, Registered Shares		18,653		2,039,717
Suedzucker AG		1,874		76,922
ThyssenKrupp AG		8,676		204,863
United Internet AG		2,012		43,510
Volkswagen AG		683		148,168
Volkswagen AG, Preference Shares		3,286		753,969

				22,091,872
Greece — 0.0%
Coca Cola Hellenic Bottling Co. SA		4,589		107,213
OPAP SA		5,590		40,084

				147,297
Hong Kong — 2.3%
AIA Group Ltd.		250,600		993,964
Anta Sports Products Ltd.		17,000		15,296
ASM Pacific Technology Ltd.		4,800		58,930
Bank of East Asia Ltd.		30,800		119,606
BOC Hong Kong Holdings Ltd.		84,000		264,246
Bosideng International Holdings Ltd.		60,000		18,063
Cathay Pacific Airways Ltd.		24,000		44,577


Common Stocks	Shares		Value

Hong Kong (concluded)
Cheung Kong Holdings Ltd.		31,000	$	482,341
Cheung Kong Infrastructure Holdings Ltd.		12,000		74,124
China Everbright Ltd.		22,000		43,349
China Gas Holdings Ltd.		70,000		55,513
China Resources Gas Group Ltd.		20,000		41,469
China State Construction International Holdings Ltd.		40,000		48,826
CLP Holdings Ltd.		43,000		361,279
Dah Chong Hong Holdings Ltd.		16,000		17,082
Far East Horizon Ltd.		35,000		28,459
First Pacific Co., Ltd		52,000		57,424
Fosun International Ltd.		46,000		29,720
Franshion Properties China Ltd.		90,000		32,805
Galaxy Entertainment Group Ltd. (a)		48,000		192,470
Geely Automobile Holdings Ltd.		85,000		41,075
Guangdong Investment Ltd.		52,000		41,185
Haier Electronics Group Co. Ltd. (a)		18,000		26,698
Hang Lung Properties Ltd.		50,000		201,221
Hang Seng Bank Ltd.		17,400		268,603
Henderson Land Development Co. Ltd.		22,000		157,502
HKT Trust and HKT Ltd.		52,000		51,075
Hong Kong & China Gas Co. Ltd.		118,600		325,855
Hong Kong Exchanges & Clearing Ltd.		26,000		449,960
Hopewell Holdings Ltd.		12,000		52,030
Hutchison Whampoa Ltd.		49,000		519,250
Hysan Development Co. Ltd.		19,000		92,394
Kerry Properties Ltd.		16,500		86,683
Lee & Man Paper Manufacturing Ltd.		35,000		22,489
Li & Fung Ltd.		132,000		238,192
The Link REIT		52,000		260,421
MGM China Holdings Ltd.		20,800		38,310
Minmetals Resources Ltd. (a)		36,000		15,261
MTR Corp.		33,000		130,764
New World Development Co. Ltd.		84,000		132,987
Nine Dragons Paper Holdings Ltd.		45,000		41,810
NWS Holdings Ltd.		34,000		57,787
Orient Overseas International Ltd.		6,000		39,610
PCCW Ltd.		84,000		37,128
Poly Hong Kong Investments Ltd. (a)		53,000		42,432
Power Assets Holdings Ltd.		31,500		270,256
Sands China Ltd.		54,800		244,992
Shangri-La Asia Ltd.		38,000		76,548
Shui On Land Ltd.		53,500		26,283
Sihuan Pharmaceutical Holdings Group Ltd.		42,000		18,644
Sino Land Co. Ltd.		66,800		122,320
Sino-Ocean Land Holdings Ltd.		62,000		47,152
SJM Holdings Ltd.		44,000		103,843
Sun Art Retail Group Ltd.		54,000		83,486
Sun Hung Kai Properties Ltd.		35,000		530,783
Swire Pacific Ltd. Class A		15,500		193,888
Swire Properties Ltd.		25,800		86,895
Wharf Holdings Ltd.		37,000		294,880
Wheelock & Co. Ltd.		21,000		107,123
Wing Hang Bank Ltd.		4,500		47,400
Wynn Macau Ltd. (a)		35,200		96,929
Yingde Gases		16,500		16,912
Yue Yuen Industrial Holdings Ltd.		18,000		60,880
Yuexiu Property Co. Ltd.		112,000		36,004

				8,815,483

See Notes to Financial Statements.



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	23

Schedule of Investments (continued)

ACWI ex-US Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Hungary — 0.1%
Magyar Telekom Telecommunications Plc		11,226	$	19,148
MOL Hungarian Oil & Gas Plc		954		76,956
OTP Bank Plc		5,196		97,877

				193,981
Indonesia — 0.6%
PT Adaro Energy Tbk		292,500		48,521
PT Astra Agro Lestari Tbk		11,500		23,612
PT Astra International Tbk		500,500		396,470
PT Bank Central Asia Tbk		281,000		266,244
PT Bank Danamon Indonesia Tbk		85,000		49,887
PT Bank Mandiri Tbk		212,500		179,502
PT Bank Negara Indonesia Persero Tbk		155,000		59,739
PT Bank Rakyat Indonesia Persero Tbk		250,000		181,313
PT Bukit Asam Persero Tbk		21,000		33,107
PT Bumi Resources Tbk		386,500		23,841
PT Charoen Pokphand Indonesia Tbk		182,500		69,457
PT Global Mediacom Tbk		191,200		47,786
PT Gudang Garam Tbk		10,000		58,594
PT Indo Tambangraya Megah Tbk		8,000		34,633
PT Indocement Tunggal Prakarsa Tbk		32,000		74,753
PT Indofood Sukses Makmur Tbk		96,000		58,397
PT Indosat Tbk		32,000		21,480
PT Jasa Marga Persero Tbk		48,000		27,191
PT Kalbe Farma Tbk		476,500		52,512
PT Media Nusantara Citra Tbk		88,562		23,010
PT Perusahaan Gas Negara Persero Tbk		248,500		118,992
PT Semen Gresik Persero Tbk		67,500		111,498
PT Telekomunikasi Indonesia Persero Tbk		229,500		216,310
PT Unilever Indonesia Tbk		35,500		76,965
PT United Tractors Tbk		35,500		73,230
PT XL Axiata Tbk		57,500		34,119

				2,361,163
Ireland — 0.2%
CRH Plc		16,303		331,539
CRH Plc		833		17,209
Elan Corp. Plc (a)		8,654		88,735
Elan Corp. Plc (a)		3,662		37,838
James Hardie Industries SE		9,930		96,141
Kerry Group Plc		2,565		135,486
Kerry Group Plc		1,139		59,866
Prothena Corp. Plc (a)		300		2,202

				769,016
Israel — 0.4%
Bank Hapoalim BM (a)		23,031		98,813
Bank Leumi Le-Israel BM (a)		27,201		92,588
Bezeq The Israeli Telecommunication Corp., Ltd.		47,248		54,728
Delek Group Ltd.		87		20,472
Israel Chemicals Ltd.		9,925		119,528
The Israel Corp. Ltd.		50		32,889
Mellanox Technologies Ltd. (a)		905		56,057
Mizrahi Tefahot Bank Ltd. (a)		3,364		34,887
NICE Systems Ltd. (a)		1,473		49,336
Teva Pharmaceutical Industries Ltd.		22,119		821,930

				1,381,228
Italy — 1.5%
Assicurazioni Generali SpA		27,537		503,231
Atlantia SpA		7,496		136,117


Common Stocks	Shares		Value

Italy (concluded)
Banca Monte dei Paschi di Siena SpA (a)		137,307	$	41,068
Banco Popolare (a)		36,414		60,635
Enel Green Power SpA		41,367		77,057
Enel SpA		150,432		625,719
ENI SpA		57,250		1,402,483
Exor SpA		1,537		38,735
Fiat Industrial SpA		19,378		212,297
Fiat SpA (a)		19,590		98,683
Finmeccanica SpA (a)		9,342		54,064
Intesa Sanpaolo SpA		236,223		408,503
Intesa Sanpaolo SpA, Risparmio Shares		23,644		33,581
Luxottica Group SpA		3,743		154,492
Mediobanca SpA		10,859		67,076
Pirelli & C SpA		5,715		65,846
Prysmian SpA		4,599		91,801
Saipem SpA		6,017		234,380
Snam SpA		38,014		177,433
Telecom Italia SpA		218,612		198,296
Telecom Italia SpA, Risparmio Shares		148,800		118,428
Tenaris SA		10,754		224,225
Terna SpA		29,382		117,579
UniCredit SpA (a)		92,086		453,473
Unione di Banche Italiane ScpA		20,862		97,281

				5,692,483
Japan — 13.3%
ABC-Mart, Inc.		500		21,768
Acom Co. Ltd. (a)		840		24,195
Advantest Corp.		3,700		58,434
Aeon Co. Ltd.		13,500		154,285
Aeon Credit Service Co., Ltd.		1,500		30,352
Aeon Mall Co., Ltd.		1,800		44,282
Air Water, Inc.		3,000		38,396
Aisin Seiki Co. Ltd.		4,300		134,277
Ajinomoto Co. Inc.		15,000		198,487
Alfresa Holdings Corp.		1,000		39,087
All Nippon Airways Co. Ltd.		26,000		54,623
Amada Co. Ltd.		9,000		58,563
Aozora Bank Ltd.		14,000		43,046
Asahi Glass Co. Ltd.		23,000		167,937
Asahi Group Holdings Ltd.		8,700		185,247
Asahi Kasei Corp.		28,000		165,567
Asics Corp.		3,400		51,940
Astellas Pharma, Inc.		10,400		467,600
The Bank of Kyoto Ltd.		7,000		59,283
The Bank of Yokohama Ltd.		27,000		125,540
Benesse Holdings, Inc.		1,600		66,586
Bridgestone Corp.		15,400		400,886
Brother Industries Ltd.		5,600		60,287
Calbee, Inc.		400		28,185
Canon, Inc.		25,800		1,000,001
Casio Computer Co. Ltd.		5,100		44,764
Central Japan Railway Co.		3,300		267,826
The Chiba Bank Ltd.		16,000		93,731
Chiyoda Corp.		4,000		57,301
Chubu Electric Power Co. Inc.		14,600		194,833
Chugai Pharmaceutical Co. Ltd.		5,000		95,800
The Chugoku Bank Ltd.		4,000		55,831
The Chugoku Electric Power Co. Inc.		6,700		105,433
Citizen Holdings Co. Ltd.		4,800		25,356

See Notes to Financial Statements.



24	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

ACWI ex-US Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Japan (continued)
Coca-Cola West Co. Ltd.		1,400	$	21,616
Cosmo Oil Co. Ltd.		13,000		29,115
Credit Saison Co. Ltd.		3,500		87,544
Dai Nippon Printing Co. Ltd.		12,000		94,097
The Dai-ichi Life Insurance Co. Ltd.		192		270,155
Daicel Chemical Corp.		6,000		39,698
Daido Steel Co. Ltd.		6,000		30,424
Daihatsu Motor Co. Ltd.		5,000		99,614
Daiichi Sankyo Co. Ltd.		16,600		254,847
Daikin Industries Ltd.		5,300		182,050
Dainippon Sumitomo Pharma Co. Ltd.		3,800		45,652
Daito Trust Construction Co. Ltd.		1,800		170,118
Daiwa House Industry Co. Ltd.		12,000		206,313
Daiwa Securities Group, Inc.		38,000		212,003
Dena Co. Ltd.		2,400		78,730
Denki Kagaku Kogyo KK		9,000		30,814
Denso Corp.		11,500		400,478
Dentsu, Inc.		4,100		109,821
Don Quijote Co. Ltd.		1,200		44,143
East Japan Railway Co.		8,000		517,313
Eisai Co. Ltd.		6,200		258,805
Electric Power Development Co. Ltd.		2,800		66,410
FamilyMart Co. Ltd.		1,200		49,438
FANUC Corp.		4,400		818,618
Fast Retailing Co. Ltd.		1,300		331,774
Fuji Electric Co. Ltd.		14,000		34,446
Fuji Heavy Industries Ltd.		13,000		163,934
FUJIFILM Holdings Corp.		10,400		209,246
Fujitsu Ltd.		42,000		176,147
Fukuoka Financial Group, Inc.		17,000		68,081
Furukawa Electric Co. Ltd. (a)		15,000		33,737
Gree, Inc.		2,200		34,143
GS Yuasa Corp.		7,000		28,223
The Gunma Bank Ltd.		10,000		48,926
The Hachijuni Bank Ltd.		9,000		45,153
Hakuhodo DY Holdings, Inc.		540		34,944
Hamamatsu Photonics KK		1,700		61,810
Hankyu Hanshin Holdings, Inc.		26,000		134,428
Hino Motors Ltd.		6,000		54,233
Hirose Electric Co. Ltd.		700		83,818
The Hiroshima Bank Ltd.		12,000		50,322
Hisamitsu Pharmaceutical Co. Inc.		1,500		74,656
Hitachi Chemical Co. Ltd.		2,400		36,176
Hitachi Construction Machinery Co. Ltd.		2,100		44,165
Hitachi High-Technologies Corp.		1,200		24,832
Hitachi Ltd.		106,000		623,757
Hitachi Metals Ltd.		4,000		34,112
Hokkaido Electric Power Co., Inc.		4,500		54,629
Hokuriku Electric Power Co.		4,100		48,657
Honda Motor Co. Ltd.		37,200		1,377,688
Hoya Corp.		9,800		193,098
Ibiden Co. Ltd.		3,000		48,006
Idemitsu Kosan Co., Ltd.		500		43,569
IHI Corp.		31,000		80,386
Inpex Corp.		50		267,418
Isetan Mitsukoshi Holdings Ltd.		7,700		75,355
Isuzu Motors Ltd.		27,000		161,120
ITOCHU Corp.		35,900		379,431
Itochu Techno-Solutions Corp.		700		28,825
The Iyo Bank Ltd.		6,000		47,562


Common Stocks	Shares		Value

Japan (continued)
J. Front Retailing Co. Ltd.		11,000	$	60,966
Japan Airlines Co. Ltd. (a)		1,700		73,072
Japan Petroleum Exploration Co.		800		28,254
Japan Prime Realty Investment Corp.		18		52,024
Japan Real Estate Investment Corp.		13		128,078
Japan Retail Fund Investment Corp.		48		88,237
The Japan Steel Works Ltd.		8,000		52,119
Japan Tobacco, Inc.		21,000		593,237
JFE Holdings, Inc.		11,100		209,198
JGC Corp.		5,000		155,807
The Joyo Bank Ltd.		16,000		76,020
JS Group Corp.		6,000		133,833
JSR Corp.		4,000		76,350
JTEKT Corp.		5,400		51,481
Jupiter Telecommunications Co. Ltd.		45		56,045
JX Holdings, Inc.		50,700		286,240
Kajima Corp.		21,000		69,482
Kamigumi Co. Ltd.		6,000		47,873
Kaneka Corp.		6,000		30,358
The Kansai Electric Power Co. Inc.		17,000		178,536
Kansai Paint Co. Ltd.		5,000		53,884
Kao Corp.		12,500		325,719
Kawasaki Heavy Industries Ltd.		32,000		87,025
KDDI Corp.		6,300		445,393
Keikyu Corp.		11,000		97,654
Keio Corp.		13,000		96,916
Keisei Electric Railway Co. Ltd.		6,000		50,633
Keyence Corp.		1,120		310,604
Kikkoman Corp.		4,000		57,117
Kinden Corp.		3,000		19,550
Kintetsu Corp.		37,000		151,616
Kirin Holdings Co. Ltd.		20,000		235,320
Kobe Steel Ltd. (a)		59,000		75,386
Koito Manufacturing Co. Ltd.		2,000		29,168
Komatsu Ltd.		21,500		551,698
Konami Corp.		2,500		56,298
Konica Minolta Holdings, Inc.		10,500		75,561
Kubota Corp.		25,000		287,435
Kuraray Co. Ltd.		7,600		99,630
Kurita Water Industries Ltd.		2,700		59,295
Kyocera Corp.		3,300		299,195
Kyowa Hakko Kirin Co. Ltd.		6,000		59,191
Kyushu Electric Power Co. Inc.		9,600		109,452
Lawson, Inc.		1,400		94,969
M3, Inc.		15		23,941
Mabuchi Motor Co. Ltd.		500		21,322
Makita Corp.		2,500		116,136
Marubeni Corp.		40,000		287,009
Marui Group Co. Ltd.		4,300		34,351
Maruichi Steel Tube Ltd.		800		18,438
Mazda Motor Corp. (a)		60,000		123,139
McDonald’s Holdings Co. Japan Ltd.		1,400		36,943
Medipal Holdings Corp.		3,900		43,241
MEIJI Holdings Co. Ltd.		1,500		65,052
Miraca Holdings, Inc.		1,400		56,449
Mitsubishi Chemical Holdings Corp.		30,500		151,938
Mitsubishi Corp.		32,500		625,721
Mitsubishi Electric Corp.		44,000		374,632
Mitsubishi Estate Co. Ltd.		30,000		718,221
Mitsubishi Gas Chemical Co. Inc.		8,000		49,071

See Notes to Financial Statements.



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	25

Schedule of Investments (continued)

ACWI ex-US Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Japan (continued)
Mitsubishi Heavy Industries Ltd.		69,000	$	333,769
Mitsubishi Logistics Corp.		3,000		43,048
Mitsubishi Materials Corp.		27,000		92,304
Mitsubishi Motors Corp. (a)		87,000		89,949
Mitsubishi Tanabe Pharma Corp.		5,000		65,208
Mitsubishi UFJ Financial Group, Inc.		288,600		1,561,647
Mitsubishi UFJ Lease & Finance Co. Ltd.		1,450		62,373
Mitsui & Co. Ltd.		40,000		599,555
Mitsui Chemicals, Inc.		22,000		57,333
Mitsui Fudosan Co. Ltd.		20,000		489,261
Mitsui OSK Lines Ltd.		23,000		68,516
Mizuho Financial Group, Inc.		513,600		941,678
MS&AD Insurance Group Holdings, Inc.		11,400		227,509
Murata Manufacturing Co. Ltd.		4,600		271,360
Nabtesco Corp.		2,500		55,841
Namco Bandai Holdings, Inc.		4,400		57,034
NEC Corp. (a)		59,000		124,451
Nexon Co. Ltd. (a)		2,900		29,371
NGK Insulators Ltd.		6,000		71,176
NGK Spark Plug Co. Ltd.		4,000		53,285
NHK Spring Co. Ltd.		4,200		34,608
Nidec Corp.		2,400		140,157
Nikon Corp.		7,700		227,338
Nintendo Co. Ltd.		2,600		277,621
Nippon Building Fund, Inc.		14		144,827
Nippon Electric Glass Co. Ltd.		8,000		45,552
Nippon Express Co. Ltd.		20,000		82,645
Nippon Meat Packers, Inc.		4,000		55,448
Nippon Paper Group, Inc.		2,200		30,567
Nippon Steel Corp.		180,475		444,360
Nippon Telegraph & Telephone Corp.		9,600		404,189
Nippon Yusen KK		36,000		84,738
The Nishi-Nippon City Bank Ltd.		17,000		42,183
Nissan Motor Co. Ltd.		56,600		537,070
Nisshin Seifun Group, Inc.		4,500		56,314
Nissin Foods Holdings Co. Ltd.		1,400		53,113
Nitori Holdings Co. Ltd.		800		58,613
Nitto Denko Corp.		3,800		187,145
NKSJ Holdings, Inc.		8,500		182,317
NOK Corp.		2,600		40,714
Nomura Holdings, Inc.		84,000		497,220
Nomura Real Estate Holdings, Inc.		2,100		40,157
Nomura Real Estate Office Fund, Inc.		6		34,563
Nomura Research Institute Ltd.		2,500		52,077
NSK Ltd.		9,000		64,041
NTT Data Corp.		28		87,646
NTT DoCoMo, Inc.		346		498,766
NTT Urban Development Corp.		21		20,369
Obayashi Corp.		14,000		78,934
Odakyu Electric Railway Co., Ltd.		14,000		145,659
OJI Paper Co. Ltd.		19,000		65,538
Olympus Corp. (a)		4,900		95,064
Omron Corp.		4,600		110,415
Ono Pharmaceutical Co. Ltd.		1,900		97,060
Oracle Corp. Japan		1,000		41,658
Oriental Land Co. Ltd		1,300		157,436
ORIX Corp.		2,550		288,044
Osaka Gas Co. Ltd.		43,000		156,190
Otsuka Corp.		300		22,698
Otsuka Holdings Co. Ltd.		8,700		245,090


Common Stocks	Shares		Value

Japan (continued)
Panasonic Corp.		53,100	$	324,516
Park24 Co. Ltd.		2,300		36,324
Rakuten, Inc.		16,300		127,115
Resona Holdings, Inc.		42,300		193,411
Ricoh Co. Ltd.		14,000		148,602
Rinnai Corp.		700		47,561
Rohm Co. Ltd.		2,100		68,649
Sankyo Co. Ltd.		1,000		39,680
Sanrio Co. Ltd.		1,100		35,094
Santen Pharmaceutical Co. Ltd.		1,800		69,143
SBI Holdings, Inc.		4,850		43,356
Secom Co. Ltd.		4,800		241,835
Sega Sammy Holdings, Inc.		4,500		75,957
Sekisui Chemical Co. Ltd.		9,000		78,513
Sekisui House Ltd.		12,000		131,396
Seven & I Holdings Co. Ltd.		17,200		484,881
Seven Bank Ltd.		14,200		37,457
Sharp Corp.		26,000		90,933
Shikoku Electric Power Co. Inc.		4,000		63,813
Shimadzu Corp.		6,000		40,942
Shimamura Co. Ltd.		500		48,588
Shimano, Inc.		1,700		108,856
Shimizu Corp.		13,000		48,869
Shin-Etsu Chemical Co. Ltd.		9,700		591,991
Shinsei Bank Ltd.		34,000		68,052
Shionogi & Co. Ltd.		6,700		111,648
Shiseido Co. Ltd.		8,000		112,924
The Shizuoka Bank Ltd.		12,000		117,217
Shoei Co. Ltd/Chiyoda-ku		5,500		37,317
Showa Denko KK		34,000		51,967
Showa Shell Sekiyu KK		5,200		29,454
SMC Corp.		1,300		236,151
Softbank Corp.		20,700		758,473
Sojitz Corp.		31,400		46,426
Sony Corp.		23,200		260,198
Sony Financial Holdings, Inc.		4,100		73,711
Square Enix Holdings Co. Ltd.		1,400		17,809
Stanley Electric Co. Ltd.		3,500		49,746
Sumco Corp. (a)		3,100		30,493
Sumitomo Chemical Co. Ltd.		33,000		103,997
Sumitomo Corp.		27,000		346,404
Sumitomo Electric Industries Ltd.		17,000		196,500
Sumitomo Heavy Industries Ltd.		11,000		52,718
Sumitomo Metal Mining Co. Ltd.		12,000		169,390
Sumitomo Mitsui Financial Group, Inc.		30,300		1,101,156
Sumitomo Mitsui Trust Holdings, Inc.		75,000		264,248
Sumitomo Realty & Development Co. Ltd.		9,000		299,825
Sumitomo Rubber Industries Ltd.		4,300		51,997
Suruga Bank Ltd.		4,000		49,196
Suzuken Co. Ltd.		1,700		47,894
Suzuki Motor Corp.		8,200		214,580
Sysmex Corp.		1,700		78,283
T&D Holdings, Inc.		13,200		160,713
Taiheiyo Cement Corp.		23,000		63,234
Taisei Corp.		24,000		79,807
Taisho Pharmaceutical Holdings Co. Ltd.		900		61,815
Taiyo Nippon Sanso Corp.		6,000		34,519
Takashimaya Co. Ltd.		6,000		42,696
Takeda Pharmaceutical Co. Ltd.		17,900		800,040
TDK Corp.		2,800		101,967

See Notes to Financial Statements.



26	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

ACWI ex-US Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Japan (concluded)
Teijin Ltd.		23,000	$	57,278
Terumo Corp.		3,400		135,014
THK Co. Ltd.		3,000		53,957
Tobu Railway Co. Ltd.		23,000		121,972
Toho Co. Ltd.		3,000		52,802
Toho Gas Co. Ltd.		10,000		53,625
Tohoku Electric Power Co. Inc. (a)		10,200		95,110
Tokio Marine Holdings, Inc.		16,400		456,892
The Tokyo Electric Power Co. Inc. (a)		34,500		83,147
Tokyo Electron Ltd.		3,900		179,873
Tokyo Gas Co. Ltd.		59,000		269,574
Tokyu Corp.		26,000		146,477
Tokyu Land Corp.		10,000		73,271
TonenGeneral Sekiyu KK		6,000		51,886
Toppan Printing Co. Ltd.		12,000		74,389
Toray Industries, Inc.		33,000		202,720
Toshiba Corp.		96,000		379,989
TOTO Ltd.		6,000		45,108
Toyo Seikan Kaisha Ltd.		3,900		52,554
Toyo Suisan Kaisha Ltd.		2,000		53,288
Toyoda Gosei Co. Ltd.		1,700		34,556
Toyota Boshoku Corp.		1,400		16,232
Toyota Industries Corp.		3,600		114,934
Toyota Motor Corp.		63,200		2,951,195
Toyota Tsusho Corp.		4,800		118,477
Trend Micro, Inc.		2,500		75,538
Tsumura & Co.		1,400		42,323
Ube Industries Ltd.		25,000		60,056
Unicharm Corp.		2,800		145,501
Ushio, Inc.		2,500		27,414
USS Co. Ltd.		530		55,189
West Japan Railway Co.		3,800		149,707
Yahoo Japan Corp.		330		106,852
Yakult Honsha Co. Ltd.		2,200		96,365
Yamada Denki Co. Ltd.		1,920		74,210
Yamaguchi Financial Group, Inc.		5,000		44,157
Yamaha Corp.		3,400		36,060
Yamaha Motor Co. Ltd.		6,700		74,221
Yamato Holdings Co. Ltd.		8,400		127,655
Yamato Kogyo Co. Ltd.		800		23,430
Yamazaki Baking Co. Ltd.		2,000		22,285
Yaskawa Electric Corp.		5,000		48,250
Yokogawa Electric Corp.		4,100		44,957

				50,747,224
Malaysia — 0.8%
AirAsia Bhd		29,200		26,273
Alliance Financial Group Bhd		23,100		33,358
AMMB Holdings Bhd		35,800		79,608
Axiata Group Bhd		57,200		123,720
Berjaya Sports Toto Bhd		13,900		20,263
British American Tobacco (Malaysia) Bhd		3,000		61,051
Bumi Armada Bhd (a)		32,600		42,574
CIMB Group Holdings Bhd		108,600		271,839
DiGi.Com Bhd		70,700		122,877
Felda Global Ventures Holdings Bhd		25,500		38,525
Gamuda Bhd		41,700		49,801
Genting Bhd		45,600		137,856
Genting Malaysia Bhd		66,900		78,100
Genting Plantations Bhd		5,300		15,598


Common Stocks	Shares		Value

Malaysia (concluded)
Hong Leong Bank Bhd		12,040	$	58,350
Hong Leong Financial Group Bhd		4,000		17,324
IHH Healthcare Bhd (a)		47,200		52,284
IJM Corp. Bhd		29,600		48,423
IOI Corp. Bhd		71,100		118,847
Kuala Lumpur Kepong Bhd		10,500		82,738
Lafarge Malayan Cement Bhd		10,900		34,290
Malayan Banking Bhd		93,400		281,697
Malaysia Airports Holdings Bhd		14,200		24,193
Malaysia Marine & Heavy Engineering Holdings Bhd		9,200		13,298
Maxis Communications Bhd		50,100		108,949
MISC Bhd (a)		25,200		35,594
MMC Corp. Bhd		17,000		14,625
Parkson Holdings Bhd		16,200		27,697
Petronas Chemicals Group Bhd		64,500		135,349
Petronas Dagangan Bhd		5,300		40,729
Petronas Gas Bhd		13,600		86,812
PPB Group Bhd		10,800		40,968
Public Bank Bhd		24,000		127,927
RHB Capital Bhd		14,300		36,062
Sapurakencana Petroleum Bhd (a)		48,500		50,290
Sime Darby Bhd		59,600		186,139
Telekom Malaysia Bhd		27,400		54,119
Tenaga Nasional Bhd		61,400		139,583
UEM Land Holdings Bhd (a)		38,600		26,747
UMW Holdings Bhd		11,300		44,121
YTL Corp. Bhd		117,560		73,357
YTL Power International Bhd		58,000		29,668

				3,091,623
Mexico — 1.2%
Alfa SAB de CV		63,900		135,351
Alpek SA de CV		9,600		25,867
America Movil SAB de CV		889,500		1,025,317
Arca Continental SAB de CV		6,772		50,341
Cemex SAB de CV (a)		240,220		236,014
Coca-Cola Femsa SAB de CV		9,900		146,544
Compartamos SAB de CV		25,800		36,665
Controladora Comercial Mexicana SAB de CV		8,800		30,826
El Puerto de Liverpool SAB de CV		4,500		47,175
Fomento Economico Mexicano SAB de CV		45,900		459,167
Grupo Aeroportuario del Pacifico SAB de CV		7,000		39,840
Grupo Aeroportuario del Sureste SAB de CV		4,700		53,231
Grupo Bimbo SAB de CV		36,400		94,250
Grupo Carso SAB de CV		14,500		70,165
Grupo Financiero Banorte SAB de CV		44,200		285,348
Grupo Financiero Inbursa SAB de CV		46,400		140,747
Grupo Financiero Santander Mexico SAB de CV		33,800		109,352
Grupo Mexico SAB de CV		90,523		327,391
Grupo Modelo SAB de CV		14,300		128,350
Grupo Televisa SAB CPO		62,900		332,108
Industrias CH SAB de CV (a)		3,600		27,187
Industrias Penoles SAB de CV		3,190		160,639
Kimberly-Clark de Mexico SAB de CV		37,400		95,364
Mexichem SAB de CV		23,330		130,148
Minera Frisco SAB de CV (a)		14,800		62,331
Wal-Mart de Mexico SAB de CV		125,300		410,322

				4,660,040

See Notes to Financial Statements.



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	27

Schedule of Investments (continued)

ACWI ex-US Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Morocco — 0.0%
Attijariwafa Bank		352	$	13,034
Douja Promotion Groupe Addoha SA		1,712		12,760
Maroc Telecom SA		1,670		20,895

				46,689
Netherlands — 1.8%
Aegon NV		39,663		256,216
Akzo Nobel NV		5,635		373,019
ASML Holding NV		7,145		458,235
Corio NV		1,503		68,922
DE Master Blenders 1753 NV (a)		13,449		154,512
Delta Lloyd NV		3,092		50,937
European Aeronautic Defence and Space Co. NV		7,565		298,222
Fugro NV		1,557		92,389
Gemalto NV		1,917		173,038
Heineken Holding NV		2,289		126,038
Heineken NV		5,245		351,643
ING Groep NV CVA (a)		87,687		832,849
Koninklijke Ahold NV		22,824		306,047
Koninklijke Boskalis Westminster NV		1,687		76,365
Koninklijke DSM NV		3,708		225,986
Koninklijke KPN NV		22,442		110,983
Koninklijke Philips Electronics NV		23,715		627,978
Koninklijke Vopak NV		1,622		114,655
QIAGEN NV (a)		5,291		96,091
Randstad Holding NV		2,705		100,402
Reed Elsevier NV		16,775		248,734
STMicroelectronics NV		14,067		102,120
TNT Express NV		7,235		80,505
Unilever NV CVA		36,947		1,413,725
Wolters Kluwer NV		6,973		143,237
Ziggo NV		2,716		88,764

				6,971,612
New Zealand — 0.1%
Auckland International Airport Ltd.		23,523		52,067
Contact Energy Ltd. (a)		7,946		34,310
Fletcher Building Ltd.		15,481		108,666
SKYCITY Entertainment Group Ltd.		15,163		47,617
Telecom Corp. of New Zealand Ltd.		41,958		79,419

				322,079
Norway — 0.6%
Aker Solutions ASA		3,482		72,108
DnB NOR ASA		23,843		304,753
Gjensidige Forsikring ASA		4,351		62,526
Norsk Hydro ASA		20,559		104,348
Orkla ASA		17,216		150,873
Seadrill Ltd.		8,426		310,430
Statoil ASA		24,375		614,362
Subsea 7 SA		6,359		152,821
Telenor ASA		15,778		321,269
Yara International ASA		4,222		210,503

				2,303,993
Peru — 0.1%
Compania de Minas Buenaventura SA — ADR		4,309		154,909
Credicorp Ltd.		1,480		216,909
Southern Copper Corp.		3,318		125,619

				497,437


Common Stocks	Shares		Value

Philippines — 0.2%
Aboitiz Equity Ventures, Inc.		46,600	$	60,298
Aboitiz Power Corp.		38,100		34,310
Alliance Global Group, Inc.		107,000		43,847
Ayala Corp.		4,490		56,699
Ayala Land, Inc.		123,400		79,762
Bank of the Philippine Islands		16,660		38,648
BDO Unibank, Inc. (a)		30,304		53,842
DMCI Holdings, Inc.		18,000		23,649
Energy Development Corp.		185,500		30,572
Globe Telecom, Inc.		960		25,615
International Container Terminal Services, Inc.		19,200		34,687
Jollibee Foods Corp.		11,810		29,336
Metropolitan Bank & Trust		3,860		9,611
Philippine Long Distance Telephone Co.		1,045		64,582
San Miguel Corp.		11,602		29,814
SM Investments Corp.		4,820		104,004
SM Prime Holdings, Inc.		171,350		69,070
Universal Robina Corp.		18,500		37,777

				826,123
Poland — 0.4%
Asseco Poland SA		1,413		20,719
Bank Handlowy w Warszawie SA		705		22,390
Bank Millennium SA (a)		13,346		18,964
Bank Pekao SA		2,619		142,117
BRE Bank SA (a)		362		38,176
Cyfrowy Polsat SA (a)		3,713		19,686
Enea SA		3,084		15,701
Eurocash SA		1,807		25,513
Grupa Lotos SA (a)		1,964		26,258
Jastrzebska Spolka Weglowa SA		778		23,323
Kernel Holding SA (a)		1,059		22,838
KGHM Polska Miedz SA		3,157		195,030
PGE SA		16,622		98,063
Polski Koncern Naftowy Orlen SA (a)		7,181		115,110
Polskie Gornictwo Naftowe i Gazownictwo SA (a)		43,023		72,568
Powszechna Kasa Oszczednosci Bank Polski SA		16,727		200,321
Powszechny Zaklad Ubezpieczen SA		1,258		178,097
Synthos SA		15,178		26,821
Tauron Polska Energia SA		26,597		40,854
Telekomunikacja Polska SA		16,036		63,260

				1,365,809
Portugal — 0.1%
Banco Espirito Santo SA, Registered Shares (a)		47,212		56,152
EDP — Energias de Portugal SA		42,623		129,650
Galp Energia SGPS SA		5,948		92,329
Jeronimo Martins SGPS SA		4,923		95,193
Portugal Telecom SGPS SA, Registered Shares		15,020		74,796

				448,120
Russia — 1.4%
AK Transneft OAO, Preference Shares		34		77,544
Federal Grid Co. Unified Energy System JSC (a)		8,220,000		54,722
Federal Hydrogenerating Co. JSC		2,757,000		66,245
Gazprom OAO		241,480		1,141,517
IDGC Holding JSC (a)		422,700		27,317
Inter Rao Ues OAO (a)		38,100,000		31,082
LSR Group		3,461		14,418
Lukoil OAO		11,849		778,357
Magnit OJSC		6,343		257,879

See Notes to Financial Statements.



28	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

ACWI ex-US Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Russia (concluded)
Mechel		3,335	$	23,112
MegaFon OAO (a)		1,566		37,271
MMC Norilsk Nickel OJSC		1,139		209,613
Mobile Telesystems OJSC		12,627		235,494
NovaTek OAO		2,183		266,692
Novolipetsk Steel OJSC		2,077		43,048
Rosneft Oil Co.		30,300		268,494
Rostelecom OJSC		26,310		104,680
Sberbank of Russia		253,430		774,656
Sberbank of Russia, Preference Shares		21,000		46,504
Severstal OAO		3,640		44,300
Sistema JSFC		2,610		53,401
Surgutneftegas OJSC		160,300		141,175
Surgutneftegas OJSC, Preference Shares		158,300		104,016
Tatneft		32,320		231,273
TMK OAO		1,167		17,867
Uralkali OJSC		30,050		230,893
VTB Bank OJSC		68,930,000		121,433

				5,403,003
Singapore — 1.2%
Ascendas Real Estate Investment Trust		45,000		88,061
CapitaCommercial Trust		47,000		65,223
CapitaLand Ltd.		59,000		181,608
CapitaMall Trust		55,000		96,650
CapitaMalls Asia Ltd.		31,000		49,927
City Developments Ltd.		12,000		128,340
ComfortDelGro Corp. Ltd.		42,000		61,787
DBS Group Holdings Ltd.		41,684		511,734
Fraser and Neave Ltd.		24,000		191,774
Genting Singapore Plc		138,000		158,542
Global Logistic Properties Ltd.		48,000		111,010
Golden Agri-Resources Ltd.		159,000		85,566
Hutchison Port Holdings Trust		120,000		96,044
Jardine Cycle & Carriage Ltd.		2,000		79,659
Keppel Corp. Ltd.		37,000		337,868
Keppel Land Ltd.		17,000		56,937
Noble Group Ltd.		87,000		84,052
Olam International Ltd.		41,000		52,666
Oversea-Chinese Banking Corp.		62,000		499,595
SembCorp Industries Ltd.		23,000		100,287
SembCorp Marine Ltd.		19,000		72,584
Singapore Airlines Ltd.		13,000		115,304
Singapore Exchange Ltd.		20,000		116,222
Singapore Press Holdings Ltd.		4,000		13,246
Singapore Technologies Engineering Ltd.		37,000		116,780
Singapore Telecommunications Ltd.		126,000		342,850
Singapore Telecommunications Ltd.		54,000		146,718
StarHub Ltd.		13,000		40,719
United Overseas Bank Ltd.		30,000		492,121
UOL Group Ltd.		12,000		59,183
Wilmar International Ltd.		43,000		118,714
Yangzijiang Shipbuilding Holdings Ltd.		38,000		30,445

				4,702,216
South Africa — 1.8%
ABSA Group Ltd.		6,238		121,443
African Bank Investments Ltd.		17,514		66,835
African Rainbow Minerals Ltd.		2,610		58,786
Anglo American Platinum Ltd.		1,498		79,311
AngloGold Ashanti Ltd.		9,200		287,740


Common Stocks	Shares		Value

South Africa (concluded)
ArcelorMittal South Africa Ltd. (a)		4,174	$	17,846
Aspen Pharmacare Holdings Ltd.		6,592		131,980
Assore Ltd.		780		37,484
Aveng Ltd.		10,076		36,441
Barloworld Ltd.		5,391		55,910
Bidvest Group Ltd.		6,714		171,769
Discovery Holdings Ltd.		7,342		54,154
Exxaro Resources Ltd.		2,899		58,410
FirstRand Ltd.		73,622		270,911
The Foschini Group Ltd.		4,594		76,693
Gold Fields Ltd.		16,562		205,591
Growthpoint Properties Ltd.		37,988		109,921
Harmony Gold Mining Co. Ltd.		8,802		77,726
Impala Platinum Holdings Ltd.		13,082		261,629
Imperial Holdings Ltd.		4,034		95,133
Investec Ltd.		5,327		37,144
Kumba Iron Ore Ltd.		1,810		122,470
Liberty Holdings Ltd.		2,156		28,402
Life Healthcare Group Holdings Ltd.		21,860		87,672
Massmart Holdings Ltd.		2,617		59,334
MMI Holdings Ltd.		23,923		62,907
Mr Price Group Ltd.		5,402		89,528
MTN Group Ltd.		39,567		832,834
Naspers Ltd.		9,238		596,690
Nedbank Group Ltd.		4,547		101,616
Netcare Ltd.		19,926		46,245
Northam Platinum Ltd.		4,502		20,378
Pick n Pay Stores Ltd.		5,077		26,644
PPC Ltd.		13,210		53,292
Redefine Properties Ltd.		65,413		72,531
Remgro Ltd.		9,921		187,241
Reunert Ltd.		3,702		33,238
RMB Holdings Ltd.		16,591		80,231
RMI Holdings		15,431		37,841
Sanlam Ltd.		40,707		216,760
Sappi Ltd. (a)		13,940		51,099
Sasol Ltd.		12,805		552,192
Shoprite Holdings Ltd.		9,723		235,871
The Spar Group Ltd.		4,140		64,624
Standard Bank Group Ltd.		28,203		397,802
Steinhoff International Holdings Ltd. (a)		27,077		88,018
Tiger Brands Ltd.		3,672		141,597
Truworths International Ltd.		9,899		127,474
Vodacom Group Ltd.		8,356		122,972
Woolworths Holdings Ltd.		17,182		144,633

				6,994,993
South Korea — 3.6%
Amorepacific Corp.		79		89,555
Amorepacific Group		70		30,513
BS Financial Group, Inc.		4,530		56,170
Celltrion, Inc.		2,979		72,747
Cheil Industries, Inc.		1,071		94,673
Cheil Worldwide, Inc.		2,160		43,572
CJ CheilJedang Corp.		168		56,156
CJ Corp.		342		38,011
Daelim Industrial Co. Ltd.		714		58,481
Daewoo Engineering & Construction Co. Ltd. (a)		2,620		24,529
Daewoo International Corp.		1,060		39,480
Daewoo Securities Co. Ltd.		3,770		42,849

See Notes to Financial Statements.



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	29

Schedule of Investments (continued)

ACWI ex-US Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

South Korea (continued)
Daewoo Shipbuilding & Marine Engineering Co. Ltd.		2,450	$	62,832
DGB Financial Group, Inc.		3,100		42,293
Dongbu Insurance Co. Ltd.		1,000		43,202
Doosan Corp.		164		19,924
Doosan Heavy Industries & Construction Co. Ltd.		1,216		51,739
Doosan Infracore Co. Ltd. (a)		2,100		33,757
E-Mart Co. Ltd.		480		106,707
GS Engineering & Construction Corp.		906		49,049
GS Holdings		1,118		76,203
Hana Financial Group, Inc.		4,410		144,167
Hankook Tire Co. Ltd. (a)		1,676		73,579
Hanwha Chem Corp.		1,630		28,219
Hanwha Corp.		1,080		34,628
Honam Petrochemical Corp.		447		104,139
Hynix Semiconductor, Inc. (a)		11,800		286,974
Hyosung Corp.		547		37,944
Hyundai Department Store Co. Ltd.		333		49,542
Hyundai Development Co.		1,540		31,404
Hyundai Engineering & Construction Co. Ltd.		1,518		100,071
Hyundai Glovis Co. Ltd.		279		58,071
Hyundai Heavy Industries Co. Ltd.		946		215,237
Hyundai Hysco Co. Ltd.		890		38,061
Hyundai Marine & Fire Insurance Co. Ltd.		1,460		45,574
Hyundai Merchant Marine Co. Ltd. (a)		913		20,227
Hyundai Mipo Dockyard		306		36,708
Hyundai Mobis		1,631		442,505
Hyundai Motor Co.		3,642		750,777
Hyundai Motor Co., Preference Shares		517		33,794
Hyundai Motor Co., Second Preference Shares		926		65,702
Hyundai Securities Co. Ltd.		2,820		23,980
Hyundai Steel Co.		1,255		104,161
Hyundai Wia Corp.		322		52,449
Industrial Bank of Korea		3,920		43,825
Kangwon Land, Inc.		2,320		63,407
KB Financial Group, Inc.		8,327		297,431
KCC Corp.		97		27,109
Kia Motors Corp.		6,413		341,002
Korea Aerospace Industries Ltd.		810		19,641
Korea Electric Power Corp. (a)		5,850		166,112
Korea Exchange Bank (a)		6,350		45,430
Korea Gas Corp.		540		37,983
Korea Investment Holdings Co. Ltd.		940		37,741
Korea Life Insurance Co. Ltd.		4,970		35,903
Korea Zinc Co. Ltd.		181		69,188
Korean Air Lines Co. Ltd. (a)		850		36,203
KT Corp.		800		26,604
KT&G Corp.		2,502		188,835
Kumho Petro Chemical Co. Ltd.		321		39,726
LG Chem Ltd.		1,121		350,370
LG Chem Ltd., Preference Shares		179		17,176
LG Corp.		2,152		131,831
LG Display Co. Ltd. (a)		5,290		156,030
LG Electronics, Inc.		2,414		167,540
LG Household & Health Care Ltd.		215		131,711
LG Innotek Co. Ltd. (a)		213		16,460
LG Uplus Corp.		5,940		43,469
Lotte Confectionery Co. Ltd.		16		24,403
Lotte Shopping Co. Ltd.		217		76,635
LS Corp.		425		37,651
LS Industrial Systems Co. Ltd.		305		19,232


Common Stocks	Shares		Value

South Korea (concluded)
Mando Corp.		254	$	30,741
Mirae Asset Securities Co. Ltd.		530		17,807
NCSoft Corp.		333		47,122
Neo Holdings Co. Ltd. (a)		164		—
NHN Corp.		932		197,978
OCI Co. Ltd.		375		58,417
Orion Corp.		83		85,135
POSCO		1,578		516,938
S-Oil Corp.		1,019		100,649
S1 Corp.		359		23,468
Samsung C&T Corp.		2,835		167,464
Samsung Card Co.		1,020		34,960
Samsung Electro-Mechanics Co. Ltd.		1,355		126,666
Samsung Electronics Co. Ltd.		2,548		3,660,965
Samsung Electronics Co. Ltd., Preference Shares		484		388,921
Samsung Engineering Co. Ltd.		677		105,475
Samsung Fire & Marine Insurance Co. Ltd.		817		165,972
Samsung Heavy Industries Co. Ltd.		3,670		134,095
Samsung Life Insurance Co. Ltd.		1,368		120,655
Samsung SDI Co. Ltd.		774		109,858
Samsung Securities Co. Ltd.		1,296		65,346
Samsung Techwin Co. Ltd.		954		53,551
Shinhan Financial Group Co. Ltd.		8,206		300,319
Shinsegae Co. Ltd.		167		34,062
SK C&C Co. Ltd.		467		45,056
SK Holdings Co. Ltd.		590		99,780
SK Innovation Co. Ltd.		1,364		225,692
SK Networks Co. Ltd.		2,710		21,479
SK Telecom Co. Ltd.		263		37,499
Woongjin Coway Co. Ltd. (a)		1,250		50,849
Woori Finance Holdings Co. Ltd.		8,240		91,916
Woori Investment & Securities Co. Ltd.		2,660		29,832
Yuhan Corp.		183		29,572

				13,737,242
Spain — 2.0%
Abertis Infraestructuras SA		9,615		158,805
Acciona SA		589		43,986
ACS Actividades de Construccion y Servicios SA		3,214		81,454
Amadeus IT Holding SA, Class A		7,077		178,846
Banco Bilbao Vizcaya Argentaria SA		125,327		1,164,392
Banco de Sabadell SA (a)		63,836		166,949
Banco Popular Espanol SA		119,000		93,014
Banco Santander SA		236,905		1,925,329
Bankia SA (a)		16,881		8,712
CaixaBank		18,507		64,831
Distribuidora Internacional de Alimentacion SA		334		2,134
Enagas SA		4,345		93,087
Ferrovial SA		9,039		134,558
Gas Natural SDG SA		7,882		142,091
Grifols SA (a)		3,386		118,402
Iberdrola SA		92,288		515,401
Inditex SA		4,994		701,688
International Consolidated Airlines Group SA (a)		22,010		65,339
Mapfre SA		16,794		51,745
Red Electrica Corp. SA		2,445		120,773
Repsol YPF SA		18,496		377,554
Telefonica SA		92,359		1,250,452
Zardoya Otis SA		3,448		49,153

				7,508,695

See Notes to Financial Statements.



30	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

ACWI ex-US Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Sweden — 2.1%
Alfa Laval AB		7,545	$	157,764
Assa Abloy AB, Class B		8,065		303,588
Atlas Copco AB, Class A		15,349		425,632
Atlas Copco AB, Class B		9,078		222,833
Boliden AB		6,142		116,704
Electrolux AB, Class B		5,474		144,593
Elekta AB		8,418		131,257
Getinge AB, Class B		4,576		155,551
Hennes & Mauritz AB, Class B		21,574		747,691
Hexagon AB, Class B		5,394		136,405
Husqvarna AB, Class B		8,413		51,059
Industrivarden AB, Class C		2,661		44,334
Investment AB Kinnevik, Class B		4,534		94,840
Investor AB, Class B		10,293		270,399
Lundin Petroleum AB (a)		5,074		117,424
Millicom International Cellular SA		1,420		123,257
Nordea Bank AB		59,848		575,673
Ratos AB, Class B		4,891		47,104
Sandvik AB		23,296		374,407
Scania AB, Class B		7,268		151,112
Securitas AB, Class B		7,552		66,206
Skandinaviska Enskilda Banken AB, Class A		33,679		288,146
Skanska AB, Class B		8,520		139,821
SKF AB, Class B		8,777		222,300
Svenska Cellulosa AB		13,773		299,461
Svenska Handelsbanken AB, Class A		11,280		405,537
Swedbank AB, Class A		18,938		372,044
Swedish Match AB		4,641		155,798
Tele2 AB, Class B		7,124		128,765
Telefonaktiebolaget LM Ericsson, Class B		69,683		703,885
TeliaSonera AB		47,494		322,436
Volvo AB, Class B		31,983		441,018

				7,937,044
Switzerland — 5.9%
ABB Ltd.,Registered Shares		50,665		1,050,667
Actelion Ltd.,Registered Shares		2,416		115,608
Adecco SA, Registered Shares		3,000		158,875
Aryzta AG		1,951		100,389
Baloise Holding AG, Registered Shares		1,063		91,814
Banque Cantonale Vaudoise		58		30,889
Barry Callebaut AG		39		37,730
Cie Financiere Richemont SA, Bearer A Shares		12,237		960,550
Credit Suisse Group AG		29,538		720,915
EMS-Chemie Holding AG		196		46,208
Geberit AG, Registered Shares		821		181,995
Givaudan SA, Registered Shares		188		198,676
Glencore International Plc		89,442		516,691
Holcim Ltd., Registered Shares		5,545		408,417
Julius Baer Group Ltd.		4,846		172,531
Kuehne & Nagel International AG, Registered Shares		1,213		146,238
Lindt & Spruengli AG		2		75,699
Lindt & Spruengli AG, Registered Shares		23		75,006
Lonza Group AG, Registered Shares		1,094		59,280
Nestle SA, Registered Shares		73,017		4,763,881
Novartis AG, Registered Shares		52,105		3,291,643
Pargesa Holding SA		564		38,871
Partners Group Holding AG		389		89,929
Roche Holding AG		16,078		3,250,668
Schindler Holding AG Participation Certificates		1,080		156,228


Common Stocks	Shares		Value

Switzerland (concluded)
Schindler Holding AG, Registered Shares		509	$	72,187
SGS SA, Registered Shares		136		302,064
Sika AG, Registered Shares		49		113,334
Sonova Holding AG, Registered Shares		1,109		122,946
Sulzer AG		543		85,940
Swatch Group AG, Bearer Shares		744		377,286
Swatch Group AG, Registered Shares		1,002		86,678
Swiss Life Holding AG, Registered Shares		771		102,910
Swiss Prime Site AG		1,210		101,004
Swiss Re AG		8,200		594,490
Swisscom AG		566		245,255
Syngenta AG, Registered Shares		2,181		881,094
Transocean Ltd.		8,464		379,472
UBS AG, Registered Shares		84,888		1,328,401
Zurich Insurance Group AG		3,427		918,292

				22,450,751
Taiwan — 2.5%
Acer, Inc. (a)		59,000		51,453
Advanced Semiconductor Engineering, Inc.		135,097		117,618
Advantech Co. Ltd.		8,000		33,901
Asia Cement Corp.		47,462		61,272
Asustek Computer, Inc.		15,220		172,357
AU Optronics Corp. (a)		167,000		75,783
Capital Securities Corp.		44,000		16,995
Catcher Technology Co. Ltd.		13,000		65,288
Cathay Financial Holding Co. Ltd.		158,447		172,802
Chailease Holding Co. Ltd.		15,000		34,615
Chang Hwa Commercial Bank		109,717		60,625
Cheng Shin Rubber Industry Co. Ltd.		40,336		105,636
Cheng Uei Precision Industry Co. Ltd.		8,079		17,521
Chicony Electronics Co. Ltd.		9,315		21,722
Chimei Innolux Corp. (a)		147,401		79,708
China Airlines Ltd. (a)		69,687		28,912
China Development Financial Holding Corp. (a)		259,765		68,390
China Life Insurance Co. Ltd. (a)		49,831		45,286
China Motor Corp.		17,000		16,035
China Petrochemical Development Corp.		32,612		20,366
China Steel Corp.		294,743		278,328
Chinatrust Financial Holding Co. Ltd.		250,225		148,780
Chunghwa Telecom Co. Ltd.		95,000		309,471
Clevo Co.		10,805		13,408
Compal Electronics, Inc.		91,000		61,638
CTCI Corp.		14,000		27,813
Delta Electronics, Inc.		41,000		151,103
E Ink Holdings, Inc.		18,000		13,843
E.Sun Financial Holding Co. Ltd.		81,039		45,613
Epistar Corp.		17,000		31,145
Eternal Chemical Co. Ltd.		7,000		6,094
Eva Airways Corp. (a)		38,000		22,347
Evergreen Marine Corp. Taiwan Ltd. (a)		47,000		28,240
Far Eastern Department Stores Co. Ltd.		18,907		19,754
Far Eastern New Century Corp.		67,162		77,116
Far EasTone Telecommunications Co. Ltd.		36,000		91,922
Farglory Land Development Co. Ltd.		9,000		16,275
Feng Hsin Iron & Steel Co.		9,000		16,086
First Financial Holding Co. Ltd.		141,809		86,884
Formosa Chemicals & Fibre Corp.		70,000		181,781
Formosa International Hotels Corp.		1,100		14,844
Formosa Petrochemical Corp.		26,000		77,407

See Notes to Financial Statements.



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	31

Schedule of Investments (continued)

ACWI ex-US Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Taiwan (continued)
Formosa Plastics Corp.		90,000	$	244,723
Formosa Taffeta Co. Ltd.		17,000		16,456
Foxconn Technology Co. Ltd.		17,902		56,554
Fubon Financial Holding Co. Ltd.		124,952		151,707
Giant Manufacturing Co. Ltd.		6,000		34,539
Hermes Microvision, Inc.		1,000		18,467
Highwealth Construction Corp.		8,000		15,116
Hiwin Technologies Corp.		3,150		23,282
Hon Hai Precision Industry Co. Ltd.		231,000		715,018
Hotai Motor Co. Ltd.		6,000		48,492
HTC Corp.		16,050		167,648
Hua Nan Financial Holdings Co. Ltd.		127,440		73,999
Inventec Corp.		43,470		16,779
Kinsus Interconnect Technology Corp.		6,000		18,956
Largan Precision Co. Ltd.		3,000		80,808
LCY Chemical Corp.		10,497		13,093
Lite-On Technology Corp.		49,265		65,752
Macronix International		89,266		26,826
MediaTek, Inc.		26,000		290,864
Mega Financial Holding Co. Ltd.		180,072		141,045
Merida Industry Co. Ltd.		4,000		17,962
MStar Semiconductor, Inc.		5,100		38,560
Nan Kang Rubber Tire Co. Ltd.		14,819		18,177
Nan Ya Plastics Corp.		106,000		205,663
Novatek Microelectronics Corp.		13,000		53,116
Oriental Union Chemical Corp.		12,000		14,447
Pegatron Corp. (a)		40,000		52,089
Phison Electronics Corp.		3,000		19,999
Pou Chen Corp.		56,000		58,992
Powertech Technology, Inc.		18,100		29,393
President Chain Store Corp.		13,000		69,750
Quanta Computer, Inc.		56,000		132,540
Radiant Opto-Electronics Corp.		10,300		42,771
Realtek Semiconductor Corp.		9,090		19,357
Richtek Technology Corp.		3,000		17,694
Ruentex Development Co. Ltd.		12,000		24,953
Ruentex Industries Ltd.		10,000		24,983
ScinoPharm Taiwan Ltd.		5,000		12,090
Shin Kong Financial Holding Co. Ltd. (a)		120,000		34,045
Siliconware Precision Industries Co.		65,000		70,021
Simplo Technology Co. Ltd.		6,600		33,547
SinoPac Financial Holdings Co. Ltd.		125,209		54,043
Standard Foods Corp.		7,440		20,491
Synnex Technology International Corp.		30,000		55,546
Taishin Financial Holding Co. Ltd.		164,118		65,596
Taiwan Business Bank (a)		54,080		16,359
Taiwan Cement Corp.		70,000		94,323
Taiwan Cooperative Financial Holding		102,225		57,801
Taiwan Fertilizer Co. Ltd.		17,000		44,658
Taiwan Glass Industry Corp.		16,720		17,382
Taiwan Mobile Co. Ltd.		37,800		139,692
Taiwan Semiconductor Manufacturing Co. Ltd.		571,000		1,909,885
Teco Electric & Machinery Co. Ltd.		46,000		35,398
TPK Holding Co. Ltd.		4,887		87,509
Transcend Information, Inc.		6,000		16,790
Tripod Technology Corp.		12,000		25,943
TSRC Corp.		13,200		26,920
Tung Ho Steel Enterprise Corp.		16,000		16,423
U-Ming Marine Transport Corp.		10,000		16,051
Uni-President Enterprises Corp.		93,906		172,994


Common Stocks	Shares		Value

Taiwan (concluded)
Unimicron Technology Corp.		32,000	$	34,192
United Microelectronics Corp.		269,000		108,724
Walsin Lihwa Corp. (a)		85,000		29,269
Wan Hai Lines Ltd. (a)		31,000		17,979
Wintek Corp. (a)		47,399		25,296
Wistron Corp.		51,606		54,026
WPG Holdings Ltd.		30,270		39,842
Yang Ming Marine Transport Corp. (a)		33,000		15,888
Yuanta Financial Holding Co. Ltd.		175,733		91,148
Yulon Motor Co. Ltd.		21,000		39,938
Zhen Ding Technology Holding Ltd.		4,200		10,403

				9,536,959
Thailand — 0.6%
Advanced Info Service PCL		28,100		193,266
Bangkok Bank PCL, Foreign Registered		19,500		133,781
Bangkok Bank PCL-NVDR		14,400		92,583
Bank of Ayudhya PCL		64,500		68,978
Banpu PCL		3,100		42,075
Charoen Pokphand Foods PCL		79,000		87,558
CP ALL PCL		107,300		161,345
Indorama Ventures PCL		39,200		32,652
IRPC PCL		287,500		39,040
Kasikornbank PCL, Foreign Registered		26,800		170,361
Kasikornbank PCL-NVDR		21,300		135,543
Krung Thai Bank PCL		105,875		68,367
PTT Exploration & Production PCL-NVDR		35,022		188,912
PTT Global Chemical PCL		5,600		12,956
PTT Global Chemical PCL-NVDR		40,368		93,394
PTT PCL-NVDR		22,800		249,257
Siam Cement PCL		9,000		137,833
Siam Commercial Bank PCL		47,100		281,075
Thai Oil PCL		23,800		53,120

				2,242,096
Turkey — 0.5%
Akbank TAS		40,780		202,349
Anadolu Efes Biracilik Ve Malt Sanayii AS		4,734		68,233
Arcelik AS		5,894		38,656
Asya Katilim Bankasi AS (a)		5,168		6,435
BIM Birlesik Magazalar AS		2,422		118,762
Coca-Cola Icecek AS		1,230		25,634
Emlak Konut Gayrimenkul Yatirim Ortakligi AS		12,819		22,551
Enka Insaat ve Sanayi AS		6,617		19,754
Eregli Demir ve Celik Fabrikalari TAS		16,952		23,433
Ford Otomotiv Sanayi AS		1,680		20,211
Haci Omer Sabanci Holding AS		18,541		102,581
KOC Holding AS		15,144		79,127
Koza Altin Isletmeleri AS		816		19,741
TAV Havalimanlari Holding AS (a)		3,097		15,864
Tofas Turk Otomobil Fabrikasi AS		2,741		16,135
Tupras Turkiye Petrol Rafinerileri AS		2,820		81,880
Turk Hava Yollari (a)		10,553		37,222
Turk Telekomunikasyon AS		12,837		49,910
Turkcell Iletisim Hizmetleri AS (a)		17,306		112,456
Turkiye Garanti Bankasi AS		61,160		319,220
Turkiye Halk Bankasi AS		14,154		139,525
Turkiye Is Bankasi		35,601		124,166
Turkiye Sise ve Cam Fabrikalari AS		10,406		17,295
Turkiye Vakiflar Bankasi Tao		18,339		47,705

See Notes to Financial Statements.



32	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

ACWI ex-US Index Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Turkey (concluded)
Yapi ve Kredi Bankasi AS (a)		21,233	$	62,275

				1,771,120
United Kingdom — 14.9%
3i Group Plc		23,494		83,849
Aberdeen Asset Management Plc		19,638		118,170
Admiral Group Plc		4,578		87,204
Aggreko Plc		6,111		174,399
AMEC Plc		7,099		117,353
Anglo American Plc		32,110		1,012,207
Antofagasta Plc		8,955		196,248
ARM Holdings Plc		31,320		395,532
Associated British Foods Plc		8,142		208,014
AstraZeneca Plc		28,445		1,348,000
Aviva Plc		66,362		410,644
Babcock International Group Plc		8,304		131,079
BAE Systems Plc		73,731		409,810
Balfour Beatty Plc		15,341		69,049
Barclays Plc		264,109		1,147,284
BG Group Plc		78,319		1,306,345
BHP Billiton Plc		48,548		1,712,457
BP Plc		437,407		3,041,250
British American Tobacco Plc		44,423		2,258,241
British Land Co. Plc		19,100		176,458
British Sky Broadcasting Group Plc		26,160		329,940
BT Group Plc		184,067		702,253
Bunzl Plc		7,452		123,344
Burberry Group Plc		10,027		201,557
The Capita Group Plc		14,922		184,390
Capital Shopping Centres Group Plc		13,810		79,449
Carnival Plc		4,146		160,999
Centrica Plc		122,626		669,255
Cobham Plc		24,084		87,510
Compass Group Plc		44,825		532,106
Croda International Plc		3,075		120,186
Diageo Plc		57,462		1,673,673
Eurasian Natural Resources Corp. Plc		7,121		33,679
Evraz Plc		6,732		28,892
Experian Plc		23,070		371,817
Fresnillo Plc		4,107		125,968
G4S Plc		31,866		133,518
GKN Plc		36,756		138,672
GlaxoSmithKline Plc		113,618		2,473,726
Hammerson Plc		16,084		128,973
Hargreaves Lansdown Plc		5,439		60,832
HSBC Holdings Plc		421,000		4,461,238
ICAP Plc		13,183		66,662
IMI Plc		7,255		131,310
Imperial Tobacco Group Plc		22,697		879,998
Inmarsat Plc		10,192		98,241
InterContinental Hotels Group Plc		6,191		173,598
Intertek Group Plc		3,706		188,253
Invensys Plc		18,428		98,618
Investec Plc		12,972		90,306
ITV Plc		85,248		147,885
J Sainsbury Plc		28,050		158,697
Johnson Matthey Plc		4,657		182,941
Kazakhmys Plc		5,223		67,506
Kingfisher Plc		53,411		249,567
Land Securities Group Plc		17,697		236,096


Common Stocks	Shares		Value

United Kingdom (concluded)
Legal & General Group Plc		134,774	$	323,170
Lloyds Banking Group Plc (a)		984,362		784,432
London Stock Exchange Group Plc		4,275		76,258
Marks & Spencer Group Plc		36,310		228,086
Meggitt Plc		17,425		109,111
Melrose Industries Plc		25,994		95,482
National Grid Plc		83,463		957,271
Next Plc		3,746		227,391
Old Mutual Plc		111,930		328,742
Pearson Plc		19,930		388,467
Petrofac Ltd.		5,904		157,790
Prudential Plc		59,523		849,235
Randgold Resources Ltd.		1,992		197,063
Reckitt Benckiser Group Plc		15,084		957,526
Reed Elsevier Plc		28,065		296,300
Resolution Ltd.		31,320		127,424
Rexam Plc		19,767		141,437
Rio Tinto Plc		30,898		1,802,145
Rolls-Royce Holdings Plc		44,187		633,791
Royal Bank of Scotland Group Plc (a)		47,874		255,883
Royal Dutch Shell Plc, Class A		86,572		3,004,931
Royal Dutch Shell Plc, Class B		59,790		2,133,086
RSA Insurance Group Plc		79,583		164,352
SABMiller Plc		21,898		1,016,311
The Sage Group Plc		27,868		134,003
Schroders Plc		2,346		65,183
Segro Plc		18,445		74,869
Serco Group Plc		11,227		98,346
Severn Trent Plc		5,365		138,051
Shire Plc		13,565		417,275
Smith & Nephew Plc		20,484		226,428
Smiths Group Plc		8,814		172,645
SSE Plc		22,509		523,652
Standard Chartered Plc		55,195		1,428,432
Standard Life Plc		53,853		294,385
Tate & Lyle Plc		10,525		130,217
Tesco Plc		184,310		1,015,285
TUI Travel Plc		9,760		45,289
Tullow Oil Plc		20,597		429,394
Unilever Plc		29,451		1,144,787
United Utilities Group Plc		15,437		169,941
Vedanta Resources Plc		2,284		44,098
Vodafone Group Plc		1,121,760		2,823,766
The Weir Group Plc		4,795		148,276
Whitbread Plc		4,072		163,631
WM Morrison Supermarkets Plc		51,932		222,978
Wolseley Plc		7,380		347,665
WPP Plc		30,838		450,518
Xstrata Plc		49,067		856,503

				56,816,549
Total Common Stocks — 96.0%				365,774,670


Investment Companies
India — 1.5%
iShares S&P India Nifty 50 Index Fund (b)		238,211		5,933,836
Total Investment Companies — 1.5%				5,933,836

See Notes to Financial Statements.



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	33

Schedule of Investments (continued)

ACWI ex-US Index Master Portfolio

(Percentages shown are based on Net Assets)


Rights
Chile — 0.0%
Latam Airlines Group SA (Expires 1/19/13) (a)	92	52
Singapore — 0.0%
Olam International Ltd. (Expires 1/21/13) (a)	12,833	—
Spain — 0.0%
Repsol SA (Expires 1/16/13) (a)	19,260	11,745
Total Rights — 0.0%		11,797
Total Long-Term Investments (Cost — $319,650,854) — 97.5%		371,720,303


Short-Term Securities	Shares		Value
BlackRock Cash Funds: Institutional, SL Agency Shares 0.25% (b)(c)		7,988,899	$	7,988,899
Total Short-Term Securities (Cost — $7,988,899) — 2.1%				7,988,899
Total Investments *(Cost — $327,639,753) — 99.6%**				379,709,202
Other Assets in Excess of Liabilities — 0.4%				1,346,718

Net Assets — 100.0%			$	381,055,920


Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	334,756,781

Gross unrealized appreciation	$	56,057,442
Gross unrealized depreciation		(11,105,021	)

Net unrealized appreciation	$	44,952,421

(a)

Non-income producing security.

(b)


Affiliate	Shares Held at December 30, 2011		Shares Purchased			Shares Sold			Shares Held at December 31, 2012		Value at December 31, 2012		Income		Realized Loss
BlackRock Cash Funds: Institutional, SL Agency Shares		3,240,217		4,748,682	¹		—			7,988,899	$	7,988,899	$	19,519		—
iShares S&P India Nifty 50 Index Fund		31,280		283,260			(76,329	)		238,211	$	5,933,836	$	21,782	$	(76,980	)

Represents net shares purchased.

(c)

Represents the current yield as of report date.

_Ÿ

Financial futures contracts as of December 31, 2012 were as follows:


Contracts		Issue	Exchange	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
	70	E-mini MSCI EAFE Index	NYSE Liffe U.S.	March 2013	$	5,671,050	$	86,284
	33	MSCI Emerging Markets Mini Index	NYSE Liffe U.S.	March 2013	$	1,771,275	$	37,471
							$	123,755

_Ÿ

Foreign currency exchange contracts as of December 31, 2012 were as follows:


Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	193,527	HKD	1,500,000	Westpac Banking Corp.		1/03/13		—
USD	23,346	KRW	25,000,000	State Street Bank & Trust		1/03/13	$	(6	)
USD	34,437	TWD	1,000,000	State Street Bank & Trust		1/03/13		—
SEK	900,000	USD	138,229	UBS AG		1/04/13		165
USD	311,437	AUD	300,000	Westpac Banking Corp.		1/04/13		(98	)
USD	34,220	BRL	70,000	State Street Bank & Trust		1/04/13		32
USD	138,088	CAD	137,500	Credit Suisse Group AG		1/04/13		(145	)
USD	276,177	CAD	275,000	HSBC Holdings Plc		1/04/13		(289	)
USD	138,086	CAD	137,500	JPMorgan Chase & Co.		1/04/13		(147	)
USD	219,013	CHF	200,000	UBS AG		1/04/13		351
USD	79,745	DKK	450,000	UBS AG		1/04/13		132
USD	922,886	EUR	700,000	Westpac Banking Corp.		1/04/13		(1,080	)
USD	406,373	GBP	250,000	Westpac Banking Corp.		1/04/13		261

See Notes to Financial Statements.



34	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012


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

Foreign currency exchange contracts as of December 31, 2012 were as follows (concluded):


Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	23,099	MXN	300,000	Westpac Banking Corp.		1/04/13	$	(109	)
USD	62,650	NOK	350,000	UBS AG		1/04/13		(325	)
USD	24,560	SGD	30,000	Westpac Banking Corp.		1/04/13		1
USD	406,531	JPY	35,000,000	UBS AG		1/08/13		2,537
Total							$	1,280

_Ÿ

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

_Ÿ

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total

Assets:
Investments:
Long-Term Investments:
Common Stocks:
Australia		—	$	22,634,344		—	$	22,634,344
Austria		—		738,026		—		738,026
Belgium	$	160,873		2,776,365		—		2,937,238
Brazil		11,241,152		—		—		11,241,152
Canada		28,776,787		—		—		28,776,787
Chile		1,568,955		—		—		1,568,955
China		17,320		15,819,609		—		15,836,929
Colombia		1,104,360		—		—		1,104,360
Czech Republic		178,050		74,412		—		252,462
Denmark		—		2,896,220		—		2,896,220
Egypt		274,197		—		—		274,197
Finland		—		1,972,730		—		1,972,730
France		1,038,663		22,668,667		—		23,707,330
Germany		—		22,091,872		—		22,091,872
Greece		107,213		40,084		—		147,297
Hong Kong		—		8,815,483		—		8,815,483
Hungary		—		193,981		—		193,981
Indonesia		—		2,361,163		—		2,361,163
Ireland		99,906		669,110		—		769,016
Israel		—		1,381,228		—		1,381,228
Italy		—		5,692,483		—		5,692,483
Japan		225,708		50,521,516		—		50,747,224
Malaysia		616,231		2,475,392		—		3,091,623
Mexico		4,660,040		—		—		4,660,040
Morocco		25,794		20,895		—		46,689
Netherlands		169,269		6,802,343		—		6,971,612

See Notes to Financial Statements.



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	35


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


	Level 1		Level 2			Level 3		Total

Assets (concluded):
Investments (concluded):
Long-Term Investments (concluded):
Common Stocks (concluded):
New Zealand		—	$	322,079			—	$	322,079
Norway		—		2,303,993			—		2,303,993
Peru	$	497,437		—			—		497,437
Philippines		90,762		735,361			—		826,123
Poland		68,037		1,297,772			—		1,365,809
Portugal		92,329		355,791			—		448,120
Russia		559,055		4,843,948			—		5,403,003
Singapore		—		4,702,216			—		4,702,216
South Africa		314,064		6,680,929			—		6,994,993
South Korea		432,390		13,304,852			—		13,737,242
Spain		57,865		7,450,830			—		7,508,695
Sweden		131,257		7,805,787			—		7,937,044
Switzerland		223,949		22,226,802			—		22,450,751
Taiwan		—		9,536,959			—		9,536,959
Thailand		—		2,242,096			—		2,242,096
Turkey		—		1,771,120			—		1,771,120
United Kingdom		—		56,816,549			—		56,816,549
Investment Companies:
India		5,933,836		—			—		5,933,836
Rights:
Chile		52		—			—		52
Singapore		—		—			—		—
Spain		11,745		—			—		11,745
Short-Term Securities:		7,988,899		—			—		7,988,899

Total	$	66,666,195	$	313,043,007			—	$	379,709,202


	Level 1		Level 2			Level 3		Total
Derivative Financial Instruments¹
Assets:
Equity contracts	$	123,755		—			—	$	123,755
Foreign currency transactions		—	$	3,479			—		3,479
Liabilities:
Foreign currency transactions		—		(2,199	)		—		(2,199	)

Total	$	123,755	$	1,280			—	$	125,035

Derivative financial instruments are financial futures contracts and foreign currency exchange contracts. Financial futures contracts and foreign currency exchange contracts are valued at the unrealized appreciation/depreciation on the instrument.

Certain of the Master Portfolio’s assets are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, such assets are categorized within the disclosure hierarchy as follows:


	Level 1		Level 2	Level 3	Total

Assets:
Cash	$	215,000	—	—	$	215,000
Foreign currency at value		1,403,876	—	—		1,403,876
Cash pledged as collateral for financial futures contracts		455,000	—	—		455,000

Total	$	2,073,876	—	—	$	2,073,876

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



36	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012


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


December 31, 2012

Assets
Investments at value — unaffiliated (cost — $314,715,630)	$	365,786,467
Investments at value — affiliated (cost — $12,924,123)		13,922,735
Foreign currency at value (cost — $1,410,687)		1,403,876
Cash		215,000
Cash pledged as collateral for financial futures contracts		455,000
Investments sold receivable		3,022,506
Dividends receivable		482,947
Unrealized appreciation on foreign currency exchange contracts		3,479
Interest receivable		1,393
Variation margin receivable		104,885
Prepaid expenses		411

Total assets		385,398,699


Liabilities
Investments purchased payable		3,011
Trustees’ fees payable		1,134
Investment advisory fees payable		32,790
Custodian fees payable		105,045
Printing fees payable		1,000
Professional fees payable		38,152
Withdrawals payable to investors		4,103,199
Unrealized depreciation on foreign currency exchange contracts		2,199
Foreign taxes payable		51,672
Other accrued expenses payable		4,577

Total liabilities		4,342,779

Net Assets	$	381,055,920


Net Assets Consist of
Investors’ capital	$	328,868,319
Net unrealized appreciation/depreciation		52,187,601

Net Assets	$	381,055,920


Statement of Operations		ACWI ex-US Index Master Portfolio


Year Ended December 31, 2012

Investment Income
Dividends — unaffiliated	$	7,156,112
Foreign taxes withheld		(790,075	)
Dividends — affiliated		21,782
Income — affiliated		19,519
Interest — unaffiliated		869

Total income		6,408,207


Expenses
Investment advisory		376,651
Professional		40,944
Independent Trustees		4,010
Custodian		635,461
Miscellaneous		2,283

Total expenses		1,059,349
Less fees waived and/or reimbursed by manager		(258,034	)

Total expenses after fees waived		801,315

Net investment income		5,606,892


Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — unaffiliated		(2,538,120	)
Investments — affiliated		(76,980	)
Financial futures contracts		443,499
Foreign currency transactions		(153,454	)

		(2,325,055	)

Net change in unrealized appreciation/depreciation on:
Investments		55,150,043
Financial futures contracts		104,560
Foreign currency translations		(5,454	)

		55,249,149

Total realized and unrealized gain		52,924,094

Net Increase in Net Assets Resulting from Operations	$	58,530,986


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


Increase (Decrease) in Net Assets:	Year Ended December 31, 2012			Period June 30, 2011¹ to December 31, 2011


Operations
Net investment income	$	5,606,892		$	239,468
Net realized loss		(2,325,055	)		(138,828	)
Net change in unrealized appreciation/depreciation		55,249,149			(3,061,548	)

Net increase (decrease) in net assets resulting from operations		58,530,986			(2,960,908	)


Capital Transactions
Proceeds from contributions		568,052,800			49,234,708
Value of withdrawals		(289,082,111	)		(2,719,555	)

Net increase in net assets derived from capital transactions		278,970,689			46,515,153


Net Assets
Total increase in net assets		337,501,675			43,554,245
Beginning of period		43,554,245			—

End of period	$	381,055,920		$	43,554,245

Commencement of operations.


Financial Highlights		ACWI ex-US Index Master Portfolio


	Year Ended December 31, 2012		Period June 30, 2011¹ to December 31, 2011


Total Investment Return
Total investment return		16.65%		(18.04	)%²


Ratios to Average Net Assets
Total expenses		0.42%		1.47%	^3,4

Total expenses after fees waived		0.32%		0.33%	⁴

Net investment income		2.23%		1.76%	⁴


Supplemental Data
Net assets, end of period (000)	$	381,056	$	43,554

Portfolio turnover		42%		4%

Commencement of operations.

Aggregate total investment return.

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%.

⁴

Annualized.


Notes to Financial Statements		ACWI ex-US Index Master Portfolio

1. Organization and Significant Accounting Policies:

ACWI ex-US Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a non-diversified, open-end management investment company. MIP is organized as a Delaware statutory trust. The Master Portfolio’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates.

The following is a summary of significant accounting policies followed by the Master Portfolio:

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

In the event that application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the investment advisor and/or sub-advisor 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. A market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Master Portfolio’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	41


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

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

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

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

Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”) require that the Master Portfolio either deliver collateral or segregate assets in connection with certain investments (e.g., financial futures contracts and foreign currency exchange contracts), the Master Portfolio will, consistent with SEC rules and/or certain interpretive letters issued by the SEC, segregate collateral or designate on its books and records cash or liquid securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, the Master Portfolio engaging in such transactions may have requirements to deliver/deposit securities to/with an exchange or broker-dealer as collateral for certain investments.

subsequently recorded when the Master Portfolio is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis. Income and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets. Consent fees are compensation for agreeing to changes in the terms of debt instruments and are included in interest income in the Statement of Operations.

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.



42	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012


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

Offering Costs: Offering costs associated with the establishment of the Master Portfolio are amortized over a 12-month period beginning with the commencement of operations.

2. Derivative Financial Instruments:

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

The Master Portfolio may mitigate counterparty risk by procuring collateral and through netting provisions included within an International Swaps and Derivatives Association, Inc. master agreement (“ISDA Master Agreement”) implemented between the Master Portfolio and each of its respective counterparties. An ISDA Master Agreement allows the Master Portfolio to offset with each separate counterparty certain derivative financial instrument’s payables and/or receivables with collateral held. The amount of collateral moved to/from applicable counterparties is generally based upon minimum transfer amounts of up to $500,000. To the extent amounts due to a Master Portfolio from its counterparties are not fully collateralized contractually or otherwise, the Master Portfolio bears the risk of loss from counterparty non-performance. See Note 1 “Segregation and Collateralization” for information with respect to collateral practices. In addition, the Master Portfolio manages counterparty risk by entering into agreements only with counterparties that it believes have the financial resources to honor

their obligations and by monitoring the financial stability of those counterparties.

Certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the Master Portfolio’s net assets decline by a stated percentage or the Master Portfolio fails to meet the terms of its ISDA Master Agreements, which would cause the Master Portfolio to accelerate payment of any net liability owed to the counterparty.

Foreign Currency Exchange Contracts: The Master Portfolio enters into foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to foreign currencies (foreign currency exchange rate risk). A foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. Foreign currency exchange contracts, when used by the Master Portfolio, help to manage the overall exposure to the currencies in which some of the investments held by the Master Portfolio are denominated. The contract is marked-to-market daily and the change in market value is recorded by the Master Portfolio as an unrealized appreciation or depreciation. When the contract is closed, the Master Portfolio records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of foreign currency exchange contracts involves the risk that the value of a foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies and the risk that the counterparty to the contract does not perform its obligations under the agreement.



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	43


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


Derivative Financial Instruments Categorized by Risk Exposure:
Fair Values of Derivative Financial Instruments as of December 31, 2012
	Asset Derivatives
	Statement of Assets and Liabilities Location	Value
Equity contracts	Net unrealized appreciation/depreciation¹	$	123,755
Foreign currency exchange contracts	Unrealized appreciation on foreign currency exchange contracts		3,479

	Liability Derivatives
	Statement of Assets and Liabilities Location	Value
Foreign currency exchange contracts	Unrealized depreciation on foreign currency exchange contracts	$	2,199

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, 2012
	Net Realized Gain (Loss) From
	Financial Futures Contracts		Foreign Currency Transactions
Equity contracts	$	443,499		—
Foreign currency exchange contracts		—	$	(153,454)
	Net Change in Unrealized Appreciation/Depreciation on
	Financial Futures Contracts		Foreign Currency Translations
Equity contracts	$	104,560		—
Foreign currency exchange contracts		—	$	(5,454)

For the year ended December 31, 2012, the average quarterly balances of outstanding derivative financial instruments were as follows:


Financial futures contracts:
Average number of contracts purchased		90
Average notional value of contracts purchased	$	6,063,636
Foreign currency exchange contracts:
Average number of contracts — US dollars purchased		7
Average number of contracts — US dollars sold		12
Average US dollar amounts purchased	$	2,778,259
Average US dollar amounts sold	$	3,502,279

3. 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, Inc. (“BlackRock”).

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 its assets in the Master Portfolio. The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to May 1, 2013 unless approved by the Board, including a majority of the independent trustees. For the year ended December 31, 2012, the Manager waived $258,034, which is included in fees waived and/or reimbursed by the manager in the Statement of Operations.

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

4. Investments:

Purchases and sales of investments, excluding short-term securities, for the year ended December 31, 2012, were $376,849,865 and $100,276,103, respectively.

5. Borrowings:



44	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012


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

the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Master Portfolio paid administration and arrangement fees which were allocated to the Master Portfolio based on its net assets as of October 31, 2012. The Master Portfolio did not borrow under the credit agreement during the year ended December 31, 2012.

6. Concentration, Market and Credit Risk:

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 US. 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, including Greece, Ireland, Italy, Portugal and Spain. As of

December 31, 2012, these events have adversely affected the exchange rate of the euro and may continue to spread to other countries in Europe, including countries that do not use the euro. These events may affect the value and liquidity of certain of the Master Portfolio’s investments.

As of December 31, 2012, the Master Portfolio had the following industry classifications:


Industry Allocation		Percent of Long-Term Investments


Commercial Banks	15	%
Oil, Gas & Consumable Fuels	9	%
Metals & Mining	6	%
Pharmaceuticals	6	%
Insurance	5	%
Other*	59	%

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

7. Subsequent Events:



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	45


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

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

accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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, 2012 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 22, 2013



46	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012


Officers and Trustees


Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees¹
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 106 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. since 1987; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of Seventy (civic) since 2006; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 106 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy since 2002; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 106 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President of Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 106 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 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) since 2011, President thereof from 1997 to 2011 and Trustee since 1980; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (strategic solutions company) since 2005; Director, Cerego, LLC (software development and design) since 2005; Director, Cybersettle (dispute resolution technology) since 2009.	33 RICs consisting of 106 Portfolios	AIMS Worldwide, Inc. (marketing)
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1999 to 2008.	33 RICs consisting of 106 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital since 2005; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 106 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, The West Penn Allegheny Health System (a not-for-profit health system) since 2008; 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; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 106 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 106 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 106 Portfolios	None



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	47


Officers and Trustees (continued)


Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees¹ (concluded)
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Chairman Elect 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; 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 106 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh since 2005 and Dean thereof from 1997 to 2005; Director, Alkon Corporation (pneumatics) since 1992; Director, Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 106 Portfolios	None
	¹ Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year extensions in terms of Trustees who turn 72 prior to December 31, 2013. ² Date shown is the earliest date a person has served for the Trust/MIP covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the Trust’s Board. As a result, although the chart shows certain Trustees as joining the Trust’s board in 2009, each Trustee first became a member of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees³
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	155 RICs consisting of 278 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	155 RICs consisting of 278 Portfolios	None
	³ Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.



48	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012


Officers and Trustees (concluded)


Name, Address and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers*
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock since 2000; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2002; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009; and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Simon Mendelson 55 East 52nd Street New York, NY 10055 1964	Vice President	Since 2009	Managing Director of BlackRock since 2005; Co-head of the Global Cash and Securities Lending Group since 2010; Chief Operating Officer and Head of the Global Client Group for BlackRock’s Global Cash Management Business from 2007 to 2010; Head of BlackRock’s Strategy and Development Group from 2005 to 2007; Partner of McKinsey & Co. from 1997 to 2005.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2009	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2009	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Director of BlackRock since 2010; 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.
	* Officers of the Trust/MIP serve at the pleasure of the Board of Trustees.


Investment Advisor BlackRock Fund Advisors San Francisco, CA 94105	Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Custodian and Accounting Agent State Street Bank and Trust Company Boston, MA 02110	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Sidley Austin LLP New York, NY 10019

				Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP New York, NY 10017	Address of the Trust/MIP 400 Howard Street San Francisco, CA 94105



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	49


Additional Information

General Information

Electronic Delivery

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

To enroll:

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

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

Shareholders Who Hold Accounts Directly with BlackRock:

1) Access the BlackRock website at

http://www.blackrock.com/edelivery

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

3) Log into your account

Householding

The Funds will mail only one copy of shareholder documents, including prospectuses’, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Funds at (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 December 31 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

Shareholder Privileges

Account Information

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.



50	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012


Additional Information (concluded)

BlackRock Privacy Principles



BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012	51


A World-Class Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing.


Equity Funds

BlackRock ACWI ex-US Index Fund

BlackRock All-Cap Energy & Resources Portfolio

BlackRock Basic Value Fund

BlackRock Capital Appreciation Fund

BlackRock China Fund

BlackRock Commodity Strategies Fund

BlackRock Emerging Markets Fund

BlackRock Emerging Markets Long/Short Equity Fund

BlackRock Energy & Resources Portfolio

BlackRock Equity Dividend Fund

BlackRock EuroFund

BlackRock Flexible Equity Fund

BlackRock Focus Growth Fund

BlackRock Global Dividend Income Portfolio

BlackRock Global Long/Short Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Global SmallCap Fund

BlackRock Health Sciences Opportunities Portfolio

BlackRock Index Equity Portfolio

BlackRock India Fund

BlackRock International Fund

BlackRock International Index Fund

BlackRock International Opportunities Portfolio

BlackRock Large Cap Core Fund

BlackRock Large Cap Core Plus Fund

BlackRock Large Cap Growth Fund

BlackRock Large Cap Value Fund

BlackRock Latin America Fund

BlackRock Long-Horizon Equity Fund

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Mid Cap Value Opportunities Fund

BlackRock Natural Resources Trust

BlackRock Pacific Fund

BlackRock Real Estate Securities Fund

BlackRock Russell 1000 Index Fund

BlackRock Science & Technology Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock Small Cap Growth Fund II

BlackRock Small Cap Index Fund

BlackRock S&P 500 Index Fund

BlackRock S&P 500 Stock Fund

BlackRock U.S. Opportunities Portfolio

BlackRock Value Opportunities Fund

BlackRock World Gold Fund


Taxable Fixed Income Funds

BlackRock Bond Index Fund

BlackRock Core Bond Portfolio

BlackRock CoreAlpha Bond Fund

BlackRock Emerging Market Local Debt Portfolio

BlackRock Floating Rate Income Portfolio

BlackRock Global Long/Short Credit Fund

BlackRock GNMA Portfolio

BlackRock High Yield Bond Portfolio

BlackRock Inflation Protected Bond Portfolio

BlackRock International Bond Portfolio

BlackRock Long Duration Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Secured Credit Portfolio

BlackRock Strategic Income Opportunities Portfolio

BlackRock Total Return Fund

BlackRock U.S. Government Bond Portfolio

BlackRock U.S. Mortgage Portfolio

BlackRock World Income Fund


Municipal Fixed Income Funds

BlackRock California Municipal Bond Fund

BlackRock High Yield Municipal Fund

BlackRock Intermediate Municipal Fund

BlackRock National Municipal Fund

BlackRock New Jersey Municipal Bond Fund

BlackRock New York Municipal Bond Fund

BlackRock Pennsylvania Municipal Bond Fund

BlackRock Short-Term Municipal Fund


Mixed Asset Funds


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

BlackRock Prepared Portfolios	LifePath Portfolios
Conservative Prepared Portfolio		Retirement	2040
Moderate Prepared Portfolio		2020	2045
Growth Prepared Portfolio		2025	2050
Aggressive Growth Prepared Portfolio		2030	2055
		2035



52	BLACKROCK ACWI ex-US INDEX FUND	DECEMBER 31, 2012

LOGO


# ACWI-12/12-AR

DECEMBER 31, 2012

ANNUAL REPORT

BlackRock CoreAlpha Bond Fund | of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee


Table of Contents


		Page
Dear Shareholder		3
Annual Report:
Fund Summary		4
About Fund Performance		6
Disclosure of Expenses		6
Derivative Financial Instruments		7
Fund Financial Statements:
Statement of Assets and Liabilities		8
Statement of Operations		9
Statements of Changes in Net Assets		10
Fund Financial Highlights		11
Fund Notes to Financial Statements		14
Fund Report of Independent Registered Public Accounting Firm		17
Important Tax Information (Unaudited)		17
Master Portfolio Information		18
Master Portfolio Financial Statements:
Schedule of Investments		19
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		47
Disclosure of Investment Advisory Agreement and Sub-Advisory Agreements		48
Officers and Trustees		49
Additional Information		52
A World-Class Mutual Fund Family		54



2	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012

Dear Shareholder

Sincerely,

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

“Although 2012 brought its share of headwinds, the strongest returns came from higher-risk asset classes as investors reached for yield in an environment of extremely low interest rates.”

Rob Kapito

President, BlackRock Advisors, LLC


Total Returns as of December 31, 2012
	6-month			12-month
US large cap equities (S&P 500^® Index)		5.95	%		16.00	%
US small cap equities (Russell 2000^® Index)		7.20			16.35
International equities (MSCI Europe, Australasia, Far East Index)		13.95			17.32
Emerging market equities (MSCI Emerging Markets Index)		13.75			18.22
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)		0.07			0.11
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		0.71			4.18
US investment grade bonds (Barclays US Aggregate Bond Index)		1.80			4.21
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.15			7.42
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)		7.97			15.78

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 IS NOT PART OF YOUR FUND REPORT				3


Fund Summary as of December 31, 2012		BlackRock CoreAlpha Bond Fund

Investment Objective

BlackRock CoreAlpha Bond Fund’s (the “Fund”) investment objective is 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, 2012, the Fund’s Institutional Shares returned 4.82%, outperforming its benchmark, the Barclays US Aggregate Bond Index (the “Index”), which returned 4.21%. The Index is comprised of US government securities and investment-grade corporate bonds, as well as mortgage-backed securities (“MBS”), asset-backed securities (“ABS”) and commercial mortgage-backed securities.

_Ÿ

For the period beginning with their initial trading date of April 30, 2012 through December 31, 2012, the Fund’s Investor A and Investor C Shares returned 3.25% and 2.61%, respectively. For the same period, the Index returned 2.76%.

_Ÿ

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

What factors influenced performance?

_Ÿ

The Master Portfolio’s overweight to non-government spread sectors contributed positively to performance for the period. All spread sectors in the Index outperformed similarly-dated US Treasuries. Notably, an overweight allocation to investment grade credit and security selection among industrial and financial names had a positive impact on results. Exposure to high yield debt and non-agency residential MBS, neither of which are represented in the Index, also benefited performance as those sectors experienced meaningful spread tightening and interest income during the period. Additionally, out-of-index exposures to non-US currencies enhanced returns. Specifically, long positions in the Norwegian krone and Swedish krona versus short positions in the Australian and New Zealand dollars proved beneficial, as did short positions in the Japanese yen and British pound.

_Ÿ

Relative to the Index, an underweight in agency MBS when the US Federal Reserve launched its purchasing program in September

detracted from the Master Portfolio’s performance. In addition, the Master Portfolio’s long duration bias (higher sensitivity to interest rate movements versus the Index) caused a drag on results as interest rates edged up across most of the yield curve in December.

Describe recent portfolio activity.

_Ÿ

Throughout the 12-month period, the Master Portfolio actively managed duration while generally maintaining a long bias relative to the Index. The Master Portfolio tactically traded investment grade credits throughout the period, cautiously seeking to take advantage of relative value opportunities in industrials and financials. Also during the period, the Master Portfolio maintained its out-of-index allocation to high yield debt. Given strong growth and positive price momentum in Norway and Sweden, in August, the Master Portfolio took long positions in the Norwegian krone and Swedish krona versus short positions in the Australian and New Zealand dollars, which were more vulnerable to slowing growth in China. The Master Portfolio later moved to short positions in the Japanese yen and British pound and a long position in the Canadian dollar in light of growth differentials and the respective interest rate environments. 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

At period end, the Master Portfolio remained overweight relative to the Index in non-government spread sectors and generally underweight US Treasuries. Within spread sectors, the Master Portfolio was overweight in investment grade corporate credit, agency MBS and ABS. The Master Portfolio also held out-of-index positions in high yield debt and non-agency residential MBS. With respect to currency positions, the Master Portfolio was short the Japanese yen, Australian dollar and British pound versus the Swedish krona, Canadian dollar and Norwegian krone. The Master Portfolio ended the period with a long duration position versus the Index.

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

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



4	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012


		BlackRock CoreAlpha Bond Fund

Total Return Based on a $10,000 Investment

LOGO

Assuming maximum sales charges, transaction costs and other operating expenses, including administration fees, if any. Institutional Shares do not have a sales charge.

The Fund invests all of its assets in the Master Portfolio. The Master Portfolio invests primarily in bonds rated in the four highest categories of the recognized rating agencies (Baa or better by Moody’s Investors Services, Inc., or BBB or better by Standard & Poor’s), 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.

The unmanaged market-weighted index is composed of investment grade corporate bonds (rated BBB or better), mortgages and US Treasury and government agency issues with at least one year to maturity.

⁴

Commencement of operations of the Master Portfolio.

Performance Summary for the Period Ended December 31, 2012


				Average Annual Total Returns⁵
				1 Year						5 Years						Since Inception⁶
	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		2.36	%		4.82	%		N/A			6.95	%		N/A			5.37	%		N/A
Investor A		2.25			4.57			0.38	%		6.62			2.36	%		5.03			0.83	%
Investor C		1.75			3.65			2.65			5.80			5.80			4.24			4.24
Barclays US Aggregate Bond Index		1.80			4.21			N/A			5.95			N/A			5.10			N/A

⁵

Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 6 for a detailed description of share classes, including any related sales charges and fees.

⁶

The Master Portfolio commenced operations on March 15, 2004.

N/A — Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

Expense Example


	Actual						Hypothetical⁷
	Beginning Account Value July 1, 2012		Ending Account Value December 31, 2012		Expenses Paid During the Period⁶		Beginning Account Value July 1, 2012		Ending Account Value December 31, 2012		Expenses Paid During the Period⁶		Annualized Expense Ratio
Institutional	$	1,000.00	$	1,023.60	$	1.73	$	1,000.00	$	1,023.43	$	1.73		0.34	%
Investor A	$	1,000.00	$	1,022.50	$	3.51	$	1,000.00	$	1,021.67	$	3.51		0.69	%
Investor C	$	1,000.00	$	1,017.50	$	7.30	$	1,000.00	$	1,017.90	$	7.30		1.44	%

⁶

For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period shown). Because the Fund invests significantly in the Master Portfolio, the expense table 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 366.

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



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	5


About Fund Performance		BlackRock CoreAlpha Bond Fund

_Ÿ

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

_Ÿ

Investor A Shares incur a maximum initial sales charge (front-end load) of 4.00%. These shares are subject to a service fee of 0.25% per year (but no distribution fee).

_Ÿ

Investor C 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 0.25% per year.

Prior to February 28, 2011 for Institutional Shares and prior to April 30, 2012 for Investor A and Investor C Shares, the performance of the classes is based on the returns of the Master Portfolio in which the Fund invests all of its assets for each period since March 15, 2004,

the commencement of the Master Portfolio’s operations, adjusted to reflect the estimated annual fund fees and operating expenses of each respective share class of the Fund.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Figures shown in the performance tables on the previous page assume reinvestment of all dividends and distributions, if any, at net asset value on the payable date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. The Fund’s administrator waived a portion of the Fund’s expenses. Without such waiver, the Fund’s performance would have been lower.


Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) expenses related to transactions, including sales charges and exchange fees; 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, 2012 and held through December 31, 2012) 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 also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in other funds’ shareholder reports.



6	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012


Derivative Financial Instruments		BlackRock CoreAlpha Bond Fund

The Master Portfolio may invest in various derivative financial instruments, including financial futures contracts, foreign currency exchange contracts, options and swaps, as specified in Note 2 of the Master Portfolio’s Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market, credit, interest rate, foreign currency exchange rate and/or other risks. Derivative financial instruments involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative financial instrument. The Master Portfolio’s

ability to use a derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require the Master Portfolio to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation the Master Portfolio can realize on an investment, may result in lower dividends paid to shareholders or may cause the Master Portfolio to hold an investment that it might otherwise sell. The Master Portfolio’s investments in these instruments are discussed in detail in the Notes to Financial Statements.



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	7


Statement of Assets and Liabilities		BlackRock CoreAlpha Bond Fund


December 31, 2012


Assets
Investments at value — Master Portfolio (cost — $107,740,311)	$	110,602,464
Capital shares sold receivable		1,515,079

Total assets		112,117,543


Liabilities
Contributions payable to the Master Portfolio		1,251,799
Capital shares redeemed payable		263,280
Income dividends payable		114,838
Administration fees payable		8,046
Service fees payable		253
Professional fees payable		18,508

Total liabilities		1,656,724

Net Assets	$	110,460,819


Net Assets Consist of
Paid-in capital	$	107,240,664
Distributions in excess of net investment income		(135,361	)
Accumulated net realized gain allocated from the Master Portfolio		493,363
Net unrealized appreciation/depreciation allocated from the Master Portfolio		2,862,153

Net Assets	$	110,460,819


Net Asset Value
Institutional — Based on net assets of $110,019,980 and 10,265,699 shares outstanding, unlimited number of shares authorized, no par value	$	10.72

Investor A — Based on net assets of $167,688 and 15,646 shares outstanding, unlimited number of shares authorized, no par value	$	10.72

Investor C — Based on net assets of $273,151 and 25,497 shares outstanding, unlimited number of shares authorized, no par value	$	10.71


Statement of Operations		BlackRock CoreAlpha Bond Fund


Year Ended December 31, 2012


Investment Income
Net investment income allocated from the Master Portfolio:
Interest	$	2,165,981
Income — affiliated		36,819
Dividends		12,254
Securities lending — affiliated — net		7,294
Expenses		(216,423	)
Fees waived		4,290

Total income		2,010,215


Fund Expenses
Administration — Institutional		86,269
Administration — Investor A		102
Administration — Investor C		209
Service — Investor A		127
Service and distribution — Investor C		1,044
Professional		19,155

Total expenses		106,906
Less fees waived and/or reimbursed by administrator — Institutional		(19,125	)
Less fees waived and/or reimbursed by administrator — Investor A		(10	)
Less fees waived and/or reimbursed by administrator — Investor C		(20	)

Total expenses after fees waived		87,751

Net investment income		1,922,464


Realized and Unrealized Gain (Loss) Allocated from the Master Portfolio
Net realized gain from investments, financial futures contracts, swaps and foreign currency transactions		203,767
Net change in unrealized appreciation/depreciation on investments, financial futures contracts, swaps and foreign currency translations		1,922,175

Total realized and unrealized gain		2,125,942

Net Increase in Net Assets Resulting from Operations	$	4,048,406


Statements of Changes in Net Assets		BlackRock CoreAlpha Bond Fund


Increase (Decrease) in Net Assets:	Year Ended December 31, 2012			Period February 28, 2011¹ to December 31, 2011


Operations
Net investment income	$	1,922,464		$	629,461
Net realized gain		203,767			290,164
Net change in unrealized appreciation/depreciation		1,922,175			939,978

Net increase in net assets resulting from operations		4,048,406			1,859,603


Dividends and Distributions to Shareholders From²
Net investment income:
Institutional		(2,083,770	)		(601,659	)
Investor A		(1,007	)		—
Investor C		(1,418	)		—
Tax return of capital:
Institutional		(206,071	)		(27,824	)
Investor A		(134	)		—
Investor C		(142	)		—

Decrease in net assets resulting from dividends and distributions to shareholders		(2,292,542	)		(629,483	)


Capital Share Transactions
Net increase in net assets derived from capital share transactions		49,455,150			58,019,685


Net Assets
Total increase in net assets		51,211,014			59,249,805
Beginning of period		59,249,805			—

End of period	$	110,460,819		$	59,249,805

Undistributed (distributions in excess of) net investment income	$	(135,361	)	$	28,370

Commencement of operations.

Dividends and distributions are determined in accordance with federal income tax regulations.


Financial Highlights		BlackRock CoreAlpha Bond Fund


	Institutional
	Year Ended December 31, 2012			Period February 28, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	10.50		$	10.00

Net investment income²		0.24			0.25
Net realized and unrealized gain		0.26			0.52

Net increase from investment operations		0.50			0.77

Dividends and distributions from:³
Net investment income		(0.25	)		(0.26	)
Tax return of capital		(0.03	)		(0.01	)

Total dividends and distributions		(0.28	)		(0.27	)

Net asset value, end of period	$	10.72		$	10.50


Total Investment Return⁴
Based on net asset value		4.82%			7.80%	⁵


Ratios to Average Net Assets⁶
Total expenses		0.37%	⁷		0.44%	^8,9

Total expenses after fees waived		0.34%	⁷		0.35%	^8,9

Net investment income		2.22%	⁷		2.93%	^8,9


Supplemental Data
Net assets, end of period (000)	$	110,020		$	59,250

Portfolio turnover of the Master Portfolio		2,128%			1,646%	¹⁰

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

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

⁷

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

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. Excluding these transactions the portfolio turnover rate would have been 1,510%.


Financial Highlights (continued)		BlackRock CoreAlpha Bond Fund


	Investor A
	Period April 30, 2012¹ to December 31, 2012


Per Share Operating Performance
Net asset value, beginning of period	$	10.55

Net investment income²		0.12
Net realized and unrealized gain		0.22

Net increase from investment operations		0.34

Dividends and distributions from:³
Net investment income		(0.15	)
Tax return of capital		(0.02	)

Total dividends and distributions		(0.17	)

Net asset value, end of period	$	10.72


Total Investment Return^4,5
Based on net asset value		3.25%


Ratios to Average Net Assets^6,7,8
Total expenses		0.72%

Total expenses after fees waived		0.70%

Net investment income		1.80%


Supplemental Data
Net assets, end of period (000)	$	168

Portfolio turnover of the Master Portfolio		2,128%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

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

⁷

Annualized.

⁸

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


Financial Highlights (concluded)		BlackRock CoreAlpha Bond Fund


	Investor C
	Period April 30, 2012¹ to December 31, 2012


Per Share Operating Performance
Net asset value, beginning of period	$	10.55

Net investment income²		0.06
Net realized and unrealized gain		0.21

Net increase from investment operations		0.27

Dividends and distributions from:³
Net investment income		(0.10	)
Tax return of capital		(0.01	)

Total dividends and distributions		(0.11	)

Net asset value, end of period	$	10.71


Total Investment Return^4,5
Based on net asset value		2.61%


Ratios to Average Net Assets^6,7,8
Total expenses		1.46%

Total expenses after fees waived		1.44%

Net investment income		1.04%


Supplemental Data
Net assets, end of period (000)	$	273

Portfolio turnover of the Master Portfolio		2,128%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

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

⁷

Annualized.

⁸

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


Notes to Financial Statements		BlackRock CoreAlpha Bond Fund

1. Organization and Significant Accounting Policies:

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 substantially 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. The percentage of the Master Portfolio owned by the Fund at December 31, 2012 was 3.96%. 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’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund offers multiple classes of shares. Institutional Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally sold with a front-end sales charge. Investor C Shares may be subject to a CDSC. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Investor A and Investor C Shares bear certain expenses related to the shareholder servicing of such shares and Investor C Shares also bear certain expenses related to the distribution of such shares. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures.

The following is a summary of significant accounting policies followed by the Fund:

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 allocations rules. In addition, the Fund accrues its own expenses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Dividends and Distributions: Dividends from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. The portion of distributions that exceeds the Fund’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a nontaxable return of capital. Distributions in excess of the Fund’s taxable income and net capital gains, but not in excess of the Fund’s earnings and profits, will be taxable to shareholders as ordinary income and will not constitute a nontaxable return of capital. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

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

2. Administration 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, Inc. (“BlackRock”).



14	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012


Notes to Financial Statements (continued)		BlackRock CoreAlpha Bond Fund

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. BTC 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. Effective July 1, 2012, BlackRock Advisors, LLC (“BAL”) replaced BTC as the Fund’s administrator and entered into an Administration Agreement with the Trust, on behalf of the Fund, on similar terms.

From time to time, BAL may waive, and previously BTC, waived 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, and previously BTC delegated, 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 and BTC 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, 2013.

The Trust, on behalf of the Fund, entered into a Distribution Agreement and Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of BlackRock. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing service and distribution fees. The fees are accrued daily and paid monthly at an annual rate of 0.25% based upon the average daily net assets of the Investor A Shares and 1.00% based upon the average daily net assets of the Investor C 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 fees compensate BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to Investor A and Investor C shareholders.

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

3. Income Tax Information:

The tax character of distributions paid during the fiscal periods ended December 31, 2012 and December 31, 2011 were as follows:


	12/31/12		12/31/11
Ordinary income	$	2,086,195	$	601,659
Tax return of capital		206,347		27,824

Total	$	2,292,542	$	629,483

As of December 31, 2012, the tax components of accumulated net earnings were as follows:


Capital loss carryforwards	$	(39,766	)
Net unrealized gains¹		3,259,921

Total	$	3,220,155

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, 2012, the Fund had a capital loss carryforward available to offset future realized capital gains of $39,766. This capital loss carryforward has no expiration date.

During the year ended December 31, 2012, the Fund utilized $57,164 of its capital loss carryforward.



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	15


Notes to Financial Statements (concluded)		BlackRock CoreAlpha Bond Fund

4. Capital Share Transactions:

Transactions in capital shares for each class were as follows:


	Year Ended December 31, 2012						Period February 28, 2011¹ to December 31, 2011
	Shares			Amount			Shares			Amount
Institutional
Shares sold		5,419,465		$	57,431,644			5,801,715		$	59,651,623
Shares issued to shareholders in reinvestment of dividends and distributions		114,425			1,219,007			45,330			469,499
Shares redeemed		(911,492	)		(9,635,206	)		(203,744	)		(2,101,437	)

Net increase		4,622,398		$	49,015,445			5,643,301		$	58,019,685

		Period April 30, 2012¹ to December 31, 2012
Investor A
Shares sold		16,140		$	172,594			—			—
Shares issued to shareholders in reinvestment of dividends and distributions		99			1,061			—			—
Shares redeemed		(593	)		(6,347	)		—			—

Net increase		15,646		$	167,308			—			—


Investor C
Shares sold		30,070		$	321,558			—			—
Shares issued to shareholders in reinvestment of dividends and distributions		145			1,558			—			—
Shares redeemed		(4,718	)		(50,719	)		—			—

Net increase		25,497		$	272,397			—			—

Total Net Increase		4,663,541		$	49,455,150			5,643,301		$	58,019,685

¹ Commencement of operations.

At December 31, 2012, shares owned by affiliates were as follows:


	Shares
Investor A		1,926
Investor C		1,916

5. Subsequent Events:



16	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012


Report of Independent Registered Public Accounting Firm		BlackRock CoreAlpha Bond Fund

To the Shareholders and Board of Trustees of BlackRock Funds III:

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.

PricewaterhouseCoopers LLP

New York, New York

February 22, 2013

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, 2012.


	January —December 2012
Qualified Dividend Income for Individuals¹		0.60%
Dividends Qualifying for the Dividends Received Deduction for Corporations¹		0.60%
Interest-Related Dividends for Non-US Residents²		81.45%
Federal Obligation Interest³		9.71%

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

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

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.



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	17


Master Portfolio Information		CoreAlpha Bond Master Portfolio


As of December 31, 2012

Portfolio Composition

Percent of

Long-Term Investments


US Government Sponsored Agency securities	55	%
Corporate Bonds	18
US Treasury Obligations	16
Asset-Backed Securities	7
Non-Agency Mortgage-Backed Securities	4


Credit Quality Allocation¹		Percent of Long-Term Investments


AAA/Aaa²	73	%
AA/Aa	4
A	10
BBB/Baa	10
BB/Ba	2
Not Rated	1

Using the higher of Standard & Poor’s (“S&P’s”) or Moody’s Investors Service ratings.

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



18	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012

Schedule of Investments December 31, 2012

CoreAlpha Bond Master Portfolio

(Percentages shown are based on Net Assets)


Asset-Backed Securities	Par (000)		Value

Access Group, Inc., Series 2005-1, Class A2, 0.42%, 3/23/20	$	5,073	$	5,058,672
ACE Securities Corp., Series 2005-AG1, Class A2D, 0.57%, 8/25/35 (a)		3,386		3,045,897
AH Mortgage Advance Trust, Series SART-1, Class A1R, 2.23%, 5/10/43 (b)		4,000		4,002,800
Ally Auto Receivables Trust 2009-B, Series 2009-B, Class B, 3.67%, 3/16/15 (b)		2,039		2,094,088
AmeriCredit Automobile Receivables Trust:
Series 2009-1, Class B, 9.79%, 4/15/14		734		748,060
Series 2010-1, Class C, 5.19%, 8/17/15		2,385		2,483,784
Series 2010-1, Class D, 6.65%, 7/17/17		1,500		1,595,406
Series 2010-4, Class D, 4.20%, 11/08/16		2,600		2,731,810
Series 2011-1, Class C, 2.85%, 8/08/16		5,100		5,227,184
Ameriquest Mortgage Securities, Inc. (a):
Series 2005-R6, Class A2, 0.41%, 8/25/35		449		436,946
Series 2006-R1, Class A2C, 0.40%, 3/25/36		134		133,349
Asset Backed Funding Corp. Certificates (a):
Series 2005-HE2, Class M1, 0.93%, 6/25/35		416		412,794
Series 2005-OPT1, Class A1SS, 0.45%, 7/25/35		365		359,192
BA Credit Card Trust (a):
0.61%, 1/15/16		5,805		5,806,056
4.96%, 3/15/16		8,400		8,693,513
Bank One Issuance Trust, Series 2003-C3, Class C3, 4.77%, 2/16/16		6,000		6,107,058
Bear Stearns Asset Backed Securities Trust, Series 2007-HE2, Class 1A1, 0.31%, 3/25/37 (a)		35		34,753
BNC Mortgage Loan Trust, Series 2007-4, Class A3A, 0.46%, 11/25/37 (a)		1,159		1,140,887
Capital One Multi-Asset Execution Trust, Series 2003-C3, Class C3, 2.46%, 7/15/16 (a)		1,100		1,110,915


Asset-Backed Securities	Par (000)		Value

Carrington Mortgage Loan Trust, Series 2007-FRE1, Class A1, 0.33%, 2/25/37 (a)	$	1,832	$	1,816,943
Chase Funding Mortgage Loan Asset-Backed Certificates, Series 2003-5, Class 1A4, 4.40%, 2/25/30		281		282,160
CIT Mortgage Loan Trust, Series 2007-1, Class 2A2, 1.46%, 10/25/37 (b)		8,452		8,167,682
Citibank Credit Card Issuance Trust:
Series 2003-C4, Class C4, 5.00%, 6/10/15		3,100		3,156,389
Series 2006-C1, Class C1, 0.61%, 2/20/15 (a)		6,000		5,999,898
Citigroup Mortgage Loan Trust, Inc. (a):
Series 2007-WFH2, Class A2, 0.36%, 3/25/37		1,454		1,449,551
Series 2007-WFH4, Class A2A, 1.11%, 7/25/37		43		42,397
Countrywide Asset-Backed Certificates:
0.68%, 12/25/35 (a)		3,700		3,587,953
Series 2005-4, Class MV1, 0.67%, 10/25/35 (a)		2,404		2,351,936
Series 2005-14, Class 3A2, 0.45%, 4/25/36 (a)		2,145		2,126,667
Series 2006-20, Class 2A2, 0.33%, 4/25/47 (a)		1,000		985,116
Series 2006-22, Class 2A2, 0.32%, 5/25/47 (a)		2,225		2,210,890
Series 2006-25, Class 2A2, 0.33%, 6/25/47 (a)		3,642		3,596,150
Series 2007-4, Class A1B, 5.81%, 2/25/27		128		127,747
Series 2007-8, Class 2A1, 0.27%, 11/25/37 (a)		409		407,133
Series 2007-12, Class 2A1, 0.56%, 8/25/47 (a)		3,250		3,219,159
Ellington Loan Acquisition Trust, Series 2007-1, Class A2A1, 1.21%, 5/26/37 (a)(b)		1,575		1,581,103
First Franklin Mortgage Loan Asset Backed Certificates (a):
Series 2004-FF10, Class A3, 0.75%, 9/25/34		150		146,482
Series 2005-FF4, Class M1, 0.64%, 5/25/35		2,228		2,117,037


Portfolio Abbreviations

To simplify the listings of portfolio holdings in the Schedule of Investments, the names and descriptions of many of the securities have been abbreviated according to the following list:

AUD Australian Dollar

BRL Brazilian Real

CAD Canadian Dollar

CZK Czech Koruna

EUR Euro

GBP British Pound

HUF Hungarian Forints

ILS Israeli Shekel

INR Indian Rupee

JPY Japanese Yen

KRW Korean Won

LIBOR London Interbank Offered Rate

MXN Mexican Peso

NOK Norwegian Krone

NZD New Zealand Dollar

PLN Polish Zloty

RUB Russian Ruble

SEK Swedish Krona

SGD Singapore Dollar

TBA To Be Announced

TRY Turkish Lira

USD US Dollar

ZAR South African Rand

See Notes to Financial Statements.



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	19

Schedule of Investments (continued)

CoreAlpha Bond Master Portfolio

(Percentages shown are based on Net Assets)


Asset-Backed Securities	Par (000)		Value

Series 2005-FF10, Class A4, 0.53%, 11/25/35	$	1,585	$	1,521,060
Series 2006-FF14, Class A2, 0.27%, 10/25/36		811		809,251
Iowa Student Loan Liquidity Corp., Series 2005-1, Class A2, 0.41%, 3/25/22		7,128		7,048,722
JPMorgan Mortgage Acquisition Corp. (a):
Series 2006-CH1, Class A3, 0.31%, 7/25/36		1,590		1,587,625
Series 2007-CH5, Class A2, 0.26%, 5/25/37		1,328		1,326,982
Keycorp Student Loan Trust, Series 2006-A, Class 2A3, 0.50%, 6/27/29 (a)		15,000		14,556,420
Long Beach Mortgage Loan Trust, Series 2005-WL1, Class M2, 0.76%, 6/25/35 (a)		1,473		1,440,773
National Collegiate Student Loan Trust (a):
0.45%, 7/25/28		6,622		6,390,673
Series 2005-1, Class A3, 0.35%, 10/26/26		4,309		4,236,988
Series 2006-1, Class A3, 0.40%, 5/25/26		1,633		1,575,718
Series 2006-2, Class A2, 0.36%, 7/25/26		4,028		3,876,161
Nationstar Home Equity Loan Trust, Series 2006-B, Class AV2, 0.34%, 9/25/36 (a)		841		839,628
New Century Home Equity Loan Trust Series 2005-3 (a):
Class A2D, 0.59%, 7/25/35		3,137		3,127,264
Class M2, 0.70%, 7/25/35		1,590		1,283,038
Park Place Securities, Inc., Series 2005-WCW3, Class A2C, 0.59%, 8/25/35 (a)		5,734		5,511,469
RAAC Series, Series 2006-SP3, Class A2, 0.38%, 8/25/36		3,306		3,262,888
RASC Trust, Series 2005-AHL3, Class A2, 0.45%, 11/25/35		4,795		4,609,903
Residential Asset Mortgage Products, Inc. Class M1 (a):
Series 2005-EFC3, 0.66%, 8/25/35		862		855,589
Series 2005-RS6, 0.71%, 6/25/35		4,300		4,232,382
Santander Drive Auto Receivables Trust:
Series 2010-2, Class C, 3.89%, 7/17/17		1,225		1,266,792
Series 2010-3, Class C, 3.06%, 11/15/17		4,310		4,451,467
Series 2010-B, Class C, 3.02%, 10/17/16 (b)		13,400		13,648,637
Series 2011-1, Class C, 3.11%, 5/16/16		5,000		5,148,730
Series 2011-3, Class B, 2.50%, 12/15/15		1,155		1,173,758


Asset-Backed Securities	Par (000)		Value

Series 2011-3, Class D, 4.23%, 5/15/17	$	3,900	$	4,108,946
Series 2011-S1A, Class D, 3.10%, 5/15/17 (b)		2,317		2,323,546
SLC Student Loan Trust, 4.75%, 6/15/33 (b)		11,285		10,788,629
SLM Student Loan Trust:
1.31%, 12/15/21 (a)(b)		3,135		3,159,443
0.45%, 12/15/22 (a)		2,403		2,392,508
Series 2004-A, Class A2, 0.51%, 3/16/20 (a)		10,266		10,171,441
Series 2004-B, Class A2, 0.51%, 6/15/21		1,374		1,355,653
Series 2005-A, Class A2, 0.45%, 12/15/20 (a)		4,027		3,983,913
Series 2006-C, Class A3, 0.44%, 6/15/21 (a)		12,209		12,083,549
Series 2009-CT, Class 1A, 2.35%, 4/15/39 (b)		4,669		4,699,201
Series 2009-CT, Class 2A, 2.06%, 4/15/39 (a)(b)		7,107		7,124,973
Series 2009-D, Class A, 3.50%, 8/17/43 (b)		12,992		12,571,683
Series 2010-A, Class 1A, 3.20%, 5/16/44 (b)		5,047		5,289,972
Series 2011-A, Class A1, 1.21%, 10/15/24 (b)		13,402		13,463,220
Series 2011-B, Class A1, 1.06%, 12/16/24 (b)		902		903,895
Series 2012-D, Class A1, 1.26%, 6/15/23 (b)		1,579		1,591,343
Series 2012-E, Class A1, 0.96%, 10/16/23 (b)		3,956		3,970,529
Soundview Home Equity Loan Trust, Series 2007-1, Class 2A1, 0.30%, 3/25/37 (a)		206		203,184
SunTrust Student Loan Trust, Series 2006-1A, Class A2, 0.41%, 7/28/20 (b)		1,508		1,507,956
Terwin Mortgage Trust, Series 2005-12AL, Class AF2, 4.65%, 7/25/36		168		167,826
Total Asset-Backed Securities — 10.4%				290,238,885


Corporate Bonds
Aerospace & Defense — 0.5%
L-3 Communications Corp.:
3.95%, 11/15/16 (c)		1,250		1,351,582
4.75%, 7/15/20		900		1,003,172
4.95%, 2/15/21		600		676,984
Lockheed Martin Corp.:
3.35%, 9/15/21		1,649		1,742,591
4.85%, 9/15/41		2,000		2,206,976
4.07%, 12/15/42 (b)		2,052		2,016,652
Precision Castparts Corp., 2.50%, 1/15/23		1,225		1,232,850
Raytheon Co., 4.70%, 12/15/41		2,100		2,376,480
TransDigm, Inc., 7.75%, 12/15/18		2,200		2,433,750

				15,041,037

See Notes to Financial Statements.



20	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

CoreAlpha Bond Master Portfolio

(Percentages shown are based on Net Assets)


Corporate Bonds	Par (000)		Value

Air Freight & Logistics — 0.0%
United Parcel Service, Inc., 4.88%, 11/15/40	$	400	$	464,098
Beverages — 0.5%
Anheuser-Busch InBev Worldwide, Inc., 2.50%, 7/15/22		7,400		7,446,324
Bottling Group LLC, 5.13%, 1/15/19		1,100		1,298,836
Constellation Brands, Inc., 4.63%, 3/01/23		1,200		1,254,000
Diageo Finance BV, 3.25%, 1/15/15		2,000		2,100,662
Dr Pepper Snapple Group, Inc., 2.90%, 1/15/16 (c)		1,250		1,317,094
PepsiCo, Inc., 4.88%, 11/01/40		1,000		1,169,506

				14,586,422
Biotechnology — 0.7%
Amgen, Inc.:
2.30%, 6/15/16		800		831,717
6.40%, 2/01/39		900		1,165,192
Biogen Idec, Inc., 6.88%, 3/01/18		7,528		9,324,670
Celgene Corp.:
3.95%, 10/15/20		4,000		4,341,144
3.25%, 8/15/22		1,900		1,936,830
Genentech, Inc., 4.75%, 7/15/15		625		689,263

				18,288,816
Capital Markets — 1.0%
The Bear Stearns Cos., Inc., 6.40%, 10/02/17		2,500		3,002,495
The Bear Stearns Cos., Inc./JPMorgan Chase & Co., 5.70%, 11/15/14		800		869,338
Credit Suisse First Boston USA, Inc., 5.13%, 1/15/14		1,400		1,462,363
The Goldman Sachs Group, Inc.:
5.95%, 1/18/18		3,700		4,305,664
6.15%, 4/01/18		1,500		1,762,152
7.50%, 2/15/19		1,200		1,509,906
5.75%, 1/24/22		1,400		1,655,097
6.75%, 10/01/37		1,650		1,869,990
6.25%, 2/01/41		3,050		3,742,109
Morgan Stanley:
2.88%, 7/28/14		3,400		3,474,837
6.00%, 4/28/15		1,400		1,524,891
6.25%, 8/28/17		1,500		1,716,828

				26,895,670
Chemicals — 0.3%
Agrium, Inc., 3.15%, 10/01/22		1,450		1,440,803
LyondellBasell Industries NV, 6.00%, 11/15/21		1,800		2,110,500
Rockwood Specialties Group, Inc., 4.63%, 10/15/20		1,800		1,863,000
RPM International, Inc., 6.13%, 10/15/19		2,453		2,863,485
Valspar Corp., 4.20%, 1/15/22		300		327,719

				8,605,507
Commercial Banks — 0.9%
Discover Bank, 8.70%, 11/18/19		854		1,111,295
HSBC Bank USA NA, 5.88%, 11/01/34		1,700		1,995,416
HSBC Holdings Plc, 6.50%, 9/15/37		700		873,732
JPMorgan Chase Bank NA, Series BKNT, 6.00%, 10/01/17		800		947,072


Corporate Bonds	Par (000)		Value

Commercial Banks (concluded)
US Bancorp, 2.20%, 11/15/16	$	4,000	$	4,167,632
Wachovia Bank NA, 6.00%, 11/15/17		5,400		6,475,550
Wells Fargo & Co., 3.50%, 3/08/22		8,900		9,493,203

				25,063,900
Commercial Services & Supplies — 0.1%
Catholic Health Initiatives, 4.35%, 11/01/42		1,600		1,631,728
Communications Equipment — 0.1%
Omnicom Group, Inc., 4.45%, 8/15/20		2,700		3,004,387
Consumer Finance — 0.4%
American Express Co., 2.65%, 12/02/22 (b)		5,520		5,498,020
American Express Credit Co., 2.75%, 9/15/15		2,600		2,725,793
Discover Financial Services, 3.85%, 11/21/22 (b)		2,746		2,833,526

				11,057,339
Containers & Packaging — 0.3%
Ball Corp., 5.00%, 3/15/22		2,100		2,247,000
Crown Americas LLC and Crown Americas Capital Corp. II, 7.63%, 5/15/17		3,250		3,432,812
Rock-Tenn Co. (b):
4.45%, 3/01/19		1,750		1,888,033
4.90%, 3/01/22		1,900		2,053,302

				9,621,147
Diversified Financial Services — 2.2%
American Express Credit Corp., 2.38%, 3/24/17 (c)		3,000		3,138,951
Associates Corp. of North America, 6.95%, 11/01/18		964		1,161,234
Bank of America Corp.:
4.50%, 4/01/15		4,300		4,583,482
3.70%, 9/01/15		1,000		1,057,139
3.75%, 7/12/16		2,400		2,565,425
5.49%, 3/15/19		1,500		1,666,227
5.70%, 1/24/22		3,500		4,208,921
5.88%, 2/07/42		750		935,692
Citigroup, Inc.:
6.50%, 8/19/13		1,400		1,448,436
6.38%, 8/12/14		1,400		1,512,910
4.45%, 1/10/17		4,200		4,652,760
6.13%, 11/21/17		1,000		1,190,157
8.50%, 5/22/19		1,600		2,151,419
8.13%, 7/15/39		1,300		1,946,249
5.88%, 1/30/42		350		431,951
Ford Motor Credit Co. LLC, 5.88%, 8/02/21		3,800		4,425,244
General Electric Capital Corp.:
2.25%, 11/09/15		2,000		2,065,430
4.38%, 9/16/20		4,000		4,464,184
4.63%, 1/07/21		1,600		1,814,874
6.75%, 3/15/32		500		649,367
6.88%, 1/10/39		1,000		1,359,299
JPMorgan Chase & Co.:
2.00%, 8/15/17 (c)		4,100		4,188,134
3.25%, 9/23/22		2,600		2,677,431
5.60%, 7/15/41		1,000		1,238,442
Merrill Lynch & Co., Inc., 6.88%, 4/25/18		550		663,000
SLM Corp.:
6.00%, 1/25/17		600		649,500

See Notes to Financial Statements.



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	21

Schedule of Investments (continued)

CoreAlpha Bond Master Portfolio

(Percentages shown are based on Net Assets)


Corporate Bonds	Par (000)		Value

Diversified Financial Services (concluded)
4.63%, 9/25/17	$	2,500	$	2,559,377
7.25%, 1/25/22		1,800		1,984,500

				61,389,735
Diversified Telecommunication Services — 1.4%
AT&T, Inc.:
2.40%, 8/15/16		1,250		1,304,464
3.00%, 2/15/22 (c)		7,700		8,008,177
6.55%, 2/15/39		2,000		2,628,226
5.35%, 9/01/40		1,231		1,433,558
5.55%, 8/15/41 (c)		5,000		6,000,620
4.35%, 6/15/45 (b)		2,632		2,643,833
British Telecommunications Plc, 9.63%, 12/15/30		400		635,472
Embarq Corp., 8.00%, 6/01/36		1,000		1,104,521
Telefonica Emisiones SAU, 5.86%, 2/04/13		3,600		3,612,600
Verizon Communications, Inc.:
8.75%, 11/01/18		1,300		1,805,011
6.90%, 4/15/38		900		1,280,875
7.35%, 4/01/39		1,700		2,520,061
4.75%, 11/01/41		2,100		2,381,986
Virgin Media Finance Plc, 4.88%, 2/15/22		2,650		2,709,625

				38,069,029
Electric Utilities — 1.8%
Commonwealth Edison Co.:
4.70%, 4/15/15		1,000		1,086,842
5.88%, 2/01/33		3,500		4,442,522
Duke Energy Corp.:
2.15%, 11/15/16		2,100		2,171,433
5.05%, 9/15/19 (c)		2,000		2,319,972
FirstEnergy Solutions Corp., 6.05%, 8/15/21		1,200		1,373,422
Florida Power Corp., 3.85%, 11/15/42		2,500		2,424,715
Ipalco Enterprises, Inc., 5.00%, 5/01/18		850		890,375
MidAmerican Energy Holdings Co., 5.75%, 4/01/18		6,550		7,887,837
Mississippi Power Co., 4.25%, 3/15/42		1,700		1,736,081
Northern States Power Co., 5.25%, 7/15/35		2,500		3,060,970
Pacific Gas & Electric Co.:
5.63%, 11/30/17		1,500		1,810,987
3.25%, 9/15/21 (c)		2,900		3,098,087
3.75%, 8/15/42		3,000		2,868,414
PacifiCorp:
5.50%, 1/15/19		1,300		1,571,677
6.25%, 10/15/37		1,000		1,347,016
Progress Energy, Inc.:
4.88%, 12/01/19		3,100		3,554,829
4.40%, 1/15/21		3,700		4,124,338
3.15%, 4/01/22 (c)		950		961,710
Southern Co. (The), 4.15%, 5/15/14		900		942,772
Tampa Electric Co., 2.60%, 9/15/22		2,000		2,017,792

				49,691,791
Electrical Equipment — 0.1%
Roper Industries, Inc., 6.25%, 9/01/19		1,500		1,792,689
Electronic Equipment, Instruments & Components — 0.1%
Tyco Electronics Group SA, 6.55%, 10/01/17		2,900		3,477,422


Corporate Bonds	Par (000)		Value

Energy Equipment & Services — 0.1%
National Oilwell Varco, Inc.:
2.60%, 12/01/22	$	1,500	$	1,521,057
3.95%, 12/01/42		1,400		1,418,515

				2,939,572
Food & Staples Retailing — 0.4%
Costco Wholesale Corp., 1.70%, 12/15/19		2,900		2,919,749
Wal-Mart Stores, Inc.:
5.63%, 4/01/40		1,500		1,945,555
5.63%, 4/15/41		3,800		4,976,393

				9,841,697
Food Products — 0.6%
ConAgra Foods, Inc., 7.13%, 10/01/26		2,400		3,070,078
General Mills, Inc., 5.65%, 2/15/19		1,400		1,702,145
Hershey Co. (The), 4.13%, 12/01/20		1,550		1,774,499
Kellogg Co.:
4.45%, 5/30/16		100		110,623
3.25%, 5/21/18		1,550		1,688,421
Kraft Foods Group, Inc., 5.38%, 2/10/20 (b)		1,885		2,263,336
Mead Johnson Nutrition Co., 4.90%, 11/01/19		4,500		5,135,665
Mondelez International, Inc., 5.38%, 2/10/20		1,715		2,070,453

				17,815,220
Gas Utilities — 0.1%
Southern California Gas Co., 3.75%, 9/15/42		1,800		1,808,300
Health Care Equipment & Supplies — 0.1%
Covidien International Finance SA, 4.20%, 6/15/20		1,700		1,925,445
Health Care Providers & Services — 0.7%
AmerisourceBergen Corp.:
4.88%, 11/15/19		900		1,043,553
3.50%, 11/15/21 (c)		6,250		6,708,719
DaVita HealthCare Partners, Inc., 6.38%, 11/01/18		3,550		3,807,375
Humana, Inc., 6.45%, 6/01/16		4,100		4,657,067
UnitedHealth Group, Inc., 4.70%, 2/15/21 (c)		3,100		3,611,491

				19,828,205
Hotels, Restaurants & Leisure — 0.6%
McDonald’s Corp.:
6.30%, 10/15/37		1,000		1,384,189
4.88%, 7/15/40		1,600		1,915,446
Wyndham Worldwide Corp.:
5.75%, 2/01/18		3,400		3,800,568
4.25%, 3/01/22		1,550		1,600,401
Yum! Brands, Inc.:
4.25%, 9/15/15		2,000		2,159,832
5.30%, 9/15/19		2,241		2,618,869
6.88%, 11/15/37		2,100		2,867,449

				16,346,754
Household Durables — 0.0%
Tupperware Brands Corp., 4.75%, 6/01/21		900		963,042
Household Products — 0.1%
Kimberly-Clark Corp.:
2.40%, 3/01/22		1,250		1,265,841
6.63%, 8/01/37		2,000		2,908,026

				4,173,867

See Notes to Financial Statements.



