UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

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

Name of Fund:  BlackRock Funds III

BlackRock Cash Funds: Institutional

BlackRock Cash Funds: Prime

BlackRock Cash Funds: Treasury

BlackRock CoreAlpha Bond Fund

BlackRock Disciplined International Fund

BlackRock Large Cap Index Fund

BlackRock LifePath® Dynamic Retirement Fund (Formerly BlackRock LifePath® Retirement Fund)

BlackRock LifePath® Dynamic 2020 Fund (Formerly BlackRock LifePath® 2020 Fund)

BlackRock LifePath® Dynamic 2025 Fund (Formerly BlackRock LifePath® 2025 Fund)

BlackRock LifePath® Dynamic 2030 Fund (Formerly BlackRock LifePath® 2030 Fund)

BlackRock LifePath® Dynamic 2035 Fund (Formerly BlackRock LifePath® 2035 Fund)

BlackRock LifePath® Dynamic 2040 Fund (Formerly BlackRock LifePath® 2040 Fund)

BlackRock LifePath® Dynamic 2045 Fund (Formerly BlackRock LifePath® 2045 Fund)

BlackRock LifePath® Dynamic 2050 Fund (Formerly BlackRock LifePath® 2050 Fund)

BlackRock LifePath® Dynamic 2055 Fund (Formerly BlackRock LifePath® 2055 Fund)

BlackRock LifePath® Index Retirement Fund

BlackRock LifePath® Index 2020 Fund

BlackRock LifePath® Index 2025 Fund

BlackRock LifePath® Index 2030 Fund

BlackRock LifePath® Index 2035 Fund

BlackRock LifePath® Index 2040 Fund

BlackRock LifePath® Index 2045 Fund

BlackRock LifePath® Index 2050 Fund

BlackRock LifePath® Index 2055 Fund

BlackRock LifePath® Index 2060 Fund

BlackRock S&P 500 Index Fund

BlackRock Total International ex U.S. Index Fund

BlackRock U.S. Total Bond Index Fund

Master Investment Portfolio

Active Stock Master Portfolio

CoreAlpha Bond Master Portfolio

International Tilts Master Portfolio

Large Cap Index Master Portfolio

LifePath® Dynamic Retirement Master Portfolio (Formerly LifePath® Retirement Master Portfolio)

LifePath® Dynamic 2020 Master Portfolio (Formerly LifePath® 2020 Master Portfolio)

LifePath® Dynamic 2025 Master Portfolio (Formerly LifePath® 2025 Master Portfolio)

LifePath® Dynamic 2030 Master Portfolio (Formerly LifePath® 2030 Master Portfolio)

LifePath® Dynamic 2035 Master Portfolio (Formerly LifePath® 2035 Master Portfolio)

LifePath® Dynamic 2040 Master Portfolio (Formerly LifePath® 2040 Master Portfolio)

LifePath® Dynamic 2045 Master Portfolio (Formerly LifePath® 2045 Master Portfolio)

LifePath® Dynamic 2050 Master Portfolio (Formerly LifePath® 2050 Master Portfolio)

LifePath® Dynamic 2055 Master Portfolio (Formerly 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

LifePath® Index 2060 Master Portfolio

Money Market Master Portfolio

Prime Money Market Master Portfolio

S&P 500 Index Master Portfolio

Total International ex U.S. Index Master Portfolio

Treasury Money Market Master Portfolio

U.S. Total Bond Index 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: 12/31/2016

Date of reporting period: 12/31/2016

Item 1 – Report to Stockholders

2

DECEMBER 31, 2016

  ANNUAL REPORT

BlackRock Funds III

^Ø   BlackRock Cash Funds: Institutional

^Ø   BlackRock Cash Funds: Prime

^Ø   BlackRock Cash Funds: Treasury

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
The Markets in Review		3
Annual Report:
Money Market Overview		4
Fund Information		5
Disclosure of Expenses		6
Fund Financial Statements:
Statements of Assets and Liabilities		7
Statements of Operations		8
Statements of Changes in Net Assets		9
Fund Financial Highlights		11
Fund Notes to Financial Statements		28
Fund Report of Independent Registered Public Accounting Firm		33
Important Tax Information		33
Master Portfolio Information		34
Master Portfolio Financial Statements:
Schedules of Investments		35
Statements of Assets and Liabilities		45
Statements of Operations		46
Statements of Changes in Net Assets		47
Master Portfolio Financial Highlights		48
Master Portfolio Notes to Financial Statements		50
Master Portfolio Report of Independent Registered Public Accounting Firm		54
Officers and Trustees		55
Additional Information		58

2 BLACKROCK FUNDS III DECEMBER 31, 2016

The Markets in Review

Dear Shareholder,

The year 2016 started on a fraught note with worries about slowing growth in China, plunging oil prices and sliding share prices. Then reflationary expectations in the United States helped drive a second-half global growth pick-up and big market reversals. As such, higher-quality asset classes such as Treasury bonds, municipals and investment grade credit prevailed in the first half of the year, only to struggle in the second. In contrast, risk assets sold off at the start of the year and rebounded in the latter half, with some asset classes posting strong year-end returns.

A key takeaway from 2016’s market performance is that economics can trump politics. The global reflationary theme — governments taking policy action to support growth — was the dominant driver of 2016 asset returns, outweighing significant political upheavals and uncertainty. This trend accelerated after the U.S. election on expectations for an extra boost to U.S. growth via fiscal policy.

Markets were remarkably resilient during the year. Spikes in equity volatility after big surprises such as the U.K.’s vote to leave the European Union and the outcome of the U.S. presidential election were short-lived. Instead, political surprises and initial sell-offs were seized upon as buying opportunities. We believe this reinforces the case for taking the long view rather than reacting to short-term market noise.

Asset returns varied widely in 2016. Perceived safe assets such as government bonds and low-volatility shares underperformed the higher-risk areas of the market. And the reversal of longstanding trends created opportunities, such as in the recovery of value stocks and commodities.

We expect some of these trends to extend into 2017 and see the potential for more flows into risk assets this year. Learn more by reading our market insights at blackrock.com.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2016
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		7.82	%		11.96	%
U.S. small cap equities (Russell 2000® Index)		18.68			21.31
International equities (MSCI Europe, Australasia, Far East Index)		5.67			1.00
Emerging market equities (MSCI Emerging Markets Index)		4.49			11.19
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.18			0.33
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		(7.51	)		(0.16	)
U.S. investment grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index)		(2.53	)		2.65
Tax-exempt municipal bonds (S&P Municipal Bond Index)		(3.43	)		0.77
U.S. high yield bonds (Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		7.40			17.13
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, 2016

After seven years of near-zero interest rate policy, the Federal Open Market Committee (the “FOMC”) in a unanimous decision raised the target range for the federal funds rate by 25 basis points (0.25%) to 0.25--0.50% at its December 2015 meeting. The FOMC was clear in its expectation that the future removal of monetary accommodation would likely be gradual and dependent on incoming data. Following broader financial market turmoil in early 2016, the FOMC left rates unchanged for the majority of the year.

In late June the United Kingdom voted to leave the European Union. This led markets to factor in expectations that the FOMC would not resume its course of raising interest rates before 2018. Markets further reflected that investors anticipated the Bank of England and European Central Bank would turn more accommodative. Additionally, major credit rating agencies generally viewed the result of the “leave” decision unfavorably, assigning or maintaining a negative outlook on the United Kingdom, and in certain cases, downgrading the nation’s long-term credit rating by as much as two “notches” to AA.

October 14, 2016 represented the final compliance date of the SEC’s Rule 2a-7 money market reform, marking the completion of an effort that began over two years ago. While the movement of assets to government money market funds from prime funds was substantial at approximately $1 trillion since these reforms were announced, the defensive positioning of prime funds ensured that the process remained manageable. At the same time, fears that government money market funds would be unable to accommodate the large shift in assets were put to rest, in part due to increased issuance of treasury bills and higher-than-usual utilization of the Federal Reserve Bank of New York’s Reverse Repo Program.

After leaving rates unchanged for the majority of the year the FOMC, at its December 14, 2016 meeting, announced a 0.25% increase in the target range for the federal funds rate to 0.50%--0.75%. The decision to raise interest rates was unanimous, and widely expected. This was the first rate hike since December 2015 and only the second to occur in the United States since the global financial crisis which contributed to a prolonged period of near-zero interest rates. This further reduction in monetary accommodation is demonstrative of the FOMC’s conviction that the economy is on an upward trajectory. The FOMC continues to believe that the risks to the economic outlook in the near term are roughly balanced. Despite the nudging up of interest rates, the FOMC acknowledged that monetary policy remains accommodative.

The London Interbank Offered Rate (“LIBOR”) moved higher over the period in response to both speculation of another possible rate hike from the FOMC as well as money market reform, which created a shift in assets away from credit products into government products. The benchmark three-month LIBOR ended the period at 0.85% (rising over 20 basis points from the 0.63% March 31 level), which is over 50 basis points higher than it had been at the beginning of the year.

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

4 BLACKROCK FUNDS III DECEMBER 31, 2016

Fund Information as of December 31, 2016

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		0.76	%		0.76	%
Select		0.90	%		0.90	%
SL Agency		0.89	%		0.89	%

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		0.59	%		0.59	%
Institutional		0.57	%		0.57	%
Premium		0.52	%		0.52	%

BlackRock Cash Funds: Treasury

BlackRock Cash Funds: Treasury’s (the “Fund”) investment objective is to seek current income consistent with liquidity and stability of principal.

	7-Day SEC Yield			7-Day Yield
Institutional		0.41	%		0.41	%
SL Agency		0.44	%		0.44	%

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.

On May 19, 2016, the Board of Trustees approved the designation of each of BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and their corresponding Master Portfolios as a money market fund that does not qualify as a “government money market fund” or as a “retail money market fund” under Rule 2a-7 under the Investment Company Act of 1940, as amended (each an “Institutional Money Market Fund”). This designation became effective October 11, 2016.

Institutional Money Market Funds will no longer value their investments under the amortized cost method and will be required to price and transact in their shares at a NAV per share reflecting market-based values of their portfolio holdings (i.e., at a “floating” NAV). The NAV of certain Institutional Money Market Funds may be priced multiple times each day such Fund accepts purchase orders and redemption requests.

The Boards of the Institutional Money Market Funds will be permitted to impose a liquidity fee of up to 2% on the value of shares redeemed or temporarily restrict redemptions from each Institutional Money Market Fund for up to 10 business days during a 90 day period, in the event that such Institutional Money Market Fund’s weekly liquid assets fall below certain thresholds.

BLACKROCK FUNDS III DECEMBER 31, 2016 5

Disclosure of Expenses

Shareholders of these Funds may incur the following charges: (a) transactional expenses; and (b) operating expenses, including administration fees, service and distribution fees, and other fund expenses. The expense examples shown below (which are based on a hypothetical investment of $1,000 invested on July 1, 2016 and held through December 31, 2016) 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 examples with the 5% hypothetical examples that appear in shareholder reports of other funds.

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

Expense Examples

	Actual						Hypothetical2
	Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period1		Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period1		Annualized Expense Ratio
BlackRock Cash Funds: Institutional
Aon Captives	$	1,000.00	$	1,003.00	$	1.11	$	1,000.00	$	1,024.03	$	1.12		0.22	%
Institutional	$	1,000.00	$	1,000.00	$	0.60	$	1,000.00	$	1,024.53	$	0.61		0.12	%
Select	$	1,000.00	$	1,003.00	$	0.96	$	1,000.00	$	1,024.18	$	0.97		0.19	%
SL Agency	$	1,000.00	$	1,003.60	$	0.45	$	1,000.00	$	1,024.68	$	0.46		0.09	%
BlackRock Cash Funds: Prime
Capital	$	1,000.00	$	1,002.40	$	0.70	$	1,000.00	$	1,024.43	$	0.71		0.14	%
Institutional	$	1,000.00	$	1,002.50	$	0.60	$	1,000.00	$	1,024.53	$	0.61		0.12	%
Premium	$	1,000.00	$	1,002.40	$	0.86	$	1,000.00	$	1,024.28	$	0.87		0.17	%
Select	$	1,000.00	$	1,000.00	$	1.01	$	1,000.00	$	1,024.13	$	1.02		0.20	%
SL Agency	$	1,000.00	$	1,000.00	$	0.45	$	1,000.00	$	1,024.68	$	0.46		0.09	%
BlackRock Cash Funds: Treasury
Institutional	$	1,000.00	$	1,000.20	$	0.60	$	1,000.00	$	1,024.53	$	0.61		0.12	%
SL Agency	$	1,000.00	$	1,001.40	$	0.45	$	1,000.00	$	1,024.68	$	0.46		0.09	%

¹  For each class of a Fund, expenses are equal to the annualized net expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period shown). Because each Fund invests all of its assets in its corresponding Master Portfolio, the expense examples reflect the net expenses of both the Fund and the Master Portfolio in which it invests.

²  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366.

6 BLACKROCK FUNDS III DECEMBER 31, 2016

Statements of Assets and Liabilities

December 31, 2016	BlackRock Cash Funds: Institutional		BlackRock Cash Funds: Prime		BlackRock Cash Funds: Treasury
Assets
Investments at value — from the applicable Master Portfolio1,2	$	41,223,923,991	$	285,823,612	$	3,652,094,956
Capital shares sold receivable		3,256		298		4
Total assets		41,223,927,247		285,823,910		3,652,094,960
Liabilities
Payables:
Income dividends		28,630,562		33,945		1,182,813
Administration fees		696,560		9,690		69,543
Contributions to the applicable Master Portfolio		3,256		298		4
Distribution fees		478		—		—
Professional fees		8,909		8,917		8,968
Total liabilities		29,339,765		52,850		1,261,328
Net Assets	$	41,194,587,482	$	285,771,060	$	3,650,833,632
Net Assets Consist of
Paid-in capital	$	41,183,736,400	$	285,752,689	$	3,650,659,586
Undistributed net investment income		—		13,514		—
Accumulated net realized gain allocated from the applicable Master Portfolio		746,927		—		174,046
Net unrealized appreciation (depreciation) allocated from the applicable Master Portfolio		10,104,155		4,857		—
Net Assets	$	41,194,587,482	$	285,771,060	$	3,650,833,632
Net Asset Value
Aon Captives:
Net assets	$	5,560,075		—		—
Shares outstanding3		5,558,807		—		—
Net asset value	$	1.0002		—		—
Capital:
Net assets		—	$	67,482,164		—
Shares outstanding3		—		67,482,349		—
Net asset value		—	$	1.0000		—
Institutional:
Net assets		—	$	214,691,687	$	80,257,384
Shares outstanding3		—		214,684,928		80,253,557
Net asset value		—	$	1.0000	$	1.00
Premium:
Net assets		—	$	3,597,209		—
Shares outstanding3		—		3,597,017		—
Net asset value		—	$	1.0001		—
Select:
Net assets	$	762		—		—
Shares outstanding3		762		—		—
Net asset value	$	1.0002		—		—
SL Agency:
Net assets	$	41,189,026,645		—	$	3,570,576,248
Shares outstanding3		41,179,766,646		—		3,570,406,031
Net asset value	$	1.0002		—	$	1.00
1    Investments at cost — from the applicable Master Portfolio	$	41,213,819,836	$	285,818,755	$	3,652,094,956
2    Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio (each, a “Master Portfolio”), respectively.
3    Unlimited number of shares authorized, no par value.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	7

Statements of Operations

Year Ended December 31, 2016	BlackRock Cash Funds: Institutional			BlackRock Cash Funds: Prime			BlackRock Cash Funds: Treasury
Investment Income
Net investment income allocated from the applicable Master Portfolio:
Interest — unaffiliated	$	270,469,178		$	106,608,525		$	11,908,509
Expenses		(40,989,475	)		(19,000,174	)		(3,154,287	)
Fees waived		12,695,981			5,862,832			979,683
Total investment income		242,175,684			93,471,183			9,733,905
Fund Expenses
Administration — class specific		8,439,450			8,573,062			628,565
Professional		15,854			15,081			11,140
Miscellaneous		14,100			14,100			56
Distribution — Aon Captives		7,527			—			—
Total expenses		8,476,931			8,602,243			639,761
Less:
Fees reimbursed by the Administrator		(15,854	)		(15,081	)		(11,140	)
Administration fees waived — class specific		—			(273	)		—
Total expenses after fees waived and/or reimbursed		8,461,077			8,586,889			628,621
Net investment income		233,714,607			84,884,294			9,105,284
Realized and Unrealized Gain Allocated from the Master Portfolios
Net realized gain from investments		3,815,059			675,914			444,137
Net change in unrealized appreciation (depreciation) on investments		10,104,155			4,857			—
Net realized and unrealized gain		13,919,214			680,771			444,137
Net Increase in Net Assets Resulting from Operations	$	247,633,821		$	85,565,065		$	9,549,421

See Notes to Financial Statements.
8	BLACKROCK FUNDS III	DECEMBER 31, 2016

Statements of Changes in Net Assets

	BlackRock Cash Funds: Institutional						BlackRock Cash Funds: Prime
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	233,714,607		$	78,123,251		$	84,884,294		$	36,457,663
Net realized gain		3,815,059			1,366,640			675,914			570,515
Net change in unrealized appreciation (depreciation)		10,104,155			—			4,857			—
Net increase in net assets resulting from operations		247,633,821			79,489,891			85,565,065			37,028,178
Distributions to Shareholders1
From net investment income:
Aon Captives		(32,990	)		(4,715	)		—			—
Capital		—			—			(7,597,597	)		(2,423,327	)
Institutional		(5,693,492	)		(4,942,131	)		(42,412,234	)		(15,039,119	)
Premium		—			—			(5,472,321	)		(1,252,061	)
Select		(16	)		(13	)		(5,076	)		(1,082	)
SL Agency		(227,988,109	)		(73,176,392	)		(29,398,609	)		(17,730,967	)
From net realized gain:
Aon Captives		(629	)		(270	)		—			—
Capital		—			—			(224,218	)		(28,402	)
Institutional		(25,496	)		(72,604	)		(924,451	)		(170,670	)
Premium		—			—			(1,660	)		(17,796	)
Select		—			—			—			(19	)
SL Agency		(4,280,941	)		(1,333,902	)		—			(131,220	)
Decrease in net assets resulting from distributions to shareholders		(238,021,673	)		(79,530,027	)		(86,036,166	)		(36,794,663	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(1,323,776,641	)		2,500,790,392			(25,164,637,725	)		2,758,323,754
Net Assets
Total increase (decrease) in net assets		(1,314,164,493	)		2,500,750,256			(25,165,108,826	)		2,758,557,269
Beginning of year		42,508,751,975			40,008,001,719			25,450,879,886			22,692,322,617
End of year	$	41,194,587,482		$	42,508,751,975		$	285,771,060		$	25,450,879,886
Undistributed net investment income, end of year		—			—		$	13,514		$	3,950
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	9

Statements of Changes in Net Assets

	BlackRock Cash Funds: Treasury
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	9,105,284		$	546,933
Net realized gain		444,137			98,963
Net increase in net assets resulting from operations		9,549,421			645,896
Distributions to Shareholders1
From net investment income:
Institutional		(69,601	)		(279	)
Select		—			(1	)
SL Agency		(9,035,683	)		(546,653	)
From net realized gain:
Institutional		(5,210	)		(51	)
SL Agency		(280,502	)		(90,949	)
Decrease in net assets resulting from distributions to shareholders		(9,390,996	)		(637,933	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		1,496,101,672			(231,225,048	)
Net Assets
Total increase (decrease) in net assets		1,496,260,097			(231,217,085	)
Beginning of year		2,154,573,535			2,385,790,620
End of year	$	3,650,833,632		$	2,154,573,535
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
10	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights BlackRock Cash Funds: Institutional

	Aon Captives
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0045			0.0006			0.0000	1		0.0005			0.0012
Net realized and unrealized gain		0.0003			0.0000	1		0.0001			0.0000	1		—
Net increase from investment operations		0.0048			0.0006			0.0001			0.0005			0.0012
Distributions:2
From net investment income		(0.0045	)		(0.0006	)		(0.0000	)3		(0.0005	)		(0.0012	)
From net realized gain		(0.0001	)		(0.0000	)3		(0.0001	)		(0.0000	)3		—
Total distributions		(0.0046	)		(0.0006	)		(0.0001	)		(0.0005	)		(0.0012	)
Net asset value, end of year	$	1.0002		$	1.00		$	1.00		$	1.00		$	1.00
Total Return4
Based on net asset value		0.48%			0.06%			0.01%			0.05%			0.12%
Ratios to Average Net Assets5,6
Total expenses		0.22%			0.22%			0.22%			0.22%			0.22%
Total expenses after fees waived and/or reimbursed		0.22%			0.22%			0.22%			0.22%			0.22%
Net investment income		0.44%			0.06%			0.01%			0.04%			0.12%
Supplemental Data
Net assets, end of year (000)	$	5,560		$	8,558		$	7,999		$	9,166		$	11,003

¹ Amount is less than $0.00005 per share.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

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

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	11

Financial Highlights (continued) BlackRock Cash Funds: Institutional

	Institutional
	Period January 1, 2016 to December 2, 20161			Year Ended December 31,
				2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0049			0.0016			0.0010			0.0015			0.0022
Net realized and unrealized gain		0.0004			0.0000	2		0.0001			0.0000	2		—
Net increase from investment operations		0.0053			0.0016			0.0011			0.0015			0.0022
Distributions:3
From net investment income		(0.0049	)		(0.0016	)		(0.0010	)		(0.0015	)		(0.0022	)
From net realized gain		(0.0001	)		(0.0000	)4		(0.0001	)		(0.0000	)4		—
Total distributions		(0.0050	)		(0.0016	)		(0.0011	)		(0.0015	)		(0.0022	)
Net asset value, end of period	$	1.0003		$	1.00		$	1.00		$	1.00		$	1.00
Total Return5
Based on net asset value		0.53%	6		0.16%			0.11%			0.15%			0.22%
Ratios to Average Net Assets7,8
Total expenses		0.12%	9		0.12%			0.12%			0.12%			0.12%
Total expenses after fees waived and/or reimbursed		0.12%	9		0.12%			0.12%			0.12%			0.12%
Net investment income		0.48%	9		0.15%			0.11%			0.14%			0.22%
Supplemental Data
Net assets, end of period (000)		—	1	$	2,056,594		$	2,251,121		$	2,802,911		$	1,211,912

¹  There were no Institutional Shares outstanding since December 2, 2016.

²  Amount is less than $0.00005 per share.

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

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total return.

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

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

⁹  Annualized.

See Notes to Financial Statements.
12	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock Cash Funds: Institutional

	Select
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0047			0.0008			0.0002			0.0007			0.0014
Net realized and unrealized gain		0.0003			0.0000	1		0.0001			0.0000	1		—
Net increase from investment operations		0.0050			0.0008			0.0003			0.0007			0.0014
Distributions:2
From net investment income		(0.0047	)		(0.0008	)		(0.0002	)		(0.0007	)		(0.0014	)
From net realized gain		(0.0001	)		(0.0000	)3		(0.0001	)		(0.0000	)3		—
Total distributions		(0.0048	)		(0.0008	)		(0.0003	)		(0.0007	)		(0.0014	)
Net asset value, end of year	$	1.0002		$	1.00		$	1.00		$	1.00		$	1.00
Total Return4
Based on net asset value		0.50%			0.08%			0.03%			0.07%			0.14%
Ratios to Average Net Assets5,6
Total expenses		0.19%			0.22%			0.22%			0.22%			0.22%
Total expenses after fees waived and/or reimbursed		0.19%			0.20%			0.20%			0.20%			0.20%
Net investment income		0.42%			0.07%			0.03%			0.06%			0.14%
Supplemental Data
Net assets, end of year (000)	$	1		$	5		$	109		$	4,324		$	11,459

¹ Amount is less than $0.00005 per share.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

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

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	13

Financial Highlights (continued) BlackRock Cash Funds: Institutional

	SL Agency
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0058			0.0019			0.0013			0.0018			0.0025
Net realized and unrealized gain		0.0003			0.0000	1		0.0001			0.0000	1		—
Net increase from investment operations		0.0061			0.0019			0.0014			0.0018			0.0025
Distributions:2
From net investment income		(0.0058	)		(0.0019	)		(0.0013	)		(0.0018	)		(0.0025	)
From net realized gain		(0.0001	)		(0.0000	)3		(0.0001	)		(0.0000	)3		—
Total distributions		(0.0059	)		(0.0019	)		(0.0014	)		(0.0018	)		(0.0025	)
Net asset value, end of year	$	1.0002		$	1.00		$	1.00		$	1.00		$	1.00
Total Return4
Based on net asset value		0.61%			0.19%			0.14%			0.18%			0.25%
Ratios to Average Net Assets5,6
Total expenses		0.09%			0.09%			0.09%			0.09%			0.09%
Total expenses after fees waived and/or reimbursed		0.09%			0.09%			0.09%			0.09%			0.09%
Net investment income		0.58%			0.19%			0.14%			0.17%			0.25%
Supplemental Data
Net assets, end of year (000)	$	41,189,027		$	40,443,595		$	37,748,773		$	37,867,084		$	33,350,562

¹ Amount is less than $0.00005 per share.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

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

See Notes to Financial Statements.
14	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (concluded) BlackRock Cash Funds: Institutional

	Trust
	Period January 1, 2014 to November 10, 20141			Year Ended December 31,
				2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00
Net investment income		0.0000	2		0.0001			0.0000	2
Net realized gain		0.0000	2		0.0000	2		—
Net increase from investment operations		0.0000			0.0001			0.0000
Distributions:3
From net investment income		(0.0000	)4		(0.0001	)		(0.0000	)4
From net realized gain		(0.0000	)4		(0.0000	)4		—
Total distributions		(0.0000	)		(0.0001	)		(0.0000	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00
Total Return5
Based on net asset value		0.00%	6		0.01%			—%
Ratios to Average Net Assets7,8
Total expenses		0.45%	9		0.45%			0.45%
Total expenses after fees waived and/or reimbursed		0.22%	9		0.28%			0.34%
Net investment income		0.00%	9		0.00%			0.00%
Supplemental Data
Net assets, end of period (000)		—	1	$	547		$	8,215

¹ There were no Trust Shares outstanding from November 11, 2014 through December 31, 2014 and during the years ended December 31, 2015 and December 31, 2016.

² Amount is less than $0.00005 per share.

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

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

⁵ Where applicable, assumes the reinvestment of distributions.

⁶ Aggregate total return.

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

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

⁹ Annualized.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	15

Financial Highlights BlackRock Cash Funds: Prime

	Capital
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0043			0.0013			0.0007			0.0011			0.0018
Net realized and unrealized gain		0.0003			0.0000	1		0.0000	1		0.0000	1		—
Net increase from investment operations		0.0046			0.0013			0.0007			0.0011			0.0018
Distributions:2
From net investment income		(0.0041	)		(0.0013	)		(0.0007	)		(0.0011	)		(0.0018	)
From net realized gain		(0.0005	)		(0.0000	)3		(0.0000	)3		(0.0000	)3		—
Total distributions		(0.0046	)		(0.0013	)		(0.0007	)		(0.0011	)		(0.0018	)
Net asset value, end of year	$	1.0000		$	1.00		$	1.00		$	1.00		$	1.00
Total Return4
Based on net asset value		0.46%			0.13%			0.07%			0.11%			0.18%
Ratios to Average Net Assets5,6
Total expenses		0.14%			0.14%			0.14%			0.14%			0.14%
Total expenses after fees waived and/or reimbursed		0.14%			0.14%			0.14%			0.14%			0.14%
Net investment income		0.43%			0.13%			0.07%			0.10%			0.18%
Supplemental Data
Net assets, end of year (000)	$	67,482		$	2,125,858		$	1,747,725		$	1,472,926		$	1,394,794

¹ Amount is less than $0.00005 per share.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

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

See Notes to Financial Statements.
16	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock Cash Funds: Prime

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0045			0.0015			0.0009			0.0013			0.0020
Net realized and unrealized gain		0.0003			0.0000	1		0.0000	1		0.0000	1		—
Net increase from investment operations		0.0048			0.0015			0.0009			0.0013			0.0020
Distributions:2
From net investment income		(0.0043	)		(0.0015	)		(0.0009	)		(0.0013	)		(0.0020	)
From net realized gain		(0.0005	)		(0.0000	)3		(0.0000	)3		(0.0000	)3		—
Total distributions		(0.0048	)		(0.0015	)		(0.0009	)		(0.0013	)		(0.0020	)
Net asset value, end of year	$	1.0000		$	1.00		$	1.00		$	1.00		$	1.00
Total Return4
Based on net asset value		0.48%			0.15%			0.09%			0.13%			0.20%
Ratios to Average Net Assets5,6
Total expenses		0.12%			0.12%			0.12%			0.12%			0.12%
Total expenses after fees waived and/or reimbursed		0.12%			0.12%			0.12%			0.12%			0.12%
Net investment income		0.45%			0.15%			0.09%			0.12%			0.20%
Supplemental Data
Net assets, end of year (000)	$	214,692		$	13,516,545		$	9,074,064		$	5,269,961		$	3,236,082

¹ Amount is less than $0.00005 per share.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

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

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	17

Financial Highlights (continued) BlackRock Cash Funds: Prime

	Premium
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0041			0.0010			0.0004			0.0008			0.0015
Net realized and unrealized gain		0.0003			0.0000	1		0.0000	1		0.0000	1		—
Net increase from investment operations		0.0044			0.0010			0.0004			0.0008			0.0015
Distributions:2
From net investment income		(0.0038	)		(0.0010	)		(0.0004	)		(0.0008	)		(0.0015	)
From net realized gain		(0.0005	)		(0.0000	)3		(0.0000	)3		(0.0000	)3		—
Total distributions		(0.0043	)		(0.0010	)		(0.0004	)		(0.0008	)		(0.0015	)
Net asset value, end of year	$	1.0001		$	1.00		$	1.00		$	1.00		$	1.00
Total Return4
Based on net asset value		0.44%	5		0.10%			0.04%			0.08%			0.15%
Ratios to Average Net Assets5,6
Total expenses		0.17%			0.17%			0.17%			0.17%			0.17%
Total expenses after fees waived and/or reimbursed		0.17%			0.17%			0.17%			0.17%			0.17%
Net investment income		0.41%			0.10%			0.04%			0.07%			0.16%
Supplemental Data
Net assets, end of year (000)	$	3,597		$	1,132,614		$	1,254,768		$	4,669,369		$	3,481,506

¹ Amount is less than $0.00005 per share.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

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

See Notes to Financial Statements.
18	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock Cash Funds: Prime

	Select
	Period January 1, 2016 to December 21, 20161			Period January 1, 2015 to December 31, 20152			Period January 1, 2014 to December 21, 20143			Year Ended December 31,
										2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0003			0.0000	4		0.0000	4		0.0005			0.0012
Net realized and unrealized gain		0.0000	4		0.0000	4		0.0000	4		0.0000	4		—
Net increase from investment operations		0.0003			0.0000			0.0000			0.0005			0.0012
Distributions:5
From net investment income		(0.0003	)		(0.0000	)6		(0.0000	)6		(0.0005	)		(0.0012	)
From net realized gain		—			—			(0.0000	)6		(0.0000	)6		—
Total distributions		(0.0003	)		(0.0000	)		(0.0000	)		(0.0005	)		(0.0012)
Net asset value, end of period	$	1.0000		$	1.00		$	1.00		$	1.00		$	1.00
Total Return7
Based on net asset value		0.03%	8		0.00%	8		0.00%	8		0.05%			0.12%
Ratios to Average Net Assets9,10
Total expenses		0.22%	11		0.22%	11		0.22%	11		0.22%			0.22%
Total expenses after fees waived and/or reimbursed		0.20%	11		0.20%	11		0.20%	11		0.20%			0.20%
Net investment income		0.37%	11		0.00%	11		0.00%	11		0.04%			0.12%
Supplemental Data
Net assets, end of period (000)		—	1		—	2		—	3	$	90		$	10,454

¹ There were no Select Shares outstanding from January 1, 2016 through January 18, 2016, January 20, 2016 through February 17, 2016, February 22, 2016 through March 17, 2016, March 21, 2016 through April 17, 2016, April 21, 2016 through May 17, 2016, May 20, 2016 through June 20, 2016, June 23, 2016 through July 17, 2016, July 21, 2016 through August 17, 2016, August 23, 2016 through September 18, 2016, September 22, 2016 through October 18, 2016, October 21, 2016 through December 18, 2016, and December 21, 2016 through December 31, 2016.

² There were no Select Shares outstanding from January 1, 2015 through January 19, 2015, January 21, 2015 through February 17, 2015, February 20, 2015 through March 17, 2015, March 20, 2015 through April 19, 2015, April 22, 2015 through May 17, 2015, May 20, 2015 through June 18, 2015 and June 22, 2015 through December 31, 2015.

³ There were no Select Shares outstanding from November 11, 2014 through November 17, 2014, November 18, 2014 through December 18, 2014 and December 22, 2014 through December 31, 2014.

⁴ Amount is less than $0.00005 per share.

⁵ Distributions for annual periods determined in accordance with federal income tax regulations.

⁶ Amount is greater than $(0.00005) per share.

⁷ Where applicable, assumes the reinvestment of distributions.

⁸ Aggregate total return.

⁹ Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

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

¹¹ Annualized.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	19

Financial Highlights (continued) BlackRock Cash Funds: Prime

	SL Agency
	Period January 1, 2016 to September 14, 20161			Year Ended December 31,
				2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0034			0.0018			0.0012			0.0016			0.0023
Net realized and unrealized gain		0.0000	1		0.0000	2		0.0000	2		0.0000	2		—
Net increase from investment operations		0.0034			0.0018			0.0012			0.0016			0.0023
Distributions:3
From net investment income		(0.0034	)		(0.0018	)		(0.0012	)		(0.0016	)		(0.0023	)
From net realized gain		—			(0.0000	)4		(0.0000	)4		(0.0000	)4		—
Total distributions		(0.0034	)		(0.0018	)		(0.0012	)		(0.0016	)		(0.0023	)
Net asset value, end of period	$	1.0000		$	1.00		$	1.00		$	1.00		$	1.00
Total Return5
Based on net asset value		0.34%	6		0.18%			0.12%			0.16%			0.23%
Ratios to Average Net Assets7,8
Total expenses		0.09%	9		0.09%			0.09%			0.09%			0.09%
Total expenses after fees waived and/or reimbursed		0.09%	9		0.09%			0.09%			0.09%			0.09%
Net investment income		0.48%	9		0.18%			0.12%			0.15%			0.23%
Supplemental Data
Net assets, end of period (000)		—	1	$	8,675,863		$	10,615,765		$	5,689,192		$	5,877,464

¹ There were no SL Agency Shares outstanding since September 14, 2016.

² Amount is less than $0.00005 per share.

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

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

⁵ Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total return.

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

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

⁹  Annualized.

See Notes to Financial Statements.
20	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (concluded) BlackRock Cash Funds: Prime

	Trust
	Period January 1, 2014 to November 10, 20141			Year Ended December 31,
				2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00
Net investment income		0.0000	2		0.0001			0.0000	2
Net realized gain		0.0000	2		0.0000	2		—
Net increase from investment operations		0.0000			0.0001			0.0000
Distributions:3
From net investment income		(0.0000	)4		(0.0001	)		(0.0000	)4
From net realized gain		(0.0000	)4		(0.0000	)4		—
Total distributions		(0.0000	)		(0.0001	)		(0.0000	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00
Total Return5
Based on net asset value		0.00%	6		0.01%			0.00%
Ratios to Average Net Assets7
Total expenses		0.45%	8,9		0.45%	9		0.45%	9
Total expenses after fees waived and/or reimbursed		0.20%	8,9		0.24%	9		0.32%	9
Net investment income		0.00%	8,9		0.00%	9		0.00%	9
Supplemental Data
Net assets, end of period (000)		—	1	$	8,086		$	21,702

¹ There were no Trust Shares outstanding from November 11, 2014 through December 31, 2014 and during the years ended December 31, 2015 and December 31, 2016.

² Amount is less than $0.00005 per share.

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

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

⁵ Where applicable, assumes the reinvestment of distributions.

⁶ Aggregate total return.

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

⁸ Annualized.

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

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	21

Financial Highlights BlackRock Cash Funds: Treasury

	Capital
	Period January 1, 2014 to November 10, 20141			Year Ended December 31,
				2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00
Net investment income		—			0.0001			0.0002
Net realized gain		0.0000	2		0.0000	2		—
Net increase from investment operations		0.0000			0.0001			0.0002
Distributions:3
From net investment income		—			(0.0001	)		(0.0002	)
From net realized gain		(0.0000	)4		(0.0000	)4		—
Total distributions		(0.0000	)		(0.0001	)		(0.0002	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00
Total Return5
Based on net asset value		0.00%	6		0.01%			0.02%
Ratios to Average Net Assets7
Total expenses		0.13%	8,9		0.14%	10		0.14%	10
Total expenses after fees waived and/or reimbursed		0.06%	8,9		0.12%	10		0.13%	10
Net investment income		0.00%	8,9		0.00%	10		0.02%	10
Supplemental Data
Net assets, end of period (000)		—	1	$	715		$	273,121

¹ There were no Capital Shares outstanding from November 11, 2014 through December 31, 2014 and during the years ended December 31, 2015 and December 31, 2016.

² Amount is less than $0.00005 per share.

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

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

⁵ Where applicable, assumes the reinvestment of distributions.

⁶ Aggregate total return.

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

⁸ Annualized.

⁹ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.04%.

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

See Notes to Financial Statements.
22	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock Cash Funds: Treasury

	Institutional
	Period June 6, 20161 to December 31, 2016			Period January 1, 2015 to December 31, 20152			Year Ended December 31,
							2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0015			0.0000	3		—			0.0001			0.0002
Net realized gain		0.0001			0.0000	3		0.0000	3		0.0000	3		—
Net increase from investment operations		0.0016			0.0000			0.0000			0.0001			0.0002
Distributions:4
From net investment income		(0.0015	)		(0.0000	)5		—			(0.0001	)		(0.0002	)
From realized gain		(0.0001	)		(0.0000	)5		(0.0000	)5		(0.0000	)5		—
Total distributions		(0.0016	)		(0.0000	)		(0.0000	)		(0.0001	)		(0.0002	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return6
Based on net asset value		0.16%	7		0.00%			0.00%			0.01%			0.02%
Ratios to Average Net Assets8
Total expenses		0.12%	9,10		0.12%	10		0.17%	11		0.12%	10		0.12%	10
Total expenses after fees waived and/or reimbursed		0.12%	9,10		0.11%	10		0.06%	11		0.10%	10		0.11%	10
Net investment income		0.29%	9,10		0.01%	10		0.00%	11		0.01%	10		0.02%	10
Supplemental Data
Net assets, end of period (000)	$	80,257			—	1	$	4		$	4		$	4

¹  Recommencement of operations.

²  There were no Institutional Shares outstanding as of the year ended December 31, 2015.

³  Amount is less than $0.00005 per share.

⁴  Distributions for annual periods determined in accordance with federal income tax regulations.

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

⁶  Where applicable, assumes the reinvestment of distributions.

⁷  Aggregate total return.

⁸ Includes the Fund’s share of the Master Portfolio’s allocated expenses and/or net investment income.

⁹  Annualized.

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

¹¹  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.04%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	23

Financial Highlights (continued) BlackRock Cash Funds: Treasury

	Premium
	Period December 20, 20121
Per Share Operating Performance
Net asset value, beginning of period	$	1.00
Net investment income		0.0000	2
Net realized gain		0.0000	2
Net increase from investment operations		0.0000
Distributions:3
From net investment income		(0.0000	)4
From net realized gain		(0.0000	)4
Total distributions		(0.0000	)
Net asset value, end of period	$	1.00
Total Return5
Based on net asset value		0.00%	6
Ratios to Average Net Assets7
Total expenses		0.00%	8,9
Total expenses after fees waived		0.00%	8,9
Net investment income		0.00%	8,9
Supplemental Data
Net assets, end of period (000)		_	1

¹  There were no Premium Shares outstanding during the fiscal years ended December 31, 2012, December 31, 2013, December 31, 2014, December 31, 2015 and December 31, 2016, except for December 20, 2012.

²  Amount is less than $0.00005 per share.

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

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

⁵  Where applicable, assumes the reinvestment of distributions.

⁶  Aggregate total return.

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

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

⁹  Annualized.

See Notes to Financial Statements.
24	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock Cash Funds: Treasury

	Select
	Period January 1, 2014 to December 22, 20141			Year Ended December 31,
				2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00
Net investment income		—			0.0001			0.0000	2
Net realized gain		0.0000	2		0.0000	2		—
Net increase from investment operations		0.0000			0.0001			0.0000
Distributions from:3
Net investment income		—			(0.0001	)		(0.0000	)4
Net realized gain		(0.0000	)4		(0.0000	)4		—
Total distributions		(0.0000	)		(0.0001	)		(0.0000	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00
Total Return5
Based on net asset value		0.00%	6		0.01%			0.00%
Ratios to Average Net Assets7
Total expenses		0.21%	8,9		0.21%	9		0.22%	10
Total expenses after fees waived and/or reimbursed		0.06%	8,9		0.09%	9		0.15%	10
Net investment income		0.00%	8,9		0.00%	9		0.00%	10
Supplemental Data
Net assets, end of period (000)		—	1	$	10,398		$	10,543

¹ There were no Select Shares outstanding from December 22, 2014 through December 31, 2014 and during the years ended December 31, 2015 and December 31, 2016.

² Amount is less than $0.00005 per share.

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

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

⁵ Where applicable, assumes the reinvestment of distributions.

⁶ Aggregate total return.

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

⁸ Annualized.

⁹ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.04%.

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

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	25

Financial Highlights (continued) BlackRock Cash Funds: Treasury

	SL Agency
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0029			0.0003			—			0.0002			0.0006
Net realized gain		0.0001			0.0000	1		0.0000	1		0.0000	1		—
Net increase from investment operations		0.0030			0.0003			0.0000			0.0002			0.0006
Distributions:2
From net investment income		(0.0029	)		(0.0003	)		—			(0.0002	)		(0.0006	)
From realized gain		(0.0001	)		(0.0000	)3		(0.0000	)3		(0.0000	)3		—
Total distributions		(0.0030	)		(0.0003	)		(0.0000	)		(0.0002	)		(0.0006	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return4
Based on net asset value		0.30%			0.03%			0.00%			0.02%			0.06%
Ratios to Average Net Assets5
Total expenses		0.09%	6		0.09%	6		0.08%	7		0.08%	7		0.09%	6
Total expenses after fees waived and/or reimbursed		0.09%	6		0.09%	6		0.06%	7		0.07%	7		0.09%	6
Net investment income		0.29%	6		0.03%	6		0.00%	7		0.01%	7		0.06%	6
Supplemental Data
Net assets, end of year (000)	$	3,570,576		$	2,154,574		$	2,385,787		$	1,548,187		$	1,525,904

¹ Amount is less than $0.00005 per share.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

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

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

See Notes to Financial Statements.
26	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (concluded) BlackRock Cash Funds: Treasury

	Trust
	Period January 1, 2014 to November 10, 20141			Year Ended December 31,
				2013			2012
Per Share Operating Performance
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00
Net investment income		—			0.0001			0.0000	2
Net realized gain		0.0000	2		0.0000	2		—
Net increase from investment operations		0.0000			0.0001			0.0000
Distributions from:3
Net investment income		—			(0.0001	)		(0.0000	)4
Net realized gain		(0.0000	)4		(0.0000	)4		—
Total distributions		(0.0000	)		(0.0001	)		(0.0000	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00
Total Return5
Based on net asset value		0.00%	6		0.01%			0.00%
Ratios to Average Net Assets7
Total expenses		0.44%	8,9		0.44%	9		0.45%	10
Total expenses after fees waived and/or reimbursed		0.06%	8,9		0.09%	9		0.15%	10
Net investment income		0.00%	8,9		0.00%	9		0.00%	10
Supplemental Data
Net assets, end of period (000)		—	1	$	25,914		$	15,407

¹ There were no Trust Shares outstanding from November 11, 2014 through December 31, 2014 and during the years ended December 31, 2015 and December 31, 2016.

² Amount is less than $0.00005 per share.

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

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

⁵ Where applicable, assumes the reinvestment of distributions.

⁶ Aggregate total return.

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

⁸ Annualized.

⁹ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.04%.

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

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	27

Notes to Financial Statements BlackRock Funds III

1. Organization:

BlackRock Funds III (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Delaware statutory trust. The following series of the Trust are referred to herein collectively as the “Funds” or individually, a “Fund”:

Fund Name	Herein Referred To As	Diversification Classification
BlackRock Cash Funds: Institutional	Institutional	Diversified
BlackRock Cash Funds: Prime	Prime	Diversified
BlackRock Cash Funds: Treasury	Treasury	Diversified

Each Fund seeks to achieve its investment objective by investing all of its assets in a corresponding series of Master Investment Portfolio (“MIP”): Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio (each, a “Master Portfolio” and together, the “Master Portfolios”). MIP is an affiliate of the Trust. Each Master Portfolio has the same investment objective and strategies as its corresponding Fund. The value of each Fund’s investment in its corresponding Master Portfolio reflects the Fund’s proportionate interest in the net assets of the Master Portfolio. The performance of the Funds is directly affected by the performance of the Master Portfolios. At December 31, 2016, the percentage of the Master Portfolio owned by the corresponding Fund was 100% for Institutional, 100% for Prime and 60.2% for Treasury. As such, the financial statements of the Master Portfolios, including the Schedules of Investments, are included elsewhere in this report and should be read in conjunction with the Funds’ financial statements.

Treasury and Prime each offers multiple classes of shares. Institutional, Select, SL Agency, Capital, Premium and Trust Shares are sold without a sales charge and only to certain eligible investors. Institutional only offers SL Agency share class and is only available for certain eligible investors. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, and differ principally with respect to administration fees. 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 Boards of Trustees of the Trust and Boards of Directors of MIP are referred to throughout this report as the “Board of Directors” or the “Board” and the members are referred to as “Directors.”

Effective as of the close of business on the dates below, Institutional no longer accepts purchase orders on the following share classes. Shareholders of each share class may continue to redeem their shares after the closure date.

Closure Date	Share Class
March 1, 2016	Capital Shares, Premium Shares, Select Shares and Trust Shares
June 1, 2016	Aon Captives Shares
August 1, 2016	Institutional Shares

Treasury operates as a “government money market fund” under Rule 2a-7 under the 1940 Act. The Fund is not subject to liquidity fees or temporary suspensions of redemptions due to declines in the Fund’s weekly liquid assets.

On October 11, 2016, Institutional and Prime began pricing and transacting their shares at a net asset value (“NAV”) per share calculated to four decimal places, reflecting market-based values of their portfolio holdings (i.e., at a “floating” NAV). The NAV of Prime is priced multiple times each day such Fund accepts purchase orders and redemption requests. Prior to the Funds’ adoption of the floating NAV, their portfolio holdings were valued at amortized cost.

With respect to each of Institutional and Prime, the Board is permitted to impose a liquidity fee of up to 2% on the value redeemed or temporarily restrict redemptions from each of Institutional and Prime for up to 10 business days during a 90 day period, in the event that Institutional’s or Prime’s weekly liquid assets fall below certain thresholds.

The Funds, together with certain other registered investment companies are included in a complex of open-end funds referred to as the Equity-Liquidity Complex.

2. Significant Accounting Policies:

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

Investment Transactions and Investment Income: For financial reporting purposes, contributions to and withdrawals from the Master Portfolios are accounted for on a trade date basis. The Funds record their proportionate share of the Master Portfolios’ income, expenses and realized and unrealized gains and losses on a daily basis. In addition, the Funds accrue their own expenses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

28 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued) BlackRock Funds III

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

Indemnifications: In the normal course of business, a Fund enters into contracts that contain a variety of representations that provide general indemnification. A Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against a Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to a Fund or its classes are charged to that Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Blackrock Fund Advisors (the “Manager” or “BFA”), the investment adviser to the Master Portfolios, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Funds and other shared expenses prorated to the Funds are allocated daily to each class based on their relative net assets or other appropriate methods.

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Funds’ policy is to value its financial instruments at fair value. Each Fund records its investment in the Master Portfolio at fair value based on the Funds’ proportionate interest in the net assets of the Master Portfolio. Valuation of securities held by the Master Portfolio is discussed in Note 3 of the Master Portfolio’s Notes to Financial Statements, which are included elsewhere in this report.

4. Administration Agreement and Other Transactions with Affiliates:

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

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

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

¹ With no shares outstanding as of December 31, 2016.

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

For the year ended December 31, 2016, the following table shows the class specific administration fees borne directly by each class of each Fund:

	Institutional			Prime			Treasury
Aon Captives	$	3,764			N/A			N/A
Capital		—	1	$	1,236,811			—	1
Institutional		591,821	1		4,753,953		$	12,208
Premium		—	1		1,350,912			—	1
Select		5			2,051	1		—	1
SL Agency		7,843,860			1,229,335	1		616,357
Trust		—	1		—	1		—	1
Total	$	8,439,450		$	8,573,062		$	628,565

¹ With no shares outstanding as of December 31, 2016.

As of December 31, 2016, the only investors for the SL Agency Shares of Institutional are investment companies for which (i) BFA, BlackRock Institutional Trust Company, N.A. (“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 SL Agency Shares of Institutional. 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.

Distribution Fees: The Trust, on behalf of the Funds, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Administrator. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, Institutional pays BRIL ongoing service and distribution fees with respect to Aon Captives Shares. The fees are accrued daily and paid monthly at annual rate of 0.10% based

BLACKROCK FUNDS III DECEMBER 31, 2016 29

Notes to Financial Statements (continued) BlackRock Funds III

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.

Waivers: BAL voluntarily agreed to waive administration fees and/or reimburse operating expenses to enable the Funds to maintain minimum levels of daily net investment income. These amounts are reported in the Statements of Operations as administration fees waived — class specific. BAL may discontinue the waiver and/or reimbursement at any time.

BAL contractually agreed to waive a portion of its administration fees for the Select Shares through April 30, 2018. After giving effect to such contractual expense waiver, the administration fees for the Select Shares will be 0.13%. These amounts are included in administration fees waived — class specific in the Statements of Operations.

For the year ended December 31, 2016, BAL waived $273 of administration fees for Prime — Select Shares.

The fees and expenses of the Funds’ trustees who are not “interested persons” of the Trust, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and the Trust’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Funds. BAL has contractually agreed to reimburse the Funds or provide an offsetting credit against the administration fees paid by the Funds in an amount equal to the independent expenses through April 30, 2017.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the U.S. Securities and Exchange Commission, each Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by each Fund’s investment policies and restrictions. Each Fund is currently permitted to borrow and lend under the Interfund Lending Program.

A Fund may lend in aggregate up to 15% of its net assets, but no more than 5% of its net assets, to any one borrowing fund through the Interfund Lending Program. A Fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets or any lower threshold provided for by the Fund’s investment restrictions. If a Fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2016, the Funds did not participate in the Interfund Lending Program.

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

5. Income Tax Information:

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

Each Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Funds as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent difference attributable to the reclassification of a portion of the amounts paid to redeemed shareholders as a distribution for tax purposes was reclassified to the following accounts:

	Prime
Paid-in capital .	$	96,100
Accumulated net realized loss	$	(96,100	)

The tax character of distributions paid was as follows:

		Institutional		Prime1		Treasury
Ordinary income	12/31/16	$	237,268,876	$	86,132,266	$	9,380,284
	12/31/15	$	79,488,252	$	36,794,663	$	637,933
Long-term capital gains	12/31/16		752,797		—		10,712
	12/31/15		41,775		—		—
Total	12/31/16	$	238,021,673	$	86,132,266	$	9,390,996
	12/31/15	$	79,530,027	$	36,794,663	$	637,933

¹  Distribution amounts may include a portion of the proceeds from redeemed shares.

30 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued) BlackRock Funds III

As of December 31, 2016, the tax components of accumulated net earnings (losses) were as follows:

	Institutional		Prime		Treasury
Undistributed ordinary income	$	746,927	$	13,514	$	171,156
Undistributed long-term capital gains		—		—		2,890
Net unrealized capital gains		10,104,155		4,857		—
Total	$	10,851,082	$	18,371	$	174,046

6. Capital Share Transactions:

Effective October 11, 2016, the number of shares sold, reinvested and redeemed for Institutional and Prime were transacted at each class’ floating NAV per share calculated to four decimal places.

Transactions in capital shares for each class of Institutional and Prime were as follows:

	Year Ended December 31, 2016						Year Ended December 31, 2015
Institutional	Shares			Amount			Shares			Amount1
Aon Captives
Shares sold		28,765		$	28,767			559,341		$	559,341
Shares issued in reinvestment of distributions		776			776			7			7
Shares redeemed		(3,028,971	)		(3,028,995	)		—			—
Net increase (decrease)		(2,999,430	)	$	(2,999,452	)		559,348		$	559,348
Institutional
Shares sold		13,560,264,025		$	13,560,264,025			26,330,768,077		$	26,330,768,077
Shares issued in reinvestment of distributions		2,861,501			2,861,519			2,755,963			2,755,963
Shares redeemed		(15,619,723,805	)		(15,619,741,123	)		(26,528,049,293	)		(26,528,049,293	)
Net decrease		(2,056,598,279	)	$	(2,056,615,579	)		(194,525,253	)	$	(194,525,253	)
Select
Shares sold		—			—			—			—
Shares issued in reinvestment of distributions		24		$	24			13		$	13
Shares redeemed		(4,654	)		(4,654	)		(103,187	)		(103,187	)
Net decrease		(4,630	)	$	(4,630	)		(103,174	)	$	(103,174	)
SL Agency
Shares sold		145,231,634,893		$	110,741,111,944			98,921,406,773		$	98,921,406,773
Shares issued in reinvestment of distributions		283,323			283,328			20,513			20,513
Shares redeemed		(144,495,833,489	)		(110,005,552,252	)		(96,226,567,815	)		(96,226,567,815	)
Net increase		736,084,727		$	735,843,020			2,694,859,471		$	2,694,859,471
Total Net Increase (Decrease)		(1,323,517,612	)	$	(1,323,776,641	)		2,500,790,392		$	2,500,790,392
Prime
Capital
Shares sold		28,980,054,020		$	28,980,054,020			30,021,242,764		$	30,021,242,764
Shares issued in reinvestment of distributions		5,267,355			5,267,355			1,851,980			1,851,980
Shares redeemed		(31,043,657,548	)		(31,043,657,548	)		(29,644,982,520	)		(29,644,982,520	)
Net increase (decrease)		(2,058,336,173	)	$	(2,058,336,173	)		378,112,224		$	378,112,224
Institutional
Shares sold		124,526,853,444		$	124,526,859,955			146,093,605,195		$	146,093,605,195
Shares issued in reinvestment of distributions		22,921,997			22,921,997			6,541,052			6,541,052
Shares redeemed		(137,851,381,601	)		(137,851,387,465	)		(141,657,821,784	)		(141,657,821,784	)
Net increase (decrease)		(13,301,606,160	)	$	(13,301,605,513	)		4,442,324,463		$	4,442,324,463

BLACKROCK FUNDS III DECEMBER 31, 2016 31

Notes to Financial Statements (concluded) BlackRock Funds III

	Year Ended December 31, 2016						Year Ended December 31, 2015
Prime (concluded)	Shares			Amount			Shares			Amount1
Premium
Shares sold		50,166,069,660		$	50,166,069,685			168,198,834,483		$	168,198,834,483
Shares issued in reinvestment of distributions		881,334			881,334			82,926			82,926
Shares redeemed		(51,295,946,690	)		(51,295,946,690	)		(168,321,079,404	)		(168,321,079,404	)
Net decrease		(1,128,995,696	)	$	(1,128,995,671	)		(122,161,995	)	$	(122,161,995	)
Select
Shares sold		187,179,367		$	187,179,367			221,615,435		$	221,615,435
Shares issued in reinvestment of distributions		5,076			5,076			1,100			1,100
Shares redeemed		(187,184,443	)		(187,184,443	)		(221,616,535	)		(221,616,535	)
Net increase		—			—			—			—
SL Agency
Shares sold		8,438,336,925		$	8,438,336,925			10,735,695,202		$	10,735,695,202
Shares issued in reinvestment of distributions		1,761,927			1,761,927			87			87
Shares redeemed		(17,115,799,220	)		(17,115,799,220	)		(12,675,646,227	)		(12,675,646,227	)
Net decrease		(8,675,700,368	)	$	(8,675,700,368	)		(1,939,950,938	)	$	(1,939,950,938	)
Total Net Increase (Decrease)		(25,164,638,397	)	$	(25,164,637,725	)		2,758,323,754		$	2,758,323,754
1    Amounts were included for consistency of current year presentations.

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

Transactions in capital shares for each class of Treasury were as follows:

	Year Ended December 31,
Treasury	2016			2015
Institutional
Shares sold		651,076,039			211,800,000
Shares issued in reinvestment of distributions		36,879			330
Shares redeemed		(570,859,361	)		(211,804,234	)
Net increase (decrease)		80,253,557			(3,904	)
SL Agency
Shares sold		79,242,890,065			61,854,753,309
Shares issued in reinvestment of distributions		248,776			23,792
Shares redeemed and automatic conversion of shares		(77,827,290,726	)		(62,085,998,245	)
Net increase (decrease)		1,415,848,115			(231,221,144	)
Total Net Increase (Decrease)		1,496,101,672			(231,225,048	)

7. Subsequent Events:

Management’s evaluation of the impact of all subsequent events on the Funds’ financial statements was completed through the date the financial statements were issued and the following items were noted:

On February 23, 2017, the Board approved a proposal to close Prime to purchases and thereafter to liquidate the Fund. Accordingly, effective 3:00 p.m. (Eastern time) on April 24, 2017 Prime will no longer accept purchase orders. On or about April 28, 2017 (the “Liquidation Date”), all of the assets of Prime will be liquidated completely, the shares outstanding on the Liquidation Date will be redeemed at the 3:00 p.m. (Eastern time) net asset value per share and Prime will then be terminated as a series of the Trust.

32 BLACKROCK FUNDS III DECEMBER 31, 2016

Report of Independent Registered Public Accounting Firm BlackRock Funds III

To the Board of Trustees of BlackRock Funds III and the Shareholders of the Funds, as defined:

In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and BlackRock Cash Funds: Treasury (the “Funds”), each a series of BlackRock Funds III, as of December 31, 2016, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by Institutional, Prime and Treasury for the taxable year ended December 31, 2016.

Interest Related Dividends and Qualified Short-Term Capital Gains for Non-US Residents1
	Months Paid
	January — December 2016
Institutional	76.98%
Prime	80.30%
Treasury	100.00%
Federal Obligation Interest2
Institutional	1.65%
Prime	0.76%
Treasury	55.28%

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

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

Additionally, the Funds distributed long-term capital gains per-share as follows:

	Record Date		Institutional		Treasury
Long-Term Capital Gains Per-Share		08/11/2016		—		$0.000002033
		10/03/2016		$0.000016680		—
		12/15/2016		—		$0.000001652

BLACKROCK FUNDS III DECEMBER 31, 2016 33

Master Portfolio Information as of December 31, 2016 Master Investment Portfolio

Money Market Master Portfolio

Portfolio Composition	Percent of Net Assets
Certificates of Deposit		34	%
Commercial Paper		30
Time Deposits		16
Repurchase Agreements		14
Municipal Bonds		6
Corporate Notes		—	1
Liabilities in Excess of Other Assets		—	1
Total		100	%

¹  Represents less than 1%.

Prime Money Market Master Portfolio

Portfolio Composition	Percent of Net Assets
Repurchase Agreements		42	%
Time Deposits		28
Commercial Paper		19
Certificates of Deposit		11
Corporate Notes		—	1
Liabilities in Excess of Other Assets		—	1
Total		100	%

¹  Represents less than 1%.

Treasury Money Market Master Portfolio

Portfolio Composition	Percent of Net Assets
Repurchase Agreements		42	%
U.S. Treasury Obligations		58
Other Assets Less Liabilities		—	1
Total		100	%

¹  Represents less than 1%.

34 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 Money Market Master Portfolio (Percentages shown are based on Net Assets)

Certificates of Deposit	Par   (000)		Value
Domestic — 3.3%
Bank of America N.A., 1.05%, 1/13/17	$	148,500	$	148,512,726
Citibank NA, New York:
1.30%, 6/30/17		200,000		200,000,000
1.16%, 7/05/17 (a)		99,000		99,000,000
State Street Bank & Trust (a):
1.23%, 3/08/17		50,000		50,039,929
1.23%, 3/10/17		32,000		32,026,011
Wells Fargo Bank NA (a):
1.22%, 2/15/17		125,000		125,085,170
1.20%, 6/29/17		164,000		164,013,891
1.30%, 10/16/17		394,000		394,420,788
1.26%, 11/16/17		125,000		125,081,551
				1,338,180,066
Yankee (b) — 30.5%
Bank of Montreal, Chicago:
1.01%, 3/14/17		100,000		100,006,879
1.08%, 3/16/17		299,000		299,056,412
1.27%, 11/20/17 (a)		250,000		250,052,755
1.29%, 11/27/17 (a)		100,000		100,017,676
Bank of Nova Scotia, Houston 1.26%, 4/12/17 (a)		52,900		52,964,772
Bank of Tokyo-Mitsubishi UFJ Ltd., New York:
1.28%, 4/13/17		270,000		270,246,032
1.25%, 5/15/17		215,000		215,149,756
Canadian Imperial Bank of Commerce, New York (a):
1.31%, 10/13/17		384,500		385,042,264
1.17%, 12/01/17		250,000		250,082,705
Cooperatieve Rabobank UA, New York, 1.25%, 10/23/17 (a)		197,000		197,135,603
Credit Industriel et Commercial, New York:
1.24%, 4/11/17		275,000		275,159,412
1.24%, 4/13/17		69,000		69,040,381
Credit Suisse AG, New York, 1.15%, 3/22/17		250,000		250,135,568
Dexia Credit Local SA, New York, 1.07%, 5/24/17 (a)		328,650		328,977,378
DZ Bank Deutsche Genossenschaf, New York:
1.04%, 2/14/17		250,000		250,022,605
1.22%, 4/18/17		275,000		274,948,440
Kookmin Bank, New York:
0.69%, 1/05/17		193,000		192,999,678
0.69%, 1/06/17		100,000		99,999,805
Landesbank Baden-Wurttemberg, New York, 0.90%, 1/13/17		500,000		500,008,620
Mitsubishi UFJ Trust & Banking Corp., New York:
0.68%, 1/03/17		247,000		247,002,934
0.68%, 1/04/17		400,000		400,005,720
1.36%, 4/12/17 (a)		252,000		252,294,318
Mizuho Bank Ltd., New York (a):
1.36%, 4/11/17		150,000		150,146,292
1.39%, 4/12/17		300,000		300,288,657
1.38%, 4/13/17		150,000		150,143,678
1.25%, 5/09/17		240,000		240,068,774
1.34%, 5/17/17		200,000		200,076,434
1.36%, 5/30/17		150,000		150,049,323
1.36%, 6/19/17		298,000		298,089,513

Certificates of Deposit	Par   (000)		Value
Yankee (b) (continued)
Natixis, New York:
0.68%, 1/03/17	$	597,000	$	597,000,000
0.94%, 1/10/17		250,000		250,018,220
0.94%, 1/11/17		250,000		250,019,875
Norinchukin Bank, New York, 1.29%, 4/20/17		299,000		299,213,205
Royal Bank of Canada, New York, 1.09%, 4/18/17 (a)		188,500		188,636,120
Skandinaviska Enskilda Banken AB, New York (a):
1.22%, 5/12/17		190,000		190,182,841
1.18%, 7/19/17		282,000		282,135,899
Sumitomo Mitsui Banking Corp., New York:
1.00%, 1/06/17		100,000		100,008,442
0.95%, 1/12/17		150,000		150,019,809
1.49%, 3/03/17 (a)		100,000		100,111,655
1.36%, 4/12/17 (a)		294,000		294,319,846
1.18%, 4/20/17 (a)		300,000		300,287,457
1.34%, 6/19/17 (a)		400,000		400,176,972
Sumitomo Trust & Banking Co. Ltd., New York:
0.69%, 1/03/17		245,000		245,003,729
0.70%, 1/06/17 (a)		134,000		134,013,068
1.36%, 4/12/17 (a)		299,000		299,325,285
1.24%, 6/01/17 (a)		340,000		340,211,041
1.34%, 6/19/17 (a)		349,000		349,154,408
Svenska Handelsbanken, New York (a):
1.24%, 5/15/17		100,000		100,110,676
1.25%, 5/16/17		241,500		241,766,478
1.15%, 8/01/17		183,000		183,105,443
Toronto-Dominion Bank, New York:
1.08%, 3/17/17		100,000		100,028,512
1.28%, 11/27/17 (a)		195,000		195,018,389
UBS AG, Stamford, 1.05%, 1/11/17		250,000		250,051,480
				12,589,131,234
Total Certificates of Deposit — 33.8%				13,927,311,300
Commercial Paper
Albion Capital LLC, 0.80%, 1/03/17 (c)		197,000		196,989,340
Alpine Securitization (c):
0.65%, 1/03/17		100,000		99,994,278
1.05%, 1/10/17		100,000		99,983,194
1.05%, 1/17/17		200,000		199,941,000
Antalis SA, 0.81%, 1/03/17 (c)		40,640		40,637,675
ASB Finance Ltd., London:
1.08%, 2/01/17 (c)		40,000		39,978,733
1.24%, 11/13/17 (a)		100,000		100,047,444
Australia & New Zealand Banking International Group Ltd.:
0.91%, 1/04/17 (c)		17,000		16,998,267
1.23%, 10/24/17 (a)		50,000		50,047,682
Bank Nederlandse Gemeenten (c):
0.68%, 1/03/17		968,000		967,944,611
0.70%, 1/06/17		100,000		99,989,694
Bank of Nova Scotia, Houston (a):
1.23%, 8/01/17		249,000		249,000,000
1.28%, 11/01/17		180,000		180,189,995
1.27%, 11/22/17		150,000		150,017,659

Portfolio Abbreviations

AMT	Alternative Minimum Tax (subject to)	HFA	Housing Finance Agency	RB	Revenue Bonds
EDA	Economic Development Authority	HRB	Housing Revenue Bonds	SBPA	Stand-by Bond Purchase Agreements
FLOATS	Floating Rate Securities	ISD	Independent School District	S/F	Single-Family
GO	General Obligation Bonds	LOC	Letter of Credit	VRDN	Variable Rate Demand Notes
		M/F	Multi-Family

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 35

Schedule of Investments (continued) Money Market Master Portfolio

Commercial Paper	Par   (000)		Value
Barclays Bank PLC, New York, 0.87%, 1/05/17 (c)	$	100,000	$	99,995,167
Barton Capital Corp., 0.75%, 1/04/17 (c)		147,000		146,987,689
Bedford Row Funding Corp., 1.21%, 7/24/17 (a)		50,000		50,032,009
Bennington Sark Cap Co. (c):
1.10%, 1/09/17		275,000		274,958,368
1.10%, 1/13/17		200,000		199,956,056
BNP Paribas Fortis SA, New York, 0.69%, 1/03/17 (c)		500,000		499,967,280
BNP Paribas SA, New York (c):
0.68%, 1/03/17		300,000		299,980,368
1.26%, 4/12/17		194,000		193,421,632
1.26%, 4/13/17		160,000		159,517,902
BNZ International Funding Ltd., 1.12%, 1/13/17 (a)		100,000		100,019,533
Caisse Centrale Desjardins du Quebec, 0.66%, 1/04/17 (c)		92,000		91,991,171
Cancara Asset Securitisation LLC (c):
1.00%, 1/12/17		115,000		114,976,745
1.02%, 1/19/17		120,000		119,959,800
Collateralized Commercial Paper Co. LLC (a):
1.30%, 4/13/17		100,000		100,126,753
1.35%, 4/19/17		147,000		147,190,174
Commonwealth Bank of Australia (a):
1.28%, 10/13/17		121,700		121,859,129
1.26%, 10/16/17		200,000		200,222,562
1.24%, 10/23/17		150,000		150,118,620
Crown Point Capital Co. LLC, 1.40%, 8/07/17 (a)		210,000		210,165,094
Eni Finance USA, Inc. (c):
0.92%, 1/03/17		25,000		24,997,989
1.00%, 1/04/17		125,000		124,987,396
Enterprise Products Operating LLC, 1.03%, 1/04/17 (c)		193,000		192,979,334
HSBC Bank PLC, 1.27%, 10/20/17 (a)		185,000		185,158,075
ING US Funding LLC, 1.20%, 5/03/17 (a)		190,000		190,220,784
JPMorgan Securities LLC, 1.28%, 10/23/17 (a)		200,000		200,221,778
Kells Funding LLC, 1.21%, 5/08/17 (a)		41,000		41,014,229
Kroger Co., 0.90%, 1/03/17 (c)		170,000		169,985,513
Landesbank Baden-Wurttemberg, New York, 0.52%, 1/03/17 (c)		866,000		865,946,308
LMA Americas LLC (c):
0.58%, 1/03/17		175,000		174,989,986
0.64%, 1/06/17		100,000		99,989,694
Macquarie Bank Ltd. (c):
1.04%, 3/07/17		150,000		149,720,833
1.17%, 3/14/17		91,400		91,204,795
1.16%, 3/15/17		100,000		99,782,292
Matchpoint Finance PLC, 1.35%, 2/22/17 (c)		60,000		59,924,400
Mitsubishi UFJ Trust & Banking Corp., New York (c):
0.55%, 1/03/17		98,000		97,993,760
0.93%, 1/12/17		35,000		34,992,379
National Australia Bank Ltd., 1.25%, 10/17/17 (a)		200,000		200,182,360
Nationwide Building Society (c):
1.24%, 4/18/17		198,000		197,223,648
1.24%, 4/19/17		200,000		199,205,556
Oversea Chinese Banking, Corp. Ltd., New York:
1.09%, 3/16/17 (c)		150,000		149,718,166
1.09%, 4/27/17 (a)		145,000		145,091,469
Prudential Funding LLC, 0.50%, 1/03/17 (c)		13,000		12,999,340
Ridgefield Funding Co. LLC, 1.44%, 4/12/17 (a)		50,000		50,075,834
Sheffield Receivable Corp. (c):
1.05%, 1/13/17		335,000		334,893,825
1.05%, 1/20/17		200,000		199,899,666
Societe Generale, 0.54%, 1/03/17 (c)		498,000		497,985,279

Commercial Paper	Par   (000)		Value
Southern California Edison Co., 0.86%, 1/05/17 (c)	$	69,200	$	69,191,396
Sumitomo Trust & Banking Co. Ltd., New York, 0.95%, 1/12/17 (c)		150,000		149,968,420
Suncorp Group Ltd., 0.98%, 1/04/17 (c)		54,200		54,194,422
Thunder Bay Funding LLC:
1.15%, 3/20/17 (c)		50,000		49,898,556
1.02%, 6/01/17 (a)		50,000		50,015,125
Toyota Motor Credit Corp.:
1.06%, 3/10/17 (c)		11,000		10,983,167
1.16%, 7/11/17 (a)		160,000		160,060,043
1.16%, 7/12/17 (a)		300,000		300,111,609
United Overseas Bank Ltd., 1.09%, 3/14/17 (c)		159,000		158,725,459
Victory Receivables Corp. (c):
1.02%, 1/11/17		60,000		59,988,900
1.15%, 3/14/17		198,735		198,378,370
1.15%, 3/16/17		100,000		99,812,744
Westpac Banking Corp., New York (a):
1.23%, 10/20/17		150,000		150,082,051
1.24%, 11/21/17		200,000		199,988,786
Westpac Securities NZ, Ltd. London, 1.05%, 5/18/17 (a)		110,000		110,100,213
Total Commercial Paper — 30.1%				12,386,089,573
Corporate Notes
Sumitomo Mitsui Banking Corp., 1.31%, 1/10/17 (a)		77,116		77,119,855
Toyota Motor Credit Corp., 1.19%, 12/05/17 (a)		155,000		155,116,799
Total Corporate Notes — 0.6%				232,236,654
Municipal Bonds (d)
Abag Finance Authority for Nonprofit Corps., RB, Series A, VRDN, 0.69%, 8/01/24		15,500		15,500,000
Arizona Health Facilities Authority, RB, Banner Health, Series B (Bank of Tokyo Mitsubishi UFJ LOC), VRDN, 0.74%, 1/01/46		32,000		32,000,000
Arkansas Development Finance Authority, RB, VRDN, S/F Housing, Mortgage-Backed Securities Program, Series E, AMT (Ginnie Mae & Fannie Mae Guarantors) (State Street Bank & Trust Co. SBPA), 0.90%, 1/01/37		5,520		5,520,000
Arkansas Development Finance Authority, Refunding RB, VRDN, S/F Housing, Mortgage-Backed Securities/Mortgage Loans Program, Series C, AMT (Ginnie Mae & Fannie Mae Guarantors) (State Street Bank & Trust Co. SBPA), 0.90%, 1/01/38		12,615		12,615,000
California Health Facilities Financing Authority, RB, VRDN, Scripps Health, Series B (JPMorgan Chase Bank LOC), 0.70%, 10/01/40		51,150		51,150,000
Capital City Connecticut EDA, RB, VRDN, Series B (Bank of America NA SBPA), 0.78%, 6/15/24		14,450		14,450,000
City of Austin Texas Water & Wastewater System, Refunding RB, VRDN (Bank of Tokyo-Mitsubishi UFJ Ltd. LOC, Sumitomo Mitsui Banking Corp. LOC), 0.72%, 5/15/31		99,310		99,310,000
City of Denton Texas ISD, GO, VRDN, School Building, Series B (Bank of Tokyo-Mitsubishi SBPA), 0.73%, 8/01/35		22,100		22,100,000
City of Houston Texas Utility System Revenue, RB, VRDN, 0.73%, 5/15/34		44,350		44,350,000
City of Raleigh Durham North Carolina Airport Authority, Refunding RB, VRDN, Series C (Royal Bank of Canada LOC), 0.72%, 5/01/36		33,925		33,925,000

See Notes to Financial Statements.

36 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) Money Market Master Portfolio

Municipal Bonds (d)	Par   (000)		Value
City of Rochester Minnesota, Refunding RB, 0.67%, 8/15/32	$	2,000	$	22,000,000
County of Riverside California, Refunding, Woodrest Library Projects, 0.72%, 11/01/39		44,575		44,575,000
County of Riverside Transportation Commission, Refunding RB, Series B, VRDN (Bank of Tokyo Mitsubishi UFJ SBPA), 0.70%, 6/01/29		42,980		42,980,000
Illinois Finance Authority, RB, VRDN, 0.71%, 8/15/46		25,000		25,000,000
Illinois State Toll Highway Authority, RB, VRDN, Priority, Series A-1B (Mizuho Bank Ltd. LOC), 0.72%, 7/01/30		63,300		63,300,000
Indiana Finance Authority, Refunding RB, VRDN:
0.68%, 11/01/39		16,640		16,640,000
Series A-2 (BMO Harris Bank NA SBPA), 0.73%, 2/01/39		40,700		40,700,000
Jets Stadium Development LLC, VRDN, Series A-4B, 0.75%, 4/01/47 (e)		2,500		2,500,000
Los Angeles Department of Water & Power, Refunding RB, VRDN, Sub-Series B-1 (Royal Bank of Canada SBPA), 0.69%, 7/01/34		44,000		44,000,000
Maryland Health & Higher Educational Facilities Authority, Refunding RB, VRDN, 0.70%, 4/01/35		15,655		15,655,000
Massachusetts Bay Transportation Authority, Refunding RB, Series A-1, 0.71%, 7/01/21		82,020		82,020,000
Massachusetts Health & Educational Facilities Authority, RB, VRDN, Partners Healthcare System, Series P2 (JPMorgan Chase Bank NA SBPA), 0.69%, 7/01/27		42,100		42,100,000
Metropolitan Transportation Authority, Refunding RB, VRDN:
0.67%, 11/15/50		18,825		18,825,000
(TD Bank NA LOC), 0.70%, 11/01/32		74,150		74,150,000
Michigan Higher Education Facilities Authority, Refunding RB, VRDN, 0.72%, 11/01/36		33,900		33,900,000
Mississippi Business Finance Corp., RB, VRDN, Series A, Chevron USA, Inc., 0.72%, 12/01/30		50,000		50,000,000
New Hampshire Health and Education Facilities Authority Act, RB, VRDN, 0.71%, 2/01/36		13,825		13,825,000
New York City Municipal Water Finance Authority, Refunding RB, VRDN, 2nd General Resolution, Sub-Series BB-3 (Royal Bank of Canada SBPA), 0.72%, 6/15/34		62,000		62,000,000
New York State Dormitory Authority, Refunding RB, VRDN, City University, Consolidated 5th:
Series C (Bank of America NA LOC), 0.73%, 7/01/31		54,790		54,790,000
Series D (TD Bank NA LOC), 0.70%, 7/01/31		29,600		29,600,000
New York State HFA, RB, VRDN, 0.69%, 5/01/44		102,685		102,685,000
New York State HFA, HRB, VRDN, M/F Housing, 625 West 57th Street, Series A-1 (Bank of New York Mellon Trust LOC), 0.68%, 5/01/49		32,680		32,680,000
North Texas Tollway Authority, Refunding RB, VRDN, 0.73%, 1/01/49		88,275		88,275,000
Ohio State University, Refunding RB, Series E, VRDN, 0.70%, 6/01/35		72,625		72,625,000
Orlando Florida Utilities Commission, Refunding RB, Series B, VRDN (TD Bank NA SBPA), 0.70%, 10/01/39		104,095		104,095,000
Orlando Utilities Commission, RB, VRDN, Series 1 (JPMorgan Chase Bank NA SBPA), 0.72%, 10/01/33		61,935		61,935,000
RBC Municipal Products Inc Trust, GO, VRDN, 0.90%, 11/07/18 (e)		64,995		64,995,000

Municipal Bonds (d)	Par   (000)		Value
RBC Municipal Products Inc Trust, Refunding RB, VRDN, 0.80%, 7/13/17 (e)	$	25,000	$	25,000,000
Rhode Island Health & Educational Building Corp., RB, VRDN, 0.68%, 5/01/35		29,225		29,225,000
Rib Floater Trust Various States, RB, Series 19-W, 1.11%, 8/15/22 (e)		200,000		200,000,000
Sacramento Transportation Authority, Refunding RB, VRDN, Series A (Mizuho Bank Ltd. SBPA), 0.68%, 10/01/38		26,800		26,800,000
Santa Clara Valley Transportation Authority, Refunding RB, Series A, VRDN, 0.70%, 6/01/26		30,000		30,000,000
State of California, GO, VRDN:
0.70%, 5/01/33		9,600		9,600,000
FLOATS, Series C-1 (Bank of America NA LOC), 0.65%, 5/01/33		38,450		38,450,000
Refunding (Sumitomo Mitsui Banking Corp. LOC), 0.70%, 5/01/40		37,300		37,300,000
State of Connecticut, GO, Series C, VRDN, 0.72%, 5/15/34		107,650		107,650,000
State of Illinois Finance Authority, Refunding RB, OSF Healthcare System, Series D, VRDN, 0.75%, 11/15/37		25,000		25,000,000
Triborough Bridge & Tunnel Authority, RB, VRDN, 0.70%, 11/01/35		52,165		52,165,000
Tuscaloosa County Industrial Development Authority, RB:
Hunt Refining Project, 0.75%, 3/01/27		20,000		20,000,000
VRDN, 0.75%, 6/01/28 (e)		103,300		103,300,000
University of Michigan, RB, Series B, 0.69%, 4/01/28		23,440		23,440,000
Utah Associated Municipal Power Systems, RB, Horse Butte Wind Project, 0.73%, 9/01/32		11,150		11,150,000
Utah County, RB, VRDN, 0.75%, 5/15/51		25,000		25,000,000
Waco Educational Finance Corp., Refunding RB, Baylor University, Series A, VRDN (Bank of New York Mellon Trust LOC), 0.73%, 2/01/32		38,065		38,065,000
Wheaton College Illinois, RB, Series A, Taxable Multi-Modal Revenue Bonds, 0.77%, 10/01/35		6,750		6,750,000
Total Municipal Bonds — 5.9%				2,445,665,000
Time Deposits
Australia & New Zealand Banking International Group Ltd.:
0.55%, 1/03/17		298,000		298,000,000
0.69%, 1/04/17		1,243,000		1,243,000,000
Bank of Tokyo-Mitsubishi UFJ, Ltd., 0.50%, 1/03/17		100,000		100,000,000
BNP Paribas SA, 0.52%, 1/03/17		150,000		150,000,000
Canadian Imperial Bank of Commerce, New York, 0.52%, 1/03/17		509,000		509,000,000
Credit Agricole CIB, New York:
0.51%, 1/03/17		288,000		288,000,000
0.55%, 1/03/17		875,000		875,000,000
0.58%, 1/03/17		400,000		400,000,000
Den Norske Bank, New York, 0.51%, 1/03/17		89,000		89,000,000
ING Bank NV, 0.72%, 1/03/17		213,000		213,000,000
National Australia Bank Ltd., New York, 0.50%, 1/03/17		525,000		525,000,000
National Bank of Canada, 0.68%, 1/03/17		825,000		825,000,000
Natixis, SA, 0.55%, 1/03/17		760,139		760,139,000
Nordea Bank Finland PLC, 0.50%, 1/03/17		242,000		242,000,000

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 37

Schedule of Investments (continued) Money Market Master Portfolio

Time Deposits	Par   (000)		Value
Skandinaviska Enskilda Banken AB, 0.51%, 1/03/17	$	92,000	$	92,000,000
Total Time Deposits — 16.0%				6,609,139,000
Total Repurchase Agreements — 13.8%				5,698,249,835
Total Investments (Cost — $41,288,587,207*) — 100.2%				41,298,691,362
Liabilities in Excess of Other Assets — (0.2)%				(74,767,371	)
Net Assets — 100.0%			$	41,223,923,991

Notes to Schedule of Investments

* Cost for federal income tax purposes.

(a) Variable rate security. Rate as of period end.

(b) Issuer is a U.S. branch of foreign domiciled bank.

(c) Rates are discount rates or a range of discount rates paid at the time of purchase.

(d) Variable rate security. Rate as of period end and maturity is the date the principal owed can be recovered through demand.

(e) 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.

Repurchase Agreements

Repurchase Agreements														Collateral
Counterparty	Coupon Rate			Purchase Date		Maturity Date		Par (000)		at Value (000)		Proceeds including Interest		Position	Original Par		Position Received, at Value
BNP Paribas Securities Corp.		0.76	%		12/30/16		1/03/17	$	245,000	$	245,000	$	245,020,689	U.S. Government Sponsored Agency Obligations and Corporate Debt Obligations, 0.53% to 10.00%, due 2/15/17 to 1/01/47	$	417,006,954	$	265,793,663
Citigroup Global Markets, Inc.		0.51	%1		12/30/16		1/03/17		65,000		65,000		65,003,683	U.S. Treasury Obligations, 0.00% to 6.13%, due 1/03/17 to 4/01/42		69,654,426		66,300,025
		0.71	%		12/30/16		1/03/17		100,000		100,000		100,007,889	U.S. Treasury Obligations, 0.00% to 9.69%, due 3/15/17 to 12/25/65		105,193,000		102,000,049
		1.50	%2		12/30/16		4/04/17		222,500		222,500		223,380,729	Corporate Debt Obligations, 0.34% to 5.99%, due 5/15/18 to 6/25/65		465,602,498		238,075,000
Total Citigroup Global Markets, Inc.										$	387,500						$	406,375,074
Credit Agricole Corp.		0.51	%1		12/30/16		1/03/17		39,000		39,000		39,002,210	U.S. Treasury Obligations, 1.00% to 9.50%, due 5/30/17 to 12/15/46		40,957,702		39,780,018
Credit Suisse Securities (USA) LLC		1.01	%		12/30/16		1/03/17		142,000		142,000		142,015,936	Corporate Debt Obligation, 1.13%, due 7/31/21		3,932,249,609		163,153,446
		1.22	%2		12/30/16		2/03/17		250,000		250,000		250,296,528	U.S. Government Sponsored Agency Obligations and Corporate Debt Obligations, 1.38% to 1.63%, due 1/31/20 to 5/15/26		10,162,398,111		300,000,251
		1.60	%2		12/30/16		4/04/17		75,000		75,000		75,316,667	Corporate Debt Obligations, 1.13% to 1.25%, due 3/31/21 to 8/31/21		86,948,000		87,501,343
Total Credit Suisse Securities (USA) LLC										$	467,000						$	550,655,040
Federal Reserve Bank of New York		0.50	%		12/30/16		1/03/17		1,000,000		1,000,000		1,000,055,556	U.S. Treasury Obligations, 3.50% to 11.00%, due 8/15/17 to 2/15/35		864,669,200		1,000,055,602
Goldman Sachs & Co.		0.62	%		12/29/16		1/05/17		185,500		185,500		185,522,198	U.S. Government Sponsored Agency Obligations and Corporate Debt Obligations, 0.00% to 8.45%, due 1/15/19 to 2/10/51		2,411,612,649		203,507,465
HSBC Securities (USA), Inc.		0.78	%		12/30/16		1/03/17		261,000		261,000		261,022,620	Corporate Debt Obligations, 0.00% to 49.28%, due 5/25/34 to 5/25/47		259,300,000		268,833,266
		0.86	%		12/30/16		1/03/17		350,000		350,000		350,033,444	Corporate Debt Obligations, 1.30% to 7.75%, due 1/15/17 to 10/15/35		354,724,000		367,500,162

See Notes to Financial Statements.

38 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) Money Market Master Portfolio

Repurchase Agreements														Collateral
Counterparty	Coupon Rate			Purchase Date		Maturity Date		Par (000)		at Value (000)		Proceeds including Interest		Position	Original Par		Position Received, at Value
HSBC Securities (USA), Inc. (continued)		1.16	%2		12/30/16		1/30/17	$	150,000	$	150,000	$	150,149,833	Corporate Debt Obligations, 0.00% to 5.46%, due 12/17/18 to 4/26/55	$	147,852,000	$	155,551,733
Total HSBC Securities (USA), Inc.										$	761,000						$	791,885,161
J.P. Morgan Securities LLC		0.84	%		12/30/16		1/03/17		50,000		50,000		50,004,667	Corporate Debt Obligations, 0.00% to 12.00%, due 3/10/17 to 6/12/50		166,448,000		53,500,502
		1.01	%		12/30/16		1/03/17		90,000		90,000		90,010,100	Corporate Debt Obligations, 1.13% to 7.25%, due 3/10/20 to 11/15/49		526,101,940		107,193,351
		1.05	%2		12/30/16		2/03/17		175,000		175,000		175,178,646	U.S. Government Sponsored Agency Obligations and Corporate Debt Obligations, 2.22% to 4.00%, due 1/01/37 to 8/01/45		19,644,223,548		187,250,284
		1.38	%2		12/30/16		3/31/17		345,000		345,000		346,203,475	Corporate Debt Obligations, 1.21% to 7.80%, due 2/01/17 to 8/15/46		2,136,458,093		426,151,205
		1.50	%2		12/30/16		3/31/17		205,000		205,000		205,777,292	Corporate Debt Obligations, 0.00% to 20.92%, due 1/19/17 to 1/01/47		373,865,880		238,567,857
		1.21	%		11/17/16		2/14/17		125,000		125,000		125,373,924	Corporate Debt Obligations, 0.00% to 9.25%, due 4/15/18 to 5/15/87		215,681,851		143,751,795
Total J.P. Morgan Securities LLC										$	990,000						$	1,156,414,994
Merrill Lynch, Pierce, Fenner & Smith, Inc.		0.62	%		12/29/16		1/05/17		151,500		151,500		151,518,264	U.S. Government Sponsored Agency Obligations, 1.05% to 7.67%, due 6/15/19 to 4/28/55		239,079,850		156,045,000
		1.26	%2		12/30/16		2/13/17		282,000		282,000		282,444,150	Corporate Debt Obligations, 1.50% to 3.25%, due 2/28/17 to 11/15/41		667,566,022		352,500,001
Total Merrill Lynch, Pierce, Fenner & Smith, Inc.										$	433,500						$	508,545,001
Mizuho Security USA, Inc.		0.86	%		12/30/16		1/03/17		75,000		75,000		75,007,167	U.S. Treasury Obligation, 0.13%, due 1/15/23		75,463,300		76,500,065
		1.79	%2		12/30/16		2/03/17		44,750		44,750		44,827,877	U.S. Treasury Obligations, 4.75% to 10.00%, due 9/01/18 to 12/31/49		44,035,400		45,645,100
Total Mizuho Security USA, Inc.										$	119,750						$	122,145,165
RBC Capital Markets LLC		0.74	%		12/30/16		1/03/17		67,000		67,000		67,005,509	Corporate Debt Obligations, 0.00% to 6.64%, due 7/24/17 to 9/25/57		67,337,631		70,350,000
		0.74	%		12/30/16		1/03/17		114,000		114,000		114,009,373	U.S. Government Sponsored Agency Obligations and Corporate Debt Obligations, 0.02% to 1.98%, due 5/25/25 to 11/25/60		1,415,372,383		120,672,391
		0.74	%		12/30/16		1/03/17		285,000		285,000		285,023,433	U.S. Government Sponsored Agency Obligations and Corporate Debt Obligations, 1.03% to 7.88%, due 7/15/19 to 8/25/36		1,484,420,027		300,980,910
		0.74	%		12/29/16		1/05/17		100,000		100,000		100,014,389	Corporate Debt Obligations, 2.05% to 8.75%, due 5/01/17 to 10/23/35		101,384,500		105,000,001
Total RBC Capital Markets LLC										$	566,000						$	597,003,302
Wells Fargo Securities LLC		0.76	%		12/30/16		1/03/17		49,000		49,000		49,004,138	Corporate Debt Obligation, 3.88%, due 8/15/40		50,050,696		51,450,000
		0.81	%2		12/30/16		1/03/17		455,000		455,000		455,040,950	Corporate Debt Obligations, 0.00% to 19.67%, due 6/25/20 to 10/25/46		487,259,395		486,850,001
Total Wells Fargo Securities LLC										$	504,000						$	538,300,001
Total										$	5,698,250						$	6,180,460,486

¹   Traded in a joint account.

²    Variable rate security. Rate as of period end and maturity is the date the principal owed can be recovered through demand.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 39

Schedule of Investments (concluded) Money Market Master Portfolio

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the Master Portfolio’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following tables summarize the Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Short-Term Securities1		—	$	41,298,691,362		—	$	41,298,691,362
1   See above Schedule of Investments for values in each security type.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

40 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 Prime Money Market Master Portfolio (Percentages shown are based on Net Assets)

Certificates of Deposit	Par   (000)		Value
Domestic — 0.7%
Citibank NA, New York, 1.16%, 7/05/17 (a)	$	1,000	$	1,000,000
Wells Fargo Bank NA, 1.20%, 6/29/17 (a)		1,000		1,000,085
				2,000,085
Yankee (b) — 10.1%
Bank of Montreal, Chicago, 1.08%, 3/16/17		1,000		1,000,189
BNP Paribas SA, New York, 1.25%, 5/24/17		1,000		1,000,419
DNB NOR Bank ASA, New York, 1.24%, 5/26/17		1,000		1,000,709
Kookmin Bank, New York, 0.69%, 1/05/17		7,000		6,999,988
Mitsubishi UFJ Trust & Banking Corp., New York, 0.68%, 1/03/17		3,000		3,000,036
Mizuho Bank Ltd., New York, 1.36%, 6/19/17 (a)		2,000		2,000,601
Natixis, SA, New York, 0.68%, 1/03/17		3,000		3,000,000
Nordea Bank Finland PLC, New York, 1.15%, 5/26/17		1,000		1,000,398
Sumitomo Trust & Banking Co. Ltd., New York:
0.69%, 1/03/17		5,000		5,000,076
1.15%, 1/06/17 (a)		2,000		2,000,195
1.34%, 6/19/17 (a)		1,000		1,000,442
Toronto-Dominion Bank, New York:
0.95%, 3/07/17		1,000		1,000,110
1.08%, 3/17/17		1,000		1,000,285
				29,003,448
Total Certificates of Deposit — 10.8%				31,003,533
Commercial Paper
Albion Capital Corp., 0.80%, 1/03/17 (c)		3,000		2,999,838
ANZ New Zealand (Int’l) Ltd., London, 1.07%, 5/08/17 (c)		1,000		996,126
Bank of Nova Scotia, 1.23%, 8/01/17 (a)		1,000		1,000,000
Barton Capital Corp., 0.75%, 1/04/17 (c)		3,000		2,999,749
Caisse Centrale Desjardins du Quebec, 0.66%, 1/04/17 (c)		8,000		7,999,232
Caisse Des Depots et Consignations, 0.98%, 3/13/17 (c)		1,000		998,317
Commonwealth Bank of Australia, 1.29%, 12/01/17 (a)		1,000		1,000,289
DBS Bank, Ltd., 1.10%, 4/10/17 (c)		1,000		997,040
Liberty Street Funding LLC, 1.10%, 4/06/17 (c)		1,000		997,284
Macquarie Bank Ltd., 1.03%, 3/07/17 (c)		1,000		998,139
Mitsubishi UFJ Trust & Banking Corp. (c):
0.55%, 1/03/17		2,000		1,999,873
1.21%, 6/06/17		1,000		994,984
N.V. Bank Nederlandse Gemeenten, 0.70%, 1/03/17 (c)(d)		7,000		6,999,599

Commercial Paper	Par   (000)		Value
Nationwide Building Society, 1.24%, 4/18/17 (c)(d)	$	2,000	$	1,992,158
Oversea Chinese Banking Corp. Ltd. (c):
1.09%, 3/14/17		1,000		998,212
1.10%, 4/07/17 (d)		1,000		997,087
Prudential Funding, LLC, 0.50%, 1/03/17 (c)		7,000		6,999,645
Ridgefield Funding Co. LLC, 0.88%, 1/04/17 (c)		4,000		3,999,711
Societe Generale Group, 0.54%, 1/03/17 (c)		2,000		1,999,941
Starbird Funding Corp., 1.43%, 6/19/17 (c)(d)		1,000		993,184
Thunder Bay Funding LLC, 1.02%, 6/01/17 (a)		1,000		1,000,302
United Overseas Bank Ltd. (c):
0.95%, 3/07/17		1,000		998,567
1.09%, 3/14/17 (d)		1,000		998,273
Victory Receivables Corp. (c):
1.04%, 3/06/17		1,000		998,497
1.15%, 3/14/17		1,000		998,205
Total Commercial Paper — 18.8%				53,954,252
Time Deposits
Canadian Imperial Bank of Commerce, 0.52%, 1/03/17		7,000		7,000,000
Credit Agricole CIB, 0.55%, 1/03/17		9,000		9,000,000
Den Norske Bank, New York, 0.51%, 1/03/17		7,000		7,000,000
DG Bank Deutsche Genossenschaftsbank AG, 0.51%, 1/03/17		8,000		8,000,000
National Australia Bank Ltd., 0.50%, 1/03/17		7,000		7,000,000
National Bank of Canada, 0.68%, 1/03/17		10,000		10,000,000
Natixis, SA, New York, 0.55%, 1/03/17		7,861		7,861,000
New Zealand Bank of Australia:
0.55%, 1/03/17		2,000		2,000,000
0.69%, 1/04/17		7,000		7,000,000
Nordea Bank Finland PLC, 0.50%, 1/03/17		8,000		8,000,000
Skandinaviska Enskilda Banken AB, 0.51%, 1/03/17		8,000		8,000,000
Total Time Deposits — 28.3%				80,861,000
Corporate Notes — 0.4%
Toyota Motor Credit Corp., 1.19%, 12/05/17 (a)		1,000		1,000,754
Total Repurchase Agreements — 42.0%				120,000,000
Total Investments (Cost — $286,814,682*) — 100.3%				286,819,539
Liabilities in Excess of Other Assets — (0.3)%				(995,927	)
Net Assets — 100.0%			$	285,823,612

Notes to Schedule of Investments

* Cost for federal income tax purposes.

(a) Variable rate security. Rate as of period end.

(b) Issuer is a U.S. branch of foreign domiciled bank.

(c) Rates are discount rates or a range of discount rates paid at the time of purchase.

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

Repurchase Agreements

Repurchase Agreements														Collateral
Counterparty	Coupon Rate			Purchase Date		Maturity Date		Par (000)		at Value (000)		Proceeds including Interest		Position	Original Par		Postion Received, at Value
BNP Paribas Securities Corp.		0.76	%		12/30/16		1/03/17	$	5,000	$	5,000	$	5,000,422	Corporate Debt Obligations, 1.38% to 1.63%, due 1/31/20 to 5/15/26	$	35,204,632	$	6,221,333

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 41

Schedule of Investments (concluded) Prime Money Market Master Portfolio

Repurchase Agreements														Collateral
Counterparty	Coupon Rate			Purchase Date		Maturity Date		Par (000)		at Value (000)		Proceeds including Interest		Position	Original Par		Postion Received, at Value
Citigroup Global Markets, Inc.		0.51	%1		12/30/16		1/03/17	$	35,000	$	35,000	$	35,001,983	U.S. Treasury Obligations, 2.55% to 7.25%, due 1/15/26 to 8/15/45	$	37,506,230	$	35,700,013
Credit Agricole Corp.		0.51	%1		12/30/16		1/03/17		30,000		30,000		30,001,700	U.S. Treasury Obligations, 0.00% to 3.00%, due 3/30/17 to 2/01/37		31,505,925		30,600,014
Credit Suisse Securities (USA) LLC		1.01	%		12/30/16		1/03/17		5,000		5,000		5,000,561	Corporate Debt Obligations, 1.13% to 1.25%, due 3/31/21 to 8/31/21		11,705,000		5,350,669
HSBC Securities (USA), Inc.		0.78	%		12/30/16		1/03/17		5,000		5,000		5,000,433	U.S. Treasury Obligations and Corporate Debt Obligations, 1.34% to 5.38%, due 8/15/19 to 10/16/23		5,190,000		5,112,968
J.P. Morgan Securities LLC		0.84	%		12/30/16		1/03/17		5,000		5,000		5,000,467	Corporate Debt Obligations, 1.26% to 6.00%, due 1/15/20 to 8/15/40		13,270,322		5,350,180
Merrill Lynch, Pierce, Fenner & Smith, Inc.		0.50	%		12/30/16		1/03/17		25,000		25,000		25,001,389	U.S. Treasury Obligation, 1.04%, due 5/25/47		24,491,600		25,500,061
RBC Capital Markets LLC		0.74	%		12/30/16		1/03/17		5,000		5,000		5,000,411	Corporate Debt Obligation, 0.00%, due 3/22/17		5,261,318		5,250,000
Wells Fargo Securities LLC		0.81	%		12/30/16		1/03/17		5,000		5,000		5,000,450	Corporate Debt Obligation, 2.75%, due 2/15/19		5,295,456		5,350,000
Total										$	120,000						$	124,435,238

¹    Traded in a joint account.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the Master Portfolio’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Short-Term Securities1		—	$	286,819,539		—	$	286,819,539
1   See above Schedule of Investments for values in each security type.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

42 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 Treasury Money Market Master Portfolio (Percentages shown are based on Net Assets)

U.S. Treasury Obligations	Par   (000)		Value
U.S. Treasury Bills (a):
0.40%, 1/12/17	$	35,000	$	34,995,829
0.35%, 1/26/17		100,000		99,976,389
0.42%, 2/02/17		48,500		48,482,099
0.43%, 2/09/17		30,130		30,116,291
0.50%, 2/16/17		400,000		399,745,862
0.47%, 2/23/17		580,000		579,606,474
0.50%, 3/02/17		124,000		123,900,800
0.49%, 3/09/17		61,000		60,945,507
0.55%, 3/16/17		82,900		82,807,981
0.50%, 3/23/17		95,225		95,118,943
0.50%, 4/06/17		120,000		119,844,833
0.50%, 4/13/17		100,000		99,859,750
0.48%, 4/20/17		100,000		99,857,694
0.62%, 4/27/17		67,500		67,368,413
0.50%, 5/11/17		87,280		87,124,218
0.57%, 6/22/17		23,075		23,013,813
0.69%, 10/12/17		6,745		6,709,081
U.S. Treasury Notes:
0.75%, 1/15/17		31,450		31,453,964
0.50%, 1/31/17		9,000		9,000,393
3.00%, 2/28/17		15,795		15,858,166
0.75%, 3/15/17		27,855		27,871,085
1.00%, 3/31/17		77,020		77,106,804

U.S. Treasury Obligations	Par   (000)		Value
U.S. Treasury Notes (continued):
4.50%, 5/15/17	$	27,795	$	28,188,600
0.63%, 5/31/17		150,270		150,266,978
0.63% - 2.50%, 6/30/17		57,765		57,871,031
0.88%, 7/15/17		40,255		40,329,048
0.50%, 7/31/17		65,955		65,943,059
0.88% - 4.75%, 8/15/17		13,635		13,932,967
0.63%, 8/31/17		25,520		25,516,133
1.00%, 9/15/17		130,000		130,172,380
0.72%, 10/31/17 (b)		59,036		59,064,727
0.88%, 11/15/17		48,420		48,406,731
0.83%, 1/31/18 (b)		158,320		158,383,781
0.75%, 4/30/18 (b)		299,030		299,146,551
0.73%, 7/31/18 (b)		52,020		52,016,933
0.69%, 10/31/18 (b)		143,455		143,447,282
Total U.S. Treasury Obligations — 57.6%				3,493,450,590
Total Repurchase Agreements — 42.3%				2,570,500,000
Total Investments (Cost — $6,063,950,590*) — 99.9%				6,063,950,590
Other Assets Less Liabilities — 0.1%				3,114,786
Net Assets — 100.0%			$	6,067,065,376

Notes to Schedule of Investments

* Cost for federal income tax purposes.

(a) Rates are discount rates or a range of discount rates paid at the time of purchase.

(b) Variable rate security. Rate as of period end.

Repurchase Agreements

	Repurchase Agreements											Collateral
Counterparty	Coupon Rate			Purchase Date		Maturity Date		Par (000)		at Value (000)		Proceeds including Interest		Position	Original Par		Position Received, at Value
Bank of Montreal		0.50	%		12/30/16		1/03/17	$	225,000	$	225,000	$	225,012,500	U.S. Treasury Obligations, 0.13% to 1.25%, due 5/31/18 to 4/15/21	$	259,996,600	$	229,500,080
Bank of Nova Scotia		0.50	%		12/30/16		1/03/17		198,000		198,000		198,011,000	U.S. Treasury Obligations, 0.50% to 6.13%, due 12/31/16 to 8/15/46		199,718,400		201,971,229
BNP Paribas Securities Corp.		0.50	%		12/30/16		1/03/17		435,000		435,000		435,024,167	U.S. Treasury Obligations, 0.00% to 8.13%, due 1/12/17 to 8/15/45		423,420,424		443,700,003
Citigroup Global Markets, Inc.		0.51	%1		12/30/16		1/03/17		175,000		175,000		175,009,917	U.S. Treasury Obligations, 1.13% to 1.25%, due 3/31/21 to 8/31/21		187,531,146		178,500,064
Credit Agricole Corp.		0.51	%1		12/30/16		1/03/17		131,000		131,000		131,007,423	U.S. Treasury Obligations, 1.00% to 4.75%, due 9/15/17 to 2/15/37		137,575,872		133,620,061
HSBC Securities (USA), Inc.		0.28	%		12/27/16		1/03/17		41,500		41,500		41,502,259	U.S. Treasury Obligations, 0.00% to 4.50%, due 3/31/21 to 2/15/45		38,879,600		42,335,762
		0.45	%		12/30/16		1/03/17		200,000		200,000		200,010,000	U.S. Treasury Obligations, 0.00% to 6.25%, due 2/02/17 to 5/15/46		200,798,237		204,004,349
		0.45	%		12/30/16		1/03/17		27,000		27,000		27,001,350	U.S. Treasury Obligations, 0.00% to 3.63%, due 11/30/18 to 8/15/46		24,686,900		27,544,848
		0.45	%		12/30/16		1/03/17		200,000		200,000		200,010,000	U.S. Treasury Obligation, 0.00%, due 8/31/22		197,003,700		204,003,288
Total HSBC Securities (USA), Inc.										$	468,500						$	477,888,247
Merrill Lynch, Pierce, Fenner & Smith, Inc.		0.50	%		12/30/16		1/03/17		10,000		10,000		10,000,556	U.S. Treasury Obligations, 0.00% to 2.00%, due 6/30/18 to 8/15/43		10,280,200		10,200,069
Mitsubishi UFJ Securities USA, Inc.		0.50	%		12/30/16		1/03/17		450,000		450,000		450,025,000	U.S. Treasury Obligations, 1.38% to 1.63%, due 1/31/20 to 5/15/26		456,816,441		459,000,025

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 43

Schedule of Investments (concluded) Treasury Money Market Master Portfolio

	Repurchase Agreements											Collateral
Counterparty	Coupon Rate			Purchase Date		Maturity Date		Par (000)		at Value (000)		Proceeds including Interest		Position	Original Par		Position Received, at Value
Morgan Stanley & Co. LLC		0.50	%		12/30/16		1/03/17	$	15,000	$	15,000	$	15,000,833	U.S. Treasury Obligations, 1.50% to 4.75%, due 2/28/19 to 2/15/37	$	15,121,300	$	15,300,009
RBC Capital Markets LLC		0.45	%		12/30/16		1/03/17		123,000		123,000		123,006,150	U.S. Treasury Obligations, 0.00% to 3.50%, due 2/02/17 to 2/15/39		130,875,637		125,460,051
TD Securities (USA) LLC		0.51	%		12/30/16		1/03/17		340,000		340,000		340,019,267	U.S. Treasury Obligations, 0.75% to 7.88%, due 1/31/17 to 8/15/44		418,958,700		346,800,004
Total										$	2,570,500						$	2,621,939,842

¹    Traded in a joint account.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the Master Portfolio’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Short-Term Securities1		—	$	6,063,950,590		—	$	6,063,950,590
1   See above Schedule of Investments for values in each security type.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

44 BLACKROCK FUNDS III DECEMBER 31, 2016

Statements of Assets and Liabilities

December 31, 2016	Money Market Master Portfolio		Prime Money Market Master Portfolio		Treasury Money Market Master Portfolio
Assets
Investments at value — unaffiliated1	$	35,600,441,527	$	166,819,539	$	3,493,450,590
Repurchase agreements at value — unaffiliated2		5,698,249,835		120,000,000		2,570,500,000
Cash		180,604		359		513,194
Receivables:
Contributions from investors		3,256		298		4
Interest — unaffiliated		26,563,590		28,157		3,014,058
Total assets		41,325,438,812		286,848,353		6,067,477,846
Liabilities
Payables:
Investments purchased		99,000,000		1,000,000		—
Investment advisory fees		2,376,076		8,528		385,822
Professional fees		54,873		15,157		12,438
Trustees’ fees		83,872		1,056		14,210
Total liabilities		101,514,821		1,024,741		412,470
Net Assets	$	41,223,923,991	$	285,823,612	$	6,067,065,376
Net Assets Consist of
Investors’ capital	$	41,213,819,836	$	285,818,755	$	6,067,065,376
Net unrealized appreciation (depreciation)		10,104,155		4,857		—
Net Assets	$	41,223,923,991	$	285,823,612	$	6,067,065,376
1   Investments at cost — unaffiliated	$	35,590,337,372	$	166,814,682	$	3,493,450,590
2   Repurchase agreements at cost — unaffiliated	$	5,698,249,835	$	120,000,000	$	2,570,500,000

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	45

Statements of Operations

Year Ended December 31, 2016	Money Market Master Portfolio			Prime Money Market Master Portfolio			Treasury Money Market Master Portfolio
Investment Income
Interest — unaffiliated	$	271,993,367		$	107,810,075		$	19,781,273
Expenses
Investment advisory		40,684,622			18,984,654			5,166,428
Independent Trustees		388,228			150,888			56,292
Professional		185,527			84,696			24,081
Total expenses		41,258,377			19,220,238			5,246,801
Less fees waived by the Manager		(12,779,142	)		(5,930,980	)		(1,630,301	)
Total expenses after fees waived		28,479,235			13,289,258			3,616,500
Net investment income		243,514,132			94,520,817			16,164,773
Realized and Unrealized Gain
Net realized gain from investments — unaffiliated		3,820,611			679,482			727,811
Net change in unrealized appreciation (depreciation) on investments — unaffiliated		10,104,155			4,857			—
Net realized and unrealized gain		13,924,766			684,339			727,811
Net Increase in Net Assets Resulting from Operations	$	257,438,898		$	95,205,156		$	16,892,584

See Notes to Financial Statements.
46	BLACKROCK FUNDS III	DECEMBER 31, 2016

Statements of Changes in Net Assets Master Investment Portfolio

	Money Market Master Portfolio						Prime Money Market Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	243,514,132		$	89,315,891		$	94,520,817		$	48,160,981
Net realized gain		3,820,611			1,394,458			679,482			597,937
Net change in unrealized appreciation (depreciation)		10,104,155			—			4,857			—
Net increase in net assets resulting from operations		257,438,898			90,710,349			95,205,156			48,758,918
Capital Transactions
Proceeds from contributions		158,911,217,460			125,579,520,075			215,080,864,954			367,806,236,981
Value of withdrawals		(161,233,886,359	)		(123,227,762,969	)		(241,591,917,250	)		(364,947,666,929	)
Net increase (decrease) in net assets derived from capital transactions		(2,322,668,899	)		2,351,757,106			(26,511,052,296	)		2,858,570,052
Net Assets
Total increase (decrease) in net assets		(2,065,230,001	)		2,442,467,455			(26,415,847,140	)		2,907,328,970
Beginning of year		43,289,153,992			40,846,686,537			26,701,670,752			23,794,341,782
End of year	$	41,223,923,991		$	43,289,153,992		$	285,823,612		$	26,701,670,752

	Treasury Money Market Master Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	16,164,773		$	1,341,031
Net realized gain		727,811			169,786
Net increase in net assets resulting from operations		16,892,584			1,510,817
Capital Transactions
Proceeds from contributions		83,703,130,631			63,745,962,994
Value of withdrawals		(81,103,139,118	)		(64,154,846,234	)
Net increase (decrease) in net assets derived from capital transactions		2,599,991,513			(408,883,240	)
Net Assets
Total increase (decrease) in net assets		2,616,884,097			(407,372,423	)
Beginning of year		3,450,181,279			3,857,553,702
End of year	$	6,067,065,376		$	3,450,181,279

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	47

Financial Highlights Master Investment Portfolio

	Money Market Master Portfolio
	Year Ended December 31,
	2016		2015		2014		2013		2012
Total Return
Total return		0.63%		0.21%		0.16%		0.20%		0.27%
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		0.60%		0.21%		0.16%		0.19%		0.27%
Supplemental Data
Net assets, end of year (000)	$	41,223,924	$	43,289,154	$	40,846,687	$	41,524,435	$	35,289,099

	Prime Money Market Master Portfolio
	Year Ended December 31,
	2016		2015		2014		2013		2012
Total Return
Total return		0.52%		0.19%		0.13%		0.17%		0.25%
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		0.50%		0.20%		0.14%		0.17%		0.25%
Supplemental Data
Net assets, end of year (000)	$	285,824	$	26,701,671	$	23,794,342	$	18,912,643	$	15,934,441

See Notes to Financial Statements.
48	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (concluded) Master Investment Portfolio

	Treasury Money Market Master Portfolio
	Year Ended December 31,
	2016		2015		2014		2013		2012
Total Return
Total return		0.32%		0.03%		0.00%		0.02%		0.06%
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%		0.06%		0.06%		0.07%
Net investment income		0.31%		0.04%		0.00%		0.02%		0.08%
Supplemental Data
Net assets, end of year (000)	$	6,067,065	$	3,450,181	$	3,857,554	$	2,738,199	$	2,613,824

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	49

Notes to Financial Statements Master Investment Portfolio

1. Organization:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio (each, a “Master Portfolio” and together, the “Master Portfolios”), are each a series of MIP. The Master Portfolios are classified as diversified. MIP is organized as a Delaware statutory trust. The financial statements and these accompanying notes relate to three series of MIP.

Treasury Money Market Master Portfolio operates as a “government money market fund” under Rule 2a-7 under the 1940 Act. The Master Portfolio is not subject to liquidity fees or temporary suspensions of redemptions due to declines in the Master Portfolio’s weekly liquid assets.

On October 11, 2016, BlackRock Funds: Institutional and BlackRock Funds: Prime (“BlackRock Funds”) began pricing and transacting their shares at a net asset value (“NAV”) per share calculated to four decimal places, reflecting market-based values of their portfolio holdings (i.e., at a “floating” NAV). The NAV of Prime Money Market Master Portfolio is priced multiple times each day, such Master Portfolio accepts purchase orders and redemption requests. Prior to the BlackRock Funds’ adoption of the floating NAV, their portfolio holdings were valued at amortized cost.

With respect to each of Institutional and Prime, the Board is permitted to impose a liquidity fee of up to 2% on the value redeemed or temporarily restrict redemptions from each of Institutional and Prime for up to 10 business days during a 90 day period, in the event that either Money Market Master Portfolio’s or Prime Money Market Master Portfolio’s weekly liquid assets fall below certain thresholds.

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

2. Significant Accounting Policies:

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

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.

Recent Accounting Standard: In November 2016, the Financial Accounting Standards Board issued Accounting Standards Update “Restricted Cash” which will require entities to include the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the beginning and ending cash balances in the Statements of Cash Flows. The guidance will be applied retrospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. Management is evaluating the impact, if any, of this guidance on the Master Portfolios’ presentation in the Statements of Cash Flows.

Indemnifications: In the normal course of business, a Master Portfolio enters into contracts that contain a variety of representations that provide general indemnification. A Master Portfolio’s maximum exposure under these arrangements is unknown because it involves future potential claims against a Master Portfolio, which cannot be predicted with any certainty.

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

Through May 31, 2016, the Master Portfolios had an arrangement with their custodian whereby credits were earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. Credits previously earned may have been utilized until December 31, 2016. Under current arrangements effective June 1, 2016, the Master Portfolios no longer earn credits on uninvested cash, and may incur charges on uninvested cash balances and overdrafts, subject to certain conditions.

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies (Money Market Master Portfolio and Prime Money Master Portfolio): The Master Portfolios investments are valued at fair value (also referred to as “market value” within the financial statements) as of 5:00 p.m. and 3:00 p.m., Eastern time respectively, or if the reporting date falls on a day a Master Portfolio is closed, investments are valued at fair value as of the period end. U.S. GAAP defines fair value as the price the Master Portfolios would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Master Portfolios determine the fair values of their financial instruments using various 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 oversee the pricing function for all financial instruments.

50 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued) Master Investment Portfolio

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of each Master Portfolio’s assets and liabilities:

• Investments 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.

• 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.

U.S. GAAP defines fair value as the price the Treasury Money Market 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. Treasury Money Market Master Portfolio’s investments are valued under the amortized cost method which approximates current market value in accordance with Rule 2a-7 under the 1940 Act. Under this method, investments are valued at cost when purchased and, thereafter, a constant proportionate accretion of discounts and amortization of premiums are recorded until the maturity of the security. Treasury Money Market Master Portfolio seeks to maintain the NAV per share of its feeder funds at $1.00, although there is no assurance that it will be able to do so on a continuing basis.

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

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

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

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

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

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

4. Securities and Other Investments:

Repurchase Agreements: Repurchase agreements are commitments to purchase a security from a counterparty who agrees to repurchase the same security at a mutually agreed upon date and price. On a daily basis, the counterparty is required to maintain collateral subject to the agreement and in value no less than the agreed upon repurchase amount. Pursuant to the custodial undertaking associated with a tri-party repurchase arrangement, an unaffiliated third party custodian maintains accounts to hold collateral for a Master Portfolio and its counterparties. Typically, a Master Portfolio and counterparty are not permitted to sell, re-pledge or use the collateral absent a default by the counterparty or a Master Portfolio, respectively. Certain Master Portfolios, along with other registered investment companies advised by the Manager, may transfer uninvested cash into a single joint trading account which is then invested in one or more repurchase agreements.

In the event the counterparty defaults and the fair value of the collateral declines, a Master Portfolio could experience losses, delays and costs in liquidating the collateral.

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

BLACKROCK FUNDS III DECEMBER 31, 2016 51

Notes to Financial Statements (continued) Master Investment Portfolio

5. Investment Advisory Agreement and Other Transactions with Affiliates:

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

Investment Advisory/Administration: MIP, on behalf of each Master Portfolio, entered into an Investment Advisory Agreement with the Manager, the Master Portfolios’ investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory services. The Manager is responsible for the management of each Master Portfolio’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of each Master Portfolio.

For such services, each Master Portfolio pays the Manager a monthly fee at an annual rate equal to 0.10% of the average daily value of each Master Portfolio’s net assets.

MIP, on behalf of the Master Portfolios, entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL, in consideration thereof, has agreed to bear all of the Master Portfolios’ ordinary operating expenses, excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the Master Portfolios. BAL is not entitled to compensation for providing administration service to the Master Portfolios, for so long as BAL is entitled to compensation for providing administration service to corresponding feeder funds that invest substantially all of their assets in the Master Portfolios, or BAL (or an affiliate) receives investment advisory fees from the Master Portfolios.

Waivers/Reimbursements: The Manager has contractually agreed to waive 0.03% of its investment advisory fees through April 30, 2018. The Manager has also voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees to enable the feeders that invest in the Master Portfolios to maintain minimum levels of daily net investment income. The Manager may discontinue the voluntary waiver at any time. For the year ended December 31, 2016, the amounts waived are included in fees waived by the Manager in the Statements of Operations are as follows:

Money Market Master Portfolio	$	12,205,387
Prime Money Market Master Portfolio	$	5,695,396
Treasury Money Market Master Portfolio	$	1,549,928

The fees and expenses of MIP’s trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and the Master Portfolios’ independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolios. BAL has contractually agreed to reimburse the Master Portfolios or provide an offsetting credit against the administration fees paid by the Master Portfolios in an amount equal to these independent expenses through April 30, 2018. For the year ended December 31, 2016, the amounts waived were as follows:

Money Market Master Portfolio	$	573,755
Prime Money Market Master Portfolio	$	235,584
Treasury Money Market Master Portfolio	$	80,373

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

Other Transactions: The Master Portfolios may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common trustees. For the year ended December 31, 2016, the purchase and sale transactions and any net realized gains (losses) with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:

	Purchases
Money Market Master Portfolio	$	271,802,500
Prime Market Master Portfolio	$	5,600,905

6. Income Tax Information:

Treasury Money Market 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.

Treasury Money Market Master Portfolio files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on Master Portfolio’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016. The statutes of limitations on Master Portfolio’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Treasury Money Market Master Portfolio as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Master Portfolio’s financial statements.

52 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (concluded) Master Investment Portfolio

After May 2, 2016 and April 18, 2016, Money Market Master Portfolio and Prime Money Market Master Portfolio, respectively, became disregarded entities separate from their owners for tax purposes. As such, the feeders of the Master Portfolios’ are treated as the owners of the net assets, income, expenses and realized and unrealized gains and losses of the Master Portfolio. No federal income tax provision was required. It is intended that the Portfolios’ assets will be managed so the owners of the Master Portfolios can satisfy requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

7. Principal Risks:

Many municipalities insure repayment of their bonds, which may reduce the potential for loss due to credit risk. The market value of these bonds may fluctuate for other reasons, including market perception of the value of such insurance, and there is no guarantee that the insurer will meet its obligation.

Inventories of municipal bonds held by brokers and dealers may decrease, which would lessen their ability to make a market in these securities. Such a reduction in market making capacity could potentially decrease a Fund’s ability to buy or sell bonds. As a result, a Fund may sell a security at a lower price, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative impact on performance. If a Fund needed to sell large blocks of bonds, those sales could further reduce the bonds’ prices and impact performance.

In the normal course of business, certain 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 to meet all its obligations, including the ability to pay principal and interest when due (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 of securities owned by the Master Portfolios. Changes arising from the general economy, the overall market and local, regional or global political and/or social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

Counterparty Credit Risk: Similar to issuer credit risk, the Master Portfolios may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Master Portfolios manage counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the 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 approximately their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Master Portfolios.

8. Subsequent Events:

Management’s evaluation of the impact of all subsequent events on the Master Portfolios’ financial statements was completed through the date the financial statements were issued and the following items were noted:

On February 23, 2017, the Board approved a proposal to liquidate Prime Money Market Master Portfolio. On or about April 28, 2017 (the “Liquidation Date”), following the Liquidation of BlackRock Cash Funds: Prime (Prime Money Market Master Portfolio’s sole feeder fund), Prime Money Market Master Portfolio will be terminated as a series of MIP.

BLACKROCK FUNDS III DECEMBER 31, 2016 53

Report of Independent Registered Public Accounting Firm Master Investment Portfolio

To the Board of Trustees of Master Investment Portfolio and the Investors of the Master Portfolios, as defined:

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio (the “Master Portfolios”), each a series of Master Investment Portfolio, as of December 31, 2016, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolios’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

54 BLACKROCK FUNDS III DECEMBER 31, 2016

Officers and Trustees¹

Name, Address2 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3
Rodney D. Johnson 1941	Chair of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011; Director, The Mainstay (non-profit) since 2016.	26 RICs consisting of 146 Portfolios	None
Susan J. Carter 1956	Trustee	Since 2016	Director, Pacific Pension Institute since 2014; Advisory Board Member, Center for Private Equity and Entrepreneurship at Tuck School of Business since 1997; Senior Advisor, Commonfund Capital, Inc. (“CCI”) (investment adviser) in 2015; Chief Executive Officer, CCI from 2013 to 2014; President & Chief Executive Officer, CCI from 1997 to 2013; Advisory Board Member, Girls Who Invest since 2015; Advisory Board Member, Bridges Ventures since 2016; Trustee, Financial Accounting Foundation since 2017.	26 RICs consisting of 146 Portfolios	None
Collette Chilton 1958	Trustee	Since 2015	Chief Investment Officer, Williams College since 2006; Chief Investment Officer, Lucent Asset Management Corporation from 1998 to 2006.	26 RICs consisting of 146 Portfolios	None
Neil A. Cotty 1954	Trustee	Since 2016	Bank of America Corporation from 1996 to 2015, serving in various senior finance leadership roles, including Chief Accounting Officer, from 2009 to 2015, Chief Financial Officer of Global Banking, Markets and Wealth Management from 2008 to 2009, Chief Accounting Officer from 2004 to 2008, Chief Financial Officer of Consumer Bank from 2003 to 2004, Chief Financial Officer of Global Corporate Investment Bank from 1999 to 2002.	26 RICs consisting of 146 Portfolios	None
Cynthia A. Montgomery 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012.	26 RICs consisting of 146 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 1947	Trustee	Since 2009	General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Chair, Basic Health International (non-profit) since 2015.	26 RICs consisting of 146 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company); Consol Energy Inc.
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981 and Principal since 2010.	26 RICs consisting of 146 Portfolios	None
Mark Stalnecker 1951	Trustee	Since 2015	Chief Investment Officer, University of Delaware from 1999 to 2013; Trustee, Winterthur Museum and Country Estate from 2001 to 2015; Member of the Investment Committee, Delaware Public Employees’ Retirement System since 2002; Member of the Investment Committee, Christiana Care Health System since 2009; Member of the Investment Committee, Delaware Community Foundation from 2013 to 2014; Director, SEI Private Trust Co. from 2001 to 2014.	26 RICs consisting of 146 Portfolios	None
Kenneth L. Urish 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since founding in 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	26 RICs consisting of 146 Portfolios	None

BLACKROCK FUNDS III DECEMBER 31, 2016 55

Officers and Trustees¹ (continued)

Name, Address2 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3 (concluded)
Claire A. Walton 1957	Trustee	Since 2016	Chief Operating Officer and Chief Financial Officer of Liberty Square Asset Management, LP from 1998 to 2015; General Partner of Neon Liberty Capital Management, LLC since 2003; Director, Boston Hedge Fund Group since 2009; Director, Woodstock Ski Runners since 2013; Director, Massachusetts Council on Economic Education from 2013 to 2015.	26 RICs consisting of 146 Portfolios	None
Frederick W. Winter 1945	Trustee	Since 2009	Director, Alkon Corporation since 1992; Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh, Dean and Professor from 1997 to 2005, Professor until 2013.	26 RICs consisting of 146 Portfolios	None
Interested Trustees5
Barbara G. Novick 1960	Trustee	Since 2015	Vice Chairman of BlackRock, Inc. since 2006; Chair of BlackRock’s Government Relations Steering Committee since 2009; Head of the Global Client Group of BlackRock, Inc. from 1988 to 2008.	100 RICs consisting of 220 Portfolios	None
John M. Perlowski 1964	Trustee, President and Chief Executive Officer	Since 2015 (Trustee); Since 2010 (President and Chief Executive Officer)	Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Fund & Accounting Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Advisory Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.	128 RICs consisting of 318 Portfolios	None
	1    As of February 24, 2017.
	2   The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	3    Independent Trustees serve until their resignation, retirement, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Independent Trustees on a case-by-case basis, as appropriate.
	4   In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, certain Independent Trustees were elected to the Board. As a result, although the chart shows certain Independent Trustees as joining the Board in 2009, those Independent Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: Rodney D. Johnson, 1995; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1999; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
	5   Ms. Novick and Mr. Perlowski are both “interested persons,” as defined in the 1940 Act, of the Trust/MIP based on their positions with BlackRock and its affiliates. Mr. Perlowski and Ms. Novick are also board members of certain complexes of BlackRock registered open-end and closed-end funds. Mr. Perlowski is also a board member of the BlackRock Equity-Bond Complex and the BlackRock Closed-End Complex, and Ms. Novick is a board member of the BlackRock Closed-End Complex.

56 BLACKROCK FUNDS III DECEMBER 31, 2016

Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served as an Officer	Principal Occupation(s) During Past Five Years
Officers Who Are Not Trustees2
Thomas Callahan 1968	Vice President	Since 2016	Managing Director of BlackRock, Inc. since 2013; Head of BlackRock’s Global Cash Management Business since 2016; Co-Head of the Global Cash Management Business from 2014 to 2016; Deputy Head of the Global Cash Management Business from 2013 to 2014; Member of the Cash Management Group Executive Committee since 2013; Chief Executive Officer of NYSE Liffe U.S. from 2008 to 2013.
Jennifer McGovern 1977	Vice President	Since 2014	Managing Director of BlackRock, Inc. since 2016; Director of BlackRock, Inc. from 2011 to 2015; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal J. Andrews 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock, Inc. 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 M. Fife 1970	Treasurer	Since 2007	Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Charles Park 1967	Chief Compliance Officer	Since 2014	Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Fernanda Piedra 1969	Anti-Money Laundering Compliance Officer	Since 2015	Director of BlackRock, Inc. since 2014; Anti-Money Laundering Compliance Officer and Regional Head of Financial Crime for the Americas at BlackRock, Inc. since 2014; Head of Regulatory Changes and Remediation for the Asset Wealth Management Division of Deutsche Bank from 2010 to 2014; Vice President of Goldman Sachs (Anti-Money Laundering/Suspicious Activities Group) from 2004 to 2010.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock, Inc. since 2014; Director of BlackRock, Inc. from 2010 to 2013; Secretary of the iShares® exchange traded funds since 2015; Secretary of the BlackRock-advised mutual funds since 2012.
	1    The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	2    Officers of the Trust/MIP serve at the pleasure of the Board.
	Further information about the Trust’s/MIP’s Officers and Trustees is available in the Trust’s/MIP’s Statement of Additional Information, which can be obtained without charge by calling (800) 626-1960.

Effective December 31, 2016, David O. Beim and Dr. Matina S. Horner resigned as Trustees of the Trust/MIP.

Investment Adviser BlackRock Fund Advisors San Francisco, CA 94105	Custodian and Accounting Agent State Street Bank and Trust Company Boston, MA 02110	Distributor BlackRock Investments, LLC New York, NY 10022	Address of the Trust/MIP 400 Howard Street San Fransisco, CA 94105
Administrator BlackRock Advisors LLC Wilmington, DE 19809	Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP Philadelphia, PA 19103	Legal Counsel Sidley Austin LLP New York, NY 10019	Transfer Agent State Street Bank and Trust Company North Quincy, MA 20171

BLACKROCK FUNDS III DECEMBER 31, 2016 57

Additional Information

General Information

Householding

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

Availability of Quarterly Schedule of Investments

The Funds/Master Portfolios file their complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Each Fund’s/Master Portfolio’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room or how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. Each Fund’s/Master Portfolio’s Forms N-Q may also be obtained upon request and without charge by calling (800) 626-1960.

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 upon request and without charge (1) by calling (800) 626-1960; (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 Funds/Master Portfolios voted proxies relating to securities held in the Funds’/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) 626-1960; and (2) on the SEC’s website at http://www.sec.gov.

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

58 BLACKROCK FUNDS III DECEMBER 31, 2016

Additional Information (concluded)

Important Fund Information

The following applies to BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and their corresponding Master Portfolios: This report is intended for current holders. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of a Fund unless preceded or accompanied by the Fund’s current prospectus. You could lose money by investing in a Fund. Because the share price of the Funds will fluctuate, when you sell your shares they may be worth more or less than what you originally paid for them. The Funds may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Funds’ liquidity falls below required minimums because of market conditions or other factors. An investment in a Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Funds’ sponsor has no legal obligation to provide financial support to the Funds at any time. 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) 626-1960. Each Fund’s current 7-day yield more closely reflects the current earnings of a Fund than the total returns quoted. Statements and other information herein are as dated and are subject to change.

The following applies to BlackRock Cash Funds: Treasury and its corresponding Master Portfolio: This report is intended for current holders. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless preceded or accompanied by the Fund’s current prospectus. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund at any time. 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) 626-1960. The 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.

BLACKROCK FUNDS III DECEMBER 31, 2016 59

MMF3-12/16-AR

DECEMBER 31, 2016

  ANNUAL REPORT

BlackRock CoreAlpha Bond Fund  |  of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
The Markets in Review		3
Annual Report:
Fund Summary		4
About Fund Performance		6
Disclosure of Expenses		6
Derivative Financial Instruments		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		15
Fund Report of Independent Registered Public Accounting Firm		19
Important Tax Information		19
Master Portfolio Information		20
Master Portfolio Financial Statements:
Schedule of Investments		21
Statement of Assets and Liabilities		36
Statement of Operations		37
Statements of Changes in Net Assets		38
Master Portfolio Financial Highlights		38
Master Portfolio Notes to Financial Statements		39
Master Portfolio Report of Independent Registered Public Accounting Firm		50
Officers and Trustees		51
Additional Information		54

2 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

The Markets in Review

Dear Shareholder,

The year 2016 started on a fraught note with worries about slowing growth in China, plunging oil prices and sliding share prices. Then reflationary expectations in the United States helped drive a second-half global growth pick-up and big market reversals. As such, higher-quality asset classes such as Treasury bonds, municipals and investment grade credit prevailed in the first half of the year, only to struggle in the second. In contrast, risk assets sold off at the start of the year and rebounded in the latter half, with some asset classes posting strong year-end returns.

A key takeaway from 2016’s market performance is that economics can trump politics. The global reflationary theme — governments taking policy action to support growth — was the dominant driver of 2016 asset returns, outweighing significant political upheavals and uncertainty. This trend accelerated after the U.S. election on expectations for an extra boost to U.S. growth via fiscal policy.

Markets were remarkably resilient during the year. Spikes in equity volatility after big surprises such as the U.K.’s vote to leave the European Union and the outcome of the U.S. presidential election were short-lived. Instead, political surprises and initial sell-offs were seized upon as buying opportunities. We believe this reinforces the case for taking the long view rather than reacting to short-term market noise.

Asset returns varied widely in 2016. Perceived safe assets such as government bonds and low-volatility shares underperformed the higher-risk areas of the market. And the reversal of longstanding trends created opportunities, such as in the recovery of value stocks and commodities.

We expect some of these trends to extend into 2017 and see the potential for more flows into risk assets this year. Learn more by reading our market insights at blackrock.com.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2016
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		7.82	%		11.96	%
U.S. small cap equities (Russell 2000® Index)		18.68			21.31
International equities (MSCI Europe, Australasia, Far East Index)		5.67			1.00
Emerging market equities (MSCI Emerging Markets Index)		4.49			11.19
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.18			0.33
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		(7.51	)		(0.16	)
U.S. investment grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index)		(2.53	)		2.65
Tax-exempt municipal bonds (S&P Municipal Bond Index)		(3.43	)		0.77
U.S. high yield bonds (Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		7.40			17.13
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, 2016

Investment Objective

BlackRock CoreAlpha Bond Fund’s (the “Fund”) investment objective is to seek to provide a combination of income and capital growth.

Portfolio Management Commentary

How did the Fund perform?

• For the 12-month period ended December 31, 2016, the Fund underperformed the benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index (the “Index”).

• 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?

• Currency strategies were the largest detractor from performance during the 12-month period as the Master Portfolio’s developed market currency strategies, driven by a short Norwegian krone position, were unfavorable. The Master Portfolio’s U.S. rates strategies were also negative, primarily during the first quarter, during which the Master Portfolio had short positions in ultra-long Treasury contracts. Global rates strategies also detracted, in particular developed market positions during the first quarter (European rates) and the fourth quarter (commodity exporters).

• Asset allocation was a positive contributor as the Master Portfolio was long high yield and other spread assets for much of the year, and high yield benefited from continued spread tightening. Credit security selection also was positive due to an overweight in consumer non-cyclicals, particularly the food & beverage and tobacco sub-sectors.

• The Master Portfolio held derivatives in the form of futures contracts as part of its investment strategy. The use of futures had a negative impact on performance during the period.

Describe recent portfolio activity.

• During the 12-month period, the Master Portfolio decreased its energy and basic materials underweights. Based on weak fundamental signals, the Master Portfolio was defensive and underweight in terms of its energy holdings throughout the year. However, the investment adviser found value within the midstream sub-sector and increased exposure there during the second half of the year. The banking sector experienced a volatile 12-month period, beginning the year by underperforming on concerns over low rates, regulation and supply expectations. The Master Portfolio was overweight to banking at the start of the year and soon changed to an underweight based on momentum and relative value signals. As the rate environment improved, leading to lower default probabilities and strong signals, the Master Portfolio reduced its underweight in banking.

Describe portfolio positioning at period end.

• At period end, the Master Portfolio remained overweight relative to the Index in non-government spread sectors and generally underweight U.S. Treasury securities. Within spread sectors, the Master Portfolio was overweight in investment grade corporate credit, agency mortgage-backed securities and asset-backed securities, and underweight in select non-corporate sectors including emerging markets. The Master Portfolio also held a non-benchmark allocation to high yield debt. Within investment grade, the portfolio was overweight consumer sectors, banking names, and select issues within technology.

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, 2016

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including administration fees, if any. Institutional Shares do not have a sales charge.

²  The Fund invests all of its assets in the Master Portfolio. The Master Portfolio invests, under normal circumstances, at least 80% of its assets in bonds, including obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities; mortgage-backed securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, including U.S. agency mortgage pass-through securities; commercial mortgage-backed securities; debt obligations of U.S. issuers; municipal securities; asset-backed securities; and U.S.-registered dollar-denominated debt obligations of foreign issuers. The Master Portfolio may invest in bonds of any maturity or duration.

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

Performance Summary for the Period Ended December 31, 2016

										Average Annual Total Returns4
										1 Year						5 Years						10 Years
	Standardized 30-Day Yields			Unsubsidized 30-Day Yields			6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		2.24	%		2.24	%		(2.58	)%		2.37	%		N/A			2.29	%		N/A			4.62	%		N/A
Investor A		1.88			1.88			(2.74	)		2.01			(2.07	)%		1.95			1.12	%		4.28			3.85	%
Investor C		1.17			1.16			(3.02	)		1.35			0.36			1.21			1.21			3.51			3.51
Class K		2.30			2.29			(2.46	)		2.46			N/A			2.40			N/A			4.69			N/A
Bloomberg Barclays U.S. Aggregate Bond Index		—			—			(2.53	)		2.65			N/A			2.23			N/A			4.34			N/A

⁴  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 6 for a detailed description of share classes, including any related sales charges and fees.

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

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical6
	Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period5		Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period5		Annualized Expense Ratio
Institutional	$	1,000.00	$	974.20	$	1.74	$	1,000.00	$	1,023.38	$	1.78		0.35	%
Investor A	$	1,000.00	$	972.60	$	3.42	$	1,000.00	$	1,021.67	$	3.51		0.69	%
Investor C	$	1,000.00	$	969.80	$	7.18	$	1,000.00	$	1,017.85	$	7.35		1.45	%
Class K	$	1,000.00	$	975.40	$	1.49	$	1,000.00	$	1,023.63	$	1.53		0.30	%

⁵  For each class of the Fund, expenses are equal to the annualized net expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period shown). Because the Fund invests all of its assets in the Master LLC, the expense example reflects the net expenses of both the Fund and the Master LLC in which it invests.

⁶  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366.

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

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 5

About Fund Performance

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

• Investor A Shares are subject to a maximum initial sales charge (front-end load) of 4.00% and a service fee of 0.25% per year (but no distribution fee). Certain redemptions of these shares may be subject to a contingent deferred sales charge (“CDSC”) where no initial sales charge was paid at the time of purchase. These shares are generally available through financial intermediaries.

• Investor C Shares are subject to a 1.00% CDSC if redeemed within one year of purchase. In addition, these shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. These shares are generally available through financial intermediaries.

Prior to February 28, 2011 for Institutional Shares, April 30, 2012 for Investor A and Investor C Shares and March 28, 2016 for Class K Shares, the performance of the classes is based on the returns of the Master Portfolio adjusted to reflect the estimated annual fund fees and operating expenses of each respective share class of the Fund.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the

performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in the performance table on the previous page assume reinvestment of all distributions, if any, at net asset value (“NAV”) on the ex-dividend/payable dates Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Distributions paid to each class of shares will vary because of the different levels of service, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders.

BlackRock Advisors, LLC (“BAL” or the “Administrator”), the Fund’s administrator, voluntarily waived a portion of the Fund’s expenses. Without such waiver, the Fund’s performance would have been lower. The Administrator is under no obligation to waive or to continue waiving its fees and such voluntary waiver may be reduced or discontinued at any time. See Note 4 of the Notes to Financial Statements for additional information on waivers. The standardized 30-day yield includes the effects of any waivers and/or reimbursements. The unsubsidized 30-day yield excludes the effects of any waivers and/or reimbursements.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including administration fees, service and distribution fees, including 12b-1 fees, 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, 2016 and held through December 31, 2016) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

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

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

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

6 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

Derivative Financial Instruments

The Master Portfolio may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other asset without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the

transaction or illiquidity of the instrument. The Master Portfolio’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Master Portfolio can realize on an investment and/or may result in lower distributions paid to shareholders. The Master Portfolio’s investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 7

Statement of Assets and Liabilities BlackRock CoreAlpha Bond Fund

December 31, 2016
Assets
Investments at value — Master Portfolio (cost — $352,050,925)	$	347,559,627
Withdrawals from the Master Portfolio		700,943
Receivable for capital shares sold		100,000
Total assets		348,360,570
Liabilities
Payables:
Administration fees		28,223
Capital shares redeemed		800,943
Income dividends		35,529
Professional fees		9,358
Service and distribution fees		760
Total liabilities		874,813
Net Assets	$	347,485,757
Net Assets Consist of
Paid-in capital	$	354,327,048
Undistributed net investment income		805,041
Accumulated net realized loss allocated from the Master Portfolio		(3,155,034	)
Net unrealized appreciation (depreciation) allocated from the Master Portfolio		(4,491,298	)
Net Assets	$	347,485,757
Net Asset Value
Institutional — Based on net assets of $345,258,958 and 33,772,798 shares outstanding, unlimited shares authorized, no par value	$	10.22
Investor A — Based on net assets of $1,694,996 and 165,821 shares outstanding, unlimited shares authorized, no par value	$	10.22
Investor C — Based on net assets of $337,178 and 32,967 shares outstanding, unlimited shares authorized, no par value	$	10.23
Class K — Based on net assets of $194,625 and 19,029 shares outstanding, unlimited shares authorized, no par value	$	10.23

See Notes to Financial Statements.
8	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2016

Statement of Operations BlackRock CoreAlpha Bond Fund

Year Ended December 31, 2016
Investment Income
Net investment income allocated from the Master Portfolio:
Interest — unaffiliated	$	8,134,799
Dividends — affiliated		61,088
Securities lending — affiliated — net		1,218
Expenses		(813,831	)
Fees waived		24,047
Total investment income		7,407,321
Fund Expenses
Administration — class specific		321,321
Service and distribution — class specific		13,199
Professional		8,406
Miscellaneous		1,128
Total expenses		344,054
Less fees waived by the Administrator		(8,406	)
Total expenses after fees waived		335,648
Net investment income		7,071,673
Realized and Unrealized Loss Allocated from the Master Portfolio
Net realized loss from investments, futures contracts, options written, swaps, forward foreign currency exchange contracts, foreign currency transactions and capital gain distributions from investment companies — affiliated		(437,304	)
Net change in unrealized appreciation (depreciation) on investments, futures contracts, swaps, forward foreign currency exchange contracts and foreign currency translations		(1,138,400	)
Net realized and unrealized loss		(1,575,704	)
Net Increase in Net Assets Resulting from Operations	$	5,495,969

See Notes to Financial Statements.
	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2016	9

Statements of Changes in Net Assets BlackRock CoreAlpha Bond Fund

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	7,071,673		$	5,612,539
Net realized gain (loss)		(437,304	)		464,898
Net change in unrealized appreciation (depreciation)		(1,138,400	)		(5,654,572	)
Net increase in net assets resulting from operations		5,495,969			422,865
Distributions to Shareholders1
From net investment income:
Institutional		(6,177,808	)		(5,292,050	)
Investor A		(76,384	)		(34,988	)
Investor C		(3,574	)		(3,325	)
Class K		(2,860	)		—
From net realized gain:
Institutional		(3,827,749	)		(1,185,065	)
Investor A		(19,075	)		(8,426	)
Investor C		(4,200	)		(1,358	)
Class K		(2,276	)		—
From return of capital
Institutional		(424,377	)		—
Investor A		(2,115	)		—
Investor C		(466	)		—
Class K		(252	)		—
Decrease in net assets resulting from distributions to shareholders		(10,541,136	)		(6,525,212	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		113,529,581			59,195,073
Net Assets
Total increase in net assets		108,484,414			53,092,726
Beginning of year		239,001,343			185,908,617
End of year	$	347,485,757		$	239,001,343
Undistributed (Distributions in excess of) net investment income, end of year	$	805,041		$	(6,006	)
1   Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
10	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2016

Financial Highlights BlackRock CoreAlpha Bond Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.32		$	10.57		$	10.19		$	10.72		$	10.50
Net investment income1		0.24			0.26			0.26			0.22			0.24
Net realized and unrealized gain (loss)		0.01			(0.20	)		0.39			(0.48	)		0.26
Net increase (decrease) from investment operations		0.25			0.06			0.65			(0.26	)		0.50
Distributions:2
From net investment income		(0.22	)		(0.25	)		(0.26	)		(0.25	)		(0.25	)
From net realized gain		(0.12	)		(0.06	)		(0.01	)		(0.00	)3		—
From return of capital		(0.01	)		—			—			(0.02	)		(0.03	)
Total distributions		(0.35	)		(0.31	)		(0.27	)		(0.27	)		(0.28	)
Net asset value, end of year	$	10.22		$	10.32		$	10.57		$	10.19		$	10.72
Total Return4
Based on net asset value		2.37%			0.48%			6.45%			(2.44)%			4.82%
Ratios to Average Net Assets5
Total expenses		0.35%	6		0.35%	6		0.35%	6		0.36%	6		0.37%	7
Total expenses after fees waived		0.35%	6		0.35%	6		0.34%	6		0.34%	6		0.34%	7
Net investment income		2.24%	6		2.48%	6		2.53%	6		2.16%	6		2.22%	7
Supplemental Data
Net assets, end of year (000)	$	345,259		$	236,267		$	183,880		$	99,630		$	110,020
Portfolio turnover rate of the Master Portfolio8		677%			612%			686%			986%			2,128%

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

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

⁷ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of less than 0.01%.

⁸ Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Portfolio turnover rate (excluding MDRs)		459%		540%		470%		736%		1,774%

See Notes to Financial Statements.
	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2016	11

Financial Highlights (continued) BlackRock CoreAlpha Bond Fund

	Investor A
	Year Ended December 31,												Period April 30, 20121 to December  31, 2012
	2016			2015			2014			2013
Per Share Operating Performance
Net asset value, beginning of period	$	10.32		$	10.58		$	10.19		$	10.72		$	10.55
Net investment income2		0.20			0.22			0.23			0.18			0.12
Net realized and unrealized gain (loss)		0.01			(0.21	)		0.39			(0.48	)		0.22
Net increase (decrease) from investment operations		0.21			0.01			0.62			(0.30	)		0.34
Distributions:3
From net investment income		(0.18	)		(0.21	)		(0.22	)		(0.21	)		(0.15	)
From net realized gain		(0.12	)		(0.06	)		(0.01	)		(0.00	)4		—
From return of capital		(0.01	)		—			—			(0.02	)		(0.02	)
Total distributions		(0.31	)		(0.27	)		(0.23	)		(0.23	)		(0.17	)
Net asset value, end of period	$	10.22		$	10.32		$	10.58		$	10.19		$	10.72
Total Return5
Based on net asset value		2.01%			0.04%			6.18%			(2.78)%			3.25%	6
Ratios to Average Net Assets7
Total expenses		0.70%	8		0.70%	8		0.71%	8		0.71%	8		0.72%	8,9
Total expenses after fees waived		0.69%	8		0.70%	8		0.69%	8		0.69%	8		0.70%	8,9
Net investment income		1.92%	8		2.13%	8		2.19%	8		1.78%	8		1.80%	8,9
Supplemental Data
Net assets, end of period (000)	$	1,695		$	2,463		$	1,776		$	166		$	168
Portfolio turnover rate of the Master Portfolio10		677%			612%			686%			986%			2,128%

¹ Commencement of operations.

² Based on average shares outstanding.

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

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

⁵ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁶ Aggregate total return.

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

⁸ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.01%.

⁹ Annualized.

¹⁰ Includes MDRs. Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,								Period April 30, 20121 to December  31, 2012
	2016		2015		2014		2013
Portfolio turnover rate (excluding MDRs)		459%		540%		470%		736%		1,774%

See Notes to Financial Statements.
12	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock CoreAlpha Bond Fund

	Investor C
	Year Ended December 31,												Period April 30, 20121 to December  31, 2012
	2016			2015			2014			2013
Per Share Operating Performance
Net asset value, beginning of period	$	10.32		$	10.57		$	10.18		$	10.71		$	10.55
Net investment income2		0.12			0.15			0.15			0.11			0.06
Net realized and unrealized gain (loss)		0.02			(0.21	)		0.40			(0.48	)		0.21
Net increase (decrease) from investment operations		0.14			(0.06	)		0.55			(0.37	)		0.27
Distributions:3
From net investment income		(0.10	)		(0.13	)		(0.15	)		(0.14	)		(0.10	)
From net realized gain		(0.12	)		(0.06	)		(0.01	)		(0.00	)4		—
From return of capital		(0.01	)		—			—			(0.02	)		(0.01	)
Total distributions		(0.23	)		(0.19	)		(0.16	)		(0.16	)		(0.11	)
Net asset value, end of period	$	10.23		$	10.32		$	10.57		$	10.18		$	10.71
Total Return5
Based on net asset value		1.35%			(0.61)%			5.40%			(3.51)%			2.61%	6
Ratios to Average Net Assets7
Total expenses		1.45%	8		1.46%	8		1.45%	8		1.46%	8		1.46%	8,9
Total expenses after fees waived		1.45%	8		1.45%	8		1.44%	8		1.44%	8		1.44%	8,9
Net investment income		1.14%	8		1.39%	8		1.44%	8		1.04%	8		1.04%	8,9
Supplemental Data
Net assets, end of period (000)	$	337		$	272		$	253		$	288		$	273
Portfolio turnover rate of the Master Portfolio10		677%			612%			686%			986%			2,128%

¹ Commencement of operations.

² Based on average shares outstanding.

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

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

⁵ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁶ Aggregate total return.

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

⁸ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.01%.

⁹ Annualized.

¹⁰ Includes MDRs. Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,								Period April 30, 20121 to December  31, 2012
	2016		2015		2014		2013
Portfolio turnover rate (excluding MDRs)		459%		540%		470%		736%		1,774%

See Notes to Financial Statements.
	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2016	13

Financial Highlights (concluded) BlackRock CoreAlpha Bond Fund

	Class K
	Period March 28, 20161 to December  31, 2016
Per Share Operating Performance
Net asset value, beginning of period	$	10.51
Net investment income2		0.18
Net realized and unrealized loss		(0.17	)
Net increase from investment operations		0.01
Distributions:3
From net investment income		(0.16	)
From net realized gain		(0.12	)
From return of capital		(0.01	)
Total distributions		(0.29	)
Net asset value, end of period	$	10.23
Total Return4
Based on net asset value		0.00%	5
Ratios to Average Net Assets6
Total expenses		0.30%	7,8
Total expenses after fees waived		0.30%	7,8
Net investment income		2.25%	7,8
Supplemental Data
Net assets, end of period (000)	$	195
Portfolio turnover rate of the Master Portfolio9,10		677%

¹ Commencement of operations.

² Based on average shares outstanding.

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

⁴ Where applicable, assumes the reinvestment of distributions.

⁵ Aggregate total return.

⁶ Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁷ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.01%.

⁸ Annualized.

⁹ Includes MDRs. Additional information regarding portfolio turnover rate is as follows:

	Period March 28, 20161 to December  31, 2016
Portfolio turnover rate (excluding MDRs)		459%

¹⁰ Portfolio turnover is representative of the Fund for the entire year.

See Notes to Financial Statements.
14	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2016

Notes to Financial Statements BlackRock CoreAlpha Bond Fund

1. Organization:

BlackRock Funds III (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Delaware statutory trust. BlackRock CoreAlpha Bond Fund (the “Fund”) is a series of the Trust. The Fund is classified as diversified. The Fund seeks to achieve its investment objective by investing all of its assets in CoreAlpha Bond Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), an affiliate of the Fund, which has the same investment objective and strategies as the Fund. The value of the Fund’s investment in the Master Portfolio reflects the Fund’s proportionate interest in the net assets of the Master Portfolio. The performance of the Fund is directly affected by the performance of the Master Portfolio. At December 31, 2016, the percentage of the Master Portfolio owned by the Fund was 51.7%. The financial statements of the Master Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with the Fund’s financial statements.

The Fund offers multiple classes of shares. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that Investor A and Investor C Shares bear certain expenses related to shareholder servicing of such shares, and Investor C Shares also bears certain expenses related to distribution of such shares. Institutional and Class K Shares are sold without a sales charge and only to certain eligible investors. Investor A and Investor C Shares are generally available through financial intermediaries. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures. The Board of Trustees of the Trust and Board of Trustees of MIP are referred to throughout this report as the “Board of Trustees” or the “Board” and the members are referred to as “Trustees.”

Share Class	Initial Sales Charge		CDSC			Conversion Privilege
Institutional Shares		No		No			None
Investor A Shares		Yes		No	1		None
Investor C Shares		No		Yes			None
Class K Shares		No		No			None

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

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

2. Significant Accounting Policies:

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

Investment Transactions and 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 its proportionate share of the Master Portfolio’s income, expenses and realized and unrealized gains and losses on a daily basis. Realized and unrealized gains and losses are adjusted utilizing partnership tax allocation rules. In addition, the Fund accrues its own expenses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Distributions: Distributions from net investment income are declared daily and paid monthly. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The portion of distributions, if any, that exceeds the Fund’s current and accumulated earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. The character and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

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

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Fund’s policy is to value its financial instruments at fair 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 3 of the Master Portfolio’s Notes to Financial Statements, which are included elsewhere in this report.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 15

Notes to Financial Statements (continued) BlackRock CoreAlpha Bond Fund

4. Administration Agreement and Other Transactions with Affiliates:

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

Administration: The Trust, on behalf of the Fund, entered into an Administration Agreement with BAL, an indirect, wholly-owned subsidiary of BlackRock, to provide administrative services (other than investment advice and related portfolio activities). For such services, the Fund pays BAL a monthly fee at an annual rate based upon the average daily net assets of the relevant share class of the Fund as follows:

Institutional	Investor A	Investor C	Class K
0.10%	0.20%	0.20%	0.05%

For the year ended December 31, 2016, the following table shows the class specific administration fee borne directly by each share class of the Fund:

Institutional	Investor A	Investor C	Class K	Total
$312,865	$7,620	$759	$77	$321,321

The Fund does not pay an investment advisory fee or investment management fee.

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

Service and Distribution Fees: The Trust, on behalf of the Fund, entered into a Distribution Agreement and a Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of BAL. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing service and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the relevant share class of the Fund as follows:

	Service Fees		Distribution Fees
Investor A		0.25%		—
Investor C		0.25%		0.75%

BRIL and broker-dealers, pursuant to sub-agreements with 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 the shareholders.

For the year ended December 31, 2016, the following table shows the class specific service and distribution fees borne directly by each share class of the Fund:

Investor A	Investor C	Total
$9,401	$3,798	$13,199

Waivers: The fees and expenses of the Trust’s trustees who are not “interested persons” of the Trust, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and the Trust’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Fund. BAL has contractually agreed to reimburse the Fund or provide an offsetting credit against the administration fees paid by the Fund in an amount equal to these independent expenses through April 30, 2017 and may not be terminated without consent of the Board. For the year ended December 31, 2016, BAL waived $8,406.

Other Fees: For the year ended December 31, 2016, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of the Fund’s Investor A Shares which totaled $124.

For the year ended December 31, 2016, affiliates received CDSCs of $79 for Investor A Shares.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the U.S. Securities and Exchange Commission, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow and lend under the Interfund Lending Program.

The Fund may lend in aggregate up to 15% of its net assets, but no more than 5% of its net assets, to any one borrowing fund through the Interfund Lending Program. The Fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets or any lower threshold provided for by the Fund’s investment restrictions. If the Fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2016, the Fund did not participate in the Interfund Lending Program.

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

16 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) BlackRock CoreAlpha Bond Fund

5. Income Tax Information:

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

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2016, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

The tax character of distributions paid was as follows:

	12/31/16		12/31/15
Ordinary income	$	9,336,024	$	6,146,395
Long-term capital gains		777,902		378,817
Return of capital		427,210		—
Total	$	10,541,136	$	6,525,212

As of period end, the tax components of accumulated net earnings (losses) were as follows:

Qualified late-year losses1	$	(4,667,984	)
Net unrealized gains (losses)2		(2,173,307	)
Total	$	(6,841,291	)

¹ The Fund has elected to defer certain qualified late-year losses and recognize such losses in the next taxable year.

²  The difference between book-basis and tax-basis net unrealized gains (losses) was attributable primarily to the timing and recognition of partnership income.

During the year ended December 31, 2016, the Fund utilized $1,587,249 of its respective capital loss carryforwards.

6. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Institutional
Shares sold		23,256,688		$	244,883,722			9,352,784		$	98,811,293
Shares issued to shareholders in reinvestment of distributions		913,476			9,552,636			568,522			5,968,027
Shares redeemed		(13,297,158	)		(140,386,507	)		(4,416,226	)		(46,330,882	)
Net increase		10,873,006		$	114,049,851			5,505,080		$	58,448,438
Investor A
Shares sold		1,009,307		$	10,637,077			206,461		$	2,163,091
Shares issued to shareholders in reinvestment of distributions		9,284			97,593			4,095			43,073
Shares redeemed		(1,091,333	)		(11,526,113	)		(139,923	)		(1,485,387	)
Net increase (decrease)		(72,742	)	$	(791,443	)		70,633		$	720,777
Investor C
Shares sold		14,356		$	150,740			8,280		$	86,812
Shares issued to shareholders in reinvestment of distributions		747			7,798			407			4,273
Shares redeemed		(8,457	)		(87,365	)		(6,261	)		(65,227	)
Net increase		6,646		$	71,173			2,426		$	25,858
Class K1
Shares sold		19,029		$	200,000			—			—
Net increase		19,029		$	200,000			—			—
Total Net Increase		10,825,939		$	113,529,581			5,578,139		$	59,195,073

¹ Commenced operations on March 29, 2016.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 17

Notes to Financial Statements (concluded) BlackRock CoreAlpha Bond Fund

At period end, shares owned by BlackRock HoldCo 2, Inc., an affiliate of the Fund, were as follows:

Investor C	1,924
Class K	19,029

7. 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.

18 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

Report of Independent Registered Public Accounting Firm

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

In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock CoreAlpha Bond Fund (the “Fund”), a series of BlackRock Funds III, as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

Important Tax Information (Unaudited)

For the fiscal year ended December 31, 2016, the following information is provided with respect to the ordinary income distributions paid by the Fund.

Interest-Related Dividends and Qualified Short Term Capital Gains for Non-U.S. Residents1	97.65%
Federal Obligation Interest2	0.84%

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

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

Additionally, the Fund distributed long-term capital gains of $0.024147948 per share to shareholders on record December 15, 2016.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 19

Master Portfolio Information CoreAlpha Bond Master Portfolio

As of December 31, 2016

Portfolio Composition Percent of Total  Investments¹

Corporate Bonds	47	%
U.S. Government Sponsored Agency Securities	43
Non-Agency Mortgage-Backed Securities	14
Asset-Backed Securities	14
Foreign Agency Obligations	1
Municipal Bonds	1
Preferred Securities	—	4
Investment Companies	—	4
TBA Sale Commitments	(20	)

Credit Quality Allocation² Percent of
Total  Investments¹

AAA/Aaa3	45	%
AA/Aa	7
A	17
BBB/Baa	24
BB/Ba	2
B/B	1
N/R	4

¹  Excludes short-term securities.