22	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

CoreAlpha Bond Master Portfolio

(Percentages shown are based on Net Assets)


Corporate Bonds	Par (000)		Value

Independent Power Producers & Energy Traders — 0.2%
Constellation Energy Group, Inc., 5.15%, 12/01/20	$	3,200	$	3,657,984
Exelon Generation Co. LLC, 5.75%, 10/01/41		500		554,854
PSEG Power LLC, 4.15%, 9/15/21		1,150		1,260,164
Southern Power Co., 5.15%, 9/15/41		1,000		1,126,098

				6,599,100
Industrial Conglomerates — 0.0%
General Electric Co., 4.13%, 10/09/42		1,200		1,234,378
Insurance — 0.8%
The Allstate Corp.:
7.45%, 5/16/19		2,031		2,663,392
5.20%, 1/15/42		1,500		1,780,263
American International Group, Inc.:
6.40%, 12/15/20		1,200		1,488,958
8.18%, 5/15/68 (a)		500		651,250
Berkshire Hathaway, Inc., 1.90%, 1/31/17		2,400		2,480,933
Fidelity National Financial, Inc., 5.50%, 9/01/22		1,225		1,355,861
Markel Corp.:
5.35%, 6/01/21		1,300		1,420,761
4.90%, 7/01/22		2,500		2,718,300
Marsh & McLennan Cos., Inc.:
5.75%, 9/15/15		400		448,418
9.25%, 4/15/19		200		269,773
4.80%, 7/15/21		1,600		1,800,390
Principal Financial Group, Inc., 3.30%, 9/15/22		800		811,543
Protective Life Corp., 8.45%, 10/15/39		800		1,043,331
Willis Group Holdings Plc, 4.13%, 3/15/16		2,600		2,773,209
XL Group Ltd., 5.75%, 10/01/21 (c)		1,400		1,662,598

				23,368,980
Internet & Catalog Retail — 0.1%
Amazon.com, Inc., 1.20%, 11/29/17		2,600		2,585,710
Export-Import Bank of Korea, 4.00%, 1/29/21		1,446		1,554,758

				4,140,468
Internet Software & Services — 0.1%
Digital Realty Trust LP, 5.88%, 2/01/20		1,200		1,371,129
eBay, Inc., 2.60%, 7/15/22		850		858,703

				2,229,832
IT Services — 0.6%
Fiserv, Inc., 3.50%, 10/01/22		2,000		2,036,274
International Business Machines Corp.:
2.00%, 1/05/16		8,600		8,886,122
7.63%, 10/15/18		2,050		2,738,169
5.60%, 11/30/39		88		113,415
4.00%, 6/20/42		1,746		1,847,905

				15,621,885
Leisure Equipment & Products — 0.1%
Mattel, Inc.:
2.50%, 11/01/16		750		780,180
5.45%, 11/01/41		1,800		2,033,341

				2,813,521


Corporate Bonds	Par (000)		Value

Life Sciences Tools & Services — 0.2%
Bio-Rad Laboratories, Inc., 4.88%, 12/15/20	$	3,100	$	3,277,475
Thermo Fisher Scientific, Inc., 3.25%, 11/20/14		1,600		1,672,981

				4,950,456
Machinery — 0.3%
Case New Holland, Inc., 7.75%, 9/01/13		2,829		2,942,160
Danaher Corp., 2.30%, 6/23/16		450		470,575
Dover Corp., 4.30%, 3/01/21		2,400		2,765,661
Eaton Corp., 2.75%, 11/02/22 (b)		1,400		1,395,680
Flowserve Corp., 3.50%, 9/15/22		550		552,372

				8,126,448
Media — 1.1%
CC Holdings GS V LLC, 3.85%, 4/15/23 (b)		2,250		2,288,950
Comcast Corp.:
5.70%, 5/15/18		2,450		2,945,549
3.13%, 7/15/22		2,550		2,656,679
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc., 5.15%, 3/15/42		1,100		1,112,576
Discovery Communications LLC, 4.95%, 5/15/42 (c)		2,500		2,671,995
DISH DBS Corp.:
4.63%, 7/15/17		800		834,000
7.88%, 9/01/19 (c)		2,700		3,199,500
6.75%, 6/01/21		1,200		1,368,000
NBCUniversal Media LLC, 6.40%, 4/30/40 (c)		500		641,558
News America, Inc.:
4.50%, 2/15/21 (c)		2,500		2,856,112
6.15%, 2/15/41		1,600		2,026,533
Scripps Networks Interactive, Inc., 2.70%, 12/15/16		2,300		2,408,528
Time Warner, Inc., 8.25%, 4/01/19		2,350		3,127,232
Viacom, Inc., 4.38%, 9/15/14		1,300		1,377,370

				29,514,582
Metals & Mining — 0.1%
Xstrata Canada Corp., 6.20%, 6/15/35		1,000		1,072,628
Xstrata Canada Financial Corp., 6.00%, 11/15/41 (b)		650		704,250

				1,776,878
Multi-Utilities — 0.4%
Consolidated Edison Co. of New York, Inc., 4.20%, 3/15/42 (c)		2,400		2,557,793
Dominion Resources, Inc.:
6.40%, 6/15/18		4,050		5,032,935
4.45%, 3/15/21		2,100		2,419,326
4.05%, 9/15/42 (c)		1,700		1,678,483
SCANA Corp., 4.13%, 2/01/22		500		524,271

				12,212,808
Multiline Retail — 0.1%
Nordstrom, Inc.:
4.00%, 10/15/21 (c)		1,200		1,337,936
7.00%, 1/15/38		600		849,910

				2,187,846

See Notes to Financial Statements.



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	23

Schedule of Investments (continued)

CoreAlpha Bond Master Portfolio

(Percentages shown are based on Net Assets)


Corporate Bonds	Par (000)		Value

Oil, Gas & Consumable Fuels — 2.7%
BP Capital Markets Plc:
3.13%, 10/01/15	$	700	$	743,084
3.20%, 3/11/16		1,500		1,600,085
3.56%, 11/01/21		1,900		2,053,123
Buckeye Partners LP, 4.88%, 2/01/21		550		569,623
Chevron Corp., 2.36%, 12/05/22		4,200		4,206,892
ConocoPhillips, 6.50%, 2/01/39		4,500		6,381,625
ConocoPhillips Canada Funding Co. I, 5.63%, 10/15/16		500		586,329
Encana Corp., 6.50%, 5/15/19		400		493,725
Energy Transfer Partners LP:
9.70%, 3/15/19		842		1,134,192
9.00%, 4/15/19		373		491,834
Enterprise Products Operating LLC:
5.20%, 9/01/20		500		596,807
5.75%, 3/01/35		1,500		1,709,914
5.95%, 2/01/41		900		1,086,543
4.45%, 2/15/43		1,100		1,113,758
EOG Resources, Inc., 2.63%, 3/15/23		2,950		2,970,756
Husky Energy, Inc.:
3.95%, 4/15/22 (c)		5,300		5,693,583
6.80%, 9/15/37		1,000		1,322,461
Kinder Morgan Energy Partners LP, 3.95%, 9/01/22		4,400		4,704,726
Linn Energy LLC/Linn Energy Finance Corp.:
6.50%, 5/15/19 (c)		300		303,000
6.25%, 11/01/19 (b)(c)		800		804,000
8.63%, 4/15/20		3,200		3,488,000
7.75%, 2/01/21		250		266,250
Marathon Petroleum Corp., 6.50%, 3/01/41		1,830		2,318,712
ONEOK Partners LP:
3.38%, 10/01/22		1,900		1,936,185
6.85%, 10/15/37		1,300		1,656,050
Petrobras International Finance Co.:
5.38%, 1/27/21		2,200		2,476,804
6.75%, 1/27/41		500		633,544
Petroleos Mexicanos:
5.50%, 1/21/21		1,100		1,285,350
4.88%, 1/24/22		2,600		2,934,100
Phillips 66, 4.30%, 4/01/22 (b)		3,700		4,134,450
Plains All American Pipeline LP/PAA Finance Corp.:
8.75%, 5/01/19 (c)		600		816,247
6.70%, 5/15/36		1,000		1,277,719
5.15%, 6/01/42 (c)		700		788,613
TransCanada PipeLines Ltd.:
6.50%, 8/15/18		2,850		3,589,202
3.80%, 10/01/20		4,200		4,686,776
Williams Partners LP:
3.80%, 2/15/15		800		845,910
4.00%, 11/15/21		1,150		1,230,037
3.35%, 8/15/22		3,000		3,050,376

				75,980,385
Paper & Forest Products — 0.1%
International Paper Co., 9.38%, 5/15/19		1,600		2,181,936
Pharmaceuticals — 1.2%
AbbVie, Inc., 2.90%, 11/06/22 (b)		1,925		1,960,382


Corporate Bonds	Par (000)		Value

Pharmaceuticals (concluded)
AstraZeneca Plc:
6.45%, 9/15/37	$	2,500	$	3,385,852
4.00%, 9/18/42		3,400		3,438,950
Bristol-Myers Squibb Co., 2.00%, 8/01/22		4,600		4,452,584
Eli Lilly & Co., 5.55%, 3/15/37		1,700		2,129,265
GlaxoSmithKline Capital Plc, 2.85%, 5/08/22		4,500		4,673,934
GlaxoSmithKline Capital, Inc.:
5.65%, 5/15/18		1,200		1,461,653
6.38%, 5/15/38		500		690,724
Pfizer, Inc.:
6.20%, 3/15/19		1,500		1,895,964
7.20%, 3/15/39		1,500		2,299,754
Sanofi-Aventis SA, 2.63%, 3/29/16		2,400		2,526,055
Teva Pharmaceutical Finance IV BV, 3.65%, 11/10/21		2,800		2,996,650
Watson Pharmaceuticals, 3.25%, 10/01/22		1,000		1,020,848

				32,932,615
Professional Services — 0.0%
Dun & Bradstreet Corp. (The), 2.88%, 11/15/15 (c)		600		608,657
Real Estate — 0.1%
Simon Property Group LP, 4.75%, 3/15/42 (c)		1,900		2,035,498
Real Estate Investment Trusts (REITs) — 0.5%
American Tower Corp.:
4.63%, 4/01/15		4,000		4,251,836
4.70%, 3/15/22		4,400		4,868,226
Health Care REIT, Inc., 5.25%, 1/15/22		3,100		3,451,996
Simon Property Group LP, 5.65%, 2/01/20		1,000		1,200,015

				13,772,073
Road & Rail — 0.3%
Burlington Northern Santa Fe LLC, 5.40%, 6/01/41		2,700		3,197,286
CSX Corp., 5.75%, 3/15/13		2,600		2,626,795
Norfolk Southern Corp., 5.75%, 1/15/16		1,100		1,251,612
Union Pacific Corp., 6.13%, 2/15/20 (c)		1,300		1,627,972

				8,703,665
Semiconductors & Semiconductor Equipment — 0.1%
Intel Corp., 3.30%, 10/01/21 (c)		2,100		2,226,760
Software — 0.2%
BMC Software, Inc., 4.25%, 2/15/22 (c)		700		710,771
Microsoft Corp., 2.13%, 11/15/22		2,700		2,673,553
Oracle Corp.:
5.25%, 1/15/16		1,500		1,697,415
5.75%, 4/15/18		550		669,353
5.38%, 7/15/40		800		997,462

				6,748,554
Specialty Retail — 1.4%
Advance Auto Parts, Inc., 4.50%, 1/15/22		3,100		3,236,428
AutoZone, Inc.:
4.00%, 11/15/20		4,700		5,097,000
3.70%, 4/15/22		600		630,781
The Gap, Inc., 5.95%, 4/12/21		3,635		4,158,567
The Home Depot, Inc.:
5.88%, 12/16/36		2,500		3,285,510
5.40%, 9/15/40		2,000		2,507,598
5.95%, 4/01/41		1,300		1,755,352

See Notes to Financial Statements.



24	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

CoreAlpha Bond Master Portfolio

(Percentages shown are based on Net Assets)


Corporate Bonds	Par (000)		Value

Specialty Retail (concluded)
Limited Brands, Inc.:
6.90%, 7/15/17 (c)	$	2,167	$	2,486,633
8.50%, 6/15/19		4,000		4,880,000
McDonald’s Corp., 3.70%, 2/15/42 (c)		1,800		1,785,974
O’Reilly Automotive, Inc., 4.63%, 9/15/21		5,300		5,803,489
The Sherwin-Williams Co., 3.13%, 12/15/14		3,300		3,453,988

				39,081,320
Textiles, Apparel & Luxury Goods — 0.1%
PVH Corp., 4.50%, 12/15/22		1,600		1,616,000
Tobacco — 0.7%
Altria Group, Inc., 2.85%, 8/09/22		3,400		3,364,398
Lorillard Tobacco Co., 3.50%, 8/04/16		650		687,829
Philip Morris International, Inc.:
4.88%, 5/16/13		2,200		2,235,625
5.65%, 5/16/18		4,300		5,213,260
2.90%, 11/15/21		2,700		2,808,076
6.38%, 5/16/38		1,500		2,042,577
Reynolds American, Inc., 3.25%, 11/01/22		2,300		2,310,338

				18,662,103
Transportation Infrastructure — 0.0%
Canadian Pacific Railway Co., 7.13%, 10/15/31		1,000		1,311,588
Wireless Telecommunication Services — 0.5%
America Movil SAB de CV:
5.00%, 3/30/20		800		930,778
6.13%, 3/30/40		700		920,952
4.38%, 7/16/42		1,700		1,766,521
American Tower Corp.:
4.50%, 1/15/18		2,100		2,302,049
5.05%, 9/01/20		2,300		2,579,337
Crown Castle International Corp., 5.25%, 1/15/23 (b)(c)		3,200		3,424,000
Vodafone Group Plc:
2.88%, 3/16/16		1,800		1,902,244
5.63%, 2/27/17		950		1,114,781

				14,940,662
Total Corporate Bonds — 25.1%				699,901,817


Foreign Agency Obligations
Brazilian Government International Bond, 5.63%, 1/07/41		1,500		1,965,000
Colombia Government International Bond:
4.38%, 7/12/21		2,000		2,303,000
7.38%, 9/18/37		800		1,242,400
Covidien International Finance SA, 3.20%, 6/15/22		5,100		5,339,175
Mexico Government International Bond:
6.05%, 1/11/40		1,300		1,743,300
4.75%, 3/08/44 (c)		5,800		6,554,000
Panama Government International Bond, 6.70%, 1/26/36		1,600		2,272,000
South Africa Government International Bond, 5.50%, 3/09/20		2,000		2,370,000
United Kingdom Gilt Inflation Linked, 1.88%, 11/22/22		10,629		22,201,438
Total Foreign Agency Obligations — 1.6%				45,990,313


Non-Agency Mortgage-Backed Securities	Par (000)			Value

Collateralized Mortgage Obligations — 1.5%
Arkle Master Issuer Plc, 1.71%, 5/17/60 (b)	$	8,155		$	8,216,309
Banc of America Funding Corp.:
Series 2005-6, Class 1A5, 5.50%, 10/25/35		433			432,697
Series 2005-8, Class 4A27, 5.75%, 1/25/36		419			419,333
Citicorp Mortgage Securities, Inc., Series 2006-1, Class 2A1, 5.00%, 2/25/21		561			587,318
Countrywide Alternative Loan Trust, Series 2006-HY12, Class A1, 5.39%, 8/25/36 (a)		306			310,642
Credit Suisse First Boston Mortgage Securities Corp., Series 2005-7, Class 1A6, 5.25%, 8/25/35		1,130			1,158,028
GMAC Mortgage Corp. Loan Trust, Series 2005-AR3, Class 4A3, 3.62%, 6/19/35 (a)		379			378,969
Greenpoint Mortgage Funding Trust Class A1A (a):
Series 2006-AR4, 0.31%, 9/25/46		—	(d)		8
Series 2006-AR5, 0.29%, 10/25/46		—	(d)		140
GSR Mortgage Loan Trust, Series 2006-AR1, Class 2A2, 2.77%, 1/25/36 (a)		1,320			1,305,278
Holmes Master Issuer Plc, 1.74%, 10/15/54 (b)		7,114			7,177,848
HSI Asset Securitization Corp. Trust, Series 2005, Class 2A4, 0.60%, 8/25/35 (a)		717			701,272
MASTR Asset Securitization Trust 2005-2, Series 2005-2, Class 1A1, 5.25%, 11/25/35		433			441,719
Permanent Master Issuer Plc (a)(b):
1.71%, 7/15/42		8,500			8,596,186
Series 2010-1A, Class 1A, 1.49%, 7/15/42		9,776			9,779,187
Puma Finance Ltd., Series G5, Class A1, 0.45%, 2/21/38 (a)(b)		1,215			1,189,920
Residential Accredit Loans, Inc., Series 2004-QS9, Class A1, 5.00%, 6/25/19		490			492,243
Wells Fargo Mortgage Backed Securities Trust:
Series 2003-11, Class 1A13, 4.75%, 10/25/18		444			457,251
Series 2005-7, Class A3, 5.25%, 9/25/35		328			331,050

					41,975,398
Commercial Mortgage-Backed Securities — 3.9%
American Tower Trust, Series 2007-1A, Class AFX, 5.42%, 4/15/37 (b)		3,500			3,589,929
Banc of America Commercial Mortgage Trust, Series 2006-5, Class AM, 5.45%, 9/10/47		1,440			1,537,040
Banc of America Merrill Lynch Commercial Mortgage, Inc.:
Series 2004-6, Class A3, 4.51%, 12/10/42		248			250,465

See Notes to Financial Statements.



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	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)
Series 2005-5, Class A4, 5.12%, 10/10/45	$	7,890	$	8,744,961
Bear Stearns Commercial Mortgage Securities, Series 2002-TOP8, Class A2, 4.83%, 8/15/38		200		200,405
COMM 2004-LNB2 Mortgage Trust, Series 2004-LB2A, Class A4, 4.72%, 3/10/39		13,378		13,847,056
Commercial Mortgage Trust, Series 2007-C9, Class A4, 5.80%, 12/10/49		2,704		3,212,771
Credit Suisse First Boston Mortgage Securities Corp. Series 2004-C1:
Class A4, 4.75%, 1/15/37		5,916		6,102,995
Class B, 4.86%, 1/15/37		5,522		5,698,969
DBRR Trust, Series 2012-EZ1, Class A, 0.95%, 9/25/45 (b)		5,552		5,566,258
GE Capital Commercial Mortgage Corp., Series 2007-C1, Class A2, 5.42%, 12/10/49		991		989,391
GMAC Commercial Mortgage Securities, Inc., Series 2004-C1 Trust, Series 2004-C1, Class A4, 4.91%, 3/10/38		3,425		3,561,873
Greenwich Capital Commercial Funding Corp.:
Series 2003-C2, Class A4, 4.92%, 1/05/36		14,997		15,278,062
Series 2006-GG7, Class AM, 5.87%, 7/10/38 (a)		3,400		3,825,037
GS Mortgage Securities Corp. II, Series 2007-EOP, Class B, 1.73%, 3/06/20 (b)		1,300		1,302,574
JP Morgan Chase Commercial Mortgage Securities Corp., Series 2006-CB14, Class A4, 5.48%, 12/12/44		3,430		3,854,967
LB-UBS Commercial Mortgage Trust:
Series 2006-C6, Class A4, 5.37%, 9/15/39		5,840		6,714,406
Series 2006-C7, Class A2, 5.30%, 11/15/38		3,459		3,547,202
Series 2007-C1, Class AM, 5.46%, 2/15/40		2,450		2,753,200
Series 2007-C2, Class A3, 5.43%, 2/15/40		4,030		4,625,106
Merrill Lynch Mortgage Trust, Series 2004-MKB1, Class A3, 4.89%, 2/12/42		268		268,389
Merrill Lynch/Countrywide Commercial Mortgage Trust, Series 2007-7, Class A4, 5.74%, 6/12/50		800		916,483
Morgan Stanley Capital I Trust 2005-IQ9, Series 2005-IQ9, Class A5, 4.70%, 7/15/56		2,100		2,245,797
ORES NPL LLC, Series 2012-LV1, Class A, 4.00%, 9/25/44 (b)		5,848		5,868,797


Non-Agency Mortgage-Backed Securities	Par (000)		Value

Commercial Mortgage-Backed Securities (concluded)
Wachovia Bank Commercial Mortgage Trust, Series 2003-C5, Class A2, 3.99%, 6/15/35	$	2,887	$	2,907,178

				107,409,311
Total Non-Agency Mortgage-Backed Securities — 5.4%				149,384,709


Preferred Securities
Capital Trusts
Insurance — 0.1%
Chubb Corp. (The):
6.00%, 5/11/37		800		1,043,924
6.38%, 3/29/67 (a)		2,550		2,779,500
Total Capital Trusts — 0.1%				3,823,424


Preferred Stocks — 0.2%		Shares
Diversified Telecommunication Services — 0.2%
Qwest Corp. 7.38%		196,000		5,254,760
Total Preferred Securities — 0.3%				9,078,184


Taxable Municipal Bonds		Par (000)
Bay Area Toll Authority, 6.26%, 4/01/49	$	125		171,233
Brazos Higher Education Authority, Series 2004-I, Class A2, 0.53%, 6/27/22		1,015		1,011,254
Chicago, Illinois Waterworks Revenue, 6.74%, 11/01/40		150		203,657
Massachusetts State Transportation Fund Revenue, 5.73%, 6/01/40		150		196,602
New Jersey State Turnpike Authority Revenue:
7.41%, 1/01/40		700		1,025,619
7.10%, 1/01/41		700		992,635
New York City Transitional Finance Authority Revenue, 5.57%, 11/01/38		450		553,878
Orange County Local Transportation Authority Sales Tax Revenue, 6.91%, 2/15/41		450		630,346
Oregon Department of Transportation, 5.83%, 11/15/34		400		518,692
Port Authority of New York & New Jersey Revenue:
5.65%, 11/01/40		800		959,160
4.46%, 10/01/62		700		686,854
San Diego County Regional Transportation Commission Revenue, 5.91%, 4/01/48		600		792,450
San Francisco City & County Public Utilities Commission Revenue, 6.95%, 11/01/50		900		1,267,515
State of California:
7.55%, 4/01/39		400		573,992
7.63%, 3/01/40		1,150		1,651,503
7.60%, 11/01/40		250		365,488
State of Illinois, 7.35%, 7/01/35 (c)		650		788,586

See Notes to Financial Statements.



26	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

CoreAlpha Bond Master Portfolio

(Percentages shown are based on Net Assets)


Taxable Municipal Bonds	Par (000)		Value

State of Mississippi, 5.25%, 11/01/34	$	600	$	716,646
University of Missouri System Facilities Revenue, 5.79%, 11/01/41		300		385,974
Total Taxable Municipal Bonds — 0.5%				13,492,084


US Government Sponsored Agency Securities
Agency Obligations — 0.5%
Fannie Mae, 0.00%, 6/01/17 (e)		12,500		11,985,775
Tennessee Valley Authority:
3.50%, 12/15/42		250		248,436
5.88%, 4/01/36		1,125		1,563,101

				13,797,312
Collateralized Mortgage Obligations — 0.7%
Fannie Mae REMICS (a):
Series 2007-54, Class PF, 0.43%, 6/25/37		4,542		4,549,149
Series 2010-35, Class EF, 0.76%, 4/25/40		4,553		4,594,572
Series 2010-89, Class CF, 0.66%, 2/25/38		4,295		4,333,823
Freddie Mac Mortgage-Backed Securities (a):
Series 3667, Class FW, 0.76%, 2/15/38		2,879		2,908,592
Series 3807, Class FN, 0.71%, 2/15/41		2,785		2,815,092

				19,201,228
Mortgage-Backed Securities — 75.1%
Fannie Mae Mortgage-Backed Securities:
2.32%, 8/01/33		2,343		2,490,045
2.34%, 5/01/33 (a)		3,018		3,180,733
2.47%, 2/01/42 (a)		40		42,110
2.50%, 1/01/28—1/01/43 (f)		14,000		14,612,344
2.52%, 1/01/36 (a)		1,481		1,573,422
2.66%, 1/01/35 (a)		1,387		1,471,688
2.77%, 8/01/41 (a)		2,988		3,117,060
2.79%, 1/01/42 (a)		908		952,425
3.00%, 1/01/28—1/01/43 (f)		387,372		406,338,289
3.31%, 9/01/41 (a)		1,655		1,746,209
3.36%, 4/01/40 (a)		419		441,820
3.50%, 2/01/26—1/01/43 (f)		480,214		512,185,519
3.61%, 5/01/40 (a)		2,714		2,873,000
4.00%, 8/01/25—1/01/43 (f)		128,130		137,890,147
4.50%, 10/01/24—1/01/43 (f)		207,923		224,953,455
5.00%, 1/01/18—1/01/43 (f)		204,564		221,875,405
5.50%, 9/01/19—1/01/43 (f)		36,461		39,876,987
6.00%, 11/01/22—1/01/43 (f)		34,307		37,646,295
6.50%, 12/01/30—12/01/32		13,094		15,102,368
Freddie Mac Mortgage-Backed Securities:
2.28%, 10/01/33 (a)		1,399		1,491,940
2.50%, 1/01/28 (f)		8,000		8,348,750
2.66%, 1/01/42 (a)		41		43,290
2.84%, 11/01/36 (a)		1,582		1,656,310
3.00%, 1/01/28—1/01/43 (f)		21,239		22,295,147
3.25%, 8/01/41 (a)		1,969		2,072,031
3.34%, 7/01/41 (a)		1,177		1,242,114
3.37%, 2/01/40 (a)		2,572		2,711,234
3.50%, 12/01/25—1/01/43 (f)		37,661		40,141,221
4.00%, 3/01/26—1/01/43 (f)		39,910		42,593,011
4.50%, 8/01/20—1/01/43 (f)		43,541		46,750,414


US Government Sponsored Agency Securities	Par (000)		Value

Mortgage-Backed Securities (concluded)
4.59%, 4/01/38 (a)	$	2,713	$	2,888,778
5.00%, 10/01/20—1/01/43 (f)		31,264		33,705,658
5.50%, 12/01/27—8/01/38		18,179		19,699,923
6.00%, 12/01/28—1/01/38		14,312		15,663,352
6.50%, 5/01/21—1/01/36		3,333		3,777,994
Ginnie Mae Mortgage-Backed Securities:
3.00%, 1/01/43 (f)		10,000		10,628,438
3.50%, 12/15/40—1/01/43 (f)		53,947		58,662,629
4.00%, 9/15/40—1/01/43 (f)		35,843		39,430,843
4.50%, 3/15/39—1/01/43 (f)		44,864		49,475,182
5.00%, 9/15/39—5/20/41		36,547		40,748,363
5.50%, 6/15/34—11/20/39		11,988		13,192,354
6.00%, 9/20/38—1/01/43 (f)		7,788		8,691,615

				2,094,279,912
Total US Government Sponsored Agency Securities — 76.3%				2,127,278,452


US Treasury Obligations
US Treasury Bonds:
6.38%, 8/15/27 (c)		24,068		36,466,775
6.25%, 5/15/30 (c)		27,228		42,100,986
5.00%, 5/15/37 (c)		23,800		33,580,324
4.38%, 5/15/40 (c)(g)		23,100		30,069,709
3.88%, 8/15/40		15,149		18,207,204
4.25%, 11/15/40		10		12,769
4.38%, 5/15/41		4,931		6,424,166
US Treasury Inflation Indexed Note:
1.88%, 7/15/13 (c)		37,658		38,263,616
2.00%, 7/15/14 (c)		38,656		40,790,972
US Treasury Notes:
1.25%, 2/15/14 (c)		61,000		61,707,722
0.25%, 2/28/14 (c)		68,659		68,696,556
1.75%, 3/31/14 (c)		33,000		33,627,759
0.25%, 6/30/14 (c)		75,000		75,029,325
2.63%, 12/31/14 (c)		48,363		50,645,153
0.38%, 3/15/15		3		3,006
0.88%, 4/30/17 (c)		78,751		79,716,960
2.75%, 12/31/17		1		1,100
1.75%, 5/15/22 (c)		21,422		21,607,772
Total US Treasury Obligations — 22.8%				636,951,874
Total Long-Term Investments (Cost — $ 3,859,631,479) — 142.4%				3,972,316,318


Short-Term Securities		Shares
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (h)(i)(j)		598,803,477		598,803,477
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (h)(i)(j)		116,380,753		116,380,753
Total Short-Term Securities (Cost — $ 715,184,230) — 25.6%				715,184,230
Options Purchased
(Cost — $ 1,905,994) — 0.1%				1,482,188
Total Investments Before TBA Sale Commitments *(Cost — $ 4,576,721,703) — 168.1%**				4,688,982,736

See Notes to Financial Statements.



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	27

Schedule of Investments (continued)

CoreAlpha Bond Master Portfolio

(Percentages shown are based on Net Assets)


TBA Sale Commitments (f)	Par (000)		Value

Fannie Mae Mortgage-Backed Securities:
3.00%, 1/01/28—1/01/43	$	102,300	$	(107,282,297	)
3.50%, 1/01/43		212,000		(226,045,000	)
4.00%, 1/01/28—1/01/43		126,400		(135,479,375	)
4.50%, 1/01/43		19,800		(21,390,188	)
5.00%, 1/01/28—1/01/43		185,700		(201,136,313	)
5.50%, 1/01/43		27,400		(29,728,157	)
6.00%, 1/01/43		12,800		(13,980,000	)
Freddie Mac Mortgage-Backed Securities:
3.50%, 1/01/43		8,000		(8,508,750	)
4.00%, 1/01/43		3,400		(3,629,500	)


TBA Sale Commitments (f)	Par (000)		Value

Ginnie Mae Mortgage-Backed Securities:
3.50%, 1/01/43	$	17,200	$	(18,688,875	)
4.00%, 1/01/43		3,500		(3,813,359	)
5.00%, 1/01/43		8,000		(8,726,250	)
Total TBA Sale Commitments (Proceeds — $ 778,932,704) — (27.9)%				(778,408,064	)
Total Investments, Net of TBA Sale Commitments — 140.2%				3,910,574,672
Liabilities in Excess of Other Assets — (40.2)%				(1,120,934,290	)

Net Assets —100.0%			$	2,789,640,382

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	4,577,298,234

Gross unrealized appreciation	$	123,557,277
Gross unrealized depreciation		(11,872,775	)

Net unrealized appreciation	$	111,684,502

(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)

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

(d)

Amount is less than $500.

(e)

Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.

(f)

Represents or includes a TBA transaction. Unsettled TBA transactions as of December 31, 2012 were as follows:


Counterparty	Value			Unrealized Appreciation (Depreciation)
Bank of America Corp.	$	43,892,289		$	79,847
Barclays Plc	$	44,738,732		$	2,530
BNP Paribas SA	$	(2,208,547	)	$	(10,113	)
Citigroup, Inc.	$	6,583,797		$	91
Credit Suisse Group AG	$	33,334,812		$	112,808
Deutsche Bank AG	$	(22,359,953	)	$	165,052
Goldman Sachs Group, Inc.	$	220,074,768		$	195,723
Jefferies Group, Inc.	$	(854,000	)	$	(1,250	)
JPMorgan Chase & Co.	$	138,526,297		$	227,307
Morgan Stanley	$	17,183,914		$	52,984
Nomura Trust and Banking Co., Ltd.	$	(6,968,203	)	$	3,359
R.B.C. Dominion Securities	$	(3,827,109	)	$	(4,609	)
Royal Bank of Scotland Group Plc	$	151,725,375		$	593,140
UBS AG	$	(32,185,250	)	$	(83,244	)
Wells Fargo & Co.	$	31,582,063		$	46,305

(g)

All or a portion of security has been pledged as collateral in connection with open financial futures contracts.

(h)


Affiliate	Shares Held at December 31, 2011		Net Activity		Shares Held at December 31, 2012		Income
BlackRock Cash Funds:
Institutional, SL Agency Shares		559,553,070		39,250,407		598,803,477	$	1,274,787
BlackRock Cash Funds:
Prime, SL Agency Shares		36,989,307		79,391,446		116,380,753	$	46,128

See Notes to Financial Statements.



28	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012


Schedule of Investments (continued)		CoreAlpha Bond Master Portfolio

(i)

Represents the current yield as of report date.

(j)

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

_Ÿ

For Master Portfolio compliance purposes, the Master Portfolio‘s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Master Portfolio management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease.

_Ÿ

Financial futures contracts as of December 31, 2012 were as follows:


Contracts Purchased/(Sold)		Issue	Exchange	Expiration	Notional Value			Unrealized Appreciation (Depreciation)
	1,463	2-Year US Treasury Note	Chicago Mercantile	March 2013		USD	322,545,781	$	85,908
	2,209	5-Year US Treasury Note	Chicago Mercantile	March 2013		USD	274,830,665		216,496
	63	10-Year Canada Bond Future	Chicago Mercantile	March 2013		USD	8,584,518		(20,929	)
	5	10-Year Japan Bond	Tokyo Stock Exchange	March 2013		USD	8,290,529		5,102
	581	10-Year US Treasury Note	Chicago Mercantile	March 2013		USD	77,145,906		38,621
	(147)	30-Year US Treasury Bond	Chicago Mercantile	March 2013		USD	21,682,500		(115,934	)
	375	Euro-Bund Future	Eurex	March 2013		USD	72,089,113		487,552
	(472)	UK Long Gilt Bond	NYSE Liffe	March 2013		USD	91,180,764		(431,196	)
	(30)	Ultra Long-Term US Treasury Bond	Chicago Mercantile	March 2013		USD	4,877,813		118,082
	Total							$	383,702


_Ÿ Foreign currency exchange contracts as of December 31, 2012 were as follows:
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
BRL	520,000	USD	248,507	BNP Paribas SA		1/03/13	$	5,462
BRL	11,220,000	USD	5,340,237	Citigroup, Inc.		1/03/13		139,616
BRL	730,000	USD	351,299	Deutsche Bank AG		1/03/13		5,233
BRL	42,914,000	USD	20,811,794	UBS AG		1/03/13		147,425
USD	254,465	BRL	520,000	BNP Paribas SA		1/03/13		497
USD	5,490,580	BRL	11,220,000	Citigroup, Inc.		1/03/13		10,726
USD	357,230	BRL	730,000	Deutsche Bank AG		1/03/13		698
USD	20,733,705	BRL	42,914,000	UBS AG		1/03/13		(225,513	)
BRL	3,690,000	USD	1,769,784	Citigroup, Inc.		2/04/13		24,832
BRL	1,820,000	USD	871,022	UBS AG		2/04/13		14,128
USD	6,042,830	BRL	12,712,000	UBS AG		2/04/13		(139,598	)
USD	21,813,102	GBP	13,409,279	Citigroup, Inc.		2/27/13		33,929
CZK	59,790,000	USD	3,099,137	Bank of America Corp.		3/04/13		48,153
CZK	81,100,000	USD	4,197,777	BNP Paribas SA		3/04/13		71,251
CZK	37,160,000	USD	1,917,138	Citigroup, Inc.		3/04/13		38,929
CZK	32,350,000	USD	1,665,639	Deutsche Bank AG		3/04/13		37,235
CZK	32,120,000	USD	1,658,406	HSBC Holdings Plc		3/04/13		32,361
CZK	36,050,000	USD	1,863,686	JPMorgan Chase & Co.		3/04/13		33,953
CZK	8,430,000	USD	444,236	State Street Corp.		3/04/13		(489	)
CZK	5,890,000	USD	304,201	UBS AG		3/04/13		5,843
HUF	302,900,000	USD	1,372,327	Deutsche Bank AG		3/04/13		(9,421	)
ILS	1,000,000	USD	261,906	BNP Paribas SA		3/04/13		5,263
ILS	13,830,000	USD	3,598,892	Citigroup, Inc.		3/04/13		96,055
ILS	8,915,000	USD	2,308,120	Deutsche Bank AG		3/04/13		73,691
ILS	11,770,000	USD	3,038,352	UBS AG		3/04/13		106,226
INR	53,200,000	USD	961,678	BNP Paribas SA		3/04/13		(1,822	)
INR	35,100,000	USD	636,100	Citigroup, Inc.		3/04/13		(2,812	)
INR	77,700,000	USD	1,406,867	Deutsche Bank AG		3/04/13		(4,972	)
INR	10,700,000	USD	194,016	Goldman Sachs Group, Inc.		3/04/13		(963	)
INR	62,200,000	USD	1,121,327	HSBC Holdings Plc		3/04/13		910
INR	41,700,000	USD	750,000	JPMorgan Chase & Co.		3/04/13		2,368
INR	131,300,000	USD	2,382,111	UBS AG		3/04/13		(13,144	)
KRW	305,400,000	USD	282,386	Deutsche Bank AG		3/04/13		1,846
KRW	409,500,000	USD	376,933	Goldman Sachs Group, Inc.		3/04/13		4,183
KRW	1,510,600,000	USD	1,398,747	HSBC Holdings Plc		3/04/13		7,149
KRW	2,545,700,000	USD	2,336,469	JPMorgan Chase & Co.		3/04/13		32,781

See Notes to Financial Statements.



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	29


Schedule of Investments (continued)		CoreAlpha Bond Master Portfolio


_Ÿ Foreign currency exchange contracts as of December 31, 2012 were as follows (continued)
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
MXN	102,450,000	USD	7,844,827	Citigroup, Inc.		3/04/13	$	37,428
MXN	10,160,000	USD	778,703	Credit Suisse Group AG		3/04/13		2,982
MXN	25,360,000	USD	1,942,997	Deutsche Bank AG		3/04/13		8,140
MXN	23,690,000	USD	1,814,865	JPMorgan Chase & Co.		3/04/13		7,786
MXN	7,880,000	USD	603,896	UBS AG		3/04/13		2,372
PLN	40,511,500	USD	12,709,690	Citigroup, Inc.		3/04/13		298,531
PLN	8,950,000	USD	2,797,222	HSBC Holdings Plc		3/04/13		76,618
PLN	7,320,000	USD	2,293,410	JPMorgan Chase & Co.		3/04/13		57,038
RUB	204,100,000	USD	6,533,278	Citigroup, Inc.		3/04/13		79,711
RUB	223,400,000	USD	7,104,035	Credit Suisse Group AG		3/04/13		134,289
RUB	41,700,000	USD	1,343,211	Goldman Sachs Group, Inc.		3/04/13		7,899
RUB	37,100,000	USD	1,195,592	UBS AG		3/04/13		6,475
SGD	460,000	USD	376,746	Deutsche Bank AG		3/04/13		(203	)
SGD	4,330,000	USD	3,546,942	Goldman Sachs Group, Inc.		3/04/13		(2,526	)
SGD	4,430,000	USD	3,631,008	HSBC Holdings Plc		3/04/13		(4,735	)
SGD	3,370,000	USD	2,767,690	JPMorgan Chase & Co.		3/04/13		(9,103	)
SGD	17,910,000	USD	14,655,582	State Street Corp.		3/04/13		5,039
SGD	290,000	USD	237,846	UBS AG		3/04/13		(460	)
TRY	21,017,760	USD	11,593,447	HSBC Holdings Plc		3/04/13		93,865
USD	5,359,803	CZK	104,350,000	Deutsche Bank AG		3/04/13		(133,083	)
USD	1,818,182	CZK	35,540,000	JPMorgan Chase & Co.		3/04/13		(52,610	)
USD	6,392	HUF	1,400,000	BNP Paribas SA		3/04/13		93
USD	2,280,124	HUF	498,800,000	Deutsche Bank AG		3/04/13		35,761
USD	7,302,290	HUF	1,597,595,000	UBS AG		3/04/13		113,872
USD	562,005	ILS	2,130,000	BNP Paribas SA		3/04/13		(7,065	)
USD	7,384,965	ILS	28,390,000	Citigroup, Inc.		3/04/13		(199,961	)
USD	1,070,385	ILS	4,030,000	Deutsche Bank AG		3/04/13		(6,306	)
USD	1,005,318	ILS	3,800,000	JPMorgan Chase & Co.		3/04/13		(9,924	)
USD	4,817,747	INR	271,000,000	Citigroup, Inc.		3/04/13		(71,743	)
USD	588,977	INR	32,700,000	Deutsche Bank AG		3/04/13		(1,010	)
USD	1,577,998	KRW	1,725,000,000	Citigroup, Inc.		3/04/13		(27,437	)
USD	1,310,742	KRW	1,420,500,000	Deutsche Bank AG		3/04/13		(11,299	)
USD	891,657	KRW	969,900,000	HSBC Holdings Plc		3/04/13		(11,016	)
USD	4,693,671	KRW	5,119,600,000	Royal Bank of Scotland Group Plc		3/04/13		(71,075	)
USD	271,462	KRW	292,500,000	UBS AG		3/04/13		(764	)
USD	2,994,648	MXN	38,450,000	Citigroup, Inc.		3/04/13		36,398
USD	1,191,986	MXN	15,280,000	HSBC Holdings Plc		3/04/13		16,380
USD	1,579,274	PLN	5,090,000	Bank of America Corp.		3/04/13		(55,122	)
USD	6,903,900	PLN	22,030,000	BNP Paribas SA		3/04/13		(169,921	)
USD	1,772,756	PLN	5,610,000	Citigroup, Inc.		3/04/13		(28,612	)
USD	2,896,046	PLN	9,130,000	Deutsche Bank AG		3/04/13		(35,592	)
USD	1,808,367	PLN	5,810,000	HSBC Holdings Plc		3/04/13		(57,221	)
USD	1,947,548	PLN	6,180,000	JPMorgan Chase & Co.		3/04/13		(36,846	)
USD	556,040	PLN	1,720,000	State Street Corp.		3/04/13		3,749
USD	1,487,645	PLN	4,720,000	UBS AG		3/04/13		(27,944	)
USD	1,955,719	RUB	61,300,000	Credit Suisse Group AG		3/04/13		(30,446	)
USD	747,365	RUB	23,400,000	HSBC Holdings Plc		3/04/13		(10,812	)
USD	5,670,269	RUB	179,400,000	Royal Bank of Scotland Group Plc		3/04/13		(142,423	)
USD	581,098	RUB	18,200,000	UBS AG		3/04/13		(8,595	)
USD	9,101,941	SGD	11,115,000	Citigroup, Inc.		3/04/13		3,515
USD	3,758,040	SGD	4,590,000	Deutsche Bank AG		3/04/13		796
USD	7,450,168	SGD	9,105,000	HSBC Holdings Plc		3/04/13		(2,928	)
USD	5,332,373	SGD	6,520,000	JPMorgan Chase & Co.		3/04/13		(4,715	)
USD	1,857,782	TRY	3,340,000	Citigroup, Inc.		3/04/13		514
USD	7,145,970	TRY	12,950,000	Credit Suisse Group AG		3/04/13		(55,115	)
USD	608,306	TRY	1,100,000	Deutsche Bank AG		3/04/13		(3,369	)
USD	606,904	TRY	1,090,000	Goldman Sachs Group, Inc.		3/04/13		790
USD	2,817,139	TRY	5,090,000	HSBC Holdings Plc		3/04/13		(13,249	)
USD	2,302,076	TRY	4,160,000	JPMorgan Chase & Co.		3/04/13		(11,169	)
USD	962,310	TRY	1,740,000	Royal Bank of Canada		3/04/13		(5,249	)

See Notes to Financial Statements.



30	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012


Schedule of Investments (continued)		CoreAlpha Bond Master Portfolio


_Ÿ Foreign currency exchange contracts as of December 31, 2012 were as follows (concluded)
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	775,080	ZAR	6,910,000	BNP Paribas SA		3/04/13	$	(33,294	)
USD	1,281,193	ZAR	11,480,000	Citigroup, Inc.		3/04/13		(61,811	)
USD	236,098	ZAR	2,110,000	Deutsche Bank AG		3/04/13		(10,744	)
USD	161,156	ZAR	1,430,000	UBS AG		3/04/13		(6,134	)
ZAR	14,370,000	USD	1,640,284	Bank of America Corp.		3/04/13		40,811
ZAR	9,175,000	USD	1,049,220	BNP Paribas SA		3/04/13		24,131
ZAR	36,255,000	USD	4,113,182	Citibank NA		3/04/13		128,161
ZAR	2,010,000	USD	224,466	HSBC Holdings Plc		3/04/13		10,676
ZAR	1,910,000	USD	215,834	UBS AG		3/04/13		7,610
AUD	893,000	USD	922,112	UBS AG		3/15/13		385
CAD	1,645,000	USD	1,667,620	HSBC Holdings Plc		3/15/13		(16,352	)
CAD	1,696,000	USD	1,719,715	State Street Corp.		3/15/13		(17,253	)
CAD	1,645,000	USD	1,667,373	UBS AG		3/15/13		(16,105	)
EUR	1,376,000	USD	1,815,186	HSBC Holdings Plc		3/15/13		2,212
EUR	1,417,000	USD	1,869,151	State Street Corp.		3/15/13		2,400
EUR	1,375,500	USD	1,814,549	UBS AG		3/15/13		2,189
EUR	1,588,000	USD	2,108,991	Westpac Banking Corp.		3/15/13		(11,586	)
GBP	112,000	USD	181,500	HSBC Holdings Plc		3/15/13		398
GBP	115,000	USD	186,399	State Street Corp.		3/15/13		371
GBP	112,000	USD	181,548	UBS AG		3/15/13		350
JPY	247,800,000	USD	2,933,016	BNP Paribas SA		3/15/13		(71,192	)
JPY	361,727,000	USD	4,314,385	HSBC Holdings Plc		3/15/13		(136,826	)
JPY	104,100,000	USD	1,214,188	JPMorgan Chase & Co.		3/15/13		(11,945	)
JPY	140,046,000	USD	1,670,938	State Street Corp.		3/15/13		(53,557	)
JPY	135,927,000	USD	1,621,178	UBS AG		3/15/13		(51,366	)
NOK	20,745,000	USD	3,690,631	HSBC Holdings Plc		3/15/13		32,260
NOK	21,374,000	USD	3,802,716	State Street Corp.		3/15/13		33,055
NOK	20,745,000	USD	3,689,637	UBS AG		3/15/13		33,253
NZD	1,939,000	USD	1,622,646	HSBC Holdings Plc		3/15/13		(27,513	)
NZD	1,998,000	USD	1,672,246	State Street Corp.		3/15/13		(28,576	)
NZD	1,938,000	USD	1,621,922	UBS AG		3/15/13		(27,611	)
SEK	31,113,000	USD	4,683,550	HSBC Holdings Plc		3/15/13		92,973
SEK	32,057,000	USD	4,827,207	State Street Corp.		3/15/13		94,241
SEK	31,113,000	USD	4,683,217	UBS AG		3/15/13		93,306
USD	4,091,872	AUD	3,911,000	HSBC Holdings Plc		3/15/13		51,688
USD	4,217,477	AUD	4,029,000	State Street Corp.		3/15/13		55,395
USD	4,092,537	AUD	3,911,000	UBS AG		3/15/13		52,353
USD	457,004	AUD	437,000	Westpac Banking Corp.		3/15/13		5,570
USD	903,252	CAD	891,000	HSBC Holdings Plc		3/15/13		8,857
USD	414,165	CAD	409,000	Royal Bank of Canada		3/15/13		3,607
USD	931,850	CAD	919,000	State Street Corp.		3/15/13		9,349
USD	903,118	CAD	891,000	UBS AG		3/15/13		8,723
USD	10,618,050	EUR	7,997,000	BNP Paribas SA		3/15/13		55,742
USD	2,911,421	EUR	2,207,000	HSBC Holdings Plc		3/15/13		(3,548	)
USD	3,000,930	EUR	2,275,000	State Street Corp.		3/15/13		(3,853	)
USD	2,911,457	EUR	2,207,000	UBS AG		3/15/13		(3,513	)
USD	5,810,716	GBP	3,578,000	HSBC Holdings Plc		3/15/13		(279	)
USD	1,641,073	GBP	1,010,000	JPMorgan Chase & Co.		3/15/13		742
USD	2,019,592	GBP	1,246,000	State Street Corp.		3/15/13		(4,025	)
USD	1,958,123	GBP	1,208,000	UBS AG		3/15/13		(3,778	)
USD	3,585,443	JPY	301,032,000	HSBC Holdings Plc		3/15/13		108,846
USD	4,308,560	JPY	369,400,000	JPMorgan Chase & Co.		3/15/13		42,386
USD	2,679,018	JPY	224,536,000	State Street Corp.		3/15/13		85,868
USD	2,599,237	JPY	217,932,000	UBS AG		3/15/13		82,356
USD	3,432,192	NOK	19,193,000	JPMorgan Chase & Co.		3/15/13		(12,177	)
USD	1,005,544	NZD	1,219,400	BNP Paribas SA		3/15/13		2,395
USD	924,234	NZD	1,125,600	HSBC Holdings Plc		3/15/13		(1,750	)
USD	4,347,705	SEK	28,442,000	HSBC Holdings Plc		3/15/13		(18,761	)
USD	4,518,176	SEK	29,472,000	JPMorgan Chase & Co.		3/15/13		(6,418	)
Total							$	825,094

See Notes to Financial Statements.



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	31


Schedule of Investments (continued)		CoreAlpha Bond Master Portfolio

_Ÿ

Exchange-Traded options purchased as of December 31, 2012 were as follows:

Description

Put/
Call

Strike

Price

Expiration
Date

Contracts

Market
Value

10-Year /US Treasury Note Future

Call

USD

134.5

2/22/13

1,530

334,688

10-Year /US Treasury Note Future

Put

USD

132.5

2/22/13

1,530

1,147,500

Total

1,482,188

_Ÿ

Credit default swaps — sold protection outstanding as of December 31, 2012 were as follows:


Issuer/Index	Receive Fixed Rate			Counterparty	Expiration Date	Credit Rating¹		Notional Amount (000)²		Unrealized Appreciation
General Electric Capital Corp.		3.25	%	Deutsche Bank AG	12/20/13		AA+	USD	4,000	$	53,239
Dow Jones CDX North America Investment Grade Index Series 19, Version 1		1.00	%	Deutsche Bank AG	12/20/17		BBB+	USD	144,000		546,921
iTraxx — Europe Sub Financial Index Series 18, Version 1		5.00	%	BNP Paribas SA	12/20/17		CCC-	EUR	33,700		424,819
iTraxx — Europe Sub Financial Index Series 18, Version 1		5.00	%	BNP Paribas SA	12/20/17		CCC-	EUR	12,300		419,126
iTraxx — Europe Sub Financial Index Series 18, Version 1		5.00	%	Deutsche Bank AG	12/20/17		CCC-	EUR	6,400		132,151
Total										$	1,576,256

Using S&P’s rating of the issuer or the underlying securities of the index, as applicable.

The maximum potential amount the Master Portfolio may pay should a negative credit event take place as defined under the terms of agreement.

_Ÿ

Interest rate swaps outstanding as of December 31, 2012 were as follows:

Fixed Rate

Floating Rate

Counterparty

Expiration
Date

Notional
Amount (000)

Unrealized
Appreciation

0.37%¹

3-month LIBOR

Deutsche Bank AG

11/13/14

USD

135,800

30,500

1.22%¹

3-month LIBOR

Royal Bank of Scotland Group Plc

11/15/19

USD

118,430

735,741

1.80%²

6-month LIBOR

Deutsche Bank AG

3/07/22

GBP

28,350

124,665

Total

890,906

Master Portfolio pays the fixed rate and receives the floating rate.

Master Portfolio pays the floating rate and receives the fixed rate.

_Ÿ

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

_Ÿ

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative and 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.

See Notes to Financial Statements.



32	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012


Schedule of Investments (concluded)		CoreAlpha Bond Master Portfolio

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1			Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities		—		$	290,238,885			—	$	290,238,885
Corporate Bonds		—			699,901,817			—		699,901,817
Foreign Agency Obligations		—			45,990,313			—		45,990,313
Non-Agency Mortgage- Backed Securities		—			149,384,709			—		149,384,709
Preferred Securities	$	5,254,760			3,823,424			—		9,078,184
Taxable Municipal Bonds		—			13,492,084			—		13,492,084
US Government Sponsored Agency Securities		—			2,127,278,452			—		2,127,278,452
US Treasury Obligations		—			636,951,874			—		636,951,874
Short-Term Securities		715,184,230			—			—		715,184,230
Options Purchased:
Interest Rate Contracts		1,482,188			—			—		1,482,188
Liabilities:
TBA Sale Commitments		—			(778,408,064	)		—		(778,408,064	)

Total	$	721,921,178		$	3,188,653,494			—	$	3,910,574,672


	Level 1			Level 2			Level 3		Total

Derivative Financial Instruments¹
Assets:
Credit contracts		—		$	1,576,256			—	$	1,576,256
Foreign currency transactions		—			3,254,420			—		3,254,420
Interest rate contracts	$	951,761			890,906			—		1,842,667
Liabilities:
Foreign currency transactions		—			(2,429,326	)		—		(2,429,326	)
Interest rate contracts		(568,059	)		—			—		(568,059	)

Total	$	383,702		$	3,292,256			—	$	3,675,958

Derivative financial instruments are swaps, financial futures contracts and foreign currency exchange contracts. Swaps, financial futures contracts and foreign exchange contracts are valued at the unrealized appreciation/depreciation on the instrument.

Certain of the Master Portfolio’s assets and liabilities are held at carrying amount which approximates fair value for financial statement purposes. As of December 31, 2012, such assets and liabilities are categorized within the disclosure hierarchy as follows:


	Level 1		Level 2			Level 3	Total
Assets:
Foreign currency at value	$	3,778,066		—		—	$	3,778,066
Liabilities:
Collateral on securities loaned at value		—	$	(540,927,421	)	—		(540,927,421	)
Cash due to broker for swaps		—		(1,690,000	)	—		(1,690,000	)

Total:	$	3,778,066	$	(542,617,421	)	—	$	(538,839,355	)

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	33


Statement of Assets and Liabilities		CoreAlpha Bond Master Portfolio


December 31, 2012

Assets
Investments at value — unaffiliated (including securities loaned of $515,428,759) (cost — $3,861,537,473)	$	3,973,798,506
Investments at value — affiliated (cost — $715,184,230)		715,184,230
Foreign currency at value (cost — $3,775,510)		3,778,066
TBA sale commitments receivable		778,932,704
Contributions receivable from investors		21,380,886
Investments sold receivable		210,761
Unrealized appreciation on swaps		2,467,162
Unrealized appreciation on foreign currency exchange contracts		3,254,420
Swap premiums paid		65,210
Securities lending income receivable		30,632
Interest receivable		15,304,437
Variation margin receivable		170,584

Total assets		5,514,577,598


Liabilities
Collateral on securities loaned at value		540,927,421
Investments purchased payable		1,400,197,633
TBA sale commitments at value (proceeds — $778,932,704)		778,408,064
Swap premiums received		666,475
Cash due to broker for swaps		1,690,000
Investment advisory fees payable		567,055
Professional fees payable		31,472
Trustees’ fees payable		19,770
Unrealized depreciation on foreign currency exchange contracts		2,429,326

Total liabilities		2,724,937,216

Net Assets	$	2,789,640,382


Net Assets Consist of
Investors’ capital	$	2,673,701,340
Net unrealized appreciation/depreciation		115,939,042

Net Assets	$	2,789,640,382


Statement of Operations		CoreAlpha Bond Master Portfolio


Year Ended December 31, 2012

Investment Income
Interest	$	65,548,296
Income — affiliated		1,106,514
Dividends		361,353
Securities lending — affiliated — net		214,401

Total income		67,230,564


Expenses
Investment advisory		6,297,456
Independent Trustees		71,318
Professional		53,871

Total expenses		6,422,645
Less fees waived by advisor		(125,189	)

Total expenses after fees waived		6,297,456

Net investment income		60,933,108


Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments		53,111,699
Financial futures contracts		(11,562,063	)
Swaps		8,154,669
Foreign currency transactions		(379,321	)

		49,324,984

Net change in unrealized appreciation/depreciation on:
Investments		9,093,932
Financial futures contracts		(903,523	)
Swaps		4,132,596
Foreign currency translations		965,572

		13,288,577

Total realized and unrealized gain		62,613,561

Net Increase in Net Assets Resulting from Operations	$	123,546,669


Statements of Changes in Net Assets		CoreAlpha Bond Master Portfolio


Increase in Net Assets:	Year Ended December 31, 2012			Year Ended December 31, 2011

Operations
Net investment income	$	60,933,108		$	73,808,502
Net realized gain		49,324,984			68,066,011
Net change in unrealized appreciation/depreciation		13,288,577			46,053,042

Net increase in net assets resulting from operations		123,546,669			187,927,555


Capital Transactions
Proceeds from contributions		4,690,973,134			709,072,896
Value of withdrawals		(4,387,331,971	)		(685,111,132	)

Net increase in net assets derived from capital transactions		303,641,163			23,961,764


Net Assets
Total increase in net assets		427,187,832			211,889,319
Beginning of year		2,362,452,550			2,150,563,231

End of year	$	2,789,640,382		$	2,362,452,550


Financial Highlights		CoreAlpha Bond Master Portfolio


	Year Ended December 31,
	2012		2011			2010			2009			2008

Total Investment Return
Total investment return		4.95%		8.38%			6.56%			11.67%			3.62%


Ratios to Average Net Assets
Total expenses		0.25%		0.27%			0.36%			0.35%			0.36%

Total expenses after fees waived		0.24%		0.26%			0.35%			0.35%			0.36%

Net investment income		2.36%		3.22%			3.19%			4.33%			4.47%


Supplemental Data
Net assets, end of year (000)	$	2,789,640	$	2,362,453		$	2,150,563		$	1,633,960		$	1,115,903

Portfolio turnover¹		2,128%		1,646%	²		621%	³		278%	⁴		351%

Portfolio turnover rates include TBA transactions, if any.

Includes mortgage dollar roll transactions. Excluding these transactions the portfolio turnover rate would have been 1,510%.

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

⁴

Excluding TBA transactions, the portfolio turnover rate would have been 199%.


Notes to Financial Statements		CoreAlpha Bond Master Portfolio

1. Organization and Significant Accounting Policies:

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

The following is a summary of significant accounting policies followed by the Master Portfolio:

The Master Portfolio values its bond investments on the basis of last available bid prices or current market quotations provided by dealers or pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more brokers or dealers as obtained from a pricing service. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between investments and calculated yield measures. Asset-backed and mortgage-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. Financial futures contracts traded on exchanges are valued at their last sale price. To-be-announced (“TBA”) commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services. Swap agreements are valued utilizing quotes received daily by the Master Portfolio’s pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments. Investments in open-end

registered investment companies are valued at net asset value each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

Municipal investments (including commitments to purchase such investments on a “when-issued” basis) are valued on the basis of prices provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments and information with respect to various relationships between investments.

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.



38	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012


Notes to Financial Statements (continued)		CoreAlpha Bond Master Portfolio

assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Master Portfolio’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

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

Statement of Operations from the effects of changes in market prices of those investments but are included as a component of net realized and unrealized gain (loss) from investments. The Master Portfolio reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are treated as ordinary income for federal income tax purposes.

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. If the Master Portfolio has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.

The Master Portfolio may purchase certain mortgage pass-through securities. There are a number of important differences among the agencies and instrumentalities of the US government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed Mortgage Pass-Through Certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States but are supported by the right of the issuer to borrow from the Treasury.



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	39


Notes to Financial Statements (continued)		CoreAlpha Bond Master Portfolio

are debt obligations of a legal entity that are collateralized by, and multiple class pass-through securities represent direct ownership interests in, a pool of residential or commercial mortgage loans or mortgage pass-through securities (the “Mortgage Assets”), the payments on which are used to make payments on the CMOs or multiple pass-through securities. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. If the underlying Mortgage Assets experience greater than anticipated pre-payments of principal, the Master Portfolio may not fully recoup its initial investment in IOs.

Stripped Mortgage-Backed Securities: The Master Portfolio may invest in stripped mortgage-backed securities issued by the US government, its agencies and instrumentalities. Stripped mortgage-backed securities are usually structured with two classes that receive different proportions of the interest (IOs) and principal (POs) distributions on a pool of Mortgage Assets. The Master Portfolio also may invest in stripped mortgage-backed securities that are privately issued.

Capital Trusts: The Master Portfolio may invest in capital trusts. 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. 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.

Preferred Stock: The Master Portfolio may invest in preferred stock. Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion

element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

TBA Commitments: The Master Portfolio may enter into TBA commitments. TBA commitments are forward agreements for the purchase or sale of mortgage-backed securities for a fixed price, with payment and delivery on an agreed upon future settlement date. The specific securities to be delivered are not identified at the trade date. However, delivered securities must meet specified terms, including issuer, rate and mortgage terms. The Master Portfolio generally enters into TBA commitments with the intent to take possession of or deliver the underlying mortgage-backed securities but can extend the settlement or roll the transaction. TBA commitments involve a risk of loss if the value of the security to be purchased or sold declines or increases, respectively, prior to settlement date.

Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”) require that the Master Portfolio either deliver collateral or segregate assets in connection with certain investments (e.g., dollar rolls, TBA sale commitments, financial futures contracts, foreign currency exchange contracts, and swaps), the Master Portfolio will, consistent with SEC rules and/or certain interpretive letters issued by the SEC, segregate collateral or designate on its books and records cash or liquid securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, the Master Portfolio engaging in such transactions may have requirements to deliver/deposit securities to/with an exchange or broker-dealer as collateral for certain investments.



40	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012


Notes to Financial Statements (continued)		CoreAlpha Bond Master Portfolio

Securities Lending: The Master Portfolio may lend securities to approved borrowers, such as banks, brokers and other financial institutions. The borrower pledges cash, securities issued or guaranteed by the US government or irrevocable letters of credit issued by a bank as collateral. The initial collateral received by the Master Portfolio 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 in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statement of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the Master Portfolio earns dividend or interest income on the securities loaned but does not receive interest income on the securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions. The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate this risk the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”) BlackRock’s indemnity allows for full replacement of securities lent. The Master Portfolio also could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received. During the year ended December 31, 2012, any securities on loan were collateralized by cash.

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

2. Derivative Financial Instruments:

The Master Portfolio engages in various portfolio investment strategies using derivative contracts both to increase the return of the Master Portfolio and/or to economically hedge, or protect, its exposure to certain risks such as credit risk, interest rate risk, foreign currency exchange rate risk or other risk. These contracts may be transacted on an exchange or OTC.

Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. The Master Portfolio’s maximum risk of loss from counterparty credit risk on OTC derivatives is generally the aggregate unrealized gain netted against any collateral pledged by/posted to the counterparty. For OTC options purchased, the Master Portfolio bears the risk of loss in the amount of the premiums paid plus the positive change in market values net of any collateral received on the options should the counterparty fail to perform under the contracts. Options written by the Master Portfolio do not give rise to counterparty credit risk, as options written obligate the Master Portfolio to perform and not the counterparty. Counterparty risk related to exchange-traded financial futures contracts and options and centrally cleared swaps is deemed to be minimal due to the protection against defaults provided by the exchange on which these contracts trade.



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	41


Notes to Financial Statements (continued)		CoreAlpha Bond Master Portfolio

Financial Futures Contracts: The Master Portfolio purchases 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 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. 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 and are recorded by the Master Portfolio as unrealized appreciation or depreciation. 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.

currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. Foreign currency exchange contracts, when used by the Master Portfolio, help to manage the overall exposure to the currencies in which some of the investments held by the Master Portfolio are denominated. The contract is marked-to-market daily and the change in market value is recorded by the Master Portfolio as an unrealized appreciation or depreciation. When the contract is closed, the Master Portfolio records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of foreign currency exchange contracts involves the risk that the value of a foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies and the risk that the counterparty to the contract does not perform its obligations under the agreement.

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 at a price different from the current market value.



42	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012


Notes to Financial Statements (continued)		CoreAlpha Bond Master Portfolio

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 net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract or centrally cleared (“centrally cleared swaps”). 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 faces the CCP through a future commission merchant. Unlike a bilateral swap agreement, for centrally cleared swaps, the Master Portfolio has no credit exposure to the counterparty as the CCP stands between the Master Portfolio and the counterparty. These payments received or made by the Master Portfolio are recorded in the Statement of Operations as realized gains or losses, respectively. Any upfront fees 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 swap. Swaps are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swaps, if any, is recorded as a receivable or payable for variation margin in the Statement of Assets and Liabilities. When the swap is terminated, the Master Portfolio will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Master Portfolio’s basis in the contract, if any. Generally, the basis of the contracts is the premium received or paid. 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 occurs. As a buyer, if an underlying credit event occurs, the Master Portfolio will either 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 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) (equity risk and/or interest rate risk). Total return swaps are agreements in which there is an exchange of cash flows whereby one party commits to make payments based on the total return (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.

_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. Interest rate floors, which are a type of interest rate swap, are agreements in which one party agrees to make payments to the other party to the extent that interest rates fall below a specified rate or floor in return for a premium. In more complex swaps, the notional principal amount may decline (or amortize) over time.



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	43


Notes to Financial Statements (continued)		CoreAlpha Bond Master Portfolio


Derivative Financial Instruments Categorized by Risk Exposure:
Fair Values of Derivative Financial Instruments as of December 31, 2012
	Asset Derivatives
	Statement of Assets and Liabilities Location	Value
Interest rate contracts	Net unrealized appreciation/depreciation¹; Unrealized appreciation on swaps¹; Investments at value — unaffiliated²;	$	3,324,855
Foreign currency exchange contracts	Unrealized appreciation on foreign currency exchange contracts		3,254,420
Credit contracts	Unrealized appreciation on swaps¹, Swap premiums paid		1,641,466

Total		$	8,220,741


	Liabilities Derivatives
	Statement of Assets and Liabilities Location	Value
Interest rate contracts	Net unrealized appreciation/depreciation¹;	$	568,059
Foreign currency exchange contracts	Unrealized depreciation on foreign currency exchange contracts		2,429,326
Credit contracts	Swap premiums received		666,475

Total		$	3,663,860

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

Includes options purchased at value as reported in the Schedule of Investments.


The Effect of Derivative Financial Instruments in the Statement of Operations Year Ended December 31, 2012
	Net Realized Gain (Loss) From
	Financial Futures Contracts		Swaps		Foreign Currency Transactions
Interest rate contracts	$	(11,562,063)	$	(3,087,954)		—
Foreign currency exchange contracts		—		—	$	(379,321)
Credit contracts		—		11,070,358		—
Other contracts		—		172,265		—

Total	$	(11,562,063)	$	8,154,669	$	(379,321)


	Net Change in Unrealized Appreciation/Depreciation on
	Financial Futures Contracts		Swaps		Foreign Currency Translations		Options³
Interest rate contracts	$	(903,523)	$	2,346,543		—	$	(423,806)
Foreign currency exchange contracts		—		—	$	965,572		—
Credit contracts		—		1,786,053		—		—

Total	$	(903,523)	$	4,132,596	$	965,572	$	(423,806)

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, 2012, the average quarterly balances of outstanding derivative financial instruments were as follows:


Financial futures contracts:
Average number of contracts purchased		6,778
Average number of contracts sold		587
Average notional value of contracts purchased	$	2,423,151,925
Average notional value of contracts sold	$	99,449,302
Options:
Average number of option contracts purchased		765
Average notional value of option contracts purchased	$	7,650,000
Foreign currency exchange contracts:
Average number of contracts — US dollars purchased		94
Average number of contracts — US dollars sold		93
Average US dollar amounts purchased	$	413,872,835
Average US dollar amounts sold	$	428,821,379
Credit default swaps:
Average number of contracts — sell protection		5
Average notional value — sell protection	$	192,162,500
Interest rate swaps:
Average number of contracts — pays fixed rate		3
Average number of contracts — receives fixed rate		1
Average notional value — pays fixed rate	$	1,245,715,000
Average notional value — receives fixed rate	$	28,125,000
Total return swaps:
Average number of contracts		1
Average notional value	$	7,779,750

3. 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 BlackRock Fund Advisors (“BFA”), the Master Portfolio’s investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory services. BFA is responsible for the management of the Master Portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Master Portfolio. For such services, the Master Portfolio pays BFA a monthly fee based on a percentage of the Master Portfolio’s average daily net assets at the following annual rates:



44	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012


Notes to Financial Statements (continued)		CoreAlpha Bond Master Portfolio


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	%

Effective December 28, 2012, BlackRock Advisors, LLC (“BAL”) replaced BFA as the Master Portfolio’s investment advisor pursuant to the same terms.

Effective December 28, 2012, BAL entered into a sub-advisory agreement with each of BlackRock International Limited (“BIL”) and BFA, both affiliates of BAL. BAL pays BIL and BFA, for services they provide with respect to the Master Portfolio, a monthly fee that is a percentage of the investment advisory fees paid by the Master Portfolio to BAL.

The fees and expenses of MIP’s trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolio. BAL and BFA have contractually agreed to cap the expenses of the Master Portfolio at the rate at which the Master Portfolio pays an advisory fee to BAL or BFA, as applicable, by providing an offsetting credit against the investment advisory fees paid by the Master Portfolio in an amount equal to the independent expenses. This contractual waiver is effective through April 30, 2013. The amount of the waiver, if any, is shown as fees waived in the Statement of Operations.

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

managing the cash collateral. The share of income earned by the Master Portfolio is shown as securities lending – affiliated – net in the Statement of Operations. For the year ended December 31, 2012, BTC received $115,323 in securities lending agent fees related to securities lending activities for the Master Portfolio.

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

4. Investments:

Purchases and sales of investments including paydowns, mortgage dollar roll and TBA transactions and excluding short-term securities and US government securities for the year ended December 31, 2012, were $49,373,200,818 and $48,652,433,759, respectively.

Purchases and sales of US government securities for the Master Portfolio for the year ended December 31, 2012, were $4,375,309,555 and $3,843,701,300, respectively.

5. Borrowings:

MIP on behalf of, the Master Portfolio, along with certain other funds managed by BAL and its affiliates, is a party to a $500 million credit agreement with a group of lenders. The Master Portfolio may borrow under the credit agreement to fund shareholder redemptions. Effective November 2011 to November 2012, the credit agreement had the following terms: a commitment fee of 0.065% per annum based on the Master Portfolio’s pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month London Interbank Offered Rate (“LIBOR”) plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Master Portfolio paid administration and arrangement fees which were allocated to the Master Portfolio based on its net assets as of October 31, 2011. The credit agreement, which expired in November 2012, was renewed with the same terms until November 2013. Effective November 2012 to November 2013, the credit agreement has the following terms: a commitment fee of 0.065% per annum based on the Master Portfolio’s pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Master Portfolio paid administration and arrangement fees which were allocated to the Master Portfolio based on its net assets as of October 31, 2012. The Master Portfolio did not borrow under the credit agreement during the year ended December 31, 2012.

6. Concentration, Market and Credit Risk:



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	45


Notes to Financial Statements (concluded)		CoreAlpha Bond Master Portfolio

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 securities backed by commercial or residential mortgage loans or in issuers that hold mortgage and other asset-backed securities. Please see the Schedule of Investments for these securities. Changes in economic conditions, including delinquencies and/or defaults on assets underlying these securities, can affect the value, income and/or liquidity of such positions.

7. Subsequent Events:



46	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012


Report of Independent Registered Public Accounting Firm		CoreAlpha Bond Master Portfolio

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

audits of these financial statements in accordance with 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, 2012 by correspondence with the custodian, transfer agent, and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 22, 2013



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	47

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreements

The Board of Trustees of Master Investment Portfolio (the “Master Fund”) met on November 29-30, 2012 to consider the approval of the proposed transfer to BlackRock Advisors, LLC (“BAL”) of the obligations of BlackRock Fund Advisors (“BFA”), the Master Fund’s investment advisor, under the investment advisory agreement between the Master Fund and BFA (the “Prior Advisory Agreement”) on behalf of CoreAlpha Bond Master Portfolio (the “Master Portfolio”), a series of the Master Fund. The transfer, which was proposed in light of certain rule amendments recently adopted by the Commodity Futures Trading Commission, required the approval of a new investment advisory agreement (the “Advisory Agreement”) between the Master Fund and BAL that is substantially similar to the Prior Advisory Agreement. The Board of the Master Fund also considered the approval of the proposed sub-advisory agreement (the “BFA Sub-Advisory Agreement”) between BAL and BFA providing that BFA would become a sub-advisor with respect to the Master Portfolio, as well as the approval of a new sub-advisory agreement between BAL and BlackRock International Limited (“BIL”) with respect to the Master Portfolio (the “BIL Sub-Advisory Agreement”, and together with the BFA Sub-Advisory Agreement, the “Sub-Advisory Agreements”), to replace the existing sub-advisory agreement between BFA and BIL (the “Prior Sub-Advisory Agreement”). BlackRock CoreAlpha Bond Fund (the “Portfolio”), a series of BlackRock Funds III (the “Fund”), is a “feeder” fund that invests all of its investable assets in the Master Portfolio. Accordingly, the Board of Trustees of the Fund also considered the approval of the transfer of the Advisory Agreement to BAL and the approval of the Sub-Advisory Agreements. For simplicity, the Board of Trustees of the Master Fund and the Board of Trustees of the Fund are referred to herein collectively as the “Board,” and the members are referred to as “Board Members.”

As previously disclosed to the interestholders of the Master Portfolio and the shareholders of the Portfolio, the Board of the Master Fund and the Fund met in person on April 17, 2012 and May 15-16, 2012, pursuant to requirements under the Investment Company Act of 1940, as amended (the “1940 Act”), to consider the annual renewal of the Prior Advisory Agreement with BFA and the Prior Sub-Advisory Agreement. As reported in the Semi-Annual Report of the Master Fund for the period ended June 30, 2012, after full review and discussion of all relevant factors, the Board of the Master Fund at the May 15-16, 2012 meeting approved the continuation of the Prior Advisory Agreement with BFA and the Prior Sub-Advisory Agreement. The Board of the Fund also considered the continuation of the Prior Advisory Agreement with BFA and the Prior Sub-Advisory Agreement and found the Prior Advisory Agreement and the Prior Sub-Advisory Agreement to be satisfactory.

At the November 29-30, 2012 meeting, the Board noted that the factors considered in connection with the May 2012 approval of the Prior Advisory Agreement and the Prior Sub-Advisory Agreement would not be materially affected by the transfer of the Prior Advisory Agreement from BFA to BAL or the Prior Sub-Advisory Agreement from BFA to BAL. The Board was informed that the Master Portfolio would be charged the same advisory fee, the contractual independent expense reimbursement agreement currently in effect would continue and the portfolio management team that advised the Master Portfolio under BFA would continue to advise the Master Portfolio under BAL. The Board further noted that the sub-advisory services to be provided under the BFA Sub-Advisory Agreement would be provided by BFA, presently the Master Portfolio’s investment adviser. In addition, the Board noted that the BIL Sub-Advisory Agreement was substantially similar to the Prior Sub-Advisory Agreement with BIL. Finally, the Board was advised by counsel that the proposed transaction would not constitute an “assignment” of the Prior Advisory Agreement or the Prior Sub-Advisory Agreement, within the meaning of the 1940 Act, that would require a shareholder vote.

Following further discussion, all Board Members of the Master Fund present at the November 29-30, 2012 meeting, including all the Independent Board Members, approved the Advisory Agreement and the transfer to BAL of the obligations under the Prior Advisory Agreement between BFA and the Master Fund, with respect to the Master Portfolio. The Board of the Master Fund also approved the Sub-Advisory Agreement between BAL and BFA, the Sub-Advisory Agreement between BAL and BIL and the transfer to BAL of the obligations of BFA under the Prior Sub-Advisory Agreement between BFA and BIL. The approvals of the new agreements are effective through June 30, 2013. All Board Members of the Fund present at the November 29-30, 2012 meeting, including all the Independent Board Members, also considered the approval of the Advisory Agreement and the Sub-Advisory Agreements, as well as the transfer of the obligations under the Prior Advisory Agreement and the Prior Sub-Advisory Agreement, and found the new arrangements to be satisfactory.



48	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012


Officers and Trustees


Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees¹
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 106 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. since 1987; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of Seventy (civic) since 2006; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 106 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy since 2002; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 106 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President of Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 106 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 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) since 2011, President thereof from 1997 to 2011 and Trustee since 1980; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (strategic solutions company) since 2005; Director, Cerego, LLC (software development and design) since 2005; Director, Cybersettle (dispute resolution technology) since 2009.	33 RICs consisting of 106 Portfolios	AIMS Worldwide, Inc. (marketing)
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1999 to 2008.	33 RICs consisting of 106 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital since 2005; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 106 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, The West Penn Allegheny Health System (a not-for-profit health system) since 2008; 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; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 106 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 106 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 106 Portfolios	None



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	49


Officers and Trustees (continued)


Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees¹ (concluded)
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Chairman Elect 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; 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 106 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh since 2005 and Dean thereof from 1997 to 2005; Director, Alkon Corporation (pneumatics) since 1992; Director, Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 106 Portfolios	None
	¹ Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year extensions in terms of Trustees who turn 72 prior to December 31, 2013. ² Date shown is the earliest date a person has served for the Trust/MIP covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the Trust’s/MIP’s Board. As a result, although the chart shows certain Trustees as joining the Trust’s/MIP’s board in 2009, each Trustee first became a member of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees³
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	155 RICs consisting of 278 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	155 RICs consisting of 278 Portfolios	None
	³ Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.



50	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012


Officers and Trustees (concluded)


Name, Address and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers*
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock since 2000; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2002; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009; and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Simon Mendelson 55 East 52nd Street New York, NY 10055 1964	Vice President	Since 2009	Managing Director of BlackRock since 2005; Co-head of the Global Cash and Securities Lending Group since 2010; Chief Operating Officer and Head of the Global Client Group for BlackRock’s Global Cash Management Business from 2007 to 2010; Head of BlackRock’s Strategy and Development Group from 2005 to 2007; Partner of McKinsey & Co. from 1997 to 2005.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2009	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2009	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Director of BlackRock since 2010; 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.
	* Officers of the Trust/MIP serve at the pleasure of the Board of Trustees.

Investment Advisor

and Administrator

BlackRock

Advisors, LLC

Wilmington, DE 19809

Sub-Advisors

BlackRock Fund
Advisors

San Francisco, CA
94105

BlackRock International Limited

Edinburgh, EH3 8JB

United Kingdom

Custodian and

Accounting Agent

State Street Bank

and Trust Company

Boston, MA 02110

Transfer Agent

BNY Mellon Investment

Servicing (US) Inc.

Wilmington, DE 19809

Distributor

BlackRock

Investments, LLC

New York, NY 10022

Independent
Registered

Public Accounting Firm

PricewaterhouseCoopers
LLP

New York, NY 10017

Legal Counsel

Sidley Austin LLP

New York, NY 10019

Address of the

Trust/MIP

400 Howard Street

San Francisco, CA
94105



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	51


Additional Information

General Information

Electronic Delivery

To enroll:

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

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

Shareholders Who Hold Accounts Directly with BlackRock:

1) Access the BlackRock website at http://www.blackrock.com/edelivery

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

3)	Log into your account

Householding

Availability of Quarterly Schedule of Investments

Availability of Proxy Voting Policies and Procedures

Availability of Proxy Voting Record

Shareholder Privileges

Account Information

Automatic Investment Plans

Investor Class shareholders who want to invest regularly can arrange to have $50 or more automatically deducted from their checking or savings account and invested in any of the BlackRock funds.

Systematic Withdrawal Plans

Investor Class shareholders can establish a systematic withdrawal plan and receive periodic payments of $50 or more from their BlackRock funds, as long as their account balance is at least $10,000.

Retirement Plans

Shareholders may make investments in conjunction with Traditional, Rollover, Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.



52	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012


Additional Information (concluded)

BlackRock Privacy Principles



BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012	53


A World-Class Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing.


Equity Funds

BlackRock ACWI ex-US Index Fund

BlackRock All-Cap Energy & Resources Portfolio

BlackRock Basic Value Fund

BlackRock Capital Appreciation Fund

BlackRock China Fund

BlackRock Commodity Strategies Fund

BlackRock Emerging Markets Fund

BlackRock Emerging Markets Long/Short Equity Fund

BlackRock Energy & Resources Portfolio

BlackRock Equity Dividend Fund

BlackRock EuroFund

BlackRock Flexible Equity Fund

BlackRock Focus Growth Fund

BlackRock Global Dividend Income Portfolio

BlackRock Global Long/Short Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Global SmallCap Fund

BlackRock Health Sciences Opportunities Portfolio

BlackRock Index Equity Portfolio

BlackRock India Fund

BlackRock International Fund

BlackRock International Index Fund

BlackRock International Opportunities Portfolio

BlackRock Large Cap Core Fund

BlackRock Large Cap Core Plus Fund

BlackRock Large Cap Growth Fund

BlackRock Large Cap Value Fund

BlackRock Latin America Fund

BlackRock Long-Horizon Equity Fund

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Mid Cap Value Opportunities Fund

BlackRock Natural Resources Trust

BlackRock Pacific Fund

BlackRock Real Estate Securities Fund

BlackRock Russell 1000 Index Fund

BlackRock Science & Technology Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock Small Cap Growth Fund II

BlackRock Small Cap Index Fund

BlackRock S&P 500 Index Fund

BlackRock S&P 500 Stock Fund

BlackRock U.S. Opportunities Portfolio

BlackRock Value Opportunities Fund

BlackRock World Gold Fund


Taxable Fixed Income Funds

BlackRock Bond Index Fund

BlackRock Core Bond Portfolio

BlackRock CoreAlpha Bond Fund

BlackRock Emerging Market Local Debt Portfolio

BlackRock Floating Rate Income Portfolio

BlackRock Global Long/Short Credit Fund

BlackRock GNMA Portfolio

BlackRock High Yield Bond Portfolio

BlackRock Inflation Protected Bond Portfolio

BlackRock International Bond Portfolio

BlackRock Long Duration Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Secured Credit Portfolio

BlackRock Strategic Income Opportunities Portfolio

BlackRock Total Return Fund

BlackRock U.S. Government Bond Portfolio

BlackRock U.S. Mortgage Portfolio

BlackRock World Income Fund


Municipal Fixed Income Funds

BlackRock California Municipal Bond Fund

BlackRock High Yield Municipal Fund

BlackRock Intermediate Municipal Fund

BlackRock National Municipal Fund

BlackRock New Jersey Municipal Bond Fund

BlackRock New York Municipal Bond Fund

BlackRock Pennsylvania Municipal Bond Fund

BlackRock Short-Term Municipal Fund


Mixed Asset Funds


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

BlackRock Prepared Portfolios	LifePath Portfolios
Conservative Prepared Portfolio		Retirement	2040
Moderate Prepared Portfolio		2020	2045
Growth Prepared Portfolio		2025	2050
Aggressive Growth Prepared Portfolio		2030	2055
		2035



54	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2012

LOGO


# CAB-12/12-AR

DECEMBER 31, 2012

ANNUAL REPORT

BlackRock Bond Index Fund | of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee


Table of Contents


	Page
Dear Shareholder		3
Annual Report:
Fund Summary		4
About Fund Performance		6
Disclosure of Expenses		6
Fund Financial Statements:
Statement of Assets and Liabilities		7
Statement of Operations		8
Statements of Changes in Net Assets		9
Fund Financial Highlights		10
Fund Notes to Financial Statements		13
Fund Report of Independent Registered Public Accounting Firm		16
Important Tax Information (Unaudited)		16
Master Portfolio Information		17
Master Portfolio Financial Statements:
Schedule of Investments		18
Statement of Assets and Liabilities		33
Statement of Operations		34
Statements of Changes in Net Assets		35
Master Portfolio Financial Highlights		36
Master Portfolio Notes to Financial Statements		37
Master Portfolio Report of Independent Registered Public Accounting Firm		42
Officers and Trustees		43
Additional Information		46
A World-Class Mutual Fund Family		48



2	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012

Dear Shareholder

All major asset classes generated positive returns for the 6—and 12-month periods ended December 31, 2012. Riskier assets outperformed higher quality investments as investors sought meaningful returns in a low interest rate environment. International and emerging market equities were the strongest performers. US Treasury yields were volatile, but declined overall, resulting in moderate gains for higher quality fixed income sectors. Tax-exempt municipal bonds benefited from a favorable supply-and-demand environment. Near-zero short term interest rates continued to keep yields on money market securities near their all-time lows.

Sincerely,

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

“Although 2012 brought its share of headwinds, the strongest returns came from higher-risk asset classes as investors reached for yield in an environment of extremely low interest rates.”

Rob Kapito

President, BlackRock Advisors, LLC


Total Returns as of December 31, 2012
	6-month			12-month
US large cap equities (S&P 500^® Index)		5.95	%		16.00	%
US small cap equities (Russell 2000^® Index)		7.20			16.35
International equities (MSCI Europe, Australasia, Far East Index)		13.95			17.32
Emerging market equities (MSCI Emerging Markets Index)		13.75			18.22
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)		0.07			0.11
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		0.71			4.18
US investment grade bonds (Barclays US Aggregate Bond Index)		1.80			4.21
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.15			7.42
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)		7.97			15.78

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 IS NOT PART OF YOUR FUND REPORT				3


Fund Summary as of December 31, 2012		BlackRock Bond Index Fund

Investment Objective

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

Portfolio Management Commentary

How did the Fund perform?

_Ÿ

For the 12-month period ended December 31, 2012, the Fund’s Institutional, Investor A and Class K Shares returned 3.91%, 3.66% and 3.94%, respectively, while the benchmark Barclays US Aggregate Bond Index (the “Index”) returned 4.21%. The Index is comprised of US government securities and investment-grade corporate bonds, as well as mortgage-backed securities (“MBS”), asset-backed securities (“ABS”) and commercial mortgage-backed securities (“CMBS”).

_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

Risk asset markets in the United States rallied in early 2012 amid reduced systemic risk levels stemming from the eurozone’s sovereign debt crisis and better economic data in the United States. Global central bank stimulus was vital to calming financial markets. In addition to improving liquidity conditions, the European Central Bank’s (“ECB”) long-term refinancing operation program appeared to begin rebuilding confidence in eurozone banks by reducing the rollover risk of wholesale funding. Beyond Europe, massive global central bank liquidity infusions and broadly accommodative policies intended to mitigate shock risks and stimulate economic growth helped drive risk asset rallies globally.

_Ÿ

In sharp contrast with the first quarter, a broad range of economic indicators markedly deteriorated in the second quarter. At the same time, the eurozone’s debt troubles resurfaced in the headlines and the US election and debt ceiling debate added to concerns. Risk assets globally sold off as investors flocked to safe-haven investments, pushing US Treasury yields to record lows. However, as the outlook for the global economy worsened, investors grew more optimistic that the world’s largest central banks would enact policies to stimulate growth. The anticipation of central bank stimulus drove risk markets higher over the summer. Risk sentiment became even more positive later in July when members of the ECB, including President Draghi, made strong

commitments to do “whatever it takes” to preserve the euro. That stated commitment spurred a sell-off in Treasuries and a further rally of peripheral yields as investors anticipated greater ECB intervention to reduce risk premiums.

_Ÿ

Going into the fourth quarter, economic data showed signs of improvement, but investors continued to question whether the third round of quantitative easing from the US Federal Reserve (the “Fed”) could drive real growth. Emerging markets and credit sectors led a fixed income rally as growth-related assets caught up with improving US economic data. In the final months of the year, investors became increasingly concerned about the US “fiscal cliff” (i.e., tax increases and spending cuts scheduled to take effect at the beginning of 2013). While consumer spending was robust, business investment remained muted due to fiscal policy uncertainty. On New Year’s Day, Congress finally agreed to a tax deal to avoid the worst part of the “fiscal cliff.”

_Ÿ

While the 2-year and 30-year portions of the Treasury yield curve moved up modestly over the course of the year, the intermediate portion of the curve rallied. Credit sectors outperformed government-related sectors, with particular strength from financial names. All non-government sectors outperformed similarly-dated Treasuries.

Describe recent portfolio activity.

_Ÿ

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

_Ÿ

Also during the period, 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.



4	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012


		BlackRock Bond Index Fund

Total Return Based on a $10,000 Investment

LOGO

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

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

The unmanaged market-weighted index is composed of investment grade corporate bonds (rated BBB or better), ABS, MBS, CMBS, and US Treasury and government agency issues with at least one year to maturity.

Performance Summary for the Period Ended December 31, 2012


	Standardized 30-Day Yields			6-Month Total Returns			Average Annual Total Returns
	Standardized 30-Day Yields			6-Month Total Returns			1 Year			5 Years			10 Years
Institutional		(0.18	)%		1.66	%		3.91	%		5.83	%		5.10	%
Investor A		(0.20	)		1.54			3.66			5.61			4.91
Class K		(0.17	)		1.59			3.94			5.87			5.13
Barclays US Aggregate Bond Index		—			1.80			4.21			5.95			5.18

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						Hypothetical²
	Beginning Account Value July 1, 2012		Ending Account Value December 31, 2012		Expenses Paid During the Period¹		Beginning Account Value July 1, 2012		Ending Account Value December 31, 2012		Expenses Paid During the Period¹		Annualized Expense Ratio

Institutional	$	1,000.00	$	1,016.60	$	1.27	$	1,000.00	$	1,023.88	$	1.27		0.25	%
Investor A		1,000.00		1,015.40		2.53		1,000.00		1,022.62		2.54		0.50
Class K		1,000.00		1,015.90		1.01		1,000.00		1,024.13		1.02		0.20

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366.

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



BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012	5


About Fund Performance		BlackRock Bond Index Fund

_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 eligible investors. Prior to March 31, 2011, Institutional Shares’ performance results are those of Class K Shares restated to reflect Institutional Shares’ fees.

_Ÿ

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

Performance information reflects past performance and does not guarantee future results. Current performance data may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the

most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in the performance table on the previous page assume reinvestment of all dividends and capital gain distributions, if any, at net asset value on the 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. Dividends paid to each class of shares will vary because of the different levels of services and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders. The Fund’s administrator waived a portion of the Fund’s expenses. Without such waiver, the Fund’s performance would have been lower.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: 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, 2012 and held through December 31, 2012) 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 also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in other funds’ shareholder reports.



6	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012


Statement of Assets and Liabilities		BlackRock Bond Index Fund


December 31, 2012


Assets
Investments at value — Master Portfolio (cost — $120,504,792)	$	128,885,284
Capital shares sold receivable		205,446

Total assets		129,090,730


Liabilities
Contributions payable to the Master Portfolio		179,513
Capital shares redeemed payable		25,933
Administration fees payable		12,302
Service fees payable		353
Professional fees payable		18,567

Total liabilities		236,668

Net Assets	$	128,854,062


Net Assets Consist of
Paid-in capital	$	116,919,079
Distributions in excess of net investment income		(314,256	)
Accumulated net realized gain allocated from the Master Portfolio		3,868,747
Net unrealized appreciation/depreciation allocated from the Master Portfolio		8,380,492

Net Assets	$	128,854,062


Net Asset Value
Institutional — Based on net assets of $11,533,522 and 1,083,045 shares outstanding, unlimited number of shares authorized, no par value	$	10.65

Investor A — Based on net assets of $1,804,874 and 169,546 shares outstanding, unlimited number of shares authorized, no par value	$	10.65

Class K — Based on net assets of $115,515,666 and 10,846,244 shares outstanding, unlimited number of shares authorized, no par value	$	10.65


Statement of Operations		BlackRock Bond Index Fund


Year Ended December 31, 2012


Investment Income
Net investment income allocated from the Master Portfolio:
Interest	$	2,850,336
Income — affiliated		152,880
Securities lending — affiliated — net		20,992
Expenses		(133,646	)
Fees waived		21,265

Total income		2,911,827


Fund Expenses
Administration — Institutional		14,492
Administration — Investor A		1,544
Administration — Class K		157,714
Service — Investor A		2,276
Professional		19,356

Total expenses		195,382
Less fees waived by administrator — Institutional		(1,156	)
Less fees waived by administrator — Investor A		(123	)
Less fees waived by administrator — Class K		(18,077	)

Total expenses after fees waived		176,026

Net investment income		2,735,801


Realized and Unrealized Gain Allocated from the Master Portfolio
Net realized gain from investments		1,702,108
Net change in unrealized appreciation/depreciation on investments		1,011,040

Total realized and unrealized gain		2,713,148

Net Increase in Net Assets Resulting from Operations	$	5,448,949


Statements of Changes in Net Assets		BlackRock Bond Index Fund


	Year Ended December 31,
Increase (Decrease) in Net Assets:	2012			2011


Operations
Net investment income	$	2,735,801		$	3,405,028
Net realized gain		1,702,108			831,963
Net change in unrealized appreciation/depreciation		1,011,040			3,625,776

Net increase in net assets resulting from operations		5,448,949			7,862,767


Dividends and Distributions to Shareholders From¹
Net investment income:
Institutional		(172,553	)		(690	)²
Investor A		(15,435	)		(1,931	)²
Class K		(2,676,865	)		(3,612,372	)
Net realized gain:
Institutional		(120,228	)		(19	)²
Investor A		(16,757	)		(83	)²
Class K		(1,213,805	)		(49,563	)

Decrease in net assets resulting from dividends and distributions to shareholders		(4,215,643	)		(3,664,658	)


Capital Share Transactions
Net increase in net assets derived from capital share transactions		5,351,333			19,512,360


Net Assets
Total increase in net assets		6,584,639			23,710,469
Beginning of year		122,269,423			98,558,954

End of year	$	128,854,062		$	122,269,423

Distributions in excess of net investment income	$	(314,256	)	$	(185,204	)

Dividends and distributions are determined in accordance with federal income tax regulations.

Amounts are from March 31, 2011 (commencement of operations) to December 31, 2011.


Financial Highlights		BlackRock Bond Index Fund


	Institutional
	Year Ended December 31, 2012			Period March 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	10.57		$	10.11

Net investment income²		0.19			0.25
Net realized and unrealized gain		0.22			0.46

Net increase from investment operations		0.41			0.71

Dividends and distributions from:³
Net investment income		(0.22	)		(0.25	)
Net realized gain		(0.11	)		(0.00	)⁴

Total dividends and distributions		(0.33	)		(0.25	)

Net asset value, end of period	$	10.65		$	10.57


Total Investment Return⁵
Based on net asset value		3.91%			7.18%	⁶


Ratios to Average Net Assets⁷
Total expenses		0.26%	⁸		0.27%	^9,10

Total expenses after fees waived		0.25%	⁸		0.25%	^9,10

Net investment income		1.71%	⁸		2.98%	^9,10


Supplemental Data
Net assets, end of period (000)	$	11,534		$	53

Portfolio turnover of the Master Portfolio		436%			122%	¹¹

Commencement of operations.

Based on average shares outstanding throughout the period.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

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

⁸

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

⁹

Annualized.

¹⁰

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

¹¹

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


Financial Highlights (continued)		BlackRock Bond Index Fund


	Investor A
	Year Ended December 31, 2012			Period March 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	10.57		$	10.11

Net investment income²		0.16			0.22
Net realized and unrealized gain		0.22			0.48

Net increase from investment operations		0.38			0.70

Dividends and distributions from:³
Net investment income		(0.19	)		(0.24	)
Net realized gain		(0.11	)		(0.00	)⁴

Total dividends and distributions		(0.30	)		(0.24	)

Net asset value, end of period	$	10.65		$	10.57


Total Investment Return⁵
Based on net asset value		3.66%			7.01%	⁶


Ratios to Average Net Assets⁷
Total expenses		0.51%	⁸		0.53%	^9,10

Total expenses after fees waived		0.50%	⁸		0.50%	^9,10

Net investment income		1.45%	⁸		2.65%	^9,10


Supplemental Data
Net assets, end of period (000)	$	1,805		$	202

Portfolio turnover of the Master Portfolio		436%			122%	¹¹

Commencement of operations.

Based on average shares outstanding throughout the period.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

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

⁸

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

⁹

Annualized.

¹⁰

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

¹¹

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


Financial Highlights (concluded)		BlackRock Bond Index Fund


	Class K
	Year Ended December 31,
	2012			2011			2010			2009			2008


Per Share Operating Performance
Net asset value, beginning of year	$	10.57		$	10.17		$	9.90		$	9.82		$	9.74

Net investment income		0.22	¹		0.35	¹		0.37	¹		0.40	¹		0.47
Net realized and unrealized gain		0.19			0.40			0.30			0.10			0.09

Net increase from investment operations		0.41			0.75			0.67			0.50			0.56

Dividends and distributions to shareholders from:²
Net investment income		(0.22	)		(0.35	)		(0.40	)		(0.42	)		(0.48	)
Net realized gain		(0.11	)		(0.00	)³		—			—			—
Return of capital		—			—			—			—			(0.00	)³

Total dividends and distributions		(0.33	)		(0.35	)		(0.40	)		(0.42	)		(0.48	)

Net asset value, end of year	$	10.65		$	10.57		$	10.17		$	9.90		$	9.82


Total Investment Return⁴
Based on net asset value		3.94%			7.55%			6.79%			5.21%			5.91%


Ratios to Average Net Assets⁵
Total expenses		0.21%	⁶		0.23%	⁷		0.26%			0.25%			0.26%

Total expenses after fees waived		0.20%	⁶		0.20%	⁷		0.23%			0.23%			0.23%

Net investment income		1.96%	⁶		3.19%	⁷		3.65%			4.05%			4.84%


Supplemental Data
Net assets, end of year (000)	$	115,516		$	122,015		$	98,559		$	156,688		$	132,997

Portfolio turnover of the Master Portfolio		436%			122%	⁸		59%	⁹		103%	¹⁰		89%

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

Amount is greater than ($0.00) per share.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

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

⁶

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

⁷

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

⁸

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

⁹

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

¹⁰

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


Notes to Financial Statements		BlackRock Bond Index Fund

1. Organization and Significant Accounting Policies:

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”), which has the same investment objective and strategies as the Fund. The value of the Fund’s investment in the Master Portfolio reflects the Fund’s proportionate interest in the net assets of the Master Portfolio. The performance of the Fund is directly affected by the performance of the Master Portfolio. The percentage of the Master Portfolio owned by the Fund at December 31, 2012 was 26.76%. 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’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period . Actual results could differ from those estimates. The Fund offers multiple classes of shares. Institutional and Class K Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are sold without a sales charge. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Investor A Shares bear certain expenses related to the shareholder servicing of such shares. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing expenditures.

The following is a summary of significant accounting policies followed by the Fund:

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 for utilizing partnership tax allocations rules. In addition, the Fund accrues its own expenses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Dividends and Distributions: Dividends from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. The portion of distributions that exceeds the Fund’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a nontaxable return of capital. Distributions in excess of the Fund’s taxable income and net capital gains, but not in excess of the Fund’s earnings and profits, will be taxable to shareholders as ordinary income and will not constitute a nontaxable return of capital. Capital losses carried forward from years beginning before 2011 do not reduce earnings and profits, even if such carried forward losses offset current year realized gains. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

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

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

2. Administration 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, Inc. (“BlackRock”).

The Trust, on behalf of the Fund, entered into an Administration Agreement with BlackRock Institutional Trust Company, N.A. (“BTC”) (the “Administrator”), which has agreed to provide general administration services (other than investment advice and related portfolio activities).



BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012	13


Notes to Financial Statements (continued)		BlackRock Bond Index Fund

BTC, 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. BTC is entitled to receive for these administration services an annual fee of 0.12% based on the average daily net assets of Class K Shares and 0.17% of the average daily net assets of Institutional and Investor A Shares. Effective July 1, 2012, BlackRock Advisors, LLC (“BAL”) replaced BTC as the Fund’s administrator and entered into an Administration Agreement with the Trust, on behalf of the Fund, on similar terms.

From time to time, BAL may waive and previously BTC waived 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 and previously BTC delegated 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, and previously BTC have 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, 2013.

The Trust, on behalf of the Fund, entered into a Distribution Agreement and Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of BlackRock. Pursuant to the Distribution 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 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.

3. Income Tax Information:

The tax character of distributions paid during the fiscal years ended December 31, 2012 and December 31, 2011 was as follows:


	12/31/12		12/31/11
Ordinary income	$	3,909,690	$	3,590,232
Long-term capital gains		305,953		74,426

Total	$	4,215,643	$	3,664,658

As of December 31, 2012, the tax components of accumulated net earnings were as follows:


Undistributed ordinary income	$	11,101
Undistributed long-term capital gains		279,933
Net unrealized gains¹		11,643,949

Total	$	11,934,983

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

4. Capital Share Transactions:

Transactions in capital shares for each class were as follows:


	Year Ended December 31, 2012						Period March 31, 2011¹ to December 31, 2011
	Shares			Amount			Shares			Amount
Institutional
Shares sold		1,074,128		$	11,402,994			9,869		$	101,838
Shares issued to shareholders in reinvestment of dividends and distributions		27,318			291,967			7			70
Shares redeemed		(23,432	)		(251,264	)		(4,845	)		(50,004	)

Net increase		1,078,014		$	11,443,697			5,031		$	51,904



14	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012


Notes to Financial Statements (concluded)		BlackRock Bond Index Fund


	Year Ended December 31, 2012						Period March 31, 2011¹ to December 31, 2011
	Shares			Amount			Shares			Amount
Investor A
Shares sold		180,089		$	1,929,146			19,264		$	201,272
Shares issued to shareholders in reinvestment of dividends and distributions		2,944			31,441			135			1,414
Shares redeemed		(32,565	)		(350,706	)		(321	)		(3,363	)

Net increase		150,468		$	1,609,881			19,078		$	199,323


Class K								Year Ended December 31, 2011
Shares sold		4,385,092		$	46,828,468			4,681,283		$	48,629,757
Shares issued to shareholders in reinvestment of dividends and distributions		299,276			3,195,475			299,480			3,098,229
Shares redeemed		(5,378,321	)		(57,726,188	)		(3,134,942	)		(32,466,853	)

Net increase (decrease)		(693,953	)	$	(7,702,245	)		1,845,821		$	19,261,133

Total Net Increase		534,529		$	5,351,333			1,869,930		$	19,512,360

Commencement of operations.

At December 31, 2012, shares owned by affiliates were as follows:


	Shares
Institutional		2,473
Investor A		2,473

5. Subsequent Events:



BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012	15


Report of Independent Registered Public Accounting Firm		BlackRock Bond Index Fund

To the Shareholders and Board of Trustees of BlackRock Funds III:

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 audits 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.

PricewaterhouseCoopers LLP

New York, New York

February 22, 2013


Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by the Fund during the fiscal year ended December 31, 2012:


	January — December 2012
Interest-Related Dividends for Non-US Residents and Qualified Short-Term Capital Gains¹		85.27%
Federal Obligation Interest²		15.61%

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

Additionally, the Fund distributed long-term capital gains of $0.007705 and $0.016759 to shareholders of record on June 28, 2012 and December 11, 2012 respectively.



16	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012


Master Portfolio Information as of December 31, 2012		Bond Index Master Portfolio


Portfolio Composition


		Percent of Long-Term Investments


US Treasury Obligations	37	%
US Government Sponsored Agency Securities	36
Corporate Bonds	22
Foreign Agency Obligations	2
Non-Agency Mortgage-Backed Securities	2
Taxable Municipal Bonds	1


Credit Quality Allocation¹

Percent of

Long-Term Investments


AAA/Aaa²	70	%
AA/Aa	8
A/A	12
BBB/Baa	10

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

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



BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012	17

Schedule of Investments December 31, 2012

Bond Index Master Portfolio

(Percentages shown are based on Net Assets)


Asset-Backed Securities	Par (000)		Value

Ally Auto Receivables Trust, 0.80%, 10/16/17	$	500	$	500,439
AmeriCredit Automobile Receivables Trust, Series 2011-4, Class B, 2.26%, 9/08/16		650		664,012
Chase Issuance Trust, Series 2012-A8, Class A8, 0.54%, 10/16/17		250		249,780
Citibank Credit Card Issuance Trust:
Series 2006-A3, Class A3, 5.30%, 3/15/18		100		114,750
Series 2008-A1, Class A1, 5.35%, 2/07/20		170		205,173
Total Asset-Backed Securities — 0.4%				1,734,154

Corporate Bonds
Aerospace & Defense — 0.4%
The Boeing Co., 6.13%, 2/15/33		100		133,778
General Dynamics Corp., 3.88%, 7/15/21		50		56,086
Honeywell International, Inc., 5.30%, 3/01/18		100		119,538
L-3 Communications Corp.:
3.95%, 11/15/16		250		270,316
4.95%, 2/15/21		50		56,415
Lockheed Martin Corp., 3.35%, 9/15/21		250		264,189
Precision Castparts Corp., 1.25%, 1/15/18		75		75,124
Raytheon Co., 4.70%, 12/15/41		100		113,166
United Technologies Corp.:
1.80%, 6/01/17		250		257,340
3.10%, 6/01/22		100		105,899
5.70%, 4/15/40		50		64,291
4.50%, 6/01/42		200		222,232

				1,738,374
Agriculture — 0.0%
Bunge Ltd. Finance Corp., 3.20%, 6/15/17		150		156,545
Air Freight & Logistics — 0.1%
FedEx Corp., 3.88%, 8/01/42		50		48,887
United Parcel Service, Inc.:
5.13%, 4/01/19		50		60,811
6.20%, 1/15/38		100		134,127

				243,825
Airlines — 0.0%
Continental Airlines 2012-1 Class A Pass Through Trust, 4.15%, 10/11/25		50		52,625
Delta Air Lines 2012-1 Class A Pass Through Trust, 4.75%, 5/07/21		100		107,000

				159,625
Auto Components — 0.0%
Johnson Controls, Inc., 1.75%, 3/01/14		50		50,675
Automobiles — 0.2%
DaimlerChrysler North America Holding Corp., 8.50%, 1/18/31		100		155,643
Ford Motor Co., 7.45%, 7/16/31		150		190,500


Corporate Bonds	Par (000)		Value

Automobiles (concluded)
Toyota Motor Credit Corp., 1.00%, 2/17/15	$	500	$	503,354

				849,497
Beverages — 0.5%
Anheuser-Busch Cos. LLC, 6.45%, 9/01/37		100		136,743
Anheuser-Busch InBev Worldwide, Inc.:
5.38%, 11/15/14		150		162,831
7.75%, 1/15/19		250		333,904
2.50%, 7/15/22		200		201,252
3.75%, 7/15/42		50		50,231
Beam, Inc., 1.88%, 5/15/17		100		102,150
The Coca-Cola Co.:
1.80%, 9/01/16		50		51,643
4.88%, 3/15/19 (a)		150		178,921
Diageo Capital Plc:
1.50%, 5/11/17		200		202,828
5.75%, 10/23/17		100		120,477
Diageo Investment Corp., 2.88%, 5/11/22		100		103,227
Dr Pepper Snapple Group, Inc.:
3.20%, 11/15/21		25		25,885
2.70%, 11/15/22		100		99,346
Molson Coors Brewing Co., 3.50%, 5/01/22		75		79,180
PepsiCo, Inc.:
0.75%, 3/05/15		100		100,360
2.75%, 3/05/22		250		256,828
4.88%, 11/01/40		100		116,951

				2,322,757
Biotechnology — 0.2%
Amgen, Inc.:
2.13%, 5/15/17		50		51,797
3.45%, 10/01/20		100		107,042
5.15%, 11/15/41		300		337,610
Celgene Corp., 3.25%, 8/15/22		150		152,907
Gilead Sciences, Inc.:
3.05%, 12/01/16		150		160,654
5.65%, 12/01/41		50		62,115

				872,125
Capital Markets — 1.0%
The Bear Stearns Cos., Inc./JPMorgan Chase & Co., 5.70%, 11/15/14		200		217,334
The Charles Schwab Corp., 4.45%, 7/22/20		100		113,006
Franklin Resources, Inc., 2.80%, 9/15/22		150		151,834
The Goldman Sachs Group, Inc.:
3.30%, 5/03/15		500		521,129
3.70%, 8/01/15		150		158,309
3.63%, 2/07/16		400		423,409
5.95%, 1/18/18		300		349,108
7.50%, 2/15/19		150		188,738
5.75%, 1/24/22		350		413,774
6.13%, 2/15/33 (a)		150		175,579
6.75%, 10/01/37		200		226,665


Portfolio Abbreviations:

To simplify the listings of portfolio holdings in the Schedule of Investments, the names and descriptions of many of the securities have been abbreviated according to the following list:


GO General Obligation Bonds		RB Revenue Bonds

See Notes to Financial Statements.



18	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

Bond Index Master Portfolio

(Percentages shown are based on Net Assets)


Corporate Bonds	Par (000)		Value

Capital Markets (concluded)
Jefferies Group, Inc., 8.50%, 7/15/19 (a)	$	125	$	149,375
Morgan Stanley:
4.75%, 4/01/14 (a)		150		155,321
5.75%, 10/18/16		225		249,428
4.75%, 3/22/17		350		381,836
6.63%, 4/01/18		500		589,288
5.50%, 7/28/21		100		113,537
7.25%, 4/01/32		50		62,904
6.38%, 7/24/42		50		58,615
Nomura Holdings, Inc., 5.00%, 3/04/15 (a)		50		53,013
Raymond James Financial, Inc., 4.25%, 4/15/16		100		105,138
State Street Corp., 2.88%, 3/07/16		100		106,089

				4,963,429
Chemicals — 0.4%
Agrium, Inc., 3.15%, 10/01/22		50		49,683
CF Industries, Inc., 6.88%, 5/01/18		200		244,322
The Dow Chemical Co.:
8.55%, 5/15/19		100		135,008
4.25%, 11/15/20		50		55,586
4.13%, 11/15/21 (a)		50		54,776
5.25%, 11/15/41		100		111,531
E.I. du Pont de Nemours & Co., 6.00%, 7/15/18		325		401,094
Eastman Chemical Co., 3.60%, 8/15/22		200		209,465
Ecolab, Inc., 4.35%, 12/08/21		150		167,427
Methanex Corp., 3.25%, 12/15/19		250		251,454
The Mosaic Co., 3.75%, 11/15/21		50		53,115
Potash Corp. of Saskatchewan, Inc., 3.25%, 12/01/17		250		273,543
Praxair, Inc., 4.63%, 3/30/15		100		108,875

				2,115,879
Commercial Banks — 2.7%
Abbey National Treasury Services PLC, 4.00%, 4/27/16		150		158,607
Bancolombia SA, 5.95%, 6/03/21		100		115,500
Bank of Montreal, 2.50%, 1/11/17		150		157,236
The Bank of New York Mellon Corp.:
2.30%, 7/28/16		50		52,263
3.55%, 9/23/21		50		54,478
Bank of Nova Scotia:
3.40%, 1/22/15		200		210,856
2.90%, 3/29/16		100		105,987
1.38%, 12/18/17		100		100,139
Barclays Bank Plc:
2.75%, 2/23/15		100		103,583
5.00%, 9/22/16		175		196,155
5.13%, 1/08/20		200		227,787
BB&T Corp., 5.25%, 11/01/19 (a)		100		115,624
BBVA US Senior SAU, 4.66%, 10/09/15		250		256,329
Commonwealth Bank of Australia/New York NY, 1.25%, 9/18/15		200		202,185
Council of Europe Development Bank, 1.50%, 1/15/15		50		51,035
Credit Suisse AG, 5.40%, 1/14/20		150		168,659
Credit Suisse New York:
2.20%, 1/14/14		100		101,526
3.50%, 3/23/15		300		316,364


Corporate Bonds	Par (000)		Value

Commercial Banks (continued)
European Investment Bank:
1.25%, 2/14/14	$	250	$	252,402
3.13%, 6/04/14		1,000		1,037,960
2.50%, 5/16/16		100		105,962
5.13%, 9/13/16		225		260,550
1.25%, 10/14/16		100		101,870
1.63%, 6/15/17		500		516,100
Export-Import Bank of Korea, 4.00%, 1/11/17		400		433,736
Fifth Third Bancorp:
3.63%, 1/25/16		50		53,421
3.50%, 3/15/22		100		104,808
HSBC Holdings Plc:
4.88%, 1/14/22		150		174,085
4.00%, 3/30/22		250		273,716
6.80%, 6/01/38		250		319,716
HSBC USA, Inc., 2.38%, 2/13/15		300		308,588
International Bank for Reconstruction & Development:
2.38%, 5/26/15		500		524,203
1.00%, 9/15/16		75		76,158
International Finance Corp., 0.50%, 5/15/15		500		501,504
JPMorgan Chase Bank NA, Series BKNT, 6.00%, 10/01/17		250		295,960
KeyCorp, 5.10%, 3/24/21		100		116,501
Korea Development Bank, 3.25%, 3/09/16		100		104,731
Landwirtschaftliche Rentenbank, 3.13%, 7/15/15		200		213,100
Lloyds TSB Bank Plc, 4.20%, 3/28/17		50		55,432
National Australia Bank, NY, 2.00%, 3/09/15		250		255,980
Oesterreichische Kontrollbank AG:
1.38%, 1/21/14		200		202,022
2.00%, 6/03/16		100		103,870
PNC Funding Corp.:
5.63%, 2/01/17 (b)		150		173,187
3.30%, 3/08/22 (b)		150		158,132
Rabobank Nederland:
3.38%, 1/19/17		100		107,429
3.88%, 2/08/22		150		161,419
5.25%, 5/24/41		25		29,356
Royal Bank of Canada, 1.45%, 10/30/14		100		101,722
Sumitomo Mitsui Banking Corp., 1.80%, 7/18/17		250		254,762
SunTrust Banks, Inc., 3.50%, 1/20/17 (a)		50		53,696
Svensk Exportkredit AB, 2.13%, 7/13/16		200		207,847
Swiss Bank Corp., 7.00%, 10/15/15		150		164,169
The Toronto-Dominion Bank, 2.38%, 10/19/16		50		52,542
US Bancorp:
1.65%, 5/15/17		250		254,725
4.13%, 5/24/21		50		56,698
Wachovia Bank NA/Wells Fargo & Co., 6.60%, 1/15/38		50		68,631
Wachovia Corp., 5.63%, 10/15/16		250		286,632
Wells Fargo & Co.:
2.63%, 12/15/16		100		105,537
2.10%, 5/08/17		150		155,081
5.63%, 12/11/17		250		298,176
3.50%, 3/08/22		350		373,328
Wells Fargo Bank NA, 4.75%, 2/09/15		500		537,008

See Notes to Financial Statements.



BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012	19

Schedule of Investments (continued)

Bond Index Master Portfolio

(Percentages shown are based on Net Assets)


Corporate Bonds	Par (000)		Value

Commercial Banks (concluded)
Westpac Banking Corp.:
3.00%, 8/04/15	$	250	$	264,042
4.88%, 11/19/19		50		58,333

				13,009,140
Commercial Services & Supplies — 0.2%
The ADT Corp., 4.88%, 7/15/42 (c)		100		94,918
Republic Services, Inc.:
5.25%, 11/15/21 (a)		50		58,930
3.55%, 6/01/22		250		260,654
Vanderbilt University, 5.25%, 4/01/19		100		119,830
Waste Management, Inc., 2.90%, 9/15/22 (a)		200		197,890

				732,222
Communications Equipment — 0.1%
Cisco Systems, Inc.:
1.63%, 3/14/14		100		101,496
5.50%, 1/15/40		150		190,642
Motorola Solutions, Inc., 3.75%, 5/15/22 (a)		150		153,257

				445,395
Computers & Peripherals — 0.3%
ACE INA Holdings, Inc., 2.60%, 11/23/15		300		314,940
Dell, Inc., 5.65%, 4/15/18 (a)		75		86,960
Hewlett-Packard Co.:
4.75%, 6/02/14		150		156,360
3.30%, 12/09/16		150		152,683
4.65%, 12/09/21 (a)		100		100,389
6.00%, 9/15/41 (a)		150		148,485
NetApp, Inc., 2.00%, 12/15/17		350		348,753

				1,308,570
Construction & Engineering — 0.1%
ABB Finance USA, Inc.:
1.63%, 5/08/17		150		151,951
2.88%, 5/08/22		100		102,384
URS Corp., 3.85%, 4/01/17 (c)		100		103,014

				357,349
Consumer Finance — 0.3%
American Express Co.:
2.65%, 12/02/22 (c)		230		229,084
4.05%, 12/03/42 (c)		68		67,803
American Express Credit Co., 2.75%, 9/15/15		250		262,095
Capital One Financial Corp.:
7.38%, 5/23/14		250		271,957
6.75%, 9/15/17		100		122,128
Caterpillar Financial Services Corp., 1.10%, 5/29/15		250		252,076
HSBC Finance Corp., 6.68%, 1/15/21		161		191,006

				1,396,149
Diversified Financial Services — 2.7%
American Express Credit Corp., 2.38%, 3/24/17		100		104,632
Bank of America Corp.:
7.38%, 5/15/14		150		162,427
4.50%, 4/01/15		50		53,296
7.75%, 8/15/15		250		283,368
3.63%, 3/17/16		150		158,940
3.75%, 7/12/16		350		374,124


Corporate Bonds	Par (000)		Value

Diversified Financial Services (continued)
3.88%, 3/22/17	$	300	$	325,356
5.63%, 7/01/20		150		177,844
5.00%, 5/13/21		100		114,165
5.70%, 1/24/22		100		120,255
5.88%, 2/07/42		100		124,759
BNP Paribas SA:
3.25%, 3/11/15		100		104,368
2.38%, 9/14/17		250		253,587
5.00%, 1/15/21		100		112,315
Citigroup, Inc.:
6.38%, 8/12/14		150		162,098
2.65%, 3/02/15		400		411,906
3.95%, 6/15/16		150		161,454
4.45%, 1/10/17		400		443,120
8.50%, 5/22/19		250		336,159
6.63%, 6/15/32		100		115,506
6.88%, 3/05/38		100		131,646
8.13%, 7/15/39		75		112,284
5.88%, 1/30/42		150		185,122
Deutsche Bank AG London, 3.25%, 1/11/16		300		317,460
Ford Motor Credit Co. LLC:
7.00%, 4/15/15		250		278,760
2.75%, 5/15/15		500		510,285
4.25%, 2/03/17		250		267,823
General Electric Capital Corp.:
2.25%, 11/09/15		100		103,272
2.90%, 1/09/17		100		105,734
5.63%, 5/01/18		300		356,260
4.38%, 9/16/20		50		55,802
4.65%, 10/17/21		200		228,207
5.88%, 1/14/38		500		603,126
6.38%, 11/15/67 (d)		250		263,750
Series G, 6.00%, 8/07/19		100		121,656
John Deere Capital Corp.:
0.88%, 4/17/15		250		251,099
2.25%, 4/17/19		100		102,922
3.90%, 7/12/21		50		55,767
JPMorgan Chase & Co.:
1.88%, 3/20/15		350		356,293
5.25%, 5/01/15		250		271,957
3.15%, 7/05/16		300		317,835
2.00%, 8/15/17 (a)		250		255,374
4.50%, 1/24/22		300		339,371
3.25%, 9/23/22		200		205,956
6.40%, 5/15/38		100		134,048
5.50%, 10/15/40		125		152,807
5.60%, 7/15/41		50		61,922
Merrill Lynch & Co., Inc.:
6.05%, 5/16/16		250		275,214
6.88%, 4/25/18		400		482,182
6.11%, 1/29/37		100		109,155
Moody’s Corp., 4.50%, 9/01/22		50		53,457
Murray Street Investment Trust I, 4.65%, 3/09/17 (e)		200		216,329
National Rural Utilities Cooperative Finance Corp.:
1.00%, 2/02/15		200		201,481
3.05%, 3/01/16		50		53,075
ORIX Corp., 3.75%, 3/09/17		100		105,560

See Notes to Financial Statements.



20	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

Bond Index Master Portfolio

(Percentages shown are based on Net Assets)


Corporate Bonds	Par (000)		Value

Diversified Financial Services (concluded)
Royal Bank of Scotland Plc:
2.55%, 9/18/15	$	200	$	204,682
4.38%, 3/16/16 (a)		250		270,503
SLM Corp.:
6.00%, 1/25/17		300		324,750
8.45%, 6/15/18		100		117,000
UBS AG Stamford, 5.75%, 4/25/18		300		356,143

				13,015,748
Diversified Telecommunication Services — 1.1%
AT&T, Inc.:
5.10%, 9/15/14		300		322,260
0.80%, 12/01/15		500		499,985
6.30%, 1/15/38		200		256,445
5.35%, 9/01/40		213		248,049
4.30%, 12/15/42 (c)		151		151,657
4.35%, 6/15/45 (c)		509		511,288
British Telecommunications Plc:
2.00%, 6/22/15		250		257,004
9.63%, 12/15/30		50		79,434
CenturyLink, Inc.:
5.80%, 3/15/22		100		105,713
7.65%, 3/15/42		100		104,511
Deutsche Telekom International Finance BV, 8.75%, 6/15/30		150		224,737
France Telecom SA:
2.75%, 9/14/16		200		209,944
4.13%, 9/14/21		150		165,291
5.38%, 1/13/42		25		28,865
Qwest Corp.:
6.50%, 6/01/17 (a)		150		175,140
6.75%, 12/01/21		50		58,598
Telecom Italia Capital SA:
7.18%, 6/18/19		200		232,100
7.72%, 6/04/38		50		54,125
Telefonaktiebolaget LM Ericsson, 4.13%, 5/15/22		100		103,930
Telefonica Emisiones SAU:
3.99%, 2/16/16		100		104,050
5.46%, 2/16/21		50		53,313
7.05%, 6/20/36		75		81,000
Telefonica Europe BV, 8.25%, 9/15/30		50		59,188
Verizon Communications, Inc.:
1.95%, 3/28/14		200		203,616
8.75%, 11/01/18		65		90,251
6.40%, 2/15/38		200		270,774
6.00%, 4/01/41		250		326,294
Verizon Global Funding Corp., 7.75%, 12/01/30		100		146,409

				5,123,971
Electric Utilities — 0.9%
Alabama Power Co., 5.50%, 10/15/17		100		119,589
Ameren Illinois Co., 2.70%, 9/01/22		100		100,032
Carolina Power & Light Co., 4.10%, 5/15/42		150		153,515
CenterPoint Energy Houston Electric LLC, 3.55%, 8/01/42		100		95,170
Commonwealth Edison Co., 5.90%, 3/15/36		50		64,503
Consolidated Edison Co. of New York, Inc., 6.65%, 4/01/19		100		127,394


Corporate Bonds	Par (000)		Value

Electric Utilities (concluded)
Duke Energy Carolinas LLC, 6.05%, 4/15/38	$	100	$	131,000
Duke Energy Indiana, Inc., 4.20%, 3/15/42		150		153,203
Entergy Corp.:
3.63%, 9/15/15		50		52,325
4.70%, 1/15/17		150		162,489
FirstEnergy Corp., 7.38%, 11/15/31		200		258,317
Florida Power & Light Co.:
5.95%, 2/01/38		50		66,556
4.05%, 6/01/42		150		156,222
Georgia Power Co., 4.30%, 3/15/42		200		209,775
Great Plains Energy, Inc., 5.29%, 6/15/22 (a)(f)		150		168,564
Indiana Michigan Power Co., 6.05%, 3/15/37		175		212,554
LG&E & KU Energy LLC, 3.75%, 11/15/20 (a)		50		52,803
Nevada Power Co., 5.45%, 5/15/41		50		61,216
Nisource Finance Corp., 5.25%, 2/15/43		75		79,388
Northern States Power Co/MN, 3.40%, 8/15/42		200		188,428
Oncor Electric Delivery Co. LLC:
7.00%, 9/01/22		100		127,099
5.30%, 6/01/42		75		85,747
PacifiCorp, 2.95%, 2/01/22 (a)		100		104,494
Progress Energy, Inc.:
4.40%, 1/15/21		100		111,469
7.75%, 3/01/31		50		68,306
Public Service Electric & Gas Co.:
3.50%, 8/15/20		50		54,917
3.95%, 5/01/42		50		51,371
3.65%, 9/01/42		50		49,161
Southern California Edison Co.:
5.00%, 1/15/16		100		112,126
5.50%, 3/15/40		50		63,592
4.05%, 3/15/42		150		155,925
The Toledo Edison Co., 6.15%, 5/15/37		100		124,709
Virginia Electric & Power Co., 2.95%, 1/15/22		400		421,230

				4,143,189
Electrical Equipment — 0.1%
Eaton Corp., 4.00%, 11/02/32 (c)		50		51,426
Emerson Electric Co., 5.00%, 4/15/19		100		119,677
Roper Industries, Inc., 3.13%, 11/15/22		150		150,982

				322,085
Electronic Equipment, Instruments & Components — 0.1%
Corning, Inc., 4.75%, 3/15/42		50		52,655
Jabil Circuit, Inc., 4.70%, 9/15/22		250		262,812
Tyco Electronics Group SA:
6.55%, 10/01/17		50		59,956
3.50%, 2/03/22		100		102,776

				478,199
Energy Equipment & Services — 0.2%
Baker Hughes, Inc., 5.13%, 9/15/40		100		120,361
Ensco Plc, 3.25%, 3/15/16		100		106,040
FMC Technologies, Inc., 3.45%, 10/01/22		100		102,064
Halliburton Co.:
6.15%, 9/15/19		100		125,927
4.50%, 11/15/41		50		55,819
National Oilwell Varco, Inc., 3.95%, 12/01/42		150		151,984

See Notes to Financial Statements.



BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012	21

Schedule of Investments (continued)

Bond Index Master Portfolio

(Percentages shown are based on Net Assets)


Corporate Bonds	Par (000)		Value

Energy Equipment & Services (concluded)
Transocean, Inc.:
5.05%, 12/15/16	$	250	$	278,355
6.80%, 3/15/38		50		61,208

				1,001,758
Food & Staples Retailing — 0.3%
Costco Wholesale Corp., 1.13%, 12/15/17		150		151,005
CVS Caremark Corp., 6.13%, 9/15/39		50		63,988
The Kroger Co.:
6.15%, 1/15/20		100		121,850
3.40%, 4/15/22		100		103,416
Safeway, Inc., 4.75%, 12/01/21 (a)		100		103,029
Wal-Mart Stores, Inc.:
1.50%, 10/25/15		100		102,927
3.63%, 7/08/20		150		166,750
5.63%, 4/15/41		350		458,352
Walgreen Co.:
1.80%, 9/15/17		200		201,115
3.10%, 9/15/22		200		201,734

				1,674,166
Food Products — 0.5%
Archer-Daniels-Midland Co., 4.54%, 3/26/42 (a)		75		80,337
ConAgra Foods, Inc.:
5.88%, 4/15/14		250		265,993
3.25%, 9/15/22		200		200,888
Delhaize Group SA, 4.13%, 4/10/19 (a)		150		154,837
General Mills, Inc.:
1.55%, 5/16/14		100		101,292
3.15%, 12/15/21		150		156,793
Ingredion Inc., 3.20%, 11/01/15		50		52,485
The JM Smucker Co., 3.50%, 10/15/21		50		53,124
Kellogg Co.:
1.88%, 11/17/16		200		205,429
3.13%, 5/17/22		100		104,799
Kraft Foods Group, Inc.:
5.38%, 2/10/20 (c)		52		62,437
5.00%, 6/04/42 (c)		100		112,450
Kraft Foods, Inc.:
4.13%, 2/09/16		150		163,426
6.13%, 8/23/18		150		184,400
6.50%, 2/09/40		150		201,503
Mondelez International, Inc., 5.38%, 2/10/20		48		57,948
Tyson Foods, Inc., 4.50%, 6/15/22		150		162,377
Unilever Capital Corp., 4.25%, 2/10/21		200		230,847

				2,551,365
Gas Utilities — 0.0%
AGL Capital Corp., 3.50%, 9/15/21		50		54,120
ONEOK, Inc., 4.25%, 2/01/22		100		108,657

				162,777
Health Care Equipment & Supplies — 0.2%
Boston Scientific Corp.:
4.50%, 1/15/15		250		265,736
6.00%, 1/15/20		100		116,645
Covidien International Finance SA:
1.35%, 5/29/15		250		253,383
6.55%, 10/15/37		25		34,944


Corporate Bonds	Par (000)		Value

Health Care Equipment & Supplies (concluded)
Hospira, Inc., 6.05%, 3/30/17	$	125	$	145,120
Medtronic, Inc., 4.13%, 3/15/21		50		56,799
Zimmer Holdings, Inc., 1.40%, 11/30/14		250		251,880

				1,124,507
Health Care Providers & Services — 0.4%
Aetna, Inc., 6.75%, 12/15/37		50		69,361
Cardinal Health, Inc., 3.20%, 6/15/22 (a)		50		51,541
Cigna Corp.:
2.75%, 11/15/16		100		105,194
4.00%, 2/15/22		25		27,329
5.38%, 2/15/42		50		58,213
Kaiser Foundation Hospitals, 3.50%, 4/01/22		100		105,447
Laboratory Corp. of America Holdings, 3.75%, 8/23/22		100		106,047
McKesson Corp., 3.25%, 3/01/16		250		267,976
Medco Health Solutions, Inc., 2.75%, 9/15/15		50		52,119
Quest Diagnostics, Inc.:
3.20%, 4/01/16 (a)		50		52,737
4.70%, 4/01/21		100		111,974
UnitedHealth Group, Inc.:
5.95%, 2/15/41		100		125,731
3.95%, 10/15/42		150		149,369
WellPoint, Inc.:
5.25%, 1/15/16		150		167,158
1.88%, 1/15/18		200		202,484
3.13%, 5/15/22		200		202,089
3.30%, 1/15/23		100		102,600
4.63%, 5/15/42		50		51,641

				2,009,010
Hotels, Restaurants & Leisure — 0.2%
Darden Restaurants, Inc., 3.35%, 11/01/22 (a)		100		96,763
Marriott International, Inc.:
3.00%, 3/01/19		100		102,920
3.25%, 9/15/22		100		100,030
McDonald’s Corp.:
0.75%, 5/29/15		250		251,790
1.88%, 5/29/19 (a)		100		101,753
3.50%, 7/15/20		50		55,420
Starwood Hotels & Resorts Worldwide, Inc., 3.13%, 2/15/23		250		247,817
Wyndham Worldwide Corp., 4.25%, 3/01/22		50		51,626
Yum! Brands, Inc., 5.30%, 9/15/19		100		116,861

				1,124,980
Household Durables — 0.0%
Whirlpool Corp., 8.60%, 5/01/14		100		109,504
Household Products — 0.1%
The Clorox Co., 3.05%, 9/15/22		50		51,552
Energizer Holdings, Inc., 4.70%, 5/19/21		50		53,587
Kimberly-Clark Corp., 3.63%, 8/01/20		50		55,330
The Procter & Gamble Co.:
1.80%, 11/15/15		100		103,373
2.30%, 2/06/22		250		254,408

				518,250

See Notes to Financial Statements.



22	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

Bond Index Master Portfolio

(Percentages shown are based on Net Assets)


Corporate Bonds	Par (000)		Value

Independent Power Producers & Energy Traders — 0.1%
Ameren Corp., 8.88%, 5/15/14	$	150	$	164,148
Exelon Generation Co. LLC:
6.25%, 10/01/39		150		174,429
5.60%, 6/15/42 (c)		50		53,597
PPL Energy Supply LLC, 4.60%, 12/15/21 (a)		150		162,630

				554,804
Industrial Conglomerates — 0.2%
General Electric Co., 0.85%, 10/09/15		500		501,762
Koninklijke Philips Electronics N.V., 3.75%, 3/15/22		250		270,248
Waste Management, Inc., 4.60%, 3/01/21		100		113,313

				885,323
Insurance — 0.9%
Aflac, Inc., 2.65%, 2/15/17 (a)		250		262,805
Alleghany Corp., 4.95%, 6/27/22		50		54,768
The Allstate Corp.:
5.00%, 8/15/14		100		106,948
7.45%, 5/16/19		150		196,706
5.20%, 1/15/42		50		59,342
American International Group, Inc.:
4.25%, 9/15/14		100		105,340
4.88%, 9/15/16		150		167,772
3.80%, 3/22/17		100		108,233
8.25%, 8/15/18		100		131,389
8.18%, 5/15/38 (d)		175		227,937
Aon Corp., 3.13%, 5/27/16		50		52,639
AXA SA, 8.60%, 12/15/30		50		62,669
Berkshire Hathaway Finance Corp.:
5.10%, 7/15/14		100		106,888
4.40%, 5/15/42		100		103,456
Berkshire Hathaway, Inc., 1.90%, 1/31/17		100		103,372
CNA Financial Corp., 5.75%, 8/15/21 (a)		100		117,291
Genworth Financial, Inc., 7.70%, 6/15/20		50		55,200
Hartford Financial Services Group, Inc., 6.10%, 10/01/41		100		118,843
Lincoln National Corp.:
4.85%, 6/24/21		50		56,097
4.20%, 3/15/22 (a)		100		107,284
Marsh & McLennan Cos., Inc., 4.80%, 7/15/21		50		56,262
MetLife, Inc.:
5.00%, 6/15/15		100		110,090
4.75%, 2/08/21 (a)		200		232,224
6.40%, 12/15/36		100		106,923
4.13%, 8/13/42		50		50,007
Principal Financial Group, Inc., 4.63%, 9/15/42		50		50,817
The Progressive Corp., 3.75%, 8/23/21 (a)		50		54,967
Prudential Financial, Inc.:
3.00%, 5/12/16		150		158,372
5.38%, 6/21/20 (a)		350		409,160
8.88%, 6/15/38		100		121,500
Travelers Property Casualty Corp., 6.38%, 3/15/33		100		133,123
Willis Group Holdings Plc, 4.13%, 3/15/16		200		213,324
WR Berkley Corp., 4.63%, 3/15/22		200		214,369
XL Group Ltd., 5.75%, 10/01/21		100		118,757

				4,334,874


Corporate Bonds	Par (000)		Value

Internet Software & Services — 0.0%
eBay, Inc.:
3.25%, 10/15/20 (a)	$	50	$	53,929
2.60%, 7/15/22		50		50,512
Google, Inc., 3.63%, 5/19/21		25		27,821

				132,262
IT Services — 0.2%
Fiserv, Inc., 6.80%, 11/20/17		50		60,160
International Business Machines Corp.:
0.55%, 2/06/15		250		250,046
2.00%, 1/05/16		150		154,991
1.88%, 5/15/19 (a)		250		253,749
2.90%, 11/01/21		100		105,045
The Western Union Co.:
2.88%, 12/10/17		250		247,712
6.20%, 11/17/36		25		25,297

				1,097,000
Life Sciences Tools & Services — 0.0%
Life Technologies Corp., 6.00%, 3/01/20		100		118,519
Thermo Fisher Scientific, Inc.:
2.05%, 2/21/14		25		25,351
2.25%, 8/15/16		50		51,770

				195,640
Machinery — 0.2%
Caterpillar, Inc.:
5.70%, 8/15/16 (a)		100		116,010
3.90%, 5/27/21		50		56,095
5.20%, 5/27/41		100		121,925
Danaher Corp., 3.90%, 6/23/21		50		56,258
Deere & Co., 3.90%, 6/09/42		50		51,102
Flowserve Corp., 3.50%, 9/15/22		100		100,431
Illinois Tool Works, Inc.:
4.88%, 9/15/41		50		58,621
3.90%, 9/01/42		75		77,063
Ingersoll-Rand Global Holding Co. Ltd., 6.88%, 8/15/18		50		61,055
Joy Global, Inc., 5.13%, 10/15/21		50		55,117
Stanley Black & Decker, Inc., 2.90%, 11/01/22		150		151,588

				905,265
Media — 1.3%
CBS Corp.:
7.88%, 7/30/30		75		103,556
4.85%, 7/01/42		75		78,059
CC Holdings GS V LLC, 2.38%, 12/15/17 (c)		325		326,589
Cintas Corp. No 2, 4.30%, 6/01/21		25		27,820
Comcast Corp.:
5.15%, 3/01/20		350		414,842
6.45%, 3/15/37		200		256,638
4.65%, 7/15/42		150		158,109
COX Communications, Inc., 5.50%, 10/01/15		100		112,293
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc.,:
3.13%, 2/15/16		100		104,723
3.50%, 3/01/16		250		264,851
5.15%, 3/15/42		150		151,715

See Notes to Financial Statements.



BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012	23

Schedule of Investments (continued)

Bond Index Master Portfolio

(Percentages shown are based on Net Assets)


Corporate Bonds	Par (000)		Value

Media (concluded)
Discovery Communications LLC:
4.38%, 6/15/21	$	50	$	55,825
4.95%, 5/15/42		50		53,440
NBC Universal Media LLC:
3.65%, 4/30/15		250		265,954
4.38%, 4/01/21		100		112,334
2.88%, 1/15/23		250		251,064
News America, Inc.:
4.50%, 2/15/21		100		114,245
3.00%, 9/15/22 (c)		150		150,675
6.20%, 12/15/34		100		121,115
6.15%, 2/15/41		150		189,987
Omnicom Group, Inc., 3.63%, 5/01/22		125		130,215
TCI Communications, Inc., 8.75%, 8/01/15		50		59,665
Thomson Reuters Corp., 6.50%, 7/15/18		250		312,425
Time Warner Cable, Inc.:
7.50%, 4/01/14		250		270,888
4.13%, 2/15/21		100		109,512
6.55%, 5/01/37		150		185,582
6.75%, 6/15/39		50		63,419
4.50%, 9/15/42		75		73,144
Time Warner, Inc.:
8.25%, 4/01/19		150		199,611
4.88%, 3/15/20		250		292,013
3.40%, 6/15/22		250		260,770
7.70%, 5/01/32		250		349,544
Viacom, Inc.:
3.13%, 6/15/22 (a)		150		153,570
4.38%, 3/15/43 (c)		70		68,859
The Walt Disney Co.:
0.88%, 12/01/14		250		252,063
3.75%, 6/01/21		50		55,249
WPP Finance 2010, 4.75%, 11/21/21		100		108,310

				6,258,673
Metals & Mining — 0.7%
Alcoa, Inc.:
5.55%, 2/01/17		200		216,508
5.90%, 2/01/27		100		102,929
AngloGold Ashanti Holdings Plc, 5.13%, 8/01/22 (a)		100		101,348
Barrick Gold Corp.:
2.90%, 5/30/16		250		262,300
3.85%, 4/01/22		100		105,853
Barrick North America Finance LLC, 5.70%, 5/30/41		50		57,328
BHP Billiton Finance USA Ltd.:
1.63%, 2/24/17		100		102,259
2.88%, 2/24/22		250		261,030
Cliffs Natural Resources, Inc., 4.88%, 4/01/21 (a)		50		49,658
Freeport-McMoRan Copper & Gold, Inc.:
2.15%, 3/01/17		100		100,531
3.55%, 3/01/22		50		49,589
Newmont Mining Corp.:
3.50%, 3/15/22		200		206,273
4.88%, 3/15/42		50		51,496
Rio Tinto Finance USA Ltd.:
2.50%, 5/20/16		50		52,197
4.13%, 5/20/21		150		165,742


Corporate Bonds	Par (000)		Value

Metals & Mining (concluded)
Rio Tinto Finance USA Plc:
1.13%, 3/20/15	$	250	$	252,048
2.88%, 8/21/22		100		100,661
4.75%, 3/22/42		100		110,568
Southern Copper Corp., 6.75%, 4/16/40		100		120,387
Teck Resources Ltd.:
3.00%, 3/01/19		100		103,091
4.75%, 1/15/22		50		55,024
3.75%, 2/01/23		100		102,568
5.20%, 3/01/42		50		51,104
Vale Overseas Ltd., 6.88%, 11/21/36		200		247,916
Vale SA, 5.63%, 9/11/42		100		108,560

				3,136,968
Multi-Utilities — 0.2%
Consolidated Edison Co. of New York, Inc., 4.20%, 3/15/42 (a)		150		159,862
Dominion Resources, Inc., 4.90%, 8/01/41		50		56,024
Nisource Finance Corp., 5.95%, 6/15/41		50		57,742
Pacific Gas & Electric Co., 6.05%, 3/01/34		250		322,101
San Diego Gas & Electric Co., 4.30%, 4/01/42		100		110,015
SCANA Corp., 4.13%, 2/01/22		100		104,854

				810,598
Multiline Retail — 0.1%
Kohl’s Corp., 4.00%, 11/01/21 (a)		50		52,879
Nordstrom, Inc., 4.00%, 10/15/21 (a)		100		111,495
Target Corp.:
2.90%, 1/15/22		150		158,988
7.00%, 1/15/38		100		146,881

				470,243
Office Electronics — 0.1%
Xerox Corp.:
4.25%, 2/15/15		250		262,922
5.63%, 12/15/19 (a)		100		111,726

				374,648
Oil, Gas & Consumable Fuels — 2.8%
Alberta Energy Co. Ltd., 7.38%, 11/01/31		50		64,924
Anadarko Petroleum Corp.:
6.38%, 9/15/17		250		298,624
6.45%, 9/15/36		100		125,277
Apache Corp.:
3.25%, 4/15/22 (a)		200		211,961
6.00%, 1/15/37		100		126,294
Boardwalk Pipelines LP, 3.38%, 2/01/23		200		196,431
BP Capital Markets Plc:
3.63%, 5/08/14		100		104,092
3.20%, 3/11/16		100		106,672
1.85%, 5/05/17		250		255,568
4.74%, 3/11/21		50		58,552
3.25%, 5/06/22		100		105,351
Canadian Natural Resources Ltd.:
1.45%, 11/14/14		50		50,711
3.45%, 11/15/21		100		106,723
6.25%, 3/15/38		50		64,415
Cenovus Energy, Inc.:
5.70%, 10/15/19		150		181,898
3.00%, 8/15/22		100		102,132

See Notes to Financial Statements.



24	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012

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)
ConocoPhillips:
4.60%, 1/15/15	$	200	$	216,139
6.50%, 2/01/39		150		212,721
ConocoPhillips Holding Co., 6.95%, 4/15/29		100		139,417
Devon Energy Corp.:
1.88%, 5/15/17		250		254,857
4.00%, 7/15/21 (a)		150		165,962
4.75%, 5/15/42		50		53,491
Ecopetrol SA, 7.63%, 7/23/19		100		129,250
El Paso Pipeline Partners Operating Co. LLC, 5.00%, 10/01/21		200		226,653
Enbridge Energy Partners LP, 4.20%, 9/15/21 (a)		100		107,491
Encana Corp., 3.90%, 11/15/21		200		217,228
Energy Transfer Partners LP:
9.70%, 3/15/19		44		59,269
5.20%, 2/01/22		250		285,178
Ensco Plc, 4.70%, 3/15/21		100		112,536
Enterprise Products Operating LLC:
5.60%, 10/15/14		200		216,511
5.95%, 2/01/41		150		181,090
4.45%, 2/15/43		75		75,938
EOG Resources, Inc.:
2.50%, 2/01/16		50		52,289
5.63%, 6/01/19		150		184,122
EQT Corp., 4.88%, 11/15/21		50		53,677
Hess Corp.:
8.13%, 2/15/19		200		263,221
5.60%, 2/15/41		50		59,134
Husky Energy, Inc., 3.95%, 4/15/22		150		161,139
Kinder Morgan Energy Partners LP:
3.95%, 9/01/22		225		240,583
6.50%, 2/01/37		100		122,080
5.00%, 8/15/42		75		79,483
Marathon Oil Corp.:
5.90%, 3/15/18		100		120,948
2.80%, 11/01/22		150		150,929
Marathon Petroleum Corp.:
3.50%, 3/01/16		250		266,127
5.13%, 3/01/21		150		176,526
MidAmerican Energy Holdings Co., 6.13%, 4/01/36		250		315,585
Murphy Oil Corp., 4.00%, 6/01/22		100		100,795
Nabors Industries, Inc., 5.00%, 9/15/20		50		54,332
Nexen, Inc., 6.40%, 5/15/37		100		129,280
Noble Energy, Inc., 4.15%, 12/15/21 (a)		150		165,591
Noble Holding International Ltd.:
2.50%, 3/15/17		150		154,806
5.25%, 3/15/42		50		53,314
Occidental Petroleum Corp., 4.10%, 2/01/21		50		57,170
ONEOK Partners LP, 6.13%, 2/01/41		50		59,946
Pemex Project Funding Master Trust, 5.75%, 3/01/18		100		116,750
Petrobras International Finance Co.:
2.88%, 2/06/15		100		102,610
3.50%, 2/06/17		500		524,373
5.75%, 1/20/20		400		455,342
Petrohawk Energy Corp., 7.88%, 6/01/15 (a)		50		52,207


Corporate Bonds	Par (000)		Value

Oil, Gas & Consumable Fuels (concluded)
Petroleos Mexicanos:
4.88%, 1/24/22	$	400	$	451,400
6.50%, 6/02/41		50		62,750
5.50%, 6/27/44		100		110,000
Phillips 66:
1.95%, 3/05/15 (c)		250		255,084
5.88%, 5/01/42 (c)		100		120,334
Pioneer Natural Resources Co., 3.95%, 7/15/22		150		157,181
Plains All American Pipeline LP/PAA Finance Corp., 5.15%, 6/01/42		50		56,330
Sempra Energy:
2.00%, 3/15/14		100		101,513
2.30%, 4/01/17		250		259,595
Shell International Finance BV:
3.10%, 6/28/15		150		158,904
4.38%, 3/25/20		100		115,995
6.38%, 12/15/38		50		70,248
5.50%, 3/25/40		50		64,198
Southwestern Energy Co., 4.10%, 3/15/22		100		107,566
Statoil ASA, 5.10%, 8/17/40		100		120,484
Suncor Energy, Inc.:
6.10%, 6/01/18		200		243,964
6.50%, 6/15/38		100		133,380
Talisman Energy, Inc.:
3.75%, 2/01/21		50		53,651
5.50%, 5/15/42		50		55,108
Tennessee Gas Pipeline Co. LLC, 7.50%, 4/01/17		100		123,114
Total Capital International SA, 1.50%, 2/17/17		100		100,775
TransCanada PipeLines Ltd.:
0.88%, 3/02/15		100		100,567
6.20%, 10/15/37		200		264,055
Transocean, Inc., 3.80%, 10/15/22		100		102,493
Valero Energy Corp., 6.13%, 2/01/20		150		182,398
Weatherford International Ltd.:
6.00%, 3/15/18		150		171,385
5.13%, 9/15/20		50		55,100
5.95%, 4/15/42		50		54,268
The Williams Cos., Inc.:
7.88%, 9/01/21		31		39,939
3.70%, 1/15/23		100		100,865
Williams Partners LP:
3.80%, 2/15/15		150		158,608
4.00%, 11/15/21		250		267,399

				13,504,366
Paper & Forest Products — 0.1%
Celulosa Arauco y Constitucion SA, 4.75%, 1/11/22		50		52,445
Georgia-Pacific LLC, 8.88%, 5/15/31		25		37,485
International Paper Co.:
7.95%, 6/15/18		225		290,886
7.50%, 8/15/21		100		130,868
Westvaco Corp., 8.20%, 1/15/30		100		131,943

				643,627

See Notes to Financial Statements.



BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012	25

Schedule of Investments (continued)

Bond Index Master Portfolio

(Percentages shown are based on Net Assets)


Corporate Bonds	Par (000)		Value

Pharmaceuticals — 0.8%
AbbVie, Inc.:
2.00%, 11/06/18 (c)	$	150	$	151,939
4.40%, 11/06/42 (c)		50		53,157
AstraZeneca Plc:
5.90%, 9/15/17		100		121,503
6.45%, 9/15/37		100		135,434
Bristol-Myers Squibb Co., 2.00%, 8/01/22		250		241,988
Eli Lilly & Co., 5.50%, 3/15/27		50		63,065
Express Scripts Holding Co.:
2.65%, 2/15/17 (c)		350		363,786
3.50%, 11/15/16 (c)		100		106,917
4.75%, 11/15/21 (c)		50		56,741
GlaxoSmithKline Capital Plc:
0.75%, 5/08/15		150		150,732
2.85%, 5/08/22		150		155,798
GlaxoSmithKline Capital, Inc.:
5.65%, 5/15/18		100		121,804
6.38%, 5/15/38		50		69,072
Johnson & Johnson:
2.15%, 5/15/16 (a)		100		104,489
4.50%, 9/01/40		100		116,958
Merck & Co., Inc.:
3.88%, 1/15/21		250		280,561
5.95%, 12/01/28		100		130,353
Novartis Capital Corp., 4.40%, 4/24/20		100		116,640
Pfizer, Inc.:
5.35%, 3/15/15		100		110,131
7.20%, 3/15/39		200		306,634
Sanofi, 1.20%, 9/30/14		300		303,538
Teva Pharmaceutical Finance Co. BV, 2.40%, 11/10/16		200		208,424
Watson Pharmaceuticals, 3.25%, 10/01/22		150		153,127

				3,622,791
Real Estate — 0.2%
AvalonBay Communities, Inc., 2.95%, 9/15/22		100		99,612
Boston Properties LP, 3.70%, 11/15/18		200		217,257
Brandywine Operating Partnership LP, 3.95%, 2/15/23		250		247,795
Simon Property Group LP:
5.25%, 12/01/16		50		57,207
2.80%, 1/30/17		100		105,519
3.38%, 3/15/22 (a)		100		105,612
Ventas Realty LP/Ventas Capital Corp., 4.25%, 3/01/22 (a)		100		106,045

				939,047
Real Estate Investment Trusts (REITs) — 0.3%
American Tower Corp., 4.70%, 3/15/22		100		110,642
DDR Corp., 4.63%, 7/15/22		100		109,135
ERP Operating LP, 4.75%, 7/15/20		100		112,468
HCP, Inc.:
6.00%, 1/30/17		100		114,875
3.15%, 8/01/22 (a)		100		98,001
Health Care REIT, Inc.:
4.13%, 4/01/19		200		215,152
5.25%, 1/15/22		50		55,677
Hospitality Properties Trust, 5.00%, 8/15/22		200		211,602


Corporate Bonds	Par (000)		Value

Real Estate Investment Trusts (REITs) (concluded)
ProLogis LP:
6.25%, 3/15/17	$	50	$	57,288
6.63%, 5/15/18		150		181,174

				1,266,014
Road & Rail — 0.3%
Burlington Northern Santa Fe LLC:
5.40%, 6/01/41		50		59,209
4.40%, 3/15/42		150		157,439
Canadian National Railway Co.:
1.45%, 12/15/16		50		50,877
3.50%, 11/15/42		100		96,506
Canadian Pacific Railway Ltd., 5.75%, 1/15/42		25		30,483
CSX Corp.:
3.70%, 10/30/20		100		108,138
4.75%, 5/30/42		100		107,680
Norfolk Southern Corp.:
7.70%, 5/15/17		150		189,337
3.00%, 4/01/22		250		256,436
Union Pacific Corp.:
4.16%, 7/15/22		100		113,119
4.30%, 6/15/42		50		52,788

				1,222,012
Semiconductors & Semiconductor Equipment — 0.1%
Applied Materials, Inc., 5.85%, 6/15/41		50		61,009
Intel Corp.:
2.70%, 12/15/22		200		199,720
4.80%, 10/01/41		50		55,031
Texas Instruments, Inc., 1.38%, 5/15/14		50		50,663

				366,423
Software — 0.2%
Autodesk, Inc., 1.95%, 12/15/17		75		74,627
Microsoft Corp.:
3.00%, 10/01/20		50		53,958
5.30%, 2/08/41		100		125,279
Oracle Corp.:
5.75%, 4/15/18		150		182,551
3.88%, 7/15/20		100		112,783
5.38%, 7/15/40		150		187,024
Symantec Corp., 2.75%, 6/15/17 (a)		150		154,263

				890,485
Specialty Retail — 0.2%
AutoZone, Inc., 3.70%, 4/15/22		50		52,565
The Home Depot, Inc.:
4.40%, 4/01/21 (a)		150		176,908
5.88%, 12/16/36		100		131,420
Lowe’s Cos., Inc.:
1.63%, 4/15/17		200		204,663
4.63%, 4/15/20 (a)		100		117,366
3.12%, 4/15/22		100		105,267
4.65%, 4/15/42		50		55,670
Macy’s Retail Holdings, Inc.:
5.90%, 12/01/16		11		12,925
3.88%, 1/15/22 (a)		300		319,761

				1,176,545

See Notes to Financial Statements.



26	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

Bond Index Master Portfolio

(Percentages shown are based on Net Assets)


Corporate Bonds	Par (000)		Value

Textiles, Apparel & Luxury Goods — 0.0%
VF Corp., 3.50%, 9/01/21	$	100	$	105,783
Tobacco — 0.2%
Altria Group, Inc.:
9.70%, 11/10/18		284		397,579
9.25%, 8/06/19		68		94,598
10.20%, 2/06/39		100		167,283
Lorillard Tobacco Co., 6.88%, 5/01/20		100		121,887
Philip Morris International, Inc.:
4.13%, 5/17/21		50		56,521
4.50%, 3/20/42		50		54,337
3.88%, 8/21/42 (a)		100		100,542
Reynolds American, Inc., 4.75%, 11/01/42		150		151,332

				1,144,079
Transportation Infrastructure — 0.0%
Ryder System, Inc., 2.50%, 3/01/17		150		152,532
Water Utilities — 0.0%
United Utilities Plc, 5.38%, 2/01/19		50		55,391
Wireless Telecommunication Services — 0.3%
America Movil SAB de CV:
2.38%, 9/08/16		250		259,846
5.00%, 3/30/20		200		232,694
4.38%, 7/16/42		100		103,913
American Tower Corp., 5.05%, 9/01/20		25		28,036
Cellco Partnership / Verizon Wireless Capital LLC, 5.55%, 2/01/14		250		262,436
Vodafone Group Plc:
1.63%, 3/20/17		250		253,670
7.88%, 2/15/30		100		144,941

				1,285,536
Total Corporate Bonds — 22.8%				109,611,994


Foreign Agency Obligations
Asian Development Bank, 2.75%, 5/21/14		200		206,704
Brazilian Government International Bond:
8.00%, 1/15/18		153		177,413
4.88%, 1/22/21 (a)		650		783,250
5.63%, 1/07/41		300		393,000
Canada Government International Bond, 2.38%, 9/10/14		250		258,872
Colombia Government International Bond:
4.38%, 7/12/21		250		287,875
7.38%, 9/18/37		100		155,300
European Bank for Reconstruction & Development, 1.00%, 2/16/17		250		252,821
Hydro Quebec, 2.00%, 6/30/16		350		364,700
Inter-American Development Bank:
3.00%, 4/22/14		250		259,046
1.38%, 10/18/16		250		257,303
Italian Republic:
4.50%, 1/21/15		500		522,605
6.88%, 9/27/23		100		116,136
Italy Government International Bond, 5.38%, 6/15/33		100		100,633
Japan Bank for International Cooperation, 2.13%, 2/07/19 (a)		200		207,939


Foreign Agency Obligations	Par (000)		Value

KFW:
3.50%, 3/10/14	$	100	$	103,732
1.00%, 1/12/15		750		758,550
1.25%, 10/26/15		250		254,880
2.63%, 2/16/16		100		106,190
1.25%, 2/15/17		750		765,307
Mexico Government International Bond:
8.13%, 12/30/19		100		144,000
5.13%, 1/15/20		100		119,500
3.63%, 3/15/22 (a)		500		546,875
6.75%, 9/27/34		150		216,000
4.75%, 3/08/44		200		226,000
Panama Government International Bond:
5.20%, 1/30/20		100		119,450
6.70%, 1/26/36		100		142,000
Peruvian Government International Bond, 8.75%, 11/21/33		191		331,862
Poland Government International Bond:
3.88%, 7/16/15		100		107,250
6.38%, 7/15/19		250		311,680
3.00%, 3/17/23		200		199,500
Province of British Columbia Canada, 2.85%, 6/15/15		150		158,655
Province of Manitoba Canada, 1.38%, 4/28/14		250		253,390
Province of Nova Scotia Canada, 2.38%, 7/21/15		200		209,220
Province of Ontario Canada:
4.10%, 6/16/14		250		263,494
2.30%, 5/10/16		100		105,200
4.40%, 4/14/20 (a)		200		235,530
Province of Quebec Canada, 5.00%, 3/01/16		350		397,215
Republic of Korea, 5.75%, 4/16/14		250		265,296
South Africa Government International Bond, 4.67%, 1/17/24 (a)		200		226,000
Uruguay Government International Bond, 8.00%, 11/18/22		150		217,800
Total Foreign Agency Obligations — 2.3%				11,128,173


Non-Agency Mortgage-Backed Securities
Commercial Mortgage-Backed Securities — 1.6%
Bear Stearns Commercial Mortgage Securities, Series 2007-PW16, Class AM, 5.72%, 6/11/40 (d)		700		787,986
Citigroup/Deutsche Bank Commercial Mortgage Trust, Series 2007-CD4, Class A4, 5.32%, 12/11/49		600		688,266
CS First Boston Mortgage Securities Corp., Series 2004-C2, Class A2, 5.42%, 5/15/36 (d)		500		524,812
GE Capital Commercial Mortgage Corp., Series 2005-C3, Class A7A, 4.97%, 7/10/45 (d)		1,000		1,097,484
Greenwich Capital Commercial Funding Corp.:
Series 2007-GG11, Class A4, 5.74%, 12/10/49		350		412,581
Series 2007-GG9, Class A4, 5.44%, 3/10/39		200		230,344
GS Mortgage Securities Corp. II, Series 2007-GG10, Class A4, 5.79%, 8/10/45 (d)		300		345,872

See Notes to Financial Statements.



BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012	27

Schedule of Investments (continued)

Bond Index Master Portfolio

(Percentages shown are based on Net Assets)


Non-Agency Mortgage-Backed Securities	Par (000)		Value

Commercial Mortgage-Backed Securities (concluded)
JP Morgan Chase Commercial Mortgage Securities Corp.:
Series 2005-LDP1, Class A4, 5.04%, 3/15/46 (d)	$	1,050	$	1,135,336
Series 2006-LDP9, Class A3, 5.34%, 5/15/47		900		1,029,585
Series 2011-C5, Class A3, 4.17%, 8/15/46		650		740,273
LB-UBS Commercial Mortgage Trust, Series 2004-C2, Class A4, 4.37%, 3/15/36		500		517,783
Wachovia Bank Commercial Mortgage Trust, Series 2007-C33, Class A3, 5.92%, 2/15/51 (d)		410		429,249

				7,939,571
Total Non-Agency Mortgage-Backed Securities — 1.6%				7,939,571


Preferred Securities
Capital Trusts — 0.0%
Insurance — 0.0%
Chubb Corp. (The), 6.00%, 5/11/37		50		65,245
Total Preferred Securities — 0.0%				65,245


Taxable Municipal Bonds
Bay Area Toll Authority, 7.04%, 4/01/41		100		144,038
Chicago Transit Authority, Series A, 6.90%, 12/01/40		100		120,033
City of New York, Series G, 5.97%, 3/01/36		100		126,954
City of San Antonio TX, 4.43%, 2/01/42		100		106,657
Commonwealth of Massachusetts, 5.46%, 12/01/39		100		124,435
County of Sonoma CA, 6.00%, 12/01/29		100		112,321
Illinois State Toll Highway Authority, 5.85%, 12/01/34		100		124,157
Los Angeles Community College District, GO, Unlimited, Build America Bonds, 6.75%, 8/01/49		50		68,675
Los Angeles Department of Water & Power, 5.72%, 7/01/39		100		124,842
Los Angeles Unified School District, 6.76%, 7/01/34		150		198,466
Massachusetts School Building Authority, 5.72%, 8/15/39		100		127,738
Metropolitan Transportation Authority, RB, Build America Bonds, 6.69%, 11/15/40		50		64,002
Metropolitan Water Reclamation District of Greater Chicago, 5.72%, 12/01/38		150		193,979
New Jersey Economic Development Authority, 7.43%, 2/15/29		200		255,720
New Jersey State Turnpike Authority, RB:
4.25%, 1/01/16		155		160,935
7.41%, 1/01/40		100		146,517
New York City Municipal Water Finance Authority, 5.95%, 6/15/41		100		137,279
New York State Dormitory Authority, 5.43%, 3/15/39		135		160,800


Taxable Municipal Bonds	Par (000)		Value

Ohio State Water Development Authority, Water Pollution Control, RB, Build America Bonds, 4.88%, 12/01/34	$	100	$	115,298
Port Authority of New York & New Jersey, 5.86%, 12/01/24		100		126,967
San Francisco City & County Public Utilities Commission Revenue, 6.95%, 11/01/31		100		140,835
Santa Clara Valley Transportation Authority, 5.88%, 4/01/32		100		120,109
State of California:
7.50%, 4/01/34		100		138,710
7.55%, 4/01/39		175		251,121
7.60%, 11/01/40		200		292,390
State of Connecticut, 5.09%, 10/01/30		150		170,357
State of Illinois, GO, Unlimited:
5.67%, 3/01/18		200		227,296
5.10%, 6/01/33		200		197,328
State of Texas, GO, Build America Bonds, 5.52%, 4/01/39		100		129,943
State of Washington, 5.48%, 8/01/39		100		125,053
Texas Transportation Commission, 5.18%, 4/01/30		100		120,572
Total Taxable Municipal Bonds — 1.0%				4,653,527


US Government Sponsored Agency Securities
Agency Obligations — 4.6%
Fannie Mae:
0.50%, 9/19/14		1,000		1,000,777
0.50%, 7/02/15 (a)		2,000		2,006,964
0.60%, 8/20/15		2,200		2,201,188
0.88%, 12/20/17 (a)		2,500		2,504,882
1.13%, 4/27/17 (a)		2,310		2,352,243
1.63%, 10/26/15		350		362,079
2.38%, 7/28/15 (a)		600		630,814
2.75%, 2/05/14		300		308,593
6.63%, 11/15/30		149		226,928
Federal Home Loan Banks:
0.38%, 1/29/14		3,300		3,306,517
5.50%, 8/13/14 (a)		425		461,392
5.50%, 7/15/36		100		137,593
Financing Corp., 8.60%, 9/26/19		200		287,969
Freddie Mac:
1.25%, 10/02/19 (a)		700		697,952
1.75%, 9/10/15		1,500		1,554,955
1.75%, 5/30/19 (a)		420		434,474
2.00%, 8/25/16		750		789,327
2.38%, 1/13/22		420		438,764
4.50%, 1/15/14		700		731,096
4.88%, 6/13/18 (a)		250		301,792
6.25%, 7/15/32		150		223,252
6.75%, 3/15/31		500		768,442
Tennessee Valley Authority:
3.50%, 12/15/42		140		139,124
6.25%, 12/15/17		400		504,349

				22,371,466

See Notes to Financial Statements.



28	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

Bond Index Master Portfolio

(Percentages shown are based on Net Assets)


US Government Sponsored Agency Securities	Par (000)		Value

Mortgage-Backed Securities — 31.4%
Fannie Mae Mortgage-Backed Securities:
2.50%, 1/01/28 (g)	$	2,000	$	2,091,250
2.52%, 8/01/42		479		501,140
2.77%, 8/01/41 (d)		208		217,084
3.00%, 1/01/28 — 1/01/43 (g)		6,918		7,277,305
3.18%, 11/01/40 (d)		101		106,477
3.50%, 2/01/26 — 1/01/43 (g)		16,806		17,944,318
4.00%, 10/01/25 — 1/01/43 (g)		15,167		16,306,200
4.50%, 5/01/24 — 1/01/43 (g)		12,047		13,027,744
5.00%, 1/01/19 — 1/01/43 (g)		9,380		10,181,956
5.50%, 6/01/25 — 1/01/43 (g)		6,486		7,059,049
6.00%, 3/01/34 — 1/01/43 (g)		7,532		8,236,811
6.50%, 7/01/32		425		484,428
7.00%, 2/01/32		91		108,477
Freddie Mac Mortgage-Backed Securities:
2.50%, 1/01/28 (g)		1,000		1,043,594
3.00%, 3/01/27 — 1/01/43 (g)		3,491		3,662,431
3.25%, 8/01/41 (d)		141		148,002
3.50%, 3/01/32 — 1/01/43 (g)		4,064		4,339,752
3.68%, 9/01/40 (d)		165		175,050
4.00%, 5/01/19 — 1/01/43 (g)		7,639		8,150,388
4.50%, 4/01/18 — 1/01/43 (g)		6,954		7,474,895
5.00%, 10/01/18 — 1/01/43 (g)		3,009		3,245,539
5.06%, 7/01/38 (d)		195		206,328
5.50%, 6/01/35 — 1/01/43 (g)		3,435		3,715,490
6.50%, 6/01/31		142		162,138
8.00%, 12/01/24		332		396,140
Ginnie Mae Mortgage-Backed Securities:
3.00%, 1/01/43 (g)		1,000		1,062,813
3.50%, 4/20/42 — 1/01/43 (g)		8,820		9,591,970
4.00%, 3/15/41 — 1/01/43 (g)		6,278		6,872,377
4.50%, 7/15/39 — 1/01/43 (g)		7,151		7,855,398
5.00%, 11/15/39 — 1/01/43 (g)		5,941		6,507,421
5.50%, 12/15/32 — 1/01/43 (g)		1,218		1,338,511
6.00%, 3/15/35 — 10/20/38		1,045		1,168,096
6.50%, 9/15/36		354		416,997
7.50%, 12/15/23		365		398,222

				151,473,791
Total US Government Sponsored Agency Securities – 36.1%				173,845,257


US Treasury Obligations
US Treasury Bonds:
8.75%, 5/15/17 (a)		2,100		2,839,595
8.75%, 5/15/20 (a)		500		767,851
8.75%, 8/15/20 (a)		400		619,250
6.25%, 8/15/23 (a)		450		645,187
7.63%, 2/15/25 (a)		375		604,688
6.50%, 11/15/26		1,500		2,277,891
6.13%, 11/15/27 (a)		780		1,158,787
6.25%, 5/15/30 (a)		1,100		1,700,875
5.38%, 2/15/31 (a)		350		499,625
4.50%, 2/15/36 (a)		1,166		1,534,566
5.00%, 5/15/37 (a)		500		705,469
3.50%, 2/15/39		3,300		3,730,548
4.25%, 5/15/39		25		31,895
4.38%, 11/15/39 (a)		300		390,281
4.63%, 2/15/40 (a)		730		986,299
4.38%, 5/15/40		250		325,430


US Treasury Obligations	Par (000)		Value

US Treasury Bonds :
3.88%, 8/15/40 (a)	$	360	$	432,675
4.25%, 11/15/40 (a)		1,428		1,823,377
4.75%, 2/15/41 (a)		200		275,719
4.38%, 5/15/41		610		794,715
3.75%, 8/15/41 (a)		1,550		1,821,734
3.13%, 11/15/41 (a)		400		418,688
3.13%, 2/15/42		3,850		4,025,656
3.00%, 5/15/42		480		489,000
2.75%, 8/15/42 (a)		750		724,219
US Treasury Notes:
0.25%, 1/31/14		9,400		9,405,875
4.75%, 5/15/14 (a)		2,525		2,680,840
0.25%, 5/31/14		11,000		11,005,159
0.75%, 6/15/14 (a)		1,350		1,360,494
0.50%, 8/15/14		1,750		1,757,656
2.38%, 8/31/14 (a)		950		983,621
0.25%, 9/30/14 (a)		1,000		1,000,234
0.50%, 10/15/14 (a)		1,500		1,506,796
2.38%, 10/31/14		2,500		2,596,290
0.38%, 11/15/14 (a)		1,250		1,252,930
0.25%, 12/15/14		2,550		2,550,000
0.25%, 1/15/15		700		699,782
0.25%, 2/15/15		1,750		1,749,179
2.50%, 4/30/15		2,690		2,827,023
0.25%, 5/15/15		17,250		17,228,437
1.88%, 6/30/15		1,000		1,038,750
1.75%, 7/31/15 (a)		750		777,421
0.25%, 8/15/15		4,500		4,491,913
0.25%, 9/15/15		1,500		1,496,718
1.25%, 9/30/15		6,400		6,560,000
4.50%, 11/15/15		6,500		7,267,812
2.00%, 1/31/16		400		419,781
4.50%, 2/15/16		1,200		1,352,531
2.13%, 2/29/16		600		632,672
2.00%, 4/30/16		1,679		1,766,491
5.13%, 5/15/16 (a)		250		289,063
1.50%, 6/30/16		500		518,281
1.50%, 7/31/16 (a)		550		570,281
4.63%, 11/15/16		250		289,297
2.75%, 11/30/16		850		923,312
0.88%, 12/31/16		250		253,438
0.88%, 1/31/17		800		810,625
4.63%, 2/15/17		650		757,656
0.88%, 2/28/17		1,950		1,975,594
0.63%, 5/31/17		13,500		13,521,087
2.50%, 6/30/17		2,290		2,480,892
0.50%, 7/31/17		900		894,586
4.75%, 8/15/17 (a)		1,300		1,543,446
1.88%, 8/31/17 (a)		370		390,784
1.88%, 9/30/17		2,800		2,956,626
2.75%, 2/28/18 (a)		1,300		1,432,031
4.00%, 8/15/18		500		587,500
1.38%, 9/30/18		600		616,781
1.75%, 10/31/18		250		262,188
1.38%, 12/31/18		1,030		1,056,796
1.25%, 1/31/19 (a)		1,200		1,221,750
1.38%, 2/28/19		12,000		12,297,192
1.25%, 4/30/19		2,800		2,842,218
1.13%, 5/31/19		1,880		1,891,897

See Notes to Financial Statements.



BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012	29

Schedule of Investment (continued)

Bond Index Master Portfolio

(Percentages shown are based on Net Assets)


US Treasury Obligations	Par (000)		Value

0.88%, 7/31/19	$	1,500	$	1,481,484
1.00%, 8/31/19		2,300		2,286,524
1.25%, 10/31/19		600		604,969
3.38%, 11/15/19		1,100		1,264,743
1.13%, 12/31/19		1,500		1,494,375
3.63%, 2/15/20		500		584,219
2.63%, 8/15/20 (a)		750		823,594
3.63%, 2/15/21 (a)		110		129,121
2.13%, 8/15/21 (a)		450		473,063
2.00%, 11/15/21 (a)		1,350		1,401,153
1.75%, 5/15/22		900		907,805
1.63%, 8/15/22 (a)		1,000		993,438
1.63%, 11/15/22		2,000		1,975,624
Total US Treasury Obligations — 37.1%				178,835,858
Total Long-Term Investments (Cost — $ 475,966,842) — 101.3 %				487,813,779


Short-Term Securities	Shares
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (b)(h)(i)		116,012,563		116,012,563
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (b)(h)(i)		9,170,036		9,170,036
Total Short-Term Securities (Cost — $125,182,599) — 26.0%				125,182,599
Total Investments Before TBA Sale Commitments *(Cost — $601,149,441) — 127.3 %**				612,996,378


TBA Sale Commitments (g)	Par (000)		Value

Fannie Mae Mortgage-Backed Securities:
3.50%, 01/01/28 — 1/01/43	$	1,700	$	(1,812,625	)
Fannie Mae Mortgage-Backed Securities:
4.00%, 1/01/43		3,000		(3,213,750	)
Freddie Mac Mortgage-Backed Securities:
4.00%, 1/01/43		1,900		(2,028,250	)
Ginnie Mae Mortgage-Backed Securities:
3.50%, 1/01/43		2,600		(2,827,406	)
Total TBA Sale Commitments (Proceeds — $9,892,337) — (2.1) %				(9,882,031	)
Total Investments, Net of TBA Sale Commitments — 125.2 %				603,114,347
Liabilities in Excess of Other Assets — (25.2)%				(121,541,912	)

Net Assets — 100.0%			$	481,572,435

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	601,150,238

Gross unrealized appreciation	$	12,347,597
Gross unrealized depreciation		(501,457	)

Net unrealized appreciation	$	11,846,140

(a)

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

(b)


Affiliate	Par/Shares Held at December 31, 2011		Par/Shares Purchased			Par/Shares Sold		Par/Shares Held at December 31, 2012		Value at December 31, 2012		Income
BlackRock Cash Funds:
Institutional, SL Agency Shares		25,385,409		90,627,154	¹		—		116,012,563	$	116,012,563	$	200,266
BlackRock Cash Funds:
Prime, SL Agency Shares		5,275,209		3,894,827	¹		—		9,170,036	$	9,170,036	$	10,243
PNC Funding Corp.,
5.63%, 2/01/17		150		—			—		150	$	173,187	$	8,438
3.30%, 3/08/22		—		150			—		150	$	158,132	$	2,705

Represents net shares purchased.

(c)

(d)

Variable rate security. Rate shown is as of report date.

(e)

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.

(f)

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.

See Notes to Financial Statements.



30	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012


Schedule of Investment (continued)		Bond Index Master Portfolio

(g)

Represents or includes a TBA transaction. Unsettled TBA transactions as of December 31, 2012 were as follows:


Counterparty	Value			Unrealized Appreciation (Depreciation)
Bank of America Corp.	$	525,000		$	2,188
BNP Paribas SA	$	16,094		$	(469	)
Citigroup, Inc.	$	2,179,531		$	(4,375	)
Credit Suisse Securities	$	6,906,219		$	8,258
Deutsche Bank Group AG	$	11,672,688		$	(19,016	)
Jefferies Group, Inc.	$	(1,067,500	)	$	1,719
Goldman Sachs Group, Inc.	$	12,787,828		$	4,656
JPMorgan Chase & Co.	$	22,156,297		$	33,094
Morgan Stanley	$	4,264,640		$	3,235
Nomura Trust and Banking Co., Ltd	$	3,631,688		$	5,319
R.B.C. Dominion Securities	$	(1,086,563	)	$	(391	)
RBS Securities	$	8,472,531		$	1,489
UBS AG	$	(3,230,313	)	$	949
Wells Fargo & Co.	$	8,492,969		$	11,406

(h)

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

(i)

Represents the current yield as of report date.

_Ÿ

For Master Portfolio compliance purposes, the Master Portfolio’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Master Portfolio management. This definition may not apply for purposes of this report, which may combine 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 as follows:

_Ÿ

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

_Ÿ

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

See Notes to Financial Statements.



BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012	31


Schedule of Investment (concluded)		Bond Index Master Portfolio

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2			Level 3	Total

Assets:
Investments:
Long-Term Investments¹:
Asset-Backed Securities		—	$	1,734,154		—	$	1,734,154
Corporate Bonds		—		109,611,994		—		109,611,994
Foreign Agency Obligations		—		11,128,173		—		11,128,173
Non-Agency Mortgage-Backed Securities		—		7,939,571		—		7,939,571
Preferred Securities		—		65,245		—		65,245
Taxable Municipal Bonds		—		4,653,527		—		4,653,527
US Government Sponsored Agency Securities		—		173,845,257		—		173,845,257
US Treasury Obligations		—		178,835,858		—		178,835,858
Short-Term Securities	$	125,182,599		—		—		125,182,599
Liabilities:
TBA Sale Commitments		—		(9,882,031	)	—		(9,882,031	)

Total	$	125,182,599	$	477,931,748		—	$	603,114,347

See above Schedule of Investments for values in each sector and industry.

Certain of the Master Portfolio’s liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $42,621,513 is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



32	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012


Statement of Assets and Liabilities		Bond Index Master Portfolio


December 31, 2012

Assets
Investments at value — unaffiliated (including securities loaned of $41,414,310) (cost — $475,665,706)	$	487,482,460
Investments at value — affiliated (cost — $125,483,735)		125,513,918
TBA sale commitments receivable		9,892,337
Contributions receivable from investors		5,234,007
Interest receivable		2,472,800
Investments sold receivable		9,328
Securities lending income receivable — affiliated		3,562

Total assets		630,608,412


Liabilities
Collateral on securities loaned at value		42,621,513
Investments purchased payable		96,468,530
TBA sale commitments at value (proceeds — $9,892,337)		9,882,031
Investment advisory fees payable		27,249
Professional fees payable		34,819
Trustees’ fees payable		1,835

Total liabilities		149,035,977

Net Assets	$	481,572,435


Net Assets Consist of
Investors’ capital	$	469,725,498
Net unrealized appreciation/depreciation		11,846,937

Net Assets	$	481,572,435


Statement of Operations		Bond Index Master Portfolio


Year Ended December 31, 2012

Investment Income
Securities lending — affiliated — net	$	47,609
Income — affiliated		174,043
Interest		6,329,172

Total income		6,550,824


Expenses
Investment advisory		270,348
Professional		35,028
Independent Trustees		7,124

Total expenses		312,500
Less fees waived by Manager		(42,152	)

Total expenses after fees waived		270,348

Net investment income		6,280,476


Realized and Unrealized Gain
Net realized gain from investments — unaffiliated		1,632,196
Net change in unrealized appreciation on investments		4,372,890

Total realized and unrealized gain		6,005,086

Net Increase in Net Assets Resulting from Operations	$	12,285,562


Statements of Changes in Net Assets		Bond Index Master Portfolio


	Year Ended December 31,
Increase in Net Assets:	2012			2011

Operations
Net investment income	$	6,280,476		$	3,598,436
Net realized gain		1,632,196			830,872
Net change in unrealized appreciation/depreciation		4,372,890			3,730,381

Net increase in net assets resulting from operations		12,285,562			8,159,689


Capital Transactions
Proceeds from contributions		400,532,855			36,757,406
Value of withdrawals		(58,730,429	)		(15,921,683	)

Net increase in net assets derived from capital transactions		341,802,426			20,835,723


Net Assets
Total increase in net assets		354,087,988			28,995,412
Beginning of year		127,484,447			98,489,035

End of year	$	481,572,435		$	127,484,447


Financial Highlights		Bond Index Master Portfolio


	Year Ended December 31,
	2012		2011			2010			2009			2008

Total Investment Return
Total investment return		4.06%		7.67%			6.94%			5.36%			6.06%


Ratios to Average Net Assets
Total expenses		0.09%		0.13%			0.10%			0.09%			0.10%

Total expenses after fees waived		0.08%		0.08%			0.08%			0.08%			0.08%

Net investment income		1.86%		3.36%			3.80%			4.20%			4.99%


Supplemental Data
Net assets, end of year (000)	$	481,572	$	127,484		$	98,489		$	156,465		$	133,478

Portfolio turnover		436%		122%	¹		59%	²		103%	³		89%

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

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

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


Notes to Financial Statements		Bond Index Master Portfolio

1. Organization and Significant Accounting Policies:

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

The following is a summary of significant accounting policies followed by the Master Portfolio:

The Master Portfolio values its bond investments on the basis of last available bid prices or current market quotations provided by dealers or pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more brokers or dealers as obtained from a pricing service. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between investments and calculated yield measures. Asset-backed and mortgage-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. To-be-announced (“TBA”) commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services. Investments in open-end registered investment companies are valued at NAV each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments and information with respect to various relationships between investments.

In the event that application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the investment advisor and/or sub-advisor deem relevant consistent with the principles of fair value measurement which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. A market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Master Portfolio’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.



BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012	37


Notes to Financial Statements (continued)		Bond Index Master Portfolio

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. 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.

Multiple Class Pass-Through Securities: The Master Portfolio may invest in multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities. These multiple class securities may be issued by Ginnie Mae, US government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by, and multiple class pass-through securities represent direct ownership interests in, a pool of residential or commercial mortgage loans or mortgage pass-through securities (the “Mortgage Assets”), the payments on which are used to make payments on the CMOs or multiple pass-through securities. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages rise since this increases the

rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. If the underlying Mortgage Assets experience greater than anticipated pre-payments of principal, the Master Portfolio may not fully recoup its initial investment in IOs.



38	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012


Notes to Financial Statements (continued)		Bond Index Master Portfolio

otherwise be required to be physically segregated. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, the Master Portfolio engaging in such transactions may have requirements to deliver/deposit securities to/with an exchange or broker-dealer as collateral for certain investments.

Securities Lending: The Master Portfolio may lend securities to approved borrowers, such as banks, brokers and other financial institutions. The borrower pledges cash, securities issued or guaranteed by the US government or irrevocable letters of credit issued by a bank as collateral. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statement of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the Master Portfolio earns dividend or interest income on the securities loaned but does not receive interest income on the securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions. The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate this risk the Fund benefits from a borrower default indemnity provided by BlackRock, Inc. BlackRock’s indemnity allows for full replacement of securities lent. The Master Portfolio also could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received. During the year ended December 31, 2012, any securities on loan were collateralized by cash.

Income Taxes: The Master Portfolio is classified as a partnership for federal income tax purposes. As such, each investor in the Master

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

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

Recent Accounting Standards: In December 2011, the Financial Accounting Standards Board (the “FASB”) issued guidance that will expand current disclosure requirements on the offsetting of certain assets and liabilities. The new disclosures will be required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset in the Statements of Assets and Liabilities and will require an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarifies which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting will be limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions. The guidance is effective for financial statements with fiscal years beginning on or after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the Master Portfolio’s financial statement disclosures.

2. 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, Inc. (“BlackRock”).



BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012	39


Notes to Financial Statements (continued)		Bond Index Master Portfolio

provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Master Portfolio. For such services, the Master Portfolio pays the Manager a monthly fee based on a percentage of the Master Portfolio’s average daily net assets at an annual rate of 0.08%.

MIP entered into an Administration Agreement with BlackRock Institutional Trust Company, N.A. (“BTC”) (“The Administrator”) which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC may delegate certain of its administration duties to sub-administrators. BTC, 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. Effective July 1, 2012 BlackRock Advisors, LLC (“BAL”) replaced BTC as the Master Portfolio’s administrator.

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

collateral invested by BTC is disclosed in the Schedule of Investments, if any. Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of rebates paid to, or fees paid by, borrowers of securities. The Master Porfolio retains 65% of securities lending income and pays a fee to BTC equal to 35% of such income. The Master Portfolio benefits from a borrower default indemnity provided by BlackRock. As securities lending agent, BTC bears all operational costs directly related to securities lending as well as the cost of borrower default indemnification. BTC does not receive any fees for managing the cash collateral. The share of income earned by the Master Portfolio is shown as securities lending – affiliated – net in the Statement of Operations. For the year ended December 31, 2012, BTC received $25,701 in securities lending agent fees related to securities lending activities for the Master Portfolio.

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

3. Investments:

Purchases and sales of investments including paydowns and TBA transactions and excluding short-term securities and US government securities for the year ended December 31, 2012, were $1,577,393,501 and $1,413,218,123 respectively.

Purchases and sales of US government securities for the Master Portfolio for the year ended December 31, 2012, were $251,208,711 and $54,774,392, respectively.

4. Borrowings:

The Master Portfolio, along with certain other funds managed by the manager and its affiliates, is a party to a $500 million credit agreement with a group of lenders. The Master Portfolio may borrow under the credit agreement to fund shareholder redemptions. Effective November 2011 to November 2012, the credit agreement had the following terms: a commitment fee of 0.065% per annum based on the Master Portfolio’s pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month London Interbank Offered Rate (“LIBOR”) plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Master Portfolio paid administration and arrangement fees which were allocated to the Master Portfolio based on its net assets as of October 31, 2011. The credit agreement, which expired in November 2012, was renewed with the same terms until November 2013. Effective November 2012 to November 2013, the credit agreement has the following terms: a commitment fee of 0.065% per annum based on the Master Portfolio’s pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Master Portfolio paid administration and arrangement fees which were allo-



40	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012


Notes to Financial Statements (concluded)		Bond Index Master Portfolio

cated to the Master Portfolio based on its net assets as of October 31, 2012. The Master Portfolio did not borrow under the credit agreement during the year ended December 31, 2012.

5. Concentration, Market and Credit Risk:

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.

6. Subsequent Events:



BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012	41


Report of Independent Registered Public Accounting Firm		Bond Index Master Portfolio

To the Interestholders and Board of Trustees of

Master Investment Portfolio:

Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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, 2012 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 22, 2013



42	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012


Officers and Trustees


Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees¹
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 106 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. since 1987; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of Seventy (civic) since 2006; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 106 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy since 2002; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 106 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President of Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 106 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 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) since 2011, President thereof from 1997 to 2011 and Trustee since 1980; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (strategic solutions company) since 2005; Director, Cerego, LLC (software development and design) since 2005; Director, Cybersettle (dispute resolution technology) since 2009.	33 RICs consisting of 106 Portfolios	AIMS Worldwide, Inc. (marketing)
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1999 to 2008.	33 RICs consisting of 106 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital since 2005; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 106 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, The West Penn Allegheny Health System (a not-for-profit health system) since 2008; 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; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 106 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 106 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 106 Portfolios	None



BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012	43


Officers and Trustees (continued)


Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees¹ (concluded)
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Chairman Elect 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; 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 106 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh since 2005 and Dean thereof from 1997 to 2005; Director, Alkon Corporation (pneumatics) since 1992; Director, Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 106 Portfolios	None
	¹ Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year extensions in terms of Trustees who turn 72 prior to December 31, 2013. ² Date shown is the earliest date a person has served for the Trust covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the Trust’s Board. As a result, although the chart shows certain Trustees as joining the Trust’s board in 2009, each Trustee first became a member of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees³
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	155 RICs consisting of 278 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	155 RICs consisting of 278 Portfolios	None
	³ Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.



44	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012


Officers and Trustees (concluded)


Name, Address and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers*
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock since 2000; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2002; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009; and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Simon Mendelson 55 East 52nd Street New York, NY 10055 1964	Vice President	Since 2009	Managing Director of BlackRock since 2005; Co-head of the Global Cash and Securities Lending Group since 2010; Chief Operating Officer and Head of the Global Client Group for BlackRock’s Global Cash Management Business from 2007 to 2010; Head of BlackRock’s Strategy and Development Group from 2005 to 2007; Partner of McKinsey & Co. from 1997 to 2005.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2009	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2009	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Director of BlackRock since 2010; 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.
	* Officers of the Trust/MIP serve at the pleasure of the Board.


Investment Advisor BlackRock Fund Advisors San Francisco, CA 94105	Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Custodian and Accounting Agent State Street Bank and Trust Company Boston, MA 02110	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Sidley Austin LLP New York, NY 10019

				Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP New York, NY 10017	Address of the Trust/MIP 400 Howard Street San Francisco, CA 94105



BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012	45


Additional Information

General Information

Electronic Delivery

To enroll:

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

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

Shareholders Who Hold Accounts Directly with BlackRock:

1)	Access the BlackRock website at

http://www.blackrock.com/edelivery

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

3)	Log into your account

Householding

not want the mailing of these documents to be combined with those for other members of your household, please call the Fund’s/Master Portfolio’s at (800) 441-7762.

Availability of Quarterly Schedule of Investments

Availability of Proxy Voting Policies and Procedures

Availability of Proxy Voting Record


Shareholder Privileges

Account Information

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.



46	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012


Additional Information (concluded)


BlackRock Privacy Principles

(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.



BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012	47


A World-Class Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing.


Equity Funds

BlackRock ACWI ex-US Index Fund

BlackRock All-Cap Energy & Resources Portfolio

BlackRock Basic Value Fund

BlackRock Capital Appreciation Fund

BlackRock China Fund

BlackRock Commodity Strategies Fund

BlackRock Emerging Markets Fund

BlackRock Emerging Markets Long/Short Equity Fund

BlackRock Energy & Resources Portfolio

BlackRock Equity Dividend Fund

BlackRock EuroFund

BlackRock Flexible Equity Fund

BlackRock Focus Growth Fund

BlackRock Global Dividend Income Portfolio

BlackRock Global Long/Short Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Global SmallCap Fund

BlackRock Health Sciences Opportunities Portfolio

BlackRock Index Equity Portfolio

BlackRock India Fund

BlackRock International Fund

BlackRock International Index Fund

BlackRock International Opportunities Portfolio

BlackRock Large Cap Core Fund

BlackRock Large Cap Core Plus Fund

BlackRock Large Cap Growth Fund

BlackRock Large Cap Value Fund

BlackRock Latin America Fund

BlackRock Long-Horizon Equity Fund

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Mid Cap Value Opportunities Fund

BlackRock Natural Resources Trust

BlackRock Pacific Fund

BlackRock Real Estate Securities Fund

BlackRock Russell 1000 Index Fund

BlackRock Science & Technology Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock Small Cap Growth Fund II

BlackRock Small Cap Index Fund

BlackRock S&P 500 Index Fund

BlackRock S&P 500 Stock Fund

BlackRock U.S. Opportunities Portfolio

BlackRock Value Opportunities Fund

BlackRock World Gold Fund


Taxable Fixed Income Funds

BlackRock Bond Index Fund

BlackRock Core Bond Portfolio

BlackRock CoreAlpha Bond Fund

BlackRock Emerging Market Local Debt Portfolio

BlackRock Floating Rate Income Portfolio

BlackRock Global Long/Short Credit Fund

BlackRock GNMA Portfolio

BlackRock High Yield Bond Portfolio

BlackRock Inflation Protected Bond Portfolio

BlackRock International Bond Portfolio

BlackRock Long Duration Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Secured Credit Portfolio

BlackRock Strategic Income Opportunities Portfolio

BlackRock Total Return Fund

BlackRock U.S. Government Bond Portfolio

BlackRock U.S. Mortgage Portfolio

BlackRock World Income Fund


Municipal Fixed Income Funds

BlackRock California Municipal Bond Fund

BlackRock High Yield Municipal Fund

BlackRock Intermediate Municipal Fund

BlackRock National Municipal Fund

BlackRock New Jersey Municipal Bond Fund

BlackRock New York Municipal Bond Fund

BlackRock Pennsylvania Municipal Bond Fund

BlackRock Short-Term Municipal Fund


Mixed Asset Funds


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

BlackRock Prepared Portfolios	LifePath Portfolios
Conservative Prepared Portfolio		Retirement	2040
Moderate Prepared Portfolio		2020	2045
Growth Prepared Portfolio		2025	2050
Aggressive Growth Prepared Portfolio		2030	2055
		2035



48	BLACKROCK BOND INDEX FUND	DECEMBER 31, 2012

LOGO


# BINF-12/12-AR

DECEMBER 31, 2012

ANNUAL REPORT

BlackRock S&P 500 Stock Fund | of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee


Table of Contents


	Page
Dear Shareholder		3
Annual Report:
Fund Summary		4
About Fund Performance		6
Disclosure of Expenses		6
Derivative Financial Instruments		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		11
Fund Report of Independent Registered Public Accounting Firm		14
Important Tax Information		14
Master Portfolio Information		15
Master Portfolio Financial Statements:
Schedule of Investments		16
Statement of Assets and Liabilities		23
Statement of Operations		24
Statements of Changes in Net Assets		25
Master Portfolio Financial Highlights		26
Master Portfolio Notes to Financial Statements		27
Master Portfolio Report of Independent Registered Public Accounting Firm		32
Officers and Trustees		33
Additional Information		36
A World-Class Mutual Fund Family		38



2	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012

Dear Shareholder

Sincerely,

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

“Although 2012 brought its share of headwinds, the strongest returns came from higher-risk asset classes as investors reached for yield in an environment of extremely low interest rates.”

Rob Kapito

President, BlackRock Advisors, LLC


Total Returns as of December 31, 2012
	6-month			12-month
US large cap equities (S&P 500^® Index)		5.95	%		16.00	%
US small cap equities (Russell 2000^® Index)		7.20			16.35
International equities (MSCI Europe, Australasia, Far East Index)		13.95			17.32
Emerging market equities (MSCI Emerging Markets Index)		13.75			18.22
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)		0.07			0.11
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		0.71			4.18
US investment grade bonds (Barclays US Aggregate Bond Index)		1.80			4.21
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.15			7.42
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)		7.97			15.78
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, 2012		BlackRock S&P 500 Stock Fund


Investment Objective

BlackRock S&P 500 Stock Fund’s (the “Fund”), a series of BlackRock Funds III, (the “Trust”) investment objective is to provide investment results that correspond to the total return performance of publicly-traded common stocks in the aggregate, as represented by the Standard & Poor’s (“S&P”) 500^® Index.


Portfolio Management Commentary

On May 16, 2012, the Board of Trustees of the Trust approved separate plans of reorganization whereby the Fund will acquire substantially all of the assets and assume certain stated liabilities 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, (each, a “Target Fund”) in exchange for newly issued shares of the Fund. Each Target Fund reorganization is subject to shareholder approval by each Target Fund’s shareholders and certain other conditions. Shareholders of the Index Equity Portfolio approved its reorganization on November 9, 2012. Each Target Fund invests all of its assets in Master S&P 500 Index Series, a series of Quantitative Master Series LLC (the “Target Master Portfolio”). Each Target Fund reorganization remains contingent on the completion of the reorganization of the Target Master Portfolio with S&P 500^® Stock Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (the “Master Reorganization”). On December 12, 2012, the Master Reorganization was approved by the shareholders of each feeder fund of the Target Master Portfolio. However, the Master Reorganization is not expected to close until the reorganization of the S&P 500 Index Fund with the Fund (the “S&P 500 Fund Reorganization”) is approved by S&P 500 Index Fund’s shareholders. If the S&P 500 Fund Reorganization is not approved, the Board of each Target Fund and the Target Master Portfolio will consider other options, including whether to proceed with the reorganizations or other alternatives. If the S&P 500 Fund Reorganization is approved, each reorganization is expected to contemporaneously close in 2013.

How did the Fund perform?

For the 12 months ended December 31, 2012, the Fund returned 15.85% while the benchmark S&P 500^® Index returned 16.00%. The S&P 500^® Index is an unmanaged index that covers 500 industrial, utility, transportation and financial companies of the US markets (mostly New York Stock Exchange (“NYSE”) issues), representing 75% of NYSE market capitalization and 30% of NYSE issues.

The return for the Fund differs from the benchmark index based on Fund expenses. The Fund invests all of its assets in the Master Portfolio.

Describe the market environment.

Following a tumultuous 2011, equity markets began the new year with a strong rally amid lower volatility. The debt situation in Europe had stabilized and global liquidity conditions improved as the ECB implemented its long-term refinancing operations. Positive economic indicators out of the United States brightened the outlook for the world economy and equities moved boldly higher through the first two months of 2012.

banks. Alongside the drama in Europe, investors became discouraged by gloomy economic reports from various parts of the world. A slowdown in China, a key powerhouse for global growth, was of particular concern. Many European countries fell into recession. In the United States, disappointing jobs reports signaled that the recovery was losing steam. US equities gave back half of their year-to-date gains by the end of May.

As the global economic picture dimmed, investors grew increasingly optimistic that the world’s central banks would intervene to stimulate growth. Meanwhile, European leaders took meaningful steps toward fiscal integration in the euro currency bloc. These positive themes drove a powerful equity rebound in June. In July, ECB president Mario Draghi boosted investor confidence by stating that the ECB was committed to do “whatever it takes” to hold the eurozone together. This assurance, along with growing hopes for additional central bank stimulus, overshadowed concerns about the dreary economic landscape and US stocks continued their advance through the third quarter. In September, the ECB announced its decision to backstop eurozone governments with unlimited purchases of short-term sovereign debt. Days later, the US Federal Reserve announced an aggressive stimulus program involving purchases of agency mortgage-backed securities.

Describe recent portfolio activity.

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.

The Master Portfolio remains positioned to match the risk characteristics of its benchmark index, irrespective of the market’s future direction.



4	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012


Total Return Based on a $10,000 Investment

LOGO

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.

This unmanaged index covers 500 industrial, utility, transportation and financial companies of the US markets (mostly New York Stock Exchange (the “NYSE”) issues), representing about 75% of NYSE market capitalization and 30% of NYSE issues.


Performance Summary for the Period Ended December 31, 2012


	6-Month Total Returns			Average Annual Total Returns
	6-Month Total Returns			1 Year			5 Years			10 Years
BlackRock S&P 500 Stock Fund		5.89	%		15.85	%		1.58	%		6.96	%
S&P 500^® Index		5.95			16.00			1.66			7.10

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						Hypothetical⁴
	Beginning Account Value July 1, 2012		Ending Account Value December 31, 2012		Expenses Paid During the Period³		Beginning Account Value July 1, 2012		Ending Account Value December 31, 2012		Expenses Paid During the Period³		Annualized Expense Ratio
BlackRock S&P 500 Stock Fund	$	1,000.00	$	1,058.90	$	0.93	$	1,000.00	$	1,024.24	$	0.92		0.18	%

Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/366 (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.

⁴

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366.

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



BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012	5


About Fund Performance

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Call toll free, (800) 441-7762, to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in the performance table on the preceding page assume reinvestment of all dividends and capital gain distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. 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) expenses related to transactions, including sales charges and exchange fees; 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, 2012 and held through December 31, 2012) 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 also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in other funds’ shareholder reports.

Derivative Financial Instruments

The Master Portfolio may invest in various derivative financial instruments, including financial futures contracts, as specified in Note 2 of the Master Portfolio’s Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to an index and/or market without owning or taking physical custody of securities or to hedge market and/or equity risks. Derivative financial instruments involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative financial instrument. The Master Portfolio’s ability to use a derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require the Master Portfolio to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation the Master Portfolio can realize on an investment, may result in lower dividends paid to shareholders or may cause the Master Portfolio to hold an investment that it might otherwise sell. The Master Portfolio’s investments in these instruments are discussed in detail in the Master Portfolio’s Notes to Financial Statements.



6	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012


Statement of Assets and Liabilities		BlackRock S&P 500 Stock Fund


December 31, 2012

Assets
Investments at value — S&P 500 Master Portfolio (cost — $397,128,705)	$	380,124,978
Capital shares sold receivable		1,770,293

Total assets		381,895,271


Liabilities
Contributions payable to the Master Portfolio		1,232,488
Capital shares redeemed payable		537,805
Administration fees payable		40,388
Professional fees payable		18,567

Total liabilities		1,829,248

Net Assets	$	380,066,023


Net Assets Consist of
Paid-in capital	$	670,413,667
Undistributed net investment income		392,940
Accumulated net realized loss		(273,736,857	)
Net unrealized appreciation/depreciation		(17,003,727	)

Net Assets	$	380,066,023


Net Asset Value
Based on net assets of $380,066,023 and 2,221,048 shares outstanding, unlimited number of shares authorized, no par value	$	171.12


Statement of Operations		BlackRock S&P 500 Stock Fund


Year Ended December 31, 2012

Investment Income
Net investment income allocated from the Master Portfolio:
Dividends — unaffiliated	$	7,774,621
Securities lending — affiliated — net		84,277
Dividends — affiliated		51,362
Income — affiliated		18,092
Interest		332
Foreign taxes withheld		(4,748	)
Expenses		(217,988	)
Fees waived		47,343

Total income		7,753,291


Fund Expenses
Administration		442,203
Reorganization costs		265,471
Professional		19,356

Total expenses		727,030
Less reorganization costs reimbursed		(265,471	)
Less fees waived by administrator		(19,356	)

Total expenses after fees waived		442,203

Net investment income		7,311,088


Realized and Unrealized Gain (Loss) Allocated from the Master Portfolio
Net realized gain from investments, redemptions-in-kind and financial futures contracts		79,014,593
Net change in unrealized appreciation/depreciation on investments and financial futures contracts		(42,974,624	)

Total realized and unrealized gain		36,039,969

Net Increase in Net Assets Resulting from Operations	$	43,351,057


Statements of Changes in Net Assets		BlackRock S&P 500 Stock Fund


	Year Ended December 31,
Increase (Decrease) in Net Assets:	2012			2011

Operations
Net investment income	$	7,311,088		$	5,227,745
Net realized gain (loss)		79,014,593			(16,427,086	)
Net change in unrealized appreciation/depreciation		(42,974,624	)		18,093,455

Net increase in net assets resulting from operations		43,351,057			6,894,114


Dividends and Distributions to Shareholders From¹
Net investment income		(6,997,048	)		(5,150,567	)
Tax return of capital		—			(45,376	)

Decrease in net assets resulting from dividends and distributions to shareholders		(6,997,048	)		(5,195,943	)


Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		88,431,939			(24,079,131	)


Net Assets
Total increase (decrease) in net assets		124,785,948			(22,380,960	)
Beginning of year		255,280,075			277,661,035

End of year	$	380,066,023		$	255,280,075

Undistributed net investment income	$	392,940		$	97,637

Dividends and distributions are determined in accordance with federal income tax regulations.


Financial Highlights		BlackRock S&P 500 Stock Fund


	Year Ended December 31,
	2012			2011			2010			2009			2008

Per Share Operating Performance
Net asset value, beginning of year	$	150.57		$	150.60		$	133.49		$	107.85		$	175.47

Net investment income		3.57	¹		2.97	¹		2.55	¹		2.50	¹		3.28
Net realized and unrealized gain (loss)		20.23			(0.05	)		17.10			25.60			(67.60	)

Net increase (decrease) from investment operations		23.80			2.92			19.65			28.10			(64.32	)

Dividends and distributions from:²
Net investment income		(3.25	)		(2.92	)		(2.54	)		(2.46	)		(3.27	)
Tax return of capital		—			(0.03	)		—			—			(0.03	)

Total dividends and distributions		(3.25	)		(2.95	)		(2.54	)		(2.46	)		(3.30	)

Net asset value, end of year	$	171.12		$	150.57		$	150.60		$	133.49		$	107.85


Total Investment Return³
Based on net asset value		15.85%			2.00%			14.91%			26.48%			(37.01)%


Ratios to Average Net Assets⁴
Total expenses		0.26%	⁵		0.19%	⁶		0.21%			0.21%			0.21%

Total expenses after fees waived		0.18%	⁵		0.18%	⁶		0.20%			0.20%			0.20%

Net investment income		2.15%	⁵		1.95%	⁶		1.87%			2.20%			2.16%


Supplemental Data
Net assets, end of year (000)	$	380,066		$	255,280		$	277,661		$	215,333		$	169,425

Portfolio turnover of the Master Portfolio		10%			5%			9%			5%			8%

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁴

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

⁵

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

⁶

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


Notes to Financial Statements		BlackRock S&P 500 Stock Fund

1. Organization and Significant Accounting Policies:

BlackRock S&P 500 Stock Fund (the “Fund”), a series of BlackRock Funds III (the “Trust”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. The Trust is organized as a Delaware statutory trust. The Fund seeks to achieve its investment objective by investing substantially all of its assets in S&P 500 Stock Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), an affiliate of the Fund, which has the same investment objective and strategies as the Fund. The value of the Fund’s investment in the Master Portfolio reflects the Fund’s proportionate interest in the net assets of the Master Portfolio. The performance of the Fund is directly affected by the performance of the Master Portfolio. The percentage of the Master Portfolio owned by the Fund at December 31, 2012 was 22.13%. 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’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.

Reorganization: On May 16, 2012, the Board of Trustees of the Trust approved separate plans of reorganization whereby the Fund will acquire substantially all of the assets and assume certain stated liabilities 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, (each, a “Target Fund”) in exchange for newly issued shares of the Fund. Each Target Fund reorganization is subject to shareholder approval by each Target Fund’s shareholders and certain other conditions. Shareholders of the Index Equity Portfolio approved its reorganization on November 9, 2012. Each Target Fund invests all of its assets in Master S&P 500 Index Series, a series of Quantitative Master Series LLC (the “Target Master Portfolio”). Each Target Fund reorganization remains contingent on the completion of the reorganization of the Target Master Portfolio with S&P 500^® Stock Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (the “Master Reorganization”). On December 12, 2012, the Master Reorganization was approved by the shareholders of each feeder fund of the Target Master Portfolio. However, the Master Reorganization is not expected to close until the reorganization of the S&P 500 Index Fund with the Fund (the “S&P 500 Fund Reorganization”) is approved by S&P 500 Index Fund’s shareholders. If the S&P 500 Fund Reorganization is not approved, the board of each Target Fund and the Target Master Portfolio will consider other options, including whether to proceed with the reorganizations or other alternatives.

The following is a summary of significant accounting policies followed by the Fund:

Valuation: US GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund’s policy is to fair value its financial instruments at market value. The Fund records its investment in the Master Portfolio at fair value based on the Fund’s proportionate interest in the net assets of the Master Portfolio. Valuation of securities held by the Master Portfolio is discussed in Note 1 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.

Redemptions-In-Kind: The Fund satisfied certain redemptions in investors’ capital through a redemption-in-kind of securities and cash received from the Master Portfolio upon its redemption from the Master Portfolio. For purposes of US GAAP, these transactions were treated as a sale of securities and the resulting gains and losses were recognized based on the market value of the securities on the date of the transfer. For tax purposes, no gains or losses were recognized. Gains and losses resulting from such redemptions-in-kind are shown as redemptions-in-kind transactions in the Statement of Operations.

Dividends and Distributions: Dividends and distributions paid by the Fund are recorded on the ex-dividend dates. The portion of distributions that exceeds the Fund’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a nontaxable return of capital. Distributions in excess of the Fund’s taxable income and net capital gains, but not in excess of the Fund’s earnings and profits, will be taxable to shareholders as ordinary income and will not constitute a nontaxable return of capital. Capital losses carried forward from years beginning before 2011 do not reduce earnings and profits, even if such carried forward losses offset current year realized gains. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

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

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

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



BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012	11


Notes to Financial Statements (continued)		BlackRock S&P 500 Stock Fund

2. Administration 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, Inc. (“BlackRock”).

The Trust, on behalf of the Fund, entered into an Administration Agreement with BlackRock Institutional Trust Company, N.A. (“BTC”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC, 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. BTC is entitled to receive for these administration services an annual fee of 0.13% based on the average daily net assets of the Fund. Effective July 1, 2012, BlackRock Advisors, LLC (“BAL”) replaced BTC as the Fund’s administrator and entered into an Administration Agreement with the Trust, on behalf of the Fund, on similar terms.

From time to time, BAL, and previously BTC, 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, and previously BTC, 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, and previously BTC, 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, 2013.

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

3. Income Tax Information:

US GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. The following permanent differences as of December 31, 2012 attributable to the accounting for real estate investment trusts, the sale of securities with a different book and tax basis, the sale of contributed securities, redemptions in-kind and expirations of capital loss carryforwards were reclassified to the following accounts:


Paid-in capital	$	68,893,206
Undistributed net investment income	$	(18,737	)
Accumulated net realized loss	$	(68,874,469	)

The tax character of distributions paid during the fiscal years ended December 31, 2012 and December 31, 2011 was as follows:


	12/31/12		12/31/11
Ordinary income	$	6,997,048	$	5,150,567
Tax return of capital		—		45,376

Total	$	6,997,048	$	5,195,943

As of December 31, 2012, the tax components of accumulated net losses were as follows:


Undistributed ordinary income	$	288,168
Capital loss carryforwards		(200,462,533	)
Net unrealized losses¹		(90,173,279	)

Total	$	(290,347,644	)

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

As of December 31, 2012, the Fund had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:


Expires December 31,
2013	$	21,068,838
2014		31,394,394
2015		18,209,355
2016		55,579,530
2017		21,080,621
2018		29,366,509
No expiration date²		23,763,286

Total	$	200,462,533

Must be utilized prior to losses subject to expiration.

4. Capital Share Transactions:

Transactions in capital shares for the Fund were as follows:


	Year Ended December 31, 2012
	Shares			Amount
Shares sold		1,418,484		$	234,352,984
Shares issued to shareholders in reinvestment of dividends		23,353			3,950,755
Shares redeemed		(916,170	)		(149,871,800	)

Net increase (decrease)		525,667		$	88,431,939


	Year Ended December 31, 2011
	Shares			Amount
Shares sold		452,342		$	68,863,218
Shares issued to shareholders in reinvestment of dividends		30,661			4,567,355
Shares redeemed		(631,334	)		(97,509,704	)

Net increase (decrease)		(148,331	)	$	(24,079,131	)



12	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012


Notes to Financial Statements (concluded)		BlackRock S&P 500 Stock Fund

5. Subsequent Events:



BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012	13


Report of Independent Registered Public Accounting Firm		BlackRock S&P 500 Stock Fund

To the Shareholders and Board of Trustees of BlackRock Funds III:

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 the BlackRock S&P 500 Stock Fund, a series of BlackRock Funds III (the “Trust”), at December 31, 2012, 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 Trust’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.

PricewaterhouseCoopers LLP

New York, New York

February 22, 2013

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by the Fund during the taxable year ended December 31, 2012.

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



14	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012


Master Portfolio Information		S&P 500 Stock Master Portfolio

As of December 31, 2012

Ten Largest Holdings

Percent of

Long-Term Investments


Apple, Inc.	4	%
Exxon Mobil Corp.	3
General Electric Co.	2
Chevron Corp.	2
International Business Machines Corp.	2
Microsoft Corp.	2
Johnson & Johnson	2
AT&T, Inc.	2
Google, Inc., Class A	1
The Procter & Gamble Co.	1

Sector Allocation

Percent of

Long-Term Investments


Information Technology	19	%
Financials	16
Health Care	12
Consumer Discretionary	11
Energy	11
Consumer Staples	11
Industrials	10
Materials	4
Utilities	3
Telecommunication Services	3



BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012	15

Schedule of Investments December 31, 2012

S&P 500 Stock Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Aerospace & Defense — 2.3%
The Boeing Co.		88,987	$	6,706,060
General Dynamics Corp.		43,507		3,013,730
Honeywell International, Inc.		102,715		6,519,321
L-3 Communications Holdings, Inc.		12,365		947,406
Lockheed Martin Corp. (a)		35,229		3,251,284
Northrop Grumman Corp.		32,222		2,177,563
Precision Castparts Corp.		19,080		3,614,134
Raytheon Co.		43,299		2,492,290
Rockwell Collins, Inc. (a)		18,427		1,071,899
Textron, Inc.		36,947		915,916
United Technologies Corp.		110,568		9,067,682

				39,777,285
Air Freight & Logistics — 0.7%
C.H. Robinson Worldwide, Inc.		21,098		1,333,816
Expeditors International of Washington, Inc.		27,431		1,084,896
FedEx Corp.		38,294		3,512,326
United Parcel Service, Inc., Class B (a)		93,865		6,920,666

				12,851,704
Airlines — 0.1%
Southwest Airlines Co.		96,660		989,798
Auto Components — 0.3%
BorgWarner, Inc. (b)		15,330		1,097,935
Delphi Automotive Plc (b)		38,694		1,480,045
The Goodyear Tire & Rubber Co. (b)		32,127		443,674
Johnson Controls, Inc.		89,658		2,752,500

				5,774,154
Automobiles — 0.5%
Ford Motor Co.		499,900		6,473,705
Harley-Davidson, Inc.		29,719		1,451,476

				7,925,181
Beverages — 2.3%
Beam, Inc.		20,846		1,273,482
Brown-Forman Corp., Class B		19,828		1,254,121
The Coca-Cola Co.		505,917		18,339,491
Coca-Cola Enterprises, Inc.		35,458		1,125,082
Constellation Brands, Inc., Class A (b)		19,825		701,607
Dr. Pepper Snapple Group, Inc. (a)		27,344		1,208,058
Molson Coors Brewing Co., Class B		20,392		872,574
Monster Beverage Corp. (b)		19,595		1,036,184
PepsiCo, Inc.		202,894		13,884,036

				39,694,635
Biotechnology — 1.6%
Alexion Pharmaceuticals, Inc. (b)		25,466		2,388,966
Amgen, Inc.		100,660		8,688,971
Biogen Idec, Inc. (b)		31,020		4,549,703
Celgene Corp. (b)		55,501		4,369,039
Gilead Sciences, Inc. (b)		99,344		7,296,817

				27,293,496
Building Products — 0.0%
Masco Corp. (a)		46,647		777,139
Capital Markets — 1.9%
Ameriprise Financial, Inc.		27,028		1,692,764
The Bank of New York Mellon Corp.		153,344		3,940,941
BlackRock, Inc. (a)(c)		16,465		3,403,480
The Charles Schwab Corp.		143,722		2,063,848
Capital Markets (concluded)
E*Trade Financial Corp. (b)		33,617	$	300,872
Franklin Resources, Inc.		18,082		2,272,907
The Goldman Sachs Group, Inc.		57,951		7,392,229
Invesco Ltd.		58,350		1,522,351
Legg Mason, Inc. (a)		15,460		397,631
Morgan Stanley		181,190		3,464,353
Northern Trust Corp.		28,648		1,436,984
State Street Corp.		61,006		2,867,892
T. Rowe Price Group, Inc.		33,405		2,175,668

				32,931,920
Chemicals — 2.5%
Air Products & Chemicals, Inc.		27,899		2,344,074
Airgas, Inc.		9,204		840,233
CF Industries Holdings, Inc.		8,239		1,673,835
The Dow Chemical Co.		157,233		5,081,771
E.I. du Pont de Nemours & Co.		122,260		5,498,032
Eastman Chemical Co. (a)		20,094		1,367,397
Ecolab, Inc.		34,554		2,484,433
FMC Corp. (a)		17,960		1,051,019
International Flavors & Fragrances, Inc. (a)		10,697		711,778
LyondellBasell Industries NV, Class A		49,762		2,840,913
Monsanto Co.		70,096		6,634,586
The Mosaic Co.		36,282		2,054,650
PPG Industries, Inc.		20,102		2,720,806
Praxair, Inc. (a)		39,008		4,269,426
The Sherwin-Williams Co.		11,215		1,725,091
Sigma-Aldrich Corp. (a)		15,804		1,162,858

				42,460,902
Commercial Banks — 2.7%
BB&T Corp.		91,711		2,669,707
Comerica, Inc.		25,038		759,653
Fifth Third Bancorp (a)		117,850		1,790,141
First Horizon National Corp. (a)		32,505		322,124
Huntington Bancshares, Inc. (a)		112,187		716,875
KeyCorp		122,711		1,033,227
M&T Bank Corp. (a)		15,936		1,569,218
The PNC Financial Services Group, Inc. (c)		69,347		4,043,624
Regions Financial Corp.		185,116		1,318,026
SunTrust Banks, Inc.		70,619		2,002,049
US Bancorp		246,671		7,878,672
Wells Fargo & Co.		642,119		21,947,627
Zions Bancorporation (a)		24,132		516,425

				46,567,368
Commercial Services & Supplies — 0.5%
The ADT Corp.		30,458		1,415,992
Avery Dennison Corp.		13,127		458,395
Cintas Corp. (a)		13,975		571,577
Iron Mountain, Inc. (a)		21,835		677,977
Pitney Bowes, Inc. (a)		25,978		276,406
Republic Services, Inc.		39,214		1,150,147
Stericycle, Inc. (b)		11,259		1,050,127
Tyco International Ltd.		61,032		1,785,186
Waste Management, Inc.		57,173		1,929,017

				9,314,824
Communications Equipment — 1.9%
Cisco Systems, Inc.		696,215		13,680,625
F5 Networks, Inc. (b)		10,347		1,005,211

See Notes to Financial Statements.



16	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

S&P 500 Stock Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Communications Equipment (concluded)
Harris Corp.		14,867	$	727,888
JDS Uniphase Corp. (b)		30,584		414,107
Juniper Networks, Inc. (b)		67,728		1,332,210
Motorola Solutions, Inc.		36,828		2,050,583
QUALCOMM, Inc.		223,453		13,858,555

				33,069,179
Computers & Peripherals — 4.9%
Apple, Inc.		123,365		65,757,246
Dell, Inc.		191,258		1,937,444
EMC Corp. (b)		276,227		6,988,543
Hewlett-Packard Co.		257,762		3,673,108
NetApp, Inc. (b)		47,053		1,578,628
SanDisk Corp. (b)		31,728		1,382,072
Seagate Technology Plc		44,136		1,345,265
Western Digital Corp.		28,808		1,224,052

				83,886,358
Construction & Engineering — 0.2%
Fluor Corp.		21,846		1,283,234
Jacobs Engineering Group, Inc. (b)		17,049		725,776
Quanta Services, Inc. (b)		27,838		759,699

				2,768,709
Construction Materials — 0.1%
Vulcan Materials Co. (a)		16,993		884,486
Consumer Finance — 0.9%
American Express Co.		127,720		7,341,346
Capital One Financial Corp.		76,263		4,417,915
Discover Financial Services		66,256		2,554,169
SLM Corp.		60,744		1,040,545

				15,353,975
Containers & Packaging — 0.1%
Ball Corp.		20,217		904,711
Bemis Co.		13,527		452,613
Owens-Illinois, Inc. (b)		21,399		455,157
Sealed Air Corp.		25,435		445,367

				2,257,848
Distributors — 0.1%
Genuine Parts Co. (a)		20,309		1,291,246
Diversified Consumer Services — 0.1%
Apollo Group, Inc., Class (a)(b)		13,092		273,884
H&R Block, Inc.		35,603		661,148

				935,032
Diversified Financial Services — 3.5%
Bank of America Corp.		1,413,370		16,395,092
Citigroup, Inc.		384,551		15,212,838
CME Group, Inc. (a)		40,200		2,038,542
IntercontinentalExchange, Inc. (b)		9,528		1,179,662
JPMorgan Chase & Co.		498,503		21,919,177
Leucadia National Corp. (a)		25,914		616,494
Moody’s Corp.		25,416		1,278,933
The NASDAQ OMX Group, Inc. (a)		15,543		388,730
NYSE Euronext		31,963		1,008,113

				60,037,581
Diversified Telecommunication Services — 2.7%
AT&T, Inc.		744,967	$	25,112,838
CenturyLink, Inc.		81,836		3,201,424
Frontier Communications Corp. (a)		130,617		559,041
Verizon Communications, Inc.		374,246		16,193,624
Windstream Corp. (a)		76,806		635,954

				45,702,881
Electric Utilities — 1.9%
American Electric Power Co., Inc.		63,608		2,714,790
Duke Energy Corp.		92,338		5,891,164
Edison International		42,714		1,930,246
Entergy Corp. (a)		23,313		1,486,204
Exelon Corp.		111,992		3,330,642
FirstEnergy Corp. (a)		54,845		2,290,327
NextEra Energy, Inc. (a)		55,483		3,838,869
Northeast Utilities, Inc.		41,112		1,606,657
Pepco Holdings, Inc. (a)		30,140		591,045
Pinnacle West Capital Corp.		14,397		733,959
PPL Corp.		76,243		2,182,837
The Southern Co. (a)		114,605		4,906,240
Xcel Energy, Inc.		63,902		1,706,822

				33,209,802
Electrical Equipment — 0.7%
Eaton Corp. Plc		60,535		3,280,997
Emerson Electric Co. (a)		95,010		5,031,730
Rockwell Automation, Inc.		18,297		1,536,765
Roper Industries, Inc.		12,892		1,437,200

				11,286,692
Electronic Equipment, Instruments & Components — 0.4%
Amphenol Corp., Class A		21,023		1,360,188
Corning, Inc.		193,989		2,448,141
Flir Systems, Inc.		19,754		440,712
Jabil Circuit, Inc.		24,337		469,461
Molex, Inc.		18,072		493,908
TE Connectivity Ltd.		55,479		2,059,380

				7,271,790
Energy Equipment & Services — 1.8%
Baker Hughes, Inc.		57,637		2,353,895
Cameron International Corp. (b)		32,332		1,825,465
Diamond Offshore Drilling, Inc. (a)		9,094		618,028
Ensco Plc, Class A (a)		30,441		1,804,542
FMC Technologies, Inc. (b)		31,231		1,337,624
Halliburton Co.		121,663		4,220,489
Helmerich & Payne, Inc.		13,840		775,178
Nabors Industries Ltd. (b)		38,006		549,187
National Oilwell Varco, Inc.		55,968		3,825,413
Noble Corp.		33,069		1,151,463
Rowan Cos. Plc, Class A (b)		16,267		508,669
Schlumberger Ltd.		174,085		12,062,350

				31,032,303
Food & Staples Retailing — 2.3%
Costco Wholesale Corp.		56,697		5,599,963
CVS Caremark Corp.		163,543		7,907,304
The Kroger Co.		67,468		1,755,518
Safeway, Inc. (a)		31,467		569,238
Sysco Corp. (a)		77,047		2,439,308
Wal-Mart Stores, Inc.		219,388		14,968,843

See Notes to Financial Statements.



BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012	17

Schedule of Investments (continued)

S&P 500 Stock Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Food & Staples Retailing (concluded)
Walgreen Co.		112,630	$	4,168,436
Whole Foods Market, Inc.		22,613		2,065,245

				39,473,855
Food Products — 1.7%
Archer-Daniels-Midland Co.		86,362		2,365,455
Campbell Soup Co. (a)		23,526		820,822
ConAgra Foods, Inc.		53,403		1,575,389
Dean Foods Co. (b)		24,242		400,235
General Mills, Inc.		84,673		3,421,636
H.J. Heinz Co. (a)		42,031		2,424,348
The Hershey Co. (a)		19,643		1,418,618
Hormel Foods Corp. (a)		17,568		548,297
The J.M. Smucker Co. (a)		14,251		1,229,006
Kellogg Co.		32,438		1,811,662
Kraft Foods Group, Inc.		77,663		3,531,337
McCormick & Co., Inc. (a)		17,353		1,102,436
Mead Johnson Nutrition Co.		26,646		1,755,705
Mondelez International, Inc., Class A (a)		233,006		5,934,663
Tyson Foods, Inc., Class A		37,769		732,719

				29,072,328
Gas Utilities — 0.1%
AGL Resources, Inc.		15,467		618,216
ONEOK, Inc. (a)		26,842		1,147,495

				1,765,711
Health Care Equipment & Supplies — 1.7%
Baxter International, Inc.		72,029		4,801,453
Becton Dickinson & Co.		25,859		2,021,915
Boston Scientific Corp. (b)		180,455		1,034,007
C.R. Bard, Inc.		10,062		983,460
CareFusion Corp. (b)		28,985		828,391
Covidien Plc		62,122		3,586,924
DENTSPLY International, Inc. (a)		18,526		733,815
Edwards Lifesciences Corp. (b)		15,162		1,367,158
Intuitive Surgical, Inc. (b)		5,215		2,557,280
Medtronic, Inc. (a)		132,688		5,442,862
St. Jude Medical, Inc.		40,479		1,462,911
Stryker Corp.		37,836		2,074,170
Varian Medical Systems, Inc. (b)		14,380		1,010,051
Zimmer Holdings, Inc.		22,779		1,518,448

				29,422,845
Health Care Providers & Services — 1.9%
Aetna, Inc. (a)		43,852		2,030,348
AmerisourceBergen Corp. (a)		30,933		1,335,687
Cardinal Health, Inc.		44,637		1,838,152
Cigna Corp. (a)		37,535		2,006,621
Coventry Health Care, Inc.		17,644		790,980
DaVita, Inc. (b)		10,982		1,213,840
Express Scripts Holding Co. (b)		107,043		5,780,322
Humana, Inc.		20,784		1,426,406
Laboratory Corp. of America Holdings (b)		12,432		1,076,860
McKesson Corp.		30,942		3,000,136
Patterson Cos., Inc. (a)		10,994		376,325
Quest Diagnostics, Inc. (a)		20,785		1,211,142
Tenet Healthcare Corp. (b)		13,925		452,145
UnitedHealth Group, Inc.		134,005		7,268,431
WellPoint, Inc.		39,802		2,424,738

				32,232,133
Health Care Technology — 0.1%
Cerner Corp. (b)		19,109	$	1,483,623
Hotels, Restaurants & Leisure — 1.8%
Carnival Corp.		58,513		2,151,523
Chipotle Mexican Grill, Inc. (b)		4,132		1,229,105
Darden Restaurants, Inc. (a)		16,890		761,232
International Game Technology		35,015		496,163
Marriott International, Inc., Class A		32,338		1,205,237
McDonald’s Corp.		131,691		11,616,463
Starbucks Corp.		97,561		5,231,221
Starwood Hotels & Resorts Worldwide, Inc. (a)		25,740		1,476,446
Wyndham Worldwide Corp.		18,439		981,139
Wynn Resorts Ltd.		10,395		1,169,334
Yum! Brands, Inc. (a)		59,286		3,936,590

				30,254,453
Household Durables — 0.3%
D.R. Horton, Inc. (a)		36,601		723,968
Garmin Ltd. (a)		14,270		582,501
Harman International Industries, Inc.		8,812		393,368
Leggett & Platt, Inc. (a)		18,481		503,053
Lennar Corp., Class A (a)		21,496		831,250
Newell Rubbermaid, Inc.		37,613		837,642
PulteGroup, Inc. (b)		44,514		808,374
Whirlpool Corp.		10,198		1,037,646

				5,717,802
Household Products — 2.1%
The Clorox Co. (a)		17,093		1,251,549
Colgate-Palmolive Co.		58,258		6,090,291
Kimberly-Clark Corp. (a)		51,342		4,334,805
The Procter & Gamble Co.		358,612		24,346,169

				36,022,814
Independent Power Producers & Energy Traders — 0.1%
The AES Corp.		81,305		869,964
NRG Energy, Inc.		42,366		973,994

				1,843,958
Industrial Conglomerates — 2.4%
3M Co. (a)		83,470		7,750,189
Danaher Corp.		76,325		4,266,568
General Electric Co.		1,375,329		28,868,156

				40,884,913
Insurance — 3.9%
ACE Ltd.		44,548		3,554,930
Aflac, Inc.		61,471		3,265,340
The Allstate Corp.		63,238		2,540,270
American International Group, Inc. (b)		193,572		6,833,092
Aon Plc (a)		41,832		2,325,859
Assurant, Inc.		10,347		359,041
Berkshire Hathaway, Inc., Class B (b)		239,240		21,459,828
The Chubb Corp.		34,383		2,589,728
Cincinnati Financial Corp.		19,157		750,188
Genworth Financial, Inc., Class A (b)		64,457		484,072
Hartford Financial Services Group, Inc. (a)		57,183		1,283,187
Lincoln National Corp. (a)		36,154		936,389
Loews Corp.		40,834		1,663,985
Marsh & McLennan Cos., Inc.		71,356		2,459,641
MetLife, Inc.		143,046		4,711,935
Principal Financial Group, Inc. (a)		36,322		1,035,903

See Notes to Financial Statements.



18	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

S&P 500 Stock Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Insurance (concluded)
The Progressive Corp. (a)		73,071	$	1,541,798
Prudential Financial, Inc.		60,876		3,246,517
Torchmark Corp.		12,498		645,772
The Travelers Cos., Inc.		50,056		3,595,022
Unum Group		36,189		753,455
XL Group Plc		39,514		990,221

				67,026,173
Internet & Catalog Retail — 1.0%
Amazon.com, Inc. (b)		47,518		11,933,670
Expedia, Inc.		12,217		750,735
Netflix, Inc. (a)(b)		7,271		674,603
Priceline.com, Inc. (b)		6,538		4,061,406
TripAdvisor, Inc. (b)		14,368		602,881

				18,023,295
Internet Software & Services — 2.1%
Akamai Technologies, Inc. (b)		23,249		951,117
eBay, Inc. (b)		152,704		7,790,958
Google, Inc., Class A (b)		34,904		24,759,850
VeriSign, Inc. (b)		20,367		790,647
Yahoo! Inc. (b)		136,402		2,714,400

				37,006,972
IT Services — 3.7%
Accenture Plc, Class A		83,721		5,567,447
Automatic Data Processing, Inc.		63,645		3,628,401
Cognizant Technology Solutions Corp., Class A (b)		39,351		2,913,942
Computer Sciences Corp.		20,287		812,494
Fidelity National Information Services, Inc.		32,756		1,140,236
Fiserv, Inc. (b)		17,533		1,385,633
International Business Machines Corp.		139,305		26,683,873
MasterCard, Inc., Class A		14,020		6,887,746
Paychex, Inc. (a)		42,443		1,321,675
SAIC, Inc. (a)		37,300		422,236
Teradata Corp. (b)		22,177		1,372,535
Total System Services, Inc.		21,060		451,105
Visa, Inc., Class A (a)		68,368		10,363,221
The Western Union Co.		78,404		1,067,078

				64,017,622
Leisure Equipment & Products — 0.1%
Hasbro, Inc. (a)		15,142		543,598
Mattel, Inc. (a)		44,966		1,646,655

				2,190,253
Life Sciences Tools & Services — 0.4%
Agilent Technologies, Inc.		45,668		1,869,648
Life Technologies Corp. (b)		22,609		1,109,650
PerkinElmer, Inc.		15,012		476,481
Thermo Fisher Scientific, Inc.		47,275		3,015,199
Waters Corp. (b)		11,413		994,301

				7,465,279
Machinery — 1.9%
Caterpillar, Inc.		85,746		7,681,127
Cummins, Inc.		23,171		2,510,578
Deere & Co.		51,350		4,437,667
Dover Corp.		23,511		1,544,908
Machinery (concluded)
Flowserve Corp.		6,571	$	964,623
Illinois Tool Works, Inc. (a)		55,953		3,402,502
Ingersoll-Rand Plc		36,758		1,762,914
Joy Global, Inc.		13,833		882,269
PACCAR, Inc.		46,260		2,091,414
Pall Corp. (a)		14,606		880,157
Parker Hannifin Corp.		19,536		1,661,732
Pentair Ltd., Registered Shares (a)		27,552		1,354,181
Snap-On, Inc.		7,620		601,904
Stanley Black & Decker, Inc.		22,118		1,636,068
Xylem, Inc.		24,252		657,229

				32,069,273
Media — 3.5%
Cablevision Systems Corp., New York Group, Class A (a)		28,088		419,635
CBS Corp., Class B		77,557		2,951,044
Comcast Corp., Class A		348,545		13,028,612
DIRECTV (b)		79,273		3,976,334
Discovery Communications, Inc., Class A (b)		31,361		1,990,796
Gannett Co., Inc.		30,197		543,848
The Interpublic Group of Cos., Inc.		56,777		625,682
The McGraw-Hill Cos., Inc.		36,460		1,993,268
News Corp., Class A		264,516		6,755,739
Omnicom Group, Inc. (a)		34,664		1,731,813
Scripps Networks Interactive, Class A (a)		11,405		660,578
Time Warner Cable, Inc.		39,600		3,848,724
Time Warner, Inc. (a)		124,134		5,937,329
Viacom, Inc., Class B		60,632		3,197,732
The Walt Disney Co. (a)		232,449		11,573,636
The Washington Post Co., Class B (a)		597		218,030

				59,452,800
Metals & Mining — 0.7%
Alcoa, Inc.		139,700		1,212,596
Allegheny Technologies, Inc. (a)		14,066		427,044
Cliffs Natural Resources, Inc. (a)		18,607		717,486
Freeport-McMoRan Copper & Gold, Inc.		124,460		4,256,532
Newmont Mining Corp.		65,075		3,022,083
Nucor Corp. (a)		41,602		1,796,374
United States Steel Corp. (a)		18,890		450,904

				11,883,019
Multi-Utilities — 1.2%
Ameren Corp.		31,734		974,868
CenterPoint Energy, Inc.		55,930		1,076,652
CMS Energy Corp.		34,603		843,621
Consolidated Edison, Inc.		38,416		2,133,625
Dominion Resources, Inc. (a)		75,332		3,902,198
DTE Energy Co.		22,572		1,355,449
Integrys Energy Group, Inc.		10,203		532,801
NiSource, Inc. (a)		40,571		1,009,812
PG&E Corp.		56,359		2,264,505
Public Service Enterprise Group, Inc. (a)		66,344		2,030,126
SCANA Corp. (a)		17,258		787,655
Sempra Energy		29,485		2,091,666
TECO Energy, Inc. (a)		26,624		446,218
Wisconsin Energy Corp.		30,151		1,111,064

				20,560,260

See Notes to Financial Statements.



BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012	19

Schedule of Investments (continued)

S&P 500 Stock Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Multiline Retail — 0.8%
Big Lots, Inc. (b)		7,652	$	217,776
Dollar General Corp. (b)		34,490		1,520,664
Dollar Tree, Inc. (b)		29,854		1,210,878
Family Dollar Stores, Inc. (a)		12,597		798,776
J.C. Penney Co., Inc. (a)		18,688		368,341
Kohl’s Corp.		27,802		1,194,930
Macy’s, Inc.		51,897		2,025,021
Nordstrom, Inc. (a)		19,998		1,069,893
Target Corp.		85,385		5,052,230

				13,458,509
Office Electronics — 0.1%
Xerox Corp.		166,042		1,132,406
Oil, Gas & Consumable Fuels — 8.9%
Anadarko Petroleum Corp.		65,523		4,869,014
Apache Corp.		51,299		4,026,972
Cabot Oil & Gas Corp.		27,487		1,367,203
Chesapeake Energy Corp. (a)		67,942		1,129,196
Chevron Corp.		256,640		27,753,050
ConocoPhillips		159,174		9,230,500
CONSOL Energy, Inc.		29,903		959,886
Denbury Resources, Inc. (b)		50,799		822,944
Devon Energy Corp.		49,372		2,569,319
EOG Resources, Inc.		35,515		4,289,857
EQT Corp.		19,573		1,154,416
Exxon Mobil Corp.		597,959		51,753,351
Hess Corp.		38,945		2,062,527
Kinder Morgan, Inc.		82,924		2,929,705
Marathon Oil Corp.		92,602		2,839,177
Marathon Petroleum Corp.		44,461		2,801,043
Murphy Oil Corp.		24,155		1,438,430
Newfield Exploration Co. (b)		17,641		472,426
Noble Energy, Inc.		23,319		2,372,475
Occidental Petroleum Corp.		106,235		8,138,663
Peabody Energy Corp.		35,137		934,996
Phillips 66		82,018		4,355,156
Pioneer Natural Resources Co. (a)		16,150		1,721,429
QEP Resources, Inc. (a)		23,317		705,806
Range Resources Corp. (a)		21,285		1,337,337
Southwestern Energy Co. (b)		45,788		1,529,777
Spectra Energy Corp.		87,272		2,389,507
Tesoro Corp.		18,388		809,991
Valero Energy Corp.		72,556		2,475,611
The Williams Cos., Inc.		88,329		2,891,891
WPX Energy, Inc. (b)		26,106		388,457

				152,520,112
Paper & Forest Products — 0.2%
International Paper Co.		57,558		2,293,111
MeadWestvaco Corp.		22,883		729,281

				3,022,392
Personal Products — 0.2%
Avon Products, Inc.		56,467		810,866
The Estée Lauder Cos., Inc., Class A (a)		31,472		1,883,914

				2,694,780
Pharmaceuticals — 6.0%
Abbott Laboratories		207,276		13,576,578
Allergan, Inc.		40,318		3,698,370
Bristol-Myers Squibb Co.		216,548		7,057,299
Eli Lilly & Co.		133,898		6,603,849
Forest Laboratories, Inc. (b)		30,613		1,081,251
Hospira, Inc. (b)		21,569		673,816
Pharmaceuticals (concluded)
Johnson & Johnson		363,417	$	25,475,532
Merck & Co., Inc.		398,659		16,321,099
Mylan, Inc. (b)		53,399		1,467,405
Perrigo Co. (a)		11,561		1,202,691
Pfizer, Inc.		965,650		24,218,502
Watson Pharmaceuticals, Inc. (b)		16,718		1,437,748

				102,814,140
Professional Services — 0.1%
The Dun & Bradstreet Corp. (a)		5,884		462,777
Equifax, Inc.		15,619		845,300
Robert Half International, Inc. (a)		18,551		590,293

				1,898,370
Real Estate Investment Trusts (REITs) — 2.1%
American Tower Corp.		51,831		4,004,981
Apartment Investment & Management Co., Class A		19,126		517,549
AvalonBay Communities, Inc.		14,991		2,032,630
Boston Properties, Inc.		19,773		2,092,181
Equity Residential (a)		42,171		2,389,830
HCP, Inc. (a)		59,257		2,677,231
Health Care REIT, Inc.		34,034		2,085,944
Host Hotels & Resorts, Inc. (a)		95,008		1,488,775
Kimco Realty Corp. (a)		53,505		1,033,717
Plum Creek Timber Co., Inc. (a)		21,113		936,784
ProLogis, Inc. (a)		60,410		2,204,361
Public Storage		18,901		2,739,889
Simon Property Group, Inc.		40,562		6,412,447
Ventas, Inc. (a)		38,740		2,507,253
Vornado Realty Trust		22,198		1,777,616
Weyerhaeuser Co.		70,973		1,974,469

				36,875,657
Real Estate Management & Development — 0.0%
CBRE Group, Inc., Class A (b)		39,553		787,105
Road & Rail — 0.8%
CSX Corp.		135,373		2,670,909
Norfolk Southern Corp.		41,484		2,565,371
Ryder System, Inc. (a)		6,643		331,685
Union Pacific Corp.		61,709		7,758,055

				13,326,020
Semiconductors & Semiconductor Equipment — 1.9%
Advanced Micro Devices, Inc. (b)		79,792		191,501
Altera Corp.		42,004		1,446,618
Analog Devices, Inc.		39,491		1,660,991
Applied Materials, Inc.		157,267		1,799,134
Broadcom Corp., Class A (b)		68,010		2,258,612
First Solar, Inc. (a)(b)		7,836		241,976
Intel Corp.		652,682		13,464,830
KLA-Tencor Corp.		21,814		1,041,837
Lam Research Corp. (b)		22,533		814,117
Linear Technology Corp.		30,308		1,039,564
LSI Corp. (b)		73,071		517,343
Microchip Technology, Inc. (a)		25,482		830,458
Micron Technology, Inc. (b)		132,963		844,315
NVIDIA Corp.		81,844		1,005,863
Teradyne, Inc. (a)(b)		24,559		414,802
Texas Instruments, Inc.		147,060		4,550,036
Xilinx, Inc.		34,244		1,229,360

				33,351,357

See Notes to Financial Statements.



20	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012

Schedule of Investments (continued)

S&P 500 Stock Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Software — 3.4%
Adobe Systems, Inc. (b)		64,890	$	2,445,055
Autodesk, Inc. (b)		29,516		1,043,391
BMC Software, Inc. (b)		18,748		743,546
CA, Inc.		44,071		968,680
Citrix Systems, Inc. (b)		24,434		1,606,535
Electronic Arts, Inc. (b)		40,175		583,743
Intuit, Inc. (a)		36,476		2,170,322
Microsoft Corp.		993,348		26,552,192
Oracle Corp.		493,021		16,427,460
Red Hat, Inc. (b)		25,285		1,339,094
Salesforce.com, Inc. (b)		17,126		2,878,881
Symantec Corp. (b)		91,124		1,714,042
				58,472,941
Specialty Retail — 2.1%
Abercrombie & Fitch Co., Class A		10,482		502,822
AutoNation, Inc. (b)		5,077		201,557
AutoZone, Inc. (b)		4,850		1,718,986
Bed Bath & Beyond, Inc. (b)		30,096		1,682,667
Best Buy Co., Inc.		34,919		413,790
CarMax, Inc. (b)		29,997		1,126,087
GameStop Corp., Class A (a)		15,975		400,813
The Gap, Inc.		39,030		1,211,491
The Home Depot, Inc.		196,121		12,130,084
Limited Brands, Inc. (a)		31,363		1,475,943
Lowe’s Cos., Inc.		147,560		5,241,331
O’Reilly Automotive, Inc. (b)		15,057		1,346,397
PetSmart, Inc.		14,144		966,601
Ross Stores, Inc.		29,176		1,579,880
Staples, Inc. (a)		88,564		1,009,630
Tiffany & Co.		15,586		893,701
TJX Cos., Inc.		95,690		4,062,041
Urban Outfitters, Inc. (b)		14,304		563,005

				36,526,826
Textiles, Apparel & Luxury Goods — 0.6%
Coach, Inc.		37,232		2,066,748
Fossil, Inc. (b)		7,086		659,707
NIKE, Inc., Class B		95,768		4,941,629
Ralph Lauren Corp.		8,031		1,204,007
VF Corp. (a)		11,549		1,743,553

				10,615,644
Thrifts & Mortgage Finance — 0.1%
Hudson City Bancorp, Inc.		62,298		506,483
People’s United Financial, Inc.		45,773		553,395

				1,059,878
Tobacco — 1.8%
Altria Group, Inc.		265,652	$	8,346,786
Lorillard, Inc.		16,996		1,982,923
Philip Morris International, Inc.		219,111		18,326,444
Reynolds American, Inc.		42,570		1,763,675

				30,419,828
Trading Companies & Distributors — 0.2%
Fastenal Co. (a)		35,386		1,652,172
W.W. Grainger, Inc.		7,845		1,587,593

				3,239,765
Wireless Telecommunication Services — 0.3%
Crown Castle International Corp. (b)		38,428		2,772,964
MetroPCS Communications, Inc. (b)		41,588		413,385
Sprint Nextel Corp. (b)		393,803		2,232,863

				5,419,212
Total Long-Term Investments (Cost — $1,293,534,778) — 97.3%				1,670,850,611



Short-Term Securities
Money Market Funds — 9.0%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)(e)		132,083,169		132,083,169
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)(e)		22,497,136		22,497,136

				154,580,305


	Par (000)
US Treasury Obligations — 0.1%
US Treasury Bill, 0.06%, 3/21/13 (f)(g)	$	2,605		2,604,802
Total Short-Term Securities (Cost — $157,185,104) — 9.1%				157,185,107
Total Investments (Cost — $1,450,719,882*) — 106.4%				1,828,035,718
Liabilities in Excess of Other Assets — (6.4)%				(110,103,497	)

Net Assets — 100.0%			$	1,717,932,221

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	1,504,245,385

Gross unrealized appreciation	$	479,746,147
Gross unrealized depreciation		(155,955,814	)

Net unrealized appreciation	$	323,790,333

(a)

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

(b)

Non-income producing security.

See Notes to Financial Statements.



BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012	21


Schedule of Investments (concluded)		S&P 500 Stock Master Portfolio

(c)


Affiliate	Shares Held at December 31, 2011		Shares Purchased		Shares Sold			Shares Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain/Loss
BlackRock, Inc.		18,408		5,209		(7,152	)		16,465	$	3,403,480	$	104,691	$	(124,340	)
BlackRock Cash Funds: Institutional, SL Agency Shares		170,771,686		—		(38,688,517	)¹		132,083,169	$	132,083,169	$	451,965		—
BlackRock Cash Funds: Prime, SL Agency Shares		53,764,558		—		(31,267,422	)¹		22,497,136	$	22,497,136	$	100,879		—
The PNC Financial Services Group, Inc.		96,666		7,399		(34,718	)		69,347	$	4,043,624	$	129,398	$	309,903

Represents net shares sold.

(d)

Represents the current yield as of report date.

(e)

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

(f)

All or a portion of security has been pledged as collateral in connection with open financial futures contracts.

(g)

Rates shown are discount rates or a range of discount rates paid at the time of purchase.

_Ÿ

Financial futures contracts as of December 31, 2012 were as follows:


Contracts Purchased	Issue	Exchange	Expiration	Notional Value	Unrealized Appreciation
785	S&P 500 E-Mini	Chicago Mercantile	March 2013	$55,738,925	$391,638

_Ÿ

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

_Ÿ

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3	Total
Assets:
Investments:
Long-Term Investments:
Common Stocks²	$	1,670,850,611		—	—	$	1,670,850,611
Short-Term Investments:
Money Market Funds		154,580,305		—	—		154,580,305
US Treasury Obligations		—	$	2,604,802	—		2,604,802

Total	$	1,825,430,916	$	2,604,802	—	$	1,828,035,718

See above Schedule of Investments for values in each industry.


	Level 1		Level 2	Level 3	Total
Derivative Financial Instruments³
Assets:
Equity contracts	$	391,638	—	—	$	391,638

Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

Certain of the Master Portfolio’s liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $104,564,691 are categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



22	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012


Statement of Assets and Liabilities		S&P 500 Stock Master Portfolio


December 31, 2012

Assets
Investments at value — unaffiliated (including securities loaned of $103,692,867) (cost — $1,289,042,959)	$	1,666,008,309
Investments at value — affiliated (cost — $161,676,923)		162,027,409
Dividends receivable		1,842,013
Variation margin receivable		1,349,744
Investments sold receivable		248,287
Securities lending income receivable — affiliated		30,921
Interest receivable		4,796

Total assets		1,831,511,479


Liabilities
Collateral on securities loaned at value		104,564,691
Withdrawals payable to investors		8,902,792
Investment advisory fees payable		60,306
Professional fees payable		38,415
Trustees’ fees payable		13,054

Total liabilities		113,579,258

Net Assets	$	1,717,932,221


Net Assets Consist of
Investors’ capital	$	1,340,224,747
Net unrealized appreciation/depreciation		377,707,474

Net Assets	$	1,717,932,221


Statement of Operations		S&P 500 Stock Master Portfolio


Year Ended December 31, 2012

Investment Income
Dividends — unaffiliated	$	42,797,690
Securities lending — affiliated — net		468,876
Dividends — affiliated		234,089
Income — affiliated		83,968
Interest		1,770
Foreign taxes withheld		(21,026	)

Total income		43,565,367


Expenses
Investment advisory		958,487
Reorganization costs		169,342
Trustees		54,213
Professional		40,156

Total expenses		1,222,198
Less reorganization costs reimbursed		(169,342	)
Less fees waived by Manager		(94,369	)

Total expenses after fees waived		958,487

Net investment income		42,606,880


Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — unaffiliated		(21,226,635	)
Investments — affiliated		185,563
Redemptions-in-kind		231,258,145
Financial futures contracts		3,105,397

		213,322,470

Net change in unrealized appreciation/depreciation on:
Investments		26,943,872
Financial futures contracts		332,601

		27,276,473

Total realized and unrealized gain		240,598,943

Net Increase in Net Assets Resulting from Operations	$	283,205,823


Statements of Changes in Net Assets		S&P 500 Stock Master Portfolio


	Year Ended December 31,
Increase (Decrease) in Net Assets:	2012			2011

Operations
Net investment income	$	42,606,880		$	45,199,220
Net realized gain (loss)		213,322,470			(26,094,326	)
Net change in unrealized appreciation/depreciation		27,276,473			26,305,661

Net increase in net assets resulting from operations:		283,205,823			45,410,555


Capital Transactions
Proceeds from contributions		392,443,684			195,530,480
Value of withdrawals		(1,066,033,494	)		(291,341,608	)

Net decrease in net assets derived from capital transactions		(673,589,810	)		(95,811,128	)


Net Assets
Total decrease in net assets		(390,383,987	)		(50,400,573	)
Beginning of year		2,108,316,208			2,158,716,781

End of year	$	1,717,932,221		$	2,108,316,208


Financial Highlights		S&P 500 Stock Master Portfolio


	Year Ended December 31,
	2012		2011		2010		2009		2008

Total Investment Return
Total Investment Return		15.98%		2.13%		15.06%		26.63%		(36.86)%


Ratios to Average Net Assets
Total expenses		0.06%		0.06%		0.05%		0.05%		0.05%

Total expenses after fees waived		0.05%		0.05%		0.05%		0.05%		0.05%

Net investment income		2.22%		2.08%		2.01%		2.35%		2.32%


Supplemental Data
Net assets, end of year (000)	$	1,717,932	$	2,108,316	$	2,158,717	$	2,049,062	$	1,690,980

Portfolio turnover		10%		5%		9%		5%		8%


Notes to Financial Statements		S&P 500 Stock Master Portfolio

1. Organization and Significant Accounting Policies:

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

Reorganization: On May 16, 2012, the Board approved a plan of reorganization whereby the Master Portfolio will acquire substantially all of the assets and assume certain stated liabilities of Master S&P 500 Index Series, a series of Quantitative Master Series LLC (the “Target Master Portfolio”) in exchange for beneficial interests of the Master Portfolio (the “Master Reorganization”). The Master Reorganization is subject to shareholder approval by the feeder funds that invest their assets in the Target Master Portfolio and certain other conditions. On December 12, 2012, the Master Reorganization was approved by the shareholders of each feeder fund of the Target Master Portfolio. However, the Master Reorganization is not expected to close until the reorganization of BlackRock S&P 500 Index Fund (“S&P 500 Index Fund”), a series of BlackRock Index Funds, Inc., with BlackRock S&P 500 Stock Fund, a series of BlackRock Funds III (the “S&P 500 Fund Reorganization”) is approved by S&P 500 Index Fund’s shareholders. If the S&P 500 Fund Reorganization is not approved, the Board of Directors of the Target Master Portfolio will consider other options, including whether to proceed with the Master Reorganization or other alternatives.

Valuation: US GAAP defines fair value as the price the Master Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Master Portfolio determines the fair values of its financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Master Portfolio for all financial instruments.

In the event that application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the investment advisor and/or sub-advisor deem relevant consistent with the principles of fair value measurements which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. A market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Master Portfolio’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Preferred Stock: The Master Portfolio may invest in preferred stock. Preferred stock has a preference over common stock in liquidation (and



BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012	27


Notes to Financial Statements (continued)		S&P 500 Stock Master Portfolio

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.

Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”) require that the Master Portfolio either deliver collateral or segregate assets in connection with certain investments (e.g., financial futures contracts), the Master Portfolio will, consistent with SEC rules and/or certain interpretive letters issued by the SEC, segregate collateral or designate on its books and records cash or liquid securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, the Master Portfolio engaging in such transactions may have requirements to deliver/deposit securities to/with an exchange or broker-dealer as collateral for certain investments.

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

Securities Lending: The Master Portfolio may lend securities to approved borrowers, such as banks, brokers and other financial institutions. The borrower pledges cash, securities issued or guaranteed by the US government or irrevocable letters of credit issued by a bank as collateral. The initial collateral received by the Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on US exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statement of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the Master Portfolio earns dividend or interest income on the securities loaned but does not receive interest income on the securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions. The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate this risk the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of securities lent. The Master Portfolio also could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received. During the year ended December 31, 2012, any securities on loan were collateralized by cash.

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

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



28	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012


Notes to Financial Statements (continued)		S&P 500 Stock Master Portfolio

financial statements. In January 2013, the FASB issued guidance that clarifies which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting will be limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions. The guidance is effective for financial statements with fiscal years beginning on or after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact 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.

2. Derivative Financial Instruments:

The Master Portfolio engages in various portfolio investment strategies using derivative contracts both to increase the return of the Master Portfolio and/or to economically hedge, or protect, its exposure to certain risks such as equity risks. These contracts may be transacted on an exchange.

Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. Counterparty risk related to exchange-traded financial futures contracts is deemed to be minimal due to the protection against defaults provided by the exchange on which these contracts trade.

Financial Futures Contracts: The Master Portfolio purchases 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. 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 and are recorded by the Master Portfolio as unrealized appreciation or depreciation. 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 Effect of Derivative Financial Instruments in the Statement of Operations Year Ended December 31, 2012
	Net Realized Gain (Loss) From
Equity contracts:
Financial futures contracts	$	3,105,397
	Net Change in Unrealized Appreciation/Depreciation on
Equity contracts:
Financial futures contracts	$	332,601

For the year ended December 31, 2012, the average quarterly balances of outstanding derivative financial instruments were as follows:


Financial futures contracts:
Average number of contracts purchased		668
Average notional value of contracts purchased	$	46,618,662

3. 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 (the “Investment Advisory Agreement”) with BlackRock Fund Advisors (“BFA”), the Master Portfolio’s investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory services. BFA is responsible for the management of the Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Master Portfolio. For such services, the Master Portfolio pays BFA a monthly fee based on a percentage of the Master Portfolio’s average daily net assets at an annual rate of 0.05%.

MIP entered into an Administration Agreement with BlackRock Institutional Trust Company, N.A. (“BTC”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC may delegate certain of its administration duties to sub-administrators. BTC, 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



BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012	29


Notes to Financial Statements (continued)		S&P 500 Stock Master Portfolio

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. Effective July 1, 2012, BlackRock Advisors, LLC (“BAL”) replaced BTC as administrator and entered into an Administration Agreement with the Trust, on behalf of the Fund, on similar terms.

BAL, and previously, BTC is not entitled to compensation for providing administration services to the Master Portfolio, for so long as BAL, and previously, BTC 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, and previously, BTC (or an affiliate) receives investment advisory fees from the Master Portfolio.

The fees and expenses of MIP’s trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolio. BFA has contractually agreed to cap the expenses of the Master Portfolio at the rate at which the Master Portfolio pays an advisory fee to BFA by providing an offsetting credit against the investment advisory fees paid by the Master Portfolio in an amount equal to the independent expenses. This contractual waiver is effective through April 30, 2013. The amount of the waiver, if any, is shown as fees waived by manager in the Statement of Operations.

MIP, on behalf of the Master Portfolio, received an exemptive order from the SEC permitting it, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BlackRock Institutional Trust Company, N.A. (“BTC”), an affiliate of BFA, as the securities lending agent. BTC may, on behalf of the Master Portfolio, invest cash collateral received by the Master Portfolio for such loans, among other things, in a private investment company managed by BTC or in registered money market funds advised by BTC or its affiliates. The market value of securities on loan and the value of the related collateral, if applicable, are shown in the Statement of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC is disclosed in the Schedule of Investments, if any. Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of rebates paid to, or fees paid by, borrowers of securities. The Master Portfolio retains 65% of securities lending income and pays a fee to BTC equal to 35% of such income. The Master Portfolio benefits from a borrower default indemnity provided by BlackRock. As securities lending agent, BTC bears all operational costs directly related to securities lending as well as the cost of borrower default indemnification. BTC does not receive any fees for managing the cash collateral. The share of income earned by the Master Portfolio is shown as securities lending-affiliated-net in the Statement of Operations. For the year ended December 31, 2012, BTC received $237,905 in securities lending agent fees related to securities lending activities for the Master Portfolio.

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

4. Investments:

Purchases and sales of investments, excluding short-term securities, for the year ended December 31, 2012, were $192,971,320 and $271,905,331, respectively.

5. Borrowings:

The Master Portfolio, along with certain other funds managed by BFA and its affiliates, is a party to a $500 million credit agreement with a group of lenders. The Master Portfolio may borrow under the credit agreement to fund shareholder redemptions. Effective November 2011 to November 2012, the credit agreement has the following terms: a commitment fee of 0.065% per annum based on the Master Portfolio’s pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month London Interbank Offered Rate (“LIBOR”) plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Master Portfolio paid administration and arrangement fees which were allocated to the Master Portfolio based on its net assets as of October 31, 2011. The credit agreement, which expired in November 2012, was renewed with the same terms until November 2013. Effective November 2012 to November 2013, the credit agreement has the following terms: a commitment fee of 0.065% per annum based on the Master Portfolio’s pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Master Portfolio paid administration and arrangement fees which were allocated to the Master Portfolio based on its net assets as of October 31, 2012. The Master Portfolio did not borrow under the credit agreement during the year ended December 31, 2012.

6. Market and Credit Risk:



30	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012


Notes to Financial Statements (concluded)		S&P 500 Stock Master Portfolio

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.