²  For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s Rating Services (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”) if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

³  The investment adviser evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors, individual investments and/or issuer. Using this approach, the investment adviser has deemed U.S. Government Sponsored Agency Securities and U.S. Treasury Obligations as AAA/Aaa.

⁴  Represents less than 1%.

20 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

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

Asset-Backed Securities	Par   (000)		Value
Access Group, Inc., Series 2004-A, Class A2, 1.14%, 4/25/29 (a)	$	465	$	462,047
ACE Securities Corp. Home Equity Loan Trust (a):
Series 2005-HE2, Class M3, 1.48%, 4/25/35		106		106,244
Series 2005-HE4, Class M2, 1.54%, 7/25/35		217		215,475
AmeriCredit Automobile Receivables Trust, Class D:
Series 2012-4, 2.68%, 10/09/18		1,140		1,140,561
Series 2013-1, 2.09%, 2/08/19		2,600		2,609,831
Series 2014-4, 3.07%, 11/09/20		800		810,919
Series 2015-3, 3.34%, 8/08/21		250		253,392
Series 2016-1, 3.59%, 2/08/22		420		427,533
AVANT Loans Funding Trust, Series 2016-A, Class A, 4.11%, 5/15/19 (b)		600		600,685
Chase Issuance Trust, Series 2012-A7, Class A7, 2.16%, 9/16/24		1,190		1,159,179
Citibank Credit Card Issuance Trust, Series 2014-A6, Class A6, 2.15%, 7/15/21		2,940		2,963,045
College Loan Corp. Trust I, Series 2004-1, Class A4, 1.07%, 4/25/24 (a)		751		750,096
Conn’s Receivables Funding LLC, Series 2004-A, Class A, 4.68%, 4/16/18 (b)		703		704,794
Credit Suisse Mortgage Capital Certificates, Series 2006-CF3, Class A1, 1.30%, 10/25/36 (a)(b)		189		187,643
Discover Card Execution Note Trust, Series 2015-A2, Class A, 1.90%, 10/17/22		1,160		1,155,081
Drive Auto Receivables Trust (b):
Series 2015-DA, Class C, 3.38%, 11/15/21		945		960,449
Series 2016-AA, Class C, 3.91%, 5/17/21		650		660,728
Series 2016-BA, Class B, 2.56%, 6/15/20		4,000		4,023,565
Series 2016-BA, Class C, 3.19%, 7/15/22		1,900		1,914,340
Series 2016-CA, Class B, 2.37%, 11/16/20		2,050		2,045,080
Series 2016-CA, Class C, 3.02%, 11/15/21		2,600		2,601,597
First Franklin Mortgage Loan Trust, Series 2005-FF10, Class A4, 1.08%, 11/25/35 (a)		92		91,293
Flagship Credit Auto Trust, Series 2014-1, Class A, 1.21%, 4/15/19 (b)		77		76,918
HSBC Home Equity Loan Trust USA, Series 2007-3, Class APT, 1.76%, 11/20/36 (a)		1,869		1,865,973
HSI Asset Securitization Corp. Trust, Series 2006-OPT4, Class 2A5, 0.00%, 3/25/36 (c)		30		30,152
KeyCorp Student Loan Trust, Series 2006-A, Class 2A4, 1.31%, 9/27/35 (a)		713		705,749
Morgan Stanley ABS Capital I, Inc. Trust, Series 2005-WMC4, Class M4, 1.70%, 4/25/35 (a)		527		527,419
National Collegiate Student Loan Trust (a):
Series 2004-2, Class A4, 1.07%, 11/27/28		806		800,011
Series 2005-1, Class A4, 1.00%, 11/27/28		40		40,228
Series 2005-3, Class A4, 1.04%, 4/25/29		447		445,371
Series 2006-1, Class A4, 1.01%, 3/27/28		2,579		2,550,751
Series 2006-2, Class A3, 0.97%, 11/25/27		3,218		3,139,004

Asset-Backed Securities	Par   (000)		Value
OneMain Direct Auto Receivables Trust, Series 2016-1A, Class A, 2.04%, 1/15/21 (b)	$	1,839	$	1,842,490
OneMain Financial Issuance Trust, Series 2016-2A, Class A, 4.10%, 3/20/28 (b)		2,800		2,854,589
Park Place Securities, Inc. Asset-Backed Pass-Through Certificates, Series 2004-WHQ2, Class M2, 1.70%, 2/25/35 (a)		567		568,018
RAMP Trust (a):
Series 2004-RS11, Class M1, 1.69%, 11/25/34		85		85,191
Series 2006-NC2, Class A2, 0.95%, 2/25/36		557		550,263
Series 2006-RZ3, Class A2, 0.92%, 8/25/36		198		197,479
RASC Trust (a):
Series 2005-AHL3, Class A2, 1.00%, 11/25/35		178		177,074
Series 2005-KS12, Class A3, 1.08%, 1/25/36		228		227,418
Santander Drive Auto Receivables Trust:
Series 2012-4, Class D, 3.50%, 6/15/18		1,774		1,776,924
Series 2012-AA, Class C, 1.78%, 11/15/18 (b)		362		361,752
Series 2012-AA, Class D, 2.46%, 12/17/18 (b)		820		825,415
Series 2013-1, Class C, 1.76%, 1/15/19		334		334,521
Series 2013-3, Class C, 1.81%, 4/15/19		752		753,584
Series 2013-3, Class D, 2.42%, 4/15/19		3,160		3,184,034
Series 2013-4, Class C, 3.25%, 1/15/20		189		189,853
Series 2013-A, Class C, 3.12%, 10/15/19 (b)		1,531		1,540,949
Series 2014-1, Class C, 2.36%, 4/15/20		810		813,622
Series 2014-2, Class C, 2.33%, 11/15/19		3,445		3,462,228
Series 2014-3, Class D, 2.65%, 8/17/20		2,400		2,427,835
Series 2014-4, Class B, 1.82%, 5/15/19		324		324,722
Series 2014-4, Class C, 2.60%, 11/16/20		540		544,356
Series 2014-5, Class C, 2.46%, 6/15/20		2,800		2,821,567
Series 2015-1, Class C, 2.57%, 4/15/21		760		766,708
Series 2015-2, Class C, 2.44%, 4/15/21		700		705,257
Series 2015-3, Class C, 2.74%, 1/15/21		1,230		1,242,300
Series 2015-3, Class D, 3.49%, 5/17/21		680		693,068
Series 2015-4, Class C, 2.97%, 3/15/21		580		585,570
Series 2016-2, Class C, 2.66%, 11/15/21		1,965		1,970,413
Series 2016-3, Class C, 2.46%, 3/15/22		2,100		2,089,263
SLC Private Student Loan Trust, Series 2006-A, Class A5, 1.05%, 7/15/36 (a)		1,519		1,516,568
SLM Private Credit Student Loan Trust (a):
Series 2003-A, Class A2, 1.40%, 9/15/20		503		501,492
Series 2003-B, Class A2, 1.36%, 3/15/22		223		221,011
Series 2003-C, Class A2, 1.35%, 9/15/20		208		206,399
Series 2004-B, Class A2, 1.16%, 6/15/21		182		182,107
Series 2005-B, Class A2, 1.14%, 3/15/23		331		330,288
Series 2006-A, Class A4, 1.15%, 12/15/23		1,712		1,698,846
Series 2006-B, Class A4, 1.14%, 3/15/24		197		196,226
Series 2006-C, Class A4, 1.13%, 3/15/23		674		671,135
SLM Private Education Loan Trust (b):
Series 2010-A, Class 1A, 3.70%, 5/16/44 (a)		673		688,033
Series 2011-B, Class A2, 3.74%, 2/15/29		520		529,947
Series 2012-A, Class A1, 2.17%, 8/15/25 (a)		59		58,597
Series 2012-E, Class A1, 1.45%, 10/16/23 (a)		52		52,501

Portfolio Abbreviations

ABS	Asset-Backed Security	HSI	Hong Kong stock Exchange	PLN	Polish Zloty
AUD	Australian Dollar	HUF	Hungarian Forint	RB	Revenue Bonds
BRL	Brazilian Real	ILS	Israeli New Shekel	RUB	Russian Ruble
CAD	Canadian Dollar	INR	Indian Rupee	SEK	Swedish Krona
CHF	Swiss Franc	JPY	Japanese Yen	S&P	Standard and Poor’s
CME	Chicago Mercantile Exchange	KRW	South Korean Won	THB	Thai Baht
COP	Certificates of Participation	LIBOR	London Interbank Offered Rate	TRY	Turkish Lira
CR	Custodian Receipt	MXN	Mexican Peso	TWD	Taiwan Dollar
ETF	Exchange-Traded Fund	NOK	Norwegian Krone	USD	U.S. Dollar
EUR	Euro	NZD	New Zealand Dollar	ZAR	South African Rand
GBP	British Pound	OTC	Over-the-Counter
GO	General Obligation Bonds	PHP	Philippine Peso

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 21

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Asset-Backed Securities	Par   (000)		Value
SLM Private Education Loan Trust (b) (continued):
Series 2013-A, Class A1, 1.37%, 8/15/22 (a)	$	339	$	339,684
Series 2013-B, Class A1, 1.42%, 7/15/22 (a)		683		682,875
Series 2013-C, Class A1, 1.55%, 2/15/22 (a)		92		92,226
SoFi Consumer Loan Program LLC, Class A (b):
Series 2016-1A, 3.26%, 8/25/25		1,129		1,130,662
Series 2016-3, 3.05%, 12/26/25		2,009		2,002,306
SoFi Professional Loan Program LLC, Series 2015-B, Class A2, 2.51%, 9/27/32 (b)		195		194,568
Soundview Home Loan Trust, Series 2005-OPT4, Class 2A3, 1.02%, 12/25/35 (a)		460		455,217
SPS Servicer Advance Receivables Trust, Series 2016-T1, Class AT1, 2.53%, 11/16/48 (b)		2,575		2,568,341
Terwin Mortgage Trust, Series 2006-5, Class 2A2, 0.97%, 6/25/37 (a)(b)		404		397,880
Verizon Owner Trust, Series 2016-1A, Class A, 1.42%, 1/20/21 (b)		1,466		1,455,797
Total Asset-Backed Securities — 12.8%				86,114,322
Corporate Bonds
Aerospace & Defense — 0.8%
Harris Corp., 2.00%, 4/27/18		395		395,241
L-3 Communications Corp.:
4.75%, 7/15/20		720		765,414
4.95%, 2/15/21		1,618		1,728,592
3.85%, 12/15/26		490		487,066
Lockheed Martin Corp.:
2.50%, 11/23/20		650		655,493
4.70%, 5/15/46		1,250		1,359,657
				5,391,463
Auto Components — 0.4%
Icahn Enterprises LP/Icahn Enterprises Finance Corp.:
4.88%, 3/15/19		465		469,650
6.00%, 8/01/20		525		536,156
Lear Corp.:
4.75%, 1/15/23		310		316,200
5.38%, 3/15/24		1,115		1,166,569
ZF North America Capital, Inc., 4.50%, 4/29/22 (b)		350		360,938
				2,849,513
Automobiles — 0.3%
Ford Motor Co., 4.35%, 12/08/26		800		808,398
General Motors Co.:
5.00%, 4/01/35		500		487,562
5.20%, 4/01/45		500		481,956
6.75%, 4/01/46		190		222,811
				2,000,727
Banks — 3.9%
Australia & New Zealand Banking Group, Ltd., 2.05%, 9/23/19		1,900		1,892,313
Bank of Montreal, 2.10%, 12/12/19		765		764,997
Bank of Nova Scotia, 1.70%, 6/11/18		1,055		1,055,362
Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, 2.25%, 1/14/19		1,160		1,166,211
Credit Suisse Group Funding Guernsey, Ltd.:
3.45%, 4/16/21		1,030		1,036,501
3.80%, 9/15/22		670		675,941
Discover Bank/Greenwood Delaware:
2.00%, 2/21/18		870		869,842
3.45%, 7/27/26		600		579,367
HSBC Bank USA NA, 5.88%, 11/01/34		590		686,896
HSBC Holdings PLC:
3.40%, 3/08/21		1,525		1,550,740
3.60%, 5/25/23		900		905,218

Corporate Bonds	Par   (000)		Value
Banks (continued)
HSBC Holdings PLC (continued):
3.90%, 5/25/26	$	1,500	$	1,510,243
4.38%, 11/23/26		210		211,559
6.50%, 9/15/37		400		495,878
5.25%, 3/14/44		350		374,803
HSBC USA, Inc., 1.50%, 11/13/17		1,875		1,873,749
Sumitomo Mitsui Banking Corp., 1.76%, 10/19/18		420		418,247
Svenska Handelsbanken AB, 2.45%, 3/30/21		800		794,588
Wachovia Bank NA, 6.00%, 11/15/17		1,790		1,857,648
Wells Fargo & Co.:
2.13%, 4/22/19		2,370		2,377,669
1.75%, 5/24/19		2,200		2,189,363
2.15%, 12/06/19		1,000		999,380
4.65%, 11/04/44		180		177,162
4.40%, 6/14/46		200		191,411
Westpac Banking Corp., 1.60%, 8/19/19		1,700		1,679,751
				26,334,839
Beverages — 0.6%
Anheuser-Busch InBev Finance, Inc.:
1.90%, 2/01/19		735		736,055
2.65%, 2/01/21		530		533,045
3.30%, 2/01/23		700		712,412
4.70%, 2/01/36		300		315,560
Molson Coors Brewing Co., 1.45%, 7/15/19		175		172,419
PepsiCo, Inc.:
4.88%, 11/01/40		310		343,418
3.60%, 8/13/42		600		559,367
4.45%, 4/14/46		500		532,539
				3,904,815
Biotechnology — 0.4%
Biogen, Inc., 2.90%, 9/15/20		265		268,380
Celgene Corp., 2.30%, 8/15/18		600		603,668
Gilead Sciences, Inc.:
2.05%, 4/01/19		1,480		1,484,726
2.55%, 9/01/20		290		293,056
				2,649,830
Building Products — 0.1%
Johnson Controls International PLC, 1.40%, 11/02/17		1,000		1,001,602
Capital Markets — 3.3%
Bear Stearns Cos. LLC, 6.40%, 10/02/17		760		787,319
CME Group, Inc., 3.00%, 3/15/25		1,200		1,199,390
Goldman Sachs Group, Inc.:
6.15%, 4/01/18		460		483,881
2.90%, 7/19/18		820		831,324
2.63%, 1/31/19		820		828,817
7.50%, 2/15/19		360		399,089
2.00%, 4/25/19		155		154,384
2.55%, 10/23/19		460		463,377
2.30%, 12/13/19		1,055		1,053,803
6.00%, 6/15/20		1,040		1,153,299
2.35%, 11/15/21		490		476,064
3.75%, 2/25/26		1,900		1,905,582
3.50%, 11/16/26		365		356,600
6.75%, 10/01/37		500		617,424
6.25%, 2/01/41		990		1,227,171
Legg Mason, Inc., 2.70%, 7/15/19		1,285		1,294,149
Morgan Stanley:
2.20%, 12/07/18		450		451,657
2.50%, 1/24/19		1,140		1,151,984
5.63%, 9/23/19		2,940		3,186,842
2.63%, 11/17/21		1,195		1,180,615
3.13%, 7/27/26		1,000		955,376
6.38%, 7/24/42		460		591,177

See Notes to Financial Statements.

22 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Corporate Bonds	Par   (000)		Value
Capital Markets (continued)
Morgan Stanley (continued):
4.30%, 1/27/45	$	1,400	$	1,395,197
				22,144,521
Chemicals — 0.6%
LyondellBasell Industries NV, 5.00%, 4/15/19		1,760		1,859,707
Monsanto Co.:
2.13%, 7/15/19		275		274,562
2.75%, 7/15/21		360		359,925
3.95%, 4/15/45		680		596,659
RPM International, Inc., 6.13%, 10/15/19		743		815,937
				3,906,790
Communications Equipment — 0.1%
Cisco Systems, Inc., 2.45%, 6/15/20		770		777,768
Consumer Finance — 1.2%
Capital One Bank USA NA, 2.15%, 11/21/18		730		731,319
Capital One NA, 1.50%, 9/05/17		1,650		1,647,949
MasterCard, Inc.:
3.38%, 4/01/24		900		925,735
2.95%, 11/21/26		1,335		1,320,069
S&P Global, Inc., 2.95%, 1/22/27 (b)		285		266,477
Synchrony Financial, 3.00%, 8/15/19		1,540		1,559,957
Visa, Inc., 4.30%, 12/14/45		1,485		1,567,438
				8,018,944
Containers & Packaging — 0.2%
Ball Corp., 4.38%, 12/15/20		195		203,775
International Paper Co.:
3.80%, 1/15/26		400		405,100
3.00%, 2/15/27		500		471,719
				1,080,594
Diversified Financial Services — 5.1%
American Express Credit Corp., 1.55%, 9/22/17		855		855,952
Bank of America Corp.:
1.65%, 3/26/18		1,035		1,035,966
6.88%, 4/25/18		1,060		1,126,685
5.49%, 3/15/19		600		636,507
5.63%, 7/01/20		510		560,772
BNP Paribas SA:
1.38%, 3/17/17		1,480		1,480,226
2.40%, 12/12/18		600		604,712
Citigroup, Inc.:
1.80%, 2/05/18		1,710		1,709,044
2.50%, 9/26/18		900		908,609
2.05%, 6/07/19		200		199,245
2.50%, 7/29/19		1,620		1,631,105
Ford Motor Credit Co. LLC:
3.00%, 6/12/17		1,790		1,800,420
1.72%, 12/06/17		1,690		1,688,722
2.02%, 5/03/19		1,650		1,634,860
1.90%, 8/12/19		615		605,097
General Motors Financial Co., Inc.:
2.40%, 5/09/19		1,700		1,695,497
4.20%, 3/01/21		1,200		1,238,096
3.45%, 4/10/22		780		771,369
3.70%, 5/09/23		400		393,595
4.30%, 7/13/25		280		277,758
5.25%, 3/01/26		580		609,285
Intercontinental Exchange, Inc.:
2.50%, 10/15/18		900		911,524
3.75%, 12/01/25		2,215		2,263,559
JPMorgan Chase & Co.:
2.00%, 8/15/17		1,220		1,224,521
4.25%, 10/15/20		1,770		1,873,078

Corporate Bonds	Par   (000)		Value
Diversified Financial Services (continued)
JPMorgan Chase & Co. (continued):
2.55%, 3/01/21	$	1,100	$	1,096,543
3.25%, 9/23/22		780		788,806
3.20%, 1/25/23		580		586,455
2.95%, 10/01/26		1,700		1,622,630
3.63%, 12/01/27		700		679,130
4.85%, 2/01/44		300		333,828
4.95%, 6/01/45		340		362,545
JPMorgan Chase Bank NA, 6.00%, 10/01/17		800		825,587
Nasdaq, Inc., 3.85%, 6/30/26		405		402,328
				34,434,056
Diversified Telecommunication Services — 1.6%
AT&T, Inc.:
2.38%, 11/27/18		1,645		1,659,372
2.45%, 6/30/20		350		347,561
3.40%, 5/15/25		140		134,935
5.15%, 3/15/42		1,120		1,115,713
4.80%, 6/15/44		1,190		1,124,448
4.75%, 5/15/46		500		473,709
4.50%, 3/09/48		364		327,081
British Telecommunications PLC, 1.25%, 2/14/17		520		520,027
CC Holdings GS V LLC/Crown Castle GS III Corp., 3.85%, 4/15/23		1,270		1,290,612
Frontier Communications Corp., 8.88%, 9/15/20		260		276,900
Verizon Communications, Inc.:
3.65%, 9/14/18		1,330		1,373,913
5.05%, 3/15/34		960		1,010,915
4.40%, 11/01/34		900		888,287
6.55%, 9/15/43		245		305,999
				10,849,472
Electric Utilities — 1.8%
Berkshire Hathaway Energy Co., 6.50%, 9/15/37		460		598,773
Commonwealth Edison Co., 5.88%, 2/01/33		600		721,095
Duke Energy Corp.:
5.05%, 9/15/19		400		431,214
3.75%, 9/01/46		155		139,532
Duke Energy Florida, Inc., 3.85%, 11/15/42		460		441,102
Exelon Corp., 5.10%, 6/15/45		120		127,560
Indiana Michigan Power Co., 4.55%, 3/15/46		600		622,303
MidAmerican Energy Holdings Co., 5.75%, 4/01/18		1,420		1,492,614
Mississippi Power Co., 4.25%, 3/15/42		510		441,189
NextEra Energy Capital Holdings, Inc.:
1.65%, 9/01/18		505		503,415
2.70%, 9/15/19		1,040		1,053,164
Northern States Power Co., 5.25%, 7/15/35		560		649,188
Pacific Gas & Electric Co.:
5.63%, 11/30/17		460		477,066
3.25%, 9/15/21		430		442,131
3.75%, 8/15/42		460		431,661
PacifiCorp, 5.50%, 1/15/19		400		428,874
Progress Energy, Inc.:
4.88%, 12/01/19		920		987,970
4.40%, 1/15/21		1,110		1,177,081
South Carolina Electric & Gas Co., 4.10%, 6/15/46		300		296,948
Southern Power Co., 5.15%, 9/15/41		110		110,781
Tampa Electric Co., 2.60%, 9/15/22		600		590,294
				12,163,955
Electrical Equipment — 0.4%
Amphenol Corp.:
1.55%, 9/15/17		995		996,002
2.55%, 1/30/19		600		607,202
Roper Industries, Inc., 2.05%, 10/01/18		1,040		1,043,536
				2,646,740

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 23

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Corporate Bonds	Par   (000)		Value
Electronic Equipment, Instruments & Components — 0.2%
Flextronics International, Ltd., 4.75%, 6/15/25	$	340	$	359,727
Fortive Corp., 1.80%, 6/15/19 (b)		405		402,481
Tyco Electronics Group SA, 6.55%, 10/01/17		860		892,035
				1,654,243
Food & Staples Retailing — 0.3%
Lamb Weston Holdings, Inc., 4.88%, 11/01/26 (b)		150		148,406
Walgreens Boots Alliance, Inc.:
1.75%, 11/17/17		1,020		1,022,545
2.70%, 11/18/19		720		729,551
				1,900,502
Food Products — 1.1%
ConAgra Foods, Inc., 3.20%, 1/25/23		205		204,810
Hershey Co., 3.38%, 8/15/46		1,100		973,888
Kellogg Co.:
3.25%, 5/21/18		470		479,937
2.65%, 12/01/23		1,100		1,064,132
Kraft Heinz Foods Co.:
5.20%, 7/15/45		1,190		1,245,706
4.38%, 6/01/46		345		324,638
Pilgrim’s Pride Corp., 5.75%, 3/15/25 (b)		860		857,850
Sysco Corp.:
3.30%, 7/15/26		400		392,533
4.50%, 4/01/46		475		478,891
Tyson Foods, Inc., 3.95%, 8/15/24		1,650		1,681,010
				7,703,395
Gas Utilities — 0.1%
Southern California Gas Co., 3.75%, 9/15/42		540		527,471
Health Care Equipment & Supplies — 2.0%
Abbott Laboratories:
2.35%, 11/22/19		1,070		1,071,262
3.40%, 11/30/23		1,300		1,295,113
4.75%, 11/30/36		500		508,311
Baxter International, Inc., 2.60%, 8/15/26		2,310		2,132,534
Becton Dickinson & Co., 2.68%, 12/15/19		292		296,267
Boston Scientific Corp.:
2.65%, 10/01/18		600		606,580
2.85%, 5/15/20		225		228,356
3.85%, 5/15/25		1,300		1,302,558
Covidien International Finance SA, 4.20%, 6/15/20		1,485		1,581,666
Medtronic, Inc., 2.50%, 3/15/20		755		763,449
St Jude Medical, Inc., 2.00%, 9/15/18		575		575,811
Stryker Corp.:
2.63%, 3/15/21		245		245,946
4.38%, 5/15/44		400		387,977
Thermo Fisher Scientific, Inc., 2.15%, 12/14/18		340		341,561
Zimmer Holdings, Inc.:
2.00%, 4/01/18		530		530,647
2.70%, 4/01/20		1,340		1,340,067
				13,208,105
Health Care Providers & Services — 1.5%
Aetna, Inc.:
1.90%, 6/07/19		1,150		1,147,363
4.38%, 6/15/46		300		301,244
AmerisourceBergen Corp., 1.15%, 5/15/17		1,770		1,769,354
Cardinal Health, Inc., 1.70%, 3/15/18		660		659,337
CR Bard, Inc., 3.00%, 5/15/26		1,000		954,510
HCA, Inc., 3.75%, 3/15/19		935		960,713
McKesson Corp., 1.40%, 3/15/18		1,330		1,324,580
Quest Diagnostics, Inc., 2.50%, 3/30/20		705		704,506
UnitedHealth Group, Inc.:
2.70%, 7/15/20		270		274,062
3.10%, 3/15/26		400		394,520

Corporate Bonds	Par   (000)		Value
Health Care Providers & Services (continued)
UnitedHealth Group, Inc. (continued):
4.75%, 7/15/45	$	800	$	881,295
4.20%, 1/15/47		455		460,231
				9,831,715
Hotels, Restaurants & Leisure — 0.3%
McDonald’s Corp.:
2.10%, 12/07/18		275		276,633
6.30%, 10/15/37		310		389,479
4.88%, 12/09/45		1,050		1,124,628
				1,790,740
Household Products — 0.2%
Newell Brands, Inc., 2.60%, 3/29/19		345		348,786
Whirlpool Corp., 1.35%, 3/01/17		755		755,146
				1,103,932
Independent Power and Renewable Electricity Producers — 0.1%
Constellation Energy Group, Inc., 5.15%, 12/01/20		360		389,184
Exelon Generation Co. LLC, 5.75%, 10/01/41		170		159,555
PSEG Power LLC:
2.45%, 11/15/18		140		140,984
4.15%, 9/15/21		350		365,006
				1,054,729
Industrial Conglomerates — 0.0%
General Electric Co., 6.75%, 3/15/32		54		71,881
Insurance — 2.2%
Aflac, Inc.:
3.63%, 11/15/24		2,480		2,552,413
3.25%, 3/17/25		900		897,801
2.88%, 10/15/26		2,900		2,778,322
Allstate Corp., 4.20%, 12/15/46		110		112,334
American Financial Group, Inc., 3.50%, 8/15/26		550		526,786
American International Group, Inc., 3.30%, 3/01/21		320		327,771
Berkshire Hathaway, Inc.:
3.13%, 3/15/26		1,355		1,346,199
4.50%, 2/11/43		700		744,318
Chubb Corp., 6.00%, 5/11/37		260		324,312
Chubb INA Holdings, Inc., 3.35%, 5/15/24		660		672,403
Fidelity National Financial, Inc., 5.50%, 9/01/22		385		407,230
Markel Corp.:
5.35%, 6/01/21		400		436,613
5.00%, 4/05/46		400		402,301
Marsh & McLennan Cos., Inc.:
2.35%, 9/10/19		880		884,946
3.30%, 3/14/23		175		177,848
MetLife, Inc., 3.05%, 12/15/22		800		807,732
Protective Life Corp., 8.45%, 10/15/39		122		161,618
Unum Group, 5.75%, 8/15/42		400		430,647
Willis Group Holdings PLC, 5.75%, 3/15/21		350		382,454
XLIT Ltd., 5.75%, 10/01/21		430		477,873
				14,851,921
Internet Software & Services — 1.3%
Baidu, Inc., 3.25%, 8/06/18		2,060		2,094,791
eBay, Inc., 2.20%, 8/01/19		1,600		1,599,270
Equinix, Inc.:
5.38%, 1/01/22		555		582,750
5.75%, 1/01/25		430		449,350
Expedia, Inc., 5.00%, 2/15/26		1,600		1,649,450
Priceline Group, Inc., 3.60%, 6/01/26		1,745		1,725,812
VeriSign, Inc., 4.63%, 5/01/23		415		419,150
				8,520,573

See Notes to Financial Statements.

24 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Corporate Bonds	Par   (000)		Value
IT Services — 0.8%
Alibaba Group Holding Ltd.:
2.50%, 11/28/19	$	1,795	$	1,803,070
3.60%, 11/28/24		445		440,597
Broadridge Financial Solutions, Inc., 3.40%, 6/27/26		720		694,814
Fidelity National Information Services, Inc., 3.63%, 10/15/20		1,280		1,325,143
Verisk Analytics, Inc., 4.00%, 6/15/25		1,380		1,399,374
				5,662,998
Machinery — 0.3%
Illinois Tool Works, Inc., 1.95%, 3/01/19		690		693,560
Ingersoll-Rand Global Holding Co. Ltd., 2.88%, 1/15/19		140		142,507
Trinity Acquisition PLC, 6.13%, 8/15/43		110		117,592
Xylem, Inc., 3.25%, 11/01/26		800		776,841
				1,730,500
Media — 1.8%
Altice Financing SA, 6.63%, 2/15/23 (b)		480		493,200
CBS Corp., 2.90%, 1/15/27		1,800		1,669,684
Charter Communications Operating LLC/Charter Communications Operating Capital:
3.58%, 7/23/20		395		402,993
4.91%, 7/23/25		2,350		2,476,735
6.48%, 10/23/45		1,000		1,156,079
Comcast Corp., 3.40%, 7/15/46		155		135,363
DISH DBS Corp.:
7.88%, 9/01/19		780		865,800
6.75%, 6/01/21		360		390,600
Outfront Media Capital LLC/Outfront Media Capital Corp., 5.25%, 2/15/22		260		269,750
Time Warner Cable, Inc.:
5.00%, 2/01/20		680		721,704
4.50%, 9/15/42		510		461,884
Time Warner, Inc.:
2.10%, 6/01/19		1,220		1,219,263
3.60%, 7/15/25		375		372,900
2.95%, 7/15/26		1,325		1,234,267
				11,870,222
Metals & Mining — 0.1%
Southern Copper Corp., 5.88%, 4/23/45		500		490,863
Vale Overseas Ltd., 4.38%, 1/11/22		148		145,410
				636,273
Multi-Utilities — 0.2%
Consolidated Edison Co. of New York, Inc., 4.20%, 3/15/42		220		220,590
Dominion Resources, Inc.:
6.40%, 6/15/18		330		349,992
4.45%, 3/15/21		630		673,141
SCANA Corp., 4.13%, 2/01/22		170		171,766
				1,415,489
Oil, Gas & Consumable Fuels — 3.0%
Boardwalk Pipelines LP, 5.95%, 6/01/26		750		814,677
BP Capital Markets PLC:
2.24%, 5/10/19		900		905,453
2.11%, 9/16/21		1,040		1,020,396
Buckeye Partners LP:
2.65%, 11/15/18		1,460		1,469,599
4.35%, 10/15/24		580		591,907
3.95%, 12/01/26		280		272,498
Canadian Natural Resources Ltd., 6.25%, 3/15/38		400		455,066
Cimarex Energy Co., 4.38%, 6/01/24		500		519,974
Energy Transfer Partners LP:
9.70%, 3/15/19		262		300,719
9.00%, 4/15/19		123		139,955

Corporate Bonds	Par   (000)		Value
Oil, Gas & Consumable Fuels (continued)
Enterprise Products Operating LLC, 5.10%, 2/15/45	$	700	$	738,254
Exxon Mobil Corp.:
2.73%, 3/01/23		220		220,748
4.11%, 3/01/46		780		798,934
Kinder Morgan, Inc.:
3.05%, 12/01/19		265		268,804
5.55%, 6/01/45		200		210,355
Magellan Midstream Partners LP, 5.00%, 3/01/26		400		438,627
Marathon Petroleum Corp., 2.70%, 12/14/18		1,600		1,621,301
Occidental Petroleum Corp., 4.40%, 4/15/46		1,045		1,063,429
ONEOK Partners LP, 6.13%, 2/01/41		800		879,918
Petroleos Mexicanos:
5.50%, 2/04/19 (b)		700		725,123
4.88%, 1/24/22		400		401,200
4.63%, 9/21/23 (b)		35		34,048
6.38%, 1/23/45		660		600,600
Shell International Finance BV:
2.13%, 5/11/20		525		524,373
1.88%, 5/10/21		700		684,402
Statoil ASA, 2.75%, 11/10/21		1,680		1,696,743
Total Capital International SA, 2.10%, 6/19/19		980		984,736
TransCanada PipeLines Ltd., 4.88%, 1/15/26		460		511,126
Western Gas Partners LP, 4.65%, 7/01/26		700		724,780
Williams Partners LP, 5.10%, 9/15/45		600		570,269
				20,188,014
Pharmaceuticals — 1.6%
AbbVie, Inc., 2.50%, 5/14/20		490		490,128
Actavis Funding SCS, 2.35%, 3/12/18		320		321,850
Baxalta, Inc., 2.88%, 6/23/20		775		774,806
Bayer US Finance LLC, 1.50%, 10/06/17 (b)		1,000		998,687
GlaxoSmithKline Capital, Inc., 5.65%, 5/15/18		360		379,444
Novartis Capital Corp., 4.40%, 5/06/44		1,280		1,380,403
Pfizer, Inc.:
7.20%, 3/15/39		800		1,155,590
4.30%, 6/15/43		510		527,943
Shire Acquisitions Investments Ireland DAC, 1.90%, 9/23/19		2,500		2,468,305
Teva Pharmaceutical Finance Netherlands III BV:
1.40%, 7/20/18		810		803,395
1.70%, 7/19/19		370		363,535
2.20%, 7/21/21		635		607,496
Zoetis, Inc., 3.45%, 11/13/20		355		364,358
				10,635,940
Real Estate Investment Trusts (REITs) — 1.6%
Alexandria Real Estate Equities, Inc., 2.75%, 1/15/20		1,190		1,187,253
American Tower Corp.:
4.50%, 1/15/18		630		646,628
3.40%, 2/15/19		538		549,808
2.80%, 6/01/20		1,190		1,190,631
5.05%, 9/01/20		400		429,247
3.45%, 9/15/21		740		749,574
4.70%, 3/15/22		1,000		1,067,868
Corrections Corp. of America:
4.13%, 4/01/20		760		758,100
4.63%, 5/01/23		735		723,975
Senior Housing Properties Trust, 3.25%, 5/01/19		1,600		1,604,853
Simon Property Group LP, 4.13%, 12/01/21		1,000		1,067,160
WEA Finance LLC/Westfield UK & Europe Finance PLC, 2.70%, 9/17/19 (b)		655		662,498
				10,637,595
Semiconductors & Semiconductor Equipment — 0.3%
Analog Devices, Inc., 3.50%, 12/05/26		320		317,038
Applied Materials, Inc., 2.63%, 10/01/20		480		483,974

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 25

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Corporate Bonds	Par   (000)		Value
Semiconductors & Semiconductor Equipment (continued)
KLA-Tencor Corp., 3.38%, 11/01/19	$	280	$	286,653
NVIDIA Corp., 3.20%, 9/16/26		1,265		1,216,244
				2,303,909
Software — 0.8%
Activision Blizzard, Inc. (b):
2.30%, 9/15/21		200		195,170
3.40%, 9/15/26		385		365,413
Hewlett Packard Enterprise Co.:
4.90%, 10/15/25		1,900		1,954,747
6.35%, 10/15/45		200		202,020
Microsoft Corp.:
2.00%, 8/08/23		430		410,995
3.45%, 8/08/36		1,100		1,045,398
4.45%, 11/03/45		400		426,168
Oracle Corp., 3.85%, 7/15/36		900		878,328
				5,478,239
Specialty Retail — 0.5%
Home Depot, Inc., 5.40%, 9/15/40		600		714,984
L Brands, Inc., 8.50%, 6/15/19		1,190		1,368,500
O’Reilly Automotive, Inc., 4.63%, 9/15/21		1,080		1,159,084
				3,242,568
Technology Hardware, Storage & Peripherals — 0.3%
Apple, Inc.:
2.85%, 5/06/21		1,120		1,143,235
4.65%, 2/23/46		550		593,917
Diamond 1 Finance Corp./Diamond 2 Finance Corp., 3.48%, 6/01/19 (b)		300		306,242
				2,043,394
Tobacco — 1.4%
Altria Group, Inc.:
5.38%, 1/31/44		2,110		2,437,307
3.88%, 9/16/46		500		461,447
Philip Morris International, Inc.:
5.65%, 5/16/18		1,280		1,349,110
1.88%, 1/15/19		1,060		1,060,125
6.38%, 5/16/38		760		974,505
Reynolds American, Inc.:
2.30%, 6/12/18		2,020		2,032,805
3.25%, 6/12/20		127		130,132
4.00%, 6/12/22		305		319,007
5.85%, 8/15/45		615		728,237
				9,492,675
Wireless Telecommunication Services — 0.4%
American Tower Corp., 2.25%, 1/15/22		960		919,554
Crown Castle International Corp.:
2.25%, 9/01/21		275		266,048
4.88%, 4/15/22		830		883,784
Sprint Spectrum Co. LLC/Sprint Spectrum Co. II LLC/Sprint Spectrum Co. III LLC, 3.36%, 3/20/23 (b)		660		661,234
				2,730,620
Total Corporate Bonds — 43.2%				290,443,272
Foreign Agency Obligations
Canada Government International Bond, 1.13%, 3/19/18		1,880		1,877,797
Colombia Government International Bond:
4.00%, 2/26/24		740		747,400
4.50%, 1/28/26		730		751,900
Export-Import Bank of Korea, 2.38%, 8/12/19		1,650		1,666,584

Foreign Agency Obligations	Par   (000)		Value
Mexico Government International Bond:
3.50%, 1/21/21	$	865	$	878,840
6.75%, 9/27/34		720		853,200
Uruguay Government International Bond, 5.10%, 6/18/50		500		450,000
Total Foreign Agency Obligations — 1.1%				7,225,721
Investment Companies (d)	Shares
iShares 0-5 Year TIPS Bond ETF		1		101
iShares 1-3 Year Treasury Bond ETF		1		84
iShares 10-20 Year Treasury Bond ETF		1		133
iShares 3-7 Year Treasury Bond ETF		1		123
iShares 7-10 Year Treasury Bond ETF		1		105
iShares Agency Bond ETF		1		113
iShares Core U.S. Treasury Bond ETF		1		25
iShares Short Treasury Bond ETF		1		110
iShares TIPS Bond ETF		1		113
Total Investment Companies — 0.0%				907
Municipal Bonds	Par   (000)
Bay Area Toll Authority, RB, Build America Bonds, San Francisco Toll Bridge, Series S-1, 7.04%, 4/01/50	$	260		367,793
Chicago Transit Authority, RB, Pension Funding, Series B, 6.90%, 12/01/40		150		187,313
City & County of San Francisco California Public Utilities Commission Water Revenue, RB, Build America Bonds, Sub-Series G, 6.95%, 11/01/50		140		196,119
City of Los Angeles California Department of Water & Power, RB, Build America Bonds, Series D, 6.57%, 7/01/45		110		150,524
City of New York New York Transitional Finance Authority, RB, Build America Bonds, Future Tax Secured, Sub-Series B-1, 5.57%, 11/01/38		150		182,589
City of New York New York Water & Sewer System, Refunding RB, 2nd General Resolution, Build America Bonds, Fiscal 2010, Series EE, 6.01%, 6/15/42		110		143,680
County of Orange California Local Transportation Authority, Refunding RB, Build America Bonds, Series A, 6.91%, 2/15/41		150		201,306
County of San Diego California Regional Transportation Commission, RB, Build America Bonds, Series A, 5.91%, 4/01/48		90		114,585
Metropolitan Water District of Southern California, RB, Build America Bonds, Series A, 6.95%, 7/01/40		360		414,688
New Jersey State Turnpike Authority, RB, Build America Bonds, Series A, 7.10%, 1/01/41		220		307,344
Port Authority of New York & New Jersey, RB, 164th Series, 5.65%, 11/01/40		260		313,331
State of California, GO, Build America Bonds, Various Purposes:
7.55%, 4/01/39		350		519,753
7.63%, 3/01/40		350		514,262
State of Illinois, GO, Pension, 5.10%, 6/01/33		310		276,985
State of Mississippi, GO, Refunding, Build America Bonds, Series F, 5.25%, 11/01/34		190		228,557
State of New York Dormitory Authority, RB, Build America Bonds, General Purpose, Series H, 5.39%, 3/15/40		225		272,102
State of Oregon Department of Transportation, RB, Sub-Lien, Series A, 5.83%, 11/15/34		140		176,275
University of California, Refunding RB, General, Series AJ, 4.60%, 5/15/31		310		341,456

See Notes to Financial Statements.

26 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Municipal Bonds	Par   (000)		Value
University of Missouri, RB, Build America Bonds, Curators of the University, Series A, 5.79%, 11/01/41	$	110	$	142,508
Total Municipal Bonds — 0.7%				5,051,170
Non-Agency Mortgage-Backed Securities
Collateralized Mortgage Obligations — 6.9%
Citicorp Mortgage Securities Trust, Series 2006-1, Class 2A1, 5.00%, 2/25/21		25		25,465
Citigroup Mortgage Loan Trust, Series 2014-A, Class A, 4.00%, 1/25/35 (a)(b)		208		216,207
Credit Suisse First Boston Mortgage Securities Corp., Series 2005-7, Class 1A6, 5.25%, 8/25/35		43		43,574
CSMC Trust, Series 2013-8R (a)(b):
Class 7A1, 0.74%, 4/27/37		322		319,406
Class 8A1, 0.82%, 5/27/37		390		388,677
Fannie Mae Connecticut Avenue Securities (a):
Series 2013-C01, Class M1, 2.76%, 10/25/23		1,740		1,754,486
Series 2014-C01, Class M1, 2.36%, 1/25/24		586		588,913
Series 2014-C02, Class 1M1, 1.71%, 5/25/24		1,406		1,409,415
Series 2014-C02, Class 2M1, 1.71%, 5/25/24		1,169		1,170,393
Series 2014-C03, Class 1M1, 1.96%, 7/25/24		1,383		1,386,640
Series 2014-C03, Class 2M1., 1.96%, 7/25/24		985		985,837
Series 2014-C04, Class 1M1, 2.71%, 11/25/24		134		134,251
Series 2014-C04, Class 2M1, 2.86%, 11/25/24		17		17,323
Series 2015-C02, Class 2M1, 1.96%, 5/25/25		152		152,373
Series 2015-C03, Class 2M1, 2.26%, 7/25/25		183		183,413
Series 2015-C04, Class 2M1, 2.46%, 4/25/28		918		920,514
Series 2016-C02, Class 1M1, 2.91%, 9/25/28		1,894		1,913,926
Series 2016-C03, Class 2M1, 2.96%, 10/25/28		4,183		4,226,648
Series 2016-C04, Class 1M1, 2.21%, 1/25/29		4,188		4,214,202
Series 2016-C05, Class 2M1, 2.11%, 1/25/29		2,585		2,591,116
Series 2016-C07, Class 2M1, 2.06%, 4/25/29		1,987		1,989,222
Freddie Mac Structured Agency Credit Risk Debt Notes (a):
Series 2013-DN1, Class M1, 4.16%, 7/25/23		1,618		1,641,989
Series 2013-DN2, Class M1, 2.21%, 11/25/23		1,549		1,552,147
Series 2014-C04, Class 1M2, 3.41%, 3/25/28		3,803		3,879,637
Series 2014-C04, Class 1M2, 3.66%, 7/25/28		460		473,530
Series 2014-DN2, Class M2, 2.41%, 4/25/24		2,390		2,409,923
Series 2014-DN3, Class M2, 3.16%, 8/25/24		598		599,369
Series 2014-HQ1, Class M2, 3.26%, 8/25/24		1,642		1,656,162
Series 2014-HQ2, Class M1, 2.21%, 9/25/24		186		186,884
Series 2014-HQ3, Class M2, 3.41%, 10/25/24		1,219		1,229,342
Series 2015-DN1, Class M2, 3.16%, 1/25/25		1,464		1,469,819
Series 2015-DN1, Class M3, 4.91%, 1/25/25		2,314		2,438,064
Series 2015-DNA3, Class M1, 2.11%, 4/25/28		458		458,388
Series 2016-HQA1, Class M1, 2.51%, 9/25/28		1,553		1,559,074
Series 2016-HQA3, Class M1, 1.56%, 3/25/29		1,473		1,474,064
Nomura Resecuritization Trust, Series 2014-1R, Class 5A1, 0.73%, 10/26/36 (a)(b)		555		543,356
RALI Trust, Series 2004-QS9, Class A1, 5.00%, 6/25/19		27		27,352
RBSSP Resecuritization Trust, Series 2009-6, Class 13A4, 2.97%, 8/26/35 (a)(b)		130		130,099
				46,361,200
Commercial Mortgage-Backed Securities — 6.3%
Banc of America Commercial Mortgage Trust:
Series 2007-3, Class A4, 5.60%, 6/10/49 (a)		678		681,537
Series 2007-3, Class AMF, 5.32%, 6/10/49		660		665,622
Series 2007-4, Class A4, 5.75%, 2/10/51 (a)		679		688,467
Series 2007-5, Class A4, 5.49%, 2/10/51		1,300		1,321,911
Series 2015-UBS7, Class B, 4.37%, 9/15/48 (a)		360		379,711
CD Commercial Mortgage Trust, Series 2007-CD4, Class AMFX, 5.37%, 12/11/49 (a)		170		170,171

Non-Agency Mortgage-Backed Securities	Par   (000)		Value
Commercial Mortgage-Backed Securities (continued)
Citigroup Commercial Mortgage Trust:
Series 2007-C6, Class A4, 5.71%, 12/10/49 (a)	$	3,260	$	3,288,264
Series 2008-C7, Class A4, 6.13%, 12/10/49 (a)		1,498		1,527,311
Series 2016-GC36, Class A5, 3.62%, 2/10/49		550		564,751
Commercial Mortgage Trust:
Series 2007-C9, Class A4, 5.79%, 12/10/49 (a)		752		758,026
Series 2007-C9, Class AJ, 5.65%, 12/10/49 (a)		920		936,284
Series 2007-GG9, Class AM, 5.48%, 3/10/39		379		378,680
Series 2008-LS1, Class A4B, 6.10%, 12/10/49 (a)		421		428,738
Series 2013-CR11, Class B, 5.16%, 10/10/46 (a)		380		417,505
Series 2013-LC6, Class AM, 3.28%, 1/10/46		400		403,415
Series 2014-CR17, Class A5, 3.98%, 5/10/47		670		710,945
Credit Suisse Commercial Mortgage Trust, Series 2007-C2, Class AM, 5.62%, 1/15/49 (a)		300		302,510
DBJPM Mortgage Trust, Series 2016-C1, Class B, 4.20%, 5/10/49		330		344,093
GS Mortgage Securities Corp. II, Series 2015-GC30, Class B, 4.01%, 5/10/50 (a)		300		293,469
GS Mortgage Securities Trust:
Series 2007-GG10, Class A4, 5.80%, 8/10/45 (a)		2,281		2,295,535
Series 2012-GCJ7, Class AS, 4.09%, 5/10/45		280		294,733
Series 2013-GC13, Class A5, 4.03%, 7/10/46 (a)		170		183,832
Series 2013-GC16, Class A3, 4.24%, 11/10/46		480		518,078
Series 2014-GC20, Class A5, 4.00%, 4/10/47		730		775,188
JPMBB Commercial Mortgage Securities Trust:
Series 2013-C14, Class A4, 4.13%, 8/15/46 (a)		430		462,360
Series 2013-C14, Class AS, 4.41%, 8/15/46 (a)		240		256,757
Series 2013-C17, Class A4, 4.20%, 1/15/47		750		806,766
Series 2014-C19, Class A4, 4.00%, 4/15/47		1,320		1,401,848
JPMorgan Chase Commercial Mortgage Securities Trust:
Series 2007-CB20, Class A4, 5.79%, 2/12/51 (a)		1,833		1,860,970
Series 2011-C5, Class A3, 4.17%, 8/15/46		288		308,522
Series 2012-CBX, Class AS, 4.27%, 6/15/45		350		371,973
LB Commercial Mortgage Trust, Series 2007-C3, Class A4, 5.92%, 7/15/44 (a)		489		495,201
LB-UBS Commercial Mortgage Trust:
Series 2007-C2, Class A3, 5.43%, 2/15/40		517		517,594
Series 2007-C2, Class AM, 5.49%, 2/15/40 (a)		540		544,475
Series 2007-C7, Class A3, 5.87%, 9/15/45 (a)		833		853,242
ML-CFC Commercial Mortgage Trust (a):
Series 2007-7, Class A4, 5.73%, 6/12/50		1,221		1,228,362
Series 2007-8, Class A3, 5.89%, 8/12/49		2,897		2,932,335
Morgan Stanley Bank of America Merrill Lynch Trust, Class A4:
Series 2013-C10, 4.08%, 7/15/46 (a)		470		502,160
Series 2013-C13, 4.04%, 11/15/46		460		487,542
Series 2015-C20, 3.25%, 2/15/48		1,040		1,046,008
Morgan Stanley Capital I Trust:
Series 2007-IQ13, Class AM, 5.41%, 3/15/44		812		810,893
Series 2007-IQ15, Class A4, 5.90%, 6/11/49 (a)		49		49,440
Series 2007-IQ16, Class A4, 5.81%, 12/12/49		1,327		1,346,900
Series 2007-T27, Class A4, 5.64%, 6/11/42 (a)		1,464		1,480,635
Series 2007-T27, Class AM, 5.64%, 6/11/42 (a)		630		642,226
Series 2012-C4, Class A4, 3.24%, 3/15/45		680		702,293
Series 2015-MS1, Class A4, 3.78%, 5/15/48 (a)		550		571,159
UBS-Barclays Commercial Mortgage Trust, Series 2012-C4, Class A5, 2.85%, 12/10/45		505		509,627
Wachovia Bank Commercial Mortgage Trust, Series 2007-C34, Class A3, 5.68%, 5/15/46		1,104		1,111,809

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 27

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Non-Agency Mortgage-Backed Securities	Par   (000)		Value
Commercial Mortgage-Backed Securities (continued)
Wells Fargo Commercial Mortgage Trust, Series 2014-LC18, Class AS, 3.81%, 12/15/47	$	510	$	521,009
WF-RBS Commercial Mortgage Trust:
Series 2012-C08, Class AS, 3.66%, 8/15/45		640		662,803
Series 2012-C10, Class AS, 3.24%, 12/15/45		460		460,614
Series 2013-C18, Class A5, 4.16%, 12/15/46 (a)		570		611,619
Series 2014-C23, Class A4, 3.65%, 10/15/57		330		342,115
				42,228,033
Total Non-Agency Mortgage-Backed Securities — 13.2%				88,589,233
Preferred Securities
Capital Trust
Diversified Financial Services — 0.0%
Bank of New York Mellon Corp., Series D, 4.50% (a)(e)		194		177,403
U.S. Government Sponsored Agency Securities
Agency Obligations — 0.2%
Fannie Mae, 0.00%, 10/09/19 (c)		1,360		1,289,693
Collateralized Mortgage Obligations — 0.1%
Freddie Mac, Series 2015-HQ1, Class M3, 4.56%, 3/25/25 (a)		860		910,366
Commercial Mortgage-Backed Securities — 0.2%
Freddie Mac, Class A2:
Series K025, 2.68%, 10/25/22		900		911,797
Series K031, 3.30%, 4/25/23 (a)		281		294,042
				1,205,839
Mortgage-Backed Securities — 39.7%
Fannie Mae Mortgage-Backed Securities:
1.90%, 4/01/43 - 5/01/43 (a)		291		298,844
2.04%, 6/01/43 (a)		260		263,382
2.50%, 9/01/28 - 4/01/45		704		674,702
2.51%, 2/01/42 (a)		14		14,962
2.76%, 1/01/42 (a)		132		137,080
2.84%, 4/01/40 (a)		38		39,816
3.00%, 8/01/27 - 1/01/47 (f)		5,262		5,336,490
3.01%, 8/01/41 (a)		187		196,818
3.30%, 9/01/41 (a)		149		153,907
3.50%, 11/01/31 - 2/01/47 (f)		39,175		40,202,589
4.00%, 8/01/25 - 1/01/47 (f)		20,700		21,795,192
4.50%, 7/01/25 - 2/01/47 (f)		51,901		55,791,925
5.00%, 1/01/18 - 1/01/47 (f)		18,998		20,678,403
5.50%, 9/01/19 - 8/01/37		2,037		2,267,899
6.00%, 11/01/22 - 8/01/38		1,226		1,394,059
6.50%, 12/01/30 - 12/01/32		1,483		1,697,327
Freddie Mac Mortgage-Backed Securities:
1.80%, 6/01/43 (a)		62		63,533
2.45%, 5/01/43 (a)		194		195,906
2.52%, 8/01/43 (a)		82		82,946
2.83%, 2/01/40 (a)		204		214,796
2.88%, 4/01/38 (a)		294		312,839
3.00%, 5/01/27 - 1/01/47 (f)		3,410		3,462,562
3.08%, 8/01/41 (a)		127		134,056
3.31%, 7/01/41 (a)		129		135,583
3.49%, 1/01/42 (a)		5		5,497
3.50%, 3/01/32 - 1/01/47		23,458		24,069,577
4.00%, 3/01/26 - 1/01/47 (f)		14,713		15,473,462
4.50%, 8/01/20 - 1/01/47 (f)		9,298		9,997,367

U.S. Government Sponsored Agency Securities	Par   (000)		Value
Mortgage-Backed Securities (continued)
Freddie Mac Mortgage-Backed Securities: (continued):
5.00%, 10/01/20 - 1/01/47 (f)	$	2,979	$	3,225,942
5.50%, 5/01/34 - 1/01/47 (f)		1,111		1,240,656
6.00%, 9/01/36 - 1/01/38		483		549,285
6.50%, 5/01/21 - 7/01/32		569		663,182
Ginnie Mae Mortgage-Backed Securities:
3.00%, 1/01/47 (f)		3,800		3,846,078
3.50%, 1/01/41 - 1/01/47 (f)		20,883		21,745,511
4.00%, 9/01/40 - 1/01/47 (f)		12,978		13,815,324
4.50%, 3/01/39 - 1/01/47 (f)		10,043		10,792,757
5.00%, 10/01/39 - 1/01/47 (f)		3,329		3,668,853
5.50%, 6/01/34 - 7/01/40		1,371		1,527,048
6.00%, 9/01/38 - 10/01/38		412		465,852
				266,632,007
Total U.S. Government Sponsored Agency Securities — 40.2%				270,037,905
Total Long-Term Investments (Cost — $747,068,269) — 111.2%				747,639,933
Short-Term Securities (d)(g)	Shares
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.87%		35,917,163		35,924,346
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45%		100,000		100,000
Total Short-Term Securities (Cost — 36,024,053) — 5.4%				36,024,346
Total Investments Before TBA Sale Commitments (Cost — $783,092,322) — 116.6%				783,664,279
TBA Sale Commitments (f)	Par   (000)
Fannie Mae Mortgage-Backed Securities:
2.50%, 9/01/46	$	375		(356,777	)
3.00%, 1/01/32 - 2/01/47		18,772		(18,889,740	)
3.50%, 1/01/32 - 2/01/47		64,468		(66,093,444	)
4.00%, 1/01/47		29,586		(31,106,793	)
4.50%, 1/01/47		1,956		(2,102,394	)
5.50%, 1/01/47		125		(138,848	)
Freddie Mac Mortgage-Backed Securities:
3.00%, 1/01/47		738		(733,394	)
3.50%, 1/01/32 - 1/01/47		3,889		(3,185,079	)
4.00%, 1/01/47		515		(541,072	)
Ginnie Mae Mortgage-Backed Securities:
2.50%, 1/01/47		500		(540,625	)
4.50%, 1/01/47		275		(266,836	)
5.50%, 1/01/47		675		(739,652	)
Total TBA Sale Commitments (Proceeds — $124,369,395) — (18.6)%				(124,694,654	)
Total Investments, Net of TBA Sale Commitments (Cost — $658,722,927) — 98.0%				658,969,625
Other Assets Less Liabilities — 2.0%				13,211,316
Net Assets — 100.0%			$	672,180,941

See Notes to Financial Statements.

28 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Notes to Schedule of Investments

(a) Variable rate security. Rate as of period end.

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

(c) Zero-coupon bond.

(d) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at December 31, 2015		Shares Purchased			Shares Sold			Shares Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gain
BlackRock Cash Funds: Institutional, SL Agency Shares		19,480,003		16,437,160	1		—			35,917,163	$	35,924,346	$	129,592	4	$	6,004
BlackRock Cash Funds: Prime, SL Agency Shares2		50,944		—			(50,944	)3		—		—		692	4		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		100,000	1		—			100,000		100,000		5,375			891
iShares 0-5 Year TIPS Bond ETF		1		—			—			1		101		1			—
iShares 1-3 Year Treasury Bond ETF		1		—			—			1		84		1			—
iShares 10-20 Year Treasury Bond ETF		1		—			—			1		133		2			—
iShares 20+ Year Treasury Bond ETF		52,602		—			(52,602	)3		—		—		25,745			449,830
iShares 3-7 Year Treasury Bond ETF		1		—			—			1		123		2			—
iShares 7-10 Year Treasury Bond ETF		1		—			—			1		105		2			—
iShares Agency Bond ETF		1		—			—			1		113		2			—
iShares Core U.S. Treasury Bond ETF		1		—			—			1		25		—			—
iShares Short Treasury Bond ETF		1		—			—			1		110		—			—
iShares TIPS Bond ETF		1		—			—			1		113		2			—
Total											$	36,025,253	$	161,416		$	456,725
1    Represents net shares purchased.
2    No longer held by the Master Portfolio as of period end.
3    Represents net shares sold.
4    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

(e) Perpetual security with no stated maturity date.

(f) Represents or includes a TBA transaction. As of period end, unsettled TBA transactions were as follows:

Counterparty	Value			Unrealized Appreciation (Depreciation)
Bank of America N.A.	$	(2,301,695	)	$	(18,279	)
Barclays Capital, Inc.	$	(12,492,141	)	$	(42,400	)
BNP Paribas S.A.	$	4,322,988		$	(33,911	)
BNY Capital Markets, Inc.	$	(578,273	)		—
Citigroup Global Markets, Inc.	$	(1,803,932	)	$	(20,181	)
Credit Suisse Securities (USA) LLC	$	(2,861,651	)	$	(92,243	)
Goldman Sachs & Co.	$	11,921,132		$	15,749
J.P. Morgan Securities LLC	$	10,504,295		$	(58,297	)
Mizuho Securities USA Inc.	$	76,781		$	(281	)
Morgan Stanley & Co. LLC	$	(8,835,677	)	$	2,635
Nomura Securities International, Inc.	$	(4,452,728	)	$	161
RBC Capital Markets, LLC	$	(2,887,400	)	$	(5,372	)
Wells Fargo Securities, LLC	$	3,700,143		$	25,759

(g) Current yield as of period end.

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

Contracts Long (Short)		Issue	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
	16	2-Year U.S. Treasury Note	March 2017	$	3,467,000	$	6,055
	950	5-Year U.S. Treasury Note	March 2017	$	111,780,860		127,133
	254	10-Year Australian Treasury Bonds	March 2017	$	23,415,098		171,382
	467	10-Year U.S. Treasury Note	March 2017	$	58,039,344		(50,378	)

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 29

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Futures Contracts (concluded)

Contracts Long (Short)			Issue	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
	19		Euro Bund Futures	March 2017	$	3,283,059	$	(4,194	)
	68		Euro OAT Futures	March 2017	$	10,867,310		96,802
	(35	)	Long Term Euro BTP	March 2017	$	4,985,195		(80,365	)
	114		Long U.S. Treasury Bond	March 2017	$	17,174,812		102,922
	(220	)	UK Long Gilt Bond	March 2017	$	34,116,030		(689,904	)
	133		Ultra Long U.S. Treasury Bond	March 2017	$	21,313,250		(198,680	)
	Total						$	(519,227	)

Forward Foreign Currency Exchange Contracts

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	743,616	EUR	700,000	HSBC Bank USA N.A.		1/05/17	$	5,236
BRL	380,000	USD	109,957	Morgan Stanley & Co. International PLC		3/02/17		4,960
USD	109,441	BRL	380,000	HSBC Bank USA N.A.		3/02/17		(5,475	)
AUD	580,000	USD	434,195	Citibank N.A.		3/13/17		(14,908	)
AUD	300,000	USD	223,589	Citibank N.A.		3/13/17		(6,717	)
AUD	290,000	USD	215,714	Citibank N.A.		3/13/17		(6,070	)
CAD	6,380,000	USD	4,809,595	Goldman Sachs International		3/13/17		(48,136	)
CHF	660,000	USD	656,916	Citibank N.A.		3/13/17		(4,762	)
COP	1,720,000,000	USD	562,459	Credit Suisse International		3/13/17		4,164
EUR	166,263	HUF	52,228,209	Barclays Bank PLC		3/13/17		(2,703	)
EUR	332,589	HUF	104,488,570	Citibank N.A.		3/13/17		(5,448	)
EUR	166,268	HUF	52,309,672	Citibank N.A.		3/13/17		(2,975	)
EUR	413,222	HUF	129,000,000	Citibank N.A.		3/13/17		(3,961	)
EUR	665,236	HUF	208,487,536	Credit Suisse International		3/13/17		(9,160	)
EUR	195,582	HUF	61,486,013	Credit Suisse International		3/13/17		(3,343	)
EUR	412,185	PLN	1,844,899	Barclays Bank PLC		3/13/17		(5,220	)
EUR	220,793	PLN	989,722	Barclays Bank PLC		3/13/17		(3,149	)
EUR	251,871	PLN	1,125,000	BNP Paribas S.A.		3/13/17		(2,628	)
EUR	251,610	PLN	1,125,000	BNP Paribas S.A.		3/13/17		(2,904	)
EUR	164,881	PLN	737,274	Citibank N.A.		3/13/17		(1,917	)
EUR	23,495	PLN	105,357	Citibank N.A.		3/13/17		(344	)
EUR	112,439	PLN	504,253	Credit Suisse International		3/13/17		(1,660	)
EUR	16,488	PLN	73,853	Credit Suisse International		3/13/17		(222	)
EUR	486,286	PLN	2,178,299	Credit Suisse International		3/13/17		(6,574	)
EUR	1,441,584	USD	1,563,456	Citibank N.A.		3/13/17		(37,805	)
EUR	2,008,416	USD	2,176,395	Morgan Stanley & Co. International PLC		3/13/17		(50,859	)
HUF	10,484,568	EUR	33,331	Barclays Bank PLC		3/13/17		591
HUF	78,540,000	EUR	249,215	BNP Paribas S.A.		3/13/17		4,920
HUF	78,540,000	EUR	249,413	BNP Paribas S.A.		3/13/17		4,711
HUF	78,610,260	EUR	249,981	Citibank N.A.		3/13/17		4,349
HUF	32,000,000	EUR	101,517	Credit Suisse International		3/13/17		2,028
HUF	97,000,000	EUR	308,565	Credit Suisse International		3/13/17		5,256
HUF	29,920,000	EUR	94,961	Credit Suisse International		3/13/17		1,851
HUF	192,418,750	EUR	611,514	Credit Suisse International		3/13/17		11,047
HUF	10,486,421	EUR	33,329	HSBC Bank USA N.A.		3/13/17		599
ILS	1,700,000	USD	447,698	Citibank N.A.		3/13/17		(5,157	)
ILS	400,000	USD	105,325	Citibank N.A.		3/13/17		(1,197	)
ILS	450,000	USD	118,206	Credit Suisse International		3/13/17		(1,062	)
ILS	800,000	USD	210,768	HSBC Bank USA N.A.		3/13/17		(2,513	)
ILS	400,000	USD	104,603	Morgan Stanley & Co. International PLC		3/13/17		(475	)
JPY	12,000,000	USD	106,298	HSBC Bank USA N.A.		3/13/17		(3,066	)
KRW	574,500,000	USD	495,600	Bank of America N.A.		3/13/17		(19,898	)
KRW	415,319,055	USD	354,963	Citibank N.A.		3/13/17		(11,067	)
KRW	574,500,000	USD	495,857	Deutsche Bank AG		3/13/17		(20,155	)
KRW	766,000,000	USD	660,744	Morgan Stanley & Co. International PLC		3/13/17		(26,474	)
KRW	195,000,945	USD	166,638	Morgan Stanley & Co. International PLC		3/13/17		(5,172	)
KRW	890,000,000	USD	762,835	UBS AG		3/13/17		(25,890	)
KRW	406,880,000	USD	347,969	UBS AG		3/13/17		(11,061	)
MXN	4,500,000	USD	218,487	Deutsche Bank AG		3/13/17		(2,035	)
NOK	26,530,000	USD	3,164,795	Morgan Stanley & Co. International PLC		3/13/17		(81,274	)

See Notes to Financial Statements.

30 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Forward Foreign Currency Exchange Contracts (continued)

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
NZD	1,070,000	USD	761,012	HSBC Bank USA N.A.		3/13/17	$	(16,485	)
PHP	5,500,000	USD	109,387	Barclays Bank PLC		3/13/17		982
PHP	10,955,000	USD	217,060	Deutsche Bank AG		3/13/17		2,776
PHP	16,000,000	USD	318,947	UBS AG		3/13/17		2,127
PLN	8,683,656	EUR	1,942,174	Citibank N.A.		3/13/17		22,366
RUB	8,000,000	USD	122,926	Barclays Bank PLC		3/13/17		6,426
RUB	62,750,000	USD	965,793	JPMorgan Chase Bank N.A.		3/13/17		48,809
SEK	6,780,000	USD	752,856	Citibank N.A.		3/13/17		(3,583	)
SEK	7,480,000	USD	823,100	Citibank N.A.		3/13/17		3,532
SEK	12,420,000	USD	1,380,536	Credit Suisse International		3/13/17		(7,973	)
SEK	1,320,000	USD	145,098	Credit Suisse International		3/13/17		778
SEK	8,950,000	USD	980,101	Morgan Stanley & Co. International PLC		3/13/17		8,984
THB	17,550,000	USD	492,424	Bank of America N.A.		3/13/17		(2,498	)
THB	17,550,000	USD	492,286	BNP Paribas S.A.		3/13/17		(2,360	)
THB	17,150,650	USD	481,084	Credit Suisse International		3/13/17		(2,306	)
THB	23,100,000	USD	648,876	Goldman Sachs International		3/13/17		(4,016	)
THB	17,849,350	USD	500,543	HSBC Bank USA N.A.		3/13/17		(2,260	)
THB	23,100,000	USD	648,876	UBS AG		3/13/17		(4,016	)
TRY	836,523	USD	243,899	Barclays Bank PLC		3/13/17		(9,615	)
TRY	297,466	USD	82,582	Barclays Bank PLC		3/13/17		729
TRY	92,534	USD	25,683	Citibank N.A.		3/13/17		233
TRY	370,000	USD	104,577	Credit Suisse International		3/13/17		(951	)
TRY	613,477	USD	178,769	Morgan Stanley & Co. International PLC		3/13/17		(6,954	)
TWD	17,400,000	USD	551,156	Bank of America N.A.		3/13/17		(9,616	)
TWD	1,619,940	USD	51,126	Barclays Bank PLC		3/13/17		(709	)
TWD	5,260,060	USD	165,833	HSBC Bank USA N.A.		3/13/17		(2,124	)
TWD	3,500,000	USD	110,532	UBS AG		3/13/17		(1,602	)
USD	437,618	AUD	590,000	Citibank N.A.		3/13/17		11,101
USD	431,476	AUD	580,000	HSBC Bank USA N.A.		3/13/17		12,189
USD	2,227,139	CAD	2,940,793	Citibank N.A.		3/13/17		32,396
USD	877,268	CAD	1,150,000	Citibank N.A.		3/13/17		19,011
USD	741,498	CAD	979,208	HSBC Bank USA N.A.		3/13/17		10,706
USD	994,526	CAD	1,310,000	Morgan Stanley & Co. International PLC		3/13/17		16,860
USD	219,834	CHF	220,000	Citibank N.A.		3/13/17		2,450
USD	217,692	CHF	220,000	Citibank N.A.		3/13/17		308
USD	217,868	CHF	220,000	Citibank N.A.		3/13/17		484
USD	567,058	COP	1,720,000,000	Citibank N.A.		3/13/17		435
USD	3,730,485	EUR	3,450,000	Bank of America N.A.		3/13/17		79,298
USD	10,099	ILS	38,180	Barclays Bank PLC		3/13/17		160
USD	79,762	ILS	301,539	Citibank N.A.		3/13/17		1,266
USD	85,411	ILS	326,445	Citibank N.A.		3/13/17		431
USD	275,514	ILS	1,051,850	Credit Suisse International		3/13/17		1,698
USD	15,951	ILS	60,282	Credit Suisse International		3/13/17		259
USD	210,222	ILS	800,000	Credit Suisse International		3/13/17		1,967
USD	137,105	ILS	523,555	Credit Suisse International		3/13/17		814
USD	169,824	ILS	648,150	Goldman Sachs International		3/13/17		1,098
USD	105,774	JPY	12,000,000	Goldman Sachs International		3/13/17		2,542
USD	3,261,680	KRW	3,822,200,000	Nomura International PLC		3/13/17		96,790
USD	219,156	MXN	4,500,000	Deutsche Bank AG		3/13/17		2,704
USD	766,127	NOK	6,400,000	Citibank N.A.		3/13/17		22,270
USD	864,294	NOK	7,300,000	Citibank N.A.		3/13/17		15,832
USD	765,812	NOK	6,400,000	Credit Suisse International		3/13/17		21,955
USD	761,715	NOK	6,430,000	Morgan Stanley & Co. International PLC		3/13/17		14,371
USD	77,259	NZD	107,568	Citibank N.A.		3/13/17		2,411
USD	214,698	NZD	300,000	Citibank N.A.		3/13/17		5,952
USD	221,044	NZD	310,000	Goldman Sachs International		3/13/17		5,340
USD	253,471	NZD	352,432	Morgan Stanley & Co. International PLC		3/13/17		8,242
USD	647,288	PHP	32,455,000	HSBC Bank USA N.A.		3/13/17		(3,992	)
USD	434,802	RUB	28,100,000	Barclays Bank PLC		3/13/17		(19,545	)
USD	334,588	RUB	21,500,000	Barclays Bank PLC		3/13/17		(13,044	)
USD	339,188	RUB	21,150,000	Barclays Bank PLC		3/13/17		(2,786	)
USD	4,077,484	SEK	36,950,000	HSBC Bank USA N.A.		3/13/17		(5,944	)
USD	3,261,906	THB	116,300,000	Barclays Bank PLC		3/13/17		15,271
USD	632,939	TRY	2,210,000	Citibank N.A.		3/13/17		13,988

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 31

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Forward Foreign Currency Exchange Contracts (concluded)

Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	874,327		TWD	27,780,000	Morgan Stanley & Co. International PLC		3/13/17	$	9,730
USD	115,363		ZAR	1,600,000	Citibank N.A.		3/13/17		(167	)
USD	106,427		ZAR	1,500,000	Deutsche Bank AG		3/13/17		(1,882	)
ZAR	3,100,000		USD	224,865	Citibank N.A.		3/13/17		(1,026	)
INR	85,230,000		USD	1,255,228	BNP Paribas S.A.		3/16/17		(9,351	)
INR	13,256,187		USD	195,303	Citibank N.A.		3/16/17		(1,526	)
INR	44,149,226		USD	649,158	Deutsche Bank AG		3/16/17		(3,792	)
INR	62,500,000		USD	918,983	HSBC Bank USA N.A.		3/16/17		(5,369	)
INR	28,413,813		USD	418,330	HSBC Bank USA N.A.		3/16/17		(2,982	)
INR	45,450,774		USD	668,492	HSBC Bank USA N.A.		3/16/17		(4,101	)
INR	32,389,614		USD	475,706	HSBC Bank USA N.A.		3/16/17		(2,241	)
INR	11,364,552		USD	166,812	Morgan Stanley & Co. International PLC		3/16/17		(687	)
INR	45,402,834		USD	667,247	UBS AG		3/16/17		(3,557	)
USD	5,368,755		INR	368,157,000	Barclays Bank PLC		3/16/17		(12,898	)
USD	836,282		AUD	1,140,000	Credit Suisse International		3/21/17		12,323
USD	42,755		EUR	40,000	Citibank N.A.		3/21/17		401
USD	136,903		EUR	130,000	JPMorgan Chase Bank N.A.		3/21/17		(747	)
USD	693,483		EUR	660,000	UBS AG		3/21/17		(5,356	)
USD	148,512		GBP	120,000	Citibank N.A.		3/21/17		(50	)
USD	233,834		GBP	190,000	Citibank N.A.		3/21/17		(1,390	)
USD	111,221		GBP	90,000	Deutsche Bank AG		3/21/17		(201	)
USD	110,532		GBP	90,000	HSBC Bank USA N.A.		3/21/17		(890	)
USD	149,839		GBP	120,000	JPMorgan Chase Bank N.A.		3/21/17		1,277
USD	448,665		GBP	360,000	Royal Bank of Scotland PLC		3/21/17		2,979
USD	110,376		GBP	90,000	UBS AG		3/21/17		(1,046	)
USD	122,301		JPY	14,390,000	Royal Bank of Scotland PLC		3/21/17		(1,546	)
Total								$	(31,857	)

Centrally Cleared Credit Default Swaps — Buy Protection
Issuer/Index	Pay Fixed Rate			Expiration Date		Notional Amount (000)		Unrealized Depreciation
Markit iTraxx XO, Series 26, Version 1		5.00	%		12/20/21	EUR	9,800	$	(64,057	)

Centrally Cleared Interest Rate Swaps
Fixed Rate			Floating Rate	Effective Date		Expiration Date		Notional Amount (000)			Unrealized Appreciation (Depreciation)
	1.85	%1	3-Month LIBOR		N/A		12/15/21		USD	6,443	$	(36,224	)
	1.88	%1	3-Month LIBOR		N/A		12/15/21		USD	8,590		(35,789	)
	2.36	%2	3-Month LIBOR		N/A		12/15/28		USD	2,946		17,857
	2.39	%2	3-Month LIBOR		N/A		12/15/28		USD	3,928		8,267
	Total										$	(45,889	)
	1    Fund pays the fixed rate and receives the floating rate.
	2    Fund pays the floating rate and receives the fixed rate.

OTC Credit Default Swaps — Sell Protection

Issuer/Index

Receive Fixed Rate

Counterparty

Expiration Date

Credit Rating1

Notional Amount (000)2

Value

Premiums Received

Unrealized Appreciation

Markit CMBX North America AM Index, Series 3

0.08

%

Goldman Sachs International

12/13/49

AA+

USD

617

$

(1,276

)

$

(3,985

)

$

2,709

1    Using Standard & Poor’s (S&P’s) rating of the issuer or the underlying securities of the index, as applicable.

2    The maximum potential amount the Master Portfolio may pay should a negative credit event take place as defined under the terms of the agreement.

See Notes to Financial Statements.

32 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Transactions in Options Written for the Year Ended December 31, 2016

	Calls
	Contracts			Premiums Received
Outstanding options, beginning of year		—			—
Options written		697		$	38,051
Options expired		(697	)		(38,051	)
Outstanding options, end of year		—			—

	Puts
	Contracts			Premiums Received
Outstanding options, beginning of year		—			—
Options written		397		$	92,719
Options exercised		(77	)		(65,643	)
Options closed		(320	)		(27,076	)
Outstanding options, end of year		—			—

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Futures contracts	Net unrealized appreciation1		—		—		—		—	$	504,294		—	$	504,294
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts		—		—		—	$	594,763		—		—		594,763
Swaps — centrally cleared	Net unrealized appreciation1		—		—		—		—		26,124		—		26,124
Swaps — OTC	Unrealized appreciation on OTC swaps		—	$	2,709		—		—		—		—		2,709
			—	$	2,709		—	$	594,763	$	530,418		—	$	1,127,890
Liabilities — Derivative Financial Instruments
Futures contracts	Net unrealized depreciation1		—		—		—		—	$	1,023,521		—	$	1,023,521
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts		—		—		—	$	626,620		—		—		626,620
Swaps — centrally cleared	Net unrealized depreciation1		—	$	64,057		—		—		72,013		—		136,070
Swaps — OTC	Swap premiums received		—		3,985		—		—		—		—		3,985
Total			—	$	68,042		—	$	626,620	$	1,095,534		—	$	1,790,196
1    Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

For the year ended December 31, 2016, the effect of derivative financial instruments in the Statement of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts		Credit Contracts			Equity Contracts		Foreign Currency Exchange Contracts			Interest Rate Contracts			Other Contracts			Total
Futures contracts		—		—			—		—		$	(4,933,891	)		—		$	(4,933,891	)
Forward foreign currency exchange contracts		—		—			—	$	(1,968,516	)		—			—			(1,968,516	)
Options purchased1		—		—			—		—			(208,879	)		—			(208,879	)
Options written		—		—			—		—			123,635			—			123,635
Swaps		—	$	950,075			—		—			88,276		$	(288,397	)		749,954
Total		—	$	950,075			—	$	(1,968,516	)	$	(4,930,859	)	$	(288,397	)	$	(6,237,697	)
1    Options purchased are included in the net realized gain (loss) from investments.
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts		—		—			—		—		$	(850,228	)		—		$	(850,228	)
Forward foreign currency exchange contracts		—		—			—	$	269,380			—			—			269,380
Swaps		—	$	(132,207	)		—		—			104,789		$	131,002			103,584
Total		—	$	(132,207	)		—	$	269,380		$	(745,439	)	$	131,002		$	(477,264	)

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 33

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	245,914,868
Average notional value of contracts — short	$	77,502,365
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	304,991,930
Average amounts sold — in USD	$	296,182,628
Options:
Average value of options contracts purchased	$	233,970	1
Average value of options contracts written	$	111,870	1
Credit default swaps:
Average notional value — buy protection	$	19,842,606
Average notional value — sell protection	$	15,966,528
Interest rate swaps:
Average notional value — pays fixed rate	$	16,700,829
Average notional value — receives fixed rate	$	18,678,903
Total return swaps:
Average notional value	$	26,882,500
1    Actual amounts for the period are shown due to limited outstanding derivative financial instruments as of each quarter.

For more information about the Master Portfolio’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Derivative Financial Instruments — Offsetting as of Period End

The Master Portfolio’s derivative assets and liabilities (by type) were as follows:

	Assets			Liabilities
Derivative Financial Instruments:
Futures contracts	$	1,873,439		$	20,778
Forward foreign currency exchange contracts		594,763			626,620
Swaps — centrally cleared		—			38,917
Swaps — OTC1		2,709			3,985
Total derivative assets and liabilities in the Statement of Assets and Liabilities	$	2,470,911		$	690,300
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(1,873,439	)		(59,695	)
Total derivative assets and liabilities subject to an MNA	$	597,472		$	630,605
1    Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums received in the Statement of Assets and Liabilities.

The following table presents the Master Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Master Portfolio:

Counterparty	Derivative Assets Subject to an MNA by  Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received		Cash Collateral Received	Net Amount of Derivative Assets2
Bank of America N.A.	$	79,298	$	(32,012	)		—	—	$	47,286
Barclays Bank PLC		24,159		(24,159	)		—	—		—
BNP Paribas S.A.		9,631		(9,631	)		—	—		—
Citibank N.A.		159,216		(110,070	)		—	—		49,146
Credit Suisse International		64,140		(33,251	)		—	—		30,889
Deutsche Bank AG		5,480		(5,480	)		—	—		—
Goldman Sachs International		11,689		(11,689	)		—	—		—
HSBC Bank USA N.A.		28,730		(28,730	)		—	—		—
JPMorgan Chase Bank N.A.		50,086		(747	)		—	—		49,339
Morgan Stanley & Co. International PLC		63,147		(63,147	)		—	—		—
Nomura International PLC		96,790		—			—	—		96,790
Royal Bank of Scotland PLC		2,979		(1,546	)		—	—		1,433
UBS AG		2,127		(2,127	)		—	—		—
Total	$	597,472	$	(322,589	)		—	—	$	274,883

See Notes to Financial Statements.

34 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

Schedule of Investments (concluded) CoreAlpha Bond Master Portfolio

Counterparty	Derivative Liabilities Subject to an MNA by  Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged		Cash Collateral Pledged	Net Amount of Derivative Liabilities3
Bank of America N.A.	$	32,012	$	(32,012	)		—	—		—
Barclays Bank PLC		69,669		(24,159	)		—	—	$	45,510
BNP Paribas S.A.		17,243		(9,631	)		—	—		7,612
Citibank N.A.		110,070		(110,070	)		—	—		—
Credit Suisse International		33,251		(33,251	)		—	—		—
Deutsche Bank AG		28,065		(5,480	)		—	—		22,585
Goldman Sachs International		56,137		(11,689	)		—	—		44,448
HSBC Bank USA N.A.		57,442		(28,730	)		—	—		28,712
JPMorgan Chase Bank N.A.		747		(747	)		—	—		—
Morgan Stanley & Co. International PLC		171,895		(63,147	)		—	—		108,748
Royal Bank of Scotland PLC		1,546		(1,546	)		—	—		—
UBS AG		52,528		(2,127	)		—	—		50,401
Total	$	630,605	$	(322,589	)		—	—	$	308,016
1   The amount of derivatives available for offset is limited to the amount of derivative asset and/or liabilities that are subject to an MNA.
2   Net amount represents the net amount receivable from the counterparty in the event of default.
3   Net amount represents the net amount payable due to counterparty in the event of default.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1			Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities		—		$	86,114,322			—	$	86,114,322
Corporate Bonds		—			290,443,272			—		290,443,272
Foreign Agency Obligations		—			7,225,721			—		7,225,721
Investment Companies	$	907			—			—		907
Municipal Bonds		—			5,051,170			—		5,051,170
Non-Agency Mortgage-Backed Securities		—			88,589,233			—		88,589,233
Preferred Securities		—			177,403			—		177,403
U.S. Government Sponsored Agency Securities		—			270,037,905			—		270,037,905
Short-Term Securities		36,024,346			—			—		36,024,346
Liabilities:
Investments:
TBA Sale Commitments		—			(124,694,654	)		—		(124,694,654	)
Total	$	36,025,253		$	622,944,372			—	$	658,969,625
Derivative Financial Instruments1
Assets:
Credit contracts				$	2,709			—	$	2,709
Foreign currency exchange contracts		—			594,763			—		594,763
Interest rate contracts	$	504,294			26,124			—		530,418
Liabilities:
Credit contracts					(64,057	)		—		(64,057	)
Foreign currency exchange contracts					(626,620	)				(626,620	)
Interest rate contracts		(1,023,521	)		(72,013	)		—		(1,095,534	)
Total	$	(519,227	)	$	(139,094	)		—	$	(658,321	)
1   Derivative financial instruments are swaps, futures contracts and forward foreign currency exchange contracts. Swaps, futures contracts and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 35

Statement of Assets and Liabilities CoreAlpha Bond Master Portfolio

December 31, 2016
Assets
Investments at value — unaffiliated (cost — $747,067,361)	$	747,639,026
Investments at value — affiliated (cost — $36,024,961)		36,025,253
Cash pledged:
Futures contracts		4,208,000
Centrally cleared swaps		493,000
Foreign currency at value (cost — $1,311,037)		1,306,590
Receivables:
Investments sold		456,163
TBA sale commitments		124,369,395
Dividends — affiliated		15,368
Interest — unaffiliated		3,479,432
Principal paydowns		6,133
Variation margin on futures contracts		1,873,439
Unrealized appreciation on:
Forward foreign currency exchange contracts		594,763
OTC swaps		2,709
Total assets		920,469,271
Liabilities
Bank overdraft		1,284,873
Cash received as collateral for TBA Commitments		60,000
TBA sale commitments at value (proceeds — $124,369,395)		124,694,654
Payables:
Investments purchased		120,685,796
Investment advisory fees		137,295
Other accrued expenses		27,363
Trustees’ fees		7,106
Variation margin on futures contracts		20,778
Variation margin on centrally cleared swaps		38,917
Withdrawals to investors		700,943
Swap premiums received		3,985
Unrealized depreciation on forward foreign currency exchange contracts		626,620
Total liabilities		248,288,330
Net Assets	$	672,180,941
Net Assets Consist of
Investors’ capital	$	672,589,604
Net unrealized appreciation (depreciation)		(408,663	)
Net Assets	$	672,180,941

See Notes to Financial Statements.
36	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2016

Statement of Operations CoreAlpha Bond Master Portfolio

Year Ended December 31, 2016
Investment Income
Interest — unaffiliated	$	20,742,631
Dividends — affiliated		158,094
Securities lending — affiliated — net		3,322
Total investment income		20,904,047
Expenses
Investment advisory		2,028,497
Professional		30,038
Independent Trustees		20,164
Total expenses		2,078,699
Less fees waived by the Manager		(66,618	)
Total expenses after fees waived		2,012,081
Net investment income		18,891,966
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — unaffiliated		7,965,430
Investments — affiliated		455,834
Capital gain distributions from investment companies — affiliated		891
Futures contracts		(4,933,891	)
Forward foreign currency exchange contracts		(1,968,516	)
Foreign currency transactions		(763,158	)
Options written		123,635
Swaps		749,954
		1,630,179
Net change in unrealized appreciation (depreciation) on:
Investments — unaffiliated		2,113,279
Investments — affiliated		28,154
Futures contracts		(850,228	)
Forward foreign currency exchange contracts		269,380
Foreign currency translations		74,609
Swaps		103,584
		1,738,778
Net realized and unrealized gain		3,368,957
Net Increase in Net Assets Resulting from Operations	$	22,260,923

See Notes to Financial Statements.
	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2016	37

Statements of Changes in Net Assets CoreAlpha Bond Master Portfolio

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	18,891,966		$	65,808,146
Net realized gain		1,630,179			20,619,514
Net change in unrealized appreciation (depreciation)		1,738,778			(60,017,386	)
Net increase in net assets resulting from operations		22,260,923			26,410,274
Capital Transactions
Proceeds from contributions		333,288,915			402,475,509
Value of withdrawals		(499,366,336	)		(2,500,269,038	)1
Net decrease in net assets derived from capital transactions		(166,077,421	)		(2,097,793,529	)
Net Assets
Total decrease in net assets		(143,816,498	)		(2,071,383,255	)
Beginning of year		815,997,439			2,887,380,694
End of year	$	672,180,941		$	815,997,439

¹  See Note 2 of Notes to Financial Statements.

Financial Highlights CoreAlpha Bond Master Portfolio

	Year Ended December 31,
	2016		2015		2014		2013		2012
Total Return
Total return		2.46%		0.60%		6.64%		(2.39)%		4.95%
Ratios to Average Net Assets
Total expenses		0.26%		0.25%		0.25%		0.25%		0.25%
Total expenses after fees waived		0.25%		0.24%		0.24%		0.24%		0.24%
Net investment income		2.33%		2.53%		2.52%		2.23%		2.36%
Supplemental Data
Net assets, end of year (000)	$	672,181	$	815,997	$	2,887,381	$	3,373,147	$	2,789,640
Portfolio turnover rate1,2		677%		612%		686%		986%		2,128%

¹  Portfolio turnover rates include TBA transactions, if any.

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

	Year Ended December 31,
	2016		2015		2014		2013		2012
Portfolio turnover rate (excluding MDRs)		459%		540%		470%		736%		1,774%

See Notes to Financial Statements.
38	BLACKROCK COREALPHA BOND FUND	DECEMBER 31, 2016

Notes to Financial Statements CoreAlpha Bond Master Portfolio

1. Organization:

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

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

2. Significant Accounting Policies:

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

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

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

Segregation and Collateralization: In cases where the Master Portfolio enters into certain investments (e.g., dollar rolls, to-be-announced (“TBA”) sale commitments, futures contracts, forward foreign currency exchange contracts and swaps) that would be treated as “senior securities” for 1940 Act purposes, the Master Portfolio may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Master Portfolio may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.

In-Kind Redemptions: The Master Portfolio transferred securities and cash to shareholders in connection with an in-kind redemption transaction. For financial reporting purposes, 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 redemption. For the year ended December 31, 2015, the Master Portfolio had in-kind redemptions of $2,013,230,637. For tax purposes, no gains or losses were recognized.

Recent Accounting Standard: In November 2016, the Financial Accounting Standards Board issued Accounting Standards Update “Restricted Cash” which will require entities to include the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the beginning and ending cash balances in the Statement of Cash Flows. The guidance will be applied retrospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. Management is evaluating the impact, if any, of this guidance on the Master Portfolio’s presentation in the Statement of Cash Flows.

Indemnifications: In the normal course of business, the Master Portfolio enters into contracts that contain a variety of representations that provide general indemnification. The Master Portfolio’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Master Portfolio, which cannot be predicted with any certainty.

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

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 39

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

Through May 31, 2016, the Master Portfolio had an arrangement with its custodian whereby credits were earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. Credits previously earned may have been utilized until December 31, 2016. Under current arrangements effective June 1, 2016, the Master Portfolio no longer earns credits on uninvested cash, and may incur charges on uninvested cash balances and overdrafts, subject to certain conditions.

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Master Portfolio’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time) (or if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the 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 using various 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 oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Master Portfolio’s assets and liabilities:

• Fixed-income securities for which market quotations are readily available are generally valued using the last available bid prices or current market quotations provided by independent dealers or third party pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more independent brokers or dealers as obtained from a third party pricing service. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but the Master Portfolio may hold or transact in such securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), credit quality information, perceived market movements, news, and other relevant information. Certain fixed-income securities, including asset-backed and mortgage related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager determines such method does not represent fair value.

• Municipal investments (including commitments to purchase such investments on a “when-issued” basis) are valued on the basis of prices provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments and information with respect to various relationships between investments.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• Futures contracts traded on exchanges are valued at their last sale price.

• Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the NYSE. Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

• Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that the prior day’s price no longer reflects the fair value of the option. Over-the-counter (“OTC”) options and options on swaps (“swaptions”) are valued by an independent pricing service using a mathematical model, which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.

• Swap agreements are valued utilizing quotes received daily by the 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.

• TBA commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include Market approach, Income approach and the Cost approach. Valuation techniques such as discounted cash flow, use of market

40 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

comparables and matrix pricing are types of valuation approaches and typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

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

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

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

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued investments. Level 3 investments include equity or debt issued by Private Companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

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

4. Securities and Other Investments:

Asset-Backed and Mortgage-Backed Securities: Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, the Master Portfolio may subsequently have to reinvest the proceeds at lower interest rates. If the Master Portfolio has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.

For mortgage pass-through securities (the “Mortgage Assets”), there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury.

Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 41

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

Inflation-Indexed Bonds: Inflation-indexed bonds (other than municipal inflation-indexed and certain corporate inflation-indexed bonds) are fixed income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation rises or falls, the principal value of inflation-indexed bonds (other than municipal inflation-indexed and certain corporate inflation-indexed bonds) will be adjusted upward or downward, and consequently the interest payable on these securities (calculated with respect to a larger or smaller principal amount) will be increased or reduced, respectively. Any upward or downward adjustment in the principal amount of an inflation-indexed bond will be included as interest income in the Statement of Operations, even though investors do not receive their principal until maturity. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal. With regard to municipal inflation-indexed bonds and certain corporate inflation-indexed bonds, the inflation adjustment is typically reflected in the semi-annual coupon payment. As a result, the principal value of municipal inflation-indexed bonds and such corporate inflation-indexed bonds does not adjust according to the rate of inflation.

Multiple Class Pass-Through Securities: Multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities, may be issued by Ginnie Mae, U.S. Government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or Mortgage Assets. The payments on these are used to make payments on the CMOs or multiple pass-through securities. Multiple class pass-through securities represent direct ownership interests in the Mortgage Assets. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. If the underlying Mortgage Assets experience greater than anticipated prepayments of principal, the Master Portfolio’s initial investment in the IOs may not fully recoup.

Stripped Mortgage-Backed Securities: Stripped mortgage-backed securities are typically issued by the U.S. Government, its agencies and instrumentalities. Stripped mortgage-backed securities are usually structured with two classes that receive different proportions of the interest (IOs) and principal (POs) distributions on a pool of the Mortgage Assets. Stripped mortgage-backed securities may be privately issued.

Zero-Coupon Bonds: Zero-coupon bonds are normally issued at a significant discount from face value and do not provide for periodic interest payments. These bonds may experience greater volatility in market value than other debt obligations of similar maturity which provide for regular interest payments.

Capital Securities and Trust Preferred Securities: Capital securities, including trust preferred securities, are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics. In the case of trust preferred securities, an affiliated business trust of a corporation issues these securities, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured with either a fixed or adjustable coupon that can have either a perpetual or stated maturity date. For trust preferred securities, the issuing bank or corporation pays interest to the trust, which is then distributed to holders of these securities as a dividend. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment obligations have been met. The deferral of payments does not affect the purchase or sale of these securities in the open market. Payments on these securities are treated as interest rather than dividends for federal income tax purposes. These securities generally are rated below that of the issuing company’s senior debt securities and are freely callable at the issuer’s option.

Preferred Stock: 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: TBA commitments are forward agreements for the purchase or sale of mortgage-backed securities for a fixed price, with payment and delivery on an agreed upon future settlement date. The specific securities to be delivered are not identified at the trade date. However, delivered securities must meet specified terms, including issuer, rate and mortgage terms. When entering into TBA commitments, the Master Portfolio may take possession of or deliver the underlying mortgage-backed securities but can extend the settlement or roll the transaction. TBA commitments involve a risk of loss if the value of the security to be purchased or sold declines or increases, respectively, prior to settlement date.

In order to better define contractual rights and to secure rights that will help the Master Portfolio mitigate its counterparty risk, TBA commitments may be entered into by the Master Portfolio under Master Securities Forward Transaction Agreements (each, an “MSFTA”). An MSFTA typically contains, among

42 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

other things, collateral posting terms and netting provisions in the event of default and/or termination event. The collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of the collateral currently pledged by the Master Portfolio and the counterparty. Cash collateral that has been pledged to cover the obligations of the Master Portfolio and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as cash pledged as collateral for TBA commitments or cash received as collateral for TBA commitments, respectively. Non-cash collateral pledged by the Master Portfolio, if any, is noted in the Schedule of Investments. Typically, the Master Portfolio is permitted to sell, repledge or use the collateral it receives; however, the counterparty is not permitted to do so. To the extent amounts due to the Master Portfolio are not fully collateralized, contractually or otherwise, the Master Portfolio bears the risk of loss from counterparty non-performance.

Mortgage Dollar Roll Transactions: The Master Portfolio may sell TBA mortgage-backed securities and simultaneously contract to repurchase substantially similar (i.e., same type, coupon and maturity) securities on a specific future date at an agreed upon price. During the period between the sale and repurchase, the Master Portfolio is not entitled to receive interest and principal payments on the securities sold. Mortgage dollar roll transactions are treated as purchases and sales and realize gains and losses on these transactions. Mortgage dollar rolls involve the risk that the market value of the securities that the Master Portfolio is required to purchase may decline below the agreed upon repurchase price of those securities.

Securities Lending: The Master Portfolio may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Master Portfolio collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio, or excess collateral returned by the Master Portfolio, on the next business day. During the term of the loan, the Master Portfolio is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as corporate bonds in the Master Portfolio’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value-unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Master Portfolio under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Master Portfolio can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

As of period end, the Master Portfolio did not have any outstanding securities out on loan.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Master Portfolio could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. Derivative Financial Instruments:

The Master Portfolio engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Master Portfolio and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or OTC.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 43

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

Futures Contracts: The Master Portfolio invests in long and/or short positions in futures and options on futures contracts to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Master Portfolio and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Master Portfolio is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Master Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

Forward Foreign Currency Exchange Contracts: The Master Portfolio enters into forward foreign currency exchange contracts to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk).

A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a specified date. These contracts help to manage the overall exposure to the currencies in which some of the investments held by the Master Portfolio are denominated and in some cases, may be used to obtain exposure to a particular market.

The contract is marked to market daily and the change in market value is recorded as unrealized appreciation (depreciation) in the Statement of Assets and Liabilities. When a contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the value at the time it was opened and the value at the time it was closed. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency. The use of forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

Options: The Master Portfolio purchases and writes call and put options to increase or decrease its exposure to the risks of underlying instruments, including equity risk, interest rate risk and/or commodity price risk and/or, in the case of options written, to generate gains from options premiums.

A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised) the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period.

Premiums paid on options purchased and premiums received on options written, as well as the daily fluctuation in market value, are included in investments at value — unaffiliated and options written at value, respectively, in the Statement of Assets and Liabilities. When an instrument is purchased or sold through the exercise of an option, the premium is offset against the cost or proceeds of the underlying instrument. When an option expires, a realized gain or loss is recorded in the Statement of Operations to the extent of the premiums received or paid. When an option is closed or sold, a gain or loss is recorded in the Statement of Operations to the extent the cost of the closing transaction exceeds the premiums received or paid. When the Master Portfolio writes a call option, such option is typically “covered,” meaning that it holds the underlying instrument subject to being called by the option counterparty. When the Master Portfolio writes a put option, such option is covered by cash in an amount sufficient to cover the obligation.

• Swaptions — The Master Portfolio purchases and writes options on swaps (“swaptions”) primarily to preserve a return or spread on a particular investment or portion of the Master Portfolio’s holdings, as a duration management technique or to protect against an increase in the price of securities it anticipates purchasing at a later date. The purchaser and writer of a swaption is buying or granting the right to enter into a previously agreed upon interest rate or credit default swap agreement (interest rate risk and/or credit risk) at any time before the expiration of the option.

• Foreign Currency Options — The Master Portfolio purchases and writes foreign currency options, foreign currency futures and options on foreign currency futures to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk). Foreign currency options give the purchaser the right to buy from or sell to the writer a foreign currency at any time before the expiration of the option.

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 it may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Master Portfolio purchasing or selling a security when it otherwise would not, or at a price different from the current market value.

44 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

Swaps: The Master Portfolio enters into swap contracts to manage exposure to issuers, markets and securities. Such contracts are agreements between the Master Portfolio and a counterparty to make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract (“OTC swaps”) or centrally cleared (“centrally cleared swaps”).

For OTC swaps, any upfront premiums paid and any upfront fees received are shown as swap premiums paid and swap premiums received, respectively, in the Statement of Assets and Liabilities and amortized over the term of the contract. The daily fluctuation in market value is recorded as unrealized appreciation (depreciation) on OTC Swaps in the Statement of Assets and Liabilities. Payments received or paid are recorded in the Statement of Operations as realized gains or losses, respectively. When an OTC swap is terminated, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the proceeds from (or cost of) the closing transaction and the Master Portfolio’s basis in the contract, if any. Generally, the basis of the contract is the premium received or paid.

In a centrally cleared swap, immediately following execution of the swap contract, the swap contract is novated to a central counterparty (the “CCP”) and the Master Portfolio’s counterparty on the swap agreement becomes the CCP. The Master Portfolio is required to interface with the CCP through the broker. Upon entering into a centrally cleared swap, the Master Portfolio is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited is shown as cash pledged for centrally cleared swaps in the Statement of Assets and Liabilities. 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 market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and shown as variation margin receivable (or payable) on centrally cleared swaps in the Statement of Assets and Liabilities. Payments received from (paid to) the counterparty, including at termination, are recorded as realized gains (losses) in the Statement of Operations.

• Credit default swaps — 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 are agreements in which the protection buyer pays fixed periodic payments to the seller in consideration for a promise from the protection seller to make a specific payment should a negative credit event take place with respect to the referenced entity (e.g., bankruptcy, failure to pay, obligation acceleration, repudiation, moratorium or restructuring). As a buyer, if an underlying credit event occurs, the Master Portfolio will either (i) receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising the index, or (ii) receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index. As a seller (writer), if an underlying credit event occurs, the Master Portfolio will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising the index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.

• 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 such market or to exchange the risk/return of one market (e.g., fixed income) with another market (e.g., equity or commodity prices) (equity risk, commodity price risk and/or interest rate risk).

Total return swaps are agreements in which there is an exchange of cash flows whereby one party commits to make payments based on the total return (distributions plus capital gains/losses) of an underlying instrument in exchange for fixed or floating rate interest payments. If the total return of the instrument or index underlying the transaction exceeds or falls short of the offsetting fixed or floating interest rate obligation, the Master Portfolio receives payment from or makes a payment to the counterparty.

• 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 (interest rate risk).

Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating, in exchange for another party’s stream of interest payments, either fixed or floating, on the same notional amount for a specified period of time. In more complex interest rate swaps, the notional principal amount may decline (or amortize) over time.

• Forward swaps — The Master Portfolio enters into forward interest rate swaps and forward total return swaps. In a forward swap, the Master Portfolio and the counterparty agree to make periodic net payments beginning on a specified date or a net payment at termination.

Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the 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.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 45

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

Master Netting Arrangements: In order to define its contractual rights and to secure rights that will help it mitigate its counterparty risk, the Master Portfolio may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its counterparties. An ISDA Master Agreement is a bilateral agreement between the Master Portfolio and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Master Portfolio may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to terminate derivative contracts prior to maturity in the event the Master Portfolio’s net assets decline by a stated percentage or the Master Portfolio fails to meet the terms of its ISDA Master Agreements. The result would cause the Master Portfolio to accelerate payment of any net liability owed to the counterparty.

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty.

Cash collateral that has been pledged to cover obligations of the Master Portfolio and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by Master Portfolio, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the Master Portfolio. Any additional required collateral is delivered to/pledged by the Master Portfolio on the next business day. Typically, the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. The Master Portfolio generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Master Portfolio from its counterparties are not fully collateralized, it bears the risk of loss from counterparty non-performance. Likewise, to the extent the Master Portfolio has delivered collateral to a counterparty and stands ready to perform under the terms of its agreement with such counterparty, it bears the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.

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

6. Investment Advisory Agreement and Other Transactions with Affiliates:

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

Investment Advisory: MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement with the Manager, the Master Portfolio’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory services. The Manager is responsible for the management of the Master Portfolio and provides the 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 at an annual rate of the average daily value of the Master Portfolio’s net assets.

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%

With respect to the Master Portfolio, the Manager entered into sub-advisory agreements with BlackRock International Limited (“BIL”) and BlackRock Fund Advisors (“BFA”), affiliates of the Manager. The Manager pays BIL and BFA, for services they provide, a monthly fee that is a percentage of the investment advisory fees paid by the Master Portfolio to the Manager.

Waivers: With respect to the Master Portfolio, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Master Portfolio pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). This amount is included in fees waived by the Manager in the Statement of Operations. For the year ended December 31, 2016, the amount waived was $16,415.

46 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

The fees and expenses of the MIP’s trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and the MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolio. The Manager has contractually agreed to reimburse the Master Portfolio or provide an offsetting credit against the administration fees paid by the Master Portfolio in an amount equal to these independent expenses through April 30, 2017. For the year ended December 31, 2016, the amount waived was $50,202.

Effective September 1, 2016, the Manager voluntarily agreed to waive its advisory fee with respect to any portion of Master Portfolio’s assets invested in affiliated equity or fixed-income mutual funds or affiliated exchange-traded funds that have a contractual management fee. Prior to September 1, 2016, the Manager did not waive such fees. This voluntary waiver may be reduced or discontinued at any time without notice. For the year ended December 31, 2016, the amount waived was $1.

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

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, BTC may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the “specials only securities”).

Pursuant to such agreement, the Master Portfolio retains 80% of securities lending income. In addition, commencing the business day following the date that the aggregate securities lending income earned across certain funds in the Equity-Liquidity Complex in a calendar year exceeds a specified threshold, the Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income.

The share of securities lending income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the year ended December 31, 2016, the Master Portfolio paid BTC $831 in total for securities lending agent services and collateral investment fees.

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

Other Transactions: The Master Portfolio may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common trustees. For the year ended December 31, 2016, the purchase and sale transactions and any net realized gains (losses) with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:

Purchases	Sales		Net Realized Loss
—	$	29,380	$	(139	)

7. Purchases and Sales:

For the year ended December 31, 2016, purchases and sales of investments, including paydowns and mortgage dollar rolls and excluding short-term securities, were as follows:

	Purchases		Sales
Non-U.S. Government Securities	$	5,957,614,037	$	6,211,940,658
U.S. Government Securities	$	139,551,641	$	150,794,059

For the year ended December 31, 2016, purchases and sales related to mortgage dollar rolls were $1,963,369,935 and $1,964,937,324, respectively.

8. Income Tax Information:

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

The Master Portfolio files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolio’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016. 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.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 47

Notes to Financial Statements (continued) CoreAlpha Bond Master Portfolio

Management has analyzed tax laws and regulations and their application to the Master Portfolio as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Master Portfolio’s financial statements.

As of December 31, 2016, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	783,259,461
Gross unrealized appreciation	$	7,675,227
Gross unrealized depreciation		(7,270,409	)
Net unrealized appreciation	$	404,818

9. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Master Portfolio may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Master Portfolio, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2017 unless extended or renewed. Prior to April 21, 2016, the credit agreement had a fee per annum of 0.06% on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2016, the Master Portfolio did not borrow under the credit agreement.

10. Principal Risks:

Many municipalities insure repayment of their bonds, which may reduce the potential for loss due to credit risk. The market value of these bonds may fluctuate for other reasons, including market perception of the value of such insurance, and there is no guarantee that the insurer will meet its obligation.

Inventories of municipal bonds held by brokers and dealers may decrease, which would lessen their ability to make a market in these securities. Such a reduction in market making capacity could potentially decrease the Master Portfolio’s ability to buy or sell bonds. As a result, the Master Portfolio may sell a security at a lower price, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative impact on performance. If the Master Portfolio needed to sell large blocks of bonds, those sales could further reduce the bonds’ prices and impact performance.

In the normal course of business, the 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 to meet all its obligations, including the ability to pay principal and interest when due (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 of securities owned by the Master Portfolio. Changes arising from the general economy, the overall market and local, regional or global political and/or social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

The Master Portfolio may be exposed to prepayment risk, which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force the Master Portfolio to reinvest in lower yielding securities. The Master Portfolio may also be exposed to reinvestment risk, which is the risk that income from the Master Portfolio’s portfolio will decline if the Master Portfolio invests the proceeds from matured, traded or called fixed income securities at market interest rates that are below the Master Portfolio portfolio’s current earnings rate.

On October 11, 2016, BlackRock implemented certain changes required by amendments to Rule 2a-7 under the 1940 Act, which governs the operations of U.S. money market funds. The Master Portfolio may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Counterparty Credit Risk: Similar to issuer credit risk, the Master Portfolio may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Master Portfolio manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the 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 approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Master Portfolio.

48 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

Notes to Financial Statements (concluded) CoreAlpha Bond Master Portfolio

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

The Master Portfolio’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by the Master Portfolio.

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 held by the Master Portfolio should the counterparty fail to perform under the contracts. Options written by the Master Portfolio do not typically give rise to counterparty credit risk, as options written generally obligate the Master Portfolio, and not the counterparty, to perform. The Master Portfolio may be exposed to counterparty credit risk with respect to options written to the extent the Master Portfolio deposits collateral with its counterparty to a written option.

With exchange-traded options purchased and futures and centrally cleared swaps, there is less counterparty credit risk to the Master Portfolio since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Master Portfolio does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Master Portfolio.

Concentration Risk: The Master Portfolio invests a significant portion of its assets in fixed income securities and/or uses derivatives tied to the fixed income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed income securities will increase as interest rates fall and decrease as interest rates rise. The Master Portfolio may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

The Master Portfolio invests a significant portion of its assets in securities backed by commercial or residential mortgage loans or in issuers that hold mortgage and other asset-backed securities. Investment percentages in these securities are presented in the Schedule of Investments. Changes in economic conditions, including delinquencies and/or defaults on assets underlying these securities, can affect the value, income and/or liquidity of such positions.

11. Subsequent Events:

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

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 49

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Master Investment Portfolio and the Investors of CoreAlpha Bond Master Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of CoreAlpha Bond Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio, as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers and the transfer agent of the investee funds, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

50 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

Officers and Trustees¹

Name, Address2 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3
Rodney D. Johnson 1941	Chair of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011; Director, The Mainstay (non-profit) since 2016.	26 RICs consisting of 146 Portfolios	None
Susan J. Carter 1956	Trustee	Since 2016	Director, Pacific Pension Institute since 2014; Advisory Board Member, Center for Private Equity and Entrepreneurship at Tuck School of Business since 1997; Senior Advisor, Commonfund Capital, Inc. (“CCI”) (investment adviser) in 2015; Chief Executive Officer, CCI from 2013 to 2014; President & Chief Executive Officer, CCI from 1997 to 2013; Advisory Board Member, Girls Who Invest since 2015; Advisory Board Member, Bridges Ventures since 2016; Trustee, Financial Accounting Foundation since 2017.	26 RICs consisting of 146 Portfolios	None
Collette Chilton 1958	Trustee	Since 2015	Chief Investment Officer, Williams College since 2006; Chief Investment Officer, Lucent Asset Management Corporation from 1998 to 2006.	26 RICs consisting of 146 Portfolios	None
Neil A. Cotty 1954	Trustee	Since 2016	Bank of America Corporation from 1996 to 2015, serving in various senior finance leadership roles, including Chief Accounting Officer, from 2009 to 2015, Chief Financial Officer of Global Banking, Markets and Wealth Management from 2008 to 2009, Chief Accounting Officer from 2004 to 2008, Chief Financial Officer of Consumer Bank from 2003 to 2004, Chief Financial Officer of Global Corporate Investment Bank from 1999 to 2002.	26 RICs consisting of 146 Portfolios	None
Cynthia A. Montgomery 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012.	26 RICs consisting of 146 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 1947	Trustee	Since 2009	General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Chair, Basic Health International (non-profit) since 2015.	26 RICs consisting of 146 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company); Consol Energy Inc.
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981 and Principal since 2010.	26 RICs consisting of 146 Portfolios	None
Mark Stalnecker 1951	Trustee	Since 2015	Chief Investment Officer, University of Delaware from 1999 to 2013; Trustee, Winterthur Museum and Country Estate from 2001 to 2015; Member of the Investment Committee, Delaware Public Employees’ Retirement System since 2002; Member of the Investment Committee, Christiana Care Health System since 2009; Member of the Investment Committee, Delaware Community Foundation from 2013 to 2014; Director, SEI Private Trust Co. from 2001 to 2014.	26 RICs consisting of 146 Portfolios	None
Kenneth L. Urish 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since founding in 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	26 RICs consisting of 146 Portfolios	None

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 51

Officers and Trustees¹ (continued)

Name, Address2 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3 (concluded)
Claire A. Walton 1957	Trustee	Since 2016	Chief Operating Officer and Chief Financial Officer of Liberty Square Asset Management, LP from 1998 to 2015; General Partner of Neon Liberty Capital Management, LLC since 2003; Director, Boston Hedge Fund Group since 2009; Director, Woodstock Ski Runners since 2013; Director, Massachusetts Council on Economic Education from 2013 to 2015.	26 RICs consisting of 146 Portfolios	None
Frederick W. Winter 1945	Trustee	Since 2009	Director, Alkon Corporation since 1992; Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh, Dean and Professor from 1997 to 2005, Professor until 2013.	26 RICs consisting of 146 Portfolios	None
Interested Trustees5
Barbara G. Novick 1960	Trustee	Since 2015	Vice Chairman of BlackRock, Inc. since 2006; Chair of BlackRock’s Government Relations Steering Committee since 2009; Head of the Global Client Group of BlackRock, Inc. from 1988 to 2008.	100 RICs consisting of 220 Portfolios	None
John M. Perlowski 1964	Trustee, President and Chief Executive Officer	Since 2015 (Trustee); Since 2010 (President and Chief Executive Officer)	Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Fund & Accounting Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Advisory Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.	128 RICs consisting of 318 Portfolios	None
	1    As of February 24, 2017
	2    The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	3    Independent Trustees serve until their resignation, retirement, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Independent Trustees on a case-by-case basis, as appropriate.
	4    In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, certain Independent Trustees were elected to the Board. As a result, although the chart shows certain Independent Trustees as joining the Board in 2009, those Independent Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: Rodney D. Johnson, 1995; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1999; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
	5    Ms. Novick and Mr. Perlowski are both “interested persons,” as defined in the 1940 Act, of the Trust/MIP based on their positions with BlackRock and its affiliates. Mr. Perlowski and Ms. Novick are also board members of certain complexes of BlackRock registered open-end and closed-end funds. Mr. Perlowski is also a board member of the BlackRock Equity-Bond Complex and the BlackRock Closed-End Complex, and Ms. Novick is a board member of the BlackRock Closed-End Complex.

52 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served as an Officer	Principal Occupation(s) During Past Five Years
Officers Who Are Not Trustees2
Thomas Callahan 1968	Vice President	Since 2016	Managing Director of BlackRock, Inc. since 2013; Head of BlackRock’s Global Cash Management Business since 2016; Co-Head of the Global Cash Management Business from 2014 to 2016; Deputy Head of the Global Cash Management Business from 2013 to 2014; Member of the Cash Management Group Executive Committee since 2013; Chief Executive Officer of NYSE Liffe U.S. from 2008 to 2013.
Jennifer McGovern 1977	Vice President	Since 2014	Managing Director of BlackRock, Inc. since 2016; Director of BlackRock, Inc. from 2011 to 2015; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal J. Andrews 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock, Inc. 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 M. Fife 1970	Treasurer	Since 2007	Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Charles Park 1967	Chief Compliance Officer	Since 2014	Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Fernanda Piedra 1969	Anti-Money Laundering Compliance Officer	Since 2015	Director of BlackRock, Inc. since 2014; Anti-Money Laundering Compliance Officer and Regional Head of Financial Crime for the Americas at BlackRock, Inc. since 2014; Head of Regulatory Changes and Remediation for the Asset Wealth Management Division of Deutsche Bank from 2010 to 2014; Vice President of Goldman Sachs (Anti-Money Laundering/Suspicious Activities Group) from 2004 to 2010.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock, Inc. since 2014; Director of BlackRock, Inc. from 2010 to 2013; Secretary of the iShares® exchange traded funds since 2015; Secretary of the BlackRock-advised mutual funds since 2012.
	1    The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	2    Officers of the Trust/MIP serve at the pleasure of the Board.
	Further information about the Trust’s/MIP’s Officers and Trustees is available in the Trust’s/MIP’s Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.

Effective December 31, 2016, David O. Beim and Dr. Matina S. Horner resigned as Trustees of the Trust/MIP.

Investment Adviser and Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Accounting Agent and Custodian State Street Bank and Trust Company Boston, MA 02110	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Sidley Austin LLP New York, NY 10019
Sub-Advisors BlackRock Fund Advisors San Francisco, CA 94105 BlackRock International Limited Edinburgh, EH3 8BL United Kingdom	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP Philadelphia, PA 19103	Address of the Trust/MIP 400 Howard Street San Francisco, CA 94105

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 53

Additional Information

General Information

Householding

The Fund will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Fund at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Fund/Master Portfolio file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s/Master Portfolio’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room or how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The 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 upon request and without charge (1) by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

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

BlackRock’s Mutual Fund Family

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

Shareholder Privileges

Account Information

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

54 BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016

Additional Information (concluded)

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

BLACKROCK COREALPHA BOND FUND DECEMBER 31, 2016 55

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

CAB-12/16-AR

DECEMBER 31, 2016

  ANNUAL REPORT

BlackRock Disciplined International Fund  |  of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
The Markets in Review		3
Annual Report:
Fund Summary		4
About Fund Performance		6
Disclosure of Expenses		6
Derivative Financial Instruments		6
Fund Financial Statements:
Statement of Assets and Liabilities		7
Statement of Operations		8
Statements of Changes in Net Assets		9
Fund Financial Highlights		10
Fund Notes to Financial Statements		13
Fund Report of Independent Registered Public Accounting Firm		17
Important Tax Information		17
Master Portfolio Information		18
Master Portfolio Financial Statements:
Schedule of Investments		19
Statement of Assets and Liabilities		26
Statement of Operations		27
Statements of Changes in Net Assets		28
Master Portfolio Financial Highlights		29
Master Portfolio Notes to Financial Statements		30
Master Portfolio Report of Independent Registered Public Accounting Firm		38
Officers and Trustees		39
Additional Information		42

2 BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016

The Markets in Review

Dear Shareholder,

The year 2016 started on a fraught note with worries about slowing growth in China, plunging oil prices and sliding share prices. Then reflationary expectations in the United States helped drive a second-half global growth pick-up and big market reversals. As such, higher-quality asset classes such as Treasury bonds, municipals and investment grade credit prevailed in the first half of the year, only to struggle in the second. In contrast, risk assets sold off at the start of the year and rebounded in the latter half, with some asset classes posting strong year-end returns.

A key takeaway from 2016’s market performance is that economics can trump politics. The global reflationary theme — governments taking policy action to support growth — was the dominant driver of 2016 asset returns, outweighing significant political upheavals and uncertainty. This trend accelerated after the U.S. election on expectations for an extra boost to U.S. growth via fiscal policy.

Markets were remarkably resilient during the year. Spikes in equity volatility after big surprises such as the U.K.’s vote to leave the European Union and the outcome of the U.S. presidential election were short-lived. Instead, political surprises and initial sell-offs were seized upon as buying opportunities. We believe this reinforces the case for taking the long view rather than reacting to short-term market noise.

Asset returns varied widely in 2016. Perceived safe assets such as government bonds and low-volatility shares underperformed the higher-risk areas of the market. And the reversal of longstanding trends created opportunities, such as in the recovery of value stocks and commodities.

We expect some of these trends to extend into 2017 and see the potential for more flows into risk assets this year. Learn more by reading our market insights at blackrock.com.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2016
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		7.82	%		11.96	%
U.S. small cap equities (Russell 2000® Index)		18.68			21.31
International equities (MSCI Europe, Australasia, Far East Index)		5.67			1.00
Emerging market equities (MSCI Emerging Markets Index)		4.49			11.19
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.18			0.33
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		(7.51	)		(0.16	)
U.S. investment grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index)		(2.53	)		2.65
Tax-exempt municipal bonds (S&P Municipal Bond Index)		(3.43	)		0.77
U.S. high yield bonds (Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		7.40			17.13
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, 2016

Investment Objective

BlackRock Disciplined International Fund’s (the “Fund”) investment objective is to seek to provide long-term returns in excess of the total rate of return of the MSCI Europe Australasia Far East (“EAFE”) Index.

On December 15, 2016, the Board of Trustees of the BlackRock Funds III approved a change in the name of the Fund to BlackRock Advantage International Fund. The name change was effective February 15, 2017.

Portfolio Management Commentary

How did the Fund perform?

• For the 12-month period ended December 31, 2016, the Fund underperformed its benchmark, the MSCI EAFE Index.

• 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 International Tilts Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio.

What factors influenced performance?

• The Fund’s underperformance versus the benchmark was driven primarily by macro thematic positioning, as well as stock selection based on investor and market sentiment indicators. An overweight position to Italian financials early in the period detracted, as concerns around the solvency of Banca Monte Dei Paschi, an underweight in the Master Portfolio, impacted the entire industry. Evaluating a company’s sensitivity to China’s economy also proved a headwind, as concerns about global trade became a dominant market theme with the recent wave of populism in developed market elections. This was observed largely in tobacco holdings Japan Tobacco Inc. and Imperial Brands PLC. Additionally, the rapid market rotations impacted insights that seek to identify and capture trends in stock performance. Specifically, signals that analyze sell-side analyst commentaries and company executive conference calls detracted as the reflation theme that evolved over the course of the year ran contrary to most expectations. The impact of this was felt broadly across sectors. Finally, insights that motivate active industry and style positions based on the historic performance of these factors detracted as historical trends were overwhelmed by the market’s geopolitically driven rotations.

• On the positive side, insights that highlight underlying corporate fundamentals benefited performance during the period. As the market rotation toward value took hold in the third quarter, an insight that evaluates relative valuation when compared to cash flow became a top-performing signal. This was particularly effective with respect to materials stocks, such as Glencore PLC, as expectations for profitability

rose along with global growth expectations. In a similar vein, evaluating quality on the basis of a company’s ability to generate operating cash flows and efficiently use assets also performed well throughout the year across industrials holdings, such as commercial services company Babcock International Group. Finally, country allocations were additive overall as positioning around key events, such as an overweight to U.K. companies subsequent to the “Brexit” vote, benefited performance.

Describe recent portfolio activity.

• 2016 was characterized by numerous market rotations centered on geopolitical events. Within this context, portfolio positioning was reflective of the risk incumbent to each specific event. At the mid-point of the year, risk was reduced ahead of the Brexit vote, with a shift in focus toward company fundamentals such as value and quality. This coincided with an underweight position in financials and yield-sensitive assets in favor of consumer staples companies. Markets experienced another rotation heading into fall when investors moved out of high yield and low volatility assets, instead seeking pockets of value in the broader market. In the middle of the market shift towards fundamentals, the U.S. election results reconfirmed this theme as a new tone of reflation began to take hold in markets. The Master Portfolio was well positioned for this regime change as weightings were increased in financials and industrials and reduced in consumer staples and real estate. The Master Portfolio also reflected a reflationary posture from a geographical perspective, with overweight positions in pockets of growth such as Sweden, the United Kingdom, and Eurozone countries, namely Italy and Spain.

Describe portfolio positioning at period end.

• Relative to the MSCI EAFE Index, the Master Portfolio’s largest overweight positions at the country level were Japan, the United Kingdom and Italy, while the largest underweights were Germany and Australia. At the sector level, the Master Portfolio had significantly overweight positions in industrials, utilities, and energy, while having underweight positions in consumer staples, information technology and real estate.

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 DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction cost and other operating expenses, including administration fees, if any. Institutional Shares do not have a sales charge.

²  The Fund invests all of its assets in the Master Portfolio. The Master Portfolio invests primarily in common stocks.

³  A free-float adjusted, market capitalization-weighted index designed to measure equity performance of developed markets, excluding the United States and Canada.

⁴  Commencement of operations of the Master Portfolio.

Performance Summary for the Period Ended December 31, 2016

				Average Annual Total Returns5
				1 Year						Since Inception6
	6-Month Total Returns			w/o sales charge			with sales charge			w/o sales charge			with sales charge
Institutional		5.26	%		(0.37	)%		N/A			(0.38	)%		N/A
Investor A		5.20			(0.54	)		(5.76	)%		(0.61	)		(2.27	)%
Class K		5.43			(0.10	)		N/A			(0.16	)		N/A
MSCI EAFE Index		5.67			1.00			N/A			(1.07	)		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 October 31, 2013.

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

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical2
	Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period1		Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period1		Annualized Expense Ratio
Institutional	$	1,000.00	$	1,052.60	$	3.30	$	1,000.00	$	1,021.92	$	3.25		0.64	%
Investor A	$	1,000.00	$	1,052.00	$	4.69	$	1,000.00	$	1,020.56	$	4.62		0.91	%
Class K	$	1,000.00	$	1,054.30	$	2.53	$	1,000.00	$	1,022.67	$	2.49		0.49	%

¹  For each class of the Fund, expenses are equal to the annualized net expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/366. Because the Fund invests all of its assets in the Master Portfolio, the expense example reflects the net expenses of both the Fund and the Master Portfolio in which it invests.

²  Hypothetical 5% annual return before expenses is calculated by prorating 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 DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016 5

About Fund Performance

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

• Investor A Shares are subject to a maximum initial sales charge (front-end load) of 5.25% and a service fee of 0.25% (but no distribution fee). Certain redemptions of these shares may be subject to a contingent deferred sales charge (“CDSC”) where no initial sales charge was paid at the time of purchase. These shares are generally available through financial intermediaries.

Prior to September 9, 2015, the performance of the classes is based on the returns of the Master Portfolio in which the Fund invests all of its assets adjusted to reflect the estimated annual fund fees and operating expenses of each respective share class of the Fund.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds

to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in the performance table on the previous page assume reinvestment of all distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Distributions paid to each class of shares will vary because of the different levels of administration, service and distribution fees applicable to each class, which are deducted from the income available to be paid to shareholders.

BlackRock Advisors, LLC (“BAL” or the “Administrator”), the Fund’s administrator, contractually waived a portion of the Fund’s expenses. Without such waiver, the Fund’s performance would have been lower. The Administrator is under no obligation to waive or to continue waiving its fees and waiver is contractual may be reduced or discontinued at any time. See Note 4 of the Notes to Financial Statements for additional information on waivers.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including administration fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses and other fund expenses. The expense example on previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2016 and held through December 31, 2016) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

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

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

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

Derivative Financial Instruments

The Master Portfolio may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other asset without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible

default of the counterparty to the transaction or illiquidity of the instrument. The Master Portfolio’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Master Portfolio can realize on an investment and/or may result in lower distributions paid to shareholders. The Master Portfolio’s investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

6 BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016

Statement of Assets and Liabilities BlackRock Disciplined International Fund

December 31, 2016
Assets
Investments at value — Master Portfolio (cost — $4,566,201)	$	4,781,152
Receivable from the Administrator		578
Total assets		4,781,730
Liabilities
Payables:
Professional fees		8,340
Service fees		10
Total liabilities		8,350
Net Assets	$	4,773,380
Net Assets Consist of
Paid-in capital	$	5,068,602
Distribution in excess of net investment income		(3,295	)
Accumulated net realized loss allocated from the Master Portfolio		(506,878	)
Net unrealized appreciation (depreciation) allocated from the Master Portfolio		214,951
Net Assets	$	4,773,380
Net Asset Value
Institutional — Based on net assets of $110,450 and 11,745 shares outstanding, unlimited number of shares authorized, no par value	$	9.40
Investor A — Based on net assets of $52,512 and 5,581 shares outstanding, unlimited number of shares authorized, no par value	$	9.41
Class K — Based on net assets of $4,610,418 and 490,000 shares outstanding, unlimited number of shares authorized, no par value	$	9.41

See Notes to Financial Statements.
	BLACKROCK DISCIPLINED INTERNATIONAL FUND	DECEMBER 31, 2016	7

Statement of Operations BlackRock Disciplined International Fund

Year Ended December 31, 2016
Investment Income
Net investment income allocated from the Master Portfolio:
Dividends — unaffiliated	$	172,500
Securities lending — affiliated — net		1,259
Dividends — affiliated		176
Expenses		(21,525	)
Foreign taxes withheld		(22,060	)
Fees waived		2,915
Total investment income		133,265
Fund Expenses
Professional		10,058
Administration — class specific		4,425
Service — class specific		126
Miscellaneous		56
Total expenses		14,665
Less fees waived by the Administrator		(10,058	)
Total expenses after fees waived		4,607
Net investment income		128,658
Realized and Unrealized Gain (Loss) Allocated from the Master Portfolio
Net realized loss from investments, futures contracts, foreign currency transactions and capital gain distributions from investment companies — affiliated		(324,371	)
Net change in unrealized appreciation (depreciation) on investments, futures contracts and foreign currency translations		188,653
Net realized and unrealized loss		(135,718	)
Net Decrease in Net Assets Resulting from Operations	$	(7,060	)

See Notes to Financial Statements.
8	BLACKROCK DISCIPLINED INTERNATIONAL FUND	DECEMBER 31, 2016

Statements of Changes in Net Assets BlackRock Disciplined International Fund

Increase (Decrease) in Net Assets:	Year Ended December 31, 2016			Period September 9, 20151 to December 31, 2015
Operations
Net investment income	$	128,658		$	27,057
Net realized loss		(324,371	)		(1,992	)
Net change in unrealized appreciation (depreciation)		188,653			26,298
Net increase (decrease) in net assets resulting from operations		(7,060	)		51,363
Distributions to Shareholders2
From net investment income:
Institutional		(1,618	)		(249	)
Investor A		(1,224	)		(210	)
Class K		(128,252	)		(27,457	)
From net realized gain:
Institutional		—			(1,805	)
Investor A		—			(1,805	)
Class K		—			(176,905	)
Decrease in net assets resulting from distributions to shareholders		(131,094	)		(208,431	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		67,163			5,001,439
Net Assets
Total increase (decrease) in net assets		(70,991	)		4,844,371
Beginning of period		4,844,371			—
End of period	$	4,773,380		$	4,844,371
Distributions in excess of net investment income, end of period	$	(3,295	)	$	(859	)

¹  Commencement of operations.

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

See Notes to Financial Statements.
	BLACKROCK DISCIPLINED INTERNATIONAL FUND	DECEMBER 31, 2016	9

Financial Highlights BlackRock Disciplined International Fund

	Institutional
	Year Ended December 31, 2016			Period September 9, 20151 to December 31, 2015
Per Share Operating Performance
Net asset value, beginning of period	$	9.69		$	10.00
Net investment income2		0.27			0.05
Net realized and unrealized gain (loss)		(0.31	)		0.05
Net increase (decrease) from investment operations		(0.04	)		0.10
Distributions:3
From net investment income		(0.25	)		(0.05	)
From net realized gain		—			(0.36	)
Total distributions		(0.25	)		(0.41	)
Net asset value, end of period	$	9.40		$	9.69
Total Return4
Based on net asset value		(0.37	)%		1.03%	5
Ratios to Average Net Assets6
Total expenses		0.88%	7		1.08%	7,8,9
Total expenses after fees waived		0.67%	7		0.71%	7,8
Net investment income		2.91%	7		1.56%	7,8
Supplemental Data
Net assets, end of period (000)	$	110		$	48
Portfolio turnover rate of the Master Portfolio		98%			107%

¹ Commencement of operations.

² Based on average shares outstanding.

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

⁴ Where applicable, assumes the reinvestment of distributions.

⁵ Aggregate total return.

⁶ Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁷ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.06% and 0.07%, respectively.

⁸ Annualized.

⁹ Audit fees were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses would have been 1.91%.

See Notes to Financial Statements.
10	BLACKROCK DISCIPLINED INTERNATIONAL FUND	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock Disciplined International Fund

	Investor A
	Year Ended December 31, 2016			Period September 9, 20151 to December 31, 2015
Per Share Operating Performance
Net asset value, beginning of period	$	9.69		$	10.00
Net investment income2		0.22			0.04
Net realized and unrealized gain (loss)		(0.28	)		0.05
Net increase (decrease) from investment operations		(0.06	)		0.09
Distributions:3
From net investment income		(0.22	)		(0.04	)
From net realized gain		—			(0.36	)
Total distributions		(0.22	)		(0.40	)
Net asset value, end of period	$	9.41		$	9.69
Total Return4
Based on net asset value		(0.54	)%		0.95%	5
Ratios to Average Net Assets6
Total expenses		1.15%	7		1.33%	7,8,9
Total expenses after fees waived		0.93%	7		0.96%	7,8
Net investment income		2.38%	7		1.31%	7,8
Supplemental Data
Net assets, end of period (000)	$	53		$	50
Portfolio turnover rate of the Master Portfolio		98%			107%

¹ Commencement of operations.

² Based on average shares outstanding.

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

⁴ Where applicable, excludes the effects of sales charges and assumes the reinvestment of distributions.

⁵ Aggregate total return.

⁶ Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.06% and 0.07%, respectively.

⁸ Annualized.

⁹ Audit fees were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses would have been 2.16%.

See Notes to Financial Statements.
	BLACKROCK DISCIPLINED INTERNATIONAL FUND	DECEMBER 31, 2016	11

Financial Highlights (concluded) BlackRock Disciplined International Fund

	Class K
	Year Ended December 31, 2016			Period September 9, 20151 to December 31, 2015
Per Share Operating Performance
Net asset value, beginning of period	$	9.69		$	10.00
Net investment income2		0.26			0.05
Net realized and unrealized gain (loss)		(0.28	)		0.06
Net increase (decrease) from investment operations		(0.02	)		0.11
Distributions:3
From net investment income		(0.26	)		(0.06	)
From net realized gain		—			(0.36	)
Total distributions		(0.26	)		(0.42	)
Net asset value, end of period	$	9.41		$	9.69
Total Return4
Based on net asset value		(0.10	)%		1.10%	5
Ratios to Average Net Assets6
Total expenses		0.71%	7		0.88%	7,8,9
Total expenses after fees waived		0.49%	7		0.50%	7,8
Net investment income		2.78%	7		1.77%	7,8
Supplemental Data
Net assets, end of period (000)	$	4,610		$	4,746
Portfolio turnover rate of the Master Portfolio		98%			107%

¹ Commencement of operations.

² Based on average shares outstanding.

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

⁴ Where applicable, assumes the reinvestment of distributions.

⁵ Aggregate total return.

⁶ Includes the Fund’s share of the Master Portfolio’s allocated expenses and/or net investment income.

⁷ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.06% and 0.07%, respectively.

⁸ Annualized.

⁹ Audit fees were not annualized in the calculating of the expense ratios. If these expenses were annualized, the total expenses would have been 1.71%.

See Notes to Financial Statements.
12	BLACKROCK DISCIPLINED INTERNATIONAL FUND	DECEMBER 31, 2016

Notes to Financial Statements BlackRock Disciplined International Fund

1. Organization:

BlackRock Funds III (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Delaware statutory trust. BlackRock Disciplined International Fund (the “Fund”) is a series of the Trust. The Fund is classified as diversified. The Fund seeks to achieve its investment objective by investing all of its assets in International Tilts Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), an affiliate of the Fund, which has the same investment objective and strategies as the Fund. The value of the Fund’s investment in the Master Portfolio reflects the Fund’s proportionate interest in the net assets of the Master Portfolio. The performance of the Fund is directly affected by the performance of the Master Portfolio. At December 31, 2016, the percentage of the Master Portfolio owned by the Fund was 2.6%. The financial statements of the Master Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with the Fund’s financial statements.

The Fund offers multiple classes of shares. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except Investor A Shares bear certain expenses related to shareholder servicing of such shares. Institutional and Class K Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally available through financial intermediaries. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures. The Board of Trustees of the Trust and Board of Trustees of MIP are referred to throughout this report as the “Board of Trustees” or the “Board” and the members are referred to as “Trustees.”

Share Class	Initial Sales Charge		CDSC			Conversion Privilege
Institutional Shares		No		No			None
Investor A Shares		Yes		No	1		None
Class K Shares		No		No			None

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

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

2. Significant Accounting Policies:

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

Investment Transactions and 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 its proportionate share of the Master Portfolio’s income, expenses and realized and unrealized gains and losses on a daily basis. Realized and unrealized gains and losses are adjusted utilizing partnership tax allocation rules. In addition, the Fund accrues its own expenses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

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

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

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

BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016 13

Notes to Financial Statements (continued) BlackRock Disciplined International Fund

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Fund’s policy is to value its financial instruments at fair 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 3 of the Master Portfolio’s Notes to Financial Statements, which are included elsewhere in this report.

4. Administration Agreement and Other Transactions with Affiliates:

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

Administration: The Trust, on behalf of the Fund, entered into an Administration Agreement with BAL, which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL, in consideration thereof, has agreed to bear all of the Fund’s ordinary operating expenses, excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the Fund. BAL is entitled to receive for these administration services an annual rate based on the average daily net assets of the relevant share class of the Fund as follows:

Institutional	Investor A	Class K
0.05%	0.05%	0.00%

Prior to December 1, 2016, the annual rates as a percentage of average daily net assets of the relevant share class of the Fund were as follows:

Institutional	Investor A	Class K
0.30%	0.30%	0.10%

For the year ended December 31, 2016, the following table shows the class specific administration fees borne directly by each share class of the Fund:

Institutional	Investor A	Class K	Total
$143	$141	$4,141	$4,425

The Fund does not pay an investment advisory fee or investment management fee.

BAL is entitled to receive an annual administrative fee of 0.05% of the Master Portfolio’s average daily net assets. BAL has contractually agreed to waive this administrative fee through April 30, 2018. This waiver agreement may be terminated upon 90 days’ notice by a majority of the non-interested Trustees of MIP or by a majority of the outstanding voting securities of the Master Portfolio.

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

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

For the year ended December 31, 2016, the Investor A Shares service fee was $126.

Waivers: The fees and expenses of the Trust’s trustees who are not “interested persons” of the Trust, as defined in the 1940 Act (“Independent Trustees”) counsel to the Independent Trustees and the Trust’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Fund. BAL has contractually agreed to reimburse the Fund or provide an offsetting credit against the administration fees paid by the Fund in an amount equal to the independent expenses through April 30, 2018. For the year ended December 31, 2016, BAL waived $10,058.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the U.S. Securities and Exchange Commission, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow and lend under the Interfund Lending Program.

14 BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) BlackRock Disciplined International Fund

The Fund may lend in aggregate up to 15% of its net assets, but no more than 5% of its net assets, to any one borrowing fund through the Interfund Lending Program. The Fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets or any lower threshold provided for by the Fund’s investment restrictions. If the Fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2016, the Fund did not participate in the Interfund Lending Program.

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

5. Income Tax Information:

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

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for the year ended December 31, 2016 and the period ended December 31, 2015. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2016, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

The tax character of distributions paid was as follows:

	12/31/16		12/31/15
Ordinary income	$	131,094	$	27,916
Long-term capital gains		—		180,515
Total	$	131,094	$	208,431

As of period end, the tax components of accumulated net earnings (losses) were as follows:

Qualified late-year losses1	$	(8.188	)
Capital loss carryforwards		(397,886	)
Net unrealized gains (losses)2		110,852
Total	$	(295,222	)

¹  The Fund has elected to defer certain qualified late-year losses and recognize such losses in the next taxable year.

²  The differences between book-basis and tax-basis net unrealized gains (losses) was attributable primarily to the timing and recognition of partnership income.

As of December 31, 2016, the Fund had capital loss carryforwards, with no expiration dates, available to offset future realized capital gains of $397,886.

BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016 15

Notes to Financial Statements (concluded) BlackRock Disciplined International Fund

6. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2016						Period September 9, 20151 to December 31, 2015
	Shares			Amount			Shares		Amount
Institutional
Shares sold		9,376		$	88,048			5,000	$	50,000
Shares issued in reinvestment of distributions		41			383			—		—
Shares redeemed		(2,672	)		(25,141	)		—		—
Net increase		6,745		$	63,290			5,000	$	50,000
Investor A
Shares sold		992		$	9,113			5,150	$	51,439
Shares issued in reinvestment of distributions		13			119			—		—
Shares redeemed		(574	)		(5,359	)		—		—
Net increase		431		$	3,873			5,150	$	51,439
Class K
Shares sold		—			—			490,000	$	4,900,000
Net increase		—			—			490,000	$	4,900,000
Total Net Increase		7,176		$	67,163			500,150	$	5,001,439

¹ Commencement of operations.

At period end, shares owned by BlackRock HoldCo 2, Inc. an affiliate of the Fund, were as follows:

Institutional	5,000
Investor A	5,000
Class K	490,000

7. Subsequent Events:

Management’s evaluation of the impact of all subsequent events on the Fund’s financial statements was completed through the date the financial statements were issued and the following items were noted:

On December 15, 2016, the Board of the Trust approved a change in the name of the Fund to BlackRock Advantage International Fund. The name change was effective on February 15, 2017.

See Notes to Financial Statements.
16	BLACKROCK DISCIPLINED INTERNATIONAL FUND	DECEMBER 31, 2016

Report of Independent Registered Public Accounting Firm BlackRock Disciplined International Fund

To the Board of Trustees of BlackRock Funds III and the Shareholders of BlackRock Disciplined International Fund:

In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock Disciplined International Fund (the “Fund”), a series of BlackRock Funds III, as of December 31, 2016, and the results of its operations for the year then ended, the changes in its net assets and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

Important Tax Information (Unaudited)

During the fiscal year ended December 31, 2016, the following information is provided with respect to the ordinary income distributions paid by the Fund.

	Payable Dates
Qualified Dividend Income for Individuals1,2		Quarterly	100%
Foreign Source Income2		Quarterly	88.32%
Foreign Taxes Paid Per Share3		3/31/16	$0.007183
		6/30/16	$0.015597
		9/30/16	$0.006901
		12/31/16	$0.004868

¹ The Fund hereby designates the percentage indicated above or the maximum amount allowed by law.

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

³ The foreign taxes paid represent taxes paid by the Fund from foreign sources. Foreign taxes paid may be included in taxable income with an offsetting deduction for 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.

BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016 17

Portfolio Information as of December 31, 2016 International Tilts Master Portfolio

Ten Largest Holdings	Percent of Net Assets
Nestle SA, Registered Shares		2	%
Toyota Motor Corp.		2
British American Tobacco PLC		2
HSBC Holdings PLC		2
Nordea Bank AB		1
NTT Docomo, Inc.		1
Allianz SE, Registered Shares		1
Mizuho Financial Group, Inc.		1
Bayer AG, Registered Shares		1
CLP Holdings Ltd.		1

Geographic Allocation	Percent of Net Assets
Japan		25	%
United Kingdom		16
France		10
Switzerland		8
Germany		8
Australia		6
Sweden		4
Spain		4
Netherlands		4
Hong Kong		3
Italy		3
Other1		7
Other Assets in Excess of Liabilities		2

¹  Other includes a 1% or less investment in each of the following countries: Austria, Belgium, Denmark, Finland, Ireland, Isle of Man, Israel, Malta, Mexico, New Zealand, Norway, Portugal and Singapore.

18 BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016

Schedule of Investments December 31, 2016 International Tilts Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Australia — 6.1%
Amcor Ltd.		24,200	$	260,460
Aristocrat Leisure Ltd.		61,131		682,014
Australia & New Zealand Banking Group Ltd.		10,611		232,287
BHP Billiton Ltd. (a)		81,200		1,454,684
Caltex Australia Ltd.		34,384		753,892
CIMIC Group Ltd.		14,220		357,791
Coca-Cola Amatil Ltd.		3,434		25,044
Cochlear Ltd. (a)		982		86,672
Commonwealth Bank of Australia (a)		4,968		294,722
CSL Ltd.		10,431		754,368
CSR Ltd.		47,154		156,771
Downer EDI Ltd.		8,907		39,001
Evolution Mining, Ltd. (a)		18,973		28,371
Fortescue Metals Group Ltd.		69,352		289,822
JB Hi-Fi Ltd.		2,083		42,103
Macquarie Group Ltd.		5,656		354,303
Mirvac Group		234,488		360,102
National Australia Bank Ltd.		15,880		350,765
Newcrest Mining Ltd. (a)		13,028		186,809
Northern Star Resources Ltd.		9,743		24,902
Oil Search Ltd.		16,265		83,712
Orora Ltd.		18		39
Qantas Airways Ltd.		312,115		747,682
Regis Resources Ltd.		14,069		29,585
Rio Tinto Ltd. (a)		13,057		559,376
Scentre Group		31,928		106,878
St Barbara, Ltd. (b)		5,721		8,266
Stockland		111,697		369,011
Suncorp Group Ltd.		61,688		600,664
Sydney Airport (c)		251,209		1,084,329
Telstra Corp. Ltd.		42,799		157,273
Wesfarmers Ltd.		3,731		113,243
Westpac Banking Corp.		5,481		128,660
Woodside Petroleum Ltd.		8,882		198,941
Woolworths Ltd.		18,899		328,042
WorleyParsons Ltd. (b)		11,680		81,304
				11,331,888
Austria — 1.3%
Andritz AG		1,972		98,824
Erste Group Bank AG (b)		34,588		1,011,255
OMV AG		23,973		845,137
Raiffeisen Bank International AG (a)(b)		6,895		125,689
Vienna Insurance Group AG (a)		1,137		25,439
Voestalpine AG		3,565		139,403
Wienerberger AG		7,889		136,980
				2,382,727
Belgium — 0.6%
Ageas		9,953		393,410
bpost SA		20,187		477,233

Common Stocks	Shares		Value
Belgium (continued)
Groupe Bruxelles Lambert SA		1,233	$	103,303
KBC Group NV		1,584		97,872
NV Bekaert SA		913		36,903
UCB SA		751		48,050
				1,156,771
Denmark — 0.9%
A.P. Moeller—Maersk A/S, Class B		30		47,819
Danske Bank A/S		4,233		128,064
DONG Energy A/S (b)(d)		3,757		142,114
GN Store Nord A/S		9,989		206,576
Novo Nordisk A/S, Class B		27,228		976,728
Topdanmark A/S (b)		2,508		63,554
Vestas Wind Systems A/S		3,278		212,298
				1,777,153
Finland — 1.5%
Kone OYJ, Class B (a)		27,573		1,232,060
Neste Oil OYJ		15,272		584,422
Sampo OYJ, Class A		732		32,722
UPM-Kymmene OYJ		37,938		927,795
				2,776,999
France — 10.1%
AtoS SE		1,944		204,893
AXA SA		58,424		1,472,798
BNP Paribas SA		20,854		1,327,105
Bouygues SA		2,373		84,952
Carrefour SA		2,136		51,426
Christian Dior SE		520		108,946
Cie Generale des Etablissements Michelin		11,149		1,239,309
CNP Assurances		6,176		114,314
Compagnie de Saint-Gobain		21,342		992,773
Credit Agricole SA		21,714		268,791
Electricite de France SA (a)		23,573		239,852
Engie SA		39,493		502,704
Faurecia		3,528		136,651
Hermes International		25		10,255
ICADE		683		48,679
Ipsen SA		374		27,023
Lagardere SCA		8,232		228,483
LVMH Moet Hennessy Louis Vuitton SE		4,865		927,617
Orange SA		30,000		454,919
Peugeot SA (b)		92,580		1,507,866
Plastic Omnium SA		2,535		80,845
Renault SA		9,060		804,680
Safran SA		12,003		863,302
Sanofi		17,908		1,448,134
SCOR SE		7,223		249,271
Societe Generale SA		20,414		1,004,099
Technicolor SA, Registered Shares		4,629		25,029

Portfolio Abbreviations

AUD	Australian Dollar
EUR	Euro
FTSE	Financial Times Stock Exchange
GBP	British Pound
JPY	Japanese Yen

See Notes to Financial Statements.

BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016 19

Schedule of Investments (continued) International Tilts Master Portfolio

Common Stocks	Shares		Value
France (continued)
Technip SA		6,043	$	430,454
Thales SA		15,165		1,469,196
TOTAL SA		20,349		1,043,743
UbiSoft Entertainment SA (b)		725		25,763
Unibail-Rodamco SE		95		22,639
Valeo SA		22,807		1,309,300
Vallourec SA (b)		20,749		142,568
Wendel SA		881		106,015
				18,974,394
Germany — 7.9%
Allianz SE, Registered Shares		11,948		1,971,873
BASF SE		5,077		470,518
Bayer AG, Registered Shares		18,033		1,878,740
Beiersdorf AG		384		32,528
Continental AG		241		46,430
Covestro AG (d)		615		42,095
Daimler AG, Registered Shares		4,175		309,850
Deutsche Bank AG, Registered Shares (b)		1,368		24,815
Deutsche Euroshop AG		710		28,879
Deutsche Post AG, Registered Shares		26,483		868,511
Deutsche Telekom AG, Registered Shares (a)		7,233		124,098
E.ON SE		54,711		384,889
Evonik Industries AG		27,802		828,745
Fresenius SE & Co. KGaA		3,094		241,365
Hannover Rueck SE		584		63,088
Henkel AG & Co. KGaA		1,221		127,074
Henkel AG & Co. KGaA Preference Shares		11,339		1,349,792
Hochtief AG		11,491		1,604,293
Kloeckner & Co. SE (b)		23,212		289,850
Lanxess AG		5,864		383,994
Metro AG		8,567		284,742
Muenchener Rueckversicherungs AG, Registered Shares		2,819		532,447
Porsche Automobil Holding SE, Preference Shares		2,397		130,205
ProSiebenSat.1 Media AG, Registered Shares		13,154		506,323
Rheinmetall AG		2,931		196,702
SAP SE		2,956		255,709
Siemens AG, Registered Shares (a)		9,691		1,186,565
Software AG		2,132		77,271
Stada Arzneimittel AG		536		27,691
Talanx AG (b)		2,783		92,949
TUI AG		14,333		205,208
Uniper SE (b)		11,212		154,327
Volkswagen AG		602		86,402
				14,807,968
Hong Kong — 3.1%
AIA Group Ltd.		129,600		725,998
BOC Hong Kong Holdings Ltd.		115,000		409,579
Cheung Kong Property Holdings Ltd.		17,684		107,996
CLP Holdings Ltd.		197,000		1,806,664
Hang Lung Properties Ltd.		58,000		122,302
Henderson Land Development Co. Ltd.		26,490		140,396
HKT Trust & HKT Ltd. (c)		82,000		100,438
Hong Kong Exchanges & Clearing Ltd. (a)		14,800		348,072
Kerry Properties Ltd.		70,500		190,648
Li & Fung Ltd.		228,000		99,923
New World Development Co. Ltd.		116,000		122,218
Sands China Ltd.		26,800		115,620
Sino Land Co. Ltd.		22,000		32,803

Common Stocks	Shares		Value
Hong Kong (continued)
SJM Holdings Ltd.		142,000	$	110,807
Sun Hung Kai Properties Ltd.		64,000		805,919
Swire Properties Ltd.		47,800		131,588
WH Group Ltd. (d)		165,500		133,409
Wharf Holdings Ltd.		7,000		46,368
Wheelock & Co. Ltd. (a)		57,000		319,898
				5,870,646
Ireland — 0.5%
DCC PLC (a)		11,089		824,256
Experian PLC		2,169		41,995
Glanbia PLC		1,109		18,422
				884,673
Isle of Man — 0.0%
Playtech PLC		2,779		28,273
Israel — 0.3%
Azrieli Group Ltd.		345		14,973
Bank Hapoalim BM		34,175		202,846
Teva Pharmaceutical Industries Ltd.		8,912		320,897
				538,716
Italy — 3.0%
A2A SpA		50,137		64,751
Assicurazioni Generali SpA		74,947		1,110,891
Atlantia SpA		17,743		415,121
Enel SpA		185,731		816,417
Eni SpA		29,395		476,525
Ferrari NV		7,821		455,342
FinecoBank Banca Fineco SpA		4,609		25,770
Intesa Sanpaolo SpA		60,221		149,959
Mediaset SpA (a)		95,033		409,301
Mediobanca SpA		119,608		976,396
Moncler SpA		15,431		268,137
Parmalat SpA		27,652		86,218
Recordati SpA		4,602		130,408
Saipem SpA (a)(b)		66,150		36,999
Saras SpA (a)		5,281		9,533
UniCredit SpA		52,878		151,851
Unipol Gruppo Finanziario SpA (a)		11,286		40,583
				5,624,202
Japan — 24.7%
Asahi Group Holdings Ltd.		23,600		743,048
Astellas Pharma, Inc.		118,000		1,637,055
Bridgestone Corp.		1,700		61,167
Central Japan Railway Co.		2,700		443,312
Chiba Bank Ltd.		45,000		275,856
Chiyoda Corp.		4,000		27,610
Chubu Electric Power Co., Inc.		25,200		350,668
Coca-Cola West Co., Ltd.		200		5,888
COMSYS Holdings Corp.		17,000		310,807
Dai-ichi Life Insurance Co. Ltd.		31,800		528,722
Daicel Corp.		28,400		312,231
Daiichi Sankyo Co. Ltd.		33,000		673,834
Dainippon Screen Manufacturing Co. Ltd.		1,000		61,809
Daito Trust Construction Co. Ltd.		5,500		826,857
Daiwa House Industry Co. Ltd.		10,300		280,885
Daiwa Securities Group, Inc.		37,000		227,836
Denso Corp.		2,700		116,792
DIC Corp.		600		18,183

See Notes to Financial Statements.

20 BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016

Schedule of Investments (continued) International Tilts Master Portfolio

Common Stocks	Shares		Value
Japan (continued)
Dowa Holdings Co. Ltd.		17,000	$	129,276
East Japan Railway Co.		8,100		698,371
FANUC Corp.		700		117,106
Fuji Heavy Industries Ltd.		11,900		484,858
FUJIFILM Holdings Corp.		13,700		518,761
Fujitsu General Ltd.		25,000		528,029
Fujitsu Ltd.		36,000		199,352
Fukuoka Financial Group, Inc.		24,000		106,439
Glory Ltd.		900		28,361
Gree, Inc.		5,000		26,276
Gunma Bank Ltd.		4,900		26,777
Hankyu Hanshin Holdings, Inc.		5,200		166,508
Haseko Corp.		20,400		206,836
Hitachi Ltd.		201,000		1,083,820
Hokuhoku Financial Group, Inc.		1,800		31,010
Honda Motor Co. Ltd.		3,100		90,505
Hoya Corp.		29,200		1,224,339
Idemitsu Kosan Co. Ltd.		1,900		50,398
Iida Group Holdings Co. Ltd.		7,000		132,701
IT Holdings Corp.		1,000		21,374
ITOCHU Corp.		43,800		579,945
Japan Aviation Electronics Industry Ltd. (a)		3,000		42,124
Japan Exchange Group, Inc.		5,800		82,721
Japan Petroleum Exploration Co.		8,100		179,573
Japan Post Bank Co. Ltd.		9,700		116,240
Japan Tobacco, Inc.		9,400		308,542
JFE Holdings, Inc.		1,700		25,708
JX Holdings, Inc.		68,400		289,019
K’s Holdings Corp.		3,100		54,199
Kaken Pharmaceutical Co. Ltd.		1,700		90,027
Kansai Electric Power Co., Inc. (b)		8,100		88,303
Kao Corp.		16,200		766,825
Kikkoman Corp.		4,000		127,625
Kinden Corp.		6,600		82,156
Lintec Corp.		9,100		198,005
Matsumotokiyoshi Holdings Co. Ltd.		1,600		78,713
Mazda Motor Corp.		2,600		42,338
Miraca Holdings, Inc.		800		35,781
Mitsubishi Chemical Holdings Corp.		153,400		991,832
Mitsubishi Corp.		50,800		1,078,923
Mitsubishi Estate Co. Ltd.		18,000		357,564
Mitsubishi Gas Chemical Co., Inc.		6,500		110,756
Mitsubishi Motors Corp.		3,600		20,465
Mitsubishi UFJ Financial Group, Inc.		168,400		1,038,577
Mitsui Chemicals, Inc.		15,000		67,208
Mizuho Financial Group, Inc.		1,064,400		1,910,102
MS&AD Insurance Group Holdings, Inc.		4,200		130,064
Murata Manufacturing Co. Ltd.		3,500		467,378
NH Foods Ltd. (a)		29,000		782,320
Nichirei Corp.		2,000		41,352
Nidec Corp.		900		77,482
Nikon Corp.		4,100		63,675
Nintendo Co. Ltd.		1,600		332,601
Nippon Shokubai Co. Ltd.		3,200		199,287
Nippon Steel & Sumitomo Metal Corp.		4,100		90,810
Nippon Telegraph & Telephone Corp.		35,500		1,494,377
Nippon Television Holdings, Inc.		3,500		63,451
Nippon Yusen KK		36,000		66,668
Nissan Motor Co. Ltd.		118,500		1,188,690
Nomura Holdings, Inc.		73,800		436,318
Nomura Real Estate Holdings, Inc.		20,700		351,278

Common Stocks	Shares		Value
Japan (continued)
NSK Ltd.		2,900	$	33,493
NTT Docomo, Inc.		88,800		2,019,780
Obic Co. Ltd.		2,800		122,125
Oki Electric Industry Co. Ltd.		9,800		137,271
OKUMA Corp.		7,000		66,601
Ono Pharmaceutical Co. Ltd.		3,500		76,281
ORIX Corp.		33,100		515,177
Osaka Gas Co. Ltd.		32,000		122,786
Panasonic Corp.		20,400		206,900
Resona Holdings, Inc.		301,500		1,545,192
Rohm Co. Ltd.		800		45,898
Sankyo Co. Ltd.		2,600		83,828
Sapporo Holdings Ltd.		1,200		30,831
Seino Holdings Co Ltd.		2,400		26,593
Senshu Ikeda Holdings, Inc.		16,200		74,602
Seven & i Holdings Co. Ltd.		8,300		315,642
Seven Bank Ltd. (a)		24,700		70,627
Shionogi & Co. Ltd.		14,600		697,777
Sumitomo Chemical Co. Ltd.		88,000		417,149
Sumitomo Corp.		75,100		881,630
Sumitomo Electric Industries Ltd.		4,600		66,237
Sumitomo Forestry Co., Ltd.		4,200		55,471
Sumitomo Mitsui Financial Group, Inc.		38,300		1,458,577
Sumitomo Mitsui Trust Holdings, Inc.		46,300		1,656,554
Sumitomo Realty & Development Co. Ltd.		2,000		53,095
Sundrug Co. Ltd.		700		48,399
T&D Holdings, Inc.		3,200		42,232
Tadano Ltd. (a)		15,700		197,361
Taiyo Yuden Co Ltd.		11,300		135,181
Takeda Pharmaceutical Co. Ltd.		13,300		551,764
Tohoku Electric Power Co., Inc.		5,100		64,290
Tokai Rika Co., Ltd.		4,600		92,087
Tokio Marine Holdings, Inc.		16,200		663,277
Tokyo Electric Power Co. Holdings, Inc. (b)		14,900		59,968
Tokyo Electron Ltd.		1,500		141,074
Tokyo Gas Co. Ltd.		241,000		1,087,907
TonenGeneral Sekiyu KK		50,000		526,511
Toppan Printing Co. Ltd.		9,000		85,817
Tosoh Corp.		33,000		232,782
Toyota Motor Corp.		58,400		3,423,898
TS Tech Co. Ltd.		5,500		141,394
Ube Industries Ltd.		16,000		33,434
West Japan Railway Co.		4,000		245,024
Zeon Corp.		36,000		354,553
				46,229,749
Malta — 0.0%
Unibet Group PLC		3,319		31,089
Mexico — 0.0%
Fresnillo PLC (a)		983		14,602
Netherlands — 3.7%
ABN AMRO Group NV (d)		2,668		59,074
Akzo Nobel NV		2,619		163,653
Altice NV Class B (b)		5,489		109,220
ASML Holding NV		8,421		943,745
BE Semiconductor Industries NV		2,661		88,515
Euronext NV (d)		3,127		128,883
ING Groep NV		28,144		396,232
Koninklijke Ahold Delhaize NV		45,154		951,079
Koninklijke DSM NV		2,140		128,244
Koninklijke KPN NV		90,500		267,620

See Notes to Financial Statements.

BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016 21

Schedule of Investments (continued) International Tilts Master Portfolio

Common Stocks	Shares		Value
Netherlands (continued)
PostNL NV (b)		16,596	$	71,298
Royal Dutch Shell PLC, Class A		51,168		1,412,416
Royal Dutch Shell PLC, Class B		43,113		1,238,718
Wolters Kluwer NV		25,154		909,799
				6,868,496
New Zealand — 0.1%
Contact Energy Ltd.		10,505		33,970
Spark New Zealand Ltd.		43,699		103,401
Vector Ltd.		5,687		12,789
				150,160
Norway — 0.7%
Fred Olsen Energy ASA (a)(b)		8		29
Norsk Hydro ASA		93,519		446,341
Subsea 7 SA (a)(b)		65,750		830,375
				1,276,745
Portugal — 0.3%
EDP-Energias de Portugal SA		43,184		131,432
Galp Energia SGPS SA		1,996		29,757
Jeronimo Martins SGPS SA		20,119		312,039
NOS SGPS SA		5,046		29,947
				503,175
Singapore — 0.9%
CapitaLand Commercial Trust Ltd.		365,100		371,953
ComfortDelGro Corp. Ltd.		94,200		160,071
DBS Group Holdings Ltd.		35,500		423,545
Jardine Cycle & Carriage Ltd.		4,200		119,280
Noble Group Ltd. (b)		88		10
Venture Corp. Ltd.		19,600		133,498
Wilmar International Ltd.		7,100		17,540
Yangzijiang Shipbuilding Holdings Ltd.		944,500		529,590
				1,755,487
Spain — 3.8%
Acciona SA		1,329		97,619
ACS Actividades de Construccion y Servicios SA		34,025		1,073,747
Aena SA (d)		3,590		489,105
Amadeus IT Group SA (a)		12,831		581,939
Banco Popular Espanol SA (a)		20,239		19,500
Banco Santander SA		251,721		1,309,521
Bankinter SA (a)		23,972		185,386
Ebro Foods SA		1,004		21,012
Endesa SA (a)		20,139		425,901
Grifols SA (a)		5,782		114,781
Industria de Diseno Textil SA (a)		31,680		1,079,210
Mediaset Espana Comunicacion SA		82,149		962,273
Repsol SA		51,646		725,788
				7,085,782
Sweden — 4.0%
Atlas Copco AB, A Shares		6,126		185,842
Axfood AB		4,800		75,375
Electrolux AB, Class B		30,736		761,055
Fabege AB		8,532		139,102
Husqvarna AB, Class B		6,956		53,972
Intrum Justitia AB (a)		29,589		997,567
JM AB		891		25,686
Nordea Bank AB		187,140		2,073,628
Saab AB		4,705		175,468
Sandvik AB		13,381		165,069

Common Stocks	Shares		Value
Sweden (continued)
Skanska AB, Class B		40,987	$	965,013
Swedbank AB, Class A		5,178		124,761
Swedish Match AB		20,393		647,029
Telefonaktiebolaget LM Ericsson, Class B (a)		174,019		1,019,920
TeliaSonera AB		2		8
Volvo AB, Class B		11,500		133,883
				7,543,378
Switzerland — 8.3%
ABB Ltd., Registered Shares (b)		34,229		720,237
Actelion Ltd., Registered Shares (b)		3,845		830,937
Banque Cantonale Vaudoise, Registered Shares		95		60,141
Georg Fischer AG, Registered Shares		204		166,836
Glencore PLC (b)		269,325		910,018
IWG PLC		18,304		55,366
Kuehne & Nagel International AG, Registered Shares (a)		4,734		624,882
Logitech International SA, Registered Shares		25,162		626,242
Lonza Group AG, Registered Shares (b)		10,167		1,757,153
Nestle SA, Registered Shares		53,085		3,802,880
Novartis AG, Registered Shares		16,704		1,214,772
Roche Holding AG		7,750		1,766,633
Schindler Holding AG, Participation Certificates		2,402		423,024
Sika AG, Bearer Shares		53		254,286
STMicroelectronics NV		63,902		724,294
Straumann Holding AG, Registered Shares		1,748		681,128
UBS Group AG, Registered Shares		33,871		529,588
Zurich Insurance Group AG (b)		1,330		365,510
				15,513,927
United Kingdom — 16.0%
Admiral Group PLC		5,192		116,763
Anglo American PLC (b)		53,572		756,910
Ashmore Group PLC		8,562		29,759
AstraZeneca PLC		13,623		743,921
Aviva PLC		14,522		86,502
Barclays PLC		162,994		447,312
Berendsen PLC		3,142		33,687
BHP Billiton PLC		33,450		532,625
Booker Group PLC		53,903		116,516
BP PLC		203,846		1,276,774
British American Tobacco PLC		50,921		2,885,966
Britvic PLC		84,704		591,434
BT Group PLC		289,465		1,306,732
BTG PLC (b)		4,118		29,905
Burberry Group PLC		8,078		148,869
Carnival PLC		4,605		233,333
Centamin PLC		16,841		28,506
Centrica PLC		103,449		297,937
Close Brothers Group PLC		10,890		193,413
Coca-Cola European Partners PLC		742		23,418
Compass Group PLC		2,022		37,370
Croda International PLC		1,364		53,646
Diageo PLC		41,701		1,082,134
Dialog Semiconductor PLC (b)		903		37,939
Direct Line Insurance Group PLC		60,881		277,078
Dixons Carphone PLC		32,661		142,646
DS Smith PLC		6,620		33,243
GKN PLC		25,815		105,219
GlaxoSmithKline PLC		60,976		1,171,257
Hammerson PLC		4,703		33,145

See Notes to Financial Statements.

22 BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016

Schedule of Investments (continued) International Tilts Master Portfolio

Common Stocks	Shares		Value
United Kingdom (continued)
Hays PLC		22,289	$	40,898
Howden Joinery Group PLC		35,503		167,539
HSBC Holdings PLC		353,195		2,849,793
IG Group Holdings PLC		30,018		182,432
Imperial Brands PLC		26,348		1,148,260
Inchcape PLC		10,676		92,262
InterContinental Hotels Group PLC (a)		2,181		97,521
Intertek Group PLC		32,653		1,399,443
ITV PLC		146,155		371,088
Johnson Matthey PLC		1,673		65,460
Jupiter Fund Management PLC		9,227		50,248
Ladbrokes PLC		33,470		47,822
Land Securities Group PLC		1,770		23,253
Legal & General Group PLC		91,834		279,761
Lloyds Banking Group PLC		1,053,824		809,206
Man Group PLC		6,123		8,909
Marks & Spencer Group PLC		8,170		35,194
Mondi PLC		8,463		172,833
National Grid PLC		40,120		468,752
Old Mutual PLC		5,775		14,726
Persimmon PLC		3,291		71,802
Provident Financial PLC (a)		5,370		187,802
Prudential PLC		11,987		239,230
Qinetiq Group PLC		160,692		520,199
Reckitt Benckiser Group PLC		5,042		427,097
RELX NV		23,026		387,295
Rentokil Initial PLC		40,452		110,668
Rightmove PLC		4,538		217,989
Rio Tinto PLC		19,306		737,064
Schroders PLC		6,428		236,087
Segro PLC		12,686		71,752
Severn Trent PLC		7,296		199,391
Shire PLC		8,653		494,080
Sky PLC (a)		61,807		753,485
Spirax-Sarco Engineering PLC		6,194		318,770
SSE PLC		30,729		586,741

Common Stocks	Shares		Value
United Kingdom (continued)
Standard Chartered PLC (b)		51,836	$	422,718
Standard Life PLC		31,030		142,092
Tate & Lyle PLC		47,595		414,202
Thomas Cook Group PLC (b)		109,568		117,696
Unilever PLC		5,922		239,485
Vedanta Resources PLC		6,790		72,864
Vodafone Group PLC		508,595		1,251,590
WH Smith PLC		2,473		47,385
Wolseley PLC		3,779		230,693
Worldpay Group PLC (d)		62,152		206,350
WPP PLC		3,818		84,964
				29,968,850
Total Common Stocks — 97.8%				183,095,850
Rights — 0.0%
Spain — 0.0%
Repsol SA (Expires 01/17/22) (b)		49,854		18,472
Total Long-Term Investments (Cost — $175,961,924) — 97.8%				183,114,322
Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares (e)(f)(g)		10,282,736		10,284,793
BlackRock Cash Funds: Treasury, SL Agency Shares (e)(f)		1,790,973		1,790,973
				12,075,766
Total Short-Term Securities (Cost — $12,073,868) — 6.5%				12,075,766
Total Investments (Cost — $188,035,792) — 104.3%				195,190,088
Liabilities in Excess of Other Assets — (4.3)%				(7,976,746	)
Net Assets — 100.0%			$	187,213,342

Notes to Schedule of Investments

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

(b) Non-income producing security.

(c) A security contractually bound to one or more other securities to form a single saleable unit which cannot be sold separately.

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

See Notes to Financial Statements.

BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016 23

Schedule of Investments (continued) International Tilts Master Portfolio

(e) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliates	Shares Held at December 31, 2015		Net Activity			Shares Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gain
BlackRock Cash Funds: Institutional, SL Agency Shares		18,111,897		(7,829,161	)		10,282,736	$	10,284,793	$	70,985	1	$	733
BlackRock Cash Funds: Prime, SL Agency Shares2		4,733,349		(4,733,349	)		—		—		11,368	1		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		1,790,973			1,790,973	$	1,790,973		2,068			181
Total								$	12,075,766	$	84,421		$	914
1   Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.
2   No longer held by the Master Portfolio as of period end.

(f) Current yield as of period end.

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

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

Contracts Long		Issue		Expiration		Notional Value			Unrealized Appreciation
	48		Euro STOXX 50 Index		March 2017		EUR	1,655,777	$	42,726
	10		FTSE 100 Index		March 2017		GBP	868,842		26,267
	3		SPI 200 Index		March 2017		AUD	304,771		6,561
	11		Yen Denom Nikkei Index		March 2017		JPY	896,000		31,734
	Total								$	107,288

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Futures contracts	Net unrealized appreciation1		—		—	$	107,288		—		—		—	$	107,288
1    Includes cumulative appreciation (depreciation) on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

For the year ended December 31, 2016, the effect of derivative financial instruments in the Statement of Operation was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Futures contracts		—		—	$	104,768		—		—		—	$	104,768
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts		—		—	$	103,228		—		—		—	$	103,228

See Notes to Financial Statements.

24 BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016

Schedule of Investments (concluded) International Tilts Master Portfolio

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	6,303,013

For more information about the Master Portfolio’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Common Stocks:
Australia		—	$	11,331,888		—	$	11,331,888
Austria	$	136,980		2,245,747		—		2,382,727
Belgium		—		1,156,771		—		1,156,771
Denmark		—		1,777,153		—		1,777,153
Finland		—		2,776,999		—		2,776,999
France		—		18,974,394		—		18,974,394
Germany		—		14,807,968		—		14,807,968
Hong Kong		—		5,870,646		—		5,870,646
Ireland		18,422		866,251		—		884,673
Isle of Man		—		28,273		—		28,273
Israel		—		538,716		—		538,716
Italy		1,193,022		4,431,180		—		5,624,202
Japan		—		46,229,749		—		46,229,749
Malta		—		31,089		—		31,089
Mexico		—		14,602		—		14,602
Netherlands		—		6,868,496		—		6,868,496
New Zealand		—		150,160		—		150,160
Norway		—		1,276,745		—		1,276,745
Portugal		—		503,175		—		503,175
Singapore		—		1,755,487		—		1,755,487
Spain		—		7,085,782		—		7,085,782
Sweden		—		7,543,378		—		7,543,378
Switzerland		—		15,513,927		—		15,513,927
United Kingdom		—		29,968,850		—		29,968,850
Rights		18,472		—		—		18,472
Short-Term Securities		12,075,766		—		—		12,075,766
Total	$	13,442,662	$	181,747,426		—	$	195,190,088
Derivative Financial Instruments 1
Assets:
Equity contracts	$	107,288		—		—	$	107,288
1   Derivative financial instruments are futures contracts. Futures contracts are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016 25

Statement of Assets and Liabilities International Tilts Master Portfolio

December 31, 2016
Assets
Investments at value — unaffiliated (including securities loaned at value of $9,781,530) (cost — $175,961,924)	$	183,114,322
Investments at value — affiliated (cost — $12,073,868)		12,075,766
Cash		4,000
Foreign currency at value (cost — $2,134,701)		2,112,271
Cash pledged for futures contracts		221,910
Receivables:
Investments sold		613,684
Dividends — unaffiliated		207,799
Variation margin on futures contracts		8,798
Securities lending income — affiliated		5,098
Dividends — affiliated		640
Total assets		198,364,288
Liabilities
Cash collateral on securities loaned at value		10,282,162
Payables:
Investments purchased		778,148
Investment advisory fees		55,566
Administration fees		8,091
Trustees’ fees		3,772
Variation margin on futures contracts		2,287
Other accrued expenses		20,920
Total liabilities		11,150,946
Net Assets	$	187,213,342
Net Assets Consist of
Investors’ capital	$	179,977,151
Net unrealized appreciation (depreciation)		7,236,191
Net Assets	$	187,213,342

See Notes to Financial Statements.
26	BLACKROCK DISCIPLINED INTERNATIONAL FUND	DECEMBER 31, 2016

Statement of Operations International Tilts Master Portfolio

Year Ended December 31, 2016
Investment Income
Dividends — unaffiliated	$	10,397,444
Securities lending — affiliated — net		73,862
Dividends — affiliated		10,559
Foreign taxes withheld		(1,338,878	)
Total investment income		9,142,987
Expenses
Investment advisory		1,106,626
Administration		138,328
Professional		21,445
Trustees		12,341
Total expenses		1,278,740
Less fees waived by the Manager		(173,953	)
Total expenses after fees waived		1,104,787
Net investment income		8,038,200
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — unaffiliated		(21,394,361	)
Investments — affiliated		733
Futures contracts		104,768
Foreign currency transactions		(416,881	)
Capital gain distributions from investment companies — affiliated		181
		(21,705,560	)
Net change in unrealized appreciation (depreciation) on:
Investments — unaffiliated		10,562,193
Investments — affiliated		1,898
Futures contracts		103,228
Foreign currency translations		(21,145	)
		10,646,174
Net realized and unrealized loss		(11,059,386	)
Net Decrease in Net Assets Resulting from Operations	$	(3,021,186	)

See Notes to Financial Statements.
	BLACKROCK DISCIPLINED INTERNATIONAL FUND	DECEMBER 31, 2016	27

Statements of Changes in Net Assets International Tilts Master Portfolio

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	8,038,200		$	31,447,971
Net realized loss		(21,705,560	)		(33,347,985	)
Net change in unrealized appreciation (depreciation)		10,646,174			52,749,468
Net increase (decrease) in net assets resulting from operations		(3,021,186	)		50,849,454
Capital Transactions
Proceeds from contributions		49,472,276			211,647,509
Value of withdrawals		(164,088,821	)		(1,207,440,039	)1
Net decrease in net assets derived from capital transactions		(114,616,545	)		(995,792,530	)
Net Assets
Total decrease in net assets		(117,637,731	)		(944,943,076	)
Beginning of year		304,851,073			1,249,794,149
End of year	$	187,213,342		$	304,851,073

¹  See Note 2 of the Notes to Financial Statements.

See Notes to Financial Statements.
28	BLACKROCK DISCIPLINED INTERNATIONAL FUND	DECEMBER 31, 2016

Financial Highlights International Tilts Master Portfolio

	Year Ended December 31,							Period October 31, 20131 to December 31, 2013
	2016		2015		2014
Total Return
Total return		0.00%		2.25%		(3.94	)%		1.60%	2
Ratios to Average Net Assets
Total expenses		0.46%		0.45%		0.46%			0.53%	3
Total expenses after fees waived		0.40%		0.43%		0.45%			0.45%	3
Net investment income		2.91%		2.65%		2.84%			1.17%	3
Supplemental Data
Net assets, end of period (000)	$	187,213	$	304,851	$	1,249,794		$	552,818
Portfolio turnover rate		98%		107%		120%			15%

¹  Commencement of operations.

²  Aggregate total return.

³  Annualized.

See Notes to Financial Statements.
	BLACKROCK DISCIPLINED INTERNATIONAL FUND	DECEMBER 31, 2016	29

Notes to Financial Statements International Tilts Master Portfolio

1. Organization:

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

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

2. Significant Accounting Policies:

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

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

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

Segregation and Collateralization: In cases where the Master Portfolio enters into certain investments (e.g., futures contracts) that would be treated as “senior securities” for 1940 Act purposes, the Master Portfolio may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Master Portfolio may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividend 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.

In-Kind Redemptions: The Master Portfolio transferred securities and cash to shareholders in connection with an in-kind redemption transaction. For financial reporting purposes, 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 redemption. For the year ended December 31, 2015, the Master Portfolio had in-kind redemptions of $1,014,456,524. For tax purposes, no gains or losses were recognized.

Recent Accounting Standard: In April 2015, the Financial Accounting Standards Board issued “Disclosures for Investments in Certain Entities that Calculate Net Asset Value (“NAV”) per Share” which eliminates the requirement to categorize investments within the fair value hierarchy when fair value is based on the NAV per share and no quoted market value is available. As of December 31, 2016, certain investments of the Master Portfolio were valued using NAV per share (or its equivalent) as no quoted market value is available and have been excluded from the fair value hierarchy.

In November 2016, the Financial Accounting Standards Board issued Accounting Standards Update “restricted cash” which will require entities to include the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the beginning and ending cash balances in the Statement

30 BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) International Tilts Master Portfolio

of Cash Flows. The guidance will be applied retrospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. Management is evaluating the impact, if any, of this guidance on the Master Portfolio’s presentation in the Statement of Cash Flows.

Indemnifications: In the normal course of business, the Master Portfolio enters into contracts that contain a variety of representations that provide general indemnification. The Master Portfolio’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Master Portfolio, which cannot be predicted with any certainty.

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

Through May 31, 2016, the Master Portfolio had an arrangement with its custodian whereby credits were earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. Credits previously earned may have been utilized until December 31, 2016. Under current arrangements effective June 1, 2016, the Master Portfolio no longer earns credits on uninvested cash, and may incur charges on uninvested cash balances and overdrafts, subject to certain conditions.

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Master Portfolio’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time) (or if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the 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 using various 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 oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Master Portfolio’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price. Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Master Portfolio’s net assets. Each business day, the Master Portfolio uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.

• Investments in open-end U.S. mutual funds are valued at NAV each business day.

• Futures contracts traded on exchanges are valued at their last sale price.

• Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the NYSE. Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include Market approach, Income approach and the Cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master

BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016 31

Notes to Financial Statements (continued) International Tilts Master Portfolio

Portfolio might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

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

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

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

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued investments. Level 3 investments include equity or debt issued by Private Companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

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

4. Securities and Other Investments:

Securities Lending: The Master Portfolio may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Master Portfolio collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio, or excess collateral returned by the Master Portfolio, on the next business day. During the term of the loan, the Master Portfolio is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as common stocks in the Master Portfolio’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value—unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Master Portfolio under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net

32 BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) International Tilts Master Portfolio

exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default the borrower can resell or re-pledge the loaned securities, and the Master Portfolio can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

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

Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Credit Suisse Securities (USA) LLC	$	1,280,817	$	(1,280,817	)		—
Goldman Sachs & Co.		1,437,764		(1,437,764	)		—
HSBC Bank PLC		29		(29	)		—
Jeffries LLC		425,901		(425,901	)		—
JP Morgan Securities LLC		157,616		(157,616	)		—
Morgan Stanley & Co LLC		4,860,266		(4,860,266	)		—
State Street Bank & Trust Co.		1,619,137		(1,619,137	)		—
Total	$	9,781,530	$	(9,781,530	)		—

¹  Cash collateral with a value of $10,282,162 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the table above.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Master Portfolio could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. Derivative Financial Instruments:

The Master Portfolio engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Master Portfolio and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or OTC.

Futures Contracts: The Master Portfolio invests in long and/or short positions in futures and options on futures contracts to gain exposure to, or manage exposure to, changes in the value of equity securities (equity risk).

Futures contracts are agreements between the Master Portfolio and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Master Portfolio is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Master Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016 33

Notes to Financial Statements (continued) International Tilts Master Portfolio

6. Investment Advisory Agreement and Other Transactions with Affiliates:

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

Investment Advisory: MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement with the Manager, the Master Portfolio’s investment adviser, 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 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 at the annual rate of the average daily value of the Master Portfolio’s net assets:

Average Daily Net Assets	Investment Advisory Fee
First $1 Billion		0.40%
$1 Billion — $3 Billion		0.38%
$3 Billion — $5 Billion		0.36%
$5 Billion — $10 Billion		0.35%
Greater than $10 Billion		0.34%

With respect to the Master Portfolio, the Manager entered into sub-advisory agreements with BlackRock Fund Advisors (“BFA”) and BlackRock International Limited (“BIL”), affiliates of the Manager. The Manager pays BFA and BIL, for services it provides, a monthly fee that is a percentage of the investment advisory fees paid by the Master Portfolio to the Manager.

MIP, on behalf of the Master Portfolio, entered into an Administration Agreement with the Manager, which has agreed to provide general administration services (other than investment advice and related portfolio activities). The Manager, in consideration thereof, has agreed to bear all of the Master Portfolio’s ordinary operating expenses, excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the Master Portfolio. The Manager is entitled to receive for these administration services an annual fee of 0.05% based on the average daily net assets of the Master Portfolio. The Manager has contractually agreed to waive this administration fee through April 30, 2018. The contractual agreement may be terminated by a majority of the non-interested trustees or a vote of the Master Portfolio. For the year ended December 31, 2016, the amount waived was $138,328.

Waivers: With respect to the Master Portfolio, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Master Portfolio pays to the Manager indirectly through its investment in affiliated money market funds. This amount is included in fees waived by the Manager in the Statement of Operations. For the year ended December 31, 2016, the amount waived was $1,839.

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 the Master Portfolio’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolio. The Manager has contractually agreed to reimburse the Master Portfolio or provide an offsetting credit against the administration fees paid by the Master Portfolio in an amount equal to the independent expenses through April 30, 2018. For the year ended December 31, 2016, the amount waived was $33,786.

Effective September 1, 2016, the Manager voluntarily agreed to waive its advisory fee with respect to any portion of Master Portfolio’s assets invested in affiliated equity or fixed-income mutual funds or affiliated exchange-traded funds that have a contractual management fee. Prior to September 1, 2016, the Manager did not waive such fees. This voluntary waiver may be reduced or discontinued at any time without notice.

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

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent.

34 BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) International Tilts Master Portfolio

Pursuant to a securities lending agreement, the Master Portfolio retains 80% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees. In addition, commencing the business day following the date that the aggregate securities lending income earned across certain funds in the Equity-Liquidity Complex in a calendar year exceeds a specified threshold, the Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.

The share of securities lending income earned by the Master Portfolio is shown as securities lending — affiliated – net in the Statement of Operations. For the year ended December 31, 2016, the Master Portfolio paid BTC $17,214 in total for securities lending agent services and collateral investment fees.

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

7. Purchases and Sales:

For the year ended December 31, 2016, purchases and sales of investments, excluding short-term securities, were $265,385,542 and $354,826,071, respectively.

8. Income Tax Information:

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

The Master Portfolio files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolio’s U.S. federal tax returns generally remains open for each of the three years ended December 31, 2016 and the period ended December 31, 2013. The statutes of limitations on the Master Portfolio’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Master Portfolio as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Master Portfolio’s financial statements.

As of December 31, 2016, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	194,726,521
Gross unrealized appreciation	$	14,799,066
Gross unrealized depreciation		(14,335,499	)
Net unrealized appreciation	$	463,567

9. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Master Portfolio may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Master Portfolio, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2017 unless extended or renewed. Prior to April 21, 2016, the credit agreement had a fee per annum of 0.06% on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2016, the Master Portfolio did not borrow under the credit agreement.

BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016 35

Notes to Financial Statements (continued) International Tilts Master Portfolio

10. Principal Risks:

In the normal course of business, the Master Portfolio invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer to meet all its obligations, including the ability to pay principal and interest when due (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 of securities owned by the Master Portfolio. Changes arising from the general economy, the overall market and local, regional or global political and/or social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

On October 11, 2016, BlackRock implemented certain changes required by amendments to Rule 2a-7 under the 1940 Act, which governs the operations of U.S. money market funds. The Master Portfolio may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Master Portfolio may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Master Portfolio’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Master Portfolio may lose value, regardless of the individual results of the securities and other instruments in which the Master Portfolio invests.

Counterparty Credit Risk: Similar to issuer credit risk, the Master Portfolio may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Master Portfolio manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the 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 approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Master Portfolio.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

With exchange-traded futures, there is less counterparty credit risk to the Master Portfolio since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Master Portfolio does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Master Portfolio.

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

The Master Portfolio invests a significant portion of its assets in securities of issuers located in Europe or with significant exposure to European issuers or countries. The European financial markets have recently experienced volatility and adverse trends due to concerns about economic downturns in, or rising government debt levels of, several European countries. These events may spread to other countries in Europe and may affect the value and liquidity of certain of the Master Portfolio’s investments.

36 BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016

Notes to Financial Statements (concluded) International Tilts Master Portfolio

The United Kingdom voted on June 23, 2016 to withdraw from the European Union, which may introduce significant new uncertainties and instability in the financial markets across Europe.

The Master Portfolio invests a significant portion of its assets in securities of issuers located in Asia or with significant exposure to Asian issuers or countries. The Asian financial markets have recently experienced volatility and adverse trends due to concerns in several Asian countries regarding monetary policy, government intervention in the markets, rising government debt levels or economic downturns. These events may spread to other countries in Asia and may affect the value and liquidity of certain of the Master Portfolio’s investments.

11. 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 DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016 37

Report of Independent Registered Public Accounting  Firm

To the Board of Trustees of Master Investment Portfolio and the Investors of International Tilts Master Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of International Tilts Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio, as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers and the transfer agent of the investee funds, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

38 BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016

Officers and Trustees¹

Name, Address2 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3
Rodney D. Johnson 1941	Chair of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011; Director, The Mainstay (non-profit) since 2016.	26 RICs consisting of 146 Portfolios	None
Susan J. Carter 1956	Trustee	Since 2016	Director, Pacific Pension Institute since 2014; Advisory Board Member, Center for Private Equity and Entrepreneurship at Tuck School of Business since 1997; Senior Advisor, Commonfund Capital, Inc. (“CCI”) (investment adviser) in 2015; Chief Executive Officer, CCI from 2013 to 2014; President & Chief Executive Officer, CCI from 1997 to 2013; Advisory Board Member, Girls Who Invest since 2015; Advisory Board Member, Bridges Ventures since 2016; Trustee, Financial Accounting Foundation since 2017.	26 RICs consisting of 146 Portfolios	None
Collette Chilton 1958	Trustee	Since 2015	Chief Investment Officer, Williams College since 2006; Chief Investment Officer, Lucent Asset Management Corporation from 1998 to 2006.	26 RICs consisting of 146 Portfolios	None
Neil A. Cotty 1954	Trustee	Since 2016	Bank of America Corporation from 1996 to 2015, serving in various senior finance leadership roles, including Chief Accounting Officer, from 2009 to 2015, Chief Financial Officer of Global Banking, Markets and Wealth Management from 2008 to 2009, Chief Accounting Officer from 2004 to 2008, Chief Financial Officer of Consumer Bank from 2003 to 2004, Chief Financial Officer of Global Corporate Investment Bank from 1999 to 2002.	26 RICs consisting of 146 Portfolios	None
Cynthia A. Montgomery 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012.	26 RICs consisting of 146 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 1947	Trustee	Since 2009	General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Chair, Basic Health International (non-profit) since 2015.	26 RICs consisting of 146 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company); Consol Energy Inc.
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981 and Principal since 2010.	26 RICs consisting of 146 Portfolios	None
Mark Stalnecker 1951	Trustee	Since 2015	Chief Investment Officer, University of Delaware from 1999 to 2013; Trustee, Winterthur Museum and Country Estate from 2001 to 2015; Member of the Investment Committee, Delaware Public Employees’ Retirement System since 2002; Member of the Investment Committee, Christiana Care Health System since 2009; Member of the Investment Committee, Delaware Community Foundation from 2013 to 2014; Director, SEI Private Trust Co. from 2001 to 2014.	26 RICs consisting of 146 Portfolios	None

BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016 39

Officers and Trustees¹ (continued)

Name, Address2 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3
Kenneth L. Urish 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since founding in 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	26 RICs consisting of 146 Portfolios	None
Claire A. Walton 1957	Trustee	Since 2016	Chief Operating Officer and Chief Financial Officer of Liberty Square Asset Management, LP from 1998 to 2015; General Partner of Neon Liberty Capital Management, LLC since 2003; Director, Boston Hedge Fund Group since 2009; Director, Woodstock Ski Runners since 2013; Director, Massachusetts Council on Economic Education from 2013 to 2015.	26 RICs consisting of 146 Portfolios	None
Frederick W. Winter 1945	Trustee	Since 2009	Director, Alkon Corporation since 1992; Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh, Dean and Professor from 1997 to 2005, Professor until 2013.	26 RICs consisting of 146 Portfolios	None
Interested Trustees5
0Barbara G. Novick 1960	Trustee	Since 2015	Vice Chairman of BlackRock, Inc. since 2006; Chair of BlackRock’s Government Relations Steering Committee since 2009; Head of the Global Client Group of BlackRock, Inc. from 1988 to 2008.	100 RICs consisting of 220 Portfolios	None
John M. Perlowski 1964	Trustee, President and Chief Executive Officer	Since 2015 (Trustee); Since 2010 (President and Chief Executive Officer)	Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Fund & Accounting Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.	128 RICs consisting of 318 Portfolios	None
	1    As of February 24, 2017.
	2    The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	3    Independent Trustees serve until their resignation, retirement, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Independent Trustees on a case-by-case basis, as appropriate.
	4    In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, certain Independent Trustees were elected to the Board. As a result, although the chart shows certain Independent Trustees as joining the Board in 2009, those Independent Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: Rodney D. Johnson, 1995; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1999; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
	5    Ms. Novick and Mr. Perlowski are both “interested persons,” as defined in the 1940 Act, of the Trust/MIP based on their positions with BlackRock and its affiliates. Mr. Perlowski and Ms. Novick are also board members of certain complexes of BlackRock registered open-end and closed-end funds. Mr. Perlowski is also a board member of the BlackRock Equity-Bond Complex and the BlackRock Closed-End Complex, and Ms. Novick is a board member of the BlackRock Closed-End Complex.

40 BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016

Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served as an Officer	Principal Occupation(s) During Past Five Years
Officers Who Are Not Trustees2
Thomas Callahan 1968	Vice President	Since 2016	Managing Director of BlackRock, Inc. since 2013; Head of BlackRock’s Global Cash Management Business since 2016; Co-Head of the Global Cash Management Business from 2014 to 2016; Deputy Head of the Global Cash Management Business from 2013 to 2014; Member of the Cash Management Group Executive Committee since 2013; Chief Executive Officer of NYSE Liffe U.S. from 2008 to 2013.
Jennifer McGovern 1977	Vice President	Since 2014	Managing Director of BlackRock, Inc. since 2016; Director of BlackRock, Inc. from 2011 to 2015; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal J. Andrews 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock, Inc. 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 M. Fife 1970	Treasurer	Since 2007	Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Charles Park 1967	Chief Compliance Officer	Since 2014	Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Fernanda Piedra 1969	Anti-Money Laundering Compliance Officer	Since 2015	Director of BlackRock, Inc. since 2014; Anti-Money Laundering Compliance Officer and Regional Head of Financial Crime for the Americas at BlackRock, Inc. since 2014; Head of Regulatory Changes and Remediation for the Asset Wealth Management Division of Deutsche Bank from 2010 to 2014; Vice President of Goldman Sachs (Anti-Money Laundering/Suspicious Activities Group) from 2004 to 2010.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock, Inc. since 2014; Director of BlackRock, Inc. from 2010 to 2013; Secretary of the iShares® exchange traded funds since 2015; Secretary of the BlackRock-advised mutual funds since 2012.
	1    The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	2    Officers of the Trust/MIP serve at the pleasure of the Board.
	Further information about the Trust’s/MIP’s Officers and Trustees is available in the Trust’s/MIP’s Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.

Effective December 31, 2016, David O. Beim and Dr. Matina S. Horner resigned as Trustees of the Trust/MIP.

Investment Adviser and Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Accounting Agent and Custodian State Street Bank and Trust Company Boston, MA 02110	Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP Philadelphia, PA 19103
Sub-Advisers BlackRock Fund Advisors San Francisco, CA 94105 BlackRock International Limited Edinburgh EH3 8BL, United Kingdom	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Legal Counsel Sidley Austin LLP New York, NY 10019
		Address of the Trust/MIP 400 Howard Street San Francisco, CA 94105

BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016 41

Additional Information

General Information

Householding

The Fund will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Fund at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Fund/Master Portfolio file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s/Master Portfolio’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room or how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The 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 upon request and without charge (1) by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

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

BlackRock’s Mutual Fund Family

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

Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM ET on any business day to get information about your account balances, recent transactions and share prices. You can also reach us on the Web at http://www.blackrock.com/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 DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016

Additional Information (concluded)

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

BLACKROCK DISCIPLINED INTERNATIONAL FUND DECEMBER 31, 2016 43

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

DIF-12/16-AR

DECEMBER 31, 2016

  ANNUAL REPORT

BlackRock Large Cap Index Fund  |  of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
The Markets in Review		3
Annual Report:
Fund Summary		4
About Fund Performance		6
Disclosure of Expenses		6
Fund Financial Statements:
Statement of Assets and Liabilities		7
Statement of Operations		8
Statements of Changes in Net Assets		9
Fund Financial Highlights		10
Fund Notes to Financial Statements		13
Fund Report of Independent Registered Public Accounting Firm		17
Important Tax Information		17
Master Portfolio Information		18
Derivative Financial Instruments		18
Master Portfolio Financial Statements:
Schedule of Investments		19
Statement of Assets and Liabilities		31
Statement of Operations		32
Statements of Changes in Net Assets		33
Master Portfolio Financial Highlights		34
Master Portfolio Notes to Financial Statements		35
Master Portfolio Report of Independent Registered Public Accounting Firm		42
Officers and Trustees		43
Additional Information		46

2 BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016

The Markets in Review

Dear Shareholder,

The year 2016 started on a fraught note with worries about slowing growth in China, plunging oil prices and sliding share prices. Then reflationary expectations in the United States helped drive a second-half global growth pick-up and big market reversals. As such, higher-quality asset classes such as Treasury bonds, municipals and investment grade credit prevailed in the first half of the year, only to struggle in the second. In contrast, risk assets sold off at the start of the year and rebounded in the latter half, with some asset classes posting strong year-end returns.

A key takeaway from 2016’s market performance is that economics can trump politics. The global reflationary theme — governments taking policy action to support growth — was the dominant driver of 2016 asset returns, outweighing significant political upheavals and uncertainty. This trend accelerated after the U.S. election on expectations for an extra boost to U.S. growth via fiscal policy.

Markets were remarkably resilient during the year. Spikes in equity volatility after big surprises such as the U.K.’s vote to leave the European Union and the outcome of the U.S. presidential election were short-lived. Instead, political surprises and initial sell-offs were seized upon as buying opportunities. We believe this reinforces the case for taking the long view rather than reacting to short-term market noise.

Asset returns varied widely in 2016. Perceived safe assets such as government bonds and low-volatility shares underperformed the higher-risk areas of the market. And the reversal of longstanding trends created opportunities, such as in the recovery of value stocks and commodities.

We expect some of these trends to extend into 2017 and see the potential for more flows into risk assets this year. Learn more by reading our market insights at blackrock.com.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2016
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		7.82	%		11.96	%
U.S. small cap equities (Russell 2000® Index)		18.68			21.31
International equities (MSCI Europe, Australasia, Far East Index)		5.67			1.00
Emerging market equities (MSCI Emerging Markets Index)		4.49			11.19
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.18			0.33
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		(7.51	)		(0.16	)
U.S. investment grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index)		(2.53	)		2.65
Tax-exempt municipal bonds (S&P Municipal Bond Index)		(3.43	)		0.77
U.S. high yield bonds (Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		7.40			17.13
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, 2016

Investment Objective

BlackRock Large Cap 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?

• For the 12-month period ended December 31, 2016, the Fund’s Institutional Shares returned 11.92%, Investor A Shares returned 11.61%, and Class K Shares returned 11.92%. The benchmark Russell 1000^® Index returned 12.05% for the same period.

• 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 Large Cap Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio.

Describe the market environment.

• The year started with U.S. stock prices falling due to fears of a global economic slowdown, oil prices cratering, and terrorist attacks in Istanbul, Jakarta and Pakistan. Domestic equity markets rebounded in the second quarter of 2016, despite increased volatility in June from the “Brexit,” i.e., the U.K.’s vote to leave the European Union.

• U.S. equities capitalized on the upward momentum from their second quarter rally, which continued through the second half of the reporting period, driven by a dovish Federal Reserve (the “Fed”) that kept rates unchanged and stronger-than-expected earnings releases versus

analyst expectations. The U.S. economy continued to strengthen into the fourth quarter as seen by strong macro data and tightening of the U.S. labor market. As such, the Fed’s decision to raise rates by 25 basis points at the end of the reporting period did not come as a big surprise.

• The U.S. election and the Fed were front and center in 2016. The year started with an increase in volatility as investors prepared for a possible Fed rate increase, and weighed probable outcomes of the U.S. election. While many people were shocked by the Trump win, markets did not experience the same type of volatility seen after the Brexit vote, with major U.S. indexes posting solid gains in November.

Describe recent portfolio activity.

• 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.

• 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 LARGE CAP INDEX FUND DECEMBER 31, 2016

Total Return Based on a $10,000 Investment

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

²  The Fund invests all of its assets in the Master Portfolio. The Master Portfolio will be substantially invested in securities in the Russell 1000^® Index and will invest, under normal circumstances, at least 80% of its assets in securities or other financial instruments that are components of or have economic characteristics similar to the securities included in the Russell 1000^® Index.

³  An index that measures the performance of the large cap segment of the U.S. equity universe. It is a subset of the Russell 3000^® Index and includes approximately 1,000 of the largest securities based on a combination of their market capitalization and current index membership. The index represents approximately 92% of the total market capitalization of the Russell 3000^® Index.

⁴  Commencement of operations.

Performance Summary for the Period Ended December 31, 2016

				Average Annual Total Returns5
	6-Month Total Returns			1 Year			5 Years			Since Inception6
Institutional		7.98	%		11.92	%		14.60	%		11.63	%
Investor A		7.81			11.61			14.25			11.29
Class K		7.95			11.92			14.57			11.61
Russell 1000® Index		8.01			12.05			14.69			11.76

⁵  See “About Fund Performance” on Page 6 for a detailed description of share classes, including any related sales charges and fees.

⁶  The Fund commenced operations on March 31, 2011.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical8
	Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period7		Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period7		Annualized Expense Ratio
Institutional	$	1,000.00	$	1,079.80	$	047	$	1,000.00	$	1,024.68	$	0.46		0.09	%
Investor A	$	1,000.00	$	1,078.10	$	1.98	$	1,000.00	$	1,023.23	$	1.93		0.38	%
Class K	$	1,000.00	$	1,079.50	$	0.42	$	1,000.00	$	1,024.73	$	0.41		0.08	%

⁷  For each class of the Fund, expenses are equal to the annualized net expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period shown). Because the Fund invests all of its assets in the Master Portfolio, the expense example reflects the net expenses of both the Fund and the Master Portfolio in which it invests.

⁸  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366.

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

BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016 5

About Fund Performance

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

• Investor A Shares are not subject to any sales charge and bear no ongoing distribution fee. These shares are subject to an ongoing service fee of 0.25% per year. These shares are generally available through financial intermediaries.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in the performance table on the previous page assume reinvestment of all distributions, if any, at net asset value

(“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Distributions paid to each class of shares will vary because of the different levels of service, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders.

BlackRock Advisors, LLC (the “Administrator”), the Fund’s administrator, has contractually agreed to waive and/or reimburse a portion of the Fund’s expenses. Without such waiver and/or reimbursement, the Fund’s performance would have been lower. The Administrator is under no obligation to continue waiving and/or reimbursing its fees after the applicable termination date of such agreement. See Note 4 of the Notes to Financial Statements for additional information on waivers and/or reimbursements.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including administration fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2016 and held through December 31, 2016) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

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

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

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

6 BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016

Statement of Assets and Liabilities BlackRock Large Cap Index Fund

December 31, 2016
Assets
Investments at value — Master Portfolio (cost — $141,440,759)	$	165,670,888
Receivables:
Capital shares sold		23,159,160
From the Administrator		4,565
Prepaid expenses		14,703
Total assets		188,849,316
Liabilities
Payables:
Contributions to the Master Portfolio		21,741,301
Capital shares redeemed		1,417,859
Other accrued expenses		57,438
Service fees		4,987
Administration fees		1,234
Total liabilities		23,222,819
Net Assets	$	165,626,497
Net Assets Consist of
Paid-in capital	$	123,880,536
Distributions in excess of net investment income		(161,214	)
Accumulated net realized gain allocated from the Master Portfolio		17,677,046
Net unrealized appreciation (depreciation) allocated from the Master Portfolio		24,230,129
Net Assets	$	165,626,497
Net Asset Value
Institutional — Based on net assets of $18,964,031 and 1,258,540 shares outstanding, unlimited number of shares authorized, no par value	$	15.07
Investor A — Based on net assets of $23,938,590 and 1,596,940 shares outstanding, unlimited number of shares authorized, no par value	$	14.99
Class K — Based on net assets of $122,723,876 and 8,174,554 shares outstanding, unlimited number of shares authorized, no par value	$	15.01

See Notes to Financial Statements.
	BLACKROCK LARGE CAP INDEX FUND	DECEMBER 31, 2016	7

Statement of Operations BlackRock Large Cap Index Fund

Year Ended December 31, 2016
Investment Income
Net investment income allocated from the Master Portfolio:
Dividends — unaffiliated	$	3,391,648
Securities lending — affiliated — net		56,770
Dividends — affiliated		31,238
Foreign taxes withheld		(852	)
Expenses		(62,686	)
Fees waived		3,455
Total investment income		3,419,573
Fund Expenses
Administration		16,026
Service and distribution — class specific		49,220
Registration		47,849
Professional		42,524
Transfer agent — class specific		27,561
Printing		16,858
Recoupment of past waived fees — class specific		1,619
Miscellaneous		8,570
Total expenses		210,227
Less:
Fees waived by the Administrator		(16,026	)
Transfer agent fees waived — class specific		(12,642	)
Other expenses reimbursed by the Administrator		(47,142	)
Total expenses after fees waived and/or reimbursed		134,417
Net investment income		3,285,156
Realized and Unrealized Gain (Loss) Allocated from the Master Portfolio
Net realized loss from investments and futures contracts		2,821,304
Net change in unrealized appreciation (depreciation) on investments and futures contracts		20,495,722
Net realized and unrealized gain		23,317,026
Net Increase in Net Assets Resulting from Operations	$	26,602,182

See Notes to Financial Statements.
8	BLACKROCK LARGE CAP INDEX FUND	DECEMBER 31, 2016

Statements of Changes in Net Assets BlackRock Large Cap Index Fund

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	3,285,156		$	1,780,592
Net realized gain (loss)		2,821,304			23,655,263
Net change in unrealized appreciation (depreciation)		20,495,722			(24,271,610	)
Net increase in net assets resulting from operations		26,602,182			1,164,245
Distributions to Shareholders1
From net investment income:
Institutional		(1,114,048	)		(49,031	)
Investor A		(355,715	)		(294,975	)
Class K		(1,854,469	)		(1,564,063	)
From net realized gain:
Institutional		(663,823	)		(108,722	)
Investor A		(580,368	)		(563,699	)
Class K		(2,456,195	)		(2,500,143	)
Decrease in net assets resulting from distributions to shareholders		(7,024,618	)		(5,080,633	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		47,588,252			14,158,685
Net Assets
Total increase in net assets		67,165,816			10,242,297
Beginning of year		98,460,681			88,218,384
End of year	$	165,626,497		$	98,460,681
Distributions in excess of net investment income, end of year	$	(161,214	)	$	(122,138	)

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

See Notes to Financial Statements.
	BLACKROCK LARGE CAP INDEX FUND	DECEMBER 31, 2016	9

Financial Highlights BlackRock Large Cap Index Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	14.08		$	14.72		$	13.49		$	10.62		$	9.40
Net investment income1		0.31			0.28			0.26			0.23			0.21
Net realized and unrealized gain (loss)		1.35			(0.16	)		1.49			3.26			1.33
Net increase from investment operations		1.66			0.12			1.75			3.49			1.54
Distributions:2
From net investment income		(0.29	)		(0.29	)		(0.25	)		(0.23	)		(0.21	)
From net realized gain		(0.38	)		(0.47	)		(0.27	)		(0.39	)		(0.11	)
Total distributions		(0.67	)		(0.76	)		(0.52	)		(0.62	)		(0.32	)
Net asset value, end of year	$	15.07		$	14.08		$	14.72		$	13.49		$	10.62
Total Return3
Based on net asset value		11.92%			0.82%			13.07%			33.09%			16.42%
Ratios to Average Net Assets4
Total expenses		0.13%	5		0.27%	6		0.59%			0.56%	7		0.65%	6
Total expenses after fees waived and/or reimbursed		0.09%	5		0.13%	6		0.16%			0.23%	7		0.23%	6
Net investment income		2.14%	5		1.93%	6		1.81%			1.80%	7		2.07%	6
Supplemental Data
Net assets, end of year (000)	$	18,964		$	3,431		$	363		$	183		$	28
Portfolio turnover rate of the Master Portfolio		13%			6%			6%			14%			16%

¹ Based on average shares outstanding.

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

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes the Fund’s share of the Master Portfolio’s allocated expenses and/or net investment income.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of less than 0.01%.

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

⁷ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01% for the year ended December 31, 2013.

See Notes to Financial Statements.
10	BLACKROCK LARGE CAP INDEX FUND	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock Large Cap Index Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	14.01		$	14.65		$	13.43		$	10.61		$	9.39
Net investment income1		0.25			0.24			0.22			0.19			0.19
Net realized and unrealized gain (loss)		1.36			(0.16	)		1.49			3.22			1.33
Net increase from investment operations		1.61			0.08			1.71			3.41			1.52
Distributions:2
From net investment income		(0.25	)		(0.25	)		(0.22	)		(0.20	)		(0.19	)
From net realized gain		(0.38	)		(0.47	)		(0.27	)		(0.39	)		(0.11	)
Total distributions		(0.63	)		(0.72	)		(0.49	)		(0.59	)		(0.30	)
Net asset value, end of year	$	14.99		$	14.01		$	14.65		$	13.43		$	10.61
Total Return3
Based on net asset value		11.61%			0.56%			12.79%			32.35%			16.18%
Ratios to Average Net Assets4
Total expenses		0.48%	5		0.54%	6		0.57%			0.66%	7		0.83%	6
Total expenses after fees waived and/or reimbursed		0.38%	5		0.39%	6		0.41%			0.48%	7		0.45%	6
Net investment income		1.76%	5		1.62%	6		1.56%			1.56%	7		1.83%	6
Supplemental Data
Net assets, end of year (000)	$	23,939		$	17,397		$	17,507		$	6,454		$	2,310
Portfolio turnover rate of the Master Portfolio		13%			6%			6%			14%			16%

¹ Based on average shares outstanding.

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

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes the Fund’s share of the Master Portfolio’s allocated expenses and/or net investment income.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of less than 0.01%.

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

⁷ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01% for the year ended December 31, 2013.

See Notes to Financial Statements.
	BLACKROCK LARGE CAP INDEX FUND	DECEMBER 31, 2016	11

Financial Highlights (concluded) BlackRock Large Cap Index Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	14.03		$	14.67		$	13.44		$	10.61		$	9.40
Net investment income1		0.30			0.28			0.26			0.23			0.22
Net realized and unrealized gain (loss)		1.36			(0.15	)		1.50			3.22			1.32
Net increase from investment operations		1.66			0.13			1.76			3.45			1.54
Distributions:2
From net investment income		(0.30	)		(0.30	)		(0.27	)		(0.23	)		(0.22	)
From net realized gain		(0.38	)		(0.47	)		(0.26	)		(0.39	)		(0.11	)
Total distributions		(0.68	)		(0.77	)		(0.53	)		(0.62	)		(0.33	)
Net asset value, end of year	$	15.01		$	14.03		$	14.67		$	13.44		$	10.61
Total Return3
Based on net asset value		11.92%			0.86%			13.17%			32.80%			16.37%
Ratios to Average Net Assets4
Total expenses		0.12%	5		0.19%	6		0.24%			0.33%	7		0.52%	6
Total expenses after fees waived and/or reimbursed		0.08%	5		0.09%	6		0.12%			0.18%	7		0.18%	6
Net investment income		2.06%	5		1.91%	6		1.83%			1.85%	7		2.11%	6
Supplemental Data
Net assets, end of year (000)	$	122,724		$	77,632		$	70,348		$	6,746		$	56,654
Portfolio turnover rate of the Master Portfolio		13%			6%			6%			14%			16%

¹ Based on average shares outstanding.

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

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes the Fund’s share of the Master Portfolio’s allocated expenses and/or net investment income.

⁵  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of less than 0.01%.

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

⁷ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01% for the year ended December 31, 2013.

See Notes to Financial Statements.
12	BLACKROCK LARGE CAP INDEX FUND	DECEMBER 31, 2016

Notes to Financial Statements BlackRock Large Cap Index Fund

1. Organization:

BlackRock Funds III (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. BlackRock Large Cap Index Fund (the “Fund”), is a series of the Trust. The Fund is classified as diversified. The Trust is organized as a Delaware statutory trust. The Fund seeks to achieve its investment objective by investing all of its assets in Large Cap Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), an affiliate of the Fund, which has the same investment objective and strategies as the Fund. The value of the Fund’s investment in the Master Portfolio reflects the Fund’s proportionate interest in the net assets of the Master Portfolio. The performance of the Fund is directly affected by the performance of the Master Portfolio. At December 31, 2016, the percentage of the Master Portfolio owned by the Fund was 4.2%. The financial statements of the Master Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with the Fund’s financial statements.

The Fund offers multiple classes of shares. Institutional and Class K Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally sold without a sales charge. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions. Investor A Shares bear certain expenses related to shareholder servicing of such shares. Investor A Shares are generally available through financial intermediaries. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures. The Board of Trustees of the Trust and the Board of Trustees of MIP are referred to throughout this report as the “Board of Trustees” or the “Board” and the members are referred to as “Trustees.”

Share Class	Initial Sales Charge		CDSC		Conversion Privilege
Institutional Shares		No		No		None
Investor A Shares		No		No		None
Class K Shares		No		No		None

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

2. Significant Accounting Policies:

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

Investment Transactions and 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 its proportionate share of the Master Portfolio’s income, expenses and realized and unrealized gains and losses on a daily basis. Realized and unrealized gains and losses are adjusted utilizing partnership tax allocation rules. In addition, the Fund accrues its own expenses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

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

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

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

BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016 13

Notes to Financial Statements (continued) BlackRock Large Cap Index Fund

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Fund’s policy is to value its financial instruments at fair 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 3 of the Master Portfolio’s Notes to Financial Statements, which are included elsewhere in this report.

4. Administration Agreement and Other Transactions with Affiliates:

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

Administration: The Trust, on behalf of the Fund, entered into an Administration Agreement with the Administrator, 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 the Administrator a monthly fee at an annual rate of 0.01% of the average daily net assets of the Fund. The Fund does not pay an investment advisory fee or investment management fee.

Service and Distribution Fees: The Trust, on behalf of the Fund, entered into a Distribution Agreement and a Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Administrator. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing service 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. These amounts are shown as service and distribution – class specific in the Statement of Operations.

BRIL and broker-dealers, pursuant to sub-agreements with 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 the shareholders.

Transfer Agent: The Administrator maintains a call center that is responsible for providing certain shareholder services to the Fund. Shareholder services include responding to inquiries and processing subscriptions and redemptions transactions based upon instructions from shareholders. For the year ended December 31, 2016, the Fund reimbursed the Administrator the following amounts for costs incurred in running the call center, which are included in transfer agent — class specific in the Statement of Operations:

Institutional	Investor A		Class K		Total
$376	$	1,672	$	71	$	2,119

For the year ended December 31, 2016, the following table shows the class specific transfer agent fees borne directly by each class of the Fund:

Institutional	Investor A		Class K		Total
$6,562	$	20,862	$	137	$	27,561

Expense Limitations, Waivers, Reimbursements and Recoupments: With respect to the Fund, BAL contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business. The expense limitations as a percentage of average daily net assets are as follows:

Institutional		Investor A		Class K
	0.13%		0.38%		0.08%

These amounts waived and/or reimbursed are shown as fees waived by the Administrator, other expenses reimbursed by the Administrator and transfer agent fees waived — class specific respectively, in the Statement of Operations.

BAL has agreed not to reduce or discontinue this contractual expense limitation prior to May 1, 2017, unless approved by the Board, including a majority of the trustees who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Trustees”), or by a vote of a majority of the outstanding voting securities of the Fund.

For the year ended December 31, 2016, the following table shows the class specific transfer agent fees waived and/or reimbursed by each class of the Fund:

Institutional	Investor A		Class K		Total
$1,376	$	11,131	$	135	$	12,642

14 BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) BlackRock Large Cap Index Fund

With respect to the contractual expense caps, if during the Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver and/or reimbursement from the Administrator, are less than the expense cap for that share class, the Administrator is entitled to be reimbursed by such share class up to the lesser of the following expenses:

(a) The amount of fees waived and/or expenses reimbursed during those prior two fiscal years under the agreement.

(b) The amount by which the expense cap for that share class exceeds the operating expenses of the share class for the current fiscal year, provided that:

• The Fund, of which the share class is a part, has more than $50 million in assets for the fiscal year.

• The Administrator or an affiliate continues to serve as the Fund’s investment adviser or administrator.

In the event the expense cap for a share class is changed subsequent to a fiscal year in which the Administrator becomes entitled to reimbursement for fees waived and/or reimbursed, the amount available to reimburse the Administrator shall be calculated by reference to the expense cap for that share class in effect at the time the Administrator became entitled to receive such reimbursement, rather than the subsequently changed expense limit cap for that share class.

For the year ended December 31, 2016, the Administrator recouped the following fund level and class specific waivers and/or reimbursements previously recorded by the Fund:

Institutional	Investor A		Class K
$1,610	$	4	$	5

As of period end, 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,	2017		2018
Fund level	$	95,615	$	63,167
Institutional	$	852	$	1,376
Investor A	$	9,829	$	11,132
Class K		—	$	135

The following Fund level and class specific waivers and/or reimbursements previously recorded by the Fund, which were subject to recoupment by BAL and BFA, expired on December 31, 2016:

Fund level	$	99,938
Institutional		—
Investor A	$	4,977
Class K	$	66

Interfund Lending: In accordance with an exemptive order (the “Order”) from the U.S. Securities and Exchange Commission, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow and lend under the Interfund Lending Program.

The Fund may lend in aggregate up to 15% of its net assets, but no more than 5% of its net assets, to any one borrowing fund through the Interfund Lending Program. The Fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets or any lower threshold provided for by the Fund’s investment restrictions. If the Fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2016, the Fund did not participate in the Interfund Lending Program.

Officers and Trustees: 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 Fund’s Chief Compliance Officer, which is included in Officer and Trustees in the Statement of Operations.

5. Income Tax Information:

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

BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016 15

Notes to Financial Statements (concluded) BlackRock Large Cap Index Fund

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent difference attributable to the character of proceeds from redeemed shares was reclassified to the following accounts:

Paid-in capital	$	771,551
Accumulated net unrealized gain	$	(771,551	)

The tax character of distributions paid was as follows:

	12/31/161		12/31/15
Ordinary income	$	4,865,814	$	2,615,289
Long-term capital gains		2,930,355		2,465,344
Total	$	7,796,169	$	5,080,633

¹  Distribution amounts include a portion of the proceeds from redeemed shares.

As of period end, the tax components of accumulated net earnings (losses) were as follows:

Net unrealized gains (losses)² $ 41,745,961

²  The differences between book-basis and tax-basis net unrealized gains (losses) was attributable primarily to the timing and recognition of partnership income.

6. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Institutional
Shares sold		7,841,863		$	105,033,185			235,121		$	3,472,697
Shares issued in reinvestment of distributions		121,458			1,777,334			11,038			157,118
Shares redeemed		(6,948,515	)		(103,217,765	)		(27,116	)		(399,482	)
Net increase		1,014,806		$	3,592,754			219,043		$	3,230,333
Investor A
Shares sold		645,111		$	9,305,027			551,765		$	8,156,831
Shares issued in reinvestment of distributions		62,764			934,833			60,105			853,788
Shares redeemed		(352,647	)		(5,053,491	)		(565,416	)		(8,408,598	)
Net increase		355,228		$	5,186,369			46,454		$	602,021
Class K
Shares sold		3,193,953		$	46,717,150			960,151		$	13,837,654
Shares issued in reinvestment of distributions		289,647			4,310,663			285,513			4,064,205
Shares redeemed		(842,604	)		(12,218,684	)		(508,830	)		(7,575,528	)
Net increase		2,640,996		$	38,809,129			736,834		$	10,326,331
Total Net Increase		4,011,030		$	47,588,252			1,002,331		$	14,158,685

7. Subsequent Events:

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

16 BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016

Report of Independent Registered Public Accounting Firm BlackRock Large Cap Index Fund

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

In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock Large Cap Index Fund (the “Fund”), a series of BlackRock Funds III, as of December 31, 2016, 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 Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid during the taxable year ended December 31, 2016.

	January — December 2016
Qualified Dividend Income for Individuals1		71.13%
Dividends Qualifying for the Dividend Received Deductions for Corporations1		67.24%

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

Additionally, the Fund distributed long-term capital gains of $0.031180 and $0.230645 per share to shareholders on record June 29, 2016 and December 15, 2016, respectively.

BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016 17

Master Portfolio Information Large Cap Index Master Portfolio

As of Period End

Ten Largest Holdings Percent of
Net Assets

Apple, Inc.	3	%
Microsoft Corp.	2
Exxon Mobil Corp.	2
Johnson & Johnson	1
JPMorgan Chase & Co.	1
Berkshire Hathaway, Inc.	1
Amazon.com, Inc.	1
General Electric Co.	1
AT&T, Inc.	1
Facebook, Inc.	1

Sector Allocation Percent of
Net Assets

Information Technology	20	%
Financials	15
Health Care	13
Consumer Discretionary	12
Short-Term Securities	12
Industrials	10
Consumer Staples	8
Energy	7
Real Estate	3
Materials	3
Utilities	3
Telecommunication Services	3
Liabilities in Excess of Other Assets	(9	)

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

Derivative Financial Instruments

The Master Portfolio may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market and/or other assets without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the

instrument. The Master Portfolio’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Master Portfolio can realize on an investment and/or may result in lower distributions paid to shareholders. The Master Portfolio’s investments in these instruments, if any, are discussed in detail in the Master Portfolio’s Notes to Financial Statements.

18 BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016

Schedule of Investments December 31, 2016 Large Cap Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Aerospace & Defense — 2.0%
B/E Aerospace, Inc.		18,847	$	1,134,401
Boeing Co. (a)		107,074		16,669,280
General Dynamics Corp.		43,689		7,543,343
HEICO Corp. (a)		3,064		236,388
HEICO Corp., Class A		7,006		475,707
Hexcel Corp.		16,020		824,069
Huntington Ingalls Industries, Inc.		8,459		1,558,063
L3 Technologies, Inc.		13,423		2,041,773
Lockheed Martin Corp.		45,546		11,383,767
Northrop Grumman Corp.		29,712		6,910,417
Orbital ATK, Inc.		10,009		878,090
Raytheon Co.		53,141		7,546,022
Rockwell Collins, Inc.		23,628		2,191,733
Spirit Aerosystems Holdings, Inc., Class A		21,334		1,244,839
Textron, Inc.		48,824		2,370,893
TransDigm Group, Inc. (a)		8,772		2,183,877
United Technologies Corp.		139,358		15,276,424
				80,469,086
Air Freight & Logistics — 0.7%
C.H. Robinson Worldwide, Inc. (a)		25,973		1,902,782
Expeditors International of Washington, Inc. (a)		31,675		1,677,508
FedEx Corp.		44,716		8,326,119
United Parcel Service, Inc., Class B		123,892		14,202,979
				26,109,388
Airlines — 0.6%
Alaska Air Group, Inc. (a)		20,951		1,858,982
American Airlines Group, Inc.		93,357		4,358,838
Copa Holdings SA, Class A (a)		5,163		468,955
Delta Air Lines, Inc. (a)		138,253		6,800,665
JetBlue Airways Corp. (b)		54,971		1,232,450
Southwest Airlines Co.		114,618		5,712,561
Spirit Airlines, Inc. (b)		12,428		719,084
United Continental Holdings, Inc. (b)		57,046		4,157,513
				25,309,048
Auto Components — 0.5%
Adient PLC (b)		16,949		993,211
Allison Transmission Holdings, Inc. (a)		23,908		805,461
BorgWarner, Inc. (a)		39,415		1,554,528
Delphi Automotive PLC		49,038		3,302,709
Gentex Corp. (a)		50,983		1,003,855
Goodyear Tire & Rubber Co. (a)		46,608		1,438,789
Johnson Controls International PLC		164,718		6,784,735
Lear Corp. (a)		13,501		1,787,127
Visteon Corp.		5,649		453,841
				18,124,256
Automobiles — 0.6%
Ford Motor Co.		697,107		8,455,908
General Motors Co. (a)		251,667		8,768,078
Harley-Davidson, Inc.		33,012		1,925,920
Tesla Motors, Inc. (a)(b)		22,363		4,778,749
Thor Industries, Inc.		8,110		811,406
				24,740,061

Common Stocks	Shares		Value
Banks — 6.4%
Associated Banc-Corp		25,720	$	635,284
Bank of America Corp.		1,846,067		40,798,081
Bank of Hawaii Corp. (a)		7,294		646,905
BankUnited, Inc.		16,936		638,318
BB&T Corp. (a)		145,824		6,856,645
BOK Financial Corp. (a)		4,260		353,750
CIT Group, Inc.		34,846		1,487,227
Citigroup, Inc.		527,454		31,346,591
Citizens Financial Group, Inc.		95,486		3,402,166
Comerica, Inc. (a)		31,690		2,158,406
Commerce Bancshares, Inc. (a)		15,254		881,834
Cullen/Frost Bankers, Inc. (a)		9,727		858,213
East West Bancorp, Inc.		26,624		1,353,298
Fifth Third Bancorp (a)		138,097		3,724,476
First Hawaiian, Inc. (a)		4,262		148,403
First Horizon National Corp.		43,345		867,333
First Republic Bank		26,383		2,430,930
Huntington Bancshares, Inc. (a)		194,475		2,570,960
JPMorgan Chase & Co.		653,478		56,388,617
KeyCorp		193,491		3,535,081
M&T Bank Corp. (a)		26,834		4,197,643
PacWest Bancorp (a)		21,198		1,154,019
PNC Financial Services Group, Inc. (a)(c)		89,475		10,464,996
Popular, Inc.		19,041		834,377
Regions Financial Corp. (a)		228,662		3,283,586
Signature Bank (b)		9,242		1,388,148
SunTrust Banks, Inc. (a)		90,198		4,947,360
SVB Financial Group (b)		9,434		1,619,440
Synovus Financial Corp. (a)		23,505		965,585
TCF Financial Corp.		27,804		544,680
US Bancorp (a)		291,035		14,950,468
Wells Fargo & Co.		820,119		45,196,758
Western Alliance Bancorp (b)		16,103		784,377
Zions Bancorporation (a)		36,114		1,554,347
				252,968,302
Beverages — 1.8%
Brown-Forman Corp., Class A (a)		9,523		440,439
Brown-Forman Corp., Class B (a)		32,557		1,462,460
Coca-Cola Co.		699,541		29,002,970
Constellation Brands, Inc., Class A (a)		29,266		4,486,770
Dr. Pepper Snapple Group, Inc. (a)		33,226		3,012,601
Molson Coors Brewing Co., Class B		30,496		2,967,566
Monster Beverage Corp. (b)		75,303		3,338,935
PepsiCo, Inc.		259,147		27,114,551
				71,826,292
Biotechnology — 2.7%
AbbVie, Inc.		290,747		18,206,577
ACADIA Pharmaceuticals, Inc. (a)(b)		16,207		467,410
Agios Pharmaceuticals, Inc. (b)		5,046		210,570
Alexion Pharmaceuticals, Inc. (b)		39,064		4,779,480
Alkermes PLC (b)		27,207		1,512,165
Alnylam Pharmaceuticals, Inc. (a)(b)		12,648		473,541
Amgen, Inc.		134,923		19,727,092
Biogen, Inc. (b)		39,288		11,141,291
BioMarin Pharmaceutical, Inc. (a)(b)		30,776		2,549,484

Portfolio Abbreviations

REIT Real Estate Investment Trust

See Notes to Financial Statements.

BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016 19

Schedule of Investments (continued) Large Cap Index Master Portfolio

Common Stocks	Shares		Value
Biotechnology (continued)
Celgene Corp. (b)		138,006	$	15,974,194
Gilead Sciences, Inc.		238,016		17,044,326
Incyte Corp. (b)		28,867		2,894,494
Intercept Pharmaceuticals, Inc. (a)(b)		3,097		336,489
Intrexon Corp. (a)(b)		8,664		210,535
Ionis Pharmaceuticals, Inc. (b)		21,066		1,007,587
Juno Therapeutics, Inc. (a)(b)		12,157		229,159
Neurocrine Biosciences, Inc. (b)		14,386		556,738
OPKO Health, Inc. (a)(b)		55,432		515,518
Regeneron Pharmaceuticals, Inc. (b)		13,959		5,124,209
Seattle Genetics, Inc. (a)(b)		16,699		881,206
United Therapeutics Corp. (b)		7,562		1,084,618
Vertex Pharmaceuticals, Inc. (b)		44,383		3,269,696
				108,196,379
Building Products — 0.2%
Allegion PLC		16,794		1,074,816
AO Smith Corp. (a)		26,245		1,242,701
Armstrong World Industries, Inc. (b)		8,876		371,017
Fortune Brands Home & Security, Inc.		26,739		1,429,467
Lennox International, Inc. (a)		6,819		1,044,466
Masco Corp.		58,095		1,836,964
Owens Corning		21,191		1,092,608
USG Corp. (a)(b)		15,525		448,362
				8,540,401
Capital Markets — 2.3%
Affiliated Managers Group, Inc. (b)		9,418		1,368,435
Ameriprise Financial, Inc. (a)		28,295		3,139,047
Artisan Partners Asset Management, Inc., Class A		5,903		175,614
Bank of New York Mellon Corp.		187,851		8,900,380
BlackRock, Inc. (c)		22,394		8,521,813
Charles Schwab Corp. (a)		209,308		8,261,387
CME Group, Inc. (a)		60,549		6,984,327
Donnelley Financial Solutions, Inc. (b)		4,409		101,319
E*Trade Financial Corp. (b)		48,867		1,693,242
Eaton Vance Corp. (a)		20,410		854,771
Federated Investors, Inc., Class B (a)		13,944		394,336
Franklin Resources, Inc. (a)		65,361		2,586,988
Goldman Sachs Group, Inc.		69,254		16,582,870
Invesco Ltd. (a)		74,527		2,261,149
Lazard Ltd., Class A		22,969		943,796
Legg Mason, Inc.		17,767		531,411
LPL Financial Holdings, Inc.		15,160		533,784
Morgan Stanley (a)		256,462		10,835,520
Northern Trust Corp.		37,324		3,323,702
NorthStar Asset Management Group, Inc.		34,290		511,607
Raymond James Financial, Inc.		22,912		1,587,114
SEI Investments Co.		22,274		1,099,445
State Street Corp.		70,853		5,506,695
T. Rowe Price Group, Inc.		43,765		3,293,754
TD Ameritrade Holding Corp.		43,529		1,897,865
				91,890,371
Chemicals — 2.1%
AdvanSix, Inc. (b)		5,229		115,770
Air Products & Chemicals, Inc.		35,094		5,047,219
Albemarle Corp. (a)		20,255		1,743,550
Ashland Global Holdings, Inc.		10,787		1,178,911
Axalta Coating Systems Ltd. (b)		30,073		817,986
Cabot Corp.		10,691		540,323

Common Stocks	Shares		Value
Chemicals (continued)
Celanese Corp., Series A		26,784	$	2,108,972
CF Industries Holdings, Inc. (a)		42,825		1,348,131
Dow Chemical Co.		201,495		11,529,544
E.I. du Pont de Nemours & Co.		157,130		11,533,342
Eastman Chemical Co.		26,889		2,022,322
Ecolab, Inc.		46,728		5,477,456
FMC Corp. (a)		23,384		1,322,599
Huntsman Corp.		36,059		688,006
International Flavors & Fragrances, Inc. (a)		13,963		1,645,260
LyondellBasell Industries NV, Class A		62,341		5,347,611
Monsanto Co.		78,315		8,239,521
Mosaic Co. (a)		61,285		1,797,489
NewMarket Corp. (a)		1,256		532,343
Platform Specialty Products Corp. (a)(b)		32,417		318,011
PPG Industries, Inc.		47,719		4,521,852
Praxair, Inc. (a)		51,289		6,010,558
RPM International, Inc.		23,835		1,283,038
Scotts Miracle-Gro Co., Class A		7,743		739,844
Sherwin-Williams Co.		14,536		3,906,405
Valspar Corp. (a)		14,237		1,475,096
Valvoline, Inc. (a)		6,075		130,613
Westlake Chemical Corp. (a)		7,052		394,841
WR Grace & Co.		13,032		881,484
				82,698,097
Commercial Services & Supplies — 0.4%
Cintas Corp.		15,540		1,795,802
Clean Harbors, Inc. (b)		9,235		513,928
Copart, Inc. (a)(b)		16,695		925,070
Covanta Holding Corp. (a)		18,137		282,937
Iron Mountain, Inc.		45,563		1,479,886
KAR Auction Services, Inc.		23,809		1,014,740
LSC Communications Inc.		4,409		130,859
Pitney Bowes, Inc.		32,426		492,551
Republic Services, Inc.		42,650		2,433,183
Rollins, Inc. (a)		16,690		563,788
RR Donnelley & Sons Co.		11,758		191,891
Stericycle, Inc. (a)(b)		14,057		1,082,951
Waste Management, Inc.		79,185		5,615,008
				16,522,594
Communications Equipment — 1.0%
Arista Networks, Inc. (b)		6,779		656,004
ARRIS International PLC (b)		32,995		994,139
Brocade Communications Systems, Inc.		70,053		874,962
Cisco Systems, Inc.		903,610		27,307,094
CommScope Holding Co., Inc. (b)		23,646		879,631
EchoStar Corp., Class A (b)		7,949		408,499
F5 Networks, Inc. (b)		12,129		1,755,309
Harris Corp.		21,857		2,239,687
Juniper Networks, Inc.		68,122		1,925,128
Motorola Solutions, Inc. (a)		31,425		2,604,818
Palo Alto Networks, Inc. (b)		15,841		1,980,917
				41,626,188
Construction & Engineering — 0.1%
AECOM (b)		26,648		968,921
Chicago Bridge & Iron Co. NV		17,755		563,721
Fluor Corp.		24,392		1,281,068
Jacobs Engineering Group, Inc. (a)(b)		20,957		1,194,549
KBR, Inc.		28,076		468,589

See Notes to Financial Statements.

20 BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) Large Cap Index Master Portfolio

Common Stocks	Shares		Value
Construction & Engineering (continued)
Quanta Services, Inc. (b)		24,746	$	862,398
				5,339,246
Construction Materials — 0.2%
Eagle Materials, Inc.		8,244		812,281
Martin Marietta Materials, Inc.		11,486		2,544,494
Vulcan Materials Co.		23,951		2,997,468
				6,354,243
Consumer Finance — 0.8%
Ally Financial, Inc.		77,715		1,478,139
American Express Co.		143,774		10,650,778
Capital One Financial Corp.		86,531		7,548,964
Credit Acceptance Corp. (a)(b)		1,311		285,156
Discover Financial Services		73,782		5,318,944
Navient Corp.		54,697		898,672
OneMain Holdings, Inc. (b)		10,078		223,127
Santander Consumer USA Holdings, Inc. (b)		16,436		221,886
SLM Corp. (b)		74,523		821,244
Synchrony Financial		150,181		5,447,065
				32,893,975
Containers & Packaging — 0.5%
Aptargroup, Inc. (a)		10,535		773,796
Avery Dennison Corp.		16,033		1,125,837
Ball Corp.		30,949		2,323,341
Bemis Co., Inc. (a)		16,105		770,141
Berry Plastics Group, Inc. (b)		22,075		1,075,715
Crown Holdings, Inc. (b)		23,549		1,237,971
Graphic Packaging Holding Co.		58,690		732,451
International Paper Co.		73,692		3,910,097
Owens-Illinois, Inc. (b)		28,300		492,703
Packaging Corp. of America		16,352		1,386,977
Sealed Air Corp.		34,389		1,559,197
Silgan Holdings, Inc. (a)		6,196		317,111
Sonoco Products Co. (a)		18,378		968,521
WestRock Co.		45,388		2,304,349
				18,978,207
Distributors — 0.1%
Genuine Parts Co.		26,432		2,525,313
LKQ Corp. (b)		53,426		1,637,507
Pool Corp.		7,530		785,680
				4,948,500
Diversified Consumer Services — 0.1%
Graham Holdings Co., Class B		758		388,058
H&R Block, Inc. (a)		35,374		813,248
Service Corp. International		34,652		984,117
ServiceMaster Global Holdings, Inc. (b)		23,091		869,838
				3,055,261
Diversified Financial Services — 2.0%
Berkshire Hathaway, Inc., Class B (a)(b)		339,420		55,318,672
CBOE Holdings, Inc.		13,981		1,033,056
FactSet Research Systems, Inc. (a)		7,157		1,169,669
Interactive Brokers Group, Inc., Class A		11,057		403,691
Intercontinental Exchange, Inc.		105,549		5,955,075
Leucadia National Corp. (a)		57,537		1,337,735
MarketAxess Holdings, Inc.		6,368		935,587
Moody’s Corp.		30,556		2,880,514
Morningstar, Inc.		2,888		212,441

Common Stocks	Shares		Value
Diversified Financial Services (continued)
MSCI, Inc.		16,512	$	1,300,815
Nasdaq, Inc.		19,619		1,316,827
S&P Global, Inc.		47,405		5,097,934
Voya Financial, Inc.		35,788		1,403,605
				78,365,621
Diversified Telecommunication Services — 2.3%
AT&T, Inc.		1,106,553		47,061,699
CenturyLink, Inc. (a)		97,482		2,318,122
Frontier Communications Corp. (a)		211,491		714,840
Level 3 Communications, Inc. (b)		51,865		2,923,111
Verizon Communications, Inc.		732,761		39,114,782
Zayo Group Holdings, Inc. (b)		28,566		938,679
				93,071,233
Electric Utilities — 1.6%
American Electric Power Co., Inc.		88,076		5,545,265
Avangrid, Inc. (a)		10,323		391,035
Duke Energy Corp.		123,595		9,593,444
Edison International		56,280		4,051,597
Entergy Corp.		32,440		2,383,367
Eversource Energy (a)		56,895		3,142,311
Exelon Corp.		159,302		5,653,628
FirstEnergy Corp.		77,419		2,397,666
Great Plains Energy, Inc. (a)		37,697		1,031,013
Hawaiian Electric Industries, Inc.		18,619		615,730
NextEra Energy, Inc. (a)		82,369		9,839,801
OGE Energy Corp.		36,649		1,225,909
Pinnacle West Capital Corp.		20,175		1,574,255
PPL Corp.		122,367		4,166,596
Southern Co.		168,142		8,270,905
Westar Energy, Inc.		24,759		1,395,170
Xcel Energy, Inc.		92,028		3,745,540
				65,023,232
Electrical Equipment — 0.5%
Acuity Brands, Inc.		7,957		1,836,953
AMETEK, Inc.		41,915		2,037,069
Eaton Corp. PLC		82,264		5,519,092
Emerson Electric Co.		115,210		6,422,957
Hubbell, Inc.		10,146		1,184,038
Regal-Beloit Corp.		7,807		540,635
Rockwell Automation, Inc.		23,370		3,140,928
				20,681,672
Electronic Equipment, Instruments & Components — 0.5%
Amphenol Corp., Class A		53,608		3,602,458
Arrow Electronics, Inc. (b)		15,907		1,134,169
Avnet, Inc.		23,446		1,116,264
CDW Corp.		29,035		1,512,433
Cognex Corp.		13,960		888,135
Corning, Inc. (a)		170,672		4,142,209
Dolby Laboratories, Inc., Class A		8,966		405,174
Fitbit, Inc., Series A (b)		24,207		177,195
FLIR Systems, Inc.		25,343		917,163
IPG Photonics Corp. (b)		6,181		610,127
Jabil Circuit, Inc.		34,479		816,118
Keysight Technologies, Inc. (b)		29,370		1,074,061
National Instruments Corp. (a)		18,092		557,595
Trimble, Inc. (b)		45,900		1,383,885
Zebra Technologies Corp., Class A (b)		8,863		760,091
				19,097,077

See Notes to Financial Statements.

BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016 21

Schedule of Investments (continued) Large Cap Index Master Portfolio

Common Stocks	Shares		Value
Energy Equipment & Services — 1.2%
Baker Hughes, Inc.		78,549	$	5,103,328
Diamond Offshore Drilling, Inc. (a)		9,999		176,982
Dril-Quip, Inc. (a)(b)		7,197		432,180
Ensco PLC, Class A		55,464		539,110
FMC Technologies, Inc. (b)		40,819		1,450,299
Frank’s International NV (a)		5,864		72,186
Halliburton Co.		153,909		8,324,938
Helmerich & Payne, Inc. (a)		17,639		1,365,259
Nabors Industries Ltd.		47,761		783,280
National Oilwell Varco, Inc.		68,461		2,563,180
Noble Corp. PLC (a)		46,681		276,351
Oceaneering International, Inc. (a)		17,288		487,694
Patterson-UTI Energy, Inc. (a)		25,363		682,772
Rowan Cos. PLC, Class A (a)		20,313		383,713
RPC, Inc. (a)		8,807		174,467
Schlumberger Ltd. (a)		249,753		20,966,764
Superior Energy Services, Inc. (a)		26,291		443,792
Transocean Ltd. (a)(b)		62,544		921,899
Weatherford International PLC (a)(b)		171,434		855,456
				46,003,650
Food & Staples Retailing — 1.9%
Casey’s General Stores, Inc. (a)		6,673		793,286
Costco Wholesale Corp.		78,098		12,504,271
CVS Health Corp. (a)		192,786		15,212,743
Kroger Co.		170,655		5,889,304
Rite Aid Corp. (b)		180,030		1,483,447
Sprouts Farmers Market, Inc. (a)(b)		23,817		450,618
Sysco Corp.		94,204		5,216,075
U.S. Foods Holding Corp. (b)		6,666		183,182
Wal-Mart Stores, Inc.		271,289		18,751,496
Walgreens Boots Alliance, Inc.		154,393		12,777,565
Whole Foods Market, Inc. (a)		55,792		1,716,162
				74,978,149
Food Products — 1.7%
Archer-Daniels-Midland Co. (a)		103,463		4,723,086
Blue Buffalo Pet Products, Inc. (b)		11,930		286,797
Bunge Ltd.		24,336		1,758,033
Campbell Soup Co. (a)		32,639		1,973,680
ConAgra Foods, Inc.		78,575		3,107,641
Flowers Foods, Inc. (a)		30,454		608,166
General Mills, Inc.		106,740		6,593,330
Hain Celestial Group, Inc. (b)		17,527		684,079
Hershey Co.		24,931		2,578,613
Hormel Foods Corp. (a)		47,399		1,649,959
Ingredion, Inc. (a)		12,561		1,569,623
J.M. Smucker Co. (a)		20,844		2,669,283
Kellogg Co.		44,064		3,247,957
Kraft Heinz Co.		107,037		9,346,471
Lamb Weston Holdings, Inc. (b)		26,799		1,014,342
McCormick & Co., Inc.		21,089		1,968,236
Mead Johnson Nutrition Co. (a)		33,820		2,393,103
Mondelez International, Inc., Class A (a)		268,430		11,899,502
Pilgrim’s Pride Corp. (a)		12,330		234,147
Pinnacle Foods, Inc.		19,924		1,064,938
Post Holdings, Inc. (b)		11,754		944,904
TreeHouse Foods, Inc. (a)(b)		10,099		729,047
Tyson Foods, Inc., Class A		51,574		3,181,084
WhiteWave Foods Co. (b)		30,418		1,691,241
				65,917,262

Common Stocks	Shares		Value
Gas Utilities — 0.1%
Atmos Energy Corp.		17,702	$	1,312,603
National Fuel Gas Co. (a)		13,771		779,990
UGI Corp.		30,114		1,387,653
				3,480,246
Health Care Equipment & Supplies — 2.2%
Abbott Laboratories (a)		263,658		10,127,104
ABIOMED, Inc. (b)		6,699		754,843
Alere, Inc. (b)		14,452		563,194
Align Technology, Inc. (b)		12,566		1,207,970
Baxter International, Inc.		89,320		3,960,449
Becton Dickinson & Co.		37,493		6,206,966
Boston Scientific Corp. (b)		241,873		5,231,713
C.R. Bard, Inc.		13,143		2,952,706
Cooper Cos., Inc.		8,316		1,454,718
Dentsply Sirona, Inc. (a)		41,555		2,398,970
DexCom, Inc. (b)		14,382		858,605
Edwards Lifesciences Corp. (b)		37,344		3,499,133
Hill-Rom Holdings, Inc.		12,257		688,108
Hologic, Inc. (b)		48,852		1,959,942
IDEXX Laboratories, Inc. (b)		16,191		1,898,719
Intuitive Surgical, Inc. (b)		6,682		4,237,524
Medtronic PLC		252,060		17,954,234
ResMed, Inc. (a)		24,229		1,503,410
St. Jude Medical, Inc.		49,936		4,004,368
Stryker Corp.		60,288		7,223,105
Teleflex, Inc. (a)		7,641		1,231,347
Varian Medical Systems, Inc. (b)		16,686		1,498,069
West Pharmaceutical Services, Inc.		12,118		1,027,970
Zimmer Biomet Holdings, Inc. (a)		33,193		3,425,518
				85,868,685
Health Care Providers & Services — 2.4%
Acadia Healthcare Co., Inc. (a)(b)		12,053		398,954
Aetna, Inc.		60,857		7,546,877
AmerisourceBergen Corp. (a)		29,871		2,335,614
Anthem, Inc.		47,164		6,780,768
Brookdale Senior Living, Inc. (b)		31,473		390,895
Cardinal Health, Inc.		58,606		4,217,874
Centene Corp. (b)		29,274		1,654,274
Cigna Corp.		45,555		6,076,581
DaVita, Inc. (b)		29,346		1,884,013
Envision Healthcare Corp. (b)		20,728		1,311,875
Express Scripts Holding Co. (b)		113,705		7,821,767
HCA Holdings, Inc. (b)		55,426		4,102,633
Henry Schein, Inc. (b)		14,847		2,252,438
Humana, Inc. (a)		26,740		5,455,762
Laboratory Corp. of America Holdings (b)		18,527		2,378,496
LifePoint Hospitals, Inc. (a)(b)		6,265		355,852
McKesson Corp. (a)		40,404		5,674,742
MEDNAX, Inc. (a)(b)		16,027		1,068,360
Patterson Cos., Inc. (a)		15,549		637,975
Premier, Inc., Class A (b)		9,177		278,614
Quest Diagnostics, Inc.		25,646		2,356,867
Tenet Healthcare Corp. (b)		15,212		225,746
UnitedHealth Group, Inc.		168,216		26,921,289
Universal Health Services, Inc., Class B		14,984		1,593,998
VCA, Inc. (b)		13,463		924,235
WellCare Health Plans, Inc. (b)		7,572		1,037,970
				95,684,469

See Notes to Financial Statements.

22 BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) Large Cap Index Master Portfolio

Common Stocks	Shares		Value
Health Care Technology — 0.1%
athenahealth, Inc. (b)		6,519	$	685,603
Cerner Corp. (b)		53,048		2,512,884
Inovalon Holdings, Inc., Class A (b)		8,806		90,702
Veeva Systems, Inc., Class A (b)		16,730		680,911
				3,970,100
Hotels, Restaurants & Leisure — 1.9%
Aramark		43,469		1,552,713
Brinker International, Inc. (a)		8,208		406,542
Carnival Corp. (a)		73,614		3,832,345
Chipotle Mexican Grill, Inc. (b)		5,144		1,940,934
Choice Hotels International, Inc.		5,233		293,310
Darden Restaurants, Inc. (a)		21,074		1,532,501
Domino’s Pizza, Inc.		8,734		1,390,802
Dunkin’ Brands Group, Inc. (a)		17,072		895,256
Extended Stay America, Inc.		10,992		177,521
Hilton Worldwide Holdings, Inc.		95,262		2,591,126
Hyatt Hotels Corp., Class A (b)		5,709		315,479
International Game Technology PLC		16,404		418,630
Las Vegas Sands Corp. (a)		65,599		3,503,643
Marriott International, Inc., Class A		58,127		4,805,940
McDonald’s Corp.		149,276		18,169,875
MGM Resorts International (b)		84,346		2,431,695
Norwegian Cruise Line Holdings Ltd. (b)		27,839		1,183,993
Panera Bread Co., Class A (b)		3,786		776,471
Royal Caribbean Cruises Ltd. (a)		30,317		2,487,207
Six Flags Entertainment Corp.		13,287		796,688
Starbucks Corp.		256,333		14,231,608
Vail Resorts, Inc.		6,860		1,106,587
Wendy’s Co. (a)		36,421		492,412
Wyndham Worldwide Corp.		19,273		1,471,879
Wynn Resorts Ltd. (a)		13,993		1,210,534
Yum China Holdings, Inc. (b)		60,981		1,592,824
Yum! Brands, Inc.		62,706		3,971,171
				73,579,686
Household Durables — 0.5%
CalAtlantic Group, Inc. (a)		13,089		445,157
D.R. Horton, Inc.		59,058		1,614,055
Garmin Ltd. (a)		18,967		919,710
Harman International Industries, Inc.		12,322		1,369,714
Leggett & Platt, Inc. (a)		23,193		1,133,674
Lennar Corp., Class A		32,367		1,389,515
Lennar Corp., Class B		1,943		67,033
Mohawk Industries, Inc. (b)		10,795		2,155,546
Newell Brands, Inc. (a)		84,599		3,777,345
NVR, Inc. (b)		602		1,004,738
PulteGroup, Inc.		60,123		1,105,061
Tempur Sealy International, Inc. (a)(b)		9,215		629,200
Toll Brothers, Inc. (b)		28,708		889,948
Tupperware Brands Corp. (a)		8,544		449,585
Whirlpool Corp.		13,441		2,443,171
				19,393,452
Household Products — 1.6%
Church & Dwight Co., Inc. (a)		46,680		2,062,789
Clorox Co.		23,230		2,788,065
Colgate-Palmolive Co.		155,830		10,197,515
Energizer Holdings, Inc.		10,803		481,922
Kimberly-Clark Corp. (a)		64,376		7,346,589
Procter & Gamble Co.		459,254		38,614,076

Common Stocks	Shares		Value
Household Products (continued)
Spectrum Brands Holdings, Inc. (a)		4,198	$	513,542
				62,004,498
Independent Power and Renewable Electricity Producers — 0.1%
AES Corp.		115,509		1,342,215
Calpine Corp. (b)		60,298		689,206
NRG Energy, Inc.		52,831		647,708
				2,679,129
Industrial Conglomerates — 2.5%
3M Co. (a)		105,446		18,829,492
BWX Technologies, Inc.		15,807		627,538
Carlisle Cos., Inc.		10,927		1,205,139
Danaher Corp. (a)		108,723		8,462,998
General Electric Co.		1,652,607		52,222,381
Honeywell International, Inc.		136,358		15,797,074
Roper Technologies, Inc. (a)		17,896		3,276,400
				100,421,022
Insurance — 3.0%
Aflac, Inc.		72,280		5,030,688
Alleghany Corp. (b)		2,272		1,381,649
Allied World Assurance Co. Holdings AG		16,755		899,911
Allstate Corp.		67,139		4,976,343
American Financial Group, Inc.		12,890		1,135,867
American International Group, Inc.		183,233		11,966,947
American National Insurance Co.		1,090		135,825
AmTrust Financial Services, Inc. (a)		15,441		422,775
Aon PLC		47,146		5,258,193
Arch Capital Group Ltd. (b)		20,968		1,809,329
Arthur J Gallagher & Co.		32,229		1,674,619
Aspen Insurance Holdings Ltd.		12,021		661,155
Assurant, Inc.		10,801		1,002,981
Assured Guaranty Ltd.		23,276		879,135
Axis Capital Holdings Ltd.		17,281		1,127,931
Brown & Brown, Inc.		21,537		966,150
Chubb Ltd. (a)		82,912		10,954,333
Cincinnati Financial Corp. (a)		27,274		2,066,005
CNA Financial Corp. (a)		5,924		245,846
Endurance Specialty Holdings Ltd.		11,182		1,033,217
Erie Indemnity Co., Class A		4,325		486,346
Everest Re Group Ltd. (a)		6,116		1,323,502
First American Financial Corp.		18,648		683,076
FNF Group (a)		48,227		1,637,789
Hanover Insurance Group, Inc.		8,103		737,454
Hartford Financial Services Group, Inc.		70,644		3,366,187
Lincoln National Corp. (a)		43,146		2,859,285
Loews Corp.		50,685		2,373,579
Markel Corp. (b)		2,488		2,250,396
Marsh & McLennan Cos., Inc.		93,556		6,323,450
Mercury General Corp. (a)		845		50,877
MetLife, Inc. (a)		167,380		9,020,108
Old Republic International Corp.		42,101		799,919
Principal Financial Group, Inc. (a)		48,155		2,786,248
ProAssurance Corp.		9,179		515,860
Progressive Corp.		104,833		3,721,571
Prudential Financial, Inc. (a)		79,507		8,273,498
Reinsurance Group of America, Inc.		11,178		1,406,528
RenaissanceRe Holdings Ltd.		6,143		836,799
Torchmark Corp.		20,796		1,533,913
Travelers Cos., Inc.		52,480		6,424,602

See Notes to Financial Statements.

BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016 23

Schedule of Investments (continued) Large Cap Index Master Portfolio

Common Stocks	Shares		Value
Insurance (continued)
Unum Group (a)		43,485	$	1,910,296
Validus Holdings Ltd.		14,651		805,952
W.R. Berkley Corp.		17,940		1,193,189
White Mountains Insurance Group Ltd.		852		712,315
XL Group Ltd.		48,285		1,799,099
				117,460,737
Internet & Direct Marketing Retail — 2.0%
Amazon.com, Inc. (b)		69,846		52,375,420
Expedia, Inc.		21,392		2,423,286
Groupon, Inc. (a)(b)		69,862		231,942
Liberty Expedia Holdings, Inc., Class A (b)		9,846		390,591
Liberty Interactive Corp QVC Group, Series A (b)		80,136		1,601,117
Liberty Ventures (b)		14,797		545,565
Netflix, Inc. (b)		73,212		9,063,645
Priceline Group, Inc. (b)		8,880		13,018,613
TripAdvisor, Inc. (b)		19,686		912,840
				80,563,019
Internet Software & Services — 3.8%
Akamai Technologies, Inc. (b)		30,168		2,011,602
Alphabet, Inc., Class A (b)		52,705		41,766,077
Alphabet, Inc., Class C (b)		53,288		41,128,744
CommerceHub, Inc., Series A (b)		2,167		32,527
CommerceHub, Inc., Series C (b)		4,335		65,155
CoStar Group, Inc. (b)		5,511		1,038,768
eBay, Inc. (b)		191,535		5,686,674
Facebook, Inc., Class A (b)		402,981		46,362,964
GoDaddy, Inc., Class A (a)(b)		9,223		322,344
IAC/InterActiveCorp		13,110		849,397
Match Group, Inc. (a)(b)		4,391		75,086
Nutanix, Inc. (a)(b)		2,618		69,534
Pandora Media, Inc. (b)		37,613		490,474
Twilio, Inc. (a)(b)		2,800		80,780
Twitter, Inc. (a)(b)		110,984		1,809,039
VeriSign, Inc. (a)(b)		16,610		1,263,523
Yahoo!, Inc. (b)		155,616		6,017,671
Yelp, Inc. (a)(b)		11,989		457,141
Zillow Group, Inc., Class A (b)		9,936		362,167
Zillow Group, Inc., Class C (a)(b)		17,483		637,605
				150,527,272
IT Services — 3.7%
Accenture PLC, Class A		112,038		13,123,011
Alliance Data Systems Corp. (a)		10,411		2,378,914
Amdocs Ltd.		27,235		1,586,439
Automatic Data Processing, Inc.		81,845		8,412,029
Black Knight Financial Services, Inc., Class A (a)(b)		3,228		122,018
Booz Allen Hamilton Holding Corp.		19,631		708,090
Broadridge Financial Solutions, Inc.		20,610		1,366,443
Cognizant Technology Solutions Corp., Class A (b)		108,582		6,083,849
Computer Sciences Corp.		24,253		1,441,113
CoreLogic, Inc. (b)		14,945		550,424
CSRA, Inc. (a)		27,738		883,178
DST Systems, Inc.		5,658		606,255
Euronet Worldwide, Inc. (b)		8,386		607,398
Fidelity National Information Services, Inc.		58,433		4,419,872
First Data Corp., Class A (b)		52,637		746,919
Fiserv, Inc. (b)		39,818		4,231,857
FleetCor Technologies, Inc. (b)		16,522		2,338,193
Gartner, Inc. (b)		13,989		1,413,868

Common Stocks	Shares		Value
IT Services (continued)
Genpact Ltd. (b)		25,024	$	609,084
Global Payments, Inc.		27,961		1,940,773
International Business Machines Corp. (a)		157,852		26,201,854
Jack Henry & Associates, Inc.		14,434		1,281,451
Leidos Holdings, Inc.		23,989		1,226,797
Mastercard, Inc., Class A (a)		173,028		17,865,141
Paychex, Inc. (a)		58,062		3,534,815
PayPal Holdings, Inc. (b)		203,313		8,024,764
Sabre Corp. (a)		37,741		941,638
Square, Inc., Class A (b)		7,719		105,210
Teradata Corp. (b)		21,362		580,406
Total System Services, Inc.		29,063		1,424,959
Vantiv, Inc., Class A (b)		26,731		1,593,702
VeriFone Systems, Inc. (a)(b)		18,034		319,743
Visa, Inc., Class A (a)		342,092		26,690,018
Western Union Co. (a)		89,782		1,950,065
WEX, Inc. (a)(b)		6,592		735,667
Xerox Corp.		175,656		1,533,477
				147,579,434
Leisure Products — 0.1%
Brunswick Corp.		15,702		856,387
Hasbro, Inc.		20,508		1,595,317
Mattel, Inc. (a)		59,724		1,645,396
Polaris Industries, Inc. (a)		11,071		912,140
Vista Outdoor, Inc. (b)		10,608		391,435
				5,400,675
Life Sciences Tools & Services — 0.7%
Agilent Technologies, Inc.		58,696		2,674,190
Bio-Rad Laboratories, Inc., Class A (b)		3,553		647,641
Bio-Techne Corp. (a)		6,837		703,049
Bruker Corp.		16,987		359,785
Charles River Laboratories International, Inc. (b)		8,645		658,662
Illumina, Inc. (b)		26,265		3,362,970
Mettler-Toledo International, Inc. (b)		4,595		1,923,283
Patheon NV (b)		7,060		202,692
PerkinElmer, Inc.		19,508		1,017,342
QIAGEN NV (a)(b)		41,549		1,164,203
Quintiles Transnational Holdings, Inc. (b)		25,637		1,949,694
Thermo Fisher Scientific, Inc.		70,377		9,930,195
VWR Corp. (b)		14,401		360,457
Waters Corp. (b)		13,443		1,806,605
				26,760,768
Machinery — 1.7%
AGCO Corp. (a)		12,179		704,677
Caterpillar, Inc. (a)		100,289		9,300,802
Colfax Corp. (b)		17,193		617,744
Crane Co.		8,318		599,894
Cummins, Inc.		28,464		3,890,175
Deere & Co. (a)		56,563		5,828,252
Donaldson Co., Inc. (a)		22,756		957,572
Dover Corp.		27,890		2,089,798
Flowserve Corp. (a)		22,739		1,092,609
Fortive Corp.		54,606		2,928,520
Graco, Inc. (a)		10,082		837,713
IDEX Corp.		14,069		1,267,054
Illinois Tool Works, Inc. (a)		52,779		6,463,316
Ingersoll-Rand PLC		46,457		3,486,133
ITT, Inc.		15,379		593,168

See Notes to Financial Statements.

24 BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) Large Cap Index Master Portfolio

Common Stocks	Shares		Value
Machinery (continued)
Lincoln Electric Holdings, Inc.		10,786	$	826,963
Manitowoc Foodservice, Inc. (a)(b)		23,272		449,848
Middleby Corp. (b)		9,907		1,276,121
Nordson Corp.		10,516		1,178,318
Oshkosh Corp.		12,491		807,043
PACCAR, Inc. (a)		61,450		3,926,655
Parker Hannifin Corp.		24,067		3,369,380
Pentair PLC		29,101		1,631,693
Snap-on, Inc.		10,463		1,791,998
Stanley Black & Decker, Inc.		26,973		3,093,533
Terex Corp.		18,613		586,868
Timken Co.		12,303		488,429
Toro Co. (a)		19,514		1,091,808
Trinity Industries, Inc. (a)		25,691		713,182
Valmont Industries, Inc.		3,884		547,256
WABCO Holdings, Inc. (b)		9,584		1,017,342
Wabtec Corp. (a)		14,995		1,244,885
Xylem, Inc. (a)		31,319		1,550,917
				66,249,666
Marine — 0.0%
Kirby Corp. (a)(b)		8,882		590,653
Media — 3.1%
AMC Networks, Inc., Class A (a)(b)		10,178		532,717
Cable One, Inc.		827		514,171
CBS Corp., Class B		68,407		4,352,053
Charter Communications, Inc., Class A (b)		35,963		10,354,467
Cinemark Holdings, Inc. (a)		18,326		702,985
Clear Channel Outdoor Holdings, Inc., Class A		4,142		20,917
Comcast Corp., Class A		432,510		29,864,815
Discovery Communications, Inc., Class A (a)(b)		26,192		717,923
Discovery Communications, Inc., Class C (b)		39,228		1,050,526
DISH Network Corp., Class A (b)		39,786		2,304,803
Interpublic Group of Cos., Inc.		70,278		1,645,208
John Wiley & Sons, Inc., Class A		8,618		469,681
Liberty Broadband Corp., Class A (b)		3,971		287,739
Liberty Broadband Corp., Class C (a)(b)		19,150		1,418,440
Liberty SiriusXM Group, Class A (b)		15,901		548,902
Liberty SiriusXM Group, Class C (b)		33,830		1,147,514
Lions Gate Entertainment Corp., Class A		7,630		205,247
Lions Gate Entertainment Corp., Class B (b)		17,664		433,475
Live Nation Entertainment, Inc. (b)		22,260		592,116
Madison Square Garden Co., Class A (b)		3,330		571,128
News Corp., Class A		66,468		761,723
News Corp., Class B		18,151		214,182
Omnicom Group, Inc. (a)		42,508		3,617,856
Regal Entertainment Group, Class A (a)		16,172		333,143
Scripps Networks Interactive, Inc., Class A (a)		15,158		1,081,826
Sirius XM Holdings, Inc. (a)		307,315		1,367,552
TEGNA, Inc. (a)		37,625		804,799
Thomson Reuters Corp. (a)		54,381		2,380,800
Time Warner, Inc. (a)		141,071		13,617,584
Tribune Media Co., Class A		13,273		464,290
Twenty-First Century Fox, Inc., Class A		190,939		5,353,930
Twenty-First Century Fox, Inc., Class B		92,652		2,524,767
Viacom, Inc., Class A (a)		1,857		71,494
Viacom, Inc., Class B		62,602		2,197,330
Walt Disney Co. (a)		291,107		30,339,172
				122,865,275

Common Stocks	Shares		Value
Metals & Mining — 0.4%
Alcoa Corp.		26,868	$	754,453
Arconic, Inc. (a)		80,255		1,487,928
Compass Minerals International, Inc. (a)		5,978		468,376
Freeport-McMoRan, Inc. (b)		234,936		3,098,806
Newmont Mining Corp.		94,218		3,210,007
Nucor Corp. (a)		57,375		3,414,960
Reliance Steel & Aluminum Co.		12,857		1,022,646
Royal Gold, Inc.		11,070		701,285
Southern Copper Corp. (a)		14,651		467,953
Steel Dynamics, Inc.		41,065		1,461,093
Tahoe Resources, Inc. (a)		55,319		521,105
United States Steel Corp. (a)		26,326		869,021
				17,477,633
Multi-Utilities — 1.1%
Alliant Energy Corp.		39,786		1,507,492
Ameren Corp.		44,004		2,308,450
CenterPoint Energy, Inc.		78,757		1,940,572
CMS Energy Corp.		50,633		2,107,345
Consolidated Edison, Inc.		55,079		4,058,221
Dominion Resources, Inc.		110,133		8,435,086
DTE Energy Co.		31,766		3,129,269
MDU Resources Group, Inc.		33,607		966,873
NiSource, Inc.		56,516		1,251,264
PG&E Corp. (a)		88,715		5,391,211
Public Service Enterprise Group, Inc.		91,352		4,008,526
SCANA Corp.		23,868		1,749,047
Sempra Energy		44,919		4,520,648
Vectren Corp.		15,190		792,159
WEC Energy Group, Inc.		57,416		3,367,448
				45,533,611
Multiline Retail — 0.5%
Burlington Stores, Inc. (b)		11,996		1,016,661
Dillard’s, Inc., Class A (a)		2,921		183,117
Dollar General Corp. (a)		50,353		3,729,647
Dollar Tree, Inc. (b)		40,722		3,142,924
JC Penney Co., Inc. (b)		52,930		439,848
Kohl’s Corp.		33,821		1,670,081
Macy’s, Inc.		55,952		2,003,641
Nordstrom, Inc. (a)		22,232		1,065,580
Target Corp. (a)		106,044		7,659,558
				20,911,057
Oil, Gas & Consumable Fuels — 5.9%
Anadarko Petroleum Corp.		100,529		7,009,887
Antero Resources Corp. (a)(b)		30,255		715,531
Apache Corp. (a)		68,247		4,331,637
Cabot Oil & Gas Corp.		80,599		1,882,793
Cheniere Energy, Inc. (a)(b)		34,912		1,446,404
Chesapeake Energy Corp. (a)(b)		111,438		782,295
Chevron Corp.		337,605		39,736,109
Cimarex Energy Co.		16,951		2,303,641
Concho Resources, Inc. (b)		25,420		3,370,692
ConocoPhillips (a)		223,096		11,186,033
CONSOL Energy, Inc.		39,025		711,426
Continental Resources, Inc. (a)(b)		15,823		815,517
Devon Energy Corp. (a)		94,237		4,303,804
Diamondback Energy, Inc. (a)(b)		14,152		1,430,201
Energen Corp. (b)		17,817		1,027,506
EOG Resources, Inc.		98,806		9,989,287

See Notes to Financial Statements.

BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016 25

Schedule of Investments (continued) Large Cap Index Master Portfolio

Common Stocks	Shares		Value
Oil, Gas & Consumable Fuels (continued)
EQT Corp.		30,149	$	1,971,745
Exxon Mobil Corp.		748,686		67,576,398
Gulfport Energy Corp. (b)		21,338		461,754
Hess Corp.		51,036		3,179,032
HollyFrontier Corp. (a)		28,004		917,411
Kinder Morgan, Inc. (a)		345,693		7,159,302
Kosmos Energy Ltd. (a)(b)		21,624		151,584
Laredo Petroleum, Inc. (b)		25,427		359,538
Marathon Oil Corp.		153,166		2,651,303
Marathon Petroleum Corp.		94,470		4,756,565
Murphy Oil Corp. (a)		30,008		934,149
Murphy USA, Inc. (b)		6,459		397,035
Newfield Exploration Co. (b)		34,752		1,407,456
Noble Energy, Inc. (a)		77,013		2,931,115
Occidental Petroleum Corp.		137,128		9,767,627
ONEOK, Inc. (a)		37,959		2,179,226
Parsley Energy, Inc., Class A (b)		30,013		1,057,658
PBF Energy, Inc., Class A (a)		18,333		511,124
Phillips 66		80,929		6,993,075
Pioneer Natural Resources Co. (a)		29,213		5,260,385
QEP Resources, Inc. (a)		40,902		753,006
Range Resources Corp. (a)		35,780		1,229,401
Rice Energy, Inc. (b)		20,456		436,736
SM Energy Co. (a)		17,885		616,675
Southwestern Energy Co. (b)		83,027		898,352
Spectra Energy Corp.		125,509		5,157,165
Targa Resources Corp. (a)		28,881		1,619,358
Tesoro Corp.		20,894		1,827,180
Valero Energy Corp.		84,320		5,760,742
Whiting Petroleum Corp. (b)		32,864		395,025
Williams Cos., Inc.		124,373		3,872,975
World Fuel Services Corp. (a)		11,839		543,529
WPX Energy, Inc. (b)		58,225		848,338
				235,624,727
Paper & Forest Products — 0.0%
Domtar Corp. (a)		11,612		453,216
Personal Products — 0.2%
Coty, Inc., Class A (a)		79,521		1,456,029
Edgewell Personal Care Co. (a)(b)		9,941		725,594
Estee Lauder Cos., Inc., Class A (a)		39,034		2,985,711
Herbalife Ltd. (a)(b)		13,597		654,560
Nu Skin Enterprises, Inc., Class A		9,040		431,931
				6,253,825
Pharmaceuticals — 4.4%
Akorn, Inc. (b)		13,301		290,361
Allergan PLC (b)		60,150		12,632,101
Bristol-Myers Squibb Co.		299,925		17,527,617
Eli Lilly & Co.		175,086		12,877,575
Endo International PLC (b)		34,340		565,580
Johnson & Johnson		493,047		56,803,945
Mallinckrodt PLC (b)		19,734		983,148
Merck & Co., Inc.		497,306		29,276,404
Mylan NV (b)		82,294		3,139,516
Perrigo Co. PLC		24,107		2,006,426
Pfizer, Inc.		1,078,755		35,037,962
Zoetis, Inc.		82,126		4,396,205
				175,536,840

Common Stocks	Shares		Value
Professional Services — 0.3%
Dun & Bradstreet Corp.		6,752	$	819,153
Equifax, Inc.		21,385		2,528,349
ManpowerGroup, Inc.		11,643		1,034,713
Nielsen Holdings PLC (a)		65,182		2,734,385
Robert Half International, Inc.		23,453		1,144,037
TransUnion (b)		10,245		316,878
Verisk Analytics, Inc. (b)		27,791		2,255,795
				10,833,310
Real Estate Investment Trusts (REITs) — 3.6%
AGNC Investment Corp.		58,179		1,054,785
Alexandria Real Estate Equities, Inc.		14,206		1,578,713
American Campus Communities, Inc. (a)		23,804		1,184,725
American Homes 4 Rent, Class A		30,302		635,736
American Tower Corp.		75,665		7,996,277
Annaly Capital Management, Inc.		175,142		1,746,166
Apartment Investment & Management Co., Class A		28,464		1,293,689
Apple Hospitality REIT, Inc.		28,747		574,365
AvalonBay Communities, Inc.		24,539		4,347,084
Boston Properties, Inc.		27,421		3,449,013
Brandywine Realty Trust		30,088		496,753
Brixmor Property Group, Inc.		35,312		862,319
Camden Property Trust		14,950		1,256,847
Care Capital Properties, Inc. (a)		14,812		370,300
Chimera Investment Corp.		37,902		645,092
Columbia Property Trust, Inc.		21,367		461,527
Communications Sales & Leasing, Inc. (b)		20,500		520,905
CoreCivic, Inc.		19,322		472,616
Corporate Office Properties Trust		16,599		518,221
Crown Castle International Corp.		64,373		5,585,645
CubeSmart		32,987		883,062
CyrusOne, Inc.		13,445		601,395
DCT Industrial Trust, Inc.		16,368		783,700
DDR Corp.		56,113		856,846
Digital Realty Trust, Inc.		28,713		2,821,339
Douglas Emmett, Inc.		25,226		922,263
Duke Realty Corp.		60,575		1,608,872
Empire State Realty Trust, Inc., Class A		21,314		430,330
EPR Properties		11,794		846,455
Equinix, Inc.		12,384		4,426,165
Equity Commonwealth (b)		20,467		618,922
Equity Lifestyle Properties, Inc.		14,223		1,025,478
Equity One, Inc.		15,908		488,217
Equity Residential		63,826		4,107,841
Essex Property Trust, Inc. (a)		11,770		2,736,525
Extra Space Storage, Inc. (a)		21,096		1,629,455
Federal Realty Investment Trust		12,927		1,837,056
Forest City Realty Trust, Inc., Class A		41,700		869,028
Gaming and Leisure Properties, Inc.		32,638		999,376
General Growth Properties, Inc.		103,310		2,580,684
HCP, Inc.		84,920		2,523,822
Healthcare Trust of America, Inc., Class A		24,513		713,573
Highwoods Properties, Inc.		18,038		920,118
Hospitality Properties Trust		28,788		913,731
Host Hotels & Resorts, Inc.		133,080		2,507,227
Kilroy Realty Corp.		16,622		1,217,063
Kimco Realty Corp.		70,673		1,778,133
Lamar Advertising Co., Class A		15,132		1,017,476
Liberty Property Trust		25,570		1,010,015
Life Storage, Inc.		7,861		670,229
Macerich Co.		26,262		1,860,400

See Notes to Financial Statements.

26 BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) Large Cap Index Master Portfolio

Common Stocks	Shares		Value
Real Estate Investment Trusts (REITs) (continued)
MFA Financial, Inc.		64,258	$	490,289
Mid-America Apartment Communities, Inc.		20,398		1,997,372
National Retail Properties, Inc.		26,400		1,166,880
NorthStar Realty Finance Corp.		32,920		498,738
Omega Healthcare Investors, Inc.		32,213		1,006,978
Outfront Media, Inc.		23,654		588,275
Paramount Group, Inc.		30,749		491,677
Piedmont Office Realty Trust, Inc., Class A (a)		24,836		519,321
Prologis, Inc.		93,885		4,956,189
Public Storage		26,366		5,892,801
Quality Care Properties, Inc. (b)		17,076		264,678
Rayonier, Inc.		20,829		554,051
Realty Income Corp. (a)		46,508		2,673,280
Regency Centers Corp.		18,936		1,305,637
Retail Properties of America, Inc., Class A		44,021		674,842
Senior Housing Properties Trust		40,449		765,700
Simon Property Group, Inc.		55,079		9,785,886
SL Green Realty Corp.		17,817		1,916,218
Spirit Realty Capital, Inc. (a)		88,419		960,230
Starwood Property Trust, Inc.		44,008		965,976
STORE Capital Corp.		27,368		676,263
Sun Communities, Inc.		11,717		897,639
Tanger Factory Outlet Centers, Inc.		15,990		572,122
Taubman Centers, Inc.		10,278		759,853
Two Harbors Investment Corp.		60,503		527,586
UDR, Inc.		46,408		1,692,964
Ventas, Inc.		60,527		3,784,148
VEREIT, Inc.		179,265		1,516,582
Vornado Realty Trust		30,889		3,223,885
Weingarten Realty Investors		20,373		729,150
Welltower, Inc.		64,274		4,301,859
Weyerhaeuser Co.		133,638		4,021,167
WP Carey, Inc.		18,100		1,069,529
				142,503,339
Real Estate Management & Development — 0.1%
CBRE Group, Inc., Class A (b)		54,326		1,710,726
Howard Hughes Corp. (b)		6,205		707,991
Jones Lang LaSalle, Inc.		8,384		847,119
Realogy Holdings Corp. (a)		27,088		696,974
				3,962,810
Road & Rail — 0.9%
AMERCO, Inc.		1,201		443,878
Avis Budget Group, Inc. (b)		13,822		506,991
CSX Corp.		171,673		6,168,211
Genesee & Wyoming, Inc., Class A (b)		9,900		687,159
Hertz Global Holdings, Inc. (b)		12,113		261,156
JB Hunt Transport Services, Inc.		16,266		1,578,941
Kansas City Southern (a)		18,854		1,599,762
Landstar System, Inc.		7,343		626,358
Norfolk Southern Corp.		53,233		5,752,890
Old Dominion Freight Line, Inc. (b)		12,390		1,062,938
Ryder System, Inc.		9,455		703,830
Union Pacific Corp.		151,459		15,703,269
				35,095,383
Semiconductors & Semiconductor Equipment — 3.0%
Analog Devices, Inc.		55,333		4,018,282
Applied Materials, Inc.		195,424		6,306,333
Broadcom Ltd.		67,602		11,950,006

Common Stocks	Shares		Value
Semiconductors & Semiconductor Equipment (continued)
Cree, Inc. (a)(b)		17,383	$	458,737
Cypress Semiconductor Corp. (a)		52,931		605,531
First Solar, Inc. (a)(b)		14,592		468,257
Intel Corp. (a)		848,649		30,780,499
KLA-Tencor Corp.		27,318		2,149,380
Lam Research Corp. (a)		28,636		3,027,684
Linear Technology Corp. (a)		42,289		2,636,719
Marvell Technology Group Ltd.		68,425		949,055
Maxim Integrated Products, Inc.		51,502		1,986,432
Microchip Technology, Inc. (a)		37,757		2,422,112
Micron Technology, Inc. (b)		183,126		4,014,122
NVIDIA Corp. (a)		91,272		9,742,373
ON Semiconductor Corp. (b)		72,129		920,366
Qorvo, Inc. (b)		22,375		1,179,834
QUALCOMM, Inc.		263,708		17,193,762
Skyworks Solutions, Inc. (a)		33,711		2,516,863
SunPower Corp. (a)(b)		9,481		62,669
Teradyne, Inc.		37,288		947,115
Texas Instruments, Inc.		180,067		13,139,489
Versum Materials, Inc. (b)		16,926		475,113
Xilinx, Inc. (a)		45,683		2,757,883
				120,708,616
Software — 4.2%
Activision Blizzard, Inc.		99,163		3,580,776
Adobe Systems, Inc. (b)		87,570		9,015,331
Allscripts Healthcare Solutions, Inc. (a)(b)		32,175		328,507
ANSYS, Inc. (b)		16,047		1,484,187
Atlassian Corp. PLC, Class A (b)		4,571		110,070
Autodesk, Inc. (b)		38,201		2,827,256
CA, Inc.		51,053		1,621,954
Cadence Design Systems, Inc. (b)		51,915		1,309,296
CDK Global, Inc.		28,144		1,679,915
Citrix Systems, Inc. (b)		28,053		2,505,413
Dell Technologies, Inc., Class V (b)		38,011		2,089,465
Electronic Arts, Inc. (b)		52,432		4,129,544
FireEye, Inc. (a)(b)		28,809		342,827
Fortinet, Inc. (b)		25,342		763,301
Guidewire Software, Inc. (b)		13,327		657,421
Intuit, Inc.		43,798		5,019,689
Manhattan Associates, Inc. (b)		12,351		654,974
Microsoft Corp.		1,360,206		84,523,201
Nuance Communications, Inc. (b)		39,079		582,277
Oracle Corp.		531,178		20,423,794
PTC, Inc. (b)		19,595		906,661
Red Hat, Inc. (b)		32,651		2,275,775
salesforce.com, Inc. (b)		115,040		7,875,638
ServiceNow, Inc. (b)		28,448		2,114,824
Splunk, Inc. (b)		22,922		1,172,460
SS&C Technologies Holdings, Inc.		30,990		886,314
Symantec Corp.		108,941		2,602,600
Synopsys, Inc. (b)		26,462		1,557,553
Tableau Software, Inc., Class A (b)		9,361		394,566
Tyler Technologies, Inc. (b)		6,083		868,470
Ultimate Software Group, Inc. (a)(b)		5,062		923,056
VMware, Inc., Class A (a)(b)		14,215		1,119,147
Workday, Inc., Class A (a)(b)		20,397		1,348,038
Zynga, Inc., Class A (b)		136,259		350,186
				168,044,486

See Notes to Financial Statements.

BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016 27

Schedule of Investments (continued) Large Cap Index Master Portfolio

Common Stocks	Shares		Value
Specialty Retail — 2.3%
Advance Auto Parts, Inc.		12,396	$	2,096,412
AutoNation, Inc. (b)		11,212		545,464
AutoZone, Inc. (b)		5,200		4,106,908
Bed Bath & Beyond, Inc.		26,017		1,057,331
Best Buy Co., Inc.		48,530		2,070,775
Cabela’s, Inc. (b)		8,408		492,288
CarMax, Inc. (a)(b)		33,838		2,178,829
CST Brands, Inc.		12,608		607,075
Dick’s Sporting Goods, Inc.		15,050		799,155
Foot Locker, Inc.		24,671		1,748,927
GameStop Corp., Class A (a)		19,545		493,707
Gap, Inc. (a)		38,598		866,139
Home Depot, Inc.		223,371		29,949,584
L Brands, Inc. (a)		43,718		2,878,393
Lowe’s Cos., Inc.		160,601		11,421,943
Michaels Cos., Inc. (b)		15,481		316,586
O’Reilly Automotive, Inc. (b)		16,678		4,643,322
Penske Automotive Group, Inc. (a)		6,328		328,044
Ross Stores, Inc.		70,690		4,637,264
Sally Beauty Holdings, Inc. (a)(b)		24,671		651,808
Signet Jewelers Ltd.		12,197		1,149,689
Staples, Inc.		117,675		1,064,959
Tiffany & Co. (a)		19,163		1,483,791
TJX Cos., Inc.		118,703		8,918,156
Tractor Supply Co.		23,363		1,771,149
Ulta Salon Cosmetics & Fragrance, Inc. (b)		10,404		2,652,396
Urban Outfitters, Inc. (b)		15,564		443,263
Williams-Sonoma, Inc. (a)		15,378		744,141
				90,117,498
Technology Hardware, Storage & Peripherals — 3.3%
Apple, Inc.		984,347		114,007,069
Hewlett Packard Enterprise Co.		309,905		7,171,202
HP, Inc.		311,563		4,623,595
NCR Corp. (b)		21,612		876,583
NetApp, Inc.		52,814		1,862,750
Western Digital Corp. (a)		51,159		3,476,254
				132,017,453
Textiles, Apparel & Luxury Goods — 0.7%
Carter’s, Inc.		8,571		740,449
Coach, Inc.		51,011		1,786,405
Hanesbrands, Inc. (a)		66,000		1,423,620
Kate Spade & Co. (b)		20,976		391,622
lululemon athletica, Inc. (b)		17,569		1,141,809
Michael Kors Holdings Ltd. (b)		28,070		1,206,449
NIKE, Inc., Class B (a)		238,442		12,120,007
PVH Corp.		14,123		1,274,460
Ralph Lauren Corp. (a)		9,987		902,026
Skechers U.S.A., Inc., Class A (a)(b)		21,638		531,862
Under Armour, Inc., Class A (a)(b)		31,305		909,410
Under Armour, Inc., Class C (b)		33,613		846,039
VF Corp.		61,944		3,304,712
				26,578,870
Thrifts & Mortgage Finance — 0.1%
New York Community Bancorp, Inc.		83,064		1,321,548
People’s United Financial, Inc. (a)		55,304		1,070,686
TFS Financial Corp.		8,385		159,650
				2,551,884

Common Stocks	Shares		Value
Tobacco — 1.4%
Altria Group, Inc.		350,815	$	23,722,110
Philip Morris International, Inc.		278,373		25,468,346
Reynolds American, Inc.		148,399		8,316,280
				57,506,736
Trading Companies & Distributors — 0.3%
Air Lease Corp.		18,022		618,695
Fastenal Co. (a)		51,970		2,441,551
HD Supply Holdings, Inc. (b)		35,195		1,496,139
Herc Holdings, Inc. (b)		3,560		142,970
MSC Industrial Direct Co., Inc., Class A		8,291		766,006
United Rentals, Inc. (b)		15,962		1,685,268
W.W. Grainger, Inc. (a)		10,021		2,327,377
Watsco, Inc.		4,393		650,691
WESCO International, Inc. (b)		8,471		563,745
				10,692,442
Transportation Infrastructure — 0.0%
Macquarie Infrastructure Corp.		13,063		1,067,247
Water Utilities — 0.1%
American Water Works Co., Inc.		31,719		2,295,187
Aqua America, Inc. (a)		32,562		978,162
				3,273,349
Wireless Telecommunication Services — 0.2%
SBA Communications Corp., Class A (b)		22,542		2,327,687
Sprint Corp. (a)(b)		129,093		1,086,963
T-Mobile U.S., Inc. (b)		50,547		2,906,958
Telephone & Data Systems, Inc.		16,748		483,515
United States Cellular Corp. (b)		2,304		100,731
				6,905,854
Total Long-Term Investments (Cost — $3,449,779,908) — 97.3%				3,862,456,763
Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares 0.87% (c)(d)(e)		368,761,779		368,835,532
BlackRock Cash Funds: Treasury, SL Agency Shares 0.45% (c)(e)		99,224,550		99,224,550
Total Short-Term Securities (Cost — $468,018,877) — 11.8%				468,060,082
Total Investments (Cost — $3,917,798,785) — 109.1%				4,330,516,845
Liabilities in Excess of Other Assets — (9.1)%				(362,960,283	)
Net Assets — 100.0%			$	3,967,556,562

See Notes to Financial Statements.

28 BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) Large Cap Index Master Portfolio

Notes to Schedule of Investments

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

(b) Non-income producing security.

(c) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at December 31, 2015		Shares Purchased			Shares Sold			Shares Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
BlackRock Cash Funds: Institutional, SL Agency Shares		198,484,859		170,276,920	1		—			368,761,779	$	368,835,532	$	1,289,231	2	$	11,471
BlackRock Cash Funds: Prime, SL Agency Shares		115,638,588		—			(115,638,588	)3		—		—		144,565	2		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		99,224,550	1		—			99,224,550		99,224,550		127,620			5,591
BlackRock, Inc.		15,691		8,410			(1,707	)		22,394		8,521,813		174,058			(1,074	)
PNC Financial Services Group, Inc.		64,776		31,553			(6,854	)		89,475		10,464,996		158,496			101,669
Total											$	487,046,891	$	1,893,970		$	117,657
1   Represents net shares purchased.
2   Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.
3   Represents net shares sold.

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

(e) Current yield as of period end.

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts
Contracts Long		Issue		Expiration		Notional Value		Unrealized Depreciation
	476		S&P 500 E-Mini Index		March 2017	$	53,221,560	$	(576,619	)
	31		S&P MidCap 400 E-Mini Index		March 2017	$	5,143,210		(51,153	)
	Total							$	(627,772	)

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:

Liabilities — Derivative Financial Instruments		Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contacts		Total
Futures contracts	Net unrealized depreciation1		—		—	$	627,772		—		—		—	$	627,772
1    Includes cumulative depreciation on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

See Notes to Financial Statements.

BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016 29

Schedule of Investments (concluded) Large Cap Index Master Portfolio

For the year ended December 31, 2016, the effect of derivative financial instruments in the Statement of Operations was as follows:

Net Realized Gain (Loss) From:	Commodity Contracts		Credit Contracts		Equity Contracts			Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contacts		Total
Futures contracts		—		—	$	14,250,860			—		—		—	$	14,250,860
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts		—		—	$	(490,801	)		—		—		—	$	(490,801	)

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	76,316,768

For more information about the Master Portfolio’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1			Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks 1	$	3,862,456,763			—		—	$	3,862,456,763
Short-Term Securities		468,060,082			—		—		468,060,082
Total	$	4,330,516,845			—		—	$	4,330,516,845
Derivative Financial Instruments 2
Liabilities:
Equity contracts	$	(627,772	)		—		—	$	(627,772	)
1   See above Schedule of Investments for values in each sector. 2   Derivative financial instruments are futures contracts, which are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

30 BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016

Statement of Assets and Liabilities Large Cap Index Master Portfolio

December 31, 2016
Assets
Investments at value — unaffiliated (including securities loaned at value of $358,199,770) (cost — $3,434,429,588)	$	3,843,469,954
Investments at value — affiliated (cost — $483,369,197)		487,046,891
Cash		1,135,527
Cash pledged for futures contracts		4,504,100
Receivables:
Dividends — unaffiliated		4,961,419
Dividends — affiliated		33,467
Securities lending income — affiliated		99,578
Contributions from investors		21,741,301
Prepaid expenses		12,090
Total assets		4,363,004,327
Liabilities
Cash collateral on securities loaned at value		368,782,855
Payables:
Investment advisory fees		92,611
Trustees’ fees		24,013
Variation margin on futures contracts		441,340
Other accrued expenses		108,937
Withdrawals to investors		25,998,009
Total liabilities		395,447,765
Net Assets	$	3,967,556,562
Net Assets Consist of
Investors’ capital	$	3,555,466,274
Net unrealized appreciation (depreciation)		412,090,288
Net Assets	$	3,967,556,562

See Notes to Financial Statements.
	BLACKROCK LARGE CAP INDEX FUND	DECEMBER 31, 2016	31

Statement of Operations Large Cap Index Master Portfolio

Year Ended December 31, 2016
Investment Income
Dividends — unaffiliated	$	67,103,198
Securities lending — affiliated — net		1,145,848
Dividends — affiliated		748,122
Foreign taxes withheld		(13,232	)
Total Investment Income		68,983,936
Expenses
Investment advisory		963,396
Accounting services		106,523
Trustees		100,607
Insurance		16,299
Printing		775
Professional		54,336
Miscellaneous		18,380
Total expenses		1,260,316
Less:
Fees waived and/or reimbursed by the Manager		(67,426	)
Fees paid indirectly		(387	)
Total expenses after fees waived and/or reimbursed and paid indirectly		1,192,503
Net investment income		67,791,433
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — unaffiliated		(37,168,441	)
Investments — affiliated		112,066
Futures contracts		14,250,860
Capital gain distributions from investment companies — affiliated		5,591
		(22,799,924	)
Net change in unrealized appreciation (depreciation) on:
Investments — unaffiliated		356,108,105
Investments — affiliated		3,001,019
Futures contracts		(490,801	)
		358,618,323
Net realized and unrealized gain		335,818,399
Net Increase in Net Assets Resulting from Operations	$	403,609,832

See Notes to Financial Statements.
32	BLACKROCK LARGE CAP INDEX FUND	DECEMBER 31, 2016

Statements of Changes in Net Assets Large Cap Index Master Portfolio

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	67,791,433		$	62,512,671
Net realized gain (loss)		(22,799,924	)		336,397,620
Net change in unrealized appreciation (depreciation)		358,618,323			(347,723,072	)
Net increase in net assets resulting from operations		403,609,832			51,187,219
Capital Transactions
Proceeds from contributions		1,796,884,222			1,332,533,563
Value of withdrawals		(775,566,022	)		(1,614,489,855	)
Net increase (decrease) in net assets derived from capital transactions		1,021,318,200			(281,956,292	)
Net Assets
Total increase (decrease) in net assets		1,424,928,032			(230,769,073	)
Beginning of year		2,542,628,530			2,773,397,603
End of year	$	3,967,556,562		$	2,542,628,530

See Notes to Financial Statements.
	BLACKROCK LARGE CAP INDEX FUND	DECEMBER 31, 2016	33

Financial Highlights Large Cap Index Master Portfolio

	Year Ended December 31,
	2016		2015		2014		2013			2012
Total Return
Total return		11.97%		0.92%		13.27%		32.88%			16.39%
Ratios to Average Net Assets
Total expenses		0.04%		0.05%		0.06%		0.08%	1		0.09%
Total expenses after fees waived and/or reimbursed and paid indirectly		0.04%		0.04%		0.06%		0.08%	1		0.09%
Net investment income		2.11%		1.93%		1.92%		1.96%	1		2.30%
Supplemental Data
Net assets, end of year (000)	$	3,967,557	$	2,542,629	$	2,773,398	$	1,132,872		$	440,092
Portfolio turnover rate		13%		6%		6%		14%			16%

¹ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01% for the year ended December 31, 2013.

See Notes to Financial Statements.
34	BLACKROCK LARGE CAP INDEX FUND	DECEMBER 31, 2016

Notes to Financial Statements Large Cap Index Master Portfolio

1. Organization:

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

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

2. Significant Accounting Policies:

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

Segregation and Collateralization: In cases where the Master Portfolio enters into certain investments (e.g., futures contracts) that would be treated as “senior securities” for 1940 Act purposes, the Master Portfolio may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Master Portfolio may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Master Portfolio is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain.

Recent Accounting Standard: In November 2016, the Financial Accounting Standards Board issued Accounting Standards Update “Restricted Cash” which will require entities to include the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the beginning and ending cash balances in the Statement of Cash Flows. The guidance will be applied retrospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. Management is evaluating the impact, if any, of this guidance on the Master Portfolio’s presentation in the Statement of Cash Flows.

Indemnifications: In the normal course of business, the Master Portfolio enters into contracts that contain a variety of representations that provide general indemnification. The Master Portfolio’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Master Portfolio, which cannot be predicted with any certainty.

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

Through May 31, 2016, the Master Portfolio had an arrangement with its custodian whereby credits were earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. Credits previously earned may have been utilized until December 31, 2016. Under current arrangements effective June 1, 2016, the Master Portfolio no longer earns credits on uninvested cash, and may incur charges on uninvested cash balances and overdrafts, subject to certain conditions.

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Master Portfolio’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time) (or if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the 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

BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016 35

Notes to Financial Statements (continued) Large Cap Index Master Portfolio

Portfolio determines the fair values of its financial instruments using various 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 oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Master Portfolio’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Investments in open-end U.S. mutual funds are valued at NAV each business day.

• Futures contracts traded on exchanges are valued at their last sale price.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include Market approach, Income approach and the Cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

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

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

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

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued investments. Level 3 investments include equity or debt issued by Private Companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

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

36 BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) Large Cap Index Master Portfolio

4. Securities and Other Investments:

Securities Lending: The Master Portfolio may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Master Portfolio collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio, or excess collateral returned by the Master Portfolio, on the next business day. During the term of the loan, the Master Portfolio is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as common stocks in the Master Portfolio’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value-unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Master Portfolio under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Master Portfolio can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

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

Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital, Inc.	$	2,689,978	$	(2,689,978	)		—
BNP Paribas S.A.		206,136,792		(206,136,792	)		—
Credit Suisse Securities (USA) LLC		6,875,931		(6,875,931	)		—
Deutsche Bank Securities, Inc.		2,459,270		(2,459,270	)		—
Goldman Sachs & Co.		36,380,702		(36,380,702	)		—
HSBC Bank PLC		89,106		(89,106	)		—
Jefferies LLC		484,715		(484,715	)		—
JP Morgan Securities LLC		27,972,398		(27,972,398	)		—
Merrill Lynch, Pierce, Fenner & Smith, Inc.		24,691,565		(24,691,565	)		—
Morgan Stanley		18,815,744		(18,815,744	)		—
Nomura Securities International, Inc.		185,690		(185,690	)		—
Scotia Capital (USA), Inc.		11,283,922		(11,283,922	)		—
State Street Bank and Trust Co.		13,975,730		(13,975,730	)		—
UBS Securities LLC		6,158,227		(6,158,227	)		—
Total	$	358,199,770	$	(358,199,770	)		—

¹  Cash collateral with a value of $368,782,855 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the table above.

BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016 37

Notes to Financial Statements (continued) Large Cap Index Master Portfolio

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

5. Derivative Financial Instruments:

The Master Portfolio engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Master Portfolio and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or over-the-counter (“OTC”).

Futures Contracts: The Master Portfolio invests in long and/or short positions in futures and options on futures contracts to gain exposure to, or manage exposure to changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Master Portfolio and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Master Portfolio is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Master Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

6. Investment Advisory Agreement and Other Transactions with Affiliates:

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

Investment Advisory: MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement with the Manager, the Master Portfolio’s investment adviser, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of the Master Portfolio’s portfolio and provides the 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 at an annual rate of 0.03% of the Master Portfolio’s average daily net assets.

Waivers and Reimbursements: With respect to the Master Portfolio, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, acquired fund fees and expenses and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the 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, 2017, unless approved by the Board, including a majority of the Independent Trustees.

With respect to the Master Portfolio, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Master Portfolio pays to the Manager indirectly through its investment in affiliated money market funds. This amount is shown as fees waived and/or reimbursed by the Manager in the Statement of Operations.

Effective September 1, 2016, the Manager voluntarily agreed to waive its advisory fee with respect to any portion of Master Portfolio’s assets invested in affiliated equity or fixed-income mutual funds or affiliated exchange-traded funds that have a contractual management fee. Prior to September 1, 2016, the Manager did not waive such fees. This voluntary waiver may be reduced or discontinued at any time without notice.

38 BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) Large Cap Index Master Portfolio

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

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, the Master Portfolio retains 71.5% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment fees. In addition, commencing the business day following the date that the aggregate securities lending income earned across certain funds in the Equity-Liquidity Complex in a calendar year exceeds a specified threshold, the Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 75% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment fees.

The share of securities lending income earned by the Master Portfolio is shown as securities lending — affiliated – net in the Statement of Operations. For the year ended December 31, 2016, the Master Portfolio paid BTC $437,240 in total for securities lending agent services and collateral investment fees.

Officers and Trustees: Certain officers and/or trustees of MIP are officers and/or trustees of BlackRock or its affiliates.

Other Transactions: The Master Portfolio may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common trustees. For the year ended December 31, 2016, the purchase and sale transactions and any net realized gains (losses) with affiliated funds in compliance with Rule 17a-7 under the 1940 Act were as follows:

Purchases	Sales	Net Realized Loss
$181,227,040	$40,669,329	$(13,516,371)

7. Purchases and Sales:

For the year ended December 31, 2016, purchases and sales of investments excluding short-term securities, were $1,658,144,518 and $413,914,318, respectively.

8. Income Tax Information:

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

The Master Portfolio files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolio’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016. The statutes of limitations on the Master Portfolio’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Master Portfolio as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Master Portfolio’s financial statements.

BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016 39

Notes to Financial Statements (continued) Large Cap Index Master Portfolio

As of December 31, 2016, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	3,964,191,095
Gross unrealized appreciation	$	502,414,057
Gross unrealized depreciation		(136,088,307	)
Net unrealized appreciation	$	366,325,750

9. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Master Portfolio may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Master Portfolio, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2017 unless extended or renewed. Prior to April 21, 2016, the credit agreement had a fee per annum of 0.06% on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2016, the Master Portfolio did not borrow under the credit agreement.

10. Principal Risks:

In the normal course of business, the Master Portfolio invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer to meet all its obligations, including the ability to pay principal and interest when due (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 of securities owned by the Master Portfolio. Changes arising from the general economy, the overall market and local, regional or global political and/or social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

On October 11, 2016, BlackRock implemented certain changes required by amendments to Rule 2a-7 under the 1940 Act, which governs the operations of U.S. money market funds. The Master Portfolio may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Master Portfolio may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Master Portfolio’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Master Portfolio may lose value, regardless of the individual results of the securities and other instruments in which the Master Portfolio invests.

Counterparty Credit Risk: Similar to issuer credit risk, the Master Portfolio may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Master Portfolio manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the 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 approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Master Portfolio.

40 BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016

Notes to Financial Statements (concluded) Large Cap Index Master Portfolio

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

With exchange-traded futures, there is less counterparty credit risk to the Master Portfolio since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Master Portfolio does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Master Portfolio.

11. 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 LARGE CAP INDEX FUND DECEMBER 31, 2016 41

Report of Independent Registered Public Accounting Firm Large Cap Index Master Portfolio

To the Board of Trustees of Master Investment Portfolio and the Investors of Large Cap Index Master Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Large Cap Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio, as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers and the transfer agent of the investee funds, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

42 BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016

Officers and Trustees¹

Name, Address2 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3
Rodney D. Johnson 1941	Chair of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011; Director, The Mainstay (non-profit) since 2016.	26 RICs consisting of 146 Portfolios	None
Susan J. Carter 1956	Trustee	Since 2016	Director, Pacific Pension Institute since 2014; Advisory Board Member, Center for Private Equity and Entrepreneurship at Tuck School of Business since 1997; Senior Advisor, Commonfund Capital, Inc. (“CCI”) (investment adviser) in 2015; Chief Executive Officer, CCI from 2013 to 2014; President & Chief Executive Officer, CCI from 1997 to 2013; Advisory Board Member, Girls Who Invest since 2015; Advisory Board Member, Bridges Ventures since 2016; Trustee, Financial Accounting Foundation since 2017.	26 RICs consisting of 146 Portfolios	None
Collette Chilton 1958	Trustee	Since 2015	Chief Investment Officer, Williams College since 2006; Chief Investment Officer, Lucent Asset Management Corporation from 1998 to 2006.	26 RICs consisting of 146 Portfolios	None
Neil A. Cotty 1954	Trustee	Since 2016	Bank of America Corporation from 1996 to 2015, serving in various senior finance leadership roles, including Chief Accounting Officer, from 2009 to 2015, Chief Financial Officer of Global Banking, Markets and Wealth Management from 2008 to 2009, Chief Accounting Officer from 2004 to 2008, Chief Financial Officer of Consumer Bank from 2003 to 2004, Chief Financial Officer of Global Corporate Investment Bank from 1999 to 2002.	26 RICs consisting of 146 Portfolios	None
Cynthia A. Montgomery 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012.	26 RICs consisting of 146 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 1947	Trustee	Since 2009	General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Chair, Basic Health International (non-profit) since 2015.	26 RICs consisting of 146 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company); Consol Energy Inc.
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981 and Principal since 2010.	26 RICs consisting of 146 Portfolios	None
Mark Stalnecker 1951	Trustee	Since 2009	Chief Investment Officer, University of Delaware from 1999 to 2013; Trustee, Winterthur Museum and Country Estate from 2001 to 2015; Member of the Investment Committee, Delaware Public Employees’ Retirement System since 2002; Member of the Investment Committee, Christiana Care Health System since 2009; Member of the Investment Committee, Delaware Community Foundation from 2013 to 2014; Director, SEI Private Trust Co. from 2001 to 2014.	26 RICs consisting of 146 Portfolios	None
Kenneth L. Urish 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since founding in 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	26 RICs consisting of 146 Portfolios	None

BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016 43

Officers and Trustees (continued)

Name, Address2 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3 (concluded)
Claire A. Walton 1957	Trustee	Since 2016	Chief Operating Officer and Chief Financial Officer of Liberty Square Asset Management, LP from 1998 to 2015; General Partner of Neon Liberty Capital Management, LLC since 2003; Director, Boston Hedge Fund Group since 2009; Director, Woodstock Ski Runners since 2013; Director, Massachusetts Council on Economic Education from 2013 to 2015.	26 RICs consisting of 146 Portfolios	None
Frederick W. Winter 1945	Trustee	Since 2009	Director, Alkon Corporation since 1992; Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh, Dean and Professor from 1997 to 2005, Professor until 2013.	26 RICs consisting of 146 Portfolios	None
	1    As of February 24, 2017.
	2    The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	3    Independent Trustees serve until their resignation, retirement, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Independent Trustees on a case-by-case basis, as appropriate.
	4    In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, certain Independent Trustees were elected to the Board. As a result, although the chart shows certain Independent Trustees as joining the Board in 2009, those Independent Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: Rodney D. Johnson, 1995; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1999; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees5
Barbara G. Novick 1960	Trustee	Since 2015	Vice Chairman of BlackRock, Inc. since 2006; Chair of BlackRock’s Government Relations Steering Committee since 2009; Head of the Global Client Group of BlackRock, Inc. from 1988 to 2008.	100 RICs consisting of 220 Portfolios	None
John M. Perlowski 1964	Trustee, President and Chief Executive Officer	Since 2015 (Trustee); Since 2010 (President and Chief Executive Officer)	Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Fund & Accounting Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Advisory Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.	128 RICs consisting of 318 Portfolios	None
	5    Ms. Novick and Mr. Perlowski are both “interested persons,” as defined in the 1940 Act, of the Trust/MIP based on their positions with BlackRock and its affiliates. Mr. Perlowski and Ms. Novick are also board members of certain complexes of BlackRock registered open-end and closed-end funds. Mr. Perlowski is also a board member of the BlackRock Equity-Bond Complex and the BlackRock Closed-End Complex, and Ms. Novick is a board member of the BlackRock Closed-End Complex.

44 BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016

Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Officers Who Are Not Trustees2
Thomas Callahan 1968	Vice President	Since 2016	Managing Director of BlackRock, Inc. since 2013; Head of BlackRock’s Global Cash Management Business since 2016; Co-Head of the Global Cash Management Business from 2014 to 2016; Deputy Head of the Global Cash Management Business from 2013 to 2014; Member of the Cash Management Group Executive Committee since 2013; Chief Executive Officer of NYSE Liffe U.S. from 2008 to 2013.
Jennifer McGovern 1977	Vice President	Since 2014	Managing Director of BlackRock, Inc. since 2016; Director of BlackRock, Inc. from 2011 to 2015; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal J. Andrews 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock, Inc. 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 M. Fife 1970	Treasurer	Since 2007	Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Charles Park 1967	Chief Compliance Officer	Since 2014	Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Fernanda Piedra 1969	Anti-Money Laundering Compliance Officer	Since 2015	Director of BlackRock, Inc. since 2014; Anti-Money Laundering Compliance Officer and Regional Head of Financial Crime for the Americas at BlackRock, Inc. since 2014; Head of Regulatory Changes and Remediation for the Asset Wealth Management Division of Deutsche Bank from 2010 to 2014; Vice President of Goldman Sachs (Anti-Money Laundering/Suspicious Activities Group) from 2004 to 2010.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock, Inc. since 2014; Director of BlackRock, Inc. from 2010 to 2013; Secretary of the iShares® exchange traded funds since 2015; Secretary of the BlackRock-advised mutual funds since 2012.
	1    The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	2    Officers of the Trust/MIP serve at the pleasure of the Board.
	Further information about the Trust’s/MIP’s Officers and Trustees is available in the Trust’s/MIP’s Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.

Effective December 31, 2016, David O. Beim and Dr. Matina S. Horner resigned as Trustees of the Trust/MIP.

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

BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016 45

Additional Information

General Information

Householding

The Fund will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Fund at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Fund/Master Portfolio file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s/Master Portfolio’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room or how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The 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 upon request and without charge (1) by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

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

BlackRock’s Mutual Fund Family

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

Shareholder Privileges

Account Information

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

46 BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016

Additional Information (concluded)

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

BLACKROCK LARGE CAP INDEX FUND DECEMBER 31, 2016 47

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

LCI-12/16-AR

DECEMBER 31, 2016

  ANNUAL REPORT

BlackRock Funds III

^Ø   BlackRock LifePath^® Dynamic 2025 Fund

^Ø   BlackRock LifePath^® Dynamic 2035 Fund

^Ø   BlackRock LifePath^® Dynamic 2045 Fund

^Ø   BlackRock LifePath^® Dynamic 2055 Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
The Markets in Review		3
Annual Report:
Fund Summaries		4
About Fund Performance		14
Disclosure of Expenses		15
Derivative Financial Instruments		16
Fund Financial Statements:
Statements of Assets and Liabilities		17
Statements of Operations		18
Statements of Changes in Net Assets		19
Fund Financial Highlights		21
Fund Notes to Financial Statements		41
Fund Report of Independent Registered Public Accounting Firm		48
Important Tax Information		48
Master Portfolio Information		49
Master Portfolio Financial Statements:
Schedules of Investments		51
Statements of Assets and Liabilities		79
Statements of Operations		80
Statements of Changes in Net Assets		81
Master Portfolio Financial Highlights		82
Master Portfolio Notes to Financial Statements		86
Master Portfolio Report of Independent Registered Public Accounting Firm		94
Officers and Trustees		95
Additional Information		98

2 BLACKROCK FUNDS III DECEMBER 31, 2016

The Markets in Review

Dear Shareholder,

The year 2016 started on a fraught note with worries about slowing growth in China, plunging oil prices and sliding share prices. Then reflationary expectations in the United States helped drive a second-half global growth pick-up and big market reversals. As such, higher-quality asset classes such as Treasury bonds, municipals and investment grade credit prevailed in the first half of the year, only to struggle in the second. In contrast, risk assets sold off at the start of the year and rebounded in the latter half, with some asset classes posting strong year-end returns.

A key takeaway from 2016’s market performance is that economics can trump politics. The global reflationary theme — governments taking policy action to support growth — was the dominant driver of 2016 asset returns, outweighing significant political upheavals and uncertainty. This trend accelerated after the U.S. election on expectations for an extra boost to U.S. growth via fiscal policy.

Markets were remarkably resilient during the year. Spikes in equity volatility after big surprises such as the U.K.’s vote to leave the European Union and the outcome of the U.S. presidential election were short-lived. Instead, political surprises and initial sell-offs were seized upon as buying opportunities. We believe this reinforces the case for taking the long view rather than reacting to short-term market noise.

Asset returns varied widely in 2016. Perceived safe assets such as government bonds and low-volatility shares underperformed the higher-risk areas of the market. And the reversal of longstanding trends created opportunities, such as in the recovery of value stocks and commodities.

We expect some of these trends to extend into 2017 and see the potential for more flows into risk assets this year. Learn more by reading our market insights at blackrock.com.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2016
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		7.82	%		11.96	%
U.S. small cap equities (Russell 2000® Index)		18.68			21.31
International equities (MSCI Europe, Australasia, Far East Index)		5.67			1.00
Emerging market equities (MSCI Emerging Markets Index)		4.49			11.19
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.18			0.33
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		(7.51	)		(0.16	)
U.S. investment grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index)		(2.53	)		2.65
Tax-exempt municipal bonds (S&P Municipal Bond Index)		(3.43	)		0.77
U.S. high yield bonds (Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		7.40			17.13
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, 2016 BlackRock LifePath Dynamic Funds

Portfolio Management Commentary

How did each Fund perform?

• The LifePath Dynamic Funds with target dates of 2025, 2035, 2045 and 2055 (together, the “LifePath Dynamic Funds”) invest in their respective LifePath Dynamic Master Portfolio.

• For the 12-month period ended December 31, 2016, the LifePath Dynamic Funds underperformed their respective custom benchmarks across various LifePath Dynamic Fund target dates. The returns for the LifePath Dynamic Funds include fund expenses. The custom benchmarks have no expenses associated with performance.

What factors influenced performance?

• Detractors from relative returns largely derived from the underperformance of the International Tilts Master Portfolio strategy. The International Tilts Master Portfolio entered 2016 with a pro-growth stance, with its proprietary signals indicating positive economic conditions. Given the dramatic fall in the markets during the first weeks of 2016, this pro-growth stance detracted from returns. In April, the main cause of negative performance was the sharp rotation in market momentum, as expressed by the rally in materials and energy. An overweight in Italy (specifically, Italian banks and financials) was another detractor. At the end of the second quarter, the International Tilts Master Portfolio experienced additional losses concentrated around Brexit market moves. In the third quarter, there was a recovery in the Europe region, but losses in Japan erased those gains. Although the fourth quarter saw a strong performance rebound primarily driven by fundamental insights, this was not sufficient to cover earlier losses.

• BlackRock Commodity Strategies Fund (the “Fund”) was the main positive contributor to relative performance, largely due to the outperformance of natural resources equities versus underlying commodity prices. The Fund’s mining and energy strategies also made a positive contribution. In addition, the futures’ curve strategies within the commodity futures based investment side of the Fund had a positive impact on performance relative to the benchmark, as in general the Fund has been positioned further out on the futures curve than the benchmark.

• Active Stock Master Portfolio also made a positive contribution to relative performance due to the basic value strategy. The largest contributors to performance were stock selection in financials, energy and health care. Conversely, the largest detractors were stock selection in industrials, information technology and consumer staples. Stock selection in the energy sector benefited from a rebound in crude oil prices following OPEC’s agreement to curb production. Active Stock Master Portfolio’s underweight allocation to real estate, based primarily on valuation, also added to returns.

Describe recent portfolio activity.

• Effective November 7, 2016, LifePath Funds were renamed and restructured as LifePath Dynamic Funds to gain additional flexibility in its portfolio management and access to additional underlying funds. The changes were designed to obtain greater flexibility to adjust the LifePath Dynamic Funds’ asset allocation to respond to market conditions and opportunities; invest in a broader mix of actively managed funds, smart beta ETFs and traditional cap-weighted index funds; and to add additional fixed income diversification by incorporating the Master Total Return Portfolio.

• Each LifePath Dynamic Fund 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 Dynamic Fund is systematically adjusted to reflect the shareholders’ remaining investment time horizon. During the period, the LifePath Dynamic Funds were rebalanced in accordance with their updated strategic allocations, and daily cash flows were allocated to the underlying funds and instruments as appropriate. The dynamic signal, which assesses more recent volatility and valuations, was activated during the period and had a slightly positive impact on relative performance.

Describe portfolio positioning at period end.

• At period end, each of the LifePath Dynamic Funds was invested according to its respective strategic allocation benchmark within tolerance limits.

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

4 BLACKROCK FUNDS III DECEMBER 31, 2016

BlackRock LifePath Dynamic Funds

Glide Path Evolution

Under normal circumstances, the asset allocation of each LifePath Dynamic Fund will change over time according to a “glide path” as each LifePath Dynamic Fund approaches its respective target date. The glide path represents the shifting of asset classes over time. Each LifePath Dynamic Fund’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 Dynamic Fund, which may be a primary source of income after retirement. As each LifePath Dynamic Fund approaches its target date, its asset allocation will shift so that it invests a greater percentage of its assets in fixed income funds. The asset allocation targets are established by the portfolio managers. The investment committee, including the portfolio managers, meets regularly to assess market conditions, review the asset

allocation targets of each LifePath Dynamic Fund, and determine whether any changes are required to enable each LifePath Dynamic Fund to achieve its investment objective.

Although the asset allocation targets listed for the glide path are general, long-term targets, BlackRock Fund Advisers (“BFA” or the “Manager”) may adjust the allocation to equity and fixed income in the LifePath Dynamic Fund, based on an assessment of the current market conditions and the potential contribution of each asset class to the expected risk and return characteristics of the LifePath Dynamic Fund. In general, the adjustments will be limited to +/- 10% relative to the target allocations. BFA may determine, in light of market conditions or other factors, that a greater variation is warranted to protect the LifePath Dynamic Fund or achieve its investment objective.

BLACKROCK FUNDS III DECEMBER 31, 2016 5

BlackRock LifePath Dynamic 2025 Fund

Investment Objective

The investment objective of BlackRock LifePath^® Dynamic 2025 Fund (“LifePath Dynamic 2025 Fund” or the “LifePath Fund”) is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, LifePath Dynamic 2025 Fund will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

Effective November 7, 2016, BlackRock LifePath^® 2025 Fund changed its name to the BlackRock LifePath^® Dynamic 2025 Fund.

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

²  The LifePath Fund compares its performance to that of a customized weighted index (the “LifePath Dynamic 2025 Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

³  Commencement of operations.

The LifePath Fund’s custom benchmark consists of the following:

Period	Bloomberg Barclays U.S. Aggregate Bond Index			Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index (Series L)			Bloomberg Commodity Index4			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA IMI Index			Russell 1000® Index			Russell 2000® Index			S&P MidCap 400® Index			S&P 500® Index			S&P SmallCap 600® Index
6/30/10 to 12/31/10		28.5	%		4.4	%		N/A			4.9	%		18.8	%		N/A			N/A			5.9	%		34.9	%		2.6	%
1/01/11 to 12/31/11		29.8			4.6			N/A			4.8			18.9			15.2	%		1.4	%		3.5			20.3			1.5
1/01/12 to 12/31/12		31.9			5.0			1.0	%		4.7			18.2			35.9			3.3			N/A			N/A			N/A
1/01/13 to 12/31/13		33.7			5.2			3.8			4.3			17.1			32.6			3.3			N/A			N/A			N/A
1/01/14 to 12/31/14		34.3			5.3			3.8			4.5			17.3			31.5			3.3			N/A			N/A			N/A
1/01/15 to 12/31/15		31.0			5.0			3.8			5.3			18.8			33.1			3.0			N/A			N/A			N/A
1/01/16 to 12/31/16		32.4			5.2			3.8			5.2			18.5			31.9			2.9			N/A			N/A			N/A

⁴  Prior to July 1, 2014, the Bloomberg Commodity Index was known as the Dow Jones-UBS Commodity Index.

See “About Fund Performance” on page 14 for descriptions of the indexes.

6 BLACKROCK FUNDS III DECEMBER 31, 2016

BlackRock LifePath Dynamic 2025 Fund

Performance Summary for the Period Ended December 31, 2016

				Average Annual Total Returns1
				1 Year						5 Years						Since  Inception2
	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		3.02	%		6.88	%		N/A			6.68	%		N/A			7.80	%		N/A
Investor A		2.90			6.54			0.95	%		6.41			5.27	%		7.52			6.63	%
Investor C		2.41			5.61			4.61			5.59			5.59			6.70			6.70
Class K		3.14			7.02			N/A			6.84			N/A			8.01			N/A
Class R		2.80			6.28			N/A			6.14			N/A			7.26			N/A
LifePath Dynamic 2025 Fund Custom Benchmark		2.83			7.15			N/A			7.13			N/A			8.07			N/A
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		2.65			N/A			2.23			N/A			3.08			N/A
Bloomberg Barclays U.S. TIPS Index (Series L)		(1.47	)		4.68			N/A			0.89			N/A			2.96			N/A
Bloomberg Commodity Index		(1.31	)		11.77			N/A			(8.95	)		N/A			(5.32	)		N/A
FTSE EPRA/NAREIT Developed Index		(4.41	)		4.06			N/A			9.48			N/A			9.87			N/A
MSCI ACWI ex USA IMI Index		5.37			4.41			N/A			5.35			N/A			5.30			N/A
Russell 1000® Index		8.01			12.05			N/A			14.69			N/A			15.12			N/A
Russell 2000® Index		18.68			21.31			N/A			14.46			N/A			14.67			N/A

¹  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distributions and service fees. See “About Fund Performance” on page 14 for a detailed description of share classes, including any related sales charges and fees.

²  The LifePath Fund commenced operations on June 30, 2010.

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

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

BLACKROCK FUNDS III DECEMBER 31, 2016 7

BlackRock LifePath Dynamic 2035 Fund

Investment Objective

The investment objective of BlackRock LifePath^® Dynamic 2035 Fund (“LifePath Dynamic 2035 Fund” or the “LifePath Fund”) is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, LifePath Dynamic 2035 Fund will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

Effective November 7, 2016, BlackRock LifePath^® 2035 Fund changed its name to the BlackRock LifePath^® Dynamic 2035 Fund.

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

²  The LifePath Fund compares its performance to that of a customized weighted index (the “LifePath Dynamic 2035 Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

³ Commencement of operations.

The LifePath Fund’s custom benchmark consists of the following:

Period	Bloomberg Barclays U.S. Aggregate Bond Index			Bloomberg Barclays  U.S. Treasury Inflation Protected Securities (TIPS) Index (Series L)			Bloomberg Commodity Index4			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA IMI Index			Russell 1000® Index			Russell 2000® Index			S&P MidCap 400® Index			S&P 500® Index			S&P SmallCap 600® Index
6/30/10 to 12/31/10		16.6	%		2.2	%		N/A			6.8	%		22.7	%		N/A			N/A			6.4	%		42.5	%		2.8	%
1/01/11 to 12/31/11		17.8			2.3			N/A			7.0			22.8			18.6	%		1.2	%		3.9			24.7			1.7
1/01/12 to 12/31/12		20.3			2.6			1.0	%		7.2			21.1			44.1			2.7			N/A			N/A			N/A
1/01/13 to 12/31/13		22.1			2.9			3.9			6.9			21.3			40.3			2.6			N/A			N/A			N/A
1/01/14 to 12/31/14		21.4			2.8			3.9			7.6			22.2			39.6			2.5			N/A			N/A			N/A
1/01/15 to 12/31/15		13.2			1.9			3.9			9.8			25.4			43.6			2.2			N/A			N/A			N/A
1/01/16 to 12/31/16		14.7			2.2			3.9			9.9			25.1			42.1			2.1			N/A			N/A			N/A

⁴  Prior to July 1, 2014, the Bloomberg Commodity Index was known as the Dow Jones-UBS Commodity Index.

See “About Fund Performance” on page 14 for descriptions of the indexes.