7. Subsequent Events:



BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012	31


Report of Independent Registered Public Accounting Firm		S&P 500 Stock Master Portfolio

To the Interestholders and Board of Trustees of Master Investment 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 the S&P 500 Stock Master Portfolio, a portfolio of Master Investment Portfolio (the “Master Portfolio”), at December 31, 2012, 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 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, 2012 by correspondence with the custodian, transfer agent, and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 22, 2013



32	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012


Officers and Trustees


Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees¹
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 106 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. since 1987; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of Seventy (civic) since 2006; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 106 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy since 2002; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 106 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President of Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 106 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 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) since 2011, President thereof from 1997 to 2011 and Trustee since 1980; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (strategic solutions company) since 2005; Director, Cerego, LLC (software development and design) since 2005; Director, Cybersettle (dispute resolution technology) since 2009.	33 RICs consisting of 106 Portfolios	AIMS Worldwide, Inc. (marketing)
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1999 to 2008.	33 RICs consisting of 106 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital since 2005; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 106 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, The West Penn Allegheny Health System (a not-for-profit health system) since 2008; 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; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 106 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 106 Portfolios	None



BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012	33


Officers and Trustees (continued)


Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees¹ (concluded)
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 106 Portfolios	None
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Chairman Elect 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; 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 106 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh since 2005 and Dean thereof from 1997 to 2005; Director, Alkon Corporation (pneumatics) since 1992; Director, Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 106 Portfolios	None
	¹ Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year extensions in terms of Trustees who turn 72 prior to December 31, 2013. ² Date shown is the earliest date a person has served for the Trust/MIP covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the Trust’s/MIP’s Board. As a result, although the chart shows certain Trustees as joining the Trust’s/MIP’s board in 2009, each Trustee first became a member of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees³
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock, and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	155 RICs consisting of 278 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	155 RICs consisting of 278 Portfolios	None
	³ Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Trustees of the BlackRock registered closed-end funds and Trustees of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.



34	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012


Officers and Trustees (concluded)


Name, Address and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers¹
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock since 2000; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2002; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009 and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Simon Mendelson 55 East 52nd Street New York, NY 10055 1964	Vice President	Since 2009	Managing Director of BlackRock since 2005; Co-head of the Global Cash and Securities Lending Group since 2010; Chief Operating Officer and Head of the Global Client Group for BlackRock’s Global Cash Management Business from 2007 to 2010; Head of BlackRock’s Strategy and Development Group from 2005 to 2007; Partner of McKinsey & Co. from 1997 to 2005.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2007	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2007	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Director of BlackRock since 2010; 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 Officers of the Trust/MIP serve at the pleasure of the Board of Trustees.



BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012	35


Additional Information


General Information

Electronic Delivery

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

To enroll:

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

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

Shareholders Who Hold Accounts Directly with BlackRock:

1)	Access the BlackRock website at http://www.blackrock.com/edelivery

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

3)	Log into your account

Householding

The Fund will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “house holding” 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

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



36	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012


Additional Information (concluded)

Shareholder Privileges

Account Information

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 Privacy Principles

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.



BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012	37

A World-Class Mutual Fund Family

BlackRock of fers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing.


Equity Funds

BlackRock ACWI ex-US Index Fund

BlackRock All-Cap Energy & Resources Portfolio

BlackRock Basic Value Fund

BlackRock Capital Appreciation Fund

BlackRock China Fund

BlackRock Commodity Strategies Fund

BlackRock Emerging Markets Fund

BlackRock Emerging Markets Long/Short Equity Fund

BlackRock Energy & Resources Portfolio

BlackRock Equity Dividend Fund

BlackRock EuroFund

BlackRock Flexible Equity Fund

BlackRock Focus Growth Fund

BlackRock Global Dividend Income Portfolio

BlackRock Global Long/Short Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Global SmallCap Fund

BlackRock Health Sciences Opportunities Portfolio

BlackRock Index Equity Portfolio

BlackRock India Fund

BlackRock International Fund

BlackRock International Index Fund

BlackRock International Opportunities Portfolio

BlackRock Large Cap Core Fund

BlackRock Large Cap Core Plus Fund

BlackRock Large Cap Growth Fund

BlackRock Large Cap Value Fund

BlackRock Latin America Fund

BlackRock Long-Horizon Equity Fund

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Mid Cap Value Opportunities Fund

BlackRock Natural Resources Trust

BlackRock Pacific Fund

BlackRock Real Estate Securities Fund

BlackRock Russell 1000 Index Fund

BlackRock Science & Technology Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock Small Cap Growth Fund II

BlackRock Small Cap Index Fund

BlackRock S&P 500 Index Fund

BlackRock S&P 500 Stock Fund

BlackRock U.S. Opportunities Portfolio

BlackRock Value Opportunities Fund

BlackRock World Gold Fund


Taxable Fixed Income Funds

BlackRock Bond Index Fund

BlackRock Core Bond Portfolio

BlackRock CoreAlpha Bond Fund

BlackRock Emerging Market Local Debt Portfolio

BlackRock Floating Rate Income Portfolio

BlackRock Global Long/Short Credit Fund

BlackRock GNMA Portfolio

BlackRock High Yield Bond Portfolio

BlackRock Inflation Protected Bond Portfolio

BlackRock International Bond Portfolio

BlackRock Long Duration Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Secured Credit Portfolio

BlackRock Strategic Income Opportunities Portfolio

BlackRock Total Return Fund

BlackRock U.S. Government Bond Portfolio

BlackRock U.S. Mortgage Portfolio

BlackRock World Income Fund


Municipal Fixed Income Funds

BlackRock California Municipal Bond Fund

BlackRock High Yield Municipal Fund

BlackRock Intermediate Municipal Fund

BlackRock National Municipal Fund

BlackRock New Jersey Municipal Bond Fund

BlackRock New York Municipal Bond Fund

BlackRock Pennsylvania Municipal Bond Fund

BlackRock Short-Term Municipal Fund


Mixed Asset Funds


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

BlackRock Prepared Portfolios	LifePath Portfolios
Conservative Prepared Portfolio		Retirement	2040
Moderate Prepared Portfolio		2020	2045
Growth Prepared Portfolio		2025	2050
Aggressive Growth Prepared Portfolio		2030	2055
		2035



38	BLACKROCK S&P 500 STOCK FUND	DECEMBER 31, 2012

LOGO


#SPSF-12/12-AR

DECEMBER 31, 2012

ANNUAL REPORT

BlackRock Funds III

^Ø	LifePath^® 2025 Portfolio

^Ø	LifePath^® 2035 Portfolio

^Ø	LifePath^® 2045 Portfolio

^Ø	LifePath^® 2055 Portfolio

Not FDIC Insured • May Lose Value • No Bank Guarantee


Table of Contents


	Page
Dear Shareholder		3
Annual Report:
Portfolio Summaries		4
About Portfolio Performance		13
Derivative Financial Instruments		13
Disclosure of Expenses		14
Portfolio Financial Statements:
Statements of Assets and Liabilities		15
Statements of Operations		16
Statements of Changes in Net Assets		17
Portfolio Financial Highlights		19
Portfolio Notes to Financial Statements		39
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		63
Statements of Operations		65
Statements of Changes in Net Assets		67
Master Portfolio Financial Highlights		69
Master Portfolio Notes to Financial Statements		74
Master Portfolio Report of Independent Registered Public Accounting Firm		79
Officers and Trustees		80
Additional Information		83
A World-Class Mutual Fund Family		85



2	BLACKROCK FUNDS III	December 31, 2012

Dear Shareholder

Sincerely,

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

“Although 2012 brought its share of headwinds, the strongest returns came from higher risk asset classes as investors reached for yield in an environment of extremely low interest rates.”

Rob Kapito

President, BlackRock Advisors, LLC


Total Returns as of December 31, 2012
	6-month			12-month
US large cap equities (S&P 500^® Index)		5.95	%		16.00	%
US small cap equities (Russell 2000^® Index)		7.20			16.35
International equities (MSCI Europe, Australasia, Far East Index)		13.95			17.32
Emerging market equities (MSCI Emerging Markets Index)		13.75			18.22
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)		0.07			0.11
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		0.71			4.18
US investment grade bonds (Barclays US Aggregate Bond Index)		1.80			4.21
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.15			7.42
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)		7.97			15.78

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, 2012		LifePath Portfolios

Portfolio Management Commentary

How did each Portfolio perform?

_Ÿ

All share classes of the LifePath Portfolios with target dates of 2025, 2035, 2045 and 2055 (altogether, the “LifePath Portfolios”) invest in their respective LifePath Master Portfolio.

_Ÿ

For the 12-month period ended December 31, 2012, all of the LifePath Portfolios underperformed their respective custom benchmarks with the exception of the Class K Shares of the LifePath Portfolio with the target date 2025, which performed in line. The returns for the LifePath Portfolios include fund expenses. The custom benchmarks have no expenses associated with performance.

What factors influenced performance?

_Ÿ

Equity markets generally outperformed fixed income markets during the period. While all of the LifePath Portfolios generated positive absolute returns for the period, those with longer time horizons benefited most from the strong performance of equities given their larger allocations to equity investments.

_Ÿ

The LifePath Portfolios underperformed relative to their respective custom benchmarks primarily due to their investment in the Active Stock Master Portfolio (“Active Stock”), which is held in greater proportions in the longer-dated LifePath Portfolios. Active Stock invests in BlackRock’s Scientific Active Large Cap Equity strategy and four fundamental active large cap strategies including Large Cap Growth, Fundamental Large Cap Growth, Basic Value and Equity Dividend. On an absolute basis, all of the strategies delivered positive performance for the period as equity markets broadly rallied; however, sector allocation decisions in the Fundamental Large Cap Growth, Basic Value and Equity Dividend strategies resulted in Active Stock’s underperformance relative to its benchmark, the Russell 1000^® Index. Overall, a large overweight in information technology and significant underweights in consumer discretionary and financials had a negative impact on results. An overweight to industrials in the value

strategies, i.e., Basic Value and Equity Dividend, also detracted from relative performance as the sector struggled due to slowing growth in emerging markets and fears of an economic hard landing in China.

_Ÿ

Contributing positively to relative performance was the investment in CoreAlpha Bond Master Portfolio (“CoreAlpha Bond”), which is held in greater proportions in the shorter-dated LifePath Portfolios. While risk assets generated strong performance for 2012, CoreAlpha Bond outperformed its benchmark, the Barclays US Aggregate Bond Index, primarily due to its overweight allocation to investment grade credit and exposure to high yield debt, which is not represented in the benchmark index. Exposure to high-quality, short-duration securitized credit assets also boosted returns. Additionally, the LifePath Portfolios benefited from their investment in the BlackRock Commodity Strategies Fund (“Commodity Strategies”), which was added as an investment option in the fourth quarter of 2012. The mining and agriculture sleeves of Commodity Strategies posted positive returns while stock selection in the equity portion enhanced performance.

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.

Describe portfolio positioning at period end.

_Ÿ

As of period end, each of the LifePath Portfolios was invested according to its respective strategic allocation benchmark within tolerance limits.

The LifePath Portfolios are organized as “feeder” funds in a “master-feeder” structure. Instead of investing directly in individual securities, the feeder fund, which is offered to the public, holds interests in the net assets of its corresponding Master Portfolio. It is the Master Portfolio that actually invests in individual securities. References to the “LifePath Portfolios” are to the feeder funds or the Master Portfolios, as the context requires.

Glidepath Evolution

Under normal circumstances, the asset allocation of each LifePath Portfolio (the “Portfolio” or “each Portfolio”) will change over time according to a “glidepath” as each of the Portfolios approaches its respective target date. The glidepath represents the shifting of asset classes over time. Each 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 Portfolio, which may be a primary source of income after retirement. As each Portfolio approaches its target date, its asset allocation will shift so that each 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 Portfolio, and determine whether any changes are required to enable each Portfolio to achieve its investment objective.

Although the asset allocation targets listed for the glidepath are general, long-term targets, BlackRock investment professionals may periodically adjust the proportion of equity and fixed income funds in each 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 Portfolio, reallocations of each Portfolio’s composition to reflect intra-year movement along the glidepath 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 Portfolio or achieve each Portfolio’s investment objective.



4	BLACKROCK FUNDS III	DECEMBER 31, 2012


		LifePath^® 2025 Portfolio

Investment Objective

LifePath^® 2025 Portfolio’s investment objective is to be managed for investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2025.

Total Return Based on a $10,000 Investment

LOGO

Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

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, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the LifePath Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

The Russell 1000 Index and Russell 2000 Index replaced the S&P 1500 Index on July 29, 2011.

⁴

Commencement of operations.


Period	Barclays US Aggregate Bond Index			Barclays US Treasury Inflation Protected Securities (TIPS) Index			Dow Jones- UBS Commodity Index⁵			FTSE EPRA/ NAREIT Developed Real Estate Index			MSCI ACWI ex - US IMI Index			Russell 1000^® Index			Russell 2000^® Index			S&P MidCap 400^® Index			S&P 500^® Index			S&P SmallCap 600^® Index
6/30/10 to 12/31/10		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

⁵

As of October 1, 2012, each LifePath Portfolio added a new component, the Dow Jones—UBS Commodity index, to the composite benchmark against which it measures its performance.

See “About Portfolio Performance” on page 13 for descriptions of the indexes.



BLACKROCK FUNDS III	DECEMBER 31, 2012	5


		LifePath^® 2025 Portfolio

Performance Summary for the Period Ended December 31, 2012


				Average Annual Total Returns
				1 Year						Since Inception¹
	6 Month w/o sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		6.05	%		12.07	%		N/A			11.79	%		N/A
Investor A		5.96			11.84			5.97	%		11.51			9.13	%
Investor C		5.64			10.99			9.99			10.69			10.69
Class K		6.26			12.44			N/A			12.18			N/A
Class R		5.81			11.45			N/A			11.22			N/A
Barclays US Aggregate Bond Index		1.80			4.21			N/A			N/A			N/A
Barclays US TIPS Index		2.82			6.98			N/A			N/A			N/A
LifePath 2025 Portfolio Custom Benchmark		5.94			12.48			N/A			N/A			N/A
MSCI ACWI ex-US IMI Index		13.70			17.04			N/A			N/A			N/A
FTSE EPRA/NAREIT Developed Real Estate Index		11.25			27.73			N/A			N/A			N/A
Dow Jones—UBS Commodity Index		2.75			(1.06	)		N/A			N/A			N/A
Russell 1000^® Index		6.44			16.42			N/A			N/A			N/A
Russell 2000^® Index		7.20			16.35			N/A			N/A			N/A

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.



6	BLACKROCK FUNDS III	DECEMBER 31, 2012


		LifePath^® 2035 Portfolio

Investment Objective

LifePath^® 2035 Portfolio’s investment objective is to be managed for investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2035.

Total Return Based on a $10,000 Investment

LOGO

Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

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, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the LifePath Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

The Russell 1000 Index and Russell 2000 Index replaced the S&P 1500 Index on July 29, 2011.

⁴

Commencement of operations.


Period	Barclays US Aggregate Bond Index			Barclays US Treasury Inflation Protected Securities (TIPS) Index			Dow Jones- UBS Commodity Index⁵			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex- US IMI Index			Russell 1000^® Index			Russell 2000^® Index			S&P MidCap 400^® Index			S&P 500^® Index			S&P SmallCap 600^® Index
6/30/10 to 12/31/10		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			22.1			44.1			2.7			N/A			N/A			N/A

⁵

As of October 1, 2012, each LifePath Portfolio added a new component, the Dow Jones—UBS Commodity index, to the composite benchmark against which it measures its performance.

See “About Portfolio Performance” on page 13 for descriptions of the indexes.



BLACKROCK FUNDS III	DECEMBER 31, 2012	7


		LifePath^® 2035 Portfolio

Performance Summary for the Period Ended December 31, 2012


				Average Annual Total Returns
				1 Year						Since Inception¹
	6 Month w/o sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		7.02	%		13.85	%		N/A			13.02	%		N/A
Investor A		6.94			13.63			7.66	%		12.75			10.35	%
Investor C		6.51			12.70			11.70			11.88			11.88
Class K		7.22			14.30			N/A			13.45			N/A
Class R		6.82			13.37			N/A			12.48			N/A
Barclays US Aggregate Bond Index		1.80			4.21			N/A			N/A			N/A
Barclays US TIPS Index		2.82			6.98			N/A			N/A			N/A
LifePath 2035 Portfolio Custom Benchmark		6.97			14.44			N/A			N/A			N/A
MSCI ACWI ex-US IMI Index		13.70			17.04			N/A			N/A			N/A
FTSE EPRA/NAREIT Developed Real Estate Index		11.25			27.73			N/A			N/A			N/A
Dow Jones—UBS Commodity Index		2.75			(1.06	)		N/A			N/A			N/A
Russell 1000^® Index		6.44			16.42			N/A			N/A			N/A
Russell 2000^® Index		7.20			16.35			N/A			N/A			N/A

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.



8	BLACKROCK FUNDS III	DECEMBER 31, 2012


		LifePath^® 2045 Portfolio

Investment Objective

LifePath^® 2045 Portfolio’s investment objective is to be managed for investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2045.

Total Return Based on a $10,000 Investment

LOGO

Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

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, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the LifePath Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

The Russell 1000 Index and Russell 2000 Index replaced the S&P 1500 Index on July 29, 2011.

⁴

Commencement of operations.


Period	Barclays US Aggregate Bond Index			Dow Jones- UBS Commodity Index⁵			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex- US IMI Index			Russell 1000^® Index			Russell 2000^® Index			S&P MidCap 400^® Index			S&P 500^® Index			S&P SmallCap 600^® Index
6/30/10 to 12/31/10		6.8	%		N/A			8.5	%		25.9	%		N/A			N/A			6.8	%		49.0	%		3.0	%
1/01/11 to 12/31/11		8.2			N/A			8.7			26.1			21.5	%		1.1	%		4.2			28.4			1.8
1/01/12 to 12/31/12		11.2			1.0	%		9.2			25.3			51.0			2.3			N/A			N/A			N/A

⁵

As of October 1, 2012, each LifePath Portfolio added a new component, the Dow Jones—UBS Commodity index, to the composite benchmark against which it measures its performance.

See “About Portfolio Performance” on page 13 for descriptions of the indexes.



BLACKROCK FUNDS III	DECEMBER 31, 2012	9


		LifePath^® 2045 Portfolio

Performance Summary for the Period Ended December 31, 2012


				Average Annual Total Returns
				1 Year						Since Inception¹
	6 Month w/o sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		7.83	%		15.34	%		N/A			14.21	%		N/A
Investor A		7.75			15.03			8.99	%		13.97			11.54	%
Investor C		7.29			14.15			13.15			13.07			13.07
Class K		8.05			15.72			N/A			14.62			N/A
Class R		7.55			14.77			N/A			13.65			N/A
Barclays US Aggregate Bond Index		1.80			4.21			N/A			N/A			N/A
LifePath 2045 Portfolio Custom Benchmark		7.83			16.05			N/A			N/A			N/A
MSCI ACWI ex-US IMI Index		13.70			17.04			N/A			N/A			N/A
FTSE EPRA/NAREIT Developed Real Estate Index		11.25			27.73			N/A			N/A			N/A
Dow Jones—UBS Commodity Index		2.75			(1.06	)		N/A			N/A			N/A
Russell 1000^® Index		6.44			16.42			N/A			N/A			N/A
Russell 2000^® Index		7.20			16.35			N/A			N/A			N/A

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.



10	BLACKROCK FUNDS III	DECEMBER 31, 2012


		LifePath^® 2055 Portfolio

Investment Objective

LifePath^® 2055 Portfolio’s investment objective is to be managed for investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2055.

Total Return Based on a $10,000 Investment

LOGO

Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

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, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the LifePath Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

The Russell 1000 Index and Russell 2000 Index replaced the S&P 1500 Index on July 29, 2011.

⁴

Commencement of operations.


Period	Barclays US Aggregate Bond Index			Dow Jones- UBS Commodity Index⁵			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex- US IMI Index			Russell 1000^® Index			Russell 2000^® Index			S&P MidCap 400^® Index			S&P 500^® Index			S&P SmallCap 600^® Index
6/30/10 to 12/31/10		1.0	%		N/A			9.0	%		28.2	%		N/A			N/A			8.1	%		50.1	%		3.6	%
1/01/11 to 12/31/11		1.0			N/A			9.7			28.8			22.0	%		2.0	%		4.9			29.5			2.1
1/01/12 to 12/31/12		1.3			1.0	%		11.3			28.6			54.5			3.3			N/A			N/A			N/A

⁵

As of October 1, 2012, each LifePath Portfolio added a new component, the Dow Jones—UBS Commodity index, to the composite benchmark against which it measures its performance.

See “About Portfolio Performance” on page 13 for descriptions of the indexes.



BLACKROCK FUNDS III	DECEMBER 31, 2012	11


		LifePath^® 2055 Portfolio

Performance Summary for the Period Ended December 31, 2012


				Average Annual Total Returns
				1 Year						Since Inception¹
	6 Month w/o sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		8.56	%		16.46	%		N/A			14.49	%		N/A
Investor A		8.41			16.09			9.99	%		14.16			11.73	%
Investor C		7.97			15.27			14.27			13.34			13.34
Class K		8.70			16.83			N/A			14.88			N/A
Class R		8.18			15.75			N/A			13.88			N/A
Barclays US Aggregate Bond Index		1.80			4.21			N/A			N/A			N/A
LifePath 2055 Portfolio Custom Benchmark		8.64			17.37			N/A			N/A			N/A
MSCI ACWI ex-US IMI Index		13.70			17.04			N/A			N/A			N/A
FTSE EPRA/NAREIT Developed Real Estate Index		11.25			27.73			N/A			N/A			N/A
Dow Jones—UBS Commodity Index		2.75			(1.06	)		N/A			N/A			N/A
Russell 1000^® Index		6.44			16.42			N/A			N/A			N/A
Russell 2000^® Index		7.20			16.35			N/A			N/A			N/A

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.



12	BLACKROCK FUNDS III	DECEMBER 31, 2012


About Portfolio Performance		BlackRock Funds III

_Ÿ

Institutional Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to 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).

_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 eligible investors.

_Ÿ

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. Figures shown in each of the performance tables on the previous pages assume reinvestment of all dividends and distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.

Dividends paid to each class of shares will vary because of the different levels of administration and distribution fees applicable to each class,

which are deducted from the income available to be paid to shareholders. The LifePath Portfolios’ administrator waived and/or reimbursed a portion of each LifePath Portfolio’s expenses. Without such waiver, each LifePath Portfolio’s performance would have been lower.

The Russell 3000 Index is comprised of the Russell 1000 Index and the Russell 2000 Index, which together represent approximately 98% of the total US equity market. The Barclays US Aggregate Bond Index is an unmanaged market weighted index comprised of investment grade corporate bonds (rated BBB or better), mortgages and US Treasury and government agency securities with at least one year to maturity. The MSCI ACWI ex-US IMI Index is a free float-adjusted market capitalization-weighted index that measures the equity market performance of the developed (excluding the US) and emerging investable market universe. The Dow Jones-UBS Commodity Index (DJ-UBSCI) is a broadly diversified index that allows investors to track commodity futures through a single, simple measure. The FTSE EPRA/NAREIT Developed Index is designed to track the performance of listed real estate companies and REITS worldwide. By making the index constituents free-float adjusted, liquidity, size and revenue screened, the series is suitable for use as the basis for investment products, such as derivatives and Exchange Traded Funds (ETFs). Barclays US Treasury Inflation Protected Securities (TIPS) Index is a rules-based, market value-weighted index that tracks inflation-protected securities issued by the U.S. Treasury.

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, 2012, the following indexes are used to calculate the LifePath Portfolios’ custom benchmarks: Barclays US Aggregate Bond Index, Dow Jones-UBS Commodity Index, MSCI ACWI ex-US IMI Index, FTSE EPRA/NAREIT Developed Real Estate Index, Russell 1000^® Index and Russell 2000^® Index.

Derivative Financial Instruments

Active Stock may invest in various derivative financial instruments, including financial futures contracts, as specified in Note 2 of the Master Portfolios’ Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market and/or equity risks. Derivative financial instruments involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative financial instrument. Active Stock ability to use

a derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require Active Stock to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation Active Stock can realize on an investment, may result in lower dividends paid to shareholders or may cause Active Stock to hold an investment that it might otherwise sell. Active Stock investments in these instruments are discussed in detail in the Master Portfolios’ Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	13


Disclosure of Expenses		BlackRock Funds III

Shareholders of each LifePath Portfolio may incur the following charges: (a) expenses related to transactions, including sales charges and exchange fees; 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, 2012 and held through December 31, 2012) 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 or exchange fees, 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, 2012		Ending Account Value December 31, 2012		Expenses Paid During the Period¹		Beginning Account Value July 1, 2012		Ending Account Value December 31, 2012		Expenses Paid During the Period¹		Annualized Expense Ratio
LifePath^® 2025 Portfolio
Institutional		$1,000.00		$1,060.50		$3.94		$1,000.00		$1,021.32		$3.86		0.76%
Investor A		$1,000.00		$1,059.60		$5.18		$1,000.00		$1,020.11		$5.08		1.00%
Investor C		$1,000.00		$1,056.40		$9.05		$1,000.00		$1,016.34		$8.87		1.75%
Class K		$1,000.00		$1,062.60		$2.13		$1,000.00		$1,023.08		$2.08		0.41%
Class R		$1,000.00		$1,058.10		$6.47		$1,000.00		$1,018.85		$6.34		1.25%
LifePath^® 2035 Portfolio
Institutional		$1,000.00		$1,070.20		$3.90		$1,000.00		$1,021.37		$3.81		0.75%
Investor A		$1,000.00		$1,069.40		$5.20		$1,000.00		$1,020.11		$5.08		1.00%
Investor C		$1,000.00		$1,065.10		$9.08		$1,000.00		$1,016.34		$8.87		1.75%
Class K		$1,000.00		$1,072.20		$2.08		$1,000.00		$1,023.13		$2.03		0.40%
Class R		$1,000.00		$1,068.20		$6.50		$1,000.00		$1,018.85		$6.34		1.25%
LifePath^® 2045 Portfolio
Institutional		$1,000.00		$1,078.30		$3.87		$1,000.00		$1,021.42		$3.76		0.74%
Investor A		$1,000.00		$1,077.50		$5.17		$1,000.00		$1,020.16		$5.03		0.99%
Investor C		$1,000.00		$1,072.90		$9.07		$1,000.00		$1,016.39		$8.82		1.74%
Class K		$1,000.00		$1,080.50		$2.04		$1,000.00		$1,023.18		$1.98		0.39%
Class R		$1,000.00		$1,075.50		$6.47		$1,000.00		$1,018.90		$6.29		1.24%
LifePath^® 2055 Portfolio
Institutional		$1,000.00		$1,085.60		$3.93		$1,000.00		$1,021.37		$3.81		0.75%
Investor A		$1,000.00		$1,084.10		$5.24		$1,000.00		$1,020.11		$5.08		1.00%
Investor C		$1,000.00		$1,079.70		$9.20		$1,000.00		$1,016.29		$8.92		1.76%
Class K		$1,000.00		$1,087.00		$2.10		$1,000.00		$1,023.13		$2.03		0.40%
Class R		$1,000.00		$1,081.80		$6.59		$1,000.00		$1,018.80		$6.39		1.26%

For each class of the LifePath Portfolio, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period shown). 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.

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366.



14	BLACKROCK FUNDS III	DECEMBER 31, 2012


Statements of Assets and Liabilities		BlackRock Funds III


December 31, 2012	LifePath 2025 Portfolio			LifePath 2035 Portfolio			LifePath 2045 Portfolio			LifePath 2055 Portfolio


Assets
Investments at value — from the applicable LifePath Master Portfolio¹	$	34,030,339		$	25,718,173		$	12,163,640		$	3,760,678
Capital shares sold receivable		3,435,007			3,190,973			1,446,117			708,993
Receivable from administrator		11,668			15,007			19,096			22,053

Total assets		37,477,014			28,924,153			13,628,853			4,491,724


Liabilities
Contributions payable to the LifePath Master Portfolio		3,419,643			3,190,891			1,446,042			708,991
Capital shares redeemed payable		15,365			81			75			2
Income dividends payable		6,755			2,634			2,627			1,713
Service and distribution fees payable		4,094			2,557			1,272			409
Professional fees payable		18,560			18,560			18,560			18,576

Total liabilities		3,464,417			3,214,723			1,468,576			729,691

Net Assets	$	34,012,597		$	25,709,430		$	12,160,277		$	3,762,033


Net Assets Consist of
Paid-in capital	$	32,733,530		$	24,737,990		$	11,660,741		$	3,595,931
Distributions in excess of net investment income		(20,190	)		(11,444	)		(4,205	)		(754	)
Accumulated net realized gain (loss) allocated from the LifePath Master Portfolio		82,888			(14,510	)		(25,402	)		(8,721	)
Net unrealized appreciation/depreciation allocated from the LifePath Master Portfolio		1,216,369			997,394			529,143			175,577

Net Assets	$	34,012,597		$	25,709,430		$	12,160,277		$	3,762,033


Net Asset Value
Institutional
Net assets	$	15,816,040		$	12,853,266		$	7,065,667		$	1,980,500

Shares outstanding²		1,297,175			1,027,415			554,472			155,484

Net asset value	$	12.19		$	12.51		$	12.74		$	12.74

Investor A
Net assets	$	13,981,032		$	9,965,637		$	3,512,368		$	1,042,651

Shares outstanding²		1,146,760			796,625			275,510			81,907

Net asset value	$	12.19		$	12.51		$	12.75		$	12.73

Maximum offering price per share (100/94.75 of net asset value)	$	12.87		$	13.20		$	13.46		$	13.44

Investor C
Net assets	$	992,316		$	533,007		$	462,573		$	231,233

Shares outstanding²		81,693			42,803			36,558			18,296

Net asset value	$	12.15		$	12.45		$	12.65		$	12.64

Class K
Net assets	$	1,941,326		$	1,998,534		$	697,064		$	448,191

Shares outstanding²		158,851			159,267			54,605			35,101

Net asset value	$	12.22		$	12.55		$	12.77		$	12.77

Class R
Net assets	$	1,281,883		$	358,986		$	422,605		$	59,458

Shares outstanding²		105,121			28,668			33,190			4,674

Net asset value	$	12.19		$	12.52		$	12.73		$	12.72

¹ Cost — from the applicable LifePath Master Portfolio	$	32,813,970		$	24,720,779		$	11,634,497		$	3,585,101

² No par value, unlimited number of shares authorized.


Statements of Operations		BlackRock Funds III


Year Ended December 31, 2012	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	$	337,402		$	293,974		$	155,687		$	43,584
Interest — affiliated		148,862			67,607			17,414			664
Securities lending — affiliated — net		1,215			806			368			76
Income — affiliated		148			113			55			19
Expenses		(139,703	)		(110,132	)		(66,841	)		(37,695	)
Fees waived		91,325			76,202			51,597			33,839

Total income		439,249			328,570			158,280			40,487


Portfolio Expenses
Administration		89,995			63,143			29,855			7,142
Service — Investor A		26,207			18,172			5,939			1,440
Service and distribution — Investor C		4,913			2,872			2,203			1,429
Service and distribution — Class R		2,363			777			1,208			230
Professional		19,356			19,356			19,356			18,938

Total expenses		142,834			104,320			58,561			29,179
Less fees waived by administrator		(19,356	)		(19,356	)		(19,356	)		(18,938	)

Total expenses after fees waived		123,478			84,964			39,205			10,241

Net investment income		315,771			243,606			119,075			30,246


Realized and Unrealized Gain (Loss) Allocated from the Master Portfolios
Net realized gain (loss) from investments, financial futures contracts, swaps and foreign currency transactions		262,772			129,046			51,373			(4,751	)
Net change in unrealized appreciation/depreciation on investments, financial futures contracts, swaps and foreign currency transactions		1,467,212			1,257,035			644,573			175,681

Total realized and unrealized gain		1,729,984			1,386,081			695,946			170,930

Net Increase in Net Assets Resulting from Operations	$	2,045,755		$	1,629,687		$	815,021		$	201,176


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:	2012			2011			2012			2011


Operations
Net investment income	$	315,771		$	159,967		$	243,606		$	98,949
Net realized gain (loss)		262,772			(171,742	)		129,046			(138,750	)
Net change in unrealized appreciation/depreciation		1,467,212			(266,934	)		1,257,035			(279,386	)

Net increase (decrease) in net assets resulting from operations		2,045,755			(278,709	)		1,629,687			(319,187	)


Dividends and Distributions to Shareholders From¹

Net investment income:
Institutional		(136,096	)		(42,732	)		(105,235	)		(27,579	)
Investor A		(160,757	)		(83,474	)		(114,757	)		(50,150	)
Investor C		(5,950	)		(1,017	)		(3,003	)		(887	)
Class K		(30,293	)		(31,159	)		(30,232	)		(20,070	)
Class R		(9,096	)		(246	)		(2,781	)		(240	)
Net realized gain:
Institutional		—			(7	)		—			(5	)
Investor A		—			(16	)		—			(9	)
Investor C		—			—			—			—
Class K		—			(5	)		—			(3	)
Class R		—			—			—			—
Tax return of capital:
Institutional		—			—			(790	)		—
Investor A		—			—			(862	)		—
Investor C		—			—			(23	)		—
Class K		—			—			(227	)		—
Class R		—			—			(21	)		—

Decrease in net assets resulting from dividends and distributions to shareholders		(342,192	)		(158,656	)		(257,931	)		(98,943	)


Capital Share Transactions
Net increase in net assets derived from capital share transactions		20,142,253			12,491,883			16,920,364			7,709,336


Net Assets
Total increase in net assets		21,845,816			12,054,518			18,292,120			7,291,206
Beginning of year		12,166,781			112,263			7,417,310			126,104

End of year	$	34,012,597		$	12,166,781		$	25,709,430		$	7,417,310

Undistributed (distributions in excess of) net investment income	$	(20,190	)	$	2,156		$	(11,444	)	$	958

Dividends and distributions are determined in accordance with federal income tax regulations.


Statements of Changes in Net Assets (concluded)		BlackRock Funds III


	LifePath 2045 Portfolio						LifePath 2055 Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2012			2011			2012			2011


Operations
Net investment income	$	119,075		$	37,394		$	30,246		$	3,864
Net realized gain (loss)		51,373			(71,148	)		(4,751	)		5,284
Net change in unrealized appreciation/depreciation		644,573			(137,673	)		175,681			(23,807	)

Net increase (decrease) in net assets resulting from operations		815,021			(171,427	)		201,176			(14,659	)


Dividends and Distributions to Shareholders From¹

Net investment income:
Institutional		(67,201	)		(18,495	)		(14,245	)		(1,496	)
Investor A		(40,414	)		(13,393	)		(10,527	)		(914	)
Investor C		(2,621	)		(589	)		(1,373	)		(715	)
Class K		(9,255	)		(4,510	)		(4,435	)		(375	)
Class R		(4,033	)		(221	)		(584	)		(196	)
Net realized gain:
Institutional		—			(147	)		(226	)		(1,174	)
Investor A		—			(145	)		(220	)		(1,050	)
Investor C		—			(6	)		(44	)		(873	)
Class K		—			(36	)		(11	)		(188	)
Class R		—			(3	)		(19	)		(187	)
Tax return of capital:
Institutional		(334	)		—			—			—
Investor A		(201	)		—			—			—
Investor C		(13	)		—			—			—
Class K		(46	)		—			—			—
Class R		(20	)		—			—			—

Decrease in net assets resulting from dividends and distributions to shareholders		(124,138	)		(37,545	)		(31,684	)		(7,168	)


Capital Share Transactions
Net increase in net assets derived from capital share transactions		8,218,742			3,342,643			3,112,252			383,669


Net Assets
Total increase in net assets		8,909,625			3,133,671			3,281,744			361,842
Beginning of year		3,250,652			116,981			480,289			118,447

End of year	$	12,160,277		$	3,250,652		$	3,762,033		$	480,289

Undistributed (distributions in excess of) net investment income	$	(4,205	)	$	244		$	(754	)	$	164

Dividends and distributions are determined in accordance with federal income tax regulations.


Financial Highlights		LifePath 2025 Portfolio


	Institutional
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.07		$	11.21		$	10.00

Net investment income²		0.22			0.25			0.11
Net realized and unrealized gain (loss)		1.11			(0.19	)		1.63

Net increase from investment operations		1.33			0.06			1.74

Dividends and distributions from:³
Net investment income		(0.21	)		(0.20	)		(0.11	)
Net realized gain		(0.00	)⁴		(0.00	)⁴		(0.42	)

Total dividends and distributions		(0.21	)		(0.20	)		(0.53	)

Net asset value, end of period	$	12.19		$	11.07		$	11.21


Total Investment Return⁵
Based on net asset value		12.07%			0.49%			17.40%	⁶


Ratios to Average Net Assets⁷
Total expenses		0.86%	^8,9		1.06%	^10,11		24.41%	¹²

Total expenses after fees waived		0.76%	^8,9		0.74%	^10,11		0.73%	¹²

Net investment income		1.85%	^8,9		2.25%	^10,11		1.93%	¹²


Supplemental Data
Net assets, end of period (000)	$	15,816		$	3,233		$	22

Portfolio turnover of the LifePath Master Portfolio		4%			24%			2%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

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

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.48%.

⁹

Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.10%, although the ratio does include the LifePath Portfolio’s share of the Master Portfolio’s allocated expenses and/or net investment income.

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.82%.

¹¹

Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.12%, although the ratio does include the LifePath Portfolio’s share of the Master Portfolio’s allocated expenses and/or net investment income.

¹²

Annualized.


Financial Highlights (continued)		LifePath 2025 Portfolio


	Investor A
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.06		$	11.21		$	10.00

Net investment income²		0.18			0.21			0.09
Net realized and unrealized gain (loss)		1.12			(0.19	)		1.63

Net increase from investment operations		1.30			0.02			1.72

Dividends and distributions from:³
Net investment income		(0.17	)		(0.17	)		(0.09	)
Net realized gain		(0.00	)⁴		(0.00	)⁴		(0.42	)

Total dividends and distributions		(0.17	)		(0.17	)		(0.51	)

Net asset value, end of period	$	12.19		$	11.06		$	11.21


Total Investment Return⁵
Based on net asset value		11.84%			0.18%			17.26%	⁶


Ratios to Average Net Assets⁷
Total expenses		1.11%	^8,9		1.32%	^10,11		24.68%	¹²

Total expenses after fees waived		1.01%	^8,9		0.99%	^10,11		0.98%	¹²

Net investment income		1.54%	^8,9		1.87%	^10,11		1.67%	¹²


Supplemental Data
Net assets, end of period (000)	$	13,981		$	7,076		$	22

Portfolio turnover of the LifePath Master Portfolio		4%			24%			2%

Commencement of operations.

Based on average shares outstanding throughout the period.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.48%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.86%.

¹¹

¹²

Annualized.


Financial Highlights (continued)		LifePath 2025 Portfolio


	Investor C
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.05		$	11.21		$	10.00

Net investment income²		0.10			0.14			0.05
Net realized and unrealized gain (loss)		1.11			(0.20	)		1.63

Net increase (decrease) from investment operations		1.21			(0.06	)		1.68

Dividends and distributions from:³
Net investment income		(0.11	)		(0.10	)		(0.05	)
Net realized gain		(0.00	)⁴		(0.00	)⁴		(0.42	)

Total dividends and distributions		(0.11	)		(0.10	)		(0.47	)

Net asset value, end of period	$	12.15		$	11.05		$	11.21


Total Investment Return⁵
Based on net asset value		10.99%			(0.54	)%		16.84%	⁶


Ratios to Average Net Assets⁷
Total expenses		1.85%	^8,9		2.10%	^10,11		25.46%	¹²

Total expenses after fees waived		1.76%	^8,9		1.75%	^10,11		1.72%	¹²

Net investment income		0.87%	^8,9		1.25%	^10,11		0.95%	¹²


Supplemental Data
Net assets, end of period (000)	$	992		$	245		$	22

Portfolio turnover of the LifePath Master Portfolio		4%			24%			2%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.48%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.82%.

¹¹

¹²

Annualized.


Financial Highlights (continued)		LifePath 2025 Portfolio


	Class K
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.09		$	11.21		$	10.00

Net investment income²		0.26			0.26			0.13
Net realized and unrealized gain (loss)		1.11			(0.16	)		1.63

Net increase from investment operations		1.37			0.10			1.76

Dividends and distributions from:³
Net investment income		(0.24	)		(0.22	)		(0.13	)
Net realized gain		(0.00	)⁴		(0.00	)⁴		(0.42	)

Total dividends and distributions		(0.24	)		(0.22	)		(0.55	)

Net asset value, end of period	$	12.22		$	11.09		$	11.21


Total Investment Return⁵
Based on net asset value		12.44%			0.87%			17.60%	⁶


Ratios to Average Net Assets⁷
Total expenses		0.51%	^8,9		0.71%	^10,11		24.05%	¹²

Total expenses after fees waived		0.41%	^8,9		0.38%	^10,11		0.38%	¹²

Net investment income		2.20%	^8,9		2.31%	^10,11		2.29%	¹²


Supplemental Data
Net assets, end of period (000)	$	1,941		$	1,590		$	22

Portfolio turnover of the LifePath Master Portfolio		4%			24%			2%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.49%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.89%.

¹¹

¹²

Annualized.


Financial Highlights (concluded)		LifePath 2025 Portfolio


	Class R
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.09		$	11.21		$	10.00

Net investment income²		0.18			0.17			0.08
Net realized and unrealized gain (loss)		1.08			(0.17	)		1.63

Net increase from investment operations		1.26			—			1.71

Dividends and distributions from:³
Net investment income		(0.16	)		(0.12	)		(0.08	)
Net realized gain		(0.00	)⁴		(0.00	)⁴		(0.42	)

Total dividends and distributions		(0.16	)		(0.12	)		(0.50	)

Net asset value, end of period	$	12.19		$	11.09		$	11.21


Total Investment Return⁵
Based on net asset value		11.45%			0.02%			17.12%	⁶


Ratios to Average Net Assets⁷
Total expenses		1.35%	^8,9		1.57%	^10,11		24.94%	¹²

Total expenses after fees waived		1.26%	^8,9		1.23%	^10,11		1.23%	¹²

Net investment income		1.54%	^8,9		1.46%	^10,11		1.43%	¹²


Supplemental Data
Net assets, end of period (000)	$	1,282		$	22		$	22

Portfolio turnover of the LifePath Master Portfolio		4%			24%			2%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.48%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.91%.

¹¹

¹²

Annualized.


Financial Highlights		LifePath 2035 Portfolio


	Institutional
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.18		$	11.52		$	10.00

Net investment income²		0.24			0.24			0.11
Net realized and unrealized gain (loss)		1.30			(0.39	)		1.99

Net increase (decrease) from investment operations		1.54			(0.15	)		2.10

Dividends and distributions from:³
Net investment income		(0.21	)		(0.19	)		(0.10	)
Net realized gain		—			(0.00	)⁴		(0.48	)
Tax return of capital		(0.00	)⁴		—			—

Total dividends and distributions		(0.21	)		(0.19	)		(0.58	)

Net asset value, end of period	$	12.51		$	11.18		$	11.52


Total Investment Return⁵
Based on net asset value		13.85%			(1.32	)%		20.96%	⁶


Ratios to Average Net Assets⁷
Total expenses		0.89%	^8,9		1.22%	^10,11		24.07%	¹²

Total expenses after fees waived		0.75%	^8,9		0.72%	^10,11		0.71%	¹²

Net investment income		1.98%	^8,9		2.13%	^10,11		1.88%	¹²


Supplemental Data
Net assets, end of period (000)	$	12,853		$	2,033		$	23

Portfolio turnover of the LifePath Master Portfolio		4%			21%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.56%.

⁹

Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Portfolio’s share of the Master Portfolio’s allocated expenses and/or net investment income.

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 1.10%.

¹¹

Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.14%, although the ratio does include the LifePath Portfolio’s share of the Master Portfolio’s allocated expenses and/or net investment income.

¹²

Annualized.


Financial Highlights (continued)		LifePath 2035 Portfolio


	Investor A
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.17		$	11.51		$	10.00

Net investment income²		0.20			0.20			0.10
Net realized and unrealized gain (loss)		1.32			(0.37	)		1.98

Net increase (decrease) from investment operations		1.52			(0.17	)		2.08

Dividends and distributions from:³
Net investment income		(0.18	)		(0.17	)		(0.09	)
Net realized gain		—			(0.00	)⁴		(0.48	)
Tax return of capital		(0.00	)⁴		—			—

Total dividends and distributions		(0.18	)		(0.17	)		(0.57	)

Net asset value, end of period	$	12.51		$	11.17		$	11.51


Total Investment Return⁵
Based on net asset value		13.63%			(1.55	)%		20.74%	⁶


Ratios to Average Net Assets⁷
Total expenses		1.14%	^8,9		1.48%	^10,11		22.59%	¹²

Total expenses after fees waived		1.00%	^8,9		0.97%	^10,11		0.96%	¹²

Net investment income		1.63%	^8,9		1.77%	^10,11		1.71%	¹²


Supplemental Data
Net assets, end of period (000)	$	9,966		$	4,121		$	27

Portfolio turnover of the LifePath Master Portfolio		4%			21%			1%

Commencement of operations.

Based on average shares outstanding throughout the period.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.56%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 1.15%.

¹¹

¹²

Annualized.


Financial Highlights (continued)		LifePath 2035 Portfolio


	Investor C
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.14		$	11.49		$	10.00

Net investment income²		0.11			0.09			0.05
Net realized and unrealized gain (loss)		1.30			(0.35	)		1.98

Net increase (decrease) from investment operations		1.41			(0.26	)		2.03

Dividends and distributions from:³
Net investment income		(0.10	)		(0.09	)		(0.06	)
Net realized gain		—			(0.00	)⁴		(0.48	)
Tax return of capital		(0.00	)⁴		—			—

Total dividends and distributions		(0.10	)		(0.09	)		(0.54	)

Net asset value, end of period	$	12.45		$	11.14		$	11.49


Total Investment Return⁵
Based on net asset value		12.70%			(2.28	)%		20.30%	⁶


Ratios to Average Net Assets⁷
Total expenses		1.89%	^8,9		2.24%	^10,11		25.11%	¹²

Total expenses after fees waived		1.75%	^8,9		1.72%	^10,11		1.70%	¹²

Net investment income		0.92%	^8,9		0.80%	^10,11		0.89%	¹²


Supplemental Data
Net assets, end of period (000)	$	533		$	190		$	30

Portfolio turnover of the LifePath Master Portfolio		4%			21%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.56%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 1.09%.

¹¹

¹²

Annualized.


Financial Highlights (continued)		LifePath 2035 Portfolio


	Class K
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.20		$	11.52		$	10.00

Net investment income²		0.27			0.25			0.13
Net realized and unrealized gain (loss)		1.32			(0.35	)		1.99

Net increase (decrease) from investment operations		1.59			(0.10	)		2.12

Dividends and distributions from:³
Net investment income		(0.24	)		(0.22	)		(0.12	)
Net realized gain		—			(0.00	)⁴		(0.48	)
Tax return of capital		(0.00	)⁴		—			—

Total dividends and distributions		(0.24	)		(0.22	)		(0.60	)

Net asset value, end of period	$	12.55		$	11.20		$	11.52


Total Investment Return⁵
Based on net asset value		14.30%			(0.94	)%		21.16%	⁶


Ratios to Average Net Assets⁷
Total expenses		0.55%	^8,9		0.87%	^10,11		23.70%	¹²

Total expenses after fees waived		0.40%	^8,9		0.36%	^10,11		0.36%	¹²

Net investment income		2.26%	^8,9		2.17%	^10,11		2.23%	¹²


Supplemental Data
Net assets, end of period (000)	$	1,999		$	1,050		$	23

Portfolio turnover of the LifePath Master Portfolio		4%			21%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.57%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 1.20%.

¹¹

¹²

Annualized.


Financial Highlights (concluded)		LifePath 2035 Portfolio


	Class R
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.19		$	11.52		$	10.00

Net investment income²		0.21			0.15			0.08
Net realized and unrealized gain (loss)		1.28			(0.36	)		1.99

Net increase (decrease) from investment operations		1.49			(0.21	)		2.07

Dividends and distributions from:³
Net investment income		(0.16	)		(0.12	)		(0.07	)
Net realized gain		—			(0.00	)⁴		(0.48	)
Tax return of capital		(0.00	)⁴		—			—

Total dividends and distributions		(0.16	)		(0.12	)		(0.55	)

Net asset value, end of period	$	12.52		$	11.19		$	11.52


Total Investment Return⁵
Based on net asset value		13.37%			(1.85	)%		20.67%	⁶


Ratios to Average Net Assets⁷
Total expenses		1.38%	^8,9		1.72%	^10,11		24.60%	¹²

Total expenses after fees waived		1.25%	^8,9		1.21%	^10,11		1.22%	¹²

Net investment income		1.71%	^8,9		1.31%	^10,11		1.39%	¹²


Supplemental Data
Net assets, end of period (000)	$	359		$	22		$	23

Portfolio turnover of the LifePath Master Portfolio		4%			21%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.55%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 1.19%.

¹¹

¹²

Annualized.


Financial Highlights		LifePath 2045 Portfolio


	Institutional
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.24		$	11.70		$	10.00

Net investment income²		0.25			0.23			0.10
Net realized and unrealized gain (loss)		1.47			(0.51	)		2.30

Net increase (decrease) from investment operations		1.72			(0.28	)		2.40

Dividends and distributions from:³
Net investment income		(0.22	)		(0.18	)		(0.10	)
Net realized gain		—			(0.00	)⁴		(0.60	)
Tax return of capital		(0.00	)⁴		—			—

Total dividends and distributions		(0.22	)		(0.18	)		(0.70	)

Net asset value, end of period	$	12.74		$	11.24		$	11.70


Total Investment Return⁵
Based on net asset value		15.34%			(2.46	)%		24.01%	⁶


Ratios to Average Net Assets⁷
Total expenses		1.06%	^8,9		2.00%	^10,11		23.73%	¹²

Total expenses after fees waived		0.75%	^8,9		0.70%	^10,11		0.68%	¹²

Net investment income		2.04%	^8,9		2.02%	^10,11		1.81%	¹²


Supplemental Data
Net assets, end of period (000)	$	7,066		$	1,646		$	23

Portfolio turnover of the LifePath Master Portfolio		4%			35%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.83%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 2.51%.

¹¹

Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.16%, although the ratio does include the LifePath Portfolio’s share of the Master Portfolio’s allocated expenses and/or net investment income.

¹²

Annualized.


Financial Highlights (continued)		LifePath 2045 Portfolio


	Investor A
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.25		$	11.70		$	10.00

Net investment income²		0.21			0.19			0.09
Net realized and unrealized gain (loss)		1.47			(0.49	)		2.29

Net increase (decrease) from investment operations		1.68			(0.30	)		2.38

Dividends and distributions from:³
Net investment income		(0.18	)		(0.15	)		(0.08	)
Net realized gain		—			(0.00	)⁴		(0.60	)
Tax return of capital		(0.00	)⁴		—			—

Total dividends and distributions		(0.18	)		(0.15	)		(0.68	)

Net asset value, end of period	$	12.75		$	11.25		$	11.70


Total Investment Return⁵
Based on net asset value		15.03%			(2.61	)%		23.86%	⁶


Ratios to Average Net Assets⁷
Total expenses		1.31%	^8,9		2.20%	^10,11		24.00%	¹²

Total expenses after fees waived		0.99%	^8,9		0.95%	^10,11		0.93%	¹²

Net investment income		1.75%	^8,9		1.65%	^10,11		1.56%	¹²


Supplemental Data
Net assets, end of period (000)	$	3,512		$	1,228		$	23

Portfolio turnover of the LifePath Master Portfolio		4%			35%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.83%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 2.23%.

¹¹

¹²

Annualized.


Financial Highlights (continued)		LifePath 2045 Portfolio


	Investor C
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.18		$	11.67		$	10.00

Net investment income²		0.13			0.11			0.05
Net realized and unrealized gain (loss)		1.45			(0.50	)		2.28

Net increase (decrease) from investment operations		1.58			(0.39	)		2.33

Dividends and distributions from:³
Dividends from net investment income		(0.11	)		(0.10	)		(0.06	)
Net realized gain		—			(0.00	)⁴		(0.60	)
Tax return of capital		(0.00	)⁴		—			—

Total dividends and distributions		(0.11	)		(0.10	)		(0.66	)

Net asset value, end of period	$	12.65		$	11.18		$	11.67


Total Investment Return⁵
Based on net asset value		14.15%			(3.37	)%		23.33%	⁶


Ratios to Average Net Assets⁷
Total expenses		2.04%	^8,9		2.99%	^10,11		24.78%	¹²

Total expenses after fees waived		1.75%	^8,9		1.70%	^10,11		1.69%	¹²

Net investment income		1.07%	^8,9		0.94%	^10,11		0.81%	¹²


Supplemental Data
Net assets, end of period (000)	$	463		$	95		$	23

Portfolio turnover of the LifePath Master Portfolio		4%			35%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.81%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 2.41%.

¹¹

¹²

Annualized.


Financial Highlights (continued)		LifePath 2045 Portfolio


	Class K
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.26		$	11.70		$	10.00

Net investment income²		0.30			0.24			0.12
Net realized and unrealized gain (loss)		1.46			(0.48	)		2.30

Net increase (decrease) from investment operations		1.76			(0.24	)		2.42

Dividends and distributions from:³
Net investment income		(0.25	)		(0.20	)		(0.12	)
Net realized gain		—			(0.00	)⁴		(0.60	)
Tax return of capital		(0.00	)⁴		—			—

Total dividends and distributions		(0.25	)		(0.20	)		(0.72	)

Net asset value, end of period	$	12.77		$	11.26		$	11.70


Total Investment Return⁵
Based on net asset value		15.72%			(2.08	)%		24.22%	⁶


Ratios to Average Net Assets⁷
Total expenses		0.70%	^8,9		1.72%	^10,11		23.37%	¹²

Total expenses after fees waived		0.39%	^8,9		0.35%	^10,11		0.33%	¹²

Net investment income		2.41%	^8,9		2.04%	^10,11		2.17%	¹²


Supplemental Data
Net assets, end of period (000)	$	697		$	259		$	23

Portfolio turnover of the LifePath Master Portfolio		4%			35%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.83%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 2.71%.

¹¹

¹²

Annualized.


Financial Highlights (concluded)		LifePath 2045 Portfolio


	Class R
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.24		$	11.69		$	10.00

Net investment income²		0.23			0.14			0.07
Net realized and unrealized gain (loss)		1.42			(0.48	)		2.30

Net increase (decrease) from investment operations		1.65			(0.34	)		2.37

Dividends and distributions from:³
Dividends from net investment income		(0.16	)		(0.11	)		(0.08	)
Net realized gain		—			(0.00	)⁴		(0.60	)
Tax return of capital		(0.00	)⁴		—			—

Total dividends and distributions		(0.16	)		(0.11	)		(0.68	)

Net asset value, end of period	$	12.73		$	11.24		$	11.69


Total Investment Return⁵
Based on net asset value		14.77	%		(2.93	)%		23.68	%⁶


Ratios to Average Net Assets⁷
Total expenses		1.55	%^8,9		2.57	%^10,11		24.26	%¹²

Total expenses after fees waived		1.25	%^8,9		1.19	%^10,11		1.19	%¹²

Net investment income		1.84	%^8,9		1.17	%^10,11		1.31	%¹²


Supplemental Data
Net assets, end of period (000)	$	423		$	22		$	23

Portfolio turnover of the LifePath Master Portfolio		4%			35%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.82%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 2.71%.

¹¹

¹²

Annualized.


Financial Highlights		LifePath 2055 Portfolio


	Institutional
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.13		$	11.85		$	10.00

Net investment income²		0.27			0.23			0.10
Net realized and unrealized gain (loss)		1.56			(0.70	)		2.45

Net increase (decrease) from investment operations		1.83			(0.47	)		2.55

Dividends and distributions from:³
Net investment income		(0.21	)		(0.16	)		(0.09	)
Net realized gain		(0.01	)		(0.09	)		(0.61	)

Total dividends and distributions		(0.22	)		(0.25	)		(0.70	)

Net asset value, end of period	$	12.74		$	11.13		$	11.85


Total Investment Return⁴
Based on net asset value		16.46%			(4.02	)%		25.58%	⁵


Ratios to Average Net Assets⁶
Total expenses		2.00%	^7,8		9.82%	^9,10		23.56%	¹¹

Total expenses after fees waived		0.75%	^7,8		0.69%	^9,10		0.66%	¹¹

Net investment income		2.17%	^7,8		1.94%	^9,10		1.78%	¹¹


Supplemental Data
Net assets, end of period (000)	$	1,981		$	164		$	24

Portfolio turnover of the LifePath Master Portfolio		7%			51%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

⁷

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 2.22%.

⁸

⁹

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 15.11%.

¹⁰

Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.17%, although the ratio does include the LifePath Portfolio’s share of the Master Portfolio’s allocated expenses and/or net investment income.

¹¹

Annualized.


Financial Highlights (continued)		LifePath 2055 Portfolio


	Investor A
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.13		$	11.85		$	10.00

Net investment income²		0.23			0.16			0.09
Net realized and unrealized gain (loss)		1.56			(0.67	)		2.46

Net increase (decrease) from investment operations		1.79			(0.51	)		2.55

Dividends and distributions from:³
Net investment income		(0.18	)		(0.12	)		(0.09	)
Net realized gain		(0.01	)		(0.09	)		(0.61	)

Total dividends and distributions		(0.19	)		(0.21	)		(0.70	)

Net asset value, end of period	$	12.73		$	11.13		$	11.85


Total Investment Return⁴
Based on net asset value		16.09%			(4.35	)%		25.50%	⁵


Ratios to Average Net Assets⁶
Total expenses		2.29%	^7,8		8.94%	^9,10		23.83%	¹¹

Total expenses after fees waived		1.00%	^7,8		0.94%	^9,10		0.91%	¹¹

Net investment income		1.88%	^7,8		1.43%	^9,10		1.53%	¹¹


Supplemental Data
Net assets, end of period (000)	$	1,043		$	163		$	24

Portfolio turnover of the LifePath Master Portfolio		7%			51%			1%

Commencement of operations.

Based on average shares outstanding throughout the period.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

⁷

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 2.28%.

⁸

⁹

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 12.56%.

¹⁰

¹¹

Annualized.


Financial Highlights (continued)		LifePath 2055 Portfolio


	Investor C
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.06		$	11.82		$	10.00

Net investment income²		0.13			0.10			0.04
Net realized and unrealized gain (loss)		1.56			(0.69	)		2.45

Net increase (decrease) from investment operations		1.69			(0.59	)		2.49

Dividends and distributions from:³
Net investment income		(0.10	)		(0.08	)		(0.06	)
Net realized gain		(0.01	)		(0.09	)		(0.61	)

Total dividends and distributions		(0.11	)		(0.17	)		(0.67	)

Net asset value, end of period	$	12.64		$	11.06		$	11.82


Total Investment Return⁴
Based on net asset value		15.27%			(5.01	)%		24.98%	⁵


Ratios to Average Net Assets⁶
Total expenses		3.12%	^7,8		11.00%	^9,10		24.62%	¹¹

Total expenses after fees waived		1.75%	^7,8		1.69%	^9,10		1.67%	¹¹

Net investment income		1.05%	^7,8		0.88%	^9,10		0.78%	¹¹


Supplemental Data
Net assets, end of period (000)	$	231		$	109		$	24

Portfolio turnover of the LifePath Master Portfolio		7%			51%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

⁷

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 2.42%.

⁸

⁹

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 14.29%.

¹⁰

¹¹

Annualized.


Financial Highlights (continued)		LifePath 2055 Portfolio


	Class K
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.15		$	11.86		$	10.00

Net investment income²		0.35			0.23			0.12
Net realized and unrealized gain (loss)		1.52			(0.66	)		2.46

Net increase (decrease) from investment operations		1.87			(0.43	)		2.58

Dividends and distributions from:³
Net investment income		(0.24	)		(0.19	)		(0.11	)
Net realized gain		(0.01	)		(0.09	)		(0.61	)

Total dividends and distributions		(0.25	)		(0.28	)		(0.72	)

Net asset value, end of period	$	12.77		$	11.15		$	11.86


Total Investment Return⁴
Based on net asset value		16.83%			(3.71	)%		25.84%	⁵


Ratios to Average Net Assets⁶
Total expenses		1.27%	^7,8		9.68%	^9,10		23.20%	¹¹

Total expenses after fees waived		0.40%	^7,8		0.33%	^9,10		0.31%	¹¹

Net investment income		2.80%	^7,8		1.99%	^9,10		2.14%	¹¹


Supplemental Data
Net assets, end of period (000)	$	448		$	22		$	24

Portfolio turnover of the LifePath Master Portfolio		7%			51%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

⁷

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 1.71%.

⁸

⁹

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 16.23%.

¹⁰

¹¹

Annualized.


Financial Highlights (concluded)		LifePath 2055 Portfolio


	Class R
	Year Ended December 31,						Period June 30, 2010¹ to December 31, 2010
	2012			2011			Period June 30, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.12		$	11.84		$	10.00

Net investment income²		0.19			0.13			0.07
Net realized and unrealized gain (loss)		1.56			(0.66	)		2.46

Net increase (decrease) from investment operations		1.75			(0.53	)		2.53

Dividends and distributions from:³
Net investment income		(0.14	)		(0.10	)		(0.08	)
Net realized gain		(0.01	)		(0.09	)		(0.61	)

Total dividends and distributions		(0.15	)		(0.19	)		(0.69	)

Net asset value, end of period	$	12.72		$	11.12		$	11.84


Total Investment Return⁴
Based on net asset value		15.75%			(4.54	)%		25.33%	⁵


Ratios to Average Net Assets⁶
Total expenses		2.75%	^7,8		10.53%	^9,10		24.09%	¹¹

Total expenses after fees waived		1.25%	^7,8		1.18%	^9,10		1.16%	¹¹

Net investment income		1.53%	^7,8		1.14%	^9,10		1.29%	¹¹


Supplemental Data
Net assets, end of period (000)	$	59		$	22		$	24

Portfolio turnover of the LifePath Master Portfolio		7%			51%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

⁷

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 2.60%.

⁸

⁹

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 16.23%.

¹⁰

¹¹

Annualized.


Notes to Financial Statements		BlackRock Funds III

1. Organization and Significant Accounting Policies:

BlackRock Funds III (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Delaware statutory trust. LifePath 2025 Portfolio, LifePath 2035 Portfolio, LifePath 2045 Portfolio and LifePath 2055 Portfolio (each, a “LifePath Portfolio” and collectively, the “LifePath Portfolios”) are each a series of the Trust. The LifePath Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. 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 2025 Master Portfolio, LifePath 2035 Master Portfolio, LifePath 2045 Master Portfolio and LifePath 2055 Master Portfolio (each, a “LifePath Master Portfolio” and collectively, the “LifePath Master Portfolios”). Each LifePath Master Portfolio has the same or substantially similar investment objective as its corresponding LifePath Portfolio. The performance of a LifePath Portfolio is directly affected by the performance of its corresponding LifePath Master Portfolio.

The value of each LifePath Portfolio’s investment in its corresponding LifePath Master Portfolio reflects that LifePath Portfolio’s proportionate interest in the net assets of that LifePath Master Portfolio (99.96%, 99.96%, 99.88% and 99.63% for the LifePath 2025 Portfolio, LifePath 2035 Portfolio, LifePath 2045 Portfolio and LifePath 2055 Portfolio, respectively, as of December 31, 2012).

Each LifePath Portfolio offers multiple classes of shares. Institutional and Class K Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally sold with a front-end sales charge. Investor C Shares may be subject to a CDSC. Class R Shares are sold without a sales charge and only to certain retirement or similar plans. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Investor A, Investor C and Class R Shares bear certain expenses related to the shareholder servicing of such shares, and Investor C and Class R Shares also bear certain expenses related to the distribution of such shares. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures.

The following is a summary of significant accounting policies followed by the LifePath Portfolios:

Valuation: US GAAP defines fair value as the price the LifePath Portfolios would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The LifePath Portfolios’ policy is to fair value their financial instruments at market value. Each LifePath Portfolio records its investments in the applicable LifePath Master Portfolio at fair value based on the LifePath Portfolio’s proportionate interest in the net assets of the applicable LifePath Master Portfolio. Valuation of securities held by the LifePath Master

Portfolios is discussed in Note 1 of the Master Portfolios’ Notes to Financial Statements, which are included elsewhere in this report.

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

Dividends and Distributions: Dividends from net investment income are declared and paid quarterly. Distributions of capital gains are recorded on the ex-dividend dates. The portion of distributions that exceeds a Portfolio’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a nontaxable return of capital. Distributions in excess of a LifePath Portfolio’s taxable income and net capital gains, but not in excess of a LifePath Portfolio’s earnings and profits, will be taxable to shareholders as ordinary income and will not constitute a nontaxable return of capital. Capital losses carried forward from years beginning before 2011 do not reduce earnings and profits, even if such carried forward losses offset current year realized gains. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

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

Each LifePath Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each LifePath Portfolio’s US federal tax returns remains open for each of the two years ended December 31, 2012 and the period ended December 31, 2010. The statutes of limitations on each LifePath Portfolio’s state and local tax returns may remain open for an additional year depending upon the jurisdiction. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

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

2. Administration 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, Inc. (“BlackRock”).



BLACKROCK FUNDS III	DECEMBER 31, 2012	39


Notes to Financial Statements (continued)		BlackRock Funds III

The Trust, on behalf of the LifePath Portfolios, entered into an Administration Agreement with BlackRock Institutional Trust Company, N.A. (“BTC”) (the “Administrator”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC, 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. BTC 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. Effective July 1, 2012, BlackRock Advisors, LLC (“BAL”) replaced BTC as each LifePath Portfolio’s administrator and entered into an Administration Agreement with the Trust, on behalf of the LifePath Portfolios, on similar terms.

From time to time, BAL may waive and previously BTC waived 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 and previously BTC delegated certain of its administration duties to sub-administrators.

The fees of the Trust’s independent registered public accounting firm and legal counsel (the “independent expenses”) are paid directly by the LifePath Portfolios. BAL has contractually agreed and previously BTC 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, 2022. These amounts are included in fees waived by administrator in the Statements of Operations.

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


	Service Fee			Distribution Fee
Investor A		0.25	%		—
Investor C		0.25	%		0.75	%
Class R		0.25	%		0.25	%

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

For the year ended December 31, 2012, 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	$	228
LifePath 2035 Portfolio	$	200
LifePath 2045 Portfolio	$	126
LifePath 2055 Portfolio	$	96

For the year ended December 31, 2012, affiliates received CDSCs relating to transactions in Investor C Shares as follows:


	Investor C
LifePath 2025 Portfolio	$	197
LifePath 2035 Portfolio	$	421
LifePath 2045 Portfolio	$	208
LifePath 2055 Portfolio	$	600

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

3. Income Tax Information:


	LifePath 2025 Portfolio
Distributions in excess of net investment income	$	4,075
Accumulated net realized gain allocated from the LifePath Master Portfolio	$	(4,075	)



40	BLACKROCK FUNDS III	DECEMBER 31, 2012


Notes to Financial Statements (continued)		BlackRock Funds III

The tax character of distributions paid during the fiscal years ended December 31, 2012 and December 31, 2011 was as follows:


		LifePath 2025 Portfolio		LifePath 2035 Portfolio		LifePath 2045 Portfolio		LifePath 2055 Portfolio
Ordinary income	12/31/12	$	338,117	$	256,008	$	123,524	$	31,164
	12/31/11	$	158,628	$	98,927	$	37,326	$	3,984
Long-term capital gains	12/31/12	$	4,075		—		—	$	520
	12/31/11	$	28	$	16	$	219	$	3,184
Return of Capital	12/31/12		—	$	1,923	$	614		—

Total	12/31/12	$	342,192	$	257,931	$	124,138	$	31,684

	12/31/11	$	158,656	$	98,943	$	37,545	$	7,168

As of December 31, 2012, 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		—		—			—		$	144
Undistributed long-term capital gains	$	2,946		—			—			—
Capital loss carryforwards		—	$	(33,935	)	$	(22,438	)		—
Net unrealized gains¹		1,276,121		1,010,001			526,615			169,519
Qualified late-year losses²		—		(4,626	)		(4,641	)		(3,561	)

Total	$	1,279,067	$	971,440		$	499,536		$	166,102

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

The LifePath Portfolios have elected to defer certain qualified late-year losses and recognize such losses in the year ending December 31, 2013.

As of December 31, 2012, the LifePath Portfolios had capital loss carryforwards with no expiration dates, available to offset future realized capital gains as follows:


LifePath 2035 Portfolio	$	33,935
LifePath 2045 Portfolio	$	22,438

During the year ended December 31, 2012, LifePath Portfolios listed below utilized the following amounts of their respective capital loss carryforwards:


LifePath 2025 Portfolio	$	227,304
LifePath 2035 Portfolio	$	146,374
LifePath 2045 Portfolio	$	63,031

4. Capital Share Transactions:

Transactions in capital shares for each class were as follows:


	Year Ended December 31, 2012						Year Ended December 31, 2011
LifePath 2025 Portfolio	Shares			Amount			Shares			Amount
Institutional
Shares sold		1,045,339		$	12,568,837			308,420		$	3,585,836
Shares issued to shareholders in reinvestment of dividends and distributions		11,282			135,315			3,779			42,343
Shares redeemed		(51,418	)		(613,325	)		(22,232	)		(250,826	)

Net increase		1,005,203		$	12,090,827			289,967		$	3,377,353


Investor A
Shares sold		646,048		$	7,555,703			743,173		$	8,518,519
Shares issued to shareholders in reinvestment of dividends and distributions		12,936			154,187			7,269			81,569
Shares redeemed		(151,744	)		(1,805,319	)		(112,926	)		(1,286,222	)

Net increase		507,240		$	5,904,571			637,516		$	7,313,866


Investor C
Shares sold		62,648		$	742,048			20,186		$	219,747
Shares issued to shareholders in reinvestment of dividends and distributions		149			1,762			27			302
Shares redeemed		(3,317	)		(39,041	)		—			—

Net increase		59,480		$	704,769			20,213		$	220,049



BLACKROCK FUNDS III	DECEMBER 31, 2012	41


Notes to Financial Statements (continued)		BlackRock Funds III


LifePath 2025 Portfolio (concluded)	Year Ended December 31, 2012						Year Ended December 31, 2011
LifePath 2025 Portfolio (concluded)	Shares			Amount			Shares			Amount
Class K
Shares sold		91,635		$	1,104,068			282,594		$	3,190,420
Shares issued to shareholders in reinvestment of dividends and distributions		2,493			29,808			2,730			30,725
Shares redeemed		(78,700	)		(919,978	)		(143,907	)		(1,640,530	)

Net increase		15,428		$	213,898			141,417		$	1,580,615


Class R
Shares sold		139,022		$	1,661,296			—			—
Shares issued to shareholders in reinvestment of dividends and distributions		554			6,692			—			—
Shares redeemed		(36,457	)		(439,800	)		—			—

Net increase		103,119		$	1,228,188			—			—

Total Net Increase		1,690,470		$	20,142,253			1,089,113		$	12,491,883


LifePath 2035 Portfolio
Institutional
Shares sold		876,904		$	10,802,927			187,358		$	2,242,066
Shares issued to shareholders in reinvestment of dividends and distributions		8,560			105,118			2,382			27,198
Shares redeemed		(39,959	)		(481,433	)		(9,833	)		(113,675	)

Net increase		845,505		$	10,426,612			179,907		$	2,155,589


Investor A
Shares sold		510,399		$	6,061,025			411,896		$	4,866,349
Shares issued to shareholders in reinvestment of dividends and distributions		9,088			111,016			4,340			49,724
Shares redeemed		(91,669	)		(1,110,992	)		(49,782	)		(580,912	)

Net increase		427,818		$	5,061,049			366,454		$	4,335,161


Investor C
Shares sold		32,228		$	392,026			18,711		$	215,709
Shares issued to shareholders in reinvestment of dividends and distributions		72			866			50			559
Shares redeemed		(6,576	)		(79,864	)		(4,277	)		(47,057	)

Net increase		25,724		$	313,028			14,484		$	169,211


Class K
Shares sold		76,743		$	935,081			134,726		$	1,559,562
Shares issued to shareholders in reinvestment of dividends and distributions		2,443			29,971			1,711			19,640
Shares redeemed		(13,680	)		(166,794	)		(44,680	)		(529,827	)

Net increase		65,506		$	798,258			91,757		$	1,049,375


Class R
Shares sold		37,010		$	450,432			—			—
Shares issued to shareholders in reinvestment of dividends and distributions		181			2,236			—			—
Shares redeemed		(10,523	)		(131,251	)		—			—

Net increase		26,668		$	321,417			—			—

Total Net Increase		1,391,221		$	16,920,364			652,602		$	7,709,336



42	BLACKROCK FUNDS III	DECEMBER 31, 2012


Notes to Financial Statements (continued)		BlackRock Funds III


	Year Ended December 31, 2012						Year Ended December 31, 2011
LifePath 2045 Portfolio	Shares			Amount			Shares			Amount
Institutional
Shares sold		441,838		$	5,521,233			150,876		$	1,790,065
Shares issued to shareholders in reinvestment of dividends and distributions		5,378			67,095			1,575			18,285
Shares redeemed		(39,114	)		(481,867	)		(8,082	)		(94,178	)

Net increase		408,102		$	5,106,461			144,369		$	1,714,172


Investor A
Shares sold		195,093		$	2,350,475			126,500		$	1,525,233
Shares issued to shareholders in reinvestment of dividends and distributions		3,199			39,754			1,134			13,226
Shares redeemed		(31,994	)		(392,545	)		(20,422	)		(231,972	)

Net increase		166,298		$	1,997,684			107,212		$	1,306,487


Investor C
Shares sold		33,075		$	404,882			8,267		$	94,835
Shares issued to shareholders in reinvestment of dividends and distributions		14			166			16			185
Shares redeemed		(5,053	)		(60,278	)		(1,761	)		(21,566	)

Net increase		28,036		$	344,770			6,522		$	73,454


Class K
Shares sold		35,316		$	437,850			21,328		$	252,476
Shares issued to shareholders in reinvestment of dividends and distributions		702			8,798			355			4,140
Shares redeemed		(4,420	)		(53,615	)		(679	)		(8,086	)

Net increase		31,598		$	393,033			21,004		$	248,530


Class R
Shares sold		50,526		$	620,689			—			—
Shares issued to shareholders in reinvestment of dividends and distributions		261			3,242			—			—
Shares redeemed		(19,597	)		(247,137	)		—			—

Net increase		31,190		$	376,794			—			—

Total Net Increase		665,224		$	8,218,742			279,107		$	3,342,643


LifePath 2055 Portfolio
Institutional
Shares sold		150,947		$	1,883,358			12,679		$	147,015
Shares issued to shareholders in reinvestment of dividends and distributions		1,120			13,978			189			2,160
Shares redeemed		(11,328	)		(140,748	)		(123	)		(1,420	)

Net increase		140,739		$	1,756,588			12,745		$	147,755


Investor A
Shares sold		83,690		$	1,011,785			24,017		$	280,326
Shares issued to shareholders in reinvestment of dividends and distributions		804			9,984			138			1,533
Shares redeemed		(17,242	)		(210,120	)		(11,500	)		(141,503	)

Net increase		67,252		$	811,649			12,655		$	140,356


Investor C
Shares sold		14,051		$	171,394			8,004		$	97,427
Shares issued to shareholders in reinvestment of dividends and distributions		35			433			98			1,138
Shares redeemed		(5,611	)		(68,197	)		(281	)		(3,007	)

Net increase		8,475		$	103,630			7,821		$	95,558



BLACKROCK FUNDS III	DECEMBER 31, 2012	43


Notes to Financial Statements (concluded)		BlackRock Funds III


LifePath 2055 Portfolio (concluded)	Year Ended December 31, 2012						Year Ended December 31, 2011
LifePath 2055 Portfolio (concluded)	Shares			Amount			Shares		Amount
Class K
Shares sold		35,037		$	433,079			—		—
Shares issued to shareholders in reinvestment of dividends and distributions		311			3,951			—		—
Shares redeemed		(2,248	)		(28,304	)		—		—

Net increase		33,100		$	408,726			—		—


Class R
Shares sold		2,667		$	31,573			—		—
Shares issued to shareholders in reinvestment of dividends and distributions		24			293			—		—
Shares redeemed		(17	)		(207	)		—		—

Net increase		2,674		$	31,659			—		—

Total Net Increase		252,240		$	3,112,252			33,221	$	383,669

At December 31, 2012, shares owned by affiliates were as follows:


	Institutional		Investor A		Investor C		Class K		Class R
LifePath 2025 Portfolio		2,005		2,004		2,000		2,006		2,002
LifePath 2035 Portfolio		2,003		2,002		2,000		2,004		2,000
LifePath 2045 Portfolio		2,001		2,000		2,000		2,003		2,000
LifePath 2055 Portfolio		2,000		2,000		2,000		2,001		2,000

5. 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, 2012


Report of Independent Registered Public Accounting Firm		BlackRock Funds III

To the Shareholders and Board of Trustees of BlackRock Funds III:

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 the LifePath 2025 Portfolio, LifePath 2035 Portfolio, LifePath 2045 Portfolio and LifePath 2055 Portfolio, each a series of BlackRock Funds III (the “Trust”), at December 31, 2012, 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 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 Trust’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 audits 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.

PricewaterhouseCoopers LLP

New York, New York

February 22, 2013

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid during the taxable year ended December 31, 2012:


	Payable Date		LifePath 2025 Portfolio		LifePath 2035 Portfolio		LifePath 2045 Portfolio		LifePath 2055 Portfolio
Qualified Dividend Income for Individuals¹		04/02/12 –01/02/13		74.48%		85.49%		93.45%		99.40%
Dividends Qualifying for the Dividend Received Deduction for Corporations¹		04/02/12 –01/02/13		44.14%		49.58%		53.64%		57.70%
Federal Obligation Interest²		04/02/12 –01/02/13		3.05%		1.89%		1.02%		—
Interest-Related Dividends for Non-US Residents³		04/02/12 –01/02/13		25.87%		16.98%		8.85%		1.31%

The LifePath Portfolios hereby designates the percentage indicated above or the maximum amount allowable by laws.

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

Additionally, the LifePath Portfolios distributed long-term capital gains per share to shareholders of record on the following dates:


Record date	June 28, 2012
LifePath 2055 Portfolio	$	0.005257



BLACKROCK FUNDS III	DECEMBER 31, 2012	45


Master Portfolio Information as of December 31, 2012		Master Investment Portfolio


LifePath 2025 Master Portfolio


Portfolio Composition		Percent of Affiliated Investment Companies


Equity Funds	61	%
Fixed Income Funds	38
Short-Term Securities	1


Portfolio Holdings		Percent of Affiliated Investment Companies


Active Stock Master Portfolio	34	%
CoreAlpha Bond Master Portfolio	33
ACWI ex-US Index Master Portfolio	11
iShares Barclays TIPS Bond Fund	5
iShares MSCI EAFE Index Fund	3
Master Small Cap Index Series	3
BlackRock Commodity Strategies Fund	3
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	2
iShares Cohen & Steers Realty Majors Index Fund	2
iShares MSCI Emerging Markets Index Fund	1
iShares MSCI EAFE Small Cap Index Fund	1
BlackRock Cash Funds: Institutional, SL Agency Shares	1
iShares MSCI Canada Index Fund	1


LifePath 2035 Master Portfolio


Portfolio Composition		Percent of Affiliated Investment Companies


Equity Funds	76	%
Fixed Income Funds	24


Portfolio Holdings		Percent of Affiliated Investment Companies


Active Stock Master Portfolio	42	%
CoreAlpha Bond Master Portfolio	22
ACWI ex-US Index Master Portfolio	15
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	3
iShares MSCI EAFE Index Fund	3
BlackRock Commodity Strategies Fund	3
iShares Cohen & Steers Realty Majors Index Fund	3
Master Small Cap Index Series	3
iShares Barclays TIPS Bond Fund	3
iShares MSCI Emerging Markets Index Fund	1
iShares MSCI EAFE Small Cap Index Fund	1
iShares MSCI Canada Index Fund	1

The Master Portfolios’ allocation and holdings listed above are current as of the report date. However, the Master Portfolios are regularly monitored and their composition may vary throughout various periods.



46	BLACKROCK FUNDS III	DECEMBER 31, 2012


Master Portfolio Information as of December 31, 2012 (concluded)		Master Investment Portfolio


LifePath 2045 Master Portfolio

Portfolio Composition

Percent of

Affiliated Investment Companies


Equity Funds	87	%
Fixed Income Funds	13

Portfolio Holdings

Percent of

Affiliated Investment Companies


Active Stock Master Portfolio	49	%
ACWI ex-US Index Master Portfolio	18
CoreAlpha Bond Master Portfolio	13
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	5
iShares Cohen & Steers Realty Majors Index Fund	4
iShares MSCI EAFE Index Fund	3
BlackRock Commodity Strategies Fund	3
Master Small Cap Index Series	2
iShares MSCI EAFE Small Cap Index Fund	1
iShares MSCI Emerging Markets Index Fund	1
iShares MSCI Canada Index Fund	1


LifePath 2055 Master Portfolio


Portfolio Composition		Percent of Affiliated Investment Companies


Equity Funds	98	%
Fixed Income Funds	2


Portfolio Holdings		Percent of Affiliated Investment Companies


Active Stock Master Portfolio	55	%
ACWI ex-US Index Master Portfolio	25
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	5
iShares Cohen & Steers Realty Majors Index Fund	4
BlackRock Commodity Strategies Fund	3
Master Small Cap Index Series	2
CoreAlpha Bond Master Portfolio	2
iShares MSCI EAFE Small Cap Index Fund	2
iShares MSCI EAFE Index Fund	1
iShares MSCI Emerging Markets Index Fund	1


Active Stock Master Portfolio


Ten Largest Holdings		Percent of Long-Term Investments


Apple, Inc.	4	%
Microsoft Corp.	2
Exxon Mobil Corp.	2
Google, Inc., Class A	2
JPMorgan Chase & Co.	2
Pfizer, Inc.	2
Wells Fargo & Co.	2
Merck & Co., Inc.	1
Verizon Communications, Inc.	1
Coca-Cola Co.	1


Sector Allocation		Percent of Long-Term Investments


Information Technology	19	%
Financials	15
Consumer Discretionary	14
Health Care	13
Industrials	12
Energy	10
Consumer Staples	9
Telecommunication Services	3
Materials	3
Utilities	2

For Active Stock Master Portfolio compliance purposes, the Active Stock 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 Active Stock Master Portfolio management. These definitions may not apply for purposes of this report, which may combine sector sub-classifications for reporting ease.



BLACKROCK FUNDS III	DECEMBER 31, 2012	47

Schedule of Investments December 31, 2012

LifePath 2025 Master Portfolio

(Percentages shown are based on Net Assets)


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value

Equity Funds — 61.1%
Active Stock Master Portfolio	$	11,459,746	$	11,459,746
ACWI ex-US Index Master Portfolio	$	3,575,376		3,575,376
BlackRock Commodity Strategies Fund		106,996		1,086,010
iShares Cohen & Steers Realty Majors Index Fund		8,050		632,247
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		22,926		759,080
iShares MSCI Canada Index Fund		6,086		172,842
iShares MSCI EAFE Index Fund (b)		20,271		1,151,798
iShares MSCI EAFE Small Cap Index Fund		8,871		361,139
iShares MSCI Emerging Markets Index Fund		10,613		470,687
Master Small Cap Index Series	$	1,135,224		1,135,224

				20,804,149
Fixed Income Funds — 37.4%
CoreAlpha Bond Master Portfolio	$	11,181,905		11,181,905
iShares Barclays TIPS Bond Fund		12,725		1,544,942

				12,726,847


Affiliated Investment Companies (a)	Shares		Value
Short-Term Securities — 1.2%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)		333,964	$	333,964
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)		74,872		74,872

				408,836
Total Affiliated Investment Companies (Cost — $32,701,090*) — 99.7%				33,939,832
Other Assets in Excess of Liabilities — 0.3%				103,840

Net Assets — 100.0%			$	34,043,672

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	32,708,679

Gross unrealized appreciation	$	1,278,360
Gross unrealized depreciation		(47,207	)

Net unrealized appreciation	$	1,231,153

(a)


Affiliate	Shares/ Beneficial Interest Held at December 31, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	4,575,528	$	6,884,218	¹		—		$	11,459,746	$	11,459,746	$	136,087	$	349,406
ACWI US Index Master Portfolio	$	71,013	$	3,504,363	¹		—		$	3,575,376	$	3,575,376	$	24,875	$	(3,399	)
BlackRock Cash Funds: Institutional, SL Agency Shares		253,632		80,332	²		—			333,964	$	333,964	$	1,102		—
BlackRock Cash Funds: Prime, SL Agency Shares		77,542		—			(2,670	)²		74,872	$	74,872	$	262		—
BlackRock Commodity Strategies Fund		—		106,996			—			106,996	$	1,086,010	$	176		—
CoreAlpha Bond Master Portfolio	$	3,701,752	$	7,480,153	¹		—		$	11,181,905	$	11,181,905	$	170,730	$	4,279
iShares Barclays TIPS Bond Fund		4,832		8,284			(391	)		12,725	$	1,544,942	$	20,513	$	4,003
iShares Cohen & Steers Realty Majors Index Fund		3,901		4,897			(748	)		8,050	$	632,247	$	14,101	$	3,833
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		11,898		13,196			(2,168	)		22,926	$	759,080	$	34,306	$	(5,648	)
iShares MSCI Canada Index Fund		7,352		321			(1,587	)		6,086	$	172,842	$	3,949	$	(10,187	)
iShares MSCI EAFE Index Fund		26,801		1,649			(8,179	)		20,271	$	1,151,798	$	46,454	$	(68,271	)
iShares MSCI EAFE Small Cap Index Fund		5,331		4,059			(519	)		8,871	$	361,139	$	10,236	$	(3,730	)
iShares MSCI Emerging Markets Index Fund		13,412		1,172			(3,971	)		10,613	$	470,687	$	10,021	$	(32,060	)
Master Small Cap Index Series	$	412,480	$	722,744	¹		—		$	1,135,224	$	1,135,224	$	15,135	$	4,882

Represents net beneficial interest purchased.

Represents net shares sold.

(b)

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

(c)

Represents the current yield as of report date.

(d)

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

_Ÿ

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

See Notes to Financial Statements.



48	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (concluded)		LifePath 2025 Master Portfolio

_Ÿ

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	6,587,581	$	27,352,251		—	$	33,939,832

Certain of the Master Portfolio’s liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $348,000 is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	49

Schedule of Investments December 31, 2012

LifePath 2035 Master Portfolio

(Percentages shown are based on Net Assets)


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value

Equity Funds — 73.8%
Active Stock Master Portfolio	$	10,655,052	$	10,655,052
ACWI ex-US Index Master Portfolio	$	3,668,078		3,668,078
BlackRock Commodity Strategies Fund		79,015		802,001
iShares Cohen & Steers Realty Majors Index Fund		8,780		689,581
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		26,170		866,489
iShares MSCI Canada Index Fund		4,319		122,660
iShares MSCI EAFE Index Fund		14,984		851,391
iShares MSCI EAFE Small Cap Index Fund		7,903		321,731
iShares MSCI Emerging Markets Index Fund		7,858		348,502
Master Small Cap Index Series	$	660,486		660,486

				18,985,971


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value

Fixed Income Funds — 23.8%
CoreAlpha Bond Master Portfolio	$	5,500,575	$	5,500,575
iShares Barclays TIPS Bond Fund		5,167		627,325

				6,127,900
Short-Term Securities — 0.3%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (b)		79,543		79,543
Total Affiliated Investment Companies (Cost — $24,192,724*) — 97.9%				25,193,414
Other Assets in Excess of Liabilities — 2.1%				538,455

Net Assets — 100.0%			$	25,731,869

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	24,205,697

Gross unrealized appreciation	$	1,033,576
Gross unrealized depreciation		(45,859	)

Net unrealized appreciation	$	987,717

(a)


Affiliate	Shares/ Beneficial Interest Held at December 31, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	3,428,411	$	7,226,641	¹		—		$	10,655,052	$	10,655,052	$	129,185	$	222,127
ACWI ex-US Index Master Portfolio	$	166,164	$	3,501,914	¹		—		$	3,668,078	$	3,668,078	$	32,421	$	(23,357	)
BlackRock Cash Funds: Institutional, SL Agency Shares		169,991		—			(90,448	)²		79,543	$	79,543		920		—
BlackRock Cash Funds: Prime, SL Agency Shares		49,989		—			(49,989	)²		—		—		—		—
BlackRock Commodity Strategies Fund		—		79,015						79,015	$	802,001		133		—
CoreAlpha Bond Master Portfolio	$	1,392,205	$	4,108,370	¹		—		$	5,500,575	$	5,500,575	$	77,815	$	(3,883	)
iShares Barclays TIPS Bond Fund		1,528		3,663			(24	)		5,167	$	627,325	$	7,969	$	173
iShares Cohen & Steers Realty Majors Index Fund		3,512		5,656			(388	)		8,780	$	689,581	$	15,706	$	1,555
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		10,719		17,452			(2,001	)		26,170	$	866,489	$	37,825	$	(2,091	)
iShares MSCI Canada Index Fund		4,932		427			(1,040	)		4,319	$	122,660	$	2,918	$	(6,412	)
iShares MSCI EAFE Index Fund		18,186		1,869			(5,071	)		14,984	$	851,391	$	32,524	$	(44,216	)
iShares MSCI EAFE Small Cap Index Fund		3,878		4,066			(41	)		7,903	$	321,731	$	9,516	$	(380	)
iShares MSCI Emerging Markets Index Fund		9,150		856			(2,148	)		7,858	$	348,502	$	6,984	$	(16,300	)
Master Small Cap Index Series	$	215,825	$	444,661	¹		—		$	660,486	$	660,486	$	8,916	$	1,710

Represents net beneficial interest purchased.

Represents net shares sold.

(b)

Represents the current yield as of report date.

_Ÿ

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

_Ÿ

See Notes to Financial Statements.



50	BLACKROCK FUNDS III	DECEMBER 31, 2012


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 the Master Portfolio’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	4,709,223	$	20,484,191		—	$	25,193,414

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	51

Schedule of Investments December 31, 2012

LifePath 2045 Master Portfolio

(Percentages shown are based on Net Assets)


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value
Equity Funds — 85.6%
Active Stock Master Portfolio	$	5,836,507	$	5,836,507
ACWI ex-US Index Master Portfolio	$	2,144,403		2,144,403
BlackRock Commodity Strategies Fund		38,377		389,531
iShares Cohen & Steers Realty Majors Index Fund (b)		5,575		437,860
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		16,215		536,879
iShares MSCI Canada Index Fund		2,208		62,707
iShares MSCI EAFE Index Fund		6,929		393,706
iShares MSCI EAFE Small Cap Index Fund		4,341		176,722
iShares MSCI Emerging Markets Index Fund		3,786		167,909
Master Small Cap Index Series	$	280,483		280,483

				10,426,707
Fixed Income Funds — 12.5%
CoreAlpha Bond Master Portfolio	$	1,516,825		1,516,825


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value
Short-Term Securities — 0.4%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)		46,211	$	46,211
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)		6,820		6,820

				53,031
Total Affiliated Investment Companies (Cost — $11,463,556*) — 98.5%				11,996,563
Other Assets in Excess of Liabilities — 1.5%				181,145

Net Assets — 100.0%			$	12,177,708

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	11,469,690

Gross unrealized appreciation	$	548,763
Gross unrealized depreciation		(21,890	)

Net unrealized appreciation	$	526,873

(a)


Affiliate	Shares/ Beneficial Interest Held at December 31, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	1,730,629	$	4,105,878	¹		—		$	5,836,507	$	5,836,507	$	75,097	$	94,663
ACWI ex-US Index Master Portfolio	$	106,097	$	2,038,306	¹		—		$	2,144,403	$	2,144,403	$	19,356	$	(17,218	)
BlackRock Cash Funds: Institutional, SL Agency Shares		80,415		—			(34,204	)²		46,211	$	46,211		345		—
BlackRock Cash Funds: Prime, SL Agency Shares		24,127		—			(17,307	)²		6,820	$	6,820		79		—
BlackRock Commodity Strategies Fund		—		38,377			—			38,377	$	389,531	$	63		—
CoreAlpha Bond Master Portfolio	$	307,353	$	1,209,472	¹		—		$	1,516,825	$	1,516,825	$	16,684	$	(791	)
iShares Cohen & Steers Realty Majors Index Fund		1,953		4,038			(416	)		5,575	$	437,860	$	9,576	$	2,658
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		5,953		11,517			(1,255	)		16,215	$	536,879	$	23,787	$	(1,432	)
iShares MSCI Canada Index Fund		2,376		119			(287	)		2,208	$	62,707	$	1,362	$	(1,504	)
iShares MSCI EAFE Index Fund		8,758		815			(2,644	)		6,929	$	393,706	$	15,616	$	(18,670	)
iShares MSCI EAFE Small Cap Index Fund		1,914		2,433			(6	)		4,341	$	176,722	$	5,040	$	(7	)
iShares MSCI Emerging Markets Index Fund		4,402		386			(1,002	)		3,786	$	167,909	$	3,361	$	(7,339	)
Master Small Cap Index Series	$	80,949	$	199,534	¹		—		$	280,483	$	280,483	$	3,507	$	799

Represents net beneficial interest purchased.

Represents net shares sold.

(b)

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

(c)

Represents the current yield as of report date.

(d)

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

_Ÿ

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

_Ÿ

See Notes to Financial Statements.



52	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (concluded)		LifePath 2045 Master Portfolio

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	2,218,345	$	9,778,218		—	$	11,996,563

Certain of the Master Portfolio’s liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $31,700 is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	53

Schedule of Investments December 31, 2012

LifePath 2055 Master Portfolio

(Percentages shown are based on Net Assets)


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value
Equity Funds — 94.3%
Active Stock Master Portfolio	$	2,007,359	$	2,007,359
ACWI ex-US Index Master Portfolio	$	905,861		905,861
BlackRock Commodity Strategies Fund		11,669		118,435
iShares Cohen & Steers Realty Majors Index Fund		1,929		151,504
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		5,735		189,886
iShares MSCI Canada Index Fund		211		5,992
iShares MSCI EAFE Index Fund		552		31,365
iShares MSCI EAFE Small Cap Index Fund		1,544		62,856
iShares MSCI Emerging Markets Index Fund		314		13,926
Master Small Cap Index Series	$	73,491		73,491

				3,560,675


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value

Fixed Income Funds — 2.0%
CoreAlpha Bond Master Portfolio	$	72,942	$	72,942
Short-Term Securities — 0.1%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (b)		5,841		5,841
Total Affiliated Investment Companies (Cost — $3,460,255*) — 96.4%				3,639,458
Other Assets in Excess of Liabilities — 3.6%				135,343

Net Assets — 100.0%			$	3,774,801

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	3,460,526

Gross unrealized appreciation	$	182,272
Gross unrealized depreciation		(3,340	)

Net unrealized appreciation	$	178,932

(a)


Affiliate	Shares/ Beneficial Interest Held at December 31, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	275,426	$	1,731,933	¹		—		$	2,007,359	$	2,007,359	$	20,353	$	6,523
ACWI ex-US Index Master Portfolio	$	31,897	$	873,964	¹		—		$	905,861	$	905,861	$	7,825	$	(10,692	)
BlackRock Cash Funds: Institutional, SL Agency Shares		12,295		—			(6,454	)²		5,841	$	5,841	$	91		—
BlackRock Cash Funds: Prime, SL Agency Shares		2,603		—			(2,603	)²		—		—	$	5		—
BlackRock Commodity Strategies Fund		—		11,669			—			11,669	$	118,435	$	21		—
CoreAlpha Bond Master Portfolio	$	4,789	$	68,153	¹		—		$	72,942	$	72,942	$	453	$	(136	)
iShares Cohen & Steers Realty Majors Index Fund		366		1,850			(287	)		1,929	$	151,504	$	3,005	$	3,349
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		1,088		5,025			(378	)		5,735	$	189,886	$	7,940	$	69
iShares MSCI Canada Index Fund		355		50			(194	)		211	$	5,992	$	160	$	(426	)
iShares MSCI EAFE Index Fund		1,302		189			(939	)		552	$	31,365	$	1,912	$	(1,656	)
iShares MSCI EAFE Small Cap Index Fund		315		1,242			(13	)		1,544	$	62,856	$	1,499	$	61
iShares MSCI Emerging Markets Index Fund		655		93			(434	)		314	$	13,926	$	438	$	(943	)
Master Small Cap Index Series	$	18,578	$	54,913	¹		—		$	73,491	$	73,491	$	997	$	(1,676	)

Represents net beneficial interest purchased.

Represents net shares sold

(b)

Represents the current yield as of report date.

_Ÿ

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

_Ÿ

See Notes to Financial Statements.



54	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (concluded)		LifePath 2055 Master Portfolio

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	579,805	$	3,059,653		—	$	3,639,458

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	55

Schedule of Investments December 31, 2012

Active Stock Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Aerospace & Defense — 3.5%
The Boeing Co.		423,300	$	31,899,887
Esterline Technologies Corp. (a)		1,878		119,460
Exelis, Inc. (b)		207,895		2,342,977
General Dynamics Corp.		41,010		2,840,763
Honeywell International, Inc.		213,820		13,571,155
Huntington Ingalls Industries, Inc.		22,834		989,625
L-3 Communications Holdings, Inc.		38,560		2,954,467
Northrop Grumman Corp.		220,678		14,913,419
Precision Castparts Corp.		40,300		7,633,626
Raytheon Co.		137,580		7,919,105
Rockwell Collins, Inc.		12,230		711,419
Spirit Aerosystems Holdings, Inc., Class A (a)		70,121		1,189,953
United Technologies Corp.		147,160		12,068,592

				99,154,448
Air Freight & Logistics — 0.6%
C.H. Robinson Worldwide, Inc. (b)		36,784		2,325,484
Expeditors International of Washington, Inc.		79,350		3,138,293
United Parcel Service, Inc., Class B		128,700		9,489,051
UTi Worldwide, Inc.		43,440		582,096

				15,534,924
Airlines — 0.5%
Copa Holdings SA		56,648		5,633,644
Delta Air Lines, Inc. (a)		385,535		4,576,300
United Continental Holdings, Inc. (a)		186,246		4,354,432

				14,564,376
Auto Components — 0.5%
Allison Transmission Holdings, Inc.		111,900		2,284,998
BorgWarner, Inc. (a)		3,670		262,845
Johnson Controls, Inc.		47,350		1,453,645
Lear Corp.		169,300		7,930,012
TRW Automotive Holdings Corp. (a)		28,100		1,506,441

				13,437,941
Automobiles — 0.5%
Ford Motor Co.		577,620		7,480,179
General Motors Co. (a)		39,600		1,141,668
Tesla Motors, Inc. (a)		140,900		4,772,283
Thor Industries, Inc.		6,935		259,577

				13,653,707
Beverages — 2.1%
Beam, Inc.		52,954		3,234,960
The Coca-Cola Co.		942,665		34,171,606
Diageo Plc		166,480		4,832,735
Monster Beverage Corp. (a)		94,289		4,986,002
PepsiCo Inc.		154,200		10,551,906

				57,777,209
Biotechnology — 2.1%
Alexion Pharmaceuticals, Inc. (a)		63,700		5,975,697
Amgen, Inc.		205,583		17,745,925
Ariad Pharmaceuticals, Inc. (a)		129,700		2,487,646
Biogen Idec, Inc. (a)		27,600		4,048,092
Celgene Corp. (a)		38,134		3,001,908
Gilead Sciences, Inc. (a)		172,500		12,670,125
Myriad Genetics, Inc. (a)		256,817		6,998,263
Regeneron Pharmaceuticals, Inc. (a)		18,300		3,130,581
Vertex Pharmaceuticals, Inc. (a)		34,206		1,434,600

				57,492,837
Building Products — 0.2%
Fortune Brands Home & Security, Inc. (a)		50,720		1,482,038
Masco Corp.		308,300		5,136,278

				6,618,316


Common Stocks	Shares		Value
Capital Markets — 0.8%
Apollo Investment Corp.		16,186	$	135,315
The Bank of New York Mellon Corp.		6		154
Franklin Resources, Inc.		1,719		216,078
The Goldman Sachs Group, Inc.		103,998		13,265,985
Jefferies Group, Inc.		275,700		5,119,749
Legg Mason, Inc. (b)		56,367		1,449,759
LPL Financial Holdings, Inc.		6,791		191,235
State Street Corp.		58,200		2,735,982

				23,114,257
Chemicals — 1.7%
Albemarle Corp.		1,307		81,191
Cabot Corp.		31,319		1,246,183
Celanese Corp.		65,075		2,897,790
CF Industries Holdings, Inc.		28,686		5,827,848
Cytec Industries, Inc.		1,188		81,770
The Dow Chemical Co.		60,160		1,944,371
E.I. du Pont de Nemours & Co.		164,320		7,389,470
LyondellBasell Industries NV, Class A		80,148		4,575,649
Minerals Technologies, Inc.		2,342		93,493
Monsanto Co.		131,800		12,474,870
NewMarket Corp. (b)		578		151,552
Olin Corp.		47,650		1,028,764
PPG Industries, Inc.		38,750		5,244,812
Praxair, Inc.		22,430		2,454,963
RPM International, Inc.		2,504		73,517
Valspar Corp.		6,459		403,042
Westlake Chemical Corp. (b)		8,391		665,406

				46,634,691
Commercial Banks — 3.4%
Associated Banc-Corp. (b)		89,257		1,171,052
Bank of Nova Scotia		61,560		3,556,085
BB&T Corp.		100,942		2,938,422
BOK Financial Corp.		1,948		106,088
CIT Group, Inc. (a)		46,204		1,785,323
Cullen/Frost Bankers, Inc. (b)		18,678		1,013,655
Fifth Third Bancorp		97,187		1,476,270
First Citizens Bancshares, Inc., Class A		6,820		1,115,070
First Niagara Financial Group, Inc.		27,856		220,898
First Republic Bank		162,008		5,310,622
M&T Bank Corp.		8,510		837,980
National Bank of Canada		51,060		3,964,888
Regions Financial Corp.		547,200		3,896,064
SunTrust Banks, Inc.		42,713		1,210,914
SVB Financial Group (a)		2,919		163,376
The Toronto-Dominion Bank		43,370		3,651,591
U.S. Bancorp		573,414		18,314,843
Wells Fargo & Co.		1,259,666		43,055,384

				93,788,525
Commercial Services & Supplies — 0.7%
The ADT Corp.		252,242		11,726,730
R.R. Donnelley & Sons Co. (b)		99,408		894,672
Tyco International Ltd.		249,403		7,295,038

				19,916,440
Communications Equipment — 1.8%
Brocade Communications Systems, Inc. (a)		39,014		207,945
Cisco Systems, Inc.		828,431		16,278,669
EchoStar Corp. (a)		10,348		354,108
F5 Networks, Inc. (a)		62,700		6,091,305
Plantronics, Inc.		3,139		115,735
QUALCOMM, Inc.		453,609		28,132,830
Riverbed Technology, Inc. (a)		16,579		326,938

				51,507,530

See Notes to Financial Statements.



56	BLACKROCK FUNDS III	DECEMBER 31, 2012

Schedule of Investments (continued)

Active Stock Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Computers & Peripherals — 4.5%
Apple, Inc.		204,381	$	108,941,204
EMC Corp. (a)		513,100		12,981,430
Fusion-io, Inc. (a)		114,420		2,623,651
QLogic Corp. (a)		8,115		78,959
Western Digital Corp.		7,611		323,391

				124,948,635
Construction & Engineering — 0.2%
Jacobs Engineering Group, Inc. (a)		67,420		2,870,069
KBR, Inc.		122,300		3,659,216

				6,529,285
Consumer Finance — 0.8%
American Express Co.		152,390		8,759,377
Capital One Financial Corp.		174,597		10,114,404
Discover Financial Services		91,000		3,508,050

				22,381,831
Containers & Packaging — 0.3%
Greif Inc, Class A		10,774		479,443
Packaging Corp. of America		183,633		7,064,362

				7,543,805
Diversified Consumer Services — 0.1%
Apollo Group, Inc., Class A (a)(b)		57,450		1,201,854
ITT Educational Services, Inc. (a)(b)		30,093		520,910
Service Corp. International (b)		153,928		2,125,746

				3,848,510
Diversified Financial Services — 3.4%
Bank of America Corp.		392,737		4,555,749
Citigroup, Inc.		785,535		31,075,765
CME Group, Inc.		12,016		609,331
JPMorgan Chase & Co.		1,179,939		51,881,918
Moody’s Corp.		56,650		2,850,628
The NASDAQ OMX Group, Inc.		113,600		2,841,136
NYSE Euronext		12,649		398,949

				94,213,476
Diversified Telecommunication Services — 2.5%
AT&T, Inc.		754,564		25,436,352
BCE, Inc.		27,640		1,186,862
CenturyLink, Inc.		123,350		4,825,452
Level 3 Communications, Inc. (a)		130,200		3,008,922
Verizon Communications, Inc.		824,239		35,664,822

				70,122,410
Electric Utilities — 0.8%
American Electric Power Co., Inc.		37,780		1,612,450
Duke Energy Corp.		23,636		1,507,977
Edison International		32,820		1,483,136
Exelon Corp.		2,104		62,573
FirstEnergy Corp.		53,650		2,240,424
ITC Holdings Corp.		10,610		816,015
N.V. Energy, Inc.		89,900		1,630,786
NextEra Energy, Inc.		46,860		3,242,244
Northeast Utilities		36,690		1,433,845
PPL Corp.		106,800		3,057,684
Southern Co.		124,010		5,308,868

				22,396,002
Electrical Equipment — 0.7%
Eaton Corp. Plc		172,500		9,349,500
Hubbell, Inc. Class B		51,849		4,387,981
Rockwell Automation, Inc.		14,040		1,179,219
Roper Industries, Inc.		44,000		4,905,120

				19,821,820


Common Stocks	Shares		Value
Electronic Equipment, Instruments & Components — 0.4%
AVX Corp.		2,150	$	23,177
Corning, Inc.		640,000		8,076,800
FLIR Systems, Inc.		54,880		1,224,373
Ingram Micro, Inc., Class A (a)		52,168		882,683
Tech Data Corp. (a)		4,525		206,023

				10,413,056
Energy Equipment & Services — 1.5%
Ensco PLC, Class A		76,200		4,517,136
Halliburton Co.		190,890		6,621,974
National Oilwell Varco, Inc.		196,733		13,446,700
Noble Corp.		167,113		5,818,875
Oceaneering International, Inc.		39,300		2,113,947
Schlumberger Ltd.		77,112		5,343,090
Superior Energy Services, Inc. (a)		33,630		696,814
Transocean Ltd.		47,000		2,098,550

				40,657,086
Food & Staples Retailing — 2.5%
Costco Wholesale Corp.		248,320		24,526,566
CVS Caremark Corp.		351,818		17,010,400
The Kroger Co.		377,540		9,823,591
Wal-Mart Stores, Inc.		195,302		13,325,456
Walgreen Co.		36,800		1,361,968
Whole Foods Market, Inc.		51,300		4,685,229

				70,733,210
Food Products — 1.6%
Archer Daniels Midland Co.		14,950		409,480
General Mills, Inc.		68,300		2,760,003
H.J. Heinz Co.		36,930		2,130,122
Ingredion, Inc. (b)		17,195		1,107,874
Kraft Foods Group, Inc.		225,633		10,259,533
Lancaster Colony Corp. (b)		3,548		245,486
Mead Johnson Nutrition Co.		112,620		7,420,532
Mondelez International, Inc.		131,657		3,353,304
Post Holdings, Inc. (a)(b)		18,149		621,603
Ralcorp Holdings, Inc. (a)		2,750		246,538
Unilever NV		392,670		15,039,261
WhiteWave Foods Co. Class A (a)		3,022		46,962

				43,640,698
Gas Utilities — 0.1%
ONEOK, Inc.		30,818		1,317,470
UGI Corp.		58,500		1,913,535

				3,231,005
Health Care Equipment & Supplies — 2.4%
Abbott Laboratories (b)		256,372		16,792,366
Alere, Inc. (a)		30,285		560,273
Baxter International, Inc.		39,790		2,652,401
C.R. Bard, Inc.		7,552		738,132
Hill-Rom Holdings, Inc.		5,939		169,262
Intuitive Surgical, Inc. (a)		20,288		9,948,627
Medtronic, Inc.		423,481		17,371,191
St. Jude Medical, Inc.		173,053		6,254,135
Stryker Corp.		89,294		4,895,097
Thoratec Corp. (a)		41,029		1,539,408
Zimmer Holdings, Inc.		77,000		5,132,820

				66,053,712
Health Care Providers & Services — 1.8%
Aetna, Inc.		92,980		4,304,974
Cardinal Health, Inc. (b)		35,541		1,463,578
Express Scripts Holding Co. (a)		440,055		23,762,970
HCA Holdings, Inc.		82,160		2,478,767
Health Net, Inc. (a)		3,098		75,281

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	57

Schedule of Investments (continued)

Active Stock Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Health Care Providers & Services (concluded)
Humana, Inc.		66,178	$	4,541,796
McKesson Corp.		68,607		6,652,135
Omnicare, Inc. (b)		37,391		1,349,815
Patterson Cos., Inc.		7,850		268,706
Quest Diagnostics Inc.		30,040		1,750,431
UnitedHealth Group, Inc.		25,659		1,391,744
WellPoint, Inc.		33,431		2,036,617

				50,076,814
Health Care Technology — 0.0%
Allscripts Healthcare Solutions, Inc. (a)		87,148		820,934
Hotels, Restaurants & Leisure — 1.0%
Brinker International, Inc. (b)		18,309		567,396
Choice Hotels International, Inc. (b)		14,511		487,860
International Speedway Corp., Class A (b)		17,535		484,317
Las Vegas Sands Corp.		106,900		4,934,504
Marriott Vacations Worldwide Corp. (a)		21,232		884,737
McDonald’s Corp.		117,316		10,348,444
Panera Bread Co., Class A (a)		2,160		343,073
Starbucks Corp.		196,620		10,542,764
Starwood Hotels & Resorts Worldwide, Inc.		2		115
Yum! Brands, Inc.		12,040		799,456

				29,392,666
Household Durables — 0.3%
Garmin Ltd.		69,450		2,834,949
NVR, Inc. (a)		2,938		2,702,960
Tempur-Pedic International, Inc. (a)		51,145		1,610,556

				7,148,465
Household Products — 1.1%
Church & Dwight Co., Inc. (b)		31,374		1,680,705
The Clorox Co.		9,902		725,025
Energizer Holdings, Inc. (b)		81,138		6,489,417
Kimberly-Clark Corp.		123,810		10,453,278
The Procter & Gamble Co.		162,057		11,002,050

				30,350,475
Independent Power Producers & Energy Traders — 0.1%
The AES Corp.		351,368		3,759,638
Industrial Conglomerates — 2.3%
3M Co.		140,640		13,058,424
Carlisle Cos., Inc.		7,974		468,552
Danaher Corp.		322,900		18,050,110
General Electric Co.		1,550,468		32,544,324

				64,121,410
Insurance — 5.1%
ACE Ltd.		290,828		23,208,074
Aflac, Inc.		161,792		8,594,391
Allied World Assurance Co. Holdings Ltd.		30,857		2,431,532
American International Group, Inc. (a)		125,486		4,429,656
American National Insurance Co.		2,382		162,667
Aspen Insurance Holdings Ltd.		30,859		989,957
Assurant, Inc. (b)		16,181		561,481
Assured Guaranty Ltd.		57,403		816,845
Axis Capital Holdings Ltd.		6,113		211,754
Berkshire Hathaway, Inc., Class B (a)		8,271		741,909
Brown & Brown, Inc.		43,768		1,114,333
The Chubb Corp.		56,760		4,275,163
CNA Financial Corp. (b)		77,895		2,181,839
Endurance Specialty Holdings Ltd.		77,395		3,071,808
Everest Re Group Ltd.		5,635		619,568
The Hanover Insurance Group, Inc.		1,039		40,251
Hartford Financial Services Group, Inc.		652,226		14,635,951
Kemper Corp.		3		89
Lincoln National Corp.		290,362		7,520,376


Common Stocks	Shares		Value
Insurance (concluded)
MetLife, Inc.		357,427	$	11,773,645
PartnerRe Ltd.		42,100		3,388,629
Prudential Financial, Inc.		324,311		17,295,506
Reinsurance Group of America, Inc.		31,697		1,696,423
The Travelers Cos., Inc.		316,548		22,734,477
Validus Holdings Ltd.		39,125		1,352,942
White Mountains Insurance Group Ltd. (b)		286		147,290
Willis Group Holdings Plc		67,600		2,266,628
XL Group Plc		217,097		5,440,451

				141,703,635
Internet & Catalog Retail — 1.6%
Amazon.com, Inc. (a)		100,300		25,189,342
Liberty Ventures, Series A (a)		33,738		2,286,087
priceline.com, Inc. (a)		26,842		16,674,250
TripAdvisor, Inc. (a)(b)		36,580		1,534,897

				45,684,576
Internet Software & Services — 2.7%
eBay, Inc. (a)		214,500		10,943,790
Google, Inc., Class A (a)		81,181		57,587,366
IAC/InterActiveCorp (b)		33,129		1,567,002
VeriSign, Inc. (a)		167,178		6,489,850

				76,588,008
IT Services — 3.2%
Alliance Data Systems Corp. (a)		26,600		3,850,616
Amdocs Ltd. (b)		142,319		4,837,423
Automatic Data Processing, Inc.		15,820		901,898
Broadridge Financial Solutions, Inc. (b)		111,439		2,549,724
Computer Sciences Corp.		6,278		251,434
CoreLogic, Inc. (a)		117,831		3,172,010
DST Systems, Inc.		46,450		2,814,870
Fidelity National Information Services, Inc.		39,998		1,392,330
International Business Machines Corp.		95,349		18,264,101
Lender Processing Services, Inc.		104,688		2,577,419
MasterCard, Inc., Class A		40,103		19,701,802
Teradata Corp. (a)		96,500		5,972,385
Total System Services, Inc. (b)		56,709		1,214,707
VeriFone Systems, Inc. (a)		1,868		55,442
Visa, Inc., Class A (b)		103,967		15,759,318
The Western Union Co.		534,980		7,281,078

				90,596,557
Leisure Equipment & Products — 0.1%
Hasbro, Inc.		36,200		1,299,580
Mattel, Inc.		55,260		2,023,621

				3,323,201
Life Sciences Tools & Services — 0.5%
Agilent Technologies, Inc. (b)		319,222		13,068,949
Bruker Corp. (a)		17,012		259,773
Charles River Laboratories International, Inc. (a)		9,828		368,255
Techne Corp.		1,124		76,814
Thermo Fisher Scientific, Inc.		18,776		1,197,534

				14,971,325
Machinery — 2.3%
Caterpillar, Inc.		64,840		5,808,367
Crane Co.		41,382		1,915,159
Cummins, Inc.		34,517		3,739,917
Deere & Co.		72,350		6,252,487
Flowserve Corp. (b)		10,706		1,571,641
Gardner Denver, Inc. (b)		20,712		1,418,772
Ingersoll-Rand Plc		106,100		5,088,556
Nordson Corp.		4,167		263,021
Oshkosh Corp. (a)		52,949		1,569,938
Parker Hannifin Corp.		29,875		2,541,168

See Notes to Financial Statements.



58	BLACKROCK FUNDS III	DECEMBER 31, 2012

Schedule of Investments (continued)

Active Stock Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Machinery (concluded)
SPX Corp.		51,139	$	3,587,401
Stanley Black & Decker, Inc.		178,300		13,188,851
Terex Corp. (a)		231,209		6,499,285
Timken Co.		53,593		2,563,353
Toro Co.		17,576		755,416
Wabtec Corp.		26,713		2,338,456
Xylem, Inc.		215,728		5,846,229

				64,948,017
Marine — 0.0%
Matson, Inc.		3,363		83,133
Media — 5.0%
CBS Corp., Class B		247,400		9,413,570
Comcast Corp, Class A		631,209		23,594,593
Comcast Corp, Special Class A		455,840		16,387,448
DIRECTV (a)		145,377		7,292,110
DISH Network Corp.		211,189		7,687,280
The Interpublic Group of Cos., Inc.		268,600		2,959,972
John Wiley & Sons, Inc., Class A (b)		39,982		1,556,499
Liberty Media Corp. — Liberty Capital (a)		5,465		633,995
The McGraw-Hill Cos., Inc.		80,600		4,406,402
News Corp., Class A		430,865		11,004,292
Omnicom Group, Inc.		29,600		1,478,816
Time Warner Cable, Inc.		121,845		11,842,116
Time Warner, Inc.		220,910		10,566,125
Viacom, Inc., Class B		411,595		21,707,520
The Walt Disney Co.		206,990		10,306,032

				140,836,770
Metals & Mining — 0.6%
Barrick Gold Corp.		34,040		1,191,588
BHP Billiton Ltd.		201,100		7,747,675
Newmont Mining Corp.		4,011		186,271
Nucor Corp.		47,380		2,045,868
Rio Tinto Ltd.		35,520		2,434,827
Royal Gold, Inc. (b)		10,063		818,223
Southern Copper Corp.		36,382		1,377,423

				15,801,875
Multi-Utilities — 0.8%
Ameren Corp.		44,591		1,369,836
Consolidated Edison, Inc.		23,154		1,285,973
Dominion Resources, Inc.		164,860		8,539,748
PG&E Corp.		80,312		3,226,936
Public Service Enterprise Group, Inc.		119,430		3,654,558
Sempra Energy		22,350		1,585,509
Wisconsin Energy Corp.		37,940		1,398,089

				21,060,649
Multiline Retail — 0.6%
Dollar Tree, Inc. (a)		181,779		7,372,956
J.C. Penney Co., Inc. (b)		3		59
Kohl’s Corp.		99,156		4,261,725
Nordstrom, Inc.		84,000		4,494,000
Target Corp.		28,025		1,658,239

				17,786,979
Oil, Gas & Consumable Fuels — 7.8%
Anadarko Petroleum Corp.		92,100		6,843,951
Apache Corp.		135,598		10,644,443
Chevron Corp.		299,641		32,403,178
ConocoPhillips		151,892		8,808,217
CONSOL Energy, Inc.		7,070		226,947
Devon Energy Corp.		65,760		3,422,150
Enbridge, Inc.		117,460		5,080,053
EQT Corp.		29,900		1,763,502
Exxon Mobil Corp.		700,154		60,598,329


Common Stocks	Shares		Value
Oil, Gas & Consumable Fuels (concluded)
Hess Corp.		152,060	$	8,053,098
Kinder Morgan, Inc.		241,203		8,521,702
Marathon Oil Corp.		749,264		22,972,434
Marathon Petroleum Corp.		76,968		4,848,984
Noble Energy, Inc.		53,700		5,463,438
Occidental Petroleum Corp.		101,390		7,767,488
Peabody Energy Corp.		250,927		6,677,167
Phillips 66		19,995		1,061,735
Plains Exploration & Production Co. (a)		6,414		301,073
Royal Dutch Shell Plc		44,300		3,054,485
Royal Dutch Shell Plc, Class A		32,480		1,119,612
Spectra Energy Corp.		51,650		1,414,177
Suncor Energy, Inc.		244,010		8,047,450
Total SA		97,350		5,063,174
Valero Energy Corp.		104,200		3,555,304

				217,712,091
Paper & Forest Products — 0.4%
Domtar Corp. (b)		31,859		2,660,864
International Paper Co.		125,225		4,988,964
MeadWestvaco Corp.		70,600		2,250,022

				9,899,850
Personal Products — 0.2%
The Estee Lauder Cos., Inc., Class A		32,181		1,926,354
Herbalife Ltd. (b)		71,386		2,351,455
Nu Skin Enterprises, Inc.		14,720		545,376

				4,823,185
Pharmaceuticals — 5.8%
Allergan, Inc. (b)		80,351		7,370,597
Bristol-Myers Squibb Co.		392,958		12,806,501
Eli Lilly & Co.		366,225		18,062,217
Endo Health Solutions, Inc. (a)		25,709		675,375
Forest Laboratories, Inc. (a)(b)		70,743		2,498,643
Hospira, Inc. (a)		11,185		349,419
Johnson & Johnson		408,036		28,603,324
Merck & Co., Inc.		881,601		36,092,745
Pfizer, Inc.		1,758,309		44,098,390
Salix Pharmaceuticals Ltd. (a)		17,345		702,126
Valeant Pharmaceuticals International, Inc. (a)		112,400		6,718,148
Warner Chilcott Plc, Class A		291,135		3,505,265

				161,482,750
Professional Services — 0.1%
The Dun & Bradstreet Corp.		10,300		810,095
Towers Watson & Co., Class A		52,315		2,940,626

				3,750,721
Real Estate Investment Trusts (REITs) — 1.0%
Alexandria Real Estate Equities, Inc.		11,473		795,308
American Tower Corp.		215,385		16,642,799
AvalonBay Communities, Inc.		5,276		715,373
Brandywine Realty Trust (b)		6,209		75,688
CommonWealth REIT		90,903		1,439,904
Equity Residential		26,489		1,501,132
Hospitality Properties Trust (b)		61,291		1,435,435
Retail Properties of America, Inc. (b)		10,928		130,808
SL Green Realty Corp.		2,756		211,247
Taubman Centers, Inc.		14,065		1,107,197
Ventas, Inc.		30,870		1,997,906
Weyerhaeuser Co.		56,500		1,571,830

				27,624,627
Real Estate Management & Development — 0.1%
Alexander & Baldwin, Inc. (a)		35,896		1,054,265
Realogy Holdings Corp. (a)		18,283		767,155

				1,821,420

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	59

Schedule of Investments (continued)

Active Stock Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Road & Rail — 0.5%
Canadian National Railway Co.		45,790	$	4,167,348
CSX Corp.		101,011		1,992,947
Norfolk Southern Corp. (b)		81,371		5,031,982
Union Pacific Corp.		21,640		2,720,581

				13,912,858
Semiconductors & Semiconductor Equipment — 1.6%
Altera Corp.		6,268		215,870
Avago Technologies Ltd.		171,266		5,422,282
Broadcom Corp., Class A		63,434		2,106,643
First Solar, Inc. (a)(b)		17,449		538,825
Intel Corp.		182,114		3,757,012
KLA-Tencor Corp. (b)		196,311		9,375,813
LSI Corp. (a)		120,681		854,421
Marvell Technology Group Ltd.		122,252		887,550
NVIDIA Corp.		26,050		320,155
ON Semiconductor Corp. (a)		376,500		2,654,325
Skyworks Solutions, Inc. (a)		84,904		1,723,551
Texas Instruments, Inc.		283,300		8,765,302
Xilinx, Inc.		235,800		8,465,220

				45,086,969
Software — 4.5%
CA, Inc.		6,653		146,233
Citrix Systems, Inc. (a)		62,515		4,110,361
Fair Isaac Corp.		6,529		274,414
Intuit, Inc.		28,253		1,681,053
Microsoft Corp.		2,362,223		63,142,221
Oracle Corp.		800,100		26,659,332
Red Hat, Inc. (a)		135,300		7,165,488
Salesforce.com, Inc. (a)		55,792		9,378,635
SolarWinds, Inc. (a)		47,435		2,487,966
Synopsys, Inc. (a)		11,523		366,892
TIBCO Software, Inc. (a)		28,085		618,151
VMware, Inc., Class A (a)		90,200		8,491,428

				124,522,174
Specialty Retail — 2.0%
Advance Auto Parts, Inc.		4,834		349,740
American Eagle Outfitters, Inc.		32,415		664,832
The Gap, Inc. (b)		137,147		4,257,043
The Home Depot, Inc.		300,793		19,531,955
Limited Brands, Inc.		91,580		4,309,755
PetSmart, Inc.		69,050		4,718,877
Ross Stores, Inc.		145,131		7,858,843
Sears Hometown & Outlet Stores, Inc. (a)		10,925		355,718
The TJX Cos., Inc.		323,185		13,719,203

				55,765,966


Common Stocks	Shares		Value
Textiles, Apparel & Luxury Goods — 1.2%
Coach, Inc.		92,721	$	5,146,943
Deckers Outdoor Corp. (a)		1,973		79,453
Michael Kors Holdings Ltd. (a)		183,981		9,388,550
NIKE, Inc., Class B		172,947		8,924,065
Under Armour Inc, Class A (a)		132,600		6,435,078
VF Corp.		29,000		4,378,130

				34,352,219
Thrifts & Mortgage Finance — 0.1%
People’s United Financial, Inc. (b)		131,946		1,595,227
Tobacco — 1.5%
Altria Group, Inc.		59,670		1,874,831
Lorillard, Inc.		82,210		9,591,441
Philip Morris International, Inc.		348,382		29,138,671

				40,604,943
Trading Companies & Distributors — 0.0%
Air Lease Corp. (a)		10,238		220,117
MRC Global, Inc. (a)(b)		20,491		569,240

				789,357
Water Utilities — 0.3%
American Water Works Co., Inc.		263,677		9,790,327
Wireless Telecommunication Services — 0.4%
Crown Castle International Corp. (a)		48,600		3,506,976
MetroPCS Communications, Inc. (a)		181,637		1,805,472
Telephone & Data Systems, Inc.		118,137		2,615,553
United States Cellular Corp. (a)(b)		46,635		1,643,418
Vodafone Group Plc		50,470		1,271,339

				10,842,758
Total Long-Term Investments (Cost — $2,472,057,204) — 96.8 %				2,702,234,403


Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)(e)		138,527,226		138,527,226
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)(e)		9,485,001		9,485,001
Total Short-Term Securities (Cost — $148,012,227) — 5.3%				148,012,227
*Total Investments (Cost — $2,620,069,431) — 102.1 %**				2,850,246,630
Liabilities in Excess of Other Assets — (2.1)%				(57,429,113	)

Net Assets — 100.0%			$	2,792,817,517

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	2,657,402,877

Gross unrealized appreciation	$	264,323,687
Gross unrealized depreciation		(71,479,934	)

Net unrealized appreciation	$	192,843,753

(a)

Non-income producing security.

(b)

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

See Notes to Financial Statements.



60	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (continued)		Active Stock Master Portfolio

(c)


Affiliate	Shares Held at December 31, 2011		Net Activity			Shares Held at December 31, 2012		Income
BlackRock Cash Funds:
Institutional, SL Agency Shares		128,263,976		10,263,250			138,527,226	$	367,531
BlackRock Cash Funds:
Prime, SL Agency Shares		20,162,910		(10,677,909	)		9,485,001	$	57,213

(d)

Represents the current yield as of report date.

(e)

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

_Ÿ

Financial futures contracts as of December 31, 2012 were as follows:

Contracts

Issue

Exchange

Expiration

Notional Value

Unrealized
Depreciation

216

S&P 500 Index

Chicago Mercantile

March 2013

USD 15,337,080

(27,206

)

_Ÿ

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

_Ÿ

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1			Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments¹:
Common Stocks	$	2,702,234,403			—		—	$	2,702,234,403
Short-Term Securities:
Money Market Funds		148,012,227			—		—		148,012,227

Total	$	2,850,246,630			—		—	$	2,850,246,630


	Level 1			Level 2		Level 3		Total
Derivative Financial Instruments²
Liabilities:
Equity Contracts	$	(27,206	)		—		—	$	(27,206	)

See above Schedule of Investments for values in each industry.

Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.


Schedule of Investments (concluded)		Active Stock Master Portfolio

Certain of the Master Portfolio’s assets and liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, such assets and liabilities are categorized within the disclosure hierarchy as follows:


	Level 1		Level 2			Level 3		Total
Assets:
Cash	$	2,835		—			—	$	2,835
Foreign currency at value		2,168		—			—		2,168
Cash pledged as collateral for futures		927,908		—			—		927,908
Liabilities:
Collateral on securities loaned at value		—	$	(44,085,444	)		—		(44,085,444	)

Total	$	932,911	$	(44,085,444	)		—	$	(43,152,533	)

There were no transfers between levels during the year ended December 31, 2012.


Statements of Assets and Liabilities		Master Investment Portfolio


December 31, 2012	LifePath 2025 Master Portfolio		LifePath 2035 Master Portfolio		LifePath 2045 Master Portfolio		LifePath 2055 Master Portfolio


Assets
Investments at value — affiliated^1,2	$	33,939,832	$	25,193,414	$	11,996,563	$	3,639,458
Contributions receivable from investors		3,419,643		3,190,891		1,446,042		708,991
Investments sold receivable		172,076		161,785		84,970		15,307
Dividends receivable		272		165		59		8
Securities lending income receivable		88		51		39		7
Interest receivable		37		29		3		3
Receivable from Manager		31,531		31,987		32,415		32,695

Total assets		37,563,479		28,578,322		13,560,091		4,396,469


Liabilities
Collateral on securities loaned at value		348,000		—		31,700		—
Investments purchased payable		3,145,000		2,819,691		1,324,000		595,000
Professional fees payable		25,918		25,919		25,910		25,941
Trustees’ fees payable		889		843		773		727

Total liabilities		3,519,807		2,846,453		1,382,383		621,668

Net Assets	$	34,043,672	$	25,731,869	$	12,177,708	$	3,774,801


Net Assets Consist of
Investors’ capital	$	32,804,930	$	24,731,179	$	11,644,701	$	3,595,598
Net unrealized appreciation/depreciation		1,238,742		1,000,690		533,007		179,203

Net Assets	$	34,043,672	$	25,731,869	$	12,177,708	$	3,774,801


¹ Investments at cost — affiliated	$	32,701,090	$	24,192,724	$	11,463,556	$	3,460,255

² Securities loaned at value	$	340,920	$	—	$	31,416	$	—


Statements of Assets and Liabilities (concluded)		Master Investment Portfolio


December 31, 2012	Active Stock Master Portfolio

Assets
Investments at value — unaffiliated^1,2	$	2,702,234,403
Investments at value — affiliated³		148,012,227
Cash		2,835
Foreign currency at value (cost — $2,160)		2,168
Investments sold receivable		80,836,239
Dividends receivable		2,678,000
Securities lending income receivable		16,603
Interest receivable		22,689
Contributions receivable from investors		11,430,000
Cash pledged as collateral for futures		927,908
Variation margin receivable		405,460

Total assets		2,946,568,532


Liabilities
Collateral on securities loaned at value		44,085,444
Investments purchased payable		105,815,036
Withdrawals payable to investors		3,200,000
Investment advisory fees payable		312,075
Administration fees payable		213,659
Professional fees payable		45,281
Trustees’ fees payable		21,945
Foreign taxes payable		57,575

Total liabilities		153,751,015

Net Assets	$	2,792,817,517


Net Assets Consist of
Investors’ capital	$	2,562,667,816
Net unrealized appreciation/depreciation		230,149,701

Net Assets	$	2,792,817,517

¹Investments at cost — unaffiliated	$	2,472,057,203

²Securities loaned at value	$	42,989,699

³Investments at cost — affiliated	$	148,012,227


Statements of Operations		Master Investment Portfolio


Year Ended December 31, 2012	LifePath 2025 Master Portfolio			LifePath 2035 Master Portfolio			LifePath 2045 Master Portfolio			LifePath 2055 Master Portfolio

Investment Income
Dividends — affiliated	$	139,756		$	113,577		$	58,805		$	14,975
Securities lending — affiliated — net		1,216			807			369			77
Income — affiliated		148			113			55			19
Net investment income allocated from the applicable Master Portfolios:
Dividends		197,866			180,666			97,194			28,958
Interest		148,961			67,669			17,450			670
Expenses		(43,998	)		(33,370	)		(16,070	)		(4,273	)
Fees waived		8,131			7,096			3,771			1,086

Total income		452,080			336,558			161,574			41,512


Expenses
Investment advisory		66,331			47,575			21,865			5,363
Professional		25,942			25,931			25,913			25,452
Independent Trustees		3,531			3,369			3,143			2,998

Total expenses		95,804			76,875			50,921			33,813
Less fees waived by Manager		(83,260	)		(69,185	)		(47,942	)		(33,112	)

Total expenses after fees waived		12,544			7,690			2,979			701

Net investment income		439,536			328,868			158,595			40,811


Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — affiliated		(112,060	)		(67,671	)		(26,296	)		454
Allocations from the applicable Master Portfolios from investments, financial futures contracts, swaps and foreign currency transactions		355,168			196,597			77,455			(5,981	)

		243,108			128,926			51,159			(5,527	)

Net change in unrealized appreciation/depreciation on:
Investments — affiliated		589,578			464,708			228,697			41,054
Allocated from the applicable Master Portfolios from investments, financial futures contracts, swaps and foreign currency transactions		898,508			793,876			417,705			137,132

		1,488,086			1,258,584			646,402			178,186

Total realized and unrealized gain		1,731,194			1,387,510			697,561			172,659

Net Increase in Net Assets Resulting from Operations	$	2,170,730		$	1,716,378		$	856,156		$	213,470


Statements of Operations (concluded)		Master Investment Portfolio


Year Ended December 31, 2012	Active Stock Master Portfolio

Investment Income
Dividends	$	64,172,440
Foreign taxes withheld		(376,240	)
Securities lending — affiliated — net		265,923
Income — affiliated		158,821
Interest		668

Total income		64,221,612


Expenses
Investment advisory		6,851,027
Administration		2,812,950
Professional		45,322
Independent Trustees		92,309

Total expenses		9,801,608
Less fees waived by Manager		(2,590,751	)

Total expenses after fees waived		7,210,857

Net investment income		57,010,755


Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments		208,235,332
Payment by affiliate		773,484
Financial futures contracts		1,658,117
Foreign currency transactions		(335,894	)

		210,331,039

Net change in unrealized appreciation/depreciation on:
Investments		147,501,781
Financial futures contracts		(22,370	)
Foreign currency transactions		(391	)

		147,479,020

Total realized and unrealized gain		357,810,059

Net Increase in Net Assets Resulting from Operations	$	414,820,814


Statements of Changes in Net Assets		Master Investment Portfolio


	LifePath 2025 Master Portfolio						LifePath 2035 Master Portfolio
Increase (Decrease) in Net Assets:	Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2012			Year Ended December 31, 2011


Operations
Net investment income	$	439,536		$	205,398		$	328,868		$	129,199
Net realized gain (loss)		243,108			(171,841	)		128,926			(138,974	)
Net change in unrealized appreciation/depreciation		1,488,086			(267,008	)		1,258,584			(279,531	)

Net increase (decrease) in net assets resulting from operations		2,170,730			(233,451	)		1,716,378			(289,306	)


Capital Transactions
Proceeds from contributions		22,086,137			15,755,466			17,596,211			9,169,420
Value of withdrawals		(2,391,310	)		(3,478,395	)		(1,006,455	)		(1,603,644	)

Net increase in net assets derived from capital transactions		19,694,827			12,277,071			16,589,756			7,565,776


Net Assets
Total increase in net assets		21,865,557			12,043,620			18,306,134			7,276,470
Beginning of year		12,178,115			134,495			7,425,735			149,265

End of year	$	34,043,672		$	12,178,115		$	25,731,869		$	7,425,735


	LifePath 2045 Master Portfolio						LifePath 2055 Master Portfolio
Increase (Decrease) in Net Assets:	Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2012			Year Ended December 31, 2011


Operations
Net investment income	$	158,595		$	49,485		$	40,811		$	6,398
Net realized gain (loss)		51,159			(71,506	)		(5,527	)		5,774
Net change in unrealized appreciation/depreciation		646,402			(137,806	)		178,186			(25,000	)

Net increase (decrease) in net assets resulting from operations		856,156			(159,827	)		213,470			(12,828	)


Capital Transactions
Proceeds from contributions		8,633,024			4,417,801			3,328,354			562,534
Value of withdrawals		(560,000	)		(1,151,200	)		(260,669	)		(199,584	)

Net increase in net assets derived from capital transactions		8,073,024			3,266,601			3,067,685			362,950


Net Assets
Total increase in net assets		8,929,180			3,106,774			3,281,155			350,122
Beginning of year		3,248,528			141,754			493,646			143,524

End of year	$	12,177,708		$	3,248,528		$	3,774,801		$	493,646


Statements of Changes in Net Assets (concluded)		Master Investment Portfolio


	Active Stock Master Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2012			2011

Operations
Net investment income	$	57,010,755		$	44,115,776
Net realized gain		210,331,039			194,035,159
Net change in unrealized appreciation/depreciation		147,479,020			(191,461,710	)

Net increase in net assets resulting from operations		414,820,814			46,689,225


Capital Transactions
Proceeds from contributions		3,136,934,911			657,028,420
Value of withdrawals		(3,476,187,910	)		(499,892,059	)

Net increase (decrease) in net assets derived from capital transactions		(339,252,999	)		157,136,361


Net Assets
Total increase in net assets		75,567,815			203,825,586
Beginning of year		2,717,249,702			2,513,424,116

End of year	$	2,792,817,517		$	2,717,249,702


Financial Highlights		Master Investment Portfolio


	LifePath 2025 Master Portfolio
	Year Ended December 31, 2012			Year Ended December 31, 2011			Period June 30, 2010¹ to December 31, 2010

Total Investment Return
Total investment return		12.57%			0.99%			17.65%	²


Ratios to Average Net Assets
Total expenses³		0.69%	^4,5		1.07%	^6,7		13.61%	⁸

Total expenses after fees waived³		0.26%	^4,5		0.24%	^6,7		0.22%	⁸

Net investment income⁹		2.32%	^4,5		2.62%	^6,7		2.37%	⁸


Supplemental Data
Net assets, end of year (000)	$	34,044		$	12,178			$134

Portfolio turnover		4%			24%			2%

Commencement of operations.

Aggregate total investment return.

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 and iShares exchange-traded funds.

⁴

Includes the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series’ allocated fees waived of 0.04%.

⁵

Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.10%, although the ratio does include the LifePath Master Portfolio’s share of 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.

⁶

⁷

Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.12%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁸

Annualized.

⁹

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.


Financial Highlights (continued)		Master Investment Portfolio


	LifePath 2035 Master Portfolio
	Year Ended December 31, 2012			Year Ended December 31, 2011			Period June 30, 2010¹ to December 31, 2010

Total Investment Return
Total investment return		14.35%			(0.82)%			21.21%	²


Ratios to Average Net Assets
Total expenses³		0.76%	^4,5		1.34%	^6,7		13.23%	⁸

Total expenses after fees waived³		0.25%	^4,5		0.22%	^6,7		0.19%	⁸

Net investment income⁹		2.42%	^4,5		2.50%	^6,7		2.33%	⁸


Supplemental Data
Net assets, end of year (000)		$25,732			$7,426			$149

Portfolio turnover		4%			21%			1%

Commencement of operations.

Aggregate total investment return.

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 three years ended December 31, 2010, which include gross expenses. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund and iShares exchange-traded funds.

⁴

⁵

Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁶

⁷

Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.14%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁸

Annualized.

⁹


Financial Highlights (continued)		Master Investment Portfolio


	LifePath 2045 Master Portfolio
	Year Ended December 31, 2012			Year Ended December 31, 2011			Period June 30, 2010¹ to December 31, 2010


Total Investment Return
Total investment return		15.84%			(1.96)%			24.26%	²


Ratios to Average Net Assets
Total expenses³		1.01%	^4,5		2.58%	^6,7		13.23%	⁸

Total expenses after fees waived³		0.24%	^4,5		0.20%	^6,7		0.17%	⁸

Net investment income⁹		2.54%	^4,5		2.43%	^6,7		2.25%	⁸


Supplemental Data
Net assets, end of year (000)		$12,178			$3,249			$142

Portfolio turnover		4%			35%			1%

Commencement of operations.

Aggregate total investment return.

⁴

⁵

⁶

⁷

Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.16%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁸

Annualized.

⁹


Financial Highlights (continued)		Master Investment Portfolio


	LifePath 2055 Master Portfolio
	Year Ended December 31, 2012			Year Ended December 31, 2011			Period June 30, 2010¹ to December 31, 2010


Total Investment Return
Total investment return		16.96%			(3.52)%			25.83%	²


Ratios to Average Net Assets
Total expenses³		2.41%	^4,5		14.66%	^6,7		13.13%	⁸

Total expenses after fees waived³		0.25%	^4,5		0.19%	^6,7		0.16%	⁸

Net investment income⁹		2.66%	^4,5		2.30%	^6,7		2.21%	⁸


Supplemental Data
Net assets, end of year (000)		$3,775			$494			$144

Portfolio turnover		7%			51%			1%

Commencement of operations.

Aggregate total investment return.

⁴

⁵

⁶

⁷

Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.17%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁸

Annualized.

⁹


Financial Highlights (concluded)		Master Investment Portfolio


	Active Stock Master Portfolio
	Year Ended December 31,
	2012		2011		2010		2009		2008

Total Investment Return
Total investment return		15.55%		2.20%		11.04%		24.86%		(36.65	)%


Ratios to Average Net Assets
Total expenses		0.35%		0.35%		0.35%		0.35%		0.35%

Total expenses after fees waived		0.26%		0.27%		0.29%		0.30%		0.32%

Net investment income		2.03%		1.70%		1.50%		1.99%		1.96%


Supplemental Data
Net assets, end of year (000)	$	2,792,818	$	2,717,250	$	2,513,424	$	1,838,453	$	1,250,987

Portfolio turnover		121%		275%		120%		149%		98%


Notes to Financial Statements		Master Investment Portfolio

1. Organization and Significant Accounting Policies:

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 2025 Master Portfolio, LifePath 2035 Master Portfolio, LifePath 2045 Master Portfolio, LifePath 2055 Master Portfolio and Active Stock Master Portfolio (each, a “Master Portfolio” and collectively, the “Master Portfolios”). The Master Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates.

As of December 31, 2012, LifePath 2025 Master Portfolio’s investment in the CoreAlpha Bond Master Portfolio was 32.8% of 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. CoreAlpha Bond Master Portfolio’s financial statements, included in filings under MIP, are available, without charge, upon request by calling (800) 441-7762 or on the SEC’s website at http://www/sec.gov.

Each of the LifePath 2025 Master Portfolio, LifePath 2035 Master Portfolio, LifePath 2045 Master Portfolio and LifePath 2055 Master Portfolio (each, a “LifePath Master Portfolio” and collectively, the “LifePath Master Portfolios”) will generally invest in other registered investment companies (each an “Underlying Fund” and collectively the “Underlying Funds”) that are managed by subsidiaries of BlackRock, Inc. (“BlackRock”) and its affiliates and affiliates of the LifePath Master Portfolios. The LifePath Master Portfolios may also invest in other master portfolios (“Underlying Master Portfolios”) that are managed by subsidiaries of BlackRock.

The value of a LifePath Master Portfolio’s investment in each of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series reflects that LifePath Master Portfolio’s proportionate interest in the net assets of that Master Portfolio. As of December 31, 2012, the interests of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series held by each LifePath Master Portfolio were as follows:


	Active Stock Master Portfolio			ACWI ex-US Index Master Portfolio			CoreAlpha Bond Master Portfolio			Master Small Cap Index Series
LifePath 2025 Master Portfolio		0.41	%		0.94	%		0.40	%		0.20	%
LifePath 2035 Master Portfolio		0.38	%		0.96	%		0.20	%		0.11	%
LifePath 2045 Master Portfolio		0.21	%		0.56	%		0.05	%		0.05	%
LifePath 2055 Master Portfolio		0.07	%		0.24	%		0.00	%¹		0.01	%

Rounds to less than 0.01%.

The following is a summary of significant accounting policies followed by the Master Portfolios:

Valuation: US GAAP defines fair value as the price the Master Portfolios would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Master Portfolios determine the fair values of their financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Master Portfolios for all financial instruments. Investments in open-end registered investment companies are valued at net asset value (“NAV”) each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value. The market value of the LifePath Master Portfolio’s investments in the Underlying Funds is based on the published NAV of each Underlying Fund computed as of the close of regular trading on the New York Stock Exchange (“NYSE”) on days when the NYSE is open. The LifePath Master Portfolios record their proportionate investment in the Underlying Master Portfolios at fair value which is based upon their pro rata ownership in the net assets of the Underlying Master Portfolios.

In the event that application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that each Master Portfolio might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the investment advisor deem relevant consistent with the principles of fair value measurement which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. A market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and 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 a Master Portfolio’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value



74	BLACKROCK FUNDS III	DECEMBER 31, 2012


Notes to Financial Statements (continued)		Master Investment Portfolio

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

Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”) require that the Master Portfolios either deliver collateral or segregate assets in connection with certain investments (e.g., financial futures contracts), each Master Portfolio will, consistent with SEC rules and/or certain interpretive letters issued by the SEC, segregate collateral or designate on its books and records cash or other liquid securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, a Master Portfolio engaging in such transactions may have requirements to deliver/deposit securities to/with an exchange or broker-dealer as collateral for certain investments.

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

Each LifePath Master Portfolio records daily its proportionate share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series income, expenses and realized and unrealized gains and losses.

Securities Lending: The Master Portfolios may lend securities to approved borrowers, such as banks, brokers and other financial institutions. The borrower pledges cash, securities issued or guaranteed by the US government or irrevocable letters of credit issued by a bank as collateral. The initial collateral received by the Master Portfolios are 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 in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statement of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, a 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 risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate this risk the Master Portfolios benefit from a borrower default indemnity provided by BlackRock. BlackRock’s indemnity allows for full replacement of securities lent. A Master Portfolio also could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received. During the year ended December 31, 2012, any securities on loan were collateralized by cash.

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

Each Master Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on Active Stock Master Portfolio’s US federal tax returns remains open for each of the four years ended December 31, 2012 and for each of the two years ended December 31, 2012 and the period ended December 31, 2010 for the LifePath Master Portfolios. 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 does not believe there are any uncertain tax positions that require recognition of a tax liability.

Recent Accounting Standards: In December 2011, the Financial Accounting Standards Board (the “FASB”) issued guidance that will expand current disclosure requirements on the offsetting of certain assets and liabilities. The new disclosures will be required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset in the Statements of Assets and Liabilities and will require an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarifies which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting will be limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions. The guidance is effective for financial statements with fiscal years beginning on or after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the Master Portfolios’ 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 pro rated among those funds on the basis of relative net assets or other appropriate methods.



BLACKROCK FUNDS III	DECEMBER 31, 2012	75


Notes to Financial Statements (continued)		Master Investment Portfolio

2. Derivative Financial Instruments:

Active Stock Master Portfolio engages in various portfolio investment strategies using derivative contracts both to increase the returns of Active Stock Master Portfolio and to economically hedge, or protect, its exposure to certain risks such as equity risk. These contracts may be transacted on an exchange.

Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. Counterparty risk related to exchange-traded financial futures contracts is deemed to be minimal due to the protection against defaults provided by the exchange on which these contracts trade.

Financial Futures Contracts: Active Stock Master Portfolio purchases or sells 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 Active Stock 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. Pursuant to the contract, Active Stock 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 and are recorded by Active Stock Master Portfolio as unrealized appreciation or depreciation. When the contract is closed, Active Stock 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.


Derivative Financial Instruments Categorized by Risk Exposure:
Fair Values of Derivative Financial Instruments as of December 31, 2012
	Asset Derivatives
	Active Stock Master Portfolio
	Statement of Assets and Liabilities Location	Value
Equity contracts	Net unrealized depreciation¹	$	(27,706	)

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


The Effect of Derivative Financial Instruments in the Statement of Operations Year Ended December 31, 2012
		Net Realized Gain From
		Active Stock Master Portfolio
Equity contracts
Financial futures contracts		$1,658,117


		Net Change in Unrealized Appreciation/Depreciation on
		Active Stock Master Portfolio
Equity contracts
Financial futures contracts		$(22,370)

For the year ended December 31, 2012, the average quarterly balances of outstanding derivative financial instruments were as follows:


	Active Stock Master Portfolio
Financial futures contracts:
Average number of contracts purchased		143
Average notional value of contracts purchased	$	10,081,140

3. 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 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 Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each Master Portfolio. For such services, each Master Portfolio pays BFA a monthly fee based on a percentage of such 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. Active Stock Master Portfolio pays BFA based on a percentage of its 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 Portfolios, entered into an Administration Agreement with BlackRock Institutional Trust Company, N.A. (“BTC”) (the “Administrator”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC may delegate certain of its administration duties to sub-administrators. In addition to providing these securities, BTC 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



76	BLACKROCK FUNDS III	DECEMBER 31, 2012


Notes to Financial Statements (continued)		Master Investment Portfolio

Master Portfolios. BTC is entitled to receive for these administration services an annual fee of 0.10% based on the average daily net assets of Active Stock Master Portfolio. Effective July 1, 2012, BlackRock Advisors, LLC (“BAL”) replaced BTC as each Master Portfolios’ administrator and entered into an Administration Agreement with the Trust, on behalf of the LifePath Portfolios, on similar terms.

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

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 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 previously BTC, from each affiliated investment company in which the LifePath Master Portfolios invest through April 30, 2013. 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, 2022. The amounts of the waivers, if any, are shown as fees waived by Manager in the Statements of Operations.

BAL voluntarily agreed to waive and previously BTC waived a portion of its administration and advisory fees paid by Active Stock Master Portfolio in an amount sufficient to maintain the advisory fees payable by each of the LifePath Master Portfolios at an annual rate of 0.35% based on the average daily net assets. This arrangement is voluntary and may be terminated by BAL at any time. With respect to the independent expenses discussed above, BAL or previously BTC has contractually agreed to provide an offsetting credit against the administration fees paid by Active Stock Master Portfolio in an amount equal to the independent expenses, through April 30, 2013. The amounts of the waiver and offsetting credits are shown as fees waived by Manager in the Statements of Operations.

The Master Portfolios received an exemptive order from the SEC permitting it, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BTC, an affiliate of BFA, as the securities lending agent. BTC may, on behalf of a Master Portfolio, invest cash collateral received by the Master Portfolio for such loans, among other things, in a private investment company managed by BTC or in registered money market funds advised by BAL or its affiliates. The market value of securities on loan and the value of the related collateral, if applicable, are shown in the Statements of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC is disclosed in the Schedules of Investments, if any. Securities lending income is equal to the total of income earned from

the reinvestment of cash collateral, net of rebates paid to, or fees paid by, borrowers of securities. The Master Portfolios retain 65% of securities lending income and pays a fee to BTC equal to 35% of such income. The Master Portfolios benefit from a borrower default indemnity provided by BlackRock. As securities lending agent, BTC bears all operational costs directly related to securities lending as well as the cost of borrower default indemnification. BTC does not receive any fees for managing the cash collateral. The share of income earned by each Master Portfolio is shown as securities lending — affiliated — net in the Statements of Operations. For the year ended December 31, 2012, BTC received securities lending agent fees related to securities lending activities for the Master Portfolios as follows:


LifePath 2025 Master Portfolio	$	655
LifePath 2035 Master Portfolio	$	434
LifePath 2045 Master Portfolio	$	198
LifePath 2055 Master Portfolio	$	42
Active Stock Market Portfolio	$	137,740

Each 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.

BFA reimbursed Active Stock Master Portfolio $773,484 for a loss associated with a December 2011 trading error.

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

4. Investments:

Purchases and sales of investments excluding short-term securities for the year ended December 31, 2012, were as follows:


	Purchases		Sales
LifePath 2025 Master Portfolio	$	3,182,395	$	836,541
LifePath 2035 Master Portfolio	$	2,512,144	$	488,964
LifePath 2045 Master Portfolio	$	1,210,314	$	265,382
LifePath 2055 Master Portfolio	$	477,692	$	108,140
Active Stock Master Portfolio	$	3,276,166,054	$	3,632,954,306

5. Borrowings:

MIP, on behalf of the Master Portfolios, along with certain other funds managed by BFA and its affiliates, is a party to a $500 million credit agreement with a group of lenders. The Master Portfolios may borrow under the credit agreement to fund shareholder redemptions. Effective November 2011 to November 2012, the credit agreement had the following terms: a commitment fee of 0.065% per annum based on the Master Portfolios’ pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month London Interbank Offered Rate (“LIBOR”) plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Master Portfolio paid administration and arrangement fees which were allocated to the Master Portfolios based on their net assets as of October 31, 2011. The credit agreement, which expired in November 2012, was renewed with the same terms until November 2013. Effective November 2012 to November 2013, the credit agreement has the



BLACKROCK FUNDS III	DECEMBER 31, 2012	77


Notes to Financial Statements (concluded)		Master Investment Portfolio

following terms: a commitment fee of 0.065% per annum based on the Master Portfolios’ pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Master Portfolio paid administration and arrangement fees which were allocated to the Master Portfolios based on their net assets as of October 31, 2012. The Master Portfolios’ commitment, administration and arrangement fees were paid by the investment advisor. The Master Portfolios did not borrow under the credit agreement during the year ended December 31, 2012.

6. Market and Credit Risk:

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

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.



78	BLACKROCK FUNDS III	DECEMBER 31, 2012


Report of Independent Registered Public Accounting Firm		Master Investment Portfolio

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

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 audits 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, 2012 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 22, 2013



BLACKROCK FUNDS III	DECEMBER 31, 2012	79


Officers and Trustees


Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees¹
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 106 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. since 1987; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of Seventy (civic) since 2006; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 106 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy since 2002; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 106 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President of Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 106 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 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) since 2011, President thereof from 1997 to 2011 and Trustee since 1980; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (strategic solutions company) since 2005; Director, Cerego, LLC (software development and design) since 2005; Director, Cybersettle (dispute resolution technology) since 2009.	33 RICs consisting of 106 Portfolios	AIMS Worldwide, Inc. (marketing)
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1999 to 2008.	33 RICs consisting of 106 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital since 2005; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 106 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, The West Penn Allegheny Health System (a not-for-profit health system) since 2008; 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; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 106 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 106 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 106 Portfolios	None



80	BLACKROCK FUNDS III	DECEMBER 31, 2012


Officers and Trustees (continued)


Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees¹ (concluded)
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Chairman Elect 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; 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 106 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh since 2005 and Dean thereof from 1997 to 2005; Director, Alkon Corporation (pneumatics) since 1992; Director, Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 106 Portfolios	None
	¹ Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year extensions in terms of Trustees who turn 72 prior to December 31, 2013. ² Date shown is the earliest date a person has served for the Trust/MIP covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the Trust’s Board. As a result, although the chart shows certain Trustees as joining the Trust’s board in 2009, each Trustee first became a member of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees³
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	155 RICs consisting of 278 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	155 RICs consisting of 278 Portfolios	None
	³ Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.



BLACKROCK FUNDS III	DECEMBER 31, 2012	81


Officers and Trustees (concluded)


Name, Address and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers*
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock since 2000; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2002; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009; and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Simon Mendelson 55 East 52nd Street New York, NY 10055 1964	Vice President	Since 2009	Managing Director of BlackRock since 2005; Co-head of the Global Cash and Securities Lending Group since 2010; Chief Operating Officer and Head of the Global Client Group for BlackRock’s Global Cash Management Business from 2007 to 2010; Head of BlackRock’s Strategy and Development Group from 2005 to 2007; Partner of McKinsey & Co. from 1997 to 2005.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2009	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2009	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Director of BlackRock since 2010; 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.
	* Officers of the Trust/MIP serve at the pleasure of the Board of Trustees.


Investment Advisor BlackRock Fund Advisors San Francisco, CA 94105	Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Custodian and Accounting Agent State Street Bank and Trust Company Boston, MA 02110	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Sidley Austin LLP New York, NY 10019

				Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP New York, NY 10017	Address of the Trust/MIP 400 Howard Street San Francisco, CA 94105



82	BLACKROCK FUNDS III	DECEMBER 31, 2012


Additional Information

General Information

Electronic Delivery

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

To enroll:

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

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

Shareholders Who Hold Accounts Directly with BlackRock:

1) Access the BlackRock website at http://www.blackrock.com/edelivery

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

3) Log into your account

Householding

The LifePath Portfolios/Master 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 Portfolios/Master Portfolios at (800) 441-7762.

Availability of Quarterly Schedule of Investments

Each Portfolio/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 Portfolio’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 Portfolio’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 Portfolio/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 Portfolio/Master Portfolio voted proxies relating to securities held in the Portfolio’s/Master Portfolio’s portfolio during the most recent 12-month period ended December 31 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

Shareholder Privileges

Account Information

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 Privacy Principles

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, 2012	83


Additional Information (concluded)

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.



84	BLACKROCK FUNDS III	DECEMBER 31, 2012


A World-Class Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing.

Equity Funds

BlackRock ACWI ex-US Index Fund

BlackRock All-Cap Energy & Resources Portfolio

BlackRock Balanced Capital Fund†

BlackRock Basic Value Fund

BlackRock Capital Appreciation Fund

BlackRock China Fund

BlackRock Commodity Strategies Fund

BlackRock Emerging Markets Fund

BlackRock Emerging Markets Long/Short Equity Fund

BlackRock Energy & Resources Portfolio

BlackRock Equity Dividend Fund

BlackRock EuroFund

BlackRock Focus Growth Fund

BlackRock Global Allocation Fund†

BlackRock Global Dividend Income Portfolio

BlackRock Global Dynamic Equity Fund

BlackRock Global Long/Short Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Global SmallCap Fund

BlackRock Health Sciences Opportunities Portfolio

BlackRock Index Equity Portfolio

BlackRock India Fund

BlackRock International Fund

BlackRock International Index Fund

BlackRock International Opportunities Portfolio

BlackRock Large Cap Core Fund

BlackRock Large Cap Core Plus Fund

BlackRock Large Cap Growth Fund

BlackRock Large Cap Value Fund

BlackRock Latin America Fund

BlackRock Managed Volatility Portfolio†

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Mid-Cap Value Equity Portfolio

BlackRock Mid Cap Value Opportunities Fund

BlackRock Multi-Asset Real Return Fund†

BlackRock Natural Resources Trust

BlackRock Pacific Fund

BlackRock Russell 1000 Index Fund

BlackRock Science & Technology Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock Small Cap Growth Fund II

BlackRock Small Cap Index Fund

BlackRock S&P 500 Index Fund

BlackRock S&P 500 Stock Fund

BlackRock Strategic Risk Allocation Fund†

BlackRock U.S. Opportunities Portfolio

BlackRock Value Opportunities Fund

BlackRock World Gold Fund

Fixed Income Funds

BlackRock Bond Index Fund

BlackRock Core Bond Portfolio

BlackRock Emerging Market Debt Portfolio

BlackRock Floating Rate Income Portfolio

BlackRock Global Long/Short Credit Fund

BlackRock GNMA Portfolio

BlackRock High Yield Bond Portfolio

BlackRock Inflation Protected Bond Portfolio

BlackRock International Bond Portfolio

BlackRock Long Duration Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Multi-Asset Income Portfolio†

BlackRock Multi-Sector Bond Portfolio

BlackRock Strategic Income Opportunities Portfolio

BlackRock Total Return Fund

BlackRock US Government Bond Portfolio

BlackRock US Mortgage Portfolio

BlackRock World Income Fund

Municipal Bond Funds†

BlackRock California Municipal Bond Fund

BlackRock High Yield Municipal Fund

BlackRock Intermediate Municipal Fund

BlackRock National Municipal Fund

BlackRock New Jersey Municipal Bond Fund

BlackRock New York Municipal Bond Fund

BlackRock Pennsylvania Municipal Bond Fund

BlackRock Short-Term Municipal Fund

Target Risk & Target Date Funds†


BlackRock Prepared Portfolios	BlackRock Lifecycle Prepared Portfolios			LifePath Portfolios		LifePath Index Portfolios
Conservative Prepared Portfolio		2015	2035	Retirement	2040	Retirement	2040
Moderate Prepared Portfolio		2020	2040	2020	2045	2020	2045
Growth Prepared Portfolio		2025	2045	2025	2050	2025	2050
Aggressive Growth Prepared Portfolio		2030	2050	2030	2055	2030	2055
				2035		2035

†

Mixed asset fund.



BLACKROCK FUNDS III	DECEMBER 31, 2012	85

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

Investment in foreign securities involves special risks including fluctuating foreign exchange rates, foreign government regulations, differing degrees of liquidity and the possibility of substantial volatility due to adverse political, economic or other developments.

LOGO


# LPincre-12/12-AR

DECEMBER 31, 2012

ANNUAL REPORT

BlackRock Funds III

^Ø	LifePath^® Retirement Portfolio

^Ø	LifePath 2020 Portfolio^®

^Ø	LifePath 2030 Portfolio^®

^Ø	LifePath 2040 Portfolio^®

^Ø	LifePath^® 2050 Portfolio

Not FDIC Insured • May Lose Value • No Bank Guarantee


Table of Contents


	Page
Dear Shareholder		3
Annual Report:
Portfolio Summaries		4
About Portfolio Performance		15
Derivative Financial Instruments		15
Disclosure of Expenses		16
Portfolio Financial Statements:
Statements of Assets and Liabilities		17
Statements of Operations		18
Statements of Changes in Net Assets		19
Portfolio Financial Highlights		22
Portfolio Notes to Financial Statements		47
Portfolio Report of Independent Registered Public Accounting Firm		53
Important Tax Information		53
Master Portfolio Information		54
Master Portfolio Financial Statements:
Schedules of Investments		56
Statements of Assets and Liabilities		73
Statements of Operations		75
Statements of Changes in Net Assets		77
Master Portfolio Financial Highlights		80
Master Portfolio Notes to Financial Statements		86
Master Portfolio Report of Independent Registered Public Accounting Firm		91
Officers and Trustees		92
Additional Information		95
A World-Class Mutual Fund Family		96



2	BLACKROCK FUNDS III	DECEMBER 31, 2012

Dear Shareholder

Sincerely,

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

“Although 2012 brought its share of headwinds, the strongest returns came from the higher-risk asset classes as investors reached for yield in an environment of extremely low interest rates.”

Rob Kapito

President, BlackRock Advisors, LLC


Total Returns as of December 31, 2012
	6-month			12-month
US large cap equities (S&P 500^® Index)		5.95	%		16.00	%
US small cap equities (Russell 2000^® Index)		7.20			16.35
International equities (MSCI Europe, Australasia, Far East Index)		13.95			17.32
Emerging market equities (MSCI Emerging Markets Index)		13.75			18.22
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)		0.07			0.11
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		0.71			4.18
US investment grade bonds (Barclays US Aggregate Bond Index)		1.80			4.21
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.15			7.42
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)		7.97			15.78

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 IS NOT PART OF YOUR FUND REPORT				3


Portfolio Summary as of December 31, 2012		LifePath Portfolios

Portfolio Management Commentary

How did each Portfolio perform?

_Ÿ

All share classes of the LifePath Portfolios with target dates of 2020, 2030, 2040 and 2050 and the LifePath Retirement Portfolio (altogether, the “LifePath Portfolios”) invest in their respective LifePath Master Portfolio.

_Ÿ

For the 12-month period ended December 31, 2012, all of the LifePath Portfolios underperformed their respective custom benchmarks with the exception of the Class K Shares of the LifePath Retirement Portfolio and the LifePath Portfolio with the target date 2020. The returns for the LifePath Portfolios include fund expenses. The custom benchmarks have no expenses associated with performance.

What factors influenced performance?

_Ÿ

The LifePath Portfolios underperformed relative to their respective custom benchmarks primarily due to their investment in the Active Stock Master Portfolio (“Active Stock”), which is held in greater proportions in the longer-dated LifePath Portfolios. Active Stock invests in BlackRock’s Scientific Active Large Cap Equity strategy and four fundamental active large cap strategies, including Large Cap Growth, Fundamental Large Cap Growth, Basic Value and Equity Dividend. On an absolute basis, all of the strategies delivered positive performance for the period as equity markets broadly rallied; however, sector allocation decisions in the Fundamental Large Cap Growth, Basic Value and Equity Dividend strategies resulted in Active Stock’s underperformance relative to its benchmark, the Russell 1000^® Index. Overall, a large overweight in information technology and significant underweights in consumer discretionary and financials had a negative impact on results. An overweight to industrials in the value

_Ÿ

Describe recent portfolio activity.

_Ÿ

Describe portfolio positioning at period end.

_Ÿ

As of period end, each of the LifePath Portfolios was invested according to its respective strategic allocation benchmark within tolerance limits.

Glidepath Evolution

market conditions, review the asset allocation targets of each Portfolio, and determine whether any changes are required to enable each Portfolio to achieve its investment objective.



4	BLACKROCK FUNDS III	DECEMBER 31, 2012


		LifePath^® Retirement Portfolio

Investment Objective

LifePath^® Retirement Portfolio’s investment objective is to be managed for investors seeking income and moderate long-term growth of capital.

Total Return Based on a $10,000 Investment

LOGO

Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

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, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the LifePath Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

The Russell 1000 Index and the Russell 2000 Index replaced the S&P 1500 Index on July 29, 2011.


Period	Barclays US Aggregate Bond Index			Barclays US Treasury Inflation Protected Securities (TIPS) Index			Cohen & Steers Realty Majors Index			Dow Jones-UBS Commodity Index⁴			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI Index			MSCI EAFE Index			Russell 1000^® Index			Russell 2000^® Index			S&P MidCap 400^® Index			S&P 500^® Index			S&P SmallCap 600^® Index
1/01/03 to 12/31/03		65.0	%		N/A			N/A			N/A			N/A			N/A			9.1	%		N/A			N/A			2.1	%		22.0	%		1.8	%
1/01/04 to 12/31/04		65.0			N/A			N/A			N/A			N/A			N/A			8.7			N/A			N/A			2.3			21.7			2.3
1/01/05 to 12/31/05		65.0			N/A			N/A			N/A			N/A			N/A			8.7			N/A			N/A			3.2			20.9			2.2
1/01/06 to 12/31/06		52.0			10.2	%		2.7	%		N/A			N/A			N/A			9.9			N/A			N/A			3.3			20.2			1.7
1/01/07 to 12/31/07		52.6			9.6			2.8			N/A			N/A			2.7	%		7.7			N/A			N/A			3.6			19.2			1.8
1/01/08 to 12/31/08		53.0			9.0			1.3			N/A			1.3	%		11.4			N/A			N/A			N/A			4.1			18.0			1.9
1/01/09 to 12/31/09		52.9			9.1			N/A			N/A			1.6			10.8			N/A			N/A			N/A			4.7			18.7			2.2
1/01/10 to 12/31/10		52.9			9.1			N/A			N/A			1.1			10.8			N/A			N/A			N/A			5.0			18.9			2.2
1/01/11 to 12/31/11		52.9			9.1			N/A			N/A			0.8			11.3			N/A			8.6	%		1.7	%		2.8			11.6			1.2
1/01/12 to 12/31/12		52.9			9.1			N/A			1.0	%		0.3			11.3			N/A			21.2			4.2			N/A			N/A			N/A

⁴

As of October 1, 2012, each LifePath Portfolio added a new component, the Dow Jones-UBS Commodity index, to the composite benchmark against which it measures its performance.

See “About Portfolio Performance” on page 15 for descriptions of the indexes.



BLACKROCK FUNDS III	DECEMBER 31, 2012	5


		LifePath^® Retirement Portfolio (concluded)

Performance Summary for the Period Ended December 31, 2012


				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		4.32	%		8.61	%		N/A			4.40	%		N/A			5.76	%		N/A
Investor A		4.21			8.46			2.77	%		4.16			3.04	%		5.86			5.29	%
Investor C		3.78			7.55			6.55			3.31			3.31			4.91			4.91
Class K		4.53			9.03			N/A			4.68			N/A			6.03			N/A
Class R		4.19			8.26			N/A			3.83			N/A			5.33			N/A
Barclays US Aggregate Bond Index		1.80			4.21			N/A			5.95			N/A			5.18			N/A
Barclays US TIPS Index		2.82			6.98			N/A			7.04			N/A			6.65			N/A
Dow Jones-UBS Commodity Index		2.75			(1.06	)		N/A			(5.17	)		N/A			4.09			N/A
FTSE EPRA/NAREIT Developed Real Estate Index		11.25			27.73			N/A			0.32			N/A			N/A			N/A
LifePath Retirement Portfolio Custom Benchmark		4.14			8.92			N/A			4.64			N/A			6.49			N/A
MSCI ACWI ex-US IMI Index		13.70			17.04			N/A			(2.59	)		N/A			10.16			N/A
Russell 1000^® Index		6.44			16.42			N/A			1.92			N/A			7.52			N/A
Russell 2000^® Index		7.20			16.35			N/A			3.56			N/A			9.72			N/A

Past performance is not indicative of future results.

N/A — Not applicable as share class and index do not have a sales charge or the index does not have a return for the period.



6	BLACKROCK FUNDS III	DECEMBER 31, 2012


		LifePath 2020 Portfolio^®

Investment Objective

LifePath 2020 Portfolio’s^® investment objective is to be 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

LOGO

Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

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, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the LifePath Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

The Russell 1000 Index and the Russell 2000 Index replaced the S&P 1500 Index on July 29, 2011.


Period	Barclays US Aggregate Bond Index			Barclays US Treasury Inflation Protected Securities (TIPS) Index			Cohen & Steers Realty Majors Index			Dow Jones-UBS Comm odity Index⁴			FTSE EPRA/NAREIT Devel oped Real Estate Index			MSCI ACWI ex-US IMI Index			MSCI EAFE Index			Russell 1000^® Index			Russell 2000^® Index			S&P MidCap 400^® Index			S&P 500^® Index			S&P SmallCap 600^® Index
1/01/03 to 12/31/03		36.5	%		N/A			N/A			N/A			N/A			N/A			15.4	%		N/A			N/A			3.7	%		41.1	%		3.3	%
1/01/04 to 12/31/04		34.2			N/A			N/A			N/A			N/A			N/A			16.2			N/A			N/A			3.0			43.8			2.8
1/01/05 to 12/31/05		35.4			N/A			N/A			N/A			N/A			N/A			15.9			N/A			N/A			4.3			41.4			3.0
1/01/06 to 12/31/06		28.5			5.2	%		4.3	%		N/A			N/A			N/A			16.8			N/A			N/A			5.1			37.5			2.6
1/01/07 to 12/31/07		29.7			5.0			4.5			N/A			N/A			17.2	%		N/A			N/A			N/A			5.4			35.4			2.8
1/01/08 to 12/31/08		31.6			5.1			2.2			N/A			2.2	%		18.4			N/A			N/A			N/A			5.8			32.0			2.7
1/01/09 to 12/31/09		33.8			5.5			N/A			N/A			4.8			16.9			N/A			N/A			N/A			5.8			30.4			2.8
1/01/10 to 12/31/10		35.2			5.7			N/A			N/A			4.0			16.5			N/A			N/A			N/A			5.8			30.2			2.6
1/01/11 to 12/31/11		36.9			6.0			N/A			N/A			3.6			16.6			N/A			13.1	%		1.5	%		3.3			17.6			1.4
1/01/12 to 12/31/12		39.0			6.3			N/A			1.0	%		3.2			15.9			N/A			31.0			3.6			N/A			N/A			N/A

⁴

As of October 1, 2012, each LifePath Portfolio added a new component, the Dow Jones-UBS Commodity index, to the composite benchmark against which it measures its performance.

See “About Portfolio Performance” on page 15 for descriptions of the indexes.



BLACKROCK FUNDS III	DECEMBER 31, 2012	7


		LifePath 2020 Portfolio^® (concluded)

Performance Summary for the Period Ended December 31, 2012


				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		5.49	%		10.99	%		N/A			2.71	%		N/A			6.48	%		N/A
Investor A		5.41			10.67			4.86	%		2.46			1.36	%		6.23			5.66	%
Investor C		5.00			9.87			8.87			1.53			1.53			5.63			5.63
Class K		5.71			11.36			N/A			2.99			N/A			6.74			N/A
Class R		5.21			10.36			N/A			2.06			N/A			6.02			N/A
Barclays US Aggregate Bond Index		1.80			4.21			N/A			5.95			N/A			5.18			N/A
Barclays US TIPS Index		2.82			6.98			N/A			7.04			N/A			6.65			N/A
Dow Jones-UBS Commodity Index		2.75			(1.06	)		N/A			(5.17	)		N/A			4.09			N/A
FTSE EPRA/NAREIT Developed Real Estate Index		11.25			27.73			N/A			0.32			N/A			N/A			N/A
LifePath 2020 Portfolio Custom Benchmark		5.32			11.31			N/A			3.17			N/A			7.21			N/A
MSCI ACWI ex-US IMI Index		13.70			17.04			N/A			(2.59	)		N/A			10.16			N/A
Russell 1000^® Index		6.44			16.42			N/A			1.92			N/A			7.52			N/A
Russell 2000^® Index		7.20			16.35			N/A			3.56			N/A			9.72			N/A

Past performance is not indicative of future results.

N/A — Not applicable as share class and index do not have a sales charge or the index does not have a return for the period.



8	BLACKROCK FUNDS III	DECEMBER 31, 2012


		LifePath 2030 Portfolio^®

Investment Objective

LifePath 2030 Portfolio’s^® investment objective is to be 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

LOGO

Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

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, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the LifePath Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

The Russell 1000 and the Russell 2000 Index replaced the S&P 1500 Index on July 29, 2011.


Period	Barclays US Aggr egate Bond Index			Barclays US Treasury Inflation Protected Securities (TIPS) Index			Cohen & Steers Realty Majors Index			Dow Jones-UBS Comm odity Index⁴			FTSE EPRA/NAREIT Devel oped Real Estate Index			MSCI ACWI ex-US IMI Index			MSCI EAFE Index			Russell 1000^® Index			Russell 2000^® Index			S&P MidCap 400^® Index			S&P 500^® Index			S&P SmallCap 600^® Index
1/01/03 to 12/31/03		24.9	%		N/A			N/A			N/A			N/A			N/A			18.6	%		N/A			N/A			4.4	%		48.3	%		3.8	%
1/01/04 to 12/31/04		21.0			N/A			N/A			N/A			N/A			N/A			19.4			N/A			N/A			3.2			53.3			3.1
1/01/05 to 12/31/05		21.8			N/A			N/A			N/A			N/A			N/A			19.2			N/A			N/A			4.8			50.9			3.3
1/01/06 to 12/31/06		16.7			2.7	%		5.1	%		N/A			N/A			N/A			20.3			N/A			N/A			6.0			46.2			3.0
1/01/07 to 12/31/07		17.4			2.6			5.4			N/A			N/A			20.9	%		N/A			N/A			N/A			6.4			44.1			3.2
1/01/08 to 12/31/08		19.0			2.8			5.5			N/A			N/A			22.4			N/A			N/A			N/A			6.9			40.2			3.2
1/01/09 to 12/31/09		21.0			3.1			N/A			N/A			7.0	%		21.0			N/A			N/A			N/A			6.6			38.2			3.1
1/01/10 to 12/31/10		22.0			3.2			N/A			N/A			6.3			20.7			N/A			N/A			N/A			6.4			38.6			2.8
1/01/11 to 12/31/11		23.5			3.4			N/A			N/A			6.0			20.9			N/A			17.0	%		1.3	%		3.7			22.6			1.6
1/01/12 to 12/31/12		25.8			3.8			N/A			1.0	%		6.0			20.2			N/A			40.2			3.0			N/A			N/A			N/A

⁴

As of October 1, 2012, each LifePath Portfolio added a new component, the Dow Jones-UBS Commodity index, to the composite benchmark against which it measures its performance.

See “About Portfolio Performance” on page 15 for descriptions of the indexes.



BLACKROCK FUNDS III	DECEMBER 31, 2012	9


		LifePath 2030 Portfolio^® (concluded)

Performance Summary for the Period Ended December 31, 2012


				Average Annual Total Returns
				1 Year						5 Years						10 Years
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		6.62	%		13.09	%		N/A			1.75	%		N/A			6.64	%		N/A
Investor A		6.50			12.75			6.83	%		1.49			0.40	%		6.37			5.80	%
Investor C		6.08			11.92			10.92			0.51			0.51			5.77			5.77
Class K		6.83			13.43			N/A			2.04			N/A			6.90			N/A
Class R		6.35			12.48			N/A			1.05			N/A			6.16			N/A
Barclays US Aggregate Bond Index		1.80			4.21			N/A			5.95			N/A			5.18			N/A
Barclays US TIPS Index		2.82			6.98			N/A			7.04			N/A			6.65			N/A
Dow Jones-UBS Commodity Index		2.75			(1.06	)		N/A			(5.17	)		N/A			4.09			N/A
FTSE EPRA/NAREIT Developed Real Estate Index		11.25			27.73			N/A			0.32			N/A			N/A			N/A
LifePath 2030 Portfolio Custom Benchmark		6.48			13.51			N/A			2.37			N/A			7.45			N/A
MSCI ACWI ex-US IMI Index		13.70			17.04			N/A			(2.59	)		N/A			10.16			N/A
Russell 1000^® Index		6.44			16.42			N/A			1.92			N/A			7.52			N/A
Russell 2000^® Index		7.20			16.35			N/A			3.56			N/A			9.72			N/A

Past performance is not indicative of future results.

N/A — Not applicable as share class and index do not have a sales charge or the index does not have a return for the period.



10	BLACKROCK FUNDS III	DECEMBER 31, 2012


		LifePath 2040 Portfolio^®

Investment Objective

LifePath^® 2040 Portfolio’s investment objective is to be 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

LOGO

Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

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, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the LifePath Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

The Russell 1000 Index and the Russell 2000 Index replaced the S&P 1500 Index on July 29, 2011.


Period	Barclays US Aggregate Bond Index			Barclays US Treasury Inflation Protected Securities (TIPS) Index			Cohen & Steers Realty Majors Index			Dow Jones-UBS Comm odity Index⁴			FTSE EPRA/NAREIT Devel oped Real Estate Index			MSCI ACWI ex-US IMI Index			MSCI EAFE Index			Russell 1000^® Index			Russell 2000^® Index			S&P MidCap 400^® Index			S&P 500^® Index			S&P SmallCap 600^® Index
1/01/03 to 12/31/03		13.9	%		N/A			N/A			N/A			N/A			N/A			20.0	%		N/A			N/A			5.1	%		56.4	%		4.6	%
1/01/04 to 12/31/04		10.0			N/A			N/A			N/A			N/A			N/A			20.0			N/A			N/A			3.7			62.8			3.5
1/01/05 to 12/31/05		10.6			N/A			N/A			N/A			N/A			N/A			20.0			N/A			N/A			5.5			60.1			3.8
1/01/06 to 12/31/06		7.4			N/A			5.8	%		N/A			N/A			N/A			23.2			N/A			N/A			6.8			53.4			3.4
1/01/07 to 12/31/07		7.7			N/A			5.9			N/A			N/A			N/A			23.5			N/A			N/A			7.2			51.9			3.7
1/01/08 to 12/31/08		9.1			0.5	%		3.2			N/A			3.2	%		25.8	%		N/A			N/A			N/A			7.7			46.9			3.6
1/01/09 to 12/31/09		10.4			1.1			N/A			N/A			8.8			24.5			N/A			N/A			N/A			7.2			44.6			3.4
1/01/10 to 12/31/10		11.2			1.1			N/A			N/A			8.1			24.2			N/A			N/A			N/A			6.9			45.5			3.0
1/01/11 to 12/31/11		12.7			1.3			N/A			N/A			7.9			24.5			N/A			20.1	%		1.2	%		4.0			26.6			1.7
1/01/12 to 12/31/12		15.3			1.6			N/A			1.0	%		8.2			23.7			N/A			47.7			2.5			N/A			N/A			N/A

⁴

As of October 1, 2012, each LifePath Portfolio added a new component, the Dow Jones-UBS Commodity index, to the composite benchmark against which it measures its performance.

See “About Portfolio Performance” on page 15 for descriptions of the indexes.



BLACKROCK FUNDS III	DECEMBER 31, 2012	11


		LifePath 2040 Portfolio^® (concluded)

Performance Summary for the Period Ended December 31, 2012


				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		7.55	%		14.73	%		N/A			0.87	%		N/A			6.74	%		N/A
Investor A		7.40			14.41			8.40	%		0.62			(0.46	)%		6.49			5.92	%
Investor C		6.97			13.59			12.59			(0.41	)		(0.41	)		5.84			5.84
Class K		7.72			15.08			N/A			1.17			N/A			6.99			N/A
Class R		7.27			14.19			N/A			0.13			N/A			6.24			N/A
Barclays US Aggregate Bond Index		1.80			4.21			N/A			5.95			N/A			5.18			N/A
Barclays US TIPS Index		2.82			6.98			N/A			7.04			N/A			6.65			N/A
Dow Jones-UBS Commodity Index		2.75			(1.06	)		N/A			(5.17	)		N/A			4.09			N/A
FTSE EPRA/NAREIT Developed Real Estate Index		11.25			27.73			N/A			0.32			N/A			N/A			N/A
LifePath 2040 Portfolio Custom Benchmark		7.42			15.28			N/A			1.63			N/A			7.59			N/A
MSCI ACWI ex-US IMI Index		13.70			17.04			N/A			(2.59	)		N/A			10.16			N/A
Russell 1000^® Index		6.44			16.42			N/A			1.92			N/A			7.52			N/A
Russell 2000^® Index		7.20			16.35			N/A			3.56			N/A			9.72			N/A

Past performance is not indicative of future results.

N/A — Not applicable as share class and index do not have a sales charge or the index does not have a return for the period.



12	BLACKROCK FUNDS III	DECEMBER 31, 2012


		LifePath^® 2050 Portfolio


Investment Objective

LifePath^® 2050 Portfolio’s investment objective is to be 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

LOGO

Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

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, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the LifePath Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

The Russell 1000 Index and the Russell 2000 Index replaced the S&P 1500 Index on July 29, 2011.

⁴

Commencement of operations.


Period	Barclays US Aggregate Bond Index			Dow Jones-UBS Commodity Index⁴			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI Index			Russell 1000^® Index			Russell 2000^® Index			S&P MidCap 400^® Index			S&P 500^® Index			S&P SmallCap 600^® Index
6/30/08 to 12/31/08		1.0	%		N/A			3.6	%		30.4	%		N/A			N/A			10.5	%		49.7	%		4.8	%
1/01/09 to 12/31/09		1.0			N/A			9.1			28.3			N/A			N/A			9.5			47.5			4.6
1/01/10 to 12/31/10		1.1			N/A			9.8			27.4			N/A			N/A			7.6			50.7			3.4
1/01/11 to 12/31/11		2.7			N/A			9.7			27.6			22.8	%		1.1	%		4.4			29.9			1.8
1/01/12 to 12/31/12		5.9			1.0	%		10.2			26.8			54.0			2.1			N/A			N/A			N/A

⁴

As of October 1, 2012, each LifePath Portfolio added a new component, the Dow Jones-UBS Commodity index, to the composite benchmark against which it measures its performance.

See “About Portfolio Performance” on page 15 for descriptions of the indexes.



BLACKROCK FUNDS III	DECEMBER 31, 2012	13


		LifePath^® 2050 Portfolio (concluded)

Performance Summary for the Period Ended December 31, 2012


				Average Annual Total Returns
				1 Year						Since Inception
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		8.26	%		16.05	%		N/A			2.54	%		N/A
Investor A		8.14			15.80			9.72	%		2.29			1.07	%
Investor C		7.76			14.93			13.93			1.25			1.25
Class K		8.49			16.53			N/A			2.90			N/A
Class R		8.03			15.59			N/A			1.78			N/A
Barclays US Aggregate Bond Index		1.80			4.21			N/A			N/A			N/A
Dow Jones-UBS Commodity Index		2.75			(1.06	)		N/A			N/A			N/A
FTSE EPRA/NAREIT Developed Real Estate Index		11.25			27.73			N/A			N/A			N/A
LifePath 2050 Portfolio Custom Benchmark		8.24			16.83			N/A			N/A			N/A
MSCI ACWI ex-US IMI Index		13.70			17.04			N/A			N/A			N/A
Russell 1000^® Index		6.44			16.42			N/A			N/A			N/A
Russell 2000^® Index		7.20			16.35			N/A			N/A			N/A

See “About Fund Performance” on page 15 for further information on how performance was calculated.

Past performance is not indicative of future results.

N/A — Not applicable as share class and index do not have a sales charge.



14	BLACKROCK FUNDS III	DECEMBER 31, 2012


About Portfolio Performance		BlackRock Funds III

_Ÿ

Institutional Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to 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). Prior to April 30, 2001 for LifePath Retirement, LifePath 2020, LifePath 2030 and LifePath 2040 Portfolios and June 30, 2008 for LifePath 2050 portfolio, Investor A Shares’ performance results are those of Institutional Shares restated to reflect Investor A Shares’ fees.

_Ÿ

Investor C 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 0.25% per year. Prior to May 3, 2010, Investor C Shares’ performance results are those of Institutional Shares restated to reflect Investor C Shares’ fees.

_Ÿ

Class K Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to eligible investors. Prior to May 30, 2008 for LifePath Retirement, LifePath 2020, LifePath 2030 and LifePath 2040 Portfolios and June 30, 2008 for LifePath 2050 portfolio, Class K Shares’ performance results are those of Institutional Shares restated to reflect Class K Shares’ fees.

_Ÿ

Class R Shares are not subject to any sales charge (front-end load) or deferred sales charge. These shares are subject to a distribution fee of 0.25% per year and a service fee of 0.25% per year. These shares are available only to certain retirement and other similar plans. Prior to May 3, 2010, Class R Shares’ performance results are those of Institutional Shares restated to reflect Class R Shares’ fees.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. Figures shown in each of the performance tables on the previous pages assume reinvestment of all dividends and distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and

principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.

Dividends paid to each class of shares will vary because of the different levels of administration and distribution fees applicable to each class, which are deducted from the income available to be paid to shareholders. The LifePath Portfolios’ administrator waived and/or reimbursed a portion of each LifePath Portfolio’s expenses. Without such waiver, each LifePath Portfolio’s performance would have been lower.

The 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, 2012, the following indexes are used to calculate the LifePath Portfolios’ custom benchmarks: Barclays US Aggregate Bond Index, Barclays US TIPS Index, Dow Jones-UBS Commodity Index, MSCI ACWI ex-US IMI Index, FTSE EPRA/NAREIT Developed Real Estate Index, Russell 1000^® Index and Russell 2000^® Index.

Derivative Financial Instruments

a derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require Active Stock to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation Active Stock can realize on an investment, may result in lower dividends paid to shareholders or may cause Active Stock to hold an investment that it might otherwise sell. Active Stock’s investments in these instruments are discussed in detail in the Master Portfolios’ Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	15


Disclosure of Expenses		BlackRock Funds III


Expense Examples
	Actual						Hypothetical²
	Beginning Account Value July 1, 2012		Ending Account Value December 31, 2012		Expenses Paid During the Period¹		Beginning Account Value July 1, 2012		Ending Account Value December 31, 2012		Expenses Paid During the Period¹		Annualized Expense Ratio
LifePath^® Retirement Portfolio
Institutional		$1,000.00		$1,043.20		$3.95		$1,000.00		$1,021.27		$3.91		0.77%
Investor A		$1,000.00		$1,042.10		$5.24		$1,000.00		$1,020.01		$5.18		1.02%
Investor C		$1,000.00		$1,037.80		$9.07		$1,000.00		$1,016.24		$8.97		1.77%
Class K		$1,000.00		$1,045.30		$2.16		$1,000.00		$1,023.03		$2.14		0.42%
Class R		$1,000.00		$1,041.90		$6.47		$1,000.00		$1,018.80		$6.39		1.26%
LifePath 2020 Portfolio^®
Institutional		$1,000.00		$1,054.90		$3.82		$1,000.00		$1,021.42		$3.76		0.74%
Investor A		$1,000.00		$1,054.10		$5.11		$1,000.00		$1,020.16		$5.03		0.99%
Investor C		$1,000.00		$1,050.00		$8.97		$1,000.00		$1,016.39		$8.82		1.74%
Class K		$1,000.00		$1,057.10		$2.02		$1,000.00		$1,023.18		$1.98		0.39%
Class R		$1,000.00		$1,052.10		$6.40		$1,000.00		$1,018.90		$6.29		1.24%
LifePath 2030 Portfolio^®
Institutional		$1,000.00		$1,066.20		$3.74		$1,000.00		$1,021.52		$3.66		0.72%
Investor A		$1,000.00		$1,065.00		$5.03		$1,000.00		$1,020.26		$4.93		0.97%
Investor C		$1,000.00		$1,060.80		$8.91		$1,000.00		$1,016.49		$8.72		1.72%
Class K		$1,000.00		$1,068.30		$1.92		$1,000.00		$1,023.28		$1.88		0.37%
Class R		$1,000.00		$1,063.50		$6.28		$1,000.00		$1,019.05		$6.14		1.21%
LifePath 2040 Portfolio^®
Institutional		$1,000.00		$1,075.50		$3.65		$1,000.00		$1,021.62		$3.56		0.70%
Investor A		$1,000.00		$1,074.00		$4.95		$1,000.00		$1,020.36		$4.82		0.95%
Investor C		$1,000.00		$1,069.70		$8.84		$1,000.00		$1,016.59		$8.62		1.70%
Class K		$1,000.00		$1,077.20		$1.83		$1,000.00		$1,023.38		$1.78		0.35%
Class R		$1,000.00		$1,072.70		$6.25		$1,000.00		$1,019.10		$6.09		1.20%
LifePath^® 2050 Portfolio
Institutional		$1,000.00		$1,082.60		$3.66		$1,000.00		$1,021.62		$3.56		0.70%
Investor A		$1,000.00		$1,081.40		$4.97		$1,000.00		$1,020.36		$4.82		0.95%
Investor C		$1,000.00		$1,077.60		$8.83		$1,000.00		$1,016.64		$8.57		1.69%
Class K		$1,000.00		$1,084.90		$1.83		$1,000.00		$1,023.38		$1.78		0.35%
Class R		$1,000.00		$1,080.30		$6.28		$1,000.00		$1,019.10		$6.09		1.20%

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366.



16	BLACKROCK FUNDS III	DECEMBER 31, 2012


Statements of Assets and Liabilities		BlackRock Funds III


December 31, 2012	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	$	590,951,736		$	1,116,050,667		$	989,019,297		$	795,936,996		$	155,037,431
Capital shares sold receivable		667,204			947,528			2,513,144			2,566,647			3,042,394
Withdrawals receivable from the LifePath Master Portfolio		3,933,744			6,500,449			6,876,955			4,149,245			—

Total assets		595,552,684			1,123,498,644			998,409,396			802,652,888			158,079,825


Liabilities
Capital shares redeemed payable		4,600,948			7,447,976			9,390,100			6,715,892			1,326,206
Contributions payable to the LifePath Master Portfolio		—			—			—			—			1,716,188
Income dividends payable		71,863			81,626			53,291			34,028			3,256
Administration fees payable		247,276			467,044			412,538			330,866			61,672
Capital gain distributions payable		402,491			190,829			270,002			140,832			9,122
Service and distribution fees payable		41,322			88,925			74,170			53,726			9,755
Professional fees payable		18,567			18,567			18,567			18,567			18,566

Total liabilities		5,382,467			8,294,967			10,218,668			7,293,911			3,144,765

Net Assets	$	590,170,217		$	1,115,203,677		$	988,190,728		$	795,358,977		$	154,935,060


Net Assets Consist of
Paid-in capital	$	527,295,071		$	982,535,509		$	906,526,656		$	701,677,892		$	143,507,787
Undistributed (distributions in excess of) net investment income		(637,231	)		(930,366	)		(45,838	)		(297,287	)		(23,692	)
Accumulated net realized gain (loss) allocated from the LifePath Master Portfolio		2,055,003			(22,715,297	)		(31,066,320	)		(25,180,913	)		961,912
Net unrealized appreciation/depreciation allocated from the LifePath Master Portfolio		61,457,374			156,313,831			112,776,230			119,159,285			10,489,053

Net Assets	$	590,170,217		$	1,115,203,677		$	988,190,728		$	795,358,977		$	154,935,060


Net Asset Value
Institutional
Net assets	$	390,150,186		$	688,544,578		$	630,131,315		$	536,902,292		$	106,813,392

Shares outstanding²		33,050,714			41,943,845			41,327,019			28,839,826			5,567,886

Net asset value	$	11.80		$	16.42		$	15.25		$	18.62		$	19.18

Investor A
Net assets	$	189,898,280		$	410,925,926		$	343,884,983		$	247,316,520		$	46,188,784

Shares outstanding²		17,519,868			26,465,048			23,076,820			13,977,494			2,408,942

Net asset value	$	10.84		$	15.53		$	14.90		$	17.69		$	19.17

Maximum offering price per share (100/94.75 of net asset value)	$	11.44		$	16.39		$	15.73		$	18.67		$	20.23

Investor C
Net assets	$	134,932		$	1,261,842		$	1,009,894		$	1,185,448		$	118,287

Shares outstanding²		11,473			77,333			66,746			64,110			6,194

Net asset value	$	11.76		$	16.32		$	15.13		$	18.49		$	19.10

Class K
Net assets	$	7,377,963		$	11,608,841		$	11,076,784		$	8,037,639		$	1,018,297

Shares outstanding²		626,317			708,358			726,380			429,946			52,914

Net asset value	$	11.78		$	16.39		$	15.25		$	18.69		$	19.24

Class R
Net assets	$	2,608,856		$	2,862,490		$	2,087,752		$	1,917,078		$	796,300

Shares outstanding²		222,084			174,946			137,601			103,414			41,609

Net asset value	$	11.75		$	16.36		$	15.17		$	18.54		$	19.14

¹ Cost — from the applicable LifePath Master Portfolio	$	529,494,362		$	959,736,836		$	876,243,067		$	676,777,711		$	144,548,378

No par value, unlimited number of shares authorized.


Statements of Operations		BlackRock Funds III


Year Ended December 31, 2012	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	$	8,353,602		$	11,564,721		$	6,701,221		$	3,179,488		$	203,566
Dividends — affiliated		6,591,671			17,115,663			18,820,979			17,531,553			3,266,596
Dividends — unaffiliated		1,363			4,056			1,093			2,068			—
Securities lending — affiliated — net		28,913			69,590			75,078			60,686			14,792
Income — affiliated		2,626			4,971			4,655			3,595			798
Expenses		(3,442,156	)		(6,442,500	)		(5,636,275	)		(4,482,421	)		(765,600	)
Fees waived		1,772,307			3,603,905			3,377,633			2,837,542			497,044

Total income		13,308,326			25,920,406			23,344,384			19,132,511			3,217,196


Portfolio Expenses
Administration		2,996,259			5,650,272			4,937,848			3,929,437			641,830
Service — Investor A		472,412			1,050,299			876,986			618,855			96,344
Service and distribution — Investor C		1,376			8,328			4,598			6,494			1,119
Service and distribution — Class R		3,230			5,641			3,637			4,553			1,426
Professional		19,356			19,356			19,356			19,356			19,356

Total expenses		3,492,633			6,733,896			5,842,425			4,578,695			760,075
Less fees waived by administrator		(19,356	)		(19,356	)		(19,356	)		(19,356	)		(19,356	)

Total expenses after fees waived		3,473,277			6,714,540			5,823,069			4,559,339			740,719

Net investment income		9,835,049			19,205,866			17,521,315			14,573,172			2,476,477


Realized and Unrealized Gain Allocated from the LifePath Master Portfolios
Net realized gain from investments, financial futures contracts, swaps and foreign currency transactions		15,257,913			30,732,921			26,368,726			22,151,518			2,825,307
Net change in unrealized appreciation/depreciation on investments, financial futures contracts, swaps and foreign currency translations		24,790,525			67,082,398			76,597,723			69,895,877			12,639,299

Total realized and unrealized gain		40,048,438			97,815,319			102,966,449			92,047,395			15,464,606

Net Increase in Net Assets Resulting from Operations	$	49,883,487		$	117,021,185		$	120,487,764		$	106,620,567		$	17,941,083


Statements of Changes in Net Assets		BlackRock Funds III


	LifePath Retirement Portfolio						LifePath 2020 Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2012			2011			2012			2011


Operations
Net investment income	$	9,835,049		$	14,580,793		$	19,205,866		$	24,446,937
Net realized gain		15,257,913			41,995,331			30,732,921			75,927,187
Net change in unrealized appreciation/depreciation		24,790,525			(31,336,679	)		67,082,398			(81,367,233	)

Net increase in net assets resulting from operations		49,883,487			25,239,445			117,021,185			19,006,891


Dividends and Distributions to Shareholders From¹
Net investment income:
Institutional		(7,061,121	)		(10,236,151	)		(12,211,664	)		(16,447,568	)
Investor A		(3,293,448	)		(4,275,518	)		(7,043,476	)		(7,869,105	)
Investor C		(1,233	)		(456	)		(8,645	)		(2,279	)
Class K		(117,736	)		(64,821	)		(166,928	)		(113,033	)
Class R		(20,400	)		(685	)		(20,272	)		(1,386	)
Net realized gain:
Institutional		(11,364,330	)		(13,363,681	)		(7,257,094	)		(30,476,493	)
Investor A		(6,014,985	)		(6,141,919	)		(4,611,046	)		(16,228,359	)
Investor C		(3,909	)		(1,658	)		(13,355	)		(10,481	)
Class K		(203,574	)		(127,622	)		(122,014	)		(232,409	)
Class R		(68,274	)		(1,249	)		(30,133	)		(6,211	)

Decrease in net assets resulting from dividends and distributions to shareholders		(28,149,010	)		(34,213,760	)		(31,484,627	)		(71,387,324	)


Capital Share Transactions
Net decrease in net assets derived from capital share transactions		(51,918,696	)		(43,210,433	)		(130,588,457	)		(10,235,703	)


Net Assets
Total decrease in net assets		(30,184,219	)		(52,184,748	)		(45,051,899	)		(62,616,136	)
Beginning of year		620,354,436			672,539,184			1,160,255,576			1,222,871,712

End of year	$	590,170,217		$	620,354,436		$	1,115,203,677		$	1,160,255,576

Distributions in excess of net investment income	$	(637,231	)	$	(117,770	)	$	(930,366	)	$	(685,247	)

Dividends and distributions are determined in accordance with federal income tax regulations.


Statements of Changes in Net Assets (continued)		BlackRock Funds III


	LifePath 2030 Portfolio						LifePath 2040 Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2012			2011			2012			2011


Operations
Net investment income	$	17,521,315		$	18,795,428		$	14,573,172		$	13,496,738
Net realized gain		26,368,726			61,537,208			22,151,518			48,872,629
Net change in unrealized appreciation/depreciation		76,597,723			(87,579,262	)		69,895,877			(82,350,608	)

Net increase (decrease) in net assets resulting from operations		120,487,764			(7,246,626	)		106,620,567			(19,981,241	)


Dividends and Distributions to Shareholders From¹
Net investment income:
Institutional		(11,440,006	)		(12,860,342	)		(10,133,572	)		(9,617,428	)
Investor A		(5,788,603	)		(5,790,050	)		(4,504,447	)		(3,802,401	)
Investor C		(6,480	)		(1,039	)		(10,309	)		(404	)
Class K		(184,947	)		(85,036	)		(145,679	)		(45,690	)
Class R		(16,375	)		(1,547	)		(18,527	)		(3,323	)
Net realized gain:
Institutional		(16,713,997	)		(7,507,892	)		(13,696,639	)		(2,721,253	)
Investor A		(9,442,859	)		(3,877,262	)		(6,725,889	)		(1,212,903	)
Investor C		(26,887	)		(1,725	)		(30,449	)		(309	)
Class K		(291,452	)		(70,970	)		(203,784	)		(23,338	)
Class R		(55,472	)		(2,104	)		(46,822	)		(2,278	)

Decrease in net assets resulting from dividends and distributions to shareholders		(43,967,078	)		(30,197,967	)		(35,516,117	)		(17,429,327	)


Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(77,236,509	)		20,401,130			(43,134,663	)		23,719,820


Net Assets
Total increase (decrease) in net assets		(715,823	)		(17,043,463	)		27,969,787			(13,690,748	)
Beginning of year		988,906,551			1,005,950,014			767,389,190			781,079,938

End of year	$	988,190,728		$	988,906,551		$	795,358,977		$	767,389,190

Undistributed (distributions in excess of) net investment income	$	(45,838	)	$	(130,742	)	$	(297,287	)	$	(57,925	)

Dividends and distributions are determined in accordance with federal income tax regulations.


Statements of Changes in Net Assets (concluded)		BlackRock Funds III


	LifePath 2050 Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2012			2011


Operations
Net investment income	$	2,476,477		$	1,551,815
Net realized gain		2,825,307			3,477,747
Net change in unrealized appreciation/depreciation		12,639,299			(10,043,951	)

Net increase (decrease) in net assets resulting from operations		17,941,083			(5,014,389	)


Dividends and Distributions to Shareholders From¹

Net investment income:
Institutional		(1,805,634	)		(1,153,867	)
Investor A		(701,770	)		(393,898	)
Investor C		(1,169	)		(256	)
Class K		(18,331	)		(6,355	)
Class R		(6,558	)		(545	)
Net realized gain:
Institutional		(1,865,783	)		(1,957,237	)
Investor A		(834,250	)		(795,921	)
Investor C		(2,137	)		(905	)
Class K		(17,918	)		(13,967	)
Class R		(13,904	)		(1,319	)

Decrease in net assets resulting from dividends and distributions to shareholders		(5,267,454	)		(4,324,270	)


Capital Share Transactions
Net increase in net assets derived from capital share transactions		38,372,478			43,659,392


Net Assets
Total increase in net assets		51,046,107			34,320,733
Beginning of year		103,888,953			69,568,220

End of year	$	154,935,060		$	103,888,953

Undistributed (distributions in excess of) net investment income	$	(23,692	)	$	7,932

Dividends and distributions are determined in accordance with federal income tax regulations.


Financial Highlights		LifePath Retirement Portfolio


	Institutional
	Year Ended December 31,
	2012			2011			2010			2009			2008


Per Share Operating Performance
Net asset value, beginning of year	$	11.39		$	11.55		$	10.80		$	9.42		$	11.46

Net investment income		0.20	¹		0.27	¹		0.23	¹		0.32	¹		0.37
Net realized and unrealized gain (loss)		0.77			0.18			0.76			1.37			(2.06	)

Net increase (decrease) from investment operations		0.97			0.45			0.99			1.69			(1.69	)

Dividends and distributions from:²
Net investment income		(0.21	)		(0.26	)		(0.22	)		(0.31	)		(0.31	)
Net realized gain		(0.35	)		(0.35	)		(0.02	)		(0.00	)³		(0.04	)

Total dividends and distributions		(0.56	)		(0.61	)		(0.24	)		(0.31	)		(0.35	)

Net asset value, end of year	$	11.80		$	11.39		$	11.55		$	10.80		$	9.42


Total Investment Return⁴
Based on net asset value		8.61%			3.96%			9.33%			18.25%			(15.04	)%


Ratios to Average Net Assets⁵
Total expenses		0.78%	^6,7		0.77%	^8,9		1.11%			1.10%			1.11%

Total expenses after fees waived		0.78%	^6,7		0.77%	^8,9		0.76%			0.76%			0.76%

Net investment income		1.70%	^6,7		2.27%	^8,9		2.10%			3.13%			3.29%


Supplemental Data
Net assets, end of year (000)	$	390,150		$	431,982		$	490,419		$	438,987		$	92,717

Portfolio turnover of the LifePath Master Portfolio		4%			4%			4%			6%			11%

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

Amount is greater than ($0.00) per share.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

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 three years ended December 31, 2010, which include gross expenses.

⁶

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.29%.

⁷

Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.08%, although the ratio does include the LifePath Portfolio’s share of the Master Portfolio’s allocated expenses and/or net investment income.

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.30%.

⁹


Financial Highlights (continued)		LifePath Retirement Portfolio


	Investor A
	Year Ended December 31,
	2012			2011			2010			2009			2008


Per Share Operating Performance
Net asset value, beginning of year	$	10.50		$	10.71		$	10.03		$	8.77		$	10.70

Net investment income		0.16	¹		0.22	¹		0.19	¹		0.27	¹		0.32
Net realized and unrealized gain (loss)		0.72			0.16			0.71			1.28			(1.92	)

Net increase (decrease) from investment operations		0.88			0.38			0.90			1.55			(1.60	)

Dividends and distributions from:²
Net investment income		(0.19	)		(0.24	)		(0.20	)		(0.29	)		(0.29	)
Net realized gain		(0.35	)		(0.35	)		(0.02	)		(0.00	)³		(0.04	)

Total dividends and distributions		(0.54	)		(0.59	)		(0.22	)		(0.29	)		(0.33	)

Net asset value, end of year	$	10.84		$	10.50		$	10.71		$	10.03		$	8.77


Total Investment Return⁴
Based on net asset value		8.46%			3.60%			9.12%			17.96%			(15.24	)%


Ratios to Average Net Assets⁵
Total expenses		1.03%	^6,7		1.02%	^8,9		1.37%			1.34%			1.36%

Total expenses after fees waived		1.03%	^6,7		1.02%	^8,9		1.02%			1.00%			1.01%

Net investment income		1.47%	^6,7		2.03%	^8,9		1.86%			2.83%			3.11%


Supplemental Data
Net assets, end of year (000)	$	189,898		$	183,967		$	181,297		$	147,741		$	25,030

Portfolio turnover of the LifePath Master Portfolio		4%			4%			4%			6%			11%

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

Amount is greater than ($0.00) per share.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

⁶

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.29%.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.30%.

⁹


Financial Highlights (continued)		LifePath Retirement Portfolio


	Investor C
	Year Ended December 31,						Period May 3, 2010¹ to December 31, 2010
	2012			2011			Period May 3, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.36		$	11.55		$	11.22

Net investment income²		0.08			0.17			0.09
Net realized and unrealized gain		0.77			0.16			0.37

Net increase from investment operations		0.85			0.33			0.46

Dividends and distributions from:³
Net investment income		(0.10	)		(0.17	)		(0.11	)
Net realized gain		(0.35	)		(0.35	)		(0.02	)

Total dividends and distributions		(0.45	)		(0.52	)		(0.13	)

Net asset value, end of period	$	11.76		$	11.36		$	11.55


Total Investment Return⁴
Based on net asset value		7.55%			2.86%			4.22%	⁵


Ratios to Average Net Assets⁶
Total expenses		1.78%	^7,8		1.78%	^9,10		2.11%	¹¹

Total expenses after fees waived		1.78%	^7,8		1.78%	^9,10		1.77%	¹¹

Net investment income		0.70%	^7,8		1.42%	^9,10		1.23%	¹¹


Supplemental Data
Net assets, end of period (000)	$	135		$	55		$	21

Portfolio turnover of the LifePath Master Portfolio		4%			4%			4%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

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

⁷

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.29%.

⁸

⁹

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.30%.

¹⁰

¹¹

Annualized.


Financial Highlights (continued)		LifePath Retirement Portfolio


	Class K
	Year Ended December 31,												Period May 30, 2008¹ to December 31, 2008
	2012			2011			2010			2009			Period May 30, 2008¹ to December 31, 2008


Per Share Operating Performance
Net asset value, beginning of period	$	11.37		$	11.54		$	10.78		$	9.44		$	11.46

Net investment income		0.25	²		0.32	²		0.28	²		0.35	²		0.25
Net realized and unrealized gain (loss)		0.77			0.17			0.76			1.33			(1.97	)

Net increase (decrease) from investment operations		1.02			0.49			1.04			1.68			(1.72	)

Dividends and distributions from:³
Net investment income		(0.26	)		(0.31	)		(0.26	)		(0.34	)		(0.26	)
Net realized gain		(0.35	)		(0.35	)		(0.02	)		(0.00	)⁴		(0.04	)

Total dividends and distributions		(0.61	)		(0.66	)		(0.28	)		(0.34	)		(0.30	)

Net asset value, end of period	$	11.78		$	11.37		$	11.54		$	10.78		$	9.44


Total Investment Return⁵
Based on net asset value		9.03%			4.27%			9.82%			18.53%			(15.53	)%⁶


Ratios to Average Net Assets⁷
Total expenses		0.43%	^8,9		0.44%	^10,11		0.76%			0.74%			0.79%	¹²

Total expenses after fees waived		0.43%	^8,9		0.43%	^10,11		0.41%			0.40%			0.44%	¹²

Net investment income		2.07%	^8,9		2.69%	^10,11		2.49%			3.43%			4.08%	¹²


Supplemental Data
Net assets, end of period (000)	$	7,378		$	4,309		$	769		$	292		$	35

Portfolio turnover of the LifePath Master Portfolio		4%			4%			4%			6%			11%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.30%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.29%.

¹¹

¹²

Annualized.


Financial Highlights (concluded)		LifePath Retirement Portfolio


	Class R
	Year Ended December 31,						Period May 3, 2010¹ to December 31, 2010
	2012			2011			Period May 3, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	11.36		$	11.54		$	11.22

Net investment income²		0.17			0.21			0.14
Net realized and unrealized gain		0.76			0.17			0.36

Net increase from investment operations		0.93			0.38			0.50

Dividends and distributions from:³
Net investment income		(0.19	)		(0.21	)		(0.16	)
Net realized gain		(0.35	)		(0.35	)		(0.02	)

Total dividends and distributions		(0.54	)		(0.56	)		(0.18	)

Net asset value, end of period	$	11.75		$	11.36		$	11.54


Total Investment Return⁴
Based on net asset value		8.26%			3.32%			4.55%	⁵


Ratios to Average Net Assets⁶
Total expenses		1.27%	^7,8		1.28%	^9,10		1.61%	¹¹

Total expenses after fees waived		1.26%	^7,8		1.27%	^9,10		1.26%	¹¹

Net investment income		1.38%	^7,8		1.76%	^9,10		1.84%	¹¹


Supplemental Data
Net assets, end of period (000)	$	2,609		$	41		$	33

Portfolio turnover of the LifePath Master Portfolio		4%			4%			4%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

⁷

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.32%.

⁸

⁹

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.29%.

¹⁰

¹¹

Annualized.


Financial Highlights		LifePath 2020 Portfolio


	Institutional
	Year Ended December 31,
	2012			2011			2010			2009			2008


Per Share Operating Performance
Net asset value, beginning of year	$	15.22		$	15.92		$	14.62		$	12.32		$	16.98

Net investment income		0.29	¹		0.33	¹		0.29	¹		0.35	¹		0.44
Net realized and unrealized gain (loss)		1.38			(0.09	)		1.28			2.38			(4.67	)

Net increase (decrease) from investment operations		1.67			0.24			1.57			2.73			(4.23	)

Dividends and distributions from:²
Net investment income		(0.29	)		(0.33	)		(0.27	)		(0.43	)		(0.31	)
Net realized gain		(0.18	)		(0.61	)		—			—			(0.12	)
Return of capital		—			—			—			(0.00	)³		—

Total dividends and distributions		(0.47	)		(0.94	)		(0.27	)		(0.43	)		(0.43	)

Net asset value, end of year	$	16.42		$	15.22		$	15.92		$	14.62		$	12.32


Total Investment Return⁴
Based on net asset value		10.99%			1.46%			10.90%			22.71%			(25.42	)%


Ratios to Average Net Assets⁵
Total expenses		0.75%	^6,7		0.75%	^8,9		1.08%			1.08%			1.07%

Total expenses after fees waived		0.75%	^6,7		0.74%	^8,9		0.73%			0.72%			0.73%

Net investment income		1.77%	^6,7		2.05%	^8,9		1.95%			2.65%			2.65%


Supplemental Data
Net assets, end of year (000)	$	688,545		$	752,092		$	843,339		$	663,890		$	432,717

Portfolio turnover of the LifePath Master Portfolio		5%			5%			4%			6%			13%

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

Amount is greater than ($0.00) per share.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

⁶

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.32%.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.32%.

⁹


Financial Highlights (continued)		LifePath 2020 Portfolio


	Investor A
	Year Ended December 31,
	2012			2011			2010			2009			2008


Per Share Operating Performance
Net asset value, beginning of year	$	14.43		$	15.14		$	13.93		$	11.75		$	16.24

Net investment income		0.24	¹		0.28	¹		0.24	¹		0.30	¹		0.37
Net realized and unrealized gain (loss)		1.30			(0.09	)		1.21			2.28			(4.45	)

Net increase (decrease) from investment operations		1.54			0.19			1.45			2.58			(4.08	)

Dividends and distributions from:²
Net investment income		(0.26	)		(0.29	)		(0.24	)		(0.40	)		(0.29	)
Net realized gain		(0.18	)		(0.61	)		—			—			(0.12	)
Return of capital		—			—			—			(0.00	)³		—

Total dividends and distributions		(0.44	)		(0.90	)		(0.24	)		(0.40	)		(0.41	)

Net asset value, end of year	$	15.53		$	14.43		$	15.14		$	13.93		$	11.75


Total Investment Return⁴
Based on net asset value		10.67%			1.26%			10.56%			22.42%			(25.57	)%


Ratios to Average Net Assets⁵
Total expenses		1.00%	^6,7		1.00%	^8,9		1.34%			1.33%			1.32%

Total expenses after fees waived		1.00%	^6,7		1.00%	^8,9		0.99%			0.97%			0.98%

Net investment income		1.55%	^6,7		1.82%	^8,9		1.71%			2.42%			2.51%


Supplemental Data
Net assets, end of year (000)	$	410,926		$	401,477		$	376,851		$	268,514		$	179,389

Portfolio turnover of the LifePath Master Portfolio		5%			5%			4%			6%			13%

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

Amount is greater than ($0.00) per share.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

⁶

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.32%.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.32%.

⁹


Financial Highlights (continued)		LifePath 2020 Portfolio


	Investor C
	Year Ended December 31,						Period May 3, 2010¹ to December 31, 2010
	2012			2011			Period May 3, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	15.16		$	15.89		$	15.29

Net investment income²		0.14			0.17			0.12
Net realized and unrealized gain (loss)		1.36			(0.09	)		0.64

Net increase from investment operations		1.50			0.08			0.76

Dividends and distributions from:³
Net investment income		(0.16	)		(0.20	)		(0.16	)
Net realized gain		(0.18	)		(0.61	)		—

Total dividends and distributions		(0.34	)		(0.81	)		(0.16	)

Net asset value, end of period	$	16.32		$	15.16		$	15.89


Total Investment Return⁴
Based on net asset value		9.87%			0.47%			5.03%	⁵


Ratios to Average Net Assets⁶
Total expenses		1.75%	^7,8		1.75%	^9,10		2.09%	¹¹

Total expenses after fees waived		1.75%	^7,8		1.75%	^9,10		1.74%	¹¹

Net investment income		0.87%	^7,8		1.05%	^9,10		1.23%	¹¹


Supplemental Data
Net assets, end of period (000)	$	1,262		$	301		$	116

Portfolio turnover of the LifePath Master Portfolio		5%			5%			4%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

⁷

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.32%.

⁸

⁹

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.32%.

¹⁰

¹¹

Annualized.


Financial Highlights (continued)		LifePath 2020 Portfolio


	Class K
	Year Ended December 31,												Period May 30, 2008¹ to December 31, 2008
	2012			2011			2010			2009			Period May 30, 2008¹ to December 31, 2008


Per Share Operating Performance
Net asset value, beginning of period	$	15.20		$	15.91		$	14.61		$	12.33		$	16.90

Net investment income		0.35	²		0.40	²		0.34	²		0.40	²		0.30
Net realized and unrealized gain (loss)		1.37			(0.12	)		1.28			2.35			(4.48	)

Net increase (decrease) from investment operations		1.72			0.28			1.62			2.75			(4.18	)

Dividends and distributions from:³
Net investment income		(0.35	)		(0.38	)		(0.32	)		(0.47	)		(0.27	)
Net realized gain		(0.18	)		(0.61	)		—			—			(0.12	)
Return of capital		—			—			—			(0.00	)⁴		—

Total dividends and distributions		(0.53	)		(0.99	)		(0.32	)		(0.47	)		(0.39	)

Net asset value, end of period	$	16.39		$	15.20		$	15.91		$	14.61		$	12.33


Total Investment Return⁵
Based on net asset value		11.36%			1.78%			11.28%			23.15%			(25.28	)%⁶


Ratios to Average Net Assets⁷
Total expenses		0.40%	^8,9		0.40%	^10,11		0.74%			0.73%			0.76%	¹²

Total expenses after fees waived		0.40%	^8,9		0.40%	^10,11		0.39%			0.37%			0.42%	¹²

Net investment income		2.18%	^8,9		2.47%	^10,11		2.29%			3.05%			4.27%	¹²


Supplemental Data
Net assets, end of period (000)	$	11,609		$	6,224		$	2,485		$	967		$	416

Portfolio turnover of the LifePath Master Portfolio		5%			5%			4%			6%			13%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.32%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.32%.

¹¹

¹²

Annualized.


Financial Highlights (concluded)		LifePath 2020 Portfolio


	Class R
	Year Ended December 31,						Period May 3, 2010¹ to December 31, 2010
	2012			2011			Period May 3, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	15.20		$	15.88		$	15.29

Net investment income²		0.25			0.24			0.23
Net realized and unrealized gain (loss)		1.32			(0.07	)		0.57

Net increase from investment operations		1.57			0.17			0.80

Dividends and distributions from:³
Net investment income		(0.23	)		(0.24	)		(0.21	)
Net realized gain		(0.18	)		(0.61	)		—

Total dividends and distributions		(0.41	)		(0.85	)		(0.21	)

Net asset value, end of period	$	16.36		$	15.20		$	15.88


Total Investment Return⁴
Based on net asset value		10.36%			1.06%			5.34%	⁵


Ratios to Average Net Assets⁶
Total expenses		1.25%	^7,8		1.25%	^9,10		1.58%	¹¹

Total expenses after fees waived		1.25%	^7,8		1.25%	^9,10		1.23%	¹¹

Net investment income		1.53%	^7,8		1.51%	^9,10		2.29%	¹¹


Supplemental Data
Net assets, end of period (000)	$	2,862		$	161		$	81

Portfolio turnover of the LifePath Master Portfolio		5%			5%			4%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

⁷

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.33%.

⁸

⁹

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.32%.

¹⁰

¹¹

Annualized.


Financial Highlights		LifePath 2030 Portfolio


	Institutional
	Year Ended December 31,
	2012			2011			2010			2009			2008


Per Share Operating Performance
Net asset value, beginning of year	$	14.11		$	14.63		$	13.31		$	10.92		$	16.19

Net investment income		0.28	¹		0.28	¹		0.25	¹		0.29	¹		0.35
Net realized and unrealized gain (loss)		1.56			(0.37	)		1.31			2.46			(5.29	)

Net increase (decrease) from investment operations		1.84			(0.09	)		1.56			2.75			(4.94	)

Dividends and distributions from:²
Net investment income		(0.28	)		(0.27	)		(0.24	)		(0.36	)		(0.25	)
Net realized gain		(0.42	)		(0.16	)		—			—			(0.08	)
Return of capital		—			—			—			(0.00	)³		—

Total dividends and distributions		(0.70	)		(0.43	)		(0.24	)		(0.36	)		(0.33	)

Net asset value, end of year	$	15.25		$	14.11		$	14.63		$	13.31		$	10.92


Total Investment Return⁴
Based on net asset value		13.09%			(0.63	)%		11.86%			25.77%			(31.03	)%


Ratios to Average Net Assets⁵
Total expenses		0.73%	^6,7		0.73%	^8,9		1.07%			1.06%			1.06%

Total expenses after fees waived		0.73%	^6,7		0.72%	^8,9		0.70%			0.70%			0.72%

Net investment income		1.84%	^6,7		1.88%	^8,9		1.85%			2.47%			2.29%


Supplemental Data
Net assets, end of year (000)	$	630,131		$	642,867		$	696,817		$	517,817		$	315,028

Portfolio turnover of the LifePath Master Portfolio		5%			7%			3%			7%			13%

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

Amount is greater than ($0.00) per share.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

⁶

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.34%.

⁷

Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.13%, although the ratio does include the LifePath Portfolio’s share of the Master Portfolio’s allocated expenses and/or net investment income.

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.34%.

⁹


Financial Highlights (continued)		LifePath 2030 Portfolio


	Investor A
	Year Ended December 31,
	2012			2011			2010			2009			2008


Per Share Operating Performance
Net asset value, beginning of year	$	13.81		$	14.33		$	13.05		$	10.71		$	15.90

Net investment income		0.24	¹		0.24	¹		0.21	¹		0.26	¹		0.29
Net realized and unrealized gain (loss)		1.52			(0.36	)		1.28			2.41			(5.17	)

Net increase (decrease) from investment operations		1.76			(0.12	)		1.49			2.67			(4.88	)

Dividends and distributions from:²
Net investment income		(0.25	)		(0.24	)		(0.21	)		(0.33	)		(0.23	)
Net realized gain		(0.42	)		(0.16	)		—			—			(0.08	)
Return of capital		—			—			—			(0.00	)³		—

Total dividends and distributions		(0.67	)		(0.40	)		(0.21	)		(0.33	)		(0.31	)

Net asset value, end of year	$	14.90		$	13.81		$	14.33		$	13.05		$	10.71


Total Investment Return⁴
Based on net asset value		12.75%			(0.87	)%		11.53%			25.51%			(31.19	)%


Ratios to Average Net Assets⁵
Total expenses		0.98%	^6,7		0.98%	^8,9		1.32%			1.31%			1.31%

Total expenses after fees waived		0.98%	^6,7		0.97%	^8,9		0.96%			0.95%			0.97%

Net investment income		1.62%	^6,7		1.65%	^8,9		1.60%			2.23%			2.13%


Supplemental Data
Net assets, end of year (000)	$	343,885		$	339,249		$	307,189		$	210,372		$	133,199

Portfolio turnover of the LifePath Master Portfolio		5%			7%			3%			7%			13%

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

Amount is greater than ($0.00) per share.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

⁶

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.34%.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.34%.

⁹


Financial Highlights (continued)		LifePath 2030 Portfolio


	Investor C
	Year Ended December 31,						Period May 3, 2010¹ to December 31, 2010
	2012			2011			Period May 3, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	14.05		$	14.62		$	13.97

Net investment income²		0.16			0.14			0.10
Net realized and unrealized gain (loss)		1.51			(0.38	)		0.67

Net increase (decrease) from investment operations		1.67			(0.24	)		0.77

Dividends and distributions from:³
Net investment income		(0.17	)		(0.17	)		(0.12	)
Net realized gain		(0.42	)		(0.16	)		—

Total dividends and distributions		(0.59	)		(0.33	)		(0.12	)

Net asset value, end of period	$	15.13		$	14.05		$	14.62


Total Investment Return⁴
Based on net asset value		11.92%			(1.63	)%		5.64%	⁵


Ratios to Average Net Assets⁶
Total expenses		1.72%	^7,8		1.74%	^9,10		2.07%	¹¹

Total expenses after fees waived		1.72%	^7,8		1.74%	^9,10		1.71%	¹¹

Net investment income		1.05%	^7,8		1.01%	^9,10		1.09%	¹¹


Supplemental Data
Net assets, end of period (000)	$	1,010		$	154		$	21

Portfolio turnover of the LifePath Master Portfolio		5%			7%			3%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

⁷

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.35%.

⁸

⁹

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.34%.

¹⁰

¹¹

Annualized.


Financial Highlights (continued)		LifePath 2030 Portfolio


	Class K
	Year Ended December 31,												Period May 30, 2008¹ to December 31, 2008
	2012			2011			2010			2009			Period May 30, 2008¹ to December 31, 2008


Per Share Operating Performance
Net asset value, beginning of period	$	14.12		$	14.63		$	13.30		$	10.92		$	16.07

Net investment income		0.34	²		0.35	²		0.29	²		0.38	²		0.25
Net realized and unrealized gain (loss)		1.55			(0.37	)		1.32			2.40			(5.09	)

Net increase (decrease) from investment operations		1.89			(0.02	)		1.61			2.78			(4.84	)

Dividends and distributions from:³
Net investment income		(0.34	)		(0.33	)		(0.28	)		(0.40	)		(0.23	)
Net realized gain		(0.42	)		(0.16	)		—			—			(0.08	)
Return of capital		—			—			—			(0.00	)⁴		—

Total dividends and distributions		(0.76	)		(0.49	)		(0.28	)		(0.40	)		(0.31	)

Net asset value, end of period	$	15.25		$	14.12		$	14.63		$	13.30		$	10.92


Total Investment Return⁵
Based on net asset value		13.43%			(0.20	)%		12.32%			26.23%			(30.65	)%⁶


Ratios to Average Net Assets⁷
Total expenses		0.38%	^8,9		0.38%	^10,11		0.72%			0.71%			0.73%	¹²

Total expenses after fees waived		0.38%	^8,9		0.38%	^10,11		0.35%			0.35%			0.39%	¹²

Net investment income		2.26%	^8,9		2.41%	^10,11		2.17%			3.19%			3.44%	¹²


Supplemental Data
Net assets, end of period (000)	$	11,077		$	6,448		$	1,849		$	396		$	95

Portfolio turnover of the LifePath Master Portfolio		5%			7%			3%			7%			13%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.35%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.34%.

¹¹

¹²

Annualized.


Financial Highlights (concluded)		LifePath 2030 Portfolio


	Class R
	Year Ended December 31,						Period May 3, 2010¹ to December 31, 2010
	2012			2011			Period May 3, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	14.08		$	14.60		$	13.97

Net investment income²		0.28			0.20			0.22
Net realized and unrealized gain (loss)		1.47			(0.36	)		0.60

Net increase (decrease) from investment operations		1.75			(0.16	)		0.82

Dividends and distributions from:³
Net investment income		(0.24	)		(0.20	)		(0.19	)
Net realized gain		(0.42	)		(0.16	)		—

Total dividends and distributions		(0.66	)		(0.36	)		(0.19	)

Net asset value, end of period	$	15.17		$	14.08		$	14.60


Total Investment Return⁴
Based on net asset value		12.48%			(1.12	)%		5.96%	⁵


Ratios to Average Net Assets⁶
Total expenses		1.22%	^7,8		1.23%	^9,10		1.56%	¹¹

Total expenses after fees waived		1.22%	^7,8		1.23%	^9,10		1.20%	¹¹

Net investment income		1.84%	^7,8		1.41%	^9,10		2.39%	¹¹


Supplemental Data
Net assets, end of period (000)	$	2,088		$	188		$	75

Portfolio turnover of the LifePath Master Portfolio		5%			7%			3%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

⁷

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.35%.

⁸

⁹

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.34%.

¹⁰

¹¹

Annualized.


Financial Highlights		LifePath 2040 Portfolio


	Institutional
	Year Ended December 31,
	2012			2011			2010			2009			2008


Per Share Operating Performance
Net asset value, beginning of year	$	16.98		$	17.78		$	16.04		$	12.88		$	20.32

Net investment income		0.35	¹		0.31	¹		0.28	¹		0.32	¹		0.35
Net realized and unrealized gain (loss)		2.14			(0.73	)		1.73			3.22			(7.45	)

Net increase (decrease) from investment operations		2.49			(0.42	)		2.01			3.54			(7.10	)

Dividends and distributions from:²
Net investment income		(0.36	)		(0.30	)		(0.27	)		(0.38	)		(0.26	)
Net realized gain		(0.49	)		(0.08	)		—			—			(0.08	)

Total dividends and distributions		(0.85	)		(0.38	)		(0.27	)		(0.38	)		(0.34	)

Net asset value, end of year	$	18.62		$	16.98		$	17.78		$	16.04		$	12.88


Total Investment Return³
Based on net asset value		14.73%			(2.38	)%		12.71%			28.08%			(35.40	)%


Ratios to Average Net Assets⁴
Total expenses		0.71%	^5,6		0.71%	^7,8		1.06%			1.05%			1.04%

Total expenses after fees waived		0.71%	^5,6		0.70%	^7,8		0.69%			0.69%			0.69%

Net investment income		1.91%	^5,6		1.73%	^7,8		1.75%			2.33%			2.02%


Supplemental Data
Net assets, end of year (000)	$	536,902		$	528,655		$	556,626		$	435,317		$	248,491

Portfolio turnover of the LifePath Master Portfolio		4%			8%			4%			6%			14%

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁴

⁵

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.36%.

⁶

Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.15%, although the ratio does include the LifePath Portfolio’s share of the Master Portfolio’s allocated expenses and/or net investment income.

⁷

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.35%.

⁸


Financial Highlights (continued)		LifePath 2040 Portfolio


	Investor A
	Year Ended December 31,
	2012			2011			2010			2009			2008


Per Share Operating Performance
Net asset value, beginning of year	$	16.18		$	16.97		$	15.33		$	12.32		$	19.46

Net investment income		0.30	¹		0.25	¹		0.23	¹		0.28	¹		0.29
Net realized and unrealized gain (loss)		2.02			(0.70	)		1.65			3.08			(7.13	)

Net increase (decrease) from investment operations		2.32			(0.45	)		1.88			3.36			(6.84	)

Dividends and distributions from:²
Net investment income		(0.32	)		(0.26	)		(0.24	)		(0.35	)		(0.22	)
Net realized gain		(0.49	)		(0.08	)		—			—			(0.08	)

Total dividends and distributions		(0.81	)		(0.34	)		(0.24	)		(0.35	)		(0.30	)

Net asset value, end of year	$	17.69		$	16.18		$	16.97		$	15.33		$	12.32


Total Investment Return³
Based on net asset value		14.41%			(2.65	)%		12.40%			27.85%			(35.56	)%


Ratios to Average Net Assets⁴
Total expenses		0.96%	^5,6		0.96%	^7,8		1.31%			1.30%			1.29%

Total expenses after fees waived		0.96%	^5,6		0.95%	^7,8		0.94%			0.94%			0.94%

Net investment income		1.69%	^5,6		1.50%	^7,8		1.50%			2.08%			1.80%


Supplemental Data
Net assets, end of year (000)	$	247,317		$	233,427		$	224,164		$	156,564		$	96,873

Portfolio turnover of the LifePath Master Portfolio		4%			8%			4%			6%			14%

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴

⁵

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.36%.

⁶

⁷

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.35%.

⁸


Financial Highlights (continued)		LifePath 2040 Portfolio


	Investor C
	Year Ended December 31,						Period May 3, 2010¹ to December 31, 2010
	2012			2011			Period May 3, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	16.92		$	17.77		$	16.89

Net investment income²		0.21			0.13			0.12
Net realized and unrealized gain (loss)		2.08			(0.73	)		0.90

Net increase (decrease) from investment operations		2.29			(0.60	)		1.02

Dividends and distributions from:³
Net investment income		(0.23	)		(0.17	)		(0.14	)
Net realized gain		(0.49	)		(0.08	)		—

Total dividends and distributions		(0.72	)		(0.25	)		(0.14	)

Net asset value, end of period	$	18.49		$	16.92		$	17.77


Total Investment Return⁴
Based on net asset value		13.59%			(3.39	)%		6.15%	⁵


Ratios to Average Net Assets⁶
Total expenses		1.71%	^7,8		1.72%	^9,10		2.06%	¹¹

Total expenses after fees waived		1.71%	^7,8		1.71%	^9,10		1.69%	¹¹

Net investment income		1.12%	^7,8		0.72%	⁹¹⁰		1.11%	¹¹


Supplemental Data
Net assets, end of period (000)	$	1,185		$	98		$	21

Portfolio turnover of the LifePath Master Portfolio		4%			8%			4%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

⁷

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.36%.

⁸

⁹

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.35%.

¹⁰

¹¹

Annualized.


Financial Highlights (continued)		LifePath 2040 Portfolio


	Class K
	Year Ended December 31,												Period May 30, 2008¹ to December 31, 2008
	2012			2011			2010			2009			Period May 30, 2008¹ to December 31, 2008


Per Share Operating Performance
Net asset value, beginning of period	$	17.05		$	17.84		$	16.03		$	12.87		$	20.11

Net investment income		0.44	²		0.46	²		0.39	²		0.38	²		0.31
Net realized and unrealized gain (loss)		2.12			(0.80	)		1.70			3.21			(7.21	)

Net increase (decrease) from investment operations		2.56			(0.34	)		2.09			3.59			(6.90	)

Dividends and distributions from:³
Net investment income		(0.43	)		(0.37	)		(0.28	)		(0.43	)		(0.26	)
Net realized gain		(0.49	)		(0.08	)		—			—			(0.08	)

Total dividends and distributions		(0.92	)		(0.45	)		(0.28	)		(0.43	)		(0.34	)

Net asset value, end of period	$	18.69		$	17.05		$	17.84		$	16.03		$	12.87


Total Investment Return⁴
Based on net asset value		15.08%			(1.95	)%		13.18%			28.52%			(34.75	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.36%	^7,8		0.37%	^9,10		0.70%			0.70%			0.69%	¹¹

Total expenses after fees waived		0.36%	^7,8		0.36%	^9,10		0.33%			0.34%			0.36%	¹¹

Net investment income		2.36%	^7,8		2.60%	^9,10		2.34%			2.73%			3.31%	¹¹


Supplemental Data
Net assets, end of period (000)	$	8,038		$	4,749		$	144		$	11		$	6

Portfolio turnover of the LifePath Master Portfolio		4%			8%			4%			6%			14%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

⁷

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.36%.

⁸

⁹

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.35%.

¹⁰

¹¹

Annualized.


Financial Highlights (concluded)		LifePath 2040 Portfolio


	Class R
	Year Ended December 31,						Period May 3, 2010¹ to December 31, 2010
	2012			2011			Period May 3, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	16.93		$	17.74		$	16.89

Net investment income²		0.34			0.23			0.34
Net realized and unrealized gain (loss)		2.05			(0.74	)		0.73

Net increase (decrease) from investment operations		2.39			(0.51	)		1.07

Dividends and distributions from:³
Net investment income		(0.29	)		(0.22	)		(0.22	)
Net realized gain		(0.49	)		(0.08	)		—

Total dividends and distributions		(0.78	)		(0.30	)		(0.22	)

Net asset value, end of period	$	18.54		$	16.93		$	17.74


Total Investment Return⁴
Based on net asset value		14.19%			(2.88	)%		6.47%	⁵


Ratios to Average Net Assets⁶
Total expenses		1.21%	^7,8		1.22%	^9,10		1.55%	¹¹

Total expenses after fees waived		1.21%	^7,8		1.22%	^9,10		1.19%	¹¹

Net investment income		1.83%	^7,8		1.35%	^9,10		3.13%	¹¹


Supplemental Data
Net assets, end of period (000)	$	1,917		$	460		$	126

Portfolio turnover of the LifePath Master Portfolio		4%			8%			4%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

⁷

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.37%.

⁸

⁹

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.35%.

¹⁰

¹¹

Annualized.


Financial Highlights		LifePath 2050 Portfolio


	Institutional
	Year Ended December 31,												Period June 30, 2008¹ to December 31, 2008
	2012			2011			2010			2009			Period June 30, 2008¹ to December 31, 2008


Per Share Operating Performance
Net asset value, beginning of period	$	17.16		$	18.58		$	16.81		$	13.46		$	20.00

Net investment income		0.37	²		0.31	²		0.31	²		0.38	²		0.10
Net realized and unrealized gain (loss)		2.37			(0.99	)		1.91			3.68			(6.52	)

Net increase (decrease) from investment operations		2.74			(0.68	)		2.22			4.06			(6.42	)

Dividends and distributions from:³
Net investment income		(0.37	)		(0.29	)		(0.28	)		(0.16	)		(0.09	)
Net realized gain		(0.35	)		(0.45	)		(0.17	)		(0.55	)		(0.00	)⁴
Return of capital		—			—			—			—			(0.03	)

Total dividends and distributions		(0.72	)		(0.74	)		(0.45	)		(0.71	)		(0.12	)

Net asset value, end of period	$	19.18		$	17.16		$	18.58		$	16.81		$	13.46


Total Investment Return⁵
Based on net asset value		16.05%			(3.78	)%		13.43%			30.35%			(32.18	)%⁶


Ratios to Average Net Assets⁷
Total expenses		0.72%	^8,9		0.71%	^10,11		1.09%			1.27%			12.80%	¹²

Total expenses after fees waived		0.71%	^8,9		0.68%	^10,11		0.67%			0.67%			0.68%	¹²

Net investment income		1.99%	^8,9		1.69%	^10,11		1.83%			2.39%			2.14%	¹²


Supplemental Data
Net assets, end of period	$	106,813		$	70,555		$	50,613		$	13,992		$	444

Portfolio turnover of the LifePath Master Portfolio		5%			13%			5%			12%			0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.39%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.40%.

¹¹

¹²

Annualized.

¹³

Rounds to less than 1% .


Financial Highlights (continued)		LifePath 2050 Portfolio


	Investor A
	Year Ended December 31,												Period from June 30, 2008¹ to December 31, 2008
	2012			2011			2010			2009			Period from June 30, 2008¹ to December 31, 2008


Per Share Operating Performance
Net asset value, beginning of period	$	17.15		$	18.58		$	16.82		$	13.47		$	20.00

Net investment income		0.33	²		0.26	²		0.28	²		0.41	²		0.14
Net realized and unrealized gain (loss)		2.36			(0.99	)		1.90			3.63			(6.59	)

Net increase (decrease) from investment operations		2.69			(0.73	)		2.18			4.04			(6.45	)

Dividends and distributions from:³
Net investment income		(0.32	)		(0.25	)		(0.25	)		(0.14	)		(0.06	)
Net realized gain		(0.35	)		(0.45	)		(0.17	)		(0.55	)		(0.00	)⁴
Return of capital		—			—			—			—			(0.02	)

Total dividends and distributions		(0.67	)		(0.70	)		(0.42	)		(0.69	)		(0.08	)

Net asset value, end of period	$	19.17		$	17.15		$	18.58		$	16.82		$	13.47


Total Investment Return⁵
Based on net asset value		15.80%			(4.06	)%		13.14%			30.08%			(32.28	)%⁶


Ratios to Average Net Assets⁷
Total expenses		0.97%	^8,9		0.96%	^10,11		1.34%			1.35%			13.04%	¹²

Total expenses after fees waived		0.96%	^8,9		0.94%	^10,11		0.92%			0.84%			0.91%	¹²

Net investment income		1.77%	^8,9		1.44%	^10,11		1.67%			2.45%			1.68%	¹²


Supplemental Data
Net assets, end of period (000)	$	46,189		$	32,617		$	18,809		$	3,056		$	34

Portfolio turnover of the LifePath Master Portfolio		5%			13%			5%			12%			0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.39%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.40%.

¹¹

¹²

Annualized.

¹³

Rounds to less than 1% .


Financial Highlights (continued)		LifePath 2050 Portfolio


	Investor C
	Year Ended December 31,						Period May 3, 2010¹ to December 31, 2010
	2012			2011			Period May 3, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	17.10		$	18.57		$	17.75

Net investment income²		0.17			0.12			0.12
Net realized and unrealized gain (loss)		2.37			(0.99	)		1.02

Net increase (decrease) from investment operations		2.54			(0.87	)		1.14

Dividends and distributions from:³
Net investment income		(0.19	)		(0.15	)		(0.15	)
Net realized gain		(0.35	)		(0.45	)		(0.17	)

Total dividends and distributions		(0.54	)		(0.60	)		(0.32	)

Net asset value, end of period	$	19.10		$	17.10		$	18.57


Total Investment Return⁴
Based on net asset value		14.93%			(4.76	)%		6.55%	⁵


Ratios to Average Net Assets⁶
Total expenses		1.72%	^7,8		1.71%	^9,10		2.07%	¹¹

Total expenses after fees waived		1.70%	^7,8		1.69%	^9,10		1.64%	¹¹

Net investment income		0.91%	^7,8		0.63%	^9,10		1.04%	¹¹


Supplemental Data
Net assets, end of period (000)	$	118		$	39		$	21

Portfolio turnover of the LifePath Master Portfolio		5%			13%			5%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

⁷

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.39%.

⁸

⁹

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.40%.

¹⁰

¹¹

Annualized.


Financial Highlights (continued)		LifePath 2050 Portfolio


	Class K
	Year Ended December 31,												Period June 30, 2008¹ to December 31, 2008
	2012			2011			2010			2009			Period June 30, 2008¹ to December 31, 2008


Per Share Operating Performance
Net asset value, beginning of period	$	17.20		$	18.63		$	16.85		$	13.46		$	20.00

Net investment income		0.45	²		0.47	²		0.37	²		0.64	²		0.17
Net realized and unrealized gain (loss)		2.37			(1.10	)		1.91			3.49			(6.57	)

Net increase (decrease) from investment operations		2.82			(0.63	)		2.28			4.13			(6.40	)

Dividends and distributions from:³
Net investment income		(0.43	)		(0.35	)		(0.33	)		(0.19	)		(0.11	)
Net realized gain		(0.35	)		(0.45	)		(0.17	)		(0.55	)		(0.00	)⁴
Return of capital		—			—			—			—			(0.03	)

Total dividends and distributions		(0.78	)		(0.80	)		(0.50	)		(0.74	)		(0.14	)

Net asset value, end of period	$	19.24		$	17.20		$	18.63		$	16.85		$	13.46


Total Investment Return⁵
Based on net asset value		16.53%			(3.48	)%		13.79%			30.89%			(32.10	)%⁶


Ratios to Average Net Assets⁷
Total expenses		0.37%	^8,9		0.36%	^10,11		0.76%			1.37%			12.41%	¹²

Total expenses after fees waived		0.36%	^8,9		0.34%	^10,11		0.33%			0.58%			0.29%	¹²

Net investment income		2.38%	^8,9		2.56%	^10,11		2.19%			4.34%			3.94%	¹²


Supplemental Data
Net assets, end of period (000)	$	1,018		$	625		$	86		$	55		$	24

Portfolio turnover of the LifePath Master Portfolio		5%			13%			5%			12%			0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

⁸

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.39%.

⁹

¹⁰

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.40%.

¹¹

¹²

Annualized.

¹³

Rounds to less than 1% .


Financial Highlights (concluded)		LifePath 2050 Portfolio


	Class R
	Year Ended December 31,						Period May 3, 2010¹ to December 31, 2010
	2012			2011			Period May 3, 2010¹ to December 31, 2010


Per Share Operating Performance
Net asset value, beginning of period	$	17.13		$	18.56		$	17.75

Net investment income²		0.37			0.22			0.22
Net realized and unrealized gain (loss)		2.29			(1.00	)		0.97

Net increase (decrease) from investment operations		2.66			(0.78	)		1.19

Dividends and distributions from:³
Net investment income		(0.30	)		(0.20	)		(0.21	)
Net realized gain		(0.35	)		(0.45	)		(0.17	)

Total dividends and distributions		(0.65	)		(0.65	)		(0.38	)

Net asset value, end of period	$	19.14		$	17.13		$	18.56


Total Investment Return⁴
Based on net asset value		15.59%			(4.29	)%		6.87%	⁵


Ratios to Average Net Assets⁶
Total expenses		1.22%	^7,8		1.21%	^9,10		1.57%	¹¹

Total expenses after fees waived		1.20%	^7,8		1.19%	^9,10		1.16%	¹¹

Net investment income		1.98%	^7,8		1.18%	^9,10		1.99%	¹¹


Supplemental Data
Net assets, end of period (000)	$	796		$	53		$	40

Portfolio turnover of the LifePath Master Portfolio		5%			13%			5%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

⁷

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.39%.

⁸

⁹

Includes the LifePath Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.40%.

¹⁰

¹¹

Annualized.


Notes to Financial Statements		BlackRock Funds III

1. Organization and Significant Accounting Policies:

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. The LifePath Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. 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 (39.62%, 44.21%, 44.20%, 46.79% and 57.88% for the LifePath Retirement Portfolio, LifePath 2020 Portfolio, LifePath 2030 Portfolio, LifePath 2040 Portfolio and LifePath 2050 Portfolio, respectively, as of December 31, 2012).

The following is a summary of significant accounting policies followed by the LifePath Portfolios:

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 1 of the Master Portfolios’ Notes to Financial Statements, which are included elsewhere in this report.

Dividends and Distributions: Dividends from net investment income are declared and paid quarterly. Distributions of capital gains are recorded on the ex-dividend dates. The portion of distributions that exceeds a LifePath Portfolio’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a nontaxable return of capital. Distributions in excess of a LifePath Portfolio’s taxable income and net capital gains, but not in excess of a LifePath Portfolio’s earnings and profits, will be taxable to shareholders as ordinary income and will not constitute a nontaxable return of capital. Capital losses carried forward from years beginning before 2011 do not reduce earnings and profits, even if such carried forward losses offset current year realized gains. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

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

2. Administration 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, Inc. (“BlackRock”).



BLACKROCK FUNDS III	DECEMBER 31, 2012	47


Notes to Financial Statements (continued)

The Trust, on behalf of the LifePath Portfolios, entered into an Administration Agreement with BlackRock Institutional Trust Company, N.A. (“BTC”) (the “Administrator”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC, 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. BTC 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. Effective July 1, 2012, BlackRock Advisors, LLC (“BAL”) replaced BTC as each LifePath Portfolio’s administrator and entered into an Administration Agreement with the Trust, on behalf of each LifePath Portfolio, on similar terms.


	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, 2012, affiliates earned underwriting discounts, direct commissions and/or dealer concessions on sales of each LifePath Portfolio’s Investor A Shares as follows:


	Investor A
LifePath Retirement Portfolio	$	255
LifePath 2020 Portfolio	$	1,262
LifePath 2030 Portfolio	$	661
LifePath 2040 Portfolio	$	230
LifePath 2050 Portfolio	$	26

For the year ended December 31, 2012, affiliates of LifePath 2030 Portfolio received CDSCs relating to transactions in Investor A Shares of $42.

For the year ended December 31, 2012, affiliates received CDSCs relating to transactions in Investor C Shares as follows:


	Investor C
LifePath Retirement Portfolio	$	50
LifePath 2030 Portfolio	$	48

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

3. Income Tax Information:


	LifePath Retirement Portfolio			LifePath 2050 Portfolio
Undistributed (distributions in excess of) net investment income	$	139,428		$	25,361
Accumulated net realized gain (loss) allocated from the LifePath Master Portfolio	$	(139,428	)	$	(25,361	)

The tax character of distributions paid during the fiscal years ended December 31, 2012 and December 31, 2011 was as follows:


		LifePath Retirement Portfolio		LifePath 2020 Portfolio		LifePath 2030 Portfolio		LifePath 2040 Portfolio		LifePath 2050 Portfolio
Ordinary income	12/31/12	$	17,326,571	$	31,484,627	$	27,100,631	$	21,470,498	$	2,727,793
	12/31/11	$	14,526,426	$	24,666,122	$	18,681,115	$	13,500,354	$	1,644,950
Long-term capital gains	12/31/12	$	10,822,439		—	$	16,866,447	$	14,045,619	$	2,539,661
	12/31/11	$	19,687,334	$	46,721,202	$	11,516,852	$	3,928,973	$	2,679,320

Total	12/31/12	$	28,149,010	$	31,484,627	$	43,967,078	$	35,516,117	$	5,267,454

	12/31/11	$	34,213,760	$	71,387,324	$	30,197,967	$	17,429,327	$	4,324,270



48	BLACKROCK FUNDS III	DECEMBER 31, 2012


Notes to Financial Statements (continued)		BlackRock Funds III

As of December 31, 2012, 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	$	855,503	$	2,663,457	$	1,540,732	$	600,403		—
Undistributed long-term capital gains	$	1,739,670	$	2,915,932	$	2,916,885	$	2,105,259	$	356,217
Net unrealized gains¹	$	60,279,973	$	127,088,779	$	77,206,455	$	90,975,423	$	11,071,056

Total	$	62,875,146	$	132,668,168	$	81,664,072	$	93,681,085	$	11,427,273

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

4. Capital Share Transactions:

Transactions in capital shares for each class were as follows:


	Year Ended December 31, 2012						Year Ended December 31, 2011
LifePath Retirement Portfolio	Shares			Amount			Shares			Amount
Institutional
Shares sold		7,203,102		$	85,592,549			8,526,399		$	99,878,871
Shares issued to shareholders in reinvestment of dividends and distributions		1,507,204			17,797,116			1,918,046			22,032,862
Shares redeemed		(13,597,881	)		(160,901,524	)		(14,957,769	)		(175,099,515	)

Net decrease		(4,887,575	)	$	(57,511,859	)		(4,513,324	)	$	(53,187,782	)


Investor A
Shares sold		4,380,445		$	47,915,846			5,225,379		$	56,814,487
Shares issued to shareholders in reinvestment of dividends and distributions		836,200			9,076,610			926,518			9,818,452
Shares redeemed		(5,211,832	)		(57,077,393	)		(5,567,375	)		(60,354,430	)

Net increase (decrease)		4,813		$	(84,937	)		584,522		$	6,278,509


Investor C
Shares sold		13,899		$	163,679			3,029		$	35,464
Shares issued to shareholders in reinvestment of dividends and distributions		55			656			—			—
Shares redeemed		(7,293	)		(87,306	)		—			—

Net increase		6,661		$	77,029			3,029		$	35,464


Class K
Shares sold		317,052		$	3,794,750			312,296		$	3,656,159
Shares issued to shareholders in reinvestment of dividends and distributions		27,237			321,310			16,847			192,443
Shares redeemed		(97,137	)		(1,155,740	)		(16,648	)		(194,056	)

Net increase		247,152		$	2,960,320			312,495		$	3,654,546


Class R
Shares sold		225,054		$	2,722,159			1,106		$	12,968
Shares issued to shareholders in reinvestment of dividends and distributions		7,344			86,513			81			934
Shares redeemed		(13,938	)		(167,921	)		(428	)		(5,072	)

Net increase		218,460		$	2,640,751			759		$	8,830

Total Net Decrease		(4,410,489	)	$	(51,918,696	)		(3,612,519	)	$	(43,210,433	)


LifePath 2020 Portfolio
Institutional
Shares sold		8,994,910		$	145,159,817			10,721,352		$	172,562,315
Shares issued to shareholders in reinvestment of dividends and distributions		1,173,906			19,103,123			2,908,861			44,888,727
Shares redeemed		(17,638,178	)		(281,874,592	)		(17,203,959	)		(275,663,564	)

Net decrease		(7,469,362	)	$	(117,611,652	)		(3,573,746	)	$	(58,212,522	)



BLACKROCK FUNDS III	DECEMBER 31, 2012	49


Notes to Financial Statements (continued)		BlackRock Funds III


LifePath 2020 Portfolio (concluded)	Year Ended December 31, 2012						Year Ended December 31, 2011
LifePath 2020 Portfolio (concluded)	Shares			Amount			Shares			Amount
Investor A
Shares sold		5,549,681		$	84,086,546			6,800,305		$	104,196,707
Shares issued to shareholders in reinvestment of dividends and distributions		739,699			11,383,520			1,619,642			23,691,305
Shares redeemed		(7,652,194	)		(116,942,104	)		(5,486,607	)		(84,222,849	)

Net increase (decrease)		(1,362,814	)	$	(21,472,038	)		2,933,340		$	43,665,163


Investor C
Shares sold		74,820		$	1,200,698			12,546		$	198,694
Shares issued to shareholders in reinvestment of dividends and distributions		260			4,219			461			7,045
Shares redeemed		(17,627	)		(281,170	)		(405	)		(6,638	)

Net increase		57,453		$	923,747			12,602		$	199,101


Class K
Shares sold		549,632		$	8,932,356			573,362		$	9,228,551
Shares issued to shareholders in reinvestment of dividends and distributions		17,709			288,942			22,482			345,441
Shares redeemed		(268,332	)		(4,315,947	)		(342,692	)		(5,540,687	)

Net increase		299,009		$	4,905,351			253,152		$	4,033,305

Class R
Shares sold		180,610		$	2,928,160			9,263		$	142,158
Shares issued to shareholders in reinvestment of dividends and distributions		1,926			31,462			426			6,486
Shares redeemed		(18,190	)		(293,487	)		(4,186	)		(69,394	)

Net increase		164,346		$	2,666,135			5,503		$	79,250

Total Net Decrease		(8,311,368	)	$	(130,588,457	)		(369,149	)	$	(10,235,703	)


LifePath 2030 Portfolio
Institutional
Shares sold		9,273,586		$	140,201,895			10,864,175		$	160,331,087
Shares issued to shareholders in reinvestment of dividends and distributions		1,820,970			27,685,332			1,336,585			19,251,879
Shares redeemed		(15,315,478	)		(229,512,146	)		(14,267,842	)		(209,352,604	)

Net decrease		(4,220,922	)	$	(61,624,919	)		(2,067,082	)	$	(29,769,638	)


Investor A
Shares sold		3,938,089		$	58,029,122			6,266,205		$	90,818,114
Shares issued to shareholders in reinvestment of dividends and distributions		1,013,951			15,060,863			681,295			9,600,090
Shares redeemed		(6,439,448	)		(95,545,782	)		(3,816,165	)		(55,267,286	)

Net increase (decrease)		(1,487,408	)	$	(22,455,797	)		3,131,335		$	45,150,918


Investor C
Shares sold		60,165		$	907,743			9,967		$	139,574
Shares issued to shareholders in reinvestment of dividends and distributions		436			6,588			108			1,502
Shares redeemed		(4,799	)		(73,160	)		(563	)		(8,015	)

Net increase		55,802		$	841,171			9,512		$	133,061


Class K
Shares sold		425,609		$	6,502,787			372,886		$	5,420,324
Shares issued to shareholders in reinvestment of dividends and distributions		31,276			476,399			10,919			156,006
Shares redeemed		(187,293	)		(2,875,344	)		(53,380	)		(799,211	)

Net increase		269,592		$	4,103,842			330,425		$	4,777,119



50	BLACKROCK FUNDS III	DECEMBER 31, 2012


Notes to Financial Statements (continued)		BlackRock Funds III


LifePath 2030 Portfolio (concluded)	Year Ended December 31, 2012						Year Ended December 31, 2011
LifePath 2030 Portfolio (concluded)	Shares			Amount			Shares			Amount
Class R
Shares sold		139,417		$	2,135,295			11,693		$	159,449
Shares issued to shareholders in reinvestment of dividends and distributions		2,999			45,483			221			3,134
Shares redeemed		(18,189	)		(281,584	)		(3,648	)		(52,913	)

Net increase		124,227		$	1,899,194			8,266		$	109,670

Total Net Increase (Decrease)		(5,258,709	)	$	(77,236,509	)		1,412,456		$	20,401,130


LifePath 2040 Portfolio
Institutional
Shares sold		6,993,899		$	128,496,383			8,158,582		$	145,577,946
Shares issued to shareholders in reinvestment of dividends and distributions		1,265,800			23,458,949			664,823			11,635,668
Shares redeemed		(10,561,602	)		(192,115,160	)		(8,989,028	)		(159,145,410	)

Net decrease		(2,301,903	)	$	(40,159,828	)		(165,623	)	$	(1,931,796	)


Investor A
Shares sold		2,623,486		$	45,761,560			3,456,802		$	59,040,725
Shares issued to shareholders in reinvestment of dividends and distributions		632,205			11,133,070			299,265			4,996,722
Shares redeemed		(3,707,289	)		(65,175,564	)		(2,539,137	)		(43,509,075	)

Net increase (decrease)		(451,598	)	$	(8,280,934	)		1,216,930		$	20,528,372


Investor C
Shares sold		63,252		$	1,165,821			4,607		$	78,201
Shares issued to shareholders in reinvestment of dividends and distributions		221			4,086			6			97
Shares redeemed		(5,158	)		(95,847	)		(2	)		(25	)

Net increase		58,315		$	1,074,060			4,611		$	78,273


Class K
Shares sold		210,956		$	3,925,377			276,335		$	4,827,363
Shares issued to shareholders in reinvestment of dividends and distributions		18,754			349,463			4,005			69,028
Shares redeemed		(78,326	)		(1,451,253	)		(9,824	)		(175,325	)

Net increase		151,384		$	2,823,587			270,516		$	4,721,066


Class R
Shares sold		89,816		$	1,667,551			20,087		$	323,569
Shares issued to shareholders in reinvestment of dividends and distributions		3,382			62,557			305			5,236
Shares redeemed		(16,971	)		(321,656	)		(279	)		(4,900	)

Net increase		76,227		$	1,408,452			20,113		$	323,905

Total Net Increase (Decrease)		(2,467,575	)	$	(43,134,663	)		1,346,547		$	23,719,820


LifePath 2050 Portfolio
Institutional
Shares sold		3,031,733		$	56,719,389			2,655,350		$	49,273,547
Shares issued to shareholders in reinvestment of dividends and distributions		191,190			3,633,778			170,482			3,015,086
Shares redeemed		(1,767,377	)		(32,562,240	)		(1,436,859	)		(25,788,852	)

Net increase		1,455,546		$	27,790,927			1,388,973		$	26,499,781



BLACKROCK FUNDS III	DECEMBER 31, 2012	51


Notes to Financial Statements (concluded)		BlackRock Funds III


LifePath 2050 Portfolio (concluded)	Year Ended December 31, 2012						Year Ended December 31, 2011
LifePath 2050 Portfolio (concluded)	Shares			Amount			Shares			Amount
Investor A
Shares sold		1,058,449		$	19,843,274			1,020,026		$	18,983,705
Shares issued to shareholders in reinvestment of dividends and distributions		80,463			1,528,213			67,355			1,189,240
Shares redeemed		(631,981	)		(11,903,692	)		(197,703	)		(3,619,720	)

Net increase		506,931		$	9,467,795			889,678		$	16,553,225


Investor C
Shares sold		6,912		$	125,986			1,195		$	20,927
Shares issued to shareholders in reinvestment of dividends and distributions		12			227			1			11
Shares redeemed		(2,990	)		(56,952	)		(63	)		(1,115	)

Net increase		3,934		$	69,261			1,133		$	19,823


Class K
Shares sold		39,215		$	744,972			30,546		$	548,675
Shares issued to shareholders in reinvestment of dividends and distributions		1,897			36,249			1,165			20,322
Shares redeemed		(24,510	)		(466,954	)		(6	)		(119	)

Net increase		16,602		$	314,267			31,705		$	568,878


Class R
Shares sold		42,723		$	811,331			1,245		$	22,576
Shares issued to shareholders in reinvestment of dividends and distributions		993			18,961			64			1,132
Shares redeemed		(5,219	)		(100,064	)		(345	)		(6,023	)

Net increase		38,497		$	730,228			964		$	17,685

Total Net Increase		2,021,510		$	38,372,478			2,312,453		$	43,659,392

At December 31, 2012, Shares owned by affiliates were as follows:


	Investor C		Class R
LifePath Retirement Portfolio		1,783		1,783
LifePath 2020 Portfolio		1,308		1,308
LifePath 2030 Portfolio		1,432		1,432
LifePath 2040 Portfolio		1,184		1,184
LifePath 2050 Portfolio		1,127		1,127

5. Subsequent Events:



52	BLACKROCK FUNDS III	DECEMBER 31, 2012


Report of Independent Registered Public Accounting Firm		BlackRock Funds III

To the Shareholders and Board of Trustees of

BlackRock Funds III:

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 the LifePath Retirement Portfolio, LifePath 2020 Portfolio, LifePath 2030 Portfolio, LifePath 2040 Portfolio and LifePath 2050 Portfolio, each a series of BlackRock Funds III (the “Trust”), at December 31, 2012, 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 Trust’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 audits 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.