8 BLACKROCK FUNDS III DECEMBER 31, 2016

BlackRock LifePath Dynamic 2035 Fund

Performance Summary for the Period Ended December 31, 2016

				Average Annual Total Returns1
				1 Year						5 Years						Since  Inception2
	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		4.47	%		7.61	%		N/A			7.84	%		N/A			8.90	%		N/A
Investor A		4.27			7.37			1.74	%		7.58			6.43	%		8.63			7.73	%
Investor C		3.82			6.42			5.42			6.74			6.74			7.79			7.79
Class K		4.53			7.82			N/A			8.27			N/A			9.32			N/A
Class R		4.18			7.10			N/A			7.32			N/A			8.36			N/A
LifePath Dynamic 2035 Fund Custom Benchmark		4.15			8.06			N/A			8.35			N/A			9.17			N/A
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		2.65			N/A			2.23			N/A			3.08			N/A
Bloomberg Barclays U.S. TIPS Index (Series L)		(1.47	)		4.68			N/A			0.89			N/A			2.96			N/A
Bloomberg Commodity Index		(1.31	)		11.77			N/A			(8.95	)		N/A			(5.32	)		N/A
FTSE EPRA/NAREIT Developed Index		(4.41	)		4.06			N/A			9.48			N/A			9.87			N/A
MSCI ACWI ex USA IMI Index		5.37			4.41			N/A			5.35			N/A			5.30			N/A
Russell 1000® Index		8.01			12.05			N/A			14.69			N/A			15.12			N/A
Russell 2000® Index		18.68			21.31			N/A			14.46			N/A			14.67			N/A

¹  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distributions and service fees. See “About Fund Performance” on page 14 for a detailed description of share classes, including any related sales charges and fees.

² The LifePath Fund commenced operations on June 30, 2010.

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

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

BLACKROCK FUNDS III DECEMBER 31, 2016 9

BlackRock LifePath Dynamic 2045 Fund

Investment Objective

The investment objective of BlackRock LifePath^® Dynamic 2045 Fund (“LifePath Dynamic 2045 Fund” or the “LifePath Fund”) is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, LifePath Dynamic 2045 Fund will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

Effective November 7, 2016, BlackRock LifePath^® 2045 Fund changed its name to the BlackRock LifePath^® Dynamic 2045 Fund.

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

²  The LifePath Fund compares its performance to that of a customized weighted index (the “LifePath Dynamic 2045 Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

³  Commencement of operations.

The LifePath Fund’s custom benchmark consists of the following:

Period	Bloomberg Barclays U.S. Aggregate Bond Index			Bloomberg Barclays U.S.  Treasury Inflation Protected Securities (TIPS) Index (Series L)			Bloomberg Commodity Index4			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA 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			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			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			N/A			1.0	%		9.2			25.3			51.0			2.3			N/A			N/A			N/A
1/01/13 to 12/31/13		13.5			N/A			3.9			9.1			24.8			46.7			2.0			N/A			N/A			N/A
1/01/14 to 12/31/14		12.5			N/A			3.9			10.1			25.9			45.6			2.0			N/A			N/A			N/A
1/01/15 to 12/31/15		1.8			0.2	%		4.2			13.4			29.6			48.8			2.0			N/A			N/A			N/A
1/01/16 to 12/31/16		2.3			0.2	%		4.3			13.6			29.8			47.8			1.8			N/A			N/A			N/A

⁴  Prior to July 1, 2014, the Bloomberg Commodity Index was known as the Dow Jones-UBS Commodity Index.

See “About Fund Performance” on page 14 for descriptions of the indexes.

10 BLACKROCK FUNDS III DECEMBER 31, 2016

BlackRock LifePath Dynamic 2045 Fund

Performance Summary for the Period Ended December 31, 2016

				Average Annual Total Returns1
				1 Year						5 Years						Since  Inception2
	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		5.36	%		8.14	%		N/A			8.80	%		N/A			9.86	%		N/A
Investor A		5.17			7.90			2.23	%		8.52			7.36	%		9.60			8.69	%
Investor C		4.71			7.04			6.04			7.69			7.69			8.75			8.75
Class K		5.43			8.38			N/A			9.13			N/A			10.22			N/A
Class R		5.09			7.64			N/A			8.27			N/A			9.32			N/A
LifePath Dynamic 2045 Fund Custom Benchmark		5.02			8.65			N/A			9.35			N/A			10.06			N/A
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		2.65			N/A			2.23			N/A			3.08			N/A
Bloomberg Barclays U.S. TIPS Index (Series L)		(1.47	)		4.68			N/A			0.89			N/A			2.96			N/A
Bloomberg Commodity Index		(1.31	)		11.77			N/A			(8.95	)		N/A			(5.32	)		N/A
FTSE EPRA/NAREIT Developed Index		(4.41	)		4.06			N/A			9.48			N/A			9.87			N/A
MSCI ACWI ex USA IMI Index		5.37			4.41			N/A			5.35			N/A			5.30			N/A
Russell 1000® Index		8.01			12.05			N/A			14.69			N/A			15.12			N/A
Russell 2000® Index		18.68			21.31			N/A			14.46			N/A			14.67			N/A

¹  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distributions and service fees. See “About Fund Performance” on page 14 for a detailed description of share classes, including any related sales charges and fees.

² The LifePath Fund commenced operations on June 30, 2010.

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

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

BLACKROCK FUNDS III DECEMBER 31, 2016 11

BlackRock LifePath Dynamic 2055 Fund

Investment Objective

The investment objective of BlackRock LifePath^® Dynamic 2055 Fund (“LifePath Dynamic 2055 Fund” or the “LifePath Fund”) is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, LifePath Dynamic 2055 Fund will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

Effective November 7, 2016, BlackRock LifePath^® 2055 Fund changed its name to the BlackRock LifePath^® Dynamic 2055 Fund.

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

²  The LifePath Fund compares its performance to that of a customized weighted index (the “LifePath Dynamic 2055 Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

³  Commencement of operations.

The LifePath Fund’s custom benchmark consists of the following:

Period	Bloomberg Barclays U.S. Aggregate Bond Index			Bloomberg Commodity Index4			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA IMI Index			Russell 1000® Index			Russell 2000® Index			S&P MidCap 400® Index			S&P 500® Index			S&P SmallCap 600® Index
6/30/10 to 12/31/10		1.0	%		N/A			9.0	%		28.2	%		N/A			N/A			8.1	%		50.1	%		3.6	%
1/01/11 to 12/31/11		1.0			N/A			9.7			28.8			22.0	%		2.0	%		4.9			29.5			2.1
1/01/12 to 12/31/12		1.3			1.0	%		11.3			28.6			54.5			3.3			N/A			N/A			N/A
1/01/13 to 12/31/13		3.1			4.1			11.5			27.8			51.7			1.8			N/A			N/A			N/A
1/01/14 to 12/31/14		4.0			4.0			12.2			28.6			49.4			1.8			N/A			N/A			N/A
1/01/15 to 12/31/15		1.0			4.2			13.7			29.9			49.2			2.0			N/A			N/A			N/A
1/01/16 to 12/31/16		1.0			4.4			14.1			30.4			48.3			1.8			N/A			N/A			N/A

⁴  Prior to July 1, 2014, the Bloomberg Commodity Index was known as the Dow Jones-UBS Commodity Index.

See “About Fund Performance” on page 14 for descriptions of the indexes.

12 BLACKROCK FUNDS III DECEMBER 31, 2016

BlackRock LifePath Dynamic 2055 Fund

Performance Summary for the Period Ended December 31, 2016

				Average Annual Total Returns1
				1 Year						5 Years						Since Inception2
	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		5.50	%		8.20	%		N/A			9.49	%		N/A			10.34	%		N/A
Investor A		5.39			7.90			2.23	%		9.21			8.04	%		10.05			9.15	%
Investor C		4.89			7.05			6.05			8.39			8.39			9.23			9.23
Class K		5.56			8.42			N/A			9.90			N/A			10.74			N/A
Class R		5.31			7.74			N/A			8.95			N/A			9.79			N/A
LifePath Dynamic 2055 Fund Custom Benchmark		5.12			8.72			N/A			10.12			N/A			10.64			N/A
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		2.65			N/A			2.23			N/A			3.08			N/A
Bloomberg Commodity Index		(1.31	)		11.77			N/A			(8.95	)		N/A			(5.32	)		N/A
FTSE EPRA/NAREIT Developed Index		(4.41	)		4.06			N/A			9.48			N/A			9.87			N/A
MSCI ACWI ex USA IMI Index		5.37			4.41			N/A			5.35			N/A			5.30			N/A
Russell 1000® Index		8.01			12.05			N/A			14.69			N/A			15.12			N/A
Russell 2000® Index		18.68			21.31			N/A			14.46			N/A			14.67			N/A

¹  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distributions and service fees. See “About Fund Performance” on page 14 for a detailed description of share classes, including any related sales charges and fees.

² The LifePath Fund commenced operations on June 30, 2010.

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

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

BLACKROCK FUNDS III DECEMBER 31, 2016 13

About Fund Performance

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

• Investor A Shares are subject to a maximum initial sales charge (front-end load) of 5.25% and a service fee of 0.25% per year (but no distribution fee). Certain redemptions of these shares may be subject to a contingent deferred sales charge (“CDSC”) where no initial sales charge was paid at the time of purchase. These shares are generally available through financial intermediaries.

• Investor C Shares are subject to a 1.00% CDSC if redeemed within one year of purchase. In addition, these shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. These shares are generally available through financial intermediaries.

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

• Class R Shares are not subject to any sales charge. These shares are subject to a distribution fee of 0.25% per year and a service fee of 0.25% per year. These shares are available only to certain employer-sponsored retirement plans.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month end. Performance results do not reflect the deduction of taxes that a shareholder would pay on LifePath Fund distributions or the redemption of LifePath Fund shares. Figures shown in each of the performance tables on the previous pages assume reinvestment of all distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Distributions paid to each class of shares will vary because of the different levels of administration, service and distribution fees applicable to each class, which are deducted from the income available to be paid to shareholders.

BlackRock Advisors, LLC (“BAL”, or the “Administrator”), each LifePath Funds’ administrator, has contractually agreed to waive and/or reimburse a portion of each LifePath Fund’s expenses. Without such waiver and/or reimbursement, the LifePath Funds’ performance would have been lower.

The Administrator is under no obligation to continue waiving and/or reimbursing its fees after the applicable termination date of such agreement. See Note 4 of the Notes to Financial Statements for additional information on waivers and/or reimbursements.

The LifePath Funds’ custom benchmarks are hypothetical representations of the performance of the respective LifePath Fund’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 Funds’ custom benchmarks are adjusted quarterly to reflect the LifePath Funds’ changing asset allocations over time. As of December 31, 2016, the following indexes are used to calculate the LifePath Funds’ custom benchmarks: Bloomberg Barclays U.S. Aggregate Bond Index, Bloomberg Barclays U.S. Treasury Inflation-Protected Securities Index (Series L), Bloomberg Commodity Index, FTSE EPRA/NAREIT Developed Index, MSCI ACWI ex USA IMI Index, Russell 1000^® Index and Russell 2000^® Index, as applicable.

The Bloomberg Barclays U.S. Aggregate Bond Index is a widely recognized unmanaged market-weighted index, comprised of investment-grade corporate bonds rated BBB or better, mortgages and U.S. Treasury and U.S. Government agency issues with at least one year to maturity. The Bloomberg Barclays U.S. Treasury Inflation-Protected Securities Index (Series L) is an unmanaged index that measures the performance of the inflation-protected public obligations of the U.S. Treasury. The Bloomberg Commodity Index is a broadly diversified index that allows investors to track commodity futures through a single, simple measure. The FTSE EPRA/NAREIT Developed Index is a global market capitalization weighted index composed of listed real estate securities from developed market countries in North America, Europe and Asia. The MSCI ACWI ex USA IMI Index is a free float-adjusted market capitalization weighted index that measures the equity market performance of the developed (excluding the U.S.) and emerging investable market universe. The Russell 1000^® Index is an index that measures the performance of the large cap segment of the U.S. equity universe. It is a subset of the Russell 3000^® Index and includes approximately 1,000 of the largest securities based on a combination of their market capitalization and current index membership. The index represents approximately 92% of the total market capitalization of the Russell 1000^® Index and Russell 3000^® Index. The Russell 2000^® Index is an unmanaged index that is a subset of the Russell 3000^® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.

14 BLACKROCK FUNDS III DECEMBER 31, 2016

Disclosure of Expenses

Shareholders of each LifePath Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including administration fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses and other fund expenses. The expense examples shown below (which are based on a hypothetical investment of $1,000 invested on July 1, 2016 and held through December 31, 2016) are intended to assist shareholders both in calculating expenses based on an investment in each LifePath 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 LifePath 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 LifePath 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 LifePath Funds and other funds, compare the 5% hypothetical examples with the 5% hypothetical examples that appear in shareholder reports of other funds.

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

Expense Examples

	Actual						Hypothetical2
	Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period1		Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period1		Annualized Expense Ratio
LifePath Dynamic 2025 Fund
Institutional . . . . . . . .	$	1,000.00	$	1,030.20	$	2.86	$	1,000.00	$	1,022.32	$	2.85		0.56	%
Investor A . . . . . . . . . .	$	1,000.00	$	1,029.00	$	4.13	$	1,000.00	$	1,021.06	$	4.12		0.81	%
Investor C . . . . . . . . . .	$	1,000.00	$	1,024.10	$	8.19	$	1,000.00	$	1,017.04	$	8.16		1.61	%
Class K . . . . . . . . .	$	1,000.00	$	1,031.40	$	1.84	$	1,000.00	$	1,023.33	$	1.83		0.36	%
Class R . . . . . . . . . . . . .	$	1,000.00	$	1,028.00	$	5.15	$	1,000.00	$	1,020.06	$	5.13		1.01	%
LifePath Dynamic 2035 Fund
Institutional . . . . . . . .	$	1,000.00	$	1,044.70	$	2.78	$	1,000.00	$	1,022.42	$	2.75		0.54	%
Investor A . . . . . . . . . .	$	1,000.00	$	1,042.70	$	4.06	$	1,000.00	$	1,021.17	$	4.01		0.79	%
Investor C . . . . . . . . . .	$	1,000.00	$	1,038.70	$	8.20	$	1,000.00	$	1,017.09	$	8.11		1.60	%
Class K . . . . . . . . .	$	1,000.00	$	1,045.30	$	1.80	$	1,000.00	$	1,023.38	$	1.78		0.35	%
Class R . . . . . . . . . . . . .	$	1,000.00	$	1,041.80	$	5.13	$	1,000.00	$	1,020.11	$	5.08		1.00	%
LifePath Dynamic 2045 Fund
Institutional . . . . . . . .	$	1,000.00	$	1,053.60	$	2.74	$	1,000.00	$	1,022.47	$	2.69		0.53	%
Investor A . . . . . . . . . .	$	1,000.00	$	1,051.70	$	4.02	$	1,000.00	$	1,021.22	$	3.96		0.78	%
Investor C . . . . . . . . . .	$	1,000.00	$	1,047.10	$	8.13	$	1,000.00	$	1,017.19	$	8.01		1.58	%
Class K . . . . . . . . .	$	1,000.00	$	1,054.30	$	1.70	$	1,000.00	$	1,023.48	$	1.68		0.33	%
Class R . . . . . . . . . . . . .	$	1,000.00	$	1,050.90	$	5.05	$	1,000.00	$	1,020.21	$	4.98		0.98	%
LifePath Dynamic 2055 Fund
Institutional . . . . . . . .	$	1,000.00	$	1,055.00	$	2.74	$	1,000.00	$	1,022.47	$	2.69		0.53	%
Investor A . . . . . . . . . .	$	1,000.00	$	1,053.90	$	4.03	$	1,000.00	$	1,021.22	$	3.96		0.78	%
Investor C . . . . . . . . . .	$	1,000.00	$	1,048.90	$	8.14	$	1,000.00	$	1,017.19	$	8.01		1.58	%
Class K . . . . . . . . .	$	1,000.00	$	1,055.60	$	1.71	$	1,000.00	$	1,023.48	$	1.68		0.33	%
Class R . . . . . . . . . . . . .	$	1,000.00	$	1,053.10	$	5.06	$	1,000.00	$	1,020.21	$	4.98		0.98	%

¹  For each class of the LifePath Funds, expenses are equal to the annualized net 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 Fund invests all of its assets in a LifePath Master Portfolio, the expense examples reflect the net expenses of both the LifePath Fund and the LifePath Master Portfolio in which it invests.

²  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366.

BLACKROCK FUNDS III DECEMBER 31, 2016 15

Derivative Financial Instruments

The LifePath Master Portfolios may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other asset without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the

counterparty to the transaction or illiquidity of the instrument. The LifePath Master Portfolios’ successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation a LifePath Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The LifePath Master Portfolios’ investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

16 BLACKROCK FUNDS III DECEMBER 31, 2016

Statements of Assets and Liabilities

December 31, 2016	BlackRock LifePath Dynamic 2025 Fund			BlackRock LifePath Dynamic 2035 Fund			BlackRock LifePath Dynamic 2045 Fund			BlackRock LifePath Dynamic 2055 Fund
Assets
Investments at value — from the applicable LifePath Master Portfolio1	$	62,534,536		$	57,359,370		$	36,404,058		$	19,366,992
Receivables:
Withdrawals from the applicable LifePath Master Portfolio		985,251			217,243			42,595			238,258
Capital shares sold		45,336			102,725			72,503			55,207
From the Administrator		—			—			107			4,912
Total assets		63,565,123			57,679,338			36,519,263			19,665,369
Liabilities
Payables:
Capital shares redeemed		1,030,587			319,968			115,098			293,465
Income dividends		18,255			23,038			22,713			9,969
Service and distribution fees		9,513			9,445			5,435			2,635
Professional fees		9,348			9,350			9,343			9,341
Administration fees		7,598			5,967			—			—
Total liabilities		1,075,301			367,768			152,589			315,410
Net Assets	$	62,489,822		$	57,311,570		$	36,366,674		$	19,349,959
Net Assets Consist of
Paid-in capital	$	60,791,270		$	55,598,241		$	35,126,844		$	18,562,798
Distributions in excess of net investment income		(126,885	)		(184,075	)		(141,041	)		(65,958	)
Accumulated net realized gain allocated from the applicable LifePath Master Portfolio		804,965			486,350			242,869			270,645
Net unrealized appreciation (depreciation) allocated from the applicable LifePath Master Portfolio		1,020,472			1,411,054			1,138,002			582,474
Net Assets	$	62,489,822		$	57,311,570		$	36,366,674		$	19,349,959
Net Asset Value
Institutional:
Net assets	$	26,145,621		$	19,650,209		$	14,863,834		$	8,625,760
Shares outstanding2		2,065,939			1,480,202			1,071,220			603,998
Net asset value	$	12.66		$	13.28		$	13.88		$	14.28
Investor A:
Net assets	$	28,135,339		$	29,768,415		$	17,205,808		$	9,316,925
Shares outstanding2		2,226,065			2,245,537			1,240,769			653,869
Net asset value	$	12.64		$	13.26		$	13.87		$	14.25
Maximum offering price per share (100/94.75 of net assets)	$	13.34		$	13.99		$	14.64		$	15.04
Investor C:
Net assets	$	2,339,096		$	2,112,428		$	1,246,879		$	499,173
Shares outstanding2		185,872			160,590			90,937			35,371
Net asset value	$	12.58		$	13.15		$	13.71		$	14.11
Class K:
Net assets	$	2,902,331		$	2,702,113		$	1,270,573		$	424,949
Shares outstanding2		229,772			200,948			90,692			29,406
Net asset value	$	12.63		$	13.45		$	14.01		$	14.45
Class R:
Net assets	$	2,967,435		$	3,078,405		$	1,779,580		$	483,152
Shares outstanding2		234,882			232,112			128,487			33,916
Net asset value	$	12.63		$	13.26		$	13.85		$	14.25
1    Investments at cost — from the applicable LifePath Master Portfolio	$	61,514,064		$	55,948,316		$	35,266,056		$	18,784,518
2    Unlimited number of shares authorized, no par value.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	17

Statements of Operations

Year Ended December 31, 2016	BlackRock LifePath Dynamic 2025 Fund			BlackRock LifePath Dynamic 2035 Fund			BlackRock LifePath Dynamic 2045 Fund			BlackRock LifePath Dynamic 2055 Fund
Investment Income
Net investment income allocated from the applicable LifePath Master Portfolio:
Dividends — affiliated	$	827,133		$	899,219		$	631,097		$	318,363
Interest — affiliated		565,517			249,332			36,015			12,360
Dividends — unaffiliated		118,047			191,139			159,884			83,985
Securities lending — affiliated — net		2,631			1,782			2,148			1,240
Foreign taxes withheld		(5,234	)		(8,425	)		(7,022	)		(3,796	)
Expenses		(400,123	)		(350,419	)		(224,324	)		(128,038	)
Fees waived		258,616			235,907			158,452			93,940
Total investment income		1,366,587			1,218,535			756,250			378,054
Fund Expenses
Administration — class specific		223,169			196,834			123,078			62,924
Service and distribution — class specific		115,030			107,460			62,318			28,696
Professional		9,576			9,576			9,563			9,576
Miscellaneous		168			56			56			56
Total expenses		347,943			313,926			195,015			101,252
Less fees waived by the Administrator		(9,576	)		(9,576	)		(9,563	)		(9,576	)
Total expenses after fees waived		338,367			304,350			185,452			91,676
Net investment income		1,028,220			914,185			570,798			286,378
Realized and Unrealized Gain (Loss) Allocated from the applicable LifePath Master Portfolio
Net realized gain from investments, futures contracts, forward foreign currency exchange contracts, foreign currency transactions and capital gain distributions from investment companies — affiliated		246,925			131,982			89,669			206,973
Net change in unrealized appreciation (depreciation) on investments, futures contracts, forward foreign currency exchange contracts and foreign currency translations		2,937,795			3,060,754			2,159,590			1,004,506
Total realized and unrealized gain		3,184,720			3,192,736			2,249,259			1,211,479
Net Increase in Net Assets Resulting from Operations	$	4,212,940		$	4,106,921		$	2,820,057		$	1,497,857

See Notes to Financial Statements.
18	BLACKROCK FUNDS III	DECEMBER 31, 2016

Statements of Changes in Net Assets

	BlackRock LifePath Dynamic 2025 Fund						BlackRock LifePath Dynamic 2035 Fund
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	1,028,220		$	902,834		$	914,185		$	798,710
Net realized gain		246,925			2,035,397			131,982			1,954,281
Net change in unrealized appreciation (depreciation)		2,937,795			(4,550,254	)		3,060,754			(4,206,454	)
Net increase (decrease) in net assets resulting from operations		4,212,940			(1,612,023	)		4,106,921			(1,453,463	)
Distributions to Shareholders1
From net investment income:
Institutional		(465,279	)		(457,154	)		(393,268	)		(370,041	)
Investor A		(437,614	)		(472,452	)		(517,674	)		(444,086	)
Investor C		(15,205	)		(23,600	)		(18,290	)		(14,029	)
Class K		(39,996	)		(16,121	)		(38,730	)		(7,088	)
Class R		(43,521	)		(29,082	)		(43,911	)		(8,944	)
From net realized gain:
Institutional		(5,876	)		(633,373	)		—			(599,762	)
Investor A		(6,330	)		(702,920	)		—			(829,270	)
Investor C		(530	)		(71,606	)		—			(55,514	)
Class K		(458	)		(23,595	)		—			(16,379	)
Class R		(690	)		(52,796	)		—			(20,443	)
From return of capital:
Institutional		—			(24,704	)		—			(7,657	)
Investor A		—			(30,201	)		—			(10,622	)
Investor C		—			(3,278	)		—			(657	)
Class K		—			(534	)		—			(62	)
Class R		—			(1,601	)		—			(227	)
Decrease in net assets resulting from distributions to shareholders		(1,015,499	)		(2,543,017	)		(1,011,873	)		(2,384,781	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(5,770,015	)		5,421,219			(1,843,770	)		4,313,067
Net Assets
Total increase (decrease) in net assets		(2,572,574	)		1,266,179			1,251,278			474,823
Beginning of year		65,062,396			63,796,217			56,060,292			55,585,469
End of year	$	62,489,822		$	65,062,396		$	57,311,570		$	56,060,292
Distributions in excess of net investment income, end of year	$	(126,885	)	$	(153,490	)	$	(184,075	)	$	(86,387	)
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	19

Statements of Changes in Net Assets

	BlackRock LifePath Dynamic 2045 Fund						BlackRock LifePath Dynamic 2055 Fund
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	570,798		$	477,938		$	286,378		$	202,061
Net realized gain		89,669			1,285,632			206,973			470,460
Net change in unrealized appreciation (depreciation)		2,159,590			(2,669,151	)		1,004,506			(1,101,709	)
Net increase (decrease) in net assets resulting from operations		2,820,057			(905,581	)		1,497,857			(429,188	)
Distributions to Shareholders1
From net investment income:
Institutional		(309,840	)		(237,262	)		(167,409	)		(104,375	)
Investor A		(312,572	)		(225,525	)		(159,602	)		(90,276	)
Investor C		(13,077	)		(9,617	)		(4,795	)		(3,186	)
Class K		(23,483	)		(3,515	)		(6,337	)		(700	)
Class R		(27,891	)		(6,511	)		(7,547	)		(2,224	)
From net realized gain:
Institutional		—			(459,944	)		—			(159,148	)
Investor A		—			(510,798	)		—			(163,009	)
Investor C		—			(48,009	)		—			(12,905	)
Class K		—			(12,210	)		—			(1,036	)
Class R		—			(17,867	)		—			(5,133	)
Decrease in net assets resulting from distributions to shareholders		(686,863	)		(1,531,258	)		(345,690	)		(541,992	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(252,743	)		2,333,808			2,370,014			3,808,319
Net Assets
Total increase (decrease) in net assets		1,880,451			(103,031	)		3,522,181			2,837,139
Beginning of year		34,486,223			34,589,254			15,827,778			12,990,639
End of year	$	36,366,674		$	34,486,223		$	19,349,959		$	15,827,778
Distributions in excess of net investment income, end of year	$	(141,041	)	$	(24,976	)	$	(65,958	)	$	(6,603	)
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
20	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights BlackRock LifePath Dynamic 2025 Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	12.05		$	12.80		$	13.11		$	12.19		$	11.07
Net investment income1		0.21			0.19			0.21			0.21			0.22
Net realized and unrealized gain (loss)		0.61			(0.44	)		0.48			1.22			1.11
Net increase (decrease) from investment operations		0.82			(0.25	)		0.69			1.43			1.33
Distributions:2
From net investment income		(0.21	)		(0.21	)		(0.21	)		(0.19	)		(0.21	)
From net realized gain		(0.00	)3		(0.28	)		(0.79	)		(0.32	)		(0.00	)3
From return of capital		—			(0.01	)		—			—			—
Total distributions		(0.21	)		(0.50	)		(1.00	)		(0.51	)		(0.21	)
Net asset value, end of year	$	12.66		$	12.05		$	12.80		$	13.11		$	12.19
Total Return4
Based on net asset value		6.88%			(1.92)%			5.23%			11.84%			12.07%
Ratios to Average Net Assets5,6,7
Total expenses		0.58%			0.74%			0.75%			0.79%			0.86%
Total expenses after fees waived		0.57%			0.71%			0.73%			0.75%			0.76%
Net investment income		1.74%			1.51%			1.53%			1.60%			1.85%
Supplemental Data
Net assets, end of year (000)	$	26,146		$	27,821		$	23,625		$	25,882		$	15,816
Portfolio turnover rate of the LifePath Master Portfolio		54%	8		51%	9		50%	10		30%	10		4%	11

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.40%, 0.40%, 0.40%, 0.40% and 0.48% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.11%		0.13%		0.13%		0.10%		0.10%

⁸  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio.

⁹  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹  Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 17% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	21

Financial Highlights (continued) BlackRock LifePath Dynamic 2025 Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	12.04		$	12.78		$	13.10		$	12.19		$	11.06
Net investment income1		0.18			0.16			0.17			0.18			0.18
Net realized and unrealized gain (loss)		0.60			(0.43	)		0.48			1.22			1.12
Net increase (decrease) from investment operations		0.78			(0.27	)		0.65			1.40			1.30
Distributions:2
From net investment income		(0.18	)		(0.18	)		(0.18	)		(0.17	)		(0.17	)
From net realized gain		(0.00	)3		(0.28	)		(0.79	)		(0.32	)		(0.00	)3
From return of capital		—			(0.01	)		—			—			—
Total distributions		(0.18	)		(0.47	)		(0.97	)		(0.49	)		(0.17	)
Net asset value, end of year	$	12.64		$	12.04		$	12.78		$	13.10		$	12.19
Total Return4
Based on net asset value		6.54%			(2.17)%			4.95%			11.52%			11.84%
Ratios to Average Net Assets5,6,7
Total expenses		0.83%			0.99%			1.00%			1.05%			1.11%
Total expenses after fees waived		0.82%			0.96%			0.98%			1.00%			1.01%
Net investment income		1.50%			1.26%			1.31%			1.37%			1.54%
Supplemental Data
Net assets, end of year (000)	$	28,135		$	30,373		$	35,324		$	29,049		$	13,981
Portfolio turnover rate of the LifePath Master Portfolio		54%	8		51%	9		50%	10		30%	10		4%	11

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.40%, 0.40%, 0.40%, 0.40% and 0.48% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.11%		0.13%		0.13%		0.10%		0.10%

⁸  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio.

⁹  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹  Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 17% for the year ended December 31, 2012.

See Notes to Financial Statements.
22	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Dynamic 2025 Fund

	Investor C
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.99		$	12.72		$	13.06		$	12.15		$	11.05
Net investment income1		0.08			0.06			0.07			0.07			0.10
Net realized and unrealized gain (loss)		0.59			(0.42	)		0.47			1.23			1.11
Net increase (decrease) from investment operations		0.67			(0.36	)		0.54			1.30			1.21
Distributions:2
From net investment income		(0.08	)		(0.09	)		(0.09	)		(0.07	)		(0.11	)
From net realized gain		(0.00	)3		(0.27	)		(0.79	)		(0.32	)		(0.00	)3
From return of capital		—			(0.01	)		—			—			—
Total distributions		(0.08	)		(0.37	)		(0.88	)		(0.39	)		(0.11	)
Net asset value, end of year	$	12.58		$	11.99		$	12.72		$	13.06		$	12.15
Total Return4
Based on net asset value		5.61%			(2.86)%			4.08%			10.73%			10.99%
Ratios to Average Net Assets5,6,7
Total expenses		1.63%			1.75%			1.75%			1.80%			1.85%
Total expenses after fees waived		1.62%			1.72%			1.73%			1.76%			1.76%
Net investment income		0.69%			0.51%			0.56%			0.57%			0.87%
Supplemental Data
Net assets, end of year (000)	$	2,339		$	2,900		$	2,849		$	1,997		$	992
Portfolio turnover rate of the LifePath Master Portfolio		54%	8		51%	9		50%	10		30%	10		4%	11

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.40%, 0.40%, 0.40%, 0.40% and 0.48% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.11%		0.13%		0.13%		0.10%		0.10%

⁸  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio.

⁹  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹  Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 17% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	23

Financial Highlights (continued) BlackRock LifePath Dynamic 2025 Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	12.03		$	12.78		$	13.10		$	12.22		$	11.09
Net investment income1		0.25			0.25			0.26			0.20			0.26
Net realized and unrealized gain (loss)		0.59			(0.45	)		0.46			1.20			1.11
Net increase (decrease) from investment operations		0.84			(0.20	)		0.72			1.40			1.37
Distributions:2
From net investment income		(0.24	)		(0.26	)		(0.25	)		(0.20	)		(0.24	)
From net realized gain		(0.00	)3		(0.28	)		(0.79	)		(0.32	)		(0.00	)3
From return of capital		—			(0.01	)		—			—			—
Total distributions		(0.24	)		(0.55	)		(1.04	)		(0.52	)		(0.24	)
Net asset value, end of year	$	12.63		$	12.03		$	12.78		$	13.10		$	12.22
Total Return4
Based on net asset value		7.02%			(1.64)%			5.51%			11.47%			12.44%
Ratios to Average Net Assets5,6,7
Total expenses		0.38%			0.41%			0.40%			0.44%			0.51%
Total expenses after fees waived		0.37%			0.38%			0.37%			0.40%			0.41%
Net investment income		2.02%			2.00%			1.91%			1.57%			2.20%
Supplemental Data
Net assets, end of year (000)	$	2,902		$	1,278		$	317		$	102		$	1,941
Portfolio turnover rate of the LifePath Master Portfolio		54%	8		51%	9		50%	10		30%	10		4%	11

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.40%, 0.40%, 0.40%, 0.40% and 0.49% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷ Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.11%		0.13%		0.13%		0.10%		0.10%

⁸ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio.

⁹ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹  Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 17% for the year ended December 31, 2012.

See Notes to Financial Statements.
24	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (concluded) BlackRock LifePath Dynamic 2025 Fund

	Class R
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	12.04		$	12.79		$	13.11		$	12.19		$	11.09
Net investment income1		0.16			0.13			0.14			0.13			0.18
Net realized and unrealized gain (loss)		0.59			(0.43	)		0.48			1.24			1.08
Net increase (decrease) from investment operations		0.75			(0.30	)		0.62			1.37			1.26
Distributions:2
From net investment income		(0.16	)		(0.17	)		(0.15	)		(0.13	)		(0.16	)
From net realized gain		(0.00	)3		(0.27	)		(0.79	)		(0.32	)		(0.00	)3
From return of capital		—			(0.01	)		—			—			—
Total distributions		(0.16	)		(0.45	)		(0.94	)		(0.45	)		(0.16	)
Net asset value, end of year	$	12.63		$	12.04		$	12.79		$	13.11		$	12.19
Total Return4
Based on net asset value		6.28%			(2.36)%			4.69%			11.26%			11.45%
Ratios to Average Net Assets5,6,7
Total expenses		1.03%			1.24%			1.26%			1.30%			1.35%
Total expenses after fees waived		1.02%			1.21%			1.23%			1.25%			1.26%
Net investment income		1.32%			1.06%			1.04%			1.05%			1.54%
Supplemental Data
Net assets, end of year (000)	$	2,967		$	2,690		$	1,682		$	1,484		$	1,282
Portfolio turnover rate of the LifePath Master Portfolio		54%	8		51%	9		50%	10		30%	10		4%	11

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.40%, 0.40%, 0.40%, 0.40% and 0.48% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.11%		0.13%		0.13%		0.10%		0.10%

⁸  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio.

⁹  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹  Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 17% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	25

Financial Highlights BlackRock LifePath Dynamic 2035 Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	12.58		$	13.43		$	13.77		$	12.51		$	11.18
Net investment income1		0.23			0.21			0.22			0.24			0.24
Net realized and unrealized gain (loss)		0.72			(0.49	)		0.54			1.67			1.30
Net increase (decrease) from investment operations		0.95			(0.28	)		0.76			1.91			1.54
Distributions:2
From net investment income		(0.25	)		(0.22	)		(0.22	)		(0.23	)		(0.21	)
From net realized gain		—			(0.35	)		(0.88	)		(0.42	)		—
From return of capital		—			(0.00	)3		—			—			(0.00	)3
Total distributions		(0.25	)		(0.57	)		(1.10	)		(0.65	)		(0.21	)
Net asset value, end of year	$	13.28		$	12.58		$	13.43		$	13.77		$	12.51
Total Return4
Based on net asset value		7.61%			(2.15)%			5.51%			15.33%			13.85%
Ratios to Average Net Assets5,6,7
Total expenses		0.57%			0.72%			0.74%			0.80%			0.89%
Total expenses after fees waived		0.55%			0.68%			0.71%			0.75%			0.75%
Net investment income		1.77%			1.54%			1.55%			1.78%			1.98%
Supplemental Data
Net assets, end of year (000)	$	19,650		$	22,071		$	22,004		$	22,266		$	12,853
Portfolio turnover rate of the LifePath Master Portfolio		76%	8		44%	9		54%	10		39%	10		4%	11

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.41%, 0.42%, 0.43%, 0.43% and 0.56% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.13%		0.16%		0.15%		0.11%		0.11%

⁸  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio.

⁹  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹  Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 13% for the year ended December 31, 2012.

See Notes to Financial Statements.
26	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Dynamic 2035 Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	12.56		$	13.41		$	13.77		$	12.51		$	11.17
Net investment income1		0.19			0.17			0.19			0.21			0.20
Net realized and unrealized gain (loss)		0.73			(0.48	)		0.52			1.67			1.32
Net increase (decrease) from investment operations		0.92			(0.31	)		0.71			1.88			1.52
Distributions:2
From net investment income		(0.22	)		(0.19	)		(0.19	)		(0.20	)		(0.18	)
From net realized gain		—			(0.35	)		(0.88	)		(0.42	)		—
From return of capital		—			(0.00	)3		—			—			(0.00	)3
Total distributions		(0.22	)		(0.54	)		(1.07	)		(0.62	)		(0.18	)
Net asset value, end of year	$	13.26		$	12.56		$	13.41		$	13.77		$	12.51
Total Return4
Based on net asset value		7.37%			(2.40)%			5.17%			15.08%			13.63%
Ratios to Average Net Assets5,6,7
Total expenses		0.82%			0.97%			0.99%			1.05%			1.14%
Total expenses after fees waived		0.80%			0.93%			0.96%			1.00%			1.00%
Net investment income		1.52%			1.30%			1.33%			1.55%			1.63%
Supplemental Data
Net assets, end of year (000)	$	29,768		$	30,359		$	31,048		$	21,423		$	9,966
Portfolio turnover rate of the LifePath Master Portfolio		76%	8		44%	9		54%	10		39%	10		4%	11

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.41%, 0.43%, 0.43%, 0.43% and 0.56% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.13%		0.16%		0.15%		0.11%		0.11%

⁸  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio.

⁹  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹  Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 13% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	27

Financial Highlights (continued) BlackRock LifePath Dynamic 2035 Fund

	Investor C
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	12.47		$	13.32		$	13.69		$	12.45		$	11.14
Net investment income1		0.09			0.07			0.08			0.11			0.11
Net realized and unrealized gain (loss)		0.71			(0.48	)		0.53			1.66			1.30
Net increase (decrease) from investment operations		0.80			(0.41	)		0.61			1.77			1.41
Distributions:2
From net investment income		(0.12	)		(0.09	)		(0.10	)		(0.11	)		(0.10	)
From net realized gain		—			(0.35	)		(0.88	)		(0.42	)		—
From return of capital		—			(0.00	)3		—			—			(0.00	)3
Total distributions		(0.12	)		(0.44	)		(0.98	)		(0.53	)		(0.10	)
Net asset value, end of year	$	13.15		$	12.47		$	13.32		$	13.69		$	12.45
Total Return4
Based on net asset value		6.42%			(3.13)%			4.43%			14.22%			12.70%
Ratios to Average Net Assets5,6,7
Total expenses		1.62%			1.72%			1.74%			1.81%			1.89%
Total expenses after fees waived		1.60%			1.69%			1.71%			1.75%			1.75%
Net investment income		0.74%			0.55%			0.58%			0.81%			0.92%
Supplemental Data
Net assets, end of year (000)	$	2,112		$	2,007		$	1,816		$	1,028		$	533
Portfolio turnover rate of the LifePath Master Portfolio		76%	8		44%	9		54%	10		39%	10		4%	11

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.41%, 0.43%, 0.43%, 0.43% and 0.56% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.13%		0.16%		0.15%		0.11%		0.11%

⁸  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio.

⁹  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹  Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 13% for the year ended December 31, 2012.

See Notes to Financial Statements.
28	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Dynamic 2035 Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	12.74		$	13.60		$	13.94		$	12.55		$	11.20
Net investment income1		0.27			0.30			0.23			0.22			0.27
Net realized and unrealized gain (loss)		0.72			(0.54	)		0.57			1.82			1.32
Net increase (decrease) from investment operations		0.99			(0.24	)		0.80			2.04			1.59
Distributions:2
From net investment income		(0.28	)		(0.27	)		(0.26	)		(0.23	)		(0.24	)
From net realized gain		—			(0.35	)		(0.88	)		(0.42	)		—
From return of capital		—			(0.00	)3		—			—			(0.00	)3
Total distributions		(0.28	)		(0.62	)		(1.14	)		(0.65	)		(0.24	)
Net asset value, end of year	$	13.45		$	12.74		$	13.60		$	13.94		$	12.55
Total Return4
Based on net asset value		7.82%			(1.83)%			5.73%			16.32%			14.30%
Ratios to Average Net Assets5,6,7
Total expenses		0.36%			0.39%			0.38%			0.45%			0.55%
Total expenses after fees waived		0.35%			0.35%			0.35%			0.38%			0.40%
Net investment income		2.07%			2.30%			1.91%			1.65%			2.26%
Supplemental Data
Net assets, end of year (000)	$	2,702		$	757		$	138		$	95		$	1,999
Portfolio turnover rate of the LifePath Master Portfolio		76%	8		44%	9		54%	10		39%	10		4%	11

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.41%, 0.43%, 0.43%, 0.43% and 0.57% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷ Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.13%		0.16%		0.15%		0.11%		0.11%

⁸ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio.

⁹ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹ Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 13% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	29

Financial Highlights (concluded) BlackRock LifePath Dynamic 2035 Fund

	Class R
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	12.58		$	13.44		$	13.78		$	12.52		$	11.19
Net investment income1		0.18			0.14			0.14			0.17			0.21
Net realized and unrealized gain (loss)		0.71			(0.49	)		0.54			1.67			1.28
Net increase (decrease) from investment operations		0.89			(0.35	)		0.68			1.84			1.49
Distributions:2
From net investment income		(0.21	)		(0.16	)		(0.14	)		(0.16	)		(0.16	)
From net realized gain		—			(0.35	)		(0.88	)		(0.42	)		—
From return of capital		—			(0.00	)3		—			—			(0.00	)3
Total distributions		(0.21	)		(0.51	)		(1.02	)		(0.58	)		(0.16	)
Net asset value, end of year	$	13.26		$	12.58		$	13.44		$	13.78		$	12.52
Total Return4
Based on net asset value		7.10%			(2.65)%			4.96%			14.74%			13.37%
Ratios to Average Net Assets5,6,7
Total expenses		1.02%			1.21%			1.24%			1.30%			1.38%
Total expenses after fees waived		1.00%			1.18%			1.21%			1.25%			1.25%
Net investment income		1.41%			1.09%			1.03%			1.25%			1.71%
Supplemental Data
Net assets, end of year (000)	$	3,078		$	867		$	579		$	474		$	359
Portfolio turnover rate of the LifePath Master Portfolio		76%	8		44%	9		54%	10		39%	10		4%	11

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.41%, 0.43%, 0.43%, 0.43% and 0.55% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷ Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.13%		0.16%		0.15%		0.11%		0.11%

⁸ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio.

⁹ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹ Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 13% for the year ended December 31, 2012.

See Notes to Financial Statements.
30	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights BlackRock LifePath Dynamic 2045 Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	13.10		$	14.05		$	14.39		$	12.74		$	11.24
Net investment income1		0.23			0.21			0.23			0.27			0.25
Net realized and unrealized gain (loss)		0.83			(0.54	)		0.58			2.07			1.47
Net increase (decrease) from investment operations		1.06			(0.33	)		0.81			2.34			1.72
Distributions:2
From net investment income		(0.28	)		(0.21	)		(0.23	)		(0.25	)		(0.22	)
From net realized gain		—			(0.41	)		(0.92	)		(0.44	)		—
From return of capital		—			—			—			—			(0.00	)3
Total distributions		(0.28	)		(0.62	)		(1.15	)		(0.69	)		(0.22	)
Net asset value, end of year	$	13.88		$	13.10		$	14.05		$	14.39		$	12.74
Total Return4
Based on net asset value		8.14%			(2.37)%			5.66%			18.49%			15.34%
Ratios to Average Net Assets5,6,7
Total expenses		0.56%			0.71%			0.75%			0.85%			1.06%
Total expenses after fees waived		0.53%			0.66%			0.69%			0.74%			0.75%
Net investment income		1.76%			1.53%			1.57%			1.94%			2.04%
Supplemental Data
Net assets, end of year (000)	$	14,864		$	15,105		$	15,678		$	12,832		$	7,066
Portfolio turnover rate of the LifePath Master Portfolio		75%	8		50%	8		54%	9		38%	9		4%	10

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.44%, 0.48%, 0.49%, 0.51% and 0.83% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.15%		0.18%		0.16%		0.11%		0.11%

⁸  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁹  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁰  Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	31

Financial Highlights (continued) BlackRock LifePath Dynamic 2045 Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	13.09		$	14.04		$	14.39		$	12.75		$	11.25
Net investment income1		0.20			0.18			0.20			0.25			0.21
Net realized and unrealized gain (loss)		0.83			(0.54	)		0.57			2.05			1.47
Net increase (decrease) from investment operations		1.03			(0.36	)		0.77			2.30			1.68
Distributions:2
From net investment income		(0.25	)		(0.18	)		(0.20	)		(0.22	)		(0.18	)
From net realized gain		—			(0.41	)		(0.92	)		(0.44	)		—
From return of capital		—			—			—			—			(0.00	)3
Total distributions		(0.25	)		(0.59	)		(1.12	)		(0.66	)		(0.18	)
Net asset value, end of year	$	13.87		$	13.09		$	14.04		$	14.39		$	12.75
Total Return4
Based on net asset value		7.90%			(2.61)%			5.37%			18.17%			15.03%
Ratios to Average Net Assets5,6,7
Total expenses		0.81%			0.96%			1.00%			1.10%			1.31%
Total expenses after fees waived		0.78%			0.91%			0.94%			0.99%			0.99%
Net investment income		1.52%			1.28%			1.35%			1.77%			1.75%
Supplemental Data
Net assets, end of year (000)	$	17,206		$	16,744		$	16,814		$	11,044		$	3,512
Portfolio turnover rate of the LifePath Master Portfolio		75%	8		50%	8		54%	9		38%	9		4%	10

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.44%, 0.48%, 0.49%, 0.51% and 0.83% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.15%		0.18%		0.16%		0.11%		0.11%

⁸  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁹  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁰  Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
32	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Dynamic 2045 Fund

	Investor C
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	12.94		$	13.90		$	14.26		$	12.65		$	11.18
Net investment income1		0.09			0.07			0.09			0.13			0.13
Net realized and unrealized gain (loss)		0.82			(0.54	)		0.57			2.05			1.45
Net increase (decrease) from investment operations		0.91			(0.47	)		0.66			2.18			1.58
Distributions:2
From net investment income		(0.14	)		(0.08	)		(0.10	)		(0.13	)		(0.11	)
From net realized gain		—			(0.41	)		(0.92	)		(0.44	)		—
From return of capital		—			—			—			—			(0.00	)3
Total distributions		(0.14	)		(0.49	)		(1.02	)		(0.57	)		(0.11	)
Net asset value, end of year	$	13.71		$	12.94		$	13.90		$	14.26		$	12.65
Total Return4
Based on net asset value		7.04%			(3.43)%			4.63%			17.31%			14.15%
Ratios to Average Net Assets5,6,7
Total expenses		1.61%			1.72%			1.75%			1.85%			2.04%
Total expenses after fees waived		1.58%			1.67%			1.69%			1.74%			1.75%
Net investment income		0.70%			0.53%			0.61%			0.97%			1.07%
Supplemental Data
Net assets, end of year (000)	$	1,247		$	1,420		$	1,549		$	935		$	463
Portfolio turnover rate of the LifePath Master Portfolio		75%	8		50%	8		54%	9		38%	9		4%	10

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.44%, 0.48%, 0.49%, 0.51% and 0.81% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.15%		0.18%		0.16%		0.11%		0.11%

⁸ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁹ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁰ Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	33

Financial Highlights (continued) BlackRock LifePath Dynamic 2045 Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	13.22		$	14.18		$	14.50		$	12.77		$	11.26
Net investment income1		0.27			0.40			0.29			0.21			0.30
Net realized and unrealized gain (loss)		0.83			(0.68	)		0.55			2.21			1.46
Net increase (decrease) from investment operations		1.10			(0.28	)		0.84			2.42			1.76
Distributions:2
From net investment income		(0.31	)		(0.27	)		(0.24	)		(0.25	)		(0.25	)
From net realized gain		—			(0.41	)		(0.92	)		(0.44	)		—
From return of capital		—			—			—			—			(0.00	)3
Total distributions		(0.31	)		(0.68	)		(1.16	)		(0.69	)		(0.25	)
Net asset value, end of year	$	14.01		$	13.22		$	14.18		$	14.50		$	12.77
Total Return4
Based on net asset value		8.38%			(2.04)%			5.80%			19.11%			15.72%
Ratios to Average Net Assets5,6,7
Total expenses		0.36%			0.40%			0.38%			0.49%			0.70%
Total expenses after fees waived		0.33%			0.34%			0.33%			0.38%			0.39%
Net investment income		2.02%			3.08%			1.92%			1.60%			2.41%
Supplemental Data
Net assets, end of year (000)	$	1,271		$	524		$	28		$	29		$	697
Portfolio turnover rate of the LifePath Master Portfolio		75%	8		50%	8		54%	9		38%	9		4%	10

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.44%, 0.49%, 0.48%, 0.55% and 0.83% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷ Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.15%		0.18%		0.16%		0.11%		0.11%

⁸ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁹ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁰ Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
34	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (concluded) BlackRock LifePath Dynamic 2045 Fund

	Class R
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	13.09		$	14.04		$	14.38		$	12.73		$	11.24
Net investment income1		0.19			0.15			0.15			0.19			0.23
Net realized and unrealized gain (loss)		0.80			(0.53	)		0.58			2.08			1.42
Net increase (decrease) from investment operations		0.99			(0.38	)		0.73			2.27			1.65
Distributions:2
From net investment income		(0.23	)		(0.16	)		(0.15	)		(0.18	)		(0.16	)
From net realized gain		—			(0.41	)		(0.92	)		(0.44	)		—
From return of capital		—			—			—			—			(0.00	)3
Total distributions		(0.23	)		(0.57	)		(1.07	)		(0.62	)		(0.16	)
Net asset value, end of year	$	13.85		$	13.09		$	14.04		$	14.38		$	12.73
Total Return4
Based on net asset value		7.64%			(2.80	)%		5.08%			17.91%			14.77%
Ratios to Average Net Assets5,6,7
Total expenses		1.01%			1.21%			1.25%			1.35%			1.55%
Total expenses after fees waived		0.99%			1.15%			1.19%			1.24%			1.25%
Net investment income		1.39%			1.09%			1.04%			1.36%			1.84%
Supplemental Data
Net assets, end of year (000)	$	1,780		$	693		$	520		$	560		$	423
Portfolio turnover rate of the LifePath Master Portfolio		75%	8		50%	8		54%	9		38%	9		4%	10

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.44%, 0.48%, 0.49%, 0.52% and 0.82% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷ Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.15%		0.18%		0.16%		0.11%		0.11%

⁸ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁹ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁰ Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	35

Financial Highlights BlackRock LifePath Dynamic 2055 Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	13.46		$	14.33		$	14.64		$	12.74		$	11.13
Net investment income1		0.24			0.22			0.23			0.30			0.27
Net realized and unrealized gain (loss)		0.86			(0.57	)		0.63			2.36			1.56
Net increase (decrease) from investment operations		1.10			(0.35	)		0.86			2.66			1.83
Distributions:2
From net investment income		(0.28	)		(0.21	)		(0.23	)		(0.26	)		(0.21	)
From net realized gain		—			(0.31	)		(0.94	)		(0.50	)		(0.01	)
Total distributions		(0.28	)		(0.52	)		(1.17	)		(0.76	)		(0.22	)
Net asset value, end of year	$	14.28		$	13.46		$	14.33		$	14.64		$	12.74
Total Return3
Based on net asset value		8.20%			(2.52	)%		5.90%			20.99%			16.46%
Ratios to Average Net Assets4,5,6
Total expenses		0.59%			0.79%			0.82%			1.05%			2.00%
Total expenses after fees waived		0.54%			0.66%			0.67%			0.74%			0.75%
Net investment income		1.73%			1.53%			1.54%			2.11%			2.17%
Supplemental Data
Net assets, end of year (000)	$	8,626		$	7,381		$	6,773		$	4,546		$	1,981
Portfolio turnover rate of the LifePath Master Portfolio		80%	7		49%	7		48%	8		67%	8		7%	9

¹ Based on average shares outstanding.

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

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.52%, 0.62%, 0.66%, 0.83% and 2.22% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁶ Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.15%		0.18%		0.18%		0.12%		0.11%

⁷ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁸ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

⁹ Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 27% for the year ended December 31, 2012.

See Notes to Financial Statements.
36	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Dynamic 2055 Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	13.44		$	14.30		$	14.62		$	12.73		$	11.13
Net investment income1		0.20			0.19			0.20			0.28			0.23
Net realized and unrealized gain (loss)		0.85			(0.56	)		0.62			2.34			1.56
Net increase (decrease) from investment operations		1.05			(0.37	)		0.82			2.62			1.79
Distributions:2
From net investment income		(0.24	)		(0.18	)		(0.20	)		(0.23	)		(0.18	)
From net realized gain		—			(0.31	)		(0.94	)		(0.50	)		(0.01	)
Total distributions		(0.24	)		(0.49	)		(1.14	)		(0.73	)		(0.19	)
Net asset value, end of year	$	14.25		$	13.44		$	14.30		$	14.62		$	12.73
Total Return3
Based on net asset value		7.90%			(2.67	)%		5.60%			20.71%			16.09%
Ratios to Average Net Assets4,5,6
Total expenses		0.84%			1.04%			1.08%			1.30%			2.29%
Total expenses after fees waived		0.79%			0.91%			0.92%			0.99%			1.00%
Net investment income		1.49%			1.30%			1.32%			1.98%			1.88%
Supplemental Data
Net assets, end of year (000)	$	9,317		$	7,561		$	5,543		$	3,951		$	1,043
Portfolio turnover rate of the LifePath Master Portfolio		80%	7		49%	7		48%	8		67%	8		7%	9

¹ Based on average shares outstanding.

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

³ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.52%, 0.62%, 0.66%, 0.82% and 2.28% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁶ Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.15%		0.18%		0.18%		0.12%		0.11%

⁷ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁸ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

⁹ Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 27% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	37

Financial Highlights (continued) BlackRock LifePath Dynamic 2055 Fund

	Investor C
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	13.31		$	14.18		$	14.51		$	12.64		$	11.06
Net investment income1		0.09			0.08			0.08			0.15			0.13
Net realized and unrealized gain (loss)		0.85			(0.56	)		0.62			2.35			1.56
Net increase (decrease) from investment operations		0.94			(0.48	)		0.70			2.50			1.69
Distributions:2
From net investment income		(0.14	)		(0.08	)		(0.09	)		(0.13	)		(0.10	)
From net realized gain		—			(0.31	)		(0.94	)		(0.50	)		(0.01	)
Total distributions		(0.14	)		(0.39	)		(1.03	)		(0.63	)		(0.11	)
Net asset value, end of year	$	14.11		$	13.31		$	14.18		$	14.51		$	12.64
Total Return3
Based on net asset value		7.05%			(3.48)%			4.85%			19.81%			15.27%
Ratios to Average Net Assets4,5,6
Total expenses		1.65%			1.80%			1.83%			2.06%			3.12%
Total expenses after fees waived		1.59%			1.67%			1.67%			1.75%			1.75%
Net investment income		0.70%			0.54%			0.56%			1.07%			1.05%
Supplemental Data
Net assets, end of year (000)	$	499		$	543		$	528		$	313		$	231
Portfolio turnover rate of the LifePath Master Portfolio		80%	7		49%	7		48%	8		67%	8		7%	9

¹ Based on average shares outstanding.

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

³ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.52%, 0.62%, 0.66%, 0.83% and 2.42% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁶ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁷ Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.15%		0.18%		0.18%		0.12%		0.11%

⁸ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

⁹ Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 27% for the year ended December 31, 2012.

See Notes to Financial Statements.
38	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Dynamic 2055 Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	13.62		$	14.49		$	14.77		$	12.77		$	11.15
Net investment income1		0.28			0.28			0.30			0.22			0.35
Net realized and unrealized gain (loss)		0.86			(0.58	)		0.62			2.54			1.52
Net increase (decrease) from investment operations		1.14			(0.30	)		0.92			2.76			1.87
Distributions:2
From net investment income		(0.31	)		(0.26	)		(0.26	)		(0.26	)		(0.24	)
From net realized gain		—			(0.31	)		(0.94	)		(0.50	)		(0.01	)
Total distributions		(0.31	)		(0.57	)		(1.20	)		(0.76	)		(0.25	)
Net asset value, end of year	$	14.45		$	13.62		$	14.49		$	14.77		$	12.77
Total Return3
Based on net asset value		8.42%			(2.15)%			6.26%			21.74%			16.83%
Ratios to Average Net Assets4,5,6
Total expenses		0.37%			0.46%			0.46%			0.75%			1.27%
Total expenses after fees waived		0.33%			0.32%			0.32%			0.38%			0.40%
Net investment income		2.01%			1.97%			1.93%			1.61%			2.80%
Supplemental Data
Net assets, end of year (000)	$	425		$	52		$	29		$	30		$	448
Portfolio turnover rate of the LifePath Master Portfolio		80%	7		49%	7		48%	8		67%	8		7%	9

¹  Based on average shares outstanding.

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

³  Where applicable, assumes the reinvestment of distributions.

⁴  Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.52%, 0.63%, 0.65%, 0.95% and 1.71% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁶  Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.15%		0.18%		0.18%		0.12%		0.11%

⁷  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁸  Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

⁹  Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 27% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	39

Financial Highlights (concluded) BlackRock LifePath Dynamic 2055 Fund

	Class R
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	13.44		$	14.32		$	14.62		$	12.72		$	11.12
Net investment income1		0.18			0.15			0.15			0.22			0.19
Net realized and unrealized gain (loss)		0.85			(0.57	)		0.63			2.37			1.56
Net increase (decrease) from investment operations		1.03			(0.42	)		0.78			2.59			1.75
Distributions:2
From net investment income		(0.22	)		(0.15	)		(0.14	)		(0.19	)		(0.14	)
From net realized gain		—			(0.31	)		(0.94	)		(0.50	)		(0.01	)
Total distributions		(0.22	)		(0.46	)		(1.08	)		(0.69	)		(0.15	)
Net asset value, end of year	$	14.25		$	13.44		$	14.32		$	14.62		$	12.72
Total Return3
Based on net asset value		7.74%			(3.00)%			5.37%			20.44%			15.75%
Ratios to Average Net Assets4,5,6
Total expenses		1.04%			1.29%			1.32%			1.56%			2.75%
Total expenses after fees waived		0.99%			1.15%			1.17%			1.25%			1.25%
Net investment income		1.30%			1.07%			0.98%			1.58%			1.53%
Supplemental Data
Net assets, end of year (000)	$	483		$	292		$	118		$	106		$	59
Portfolio turnover rate of the LifePath Master Portfolio		80%	7		49%	7		48%	8		67%	8		7%	9

¹ Based on average shares outstanding.

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

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated fees waived of 0.51%, 0.62%, 0.65%, 0.84% and 2.60% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁶ Includes the LifePath Fund’s share of the LifePath Master Portfolio’s allocated net expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.15%		0.18%		0.18%		0.12%		0.11%

⁷ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁸ Includes the LifePath Master Portfolio’s purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

⁹ Excludes the LifePath Master Portfolio’s purchases and sales of the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 27% for the year ended December 31, 2012.

See Notes to Financial Statements.
40	BLACKROCK FUNDS III	DECEMBER 31, 2016

Notes to Financial Statements BlackRock Funds III

1. Organization:

BlackRock Funds III (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Delaware statutory trust. The following series of the Trust are referred to herein collectively as the “LifePath Funds” or individually, as a “LifePath Fund”:

Fund Name	Herein Referred To As	Diversification Classification
BlackRock LifePath® Dynamic 2025 Fund	LifePath 2025 Fund	Diversified
BlackRock LifePath® Dynamic 2035 Fund	LifePath 2035 Fund	Diversified
BlackRock LifePath® Dynamic 2045 Fund	LifePath 2045 Fund	Diversified
BlackRock LifePath® Dynamic 2055 Fund	LifePath 2055 Fund	Diversified

Each LifePath Fund seeks to achieve its investment objective by investing all of its assets in a corresponding series of Master Investment Portfolio (“MIP”): LifePath^®Dynamic 2025 Master Portfolio, LifePath^® Dynamic 2035 Master Portfolio, LifePath^® Dynamic 2045 Master Portfolio and LifePath^® Dynamic 2055 Master Portfolio (each, a “LifePath Master Portfolio” and together, the “LifePath Master Portfolios”). MIP is an affiliate of the Trust. Each LifePath Master Portfolio has the same investment objective and strategies as its corresponding LifePath Fund. The value of each LifePath Fund’s investment in its corresponding LifePath Master Portfolio reflects the LifePath Fund’s proportionate interest in the net assets of the LifePath Master Portfolio. The performance of the LifePath Funds is directly affected by the performance of its corresponding LifePath Master Portfolios. At December 31, 2016, the percentage of the LifePath Master Portfolio owned by the corresponding LifePath Fund was 99.9% for each of LifePath 2025 Fund, LifePath 2035 Fund and LifePath 2045 Fund and 99.8% for LifePath 2055 Fund. As such, the financial statements of the LifePath Master Portfolios, including the Schedules of Investments, are included elsewhere in this report and should be read in conjunction with the LifePath Funds’ financial statements.

The LifePath Funds offer multiple classes of shares. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that certain classes bear expenses related to the shareholder servicing and distribution of such shares. Institutional and Class K Shares are sold only to certain eligible investors. Class R Shares are available only to certain employer-sponsored retirement plans. Investor A and Investor C Shares are generally available through financial intermediaries. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures. The Board of Trustees of the Trust and Board of Trustees of MIP are referred to throughout this report as the “Board of Trustees” or the “Board” and the members are referred to as “Trustees.”

Share Class	Initial Sales Charge	CDSC	Conversion Privilege
Institutional, Class K and Class R	No	No	None
Investor A	Yes	No1	None
Investor C	No	Yes	None

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

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

2. Significant Accounting Policies:

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

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

Distributions: Distributions from net investment income are declared quarterly and paid quarterly. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The portion of distributions, if any, that exceeds a LifePath Fund’s current and accumulated earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. The character and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.

Indemnifications: In the normal course of business, a LifePath Fund enters into contracts that contain a variety of representations that provide general indemnification. A LifePath Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against a LifePath Fund, which cannot be predicted with any certainty.

BLACKROCK FUNDS III DECEMBER 31, 2016 41

Notes to Financial Statements (continued) BlackRock Funds III

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

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The LifePath Funds’ policy is to value its financial instruments at fair value. Each LifePath Fund records its investment in the LifePath Master Portfolio at fair value based on the LifePath Funds’ proportionate interest in the net assets of the LifePath Master Portfolio. Valuation of securities held by the LifePath Master Portfolio is discussed in Note 3 of the LifePath Master Portfolio’s Notes to Financial Statements, which are included elsewhere in this report.

4. Administration Agreement and Other Transactions with Affiliates:

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

Administration: The Trust, on behalf of the LifePath Funds, entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL, in consideration thereof, has agreed to bear all of the LifePath 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 LifePath Funds. BAL is entitled to receive for these administration services an annual fee 0.35% of on the average daily net assets of each LifePath Fund’s Institutional and Investor A Shares, 0.40% of the average daily net assets of Investor C Shares, 0.15% of average daily net assets of Class K Shares and 0.30% of the average daily net assets of Class R Shares.

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

For the year ended December 31, 2016, the following table shows the class specific administration fees borne directly by each class of each LifePath Fund:

	Institutional		Investor A		Investor C		Class K		Class R		Total
LifePath 2025 Fund	$	96,499	$	103,826	$	9,881	$	3,242	$	9,721	$	223,169
LifePath 2035 Fund	$	72,913	$	106,508	$	7,789	$	2,519	$	7,105	$	196,834
LifePath 2045 Fund	$	53,062	$	59,236	$	5,271	$	1,423	$	4,086	$	123,078
LifePath 2055 Fund	$	28,885	$	30,514	$	1,892	$	355	$	1,278	$	62,924

Service and Distribution Fees: The Trust, on behalf of the LifePath Funds, entered into a Distribution Agreement and a Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Administrator. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, each LifePath Fund pays BRIL ongoing service and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the relevant share class of each LifePath Fund as follows:

	Distribution Fees		Service Fees
Investor A		—		0.25%
Investor C		0.75%		0.25%
Class R		0.25%		0.25%

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

For the year ended December 31, 2016, the following table shows the class specific service and distribution fees borne directly by each share class of each LifePath Fund:

	Investor A		Investor C		Class R		Total
LifePath 2025 Fund	$	74,144	$	24,643	$	16,243	$	115,030
LifePath 2035 Fund	$	76,081	$	19,477	$	11,902	$	107,460
LifePath 2045 Fund	$	42,318	$	13,159	$	6,841	$	62,318
LifePath 2055 Fund	$	21,837	$	4,723	$	2,136	$	28,696

42 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued) BlackRock Funds III

Other Fees: For the year ended December 31, 2016, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of each LifePath Fund’s Investor A Shares as follows:

	LifePath 2025 Fund		LifePath 2035 Fund		LifePath 2045 Fund		LifePath 2055 Fund
Investor A	$	592	$	931	$	2,716	$	239

For the year ended December 31, 2016, affiliates received CDSCs as follows:

	LifePath 2025 Fund		LifePath 2035 Fund		LifePath 2045 Fund		LifePath 2055 Fund
Investor C	$	104	$	832	$	48	$	10

Expense Waivers: The fees and expenses of the Trust’s trustees who are not “interested persons” of the Trust, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and the Trust’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the LifePath Funds. BAL has contractually agreed to reimburse the LifePath Funds or to provide an offsetting credit against the administration fees paid by the LifePath Funds in an amount equal to these independent expenses through April 30, 2017. For the year ended December 31, 2016, the Funds waived the following amounts:

	LifePath 2025 Fund		LifePath 2035 Fund		LifePath 2045 Fund		LifePath 2055 Fund
Amount waived	$	9,576	$	9,576	$	9,563	$	9,576

Interfund Lending: In accordance with an exemptive order (the “Order”) from the U.S. Securities and Exchange Commission, each LifePath Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by each LifePath Fund’s investment policies and restrictions. Each LifePath Fund is currently permitted to borrow and lend under the Interfund Lending Program.

A LifePath Fund may lend in aggregate up to 15% of its net assets, but no more than 5% of its net assets, to any one borrowing fund through the Interfund Lending Program. A LifePath Fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets or any lower threshold provided for by the LifePath Fund’s investment restrictions. If a LifePath Fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2016, the LifePath Funds did not participate in the Interfund Lending Program.

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

5. Income Tax Information:

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

Each LifePath Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each LifePath Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016. The statutes of limitations on each LifePath Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the LifePath Funds as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the LifePath Funds’ financial statements.

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

	LifePath 2055 Fund
Undistributed Net Investment Income	$	(43	)
Accumulated net realized gain (loss)	$	43

BLACKROCK FUNDS III DECEMBER 31, 2016 43

Notes to Financial Statements (continued) BlackRock Funds III

The tax character of distributions paid was as follows:

		LifePath 2025 Fund		LifePath 2035 Fund		LifePath 2045 Fund		LifePath 2055 Fund
Ordinary Income	12/31/16	$	1,015,499	$	1,011,873	$	686,863	$	345,690
	12/31/15	$	1,146,932	$	924,943	$	514,964	$	203,965
Long-term capital gains	12/31/16		—		—		—		—
	12/31/15		1,335,767		1,440,613		1,016,294		338,027
Tax return of capital	12/31/16		—		—		—		—
	12/31/15		60,318		19,225		—		—
Total	12/31/16	$	1,015,499	$	1,011,873	$	686,863	$	345,690
	12/31/15	$	2,543,017	$	2,384,781	$	1,531,258	$	541,992

As of period end, the tax components of accumulated net earnings (losses) were as follows:

	LifePath 2025 Fund			LifePath 2035 Fund			LifePath 2035 Fund			LifePath 2045 Fund
Undistributed ordinary income	$	175,718		$	61,257		$	29,412		$	60,456
Undistributed long-term capital gains		666,244			627,597			393,554			222,089
Net unrealized gains1		901,163			1,054,904			824,465			508,402
Qualified late-year losses2		(44,573	)		(30,429	)		(7,601	)		(3,786	)
Total	$	1,698,552		$	1,713,329		$	1,239,830		$	787,161

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

²  The LifePath Funds have elected to defer certain qualified late-year losses and recognize such losses in the next taxable year.

6. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2016						Year Ended December 31, 2015
LifePath 2025 Fund	Shares			Amount			Shares			Amount
Institutional
Shares sold		550,135		$	6,743,810			1,695,717		$	22,026,427
Shares issued in reinvestment of distributions		37,741			471,155			90,453			1,115,230
Shares redeemed		(829,993	)		(10,271,144	)		(1,324,284	)		(17,169,467	)
Net increase (decrease)		(242,117	)	$	(3,056,179	)		461,886		$	5,972,190
Investor A
Shares sold		454,024		$	5,592,787			484,539		$	6,176,197
Shares issued in reinvestment of distributions		35,587			443,943			97,698			1,205,545
Shares redeemed		(786,156	)		(9,717,688	)		(823,014	)		(10,365,276	)
Net decrease		(296,545	)	$	(3,680,958	)		(240,777	)	$	(2,983,534	)
Investor C
Shares sold		76,467		$	938,366			191,836		$	2,439,322
Shares issued in reinvestment of distributions		1,264			15,704			8,028			98,474
Shares redeemed		(133,789	)		(1,611,577	)		(181,855	)		(2,252,503	)
Net increase (decrease)		(56,058	)	$	(657,507	)		18,009		$	285,293
Class K
Shares sold		284,110		$	3,531,506			135,809		$	1,698,832
Shares issued in reinvestment of distributions		3,210			40,210			3,199			39,154
Shares redeemed		(163,809	)		(2,047,022	)		(57,521	)		(713,464	)
Net increase		123,511		$	1,524,694			81,487		$	1,024,522

44 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued) BlackRock Funds III

	Year Ended December 31, 2016						Year Ended December 31, 2015
LifePath 2025 Fund (concluded)	Shares			Amount			Shares			Amount
Class R
Shares sold		157,223		$	1,928,376			198,458		$	2,505,656
Shares issued in reinvestment of distributions		3,487			43,502			6,691			82,119
Shares redeemed		(149,248	)		(1,871,943	)		(113,165	)		(1,465,027	)
Net increase		11,462		$	99,935			91,984		$	1,122,748
Total Net Increase (Decrease)		(459,747	)	$	(5,770,015	)		412,589		$	5,421,219
LifePath 2035 Fund
Institutional
Shares sold		492,928		$	6,248,393			935,048		$	12,689,214
Shares issued in reinvestment of distributions		30,181			393,268			75,760			977,461
Shares redeemed		(798,063	)		(10,177,783	)		(894,648	)		(12,126,312	)
Net increase (decrease)		(274,954	)	$	(3,536,122	)		116,160		$	1,540,363
Investor A
Shares sold		522,606		$	6,679,704			561,099		$	7,536,029
Shares issued in reinvestment of distributions		39,742			517,666			99,598			1,283,978
Shares redeemed		(733,902	)		(9,411,992	)		(558,814	)		(7,357,563	)
Net increase (decrease)		(171,554	)	$	(2,214,622	)		101,883		$	1,462,444
Investor C
Shares sold		71,580		$	901,826			105,262		$	1,406,620
Shares issued in reinvestment of distributions		1,405			18,205			5,495			70,017
Shares redeemed		(73,362	)		(907,992	)		(86,166	)		(1,137,058	)
Net increase (decrease)		(377	)	$	12,039			24,591		$	339,579
Class K
Shares sold		212,230		$	2,746,391			48,795		$	636,575
Shares issued in reinvestment of distributions		2,884			38,470			1,730			22,287
Shares redeemed		(73,580	)		(930,734	)		(1,248	)		(17,127	)
Net increase		141,534		$	1,854,127			49,277		$	641,735
Class R
Shares sold		196,159		$	2,474,179			55,006		$	724,120
Shares issued in reinvestment of distributions		3,364			43,911			2,302			29,614
Shares redeemed		(36,293	)		(477,282	)		(31,541	)		(424,788	)
Net increase		163,230		$	2,040,808			25,767		$	328,946
Total Net Increase (Decrease)		(142,121	)	$	(1,843,770	)		317,678		$	4,313,067
LifePath 2045 Fund
Institutional
Shares sold		464,396		$	6,144,244			559,557		$	7,929,643
Shares issued in reinvestment of distributions		22,819			309,840			51,781			697,205
Shares redeemed		(569,372	)		(7,613,164	)		(573,820	)		(8,169,111	)
Net increase (decrease)		(82,157	)	$	(1,159,080	)		37,518		$	457,737
Investor A
Shares sold		323,284		$	4,311,066			380,095		$	5,344,885
Shares issued in reinvestment of distributions		22,997			312,571			54,687			736,323
Shares redeemed		(384,684	)		(5,129,876	)		(352,998	)		(4,912,618	)
Net increase (decrease)		(38,403	)	$	(506,239	)		81,784		$	1,168,590

BLACKROCK FUNDS III DECEMBER 31, 2016 45

Notes to Financial Statements (continued) BlackRock Funds III

	Year Ended December 31, 2016						Year Ended December 31, 2015
LifePath 2045 Fund (concluded)
Investor C
Shares sold		40,949		$	533,048			67,371		$	938,567
Shares issued in reinvestment of distributions		972			13,076			4,325			57,482
Shares redeemed		(60,712	)		(780,521	)		(73,452	)		(999,367	)
Net decrease		(18,791	)	$	(234,397	)		(1,756	)	$	(3,318	)
Class K
Shares sold		67,995		$	907,206			37,110		$	497,656
Shares issued in reinvestment of distributions		1,658			22,866			1,078			14,363
Shares redeemed		(18,571	)		(258,657	)		(581	)		(7,775	)
Net increase		51,082		$	671,415			37,607		$	504,244
Class R
Shares sold		133,840		$	1,768,664			46,692		$	642,929
Shares issued in reinvestment of distributions		2,050			27,891			1,810			24,378
Shares redeemed		(60,370	)		(820,997	)		(32,584	)		(460,752	)
Net increase		75,520		$	975,558			15,918		$	206,555
Total Net Increase (Decrease)		(12,749	)	$	(252,743	)		171,071		$	2,333,808
LifePath 2055 Fund
Institutional
Shares sold		362,958		$	4,942,755			344,455		$	4,949,851
Shares issued in reinvestment of distributions		11,986			167,409			19,079			263,523
Shares redeemed		(319,155	)		(4,394,418	)		(287,976	)		(4,174,534	)
Net increase		55,789		$	715,746			75,558		$	1,038,840
Investor A
Shares sold		265,846		$	3,618,031			255,129		$	3,630,190
Shares issued in reinvestment of distributions		11,433			159,602			18,377			253,284
Shares redeemed		(186,151	)		(2,566,676	)		(98,266	)		(1,381,504	)
Net increase		91,128		$	1,210,957			175,240		$	2,501,970
Investor C
Shares sold		20,738		$	279,541			25,419		$	359,459
Shares issued in reinvestment of distributions		346			4,790			1,179			16,091
Shares redeemed		(26,482	)		(350,101	)		(23,073	)		(320,424	)
Net increase (decrease)		(5,398	)	$	(65,770	)		3,525		$	55,126
Class K
Shares sold		28,655		$	397,103			1,965		$	27,326
Shares issued in reinvestment of distributions		400			5,722			43			600
Shares redeemed		(3,498	)		(49,459	)		(160	)		(2,412	)
Net increase		25,557		$	353,366			1,848		$	25,514
Class R
Shares sold		35,087		$	477,640			23,493		$	330,212
Shares issued in reinvestment of distributions		506			7,077			459			6,304
Shares redeemed		(23,369	)		(329,002	)		(10,535	)		(149,647	)
Net increase		12,224		$	155,715			13,417		$	186,869
Total Net Increase		179,300		$	2,370,014			269,588		$	3,808,319

46 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (concluded) BlackRock Funds III

At December 31, 2016, shares of the LifePath Funds owned by BlackRock HoldCo 2, Inc., an affiliate of the LifePath Funds, were as follows:

	LifePath 2045 Fund		LifePath 2055 Fund
Class K		2,003		2,001
Class R		—		2,000

7. Subsequent Events:

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

BLACKROCK FUNDS III DECEMBER 31, 2016 47

Report of Independent Registered Public Accounting Firm BlackRock Funds III

To the Board of Trustees of BlackRock Funds III and the Shareholders of the Funds, as defined:

In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock LifePath^® Dynamic 2025 Fund, BlackRock LifePath^® Dynamic 2035 Fund, BlackRock LifePath^® Dynamic 2045 Fund and BlackRock LifePath^® Dynamic 2055 Fund (the “Funds”), each a series of BlackRock Funds III, as of December 31, 2016, 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 Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid during the taxable year ended December 31, 2016:

	Payable Dates		LifePath Dynamic 2025 Fund		LifePath Dynamic 2035 Fund		LifePath Dynamic 2045 Fund		LifePath Dynamic 2055 Fund
Qualified Dividend Income for Individuals1		03/31/16 - 12/30/16		72.57%		84.26%		91.75%		92.96%
Dividends Qualifying for the Dividend Received Deduction for Corporations1		03/31/16 - 12/30/16		37.46%		42.76%		44.51%		44.92%
Federal Obligation Interest2		03/31/16 - 12/30/16		4.35%		1.09%		0.16%		0.03%
Interest-Related Dividends and Qualified Short-Term Capital Gains for Non-U.S. Residents3		03/31/16 - 12/30/16		41.54%		19.02%		3.20%		1.81%

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

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

³ Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations.

48 BLACKROCK FUNDS III DECEMBER 31, 2016

Master Portfolio Information as of December 31, 2016 Master Investment Portfolio

LifePath^® Dynamic 2025 Master Portfolio

Portfolio Composition Percent of
Total Net Assets

Equity Funds	52	%
Fixed Income Funds	35
Common Stocks	5
Short-Term Securities	11
Liabilities in Excess of Other Assets	(3	)

Ten Largest Holdings Percent of
Total Net Assets

Active Stock Master Portfolio	26	%
CoreAlpha Bond Master Portfolio	24
International Tilts Master Portfolio	9
Master BlackRock Total Return Portfolio	6
iShares Edge MSCI Multifactor USA ETF	5
iShares TIPS Bond ETF	5
BlackRock Commodity Strategies Fund	4
BlackRock Tactical Opportunities Fund	3
iShares Edge MSCI Multifactor Intl ETF	2
iShares MSCI EAFE Small-Cap ETF	2

LifePath^® Dynamic 2035 Master Portfolio

Portfolio Composition Percent of
Total Net Assets

Equity Funds	66	%
Fixed Income Funds	15
Common Stocks	10
Short-Term Securities	9

Ten Largest Holdings Percent of
Total Net Assets

Active Stock Master Portfolio	33	%
International Tilts Master Portfolio	12
CoreAlpha Bond Master Portfolio	10
iShares Edge MSCI Multifactor USA ETF	8
BlackRock Commodity Strategies Fund	4
Master BlackRock Total Return Portfolio	3
BlackRock Tactical Opportunities Fund	3
iShares Edge MSCI Multifactor Intl ETF	3
iShares MSCI EAFE Small-Cap ETF	2
iShares TIPS Bond ETF	2

The LifePath Master Portfolios’ allocation and holdings listed above are current as of the report date. However, the LifePath Master Portfolios are regularly monitored and their composition may vary throughout various periods.

BLACKROCK FUNDS III DECEMBER 31, 2016 49

Master Portfolio Information as of December 31, 2016 (concluded) Master Investment Portfolio

LifePath^® Dynamic 2045 Master Portfolio

Portfolio Composition Percent of Total Net Assets

Equity Funds	72	%
Common Stocks	14
Fixed Income Funds	2
Short-Term Securities	12

Ten Largest Holdings Percent of Total Net Assets

Active Stock Master Portfolio	35	%
International Tilts Master Portfolio	14
iShares Edge MSCI Multifactor USA ETF	9
BlackRock Commodity Strategies Fund	4
iShares Edge MSCI Multifactor Intl ETF	4
iShares MSCI EAFE Small-Cap ETF	3
CoreAlpha Bond Master Portfolio	2
iShares Core S&P 500 ETF	2
BlackRock Tactical Opportunities Fund	1
Simon Property Group, Inc.	1

LifePath^® Dynamic 2055 Master Portfolio

Portfolio Composition Percent of
Total Net Assets

Equity Funds	73	%
Common Stocks	14
Fixed Income Funds	1
Short-Term Securities	12

Ten Largest Holdings Percent of
Total Net Assets

Active Stock Master Portfolio	35	%
International Tilts Master Portfolio	14
iShares Edge MSCI Multifactor USA ETF	10
BlackRock Commodity Strategies Fund	4
iShares Edge MSCI Multifactor Intl ETF	4
iShares MSCI EAFE Small-Cap ETF	3
iShares Core S&P 500 ETF	2
CoreAlpha Bond Master Portfolio	1
Simon Property Group, Inc.	1
Westfield Corp.	1

The LifePath Master Portfolios’ allocation and holdings listed above are current as of the report date. However, the LifePath Master Portfolios are regularly monitored and their composition may vary throughout various periods.

50 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 LifePath Dynamic 2025 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 52.0%
Active Stock Master Portfolio	$	15,972,961	$	15,972,961
BlackRock Commodity Strategies Fund		323,160		2,397,848
BlackRock Tactical Opportunities Fund		138,459		1,859,507
International Tilts Master Portfolio	$	5,913,673		5,913,673
iShares Core S&P 500 ETF (b)		2,883		648,646
iShares Edge MSCI Multifactor Intl ETF		53,878		1,251,586
iShares Edge MSCI Multifactor USA ETF		127,231		3,399,612
iShares MSCI EAFE Small-Cap ETF (b)		21,378		1,065,480
				32,509,313
Fixed Income Funds — 35.3%
CoreAlpha Bond Master Portfolio	$	14,909,692		14,909,692
iShares TIPS Bond ETF		28,568		3,233,040
Master Total Return Portfolio	$	3,953,205		3,953,205
				22,095,937
Short-Term Securities — 11.3%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.87% (c)(d)		1,748,046		1,748,396
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (c)		5,329,361		5,329,361
				7,077,757
Total Affiliated Investment Companies — 98.6%				61,683,007
Common Stocks
Equity Real Estate Investment Trusts (REITs) — 0.1%
Ichigo Hotel REIT Investment Corp.		28		30,896
New South Resources, Ltd. (e)		47,809		51,548
				82,444
Hotels, Restaurants & Leisure — 0.0%
Hilton Worldwide Holdings, Inc.		864		23,501
Real Estate Investment Trusts (REITs) — 3.9%
Agree Realty Corp.		394		18,144
Alexandria Real Estate Equities, Inc.		320		35,562
American Campus Communities, Inc.		849		42,255
American Homes 4 Rent, Class A		673		14,120
AvalonBay Communities, Inc.		342		60,585
Beni Stabili SpA SIIQ		30,505		17,436
Boston Properties, Inc.		853		107,290
British Land Co. PLC		6,944		53,889
CareTrust REIT, Inc.		3,009		46,098
CyrusOne, Inc.		744		33,279
DiamondRock Hospitality Co.		4,092		47,181
DuPont Fabros Technology, Inc.		1,083		47,576
EPR Properties		703		50,454
Equity One, Inc.		1,171		35,938
Essex Property Trust, Inc.		345		80,212
Eurocommercial Properties NV CVA		547		21,040
Extra Space Storage, Inc.		1,063		82,106
Federal Realty Investment Trust		532		75,602
First Industrial Realty Trust, Inc.		2,475		69,424
Gecina SA		94		12,983
General Growth Properties, Inc.		2,010		50,210

Common Stocks	Shares		Value
Real Estate Investment Trusts (REITs) (continued)
Gramercy Property Trust		4,232	$	38,850
Great Portland Estates PLC		2,121		17,424
Hammerson PLC		4,209		29,663
HCP, Inc.		3,065		91,092
Highwoods Properties, Inc.		545		27,800
Host Hotels & Resorts, Inc.		2,897		54,579
Ichigo Office REIT Investment Corp.		56		36,397
Japan Hotel REIT Investment Corp.		48		32,299
Japan Rental Housing Investments, Inc.		41		27,517
Kenedix Retail REIT Corp.		12		27,344
Kilroy Realty Corp.		597		43,712
Liberty Property Trust		1,270		50,165
Link REIT		3,500		22,691
Macerich Co.		576		40,804
Mid-America Apartment Communities, Inc.		479		46,904
NSI NV		8,103		30,584
Public Storage		123		27,490
Retail Properties of America, Inc., Class A		3,707		56,828
Rexford Industrial Realty, Inc.		1,005		23,306
RioCan Real Estate Investment Trust		749		14,856
Scentre Group		17,666		59,137
Simon Property Group, Inc.		746		132,542
SL Green Realty Corp.		289		31,082
STAG Industrial, Inc.		1,865		44,518
Sun Communities, Inc.		306		23,443
UDR, Inc.		2,059		75,112
Unibail-Rodamco SE		430		102,471
Vastned Retail NV		766		29,721
Ventas, Inc.		523		32,698
Welltower, Inc.		486		32,528
Westfield Corp.		16,392		110,833
				2,415,774
Real Estate Management & Development — 1.2%
Ayala Land, Inc.		12,800		8,224
BUWOG AG		2,371		55,042
Cheung Kong Property Holdings Ltd.		9,500		58,016
China Resources Land Ltd.		8,000		17,901
Deutsche Wohnen AG, Bearer Shares		1,125		35,287
First Capital Realty, Inc.		1,908		29,374
Global Logistic Properties Ltd.		33,600		50,878
Howard Hughes Corp. (e)		226		25,787
Inmobiliaria Colonial SA		6,326		43,780
Intiland Development Tbk PT		719,200		26,681
Kungsleden AB		3,505		22,167
LEG Immobilien AG		488		37,849
Leopalace21 Corp.		600		3,314
Mega Manunggal Property Tbk PT (e)		714,400		36,323
Megaworld Corp.		198,000		14,175
Mitsui Fudosan Co. Ltd.		1,000		23,150
Modernland Realty Tbk PT (e)		86,900		2,203
Puradelta Lestari Tbk PT		549,900		9,363
St. Modwen Properties PLC		4,410		16,591
Sun Hung Kai Properties Ltd.		7,000		88,147
Takara Leben Co., Ltd.		2,800		16,265
Unizo Holdings Co., Ltd.		3,000		79,325

Portfolio Abbreviations

AUD	Australian Dollar	HKD	Hong Kong Dollar	PHP	Philippine Peso
CAD	Canadian Dollar	IDR	Indonesian Rupiah	REIT	Real Estate Investment Trust
CHF	Swiss Franc	ILS	Israeli New Shekel	S&P	Standard and Poor’s
CVA	Certificaten Van Aandelen (Dutch Certificate)	JPY	Japanese Yen	SEK	Swedish Krona
ETF	Exchange-Traded Fund	MSCI	Morgan Stanley Capital International	SGD	Singapore Dollar
EUR	Euro	NOK	Norwegian Krone	USD	U.S. Dollar
GBP	British Pound	NZD	New Zealand Dollar

BLACKROCK FUNDS III DECEMBER 31, 2016 51

See Notes to Financial Statements.

Schedule of Investments (continued) LifePath Dynamic 2025 Master Portfolio

Common Stocks	Shares		Value
Real Estate Management & Development (continued)
Wihlborgs Fastigheter AB		965	$	17,911
				717,753
Road & Rail — 0.0%
MTR Corp. Ltd.		3,000		14,544
Total Common Stocks — 5.2%				3,254,016
Total Investments (Cost — $63,770,421) — 103.8%				64,937,023
Liabilities in Excess of Other Assets — (3.8)%				(2,385,760	)
Net Assets — 100.0%			$	62,551,263

Notes to Schedule of Investments

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December  31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December  31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
Active Stock Master Portfolio	$	13,646,396	$	2,326,565	1		—		$	15,972,961	$	15,972,961	$	234,667		$	1,026,292
BlackRock Cash Funds: Institutional, SL Agency Shares		1,667		1,746,379	1		—			1,748,046		1,748,396		2,958	3		—
BlackRock Cash Funds: Prime, SL Agency Shares*		1,261		—			(1,261	)2		—		—		429	3		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		5,329,361	1		—			5,329,361		5,329,361		2,198			369
BlackRock Commodity Strategies Fund		366,318		56,808			(99,966	)		323,160		2,397,848		22,406			(309,228	)
BlackRock Emerging Markets Fund, Inc.*		135,188		15,033			(150,221	)		—		—		—			(248,421	)
BlackRock Tactical Opportunities Fund		—		138,459			—			138,459		1,859,507		34,940			—
CoreAlpha Bond Master Portfolio	$	22,012,998		—		$	(7,103,306	)2	$	14,909,692		14,909,692		482,784			105,502
International Tilts Master Portfolio	$	8,424,203		—		$	(2,510,530	)2	$	5,913,673		5,913,673		237,875			(640,792	)
iShares Core S&P 500 ETF		—		5,624			(2,741	)		2,883		648,646		3,760			2,148
iShares Edge MSCI Min Vol EAFE ETF*		—		4,992			(4,992	)		—		—		—			6,749
iShares Edge MSCI Min Vol EAFE USA ETF*		—		20,925			(20,925	)		—		—		—			18,299
iShares Edge MSCI Multifactor Intl ETF		—		53,878			—			53,878		1,251,586		9,871			—
iShares Edge MSCI Multifactor USA ETF		—		127,231			—			127,231		3,399,612		12,317			—
iShares MSCI Canada ETF*		29,702		3,363			(33,065	)		—		—		5,554			(93,283	)
iShares MSCI EAFE Small-Cap ETF		24,094		3,612			(6,328	)		21,378		1,065,480		31,961			(5,556	)
iShares TIPS Bond ETF		23,345		11,312			(6,089	)		28,568		3,233,040		41,995			(4,806	)
Large Cap Index Master Portfolio*	$	6,667,009		—		$	(6,667,009	)2		—		—		123,580			25,424
Master Small Cap Index Series*	$	1,989,173		—		$	(1,989,173	)2		—		—		23,083			62,279
Master Total Return Portfolio		—	$	3,953,205	1		—		$	3,953,205		3,953,205		15,772			(19,825	)
Total											$	61,683,007	$	1,286,150		$	(74,849	)
*  No longer held by the LifePath Master Portfolio as of period end.
1    Represents net shares/investment value purchased.
2   Represents net shares/investment value sold.
3    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

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

(c) Current yield as of period end.

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

(e) Non-income producing security.

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

See Notes to Financial Statements.

52 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2025 Master Portfolio

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts
Contracts Long		Issue	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
	10	Canadian Dollar	March 2017	$	744,150	$	(17,969	)
	12	Euro Dollar	March 2017	$	1,586,100		(15,778	)
	60	MSCI Emerging Markets E-Mini Index	March 2017	$	2,576,700		(56,710	)
	28	Russell 2000 E-Mini Index	March 2017	$	1,899,660		(36,250	)
	6	S&P/TSX 60 Index	March 2017	$	801,609		351
	Total					$	(126,356	)

Forward Foreign Currency Exchange Contracts
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
AUD	15,000	USD	11,161	BNP Paribas S.A.		1/19/17	$	(304	)
AUD	32,000	USD	23,528	Goldman Sachs International		1/19/17		(366	)
CAD	3,000	USD	2,263	Bank of America N.A.		1/19/17		(25	)
CAD	26,000	USD	19,369	Goldman Sachs International		1/19/17		23
CAD	66,000	USD	50,266	Goldman Sachs International		1/19/17		(1,040	)
CHF	33,000	USD	33,556	Bank of America N.A.		1/19/17		(1,052	)
EUR	8,000	USD	8,809	BNP Paribas S.A.		1/19/17		(364	)
EUR	2,000	USD	2,186	Goldman Sachs International		1/19/17		(75	)
GBP	1,000	USD	1,226	Bank of America N.A.		1/19/17		10
GBP	3,000	USD	3,678	Barclays Bank PLC		1/19/17		31
GBP	7,000	USD	8,717	Barclays Bank PLC		1/19/17		(63	)
GBP	1,000	USD	1,233	Citibank N.A.		1/19/17		3
GBP	3,000	USD	3,708	Citibank N.A.		1/19/17		1
GBP	3,000	USD	3,772	Citibank N.A.		1/19/17		(63	)
GBP	7,000	USD	8,594	Goldman Sachs International		1/19/17		59
GBP	8,000	USD	9,796	Goldman Sachs International		1/19/17		93
GBP	3,000	USD	3,677	Goldman Sachs International		1/19/17		32
GBP	7,000	USD	8,771	Goldman Sachs International		1/19/17		(117	)
GBP	1,000	USD	1,235	Goldman Sachs International		1/19/17		2
GBP	1,000	USD	1,269	Goldman Sachs International		1/19/17		(33	)
GBP	1,000	USD	1,268	Goldman Sachs International		1/19/17		(32	)
HKD	52,000	USD	6,709	Barclays Bank PLC		1/19/17		(2	)
HKD	23,000	USD	2,967	BNP Paribas S.A.		1/19/17		—
HKD	50,000	USD	6,448	BNP Paribas S.A.		1/19/17		1
HKD	743,000	USD	95,852	Goldman Sachs International		1/19/17		(14	)
IDR	80,834,000	USD	6,005	BNP Paribas S.A.		1/19/17		(17	)
IDR	79,656,000	USD	5,848	Citibank N.A.		1/19/17		52
IDR	63,015,000	USD	4,777	Nomura International PLC		1/19/17		(110	)
ILS	13,000	USD	3,406	Bank of America N.A.		1/19/17		(27	)
JPY	539,000	USD	4,634	Bank of America N.A.		1/19/17		(8	)
JPY	1,626,000	USD	14,976	Bank of America N.A.		1/19/17		(1,022	)
JPY	2,044,000	USD	18,198	Bank of America N.A.		1/19/17		(657	)
JPY	628,000	USD	5,458	Bank of America N.A.		1/19/17		(69	)
JPY	503,000	USD	4,258	Bank of America N.A.		1/19/17		58
JPY	2,687,000	USD	24,268	BNP Paribas S.A.		1/19/17		(1,209	)
JPY	2,679,000	USD	23,946	BNP Paribas S.A.		1/19/17		(956	)
JPY	726,000	USD	6,173	Citibank N.A.		1/19/17		58
JPY	67,000	USD	591	Citibank N.A.		1/19/17		(16	)
JPY	408,000	USD	3,928	Goldman Sachs International		1/19/17		(427	)
JPY	381,000	USD	3,231	Goldman Sachs International		1/19/17		39
JPY	3,790,000	USD	36,467	Goldman Sachs International		1/19/17		(3,942	)
JPY	448,000	USD	4,271	Goldman Sachs International		1/19/17		(427	)
JPY	1,551,000	USD	14,842	Goldman Sachs International		1/19/17		(1,531	)
JPY	1,635,000	USD	14,417	Goldman Sachs International		1/19/17		(386	)
NOK	7,000	USD	809	Citibank N.A.		1/19/17		5
NOK	101,000	USD	11,856	Citibank N.A.		1/19/17		(120	)
NOK	43,000	USD	5,252	Goldman Sachs International		1/19/17		(255	)
NOK	55,000	USD	6,645	Goldman Sachs International		1/19/17		(254	)

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 53

Schedule of Investments (continued) LifePath Dynamic 2025 Master Portfolio

Forward Foreign Currency Exchange Contracts (continued)
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
NOK	37,000	USD	4,485	Goldman Sachs International		1/19/17	$	(186	)
NOK	14,000	USD	1,663	Goldman Sachs International		1/19/17		(36	)
NOK	15,000	USD	1,791	Goldman Sachs International		1/19/17		(48	)
NOK	8,000	USD	957	Goldman Sachs International		1/19/17		(27	)
NOK	57,000	USD	6,765	Goldman Sachs International		1/19/17		(142	)
NOK	21,000	USD	2,422	Goldman Sachs International		1/19/17		18
NZD	4,000	USD	2,843	Barclays Bank PLC		1/19/17		(55	)
PHP	78,000	USD	1,571	BNP Paribas S.A.		1/19/17		(2	)
SEK	235,000	USD	26,766	Bank of America N.A.		1/19/17		(870	)
SEK	18,000	USD	1,962	Citibank N.A.		1/19/17		21
SGD	11,000	USD	7,939	Barclays Bank PLC		1/19/17		(326	)
SGD	57,000	USD	41,048	Barclays Bank PLC		1/19/17		(1,596	)
SGD	7,000	USD	5,052	BNP Paribas S.A.		1/19/17		(207	)
SGD	6,000	USD	4,329	BNP Paribas S.A.		1/19/17		(176	)
USD	31,939	AUD	42,000	Bank of America N.A.		1/19/17		1,538
USD	9,795	AUD	13,000	Bank of America N.A.		1/19/17		386
USD	9,929	AUD	13,000	Barclays Bank PLC		1/19/17		519
USD	12,853	AUD	17,000	Goldman Sachs International		1/19/17		548
USD	3,010	CAD	4,000	BNP Paribas S.A.		1/19/17		27
USD	1,496	CAD	2,000	Royal Bank of Canada		1/19/17		4
USD	19,235	CAD	26,000	Royal Bank of Canada		1/19/17		(157	)
USD	3,970	CHF	4,000	Citibank N.A.		1/19/17		30
USD	6,267	EUR	6,000	Bank of America N.A.		1/19/17		(67	)
USD	4,165	EUR	4,000	Bank of America N.A.		1/19/17		(57	)
USD	7,727	EUR	7,000	Bank of America N.A.		1/19/17		337
USD	3,287	EUR	3,000	Bank of America N.A.		1/19/17		120
USD	8,880	EUR	8,000	Barclays Bank PLC		1/19/17		435
USD	4,180	EUR	4,000	BNP Paribas S.A.		1/19/17		(43	)
USD	4,388	EUR	4,000	Citibank N.A.		1/19/17		165
USD	7,809	EUR	7,000	Citibank N.A.		1/19/17		420
USD	3,208	EUR	3,000	Goldman Sachs International		1/19/17		41
USD	2,091	EUR	2,000	Goldman Sachs International		1/19/17		(20	)
USD	1,046	EUR	1,000	Goldman Sachs International		1/19/17		(9	)
USD	8,724	EUR	8,000	Goldman Sachs International		1/19/17		279
USD	8,757	EUR	8,000	Goldman Sachs International		1/19/17		311
USD	5,473	EUR	5,000	Goldman Sachs International		1/19/17		195
USD	16,148	EUR	15,000	Goldman Sachs International		1/19/17		313
USD	25,767	EUR	24,000	Nomura International PLC		1/19/17		431
USD	14,651	GBP	12,000	Barclays Bank PLC		1/19/17		(183	)
USD	5,077	GBP	4,000	Goldman Sachs International		1/19/17		132
USD	13,264	HKD	103,000	Bank of America N.A.		1/19/17		(22	)
USD	13,157	HKD	102,000	Bank of America N.A.		1/19/17		—
USD	28,763	HKD	223,000	BNP Paribas S.A.		1/19/17		(2	)
USD	13,026	HKD	101,000	Citibank N.A.		1/19/17		(2	)
USD	5,933	HKD	46,000	Goldman Sachs International		1/19/17		(1	)
USD	6,577	HKD	51,000	Nomura International PLC		1/19/17		(1	)
USD	4,509	HKD	35,000	Nomura International PLC		1/19/17		(6	)
USD	3,992	HKD	31,000	UBS AG		1/19/17		(7	)
USD	5,032	HKD	39,000	UBS AG		1/19/17		1
USD	3,354	HKD	26,000	UBS AG		1/19/17		—
USD	91,910	IDR	1,219,648,000	Nomura International PLC		1/19/17		1,566
USD	62,842	JPY	6,508,000	Bank of America N.A.		1/19/17		6,992
USD	8,662	JPY	976,000	BNP Paribas S.A.		1/19/17		286
USD	4,722	JPY	532,000	BNP Paribas S.A.		1/19/17		156
USD	18,361	JPY	1,903,000	Citibank N.A.		1/19/17		2,030
USD	973	JPY	100,000	Citibank N.A.		1/19/17		114
USD	1,209	JPY	126,000	Citibank N.A.		1/19/17		128
USD	42,119	NOK	345,000	Bank of America N.A.		1/19/17		2,031
USD	3,986	PHP	199,000	Bank of America N.A.		1/19/17		(16	)
USD	14,169	PHP	712,000	Citibank N.A.		1/19/17		(146	)
USD	3,314	PHP	166,000	Nomura International PLC		1/19/17		(24	)
USD	650	SEK	6,000	Barclays Bank PLC		1/19/17		(11	)
USD	2,780	SEK	25,000	Citibank N.A.		1/19/17		25
USD	3,170	SEK	28,000	Goldman Sachs International		1/19/17		84

See Notes to Financial Statements.

54 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2025 Master Portfolio

Forward Foreign Currency Exchange Contracts (continued)
Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	6,631		SEK	59,000	Goldman Sachs International		1/19/17	$	129
USD	1,127		SEK	10,000	Goldman Sachs International		1/19/17		26
USD	1,351		SEK	12,000	Goldman Sachs International		1/19/17		28
USD	3,268		SEK	29,000	Goldman Sachs International		1/19/17		73
USD	4,092		SEK	37,000	Goldman Sachs International		1/19/17		15
USD	1,113		SEK	10,000	Goldman Sachs International		1/19/17		11
USD	3,252		SEK	29,000	Goldman Sachs International		1/19/17		56
USD	1,085		SEK	10,000	Goldman Sachs International		1/19/17		(16	)
USD	2,814		SGD	4,000	Bank of America N.A.		1/19/17		45
USD	18,737		SGD	26,000	Bank of America N.A.		1/19/17		741
USD	7,019		SGD	10,000	Royal Bank of Canada		1/19/17		98
USD	7,952		SGD	11,000	UBS AG		1/19/17		339
Total								$	2,267

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Futures contracts	Net unrealized appreciation1		—		—	$	351		—		—		—	$	351
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts		—		—		—	$	21,711		—		—		21,711
Total			—		—	$	351	$	21,711		—		—	$	22,062
Liabilities — Derivative Financial Instruments
Futures contracts	Net unrealized depreciation1		—		—	$	92,960	$	33,747		—		—	$	126,707
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts		—		—		—		19,444		—		—		19,444
Total			—		—	$	92,960	$	53,191		—		—	$	146,151
1    Includes cumulative appreciation (depreciation) on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

For the year ended December 31, 2016, the effect of derivative financial instruments in the Statements of Operation was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts		Credit Contracts		Equity Contracts			Foreign Currency Exchange Contracts			Interest Rate Contracts		Other Contracts		Total
Futures contracts		—		—	$	244,916		$	17,502			—		—	$	262,418
Forward foreign currency exchange contracts		—		—		—			8,283			—		—		8,283
Total		—		—	$	244,916		$	25,785			—		—	$	270,701
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts		—		—	$	(92,609	)	$	(33,747	)		—		—	$	(126,356	)
Forward foreign currency exchange contracts		—		—		—			3,324			—		—		3,324
Total		—		—	$	(92,609	)	$	(30,423	)		—		—	$	(123,032	)

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	1,902,055
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	742,294
Average amounts sold — in USD	$	871,935

For more information about the LifePath Master Portfolio’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 55

Schedule of Investments (continued) LifePath Dynamic 2025 Master Portfolio

Derivative Financial Instruments — Offsetting as of Period End

The LifePath Master Portfolio’s derivative assets and liabilities (by type) were as follows:

	Assets			Liabilities
Forward foreign currency exchange contracts	$	21,711		$	19,444
Futures contracts		10,350			33,374
Total derivative assets and liabilities in the Statements of Assets and Liabilities	$	32,061		$	52,818
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(10,350	)		(33,374	)
Total derivative assets and liabilities subject to an MNA	$	21,711		$	19,444

The following tables present the LifePath Master Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the LifePath Master Portfolio:

Counterparty	Derivative Assets Subject to an MNA by  Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets2
Bank of America N.A.	$	12,258	$	(3,892	)		—		—	$	8,366
Barclays Bank PLC		985		(985	)		—		—		—
BNP Paribas S.A.		470		(470	)		—		—		—
Citibank N.A.		3,052		(347	)		—		—		2,705
Goldman Sachs International		2,507		(2,507	)		—		—		—
Nomura International PLC		1,997		(141	)		—		—		1,856
Royal Bank of Canada		102		(102	)		—		—		—
UBS AG		340		(7	)		—		—		333
Total	$	21,711	$	(8,451	)		—		—	$	13,260
Counterparty	Derivative Liabilities Subject to an MNA by  Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities3
Bank of America N.A.	$	3,892	$	(3,892	)		—		—		—
Barclays Bank PLC		2,236		(985	)		—		—	$	1,251
BNP Paribas S.A.		3,280		(470	)		—		—		2,810
Citibank N.A.		347		(347	)		—		—		—
Goldman Sachs International		9,384		(2,507	)		—		—		6,877
Nomura International PLC		141		(141	)		—		—		—
Royal Bank of Canada		157		(102	)		—		—		55
UBS AG		7		(7	)		—		—		—
Total	$	19,444	$	(8,451	)		—		—	$	10,993
1   The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.
2   Net amount represents the net amount receivable from the counterparty in the event of default.
3   Net amount represents the net amount payable due to counterparty in the event of default.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the LifePath Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies:
Equity Funds	$	10,622,679		—		—	$	10,622,679
Fixed Income Fund		3,233,040		—		—		3,233,040
Short-Term Securities		7,077,757		—		—		7,077,757
Common Stocks:
Equity Real Estate Investment Trusts		—	$	82,444		—		82,444
Hotels, Restaurants & Leisure		23,501		—		—		23,501
Real Estate Investment Trusts		1,831,503		584,271		—		2,415,774
Real Estate Management & Development		91,483		626,270		—		717,753
Road & Rail		—		14,544		—		14,544
Subtotal	$	22,879,963	$	1,307,529		—	$	24,187,492
Investments Valued at NAV1								40,749,531
Total							$	64,937,023

See Notes to Financial Statements.

56 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (concluded) LifePath Dynamic 2025 Master Portfolio

	Level 1			Level 2			Level 3		Total
Derivative Financial Instruments2
Assets:
Equity contracts	$	351			—			—	$	351
Forward foreign currency contracts		—		$	21,711			—		21,711
Liabilities:
Equity contracts		(92,960	)		—			—		(92,960	)
Forward foreign currency contracts		(33,747	)		(19,444	)		—		(53,191	)
Total	$	(126,356	)	$	2,267			—	$	(124,089	)
1   As of December 31, 2016, certain of the LifePath Master Portfolio’s investments were valued using NAV per share (or its equivalent) as no quoted market value is available and therefore have been excluded from the fair value hierarchy.
2   Derivative financial instruments are futures contracts and forward foreign currency exchange contracts, which are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 57

Schedule of Investments December 31, 2016 LifePath Dynamic 2035 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 66.1%
Active Stock Master Portfolio	$	19,020,143	$	19,020,143
BlackRock Commodity Strategies Fund		316,505		2,348,466
BlackRock Tactical Opportunities Fund		127,639		1,714,189
International Tilts Master Portfolio	$	7,041,872		7,041,872
iShares Core S&P 500 ETF (b)		744		167,392
iShares Edge MSCI Multifactor Intl ETF		73,013		1,696,092
iShares Edge MSCI Multifactor USA ETF		172,050		4,597,176
iShares MSCI EAFE Small-Cap ETF		27,050		1,348,172
				37,933,502
Fixed Income Funds — 15.1%
CoreAlpha Bond Master Portfolio	$	5,654,731		5,654,731
iShares TIPS Bond ETF		11,036		1,248,944
Master Total Return Portfolio	$	1,765,193		1,765,193
				8,668,868
Short-Term Securities — 8.9%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.87% (c)(d)		171,309		171,343
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (c)		4,916,810		4,916,810
				5,088,153
Total Affiliated Investment Companies — 90.1%				51,690,523
Common Stocks
Equity Real Estate Investment Trusts (REITs) — 0.2%
Ichigo Hotel REIT Investment Corp.		49		54,067
New South Resources, Ltd. (e)		83,953		90,519
				144,586
Hotels, Restaurants & Leisure — 0.1%
Hilton Worldwide Holdings, Inc.		1,517		41,262
Real Estate Investment Trusts (REITs) — 7.4%
Agree Realty Corp.		689		31,728
Alexandria Real Estate Equities, Inc.		562		62,455
American Campus Communities, Inc.		1,491		74,207
American Homes 4 Rent, Class A		1,181		24,777
AvalonBay Communities, Inc.		601		106,467
Beni Stabili SpA SIIQ		52,585		30,057
Boston Properties, Inc.		1,498		188,418
British Land Co. PLC		12,194		94,632
CareTrust REIT, Inc.		5,281		80,905
CyrusOne, Inc.		1,323		59,178
DiamondRock Hospitality Co.		7,117		82,059
DuPont Fabros Technology, Inc.		1,902		83,555
EPR Properties		1,234		88,564
Equity One, Inc.		2,056		63,099
Essex Property Trust, Inc.		605		140,663
Eurocommercial Properties NV CVA		960		36,927
Extra Space Storage, Inc.		1,860		143,666
Federal Realty Investment Trust		934		132,731
First Industrial Realty Trust, Inc.		4,345		121,877
Gecina SA		165		22,789
General Growth Properties, Inc.		3,526		88,080
Gramercy Property Trust		7,429		68,198
Great Portland Estates PLC		3,724		30,592
Hammerson PLC		7,185		50,637
HCP, Inc.		5,378		159,834
Highwoods Properties, Inc.		956		48,766

Common Stocks	Shares		Value
Real Estate Investment Trusts (REITs) (continued)
Host Hotels & Resorts, Inc.		5,080	$	95,707
Ichigo Office REIT Investment Corp.		98		63,695
Japan Hotel REIT Investment Corp.		84		56,522
Japan Rental Housing Investments, Inc.		73		48,993
Kenedix Retail REIT Corp.		22		50,130
Kilroy Realty Corp.		1,048		76,735
Liberty Property Trust		2,229		88,046
Link REIT		6,000		38,898
Macerich Co.		1,012		71,690
Mid-America Apartment Communities, Inc.		842		82,449
NSI NV		14,056		53,053
Public Storage		216		48,276
Retail Properties of America, Inc., Class A		6,508		99,768
Rexford Industrial Realty, Inc.		1,765		40,930
RioCan Real Estate Investment Trust		1,327		26,320
Scentre Group		31,021		103,842
Simon Property Group, Inc.		1,309		232,570
SL Green Realty Corp.		507		54,528
STAG Industrial, Inc.		3,275		78,174
Sun Communities, Inc.		534		40,910
UDR, Inc.		3,613		131,802
Unibail-Rodamco SE		755		179,920
Vastned Retail NV		1,340		51,993
Ventas, Inc.		917		57,331
Welltower, Inc.		852		57,024
Westfield Corp.		28,784		194,621
				4,238,788
Real Estate Management & Development — 2.2%
Ayala Land, Inc.		23,200		14,906
BUWOG AG		4,163		96,643
Cheung Kong Property Holdings Ltd.		16,500		100,765
China Resources Land Ltd.		12,000		26,852
Deutsche Wohnen AG, Bearer Shares		1,975		61,949
First Capital Realty, Inc.		3,378		52,004
Global Logistic Properties Ltd.		58,900		89,187
Howard Hughes Corp. (e)		396		45,184
Inmobiliaria Colonial SA		11,051		76,480
Intiland Development Tbk PT		1,262,800		46,848
Kungsleden AB		6,155		38,927
LEG Immobilien AG		865		67,089
Leopalace21 Corp.		1,100		6,076
Mega Manunggal Property Tbk PT (e)		1,166,900		59,330
Megaworld Corp.		348,000		24,913
Mitsui Fudosan Co. Ltd.		2,000		46,301
Modernland Realty Tbk PT (e)		143,300		3,632
Puradelta Lestari Tbk PT		965,700		16,442
St. Modwen Properties PLC		7,721		29,047
Sun Hung Kai Properties Ltd.		12,000		151,110
Takara Leben Co., Ltd.		5,100		29,626
Unizo Holdings Co., Ltd.		5,100		134,853
Wihlborgs Fastigheter AB		1,694		31,441
				1,249,605
Road & Rail — 0.0%
MTR Corp. Ltd.		5,500		26,665
Total Common Stocks— 9.9%				5,700,906
Total Investments (Cost — $55,847,802) — 100.0%				57,391,429
Liabilities in Excess of Other Assets — (0.0)%				(14,197	)
Net Assets — 100.0%			$	57,377,232

See Notes to Financial Statements.

58 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2035 Master Portfolio

Notes to Schedule of Investments

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December 31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
Active Stock Master Portfolio	$	14,054,616	$	4,965,527	1		—		$	19,020,143	$	19,020,143	$	243,855		$	1,082,470
BlackRock Cash Funds: Institutional, SL Agency Shares		114,578		56,731	1		—			171,309		171,343		2,410	3		—
BlackRock Cash Funds: Prime, SL Agency Shares*		—		—			—			—		—		224	3		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		4,916,810	1		—			4,916,810		4,916,810		2,211			342
BlackRock Commodity Strategies Fund		335,825		—			(19,320	)		316,505		2,348,466		21,945			(264,374	)
BlackRock Emerging Markets Fund, Inc.*		159,122		38,455			(197,577	)		—		—		—			(296,489	)
BlackRock Tactical Opportunities Fund		—		127,639			—			127,639		1,714,189		32,209			—
Master Total Return Portfolio		—	$	1,765,193	1		—		$	1,765,193		1,765,193		7,043			(8,850	)
CoreAlpha Bond Master Portfolio	$	9,231,410		—		$	(3,576,679	)2	$	5,654,731		5,654,731		203,600			42,640
International Tilts Master Portfolio	$	9,806,167		—		$	(2,764,295	)2	$	7,041,872		7,041,872		276,547			(761,480	)
iShares Core S&P 500 ETF		—		5,184			(4,440	)		744		167,392		970			14,713
iShares Edge MSCI Multifactor Intl ETF		—		76,965			(3,952	)		73,013		1,696,092		13,377			(1,278	)
iShares Edge MSCI Multifactor USA ETF		—		172,050			—			172,050		4,597,176		16,656			—
iShares Edge MSCI Min Vol EAFE ETF*		—		7,353			(7,353	)		—		—		—			9,941
iShares Edge MSCI Min Vol EAFE USA ETF*		—		27,391			(27,391	)		—		—		—			23,954
iShares MSCI Canada ETF *		34,847		6,607			(41,454	)		—		—		6,405			(120,950	)
iShares MSCI EAFE Small-Cap ETF		27,791		6,326			(7,067	)		27,050		1,348,172		38,486			(10,596	)
iShares TIPS Bond ETF		—		11,626			(590	)		11,036		1,248,944		5,126			803
Large Cap Index Master Portfolio*	$	9,308,017		—		$	(9,308,017	)2		—		—		178,462			31,687
Master Small Cap Index Series*	$	1,323,109		—		$	(1,323,109	)2		—		—		14,694			36,369
Total											$	51,690,523	$	1,064,220		$	(221,098	)
*  No longer held by the LifePath Master Portfolio as of period end.
1    Represents net shares/investment value purchased.
2   Represents net shares/investment value sold.
3    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

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

(c) Current yield as of period end.

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

(e) Non-income producing security.

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

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts
Contracts Long		Issue	Expiration		Notional Value		Unrealized Appreciation (Depreciation)
	13	Canadian Dollar		March 2017	$	967,395	$	(23,359	)
	11	Euro Dollar		March 2017	$	1,453,925		(14,463	)
	74	MSCI Emerging Markets E-Mini Index		March 2017	$	3,177,930		(69,942	)
	18	Russell 2000 E-Mini Index		March 2017	$	1,221,210		(23,304	)
	1	S&P 500 E-Mini Index		March 2017	$	111,810		(716	)
	7	S&P/TSX 60 Index		March 2017	$	935,210		407
	Total						$	(131,377	)

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 59

Schedule of Investments (continued) LifePath Dynamic 2035 Master Portfolio

Forward Foreign Currency Exchange Contracts
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
AUD	15,000	USD	11,553	Barclays Bank PLC		1/19/17	$	(695	)
AUD	5,000	USD	3,797	Barclays Bank PLC		1/19/17		(178	)
AUD	10,000	USD	7,441	BNP Paribas S.A.		1/19/17		(203	)
AUD	52,000	USD	38,233	Goldman Sachs International		1/19/17		(595	)
CAD	103,000	USD	78,445	Goldman Sachs International		1/19/17		(1,624	)
CAD	10,000	USD	7,625	Goldman Sachs International		1/19/17		(166	)
CAD	42,000	USD	31,288	Goldman Sachs International		1/19/17		37
CHF	48,000	USD	48,809	Bank of America N.A.		1/19/17		(1,530	)
CHF	2,000	USD	1,985	Citibank N.A.		1/19/17		(15	)
EUR	18,000	USD	19,821	BNP Paribas S.A.		1/19/17		(819	)
EUR	12,000	USD	13,218	Goldman Sachs International		1/19/17		(550	)
EUR	3,000	USD	3,280	Goldman Sachs International		1/19/17		(112	)
GBP	10,000	USD	12,530	Bank of America N.A.		1/19/17		(168	)
GBP	1,000	USD	1,226	Bank of America N.A.		1/19/17		10
GBP	5,000	USD	6,130	Barclays Bank PLC		1/19/17		51
GBP	10,000	USD	12,452	Barclays Bank PLC		1/19/17		(90	)
GBP	2,000	USD	2,466	Citibank N.A.		1/19/17		6
GBP	5,000	USD	6,286	Citibank N.A.		1/19/17		(105	)
GBP	5,000	USD	6,180	Citibank N.A.		1/19/17		1
GBP	7,000	USD	8,594	Goldman Sachs International		1/19/17		59
GBP	12,000	USD	14,694	Goldman Sachs International		1/19/17		140
GBP	5,000	USD	6,095	Goldman Sachs International		1/19/17		86
GBP	6,000	USD	7,354	Goldman Sachs International		1/19/17		63
GBP	2,000	USD	2,469	Goldman Sachs International		1/19/17		3
GBP	1,000	USD	1,269	Goldman Sachs International		1/19/17		(33	)
GBP	2,000	USD	2,536	Goldman Sachs International		1/19/17		(64	)
HKD	136,000	USD	17,547	Barclays Bank PLC		1/19/17		(5	)
HKD	37,000	USD	4,773	BNP Paribas S.A.		1/19/17		—
HKD	103,000	USD	13,284	BNP Paribas S.A.		1/19/17		2
HKD	1,221,000	USD	157,518	Goldman Sachs International		1/19/17		(23	)
HKD	63,000	USD	8,130	UBS AG		1/19/17		(3	)
IDR	77,277,000	USD	5,741	BNP Paribas S.A.		1/19/17		(17	)
IDR	132,963,000	USD	9,762	Citibank N.A.		1/19/17		87
IDR	113,548,000	USD	8,609	Nomura International PLC		1/19/17		(198	)
ILS	22,000	USD	5,764	Bank of America N.A.		1/19/17		(46	)
JPY	1,549,000	USD	13,791	Bank of America N.A.		1/19/17		(498	)
JPY	952,000	USD	8,274	Bank of America N.A.		1/19/17		(104	)
JPY	504,000	USD	4,267	Bank of America N.A.		1/19/17		58
JPY	809,000	USD	6,955	Bank of America N.A.		1/19/17		(12	)
JPY	881,000	USD	8,400	BNP Paribas S.A.		1/19/17		(839	)
JPY	1,344,000	USD	12,861	BNP Paribas S.A.		1/19/17		(1,327	)
JPY	8,128,000	USD	73,409	BNP Paribas S.A.		1/19/17		(3,656	)
JPY	2,679,000	USD	23,946	BNP Paribas S.A.		1/19/17		(956	)
JPY	1,249,000	USD	10,619	Citibank N.A.		1/19/17		100
JPY	2,027,000	USD	19,671	Goldman Sachs International		1/19/17		(2,276	)
JPY	653,000	USD	6,286	Goldman Sachs International		1/19/17		(683	)
JPY	6,228,000	USD	59,926	Goldman Sachs International		1/19/17		(6,478	)
JPY	2,197,000	USD	21,023	Goldman Sachs International		1/19/17		(2,169	)
JPY	2,911,000	USD	25,668	Goldman Sachs International		1/19/17		(686	)
JPY	122,000	USD	1,075	Goldman Sachs International		1/19/17		(28	)
JPY	700,000	USD	5,936	Goldman Sachs International		1/19/17		71
JPY	1,206,000	USD	11,107	Royal Bank of Canada		1/19/17		(757	)
JPY	251,000	USD	2,150	Royal Bank of Canada		1/19/17		4
NOK	178,000	USD	20,895	Citibank N.A.		1/19/17		(212	)
NOK	40,000	USD	4,886	Goldman Sachs International		1/19/17		(238	)
NOK	91,000	USD	10,994	Goldman Sachs International		1/19/17		(420	)
NOK	59,000	USD	7,152	Goldman Sachs International		1/19/17		(296	)
NOK	27,000	USD	3,223	Goldman Sachs International		1/19/17		(86	)
NOK	14,000	USD	1,674	Goldman Sachs International		1/19/17		(48	)
NOK	102,000	USD	12,106	Goldman Sachs International		1/19/17		(254	)
NOK	36,000	USD	4,152	Goldman Sachs International		1/19/17		31
NOK	13,000	USD	1,502	Goldman Sachs International		1/19/17		9
NZD	8,000	USD	5,686	Barclays Bank PLC		1/19/17		(111	)
SEK	383,000	USD	43,622	Bank of America N.A.		1/19/17		(1,417	)
SEK	28,000	USD	3,053	Citibank N.A.		1/19/17		33

See Notes to Financial Statements.

60 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2035 Master Portfolio

Forward Foreign Currency Exchange Contracts (continued)
Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
SGD	5,000		USD	3,595	Bank of America N.A.		1/19/17	$	(134	)
SGD	87,000		USD	62,652	Barclays Bank PLC		1/19/17		(2,436	)
SGD	18,000		USD	12,991	Barclays Bank PLC		1/19/17		(533	)
SGD	13,000		USD	9,382	BNP Paribas S.A.		1/19/17		(385	)
SGD	9,000		USD	6,493	BNP Paribas S.A.		1/19/17		(264	)
USD	52,470		AUD	69,000	Bank of America N.A.		1/19/17		2,527
USD	17,330		AUD	23,000	Bank of America N.A.		1/19/17		682
USD	16,039		AUD	21,000	Barclays Bank PLC		1/19/17		839
USD	5,331		AUD	7,000	Goldman Sachs International		1/19/17		264
USD	21,926		AUD	29,000	Goldman Sachs International		1/19/17		935
USD	2,269		CAD	3,000	Goldman Sachs International		1/19/17		32
USD	33,292		CAD	45,000	Royal Bank of Canada		1/19/17		(271	)
USD	5,519		EUR	5,000	Bank of America N.A.		1/19/17		241
USD	5,478		EUR	5,000	Bank of America N.A.		1/19/17		199
USD	10,445		EUR	10,000	Bank of America N.A.		1/19/17		(111	)
USD	29,622		EUR	27,000	Barclays Bank PLC		1/19/17		1,119
USD	22,201		EUR	20,000	Barclays Bank PLC		1/19/17		1,088
USD	13,584		EUR	13,000	BNP Paribas S.A.		1/19/17		(140	)
USD	15,622		EUR	14,000	Citibank N.A.		1/19/17		843
USD	15,267		EUR	14,000	Goldman Sachs International		1/19/17		487
USD	15,324		EUR	14,000	Goldman Sachs International		1/19/17		545
USD	25,837		EUR	24,000	Goldman Sachs International		1/19/17		501
USD	8,555		EUR	8,000	Goldman Sachs International		1/19/17		110
USD	4,182		EUR	4,000	Goldman Sachs International		1/19/17		(41	)
USD	2,093		EUR	2,000	Goldman Sachs International		1/19/17		(18	)
USD	45,092		EUR	42,000	Nomura International PLC		1/19/17		754
USD	19,535		GBP	16,000	Barclays Bank PLC		1/19/17		(244	)
USD	5,077		GBP	4,000	Goldman Sachs International		1/19/17		132
USD	19,736		HKD	153,000	Bank of America N.A.		1/19/17		1
USD	44,757		HKD	347,000	BNP Paribas S.A.		1/19/17		(2	)
USD	22,828		HKD	177,000	Citibank N.A.		1/19/17		(3	)
USD	14,836		HKD	115,000	Goldman Sachs International		1/19/17		3
USD	7,996		HKD	62,000	Goldman Sachs International		1/19/17		(1	)
USD	16,379		HKD	127,000	Nomura International PLC		1/19/17		(3	)
USD	9,018		HKD	70,000	Nomura International PLC		1/19/17		(11	)
USD	6,708		HKD	52,000	UBS AG		1/19/17		1
USD	7,083		HKD	55,000	UBS AG		1/19/17		(12	)
USD	17,772		HKD	138,000	UBS AG		1/19/17		(28	)
USD	151,546		IDR	2,011,014,000	Nomura International PLC		1/19/17		2,582
USD	105,358		JPY	10,911,000	Bank of America N.A.		1/19/17		11,722
USD	7,686		JPY	866,000	BNP Paribas S.A.		1/19/17		254
USD	14,440		JPY	1,627,000	BNP Paribas S.A.		1/19/17		477
USD	39,589		JPY	4,103,000	Citibank N.A.		1/19/17		4,377
USD	2,427		JPY	253,000	Citibank N.A.		1/19/17		256
USD	2,684		JPY	282,000	Goldman Sachs International		1/19/17		263
USD	65,193		NOK	534,000	Bank of America N.A.		1/19/17		3,143
USD	853		NOK	7,000	Goldman Sachs International		1/19/17		39
USD	6,089		PHP	304,000	Bank of America N.A.		1/19/17		(24	)
USD	23,741		PHP	1,193,000	Citibank N.A.		1/19/17		(245	)
USD	5,630		PHP	282,000	Nomura International PLC		1/19/17		(40	)
USD	1,299		SEK	12,000	Barclays Bank PLC		1/19/17		(23	)
USD	4,447		SEK	40,000	Citibank N.A.		1/19/17		40
USD	5,208		SEK	46,000	Goldman Sachs International		1/19/17		139
USD	10,901		SEK	97,000	Goldman Sachs International		1/19/17		212
USD	1,804		SEK	16,000	Goldman Sachs International		1/19/17		41
USD	2,138		SEK	19,000	Goldman Sachs International		1/19/17		45
USD	5,410		SEK	48,000	Goldman Sachs International		1/19/17		120
USD	6,636		SEK	60,000	Goldman Sachs International		1/19/17		24
USD	6,616		SEK	59,000	Goldman Sachs International		1/19/17		114
USD	2,171		SEK	20,000	Goldman Sachs International		1/19/17		(33	)
USD	32,429		SGD	45,000	Bank of America N.A.		1/19/17		1,283
USD	6,330		SGD	9,000	Bank of America N.A.		1/19/17		101
USD	6,316		SGD	9,000	Barclays Bank PLC		1/19/17		87
USD	11,231		SGD	16,000	Royal Bank of Canada		1/19/17		157
Total								$	1,838

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 61

Schedule of Investments (continued) LifePath Dynamic 2035 Master Portfolio

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Futures contracts	Net unrealized appreciation1		—		—	$	407		—		—		—	$	407
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts		—		—		—	$	37,630		—		—		37,630
Total			—		—	$	407	$	37,630		—		—	$	38,037
Liabilities — Derivative Financial Instruments
Futures contracts	Net unrealized depreciation1		—		—	$	93,962	$	37,822		—		—	$	131,784
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts		—		—		—		35,792		—		—		35,792
Total			—		—	$	93,962	$	73,614		—		—	$	167,576
1    Includes cumulative appreciation (depreciation) on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

For the year ended December 31, 2016, the effect of derivative financial instruments in the Statements of Operation was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts		Credit Contracts		Equity Contracts			Foreign Currency Exchange Contracts			Interest Rate Contracts		Other Contracts		Total
Futures contracts		—		—	$	226,043		$	25,291			—		—	$	251,334
Forward foreign currency exchange contracts		—		—		—			10,021			—		—		10,021
Total		—		—	$	226,043		$	35,312			—		—	$	261,355
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts		—		—	$	(93,555	)	$	(37,822	)		—		—	$	(131,377	)
Forward foreign currency exchange contracts		—		—		—			3,571			—		—		3,571
Total		—		—	$	(93,555	)	$	(34,251	)		—		—	$	(127,806	)

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	1,966,870
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	1,204,805
Average amounts sold — in USD	$	1,397,735

For more information about the LifePath Master Portfolio’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Derivative Financial Instruments — Offsetting as of Period End

The LifePath Master Portfolio’s derivative assets and liabilities (by type) were as follows:

	Assets			Liabilities
Forward foreign currency exchange contracts	$	37,630		$	35,792
Futures contracts		10,408			36,361
Total derivative assets and liabilities in the Statements of Assets and Liabilities	$	48,038		$	72,153
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(10,408	)		(36,361	)
Total derivative assets and liabilities subject to an MNA	$	37,630		$	35,792

See Notes to Financial Statements.

62 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2035 Master Portfolio

The following tables present the LifePath Master Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the LifePath Master Portfolio:

Counterparty	Derivative Assets Subject to an MNA by  Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets2
Bank of America N.A.	$	19,967	$	(4,044	)		—		—	$	15,923
Barclays Bank PLC		3,184		(3,184	)		—		—		—
BNP Paribas S.A.		733		(733	)		—		—		—
Citibank N.A.		5,743		(580	)		—		—		5,163
Goldman Sachs International		4,505		(4,505	)		—		—		—
Nomura International PLC		3,336		(252	)		—		—		3,084
Royal Bank of Canada		161		(161	)		—		—		—
UBS AG		1		(1	)		—		—		—
Total	$	37,630	$	(13,460	)		—		—	$	24,170
Counterparty	Derivative Liabilities Subject to an MNA by  Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities3
Bank of America N.A.	$	4,044	$	(4,044	)		—		—		—
Barclays Bank PLC		4,315		(3,184	)		—		—	$	1,131
BNP Paribas S.A.		8,608		(733	)		—		—		7,875
Citibank N.A.		580		(580	)		—		—		—
Goldman Sachs International		16,922		(4,505	)		—		—		12,417
Nomura International PLC		252		(252	)		—		—		—
Royal Bank of Canada		1,028		(161	)		—		—		867
UBS AG		43		(1	)		—		—		42
Total	$	35,792	$	(13,460	)		—		—	$	22,332
1   The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.
2   Net amount represents the net amount receivable from the counterparty in the event of default.
3   Net amount represents the net amount payable due to counterparty in the event of default.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the LifePath Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Equity Funds	$	11,871,487		—		—	$	11,871,487
Fixed Income Funds		1,248,944		—		—		1,248,944
Short-Term Securities		5,088,153		—		—		5,088,153
Common Stocks:
Equity Real Estate Investment Trusts		—	$	144,586		—		144,586
Hotels, Restaurants & Leisure		41,262		—		—		41,262
Real Estate Investment Trusts		3,213,536		1,025,252		—		4,238,788
Real Estate Management & Development		156,518		1,093,087		—		1,249,605
Road & Rail		—		26,665		—		26,665
Subtotal	$	21,619,900	$	2,289,590		—	$	23,909,490
Investments Valued at NAV1								33,481,939
Total							$	57,391,429

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 63

Schedule of Investments (concluded) LifePath Dynamic 2035 Master Portfolio

	Level 1			Level 2			Level 3		Total
Derivative Financial Instruments 2
Assets:
Equity contracts	$	407			—			—	$	407
Forward foreign currency contracts		—		$	37,630			—		37,630
Liabilities:
Equity contracts		(93,962	)		—			—		(93,962	)
Forward foreign currency contracts		(37,822	)		(35,792	)		—		(73,614	)
Total	$	(131,377	)	$	1,838			—	$	(129,539	)
1   As of December 31, 2016, certain of the LifePath Master Portfolio’s investments were valued using NAV per share (or its equivalent) as no quoted market value is available and therefore have been excluded from the fair value hierarchy.
2   Derivative financial instruments are futures contracts and forward foreign currency exchange contracts, which are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

64 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 LifePath Dynamic 2045 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 72.1%
Active Stock Master Portfolio	$	12,631,821	$	12,631,821
BlackRock Commodity Strategies Fund		217,287		1,612,266
BlackRock Tactical Opportunities Fund		26,192		351,763
International Tilts Master Portfolio	$	5,180,644		5,180,644
iShares Core S&P 500 ETF		2,508		564,275
iShares Edge MSCI Multifactor Intl ETF		59,532		1,382,928
iShares Edge MSCI Multifactor USA ETF		128,858		3,443,086
iShares MSCI EAFE Small-Cap ETF		21,690		1,081,030
				26,247,813
Fixed Income Funds — 1.9%
CoreAlpha Bond Master Portfolio	$	626,646		626,646
iShares TIPS Bond ETF		772		87,367
				714,013
Short-Term Securities — 11.7%
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (b)		4,271,765		4,271,765
Total Affiliated Investment Companies — 85.7%				31,233,591
Common Stocks
Equity Real Estate Investment Trusts (REITs) — 0.3%
Ichigo Hotel REIT Investment Corp.		42		46,343
New South Resources, Ltd. (c)		73,007		78,717
				125,060
Hotels, Restaurants & Leisure — 0.1%
Hilton Worldwide Holdings, Inc.		1,318		35,850
Real Estate Investment Trusts (REITs) — 10.1%
Agree Realty Corp.		599		27,584
Alexandria Real Estate Equities, Inc.		487		54,120
American Campus Communities, Inc.		1,296		64,502
American Homes 4 Rent, Class A		1,026		21,525
AvalonBay Communities, Inc.		523		92,649
Beni Stabili SpA SIIQ		46,583		26,626
Boston Properties, Inc.		1,302		163,766
British Land Co. PLC		10,021		77,768
CareTrust REIT, Inc.		4,590		70,319
CyrusOne, Inc.		1,135		50,769
DiamondRock Hospitality Co.		6,188		71,348
DuPont Fabros Technology, Inc.		1,654		72,660
EPR Properties		1,073		77,009
Equity One, Inc.		1,788		54,874
Essex Property Trust, Inc.		526		122,295
Eurocommercial Properties NV CVA		835		32,119
Extra Space Storage, Inc.		1,623		125,361
Federal Realty Investment Trust		812		115,393
First Industrial Realty Trust, Inc.		3,778		105,973
Gecina SA		144		19,889
General Growth Properties, Inc.		3,065		76,564
Gramercy Property Trust		6,456		59,266
Great Portland Estates PLC		3,297		27,084
Hammerson PLC		5,988		42,201
HCP, Inc.		4,674		138,911
Highwoods Properties, Inc.		831		42,389
Host Hotels & Resorts, Inc.		4,422		83,311
Ichigo Office REIT Investment Corp.		84		54,596
Japan Hotel REIT Investment Corp.		72		48,448

Common Stocks	Shares		Value
Real Estate Investment Trusts (REITs) (continued)
Japan Rental Housing Investments, Inc.		62	$	41,610
Kenedix Retail REIT Corp.		19		43,294
Kilroy Realty Corp.		903		66,118
Liberty Property Trust		1,937		76,512
Link REIT		5,500		35,657
Macerich Co.		880		62,339
Mid-America Apartment Communities, Inc.		732		71,677
NSI NV		12,373		46,700
Public Storage		184		41,124
Retail Properties of America, Inc., Class A		5,658		86,737
Rexford Industrial Realty, Inc.		1,514		35,110
RioCan Real Estate Investment Trust		1,144		22,690
Scentre Group		26,977		90,305
Simon Property Group, Inc.		1,137		202,011
SL Green Realty Corp.		440		47,322
STAG Industrial, Inc.		2,822		67,361
Sun Communities, Inc.		464		35,547
UDR, Inc.		3,140		114,547
Unibail-Rodamco SE		657		156,566
Vastned Retail NV		1,169		45,358
Ventas, Inc.		797		49,828
Welltower, Inc.		740		49,528
Westfield Corp.		25,031		169,246
				3,676,506
Real Estate Management & Development — 3.0%
Ayala Land, Inc.		18,800		12,079
BUWOG AG		3,619		84,015
Cheung Kong Property Holdings Ltd.		13,500		82,444
China Resources Land Ltd.		12,000		26,852
Deutsche Wohnen AG, Bearer Shares		1,717		53,856
First Capital Realty, Inc.		2,913		44,845
Global Logistic Properties Ltd.		51,300		77,679
Howard Hughes Corp. (c)		345		39,365
Inmobiliaria Colonial SA		9,661		66,860
Intiland Development Tbk PT		1,035,800		38,426
Kungsleden AB		5,353		33,855
LEG Immobilien AG		746		57,859
Leopalace21 Corp.		900		4,971
Mega Manunggal Property Tbk PT (c)		930,300		47,301
Megaworld Corp.		302,000		21,620
Mitsui Fudosan Co. Ltd.		2,000		46,301
Modernland Realty Tbk PT (c)		143,400		3,635
Puradelta Lestari Tbk PT		835,800		14,230
St. Modwen Properties PLC		6,715		25,262
Sun Hung Kai Properties Ltd.		11,000		138,517
Takara Leben Co., Ltd.		4,200		24,398
Unizo Holdings Co., Ltd.		4,300		113,700
Wihlborgs Fastigheter AB		1,473		27,339
				1,085,409
Road & Rail — 0.1%
MTR Corp. Ltd.		4,500		21,817
Total Common Stocks — 13.6%				4,944,642
Total Investments (Cost — $34,944,064) — 99.3%				36,178,233
Other Assets Less Liabilities — 0.7%				244,752
Net Assets — 100.0%			$	36,422,985

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 65

Schedule of Investments (continued) LifePath Dynamic 2045 Master Portfolio

Notes to Schedule of Investments

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December  31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
Active Stock Master Portfolio	$	9,661,693	$	2,970,128	1		—		$	12,631,821	$	12,631,821	$	166,748		$	736,800
BlackRock Cash Funds: Institutional, SL Agency Shares*		69,510		—			(69,510	)2		—		—		2,562	3		(53	)
BlackRock Cash Funds: Prime, SL Agency Shares*		—		—			—			—		—		370	3		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		4,271,765	1		—			4,271,765		4,271,765		2,166			281
BlackRock Commodity Strategies Fund		218,114		61,527			(62,354	)		217,287		1,612,266		15,066			(176,479	)
BlackRock Emerging Markets Fund, Inc.*		115,074		22,451			(137,525	)		—		—		—			(183,524	)
BlackRock Tactical Opportunities Fund		—		26,192			—			26,192		351,763		6,610			—
CoreAlpha Bond Master Portfolio	$	919,479		—		$	(292,833	)2	$	626,646		626,646		21,760			3,790
International Tilts Master Portfolio	$	7,130,177		—		$	(1,949,533	)2	$	5,180,644		5,180,644		205,274			(552,530	)
iShares Core S&P 500 ETF		—		3,192			(684	)		2,508		564,275		3,271			5,440
iShares Edge MSCI Min Vol EAFE ETF*		—		5,653			(5,653	)		—		—		—			7,643
iShares Edge MSCI Min Vol USA ETF*		—		18,842			(18,842	)		—		—		—			16,477
iShares Edge MSCI Multifactor Intl ETF		—		59,532			—			59,532		1,382,928		10,907			—
iShares Edge MSCI Multifactor USA ETF		—		128,858			—			128,858		3,443,086		12,474			—
iShares MSCI Canada ETF*		25,466		4,161			(29,627	)		—		—		4,909			(92,441	)
iShares MSCI EAFE Small-Cap ETF		20,165		6,996			(5,471	)		21,690		1,081,030		30,110			(4,951	)
iShares TIPS Bond ETF		—		772			—			772		87,367		188			—
Large Cap Index Master Portfolio*	$	6,622,730		—		$	(6,622,730	)2		—		—		129,961			26,170
Master Small Cap Index Series*	$	739,657		—		$	(739,657	)2		—		—		8,711			10,821
Total											$	31,233,591	$	621,087		$	(202,556	)
*  No longer held by the LifePath Master Portfolio as of period end.
1    Represents net shares/investment value purchased.
2   Represents net shares/investment value sold.
3    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

(b) Current yield as of period end.

(c) Non-income producing security.

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

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts
Contracts Long		Issue	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
	9	Canadian Dollar	March 2017	$	669,735	$	(16,173	)
	7	Euro Dollar	March 2017	$	925,225		(9,204	)
	56	MSCI Emerging Markets E-Mini Index	March 2017	$	2,404,920		(52,929	)
	10	Russell 2000 E-Mini Index	March 2017	$	678,450		(12,946	)
	5	S&P 500 E-Mini Index	March 2017	$	559,050		(3,580	)
	5	S&P/TSX 60 Index	March 2017	$	668,007		292
	Total					$	(94,540	)

See Notes to Financial Statements.

66 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2045 Master Portfolio

Forward Foreign Currency Exchange Contracts
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
AUD	11,000	USD	8,353	Barclays Bank PLC		1/19/17	$	(391	)
AUD	2,000	USD	1,488	BNP Paribas S.A.		1/19/17		(41	)
AUD	42,000	USD	30,881	Goldman Sachs International		1/19/17		(481	)
CAD	6,000	USD	4,470	Barclays Bank PLC		1/19/17		5
CAD	12,000	USD	9,031	BNP Paribas S.A.		1/19/17		(81	)
CAD	35,000	USD	26,073	Goldman Sachs International		1/19/17		31
CAD	89,000	USD	67,783	Goldman Sachs International		1/19/17		(1,403	)
CHF	42,000	USD	42,708	Bank of America N.A.		1/19/17		(1,339	)
CHF	2,000	USD	1,985	Citibank N.A.		1/19/17		(15	)
EUR	17,000	USD	18,720	BNP Paribas S.A.		1/19/17		(773	)
EUR	3,000	USD	3,280	Goldman Sachs International		1/19/17		(113	)
GBP	4,000	USD	4,944	Bank of America N.A.		1/19/17		1
GBP	1,000	USD	1,226	Bank of America N.A.		1/19/17		10
GBP	3,000	USD	3,678	Barclays Bank PLC		1/19/17		31
GBP	9,000	USD	11,207	Barclays Bank PLC		1/19/17		(81	)
GBP	5,000	USD	6,286	Citibank N.A.		1/19/17		(105	)
GBP	6,000	USD	7,354	Goldman Sachs International		1/19/17		63
GBP	5,000	USD	6,265	Goldman Sachs International		1/19/17		(84	)
GBP	1,000	USD	1,235	Goldman Sachs International		1/19/17		2
GBP	4,000	USD	5,077	Goldman Sachs International		1/19/17		(132	)
GBP	1,000	USD	1,269	Goldman Sachs International		1/19/17		(33	)
GBP	1,000	USD	1,268	Goldman Sachs International		1/19/17		(32	)
GBP	2,000	USD	2,466	Goldman Sachs International		1/19/17		6
GBP	9,000	USD	11,049	Goldman Sachs International		1/19/17		76
GBP	10,000	USD	12,245	Goldman Sachs International		1/19/17		117
HKD	32,000	USD	4,129	Barclays Bank PLC		1/19/17		(1	)
HKD	131,000	USD	16,894	Barclays Bank PLC		1/19/17		4
HKD	31,000	USD	3,999	BNP Paribas S.A.		1/19/17		—
HKD	1,060,000	USD	136,748	Goldman Sachs International		1/19/17		(20	)
IDR	104,868,000	USD	7,699	Citibank N.A.		1/19/17		69
IDR	89,282,000	USD	6,769	Nomura International PLC		1/19/17		(155	)
ILS	18,000	USD	4,716	Bank of America N.A.		1/19/17		(37	)
ILS	9,000	USD	2,359	Royal Bank of Canada		1/19/17		(20	)
JPY	3,821,000	USD	35,193	Bank of America N.A.		1/19/17		(2,401	)
JPY	1,796,000	USD	15,990	Bank of America N.A.		1/19/17		(577	)
JPY	912,000	USD	7,926	Bank of America N.A.		1/19/17		(100	)
JPY	504,000	USD	4,267	Bank of America N.A.		1/19/17		58
JPY	252,000	USD	2,160	Bank of America N.A.		1/19/17		3
JPY	809,000	USD	6,955	Bank of America N.A.		1/19/17		(12	)
JPY	623,000	USD	5,940	BNP Paribas S.A.		1/19/17		(593	)
JPY	1,386,000	USD	13,263	BNP Paribas S.A.		1/19/17		(1,369	)
JPY	5,381,000	USD	48,599	BNP Paribas S.A.		1/19/17		(2,420	)
JPY	2,680,000	USD	23,955	BNP Paribas S.A.		1/19/17		(956	)
JPY	1,077,000	USD	9,157	Citibank N.A.		1/19/17		86
JPY	5,078,000	USD	48,860	Goldman Sachs International		1/19/17		(5,282	)
JPY	2,443,000	USD	23,377	Goldman Sachs International		1/19/17		(2,412	)
JPY	1,808,000	USD	15,928	Goldman Sachs International		1/19/17		(412	)
JPY	95,000	USD	837	Goldman Sachs International		1/19/17		(22	)
JPY	659,000	USD	5,588	Goldman Sachs International		1/19/17		67
JPY	571,000	USD	5,497	Goldman Sachs International		1/19/17		(597	)
NOK	153,000	USD	17,961	Citibank N.A.		1/19/17		(182	)
NOK	31,000	USD	3,574	Citibank N.A.		1/19/17		28
NOK	11,000	USD	1,271	Citibank N.A.		1/19/17		7
NOK	23,000	USD	2,745	Goldman Sachs International		1/19/17		(73	)
NOK	12,000	USD	1,435	Goldman Sachs International		1/19/17		(41	)
NOK	88,000	USD	10,444	Goldman Sachs International		1/19/17		(219	)
NOK	63,000	USD	7,695	Goldman Sachs International		1/19/17		(374	)
NOK	73,000	USD	8,819	Goldman Sachs International		1/19/17		(337	)
NOK	48,000	USD	5,818	Goldman Sachs International		1/19/17		(241	)
NZD	6,000	USD	4,265	Barclays Bank PLC		1/19/17		(83	)
SEK	325,000	USD	37,016	Bank of America N.A.		1/19/17		(1,203	)
SEK	18,000	USD	1,962	Citibank N.A.		1/19/17		21
SGD	72,000	USD	51,850	Barclays Bank PLC		1/19/17		(2,016	)
SGD	14,000	USD	10,104	Barclays Bank PLC		1/19/17		(415	)

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 67

Schedule of Investments (continued) LifePath Dynamic 2045 Master Portfolio

Forward Foreign Currency Exchange Contracts (continued)
Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
SGD	10,000		USD	7,217	BNP Paribas S.A.		1/19/17	$	(296	)
SGD	8,000		USD	5,772	BNP Paribas S.A.		1/19/17		(235	)
USD	42,585		AUD	56,000	Bank of America N.A.		1/19/17		2,051
USD	13,563		AUD	18,000	Bank of America N.A.		1/19/17		534
USD	13,748		AUD	18,000	Barclays Bank PLC		1/19/17		719
USD	16,633		AUD	22,000	Goldman Sachs International		1/19/17		709
USD	3,772		CAD	5,000	Goldman Sachs International		1/19/17		43
USD	2,992		CAD	4,000	Royal Bank of Canada		1/19/17		8
USD	26,633		CAD	36,000	Royal Bank of Canada		1/19/17		(217	)
USD	14,350		EUR	13,000	Bank of America N.A.		1/19/17		626
USD	4,382		EUR	4,000	Bank of America N.A.		1/19/17		159
USD	11,763		EUR	11,000	Bank of America N.A.		1/19/17		151
USD	8,356		EUR	8,000	Bank of America N.A.		1/19/17		(89	)
USD	2,194		EUR	2,000	Barclays Bank PLC		1/19/17		83
USD	19,981		EUR	18,000	Barclays Bank PLC		1/19/17		979
USD	12,539		EUR	12,000	Barclays Bank PLC		1/19/17		(129	)
USD	3,171		EUR	3,000	BNP Paribas S.A.		1/19/17		4
USD	12,275		EUR	11,000	Citibank N.A.		1/19/17		662
USD	9,814		EUR	9,000	Goldman Sachs International		1/19/17		313
USD	13,135		EUR	12,000	Goldman Sachs International		1/19/17		467
USD	20,454		EUR	19,000	Goldman Sachs International		1/19/17		397
USD	4,182		EUR	4,000	Goldman Sachs International		1/19/17		(41	)
USD	2,093		EUR	2,000	Goldman Sachs International		1/19/17		(18	)
USD	39,724		EUR	37,000	Nomura International PLC		1/19/17		664
USD	4,362		EUR	4,000	UBS AG		1/19/17		139
USD	13,430		GBP	11,000	Barclays Bank PLC		1/19/17		(168	)
USD	17,900		HKD	139,000	Bank of America N.A.		1/19/17		(29	)
USD	16,382		HKD	127,000	BNP Paribas S.A.		1/19/17		1
USD	35,083		HKD	272,000	BNP Paribas S.A.		1/19/17		(2	)
USD	16,379		HKD	127,000	Citibank N.A.		1/19/17		(2	)
USD	5,933		HKD	46,000	Goldman Sachs International		1/19/17		(1	)
USD	13,026		HKD	101,000	Nomura International PLC		1/19/17		(2	)
USD	9,018		HKD	70,000	Nomura International PLC		1/19/17		(11	)
USD	11,612		HKD	90,000	UBS AG		1/19/17		3
USD	6,708		HKD	52,000	UBS AG		1/19/17		1
USD	6,053		HKD	47,000	UBS AG		1/19/17		(10	)
USD	119,918		IDR	1,591,315,000	Nomura International PLC		1/19/17		2,043
USD	96,087		JPY	9,951,000	Bank of America N.A.		1/19/17		10,690
USD	11,555		JPY	1,302,000	BNP Paribas S.A.		1/19/17		382
USD	6,257		JPY	705,000	BNP Paribas S.A.		1/19/17		207
USD	23,871		JPY	2,474,000	Citibank N.A.		1/19/17		2,639
USD	2,427		JPY	253,000	Citibank N.A.		1/19/17		256
USD	5,423		JPY	562,000	Goldman Sachs International		1/19/17		600
USD	56,280		NOK	461,000	Bank of America N.A.		1/19/17		2,713
USD	974		NOK	8,000	Goldman Sachs International		1/19/17		45
USD	2,376		NOK	20,000	Goldman Sachs International		1/19/17		52
USD	6,089		PHP	304,000	Bank of America N.A.		1/19/17		(24	)
USD	19,224		PHP	966,000	Citibank N.A.		1/19/17		(199	)
USD	4,552		PHP	228,000	Nomura International PLC		1/19/17		(32	)
USD	1,083		SEK	10,000	Barclays Bank PLC		1/19/17		(19	)
USD	8,540		SEK	76,000	Citibank N.A.		1/19/17		165
USD	3,447		SEK	31,000	Citibank N.A.		1/19/17		31
USD	4,076		SEK	36,000	Goldman Sachs International		1/19/17		109
USD	1,353		SEK	12,000	Goldman Sachs International		1/19/17		31
USD	1,688		SEK	15,000	Goldman Sachs International		1/19/17		35
USD	4,283		SEK	38,000	Goldman Sachs International		1/19/17		95
USD	5,309		SEK	48,000	Goldman Sachs International		1/19/17		19
USD	1,558		SEK	14,000	Goldman Sachs International		1/19/17		15
USD	5,494		SEK	49,000	Goldman Sachs International		1/19/17		95
USD	1,954		SEK	18,000	Goldman Sachs International		1/19/17		(30	)
USD	25,944		SGD	36,000	Bank of America N.A.		1/19/17		1,027
USD	2,110		SGD	3,000	Bank of America N.A.		1/19/17		34
USD	3,519		SGD	5,000	BNP Paribas S.A.		1/19/17		58
USD	9,827		SGD	14,000	Royal Bank of Canada		1/19/17		137
Total								$	1,648

See Notes to Financial Statements.

68 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2045 Master Portfolio

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Futures contracts	Net unrealized appreciation1		—		—	$	292		—		—		—	$	292
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts		—		—		—	$	30,876		—		—		30,876
Total			—		—	$	292	$	30,876		—		—	$	31,168
Liabilities — Derivative Financial Instruments
Futures contracts	Net unrealized depreciation1		—		—	$	69,455	$	25,377		—		—	$	94,832
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts		—		—		—		29,228		—		—		29,228
Total			—		—	$	69,455	$	54,605		—		—	$	124,060
1    Includes cumulative appreciation (depreciation) on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

For the year ended December 31, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts		Credit Contracts		Equity Contracts			Foreign Currency Exchange Contracts			Interest Rate Contracts		Other Contracts		Total
Futures contracts		—		—	$	164,512		$	17,919					—	$	182,431
Forward foreign currency exchange contracts		—		—		—			10,046			—		—		10,046
Total		—		—	$	164,512		$	27,965					—	$	192,477
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts		—		—	$	(69,164	)	$	(25,376	)		—		—	$	(94,540	)
Forward foreign currency exchange contracts		—		—		—			3,073			—		—		3,073
Total		—		—	$	(69,164	)	$	(22,303	)		—		—	$	(91,467	)

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	1,476,347
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	1,028,268
Average amounts sold — in USD	$	1,201,761

For more information about the LifePath Master Portfolio’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Derivative Financial Instruments — Offsetting as of Period End

The LifePath Master Portfolio’s derivative assets and liabilities (by type) were as follows:

Derivative Financial Instruments:

	Assets			Liabilities
Futures contracts	$	6,798		$	27,976
Forward foreign currency exchange contracts		30,876			29,228
Total derivative assets and liabilities in the Statements of Assets and Liabilities	$	37,674		$	57,204
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(6,798	)		(27,976	)
Total derivative assets and liabilities subject to an MNA	$	30,876		$	29,228

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 69

Schedule of Investments (continued) LifePath Dynamic 2045 Master Portfolio

The following tables present the LifePath Master Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the LifePath Master Portfolio:

Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets2
Bank of America N.A.	$	18,057	$	(5,811	)		—		—	$	12,246
Barclays Bank PLC		1,821		(1,821	)		—		—		—
BNP Paribas S.A.		652		(652	)		—		—		—
Citibank N.A.		3,964		(503	)		—		—		3,461
Goldman Sachs International		3,387		(3,387	)		—		—		—
Nomura International PLC		2,707		(200	)		—		—		2,507
Royal Bank of Canada		145		(145	)		—		—		—
UBS AG		143		(10	)		—		—		133
Total	$	30,876	$	(12,529	)		—		—	$	18,347
Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities3
Bank of America N.A.	$	5,811	$	(5,811	)		—		—		—
Barclays Bank PLC		3,303		(1,821	)		—		—	$	1,482
BNP Paribas S.A.		6,766		(652	)		—		—		6,114
Citibank N.A.		503		(503	)		—		—		—
Goldman Sachs International		12,398		(3,387	)		—		—		9,011
Nomura International PLC		200		(200	)		—		—		—
Royal Bank of Canada		237		(145	)		—		—		92
UBS AG		10		(10	)		—		—		—
Total	$	29,228	$	(12,529	)		—		—	$	16,699
1   The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.
2   Net amount represents the net amount receivable from the counterparty in the event of a default.
3   Net amount represents the net amount payable due to counterparty in the event of default.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the LifePath Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investments Companies:
Equity Funds	$	8,435,348		—		—	$	8,435,348
Fixed Income Funds		87,367		—		—		87,367
Short-Term Securities		4,271,765		—		—		4,271,765
Common Stocks:
Equity Real Estate Investment Trusts		—	$	125,060		—		125,060
Hotels, Restaurants & Leisure		35,850		—		—		35,850
Real Estate Investment Trusts		2,791,024		885,482		—		3,676,506
Real Estate Management & Development		131,510		953,899		—		1,085,409
Road & Rail		—		21,817		—		21,817
Subtotal	$	15,752,864	$	1,986,258		—	$	17,739,122
Investments Valued at NAV1								18,439,111
Total							$	36,178,233

See Notes to Financial Statements.