PricewaterhouseCoopers LLP

New York, New York

February 22, 2013


Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid during the tax year ended December 31, 2012.


	Payable Date		LifePath Retirement Portfolio		LifePath 2020 Portfolio		LifePath 2030 Portfolio		LifePath 2040 Portfolio		LifePath 2050 Portfolio
Qualified Dividend Income for Individuals¹		04/02/12-01/02/13		28.75%		38.92%		48.89%		61.54%		88.45%
Dividends Qualifying for the Dividend Received Deduction for Corporations¹		04/02/12-01/02/13		18.13%		24.74%		30.92%		35.72%		51.61%
Federal Obligation Interest²		04/02/12-01/02/13		1.43%		3.18%		1.60%		1.00%		—
Interest Related Dividends and Short-Term Capital Gains for Non-U.S. Residents³		04/02/12-01/02/13		69.38%		55.17%		51.56%		42.95%		12.26%

The LifePath Portfolios hereby designate the percentages indicated above or the maximum amount allowable by law.

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

Additionally, the LifePath Portfolio distributed long-term capital gains per share to shareholders of record on the following dates:


Record date	June 28, 2012		December 28, 2012
LifePath Retirement Portfolio		$0.035348		$0.179836
LifePath 2030 Portfolio		$0.001240		$0.263507
LifePath 2040 Portfolio		—		$0.332580
LifePath 2050 Portfolio		$0.013009		$0.313967



BLACKROCK FUNDS III	DECEMBER 31, 2012	53


Master Portfolio Information as of December 31, 2012		Master Investment Portfolio


LifePath^® Retirement Master Portfolio


Portfolio Composition		Percent of Affiliated Investment Companies


Fixed Income Funds	61	%
Equity Funds	38
Short-Term Securities	1


Portfolio Holdings		Percent of Affiliated Investment Companies


CoreAlpha Bond Master Portfolio	52	%
Active Stock Master Portfolio	20
iShares Barclays TIPS Bond Fund	9
iShares MSCI EAFE Index Fund	5
Master Small Cap Index Series	4
BlackRock Commodity Strategies Fund	3
iShares MSCI Emerging Markets Index Fund	2
ACWI ex-US Index Master Portfolio	2
iShares MSCI EAFE Small Cap Index Fund	1
iShares MSCI Canada Index Fund	1
BlackRock Cash Funds: Institutional, SL Agency Shares	1


LifePath 2020 Master Portfolio^®


Portfolio Composition		Percent of Affiliated Investment Companies


Equity Funds	54	%
Fixed Income Funds	45
Short-Term Securities	1


Portfolio Holdings		Percent of Affiliated Investment Companies


CoreAlpha Bond Master Portfolio	39	%
Active Stock Master Portfolio	28
iShares MSCI EAFE Index Fund	8
iShares Barclays TIPS Bond Fund	6
BlackRock Commodity Strategies Fund	4
Master Small Cap Index Series	4
iShares MSCI Emerging Markets Index Fund	3
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	2
ACWI ex-US Index Master Portfolio	2
iShares Cohen & Steers Realty Majors Index Fund	1
iShares MSCI EAFE Small Cap Index Fund	1
iShares MSCI Canada Index Fund	1
BlackRock Cash Funds: Institutional, SL Agency Shares	1


LifePath 2030 Master Portfolio^®


Portfolio Composition		Percent of Affiliated Investment Companies


Equity Funds	68	%
Fixed Income Funds	30
Short-Term Securities	2


Portfolio Holdings		Percent of Affiliated Investment Companies


Active Stock Master Portfolio	37	%
CoreAlpha Bond Master Portfolio	26
iShares MSCI EAFE Index Fund	10
iShares MSCI Emerging Markets Index Fund	4
iShares Barclays TIPS Bond Fund	4
BlackRock Commodity Strategies Fund	3
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	3
Master Small Cap Index Series	3
iShares Cohen & Steers Realty Majors Index Fund	3
ACWI ex-US Index Master Portfolio	2
BlackRock Cash Funds: Institutional, SL Agency Shares	2
iShares MSCI EAFE Small Cap Index Fund	2
iShares MSCI Canada Index Fund	1



54	BLACKROCK FUNDS III	DECEMBER 31, 2012


Master Portfolio Information as of December 31, 2012 (concluded)		Master Investment Portfolio


LifePath 2040 Master Portfolio^®


Portfolio Composition		Percent of Affiliated Investment Companies


Equity Funds	81	%
Fixed Income Funds	17
Short-Term Securities	2


Portfolio Holdings		Percent of Affiliated Investment Companies


Active Stock Master Portfolio	44	%
CoreAlpha Bond Master Portfolio	16
iShares MSCI EAFE Index Fund	12
iShares MSCI Emerging Markets Index Fund	5
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	4
iShares Cohen & Steers Realty Majors Index Fund	4
BlackRock Commodity Strategies Fund	3
Master Small Cap Index Series	2
ACWI ex-US Index Master Portfolio	2
iShares MSCI EAFE Small Cap Index Fund	2
iShares MSCI Canada Index Fund	2
iShares Barclays TIPS Bond Fund	2
BlackRock Cash Funds: Institutional, SL Agency Shares	2


LifePath^® 2050 Master Portfolio


Portfolio Composition		Percent of Affiliated Investment Companies


Equity Funds	91	%
Fixed Income Funds	7
Short-Term Securities	2


Portfolio Holdings		Percent of Affiliated Investment Companies


Active Stock Master Portfolio	50	%
iShares MSCI EAFE Index Fund	10
ACWI ex-US Index Master Portfolio	9
CoreAlpha Bond Master Portfolio	7
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	5
iShares Cohen & Steers Realty Majors Index Fund	5
iShares MSCI Emerging Markets Index Fund	4
BlackRock Commodity Strategies Fund	4
iShares MSCI EAFE Small Cap Index Fund	2
Master Small Cap Index Series	2
iShares MSCI Canada Index Fund	1
BlackRock Cash Funds: Institutional, SL Agency Shares	1


Active Stock Master Portfolio


Ten Largest Holdings		Percent of Long-Term Investments


Apple, Inc.	4	%
Microsoft Corp.	2
Exxon Mobil Corp.	2
Google, Inc., Class A	2
JPMorgan Chase & Co.	2
Pfizer, Inc.	2
Wells Fargo & Co.	2
Merck & Co., Inc.	1
Verizon Communications, Inc.	1
Coca-Cola Co.	1


Sector Allocation		Percent of Long-Term Investments


Information Technology	19	%
Financials	15
Consumer Discretionary	14
Health Care	13
Industrials	12
Energy	10
Consumer Staples	9
Telecommunication Services	3
Materials	3
Utilities	2



BLACKROCK FUNDS III	DECEMBER 31, 2012	55

Schedule of Investments December 31, 2012

LifePath Retirement Master Portfolio

(Percentages shown are based on Net Assets)


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value

Equity Funds — 38.7%
Active Stock Master Portfolio	$	298,793,488	$	298,793,488
ACWI ex-US Index Master Portfolio	$	27,699,413		27,699,413
BlackRock Commodity Strategies Fund		5,285,130		53,644,074
iShares Cohen & Steers Realty Majors Index Fund		28,264		2,219,855
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund (b)		91,497		3,029,466
iShares MSCI Canada Index Fund		350,676		9,959,198
iShares MSCI EAFE Index Fund (b)		1,310,595		74,468,008
iShares MSCI EAFE Small Cap Index Fund		344,187		14,011,853
iShares MSCI Emerging Markets Index Fund		662,040		29,361,474
Master Small Cap Index Series	$	64,132,281		64,132,281

				577,319,110
Fixed Income Funds — 60.9%
CoreAlpha Bond Master Portfolio	$	778,624,808		778,624,808
iShares Barclays TIPS Bond Fund		1,074,113		130,408,059

				909,032,867


Affiliated Investment Companies (a)	Shares		Value

Short-Term Securities — 0.6%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)		7,529,155	$	7,529,155
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)		1,254,994		1,254,994

				8,784,149
Total Affiliated Investment Companies (Cost — $1,378,973,437*) — 100.2%				1,495,136,126
Liabilities in Excess of Other Assets — (0.2)%				(3,560,422	)

Net Assets — 100.0%			$	1,491,575,704

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	1,381,858,348

Gross unrealized appreciation	$	118,012,020
Gross unrealized depreciation		(4,734,242	)

Net unrealized appreciation	$	113,277,778

(a)


Affiliate	Shares/ Beneficial Interest Held at December 31, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	298,043,934	$	749,554	¹		—		$	298,793,488	$	298,793,488	$	6,970,575	$	23,047,739
ACWI ex-US Index Master Portfolio	$	5,548,263	$	22,151,150	¹		—		$	27,699,413	$	27,699,413	$	437,782	$	327,413
BlackRock Cash Funds: Institutional, SL Agency Shares		19,603,098		—			(12,073,943	)²		7,529,155	$	7,529,155	$	59,822		—
BlackRock Cash Funds: Prime, SL Agency Shares		5,266,000		—			(4,011,006	)²		1,254,994	$	1,254,994	$	14,700		—
BlackRock Commodity Strategies Fund		—		5,285,130			—			5,285,130	$	53,644,074	$	11,144		—
CoreAlpha Bond Master Portfolio	$	725,793,169	$	52,831,639	¹		—		$	778,624,808	$	778,624,808	$	19,593,735	$	16,190,243
iShares Barclays TIPS Bond Fund		1,059,111		46,318			(31,316	)		1,074,113	$	130,408,059	$	2,888,248	$	351,606
iShares Cohen & Steers Realty Majors Index Fund		19,438		9,576			(750	)		28,264	$	2,219,855	$	62,175	$	3,530
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		59,926		33,617			(2,046	)		91,497	$	3,029,466	$	158,685	$	(7,558	)
iShares MSCI Canada Index Fund		520,174		—			(169.498	)		350,676	$	9,959,198	$	235,548	$	(703,201	)
iShares MSCI EAFE Index Fund		1,903,131		39,135			(631,671	)		1,310,595	$	74,468,008	$	2,787,998	$	(436,987	)
iShares MSCI EAFE Small Cap Index Fund		354,938		31.107			(41,858	)		344,187	$	14,011,853	$	459,825	$	(220,257	)
iShares MSCI Emerging Markets Index Fund		939,069		28,664			(305,693	)		662,040	$	29,361,474	$	588,666	$	(1,117,582	)
Master Small Cap Index Series	$	59,483,717	$	4,648,564	¹		—		$	64,132,281	$	64,132,281	$	1,327,479	$	547,025

Represents net beneficial interest purchased.

Represents net shares sold.

(b)

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

(c)

Represents the current yield as of report date.

(d)

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

_Ÿ

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

See Notes to Financial Statements.



56	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (concluded)		LifePath Retirement Master Portfolio

_Ÿ

For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	325,886,136	$	1,169,249,990		—	$	1,495,136,126

Certain of the Master Portfolio’s liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $5,833,100 is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

Schedule of Investments December 31, 2012

LifePath 2020 Master Portfolio

(Percentages shown are based on Net Assets)


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value

Equity Funds — 54.1%
Active Stock Master Portfolio	$	725,539,622	$	725,539,622
ACWI ex-US Index Master Portfolio	$	42,040,829		42,040,829
BlackRock Commodity Strategies Fund		9,023,154		91,585,017
iShares Cohen & Steers Realty Majors Index Fund (b)		450,679		35,396,329
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund (b)		1,375,939		45,557,340
iShares MSCI Canada Index Fund (b)		951,620		27,026,008
iShares MSCI EAFE Index Fund		3,472,019		197,280,120
iShares MSCI EAFE Small Cap Index Fund		772,687		31,456,088
iShares MSCI Emerging Markets Index Fund (b)		1,801,391		79,891,691
Master Small Cap Index Series	$	91,038,885		91,038,885

				1,366,811,929
Fixed Income Funds — 45.8%
CoreAlpha Bond Master Portfolio	$	997,874,524		997,874,524
iShares Barclays TIPS Bond Fund		1,297,149		157,486,860

				1,155,361,384


Affiliated Investment Companies (a)	Shares		Value

Short-Term Securities — 0.9%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)		18,545,337	$	18,545,337
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)		4,104,742		4,104,742

				22,650,079
Total Affiliated Investment Companies (Cost — $2,320,780,326*) — 100.8%				2,544,823,392
Liabilities in Excess of Other Assets — (0.8)%				(20,506,958	)

Net Assets — 100.0%			$	2,524,316,434

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	2,340,402,054

Gross unrealized appreciation	$	227,200,377
Gross unrealized depreciation		(22,779,039	)

Net unrealized appreciation	$	204,421,338

(a)


Affiliate	Shares/ Beneficial Interest Held at December 31, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	748,693,513		—		$	(23,153,891	)¹	$	725,539,622	$	725,539,622	$	17,159,758	$	58,769,240
ACWI ex-US Index Master Portfolio	$	5,969,722	$	36,071,107	²		—		$	42,040,829	$	42,040,829	$	615,583	$	497,754
BlackRock Cash Funds: Institutional, SL Agency Shares		101,724,838		—			(83,179,501	)¹		18,545,337	$	18,545,337	$	127,285		—
BlackRock Cash Funds: Prime, SL Agency Shares		32,812,403		—			(28,707,661	)¹		4,104,742	$	4,104,742	$	31,986		—
BlackRock Commodity Strategies Fund		—		9,023,154			—			9,023,154	$	91,585,017	$	19,026		—
CoreAlpha Bond Master Portfolio	$	877,647,887	$	120,226,637	²		—		$	997,874,524	$	997,874,524	$	24,456,761	$	18,949,016
iShares Barclays TIPS Bond Fund		1,219,031		128,162			(50,044	)		1,297,149	$	157,486,860	$	3,444,616	$	530,716
iShares Cohen & Steers Realty Majors Index Fund		513,326		34,698			(97,345	)		450,679	$	35,396,329	$	1,156,143	$	924,472
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		1,583,649		30,986			(238,696	)		1,375,939	$	45,557,340	$	2,741,043	$	(1,160,307	)
iShares MSCI Canada Index Fund		1,190,355		—			(238,735	)		951,620	$	27,026,008	$	617,791	$	(1,169,799	)
iShares MSCI EAFE Index Fund		4,619,681		141,086			(1,288,748	)		3,472,019	$	197,280,120	$	7,078,498	$	(3,004,378	)
iShares MSCI EAFE Small Cap Index Fund		848,248		28,868			(104,429	)		772,687	$	31,456,088	$	1,058,807	$	(591,724	)
iShares MSCI Emerging Markets Index Fund		2,251,118		46,678			(496,405	)		1,801,391	$	79,891,691	$	1,517,092	$	(4,159,781	)
Master Small Cap Index Series	$	86,267,134	$	4,771,751	²		—		$	91,038,885	$	91,038,885	$	1,915,737	$	665,664

Represents net shares/beneficial interest sold.

Represents net 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.

_Ÿ

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

See Notes to Financial Statements.



58	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (concluded)		LifePath 2020 Master Portfolio

_Ÿ

For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	688,329,532	$	1,856,493,860		—	$	2,544,823,392

Certain of the Master Portfolio’s liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $19,078,475 is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

Schedule of Investments December 31, 2012

LifePath 2030 Master Portfolio

(Percentages shown are based on Net Assets)


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value

Equity Funds — 69.6%
Active Stock Master Portfolio	$	841,283,578	$	841,283,578
ACWI ex-US Index Master Portfolio	$	48,830,798		48,830,798
BlackRock Commodity Strategies Fund		7,981,436		81,011,571
iShares Cohen & Steers Realty Majors Index Fund (b)		750,700		58,959,978
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund (b)		2,215,546		73,356,728
iShares MSCI Canada Index Fund (b)		1,114,324		31,646,801
iShares MSCI EAFE Index Fund (b)		4,026,402		228,780,162
iShares MSCI EAFE Small Cap Index Fund		889,363		36,205,968
iShares MSCI Emerging Markets Index Fund (b)		2,093,140		92,830,759
Master Small Cap Index Series	$	64,557,533		64,557,533

				1,557,463,876
Fixed Income Funds — 30.3%
CoreAlpha Bond Master Portfolio	$	593,095,629		593,095,629
iShares Barclays TIPS Bond Fund		707,463		85,893,083

				678,988,712


Affiliated Investment Companies (a)	Shares		Value

Short-Term Securities — 2.2%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)		39,402,527	$	39,402,527
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)		9,624,087		9,624,087

				49,026,614
Total Affiliated Investment Companies (Cost — $2,074,299,772*) — 102.1%				2,285,479,202
Liabilities in Excess of Other Assets — (2.1)%				(48,034,711	)

Net Assets — 100.0%			$	2,237,444,491

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	2,102,457,932

Gross unrealized appreciation	$	213,972,231
Gross unrealized depreciation		(30,950,961	)

Net unrealized appreciation	$	183,021,270

(a)


Affiliate	Shares/ Beneficial Interest Held at December 31, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	828,107,242	$	13,176,336	¹		—		$	841,283,578	$	841,283,578	$	19,484,779	$	64,430,088
ACWI ex-US Index Master Portfolio	$	6,940,554	$	41,890,244	¹		—		$	48,830,798	$	48,830,798	$	751,689	$	292,521
BlackRock Cash Funds: Institutional, SL Agency Shares		57,414,496		—			(18,011,969	)²		39,402,527	$	39,402,527	$	136,067		—
BlackRock Cash Funds: Prime, SL Agency Shares		18,184,839		—			(8,560,752	)²		9,624,087	$	9,624,087	$	34,572		—
BlackRock Commodity Strategies Fund		—		7,981,436			—			7,981,436	$	81,011,571	$	16,829		—
CoreAlpha Bond Master Portfolio	$	483,730,118	$	109,365,511	¹		—		$	593,095,629	$	593,095,629	$	14,100,196	$	9,948,978
iShares Barclays TIPS Bond Fund		647,298		84,077			(23,912	)		707,463	$	85,893,083	$	1,802,943	$	237,489
iShares Cohen & Steers Realty Majors Index Fund		779,965		87,038			(116,303	)		750,700	$	58,959,978	$	1,847,965	$	648,889
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		2,439,821		206,223			(430,498	)		2,215,546	$	73,356,728	$	4,324,948	$	(2,918,395	)
iShares MSCI Canada Index Fund		1,299,183		2,889			(187,748	)		1,114,324	$	31,646,801	$	689,223	$	(935,990	)
iShares MSCI EAFE Index Fund		4,939,362		216,540			(1,129,500	)		4,026,402	$	228,780,162	$	7,828,853	$	(6,327,465	)
iShares MSCI EAFE Small Cap Index Fund		909,785		47,184			(67,606	)		889,363	$	36,205,968	$	1,181,690	$	(372,992	)
iShares MSCI Emerging Markets Index Fund		2,471,377		116,370			(494,607	)		2,093,140	$	92,830,759	$	1,696,937	$	(4,186,522	)
Master Small Cap Index Series	$	62,185,765	$	2,371,768	¹		—		$	64,557,533	$	64,557,533	$	1,376,520	$	482,642

Represents net beneficial interest purchased.

Represents net shares sold.

(b)

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

(c)

Represents the current yield as of report date.

(d)

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

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

See Notes to Financial Statements.



60	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (concluded)		LifePath 2030 Master Portfolio

_Ÿ

For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	737,711,664	$	1,547,767,538		—	$	2,285,479,202

Certain of the Master Portfolio’s liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $44,731,905 is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

Schedule of Investments December 31, 2012

LifePath 2040 Master Portfolio

(Percentages shown are based on Net Assets)


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value

Equity Funds — 82.2%
Active Stock Master Portfolio	$	760,695,544	$	760,695,544
ACWI ex-US Index Master Portfolio	$	38,541,025		38,541,025
BlackRock Commodity Strategies Fund		6,060,504		61,514,116
iShares Cohen & Steers Realty Majors Index Fund (b)		807,851		63,448,618
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund (b)		2,340,965		77,509,351
iShares MSCI Canada Index Fund (b)		1,023,835		29,076,914
iShares MSCI EAFE Index Fund		3,712,248		210,929,931
iShares MSCI EAFE Small Cap Index Fund		797,837		32,479,944
iShares MSCI Emerging Markets Index Fund (b)		1,924,980		85,372,863
Master Small Cap Index Series	$	39,498,574		39,498,574

				1,399,066,880
Fixed Income Funds — 17.7%
CoreAlpha Bond Master Portfolio	$	272,301,743		272,301,743
iShares Barclays TIPS Bond Fund		238,933		29,008,856

				301,310,599


Affiliated Investment Companies (a)	Shares		Value

Short-Term Securities — 2.0%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)		26,972,214	$	26,972,214
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)		6,555,513		6,555,513

				33,527,727
Total Affiliated Investment Companies (Cost — $1,569,469,166*) — 101.9%				1,733,905,206
Liabilities in Excess of Other Assets — (1.9)%				(32,648,075	)

Net Assets — 100.0%			$	1,701,257,131

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	1,598,853,255

Gross unrealized appreciation	$	166,556,684
Gross unrealized depreciation		(31,504,733	)

Net unrealized appreciation	$	135,051,951

(a)


Affiliate	Shares/ Beneficial Interest Held at December 31, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	736,182,388	$	24,513,156	¹		—		$	760,695,544	$	760,695,544	$	17,489,815	$	56,670,007
ACWI ex-US Index Master Portfolio	$	6,288,397	$	32,252,628	¹		—		$	38,541,025	$	38,541,025	$	607,394	$	238,073
BlackRock Cash Funds: Institutional, SL Agency Shares		46,040,413		—			(19,068,199	)²		26,972,214	$	26,972,214	$	104,973		—
BlackRock Cash Funds: Prime, SL Agency Shares		14,394,378		—			(7,838,865	)²		6,555,513	$	6,555,513	$	26,768		—
BlackRock Commodity Strategies Fund		—		6,060,504			—			6,060,504	$	61,514,116	$	12,779		—
CoreAlpha Bond Master Portfolio	$	203,336,372	$	68,965,371	¹		—		$	272,301,743	$	272,301,743	$	6,307,393	$	3,935,768
iShares Barclays TIPS Bond Fund		180,235		66,579			(7,881	)		238,933	$	29,008,856	$	544,379	$	86,704
iShares Cohen & Steers Realty Majors Index Fund		795,460		87,318			(74,927	)		807,851	$	63,448,618	$	1,940,650	$	239,445
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		2,481,690		164,152			(304,877	)		2,340,965	$	77,509,351	$	4,552,319	$	(2,103,380	)
iShares MSCI Canada Index Fund		1,113,860		—			(90,025	)		1,023,835	$	29,076,914	$	636,774	$	(497,776	)
iShares MSCI EAFE Index Fund		4,317,966		121,164			(726,882	)		3,712,248	$	210,929,931	$	7,078,712	$	(7,745,818	)
iShares MSCI EAFE Small Cap Index Fund		796,836		59,301			(58,300	)		797,837	$	32,479,944	$	1,054,470	$	(341,121	)
iShares MSCI Emerging Markets Index Fund		2,136,980		71,328			(283,328	)		1,924,980	$	85,372,863	$	1,536,170	$	(2,328,664	)
Master Small Cap Index Series	$	40,190,017		—		$	(691,443	)²	$	39,498,574	$	39,498,574	$	872,059	$	260,202

Represents net beneficial interest purchased.

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

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

See Notes to Financial Statements.



62	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (concluded)		LifePath 2040 Master Portfolio

_Ÿ

For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	622,868,320	$	1,111,036,886		—	$	1,733,905,206

Certain of the Master Portfolio’s liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $30,469,445 is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

Schedule of Investments December 31, 2012

LifePath 2050 Master Portfolio

(Percentages shown are based on Net Assets)


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value

Equity Funds — 92.7%
Active Stock Master Portfolio	$	136,546,567	$	136,546,567
ACWI ex-US Index Master Portfolio	$	23,074,195		23,074,195
BlackRock Commodity Strategies Fund		969,991		9,845,411
iShares Cohen & Steers Realty Majors Index Fund (b)		154,447		12,130,267
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		444,626		14,721,567
iShares MSCI Canada Index Fund		130,967		3,719,463
iShares MSCI EAFE Index Fund		471,857		26,810,915
iShares MSCI EAFE Small Cap Index Fund		134,998		5,495,769
iShares MSCI Emerging Markets Index Fund		245,849		10,903,403
Master Small Cap Index Series	$	4,938,307		4,938,307

				248,185,864
Fixed Income Funds — 7.0%
CoreAlpha Bond Master Portfolio	$	18,868,890		18,868,890

				18,868,890


Affiliated Investment Companies (a)	Shares		Value

Short-Term Securities — 1.7%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)		3,548,844	$	3,548,844
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)		907,096		907,096

				4,455,940
Total Affiliated Investment Companies (Cost — $251,198,127*) — 101.4%				271,510,694
Liabilities in Excess of Other Assets — (1.4)%				(3,659,447	)

Net Assets — 100.0%			$	267,851,247

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	252,533,671

Gross unrealized appreciation	$	20,620,952
Gross unrealized depreciation		(1,643,929	)

Net unrealized appreciation	$	18,977,023

(a)


Affiliate	Shares/ Beneficial Interest Held at December 31, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
Active Stock Master Portfolio	$	96,212,649	$	40,333,918	¹		—		$	136,546,567	$	136,546,567	$	2,720,354	$	6,776,725
ACWI ex-US Index Master Portfolio	$	2,165,187	$	20,909,008	¹		—		$	23,074,195	$	23,074,195	$	329,620	$	(330,666	)
BlackRock Cash Funds: Institutional, SL Agency Shares		6,374,294		—			(2,825,450	)²		3,548,844	$	3,548,844	$	21,072		—
BlackRock Cash Funds: Prime, SL Agency Shares		1,943,189		—			(1,036,093	)²		907,096	$	907,096	$	5,404		—
BlackRock Commodity Strategies Fund		—		969,991			—			969,991	$	9,845,411	$	1,858		—
CoreAlpha Bond Master Portfolio	$	7,200,788	$	11,668,102	¹		—		$	18,868.890	$	18,868,890	$	319,805	$	22,611
iShares Cohen & Steers Realty Majors Index Fund		116,706		57,284			(19,543	)		154,447	$	12,130,267	$	330,709	$	98,005
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		358,521		140,384			(54,279	)		444,626	$	14,721,567	$	787,537	$	(138,079	)
iShares MSCI Canada Index Fund		147,564		7,933			(24,530	)		130,967	$	3,719,463	$	79,843	$	(126,525	)
iShares MSCI EAFE Index Fund		541,724		29,308			(99,175	)		471,857	$	26,810,915	$	885,729	$	(813,504	)
iShares MSCI EAFE Small Cap Index Fund		109,510		36,558			(11,070	)		134,998	$	5,495,769	$	171,018	$	(77,069	)
iShares MSCI Emerging Markets Index Fund		274,352		20,183			(48,686	)		245,849	$	10,903,403	$	194,613	$	(342,800	)
Master Small Cap Index Series	$	3,997,168	$	941,139	¹		—		$	4,938,307	$	4,938,307	$	101,509	$	6,139

Represents net beneficial interest purchased.

Represents net shares sold.

(b)

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

(c)

Represents the current yield as of report date.

(d)

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

_Ÿ

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

_Ÿ

See Notes to Financial Statements.



64	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (concluded)		LifePath 2050 Master Portfolio

For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	88,082,735	$	183,427,959		—	$	271,510,694

Certain of the Master Portfolio’s liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $4,216,100 is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

Schedule of Investments December 31, 2012

Active Stock Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Aerospace & Defense — 3.5%
The Boeing Co.		423,300	$	31,899,887
Esterline Technologies Corp. (a)		1,878		119,460
Exelis, Inc. (b)		207,895		2,342,977
General Dynamics Corp.		41,010		2,840,763
Honeywell International, Inc.		213,820		13,571,155
Huntington Ingalls Industries, Inc.		22,834		989,625
L-3 Communications Holdings, Inc.		38,560		2,954,467
Northrop Grumman Corp.		220,678		14,913,419
Precision Castparts Corp.		40,300		7,633,626
Raytheon Co.		137,580		7,919,105
Rockwell Collins, Inc.		12,230		711,419
Spirit Aerosystems Holdings, Inc., Class A (a)		70,121		1,189,953
United Technologies Corp.		147,160		12,068,592

				99,154,448
Air Freight & Logistics — 0.6%
C.H. Robinson Worldwide, Inc. (b)		36,784		2,325,484
Expeditors International of Washington, Inc.		79,350		3,138,293
United Parcel Service, Inc., Class B		128,700		9,489,051
UTi Worldwide, Inc.		43,440		582,096

				15,534,924
Airlines — 0.5%
Copa Holdings SA		56,648		5,633,644
Delta Air Lines, Inc. (a)		385,535		4,576,300
United Continental Holdings, Inc. (a)		186,246		4,354,432

				14,564,376
Auto Components — 0.5%
Allison Transmission Holdings, Inc.		111,900		2,284,998
BorgWarner, Inc. (a)		3,670		262,845
Johnson Controls, Inc.		47,350		1,453,645
Lear Corp.		169,300		7,930,012
TRW Automotive Holdings Corp. (a)		28,100		1,506,441

				13,437,941
Automobiles — 0.5%
Ford Motor Co.		577,620		7,480,179
General Motors Co. (a)		39,600		1,141,668
Tesla Motors, Inc. (a)		140,900		4,772,283
Thor Industries, Inc.		6,935		259,577

				13,653,707
Beverages — 2.1%
Beam, Inc.		52,954		3,234,960
The Coca-Cola Co.		942,665		34,171,606
Diageo Plc		166,480		4,832,735
Monster Beverage Corp. (a)		94,289		4,986,002
PepsiCo Inc.		154,200		10,551,906

				57,777,209
Biotechnology — 2.1%
Alexion Pharmaceuticals, Inc. (a)		63,700		5,975,697
Amgen, Inc.		205,583		17,745,925
Ariad Pharmaceuticals, Inc. (a)		129,700		2,487,646
Biogen Idec, Inc. (a)		27,600		4,048,092
Celgene Corp. (a)		38,134		3,001,908
Gilead Sciences, Inc. (a)		172,500		12,670,125
Myriad Genetics, Inc. (a)		256,817		6,998,263
Regeneron Pharmaceuticals, Inc. (a)		18,300		3,130,581
Vertex Pharmaceuticals, Inc. (a)		34,206		1,434,600

				57,492,837
Building Products — 0.2%
Fortune Brands Home & Security, Inc. (a)		50,720		1,482,038
Masco Corp.		308,300		5,136,278

				6,618,316


Common Stocks	Shares		Value
Capital Markets — 0.8%
Apollo Investment Corp.		16,186	$	135,315
The Bank of New York Mellon Corp.		6		154
Franklin Resources, Inc.		1,719		216,078
The Goldman Sachs Group, Inc.		103,998		13,265,985
Jefferies Group, Inc.		275,700		5,119,749
Legg Mason, Inc. (b)		56,367		1,449,759
LPL Financial Holdings, Inc.		6,791		191,235
State Street Corp.		58,200		2,735,982

				23,114,257
Chemicals — 1.7%
Albemarle Corp.		1,307		81,191
Cabot Corp.		31,319		1,246,183
Celanese Corp.		65,075		2,897,790
CF Industries Holdings, Inc.		28,686		5,827,848
Cytec Industries, Inc.		1,188		81,770
The Dow Chemical Co.		60,160		1,944,371
E.I. du Pont de Nemours & Co.		164,320		7,389,470
LyondellBasell Industries NV, Class A		80,148		4,575,649
Minerals Technologies, Inc.		2,342		93,493
Monsanto Co.		131,800		12,474,870
NewMarket Corp. (b)		578		151,552
Olin Corp.		47,650		1,028,764
PPG Industries, Inc.		38,750		5,244,812
Praxair, Inc.		22,430		2,454,963
RPM International, Inc.		2,504		73,517
Valspar Corp.		6,459		403,042
Westlake Chemical Corp. (b)		8,391		665,406

				46,634,691
Commercial Banks — 3.4%
Associated Banc-Corp. (b)		89,257		1,171,052
Bank of Nova Scotia		61,560		3,556,085
BB&T Corp.		100,942		2,938,422
BOK Financial Corp.		1,948		106,088
CIT Group, Inc. (a)		46,204		1,785,323
Cullen/Frost Bankers, Inc. (b)		18,678		1,013,655
Fifth Third Bancorp		97,187		1,476,270
First Citizens Bancshares, Inc., Class A		6,820		1,115,070
First Niagara Financial Group, Inc.		27,856		220,898
First Republic Bank		162,008		5,310,622
M&T Bank Corp.		8,510		837,980
National Bank of Canada		51,060		3,964,888
Regions Financial Corp.		547,200		3,896,064
SunTrust Banks, Inc.		42,713		1,210,914
SVB Financial Group (a)		2,919		163,376
The Toronto-Dominion Bank		43,370		3,651,591
U.S. Bancorp		573,414		18,314,843
Wells Fargo & Co.		1,259,666		43,055,384

				93,788,525
Commercial Services & Supplies — 0.7%
The ADT Corp.		252,242		11,726,730
R.R. Donnelley & Sons Co. (b)		99,408		894,672
Tyco International Ltd.		249,403		7,295,038

				19,916,440
Communications Equipment — 1.8%
Brocade Communications Systems, Inc. (a)		39,014		207,945
Cisco Systems, Inc.		828,431		16,278,669
EchoStar Corp. (a)		10,348		354,108
F5 Networks, Inc. (a)		62,700		6,091,305
Plantronics, Inc.		3,139		115,735
QUALCOMM, Inc.		453,609		28,132,830
Riverbed Technology, Inc. (a)		16,579		326,938

				51,507,530

See Notes to Financial Statements.



66	BLACKROCK FUNDS III	DECEMBER 31, 2012

Schedule of Investments (continued)

Active Stock Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Computers & Peripherals — 4.5%
Apple, Inc.		204,381	$	108,941,204
EMC Corp. (a)		513,100		12,981,430
Fusion-io, Inc. (a)		114,420		2,623,651
QLogic Corp. (a)		8,115		78,959
Western Digital Corp.		7,611		323,391

				124,948,635
Construction & Engineering — 0.2%
Jacobs Engineering Group, Inc. (a)		67,420		2,870,069
KBR, Inc.		122,300		3,659,216

				6,529,285
Consumer Finance — 0.8%
American Express Co.		152,390		8,759,377
Capital One Financial Corp.		174,597		10,114,404
Discover Financial Services		91,000		3,508,050

				22,381,831
Containers & Packaging — 0.3%
Greif Inc, Class A		10,774		479,443
Packaging Corp. of America		183,633		7,064,362

				7,543,805
Diversified Consumer Services — 0.1%
Apollo Group, Inc., Class A (a)(b)		57,450		1,201,854
ITT Educational Services, Inc. (a)(b)		30,093		520,910
Service Corp. International (b)		153,928		2,125,746

				3,848,510
Diversified Financial Services — 3.4%
Bank of America Corp.		392,737		4,555,749
Citigroup, Inc.		785,535		31,075,765
CME Group, Inc.		12,016		609,331
JPMorgan Chase & Co.		1,179,939		51,881,918
Moody’s Corp.		56,650		2,850,628
The NASDAQ OMX Group, Inc.		113,600		2,841,136
NYSE Euronext		12,649		398,949

				94,213,476
Diversified Telecommunication Services — 2.5%
AT&T, Inc.		754,564		25,436,352
BCE, Inc.		27,640		1,186,862
CenturyLink, Inc.		123,350		4,825,452
Level 3 Communications, Inc. (a)		130,200		3,008,922
Verizon Communications, Inc.		824,239		35,664,822

				70,122,410
Electric Utilities — 0.8%
American Electric Power Co., Inc.		37,780		1,612,450
Duke Energy Corp.		23,636		1,507,977
Edison International		32,820		1,483,136
Exelon Corp.		2,104		62,573
FirstEnergy Corp.		53,650		2,240,424
ITC Holdings Corp.		10,610		816,015
N.V. Energy, Inc.		89,900		1,630,786
NextEra Energy, Inc.		46,860		3,242,244
Northeast Utilities		36,690		1,433,845
PPL Corp.		106,800		3,057,684
Southern Co.		124,010		5,308,868

				22,396,002
Electrical Equipment — 0.7%
Eaton Corp. Plc		172,500		9,349,500
Hubbell, Inc. Class B		51,849		4,387,981
Rockwell Automation, Inc.		14,040		1,179,219
Roper Industries, Inc.		44,000		4,905,120

				19,821,820


Common Stocks	Shares		Value
Electronic Equipment, Instruments & Components — 0.4%
AVX Corp.		2,150	$	23,177
Corning, Inc.		640,000		8,076,800
FLIR Systems, Inc.		54,880		1,224,373
Ingram Micro, Inc., Class A (a)		52,168		882,683
Tech Data Corp. (a)		4,525		206,023

				10,413,056
Energy Equipment & Services — 1.5%
Ensco PLC, Class A		76,200		4,517,136
Halliburton Co.		190,890		6,621,974
National Oilwell Varco, Inc.		196,733		13,446,700
Noble Corp.		167,113		5,818,875
Oceaneering International, Inc.		39,300		2,113,947
Schlumberger Ltd.		77,112		5,343,090
Superior Energy Services, Inc. (a)		33,630		696,814
Transocean Ltd.		47,000		2,098,550

				40,657,086
Food & Staples Retailing — 2.5%
Costco Wholesale Corp.		248,320		24,526,566
CVS Caremark Corp.		351,818		17,010,400
The Kroger Co.		377,540		9,823,591
Wal-Mart Stores, Inc.		195,302		13,325,456
Walgreen Co.		36,800		1,361,968
Whole Foods Market, Inc.		51,300		4,685,229

				70,733,210
Food Products — 1.6%
Archer Daniels Midland Co.		14,950		409,480
General Mills, Inc.		68,300		2,760,003
H.J. Heinz Co.		36,930		2,130,122
Ingredion, Inc. (b)		17,195		1,107,874
Kraft Foods Group, Inc.		225,633		10,259,533
Lancaster Colony Corp. (b)		3,548		245,486
Mead Johnson Nutrition Co.		112,620		7,420,532
Mondelez International, Inc.		131,657		3,353,304
Post Holdings, Inc. (a)(b)		18,149		621,603
Ralcorp Holdings, Inc. (a)		2,750		246,538
Unilever NV		392,670		15,039,261
WhiteWave Foods Co. Class A (a)		3,022		46,962

				43,640,698
Gas Utilities — 0.1%
ONEOK, Inc.		30,818		1,317,470
UGI Corp.		58,500		1,913,535

				3,231,005
Health Care Equipment & Supplies — 2.4%
Abbott Laboratories (b)		256,372		16,792,366
Alere, Inc. (a)		30,285		560,273
Baxter International, Inc.		39,790		2,652,401
C.R. Bard, Inc.		7,552		738,132
Hill-Rom Holdings, Inc.		5,939		169,262
Intuitive Surgical, Inc. (a)		20,288		9,948,627
Medtronic, Inc.		423,481		17,371,191
St. Jude Medical, Inc.		173,053		6,254,135
Stryker Corp.		89,294		4,895,097
Thoratec Corp. (a)		41,029		1,539,408
Zimmer Holdings, Inc.		77,000		5,132,820

				66,053,712
Health Care Providers & Services — 1.8%
Aetna, Inc.		92,980		4,304,974
Cardinal Health, Inc. (b)		35,541		1,463,578
Express Scripts Holding Co. (a)		440,055		23,762,970
HCA Holdings, Inc.		82,160		2,478,767
Health Net, Inc. (a)		3,098		75,281

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	67

Schedule of Investments (continued)

Active Stock Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Health Care Providers & Services (concluded)
Humana, Inc.		66,178	$	4,541,796
McKesson Corp.		68,607		6,652,135
Omnicare, Inc. (b)		37,391		1,349,815
Patterson Cos., Inc.		7,850		268,706
Quest Diagnostics Inc.		30,040		1,750,431
UnitedHealth Group, Inc.		25,659		1,391,744
WellPoint, Inc.		33,431		2,036,617

				50,076,814
Health Care Technology — 0.0%
Allscripts Healthcare Solutions, Inc. (a)		87,148		820,934
Hotels, Restaurants & Leisure — 1.0%
Brinker International, Inc. (b)		18,309		567,396
Choice Hotels International, Inc. (b)		14,511		487,860
International Speedway Corp., Class A (b)		17,535		484,317
Las Vegas Sands Corp.		106,900		4,934,504
Marriott Vacations Worldwide Corp. (a)		21,232		884,737
McDonald’s Corp.		117,316		10,348,444
Panera Bread Co., Class A (a)		2,160		343,073
Starbucks Corp.		196,620		10,542,764
Starwood Hotels & Resorts Worldwide, Inc.		2		115
Yum! Brands, Inc.		12,040		799,456

				29,392,666
Household Durables — 0.3%
Garmin Ltd.		69,450		2,834,949
NVR, Inc. (a)		2,938		2,702,960
Tempur-Pedic International, Inc. (a)		51,145		1,610,556

				7,148,465
Household Products — 1.1%
Church & Dwight Co., Inc. (b)		31,374		1,680,705
The Clorox Co.		9,902		725,025
Energizer Holdings, Inc. (b)		81,138		6,489,417
Kimberly-Clark Corp.		123,810		10,453,278
The Procter & Gamble Co.		162,057		11,002,050

				30,350,475
Independent Power Producers & Energy Traders — 0.1%
The AES Corp.		351,368		3,759,638
Industrial Conglomerates — 2.3%
3M Co.		140,640		13,058,424
Carlisle Cos., Inc.		7,974		468,552
Danaher Corp.		322,900		18,050,110
General Electric Co.		1,550,468		32,544,324

				64,121,410
Insurance — 5.1%
ACE Ltd.		290,828		23,208,074
Aflac, Inc.		161,792		8,594,391
Allied World Assurance Co. Holdings Ltd.		30,857		2,431,532
American International Group, Inc. (a)		125,486		4,429,656
American National Insurance Co.		2,382		162,667
Aspen Insurance Holdings Ltd.		30,859		989,957
Assurant, Inc. (b)		16,181		561,481
Assured Guaranty Ltd.		57,403		816,845
Axis Capital Holdings Ltd.		6,113		211,754
Berkshire Hathaway, Inc., Class B (a)		8,271		741,909
Brown & Brown, Inc.		43,768		1,114,333
The Chubb Corp.		56,760		4,275,163
CNA Financial Corp. (b)		77,895		2,181,839
Endurance Specialty Holdings Ltd.		77,395		3,071,808
Everest Re Group Ltd.		5,635		619,568
The Hanover Insurance Group, Inc.		1,039		40,251
Hartford Financial Services Group, Inc.		652,226		14,635,951
Kemper Corp.		3		89
Lincoln National Corp.		290,362		7,520,376


Common Stocks	Shares		Value
Insurance (concluded)
MetLife, Inc.		357,427	$	11,773,645
PartnerRe Ltd.		42,100		3,388,629
Prudential Financial, Inc.		324,311		17,295,506
Reinsurance Group of America, Inc.		31,697		1,696,423
The Travelers Cos., Inc.		316,548		22,734,477
Validus Holdings Ltd.		39,125		1,352,942
White Mountains Insurance Group Ltd. (b)		286		147,290
Willis Group Holdings Plc		67,600		2,266,628
XL Group Plc		217,097		5,440,451

				141,703,635
Internet & Catalog Retail — 1.6%
Amazon.com, Inc. (a)		100,300		25,189,342
Liberty Ventures, Series A (a)		33,738		2,286,087
priceline.com, Inc. (a)		26,842		16,674,250
TripAdvisor, Inc. (a)(b)		36,580		1,534,897

				45,684,576
Internet Software & Services — 2.7%
eBay, Inc. (a)		214,500		10,943,790
Google, Inc., Class A (a)		81,181		57,587,366
IAC/InterActiveCorp (b)		33,129		1,567,002
VeriSign, Inc. (a)		167,178		6,489,850

				76,588,008
IT Services — 3.2%
Alliance Data Systems Corp. (a)		26,600		3,850,616
Amdocs Ltd. (b)		142,319		4,837,423
Automatic Data Processing, Inc.		15,820		901,898
Broadridge Financial Solutions, Inc. (b)		111,439		2,549,724
Computer Sciences Corp.		6,278		251,434
CoreLogic, Inc. (a)		117,831		3,172,010
DST Systems, Inc.		46,450		2,814,870
Fidelity National Information Services, Inc.		39,998		1,392,330
International Business Machines Corp.		95,349		18,264,101
Lender Processing Services, Inc.		104,688		2,577,419
MasterCard, Inc., Class A		40,103		19,701,802
Teradata Corp. (a)		96,500		5,972,385
Total System Services, Inc. (b)		56,709		1,214,707
VeriFone Systems, Inc. (a)		1,868		55,442
Visa, Inc., Class A (b)		103,967		15,759,318
The Western Union Co.		534,980		7,281,078

				90,596,557
Leisure Equipment & Products — 0.1%
Hasbro, Inc.		36,200		1,299,580
Mattel, Inc.		55,260		2,023,621

				3,323,201
Life Sciences Tools & Services — 0.5%
Agilent Technologies, Inc. (b)		319,222		13,068,949
Bruker Corp. (a)		17,012		259,773
Charles River Laboratories International, Inc. (a)		9,828		368,255
Techne Corp.		1,124		76,814
Thermo Fisher Scientific, Inc.		18,776		1,197,534

				14,971,325
Machinery — 2.3%
Caterpillar, Inc.		64,840		5,808,367
Crane Co.		41,382		1,915,159
Cummins, Inc.		34,517		3,739,917
Deere & Co.		72,350		6,252,487
Flowserve Corp. (b)		10,706		1,571,641
Gardner Denver, Inc. (b)		20,712		1,418,772
Ingersoll-Rand Plc		106,100		5,088,556
Nordson Corp.		4,167		263,021
Oshkosh Corp. (a)		52,949		1,569,938
Parker Hannifin Corp.		29,875		2,541,168

See Notes to Financial Statements.



68	BLACKROCK FUNDS III	DECEMBER 31, 2012

Schedule of Investments (continued)

Active Stock Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Machinery (concluded)
SPX Corp.		51,139	$	3,587,401
Stanley Black & Decker, Inc.		178,300		13,188,851
Terex Corp. (a)		231,209		6,499,285
Timken Co.		53,593		2,563,353
Toro Co.		17,576		755,416
Wabtec Corp.		26,713		2,338,456
Xylem, Inc.		215,728		5,846,229

				64,948,017
Marine — 0.0%
Matson, Inc.		3,363		83,133
Media — 5.0%
CBS Corp., Class B		247,400		9,413,570
Comcast Corp, Class A		631,209		23,594,593
Comcast Corp, Special Class A		455,840		16,387,448
DIRECTV (a)		145,377		7,292,110
DISH Network Corp.		211,189		7,687,280
The Interpublic Group of Cos., Inc.		268,600		2,959,972
John Wiley & Sons, Inc., Class A (b)		39,982		1,556,499
Liberty Media Corp. — Liberty Capital (a)		5,465		633,995
The McGraw-Hill Cos., Inc.		80,600		4,406,402
News Corp., Class A		430,865		11,004,292
Omnicom Group, Inc.		29,600		1,478,816
Time Warner Cable, Inc.		121,845		11,842,116
Time Warner, Inc.		220,910		10,566,125
Viacom, Inc., Class B		411,595		21,707,520
The Walt Disney Co.		206,990		10,306,032

				140,836,770
Metals & Mining — 0.6%
Barrick Gold Corp.		34,040		1,191,588
BHP Billiton Ltd.		201,100		7,747,675
Newmont Mining Corp.		4,011		186,271
Nucor Corp.		47,380		2,045,868
Rio Tinto Ltd.		35,520		2,434,827
Royal Gold, Inc. (b)		10,063		818,223
Southern Copper Corp.		36,382		1,377,423

				15,801,875
Multi-Utilities — 0.8%
Ameren Corp.		44,591		1,369,836
Consolidated Edison, Inc.		23,154		1,285,973
Dominion Resources, Inc.		164,860		8,539,748
PG&E Corp.		80,312		3,226,936
Public Service Enterprise Group, Inc.		119,430		3,654,558
Sempra Energy		22,350		1,585,509
Wisconsin Energy Corp.		37,940		1,398,089

				21,060,649
Multiline Retail — 0.6%
Dollar Tree, Inc. (a)		181,779		7,372,956
J.C. Penney Co., Inc. (b)		3		59
Kohl’s Corp.		99,156		4,261,725
Nordstrom, Inc.		84,000		4,494,000
Target Corp.		28,025		1,658,239

				17,786,979
Oil, Gas & Consumable Fuels — 7.8%
Anadarko Petroleum Corp.		92,100		6,843,951
Apache Corp.		135,598		10,644,443
Chevron Corp.		299,641		32,403,178
ConocoPhillips		151,892		8,808,217
CONSOL Energy, Inc.		7,070		226,947
Devon Energy Corp.		65,760		3,422,150
Enbridge, Inc.		117,460		5,080,053
EQT Corp.		29,900		1,763,502
Exxon Mobil Corp.		700,154		60,598,329


Common Stocks	Shares		Value
Oil, Gas & Consumable Fuels (concluded)
Hess Corp.		152,060	$	8,053,098
Kinder Morgan, Inc.		241,203		8,521,702
Marathon Oil Corp.		749,264		22,972,434
Marathon Petroleum Corp.		76,968		4,848,984
Noble Energy, Inc.		53,700		5,463,438
Occidental Petroleum Corp.		101,390		7,767,488
Peabody Energy Corp.		250,927		6,677,167
Phillips 66		19,995		1,061,735
Plains Exploration & Production Co. (a)		6,414		301,073
Royal Dutch Shell Plc		44,300		3,054,485
Royal Dutch Shell Plc, Class A		32,480		1,119,612
Spectra Energy Corp.		51,650		1,414,177
Suncor Energy, Inc.		244,010		8,047,450
Total SA		97,350		5,063,174
Valero Energy Corp.		104,200		3,555,304

				217,712,091
Paper & Forest Products — 0.4%
Domtar Corp. (b)		31,859		2,660,864
International Paper Co.		125,225		4,988,964
MeadWestvaco Corp.		70,600		2,250,022

				9,899,850
Personal Products — 0.2%
The Estee Lauder Cos., Inc., Class A		32,181		1,926,354
Herbalife Ltd. (b)		71,386		2,351,455
Nu Skin Enterprises, Inc.		14,720		545,376

				4,823,185
Pharmaceuticals — 5.8%
Allergan, Inc. (b)		80,351		7,370,597
Bristol-Myers Squibb Co.		392,958		12,806,501
Eli Lilly & Co.		366,225		18,062,217
Endo Health Solutions, Inc. (a)		25,709		675,375
Forest Laboratories, Inc. (a)(b)		70,743		2,498,643
Hospira, Inc. (a)		11,185		349,419
Johnson & Johnson		408,036		28,603,324
Merck & Co., Inc.		881,601		36,092,745
Pfizer, Inc.		1,758,309		44,098,390
Salix Pharmaceuticals Ltd. (a)		17,345		702,126
Valeant Pharmaceuticals International, Inc. (a)		112,400		6,718,148
Warner Chilcott Plc, Class A		291,135		3,505,265

				161,482,750
Professional Services — 0.1%
The Dun & Bradstreet Corp.		10,300		810,095
Towers Watson & Co., Class A		52,315		2,940,626

				3,750,721
Real Estate Investment Trusts (REITs) — 1.0%
Alexandria Real Estate Equities, Inc.		11,473		795,308
American Tower Corp.		215,385		16,642,799
AvalonBay Communities, Inc.		5,276		715,373
Brandywine Realty Trust (b)		6,209		75,688
CommonWealth REIT		90,903		1,439,904
Equity Residential		26,489		1,501,132
Hospitality Properties Trust (b)		61,291		1,435,435
Retail Properties of America, Inc. (b)		10,928		130,808
SL Green Realty Corp.		2,756		211,247
Taubman Centers, Inc.		14,065		1,107,197
Ventas, Inc.		30,870		1,997,906
Weyerhaeuser Co.		56,500		1,571,830

				27,624,627
Real Estate Management & Development — 0.1%
Alexander & Baldwin, Inc. (a)		35,896		1,054,265
Realogy Holdings Corp. (a)		18,283		767,155

				1,821,420

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	69

Schedule of Investments (continued)

Active Stock Master Portfolio

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Road & Rail — 0.5%
Canadian National Railway Co.		45,790	$	4,167,348
CSX Corp.		101,011		1,992,947
Norfolk Southern Corp. (b)		81,371		5,031,982
Union Pacific Corp.		21,640		2,720,581

				13,912,858
Semiconductors & Semiconductor Equipment — 1.6%
Altera Corp.		6,268		215,870
Avago Technologies Ltd.		171,266		5,422,282
Broadcom Corp., Class A		63,434		2,106,643
First Solar, Inc. (a)(b)		17,449		538,825
Intel Corp.		182,114		3,757,012
KLA-Tencor Corp. (b)		196,311		9,375,813
LSI Corp. (a)		120,681		854,421
Marvell Technology Group Ltd.		122,252		887,550
NVIDIA Corp.		26,050		320,155
ON Semiconductor Corp. (a)		376,500		2,654,325
Skyworks Solutions, Inc. (a)		84,904		1,723,551
Texas Instruments, Inc.		283,300		8,765,302
Xilinx, Inc.		235,800		8,465,220

				45,086,969
Software — 4.5%
CA, Inc.		6,653		146,233
Citrix Systems, Inc. (a)		62,515		4,110,361
Fair Isaac Corp.		6,529		274,414
Intuit, Inc.		28,253		1,681,053
Microsoft Corp.		2,362,223		63,142,221
Oracle Corp.		800,100		26,659,332
Red Hat, Inc. (a)		135,300		7,165,488
Salesforce.com, Inc. (a)		55,792		9,378,635
SolarWinds, Inc. (a)		47,435		2,487,966
Synopsys, Inc. (a)		11,523		366,892
TIBCO Software, Inc. (a)		28,085		618,151
VMware, Inc., Class A (a)		90,200		8,491,428

				124,522,174
Specialty Retail — 2.0%
Advance Auto Parts, Inc.		4,834		349,740
American Eagle Outfitters, Inc.		32,415		664,832
The Gap, Inc. (b)		137,147		4,257,043
The Home Depot, Inc.		300,793		19,531,955
Limited Brands, Inc.		91,580		4,309,755
PetSmart, Inc.		69,050		4,718,877
Ross Stores, Inc.		145,131		7,858,843
Sears Hometown & Outlet Stores, Inc. (a)		10,925		355,718
The TJX Cos., Inc.		323,185		13,719,203

				55,765,966


Common Stocks	Shares		Value
Textiles, Apparel & Luxury Goods — 1.2%
Coach, Inc.		92,721	$	5,146,943
Deckers Outdoor Corp. (a)		1,973		79,453
Michael Kors Holdings Ltd. (a)		183,981		9,388,550
NIKE, Inc., Class B		172,947		8,924,065
Under Armour Inc, Class A (a)		132,600		6,435,078
VF Corp.		29,000		4,378,130

				34,352,219
Thrifts & Mortgage Finance — 0.1%
People’s United Financial, Inc. (b)		131,946		1,595,227
Tobacco — 1.5%
Altria Group, Inc.		59,670		1,874,831
Lorillard, Inc.		82,210		9,591,441
Philip Morris International, Inc.		348,382		29,138,671

				40,604,943
Trading Companies & Distributors — 0.0%
Air Lease Corp. (a)		10,238		220,117
MRC Global, Inc. (a)(b)		20,491		569,240

				789,357
Water Utilities — 0.3%
American Water Works Co., Inc.		263,677		9,790,327
Wireless Telecommunication Services — 0.4%
Crown Castle International Corp. (a)		48,600		3,506,976
MetroPCS Communications, Inc. (a)		181,637		1,805,472
Telephone & Data Systems, Inc.		118,137		2,615,553
United States Cellular Corp. (a)(b)		46,635		1,643,418
Vodafone Group Plc		50,470		1,271,339

				10,842,758
Total Long-Term Investments (Cost — $2,472,057,204) — 96.8 %				2,702,234,403


Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)(e)		138,527,226		138,527,226
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)(e)		9,485,001		9,485,001
Total Short-Term Securities (Cost — $148,012,227) — 5.3%				148,012,227
*Total Investments (Cost — $2,620,069,431) — 102.1 %**				2,850,246,630
Liabilities in Excess of Other Assets — (2.1)%				(57,429,113	)

Net Assets — 100.0%			$	2,792,817,517

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	2,657,402,877

Gross unrealized appreciation	$	264,323,687
Gross unrealized depreciation		(71,479,934	)

Net unrealized appreciation	$	192,843,753

(a)

Non-income producing security.

(b)

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

See Notes to Financial Statements.



70	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (continued)		Active Stock Master Portfolio

(c)


Affiliate	Shares Held at December 31, 2011		Net Activity			Shares Held at December 31, 2012		Income
BlackRock Cash Funds:
Institutional, SL Agency Shares		128,263,976		10,263,250			138,527,226	$	367,531
BlackRock Cash Funds:
Prime, SL Agency Shares		20,162,910		(10,677,909	)		9,485,001	$	57,213

(d)

Represents the current yield as of report date.

(e)

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

_Ÿ

Financial futures contracts as of December 31, 2012 were as follows:

Contracts

Issue

Exchange

Expiration

Notional Value

Unrealized
Depreciation

216

S&P 500 Index

Chicago Mercantile

March 2013

USD 15,337,080

(27,206

)

_Ÿ

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

_Ÿ

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1			Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments¹:
Common Stocks	$	2,702,234,403			—		—	$	2,702,234,403
Short-Term Securities:
Money Market Funds		148,012,227			—		—		148,012,227

Total	$	2,850,246,630			—		—	$	2,850,246,630


	Level 1			Level 2		Level 3		Total
Derivative Financial Instruments²
Liabilities:
Equity Contracts	$	(27,206	)		—		—	$	(27,206	)

See above Schedule of Investments for values in each industry.

Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.


Schedule of Investments (concluded)		Active Stock Master Portfolio


	Level 1		Level 2			Level 3		Total
Assets:
Cash	$	2,835		—			—	$	2,835
Foreign currency at value		2,168		—			—		2,168
Cash pledged as collateral for futures		927,908		—			—		927,908
Liabilities:
Collateral on securities loaned at value		—	$	(44,085,444	)		—		(44,085,444	)

Total	$	932,911	$	(44,085,444	)		—	$	(43,152,533	)

There were no transfers between levels during the year ended December 31, 2012.


Statements of Assets and Liabilities		Master Investment Portfolio


December 31, 2012	LifePath Retirement Master Portfolio		LifePath 2020 Master Portfolio		LifePath 2030 Master Portfolio		LifePath 2040 Master Portfolio		LifePath 2050 Master Portfolio


Assets
Investments at value — affiliated^1,2	$	1,495,136,126	$	2,544,823,392	$	2,285,479,202	$	1,733,905,206	$	271,510,694
Contributions receivable from investors		3,093,243		4,562,463		2,945,520		1,885,894		2,474,995
Investments sold receivable		3,200,000		9,696,425		7,875,714		8,901,862		912,011
Dividends receivable		18,650		37,308		36,266		30,143		3,598
Securities lending income receivable		2,557		6,785		8,687		10,163		1,599
Interest receivable		410		761		801		636		129

Total assets		1,501,450,986		2,559,127,134		2,296,346,190		1,744,733,904		274,903,026


Liabilities
Collateral on securities loaned at value		5,833,100		19,078,475		44,731,905		30,469,445		4,216,100
Investments purchased payable		—		9,100,000		7,200,000		8,800,000		2,806,000
Investment advisory fees payable		69,131		83,651		47,298		17,115		1,020
Professional fees payable		28,044		29,523		29,066		28,312		26,229
Trustees’ fees payable		11,263		18,602		16,475		12,656		2,430
Withdrawals payable to investors		3,933,744		6,500,449		6,876,955		4,149,245		—

Total liabilities		9,875,282		34,810,700		58,901,699		43,476,773		7,051,779

Net Assets	$	1,491,575,704	$	2,524,316,434	$	2,237,444,491	$	1,701,257,131	$	267,851,247


Net Assets Consist of
Investors’ capital	$	1,375,413,015	$	2,300,273,368	$	2,026,265,061	$	1,536,821,091	$	247,538,680
Net unrealized appreciation/depreciation		116,162,689		224,043,066		211,179,430		164,436,040		20,312,567

Net Assets	$	1,491,575,704	$	2,524,316,434	$	2,237,444,491	$	1,701,257,131	$	267,851,247


¹Investments at cost — affiliated	$	1,378,973,437	$	2,320,780,326	$	2,074,299,772	$	1,569,469,166	$	251,198,127

²Securities loaned at value	$	5,707,244	$	18,867,959	$	44,552,599	$	30,480,806	$	4,178,328


Statements of Assets and Liabilities (concluded)		Master Investment Portfolio


December 31, 2012	Active Stock Master Portfolio

Assets
Investments at value — unaffiliated^1,2	$	2,702,234,403
Investments at value — affiliated³		148,012,227
Cash		2,835
Foreign currency at value (cost — $2,160)		2,168
Investments sold receivable		80,836,239
Dividends receivable		2,678,000
Securities lending income receivable		16,603
Interest receivable		22,689
Contributions receivable from investors		11,430,000
Cash pledged as collateral for futures		927,908
Variation margin receivable		405,460

Total assets		2,946,568,532


Liabilities
Collateral on securities loaned at value		44,085,444
Investments purchased payable		105,815,036
Withdrawals payable to investors		3,200,000
Investment advisory fees payable		312,075
Administration fees payable		213,659
Professional fees payable		45,281
Trustees’ fees payable		21,945
Foreign taxes payable		57,575

Total liabilities		153,751,015

Net Assets	$	2,792,817,517


Net Assets Consist of
Investors’ capital	$	2,562,667,816
Net unrealized appreciation/depreciation		230,149,701

Net Assets	$	2,792,817,517

¹Investments at cost — unaffiliated	$	2,472,057,203

²Securities loaned at value	$	42,989,699

³Investments at cost — affiliated	$	148,012,227


Statements of Operations		Master Investment Portfolio


Year Ended December 31, 2012	LifePath Retirement Master Portfolio			LifePath 2020 Master Portfolio			LifePath 2030 Master Portfolio			LifePath 2040 Master Portfolio			LifePath 2050 Master Portfolio


Investment Income
Dividends — affiliated	$	7,192,289		$	17,633,016		$	19,389,388		$	17,356,253		$	2,451,307
Dividends — unaffiliated		3,270			8,794			2,369			4,266			—
Securities lending — affiliated — net		68,325			148,667			160,687			124,417			25,124
Income — affiliated		6,197			10,604			9,952			7,324			1,352
Net investment income allocated from the applicable Master Portfolios:
Dividends		8,589,649			19,432,591			21,378,764			18,785,031			3,125,112
Interest		19,739,922			24,715,248			14,334,420			6,491,630			346,176
Expenses		(3,077,718	)		(5,172,373	)		(4,523,652	)		(3,421,811	)		(497,164	)
Fees waived		367,751			808,806			870,727			757,331			121,933

Total income		32,889,685			57,585,353			51,622,655			40,104,441			5,573,840


Expenses
Investment advisory		4,993,999			8,498,402			7,436,367			5,644,818			765,530
Professional		30,047			32,944			32,069			30,584			26,534
Independent Trustees		42,113			69,850			61,876			47,660			9,304

Total expenses		5,066,159			8,601,196			7,530,312			5,723,062			801,368
Less fees waived by Manager		(3,830,561	)		(6,903,574	)		(6,359,498	)		(5,036,713	)		(721,278	)

Total expenses after fees waived		1,235,598			1,697,622			1,170,814			686,349			80,090

Net investment income		31,654,087			55,887,731			50,451,841			39,418,092			5,493,750


Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — unaffiliated		7,028			32,004			13,833			21,086			—
Investments — affiliated		(2,130,449	)		(8,630,801	)		(13,854,986	)		(12,690,610	)		(1,399,972	)
Allocations from the applicable Master Portfolios from investments, financial futures contracts, swaps and foreign currency transactions		40,112,420			78,881,674			75,154,229			61,104,050			6,474,809

		37,988,999			70,282,877			61,313,076			48,434,526			5,074,837

Net change in unrealized appreciation/depreciation on:
Investments — affiliated		25,584,159			76,096,122			93,671,895			86,352,121			11,314,543
Allocated from the applicable Master Portfolios from investments, financial futures contracts, swaps and foreign currency translations		29,538,194			59,138,648			61,493,868			51,309,807			9,864,761

		55,122,353			135,234,770			155,165,763			137,661,928			21,179,304

Total realized and unrealized gain		93,111,352			205,517,647			216,478,839			186,096,454			26,254,141

Net Increase in Net Assets Resulting from Operations	$	124,765,439		$	261,405,378		$	266,930,680		$	225,514,546		$	31,747,891


Statements of Operations (concluded)		Master Investment Portfolio


Year Ended December 31, 2012	Active Stock Master Portfolio

Investment Income
Dividends	$	64,172,440
Foreign taxes withheld		(376,240	)
Securities lending — affiliated — net		265,923
Income — affiliated		158,821
Interest		668

Total income		64,221,612


Expenses
Investment advisory		6,851,027
Administration		2,812,950
Professional		45,322
Independent Trustees		92,309

Total expenses		9,801,608
Less fees waived by Manager		(2,590,751	)

Total expenses after fees waived		7,210,857

Net investment income		57,010,755


Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments		208,235,332
Payment by affiliate		773,484
Financial futures contracts		1,658,117
Foreign currency transactions		(335,894	)

		210,331,039

Net change in unrealized appreciation/depreciation on:
Investments		147,501,781
Financial futures contracts		(22,370	)
Foreign currency transactions		(391	)

		147,479,020

Total realized and unrealized gain		357,810,059

Net Increase in Net Assets Resulting from Operations	$	414,820,814


Statements of Changes in Net Assets		Master Investment Portfolio


	LifePath Retirement Master Portfolio						LifePath 2020 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2012			2011			2012			2011

Operations
Net investment income	$	31,654,087		$	38,067,629		$	55,887,731		$	60,372,244
Net realized gain		37,988,999			83,442,854			70,282,877			142,008,444
Net change in unrealized appreciation/depreciation		55,122,353			(62,125,719	)		135,234,770			(155,171,111	)

Net increase in net assets resulting from operations		124,765,439			59,384,764			261,405,378			47,209,577


Capital Transactions
Proceeds from contributions		203,555,243			146,032,233			280,792,493			253,699,470
Value of withdrawals		(223,777,527	)		(198,525,183	)		(376,464,121	)		(286,287,280	)

Net decrease in net assets derived from capital transactions		(20,222,284	)		(52,492,950	)		(95,671,628	)		(32,587,810	)


Net Assets
Total increase in net assets		104,543,155			6,891,814			165,733,750			14,621,767
Beginning of year		1,387,032,549			1,380,140,735			2,358,582,684			2,343,960,917

End of year	$	1,491,575,704		$	1,387,032,549		$	2,524,316,434		$	2,358,582,684


	LifePath 2030 Master Portfolio						LifePath 2040 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2012			2011			2012			2011

Operations
Net investment income		50,451,841		$	48,007,839		$	39,418,092		$	34,237,278
Net realized gain		61,313,076			116,683,095			48,434,526			90,966,772
Net change in unrealized appreciation/depreciation		155,165,763			(168,358,770	)		137,661,928			(154,925,236	)

Net increase (decrease) in net assets resulting from operations		266,930,680			(3,667,836	)		225,514,546			(29,721,186	)


Capital Transactions
Proceeds from contributions		257,202,657			258,359,711			182,726,933			183,590,711
Value of withdrawals		(300,799,718	)		(212,656,069	)		(216,740,612	)		(163,316,566	)

Net increase (decrease) in net assets derived from capital transactions		(43,597,061	)		45,703,642			(34,013,679	)		20,274,145


Net Assets
Total increase (decrease) in net assets		223,333,619			42,035,806			191,500,867			(9,447,041	)
Beginning of year		2,014,110,872			1,972,075,066			1,509,756,264			1,519,203,305

End of year	$	2,237,444,491		$	2,014,110,872		$	1,701,257,131		$	1,509,756,264


Statements of Changes in Net Assets (continued)		Master Investment Portfolio


	LifePath 2050 Master Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2012			2011

Operations
Net investment income	$	5,493,750		$	3,366,572
Net realized gain		5,074,837			5,616,076
Net change in unrealized appreciation/depreciation		21,179,304			(15,828,122	)

Net increase (decrease) in net assets resulting from operations		31,747,891			(6,845,474	)


Capital Transactions
Proceeds from contributions		102,543,769			76,805,333
Value of withdrawals		(46,527,191	)		(9,263,627	)

Net increase in net assets derived from capital transactions		56,016,578			67,541,706


Net Assets
Total increase in net assets		87,764,469			60,696,232
Beginning of year		180,086,778			119,390,546

End of year	$	267,851,247		$	180,086,778


Statements of Changes in Net Assets (concluded)		Master Investment Portfolio


	Active Stock Master Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2012			2011

Operations
Net investment income	$	57,010,755		$	44,115,776
Net realized gain		210,331,039			194,035,159
Net change in unrealized appreciation/depreciation		147,479,020			(191,461,710	)

Net increase in net assets resulting from operations		414,820,814			46,689,225


Capital Transactions
Proceeds from contributions		3,136,934,911			657,028,420
Value of withdrawals		(3,476,187,910	)		(499,892,059	)

Net increase (decrease) in net assets derived from capital transactions		(339,252,999	)		157,136,361


Net Assets
Total increase in net assets		75,567,815			203,825,586
Beginning of year		2,717,249,702			2,513,424,116

End of year	$	2,792,817,517		$	2,717,249,702


Financial Highlights		Master Investment Portfolio


	LifePath Retirement Master Portfolio
	Year Ended December 31,
	2012			2011			2010		2009			2008


Total Investment Return
Total investment return		9.11%			4.46%			9.83%		18.75%			(14.54	)%


Ratios to Average Net Assets
Total expenses¹		0.55%	^2,3		0.55%	^4,5		0.61%		0.59%			0.61%

Total expenses after fees waived¹		0.28%	^2,3		0.27%	^4,5		0.26%		0.26%			0.27%

Net investment income⁶		2.22%	^2,3		2.77%	^4,5		2.60%		3.61%			3.81%


Supplemental Data
Net assets, end of year (000)	$	1,491,576		$	1,387,033		$	1,380,141	$	1,165,307		$	253,604

Portfolio turnover		4%			4%			4%		6%	⁷		11%

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 three years ended December 31, 2010, which include gross expenses. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund and iShares exchange-traded funds.

Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.08%, 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.

⁴

⁵

⁶

⁷

Excludes in-kind contribution of portfolio securities received in a tax-free reorganization on November 20, 2009.


Financial Highlights (continued)		Master Investment Portfolio


	LifePath 2020 Master Portfolio
	Year Ended December 31,
	2012			2011			2010		2009		2008


Total Investment Return
Total investment return		11.49%			1.96%			11.40%		23.21%		(24.92	)%


Ratios to Average Net Assets
Total expenses¹		0.53%	^2,3		0.53%	^4,5		0.59%		0.58%		0.57%

Total expenses after fees waived¹		0.25%	^2,3		0.25%	^4,5		0.23%		0.23%		0.23%

Net investment income⁶		2.30%	^2,3		2.56%	^4,5		2.45%		3.15%		3.18%


Supplemental Data
Net assets, end of year (000)	$	2,524,316		$	2,358,583		$	2,343,961	$	1,779,673	$	1,245,671

Portfolio turnover		5%			5%			4%		6%		13%

⁴

⁵

⁶


Financial Highlights (continued)		Master Investment Portfolio


	LifePath 2030 Master Portfolio
	Year Ended December 31,
	2012			2011			2010		2009		2008


Total Investment Return
Total investment return		13.59%			(0.13	)%		12.36%		26.27%		(30.53	)%


Ratios to Average Net Assets
Total expenses¹		0.53%	^2,3		0.52%	^4,5		0.57%		0.56%		0.55%

Total expenses after fees waived¹		0.23%	^2,3		0.22%	^4,5		0.21%		0.20%		0.21%

Net investment income⁶		2.37%	^2,3		2.39%	^4,5		2.34%		2.97%		2.82%


Supplemental Data
Net assets, end of year (000)	$	2,237,444		$	2,014,111		$	1,972,075	$	1,433,256	$	952,181

Portfolio turnover		5%			7%			3%		7%		13%

Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.13%, 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.

⁴

⁵

⁶


Financial Highlights (continued)		Master Investment Portfolio


	LifePath 2040 Master Portfolio
	Year Ended December 31,
	2012			2011			2010		2009		2008

Total Investment Return
Total investment return		15.23%			(1.88	)%		13.21%		28.58%		(34.90	)%


Ratios to Average Net Assets
Total expenses¹		0.52%	^2,3		0.52%	^4,5		0.55%		0.55%		0.53%

Total expenses after fees waived¹		0.21%	^2,3		0.20%	^4,5		0.19%		0.18%		0.19%

Net investment income⁶		2.44%	^2,3		2.24%	^4,5		2.24%		2.82%		2.52%


Supplemental Data
Net assets, end of year (000)	$	1,701,257		$	1,509,756		$	1,519,203	$	1,133,675	$	720,539

Portfolio turnover		4%			8%			4%		6%		14%

Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.15%, although the ratio does include the LifePath Master Portfolio’s share of the Active Stock Master Portfolio, ACWI ex-US Index Master Portfolio, CoreAlpha Bond Master Portfolio and Master Small Cap Index Series’ allocated expenses and/or net investment income.

⁴

⁵

⁶


Financial Highlights (continued)		Master Investment Portfolio


	LifePath 2050 Master Portfolio
	Year Ended December 31,										Period June 30, 2008¹ to December 31, 2008
	2012			2011			2010		2009		Period June 30, 2008¹ to December 31, 2008

Total Investment Return
Total investment return		16.55%			(3.28	)%		13.93%		30.85%		(31.93	)%²


Ratios to Average Net Assets
Total expenses³		0.54%	^4,5		0.53%	^6,7		0.56%		0.59%		1.11%	⁸

Total expenses after fees waived³		0.21%	^4,5		0.18%	^6,7		0.17%		0.16%		0.17%	⁸

Net investment income⁹		2.51%	^4,5		2.18%	^6,7		2.31%		2.84%		3.05%	⁸


Supplemental Data
Net assets, end of period (000)	$	267,851		$	180,087		$	119,391	$	40,164	$	6,895

Portfolio turnover		5%			13%			5%		12%		0%	¹⁰

Commencement of operations.

Aggregate total investment return.

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, 2008 and the two years ended December 31, 2010, which include gross expenses. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund and iShares exchange-traded funds.

⁴

⁵

⁶

⁷

⁸

Annualized.

⁹

¹⁰

Rounds to less than 1% .


Financial Highlights (concluded)		Master Investment Portfolio


	Active Stock Master Portfolio
	Year Ended December 31,
	2012		2011		2010		2009		2008

Total Investment Return
Total investment return		15.55%		2.20%		11.04%		24.86%		(36.65	)%


Ratios to Average Net Assets
Total expenses		0.35%		0.35%		0.35%		0.35%		0.35%

Total expenses after fees waived		0.26%		0.27%		0.29%		0.30%		0.32%

Net investment income		2.03%		1.70%		1.50%		1.99%		1.96%


Supplemental Data
Net assets, end of year (000)	$	2,792,818	$	2,717,250	$	2,513,424	$	1,838,453	$	1,250,987

Portfolio turnover		120%		275%		120%		149%		98%


Notes to Financial Statements		Master Investment Portfolio

1. Organization and Significant Accounting Policies:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust. The financial statements and these accompanying notes relate to six series of MIP: LifePath Retirement Master Portfolio, LifePath 2020 Master Portfolio, LifePath 2030 Master Portfolio, LifePath 2040 Master Portfolio, LifePath 2050 Master Portfolio and Active Stock Master Portfolio (each, a “Master Portfolio” and collectively, the “Master Portfolios”). The Master Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates.

As of December 31, 2012, LifePath Retirement Master Portfolio, LifePath 2020 Master Portfolio and LifePath 2030 Master Portfolio’s investment in the CoreAlpha Bond Master Portfolio was 52.2%, 39.5% and 26.5%, respectively, of net assets. The financial statements of the CoreAlpha Bond Master Portfolio, including the Schedule of Investments, should be read in conjunction with the LifePath Retirement Master Portfolio, LifePath 2020 Master Portfolio and LifePath 2030 Master Portfolio’s financial statements. CoreAlpha Bond Master Portfolio’s financial statements are available, without charge, on the SEC’s website at http://www.sec.gov.

Each of the 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”) 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.


	Active Stock Master Portfolio			ACWI ex- US Index Master Portfolio			CoreAlpha Bond Master Portfolio			Master Small Cap Index Series
LifePath Retirement Master Portfolio		10.70	%		7.27	%		27.91	%		11.02	%
LifePath 2020 Master Portfolio		25.98	%		11.03	%		35.77	%		15.65	%
LifePath 2030 Master Portfolio		30.12	%		12.81	%		21.26	%		11.10	%
LifePath 2040 Master Portfolio		27.24	%		10.11	%		9.76	%		6.79	%
LifePath 2050 Master Portfolio		4.89	%		6.06	%		0.68	%		0.85	%

The following is a summary of significant accounting policies followed by the Master Portfolios:

Valuation: US GAAP defines fair value as the price the Master Portfolios would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Master Portfolios determine the fair values of their financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Master Portfolio for all financial instruments. Investments in open-end registered investment companies are valued at net asset value (“NAV”) each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value. The market value of the LifePath Master Portfolio’s investments in the Underlying Funds is based on the published NAV of each Underlying Fund computed as of the close of regular trading on the New York Stock Exchange (“NYSE”) on days when the NYSE is open. The LifePath Master Portfolios record their proportionate investment in the Underlying Master Portfolios at fair value which is based upon their pro rata ownership in the net assets of the Underlying Master Portfolios.



86	BLACKROCK FUNDS III	DECEMBER 31, 2012


Notes to Financial Statements (continued)		Master Investment Portfolio

flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Master Portfolio’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”) require that the Master Portfolios either deliver collateral or segregate assets in connection with certain investments (e.g., financial futures contracts), each Master Portfolio will, consistent with SEC rules and/or certain interpretive letters issued by the SEC, segregate collateral or designate on its books and records cash or other liquid securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, a Master Portfolio engaging in such transactions may have requirements to deliver/deposit securities to/with an exchange or broker-dealer as collateral for certain investments.

after in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statement of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, a 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 risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate this risk the Master Portfolios benefit from a borrower default indemnity provided by BlackRock. BlackRock’s indemnity allows for full replacement of securities lent. A Master Portfolio also could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received. During the year ended December 31, 2012, any securities on loan were collateralized by cash.

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

Recent Accounting Standards: In December 2011, the Financial Accounting Standards Board (the “FASB”) issued guidance that will expand current disclosure requirements on the offsetting of certain assets and liabilities. The new disclosures will be required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset in the Statements of Assets and Liabilities and will require an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarifies which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting will be limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing and secu-



BLACKROCK FUNDS III	DECEMBER 31, 2012	87


Notes to Financial Statements (continued)		Master Investment Portfolio

rities lending transactions. The guidance is effective for financial statements with fiscal years beginning on or after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the Master Portfolios’ financial statement disclosures.

2. Derivative Financial Instruments:

Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. Counterparty risk related to exchange-traded financial futures contracts is deemed to be minimal due to the protection against defaults provided by the exchange on which these contracts trade.


Derivative Financial Instruments Categorized by Risk Exposure:
Fair Values of Derivative Financial Instruments as of December 31, 2012
	Liability Derivatives
	Active Stock Master Portfolio
	Statements of Assets and Liabilities Location	Value
Equity contracts	Net unrealized depreciation¹	$	(27,706	)


The Effect of Derivative Financial Instruments in the Statement of Operations Year Ended December 31, 2012
		Net Realized Gain From
		Active Stock Master Portfolio
Equity contracts
Financial futures contracts		$1,658,117

		Net Change in Unrealized Appreciation/Depreciation on
		Active Stock Master Portfolio
Equity contracts
Financial futures contracts		$(22,370)

For the year ended December 31, 2012, the average quarterly balances of outstanding derivative financial instruments were as follows:


	Active Stock Master Portfolio
Financial futures contracts:
Average number of contracts purchased		143
Average notional value of contracts purchased	$	10,081,140

3. 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 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 Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each Master Portfolio. For such services, each Master Portfolio pays BFA a monthly fee based on a percentage of such 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. Active Stock Master Portfolio pays BFA based on a percentage of its 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 Portfolios, entered into an Administration Agreement with BlackRock Institutional Trust Company, N.A. (“BTC”) (the “Administrator”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC may delegate certain of its administration duties to sub-administrators. In addition to providing these services, BTC 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



88	BLACKROCK FUNDS III	DECEMBER 31, 2012


Notes to Financial Statements (continued)		Master Investment Portfolio

The fees and expenses of the MIPs’ 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. 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 previously BTC, from each affiliated investment company in which the Lifepath Master Portfolios invest through April 30, 2013. 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, 2022. The amounts of the waivers, if any, are shown as fees waived by the Manager in the Statements of Operations.

BAL voluntarily agreed to waive and previously BTC waived a portion of its administration and advisory fees paid by Active Stock Master Portfolio in an amount sufficient to maintain the advisory fees payable by each of the LifePath Master Portfolios at an annual rate of 0.35% based on the average daily net assets. This arrangement is voluntary and may be terminated by BAL at any time. With respect to the independent expenses discussed above, BAL has contractually agreed to provide and previously BTC provided an offsetting credit against the administration fees paid by Active Stock Master Portfolio in an amount equal to the independent expenses, through April 30, 2013. The amounts of the waiver an offsetting credits are shown as fees waived by the Manager in the Statements of Operations.

The Master Portfolios received an exemptive order from the SEC permitting it, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BTC, an affiliate of BFA, as the securities lending agent. BTC may, on behalf of a Master Portfolio, invest cash collateral received by the Master Portfolio for such loans, among other things, in a private investment company managed by BTC or in registered money market funds advised by BTC or its affiliates. The market value of securities on loan and the value of the related collateral, if applicable, are shown in the Statements of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC is disclosed in the Schedules of Investments, if any. Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of rebates paid to, or fees paid by,

borrowers of securities. The Master Portfolios retain 65% of securities lending income and pays a fee to BTC equal to 35% of such income. The Master Portfolios benefit from a borrower default indemnity provided by BlackRock. As securities lending agent, BTC bears all operational costs directly related to securities lending as well as the cost of borrower default indemnification. BTC does not receive any fees for managing the cash collateral. The share of income earned by each Master Portfolio is shown as securities lending – affiliated – net in the Statements of Operations. For the year ended December 31, 2012, BTC received securities lending agent fees related to securities lending activities for the Master Portfolios as follows:


LifePath Retirement Master Portfolio	$	35,938
LifePath 2020 Master Portfolio	$	77,416
LifePath 2030 Master Portfolio	$	83,101
LifePath 2040 Master Portfolio	$	64,555
LifePath 2050 Master Portfolio	$	13,423
Active Stock Master Portfolio	$	137,740

BFA reimbursed Active Stock Master Portfolio $773,484 for a loss associated with a December 2011 trading error.

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

4. Investments:

Purchases and sales of investments excluding short-term securities for the year ended December 31, 2012, were as follows:


	Purchases		Sales
LifePath Retirement Master Portfolio	$	66,957,362	$	55,839,445
LifePath 2020 Master Portfolio	$	123,794,594	$	119,230,841
LifePath 2030 Master Portfolio	$	124,448,124	$	112,080,850
LifePath 2040 Master Portfolio	$	94,591,843	$	70,736,829
LifePath 2050 Master Portfolio	$	22,799,556	$	11,306,240
Active Stock Master Portfolio	$	3,276,166,054	$	3,632,954,306

5. Borrowings:



BLACKROCK FUNDS III	DECEMBER 31, 2012	89


Notes to Financial Statements (concluded)		Master Investment Portfolio

November 2012 to November 2013, the credit agreement has the following terms: a commitment fee of 0.065% per annum based on the Master Portfolios’ pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Master Portfolio paid administration and arrangement fees which were allocated to the Master Portfolios based on their net assets as of October 31, 2012. The Master Portfolios’ commitment, administration and arrangement fees were paid by the investment advisor. The Master Portfolios did not borrow under the credit agreement during the year ended December 31, 2012.

6. Market and Credit Risk:

and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Master Portfolios may be exposed to counterparty credit risk, or the risk that an entity with which the Master Portfolios have unsettled or open transactions may fail to or be unable to perform on its commitments. The Master Portfolios manage counterparty credit risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Master Portfolios to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Master Portfolios’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Master Portfolio.

7. Subsequent Events:



90	BLACKROCK FUNDS III	DECEMBER 31, 2012


Report of Independent Registered Public Accounting Firm		Master Investment Portfolio

To the Interestholders and Board of Trustees of

Master Investment Portfolio:

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 audits 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, 2012 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 22, 2013



BLACKROCK FUNDS III	DECEMBER 31, 2012	91


Officers and Trustees


Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees¹
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 106 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. since 1987; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of Seventy (civic) since 2006; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 106 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy since 2002; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 106 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President of Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 106 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 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) since 2011, President thereof from 1997 to 2011 and Trustee since 1980; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (strategic solutions company) since 2005; Director, Cerego, LLC (software development and design) since 2005; Director, Cybersettle (dispute resolution technology) since 2009.	33 RICs consisting of 106 Portfolios	AIMS Worldwide, Inc. (marketing)
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1999 to 2008.	33 RICs consisting of 106 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital since 2005; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 106 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, The West Penn Allegheny Health System (a not-for-profit health system) since 2008; 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; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 106 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 106 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 106 Portfolios	None



92	BLACKROCK FUNDS III	DECEMBER 31, 2012


Officers and Trustees (continued)


Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees¹ (concluded)
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Chairman Elect 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; 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 106 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh since 2005 and Dean thereof from 1997 to 2005; Director, Alkon Corporation (pneumatics) since 1992; Director, Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 106 Portfolios	None
	¹ Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year extensions in terms of Trustees who turn 72 prior to December 31, 2013. ² Date shown is the earliest date a person has served for the Trust/MIP covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the Trust’s Board. As a result, although the chart shows certain Trustees as joining the Trust’s board in 2009, each Trustee first became a member of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees³
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	155 RICs consisting of 278 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	155 RICs consisting of 278 Portfolios	None
	³ Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.



BLACKROCK FUNDS III	DECEMBER 31, 2012	93


Officers and Trustees (concluded)


Name, Address and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers*
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock since 2000; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2002; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009; and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Simon Mendelson 55 East 52nd Street New York, NY 10055 1964	Vice President	Since 2009	Managing Director of BlackRock since 2005; Co-head of the Global Cash and Securities Lending Group since 2010; Chief Operating Officer and Head of the Global Client Group for BlackRock’s Global Cash Management Business from 2007 to 2010; Head of BlackRock’s Strategy and Development Group from 2005 to 2007; Partner of McKinsey & Co. from 1997 to 2005.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2009	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2009	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Director of BlackRock since 2010; 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.
	* Officers of the Trust/MIP serve at the pleasure of the Board of Trustees.


Investment Advisor BlackRock Fund Advisors San Francisco, CA 94105	Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Custodian and Accounting Agent State Street Bank and Trust Company Boston, MA 02110	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Sidley Austin LLP New York, NY 10019

				Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP New York, NY 10017	Address of the Trust/MIP 400 Howard Street San Francisco, CA 94105



94	BLACKROCK FUNDS III	DECEMBER 31, 2012


Additional Information

General Information

Electronic Delivery

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

To enroll:

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

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

Shareholders Who Hold Accounts Directly with BlackRock:

1)	Access the BlackRock website at

http://www.blackrock.com/edelivery

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

3)	Log into your account

Householding

The Lifepath Portfolios/Master 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 Portfolios/Master Portfolios at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Portfolios/Master Portfolios file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Portfolios’/Master Portfolios’ Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Portfolios’/Master Portfolios’ Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Portfolios/Master Portfolios use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

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

Shareholder Privileges

Account Information

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 Privacy Principles

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.



BLACKROCK FUNDS III	DECEMBER 31, 2012	95


A World-Class Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing.


Equity Funds

BlackRock ACWI ex-US Index Fund

BlackRock All-Cap Energy & Resources Portfolio

BlackRock Basic Value Fund

BlackRock Capital Appreciation Fund

BlackRock China Fund

BlackRock Commodity Strategies Fund

BlackRock Emerging Markets Fund

BlackRock Emerging Markets Long/Short Equity Fund

BlackRock Energy & Resources Portfolio

BlackRock Equity Dividend Fund

BlackRock EuroFund

BlackRock Flexible Equity Fund

BlackRock Focus Growth Fund

BlackRock Global Dividend Income Portfolio

BlackRock Global Long/Short Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Global SmallCap Fund

BlackRock Health Sciences Opportunities Portfolio

BlackRock Index Equity Portfolio

BlackRock India Fund

BlackRock International Fund

BlackRock International Index Fund

BlackRock International Opportunities Portfolio

BlackRock Large Cap Core Fund

BlackRock Large Cap Core Plus Fund

BlackRock Large Cap Growth Fund

BlackRock Large Cap Value Fund

BlackRock Latin America Fund

BlackRock Long-Horizon Equity Fund

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Mid Cap Value Opportunities Fund

BlackRock Natural Resources Trust

BlackRock Pacific Fund

BlackRock Real Estate Securities Fund

BlackRock Russell 1000 Index Fund

BlackRock Science & Technology Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock Small Cap Growth Fund II

BlackRock Small Cap Index Fund

BlackRock S&P 500 Index Fund

BlackRock S&P 500 Stock Fund

BlackRock U.S. Opportunities Portfolio

BlackRock Value Opportunities Fund

BlackRock World Gold Fund


Taxable Fixed Income Funds

BlackRock Bond Index Fund

BlackRock Core Bond Portfolio

BlackRock CoreAlpha Bond Fund

BlackRock Emerging Market Local Debt Portfolio

BlackRock Floating Rate Income Portfolio

BlackRock Global Long/Short Credit Fund

BlackRock GNMA Portfolio

BlackRock High Yield Bond Portfolio

BlackRock Inflation Protected Bond Portfolio

BlackRock International Bond Portfolio

BlackRock Long Duration Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Secured Credit Portfolio

BlackRock Strategic Income Opportunities Portfolio

BlackRock Total Return Fund

BlackRock U.S. Government Bond Portfolio

BlackRock U.S. Mortgage Portfolio

BlackRock World Income Fund


Municipal Fixed Income Funds

BlackRock California Municipal Bond Fund

BlackRock High Yield Municipal Fund

BlackRock Intermediate Municipal Fund

BlackRock National Municipal Fund

BlackRock New Jersey Municipal Bond Fund

BlackRock New York Municipal Bond Fund

BlackRock Pennsylvania Municipal Bond Fund

BlackRock Short-Term Municipal Fund


Mixed Asset Funds


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

BlackRock Prepared Portfolios	LifePath Portfolios
Conservative Prepared Portfolio		Retirement	2040
Moderate Prepared Portfolio		2020	2045
Growth Prepared Portfolio		2025	2050
Aggressive Growth Prepared Portfolio		2030	2055
		2035



96	BLACKROCK FUNDS III	DECEMBER 31, 2012

This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Portfolios unless accompanied or preceded by that 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.

LOGO


# LifePath-12/12-AR

DECEMBER 31, 2012

ANNUAL REPORT

BlackRock Funds III

^Ø	LifePath^® Index Retirement Portfolio

^Ø	LifePath^® Index 2020 Portfolio

^Ø	LifePath^® Index 2025 Portfolio

^Ø	LifePath^® Index 2030 Portfolio

^Ø	LifePath^® Index 2035 Portfolio

^Ø	LifePath^® Index 2040 Portfolio

^Ø	LifePath^® Index 2045 Portfolio

^Ø	LifePath^® Index 2050 Portfolio

^Ø	LifePath^® Index 2055 Portfolio

Not FDIC Insured • May Lose Value • No Bank Guarantee


Table of Contents


	Page
Dear Shareholder		3
Annual Report:
Portfolio Summaries		4
About Portfolio Performance		14
Disclosure of Expenses		15
Portfolio Financial Statements:
Statements of Assets and Liabilities		16
Statements of Operations		18
Statements of Changes in Net Assets		20
Portfolio Financial Highlights		25
Portfolio Notes to Financial Statements		52
Portfolio Report of Independent Registered Public Accounting Firm		60
Important Tax Information (Unaudited)		60
Master Portfolio Information		61
Master Portfolio Financial Statements:
Schedules of Investments		64
Statements of Assets and Liabilities		82
Statements of Operations		84
Statements of Changes in Net Assets		86
Master Portfolio Financial Highlights		89
Master Portfolio Notes to Financial Statements		98
Master Portfolio Report of Independent Registered Public Accounting Firm		102
Officers and Trustees		103
Additional Information		106
A World-Class Mutual Fund Family		107



2	BLACKROCK FUNDS III	DECEMBER 31, 2012

Dear Shareholder

Sincerely,

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

“Although 2012 brought its share of headwinds, the strongest returns came from higher-risk asset classes as investors reached for yield in an environment of extremely low interest rates.”

Rob Kapito

President, BlackRock Advisors, LLC


Total Returns as of December 31, 2012
	6-month			12-month
US large cap equities (S&P 500^® Index)		5.95	%		16.00	%
US small cap equities (Russell 2000^® Index)		7.20			16.35
International equities (MSCI Europe, Australasia, Far East Index)		13.95			17.32
Emerging market equities (MSCI Emerging Markets Index)		13.75			18.22
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)		0.07			0.11
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		0.71			4.18
US investment grade bonds (Barclays US Aggregate Bond Index)		1.80			4.21
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.15			7.42
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)		7.97			15.78

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 IS NOT PART OF YOUR FUND REPORT				3


Portfolio Summary as of December 31, 2012		LifePath Index Portfolios

Portfolio Management Commentary

How did each Portfolio perform?

All share classes of the LifePath Index Portfolios with target dates of 2020, 2025, 2030, 2035, 2040, 2045, 2050, 2055 and LifePath Index Retirement Portfolio (together, the “LifePath Index Portfolios”) invest in their respective LifePath Index Master Portfolio. The returns for the LifePath Index Portfolios include fund expenses. The respective custom benchmarks have no expenses associated with performance.

For the 12-month period ended December 31, 2012, the Investor A Shares of all of the LifePath Index Portfolios underperformed their respective custom benchmarks based on share class expenses. For the same period, the Institutional Shares of the LifePath Index Retirement Portfolio and LifePath Index Portfolios with target dates of 2020 and 2025 underperformed their respective custom benchmarks, while the Institutional Shares performed in line with their respective custom benchmarks in LifePath Index 2030, 2035 and 2045, and outperformed in LifePath Index 2040, 2050 and 2055 based on share class expenses. Also during the period, the Class K Shares of the LifePath Index Retirement Portfolio and LifePath Index Portfolios with target dates of 2020, 2025, 2030 and 2035 underperformed their respective custom benchmarks, while the Class K Shares performed in line with the custom benchmark in LifePath Index 2045 and outperformed in LifePath Index 2040, 2050 and 2055 based on share class expenses.

What factors influenced performance?

Equity markets generally outperformed fixed income markets during the period. While all of the LifePath Index Portfolios generated positive

absolute returns for the period, those with longer time horizons benefited most from the strong performance of equities given their larger allocations to equity investments.

Relative to their respective custom benchmarks, more share classes in the shorter-dated LifePath Index Portfolios underperformed due to their greater exposure to the Bond Index Master Portfolio, in which transaction costs associated with large inflows from shareholder contributions and portfolio rebalancing detracted from results for the period.

Describe recent portfolio activity.

Each LifePath Index Portfolio has its own time horizon, which affects its acceptable level of risk and, in turn, the strategic allocation of its holdings across asset classes. On a quarterly basis, the strategic allocation of each LifePath Index Portfolio is systematically adjusted to reflect the shareholders’ remaining investment time horizon. During the period, the LifePath Index Portfolios were rebalanced in accordance with their updated strategic allocations, and daily cash flows were allocated to the underlying funds and instruments as appropriate.

On June 30, 2012, the LifePath Index Portfolios added exposure to global real estate investment trusts (“REITs”) through their investment in an exchange-traded fund.

Describe portfolio positioning at period end.

As of period end, each of the LifePath Index Portfolios was invested according to its respective strategic allocation benchmark within tolerance limits.

The LifePath Index Portfolios are organized as “feeder” funds in a “master-feeder” structure. Instead of investing directly in individual securities, the feeder fund, which is offered to the public, holds interests in the net assets of its corresponding Master Portfolio. It is the Master Portfolio that actually invests in individual securities. References to the “LifePath Index Portfolios” are to the feeder funds or the Master Portfolios, as the context requires.

Glidepath Evolution

Under normal circumstances, the asset allocation of each LifePath Index Portfolio (the “LifePath Index Portfolio” or “each LifePath Index Portfolio”) will change over time according to a “glidepath” as each of the LifePath Index Portfolios approaches its respective target date. The glidepath 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 glidepath 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 glidepath 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, 2012


		LifePath^® Index Retirement Portfolio

Investment Objective

LifePath^® Index Retirement Portfolio’s investment objective is to seek to maximize return consistent with the quantitatively measured risk that investors planning to retire (or begin to withdraw substantial portions of their investment) now or in the near future may be willing to accept.

Total Return Based on a $10,000 Investment

LOGO

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, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the LifePath Index Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

Commencement of operations.


Period	Barclays US Aggregate Bond Index			Barclays US Treasury Inflation Protected Securities (TIPS) Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI Index			Russell 1000^® Index			Russell 2000^® Index
5/31/11 to 12/31/11		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

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2012


	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since Inception¹
Institutional		4.39	%		9.16	%		5.27	%
Investor A		4.25			8.88			5.00
Class K		4.39			9.17			5.29
Barclays US Aggregate Bond Index		1.80			4.21			5.64
Barclays US TIPS Index		2.82			6.98			9.65
FTSE EPRA/NAREIT Developed Real Estate Index		11.25			27.73			6.31
LifePath Index Retirement Portfolio Custom Benchmark		4.52			9.35			5.34
MSCI ACWI ex-US IMI Index		13.70			17.04			(2.93	)
Russell 1000^® Index		6.44			16.42			5.68
Russell 2000^® Index		7.20			16.35			1.60

The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.



BLACKROCK FUNDS III	DECEMBER 31, 2012	5


		LifePath^® Index 2020 Portfolio

Investment Objective

LifePath^® Index 2020 Portfolio’s investment objective is to seek to maximize return consistent with the quantitatively measured risk that investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2020 may be willing to accept.

Total Return Based on a $10,000 Investment

LOGO

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, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the LifePath Index Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

Commencement of operations.


Period	Barclays US Aggregate Bond Index			Barclays US Treasury Inflation Protected Securities (TIPS) Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI Index			Russell 1000^® Index			Russell 2000^® Index
5/31/11 to 12/31/11		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

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2012


	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since Inception¹
Institutional		5.55	%		11.35	%		4.48	%
Investor A		5.42			10.98			4.16
Class K		5.66			11.36			4.49
Barclays US Aggregate Bond Index		1.80			4.21			5.64
Barclays US TIPS Index		2.82			6.98			9.65
FTSE EPRA/NAREIT Developed Real Estate Index		11.25			27.73			6.31
LifePath Index 2020 Portfolio Custom Benchmark		5.69			11.45			4.51
MSCI ACWI ex-US IMI Index		13.70			17.04			(2.93	)
Russell 1000^® Index		6.44			16.42			5.68
Russell 2000^® Index		7.20			16.35			1.60

The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.



6	BLACKROCK FUNDS III	DECEMBER 31, 2012


		LifePath^® Index 2025 Portfolio

Investment Objective

LifePath^® Index 2025 Portfolio’s investment objective is to seek to maximize return consistent with the quantitatively measured risk that investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2025 may be willing to accept.

Total Return Based on a $10,000 Investment

LOGO

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, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the LifePath Index Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

Commencement of operations.


Period	Barclays US Aggregate Bond Index			Barclays US Treasury Inflation Protected Securities (TIPS) Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI Index			Russell 1000^® Index			Russell 2000^® Index
5/31/11 to 12/31/11		30.0	%		4.7	%		N/A			20.5	%		41.2	%		3.6	%
1/01/12 to 12/31/12		31.9			5.0			2.4	%		19.3			38.1			3.3

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2012


	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since Inception¹
Institutional		6.13	%		12.34	%		4.10	%
Investor A		6.13			12.12			3.88
Class K		6.14			12.34			4.12
Barclays US Aggregate Bond Index		1.80			4.21			5.64
Barclays US TIPS Index		2.82			6.98			9.65
FTSE EPRA/NAREIT Developed Real Estate Index		11.25			27.73			6.31
LifePath Index 2025 Portfolio Custom Benchmark		6.31			12.48			4.19
MSCI ACWI ex-US IMI Index		13.70			17.04			(2.93	)
Russell 1000^® Index		6.44			16.42			5.68
Russell 2000^® Index		7.20			16.35			1.60

The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.



BLACKROCK FUNDS III	DECEMBER 31, 2012	7


		LifePath^® Index 2030 Portfolio

Investment Objective

LifePath^® Index 2030 Portfolio’s investment objective is to seek to maximize return consistent with the quantitatively measured risk that investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2030 may be willing to accept.

Total Return Based on a $10,000 Investment

LOGO

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, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the LifePath Index Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

Commencement of operations.


Period	Barclays US Aggregate Bond Index			Barclays US Treasury Inflation Protected Securities (TIPS) Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI Index			Russell 1000^® Index			Russell 2000^® Index
5/31/11 to 12/31/11		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

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2012


	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since Inception¹
Institutional		6.77	%		13.38	%		3.89	%
Investor A		6.64			13.11			3.63
Class K		6.79			13.28			3.84
Barclays US Aggregate Bond Index		1.80			4.21			5.64
Barclays US TIPS Index		2.82			6.98			9.65
FTSE EPRA/NAREIT Developed Real Estate Index		11.25			27.73			6.31
LifePath Index 2030 Portfolio Custom Benchmark		6.84			13.38			3.88
MSCI ACWI ex-US IMI Index		13.70			17.04			(2.93	)
Russell 1000^® Index		6.44			16.42			5.68
Russell 2000^® Index		7.20			16.35			1.60

The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.



8	BLACKROCK FUNDS III	DECEMBER 31, 2012


		LifePath^® Index 2035 Portfolio

Investment Objective

LifePath^® Index 2035 Portfolio’s investment objective is to seek to maximize return consistent with the quantitatively measured risk that investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2035 may be willing to accept.

Total Return Based on a $10,000 Investment

LOGO

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, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the LifePath Index Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

Commencement of operations.


Period	Barclays US Aggregate Bond Index			Barclays US Treasury Inflation Protected Securities (TIPS) Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI Index			Russell 1000^® Index			Russell 2000^® Index
5/31/11 to 12/31/11		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

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2012


	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since Inception¹
Institutional		7.36	%		14.16	%		3.58	%
Investor A		7.15			13.83			3.29
Class K		7.26			14.07			3.54
Barclays US Aggregate Bond Index		1.80			4.21			5.64
Barclays US TIPS Index		2.82			6.98			9.65
FTSE EPRA/NAREIT Developed Real Estate Index		11.25			27.73			6.31
LifePath Index 2035 Portfolio Custom Benchmark		7.33			14.18			3.59
MSCI ACWI ex-US IMI Index		13.70			17.04			(2.93	)
Russell 1000^® Index		6.44			16.42			5.68
Russell 2000^® Index		7.20			16.35			1.60

The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.



BLACKROCK FUNDS III	DECEMBER 31, 2012	9


		LifePath^® Index 2040 Portfolio

Investment Objective

LifePath^® Index 2040 Portfolio’s investment objective is to seek to maximize return consistent with the quantitatively measured risk that investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2040 may be willing to accept.

Total Return Based on a $10,000 Investment

LOGO

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, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the LifePath Index Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

Commencement of operations.


Period	Barclays US Aggregate Bond Index			Barclays US Treasury Inflation Protected Securities (TIPS) Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI Index			Russell 1000^® Index			Russell 2000^® Index
5/31/11 to 12/31/11		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

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2012


	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since Inception¹
Institutional		7.71	%		15.01	%		3.31	%
Investor A		7.48			14.63			3.00
Class K		7.72			15.03			3.33
Barclays US Aggregate Bond Index		1.80			4.21			5.64
Barclays US TIPS Index		2.82			6.98			9.65
FTSE EPRA/NAREIT Developed Real Estate Index		11.25			27.73			6.31
LifePath Index 2040 Portfolio Custom Benchmark		7.77			14.92			3.31
MSCI ACWI ex-US IMI Index		13.70			17.04			(2.93	)
Russell 1000^® Index		6.44			16.42			5.68
Russell 2000^® Index		7.20			16.35			1.60

The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.



10	BLACKROCK FUNDS III	DECEMBER 31, 2012


		LifePath^® Index 2045 Portfolio

Investment Objective

LifePath^® Index 2045 Portfolio’s investment objective is to seek to maximize return consistent with the quantitatively measured risk that investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2045 may be willing to accept.

Total Return Based on a $10,000 Investment

LOGO

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, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the LifePath Index Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

Commencement of operations.


Period	Barclays US Aggregate Bond Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI Index			Russell 1000^® Index			Russell 2000^® Index
5/31/11 to 12/31/11		8.7	%		N/A			29.6	%		58.3	%		3.4	%
1/01/12 to 12/31/12		11.2			4.8	%		27.4			54.0			2.6

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2012


	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since Inception¹
Institutional		8.15	%		15.58	%		2.87	%
Investor A		7.95			15.27			2.60
Class K		8.05			15.61			2.90
Barclays US Aggregate Bond Index		1.80			4.21			5.64
FTSE EPRA/NAREIT Developed Real Estate Index		11.25			27.73			6.31
LifePath Index 2045 Portfolio Custom Benchmark		8.18			15.59			3.02
MSCI ACWI ex-US IMI Index		13.70			17.04			(2.93	)
Russell 1000^® Index		6.44			16.42			5.68
Russell 2000^® Index		7.20			16.35			1.60

The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.



BLACKROCK FUNDS III	DECEMBER 31, 2012	11


		LifePath^® Index 2050 Portfolio

Investment Objective

LifePath^® Index 2050 Portfolio’s investment objective is to seek to maximize return consistent with the quantitatively measured risk that investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2050 may be willing to accept.

Total Return Based on a $10,000 Investment

LOGO

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, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the LifePath Index Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

Commencement of operations.


Period	Barclays US Aggregate Bond Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI Index			Russell 1000^® Index			Russell 2000^® Index
5/31/11 to 12/31/11		3.3	%		N/A			31.6	%		61.7	%		3.4	%
1/01/12 to 12/31/12		5.8			5.3	%		29.2			57.1			2.6

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2012


	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since Inception¹
Institutional		8.52	%		16.35	%		2.69	%
Investor A		8.42			16.00			2.40
Class K		8.53			16.37			2.71
Barclays US Aggregate Bond Index		1.80			4.21			5.64
FTSE EPRA/NAREIT Developed Real Estate Index		11.25			27.73			6.31
LifePath Index 2050 Portfolio Custom Benchmark		8.59			16.25			2.76
MSCI ACWI ex-US IMI Index		13.70			17.04			(2.93	)
Russell 1000^® Index		6.44			16.42			5.68
Russell 2000^® Index		7.20			16.35			1.60

The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.



12	BLACKROCK FUNDS III	DECEMBER 31, 2012


		LifePath^® Index 2055 Portfolio

Investment Objective

LifePath^® Index 2055 Portfolio’s investment objective is to seek to maximize return consistent with the quantitatively measured risk that investors planning to retire (or begin to withdraw substantial portions of their investment) approximately in the year 2055 may be willing to accept.

Total Return Based on a $10,000 Investment

LOGO

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, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the LifePath Index Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

Commencement of operations.


Period	Barclays US Aggregate Bond Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI ACWI ex-US IMI Index			Russell 1000^® Index			Russell 2000^® Index
5/31/11 to 12/31/11		1.0	%		N/A			33.2	%		59.8	%		6.0	%
1/01/12 to 12/31/12		1.1			5.9	%		31.4			57.4			4.2

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2012


	6-Month			Average Annual Total Returns
	Total Returns			1 Year			Since Inception¹
Institutional		8.95	%		16.78	%		2.48	%
Investor A		8.85			16.55			2.25
Class K		8.98			16.83			2.52
Barclays US Aggregate Bond Index		1.80			4.21			5.64
FTSE EPRA/NAREIT Developed Real Estate Index		11.25			27.73			6.31
LifePath Index 2055 Portfolio Custom Benchmark		9.00			16.71			2.51
MSCI ACWI ex-US IMI Index		13.70			17.04			(2.93	)
Russell 1000^® Index		6.44			16.42			5.68
Russell 2000^® Index		7.20			16.35			1.60

The LifePath Index Portfolio commenced operations on May 31, 2011.

Past performance is not indicative of future results.



BLACKROCK FUNDS III	DECEMBER 31, 2012	13


About Portfolio Performance		BlackRock Funds III

_Ÿ

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

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. Figures shown in each of the performance tables on the previous pages assume reinvestment of all dividends and distributions, if any, at net asset value (“NAV”) on the 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 LifePath Index Portfolios’ administrator waived and/or reimbursed a portion of each LifePath Index Portfolio’s expenses. Without such waiver and/or reimbursement, each LifePath Index Portfolio’s performance would have been lower. Dividends paid to each class of shares will vary because of the different levels of administration and service fees applicable to each class, which are deducted from the income available to be paid to shareholders.

The Russell 3000 Index is comprised of the Russell 1000 Index and the Russell 2000 Index, which together represent approximately 98% of the total US equity market. The Barclays US Aggregate Bond Index is an unmanaged market weighted index comprised of investment grade corporate bonds (rated BBB or better), mortgages and US Treasury and government agency securities with at least one year to maturity. The MSCI ACWI ex-US IMI Index is a free float-adjusted market capitalization-weighted index that measures the equity market performance of the developed (excluding the US) and emerging investable market universe. The FTSE EPRA/NAREIT Developed Index is designed to track the performance of listed real estate companies and REITS worldwide. By making the index constituents free-float adjusted, liquidity, size and revenue screened, the series is suitable for use as the basis for investment products, such as derivatives and Exchange Traded Funds (ETFs). The Barclays US Treasury Inflation Protected Securities (TIPS) Index is a rules-based, market value-weighted index that tracks inflation-protected securities issued by the U.S. Treasury.

The LifePath Index Portfolos’ 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 Portfolios’ changing asset allocations over time. As of December 31, 2012, the following indexes are used to calculate the LifePath Index Portfolios’ custom benchmarks: Barclays US Aggregate Bond Index, Barclays US TIPS Index, FTSE EPRA/NAREIT Developed Real Estate Index, MSCI ACWI ex-US IMI Index, Russell 1000 Index and Russell 2000 Index.



14	BLACKROCK FUNDS III	DECEMBER 31, 2012


Disclosure of Expenses		BlackRock Funds III

Shareholders of each LifePath Index Portfolio may incur the following charges: (a) expenses related to transactions, including sales charges and exchange fees; and (b) operating expenses, including administration fees, distribution fees, including 12b-1 fees, service and distribution fees and other portfolio expenses. The expense examples shown below (which are based on a hypothetical investment of $1,000 invested on July 1, 2012 and held through December 31, 2012 are intended to assist shareholders both in calculating expenses based on an investment in a LifePath Index Portfolio and in comparing these expenses with similar costs of investing in other mutual funds.

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

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

The expenses shown in the expense examples are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, or exchange fees, 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, 2012		Ending Account Value December 31, 2012		Expenses Paid During the Period¹		Beginning Account Value July 1, 2012		Ending Account Value December 31, 2012		Expenses Paid During the Period¹		Annualized Expense Ratio
LifePath Index Retirement Portfolio
Institutional		$1,000.00		$1,043.90		$0.82		$1,000.00		$1,024.33		$0.81		0.16%
Investor A		$1,000.00		$1,042.50		$2.16		$1,000.00		$1,023.03		$2.14		0.42%
Class K		$1,000.00		$1,043.90		$0.77		$1,000.00		$1,024.38		$0.76		0.15%
LifePath Index 2020 Portfolio
Institutional		$1,000.00		$1,055.50		$0.88		$1,000.00		$1,024.28		$0.87		0.17%
Investor A		$1,000.00		$1,054.20		$2.17		$1,000.00		$1,023.03		$2.14		0.42%
Class K		$1,000.00		$1,056.60		$0.83		$1,000.00		$1,024.33		$0.81		0.16%
LifePath Index 2025 Portfolio
Institutional		$1,000.00		$1,061.30		$0.88		$1,000.00		$1,024.28		$0.87		0.17%
Investor A		$1,000.00		$1,061.30		$2.23		$1,000.00		$1,022.98		$2.19		0.43%
Class K		$1,000.00		$1,061.40		$0.83		$1,000.00		$1,024.33		$0.81		0.16%
LifePath Index 2030 Portfolio
Institutional		$1,000.00		$1,067.70		$0.88		$1,000.00		$1,024.28		$0.87		0.17%
Investor A		$1,000.00		$1,066.40		$2.23		$1,000.00		$1,022.98		$2.19		0.43%
Class K		$1,000.00		$1,067.90		$0.88		$1,000.00		$1,024.28		$0.87		0.17%
LifePath Index 2035 Portfolio
Institutional		$1,000.00		$1,073.60		$0.99		$1,000.00		$1,024.18		$0.97		0.19%
Investor A		$1,000.00		$1,071.50		$2.29		$1,000.00		$1,022.93		$2.24		0.44%
Class K		$1,000.00		$1,072.60		$0.89		$1,000.00		$1,024.28		$0.87		0.17%
LifePath Index 2040 Portfolio
Institutional		$1,000.00		$1,077.10		$0.94		$1,000.00		$1,024.23		$0.92		0.18%
Investor A		$1,000.00		$1,074.80		$2.24		$1,000.00		$1,022.98		$2.19		0.43%
Class K		$1,000.00		$1,077.20		$0.89		$1,000.00		$1,024.28		$0.87		0.17%
LifePath Index 2045 Portfolio
Institutional		$1,000.00		$1,081.50		$1.05		$1,000.00		$1,024.13		$1.02		0.20%
Investor A		$1,000.00		$1,079.50		$2.35		$1,000.00		$1,022.87		$2.29		0.45%
Class K		$1,000.00		$1,080.50		$0.89		$1,000.00		$1,024.28		$0.87		0.17%
LifePath Index 2050 Portfolio
Institutional		$1,000.00		$1,085.20		$1.00		$1,000.00		$1,024.18		$0.97		0.19%
Investor A		$1,000.00		$1,084.20		$2.41		$1,000.00		$1,022.82		$2.34		0.46%
Class K		$1,000.00		$1,085.30		$0.94		$1,000.00		$1,024.23		$0.92		0.18%
LifePath Index 2055 Portfolio
Institutional		$1,000.00		$1,089.50		$1.10		$1,000.00		$1,024.08		$1.07		0.21%
Investor A		$1,000.00		$1,088.50		$2.47		$1,000.00		$1,022.77		$2.39		0.47%
Class K		$1,000.00		$1,089.80		$0.95		$1,000.00		$1,024.23		$0.92		0.18%

For each class of the LifePath Index Portfolio, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period shown). 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.

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366.



BLACKROCK FUNDS III	DECEMBER 31, 2012	15


Statements of Assets and Liabilities		BlackRock Funds III


December 31, 2012	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	$	201,960,798		$	286,962,436		$	122,437,487		$	205,996,348		$	81,751,970
Capital shares sold receivable		107,280			221,849			15,517			99,281			1,716
Receivable from advisor		45,671			63,949			14,754			51,237			17,713
Withdrawals receivable from the Master Portfolio		68,317			—			—			—			64,333
Prepaid expenses		4,028			4,027			4,028			4,029			4,028

Total assets		202,186,094			287,252,261			122,471,786			206,150,895			81,839,760


Liabilities
Contributions payable to the LifePath Index Master Portfolio		—			168,728			14,222			49,727			—
Capital shares redeemed payable		175,597			53,121			1,295			49,554			66,049
Income dividends payable		72,250			49,403			337			47,767			367
Professional fees payable		27,788			27,930			18,251			28,057			27,880
Registration fees payable		23,322			31,966			13,070			22,962			8,758
Capital gain distributions payable		19,841			20,493			200			24,738			252
Transfer agent fees payable		3,954			6,622			3,531			6,147			3,669
Printing fees payable		3,858			4,365			3,041			3,461			3,689
Service fees payable		1,591			3,419			731			2,695			727
Other accrued expenses payable		353			316			298			307			318

Total liabilities		328,554			366,363			54,976			235,415			111,709

Net Assets	$	201,857,540		$	286,885,898		$	122,416,810		$	205,915,480		$	81,728,051


Net Assets Consist of
Paid-in capital	$	193,916,403		$	272,893,460		$	116,076,651		$	193,635,802		$	76,783,813
Distributions in excess of net investment income		(141,198	)		(173,652	)		(71,446	)		(115,093	)		(43,085	)
Accumulated net realized loss allocated from the LifePath Index Master Portfolio		(253,727	)		(630,616	)		(311,248	)		(618,852	)		(268,959	)
Net unrealized appreciation/depreciation allocated from the LifePath Index Master Portfolio		8,336,062			14,796,706			6,722,853			13,013,623			5,256,282

Net Assets	$	201,857,540		$	286,885,898		$	122,416,810		$	205,915,480		$	81,728,051


Net Asset Value
Institutional
Net assets	$	20,223,222		$	19,785,684		$	4,843,883		$	16,157,778		$	1,835,446

Shares outstanding²		1,927,225			1,909,417			470,056			1,574,072			179,839

Net asset value	$	10.49		$	10.36		$	10.30		$	10.26		$	10.21

Investor A
Net assets	$	7,967,165		$	17,943,545		$	3,917,725		$	13,908,379		$	3,797,626

Shares outstanding²		759,441			1,733,397			380,393			1,355,166			372,357

Net asset value	$	10.49		$	10.35		$	10.30		$	10.26		$	10.20

Class K
Net assets	$	173,667,153		$	249,156,669		$	113,655,202		$	175,849,323		$	76,094,979

Shares outstanding²		16,558,378			24,052,058			11,029,285			17,149,658			7,459,607

Net asset value	$	10.49		$	10.36		$	10.30		$	10.25		$	10.20

¹ Cost — from the applicable LifePath Index Master Portfolio	$	193,624,736		$	272,165,730		$	115,714,634		$	192,982,725		$	76,495,688

No par value, unlimited number of shares authorized.


Statements of Assets and Liabilities (concluded)		BlackRock Funds III


December 31, 2012	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	$	107,660,333		$	33,166,354		$	26,026,604		$	4,897,566
Capital shares sold receivable		77,197			6,272			119,190			372
Receivable from advisor		30,806			12,442			12,862			9,568
Withdrawals receivable from the Master Portfolio		—			19,840			—			876
Prepaid expenses		4,028			4,028			4,028			4,028

Total assets		107,772,364			33,208,936			26,162,684			4,912,410


Liabilities
Contributions payable to the LifePath Index Master Portfolio		61,834			—			116,243			—
Capital shares redeemed payable		15,363			26,112			2,947			1,249
Income dividends payable		37,132			419			500			16,763
Professional fees payable		27,901			27,869			28,116			27,645
Registration fees payable		11,502			3,250			2,466			270
Capital gain distributions payable		16,111			126			58			—
Transfer agent fees payable		4,762			3,338			3,730			1,637
Printing fees payable		2,575			4,629			4,046			4,906
Service fees payable		1,456			166			197			23
Other accrued expenses payable		297			289			288			288

Total liabilities		178,933			66,198			158,591			52,781

Net Assets	$	107,593,431		$	33,142,738		$	26,004,093		$	4,859,629


Net Assets Consist of
Paid-in capital	$	100,635,557		$	31,138,292		$	24,367,824		$	4,738,298
Distributions in excess of net investment income		(49,803	)		(15,154	)		(10,006	)		(1,190	)
Accumulated net realized loss allocated from the LifePath Index Master Portfolio		(369,762	)		(117,102	)		(92,586	)		(981,973	)
Net unrealized appreciation/depreciation allocated from the LifePath Index Master Portfolio		7,377,439			2,136,702			1,738,861			1,104,494

Net Assets	$	107,593,431		$	33,142,738		$	26,004,093		$	4,859,629


Net Asset Value
Institutional
Net assets	$	9,554,194		$	531,501		$	1,572,957		$	25,166

Shares outstanding²		938,263			52,464			155,559			2,503

Net asset value	$	10.18		$	10.13		$	10.11		$	10.05

Investor A
Net assets	$	7,563,429		$	887,275		$	1,089,576		$	128,885

Shares outstanding²		743,372			87,653			107,854			12,829

Net asset value	$	10.17		$	10.12		$	10.10		$	10.05

Class K
Net assets	$	90,475,808		$	31,723,962		$	23,341,560		$	4,705,578

Shares outstanding²		8,889,055			3,130,468			2,308,815			468,112

Net asset value	$	10.18		$	10.13		$	10.11		$	10.05

¹ Cost — from the applicable LifePath Index Master Portfolio	$	100,282,894		$	31,029,652		$	24,287,743		$	3,793,072

No par value, unlimited number of shares authorized.


Statements of Operations		BlackRock Funds III


Year Ended December 31, 2012	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	$	1,445,391		$	2,659,629		$	1,136,056		$	2,418,007		$	906,708
Securities lending — affiliated — net		1,411			8,681			2,557			5,555			2,026
Income — affiliated		1,052			1,390			541			928			325
Interest — affiliated		1,148,964			1,179,974			352,488			582,267			151,529
Expenses		(235,651	)		(333,922	)		(147,200	)		(287,748	)		(112,092	)
Fees waived		57,418			71,120			47,054			83,718			42,721

Total income		2,418,585			3,586,872			1,391,496			2,802,727			991,217


Portfolio Expenses
Administration		35,958			49,132			18,401			35,695			12,184
Service — Investor A		12,382			31,736			2,519			24,752			2,042
Registration		59,793			68,437			49,541			59,433			45,229
Transfer agent — Institutional		5,363			4,288			188			4,611			163
Transfer agent — Investor A		2,239			6,567			446			5,377			939
Transfer agent — Class K		5,720			9,402			6,582			8,561			6,633
Professional		30,738			30,858			20,738			30,698			30,438
Printing		14,045			20,176			720			15,044			8
Offering		26,885			27,362			26,582			26,877			26,942
Miscellaneous		5,842			5,300			5,233			5,270			5,219
Recoupment of past waived fees — class specific		29			29			29			29			40

Total expenses		198,994			253,287			130,979			216,347			129,837
Less administration fees waived		(35,958	)		(49,132	)		(18,401	)		(35,695	)		(12,184	)
Less transfer agent fees waived — Institutional		(46	)		(38	)		—			(36	)		—
Less transfer agent fees waived — Investor A		(32	)		(76	)		(11	)		(65	)		(13	)
Less transfer agent fees waived — Class K		(558	)		(728	)		(304	)		(519	)		(209	)
Less transfer agent fees reimbursed — Institutional		(3,886	)		(3,036	)		(33	)		(3,233	)		(49	)
Less transfer agent fees reimbursed — Investor A		(1,410	)		(4,681	)		(227	)		(3,842	)		(749	)
Less transfer agent fees reimbursed — Class K		(5,162	)		(8,673	)		(6,277	)		(8,041	)		(6,423	)
Less fees reimbursed by administrator		(137,268	)		(152,134	)		(102,563	)		(137,322	)		(107,300	)

Total expenses after fees waived and reimbursed		14,674			34,789			3,163			27,594			2,910

Net investment income		2,403,911			3,552,083			1,388,333			2,775,133			988,307


Realized and Unrealized Gain Allocated from the Master Portfolios
Net realized gain from investments, financial futures contracts and foreign currency transactions		152,180			234,038			207,730			229,918			175,707
Net change in unrealized appreciation/depreciation on investments, financial futures contracts and foreign currency translations		8,357,319			14,866,430			6,815,755			13,125,390			5,385,714

Total realized and unrealized gain		8,509,499			15,100,468			7,023,485			13,355,308			5,561,421

Net Increase in Net Assets Resulting from Operations	$	10,913,410		$	18,652,551		$	8,411,818		$	16,130,441		$	6,549,728


Statements of Operations (concluded)		BlackRock Funds III


Year Ended December 31, 2012	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	$	1,451,869		$	397,923		$	354,608		$	81,389
Securities lending — affiliated — net		3,704			1,446			1,293			186
Income — affiliated		464			129			111			25
Interest — affiliated		185,161			34,691			17,294			1,439
Expenses		(157,726	)		(64,269	)		(60,444	)		(37,804	)
Fees waived		46,988			37,242			37,105			33,595

Total income		1,530,460			407,162			349,967			78,830


Portfolio Expenses
Administration		18,394			4,667			3,929			858
Service — Investor A		12,308			533			634			128
Registration		47,973			39,721			38,937			36,741
Transfer agent — Institutional		3,494			176			646			94
Transfer agent — Investor A		2,270			273			313			136
Transfer agent — Class K		7,348			6,169			6,769			2,652
Professional		30,498			30,338			30,338			29,918
Printing		6,900			8			8			8
Offering		26,232			26,200			26,157			26,401
Miscellaneous		5,233			5,203			5,202			5,202
Recoupment of past waived fees — class specific		29			—			—			—

Total expenses		160,679			113,288			112,933			102,138
Less administration fees waived		(18,394	)		(4,667	)		(3,929	)		(858	)
Less transfer agent fees waived — Institutional		(29	)		(11	)		—			—
Less transfer agent fees waived — Investor A		(35	)		(17	)		(23	)		—
Less transfer agent fees waived — Class K		(274	)		(95	)		(87	)		(40	)
Less transfer agent fees reimbursed — Institutional		(2,506	)		(84	)		(414	)		(83	)
Less transfer agent fees reimbursed — Investor A		(1,459	)		(194	)		(200	)		(112	)
Less transfer agent fees reimbursed — Class K		(7,073	)		(6,074	)		(6,681	)		(2,612	)
Less fees reimbursed by administrator		(116,687	)		(100,497	)		(99,719	)		(96,961	)

Total expenses after fees waived and reimbursed		14,222			1,649			1,880			1,472

Net investment income		1,516,238			405,513			348,087			77,358


Realized and Unrealized Gain (Loss) Allocated from the Master Portfolios
Net realized gain (loss) from investments, financial futures contracts and foreign currency transactions		43,112			11,177			(14,447	)		(920,352	)
Net change in unrealized appreciation/depreciation on investments, financial futures contracts and foreign currency translations		7,521,044			2,293,873			1,912,161			1,282,849

Total realized and unrealized gain		7,564,156			2,305,050			1,897,714			362,497

Net Increase in Net Assets Resulting from Operations	$	9,080,394		$	2,710,563		$	2,245,801		$	439,855


Statements of Changes in Net Assets		BlackRock Funds III


	LifePath Index Retirement Portfolio						LifePath Index 2020 Portfolio
Increase (Decrease) in Net Assets:	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011			Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Operations
Net investment income	$	2,403,911		$	32,734		$	3,552,083		$	30,013
Net realized gain (loss)		152,180			(24,166	)		234,038			(35,916	)
Net change in unrealized appreciation/depreciation		8,357,319			(21,257	)		14,866,430			(69,724	)

Net increase (decrease) in net assets resulting from operations		10,913,410			(12,689	)		18,652,551			(75,627	)


Dividends and Distributions to Shareholders From²
Net investment income:
Institutional		(261,808	)		(396	)		(253,123	)		(339	)
Investor A		(71,384	)		(360	)		(199,661	)		(305	)
Class K		(2,258,479	)		(31,237	)		(3,321,958	)		(26,866	)
Net realized gain:
Institutional		(33,512	)		—			(53,825	)		—
Investor A		(13,220	)		—			(49,061	)		—
Class K		(288,093	)		—			(678,055	)		—
Tax return of capital:
Institutional		—			(18	)		—			(22	)
Investor A		—			(18	)		—			(21	)
Class K		—			(1,409	)		—			(1,670	)

Decrease in net assets resulting from dividends and distributions to shareholders		(2,926,496	)		(33,438	)		(4,555,683	)		(29,223	)


Capital Share Transactions
Net increase in net assets derived from capital share transactions		191,916,753			2,000,000			270,893,880			2,000,000


Net Assets
Total increase in net assets		199,903,667			1,953,873			284,990,748			1,895,150
Beginning of period		1,953,873			—			1,895,150			—

End of period	$	201,857,540		$	1,953,873		$	286,885,898		$	1,895,150

Undistributed (distributions in excess of) net investment income	$	(141,198	)	$	(293	)	$	(173,652	)	$	838

Commencement of operations.

Dividends and distributions are determined in accordance with federal income tax regulations.


Statements of Changes in Net Assets (continued)		BlackRock Funds III


	LifePath Index 2025 Portfolio						LifePath Index 2030 Portfolio
Increase (Decrease) in Net Assets:	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011			Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Operations
Net investment income	$	1,388,333		$	28,408		$	2,775,133		$	27,262
Net realized gain (loss)		207,730			(38,267	)		229,918			(41,867	)
Net change in unrealized appreciation/depreciation		6,815,755			(92,902	)		13,125,390			(111,767	)

Net increase (decrease) in net assets resulting from operations		8,411,818			(102,761	)		16,130,441			(126,372	)


Dividends and Distributions to Shareholders From²
Net investment income:
Institutional		(46,532	)		(318	)		(233,456	)		(297	)
Investor A		(29,124	)		(282	)		(167,955	)		(262	)
Class K		(1,395,326	)		(25,086	)		(2,515,902	)		(23,449	)
Net realized gain:
Institutional		(18,637	)		—			(61,189	)		—
Investor A		(15,089	)		—			(52,788	)		—
Class K		(437,200	)		—			(667,736	)		—
Tax return of capital:
Institutional		—			(21	)		—			(22	)
Investor A		—			(22	)		—			(23	)
Class K		—			(1,681	)		—			(1,758	)

Decrease in net assets resulting from dividends and distributions to shareholders		(1,941,908	)		(27,410	)		(3,699,026	)		(25,811	)


Capital Share Transactions
Net increase in net assets derived from capital share transactions		114,077,071			2,000,000			191,636,248			2,000,000


Net Assets
Total increase in net assets		120,546,981			1,869,829			204,067,663			1,847,817
Beginning of period		1,869,829			—			1,847,817			—

End of period	$	122,416,810		$	1,869,829		$	205,915,480		$	1,847,817

Undistributed (distributions in excess of) net investment income	$	(71,446	)	$	784		$	(115,093	)	$	1,074

Commencement of operations.

Dividends and distributions are determined in accordance with federal income tax regulations.


Statements of Changes in Net Assets (continued)		BlackRock Funds III


	LifePath Index 2035 Portfolio						LifePath Index 2040 Portfolio
Increase (Decrease) in Net Assets:	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011			Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Operations
Net investment income	$	988,307		$	26,244		$	1,516,238		$	25,305
Net realized gain (loss)		175,707			(45,187	)		43,112			(50,650	)
Net change in unrealized appreciation/depreciation		5,385,714			(129,432	)		7,521,044			(143,605	)

Net increase (decrease) in net assets resulting from operations		6,549,728			(148,375	)		9,080,394			(168,950	)


Dividends and Distributions to Shareholders From²
Net investment income:
Institutional		(18,375	)		(278	)		(155,822	)		(261	)
Investor A		(27,832	)		(244	)		(91,979	)		(228	)
Class K		(988,293	)		(22,007	)		(1,325,612	)		(20,677	)
Net realized gain:
Institutional		(8,944	)		—			(31,671	)		—
Investor A		(18,524	)		—			(25,153	)		—
Class K		(371,207	)		—			(300,713	)		—
Tax return of capital:
Institutional		—			(23	)		—			(24	)
Investor A		—			(23	)		—			(24	)
Class K		—			(1,774	)		—			(1,887	)

Decrease in net assets resulting from dividends and distributions to shareholders		(1,433,175	)		(24,349	)		(1,930,950	)		(23,101	)


Capital Share Transactions
Net increase in net assets derived from capital share transactions		74,784,086			2,000,136			98,636,038			2,000,000


Net Assets
Total increase in net assets		79,900,639			1,827,412			105,785,482			1,807,949
Beginning of period		1,827,412			—			1,807,949			—

End of period	$	81,728,051		$	1,827,412		$	107,593,431		$	1,807,949

Undistributed (distributions in excess of) net investment income	$	(43,085	)	$	1,319		$	(49,803	)	$	1,542

Commencement of operations.

Dividends and distributions are determined in accordance with federal income tax regulations.


Statements of Changes in Net Assets (continued)		BlackRock Funds III


	LifePath Index 2045 Portfolio						LifePath Index 2050 Portfolio
Increase (Decrease) in Net Assets:	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011			Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Operations
Net investment income	$	405,513		$	24,284		$	348,087		$	23,716
Net realized gain (loss)		11,177			(56,467	)		(14,447	)		(58,176	)
Net change in unrealized appreciation/depreciation		2,293,873			(157,171	)		1,912,161			(173,300	)

Net increase (decrease) in net assets resulting from operations		2,710,563			(189,354	)		2,245,801			(207,760	)


Dividends and Distributions to Shareholders From²
Net investment income:
Institutional		(6,138	)		(243	)		(23,821	)		(230	)
Investor A		(7,644	)		(210	)		(9,234	)		(225	)
Class K		(407,126	)		(19,310	)		(325,463	)		(18,343	)
Net realized gain:
Institutional		(1,196	)		—			(1,299	)		—
Investor A		(1,999	)		—			(966	)		—
Class K		(71,398	)		—			(20,664	)		—
Tax return of capital:
Institutional		—			(25	)		—			(26	)
Investor A		—			(25	)		—			(28	)
Class K		—			(1,935	)		—			(1,984	)

Decrease in net assets resulting from dividends and distributions to shareholders		(495,501	)		(21,748	)		(381,447	)		(20,836	)


Capital Share Transactions
Net increase in net assets derived from capital share transactions		29,138,778			2,000,000			22,365,225			2,003,110


Net Assets
Total increase in net assets		31,353,840			1,788,898			24,229,579			1,774,514
Beginning of period		1,788,898			—			1,774,514			—

End of period	$	33,142,738		$	1,788,898		$	26,004,093		$	1,774,514

Undistributed (distributions in excess of) net investment income	$	(15,154	)	$	1,740		$	(10,006	)	$	1,952

Commencement of operations.

Dividends and distributions are determined in accordance with federal income tax regulations.


Statements of Changes in Net Assets (concluded)		BlackRock Funds III


	LifePath Index 2055 Portfolio
Increase (Decrease) in Net Assets:	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Operations
Net investment income	$	77,358		$	23,461
Net realized loss		(920,352	)		(64,676	)
Net change in unrealized appreciation/depreciation		1,282,849			(178,355	)

Net increase (decrease) in net assets resulting from operations		439,855			(219,570	)


Dividends and Distributions to Shareholders From²
Net investment income:
Institutional		(539	)		(226	)
Investor A		(1,556	)		(194	)
Class K		(76,957	)		(17,983	)
Tax return of capital:
Institutional		(7	)		(26	)
Investor A		(20	)		(25	)
Class K		(970	)		(1,982	)

Decrease in net assets resulting from dividends and distributions to shareholders		(80,049	)		(20,436	)


Capital Share Transactions
Net increase in net assets derived from capital share transactions		2,739,829			2,000,000


Net Assets
Total increase in net assets		3,099,635			1,759,994
Beginning of period		1,759,994			—

End of period	$	4,859,629		$	1,759,994

Undistributed net investment income	$	(1,190	)	$	2,003

Commencement of operations.

Dividends and distributions are determined in accordance with federal income tax regulations.


Financial Highlights		LifePath Index Retirement Portfolio


	Institutional
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.77		$	10.00

Net investment income²		0.21			0.16
Net realized and unrealized gain (loss)		0.68			(0.22	)

Net increase (decrease) from investment operations		0.89			(0.06	)

Dividends and distributions from:³
Net investment income		(0.15	)		(0.16	)
Net realized gain		(0.02	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.17	)		(0.17	)

Net asset value, end of period	$	10.49		$	9.77


Total Investment Return⁴
Based on net asset value		9.16%			(0.61	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.38%	^7,8		6.81%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.16%	^7,8		0.18%	^9,10,11

Net investment income		2.00%	^7,8		2.84%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	20,223		$	24

Portfolio turnover of the LifePath Index Master Portfolio		1%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.06%.

⁸

Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.02%, although the ratio does include the LifePath Index Portfolio’s share of the Master Portfolio’s allocated expenses and/or net investment income.

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.37%.

¹¹

Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.04%, although the ratio does include the LifePath Index Portfolio’s share of the Master Portfolio’s allocated expenses and/or net investment income.

¹²

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%.


Financial Highlights (continued)		LifePath Index Retirement Portfolio


	Investor A
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.77		$	10.00

Net investment income²		0.18			0.15
Net realized and unrealized gain (loss)		0.69			(0.23	)

Net increase (decrease) from investment operations		0.87			(0.08	)

Dividends and distributions from:³
Net investment income		(0.13	)		(0.14	)
Net realized gain		(0.02	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.15	)		(0.15	)

Net asset value, end of period	$	10.49		$	9.77


Total Investment Return⁴
Based on net asset value		8.88%			(0.76	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.81%	^7,8		7.06%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.41%	^7,8		0.43%	^9,10,11

Net investment income		1.71%	^7,8		2.58%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	7,967		$	24

Portfolio turnover of the LifePath Index Master Portfolio		1%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.13%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.37%.

¹¹

¹²

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%.


Financial Highlights (concluded)		LifePath Index Retirement Portfolio


	Class K
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.77		$	10.00

Net investment income²		0.21			0.16
Net realized and unrealized gain (loss)		0.69			(0.22	)

Net increase (decrease) from investment operations		0.90			(0.06	)

Dividends and distributions from:³
Net investment income		(0.16	)		(0.16	)
Net realized gain		(0.02	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.18	)		(0.17	)

Net asset value, end of period	$	10.49		$	9.77


Total Investment Return⁴
Based on net asset value		9.17%			(0.59	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.28%	^7,8		6.71%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.15%	^7,8		0.15%	^9,10,11

Net investment income		2.02%	^7,8		2.87%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	173,667		$	1,905

Portfolio turnover of the LifePath Index Master Portfolio		1%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.04%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.38%.

¹¹

¹²

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%.


Financial Highlights		LifePath Index 2020 Portfolio


	Institutional
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.48		$	10.00

Net investment income²		0.22			0.15
Net realized and unrealized gain (loss)		0.85			(0.53	)

Net increase (decrease) from investment operations		1.07			(0.38	)

Dividends and distributions from:³
Net investment income		(0.16	)		(0.13	)
Net realized gain		(0.03	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.19	)		(0.14	)

Net asset value, end of period	$	10.36		$	9.48


Total Investment Return⁴
Based on net asset value		11.35%			(3.72	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.36%	^7,8		6.91%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.17%	^7,8		0.20%	^9,10,11

Net investment income		2.14%	^7,8		2.66%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	19,786		$	24

Portfolio turnover of the LifePath Index Master Portfolio		1%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.06%.

⁸

Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.03%, although the ratio does include the LifePath Index Portfolio’s share of the Master Portfolio’s allocated expenses and/or net investment income.

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.48%.

¹¹

Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.05%, although the ratio does include the LifePath Index Portfolio’s share of the Master Portfolio’s allocated expenses and/or net investment income.

¹²

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%.


Financial Highlights (continued)		LifePath Index 2020 Portfolio


	Investor A
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.48		$	10.00

Net investment income²		0.19			0.13
Net realized and unrealized gain (loss)		0.85			(0.52	)

Net increase (decrease) from investment operations		1.04			(0.39	)

Dividends and distributions from:³
Net investment income		(0.14	)		(0.12	)
Net realized gain		(0.03	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.17	)		(0.13	)

Net asset value, end of period	$	10.35		$	9.48


Total Investment Return⁴
Based on net asset value		10.98%			(3.87	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.68%	^7,8		7.16%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.42%	^7,8		0.46%	^9,10,11

Net investment income		1.85%	^7,8		2.42%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	17,944		$	24

Portfolio turnover of the LifePath Index Master Portfolio		1%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.08%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.48%.

¹¹

¹²

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%.


Financial Highlights (concluded)		LifePath Index 2020 Portfolio


	Class K
	YearEnded December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.48		$	10.00

Net investment income²		0.22			0.15
Net realized and unrealized gain (loss)		0.85			(0.52	)

Net increase (decrease) from investment operations		1.07			(0.37	)

Dividends and distributions from:³
Net investment income		(0.16	)		(0.14	)
Net realized gain		(0.03	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.19	)		(0.15	)

Net asset value, end of period	$	10.36		$	9.48


Total Investment Return⁴
Based on net asset value		11.36%			(3.71	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.28%	^7,8		6.81%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.16%	^7,8		0.18%	^9,10,11

Net investment income		2.20%	^7,8		2.70%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	249,157		$	1,848

Portfolio turnover of the LifePath Index Master Portfolio		1%			1%

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.04%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.48%.

¹¹

¹²

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%.


Financial Highlights		LifePath Index 2025 Portfolio


	Institutional
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.35		$	10.00

Net investment income²		0.23			0.14
Net realized and unrealized gain (loss)		0.92			(0.65	)

Net increase (decrease) from investment operations		1.15			(0.51	)

Dividends and distributions from:³
Net investment income		(0.16	)		(0.13	)
Net realized gain		(0.04	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.20	)		(0.14	)

Net asset value, end of period	$	10.30		$	9.35


Total Investment Return⁴
Based on net asset value		12.34%			(5.12	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.51%	^7,8		6.97%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.18%	^7,8		0.21%	^9,10,11

Net investment income		2.26%	^7,8		2.55%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	4,844		$	23

Portfolio turnover of the LifePath Index Master Portfolio		0%	¹³		0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.12%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.53%.

¹¹

Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.06%, although the ratio does include the LifePath Index Portfolio’s share of the Master Portfolio’s allocated expenses and/or net investment income.

¹²

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%.

¹³

Rounds to less than 1%.


Financial Highlights (continued)		LifePath Index 2025 Portfolio


	Investor A
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.35		$	10.00

Net investment income²		0.22			0.13
Net realized and unrealized gain (loss)		0.91			(0.66	)

Net increase (decrease) from investment operations		1.13			(0.53	)

Dividends and distributions from:³
Net investment income		(0.14	)		(0.11	)
Net realized gain		(0.04	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.18	)		(0.12	)

Net asset value, end of period	$	10.30		$	9.35


Total Investment Return⁴
Based on net asset value		12.12%			(5.26	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.85%	^7,8		7.22%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.44%	^7,8		0.46%	^9,10,11

Net investment income		2.21%	^7,8		2.30%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	3,918		$	23

Portfolio turnover of the LifePath Index Master Portfolio		0%	¹³		0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.13%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.53%.

¹¹

¹²

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%.

¹³

Rounds to less than 1%.


Financial Highlights (concluded)		LifePath Index 2025 Portfolio


	Class K
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.35		$	10.00

Net investment income²		0.23			0.14
Net realized and unrealized gain (loss)		0.92			(0.65	)

Net increase (decrease) from investment operations		1.15			(0.51	)

Dividends and distributions from:³
Net investment income		(0.16	)		(0.13	)
Net realized gain		(0.04	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.20	)		(0.14	)

Net asset value, end of period	$	10.30		$	9.35


Total Investment Return⁴
Based on net asset value		12.34%			(5.10	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.37%	^7,8		6.87%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.16%	^7,8		0.18%	^9,10,11

Net investment income		2.26%	^7,8		2.58%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	113,655		$	1,823

Portfolio turnover of the LifePath Index Master Portfolio		0%	¹³		0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.07%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.53%.

¹¹

¹²

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%.

¹³

Rounds to less than 1%.


Financial Highlights		LifePath Index 2030 Portfolio


	Institutional
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.24		$	10.00

Net investment income²		0.23			0.13
Net realized and unrealized gain (loss)		1.00			(0.76	)

Net increase (decrease) from investment operations		1.23			(0.63	)

Dividends and distributions from:³
Net investment income		(0.17	)		(0.12	)
Net realized gain		(0.04	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.21	)		(0.13	)

Net asset value, end of period	$	10.26		$	9.24


Total Investment Return⁴
Based on net asset value		13.38%			(6.30	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.41%	^7,8		7.04%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.18%	^7,8		0.22%	^9,10,11

Net investment income		2.27%	^7,8		2.47%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	16,158		$	23

Portfolio turnover of the LifePath Index Master Portfolio		2%			0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.07%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.57%.

¹¹

¹²

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%.

¹³

Rounds to less than 1%.


Financial Highlights (continued)		LifePath Index 2030 Portfolio


	Investor A
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.24		$	10.00

Net investment income²		0.20			0.12
Net realized and unrealized gain (loss)		1.01			(0.77	)

Net increase (decrease) from investment operations		1.21			(0.65	)

Dividends and distributions from:³
Net investment income		(0.15	)		(0.10	)
Net realized gain		(0.04	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.19	)		(0.11	)

Net asset value, end of period	$	10.26		$	9.24


Total Investment Return⁴
Based on net asset value		13.11%			(6.44	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.72%	^7,8		7.29%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.44%	^7,8		0.47%	^9,10,11

Net investment income		1.99%	^7,8		2.22%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	13,908		$	23

Portfolio turnover of the LifePath Index Master Portfolio		2%			0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.09%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.57%.

¹¹

¹²

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%.

¹³

Rounds to less than 1%.


Financial Highlights (concluded)		LifePath Index 2030 Portfolio


	Class K
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.24		$	10.00

Net investment income²		0.24			0.14
Net realized and unrealized gain (loss)		0.98			(0.77	)

Net increase (decrease) from investment operations		1.22			(0.63	)

Dividends and distributions from:³
Net investment income		(0.17	)		(0.12	)
Net realized gain		(0.04	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.21	)		(0.13	)

Net asset value, end of period	$	10.25		$	9.24


Total Investment Return⁴
Based on net asset value		13.28%			(6.28	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.31%	^7,8		6.94%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.17%	^7,8		0.19%	^9,10,11

Net investment income		2.37%	^7,8		2.50%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	175,849		$	1,802

Portfolio turnover of the LifePath Index Master Portfolio		2%			0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.05%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.57%.

¹¹

¹²

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%.

¹³

Rounds to less than 1%.


Financial Highlights		LifePath Index 2035 Portfolio


	Institutional
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.14		$	10.00

Net investment income²		0.25			0.13
Net realized and unrealized gain (loss)		1.04			(0.87	)

Net increase (decrease) from investment operations		1.29			(0.74	)

Dividends and distributions from:³
Net investment income		(0.17	)		(0.11	)
Net realized gain		(0.05	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.22	)		(0.12	)

Net asset value, end of period	$	10.21		$	9.14


Total Investment Return⁴
Based on net asset value		14.16%			(7.37	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.86%	^7,8		7.12%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.20%	^7,8		0.23%	^9,10,11

Net investment income		2.52%	^7,8		2.40%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	1,835		$	23

Portfolio turnover of the LifePath Index Master Portfolio		1%			0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.21%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.61%.

¹¹

¹²

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%.

¹³

Rounds to less than 1%.


Financial Highlights (continued)		LifePath Index 2035 Portfolio


	Investor A
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.14		$	10.00

Net investment income²		0.26			0.12
Net realized and unrealized gain (loss)		1.00			(0.87	)

Net increase (decrease) from investment operations		1.26			(0.75	)

Dividends and distributions from:³
Net investment income		(0.15	)		(0.10	)
Net realized gain		(0.05	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.20	)		(0.11	)

Net asset value, end of period	$	10.20		$	9.14


Total Investment Return⁴
Based on net asset value		13.83%			(7.52	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.89%	^7,8		7.47%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.45%	^7,8		0.48%	^9,10,11

Net investment income		2.59%	^7,8		2.14%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	3,798		$	23

Portfolio turnover of the LifePath Index Master Portfolio		1%			0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.09%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.61%.

¹¹

¹²

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%.

¹³

Rounds to less than 1%.


Financial Highlights (concluded)		LifePath Index 2035 Portfolio


	Class K
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.14		$	10.00

Net investment income²		0.24			0.13
Net realized and unrealized gain (loss)		1.04			(0.87	)

Net increase (decrease) from investment operations		1.28			(0.74	)

Dividends and distributions from:³
Net investment income		(0.17	)		(0.11	)
Net realized gain		(0.05	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.22	)		(0.12	)

Net asset value, end of period	$	10.20		$	9.14


Total Investment Return⁴
Based on net asset value		14.07%			(7.35	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.48%	^7,8		7.02%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.17%	^7,8		0.19%	^9,10,11

Net investment income		2.43%	^7,8		2.43%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	76,095		$	1,782

Portfolio turnover of the LifePath Index Master Portfolio		1%			0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.10%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.61%.

¹¹

¹²

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%.

¹³

Rounds to less than 1%.


Financial Highlights		LifePath Index 2040 Portfolio


	Institutional
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.04		$	10.00

Net investment income²		0.23			0.13
Net realized and unrealized gain (loss)		1.12			(0.98	)

Net increase (decrease) from investment operations		1.35			(0.85	)

Dividends and distributions from:³
Net investment income		(0.18	)		(0.10	)
Net realized gain		(0.03	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.21	)		(0.11	)

Net asset value, end of period	$	10.18		$	9.04


Total Investment Return⁴
Based on net asset value		15.01%			(8.44	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.53%	^7,8		7.17%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.19%	^7,8		0.23%	^9,10,11

Net investment income		2.36%	^7,8		2.34%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	9,554		$	23

Portfolio turnover of the LifePath Index Master Portfolio		3%			0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.11%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.65%.

¹¹

Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.07%, although the ratio does include the LifePath Index Portfolio’s share of the Master Portfolio’s allocated expenses and/or net investment income.

¹²

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%.

¹³

Rounds to less than 1%.


Financial Highlights (continued)		LifePath Index 2040 Portfolio


	Investor A
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.04		$	10.00

Net investment income²		0.21			0.11
Net realized and unrealized gain (loss)		1.11			(0.97	)

Net increase (decrease) from investment operations		1.32			(0.86	)

Dividends and distributions from:³
Net investment income		(0.16	)		(0.09	)
Net realized gain		(0.03	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.19	)		(0.10	)

Net asset value, end of period	$	10.17		$	9.04


Total Investment Return⁴
Based on net asset value		14.63%			(8.58	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.85%	^7,8		7.42%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.45%	^7,8		0.48%	^9,10,11

Net investment income		2.13%	^7,8		2.08%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	7,563		$	23

Portfolio turnover of the LifePath Index Master Portfolio		3%			0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.14%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.65%.

¹¹

¹²

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%.

¹³

Rounds to less than 1%.


Financial Highlights (concluded)		LifePath Index 2040 Portfolio


	Class K
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	9.04		$	10.00

Net investment income²		0.25			0.13
Net realized and unrealized gain (loss)		1.10			(0.97	)

Net increase (decrease) from investment operations		1.35			(0.84	)

Dividends and distributions from:³
Net investment income		(0.18	)		(0.11	)
Net realized gain		(0.03	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.21	)		(0.12	)

Net asset value, end of period	$	10.18		$	9.04


Total Investment Return⁴
Based on net asset value		15.03%			(8.42	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.39%	^7,8		7.06%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.18%	^7,8		0.20%	^9,10,11

Net investment income		2.52%	^7,8		2.36%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	90,476		$	1,763

Portfolio turnover of the LifePath Index Master Portfolio		3%			0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.07%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.65%.

¹¹

¹²

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%.

¹³

Rounds to less than 1%.


Financial Highlights		LifePath Index 2045 Portfolio


	Institutional
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	8.94		$	10.00

Net investment income²		0.26			0.12
Net realized and unrealized gain (loss)		1.13			(1.07	)

Net increase (decrease) from investment operations		1.39			(0.95	)

Dividends and distributions from:³
Net investment income		(0.18	)		(0.10	)
Net realized gain		(0.02	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.20	)		(0.11	)

Net asset value, end of period	$	10.13		$	8.94


Total Investment Return⁴
Based on net asset value		15.58%			(9.51	)%⁵


Ratios to Average Net Assets⁶
Total expenses		1.35%	^7,8		7.23%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.22%	^7,8		0.24%	^9,10,11

Net investment income		2.64%	^7,8		2.26%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	532		$	22

Portfolio turnover of the LifePath Index Master Portfolio		2%			0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.36%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.69%.

¹¹

¹²

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%.

¹³

Rounds to less than 1%.


Financial Highlights (continued)		LifePath Index 2045 Portfolio


	Investor A
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	8.94		$	10.00

Net investment income²		0.27			0.11
Net realized and unrealized gain (loss)		1.09			(1.08	)

Net increase (decrease) from investment operations		1.36			(0.97	)

Dividends and distributions from:³
Net investment income		(0.16	)		(0.08	)
Net realized gain		(0.02	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.18	)		(0.09	)

Net asset value, end of period	$	10.12		$	8.94


Total Investment Return⁴
Based on net asset value		15.27%			(9.64	)%⁵


Ratios to Average Net Assets⁶
Total expenses		1.39%	^7,8		7.48%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.46%	^7,8		0.49%	^9,10,11

Net investment income		2.75%	^7,8		2.00%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	887		$	22

Portfolio turnover of the LifePath Index Master Portfolio		2%			0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.25%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.69%.

¹¹

¹²

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%.

¹³

Rounds to less than 1%.


Financial Highlights (concluded)		LifePath Index 2045 Portfolio


	Class K
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	8.94		$	10.00

Net investment income²		0.26			0.12
Net realized and unrealized gain (loss)		1.13			(1.07	)

Net increase (decrease) from investment operations		1.39			(0.95	)

Dividends and distributions from:³
Net investment income		(0.18	)		(0.10	)
Net realized gain		(0.02	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.20	)		(0.11	)

Net asset value, end of period	$	10.13		$	8.94


Total Investment Return⁴
Based on net asset value		15.61%			(9.49	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.89%	^7,8		7.12%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.18%	^7,8		0.21%	^9,10,11

Net investment income		2.60%	^7,8		2.29%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	31,724		$	1,744

Portfolio turnover of the LifePath Index Master Portfolio		2%			0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.24%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.69%.

¹¹

¹²

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%.

¹³

Rounds to less than 1%.


Financial Highlights		LifePath Index 2050 Portfolio


	Institutional
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	8.86		$	10.00

Net investment income²		0.24			0.12
Net realized and unrealized gain (loss)		1.21			(1.16	)

Net increase (decrease) from investment operations		1.45			(1.04	)

Dividends and distributions from:³
Net investment income		(0.19	)		(0.09	)
Net realized gain		(0.01	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.20	)		(0.10	)

Net asset value, end of period	$	10.11		$	8.86


Total Investment Return⁴
Based on net asset value		16.35%			(10.36	)%⁵


Ratios to Average Net Assets⁶
Total expenses		1.55%	^7,8		7.27%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.21%	^7,8		0.24%	^9,10,11

Net investment income		2.44%	^7,8		2.22%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	1,573		$	22

Portfolio turnover of the LifePath Index Master Portfolio		3%			0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.47%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.71%.

¹¹

¹²

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%.

¹³

Rounds to less than 1%.


Financial Highlights (continued)		LifePath Index 2050 Portfolio


	Investor A
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	8.86		$	10.00

Net investment income²		0.28			0.10
Net realized and unrealized gain (loss)		1.14			(1.15	)

Net increase (decrease) from investment operations		1.42			(1.05	)

Dividends and distributions from:³
Net investment income		(0.17	)		(0.08	)
Net realized gain		(0.01	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.18	)		(0.09	)

Net asset value, end of period	$	10.10		$	8.86


Total Investment Return⁴
Based on net asset value		16.00%			(10.49	)%⁵


Ratios to Average Net Assets⁶
Total expenses		1.33%	^7,8		7.69%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.47%	^7,8		0.49%	^9,10,11

Net investment income		2.86%	^7,8		1.97%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	1,090		$	25

Portfolio turnover of the LifePath Index Master Portfolio		3%			0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.22%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.71%.

¹¹

¹²

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%.

¹³

Rounds to less than 1%.


Financial Highlights (concluded)		LifePath Index 2050 Portfolio


	Class K
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	8.86		$	10.00

Net investment income²		0.26			0.12
Net realized and unrealized gain (loss)		1.19			(1.16	)

Net increase (decrease) from investment operations		1.45			(1.04	)

Dividends and distributions from:³
Net investment income		(0.19	)		(0.09	)
Net realized gain		(0.01	)		—
Tax return of capital		—			(0.01	)

Total dividends and distributions		(0.20	)		(0.10	)

Net asset value, end of period	$	10.11		$	8.86


Total Investment Return⁴
Based on net asset value		16.37%			(10.34	)%⁵


Ratios to Average Net Assets⁶
Total expenses		0.99%	^7,8		7.17%	^9,10,11,12

Total expenses after fees waived and/or reimbursed		0.19%	^7,8		0.21%	^9,10,11

Net investment income		2.67%	^7,8		2.25%	^9,10,11


Supplemental Data
Net assets, end of period (000)	$	23,342		$	1,727

Portfolio turnover of the LifePath Index Master Portfolio		3%			0%	¹³

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁷

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 0.27%.

⁸

⁹

Annualized.

¹⁰

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.71%.

¹¹

¹²

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%.

¹³

Rounds to less than 1%.


Financial Highlights		LifePath Index 2055 Portfolio


	Institutional
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	8.80		$	10.00

Net investment income²		0.24			0.12
Net realized and unrealized gain (loss)		1.23			(1.22	)

Net increase (decrease) from investment operations		1.47			(1.10	)

Dividends and distributions from:³
Net investment income		(0.22	)		(0.09	)
Tax return of capital		(0.00	)⁴		(0.01	)

Total dividends and distributions		(0.22	)		(0.10	)

Net asset value, end of period	$	10.05		$	8.80


Total Investment Return⁵
Based on net asset value		16.78%			(10.98	)%⁶


Ratios to Average Net Assets⁷
Total expenses		4.43%	^8,9		7.32%	^10,11,12,13

Total expenses after fees waived and/or reimbursed		0.24%	^8,9		0.24%	^10,11,13

Net investment income		2.46%	^8,9		2.21%	^10,11,13


Supplemental Data
Net assets, end of period (000)	$	25		$	22

Portfolio turnover of the LifePath Index Master Portfolio		8%			0%	¹⁴

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁸

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 1.36%.

⁹

¹⁰

Annualized.

¹¹

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.73%.

¹²

Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.08%, although the ratio does include the LifePath Index Portfolio’s share of the Master Portfolio’s allocated expenses and/or net investment income.

¹³

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%.

¹⁴

Rounds to less than 1%.


Financial Highlights (continued)		LifePath Index 2055 Portfolio


	Investor A
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	8.80		$	10.00

Net investment income²		0.25			0.10
Net realized and unrealized gain (loss)		1.20			(1.21	)

Net increase (decrease) from investment operations		1.45			(1.11	)

Dividends and distributions from:³
Net investment income		(0.20	)		(0.08	)
Tax return of capital		(0.00	)⁴		(0.01	)

Total dividends and distributions		(0.20	)		(0.09	)

Net asset value, end of period	$	10.05		$	8.80


Total Investment Return⁵
Based on net asset value		16.55%			(11.11	)%⁶


Ratios to Average Net Assets⁷
Total expenses		3.98%	^8,9		7.57%	^10,11,12,13

Total expenses after fees waived and/or reimbursed		0.49%	^8,9		0.49%	^10,11,13

Net investment income		2.60%	^8,9		1.95%	^10,11,13


Supplemental Data
Net assets, end of period (000)	$	129		$	22

Portfolio turnover of the LifePath Index Master Portfolio		8%			0%	¹⁴

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁸

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 1.05%.

⁹

¹⁰

Annualized.

¹¹

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.73%.

¹²

Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.08%, although the ratio does include the LifePath Index Portfolio’s share of the Master Portfolio’s allocated expenses and/or net investment income.

¹³

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%.

¹⁴

Rounds to less than 1%.


Financial Highlights (concluded)		LifePath Index 2055 Portfolio


	Class K
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Per Share Operating Performance
Net asset value, beginning of period	$	8.80		$	10.00

Net investment income²		0.26			0.12
Net realized and unrealized gain (loss)		1.21			(1.22	)

Net increase (decrease) from investment operations		1.47			(1.10	)

Dividends and distributions from:³
Net investment income		(0.22	)		(0.09	)
Tax return of capital		(0.00	)⁴		(0.01	)

Total dividends and distributions		(0.22	)		(0.10	)

Net asset value, end of period	$	10.05		$	8.80


Total Investment Return⁵
Based on net asset value		16.83%			(10.96	)%⁶


Ratios to Average Net Assets⁷
Total expenses		3.71%	^8,9		7.21%	^10,11,12,13

Total expenses after fees waived and/or reimbursed		0.19%	^8,9		0.21%	^10,11,13

Net investment income		2.71%	^8,9		2.24%	^10,11,13


Supplemental Data
Net assets, end of period (000)	$	4,706		$	1,716

Portfolio turnover of the LifePath Index Master Portfolio		8%			0%	¹⁴

Commencement of operations.

Based on average shares outstanding.

Dividends and distributions are determined in accordance with federal income tax regulations.

⁴

Amount is greater than ($0.00) per share.

⁵

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

Includes the LifePath Index Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁸

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 1.18%.

⁹

¹⁰

Annualized.

¹¹

Includes the LifePath Index Portfolio’s share of the Master Portfolio’s allocated fees waived of 3.74%.

¹²

Excludes expenses incurred indirectly as a result of the Master Portfolio’s investments in underlying funds of approximately 0.08%, although the ratio does include the LifePath Index Portfolio’s share of the Master Portfolio’s allocated expenses and/or net investment income.

¹³

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%.

¹⁴

Rounds to less than 1%.


Notes to Financial Statements		BlackRock Funds III

1. Organization and Significant Accounting Policies:

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. The LifePath Index Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the period. Actual results could differ from those estimates. Each LifePath Index Portfolio seeks to achieve its investment objective by investing substantially all of its assets in a separate series of Master Investment Portfolio (“MIP”): LifePath Index Retirement Master Portfolio, LifePath Index 2020 Master Portfolio, LifePath Index 2025 Master Portfolio, LifePath Index 2030 Master Portfolio, LifePath Index 2035 Master Portfolio, LifePath Index 2040 Master Portfolio, LifePath Index 2045 Master Portfolio, LifePath Index 2050 Master Portfolio and LifePath Index 2055 Master Portfolio (each, a “LifePath Index Master Portfolio” and collectively, the “LifePath Index Master Portfolios”). Each LifePath Index Master Portfolio has the same or a substantially similar investment objective as its corresponding LifePath Index Portfolio. The performance of a LifePath Index Portfolio is directly affected by the performance of its corresponding LifePath Index Master Portfolio.

The value of each LifePath Index Portfolio’s investment in its corresponding LifePath Index Master Portfolio reflects that LifePath Index Portfolio’s proportionate interest in the net assets of its corresponding LifePath Index Master Portfolio (99.99%, 99.99%, 99.99%, 99.99%, 99.99%, 99.99%, 99.97%, 99.96% and 99.79% for the LifePath Index Retirement Portfolio, LifePath Index 2020 Portfolio, LifePath Index 2025 Portfolio, LifePath Index 2030 Portfolio, LifePath Index 2035 Portfolio, LifePath Index 2040 Portfolio, LifePath Index 2045 Portfolio, LifePath Index 2050 Portfolio and LifePath Index 2055 Portfolio, respectively, as of December 31, 2012).

Each LifePath Index Portfolio offers multiple classes of shares. Institutional, Investor A and Class K Shares are sold without a sales charge. Institutional and Class K Shares are available only to certain eligible investors. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Investor A Shares bear certain expenses related to the shareholder servicing of such shares. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures.

The following is a summary of significant accounting policies followed by the LifePath Index Portfolios:

Valuation: US GAAP defines fair value as the price the LifePath Index Portfolios would receive to sell an asset or pay to transfer a liability in an

orderly transaction between market participants at the measurement date. The LifePath Index Portfolios’ policy is to fair value their financial instruments at market value. Each LifePath Index Portfolio records its investments in the applicable LifePath Index Master Portfolio at fair value based on the LifePath Index Portfolio’s proportionate interest in the net assets of the LifePath Index Master Portfolio. Valuation of securities held by the LifePath Index Master Portfolios is discussed in Note 1 of the LifePath Index Master Portfolios’ Notes to Financial Statements, which are included elsewhere in this report.

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

Dividends and Distributions: Dividends from net investment income are declared and paid quarterly. Distributions of capital gains are recorded on the ex-dividend dates. The portion of distributions that exceeds a LifePath Index Portfolio’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a nontaxable return of capital. Distributions in excess of a LifePath Index Portfolio’s taxable income and net capital gains, but not in excess of a LifePath Index Portfolio’s earnings and profits, will be taxable to shareholders as ordinary income and will not constitute a nontaxable return of capital. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

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

Each LifePath Index Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each LifePath Index Portfolio’s US federal tax returns remains open for the year ended December 31, 2012 and for the period ended December 31, 2011. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

Offering Costs: Offering costs are amortized over a 12-month period beginning with the commencement of operations. BlackRock Fund Advisors (“BFA”) reimbursed the LifePath Index Portfolios which are shown as expenses reimbursed by advisor in the Statements of Operations, for the following amounts:


LifePath Index Retirement Portfolio	$	137,268
LifePath Index 2020 Portfolio	$	152,134
LifePath Index 2025 Portfolio	$	102,563
LifePath Index 2030 Portfolio	$	137,322
LifePath Index 2035 Portfolio	$	107,300
LifePath Index 2040 Portfolio	$	116,687
LifePath Index 2045 Portfolio	$	100,497
LifePath Index 2050 Portfolio	$	99,719
LifePath Index 2055 Portfolio	$	96,961



52	BLACKROCK FUNDS III	DECEMBER 31, 2012


Notes to Financial Statements (continued)		BlackRock Funds III

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

2. Administration 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, Inc. (“BlackRock”).

The Trust, on behalf of the LifePath Index Portfolios, entered into an Administration Agreement with BlackRock Institutional Trust Company, N.A. (“BTC”) (the “Administrator”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC is entitled to receive for these administration services an annual fee of 0.03% based on the average daily net assets of each LifePath Index Portfolio. Effective July 1, 2012, BlackRock Advisors, LLC (“BAL”) replaced BTC as each LifePath Index Portfolio’s administrator and entered into an Administration Agreement with the Trust, on behalf of each LifePath Index Portfolio, on similar terms.

From time to time, BAL may waive and previously BTC waived 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 and previously BTC delegated certain of its administration duties to sub-administrators.

BFA, BTC and BAL 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, in order to limit expenses. The expense limitations as a percentage of average daily net assets are as follows: 0.10% for Institutional, 0.35% for Investor A and 0.05% for Class K until May 1, 2013. A LifePath Index Portfolio may have to repay some of these waivers and reimbursements to BFA, BTC and BAL in the following two years. The agreement may be terminated upon 90 days notice by a majority of the non-interested trustees of the Trust or by a vote of majority of the outstanding voting shares.

These amounts waived or reimbursed are included in fees reimbursed by administrator, and shown as transfer agent fees reimbursed – class specific, respectively, in the Statements of Operations. For the year ended December 31, 2012, the amounts included in fees reimbursed by administrator were as follows:


LifePath Index Retirement Portfolio	$	10,458
LifePath Index 2020 Portfolio	$	16,390
LifePath Index 2025 Portfolio	$	6,537
LifePath Index 2030 Portfolio	$	15,116
LifePath Index 2035 Portfolio	$	7,221
LifePath Index 2040 Portfolio	$	11,038
LifePath Index 2045 Portfolio	$	6,352
LifePath Index 2050 Portfolio	$	7,295
LifePath Index 2055 Portfolio	$	2,807

If during a LifePath Index Portfolio’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal periods received a waiver or reimbursement from BAL and previously BTC, are less than the expense limit for that share class, BAL is entitled and previously BTC was entitled to be reimbursed by such share class up to the lesser of (a) the amount of fees waived or expenses reimbursed during the prior two fiscal periods under the agreement and (b) the amount by which the expense limit for that share class exceeds the operating expenses of the share class for the current fiscal year, provided that: (1) the LifePath Index Portfolio, of which the share class is a part, has more than $50 million in assets for the fiscal year and (2) BAL and previously 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 and previously BTC becomes entitled to reimbursement for fees waived or reimbursed, the amount available to reimburse BAL and previously BTC shall be calculated by reference to the expense limit for that share class in effect at the time BAL and previously BTC became entitled to receive such reimbursement, rather than the subsequently changed expense limit for that share class.

For the year ended December 31, 2012, BTC and BAL recouped the following Fund level and class specific waivers and/or reimbursements previously recorded by the Funds:


	BTC		BAL
LifePath Index Retirement Portfolio
Institutional	$	15		—
Investor A	$	14		—
LifePath Index 2020 Portfolio
Institutional	$	15		—
Investor A	$	14		—
LifePath Index 2025 Portfolio
Institutional	$	11	$	4
Investor A	$	9	$	5
LifePath Index 2030 Portfolio
Institutional	$	14		—
Investor A	$	15		—
LifePath Index 2035 Portfolio
Institutional		—	$	14
Investor A		—	$	26
LifePath Index 2040 Portfolio
Institutional	$	15		—
Investor A	$	14		—

On December 31, 2012, the Fund level and class specific waivers and/or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:


	Expiring December 31,
	2013		2014
	BTC		BTC		BAL
LifePath Index Retirement Portfolio
Fund level	$	74,386	$	63,411	$	109,815
Institutional		—	$	1	$	3,931
Investor A		—	$	1	$	1,441
Class k	$	346	$	162	$	5,558
LifePath Index 2020 Portfolio
Fund level	$	73,478	$	66,273	$	134,993
Institutional		—	$	1	$	3,073
Investor A		—	$	1	$	4,756
Class k	$	346	$	162	$	9,239



BLACKROCK FUNDS III	DECEMBER 31, 2012	53


Notes to Financial Statements (continued)		BlackRock Funds III


	Expiring December 31,
	2013		2014
	BTC		BTC		BAL
LifePath Index 2025 Portfolio
Fund level	$	73,205	$	58,004	$	62,960
Institutional		—	$	3	$	30
Investor A		—	$	1	$	237
Class k	$	346	$	159	$	6,422
LifePath Index 2030 Portfolio
Fund level	$	73,292	$	63,227	$	109,790
Institutional		—	$	1	$	3,268
Investor A		—	$	1	$	3,906
Class k	$	346	$	162	$	8,398
LifePath Index 2035 Portfolio
Fund level	$	73,331	$	57,339	$	62,145
Institutional		—	$	3	$	46
Investor A		—	$	30	$	733
Class k	$	345	$	160	$	6,472
LifePath Index 2040 Portfolio
Fund level	$	73,077	$	59,087	$	75,994
Institutional		—	$	1	$	2,534
Investor A		—	$	1	$	1,493
Class k	$	345	$	155	$	7,192
LifePath Index 2045 Portfolio
Fund level	$	73,053	$	55,569	$	49,596
Institutional	$	15	$	10	$	85
Investor A	$	15	$	31	$	179
Class k	$	345	$	160	$	6,009
LifePath Index 2050 Portfolio
Fund level	$	73,040	$	55,597	$	48,051
Institutional	$	14	$	1	$	413
Investor A	$	39	$	52	$	171
Class k	$	346	$	163	$	6,605
LifePath Index 2055 Portfolio
Fund level	$	73,115	$	55,312	$	42,507
Institutional	$	15	$	19	$	64
Investor A	$	14	$	23	$	89
Class k	$	345	$	139	$	2,512

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

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

Pursuant to written agreements, certain financial intermediaries, some of which may be affiliates, provide the LifePath Index Portfolios with sub-accounting, recordkeeping, sub-transfer agency and other administrative services with respect to sub-accounts they service. For these services, these entities receive an annual fee per shareholder account, which will vary depending on share class and/or net assets.

The Administrator maintains a call center, which is responsible for providing certain shareholder services to the LifePath Index Portfolios, such as responding to shareholder inquiries and processing transactions based upon instructions from shareholders with respect to the subscription and redemption of LifePath Index Portfolio shares. These amounts are included in transfer agent — class specific in the Statements of Operations.

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.

3. Income Tax Information:


	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
Paid-in capital	$	1,095		$	1,293		$	1,304		$	1,357		$	1,411		$	1,454		$	1,499		$	1,527		$	1,498
Distributions in excess of net investment income	$	46,855		$	48,169		$	10,419		$	26,013		$	1,789		$	5,830		$	(1,499	)	$	(1,527	)	$	(1,498	)
Accumulated net realized loss allocated from the LifePath Index Master Portfolio	$	(47,950	)	$	(49,462	)	$	(11,723	)	$	(27,370	)	$	(3,200	)	$	(7,284	)		—			—			—

The tax character of distributions paid during the fiscal years ended December 31, 2012 and December 31, 2011 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	12/31/12		$	2,692,796		$	4,107,098		$	1,696,755		$	3,316,768		$	1,243,349		$	1,750,697		$	456,733		$	368,966		$	79,053
	12/31/11			31,993			27,510			25,686			24,008			22,529			21,166			19,763			18,798			18,403
Long-term capital gains	12/31/12			233,700			448,585			245,153			382,258			189,826			180,253			38,768			12,481			—
Tax return of capital	12/31/12			—			—			—			—			—			—			—			—			996
	12/31/11			1,445			1,713			1,724			1,803			1,820			1,935			1,985			2,038			2,033

Total	12/31/12		$	2,926,496		$	4,555,683		$	1,941,908		$	3,699,026		$	1,433,175		$	1,930,950		$	495,501		$	381,447		$	80,049

	12/31/11		$	33,438		$	29,223		$	27,410		$	25,811		$	24,349		$	23,101		$	21,748		$	20,836		$	20,436



54	BLACKROCK FUNDS III	DECEMBER 31, 2012


Notes to Financial Statements (continued)		BlackRock Funds III

As of December 31, 2012, the tax components of accumulated net earnings were as follows:


	LifePath Index Retirement Portfolio			LifePath Index 2020 Portfolio			LifePath Index 2025 Portfolio		LifePath Index 2030 Portfolio		LifePath Index 2035 Portfolio		LifePath Index 2040 Portfolio		LifePath Index 2045 Portfolio		LifePath Index 2050 Portfolio		LifePath Index 2055 Portfolio
Undistributed ordinary income		—			—			—	$	3,599	$	13,730	$	22,687	$	7,474	$	7,497		—
Undistributed long-term capital gains	$	237,571		$	449,894		$	220,895		428,177		179,584		236,233		70,830		54,938		—
Capital loss carryforwards		—			—			—		—		—		—		—		—	$	(145,270	)
Net unrealized gains¹		7,768,049			13,564,740			6,119,264		11,847,902		4,750,924		6,698,954		1,926,142		1,573,834		270,715
Qualified late-year losses²		(64,483	)		(22,196	)		—		—		—		—		—		—		(4,114	)

Total	$	7,941,137		$	13,992,438		$	6,340,159	$	12,279,678	$	4,944,238	$	6,957,874	$	2,004,446	$	1,636,269	$	121,331

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

The LifePath Index Portfolios have elected to defer certain qualified late-year losses and recognize such losses in the year ending December 31, 2013.

As of December 31, 2012, the LifePath Index 2055 Portfolio had capital loss carryforwards with no expiration dates, available to offset future realized capital gains of $145,270.

During the year ended December 31, 2012, LifePath Index Portfolios listed below utilized the following amounts of their respective capital loss carryforwards:


LifePath Index Retirement Portfolio	$	17,339
LifePath Index 2020 Portfolio	$	22,825
LifePath Index 2025 Portfolio	$	25,169
LifePath Index 2030 Portfolio	$	27,192
LifePath Index 2035 Portfolio	$	29,014
LifePath Index 2040 Portfolio	$	30,742
LifePath Index 2045 Portfolio	$	29,378
LifePath Index 2050 Portfolio	$	34,324

4. Capital Share Transactions:

Transactions in capital shares for each class were as follows:


	Year Ended December 31, 2012						Period May 31, 2011¹ to December 31, 2011
LifePath Index Retirement Portfolio	Shares			Amount			Shares		Amount
Institutional
Shares sold		2,346,217		$	24,115,637			2,500	$	25,000
Shares issued to shareholders in reinvestment of dividends and distributions		9,339			97,595			—		—
Shares redeemed		(430,831	)		(4,418,911	)		—		—

Net increase		1,924,725		$	19,794,321			2,500	$	25,000


Investor A
Shares sold		975,316		$	9,874,184			2,500	$	25,000
Shares issued to shareholders in reinvestment of dividends and distributions		8,071			84,239			—		—
Shares redeemed		(226,446	)		(2,319,458	)		—		—

Net increase		756,941		$	7,638,965			2,500	$	25,000


Class K
Shares sold		17,830,262		$	179,573,432			195,000	$	1,950,000
Shares issued to shareholders in reinvestment of dividends and distributions		244,068			2,543,045			—		—
Shares redeemed		(1,710,952	)		(17,633,010	)		—		—

Net increase		16,363,378		$	164,483,467			195,000	$	1,950,000

Total Net Increase		19,045,044		$	191,916,753			200,000	$	2,000,000

Commencement of operations.



BLACKROCK FUNDS III	DECEMBER 31, 2012	55


Notes to Financial Statements (continued)		BlackRock Funds III


	Year Ended December 31, 2012						Period May 31, 2011¹ to December 31, 2011
LifePath Index 2020 Portfolio	Shares			Amount			Shares		Amount
Institutional
Shares sold		2,239,380		$	22,661,709			2,500	$	25,000
Shares issued to shareholders in reinvestment of dividends and distributions		16,463			169,675			—		—
Shares redeemed		(348,926	)		(3,544,273	)		—		—

Net increase		1,906,917		$	19,287,111			2,500	$	25,000


Investor A
Shares sold		1,961,732		$	19,270,872			2,500	$	25,000
Shares issued to shareholders in reinvestment of dividends and distributions		24,164			248,301			—		—
Shares redeemed		(254,999	)		(2,571,734	)		—		—

Net increase		1,730,897		$	16,947,439			2,500	$	25,000


Class K
Shares sold		24,558,594		$	241,633,100			195,000	$	1,950,000
Shares issued to shareholders in reinvestment of dividends and distributions		388,823			3,995,761			—		—
Shares redeemed		(1,090,359	)		(10,969,531	)		—		—

Net increase		23,857,058		$	234,659,330			195,000	$	1,950,000

Total Net Increase		27,494,872		$	270,893,880			200,000	$	2,000,000


LifePath Index 2025 Portfolio
Institutional
Shares sold		509,320		$	5,193,652			2,500	$	25,000
Shares issued to shareholders in reinvestment of dividends and distributions		6,295			64,669			—		—
Shares redeemed		(48,059	)		(494,153	)		—		—

Net increase		467,556		$	4,764,168			2,500	$	25,000


Investor A
Shares sold		447,523		$	4,530,663			2,500	$	25,000
Shares issued to shareholders in reinvestment of dividends and distributions		4,256			43,760			—		—
Shares redeemed		(73,886	)		(743,353	)		—		—

Net increase		377,893		$	3,831,070			2,500	$	25,000


Class K
Shares sold		11,248,567		$	109,513,473			195,000	$	1,950,000
Shares issued to shareholders in reinvestment of dividends and distributions		178,559			1,827,580			—		—
Shares redeemed		(592,841	)		(5,859,220	)		—		—

Net increase		10,834,285		$	105,481,833			195,000	$	1,950,000

Total Net Increase		11,679,734		$	114,077,071			200,000	$	2,000,000


LifePath Index 2030 Portfolio
Institutional
Shares sold		1,823,622		$	18,049,163			2,500	$	25,000
Shares issued to shareholders in reinvestment of dividends and distributions		16,321			166,238			—		—
Shares redeemed		(268,371	)		(2,679,649	)		—		—

Net increase		1,571,572		$	15,535,752			2,500	$	25,000

Commencement of operations.



56	BLACKROCK FUNDS III	DECEMBER 31, 2012


Notes to Financial Statements (continued)		BlackRock Funds III


	Year Ended December 31, 2012						Period May 31, 2011¹ to December 31, 2011
LifePath Index 2030 Portfolio (concluded)	Shares			Amount			Shares			Amount
Investor A
Shares sold		1,655,996		$	15,974,496			2,500		$	25,000
Shares issued to shareholders in reinvestment of dividends and distributions		21,635			220,272			—			—
Shares redeemed		(324,965	)		(3,221,856	)		—			—

Net increase		1,352,666		$	12,972,912			2,500		$	25,000


Class K
Shares sold		17,538,954		$	168,834,753			195,000		$	1,950,000
Shares issued to shareholders in reinvestment of dividends and distributions		312,964			3,179,242			—			—
Shares redeemed		(897,260	)		(8,886,411	)		—			—

Net increase		16,954,658		$	163,127,584			195,000		$	1,950,000

Total Net Increase		19,878,896		$	191,636,248			200,000		$	2,000,000


LifePath Index 2035 Portfolio
Institutional
Shares sold		197,391		$	1,981,173			2,500		$	25,000
Shares issued to shareholders in reinvestment of dividends and distributions		2,629			26,767			—			—
Shares redeemed		(22,681	)		(228,034	)		—			—

Net increase		177,339		$	1,779,906			2,500		$	25,000


Investor A
Shares sold		420,557		$	4,229,470			2,515		$	25,150
Shares issued to shareholders in reinvestment of dividends and distributions		4,498			45,854			—			1
Shares redeemed		(55,211	)		(558,563	)		(2	)		(15	)

Net increase		369,844		$	3,716,761			2,513		$	25,136


Class K
Shares sold		7,790,296		$	74,282,072			195,000		$	1,950,000
Shares issued to shareholders in reinvestment of dividends and distributions		133,587			1,353,590			—			—
Shares redeemed		(659,276	)		(6,348,243	)		—			—

Net increase		7,264,607		$	69,287,419			195,000		$	1,950,000

Total Net Increase		7,811,790		$	74,784,086			200,013		$	2,000,136


LifePath Index 2040 Portfolio
Institutional
Shares sold		1,010,208		$	9,828,924			2,500		$	25,000
Shares issued to shareholders in reinvestment of dividends and distributions		8,927			89,803			—			—
Shares redeemed		(83,372	)		(818,531	)		—			—

Net increase		935,763		$	9,100,196			2,500		$	25,000


Investor A
Shares sold		854,797		$	8,138,845			2,500		$	25,000
Shares issued to shareholders in reinvestment of dividends and distributions		11,575			116,658			—			—
Shares redeemed		(125,500	)		(1,238,170	)		—			—

Net increase		740,872		$	7,017,333			2,500		$	25,000

Commencement of operations.



BLACKROCK FUNDS III	DECEMBER 31, 2012	57


Notes to Financial Statements (continued)		BlackRock Funds III


	Year Ended December 31, 2012						Period May 31, 2011¹ to December 31, 2011
LifePath Index 2040 Portfolio (concluded)	Shares			Amount			Shares			Amount
Class K
Shares sold		9,146,340		$	86,822,641			195,000		$	1,950,000
Shares issued to shareholders in reinvestment of dividends and distributions		161,135			1,621,956			—			—
Shares redeemed		(613,420	)		(5,926,088	)		—			—

Net increase		8,694,055		$	82,518,509			195,000		$	1,950,000

Total Net Increase		10,370,690		$	98,636,038			200,000		$	2,000,000


LifePath Index 2045 Portfolio
Institutional
Shares sold		62,540		$	612,746			2,500		$	25,000
Shares issued to shareholders in reinvestment of dividends and distributions		674			6,787			—			—
Shares redeemed		(13,250	)		(134,377	)		—			—

Net increase		49,964		$	485,156			2,500		$	25,000


Investor A
Shares sold		87,783		$	859,010			2,500		$	25,000
Shares issued to shareholders in reinvestment of dividends and distributions		908			9,169			—			—
Shares redeemed		(3,538	)		(35,843	)		—			—

Net increase		85,153		$	832,336			2,500		$	25,000


Class K
Shares sold		3,212,318		$	30,377,207			195,000		$	1,950,000
Shares issued to shareholders in reinvestment of dividends and distributions		47,023			471,885			—			—
Shares redeemed		(323,873	)		(3,027,806	)		—			—

Net increase		2,935,468		$	27,821,286			195,000		$	1,950,000

Total Net Increase		3,070,585		$	29,138,778			200,000		$	2,000,000


LifePath Index 2050 Portfolio
Institutional
Shares sold		196,023		$	1,849,878			2,500		$	25,000
Shares issued to shareholders in reinvestment of dividends and distributions		2,434			24,218			—			—
Shares redeemed		(45,398	)		(441,494	)		—			—

Net increase		153,059		$	1,432,602			2,500		$	25,000


Investor A
Shares sold		115,220		$	1,129,917			2,830		$	28,096
Shares issued to shareholders in reinvestment of dividends and distributions		969			9,763			3			29
Shares redeemed		(11,166	)		(110,000	)		(2	)		(15	)

Net increase		105,023		$	1,029,680			2,831		$	28,110


Class K
Shares sold		2,383,199		$	22,379,083			195,000		$	1,950,000
Shares issued to shareholders in reinvestment of dividends and distributions		34,096			339,984			—			—
Shares redeemed		(303,480	)		(2,816,124	)		—			—

Net increase		2,113,815		$	19,902,943			195,000		$	1,950,000

Total Net Increase		2,371,897		$	22,365,225			200,331		$	2,003,110

Commencement of operations.



58	BLACKROCK FUNDS III	DECEMBER 31, 2012


Notes to Financial Statements (concluded)		BlackRock Funds III


	Year Ended December 31, 2012						Period May 31, 2011¹ to December 31, 2011
LifePath Index 2055 Portfolio	Shares			Amount			Shares		Amount
Institutional
Shares sold		3		$	30			2,500	$	25,000

Net increase		3		$	30			2,500	$	25,000


Investor A
Shares sold		11,793		$	113,668			2,500	$	25,000
Shares issued to shareholders in reinvestment of dividends and distributions		108			1,077			—		—
Shares redeemed		(1,572	)		(15,055	)		—		—

Net increase		10,329		$	99,690			2,500	$	25,000


Class K
Shares sold		332,227		$	3,221,558			195,000	$	1,950,000
Shares issued to shareholders in reinvestment of dividends and distributions		3,472			34,476			—		—
Shares redeemed		(62,587	)		(615,925	)		—		—

Net increase		273,112		$	2,640,109			195,000	$	1,950,000

Total Net Increase		283,444		$	2,739,829			200,000	$	2,000,000

¹Commencement of operations.

As of December 31, 2012, shares owned by affiliates were as follows:


	Institutional		Investor A		Class K
LifePath Index Retirement Portfolio		2,500		2,500		—
LifePath Index 2020 Portfolio		2,500		2,500		—
LifePath Index 2025 Portfolio		2,500		2,500		—
LifePath Index 2030 Portfolio		2,500		2,500		—
LifePath Index 2035 Portfolio		2,500		2,500		—
LifePath Index 2040 Portfolio		2,500		2,500		—
LifePath Index 2045 Portfolio		2,500		2,500		—
LifePath Index 2050 Portfolio		2,500		2,500		—
LifePath Index 2055 Portfolio		2,500		2,500		195,000

5. Subsequent Events:

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



BLACKROCK FUNDS III	DECEMBER 31, 2012	59


Report of Independent Registered Public Accounting Firm		BlackRock Funds III

To the Shareholders and Board of Trustees of

BlackRock Funds III:

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 the LifePath Index Retirement Portfolio, LifePath Index 2020 Portfolio, LifePath Index 2025 Portfolio, LifePath Index 2030 Portfolio, LifePath Index 2035 Portfolio, LifePath Index 2040 Portfolio, LifePath Index 2045 Portfolio, LifePath Index 2050 Portfolio, and LifePath Index 2055 Portfolio, each a series of BlackRock Funds III (the “Trust”), at December 31, 2012, the results of each of their operations for the year then ended, the changes in each of their net assets and the financial highlights for the year then ended and for the period May 31, 2011 (commencement of operations) through December 31, 2011, 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 Trust’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 audits 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.

PricewaterhouseCoopers LLP

New York, New York

February 22, 2013


Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid during the tax year ended December 31, 2012.


	Payable Date		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		04/02/12-01/02/13		37.83%		47.31%		48.78%		54.56%		53.29%		62.75%		63.82%		71.13%		77.71%
Dividends Qualifying for the Dividend Received Deduction for Corporations¹		04/02/12-01/02/13		25.10%		30.25%		31.52%		34.20%		34.14%		38.74%		40.67%		44.31%		46.32%
Federal Obligation Interest²		04/02/12-01/02/13		8.79%		5.87%		4.33%		3.54%		2.48%		2.04%		1.47%		—		—
Interest-Related Dividends and Qualified Short-Term Capital Gain for Non-US Residents³		04/02/12-01/02/13		39.13%		32.01%		30.66%		25.99%		26.68%		18.43%		13.68%		6.51%		1.07%

The LifePath Portfolios hereby designate the percentages indicated above or the maximum amount allowable by law.

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

Additionally, the LifePath Index Portfolios distributed long-term capital gains per share to shareholders of record on the following dates:


Record date	December 28, 2012
LifePath Index Retirement Portfolio		$0.009719
LifePath Index 2020 Portfolio		$0.014551
LifePath Index 2025 Portfolio		$0.020110
LifePath Index 2030 Portfolio		$0.019250
LifePath Index 2035 Portfolio		$0.023968
LifePath Index 2040 Portfolio		$0.017243
LifePath Index 2045 Portfolio		$0.011963
LifePath Index 2050 Portfolio		$0.004917



60	BLACKROCK FUNDS III	DECEMBER 31, 2012


Master Portfolio Information as of December 31, 2012		Master Investment Portfolio


LifePath^® Index Retirement Master Portfolio


Portfolio Composition		Percent of Affiliated Investment Companies


Fixed Income Funds	61	%
Equity Funds	38
Short-Term Securities	1


Portfolio Holdings		Percent of Affiliated Investment Companies


Bond Index Master Portfolio	52	%
Russell 1000 Index Master Portfolio	22
ACWI ex-US Index Master Portfolio	11
iShares Barclays TIPS Bond Fund	9
Master Small Cap Index Series	4
iShares MSCI EAFE Small Cap Index Fund	1
BlackRock Cash Funds: Institutional, SL Agency Shares	1


LifePath^® Index 2020 Master Portfolio


Portfolio Composition		Percent of Affiliated Investment Companies


Equity Funds	54	%
Fixed Income Funds	45
Short-Term Securities	1


Portfolio Holdings		Percent of Affiliated Investment Companies


Bond Index Master Portfolio	39	%
Russell 1000 Index Master Portfolio	31
ACWI ex-US Index Master Portfolio	15
iShares Barclays TIPS Bond Fund	6
Master Small Cap Index Series	4
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	2
iShares Cohen & Steers Realty Majors Index Fund	1
iShares MSCI EAFE Small Cap Index Fund	1
BlackRock Cash Funds: Institutional, SL Agency Shares	1


LifePath Index 2025 Master Portfolio


Portfolio Composition		Percent of Affiliated Investment Companies


Equity Funds	62	%
Fixed Income Funds	37
Short-Term Securities	1


Portfolio Holdings		Percent of Affiliated Investment Companies


Russell 1000 Index Master Portfolio	35	%
Bond Index Master Portfolio	32
ACWI ex-US Index Master Portfolio	17
iShares Barclays TIPS Bond Fund	5
Master Small Cap Index Series	3
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	3
iShares Cohen & Steers Realty Majors Index Fund	2
iShares MSCI EAFE Small Cap Index Fund	2
BlackRock Cash Funds: Institutional, SL Agency Shares	1

The LifePath Index Master Portfolios’ allocation and holdings listed above are current as of the report date. However, the LifePath Index Master Portfolios are regularly monitored and their composition may vary throughout various periods.



BLACKROCK FUNDS III	DECEMBER 31, 2012	61


Master Portfolio Information as of December 31, 2012 (continued)		Master Investment Portfolio


LifePath Index 2030 Master Portfolio


Portfolio Composition		Percent of Affiliated Investment Companies


Equity Funds	69	%
Fixed Income Funds	30
Short-Term Securities	1


Portfolio Holdings		Percent of Affiliated Investment Companies


Russell 1000 Index Master Portfolio	39	%
Bond Index Master Portfolio	26
ACWI ex-US Index Master Portfolio	19
iShares Barclays TIPS Bond Fund	4
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	3
Master Small Cap Index Series	3
iShares Cohen & Steers Realty Majors Index Fund	3
iShares MSCI EAFE Small Cap Index Fund	2
BlackRock Cash Funds: Institutional, SL Agency Shares	1


LifePath Index 2035 Master Portfolio


Portfolio Composition		Percent of Affiliated Investment Companies


Equity Funds	75	%
Fixed Income Funds	23
Short-Term Securities	2


Portfolio Holdings		Percent of Affiliated Investment Companies


Russell 1000 Index Master Portfolio	43	%
Bond Index Master Portfolio	21
ACWI ex-US Index Master Portfolio	20
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	4
iShares Cohen & Steers Realty Majors Index Fund	3
iShares Barclays TIPS Bond Fund	3
Master Small Cap Index Series	3
iShares MSCI EAFE Small Cap Index Fund	2
BlackRock Cash Funds: Institutional, SL Agency Shares	1


LifePath Index 2040 Master Portfolio


Portfolio Composition		Percent of Affiliated Investment Companies


Equity Funds	81	%
Fixed Income Funds	17
Short-Term Securities	2


Portfolio Holdings		Percent of Affiliated Investment Companies


Russell 1000 Index Master Portfolio	47	%
ACWI ex-US Index Master Portfolio	22
Bond Index Master Portfolio	16
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	5
iShares Cohen & Steers Realty Majors Index Fund	4
Master Small Cap Index Series	2
iShares MSCI EAFE Small Cap Index Fund	2
iShares Barclays TIPS Bond Fund	1
BlackRock Cash Funds: Institutional, SL Agency Shares	1



62	BLACKROCK FUNDS III	DECEMBER 31, 2012


Master Portfolio Information as of December 31, 2012 (concluded)		Master Investment Portfolio


LifePath Index 2045 Master Portfolio


Portfolio Composition		Percent of Affiliated Investment Companies


Equity Funds	85	%
Fixed Income Funds	11
Short-Term Securities	4


Portfolio Holdings		Percent of Affiliated Investment Companies


Russell 1000 Index Master Portfolio	49	%
ACWI ex-US Index Master Portfolio	23
Bond Index Master Portfolio	11
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	5
iShares Cohen & Steers Realty Majors Index Fund	4
BlackRock Cash Funds: Institutional, SL Agency Shares	3
Master Small Cap Index Series	2
iShares MSCI EAFE Small Cap Index Fund	2
BlackRock Cash Funds: Prime, SL Agency Shares	1


LifePath Index 2050 Master Portfolio


Portfolio Composition		Percent of Affiliated Investment Companies


Equity Funds	90	%
Fixed Income Funds	6
Short-Term Securities	4


Portfolio Holdings		Percent of Affiliated Investment Companies


Russell 1000 Index Master Portfolio	52	%
ACWI ex-US Index Master Portfolio	24
Bond Index Master Portfolio	6
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	6
iShares Cohen & Steers Realty Majors Index Fund	4
BlackRock Cash Funds: Institutional, SL Agency Shares	3
iShares MSCI EAFE Small Cap Index Fund	2
Master Small Cap Index Series	2
BlackRock Cash Funds: Prime, SL Agency Shares	1


LifePath Index 2055 Master Portfolio


Portfolio Composition		Percent of Affiliated Investment Companies


Equity Funds	97	%
Short-Term Securities	2
Fixed Income Funds	1


Portfolio Holdings		Percent of Affiliated Investment Companies


Russell 1000 Index Master Portfolio	56	%
ACWI ex-US Index Master Portfolio	26
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	7
iShares Cohen & Steers Realty Majors Index Fund	5
iShares MSCI EAFE Small Cap Index Fund	2
Master Small Cap Index Series	2
BlackRock Cash Funds: Institutional, SL Agency Shares	1
Bond Index Master Portfolio	1



BLACKROCK FUNDS III	DECEMBER 31, 2012	63

Schedule of Investments December 31, 2012

LifePath Index Retirement Master Portfolio

(Percentages shown are based on Net Assets)


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value
Equity Funds — 38.5%
ACWI ex-US Index Master Portfolio	$	22,294,444	$	22,294,444
iShares Cohen & Steers Realty Majors Index Fund		4,489		352,566
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		13,560		448,971
iShares MSCI EAFE Small Cap Index Fund (b)		47,290		1,925,176
Master Small Cap Index Series	$	8,712,697		8,712,697
Russell 1000 Index Master Portfolio	$	44,045,813		44,045,813

				77,779,667
Fixed Income Funds — 61.4%
Bond Index Master Portfolio	$	105,813,216		105,813,216
iShares Barclays TIPS Bond Fund		148,963		18,085,598

				123,898,814


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value
Short-Term Securities — 0.9%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)		1,669,412	$	1,669,412
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)		238,171		238,171

				1,907,583
Total Affiliated Investment Companies (Cost — $195,189,294*) — 100.8%				203,586,064
Liabilities in Excess of Other Assets — (0.8)%				(1,614,407	)

Net Assets — 100.0%			$	201,971,657


Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	195,197,655

Gross unrealized appreciation		8,397,886
Gross unrealized depreciation		(9,477	)

Net unrealized appreciation	$	8,388,409

(a)

Investments in issuers considered to be an affiliate of the LifePath Index Master Portfolio during the year ended December 31, 2012, 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, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	5,157	$	22,289,287	¹		—		$	22,294,444	$	22,294,444	$	323,139	$	173,294
BlackRock Cash Funds: Institutional, SL Agency Shares		5,082		1,664,330	¹		—			1,669,412	$	1,669,412	$	2,159		—
BlackRock Cash Funds: Prime, SL Agency Shares		—		238,171	¹		—			238,171	$	238,171	$	304		—
Bond Index Master Portfolio	$	1,055,367	$	104,757,849	¹		—		$	105,813,216	$	105,813,216	$	1,129,158	$	(14,029	)
iShares Barclays TIPS Bond Fund		1,556		153,679			(6,272	)		148,963	$	18,085,598	$	291,370	$	12,322
iShares Cohen & Steers Realty Majors Index Fund		—		4,489			—			4,489	$	352,566	$	5,523		—
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		—		13,560			—			13,560	$	448,971	$	16,921		—
iShares MSCI Canada Index Fund		682		2,379			(3,061	)		—		—		—	$	(1,887	)
iShares MSCI EAFE Small Cap Index Fund		485		48,489			(1,684	)		47,290	$	1,925,176	$	60,869	$	(6,811	)
iShares MSCI Emerging Markets Index Fund		1,290		4,562			(5,852	)		—		—		—	$	(2,183	)
Master International Index Series	$	122,801		—		$	(122,801	)²		—		—	$	1,341	$	(217	)
Master Small Cap Index Series	$	77,362	$	8,635,335	¹		—		$	8,712,697	$	8,712,697	$	128,993	$	(8,659	)
Russell 1000 Index Master Portfolio	$	462,961	$	43,582,852	¹		—		$	44,045,813	$	44,045,813	$	637,232	$	(59,724	)

Represents net shares/beneficial interest purchased.

Represents net beneficial interest sold.

(b)

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

(c)

Represents the current yield as of report date.

(d)

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

_Ÿ

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

_Ÿ

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

_Ÿ

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

See Notes to Financial Statements.



64	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (concluded)		LifePath Index 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 the LifePath Index Master Portfolio’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities.

For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	22,719,894	$	180,866,170		—	$	203,586,064

Certain of the LifePath Index Master Portfolio’s liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $1,107,000 is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	65

Schedule of Investments December 31, 2012

LifePath Index 2020 Master Portfolio

(Percentages shown are based on Net Assets)


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value
Equity Funds — 54.1%
ACWI ex-US Index Master Portfolio	$	42,893,092	$	42,893,092
iShares Cohen & Steers Realty Majors Index Fund (b)		53,789		4,224,588
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		161,704		5,354,019
iShares MSCI EAFE Small Cap Index Fund		95,698		3,895,866
Master Small Cap Index Series	$	10,236,679		10,236,679
Russell 1000 Index Master Portfolio	$	88,699,522		88,699,522

				155,303,766
Fixed Income Funds — 45.7%
Bond Index Master Portfolio	$	113,315,788		113,315,788
iShares Barclays TIPS Bond Fund		145,848		17,707,406

				131,023,194


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value
Short-Term Securities — 0.9%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)		2,276,225	$	2,276,225
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)		262,580		262,580

				2,538,805
Total Affiliated Investment Companies (Cost — $274,068,279*) — 100.7%				288,865,765
Liabilities in Excess of Other Assets — (0.7)%				(1,892,599	)

Net Assets — 100.0%			$	286,973,166

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	274,072,179

Gross unrealized appreciation		14,809,751
Gross unrealized depreciation		(16,165	)

Net unrealized appreciation	$	14,793,586

(a)


Affiliate	Shares/ Beneficial Interest Held at December 31, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio		—	$	42,893,092	¹		—		$	42,893,092	$	42,893,092	$	632,369	$	297,443
BlackRock Cash Funds: Institutional, SL Agency Shares		5,467		2,270,758	¹		—			2,276,225	$	2,276,225	$	8,203		—
BlackRock Cash Funds: Prime, SL Agency Shares		—		262,580	¹		—			262,580	$	262,580	$	1,868		—
Bond Index Master Portfolio	$	728,061	$	112,587,727	¹		—		$	113,315,788	$	113,315,788	$	1,147,432	$	(23,857	)
iShares Barclays TIPS Bond Fund		1,016		146,267			(1,435	)		145,848	$	17,707,406	$	266,886	$	8,686
iShares Cohen & Steers Realty Majors Index Fund		—		53,947			(158	)		53,789	$	4,224,588	$	64,512	$	(144	)
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		—		162,184			(480	)		161,704	$	5,354,019	$	193,783	$	(142	)
iShares MSCI Canada Index Fund		1,026		10,171			(11,197	)		—		—		—	$	732
iShares MSCI EAFE Small Cap Index Fund		744		95,422			(468	)		95,698	$	3,895,866	$	119,673	$	(3,200	)
iShares MSCI Emerging Markets Index Fund		1,943		19,113			(21,056	)		—		—		—	$	11,299
Master International Index Series	$	192,815		—		$	192,815	²		—		—	$	4,674	$	2,860
Master Small Cap Index Series	$	73,681	$	10,162,998	¹		—		$	10,236,679	$	10,236,679	$	153,957	$	(6,058	)
Russell 1000 Index Master Portfolio	$	689,398	$	88,010,124	¹		—		$	88,699,522	$	88,699,522	$	1,256,534	$	(53,805	)

Represents net shares/beneficial interest purchased.

Represents net beneficial interest sold.

(b)

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

(c)

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

(d)

Represents the current yield as of report date.

_Ÿ

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

_Ÿ

See Notes to Financial Statements.



66	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (concluded)		LifePath Index 2020 Master Portfolio

_Ÿ

The following table summarizes the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	33,720,684	$	255,145,081		—	$	288,865,765

Certain of the LifePath Index Master Portfolio’s assets and/or liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $1,220,450 is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	67

Schedule of Investments December 31, 2012

LifePath Index 2025 Master Portfolio

(Percentages shown are based on Net Assets)


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value
Equity Funds — 62.4%
ACWI ex-US Index Master Portfolio	$	20,765,746	$	20,765,746
iShares Cohen & Steers Realty Majors Index Fund (b)		33,031		2,594,255
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		99,285		3,287,326
iShares MSCI EAFE Small Cap Index Fund		45,918		1,869,322
Master Small Cap Index Series	$	3,915,122		3,915,122
Russell 1000 Index Master Portfolio	$	43,964,878		43,964,878

				76,396,649
Fixed Income Funds — 37.4%
Bond Index Master Portfolio	$	39,762,329		39,762,329
iShares Barclays TIPS Bond Fund		50,099		6,082,519

				45,844,848


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value
Short-Term Securities — 1.5%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)		1,510,674	$	1,510,674
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)		267,696		267,696

				1,778,370
Total Affiliated Investment Companies (Cost — $117,296,488*) — 101.3%				124,019,867
Liabilities in Excess of Other Assets — (1.3)%				(1,571,709	)

Net Assets — 100.0%			$	122,448,158


Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	117,298,242

Gross unrealized appreciation		6,729,072
Gross unrealized depreciation		(7,447	)

Net unrealized appreciation	$	6,721,625

(a)


Affiliate	Shares/ Beneficial Interest Held at December 31, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	2,608	$	20,763,138	¹		—		$	20,765,746	$	20,765,746	$	255,989	$	246,315
BlackRock Cash Funds: Institutional, SL Agency Shares		4,643		1,506,031	¹		—			1,510,674	$	1,510,674	$	2,548		—
BlackRock Cash Funds: Prime, SL Agency Shares		—		267,696	¹		—			267,696	$	267,696	$	550		—
Bond Index Master Portfolio	$	581,850	$	36,180,479	¹		—		$	39,762,329	$	39,762,329	$	339,363	$	(13,712	)
iShares Barclays TIPS Bond Fund		788		49,623			(312	)		50,099	$	6,082,519	$	78,157	$	2,987
iShares Cohen & Steers Realty Majors Index Fund		—		33,031			—			33,031	$	2,594,255	$	38,030		—
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		—		101,038			(1,753	)		99,285	$	3,287,326	$	114,349	$	355
iShares MSCI Canada Index Fund		1,140		707			(1,847	)		—		—		—	$	(4,019	)
iShares MSCI EAFE Index Fund		—		—			—			—		—		—		—
iShares MSCI EAFE Small Cap Index Fund		865		45,288			(235	)		45,918	$	1,869,322	$	56,195	$	(1,649	)
iShares MSCI Emerging Markets Index Fund		2,264		1,291			(3,555	)		—		—		—	$	(5,966	)
Master International Index Series	$	223,117		—		$	(223,117	)²		—		—	$	1,257	$	(384	)
Master Small Cap Index Series	$	69,031	$	3,846,091	¹		—		$	3,915,122	$	3,915,122	$	54,992	$	214
Russell 1000 Index Master Portfolio	$	789,091	$	43,175,787	¹		—		$	43,964,878	$	43,964,878	$	550,394	$	(16,379	)

Represents net shares/beneficial interest sold.

Represents net beneficial interest sold.

(b)

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

(c)

Represents the current yield as of report date.

(d)

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

_Ÿ

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

_Ÿ

See Notes to Financial Statements.



68	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (concluded)		LifePath Index 2025 Master Portfolio

The following table summarizes the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	15,611,792	$	108,408,075		—	$	124,019,867

Certain of the LifePath Index Master Portfolio’s assets and/or liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $1,244,225 is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	69

Schedule of Investments December 31, 2012

LifePath Index 2030 Master Portfolio

(Percentages shown are based on Net Assets)


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value

Equity Funds — 69.8%
ACWI ex-US Index Master Portfolio	$	38,837,788	$	38,837,788
iShares Cohen & Steers Realty Majors Index Fund (b)		72,621		5,703,653
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		212,626		7,040,047
iShares MSCI EAFE Small Cap Index Fund		84,848		3,454,162
Master Small Cap Index Series	$	6,096,821		6,096,821
Russell 1000 Index Master Portfolio	$	82,627,626		82,627,626

				143,760,097
Fixed Income Funds — 30.0%
Bond Index Master Portfolio	$	54,069,158		54,069,158
iShares Barclays TIPS Bond Fund		63,925		7,761,134

				61,830,292


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value
Short-Term Securities — 1.5%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)		2,647,522	$	2,647,522
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)		545,622		545,622

				3,193,144
Total Affiliated Investment Companies (Cost — $195,769,472*) — 101.3%				208,783,533
Liabilities in Excess of Other Assets — (1.3)%				(2,776,548	)

Net Assets — 100.0%			$	206,006,985

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	195,786,913

Gross unrealized appreciation		13,027,725
Gross unrealized depreciation		(31,105	)

Net unrealized appreciation	$	12,996,620

(a)


Affiliate	Shares/ Beneficial Interest Held at December 31, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio		—	$	38,837,788	¹		—		$	38,837,788	$	38,837,788	$	591,919	$	227,412
BlackRock Cash Funds: Institutional, SL Agency Shares		9,277		2,638,245	¹		—			2,647,522	$	2,647,522	$	5,288		—
BlackRock Cash Funds: Prime, SL Agency Shares		—		545,622	¹		—			545,622	$	545,622	$	1,195		—
Bond Index Master Portfolio	$	454,601	$	53,614,557	¹		—		$	54,069,158	$	54,069,158	$	554,851	$	(11,023	)
iShares Barclays TIPS Bond Fund		575		63,584			(234	)		63,925	$	7,761,134	$	115,593	$	(21	)
iShares Cohen & Steers Realty Majors Index Fund		—		72,621			—			72,621	$	5,703,653	$	85,948		—
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		—		214,060			(1,434	)		212,626	$	7,040,047	$	257,491	$	881
iShares MSCI Canada Index Fund		1,315		13,587			(14,902	)		—		—		—	$	6,400
iShares MSCI EAFE Small Cap Index Fund		965		91,383			(7,500	)		84,848	$	3,454,162	$	109,653	$	(28,862	)
iShares MSCI Emerging Markets Index Fund		2,519		25,444			(27,963	)		—		—		—	$	40,020
Master International Index Series	$	249,180		—		$	(249,180	)²		—		—	$	7,215	$	35,059
Master Small Cap Index Series	$	67,825	$	6,028,996	¹		—		$	6,096,821	$	6,096,821	$	94,918	$	786
Russell 1000 Index Master Portfolio	$	874,441	$	81,753,185	¹		—		$	82,627,626	$	82,627,626	$	1,182,922	$	(40,683	)

Represents net shares/beneficial interest purchased.

Represents net beneficial interest sold.

(b)

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

(c)

Represents the current yield as of report date.

(d)

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

_Ÿ

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

_Ÿ

See Notes to Financial Statements.



70	BLACKROCK FUNDS III	DECEMBER 31, 2012


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, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	27,152,140	$	181,631,393		—	$	208,783,533

Certain of the LifePath Index Master Portfolio’s assets and/or liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $2,536,000 is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	71

Schedule of Investments December 31, 2012

LifePath Index 2035 Master Portfolio

(Percentages shown are based on Net Assets)


Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds — 76.4%
ACWI ex-US Index Master Portfolio	$	16,824,732	$	16,824,732
iShares Cohen & Steers Realty Majors Index Fund (b)		34,614		2,718,583
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		101,338		3,355,301
iShares MSCI EAFE Small Cap Index Fund		36,174		1,472,643
Master Small Cap Index Series	$	2,152,436		2,152,436
Russell 1000 Index Master Portfolio	$	35,937,620		35,937,620

				62,461,315
Fixed Income Funds — 23.6%
Bond Index Master Portfolio	$	17,070,724		17,070,724
iShares Barclays TIPS Bond Fund		17,877		2,170,447

				19,241,171


Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Short-Term Securities — 1.7%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)		1,154,498	$	1,154,498
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)		255,760		255,760

				1,410,258
Total Affiliated Investment Companies (Cost — $77,853,709*) — 101.7%				83,112,744
Liabilities in Excess of Other Assets — (1.7)%				(1,350,192	)

Net Assets — 100.0%			$	81,762,552


Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	77,867,131

Gross unrealized appreciation		5,262,924
Gross unrealized depreciation		(17,311	)

Net unrealized appreciation	$	5,245,613

(a)


Affiliate	Shares/ Beneficial Interest Held at December 31, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	2,608	$	16,822,124	¹		—		$	16,824,732	$	16,824,732	$	203,308	$	211,434
BlackRock Cash Funds: Institutional, SL Agency Shares		4,730		1,149,768	¹		—			1,154,498	$	1,154,498	$	1,915		—
BlackRock Cash Funds: Prime, SL Agency Shares		—		255,760	¹		—			255,760	$	255,760	$	436		—
Bond Index Master Portfolio	$	351,541	$	16,719,183	¹		—		$	17,070,724	$	17,070,724	$	141,755	$	(5,385	)
iShares Barclays TIPS Bond Fund		378		17,499			—			17,877	$	2,170,447	$	27,241		—
iShares Cohen & Steers Realty Majors Index Fund		—		35,119			(505	)		34,614	$	2,718,583	$	39,354	$	287
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		—		103,441			(2,103	)		101,338	$	3,355,301	$	120,333	$	314
iShares MSCI Canada Index Fund		1,402		834			(2,236	)		—		—		—	$	(4,678	)
iShares MSCI EAFE Small Cap Index Fund		1,045		38,990			(3,861	)		36,174	$	1,472,643	$	45,543	$	(12,923	)
iShares MSCI Emerging Markets Index Fund		2,772		1,513			(4,285	)		—		—		—	$	(7,086	)
Master International Index Series	$	274,385		—		$	(274,385	)²		—		—	$	1,623	$	(448	)
Master Small Cap Index Series	$	63,824	$	2,088,612	¹		—		$	2,152,436	$	2,152,436	$	31,084	$	2,459
Russell 1000 Index Master Portfolio	$	943,795	$	34,993,825	¹		—		$	35,937,620	$	35,937,620	$	448,211	$	(10,547	)

Represents net shares/beneficial interest purchased.

Represents net beneficial interest sold.

(b)

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

(c)

Represents the current yield as of report date.

(d)

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

_Ÿ

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

_Ÿ

See Notes to Financial Statements.



72	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (concluded)		LifePath Index 2035 Master Portfolio

_Ÿ

The following table summarizes the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	11,127,232	$	71,985,512		—	$	83,112,744

Certain of the LifePath Index Master Portfolio’s assets and/or liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $1,188,750 is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	73

Schedule of Investments December 31, 2012

LifePath Index 2040 Master Portfolio

(Percentages shown are based on Net Assets)


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value
Equity Funds — 82.4%
ACWI ex-US Index Master Portfolio	$	23,746,745	$	23,746,745
iShares Cohen & Steers Realty Majors Index Fund (b)		51,870		4,073,870
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		153,492		5,082,120
iShares MSCI EAFE Small Cap Index Fund (b)		50,893		2,071,854
Master Small Cap Index Series	$	2,607,129		2,607,129
Russell 1000 Index Master Portfolio	$	51,135,950		51,135,950

				88,717,668
Fixed Income Funds — 17.4%
Bond Index Master Portfolio	$	17,074,832		17,074,832
iShares Barclays TIPS Bond Fund		13,522		1,641,706

				18,716,538


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value
Short-Term Securities — 1.7%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)		1,549,972	$	1,549,972
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)		352,933		352,933

				1,902,905
Total Affiliated Investment Companies (Cost — $101,958,327*) — 101.5%				109,337,111
Liabilities in Excess of Other Assets — (1.5)%				(1,666,237	)

Net Assets — 100.0%			$	107,670,874

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	101,981,832

Gross unrealized appreciation		7,385,978
Gross unrealized depreciation		(30,699	)

Net unrealized appreciation	$	7,355,279

(a)


Affiliate	Shares/ Beneficial Interest Held at December 31, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	1,705	$	23,745,040	¹		—		$	23,746,745	$	23,746,745	$	365,168	$	68,050
BlackRock Cash Funds: Institutional, SL Agency Shares		6,541		1,543,431	¹		—			1,549,972	$	1,549,972	$	3,371		—
BlackRock Cash Funds: Prime, SL Agency Shares		—		352,933	¹		—			352,933	$	352,933	$	797		—
Bond Index Master Portfolio	$	253,518	$	16,821,314	¹		—		$	17,074,832	$	17,074,832	$	169,419	$	(1,625	)
iShares Barclays TIPS Bond Fund		202		13,683			(363	)		13,522	$	1,641,706	$	23,582	$	1,347
iShares Cohen & Steers Realty Majors Index Fund		—		52,009			(139	)		51,870	$	4,073,870	$	60,121	$	(172	)
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		—		153,906			(414	)		153,492	$	5,082,120	$	180,703	$	(122	)
iShares MSCI Canada Index Fund		1,569		10,330			(11,899	)		—		—		—	$	3,535
iShares MSCI EAFE Small Cap Index Fund		1,124		55,550			(5,781	)		50,893	$	2,071,854	$	66,098	$	(23,524	)
iShares MSCI Emerging Markets Index Fund		2,948		19,275			(22,223	)		—		—		—	$	27,413
Master International Index Series	$	294,880		—		$	(294,880	)²		—		—	$	6,461	$	20,426
Master Small Cap Index Series	$	62,432	$	2,544,697	¹		—		$	2,607,129	$	2,607,129	$	41,726	$	(1,210	)
Russell 1000 Index Master Portfolio	$	1,010,878	$	50,125,072	¹		—		$	51,135,950	$	51,135,950	$	724,012	$	(52,236	)

Represents net shares/beneficial interest purchased.

Represents net beneficial interest sold.

(b)

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

(c)

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

(d)

Represents the current yield as of report date.

_Ÿ

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

_Ÿ

See Notes to Financial Statements.



74	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (concluded)		LifePath Index 2040 Master Portfolio

The following table summarizes the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	14,772,455	$	94,564,656		—	$	109,337,111

Certain of the LifePath Index Master Portfolio’s assets and/or liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $1,640,400 is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	75

Schedule of Investments December 31, 2012

LifePath Index 2045 Master Portfolio

(Percentages shown are based on Net Assets)


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value
Equity Funds — 88.4%
ACWI ex-US Index Master Portfolio	$	7,793,079	$	7,793,079
iShares Cohen & Steers Realty Majors Index Fund (b)		18,719		1,470,190
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		53,482		1,770,789
iShares MSCI EAFE Small Cap Index Fund		16,457		669,965
Master Small Cap Index Series	$	715,705		715,705
Russell 1000 Index Master Portfolio	$	16,907,725		16,907,725

			$	29,327,453
Fixed Income Funds — 11.5%
Bond Index Master Portfolio	$	3,838,900		3,838,900


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value
Short-Term Securities — 3.8%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)		998,543	$	998,543
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)		255,760		255,760

				1,254,303
Total Affiliated Investment Companies (Cost — $32,282,202*) — 103.7%				34,420,656
Liabilities in Excess of Other Assets — (3.7)%				(1,243,829	)

Net Assets — 100.0%			$	33,176,827

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	32,293,330

Gross unrealized appreciation		2,138,454
Gross unrealized depreciation		(11,128	)

Net unrealized appreciation	$	2,127,326

(a)


Affiliate	Shares/ Beneficial Interest Held at December 31, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	2,508	$	7,790,571	¹		—		$	7,793,079	$	7,793,079	$	89,446	$	44,345
BlackRock Cash Funds: Institutional, SL Agency Shares		5,019		993,524	¹		—			998,543	$	998,543	$	1,265		—
BlackRock Cash Funds: Prime, SL Agency Shares		—		255,760	¹		—			255,760	$	255,760	$	311		—
Bond Index Master Portfolio	$	171,154	$	3,667,746	¹		—		$	3,838,900	$	3,838,900	$	30,621	$	(571	)
iShares Cohen & Steers Realty Majors Index Fund		—		18,769			(50	)		18,719	$	1,470,190	$	19,657	$	(37	)
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		—		54,884			(1,402	)		53,482	$	1,770,789	$	62,026	$	114
iShares MSCI Canada Index Fund		1,631		357			(1,988	)		—		—		—	$	(5,240	)
iShares MSCI EAFE Small Cap Index Fund		1,179		16,916			(1,638	)		16,457	$	669,965	$	19,295	$	(10,955	)
iShares MSCI Emerging Markets Index Fund		3,061		857			(3,918	)		—		—		—	$	(8,490	)
Master International Index Series	$	316,913		—		$	(316,913	)²		—		—	$	1,679	$	(548	)
Master Small Cap Index Series	$	59,434	$	656,271	¹		—		$	715,705	$	715,705	$	10,125	$	2,092
Russell 1000 Index Master Portfolio	$	1,069,178	$	15,838,547	¹		—		$	16,907,725	$	16,907,725	$	200,016	$	(10,884	)

Represents net shares/beneficial interest purchased.

Represents net beneficial interest sold.

(b)

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

(c)

Represents the current yield as of report date.

(d)

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

_Ÿ

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

_Ÿ

See Notes to Financial Statements.



76	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (concluded)		LifePath Index 2045 Master Portfolio

The following table summarizes the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	5,165,247	$	29,255,409		—	$	34,420,656

Certain of the LifePath Index Master Portfolio’s assets and/or liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $1,188,750 is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	77

Schedule of Investments December 31, 2012

LifePath Index 2050 Master Portfolio

(Percentages shown are based on Net Assets)


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value
Equity Funds — 93.5%
ACWI ex-US Index Master Portfolio	$	6,419,258	$	6,419,258
iShares Cohen & Steers Realty Majors Index Fund (b)		15,578		1,223,496
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		46,871		1,551,899
iShares MSCI EAFE Small Cap Index Fund		13,638		555,203
Master Small Cap Index Series	$	519,112		519,112
Russell 1000 Index Master Portfolio	$	14,070,835		14,070,835

				24,339,803
Fixed Income Funds — 6.4%
Bond Index Master Portfolio	$	1,679,463		1,679,463


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value
Short-Term Securities — 3.8%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)		779,019	$	779,019
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)		199,493		199,493

				978,512
Total Affiliated Investment Companies (Cost — $25,253,872*) — 103.7%				26,997,778
Liabilities in Excess of Other Assets — (3.7)%				(960,737	)

Net Assets — 100.0%			$	26,037,041

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	25,262,767

Gross unrealized appreciation		1,743,906
Gross unrealized depreciation		(8,895	)

Net unrealized appreciation	$	1,735,011

(a)


Affiliate	Shares/ Beneficial Interest Held at December 31, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	2,508	$	6,416,750	¹		—		$	6,419,258	$	6,419,258	$	84,258	$	9,175
BlackRock Cash Funds: Institutional, SL Agency Shares		5,192		773,827	¹		—			779,019	$	779,019	$	1,127		—
BlackRock Cash Funds: Prime, SL Agency Shares		—		199,493	¹		—			199,493	$	199,493	$	278		—
Bond Index Master Portfolio	$	72,275	$	1,607,188	¹		—		$	1,679,463	$	1,679,463	$	13,680	$	(87	)
iShares Cohen & Steers Realty Majors Index Fund		—		16,092			(514	)		15,578	$	1,223,496	$	17,315	$	(1,459	)
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		—		46,871			—			46,871	$	1,551,899	$	53,439		—
iShares MSCI Canada Index Fund		1,692		1,264			(2,956	)		—		—		—	$	(4,383	)
iShares MSCI EAFE Small Cap Index Fund		1,263		13,233			(858	)		13,638	$	555,203	$	16,162	$	(7,436	)
iShares MSCI Emerging Markets Index Fund		3,332		2,288			(5,620	)		—		—		—	$	(1,833	)
Master International Index Series	$	331,764		—		$	(331,764	)²		—		—	$	2,422	$	287
Master Small Cap Index Series	$	59,143	$	459,969	¹		—		$	519,112	$	519,112	$	8,002	$	1,120
Russell 1000 Index Master Portfolio	$	1,123,015	$	12,947,820	¹		—		$	14,070,835	$	14,070,835	$	176,885	$	(14,516	)

Represents net shares/beneficial interest purchased.

Represents net beneficial interest sold.

(b)

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

(c)

Represents the current yield as of report date.

(d)

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

_Ÿ

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

_Ÿ

See Notes to Financial Statements.



78	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (concluded)		LifePath Index 2050 Master Portfolio

The following table summarizes the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	4,309,110	$	22,688,668		—	$	26,997,778

Certain of the LifePath Index Master Portfolio’s assets and/or liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $927,225 is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	79

Schedule of Investments December 31, 2012

LifePath Index 2055 Master Portfolio

(Percentages shown are based on Net Assets)


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value
Equity Funds — 99.0%
ACWI ex-US Index Master Portfolio	$	1,274,171	$	1,274,171
iShares Cohen & Steers Realty Majors Index Fund (b)		3,345		262,716
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		9,792		324,213
iShares MSCI EAFE Small Cap Index Fund		2,800		113,988
Master Small Cap Index Series	$	98,795		98,795
Russell 1000 Index Master Portfolio	$	2,784,118		2,784,118

				4,858,001
Fixed Income Funds — 1.3%
Bond Index Master Portfolio	$	62,439		62,439


Affiliated Investment Companies (a)	Shares/Beneficial Interest		Value
Short-Term Securities — 1.6%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)		65,649	$	65,649
BlackRock Cash Funds: Prime, SL Agency Shares, 0.22% (c)(d)		15,346		15,346

				80,995
Total Affiliated Investment Companies (Cost — $3,893,018*) — 101.9%				5,001,435
Liabilities in Excess of Other Assets — (1.9)%				(93,457	)

Net Assets — 100.0%			$	4,907,978

Notes to Schedule of Investments

As of December 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	3,896,818

Gross unrealized appreciation		1,108,471
Gross unrealized depreciation		(3,854	)

Net unrealized appreciation	$	1,104,617

(a)


Affiliate	Shares/ Beneficial Interest Held at December 31, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at December 31, 2012		Value at December 31, 2012		Income		Realized Gain (Loss)
ACWI ex-US Index Master Portfolio	$	5,015	$	1,269,156	¹		—		$	1,274,171	$	1,274,171	$	21,391	$	(869,308	)
BlackRock Cash Funds: Institutional, SL Agency Shares		5,013		60,636	¹		—			65,649	$	65,649	$	172		—
BlackRock Cash Funds: Prime, SL Agency Shares		—		15,346	¹		—			15,346	$	15,346	$	40		—
Bond Index Master Portfolio	$	15,948	$	46,491	¹		—		$	62,439	$	62,439	$	576	$	132
iShares Cohen & Steers Realty Majors Index Fund		—		3,474			(129	)		3,345	$	262,716	$	3,618	$	(597	)
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		—		10,272			(480	)		9,792	$	324,213	$	11,298	$	(143	)
iShares MSCI Canada Index Fund		1,788		—			(1,788	)		—		—		—	$	(6,418	)
iShares MSCI EAFE Small Cap Index Fund		1,295		1,898			(393	)		2,800	$	113,988	$	3,047	$	(3,038	)
iShares MSCI Emerging Markets Index Fund		3,466		—			(3,466	)		—		—		—	$	(10,886	)
Master International Index Series	$	349,044		—		$	(349,044	)²		—		—	$	1,654	$	(4,137	)
Master Small Cap Index Series	$	122,459		—		$	(23,664	)²	$	98,795	$	98,795	$	2,204	$	13
Russell 1000 Index Master Portfolio	$	1,110,241	$	1,673,877	¹		—		$	2,784,118	$	2,784,118	$	39,313	$	(29,536	)

Represents net shares/beneficial interest purchased.

Represents net beneficial interest sold.

(b)

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

(c)

Represents the current yield as of report date.

(d)

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

_Ÿ

•Level 1 — unadjusted price quotations in active markets/exchanges for identical assets and liabilities that the LifePath Index Master Portfolio has the ability to access

_Ÿ

See Notes to Financial Statements.



80	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (concluded)		LifePath Index 2055 Master Portfolio

The following table summarizes the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	781,912	$	4,219,523		—	$	5,001,435

Certain of the LifePath Index Master Portfolio’s assets and/or liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of December 31, 2012, collateral on securities loaned at value of $71,325 is categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	81


Statements of Assets and Liabilities		Master Investment Portfolio


December 31, 2012	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 — affiliated^1,2	$	203,586,064	$	288,865,765	$	124,019,867	$	208,783,533	$	83,112,744
Contributions receivable from investors		—		168,728		14,222		49,727		—
Investments sold receivable		509,428		1,700,000		500,000		1,500,000		530,000
Dividends receivable		1,252		1,214		411		530		152
Securities lending income receivable		323		624		582		860		403
Interest receivable		93		159		73		88		36
Prepaid expenses		1,162		1,585		648		1,141		437

Total assets		204,098,322		290,738,075		124,535,803		210,335,879		83,643,772


Liabilities
Collateral on securities loaned at value		1,107,000		1,220,450		1,244,225		2,536,000		1,188,750
Investments purchased payable		908,255		2,498,145		803,442		1,749,739		589,991
Withdrawals payable to investors		68,317		—		—		—		64,333
Professional fees payable		30,709		30,750		30,850		30,804		30,852
Investment advisory fees payable		7,750		10,480		4,899		7,559		3,308
Trustees’ fees payable		1,930		2,386		1,354		1,907		1,123
Printing fees payable		1,000		1,000		1,000		1,000		1,000
Custodian fees payable		957		1,048		1,010		1,121		938
Other accrued expenses payable		747		650		865		764		925

Total liabilities		2,126,665		3,764,909		2,087,645		4,328,894		1,881,220

Net Assets	$	201,971,657	$	286,973,166	$	122,448,158	$	206,006,985	$	81,762,552


Net Assets Consist of
Investors’ capital	$	193,574,887	$	272,175,680	$	115,724,779	$	192,992,924	$	76,503,517
Net unrealized appreciation/depreciation		8,396,770		14,797,486		6,723,379		13,014,061		5,259,035

Net Assets	$	201,971,657	$	286,973,166	$	122,448,158	$	206,006,985	$	81,762,552

¹Investments at cost — affiliated	$	195,189,294	$	274,068,279	$	117,296,488	$	195,769,472	$	77,853,709

²Securities loaned at value	$	1,099,170	$	1,209,516	$	1,233,078	$	2,513,280	$	1,178,100


Statements of Assets and Liabilities (concluded)		Master Investment Portfolio


December 31, 2012	LifePath Index 2040 Master Portfolio		LifePath Index 2045 Master Portfolio		LifePath Index 2050 Master Portfolio		LifePath Index 2055 Master Portfolio


Assets
Investments at value — affiliated^1,2	$	109,337,111	$	34,420,656	$	26,997,778	$	5,001,435
Contributions receivable from investors		61,834		—		116,243		—
Investments sold receivable		660,000		120,000		140,362		33,000
Dividends receivable		112		—		—		—
Securities lending income receivable		719		403		314		16
Interest receivable		58		23		20		3
Prepaid expenses		577		164		129		129

Total assets		110,060,411		34,541,246		27,254,846		5,034,583


Liabilities
Collateral on securities loaned at value		1,640,400		1,188,750		927,225		71,325
Investments purchased payable		709,883		120,000		255,041		20,000
Withdrawals payable to investors		—		19,840		—		876
Professional fees payable		30,762		30,802		30,771		30,720
Investment advisory fees payable		4,347		1,333		1,023		197
Trustees’ fees payable		1,295		846		813		704
Printing fees payable		1,000		1,000		1,000		1,000
Custodian fees payable		966		869		945		780
Other accrued expenses payable		884		979		987		1,003

Total liabilities		2,389,537		1,364,419		1,217,805		126,605

Net Assets	$	107,670,874	$	33,176,827	$	26,037,041	$	4,907,978


Net Assets Consist of
Investors’ capital	$	100,292,090	$	31,038,373	$	24,293,135	$	3,799,561
Net unrealized appreciation/depreciation		7,378,784		2,138,454		1,743,906		1,108,417

Net Assets	$	107,670,874	$	33,176,827	$	26,037,041	$	4,907,978


¹ Investments at cost — affiliated	$	101,958,327	$	32,282,202	$	25,253,872	$	3,893,018

³ Securities loaned at value	$	1,627,482	$	1,178,100	$	918,918	$	70,686


Statements of Operations		Master Investment Portfolio


Year Ended December 31, 2012	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	$	374,683		$	644,854		$	286,731		$	568,685		$	232,471
Securities lending — affiliated — net		1,411			8,681			2,557			5,555			2,026
Income — affiliated		1,052			1,390			541			928			325
Net investment income allocated from the applicable Master Portfolios:
Dividends		1,070,832			2,014,935			849,507			1,849,517			674,448
Interest		1,149,031			1,180,031			352,488			582,308			151,533
Expenses		(138,106	)		(209,610	)		(80,253	)		(166,244	)		(56,764	)
Fees waived		19,700			28,603			10,510			21,628			7,084

Total income		2,478,603			3,668,884			1,442,081			2,862,377			1,011,123


Expenses
Investment advisory		59,936			81,895			30,673			59,497			20,309
Professional		27,318			27,318			27,318			27,318			27,318
Independent Trustees		6,980			8,389			4,969			6,861			4,251
Custodian		5,565			6,600			6,308			6,111			5,815
Miscellaneous		109			138			75			119			74

Total expenses		99,908			124,340			69,343			99,906			57,767
Less fees waived/reimbursed by Manager		(40,069	)		(42,529	)		(38,922	)		(40,474	)		(38,060	)

Total expenses after fees waived		59,839			81,811			30,421			59,432			19,707

Net investment income		2,418,764			3,587,073			1,391,660			2,802,945			991,416


Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — affiliated		1,441			17,231			(8,292	)		18,418			(24,086	)
Allocations from the applicable Master Portfolios from investments, financial futures contracts and foreign currency transactions		90,665			216,583			216,054			211,551			197,513

		92,106			233,814			207,762			229,969			173,427

Net change in unrealized appreciation/depreciation on:
Investments — affiliated		476,627			1,321,659			673,423			1,449,863			633,289
Allocated from the applicable Master Portfolios from investments, financial futures contracts and foreign currency translations		7,941,505			13,545,895			6,143,316			11,676,520			4,755,822

		8,418,132			14,867,554			6,816,739			13,126,383			5,389,111

Total realized and unrealized gain		8,510,238			15,101,368			7,024,501			13,356,352			5,562,538

Net Increase in Net Assets Resulting from Operations	$	10,929,002		$	18,688,441		$	8,416,161		$	16,159,297		$	6,553,954


Statements of Operations (concluded)		Master Investment Portfolio


Year Ended December 31, 2012	LifePath Index 2040 Master Portfolio			LifePath Index 2045 Master Portfolio			LifePath Index 2050 Master Portfolio			LifePath Index 2055 Master Portfolio

Investment Income
Dividends — affiliated	$	330,504		$	100,978		$	86,916		$	17,963
Securities lending — affiliated — net		3,704			1,447			1,294			187
Income — affiliated		464			129			111			25
Net investment income allocated from the applicable Master Portfolios:
Dividends		1,121,597			297,181			267,941			63,692
Interest		185,189			34,706			17,306			1,446
Expenses		(91,885	)		(23,116	)		(20,264	)		(4,745	)
Fees waived		11,606			2,871			2,522			641

Total income		1,561,179			414,196			355,826			79,209


Expenses
Investment advisory		30,660			7,781			6,550			1,432
Professional		27,318			27,318			27,318			27,318
Independent Trustees		4,912			3,406			3,317			2,983
Custodian		5,339			5,121			5,455			3,818
Miscellaneous		74			47			44			36

Total expenses		68,303			43,673			42,684			35,587
Less fees waived/reimbursed by Manager		(37,827	)		(36,875	)		(37,069	)		(35,467	)

Total expenses after fees waived		30,476			6,798			5,615			120

Net investment income		1,530,703			407,398			350,211			79,089


Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — affiliated		8,477			(24,608	)		(15,111	)		(21,082	)
Allocations from the applicable Master Portfolios from investments, financial futures contracts and foreign currency transactions		33,405			34,434			(4,021	)		(902,836	)

		41,882			9,826			(19,132	)		(923,918	)

Net change in unrealized appreciation/depreciation on:
Investments — affiliated		938,595			314,555			281,481			91,728
Allocated from the applicable Master Portfolios from investments, financial futures contracts and foreign currency translations		6,584,815			1,981,848			1,636,588			1,195,932

		7,523,410			2,296,403			1,918,069			1,287,660

Total realized and unrealized gain		7,565,292			2,306,229			1,898,937			363,742

Net Increase in Net Assets Resulting from Operations	$	9,095,995		$	2,713,627		$	2,249,148		$	442,831


Statements of Changes in Net Assets		Master Investment Portfolio


	LifePath Index Retirement Master Portfolio						LifePath Index 2020 Master Portfolio
Increase (Decrease) in Net Assets:	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011			Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011

Operations
Net investment income	$	2,418,764		$	32,947		$	3,587,073		$	30,209
Net realized gain (loss)		92,106			(24,286	)		233,814			(36,096	)
Net change in unrealized appreciation/depreciation		8,418,132			(21,362	)		14,867,554			(70,068	)

Net increase (decrease) in net assets resulting from operations		10,929,002			(12,701	)		18,688,441			(75,955	)


Capital Transactions
Proceeds from contributions		208,844,687			2,025,317			275,399,935			2,024,638
Value of withdrawals		(19,770,291	)		(44,357	)		(9,022,795	)		(41,098	)

Net increase in net assets derived from capital transactions		189,074,396			1,980,960			266,377,140			1,983,540


Net Assets
Total increase in net assets		200,003,398			1,968,259			285,065,581			1,907,585
Beginning of period		1,968,259			—			1,907,585			—

End of period	$	201,971,657		$	1,968,259		$	286,973,166		$	1,907,585


	LifePath Index 2025 Master Portfolio						LifePath Index 2030 Master Portfolio
Increase (Decrease) in Net Assets:	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011			Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011

Operations
Net investment income	$	1,391,660		$	28,595		$	2,802,945		$	27,445
Net realized gain (loss)		207,762			(38,459	)		229,969			(42,078	)
Net change in unrealized appreciation/depreciation		6,816,739			(93,360	)		13,126,383			(112,322	)

Net increase (decrease) in net assets resulting from operations		8,416,161			(103,224	)		16,159,297			(126,955	)


Capital Transactions
Proceeds from contributions		115,843,506			2,024,525			194,909,784			2,024,448
Value of withdrawals		(3,693,827	)		(38,983	)		(6,921,266	)		(38,323	)

Net increase in net assets derived from capital transactions		112,149,679			1,985,542			187,988,518			1,986,125


Net Assets
Total increase in net assets		120,565,840			1,882,318			204,147,815			1,859,170
Beginning of period		1,882,318			—			1,859,170			—

End of period	$	122,448,158		$	1,882,318		$	206,006,985		$	1,859,170

Commencement of operations.


Statements of Changes in Net Assets (continued)		Master Investment Portfolio


	LifePath Index 2035 Master Portfolio						LifePath Index 2040 Master Portfolio
Increase (Decrease) in Net Assets:	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011			Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011

Operations
Net investment income	$	991,416		$	26,424		$	1,530,703		$	25,478
Net realized gain (loss)		173,427			(45,414	)		41,882			(50,597	)
Net change in unrealized appreciation/depreciation		5,389,111			(130,076	)		7,523,410			(144,626	)

Net increase (decrease) in net assets resulting from operations		6,553,954			(149,066	)		9,095,995			(169,745	)


Capital Transactions
Proceeds from contributions		77,260,091			2,024,586			99,615,956			2,024,475
Value of withdrawals		(3,889,454	)		(37,559	)		(2,859,861	)		(35,946	)

Net increase in net assets derived from capital transactions		73,370,637			1,987,027			96,756,095			1,988,529


Net Assets
Total increase in net assets		79,924,591			1,837,961			105,852,090			1,818,784
Beginning of period		1,837,961			—			1,818,784			—

End of period	$	81,762,552		$	1,837,961		$	107,670,874		$	1,818,784


	LifePath Index 2045 Master Portfolio						LifePath Index 2050 Master Portfolio
Increase (Decrease) in Net Assets:	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011			Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011

Operations
Net investment income	$	407,398		$	24,448		$	350,211		$	23,884
Net realized gain (loss)		9,826			(56,751	)		(19,132	)		(58,467	)
Net change in unrealized appreciation/depreciation		2,296,403			(157,949	)		1,918,069			(174,163	)

Net increase (decrease) in net assets resulting from operations		2,713,627			(190,252	)		2,249,148			(208,746	)


Capital Transactions
Proceeds from contributions		29,648,308			2,024,410			22,862,252			2,027,364
Value of withdrawals		(984,231	)		(35,035	)		(858,634	)		(34,343	)

Net increase in net assets derived from capital transactions		28,664,077			1,989,375			22,003,618			1,993,021


Net Assets
Total increase in net assets		31,377,704			1,799,123			24,252,766			1,784,275
Beginning of period		1,799,123			—			1,784,275			—

End of period	$	33,176,827		$	1,799,123		$	26,037,041		$	1,784,275

Commencement of operations.


Statements of Changes in Net Assets (concluded)		Master Investment Portfolio


	LifePath Index 2055 Master Portfolio
Increase (Decrease) in Net Assets:	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011

Operations
Net investment income	$	79,089		$	23,624
Net realized loss		(923,918	)		(65,000	)
Net change in unrealized appreciation/depreciation		1,287,660			(179,243	)

Net increase (decrease) in net assets resulting from operations		442,831			(220,619	)


Capital Transactions
Proceeds from contributions		3,370,271			2,024,315
Value of withdrawals		(674,310	)		(34,510	)

Net increase in net assets derived from capital transactions		2,695,961			1,989,805


Net Assets
Total increase in net assets		3,138,792			1,769,186
Beginning of period		1,769,186			—

End of period	$	4,907,978		$	1,769,186

Commencement of operations.


Financial Highlights		Master Investment Portfolio


	LifePath Index Retirement Master Portfolio
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Total Investment Return
Total investment return		9.17%			(0.59	)%²


Ratios to Average Net Assets
Total expenses³		0.18%	^4,5		3.44%	^6,7,8,9

Total expenses after fees waived³		0.15%	^4,5		0.15%	^6,7,8

Net investment income¹⁰		2.02%	^4,5		2.87%	^6,7,8


Supplemental Data
Net assets, end of period (000)	$	201,972		$	1,968

Portfolio turnover		1%			1%

Commencement of operations.

Aggregate total investment return.

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. 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 ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master International Index Series, Master SmallCap Index Series and Russell 1000 Index Master Portfolio’s allocated fees waived of 0.02%.

⁵

Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.02%, 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

⁸

Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.04%, although the ratio does include the LifePath Index Master Portfolio’s share of the Master Portfolios allocated expenses and/or net investment income.

⁹

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%.

¹⁰

Includes the LifePath Index Master Portfolio’s share of the allocated net investment income 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.


Financial Highlights (continued)		Master Investment Portfolio


	LifePath Index 2020 Master Portfolio
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Total Investment Return
Total investment return		11.36%			(3.71	)%²


Ratios to Average Net Assets
Total expenses³		0.19%	^4,5		3.55%	^6,7,8,9

Total expenses after fees waived³		0.16%	^4,5		0.18%	^6,7,8

Net investment income¹⁰		2.19%	^4,5		2.70%	^6,7,8


Supplemental Data
Net assets, end of period (000)	$	286,973		$	1,908

Portfolio turnover		1%			1%

Commencement of operations.

Aggregate total investment return.

⁴

⁵

Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.03%, 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

⁸

Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.05%, although the ratio does include the LifePath Index Master Portfolio’s share of the Master Portfolios allocated expenses and/or net investment income.

⁹

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%.

¹⁰


Financial Highlights (continued)		Master Investment Portfolio


	LifePath Index 2025 Master Portfolio
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Total Investment Return
Total investment return		12.34%			(5.10	)%²


Ratios to Average Net Assets
Total expenses³		0.23%	^4,5		3.59%	^6,7,8,9

Total expenses after fees waived³		0.16%	^4,5		0.18%	^6,7,8

Net investment income¹⁰		2.27%	^4,5		2.58%	^6,7,8


Supplemental Data
Net assets, end of period (000)	$	122,448		$	1,882

Portfolio turnover		0%	¹¹		0%	¹¹

Commencement of operations.

Aggregate total investment return.

⁴

⁵

⁶

Annualized.

⁷

⁸

Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.06%, although the ratio does include the LifePath Index Master Portfolio’s share of the Master Portfolios allocated expenses and/or net investment income.

⁹

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%.

¹⁰

¹¹

Rounds to less than 1%.


Financial Highlights (continued)		Master Investment Portfolio


	LifePath Index 2030 Master Portfolio
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Total Investment Return
Total investment return²		13.28%			(6.28	)%


Ratios to Average Net Assets
Total expenses³		0.21%	^4,5		3.63%	^6,7,8,9

Total expenses after fees waived³		0.17%	^4,5		0.19%	^6,7,8

Net investment income¹⁰		2.36%	^4,5		2.50%	^6,7,8


Supplemental Data
Net assets, end of period (000)	$	206,007		$	1,859

Portfolio turnover		2%			0%	¹¹

Commencement of operations.

Aggregate total investment return.

⁴

⁵

⁶

Annualized.

⁷

⁸

⁹

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%.

¹⁰

¹¹

Rounds to less than 1%.


Financial Highlights (continued)		Master Investment Portfolio


	LifePath Index 2035 Master Portfolio
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011



Total Investment Return
Total investment return		14.07%			(7.35	)%²


Ratios to Average Net Assets
Total expenses³		0.26%	^4,5		3.67%	^6,7,8,9

Total expenses after fees waived³		0.17%	^4,5		0.19%	^6,7,8

Net investment income¹⁰		2.44%	^4,5		2.43%	^6,7,8


Supplemental Data
Net assets, end of period (000)	$	81,763		$	1,838

Portfolio turnover		1%			0%	¹¹

Commencement of operations.

Aggregate total investment return.

⁴

⁵

⁶

Annualized.

⁷

⁸

⁹

Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 3.68%.

¹⁰

¹¹

Rounds to less than 1%.


Financial Highlights (continued)		Master Investment Portfolio


	LifePath Index 2040 Master Portfolio
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Total Investment Return
Total investment return		15.03%			(8.42	)%²


Ratios to Average Net Assets
Total expenses³		0.24%	^4,5		3.70%	^6,7,8,9

Total expenses after fees waived³		0.18%	^4,5		0.20%	^6,7,8

Net investment income¹⁰		2.50%	^4,5		2.36%	^6,7,8


Supplemental Data
Net assets, end of period (000)	$	107,671		$	1,819

Portfolio turnover		3%			0%	¹¹

Commencement of operations.

Aggregate total investment return.

⁴

⁵

⁶

Annualized.

⁷

⁸

Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.07%, although the ratio does include the LifePath Index Master Portfolio’s share of the Master Portfolios allocated expenses and/or net investment income.

⁹

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%.

¹⁰

¹¹

Rounds to less than 1%.


Financial Highlights (continued)		Master Investment Portfolio


	LifePath Index 2045 Master Portfolio
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Total Investment Return
Total investment return		15.61%			(9.49	)%²


Ratios to Average Net Assets
Total expenses³		0.41%	^4,5		3.74%	^6,7,8,9

Total expenses after fees waived³		0.17%	^4,5		0.21%	^6,7,8

Net investment income¹⁰		2.62%	^4,5		2.29%	^6,7,8


Supplemental Data
Net assets, end of period (000)	$	33,177		$	1,799

Portfolio turnover		2%			0%	¹¹

Commencement of operations.

Aggregate total investment return.

⁴

⁵

⁶

Annualized.

⁷

⁸

⁹

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%.

¹⁰

¹¹

Rounds to less than 1%.


Financial Highlights (continued)		Master Investment Portfolio


	LifePath Index 2050 Master Portfolio
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Total Investment Return
Total investment return		16.37%			(10.34	)%²


Ratios to Average Net Assets
Total expenses³		0.46%	^4,5		3.76%	^6,7,8,9

Total expenses after fees waived³		0.18%	⁴^,5		0.21%	^6,7,8

Net investment income¹⁰		2.67%	^4,5		2.25%	^6,7,8


Supplemental Data
Net assets, end of period (000)	$	26,037		$	1,784

Portfolio turnover		3%			0%	¹¹

Commencement of operations.

Aggregate total investment return.

⁴

⁵

⁶

Annualized.

⁷

⁸

⁹

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%.

¹⁰

¹¹

Rounds to less than 1%.


Financial Highlights (concluded)		Master Investment Portfolio


	LifePath Index 2055 Master Portfolio
	Year Ended December 31, 2012			Period May 31, 2011¹ to December 31, 2011


Total Investment Return
Total investment return		16.83%			(10.96	)%²


Ratios to Average Net Assets
Total expenses³		1.39%	^4,5		3.79%	^6,7,8,9

Total expenses after fees waived³		0.15%	^4,5		0.21%	^6,7,8

Net investment income¹⁰		2.76%	^4,5		2.24%	^6,7,8


Supplemental Data
Net assets, end of period (000)	$	4,908		$	1,769

Portfolio turnover		8%			0%	¹¹

Commencement of operations.

Aggregate total investment return.

⁴

⁵

⁶

Annualized.

⁷

⁸

Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.08%, although the ratio does include the LifePath Index Master Portfolio’s share of the Master Portfolios allocated expenses and/or net investment income.

⁹

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%.

¹⁰

¹¹

Rounds to less than 1%.


Notes to Financial Statements		Master Investment Portfolio

1. Organization and Significant Accounting Policies:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust. LifePath Index Retirement Master Portfolio, LifePath Index 2020 Master Portfolio, LifePath Index 2025 Master Portfolio, LifePath Index 2030 Master Portfolio, LifePath Index 2035 Master Portfolio, LifePath Index 2040 Master Portfolio, LifePath Index 2045 Master Portfolio, LifePath Index 2050 Master Portfolio and LifePath Index 2055 Master Portfolio (each, a “LifePath Index Master Portfolio” and collectively, the “LifePath Index Master Portfolios”) are each a series of MIP. The LifePath Index Master Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates.

As of December 31, 2012, LifePath Index 2055 Master Portfolio’s investment in the ACWI ex-US Index Master Portfolio was 26.0% of net assets, LifePath Index Retirement, LifePath Index 2020, LifePath Index 2025, and LifePath Index 2030 Master Portfolios’ investment in the Bond Index Master Portfolio was 52.4%, 39.5%, 32.5% and 26.2%, respectively, of net assets and LifePath Index 2020, LifePath Index 2025, LifePath Index 2030, LifePath Index 2035, LifePath Index 2040, LifePath Index 2045, LifePath Index 2050 and LifePath Index 2055 Master Portfolios’ investment in the Russell 1000 Index Master Portfolio was 30.9%, 35.9%, 40.1%, 44.0%, 47.5%, 51.0%, 54.0% and 56.7% of the applicable LifePath Index Master Portfolio’s net assets, respectively. The financial statements of the ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio and Russell 1000 Index Master Portfolio, including the Schedules of Investments, can be read in conjunction with the LifePath Index Master Portfolios’ financial statements, respectively. ACWI ex-US Index Master Portfolio’s, Bond Index Master Portfolio’s and Russell 1000 Index Master Portfolio’s financial statements, included in filings by MIP, are available, without charge, on the SEC’s website at http://www.sec.gov.

Each of 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 the ACWI ex-US Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio reflects that LifePath Index Master Portfolio’s proportionate interest in the net assets of that Master Portfolio. As of December 31, 2012, each LifePath Index Master Portfolio held the percentage of interests in the ACWI ex-US

Index Master Portfolio, Bond Index Master Portfolio, Master Small Cap Index Series and Russell 1000 Index Master Portfolio as follows:


	ACWI ex- US Index Master Portfolio			Bond Index Master Portfolio			Master Small Cap Index Series			Russell 1000 Index Master Portfolio
LifePath Index Retirement Master Portfolio		5.85	%		21.97	%		1.50	%		10.01	%
LifePath Index 2020 Master Portfolio		11.26	%		23.53	%		1.76	%		20.15	%
LifePath Index 2025 Master Portfolio		5.45	%		8.26	%		0.67	%		9.99	%
LifePath Index 2030 Master Portfolio		10.19	%		11.23	%		1.05	%		18.78	%
LifePath Index 2035 Master Portfolio		4.42	%		3.54	%		0.37	%		8.17	%
LifePath Index 2040 Master Portfolio		6.23	%		3.55	%		0.45	%		11.62	%
LifePath Index 2045 Master Portfolio		2.05	%		0.80	%		0.12	%		3.84	%
LifePath Index 2050 Master Portfolio		1.68	%		0.35	%		0.09	%		3.20	%
LifePath Index 2055 Master Portfolio		0.33	%		0.01	%		0.02	%		0.63	%

The following is a summary of significant accounting policies followed by the LifePath Index Master Portfolios:

Valuation: US GAAP defines fair value as the price the LifePath Index Master Portfolios would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The LifePath Index Master Portfolios determine the fair values of their financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the LifePath Index Master Portfolios for all financial instruments. Investments in open-end registered investment companies are valued at net asset value (“NAV”) each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value. The market value of the LifePath 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 New York Stock Exchange (“NYSE”) on days when the NYSE is open. The LifePath Index Master Portfolios record their proportionate investment in the Underlying Master Portfolios at fair value which is based upon their pro rata ownership in the net assets of the Underlying Master Portfolios.



98	BLACKROCK FUNDS III	DECEMBER 31, 2012


Notes to Financial Statements (continued)		Master Investment Portfolio

market transactions. The income approach generally is used to discount future cash flows to present value and adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the LifePath Index Master Portfolios’ pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Each LifePath Index Master Portfolio records daily its proportionate share of the 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 income, expenses and realized and unrealized gains and losses.

Securities Lending: The LifePath Index Master Portfolios may lend securities to approved borrowers, such as banks, brokers and other financial institutions. The borrower pledges cash, securities issued or guaranteed by the US government or irrevocable letters of credit issued by a bank as collateral. The initial collateral received by the LifePath Index Master Portfolios are 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 in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the LifePath Index Master Portfolio and any additional required collateral is delivered to the LifePath Index Master Portfolio on the next business day. Securities lending income, as disclosed in the Statements of Operations, represents the income earned from the investment of the cash collateral, net of

rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the LifePath Index 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 risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate this risk, the LifePath Index Master Portfolios benefit from a borrower default indemnity provided by BlackRock. BlackRock’s indemnity allows for full replacement of securities lent. A LifePath Index Master Portfolio also could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received. During the year ended December 31, 2012, any securities on loan were collateralized by cash.

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

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

Recent Accounting Standards: In December 2011, the Financial Accounting Standards Board (the “FASB”) issued guidance that will expand current disclosure requirements on the offsetting of certain assets and liabilities. The new disclosures will be required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset in the Statements of Assets and Liabilities and will require an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarifies which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting will be limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions. The guidance is effective for financial statements with fiscal years beginning on or after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the LifePath Index Master Portfolios’ financial statement disclosures.



BLACKROCK FUNDS III	DECEMBER 31, 2012	99


Notes to Financial Statements (continued)		Master Investment Portfolio

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.

2. 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 (the “Investment Advisory Agreement”) with BlackRock Fund Advisors (“BFA” or the “Manager”), the LifePath Index Master Portfolios’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory services. Pursuant to the Investment Advisory Agreement with MIP, BFA is responsible for the management of each LifePath Index Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each LifePath Index Master Portfolio. For such services, each LifePath Index Master Portfolio pays BFA a monthly fee based on a percentage of each LifePath Index Master Portfolio’s average daily net assets at an annual rate of 0.05%.

The LifePath Index Master Portfolios received an exemptive order from the SEC permitting it, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BlackRock Institutional Trust Company, N.A. (“BTC”), an affiliate of BFA, as the securities lending agent. BTC may, on behalf of a LifePath Index Master Portfolio, invest cash collateral received by the LifePath Index Master Portfolio for such loans, among other things, in a private investment company managed by BTC or in registered money market funds advised by BTC or its affiliates. The market value of securities on loan and the value of the related collateral, if applicable, are shown in the Statements of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC is disclosed in the Schedules of Investments, if any. Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of rebates paid to, or fees paid by, borrowers of securities. The LifePath Index Master Portfolios retain 65% of securities lending income and pay a fee to BTC equal to 35% of such income. The LifePath Index Master Portfolios benefit from a borrower default indemnity provided by BlackRock. As securities lending agent, BTC bears all operational costs directly related to securities lending as well as the cost of borrower default indemnification. BTC does not receive any fees for managing the cash collateral. The share of income earned by each LifePath Index Master Portfolio is shown as securities lending — affiliated — net in the Statements of Operations. For the year ended December 31, 2012, BTC received securities lending agent fees related to securities lending activities for the LifePath Index Master Portfolios as follows:


LifePath Index Retirement Portfolio	$	759
LifePath Index 2020 Portfolio	$	4,674
LifePath Index 2025 Portfolio	$	1,377
LifePath Index 2030 Portfolio	$	2,991
LifePath Index 2035 Portfolio	$	1,089
LifePath Index 2040 Portfolio	$	1,993
LifePath Index 2045 Portfolio	$	779
LifePath Index 2050 Portfolio	$	695
LifePath Index 2055 Portfolio	$	99

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.

3. Investments:

Purchases and sales of investments excluding short-term securities for the year ended December 31, 2012, were as follows:


	Purchases		Sales
LifePath Index Retirement Master Portfolio	$	21,235,558	$	1,167,027
LifePath Index 2020 Master Portfolio	$	31,072,306	$	1,474,883
LifePath Index 2025 Master Portfolio	$	13,237,988	$	308,047
LifePath Index 2030 Master Portfolio	$	24,270,558	$	2,011,119
LifePath Index 2035 Master Portfolio	$	9,380,375	$	495,566
LifePath Index 2040 Master Portfolio	$	13,313,275	$	1,607,118
LifePath Index 2045 Master Portfolio	$	3,755,556	$	335,092
LifePath Index 2050 Master Portfolio	$	3,255,021	$	406,132
LifePath Index 2055 Master Portfolio	$	651,235	$	245,042

4. Borrowings:

MIP, on behalf of the LifePath Index Master Portfolios, along with certain other funds managed by BFA and its affiliates, is a party to a $500 million credit agreement with a group of lenders. The LifePath Index Master Portfolios may borrow under the credit agreement to fund shareholder redemptions. Effective November 2012 to November 2013, the credit agreement has the following terms: a commitment fee of 0.065% per annum based on the LifePath Index Master Portfolios’ pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month London Interbank Offered Rate (“LIBOR”) plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the LifePath Index Master Portfolios paid administration and arrangement fees which were allocated to the LifePath Index Master Portfolios based on their net assets as of October 31, 2012. The Master Portfolios did not borrow under the credit agreement during the year ended December 31, 2012.