70 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (concluded) LifePath Dynamic 2045 Master Portfolio

	Level 1			Level 2			Level 3		Total
Derivative Financial Instruments 2
Assets:
Equity contracts	$	292			—			—	$	292
Forward foreign currency contracts		—		$	30,876			—		30,876
Liabilities:
Equity contracts		(69,455	)		—			—		(69,455	)
Forward foreign currency contracts		(25,377	)		(29,228	)		—		(54,605	)
Total	$	(94,540	)	$	1,648			—	$	(92,892	)
1   As of December 31, 2016, certain of the LifePath Master Portfolio’s investments were valued using NAV per share (or its equivalent) as no quoted market value is available and therefore have been excluded from the fair value hierarchy.
2   Derivative financial instruments are futures contracts and forward foreign currency exchange contracts, which are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 71

Schedule of Investments December 31, 2016 LifePath Dynamic 2055 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 72.7%
Active Stock Master Portfolio	$	6,834,913	$	6,834,913
BlackRock Commodity Strategies Fund		117,167		869,377
International Tilts Master Portfolio	$	2,771,226		2,771,226
iShares Core S&P 500 ETF		1,685		379,108
iShares Edge MSCI Multifactor Intl ETF		33,798		785,128
iShares Edge MSCI Multifactor USA ETF		69,896		1,867,621
iShares MSCI EAFE Small-Cap ETF		11,642		580,236
				14,087,609
Fixed Income Fund — 0.9%
CoreAlpha Bond Master Portfolio	$	183,812		183,812
Short-Term Securities — 12.7%
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (b)		2,459,631		2,459,631
Total Affiliated Investment Companies — 86.3%				16,731,052
Common Stocks
Equity Real Estate Investment Trusts (REITs) — 0.3%
Ichigo Hotel REIT Investment Corp.		23		25,378
New South Resources, Ltd. (c)		40,389		43,548
				68,926
Hotels, Restaurants & Leisure — 0.1%
Hilton Worldwide Holdings, Inc.		729		19,829
Real Estate Investment Trusts (REITs) — 10.5%
Agree Realty Corp.		331		15,243
Alexandria Real Estate Equities, Inc.		270		30,005
American Campus Communities, Inc.		717		35,685
American Homes 4 Rent, Class A		568		11,917
AvalonBay Communities, Inc.		289		51,196
Beni Stabili SpA SIIQ		25,771		14,730
Boston Properties, Inc.		720		90,562
British Land Co. PLC		5,592		43,397
CareTrust REIT, Inc.		2,541		38,928
CyrusOne, Inc.		628		28,090
DiamondRock Hospitality Co.		3,423		39,467
DuPont Fabros Technology, Inc.		915		40,196
EPR Properties		594		42,631
Equity One, Inc.		989		30,352
Essex Property Trust, Inc.		291		67,657
Eurocommercial Properties NV CVA		462		17,771
Extra Space Storage, Inc.		898		69,362
Federal Realty Investment Trust		449		63,807
First Industrial Realty Trust, Inc.		2,075		58,204
Gecina SA		79		10,911
General Growth Properties, Inc.		1,697		42,391
Gramercy Property Trust		3,572		32,791
Great Portland Estates PLC		1,840		15,115
Hammerson PLC		3,339		23,532
HCP, Inc.		2,587		76,886
Highwoods Properties, Inc.		460		23,465
Host Hotels & Resorts, Inc.		2,446		46,083
Ichigo Office REIT Investment Corp.		47		30,548
Japan Hotel REIT Investment Corp.		40		26,915
Japan Rental Housing Investments, Inc.		35		23,490

Common Stocks	Shares		Value
Real Estate Investment Trusts (REITs) (continued)
Kenedix Retail REIT Corp.		9	$	20,508
Kilroy Realty Corp.		504		36,903
Liberty Property Trust		1,072		42,344
Link REIT		3,000		19,449
Macerich Co.		487		34,499
Mid-America Apartment Communities, Inc.		405		39,658
NSI NV		6,845		25,836
Public Storage		103		23,020
Retail Properties of America, Inc., Class A		3,130		47,983
Rexford Industrial Realty, Inc.		845		19,596
RioCan Real Estate Investment Trust		633		12,555
Scentre Group		14,924		49,958
Simon Property Group, Inc.		630		111,932
SL Green Realty Corp.		244		26,242
STAG Industrial, Inc.		1,575		37,595
Sun Communities, Inc.		257		19,689
UDR, Inc.		1,737		63,366
Unibail-Rodamco SE		363		86,505
Vastned Retail NV		647		25,104
Ventas, Inc.		441		27,571
Welltower, Inc.		410		27,441
Westfield Corp.		13,848		93,632
				2,032,713
Real Estate Management & Development — 3.1%
Ayala Land, Inc.		10,500		6,746
BUWOG AG		2,003		46,499
Cheung Kong Property Holdings Ltd.		7,500		45,802
China Resources Land Ltd.		6,000		13,426
Deutsche Wohnen AG, Bearer Shares		949		29,767
First Capital Realty, Inc.		1,612		24,817
Global Logistic Properties Ltd.		28,400		43,004
Howard Hughes Corp. (c)		191		21,793
Inmobiliaria Colonial SA		5,344		36,984
Intiland Development Tbk PT		553,000		20,515
Kungsleden AB		2,908		18,391
LEG Immobilien AG		413		32,032
Leopalace21 Corp.		500		2,762
Mega Manunggal Property Tbk PT (c)		510,400		25,951
Megaworld Corp.		167,000		11,956
Mitsui Fudosan Co. Ltd.		1,000		23,150
Modernland Realty Tbk PT (c)		35,000		887
Puradelta Lestari Tbk PT		471,200		8,023
St. Modwen Properties PLC		3,715		13,976
Sun Hung Kai Properties Ltd.		6,000		75,555
Takara Leben Co., Ltd.		2,400		13,942
Unizo Holdings Co., Ltd.		2,500		66,104
Wihlborgs Fastigheter AB		795		14,755
				596,837
Road & Rail — 0.1%
MTR Corp. Ltd.		2,500		12,121
Total Common Stocks — 14.1%				2,730,426
Total Investments (Cost — $18,826,335) — 100.4%				19,461,478
Liabilities in Excess of Other Assets — (0.4)%				(75,044	)
Net Assets — 100.0%			$	19,386,434

See Notes to Financial Statements.

72 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2055 Master Portfolio

Notes to Schedule of Investments

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December 31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
Active Stock Master Portfolio	$	5,262,393	$	1,572,520	1		—		$	6,834,913	$	6,834,913	$	98,789		$	427,243
BlackRock Cash Funds: Institutional, SL Agency Shares*		35,783		—			(35,783	)2		—		—		1,461	3		(48	)
BlackRock Cash Funds: Prime, SL Agency Shares*		—		—			—			—		—		199	3		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		2,459,631	1		—			2,459,631		2,459,631		1,135			164
BlackRock Commodity Strategies Fund		98,531		39,482			(20,846	)		117,167		869,377		8,124			(54,525	)
BlackRock Emerging Markets Fund, Inc.*		54,081		17,321			(71,402	)		—		—		—			(61,950	)
CoreAlpha Bond Master Portfolio	$	239,880		—		$	(56,068	)2	$	183,812		183,812		5,712			17
International Tilts Master Portfolio	$	3,333,398		—		$	(562,172	)2	$	2,771,226		2,771,226		104,931			(257,019	)
iShares Core S&P 500 ETF		—		1,685			—			1,685		379,108		2,197			—
iShares Edge MSCI Min Vol EAFE ETF*		—		3,280			(3,280	)		—		—		—			4,435
iShares Edge MSCI Min Vol USA ETF*		—		10,449			(10,449	)		—		—		—			9,138
iShares Edge MSCI Multifactor Intl ETF		—		33,798			—			33,798		785,128		6,192			—
iShares Edge MSCI Multifactor USA ETF		—		69,896			—			69,896		1,867,621		6,766			—
iShares MSCI Canada ETF		11,738		3,754			(15,492	)		—		—		2,489			(29,612	)
iShares MSCI EAFE Small-Cap ETF		9,332		4,810			(2,500	)		11,642		580,236		15,855			(349	)
Large Cap Index Master Portfolio*	$	2,261,152		—		$	(2,261,152	)2		—		—		48,768			12,309
Master Small Cap Index Series*	$	327,450		—		$	(327,450	)2		—		—		4,371			792
Total											$	16,731,052	$	306,989		$	50,595
*  No longer held by the LifePath Master Portfolio as of period end.
1    Represents net shares/investment value purchased.
2   Represents net shares/investment value sold.
3    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

(b) Current yield as of period end.

(c) Non-income producing security.

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

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts
Contracts Long		Issue	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
	5	Canadian Dollar	March 2017	$	372,075	$	(8,985	)
	4	Euro Dollar	March 2017	$	528,700		(5,259	)
	30	MSCI Emerging Markets E-Mini Index	March 2017	$	1,288,350		(28,355	)
	6	Russell 2000 E-Mini Index	March 2017	$	407,070		(7,768	)
	2	S&P 500 E-Mini Index	March 2017	$	223,620		(1,432	)
	3	S&P/TSX 60 Index	March 2017	$	400,804		176
	Total					$	(51,623	)

Forward Foreign Currency Exchange Contracts
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
AUD	4,000	USD	3,037	Barclays Bank PLC		1/19/17	$	(142	)
AUD	1,000	USD	744	BNP Paribas S.A.		1/19/17		(20	)
AUD	24,000	USD	17,646	Goldman Sachs International		1/19/17		(275	)
CAD	8,000	USD	6,021	BNP Paribas S.A.		1/19/17		(54	)
CAD	19,000	USD	14,154	Goldman Sachs International		1/19/17		17

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 73

Schedule of Investments (continued) LifePath Dynamic 2055 Master Portfolio

Forward Foreign Currency Exchange Contracts (continued)
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
CAD	50,000	USD	38,080	Goldman Sachs International		1/19/17	$	(788	)
CHF	22,000	USD	22,371	Bank of America N.A.		1/19/17		(701	)
CHF	2,000	USD	1,985	Citibank N.A.		1/19/17		(15	)
EUR	8,000	USD	8,809	BNP Paribas S.A.		1/19/17		(364	)
EUR	2,000	USD	2,186	Goldman Sachs International		1/19/17		(75	)
GBP	3,000	USD	3,708	Bank of America N.A.		1/19/17		1
GBP	1,000	USD	1,226	Barclays Bank PLC		1/19/17		10
GBP	5,000	USD	6,226	Barclays Bank PLC		1/19/17		(45	)
GBP	3,000	USD	3,772	Citibank N.A.		1/19/17		(63	)
GBP	1,000	USD	1,233	Citibank N.A.		1/19/17		3
GBP	5,000	USD	6,129	Goldman Sachs International		1/19/17		53
GBP	1,000	USD	1,269	Goldman Sachs International		1/19/17		(33	)
GBP	1,000	USD	1,235	Goldman Sachs International		1/19/17		2
GBP	5,000	USD	6,139	Goldman Sachs International		1/19/17		42
GBP	6,000	USD	7,347	Goldman Sachs International		1/19/17		70
GBP	1,000	USD	1,269	Goldman Sachs International		1/19/17		(33	)
HKD	86,000	USD	11,096	Barclays Bank PLC		1/19/17		(3	)
HKD	63,000	USD	8,125	Barclays Bank PLC		1/19/17		2
HKD	532,000	USD	68,632	Goldman Sachs International		1/19/17		(10	)
HKD	17,000	USD	2,193	UBS AG		1/19/17		—
IDR	52,625,000	USD	3,864	Citibank N.A.		1/19/17		35
IDR	37,584,000	USD	2,849	Nomura International PLC		1/19/17		(65	)
ILS	9,000	USD	2,358	Bank of America N.A.		1/19/17		(19	)
ILS	6,000	USD	1,573	Royal Bank of Canada		1/19/17		(13	)
JPY	334,000	USD	2,903	Bank of America N.A.		1/19/17		(37	)
JPY	504,000	USD	4,267	Bank of America N.A.		1/19/17		58
JPY	539,000	USD	4,634	Bank of America N.A.		1/19/17		(8	)
JPY	2,228,000	USD	19,837	Bank of America N.A.		1/19/17		(716	)
JPY	54,000	USD	476	Barclays Bank PLC		1/19/17		(13	)
JPY	818,000	USD	7,828	BNP Paribas S.A.		1/19/17		(808	)
JPY	2,776,000	USD	25,072	BNP Paribas S.A.		1/19/17		(1,249	)
JPY	2,680,000	USD	23,955	BNP Paribas S.A.		1/19/17		(956	)
JPY	615,000	USD	5,229	Citibank N.A.		1/19/17		49
JPY	326,000	USD	3,138	Goldman Sachs International		1/19/17		(341	)
JPY	2,627,000	USD	25,277	Goldman Sachs International		1/19/17		(2,733	)
JPY	309,000	USD	2,946	Goldman Sachs International		1/19/17		(294	)
JPY	335,000	USD	2,841	Goldman Sachs International		1/19/17		34
JPY	1,408,000	USD	13,473	Goldman Sachs International		1/19/17		(1,390	)
JPY	1,829,000	USD	16,844	Royal Bank of Canada		1/19/17		(1,148	)
NOK	85,000	USD	9,978	Citibank N.A.		1/19/17		(101	)
NOK	17,000	USD	1,960	Citibank N.A.		1/19/17		15
NOK	13,000	USD	1,552	Goldman Sachs International		1/19/17		(41	)
NOK	7,000	USD	837	Goldman Sachs International		1/19/17		(24	)
NOK	48,000	USD	5,697	Goldman Sachs International		1/19/17		(119	)
NOK	7,000	USD	809	Goldman Sachs International		1/19/17		5
NOK	32,000	USD	3,908	Goldman Sachs International		1/19/17		(190	)
NOK	41,000	USD	4,953	Goldman Sachs International		1/19/17		(189	)
NOK	26,000	USD	3,152	Goldman Sachs International		1/19/17		(131	)
NZD	3,000	USD	2,132	Barclays Bank PLC		1/19/17		(41	)
SEK	172,000	USD	19,590	Bank of America N.A.		1/19/17		(637	)
SEK	20,000	USD	2,180	Citibank N.A.		1/19/17		24
SGD	41,000	USD	29,526	Barclays Bank PLC		1/19/17		(1,148	)
SGD	8,000	USD	5,774	Barclays Bank PLC		1/19/17		(237	)
SGD	6,000	USD	4,330	BNP Paribas S.A.		1/19/17		(178	)
SGD	4,000	USD	2,886	BNP Paribas S.A.		1/19/17		(117	)
USD	22,053	AUD	29,000	Bank of America N.A.		1/19/17		1,062
USD	7,535	AUD	10,000	Bank of America N.A.		1/19/17		297
USD	7,638	AUD	10,000	Barclays Bank PLC		1/19/17		399
USD	9,829	AUD	13,000	Goldman Sachs International		1/19/17		419
USD	1,509	CAD	2,000	Goldman Sachs International		1/19/17		17
USD	748	CAD	1,000	Royal Bank of Canada		1/19/17		2
USD	14,796	CAD	20,000	Royal Bank of Canada		1/19/17		(121	)
USD	5,519	EUR	5,000	Bank of America N.A.		1/19/17		241
USD	2,083	EUR	2,000	Bank of America N.A.		1/19/17		(29	)

See Notes to Financial Statements.

74 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2055 Master Portfolio

Forward Foreign Currency Exchange Contracts (continued)
Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	6,694		EUR	6,000	Bank of America N.A.		1/19/17	$	360
USD	3,287		EUR	3,000	Bank of America N.A.		1/19/17		120
USD	8,555		EUR	8,000	Bank of America N.A.		1/19/17		110
USD	21,471		EUR	20,000	Bank of America N.A.		1/19/17		358
USD	4,178		EUR	4,000	Bank of America N.A.		1/19/17		(45	)
USD	9,990		EUR	9,000	Barclays Bank PLC		1/19/17		489
USD	2,114		EUR	2,000	BNP Paribas S.A.		1/19/17		3
USD	4,179		EUR	4,000	BNP Paribas S.A.		1/19/17		(43	)
USD	3,291		EUR	3,000	Citibank N.A.		1/19/17		124
USD	6,543		EUR	6,000	Citibank N.A.		1/19/17		209
USD	2,093		EUR	2,000	Goldman Sachs International		1/19/17		(18	)
USD	10,766		EUR	10,000	Goldman Sachs International		1/19/17		209
USD	2,091		EUR	2,000	Goldman Sachs International		1/19/17		(20	)
USD	7,662		EUR	7,000	Goldman Sachs International		1/19/17		272
USD	6,105		GBP	5,000	Barclays Bank PLC		1/19/17		(76	)
USD	8,886		HKD	69,000	Bank of America N.A.		1/19/17		(15	)
USD	19,089		HKD	148,000	BNP Paribas S.A.		1/19/17		(1	)
USD	9,933		HKD	77,000	BNP Paribas S.A.		1/19/17		1
USD	9,802		HKD	76,000	Citibank N.A.		1/19/17		(1	)
USD	4,509		HKD	35,000	Goldman Sachs International		1/19/17		(6	)
USD	4,643		HKD	36,000	Goldman Sachs International		1/19/17		(1	)
USD	6,577		HKD	51,000	Nomura International PLC		1/19/17		(1	)
USD	3,219		HKD	25,000	UBS AG		1/19/17		(5	)
USD	4,257		HKD	33,000	UBS AG		1/19/17		1
USD	3,354		HKD	26,000	UBS AG		1/19/17		—
USD	62,639		IDR	831,224,000	Nomura International PLC		1/19/17		1,067
USD	48,415		JPY	5,014,000	Bank of America N.A.		1/19/17		5,386
USD	6,355		JPY	716,000	BNP Paribas S.A.		1/19/17		210
USD	3,515		JPY	396,000	BNP Paribas S.A.		1/19/17		116
USD	16,345		JPY	1,694,000	Citibank N.A.		1/19/17		1,807
USD	2,879		JPY	296,000	Citibank N.A.		1/19/17		338
USD	1,218		JPY	127,000	Citibank N.A.		1/19/17		129
USD	6,992		JPY	793,000	Goldman Sachs International		1/19/17		187
USD	2,684		JPY	282,000	Goldman Sachs International		1/19/17		263
USD	30,521		NOK	250,000	Bank of America N.A.		1/19/17		1,471
USD	1,188		NOK	10,000	Goldman Sachs International		1/19/17		26
USD	487		NOK	4,000	Goldman Sachs International		1/19/17		22
USD	3,305		PHP	165,000	Bank of America N.A.		1/19/17		(13	)
USD	10,766		PHP	541,000	Citibank N.A.		1/19/17		(111	)
USD	2,496		PHP	125,000	Nomura International PLC		1/19/17		(18	)
USD	650		SEK	6,000	Barclays Bank PLC		1/19/17		(11	)
USD	4,944		SEK	44,000	Citibank N.A.		1/19/17		96
USD	2,001		SEK	18,000	Citibank N.A.		1/19/17		18
USD	2,377		SEK	21,000	Goldman Sachs International		1/19/17		63
USD	789		SEK	7,000	Goldman Sachs International		1/19/17		18
USD	900		SEK	8,000	Goldman Sachs International		1/19/17		19
USD	2,479		SEK	22,000	Goldman Sachs International		1/19/17		55
USD	2,986		SEK	27,000	Goldman Sachs International		1/19/17		11
USD	3,027		SEK	27,000	Goldman Sachs International		1/19/17		52
USD	977		SEK	9,000	Goldman Sachs International		1/19/17		(15	)
USD	14,413		SGD	20,000	Bank of America N.A.		1/19/17		570
USD	703		SGD	1,000	Bank of America N.A.		1/19/17		11
USD	2,105		SGD	3,000	Barclays Bank PLC		1/19/17		29
USD	1,407		SGD	2,000	BNP Paribas S.A.		1/19/17		23
USD	5,616		SGD	8,000	Royal Bank of Canada		1/19/17		78
Total								$	1,064

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 75

Schedule of Investments (continued) LifePath Dynamic 2055 Master Portfolio

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Futures contracts	Net unrealized appreciation1		—		—	$	176		—		—		—	$	176
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts		—		—		—	$	17,178		—		—		17,178
Total			—		—	$	176	$	17,178		—		—	$	17,354
Liabilities — Derivative Financial Instruments
Futures contracts	Net unrealized depreciation1		—		—	$	37,555	$	14,244		—		—	$	51,799
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts		—		—		—		16,114		—		—		16,114
Total			—		—	$	37,555	$	30,358		—		—	$	67,913
1    Includes cumulative appreciation (depreciation) on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

For the year ended December 31, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts		Credit Contracts		Equity Contracts			Foreign Currency Exchange Contracts			Interest Rate Contracts		Other Contracts		Total
Futures contracts		—		—	$	91,990		$	9,226			—		—	$	101,216
Forward foreign currency exchange contracts		—		—		—			6,636			—		—		6,636
Total		—		—	$	91,990		$	15,862			—		—	$	107,852
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts		—		—	$	(37,379	)	$	(14,244	)		—		—	$	(51,623	)
Forward foreign currency exchange contracts		—		—		—			1,763			—		—		1,763
Total		—		—	$	(37,379	)	$	(12,481	)		—		—	$	(49,860	)

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	805,155
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	530,918
Average amounts sold — in USD	$	626,869

For more information about the LifePath Master Portfolio’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Derivative Financial Instruments — Offsetting as of Period End

The LifePath Master Portfolio’s derivative assets and liabilities (by type) were as follows:

	Assets			Liabilities
Futures contracts	$	3,850		$	15,297
Forward foreign currency exchange contracts		17,178			16,114
Total derivative assets and liabilities in the Statements of Assets and Liabilities	$	21,028		$	31,411
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(3,850	)		(15,297	)
Total derivative assets and liabilities subject to an MNA	$	17,178		$	16,114

See Notes to Financial Statements.

76 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2055 Master Portfolio

The following tables present the LifePath Master Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the LifePath Master Portfolio:

Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets2
Bank of America N.A.	$	10,045	$	(2,220	)		—		—	$	7,825
Barclays Bank PLC		929		(929	)		—		—		—
BNP Paribas S.A.		353		(353	)		—		—		—
Citibank N.A.		2,847		(291	)		—		—		2,556
Goldman Sachs International		1,856		(1,856	)		—		—		—
Nomura International PLC		1,067		(84	)		—		—		983
Royal Bank of Canada		80		(80	)		—		—		—
UBS AG		1		(1	)		—		—		—
Total	$	17,178	$	(5,814	)		—		—	$	11,364
Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities3
Bank of America N.A.	$	2,220	$	(2,220	)		—		—		—
Barclays Bank PLC		1,716		(929	)		—		—	$	787
BNP Paribas S.A.		3,790		(353	)		—		—		3,437
Citibank N.A.		291		(291	)		—		—		—
Goldman Sachs International		6,726		(1,856	)		—		—		4,870
Nomura International PLC		84		(84	)		—		—		—
Royal Bank of Canada		1,282		(80	)		—		—		1,202
UBS AG		5		(1	)		—		—		4
Total	$	16,114	$	(5,814	)		—		—	$	10,300
1    The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.
2    Net amount represents the net amount receivable from the counterparty in the event of default.
3    Net amount represents the net amount payable due to counterparty in the event of default.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the LifePath Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies:
Equity Funds	$	4,481,470		—		—	$	4,481,470
Fixed Income Fund		—		—		—		—
Short-Term Securities		2,459,631		—		—		2,459,631
Common Stocks:
Equity Real Estate Investment Trusts		—	$	68,926		—		68,926
Hotels, Restaurants & Leisure		19,829		—		—		19,829
Real Estate Investment Trusts		1,545,146		487,567		—		2,032,713
Real Estate Management & Development		72,561		524,276		—		596,837
Road & Rail		—		12,121		—		12,121
Subtotal	$	8,578,637	$	1,092,890		—	$	9,671,527
Investments Valued at NAV1								9,789,951
Total							$	19,461,478

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 77

Schedule of Investments (concluded) LifePath Dynamic 2055 Master Portfolio

	Level 1			Level 2			Level 3		Total
Derivative Financial Instruments 2
Assets:
Equity contracts	$	176			—			—	$	176
Forward foreign currency contracts		—		$	17,178			—		17,178
Liabilities:
Equity contracts		(37,555	)		—			—		(37,555	)
Forward foreign currency contracts		(14,244	)		(16,114	)		—		(30,358	)
Total	$	(51,623	)	$	1,064			—	$	(50,559	)
1    As of December 31, 2016, certain of the LifePath Master Portfolio’s investments were valued using NAV per share (or its equivalent) as no quoted market value is available and therefore have been excluded from the fair value hierarchy.
2    Derivative financial instruments are futures contracts and forward foreign currency exchange contracts, which are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

78 BLACKROCK FUNDS III DECEMBER 31, 2016

Statements of Assets and Liabilities Master Investment Portfolio

December 31, 2016	LifePath Dynamic 2025 Master Portfolio		LifePath Dynamic 2035 Master Portfolio		LifePath Dynamic 2045 Master Portfolio		LifePath Dynamic 2055 Master Portfolio
Assets
Investments at value — unaffiliated1	$	3,254,016	$	5,700,906	$	4,944,642	$	2,730,426
Investments at value — affiliated2,3		61,683,007		51,690,523		31,233,591		16,731,052
Cash pledged for futures contracts		307,000		314,000		238,000		129,000
Foreign currency at value4		32,432		38,178		27,904		17,795
Receivables:
Dividends — unaffiliated		14,538		25,389		21,949		12,150
Dividends — affiliated		2,929		3,352		2,896		1,654
Investments sold		22,358		36,831		31,661		20,059
Variation margin on futures contracts		10,350		10,408		6,798		3,850
From the Manager		14,349		14,785		15,583		16,208
Securities lending income — affiliated		625		151		274		154
Unrealized appreciation on forward foreign currency exchange contracts		21,711		37,630		30,876		17,178
Total assets		65,363,315		57,872,153		36,554,174		19,679,526
Liabilities
Cash collateral on securities loaned at value		1,748,396		171,343		—		—
Payables:
Investments purchased		11,543		20,243		17,587		9,746
Professional fees		11,636		11,599		11,587		11,573
Variation margin on futures contracts		33,374		36,361		27,976		15,297
Independent Trustees’ fees		2,408		2,340		2,216		2,104
Withdrawals to investors		985,251		217,243		42,595		238,258
Unrealized depreciation on forward foreign currency exchange contracts		19,444		35,792		29,228		16,114
Total liabilities		2,812,052		494,921		131,189		293,092
Net Assets	$	62,551,263	$	57,377,232	$	36,422,985	$	19,386,434
Net Assets Consist of
Investors’ capital	$	61,509,869	$	55,964,714	$	35,282,933	$	18,802,562
Net unrealized appreciation (depreciation)		1,041,394		1,412,518		1,140,052		583,872
Net Assets	$	62,551,263	$	57,377,232	$	36,422,985	$	19,386,434
1    Investments at cost — unaffiliated	$	3,257,989	$	5,715,219	$	4,957,848	$	2,743,741
2    Investments at cost — affiliated	$	60,512,432	$	50,132,583	$	29,986,216	$	16,082,594
3    Securities loaned at value	$	1,714,126	$	167,393		—		—
4    Foreign currency at cost	$	32,746	$	38,545	$	28,183	$	17,980

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	79

Statements of Operations Master Investment Portfolio

Year Ended December 31, 2016	LifePath Dynamic 2025 Master Portfolio			LifePath Dynamic 2035 Master Portfolio			LifePath Dynamic 2045 Master Portfolio			LifePath Dynamic 2055 Master Portfolio
Investment Income
Dividends — unaffiliated	$	118,078		$	191,231		$	159,996		$	84,069
Dividends — affiliated		165,757			138,236			86,484			43,176
Securities lending — affiliated — net		2,632			1,783			2,149			1,242
Foreign taxes withheld		(5,236	)		(8,428	)		(7,026	)		(3,800	)
Net investment income allocated from the applicable Underlying Master Portfolios:
Dividends		661,578			761,215			544,899			275,508
Interest		565,654			249,407			36,033			12,373
Expenses		(145,861	)		(123,936	)		(73,985	)		(39,964	)
Fees waived		36,390			37,515			25,507			14,654
Total investment income		1,398,992			1,247,023			774,057			387,258
Expenses
Investment advisory		228,056			200,574			125,128			63,472
Professional		14,318			14,278			14,191			14,132
Independent Trustees		11,983			11,734			11,128			10,599
Total expenses		254,357			226,586			150,447			88,203
Less fees waived by the Manager		(222,289	)		(198,461	)		(133,023	)		(79,382	)
Total expenses after fees waived		32,068			28,125			17,424			8,821
Net investment income		1,366,924			1,218,898			756,633			378,437
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — unaffiliated		53,623			95,753			104,240			51,261
Investments — affiliated		(634,098	)		(644,276	)		(427,888	)		(132,911	)
Futures contracts		262,418			251,334			182,431			101,216
Forward foreign currency exchange contracts		8,283			10,021			10,046			6,636
Foreign currency transactions		(2,526	)		(3,949	)		(4,453	)		(2,662	)
Capital gain distributions from investment companies—affiliated		369			342			281			164
Allocation from the applicable Underlying Master Portfolios from investments, futures contracts and foreign currency transactions		558,880			422,836			225,051			183,342
		246,949			132,061			89,708			207,046
Net change in unrealized appreciation (depreciation) on:
Investments — unaffiliated		(40,551	)		(75,713	)		(64,344	)		(36,915	)
Investments — affiliated		1,582,453			1,558,389			1,118,204			487,973
Futures contracts		(126,356	)		(131,377	)		(94,540	)		(51,623	)
Forward foreign currency exchange contracts		3,324			3,571			3,073			1,763
Foreign currency translations		(953	)		(1,383	)		(1,064	)		(616	)
Allocation from the applicable Underlying Master Portfolios from investments, futures contracts and foreign currency translations		1,520,636			1,708,146			1,199,324			605,003
		2,938,553			3,061,633			2,160,653			1,005,585
Net realized and unrealized gain		3,185,502			3,193,694			2,250,361			1,212,631
Net Increase in Net Assets Resulting from Operations	$	4,552,426		$	4,412,592		$	3,006,994		$	1,591,068

See Notes to Financial Statements.
80	BLACKROCK FUNDS III	DECEMBER 31, 2016

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath Dynamic 2025 Master Portfolio						LifePath Dynamic 2035 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	1,366,924		$	1,367,277		$	1,218,898		$	1,187,387
Net realized gain		246,949			2,037,290			132,061			1,956,660
Net change in unrealized appreciation (depreciation)		2,938,553			(4,552,702	)		3,061,633			(4,209,460	)
Net increase (decrease) in net assets resulting from operations		4,552,426			(1,148,135	)		4,412,592			(1,065,413	)
Capital Transactions
Proceeds from contributions		18,734,845			34,846,434			19,050,493			22,992,558
Value of withdrawals		(25,841,430	)		(32,667,282	)		(22,185,822	)		(21,589,751	)
Net increase (decrease) in net assets derived from capital transactions		(7,106,585	)		2,179,152			(3,135,329	)		1,402,807
Net Assets
Total increase (decrease) in net assets		(2,554,159	)		1,031,017			1,277,263			337,394
Beginning of year		65,105,422			64,074,405			56,099,969			55,762,575
End of year	$	62,551,263		$	65,105,422		$	57,377,232		$	56,099,969

	LifePath Dynamic 2045 Master Portfolio						LifePath Dynamic 2055 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	756,633		$	712,571		$	378,437		$	297,359
Net realized gain		89,708			1,288,414			207,046			473,277
Net change in unrealized appreciation (depreciation)		2,160,653			(2,672,638	)		1,005,585			(1,105,267	)
Net increase (decrease) in net assets resulting from operations		3,006,994			(671,653	)		1,591,068			(334,631	)
Capital Transactions
Proceeds from contributions		13,664,228			15,353,680			9,715,070			9,297,038
Value of withdrawals		(14,765,007	)		(14,907,021	)		(7,770,014	)		(6,168,994	)
Net increase (decrease) in net assets derived from capital transactions		(1,100,779	)		446,659			1,945,056			3,128,044
Net Assets
Total increase (decrease) in net assets		1,906,215			(224,994	)		3,536,124			2,793,413
Beginning of year		34,516,770			34,741,764			15,850,310			13,056,897
End of year	$	36,422,985		$	34,516,770		$	19,386,434		$	15,850,310

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	81

Financial Highlights Master Investment Portfolio

	LifePath Dynamic 2025 Master Portfolio
	Year Ended December 31,
	2016			2015			2014			2013			2012
Total Return
Total return		7.25%			(1.50)%			5.73%			12.34%			12.57%
Ratios to Average Net Assets
Total expenses		0.56%	1,2,3		0.57%	4,5,6		0.58%	7,8,9		0.61%	7,8,9		0.69%	10,11,12
Total expenses after fees waived		0.22%	1,2,3		0.23%	4,5,6		0.22%	7,8,9		0.25%	7,8,9		0.26%	10,11,12
Net investment income13		2.10%	1,2,3		1.98%	4,5,6		2.05%	7,8,9		2.11%	7,8,9		2.32%	10,11,12
Supplemental Data
Net assets, end of year (000)	$	62,551		$	65,105		$	64,074		$	58,662		$	34,044
Portfolio turnover rate		54%	14		51%	15		50%	16		30%	16		4%	17

¹  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, Prime, Treasury, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc., BlackRock Tactical Opportunities Fund and iShares exchange-traded funds.

²  Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio allocated fees waived of 0.06% for the year ended December 31, 2016.

³  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11% for the year ended December 31, 2016, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio allocated net expenses and/or net investment income.

⁴  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, Prime, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁵  Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated fees waived of 0.05% for the year ended December 31, 2015.

⁶  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.13% for the year ended December 31, 2015, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated net expenses and/or net investment income.

⁷  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series, and Total International ex U.S. Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁸  Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated fees waived of 0.05% and 0.04% for the years ended December 31, 2014 and December 31, 2013, respectively.

⁹  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.13% and 0.10% for the years ended December 31, 2014 and December 31, 2013, respectively, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated net expenses and/or net investment income.

¹⁰ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

¹¹ Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated fees waived of 0.04% for the years ended December 31, 2012.

¹² Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.10% for the year ended December 31, 2012, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated net expenses and/or net investment income.

¹³ Includes the LifePath Master Portfolio’s share of the allocated net investment income from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio, except for the year ended December 31, 2016, which also Master Total Return Portfolio, except for the years December 31, 2016, December 31, 2015, December 31, 2014 and December 31, 2013, which also includes International Tilts Master Portfolio. For the year ended December 31, 2015, the ratio does not include Total International ex U.S. Index Master Portfolio, which is no longer held by LifePath Master Portfolio.

¹⁴ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio.

¹⁵ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁶ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁷ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 17% for the year ended December 31, 2012.

See Notes to Financial Statements.
82	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights Master Investment Portfolio

	LifePath Dynamic 2035 Master Portfolio
	Year Ended December 31,
	2016			2015			2014			2013			2012
Total Return
Total return		7.99%			(1.65)%			6.01%			15.83%			14.35%
Ratios to Average Net Assets
Total expenses		0.55%	1,2,3		0.57%	4,5,6		0.58%	7,8,9		0.63%	7,8,9		0.76%	10,11,12
Total expenses after fees waived		0.20%	1,2,3		0.20%	4,5,6		0.20%	7,8,9		0.25%	7,8,9		0.25%	10,11,12
Net investment income13		2.13%	1,2,3		2.02%	4,5,6		2.06%	7,8,9		2.29%	7,8,9		2.42%	10,11,12
Supplemental Data
Net assets, end of year (000)	$	57,377		$	56,100		$	55,763		$	45,363		$	25,732
Portfolio turnover rate		76%	14		44%	15		54%	16		39%	16		4%	17

¹  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, Prime, Treasury, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc., BlackRock Tactical Opportunities Fund and iShares exchange-traded funds.

²  Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio allocated fees waived of 0.07% for the year ended December 31, 2016.

³  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.13% for the year ended December 31, 2016, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio allocated net expenses and/or net investment income.

⁴  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, Prime, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁵  Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated fees waived of 0.06% for the year ended December 31, 2015.

⁶  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.16% for the year ended December 31, 2015, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated net expenses and/or net investment income.

⁷  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series, and Total International ex U.S. Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁸  Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated fees waived of 0.06% and 0.05% for the years ended December 31, 2014 and December 31, 2013, respectively.

⁹  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.15% and 0.11% for the years ended December 31, 2014 and December 31, 2013, respectively, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated net expenses and/or net investment income.

¹⁰ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

¹¹ Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated fees waived of 0.05% for the years ended December 31, 2012.

¹² Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11% for the year ended December 31, 2012, respectively, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated net expenses and/or net investment income.

¹³ Includes the LifePath Master Portfolio’s share of the allocated net investment income from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio, except for the year ended December 31, 2016, which also Master Total Return Portfolio, except for the years December 31, 2016, December 31, 2015, December 31, 2014 and December 31, 2013, which also includes International Tilts Master Portfolio. For the year ended December 31, 2015, the ratio does not include Total International ex U.S. Index Master Portfolio, which is no longer held by LifePath Master Portfolio.

¹⁴ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio.

¹⁵ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁶ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁷ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 13% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	83

Financial Highlights Master Investment Portfolio

	LifePath Dynamic 2045 Master Portfolio
	Year Ended December 31,
	2016			2015			2014			2013			2012
Total Return
Total return		8.52%			(1.87)%			6.16%			18.99%			15.84%
Ratios to Average Net Assets
Total expenses		0.56%	1,2,3		0.59%	4,5,6		0.61%	7,8,9		0.70%	7,8,9		1.01%	10,11,12
Total expenses after fees waived		0.18%	1,2,3		0.17%	4,5,6		0.19%	7,8,9		0.24%	7,8,9		0.24%	10,11,12
Net investment income13		2.12%	1,2,3		2.02%	4,5,6		2.08%	7,8,9		2.47%	7,8,9		2.54%	10,11,12
Supplemental Data
Net assets, end of year (000)	$	36,423		$	34,517		$	34,742		$	25,479		$	12,178
Portfolio turnover rate		75%	14		50%	14		54%	15		38%	15		4%	16

¹  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, Prime, Treasury, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc., BlackRock Tactical Opportunities Fund and iShares exchange-traded funds.

²  Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated fees waived of 0.07% for the year ended December 31, 2016.

³  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.15% for the year ended December 31, 2016, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated net expenses and/or net investment income.

⁴  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, Prime, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁵  Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated fees waived of 0.06% for the year ended December 31, 2015.

⁶  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.18% for the year ended December 31, 2015, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated net expenses and/or net investment income.

⁷  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁸  Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated fees waived of 0.06% and 0.05% for the years ended December 31, 2014 and December 31, 2013, respectively.

⁹  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.16% and 0.11% for the years ended December 31, 2014 and December 31, 2013, respectively, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated net expenses and/or net investment income.

¹⁰ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

¹¹ Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated fees waived of 0.06% for the year ended December 31, 2012.

¹² Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11% for the year ended December 31, 2012, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated net expenses and/or net investment income.

¹³ Includes the LifePath Master Portfolio’s share of the allocated net investment income from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio, except for the years ended December 31, 2016, December 31, 2015, December 31, 2014 and December 31, 2013, which also includes International Tilts Master Portfolio. For the year ended December 31, 2015, the ratio does not include Total International ex U.S. Index Master Portfolio, which is no longer held by LifePath Master Portfolio.

¹⁴ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁵ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁶ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
84	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights Master Investment Portfolio

	LifePath Dynamic 2055 Master Portfolio
	Year Ended December 31,
	2016			2015			2014			2013			2012
Total Return
Total return		8.58%			(2.02)%			6.40%			21.49%			16.96%
Ratios to Average Net Assets
Total expenses		0.63%	1,2,3		0.72%	1,2,3		0.76%	4,5,6		1.01%	4,5,6		2.41%	7,8,9
Total expenses after fees waived		0.19%	1,2,3		0.17%	1,2,3		0.17%	4,5,6		0.24%	4,5,6		0.25%	7,8,9
Net investment income10		2.09%	1,2,3		2.03%	1,2,3		2.06%	4,5,6		2.65%	4,5,6		2.66%	7,8,9
Supplemental Data
Net assets, end of year (000)	$	19,386		$	15,850		$	13,057		$	8,978		$	3,775
Portfolio turnover rate		80%	11		49%	11		48%	12		67%	12		7%	13

¹  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, Prime, Treasury, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

²  Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated fees waived of 0.08% and 0.07% for the years ended December 31, 2016 and December 31, 2015, respectively.

³  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.15% and 0.18% for the years ended December 31, 2016 and December 31, 2015, respectively, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated net expenses and/or net investment income.

⁴  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series, and Total International ex U.S. Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁵  Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated fees waived of 0.07% and 0.06% for the years ended December 31, 2014 and December 31, 2013, respectively.

⁶  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.18% and 0.12% for the years ended December 31, 2014 and December 31, 2013, respectively, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated net expenses and/or net investment income.

⁷  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁸  Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated fees waived of 0.07% for the years ended December 31, 2012.

⁹  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11% for the year ended December 31, 2012, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated net expenses and/or net investment income.

¹⁰ Includes the LifePath Master Portfolio’s share of the allocated net investment income from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio, for the year ended December 31, 2016, except for the years ended December 31, 2015, December 31, 2014 and December 31, 2013, which also includes International Tilts Master Portfolio. For the year ended December 31, 2015, the ratio does not include Large Cap Index Master Portfolio and Total International ex U.S. Index Master Portfolio, which is no longer held by LifePath Master Portfolio.

¹¹ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹² Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹³ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 27% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	85

Notes to Financial Statements Master Investment Portfolio

1. Organization:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. MIP is classified as diversified. MIP is organized as a Delaware statutory trust. The financial statements and these accompanying notes relate to four series of MIP: LifePath^® Dynamic 2025 Master Portfolio, LifePath^®Dynamic 2035 Master Portfolio, LifePath^® Dynamic 2045 Master Portfolio and LifePath^® Dynamic 2055 Master Portfolio (each, a “LifePath Master Portfolio” and together, the “LifePath Master Portfolios”).

As of period end, the investment of LifePath 2035 Master Portfolio, LifePath 2045 Master Portfolio and LifePath 2055 Master Portfolio in the Active Stock Master Portfolio represented 33.2%, 34.7% and 35.3%, respectively, of net assets. As such, financial statements of Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio, including the Schedules of Investments, should be read in conjunction with each respective LifePath Master Portfolio’s financial statements. Active Stock Master Portfolio’s and CoreAlpha Bond Master Portfolio’s financial statements are available, without charge, on the U.S. Securities and Exchange Commission’s (“SEC’s”) website at http://www.sec.gov.

The LifePath Master Portfolios will generally invest in other registered investment companies (each, an “Underlying Fund” and collectively the “Underlying Funds”) that are managed by subsidiaries of BlackRock, Inc. (“BlackRock”) and its affiliates and affiliates of the LifePath Master Portfolios. The LifePath Master Portfolios may also invest in other master portfolios (“Underlying Master Portfolios”) that are managed by subsidiaries of BlackRock.

The value of a LifePath Master Portfolio’s investment in each of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index 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 period end, the LifePath Master Portfolios held interests in these Underlying Master Portfolios as follows:

	Active Stock Master Portfolio			CoreAlpha Bond Master Portfolio			International Tilts Master Portfolio			Master Total Return Portfolio
LifePath 2025 Master Portfolio		3.18	%		2.22	%		3.16	%		0.04	%
LifePath 2035 Master Portfolio		3.78	%		0.84	%		3.76	%		0.02	%
LifePath 2045 Master Portfolio		2.51	%		0.09	%		2.77	%		—
LifePath 2055 Master Portfolio		1.36	%		0.03	%		1.48	%		—

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

2. Significant Accounting Policies:

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

Foreign Currency: Each LifePath Master Portfolio’s books and records are maintained in U.S. dollars. Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

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

Segregation and Collateralization: In cases where a LifePath Master Portfolio enters into certain investments (e.g., futures contracts and forward foreign currency exchange contracts) that would be treated as “senior securities” for 1940 Act purposes, a LifePath Master Portfolio may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the LifePath Master Portfolios may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the

86 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued) Master Investment Portfolio

LifePath Master Portfolios are 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 Underlying Master Portfolios’ income, expenses and realized and unrealized gains and losses.

Recent Accounting Standard: In April 2015, the Financial Accounting Standards Board issued “Disclosures for Investments in Certain Entities that Calculate Net Asset Value (“NAV”) per Share” which eliminates the requirement to categorize investments within the fair value hierarchy when fair value is based on the NAV per share and no quoted market value is available. As of December 31, 2016, certain investments of the LifePath Master Portfolios were valued using NAV per share (or its equivalent) as no quoted market value is available and have been excluded from the fair value hierarchy.

In November 2016, the Financial Accounting Standards Board issued Accounting Standards Update “Restricted Cash” which will require entities to include the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the beginning and ending cash balances in the Statements of Cash Flows. The guidance will be applied retrospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. Management is evaluating the impact, if any, of this guidance on the LifePath Master Portfolios’ presentation in the Statements of Cash Flows.

Indemnifications: In the normal course of business, a LifePath Master Portfolio enters into contracts that contain a variety of representations that provide general indemnification. A LifePath Master Portfolio’s maximum exposure under these arrangements is unknown because it involves future potential claims against a LifePath Master Portfolio, which cannot be predicted with any certainty.

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

Through May 31, 2016, the LifePath Master Portfolios had an arrangement with their custodian whereby credits were earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. Credits previously earned may have been utilized until December 31, 2016. Under current arrangements effective June 1, 2016, the LifePath Master Portfolios no longer earn credits on uninvested cash, and may incur charges on uninvested cash balances and overdrafts, subject to certain conditions.

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The LifePath Master Portfolios’ investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time) (or if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the LifePath Master Portfolios would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The LifePath Master Portfolios determine the fair values of their financial instruments using various 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 oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of each LifePath Master Portfolio’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the LifePath Master Portfolios’ net assets. Each business day, the LifePath Master Portfolios use a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• Futures contracts traded on exchanges are valued at their last sale price.

• Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the NYSE. Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

BLACKROCK FUNDS III DECEMBER 31, 2016 87

Notes to Financial Statements (continued) Master Investment Portfolio

• The market value of the LifePath Master Portfolios’ investments in the Underlying Funds is based on the published NAV of each Underlying Fund computed as of the close of trading on the NYSE on days when the NYSE is open.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include Market approach, Income approach and the Cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each LifePath Master Portfolio might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

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

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

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

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued investments. Level 3 investments include equity or debt issued by private companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

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

4. Securities and Other Investments:

Securities Lending: Certain LifePath Master Portfolios may lend their securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the LifePath Master Portfolios collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by each LifePath Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the LifePath Master Portfolio and any additional required collateral is delivered to the LifePath Master Portfolio, or excess collateral returned by the LifePath Master Portfolio, on the next business day. During the term of the loan, the LifePath Master Portfolios are entitled to all distributions made on or in respect of the loaned securities, but do not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as common stocks in the LifePath Master Portfolios’ Schedules of Investments, and the value of any related collateral are shown separately in the Statements of Assets and Liabilities as a component of investments at value-unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedules of Investments.

88 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued) Master Investment Portfolio

Securities lending transactions are entered into by the LifePath Master Portfolios under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the LifePath Master Portfolios, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and a LifePath Master Portfolio can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

As of period end, the following table is a summary of the LifePath Master Portfolios’ securities lending agreements by counterparty which are subject to offset under an MSLA:

LifePath 2025 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Goldman Sachs & Co.	$	1,065,480	$	(1,065,480	)		—
JP Morgan Securities LLC		648,646		(648,646	)		—
Total	$	1,714,126	$	1,714,126			—
LifePath 2035 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
UBS Securities LLC	$	167,393	$	(167,393	)		—

¹ Cash collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the tables above. Cash collateral has been received in connection with securities lending agreements as follows:

LifePath 2025 Master Portfolio	LifePath 2035 Master Portfolio
$1,748,396	$171,343

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the LifePath Master Portfolios benefit from a borrower default indemnity provided by BlackRock. BlackRock’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. Each LifePath Master Portfolio could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. Derivative Financial Instruments:

The LifePath Master Portfolios engage in various portfolio investment strategies using derivative contracts both to increase the returns of the LifePath Master Portfolios and/or to manage their exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedules of Investments. These contracts may be transacted on an exchange or OTC.

Futures Contracts: Certain LifePath Master Portfolios invest in long and/or short positions in futures and options on futures contracts to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the LifePath Master Portfolios and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the LifePath Master Portfolios are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statements of Assets and Liabilities. Pursuant to the contract, the LifePath Master Portfolios agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statements of Assets and Liabilities. When the

BLACKROCK FUNDS III DECEMBER 31, 2016 89

Notes to Financial Statements (continued) Master Investment Portfolio

contract is closed, a realized gain or loss is recorded in the Statements of Operations 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 futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

Forward Foreign Currency Exchange Contracts: Certain LifePath Master Portfolios enter into forward foreign currency exchange contracts to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk).

A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a specified date. These contracts help to manage the overall exposure to the currencies in which some of the investments held by the LifePath Master Portfolios are denominated and in some cases, may be used to obtain exposure to a particular market.

The contract is marked to market daily and the change in market value is recorded as unrealized appreciation (depreciation) in the Statements of Assets and Liabilities. When a contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the value at the time it was opened and the value at the time it was closed. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency. The use of forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

Master Netting Arrangements: In order to define their contractual rights and to secure rights that will help them mitigate their counterparty risk, the LifePath Master Portfolios may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their counterparties. An ISDA Master Agreement is a bilateral agreement between each LifePath Master Portfolio and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, each LifePath Master Portfolio may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to terminate derivative contracts prior to maturity in the event the LifePath Master Portfolios’ net assets decline by a stated percentage or the LifePath Master Portfolios fail to meet the terms of their ISDA Master Agreements. The result would cause the LifePath Master Portfolios to accelerate payment of any net liability owed to the counterparty.

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the LifePath Master Portfolios and the counterparty.

Cash collateral that has been pledged to cover obligations of the LifePath Master Portfolios and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the LifePath Master Portfolios, if any, is noted in the Schedules of Investments. Generally, the amount of collateral due from or to a counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the LifePath Master Portfolios. Any additional required collateral is delivered to/pledged by the LifePath Master Portfolios on the next business day. Typically, the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. A LifePath Master Portfolio generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the LifePath Master Portfolios from their counterparties are not fully collateralized, they bear the risk of loss from counterparty non-performance. Likewise, to the extent the LifePath Master Portfolios have delivered collateral to a counterparty and stand ready to perform under the terms of their agreement with such counterparty, they bear the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.

For financial reporting purposes, the LifePath Master Portfolios do not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statements of Assets and Liabilities.

6. Investment Advisory Agreement and Other Transactions with Affiliates:

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

Investment Advisory: MIP, on behalf of the LifePath Master Portfolios, entered into an Investment Advisory Agreement with BFA, the LifePath Master Portfolios’ investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory services. The Manager is responsible for the management of each LifePath Master Portfolio’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of each LifePath Master Portfolio.

For such services, each LifePath Master Portfolio pays the Manager a monthly fee at an annual rate equal to 0.35% of the average daily value of each LifePath Master Portfolio’s net assets.

90 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued) Master Investment Portfolio

With respect to the LifePath Master Portfolios, MIP entered into separate sub-advisory agreements with BlackRock International Limited (“BIL”) and BlackRock (Singapore) Limited (“BRS”), affiliates of the Manager. The Manager pays BIL and BRS, for services they provide, a monthly fee that is a percentage of the investment advisory fees paid by each LifePath Master Portfolio to the Manager.

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

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

Expense Limitations and Waivers: BFA, with respect to each LifePath Master Portfolio, has contractually agreed to waive 0.30% of its advisory fees through April 30, 2017. For the year ended December 31, 2016, the amounts waived are included in fees waived by the Manager in the Statements of Operations as follows:

	LifePath 2025 Master Portfolio			LifePath 2035 Master Portfolio		LifePath 2045 Master Portfolio		LifePath 2055 Master Portfolio
Amount waived		$	195,478	$	171,920	$	107,252	$	54,405

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

With respect to each LifePath Master Portfolio, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees each LifePath Master Portfolio pays to the Manager indirectly through its investment in affiliated money market funds. These amounts are included in fees waived by the Manager in the Statements of Operations. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with each LifePath Master Portfolio’s investments in other affiliated investment companies, if any. For the year ended December 31, 2016, the amounts waived were as follows:

	LifePath 2025 Master Portfolio			LifePath 2035 Master Portfolio		LifePath 2045 Master Portfolio		LifePath 2055 Master Portfolio
Amount waived		$	510	$	529	$	452	$	246

The fees and expenses of MIP’s trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the LifePath Master Portfolios. BFA has contractually agreed to reimburse the LifePath Master Portfolios or provide an offsetting credit against the administration fees paid by the LifePath Master Portfolios in an amount equal to the independent expenses through April 30, 2026. For the year ended December 31, 2016, the amounts waived are included in fees waived by the Manager in the Statements of Operations as follows:

	LifePath 2025 Master Portfolio			LifePath 2035 Master Portfolio		LifePath 2045 Master Portfolio		LifePath 2055 Master Portfolio
Amount waived		$	26,301	$	26,012	$	25,319	$	24,731

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

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. Each LifePath Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, each LifePath Master Portfolio retains 80% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees. In addition, commencing the business day following the date that the aggregate securities lending income earned across certain funds in the Equity-Liquidity Complex in a calendar year exceeds a specified threshold, each LifePath Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.

BLACKROCK FUNDS III DECEMBER 31, 2016 91

Notes to Financial Statements (continued) Master Investment Portfolio

The share of securities lending income earned by each LifePath Master Portfolio is shown as securities lending — affiliated — net in the Statements of Operations. For the year ended December 31, 2016, each LifePath Master Portfolio paid BTC the following amounts in total for securities lending agent services and collateral investment fees:

LifePath 2025 Master Portfolio	LifePath 2035 Master Portfolio		LifePath 2045 Master Portfolio		LifePath 2055 Master Portfolio
$605	$	414	$	509	$	295

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

Other Transactions: The LifePath Master Portfolios may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common trustees. For the year ended December 31, 2016, the purchase and sale transactions which resulted in net realized gains with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:

	Sales		Net Realized Gain
LifePath 2025 Master Portfolio . . . . . . . . . .	$	17,500	$	1,305
LifePath 2035 Master Portfolio . . . . . . . . . .	$	27,999	$	2,136
LifePath 2045 Master Portfolio . . . . . . . . . .	$	23,624	$	1,805
LifePath 2055 Master Portfolio . . . . . . . . . .	$	11,375	$	868

Each LifePath Master Portfolio may invest its positive cash balances in certain money market funds managed by the Manager or an affiliate. The income earned on these temporary cash investments is shown as income — affiliated in the Statements of Operations.

7. Purchases and Sales:

For the year ended December 31, 2016, purchases and sales of investments in the Underlying Funds and Master Portfolios, excluding short-term securities, were as follows:

	LifePath 2025 Master Portfolio			LifePath 2035 Master Portfolio		LifePath 2045 Master Portfolio		LifePath 2055 Master Portfolio
Purchases		$	35,177,910	$	43,197,568	$	26,353,548	$	14,232,747
Sales		$	46,308,473	$	50,694,744	$	31,376,221	$	14,354,033

8. Income Tax Information:

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

Each LifePath Master Portfolio files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each LifePath Master Portfolio’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016. The statutes of limitations on each LifePath Master Portfolio’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the LifePath Master Portfolios as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the LifePath Master Portfolios’ financial statements.

As of December 31, 2016, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

	LifePath 2025 Master Portfolio				LifePath 2035 Master Portfolio			LifePath 2045 Master Portfolio			LifePath 2055 Master Portfolio
Tax cost		$	64,068,299		$	56,374,610		$	35,380,871		$	18,970,180
Gross unrealized appreciation		$	3,992,094		$	1,323,902		$	998,418		$	614,375
Gross unrealized depreciation			(3,123,370	)		(307,083	)		(201,056	)		(123,077	)
Net unrealized depreciation		$	868,724		$	1,016,819		$	797,362		$	491,298

9. Bank Borrowings:

MIP, on behalf of the LifePath Master Portfolios, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the LifePath Master Portfolios may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the LifePath Master Portfolios, can borrow

92 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (concluded) Master Investment Portfolio

up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2017 unless extended or renewed. Prior to April 21, 2016, the credit agreement had a fee per annum of 0.06% on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statements of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2016, the LifePath Master Portfolios did not borrow under the credit agreement.

10. Principal Risks:

In the normal course of business, the LifePath Master Portfolios invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer to meet all its obligations, including the ability to pay principal and interest when due (issuer credit risk). The value of securities held by the LifePath Master Portfolios may decline in response to certain events, including those directly involving the issuers of securities owned by the LifePath Master Portfolios. Changes arising from the general economy, the overall market and local, regional or global political and/or social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

On October 11, 2016, BlackRock implemented certain changes required by amendments to Rule 2a-7 under the 1940 Act, which governs the operations of U.S. money market funds. The LifePath Master Portfolios may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. A LifePath Master Portfolio may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause each LifePath Master Portfolio’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of a LifePath Master Portfolio may lose value, regardless of the individual results of the securities and other instruments in which the LifePath Master Portfolio invests.

Counterparty Credit Risk: Similar to issuer credit risk, the LifePath Master Portfolios may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The LifePath Master Portfolios manage counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the LifePath Master Portfolios to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the LifePath Master Portfolios’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statements of Assets and Liabilities, less any collateral held by the LifePath Master Portfolios.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

The LifePath Master Portfolios’ risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by such LifePath Master Portfolio.

With exchange-traded futures, there is less counterparty credit risk to the LifePath Master Portfolios since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a LifePath Master Portfolio does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the LifePath Master Portfolios.

11. 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, 2016 93

Report of Independent Registered Public Accounting Firm Master Investment Portfolio

To the Board of Trustees of Master Investment Portfolio and the Investors of the Funds, as defined:

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of LifePath^® Dynamic 2025 Master Portfolio, LifePath^® Dynamic 2035 Master Portfolio, LifePath^® Dynamic 2045 Master Portfolio and LifePath^® Dynamic 2055 Master Portfolio (the “Master Portfolios”), each a series of Master Investment Portfolio, as of December 31, 2016, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolios’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers and the transfer agent of the investee funds, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

94 BLACKROCK FUNDS III DECEMBER 31, 2016

Officers and Trustees¹

Name, Address2 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3
Rodney D. Johnson 1941	Chair of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011; Director, The Mainstay (non-profit) since 2016.	26 RICs consisting of 146 Portfolios	None
Susan J. Carter 1956	Trustee	Since 2016	Director, Pacific Pension Institute since 2014; Advisory Board Member, Center for Private Equity and Entrepreneurship at Tuck School of Business since 1997; Senior Advisor, Commonfund Capital, Inc. (“CCI”) (investment adviser) in 2015; Chief Executive Officer, CCI from 2013 to 2014; President & Chief Executive Officer, CCI from 1997 to 2013; Advisory Board Member, Girls Who Invest since 2015; Advisory Board Member, Bridges Ventures since 2016; Trustee, Financial Accounting Foundation since 2017.	26 RICs consisting of 146 Portfolios	None
Collette Chilton 1958	Trustee	Since 2015	Chief Investment Officer, Williams College since 2006; Chief Investment Officer, Lucent Asset Management Corporation from 1998 to 2006.	26 RICs consisting of 146 Portfolios	None
Neil A. Cotty 1954	Trustee	Since 2016	Bank of America Corporation from 1996 to 2015, serving in various senior finance leadership roles, including Chief Accounting Officer, from 2009 to 2015, Chief Financial Officer of Global Banking, Markets and Wealth Management from 2008 to 2009, Chief Accounting Officer from 2004 to 2008, Chief Financial Officer of Consumer Bank from 2003 to 2004, Chief Financial Officer of Global Corporate Investment Bank from 1999 to 2002.	26 RICs consisting of 146 Portfolios	None
Cynthia A. Montgomery 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012.	26 RICs consisting of 146 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 1947	Trustee	Since 2009	General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Chair, Basic Health International (non-profit) since 2015.	26 RICs consisting of 146 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company); Consol Energy Inc.
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981 and Principal since 2010.	26 RICs consisting of 146 Portfolios	None
Mark Stalnecker 1951	Trustee	Since 2015	Chief Investment Officer, University of Delaware from 1999 to 2013; Trustee, Winterthur Museum and Country Estate from 2001 to 2015; Member of the Investment Committee, Delaware Public Employees’ Retirement System since 2002; Member of the Investment Committee, Christiana Care Health System since 2009; Member of the Investment Committee, Delaware Community Foundation from 2013 to 2014; Director, SEI Private Trust Co. from 2001 to 2014.	26 RICs consisting of 146 Portfolios	None
Kenneth L. Urish 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since founding in 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	26 RICs consisting of 146 Portfolios	None

BLACKROCK FUNDS III DECEMBER 31, 2016 95

Officers and Trustees¹ (continued)

Name, Address2 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3 (concluded)
Claire A. Walton 1957	Trustee	Since 2016	Chief Operating Officer and Chief Financial Officer of Liberty Square Asset Management, LP from 1998 to 2015; General Partner of Neon Liberty Capital Management, LLC since 2003; Director, Boston Hedge Fund Group since 2009; Director, Woodstock Ski Runners since 2013; Director, Massachusetts Council on Economic Education from 2013 to 2015.	26 RICs consisting of 146 Portfolios	None
Frederick W. Winter 1945	Trustee	Since 2009	Director, Alkon Corporation since 1992; Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh, Dean and Professor from 1997 to 2005, Professor until 2013.	26 RICs consisting of 146 Portfolios	None
Interested Trustees5
Barbara G. Novick 1960	Trustee	Since 2015	Vice Chairman of BlackRock, Inc. since 2006; Chair of BlackRock's Government Relations Steering Committee since 2009; Head of the Global Client Group of BlackRock, Inc. from 1988 to 2008.	100 RICs consisting of 220 Portfolios	None
John M. Perlowski 1964	Trustee, President and Chief Executive Officer	Since 2015 (Trustee); Since 2010 (President and Chief Executive Officer)	Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Fund & Accounting Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Advisory Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.	128 RICs consisting of 318 Portfolios	None
	1    As of February 24, 2017.
	2   The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	3   Independent Trustees serve until their resignation, retirement, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Independent Trustees on a case-by-case basis, as appropriate.
	4   In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, certain Independent Trustees were elected to the Board. As a result, although the chart shows certain Independent Trustees as joining the Board in 2009, those Independent Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: Rodney D. Johnson, 1995; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1999; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
	5    Ms. Novick and Mr. Perlowski are both “interested persons,” as defined in the 1940 Act, of the Trust/MIP based on their positions with BlackRock and its affiliates. Mr. Perlowski and Ms. Novick are also board members of certain complexes of BlackRock registered open-end and closed-end funds. Mr. Perlowski is also a board member of the BlackRock Equity-Bond Complex and the BlackRock Closed-End Complex, and Ms. Novick is a board member of the BlackRock Closed-End Complex.

96 BLACKROCK FUNDS III DECEMBER 31, 2016

Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served as an Officer	Principal Occupation(s) During Past Five Years
Officers Who Are Not Trustees2
Thomas Callahan 1968	Vice President	Since 2016	Managing Director of BlackRock, Inc. since 2013; Head of BlackRock’s Global Cash Management Business since 2016; Co-Head of the Global Cash Management Business from 2014 to 2016; Deputy Head of the Global Cash Management Business from 2013 to 2014; Member of the Cash Management Group Executive Committee since 2013; Chief Executive Officer of NYSE Liffe U.S. from 2008 to 2013.
Jennifer McGovern 1977	Vice President	Since 2014	Managing Director of BlackRock, Inc. since 2016; Director of BlackRock, Inc. from 2011 to 2015; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal J. Andrews 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock, Inc. 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 M. Fife 1970	Treasurer	Since 2007	Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Charles Park 1967	Chief Compliance Officer	Since 2014	Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Fernanda Piedra 1969	Anti-Money Laundering Compliance Officer	Since 2015	Director of BlackRock, Inc. since 2014; Anti-Money Laundering Compliance Officer and Regional Head of Financial Crime for the Americas at BlackRock, Inc. since 2014; Head of Regulatory Changes and Remediation for the Asset Wealth Management Division of Deutsche Bank from 2010 to 2014; Vice President of Goldman Sachs (Anti-Money Laundering/Suspicious Activities Group) from 2004 to 2010.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock, Inc. since 2014; Director of BlackRock, Inc. from 2010 to 2013; Secretary of the iShares® exchange traded funds since 2015; Secretary of the BlackRock-advised mutual funds since 2012.
	1    The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	2    Officers of the Trust/MIP serve at the pleasure of the Board.
	Further information about the Trust’s/MIP’s Officers and Trustees is available in the LifePath Fund’s Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.

Effective December 31, 2016, David O. Beim and Dr. Matina S. Horner resigned as Trustees of the Trust/MIP.

Investment Adviser BlackRock Fund Advisors San Francisco, CA 94105	Accounting Agent and Custodian State Street Bank and Trust Company Boston, MA 02110	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Sidley Austin LLP New York, NY 10019
Sub-Advisers BlackRock International Limited Edinburgh EH3 8BL, United Kingdom BlackRock (Singapore) Limited Singapore 079912 Singapore	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP Philadelphia, PA 19103	Address of the Trust/MIP 400 Howard Street San Francisco, CA 94105
Administrator BlackRock Advisors, LLC Wilmington, DE 19809

BLACKROCK FUNDS III DECEMBER 31, 2016 97

Additional Information

General Information

Householding

The LifePath 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 LifePath Funds at (800) 441-7762.

Availability of Quarterly Schedule of Investments

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

Availability of Proxy Voting Policies and Procedures

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

Availability of Proxy Voting Record

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

BlackRock’s Mutual Fund Family

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

Shareholder Privileges

Account Information

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

98 BLACKROCK FUNDS III DECEMBER 31, 2016

Additional Information (concluded)

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

BLACKROCK FUNDS III DECEMBER 31, 2016 99

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

LPincre-12/16-AR

DECEMBER 31, 2016

  ANNUAL REPORT

BlackRock Funds III

^Ø   BlackRock LifePath^® Dynamic Retirement Fund

^Ø   BlackRock LifePath^® Dynamic 2020 Fund

^Ø   BlackRock LifePath^® Dynamic 2030 Fund

^Ø   BlackRock LifePath^® Dynamic 2040 Fund

^Ø   BlackRock LifePath^® Dynamic 2050 Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
The Markets in Review		3
Annual Report:
Fund Summaries		4
About Fund Performance		16
Disclosure of Expenses		17
Derivative Financial Instruments		18
Fund Financial Statements:
Statements of Assets and Liabilities		19
Statements of Operations		20
Statements of Changes in Net Assets		21
Fund Financial Highlights		24
Fund Notes to Financial Statements		49
Fund Report of Independent Registered Public Accounting Firm		56
Important Tax Information		56
Master Portfolio Information		57
Master Portfolio Financial Statements:
Schedules of Investments		59
Statements of Assets and Liabilities		91
Statements of Operations		92
Statements of Changes in Net Assets		93
Master Portfolio Financial Highlights		96
Master Portfolio Notes to Financial Statements		101
Master Portfolio Report of Independent Registered Public Accounting Firm		110
Officers and Trustees		111
Additional Information		114

2 BLACKROCK FUNDS III DECEMBER 31, 2016

The Markets in Review

Dear Shareholder,

The year 2016 started on a fraught note with worries about slowing growth in China, plunging oil prices and sliding share prices. Then reflationary expectations in the United States helped drive a second-half global growth pick-up and big market reversals. As such, higher-quality asset classes such as Treasury bonds, municipals and investment grade credit prevailed in the first half of the year, only to struggle in the second. In contrast, risk assets sold off at the start of the year and rebounded in the latter half, with some asset classes posting strong year-end returns.

A key takeaway from 2016’s market performance is that economics can trump politics. The global reflationary theme — governments taking policy action to support growth — was the dominant driver of 2016 asset returns, outweighing significant political upheavals and uncertainty. This trend accelerated after the U.S. election on expectations for an extra boost to U.S. growth via fiscal policy.

Markets were remarkably resilient during the year. Spikes in equity volatility after big surprises such as the U.K.’s vote to leave the European Union and the outcome of the U.S. presidential election were short-lived. Instead, political surprises and initial sell-offs were seized upon as buying opportunities. We believe this reinforces the case for taking the long view rather than reacting to short-term market noise.

Asset returns varied widely in 2016. Perceived safe assets such as government bonds and low-volatility shares underperformed the higher-risk areas of the market. And the reversal of longstanding trends created opportunities, such as in the recovery of value stocks and commodities.

We expect some of these trends to extend into 2017 and see the potential for more flows into risk assets this year. Learn more by reading our market insights at blackrock.com.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2016
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		7.82	%		11.96	%
U.S. small cap equities (Russell 2000® Index)		18.68			21.31
International equities (MSCI Europe, Australasia, Far East Index)		5.67			1.00
Emerging market equities (MSCI Emerging Markets Index)		4.49			11.19
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.18			0.33
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		(7.51	)		(0.16	)
U.S. investment grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index)		(2.53	)		2.65
Tax-exempt municipal bonds (S&P Municipal Bond Index)		(3.43	)		0.77
U.S. high yield bonds (Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		7.40			17.13
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, 2016 BlackRock LifePath Dynamic Funds

Portfolio Management Commentary

How did each Fund perform?

• The LifePath Dynamic Funds with target dates of 2020, 2030, 2040 and 2050 and the LifePath Dynamic Retirement Fund (together, the “LifePath Dynamic Funds”) invest in their respective LifePath Dynamic Master Portfolio.

• For the 12-month period ended December 31, 2016, the LifePath Dynamic 2020, 2030, 2040 and 2050 Funds underperformed their custom benchmarks except for Class K Shares of LifePath Dynamic 2020 Fund, which performed in line with its custom benchmark. Class K Shares of the LifePath Dynamic Retirement Portfolio performed in line with its custom benchmark for the same period, while the Fund’s other share classes underperformed. The returns for the LifePath Dynamic Funds include fund expenses. The custom benchmarks have no expenses associated with performance.

What factors influenced performance?

• Detractors from relative returns largely derived from the underperformance of the International Tilts Master Portfolio strategy. The International Tilts Master Portfolio entered 2016 with a pro-growth stance, with its proprietary signals indicating positive economic conditions. Given the dramatic fall in the markets during the first weeks of 2016, this pro-growth stance detracted from returns. In April, the main cause of negative performance was the sharp rotation in market momentum, as expressed by the rally in materials and energy. An overweight in Italy (specifically, Italian banks and financials) was another detractor. At the end of the second quarter, the International Tilts Master Portfolio experienced additional losses concentrated around Brexit market moves. In the third quarter, there was a recovery in the Europe region, but losses in Japan erased those gains. Although the fourth quarter saw a strong performance rebound primarily driven by fundamental insights, this was not sufficient to cover earlier losses.

• BlackRock Commodity Strategies Fund (the “Fund”) was the main positive contributor to relative performance, largely due to the outperformance of natural resources equities versus underlying commodity prices. The Fund’s mining and energy strategies also made a positive contribution. In addition, the futures’ curve strategies within the commodity futures based investment side of the Fund, had a positive impact on performance relative to the benchmark, as the Fund has generally been positioned further out on the futures curve than the benchmark.

• Active Stock Master Portfolio also made a positive contribution to relative performance due to the basic value strategy. The largest contributors to performance were stock selection in financials, energy and health care. Conversely, the largest detractors were stock selection in industrials, information technology and consumer staples. Stock selection in the energy sector benefited from a rebound in crude oil prices following OPEC’s agreement to curb production. Active Stock Master Portfolio’s underweight allocation to real estate, based primarily on valuation, also added to returns.

Describe recent portfolio activity.

• Effective November 7, 2016, LifePath Funds were renamed and restructured as LifePath Dynamic Funds to gain additional flexibility in its portfolio management and access to additional underlying funds. The changes were designed to obtain greater flexibility to adjust the LifePath Dynamic Funds’ asset allocation to respond to market conditions and opportunities; invest in a broader mix of actively managed funds, smart beta ETFs and traditional cap-weighted index funds; and to add additional fixed income diversification by incorporating the Master Total Return Portfolio.

• Each LifePath Dynamic Fund 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 Dynamic Fund is systematically adjusted to reflect the shareholders’ remaining investment time horizon. During the period, the LifePath Dynamic Funds were rebalanced in accordance with their updated strategic allocations, and daily cash flows were allocated to the underlying funds and instruments as appropriate. The dynamic signal, which assesses more recent volatility and valuations, was activated during the period and had a slightly positive impact on relative performance.

Describe portfolio positioning at period end.

• At period end, each of the LifePath Dynamic Funds was invested according to its respective strategic allocation benchmark within tolerance limits.

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

4 BLACKROCK FUNDS III DECEMBER 31, 2016

BlackRock LifePath Dynamic Funds

Glide Path Evolution

Under normal circumstances, the asset allocation of each LifePath Dynamic Fund will change over time according to a “glide path” as each LifePath Fund approaches its respective target date. The glide path represents the shifting of asset classes over time. Each LifePath Dynamic Fund’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 Dynamic Fund, which may be a primary source of income after retirement. As each LifePath Dynamic Fund approaches its target date, its asset allocation will shift so that it invests a greater percentage of its assets in fixed income funds. The asset allocation targets are established by the portfolio managers. The investment committee, including the portfolio managers, meets regularly to assess market conditions, review the asset allocation targets of each LifePath Dynamic Fund, and determine whether any changes are required to enable each LifePath Dynamic Fund to achieve its investment objective.

Although the asset allocation targets listed for the glide path are general, long-term targets, BlackRock Fund Advisors (“BFA” or the Manager) may adjust the allocation to equity and fixed income in the LifePath Dynamic Fund, based on an assessment of the current market conditions and the potential contribution of each asset class to the expected risk and return characteristics of the LifePath Dynamic Fund. In general, the adjustments will be limited to +/- 10% relative to the target allocations. BFA, may determine, in light of market conditions or other factors, that a greater variation is warranted to protect the LifePath Dynamic Fund or achieve its investment objective.

BLACKROCK FUNDS III DECEMBER 31, 2016 5

BlackRock LifePath Dynamic Retirement Fund

Investment Objective

The investment objective of BlackRock LifePath^® Dynamic Retirement Fund (“LifePath Dynamic Retirement Fund” or the “LifePath Fund”) is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, LifePath Dynamic Retirement Fund will be broadly diversified across global asset classes.

Effective November 7, 2016, BlackRock LifePath^® Retirement Fund changed its name to the BlackRock LifePath^® Dynamic Retirement Fund.

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

²  The LifePath Fund compares its performance to that of a customized weighted index (the “LifePath Dynamic Retirement Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

The LifePath Fund’s custom benchmark consists of the following:

Period	Bloomberg Barclays U.S. Aggregate Bond Index			Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index (Series L)			Cohen & Steers Realty Majors Index			Bloomberg Commodity Index3			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA 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
1/01/06 to 12/31/06		52.0	%		10.2	%		2.7	%		N/A			N/A			N/A			9.9	%		N/A			N/A			3.3	%		20.2	%		1.7	%
1/01/07 to 12/31/07		52.6			9.6			2.8			N/A			N/A			2.7	%		7.7			N/A			N/A			3.6			19.2			1.8
1/01/08 to 12/31/08		53.0			9.0			1.3			N/A			1.3	%		11.4			N/A			N/A			N/A			4.1			18.0			1.9
1/01/09 to 12/31/09		52.9			9.1			N/A			N/A			1.6			10.8			N/A			N/A			N/A			4.7			18.7			2.2
1/01/10 to 12/31/10		52.9			9.1			N/A			N/A			1.1			10.8			N/A			N/A			N/A			5.0			18.9			2.2
1/01/11 to 12/31/11		52.9			9.1			N/A			N/A			0.8			11.3			N/A			8.6	%		1.7	%		2.8			11.6			1.2
1/01/12 to 12/31/12		52.9			9.1			N/A			1.0	%		0.3			11.3			N/A			21.2			4.2			N/A			N/A			N/A
1/01/13 to 12/31/13		52.9			9.1			N/A			3.7			0.1			10.1			N/A			19.7			4.4			N/A			N/A			N/A
1/01/14 to 12/31/14		52.6			9.0			N/A			3.8			0.2			10.2			N/A			19.9			4.3			N/A			N/A			N/A
1/01/15 to 12/31/15		51.2			8.8			N/A			3.8			0.5			11.0			N/A			21.0			3.8			N/A			N/A			N/A
1/01/16 to 12/31/16		51.2			8.8			N/A			3.7			0.5			11.3			N/A			20.9			3.7			N/A			N/A			N/A

³  Prior to July 1, 2014, the Bloomberg Commodity Index was known as the Dow Jones-UBS Commodity Index.

See “About Fund Performance” on page 16 for descriptions of the indexes.

6 BLACKROCK FUNDS III DECEMBER 31, 2016

BlackRock LifePath Dynamic Retirement Fund

Performance Summary for the Period Ended December 31, 2016

				Average Annual Total Returns1
				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		1.50	%		5.91	%		N/A			4.75	%		N/A			4.17	%		N/A
Investor A		1.48			5.78			0.22	%		4.51			3.39	%		3.91			3.36	%
Investor C		1.04			4.97			3.97			3.70			3.70			3.10			3.10
Class K		1.63			6.20			N/A			5.09			N/A			4.48			N/A
Class R		1.42			5.59			N/A			4.26			N/A			3.63			N/A
LifePath Dynamic Retirement Fund Custom Benchmark		1.42			6.15			N/A			5.10			N/A			4.68			N/A
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		2.65			N/A			2.23			N/A			4.34			N/A
Bloomberg Barclays U.S. TIPS Index (Series L)		(1.47	)		4.68			N/A			0.89			N/A			4.36			N/A
Bloomberg Commodity Index		(1.31	)		11.77			N/A			(8.95	)		N/A			(5.58	)		N/A
FTSE EPRA/NAREIT Developed Index		(4.41	)		4.06			N/A			9.48			N/A			1.48			N/A
MSCI ACWI ex USA IMI Index		5.37			4.41			N/A			5.35			N/A			1.22			N/A
Russell 1000® Index		8.01			12.05			N/A			14.69			N/A			7.08			N/A
Russell 2000® Index		18.68			21.31			N/A			14.46			N/A			7.07			N/A

¹  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distributions and service fees. See “About Fund Performance” on page 16 for a detailed description of share classes, including any related sales charges and fees.

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

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

BLACKROCK FUNDS III DECEMBER 31, 2016 7

BlackRock LifePath Dynamic 2020 Fund

Investment Objective

The investment objective of BlackRock LifePath^® Dynamic 2020 Fund (“LifePath Dynamic 2020 Fund” or the “LifePath Fund”) is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, LifePath Dynamic 2020 Fund will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

Effective November 7, 2016, BlackRock LifePath^® 2020 Fund changed its name to the BlackRock LifePath^® Dynamic 2020 Fund.

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

²  The LifePath Fund compares its performance to that of a customized weighted index (the “LifePath Dynamic 2020 Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

The LifePath Fund’s custom benchmark consists of the following:

Period	Bloomberg Barclays U.S. Aggregate Bond Index			Bloomberg Barclays U.S.  Treasury Inflation Protected Securities (TIPS) Index (Series L)			Cohen & Steers Realty Majors Index			Bloomberg Commodity Index3			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA 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
1/01/06 to 12/31/06		29.0	%		5.2	%		4.3	%		N/A			N/A			N/A			16.8	%		N/A			N/A			5.1	%		37.5	%		2.6	%
1/01/07 to 12/31/07		29.7			5.0			4.5			N/A			N/A			17.2	%		N/A			N/A			N/A			5.4			35.4			2.8
1/01/08 to 12/31/08		31.6			5.1			2.2			N/A			2.2	%		18.4			N/A			N/A			N/A			5.8			32.0			2.7
1/01/09 to 12/31/09		33.8			5.5			N/A			N/A			4.8			16.9			N/A			N/A			N/A			5.8			30.4			2.8
1/01/10 to 12/31/10		35.2			5.7			N/A			N/A			4.0			16.5			N/A			N/A			N/A			5.8			30.2			2.6
1/01/11 to 12/31/11		36.9			6.0			N/A			N/A			3.6			16.6			N/A			13.1	%		1.5	%		3.3			17.6			1.4
1/01/12 to 12/31/12		39.0			6.3			N/A			1.0	%		3.2			15.9			N/A			31.0			3.6			N/A			N/A			N/A
1/01/13 to 12/31/13		40.8			6.6			N/A			3.8			2.8			14.5			N/A			27.8			3.7			N/A			N/A			N/A
1/01/14 to 12/31/14		42.0			6.8			N/A			3.8			2.6			14.4			N/A			26.7			3.7			N/A			N/A			N/A
1/01/15 to 12/31/15		40.4			6.7			N/A			3.8			2.9			15.3			N/A			27.5			3.4			N/A			N/A			N/A
1/01/16 to 12/31/16		42.1			7.0			N/A			3.7			2.7			14.9			N/A			26.2			3.3			N/A			N/A			N/A

³  Prior to July 1, 2014, the Bloomberg Commodity Index was known as the Dow Jones-UBS Commodity Index.

See “About Fund Performance” on page 16 for descriptions of the indexes.

8 BLACKROCK FUNDS III DECEMBER 31, 2016

BlackRock LifePath Dynamic 2020 Fund

Performance Summary for the Period Ended December 31, 2016

				Average Annual Total Returns1
				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		2.29	%		6.29	%		N/A			5.95	%		N/A			3.57	%		N/A
Investor A		2.15			6.04			0.47	%		5.68			4.54	%		3.32			2.76	%
Investor C		1.73			5.23			4.23			4.88			4.88			2.48			2.48
Class K		2.42			6.57			N/A			6.29			N/A			3.89			N/A
Class R		2.05			5.79			N/A			5.42			N/A			3.00			N/A
LifePath Dynamic 2020 Fund Custom Benchmark		2.10			6.62			N/A			6.38			N/A			4.29			N/A
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		2.65			N/A			2.23			N/A			4.34			N/A
Bloomberg Barclays U.S. TIPS Index (Series L)		(1.47	)		4.68			N/A			0.89			N/A			4.36			N/A
Bloomberg Commodity Index		(1.31	)		11.77			N/A			(8.95	)		N/A			(5.58	)		N/A
FTSE EPRA/NAREIT Developed Index		(4.41	)		4.06			N/A			9.48			N/A			1.48			N/A
MSCI ACWI ex USA IMI Index		5.37			4.41			N/A			5.35			N/A			1.22			N/A
Russell 1000® Index		8.01			12.05			N/A			14.69			N/A			7.08			N/A
Russell 2000® Index		18.68			21.31			N/A			14.46			N/A			7.07			N/A

¹  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distributions and service fees. See “About Fund Performance” on page 16 for a detailed description of share classes, including any related sales charges and fees.

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

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

BLACKROCK FUNDS III DECEMBER 31, 2016 9

BlackRock LifePath Dynamic 2030 Fund

Investment Objective

The investment objective of BlackRock LifePath^® Dynamic 2030 Fund (“LifePath Dynamic 2030 Fund” or the “LifePath Fund”) is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, LifePath Dynamic 2030 Fund will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

Effective November 7, 2016, BlackRock LifePath^® 2030 Fund changed its name to the BlackRock LifePath^® Dynamic 2030 Fund.

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

²  The LifePath Fund compares its performance to that of a customized weighted index (the “LifePath Dynamic 2030 Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

The LifePath Fund’s custom benchmark consists of the following:

Period	Bloomberg Barclays U.S. Aggregate Bond Index			Bloomberg Barclays U.S.  Treasury Inflation Protected Securities (TIPS) Index (Series L)			Cohen & Steers Realty Majors Index			Bloomberg Commodity Index3			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA 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
1/01/06 to 12/31/06		16.7	%		2.7	%		5.1	%		N/A			N/A			N/A			20.3	%		N/A			N/A			6.0	%		46.2	%		3.0	%
1/01/07 to 12/31/07		17.4			2.6			5.4			N/A			N/A			20.9	%		N/A			N/A			N/A			6.4			44.1			3.2
1/01/08 to 12/31/08		19.0			2.8			5.5			N/A			N/A			22.4			N/A			N/A			N/A			6.9			40.2			3.2
1/01/09 to 12/31/09		21.0			3.1			N/A			N/A			7.0	%		21.0			N/A			N/A			N/A			6.6			38.2			3.1
1/01/10 to 12/31/10		22.0			3.2			N/A			N/A			6.3			20.7			N/A			N/A			N/A			6.4			38.6			2.8
1/01/11 to 12/31/11		23.5			3.4			N/A			N/A			6.0			20.9			N/A			17.0	%		1.3	%		3.7			22.6			1.6
1/01/12 to 12/31/12		25.8			3.8			N/A			1.0	%		6.0			20.2			N/A			40.2			3.0			N/A			N/A			N/A
1/01/13 to 12/31/13		27.6			4.0			N/A			3.9			5.7			19.3			N/A			36.6			2.9			N/A			N/A			N/A
1/01/14 to 12/31/14		27.5			4.0			N/A			3.9			6.1			19.8			N/A			35.8			2.9			N/A			N/A			N/A
1/01/15 to 12/31/15		21.8			3.4			N/A			3.9			7.7			22.2			N/A			38.5			2.5			N/A			N/A			N/A
1/01/16 to 12/31/16		6.9			3.6			N/A			3.9			7.6			21.9			N/A			37.1			2.5			N/A			N/A			N/A

³  Prior to July 1, 2014, the Bloomberg Commodity Index was known as the Dow Jones-UBS Commodity Index.

See “About Fund Performance” on page 16 for descriptions of the indexes.

10 BLACKROCK FUNDS III DECEMBER 31, 2016

BlackRock LifePath Dynamic 2030 Fund

Performance Summary for the Period Ended December 31, 2016

				Average Annual Total Returns1
				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		3.76	%		7.24	%		N/A			7.30	%		N/A			3.48	%		N/A
Investor A		3.62			6.93			1.32	%		7.02			5.87	%		3.21			2.66	%
Investor C		3.19			6.12			5.12			6.21			6.21			2.36			2.36
Class K		3.81			7.42			N/A			7.63			N/A			3.79			N/A
Class R		3.51			6.74			N/A			6.76			N/A			2.88			N/A
LifePath Dynamic 2030 Fund Custom Benchmark		3.51			7.62			N/A			7.78			N/A			4.32			N/A
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		2.65			N/A			2.23			N/A			4.34			N/A
Bloomberg Barclays U.S. TIPS Index (Series L)		(1.47	)		4.68			N/A			0.89			N/A			4.36			N/A
Bloomberg Commodity Index		(1.31	)		11.77			N/A			(8.95	)		N/A			(5.58	)		N/A
FTSE EPRA/NAREIT Developed Index		(4.41	)		4.06			N/A			9.48			N/A			1.48			N/A
MSCI ACWI ex USA IMI Index		5.37			4.41			N/A			5.35			N/A			1.22			N/A
Russell 1000® Index		8.01			12.05			N/A			14.69			N/A			7.08			N/A
Russell 2000® Index		18.68			21.31			N/A			14.46			N/A			7.07			N/A

¹  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distributions and service fees. See “About Fund Performance” on page 16 for a detailed description of share classes, including any related sales charges and fees.

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

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

BLACKROCK FUNDS III DECEMBER 31, 2016 11

BlackRock LifePath Dynamic 2040 Fund

Investment Objective

The investment objective of BlackRock LifePath^® Dynamic 2040 Fund (“LifePath Dynamic 2040 Fund” or the “LifePath Fund”) is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, LifePath Dynamic 2040 Fund will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

Effective November 7, 2016, BlackRock LifePath^® 2040 Fund changed its name to the BlackRock LifePath^® Dynamic 2040 Fund.

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

²  The LifePath Fund compares its performance to that of a customized weighted index (the “LifePath Dynamic 2040 Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

The LifePath Fund’s custom benchmark consists of the following:

Period	Bloomberg Barclays U.S. Aggregate Bond Index			Bloomberg Barclays U.S.  Treasury Inflation Protected Securities (TIPS) Index (Series L)			Cohen & Steers Realty Majors Index			Bloomberg Commodity Index3			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA 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
1/01/06 to 12/31/06		7.4	%		N/A			5.8	%		N/A			N/A			N/A			23.2	%		N/A			N/A			6.8	%		53.4	%		3.4	%
1/01/07 to 12/31/07		7.7			N/A			5.9			N/A			N/A			N/A			23.5			N/A			N/A			7.2			51.9			3.7
1/01/08 to 12/31/08		9.1			0.5	%		3.2			N/A			3.2	%		25.8	%		N/A			N/A			N/A			7.7			46.9			3.6
1/01/09 to 12/31/09		10.4			1.1			N/A			N/A			8.8			24.5			N/A			N/A			N/A			7.2			44.6			3.4
1/01/10 to 12/31/10		11.2			1.1			N/A			N/A			8.1			24.2			N/A			N/A			N/A			6.9			45.5			3.0
1/01/11 to 12/31/11		12.7			1.3			N/A			N/A			7.9			24.5			N/A			20.1	%		1.2	%		4.0			26.6			1.7
1/01/12 to 12/31/12		15.3			1.6			N/A			1.0	%		8.2			23.7			N/A			47.7			2.5			N/A			N/A			N/A
1/01/13 to 12/31/13		17.3			1.7			N/A			3.9			8.1			23.1			N/A			43.6			2.3			N/A			N/A			N/A
1/01/14 to 12/31/14		16.1			1.6			N/A			3.9			9.0			24.2			N/A			42.9			2.3			N/A			N/A			N/A
1/01/15 to 12/31/15		5.7			0.7			N/A			4.1			12.1			28.1			N/A			47.3			2.0			N/A			N/A			N/A
1/01/16 to 12/31/16		6.9			0.9			N/A			4.1			12.1			28.0			N/A			37.1			2.5			N/A			N/A			N/A

³  Prior to July 1, 2014, the Bloomberg Commodity Index was known as the Dow Jones-UBS Commodity Index.

See “About Fund Performance” on page 16 for descriptions of the indexes.

12 BLACKROCK FUNDS III DECEMBER 31, 2016

BlackRock LifePath Dynamic 2040 Fund

Performance Summary for the Period Ended December 31, 2016

				Average Annual Total Returns1
				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		5.01	%		7.97	%		N/A			8.34	%		N/A			3.32	%		N/A
Investor A		4.84			7.69			2.04	%		8.07			6.91	%		3.07			2.51	%
Investor C		4.44			6.82			5.82			7.27			7.27			2.19			2.19
Class K		5.12			8.19			N/A			8.69			N/A			3.65			N/A
Class R		4.76			7.50			N/A			7.83			N/A			2.71			N/A
LifePath Dynamic 2040 Fund Custom Benchmark		4.71			8.43			N/A			8.87			N/A			4.27			N/A
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		2.65			N/A			2.23			N/A			4.34			N/A
Bloomberg Barclays U.S. TIPS Index (Series L)		(1.47	)		4.68			N/A			0.89			N/A			4.36			N/A
Bloomberg Commodity Index		(1.31	)		11.77			N/A			(8.95	)		N/A			(5.58	)		N/A
FTSE EPRA/NAREIT Developed Index		(4.41	)		4.06			N/A			9.48			N/A			1.48			N/A
MSCI ACWI ex USA IMI Index		5.37			4.41			N/A			5.35			N/A			1.22			N/A
Russell 1000® Index		8.01			12.05			N/A			14.69			N/A			7.08			N/A
Russell 2000® Index		18.68			21.31			N/A			14.46			N/A			7.07			N/A

¹  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distributions and service fees. See “About Fund Performance” on page 16 for a detailed description of share classes, including any related sales charges and fees.

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

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

BLACKROCK FUNDS III DECEMBER 31, 2016 13

BlackRock LifePath Dynamic 2050 Fund

Investment Objective

The investment objective of BlackRock LifePath^® Dynamic 2050 Fund (“LifePath Dynamic 2050 Fund” or the “LifePath Fund”) is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, LifePath Dynamic 2050 Fund will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

Effective November 7, 2016, BlackRock LifePath^® 2050 Fund changed its name to the BlackRock LifePath^® Dynamic 2050 Fund.

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, transaction costs and other operating expenses, including advisory fees, if any. Institutional Shares do not have a sales charge.

²  The LifePath Fund compares its performance to that of a customized weighted index (the “LifePath Dynamic 2050 Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

³  Commencement of operations.

The LifePath Fund’s custom benchmark consists of the following:

Period	Bloomberg Barclays U.S. Aggregate Bond  Index			Bloomberg Commodity Index4			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA IMI Index			Russell 1000® Index			Russell 2000® Index			S&P MidCap 400® Index			S&P 500® Index			S&P SmallCap 600® Index
1/01/08 to 12/31/08		1.0	%		N/A			3.6	%		30.4	%		N/A			N/A			10.5	%		49.7	%		4.8	%
1/01/09 to 12/31/09		1.0			N/A			9.1			28.3			N/A			N/A			9.5			47.5			4.6
1/01/10 to 12/31/10		1.1			N/A			9.8			27.4			N/A			N/A			7.6			50.7			3.4
1/01/11 to 12/31/11		2.7			N/A			9.7			27.6			22.8	%		1.1	%		4.4			29.9			1.8
1/01/12 to 12/31/12		5.9			1.0	%		10.2			26.8			54.0			2.1			N/A			N/A			N/A
1/01/13 to 12/31/13		8.2			4.0			10.1			26.3			49.6			1.8			N/A			N/A			N/A
1/01/14 to 12/31/14		8.2			3.9			11.0			27.3			47.8			1.8			N/A			N/A			N/A
1/01/15 to 12/31/15		1.0			4.2			13.7			29.9			49.2			2.0			N/A			N/A			N/A
1/01/16 to 12/31/16		1.0			4.4			14.1			30.3			48.3			1.8			N/A			N/A			N/A

⁴  Prior to July 1, 2014, the Bloomberg Commodity Index was known as the Dow Jones-UBS Commodity Index.

See “About Fund Performance” on page 16 for descriptions of the indexes.

14 BLACKROCK FUNDS III DECEMBER 31, 2016

BlackRock LifePath Dynamic 2050 Fund

Performance Summary for the Period Ended December 31, 2016

				Average Annual Total Returns1
				1 Year						5 Years						Since Inception2
	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		5.44	%		8.19	%		N/A			9.18	%		N/A			4.86	%		N/A
Investor A		5.34			7.95			2.29	%		8.93			7.76	%		4.60			3.94	%
Investor C		4.87			7.08			6.08			8.09			8.09			3.68			3.68
Class K		5.56			8.43			N/A			9.55			N/A			5.21			N/A
Class R		5.24			7.75			N/A			8.68			N/A			4.22			N/A
LifePath Dynamic 2050 Fund Custom Benchmark		5.12			8.72			N/A			9.78			N/A			5.79			N/A
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		2.65			N/A			2.23			N/A			4.16			N/A
Bloomberg Commodity Index		(1.31	)		11.77			N/A			(8.95	)		N/A			(10.73	)		N/A
FTSE EPRA/NAREIT Developed Index		(4.41	)		4.06			N/A			9.48			N/A			4.51			N/A
MSCI ACWI ex USA IMI Index		5.37			4.41			N/A			5.35			N/A			0.96			N/A
Russell 1000® Index		8.01			12.05			N/A			14.69			N/A			9.18			N/A
Russell 2000® Index		18.68			21.31			N/A			14.46			N/A			9.82			N/A

¹  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distributions and service fees. See “About Fund Performance” on page 16 for a detailed description of share classes, including any related sales charges and fees.

²  The LifePath Fund commenced operations on June 30, 2008.

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

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

BLACKROCK FUNDS III DECEMBER 31, 2016 15

About Fund Performance

• Institutional and Class K Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors. Prior to May 30, 2008 for LifePath Dynamic Retirement, LifePath Dynamic 2020, LifePath Dynamic 2030 and LifePath Dynamic 2040 Funds, Class K Shares’ performance results are those of Institutional Shares restated to reflect Class K Shares’ fees.

• Investor A Shares are subject to a maximum initial sales charge (front-end load) of 5.25% and a service fee of 0.25% per year (but no distribution fee). Certain redemptions of these shares may be subject to a contingent deferred sales charge (“CDSC”) where no initial sales charge was paid at the time of purchase. These shares are generally available through financial intermediaries.

• Investor C Shares are subject to a 1.00% CDSC if redeemed within one year of purchase. In addition, these shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. These shares are generally available through financial intermediaries. Prior to May 3, 2010, Investor C Shares’ performance results are those of Institutional Shares restated to reflect Investor C Shares’ fees.

• Class R Shares are not subject to any sales charge. These shares are subject to a distribution fee of 0.25% per year and a service fee of 0.25% per year. These shares are available only to certain employer-sponsored retirement plans. Prior to May 3, 2010, Class R Shares’ performance results are those of Institutional Shares restated to reflect Class R Shares’ fees.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month end. Performance results do not reflect the deduction of taxes that a shareholder would pay on LifePath Fund distributions or the redemption of LifePath Fund shares. Figures shown in the performance tables on the previous pages assume reinvestment of all distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Distributions paid to each class of shares will vary because of the different levels of administration, service and distribution fees applicable to each class, which are deducted from the income available to be paid to shareholders.

BlackRock Advisors, LLC (“BAL” or the “Administrator”), each LifePath Funds’ administrator, has contractually agreed to waive and/or reimburse a portion of each LifePath Fund’s expenses. Without such waivers, each

LifePath Fund’s performance would have been lower. The Administrator is under no obligation to continue waiving and/or reimbursing its fees after the applicable termination date of such agreement. See Note 4 of the Notes to Financial Statements for additional information on waivers and/or reimbursements.

The LifePath Funds’ custom benchmarks are hypothetical representations of the performance of the respective LifePath Fund’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 Funds’ custom benchmarks are adjusted quarterly to reflect the LifePath Funds’ changing asset allocations over time. As of December 31, 2016, the following indexes are used to calculate the LifePath Fund’s custom benchmarks: Bloomberg Barclays U.S. Aggregate Bond Index, Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index (Series L), Bloomberg Commodity Index, FTSE EPRA/NAREIT Developed Index, MSCI ACWI ex USA IMI Index, Russell 1000^® Index and Russell 2000^® Index, as applicable.

The Bloomberg Barclays U.S. Aggregate Bond Index is a widely recognized unmanaged market-weighted index, comprised of investment-grade corporate bonds rated BBB or better, mortgages and U.S. Treasury and U.S. Government agency issues with at least one year to maturity. The Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index (Series L) is an unmanaged index that measures the performance of the inflation-protected public obligations of the U.S. Treasury. The Bloomberg Commodity Index is a broadly diversified index that allows investors to track commodity futures through a single, simple measure. The FTSE EPRA/NAREIT Developed Index is a global market capitalization weighted index composed of listed real estate securities from developed market countries in North America, Europe, and Asia. The MSCI ACWI ex USA IMI Index is a free float-adjusted market capitalization weighted index that measures the equity market performance of the developed (excluding the U.S.) and emerging investable market universe. The Russell 1000^® Index is an index that measures the performance of the large cap segment of the U.S. equity universe. It is a subset of the Russell 3000^® Index and includes approximately 1,000 of the largest securities based on a combination of their market capitalization and current index membership. The Russell 1000® Index represents approximately 92% of the total market capitalization of the Russell 3000^® Index. The Russell 2000^® Index is an unmanaged index that is a subset of the Russell 3000^® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.

16 BLACKROCK FUNDS III DECEMBER 31, 2016

Disclosure of Expenses

Shareholders of each LifePath Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including administration fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense examples shown below (which are based on a hypothetical investment of $1,000 invested on July 1, 2016 and held through December 31, 2016) are intended to assist shareholders both in calculating expenses based on an investment in a LifePath 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 LifePath 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 each LifePath 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 a LifePath Fund and other funds, compare the 5% hypothetical examples with the 5% hypothetical examples that appear in shareholder reports of other funds.

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

Expense Examples

	Actual						Hypothetical2
	Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period1		Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period1		Annualized Expense Ratio
LifePath Dynamic Retirement Fund
Institutional	$	1,000.00	$	1,015.00	$	2.89	$	1,000.00		1,022.27		2.90		0.57	%
Investor A	$	1,000.00	$	1,014.80	$	4.20	$	1,000.00		1,020.96		4.22		0.83	%
Investor C	$	1,000.00	$	1,011.30	$	8.19	$	1,000.00		1,016.99		8.21		1.62	%
Class K	$	1,000.00	$	1,016.30	$	1.93	$	1,000.00		1,023.23		1.93		0.38	%
Class R	$	1,000.00	$	1,014.20	$	5.27	$	1,000.00		1,019.91		5.28		1.04	%
LifePath Dynamic 2020 Fund
Institutional	$	1,000.00	$	1,022.90	$	2.90	$	1,000.00		1,022.27		2.90		0.57	%
Investor A	$	1,000.00	$	1,021.50	$	4.17	$	1,000.00		1,021.01		4.17		0.82	%
Investor C	$	1,000.00	$	1,017.30	$	8.27	$	1,000.00		1,016.94		8.26		1.63	%
Class K	$	1,000.00	$	1,023.50	$	1.93	$	1,000.00		1,023.23		1.93		0.38	%
Class R	$	1,000.00	$	1,020.50	$	5.18	$	1,000.00		1,020.01		5.18		1.02	%
LifePath Dynamic 2030 Fund
Institutional	$	1,000.00	$	1,037.60	$	2.82	$	1,000.00		1,022.37		2.80		0.55	%
Investor A	$	1,000.00	$	1,036.20	$	4.15	$	1,000.00		1,021.06		4.12		0.81	%
Investor C	$	1,000.00	$	1,031.90	$	8.22	$	1,000.00		1,017.04		8.16		1.61	%
Class K	$	1,000.00	$	1,038.10	$	1.84	$	1,000.00		1,023.33		1.83		0.36	%
Class R	$	1,000.00	$	1,035.10	$	5.12	$	1,000.00		1,020.11		5.08		1.00	%
LifePath Dynamic 2040 Fund
Institutional	$	1,000.00	$	1,050.10	$	2.73	$	1,000.00		1,022.47		2.69		0.53	%
Investor A	$	1,000.00	$	1,048.40	$	4.07	$	1,000.00		1,021.17		4.01		0.79	%
Investor C	$	1,000.00	$	1,044.40	$	8.17	$	1,000.00		1,017.14		8.06		1.59	%
Class K	$	1,000.00	$	1,051.20	$	1.75	$	1,000.00		1,023.43		1.73		0.34	%
Class R	$	1,000.00	$	1,047.60	$	5.10	$	1,000.00		1,020.16		5.03		0.99	%
LifePath Dynamic 2050 Fund
Institutional	$	1,000.00	$	1,054.40	$	2.74	$	1,000.00		1,022.47		2.69		0.53	%
Investor A	$	1,000.00	$	1,053.40	$	4.03	$	1,000.00		1,021.22		3.96		0.78	%
Investor C	$	1,000.00	$	1,048.70	$	8.14	$	1,000.00		1,017.19		8.01		1.58	%
Class K	$	1,000.00	$	1,055.60	$	1.71	$	1,000.00		1,023.48		1.68		0.33	%
Class R	$	1,000.00	$	1,051.80	$	5.05	$	1,000.00		1,020.21		4.98		0.98	%

¹  For each class of the LifePath Fund, expenses are equal to the annualized net expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period shown). Because each LifePath Fund invests all of its assets in a LifePath Master Portfolio, the expense examples reflect the net expenses of both the LifePath Fund and the LifePath Master Portfolio in which it invests.

²  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366.

BLACKROCK FUNDS III DECEMBER 31, 2016 17

Derivative Financial Instruments

The LifePath Master Portfolios may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other asset without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the

counterparty to the transaction or illiquidity of the instrument. The LifePath Master Portfolios’ successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation a LifePath Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The LifePath Master Portfolios’ investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

18 BLACKROCK FUNDS III DECEMBER 31, 2016

Statements of Assets and Liabilities

December 31, 2016	BlackRock LifePath Dynamic Retirement Fund			BlackRock LifePath Dynamic 2020 Fund			BlackRock LifePath Dynamic 2030 Fund			BlackRock LifePath Dynamic 2040 Fund			BlackRock LifePath Dynamic 2050 Fund
Assets
Investments at value — from the applicable LifePath Master Portfolio1	$	155,739,972		$	439,512,462		$	448,306,875		$	361,332,445		$	116,556,895
Receivables:
Withdrawals from the LifePath Master Portfolio		1,109,596			3,154,729			2,166,267			1,659,288			495,879
Capital shares sold		80,747			339,872			573,075			219,912			196,161
Total assets		156,930,315			443,007,063			451,046,217			363,211,645			117,248,935
Liabilities
Payables:
Capital shares redeemed		1,190,343			3,494,601			2,739,342			1,879,200			692,040
Administration fees		44,284			128,526			130,178			103,335			31,972
Service and distribution fees		18,780			59,065			62,574			46,347			16,001
Professional fees		9,345			9,349			9,362			9,368			9,338
Income dividends		4,916			33,700			55,999			30,752			17,753
Capital gains distributions		—			—			90,710			—			—
Total liabilities		1,267,668			3,725,241			3,088,165			2,069,002			767,104
Net Assets	$	155,662,647		$	439,281,822		$	447,958,052		$	361,142,643		$	116,481,831
Net Assets Consist of
Paid-in capital	$	127,737,296		$	376,429,371		$	420,400,027		$	298,385,256		$	107,942,293
Distributions in excess of net investment income		(1,733,475	)		(3,371,777	)		(2,739,028	)		(1,807,686	)		(552,154	)
Accumulated net realized loss allocated from the LifePath Master Portfolio		(15,932,163	)		(37,820,886	)		(11,525,593	)		(14,428,809	)		(8,667,978	)
Net unrealized appreciation (depreciation) allocated from the LifePath Master Portfolio		45,590,989			104,045,114			41,822,646			78,993,882			17,759,670
Net Assets	$	155,662,647		$	439,281,822		$	447,958,052		$	361,142,643		$	116,481,831
Net Asset Value
Institutional:
Net assets	$	60,166,334		$	147,115,600		$	141,217,144		$	121,623,289		$	31,857,018
Shares outstanding2		5,579,238			9,895,699			10,239,348			7,092,291			1,714,419
Net asset value	$	10.78		$	14.87		$	13.79		$	17.15		$	18.58
Investor A:
Net assets	$	81,928,549		$	256,435,309		$	271,353,943		$	201,117,944		$	69,168,472
Shares outstanding2		8,499,155			18,624,106			20,350,508			12,639,669			3,731,401
Net asset value	$	9.64		$	13.77		$	13.33		$	15.91		$	18.54
Investor C:
Net assets	$	1,068,047		$	2,871,469		$	3,217,074		$	2,567,257		$	744,350
Shares outstanding2		100,144			195,481			236,904			151,631			40,503
Net asset value	$	10.67		$	14.69		$	13.58		$	16.93		$	18.38
Class K:
Net assets	$	11,571,243		$	29,607,772		$	29,419,176		$	33,643,880		$	13,388,342
Shares outstanding2		1,076,447			1,998,493			2,136,221			1,953,095			718,696
Net asset value	$	10.75		$	14.82		$	13.77		$	17.23		$	18.63
Class R:
Net assets	$	928,474		$	3,251,672		$	2,750,715		$	2,190,273		$	1,323,649
Shares outstanding2		86,732			219,850			201,177			128,574			71,563
Net asset value	$	10.71		$	14.79		$	13.67		$	17.04		$	18.50
1    Investments at cost — from the applicable LifePath Master Portfolio	$	110,148,983		$	335,467,348		$	406,484,229		$	282,338,563		$	98,797,225
2    Unlimited number of shares authorized, no par value.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	19

Statements of Operations

Year Ended December 31, 2016	BlackRock LifePath Dynamic Retirement Fund			BlackRock LifePath Dynamic 2020 Fund			BlackRock LifePath Dynamic 2030 Fund			BlackRock LifePath Dynamic 2040 Fund			BlackRock LifePath Dynamic 2050 Fund
Investment Income
Net investment income allocated from the applicable LifePath Master Portfolio:
Dividends — affiliated	$	1,842,667		$	5,736,019		$	7,168,485		$	6,861,607		$	2,113,211
Interest — affiliated		2,593,268			5,778,136			3,305,664			891,873			81,341
Dividends — unaffiliated		48,372			496,229			1,315,296			1,605,907			554,384
Securities lending — affiliated — net		8,138			29,143			35,271			36,614			12,469
Foreign taxes withheld		(2,269	)		(21,014	)		(55,264	)		(66,763	)		(24,240	)
Expenses		(1,131,947	)		(3,022,125	)		(2,932,508	)		(2,277,504	)		(702,645	)
Fees waived		681,369			1,844,732			1,866,682			1,512,567			479,209
Total investment income		4,039,598			10,841,120			10,703,626			8,564,301			2,513,729
Fund Expenses
Administration — class specific		665,727			1,774,761			1,727,054			1,352,242			400,224
Service and distribution — class specific		243,131			738,699			766,635			551,274			184,680
Professional		12,600			12,641			12,671			12,645			12,582
Miscellaneous		1,128			4,230			1,128			4,230			169
Total expenses		922,586			2,530,331			2,507,488			1,920,391			597,655
Less fees waived by the Administrator		(12,600	)		(12,641	)		(12,671	)		(12,645	)		(12,582	)
Total expenses after fees waived		909,986			2,517,690			2,494,817			1,907,746			585,073
Net investment income		3,129,612			8,323,430			8,208,809			6,656,555			1,928,656
Realized and Unrealized Gain (Loss) Allocated from the LifePath Master Portfolio
Net realized gain from investments, futures contracts, swaps, forward foreign currency exchange contracts, foreign currency transactions and capital gain distributions from investment companies — affiliated		(9,829,034	)		(15,747,752	)		14,836,373			735,282			(6,172,123	)
Net change in unrealized appreciation (depreciation) on investments, futures contracts, swaps, forward foreign currency exchange contracts and foreign currency translations		17,151,505			38,178,563			10,422,029			21,924,328			13,580,043
Net realized and unrealized gain		7,322,471			22,430,811			25,258,402			22,659,610			7,407,920
Net Increase in Net Assets Resulting from Operations	$	10,452,083		$	30,754,241		$	33,467,211		$	29,316,165		$	9,336,576

See Notes to Financial Statements.
20	BLACKROCK FUNDS III	DECEMBER 31, 2016

Statements of Changes in Net Assets

	BlackRock Dynamic LifePath Retirement Fund						BlackRock Dynamic LifePath 2020 Fund
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	3,129,612		$	4,483,843		$	8,323,430		$	9,912,866
Net realized gain		(9,829,034	)		6,260,131			(15,747,752	)		37,234,799
Net change in unrealized appreciation (depreciation)		17,151,505			(14,207,577	)		38,178,563			(55,072,147	)
Net increase (decrease) in net assets resulting from operations		10,452,083			(3,463,603	)		30,754,241			(7,924,482	)
Distributions to Shareholders1
From net investment income:
Institutional		(1,244,964	)		(3,127,076	)		(3,119,501	)		(5,744,451	)
Investor A		(1,315,159	)		(2,150,315	)		(4,074,161	)		(5,423,081	)
Investor C		(6,913	)		(14,652	)		(16,967	)		(20,432	)
Class K		(186,952	)		(162,220	)		(493,189	)		(374,112	)
Class R		(8,709	)		(9,953	)		(45,303	)		(43,593	)
In excess of net investment income:
Institutional		—			—			(19,859	)		—
Investor A		—			—			(25,968	)		—
Investor C		—			—			(240	)		—
Class K		—			—			(2,399	)		—
Class R		—			—			(374	)		—
From net realized gain:
Institutional		(23,344	)		(5,334,035	)		—			(16,437,737	)
Investor A		(22,894	)		(4,072,705	)		—			(19,138,626	)
Investor C		(320	)		(53,135	)		—			(151,851	)
Class K		(2,763	)		(286,046	)		—			(1,094,350	)
Class R		(191	)		(24,096	)		—			(192,139	)
From return of capital:
Institutional		—			(229,822	)		—			(414,898	)
Investor A		—			(150,783	)		—			(376,514	)
Investor C		—			(1,865	)		—			(3,113	)
Class K		—			(7,227	)		—			(16,893	)
Class R		—			(912	)		—			(3,437	)
Decrease in net assets resulting from distributions to shareholders		(2,812,209	)		(15,624,842	)		(7,797,961	)		(49,435,227	)
Capital Share Transactions
Net decrease in net assets derived from capital share transactions		(106,024,140	)		(106,205,622	)		(164,214,144	)		(234,934,031	)
Net Assets
Total decrease in net assets		(98,384,266	)		(125,294,067	)		(141,257,864	)		(292,293,740	)
Beginning of year		254,046,913			379,340,980			580,539,686			872,833,426
End of year	$	155,662,647		$	254,046,913		$	439,281,822		$	580,539,686
Distributions in excess of net investment income, end of year	$	(1,733,475	)	$	(2,100,390	)	$	(3,371,777	)	$	(3,946,086	)
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	21

Statements of Changes in Net Assets

	BlackRock Dynamic LifePath 2030 Fund						BlackRock Dynamic LifePath 2040 Fund
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	8,208,809		$	9,604,722		$	6,656,555		$	8,268,067
Net realized gain		14,836,373			42,635,544			735,282			39,968,484
Net change in unrealized appreciation (depreciation)		10,422,029			(60,423,454	)		21,924,328			(53,419,747	)
Net increase (decrease) in net assets resulting from operations		33,467,211			(8,183,188	)		29,316,165			(5,183,196	)
Distributions to Shareholders1
From net investment income:
Institutional		(3,228,476	)		(5,245,965	)		(2,869,667	)		(4,627,517	)
Investor A		(4,709,281	)		(5,139,428	)		(3,766,613	)		(3,769,172	)
Investor C		(26,935	)		(28,327	)		(21,994	)		(18,841	)
Class K		(551,553	)		(347,476	)		(645,213	)		(276,680	)
Class R		(47,884	)		(37,723	)		(32,040	)		(16,799	)
From net realized gain:
Institutional		(1,127,441	)		(16,480,125	)		(573,398	)		(16,944,291	)
Investor A		(2,240,993	)		(21,374,712	)		(751,398	)		(19,564,019	)
Investor C		(25,964	)		(229,534	)		(7,624	)		(207,034	)
Class K		(233,586	)		(1,118,319	)		(92,086	)		(1,178,255	)
Class R		(22,454	)		(206,273	)		(7,158	)		(112,003	)
From return of capital:
Institutional		—			(153,051	)		—			—
Investor A		—			(149,932	)		—			—
Investor C		—			(1,533	)		—			—
Class K		—			(6,383	)		—			—
Class R		—			(1,230	)		—			—
Decrease in net assets resulting from distributions to shareholders		(12,214,567	)		(50,520,011	)		(8,767,191	)		(46,714,611	)
Capital Share Transactions
Net decrease in net assets derived from capital share transactions		(116,886,320	)		(212,874,136	)		(85,162,130	)		(229,125,964	)
Net Assets
Total decrease in net assets		(95,633,676	)		(271,577,335	)		(64,613,156	)		(281,023,771	)
Beginning of year		543,591,728			815,169,063			425,755,799			706,779,570
End of year	$	447,958,052		$	543,591,728		$	361,142,643		$	425,755,799
Distributions in excess of net investment income, end of year	$	(2,739,028	)	$	(2,400,446	)	$	(1,807,686	)	$	(1,128,714	)
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
22	BLACKROCK FUNDS III	DECEMBER 31, 2016

Statements of Changes in Net Assets BlackRock Dynamic LifePath 2050 Fund

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	1,928,656		$	2,324,471
Net realized gain		(6,172,123	)		5,287,562
Net change in unrealized appreciation (depreciation)		13,580,043			(9,113,775	)
Net increase (decrease) in net assets resulting from operations		9,336,576			(1,501,742	)
Distributions to Shareholders1
From net investment income:
Institutional		(770,591	)		(1,220,284	)
Investor A		(1,249,343	)		(1,059,368	)
Investor C		(7,448	)		(5,625	)
Class K		(286,120	)		(31,254	)
Class R		(23,534	)		(16,286	)
From net realized gain:
Institutional		—			(3,318,877	)
Investor A		—			(5,011,499	)
Investor C		—			(50,455	)
Class K		—			(110,679	)
Class R		—			(103,788	)
Decrease in net assets resulting from distributions to shareholders		(2,337,036	)		(10,928,115	)
Capital Share Transactions
Net decrease in net assets derived from capital share transactions		(5,350,155	)		(54,874,122	)
Net Assets
Total increase (decrease) in net assets		1,649,385			(67,303,979	)
Beginning of year		114,832,446			182,136,425
End of year	$	116,481,831		$	114,832,446
Distributions in excess of net investment income, end of year	$	(552,154	)	$	(143,774	)
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	23

Financial Highlights BlackRock LifePath Dynamic Retirement Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.33		$	11.07		$	11.72		$	11.80		$	11.39
Net investment income1		0.18			0.16			0.18			0.16			0.20
Net realized and unrealized gain (loss)		0.43			(0.33	)		0.38			0.57			0.77
Net increase (decrease) from investment operations		0.61			(0.17	)		0.56			0.73			0.97
Distributions:2
From net investment income		(0.16	)		(0.20	)		(0.19	)		(0.16	)		(0.21	)
From net realized gain		(0.00	)3		(0.36	)		(1.02	)		(0.65	)		(0.35	)
From return of capital		—			(0.01	)		—			—			—
Total distributions		(0.16	)		(0.57	)		(1.21	)		(0.81	)		(0.56	)
Net asset value, end of year	$	10.78		$	10.33		$	11.07		$	11.72		$	11.80
Total Return4
Based on net asset value		5.91%			(1.52)%			4.75%			6.25%			8.61%
Ratios to Average Net Assets5,6,7
Total expenses		0.58%			0.75%			0.75%			0.76%			0.78%
Total expenses after fees waived		0.58%			0.70%			0.75%			0.75%			0.78%
Net investment income		1.66%			1.48%			1.52%			1.34%			1.70%
Supplemental Data
Net assets, end of year (000)	$	60,166		$	141,034		$	234,280		$	342,615		$	390,150
Portfolio turnover rate of the LifePath Master Portfolio		37%	8		21%	9		14%	10		17%	10		4%	11

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.35%, 0.31%, 0.31%, 0.30% and 0.29% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁷ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.10%		0.09%		0.10%		0.10%		0.08%

⁸ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁹ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 13% for the year ended December 31, 2012.

See Notes to Financial Statements.
24	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Dynamic Retirement Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.25		$	9.99		$	10.69		$	10.84		$	10.50
Net investment income1		0.14			0.12			0.14			0.12			0.16
Net realized and unrealized gain (loss)		0.39			(0.30	)		0.35			0.51			0.72
Net increase (decrease) from investment operations		0.53			(0.18	)		0.49			0.63			0.88
Distributions:2
From net investment income		(0.14	)		(0.19	)		(0.17	)		(0.13	)		(0.19	)
From net realized gain		(0.00	)3		(0.36	)		(1.02	)		(0.65	)		(0.35	)
From return of capital		—			(0.01	)		—			—			—
Total distributions		(0.14	)		(0.56	)		(1.19	)		(0.78	)		(0.54	)
Net asset value, end of year	$	9.64		$	9.25		$	9.99		$	10.69		$	10.84
Total Return4
Based on net asset value		5.78%			(1.89)%			4.56%			5.94%			8.46%
Ratios to Average Net Assets5,6,7
Total expenses		0.84%			1.00%			1.01%			1.01%			1.03%
Total expenses after fees waived		0.83%			0.95%			1.00%			1.00%			1.03%
Net investment income		1.49%			1.25%			1.27%			1.08%			1.47%
Supplemental Data
Net assets, end of year (000)	$	81,929		$	102,207		$	139,853		$	155,402		$	189,898
Portfolio turnover rate of the LifePath Master Portfolio		37%	8		21%	9		14%	10		17%	10		4%	11

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.35%, 0.31%, 0.33%, 0.30% and 0.29% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁷  Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.10%		0.09%		0.10%		0.10%		0.08%

⁸  Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁹  Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰  Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹  Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 13% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	25

Financial Highlights (continued) BlackRock LifePath Dynamic Retirement Fund

	Investor C
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.22		$	10.97		$	11.64		$	11.76		$	11.36
Net investment income1		0.07			0.06			0.07			0.04			0.08
Net realized and unrealized gain (loss)		0.44			(0.34	)		0.36			0.56			0.77
Net increase (decrease) from investment operations		0.51			(0.28	)		0.43			0.60			0.85
Distributions:2
From net investment income		(0.06	)		(0.10	)		(0.08	)		(0.07	)		(0.10	)
From net realized gain		(0.00	)3		(0.36	)		(1.02	)		(0.65	)		(0.35	)
From return of capital		—			(0.01	)		—			—			—
Total distributions		(0.06	)		(0.47	)		(1.10	)		(0.72	)		(0.45	)
Net asset value, end of year	$	10.67		$	10.22		$	10.97		$	11.64		$	11.76
Total Return4
Based on net asset value		4.97%			(2.56)%			3.70%			5.12%			7.55%
Ratios to Average Net Assets5,6,7
Total expenses		1.63%			1.76%			1.76%			1.77%			1.78%
Total expenses after fees waived		1.63%			1.70%			1.75%			1.76%			1.78%
Net investment income		0.66%			0.56%			0.56%			0.33%			0.70%
Supplemental Data
Net assets, end of year (000)	$	1,068		$	1,573		$	1,295		$	511		$	135
Portfolio turnover rate of the LifePath Master Portfolio		37%	8		21%	9		14%	10		17%	10		4%	11

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.35%, 0.31%, 0.33%, 0.30% and 0.29% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁷ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.10%		0.09%		0.10%		0.10%		0.08%

⁸ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁹ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 13% for the year ended December 31, 2012.

See Notes to Financial Statements.
26	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Dynamic Retirement Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.30		$	11.05		$	11.69		$	11.78		$	11.37
Net investment income1		0.21			0.21			0.22			0.20			0.25
Net realized and unrealized gain (loss)		0.43			(0.35	)		0.39			0.56			0.77
Net increase (decrease) from investment operations		0.64			(0.14	)		0.61			0.76			1.02
Distributions:2
From net investment income		(0.19	)		(0.24	)		(0.23	)		(0.20	)		(0.26	)
From net realized gain		(0.00	)3		(0.36	)		(1.02	)		(0.65	)		(0.35	)
From return of capital		—			(0.01	)		—			—			—
Total distributions		(0.19	)		(0.61	)		(1.25	)		(0.85	)		(0.61	)
Net asset value, end of year	$	10.75		$	10.30		$	11.05		$	11.69		$	11.78
Total Return4
Based on net asset value		6.20%			(1.28)%			5.24%			6.54%			9.03%
Ratios to Average Net Assets5,6,7
Total expenses		0.39%			0.42%			0.40%			0.40%			0.43%
Total expenses after fees waived		0.38%			0.42%			0.40%			0.40%			0.43%
Net investment income		2.02%			1.96%			1.86%			1.67%			2.07%
Supplemental Data
Net assets, end of year (000)	$	11,571		$	8,577		$	3,019		$	3,675		$	7,378
Portfolio turnover rate of the LifePath Master Portfolio		37%	8		21%	9		14%	10		17%	10		4%	11

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.34%, 0.30%, 0.33%, 0.30% and 0.30% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁷ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.10%		0.09%		0.10%		0.10%		0.08%

⁸ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁹ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 13% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	27

Financial Highlights (concluded) BlackRock LifePath Dynamic Retirement Fund

	Class R
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.26		$	11.01		$	11.65		$	11.75		$	11.36
Net investment income1		0.15			0.10			0.12			0.10			0.17
Net realized and unrealized gain (loss)		0.42			(0.33	)		0.38			0.55			0.76
Net increase (decrease) from investment operations		0.57			(0.23	)		0.50			0.65			0.93
Distributions:2
From net investment income		(0.12	)		(0.15	)		(0.12	)		(0.10	)		(0.19	)
From net realized gain		(0.00	)3		(0.36	)		(1.02	)		(0.65	)		(0.35	)
From return of capital		—			(0.01	)		—			—			—
Total distributions		(0.12	)		(0.52	)		(1.14	)		(0.75	)		(0.54	)
Net asset value, end of year	$	10.71		$	10.26		$	11.01		$	11.65		$	11.75
Total Return4
Based on net asset value		5.59%			(2.10)%			4.25%			5.61%			8.26%
Ratios to Average Net Assets5,6,7
Total expenses		1.04%			1.25%			1.25%			1.26%			1.27%
Total expenses after fees waived		1.04%			1.19%			1.25%			1.25%			1.26%
Net investment income		1.40%			0.99%			0.98%			0.85%			1.38%
Supplemental Data
Net assets, end of year (000)	$	928		$	656		$	895		$	2,060		$	2,609
Portfolio turnover rate of the LifePath Master Portfolio		37%	8		21%	9		14%	10		17%	10		4%	11

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.35%, 0.31%, 0.31%, 0.30% and 0.32% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁷ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.10%		0.09%		0.10%		0.10%		0.08%

⁸ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁹ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 13% for the year ended December 31, 2012.

See Notes to Financial Statements.
28	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights BlackRock LifePath Dynamic 2020 Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	14.21		$	15.65		$	16.75		$	16.42		$	15.22
Net investment income1		0.25			0.23			0.26			0.25			0.29
Net realized and unrealized gain (loss)		0.64			(0.49	)		0.58			1.32			1.38
Net increase (decrease) from investment operations		0.89			(0.26	)		0.84			1.57			1.67
Distributions:2
From net investment income		(0.23	)		(0.27	)		(0.26	)		(0.26	)		(0.29	)
In excess of net investment income		(0.00	)3		—			—			—			—
From net realized gain		—			(0.89	)		(1.68	)		(0.98	)		(0.18	)
From return of capital		—			(0.02	)		—			—			—
Total distributions		(0.23	)		(1.18	)		(1.94	)		(1.24	)		(0.47	)
Net asset value, end of year	$	14.87		$	14.21		$	15.65		$	16.75		$	16.42
Total Return4
Based on net asset value		6.29%			(1.78)%			5.06%			9.67%			10.99%
Ratios to Average Net Assets5,6,7
Total expenses		0.58%			0.73%			0.74%			0.73%			0.75%
Total expenses after fees waived		0.58%			0.73%			0.74%			0.73%			0.75%
Net investment income		1.69%			1.44%			1.50%			1.47%			1.77%
Supplemental Data
Net assets, end of year (000)	$	147,116		$	259,411		$	490,447		$	698,251		$	688,545
Portfolio turnover rate of the LifePath Master Portfolio		50%	8		18%	9		21%	10		19%	10		5%	11

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.35%, 0.34%, 0.34%, 0.32% and 0.32% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁷ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.11%		0.11%		0.11%		0.12%		0.11%

⁸ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁹ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	29

Financial Highlights (continued) BlackRock LifePath Dynamic 2020 Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	13.18		$	14.61		$	15.77		$	15.53		$	14.43
Net investment income1		0.20			0.18			0.20			0.19			0.24
Net realized and unrealized gain (loss)		0.59			(0.46	)		0.55			1.25			1.30
Net increase (decrease) from investment operations		0.79			(0.28	)		0.75			1.44			1.54
Distributions:2
From net investment income		(0.20	)		(0.24	)		(0.23	)		(0.22	)		(0.26	)
In excess of net investment income		(0.00	)3		—			—			—			—
From net realized gain		—			(0.89	)		(1.68	)		(0.98	)		(0.18	)
From return of capital		—			(0.02	)		—			—			—
Total distributions		(0.20	)		(1.15	)		(1.91	)		(1.20	)		(0.44	)
Net asset value, end of year	$	13.77		$	13.18		$	14.61		$	15.77		$	15.53
Total Return4
Based on net asset value		6.04%			(2.03)%			4.79%			9.39%			10.67%
Ratios to Average Net Assets5,6,7
Total expenses		0.83%			0.98%			0.99%			0.98%			1.00%
Total expenses after fees waived		0.83%			0.98%			0.98%			0.98%			1.00%
Net investment income		1.50%			1.24%			1.26%			1.21%			1.55%
Supplemental Data
Net assets, end of year (000)	$	256,435		$	297,027		$	367,281		$	390,380		$	410,926
Portfolio turnover rate of the LifePath Master Portfolio		50%	8		18%	9		21%	10		19%	10		5%	11

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.35%, 0.33%, 0.35%, 0.32% and 0.32% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁷ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.11%		0.11%		0.11%		0.12%		0.11%

⁸ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁹ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
30	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Dynamic 2020 Fund

	Investor C
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	14.05		$	15.49		$	16.62		$	16.32		$	15.16
Net investment income1		0.11			0.08			0.09			0.09			0.14
Net realized and unrealized gain (loss)		0.62			(0.50	)		0.57			1.30			1.36
Net increase (decrease) from investment operations		0.73			(0.42	)		0.66			1.39			1.50
Distributions:2
From net investment income		(0.09	)		(0.11	)		(0.11	)		(0.11	)		(0.16	)
In excess of net investment income		(0.00	)3		—			—			—			—
From net realized gain		—			(0.89	)		(1.68	)		(0.98	)		(0.18	)
From return of capital		—			(0.02	)		—			—			—
Total distributions		(0.09	)		(1.02	)		(1.79	)		(1.09	)		(0.34	)
Net asset value, end of year	$	14.69		$	14.05		$	15.49		$	16.62		$	16.32
Total Return4
Based on net asset value		5.23%			(2.77)%			3.98%			8.58%			9.87%
Ratios to Average Net Assets5,6,7
Total expenses		1.63%			1.74%			1.74%			1.73%			1.75%
Total expenses after fees waived		1.63%			1.73%			1.73%			1.73%			1.75%
Net investment income		0.76%			0.49%			0.54%			0.51%			0.87%
Supplemental Data
Net assets, end of year (000)	$	2,871		$	2,233		$	2,981		$	2,193		$	1,262
Portfolio turnover rate of the LifePath Master Portfolio		50%	8		18%	9		21%	10		19%	10		5%	11

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.35%, 0.33%, 0.36%, 0.32% and 0.32% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁷ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.11%		0.11%		0.11%		0.12%		0.11%

⁸ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁹ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹  Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	31

Financial Highlights (continued) BlackRock LifePath Dynamic 2020 Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	14.16		$	15.61		$	16.73		$	16.39		$	15.20
Net investment income1		0.29			0.30			0.32			0.30			0.35
Net realized and unrealized gain (loss)		0.64			(0.51	)		0.57			1.33			1.37
Net increase (decrease) from investment operations		0.93			(0.21	)		0.89			1.63			1.72
Distributions:2
From net investment income		(0.27	)		(0.33	)		(0.33	)		(0.31	)		(0.35	)
In excess of net investment income		(0.00	)3		—			—			—			—
From net realized gain		—			(0.89	)		(1.68	)		(0.98	)		(0.18	)
From return of capital		—			(0.02	)		—			—			—
Total distributions		(0.27	)		(1.24	)		(2.01	)		(1.29	)		(0.53	)
Net asset value, end of year	$	14.82		$	14.16		$	15.61		$	16.73		$	16.39
Total Return4
Based on net asset value		6.57%			(1.46)%			5.35%			10.11%			11.36%
Ratios to Average Net Assets5,6,7
Total expenses		0.38%			0.40%			0.39%			0.38%			0.40%
Total expenses after fees waived		0.38%			0.40%			0.38%			0.37%			0.40%
Net investment income		2.02%			1.96%			1.90%			1.77%			2.18%
Supplemental Data
Net assets, end of year (000)	$	29,608		$	18,412		$	9,545		$	6,500		$	11,609
Portfolio turnover rate of the LifePath Master Portfolio		50%	8		18%	9		21%	10		19%	10		5%	11

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.35%, 0.33%, 0.36%, 0.32% and 0.32% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁷  Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.11%		0.11%		0.11%		0.12%		0.11%

⁸  Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁹  Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰  Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹  Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
32	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (concluded) BlackRock LifePath Dynamic 2020 Fund

	Class R
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	14.14		$	15.59		$	16.70		$	16.36		$	15.20
Net investment income1		0.19			0.16			0.17			0.16			0.25
Net realized and unrealized gain (loss)		0.63			(0.50	)		0.58			1.33			1.32
Net increase (decrease) from investment operations		0.82			(0.34	)		0.75			1.49			1.57
Distributions:2
From net investment income		(0.17	)		(0.20	)		(0.18	)		(0.17	)		(0.23	)
In excess of net investment income		(0.00	)3		—			—			—			—
From net realized gain		—			(0.89	)		(1.68	)		(0.98	)		(0.18	)
From return of capital		—			(0.02	)		—			—			—
Total distributions		(0.17	)		(1.11	)		(1.86	)		(1.15	)		(0.41	)
Net asset value, end of year	$	14.79		$	14.14		$	15.59		$	16.70		$	16.36
Total Return4
Based on net asset value		5.79%			(2.25)%			4.49%			9.20%			10.36%
Ratios to Average Net Assets5,6,7
Total expenses		1.03%			1.23%			1.24%			1.23%			1.25%
Total expenses after fees waived		1.03%			1.23%			1.23%			1.23%			1.25%
Net investment income		1.31%			1.04%			1.01%			0.94%			1.53%
Supplemental Data
Net assets, end of year (000)	$	3,252		$	3,457		$	2,580		$	3,167		$	2,862
Portfolio turnover rate of the LifePath Master Portfolio		50%	8		18%	9		21%	10		19%	10		5%	11

¹  Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.35%, 0.33%, 0.35%, 0.32% and 0.33% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁷ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.11%		0.11%		0.11%		0.12%		0.11%

⁸ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁹ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁰ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹¹  Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	33

Financial Highlights BlackRock LifePath Dynamic 2030 Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	13.20		$	14.71		$	16.01		$	15.25		$	14.11
Net investment income1		0.23			0.22			0.24			0.26			0.28
Net realized and unrealized gain (loss)		0.72			(0.51	)		0.61			1.80			1.56
Net increase (decrease) from investment operations		0.95			(0.29	)		0.85			2.06			1.84
Distributions:2
From net investment income		(0.25	)		(0.25	)		(0.26	)		(0.26	)		(0.28	)
From net realized gain		(0.11	)		(0.96	)		(1.89	)		(1.04	)		(0.42	)
From return of capital		—			(0.01	)		—			—			—
Total distributions		(0.36	)		(1.22	)		(2.15	)		(1.30	)		(0.70	)
Net asset value, end of year	$	13.79		$	13.20		$	14.71		$	16.01		$	15.25
Total Return3
Based on net asset value		7.24%			(2.05)%			5.32%			13.66%			13.09%
Ratios to Average Net Assets4,5,6
Total expenses		0.56%			0.70%			0.71%			0.70%			0.73%
Total expenses after fees waived		0.56%			0.70%			0.71%			0.70%			0.73%
Net investment income		1.73%			1.46%			1.50%			1.62%			1.84%
Supplemental Data
Net assets, end of year (000)	$	141,217		$	222,491		$	449,354		$	674,558		$	630,131
Portfolio turnover rate of the LifePath Master Portfolio		61%	7		21%	8		33%	9		22%	9		5%	10

¹ Based on average shares outstanding.

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

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.37%, 0.37%, 0.37%, 0.33% and 0.34% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.12%		0.14%		0.14%		0.15%		0.13%

⁷  Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁸ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁹ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁰ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 16% for the year ended December 31, 2012.

See Notes to Financial Statements.
34	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Dynamic 2030 Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	12.78		$	14.28		$	15.62		$	14.90		$	13.81
Net investment income1		0.20			0.18			0.20			0.21			0.24
Net realized and unrealized gain (loss)		0.68			(0.49	)		0.58			1.77			1.52
Net increase (decrease) from investment operations		0.88			(0.31	)		0.78			1.98			1.76
Distributions:2
From net investment income		(0.22	)		(0.22	)		(0.23	)		(0.22	)		(0.25	)
From net realized gain		(0.11	)		(0.96	)		(1.89	)		(1.04	)		(0.42	)
From return of capital		—			(0.01	)		—			—			—
Total distributions		(0.33	)		(1.19	)		(2.12	)		(1.26	)		(0.67	)
Net asset value, end of year	$	13.33		$	12.78		$	14.28		$	15.62		$	14.90
Total Return3
Based on net asset value		6.93%			(2.25)%			4.98%			13.44%			12.75%
Ratios to Average Net Assets4,5,6
Total expenses		0.81%			0.95%			0.96%			0.95%			0.98%
Total expenses after fees waived		0.81%			0.95%			0.96%			0.95%			0.98%
Net investment income		1.53%			1.28%			1.28%			1.36%			1.62%
Supplemental Data
Net assets, end of year (000)	$	271,354		$	298,579		$	350,201		$	356,117		$	343,885
Portfolio turnover rate of the LifePath Master Portfolio		61%	7		21%	8		33%	9		22%	9		5%	10

¹ Based on average shares outstanding.

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

³ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.37%, 0.36%, 0.37%, 0.33% and 0.34% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.12%		0.14%		0.14%		0.15%		0.13%

⁷ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁸ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁹ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁰ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 16% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	35

Financial Highlights (continued) BlackRock LifePath Dynamic 2030 Fund

	Investor C
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	13.01		$	14.52		$	15.85		$	15.13		$	14.05
Net investment income1		0.10			0.08			0.09			0.13			0.16
Net realized and unrealized gain (loss)		0.69			(0.51	)		0.58			1.76			1.51
Net increase (decrease) from investment operations		0.79			(0.43	)		0.67			1.89			1.67
Distributions:2
From net investment income		(0.11	)		(0.11	)		(0.11	)		(0.13	)		(0.17	)
From net realized gain		(0.11	)		(0.96	)		(1.89	)		(1.04	)		(0.42	)
From return of capital		—			(0.01	)		—			—			—
Total distributions		(0.22	)		(1.08	)		(2.00	)		(1.17	)		(0.59	)
Net asset value, end of year	$	13.58		$	13.01		$	14.52		$	15.85		$	15.13
Total Return3
Based on net asset value		6.12%			(3.01)%			4.23%			12.59%			11.92%
Ratios to Average Net Assets4,5,6
Total expenses		1.61%			1.71%			1.71%			1.71%			1.72%
Total expenses after fees waived		1.61%			1.71%			1.71%			1.71%			1.72%
Net investment income		0.74%			0.56%			0.55%			0.79%			1.05%
Supplemental Data
Net assets, end of year (000)	$	3,217		$	3,173		$	3,053		$	2,531		$	1,010
Portfolio turnover rate of the LifePath Master Portfolio		61%	7		21%	8		33%	9		22%	9		5%	10

¹ Based on average shares outstanding.

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

³ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.37%, 0.36%, 0.38%, 0.34% and 0.35% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.12%		0.14%		0.14%		0.15%		0.13%

⁷ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁸ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁹ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁰ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 16% for the year ended December 31, 2012.

See Notes to Financial Statements.
36	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Dynamic 2030 Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	13.19		$	14.70		$	16.01		$	15.25		$	14.12
Net investment income1		0.28			0.29			0.31			0.31			0.34
Net realized and unrealized gain (loss)		0.69			(0.52	)		0.60			1.81			1.55
Net increase (decrease) from investment operations		0.97			(0.23	)		0.91			2.12			1.89
Distributions:2
From net investment income		(0.28	)		(0.31	)		(0.33	)		(0.32	)		(0.34	)
From net realized gain		(0.11	)		(0.96	)		(1.89	)		(1.04	)		(0.42	)
From return of capital		—			(0.01	)		—			—			—
Total distributions		(0.39	)		(1.28	)		(2.22	)		(1.36	)		(0.76	)
Net asset value, end of year	$	13.77		$	13.19		$	14.70		$	16.01		$	15.25
Total Return3
Based on net asset value		7.42%			(1.66)%			5.66%			14.05%			13.43%
Ratios to Average Net Assets4,5,6
Total expenses		0.36%			0.37%			0.36%			0.35%			0.38%
Total expenses after fees waived		0.36%			0.37%			0.36%			0.35%			0.38%
Net investment income		2.04%			2.01%			1.89%			1.95%			2.26%
Supplemental Data
Net assets, end of year (000)	$	29,419		$	16,171		$	9,518		$	8,666		$	11,077
Portfolio turnover rate of the LifePath Master Portfolio		61%	7		21%	8		33%	9		22%	9		5%	10

¹ Based on average shares outstanding.

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

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.37%, 0.36%, 0.36%, 0.34% and 0.35% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.12%		0.14%		0.14%		0.15%		0.13%

⁷ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁸ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁹ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁰ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 16% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	37

Financial Highlights (concluded) BlackRock LifePath Dynamic 2030 Fund

	Class R
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	13.09		$	14.60		$	15.92		$	15.17		$	14.08
Net investment income1		0.17			0.15			0.17			0.18			0.28
Net realized and unrealized gain (loss)		0.71			(0.50	)		0.59			1.80			1.47
Net increase (decrease) from investment operations		0.88			(0.35	)		0.76			1.98			1.75
Distributions:2
From net investment income		(0.19	)		(0.19	)		(0.19	)		(0.19	)		(0.24	)
From net realized gain		(0.11	)		(0.96	)		(1.89	)		(1.04	)		(0.42	)
From return of capital		—			(0.01	)		—			—			—
Total distributions		(0.30	)		(1.16	)		(2.08	)		(1.23	)		(0.66	)
Net asset value, end of year	$	13.67		$	13.09		$	14.60		$	15.92		$	15.17
Total Return3
Based on net asset value		6.74%			(2.50)%			4.73%			13.14%			12.48%
Ratios to Average Net Assets4,5,6
Total expenses		1.01%			1.20%			1.21%			1.21%			1.22%
Total expenses after fees waived		1.01%			1.20%			1.21%			1.21%			1.22%
Net investment income		1.30%			1.07%			1.02%			1.15%			1.84%
Supplemental Data
Net assets, end of year (000)	$	2,751		$	3,178		$	3,044		$	3,155		$	2,088
Portfolio turnover rate of the LifePath Master Portfolio		61%	7		21%	8		33%	9		22%	9		5%	10

¹ Based on average shares outstanding.

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

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.37%, 0.36%, 0.34%, 0.34% and 0.35% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.12%		0.14%		0.14%		0.15%		0.13%

⁷ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁸ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁹ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁰  Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 16% for the year ended December 31, 2012.

See Notes to Financial Statements.
38	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights BlackRock LifePath Dynamic 2040 Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	16.24		$	18.37		$	20.06		$	18.62		$	16.98
Net investment income1		0.29			0.27			0.31			0.35			0.35
Net realized and unrealized gain (loss)		1.00			(0.67	)		0.79			2.77			2.14
Net increase (decrease) from investment operations		1.29			(0.40	)		1.10			3.12			2.49
Distributions:2
From net investment income		(0.32	)		(0.30	)		(0.32	)		(0.34	)		(0.36	)
From net realized gain		(0.06	)		(1.43	)		(2.47	)		(1.34	)		(0.49	)
Total distributions		(0.38	)		(1.73	)		(2.79	)		(1.68	)		(0.85	)
Net asset value, end of year	$	17.15		$	16.24		$	18.37		$	20.06		$	18.62
Total Return3
Based on net asset value		7.97%			(2.29)%			5.48%			16.92%			14.73%
Ratios to Average Net Assets4,5,6
Total expenses		0.54%			0.67%			0.69%			0.69%			0.71%
Total expenses after fees waived		0.54%			0.67%			0.69%			0.68%			0.71%
Net investment income		1.74%			1.46%			1.51%			1.75%			1.91%
Supplemental Data
Net assets, end of year (000)	$	121,623		$	186,357		$	434,049		$	615,699		$	536,902
Portfolio turnover rate of the LifePath Master Portfolio		77%	7		19%	8		42%	9		26%	9		4%	10

¹ Based on average shares outstanding.

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

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.38%, 0.39%, 0.39%, 0.35% and 0.36% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.14%		0.17%		0.16%		0.17%		0.15%

⁷ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁸ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁹ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁰  Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 14% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	39

Financial Highlights (continued) BlackRock LifePath Dynamic 2040 Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	15.10		$	17.22		$	18.98		$	17.69		$	16.18
Net investment income1		0.24			0.23			0.25			0.28			0.30
Net realized and unrealized gain (loss)		0.92			(0.65	)		0.75			2.64			2.02
Net increase (decrease) from investment operations		1.16			(0.42	)		1.00			2.92			2.32
Distributions:2
From net investment income		(0.29	)		(0.27	)		(0.29	)		(0.29	)		(0.32	)
From net realized gain		(0.06	)		(1.43	)		(2.47	)		(1.34	)		(0.49	)
Total distributions		(0.35	)		(1.70	)		(2.76	)		(1.63	)		(0.81	)
Net asset value, end of year	$	15.91		$	15.10		$	17.22		$	18.98		$	17.69
Total Return3
Based on net asset value		7.69%			(2.57)%			5.23%			16.70%			14.41%
Ratios to Average Net Assets4,5,6
Total expenses		0.79%			0.93%			0.94%			0.94%			0.96%
Total expenses after fees waived		0.79%			0.92%			0.94%			0.93%			0.96%
Net investment income		1.55%			1.31%			1.30%			1.48%			1.69%
Supplemental Data
Net assets, end of year (000)	$	201,118		$	221,048		$	264,312		$	262,573		$	247,317
Portfolio turnover rate of the LifePath Master Portfolio		77%	7		19%	8		42%	9		26%	9		4%	10

¹ Based on average shares outstanding.

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

³ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.38%, 0.38%, 0.40%, 0.35% and 0.36% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.14%		0.17%		0.16%		0.17%		0.15%

⁷ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁸ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁹ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁰ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 14% for the year ended December 31, 2012.

See Notes to Financial Statements.
40	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Dynamic 2040 Fund

	Investor C
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	16.05		$	18.19		$	19.89		$	18.49		$	16.92
Net investment income1		0.13			0.11			0.11			0.17			0.21
Net realized and unrealized gain (loss)		0.96			(0.69	)		0.79			2.73			2.08
Net increase (decrease) from investment operations		1.09			(0.58	)		0.90			2.90			2.29
Distributions:2
From net investment income		(0.15	)		(0.13	)		(0.13	)		(0.16	)		(0.23	)
From net realized gain		(0.06	)		(1.43	)		(2.47	)		(1.34	)		(0.49	)
Total distributions		(0.21	)		(1.56	)		(2.60	)		(1.50	)		(0.72	)
Net asset value, end of year	$	16.93		$	16.05		$	18.19		$	19.89		$	18.49
Total Return3
Based on net asset value		6.82%			(3.28)%			4.49%			15.80%			13.59%
Ratios to Average Net Assets4,5,6
Total expenses		1.60%			1.68%			1.69%			1.69%			1.71%
Total expenses after fees waived		1.59%			1.68%			1.69%			1.69%			1.71%
Net investment income		0.78%			0.61%			0.55%			0.85%			1.12%
Supplemental Data
Net assets, end of year (000)	$	2,567		$	2,492		$	2,277		$	1,944		$	1,185
Portfolio turnover rate of the LifePath Master Portfolio		77%	7		19%	8		42%	9		26%	9		4%	10

¹ Based on average shares outstanding.

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

³ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.38%, 0.38%, 0.41%, 0.35% and 0.36% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.14%		0.17%		0.16%		0.17%		0.15%

⁷ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁸ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁹ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁰ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 14% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	41

Financial Highlights (continued) BlackRock LifePath Dynamic 2040 Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	16.32		$	18.47		$	20.16		$	18.69		$	17.05
Net investment income1		0.34			0.40			0.39			0.41			0.44
Net realized and unrealized gain (loss)		0.99			(0.75	)		0.79			2.81			2.12
Net increase (decrease) from investment operations		1.33			(0.35	)		1.18			3.22			2.56
Distributions:2
From net investment income		(0.36	)		(0.37	)		(0.40	)		(0.41	)		(0.43	)
From net realized gain		(0.06	)		(1.43	)		(2.47	)		(1.34	)		(0.49	)
Total distributions		(0.42	)		(1.80	)		(2.87	)		(1.75	)		(0.92	)
Net asset value, end of year	$	17.23		$	16.32		$	18.47		$	20.16		$	18.69
Total Return3
Based on net asset value		8.19%			(1.98)%			5.85%			17.41%			15.08%
Ratios to Average Net Assets4,5,6
Total expenses		0.34%			0.36%			0.34%			0.33%			0.36%
Total expenses after fees waived		0.34%			0.35%			0.34%			0.33%			0.36%
Net investment income		2.07%			2.21%			1.90%			2.05%			2.36%
Supplemental Data
Net assets, end of year (000)	$	33,644		$	14,470		$	4,980		$	5,733		$	8,038
Portfolio turnover rate of the LifePath Master Portfolio		77%	7		19%	8		42%	9		26%	9		4%	10

¹ Based on average shares outstanding.

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

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.38%, 0.38%, 0.40%, 0.35% and 0.36% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.14%		0.17%		0.16%		0.17%		0.15%

⁷ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁸ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁹ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁰  Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 14% for the year ended December 31, 2012.

See Notes to Financial Statements.
42	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (concluded) BlackRock LifePath Dynamic 2040 Fund

	Class R
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	16.15		$	18.29		$	19.98		$	18.54		$	16.93
Net investment income1		0.23			0.21			0.20			0.22			0.34
Net realized and unrealized gain (loss)		0.98			(0.69	)		0.80			2.78			2.05
Net increase (decrease) from investment operations		1.21			(0.48	)		1.00			3.00			2.39
Distributions:2
From net investment income		(0.26	)		(0.23	)		(0.22	)		(0.22	)		(0.29	)
From net realized gain		(0.06	)		(1.43	)		(2.47	)		(1.34	)		(0.49	)
Total distributions		(0.32	)		(1.66	)		(2.69	)		(1.56	)		(0.78	)
Net asset value, end of year	$	17.04		$	16.15		$	18.29		$	19.98		$	18.54
Total Return3
Based on net asset value		7.50%			(2.75)%			4.96%			16.33%			14.19%
Ratios to Average Net Assets4,5,6
Total expenses		1.00%			1.17%			1.19%			1.19%			1.21%
Total expenses after fees waived		0.99%			1.17%			1.19%			1.18%			1.21%
Net investment income		1.40%			1.13%			1.01%			1.12%			1.83%
Supplemental Data
Net assets, end of year (000)	$	2,190		$	1,389		$	1,162		$	1,438		$	1,917
Portfolio turnover rate of the LifePath Master Portfolio		77%	7		19%	8		42%	9		26%	9		4%	10

¹ Based on average shares outstanding.

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

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.38%, 0.38%, 0.39%, 0.35% and 0.37% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.14%		0.17%		0.16%		0.17%		0.15%

⁷ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

⁸ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁹ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁰  Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 14% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	43

Financial Highlights BlackRock LifePath Dynamic 2050 Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	17.53		$	19.59		$	21.37		$	19.18		$	17.16
Net investment income1		0.31			0.28			0.33			0.41			0.37
Net realized and unrealized gain (loss)		1.12			(0.74	)		0.89			3.36			2.37
Net increase (decrease) from investment operations		1.43			(0.46	)		1.22			3.77			2.74
Distributions:2
From net investment income		(0.38	)		(0.30	)		(0.34	)		(0.39	)		(0.37	)
From net realized gain		—			(1.30	)		(2.66	)		(1.19	)		(0.35	)
Total distributions		(0.38	)		(1.60	)		(3.00	)		(1.58	)		(0.72	)
Net asset value, end of year	$	18.58		$	17.53		$	19.59		$	21.37		$	19.18
Total Return3
Based on net asset value		8.19%			(2.46)%			5.73%			19.82%			16.05%
Ratios to Average Net Assets4,5,6
Total expenses		0.55%			0.66%			0.68%			0.71%			0.72%
Total expenses after fees waived		0.54%			0.65%			0.67%			0.70%			0.71%
Net investment income		1.71%			1.42%			1.51%			1.97%			1.99%
Supplemental Data
Net assets, end of year (000)	$	31,857		$	40,444		$	108,741		$	166,385		$	106,813
Portfolio turnover rate of the LifePath Master Portfolio		70%	7		36%	7		48%	8		28%	8		5%	9

¹ Based on average shares outstanding.

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

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.40%, 0.42%, 0.41%, 0.36% and 0.39% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.15%		0.19%		0.17%		0.15%		0.15%

⁷ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁸ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

⁹ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
44	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Dynamic 2050 Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	17.49		$	19.56		$	21.35		$	19.17		$	17.15
Net investment income1		0.27			0.27			0.28			0.35			0.33
Net realized and unrealized gain (loss)		1.11			(0.77	)		0.89			3.36			2.36
Net increase (decrease) from investment operations		1.38			(0.50	)		1.17			3.71			2.69
Distributions:2
From net investment income		(0.33	)		(0.27	)		(0.30	)		(0.34	)		(0.32	)
From net realized gain		—			(1.30	)		(2.66	)		(1.19	)		(0.35	)
Total distributions		(0.33	)		(1.57	)		(2.96	)		(1.53	)		(0.67	)
Net asset value, end of year	$	18.54		$	17.49		$	19.56		$	21.35		$	19.17
Total Return3
Based on net asset value		7.95%			(2.65)%			5.47%			19.48%			15.80%
Ratios to Average Net Assets4,5,6
Total expenses		0.80%			0.92%			0.93%			0.96%			0.97%
Total expenses after fees waived		0.79%			0.91%			0.92%			0.95%			0.96%
Net investment income		1.51%			1.38%			1.30%			1.67%			1.77%
Supplemental Data
Net assets, end of year (000)	$	69,168		$	70,473		$	70,442		$	62,891		$	46,189
Portfolio turnover rate of the LifePath Master Portfolio		70%	7		36%	7		48%	8		28%	8		5%	9

¹ Based on average shares outstanding.

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

³ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.40%, 0.40%, 0.42%, 0.36% and 0.39% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.15%		0.19%		0.17%		0.15%		0.15%

⁷ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁸ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

⁹ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	45

Financial Highlights (continued) BlackRock LifePath Dynamic 2050 Fund

	Investor C
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	17.35		$	19.43		$	21.23		$	19.10		$	17.10
Net investment income1		0.13			0.13			0.12			0.24			0.17
Net realized and unrealized gain (loss)		1.09			(0.77	)		0.87			3.30			2.37
Net increase (decrease) from investment operations		1.22			(0.64	)		0.99			3.54			2.54
Distributions:2
From net investment income		(0.19	)		(0.14	)		(0.13	)		(0.22	)		(0.19	)
From net realized gain		—			(1.30	)		(2.66	)		(1.19	)		(0.35	)
Total distributions		(0.19	)		(1.44	)		(2.79	)		(1.41	)		(0.54	)
Net asset value, end of year	$	18.38		$	17.35		$	19.43		$	21.23		$	19.10
Total Return3
Based on net asset value		7.08%			(3.41)%			4.67%			18.60%			14.93%
Ratios to Average Net Assets4,5,6
Total expenses		1.60%			1.68%			1.69%			1.72%			1.72%
Total expenses after fees waived		1.59%			1.67%			1.68%			1.71%			1.70%
Net investment income		0.72%			0.66%			0.55%			1.14%			0.91%
Supplemental Data
Net assets, end of year (000)	$	744		$	717		$	605		$	553		$	118
Portfolio turnover rate of the LifePath Master Portfolio		70%	7		36%	7		48%	8		28%	8		5%	9

¹ Based on average shares outstanding.

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

³ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.40%, 0.40%, 0.42%, 0.36% and 0.39% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.15%		0.19%		0.17%		0.15%		0.15%

⁷ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁸ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

⁹ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
46	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Dynamic 2050 Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	17.58		$	19.66		$	21.44		$	19.24		$	17.20
Net investment income1		0.36			0.39			0.42			0.46			0.45
Net realized and unrealized gain (loss)		1.11			(0.78	)		0.89			3.39			2.37
Net increase (decrease) from investment operations		1.47			(0.39	)		1.31			3.85			2.82
Distributions:2
From net investment income		(0.42	)		(0.39	)		(0.43	)		(0.46	)		(0.43	)
From net realized gain		—			(1.30	)		(2.66	)		(1.19	)		(0.35	)
Total distributions		(0.42	)		(1.69	)		(3.09	)		(1.65	)		(0.78	)
Net asset value, end of year	$	18.63		$	17.58		$	19.66		$	21.44		$	19.24
Total Return3
Based on net asset value		8.43%			(2.10)%			6.12%			20.19%			16.53%
Ratios to Average Net Assets4,5,6
Total expenses		0.34%			0.34%			0.33%			0.36%			0.37%
Total expenses after fees waived		0.33%			0.33%			0.32%			0.35%			0.36%
Net investment income		2.00%			2.01%			1.95%			2.22%			2.38%
Supplemental Data
Net assets, end of year (000)	$	13,388		$	1,647		$	1,257		$	821		$	1,018
Portfolio turnover rate of the LifePath Master Portfolio		70%	7		36%	7		48%	8		28%	8		5%	9

¹ Based on average shares outstanding.

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

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.40%, 0.40%, 0.43%, 0.36% and 0.39% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.15%		0.19%		0.17%		0.15%		0.15%

⁷ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁸ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

⁹ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	47

Financial Highlights (concluded) BlackRock LifePath Dynamic 2050 Fund

	Class R
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	17.45		$	19.53		$	21.31		$	19.14		$	17.13
Net investment income1		0.23			0.23			0.22			0.30			0.37
Net realized and unrealized gain (loss)		1.11			(0.78	)		0.89			3.35			2.29
Net increase (decrease) from investment operations		1.34			(0.55	)		1.11			3.65			2.66
Distributions:2
From net investment income		(0.29	)		(0.23	)		(0.23	)		(0.29	)		(0.30	)
From net realized gain		—			(1.30	)		(2.66	)		(1.19	)		(0.35	)
Total distributions		(0.29	)		(1.53	)		(2.89	)		(1.48	)		(0.65	)
Net asset value, end of year	$	18.50		$	17.45		$	19.53		$	21.31		$	19.14
Total Return3
Based on net asset value		7.75%			(2.92)%			5.21%			19.19%			15.59%
Ratios to Average Net Assets4,5,6
Total expenses		1.00%			1.17%			1.18%			1.21%			1.22%
Total expenses after fees waived		0.99%			1.16%			1.17%			1.20%			1.20%
Net investment income		1.31%			1.20%			1.01%			1.42%			1.98%
Supplemental Data
Net assets, end of year (000)	$	1,324		$	1,550		$	1,091		$	1,126		$	796
Portfolio turnover rate of the LifePath Master Portfolio		70%	7		36%	7		48%	8		28%	8		5%	9

¹ Based on average shares outstanding.

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

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated fees waived of 0.40%, 0.40%, 0.40%, 0.36% and 0.39% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012, respectively.

⁶ Includes the LifePath Fund’s share of its corresponding LifePath Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.15%		0.19%		0.17%		0.15%		0.15%

⁷ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

⁸ Includes purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

⁹ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
48	BLACKROCK FUNDS III	DECEMBER 31, 2016

Notes to Financial Statements BlackRock Funds III

1. Organization:

BlackRock Funds III (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Delaware statutory trust. The following series of the Trust are referred to herein collectively as the “LifePath Funds” or individually, as a “LifePath Fund”:

Fund Name	Herein Referred To As	Diversification Classification
BlackRock LifePath® Dynamic Retirement Fund	LifePath Retirement Fund		Diversified
BlackRock LifePath® Dynamic 2020 Fund	LifePath 2020 Fund		Diversified
BlackRock LifePath® Dynamic 2030 Fund	LifePath 2030 Fund		Diversified
BlackRock LifePath® Dynamic 2040 Fund	LifePath 2040 Fund		Diversified
BlackRock LifePath® Dynamic 2050 Fund	LifePath 2050 Fund		Diversified

Each LifePath Fund seeks to achieve its investment objective by investing all of its assets in a corresponding series of Master Investment Portfolio (“MIP”): LifePath^® Dynamic Retirement Master Portfolio, LifePath^® Dynamic 2020 Master Portfolio, LifePath^® Dynamic 2030 Master Portfolio, LifePath^® Dynamic 2040 Master Portfolio and LifePath^® Dynamic 2050 Master Portfolio (each a “LifePath Master Portfolio” and together, the “LifePath Master Portfolios”). MIP is an affiliate of the Trust. Each LifePath Master Portfolio has the same investment objective and strategies as its corresponding LifePath Fund. The value of each LifePath Fund’s investment in its corresponding LifePath Master Portfolio reflects the LifePath Fund’s proportionate interest in the net assets of the LifePath Master Portfolio. The performance of the LifePath Funds is directly affected by the performance of its corresponding LifePath Master Portfolio. At December 31, 2016, the percentage of the LifePath Master Portfolio owned by the corresponding LifePath Fund was 100.0% for each of the LifePath Retirement Fund, LifePath 2020 Fund, LifePath 2030 Fund, LifePath 2040 Fund and LifePath 2050 Fund, respectively. As such, the financial statements of each corresponding LifePath Master Portfolio, including the Schedules of Investments, are included elsewhere in this report and should be read in conjunction with the LifePath Fund’s financial statements.

Each LifePath Fund offers multiple classes of shares. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that certain classes bear expenses related to the shareholder servicing and distribution of such shares. Institutional and Class K Shares are sold without a sales charge and only to certain eligible investors. Investor A and Investor C Shares are generally available through financial intermediaries. Class R Shares are available only to certain employer-sponsored retirement plans. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures. The Board of Trustees of the Trust and Board of Trustees of MIP are referred to throughout this report as the “Board of Trustees” or the “Board” and the members are referred to as “Trustees.”

Share Class	Initial Sales Charge	CDSC	Conversion Privilege
Institutional, Class K and Class R	No	No	None
Investor A	Yes	No1	None
Investor C	No	Yes	None

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

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

2. Significant Accounting Policies:

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

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

Distributions: Distributions from net investment income are declared quarterly and paid quarterly. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. Portions of return of capital distributions under U.S. GAAP may be taxed at ordinary income rates. The character and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. The portion of distributions that exceeds a LifePath Fund’s current and accumulated earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. If distributions in any tax year are less than each LifePath Fund’s current earnings and profits but greater than net investment income and net

BLACKROCK FUNDS III DECEMBER 31, 2016 49

Notes to Financial Statements (continued) BlackRock Funds III

realized capital gains (taxable income), distributions in excess of taxable income are not treated as non-taxable return of capital, but rather may be taxable to shareholders at ordinary income rates. Under certain circumstances, taxable excess distributions could be significant. See Note 5, Income Tax Information, for the tax character of each LifePath Fund’s distributions paid during the year.

Indemnifications: In the normal course of business, a LifePath Fund enters into contracts that contain a variety of representations that provide general indemnification. A LifePath Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the LifePath Fund, which cannot be predicted with any certainty.

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

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The LifePath Funds’ policy is to value their financial instruments at fair value. Each LifePath Fund records its investment in its corresponding LifePath Master Portfolio at fair value based on the LifePath Fund’s proportionate interest in the net assets of the LifePath Master Portfolio. Valuation of securities held by the LifePath Master Portfolio is discussed in Note 3 of the LifePath Master Portfolio’s Notes to Financial Statements, which are included elsewhere in this report.

4. Administration Agreement and Other Transactions with Affiliates:

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

Administration: The Trust, on behalf of the LifePath Funds, entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL” or the “Administrator”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL, in consideration thereof, has agreed to bear all of the LifePath 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 LifePath Funds. BAL is entitled to receive for these administration services an annual fee of 0.35% based on the average daily net assets of each LifePath Fund’s Institutional and Investor A Shares, 0.40% of the average daily net assets of Investor C Shares, 0.30% of the average daily net assets of Class R Shares and 0.15% of the average daily net assets of Class K Shares.

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

For the year ended December 31, 2016, the following table shows the class specific administration fees borne directly by each class of each LifePath Fund.

	Institutional		Investor A		Investor C		Class K		Class R		Total
LifePath Retirement Fund	$	324,092	$	317,843	$	5,077	$	16,441	$	2,274	$	665,727
LifePath 2020 Fund	$	742,764	$	971,273	$	10,256	$	38,464	$	12,004	$	1,774,761
LifePath 2030 Fund	$	662,529	$	1,004,816	$	12,726	$	36,427	$	10,556	$	1,727,054
LifePath 2040 Fund	$	570,494	$	726,897	$	9,095	$	39,968	$	5,788	$	1,352,242
LifePath 2050 Fund	$	139,332	$	239,558	$	2,644	$	14,476	$	4,214	$	400,224

Service and Distribution Fees: The Trust, on behalf of the LifePath Funds, entered into a Distribution Agreement and a Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Administrator. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, each LifePath Fund pays BRIL ongoing service and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the relevant share class of the LifePath Funds as follows:

	Distribution Fees		Service Fees
Investor A		—		0.25%
Investor C		0.75%		0.25%
Class R		0.25%		0.25%

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

50 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued) BlackRock Funds III

For the year ended December 31, 2016, the following table shows the class specific service and distribution fees borne directly by each share class of each LifePath Fund:

	Investor A		Investor C		Class R		Total
LifePath Retirement Fund	$	226,666	$	12,666	$	3,799	$	243,131
LifePath 2020 Fund	$	693,033	$	25,634	$	20,032	$	738,699
LifePath 2030 Fund	$	717,223	$	31,805	$	17,607	$	766,635
LifePath 2040 Fund	$	518,845	$	22,750	$	9,679	$	551,274
LifePath 2050 Fund	$	171,043	$	6,607	$	7,030	$	184,680

Other Fees: For the year ended December 31, 2016, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of each LifePath Fund’s Investor A Shares as follows:

	LifePath Retirement Fund		LifePath 2020 Fund		LifePath 2030 Fund		LifePath 2040 Fund		LifePath 2050 Fund
Investor A	$	1,415	$	1,560	$	1,015	$	3,737	$	351

For the year ended December 31, 2016, affiliates received CDSCs as follows:

	LifePath Retirement Fund		LifePath 2020 Fund		LifePath 2030 Fund		LifePath 2040 Fund		LifePath 2050 Fund
Investor C	$	117	$	1,167	$	95	$	7	$	398

Expense Waivers: The fees and expenses of the Trust’s trustees who are not “interested persons” of the Trust, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and the Trust’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the LifePath Funds. BAL has contractually agreed to reimburse the LifePath Funds or provide an offsetting credit against the administration fees paid by the LifePath Funds in an amount equal to these independent expenses through April 30, 2026. These amounts are included in fees waived by the administrator in the Statements of Operations. For the year ended December 31, 2016, the LifePath Funds waived the following amounts:

	LifePath Retirement Fund		LifePath 2020 Fund		LifePath 2030 Fund		LifePath 2040 Fund		LifePath 2050 Fund
Amount waived	$	12,600	$	12,641	$	12,671	$	12,645	$	12,582

Interfund Lending: In accordance with an exemptive order (the “Order”) from the U.S. Securities and Exchange Commission, each LifePath Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by each LifePath Fund’s investment policies and restrictions. Each LifePath Fund is currently permitted to borrow and lend under the Interfund Lending Program.

A LifePath Fund may lend in aggregate up to 15% of its net assets, but no more than 5% of its net assets, to any one borrowing fund through the Interfund Lending Program. A LifePath Fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets or any lower threshold provided for by the LifePath Fund’s investment restrictions. If a LifePath Fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2016, the LifePath Funds did not participate in the Interfund Lending Program.

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

5. Income Tax Information:

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

Each LifePath Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each LifePath Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016. The statute of limitations on each LifePath Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the LifePath Funds as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the LifePath Funds’ financial statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 51

Notes to Financial Statements (continued) BlackRock Funds III

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

	LifePath 2030 Fund
Paid-in capital		(16,742	)
Distributions in excess of net investment income		16,738
Accumulated net realized gain (loss)		4

The tax character of distributions paid was as follows:

		LifePath Retirement Fund		LifePath 2020 Fund		LifePath 2030 Fund		LifePath 2040 Fund		LifePath 2050 Fund
Ordinary income	12/31/16	$	2,762,696	$	7,797,961	$	12,214,567	$	8,767,191	$	2,337,036
	12/31/15		10,594,975		26,990,403		25,665,726		21,220,128		4,442,571
Long-term capital gains	12/31/16		49,513		—		—		—		—
	12/31/15		4,639,258		21,629,969		24,542,156		25,494,483		6,485,544
Return of capital	12/31/16		—		—		—		—		—
	12/31/15		390,609		814,855		312,129		—		—
Total	12/31/16	$	2,812,209	$	7,797,961	$	12,214,567	$	8,767,191	$	2,337,036
	12/31/15	$	15,624,842	$	49,435,227	$	50,520,011	$	46,714,611	$	10,928,115

As of period end, the tax components of accumulated net earnings (losses) were as follows:

	LifePath Retirement Fund			LifePath 2020 Fund			LifePath 2030 Fund			LifePath 2040 Fund		LifePath 2050 Fund
Undistributed ordinary income		—			—		$	11,023,681		$	2,143,613		—
Undistributed long-term capital gains	$	4,726,979			—			6,490,676			15,594,015		—
Capital loss carryforwards		—		$	(4,292,285	)		—			—	$	(2,878,392	)
Net unrealized gains (losses)1		23,336,846			67,509,683			10,188,412			45,019,759		11,437,562
Qualified late-year losses2		(138,474	)		(364,947	)		(144,744	)		—		(19,632	)
Total	$	27,925,351		$	62,852,451		$	27,558,025		$	62,757,387	$	8,539,538

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

²  The LifePath Funds have elected to defer certain qualified late-year losses and recognize such losses in the next taxable year.

As of December 31, 2016, LifePath 2020 Fund and LifePath 2050 Fund had capital loss carryforwards, with no expiration dates, available to offset future realized capital gains of $4,292,285 and $2,878,392, respectively.

6. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2016						Year Ended December 31, 2015
LifePath Retirement Fund	Shares			Amount			Shares			Amount
Institutional
Shares sold		1,565,418		$	16,505,397			3,082,419		$	34,185,070
Shares issued in reinvestment of distributions		118,522			1,267,904			816,982			8,689,281
Shares redeemed		(9,758,765	)		(102,008,107	)		(11,402,092	)		(125,957,082	)
Net decrease		(8,074,825	)	$	(84,234,806	)		(7,502,691	)	$	(83,082,731	)
Investor A
Shares sold		876,542		$	8,269,555			1,024,947		$	10,156,190
Shares issued in reinvestment of distributions		139,648			1,338,052			668,737			6,373,801
Shares redeemed		(3,560,631	)		(33,610,428	)		(4,653,270	)		(46,034,385	)
Net decrease		(2,544,441	)	$	(24,002,821	)		(2,959,586	)	$	(29,504,394	)

52 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued) BlackRock Funds III

	Year Ended December 31, 2016						Year Ended December 31, 2015
LifePath Retirement Fund (concluded)	Shares			Amount			Shares			Amount
Investor C
Shares sold		31,036		$	323,785			81,259		$	877,768
Shares issued in reinvestment of distributions		686			7,234			6,687			69,832
Shares redeemed		(85,417	)		(895,963	)		(52,089	)		(558,971	)
Net increase (decrease)		(53,695	)	$	(564,944	)		35,857		$	388,629
Class K
Shares sold		1,167,834		$	12,482,261			600,351		$	6,640,487
Shares issued in reinvestment of distributions		17,741			189,715			43,257			455,494
Shares redeemed		(941,876	)		(10,138,580	)		(84,046	)		(908,724	)
Net increase		243,699		$	2,533,396			559,562		$	6,187,257
Class R
Shares sold		37,825		$	400,024			21,123		$	228,653
Shares issued in reinvestment of distributions		834			8,900			3,314			34,961
Shares redeemed		(15,870	)		(163,889	)		(41,754	)		(457,997	)
Net increase (decrease)		22,789		$	245,035			(17,317	)	$	(194,383	)
Total Decrease		(10,406,473	)	$	(106,024,140	)		(9,884,175	)	$	(106,205,622	)
LifePath 2020 Fund
Institutional
Shares sold		2,310,157		$	33,396,345			4,215,109		$	66,252,877
Shares issued in reinvestment of distributions		213,575			3,139,017			1,538,593			22,595,121
Shares redeemed		(10,888,973	)		(158,213,919	)		(18,834,441	)		(295,907,148	)
Net decrease		(8,365,241	)	$	(121,678,557	)		(13,080,739	)	$	(207,059,150	)
Investor A
Shares sold		1,292,429		$	17,402,182			1,338,679		$	19,437,877
Shares issued in reinvestment of distributions		300,658			4,100,129			1,838,939			24,938,220
Shares redeemed		(5,506,847	)		(74,359,802	)		(5,778,076	)		(83,791,873	)
Net decrease		(3,913,760	)	$	(52,857,491	)		(2,600,458	)	$	(39,415,776	)
Investor C
Shares sold		77,936		$	1,122,779			51,355		$	790,022
Shares issued in reinvestment of distributions		1,184			17,207			12,177			175,330
Shares redeemed		(42,525	)		(605,273	)		(97,038	)		(1,455,576	)
Net increase (decrease)		36,595		$	534,713			(33,506	)	$	(490,224	)
Class K
Shares sold		1,327,996		$	19,286,384			906,154		$	14,234,945
Shares issued in reinvestment of distributions		33,739			495,588			102,104			1,485,355
Shares redeemed		(663,321	)		(9,583,158	)		(319,506	)		(4,878,569	)
Net increase		698,414		$	10,198,814			688,752		$	10,841,731
Class R
Shares sold		100,591		$	1,437,367			153,240		$	2,359,038
Shares issued in reinvestment of distributions		3,124			45,677			16,501			239,167
Shares redeemed		(128,406	)		(1,894,667	)		(90,678	)		(1,408,817	)
Net increase (decrease)		(24,691	)	$	(411,623	)		79,063		$	1,189,388
Total Net Decrease		(11,568,683	)	$	(164,214,144	)		(14,946,888	)	$	(234,934,031	)

BLACKROCK FUNDS III DECEMBER 31, 2016 53

Notes to Financial Statements (continued) BlackRock Funds III

	Year Ended December 31, 2016						Year Ended December 31, 2015
LifePath 2030 Fund	Shares			Amount			Shares			Amount
Institutional
Shares sold		2,845,466		$	37,796,504			5,213,448		$	76,881,977
Shares issued in reinvestment of distributions		318,039			4,347,358			1,593,135			21,846,676
Shares redeemed		(9,778,281	)		(131,038,425	)		(20,505,711	)		(303,358,679	)
Net decrease		(6,614,776	)	$	(88,894,563	)		(13,699,128	)	$	(204,630,026	)
Investor A
Shares sold		1,706,475		$	22,231,257			1,856,330		$	26,432,452
Shares issued in reinvestment of distributions		524,896			6,950,240			2,024,081			26,664,070
Shares redeemed		(5,246,077	)		(68,705,788	)		(5,033,944	)		(70,961,535	)
Net decrease		(3,014,706	)	$	(39,524,291	)		(1,153,533	)	$	(17,865,013	)
Investor C
Shares sold		69,165		$	911,541			138,615		$	2,028,091
Shares issued in reinvestment of distributions		3,901			52,674			19,359			258,835
Shares redeemed		(80,072	)		(1,063,499	)		(124,341	)		(1,774,867	)
Net increase (decrease)		(7,006	)	$	(99,284	)		33,633		$	512,059
Class K
Shares sold		1,302,059		$	17,569,962			857,844		$	12,732,460
Shares issued in reinvestment of distributions		57,376			785,139			108,207			1,472,178
Shares redeemed		(449,412	)		(6,086,275	)		(387,243	)		(5,532,178	)
Net increase		910,023		$	12,268,826			578,808		$	8,672,460
Class R
Shares sold		98,977		$	1,294,764			104,545		$	1,486,750
Shares issued in reinvestment of distributions		5,192			70,338			18,287			245,226
Shares redeemed		(145,726	)		(2,002,110	)		(88,538	)		(1,295,592	)
Net increase (decrease)		(41,557	)	$	(637,008	)		34,294		$	436,384
Total Net Decrease		(8,768,022	)	$	(116,886,320	)		(14,205,926	)	$	(212,874,136	)
LifePath 2040 Fund
Institutional
Shares sold		2,093,654		$	34,155,403			3,838,975		$	71,051,113
Shares issued in reinvestment of distributions		206,176			3,442,876			1,271,130			21,570,928
Shares redeemed		(6,680,899	)		(110,515,951	)		(17,261,307	)		(319,896,632	)
Net decrease		(4,381,069	)	$	(72,917,672	)		(12,151,202	)	$	(227,274,591	)
Investor A
Shares sold		1,180,159		$	18,053,147			1,308,200		$	22,522,484
Shares issued in reinvestment of distributions		290,559			4,518,002			1,495,264			23,333,183
Shares redeemed		(3,466,536	)		(53,129,777	)		(3,519,184	)		(60,270,739	)
Net decrease		(1,995,818	)	$	(30,558,628	)		(715,720	)	$	(14,415,072	)
Investor C
Shares sold		63,727		$	1,032,133			80,026		$	1,463,438
Shares issued in reinvestment of distributions		1,776			29,380			13,679			225,450
Shares redeemed		(69,124	)		(1,086,871	)		(63,608	)		(1,156,085	)
Net increase (decrease)		(3,621	)	$	(25,358	)		30,097		$	532,803

54 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (concluded) BlackRock Funds III

	Year Ended December 31, 2016						Year Ended December 31, 2015
LifePath 2040 Fund (concluded)	Shares			Amount			Shares			Amount
Class K
Shares sold		1,431,567		$	23,747,441			787,006		$	14,765,461
Shares issued in reinvestment of distributions		43,724			737,300			86,454			1,454,936
Shares redeemed		(408,844	)		(6,833,838	)		(256,507	)		(4,573,411	)
Net increase		1,066,447		$	17,650,903			616,953		$	11,646,986
Class R
Shares sold		92,824		$	1,518,036			55,743		$	1,007,207
Shares issued in reinvestment of distributions		2,355			39,198			7,749			128,802
Shares redeemed		(52,618	)		(868,609	)		(40,978	)		(752,099	)
Net increase		42,561		$	688,625			22,514		$	383,910
Total Net Decrease		(5,271,500	)	$	(85,162,130	)		(12,197,358	)	$	(229,125,964	)
LifePath 2050 Fund
Institutional
Shares sold		1,095,707		$	19,254,085			2,156,166		$	42,661,367
Shares issued in reinvestment of distributions		42,443			770,344			246,435			4,538,084
Shares redeemed		(1,731,280	)		(30,736,648	)		(5,646,501	)		(111,606,012	)
Net decrease		(593,130	)	$	(10,712,219	)		(3,243,900	)	$	(64,406,561	)
Investor A
Shares sold		859,113		$	15,159,203			822,426		$	16,036,796
Shares issued in reinvestment of distributions		68,744			1,249,122			338,012			6,070,846
Shares redeemed		(1,226,251	)		(21,881,946	)		(731,224	)		(13,958,447	)
Net increase (decrease)		(298,394	)	$	(5,473,621	)		429,214		$	8,149,195
Investor C
Shares sold		19,481		$	341,315			30,293		$	584,184
Shares issued in reinvestment of distributions		412			7,448			3,156			56,080
Shares redeemed		(20,745	)		(356,615	)		(23,249	)		(440,677	)
Net increase (decrease)		(852	)	$	(7,852	)		10,200		$	199,587
Class K
Shares sold		740,448		$	13,213,694			39,619		$	760,896
Shares issued in reinvestment of distributions		15,667			286,120			7,855			141,933
Shares redeemed		(131,139	)		(2,366,741	)		(17,717	)		(338,992	)
Net increase		624,976		$	11,133,073			29,757		$	563,837
Class R
Shares sold		55,199		$	980,954			37,131		$	712,379
Shares issued in reinvestment of distributions		1,296			23,534			6,733			120,074
Shares redeemed		(73,776	)		(1,294,024	)		(10,892	)		(212,633	)
Net increase (decrease)		(17,281	)	$	(289,536	)		32,972		$	619,820
Total Net Decrease		(284,681	)	$	(5,350,155	)		(2,741,757	)	$	(54,874,122	)

7. Subsequent Events:

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

BLACKROCK FUNDS III DECEMBER 31, 2016 55

Report of Independent Registered Public Accounting Firm BlackRock Funds III

To the Board of Trustees of BlackRock Funds III and the Shareholders of the Funds, as defined:

In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock LifePath^® Dynamic Retirement Fund, BlackRock LifePath^® Dynamic 2020 Fund, BlackRock LifePath^® Dynamic 2030 Fund, BlackRock LifePath^® Dynamic 2040 Fund and BlackRock LifePath^® Dynamic 2050 Fund (the “Funds”), each a series of BlackRock Funds III, as of December 31, 2016, 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 Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid during the tax year ended December 31, 2016.

	Payable Dates	LifePath Retirement Fund		LifePath 2020 Fund		LifePath 2030 Fund		LifePath 2040 Fund		LifePath 2050 Fund
Qualified Dividend Income for Individuals1	3/31/16 - 12/30/16		51.46%		61.50%		54.24%		74.32%		91.75%
Dividends Qualifying for the Dividend Received Deduction for Corporations1	3/31/16 - 12/30/16		27.74%		32.66%		27.05%		37.66%		44.18%
Federal Obligation Interest2	3/31/16 - 12/30/16		7.49%		5.89%		1.79%		0.42%		0.03%
Interest Related Dividends and Short-Term Capital Gains for Non-U.S. Residents3	3/31/16 - 12/30/16		70.11%		56.33%		50.37%		24.23%		1.77%

¹  The LifePath Funds hereby designate the percentages indicated above or the maximum amount allowable by law.

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

³  Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations.

56 BLACKROCK FUNDS III DECEMBER 31, 2016

Master Portfolio Information as of December 31, 2016 Master Investment Portfolio

LifePath^® Dynamic Retirement Master Portfolio

Portfolio Composition Percent of
Total Net Assets

Fixed Income Funds	60	%
Equity Funds	37
Common Stocks	1
Short-Term Securities	3
Liabilities in Excess of Other Assets	(1	)

Ten Largest Holdings Percent of
Total Net Assets

CoreAlpha Bond Master Portfolio	40	%
Active Stock Master Portfolio	19
Master Total Return Portfolio	10
iShares TIPS Bond ETF	9
International Tilts Master Portfolio	6
BlackRock Commodity Strategies Fund	4
BlackRock Cash Funds: Treasury, SL Agency Shares	3
BlackRock Tactical Opportunities Fund	3
iShares Edge MSCI Multifactor USA ETF	3
iShares Edge MSCI Multifactor Intl ETF	1

LifePath^® Dynamic 2020 Master Portfolio

Portfolio Composition Percent of
Total Net Assets

Fixed Income Funds	49	%
Equity Funds	45
Common Stocks	3
Short-Term Securities	4
Liabilities in Excess of Other Assets	(1	)

Ten Largest Holdings Percent of
Total Net Assets

CoreAlpha Bond Master Portfolio	34	%
Active Stock Master Portfolio	23
Master Total Return Portfolio	9
International Tilts Master Portfolio	8
iShares TIPS Bond ETF	7
iShares Edge MSCI Multifactor USA ETF	4
BlackRock Commodity Strategies Fund	4
BlackRock Cash Funds: Treasury, SL Agency Shares	3
BlackRock Tactical Opportunities Fund	3
iShares Edge MSCI Multifactor Intl ETF	2

LifePath^® Dynamic 2030 Master Portfolio

Portfolio Composition Percent of
Total Net Assets

Equity Funds	61	%
Fixed Income Funds	26
Common Stocks	8
Short-Term Securities	5

Ten Largest Holdings Percent of
Total Net Assets

Active Stock Master Portfolio	31	%
CoreAlpha Bond Master Portfolio	17
International Tilts Master Portfolio	11
iShares Edge MSCI Multifactor USA ETF	7
Master Total Return Portfolio	5
BlackRock Cash Funds: Treasury, SL Agency Shares	5
BlackRock Commodity Strategies Fund	4
iShares TIPS Bond ETF	4
BlackRock Tactical Opportunities Fund	3
iShares Edge MSCI Multifactor Intl ETF	3

The LifePath Master Portfolios’ allocation and holdings listed above are current as of the report date. However, the LifePath Master Portfolios are regularly monitored and their composition may vary throughout various periods.

BLACKROCK FUNDS III DECEMBER 31, 2016 57

Master Portfolio Information as of December 31, 2016 (concluded) Master Investment Portfolio

LifePath^® Dynamic 2040 Master Portfolio

Portfolio Composition Percent of
Total Net Assets

Equity Funds	74	%
Common Stocks	13
Fixed Income Funds	6
Short-Term Securities	7

Ten Largest Holdings Percent of
Total Net Assets

Active Stock Master Portfolio	38	%
International Tilts Master Portfolio	14
iShares Edge MSCI Multifactor USA ETF	9
BlackRock Cash Funds: Treasury, SL Agency Shares	6
BlackRock Commodity Strategies Fund	4
CoreAlpha Bond Master Portfolio	4
iShares Edge MSCI Multifactor Intl ETF	3
BlackRock Tactical Opportunities Fund	3
iShares MSCI EAFE Small-Cap ETF	3
Master Total Return Portfolio	2

LifePath^® Dynamic 2050 Master Portfolio

Portfolio Composition Percent of
Total Net Assets

Equity Funds	75	%
Common Stocks	14
Short-Term Securities	10
Fixed Income Funds	1

Ten Largest Holdings Percent of
Total Net Assets

Active Stock Master Portfolio	37	%
International Tilts Master Portfolio	14
iShares Edge MSCI Multifactor USA ETF	10
BlackRock Cash Funds: Treasury, SL Agency Shares	9
BlackRock Commodity Strategies Fund	5
iShares Edge MSCI Multifactor Intl ETF	4
iShares MSCI EAFE Small-Cap ETF	3
iShares Core S&P 500 ETF	1
CoreAlpha Bond Master Portfolio	1
Simon Property Group, Inc.	1

The LifePath Master Portfolios’ allocation and holdings listed above are current as of the report date. However, the LifePath Master Portfolios are regularly monitored and their composition may vary throughout various periods.

58 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 LifePath Dynamic Retirement Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 37.0%
Active Stock Master Portfolio	$	29,539,148	$	29,539,148
BlackRock Commodity Strategies Fund		762,943		5,661,036
BlackRock Tactical Opportunities Fund		362,953		4,874,458
International Tilts Master Portfolio	$	9,504,215		9,504,215
iShares Edge MSCI Multifactor Intl ETF		77,696		1,804,878
iShares Edge MSCI Multifactor USA ETF		170,657		4,559,955
iShares MSCI EAFE Small-Cap ETF		32,472		1,618,405
				57,562,095
Fixed Income Funds — 59.6%
CoreAlpha Bond Master Portfolio	$	62,729,342		62,729,342
iShares TIPS Bond ETF		123,381		13,963,028
Master Total Return Portfolio	$	16,191,857		16,191,857
				92,884,227
Short-Term Securities — 3.2%
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (b)		4,907,840		4,907,840
Total Affiliated Investment Companies — 99.8%				155,354,162
Common Stocks
Equity Real Estate Investment Trusts (REITs) — 0.0%
Ichigo Hotel REIT Investment Corp.		7		7,724
New South Resources, Ltd. (c)		11,687		12,601
				20,325
Hotels, Restaurants & Leisure — 0.0%
Hilton Worldwide Holdings, Inc.		212		5,766
Real Estate Investment Trusts (REITs) — 0.4%
Agree Realty Corp.		96		4,421
Alexandria Real Estate Equities, Inc.		78		8,668
American Campus Communities, Inc.		208		10,352
American Homes 4 Rent, Class A		165		3,462
AvalonBay Communities, Inc.		84		14,881
Beni Stabili SpA SIIQ		7,457		4,262
Boston Properties, Inc.		209		26,288
British Land Co. PLC		1,698		13,177
CareTrust REIT, Inc.		741		11,352
CyrusOne, Inc.		173		7,738
DiamondRock Hospitality Co.		994		11,461
DuPont Fabros Technology, Inc.		266		11,685
EPR Properties		173		12,416
Equity One, Inc.		287		8,808
Essex Property Trust, Inc.		84		19,530
Eurocommercial Properties NV CVA		134		5,154
Extra Space Storage, Inc.		261		20,160
Federal Realty Investment Trust		130		18,474
First Industrial Realty Trust, Inc.		607		17,026
Gecina SA		23		3,177
General Growth Properties, Inc.		495		12,365
Gramercy Property Trust		1,040		9,547
Great Portland Estates PLC		518		4,255
Hammerson PLC		1,029		7,252
HCP, Inc.		755		22,439
Highwoods Properties, Inc.		134		6,835
Host Hotels & Resorts, Inc.		710		13,376

Common Stocks	Shares		Value
Real Estate Investment Trusts (REITs) (continued)
Ichigo Office REIT Investment Corp.		14	$	9,099
Japan Hotel REIT Investment Corp.		12		8,075
Japan Rental Housing Investments, Inc.		10		6,711
Kenedix Retail REIT Corp.		3		6,836
Kilroy Realty Corp.		146		10,690
Liberty Property Trust		313		12,364
Link REIT		1,000		6,483
Macerich Co.		141		9,989
Mid-America Apartment Communities, Inc.		118		11,555
NSI NV		1,981		7,477
Public Storage		30		6,705
Retail Properties of America, Inc., Class A		909		13,935
Rexford Industrial Realty, Inc.		246		5,705
RioCan Real Estate Investment Trust		184		3,649
Scentre Group		4,319		14,458
Simon Property Group, Inc.		184		32,691
SL Green Realty Corp.		67		7,206
STAG Industrial, Inc.		457		10,909
Sun Communities, Inc.		75		5,746
UDR, Inc.		506		18,459
Unibail-Rodamco SE		105		25,022
Vastned Retail NV		187		7,256
Ventas, Inc.		129		8,065
Welltower, Inc.		120		8,032
Westfield Corp.		4,007		27,093
				592,771
Real Estate Management & Development — 0.1%
Ayala Land, Inc.		3,100		1,992
BUWOG AG		580		13,465
Cheung Kong Property Holdings Ltd.		3,000		18,321
China Resources Land Ltd.		2,000		4,475
Deutsche Wohnen AG, Bearer Shares		277		8,689
First Capital Realty, Inc.		468		7,205
Global Logistic Properties Ltd.		8,200		12,417
Howard Hughes Corp. (c)		55		6,275
Inmobiliaria Colonial SA		1,548		10,713
Intiland Development Tbk PT		175,800		6,522
Kungsleden AB		857		5,420
LEG Immobilien AG		119		9,230
Leopalace21 Corp.		100		552
Mega Manunggal Property Tbk PT (c)		280,800		14,277
Megaworld Corp.		49,000		3,508
Puradelta Lestari Tbk PT		134,400		2,288
St. Modwen Properties PLC		1,082		4,071
Sun Hung Kai Properties Ltd.		2,000		25,185
Takara Leben Co., Ltd.		700		4,066
Unizo Holdings Co., Ltd.		800		21,153
Wihlborgs Fastigheter AB		236		4,380
				184,204
Road & Rail — 0.0%
MTR Corp. Ltd.		1,000		4,848
Total Common Stocks — 0.5%				807,914
Total Investments (Cost — $124,949,892) — 100.3%				156,162,076
Liabilities in Excess of Other Assets — (0.3)%				(411,631	)
Net Assets — 100.0%			$	155,750,445

Portfolio Abbreviations

AUD	Australian Dollar	HKD	Hong Kong Dollar	OTC	Over-the-Counter
CAD	Canadian Dollar	IDR	Indonesian Rupiah	PHP	Philippine Peso
CHF	Swiss Franc	ILS	Israeli New Shekel	REIT	Real Estate Investment Trust
CVA	Certificaten Van Aandelen (Dutch Certificate)	JPY	Japanese Yen	SEK	Swedish Krona
ETF	Exchange-Traded Fund	MSCI	Morgan Stanley Capital International	SGD	Singapore Dollar
EUR	Euro	NOK	Norwegian Krone	S&P	Standard and Poor’s
GBP	British Pound	NZD	New Zealand Dollar	USD	U.S. Dollar

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 59

Schedule of Investments (continued) LifePath Dynamic Retirement Master Portfolio

Notes to Schedule of Investments

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December 31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
Active Stock Master Portfolio	$	28,411,425	$	1,127,723	1		—		$	29,539,148	$	29,539,148	$	423,382		$	(3,885,645	)
BlackRock Cash Funds: Institutional, SL Agency Shares*		517,747		—			(517,747	)2		—		—		7,628	3		40
BlackRock Cash Funds: Prime, SL Agency Shares*		—		—			—			—		—		1,419	3		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		4,907,840	1		—			4,907,840		4,907,840		2,616			524
BlackRock Commodity Strategies Fund		1,399,391		—			(636,448	)2		762,943		5,661,036		52,899			(486,896	)
BlackRock Emerging Markets Fund, Inc.*		325,916		16,244			(342,160	)		—		—		—			155,408
BlackRock Tactical Opportunities Fund		—		362,953			—			362,953		4,874,458		91,591			—
CoreAlpha Bond Master Portfolio	$	129,362,345		—		$	(66,633,003	)2	$	62,729,342		62,729,342		2,253,161			214,240
International Tilts Master Portfolio	$	20,042,535		—		$	(10,538,320	)2	$	9,504,215		9,504,215		444,768			(1,742,346	)
iShares Core S&P 500 ETF*		—		14,742			(14,742	)		—		—		—			9,980
iShares Edge MSCI Min Vol EAFE ETF*		—		7,828			(7,828	)		—		—		—			10,584
iShares Edge MSCI Min Vol USA ETF*		—		36,567			(36,567	)		—		—		—			31,978
iShares Edge MSCI Multifactor Intl ETF		—		77,696			—			77,696		1,804,878		14,235			—
iShares Edge MSCI Multifactor USA ETF		—		170,657			—			170,657		4,559,955		16,521			—
iShares MSCI Canada ETF*		68,752		3,698			(72,450	)		—		—		10,562			138,343
iShares MSCI EAFE Small-Cap ETF		53,861		8,740			(30,129	)		32,472		1,618,405		53,552			119,532
iShares TIPS Bond ETF		208,795		17,753			(103,167	)		123,381		13,963,028		246,865			907,686
Large Cap Index Master Portfolio*	$	24,159,652		—		$	(24,159,652	)2		—		—		318,198			(6,023,486	)
Master Small Cap Index Series*	$	9,573,489		—		$	(9,573,489	)2		—		—		89,557			244,969
Master Total Return Portfolio		—	$	16,191,857	1		—		$	16,191,857		16,191,857		64,601			(81,193	)
Total											$	155,354,162	$	4,091,555		$	(10,386,282	)
*  No longer held by the LifePath Master Portfolio as of period end.
1    Represents net shares/investment value purchased.
2   Represents net shares/investment value sold.
3    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

(b) Current yield as of period end.

(c) Non-income producing security.

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

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts
Contracts Long (Short)			Issue	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
	17		Canadian Dollar	March 2017	$	1,265,055	$	(30,547	)
	30		Euro Dollar	March 2017	$	3,965,250		(39,445	)
	95		MSCI Emerging Markets E-Mini Index	March 2017	$	4,079,775		(89,790	)
	89		Russell 2000 E-Mini Index	March 2017	$	6,038,205		(115,224	)
	(5	)	S&P 500 E-Mini Index	March 2017	$	559,050		3,558
	10		S&P/TSX 60 Index	March 2017	$	1,336,015		585
	Total						$	(270,863	)

See Notes to Financial Statements.

60 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic Retirement Master Portfolio

Forward Foreign Currency Exchange Contracts
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
AUD	7,000	USD	5,361	Bank of America N.A.		1/19/17	$	(294	)
AUD	950	USD	707	Barclays Bank PLC		1/19/17		(20	)
AUD	7,000	USD	5,209	BNP Paribas S.A.		1/19/17		(142	)
AUD	7,000	USD	5,361	Citibank N.A.		1/19/17		(294	)
AUD	13,000	USD	9,558	Goldman Sachs International		1/19/17		(149	)
CAD	11,500	USD	8,675	Bank of America N.A.		1/19/17		(98	)
CAD	28,000	USD	21,325	Goldman Sachs International		1/19/17		(441	)
CAD	11,000	USD	8,194	Goldman Sachs International		1/19/17		10
CHF	13,000	USD	13,219	Bank of America N.A.		1/19/17		(414	)
EUR	11,000	USD	11,763	Bank of America N.A.		1/19/17		(151	)
EUR	1,000	USD	1,101	BNP Paribas S.A.		1/19/17		(45	)
EUR	1,000	USD	1,093	Goldman Sachs International		1/19/17		(38	)
EUR	2,000	USD	2,230	Goldman Sachs International		1/19/17		(119	)
EUR	1,000	USD	1,057	Goldman Sachs International		1/19/17		(1	)
GBP	2,000	USD	2,472	Bank of America N.A.		1/19/17		—
GBP	1,000	USD	1,226	Barclays Bank PLC		1/19/17		10
GBP	2,000	USD	2,491	Barclays Bank PLC		1/19/17		(18	)
GBP	4,000	USD	5,012	BNP Paribas S.A.		1/19/17		(67	)
GBP	1,000	USD	1,233	Citibank N.A.		1/19/17		3
GBP	3,000	USD	3,683	Goldman Sachs International		1/19/17		25
GBP	3,000	USD	3,674	Goldman Sachs International		1/19/17		35
GBP	2,000	USD	2,506	Goldman Sachs International		1/19/17		(34	)
GBP	1,000	USD	1,235	Goldman Sachs International		1/19/17		2
GBP	380	USD	482	Royal Bank of Canada		1/19/17		(12	)
HKD	9,000	USD	1,161	BNP Paribas S.A.		1/19/17		—
HKD	335,000	USD	43,217	Goldman Sachs International		1/19/17		(6	)
HKD	55,000	USD	7,096	UBS AG		1/19/17		(1	)
IDR	87,268,000	USD	6,483	BNP Paribas S.A.		1/19/17		(19	)
IDR	24,444,000	USD	1,841	BNP Paribas S.A.		1/19/17		(31	)
IDR	28,778,000	USD	2,113	Citibank N.A.		1/19/17		19
IDR	16,467,000	USD	1,248	Nomura International PLC		1/19/17		(29	)
ILS	8,000	USD	2,096	Bank of America N.A.		1/19/17		(17	)
JPY	62,000	USD	539	Bank of America N.A.		1/19/17		(7	)
JPY	41,000	USD	361	Barclays Bank PLC		1/19/17		(10	)
JPY	1,328,000	USD	12,916	Barclays Bank PLC		1/19/17		(1,519	)
JPY	2,250,000	USD	20,321	BNP Paribas S.A.		1/19/17		(1,012	)
JPY	2,679,000	USD	23,946	BNP Paribas S.A.		1/19/17		(956	)
JPY	204,000	USD	1,734	Citibank N.A.		1/19/17		16
JPY	163,000	USD	1,569	Goldman Sachs International		1/19/17		(170	)
JPY	1,594,000	USD	15,338	Goldman Sachs International		1/19/17		(1,659	)
JPY	184,000	USD	1,754	Goldman Sachs International		1/19/17		(175	)
JPY	433,000	USD	4,143	Goldman Sachs International		1/19/17		(428	)
JPY	314,000	USD	2,663	Goldman Sachs International		1/19/17		32
NOK	24,000	USD	2,817	Citibank N.A.		1/19/17		(29	)
NOK	2,000	USD	231	Citibank N.A.		1/19/17		1
NOK	40,000	USD	4,752	Goldman Sachs International		1/19/17		(104	)
NOK	18,000	USD	2,198	Goldman Sachs International		1/19/17		(107	)
NOK	22,000	USD	2,658	Goldman Sachs International		1/19/17		(102	)
NOK	15,000	USD	1,818	Goldman Sachs International		1/19/17		(75	)
NOK	6,000	USD	734	Goldman Sachs International		1/19/17		(37	)
NOK	4,000	USD	477	Goldman Sachs International		1/19/17		(13	)
NOK	2,000	USD	239	Goldman Sachs International		1/19/17		(7	)
NOK	14,000	USD	1,662	Goldman Sachs International		1/19/17		(35	)
NOK	5,000	USD	577	Goldman Sachs International		1/19/17		4
NZD	2,000	USD	1,422	Barclays Bank PLC		1/19/17		(28	)
PHP	171,000	USD	3,444	BNP Paribas S.A.		1/19/17		(5	)
SEK	101,000	USD	11,504	Bank of America N.A.		1/19/17		(374	)
SEK	15,000	USD	1,635	Citibank N.A.		1/19/17		18
SGD	3,000	USD	2,170	Bank of America N.A.		1/19/17		(93	)
SGD	23,000	USD	16,563	Barclays Bank PLC		1/19/17		(644	)
SGD	4,000	USD	2,887	Barclays Bank PLC		1/19/17		(118	)
SGD	3,000	USD	2,165	BNP Paribas S.A.		1/19/17		(89	)
SGD	3,000	USD	2,164	BNP Paribas S.A.		1/19/17		(88	)
USD	12,928	AUD	17,000	Bank of America N.A.		1/19/17		623

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 61

Schedule of Investments (continued) LifePath Dynamic Retirement Master Portfolio

Forward Foreign Currency Exchange Contracts (continued)
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	6,161	AUD	8,000	Bank of America N.A.		1/19/17	$	371
USD	4,521	AUD	6,000	Bank of America N.A.		1/19/17		178
USD	3,055	AUD	4,000	Barclays Bank PLC		1/19/17		160
USD	6,805	AUD	9,000	Goldman Sachs International		1/19/17		290
USD	17,310	CAD	23,000	BNP Paribas S.A.		1/19/17		155
USD	749	CAD	1,000	Goldman Sachs International		1/19/17		3
USD	8,138	CAD	11,000	Royal Bank of Canada		1/19/17		(66	)
USD	4,962	CHF	5,000	Citibank N.A.		1/19/17		37
USD	1,031	CHF	1,000	Goldman Sachs International		1/19/17		46
USD	4,415	EUR	4,000	Bank of America N.A.		1/19/17		193
USD	1,045	EUR	1,000	Bank of America N.A.		1/19/17		(11	)
USD	1,041	EUR	1,000	Bank of America N.A.		1/19/17		(14	)
USD	1,096	EUR	1,000	Bank of America N.A.		1/19/17		40
USD	1,097	EUR	1,000	Barclays Bank PLC		1/19/17		41
USD	3,330	EUR	3,000	Barclays Bank PLC		1/19/17		163
USD	1,045	EUR	1,000	BNP Paribas S.A.		1/19/17		(11	)
USD	7,811	EUR	7,000	Citibank N.A.		1/19/17		421
USD	3,271	EUR	3,000	Goldman Sachs International		1/19/17		104
USD	3,284	EUR	3,000	Goldman Sachs International		1/19/17		117
USD	2,189	EUR	2,000	Goldman Sachs International		1/19/17		78
USD	1,074	EUR	1,000	Goldman Sachs International		1/19/17		18
USD	1,045	EUR	1,000	Goldman Sachs International		1/19/17		(10	)
USD	6,459	EUR	6,000	Goldman Sachs International		1/19/17		125
USD	5,797	EUR	5,400	Nomura International PLC		1/19/17		97
USD	6,105	GBP	5,000	Barclays Bank PLC		1/19/17		(76	)
USD	7,616	GBP	6,000	Goldman Sachs International		1/19/17		199
USD	1,247	GBP	1,000	UBS AG		1/19/17		11
USD	22,697	HKD	176,000	Barclays Bank PLC		1/19/17		(5	)
USD	12,769	HKD	99,000	BNP Paribas S.A.		1/19/17		(1	)
USD	3,354	HKD	26,000	BNP Paribas S.A.		1/19/17		—
USD	6,449	HKD	50,000	Citibank N.A.		1/19/17		(1	)
USD	1,419	HKD	11,000	Goldman Sachs International		1/19/17		—
USD	3,097	HKD	24,000	Nomura International PLC		1/19/17		1
USD	4,509	HKD	35,000	Nomura International PLC		1/19/17		(6	)
USD	2,838	HKD	22,000	UBS AG		1/19/17		1
USD	34,656	IDR	459,889,000	Nomura International PLC		1/19/17		591
USD	1,048	ILS	4,000	Royal Bank of Canada		1/19/17		9
USD	27,906	JPY	2,890,000	Bank of America N.A.		1/19/17		3,105
USD	1,775	JPY	200,000	BNP Paribas S.A.		1/19/17		59
USD	3,461	JPY	390,000	BNP Paribas S.A.		1/19/17		114
USD	6,870	JPY	712,000	Citibank N.A.		1/19/17		760
USD	12,977	JPY	1,473,000	Citibank N.A.		1/19/17		336
USD	1,746	JPY	182,000	Citibank N.A.		1/19/17		184
USD	4,435	JPY	456,000	Goldman Sachs International		1/19/17		521
USD	2,588	JPY	281,000	Goldman Sachs International		1/19/17		176
USD	17,214	NOK	141,000	Bank of America N.A.		1/19/17		830
USD	972	NOK	8,000	Bank of America N.A.		1/19/17		42
USD	712	NZD	1,000	Royal Bank of Canada		1/19/17		15
USD	1,001	PHP	50,000	Bank of America N.A.		1/19/17		(4	)
USD	5,831	PHP	293,000	Citibank N.A.		1/19/17		(60	)
USD	1,437	PHP	72,000	Nomura International PLC		1/19/17		(10	)
USD	896	SEK	8,000	Barclays Bank PLC		1/19/17		14
USD	1,112	SEK	10,000	Citibank N.A.		1/19/17		10
USD	1,245	SEK	11,000	Goldman Sachs International		1/19/17		33
USD	2,697	SEK	24,000	Goldman Sachs International		1/19/17		53
USD	451	SEK	4,000	Goldman Sachs International		1/19/17		10
USD	563	SEK	5,000	Goldman Sachs International		1/19/17		12
USD	1,352	SEK	12,000	Goldman Sachs International		1/19/17		30
USD	1,659	SEK	15,000	Goldman Sachs International		1/19/17		6
USD	445	SEK	4,000	Goldman Sachs International		1/19/17		4
USD	1,233	SEK	11,000	Goldman Sachs International		1/19/17		21
USD	1,334	SEK	12,000	Goldman Sachs International		1/19/17		11
USD	4,924	SGD	7,000	Bank of America N.A.		1/19/17		79
USD	7,927	SGD	11,000	Bank of America N.A.		1/19/17		314

See Notes to Financial Statements.

62 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic Retirement Master Portfolio

Forward Foreign Currency Exchange Contracts (continued)
Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	3,613		SGD	5,000	BNP Paribas S.A.		1/19/17	$	152
USD	720		SGD	1,000	BNP Paribas S.A.		1/19/17		28
USD	3,510		SGD	5,000	Royal Bank of Canada		1/19/17		49
Total								$	616

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts	Credit Contracts	Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts	Other Contracts	Total
Futures contracts	Net unrealized appreciation1	—	—	$	4,143		—	—	—	$	4,143
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts	—	—		—	$	11,215	—	—		11,215
		—	—	$	4,143	$	11,215	—	—	$	15,358
Liabilities — Derivative Financial Instruments
Futures contracts	Net unrealized depreciation1	—	—	$	205,014	$	69,992	—	—	$	275,006
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts	—	—		—		10,599	—	—		10,599
Total		—	—	$	205,014	$	80,591	—	—	$	285,605
1    Includes cumulative appreciation (depreciation) on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

For the year ended December 31, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts	Credit Contracts	Equity Contracts			Foreign Currency Exchange Contracts			Interest Rate Contracts	Other Contracts	Total
Futures contracts	—	—	$	579,383		$	26,887		—	—	$	606,270
Forward foreign currency exchange contracts	—	—		—			1,839		—	—		1,839
Total	—	—	$	579,383		$	28,726		—	—	$	608,109
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts	—	—	$	(200,871	)	$	(69,992	)	—	—	$	(270,863	)
Forward foreign currency exchange contracts	—	—		—			1,112		—	—		1,112
Total	—	—	$	(200,871	)	$	(68,880	)	—	—	$	(269,751	)

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	4,171,075
Average notional value of contracts — short	$	139,763
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	472,297
Average amounts sold — in USD	$	497,008

For information about the LifePath Master Portfolio’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 63

Schedule of Investments (continued) LifePath Dynamic Retirement Master Portfolio

Derivative Financial Instruments — Offsetting as of Period End

The LifePath Master Portfolio’s derivative assets and liabilities (by type) were as follows:

	Assets			Liabilities
Futures contracts	$	26,180		$	66,238
Forward foreign currency exchange contracts		11,215			10,599
Total derivative assets and liabilities in the Statements of Assets and Liabilities	$	37,395		$	76,837
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(26,180	)		(66,238	)
Total derivative assets and liabilities subject to an MNA	$	11,215		$	10,599

The following tables present the LifePath Master Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the LifePath Master Portfolio:

Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received	Cash Collateral Received	Net Amount of Derivative Assets2
Bank of America N.A.	$	5,775	$	(1,477	)	—	—	$	4,298
Barclays Bank PLC		388		(388	)	—	—		—
BNP Paribas S.A.		508		(508	)	—	—		—
Citibank N.A.		1,805		(384	)	—	—		1,421
Goldman Sachs International		1,965		(1,965	)	—	—		—
Nomura International PLC		689		(45	)	—	—		644
Royal Bank of Canada		73		(73	)	—	—		—
UBS AG		12		(1	)	—	—		11
Total	$	11,215	$	(4,841	)	—	—	$	6,374
Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged	Cash Collateral Pledged	Net Amount of Derivative Liabilities3
Bank of America N.A.	$	1,477	$	(1,477	)	—	—		—
Barclays Bank PLC		2,438		(388	)	—	—	$	2,050
BNP Paribas S.A.		2,466		(508	)	—	—		1,958
Citibank N.A.		384		(384	)	—	—		—
Goldman Sachs International		3,710		(1,965	)	—	—		1,745
Nomura International PLC		45		(45	)	—	—		—
Royal Bank of Canada		78		(73	)	—	—		5
UBS AG		1		(1	)	—	—		—
Total	$	10,599	$	(4,841	)	—	—	$	5,758
1    The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.
2    Net amount represents the net amount receivable from the counterparty in the event of default.
3    Net amount represents the net amount payable due to counterparty in the event of default.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the LifePath Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies:
Equity Funds	$	18,518,732		—		—	$	18,518,732
Fixed Income Funds		13,963,028		—		—		13,963,028
Short-Term Securities		4,907,840		—		—		4,907,840
Common Stocks:
Equity Real Estate Investment Trusts		—	$	20,325		—		20,325
Hotels, Restaurants & Leisure		5,766		—		—		5,766
Real Estate Investment Trusts		448,501		144,270		—		592,771
Real Estate Management & Development		27,758		156,446		—		184,204
Road & Rail		—		4,848		—		4,848
Subtotal	$	37,871,625	$	325,889		—	$	38,197,514
Investments Valued at NAV1								117,964,562
Total Investments							$	156,162,076

See Notes to Financial Statements.

64 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (concluded) LifePath Dynamic Retirement Master Portfolio

	Level 1			Level 2			Level 3		Total
Derivative Financial Instruments2
Assets:
Equity contracts	$	4,143			—			—	$	4,143
Forward foreign currency contracts		—		$	11,215			—		11,215
Liabilities:
Equity contracts		(205,014	)		—			—		(205,014	)
Forward foreign currency contracts		(69,992	)		(10,599	)		—		(80,591	)
Total	$	(270,863	)	$	616			—	$	(270,247	)
1    As of December 31, 2016, certain of the LifePath Master Portfolio’s investments were valued using net asset value (“NAV”) per share (or its equivalent) as no quoted market value is available and have been excluded from the fair value hierarchy.
2    Derivative financial instruments are futures contracts and forward foreign currency exchange contracts, which are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 65

Schedule of Investments December 31, 2016 LifePath Dynamic 2020 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 44.7%
Active Stock Master Portfolio	$	99,452,464	$	99,452,464
BlackRock Commodity Strategies Fund		2,238,247		16,607,792
BlackRock Tactical Opportunities Fund		1,027,986		13,805,856
International Tilts Master Portfolio	$	34,636,248		34,636,248
iShares Core S&P 500 ETF (b)		995		223,865
iShares Edge MSCI Multifactor Intl ETF		318,928		7,408,697
iShares Edge MSCI Multifactor USA ETF		697,294		18,631,696
iShares MSCI EAFE Small-Cap ETF		116,373		5,800,030
				196,566,648
Fixed Income Funds — 49.5%
CoreAlpha Bond Master Portfolio	$	147,598,920		147,598,920
iShares TIPS Bond ETF		284,008		32,141,185
Master Total Return Portfolio	$	37,605,206		37,605,206
				217,345,311
Short-Term Securities — 3.5%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.87% (c)(d)		228,795		228,840
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (d)		15,283,000		15,283,000
				15,511,840
Total Affiliated Investment Companies — 97.7%				429,423,799
Common Stocks
Equity Real Estate Investment Trusts (REITs) — 0.1%
Ichigo Hotel REIT Investment Corp.		96		105,928
New South Resources, Ltd. (e)		165,464		178,405
				284,333
Hotels, Restaurants & Leisure — 0.0%
Hilton Worldwide Holdings, Inc.		2,995		81,464
Real Estate Investment Trusts (REITs) — 1.9%
Agree Realty Corp.		1,358		62,536
Alexandria Real Estate Equities, Inc.		1,108		123,132
American Campus Communities, Inc.		2,941		146,374
American Homes 4 Rent, Class A		2,330		48,883
AvalonBay Communities, Inc.		1,186		210,100
Beni Stabili SpA SIIQ		105,576		60,346
Boston Properties, Inc.		2,954		371,554
British Land Co. PLC		24,034		186,516
CareTrust REIT, Inc.		10,419		159,619
CyrusOne, Inc.		2,575		115,180
DiamondRock Hospitality Co.		14,038		161,858
DuPont Fabros Technology, Inc.		3,752		164,825
EPR Properties		2,435		174,760
Equity One, Inc.		4,056		124,479
Essex Property Trust, Inc.		1,193		277,372
Eurocommercial Properties NV CVA		1,892		72,776
Extra Space Storage, Inc.		3,683		284,475
Federal Realty Investment Trust		1,842		261,767
First Industrial Realty Trust, Inc.		8,570		240,389
Gecina SA		326		45,026
General Growth Properties, Inc.		6,958		173,811
Gramercy Property Trust		14,665		134,625
Great Portland Estates PLC		7,340		60,297
Hammerson PLC		14,567		102,662
HCP, Inc.		10,612		315,389
Highwoods Properties, Inc.		1,887		96,256
Host Hotels & Resorts, Inc.		10,032		189,003
Ichigo Office REIT Investment Corp.		194		126,090
Japan Hotel REIT Investment Corp.		165		111,026
Japan Rental Housing Investments, Inc.		143		95,972

Common Stocks	Shares		Value
Real Estate Investment Trusts (REITs) (continued)
Kenedix Retail REIT Corp.		42	$	95,703
Kilroy Realty Corp.		2,067		151,346
Liberty Property Trust		4,397		173,682
Link REIT		12,000		77,797
Macerich Co.		1,995		141,326
Mid-America Apartment Communities, Inc.		1,660		162,547
NSI NV		28,042		105,841
Public Storage		425		94,988
Retail Properties of America, Inc., Class A		12,836		196,776
Rexford Industrial Realty, Inc.		3,481		80,724
RioCan Real Estate Investment Trust		2,595		51,469
Scentre Group		61,141		204,668
Simon Property Group, Inc.		2,582		458,744
SL Green Realty Corp.		999		107,442
STAG Industrial, Inc.		6,460		154,200
Sun Communities, Inc.		1,053		80,670
UDR, Inc.		7,133		260,212
Unibail-Rodamco SE		1,488		354,597
Vastned Retail NV		2,650		102,822
Ventas, Inc.		1,810		113,161
Welltower, Inc.		1,681		112,509
Westfield Corp.		56,731		383,583
				8,361,905
Real Estate Management & Development — 0.6%
Ayala Land, Inc.		44,300		28,463
BUWOG AG		8,204		190,455
Cheung Kong Property Holdings Ltd.		36,500		222,905
China Resources Land Ltd.		26,000		58,179
Deutsche Wohnen AG, Bearer Shares		3,897		122,235
First Capital Realty, Inc.		6,609		101,745
Global Logistic Properties Ltd.		116,200		175,952
Howard Hughes Corp. (e)		782		89,226
Inmobiliaria Colonial SA		21,895		151,528
Intiland Development Tbk PT		2,489,000		92,337
Kungsleden AB		12,132		76,728
LEG Immobilien AG		1,690		131,075
Leopalace21 Corp.		2,000		11,047
Mega Manunggal Property Tbk PT (e)		2,932,300		149,091
Megaworld Corp.		687,000		49,182
Mitsui Fudosan Co. Ltd.		4,000		92,602
Modernland Realty Tbk PT (e)		282,600		7,163
Puradelta Lestari Tbk PT		1,903,200		32,404
St. Modwen Properties PLC		15,249		57,367
Sun Hung Kai Properties Ltd.		24,000		302,219
Takara Leben Co., Ltd.		9,800		56,928
Unizo Holdings Co., Ltd.		10,200		269,706
Wihlborgs Fastigheter AB		3,339		61,973
				2,530,510
Road & Rail — 0.0%
MTR Corp. Ltd.		11,000		53,331
Total Common Stocks — 2.6%				11,311,543
Total Investments (Cost — $396,238,575) — 100.3%				440,735,342
Liabilities in Excess of Other Assets — (0.3)%				(1,212,387	)
Net Assets — 100.0%			$	439,522,955

See Notes to Financial Statements.

66 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2020 Master Portfolio

Notes to Schedule of investments

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December 31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
Active Stock Master Portfolio	$	98,938,953	$	513,511	1		—		$	99,452,464	$	99,452,464	$	1,572,360		$	(3,907,011	)
BlackRock Cash Funds: Institutional, SL Agency Shares		2,831,794		—			(2,602,999	)2		228,795		228,840		26,715	3		(501	)
BlackRock Cash Funds: Prime, SL Agency Shares*		1,196,918		—			(1,196,918	)2		—		—		5,593	3		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		15,283,000	1		—			15,283,000		15,283,000		10,710			2,114
BlackRock Commodity Strategies Fund		3,062,221		302,194			(1,126,168	)		2,238,247		16,607,792		155,189			(1,482,650	)
BlackRock Emerging Markets Fund, Inc.*		1,006,837		31,768			(1,038,605	)		—		—		—			(113,687	)
BlackRock Tactical Opportunities Fund		—		1,027,986			—			1,027,986		13,805,856		259,411			—
CoreAlpha Bond Master Portfolio	$	246,301,565		—		$	(98,702,645	)2	$	147,598,920		147,598,920		4,991,766			1,054,823
International Tilts Master Portfolio	$	61,723,700		—		$	(27,087,452	)2	$	34,636,248		34,636,248		1,569,771			(4,467,067	)
iShares Core S&P 500 ETF		—		995			—			995		223,865		1,298			44,453
iShares Edge MSCI Multifactor Intl ETF		—		318,928			—			318,928		7,408,697		58,431			—
iShares Edge MSCI Multifactor USA ETF		—		697,294			—			697,294		18,631,696		67,504			—
iShares Edge MSCI Min Vol ETF*		—		29,633			(29,633	)		—		—		—			40,065
iShares Edge MSCI Min Vol USA ETF*		—		129,461			(129,461	)		—		—		—			113,215
iShares MSCI Canada ETF*		220,099		3,718			(223,817	)		—		—		36,690			(608,959	)
iShares MSCI EAFE Small-Cap ETF		172,841		6,377			(62,845	)		116,373		5,800,030		190,107			89,574
iShares TIPS Bond ETF		342,392		58,723			(117,107	)		284,008		32,141,185		492,034			(23,828	)
Large Cap Index Master Portfolio*		51,535,999		—			(51,535,999	)2		—		—		816,905			(8,575,200	)
Master Small Cap Index Series*		20,833,677		—			(20,833,677	)2		—		—		220,497			271,390
Master Total Return Portfolio		—	$	37,605,206	1		—		$	37,605,206		37,605,206		150,035			(188,570	)
Total											$	429,423,799	$	10,625,016		$	(17,751,839	)
*  No longer held by the LifePath Master Portfolio as of period end.
1    Represents net shares/investment value purchased.
2   Represents net shares/investment value sold.
3    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

(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) Current yield as of period end.

(e) Non-income producing security.

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

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts
Contracts Long		Issue	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
	61	Canadian Dollar	March 2017	$	4,539,315	$	(109,608	)
	85	Euro Dollar	March 2017	$	11,234,875		(111,761	)
	352	MSCI Emerging Markets E-Mini Index	March 2017	$	15,116,640		(332,696	)
	230	Russell 2000 E-Mini Index	March 2017	$	15,604,350		(297,770	)
	35	S&P/TSX 60 Index	March 2017	$	4,676,051		2,041
	Total					$	(849,794	)

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 67

Schedule of Investments (continued) LifePath Dynamic 2020 Master Portfolio

Forward Foreign Currency Exchange Contracts
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
AUD	44,000	USD	32,739	BNP Paribas S.A.		1/19/17	$	(892	)
AUD	72,000	USD	55,138	Citibank N.A.		1/19/17		(3,023	)
AUD	103,000	USD	75,731	Goldman Sachs International		1/19/17		(1,178	)
CAD	42,000	USD	31,682	Bank of America N.A.		1/19/17		(357	)
CAD	101,000	USD	75,240	Goldman Sachs International		1/19/17		89
CAD	281,000	USD	214,010	Goldman Sachs International		1/19/17		(4,429	)
CHF	134,000	USD	136,259	Bank of America N.A.		1/19/17		(4,271	)
EUR	10,000	USD	10,694	Bank of America N.A.		1/19/17		(137	)
EUR	6,000	USD	6,343	Goldman Sachs International		1/19/17		(9	)
EUR	9,000	USD	9,839	Goldman Sachs International		1/19/17		(338	)
EUR	2,000	USD	2,202	Goldman Sachs International		1/19/17		(91	)
EUR	21,000	USD	23,417	Goldman Sachs International		1/19/17		(1,248	)
EUR	7,000	USD	7,451	Nomura International PLC		1/19/17		(62	)
GBP	12,000	USD	14,832	Bank of America N.A.		1/19/17		3
GBP	15,000	USD	18,390	Barclays Bank PLC		1/19/17		153
GBP	25,000	USD	31,131	Barclays Bank PLC		1/19/17		(226	)
GBP	4,000	USD	4,904	Citibank N.A.		1/19/17		40
GBP	4,000	USD	5,077	Citibank N.A.		1/19/17		(132	)
GBP	10,000	USD	12,572	Citibank N.A.		1/19/17		(210	)
GBP	6,000	USD	7,398	Citibank N.A.		1/19/17		19
GBP	3,000	USD	3,805	Goldman Sachs International		1/19/17		(96	)
GBP	28,000	USD	34,376	Goldman Sachs International		1/19/17		238
GBP	31,000	USD	37,961	Goldman Sachs International		1/19/17		362
GBP	31,000	USD	38,842	Goldman Sachs International		1/19/17		(519	)
GBP	6,000	USD	7,407	Goldman Sachs International		1/19/17		10
HKD	128,000	USD	16,515	Barclays Bank PLC		1/19/17		(5	)
HKD	65,000	USD	8,387	BNP Paribas S.A.		1/19/17		(2	)
HKD	3,175,000	USD	409,598	Goldman Sachs International		1/19/17		(59	)
HKD	84,000	USD	10,835	UBS AG		1/19/17		—
IDR	456,115,000	USD	33,884	BNP Paribas S.A.		1/19/17		(98	)
IDR	445,424,000	USD	33,554	BNP Paribas S.A.		1/19/17		(559	)
IDR	328,591,000	USD	24,124	Citibank N.A.		1/19/17		216
IDR	337,513,000	USD	25,589	Nomura International PLC		1/19/17		(588	)
ILS	64,000	USD	16,768	Bank of America N.A.		1/19/17		(133	)
JPY	251,000	USD	2,150	Bank of America N.A.		1/19/17		4
JPY	1,888,000	USD	16,231	Bank of America N.A.		1/19/17		(28	)
JPY	2,301,000	USD	19,999	Bank of America N.A.		1/19/17		(252	)
JPY	1,261,000	USD	10,676	Bank of America N.A.		1/19/17		146
JPY	2,190,000	USD	21,299	Bank of America N.A.		1/19/17		(2,505	)
JPY	17,464,000	USD	160,846	Bank of America N.A.		1/19/17		(10,973	)
JPY	5,642,000	USD	50,232	Bank of America N.A.		1/19/17		(1,814	)
JPY	1,770,000	USD	16,876	BNP Paribas S.A.		1/19/17		(1,686	)
JPY	16,008,000	USD	144,578	BNP Paribas S.A.		1/19/17		(7,200	)
JPY	8,039,000	USD	71,857	BNP Paribas S.A.		1/19/17		(2,868	)
JPY	2,266,000	USD	19,266	Citibank N.A.		1/19/17		181
JPY	1,557,000	USD	13,203	Goldman Sachs International		1/19/17		159
JPY	1,795,000	USD	17,280	Goldman Sachs International		1/19/17		(1,875	)
JPY	15,575,000	USD	149,862	Goldman Sachs International		1/19/17		(16,200	)
JPY	5,853,000	USD	56,008	Goldman Sachs International		1/19/17		(5,779	)
JPY	325,000	USD	2,863	Royal Bank of Canada		1/19/17		(74	)
NOK	347,000	USD	40,734	Citibank N.A.		1/19/17		(414	)
NOK	52,000	USD	6,207	Goldman Sachs International		1/19/17		(165	)
NOK	153,000	USD	18,175	Goldman Sachs International		1/19/17		(397	)
NOK	27,000	USD	3,229	Goldman Sachs International		1/19/17		(92	)
NOK	199,000	USD	23,618	Goldman Sachs International		1/19/17		(495	)
NOK	71,000	USD	8,189	Goldman Sachs International		1/19/17		61
NOK	26,000	USD	3,004	Goldman Sachs International		1/19/17		17
NOK	183,000	USD	22,351	Goldman Sachs International		1/19/17		(1,087	)
NOK	232,000	USD	28,028	Goldman Sachs International		1/19/17		(1,070	)
NOK	153,000	USD	18,546	Goldman Sachs International		1/19/17		(768	)
NOK	70,000	USD	8,565	Goldman Sachs International		1/19/17		(431	)
NZD	22,000	USD	15,637	Barclays Bank PLC		1/19/17		(304	)
PHP	717,000	USD	14,439	BNP Paribas S.A.		1/19/17		(23	)
SEK	1,052,000	USD	119,819	Bank of America N.A.		1/19/17		(3,893	)

See Notes to Financial Statements.

68 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2020 Master Portfolio

Forward Foreign Currency Exchange Contracts (continued)
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
SEK	44,000	USD	4,797	Citibank N.A.		1/19/17	$	52
SGD	45,000	USD	32,479	Barclays Bank PLC		1/19/17		(1,333	)
SGD	225,000	USD	162,031	Barclays Bank PLC		1/19/17		(6,301	)
SGD	26,000	USD	18,759	BNP Paribas S.A.		1/19/17		(763	)
SGD	33,000	USD	23,816	BNP Paribas S.A.		1/19/17		(975	)
USD	40,688	AUD	54,000	Bank of America N.A.		1/19/17		1,602
USD	133,077	AUD	175,000	Bank of America N.A.		1/19/17		6,410
USD	35,897	AUD	47,000	Barclays Bank PLC		1/19/17		1,878
USD	56,705	AUD	75,000	Goldman Sachs International		1/19/17		2,419
USD	11,941	CAD	16,000	Bank of America N.A.		1/19/17		7
USD	60,960	CAD	81,000	BNP Paribas S.A.		1/19/17		547
USD	1,496	CAD	2,000	Goldman Sachs International		1/19/17		4
USD	76,940	CAD	104,000	Royal Bank of Canada		1/19/17		(627	)
USD	15,460	CHF	15,000	Bank of America N.A.		1/19/17		685
USD	19,849	CHF	20,000	Citibank N.A.		1/19/17		149
USD	17,757	EUR	17,000	Bank of America N.A.		1/19/17		(189	)
USD	30,908	EUR	28,000	Bank of America N.A.		1/19/17		1,349
USD	90,185	EUR	84,000	Barclays Bank PLC		1/19/17		1,509
USD	27,751	EUR	25,000	Barclays Bank PLC		1/19/17		1,360
USD	16,456	EUR	15,000	Barclays Bank PLC		1/19/17		621
USD	28,212	EUR	27,000	BNP Paribas S.A.		1/19/17		(291	)
USD	31,238	EUR	28,000	Citibank N.A.		1/19/17		1,679
USD	13,146	EUR	12,000	Goldman Sachs International		1/19/17		478
USD	61,363	EUR	57,000	Goldman Sachs International		1/19/17		1,190
USD	10,454	EUR	10,000	Goldman Sachs International		1/19/17		(102	)
USD	4,186	EUR	4,000	Goldman Sachs International		1/19/17		(37	)
USD	33,805	EUR	31,000	Goldman Sachs International		1/19/17		1,079
USD	39,405	EUR	36,000	Goldman Sachs International		1/19/17		1,401
USD	16,357	EUR	15,000	UBS AG		1/19/17		522
USD	46,396	GBP	38,000	Barclays Bank PLC		1/19/17		(580	)
USD	22,847	GBP	18,000	Goldman Sachs International		1/19/17		596
USD	18,705	GBP	15,000	UBS AG		1/19/17		162
USD	44,428	HKD	345,000	Bank of America N.A.		1/19/17		(73	)
USD	39,204	HKD	304,000	Barclays Bank PLC		1/19/17		(8	)
USD	108,860	HKD	844,000	BNP Paribas S.A.		1/19/17		(6	)
USD	49,276	HKD	382,000	BNP Paribas S.A.		1/19/17		3
USD	52,233	HKD	405,000	Citibank N.A.		1/19/17		(7	)
USD	16,766	HKD	130,000	Goldman Sachs International		1/19/17		(3	)
USD	35,982	HKD	279,000	Nomura International PLC		1/19/17		(6	)
USD	13,656	HKD	106,000	Nomura International PLC		1/19/17		(17	)
USD	25,932	HKD	201,000	UBS AG		1/19/17		5
USD	13,416	HKD	104,000	UBS AG		1/19/17		1
USD	13,779	HKD	107,000	UBS AG		1/19/17		(23	)
USD	400,005	IDR	5,308,065,000	Nomura International PLC		1/19/17		6,816
USD	298,353	JPY	30,898,000	Bank of America N.A.		1/19/17		33,191
USD	63,176	JPY	6,496,000	BNP Paribas S.A.		1/19/17		7,429
USD	17,750	JPY	2,000,000	BNP Paribas S.A.		1/19/17		587
USD	34,089	JPY	3,841,000	BNP Paribas S.A.		1/19/17		1,126
USD	82,583	JPY	8,559,000	Citibank N.A.		1/19/17		9,131
USD	176,899	NOK	1,449,000	Bank of America N.A.		1/19/17		8,528
USD	13,859	PHP	692,000	Bank of America N.A.		1/19/17		(54	)
USD	56,020	PHP	2,815,000	Citibank N.A.		1/19/17		(579	)
USD	13,316	PHP	667,000	Nomura International PLC		1/19/17		(95	)
USD	1,949	SEK	18,000	Barclays Bank PLC		1/19/17		(35	)
USD	6,381	SEK	57,000	BNP Paribas S.A.		1/19/17		100
USD	11,452	SEK	103,000	Citibank N.A.		1/19/17		102
USD	13,231	SEK	118,000	Goldman Sachs International		1/19/17		228
USD	13,245	SEK	117,000	Goldman Sachs International		1/19/17		352
USD	2,931	SEK	27,000	Goldman Sachs International		1/19/17		(45	)
USD	28,096	SEK	250,000	Goldman Sachs International		1/19/17		547
USD	4,623	SEK	41,000	Goldman Sachs International		1/19/17		105
USD	5,515	SEK	49,000	Goldman Sachs International		1/19/17		115
USD	13,975	SEK	124,000	Goldman Sachs International		1/19/17		311
USD	17,032	SEK	154,000	Goldman Sachs International		1/19/17		62

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 69

Schedule of Investments (continued) LifePath Dynamic 2020 Master Portfolio

Forward Foreign Currency Exchange Contracts (continued)
Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	4,785		SEK	43,000	Goldman Sachs International		1/19/17	$	46
USD	26,729		SGD	38,000	Bank of America N.A.		1/19/17		427
USD	77,110		SGD	107,000	Bank of America N.A.		1/19/17		3,052
USD	26,011		SGD	36,000	BNP Paribas S.A.		1/19/17		1,094
USD	30,183		SGD	43,000	Royal Bank of Canada		1/19/17		421
Total								$	9,972

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Futures contracts	Net unrealized appreciation1		—		—	$	2,041		—		—		—	$	2,041
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts		—		—		—	$	101,176		—		—		101,176
			—		—	$	2,041	$	101,176		—		—	$	103,217
Liabilities — Derivative Financial Instruments
Futures contracts	Net unrealized depreciation1		—		—	$	630,466	$	221,369		—		—	$	851,835
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts		—		—		—		91,204		—		—		91,204
Total			—		—	$	630,466	$	312,573		—		—	$	943,039
1   Includes cumulative appreciation (depreciation) on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

For the year ended December 31, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts		Credit Contracts		Equity Contracts			Foreign Currency Exchange Contracts			Interest Rate Contracts		Other Contracts		Total
Futures contracts		—		—	$	1,712,046		$	104,188			—		—	$	1,816,234
Forward foreign currency exchange contracts		—		—		—			34,362			—		—		34,362
Total		—		—	$	1,712,046		$	138,550			—		—	$	1,850,596
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts		—		—	$	(628,425	)	$	(221,369	)		—		—	$	(849,794	)
Forward foreign currency exchange contracts		—		—		—			14,547			—		—		14,547
Total		—		—	$	(628,425	)	$	(206,822	)		—		—	$	(835,247	)

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	12,792,808
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	3,353,794
Average amounts sold — in USD	$	3,793,500

For information about the LifePath Master Portfolio’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

See Notes to Financial Statements.

70 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2020 Master Portfolio

Derivative Financial Instruments — Offsetting as of Period End

The LifePath Master Portfolio’s derivative assets and liabilities (by type) were as follows:

	Assets			Liabilities
Futures contracts	$	70,953		$	214,260
Forward foreign currency exchange contracts		101,176			91,204
Total derivative assets and liabilities in the Statements of Assets and Liabilities	$	172,129		$	305,464
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(70,953	)		(214,260	)
Total derivative assets and liabilities subject to an MNA	$	101,176		$	91,204

The following tables present the LifePath Master Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the LifePath Master Portfolio:

Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received	Cash Collateral Received	Net Amount of Derivative Assets2
Bank of America N.A.	$	55,404	$	(24,679	)	—	—	$	30,725
Barclays Bank PLC		5,521		(5,521	)	—	—		—
BNP Paribas S.A.		10,886		(10,886	)	—	—		—
Citibank N.A.		11,569		(4,365	)	—	—		7,204
Goldman Sachs International		9,869		(9,869	)	—	—		—
Nomura International PLC		6,816		(768	)	—	—		6,048
Royal Bank of Canada		421		(421	)	—	—		—
UBS AG		690		(23	)	—	—		667
Total	$	101,176	$	(56,532	)	—	—	$	44,644
Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged	Cash Collateral Pledged	Net Amount of Derivative Liabilities3
Bank of America N.A.	$	24,679	$	(24,679	)	—	—		—
Barclays Bank PLC		8,792		(5,521	)	—	—	$	3,271
BNP Paribas S.A.		15,363		(10,886	)	—	—		4,477
Citibank N.A.		4,365		(4,365	)	—	—		—
Goldman Sachs International		36,513		(9,869	)	—	—		26,644
Nomura International PLC		768		(768	)	—	—		—
Royal Bank of Canada		701		(421	)	—	—		280
UBS AG		23		(23	)	—	—		—
Total	$	91,204	$	(56,532	)	—	—	$	34,672
1   The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.
2   Net amount represents the net amount receivable from the counterparty in the event of default.
3   Net amount represents the net amount payable due to counterparty in the event of default.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the LifePath Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies:
Equity Funds	$	62,477,936		—		—	$	62,477,936
Fixed Income Funds		32,141,185		—		—		32,141,185
Short-Term Securities		15,511,840		—		—		15,511,840
Common Stocks:
Equity Real Estate Investment Trusts (REITs)		—	$	284,333		—		284,333
Hotels, Restaurants & Leisure		81,464		—		—		81,464
Real Estate Investment Trusts (REITs)		6,339,350		2,022,555		—		8,361,905
Real Estate Management & Development		340,062		2,190,448		—		2,530,510
Road & Rail		—		53,331		—		53,331
Subtotal	$	116,891,837	$	4,550,667		—	$	121,442,504
Investments Valued at NAV1,								319,292,838
Total Investments							$	440,735,342

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 71

Schedule of Investments (concluded) LifePath Dynamic 2020 Master Portfolio

	Level 1			Level 2			Level 3		Total
Derivative Financial Instruments2
Assets:
Equity contracts	$	2,041			—			—	$	2,041
Forward foreign currency contracts		—		$	101,176			—		101,176
Liabilities:
Equity contracts		(630,466	)		—			—		(630,466	)
Forward foreign currency contracts		(221,369	)		(91,204	)		—		(312,573	)
Total	$	(849,794	)	$	9,972			—	$	(839,822	)
1   As of December 31, 2016, certain of the LifePath Master Portfolio’s investments were valued using NAV per share (or its equivalent) as no quoted market value is available and have been excluded from the fair value hierarchy.
2   Derivative financial instruments are futures contracts and forward foreign currency exchange contracts, which are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

72 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 LifePath Dynamic 2030 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 61.1%
Active Stock Master Portfolio	$	140,157,485	$	140,157,485
BlackRock Commodity Strategies Fund		2,426,806		18,006,901
BlackRock Tactical Opportunities Fund		1,038,478		13,946,753
International Tilts Master Portfolio	$	49,602,842		49,602,842
iShares Edge MSCI Multifactor Intl ETF		505,257		11,737,120
iShares Edge MSCI Multifactor USA ETF		1,182,184		31,587,957
iShares MSCI EAFE Small-Cap ETF		176,581		8,800,797
				273,839,855
Fixed Income Funds — 26.1%
CoreAlpha Bond Master Portfolio	$	78,224,883		78,224,883
iShares TIPS Bond ETF		149,782		16,950,829
Master Total Return Portfolio	$	21,774,195		21,774,195
				116,949,907
Short-Term Securities — 4.8%
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (b)		21,518,532		21,518,532
Total Affiliated Investment Companies — 92.0%				412,308,294
Common Stocks
Equity Real Estate Investment Trusts (REITs) — 0.2%
Ichigo Hotel REIT Investment Corp.		301		332,128
New South Resources, Ltd. (c)		519,361		559,980
				892,108
Hotels, Restaurants & Leisure — 0.1%
Hilton Worldwide Holdings, Inc.		9,388		255,354
Real Estate Investment Trusts (REITs) — 5.9%
Agree Realty Corp.		4,261		196,219
Alexandria Real Estate Equities, Inc.		3,476		386,288
American Campus Communities, Inc.		9,227		459,228
American Homes 4 Rent, Class A		7,306		153,280
AvalonBay Communities, Inc.		3,720		658,998
Beni Stabili SpA SIIQ		337,566		192,949
Boston Properties, Inc.		9,266		1,165,478
British Land Co. PLC		75,438		585,437
CareTrust REIT, Inc.		32,666		500,443
CyrusOne, Inc.		8,078		361,329
DiamondRock Hospitality Co.		44,037		507,747
DuPont Fabros Technology, Inc.		11,769		517,012
EPR Properties		7,634		547,892
Equity One, Inc.		12,723		390,469
Essex Property Trust, Inc.		3,743		870,248
Eurocommercial Properties NV CVA		5,940		228,484
Extra Space Storage, Inc.		11,552		892,276
Federal Realty Investment Trust		5,780		821,396
First Industrial Realty Trust, Inc.		26,886		754,152
Gecina SA		1,021		141,018
General Growth Properties, Inc.		21,814		544,914
Gramercy Property Trust		45,978		422,078
Great Portland Estates PLC		23,038		189,254
Hammerson PLC		45,724		322,242
HCP, Inc.		33,270		988,784
Highwoods Properties, Inc.		5,915		301,724
Host Hotels & Resorts, Inc.		31,470		592,895
Ichigo Office REIT Investment Corp.		607		394,519
Japan Hotel REIT Investment Corp.		517		347,882
Japan Rental Housing Investments, Inc.		450		302,011
Kenedix Retail REIT Corp.		130		296,223
Kilroy Realty Corp.		6,485		474,832
Liberty Property Trust		13,785		544,508
Link REIT		38,000		246,357
Macerich Co.		6,263		443,671

Common Stocks	Shares		Value
Real Estate Investment Trusts (REITs) (continued)
Mid-America Apartment Communities, Inc.		5,209	$	510,065
NSI NV		88,020		332,221
Public Storage		1,334		298,149
Retail Properties of America, Inc., Class A		40,266		617,278
Rexford Industrial Realty, Inc.		10,921		253,258
RioCan Real Estate Investment Trust		8,142		161,488
Scentre Group		191,909		642,412
Simon Property Group, Inc.		8,095		1,438,239
SL Green Realty Corp.		3,135		337,169
STAG Industrial, Inc.		20,266		483,749
Sun Communities, Inc.		3,295		252,430
UDR, Inc.		22,364		815,839
Unibail-Rodamco SE		4,671		1,113,121
Vastned Retail NV		8,317		322,705
Ventas, Inc.		5,674		354,738
Welltower, Inc.		5,270		352,721
Westfield Corp.		178,068		1,203,995
				26,231,814
Real Estate Management & Development — 1.7%
Ayala Land, Inc.		139,100		89,371
BUWOG AG		25,750		597,783
Cheung Kong Property Holdings Ltd.		105,500		644,288
China Resources Land Ltd.		80,000		179,014
Deutsche Wohnen AG, Bearer Shares		12,220		383,299
First Capital Realty, Inc.		20,732		319,168
Global Logistic Properties Ltd.		364,700		552,234
Howard Hughes Corp. (c)		2,452		279,773
Inmobiliaria Colonial SA		68,727		475,635
Intiland Development Tbk PT		7,812,400		289,825
Kungsleden AB		38,079		240,828
LEG Immobilien AG		5,306		411,530
Leopalace21 Corp.		7,200		39,769
Mega Manunggal Property Tbk PT (c)		7,855,300		399,397
Megaworld Corp.		2,155,000		154,276
Mitsui Fudosan Co. Ltd.		12,000		277,806
Modernland Realty Tbk PT (c)		921,700		23,362
Puradelta Lestari Tbk PT		5,973,900		101,711
St. Modwen Properties PLC		47,909		180,235
Sun Hung Kai Properties Ltd.		76,000		957,028
Takara Leben Co., Ltd.		30,700		178,336
Unizo Holdings Co., Ltd.		31,500		832,916
Wihlborgs Fastigheter AB		10,480		194,511
				7,802,095
Road & Rail — 0.0%
MTR Corp. Ltd.		34,000		164,840
Total Common Stocks — 7.9%				35,346,211
Total Investments (Cost — $434,221,703) — 99.9%				447,654,505
Other Assets Less Liabilities — 0.1%				662,938
Net Assets — 100.0%			$	448,317,443

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 73

Schedule of Investments (continued) LifePath Dynamic 2030 Master Portfolio

Notes to Schedule of Investments

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December 31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
Active Stock Master Portfolio	$	127,705,255	$	12,452,230	1		—		$	140,157,485	$	140,157,485	$	2,047,442		$	27,239,606
BlackRock Cash Funds: Institutional, SL Agency Shares*		1,688,189		—			(1,688,189	)2		—		—		34,478	3		(553	)
BlackRock Cash Funds: Prime, SL Agency Shares*		439,558		—			(439,558	)2		—		—		6,636	3		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		21,518,532	1		—			21,518,532		21,518,532		13,461			2,286
BlackRock Commodity Strategies Fund		3,173,206		168,326			(914,726	)		2,426,806		18,006,901		168,263			(1,123,035	)
BlackRock Emerging Markets Fund, Inc.		1,377,544		46,268			(1,423,812	)		—		—		—			(301,833	)
BlackRock Tactical Opportunities Fund		—		1,038,478			—			1,038,478		13,946,753		262,058			—
CoreAlpha Bond Master Portfolio	$	135,910,507		—		$	(57,685,624	)2	$	78,224,883		78,224,883		2,785,571			532,279
International Tilts Master Portfolio	$	82,549,286		—		$	(32,946,444	)2	$	49,602,842		49,602,842		2,177,768			(5,035,902	)
iShares Core S&P 500 ETF*		—		—			—			—		—		—			28,552
iShares Edge MSCI Multifactor Intl ETF		—		505,257			—			505,257		11,737,120		92,569			60,641
iShares Edge MSCI Multifactor USA ETF		—		1,182,184			—			1,182,184		31,587,957		114,445			172,017
iShares MSCI Canada ETF*		297,289		8,769			(306,058	)		—		—		51,664			(710,231	)
iShares MSCI EAFE Small-Cap ETF		233,145		20,745			(77,309	)		176,581		8,800,797		278,454			38,455
iShares TIPS Bond ETF		91,590		98,961			(40,769	)		149,782		16,950,829		169,272			(30,845	)
Large Cap Index Master Portfolio*		—		—			—			—		—		1,247,758			(8,155,352	)
Master Small Cap Index Series*		—		—			—			—		—		158,047			(462,541	)
Master Total Return Portfolio		—	$	21,774,195	1		—		$	21,774,195		21,774,195		86,874			(109,187	)
Total											$	412,308,294	$	9,694,760		$	12,144,357
*  No longer held by the LifePath Master Portfolio as of period end.
1    Represents net shares/investment value purchased.
2    Represents net shares/investment value sold.
3    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

(b) Current yield as of period end.

(c) Non-income producing security.

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

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts
Contracts Long (Short)			Issue	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
	90		Canadian Dollar	March 2017	$	6,697,350	$	(161,717	)
	86		Euro Dollar	March 2017	$	11,367,050		(113,076	)
	515		MSCI Emerging Markets E-Mini Index	March 2017	$	22,116,675		(486,757	)
	172		Russell 2000 E-Mini Index	March 2017	$	11,669,340		(222,680	)
	(23	)	S&P 500 E-Mini Index	March 2017	$	2,571,630		16,367
	52		S&P/TSX 60 Index	March 2017	$	6,947,276		3,033
	Total						$	(964,830	)

Forward Foreign Currency Exchange Contracts
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
AUD	54,000	USD	40,180	BNP Paribas S.A.		1/19/17	$	(1,094	)
AUD	188,000	USD	143,970	Citibank N.A.		1/19/17		(7,893	)
AUD	294,000	USD	216,165	Goldman Sachs International		1/19/17		(3,364	)
CAD	36,000	USD	27,156	Bank of America N.A.		1/19/17		(306	)
CAD	787,000	USD	599,380	Goldman Sachs International		1/19/17		(12,406	)
CAD	275,000	USD	204,862	Goldman Sachs International		1/19/17		244
CHF	371,000	USD	377,255	Bank of America N.A.		1/19/17		(11,826	)

See Notes to Financial Statements.

74 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2030 Master Portfolio

Forward Foreign Currency Exchange Contracts (continued)
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
EUR	68,000	USD	74,879	BNP Paribas S.A.		1/19/17	$	(3,094	)
EUR	26,000	USD	28,423	Goldman Sachs International		1/19/17		(975	)
EUR	28,000	USD	31,223	Goldman Sachs International		1/19/17		(1,664	)
EUR	4,000	USD	4,228	Goldman Sachs International		1/19/17		(6	)
GBP	32,000	USD	39,552	Bank of America N.A.		1/19/17		7
GBP	12,000	USD	14,712	Bank of America N.A.		1/19/17		122
GBP	31,000	USD	38,007	Barclays Bank PLC		1/19/17		316
GBP	67,000	USD	83,432	Barclays Bank PLC		1/19/17		(606	)
GBP	17,000	USD	20,962	Citibank N.A.		1/19/17		53
GBP	36,000	USD	45,259	Citibank N.A.		1/19/17		(755	)
GBP	75,000	USD	92,079	Goldman Sachs International		1/19/17		636
GBP	87,000	USD	106,534	Goldman Sachs International		1/19/17		1,015
GBP	79,000	USD	98,984	Goldman Sachs International		1/19/17		(1,324	)
GBP	15,000	USD	18,518	Goldman Sachs International		1/19/17		25
GBP	10,000	USD	12,692	Goldman Sachs International		1/19/17		(330	)
GBP	9,000	USD	11,414	Goldman Sachs International		1/19/17		(288	)
HKD	748,000	USD	96,510	Barclays Bank PLC		1/19/17		(26	)
HKD	232,000	USD	29,925	BNP Paribas S.A.		1/19/17		—
HKD	8,632,000	USD	1,113,591	Goldman Sachs International		1/19/17		(160	)
IDR	702,529,000	USD	52,921	BNP Paribas S.A.		1/19/17		(882	)
IDR	503,092,000	USD	37,374	BNP Paribas S.A.		1/19/17		(108	)
IDR	904,525,000	USD	66,407	Citibank N.A.		1/19/17		595
IDR	846,459,000	USD	64,174	Nomura International PLC		1/19/17		(1,474	)
ILS	174,000	USD	45,588	Bank of America N.A.		1/19/17		(362	)
JPY	14,500,000	USD	129,098	Bank of America N.A.		1/19/17		(4,661	)
JPY	6,614,000	USD	57,484	Bank of America N.A.		1/19/17		(724	)
JPY	4,537,000	USD	38,411	Bank of America N.A.		1/19/17		525
JPY	753,000	USD	6,450	Bank of America N.A.		1/19/17		12
JPY	5,663,000	USD	48,683	Bank of America N.A.		1/19/17		(85	)
JPY	7,168,000	USD	69,514	BNP Paribas S.A.		1/19/17		(7,999	)
JPY	7,926,000	USD	77,086	BNP Paribas S.A.		1/19/17		(9,066	)
JPY	45,557,000	USD	411,453	BNP Paribas S.A.		1/19/17		(20,491	)
JPY	21,763,000	USD	194,530	BNP Paribas S.A.		1/19/17		(7,764	)
JPY	786,000	USD	6,928	Citibank N.A.		1/19/17		(183	)
JPY	7,525,000	USD	63,978	Citibank N.A.		1/19/17		600
JPY	4,731,000	USD	45,545	Goldman Sachs International		1/19/17		(4,945	)
JPY	42,426,000	USD	408,221	Goldman Sachs International		1/19/17		(44,129	)
JPY	4,936,000	USD	47,060	Goldman Sachs International		1/19/17		(4,701	)
JPY	20,763,000	USD	198,683	Goldman Sachs International		1/19/17		(20,499	)
JPY	8,729,000	USD	76,969	Goldman Sachs International		1/19/17		(2,059	)
JPY	4,352,000	USD	36,905	Goldman Sachs International		1/19/17		443
JPY	36,203,000	USD	333,416	Royal Bank of Canada		1/19/17		(22,728	)
NOK	1,091,000	USD	128,072	Citibank N.A.		1/19/17		(1,300	)
NOK	491,000	USD	59,970	Goldman Sachs International		1/19/17		(2,917	)
NOK	625,000	USD	75,507	Goldman Sachs International		1/19/17		(2,884	)
NOK	413,000	USD	50,063	Goldman Sachs International		1/19/17		(2,073	)
NOK	145,000	USD	17,742	Goldman Sachs International		1/19/17		(894	)
NOK	117,000	USD	13,898	Goldman Sachs International		1/19/17		(303	)
NOK	163,000	USD	19,457	Goldman Sachs International		1/19/17		(517	)
NOK	85,000	USD	10,166	Goldman Sachs International		1/19/17		(289	)
NOK	623,000	USD	73,940	Goldman Sachs International		1/19/17		(1,549	)
NOK	223,000	USD	25,719	Goldman Sachs International		1/19/17		193
NOK	81,000	USD	9,360	Goldman Sachs International		1/19/17		52
NZD	59,000	USD	41,936	Barclays Bank PLC		1/19/17		(816	)
PHP	893,000	USD	17,983	BNP Paribas S.A.		1/19/17		(29	)
SEK	2,619,000	USD	298,295	Bank of America N.A.		1/19/17		(9,692	)
SEK	64,000	USD	6,977	Citibank N.A.		1/19/17		75
SEK	92,000	USD	10,301	Goldman Sachs International		1/19/17		(163	)
SGD	603,000	USD	434,244	Barclays Bank PLC		1/19/17		(16,886	)
SGD	125,000	USD	90,219	Barclays Bank PLC		1/19/17		(3,702	)
SGD	91,000	USD	65,678	BNP Paribas S.A.		1/19/17		(2,694	)
SGD	70,000	USD	50,504	BNP Paribas S.A.		1/19/17		(2,054	)
USD	351,324	AUD	462,000	Bank of America N.A.		1/19/17		16,922
USD	111,516	AUD	148,000	Bank of America N.A.		1/19/17		4,391

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 75

Schedule of Investments (continued) LifePath Dynamic 2030 Master Portfolio

Forward Foreign Currency Exchange Contracts (continued)
Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	106,163		AUD	139,000	Barclays Bank PLC		1/19/17	$	5,553
USD	151,969		AUD	201,000	Goldman Sachs International		1/19/17		6,482
USD	46,661		CAD	62,000	BNP Paribas S.A.		1/19/17		419
USD	212,326		CAD	287,000	Royal Bank of Canada		1/19/17		(1,729	)
USD	26,120		CAD	35,000	UBS AG		1/19/17		16
USD	15,879		CHF	16,000	Citibank N.A.		1/19/17		119
USD	46,380		CHF	45,000	Goldman Sachs International		1/19/17		2,056
USD	128,048		EUR	116,000	Bank of America N.A.		1/19/17		5,590
USD	79,211		EUR	71,000	Bank of America N.A.		1/19/17		4,258
USD	37,248		EUR	34,000	Bank of America N.A.		1/19/17		1,356
USD	282,346		EUR	263,000	Bank of America N.A.		1/19/17		4,705
USD	57,449		EUR	55,000	Bank of America N.A.		1/19/17		(613	)
USD	38,530		EUR	37,000	Bank of America N.A.		1/19/17		(530	)
USD	36,204		EUR	33,000	Barclays Bank PLC		1/19/17		1,367
USD	117,666		EUR	106,000	Barclays Bank PLC		1/19/17		5,765
USD	54,331		EUR	52,000	BNP Paribas S.A.		1/19/17		(564	)
USD	17,201		CAD	23,000	Royal Bank of Canada		1/19/17		47
USD	86,148		EUR	79,000	Goldman Sachs International		1/19/17		2,750
USD	110,554		EUR	101,000	Goldman Sachs International		1/19/17		3,931
USD	166,865		EUR	155,000	Goldman Sachs International		1/19/17		3,237
USD	57,746		EUR	54,000	Goldman Sachs International		1/19/17		740
USD	30,317		EUR	29,000	Goldman Sachs International		1/19/17		(297	)
USD	14,650		EUR	14,000	Goldman Sachs International		1/19/17		(129	)
USD	63,598		GBP	51,000	Bank of America N.A.		1/19/17		552
USD	90,349		GBP	74,000	Barclays Bank PLC		1/19/17		(1,130	)
USD	24,117		GBP	19,000	Goldman Sachs International		1/19/17		629
USD	129,164		HKD	1,003,000	Bank of America N.A.		1/19/17		(212	)
USD	22,439		HKD	174,000	Barclays Bank PLC		1/19/17		(5	)
USD	134,800		HKD	1,045,000	BNP Paribas S.A.		1/19/17		7
USD	297,432		HKD	2,306,000	BNP Paribas S.A.		1/19/17		(16	)
USD	143,802		HKD	1,115,000	Citibank N.A.		1/19/17		(20	)
USD	32,113		HKD	249,000	Goldman Sachs International		1/19/17		(5	)
USD	94,921		HKD	736,000	Nomura International PLC		1/19/17		(15	)
USD	49,597		HKD	385,000	Royal Bank of Canada		1/19/17		(64	)
USD	75,473		HKD	585,000	UBS AG		1/19/17		14
USD	27,094		HKD	210,000	UBS AG		1/19/17		6
USD	39,990		HKD	310,000	UBS AG		1/19/17		3
USD	43,655		HKD	339,000	UBS AG		1/19/17		(72	)
USD	1,042,125		IDR	13,828,995,000	Nomura International PLC		1/19/17		17,758
USD	752,795		JPY	77,961,000	Bank of America N.A.		1/19/17		83,748
USD	230,767		JPY	23,729,000	BNP Paribas S.A.		1/19/17		27,129
USD	93,597		JPY	10,546,000	BNP Paribas S.A.		1/19/17		3,093
USD	48,600		JPY	5,476,000	BNP Paribas S.A.		1/19/17		1,606
USD	221,543		JPY	22,961,000	Citibank N.A.		1/19/17		24,496
USD	476,247		NOK	3,901,000	Bank of America N.A.		1/19/17		22,960
USD	43,321		PHP	2,163,000	Bank of America N.A.		1/19/17		(169	)
USD	154,189		PHP	7,748,000	Citibank N.A.		1/19/17		(1,594	)
USD	36,594		PHP	1,833,000	Nomura International PLC		1/19/17		(260	)
USD	5,522		SEK	51,000	Barclays Bank PLC		1/19/17		(98	)
USD	30,798		SEK	277,000	Citibank N.A.		1/19/17		274
USD	35,321		SEK	312,000	Goldman Sachs International		1/19/17		940
USD	74,736		SEK	665,000	Goldman Sachs International		1/19/17		1,456
USD	12,289		SEK	109,000	Goldman Sachs International		1/19/17		278
USD	14,519		SEK	129,000	Goldman Sachs International		1/19/17		303
USD	37,304		SEK	331,000	Goldman Sachs International		1/19/17		830
USD	45,788		SEK	414,000	Goldman Sachs International		1/19/17		167
USD	12,797		SEK	115,000	Goldman Sachs International		1/19/17		124
USD	35,769		SEK	319,000	Goldman Sachs International		1/19/17		616
USD	8,032		SEK	74,000	Goldman Sachs International		1/19/17		(122	)
USD	211,149		SGD	293,000	Bank of America N.A.		1/19/17		8,353
USD	39,390		SGD	56,000	Bank of America N.A.		1/19/17		630
USD	62,138		SGD	86,000	BNP Paribas S.A.		1/19/17		2,614
USD	85,636		SGD	122,000	Royal Bank of Canada		1/19/17		1,196
Total								$	19,016

See Notes to Financial Statements.

76 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2030 Master Portfolio

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Futures contracts	Net unrealized appreciation1		—		—	$	19,400		—		—		—	$	19,400
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts		—		—		—	$	274,399		—		—		274,399
			—		—	$	19,400	$	274,399		—		—	$	293,799
Liabilities — Derivative Financial Instruments
Futures contracts	Net unrealized depreciation1		—		—	$	709,437	$	274,793		—		—	$	984,230
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts		—		—		—		255,383		—		—		255,383
Total			—		—	$	709,437	$	530,176		—		—	$	1,239,613
1    Includes cumulative appreciation (depreciation) on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

For the year ended December 31, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts		Credit Contracts		Equity Contracts			Foreign Currency Exchange Contracts			Interest Rate Contracts		Other Contracts		Total
Futures contracts		—		—	$	1,745,954		$	165,361			—		—	$	1,911,315
Forward foreign currency exchange contracts		—		—		—			94,081			—		—		94,081
Total		—		—	$	1,745,954		$	259,442			—		—	$	2,005,396
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts		—		—	$	(690,037	)	$	(274,793	)		—		—	$	(964,830	)
Forward foreign currency exchange contracts		—		—		—			30,426			—		—		30,426
Total		—		—	$	(690,037	)	$	(244,367	)		—		—	$	(934,404	)

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	14,699,423
Average notional value of contracts — short	$	642,908
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	8,245,105
Average amounts sold — in USD	$	9,611,040

For information about the LifePath Master Portfolio’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Derivative Financial Instruments — Offsetting as of Period End

The LifePath Master Portfolio’s derivative assets and liabilities (by type) were as follows:

	Assets			Liabilities
Futures contracts	$	88,810		$	267,649
Forward foreign currency exchange contracts		274,399			255,383
Total derivative assets and liabilities in the Statements of Assets and Liabilities	$	363,209		$	523,032
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(88,810	)		(267,649	)
Total derivative assets and liabilities subject to an MNA	$	274,399		$	255,383

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 77

Schedule of Investments (concluded) LifePath Dynamic 2030 Master Portfolio

The following tables present the LifePath Master Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the LifePath Master Portfolio:

Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received		Cash Collateral Received	Net Amount of Derivative Assets2
Bank of America N.A.	$	154,131	$	(29,180	)		—	—	$	124,951
Barclays Bank PLC		13,001		(13,001	)		—	—		—
BNP Paribas S.A.		34,868		(34,868	)		—	—		—
Citibank N.A.		26,212		(11,745	)		—	—		14,467
Goldman Sachs International		27,147		(27,147	)		—	—		—
Nomura International PLC		17,758		(1,749	)		—	—		16,009
Royal Bank of Canada		1,243		(1,243	)		—	—		—
UBS AG		39		(39	)		—	—		—
Total	$	274,399	$	(118,972	)		—	—	$	155,427
Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged		Cash Collateral Pledged	Net Amount of Derivative Liabilities3
Bank of America N.A.	$	29,180	$	(29,180	)		—	—		—
Barclays Bank PLC		23,269		(13,001	)		—	—	$	10,268
BNP Paribas S.A.		55,855		(34,868	)		—	—		20,987
Citibank N.A.		11,745		(11,745	)		—	—		—
Goldman Sachs International		108,992		(27,147	)		—	—		81,845
Nomura International PLC		1,749		(1,749	)		—	—		—
Royal Bank of Canada		24,521		(1,243	)		—	—		23,278
UBS AG		72		(39	)		—	—		33
Total	$	255,383	$	(118,972	)		—	—	$	136,411
1    The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.
2    Net amount represents the net amount receivable from the counterparty in the event of default.
3    Net amount represents the net amount payable due to counterparty in the event of default.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the LifePath Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1			Level 2			Level 3		Total
Assets:
Investments:
Affiliated Investment Companies:
Equity Funds	$	84,079,528			—			—	$	84,079,528
Fixed Income Funds		16,950,829			—			—		16,950,829
Short-Term Securities		21,518,532			—			—		21,518,532
Common Stocks:
Equity Real Estate Investment Trusts (REITs)		—		$	892,108			—		892,108
Hotels, Restaurants & Leisure		255,354			—			—		255,354
Real Estate Investment Trusts (REITs)		19,886,637			6,345,177			—		26,231,814
Real Estate Management & Development		998,338			6,803,757			—		7,802,095
Road & Rail		—			164,840			—		164,840
Subtotal	$	143,689,218		$	14,205,882			—	$	157,895,100
Investments Valued at NAV1										289,759,405
Total Investments									$	447,654,505
	Level 1			Level 2			Level 3		Total
Derivative Financial Instruments2
Assets:
Equity contracts	$	19,400			—			—	$	19,400
Forward foreign currency contracts		—		$	274,399			—		274,399
Liabilities:
Equity contracts		(709,437	)		—			—		(709,437	)
Forward foreign currency contracts		(274,793	)		(255,383	)		—		(530,176	)
Total	$	(964,830	)	$	19,016			—	$	(945,814	)
1    As of December 31, 2016, certain of the LifePath Master Portfolio’s investments were valued using NAV per share (or its equivalent) as no quoted market value is available and have been excluded from the fair value hierarchy.
2    Derivative financial instruments are futures contracts and forward foreign currency exchange contracts, which are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

78 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 LifePath Dynamic 2040 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 74.5%
Active Stock Master Portfolio	$	135,849,245	$	135,849,245
BlackRock Commodity Strategies Fund		2,112,341		15,673,574
BlackRock Tactical Opportunities Fund		826,781		11,103,668
International Tilts Master Portfolio	$	50,894,777		50,894,777
iShares Core S&P 500 ETF (b)		4,181		940,683
iShares Edge MSCI Multifactor Intl ETF		529,366		12,297,172
iShares Edge MSCI Multifactor USA ETF		1,257,520		33,600,934
iShares MSCI EAFE Small-Cap ETF		183,494		9,145,341
				269,505,394
Fixed Income Funds — 6.3%
CoreAlpha Bond Master Portfolio	$	13,544,446		13,544,446
iShares TIPS Bond ETF		31,194		3,530,225
Master Total Return Portfolio	$	5,532,594		5,532,594
				22,607,265
Short-Term Securities — 6.6%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.87% (c)(d)		963,528		963,720
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (d)		22,947,395		22,947,395
				23,911,115
Total Affiliated Investment Companies — 87.4%				316,023,774
Common Stocks
Equity Real Estate Investment Trusts (REITs) — 0.3%
Ichigo Hotel REIT Investment Corp.		387		427,021
New South Resources, Ltd. (e)		668,228		720,490
				1,147,511
Hotels, Restaurants & Leisure — 0.1%
Hilton Worldwide Holdings, Inc.		12,075		328,440
Real Estate Investment Trusts (REITs) — 9.3%
Agree Realty Corp.		5,371		247,335
Alexandria Real Estate Equities, Inc.		4,471		496,862
American Campus Communities, Inc.		11,870		590,770
American Homes 4 Rent, Class A		9,397		197,149
AvalonBay Communities, Inc.		4,786		847,840
Beni Stabili SpA SIIQ		415,769		237,649
Boston Properties, Inc.		11,878		1,494,015
British Land Co. PLC		97,061		753,242
CareTrust REIT, Inc.		42,012		643,624
CyrusOne, Inc.		10,392		464,834
DiamondRock Hospitality Co.		56,650		653,175
DuPont Fabros Technology, Inc.		15,140		665,100
EPR Properties		9,818		704,638
Equity One, Inc.		16,367		502,303
Essex Property Trust, Inc.		4,815		1,119,487
Eurocommercial Properties NV CVA		7,642		293,952
Extra Space Storage, Inc.		14,861		1,147,864
Federal Realty Investment Trust		7,435		1,056,588
First Industrial Realty Trust, Inc.		34,586		970,137
Gecina SA		1,314		181,487
General Growth Properties, Inc.		28,056		700,839
Gramercy Property Trust		59,134		542,850
Great Portland Estates PLC		29,641		243,496
Hammerson PLC		58,830		414,607
HCP, Inc.		42,788		1,271,659
Highwoods Properties, Inc.		7,607		388,033
Host Hotels & Resorts, Inc.		40,484		762,719
Ichigo Office REIT Investment Corp.		781		507,610
Japan Hotel REIT Investment Corp.		665		447,470
Japan Rental Housing Investments, Inc.		579		388,588
Kenedix Retail REIT Corp.		168		382,812

Common Stocks	Shares		Value
Real Estate Investment Trusts (REITs) (continued)
Kilroy Realty Corp.		8,343	$	610,874
Liberty Property Trust		17,730		700,335
Link REIT		49,000		317,671
Macerich Co.		8,058		570,829
Mid-America Apartment Communities, Inc.		6,701		656,162
NSI NV		113,704		429,162
Public Storage		1,716		383,526
Retail Properties of America, Inc., Class A		51,799		794,079
Rexford Industrial Realty, Inc.		14,049		325,796
RioCan Real Estate Investment Trust		10,589		210,021
Scentre Group		246,917		826,550
Simon Property Group, Inc.		10,412		1,849,900
SL Green Realty Corp.		4,033		433,749
STAG Industrial, Inc.		26,070		622,291
Sun Communities, Inc.		4,248		325,439
UDR, Inc.		28,763		1,049,274
Unibail-Rodamco SE		6,010		1,432,211
Vastned Retail NV		10,614		411,831
Ventas, Inc.		7,297		456,208
Welltower, Inc.		6,778		453,652
Westfield Corp.		229,108		1,549,099
				33,727,393
Real Estate Management & Development — 2.8%
Ayala Land, Inc.		185,200		118,991
BUWOG AG		33,130		769,109
Cheung Kong Property Holdings Ltd.		132,000		806,123
China Resources Land Ltd.		104,000		232,718
Deutsche Wohnen AG, Bearer Shares		15,718		493,018
First Capital Realty, Inc.		26,958		415,016
Global Logistic Properties Ltd.		469,200		710,470
Howard Hughes Corp. (e)		3,154		359,871
Inmobiliaria Colonial SA		88,427		611,972
Intiland Development Tbk PT		10,051,700		372,899
Kungsleden AB		48,994		309,859
LEG Immobilien AG		6,827		529,498
Leopalace21 Corp.		8,800		48,606
Mega Manunggal Property Tbk PT (e)		9,431,900		479,559
Megaworld Corp.		2,771,000		198,376
Mitsui Fudosan Co. Ltd.		15,000		347,257
Modernland Realty Tbk PT (e)		1,135,300		28,776
Puradelta Lestari Tbk PT		7,991,300		136,059
St. Modwen Properties PLC		61,365		230,857
Sun Hung Kai Properties Ltd.		98,000		1,234,063
Takara Leben Co., Ltd.		39,600		230,036
Unizo Holdings Co., Ltd.		40,600		1,073,536
Wihlborgs Fastigheter AB		13,484		250,266
				9,986,935
Road & Rail — 0.1%
MTR Corp. Ltd.		43,500		210,898
Total Common Stocks — 12.6%				45,401,177
Total Investments (Cost — $336,045,180) — 100.0%				361,424,951
Liabilities in Excess of Other Assets — (0.0)%				(81,885	)
Net Assets — 100.0%			$	361,343,066

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 79

Schedule of Investments (continued) LifePath Dynamic 2040 Master Portfolio

Notes to Schedule of Investments

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December 31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
Active Stock Master Portfolio	$	113,154,626	$	22,694,619	1		—		$	135,849,245	$	135,849,245	$	1,804,820		$	10,794,497
BlackRock Cash Funds: Institutional, SL Agency Shares		931,298		32,230	1		—			963,528		963,720		38,055	3		(586	)
BlackRock Cash Funds: Prime, SL Agency Shares*		—		—			—			—		—		4,717	3		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		22,947,395	1		—			22,947,395		22,947,395		14,059			2,325
BlackRock Commodity Strategies Fund		2,587,286		—			(474,945	)	$	2,112,341		15,673,574		146,459			(911,587	)
BlackRock Emerging Markets Fund*		1,391,835		79,213			(1,471,048	)		—		—		—			(1,258,292	)
BlackRock Tactical Opportunities Fund		—		826,781			—			826,781		11,103,668		208,637			—
CoreAlpha Bond Master Portfolio	$	31,354,405		—		$	(17,809,959	)2		13,544,446		13,544,446		668,330			246,116
International Tilts Master Portfolio	$	82,910,552		—		$	(32,015,775	)2		50,894,777		50,894,777		2,186,990			(5,883,172	)
iShares Core S&P 500 ETF		—		33,583			(29,402	)		4,181		940,683		5,452			40,611
iShares Edge MSCI Min Vol ETF*		—		95,204			(95,204	)		—		—		—			64,359
iShares Edge MSCI Min Vol USA ETF*		—		374,850			(374,850	)		—		—		—			163,905
iShares Edge MSCI Multifactor Intl ETF		—		529,366			—			529,366		12,297,172		96,986			—
iShares Edge MSCI Multifactor USA ETF		—		1,257,520			—			1,257,520		33,600,934		121,738			—
iShares MSCI Canada ETF		294,258		15,741			(309,999	)		—		—		52,460			(763,259	)
iShares MSCI EAFE Small-Cap ETF		236,258		33,786			(86,550	)		183,494		9,145,341		287,384			64,184
iShares TIPS Bond ETF		—		31,194			—			31,194		3,530,225		7,603			—
Large Cap Index Master Portfolio*	$	81,187,428		—		$	(81,187,428	)2		—		—		1,458,525			(4,688,165	)
Master Small Cap Index Series*	$	9,147,421		—		$	(9,147,421	)2		—		—		98,991			261,303
Master Total Return Portfolio		—	$	5,532,594	1		—		$	5,532,594		5,532,594		22,073			(27,714	)
Total											$	316,023,774	$	7,223,279		$	(1,895,475	)
*  No longer held by the LifePath Master Portfolio as of period end.
1    Represents net shares/investment value purchased.
2   Represents net shares/investment value sold.
3    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

(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) Current yield as of period end.

(e) Non-income producing security.

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

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts
Contracts Long		Issue	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
	91	Canadian Dollar	March 2017	$	6,771,765	$	(163,514	)
	69	Euro Dollar	March 2017	$	9,120,075		(90,724	)
	532	MSCI Emerging Markets E-Mini Index	March 2017	$	22,846,740		(502,825	)
	100	Russell 2000 E-Mini Index	March 2017	$	6,784,500		(129,465	)
	53	S&P/TSX 60 Index	March 2017	$	7,080,877		3,093
	Total					$	(883,435	)

See Notes to Financial Statements.

80 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2040 Master Portfolio

Forward Foreign Currency Exchange Contracts
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
AUD	103,000	USD	78,212	Barclays Bank PLC		1/19/17	$	(3,659	)
AUD	49,000	USD	36,460	BNP Paribas S.A.		1/19/17		(993	)
AUD	116,000	USD	88,833	Citibank N.A.		1/19/17		(4,870	)
AUD	357,000	USD	262,486	Goldman Sachs International		1/19/17		(4,084	)
CAD	949,000	USD	722,760	Goldman Sachs International		1/19/17		(14,959	)
CAD	338,000	USD	251,794	Goldman Sachs International		1/19/17		299
CHF	429,000	USD	436,233	Bank of America N.A.		1/19/17		(13,675	)
EUR	167,000	USD	183,894	BNP Paribas S.A.		1/19/17		(7,598	)
EUR	31,000	USD	33,889	Goldman Sachs International		1/19/17		(1,163	)
EUR	26,000	USD	28,993	Goldman Sachs International		1/19/17		(1,546	)
GBP	13,000	USD	15,938	Bank of America N.A.		1/19/17		133
GBP	22,000	USD	26,972	Barclays Bank PLC		1/19/17		224
GBP	81,000	USD	100,865	Barclays Bank PLC		1/19/17		(733	)
GBP	20,000	USD	24,662	Citibank N.A.		1/19/17		62
GBP	12,000	USD	15,230	Citibank N.A.		1/19/17		(396	)
GBP	39,000	USD	49,030	Citibank N.A.		1/19/17		(818	)
GBP	38,000	USD	46,970	Citibank N.A.		1/19/17		6
GBP	11,000	USD	13,950	Goldman Sachs International		1/19/17		(352	)
GBP	91,000	USD	111,723	Goldman Sachs International		1/19/17		772
GBP	104,000	USD	127,352	Goldman Sachs International		1/19/17		1,214
GBP	71,000	USD	87,025	Goldman Sachs International		1/19/17		745
GBP	68,000	USD	85,201	Goldman Sachs International		1/19/17		(1,139	)
GBP	19,000	USD	23,457	Goldman Sachs International		1/19/17		31
HKD	1,110,000	USD	143,217	Barclays Bank PLC		1/19/17		(39	)
HKD	111,000	USD	14,316	BNP Paribas S.A.		1/19/17		2
HKD	10,345,000	USD	1,334,580	Goldman Sachs International		1/19/17		(192	)
HKD	286,000	USD	36,890	UBS AG		1/19/17		1
IDR	255,500,000	USD	18,981	BNP Paribas S.A.		1/19/17		(55	)
IDR	581,717,000	USD	43,820	BNP Paribas S.A.		1/19/17		(731	)
IDR	1,114,937,000	USD	81,855	Citibank N.A.		1/19/17		733
IDR	1,011,140,000	USD	76,660	Nomura International PLC		1/19/17		(1,761	)
ILS	217,000	USD	56,854	Bank of America N.A.		1/19/17		(452	)
JPY	8,126,000	USD	70,625	Bank of America N.A.		1/19/17		(889	)
JPY	5,797,000	USD	49,078	Bank of America N.A.		1/19/17		671
JPY	1,004,000	USD	8,600	Bank of America N.A.		1/19/17		16
JPY	15,572,000	USD	138,642	Bank of America N.A.		1/19/17		(5,006	)
JPY	7,281,000	USD	62,595	Bank of America N.A.		1/19/17		(110	)
JPY	12,102,000	USD	115,807	BNP Paribas S.A.		1/19/17		(11,950	)
JPY	9,031,000	USD	87,832	BNP Paribas S.A.		1/19/17		(10,330	)
JPY	53,471,000	USD	482,929	BNP Paribas S.A.		1/19/17		(24,050	)
JPY	24,442,000	USD	218,477	BNP Paribas S.A.		1/19/17		(8,720	)
JPY	9,653,000	USD	82,071	Citibank N.A.		1/19/17		769
JPY	22,751,000	USD	200,610	Goldman Sachs International		1/19/17		(5,365	)
JPY	935,000	USD	8,240	Goldman Sachs International		1/19/17		(216	)
JPY	5,611,000	USD	47,581	Goldman Sachs International		1/19/17		571
JPY	5,711,000	USD	54,980	Goldman Sachs International		1/19/17		(5,969	)
JPY	51,992,000	USD	500,280	Goldman Sachs International		1/19/17		(54,093	)
JPY	5,947,000	USD	56,699	Goldman Sachs International		1/19/17		(5,663	)
JPY	22,795,000	USD	218,128	Goldman Sachs International		1/19/17		(22,505	)
JPY	35,361,000	USD	325,662	Royal Bank of Canada		1/19/17		(22,200	)
NOK	1,410,000	USD	165,519	Citibank N.A.		1/19/17		(1,680	)
NOK	288,000	USD	33,208	Citibank N.A.		1/19/17		257
NOK	105,000	USD	12,131	Citibank N.A.		1/19/17		70
NOK	74,000	USD	8,833	Goldman Sachs International		1/19/17		(235	)
NOK	111,000	USD	13,275	Goldman Sachs International		1/19/17		(377	)
NOK	805,000	USD	95,540	Goldman Sachs International		1/19/17		(2,001	)
NOK	588,000	USD	71,817	Goldman Sachs International		1/19/17		(3,493	)
NOK	752,000	USD	90,850	Goldman Sachs International		1/19/17		(3,470	)
NOK	497,000	USD	60,245	Goldman Sachs International		1/19/17		(2,495	)
NOK	102,000	USD	12,481	Goldman Sachs International		1/19/17		(629	)
NZD	73,000	USD	51,887	Barclays Bank PLC		1/19/17		(1,009	)
SEK	3,223,000	USD	367,099	Bank of America N.A.		1/19/17		(11,938	)
SEK	131,000	USD	14,282	Citibank N.A.		1/19/17		154
SEK	71,000	USD	7,950	Goldman Sachs International		1/19/17		(126	)
SGD	769,000	USD	553,787	Barclays Bank PLC		1/19/17		(21,534	)
SGD	146,000	USD	105,375	Barclays Bank PLC		1/19/17		(4,324	)

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 81

Schedule of Investments (continued) LifePath Dynamic 2040 Master Portfolio

Forward Foreign Currency Exchange Contracts (continued)
Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
SGD	107,000		USD	77,226	BNP Paribas S.A.		1/19/17	$	(3,168	)
SGD	82,000		USD	59,162	BNP Paribas S.A.		1/19/17		(2,407	)
USD	410,638		AUD	540,000	Bank of America N.A.		1/19/17		19,778
USD	137,134		AUD	182,000	Bank of America N.A.		1/19/17		5,400
USD	138,241		AUD	181,000	Barclays Bank PLC		1/19/17		7,230
USD	192,041		AUD	254,000	Goldman Sachs International		1/19/17		8,192
USD	30,663		CAD	41,000	Royal Bank of Canada		1/19/17		84
USD	260,414		CAD	352,000	Royal Bank of Canada		1/19/17		(2,121	)
USD	28,858		CHF	28,000	Goldman Sachs International		1/19/17		1,279
USD	105,971		EUR	96,000	Bank of America N.A.		1/19/17		4,626
USD	101,524		EUR	91,000	Bank of America N.A.		1/19/17		5,458
USD	46,013		EUR	42,000	Bank of America N.A.		1/19/17		1,675
USD	361,789		EUR	337,000	Bank of America N.A.		1/19/17		6,029
USD	28,874		EUR	27,000	Bank of America N.A.		1/19/17		371
USD	65,826		EUR	60,000	Barclays Bank PLC		1/19/17		2,486
USD	187,599		EUR	169,000	Barclays Bank PLC		1/19/17		9,191
USD	74,181		EUR	71,000	Citibank N.A.		1/19/17		(772	)
USD	74,160		EUR	71,000	Citibank N.A.		1/19/17		(792	)
USD	38,681		EUR	37,000	Goldman Sachs International		1/19/17		(379	)
USD	107,958		EUR	99,000	Goldman Sachs International		1/19/17		3,446
USD	131,351		EUR	120,000	Goldman Sachs International		1/19/17		4,671
USD	55,824		EUR	51,000	Goldman Sachs International		1/19/17		1,985
USD	205,621		EUR	191,000	Goldman Sachs International		1/19/17		3,989
USD	70,579		EUR	66,000	Goldman Sachs International		1/19/17		905
USD	18,836		EUR	18,000	Goldman Sachs International		1/19/17		(166	)
USD	49,985		EUR	48,000	Nomura International PLC		1/19/17		(687	)
USD	114,768		GBP	94,000	Barclays Bank PLC		1/19/17		(1,435	)
USD	94,774		GBP	76,000	Barclays Bank PLC		1/19/17		822
USD	169,085		HKD	1,313,000	Bank of America N.A.		1/19/17		(277	)
USD	167,694		HKD	1,300,000	BNP Paribas S.A.		1/19/17		9
USD	367,856		HKD	2,852,000	BNP Paribas S.A.		1/19/17		(20	)
USD	176,431		HKD	1,368,000	Citibank N.A.		1/19/17		(25	)
USD	43,462		HKD	337,000	Goldman Sachs International		1/19/17		(7	)
USD	63,253		HKD	491,000	Nomura International PLC		1/19/17		(80	)
USD	114,653		HKD	889,000	Nomura International PLC		1/19/17		(18	)
USD	56,662		HKD	440,000	UBS AG		1/19/17		(93	)
USD	74,570		HKD	578,000	UBS AG		1/19/17		14
USD	35,351		HKD	274,000	UBS AG		1/19/17		8
USD	50,051		HKD	388,000	UBS AG		1/19/17		4
USD	1,247,507		IDR	16,554,412,000	Nomura International PLC		1/19/17		21,257
USD	916,677		JPY	94,932,000	Bank of America N.A.		1/19/17		101,987
USD	195,218		JPY	20,073,000	BNP Paribas S.A.		1/19/17		22,955
USD	59,677		JPY	6,724,000	BNP Paribas S.A.		1/19/17		1,972
USD	115,545		JPY	13,019,000	BNP Paribas S.A.		1/19/17		3,818
USD	266,207		JPY	27,590,000	Citibank N.A.		1/19/17		29,434
USD	553,125		NOK	4,530,000	Citibank N.A.		1/19/17		26,749
USD	47,767		PHP	2,385,000	Bank of America N.A.		1/19/17		(186	)
USD	189,672		PHP	9,531,000	Citibank N.A.		1/19/17		(1,960	)
USD	45,079		PHP	2,258,000	Nomura International PLC		1/19/17		(321	)
USD	5,739		SEK	53,000	Barclays Bank PLC		1/19/17		(102	)
USD	37,135		SEK	334,000	Citibank N.A.		1/19/17		330
USD	42,680		SEK	377,000	Goldman Sachs International		1/19/17		1,136
USD	90,470		SEK	805,000	Goldman Sachs International		1/19/17		1,762
USD	14,770		SEK	131,000	Goldman Sachs International		1/19/17		334
USD	17,670		SEK	157,000	Goldman Sachs International		1/19/17		369
USD	44,968		SEK	399,000	Goldman Sachs International		1/19/17		1,000
USD	55,189		SEK	499,000	Goldman Sachs International		1/19/17		201
USD	15,245		SEK	137,000	Goldman Sachs International		1/19/17		148
USD	55,055		SEK	491,000	Goldman Sachs International		1/19/17		949
USD	7,707		SEK	71,000	Goldman Sachs International		1/19/17		(117	)
USD	259,432		SGD	360,000	Bank of America N.A.		1/19/17		10,263
USD	36,576		SGD	52,000	Bank of America N.A.		1/19/17		585
USD	83,092		SGD	115,000	BNP Paribas S.A.		1/19/17		3,496
USD	105,291		SGD	150,000	Royal Bank of Canada		1/19/17		1,470
Total								$	19,872

See Notes to Financial Statements.

82 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2040 Master Portfolio

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts	Credit Contracts	Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts	Other Contracts	Total
Futures contracts	Net unrealized appreciation1	—	—	$	3,093		—	—	—	$	3,093
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts	—	—		—	$	324,597	—	—		324,597
		—	—	$	3,093	$	324,597	—	—	$	327,690
Liabilities — Derivative Financial Instruments
Futures contracts	Net unrealized depreciation1	—	—	$	632,290	$	254,238	—	—	$	886,528
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts	—	—		—		304,725	—	—		304,725
Total		—	—	$	632,290	$	558,963	—	—	$	1,191,253
1    Includes cumulative appreciation (depreciation) on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

For the year ended December 31, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts	Credit Contracts	Equity Contracts			Foreign Currency Exchange Contracts			Interest Rate Contracts	Other Contracts	Total
Futures contracts	—	—	$	1,474,747		$	171,069		—	—	$	1,645,816
Forward foreign currency exchange contracts	—	—		—			129,238		—	—		129,238
Total	—	—	$	1,474,747		$	300,307		—	—	$	1,775,054
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts	—	—	$	(629,197	)	$	(254,238	)	—	—	$	(883,435	)
Forward foreign currency exchange contracts	—	—		—			32,891		—	—		32,891
Total	—	—	$	(629,197	)	$	(221,347	)	—	—	$	(850,544	)

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	13,150,989
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	10,045,051
Average amounts sold — in USD	$	11,717,806

For information about the LifePath Master Portfolio’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Derivative Financial Instruments — Offsetting as of Period End

The LifePath Master Portfolio’s derivative assets and liabilities (by type) were as follows:

	Assets			Liabilities
Futures contracts	$	67,553		$	253,392
Forward foreign currency exchange contracts		324,597			304,725
Total derivative assets and liabilities in the Statements of Assets and Liabilities	$	392,150		$	558,117
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(67,553	)		(253,392	)
Total derivative assets and liabilities subject to an MNA	$	324,597		$	304,725

The following tables present the LifePath Master Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the LifePath Master Portfolio:

Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received2	Cash Collateral Received2	Net Amount of Derivative Assets2
Bank of America N.A.	$	156,992	$	(32,533	)	—	—	$	124,459
Barclays Bank PLC		19,953		(19,953	)	—	—		—

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 83

Schedule of Investments (concluded) LifePath Dynamic 2040 Master Portfolio

Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received2	Cash Collateral Received2	Net Amount of Derivative Assets2
BNP Paribas S.A.	$	32,252	$	(32,252	)	—	—		—
Citibank N.A.		58,564		(11,313	)	—	—	$	47,251
Goldman Sachs International		33,998		(33,998	)	—	—		—
Nomura International PLC		21,257		(2,867	)	—	—		18,390
Royal Bank of Canada		1,554		(1,554	)	—	—		—
UBS AG		27		(27	)	—	—		—
Total	$	324,597	$	(134,497	)	—	—	$	190,100
Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged	Cash Collateral Pledged	Net Amount of Derivative Liabilities3
Bank of America N.A.	$	32,533	$	(32,533	)	—	—		—
Barclays Bank PLC		32,835		(19,953	)	—	—	$	12,882
BNP Paribas S.A.		70,022		(32,252	)	—	—		37,770
Citibank N.A.		11,313		(11,313	)	—	—		—
Goldman Sachs International		130,741		(33,998	)	—	—		96,743
Nomura International PLC		2,867		(2,867	)	—	—		—
Royal Bank of Canada		24,321		(1,554	)	—	—		22,767
UBS AG		93		(27	)	—	—		66
Total	$	304,725	$	(134,497	)	—	—	$	170,228
1   The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.
2   Net amount represents the net amount receivable from the counterparty in the event of default. 3   Net amount represents the net amount payable due to counterparty in the event of default.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the LifePath Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1			Level 2			Level 3		Total
Assets:
Investments:
Affiliated Investment Companies:
Equity Funds	$	82,761,372			—			—	$	82,761,372
Fixed Income Funds		3,530,225			—			—		3,530,225
Short-Term Securities		23,911,115			—			—		23,911,115
Common Stocks:
Equity Real Estate Investment Trusts (REITs)		—		$	1,147,511			—		1,147,511
Hotels, Restaurants & Leisure		328,440			—			—		328,440
Real Estate Investment Trusts (REITs)		25,559,436			8,167,957			—		33,727,393
Real Estate Management & Development		1,254,446			8,732,489			—		9,986,935
Road & Rail		—			210,898			—		210,898
Subtotal	$	137,345,034		$	18,258,855			—	$	155,603,889
Investments Valued at NAV1										205,821,062
Total Investments									$	361,424,951
	Level 1			Level 2			Level 3		Total
Derivative Financial Instruments2
Assets:
Equity contracts	$	3,093			—			—	$	3,093
Forward foreign currency contracts		—		$	324,597			—		324,597
Liabilities:
Equity contracts		(632,290	)		—			—		(632,290	)
Forward foreign currency contracts		(254,238	)		(304,725	)		—		(558,963	)
Total	$	(883,435	)	$	19,872			—	$	(863,563	)
1    As of December 31, 2016, certain of the LifePath Master Portfolio’s investments were valued using NAV per share (or its equivalent) as no quoted market value is available and have been excluded from the fair value hierarchy.
2    Derivative financial instruments are futures contracts, and forward foreign currency exchange contracts, which are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

84 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 LifePath Dynamic 2050 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 74.8%
Active Stock Master Portfolio	$	43,589,002	$	43,589,002
BlackRock Commodity Strategies Fund		713,452		5,293,812
International Tilts Master Portfolio	$	16,886,692		16,886,692
iShares Core S&P 500 ETF (b)		6,451		1,451,411
iShares MSCI EAFE Small-Cap ETF		68,718		3,424,905
iShares Edge MSCI Multifactor Intl ETF		211,613		4,915,770
iShares Edge MSCI Multifactor USA ETF		436,759		11,670,200
				87,231,792
Fixed Income Funds — 1.0%
CoreAlpha Bond Master Portfolio	$	1,148,840		1,148,840
Short-Term Securities — 9.9%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.87% (c)(d)		588,649		588,767
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (d)		10,871,097		10,871,097
				11,459,864
Total Affiliated Investment Companies — 85.7%				99,840,496
Common Stocks
Equity Real Estate Investment Trusts (REITs) — 0.3%
Ichigo Hotel REIT Investment Corp.		144		158,892
New South Resources, Ltd. (e)		247,878		267,264
				426,156
Hotels, Restaurants & Leisure — 0.1%
Hilton Worldwide Holdings, Inc.		4,504		122,509
Real Estate Investment Trusts (REITs) — 10.8%
Agree Realty Corp.		2,045		94,172
Alexandria Real Estate Equities, Inc.		1,695		188,365
American Campus Communities, Inc.		4,428		220,382
American Homes 4 Rent, Class A		3,505		73,535
AvalonBay Communities, Inc.		1,785		316,213
Beni Stabili SpA SIIQ		159,087		90,932
Boston Properties, Inc.		4,447		559,344
British Land Co. PLC		35,297		273,922
CareTrust REIT, Inc.		15,670		240,064
CyrusOne, Inc.		3,872		173,195
DiamondRock Hospitality Co.		21,133		243,663
DuPont Fabros Technology, Inc.		5,702		250,489
EPR Properties		3,662		262,822
Equity One, Inc.		6,106		187,393
Essex Property Trust, Inc.		1,796		417,570
Eurocommercial Properties NV CVA		2,852		109,703
Extra Space Storage, Inc.		5,544		428,219
Federal Realty Investment Trust		2,775		394,355
First Industrial Realty Trust, Inc.		12,943		363,051
Gecina SA		490		67,678
General Growth Properties, Inc.		10,464		261,391
Gramercy Property Trust		22,057		202,483
Great Portland Estates PLC		11,387		93,542
Hammerson PLC		21,527		151,713
HCP, Inc.		15,959		474,301
Highwoods Properties, Inc.		2,837		144,715
Host Hotels & Resorts, Inc.		15,103		284,541
Ichigo Office REIT Investment Corp.		290		188,485
Japan Hotel REIT Investment Corp.		245		164,857
Japan Rental Housing Investments, Inc.		214		143,623
Kenedix Retail REIT Corp.		62		141,276
Kilroy Realty Corp.		3,112		227,861
Liberty Property Trust		6,613		261,214
Link REIT		18,500		119,937
Macerich Co.		3,007		213,016

Common Stocks	Shares		Value
Real Estate Investment Trusts (REITs) (continued)
Mid-America Apartment Communities, Inc.		2,494	$	244,212
NSI NV		42,256		159,490
Public Storage		646		144,381
Retail Properties of America, Inc., Class A		19,324		296,237
Rexford Industrial Realty, Inc.		5,344		123,927
RioCan Real Estate Investment Trust		3,784		75,052
Scentre Group		92,129		308,400
Simon Property Group, Inc.		3,883		689,893
SL Green Realty Corp.		1,505		161,863
STAG Industrial, Inc.		9,726		232,160
Sun Communities, Inc.		1,585		121,427
UDR, Inc.		10,728		391,357
Unibail-Rodamco SE		2,242		534,279
Vastned Retail NV		3,993		154,931
Ventas, Inc.		2,722		170,179
Welltower, Inc.		2,528		169,199
Westfield Corp.		85,219		576,203
				12,581,212
Real Estate Management & Development — 3.2%
Ayala Land, Inc.		66,200		42,533
BUWOG AG		12,361		286,959
Cheung Kong Property Holdings Ltd.		48,000		293,135
China Resources Land Ltd.		38,000		85,031
Deutsche Wohnen AG, Bearer Shares		5,863		183,902
First Capital Realty, Inc.		9,949		153,164
Global Logistic Properties Ltd.		173,600		262,868
Howard Hughes Corp. (e)		1,177		134,296
Inmobiliaria Colonial SA		32,993		228,333
Intiland Development Tbk PT		3,742,800		138,851
Kungsleden AB		18,410		116,433
LEG Immobilien AG		2,547		197,544
Leopalace21 Corp.		3,100		17,123
Mega Manunggal Property Tbk PT (e)		3,424,400		174,111
Megaworld Corp.		1,033,000		73,952
Mitsui Fudosan Co. Ltd.		6,000		138,903
Modernland Realty Tbk PT (e)		405,700		10,283
Puradelta Lestari Tbk PT		2,856,500		48,634
St. Modwen Properties PLC		22,940		86,301
Sun Hung Kai Properties Ltd.		37,000		465,922
Takara Leben Co., Ltd.		14,400		83,649
Unizo Holdings Co., Ltd.		15,000		396,627
Wihlborgs Fastigheter AB		5,035		93,451
				3,712,005
Road & Rail — 0.1%
MTR Corp. Ltd.		16,500		79,996
Total Common Stocks — 14.5%				16,921,878
Total Investments (Cost — $99,448,588) — 100.2%				116,762,374
Liabilities in Excess Other Assets — (0.2)%				(194,838	)
Net Assets — 100.0%			$	116,567,536

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 85

Schedule of Investments (continued) LifePath Dynamic 2050 Master Portfolio

Notes to Schedule of Investments

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December 31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
Active Stock Master Portfolio	$	35,160,143	$	8,428,859	1		—		$	43,589,002	$	43,589,002	$	608,078		$	(2,167,962	)
BlackRock Cash Funds: Institutional, SL Agency Shares		1,133,330		—			(544,681	)2		588,649		588,767		12,615	3		231
BlackRock Cash Funds: Prime, SL Agency Shares		650,208		—			(650,208	)2		—		—		2,281	3		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		10,871,097	1		—			10,871,097		10,871,097		5,796			907
BlackRock Commodity Strategies Fund		731,981		186,867			(205,396	)		713,452		5,293,812		49,467			(234,047	)
BlackRock Emerging Markets Fund, Inc.*		392,434		70,916			(463,350	)		—		—		—			(231,001	)
CoreAlpha Bond Master Portfolio	$	1,595,987		—		$	(447,147	)2	$	1,148,840		1,148,840		37,004			4,802
International Tilts Master Portfolio	$	24,072,801		—		$	(7,186,109	)2	$	16,886,692		16,886,692		700,957			(2,040,206	)
iShares Core S&P 500 ETF		—		6,451			—			6,451		1,451,411		8,413			2,762
iShares Edge MSCI Multifactor Intl ETF		—		211,613			—			211,613		4,915,770		38,770			—
iShares Edge MSCI Min VolEAFE ETF		—		20,528			(20,528	)		—		—		—			27,754
iShares Edge MSCI Min VolEAFE USA ETF		—		65,305			(65,305	)		—		—		—			57,110
iShares Edge MSCI Multifactor USA ETF		—		436,759			—			436,759		11,670,200		42,282			—
iShares MSCI Canada ETF*		85,881		14,179			(100,060	)		—		—		16,779			(144,810	)
iShares MSCI EAFE Small-Cap ETF		70,032		18,696			(20,010	)		68,718		3,424,905		98,956			(7,783	)
Large Cap Index Master Portfolio*	$	19,606,042		—		$	(19,606,042	)2		—		—		391,473			(2,197,825	)
Master Small Cap Index Series*	$	2,338,662		—		$	(2,338,662	)2		—		—		29,505			(92,019	)
Total											$	99,840,496	$	2,042,376		$	(7,022,087	)
*  No longer held by the LifePath Master Portfolio as of period end.
1    Represents net shares/investment value purchased.
2   Represents net shares/investment value sold.
3    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

(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) Current yield as of period end.

(e) Non-income producing security.

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

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts
Contracts Long		Issue	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
	31	Canadian Dollar	March 2017	$	2,306,865	$	(55,702	)
	22	Euro Dollar	March 2017	$	2,907,850		(28,927	)
	186	MSCI Emerging Markets E-Mini Index	March 2017	$	7,987,770		(175,800	)
	32	Russell 2000 E-Mini Index	March 2017	$	2,171,040		(41,429	)
	4	S&P 500 E-Mini Index	March 2017	$	447,240		(2,864	)
	18	S&P/TSX 60 Index	March 2017	$	2,404,826		1,049
	Total					$	(303,673	)

Forward Foreign Currency Exchange Contracts
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
AUD	12,000	USD	9,112	Barclays Bank PLC		1/19/17	$	(426	)
AUD	13,000	USD	9,675	BNP Paribas S.A.		1/19/17		(265	)
AUD	49,000	USD	37,524	Citibank N.A.		1/19/17		(2,057	)
AUD	128,000	USD	94,113	Goldman Sachs International		1/19/17		(1,464	)
CAD	26,000	USD	19,567	BNP Paribas S.A.		1/19/17		(176	)
CAD	337,000	USD	256,660	Goldman Sachs International		1/19/17		(5,312	)

See Notes to Financial Statements.

86 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2050 Master Portfolio

Forward Foreign Currency Exchange Contracts (continued)
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
CAD	121,000	USD	90,139	Goldman Sachs International		1/19/17	$	107
CHF	149,000	USD	151,512	Bank of America N.A.		1/19/17		(4,750	)
EUR	66,000	USD	72,677	BNP Paribas S.A.		1/19/17		(3,003	)
EUR	12,000	USD	13,118	Goldman Sachs International		1/19/17		(450	)
EUR	3,000	USD	3,345	Goldman Sachs International		1/19/17		(178	)
GBP	5,000	USD	6,130	Bank of America N.A.		1/19/17		51
GBP	7,000	USD	8,582	Barclays Bank PLC		1/19/17		71
GBP	29,000	USD	36,112	Barclays Bank PLC		1/19/17		(262	)
GBP	7,000	USD	8,632	Citibank N.A.		1/19/17		22
GBP	16,000	USD	20,115	Citibank N.A.		1/19/17		(336	)
GBP	14,000	USD	17,305	Citibank N.A.		1/19/17		2
GBP	32,000	USD	39,287	Goldman Sachs International		1/19/17		271
GBP	38,000	USD	46,532	Goldman Sachs International		1/19/17		443
GBP	24,000	USD	29,417	Goldman Sachs International		1/19/17		252
GBP	23,000	USD	28,818	Goldman Sachs International		1/19/17		(385	)
GBP	7,000	USD	8,642	Goldman Sachs International		1/19/17		11
GBP	10,000	USD	12,693	Goldman Sachs International		1/19/17		(331	)
GBP	5,000	USD	6,346	Goldman Sachs International		1/19/17		(165	)
GBP	4,000	USD	5,073	Goldman Sachs International		1/19/17		(128	)
HKD	161,000	USD	20,773	Barclays Bank PLC		1/19/17		(6	)
HKD	142,000	USD	18,313	Barclays Bank PLC		1/19/17		4
HKD	3,817,000	USD	492,421	Goldman Sachs International		1/19/17		(71	)
HKD	104,000	USD	13,414	UBS AG		1/19/17		—
IDR	522,298,000	USD	38,345	Citibank N.A.		1/19/17		343
IDR	326,117,000	USD	24,725	Nomura International PLC		1/19/17		(568	)
ILS	64,000	USD	16,768	Bank of America N.A.		1/19/17		(133	)
ILS	29,000	USD	7,601	Royal Bank of Canada		1/19/17		(64	)
JPY	5,038,000	USD	44,855	Bank of America N.A.		1/19/17		(1,620	)
JPY	2,820,000	USD	24,509	Bank of America N.A.		1/19/17		(308	)
JPY	2,268,000	USD	19,201	Bank of America N.A.		1/19/17		262
JPY	503,000	USD	4,311	Bank of America N.A.		1/19/17		6
JPY	2,696,000	USD	23,177	Bank of America N.A.		1/19/17		(41	)
JPY	3,249,000	USD	31,599	Barclays Bank PLC		1/19/17		(3,716	)
JPY	4,073,000	USD	38,976	BNP Paribas S.A.		1/19/17		(4,022	)
JPY	18,638,000	USD	168,331	BNP Paribas S.A.		1/19/17		(8,383	)
JPY	8,039,000	USD	71,857	BNP Paribas S.A.		1/19/17		(2,868	)
JPY	3,566,000	USD	30,319	Citibank N.A.		1/19/17		284
JPY	2,121,000	USD	20,419	Goldman Sachs International		1/19/17		(2,217	)
JPY	21,532,000	USD	207,182	Goldman Sachs International		1/19/17		(22,398	)
JPY	4,024,000	USD	38,506	Goldman Sachs International		1/19/17		(3,973	)
JPY	5,680,000	USD	50,084	Goldman Sachs International		1/19/17		(1,339	)
JPY	5,991,000	USD	52,779	Goldman Sachs International		1/19/17		(1,365	)
JPY	325,000	USD	2,864	Goldman Sachs International		1/19/17		(75	)
JPY	1,821,000	USD	15,442	Goldman Sachs International		1/19/17		185
JPY	18,957,000	USD	174,587	Royal Bank of Canada		1/19/17		(11,901	)
JPY	1,412,000	USD	13,437	UBS AG		1/19/17		(1,319	)
NOK	524,000	USD	61,512	Citibank N.A.		1/19/17		(625	)
NOK	208,000	USD	25,405	Goldman Sachs International		1/19/17		(1,236	)
NOK	275,000	USD	33,223	Goldman Sachs International		1/19/17		(1,269	)
NOK	182,000	USD	22,062	Goldman Sachs International		1/19/17		(914	)
NOK	89,000	USD	10,890	Goldman Sachs International		1/19/17		(549	)
NOK	78,000	USD	9,311	Goldman Sachs International		1/19/17		(247	)
NOK	41,000	USD	4,903	Goldman Sachs International		1/19/17		(139	)
NOK	299,000	USD	35,486	Goldman Sachs International		1/19/17		(743	)
NOK	107,000	USD	12,341	Goldman Sachs International		1/19/17		93
NOK	39,000	USD	4,506	Goldman Sachs International		1/19/17		25
NZD	21,000	USD	14,926	Barclays Bank PLC		1/19/17		(290	)
SEK	1,189,000	USD	135,423	Bank of America N.A.		1/19/17		(4,400	)
SEK	92,000	USD	10,301	Goldman Sachs International		1/19/17		(163	)
SGD	25,000	USD	17,976	Bank of America N.A.		1/19/17		(672	)
SGD	261,000	USD	187,956	Barclays Bank PLC		1/19/17		(7,309	)
SGD	53,000	USD	38,253	Barclays Bank PLC		1/19/17		(1,570	)
SGD	38,000	USD	27,425	BNP Paribas S.A.		1/19/17		(1,124	)
SGD	30,000	USD	21,645	BNP Paribas S.A.		1/19/17		(880	)

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 87

Schedule of Investments (continued) LifePath Dynamic 2050 Master Portfolio

Forward Foreign Currency Exchange Contracts (continued)
Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	150,567		AUD	198,000	Bank of America N.A.		1/19/17	$	7,252
USD	48,977		AUD	65,000	Bank of America N.A.		1/19/17		1,929
USD	51,172		AUD	67,000	Barclays Bank PLC		1/19/17		2,676
USD	50,656		AUD	67,000	Goldman Sachs International		1/19/17		2,161
USD	4,526		CAD	6,000	Goldman Sachs International		1/19/17		51
USD	5,235		CAD	7,000	Royal Bank of Canada		1/19/17		14
USD	93,216		CAD	126,000	Royal Bank of Canada		1/19/17		(759	)
USD	7,463		CAD	10,000	UBS AG		1/19/17		5
USD	40,843		EUR	37,000	Bank of America N.A.		1/19/17		1,783
USD	41,707		EUR	39,000	Bank of America N.A.		1/19/17		536
USD	27,158		EUR	26,000	Bank of America N.A.		1/19/17		(289	)
USD	18,744		EUR	18,000	Bank of America N.A.		1/19/17		(258	)
USD	31,816		EUR	29,000	Barclays Bank PLC		1/19/17		1,201
USD	78,814		EUR	71,000	Barclays Bank PLC		1/19/17		3,861
USD	7,400		EUR	7,000	BNP Paribas S.A.		1/19/17		10
USD	29,257		EUR	28,000	BNP Paribas S.A.		1/19/17		(301	)
USD	39,257		EUR	36,000	Citibank N.A.		1/19/17		1,253
USD	31,245		EUR	28,000	Citibank N.A.		1/19/17		1,686
USD	51,446		EUR	47,000	Goldman Sachs International		1/19/17		1,829
USD	16,433		EUR	15,000	Goldman Sachs International		1/19/17		598
USD	73,206		EUR	68,000	Goldman Sachs International		1/19/17		1,420
USD	14,636		EUR	14,000	Goldman Sachs International		1/19/17		(143	)
USD	7,325		EUR	7,000	Goldman Sachs International		1/19/17		(65	)
USD	135,275		EUR	126,000	Nomura International PLC		1/19/17		2,260
USD	48,634		GBP	39,000	Bank of America N.A.		1/19/17		422
USD	24,419		GBP	20,000	Barclays Bank PLC		1/19/17		(305	)
USD	59,208		HKD	459,000	Bank of America N.A.		1/19/17		2
USD	62,328		HKD	484,000	Bank of America N.A.		1/19/17		(102	)
USD	127,821		HKD	991,000	BNP Paribas S.A.		1/19/17		(7	)
USD	62,035		HKD	481,000	Citibank N.A.		1/19/17		(9	)
USD	14,960		HKD	116,000	Goldman Sachs International		1/19/17		(2	)
USD	33,159		HKD	257,000	Nomura International PLC		1/19/17		9
USD	42,560		HKD	330,000	Nomura International PLC		1/19/17		(7	)
USD	22,544		HKD	175,000	Nomura International PLC		1/19/17		(29	)
USD	19,995		HKD	155,000	UBS AG		1/19/17		2
USD	20,991		HKD	163,000	UBS AG		1/19/17		(35	)
USD	440,466		IDR	5,844,982,000	Nomura International PLC		1/19/17		7,505
USD	304,381		JPY	31,522,000	Bank of America N.A.		1/19/17		33,865
USD	130,015		JPY	13,369,000	BNP Paribas S.A.		1/19/17		15,284
USD	21,425		JPY	2,414,000	BNP Paribas S.A.		1/19/17		708
USD	41,021		JPY	4,622,000	BNP Paribas S.A.		1/19/17		1,355
USD	97,857		JPY	10,142,000	Citibank N.A.		1/19/17		10,820
USD	205,588		NOK	1,684,000	Bank of America N.A.		1/19/17		9,911
USD	3,288		NOK	27,000	Goldman Sachs International		1/19/17		151
USD	5,108		NOK	43,000	Goldman Sachs International		1/19/17		111
USD	19,507		PHP	974,000	Bank of America N.A.		1/19/17		(76	)
USD	67,841		PHP	3,409,000	Citibank N.A.		1/19/17		(701	)
USD	16,071		PHP	805,000	Nomura International PLC		1/19/17		(114	)
USD	2,707		SEK	25,000	Barclays Bank PLC		1/19/17		(48	)
USD	13,787		SEK	124,000	Citibank N.A.		1/19/17		123
USD	15,849		SEK	140,000	Goldman Sachs International		1/19/17		422
USD	33,603		SEK	299,000	Goldman Sachs International		1/19/17		655
USD	5,524		SEK	49,000	Goldman Sachs International		1/19/17		125
USD	6,640		SEK	59,000	Goldman Sachs International		1/19/17		139
USD	16,455		SEK	146,000	Goldman Sachs International		1/19/17		366
USD	20,240		SEK	183,000	Goldman Sachs International		1/19/17		74
USD	20,856		SEK	186,000	Goldman Sachs International		1/19/17		359
USD	4,016		SEK	37,000	Goldman Sachs International		1/19/17		(61	)
USD	92,963		SGD	129,000	Bank of America N.A.		1/19/17		3,678
USD	7,034		SGD	10,000	Bank of America N.A.		1/19/17		112
USD	38,294		SGD	53,000	BNP Paribas S.A.		1/19/17		1,611
USD	37,203		SGD	53,000	Royal Bank of Canada		1/19/17		520
Total								$	9,770

See Notes to Financial Statements.

88 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments (continued) LifePath Dynamic 2050 Master Portfolio

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts	Credit Contracts	Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts	Other Contracts	Total
Futures contracts	Net unrealized appreciation1	—	—	$	1,049		—	—	—	$	1,049
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts	—	—		—	$	121,286	—	—		121,286
		—	—	$	1,049	$	121,286	—	—	$	122,335
Liabilities — Derivative Financial Instruments
Futures contracts	Net unrealized depreciation1	—	—	$	220,093	$	84,629	—	—	$	304,722
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts	—	—		—		111,516	—	—		111,516
Total		—	—	$	220,093	$	196,145	—	—	$	416,238
1    Includes cumulative appreciation (depreciation) on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

For the year ended December 31, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts	Credit Contracts	Equity Contracts			Foreign Currency Exchange Contracts			Interest Rate Contracts	Other Contracts	Total
Futures contracts	—	—	$	501,684		$	58,361		—	—	$	560,045
Forward foreign currency exchange contracts	—	—		—			33,557		—	—		33,557
Total	—	—	$	501,684		$	91,918		—	—	$	593,602
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts	—	—	$	(219,044	)	$	(84,629	)	—	—	$	(303,673	)
Forward foreign currency exchange contracts	—	—		—			14,403		—	—		14,403
Total	—	—	$	(219,044	)	$	(70,226	)	—	—	$	(289,270	)

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	4,556,398
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	3,382,833
Average amounts sold — in USD	$	4,031,098

For information about the LifePath Master Portfolio’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Derivative Financial Instruments — Offsetting as of Period End

The LifePath Master Portfolio’s derivative assets and liabilities (by type) were as follows:

	Assets			Liabilities
Futures contracts	$	22,015		$	88,821
Forward foreign currency exchange contracts		121,286			111,516
Total derivative assets and liabilities in the Statements of Assets and Liabilities	$	143,301		$	200,337
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(22,015	)		(88,821	)
Total derivative assets and liabilities subject to an MNA	$	121,286		$	111,516

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 89

Schedule of Investments (concluded) LifePath Dynamic 2050 Master Portfolio

The following tables present the LifePath Master Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the LifePath Master Portfolio:

Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets2
Bank of America N.A.	$	59,809	$	(12,649	)		—		—	$	47,160
Barclays Bank PLC		7,813		(7,813	)		—		—		—
BNP Paribas S.A.		18,968		(18,968	)		—		—		—
Citibank N.A.		14,533		(3,728	)		—		—		10,805
Goldman Sachs International		9,848		(9,848	)		—		—		—
Nomura International PLC		9,774		(718	)		—		—		9,056
Royal Bank of Canada		534		(534	)		—		—		—
UBS AG		7		(7	)		—		—		—
Total	$	121,286	$	(54,265	)		—		—	$	67,021
Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities3
Bank of America N.A.	$	12,649	$	(12,649	)		—		—		—
Barclays Bank PLC		13,932		(7,813	)		—		—	$	6,119
BNP Paribas S.A.		21,029		(18,968	)		—		—		2,061
Citibank N.A.		3,728		(3,728	)		—		—		—
Goldman Sachs International		45,382		(9,848	)		—		—		35,534
Nomura International PLC		718		(718	)		—		—		—
Royal Bank of Canada		12,724		(534	)		—		—		12,190
UBS AG		1,354		(7	)		—		—		1,347
Total	$	111,516	$	(54,265	)		—		—	$	57,251
1    The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.
2    Net amount represents the net amount receivable from the counterparty in the event of default.
3    Net amount represents the net amount payable due to counterparty in the event of default.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the LifePath Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1			Level 2			Level 3		Total
Assets:
Investments:
Affiliated Investment Companies:
Equity Funds	$	26,756,098			—			—	$	26,756,098
Short-Term Securities		11,459,864			—			—		11,459,864
Common Stocks:
Equity Real Estate Investment Trusts (REITs)		—		$	426,156			—		426,156
Hotels, Restaurants & Leisure		122,509			—			—		122,509
Real Estate Investment Trusts (REITs)		9,548,104			3,033,108			—		12,581,212
Real Estate Management & Development		461,571			3,250,434			—		3,712,005
Road & Rail		—			79,996			—		79,996
Total	$	48,348,146		$	6,789,694			—	$	55,137,840
Investments Valued at NAV1										61,624,534
Total									$	116,762,374
	Level 1			Level 2			Level 3		Total
Derivative Financial Instruments2
Assets:
Equity contracts	$	1,049			—			—	$	1,049
Forward foreign currency contracts		—		$	121,286			—		121,286
Liabilities:
Equity contracts		(220,093	)		—			—		(220,093	)
Forward foreign currency contracts		(84,629	)		(111,516	)		—		(196,145	)
Total	$	(303,673	)	$	9,770			—	$	(293,903	)
1    As of December 31, 2016, certain of the LifePath Master Portfolio’s investments were valued using NAV per share (or its equivalent) as no quoted market value is available and have been excluded from the fair value hierarchy.
2    Derivative financial instruments are futures contracts and forward foreign currency exchange contracts, which are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

90 BLACKROCK FUNDS III DECEMBER 31, 2016

Statements of Assets and Liabilities Master Investment Portfolio

December 31, 2016	LifePath Dynamic Retirement Master Portfolio		LifePath Dynamic 2020 Master Portfolio		LifePath Dynamic 2030 Master Portfolio		LifePath Dynamic 2040 Master Portfolio		LifePath Dynamic 2050 Master Portfolio
Assets
Investments at value — unaffiliated1	$	807,914	$	11,311,543	$	35,346,211	$	45,401,177	$	16,921,878
Investments at value — affiliated2,3		155,354,162		429,423,799		412,308,294		316,023,774		99,840,496
Cash pledged for futures contracts		697,000		2,062,000		2,467,000		2,098,000		731,000
Foreign currency at value4		51,734		177,644		263,672		269,075		93,110
Receivables:
Variation margin on futures contracts		26,180		70,953		88,810		67,553		22,015
Investments sold		5,383		75,359		237,254		302,648		114,286
Dividends — affiliated		3,885		15,896		22,183		23,108		9,410
Dividends — unaffiliated		3,715		51,027		158,199		202,638		75,316
Securities lending income — affiliated		225		1,771		3,592		4,107		530
Unrealized appreciation on forward foreign currency exchange contracts		11,215		101,176		274,399		324,597		121,286
Total assets		156,961,413		443,291,168		451,169,614		364,716,677		117,929,327
Liabilities
Cash collateral on securities loaned at value		—		229,473		—		963,721		588,767
Payables:
Withdrawals to investors		1,109,596		3,154,729		2,166,267		1,659,288		495,879
Variation margin on futures contracts		66,238		214,260		267,649		253,392		88,821
Professional fees		12,095		15,324		14,686		13,691		11,697
Investment advisory fees		6,471		18,139		17,872		13,310		1,983
Independent Trustees’ fees		3,118		5,154		5,130		4,462		2,747
Investments purchased		2,851		39,930		125,184		161,022		60,381
Unrealized depreciation on forward foreign currency exchange contracts		10,599		91,204		255,383		304,725		111,516
Total liabilities		1,210,968		3,768,213		2,852,171		3,373,611		1,361,791
Net Assets	$	155,750,445	$	439,522,955	$	448,317,443	$	361,343,066	$	116,567,536
Net Assets Consist of
Investors’ capital	$	124,809,500	$	395,871,025	$	435,840,386	$	336,837,967	$	99,551,928
Net unrealized appreciation (depreciation)		30,940,945		43,651,930		12,477,057		24,505,099		17,015,608
Net Assets	$	155,750,445	$	439,522,955	$	448,317,443	$	361,343,066	$	116,567,536
1    Investments at cost — unaffiliated	$	788,750	$	11,245,458	$	35,374,709	$	45,480,865	$	16,951,745
2    Investments at cost — affiliated	$	124,161,142	$	384,993,117	$	398,846,994	$	290,564,315	$	82,496,843
3    Securities loaned at value		—	$	223,865		—	$	940,683	$	575,074
4    Foreign currency at cost	$	52,231	$	179,413	$	266,305	$	271,739	$	94,029

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	91

Statements of Operations Master Investment Portfolio

Year Ended December 31, 2016	LifePath Dynamic Retirement Master Portfolio			LifePath Dynamic 2020 Master Portfolio			LifePath Dynamic 2030 Master Portfolio			LifePath Dynamic 2040 Master Portfolio			LifePath Dynamic 2050 Master Portfolio
Investment Income
Dividends — affiliated	$	489,750		$	1,274,539		$	1,156,029		$	946,935		$	262,889
Dividends — unaffiliated		48,375			496,229			1,315,296			1,605,907			554,509
Securities lending — affiliated — net		8,138			29,143			35,271			36,615			12,470
Foreign taxes withheld		(2,270	)		(21,015	)		(55,265	)		(66,764	)		(24,242	)
Net investment income allocated from the applicable Underlying Master Portfolios:
Dividends — affiliated		1,353,014			4,461,518			6,012,628			5,914,884			1,850,419
Interest — affiliated		2,593,401			5,778,333			3,305,727			891,896			81,349
Expenses		(424,820	)		(1,168,344	)		(1,129,505	)		(844,562	)		(256,295	)
Fees waived		72,072			249,827			314,610			277,511			91,544
Total investment income		4,137,660			11,100,230			10,954,791			8,762,422			2,572,643
Expenses
Investment advisory		687,808			1,827,785			1,776,829			1,406,163			420,177
Professional		11,672			14,046			14,050			14,071			14,501
Independent Trustees		7,452			11,757			11,933			12,513			11,729
Miscellaneous		250			250			250			250			—
Total expenses		707,182			1,853,838			1,803,062			1,432,997			446,407
Less fees waived by the Manager		(609,331	)		(1,594,939	)		(1,552,109	)		(1,235,096	)		(387,706	)
Total expenses after fees waived		97,851			258,899			250,953			197,901			58,701
Net investment income		4,039,809			10,841,331			10,703,838			8,564,521			2,513,942
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — unaffiliated		(50,727	)		171,703			729,699			914,040			275,869
Investments — affiliated		886,655			(1,942,318	)		(1,866,832	)		(2,600,665	)		(529,784	)
Futures contracts		606,270			1,816,234			1,911,315			1,645,816			560,045
Forward foreign currency exchange contracts		1,839			34,362			94,081			129,238			33,557
Foreign currency transactions		(69	)		(18,313	)		(43,166	)		(58,411	)		(19,535	)
Capital gain distributions from investment companies — affiliated		524			2,114			2,286			2,325			907
Allocated from the applicable Underlying Master Portfolios from investments, futures contracts, swaps, forward foreign currency exchange contracts and foreign currency transactions		(11,273,461	)		(15,811,635	)		14,008,903			702,865			(6,493,210	)
		(9,828,969	)		(15,747,853	)		14,836,286			735,208			(6,172,151	)
Net change in unrealized appreciation (depreciation) on:
Investments — unaffiliated		19,243			(113,986	)		(515,341	)		(675,633	)		(212,928	)
Investments — affiliated		1,819,912			9,469,394			9,674,036			9,681,432			2,811,629
Futures contracts		(270,863	)		(849,794	)		(964,830	)		(883,435	)		(303,673	)
Forward foreign currency exchange contracts		1,112			14,547			30,426			32,891			14,403
Foreign currency translations		(642	)		(4,420	)		(8,445	)		(9,209	)		(3,716	)
Allocated from the applicable Underlying Master Portfolios from investments, futures contracts, swaps, forward foreign currency exchange contracts and foreign currency translations		15,583,092			29,663,366			2,206,804			13,778,956			11,274,985
		17,151,854			38,179,107			10,422,650			21,925,002			13,580,700
Net realized and unrealized gain		7,322,885			22,431,254			25,258,936			22,660,210			7,408,549
Net Increase in Net Assets Resulting from Operations	$	11,362,694		$	33,272,585		$	35,962,774		$	31,224,731		$	9,922,491

See Notes to Financial Statements.
92	BLACKROCK FUNDS III	DECEMBER 31, 2016

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath Dynamic Retirement Master Portfolio						LifePath Dynamic 2020 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	4,039,809		$	25,787,326		$	10,841,331		$	47,034,117
Net realized gain		(9,828,969	)		38,303,062			(15,747,853	)		112,654,731
Net change in unrealized appreciation (depreciation)		17,151,854			(63,484,434	)		38,179,107			(159,303,759	)
Net increase in net assets resulting from operations		11,362,694			605,954			33,272,585			385,089
Capital Transactions
Proceeds from contributions		37,981,022			300,179,102			72,645,057			464,173,999
Value of withdrawals		(147,760,621	)		(1,636,813,035	)1		(247,199,241	)		(2,759,248,995	)1
Net decrease in net assets derived from capital transactions		(109,779,599	)		(1,336,633,933	)		(174,554,184	)		(2,295,074,996	)
Net Assets
Total decrease in net assets		(98,416,905	)		(1,336,027,979	)		(141,281,599	)		(2,294,689,907	)
Beginning of year		254,167,350			1,590,195,329			580,804,554			2,875,494,461
End of year	$	155,750,445		$	254,167,350		$	439,522,955		$	580,804,554
1   See Note 2 of the Notes to Financial Statements.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	93

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath Dynamic 2030 Master Portfolio						LifePath Dynamic 2040 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	10,703,838		$	45,601,857		$	8,564,521		$	34,986,795
Net realized gain		14,836,286			135,036,446			735,208			121,476,095
Net change in unrealized appreciation (depreciation)		10,422,650			(181,053,782	)		21,925,002			(155,925,514	)
Net increase (decrease) in net assets resulting from operations		35,962,774			(382,479	)		31,224,731			537,376
Capital Transactions
Proceeds from contributions		79,804,028			520,309,935			78,506,160			394,402,394
Value of withdrawals		(211,296,224	)		(2,678,876,359	)1		(174,343,519	)		(2,058,297,441	)1
Net decrease in net assets derived from capital transactions		(131,492,196	)		(2,158,566,424	)		(95,837,359	)		(1,663,895,047	)
Net Assets
Total decrease in net assets		(95,529,422	)		(2,158,948,903	)		(64,612,628	)		(1,663,357,671	)
Beginning of year		543,846,865			2,702,795,768			425,955,694			2,089,313,365
End of year	$	448,317,443		$	543,846,865		$	361,343,066		$	425,955,694

¹ See Note 2 of the Notes to Financial Statements.