5. Market and Credit Risk:

In the normal course of business, the LifePath Index Master Portfolios invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the LifePath Index Master Portfolios may decline in response to certain events, including those directly involving the issuers whose securities are owned by the LifePath Index Master Portfolios; conditions affecting the



100	BLACKROCK FUNDS III	DECEMBER 31, 2012


Notes to Financial Statements (concluded)		Master Investment Portfolio

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 a LifePath Index Master Portfolio’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statements of Assets and Liabilities, less any collateral held by the LifePath Index Master Portfolio.

6. 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, 2012	101


Report of Independent Registered Public Accounting Firm		Master Investment Portfolio

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

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 audits 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, 2012 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 22, 2013



102	BLACKROCK FUNDS III	DECEMBER 31, 2012


Officers and Trustees


Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees¹
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 106 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. since 1987; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of Seventy (civic) since 2006; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 106 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy since 2002; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 106 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President of Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 106 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 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) since 2011, President thereof from 1997 to 2011 and Trustee since 1980; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (strategic solutions company) since 2005; Director, Cerego, LLC (software development and design) since 2005; Director, Cybersettle (dispute resolution technology) since 2009.	33 RICs consisting of 106 Portfolios	AIMS Worldwide, Inc. (marketing)
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1999 to 2008.	33 RICs consisting of 106 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital since 2005; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 106 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, The West Penn Allegheny Health System (a not-for-profit health system) since 2008; 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; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 106 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 106 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 106 Portfolios	None



BLACKROCK FUNDS III	DECEMBER 31, 2012	103


Officers and Trustees (continued)


Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees¹ (concluded)
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Chairman Elect 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; 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 106 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh since 2005 and Dean thereof from 1997 to 2005; Director, Alkon Corporation (pneumatics) since 1992; Director, Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 106 Portfolios	None
	¹ Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year extensions in terms of Trustees who turn 72 prior to December 31, 2013. ² Date shown is the earliest date a person has served for the Trust/MIP covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the Trust’s/MIP’s Board. As a result, although the chart shows certain Trustees as joining the Trust’s/MIP’s board in 2009, each Trustee first became a member of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees³
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	155 RICs consisting of 278 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	155 RICs consisting of 278 Portfolios	None
	³ Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.



104	BLACKROCK FUNDS III	DECEMBER 31, 2012


Officers and Trustees (concluded)


Name, Address and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers*
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock since 2000; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2002; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009; and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Simon Mendelson 55 East 52nd Street New York, NY 10055 1964	Vice President	Since 2009	Managing Director of BlackRock since 2005; Co-head of the Global Cash and Securities Lending Group since 2010; Chief Operating Officer and Head of the Global Client Group for BlackRock’s Global Cash Management Business from 2007 to 2010; Head of BlackRock’s Strategy and Development Group from 2005 to 2007; Partner of McKinsey & Co. from 1997 to 2005.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2009	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2009	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Director of BlackRock since 2010; 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.
	* Officers of the Trust/MIP serve at the pleasure of the Board of Trustees.


Investment Advisor BlackRock Fund Advisors San Francisco, CA 94105	Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Custodian and Accounting Agent State Street Bank and Trust Company Boston, MA 02110	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Sidley Austin LLP New York, NY 10019

				Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP New York, NY 10017	Address of the Trust/MIP 400 Howard Street San Francisco, CA 94105



BLACKROCK FUNDS III	DECEMBER 31, 2012	105


Additional Information

General Information

Electronic Delivery

Electronic copies of most financial reports and prospectuses are available on the LifePath Index Portfolios’/LifePath Index Master Portfolios’ websites or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the LifePath Index Portfolios’/LifePath Index Master Portfolios’ electronic delivery program.

To enroll:

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

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

Shareholders Who Hold Accounts Directly with BlackRock:

1)	Access the BlackRock website at

http://www.blackrock.com/edelivery

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

3)	Log into your account

Householding

The LifePath Index Portfolios/LifePath Index Master 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/LifePath Index Master Portfolios at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The LifePath Index Portfolios/LifePath Index Master Portfolios file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The LifePath Index Portfolios’/LifePath Index Master Portfolios’ Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The LifePath Index Portfolios’/LifePath Index Master Portfolios’ Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the LifePath Index Portfolios/LifePath Index Master Portfolios use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

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

Shareholder Privileges

Account Information

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 Privacy Principles

consumer reporting agency; and (iv) from visits to our websites.



106	BLACKROCK FUNDS III	DECEMBER 31, 2012


A World-Class Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing.


Equity Funds

BlackRock ACWI ex-US Index Fund

BlackRock All-Cap Energy & Resources Portfolio

BlackRock Basic Value Fund

BlackRock Capital Appreciation Fund

BlackRock China Fund

BlackRock Commodity Strategies Fund

BlackRock Emerging Markets Fund

BlackRock Emerging Markets Long/Short Equity Fund

BlackRock Energy & Resources Portfolio

BlackRock Equity Dividend Fund

BlackRock EuroFund

BlackRock Flexible Equity Fund

BlackRock Focus Growth Fund

BlackRock Global Dividend Income Portfolio

BlackRock Global Long/Short Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Global SmallCap Fund

BlackRock Health Sciences Opportunities Portfolio

BlackRock Index Equity Portfolio

BlackRock India Fund

BlackRock International Fund

BlackRock International Index Fund

BlackRock International Opportunities Portfolio

BlackRock Large Cap Core Fund

BlackRock Large Cap Core Plus Fund

BlackRock Large Cap Growth Fund

BlackRock Large Cap Value Fund

BlackRock Latin America Fund

BlackRock Long-Horizon Equity Fund

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Mid Cap Value Opportunities Fund

BlackRock Natural Resources Trust

BlackRock Pacific Fund

BlackRock Real Estate Securities Fund

BlackRock Russell 1000 Index Fund

BlackRock Science & Technology Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock Small Cap Growth Fund II

BlackRock Small Cap Index Fund

BlackRock S&P 500 Index Fund

BlackRock S&P 500 Stock Fund

BlackRock U.S. Opportunities Portfolio

BlackRock Value Opportunities Fund

BlackRock World Gold Fund


Taxable Fixed Income Funds

BlackRock Bond Index Fund

BlackRock Core Bond Portfolio

BlackRock CoreAlpha Bond Fund

BlackRock Emerging Market Local Debt Portfolio

BlackRock Floating Rate Income Portfolio

BlackRock Global Long/Short Credit Fund

BlackRock GNMA Portfolio

BlackRock High Yield Bond Portfolio

BlackRock Inflation Protected Bond Portfolio

BlackRock International Bond Portfolio

BlackRock Long Duration Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Secured Credit Portfolio

BlackRock Strategic Income Opportunities Portfolio

BlackRock Total Return Fund

BlackRock U.S. Government Bond Portfolio

BlackRock U.S. Mortgage Portfolio

BlackRock World Income Fund


Municipal Fixed Income Funds

BlackRock California Municipal Bond Fund

BlackRock High Yield Municipal Fund

BlackRock Intermediate Municipal Fund

BlackRock National Municipal Fund

BlackRock New Jersey Municipal Bond Fund

BlackRock New York Municipal Bond Fund

BlackRock Pennsylvania Municipal Bond Fund

BlackRock Short-Term Municipal Fund


Mixed Asset Funds


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

BlackRock Prepared Portfolios	LifePath Portfolios
Conservative Prepared Portfolio		Retirement	2040
Moderate Prepared Portfolio		2020	2045
Growth Prepared Portfolio		2025	2050
Aggressive Growth Prepared Portfolio		2030	2055
		2035



BLACKROCK FUNDS III	DECEMBER 31, 2012	107

LOGO


# LPindex-12/12-AR

DECEMBER 31, 2012

ANNUAL REPORT

BlackRock Funds III

^Ø	BlackRock Cash Funds: Government

^Ø	BlackRock Cash Funds: Institutional

^Ø	BlackRock Cash Funds: Prime

^Ø	BlackRock Cash Funds: Treasury

Not FDIC Insured • May Lose Value • No Bank Guarantee


Table of Contents


	Page
Dear Shareholder		3
Annual Report:
Money Market Overview		4
Fund Information		5
Disclosure of Expenses		6
Fund Financial Statements:
Statements of Assets and Liabilities		7
Statements of Operations		9
Statements of Changes in Net Assets		10
Fund Financial Highlights		12
Fund Notes to Financial Statements		35
Fund Report of Independent Registered Public Accounting Firm		39
Important Tax Information		39
Master Portfolio Information		40
Master Portfolio Financial Statements:
Schedules of Investments		41
Statements of Assets and Liabilities		52
Statements of Operations		52
Statements of Changes in Net Assets		53
Master Portfolio Financial Highlights		54
Master Portfolio Notes to Financial Statements		56
Master Portfolio Report of Independent Registered Public Accounting Firm		58
Officers and Trustees		59
Additional Information		62



2	BLACKROCK FUNDS III	DECEMBER 31, 2012

Dear Shareholder

Sincerely,

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

“Although 2012 brought its share of headwinds, the strongest returns came from higher-risk asset classes as investors reached for yield in an environment of extremely low interest rates.”

Rob Kapito

President, BlackRock Advisors, LLC


Total Returns as of December 31, 2012
	6-month			12-month
US large cap equities (S&P 500^® Index)		5.95	%		16.00	%
US small cap equities (Russell 2000^® Index)		7.20			16.35
International equities (MSCI Europe, Australasia, Far East Index)		13.95			17.32
Emerging market equities (MSCI Emerging Markets Index)		13.75			18.22
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)		0.07			0.11
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		0.71			4.18
US investment grade bonds (Barclays US Aggregate Bond Index)		1.80			4.21
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.15			7.42
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)		7.97			15.78
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, 2012

The Federal Open Market Committee (“FOMC”) continued to maintain its target range for the federal funds rate at 0.00% to 0.25% throughout the 12-month reporting period ended December 31, 2012. Sluggish economic growth and stubbornly high unemployment have prompted the FOMC to employ multiple stimulus measures during the period including the decision in June to extend Operation Twist (selling short-dated US Treasury securities while purchasing an equal amount of longer-dated Treasury notes to keep long-term interest rates low) through the end of the year. In September, the FOMC announced it would purchase approximately $40 billion per month of agency mortgage-backed securities (“MBS”) until the US labor market exhibits substantial improvement (subject to continued price stability), leaving the size of the program open-ended. In December, the FOMC announced that in addition to the September program, it would begin purchasing long-term US Treasury bonds at the rate of $45 billion per month upon the conclusion of Operation Twist. Policymakers also committed to maintaining accommodative policy and in particular the current low target range for the federal funds rate “at least as long as the unemployment rate remains above 6.5%” unless inflation projections rise above tolerance levels. This statement represents the first time the FOMC has specified a threshold for the unemployment rate with respect to setting monetary policy. Over the past four years, the FOMC’s stimulus programs have, in large part, driven the US Federal Reserve’s balance sheet to triple in size to $2.9 trillion.

Meanwhile, the European Central Bank (“ECB”) expanded its long-term refinancing operations (“LTROs”) by providing eurozone banks virtually unlimited access to three-year loans and broadening the set of eligible collateral. While conditions in the bank funding market had dramatically improved, in July the ECB cut its deposit rate to zero to encourage banks to lend these funds. By September, spiraling government borrowing costs for peripheral European countries led ECB President Draghi to announce a bold new sovereign bond-buying plan aimed at lowering short-term financing costs for the region’s most troubled countries. The program, dubbed the “OMT” for Outright Monetary Transactions, is subject to formal request by a eurozone government and is subject to strict conditionality.

Yields on 3-month US Treasury bills began the year at 0.01%, peaked at 0.11% in August and ended the year at 0.05%, averaging 0.08% for the 12-month period. London Interbank Offered Rates (“LIBOR”) notched lower over the 12 months due in large part to central bank liquidity measures, with three-month LIBOR decreasing 28 basis points to close at 0.306% as of December 31, 2012.

The Federal Deposit Insurance Corporation’s temporary Transaction Account Guarantee (“TAG”) program, which had provided unlimited insurance for non-interest-bearing transaction accounts, expired on December 31, 2012. The level of disintermediation (withdrawals) of uninsured deposits from bank deposit accounts into short-term US Treasury securities and money market mutual funds prior to expiration of the TAG program fell short of expectations. To the extent that sizable cash flows into Treasuries are forthcoming, this may present downward pressure on short-term rates.

In the short-term tax-exempt market, money funds have endured asset outflows and a very low interest rate environment throughout the 12-month period, resulting in a 7.4% decline in tax-exempt money fund industry assets during the period to $290 billion as of December 31, 2012. The benchmark Securities Industry and Financial Markets Association (“SIFMA”) Index, which represents the average rate on seven-day, high-quality, tax-exempt variable rate demand notes (“VRDNs”) (as calculated by Municipal Market Data) ranged widely between 0.06% and 0.26%, averaging 0.16% for the period. The variation in the level of the SIFMA Index reflects the predominance of non-traditional buyers in the market and the continued demand for liquidity by money market funds broadly amid a lower-supply environment.

As the FOMC’s easy monetary policy has kept rates on taxable overnight repos low by historical measures, demand for VRDN securities from taxable money funds continued to be strong in 2012. This put additional supply pressures on an already shrinking VRDN market and allowed the dealer community to maintain yields on VRDNs that continue to attract crossover buyers from the taxable market. Additionally, VRDN new issuance remained minimal with activity consisting mostly of re-issuance for the purpose of substituting the bank underlying the issue’s credit enhancement. This trend was driven largely by uncertainty stemming from Europe’s financial problems and rating agency downgrades across the banking sector.

As state and local municipalities continued to limit spending and reduce debt, new-issue supply of one-year, fixed-rate notes remained diminished in 2012. Municipalities began their annual issuance of one-year notes in June. Generally speaking, municipal money market funds take advantage of “note season” to extend their weighted average maturity, pick up yield, and diversify beyond bank exposure in the form of credit enhancement. The municipal yield curve continued to be extremely flat with longer-dated one-year municipal notes yielding 0.22% as of December 31, 2012, representing only a nominal premium for the extension risk over VRDNs.

The economic and political climate continues to have a dramatic impact on the municipal market and tax-exempt money market funds. The US deficit crisis has federal government officials scrambling to cut spending, which results in less aid to state and local governments. At the same time, the US government’s search for additional sources of revenue puts the tax exemption for municipal securities at risk. The culmination of these factors has created a very challenging environment for tax-exempt money market funds.

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, 2012


Fund Information as of December 31, 2012		BlackRock Funds III


BlackRock Cash Funds: Government

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


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


BlackRock Cash Funds: Institutional

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


	7-Day SEC Yield			7-Day Yield
Aon Captives		0.12	%		0.12	%
Institutional		0.22	%		0.22	%
Select		0.14	%		0.14	%
SL Agency		0.25	%		0.25	%
Trust		0.00	%		0.00	%


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		0.17	%		0.17	%
Institutional		0.19	%		0.19	%
Premium		0.14	%		0.14	%
Select		0.11	%		0.11	%
SL Agency		0.22	%		0.22	%
Trust		0.00	%		0.00	%


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		0.03	%		0.03	%
Institutional		0.01	%		0.01	%
Select		0.00	%		0.00	%
SL Agency		0.08	%		0.08	%
Trust		0.00	%		0.00	%

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, 2012	5


Disclosure of Expenses		BlackRock Funds III

Shareholders of these Funds may incur the following charges: (a) expenses related to transactions, including sales charges and exchange fees; 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, 2012 and held through December 31, 2012) 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.


Expense Examples


	Actual						Hypothetical²
BlackRock Cash Funds: Government	Beginning Account Value July 1, 2012		Ending Account Value December 31, 2012		Expenses Paid During the Period¹		Beginning Account Value July 1, 2012		Ending Account Value December 31, 2012		Expenses Paid During the Period¹		Annualized Expense Ratio
Select	$	1,000.00	$	1,000.10	$	0.96	$	1,000.00	$	1,024.20	$	0.97		0.19	%
Trust	$	1,000.00	$	1,000.00	$	1.01	$	1,000.00	$	1,024.14	$	1.02		0.20	%
BlackRock Cash Funds: Institutional
Aon Captives	$	1,000.00	$	1,000.70	$	1.11	$	1,000.00	$	1,024.03	$	1.12		0.22	%
Institutional	$	1,000.00	$	1,001.20	$	0.60	$	1,000.00	$	1,024.53	$	0.61		0.12	%
Select	$	1,000.00	$	1,000.80	$	1.01	$	1,000.00	$	1,024.13	$	1.02		0.20	%
SL Agency	$	1,000.00	$	1,001.30	$	0.45	$	1,000.00	$	1,024.68	$	0.46		0.09	%
Trust	$	1,000.00	$	1,000.00	$	1.76	$	1,000.00	$	1,023.40	$	1.78		0.35	%
BlackRock Cash Funds: Prime
Capital	$	1,000.00	$	1,000.90	$	0.70	$	1,000.00	$	1,024.43	$	0.71		0.14	%
Institutional	$	1,000.00	$	1,001.00	$	0.60	$	1,000.00	$	1,024.53	$	0.61		0.12	%
Premium	$	1,000.00	$	1,000.80	$	0.85	$	1,000.00	$	1,024.28	$	0.87		0.17	%
Select	$	1,000.00	$	1,000.60	$	1.01	$	1,000.00	$	1,024.13	$	1.02		0.20	%
SL Agency	$	1,000.00	$	1,001.20	$	0.45	$	1,000.00	$	1,024.68	$	0.46		0.09	%
Trust	$	1,000.00	$	1,000.00	$	1.66	$	1,000.00	$	1,023.49	$	1.68		0.33	%
BlackRock Cash Funds: Treasury
Capital	$	1,000.00	$	1,000.20	$	0.70	$	1,000.00	$	1,024.44	$	0.71		0.14	%
Institutional	$	1,000.00	$	1,000.10	$	0.60	$	1,000.00	$	1,024.54	$	0.61		0.12	%
Select	$	1,000.00	$	1,000.00	$	0.85	$	1,000.00	$	1,024.30	$	0.87		0.17	%
SL Agency	$	1,000.00	$	1,000.40	$	0.45	$	1,000.00	$	1,024.68	$	0.46		0.09	%
Trust	$	1,000.00	$	1,000.00	$	0.85	$	1,000.00	$	1,024.29	$	0.87		0.17	%

For each class, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period shown). Because each Fund invest significantly in the corresponding master portfolios, the expense examples reflect the net expenses of both the Fund and the master portfolio in which it invests.

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366.



6	BLACKROCK FUNDS III	DECEMBER 31, 2012


Statements of Assets and Liabilities		BlackRock Funds III


December 31, 2012	BlackRock Cash Funds: Government		BlackRock Cash Funds: Institutional		BlackRock Cash Funds: Prime		BlackRock Cash Funds: Treasury


Assets
Investments at value — from the applicable Master Portfolio^1,2	$	17,613,826	$	34,598,907,972	$	14,024,461,494	$	1,825,154,566
Capital shares sold receivable		2		932		6,865		—

Total assets		17,613,828		34,598,908,904		14,024,468,359		1,825,154,566


Liabilities
Income dividends payable		—		5,069,703		1,804,976		130,296
Administration fees payable		569		673,782		639,910		32,059
Professional fees payable		13,410		13,411		13,411		13,411
Distribution fees payable — Aon Captives		—		932		—		—
Contributions payable to Master Portfolio		2		932		6,865		—

Total liabilities		13,981		5,758,760		2,465,162		175,766

Net Assets	$	17,599,847	$	34,593,150,144	$	14,022,003,197	$	1,824,978,800


Net Assets Consist of
Paid-in capital	$	17,599,842	$	34,591,314,280	$	14,021,881,574	$	1,824,941,847
Undistributed net investment income		—		—		—		312
Accumulated net realized gain		5		1,835,864		121,623		36,641

Net Assets	$	17,599,847	$	34,593,150,144	$	14,022,003,197	$	1,824,978,800

¹ Investments at cost	$	17,613,826	$	34,598,907,972	$	14,024,461,494	$	1,825,154,566

² Government Money Market Master Portfolio, Money Market Master Portfolio, Prime Money Market Master Portfolio, and Treasury Money Market Master Portfolio (each, a “Master Portfolio”).


Statements of Assets and Liabilities (concluded)		BlackRock Funds III


December 31, 2012	BlackRock Cash Funds: Government		BlackRock Cash Funds: Institutional		BlackRock Cash Funds: Prime		BlackRock Cash Funds: Treasury


Net Asset Value
Aon Captives:
Net assets		—	$	11,002,807		—		—

Shares outstanding¹		—		11,001,560		—		—

Net asset value		—	$	1.00		—		—

Capital:
Net assets		—		—	$	1,394,794,307	$	273,120,946

Shares outstanding¹		—		—		1,394,792,536		273,125,341

Net asset value		—		—	$	1.00	$	1.00

Institutional:
Net assets		—	$	1,211,912,003	$	3,236,082,132	$	3,905

Shares outstanding¹		—		1,211,789,758		3,236,234,792		3,904

Net asset value		—	$	1.00	$	1.00	$	1.00

Premium:
Net assets		—		—	$	3,481,506,380		—

Shares outstanding¹		—		—		3,481,304,221		—

Net asset value		—		—	$	1.00		—

Select:
Net assets	$	16,654,860	$	11,458,968	$	10,454,114	$	10,543,020

Shares outstanding¹		16,654,844		11,459,074		10,453,789		10,546,013

Net asset value	$	1.00	$	1.00	$	1.00	$	1.00

SL Agency:
Net assets		—	$	33,350,561,530	$	5,877,464,493	$	1,525,904,197

Shares outstanding¹		—		33,350,179,095		5,877,501,811		1,525,858,996

Net asset value		—	$	1.00	$	1.00	$	1.00

Trust:
Net assets	$	944,987	$	8,214,836	$	21,701,771	$	15,406,732

Shares outstanding¹		944,998		8,215,579		21,702,802		15,407,595

Net asset value	$	1.00	$	1.00	$	1.00	$	1.00


¹ Unlimited number of shares authorized, no par value.


Statements of Operations		BlackRock Funds III


Year Ended December 31, 2012	BlackRock Cash Funds: Government			BlackRock Cash Funds: Institutional			BlackRock Cash Funds: Prime			BlackRock Cash Funds: Treasury


Investment Income
Net investment income allocated from the applicable Master Portfolio:
Interest	$	15,618		$	122,979,206		$	33,918,354		$	1,713,843
Expenses		(28,115	)		(36,729,678	)		(10,608,955	)		(1,144,839	)
Fees waived		21,738			11,376,364			3,286,199			368,036

Total income		9,241			97,625,892			26,595,598			937,040


Fund Expenses
Administration — class specific		17,256			7,670,479			5,287,830			332,834
Distribution — Aon Captives		—			7,885			—			—
Professional		13,957			13,967			13,967			13,967

Total expenses		31,213			7,692,331			5,301,797			346,801
Less fees waived by administrator — class specific		(8,464	)		(12,131	)		(38,887	)		(82,514	)
Less fees reimbursed by administrator		(13,957	)		(13,967	)		(13,967	)		(13,967	)

Total expenses after fees waived		8,792			7,666,233			5,248,943			250,320

Net investment income		449			89,959,659			21,346,655			686,720


Realized Gain Allocated from the Master Portfolios
Net realized gain from investments		—			2,285,540			1,614,998			69,189

Net Increase in Net Assets Resulting from Operations	$	449		$	92,245,199		$	22,961,653		$	755,909


Statements of Changes in Net Assets		BlackRock Funds III


	BlackRock Cash Funds: Government						BlackRock Cash Funds: Institutional
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2012			2011			2012			2011

Operations
Net investment income	$	449		$	76,766		$	89,959,659		$	52,806,655
Net realized gain		—			—			2,285,540			1,739,894

Net increase in net assets resulting from operations		449			76,766			92,245,199			54,546,549


Dividends and Distributions to Shareholders From¹
Net investment income:
Aon Captives		—			—			(9,492	)		(11,185	)
Institutional		—			(879	)		(2,706,645	)		(1,993,214	)
Premium		—			—			(3,144	)		—
Select		(449	)		(133	)		(29,453	)		(21,870	)
SL Agency		—			(75,750	)		(87,210,925	)		(50,780,386	)
Trust		—			(4	)		—			—
Net realized gain:
Aon Captives		—			—			(355	)		(569	)
Institutional		—			—			(48,899	)		(107,118	)
Select		(47	)		(2,045	)		(517	)		(1,564	)
SL Agency		—			—			(1,149,985	)		(1,794,681	)
Trust		(13	)		(355	)		(245	)		(751	)

Decrease in net assets resulting from dividends and distributions to shareholders		(509	)		(79,166	)		(91,159,660	)		(54,711,338	)


Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		7,256,739			(16,112,757	)		6,622,317,759			8,857,754,718


Net Assets
Total increase (decrease) in net assets		7,256,679			(16,115,157	)		6,623,403,298			8,857,589,929
Beginning of year		10,343,168			26,458,325			27,969,746,846			19,112,156,917

End of year	$	17,599,847		$	10,343,168		$	34,593,150,144		$	27,969,746,846


¹ Dividends and distributions are determined in accordance with federal income tax regulations.


Statements of Changes in Net Assets (concluded)		BlackRock Funds III


	BlackRock Cash Funds: Prime						BlackRock Cash Funds: Treasury
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2012			2011			2012			2011

Operations
Net investment income	$	21,346,655		$	15,624,534		$	686,720		$	235,732
Net realized gain		1,614,998			1,500,843			69,189			19,669

Net increase in net assets resulting from operations		22,961,653			17,125,377			755,909			255,401


Dividends and Distributions to Shareholders From¹
Net investment income:
Capital		(1,244,088	)		(870,399	)		(7,969	)		(1,304	)
Institutional		(5,903,654	)		(5,027,475	)		(857	)		(3,362	)
Premium		(3,598,065	)		(2,034,580	)		—			—
Select		(39,722	)		(65,381	)		(16	)		—
SL Agency		(10,562,560	)		(7,626,699	)		(677,566	)		(231,066	)
Net realized gain:
Capital		—			—			(1,425	)		(5,607	)
Institutional		—			—			—			(2,525	)
Select		—			—			(436	)		(3,953	)
SL Agency		—			—			(38,619	)		(233,923	)
Trust		—			—			(579	)		(5,751	)

Decrease in net assets resulting from dividends and distributions to shareholders		(21,348,089	)		(15,624,534	)		(727,467	)		(487,491	)


Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		4,890,678,255			(6,805,294	)		1,078,058,501			(988,554,001	)


Net Assets
Total increase (decrease) in net assets		4,892,291,819			(5,304,451	)		1,078,086,943			(988,786,091	)
Beginning of year		9,129,711,378			9,135,015,829			746,891,857			1,735,677,948

End of year	$	14,022,003,197		$	9,129,711,378		$	1,824,978,800		$	746,891,857

Undistributed net investment income		—			—		$	312			—


¹ Dividends and distributions are determined in accordance with federal income tax regulations.


Financial Highlights		BlackRock Cash Funds: Government


	Institutional
	Period January 1, 2011 to April 18, 2011¹			Year Ended December 31,
	Period January 1, 2011 to April 18, 2011¹			2010			2009			2008


Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00

Net investment income		0.0001			0.0008			0.0009			0.0200
Dividends from net investment income²		(0.0001	)		(0.0008	)		(0.0009	)		(0.0200	)

Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return³
Based on net asset value		0.01%	⁴		0.09%			0.09%			1.96%


Ratios to Average Net Assets⁵
Total expenses		0.13%	^6,7		0.19%			0.15%			0.16%

Total expenses after fees waived		0.11%	^6,7		0.11%			0.08%			0.10%

Net investment income		0.05%	^6,7		0.09%			0.11%			0.29%


Supplemental Data
Net assets, end of period (000)		—	¹	$	5,663		$	10,496		$	1,594,728

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

Dividends are determined in accordance with federal income tax regulations.

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁴

Aggregate total Investment return.

⁵

⁶

Annualized.

⁷

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


Financial Highlights (continued)		BlackRock Cash Funds: Government


	Select
	Year Ended December 31,
	2012			2011			2010			2009			2008

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			0.0003			0.0008			0.0200
Dividends from net investment income¹		(0.0001	)		(0.0002	)		(0.0003	)		(0.0008	)		(0.0200	)

Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return²
Based on net asset value		0.01%			0.02%			0.03%			0.08%			1.89%


Ratios to Average Net Assets³
Total expenses		0.37%	⁴		0.30%	⁵		0.29%			0.25%			0.23%

Total expenses after fees waived		0.16%	⁴		0.10%	⁵		0.13%			0.09%			0.07%

Net investment income		0.01%	⁴		0.00%	⁵		0.03%			0.08%			0.82%


Supplemental Data
Net assets, end of year (000)	$	16,655		$	8,973		$	17,263		$	69,139		$	81,424

Dividends are determined in accordance with federal income tax regulations.

Where applicable, total investment returns include the reinvestment of dividends and distributions.

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

⁴

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

⁵

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


Financial Highlights (continued)		BlackRock Cash Funds: Government


	SL Agency
	Period January 1, 2011 to December 14, 2011¹			Period January 1, 2010 to March 14, 2010²			Period February 4, 2009³ to December 31, 2009
	Period January 1, 2011 to December 14, 2011¹			Period January 1, 2010 to March 14, 2010²			Period February 4, 2009³ to December 31, 2009

Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00

Net investment income		0.0002			0.0002			0.0009
Dividends from net investment income⁴		(0.0002	)		(0.0002	)		(0.0009	)

Net asset value, end of period	$	1.00		$	1.00		$	1.00


Total Investment Return^5,6
Based on net asset value		0.02%			0.02%			0.09%


Ratios to Average Net Assets^7,8
Total expenses		0.10%	⁹		0.12%			0.12%

Total expenses after fees waived		0.09%	⁹		0.02%			0.07%

Net investment income		0.08%	⁹		0.08%			0.10%


Supplemental Data
Net assets, end of period (000)		—	¹		—	²	$	563,288

There were no SL Agency Shares outstanding from March 31, 2011 through December 1, 2011, from December 15, 2011 through December 31, 2011 and during the year ended December 31, 2012.

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

Commencement of operations.

⁴

Dividends are determined in accordance with federal income tax regulations.

⁵

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁶

Aggregate total Investment return.

⁷

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

⁸

Annualized.

⁹

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


Financial Highlights (concluded)		BlackRock Cash Funds: Government


	Trust
	Year Ended December 31,
	2012			2011			2010			2009			2008

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		0.0002			0.0002			0.0008			0.0200
Dividends from net investment income²		(0.0000	)³		(0.0002	)		(0.0002	)		(0.0008	)		(0.0200	)

Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return⁴
Based on net asset value		0.00%			0.02%			0.02%			0.08%			1.69%


Ratios to Average Net Assets⁵
Total expenses		0.62%	⁶		0.54%	⁷		0.53%			0.48%	⁸		0.47%

Total expenses after fees waived		0.17%	⁶		0.10%	⁷		0.15%			0.09%			0.07%

Net investment income		0.00%	⁶		0.00%	⁷		0.03%			0.08%			0.16%


Supplemental Data
Net assets, end of year (000)	$	945		$	1,370		$	3,532		$	13,462		$	12,380

Amount is less than $0.00005 per share.

Dividends are determined in accordance with federal income tax regulations.

Amount is greater than $(0.00005) per share.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

⁶

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

⁷

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

⁸

Ratio revised to reflect exclusion of fees waived.


Financial Highlights		BlackRock Cash Funds: Institutional


	Aon Captives
	Year Ended December 31,
	2012			2011			2010			2009			2008

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			0.0008			0.0012			0.0033			0.0300
Dividends from net investment income¹		(0.0012	)		(0.0008	)		(0.0012	)		(0.0033	)		(0.0300	)

Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return²
Based on net asset value		0.12%			0.08%			0.12%			0.33%			2.74%


Ratios to Average Net Assets³
Total expenses		0.22%	⁴		0.22%	⁴		0.25%			0.25%			0.26%

Total expenses after fees waived		0.22%	⁴		0.22%	⁴		0.22%			0.22%			0.23%

Net investment income		0.12%	⁴		0.07%	⁴		0.11%			0.35%			2.67%


Supplemental Data
Net assets, end of year (000)	$	11,003		$	9,167		$	59,237		$	72,949		$	97,273

Dividends are determined in accordance with federal income tax regulations.

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁴

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


Financial Highlights (continued)		BlackRock Cash Funds: Institutional


	Capital
	Period January 1, 2010 to December 1, 2010¹			Year Ended December 31, 2009			Period February 28, 2008² to December 31, 2008
	Period January 1, 2010 to December 1, 2010¹			Year Ended December 31, 2009			Period February 28, 2008² to December 31, 2008

Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00

Net investment income		0.0018			0.0041			0.0200
Dividends from net investment income³		(0.0018	)		(0.0041	)		(0.0200	)

Net asset value, end of period	$	1.00		$	1.00		$	1.00


Total Investment Return⁴
Based on net asset value		0.18%	⁵		0.41%			2.14%	⁵


Ratios to Average Net Assets⁶
Total expenses		0.17%	⁷		0.17%			0.19%	⁷

Total expenses after fees waived		0.14%	⁷		0.14%			0.14%	⁷

Net investment income		0.18%	⁷		0.33%			2.57%	⁷


Supplemental Data
Net assets, end of period (000)		—	¹	$	277,382		$	101

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

Commencement of operations.

Dividends are determined in accordance with federal income tax regulations.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

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

⁷

Annualized.


Financial Highlights (continued)		BlackRock Cash Funds: Institutional


	Institutional
	Year Ended December 31,
	2012			2011			2010			2009			2008

Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00

Net investment income		0.0022			0.0018			0.0022			0.0043			0.0300
Dividends from net investment income¹		(0.0022	)		(0.0018	)		(0.0022	)		(0.0043	)		(0.0300	)

Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return²
Based on net asset value		0.22%			0.18%			0.22%			0.43%			2.85%


Ratios to Average Net Assets³
Total expenses		0.12%	⁴		0.12%	⁴		0.15%			0.15%			0.15%

Total expenses after fees waived		0.12%	⁴		0.12%	⁴		0.12%			0.12%			0.12%

Net investment income		0.22%	⁴		0.17%	⁴		0.22%			0.78%			2.65%


Supplemental Data
Net assets, end of year (000)	$	1,211,912		$	1,089,872		$	1,076,268		$	973,221		$	20,223,437

Dividends are determined in accordance with federal income tax regulations.

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁴

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


Financial Highlights (continued)		BlackRock Cash Funds: Institutional


	Premium
	Period October 12, 2012 to October 17, 2012¹			Period January 1, 2010 to November 11, 2010²			Year Ended December 31,
	Period October 12, 2012 to October 17, 2012¹			Period January 1, 2010 to November 11, 2010²			2009			2008

Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00

Net investment income		0.0000	³		0.0003			0.0038			0.0300
Dividends from net investment income⁴		(0.0000	)⁵		(0.0003	)		(0.0038	)		(0.0300	)

Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return⁶
Based on net asset value		0.00%	⁷		0.03%	⁷		0.38%			2.80%


Ratios to Average Net Assets⁸
Total expenses		0.17%	^9,10		0.20%	^9,10		0.20%			0.21%

Total expenses after fees waived		0.17%	^9,10		0.17%	^9,10		0.17%			0.18%

Net investment income		0.19%	^9,10		0.10%	^9,10		0.48%			2.79%


Supplemental Data
Net assets, end of period (000)		—	¹		—	²	$	97,513		$	1,021,216

There were no Premium Shares outstanding during the fiscal year ended December 31, 2012 except from October 12, 2012 through October 17, 2012.

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

Amount is less than $0.00005 per share.

⁴

Dividends are determined in accordance with federal income tax regulations.

⁵

Amount is greater than $(0.00005) per share.

⁶

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁷

Aggregate total investment return.

⁸

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

⁹

Annualized.

¹⁰

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


Financial Highlights (continued)		BlackRock Cash Funds: Institutional


	Select
	Year Ended December 31,
	2012			2011			2010			2009			2008

Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00

Net investment income		0.0014			0.0010			0.0014			0.0035			0.0300
Dividends from net investment income¹		(0.0014	)		(0.0010	)		(0.0014	)		(0.0035	)		(0.0300	)

Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return²
Based on net asset value		0.14%			0.10%			0.14%			0.35%			2.76%


Ratios to Average Net Assets³
Total expenses		0.22%	⁴		0.22%	⁴		0.25%			0.23%			0.28%

Total expenses after fees waived		0.20%	⁴		0.20%	⁴		0.20%			0.20%			0.23%

Net investment income		0.14%	⁴		0.09%	⁴		0.13%			0.57%			2.05%


Supplemental Data
Net assets, end of year (000)	$	11,459		$	44,788		$	29,944		$	23,204		$	10,014

Dividends are determined in accordance with federal income tax regulations.

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁴

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


Financial Highlights (continued)		BlackRock Cash Funds: Institutional


	SL Agency
	Year Ended December 31,									Period February 4, 2009¹to December 31, 2009
	2012			2011			2010			Period February 4, 2009¹to December 31, 2009

Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00

Net investment income		0.0025			0.0021			0.0025			0.0035
Dividends from net investment income²		(0.0025	)		(0.0021	)		(0.0025	)		(0.0035	)

Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return³
Based on net asset value		0.25%			0.21%			0.25%			0.36%	⁴


Ratios to Average Net Assets⁵
Total expenses		0.09%	⁶		0.09%	⁶		0.12%			0.12%	⁷

Total expenses after fees waived		0.09%	⁶		0.09%	⁶		0.09%			0.09%	⁷

Net investment income		0.25%	⁶		0.20%	⁶		0.24%			0.38%	⁷


Supplemental Data
Net assets, end of period (000)	$	33,350,562		$	26,815,279		$	17,938,932		$	18,832,492

Commencement of operations.

Dividends are determined in accordance with federal income tax regulations.

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁴

Aggregate total investment return.

⁵

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

⁶

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

⁷

Annualized.


Financial Highlights (concluded)		BlackRock Cash Funds: Institutional


	Trust
	Year Ended December 31,
	2012			2011			2010			2009			2008

Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00

Net investment income		0.0000	¹		0.0001	¹		0.0001			0.0018			0.0200
Dividends from net investment income²		(0.0000	)³		(0.0001	)³		(0.0001	)		(0.0018	)		(0.0200	)

Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return⁴
Based on net asset value		0.00%			0.01%			0.01%			0.18%			2.51%


Ratios to Average Net Assets⁵
Total expenses		0.45%	⁶		0.45%	⁶		0.48%			0.48%			0.49%

Total expenses after fees waived		0.34%	⁶		0.29%	⁶		0.31%			0.40%			0.46%

Net investment income		0.00%	⁶		0.00%	⁶		0.01%			0.22%			2.50%


Supplemental Data
Net assets, end of year (000)	$	8,215		$	10,640		$	7,776		$	19,713		$	76,334

Amount is less than $0.00005 per share.

Dividends are determined in accordance with federal income tax regulations.

Amount is greater than $(0.00005) per share.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

⁶

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


Financial Highlights		BlackRock Cash Funds: Prime


	Capital
	Year Ended December 31,												Period February 28, 2008¹ to December 31, 2008
	2012			2011			2010			2009			Period February 28, 2008¹ to December 31, 2008

Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00

Net investment income		0.0018			0.0014			0.0018			0.0030			0.0200
Dividends from net investment income²		(0.0018	)		(0.0014	)		(0.0018	)		(0.0030	)		(0.0020	)

Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return³
Based on net asset value		0.18%			0.14%			0.18%			0.30%			2.13%	⁴


Ratios to Average Net Assets⁵
Total expenses		0.14%	⁶		0.14%	⁶		0.17%			0.19%			0.21%	⁷

Total expenses after fees waived		0.14%	⁶		0.14%	⁶		0.14%			0.16%			0.15%	⁷

Net investment income		0.18%	⁶		0.15%	⁶		0.17%			0.27%			2.23%	⁷


Supplemental Data
Net assets, end of period (000)	$	1,394,794		$	456,657		$	517,988		$	673,375		$	226,487

Commencement of operations.

Dividends are determined in accordance with federal income tax regulations.

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁴

Aggregate total investment return.

⁵

Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income, except the total expenses for the two years ended December 31, 2010 and the period ended December 31, 2008, which include gross expenses.

⁶

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

⁷

Annualized.


Financial Highlights (continued)		BlackRock Cash Funds: Prime


	Institutional
	Year Ended December 31,
	2012			2011			2010			2009			2008

Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00

Net investment income		0.0020			0.0016			0.0020			0.0032			0.0300
Dividends from net investment income¹		(0.0020	)		(0.0016	)		(0.0020	)		(0.0032	)		(0.0300	)

Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return²
Based on net asset value		0.20%			0.16%			0.20%			0.32%			2.83%


Ratios to Average Net Assets³
Total expenses		0.12%	⁴		0.12%	⁴		0.15%			0.17%			0.15%

Total expenses after fees waived		0.12%	⁴		0.12%	⁴		0.12%			0.14%			0.11%

Net investment income		0.20%	⁴		0.16%	⁴		0.20%			0.39%			2.80%


Supplemental Data
Net assets, end of year (000)	$	3,236,082		$	2,282,923		$	3,570,577		$	3,014,591		$	10,812,890

Dividends are determined in accordance with federal income tax regulations.

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁴

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


Financial Highlights (continued)		BlackRock Cash Funds: Prime


	Premium
	Year Ended December 31,
	2012			2011			2010			2009			2008

Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00

Net investment income		0.0015			0.0011			0.0015			0.0027			0.0270
Dividends from net investment income¹		(0.0015	)		(0.0011	)		(0.0015	)		(0.0027	)		(0.0270	)

Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return²
Based on net asset value		0.15%			0.11%			0.15%			0.27%			2.78%


Ratios to Average Net Assets³
Total expenses		0.17%	⁴		0.17%	⁴		0.20%			0.23%			0.21%

Total expenses after fees waived		0.17%	⁴		0.17%	⁴		0.17%			0.20%			0.17%

Net investment income		0.16%	⁴		0.11%	⁴		0.14%			0.34%			2.60%


Supplemental Data
Net assets, end of year (000)	$	3,481,506		$	1,460,178		$	1,232,743		$	1,817,088		$	4,304,633

Dividends are determined in accordance with federal income tax regulations.

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁴

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


Financial Highlights (continued)		BlackRock Cash Funds: Prime


	Select
	Year Ended December 31,
	2012			2011			2010			2009			2008

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			0.0008			0.0012			0.0024			0.0280
Dividends from net investment income¹		(0.0012	)		(0.0008	)		(0.0012	)		(0.0024	)		(0.0280	)

Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return²
Based on net asset value		0.12%			0.09%			0.12%			0.24%			2.75%


Ratios to Average Net Assets³
Total expenses		0.22%	⁴		0.22%	⁴		0.25%			0.27%			0.25%

Total expenses after fees waived		0.20%	⁴		0.20%	⁴		0.20%			0.22%			0.18%

Net investment income		0.12%	⁴		0.08%	⁴		0.12%			0.24%			2.95%


Supplemental Data
Net assets applicable, end of year (000)	$	10,454		$	69,779		$	80,614		$	73,810		$	143,150

Dividends are determined in accordance with federal income tax regulations.

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁴

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


Financial Highlights (continued)		BlackRock Cash Funds: Prime


	SL Agency
	Year Ended December 31,									Period February 4, 2009¹ to December 31, 2009
	2012			2011			2010			Period February 4, 2009¹ to December 31, 2009

Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00

Net investment income		0.0023			0.0019			0.0023			0.0028
Dividends from net investment income²		(0.0023	)		(0.0019	)		(0.0023	)		(0.0028	)

Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return³
Based on net asset value		0.23%			0.19%			0.23%			0.28%	⁴


Ratios to Average Net Assets⁵
Total expenses		0.09%	⁶		0.09%	⁶		0.12%			0.14%	⁷

Total expenses after fees waived		0.09%	⁶		0.09%	⁶		0.09%			0.11%	⁷

Net investment income		0.23%	⁶		0.19%	⁶		0.22%			0.31%	⁷


Supplemental Data
Net assets, end of period (000)	$	5,877,464		$	4,830,517		$	3,696,051		$	58,600,881

Commencement of operations.

Dividends are determined in accordance with federal income tax regulations.

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁴

Aggregate total investment return.

⁵

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

⁶

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

⁷

Annualized.


Financial Highlights (concluded)		BlackRock Cash Funds: Prime


	Trust
	Year Ended December 31,
	2012			2011			2010			2009			2008

Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00

Net investment income		0.0000	¹		0.0000	¹		0.0001			0.0011			0.0200
Dividends from net investment income²		(0.0000	)³		(0.0000	)³		(0.0001	)		(0.0011	)		(0.0200	)

Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return⁴
Based on net asset value		0.00%			0.00%			0.01%			0.11%			2.49%


Ratios to Average Net Assets⁵
Total expenses		0.45%	⁶		0.45%	⁶		0.48%			0.51%			0.52%

Total expenses after fees waived		0.32%	⁶		0.28%	⁶		0.29%			0.36%			0.48%

Net investment income		0.00%	⁶		0.01%	⁶		0.01%			0.09%			1.34%


Supplemental Data
Net assets, end of year (000)	$	21,702		$	29,657		$	37,044		$	96,349		$	3,370

Amount is less than $0.00005 per share.

Dividends are determined in accordance with federal income tax regulations.

Amount is greater than $(0.00005) per share.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

⁶

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


Financial Highlights		BlackRock Cash Funds: Treasury


	Capital
	Year Ended December 31,												Period February 28, 2008¹to December 31, 2008
	2012			2011			2010			2009			Period February 28, 2008¹to December 31, 2008


Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00

Net investment income		0.0002			0.0004			0.0007			0.0008			0.0100
Dividends from net investment income²		(0.0002	)		(0.0004	)		(0.0007	)		(0.0008	)		(0.0100	)

Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return³
Based on net asset value		0.02%			0.04%			0.07%			0.08%			1.12%	⁴


Ratios to Average Net Assets⁵
Total expenses		0.14%	⁶		0.14%	⁷		0.17%			0.17%			0.19%	⁸

Total expenses after fees waived		0.13%	⁶		0.10%	⁷		0.12%			0.08%			0.05%	⁸

Net investment income		0.02%	⁶		0.01%	⁷		0.06%			0.07%			0.37%	⁸


Supplemental Data
Net assets, end of period (000)	$	273,121		$	18,370		$	139,657		$	32,419		$	44,698

Commencement of operations.

Dividends are determined in accordance with federal income tax regulations.

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁴

Aggregate total investment return.

⁵

⁶

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

⁷

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

⁸

Annualized.


Financial Highlights (continued)		BlackRock Cash Funds: Treasury


	Institutional
	Year Ended December 31,
	2012			2011			2010			2009			2008


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			0.0004			0.0009			0.0008			0.0200
Dividends from net investment income¹		(0.0002	)		(0.0004	)		(0.0009	)		(0.0008	)		(0.0200	)

Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return²
Based on net asset value		0.02%			0.04%			0.09%			0.08%			1.61%


Ratios to Average Net Assets³
Total expenses		0.12%	⁴		0.12%	⁵		0.16%			0.12%			0.15%

Total expenses after fees waived		0.11%	⁴		0.11%	⁵		0.11%			0.04%			0.04%

Net investment income		0.02%	⁴		0.03%	⁵		0.08%			0.09%			0.39%


Supplemental Data
Net assets, end of year (000)	$	4		$	8,941		$	124,791		$	30,011		$	1,305,944

Dividends are determined in accordance with federal income tax regulations.

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁴

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

⁵

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


Financial Highlights (continued)		BlackRock Cash Funds: Treasury


	Premium
	Period December 20, 2012¹			Period January 1, 2010 to July 26, 2010²			Year Ended December 31,
	Period December 20, 2012¹			Period January 1, 2010 to July 26, 2010²			2009			2008


Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00

Net investment income		0.0000	³		0.0003			0.0007			0.0200
Dividends from net investment income⁴		(0.0000	)⁵		(0.0003	)		(0.0007	)		(0.0200	)

Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return⁶
Based on net asset value		0.00	⁷		0.03%	⁷		0.08%			1.57%


Ratios to Average Net Assets⁸
Total expenses		0.00	^9,10		0.20%	¹⁰		0.19%			0.20%

Total expenses after fees waived		0.00	^9,10		0.11%	¹⁰		0.08%			0.07%

Net investment income		0.00	^9,10		0.05%	¹⁰		0.09%			1.17%


Supplemental Data
Net assets, end of period (000)		—	¹		—	²	$	2,542		$	65,095

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

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

Amount is less than $0.00005 per share.

⁴

Dividends are determined in accordance with federal income tax regulations.

⁵

Amount is greater than $(0.00005) per share.

⁶

Where applicable, total investment return include the reinvestment of dividends and distributions.

⁷

Aggregate total investment return.

⁸

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

⁹

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

¹⁰

Annualized.


Financial Highlights (continued)		BlackRock Cash Funds: Treasury


	Select
	Year Ended December 31,
	2012			2011			2010			2009			2008


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		0.0003			0.0003			0.0007			0.0200
Dividends from net investment income²		(0.0000	)³		(0.0003	)		(0.0003	)		(0.0007	)		(0.0200	)

Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return⁴
Based on net asset value		0.00%			0.03%			0.03%			0.08%			1.55%


Ratios to Average Net Assets⁵
Total expenses		0.22%	⁶		0.21%	⁷		0.25%			0.25%			0.25%

Total expenses after fees waived		0.15%	⁶		0.08%	⁷		0.12%			0.08%			0.09%

Net investment income		0.00%	⁶		0.00%	⁷		0.04%			0.08%			0.92%


Supplemental Data
Net assets, end of year (000)	$	10,543		$	13,119		$	288		$	4,815		$	24,340

Amount is less than $0.00005 per share.

Dividends are determined in accordance with federal income tax regulations.

Amount is greater than $(0.00005) per share.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

⁶

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

⁷

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


Financial Highlights (continued)		BlackRock Cash Funds: Treasury


	SL Agency
	Year Ended December 31,									Period February 4, 2009¹ to December 31, 2009
	2012			2011			2010			Period February 4, 2009¹ to December 31, 2009


Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00

Net investment income		0.0006			0.0005			0.0011			0.0008
Dividends from net investment income²		(0.0006	)		(0.0005	)		(0.0011	)		(0.0008	)

Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return³
Based on net asset value		0.06%			0.05%			0.12%			0.09%	⁴


Ratios to Average Net Assets⁵
Total expenses		0.09%	⁶		0.09%	⁷		0.13%			0.12%	⁸

Total expenses after fees waived		0.09%	⁶		0.08%	⁷		0.08%			0.07%	⁸

Net investment income		0.06%	⁶		0.03%	⁷		0.11%			0.08%	⁸


Supplemental Data
Net assets, end of period (000)	$	1,525,904		$	682,865		$	1,457,943		$	4,009,074

Commencement of operations.

Dividends are determined in accordance with federal income tax regulations.

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁴

Aggregate total investment return.

⁵

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

⁶

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

⁷

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

⁸

Annualized.


Financial Highlights (concluded)		BlackRock Cash Funds: Treasury


	Trust
	Year Ended December 31,
	2012			2011			2010			2009			2008


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		0.0003			0.0002			0.0007			0.0100
Dividends from net investment income²		(0.0000	)³		(0.0003	)		(0.0002	)		(0.0007	)		(0.0100	)

Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00


Total Investment Return⁴
Based on net asset value		0.00%			0.03%			0.02%			0.08%			1.45%


Ratios to Average Net Assets⁵
Total expenses		0.45%	⁶		0.45%	⁷		0.48%			0.47%			0.47%

Total expenses after fees waived		0.15%	⁶		0.10%	⁷		0.16%			0.08%			0.01%

Net investment income		0.00	%⁶		0.00%	⁷		0.02%			0.08%			0.05%


Supplemental Data
Net assets, end of year (000)	$	15,407		$	23,597		$	12,999		$	55,618		$	94,654

Amount is less than $0.00005 per share.

Dividends are determined in accordance with federal income tax regulations.

Amount is greater than $(0.00005) per share.

⁴

Where applicable, total investment returns include the reinvestment of dividends and distributions.

⁵

⁶

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

⁷

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


Notes to Financial Statements		BlackRock Funds III

1. Organization and Significant Accounting Policies:

BlackRock Funds III (the “Trust”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Delaware statutory trust. The financial statements and these accompanying notes relate to four series of the Trust: BlackRock Cash Funds: Government (“Government”), BlackRock Cash Funds: Institutional (“Institutional”), BlackRock Cash Funds: Prime (“Prime”) and BlackRock Cash Funds: Treasury (“Treasury”) (each a “Fund” and together, the “Funds”). The Funds are classified as diversified. Each Fund seeks to achieve its investment objective by investing all of its assets in a corresponding series of Master Investment Portfolio (“MIP”): Government Money Market Master Portfolio, Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio (each a “Master Portfolio” and together, the “Master Portfolios”). Each Master Portfolio has the same or a substantially similar investment objective as its corresponding Fund. The value of each Fund’s investment in its corresponding Master Portfolio reflects that Fund’s proportionate interest in the net assets of that Master Portfolio. The percentage of the Master Portfolio owned by the corresponding Fund at December 31, 2012 was 100% for Government, 98.04% for Institutional, 88.01% for Prime and 69.83% for Treasury. The performance of each Fund is directly affected by the performance of its corresponding Master Portfolio. The financial statements of the Master Portfolios, including the Schedules of Investments, are included elsewhere in this report and should be read in conjunction with the Funds’ financial statements. The Funds’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Funds offer multiple classes of shares although certain share classes may not be outstanding at report date. Each Fund offers the following classes of shares: Institutional Shares, Select Shares, SL Agency Shares and Trust Shares. Institutional, Prime and Treasury offer Capital Shares and Premium Shares and Institutional also offers Aon Captives Shares. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions and differ principally with respect to administration fees and Aon shares distribution 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.

The following is a summary of significant accounting policies followed by the Funds:

Valuation: US GAAP defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. Each Fund’s policy is to fair value its financial instruments at market value. Each Fund records its investment in its corresponding Master Portfolio at fair value based on the Fund’s proportionate interest in the net assets of the respective Master Portfolio. Valuation of securities held by the Master Portfolios is discussed in Note 1 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 for on a trade date basis. Each Fund records daily its proportionate share of its Master Portfolio’s income, expenses and realized gains and losses. In addition, each Fund accrues its own expenses. Income, expenses and realized gains and losses are allocated daily to each class based on its relative net assets.

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

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

The Funds file US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Funds’ US federal tax returns remains open for each of the four years ended December 31, 2012. The statutes of limitations on the Funds’ state and local tax returns may remain open for an additional year depending upon the jurisdiction. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

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

2. Administration 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, Inc. (“BlackRock”).

The Trust entered into Administration Agreement with BlackRock Institutional Trust Company, N.A. (“BTC”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC, in consideration thereof, has agreed to bear all of the Funds’ ordinary operating expenses, excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the Funds. Effective July 1, 2012, BlackRock Advisors, LLC (“BAL”) replaced BTC as the Funds’ administrator and entered into an Administration Agreement with the Trust, on behalf of the Funds, on similar terms. BAL, and previously BTC,



BLACKROCK FUNDS III	DECEMBER 31, 2012	35


Notes to Financial Statements (continued)		BlackRock Funds III

is entitled to receive for these administration services an annual fee based on the average daily net assets of each class of each Fund as follows:


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

There were no shares outstanding as of December 31, 2012.

For the year ended December 31, 2012, the administration fees, which are included in administration — class specific in the Statements of Operations, for each class of each Fund are as follows:


	Government		Institutional		Prime		Treasury
Aon Captives		N/A	$	3,942		N/A		N/A
Capital		N/A		N/A	$	471,671	$	24,729
Institutional		—	$	617,081	$	1,448,118	$	2,077
Premium		N/A	$	1,638	$	2,318,782		—
Select	$	11,649	$	32,180	$	49,953	$	21,106
SL Agency		—	$	6,988,895	$	902,610	$	208,705
Trust	$	5,607	$	26,743	$	96,696	$	76,217

From time to time, BAL, and previously BTC, 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, and previously BTC, contractually agreed to waive a portion of its administration fees for the Select Shares through April 30, 2013. 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 Trusts’ 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, and previously BTC, 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, 2013. These amounts are included in fees reimbursed by administrator in the Statements of Operations.

BAL, and previously BTC, 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, 2012, BAL, and previously BTC, waived administration fees for the Funds as follows:


	Government		Institutional		Prime		Treasury
Aon Captives		N/A		—		N/A		N/A
Capital		N/A		—		—	$	2,898
Institutional		—		—		—	$	395
Premium		N/A		—		—		—
Select	$	4,397	$	4,291	$	6,661	$	9,951
SL Agency		—		—		—	$	8,631
Trust	$	4,067	$	7,840	$	32,226	$	60,639

As of December 31, 2012, 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, BTC, or an affiliate provides investment advisory or administration services, or (ii) 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 adapted a Distribution Plan in accordance with Rule 12b-1 with respect to the Aon Captives Shares. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, Institutional pays BRIL ongoing distribution fees with respect to Aon Captives Shares. The fees are accrued daily and paid monthly at an annual rate of 0.10% based upon the average daily net assets of the Aon Captives Shares. The Capital Shares, Institutional Shares, Premium Shares, Select Shares, SL Agency Shares and Trust Shares of Institutional do not pay any fees for distribution services. The fees paid to BRIL by Institutional are shown as Distribution — Aon Captives in the Statements of Operations.

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

3. Income Tax Information:


	Prime
Undistributed net investment income	$	1,434
Accumulated net realized gain	$	(1,434	)

The tax character of distributions paid during the fiscal years ended December 31, 2012 and December 31, 2011 was as follows:


		Government		Institutional		Prime		Treasury
Ordinary income	12/31/12	$	509	$	91,159,660	$	21,348,089	$	727,467
	12/31/11		79,166		54,604,114		15,624,534		487,491
Long-termcapital gains	12/31/11		—		107,224		—		—
Total	12/31/12	$	509	$	91,159,660	$	21,348,089	$	727,467
	12/31/11	$	79,166	$	54,711,338	$	15,624,534	$	487,491



36	BLACKROCK FUNDS III	DECEMBER 31, 2012


Notes to Financial Statements (continued)		BlackRock Funds III

As of December 31, 2012, the tax components of accumulated net earnings were as follows:


	Government		Institutional		Prime		Treasury
Undistributed ordinary income	$	5	$	1,835,864		—	$	36,953
Undistributed long-term capital gains		—		—	$	121,623		—

Total	$	5	$	1,835,864	$	121,623	$	36,953

During the year ended December 31, 2012, Prime utilized $1,491,941 of its capital loss carryforward.

4. Capital Share Transactions:

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

Transactions in capital shares for each class were as follows:


	Year Ended December 31,
Government	2012			2011
Institutional
Shares sold		—			21,120,001
Shares issued in reinvestment of dividends		—			2,431
Shares redeemed		—			(26,782,985	)

Net decrease		—			(5,660,553	)


Select
Shares sold		47,947,695			33,208,234
Shares issued in reinvestment of dividends		495			2,334
Shares redeemed		(40,266,660	)		(41,500,352	)

Net increase (decrease)		7,681,530			(8,289,784	)


SL Agency
Shares sold		—			1,293,402,500
Shares issued in reinvestment of dividends		—			15,152
Shares redeemed		—			(1,293,417,652	)

Net increase		—			—


Trust
Shares sold		6,237,056			4,032,425
Shares issued in reinvestment of dividends		13			360
Shares redeemed		(6,661,860	)		(6,195,205	)

Net decrease		(424,791	)		(2,162,420	)

Total Net Increase (Decrease)		7,256,739			(16,112,757	)


Institutional
Aon Captives
Shares sold		5,005,789			5,656,829
Shares issued in reinvestment of dividends		2,097			8,216
Shares redeemed		(3,172,508	)		(55,734,990	)

Net increase (decrease)		1,835,378			(50,069,945	)

Institutional (concluded)	2012			2011
Premium
Shares sold		100,000,000			7,500
Shares issued in reinvestment of dividends		3,144			—
Shares redeemed		(100,003,144	)		(7,500	)

Net increase		—			—


Institutional
Shares sold		12,489,140,833			8,651,733,281
Shares issued in reinvestment of dividends		1,782,703			1,360,520
Shares redeemed		(12,368,911,496	)		(8,639,461,080	)

Net increase		122,012,040			13,632,721


Select
Shares sold		122,130,664			80,468,223
Shares issued in reinvestment of dividends		33,546			23,644
Shares redeemed		(155,494,068	)		(65,647,366	)

Net increase (decrease)		(33,329,858	)		14,844,501


SL Agency
Shares sold		81,965,578,895			82,420,167,190
Shares issued in reinvestment of dividends		9,232			11,044
Shares redeemed		(75,431,362,130	)		(73,543,695,298	)

Net increase		6,534,225,997			8,876,482,936


Trust
Shares sold		13,152,188			43,919,299
Shares issued in reinvestment of dividends		480			807
Shares redeemed		(15,578,466	)		(41,055,601	)

Net increase (decrease)		(2,425,798	)		2,864,505

Total Net Increase		6,622,317,759			8,857,754,718


Prime
Capital
Shares sold		19,623,999,355			5,397,811,345
Shares issued in reinvestment of dividends		802,827			759,435
Shares redeemed		(18,686,770,627	)		(5,459,756,950	)

Net increase (decrease)		938,031,555			(61,186,170	)


Institutional
Shares sold		26,679,153,266			22,608,075,380
Shares issued in reinvestment of dividends		2,281,837			2,201,956
Shares redeemed		(25,728,716,808	)		(23,900,189,738	)

Net increase (decrease)		952,718,295			(1,289,912,402	)


Premium
Shares sold		26,157,658,266			23,934,752,476
Shares issued in reinvestment of dividends		1,262,545			1,206,416
Shares redeemed		(24,137,961,703	)		(23,709,664,413	)

Net increase		2,020,959,108			226,294,479



BLACKROCK FUNDS III	DECEMBER 31, 2012	37


Notes to Financial Statements (concluded)		BlackRock Funds III


	Year Ended December 31,
Prime (concluded)	2012			2011
Select
Shares sold		459,791,154			551,229,916
Shares issued in reinvestment of dividends		43,389			69,707
Shares redeemed		(519,184,128	)		(562,087,435	)

Net decrease		(59,349,585	)		(10,787,812	)


SL Agency
Shares sold		6,080,507,863			4,537,643,287
Shares redeemed		(5,034,229,500	)		(3,401,487,734	)

Net increase		1,046,278,363			1,136,155,553


Trust
Shares sold		39,817,031			53,633,417
Shares redeemed		(47,776,512	)		(61,002,359	)

Net decrease		(7,959,481	)		(7,368,942	)

Total Net Increase (Decrease)		4,890,678,255			(6,805,294	)


Treasury
Capital
Shares sold		398,815,698			2,100,194
Shares issued in reinvestment of dividends		10,682			22,193
Shares redeemed		(144,076,039	)		(123,404,434	)

Net increase (decrease)		254,750,341			(121,282,047	)


Institutional
Shares sold		—			96,047,245
Shares issued in reinvestment of dividends		1,486			12,399
Shares redeemed		(8,941,292	)		(211,897,709	)

Net decrease		(8,939,806	)		(115,838,065	)


Premium
Shares sold		150,000			—
Shares issued in reinvestment of dividends		—			—
Shares redeemed		(150,000	)		—

Net increase (decrease)		—			—


Select
Shares sold		74,096,608			36,511,128
Shares issued in reinvestment of dividends		1,412			2,759
Shares redeemed		(76,674,347	)		(23,679,366	)

Net increase (decrease)		(2,576,327	)		12,834,521


SL Agency
Shares sold		34,307,460,448			33,009,840,675
Shares issued in reinvestment of dividends		13,032			5,372
Shares redeemed		(33,464,457,731	)		(33,784,717,911	)

Net increase (decrease)		843,015,749			(774,871,864	)


Trust
Shares sold		31,333,371			37,454,464
Shares issued in reinvestment of dividends		2,199			4,391
Shares redeemed		(39,527,026	)		(26,855,401	)

Net increase (decrease)		(8,191,456	)		10,603,454

Total Net Increase (Decrease)		1,078,058,501			(988,554,001	)

5. Subsequent Events:



38	BLACKROCK FUNDS III	DECEMBER 31, 2012


Report of Independent Registered Public Accounting Firm		BlackRock Funds III

To the Shareholders and Board of Trustees of BlackRock Funds III:

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 the BlackRock Cash Funds: Government, BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and BlackRock Cash Funds: Treasury, (each a “Fund” and together, the “Funds”), at December 31, 2012, 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.

PricewaterhouseCoopers LLP

New York, New York

February 22, 2013

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by Government, Institutional, Prime and Treasury for the taxable year ended December 31, 2012.


Interest Related Dividends and Qualified Short-Term Capital Gains for Non-US Residents¹
	Month Paid:
	January 2012 – December 2012
Government		100.00%
Institutional		64.49%
Prime		66.89%
Treasury		100.00%
Federal Obligation Interest²
Institutional		5.40%
Prime		4.20%
Treasury		29.83%

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

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.



BLACKROCK FUNDS III	DECEMBER 31, 2012	39


Master Portfolio Information as of December 31, 2012		Master Investment Portfolio


Government Money Market Master Portfolio


Portfolio Composition	Percent of Net Assets
Repurchase Agreements		100	%

Total		100	%

Money Market Master Portfolio


Portfolio Composition	Percent of Net Assets
Certificates of Deposit		29	%
Commercial Paper		26
Repurchase Agreements		14
US Government Sponsored Agency Obligations		12
US Treasury Obligations		9
Time Deposits		8
Corporate Notes		2

Total		100	%

Prime Money Market Master Portfolio


Portfolio Composition	Percent of Net Assets
Commercial Paper		23	%
Repurchase Agreements		23
Certificates of Deposit		22
Time Deposits		13
US Government Sponsored Agency Obligations		12
US Treasury Obligations		5
Corporate Notes		2

Total		100	%

Treasury Money Market Master Portfolio


Portfolio Composition	Percent of Net Assets
Repurchase Agreements		72	%
US Treasury Obligations		28

Total		100	%



40	BLACKROCK FUNDS III	DECEMBER 31, 2012

Schedule of Investments December 31, 2012

Government Money Market Master Portfolio

(Percentages shown are based on Net Assets)


Repurchase Agreements	Par (000)		Value
Barclays Capital, Inc., 0.20%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $3,500,039, collateralized by US Treasury obligations, 2.13%, due 05/31/15, par and fair value of $3,415,500 and $3,570,044, respectively)	$	3,500	$	3,500,000
BNP Paribas Securities Corp., 0.18%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $2,629,026, collateralized by US Treasury obligations, 2.63%, due 12/31/14, par and fair value of $2,560,800 and $2,681,639, respectively)		2,629		2,629,000
Deutsche Bank Securities Inc., 0.25%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $4,000,056, collateralized by US government sponsored agency obligations, 0.00%, due 05/01/40, par and fair value of $8,781,278 and $4,440,000, respectively)		4,000		4,000,000
Goldman Sachs & Co., 0.25%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $3,500,049, collateralized by various US government sponsored agency obligations, 3.00% to 7.00%, due 06/01/26 to 05/01/40, par and fair value of $7,680,891 and $3,570,001 respectively)		3,500		3,500,000
HSBC Securities (USA), Inc., 0.16%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $3,000,027, collateralized by US Treasury obligations, 0.63%, due 04/30/13, par and fair value of $3,055,000 and $3,063,716, respectively)	$	3,000	$	3,000,000
Morgan Stanley & Co. LLC, 0.18%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $1,000,010, collateralized by US Treasury obligations, 1.00%, due 06/30/19, par and fair value of $1,022,000 and $1,020,084, respectively)		1,000		1,000,000
Total Repurchase Agreements — 100.1%				17,629,000
*Total Investments (Cost — $17,629,000) — 100.1%**				17,629,000
Liabilities in Excess of Other Assets — (0.1)%				(15,174	)

Net Assets — 100.0%			$	17,613,826


Notes to Schedule of Investments

Cost for federal income tax purposes.

_Ÿ

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

_Ÿ

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in the securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Short-Term Securities¹		—	$	17,629,000		—	$	17,629,000

See above Schedule of Investments for values in each security type.

Certain of the Master Portfolio’s assets are held at carrying amount which approximates fair value for financial statement purposes. As of December 31, 2012, cash of $762 is categorized as Level 1 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	41

Schedule of Investments December 31, 2012

Money Market Master Portfolio

(Percentages shown are based on Net Assets)


Certificates of Deposit	Par (000)		Value

Euro — 2.1%
Mitsubishi UFJ Trust and Banking Corp., UK, 0.30%, 1/28/13	$	200,000	$	200,000,750
National Australia Bank Ltd., London, 0.42%, 1/16/13		212,000		212,000,000
Sumitomo Mitsui Banking Corp., London, 0.36%, 1/11/13		150,000		150,000,208
Sumitomo Trust & Banking Co. Ltd., London, 0.40%, 2/06/13		200,000		200,000,999

				762,001,957
Yankee (a) — 27.5%
Bank of Montreal, Chicago, 0.35%, 11/15/13		310,000		309,983,795
Bank of Nova Scotia, Houston:
0.34%, 10/16/13 (b)		250,000		249,985,015
0.41%, 12/31/13		175,000		175,000,000
Bank of Tokyo-Mitsubishi UFJ Ltd., New York:
0.49%, 2/19/13		238,000		238,000,000
0.34%, 4/25/13		350,000		350,000,000
0.34%, 5/03/13		225,000		225,000,000
Barclays Bank Plc, New York, 0.49%, 1/23/13		571,000		571,000,000
Canadian Imperial Bank of Commerce, New York, 0.32%, 6/03/13 (b)		553,015		553,015,000
Credit Industriel Et Commercial, New York, 0.45%, 3/12/13		292,000		292,000,000
Credit Suisse, New York, 0.32%, 2/04/13		384,000		384,000,000
Mitsubishi UFJ Trust and Banking Corp., New York, 0.47%, 2/28/13		155,000		155,000,000
National Australia Bank Ltd., New York, 0.29%, 8/13/13		340,000		340,000,000
National Bank of Canada, New York, 0.38%, 7/25/13		275,000		275,000,000
Natixis, New York, 0.49%, 4/01/13		550,000		550,000,000
Nordea Bank Finland Plc, New York, 0.36%, 2/19/13		325,000		325,000,000
Rabobank Nederland, New York:
0.52%, 1/14/13		360,000		360,000,000
0.50%, 4/24/13 (b)		285,500		285,500,000
0.46%, 5/09/13		225,000		225,000,000
Skandinaviska Enskilda Banken, New York:
0.36%, 2/01/13		275,000		275,000,000
0.31%, 3/26/13		350,000		350,000,000
0.31%, 4/01/13		300,000		300,000,000
0.30%, 4/04/13		170,000		170,000,000
Sumitomo Mitsui Banking Corp., New York:
0.40%, 2/08/13		375,000		375,000,000
0.40%, 2/12/13		375,000		375,000,000
0.35%, 4/24/13		300,000		300,000,000
Toronto Dominion Bank, New York:
0.30%, 7/22/13		650,000		650,000,000
0.32%, 10/22/13		560,000		560,000,000
Westpac Banking Corp., New York:
0.41%, 5/07/13		150,000		150,000,000
0.30%, 8/27/13		330,000		330,000,000

				9,698,483,810
Total Certificates of Deposit — 29.6%				10,460,485,767



Commercial Paper
Antalis US Funding Corp., 0.49%, 2/01/13 (c)		166,000		165,931,388
Atlantic Asset Securitization LLC, 0.44%, 4/04/13		150,000		150,000,000
Atlantis One Funding Corp. (c):
0.54%, 1/17/13		75,000		74,982,333
0.50%, 2/21/13		350,000		349,757,042


Commercial Paper	Par (000)		Value

Australia & New Zealand Banking Group, 0.41%, 11/12/13	$	200,000	$	200,000,000
BNP Paribas Finance, Inc., 0.48%, 2/01/13 (c)		745,000		744,692,066
Collateralized CP Co. LLC, 0.38%, 1/17/13 (c)		100,000		99,983,111
Commonwealth Bank of Australia:
0.36%, 11/14/13		295,000		294,974,024
0.36%, 11/15/13		300,000		300,000,000
0.36%, 11/27/13		75,000		75,000,000
DNB Bank ASA, 0.35%, 2/05/13 (c)		300,000		299,899,375
Erste Abwicklungsanstalt (c):
0.55%, 1/22/13		60,000		59,982,500
0.55%, 1/22/13		50,000		49,982,500
0.60%, 2/11/13		100,000		99,931,667
0.57%, 2/20/13		30,000		29,976,250
0.64%, 2/21/13		50,000		49,954,667
0.65%, 2/28/13		150,000		149,842,917
0.55%, 3/11/13		170,000		169,820,792
0.55%, 3/12/13		200,000		199,786,111
0.52%, 3/25/13		100,000		99,880,111
0.52%, 3/27/13		100,000		99,877,222
0.47%, 4/04/13		100,000		99,878,583
0.50%, 4/23/13		50,000		49,922,222
0.50%, 4/29/13		100,000		99,836,111
0.52%, 7/01/13		100,000		99,738,556
0.39%, 7/15/13		125,000		124,735,937
0.52%, 7/22/13		130,000		129,620,689
Govco LLC (c):
0.37%, 1/22/13		200,000		199,956,833
0.34%, 2/13/13		100,000		99,959,389
0.34%, 2/15/13		100,000		99,957,500
HSBC Bank Plc, 0.55%, 9/18/13		230,000		230,000,000
ING US Funding LLC, 0.44%, 1/16/13 (c)		569,050		568,945,674
Kells Funding LLC (c):
0.43%, 1/07/13		79,000		78,994,338
0.60%, 1/16/13		100,000		99,975,000
0.50%, 2/04/13		25,000		24,988,194
0.54%, 2/05/13		80,000		79,958,000
0.48%, 2/06/13		80,000		79,961,600
0.28%, 2/08/13		175,000		174,948,278
0.50%, 2/22/13		50,000		49,963,889
0.48%, 3/01/13		98,000		97,922,907
0.49%, 3/01/13		50,000		49,959,847
0.50%, 3/20/13		100,000		99,891,667
0.47%, 5/03/13		205,000		204,673,481
Mont Blanc Capital Corp. (c):
0.37%, 2/08/13		100,044		100,004,927
0.35%, 3/04/13		84,945		84,893,797
0.34%, 3/06/13		80,000		79,951,644
Natexis Banques Populaires US Financing Corp., 0.47%, 2/01/13 (c)		350,000		349,858,347
Nestle Capital Corp., 0.37%, 9/06/13 (c)		175,000		174,553,944
Old Line Funding LLC, 0.32%, 3/11/13 (c)		85,000		84,947,867
Rabobank USA Financial Corp., 0.45%, 3/11/13 (c)		225,000		224,805,937
Royal Park Investments Funding Corp. (c):
0.75%, 1/14/13		123,000		122,966,688
0.63%, 5/21/13		50,000		49,877,500
Skandinaviska Enskilda Banken AB (c):
0.31%, 3/19/13		70,000		69,953,586
0.30%, 3/21/13		175,000		174,884,792
Societe Generale North America, Inc., 0.47%, 2/05/13 (c)		350,000		349,840,069
Starbird Funding Corp., 0.45%, 2/07/13 (c)		75,000		74,965,313
Westpac Banking Corp., 0.42%, 7/02/13		275,000		275,000,000
Westpac Securities NZ Ltd., 0.54%, 4/15/13		300,000		300,000,000
Total Commercial Paper — 25.9%				9,124,547,182

See Notes to Financial Statements.



42	BLACKROCK FUNDS III	DECEMBER 31, 2012

Schedule of Investments (continued)

Money Market Master Portfolio

(Percentages shown are based on Net Assets)


Corporate Notes	Par (000)		Value

Bank of Montreal, Chicago, 0.39%, 1/10/14	$	210,000	$	210,000,000
JPMorgan Chase Bank NA, 0.39%, 5/17/13 (a)		250,725		250,725,000
Westpac Banking Corp., 0.37%, 9/24/13 (d)		25,000		25,117,922
Total Corporate Notes — 1.4%				485,842,922



Time Deposits
Bank of Nova Scotia, 0.03%, 1/02/13		1,000,000		1,000,000,000
Natexis, 0.12%, 1/02/13		864,000		864,000,000
Societe Generale:
0.15%, 1/02/13		100,000		100,000,000
0.41%, 3/04/13		850,000		850,000,000
Total Time Deposits — 8.0%				2,814,000,000



US Government Sponsored Agency Obligations
Fannie Mae Variable Rate Notes (a):
0.34%, 1/10/13		250,000		249,998,758
0.22%, 5/17/13		304,000		303,965,061
0.18%, 11/08/13		170,000		169,956,098
0.19%, 6/20/14		425,000		424,876,063
Federal Farm Credit Bank Variable Rate Notes (a):
0.12%, 6/18/13		66,000		66,000,000
0.16%, 3/07/14		40,000		39,995,649
0.18%, 5/23/14		50,000		49,989,782
0.19%, 10/20/14		95,000		94,965,385
Federal Home Loan Bank:
0.23%, 5/17/13		120,000		119,994,082
0.24%, 5/21/13		100,000		99,994,586
0.23%, 5/29/13		50,000		49,995,282
0.42%, 6/21/13		88,275		88,339,488
0.25%, 7/05/13		65,500		65,495,532
0.17%, 7/17/13		6,000		6,000,600
Federal Home Loan Bank Discount Notes (c):
0.15%, 6/12/13		358,000		357,758,350
0.14%, 6/14/13		215,855		215,717,333
0.14%, 6/20/13		10,000		9,999,682
Federal Home Loan Bank Variable Rate Notes (a):
0.22%, 4/12/13		114,500		114,495,247
0.33%, 7/08/13		50,000		50,000,000
Freddie Mac Discount Notes (c):
0.14%, 6/10/13		179,201		179,089,184
0.14%, 6/10/13		75,000		74,950,313
Freddie Mac Variable Rate Notes (a):
0.40%, 9/03/13		227,900		227,869,134
0.15%, 9/13/13		884,785		884,410,304
0.18%, 11/04/13		309,000		308,974,104
Total US Government Sponsored Agency Obligations — 12.1%				4,252,830,017



US Treasury Obligations
US Treasury Bills (c):
0.13%, 1/17/13		350,000		349,979,778
0.15%, 2/21/13		275,000		274,942,536
0.14%, 3/21/13		300,000		299,907,667
0.15%, 4/11/13		200,000		199,918,751
0.16%, 5/02/13		350,000		349,815,895
0.15%, 5/09/13		300,000		299,840,000
0.14%, 6/06/13		200,000		199,878,667
0.13%, 6/27/13		840,000		839,463,100
US Treasury Notes:
1.38%, 3/15/13		280,000		280,650,308
1.13%, 6/15/13		120,000		120,476,629
Total US Treasury Obligations — 9.1%				3,214,873,331


Repurchase Agreements	Par (000)		Value

BNP Paribas Securities Corp., 0.17%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $330,003,117, collateralized by various corporate debt obligations, 0.00% to 8.40% due 2/13/13 to 1/15/31, par and fair value of $304,314,988 and $339,928,039, respectively)	$	330,000	$	330,000,000
BNP Paribas Securities Corp., 0.22%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $200,002,444, collateralized by various US government sponsored agency obligations, 0.75% to 8.50%, due 2/01/13 to 01/01/43, par and fair value of $2,295,421,953 and $204,004,413, respectively)		200,000		200,000,000
Citigroup Global Markets Inc., 0.42%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $95,002,217, collateralized by various US Treasury obligations and non-US government debt securities, 0.00% to 7.94% due 9/15/13 to 12/01/41, par and fair value of $98,832,808 and $102,974,328, respectively)		95,000		95,000,000
Citigroup Global Markets Inc., 0.51%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $130,003,683, collateralized by various US government sponsored agency obligations and corporate debt obligations, 0.38% to 9.38% due 1/15/13 to 11/01/42, par and fair value of $244,194,912 and $133,038,951, respectively)		130,000		130,000,000
Credit Suisse Securities (USA) LLC, 0.19%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $142,771,507, collateralized by US Treasury obligations, 1.50%, due 6/30/16, par and fair value of $140,500,000 and $145,625,450, respectively)		142,770		142,770,000
Credit Suisse Securities (USA) LLC, 0.62%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $150,005,167, collateralized by various corporate debt obligations, 0.32% to 7.93% due 12/10/25 to 8/15/56, par and fair value of $430,940,989 and $172,500,755, respectively)		150,000		150,000,000
Credit Suisse Securities (USA) LLC, 0.62%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $250,008,611, collateralized by various non-US government debt securities, 0.00% to 6.56% due 11/15/17 to 2/15/51, par and fair value of $2,884,897,823 and $287,500,000, respectively)		250,000		250,000,000
Credit Suisse Securities (USA) LLC, 0.70%, 1/28/13 (Purchased on 12/31/12 to be repurchased at $210,108,889, collateralized by various US government sponsored agency obligations and corporate debt obligations, 0.00% to 7.51%, due 01/25/19 to 06/25/50, par and fair value of $503,331,238 and $250,000,030, respectively)		200,000		200,000,000
Deutsche Bank Securities Inc., 0.15%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $200,001,667, collateralized by US Treasury obligations, 0.88%, due 7/31/19, par and fair value of $205,564,800 and $204,000,022, respectively)		200,000		200,000,000

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	43

Schedule of Investments (continued)

Money Market Master Portfolio

(Percentages shown are based on Net Assets)


Repurchase Agreements	Par (000)		Value

Deutsche Bank Securities Inc., 0.20%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $180,002,000, collateralized by various US government sponsored agency obligations, 0.00% to 6.00%, due 5/01/13 to 11/02/40, par and fair value of $179,674,000 and $183,600,577, respectively)	$	180,000	$	180,000,000
Deutsche Bank Securities Inc., 0.25%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $609,308,463, collateralized by various US Treasury obligations and US government sponsored agency obligations, 0.00% to 3.50%, due 11/24/15 to 11/01/42, par and fair value of $601,937,140 and $626,578,055, respectively)		609,300		609,300,000
Goldman Sachs & Co., 0.22%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $150,001,833, collateralized by various US government sponsored agency obligations, 3.00% to 3.50%, due 11/20/42 to 12/20/42, par and fair value of $142,546,700 and $153,000,001, respectively)		150,000		150,000,000
HSBC Securities (USA) Inc., 0.15%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $200,001,667, collateralized by various corporate debt obligations, 0.43% to 10.50% due 1/15/13 to 5/29/49, par and fair value of $202,549,000 and $208,748,445, respectively)		200,000		200,000,000
HSBC Securities (USA) Inc., 0.15%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $88,223,735, collateralized by various US Treasury obligations, 3.13% to 3.25% due 10/31/16 to 1/31/17, par and fair value of $81,157,500 and $89,989,794, respectively)		88,223		88,223,000
HSBC Securities (USA) Inc., 0.16%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $70,993,631, collateralized by various US Treasury obligations, 2.38% to 3.25% due 3/31/16 to 2/28/17, par and fair value of $65,998,100 and $72,415,734, respectively)		70,993		70,993,000
JPMorgan Securities LLC, 0.42%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $60,001,400, collateralized by various non-US government debt securities, 3.63% to 8.00% due 1/27/17 to 1/14/41, par and fair value of $46,720,000 and $62,752,709, respectively)		60,000		60,000,000
JPMorgan Securities LLC, 0.73%, 1/07/13 (Purchased on 12/31/12 to be repurchased at $200,028,389, collateralized by various non-US government debt securities, 0.56% to 7.53%, due 4/25/18 to 2/15/51, par and fair value of $335,457,732 and $219,114,774, respectively)		200,000		200,000,000
Merrill Lynch, Pierce, Fenner & Smith Inc., 0.10%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $250,001,389, collateralized by various US Treasury obligations, 2.38% to 6.88% due 9/30/14 to 8/15/25, par and fair value of $238,214,900 and $255,000,053, respectively)		250,000		250,000,000
Merrill Lynch, Pierce, Fenner & Smith Inc., 0.18%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $240,002,400, collateralized by various US Treasury obligations, 0.50% to 0.75% due 8/15/13 to 12/31/17, par and fair value of $244,389,000 and $244,800,152, respectively)		240,000		240,000,000


Repurchase Agreements	Par (000)		Value

Merrill Lynch, Pierce, Fenner & Smith Inc., 0.21%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $108,301,264, collateralized by various US government sponsored agency obligations, 0.76% to 4.00%, due 4/15/41 to 3/01/42, par and fair value of $140,841,893 and $110,759,530, respectively)	$	108,300	$	108,300,000
Merrill Lynch, Pierce, Fenner & Smith Inc., 0.22%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $100,001,222, collateralized by various US government sponsored agency obligations and corporate debt obligations, 0.50% due 7/31/17, par and fair value of $3,353,672,326 and $105,679,852, respectively)		100,000		100,000,000
Morgan Stanley & Co. LLC, 0.15%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $90,000,750, collateralized by various US government sponsored agency obligations, 2.50 % to 3.49% due 8/01/27 to 11/01/42, par and fair value of $89,521,238 and $92,062,260, respectively)		90,000		90,000,000
Morgan Stanley & Co. LLC, 0.18%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $98,000,980, collateralized by US Treasury obligations, 2.13% due 8/15/21, par and fair value of $94,121,800 and $99,960,058, respectively)		98,000		98,000,000
Morgan Stanley & Co. LLC, 0.25%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $300,004,167, collateralized by various US government sponsored agency obligations 3.50% to 4.50%, due 4/01/27 to 9/01/42, par and fair value of $342,167,455 and $306,000,001, respectively)		300,000		300,000,000
RBS Securities Inc., 0.14%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $120,000,933, collateralized by various US government sponsored agency obligations, 3.00% to 6.00%, due 12/01/27 to 11/01/42, par and fair value of $139,664,248 and $122,404,522, respectively)		120,000		120,000,000
RBS Securities Inc., 0.22%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $40,000,489, collateralized by various US government sponsored agency obligations, 3.00% to 3.50% due 6/20/42 to 9/20/42, par and fair value of $38,510,000 and $40,804,148, respectively)		40,000		40,000,000
Wells Fargo Bank Co., 0.22%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $320,003,911, collateralized by various corporate debt obligations and non-US government debt securities, 0.00% to 10.00%, due 4/01/13 to 5/10/63, par and fair value of $401,951,261 and $335,697,359, respectively)		320,000		320,000,000
Total Repurchase Agreements — 13.9%				4,922,586,000
Total Investments (Cost — $35,275,165,219*) — 100.0%				35,275,165,219
Other Assets Less Liabilities — 0.0%				13,933,643

Net Assets — 100.0%			$	35,289,098,862

See Notes to Financial Statements.



44	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (concluded)		Money Market Master Portfolio


Notes to Schedule of Investments

Cost for federal income tax purposes.

(a)

Issuer is a US branch of foreign domiciled bank.

(b)

Variable rate security. Rate shown is as of report date.

(c)

Rates shown are discount rates or a range of discount rates paid at the time of purchase.

(d)

_Ÿ

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

_Ÿ

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in the securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Short-Term Securities¹		—	$	35,275,165,219		—	$	35,275,165,219

See above Schedule of Investments for values in each security type.

Certain of the Master Portfolio’s assets are held at carrying amount which approximates fair value for financial statement purposes. As of December 31, 2012, cash of $4,646,310 is categorized as Level 1 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	45

Schedule of Investments December 31, 2012

Prime Money Market Master Portfolio

(Percentages shown are based on Net Assets)


Certificates of Deposit	Par (000)		Value

Euro — 1.6%
Mitsubishi UFJ Trust and Banking Corp., UK, 0.30%, 1/28/13	$	100,000	$	100,000,375
National Australia Bank Ltd., London, 0.42%, 1/16/13		100,000		100,000,000
Sumitomo Mitsui Banking Corp., London, 0.36%, 1/11/13		50,000		50,000,069

				250,000,444
Yankee (a) — 20.3%
Bank of Montreal, Chicago:
0.43%, 7/17/13 (b)		90,000		90,000,000
0.35%, 11/15/13		122,000		121,993,623
Bank of Nova Scotia, Houston:
0.30%, 2/11/13		100,000		100,000,000
0.41%, 12/31/13		65,000		65,000,000
Bank of Tokyo-Mitsubishi UFJ Ltd., New York:
0.49%, 2/19/13 (b)		100,000		100,000,000
0.34%, 4/25/13		110,000		110,000,000
0.34%, 5/03/13		175,000		175,000,000
Canadian Imperial Bank of Commerce, New York, 0.32%, 6/03/13 (b)		162,470		162,470,000
Credit Industriel Et Commercial, New York:
0.45%, 3/07/13		15,000		15,000,000
0.45%, 3/12/13		108,000		108,000,000
National Australia Bank Ltd., New York, 0.29%, 8/13/13		130,000		130,000,000
National Bank of Canada, New York, 0.38%, 7/25/13		75,000		75,000,000
Natixis, New York:
0.42%, 3/01/13		100,000		100,000,000
0.49%, 4/01/13		115,000		115,000,000
Norinchukin Bank, New York, 0.15%, 1/07/13		175,000		175,000,000
Rabobank Nederland, New York:
0.52%, 1/14/13		50,000		50,000,000
0.50%, 4/24/13 (b)		91,500		91,500,000
0.46%, 5/09/13		75,000		75,000,000
0.42%, 6/18/13		100,000		100,000,000
Skandinaviska Enskilda Banken, New York:
0.36%, 2/01/13		100,000		100,000,000
0.31%, 3/28/13		150,000		150,000,000
0.31%, 4/01/13		180,000		180,000,000
0.30%, 4/04/13		130,000		130,000,000
Sumitomo Mitsui Banking Corp., New York, 0.40%, 2/12/13		150,000		150,000,000
Toronto Dominion Bank, New York:
0.30%, 4/19/13		250,000		250,000,000
0.32%, 10/21/13		200,000		200,000,000
Westpac Banking Corp., New York, 0.30%, 8/27/13		120,000		120,000,000

				3,238,963,623
Total Certificates of Deposit — 21.9%				3,488,964,067



Commercial Paper
Antalis US Funding Corp., 0.48%, 2/01/13 (c)		60,000		59,975,200
Atlantic Asset Securitization LLC, 0.45%, 1/02/13		50,000		50,000,000
Atlantis One Funding Corp. (c):
0.54%, 1/07/13		50,000		49,995,500
0.53%, 1/17/13		75,000		74,982,333
0.52%, 1/25/13		100,000		99,965,333
0.48%, 2/15/13		100,000		99,940,000
Australia & New Zealand Banking Group, 0.41%, 11/12/13		100,000		100,000,000
BNP Paribas Finance, Inc., 0.48%, 2/01/13 (c)		130,000		129,946,267


Commercial Paper	Par (000)		Value

Commonwealth Bank of Australia:
0.36%, 11/01/13	$	73,000	$	73,000,000
0.36%, 11/14/13		115,000		114,989,874
0.36%, 11/15/13		100,000		100,000,000
0.36%, 11/27/13		25,000		25,000,000
DNB Bank ASA, 0.35%, 2/05/13 (c)		100,000		99,966,458
Erste Abwicklungsanstalt (c):
0.60%, 2/06/13		100,000		99,940,000
0.60%, 2/07/13		50,000		49,969,167
0.57%, 2/20/13		70,000		69,944,583
0.65%, 2/25/13		40,000		39,960,278
0.55%, 3/14/13		100,000		99,890,000
0.53%, 3/15/13		80,000		79,914,022
0.47%, 5/17/13		100,000		99,822,444
0.41%, 7/08/13		50,000		49,892,944
0.50%, 8/13/13		50,000		49,844,444
ING US Funding LLC, 0.44%, 1/16/13 (c)		180,000		179,967,000
Kells Funding LLC (c):
0.50%, 1/22/13		78,000		77,977,250
0.49%, 2/04/13		100,000		99,953,722
0.28%, 2/08/13		75,000		74,977,833
0.53%, 2/11/13		50,000		49,969,819
0.43%, 4/24/13		60,000		59,919,017
0.46%, 5/02/13		100,000		99,845,389
Mont Blanc Capital Corp. (c):
0.34%, 2/22/13		54,148		54,121,407
0.34%, 3/06/13		40,000		39,975,822
0.31%, 4/08/13		70,000		69,941,531
Natexis Banques Populaires US Financing Corp., 0.47%, 2/01/13 (c)		125,000		124,949,410
Nestle Capital Corp., 0.37%, 9/06/13 (c)		150,000		149,617,667
Nieuw Amsterdam Receivables Corp. (c):
0.55%, 1/03/13		53,000		52,998,381
0.45%, 1/04/13		50,000		49,998,125
Old Line Funding LLC (c):
0.30%, 2/11/13		90,000		89,969,250
0.30%, 5/20/13		85,000		84,901,542
Rabobank USA Financial Corp., 0.45%, 3/11/13 (c)		25,000		24,978,438
Royal Park Investments Funding Corp., 0.75%, 1/22/13 (c)		75,000		74,967,188
Skandinaviska Enskilda Banken AB (c):
0.31%, 3/19/13		30,000		29,980,108
0.30%, 3/21/13		75,000		74,950,625
Societe Generale North America, Inc., 0.47%, 2/05/13 (c)		120,000		119,945,167
Thunder Bay Funding LLC Thunder Bay Funding LLC, 0.30%, 5/20/13 (c)		60,000		59,930,500
Westpac Banking Corp., 0.42%, 7/02/13		195,000		195,000,000
Total Commercial Paper — 23.0%				3,655,774,038




Corporate Notes
Bank of Montreal, Chicago, 0.39%, 1/10/14		80,000		80,000,000
JPMorgan Chase Bank NA, 0.40%, 5/17/13 (a)		121,710		121,710,000
National Australia Bank, Ltd., 2.50%, 1/08/13 (d)		40,650		40,665,093
Westpac Banking Corp., 1.01%, 9/24/13 (d)		34,000		34,159,922
Westpac Securities NZ, Ltd., 2.63%, 1/28/13 (d)		48,000		48,076,441
Total Corporate Notes — 2.0%				324,611,456



Time Deposits
Bank of Nova Scotia, 0.03%, 1/02/13		500,000		500,000,000
Natexis, 0.12%, 1/02/13		341,000		341,000,000
Nordea Bank Finland Plc, 0.29%, 6/13/13		250,000		250,000,000

See Notes to Financial Statements.



46	BLACKROCK FUNDS III	DECEMBER 31, 2012

Schedule of Investments (continued)

Prime Money Market Master Portfolio

(Percentages shown are based on Net Assets)


Time Deposits	Par (000)		Value
Societe Generale:
0.15%, 1/02/13	$	100,000	$	100,000,000
0.41%, 3/04/13		275,000		275,000,000
Sumitomo Mitsui Banking Corp., 0.34%, 6/10/13		200,000		200,000,000
Svenska Handelsbanken AB, 0.02%, 1/02/13		425,000		425,000,000
Total Time Deposits — 13.1%				2,091,000,000



US Government Sponsored Agency Obligations
Fannie Mae Discount Notes, 0.16%, 4/01/13 (c)		55,000		54,978,000
Fannie Mae Variable Rate Notes (a):
0.34%, 1/10/13		121,000		120,999,399
0.19%, 6/20/14		115,000		114,966,464
Federal Farm Credit Bank Discount Notes, 0.22%, 7/05/13 (c)		25,000		24,971,736
Federal Farm Credit Bank Variable Rate Notes, 0.12%, 6/18/13 (a)		30,000		30,000,000
Federal Home Loan Bank:
0.16%, 1/25/13		82,000		81,997,387
0.16%, 2/08/13		52,000		51,997,626
0.20%, 3/01/13		50,000		49,998,150
0.22%, 5/03/13		35,750		35,746,630
Federal Home Loan Bank Discount Notes, 0.15%, 6/12/13 (c)		340,000		339,770,500
Federal Home Loan Bank Variable Rate Note (a):
0.17%, 9/06/13		100,000		99,993,534
0.19%, 9/06/13		250,000		250,000,000
0.13%, 1/27/14		150,000		149,867,576
0.17%, 2/25/14		40,000		39,986,041
Freddie Mac Discount Notes, 0.14%, 6/10/13 (c)		78,160		78,111,367
Freddie Mac Variable Rate Notes (a):
0.15%, 5/16/13		100,000		99,993,304
0.16%, 5/06/13		220,000		219,979,978
0.18%, 11/04/13		100,000		99,991,619
Total US Government Sponsored Agency Obligations — 12.2%				1,943,349,311



US Treasury Obligations
US Treasury Bills (c):
0.15%, 2/21/13		65,000		64,986,648
0.14%, 2/28/13		100,000		99,977,847
0.14%, 3/07/13		50,000		49,987,361
0.15%, 4/11/13		150,000		149,939,166
0.13%, 6/27/13		305,000		304,805,054
0.14%, 3/21/13		100,000		99,969,717
US Treasury Note, 1.38%, 5/15/13		25,000		25,111,407
Total US Treasury Obligations — 5.0%				794,777,200



Repurchase Agreements
Barclays Capital, Inc., 0.20%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $94,001,044, collateralized by US Treasury obligations, 6.13%, due 11/15/27, par and fair value of $63,848,000 and $95,880,104, respectively)		94,000		94,000,000

BNP Paribas Securities Corp., 0.17%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $195,001,842, collateralized by various corporate debt obligations, 0.00% to 8.75%, due 01/15/13 to 7/01/35, par and fair value of $179,818,478 and $200,953,096, respectively)	$	195,000	$	195,000,000
BNP Paribas Securities Corp., 0.22%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $200,002,444, collateralized by various US government sponsored agency obligations, 0.46% to 8.00%, due 3/1/14 to 9/1/47, par and fair value of $1,162,799,626 and $204,023,956, respectively)		200,000		200,000,000
Credit Suisse Securities (USA) LLC, 0.19%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $109,001,151, collateralized by US Treasury obligations, 0.13%, due 12/31/14, par and fair value of $111,470,000 and $111,182,402, respectively)		109,000		109,000,000
Credit Suisse Securities (USA) LLC, 0.62%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $50,001,722, collateralized by various corporate debt obligations, 0.35% to 5.72%, due 6/11/17 to 10/15/48, par and fair value of $571,751,405 and $57,500,643, respectively)		50,000		50,000,000
Credit Suisse Securities (USA) LLC, 0.70%, 1/28/13 (Purchased on 12/31/12 to be repurchased at $150,081,667, collateralized by various corporate debt obligations and non-US government debt obligations, 0.00% to 7.84%, due 1/25/19 to 6/25/50, par and fair value of $411,896,378 and $187,500,236, respectively)		150,000		150,000,000
Deutsche Bank Securities Inc., 0.15%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $250,002,083, collateralized by US Treasury obligations, 0.00%, due 6/27/13, par and fair value of $255,127,600 and $255,000,036, respectively)		250,000		250,000,000
Deutsche Bank Securities Inc., 0.20%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $100,001,111, collateralized by various US government sponsored agency obligations, 0.63% to 2.13%, due 10/21/15 to 08/14/17, par and fair value of $101,471,000 and $102,000,542, respectively)		100,000		100,000,000
Deutsche Bank Securities Inc., 0.25%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $607,208,433, collateralized by various US government sponsored agency obligations, 0.45% to 3.50%, due 11/24/15 to 11/1/42, par and fair value of $593,678,081 and $623,544,171, respectively)		607,200		607,200,000
HSBC Securities (USA), Inc., 0.16%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $65,800,585, collateralized by various US Treasury obligations, 0.25% to 1.75%, due 4/15/13 to 12/15/14, par and fair value of $66,718,000 and $67,119,450, respectively)		65,800		65,800,000

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	47

Schedule of Investments (continued)

Prime Money Market Master Portfolio

(Percentages shown are based on Net Assets)


Repurchase Agreements	Par (000)		Value

JPMorgan Securities LLC, 0.22%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $110,001,344, collateralized by various non-US government debt obligations, 0.21% to 5.92%, due 10/15/25 to 5/15/45, par and fair value of $119,999,000 and $115,500,074, respectively)	$	110,000	$	110,000,000
JPMorgan Securities LLC, 0.42%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $30,000,700, collateralized by various non-US government debt obligations, 4.25% to 8.88%, due 5/23/13 to 2/14/34, par and fair value of $19,570,000 and $31,041,456, respectively)		30,000		30,000,000
JPMorgan Securities LLC, 0.73%, 1/07/13 (Purchased on 12/31/12 to be repurchased at $75,010,646, collateralized by various non-US government debt obligations, 1.26% to 7.29%, due 3/6/20 to 9/10/47, par and fair value of $93,503,770 and $78,838,826, respectively)		75,000		75,000,000
Merrill Lynch, Pierce, Fenner & Smith Inc., 0.21%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $350,004,083, collateralized by various US government sponsored agency obligations, 0.51% to 6.50%, due 7/25/22 to 12/01/42, par and fair value of $380,902,048 and $357,677,529, respectively)		350,000		350,000,000
Morgan Stanley & Co. LLC, 0.18%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $365,503,655, collateralized by various US Treasury obligations, 0.63% to 4.63%, due 1/31/13 to 8/15/21, par and fair value of $339,794,300 and $372,810,134, respectively)		365,500		365,500,000


Repurchase Agreements	Par (000)		Value
Morgan Stanley & Co. LLC, 0.25%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $611,008,486, collateralized by various US government sponsored agency obligations, 3.50% to 5.00%, due 9/01/31 to 10/01/42, par and fair value of $848,092,168 and $623,220,000, respectively)	$	611,000	$	611,000,000
RBS Securities Inc., 0.14%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $90,000,700, collateralized by various US government sponsored agency obligations, 3.50% to 4.50%, due 7/01/41 to 10/01/42, par and fair value of $87,937,353 and $91,803,920, respectively)		90,000		90,000,000
Wells Fargo Bank Co., 0.22%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $180,002,200, collateralized by various corporate debt obligations and non-US government debt obligations, 0.00% to 9.88%, due 6/15/14 to 12/11/49, par and fair value of $258,182,959 and $188,868,411, respectively)		180,000		180,000,000
Total Repurchase Agreements — 22.8%				3,632,500,000
Total Investments (Cost — $15,930,976,072*) — 100.0%				15,930,976,072
Other Assets Less Liabilities — 0.0%				3,464,696

Net Assets — 100.0%			$	15,934,440,768

Notes to Schedule of investments

Cost for federal income tax purposes.

(a)

Issuer is a US branch of foreign domiciled bank.

(b)

Variable rate security. Rate shown is as of report date.

(c)

Rates shown are discount rates or a range of discount rates paid at the time of purchase.

(d)

_Ÿ

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

_Ÿ

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in the securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

See Notes to Financial Statements.



48	BLACKROCK FUNDS III	DECEMBER 31, 2012


Schedule of Investments (concluded)		Prime Money Market Master Portfolio

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Short-Term Securities¹		—	$	15,930,976,072		—	$	15,930,976,072

See above Schedule of Investments for values in each security type.

Certain of the Master Portfolio’s assets are held at carrying amount which approximates fair value for financial statement purposes. As of December 31, 2012, cash of $177,388 is categorized as Level 1 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	49

Schedule of Investments December 31, 2012

Treasury Money Market Master Portfolio

(Percentages shown are based on Net Assets)


US Treasury Obligations	Par (000)		Value

US Treasury Bills (a):
0.14%, 2/28/13	$	50,000	$	49,988,722
0.14%, 4/04/13		100,000		99,963,833
0.15%, 4/11/13		25,000		24,990,069
0.15%, 4/18/13		75,000		74,966,563
0.15%, 4/25/13		33,000		32,984,586
0.19%, 5/02/13		15,000		14,990,774
0.15%, 5/09/13		50,000		49,973,333
0.15%, 5/16/13		25,000		24,985,937
0.14%, 5/23/13		75,000		74,958,583
0.15%, 5/30/13		55,000		54,966,061
0.13%, 6/27/13		107,400		107,331,355
US Treasury Notes:
1.38%, 1/15/13		40,000		40,018,968
1.38%, 3/15/13		8,000		8,018,676
0.63%, 4/30/13		20,000		20,029,338
0.50%, 5/31/13		5,000		5,005,608
0.50%, 11/15/13		35,000		35,091,088
0.75%, 12/15/13		15,000		15,076,652
1.00%, 1/15/14		8,000		8,066,811
Total US Treasury Obligations — 28.4%				741,406,957



Repurchase Agreements
Barclays Capital, Inc., 0.14%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $50,000,389, collateralized by US Treasury obligations, 0.25%, due 9/15/15, par and fair value of $51,082,000 and $51,000,011, respectively)		50,000		50,000,000
Barclays Capital, Inc., 0.20%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $217,002,411, collateralized by US Treasury obligations, 0.63%, due 8/31/17, par and fair value of $221,047,100 and $221,340,066, respectively)		217,000		217,000,000
BNP Paribas Securities Corp., 0.18%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $213,423,134, collateralized by US Treasury obligations, 0.38%, due 11/15/15, par and fair value of $217,416,300 and $217,689,488, respectively)		213,421		213,421,000
Citigroup Global Markets Inc., 0.18%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $72,000,720, collateralized by US Treasury obligations, 0.75%, due 10/31/17, par and fair value of $73,102,000 and $73,440,010, respectively)		72,000		72,000,000
Credit Suisse Securities (USA) LLC, 0.19%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $244,002,576, collateralized by US Treasury obligations, 1.75%, due 1/31/14, par and fair value of $243,030,000 and $248,881,158, respectively)		244,000		244,000,000
Credit Suisse Securities (USA) LLC, 0.15%, 1/04/13 (Purchased on 12/31/12 to be repurchased at $40,000,667, collateralized by US Treasury obligations, 3.63%, due 08/15/19, par and fair value of $34,590,000 and $40,800,071, respectively)		40,000		40,000,000
Deutsche Bank Securities Inc., 0.15%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $5,000,042, collateralized by US Treasury obligations, 0.13%, due 12/31/14, par and fair value of $5,113,200 and $5,100,008, respectively)		5,000		5,000,000
Repurchase Agreements	Par (000)		Value

Deutsche Bank Securities Inc., 0.17%, 1/07/13 (Purchased on 12/31/12 to be repurchased at $150,004,958, collateralized by various US Treasury obligations, 0.00% to 8.50%, due 5/15/18 to 5/15/39, par and fair value of $267,972,960 and $153,000,078, respectively)	$	150,000	$	150,000,000
Deutsche Bank Securities Inc., 0.18%, 1/07/13 (Purchased on 12/31/12 to be repurchased at $40,001,400, collateralized by various US Treasury obligations, 0.00% to 8.50%, due 5/15/18 to 2/15/40, par and fair value of $40,390,893 and $40,800,029, respectively)		40,000		40,000,000
HSBC Securities (USA) Inc., 0.15%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $50,039,417, collateralized by various US Treasury obligations, 0.63% to 1.75%, due 4/15/13 to 4/30/13, par and fair value of $50,658,000 and $51,040,595, respectively)		50,039		50,039,000
HSBC Securities (USA) Inc., 0.16%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $96,200,855, collateralized by various US Treasury obligations, 0.25% to 2.63%, due 5/15/15 to 8/15/20, par and fair value of $92,127,600 and $98,126,750, respectively)		96,200		96,200,000
HSBC Securities (USA) Inc., 0.17%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $50,000,472, collateralized by various US Treasury obligations, 0.13% to 8.75%, due 2/15/13 to 2/15/29, par and fair value of $41,635,300 and $51,005,040, respectively)		50,000		50,000,000
HSBC Securities (USA) Inc., 0.16%, 1/04/13 (Purchased on 12/31/12 to be repurchased at $80,001,422, collateralized by various US Treasury obligations, 0.25% to 11.25%, due 1/15/13 to 11/15/42, par and fair value of $74,668,672 and $81,604,546, respectively)		80,000		80,000,000
Merrill Lynch, Pierce, Fenner & Smith Inc., 0.18%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $144,001,440, collateralized by US Treasury obligations, 0.75%, due 8/15/13, par and fair value of $145,922,400 and $146,880,016, respectively)		144,000		144,000,000
Morgan Stanley & Co. LLC, 0.18%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $258,502,585, collateralized by various US Treasury obligations, 2.50% to 4.50%, due 2/15/15 to 2/28/17, par and fair value of $243,859,800 and $263,670,096, respectively)		258,500		258,500,000
RBS Securities Inc., 0.19%, 1/02/13 (Purchased on 12/31/12 to be repurchased at $162,001,710, collateralized by various US Treasury obligations, 1.25% to 4.25%, due 2/15/14 to 5/15/22, par and fair value of $161,256,400 and $165,245,443, respectively)		162,000		162,000,000
Total Repurchase Agreements — 71.6%				1,872,160,000
*Total Investments (Cost — $2,613,566,957) — 100.0%**				2,613,566,957
Other Assets Less Liabilities — 0.0%				257,429

Net Assets — 100.0%			$	2,613,824,386

See Notes to Financial Statements.



50	BLACKROCK FUNDS III	DECEMBER 31, 2012


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.

_Ÿ

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

_Ÿ

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy as of December 31, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Short-Term Securities¹		—	$	2,613,566,957		—	$	2,613,566,957

See above Schedule of Investments for values in each security type.

Certain of the Master Portfolio’s assets are held at carrying amount which approximates fair value for financial statement purposes. As of December 31, 2012, cash of $88 is categorized as Level 1 within the disclosure hierarchy.

There were no transfers between levels during the year ended December 31, 2012.

See Notes to Financial Statements.



BLACKROCK FUNDS III	DECEMBER 31, 2012	51


Statements of Assets and Liabilities		Master Investment Portfolio


December 31, 2012	Government Money Market Master Portfolio		Money Market Master Portfolio		Prime Money Market Master Portfolio		Treasury Money Market Master Portfolio

Assets
Investments at value — unaffiliated¹		—	$	30,352,579,219	$	12,298,476,072	$	741,406,957
Repurchase agreements — unaffiliated²	$	17,629,000		4,922,586,000		3,632,500,000		1,872,160,000
Cash		762		4,646,310		177,388		88
Interest receivable		103		11,578,243		4,252,010		423,207
Contributions receivable from investors		2		932		6,870		2
Receivable from advisor		641		—		—		—

Total assets		17,630,508		35,291,390,704		15,935,412,340		2,613,990,254


Liabilities
Investment advisory fees payable		—		2,115,197		903,246		138,079
Professional fees payable		15,945		72,520		31,598		19,742
Trustees’ fees payable		737		104,125		36,728		8,047

Total liabilities		16,682		2,291,842		971,572		165,868

Net Assets	$	17,613,826	$	35,289,098,862	$	15,934,440,768	$	2,613,824,386


Net Assets Consist of
Investors’ capital	$	17,613,826	$	35,289,098,862	$	15,934,440,768	$	2,613,824,386


¹ Investments at cost — unaffiliated		—	$	30,352,579,219	$	12,298,476,072	$	741,406,957

² Repurchase agreements at cost — unaffiliated	$	17,629,000	$	4,922,586,000	$	3,632,500,000	$	1,872,160,000


Statements of Operations		Master Investment Portfolio


Year Ended December 31, 2012	Government Money Market Master Portfolio			Money Market Master Portfolio			Prime Money Market Master Portfolio			Treasury Money Market Master Portfolio

Investment Income
Income	$	15,618		$	124,905,098		$	39,146,925		$	2,865,261


Expenses
Investment advisory		9,249			36,786,247			12,078,166			1,887,231
Professional		15,815			125,568			45,061			21,857
Independent Trustees		3,051			393,158			125,342			28,320

Total expenses		28,115			37,304,973			12,248,569			1,937,408
Less fees waived by advisor		(21,738	)		(11,554,727	)		(3,793,901	)		(625,320	)

Total expenses after fees waived		6,377			25,750,246			8,454,668			1,312,088

Net investment income		9,241			99,154,852			30,692,257			1,553,173


Realized Gain
Net realized gain from investments		—			2,320,981			1,868,766			127,929

Net Increase in Net Assets Resulting from Operations	$	9,241		$	101,475,833		$	32,561,023		$	1,681,102


Statements of Changes in Net Assets		Master Investment Portfolio


	Government Money Market Master Portfolio						Money Market Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2012			2011			2012			2011

Operations
Net investment income	$	9,241		$	101,405		$	99,154,852		$	60,329,486
Net realized gain		—			—			2,320,981			1,791,140

Net increase in net assets resulting from operations		9,241			101,405			101,475,833			62,120,626


Capital Transactions
Proceeds from contributions		51,211,494			1,348,250,366			56,711,226,061			52,848,164,282
Value of withdrawals		(43,961,715	)		(1,364,470,587	)		(50,051,649,581	)		(44,389,795,004	)

Net increase (decrease) in net assets derived from capital transactions		7,249,779			(16,220,221	)		6,659,576,480			8,458,369,278


Net Assets
Total increase (decrease) in net assets		7,259,020			(16,118,816	)		6,761,052,313			8,520,489,904
Beginning of year		10,354,806			26,473,622			28,528,046,549			20,007,556,645

End of year	$	17,613,826		$	10,354,806		$	35,289,098,862		$	28,528,046,549


	Prime Money Market Master Portfolio						Treasury Money Market Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2012			2011			2012			2011

Operations
Net investment income	$	30,692,257		$	22,972,083		$	1,553,173		$	551,263
Net realized gain		1,868,766			1,678,063			127,929			34,809

Net increase in net assets resulting from operations		32,561,023			24,650,146			1,681,102			586,072


Capital Share Transactions
Proceeds from contributions		64,244,951,166			47,593,540,246			20,119,690,374			18,466,639,450
Value of withdrawals		(59,075,368,652	)		(46,956,950,307	)		(19,110,014,931	)		(19,065,391,442	)

Net increase (decrease) in net assets derived from capital transactions		5,169,582,514			636,589,939			1,009,675,443			(598,751,992	)


Net Assets
Total increase (decrease) in net assets		5,202,143,537			661,240,085			1,011,356,545			(598,165,920	)
Beginning of year		10,732,297,231			10,071,057,146			1,602,467,841			2,200,633,761

End of year	$	15,934,440,768		$	10,732,297,231		$	2,613,824,386		$	1,602,467,841


Financial Highlights		Master Investment Portfolio


	Government Money Market Master Portfolio
	Year Ended December 31,
	2012		2011		2010		2009		2008


Total Investment Return
Total investment return		0.10%		0.08%		0.13%		0.12%		1.99%


Ratios to Average Net Assets
Total expenses		0.30%		0.12%		0.11%		0.10%		0.10%

Total expenses after fees waived		0.07%		0.07%		0.02%		0.05%		0.05%

Net investment income		0.10%		0.09%		0.11%		0.12%		0.59%


Supplemental Data
Net assets, end of year (000)	$	17,614	$	10,355	$	26,474	$	656,444	$	1,717,936


	Money Market Master Portfolio
	Year Ended December 31,
	2012		2011		2010		2009		2008


Total Investment Return
Total investment return		0.27%		0.23%		0.27%		0.48%		2.90%	¹


Ratios to Average Net Assets
Total expenses		0.10%		0.10%		0.10%		0.10%		0.10%

Total expenses after fees waived		0.07%		0.07%		0.07%		0.07%		0.07%

Net investment income		0.27%		0.22%		0.26%		0.48%		2.88%


Supplemental Data
Net assets, end of year (000)	$	35,289,099	$	28,528,047	$	20,007,557	$	21,134,748	$	22,488,961

For the year ended December 31, 2008, 0.01% of the total return consists of purchase of securities by BlackRock Fund Advisors (“BFA” or the “Manager”) at the prices in excess of the securities’ then current fair value. Excluding these items, total return would have been 2.89%.


Financial Highlights (concluded)		Master Investment Portfolio


	Prime Money Market Master Portfolio
	Year Ended December 31,
	2012		2011		2010		2009		2008


Total Investment Return
Total investment return		0.25%		0.21%		0.25%		0.37%		2.88%	¹


Ratios to Average Net Assets
Total expenses		0.10%		0.10%		0.10%		0.10%		0.10%

Total expenses after fees waived		0.07%		0.07%		0.07%		0.07%		0.06%

Net investment income		0.25%		0.21%		0.25%		0.41%		2.77%


Supplemental Data
Net assets, end of year (000)	$	15,934,441	$	10,732,297	$	10,071,057	$	12,208,516	$	16,570,735

For the year ended December 31, 2008, 0.01% of the total return consists of purchase of securities by BFA at the prices in excess of the securities’ then current fair value. Excluding these items, total return would have been 2.87%.



	Treasury Money Market Master Portfolio
	Year Ended December 31,
	2012		2011		2010		2009		2008


Total Investment Return
Total investment return		0.06%		0.09%		0.13%		0.11%		1.64%


Ratios to Average Net Assets
Total expenses		0.10%		0.10%		0.10%		0.10%		0.10%

Total expenses after fees waived		0.07%		0.06%		0.06%		0.05%		0.02%

Net investment income		0.08%		0.03%		0.13%		0.10%		0.48%


Supplemental Data
Net assets, end of year (000)	$	2,613,824	$	1,602,468	$	2,200,634	$	4,288,938	$	1,650,804


Notes to Financial Statements		Master Investment Portfolio

1. Organization and Significant Accounting Policies:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. MIP is organized as a Delaware statutory trust. The financial statements and these accompanying notes relate to four series of MIP: Government Money Market Master Portfolio, Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio (each a “Master Portfolio” and together, the “Master Portfolios”). The Master Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.

The following is a summary of significant accounting policies followed by the Master Portfolios:

Valuation: US GAAP defines fair value as the price the Master Portfolios would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Master Portfolios’ investments are valued under the amortized cost method which approximates current market value in accordance with Rule 2a-7 under the 1940 Act. Under this method, investments are valued at cost when purchased and thereafter, a constant proportionate accretion of 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.

Repurchase Agreements: The Master Portfolios may invest in repurchase agreements. In a repurchase agreement, a Master Portfolio purchases a security from a counterparty who agrees to repurchase the same security at a mutually agreed upon date and price. On a daily basis, the counterparty is required to maintain collateral subject to the agreement and in value no less than the agreed repurchase amount. The agreements are conditioned upon the collateral being deposited under the Federal Reserve book entry system or held in a segregated account by the Master Portfolio’s custodian or designated sub-custodians under tri-party repurchase agreements. In the event the counterparty defaults and the fair value of the collateral declines, a Master Portfolio could experience losses, delays and costs in liquidating the collateral.

Income Taxes: Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio are each classified as a partnership for federal income tax purposes. As such, each investor in the Master Portfolio is treated as the owner of its proportionate

share of net assets, income, expenses and realized gains and losses of the Master Portfolio. Therefore, no federal income tax provision is required. It is intended that the Master Portfolio’s assets will be managed so an investor in the Master Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

Each of Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio file US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each Master Portfolio’s US federal tax returns remains open for each of the four years ended December 31, 2012. 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 does not believe there are any uncertain tax positions that require recognition of a tax liability.

Government Money Market Master Portfolio is disregarded as an entity separate from its owner for tax purposes. As such, the owner of the Master Portfolio is treated as the owner of the net assets, income, expenses and realized gains and losses of the Master Portfolio. Therefore, no federal income tax provision is required. It is intended that the Master Portfolio’s assets will be managed so the owner of the Master Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

Recent Accounting Standards: In December 2011, the Financial Accounting Standards Board (the “FASB”) issued guidance that will expand current disclosure requirements on the offsetting of certain assets and liabilities. The new disclosures will be required for investments and derivative financial instruments subject to master netting or similar agreements, which are eligible for offset in the Statements of Assets and Liabilities and will require an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarifies which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting will be limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions. The guidance is effective for financial statements with fiscal years beginning on or after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on each Master Portfolio’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 pro-rated among those funds on the basis of relative net assets or other appropriate methods.

2. 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, Inc. (“BlackRock”).

MIP, on behalf of the Master Portfolios, entered into an Investment Advisory Agreement (the “Investment Advisory Agreement”) with BlackRock Fund Advisors (“BFA”), the Master Portfolios’ investment



56	BLACKROCK FUNDS III	DECEMBER 31, 2012


Notes to Financial Statements (concluded)		Master Investment Portfolio

advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. Pursuant to the Investment Advisory Agreement with MIP, BFA is responsible for the management of each Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each Master Portfolio. For such services, each Master Portfolio pays BFA a monthly fee at an annual rate of 0.10% of the average daily value of the Master Portfolio’s net assets. BFA has contractually agreed to waive 0.03% of its investment advisory fees through April 30, 2013. BFA 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. BFA may discontinue the voluntary waiver at any time. For the year ended December 31, 2012, the amounts included in fees waived by advisor in the Statements of Operations are as follows:


Government Money Market Master Portfolio	$	2,872
Money Market Master Portfolio	$	11,036,001
Prime Money Market Master Portfolio	$	3,623,498
Treasury Money Market Master Portfolio	$	575,143

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 Portfolios. BFA has contractually agreed to cap the expenses of the Master Portfolios at the rate at which the Master Portfolios pay an advisory fee to BFA by providing an offsetting credit against the investment advisory fees paid by the Master Portfolios in an amount equal to the independent expenses. These contractual waivers are effective through April 30, 2013. The amounts waived are included in fees waived by advisor in the Statements of Operations. For the year ended December 31, 2012, such waiver amounts are as follows:


Government Money Market Master Portfolio	$	18,866
Money Market Master Portfolio	$	518,726
Prime Money Market Master Portfolio	$	170,403
Treasury Money Market Master Portfolio	$	50,177

MIP entered into an administration services arrangement with BlackRock Institutional Trust Company, N.A. (“BTC”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC may delegate certain of its administration duties to sub-administrators. BTC, 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. Effective July 1, 2012, BlackRock Advisors, LLC (“BAL”) replaced BTC as administrator and entered into an Administration Agreement with the Trust, on behalf of the Funds, on similar terms.

BAL, and previously BTC, is not entitled to compensation for providing administration services to the Master Portfolios, for so long as BAL, and previously BTC, 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, and previously BTC, (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.

3. Market and Credit Risk:

In the normal course of business, the Master Portfolios invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all of 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.

4. Subsequent Events:



BLACKROCK FUNDS III	DECEMBER 31, 2012	57


Report of Independent Registered Public Accounting Firm		Master Investment Portfolio

To the Interestholders and Board of Trustees of

Master Investment 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 the Government Money Market Master Portfolio, Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio, each a portfolio of Master Investment Portfolio (the “Master Portfolios”), at December 31, 2012, 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 include confirmation of securities at December 31, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 22, 2013



58	BLACKROCK FUNDS III	DECEMBER 31, 2012


Officers and Trustees


Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees¹
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 106 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. since 1987; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of Seventy (civic) since 2006; Director, Fox Chase Cancer Center from 2004 to 2011.	33 RICs consisting of 106 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy since 2002; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 106 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President of Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 106 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 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) since 2011, President thereof from 1997 to 2011 and Trustee since 1980; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (strategic solutions company) since 2005; Director, Cerego, LLC (software development and design) since 2005; Director, Cybersettle (dispute resolution technology) since 2009.	33 RICs consisting of 106 Portfolios	AIMS Worldwide, Inc. (marketing)
Ian A. MacKinnon 55 East 52nd Street New York, NY 10055 1948	Trustee	Since 2012	Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1999 to 2008.	33 RICs consisting of 106 Portfolios	None
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital since 2005; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 106 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, The West Penn Allegheny Health System (a not-for-profit health system) since 2008; 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; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 106 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 106 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 106 Portfolios	None



BLACKROCK FUNDS III	DECEMBER 31, 2012	59


Officers and Trustees (continued)


Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees¹ (concluded)
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Chairman Elect 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; 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 106 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh since 2005 and Dean thereof from 1997 to 2005; Director, Alkon Corporation (pneumatics) since 1992; Director, Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 106 Portfolios	None
	¹ Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year extensions in terms of Trustees who turn 72 prior to December 31, 2013.
	² Date shown is the earliest date a person has served for the Trust/MIP covered by this annual report. In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, the Trustees were elected to the Trust’s/MIP’s Board. As a result, although the chart shows certain Trustees as joining the Trust’s/MIP’s board in 2009, each Trustee first became a member of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees³
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of, BlackRock, and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	155 RICs consisting of 278 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	155 RICs consisting of 278 Portfolios	None
	³ Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Trustees of the BlackRock registered closed-end funds and Trustees of other BlackRock registered open-end funds. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.



60	BLACKROCK FUNDS III	DECEMBER 31, 2012


Officers and Trustees (concluded)


Name, Address and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers¹
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock since 2000; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2002; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009 and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Simon Mendelson 55 East 52nd Street New York, NY 10055 1964	Vice President	Since 2009	Managing Director of BlackRock since 2005; Co-head of the Global Cash and Securities Lending Group since 2010; Chief Operating Officer and Head of the Global Client Group for BlackRock’s Global Cash Management Business from 2007 to 2010; Head of BlackRock’s Strategy and Development Group from 2005 to 2007; Partner of McKinsey & Co. from 1997 to 2005.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2007	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2007	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Director of BlackRock since 2010; 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 Officers of the Trust/MIP serve at the pleasure of the Board.



BLACKROCK FUNDS III	DECEMBER 31, 2012	61


Additional Information

General Information

Electronic Delivery

To enroll:

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

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

Shareholders Who Hold Accounts Directly with BlackRock:

1)	Access the BlackRock website at

http://www.blackrock.com/edelivery

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

3)	Log into your account

Householding

The Funds will mail only one copy of shareholder documents, including prospectuses [open end only], annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Funds at (800) 441-7762.

Availability of Quarterly Portfolio Schedule

The Funds/Master Portfolios file their complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Each Fund’s/Master Portfolio’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (202) SEC-0330. Each Fund’s/Master Portfolio’s Forms N-Q may also be obtained upon request and without charge by calling (877) 244-1544.

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 (877) 244-1544; (2) at 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 (877) 244-1544 and (2) on the SEC’s website at http://www.sec.gov.

Shareholder Privileges

Account Information

Call us at (877) 244-1544 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.



62	BLACKROCK FUNDS III	DECEMBER 31, 2012


Additional Information (concluded)

BlackRock Privacy Principles



BLACKROCK FUNDS III	DECEMBER 31, 2012	63

This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Funds unless accompanied or preceded 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 (800) 768-2836. Each Fund’s current 7-day yield more closely reflects the current earnings of the Fund than the total returns quoted. Statements and other information herein are as dated and are subject to change.

LOGO


# MMF4-12/12-AR


Item 2 –		Code of Ethics – Each registrant (or the “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. During the period covered by this report, there have been no amendments to or waivers granted under the code of ethics. A copy of the code of ethics is available without charge at www.blackrock.com.

Item 3 –		Audit Committee Financial Expert – Each registrant’s board of directors (the “board of directors”), has determined that (i) the registrant has the following audit committee financial expert serving on its audit committee and (ii) each audit committee financial expert is independent: Kenneth L. Urish Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification.

Item 4 –		Principal Accountant Fees and Services The following table presents fees billed by PricewaterhouseCoopers in each of the last two fiscal years for the services rendered to the Fund:


	(a) Audit Fees				(b) Audit-Related Fees¹				(c) Tax Fees²				(d) All Other 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 Funds III	$	306,936	$	306,936	$	3,800	$	0	$	183,718	$	183,718	$	0	$	0
Master Investment Portfolio	$	422,030	$	422,030	$	3,800	$	0	$	351,500	$	351,500	$	0	$	0


		The following table presents fees billed by Deloitte & Touche LLP (“D&T”) that were required to be approved by the registrant’s audit committee (the “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock 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	$	0	$	0
(c) Tax Fees²	$	0	$	0
(d) All Other Fees³	$	2,970,000	$	3,030,000

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 the review of compliance procedures and attestation thereto performed by D&T with respect to all of the registered closed-end funds and some of the registered open-end funds advised by 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 Funds III	$	187,518	$	183,718
Master Investment Portfolio	$	355,300	$	351,500


		Additionally, SSAE 16 Review (Formerly, SAS No. 70) fees for the current and previous fiscal years of $2,970,000 and $3,030,000, respectively, were billed by D&T to the Investment Adviser.

		(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 15d-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

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, each registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


BlackRock Funds III and Master Investment Portfolio

By:		/s/ John M. Perlowski
		John M. Perlowski
		Chief Executive Officer (principal executive officer) of
		BlackRock Funds III and Master Investment Portfolio

Date:		February 28, 2013

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of each registrant and in the capacities and on the dates indicated.


By:		/s/ John M. Perlowski
		John M. Perlowski
		Chief Executive Officer (principal executive officer) of
		BlackRock Funds III and Master Investment Portfolio

Date:		February 28, 2013

By:		/s/ Neal J. Andrews
		Neal J. Andrews
		Chief Financial Officer (principal financial officer) of
		BlackRock Funds III and Master Investment Portfolio

Date:		February 28, 2013