See Notes to Financial Statements.
94	BLACKROCK FUNDS III	DECEMBER 31, 2016

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath Dynamic 2050 Master Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	2,513,942		$	7,909,882
Net realized gain		(6,172,151	)		16,392,410
Net change in unrealized appreciation (depreciation)		13,580,700			(25,186,905	)
Net increase (decrease) in net assets resulting from operations		9,922,491			(884,613	)
Capital Transactions
Proceeds from contributions		48,949,251			154,043,711
Value of withdrawals		(57,207,767	)		(477,699,188	)1
Net decrease in net assets derived from capital transactions		(8,258,516	)		(323,655,477	)
Net Assets
Total increase (decrease) in net assets		1,663,975			(324,540,090	)
Beginning of year		114,903,561			439,443,651
End of year	$	116,567,536		$	114,903,561

¹ See Note 2 of the Notes to Financial Statements.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	95

Financial Highlights Master Investment Portfolio

	LifePath Dynamic Retirement Master Portfolio
	Year Ended December 31,
	2016			2015			2014			2013			2012
Total Return
Total return		6.28%			(1.02)%			5.25%			6.75%			9.11%
Ratios to Average Net Assets
Total expenses		0.54%	1,2,3		0.54%	4,5,6		0.54%	7,8,9		0.54%	7,8,9		0.55%	10,11,12
Total expenses after fees waived		0.23%	1,2,3		0.26%	4,5,6		0.25%	7,8,9		0.25%	7,8,9		0.28%	10,11,12
Net investment income13		2.06%	1,2,3		1.88%	4,5,6		2.02%	7,8,9		1.83%	7,8,9		2.22%	10,11,12
Supplemental Data
Net assets, end of year (000)	$	155,750		$	254,167		$	1,590,195		$	1,586,408		$	1,491,576
Portfolio turnover rate		37%	14		21%	15		14%	16		17%	16		4%	17

¹ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Treasury, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc., BlackRock Tactical Opportunities Fund and iShares exchange-traded funds.

² Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series allocated fees waived of 0.04% for the year ended December 31, 2016.

³ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.10% for the year ended December 31, 2016, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁴ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁵ Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated fees waived of 0.03% for the year ended December 31, 2015.

⁶ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.09% for the year ended December 31, 2015, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁷ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁸ Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated fees waived of 0.03% and 0.03% for the years ended December 31, 2014 and December 31, 2013, respectively.

⁹ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.10% and 0.10% for the years ended December 31, 2014 and December 31, 2013, respectively, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated expenses and/or net investment income.

¹⁰ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

¹¹ Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated fees waived of 0.03% for the year ended December 31, 2012.

¹² Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.08% for the year ended December 31, 2012, respectively, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated expenses and/or net investment income.

¹³ Includes the LifePath Master Portfolio’s share of the allocated net investment income from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio, except for the years ended December 31, 2016, December 31, 2015, December 31, 2014 and December 31, 2013, which also includes International Tilts Master Portfolio and for the year ended December 31, 2016 which also includes Master Total Return Portfolio. For the years ended December 31, 2016 and December 31, 2015, the ratio does not include Total International ex U.S. Index Master Portfolio, which is no longer held by the LifePath Master Portfolio.

¹⁴ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

¹⁵ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁶ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁷ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current period presentation, the portfolio turnover rate would have been 13% for the year ended December 31, 2012.

See Notes to Financial Statements.
96	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights Master Investment Portfolio

	LifePath Dynamic 2020 Master Portfolio
	Year Ended December 31,
	2016			2015			2014			2013			2012
Total Return
Total return		6.66%			(1.28)%			5.56%			10.17%			11.49%
Ratios to Average Net Assets
Total expenses		0.53%	1,2,3		0.53%	4,5,6		0.54%	7,8,9		0.53%	7,8,9		0.53%	10,11,12
Total expenses after fees waived		0.23%	1,2,3		0.24%	4,5,6		0.24%	7,8,9		0.23%	7,8,9		0.25%	10,11,12
Net investment income13		2.08%	1,2,3		1.90%	4,5,6		2.01%	7,8,9		1.97%	7,8,9		2.30%	10,11,12
Supplemental Data
Net assets, end of year (000)	$	439,523		$	580,805		$	2,875,494		$	2,831,270		$	2,524,316
Portfolio turnover rate		50%	14		18%	15		21%	16		19%	16		5%	17

¹ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Treasury, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc., BlackRock Tactical Opportunities Fund and iShares exchange-traded funds.

² Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series allocated fees waived of 0.05% for the year ended December 31, 2016.

³ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11% for the year ended December 31, 2016, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁴ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁵ Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated fees waived of 0.04% for the year ended December 31, 2015.

⁶ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11% for the year ended December 31, 2015, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁷ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁸ Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated fees waived of 0.04% and 0.03% for the years ended December 31, 2014 and December 31, 2013, respectively.

⁹ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11% and 0.12% for the years ended December 31, 2014 and December 31, 2013, respectively, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated expenses and/or net investment income.

¹⁰  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

¹¹ Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated fees waived of 0.03% for the year ended December 31, 2012.

¹²  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11% for the year ended December 31, 2012, respectively, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated expenses and/or net investment income.

¹³  Includes the LifePath Master Portfolio’s share of the allocated net investment income from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio, except for the years ended December 31, 2016, December 31, 2015, December 31, 2014 and December 31, 2013, which also includes International Tilts Master Portfolio and for the year ended December 31, 2016 which also includes Master Total Return Portfolio. For the years ended December 31, 2016 and December 31, 2015, the ratio does not include Total International ex U.S. Index Master Portfolio, which is no longer held by the LifePath Master Portfolio.

¹⁴  Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

¹⁵  Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁶  Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁷  Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current period presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	97

Financial Highlights Master Investment Portfolio

	LifePath Dynamic 2030 Master Portfolio
	Year Ended December 31,
	2016			2015			2014			2013			2012
Total Return
Total return		7.61%			(1.55	)%		5.82%			14.16%			13.59%
Ratios to Average Net Assets
Total expenses		0.52%	1,2,3		0.52%	4,5,6		0.53%	7,8,9		0.52%	7,8,9		0.53%	10,11,12
Total expenses after fees waived		0.21%	1,2,3		0.21%	4,5,6		0.21%	7,8,9		0.20%	7,8,9		0.23%	10,11,12
Net investment income13		2.11%	1,2,3		1.93%	4,5,6		2.02%	7,8,9		2.13%	7,8,9		2.37%	10,11,12
Supplemental Data
Net assets, end of year (000)	$	448,317		$	543,847		$	2,702,796		$	2,651,481		$	2,237,444
Portfolio turnover rate		61%	14		21%	15		33%	16		22%	16		5%	17

¹  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Treasury, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc., BlackRock Tactical Opportunities Fund and iShares exchange-traded funds.

²  Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series allocated fees waived of 0.06% for the year ended December 31, 2016.

³  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.12% for the year ended December 31, 2016, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁴  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁵  Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated fees waived of 0.05% for the year ended December 31, 2015.

⁶  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.14% for the year ended December 31, 2015, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁷  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁸  Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated fees waived of 0.05% and 0.05% for the years ended December 31, 2014 and December 31, 2013, respectively.

⁹  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.14% and 0.15% for the years ended December 31, 2014 and December 31, 2013, respectively, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated expenses and/or net investment income.

¹⁰  Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

¹¹  Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated fees waived of 0.04% for the year ended December 31, 2012.

¹²  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.13% for the year ended December 31, 2012, respectively, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated expenses and/or net investment income.

¹³ Includes the LifePath Master Portfolio’s share of the allocated net investment income from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio, except for the years ended December 31, 2016, December 31, 2015, December 31, 2014 and December 31, 2013, which also includes International Tilts Master Portfolio and for the year ended December 31, 2016 which also includes Master Total Return Portfolio. For the years ended December 31, 2016 and December 31, 2015, the ratio does not include Total International ex U.S. Index Master Portfolio, which is no longer held by the LifePath Master Portfolio.

¹⁴ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

¹⁵ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁶ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁷ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current period presentation, the portfolio turnover rate would have been 16% for the year ended December 31, 2012.

See Notes to Financial Statements.
98	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights Master Investment Portfolio

	LifePath Dynamic 2040 Master Portfolio
	Year Ended December 31,
	2016			2015			2014			2013			2012
Total Return
Total return		8.35%			(1.79)%			5.98%			17.42%			15.23%
Ratios to Average Net Assets
Total expenses		0.50%	1,2,3		0.50%	4,5,6		0.53%	7,8,9		0.51%	7,8,9		0.52%	10,11,12
Total expenses after fees waived		0.19%	1,2,3		0.18%	4,5,6		0.19%	7,8,9		0.18%	7,8,9		0.21%	10,11,12
Net investment income13		2.13%	1,2,3		1.94%	4,5,6		2.03%	7,8,9		2.26%	7,8,9		2.44%	10,11,12
Supplemental Data
Net assets, end of year (000)	$	361,343		$	425,956		$	2,089,313		$	2,064,693		$	1,701,257
Portfolio turnover rate		77%	14		19%	15		42%	16		26%	16		4%	17

¹ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Treasury, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc., BlackRock Tactical Opportunities Fund and iShares exchange-traded funds.

² Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series allocated fees waived of 0.07% for the year ended December 31, 2016.

³ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.14% for the year ended December 31, 2016, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁴ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁵ Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated fees waived of 0.06% for the year ended December 31, 2015.

⁶ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.17% for the year ended December 31, 2015, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁷ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁸ Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated fees waived of 0.06% and 0.05% for the years ended December 31, 2014 and December 31, 2013, respectively.

⁹ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.16% and 0.17% for the years ended December 31, 2014 and December 31, 2013, respectively, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated expenses and/or net investment income.

¹⁰ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series, and Total International ex U.S. Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

¹¹ Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated fees waived of 0.05% for the year ended December 31, 2012.

¹² Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.15% for the year ended December 31, 2012, respectively, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated expenses and/or net investment income.

¹³ Includes the LifePath Master Portfolio’s share of the allocated net investment income from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio, except for the years ended December 31, 2016, December 31, 2015, December 31, 2014 and December 31, 2013, which also includes International Tilts Master Portfolio and for the year ended December 31, 2016 which also includes Master Total Return Portfolio. For the years ended December 31, 2016 and December 31, 2015, the ratio does not include Total International ex U.S. Index Master Portfolio, which is no longer held by the LifePath Master Portfolio.

¹⁴ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Total Return Portfolio and Master Small Cap Index Series.

¹⁵ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁶ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁷ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current period presentation, the portfolio turnover rate would have been 14% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	99

Financial Highlights Master Investment Portfolio

	LifePath Dynamic 2050 Master Portfolio
	Year Ended December 31,
	2016			2015			2014			2013			2012
Total Return
Total return		8.57%			(1.96	)%		6.23%			20.32%			16.55%
Ratios to Average Net Assets
Total expenses		0.51%	1,2,3		0.51%	4,5,6		0.53%	7,8,9		0.53%	7,8,9		0.54%	10,11,12
Total expenses after fees waived		0.19%	1,2,3		0.17%	4,5,6		0.18%	7,8,9		0.20%	7,8,9		0.21%	10,11,12
Net investment income13		2.09%	1,2,3		1.94%	4,5,6		2.04%	7,8,9		2.46%	7,8,9		2.51%	10,11,12
Supplemental Data
Net assets, end of year (000)	$	116,568		$	114,904		$	439,444		$	415,263		$	267,851
Portfolio turnover rate		70%	14		36%	15		48%	15		28%	15		5%	16

¹ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Treasury, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

² Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated fees waived of 0.08% for the year ended December 31, 2016.

³ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.15% for the year ended December 31, 2016, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁴ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁵ Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated fees waived of 0.07% for the year ended December 31, 2015.

⁶ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.19% for the year ended December 31, 2015, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series allocated expenses and/or net investment income.

⁷ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

⁸ Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated fees waived of 0.07% and 0.06% for the years ended December 31, 2014 and December 31, 2013, respectively.

⁹ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.17% and 0.15% for the years ended December 31, 2014 and December 31, 2013, respectively, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated expenses and/or net investment income.

¹⁰ Includes the LifePath Master Portfolio’s pro rata portion of expenses from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series, and Total International ex U.S. Index Master Portfolio. These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Commodity Strategies Fund, BlackRock Emerging Markets Fund, Inc. and iShares exchange-traded funds.

¹¹ Includes the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated fees waived of 0.06% for the year ended December 31, 2012.

¹² Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.15% for the year ended December 31, 2012, respectively, although the ratio does include the LifePath Master Portfolio’s share of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio allocated expenses and/or net investment income.

¹³ Includes the LifePath Master Portfolio’s share of the allocated net investment income from Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio, except for the years ended December 31, 2016, December 31, 2015, December 31, 2014 and December 31, 2013, which also includes International Tilts Master Portfolio and for the year ended December 31, 2016 which also includes Master Total Return Portfolio. For the years ended December 31, 2016 and December 31, 2015, the ratio does not include Total International ex U.S. Index Master Portfolio, which is no longer held by the LifePath Master Portfolio.

¹⁴ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio and Master Small Cap Index Series.

¹⁵ Includes the purchases and sales of the underlying funds and Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Large Cap Index Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio.

¹⁶ Excludes purchases and sales of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, Master Small Cap Index Series and Total International ex U.S. Index Master Portfolio. If these transactions had been included to conform to the current period presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
100	BLACKROCK FUNDS III	DECEMBER 31, 2016

Notes to Financial Statements Master Investment Portfolio

1. Organization:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. MIP is classified as diversified. MIP is organized as a Delaware statutory trust. The financial statements and these accompanying notes relate to five series of MIP: LifePath^® Dynamic Retirement Master Portfolio, LifePath^® Dynamic 2020 Master Portfolio, LifePath^® Dynamic 2030 Master Portfolio, LifePath^® Dynamic 2040 Master Portfolio and LifePath^® Dynamic 2050 Master Portfolio (each a “LifePath Master Portfolio” and together, the “LifePath Master Portfolios”).

As of period end, the investment of LifePath 2030 Master Portfolio, LifePath 2040 Master Portfolio and LifePath 2050 Master Portfolio in the Active Stock Master Portfolio represented 31.3%, 37.6% and 37.4%, respectively, of net assets. The investment of LifePath Retirement Master Portfolio and LifePath 2020 Master Portfolio in CoreAlpha Bond Master Portfolio represented 40.3% and 33.6%, respectively, of net assets. As such, financial statements of Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio, including the Schedules of Investments, should be read in conjunction with each respective LifePath Master Portfolio’s financial statements. Active Stock Master Portfolio’s and International Tilts Master Portfolio’s financial statements are available, without charge, on the U.S. Securities and Exchange Commission’s (“SEC’s”) website at http://www.sec.gov.

The LifePath Master Portfolios will generally invest in other registered investment companies (each, an “Underlying Fund” and collectively the “Underlying Funds”) that are managed by subsidiaries of BlackRock, Inc. (“BlackRock”) and its affiliates and affiliates of the LifePath Master Portfolios. The LifePath Master Portfolios may also invest in other master portfolios (“Underlying Master Portfolios”) that are managed by subsidiaries of BlackRock.

The value of a LifePath Master Portfolio’s investment in each of Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio, International Tilts Master Portfolio, Master Small Cap Index Series and Master Total Return Portfolio reflects that LifePath Master Portfolio’s proportionate interest in the net assets of that master portfolio. As of period end, the LifePath Master Portfolios held interests in these Underlying Master Portfolios as follows:

	Active Stock Master Portfolio		CoreAlpha Bond Master Portfolio		International Tilts Master Portfolio		Master Total Return Portfolio
LifePath Retirement Master Portfolio		5.87%		9.33%		5.08%		0.17%
LifePath 2020 Master Portfolio		19.77%		21.96%		18.50%		0.39%
LifePath 2030 Master Portfolio		27.86%		11.64%		26.50%		0.23%
LifePath 2040 Master Portfolio		27.01%		2.01%		27.19%		0.06%
LifePath 2050 Master Portfolio		8.66%		0.17%		9.02%		—

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

2. Significant Accounting Policies:

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

Foreign Currency: Each LifePath Master Portfolio’s books and records are maintained in U.S. dollars. Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

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

Segregation and Collateralization: In cases where a LifePath Master Portfolio enters into certain investments (e.g. futures contracts and forward foreign currency exchange contracts) that would be treated as “senior securities” for 1940 Act purposes, a LifePath Master Portfolio may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the LifePath Master Portfolios may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

BLACKROCK FUNDS III DECEMBER 31, 2016 101

Notes to Financial Statements (continued) Master Investment Portfolio

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the LifePath Master Portfolios are 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 Underlying Master Portfolios’ income, expenses and realized and unrealized gains and losses.

In-Kind Redemptions: The LifePath Master Portfolios transferred securities and cash to shareholders in connection with an in-kind redemption transaction. For financial reporting purposes, 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 redemption. For tax purposes, no gains or losses were recognized. For the year ended December 31, 2015, the LifePath Master Portfolios had in-kind redemptions of:

LifePath Retirement Master Portfolio	LifePath 2020 Master Portfolio		LifePath 2030 Master Portfolio		LifePath 2040 Master Portfolio		LifePath 2050 Master Portfolio
$214,660,215	$	370,308,876	$	425,280,989	$	364,218,851	$	83,345,198

Recent Accounting Standard: In April 2015, the Financial Accounting Standards Board issued “Disclosures for Investments in Certain Entities that Calculate Net Asset Value (“NAV”) per Share” which eliminates the requirement to categorize investments within the fair value hierarchy when fair value is based on the NAV per share and no quoted market value is available. As of December 31, 2016, certain investments of the LifePath Master Portfolios were valued using NAV per share (or its equivalent) as no quoted market value is available and have been excluded from the fair value hierarchy.

In November 2016, the Financial Accounting Standards Board issued Accounting Standards Update “Restricted Cash” which will require entities to include the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the beginning and ending cash balances in the Statement of Cash Flows. The guidance will be applied retrospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. Management is evaluating the impact, if any, of this guidance on the LifePath Master Portfolio’s presentation in the Statements of Cash Flows.

Indemnifications: In the normal course of business, a LifePath Master Portfolio enters into contracts that contain a variety of representations that provide general indemnification. A LifePath Master Portfolio’s maximum exposure under these arrangements is unknown because it involves future potential claims against a LifePath Master Portfolio, which cannot be predicted with any certainty.

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

Through May 31, 2016, the LifePath Master Portfolios had an arrangement with their custodian whereby credits were earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. Credits previously earned may have been utilized until December 31, 2016. Under current arrangements effective June 1, 2016, the LifePath Master Portfolios no longer earn credits on uninvested cash, and may incur charges on uninvested cash balances and overdrafts, subject to certain conditions.

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The LifePath Master Portfolios’ investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time) (or if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the LifePath Master Portfolios would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The LifePath Master Portfolios determine the fair values of their financial instruments using various 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 oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of each LifePath Master Portfolio’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be

102 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued) Master Investment Portfolio

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

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• Futures contracts traded on exchanges are valued at their last sale price.

• Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the NYSE. Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

• The market value of the LifePath Master Portfolios’ investments in the Underlying Funds is based on the published NAV of each Underlying Fund computed as of the close of trading on the NYSE on days when the NYSE is open.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include Market approach, Income approach and the Cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the LifePath Master Portfolios might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

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

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

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

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued investments. Level 3 investments include equity or debt issued by private companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

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

4. Securities and Other Investments:

Securities Lending: Certain LifePath Master Portfolios may lend their securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the LifePath Master Portfolios collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by each LifePath Master Portfolios is required to have a

BLACKROCK FUNDS III DECEMBER 31, 2016 103

Notes to Financial Statements (continued) Master Investment Portfolio

value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the LifePath Master Portfolio and any additional required collateral is delivered to the LifePath Master Portfolio, or excess collateral returned by the LifePath Master Portfolio, on the next business day. During the term of the loan, the LifePath Master Portfolios are entitled to all distributions made on or in respect of the loaned securities, but do not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as affiliated investments in the LifePath Master Portfolios’ Schedules of Investments, and the value of any related collateral are shown separately in the Statements of Assets and Liabilities as a component of investments at value-unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedules of Investments.

Securities lending transactions are entered into by the LifePath Master Portfolios under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the LifePath Master Portfolios, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and a LifePath Master Portfolio can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

As of period end, the following table is a summary of the LifePath Master Portfolios’ securities lending agreements by counterparty which are subject to offset under an MSLA:

LifePath 2020 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
JP Morgan Securities LLC	$	223,865	$	(223,865	)		—
LifePath 2040 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
JP Morgan Securities LLC	$	940,683	$	(940,683	)		—
LifePath 2050 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
BNP Paribas Prime Brokerage, Inc.	$	134,994	$	(134,994	)		—
UBS Securities LLC		440,080		(440,080	)		—
Total	$	575,074	$	(575,074	)		—

¹ Cash collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the tables above. Cash collateral has been received in connection with securities lending agreements as follows:

LifePath 2020 Master Portfolio	LifePath 2040 Master Portfolio		LifePath 2050 Master Portfolio
$229,473	$	963,721	$	588,767

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the LifePath Master Portfolios benefit from a borrower default indemnity provided by BlackRock. BlackRock’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The LifePath Master Portfolios 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.

104 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued) Master Investment Portfolio

5. Derivative Financial Instruments:

The LifePath Master Portfolios engage in various portfolio investment strategies using derivative contracts both to increase the returns of the LifePath Master Portfolios and/or to manage their exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedules of Investments. These contracts may be transacted on an exchange or OTC.

Futures Contracts: Certain LifePath Master Portfolios invest in long and/or short positions in futures and options on futures contracts to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the LifePath Master Portfolios and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the LifePath Master Portfolios are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statements of Assets and Liabilities. Pursuant to the contract, the LifePath Master Portfolios agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statements of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statements of Operations 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 futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

Forward Foreign Currency Exchange Contracts: Certain LifePath Master Portfolios enter into forward foreign currency exchange contracts to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk).

A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a specified date. These contracts help to manage the overall exposure to the currencies in which some of the investments held by the LifePath Master Portfolios are denominated and in some cases, may be used to obtain exposure to a particular market.

The contract is marked to market daily and the change in market value is recorded as unrealized appreciation (depreciation) in the Statements of Assets and Liabilities. When a contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the value at the time it was opened and the value at the time it was closed. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency. The use of forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

Master Netting Arrangements: In order to define their contractual rights and to secure rights that will help them mitigate their counterparty risk, the LifePath Master Portfolios may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their counterparties. An ISDA Master Agreement is a bilateral agreement between each LifePath Master Portfolio and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, each LifePath Master Portfolio may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to terminate derivative contracts prior to maturity in the event the LifePath Master Portfolios’ net assets decline by a stated percentage or the LifePath Master Portfolios fail to meet the terms of their ISDA Master Agreements. The result would cause the LifePath Master Portfolios to accelerate payment of any net liability owed to the counterparty.

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the LifePath Master Portfolios and the counterparty.

Cash collateral that has been pledged to cover obligations of the LifePath Master Portfolios and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the LifePath Master Portfolios, if any, is noted in the Schedules of Investments. Generally, the amount of collateral due from or to a counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the LifePath Master Portfolios. Any additional required collateral is delivered to/pledged by the LifePath Master Portfolios on the next business day. Typically,

BLACKROCK FUNDS III DECEMBER 31, 2016 105

Notes to Financial Statements (continued) Master Investment Portfolio

the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. A LifePath Master Portfolio generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the LifePath Master Portfolios from their counterparties are not fully collateralized, they bear the risk of loss from counterparty non-performance. Likewise, to the extent the LifePath Master Portfolios have delivered collateral to a counterparty and stand ready to perform under the terms of their agreement with such counterparty, they bear the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.

For financial reporting purposes, the LifePath Master Portfolios do not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statements of Assets and Liabilities.

6. Investment Advisory Agreement and Other Transactions with Affiliates:

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

Investment Advisory: MIP, on behalf of the LifePath Master Portfolios, entered into an Investment Advisory Agreement with BFA, the LifePath Master Portfolios’ investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory services. The Manager is responsible for the management of each LifePath Master Portfolio’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of each LifePath Master Portfolio.

For such services, each LifePath Master Portfolio pays the Manager a monthly fee at an annual rate equal to 0.35% of the average daily value of each LifePath Master Portfolio’s net assets.

With respect to the LifePath Master Portfolios, MIP entered into separate sub-advisory agreements with BlackRock International Limited (“BIL”) and BlackRock (Singapore) Limited (“BRS”), affiliates of the Manager. The Manager pays BIL and BRS, for services they provide, a monthly fee that is a percentage of the investment advisory fees paid by each LifePath Master Portfolio to the Manager.

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

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

Expense Limitations and Waivers: BFA, with respect to each LifePath Master Portfolio, has contractually agreed to waive 0.30% of its advisory fees through April 30, 2018. For the year ended December 31, 2016, the amounts waived are included in fees waived by the Manager in the Statements of Operations as follows:

	LifePath Retirement Master Portfolio		LifePath 2020 Master Portfolio		LifePath 2030 Master Portfolio		LifePath 2040 Master Portfolio		LifePath 2050 Master Portfolio
Amount waived	$	589,551	$	1,566,673	$	1,522,995	$	1,205,283	$	360,151

With respect to each LifePath Master Portfolio, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees each LifePath Master Portfolio pays to the Manager indirectly through its investment in affiliated money market funds. These amounts are included in fees waived by the Manager in the Statements of Operations. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with each LifePath Master Portfolio’s investments in other affiliated investment companies, if any. For the year ended December 31, 2016, the amounts waived were as follows:

	LifePath Retirement Master Portfolio		LifePath 2020 Master Portfolio		LifePath 2030 Master Portfolio		LifePath 2040 Master Portfolio		LifePath 2050 Master Portfolio
Amount waived	$	656	$	2,463	$	3,131	$	3,229	$	1,325

106 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued) Master Investment Portfolio

The fees and expenses of MIP’s trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the LifePath Master Portfolios. BAL has contractually agreed to reimburse the LifePath Master Portfolios or provide an offsetting credit against the administration fees paid by the LifePath Master Portfolios in an amount equal to the independent expenses through April 30, 2027. If the LifePath Master Portfolios do not pay administration fees, BFA agrees to cap the expenses of the LifePath Master Portfolios at the rate at which it pays an investment advisory fee to BFA. For the year ended December 31, 2016, the LifePath Master Portfolios waived the following amounts:

	LifePath Retirement Master Portfolio		LifePath 2020 Master Portfolio		LifePath 2030 Master Portfolio		LifePath 2040 Master Portfolio		LifePath 2050 Master Portfolio
Amount waived	$	19,124	$	25,803	$	25,983	$	26,584	$	26,230

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

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

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The LifePath Master Portfolios retain a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, each LifePath Master Portfolio retains 80% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees. In addition, commencing the business day following the date that the aggregate securities lending income earned across certain funds in the Equity-Liquidity Complex in a calendar year exceeds a specified threshold, each LifePath Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.

The share of securities lending income earned by each LifePath Master Portfolio is shown as securities lending — affiliated – net in the Statements of Operations. For the year ended December 31, 2016, the LifePath Master Portfolios paid BTC the following amounts in total for securities lending agent services and collateral investment fees.

LifePath Retirement Master Portfolio	LifePath 2020 Master Portfolio	LifePath 2030 Master Portfolio	LifePath 2040 Master Portfolio	LifePath 2050 Master Portfolio
$1,985	$6,998	$8,352	$8,410	$2,976

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

Other Transactions: The LifePath Master Portfolios may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common trustees. For the year ended December 31, 2016, the purchase and sale transactions and any net realized gains (losses) with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:

	Purchases		Sales		Net Realized Gain
LifePath Retirement Master Portfolio		—	$	7,870	$	616
LifePath 2020 Master Portfolio		—	$	79,577	$	5,890
LifePath 2030 Master Portfolio		—	$	204,625	$	15,612
LifePath 2040 Master Portfolio		—	$	248,349	$	18,949
LifePath 2050 Master Portfolio		—	$	79,577	$	6,075

Each LifePath Master Portfolio may invest its positive cash balances in certain money market funds managed by the Manager or an affiliate. The income earned on these temporary cash investments is shown as dividends — affiliated in the Statements of Operations.

BLACKROCK FUNDS III DECEMBER 31, 2016 107

Notes to Financial Statements (continued) Master Investment Portfolio

7. Purchase and Sales:

For the year ended December 31, 2016, purchases and sales of investments in the Underlying Funds and Underlying Master Portfolios, excluding short-term securities, were as follows:

	LifePath Retirement Master Portfolio		LifePath 2020 Master Portfolio		LifePath 2030 Master Portfolio		LifePath 2040 Master Portfolio		LifePath 2050 Master Portfolio
Purchases	$	72,974,412	$	259,940,737	$	307,748,118	$	306,889,429	$	82,943,845
Sales	$	184,959,754	$	419,189,168	$	444,151,238	$	403,832,704	$	99,552,810

8. Income Tax Information:

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

Each LifePath Master Portfolio files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each LifePath Master Portfolio’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016. The statutes of limitations on each LifePath Master Portfolio’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the LifePath Master Portfolios as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the LifePath Master Portfolios’ financial statements.

As of December 31, 2016, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

	LifePath Retirement Master Portfolio			LifePath 2020 Master Portfolio			LifePath 2030 Master Portfolio			LifePath 2040 Master Portfolio			LifePath 2050 Master Portfolio
Tax cost	$	109,869,180		$	410,928,827		$	433,446,837		$	335,050,594		$	106,129,958
Gross unrealized appreciation	$	46,385,330		$	34,788,510		$	40,355,472		$	43,287,820		$	11,313,526
Gross unrealized depreciation		(92,434	)		(4,981,995	)		(26,147,804	)		(16,913,463	)		(681,110	)
Net unrealized appreciation	$	46,292,896		$	29,806,515		$	14,207,668		$	26,374,357		$	10,632,416

9. Bank Borrowings:

MIP, on behalf of the LifePath Master Portfolios, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the LifePath Master Portfolios may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the LifePath Master Portfolios, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2017 unless extended or renewed. Prior to April 21, 2016, the credit agreement had a fee per annum of 0.06% on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statements of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2016, the LifePath Master Portfolios did not borrow under the credit agreement.

10. Principal Risks:

In the normal course of business, the LifePath Master Portfolios invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer to meet all its obligations, including the ability to pay principal and interest when due (issuer credit risk). The value of securities held by the LifePath Master Portfolios may decline in response to certain events, including those directly involving the issuers of securities owned by the LifePath Master Portfolios. Changes arising from the general economy, the overall market and local, regional or global political and/or social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

108 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (concluded) Master Investment Portfolio

On October 11, 2016, BlackRock implemented certain changes required by amendments to Rule 2a-7 under the 1940 Act, which governs the operations of U.S. money market funds. The LifePath Master Portfolios may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. A LifePath Master Portfolio may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause each LifePath Master Portfolio’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of a LifePath Master Portfolio may lose value, regardless of the individual results of the securities and other instruments in which the LifePath Master Portfolio invests.

Counterparty Credit Risk: Similar to issuer credit risk, the LifePath Master Portfolios may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The LifePath Master Portfolios manage counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the LifePath Master Portfolios to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the LifePath Master Portfolios’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statements of Assets and Liabilities, less any collateral held by the LifePath Master Portfolios.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

A LifePath Master Portfolio’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by such LifePath Master Portfolio.

With exchange-traded futures, there is less counterparty credit risk to the LifePath Master Portfolios since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a LifePath Master Portfolio does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the LifePath Master Portfolios.

11. 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, 2016 109

Report of Independent Registered Public Accounting Firm Master Investment Portfolio

To the Board of Trustees of Master Investment Portfolio and the Investors of the Funds, as defined:

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of LifePath^® Dynamic Retirement Master Portfolio, LifePath^® Dynamic 2020 Master Portfolio, LifePath^® Dynamic 2030 Master Portfolio, LifePath^® Dynamic 2040 Master Portfolio and LifePath^® Dynamic 2050 Master Portfolio (the “Master Portfolios”), each a series of Master Investment Portfolio, as of December 31, 2016, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolios’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers and the transfer agent of the investee funds, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

110 BLACKROCK FUNDS III DECEMBER 31, 2016

Officers and Trustees¹

Name, Address2 and Year of Birth	Positions(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3
Rodney D. Johnson 1941	Chair of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011; Director, The Mainstay (non-profit) since 2016.	26 RICs consisting of 146 Portfolios	None
Susan J. Carter 1956	Trustee	Since 2016	Director, Pacific Pension Institute since 2014; Advisory Board Member, Center for Private Equity and Entrepreneurship at Tuck School of Business since 1997; Senior Advisor, Commonfund Capital, Inc. (“CCI”) (investment adviser) in 2015; Chief Executive Officer, CCI from 2013 to 2014; President & Chief Executive Officer, CCI from 1997 to 2013; Advisory Board Member, Girls Who Invest since 2015; Advisory Board Member, Bridges Ventures since 2016; Trustee, Financial Accounting Foundation since 2017.	26 RICs consisting of 146 Portfolios	None
Collette Chilton 1958	Trustee	Since 2015	Chief Investment Officer, Williams College since 2006; Chief Investment Officer, Lucent Asset Management Corporation from 1998 to 2006.	26 RICs consisting of 146 Portfolios	None
Neil A. Cotty 1954	Trustee	Since 2016	Bank of America Corporation from 1996 to 2015, serving in various senior finance leadership roles, including Chief Accounting Officer, from 2009 to 2015, Chief Financial Officer of Global Banking, Markets and Wealth Management from 2008 to 2009, Chief Accounting Officer from 2004 to 2008, Chief Financial Officer of Consumer Bank from 2003 to 2004, Chief Financial Officer of Global Corporate Investment Bank from 1999 to 2002.	26 RICs consisting of 146 Portfolios	None
Cynthia A. Montgomery 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012.	26 RICs consisting of 146 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 1947	Trustee	Since 2009	General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Chair, Basic Health International (non-profit) since 2015.	26 RICs consisting of 146 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company); Consol Energy Inc.
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981 and Principal since 2010.	26 RICs consisting of 146 Portfolios	None
Mark Stalnecker 1951	Trustee	Since 2015	Chief Investment Officer, University of Delaware from 1999 to 2013; Trustee, Winterthur Museum and Country Estate from 2001 to 2015; Member of the Investment Committee, Delaware Public Employees’ Retirement System since 2002; Member of the Investment Committee, Christiana Care Health System since 2009; Member of the Investment Committee, Delaware Community Foundation from 2013 to 2014; Director, SEI Private Trust Co. from 2001 to 2014.	26 RICs consisting of 146 Portfolios	None
Kenneth L. Urish 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since founding in 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	26 RICs consisting of 146 Portfolios	None
Claire A. Walton 1957	Trustee	Since 2016	Chief Operating Officer and Chief Financial Officer of Liberty Square Asset Management, LP from 1998 to 2015; General Partner of Neon Liberty Capital Management, LLC since 2003; Director, Boston Hedge Fund Group since 2009; Director, Woodstock Ski Runners since 2013; Director, Massachusetts Council on Economic Education from 2013 to 2015.	26 RICs consisting of 146 Portfolios	None
Frederick W. Winter 1945	Trustee	Since 2009	Director, Alkon Corporation since 1992; Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh, Dean and Professor from 1997 to 2005, Professor until 2013.	26 RICs consisting of 146 Portfolios	None

BLACKROCK FUNDS III DECEMBER 31, 2016 111

Officers and Trustees¹ (continued)

Name, Address2 and Year of Birth	Positions(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Interested Trustees5
Barbara G. Novick 1960	Trustee	Since 2015	Vice Chairman of BlackRock, Inc. since 2006; Chair of BlackRock’s Government Relations Steering Committee since 2009; Head of the Global Client Group of BlackRock, Inc. from 1988 to 2008.	100 RICs consisting of 220 Portfolios	None
John M. Perlowski 1964	Trustee, President and Chief Executive Officer	Since 2015 (Trustee); Since 2010 (President and Chief Executive Officer)	Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Fund & Accounting Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Advisory Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.	128 RICs consisting of 318 Portfolios	None
	1    As of February 24, 2017.
	2    The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	3    Independent Trustees serve until their resignation, retirement, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Independent Trustees on a case-by-case basis, as appropriate.
	4    In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, certain Independent Trustees were elected to the Board. As a result, although the chart shows certain Independent Trustees as joining the Board in 2009, those Independent Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: Rodney D. Johnson, 1995; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1999; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
	5    Ms. Novick and Mr. Perlowski are both “interested persons,” as defined in the 1940 Act, of the Trust/MIP based on their positions with BlackRock and its affiliates. Mr. Perlowski and Ms. Novick are also board members of certain complexes of BlackRock registered open-end and closed-end funds. Mr. Perlowski is also a board member of the BlackRock Equity-Bond Complex and the BlackRock Closed-End Complex, and Ms. Novick is a board member of the BlackRock Closed-End Complex.

112 BLACKROCK FUNDS III DECEMBER 31, 2016

Officers and Trustees(concluded)

Name, Address1 and Year of Birth	Positions(s) Held with the Trust/MIP	Length of Time Served as an Officer	Principal Occupation(s) During Past Five Years
Officers Who Are Not Trustees2
Thomas Callahan 1968	Vice President	Since 2016	Managing Director of BlackRock, Inc. since 2013; Head of BlackRock’s Global Cash Management Business since 2016; Co-Head of the Global Cash Management Business from 2014 to 2016; Deputy Head of the Global Cash Management Business from 2013 to 2014; Member of the Cash Management Group Executive Committee since 2013; Chief Executive Officer of NYSE Liffe U.S. from 2008 to 2013.
Jennifer McGovern 1977	Vice President	Since 2014	Managing Director of BlackRock, Inc. since 2016; Director of BlackRock, Inc. from 2011 to 2015; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal J. Andrews 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock, Inc. 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 M. Fife 1970	Treasurer	Since 2007	Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Charles Park 1967	Chief Compliance Officer	Since 2014	Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Fernanda Piedra 1969	Anti-Money Laundering Compliance Officer	Since 2015	Director of BlackRock, Inc. since 2014; Anti-Money Laundering Compliance Officer and Regional Head of Financial Crime for the Americas at BlackRock, Inc. since 2014; Head of Regulatory Changes and Remediation for the Asset Wealth Management Division of Deutsche Bank from 2010 to 2014; Vice President of Goldman Sachs (Anti-Money Laundering/Suspicious Activities Group) from 2004 to 2010.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock, Inc. since 2014; Director of BlackRock, Inc. from 2010 to 2013; Secretary of the iShares® exchange traded funds since 2015; Secretary of the BlackRock-advised mutual funds since 2012.
	1    The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	2    Officers of the Trust/MIP serve at the pleasure of the Board.
	Further information about the Trust’s/MIP’s Officers and Trustees is available in the Trust’s/MIP’s Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.

Effective December 31, 2016, David O. Beim and Dr. Matina S. Horner resigned as Trustees of the Trust/MIP

Investment Adviser BlackRock Fund Advisors San Francisco, CA 94105	Accounting Agent and Custodian State Street Bank and Trust Company Boston, MA 02110	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Sidley Austin LLP New York, NY 10019
Sub-Advisers BlackRock International Limited Edinburgh EH3 8BL, United Kingdom BlackRock (Singapore) Limited 079912 Singapore	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP Philadelphia, PA 19103	Address of the Trust/MIP 400 Howard Street San Francisco, CA 94105
Administrator BlackRock Advisors, LLC Wilmington, DE 19809

BLACKROCK FUNDS III DECEMBER 31, 2016 113

Additional Information

General Information

Householding

The LifePath 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 LifePath Funds at (800) 441-7762.

Availability of Quarterly Schedule of Investments

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

Availability of Proxy Voting Policies and Procedures

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

Availability of Proxy Voting Record

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

BlackRock’s Mutual Fund Family

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

Shareholder Privileges

Account Information

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

114 BLACKROCK FUNDS III DECEMBER 31, 2016

Additional Information (concluded)

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

BLACKROCK FUNDS III DECEMBER 31, 2016 115

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

LifePath-12/16-AR

DECEMBER 31, 2016

  ANNUAL REPORT

BlackRock Funds III

^Ø   BlackRock LifePath^® Index Retirement Fund

^Ø   BlackRock LifePath^® Index 2020 Fund

^Ø   BlackRock LifePath^® Index 2025 Fund

^Ø   BlackRock LifePath^® Index 2030 Fund

^Ø   BlackRock LifePath^® Index 2035 Fund

^Ø   BlackRock LifePath^® Index 2040 Fund

^Ø   BlackRock LifePath^® Index 2045 Fund

^Ø   BlackRock LifePath^® Index 2050 Fund

^Ø   BlackRock LifePath^® Index 2055 Fund

^Ø   BlackRock LifePath^® Index 2060 Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
The Markets in Review		3
Annual Report:
Fund Summaries		4
About Fund Performance		15
Disclosure of Expenses		15
Fund Financial Statements:
Statements of Assets and Liabilities		17
Statements of Operations		19
Statements of Changes in Net Assets		21
Fund Financial Highlights		26
Fund Notes to Financial Statements		56
Fund Report of Independent Registered Public Accounting Firm		67
Important Tax Information		68
Master Portfolio Information		69
Master Portfolio Financial Statements:
Schedules of Investments		73
Statements of Assets and Liabilities		93
Statements of Operations		95
Statements of Changes in Net Assets		97
Master Portfolio Financial Highlights		100
Master Portfolio Notes to Financial Statements		110
Master Portfolio Report of Independent Registered Public Accounting Firm		117
Officers and Trustees		118
Additional Information		121

2 BLACKROCK FUNDS III DECEMBER 31, 2016

The Markets in Review

Dear Shareholder,

The year 2016 started on a fraught note with worries about slowing growth in China, plunging oil prices and sliding share prices. Then reflationary expectations in the United States helped drive a second-half global growth pick-up and big market reversals. As such, higher-quality asset classes such as Treasury bonds, municipals and investment grade credit prevailed in the first half of the year, only to struggle in the second. In contrast, risk assets sold off at the start of the year and rebounded in the latter half, with some asset classes posting strong year-end returns.

A key takeaway from 2016’s market performance is that economics can trump politics. The global reflationary theme — governments taking policy action to support growth — was the dominant driver of 2016 asset returns, outweighing significant political upheavals and uncertainty. This trend accelerated after the U.S. election on expectations for an extra boost to U.S. growth via fiscal policy.

Markets were remarkably resilient during the year. Spikes in equity volatility after big surprises such as the U.K.’s vote to leave the European Union and the outcome of the U.S. presidential election were short-lived. Instead, political surprises and initial sell-offs were seized upon as buying opportunities. We believe this reinforces the case for taking the long view rather than reacting to short-term market noise.

Asset returns varied widely in 2016. Perceived safe assets such as government bonds and low-volatility shares underperformed the higher-risk areas of the market. And the reversal of longstanding trends created opportunities, such as in the recovery of value stocks and commodities.

We expect some of these trends to extend into 2017 and see the potential for more flows into risk assets this year. Learn more by reading our market insights at blackrock.com.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2016
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		7.82	%		11.96	%
U.S. small cap equities (Russell 2000® Index)		18.68			21.31
International equities (MSCI Europe, Australasia, Far East Index)		5.67			1.00
Emerging market equities (MSCI Emerging Markets Index)		4.49			11.19
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.18			0.33
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		(7.51	)		(0.16	)
U.S. investment grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index)		(2.53	)		2.65
Tax-exempt municipal bonds (S&P Municipal Bond Index)		(3.43	)		0.77
U.S. high yield bonds (Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		7.40			17.13
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, 2016 BlackRock LifePath Index Funds

Portfolio Management Commentary

How did each Fund perform?

• Each of the LifePath Index Funds with target dates of 2020, 2025, 2030, 2035, 2040, 2045, 2050, 2055, 2060 and LifePath Index Retirement Fund (together, the “LifePath Index Funds” or the “Funds”) invest in their respective LifePath Index Master Portfolio.

• For the 12-month period ended December 31, 2016, each of the LifePath Index Funds with target dates of 2020, 2025, 2030, 2035, 2040, 2045, 2050 and 2055 and the LifePath Index Retirement Fund underperformed its respective custom benchmark. For LifePath Index 2060 Fund, since February 29, 2016, the Fund’s Institutional and Class K Shares outperformed the custom benchmark, while Investor A Shares underperformed. The returns for the LifePath Index Funds include fund expenses. The custom benchmarks have no expenses associated with performance.

What factors influenced performance?

• In the near-dated funds, the U.S. Total Bond Index Master Portfolio was the most significant detractor due to the sampling process and transaction costs for trading in the underlying bond positions. In the farther-dated funds, the international instrument iShares Core MSCI Total International Stock ETF detracted due to ETF discount pricing relative to the benchmark.

• The positive impact of fair value pricing in the underlying international strategies, which are held in larger percentages in the farther-dated funds, contributed to relative performance.

Describe recent portfolio activity.

• In early December, the Funds’ real estate exposure was transitioned from two iShares instruments (iShares Cohen & Steers REIT ETF and iShares International Developed Real Estate ETF) to the BlackRock Developed Real Estate Index Fund to minimize tracking error to the FTSE EPRA/NAREIT benchmark.

• Each LifePath Index Fund 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 Fund is systematically adjusted to reflect the shareholders’ remaining investment time horizon. During the period, the LifePath Index Funds were rebalanced in accordance with their updated strategic allocations. Daily cash flows were allocated to the underlying funds and instruments as appropriate. In addition, the LifePath Index 2060 Fund commenced operations on February 29, 2016.

Describe portfolio positioning at period end.

• At period end, each of the LifePath Index Funds was invested according to its respective strategic allocation benchmark within tolerance limits.

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

Glide Path Evolution

Under normal circumstances, the asset allocation of each LifePath Index Fund will change over time according to a predetermined “glide path” as each LifePath Index Fund approaches its respective target date. The glide path represents the shifting of asset classes over time. Each LifePath Index Fund’s asset allocations become 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 Fund, which may be a primary source of income after retirement. As each LifePath Index Fund approaches its target date, its asset allocation will shift so that each LifePath Index Fund invests a greater percentage of its assets in fixed income funds. The asset allocation targets are established by the portfolio managers. The investment team, including the portfolio managers, meets regularly to assess market conditions, review the asset allocation targets of each LifePath Index Fund, and determine whether any

changes are required to enable each LifePath Index Fund to achieve its investment objective.

Although the asset allocation targets listed for the glide path are general, long-term targets, BlackRock Fund Advisors (“BFA” or the “Manager”) may periodically adjust the proportion of equity and fixed income index funds in each LifePath Index Fund, 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 Fund, reallocations of each LifePath Index Fund’s composition to reflect intra-year movement along the glide path and other factors. In general, such adjustments will be limited; however, BFA may determine that a greater degree of variation is warranted to protect a LifePath Index Fund or achieve a LifePath Index Fund’s investment objective.

4 BLACKROCK FUNDS III DECEMBER 31, 2016

BlackRock LifePath Index Retirement Fund

Investment Objective

BlackRock LifePath^® Index Retirement Fund’s (“LifePath Index Retirement Fund” or the “LifePath Index Fund”) investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Fund will be broadly diversified across global asset classes.

Total Return Based on a $10,000 Investment

`

¹  The LifePath Index Fund compares its performance to that of a customized weighted index (the “LifePath Index Retirement Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

The LifePath Index Fund’s custom benchmark consists of the following:

Period3	Bloomberg Barclays U.S. Aggregate Bond Index			Bloomberg Barclays U.S. Treasury Inflation  Protected Securities (TIPS) Index (Series L)			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA IMI Index			Russell 1000® Index			Russell 2000® Index
5/31/11 to 12/31/11		37.1	%		6.0	%		N/A			17.5	%		35.7	%		3.7	%
1/01/12 to 12/31/12		39.0			6.3			1.6	%		16.6			32.9			3.6
1/01/13 to 12/31/13		40.9			6.6			3.1			16.0			29.7			3.7
1/01/14 to 12/31/14		42.1			6.8			3.0			16.0			28.4			3.7
1/01/15 to 12/31/15		40.4			6.7			3.3			16.9			29.3			3.4
1/01/16 to 12/31/16		51.2			8.8			0.6			13.3			22.3			3.8

See “About Fund Performance” on page 15 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2016

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			5 Years			Since  Inception3
Institutional		1.45	%		5.86	%		5.56	%		4.85	%
Investor A		1.33			5.51			5.29			4.58
Class K		1.39			5.82			5.59			4.87
LifePath Index Retirement Fund Custom Benchmark		1.70			6.00			5.77			5.02
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		2.65			2.23			2.83
Bloomberg Barclays U.S. TIPS Index (Series L)		(1.47	)		4.68			0.89			2.23
FTSE EPRA/NAREIT Developed Index		(4.41	)		4.06			9.48			5.61
MSCI ACWI ex USA IMI Index		5.37			4.41			5.35			1.01
Russell 1000® Index		8.01			12.05			14.69			11.76
Russell 2000® Index		18.68			21.31			14.46			10.33

³  The LifePath Index Fund commenced operations on May 31, 2011.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

BLACKROCK FUNDS III DECEMBER 31, 2016 5

BlackRock LifePath Index 2020 Fund

Investment Objective

BlackRock LifePath^® Index 2020 Fund’s (“LifePath Index 2020 Fund” or the “LifePath Index Fund”) investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Fund will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

Total Return Based on a $10,000 Investment

¹  The LifePath Index Fund compares its performance to that of a customized weighted index (the “LifePath Index 2020 Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

The LifePath Index Fund’s custom benchmark consists of the following:

Period3	Bloomberg Barclays U.S. Aggregate Bond Index			Bloomberg Barclays U.S. Treasury Inflation  Protected Securities (TIPS) Index (Series L)			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA IMI Index			Russell 1000® Index			Russell 2000® Index
5/31/11 to 12/31/11		37.1	%		6.0	%		N/A			17.5	%		35.7	%		3.7	%
1/01/12 to 12/31/12		39.0			6.3			1.6	%		16.6			32.9			3.6
1/01/13 to 12/31/13		40.9			6.6			3.1			16.0			29.7			3.7
1/01/14 to 12/31/14		42.1			6.8			3.0			16.0			28.4			3.7
1/01/15 to 12/31/15		40.4			6.7			3.3			16.9			29.3			3.4
1/01/16 to 12/31/16		42.2			7.0			3.0			16.5			27.9			3.4

See “About Fund Performance” on page 15 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2016

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			5 Years			Since  Inception3
Institutional		2.00	%		6.17	%		6.82	%		5.37	%
Investor A		1.88			5.93			6.54			5.09
Class K		2.03			6.32			6.86			5.41
LifePath Index 2020 Fund Custom Benchmark		2.36			6.47			7.02			5.53
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		2.65			2.23			2.83
Bloomberg Barclays U.S. TIPS Index (Series L)		(1.47	)		4.68			0.89			2.23
FTSE EPRA/NAREIT Developed Index		(4.41	)		4.06			9.48			5.61
MSCI ACWI ex USA IMI Index		5.37			4.41			5.35			1.01
Russell 1000® Index		8.01			12.05			14.69			11.76
Russell 2000® Index		18.68			21.31			14.46			10.33

³  The LifePath Index Fund commenced operations on May 31, 2011.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

6 BLACKROCK FUNDS III DECEMBER 31, 2016

BlackRock LifePath Index 2025 Fund

Investment Objective

BlackRock LifePath^® Index 2025 Fund’s (“LifePath Index 2025 Fund” or the “LifePath Index Fund”) investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Fund will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

Total Return Based on a $10,000 Investment

¹  The LifePath Index Fund compares its performance to that of a customized weighted index (the “LifePath Index 2025 Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

The LifePath Index Fund’s custom benchmark consists of the following:

Period3	Bloomberg Barclays U.S. Aggregate Bond Index			Bloomberg Barclays U.S. Treasury Inflation  Protected Securities (TIPS) Index (Series L)			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA IMI Index			Russell 1000® Index			Russell 2000® Index
5/31/11 to 12/31/11		30.0	%		4.7	%		N/A			20.5	%		41.2	%		3.6	%
1/01/12 to 12/31/12		31.9			8.0			2.4	%		19.3			38.1			3.3
1/01/13 to 12/31/13		33.7			5.3			4.8			18.3			34.6			3.3
1/01/14 to 12/31/14		34.5			5.4			4.9			18.5			33.4			3.3
1/01/15 to 12/31/15		30.9			5.0			5.9			20.1			35.1			3.0
1/01/16 to 12/31/16		32.4			5.3			5.8			19.8			33.8			2.9

See “About Fund Performance” on page 15 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2016

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			5 Years			Since  Inception3
Institutional		2.74	%		6.82	%		7.59	%		5.76	%
Investor A		2.62			6.57			7.34			5.51
Class K		2.76			6.87			7.63			5.80
LifePath Index 2025 Fund Custom Benchmark		3.08			7.01			7.77			5.93
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		2.65			2.23			2.83
Bloomberg Barclays U.S. TIPS Index (Series L)		(1.47	)		4.68			0.89			2.23
FTSE EPRA/NAREIT Developed Index		(4.41	)		4.06			9.48			5.61
MSCI ACWI ex USA IMI Index		5.37			4.41			5.35			1.01
Russell 1000® Index		8.01			12.05			14.69			11.76
Russell 2000® Index		18.68			21.31			14.46			10.33

³  The LifePath Index Fund commenced operations on May 31, 2011.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

BLACKROCK FUNDS III DECEMBER 31, 2016 7

BlackRock LifePath Index 2030 Fund

Investment Objective

BlackRock LifePath^® Index 2030 Fund’s (“LifePath Index 2030 Fund” or the “LifePath Index Fund”) investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Fund will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

Total Return Based on a $10,000 Investment

¹  The LifePath Index Fund compares its performance to that of a customized weighted index (the “LifePath Index 2030 Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

The LifePath Index Fund’s custom benchmark consists of the following:

Period3	Bloomberg Barclays U.S. Aggregate Bond Index			Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index (Series  L)			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA IMI Index			Russell 1000® Index			Russell 2000® Index
5/31/11 to 12/31/11		23.8	%		3.5	%		N/A			23.1	%		46.1	%		3.5	%
1/01/12 to 12/31/12		25.8			3.8			3.1	%		21.6			42.6			3.1
1/01/13 to 12/31/13		27.6			4.0			6.2			20.3			38.9			3.0
1/01/14 to 12/31/14		27.7			4.1			6.6			20.9			37.8			2.9
1/01/15 to 12/31/15		21.8			3.4			8.3			23.1			40.8			2.6
1/01/16 to 12/31/16		23.4			3.6			8.3			22.9			39.3			2.5

See “About Fund Performance” on page 15 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2016

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			5 Years			Since  Inception3
Institutional		3.33	%		7.23	%		8.25	%		6.11	%
Investor A		3.30			6.98			8.00			5.86
Class K		3.45			7.29			8.28			6.13
LifePath Index 2030 Fund Custom Benchmark		3.76			7.48			8.42			6.26
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		2.65			2.23			2.83
Bloomberg Barclays U.S. TIPS Index (Series L)		(1.47	)		4.68			0.89			2.23
FTSE EPRA/NAREIT Developed Index		(4.41	)		4.06			9.48			5.61
MSCI ACWI ex USA IMI Index		5.37			4.41			5.35			1.01
Russell 1000® Index		8.01			12.05			14.69			11.76
Russell 2000® Index		18.68			21.31			14.46			10.33

³  The LifePath Index Fund commenced operations on May 31, 2011.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

8 BLACKROCK FUNDS III DECEMBER 31, 2016

BlackRock LifePath Index 2035 Fund

Investment Objective

BlackRock LifePath^® Index 2035 Fund’s (“LifePath Index 2035 Fund” or the “LifePath Index Fund”) investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Fund will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

Total Return Based on a $10,000 Investment

¹  The LifePath Index Fund compares its performance to that of a customized weighted index (the “LifePath Index 2035 Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

The LifePath Index Fund’s custom benchmark consists of the following:

Period3	Bloomberg Barclays U.S. Aggregate Bond Index			Bloomberg Barclays U.S. Treasury Inflation  Protected Securities (TIPS) Index (Series L)			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA IMI Index			Russell 1000® Index			Russell 2000® Index
5/31/11 to 12/31/11		18.2	%		2.4	%		N/A			25.4	%		50.5	%		3.5	%
1/01/12 to 12/31/12		20.3			2.6			3.7	%		23.7			46.7			3.0
1/01/13 to 12/31/13		22.1			2.9			7.5			22.2			42.7			2.6
1/01/14 to 12/31/14		21.6			2.9			8.1			23.0			41.8			2.6
1/01/15 to 12/31/15		13.2			1.9			10.6			26.0			46.0			2.3
1/01/16 to 12/31/16		14.7			2.2			10.7			25.7			44.6			2.1

See “About Fund Performance” on page 15 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2016

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			5 Years			Since  Inception3
Institutional		3.95	%		7.69	%		8.82	%		6.39	%
Investor A		3.83			7.36			8.53			6.10
Class K		3.98			7.74			8.85			6.41
LifePath Index 2035 Fund Custom Benchmark		4.40			7.92			9.00			6.54
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		2.65			2.23			2.83
Bloomberg Barclays U.S. TIPS Index (Series L)		(1.47	)		4.68			0.89			2.23
FTSE EPRA/NAREIT Developed Index		(4.41	)		4.06			9.48			5.61
MSCI ACWI ex USA IMI Index		5.37			4.41			5.35			1.01
Russell 1000® Index		8.01			12.05			14.69			11.76
Russell 2000® Index		18.68			21.31			14.46			10.33

³  The LifePath Index Fund commenced operations on May 31, 2011.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

BLACKROCK FUNDS III DECEMBER 31, 2016 9

BlackRock LifePath Index 2040 Fund

Investment Objective

BlackRock LifePath^® Index 2040 Fund’s (“LifePath Index 2040 Fund” or the “LifePath Index Fund”) investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Fund will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

Total Return Based on a $10,000 Investment

¹  The LifePath Index Fund compares its performance to that of a customized weighted index (the “LifePath Index 2040 Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

The LifePath Index Fund’s custom benchmark consists of the following:

Period3	Bloomberg Barclays U.S. Aggregate Bond Index			Bloomberg Barclays U.S. Treasury Inflation  Protected Securities (TIPS) Index (Series L)			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA IMI Index			Russell 1000® Index			Russell 2000® Index
5/31/11 to 12/31/11		13.1	%		1.3	%		N/A			27.6	%		54.6	%		3.4	%
1/01/12 to 12/31/12		15.3			1.6			4.2	%		25.6			50.5			2.8
1/01/13 to 12/31/13		17.1			1.7			8.7			23.9			46.2			2.4
1/01/14 to 12/31/14		16.3			1.6			9.5			24.9			45.3			2.4
1/01/15 to 12/31/15		5.6			0.7			12.9			28.6			50.1			2.1
1/01/16 to 12/31/16		6.9			0.9			12.9			28.5			48.9			1.9

See “About Fund Performance” on page 15 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2016

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			5 Years			Since  Inception3
Institutional		4.50	%		8.05	%		9.38	%		6.65	%
Investor A		4.39			7.72			9.09			6.38
Class K		4.53			8.10			9.42			6.69
LifePath Index 2040 Fund Custom Benchmark		4.96			8.30			9.52			6.80
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		2.65			2.23			2.83
Bloomberg Barclays U.S. TIPS Index (Series L)		(1.47	)		4.68			0.89			2.23
FTSE EPRA/NAREIT Developed Index		(4.41	)		4.06			9.48			5.61
MSCI ACWI ex USA IMI Index		5.37			4.41			5.35			1.01
Russell 1000® Index		8.01			12.05			14.69			11.76
Russell 2000® Index		18.68			21.31			14.46			10.33

³  The LifePath Index Fund commenced operations on May 31, 2011.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

10 BLACKROCK FUNDS III DECEMBER 31, 2016

BlackRock LifePath Index 2045 Fund

Investment Objective

BlackRock LifePath^® Index 2045 Fund’s (“LifePath Index 2045 Fund” or the “LifePath Index Fund”) investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Fund will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

Total Return Based on a $10,000 Investment

¹  The LifePath Index Fund compares its performance to that of a customized weighted index (the “LifePath Index 2045 Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

The LifePath Index Fund’s custom benchmark consists of the following:

Period3	Bloomberg Barclays U.S. Aggregate Bond Index			Bloomberg Barclays U.S. Treasury Inflation  Protected Securities (TIPS) Index (Series L)			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA IMI Index			Russell 1000® Index			Russell 2000® Index
5/31/11 to 12/31/11		8.7	%		N/A			N/A			29.6	%		58.3	%		3.4	%
1/01/12 to 12/31/12		11.2			N/A			4.8	%		27.4			54.0			2.6
1/01/13 to 12/31/13		13.2			N/A			9.8			25.4			49.5			2.1
1/01/14 to 12/31/14		12.6			N/A			10.7			26.4			48.1			2.2
1/01/15 to 12/31/15		1.8			0.2	%		14.2			30.0			51.7			2.1
1/01/16 to 12/31/16		2.3			0.2			14.6			30.2			50.8			1.9

See “About Fund Performance” on page 15 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2016

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			5 Years			Since  Inception3
Institutional		4.79	%		8.23	%		9.83	%		6.83	%
Investor A		4.67			8.00			9.57			6.57
Class K		4.81			8.28			9.89			6.88
LifePath Index 2045 Fund Custom Benchmark		5.28			8.52			10.01			7.02
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		2.65			2.23			2.83
Bloomberg Barclays U.S. TIPS Index (Series L)		(1.47	)		4.68			0.89			2.23
FTSE EPRA/NAREIT Developed Index		(4.41	)		4.06			9.48			5.61
MSCI ACWI ex USA IMI Index		5.37			4.41			5.35			1.01
Russell 1000® Index		8.01			12.05			14.69			11.76
Russell 2000® Index		18.68			21.31			14.46			10.33

³  The LifePath Index Fund commenced operations on May 31, 2011.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

BLACKROCK FUNDS III DECEMBER 31, 2016 11

BlackRock LifePath Index 2050 Fund

Investment Objective

BlackRock LifePath^® Index 2050 Fund’s (“LifePath Index 2050 Fund” or the “LifePath Index Fund”) investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Fund will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

Total Return Based on a $10,000 Investment

¹  The LifePath Index Fund compares its performance to that of a customized weighted index (the “LifePath Index 2050 Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

The LifePath Index Fund’s custom benchmark consists of the following:

Period3	Bloomberg Barclays U.S. Aggregate Bond Index			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA IMI Index			Russell 1000® Index			Russell 2000® Index
5/31/11 to 12/31/11		3.3	%		N/A			31.6	%		61.7	%		3.4	%
1/01/12 to 12/31/12		5.8			5.3	%		29.2			57.1			2.6
1/01/13 to 12/31/13		7.9			10.8			26.9			52.5			1.9
1/01/14 to 12/31/14		8.3			11.7			27.7			50.4			1.9
1/01/15 to 12/31/15		1.0			14.5			30.3			52.1			2.1
1/01/16 to 12/31/16		1.0			15.0			30.9			51.2			1.9

See “About Fund Performance” on page 15 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2016

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			5 Years			Since  Inception3
Institutional		4.91	%		8.36	%		10.29	%		7.04	%
Investor A		4.72			8.04			10.00			6.76
Class K		4.94			8.41			10.33			7.08
LifePath Index 2050 Fund Custom Benchmark		5.38			8.58			10.44			7.21
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		2.65			2.23			2.83
FTSE EPRA/NAREIT Developed Index		(4.41	)		4.06			9.48			5.61
MSCI ACWI ex USA IMI Index		5.37			4.41			5.35			1.01
Russell 1000® Index		8.01			12.05			14.69			11.76
Russell 2000® Index		18.68			21.31			14.46			10.33

³  The LifePath Index Fund commenced operations on May 31, 2011.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

12 BLACKROCK FUNDS III DECEMBER 31, 2016

BlackRock LifePath Index 2055 Fund

Investment Objective

BlackRock LifePath^® Index 2055 Fund’s (“LifePath Index 2055 Fund” or the “LifePath Index Fund”) investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Fund will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

Total Return Based on a $10,000 Investment

¹  The LifePath Index Fund compares its performance to that of a customized weighted index (the “LifePath Index 2055 Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

The LifePath Index Fund’s custom benchmark consists of the following:

Period3	Bloomberg Barclays U.S. Aggregate Bond Index			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA IMI Index			Russell 1000® Index			Russell 2000® Index
5/31/11 to 12/31/11		1.0	%		N/A			33.2	%		59.8	%		6.0	%
1/01/12 to 12/31/12		1.1			5.9	%		31.4			57.4			4.2
1/01/13 to 12/31/13		2.7			12.2			28.4			54.8			1.9
1/01/14 to 12/31/14		4.2			12.8			29.0			52.1			1.9
1/01/15 to 12/31/15		1.0			14.5			30.3			52.1			2.1
1/01/16 to 12/31/16		1.0			15.0			30.9			51.2			1.9

See “About Fund Performance” on page 15 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2016

	6-Month			Average Annual Total Returns
	Total Returns			1 Year			5 Year			Since  Inception3
Institutional		4.82	%		8.32	%		10.67	%		7.24	%
Investor A		4.71			8.10			10.39			6.97
Class K		4.85			8.37			10.71			7.28
LifePath Index 2055 Fund Custom Benchmark		5.38			8.58			10.79			7.36
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		2.65			2.23			2.83
FTSE EPRA/NAREIT Developed Index		(4.41	)		4.06			9.48			5.61
MSCI ACWI ex USA IMI Index		5.37			4.41			5.35			1.01
Russell 1000® Index		8.01			12.05			14.69			11.76
Russell 2000® Index		18.68			21.31			14.46			10.33

³  The LifePath Index Fund commenced operations on May 31, 2011.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

BLACKROCK FUNDS III DECEMBER 31, 2016 13

BlackRock LifePath Index 2060 Fund

Investment Objective

BlackRock LifePath^® Index 2060 Fund’s (“LifePath Index 2060 Fund” or the “LifePath Index Fund”) investment objective is to seek to provide for retirement outcomes based on quantitatively measured risk. In pursuit of this objective, the LifePath Index Fund will be broadly diversified across global asset classes, with asset allocations becoming more conservative over time.

Total Return Based on a $10,000 Investment

¹  The LifePath Index Fund compares its performance to that of a customized weighted index (the “LifePath Index 2060 Fund Custom Benchmark”), comprised of the indexes indicated below, which reflects the investment adviser’s changes to the benchmark’s weightings over time. The investment adviser adjusts the weightings of these indexes periodically based upon its evaluation and adjustment of the LifePath Index Fund’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

²  Commencement of operations.

The LifePath Index Fund’s custom benchmark consists of the following:

Period3	Bloomberg Barclays U.S. Aggregate Bond Index			FTSE EPRA/NAREIT Developed Index			MSCI ACWI ex USA IMI Index			Russell 1000® Index			Russell 2000® Index
2/29/16 to 12/31/16		1.0	%		15.0	%		30.9	%		51.2	%		1.9	%

See “About Fund Performance” on page 15 for descriptions of the indexes.

Performance Summary for the Period Ended December 31, 2016

	Total Returns
	6-Month			Since  Inception3
Institutional		4.93	%		15.50	%
Investor A		4.85			15.24
Class K		4.95			15.54
LifePath Index 2060 Fund Custom Benchmark		5.38			15.42
Bloomberg Barclays U.S. Aggregate Bond Index		(2.53	)		0.54
FTSE EPRA/NAREIT Developed Index		(4.41	)		8.27
MSCI ACWI ex USA IMI Index		5.37			13.24
Russell 1000® Index		8.01			18.47
Russell 2000® Index		18.68			33.01

³  The LifePath Index Fund commenced operations on February 29, 2016.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

14 BLACKROCK FUNDS III DECEMBER 31, 2016

About Fund Performance

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

• Investor A Shares are not subject to any sales charge and bear no ongoing distribution fee. These shares are subject to an ongoing service fee of 0.25% per year. These shares are generally available through financial intermediaries.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month end. Performance results do not reflect the deduction of taxes that a shareholder would pay on LifePath Index Fund distributions or the redemption of LifePath Index Fund shares. Figures shown in the performance tables on the previous pages assume reinvestment of all distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Distributions paid to each class of shares will vary because of the different levels of service, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders.

BlackRock Advisors, LLC (“BAL” or the “Administrator”), each LifePath Index Funds’ administrator, has contractually agreed to waive and/or reimburse a portion of each LifePath Index Fund’s expenses. Without such waiver and/or reimbursement, each LifePath Index Fund’s performance would have been lower. The Administrator is under no obligation to continue waiving and/or reimbursing its fees after the applicable termination date of such agreement. See Note 4 of the Notes to Financial Statements for additional information on waivers and/or reimbursements.

The LifePath Index Funds’ custom benchmarks are hypothetical representations of the performance of the respective LifePath Index Fund’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 Funds’ custom benchmarks are adjusted quarterly to reflect the LifePath Index Fund’s changing asset allocations over time. As of December 31, 2016, the following indexes are used to calculate the LifePath Index Funds’ custom benchmarks: Bloomberg Barclays U.S. Aggregate Bond Index, Bloomberg Barclays U.S. Treasury Inflation Protected Securities (“TIPS”) Index (Series L), FTSE EPRA/NAREIT Developed Index, MSCI ACWI ex USA IMI Index, Russell 1000^® Index and Russell 2000^® Index.

The Bloomberg Barclays U.S. Aggregate Bond Index is a widely recognized unmanaged market-weighted index comprised of investment-grade corporate bonds rated BBB or better, mortgages and U.S. Treasury and U.S. Government agency issues with at least one year to maturity. The Bloomberg Barclays U.S. TIPS Index (Series L) is a market value-weighted index that tracks inflation-protected securities issued by the U.S. Treasury. The FTSE EPRA/NAREIT Developed Index is a global market capitalization weighted index composed of listed real estate securities from developed market countries in North America, Europe, and Asia. The MSCI ACWI ex USA IMI Index is a free float-adjusted market capitalization weighted index that measures the equity market performance of the developed (excluding the U.S.) and emerging investable market universe. The Russell 1000^® Index is an index that measures the performance of the large cap segment of the U.S. equity universe. It is a subset of the Russell 3000^® Index and includes approximately 1,000 of the largest securities based on a combination of their market capitalization and current index membership. The Russell 1000^® Index represents approximately 92% of the total market capitalization of the Russell 3000^® Index. The Russell 2000^® Index is an unmanaged index that is a subset of the Russell 3000^® Index representing approximately 10% of the total market capitalization of that Index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.

Disclosure of Expenses

Shareholders of each LifePath Index Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including administration fees, service and distribution fees, including 12b-1 fees, and other fund expenses. The expense examples shown below (which are based on a hypothetical investment of $1,000 invested on July 1, 2016 and held through December 31, 2016) are intended to assist shareholders both in calculating expenses based on an investment in a LifePath Index 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 LifePath Index 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 each LifePath Index 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 a LifePath Index Fund and other funds, compare the 5% hypothetical examples with the 5% hypothetical examples that appear in shareholder reports of other funds.

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

BLACKROCK FUNDS III DECEMBER 31, 2016 15

Disclosure of Expenses (concluded)

Expense Examples

	Actual						Hypothetical2
	Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period1		Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period1		Annualized Expense Ratio
LifePath Index Retirement Fund
Institutional	$	1,000.00	$	1,014.50	$	0.66	$	1,000.00	$	1,024.48	$	0.66		0.13%
Investor A	$	1,000.00	$	1,013.30	$	1.92	$	1,000.00	$	1,023.23	$	1.93		0.38%
Class K	$	1,000.00	$	1,013.90	$	0.40	$	1,000.00	$	1,024.73	$	0.41		0.08%
LifePath Index 2020 Fund
Institutional	$	1,000.00	$	1,020.00	$	0.66	$	1,000.00	$	1,024.48	$	0.66		0.13%
Investor A	$	1,000.00	$	1,018.80	$	1.93	$	1,000.00	$	1,023.23	$	1.93		0.38%
Class K	$	1,000.00	$	1,020.30	$	0.41	$	1,000.00	$	1,024.73	$	0.41		0.08%
LifePath Index 2025 Fund
Institutional	$	1,000.00	$	1,027.40	$	0.66	$	1,000.00	$	1,024.48	$	0.66		0.13%
Investor A	$	1,000.00	$	1,026.20	$	1.94	$	1,000.00	$	1,023.23	$	1.93		0.38%
Class K	$	1,000.00	$	1,027.60	$	0.41	$	1,000.00	$	1,024.73	$	0.41		0.08%
LifePath Index 2030 Fund
Institutional	$	1,000.00	$	1,033.30	$	0.66	$	1,000.00	$	1,024.48	$	0.66		0.13%
Investor A	$	1,000.00	$	1,033.00	$	1.94	$	1,000.00	$	1,023.23	$	1.93		0.38%
Class K	$	1,000.00	$	1,034.50	$	0.41	$	1,000.00	$	1,024.73	$	0.41		0.08%
LifePath Index 2035 Fund
Institutional	$	1,000.00	$	1,039.50	$	0.62	$	1,000.00	$	1,024.53	$	0.61		0.12%
Investor A	$	1,000.00	$	1,038.30	$	1.90	$	1,000.00	$	1,023.28	$	1.88		0.37%
Class K	$	1,000.00	$	1,039.80	$	0.36	$	1,000.00	$	1,024.78	$	0.36		0.07%
LifePath Index 2040 Fund
Institutional	$	1,000.00	$	1,045.00	$	0.62	$	1,000.00	$	1,024.53	$	0.61		0.12%
Investor A	$	1,000.00	$	1,043.90	$	1.90	$	1,000.00	$	1,023.28	$	1.88		0.37%
Class K	$	1,000.00	$	1,045.30	$	0.36	$	1,000.00	$	1,024.78	$	0.36		0.07%
LifePath Index 2045 Fund
Institutional	$	1,000.00	$	1,047.90	$	0.57	$	1,000.00	$	1,024.58	$	0.56		0.11%
Investor A	$	1,000.00	$	1,046.70	$	1.85	$	1,000.00	$	1,023.33	$	1.83		0.36%
Class K	$	1,000.00	$	1,048.10	$	0.31	$	1,000.00	$	1,024.83	$	0.31		0.06%
LifePath Index 2050 Fund
Institutional	$	1,000.00	$	1,049.10	$	0.57	$	1,000.00	$	1,024.58	$	0.56		0.11%
Investor A	$	1,000.00	$	1,047.20	$	1.85	$	1,000.00	$	1,023.33	$	1.83		0.36%
Class K	$	1,000.00	$	1,049.40	$	0.31	$	1,000.00	$	1,024.83	$	0.31		0.06%
LifePath Index 2055 Fund
Institutional	$	1,000.00	$	1,048.20	$	0.51	$	1,000.00	$	1,024.63	$	0.51		0.10%
Investor A	$	1,000.00	$	1,047.10	$	1.75	$	1,000.00	$	1,023.43	$	1.73		0.34%
Class K	$	1,000.00	$	1,048.50	$	0.21	$	1,000.00	$	1,024.94	$	0.20		0.04%
LifePath Index 2060 Fund
Institutional	$	1,000.00	$	1,049.30	$	0.57	$	1,000.00	$	1,024.58	$	0.56		0.11%
Investor A	$	1,000.00	$	1,048.50	$	1.75	$	1,000.00	$	1,023.43	$	1.73		0.34%
Class K	$	1,000.00	$	1,049.50	$	0.21	$	1,000.00	$	1,024.94	$	0.20		0.04%

¹  For each class of the LifePath Index 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 each LifePath Index Fund invests all its assets in a LifePath Index Master Portfolio, the expense examples reflect the net expenses of both the LifePath Index Fund and the LifePath Index Master Portfolio in which it invests.

²  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366.

16 BLACKROCK FUNDS III DECEMBER 31, 2016

Statements of Assets and Liabilities

December 31, 2016	BlackRock LifePath Index Retirement Fund			BlackRock LifePath Index 2020 Fund			BlackRock LifePath Index 2025 Fund			BlackRock LifePath Index 2030 Fund			BlackRock LifePath Index 2035 Fund
Assets
Investments at value — from the applicable LifePath Index Master Portfolio1	$	810,493,654		$	1,677,374,094		$	1,435,843,752		$	1,911,124,311		$	1,169,904,170
Receivables:
Capital shares sold		3,418,830			11,065,112			6,361,615			9,423,768			5,236,408
From the Administrator		39,144			56,749			58,435			73,356			52,186
Prepaid expenses		19,053			19,045			17,054			18,884			19,375
Total assets		813,970,681			1,688,515,000			1,442,280,856			1,920,640,319			1,175,212,139
Liabilities
Payables:
Capital gains distributions		89,910			52,876			5,564			55,715			2,460
Capital shares redeemed		1,324,435			3,777,676			347,307			2,464,300			336,396
Contributions to the LifePath Index Master Portfolio		2,094,395			7,287,436			6,014,308			6,959,468			4,900,012
Income dividends		97,774			75,167			16,034			125,480			9,742
Other accrued expenses		3,560			12,139			4,783			18,989			1,339
Printing fees		6,194			5,427			5,921			6,038			6,057
Professional fees		20,389			18,867			20,357			19,574			21,349
Registration fees		28,867			54,322			58,785			74,141			48,970
Service fees		15,093			33,783			27,704			44,119			26,021
Transfer agent fees		33,787			40,288			36,264			38,143			32,949
Total liabilities		3,714,404			11,357,981			6,537,027			9,805,967			5,385,295
Net Assets	$	810,256,277		$	1,677,157,019		$	1,435,743,829		$	1,910,834,352		$	1,169,826,844
Net Assets Consist of
Paid-in capital	$	781,259,152		$	1,602,633,541		$	1,380,954,387		$	1,815,727,792		$	1,114,907,600
Distributions in excess of net investment income		(1,298,286	)		(2,546,060	)		(1,503,161	)		(2,076,131	)		(912,878	)
Accumulated net realized gain allocated from the applicable LifePath Index Master Portfolio		16,194,989			41,039,575			18,471,073			40,459,468			15,693,820
Net unrealized appreciation (depreciation) allocated from the applicable LifePath Index Master Portfolio		14,100,422			36,029,963			37,821,530			56,723,223			40,138,302
Net Assets	$	810,256,277		$	1,677,157,019		$	1,435,743,829		$	1,910,834,352		$	1,169,826,844
Net Asset Value
Institutional:
Net assets	$	71,606,294		$	87,573,043		$	76,592,744		$	99,722,199		$	61,938,968
Shares outstanding2		6,320,253			7,542,726			6,437,918			8,317,343			5,081,638
Net asset value	$	11.33		$	11.61		$	11.90		$	11.99		$	12.19
Investor A:
Net assets	$	72,285,569		$	161,273,060		$	133,513,960		$	209,757,386		$	124,020,977
Shares outstanding2		6,385,552			13,912,370			11,233,618			17,501,154			10,196,663
Net asset value	$	11.32		$	11.59		$	11.89		$	11.99		$	12.16
Class K:
Net assets	$	666,364,414		$	1,428,310,916		$	1,225,637,125		$	1,601,354,767		$	983,866,899
Shares outstanding2		58,847,295			123,038,722			102,982,443			133,690,180			80,785,193
Net asset value	$	11.32		$	11.61		$	11.90		$	11.98		$	12.18
1   Investments at cost — from the applicable LifePath Index Master Portfolio	$	796,393,232		$	1,641,344,131		$	1,398,022,222		$	1,854,401,088		$	1,129,765,868
2   No par value, unlimited number of shares authorized.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	17

Statements of Assets and Liabilities

December 31, 2016	BlackRock LifePath Index 2040 Fund			BlackRock LifePath Index 2045 Fund			BlackRock LifePath Index 2050 Fund			BlackRock LifePath Index 2055 Fund			BlackRock LifePath Index 2060 Fund
Assets
Investments at value — from the applicable LifePath Index Master Portfolio1	$	1,354,879,964		$	691,626,409		$	649,847,712		$	251,013,241		$	10,742,990
Receivables:
Capital shares sold		6,773,196			3,427,838			6,423,276			3,700,749			35,380
From the Administrator		58,485			12,373			38,284			2,458			33,033
Deferred offering costs		—			—			—			—			26,434
Prepaid expenses		19,432			15,747			17,913			14,942			36,409
Total assets		1,361,731,077			695,082,367			656,327,185			254,731,390			10,874,246
Liabilities
Payables:
Capital gains distributions		25,954			1,832			2,528			239			429
Capital shares redeemed		3,494,115			208,508			4,114,135			1,965,000			7,922
Contributions to the LifePath Index Master Portfolio		3,279,081			3,219,330			2,309,141			1,735,749			27,458
Income dividends		85,343			10,677			15,329			1,533			7,032
Offering costs		—			—			—			—			74,085
Other accrued expenses		9,488			588			2,321			579			725
Printing fees		5,961			6,277			6,264			6,454			—
Professional fees		20,335			21,707			21,590			22,996			17,671
Registration fees		52,650			30,671			27,169			12,253			852
Service fees		28,296			12,789			12,497			5,576			72
Transfer agent fees		31,610			—			27,980			—			—
Total liabilities		7,032,833			3,512,379			6,538,954			3,750,379			136,246
Net Assets	$	1,354,698,244		$	691,569,988		$	649,788,231		$	250,981,011		$	10,738,000
Net Assets Consist of
Paid-in capital	$	1,281,718,074		$	658,658,936		$	618,793,011		$	240,472,704		$	10,520,253
Distributions in excess of net investment income		(1,095,324	)		(422,519	)		(401,913	)		(116,888	)		(2,036	)
Accumulated net realized gain (loss) allocated from the applicable LifePath Index Master Portfolio		26,187,060			7,748,517			7,718,169			480,088			(92,594	)
Net unrealized appreciation (depreciation) allocated from the applicable LifePath Index Master Portfolio		47,888,434			25,585,054			23,678,964			10,145,107			312,377
Net Assets	$	1,354,698,244		$	691,569,988		$	649,788,231		$	250,981,011		$	10,738,000
Net Asset Value
Institutional:
Net assets	$	68,323,816		$	45,760,273		$	40,195,872		$	26,560,793		$	118,145
Shares outstanding2		5,560,558			3,665,733			3,178,303			2,062,171			10,398
Net asset value	$	12.29		$	12.48		$	12.65		$	12.88		$	11.36
Investor A:
Net assets	$	134,897,183		$	61,641,510		$	60,051,047		$	27,025,774		$	386,363
Shares outstanding2		10,996,712			4,946,564			4,757,154			2,101,988			34,032
Net asset value	$	12.27		$	12.46		$	12.62		$	12.86		$	11.35
Class K:
Net assets	$	1,151,477,245		$	584,168,205		$	549,541,312		$	197,394,444		$	10,233,492
Shares outstanding2		93,728,530			46,765,002			43,453,305			15,325,324			900,540
Net asset value	$	12.29		$	12.49		$	12.65		$	12.88		$	11.36
1   Investments at cost — from the applicable LifePath Index Master Portfolio	$	1,306,991,530		$	666,041,355		$	626,168,748		$	240,868,134		$	10,430,613
2   No par value, unlimited number of shares authorized.

See Notes to Financial Statements.
18	BLACKROCK FUNDS III	DECEMBER 31, 2016

Statements of Operations

Year Ended December 31, 2016	BlackRock LifePath Index Retirement Fund			BlackRock LifePath Index 2020 Fund			BlackRock LifePath Index 2025 Fund			BlackRock LifePath Index 2030 Fund			BlackRock LifePath Index 2035 Fund
Investment Income
Net investment income allocated from the applicable LifePath Index Master Portfolio:
Dividends — affiliated	$	6,552,822		$	17,332,162		$	16,660,222		$	25,791,077		$	17,313,511
Interest — affiliated		6,578,727			11,670,873			7,226,688			7,107,371			2,750,375
Securities lending — affiliated — net		12,001			20,569			45,509			43,100			29,437
Expenses		(602,605	)		(1,259,532	)		(980,893	)		(1,309,048	)		(769,395	)
Fees waived		109,601			190,037			149,364			172,155			192,642
Total investment income		12,650,546			27,954,109			23,100,890			31,804,655			19,516,570
Fund Expenses
Administration		184,777			395,659			315,733			422,273			250,564
Service and distribution — class specific		160,625			323,590			289,098			388,911			269,553
Transfer agent — class specific		112,907			159,744			142,672			173,820			135,020
Registration		79,628			115,038			108,799			135,768			97,553
Professional		32,271			35,277			33,670			35,764			32,722
Printing		18,724			23,779			21,436			23,977			20,062
Miscellaneous		8,537			9,575			8,678			9,668			8,250
Recoupment of past waived fees — class specific		3,615			11,930			5,246			19,606			1,564
Total expenses		601,084			1,074,592			925,332			1,209,787			815,288
Less:
Fees waived by the Administrator		(184,777	)		(395,659	)		(315,733	)		(422,273	)		(250,564	)
Fees reimbursed by Administrator		(138,032	)		(182,541	)		(172,187	)		(204,049	)		(158,419	)
Transfer agent fees waived and/or reimbursed — class specific		(47,851	)		(63,068	)		(51,358	)		(69,145	)		(52,210	)
Total expenses after fees waived and/or reimbursed		230,424			433,324			386,054			514,320			354,095
Net investment income		12,420,122			27,520,785			22,714,836			31,290,335			19,162,475
Realized and Unrealized Gain (Loss) Allocated from the applicable LifePath Index Master Portfolio
Net realized gain (loss) from investments		495,436			987,000			(2,868,393	)		(4,141,751	)		(4,188,070	)
Net change in unrealized appreciation (depreciation) on investments		19,161,625			47,041,353			48,798,801			70,914,184			50,669,306
Net realized and unrealized gain		19,657,061			48,028,353			45,930,408			66,772,433			46,481,236
Net Increase in Net Assets Resulting from Operations	$	32,077,183		$	75,549,138		$	68,645,244		$	98,062,768		$	65,643,711

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	19

Statements of Operations

Year Ended December 31, 2016	BlackRock LifePath Index 2040 Fund			BlackRock LifePath Index 2045 Fund			BlackRock LifePath Index 2050 Fund			BlackRock LifePath Index 2055 Fund			BlackRock LifePath Index 2060 Fund1
Investment Income
Net investment income allocated from the LifePath Index Master Portfolio:
Dividends — affiliated	$	22,176,166		$	11,425,264		$	11,094,425		$	4,104,347		$	83,792
Interest — affiliated		1,674,671			370,966			246,657			85,323			1,485
Securities lending — affiliated — net		31,475			20,158			20,654			11,920			—
Expenses		(892,280	)		(443,694	)		(427,694	)		(176,721	)		(46,842	)
Fees waived		208,129			168,737			161,885			103,664			45,597
Total investment income		23,198,161			11,541,431			11,095,927			4,128,533			84,032
Fund Expenses
Administration		291,491			141,728			136,258			49,550			916
Service and distribution — class specific		238,796			127,586			102,241			49,172			281
Transfer agent — class specific		136,548			101,365			103,354			82,812			1,173
Registration		112,637			76,590			82,278			55,163			4,492
Professional		33,633			31,034			30,678			29,561			21,970
Printing		21,192			17,942			18,015			16,126			4,457
Offering cost		—			—			—			—			134,866
Independent Trustees		—			—			—			31			—
Organization		—			—			—			—			10,912
Miscellaneous		8,425			7,774			7,774			7,744			5,141
Recoupment of past waived fees — class specific		9,782			49			1,705			—			—
Total expenses excluding interest expense and fees		852,504			504,068			482,303			290,159			184,208
Less:
Fees waived by the Administrator		(291,491	)		(141,728	)		(136,258	)		(49,550	)		(916	)
Fees reimbursed by Administrator		(175,719	)		(133,284	)		(138,688	)		(108,570	)		(181,838	)
Transfer agent fees waived and/or reimbursed — class specific		(64,584	)		(52,344	)		(64,516	)		(61,099	)		(1,105	)
Total expenses after fees waived and/or reimbursed		320,710			176,712			142,841			70,940			349
Net investment income		22,877,451			11,364,719			10,953,086			4,057,593			83,683
Realized and Unrealized Gain (Loss) Allocated from the LifePath Index Master Portfolio
Net realized loss from investments		(5,823,261	)		(3,669,490	)		(4,050,177	)		(1,441,659	)		(88,577	)
Net change in unrealized appreciation (depreciation) on investments		61,242,373			33,053,757			31,821,083			12,158,107			312,377
Net realized and unrealized gain		55,419,112			29,384,267			27,770,906			10,716,448			223,800
Net Increase in Net Assets Resulting from Operations	$	78,296,563		$	40,748,986		$	38,723,992		$	14,774,041		$	307,483
1    Commenced operations on February 29, 2016.

See Notes to Financial Statements.
20	BLACKROCK FUNDS III	DECEMBER 31, 2016

Statements of Changes in Net Assets

	BlackRock LifePath Index Retirement Fund						BlackRock LifePath Index 2020 Fund
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	12,420,122		$	8,641,794		$	27,520,785		$	19,700,454
Net realized gain (loss)		495,436			25,091,156			987,000			57,467,254
Net change in unrealized appreciation (depreciation)		19,161,625			(35,849,607	)		47,041,353			(83,870,133	)
Net increase (decrease) in net assets resulting from operations		32,077,183			(2,116,657	)		75,549,138			(6,702,425	)
Distributions to Shareholders1
From net investment income:
Institutional		(1,415,283	)		(1,277,848	)		(1,809,289	)		(1,703,517	)
Investor A		(1,099,578	)		(1,083,250	)		(2,307,356	)		(2,187,020	)
Class K		(10,239,683	)		(6,712,304	)		(24,224,618	)		(16,717,448	)
From net realized gain:
Institutional		(396,435	)		(671,047	)		(356,080	)		(797,026	)
Investor A		(387,014	)		(661,044	)		(647,953	)		(1,155,335	)
Class K		(3,507,754	)		(3,568,084	)		(5,692,807	)		(7,783,760	)
Decrease in net assets resulting from distributions to shareholders		(17,045,747	)		(13,973,577	)		(35,038,103	)		(30,344,106	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		295,487,788			84,341,187			561,515,855			231,104,256
Net Assets
Total increase in net assets		310,519,224			68,250,953			602,026,890			194,057,725
Beginning of year		499,737,053			431,486,100			1,075,130,129			881,072,404
End of year	$	810,256,277		$	499,737,053		$	1,677,157,019		$	1,075,130,129
Distributions in excess of net investment income, end of year	$	(1,298,286	)	$	(963,864	)	$	(2,546,060	)	$	(1,725,582	)

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

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	21

Statements of Changes in Net Assets

	BlackRock LifePath Index 2025 Fund						BlackRock LifePath Index 2030 Fund
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	22,714,836		$	13,183,833		$	31,290,335		$	20,906,687
Net realized gain (loss)		(2,868,393	)		29,568,229			(4,141,751	)		61,509,874
Net change in unrealized appreciation (depreciation)		48,798,801			(48,301,927	)		70,914,184			(90,984,619	)
Net increase (decrease) in net assets resulting from operations		68,645,244			(5,549,865	)		98,062,768			(8,568,058	)
Distributions to Shareholders1
From net investment income:
Institutional		(1,594,498	)		(1,377,536	)		(2,064,771	)		(1,813,762	)
Investor A		(2,129,053	)		(1,805,811	)		(2,923,963	)		(2,626,280	)
Class K		(19,570,027	)		(10,608,523	)		(27,026,495	)		(17,338,274	)
From net realized gain:
Institutional		(162,965	)		(407,135	)		(287,713	)		(716,183	)
Investor A		(284,149	)		(592,391	)		(599,477	)		(1,160,733	)
Class K		(2,593,407	)		(3,270,147	)		(4,573,876	)		(7,146,165	)
From return of capital:
Institutional		(3,595	)		(9,315	)		(2,894	)		—
Investor A		(5,289	)		(13,769	)		(4,640	)		—
Class K		(39,319	)		(65,804	)		(34,619	)		—
Decrease in net assets resulting from distributions to shareholders		(26,382,302	)		(18,150,431	)		(37,518,448	)		(30,801,397	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		616,967,146			282,075,364			773,637,326			297,955,479
Net Assets
Total increase in net assets		659,230,088			258,375,068			834,181,646			258,586,024
Beginning of year		776,513,741			518,138,673			1,076,652,706			818,066,682
End of year	$	1,435,743,829		$	776,513,741		$	1,910,834,352		$	1,076,652,706
Distributions in excess of net investment income, end of year	$	(1,503,161	)	$	(924,419	)	$	(2,076,131	)	$	(1,415,570	)

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

See Notes to Financial Statements.
22	BLACKROCK FUNDS III	DECEMBER 31, 2016

Statements of Changes in Net Assets

	BlackRock LifePath Index 2035 Fund						BlackRock LifePath Index 2040 Fund
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	19,162,475		$	11,244,213		$	22,877,451		$	15,551,462
Net realized gain (loss)		(4,188,070	)		27,014,851			(5,823,261	)		43,354,569
Net change in unrealized appreciation (depreciation)		50,669,306			(43,393,602	)		61,242,373			(66,075,844	)
Net increase (decrease) in net assets resulting from operations		65,643,711			(5,134,538	)		78,296,563			(7,169,813	)
Distributions to Shareholders1
From net investment income:
Institutional		(1,339,405	)		(1,117,568	)		(1,570,527	)		(1,422,218	)
Investor A		(2,108,791	)		(1,835,251	)		(1,909,212	)		(1,669,244	)
Class K		(16,052,312	)		(8,692,886	)		(19,751,840	)		(12,960,520	)
From net realized gain:
Institutional		(103,800	)		(373,420	)		(146,130	)		(569,482	)
Investor A		(208,486	)		(639,622	)		(283,781	)		(758,603	)
Class K		(1,645,488	)		(2,991,293	)		(2,410,320	)		(5,436,087	)
From return of capital:
Institutional		—			—			(3,352	)		—
Investor A		—			—			(4,527	)		—
Class K		—			—			(38,380	)		—
Decrease in net assets resulting from distributions to shareholders		(21,458,282	)		(15,650,040	)		(26,118,069	)		(22,816,154	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		516,086,230			220,348,776			551,225,731			234,932,488
Net Assets
Total increase in net assets		560,271,659			199,564,198			603,404,225			204,946,521
Beginning of year		609,555,185			409,990,987			751,294,019			546,347,498
End of year	$	1,169,826,844		$	609,555,185		$	1,354,698,244		$	751,294,019
Distributions in excess of net investment income, end of year	$	(912,878	)	$	(574,845	)	$	(1,095,324	)	$	(741,196	)

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

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	23

Statements of Changes in Net Assets

	BlackRock LifePath Index 2045 Fund						BlackRock LifePath Index 2050 Fund
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	11,364,719		$	6,791,462		$	10,953,086		$	7,132,242
Net realized gain (loss)		(3,669,490	)		15,256,959			(4,050,177	)		15,525,064
Net change in unrealized appreciation (depreciation)		33,053,757			(25,245,810	)		31,821,083			(26,110,210	)
Net increase (decrease) in net assets resulting from operations		40,748,986			(3,197,389	)		38,723,992			(3,452,904	)
Distributions to Shareholders1
From net investment income:
Institutional		(1,050,895	)		(959,840	)		(942,459	)		(848,474	)
Investor A		(1,054,376	)		(878,566	)		(847,800	)		(637,156	)
Class K		(9,413,775	)		(5,161,906	)		(9,304,550	)		(5,861,725	)
From net realized gain:
Institutional		(56,706	)		(322,391	)		(54,860	)		(273,605	)
Investor A		(76,305	)		(327,816	)		(73,983	)		(236,197	)
Class K		(718,183	)		(1,825,857	)		(674,937	)		(1,956,362	)
From return of capital:
Institutional		(5,451	)		—			(2,961	)		—
Investor A		(5,844	)		—			(2,901	)		—
Class K		(42,909	)		—			(26,536	)		—
Decrease in net assets resulting from distributions to shareholders		(12,424,444	)		(9,476,376	)		(11,930,987	)		(9,813,519	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		322,019,423			127,142,109			285,927,767			117,465,063
Net Assets
Total increase in net assets		350,343,965			114,468,344			312,720,772			104,198,640
Beginning of year		341,226,023			226,757,679			337,067,459			232,868,819
End of year	$	691,569,988		$	341,226,023		$	649,788,231		$	337,067,459
Distributions in excess of net investment income, end of year	$	(422,519	)	$	(268,192	)	$	(401,913	)	$	(260,190	)

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

See Notes to Financial Statements.
24	BLACKROCK FUNDS III	DECEMBER 31, 2016

Statements of Changes in Net Assets

	BlackRock LifePath Index 2055 Fund						BlackRock LifePath Index 2060 Fund
	Year Ended December 31,						Period February 29, 20161 to December 31, 2016
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	4,057,593		$	2,091,558		$	83,683
Net realized gain (loss)		(1,441,659	)		3,730,516			(88,577	)
Net change in unrealized appreciation (depreciation)		12,158,107			(6,917,381	)		312,377
Net increase (decrease) in net assets resulting from operations		14,774,041			(1,095,307	)		307,483
Distributions to Shareholders2
From net investment income:
Institutional		(564,500	)		(383,507	)		(1,266	)
Investor A		(427,098	)		(263,372	)		(2,905	)
Class K		(3,116,295	)		(1,505,805	)		(81,548	)
From net realized gain:
Institutional		(38,068	)		(99,073	)		(44	)
Investor A		(35,292	)		(76,262	)		(145	)
Class K		(248,468	)		(391,251	)		(3,828	)
From return of capital:
Institutional		(2,930	)		—			(9	)
Investor A		(2,374	)		—			(19	)
Class K		(14,712	)		—			(511	)
Decrease in net assets resulting from distributions to shareholders		(4,449,737	)		(2,719,270	)		(90,275	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		133,646,388			48,966,574			10,520,792
Net Assets
Total increase in net assets		143,970,692			45,151,997			10,738,000
Beginning of year		107,010,319			61,858,322			—
End of year	$	250,981,011		$	107,010,319		$	10,738,000
Distributions in excess of net investment income, end of year	$	(116,888	)	$	(66,588	)	$	(2,036	)

¹  Commencement of operations.

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

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	25

Financial Highlights BlackRock LifePath Index Retirement Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.97		$	11.33		$	11.05		$	10.49		$	9.77
Net investment income1		0.23			0.21			0.21			0.18			0.21
Net realized and unrealized gain (loss)		0.41			(0.25	)		0.42			0.62			0.68
Net increase (decrease) from investment operations		0.64			(0.04	)		0.63			0.80			0.89
Distributions:2
From net investment income		(0.22	)		(0.21	)		(0.21	)		(0.19	)		(0.15	)
From net realized gain		(0.06	)		(0.11	)		(0.14	)		(0.05	)		(0.02	)
Total distributions		(0.28	)		(0.32	)		(0.35	)		(0.24	)		(0.17	)
Net asset value, end of year	$	11.33		$	10.97		$	11.33		$	11.05		$	10.49
Total Return3
Based on net asset value		5.86%			(0.36)%			5.73%			7.68%			9.16%
Ratios to Average Net Assets4
Total expenses5,6		0.19%			0.21%			0.23%			0.26%			0.38%
Total expenses after fees waived and/or reimbursed5,6		0.13%			0.14%			0.16%			0.18%			0.16%
Net investment income5,6		2.02%			1.79%			1.82%			1.70%			2.00%
Supplemental Data
Net assets, end of year (000)	$	71,606		$	68,492		$	68,385		$	39,793		$	20,223
Portfolio turnover rate of the LifePath Index Master Portfolio		13%	7		25%	7		15%	7		18%	7		1%	8

¹  Based on average shares outstanding.

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

³  Where applicable, assumes the reinvestment of distributions.

⁴  Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁵  Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.02%, 0.02%, 0.03%, 0.02%, and 0.06% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁶  Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.03%		0.03%		0.03%		0.02%		0.02%

⁷  Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁸  Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
26	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Index Retirement Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.97		$	11.33		$	11.05		$	10.49		$	9.77
Net investment income1		0.20			0.17			0.17			0.16			0.18
Net realized and unrealized gain (loss)		0.40			(0.24	)		0.43			0.62			0.69
Net increase (decrease) from investment operations		0.60			(0.07	)		0.60			0.78			0.87
Distributions:2
From net investment income		(0.19	)		(0.18	)		(0.18	)		(0.17	)		(0.13	)
From net realized gain		(0.06	)		(0.11	)		(0.14	)		(0.05	)		(0.02	)
Total distributions		(0.25	)		(0.29	)		(0.32	)		(0.22	)		(0.15	)
Net asset value, end of year	$	11.32		$	10.97		$	11.33		$	11.05		$	10.49
Total Return3
Based on net asset value		5.51%			(0.61)%			5.50%			7.44%			8.88%
Ratios to Average Net Assets4
Total expenses5,6		0.44%			0.46%			0.48%			0.51%			0.81%
Total expenses after fees waived and/or reimbursed5,6		0.38%			0.39%			0.41%			0.43%			0.41%
Net investment income5,6		1.75%			1.54%			1.55%			1.45%			1.71%
Supplemental Data
Net assets, end of year (000)	$	72,286		$	61,886		$	55,156		$	28,215		$	7,967
Portfolio turnover rate of the LifePath Index Master Portfolio		13%	7		25%	7		15%	7		18%	7		1%	8

¹ Based on average shares outstanding.

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

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.02%, 0.02%, 0.03%, 0.02%, and 0.13% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁶  Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.03%		0.03%		0.03%		0.02%		0.02%

⁷ Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁸ Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	27

Financial Highlights (concluded) BlackRock LifePath Index Retirement Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.97		$	11.33		$	11.05		$	10.49		$	9.77
Net investment income1		0.23			0.20			0.21			0.19			0.21
Net realized and unrealized gain (loss)		0.40			(0.23	)		0.42			0.61			0.69
Net increase (decrease) from investment operations		0.63			(0.03	)		0.63			0.80			0.90
Distributions:2
From net investment income		(0.22	)		(0.22	)		(0.21	)		(0.19	)		(0.16	)
From net realized gain		(0.06	)		(0.11	)		(0.14	)		(0.05	)		(0.02	)
Total distributions		(0.28	)		(0.33	)		(0.35	)		(0.24	)		(0.18	)
Net asset value, end of year	$	11.32		$	10.97		$	11.33		$	11.05		$	10.49
Total Return3
Based on net asset value		5.82%			(0.31)%			5.78%			7.72%			9.17%
Ratios to Average Net Assets4
Total expenses5,6		0.14%			0.15%			0.19%			0.22%			0.28%
Total expenses after fees waived and/or reimbursed5,6		0.08%			0.09%			0.11%			0.14%			0.15%
Net investment income5,6		2.05%			1.84%			1.87%			1.74%			2.02%
Supplemental Data
Net assets, end of year (000)	$	666,364		$	369,359		$	307,946		$	253,463		$	173,667
Portfolio turnover rate of the LifePath Index Master Portfolio		13%	7		25%	7		15%	7		18%	7		1%	8

¹ Based on average shares outstanding.

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

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.02%, 0.02%, 0.03%, 0.02%, and 0.04% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁶  Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.03%		0.03%		0.03%		0.02%		0.02%

⁷ Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁸ Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
28	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights BlackRock LifePath Index 2020 Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.20		$	11.57		$	11.25		$	10.36		$	9.48
Net investment income1		0.24			0.22			0.22			0.22			0.22
Net realized and unrealized gain (loss)		0.45			(0.27	)		0.46			0.94			0.85
Net increase (decrease) from investment operations		0.69			(0.05	)		0.68			1.16			1.07
Distributions:2
From net investment income		(0.23	)		(0.22	)		(0.22	)		(0.21	)		(0.16	)
From net realized gain		(0.05	)		(0.10	)		(0.14	)		(0.06	)		(0.03	)
Total distributions		(0.28	)		(0.32	)		(0.36	)		(0.27	)		(0.19	)
Net asset value, end of year	$	11.61		$	11.20		$	11.57		$	11.25		$	10.36
Total Return3
Based on net asset value		6.17%			(0.38)%			6.10%			11.32%			11.35%
Ratios to Average Net Assets4
Total expenses5,6		0.18%			0.20%			0.22%			0.26%			0.36%
Total expenses after fees waived and/or reimbursed5,6		0.13%			0.14%			0.16%			0.18%			0.17%
Net investment income5,6		2.08%			1.89%			1.93%			1.98%			2.14%
Supplemental Data
Net assets, end of year (000)	$	87,573		$	89,773		$	81,485		$	42,447		$	19,786
Portfolio turnover rate of the LifePath Index Master Portfolio		14%	7		14%	7		12%	7		12%	7		1%	8

¹ Based on average shares outstanding.

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

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.01%, 0.02%, 0.02%, 0.01%, and 0.06% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁶ Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.04%		0.04%		0.04%		0.03%		0.03%

⁷ Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁸ Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 13% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	29

Financial Highlights (continued) BlackRock LifePath Index 2020 Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.18		$	11.55		$	11.23		$	10.35		$	9.48
Net investment income1		0.20			0.19			0.19			0.19			0.19
Net realized and unrealized gain (loss)		0.46			(0.26	)		0.46			0.94			0.85
Net increase (decrease) from investment operations		0.66			(0.07	)		0.65			1.13			1.04
Distributions:2
From net investment income		(0.20	)		(0.20	)		(0.19	)		(0.19	)		(0.14	)
From net realized gain		(0.05	)		(0.10	)		(0.14	)		(0.06	)		(0.03	)
Total distributions		(0.25	)		(0.30	)		(0.33	)		(0.25	)		(0.17	)
Net asset value, end of year	$	11.59		$	11.18		$	11.55		$	11.23		$	10.35
Total Return3
Based on net asset value		5.93%			(0.63)%			5.87%			10.99%			10.98%
Ratios to Average Net Assets4
Total expenses5,6		0.43%			0.45%			0.47%			0.51%			0.68%
Total expenses after fees waived and/or reimbursed5,6		0.38%			0.39%			0.41%			0.44%			0.42%
Net investment income5,6		1.79%			1.64%			1.68%			1.75%			1.85%
Supplemental Data
Net assets, end of year (000)	$	161,273		$	109,566		$	99,790		$	61,996		$	17,944
Portfolio turnover rate of the LifePath Index Master Portfolio		14%	7		14%	7		12%	7		12%	7		1%	8

¹  Based on average shares outstanding.

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

³  Where applicable, assumes the reinvestment of distributions.

⁴  Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁵  Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.01%, 0.02%, 0.02%, 0.01%, and 0.06% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁶  Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.04%		0.04%		0.04%		0.03%		0.03%

⁷  Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁸  Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 13% for the year ended December 31, 2012.

See Notes to Financial Statements.
30	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (concluded) BlackRock LifePath Index 2020 Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.19		$	11.57		$	11.25		$	10.36		$	9.48
Net investment income1		0.24			0.23			0.23			0.22			0.22
Net realized and unrealized gain (loss)		0.47			(0.28	)		0.46			0.94			0.85
Net increase (decrease) from investment operations		0.71			(0.05	)		0.69			1.16			1.07
Distributions:2
From net investment income		(0.24	)		(0.23	)		(0.23	)		(0.21	)		(0.16	)
From net realized gain		(0.05	)		(0.10	)		(0.14	)		(0.06	)		(0.03	)
Total distributions		(0.29	)		(0.33	)		(0.37	)		(0.27	)		(0.19	)
Net asset value, end of year	$	11.61		$	11.19		$	11.57		$	11.25		$	10.36
Total Return3
Based on net asset value		6.32%			(0.42)%			6.15%			11.36%			11.36%
Ratios to Average Net Assets4
Total expenses5,6		0.13%			0.14%			0.17%			0.21%			0.28%
Total expenses after fees waived and/or reimbursed5,6		0.08%			0.09%			0.11%			0.14%			0.16%
Net investment income5,6		2.12%			1.95%			1.98%			2.00%			2.20%
Supplemental Data
Net assets, end of year (000)	$	1,428,311		$	875,791		$	699,797		$	511,443		$	249,157
Portfolio turnover rate of the LifePath Index Master Portfolio		14%	7		14%	7		12%	7		12%	7		1%	8

¹  Based on average shares outstanding.

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

³  Where applicable, assumes the reinvestment of distributions.

⁴  Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated net expenses and/or net investment income.

⁵  Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.01%, 0.02%, 0.02%, 0.01%, and 0.04% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁶  Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.04%		0.04%		0.04%		0.03%		0.03%

⁷  Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁸  Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 13% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	31

Financial Highlights BlackRock LifePath Index 2025 Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.39		$	11.74		$	11.37		$	10.30		$	9.35
Net investment income1		0.25			0.24			0.24			0.25			0.23
Net realized and unrealized gain (loss)		0.53			(0.29	)		0.47			1.12			0.92
Net increase (decrease) from investment operations		0.78			(0.05	)		0.71			1.37			1.15
Distributions:2
From net investment income		(0.24	)		(0.23	)		(0.22	)		(0.22	)		(0.16	)
From net realized gain		(0.03	)		(0.07	)		(0.12	)		(0.08	)		(0.04	)
From return of capital		(0.00	)3		(0.00	)3		—			—			—
Total distributions		(0.27	)		(0.30	)		(0.34	)		(0.30	)		(0.20	)
Net asset value, end of year	$	11.90		$	11.39		$	11.74		$	11.37		$	10.30
Total Return4
Based on net asset value		6.82%			(0.42)%			6.33%			13.46%			12.34%
Ratios to Average Net Assets5
Total expenses6,7		0.18%			0.20%			0.23%			0.27%			0.51%
Total expenses after fees waived and/or reimbursed6,7		0.13%			0.14%			0.16%			0.17%			0.18%
Net investment income6,7		2.16%			2.00%			2.03%			2.25%			2.26%
Supplemental Data
Net assets, end of year (000)	$	76,593		$	73,993		$	53,760		$	21,097		$	4,844
Portfolio turnover rate of the LifePath Index Master Portfolio		16%	8		12%	8		15%	8		13%	8		0%	9,10

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.01%, 0.01%, 0.02%, 0.02%, and 0.12% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.06%		0.05%		0.05%		0.04%		0.03%

⁸  Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹  Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 14% for the year ended December 31, 2012.

¹⁰  Rounds to less than 1%.

See Notes to Financial Statements.
32	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Index 2025 Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.38		$	11.73		$	11.36		$	10.30		$	9.35
Net investment income1		0.22			0.20			0.21			0.23			0.22
Net realized and unrealized gain (loss)		0.53			(0.28	)		0.48			1.11			0.91
Net increase (decrease) from investment operations		0.75			(0.08	)		0.69			1.34			1.13
Distributions:2
From net investment income		(0.21	)		(0.20	)		(0.20	)		(0.20	)		(0.14	)
From net realized gain		(0.03	)		(0.07	)		(0.12	)		(0.08	)		(0.04	)
From return of capital		(0.00	)3		(0.00	)3		—			—			—
Total distributions		(0.24	)		(0.27	)		(0.32	)		(0.28	)		(0.18	)
Net asset value, end of year	$	11.89		$	11.38		$	11.73		$	11.36		$	10.30
Total Return4
Based on net asset value		6.57%			(0.67)%			6.10%			13.13%			12.12%
Ratios to Average Net Assets5
Total expenses6,7		0.43%			0.45%			0.48%			0.52%			0.85%
Total expenses after fees waived and/or reimbursed6,7		0.38%			0.39%			0.41%			0.43%			0.44%
Net investment income6,7		1.90%			1.75%			1.77%			2.04%			2.21%
Supplemental Data
Net assets, end of year (000)	$	133,514		$	104,993		$	89,983		$	49,232		$	3,918
Portfolio turnover rate of the LifePath Index Master Portfolio		16%	8		12%	8		15%	8		13%	8		0%	9,10

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.01%, 0.01%, 0.02%, 0.02%, and 0.13% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷ Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.06%		0.05%		0.05%		0.04%		0.03%

⁸ Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹ Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 14% for the year ended December 31, 2012.

¹⁰  Rounds to less than 1%.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	33

Financial Highlights (concluded) BlackRock LifePath Index 2025 Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.39		$	11.75		$	11.37		$	10.30		$	9.35
Net investment income1		0.26			0.24			0.24			0.24			0.23
Net realized and unrealized gain (loss)		0.52			(0.29	)		0.49			1.14			0.92
Net increase (decrease) from investment operations		0.78			(0.05	)		0.73			1.38			1.15
Distributions:2
From net investment income		(0.24	)		(0.24	)		(0.23	)		(0.23	)		(0.16	)
From net realized gain		(0.03	)		(0.07	)		(0.12	)		(0.08	)		(0.04	)
From return of capital		(0.00	)3		(0.00	)3		—			—			—
Total distributions		(0.27	)		(0.31	)		(0.35	)		(0.31	)		(0.20	)
Net asset value, end of year	$	11.90		$	11.39		$	11.75		$	11.37		$	10.30
Total Return4
Based on net asset value		6.87%			(0.45)%			6.47%			13.48%			12.34%
Ratios to Average Net Assets5
Total expenses6,7		0.13%			0.14%			0.18%			0.23%			0.37%
Total expenses after fees waived and/or reimbursed6,7		0.08%			0.09%			0.11%			0.14%			0.16%
Net investment income6,7		2.19%			2.06%			2.08%			2.16%			2.26%
Supplemental Data
Net assets, end of year (000)	$	1,225,637		$	597,527		$	374,396		$	208,280		$	113,655
Portfolio turnover rate of the LifePath Index Master Portfolio		16%	8		12%	8		15%	8		13%	8		0%	9,10

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.01%, 0.01%, 0.02%, 0.02%, and 0.07% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.06%		0.05%		0.05%		0.04%		0.03%

⁸  Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹  Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 14% for the year ended December 31, 2012.

¹⁰  Rounds to less than 1%.

See Notes to Financial Statements.
34	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights BlackRock LifePath Index 2030 Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.45		$	11.86		$	11.49		$	10.26		$	9.24
Net investment income1		0.26			0.25			0.25			0.25			0.23
Net realized and unrealized gain (loss)		0.56			(0.31	)		0.51			1.31			1.00
Net increase (decrease) from investment operations		0.82			(0.06	)		0.76			1.56			1.23
Distributions:2
From net investment income		(0.25	)		(0.25	)		(0.24	)		(0.24	)		(0.17	)
From net realized gain		(0.03	)		(0.10	)		(0.15	)		(0.09	)		(0.04	)
From return of capital		(0.00	)3		—			—			—			—
Total distributions		(0.28	)		(0.35	)		(0.39	)		(0.33	)		(0.21	)
Net asset value, end of year	$	11.99		$	11.45		$	11.86		$	11.49		$	10.26
Total Return4
Based on net asset value		7.23%			(0.55)%			6.58%			15.34%			13.38%
Ratios to Average Net Assets5
Total expenses6,7		0.19%			0.20%			0.22%			0.27%			0.41%
Total expenses after fees waived and/or reimbursed6,7		0.13%			0.14%			0.16%			0.19%			0.18%
Net investment income6,7		2.22%			2.08%			2.10%			2.30%			2.27%
Supplemental Data
Net assets, end of year (000)	$	99,722		$	88,246		$	73,640		$	32,538		$	16,158
Portfolio turnover rate of the LifePath Index Master Portfolio		19%	8		12%	8		20%	8		12%	8		2%	9

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.01%, 0.01%, 0.02%, 0.01%, and 0.07% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.07%		0.06%		0.05%		0.04%		0.04%

⁸  Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹  Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 18% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	35

Financial Highlights (continued) BlackRock LifePath Index 2030 Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.45		$	11.85		$	11.49		$	10.26		$	9.24
Net investment income1		0.22			0.22			0.22			0.23			0.20
Net realized and unrealized gain (loss)		0.57			(0.30	)		0.50			1.30			1.01
Net increase (decrease) from investment operations		0.79			(0.08	)		0.72			1.53			1.21
Distributions:2
From net investment income		(0.22	)		(0.22	)		(0.21	)		(0.21	)		(0.15	)
From net realized gain		(0.03	)		(0.10	)		(0.15	)		(0.09	)		(0.04	)
From return of capital		(0.00	)3		—			—			—			—
Total distributions		(0.25	)		(0.32	)		(0.36	)		(0.30	)		(0.19	)
Net asset value, end of year	$	11.99		$	11.45		$	11.85		$	11.49		$	10.26
Total Return4
Based on net asset value		6.98%			(0.80)%			6.26%			15.09%			13.11%
Ratios to Average Net Assets5
Total expenses6,7		0.43%			0.45%			0.47%			0.52%			0.72%
Total expenses after fees waived and/or reimbursed6,7		0.38%			0.39%			0.41%			0.45%			0.44%
Net investment income6,7		1.90%			1.84%			1.84%			2.10%			1.99%
Supplemental Data
Net assets, end of year (000)	$	209,757		$	117,745		$	111,333		$	62,487		$	13,908
Portfolio turnover rate of the LifePath Index Master Portfolio		19%	8		12%	8		20%	8		12%	8		2%	9

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.01%, 0.01%, 0.02%, 0.01%, and 0.07% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷ Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.07%		0.06%		0.05%		0.04%		0.04%

⁸ Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹ Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 18% for the year ended December 31, 2012.

See Notes to Financial Statements.
36	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (concluded) BlackRock LifePath Index 2030 Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.44		$	11.85		$	11.48		$	10.25		$	9.24
Net investment income1		0.27			0.26			0.25			0.26			0.24
Net realized and unrealized gain (loss)		0.55			(0.32	)		0.51			1.30			0.98
Net increase (decrease) from investment operations		0.82			(0.06	)		0.76			1.56			1.22
Distributions:2
From net investment income		(0.25	)		(0.25	)		(0.24	)		(0.24	)		(0.17	)
From net realized gain		(0.03	)		(0.10	)		(0.15	)		(0.09	)		(0.04	)
From return of capital		(0.00	)3		—			—			—			—
Total distributions		(0.28	)		(0.35	)		(0.39	)		(0.33	)		(0.21	)
Net asset value, end of year	$	11.98		$	11.44		$	11.85		$	11.48		$	10.25
Total Return4
Based on net asset value		7.29%			(0.50)%			6.64%			15.40%			13.28%
Ratios to Average Net Assets5
Total expenses6,7		0.13%			0.14%			0.17%			0.22%			0.31%
Total expenses after fees waived and/or reimbursed6,7		0.08%			0.09%			0.11%			0.15%			0.17%
Net investment income6,7		2.27%			2.15%			2.14%			2.32%			2.37%
Supplemental Data
Net assets, end of year (000)	$	1,601,355		$	870,661		$	633,093		$	433,320		$	175,849
Portfolio turnover rate of the LifePath Index Master Portfolio		19%	8		12%	8		20%	8		12%	8		2%	9

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.01%, 0.01%, 0.02%, 0.01%, and 0.09% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.07%		0.06%		0.05%		0.04%		0.04%

⁸ Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹ Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 18% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	37

Financial Highlights BlackRock LifePath Index 2035 Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.58		$	11.98		$	11.57		$	10.21		$	9.14
Net investment income1		0.27			0.26			0.26			0.29			0.25
Net realized and unrealized gain (loss)		0.61			(0.32	)		0.51			1.43			1.04
Net increase (decrease) from investment operations		0.88			(0.06	)		0.77			1.72			1.29
Distributions:2
From net investment income		(0.25	)		(0.26	)		(0.24	)		(0.25	)		(0.17	)
From net realized gain		(0.02	)		(0.08	)		(0.12	)		(0.11	)		(0.05	)
From return of capital		(0.00	)3		—			—			—			—
Total distributions		(0.27	)		(0.34	)		(0.36	)		(0.36	)		(0.22	)
Net asset value, end of year	$	12.19		$	11.58		$	11.98		$	11.57		$	10.21
Total Return4
Based on net asset value		7.69%			(0.53)%			6.68%			16.98%			14.16%
Ratios to Average Net Assets5
Total expenses6,7		0.18%			0.20%			0.24%			0.28%			0.86%
Total expenses after fees waived and/or reimbursed6,7		0.12%			0.13%			0.15%			0.18%			0.20%
Net investment income6,7		2.30%			2.19%			2.18%			2.59%			2.52%
Supplemental Data
Net assets, end of year (000)	$	61,939		$	57,253		$	37,073		$	10,605		$	1,835
Portfolio turnover rate of the LifePath Index Master Portfolio		22%	8		10%	8		25%	8		12%	8		1%	9

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.02%, 0.02%, 0.02%, 0.03%, and 0.21% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷ Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.08%		0.07%		0.06%		0.05%		0.04%

⁸ Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹ Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 24% for the year ended December 31, 2012.

See Notes to Financial Statements.
38	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Index 2035 Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.56		$	11.96		$	11.56		$	10.20		$	9.14
Net investment income1		0.24			0.23			0.23			0.25			0.26
Net realized and unrealized gain (loss)		0.60			(0.32	)		0.51			1.45			1.00
Net increase (decrease) from investment operations		0.84			(0.09	)		0.74			1.70			1.26
Distributions:2
From net investment income		(0.22	)		(0.23	)		(0.22	)		(0.23	)		(0.15	)
From net realized gain		(0.02	)		(0.08	)		(0.12	)		(0.11	)		(0.05	)
From return of capital		(0.00	)3		—			—			—			—
Total distributions		(0.24	)		(0.31	)		(0.34	)		(0.34	)		(0.20	)
Net asset value, end of year	$	12.16		$	11.56		$	11.96		$	11.56		$	10.20
Total Return4
Based on net asset value		7.36%			(0.78)%			6.37%			16.74%			13.83%
Ratios to Average Net Assets5
Total expenses6,7		0.42%			0.45%			0.48%			0.54%			0.89%
Total expenses after fees waived and/or reimbursed6,7		0.37%			0.38%			0.41%			0.44%			0.45%
Net investment income6,7		2.05%			1.95%			1.91%			2.29%			2.59%
Supplemental Data
Net assets, end of year (000)	$	124,021		$	94,830		$	83,587		$	38,107		$	3,798
Portfolio turnover rate of the LifePath Index Master Portfolio		22%	8		10%	8		25%	8		12%	8		1%	9

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.02%, 0.02%, 0.02%, 0.03%, and 0.09% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷ Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.08%		0.07%		0.06%		0.05%		0.04%

⁸ Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹ Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 24% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	39

Financial Highlights (concluded) BlackRock LifePath Index 2035 Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.57		$	11.98		$	11.56		$	10.20		$	9.14
Net investment income1		0.28			0.27			0.26			0.27			0.24
Net realized and unrealized gain (loss)		0.61			(0.33	)		0.53			1.45			1.04
Net increase (decrease) from investment operations		0.89			(0.06	)		0.79			1.72			1.28
Distributions:2
From net investment income		(0.26	)		(0.27	)		(0.25	)		(0.25	)		(0.17	)
From net realized gain		(0.02	)		(0.08	)		(0.12	)		(0.11	)		(0.05	)
From return of capital		(0.00	)3		—			—			—			—
Total distributions		(0.28	)		(0.35	)		(0.37	)		(0.36	)		(0.22	)
Net asset value, end of year	$	12.18		$	11.57		$	11.98		$	11.56		$	10.20
Total Return4
Based on net asset value		7.74%			(0.56)%			6.82%			17.02%			14.07%
Ratios to Average Net Assets5
Total expenses6,7		0.12%			0.14%			0.19%			0.25%			0.48%
Total expenses after fees waived and/or reimbursed6,7		0.07%			0.08%			0.11%			0.15%			0.17%
Net investment income6,7		2.33%			2.26%			2.22%			2.44%			2.43%
Supplemental Data
Net assets, end of year (000)	$	983,867		$	457,472		$	289,331		$	158,455		$	76,095
Portfolio turnover rate of the LifePath Index Master Portfolio		22%	8		10%	8		25%	8		12%	8		1%	9

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.02%, 0.02%, 0.02%, 0.03%, and 0.10% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.08%		0.07%		0.06%		0.05%		0.04%

⁸  Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹  Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 24% for the year ended December 31, 2012.

See Notes to Financial Statements.
40	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights BlackRock LifePath Index 2040 Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.65		$	12.11		$	11.69		$	10.18		$	9.04
Net investment income1		0.28			0.28			0.27			0.28			0.23
Net realized and unrealized gain (loss)		0.65			(0.36	)		0.54			1.60			1.12
Net increase (decrease) from investment operations		0.93			(0.08	)		0.81			1.88			1.35
Distributions:2
From net investment income		(0.26	)		(0.27	)		(0.26	)		(0.26	)		(0.18	)
From net realized gain		(0.03	)		(0.11	)		(0.13	)		(0.11	)		(0.03	)
From return of capital		(0.00	)3		—			—			—			—
Total distributions		(0.29	)		(0.38	)		(0.39	)		(0.37	)		(0.21	)
Net asset value, end of year	$	12.29		$	11.65		$	12.11		$	11.69		$	10.18
Total Return4
Based on net asset value		8.05%			(0.69)%			6.94%			18.61%			15.01%
Ratios to Average Net Assets5
Total expenses6,7		0.18%			0.20%			0.23%			0.29%			0.53%
Total expenses after fees waived and/or reimbursed6,7		0.12%			0.13%			0.16%			0.20%			0.19%
Net investment income6,7		2.36%			2.26%			2.23%			2.55%			2.36%
Supplemental Data
Net assets, end of year (000)	$	68,324		$	66,512		$	50,054		$	19,346		$	9,554
Portfolio turnover rate of the LifePath Index Master Portfolio		26%	8		11%	8		29%	8		12%	8		3%	9

¹  Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.02%, 0.02%, 0.02%, 0.02%, and 0.11% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷ Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.09%		0.07%		0.06%		0.05%		0.04%

⁸ Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹ Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 21% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	41

Financial Highlights (continued) BlackRock LifePath Index 2040 Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.64		$	12.09		$	11.68		$	10.17		$	9.04
Net investment income1		0.24			0.25			0.24			0.27			0.21
Net realized and unrealized gain (loss)		0.66			(0.35	)		0.53			1.58			1.11
Net increase (decrease) from investment operations		0.90			(0.10	)		0.77			1.85			1.32
Distributions:2
From net investment income		(0.24	)		(0.24	)		(0.23	)		(0.23	)		(0.16	)
From net realized gain		(0.03	)		(0.11	)		(0.13	)		(0.11	)		(0.03	)
From return of capital		(0.00	)3		—			—			—			—
Total distributions		(0.27	)		(0.35	)		(0.36	)		(0.34	)		(0.19	)
Net asset value, end of year	$	12.27		$	11.64		$	12.09		$	11.68		$	10.17
Total Return4
Based on net asset value		7.72%			(0.94)%			6.62%			18.38%			14.63%
Ratios to Average Net Assets5
Total expenses6,7		0.43%			0.45%			0.48%			0.53%			0.85%
Total expenses after fees waived and/or reimbursed6,7		0.37%			0.38%			0.41%			0.45%			0.45%
Net investment income6,7		2.02%			2.02%			1.98%			2.39%			2.13%
Supplemental Data
Net assets, end of year (000)	$	134,897		$	69,660		$	58,952		$	31,753		$	7,563
Portfolio turnover rate of the LifePath Index Master Portfolio		26%	8		11%	8		29%	8		12%	8		3%	9

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.02%, 0.02%, 0.02%, 0.02%, and 0.14% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷ Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.09%		0.07%		0.06%		0.05%		0.04%

⁸ Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹ Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 21% for the year ended December 31, 2012.

See Notes to Financial Statements.
42	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (concluded) BlackRock LifePath Index 2040 Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.65		$	12.10		$	11.69		$	10.18		$	9.04
Net investment income1		0.28			0.28			0.27			0.29			0.25
Net realized and unrealized gain (loss)		0.66			(0.34	)		0.53			1.59			1.10
Net increase (decrease) from investment operations		0.94			(0.06	)		0.80			1.88			1.35
Distributions:2
From net investment income		(0.27	)		(0.28	)		(0.26	)		(0.26	)		(0.18	)
From net realized gain		(0.03	)		(0.11	)		(0.13	)		(0.11	)		(0.03	)
From return of capital		(0.00	)3		—			—			—			—
Total distributions		(0.30	)		(0.39	)		(0.39	)		(0.37	)		(0.21	)
Net asset value, end of year	$	12.29		$	11.65		$	12.10		$	11.69		$	10.18
Total Return4
Based on net asset value		8.10%			(0.56)%			6.90%			18.66%			15.03%
Ratios to Average Net Assets5
Total expenses6,7		0.12%			0.14%			0.18%			0.24%			0.39%
Total expenses after fees waived and/or reimbursed6,7		0.07%			0.08%			0.11%			0.15%			0.18%
Net investment income6,7		2.39%			2.33%			2.27%			2.58%			2.52%
Supplemental Data
Net assets, end of year (000)	$	1,151,477		$	615,122		$	437,342		$	275,471		$	90,476
Portfolio turnover rate of the LifePath Index Master Portfolio		26%	8		11%	8		29%	8		12%	8		3%	9

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.02%, 0.02%, 0.02%, 0.02%, and 0.14% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.09%		0.07%		0.06%		0.05%		0.04%

⁸  Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹  Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 21% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	43

Financial Highlights BlackRock LifePath Index 2045 Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.80		$	12.25		$	11.78		$	10.13		$	8.94
Net investment income1		0.29			0.29			0.29			0.34			0.26
Net realized and unrealized gain (loss)		0.68			(0.37	)		0.54			1.69			1.13
Net increase (decrease) from investment operations		0.97			(0.08	)		0.83			2.03			1.39
Distributions:2
From net investment income		(0.27	)		(0.28	)		(0.26	)		(0.27	)		(0.18	)
From net realized gain		(0.02	)		(0.09	)		(0.10	)		(0.11	)		(0.02	)
From return of capital		(0.00	)3		—			—			—			—
Total distributions		(0.29	)		(0.37	)		(0.36	)		(0.38	)		(0.20	)
Net asset value, end of year	$	12.48		$	11.80		$	12.25		$	11.78		$	10.13
Total Return4
Based on net asset value		8.23%			(0.70)%			7.07%			20.18%			15.58%
Ratios to Average Net Assets5
Total expenses6,7		0.18%			0.21%			0.26%			0.35%			1.35%
Total expenses after fees waived and/or reimbursed6,7		0.11%			0.12%			0.15%			0.20%			0.22%
Net investment income6,7		2.39%			2.32%			2.35%			3.01%			2.64%
Supplemental Data
Net assets, end of year (000)	$	45,760		$	45,228		$	27,964		$	4,117		$	532
Portfolio turnover rate of the LifePath Index Master Portfolio		26%	8		10%	8		30%	8		12%	8		2%	9

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.04%, 0.03%, 0.03%, 0.05%, and 0.36% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.10%		0.08%		0.07%		0.05%		0.04%

⁸  Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹  Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 22% for the year ended December 31, 2012.

See Notes to Financial Statements.
44	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Index 2045 Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.78		$	12.23		$	11.77		$	10.12		$	8.94
Net investment income1		0.26			0.26			0.25			0.29			0.27
Net realized and unrealized gain (loss)		0.68			(0.37	)		0.54			1.72			1.09
Net increase (decrease) from investment operations		0.94			(0.11	)		0.79			2.01			1.36
Distributions:2
From net investment income		(0.24	)		(0.25	)		(0.23	)		(0.25	)		(0.16	)
From net realized gain		(0.02	)		(0.09	)		(0.10	)		(0.11	)		(0.02	)
From return of capital		(0.00	)3		—			—			—			—
Total distributions		(0.26	)		(0.34	)		(0.33	)		(0.36	)		(0.18	)
Net asset value, end of year	$	12.46		$	11.78		$	12.23		$	11.77		$	10.12
Total Return4
Based on net asset value		8.00%			(0.94)%			6.74%			19.96%			15.27%
Ratios to Average Net Assets5
Total expenses6,7		0.42%			0.46%			0.51%			0.58%			1.39%
Total expenses after fees waived and/or reimbursed6,7		0.36%			0.37%			0.40%			0.44%			0.46%
Net investment income6,7		2.15%			2.09%			2.04%			2.61%			2.75%
Supplemental Data
Net assets, end of year (000)	$	61,642		$	43,155		$	33,859		$	16,428		$	887
Portfolio turnover rate of the LifePath Index Master Portfolio		26%	8		10%	8		30%	8		12%	8		2%	9

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.04%, 0.03%, 0.03%, 0.06%, and 0.25% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷ Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.10%		0.08%		0.07%		0.05%		0.04%

⁸ Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹ Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 22% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	45

Financial Highlights (concluded) BlackRock LifePath Index 2045 Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.81		$	12.26		$	11.79		$	10.13		$	8.94
Net investment income1		0.29			0.29			0.28			0.30			0.26
Net realized and unrealized gain (loss)		0.68			(0.37	)		0.55			1.74			1.13
Net increase (decrease) from investment operations		0.97			(0.08	)		0.83			2.04			1.39
Distributions:2
From net investment income		(0.27	)		(0.28	)		(0.26	)		(0.27	)		(0.18	)
From net realized gain		(0.02	)		(0.09	)		(0.10	)		(0.11	)		(0.02	)
From return of capital		(0.00	)3		—			—			—			—
Total distributions		(0.29	)		(0.37	)		(0.36	)		(0.38	)		(0.20	)
Net asset value, end of year	$	12.49		$	11.81		$	12.26		$	11.79		$	10.13
Total Return4
Based on net asset value		8.28%			(0.64)%			7.10%			20.32%			15.61%
Ratios to Average Net Assets5
Total expenses6,7		0.13%			0.15%			0.22%			0.31%			0.89%
Total expenses after fees waived and/or reimbursed6,7		0.06%			0.07%			0.10%			0.15%			0.18%
Net investment income6,7		2.44%			2.39%			2.33%			2.73%			2.60%
Supplemental Data
Net assets, end of year (000)	$	584,168		$	252,843		$	164,934		$	84,015		$	31,724
Portfolio turnover rate of the LifePath Index Master Portfolio		26%	8		10%	8		30%	8		12%	8		2%	9

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.04%, 0.03%, 0.03%, 0.06%, and 0.24% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷ Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.10%		0.08%		0.07%		0.05%		0.04%

⁸ Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹ Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 22% for the year ended December 31, 2012.

See Notes to Financial Statements.
46	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights BlackRock LifePath Index 2050 Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.95		$	12.41		$	11.91		$	10.11		$	8.86
Net investment income1		0.29			0.29			0.29			0.34			0.24
Net realized and unrealized gain (loss)		0.70			(0.38	)		0.57			1.82			1.21
Net increase (decrease) from investment operations		0.99			(0.09	)		0.86			2.16			1.45
Distributions:2
From net investment income		(0.27	)		(0.28	)		(0.26	)		(0.27	)		(0.19	)
From net realized gain		(0.02	)		(0.09	)		(0.10	)		(0.09	)		(0.01	)
From return of capital		(0.00	)3		—			—			—			—
Total distributions		(0.29	)		(0.37	)		(0.36	)		(0.36	)		(0.20	)
Net asset value, end of year	$	12.65		$	11.95		$	12.41		$	11.91		$	10.11
Total Return4
Based on net asset value		8.36%			(0.72)%			7.23%			21.56%			16.35%
Ratios to Average Net Assets5
Total expenses6,7		0.19%			0.22%			0.27%			0.34%			1.55%
Total expenses after fees waived and/or reimbursed6,7		0.11%			0.12%			0.15%			0.20%			0.21%
Net investment income6,7		2.40%			2.32%			2.33%			3.03%			2.44%
Supplemental Data
Net assets, end of year (000)	$	40,196		$	38,476		$	24,618		$	7,679		$	1,573
Portfolio turnover rate of the LifePath Index Master Portfolio		28%	8		14%	8		22%	8		12%	8		3%	9

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.04%, 0.03%, 0.03%, 0.06%, and 0.47% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷ Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.10%		0.09%		0.08%		0.06%		0.05%

⁸ Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹ Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 26% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	47

Financial Highlights (continued) BlackRock LifePath Index 2050 Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.93		$	12.39		$	11.89		$	10.10		$	8.86
Net investment income1		0.25			0.26			0.26			0.32			0.28
Net realized and unrealized gain (loss)		0.71			(0.38	)		0.57			1.81			1.14
Net increase (decrease) from investment operations		0.96			(0.12	)		0.83			2.13			1.42
Distributions:2
From net investment income		(0.25	)		(0.25	)		(0.23	)		(0.25	)		(0.17	)
From net realized gain		(0.02	)		(0.09	)		(0.10	)		(0.09	)		(0.01	)
From return of capital		(0.00	)3		—			—			—			—
Total distributions		(0.27	)		(0.34	)		(0.33	)		(0.34	)		(0.18	)
Net asset value, end of year	$	12.62		$	11.93		$	12.39		$	11.89		$	10.10
Total Return4
Based on net asset value		8.04%			(0.96)%			7.01%			21.25%			16.00%
Ratios to Average Net Assets5
Total expenses6,7		0.43%			0.46%			0.52%			0.59%			1.33%
Total expenses after fees waived and/or reimbursed6,7		0.36%			0.37%			0.40%			0.45%			0.47%
Net investment income6,7		2.07%			2.09%			2.08%			2.85%			2.86%
Supplemental Data
Net assets, end of year (000)	$	60,051		$	27,413		$	22,053		$	12,103		$	1,090
Portfolio turnover rate of the LifePath Index Master Portfolio		28%	8		14%	8		22%	8		12%	8		3%	9

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.04%, 0.03%, 0.03%, 0.06%, and 0.22% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷ Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.10%		0.09%		0.08%		0.06%		0.05%

⁸ Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹ Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 26% for the year ended December 31, 2012.

See Notes to Financial Statements.
48	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (concluded) BlackRock LifePath Index 2050 Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.95		$	12.41		$	11.91		$	10.11		$	8.86
Net investment income1		0.30			0.30			0.29			0.32			0.26
Net realized and unrealized gain (loss)		0.70			(0.38	)		0.58			1.85			1.19
Net increase (decrease) from investment operations		1.00			(0.08	)		0.87			2.17			1.45
Distributions:2
From net investment income		(0.28	)		(0.29	)		(0.27	)		(0.28	)		(0.19	)
From net realized gain		(0.02	)		(0.09	)		(0.10	)		(0.09	)		(0.01	)
From return of capital		(0.00	)3		—			—			—			—
Total distributions		(0.30	)		(0.38	)		(0.37	)		(0.37	)		(0.20	)
Net asset value, end of year	$	12.65		$	11.95		$	12.41		$	11.91		$	10.11
Total Return4
Based on net asset value		8.41%			(0.67)%			7.28%			21.61%			16.37%
Ratios to Average Net Assets5
Total expenses6,7		0.13%			0.16%			0.23%			0.33%			0.99%
Total expenses after fees waived and/or reimbursed6,7		0.06%			0.07%			0.10%			0.15%			0.19%
Net investment income6,7		2.45%			2.39%			2.37%			2.88%			2.67%
Supplemental Data
Net assets, end of year (000)	$	549,541		$	271,178		$	186,198		$	83,933		$	23,342
Portfolio turnover rate of the LifePath Index Master Portfolio		28%	8		14%	8		22%	8		12%	8		3%	9

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.04%, 0.03%, 0.03%, 0.06%, and 0.27% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷ Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.10%		0.09%		0.08%		0.06%		0.05%

⁸ Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹ Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 26% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	49

Financial Highlights BlackRock LifePath Index 2055 Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	12.17		$	12.60		$	12.05		$	10.05		$	8.80
Net investment income1		0.30			0.30			0.31			0.37			0.24
Net realized and unrealized gain (loss)		0.71			(0.38	)		0.58			1.91			1.23
Net increase (decrease) from investment operations		1.01			(0.08	)		0.89			2.28			1.47
Distributions:2
From net investment income		(0.28	)		(0.28	)		(0.27	)		(0.28	)		(0.22	)
From net realized gain		(0.02	)		(0.07	)		(0.07	)		—			—
From return of capital		(0.00	)3		—			—			—			(0.00	)3
Total distributions		(0.30	)		(0.35	)		(0.34	)		(0.28	)		(0.22	)
Net asset value, end of year	$	12.88		$	12.17		$	12.60		$	12.05		$	10.05
Total Return4
Based on net asset value		8.32%			(0.64)%			7.46%			22.91%			16.78%
Ratios to Average Net Assets5
Total expenses6,7		0.23%			0.30%			0.43%			0.75%			4.43%
Total expenses after fees waived and/or reimbursed6,7		0.10%			0.11%			0.13%			0.20%			0.24%
Net investment income6,7		2.45%			2.39%			2.50%			3.25%			2.46%
Supplemental Data
Net assets, end of year (000)	$	26,561		$	19,214		$	7,874		$	896		$	25
Portfolio turnover rate of the LifePath Index Master Portfolio		33%	8		17%	8		22%	8		15%	8		8%	9

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.06%, 0.05%, 0.10%, 0.26%, and 1.36% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.11%		0.09%		0.09%		0.06%		0.05%

⁸  Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹  Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 53% for the year ended December 31, 2012.

See Notes to Financial Statements.
50	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock LifePath Index 2055 Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	12.15		$	12.58		$	12.04		$	10.05		$	8.80
Net investment income1		0.27			0.27			0.27			0.33			0.25
Net realized and unrealized gain (loss)		0.71			(0.38	)		0.58			1.92			1.20
Net increase (decrease) from investment operations		0.98			(0.11	)		0.85			2.25			1.45
Distributions:2
From net investment income		(0.25	)		(0.25	)		(0.24	)		(0.26	)		(0.20	)
From net realized gain		(0.02	)		(0.07	)		(0.07	)		—			—
From return of capital		(0.00	)3		—			—			—			(0.00	)3
Total distributions		(0.27	)		(0.32	)		(0.31	)		(0.26	)		(0.20	)
Net asset value, end of year	$	12.86		$	12.15		$	12.58		$	12.04		$	10.05
Total Return4
Based on net asset value		8.10%			(0.88)%			7.13%			22.55%			16.55%
Ratios to Average Net Assets5
Total expenses6,7		0.46%			0.53%			0.69%			0.91%			3.98%
Total expenses after fees waived and/or reimbursed6,7		0.34%			0.36%			0.40%			0.44%			0.49%
Net investment income6,7		2.19%			2.13%			2.14%			2.87%			2.60%
Supplemental Data
Net assets, end of year (000)	$	27,026		$	13,140		$	8,945		$	4,696		$	129
Portfolio turnover rate of the LifePath Index Master Portfolio		33%	8		17%	8		22%	8		15%	8		8%	9

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.06%, 0.05%, 0.10%, 0.27%, and 1.05% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.11%		0.09%		0.09%		0.06%		0.05%

⁸  Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹  Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 53% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	51

Financial Highlights (concluded) BlackRock LifePath Index 2055 Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	12.17		$	12.60		$	12.05		$	10.05		$	8.80
Net investment income1		0.31			0.31			0.30			0.34			0.26
Net realized and unrealized gain (loss)		0.70			(0.38	)		0.60			1.95			1.21
Net increase (decrease) from investment operations		1.01			(0.07	)		0.90			2.29			1.47
Distributions:2
From net investment income		(0.28	)		(0.29	)		(0.28	)		(0.29	)		(0.22	)
From net realized gain		(0.02	)		(0.07	)		(0.07	)		—			—
From return of capital		(0.00	)3		—			—			—			(0.00	)3
Total distributions		(0.30	)		(0.36	)		(0.35	)		(0.29	)		(0.22	)
Net asset value, end of year	$	12.88		$	12.17		$	12.60		$	12.05		$	10.05
Total Return4
Based on net asset value		8.37%			(0.60)%			7.50%			22.95%			16.83%
Ratios to Average Net Assets5
Total expenses6,7		0.18%			0.24%			0.42%			0.70%			3.71%
Total expenses after fees waived and/or reimbursed6,7		0.04%			0.06%			0.10%			0.15%			0.19%
Net investment income6,7		2.50%			2.43%			2.44%			3.05%			2.71%
Supplemental Data
Net assets, end of year (000)	$	197,394		$	74,656		$	45,039		$	18,345		$	4,706
Portfolio turnover rate of the LifePath Index Master Portfolio		33%	8		17%	8		22%	8		15%	8		8%	9

¹  Based on average shares outstanding.

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

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

⁴  Where applicable, assumes the reinvestment of distributions.

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

⁶  Includes the LifePath Index Fund’s share of its corresponding LifePath Index Master Portfolio’s allocated fees waived of 0.06%, 0.05%, 0.10%, 0.28%, and 0.18% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

⁷  Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of LifePath Master Portfolio’s investments in underlying funds as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Investments in underlying funds		0.11%		0.09%		0.09%		0.06%		0.05%

⁸  Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio.

⁹  Excludes the LifePath Index Master Portfolio’s purchases and sales of the Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio. If these transactions had been included to conform to the current year presentation, the portfolio turnover rate would have been 53% for the year ended December 31, 2012.

See Notes to Financial Statements.
52	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights BlackRock LifePath Index 2060 Fund

	Institutional
	Period February 29, 20161 to December 31, 2016
Per Share Operating Performance
Net asset value, beginning of period	$	10.00
Net investment income2		0.33
Net realized and unrealized gain		1.21
Net increase from investment operations		1.54
Distributions:3
From net investment income		(0.18	)
From net realized gain		(0.00	)4
From return of capital		(0.00	)4
Total Distributions		(0.18	)
Net asset value, end of period	$	11.36
Total Return5
Based on net asset value		15.50%	6
Ratios to Average Net Assets7
Total expenses8,9,10		9.54%	11
Total expenses after fees waived/or reimbursed8,9,10		0.11%
Net investment income8,9,10		3.56%
Supplemental Data
Net assets, end of period (000)	$	118
Portfolio turnover rate of the LifePath Index Master Portfolio		71%	12

¹ Commencement of operations.

² Based on average shares outstanding.

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

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

⁵ Where applicable, assumes the reinvestment of distributions.

⁶ Aggregate total return.

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

⁸ Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated fees waived of 2.41% for the period ended December 31, 2016.

⁹ Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds as follows:

	Period February 29, 20161 to December 31, 2016
Investments in underlying funds		0.12%

¹⁰ Annualized.

¹¹ Audit, Offering and Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 11.15%.

¹² Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series and U.S. Total Bond Index Master Portfolio.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	53

Financial Highlights (continued) BlackRock LifePath Index 2060 Fund

	Investor A
	Period February 29, 20161 to December 31, 2016
Per Share Operating Performance
Net asset value, beginning of period	$	10.00
Net investment income2		0.26
Net realized and unrealized gain		1.26
Net increase from investment operations		1.52
Distributions:3
From net investment income		(0.17	)
From net realized gain		(0.00	)4
From return of capital		(0.00	)4
Total Distributions		(0.17	)
Net asset value, end of period	$	11.35
Total Return5
Based on net asset value		15.24%	6
Ratios to Average Net Assets7
Total expenses8,9,10		6.36%	11
Total expenses after fees waived/or reimbursed8,9,10		0.34%
Net investment income8,9,10		2.85%
Supplemental Data
Net assets, end of period (000)	$	386
Portfolio turnover rate of the LifePath Index Master Portfolio		71%	12

¹ Commencement of operations.

² Based on average shares outstanding.

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

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

⁵ Where applicable, assumes the reinvestment of distributions.

⁶ Aggregate total return.

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

⁸ Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated fees waived of 1.68% for period ended December 31, 2016.

⁹ Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds as follows:

	Period February 29, 20161 to December 31, 2016
Investments in underlying funds		0.12%

¹⁰ Annualized.

¹¹ Audit, Offering and Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 7.39%.

¹² Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series and U.S. Total Bond Index Master Portfolio.

See Notes to Financial Statements.
54	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights (concluded) BlackRock LifePath Index 2060 Fund

	Class K
	Period February 29, 20161 to December 31, 2016
Per Share Operating Performance
Net asset value, beginning of period	$	10.00
Net investment income2		0.25
Net realized and unrealized gain		1.30
Net increase from investment operations		1.55
Distributions:3
From net investment income		(0.19	)
From net realized gain		(0.00	)4
From return of capital		(0.00	)4
Total Distributions		(0.19	)
Net asset value, end of period	$	11.36
Total Return5
Based on net asset value		15.54%	6
Ratios to Average Net Assets7
Total expenses8,9,10		5.07%	11
Total expenses after fees waived/or reimbursed8,9,10		0.04%
Net investment income8,9,10		2.72%
Supplemental Data
Net assets, end of period (000)	$	10,233
Portfolio turnover rate of the LifePath Index Master Portfolio		71%	12

¹ Commencement of operations.

² Based on average shares outstanding.

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

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

⁵ Where applicable, assumes the reinvestment of distributions.

⁶ Aggregate total return.

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

⁸ Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated fees waived of 1.47% for period ended December 31, 2016.

⁹ Includes the LifePath Index Fund’s share of the LifePath Index Master Portfolio’s allocated expenses and/or net investment income. Excludes expenses incurred indirectly as a result of the LifePath Index Master Portfolio’s investments in underlying funds as follows:

	Period February 29, 20161 to December 31, 2016
Investments in underlying funds		0.12%

¹⁰ Annualized.

¹¹ Audit, Offering and Organization costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the total expenses would have been 5.94%.

¹² Includes the LifePath Index Master Portfolio’s purchases and sales of the underlying funds and Large Cap Index Master Portfolio, Master Small Cap Index Series and U.S. Total Bond Index Master Portfolio.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	55

Notes to Financial Statements

1. Organization:

BlackRock Funds III (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Delaware statutory trust. The following series of the Trust are referred to herein collectively as the “LifePath Index Funds” or individually, as a “LifePath Index Fund”:

Fund Name	Herein Referred To As	Diversification Classification
BlackRock LifePath® Index Retirement Fund	LifePath Index Retirement Fund	Diversified
BlackRock LifePath® Index 2020 Fund	LifePath Index 2020 Fund	Diversified
BlackRock LifePath® Index 2025 Fund	LifePath Index 2025 Fund	Diversified
BlackRock LifePath® Index 2030 Fund	LifePath Index 2030 Fund	Diversified
BlackRock LifePath® Index 2035 Fund	LifePath Index 2035 Fund	Diversified
BlackRock LifePath® Index 2040 Fund	LifePath Index 2040 Fund	Diversified
BlackRock LifePath® Index 2045 Fund	LifePath Index 2045 Fund	Diversified
BlackRock LifePath® Index 2050 Fund	LifePath Index 2050 Fund	Diversified
BlackRock LifePath® Index 2055 Fund	LifePath Index 2055 Fund	Diversified
BlackRock LifePath® Index 2060 Fund	LifePath Index 2060 Fund	Diversified

Each LifePath Index Fund seeks to achieve its investment objective by investing all of its assets in a corresponding 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, LifePath^® Index 2055 Master Portfolio and LifePath^® Index 2060 Master Portfolio (each, a “LifePath Index Master Portfolio” and together, the “LifePath Index Master Portfolios”). MIP is an affiliate of the Trust. Each LifePath Index Master Portfolio has the same investment objective and strategies as its corresponding LifePath Index Fund. The value of each LifePath Index Fund’s investment in its corresponding LifePath Index Master Portfolio reflects the LifePath Index Fund’s proportionate interest in the net assets of the Master Portfolio. The performance of the LifePath Index Funds is directly affected by the performance of the LifePath Index Master Portfolios. At December 31, 2016, the percentage of the LifePath Index Master Portfolio owned by the corresponding LifePath Index Fund was 100%, except that 99.9% of LifePath^® Index 2060 Master Portfolio was owned by LifePath Index 2060 Fund. As such, the financial statements of the LifePath Index Master Portfolios, including the Schedules of Investments, are included elsewhere in this report and should be read in conjunction with the LifePath Index Funds’ financial statements.

Each LifePath Index 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 and are generally available through financial intermediaries. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions and, except that certain classes bear expenses related to the shareholder servicing and distribution of such shares. The Board of Trustees of the Trust and Board of Trustees of MIP are referred to throughout this report as the “Board of Trustees” or the “Board” and the members are referred to as “Trustees.”

Share Class	Initial Sales Charge	CDSC	Conversion Privilege
Institutional, Investor A and Class K	No	No	None

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

2. Significant Accounting Policies:

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

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

Distributions: Distributions from net investment income are declared and paid quarterly. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The portion of distributions, if any, that exceeds a LifePath Index Fund’s current and accumulated earnings and profits, as

56 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued)

measured on a tax basis, constitute a non-taxable return of capital. The character and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.

Organization and Offering Costs: Upon commencement of operations, organization costs associated with the establishment of the LifePath Index 2060 Fund were expensed by the LifePath Index 2060 Fund and reimbursed by the Manager. The Manager reimbursed the LifePath Index 2060 Fund $10,912, which is shown as expenses reimbursed by the Manager in the Statements of Operations. Offering costs are amortized over a 12-month period beginning with the commencement of operations.

Indemnifications: In the normal course of business, a LifePath Index Fund enters into contracts that contain a variety of representations that provide general indemnification. A LifePath Index Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against a LifePath Index Fund, which cannot be predicted with any certainty.

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

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The LifePath Index Funds’ investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time or if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the LifePath Index Funds 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 Funds’ policy is to value its financial instruments at fair value. Each LifePath Index Fund records its investment in the LifePath Index Master Portfolio at fair value based on the LifePath Index Funds’ proportionate interest in the net assets of the LifePath Index Master Portfolio. Valuation of securities held by the LifePath Index Master Portfolio is discussed in Note 3 of the LifePath Index Master Portfolio’s Notes to Financial Statements, which are included elsewhere in this report.

4. Administration Agreement and Other Transactions with Affiliates:

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

Administration: The Trust, on behalf of the LifePath Index Funds, entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL, in consideration thereof, has agreed to bear all of the LifePath Index 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 LifePath Index Funds. BAL is entitled to receive for these administration services an annual fee of 0.03% based on the average daily net assets of each LifePath Index Fund.

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

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

BRIL and broker-dealers, pursuant to sub-agreements with BRIL, provide shareholder servicing and distribution services to the LifePath Index Funds. The ongoing service and/or distribution fee compensates BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to the shareholders.

For the year ended December 31, 2016, the following table shows the class specific service and distribution fees borne directly by each share class of each LifePath Index Fund:

Service and Distribution Fees
	Investor A
LifePath Index Retirement Fund	$	160,625
LifePath Index 2020 Fund	$	323,590
LifePath Index 2025 Fund	$	289,098

BLACKROCK FUNDS III DECEMBER 31, 2016 57

Notes to Financial Statements (continued)

Service and Distribution Fees
	Investor A
LifePath Index 2030 Fund	$	388,911
LifePath Index 2035 Fund	$	269,553
LifePath Index 2040 Fund	$	238,796
LifePath Index 2045 Fund	$	127,586
LifePath Index 2050 Fund	$	102,241
LifePath Index 2055 Fund	$	49,172
LifePath Index 2060 Fund*	$	281

* Commenced operations on February 29, 2016.

Transfer Agent: Pursuant to written agreements, certain financial intermediaries, some of which may be affiliates, provide the LifePath Index Funds with sub-accounting, recordkeeping, sub-transfer agency and other administrative services with respect to sub-accounts they service. For these services, these entities receive an asset-based fee or an annual fee per shareholder account, which will vary depending on share class and/or net assets.

The Administrator maintains a call center that is responsible for providing certain shareholder services to the LifePath Index Funds. Shareholder services include responding to inquiries and processing subscriptions and redemptions transactions based upon instructions from shareholders. For the year ended December 31, 2016, each LifePath Index Fund reimbursed the Administrator the following amounts for costs incurred in running the call center, which are included in transfer agent — class specific in the Statements of Operations:

	Institutional		Investor A		Class K		Total
LifePath Index Retirement Fund	$	315	$	498	$	1,381	$	2,194
LifePath Index 2020 Fund	$	355	$	882	$	2,730	$	3,967
LifePath Index 2025 Fund	$	338	$	805	$	2,455	$	3,598
LifePath Index 2030 Fund	$	360	$	884	$	2,838	$	4,082
LifePath Index 2035 Fund	$	310	$	739	$	2,155	$	3,204
LifePath Index 2040 Fund	$	357	$	727	$	2,233	$	3,317
LifePath Index 2045 Fund	$	285	$	743	$	1,711	$	2,739
LifePath Index 2050 Fund	$	312	$	689	$	1,457	$	2,458
LifePath Index 2055 Fund	$	24	$	686	$	1,320	$	2,030
LifePath Index 2060 Fund*	$	9	$	17	$	12	$	38

* Commenced operations on February 29, 2016.

For the year ended December 31, 2016, the following table shows the class specific transfer agent fees borne directly by each class of each LifePath Index Fund:

	Institutional		Investor A		Class K		Total
LifePath Index Retirement Fund	$	40,852	$	36,437	$	35,618	$	112,907
LifePath Index 2020 Fund	$	50,909	$	61,790	$	47,045	$	159,744
LifePath Index 2025 Fund	$	45,138	$	59,492	$	38,042	$	142,672
LifePath Index 2030 Fund	$	55,901	$	67,211	$	50,708	$	173,820
LifePath Index 2035 Fund	$	38,392	$	56,766	$	39,862	$	135,020
LifePath Index 2040 Fund	$	44,094	$	43,668	$	48,786	$	136,548
LifePath Index 2045 Fund	$	30,962	$	29,274	$	41,129	$	101,365
LifePath Index 2050 Fund	$	29,105	$	23,423	$	50,825	$	103,353
LifePath Index 2055 Fund	$	21,410	$	14,438	$	46,964	$	82,812
LifePath Index 2060 Fund*	$	65	$	125	$	983	$	1,173

* Commenced operations on February 29, 2016.

Expense Limitations, Waivers, Reimbursements and Recoupments: With respect to the LifePath Index Funds, BFA and BAL contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of each LifePath Index Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

Share Class
Institutional	1.10%
Investor A	1.35%
Class K	1.05%

This agreement will automatically renew on May 1 of each year for an additional year until May 1, 2026, unless terminated earlier by the Board, including a majority of the trustees who are not “Interested Persons” of the LifePath Index Funds, as defined in the 1940 Act (“Independent Trustees”), or by a vote of the majority of the outstanding voting securities of the applicable LifePath Index Fund.

In addition, BFA and BAL contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of each LifePath Index Fund’s business. The agreement may be terminated upon 90 days’ notice by a majority of the non-interested

58 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued)

trustees of the Trust or by a vote of majority of the outstanding voting securities of the applicable LifePath Index Fund. The expense limitations as a percentage of average daily net assets until May 1, 2017 are as follows:

	Institutional		Investor A		Class K
LifePath Index Retirement Fund		0.10%		0.35%		0.05%
LifePath Index 2020 Fund		0.10%		0.35%		0.05%
LifePath Index 2025 Fund		0.10%		0.35%		0.05%
LifePath Index 2030 Fund		0.10%		0.35%		0.05%
LifePath Index 2035 Fund		0.09%		0.34%		0.04%
LifePath Index 2040 Fund		0.09%		0.34%		0.04%
LifePath Index 2045 Fund		0.08%		0.33%		0.03%
LifePath Index 2050 Fund		0.08%		0.33%		0.03%
LifePath Index 2055 Fund		0.07%		0.32%		0.02%
LifePath Index 2060 Fund		0.07%		0.32%		0.02%

These amounts waived and/or reimbursed are included in fees waived by the Administrator and fees reimbursed by the Administrator, and shown as transfer agent fees waived /or reimbursed — class specific, respectively, in the Statements of Operations. For the year ended December 31, 2016, the amounts included in fees waived by the Administrator were as follows:

		Institutional		Investor A		Class K		Total
Amount waived	LifePath Index Retirement Fund	$	4,994	$	6,655	$	34,235	$	45,884
Amount waived	LifePath Index 2020 Fund	$	6,485	$	8,793	$	44,314	$	59,592
Amount waived	LifePath Index 2025 Fund	$	6,412	$	6,189	$	35,584	$	48,185
Amount waived	LifePath Index 2030 Fund	$	9,074	$	8,558	$	47,868	$	65,500
Amount waived	LifePath Index 2035 Fund	$	7,271	$	4,503	$	37,706	$	49,480
Amount waived	LifePath Index 2040 Fund	$	8,718	$	6,294	$	46,551	$	61,563
Amount waived	LifePath Index 2045 Fund	$	6,893	$	3,400	$	39,416	$	49,709
Amount waived	LifePath Index 2050 Fund	$	8,009	$	4,923	$	49,366	$	62,298
Amount waived	LifePath Index 2055 Fund	$	9,070	$	4,139	$	45,643	$	58,852
Amount waived	LifePath Index 2060 Fund*	$	31	$	63	$	971	$	1,065

* Commenced operations on February 29, 2016.

With respect to the contractual expense caps, if during a LifePath Index Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver and/or reimbursement from the BFA or BAL, are less than the expense cap for that share class, the BFA or BAL is entitled to be reimbursed by such share class up to the lesser of the following expenses:

(a) The amount of fees waived and/or expenses reimbursed during those prior two fiscal years under the agreement.

(b) The amount by which the expense cap for that share class exceeds the operating expenses of the share class for the current fiscal year, provided that:

• Each LifePath Index Fund, of which the share class is a part, has more than $50 million in assets for the fiscal year; and

• BFA or BAL or an affiliate continues to serve as a LifePath Index Fund’s investment adviser or administrator.

In the event the expense cap for a share class is changed subsequent to a fiscal year in which BFA or BAL becomes entitled to reimbursement for fees waived and/or reimbursed, the amount available to reimburse BFA or BAL shall be calculated by reference to the expense cap for that share class in effect at the time BFA or BAL became entitled to receive such reimbursement, rather than the subsequently changed expense cap for that share class.

For the year ended December 31, 2016, the BAL recouped the following fund level and class specific waivers and/or reimbursements previously recorded by the LifePath Index Funds:

	BAL
LifePath Index Retirement Fund
Institutional	$	874
Investor A	$	2,741
LifePath Index 2020 Fund
Institutional	$	1,064
Investor A	$	10,866
LifePath Index 2025 Fund
Institutional	$	612
Investor A	$	4,634
LifePath Index 2030 Fund
Institutional	$	1,809
Investor A	$	17,797
LifePath Index 2035 Fund
Institutional	$	115
Investor A	$	1,449

BLACKROCK FUNDS III DECEMBER 31, 2016 59

Notes to Financial Statements (continued)

	BAL
LifePath Index 2040 Fund
Institutional	$	207
Investor A	$	9,575
LifePath Index 2045 Fund
Institutional	$	4
Investor A	$	45
LifePath Index 2050 Fund
Investor A	$	1,705

On December 31, 2016, 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,
	2017		2018
LifePath Index Retirement Fund
Fund level	$	267,767	$	322,809
Institutional	$	8,299	$	5,170
Investor A	$	8,180	$	7,066
Class K	$	28,603	$	35,616
LifePath Index 2020 Fund
Fund level	$	470,803	$	578,200
Institutional	$	9,854	$	6,680
Investor A	$	7,675	$	9,344
Class K	$	33,795	$	47,044
LifePath Index 2025 Fund
Fund level	$	335,371	$	487,920
Institutional	$	9,037	$	6,638
Investor A	$	11,676	$	6,681
Class K	$	18,415	$	38,039
LifePath Index 2030 Fund
Fund level	$	463,274	$	626,323
Institutional	$	9,386	$	9,312
Investor A	$	2,223	$	9,126
Class K	$	35,862	$	50,707
LifePath Index 2035 Fund
Fund level	$	281,863	$	408,983
Institutional	$	6,733	$	7,538
Investor A	$	13,435	$	4,812
Class K	$	19,218	$	39,861
LifePath Index 2040 Fund
Fund level	$	353,535	$	467,210
Institutional	$	8,016	$	9,043
Investor A	$	2,384	$	6,757
Class K	$	34,606	$	48,784
LifePath Index 2045 Fund
Fund level	$	200,123	$	275,012
Institutional	$	7,595	$	7,169
Investor A	$	7,392	$	4,047
Class K	$	19,915	$	41,127
LifePath Index 2050 Fund
Fund level	$	212,016	$	274,945
Institutional	$	8,506	$	8,321
Investor A	$	5,578	$	5,371
Class K	$	34,776	$	50,824
LifePath Index 2055 Fund
Fund level	$	126,231	$	158,120
Institutional	$	6,770	$	9,311
Investor A	$	3,365	$	4,824
Class K	$	19,560	$	46,963
LifePath Index 2060 Fund
Fund level		—	$	171,842
Institutional		—	$	40
Investor A		—	$	81
Class K		—	$	983

60 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued)

The following LifePath Index Funds level and class specific waivers and/or reimbursements previously recorded by the LifePath Index Funds, which were subject to recoupment by the Administrator, expired on December 31, 2016:

	BAL
LifePath Index Retirement Fund
Fund level	$	236,881
Institutional	$	3,238
Class K	$	38,752
LifePath Index 2020 Fund
Fund level	$	378,914
Institutional	$	4,244
Class K	$	34,471
LifePath Index 2025 Fund
Fund level	$	251,481
Institutional	$	1,233
Class K	$	18,068
LifePath Index 2030 Fund
Fund level	$	360,380
Institutional	$	1,556
Class K	$	35,943
LifePath Index 2035 Fund
Fund level	$	217,349
Institutional	$	1,381
Class K	$	20,255
LifePath Index 2040 Fund
Fund level	$	274,798
Institutional	$	1,659
Class K	$	35,927
LifePath Index 2045 Fund
Fund level	$	161,498
Institutional	$	165
Investor A	$	1,798
Class K	$	21,336
LifePath Index 2050 Fund
Fund level	$	167,905
Institutional	$	1,309
Investor A	$	1,542
Class K	$	35,911
LifePath Index 2055 Fund
Fund level	$	104,536
Institutional	$	1,426
Investor A	$	1,708
Class K	$	17,946

Interfund Lending: In accordance with an exemptive order (the “Order”) from the U.S. Securities and Exchange Commission, each LifePath Index Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by each LifePath Index Fund’s investment policies and restrictions. Each LifePath Index Fund is currently permitted to borrow and lend under the Interfund Lending Program.

A LifePath Index Fund may lend in aggregate up to 15% of its net assets, but no more than 5% of its net assets, to any one borrowing fund through the Interfund Lending Program. A LifePath Index Fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets or any lower threshold provided for by the Fund’s investment restrictions. If a LifePath Index Fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2016, the LifePath Index Funds did not participate in the Interfund Lending Program.

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

5. Income Tax Information:

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

Each LifePath Index Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each LifePath Index Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016, except for

BLACKROCK FUNDS III DECEMBER 31, 2016 61

Notes to Financial Statements (continued)

LifePath Index 2060 Fund, which remains open for the period ended December 31, 2016. The statutes of limitations on each LifePath Index Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the LifePath Index Funds as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the LifePath Index Funds’ financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to prior period adjustments were reclassified to the following accounts:

	LifePath Index 2030
Undistributed net investment income	$	64,333
Accumulated net realized gain (loss)	$	(64,333	)

The tax character of distributions paid was as follows:

		LifePath Index Retirement Fund		LifePath Index 2020 Fund		LifePath Index 2025 Fund		LifePath Index 2030 Fund		LifePath Index 2035 Fund		LifePath Index 2040 Fund		LifePath Index 2045 Fund		LifePath Index 2050 Fund		LifePath Index 2055 Fund		LifePath Index 2060 Fund
Ordinary Income	12/31/16	$	14,504,615	$	31,618,652	$	24,675,365	$	34,780,724	$	20,584,212	$	24,774,238	$	12,006,530	$	11,565,385	$	4,231,270	$	87,025
	12/31/15	$	10,572,327	$	22,888,339	$	14,722,743	$	23,740,137	$	12,472,608	$	17,442,544	$	7,483,496	$	7,671,288	$	2,206,215		—
Long-term capital gains	12/31/16	$	2,541,131	$	3,419,451	$	1,658,734	$	2,695,572	$	874,070	$	1,297,649	$	363,711	$	333,204	$	198,451	$	2,711
	12/31/15	$	3,401,250	$	7,455,767	$	3,338,800	$	7,061,260	$	3,177,432	$	5,373,610	$	1,992,880	$	2,142,231	$	513,055		—
Tax return of capital	12/31/16		—		—	$	48,203	$	42,152		—	$	46,182	$	54,203	$	32,398	$	20,016	$	539
	12/31/15		—		—	$	88,888		—		—		—		—		—		—		—
Total	12/31/16	$	17,045,746	$	35,038,103	$	26,382,302	$	37,518,448	$	21,458,282	$	26,118,069	$	12,424,444	$	11,930,987	$	4,449,737	$	90,275
	12/31/15	$	13,973,577	$	30,344,106	$	18,150,431	$	30,801,397	$	15,650,040	$	22,816,154	$	9,476,376	$	9,813,519	$	2,719,270		—

As of period end, the tax components of accumulated net earnings (losses) were as follows:

	LifePath Index Retirement Fund			LifePath Index 2020 Fund			LifePath Index 2025 Fund			LifePath Index 2030 Fund			LifePath Index 2035 Fund			LifePath Index 2040 Fund			LifePath Index 2045 Fund			LifePath Index 2050 Fund			LifePath Index 2055 Fund			LifePath Index 2060 Fund
Undistributed ordinary income . . . .	$	132,225		$	29,212			—			—			—			—			—			—			—			—
Net unrealized gains1		29,620,289			75,790,587		$	56,734,128		$	98,311,279		$	56,925,666		$	76,695,032		$	34,764,451		$	33,185,059		$	11,305,814		$	273,774
Qualified late-year losses2.		(755,389	)		(1,296,321	)		(1,944,686	)		(3,204,719	)		(2,006,422	)		(3,714,862	)		(1,853,399	)		(2,189,839	)		(797,507	)		(56,027	)
Total	$	28,997,125		$	74,523,478		$	54,789,442		$	95,106,560		$	54,919,244		$	72,980,170		$	32,911,052		$	30,995,220		$	10,508,307		$	217,747

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

²  The LifePath Funds have elected to defer certain qualified late-year losses and recognize such losses in the next taxable year.

6. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2016						Year Ended December 31, 2015
LifePath Index Retirement Fund	Shares			Amount			Shares			Amount
Institutional
Shares sold		2,172,146		$	24,473,536			2,554,950		$	29,021,680
Shares issued in reinvestment of distributions		157,718			1,788,845			175,020			1,948,895
Shares redeemed		(2,251,590	)		(25,558,344	)		(2,521,227	)		(28,805,683	)
Net increase		78,274		$	704,037			208,743		$	2,164,892
Investor A
Shares sold		2,658,189		$	30,100,376			3,392,349		$	38,594,002
Shares issued in reinvestment of distributions		131,134			1,486,591			156,883			1,744,295
Shares redeemed		(2,047,688	)		(22,972,763	)		(2,774,607	)		(31,378,201	)
Net increase		741,635		$	8,614,204			774,625		$	8,960,096

62 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued)

	Year Ended December 31, 2016						Year Ended December 31, 2015
LifePath Index Retirement Fund (concluded)	Shares			Amount			Shares			Amount
Class K
Shares sold		35,696,531		$	404,603,854			16,777,846		$	189,800,125
Shares issued in reinvestment of distributions		1,211,664			13,744,555			923,943			10,276,621
Shares redeemed		(11,737,533	)		(132,178,862	)		(11,204,827	)		(126,860,547	)
Net increase		25,170,662		$	286,169,547			6,496,962		$	73,216,199
Total Net Increase		25,990,571		$	295,487,788			7,480,330		$	84,341,187
LifePath Index 2020 Fund
Institutional
Shares sold		3,122,997		$	35,765,199			4,515,664		$	52,369,745
Shares issued in reinvestment of distributions		184,461			2,136,485			220,078			2,500,544
Shares redeemed		(3,782,730	)		(43,445,318	)		(3,759,343	)		(43,917,181	)
Net increase (decrease)		(475,272	)	$	(5,543,634	)		976,399		$	10,953,108
Investor A
Shares sold		7,805,341		$	90,526,292			4,853,576		$	56,122,302
Shares issued in reinvestment of distributions		255,153			2,955,308			294,782			3,342,355
Shares redeemed		(3,948,390	)		(45,061,098	)		(3,984,733	)		(45,510,700	)
Net increase		4,112,104		$	48,420,502			1,163,625		$	13,953,957
Class K
Shares sold		60,982,264		$	703,922,811			30,589,214		$	355,194,101
Shares issued in reinvestment of distributions		2,579,307			29,912,927			2,157,628			24,501,172
Shares redeemed		(18,755,337	)		(215,196,751	)		(15,000,205	)		(173,498,082	)
Net increase		44,806,234		$	518,638,987			17,746,637		$	206,197,191
Total Net Increase		48,443,066		$	561,515,855			19,886,661		$	231,104,256
LifePath Index 2025 Fund
Institutional
Shares sold		2,652,941		$	30,896,140			4,469,528		$	52,624,386
Shares issued in reinvestment of distributions		148,018			1,747,636			153,474			1,771,190
Shares redeemed		(2,859,196	)		(33,539,712	)		(2,704,757	)		(32,206,958	)
Net increase (decrease)		(58,237	)	$	(895,936	)		1,918,245		$	22,188,618
Investor A
Shares sold		4,028,309		$	47,198,398			3,065,236		$	36,262,072
Shares issued in reinvestment of distributions		204,861			2,418,491			209,188			2,411,971
Shares redeemed		(2,225,550	)		(26,026,312	)		(1,718,276	)		(20,315,086	)
Net increase		2,007,620		$	23,590,577			1,556,148		$	18,358,957
Class K
Shares sold		59,303,860		$	696,390,493			26,119,320		$	307,027,110
Shares issued in reinvestment of distributions		1,875,108			22,193,238			1,209,314			13,941,182
Shares redeemed		(10,638,482	)		(124,311,226	)		(6,759,750	)		(79,440,503	)
Net increase		50,540,486		$	594,272,505			20,568,884		$	241,527,789
Total Net Increase		52,489,869		$	616,967,146			24,043,277		$	282,075,364
LifePath Index 2030 Fund
Institutional
Shares sold		4,010,299		$	47,144,810			4,274,480		$	50,812,514
Shares issued in reinvestment of distributions		197,625			2,345,990			217,842			2,529,945
Shares redeemed		(3,597,085	)		(42,487,226	)		(2,995,796	)		(36,095,486	)
Net increase		610,839		$	7,003,574			1,496,526		$	17,246,973

BLACKROCK FUNDS III DECEMBER 31, 2016 63

Notes to Financial Statements (continued)

	Year Ended December 31, 2016						Year Ended December 31, 2015
LifePath Index 2030 Fund (concluded)	Shares			Amount			Shares			Amount
Investor A
Shares sold		10,486,831		$	124,479,163			4,892,193		$	58,052,152
Shares issued in reinvestment of distributions		296,381			3,528,079			326,058			3,787,014
Shares redeemed		(3,569,295	)		(41,422,144	)		(4,325,077	)		(50,669,367	)
Net increase		7,213,917		$	86,585,098			893,174		$	11,169,799
Class K
Shares sold		69,062,699		$	814,037,439			31,052,806		$	369,413,212
Shares issued in reinvestment of distributions		2,662,972			31,634,345			2,111,529			24,483,767
Shares redeemed		(14,145,862	)		(165,623,130	)		(10,494,964	)		(124,358,272	)
Net increase		57,579,809		$	680,048,654			22,669,371		$	269,538,707
Total Net Increase		65,404,565		$	773,637,326			25,059,071		$	297,955,479
LifePath Index 2035 Fund
Institutional
Shares sold		2,784,487		$	32,810,332			3,454,555		$	41,467,537
Shares issued in reinvestment of distributions		120,013			1,440,832			125,913			1,476,870
Shares redeemed		(2,767,160	)		(32,989,409	)		(1,729,644	)		(21,158,214	)
Net increase		137,340		$	1,261,755			1,850,824		$	21,786,193
Investor A
Shares sold		3,670,070		$	43,416,765			2,571,827		$	30,980,524
Shares issued in reinvestment of distributions		193,278			2,317,278			211,247			2,474,873
Shares redeemed		(1,872,287	)		(22,156,377	)		(1,565,151	)		(18,736,195	)
Net increase		1,991,061		$	23,577,666			1,217,923		$	14,719,202
Class K
Shares sold		47,568,120		$	566,239,734			19,333,090		$	231,569,790
Shares issued in reinvestment of distributions		1,470,094			17,697,395			997,433			11,683,839
Shares redeemed		(7,794,154	)		(92,690,320	)		(4,950,460	)		(59,410,248	)
Net increase		41,244,060		$	491,246,809			15,380,063		$	183,843,381
Total Net Increase		43,372,461		$	516,086,230			18,448,810		$	220,348,776
LifePath Index 2040 Fund
Institutional
Shares sold		2,927,417		$	34,668,762			3,742,465		$	45,441,390
Shares issued in reinvestment of distributions		142,384			1,718,354			168,425			1,991,699
Shares redeemed		(3,217,735	)		(38,677,041	)		(2,336,755	)		(28,748,355	)
Net increase (decrease)		(147,934	)	$	(2,289,925	)		1,574,135		$	18,684,734
Investor A
Shares sold		6,733,379		$	81,132,288			3,394,171		$	40,987,512
Shares issued in reinvestment of distributions		181,349			2,197,520			205,645			2,427,847
Shares redeemed		(1,904,912	)		(22,430,352	)		(2,488,529	)		(29,580,282	)
Net increase		5,009,816		$	60,899,456			1,111,287		$	13,835,077
Class K
Shares sold		48,207,991		$	578,765,209			22,594,367		$	274,630,234
Shares issued in reinvestment of distributions		1,832,198			22,199,868			1,556,425			18,395,984
Shares redeemed		(9,116,664	)		(108,348,877	)		(7,475,003	)		(90,613,541	)
Net increase		40,923,525		$	492,616,200			16,675,789		$	202,412,677
Total Net Increase		45,785,407		$	551,225,731			19,361,211		$	234,932,488

64 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued)

	Year Ended December 31, 2016						Year Ended December 31, 2015
LifePath Index 2045 Fund	Shares			Amount			Shares			Amount
Institutional
Shares sold		2,010,083		$	24,034,661			2,832,028		$	34,762,713
Shares issued in reinvestment of distributions		91,074			1,112,705			107,110			1,282,231
Shares redeemed		(2,267,768	)		(27,495,364	)		(1,389,856	)		(17,360,373	)
Net increase (decrease)		(166,611	)	$	(2,347,998	)		1,549,282		$	18,684,571
Investor A
Shares sold		2,012,649		$	24,190,626			1,707,713		$	21,065,033
Shares issued in reinvestment of distributions		92,988			1,136,522			100,984			1,206,383
Shares redeemed		(821,398	)		(9,905,644	)		(914,620	)		(11,197,390	)
Net increase		1,284,239		$	15,421,504			894,077		$	11,074,026
Class K
Shares sold		28,929,976		$	351,993,939			10,357,098		$	127,174,706
Shares issued in reinvestment of distributions		826,758			10,166,213			583,925			6,985,514
Shares redeemed		(4,402,391	)		(53,214,235	)		(2,987,293	)		(36,776,708	)
Net increase		25,354,343		$	308,945,917			7,953,730		$	97,383,512
Total Net Increase		26,471,971		$	322,019,423			10,397,089		$	127,142,109
LifePath Index 2050 Fund
Institutional
Shares sold		1,813,236		$	22,004,075			2,839,446		$	35,471,658
Shares issued in reinvestment of distributions		80,770			1,000,220			92,590			1,122,079
Shares redeemed		(1,934,609	)		(23,799,961	)		(1,696,316	)		(21,414,834	)
Net increase (decrease)		(40,603	)	$	(795,666	)		1,235,720		$	15,178,903
Investor A
Shares sold		3,140,951		$	38,724,351			1,493,742		$	18,562,504
Shares issued in reinvestment of distributions		74,370			924,683			72,199			873,353
Shares redeemed		(755,257	)		(9,023,852	)		(1,048,315	)		(12,800,671	)
Net increase		2,460,064		$	30,625,182			517,626		$	6,635,186
Class K
Shares sold		25,260,372		$	310,821,104			11,998,246		$	149,820,858
Shares issued in reinvestment of distributions		804,155			10,000,774			645,363			7,817,658
Shares redeemed		(5,299,051	)		(64,723,627	)		(4,957,672	)		(61,987,542	)
Net increase		20,765,476		$	256,098,251			7,685,937		$	95,650,974
Total Net Increase		23,184,937		$	285,927,767			9,439,283		$	117,465,063
LifePath Index 2055 Fund
Institutional
Shares sold		1,552,173		$	19,237,386			1,466,687		$	18,564,571
Shares issued in reinvestment of distributions		47,942			605,263			39,112			481,437
Shares redeemed		(1,117,013	)		(14,072,058	)		(551,644	)		(7,052,483	)
Net increase		483,102		$	5,770,591			954,155		$	11,993,525
Investor A
Shares sold		1,277,285		$	15,786,704			695,213		$	8,822,753
Shares issued in reinvestment of distributions		36,799			464,764			27,644			339,634
Shares redeemed		(293,501	)		(3,640,930	)		(352,293	)		(4,399,745	)
Net increase		1,020,583		$	12,610,538			370,564		$	4,762,642

BLACKROCK FUNDS III DECEMBER 31, 2016 65

Notes to Financial Statements (concluded)

	Year Ended December 31, 2016						Year Ended December 31, 2015
LifePath Index 2055 Fund (concluded)	Shares			Amount			Shares			Amount
Class K
Shares sold		10,848,162		$	135,793,609			4,101,454		$	51,922,767
Shares issued in reinvestment of distributions		266,527			3,379,423			154,168			1,897,041
Shares redeemed		(1,924,729	)		(23,907,773	)		(1,694,573	)		(21,609,401	)
Net increase		9,189,960		$	115,265,259			2,561,049		$	32,210,407
Total Net Increase		10,693,645		$	133,646,388			3,885,768		$	48,966,574

	Period February 29, 20161 to December 31, 2016
LifePath Index 2060 Fund	Shares			Amount
Institutional
Shares sold		10,365		$	110,858
Shares issued in reinvestment of distributions		35			398
Shares redeemed		(2	)		(26	)
Net increase		10,398		$	111,230
Investor A
Shares sold		34,215		$	377,921
Shares issued in reinvestment of distributions		196			2,224
Shares redeemed		(379	)		(4,151	)
Net increase		34,032		$	375,994
Class K
Shares sold		927,052		$	10,331,740
Shares issued in reinvestment of distributions		6,083			68,951
Shares redeemed		(32,595	)		(367,123	)
Net increase		900,540		$	10,033,568
Total Net Increase		944,970		$	10,520,792

¹  Commencement of operations.

7. Subsequent Events:

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

66 BLACKROCK FUNDS III DECEMBER 31, 2016

Report of Independent Registered Public Accounting Firm BlackRock Funds III

To the Board of Trustees of BlackRock Funds III and the Shareholders of the Funds, as defined:

In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock LifePath^® Index Retirement Fund, BlackRock LifePath^® Index 2020 Fund, BlackRock LifePath^® Index 2025 Fund, BlackRock LifePath^® Index 2030 Fund, BlackRock LifePath^® Index 2035 Fund, BlackRock LifePath^® Index 2040 Fund, BlackRock LifePath^® Index 2045 Fund, BlackRock LifePath^® Index 2050 Fund, BlackRock LifePath^® Index 2055 Fund and BlackRock LifePath^® Index 2060 Fund (the “Funds”), each a series of BlackRock Funds III, as of December 31, 2016, and the results of each of their operations, the changes in each of their net assets and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

BLACKROCK FUNDS III DECEMBER 31, 2016 67

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid during the tax year ended December 31, 2016:

	Payable Dates		LifePath Index Retirement Fund		LifePath Index 2020 Fund		LifePath Index 2025 Fund		LifePath Index 2030 Fund		LifePath Index 2035 Fund		LifePath Index 2040 Fund		LifePath Index 2045 Fund		LifePath Index 2050 Fund		LifePath Index 2055 Fund		LifePath Index 2060 Fund
Qualified Dividend Income for Individuals1		Quarterly		35.26%		42.99%		52.41%		58.13%		65.62%		69.92%		73.34%		74.05%		73.72%		72.88%
Dividends Qualifying for the Dividend Received Deduction for Corporations1		Quarterly		19.29%		23.00%		27.95%		30.50%		34.40%		36.19%		37.63%		37.81%		37.47%		33.94%
Federal Obligation Interest2		Quarterly		21.62%		18.05%		15.57%		10.60%		7.17%		3.17%		1.07%		0.37%		0.43%		0.48%
Interest Related Dividends and Short-Term Capital Gains for Non-U.S. Residents3		Quarterly		56.75%		46.58%		33.99%		27.36%		17.58%		11.85%		6.03%		5.04%		3.88%		2.35%

¹  The LifePath Index Funds hereby designate the percentages indicated above or the maximum amount allowable by law.

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

³  Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations.

Additionally, the Funds distributed long-term capital gains per-share as follows:

	Record Date		LifePath Index Retirement Fund		LifePath Index 2020 Fund		LifePath Index 2025 Fund		LifePath Index 2030 Fund		LifePath Index 2035 Fund		LifePath Index 2040 Fund		LifePath Index 2045 Fund		LifePath Index 2050 Fund		LifePath Index 2055 Fund		LifePath Index 2060 Fund
Long-Term Capital Gains Per-Share		6/29/16		$0.007322		—		—		$0.000715		—		—		$0.000074		$0.000884		$0.002745		—
		12/29/16		$0.030605		$0.024001		$0.013921		$0.016605		$0.009214		$0.011902		$0.006604		$0.005958		$0.008519		$0.002894

68 BLACKROCK FUNDS III DECEMBER 31, 2016

Master Portfolio Information as of December 31, 2016 Master Investment Portfolio

LifePath^® Index Retirement Master Portfolio

Portfolio Composition Percent of
Total Net Assets

Fixed Income Funds	60	%
Equity Funds	40

Ten Largest Holdings Percent of
Total Net Assets

U.S. Total Bond Index Master Portfolio	51	%
Large Cap Index Master Portfolio	22
iShares Core MSCI Total International Stock ETF	10
iShares TIPS Bond ETF	9
Master Small Cap Index Series	4
Total International ex U.S. Index Master Portfolio	3
BlackRock Developed Real Estate Index Fund	1

LifePath^® Index 2020 Master Portfolio

Portfolio Composition Percent of
Total Net Assets

Fixed Income Funds	50	%
Equity Funds	50

Ten Largest Holdings Percent of
Total Net Assets

U.S. Total Bond Index Master Portfolio	43	%
Large Cap Index Master Portfolio	27
iShares Core MSCI Total International Stock ETF	11
iShares TIPS Bond ETF	7
Total International ex U.S. Index Master Portfolio	5
Master Small Cap Index Series	4
BlackRock Developed Real Estate Index Fund	3

LifePath^® Index 2025 Master Portfolio

Portfolio Composition Percent of
Total Net Assets

Fixed Income Funds	39	%
Equity Funds	61

Ten Largest Holdings Percent of
Total Net Assets

U.S. Total Bond Index Master Portfolio	33	%
Large Cap Index Master Portfolio	33
iShares Core MSCI Total International Stock ETF	15
BlackRock Developed Real Estate Index Fund	6
iShares TIPS Bond ETF	5
Total International ex U.S. Index Master Portfolio	4
Master Small Cap Index Series	3

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, 2016 69

Master Portfolio Information as of December 31, 2016 (continued) Master Investment Portfolio

LifePath^® Index 2030 Master Portfolio

Portfolio Composition Percent of
Total Net Assets

Fixed Income Funds	28	%
Equity Funds	72

Ten Largest Holdings Percent of
Total Net Assets

Large Cap Index Master Portfolio	38	%
U.S. Total Bond Index Master Portfolio	24
iShares Core MSCI Total International Stock ETF	15
BlackRock Developed Real Estate Index Fund	8
Total International ex U.S. Index Master Portfolio	7
iShares TIPS Bond ETF	4
Master Small Cap Index Series	3

LifePath^® Index 2035 Master Portfolio

Portfolio Composition Percent of
Total Net Assets

Fixed Income Funds	18	%
Equity Funds	82
Short-Term Securities	1
Liabilities in Excess of Other Assets	(1	)

Ten Largest Holdings Percent of
Total Net Assets

Large Cap Index Master Portfolio	44	%
iShares Core MSCI Total International Stock ETF	19
U.S. Total Bond Index Master Portfolio	15
BlackRock Developed Real Estate Index Fund	11
Total International ex U.S. Index Master Portfolio	6
iShares TIPS Bond ETF	2
Master Small Cap Index Series	2
BlackRock Cash Funds: Institutional, SL Agency Shares	1

LifePath^® Index 2040 Master Portfolio

Portfolio Composition Percent of
Total Net Assets

Fixed Income Funds	9	%
Equity Funds	91

Ten Largest Holdings Percent of
Total Net Assets

Large Cap Index Master Portfolio	48	%
iShares Core MSCI Total International Stock ETF	20
BlackRock Developed Real Estate Index Fund	13
Total International ex U.S. Index Master Portfolio	8
U.S. Total Bond Index Master Portfolio	8
Master Small Cap Index Series	2
iShares TIPS Bond ETF	1
iShares MSCI EAFE Small-Cap ETF	1

The LifePath Index Master Portfolios’ allocation and holdings listed above are current as of the report date. However, the LifePath Index Master Portfolios are regularly monitored and their composition may vary throughout various periods.

70 BLACKROCK FUNDS III DECEMBER 31, 2016

Master Portfolio Information as of December 31, 2016 (continued) Master Investment Portfolio

LifePath^® Index 2045 Master Portfolio

Portfolio Composition Percent of
Total Net Assets

Fixed Income Funds	3	%
Equity Funds	97
Short-Term Securities	1
Liabilities in Excess of Other Assets	(1	)

Ten Largest Holdings Percent of
Total Net Assets

Large Cap Index Master Portfolio	50	%
iShares Core MSCI Total International Stock ETF	23
BlackRock Developed Real Estate Index Fund	15
Total International ex U.S. Index Master Portfolio	6
U.S. Total Bond Index Master Portfolio	2
Master Small Cap Index Series	1
BlackRock Cash Funds: Institutional, SL Agency Shares	1
iShares MSCI EAFE Small-Cap ETF	1
BlackRock Cash Funds: Treasury, SL Agency Shares	1

LifePath^® Index 2050 Master Portfolio

Portfolio Composition Percent of
Total Net Assets

Fixed Income Funds	1	%
Equity Funds	99
Short-Term Securities	1
Liabilities in Excess of Other Assets	(1	)

Ten Largest Holdings Percent of
Total Net Assets

Large Cap Index Master Portfolio	50	%
iShares Core MSCI Total International Stock ETF	23
BlackRock Developed Real Estate Index Fund	16
Total International ex U.S. Index Master Portfolio	7
Master Small Cap Index Series	2
U.S. Total Bond Index Master Portfolio	1
BlackRock Cash Funds: Treasury, SL Agency Shares	1

LifePath^® Index 2055 Master Portfolio

Portfolio Composition Percent of
Total Net Assets

Fixed Income Funds	1	%
Equity Funds	98
Short-Term Securities	1

Ten Largest Holdings Percent of
Total Net Assets

Large Cap Index Master Portfolio	50	%
iShares Core MSCI Total International Stock ETF	28
BlackRock Developed Real Estate Index Fund	16
Total International ex U.S. Index Master Portfolio	2
Master Small Cap Index Series	2
U.S. Total Bond Index Master Portfolio	1
BlackRock Cash Funds: Treasury, 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, 2016 71

Master Portfolio Information as of December 31, 2016 (concluded) Master Investment Portfolio

LifePath^® Index 2060 Master Portfolio

Portfolio Composition Percent of
Total Net Assets

Fixed Income Funds	1	%
Equity Funds	99
Short-Term Securities	1
Liabilities in Excess of Other Assets	(1	)

Ten Largest Holdings Percent of
Total Net Assets

Large Cap Index Master Portfolio	50	%
iShares Core MSCI Total International Stock ETF	31
BlackRock Developed Real Estate Index Fund	16
Master Small Cap Index Series	2
U.S. Total Bond Index Master Portfolio	1
BlackRock Cash Funds: Treasury, 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.

72 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 LifePath Index Retirement Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 40.2%
BlackRock Developed Real Estate Index Fund		402,284	$	3,982,608
iShares Core MSCI Total International Stock ETF		1,636,585		82,631,176
Large Cap Index Master Portfolio	$	179,250,938		179,250,938
Master Small Cap Index Series	$	34,440,451		34,440,451
Total International ex U.S. Index Master Portfolio	$	25,062,003		25,062,003
				325,367,176
Fixed Income Funds — 59.6%
iShares TIPS Bond ETF		621,994		70,391,061
U.S. Total Bond Index Master Portfolio	$	412,873,479		412,873,479
				483,264,540

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Short-Term Securities — 0.1%
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (b)		717,035	$	717,035
Total Affiliated Investment Companies (Cost — $795,188,163) — 99.9%				809,348,751
Other Assets Less Liabilities — 0.1%				1,157,963
Net Assets — 100.0%			$	810,506,714

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Index Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December  31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December  31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
BlackRock Cash Funds: Institutional, SL Agency Shares*		1,955,906		—			(1,955,906	)1		—		—	$	14,898	2		—
BlackRock Cash Funds: Prime, SL Agency Shares*		229,051		—			(229,051	)1		—		—	$	1,618	2		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		717,035	3		—			717,035	$	717,035	$	2,460	2	$	891
BlackRock Developed Real Estate Index Fund		—		402,284			—			402,284	$	3,982,608	$	11,670			—
iShares Cohen & Steers REIT ETF*		14,574		7,937			(22,511	)		—		—	$	43,303		$	113,095
iShares Core MSCI Total International Stock ETF		640,123		1,032,012			(35,550	)		1,636,585	$	82,631,176	$	1,566,796		$	(341,839	)
iShares International Developed Real Estate ETF*		41,936		21,395			(63,331	)		—		—	$	34,565		$	(122,339	)
iShares MSCI EAFE Small-Cap ETF*		38,878		—			(38,878	)		—		—	$	26,280		$	206,077
iShares TIPS Bond ETF		408,584		254,477			(41,067	)		621,994	$	70,391,061	$	806,465		$	(324,152	)
Large Cap Index Master Portfolio	$	111,965,799	$	67,285,139	3		—		$	179,250,938	$	179,250,938	$	2,924,105		$	1,356,060
Master Small Cap Index Series	$	19,969,721	$	14,470,730	3		—		$	34,440,451	$	34,440,451	$	357,302		$	366,684
Total International ex U.S. Index Master Portfolio	$	31,996,970		—		$	(6,934,967	)1	$	25,062,003	$	25,062,003	$	817,636		$	(641,813	)
U.S. Total Bond Index Master Portfolio	$	254,892,164	$	157,981,315	3		—		$	412,873,479	$	412,873,479	$	6,351,516		$	(117,263	)
Total											$	809,348,751	$	12,958,614		$	495,401
*  No longer held by the LifePath Index Master Portfolio as of period end.
1    Represents net shares/investment value sold.
2    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.
3    Represents net shares/investment value purchased.

(b) Current yield as of period end.

Portfolio Abbreviations

ETF Exchange-Traded Fund

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 73

Schedule of Investments (concluded) LifePath Index Retirement Master Portfolio

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Equity Funds	$	86,613,784		—		—	$	86,613,784
Fixed Income Funds		70,391,061		—		—		70,391,061
Short-Term Securities		717,035		—		—		717,035
Subtotal	$	157,721,880		—		—	$	157,721,880
Investments Valued at NAV1								651,626,871
Total							$	809,348,751
1    As of December 31, 2016, certain of the LifePath Index Master Portfolio’s Investments were valued using net asset value (“NAV”) per share (or its equivalent) as no quoted market value is available and have been excluded from the fair value hierarchy.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

74 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 LifePath Index 2020 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 49.7%
BlackRock Developed Real Estate Index Fund		4,757,223	$	47,096,511
iShares Core MSCI Total International Stock ETF		3,497,604		176,594,026
iShares MSCI EAFE Small-Cap ETF (b)		103,367		5,151,811
Large Cap Index Master Portfolio	$	451,450,181		451,450,181
Master Small Cap Index Series	$	63,214,259		63,214,259
Total International ex U.S. Index Master Portfolio	$	89,280,690		89,280,690
				832,787,478
Fixed Income Funds — 50.1%
iShares TIPS Bond ETF		1,041,857		117,906,957
U.S. Total Bond Index Master Portfolio	$	722,945,868		722,945,868
				840,852,825

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Short-Term Securities — 0.2%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.87% (c)(d)		31,608	$	31,615
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (d)		3,341,262		3,341,262
				3,372,877
Total Affiliated Investment Companies (Cost — $1,640,982,515) — 100.0%				1,677,013,180
Other Assets Less Liabilities — 0.0%				374,341
Net Assets — 100.0%			$	1,677,387,521

Notes to Schedule of Investments

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Index Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December 31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
BlackRock Cash Funds: Institutional, SL Agency Shares		7,305,823		—			(7,274,215	)1		31,608	$	31,615	$	29,110	2	$	1,218
BlackRock Cash Funds: Prime, SL Agency Shares*		2,715,981		—			(2,715,981	)1		—		—	$	1,966	2		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		3,341,262	3		—			3,341,262	$	3,341,262	$	4,749	2	$	375
BlackRock Developed Real Estate Index Fund		—		4,757,223			—			4,757,223	$	47,096,511	$	138,014			—
iShares Cohen & Steers REIT ETF*		188,176		76,951			(265,127	)		—		—	$	549,946		$	1,742,377
iShares Core MSCI Total International Stock ETF		1,264,323		2,233,281			—			3,497,604	$	176,594,026	$	3,460,598			—
iShares International Development Real Estate ETF*		555,003		228,748			(783,751	)		—		—	$	456,315		$	(1,725,278	)
iShares MSCI EAFE Small-Cap ETF		204,158		—			(100,791	)		103,367	$	5,151,811	$	199,340		$	276,460
iShares TIPS Bond ETF		681,438		385,611			(25,192	)		1,041,857	$	117,906,957	$	1,405,136		$	(234,743	)
Large Cap Index Master Portfolio	$	310,598,522	$	140,851,659	3		—		$	451,450,181	$	451,450,181	$	7,783,838		$	3,207,912
Master Small Cap Index Series	$	38,748,461	$	24,465,798	3		—		$	63,214,259	$	63,214,259	$	673,352		$	149,873
Total International ex U.S. Index Master Portfolio	$	106,850,308		—		$	(17,569,618	)1	$	89,280,690	$	89,280,690	$	2,732,297		$	(2,193,912	)
U.S. Total Bond Index Master Portfolio	$	454,062,674	$	268,883,194	3		—		$	722,945,868	$	722,945,868	$	11,179,030		$	(237,317	)
Total											$	1,677,013,180	$	28,613,691		$	986,965
*  No longer held by the LifePath Index Master Portfolio as of period end.
1    Represents net shares/investment value sold.
2    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.
3    Represents net shares/investment value purchased.

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

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

(d) Current yield as of period end.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 75

Schedule of Investments (concluded) LifePath Index 2020 Master Portfolio

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Equity Funds	$	228,842,348		—		—	$	228,842,348
Fixed Income Funds		117,906,957		—		—		117,906,957
Short-Term Securities		3,372,877		—		—		3,372,877
Subtotal	$	350,122,182		—		—	$	350,122,182
Investments Valued at NAV1								1,326,890,998
Total							$	1,677,013,180
1    As of December 31, 2016, certain of the LifePath Index Master Portfolio’s Investments were valued using net asset value (“NAV”) per share (or its equivalent) as no quoted market value is available and have been excluded from the fair value hierarchy.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

76 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 LifePath Index 2025 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 61.3%
BlackRock Developed Real Estate Index Fund		8,157,732	$	80,761,544
iShares Core MSCI Total International Stock ETF		4,368,278		220,554,356
iShares MSCI EAFE Small-Cap ETF (b)		34,830		1,735,927
Large Cap Index Master Portfolio	$	473,120,757		473,120,757
Master Small Cap Index Series	$	44,721,084		44,721,084
Total International ex U.S. Index Master Portfolio	$	59,297,124		59,297,124
				880,190,792
Fixed Income Funds — 38.5%
iShares TIPS Bond ETF		674,570		76,341,087
U.S. Total Bond Index Master Portfolio	$	476,185,674		476,185,674
				552,526,761

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Short-Term Securities — 0.3%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.87% (c)(d)		235,138	$	235,185
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (d)		4,157,343		4,157,343
				4,392,528
Total Affiliated Investment Companies (Cost — $1,399,288,731) — 100.1%				1,437,110,081
Liabilities in Excess of Other Assets — (0.1)%				(1,252,616	)
Net Assets — 100.0%			$	1,435,857,465

Notes to Schedule of Investments

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Index Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December  31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December  31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
BlackRock Cash Funds: Institutional, SL Agency Shares		6,872,778		—			(6,637,640	)1		235,138	$	235,185	$	52,832	2	$	803
BlackRock Cash Funds: Prime, SL Agency Shares*		1,883,549		—			(1,883,549	)1		—		—	$	4,529	2		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		4,157,343	3		—			4,157,343	$	4,157,343	$	5,659	2	$	363
BlackRock Developed Real Estate Index Fund		—		8,157,732			—			8,157,732	$	80,761,544	$	233,296			—
iShares Cohen & Steers REIT ETF*		248,988		216,910			(465,898	)		—		—	$	796,994		$	1,741,599
iShares Core MSCI Total International Stock ETF		1,556,261		2,821,217			(9,200	)		4,368,278	$	220,554,354	$	4,260,648		$	(93,883	)
iShares International Development Real Estate ETF*		715,578		473,370			(1,188,948	)		—		—	$	665,947		$	(2,491,503	)
iShares MSCI EAFE Small-Cap ETF		138,530		—			(103,700	)		34,830	$	1,735,927	$	109,295		$	400,735
iShares TIPS Bond ETF		361,737		320,933			(8,100	)		674,570	$	76,341,087	$	850,021		$	(64,470	)
Large Cap Index Master Portfolio	$	266,338,811	$	206,781,946	3		—		$	473,120,757	$	473,120,757	$	7,528,574		$	(21,404	)
Master Small Cap Index Series	$	24,045,521	$	20,675,563	3		—		$	44,721,084	$	44,721,084	$	468,766		$	(408,998	)
Total International ex U.S. Index Master Portfolio	$	68,026,251		—		$	(8,729,127	)1	$	59,297,124	$	59,297,124	$	1,797,582		$	(1,415,555	)
U.S. Total Bond Index Master Portfolio	$	248,639,480	$	227,546,194	3		—		$	476,185,674	$	476,185,674	$	6,853,036		$	(516,124	)
Total											$	1,437,110,079	$	23,627,179		$	(2,868,437	)
*  No longer held by the LifePath Index Master Portfolio as of period end.
1    Represents net shares/investment value sold.
2    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.
3    Represents net shares/investment value purchased.

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

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

(d) Current yield as of period end.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 77

Schedule of Investments (concluded) LifePath Index 2025 Master Portfolio

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Equity Funds	$	303,051,827		—		—	$	303,051,827
Fixed Income Funds		76,341,087		—		—		76,341,087
Short-Term Securities		4,392,528		—		—		4,392,528
Subtotal	$	383,785,442		—		—	$	383,785,442
Investments Valued at NAV1								1,053,324,639
Total							$	1,437,110,081
1    As of December 31, 2016, certain of the LifePath Index Master Portfolio’s Investments were valued using net asset value (“NAV”) per share (or its equivalent) as no quoted market value is available and have been excluded from the fair value hierarchy.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

78 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 LifePath Index 2030 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 71.8%
BlackRock Developed Real Estate Index Fund		16,082,653	$	159,218,269
iShares Core MSCI Total International Stock ETF		5,846,070		295,168,074
iShares MSCI EAFE Small-Cap ETF (b)		186,733		9,306,773
Large Cap Index Master Portfolio	$	732,938,640		732,938,640
Master Small Cap Index Series	$	49,267,846		49,267,846
Total International ex U.S. Index Master Portfolio	$	127,047,310		127,047,310
				1,372,946,912
Fixed Income Funds — 28.0%
iShares TIPS Bond ETF		633,115		71,649,625
U.S. Total Bond Index Master Portfolio	$	462,612,989		462,612,989
				534,262,614

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Short-Term Securities — 0.6%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.87% (c)(d)		4,529,813	$	4,530,719
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (d)		7,061,526		7,061,526
				11,592,245
Total Affiliated Investment Companies (Cost — $1,862,078,702) — 100.4%				1,918,801,771
Liabilities in Excess of Other Assets — (0.4)%				(7,663,495	)
Net Assets — 100.0%			$	1,911,138,276

Notes to Schedule of Investments

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Index Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December 31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
BlackRock Cash Funds: Institutional, SL Agency Shares		4,224,689		305,124	1		—			4,529,813	$	4,530,719	$	54,101	2	$	1,366
BlackRock Cash Funds: Prime, SL Agency Shares*		202,078		—			(202,078	)3		—		—	$	4,020	2		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		7,061,526	1		—			7,061,526	$	7,061,526	$	7,361	2	$	291
BlackRock Developed Real Estate Index Fund		—		16,082,653			—			16,082,653	$	159,218,269	$	450,373			—
iShares Cohen & Steers REIT ETF*		509,918		405,384			(915,302	)		—		—	$	1,510,776		$	3,393,969
iShares Core MSCI Total International Stock ETF		1,857,147		3,988,923			—			5,846,070	$	295,168,074	$	5,466,132			—
iShares International Development Real Estate ETF*		1,463,321		895,009			(2,358,330	)		—		—	$	1,259,544		$	(5,673,698	)
iShares MSCI EAFE Small-Cap ETF		253,525		—			(66,792	)		186,733	$	9,306,773	$	299,671		$	112,387
iShares TIPS Bond ETF		350,843		294,872			(12,600	)		633,115	$	71,649,625	$	788,920		$	(116,625	)
Large Cap Index Master Portfolio	$	429,624,226	$	303,314,414	1		—		$	732,938,640	$	732,938,640	$	11,705,058		$	1,693,899
Master Small Cap Index Series	$	28,641,879	$	20,625,967	1		—		$	49,267,846	$	49,267,846	$	533,042		$	(46,692	)
Total International ex U.S. Index Master Portfolio	$	142,152,800		—		$	(15,105,490	)3	$	127,047,310	$	127,047,310	$	3,833,904		$	(2,920,173	)
U.S. Total Bond Index Master Portfolio	$	245,012,642	$	217,600,347	1		—		$	462,612,989	$	462,612,989	$	6,595,771		$	(586,545	)
Total											$	1,918,801,771	$	32,508,673		$	(4,141,821	)
*  No longer held by the LifePath Index Master Portfolio as of period end.
1    Represents net shares/investment value purchased.
2    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.
3    Represents net shares/investment value 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) Current yield as of period end.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 79

Schedule of Investments (concluded) LifePath Index 2030 Master Portfolio

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Equity Funds	$	463,693,116		—		—	$	463,693,116
Fixed Income Funds		71,649,625		—		—		71,649,625
Short-Term Securities		11,592,245		—		—		11,592,245
Subtotal	$	546,934,986		—		—	$	546,934,986
Investments Valued at NAV1								1,371,866,785
Total							$	1,918,801,771
1    As of December 31, 2016, certain of the LifePath Index Master Portfolio’s Investments were valued using net asset value (“NAV”) per share (or its equivalent) as no quoted market value is available and have been excluded from the fair value hierarchy.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

80 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 LifePath Index 2035 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 82.0%
BlackRock Developed Real Estate Index Fund		12,987,139	$	128,572,671
iShares Core MSCI Total International Stock ETF (b)		4,456,608		225,014,138
iShares MSCI EAFE Small-Cap ETF		91,234		4,547,103
Large Cap Index Master Portfolio	$	509,351,954		509,351,954
Master Small Cap Index Series	$	23,550,738		23,550,738
Total International ex U.S. Index Master Portfolio	$	68,534,368		68,534,368
				959,570,972
Fixed Income Funds — 17.8%
iShares TIPS Bond ETF		235,717		26,676,093
U.S. Total Bond Index Master Portfolio	$	181,166,426		181,166,426
				207,842,519

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Short-Term Securities — 1.0%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.87% (c)(d)		7,764,647	$	7,766,200
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (d)		3,842,905		3,842,905
				11,609,105
Total Affiliated Investment Companies (Cost — $1,138,882,384) — 100.8%,				1,179,022,596
Liabilities in Excess of Other Assets — (0.8)%				(9,104,255	)
Net Assets — 100.0%			$	1,169,918,341

Notes to Schedule of Investments

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Index Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December  31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December  31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
BlackRock Cash Funds: Institutional, SL Agency Shares		3,748,132		4,016,515	1		—			7,764,647	$	7,766,200	$	35,983	2	$	3,317
BlackRock Cash Funds: Prime, SL Agency Shares*		624,013		—			(624,013	)3		—		—	$	3,791	2		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		3,842,905	1		—			3,842,905	$	3,842,905	$	5,257	2	$	214
BlackRock Developed Real Estate Index Fund		—		12,987,139			—			12,987,139	$	128,572,671	$	355,570			—
iShares Cohen & Steers REIT ETF*		365,844		351,737			(717,581	)		—		—	$	1,150,090		$	2,127,408
iShares Core MSCI Total International Stock ETF		1,508,195		2,948,413			—			4,456,608	$	225,014,138	$	4,264,037			—
iShares International Development Real Estate ETF*		1,046,365		764,582			(1,810,947	)		—		—	$	958,156		$	(3,790,205	)
iShares MSCI EAFE Small-Cap ETF		140,134		—			(48,900	)		91,234	$	4,547,103	$	161,402		$	108,572
iShares TIPS Bond ETF		112,159		124,458			(900	)		235,717	$	26,676,093	$	278,833		$	(3,340	)
Large Cap Index Master Portfolio	$	276,036,983	$	233,314,971	1		—		$	509,351,954	$	509,351,954	$	7,873,452		$	(616,739	)
Master Small Cap Index Series	$	13,686,883	$	9,863,855	1		—		$	23,550,738	$	23,550,738	$	270,475		$	(204,942	)
Total International ex U.S. Index Master Portfolio	$	74,464,733		—		$	(5,930,365	)3	$	68,534,368	$	68,534,368	$	2,035,328		$	(1,528,112	)
U.S. Total Bond Index Master Portfolio	$	85,746,349	$	95,420,077	1		—		$	181,166,426	$	181,166,426	$	2,458,419		$	(284,318	)
Total											$	1,179,022,596	$	19,850,793		$	(4,188,145	)
*  No longer held by the LifePath Index Master Portfolio as of period end.
1    Represents net shares/investment value purchased.
2    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.
3    Represents net shares/investment value 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) Current yield as of period end.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 81

Schedule of Investments (concluded) LifePath Index 2035 Master Portfolio

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Equity Funds	$	358,133,912		—		—	$	358,133,912
Fixed Income Funds		26,676,093		—		—		26,676,093
Short-Term Securities		11,609,105		—		—		11,609,105
Subtotal	$	396,419,110		—		—	$	396,419,110
Investments Valued at NAV1								782,603,486
Total							$	1,179,022,596
1    As of December 31, 2016, certain of the LifePath Index Master Portfolio’s Investments were valued using net asset value (“NAV”) per share (or its equivalent) as no quoted market value is available and have been excluded from the fair value hierarchy.

During the ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

82 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 LifePath Index 2040 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 91.2%
BlackRock Developed Real Estate Index Fund		18,471,957	$	182,872,374
iShares Core MSCI Total International Stock ETF		5,284,259		266,802,237
iShares MSCI EAFE Small-Cap ETF		164,443		8,195,839
Large Cap Index Master Portfolio	$	649,462,582		649,462,582
Master Small Cap Index Series	$	20,978,941		20,978,941
Total International ex U.S. Index Master Portfolio	$	107,744,430		107,744,430
				1,236,056,403

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Fixed Income Funds — 8.6%
iShares TIPS Bond ETF		119,210	$	13,490,996
U.S. Total Bond Index Master Portfolio	$	102,565,134		102,565,133
				116,056,129
Short-Term Securities — 0.4%
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (b)		5,950,404		5,950,404
Total Affiliated Investment Companies (Cost — $1,310,173,725) — 100.2%				1,358,062,936
Liabilities in Excess of Other Assets — (0.2)%				(3,168,602	)
Net Assets — 100.0%			$	1,354,894,334

Notes to Schedule of Investments

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Index Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December 31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
BlackRock Cash Funds: Institutional, SL Agency Shares*		2,836,397		—			(2,836,397	)1		—		—	$	37,811	2	$	1,814
BlackRock Cash Funds: Prime, SL Agency Shares*		—		—			—			—		—	$	4,707	2		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		5,950,404	3		—			5,950,404	$	5,950,404	$	6,235	2	$	266
BlackRock Developed Real Estate Index Fund		—		18,471,957	3		—			18,471,957	$	182,872,374	$	504,714			—
iShares Cohen & Steers REIT ETF*		554,158		470,808			(1,024,966	)		—		—	$	1,621,516		$	2,822,062
iShares Core MSCI Total International Stock ETF		1,745,458		3,538,801			—			5,284,259	$	266,802,237	$	4,829,319			—
iShares International Development Real Estate ETF*		1,585,534		1,041,891			(2,627,425	)		—		—	$	1,347,216		$	(6,094,395	)
iShares MSCI EAFE Small-Cap ETF		229,343		—			(64,900	)		164,443	$	8,195,839	$	261,689		$	51,213
iShares TIPS Bond ETF		55,895		67,415			(4,100	)		119,210	$	13,490,996	$	135,786		$	(12,104	)
Large Cap Index Master Portfolio	$	372,521,982	$	276,940,600	3		—		$	649,462,582	$	649,462,582	$	10,038,447		$	184,742
Master Small Cap Index Series	$	14,850,473	$	6,128,468	3		—		$	20,978,941	$	20,978,941	$	275,430		$	(61,529	)
Total International ex U.S. Index Master Portfolio	$	117,826,153		—		$	(10,081,723	)1	$	107,744,430	$	107,744,430	$	3,195,592		$	(2,504,524	)
U.S. Total Bond Index Master Portfolio	$	45,832,656	$	56,732,478	3		—		$	102,565,134	$	102,565,133	$	1,328,617		$	(210,907	)
Total											$	1,358,062,936	$	23,587,079		$	(5,823,362	)
*  No longer held by the LifePath Index Master Portfolio as of period end.
1    Represents net shares/investment value sold.
2    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.
3    Represents net shares/investment value purchased.

(b) Current yield as of period end.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 83

Schedule of Investments (concluded) LifePath Index 2040 Master Portfolio

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Equity Funds	$	457,870,450		—		—	$	457,870,450
Fixed Income Funds		13,490,996		—		—		13,490,996
Short-Term Securities		5,950,404		—		—		5,950,404
Subtotal	$	477,311,850		—		—	$	477,311,850
Investments Valued at NAV1								880,751,086
Total							$	1,358,062,936
1    As of December 31, 2016, certain of the LifePath Index Master Portfolio’s Investments were valued using net asset value (“NAV”) per share (or its equivalent) as no quoted market value is available and have been excluded from the fair value hierarchy.

During the ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

84 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 LifePath Index 2045 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 97.0%
BlackRock Developed Real Estate Index Fund		10,688,266	$	105,813,836
iShares Core MSCI Total International Stock ETF (b)		3,178,875		160,501,399
iShares MSCI EAFE Small-Cap ETF		64,900		3,234,616
Large Cap Index Master Portfolio	$	346,473,199		346,473,199
Master Small Cap Index Series	$	10,207,479		10,207,479
Total International ex U.S. Index Master Portfolio	$	44,423,237		44,423,237
				670,653,766

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Fixed Income Funds — 2.8%
iShares TIPS Bond ETF (b)		19,270	$	2,180,786
U.S. Total Bond Index Master Portfolio	$	17,147,916		17,147,916
				19,328,702
Short-Term Securities — 1.4%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.87% (c)(d)		6,719,853		6,721,197
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (d)		3,229,694		3,229,694
				9,950,891
Total Affiliated Investment Companies (Cost — $674,347,583) — 101.2%				699,933,359
Liabilities in Excess of Other Assets — (1.2)%				(8,292,434	)
Net Assets — 100.0%			$	691,640,925

Notes to Schedule of Investments

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Index Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December 31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
BlackRock Cash Funds: Institutional, SL Agency Shares		2,228,251		4,491,602	1		—			6,719,853	$	6,721,197	$	22,700	2	$	190
BlackRock Cash Funds: Prime, SL Agency Shares*		306,340		—			(306,340	)3		—		—	$	3,589	2		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		3,229,694	1		—			3,229,694	$	3,229,694	$	3,822	2	$	98
BlackRock Developed Real Estate Index Fund		—		10,688,266			—			10,688,266	$	105,813,836	$	290,529			—
iShares Cohen & Steers REIT ETF*		276,055		306,864			(582,919	)		—		—	$	870,182		$	1,266,194
iShares Core MSCI Total International Stock ETF		1,068,849		2,110,026			—			3,178,875	$	160,501,399	$	2,933,502			—
iShares International Development Real Estate ETF*		789,580		681,443			(1,471,023	)		—		—	$	726,161		$	(3,045,755	)
iShares MSCI EAFE Small-Cap ETF		95,700		—			(30,800	)		64,900	$	3,234,616	$	104,009		$	24,762
iShares TIPS Bond ETF		6,225		13,145			(100	)		19,270	$	2,180,786	$	16,930		$	(176	)
Large Cap Index Master Portfolio	$	175,431,933	$	171,041,266	1		—		$	346,473,199	$	346,473,199	$	5,079,924		$	(782,100	)
Master Small Cap Index Series	$	6,688,764	$	3,518,715	1		—		$	10,207,479	$	10,207,479	$	135,155		$	(156,897	)
Total International ex U.S. Index Master Portfolio	$	45,792,251		—		$	(1,369,014	)3	$	44,423,237	$	44,423,237	$	1,286,996		$	(932,044	)
U.S. Total Bond Index Master Portfolio	$	6,335,194	$	10,812,722	1		—		$	17,147,916	$	17,147,916	$	209,910		$	(43,864	)
Total											$	699,933,359	$	11,683,409		$	(3,669,592	)
*  No longer held by the LifePath Index Master Portfolio as of period end.
1    Represents net shares/investment value purchased.
2    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.
3    Represents net shares/investment value 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) Current yield as of period end.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 85

Schedule of Investments (concluded) LifePath Index 2045 Master Portfolio

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Equity Funds	$	269,549,851		—		—	$	269,549,851
Fixed Income Funds		2,180,786		—		—		2,180,786
Short-Term Securities		9,950,891		—		—		9,950,891
Subtotal	$	281,681,528		—		—	$	281,681,528
Investments Valued at NAV1								418,251,831
Total							$	699,933,359
1   As of December 31, 2016, certain of the LifePath Index Master Portfolio’s Investments were valued using net asset value (“NAV”) per share (or its equivalent) as no quoted market value is available and have been excluded from the fair value hierarchy.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

86 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 LifePath Index 2050 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 98.8%
BlackRock Developed Real Estate Index Fund		10,462,157	$	103,575,350
iShares Core MSCI Total International Stock ETF		3,015,540		152,254,615
iShares MSCI EAFE Small-Cap ETF (b)		61,118		3,046,121
Large Cap Index Master Portfolio	$	327,759,989		327,759,989
Master Small Cap Index Series	$	9,906,269		9,906,269
Total International ex U.S. Index Master Portfolio	$	45,503,138		45,503,138
				642,045,482

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Fixed Income Fund — 1.0%
U.S. Total Bond Index Master Portfolio	$	6,530,434	$	6,530,434
Short-Term Securities — 0.6%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.87% (c)(d)		709,293		709,435
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (d)		3,212,380		3,212,380
				3,921,815
Total Affiliated Investment Companies (Cost — $628,814,763) — 100.4%				652,497,731
Liabilities in Excess of Other Assets — (0.4)%				(2,635,360	)
Net Assets — 100.0%			$	649,862,371

Notes to Schedule of Investments

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Index Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December 31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
BlackRock Cash Funds: Institutional, SL Agency Shares		3,062,777		—			(2,353,484	)1		709,293	$	709,435	$	18,655	2	$	1,159
BlackRock Cash Funds: Prime, SL Agency Shares*		1,208,810		—			(1,208,810	)1		—		—	$	8,814	2		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		3,212,380	3		—			3,212,380	$	3,212,380	$	3,428	2	$	161
BlackRock Developed Real Estate Index Fund		—		10,462,157			—			10,462,157	$	103,575,350	$	284,256			—
iShares Cohen & Steers REIT ETF*		282,305		290,153			(572,458	)		—		—	$	862,898		$	1,186,570
iShares Core MSCI Total International Stock ETF		1,075,396		1,967,044			(26,900	)		3,015,540	$	152,254,615	$	2,780,363		$	(229,430	)
iShares International Development Real Estate ETF*		806,393		652,516			(1,458,909	)		—		—	$	723,022		$	(3,231,091	)
iShares MSCI EAFE Small-Cap ETF		89,118		—			(28,000	)		61,118	$	3,046,121	$	92,402		$	5,836
Large Cap Index Master Portfolio	$	173,705,052	$	154,054,937	3		—		$	327,759,989	$	327,759,989	$	4,904,550		$	(619,608	)
Master Small Cap Index Series	$	6,843,092	$	3,063,177	3		—		$	9,906,269	$	9,906,269	$	131,698		$	(179,314	)
Total International ex U.S. Index Master Portfolio	$	46,580,774		—		$	(1,077,636	)1	$	45,503,138	$	45,503,138	$	1,331,738		$	(975,786	)
U.S. Total Bond Index Master Portfolio	$	3,370,948	$	3,159,486	3		—		$	6,530,434	$	6,530,434	$	90,678		$	(8,794	)
Total											$	652,497,731	$	11,232,502		$	(4,050,297	)
*  No longer held by the LifePath Index Master Portfolio as of period end.
1    Represents net shares/investment value sold.
2    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.
3    Represents net shares/investment value purchased.

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

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

(d) Current yield as of period end.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 87

Schedule of Investments (concluded) LifePath Index 2050 Master Portfolio

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Equity Funds	$	258,876,086		—		—	$	258,876,086
Short-Term Securities		3,921,815		—		—		3,921,815
Subtotal	$	262,797,901		—		—	$	262,797,901
Investments Valued at NAV1								389,699,830
Total							$	652,497,731
1   As of December 31, 2016, certain of the LifePath Index Master Portfolio’s Investments were valued using net asset value (“NAV”) per share (or its equivalent) as no quoted market value is available and have been excluded from the fair value hierarchy.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

88 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 LifePath Index 2055 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 98.6%
BlackRock Developed Real Estate Index Fund		4,028,158	$	39,878,765
iShares Core MSCI Total International Stock ETF		1,405,456		70,961,473
iShares MSCI EAFE Small-Cap ETF (b)		2,167		108,003
Large Cap Index Master Portfolio	$	126,656,073		126,656,073
Master Small Cap Index Series	$	3,875,613		3,875,613
Total International ex U.S. Index Master Portfolio	$	6,150,576		6,150,576
				247,630,503

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Fixed Income Fund — 1.0%
U.S. Total Bond Index Master Portfolio	$	2,540,733	$	2,540,733
Short-Term Securities — 0.6%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.87% (c)(d)		109,953		109,975
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (d)		1,311,636		1,311,636
				1,421,611
Total Affiliated Investment Companies (Cost — $241,445,002) — 100.2%				251,592,847
Liabilities in Excess of Other Assets — (0.2)%				(564,783	)
Net Assets — 100.0%			$	251,028,064

Notes to Schedule of Investments

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Index Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December  31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December  31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
BlackRock Cash Funds: Institutional, SL Agency Shares	$	3,001,864		—			(2,891,911	)1		109,953	$	109,975	$	12,721	2	$	(11	)
BlackRock Cash Funds: Prime, SL Agency Shares*	$	1,681,340		—			(1,681,340	)1		—		—	$	2,349	2		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		1,311,636	2		—			1,311,636	$	1,311,636	$	1,527	2	$	56
BlackRock Developed Real Estate Index Fund		—		4,028,158			—			4,028,158	$	39,878,765	$	107,968			—
iShares Cohen & Steers REIT ETF*		88,789		127,872			(216,661	)		—		—	$	316,526		$	313,190
iShares Core MSCI Total International Stock ETF		431,175		974,281			—			1,405,456	$	70,961,473	$	1,346,191			—
iShares International Development Real Estate ETF*		253,583		292,508			(546,091	)		—		—	$	266,492		$	(1,078,122	)
iShares MSCI EAFE Small-Cap ETF		21,217		—			(19,050	)		2,167	$	108,003	$	11,870		$	56,187
Large Cap Index Master Portfolio	$	55,147,907	$	71,508,166	3		—		$	126,656,073	$	126,656,073	$	1,782,574		$	(442,916	)
Master Small Cap Index Series	$	2,173,646	$	1,701,967	3		—		$	3,875,613	$	3,875,613	$	48,364		$	(73,017	)
Total International ex U.S. Index Master Portfolio	$	10,703,083		—		$	(4,552,507	)1	$	6,150,576	$	6,150,576	$	232,120		$	(213,086	)
U.S. Total Bond Index Master Portfolio	$	1,070,209	$	1,470,524	3		—		$	2,540,733	$	2,540,733	$	33,194		$	(4,042	)
Total											$	251,592,847	$	4,161,896		$	(1,441,761	)
*  No longer held by the LifePath Index Master Portfolio as of period end.
1    Represents net shares/investment value sold.
2    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.
3    Represents net shares/investment value purchased.

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

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

(d) Current yield as of period end.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 89

Schedule of Investments (concluded) LifePath Index 2055 Master Portfolio

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Equity Funds	$	110,948,241		—		—	$	110,948,241
Short-Term Securities		1,421,611		—		—		1,421,611
Subtotal	$	112,369,852		—		—	$	112,369,852
Investments Valued at NAV1								139,222,995
Total							$	251,592,847
1   As of December 31, 2016, certain of the LifePath Index Master Portfolio’s Investments were valued using net asset value (“NAV”) per share (or its equivalent) as no quoted market value is available and have been excluded from the fair value hierarchy.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

90 BLACKROCK FUNDS III DECEMBER 31, 2016

Schedule of Investments December 31, 2016 LifePath Index 2060 Master Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Investment Value		Value
Equity Funds — 98.8%
BlackRock Developed Real Estate Index Fund		172,972	$	1,712,427
iShares Core MSCI Total International Stock ETF		65,969		3,330,775
Large Cap Index Master Portfolio	$	5,421,280		5,421,280
Master Small Cap Index Series	$	164,824		164,824
				10,629,306
Fixed Income Fund — 1.1%
U.S. Total Bond Index Master Portfolio	$	118,637		118,637
Short-Term Securities — 0.9%
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (b)		91,465		91,465
Total Affiliated Investment Companies (Cost — $10,525,604) — 100.8%				10,839,408
Liabilities in Excess of Other Assets — (0.8)%				(84,866	)
Net Assets — 100.0%			$	10,754,542

Notes to Schedule of Investments

(a) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the LifePath Index Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Investment Value Held at December  31, 2015		Shares/ Investment Value Purchased			Shares/ Investment Value Sold			Shares/ Investment Value Held at December  31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
BlackRock Cash Funds: Institutional, SL Agency Shares*		—		—			—			—		—	$	61	2		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		91,465	1		—			91,465	$	91,465	$	90	2	$	7
BlackRock Developed Real Estate Index Fund		—		172,972			—			172,972	$	1,712,427	$	4,104			—
iShares Cohen & Steers REIT ETF*		—		8,575			(8,575	)		—		—	$	4,126		$	(20,209	)
iShares Core MSCI Total International Stock ETF		—		73,146			(7,177	)		65,969	$	3,330,775	$	37,692		$	(1,036	)
iShares International Developed Real Estate ETF*		—		22,786			(22,786	)		—		—	$	3,495		$	(29,965	)
Large Cap Index Master Portfolio		—	$	5,421,280	1		—		$	5,421,280	$	5,421,280	$	33,644		$	(31,879	)
Master Small Cap Index Series		—	$	164,824	1		—		$	164,824	$	164,824	$	1,027		$	(4,497	)
U.S. Total Bond Index Master Portfolio		—	$	118,637	1		—		$	118,637	$	118,637	$	642		$	(1,109	)
Total											$	10,839,408	$	84,881		$	(88,688	)
*  No longer held by the LifePath Index Master Portfolio as of period end.
1    Represents net shares/investment value purchased.
2    Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities

(b) Current yield as of period end.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 91

Schedule of Investments (concluded) LifePath Index 2060 Master Portfolio

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the LifePath Index Master Portfolio’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following tables summarize the LifePath Index Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Equity Funds	$	5,043,202		—		—	$	5,043,202
Short-Term Securities		91,465		—		—		91,465
Subtotal	$	5,134,667		—		—	$	5,134,667
Investments Valued at NAV1								5,704,741
Total							$	10,839,408
1   As of December 31, 2016, certain of the LifePath Index Master Portfolio’s Investments were valued using net asset value (“NAV”) per share (or its equivalent) as no quoted market value is available and have been excluded from the fair value hierarchy.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

92 BLACKROCK FUNDS III DECEMBER 31, 2016

Statements of Assets and Liabilities Master Investment Portfolio

December 31, 2016	LifePath Index Retirement Master Portfolio		LifePath Index 2020 Master Portfolio		LifePath Index 2025 Master Portfolio		LifePath Index 2030 Master Portfolio		LifePath Index 2035 Master Portfolio
Assets
Investments at value — affiliated1,2	$	809,348,751	$	1,677,013,180	$	1,437,110,081	$	1,918,801,771	$	1,179,022,596
Cash		797,161		1,473,995		1,975,354		2,702,325		2,005,436
Receivables:
Investments sold		3,697,929		9,000,000		9,000,000		10,400,000		10,900,000
Securities lending income — affiliated		53		2,030		11,920		11,519		2,058
Contributions from investors		2,094,395		7,287,436		6,014,308		6,959,468		4,900,012
Dividends — affiliated		692		4,922		1,681		2,142		1,537
Investment adviser		—		—		—		—		—
Prepaid expenses		2,854		5,909		4,890		6,525		3,921
Total assets		815,941,835		1,694,787,472		1,454,118,234		1,938,883,750		1,196,835,560
Liabilities
Cash collateral on securities loaned at value		—		30,390		234,335		4,528,575		7,766,200
Payables:
Investments purchased		5,381,701		17,279,375		17,942,418		23,116,413		19,087,913
Custodian fees		852		1,510		1,715		1,957		1,539
Investment advisory fees		23,917		48,856		43,598		55,636		25,502
Independent Trustees’ fees		—		8,859		9,446		11,973		7,855
Other accrued expenses		2,354		5,164		4,008		5,467		3,150
Printing fees		311		311		334		312		320
Professional fees		25,986		25,486		24,915		25,141		24,740
Total liabilities		5,435,121		17,399,951		18,260,769		27,745,474		26,917,219
Net Assets	$	810,506,714	$	1,677,387,521	$	1,435,857,465	$	1,911,138,276	$	1,169,918,341
Net Assets Consist of
Investors’ capital	$	796,346,126	$	1,641,356,856	$	1,398,036,115	$	1,854,415,207	$	1,129,778,129
Net unrealized appreciation (depreciation)		14,160,588		36,030,665		37,821,350		56,723,069		40,140,212
Net Assets	$	810,506,714	$	1,677,387,521	$	1,435,857,465	$	1,911,138,276	$	1,169,918,341
1   Investments at cost — affiliated	$	795,188,163	$	1,640,982,515	$	1,399,288,731	$	1,862,078,702	$	1,138,882,384
2   Securities loaned at value		—	$	29,904	$	230,360	$	4,447,373	$	7,613,892

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	93

Statements of Assets and Liabilities Master Investment Portfolio

December 31, 2016	LifePath Index 2040 Master Portfolio		LifePath Index 2045 Master Portfolio		LifePath Index 2050 Master Portfolio		LifePath Index 2055 Master Portfolio		LifePath Index 2060 Master Portfolio
Assets
Investments at value — affiliated1,2	$	1,358,062,936	$	699,933,359	$	652,497,731	$	251,592,847	$	10,839,408
Cash		2,692,298		1,439,628		1,645,038		617,122		345,953
Receivables:
Investments sold		9,850,000		5,250,000		4,400,000		2,135,000		48,500
Securities lending income — affiliated		877		2,099		1,977		646		—
Contributions from investors		3,279,081		3,219,330		2,309,141		1,735,749		27,458
Dividends — affiliated		1,917		1,017		1,012		428		234
Investment adviser		—		—		—		1,472		10,928
Prepaid expenses		4,570		2,293		2,154		800		25
Total assets		1,373,891,679		709,847,726		660,857,053		256,084,064		11,272,506
Liabilities
Cash collateral on securities loaned at value		—		6,721,000		709,800		109,975		—
Payables:
Investments purchased		18,927,414		11,443,157		10,243,028		4,915,336		484,386
Custodian fees		1,821		1,660		1,432		1,845		6,885
Investment advisory fees		30,214		8,770		8,296		—		—
Independent Trustees’ fees		8,853		5,360		5,262		3,245		2,082
Other accrued expenses		3,719		1,764		1,716		851		395
Printing fees		337		329		328		335		232
Professional fees		24,987		24,761		24,820		24,413		23,984
Total liabilities		18,997,345		18,206,801		10,994,682		5,056,000		517,964
Net Assets	$	1,354,894,334	$	691,640,925	$	649,862,371	$	251,028,064	$	10,754,542
Net Assets Consist of
Investors’ capital	$	1,307,005,123	$	666,055,149	$	626,179,403	$	240,880,219	$	10,440,738
Net unrealized appreciation (depreciation)		47,889,211		25,585,776		23,682,968		10,147,845		313,804
Net Assets	$	1,354,894,334	$	691,640,925	$	649,862,371	$	251,028,064	$	10,754,542
1   Investments at cost — affiliated	$	1,310,173,725	$	674,347,583	$	628,814,763	$	241,445,002	$	10,525,604
2   Securities loaned at value		—	$	6,590,172	$	697,760	$	108,003		—

See Notes to Financial Statements.
94	BLACKROCK FUNDS III	DECEMBER 31, 2016

Statements of Operations Master Investment Portfolio

Year Ended December 31, 2016	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	$	2,496,054		$	6,224,605		$	6,933,712		$	9,797,798		$	7,183,682
Securities lending — affiliated — net		12,001			20,569			45,509			43,100			29,437
Net investment income allocated from the applicable Underlying Master Portfolio:
Dividends — affiliated		4,056,901			11,107,727			9,726,717			15,993,524			10,130,106
Interest — affiliated		6,578,862			11,670,989			7,226,780			7,107,440			2,750,418
Expenses		(233,159	)		(497,899	)		(362,424	)		(493,411	)		(269,348	)
Fees waived		47,955			87,700			56,885			60,222			26,498
Total investment income		12,958,614			28,613,691			23,627,179			32,508,673			19,850,793
Expenses
Investment advisory		308,007			659,518			526,290			703,867			417,661
Professional		29,231			31,193			29,359			34,041			29,592
Independent Trustees		18,243			46,919			41,835			52,007			35,217
Accounting services		3,390			3,962			5,064			4,889			4,567
Printing		2,471			2,471			2,479			2,471			2,471
Miscellaneous		8,162			17,753			13,581			18,630			10,752
Total expenses		369,504			761,816			618,608			815,905			500,260
Less:
Fees waived by the Manager		(61,648	)		(102,338	)		(92,480	)		(111,934	)		(166,148	)
Fees paid indirectly		(46	)		(170	)		(127	)		(257	)		(200	)
Total expenses after fees waived and paid indirectly		307,810			659,308			526,001			703,714			333,912
Net investment income		12,650,804			27,954,383			23,101,178			31,804,959			19,516,881
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — affiliated		(469,937	)		60,036			(506,719	)		(2,282,601	)		(1,554,248	)
Capital gain distributions from underlying funds — affiliated		891			375			363			291			214
Allocated from the applicable Underlying Master Portfolios from investments		964,447			926,554			(2,362,081	)		(1,859,511	)		(2,634,111	)
		495,401			986,965			(2,868,437	)		(4,141,821	)		(4,188,145	)
Net change in unrealized appreciation (depreciation) on:
Investments — affiliated		2,786,704			4,373,905			4,374,452			5,211,426			3,979,476
Allocated from the applicable Underlying Master Portfolios from investments		16,375,418			42,668,000			44,424,982			65,703,472			46,690,611
		19,162,122			47,041,905			48,799,434			70,914,898			50,670,087
Net realized and unrealized gain		19,657,523			48,028,870			45,930,997			66,773,077			46,481,942
Net Increase in Net Assets Resulting from Operations	$	32,308,327		$	75,983,253		$	69,032,175		$	98,578,036		$	65,998,823

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	95

Statements of Operations Master Investment Portfolio

Year Ended December 31, 2016	LifePath Index 2040 Master Portfolio			LifePath Index 2045 Master Portfolio			LifePath Index 2050 Master Portfolio			LifePath Index 2055 Master Portfolio			LifePath Index 2060 Master Portfolio1
Investment Income
Dividends — affiliated	$	8,717,517		$	4,951,266		$	4,753,184		$	2,053,722		$	49,568
Securities lending — affiliated — net		31,476			20,158			20,654			11,922			—
Net investment income allocated from the applicable Underlying Master Portfolio:
Dividends — affiliated		13,458,957			6,474,326			6,341,575			2,050,962			34,459
Interest — affiliated		1,674,692			370,976			246,664			85,331			1,490
Expenses		(316,924	)		(140,853	)		(136,138	)		(42,350	)		(676	)
Fees waived		21,361			7,536			6,563			2,309			40
Total investment income		23,587,079			11,683,409			11,232,502			4,161,896			84,881
Expenses
Investment advisory		485,876			236,242			227,118			82,592			1,526
Professional		29,896			28,732			28,746			28,018			26,862
Independent Trustees		38,996			24,214			23,645			15,093			9,566
Accounting services		5,439			5,498			4,096			4,889			7,499
Printing		2,479			2,221			2,221			2,067			516
Miscellaneous		12,775			6,032			5,928			1,841			435
Total expenses		575,461			302,939			291,754			134,500			46,404
Less:
Fees waived by the Manager		(186,771	)		(161,206	)		(155,326	)		(82,592	)		(1,382	)
Fees reimbursed by the Manager		—			—			—			(18,773	)		(44,407	)
Fees paid indirectly		(95	)		(86	)		(186	)		(116	)		(2	)
Total expenses after fees waived and paid indirectly		388,595			141,647			136,242			33,019			613
Net investment income		23,198,484			11,541,762			11,096,260			4,128,877			84,268
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — affiliated		(3,231,410	)		(1,754,785	)		(2,266,956	)		(708,756	)		(51,210	)
Capital gain distributions from underlying funds — affiliated		266			98			161			56			7
Allocated from the applicable Underlying Master Portfolios from investments		(2,592,218	)		(1,914,905	)		(1,783,502	)		(733,061	)		(37,485	)
		(5,823,362	)		(3,669,592	)		(4,050,297	)		(1,441,761	)		(88,688	)
Net change in unrealized appreciation (depreciation) on:
Investments — affiliated		3,922,195			2,186,201			2,417,132			1,008,709			11,442
Allocated from the applicable Underlying Master Portfolios from investments		57,321,030			30,868,441			29,404,867			11,150,306			302,362
		61,243,225			33,054,642			31,821,999			12,159,015			313,804
Net realized and unrealized gain		55,419,863			29,385,050			27,771,702			10,717,254			225,116
Net Increase in Net Assets Resulting from Operations	$	78,618,347		$	40,926,812		$	38,867,962		$	14,846,131		$	309,384
1    Commenced operations on February 29, 2016.

See Notes to Financial Statements.
96	BLACKROCK FUNDS III	DECEMBER 31, 2016

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath Index Retirement Master Portfolio						LifePath Index 2020 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	12,650,804		$	8,876,782		$	27,954,383		$	20,127,555
Net realized gain (loss)		495,401			25,092,542			986,965			57,468,798
Net change in unrealized appreciation (depreciation)		19,162,122			(35,851,265	)		47,041,905			(83,871,972	)
Net increase (decrease) in net assets resulting from operations		32,308,327			(1,881,941	)		75,983,253			(6,275,619	)
Capital Transactions
Proceeds from contributions		459,177,765			257,415,807			830,214,302			463,686,148
Value of withdrawals		(180,728,394	)		(187,579,951	)		(303,966,814	)		(263,577,292	)
Net increase in net assets derived from capital transactions		278,449,371			69,835,856			526,247,488			200,108,856
Net Assets
Total increase in net assets		310,757,698			67,953,915			602,230,741			193,833,237
Beginning of year		499,749,016			431,795,101			1,075,156,780			881,323,543
End of year	$	810,506,714		$	499,749,016		$	1,677,387,521		$	1,075,156,780
	LifePath Index 2025 Master Portfolio						LifePath Index 2030 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	23,101,178		$	13,523,406		$	31,804,959		$	21,369,222
Net realized gain (loss)		(2,868,437	)		29,570,553			(4,141,821	)		61,512,318
Net change in unrealized appreciation (depreciation)		48,799,434			(48,304,565	)		70,914,898			(90,987,411	)
Net increase (decrease) in net assets resulting from operations		69,032,175			(5,210,606	)		98,578,036			(8,105,871	)
Capital Transactions
Proceeds from contributions		774,485,031			395,913,568			985,661,422			478,277,878
Value of withdrawals		(184,195,087	)		(132,362,034	)		(249,782,668	)		(211,785,714	)
Net increase in net assets derived from capital transactions		590,289,944			263,551,534			735,878,754			266,492,164
Net Assets
Total increase in net assets		659,322,119			258,340,928			834,456,790			258,386,293
Beginning of year		776,535,346			518,194,418			1,076,681,486			818,295,193
End of year	$	1,435,857,465		$	776,535,346		$	1,911,138,276		$	1,076,681,486

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	97

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath Index 2035 Master Portfolio						LifePath Index 2040 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	19,516,881		$	11,549,977		$	23,198,484		$	15,825,065
Net realized gain (loss)		(4,188,145	)		27,017,731			(5,823,362	)		43,357,531
Net change in unrealized appreciation (depreciation)		50,670,087			(43,396,849	)		61,243,225			(66,079,203	)
Net increase (decrease) in net assets resulting from operations		65,998,823			(4,829,141	)		78,618,347			(6,896,607	)
Capital Transactions
Proceeds from contributions		642,466,863			304,017,851			694,566,329			361,059,136
Value of withdrawals		(148,119,208	)		(99,656,977	)		(169,595,908	)		(149,358,428	)
Net increase in net assets derived from capital transactions		494,347,655			204,360,874			524,970,421			211,700,708
Net Assets
Total increase in net assets		560,346,478			199,531,733			603,588,768			204,804,101
Beginning of year		609,571,863			410,040,130			751,305,566			546,501,465
End of year	$	1,169,918,341		$	609,571,863		$	1,354,894,334		$	751,305,566
	LifePath Index 2045 Master Portfolio						LifePath Index 2050 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	11,541,762		$	6,936,498		$	11,096,260		$	7,240,018
Net realized gain (loss)		(3,669,592	)		15,260,388			(4,050,297	)		15,528,685
Net change in unrealized appreciation (depreciation)		33,054,642			(25,249,645	)		31,821,999			(26,114,247	)
Net increase (decrease) in net assets resulting from operations		40,926,812			(3,052,759	)		38,867,962			(3,345,544	)
Capital Transactions
Proceeds from contributions		400,219,225			183,002,452			371,549,626			203,855,020
Value of withdrawals		(90,735,188	)		(65,515,857	)		(97,619,626	)		(96,352,760	)
Net increase in net assets derived from capital transactions		309,484,037			117,486,595			273,930,000			107,502,260
Net Assets
Total increase in net assets		350,410,849			114,433,836			312,797,962			104,156,716
Beginning of year		341,230,076			226,796,240			337,064,409			232,907,693
End of year	$	691,640,925		$	341,230,076		$	649,862,371		$	337,064,409

See Notes to Financial Statements.
98	BLACKROCK FUNDS III	DECEMBER 31, 2016

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath Index 2055 Master Portfolio						LifePath Index 2060 Master Portfolio
	Year Ended December 31,						Period February 29, 20161 to December 31, 2016
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	4,128,877		$	2,136,211		$	84,268
Net realized gain (loss)		(1,441,761	)		3,734,441			(88,688	)
Net change in unrealized appreciation (depreciation)		12,159,015			(6,921,725	)		313,804
Net increase (decrease) in net assets resulting from operations		14,846,131			(1,051,073	)		309,384
Capital Transactions
Proceeds from contributions		170,817,798			79,310,091			10,830,520
Value of withdrawals		(41,639,954	)		(33,130,687	)		(385,362	)
Net increase in net assets derived from capital transactions		129,177,844			46,179,404			10,445,158
Net Assets
Total increase in net assets		144,023,975			45,128,331			10,754,542
Beginning of year		107,004,089			61,875,758			—
End of year	$	251,028,064		$	107,004,089		$	10,754,542

¹  Commencement of operations.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	99

Financial Highlights Master Investment Portfolio

	LifePath Index Retirement Master Portfolio
	Year Ended December 31,
	2016			2015			2014			2013			2012
Total Return
Total return		5.82%			(0.31)%			5.78%			7.72%			9.17%
Ratios to Average Net Assets
Total expenses1,2,3		0.09%			0.10%			0.13%			0.16%			0.18%
Total expenses after fees waived and paid indirectly1,2,3		0.08%			0.09%			0.11%			0.14%			0.15%
Net investment income2,3,4		2.05%			1.84%			1.87%			1.74%			2.02%
Supplemental Data
Net assets, end of year (000)	$	810,507		$	499,749		$	431,795		$	321,594		$	201,972
Portfolio turnover rate		13%	5		25%	5		15%	5		18%	5		1%	6

¹ Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio (collectively, the “Underlying Master Portfolios”). These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

² Includes the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated fees waived of 0.01%, 0.01%, 0.01%, 0.00% and 0.02% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

³ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.03%, 0.03%, 0.03%, 0.02%, and 0.02% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively, although the ratio does include the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated expenses and/or net investment income.

⁴ Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Underlying Master Portfolios.

⁵ Includes the purchases or sales of the underlying funds and the Underlying Master Portfolios.

⁶ Excludes purchases and sales of the Underlying Master Portfolios. If these transactions had been included to conform to the current year presentation, portfolio turnover would have been 15% for the year ended December 31, 2012.

See Notes to Financial Statements.
100	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights Master Investment Portfolio

	LifePath Index 2020 Master Portfolio
	Year Ended December 31,
	2016			2015			2014			2013			2012
Total Return
Total return		6.32%			(0.42)%			6.15%			11.36%			11.36%
Ratios to Average Net Assets
Total expenses1,2,3		0.09%			0.10%			0.12%			0.16%			0.19%
Total expenses after fees waived and paid indirectly1,2,3		0.08%			0.09%			0.11%			0.14%			0.16%
Net investment income2,3,4		2.12%			1.95%			1.99%			2.01%			2.19%
Supplemental Data
Net assets, end of year (000)	$	1,677,388		$	1,075,157		$	881,324		$	616,003		$	286,973
Portfolio turnover rate		14%	5		14%	5		12%	5		12%	5		1%	6

¹  Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio (collectively, the “Underlying Master Portfolios”). These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

²  Includes the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated fees waived of 0.01%, 0.01%, 0.01%, 0.00% and 0.02% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

³  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.04%, 0.04%, 0.04%, 0.03%, and 0.03% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively, although the ratio does include the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated expenses and/or net investment income.

⁴  Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Underlying Master Portfolios.

⁵ Includes the purchases or sales of the underlying funds and the Underlying Master Portfolios.

⁶ Excludes purchases and sales of the Underlying Master Portfolios. If these transactions had been included to conform to the current year presentation, portfolio turnover would have been 13% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	101

Financial Highlights Master Investment Portfolio

	LifePath Index 2025 Master Portfolio
	Year Ended December 31,
	2016			2015			2014			2013			2012
Total Return
Total return		6.87%			(0.45)%			6.47%			13.48%			12.34%
Ratios to Average Net Assets
Total expenses1,2,3		0.09%			0.10%			0.12%			0.17%			0.23%
Total expenses after fees waived and paid indirectly1,2,3		0.08%			0.09%			0.11%			0.14%			0.16%
Net investment income2,3,4		2.19%			2.06%			2.08%			2.19%			2.27%
Supplemental Data
Net assets, end of year (000)	$	1,435,857		$	776,535		$	518,194		$	278,608		$	122,448
Portfolio turnover rate		16%	5		12%	5		15%	5		13%	5		0%	6,7

¹ Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio (collectively, the “Underlying Master Portfolios”). These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

² Includes the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated fees waived of 0.01%, 0.00%, 0.01%, 0.00% and 0.02% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

³ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.06%, 0.05%, 0.05%, 0.04%, and 0.03% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively, although the ratio does include the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated expenses and/or net investment income.

⁴ Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Underlying Master Portfolios.

⁵ Includes the purchases or sales of the underlying funds and the Underlying Master Portfolios.

⁶ Excludes purchases and sales of the Underlying Master Portfolios. If these transactions had been included to conform to the current year presentation, portfolio turnover would have been 14% for the year ended December 31, 2012.

⁷ Rounds to less than 1%.

See Notes to Financial Statements.
102	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights Master Investment Portfolio

	LifePath Index 2030 Master Portfolio
	Year Ended December 31,
	2016			2015			2014			2013			2012
Total Return
Total return		7.29%			(0.50)%			6.64%			15.40%			13.28%
Ratios to Average Net Assets
Total expenses1,2,3		0.09%			0.10%			0.12%			0.16%			0.21%
Total expenses after fees waived and paid indirectly1,2,3		0.08%			0.09%			0.11%			0.15%			0.17%
Net investment income2,3,4		2.26%			2.15%			2.14%			2.33%			2.36%
Supplemental Data
Net assets, end of year (000)	$	1,911,138		$	1,076,681		$	818,295		$	528,481		$	206,007
Portfolio turnover rate		19%	5		12%	5		20%	5		12%	5		2%	6

¹ Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio (collectively, the “Underlying Master Portfolios”). These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

² Includes the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated fees waived of 0.00%, 0.01%, 0.01%, 0.00% and 0.02% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

³ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.07%, 0.06%, 0.05%, 0.04%, and 0.04% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively, although the ratio does include the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated expenses and/or net investment income.

⁴ Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Underlying Master Portfolios.

⁵ Includes the purchases or sales of the underlying funds and the Underlying Master Portfolios.

⁶ Excludes purchases and sales of the Underlying Master Portfolios. If these transactions had been included to conform to the current year presentation, portfolio turnover would have been 18% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	103

Financial Highlights Master Investment Portfolio

	LifePath Index 2035 Master Portfolio
	Year Ended December 31,
	2016			2015			2014			2013			2012
Total Return
Total return		7.74%			(0.56)%			6.82%			17.02%			14.07%
Ratios to Average Net Assets
Total expenses1,2,3		0.09%			0.10%			0.12%			0.18%			0.26%
Total expenses after fees waived and paid indirectly1,2,3		0.07%			0.08%			0.11%			0.15%			0.17%
Net investment income2,3,4		2.34%			2.26%			2.22%			2.47%			2.44%
Supplemental Data
Net assets, end of year (000)	$	1,169,918		$	609,572		$	410,040		$	207,175		$	81,763
Portfolio turnover rate		22%	5		10%	5		25%	5		12%	5		1%	6

¹ Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio (collectively, the “Underlying Master Portfolios”). These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

² Includes the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated fees waived of 0.00%, 0.00%, 0.01%, 0.00% and 0.02% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

³ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.08%, 0.07%, 0.06%, 0.05%, and 0.04% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively, although the ratio does include the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated expenses and/or net investment income.

⁴ Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Underlying Master Portfolios.

⁵ Includes the purchases or sales of the underlying funds and the Underlying Master Portfolios.

⁶ Excludes purchases and sales of the Underlying Master Portfolios. If these transactions had been included to conform to the current year presentation, portfolio turnover would have been 24% for the year ended December 31, 2012.

See Notes to Financial Statements.
104	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights Master Investment Portfolio

	LifePath Index 2040 Master Portfolio
	Year Ended December 31,
	2016			2015			2014			2013			2012
Total Return
Total return		8.10%			(0.56)%			6.90%			18.66%			15.03%
Ratios to Average Net Assets
Total expenses1,2,3		0.09%			0.10%			0.12%			0.17%			0.24%
Total expenses after fees waived and paid indirectly1,2,3		0.07%			0.08%			0.11%			0.15%			0.18%
Net investment income2,3,4		2.39%			2.33%			2.27%			2.59%			2.50%
Supplemental Data
Net assets, end of year (000)	$	1,354,894		$	751,306		$	546,501		$	326,693		$	107,671
Portfolio turnover rate		26%	5		11%	5		29%	5		12%	5		3%	6

¹ Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio (collectively, the “Underlying Master Portfolios”). These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

² Includes the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated fees waived of 0.00%, 0.00%, 0.01%, 0.00% and 0.02% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

³ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.09%, 0.07%, 0.06%, 0.05%, and 0.04% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively, although the ratio does include the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated expenses and/or net investment income.

⁴ Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Underlying Master Portfolios.

⁵ Includes the purchases or sales of the underlying funds and the Underlying Master Portfolios.

⁶ Excludes purchases and sales of the Underlying Master Portfolios. If these transactions had been included to conform to the current year presentation, portfolio turnover would have been 21% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	105

Financial Highlights Master Investment Portfolio

	LifePath Index 2045 Master Portfolio
	Year Ended December 31,
	2016			2015			2014			2013			2012
Total Return
Total return		8.28%			(0.64)%			7.10%			20.33%			15.61%
Ratios to Average Net Assets
Total expenses1,2,3		0.09%			0.11%			0.13%			0.21%			0.41%
Total expenses after fees waived and paid indirectly1,2,3		0.06%			0.07%			0.10%			0.15%			0.17%
Net investment income2,3,4		2.44%			2.39%			2.34%			2.77%			2.62%
Supplemental Data
Net assets, end of year (000)	$	691,641		$	341,230		$	226,796		$	104,567		$	33,177
Portfolio turnover rate		26%	5		10%	5		30%	5		12%	5		2%	6

¹ Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio (collectively, the “Underlying Master Portfolios”). These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

² Includes the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated fees waived of 0.00%, 0.00%, 0.00%, 0.00% and 0.02% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

³ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.10%, 0.08%, 0.07%, 0.05% and 0.04% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively, although the ratio does include the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated expenses and/or net investment income.

⁴ Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Underlying Master Portfolios.

⁵ Includes the purchases or sales of the underlying funds and the Underlying Master Portfolios.

⁶ Excludes purchases and sales of the Underlying Master Portfolios. If these transactions had been included to conform to the current year presentation, portfolio turnover would have been 22% for the year ended December 31, 2012.

See Notes to Financial Statements.
106	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights Master Investment Portfolio

	LifePath Index 2050 Master Portfolio
	Year Ended December 31,
	2016			2015			2014			2013			2012
Total Return
Total return		8.41%			(0.67)%			7.28%			21.62%			16.37%
Ratios to Average Net Assets
Total expenses1,2,3		0.09%			0.11%			0.13%			0.21%			0.46%
Total expenses after fees waived and paid indirectly1,2,3		0.06%			0.07%			0.10%			0.15%			0.18%
Net investment income2,3,4		2.44%			2.39%			2.38%			2.91%			2.67%
Supplemental Data
Net assets, end of year (000)	$	649,862		$	337,064		$	232,908		$	103,722		$	26,037
Portfolio turnover rate		28%	5		14%	5		22%	5		12%	5		3%	6

¹ Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio (collectively, the “Underlying Master Portfolios”). These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

² Includes the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated fees waived of 0.00%, 0.00%, 0.00%, 0.00% and 0.02% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

³ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.10%, 0.09%, 0.08%, 0.06%, and 0.05% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively, although the ratio does include the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated expenses and/or net investment income.

⁴ Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Underlying Master Portfolios.

⁵ Includes the purchases or sales of the underlying funds and the Underlying Master Portfolios.

⁶ Excludes purchases and sales of the Underlying Master Portfolios. If these transactions had been included to conform to the current year presentation, portfolio turnover would have been 26% for the year ended December 31, 2012.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	107

Financial Highlights Master Investment Portfolio

	LifePath Index 2055 Master Portfolio
	Year Ended December 31,
	2016			2015			2014			2013			2012
Total Return
Total return		8.37%			(0.60)%			7.50%			22.99%			16.83%
Ratios to Average Net Assets
Total expenses1,2,3		0.11%			0.14%			0.20%			0.42%			1.39%
Total expenses after fees waived and paid indirectly1,2,3		0.04%			0.06%			0.10%			0.15%			0.15%
Net investment income2,3,4		2.50%			2.44%			2.46%			3.09%			2.76%
Supplemental Data
Net assets, end of year (000)	$	251,028		$	107,004		$	61,856		$	23,968		$	4,908
Portfolio turnover rate		33%	5		17%	5		22%	5		15%	5		8%	6

¹ Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from Large Cap Index Master Portfolio, Master International Index Series, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio (collectively, the “Underlying Master Portfolios”). These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

² Includes the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated fees waived of 0.00%, 0.00%, 0.00%, 0.00% and 0.02% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

³ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11%, 0.09%, 0.09%, 0.06%, and 0.05% for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, respectively, although the ratio does include the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated expenses and/or net investment income.

⁴ Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Underlying Master Portfolios.

⁵ Includes the purchases or sales of the underlying funds and the Underlying Master Portfolios.

⁶ Excludes purchases and sales of the Underlying Master Portfolios. If these transactions had been included to conform to the current year presentation, portfolio turnover would have been 53% for the year ended December 31, 2012.

See Notes to Financial Statements.
108	BLACKROCK FUNDS III	DECEMBER 31, 2016

Financial Highlights Master Investment Portfolio

	LifePath Index 2060 Master Portfolio
	Period February 29, 20161 to December  31, 2016
Total Return
Total return		15.54%	2
Ratio to Average Net Assets
Total expenses3,4,5,6		1.40%	7
Total expenses after fees waived3,4,5		0.04%	7
Net investment income4,5,8		2.74%	7
Supplemental Data
Net assets, end of period (000)	$	10,755
Portfolio turnover rate		71%	9

¹ Commencement of operations.

² Aggregate total return.

³ Includes the LifePath Index Master Portfolio’s pro rata portion of expenses from Large Cap Index Master Portfolio, Master Small Cap Index Series and U.S. Total Bond Index Master Portfolio (collectively, the “Underlying Master Portfolios”). These ratios do not reflect any expenses incurred indirectly as a result of investments in BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and iShares exchange-traded funds.

⁴ Includes the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated fees waived 0.00% for the period ended December 31, 2016.

⁵ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.12% for the period ended December 31, 2016, although the ratio does not include the LifePath Index Master Portfolio’s share of the Underlying Master Portfolios’ allocated expenses and/or net investment income.

⁶ Audit costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses would have been 1.54%.

⁷ Annualized.

⁸ Includes the LifePath Index Master Portfolio’s share of the allocated net investment income from the Underlying Master Portfolios.

⁹ Includes the purchases or sales of the underlying funds and the Underlying Master Portfolios.

See Notes to Financial Statements.
	BLACKROCK FUNDS III	DECEMBER 31, 2016	109

Notes to Financial Statements Master Investment Portfolio

1. Organization:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. LifePath Index Master Portfolios (the “Master Portfolio”) is a series of MIP. MIP is organized as a Delaware statutory trust. The financial statements and these accompanying notes relate to ten series of MIP: LifePath^® Index Retirement Master Portfolio, LifePath^® Index 2020 Master Portfolio, LifePath^® Index 2025 Master Portfolio, LifePath^® Index 2030 Master Portfolio, LifePath^® Index 2035 Master Portfolio, LifePath^® Index 2040 Master Portfolio, LifePath^® Index 2045 Master Portfolio, LifePath^® Index 2050 Master Portfolio, LifePath^® Index 2055 Master Portfolio and LifePath^® Index 2060 Master Portfolio (each, a “LifePath Index Master Portfolio” and together, the “LifePath Index Master Portfolios”). Each of the LifePath Index Master Portfolios is classified as diversified.

As of period end, the investment of LifePath Index Master Retirement 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 and LifePath Index 2060 Master Portfolio in Large Cap Index Master Portfolio represented 22.1%, 26.9%, 33.0%, 38.4%, 43.5%, 47.9%, 50.1%, 50.4%, 50.5% and 50.4%, respectively, of net assets. The investment of LifePath Index Retirement Master Portfolio, LifePath Index 2020 Master Portfolio and LifePath Index 2025 Master Portfolio in U.S. Total Bond Index Master Portfolio represented 50.9%, 43.1% and 33.2%, respectively, of net assets. As such, financial statements of Large Cap Index Master Portfolio and U.S. Total Bond Index Master Portfolio, including the Schedules of Investments, should be read in conjunction with each respective LifePath Index Master Portfolio’s financial statements. The financial statements of Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio, which are included in filings by MIP, and the financial statements of Master Small Cap Index Series, which are included in filings by Quantitative Master Series LLC, are available, without charge, on the U.S. Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.

The LifePath Index Master Portfolios will generally invest in other registered investment companies (each, an “Underlying Fund” and collectively the “Underlying Funds”) that are managed by subsidiaries of BlackRock, Inc. (“BlackRock”) and its affiliates and affiliates of the LifePath Index Master Portfolios. The LifePath Index Master Portfolios may also invest in other master portfolios (“Underlying Master Portfolios”) that are managed by subsidiaries of BlackRock.

The value of a LifePath Index Master Portfolio’s investment in each of Large Cap Index Master Portfolio, Master Small Cap Index Series, Total International ex U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio reflects that LifePath Index Master Portfolio’s proportionate interest in the net assets of that Underlying Master Portfolio. As of period end, the LifePath Index Master Portfolios held interests in these Underlying Master Portfolios as follows:

	Large Cap Index Master Portfolio		Master Small Cap Index Series		Total International ex U.S. Index Master Portfolio		U.S. Total Bond Index Master Portfolio
LifePath Index Retirement Master Portfolio		4.52%		5.17%		2.51%		13.68%
LifePath Index 2020 Master Portfolio		11.38%		9.48%		8.92%		23.95%
LifePath Index 2025 Master Portfolio		11.92%		6.71%		5.93%		15.78%
LifePath Index 2030 Master Portfolio		18.47%		7.39%		12.70%		15.33%
LifePath Index 2035 Master Portfolio		12.84%		3.53%		6.85%		6.00%
LifePath Index 2040 Master Portfolio		16.37%		3.15%		10.77%		3.40%
LifePath Index 2045 Master Portfolio		8.73%		1.53%		4.44%		0.57%
LifePath Index 2050 Master Portfolio		8.26%		1.49%		4.55%		0.22%
LifePath Index 2055 Master Portfolio		3.19%		0.58%		0.61%		0.08%
LifePath Index 2060 Master Portfolio		0.14%		0.02%		—		—

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

2. Significant Accounting Policies:

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

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. -Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the LifePath Index Master Portfolios are 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

110 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued) Master Investment Portfolio

may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.

Each LifePath Index Master Portfolio records daily its proportionate share of the Underlying Master Portfolios’ income, expenses and realized and unrealized gains and losses.

Recent Accounting Standard: In November 2016, the Financial Accounting Standards Board issued Accounting Standards Update “Restricted Cash” which will require entities to include the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the beginning and ending cash balances in the Statement of Cash Flows. The guidance will be applied retrospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. Management is evaluating the impact, if any, of this guidance on the LifePath Index Master Portfolios’ presentation in the Statement of Cash Flows.

Indemnifications: In the normal course of business, a LifePath Index Master Portfolio enters into contracts that contain a variety of representations that provide general indemnification. A LifePath Index Master Portfolio’s maximum exposure under these arrangements is unknown because it involves future potential claims against a LifePath Index Master Portfolio, which cannot be predicted with any certainty.

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, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods.

Through May 31, 2016, the LifePath Index Master Portfolios had an arrangement with their custodian whereby credits were earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. Credits previously earned may have been utilized until December 31, 2016. Under current arrangements effective June 1, 2016, the LifePath Index Master Portfolios no longer earn credits on uninvested cash, and may incur charges on uninvested cash balances and overdrafts, subject to certain conditions.

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The LifePath Index Master Portfolios investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time or if reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the 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 using various 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 oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of each LifePath Index Master Portfolio’s assets and liabilities:

• The market value of the LifePath Index Master Portfolios’ investments in the Underlying Funds is based on the published net asset value (“NAV”) of each Underlying Fund computed as of the close of trading on the days when the NYSE is open.

• Investments in open-end U.S. mutual funds are valued at NAV each business day.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and the cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each LifePath Index Master Portfolio might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

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

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

BLACKROCK FUNDS III DECEMBER 31, 2016 111

Notes to Financial Statements (continued) Master Investment Portfolio

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

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued investments. Level 3 investments include equity or debt issued by Private Companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

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

4. Securities and Other Investments:

Securities Lending: The LifePath Index Master Portfolios may lend their securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the LifePath Index Master Portfolios collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by each LifePath Index Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the LifePath Index Master Portfolio and any additional required collateral is delivered to the LifePath Index Master Portfolio, or excess collateral returned by the LifePath Index Master Portfolio, on the next business day. During the term of the loan, the LifePath Index Master Portfolios are entitled to all distributions made on or in respect of the loaned securities, but do not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as common stocks in the LifePath Index Master Portfolios’ Schedules of Investments, and the value of any related collateral are shown separately in the Statements of Assets and Liabilities as a component of investments at value-unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government Obligations. Cash collateral invested by the securities lending agent, BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedules of Investments.

Securities lending transactions are entered into by the LifePath Index Master Portfolios under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the LifePath Index Master Portfolios, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and a LifePath Index Master Portfolio can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

112 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued) Master Investment Portfolio

As of period end, the following table is a summary of the LifePath Index Master Portfolios’ securities lending agreements by counterparty which are subject to offset under an MSLA:

LifePath Index 2020 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Credit Suisse Securities (USA) LLC	$	29,904	$	(29,904	)		—
LifePath Index 2025 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Goldman Sachs & Co	$	230,360	$	(230,360	)		—
LifePath Index 2030 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Scotia Capital (USA) Inc	$	3,837,680	$	(3,837,680	)		—
Merrill Lynch, Pierce, Fenner & Smith Inc		609,693		(609,693	)		—
Total	$	4,447,373	$	(4,447,373	)		—

LifePath Index 2035 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Goldman Sachs & Co	$	7,613,892	$	(7,613,892	)		—
LifePath Index 2045 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Goldman Sachs & Co	$	5,796,252	$	(5,796,252	)		—
Morgan Stanley & Co. LLC		333,234		(333,234	)		—
UBS Securities LLC		460,686		(460,686	)		—
Total	$	6,590,172	$	(6,590,172	)		—
LifePath Index 2050 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Goldman Sachs & Co	$	697,760	$	(697,760	)		—
LifePath Index 2055 Master Portfolio
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Merrill Lynch, Pierce, Fenner & Smith Inc	$	108,003	$	(108,003	)		—

¹  Cash collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the tables above. Collateral has been received in connection with securities lending agreements as follows:

LifePath Index 2020 Master Portfolio	LifePath Index 2025 Master Portfolio	LifePath Index 2030 Master Portfolio	LifePath Index 2035 Master Portfolio	LifePath Index 2045 Master Portfolio	LifePath Index 2050 Master Portfolio	LifePath Index 2055 Master Portfolio
$30,390	$234,335	$4,528,575	$7,766,200	$6,721,000	$709,800	$109,975

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the LifePath Index Master Portfolios benefit from a borrower default indemnity provided by BlackRock. BlackRock’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. Each LifePath Index Master Portfolio could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

BLACKROCK FUNDS III DECEMBER 31, 2016 113

Notes to Financial Statements (continued) Master Investment Portfolio

5. Investment Advisory Agreement and Other Transactions with Affiliates:

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

Investment Advisory: MIP, on behalf of the LifePath Index Master Portfolios, entered into an Investment Advisory Agreement with BFA, the LifePath Index Master Portfolios’ investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory services. The Manager is responsible for the management of each LifePath Index Master Portfolio’s portfolio and provides the 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 the BFA a monthly fee at an annual rate equal to 0.05% of the average daily value of each LifePath Index Master Portfolio’s net assets.

Administration: MIP, on behalf of the LifePath Master Portfolios, entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL”), which has agreed to provide general administration services (other than investment advice and related portfolio activities).

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

Expense Limitations and Waivers: With respect to each LifePath Index Master Portfolio, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees each LifePath Index Master Portfolio pays to the Manager indirectly through its investment in affiliated money market funds. These amounts are included in fees waived by the Manager in the Statements of Operations. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with each LifePath Index Master Portfolio investments in other affiliated investment companies, if any. For the year ended December 31, 2016, the amounts waived were as follows:

	LifePath Index Retirement Master Portfolio		LifePath Index 2020 Master Portfolio		LifePath Index 2025 Master Portfolio		LifePath Index 2030 Master Portfolio		LifePath Index 2035 Master Portfolio
Amounts waived	$	1,123	$	2,489	$	2,749	$	3,729	$	2,502

	LifePath Index 2040 Master Portfolio		LifePath Index 2045 Master Portfolio		LifePath Index 2050 Master Portfolio		LifePath Index 2055 Master Portfolio		LifePath Index 2060 Master Portfolio*
Amounts waived	$	2,857	$	1,645	$	1,177	$	708	$	30

* Commenced operations on February 29, 2016.

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

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. Each LifePath Index Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, each LifePath Index Master Portfolio retains 80% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees. In addition, commencing the business day following the date that the aggregate securities lending income earned across certain funds in the Equity-Liquidity Complex in a calendar year exceeds a specified threshold, each LifePath Index Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.

114 BLACKROCK FUNDS III DECEMBER 31, 2016

Notes to Financial Statements (continued) Master Investment Portfolio

The share of securities lending income earned by each LifePath Index Master Portfolio is shown as securities lending — affiliated — net in the Statements of Operations. For the year ended December 31, 2016, each LifePath Index Master Portfolio paid BTC the following amounts in total for securities lending agent services and collateral investment fees:

	LifePath Index Retirement Master Portfolio		LifePath Index 2020 Master Portfolio		LifePath Index 2025 Master Portfolio		LifePath Index 2030 Master Portfolio		LifePath Index 2035 Master Portfolio
Amounts	$	2,745	$	4,479	$	9,678	$	9,100	$	6,574

	LifePath Index 2040 Master Portfolio		LifePath Index 2045 Master Portfolio		LifePath Index 2050 Master Portfolio		LifePath Index 2055 Master Portfolio		LifePath Index 2060 Master Portfolio*
Amounts	$	7,288	$	4,789	$	4,703	$	2,886		—

* Commenced operations on February 29, 2016.

Other Transactions: Each LifePath Index Master Portfolio may invest its positive cash balances in certain money market funds managed by the Manager or an affiliate. The income earned on these temporary cash investments is shown as income-affiliated in the Statements of Operations.

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

6. Purchases and Sales:

For the year ended December 31, 2016, purchases and sales of investments in the Underlying Funds and Underlying Master Portfolios, excluding short-term securities, were as follows:

	LifePath Index Retirement Master Portfolio		LifePath Index 2020 Master Portfolio		LifePath Index 2025 Master Portfolio		LifePath Index 2030 Master Portfolio		LifePath Index 2035 Master Portfolio
Purchases	$	360,170,763	$	704,644,117	$	779,955,993	$	1,022,728,208	$	683,946,995
Sales	$	81,511,874	$	184,127,299	$	168,588,236	$	272,802,810	$	181,252,163

	LifePath Index 2040 Master Portfolio		LifePath Index 2045 Master Portfolio		LifePath Index 2050 Master Portfolio		LifePath Index 2055 Master Portfolio		LifePath Index 2060 Master Portfolio*
Purchases	$	787,545,780	$	438,579,217	$	401,955,627	$	180,491,913	$	13,052,464
Sales	$	257,491,746	$	125,589,438	$	126,272,876	$	50,505,893	$	2,564,944

* Commenced operations on February 29, 2016.

7. Income Tax Information:

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

Each LifePath Index Master Portfolio files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each LifePath Index Master Portfolio U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016, except for LifePath Index 2060 Master Portfolio, which remains open for the period ended December 31, 2016. The statutes of limitations on each LifePath Index Master Portfolio’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the LifePath Index Master Portfolios as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the LifePath Index Master Portfolios’ financial statements.

BLACKROCK FUNDS III DECEMBER 31, 2016 115

Notes to Financial Statements (concluded) Master Investment Portfolio

As of December 31, 2016, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

	LifePath Index Retirement Master Portfolio			LifePath Index 2020 Master Portfolio			LifePath Index 2025 Master Portfolio			LifePath Index 2030 Master Portfolio			LifePath Index 2035 Master Portfolio
Tax cost	$	779,719,212		$	1,601,148,531		$	1,380,280,177		$	1,820,283,351		$	1,121,945,901
Gross unrealized appreciation	$	69,608,406		$	173,954,665		$	112,767,946		$	204,461,195		$	106,385,590
Gross unrealized depreciation		(39,978,867	)		(98,090,016	)		(55,938,042	)		(105,942,775	)		(49,308,895	)
Net unrealized appreciation	$	29,629,539		$	75,864,649		$	56,829,904		$	98,518,420		$	57,076,695

	LifePath Index 2040 Master Portfolio			LifePath Index 2045 Master Portfolio			LifePath Index 2050 Master Portfolio			LifePath Index 2055 Master Portfolio			LifePath Index 2060 Master Portfolio
Tax cost	$	1,281,137,462		$	665,043,936		$	619,189,211		$	240,238,712		$	10,563,173
Gross unrealized appreciation	$	150,829,190		$	61,733,938		$	60,544,724		$	17,236,520		$	280,179
Gross unrealized depreciation		(73,903,716	)		(26,844,515	)		(27,236,204	)		(5,882,385	)		(3,944	)
Net unrealized appreciation	$	76,925,474		$	34,889,423		$	33,308,520		$	11,354,135		$	276,235

8. Bank Borrowings:

MIP, on behalf of the LifePath Index Master Portfolios, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the LifePath Index Master Portfolios may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the LifePath Index Master Portfolios, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2017 unless extended or renewed. Prior to April 21, 2016, the credit agreement had a fee per annum of 0.06% on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statements of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2016, the LifePath Index Master Portfolios did not borrow under the credit agreement.

9. Principal Risks:

In the normal course of business, certain 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 to meet all its obligations, including the ability to pay principal and interest when due (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 of securities owned by the LifePath Index Master Portfolios. Changes arising from the general economy, the overall market and local, regional or global political and/or social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

On October 11, 2016, BlackRock implemented certain changes required by amendments to Rule 2a-7 under the 1940 Act, which governs the operations of U.S. money market funds. The LifePath Index Master Portfolios may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Counterparty Credit Risk: Similar to issuer credit risk, the LifePath Index Master Portfolios may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The LifePath Index Master Portfolios manage counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the LifePath Index Master Portfolios to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the LifePath Index Master Portfolios’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statements of Assets and Liabilities, less any collateral held by the LifePath Index Master Portfolios.

10. Subsequent Events:

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

116 BLACKROCK FUNDS III DECEMBER 31, 2016

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Master Investment Portfolio and the Investors of the Funds, as defined:

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of LifePath^® Index Retirement Master Portfolio, LifePath^® Index 2020 Master Portfolio, LifePath^® Index 2025 Master Portfolio, LifePath^® Index 2030 Master Portfolio, LifePath^® Index 2035 Master Portfolio, LifePath^® Index 2040 Master Portfolio, LifePath^® Index 2045 Master Portfolio, LifePath^® Index 2050 Master Portfolio, LifePath^® Index 2055 Master Portfolio and LifePath^® Index 2060 Master Portfolio (the “Master Portfolios”), each a series of Master Investment Portfolio, as of December 31, 2016, and the results of each of their operations, the changes in each of their net assets and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolios’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, broker and the transfer agent of the investee funds, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

BLACKROCK FUNDS III DECEMBER 31, 2016 117

Officers and Trustees¹

Name, Address2 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3
Rodney D. Johnson 1941	Chair of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011; Director, The Mainstay (non-profit) since 2016.	26 RICs consisting of 146 Portfolios	None
Susan J. Carter 1956	Trustee	Since 2016	Director, Pacific Pension Institute since 2014; Advisory Board Member, Center for Private Equity and Entrepreneurship at Tuck School of Business since 1997; Senior Advisor, Commonfund Capital, Inc. (“CCI”) (investment adviser) in 2015; Chief Executive Officer, CCI from 2013 to 2014; President & Chief Executive Officer, CCI from 1997 to 2013; Advisory Board Member, Girls Who Invest since 2015; Advisory Board Member, Bridges Ventures since 2016. Trustee, Financial Accounting Foundation since 2017.	26 RICs consisting of 146 Portfolios	None
Collette Chilton 1958	Trustee	Since 2015	Chief Investment Officer, Williams College since 2006; Chief Investment Officer, Lucent Asset Management Corporation from 1998 to 2006.	26 RICs consisting of 146 Portfolios	None
Neil A. Cotty 1954	Trustee	Since 2016	Bank of America Corporation from 1996 to 2015, serving in various senior finance leadership roles, including Chief Accounting Officer, from 2009 to 2015, Chief Financial Officer of Global Banking, Markets and Wealth Management from 2008 to 2009, Chief Accounting Officer from 2004 to 2008, Chief Financial Officer of Consumer Bank from 2003 to 2004, Chief Financial Officer of Global Corporate Investment Bank from 1999 to 2002.	26 RICs consisting of 146 Portfolios	None
Cynthia A. Montgomery 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012.	26 RICs consisting of 146 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 1947	Trustee	Since 2009	General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Chair, Basic Health International (non-profit) since 2015.	26 RICs consisting of 146 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company); Consol Energy Inc.
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981 and Principal since 2010.	26 RICs consisting of 146 Portfolios	None
Mark Stalnecker 1951	Trustee	Since 2015	Chief Investment Officer, University of Delaware from 1999 to 2013; Trustee, Winterthur Museum and Country Estate from 2001 to 2015; Member of the Investment Committee, Delaware Public Employees’ Retirement System since 2002; Member of the Investment Committee, Christiana Care Health System since 2009; Member of the Investment Committee, Delaware Community Foundation from 2013 to 2014; Director, SEI Private Trust Co. from 2001 to 2014.	26 RICs consisting of 146 Portfolios	None
Kenneth L. Urish 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since founding in 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	26 RICs consisting of 146 Portfolios	None

118 BLACKROCK FUNDS III DECEMBER 31, 2016

Officers and Trustees¹ (continued)

Name, Address2 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3 (concluded)
Claire A. Walton 1957	Trustee	Since 2016	Chief Operating Officer and Chief Financial Officer of Liberty Square Asset Management, LP from 1998 to 2015; General Partner of Neon Liberty Capital Management, LLC since 2003; Director, Boston Hedge Fund Group since 2009; Director, Woodstock Ski Runners since 2013; Director, Massachusetts Council on Economic Education from 2013 to 2015.	26 RICs consisting of 146 Portfolios	None
Frederick W. Winter 1945	Trustee	Since 2009	Director, Alkon Corporation since 1992; Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh, Dean and Professor from 1997 to 2005, Professor until 2013.	26 RICs consisting of 146 Portfolios	None
Interested Trustees5
Barbara G. Novick 1960	Trustee	Since 2015	Vice Chairman of BlackRock, Inc. since 2006; Chair of BlackRock’s Government Relations Steering Committee since 2009; Head of the Global Client Group of BlackRock, Inc. from 1988 to 2008.	100 RICs consisting of 220 Portfolios	None
John M. Perlowski 1964	Trustee, President and Chief Executive Officer	Since 2015 (Trustee); Since 2010 (President and Chief Executive Officer)	Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Fund & Accounting Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Advisory Director of Family Resource Network (charitable foundation) since 2009.	128 RICs consisting of 318 Portfolios	None
	1    As of February 24, 2017.
	2    The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	3    Independent Trustees serve until their resignation, retirement, removal or death, or until December 31 of the year in which they turn 75. The Board may determine to extend the terms of Independent Trustees on a case-by-case basis, as appropriate.
	4    In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, certain Independent Trustees were elected to the Board. As a result, although the chart shows certain Independent Trustees as joining the Board in 2009, those Independent Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: Rodney D. Johnson, 1995; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1999; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
	5    Ms. Novick and Mr. Perlowski are both “interested persons,” as defined in the 1940 Act, of the Trust/MIP based on their positions with BlackRock and its affiliates. Mr. Perlowski and Ms. Novick are also board members of certain complexes of BlackRock registered open-end and closed-end funds. Mr. Perlowski is also a board member of the BlackRock Equity-Bond Complex and the BlackRock Closed-End Complex, and Ms. Novick is a board member of the BlackRock Closed-End Complex.

BLACKROCK FUNDS III DECEMBER 31, 2016 119

Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served as an Officer	Principal Occupation(s) During Past Five Years
Officers Who Are Not Trustees2
Thomas Callahan 1968	Vice President	Since 2016	Managing Director of BlackRock, Inc. since 2013; Head of BlackRock’s Global Cash Management Business since 2016; Co-Head of the Global Cash Management Business from 2014 to 2016; Deputy Head of the Global Cash Management Business from 2013 to 2014; Member of the Cash Management Group Executive Committee since 2013; Chief Executive Officer of NYSE Liffe U.S. from 2008 to 2013.
Jennifer McGovern 1977	Vice President	Since 2014	Managing Director of BlackRock, Inc. since 2016; Director of BlackRock, Inc. from 2011 to 2015; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal J. Andrews 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock, Inc. 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 M. Fife 1970	Treasurer	Since 2007	Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Charles Park 1967	Chief Compliance Officer	Since 2014	Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Fernanda Piedra 1969	Anti-Money Laundering Compliance Officer	Since 2015	Director of BlackRock, Inc. since 2014; Anti-Money Laundering Compliance Officer and Regional Head of Financial Crime for the Americas at BlackRock, Inc. since 2014; Head of Regulatory Changes and Remediation for the Asset Wealth Management Division of Deutsche Bank from 2010 to 2014; Vice President of Goldman Sachs (Anti-Money Laundering/Suspicious Activities Group) from 2004 to 2010.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock, Inc. since 2014; Director of BlackRock, Inc. from 2010 to 2013; Secretary of the iShares® exchange traded funds since 2015; Secretary of the BlackRock-advised mutual funds since 2012.
	1    The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	2    Officers of the Trust/MIP serve at the pleasure of the Board.
	Further information about the Trust’s/MIP’s Officers and Trustees is available in the Trust’s/MIP’s Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.

Effective December 31, 2016, David O. Beim and Dr. Matina S. Horner resigned as Trustees of the Trust/MIP.

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

120 BLACKROCK FUNDS III DECEMBER 31, 2016

Additional Information

General Information

Householding

The LifePath Index 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 LifePath Index Funds at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The LifePath Index Funds/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 Funds’/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, D.C. Information on the operation of the Public Reference Room or how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The LifePath Index Funds’/ 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 Funds/LifePath Index Master Portfolios use to determine how to vote proxies relating to portfolio securities is available upon request and without charge (1) by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

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

BlackRock’s Mutual Fund Family

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

BLACKROCK FUNDS III DECEMBER 31, 2016 121

Additional Information (concluded)

Shareholder Privileges

Account Information

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

Automatic Investment Plans

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

Systematic Withdrawal Plans

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

Retirement Plans

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

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

122 BLACKROCK FUNDS III DECEMBER 31, 2016

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

LPindex-12/16-AR

DECEMBER 31, 2016

  ANNUAL REPORT

BlackRock S&P 500 Index Fund  |  of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
The Markets in Review		3
Annual Report:
Fund Summary		4
About Fund Performance		6
Disclosure of Expenses		6
Derivative Financial Instruments		6
Fund Financial Statements:
Statement of Assets and Liabilities		7
Statement of Operations		8
Statements of Changes in Net Assets		9
Fund Financial Highlights		10
Fund Notes to Financial Statements		14
Fund Report of Independent Registered Public Accounting Firm		18
Important Tax Information		18
Master Portfolio Information		19
Master Portfolio Financial Statements:
Schedule of Investments		20
Statement of Assets and Liabilities		28
Statement of Operations		29
Statements of Changes in Net Assets		30
Master Portfolio Financial Highlights		30
Master Portfolio Notes to Financial Statements		31
Master Portfolio Report of Independent Registered Public Accounting Firm		38
Officers and Trustees		39
Additional Information		42

2 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016

The Markets in Review

Dear Shareholder,

The year 2016 started on a fraught note with worries about slowing growth in China, plunging oil prices and sliding share prices. Then reflationary expectations in the United States helped drive a second-half global growth pick-up and big market reversals. As such, higher-quality asset classes such as Treasury bonds, municipals and investment grade credit prevailed in the first half of the year, only to struggle in the second. In contrast, risk assets sold off at the start of the year and rebounded in the latter half, with some asset classes posting strong year-end returns.

A key takeaway from 2016’s market performance is that economics can trump politics. The global reflationary theme — governments taking policy action to support growth — was the dominant driver of 2016 asset returns, outweighing significant political upheavals and uncertainty. This trend accelerated after the U.S. election on expectations for an extra boost to U.S. growth via fiscal policy.

Markets were remarkably resilient during the year. Spikes in equity volatility after big surprises such as the U.K.’s vote to leave the European Union and the outcome of the U.S. presidential election were short-lived. Instead, political surprises and initial sell-offs were seized upon as buying opportunities. We believe this reinforces the case for taking the long view rather than reacting to short-term market noise.

Asset returns varied widely in 2016. Perceived safe assets such as government bonds and low-volatility shares underperformed the higher-risk areas of the market. And the reversal of longstanding trends created opportunities, such as in the recovery of value stocks and commodities.

We expect some of these trends to extend into 2017 and see the potential for more flows into risk assets this year. Learn more by reading our market insights at blackrock.com.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2016
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		7.82	%		11.96	%
U.S. small cap equities (Russell 2000® Index)		18.68			21.31
International equities (MSCI Europe, Australasia, Far East Index)		5.67			1.00
Emerging market equities (MSCI Emerging Markets Index)		4.49			11.19
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.18			0.33
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		(7.51	)		(0.16	)
U.S. investment grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index)		(2.53	)		2.65
Tax-exempt municipal bonds (S&P Municipal Bond Index)		(3.43	)		0.77
U.S. high yield bonds (Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		7.40			17.13
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, 2016

Investment Objective

BlackRock S&P 500 Index Fund’s (the “Fund”) investment objective is to seek to provide investment results that correspond to the total return performance of publicly-traded common stocks in the aggregate, as represented by the Standard & Poor’s (“S&P”) 500^® Index.

Portfolio Management Commentary

How did the Fund perform?

• For the 12-month period ended December 31, 2016, the Fund’s Institutional Shares returned 11.84%, Service Shares returned 11.71%, Investor A Shares returned 11.56%, Investor C1 Shares returned 10.76% and Class K Shares returned 11.92%. The benchmark S&P 500^® Index returned 11.96% for the same period.

• Returns for the Fund’s respective share classes differ from the benchmark index based on individual share-class expenses. The Fund invests all of its assets in S&P 500^® Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio.

Describe the market environment.

• The year started with U.S. stock prices falling due to fears of a global economic slowdown, oil prices cratering, and terrorist attacks in Istanbul, Jakarta and Pakistan. Domestic equity markets rebounded in the second quarter of 2016, despite increased volatility in June from the “Brexit,” i.e., the U.K.’s vote to leave the European Union.

• U.S. equities capitalized on the upward momentum from their second quarter rally, which continued through the second half of the reporting period, driven by a dovish Federal Reserve (the “Fed”) that kept rates unchanged and stronger-than-expected earnings releases versus

analyst expectations. The U.S. economy continued to strengthen into the fourth quarter as seen by strong macro data and tightening of the U.S. labor market. As such, the Fed’s decision to raise rates by 25 basis points (0.25%) at the end of the reporting period did not come as a big surprise.

• The U.S. election and the Fed were front and center in 2016. The year started with an increase in volatility as investors prepared for a possible Fed rate increase, and weighed probable outcomes of the U.S. election. While many people were shocked by the Trump win, markets did not experience the same type of volatility seen after the Brexit vote, with major U.S. indexes posting solid gains in November.

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.

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

4 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016

Total Return Based on a $10,000 Investment

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

²  The Fund invests all of its assets in the Master Portfolio. The Master Portfolio invests primarily in a diversified portfolio of equity securities of large companies located in the United States.

³  An unmanaged index that covers 500 leading companies and captures approximately 80% coverage of available market capitalization.

Performance Summary for the Period Ended December 31, 2016

	6-Month Total Returns			Average Annual Total Returns4
				1 Year			5 Years			10 Years
				w/o sales charge			w/o sales charge			w/o sales charge
Institutional		7.78	%		11.84	%		14.49	%		6.78	%
Service		7.71			11.71			14.35			6.66
Investor A		7.64			11.56			14.20			6.52
Investor C1		7.25			10.76			13.38			5.75
Class K		7.81			11.92			14.57			6.86
S&P 500® Index		7.82			11.96			14.66			6.95

⁴  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.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical6
	Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period5		Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period5		Annualized Expense Ratio
Institutional	$	1,000.00	$	1,077.80	$	0.57	$	1,000.00	$	1,024.58	$	0.56		0.11	%
Service	$	1,000.00	$	1,077.10	$	1.20	$	1,000.00	$	1,023.98	$	1.17		0.23	%
Investor A	$	1,000.00	$	1,076.40	$	1.88	$	1,000.00	$	1,023.33	$	1.83		0.36	%
Investor C1	$	1,000.00	$	1,072.50	$	5.63	$	1,000.00	$	1,019.71	$	5.48		1.08	%
Class K	$	1,000.00	$	1,078.10	$	0.21	$	1,000.00	$	1,024.94	$	0.20		0.04	%

⁵  For each class of the Fund, expenses are equal to the annualized net expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period shown). Because the Fund invests all of its assets in the Master Portfolio, the expense example reflects the net expenses of both the Fund and the Master Portfolio in which it invests.

⁶  Hypothetical 5% annual return before expenses is calculated by prorating 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 INDEX FUND DECEMBER 31, 2016 5

About Fund Performance

• Institutional and Class K Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors. Prior to April 11, 2013, Class K Shares were an undesignated share class of the Fund.

• Service Shares are not subject to any sales charge. These shares are subject to a service fee of 0.15% per year (but no distribution fee) and are available only to certain eligible investors.

• Investor A Shares are not subject to any sales charge and bear no ongoing distribution fee. These shares are subject to an ongoing service fee of 0.25% per year. These shares are generally available through financial intermediaries.

• Investor C1 Shares are not subject to any sales charge. These shares are subject to a distribution fee of 0.75% per year and a service fee of 0.15% per year. These shares are only available for dividend and capital gain reinvestment by existing shareholders and for purchase by certain employer-sponsored retirement plans.

Prior to the inception date of April 10, 2013 for Institutional and Investor A Shares and prior to the inception date of April 19, 2013 for Service and Investor C1 Shares, the performance of the classes is based on the returns of the Class K Shares, adjusted to reflect the estimated annual fund fees and operating expenses of each respective share class of the Fund.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in the performance table on the previous page assume reinvestment of all distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Distributions paid to each class of shares will vary because of the different levels of administration, service and distribution fees applicable to each class, which are deducted from the income available to be paid to shareholders.

BlackRock Advisors, LLC (“BAL” or the “Administrator”), the Fund’s administrator, voluntarily waived a portion of the Fund’s expenses. Without such waiver, the Fund’s performance would have been lower. The Administrator is under no obligation to waive or to continue waiving its fees and such voluntary waiver may be reduced or discontinued at any time. See Note 4 of the Notes to Financial Statements for additional information on waivers.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including administration fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses and other fund expenses. The expense example on previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2016 and held through December 31, 2016) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

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

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

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

Derivative Financial Instruments

The Master Portfolio may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other asset without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default

of the counterparty to the transaction or illiquidity of the instrument. The Master Portfolio’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Master Portfolio can realize on an investment and/or may result in lower distributions paid to shareholders. The Master Portfolio’s investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

6 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016

Statement of Assets and Liabilities BlackRock S&P 500 Index Fund

December 31, 2016
Assets
Investments at value — Master Portfolio (cost — $6,558,936,158)	$	8,819,665,548
Receivables:
Capital shares sold		23,769,401
Withdrawals from the Master Portfolio		31,050,441
Total assets		8,874,485,390
Liabilities
Payables:
Capital shares redeemed		54,819,842
Service and distribution fees		466,167
Administration fees		378,324
Professional fees		9,351
Other accrued expenses		299
Total liabilities		55,673,983
Net Assets	$	8,818,811,407
Net Assets Consist of
Paid-in capital	$	6,379,022,214
Distributions in excess of net investment income		(5,749,351	)
Accumulated net realized gain allocated from the Master Portfolio		184,809,154
Net unrealized appreciation (depreciation) allocated from the Master Portfolio		2,260,729,390
Net Assets	$	8,818,811,407
Institutional: — Based on net assets of $4,290,474,508 and 16,067,067 shares outstanding, unlimited number of shares authorized, no par value	$	267.04
Service — Based on net assets of $332,291,564 and 1,244,459 shares outstanding, unlimited number of shares authorized, no par value	$	267.02
Investor A — Based on net assets of $1,774,331,332 and 6,645,703 shares outstanding, unlimited number of shares authorized, no par value	$	266.99
Investor C1: — Based on net assets of $74,258,944 and 278,046 shares outstanding, unlimited number of shares authorized, no par value	$	267.07
Class K: — Based on net assets of $2,347,455,059 and 8,789,226 shares outstanding, unlimited number of shares authorized, no par value	$	267.08

See Notes to Financial Statements.
	BLACKROCK S&P 500 INDEX FUND	DECEMBER 31, 2016	7

Statement of Operations BlackRock S&P 500 Index Fund

Year Ended December 31, 2016
Investment Income
Net investment income allocated from the Master Portfolio:
Dividends — unaffiliated	$	151,934,596
Dividends — affiliated		2,051,706
Securities lending — affiliated — net		420,513
Foreign taxes withheld		(387,700	)
Expenses		(3,127,450	)
Fees waived		452,875
Total investment income		151,344,540
Fund Expenses
Service and distribution — class specific		4,678,938
Administration — class specific		3,856,701
Professional		9,361
Miscellaneous		56
Total expenses		8,545,056
Less fees waived by the Administrator		(9,361	)
Total expenses after fees waived		8,535,695
Net investment income		142,808,845
Realized and Unrealized Loss Allocated from the Master Portfolio
Net realized gain from investments, futures contracts and capital gain distributions from investment companies — affiliated		42,126,119
Net change in unrealized depreciation on investments and futures contracts		671,210,484
Net realized and unrealized gain		713,336,603
Net Increase in Net Assets Resulting from Operations	$	856,145,448

See Notes to Financial Statements.
8	BLACKROCK S&P 500 INDEX FUND	DECEMBER 31, 2016

Statements of Changes in Net Assets BlackRock S&P 500 Index Fund

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	142,808,845		$	101,541,341
Net realized gain		42,126,119			78,044,657
Net change in unrealized appreciation (depreciation)		671,210,484			(128,478,964	)
Net increase in net assets resulting from operations		856,145,448			51,107,034
Distributions to Shareholders1
From net investment income:
Institutional		(77,612,557	)		(57,769,260	)
Service		(6,149,740	)		(5,322,477	)
Investor A		(26,111,994	)		(20,472,384	)
Investor C1		(761,711	)		(718,684	)
Class K		(35,292,109	)		(20,537,451	)
From net realized gain:
Institutional		(16,945,259	)		(15,240,580	)
Service		(1,367,207	)		(1,436,649	)
Investor A		(6,773,546	)		(5,932,833	)
Investor C1		(304,927	)		(349,393	)
Class K		(8,150,119	)		(5,391,331	)
Decrease in net assets resulting from distributions to shareholders		(179,469,169	)		(133,171,042	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		2,089,178,602			1,795,625,047
Net Assets
Total increase in net assets		2,765,854,881			1,713,561,039
Beginning of year		6,052,956,526			4,339,395,487
End of year	$	8,818,811,407		$	6,052,956,526
Distributions in excess of net investment income, end of year	$	(5,749,351	)	$	(2,630,085	)
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK S&P 500 INDEX FUND	DECEMBER 31, 2016	9

Financial Highlights BlackRock S&P 500 Index Fund

	Institutional
	Year Ended December 31,									Period April 10, 20131 to December 31, 2013
	2016			2015			2014
Per Share Operating Performance
Net asset value, beginning of period	$	244.52		$	247.36		$	221.97		$	190.60
Net investment income2		5.13			4.79			4.28			2.89
Net realized and unrealized gain (loss)		23.55			(1.71	)		25.50			31.21
Net increase from investment operations		28.68			3.08			29.78			34.10
Distributions:3
From net investment income		(5.08	)		(4.77	)		(4.39	)		(2.73	)
From net realized gain		(1.08	)		(1.15	)		—			—
Total distributions		(6.16	)		(5.92	)		(4.39	)		(2.73	)
Net asset value, end of period	$	267.04		$	244.52		$	247.36		$	221.97
Total Return4
Based on net asset value		11.84%			1.28%			13.53%			18.03%	5
Ratios to Average Net Assets6
Total expenses		0.11%	7		0.11%	8		0.14%	7		0.23%	7,9
Total expenses after fees waived		0.11%	7		0.11%	8		0.14%	7		0.23%	7,9
Net investment income		2.04%	7		1.93%	8		1.84%	7		1.93%	7,9
Supplemental Data
Net assets, end of period (000)	$	4,290,475		$	3,247,607		$	1,909,077		$	1,570,760
Portfolio turnover rate of the Master Portfolio		4%			2%			3%			2%

¹  Commencement of operations.

²  Based on average shares outstanding.

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

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total return.

⁶  Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁷  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of less than 0.01%.

⁸  Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.01%.

⁹  Annualized.

See Notes to Financial Statements.
10	BLACKROCK S&P 500 INDEX FUND	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock S&P 500 Index Fund

	Service
	Year Ended December 31,									Period April 19, 20131 to December  31, 2013
	2016			2015			2014
Per Share Operating Performance
Net asset value, beginning of period	$	244.52		$	247.35		$	221.97		$	186.71
Net investment income2		4.80			4.48			3.98			2.59
Net realized and unrealized gain (loss)		23.56			(1.69	)		25.50			35.22
Net increase from investment operations		28.36			2.79			29.48			37.81
Distributions:3
From net investment income		(4.78	)		(4.47	)		(4.10	)		(2.55	)
From net realized gain		(1.08	)		(1.15	)		—			—
Total distributions		(5.86	)		(5.62	)		(4.10	)		(2.55	)
Net asset value, end of period	$	267.02		$	244.52		$	247.35		$	221.97
Total Return4
Based on net asset value		11.71%			1.16%			13.39%			20.39%	5
Ratios to Average Net Assets6
Total expenses		0.23%	7		0.23%	8		0.27%	7		0.35%	7,9
Total expenses after fees waived		0.23%	7		0.23%	8		0.27%	7		0.35%	7,9
Net investment income		1.91%	7		1.81%	8		1.71%	7		1.81%	7,9
Supplemental Data
Net assets, end of period (000)	$	332,292		$	304,088		$	277,856		$	252,419
Portfolio turnover rate of the Master Portfolio		4%			2%			3%			2%

¹ Commencement of operations.

² Based on average shares outstanding.

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

⁴ Where applicable, assumes the reinvestment of distributions.

⁵ Aggregate total return.

⁶ Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁷ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of less than 0.01%.

⁸ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of 0.01%.

⁹ Annualized.

See Notes to Financial Statements.
	BLACKROCK S&P 500 INDEX FUND	DECEMBER 31, 2016	11

Financial Highlights (continued) BlackRock S&P 500 Index Fund

	Investor A												Investor C1
	Year Ended December 31,									Period April 10, 20131 to December  31, 2013			Year Ended December 31,									Period April 19, 20131 to December  31, 2013
	2016			2015			2014						2016			2015			2014
Per Share Operating Performance
Net asset value, beginning of period	$	244.52		$	247.35		$	221.96		$	190.60		$	244.59		$	247.36		$	221.98		$	186.71
Net investment income2		4.49			4.16			3.68			2.50			2.68			2.36			1.98			1.38
Net realized and unrealized gain (loss)		23.53			(1.69	)		25.51			31.23			23.49			(1.65	)		25.48			35.22
Net increase from investment operations		28.02			2.47			29.19			33.73			26.17			0.71			27.46			36.60
Distributions:3
From net investment income		(4.47	)		(4.15	)		(3.80	)		(2.37	)		(2.61	)		(2.33	)		(2.08	)		(1.33	)
From net realized gain		(1.08	)		(1.15	)		—			—			(1.08	)		(1.15	)		—			—
Total distributions		(5.55	)		(5.30	)		(3.80	)		(2.37	)		(3.69	)		(3.48	)		(2.08	)		(1.33	)
Net asset value, end of period	$	266.99		$	244.52		$	247.35		$	221.96		$	267.07		$	244.59		$	247.36		$	221.98
Total Return4
Based on net asset value		11.56%			1.03%			13.25%			17.82%	5		10.76%			0.30%			12.42%			19.68%	5
Ratios to Average Net Assets6
Total expenses		0.36%	7		0.36%	8		0.39%	7		0.48%	7,9		1.08%	7		1.08%	8		1.12%	7		1.19%	7,9
Total expenses after fees waived		0.36%	7		0.36%	8		0.39%	7		0.48%	7,9		1.08%	7		1.08%	8		1.12%	7		1.19%	7,9
Net investment income		1.79%	7		1.68%	8		1.59%	7		1.67%	7,9		1.07%	7		0.95%	8		0.85%	7		0.97%	7,9
Supplemental Data
Net assets, end of period (000)	$	1,774,331		$	1,281,538		$	1,149,714		$	1,046,428		$	74,259		$	74,558		$	79,476		$	77,040
Portfolio turnover rate of the Master Portfolio		4%			2%			3%			2%			4%			2%			3%			2%

¹ Commencement of operations.

² Based on average shares outstanding.

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

⁴ Where applicable, assumes the reinvestment of distributions.

⁵ Aggregate total return.

⁶ Includes the Fund’s share of the Master Portfolio’s net allocated 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.

See Notes to Financial Statements.
12	BLACKROCK S&P 500 INDEX FUND	DECEMBER 31, 2016

Financial Highlights (concluded) BlackRock S&P 500 Index Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	244.56		$	247.39		$	221.99		$	171.12		$	150.57
Net investment income1		5.32			4.97			4.44			3.91			3.57
Net realized and unrealized gain (loss)		23.53			(1.72	)		25.51			50.74			20.23
Net increase from investment operations		28.85			3.25			29.95			54.65			23.80
Distributions:2
From net investment income		(5.25	)		(4.93	)		(4.55	)		(3.78	)		(3.25	)
From net realized gain		(1.08	)		(1.15	)		—			—			—
Total distributions		(6.33	)		(6.08	)		(4.55	)		(3.78	)		(3.25	)
Net asset value, end of year	$	267.08		$	244.56		$	247.39		$	221.99		$	171.12
Total Return3
Based on net asset value		11.92%			1.35%			13.61%			32.21%			15.85%
Ratios to Average Net Assets4
Total expenses		0.04%	5		0.04%	6		0.07%	5		0.17%	5		0.26%	6
Total expenses after fees waived		0.04%	5		0.04%	6		0.07%	5		0.16%	5		0.18%	6
Net investment income		2.11%	5		2.00%	6		1.91%	5		1.96%	5		2.15%	6
Supplemental Data
Net assets, end of year (000)	$	2,347,455		$	1,145,165		$	923,271		$	826,342		$	380,066
Portfolio turnover rate of the Master Portfolio		4%			2%			3%			2%			10%

¹ Based on average shares outstanding.

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

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Includes the Fund’s share of the Master Portfolio’s allocated fees waived of less than 0.01%.

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

See Notes to Financial Statements.
	BLACKROCK S&P 500 INDEX FUND	DECEMBER 31, 2016	13

Notes to Financial Statements BlackRock S&P 500 Index Fund

1. Organization:

BlackRock Funds III (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Delaware statutory trust. BlackRock S&P 500 Index Fund (the “Fund”) is a series of the Trust. The Trust is classified as diversified. The Fund seeks to achieve its investment objective by investing all of its assets in S&P 500 Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), an affiliate of the Fund, which has the same investment objective and strategies as the Fund. The value of the Fund’s investment in the Master Portfolio reflects the Fund’s proportionate interest in the net assets of the Master Portfolio. The performance of the Fund is directly affected by the performance of the Master Portfolio. At December 31, 2016, the percentage of the Master Portfolio owned by the Fund was 90.1%. The financial statements of the Master Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with the Fund’s financial statements.

The Fund offers multiple classes of shares. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that Service, Investor A and Investor C1 Shares bear certain expenses related to shareholder servicing of such shares, and Investor C1 Shares also bears certain expenses related to distribution of such shares. Institutional, Service and Class K Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally available through financial intermediaries. Investor C1 Shares are only available for dividend and capital gain reinvestment by existing shareholders, and for purchase by certain employer-sponsored retirement plans. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures. The Board of Trustees of the Trust and Board of Trustees of MIP are referred to throughout this report as the “Board of Trustees” or the “Board” and the members are referred to as “Trustees.”

Share Class	Initial Sales Charge		CDSC		Conversion Privilege
Institutional Shares		No		No		None
Service Shares		No		No		None
Investor A Shares		No		No		None
Investor C1 Shares		No		No		None
Class K Shares		No		No		None

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

2. Significant Accounting Policies:

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

Investment Transactions and 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 its proportionate share of the Master Portfolio’s income, expenses and realized and unrealized gains and losses on a daily basis. Realized and unrealized gains and losses are adjusted utilizing partnership tax allocation rules. In addition, the Fund accrues its own expenses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

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

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

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

14 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) BlackRock S&P 500 Index Fund

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Fund’s policy is to value its financial instruments at fair 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 3 of the Master Portfolio’s Notes to Financial Statements, which are included elsewhere in this report.

4. Administration Agreement and Other Transactions with Affiliates:

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

Administration: The Trust, on behalf of the Fund, entered into an Administration Agreement with BAL, an indirect, wholly-owned subsidiary of BlackRock, to provide general administrative services (other than investment advice and related portfolio activities). For such services, the Fund pays BAL a monthly fee at an annual rate based upon the average daily net assets of the relevant share class of the Fund as follows:

	Institutional		Service		Investor A		Investor C1		Class K
Rate		0.07%		0.04%		0.07%		0.14%		0.00%

The Fund does not pay an investment advisory fee or investment management fee.

From time to time, BAL may waive such fees in whole or in part. Any such waiver will reduce the expenses of the Fund and, accordingly, have a favorable impact on its performance. BAL may delegate certain of its administration duties to sub-administrators. For the year ended December 31, 2016, BAL waived $9,361.

For the year ended December 31, 2016, the following table shows the class specific administration fees borne directly by each class of the Fund:

Institutional	Service	Investor A	Investor C1	Total
$2,636,256	$125,979	$991,485	$102,981	$3,856,701

Service and Distribution Fees: The Trust, on behalf of the Fund, entered into a Distribution Agreement and a Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of BAL. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing service and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the relevant share class of the Fund as follows:

	Service		Investor A		Investor C1
Service Fee		0.15%		0.25%		0.15%
Distribution Fee		—		—		0.75%

BRIL and broker-dealers, pursuant to sub-agreements with 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 the shareholders.

For the year ended December 31, 2016, the following table shows the class specific service and distribution fees borne directly by each share class of the Fund:

Service	Investor A	Investor C1	Total
$472,727	$3,544,085	$662,126	$4,678,938

Waivers: The fees and expenses of the Trust’s trustees who are not “interested persons” of the Trust, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and the Trust’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Fund. BAL has contractually agreed to provide an offsetting credit against the administration fees paid by the Fund in an amount equal to the independent expenses through April 30, 2017.

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

Interfund Lending: In accordance with an exemptive order (the “Order”) from the U.S. Securities and Exchange Commission, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow and lend under the Interfund Lending Program.

BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016 15

Notes to Financial Statements (continued) BlackRock S&P 500 Index Fund

The Fund may lend in aggregate up to 15% of its net assets, but no more than 5% of its net assets, to any one borrowing fund through the Interfund Lending Program. The Fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets or any lower threshold provided for by the Fund’s investment restrictions. If the Fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2016, the Fund did not participate in the Interfund Lending Program.

5. Income Tax Information:

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

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to capital loss carryover expiring in 2016 were reclassified to the following accounts:

Paid-in capital	$	(30,530,622	)
Accumulated net realized gain allocated from the Master Portfolio	$	30,530,622

The tax character of distributions paid was as follows:

	12/31/16		12/31/15
Ordinary income	$	145,928,111	$	104,820,256
Long-term capital gains		33,541,058		28,350,786
Total	$	179,469,169	$	133,171,042

As of period end, the tax components of accumulated net earnings (losses) were as follows:

Undistributed long-term capital gains	$	16,300,440
Capital loss carryforwards		(50,447,130	)
Net unrealized gains (losses)1		2,473,935,883
Total	$	2,439,789,193

¹  The differences between book-basis and tax-basis net unrealized gains (losses) was attributable primarily to the limiting and recognition of partnership income.

As of December 31, 2016, the Fund had a capital loss carryforward available to offset future realized capital gains through the indicated expiration dates as follows:

Expires December 31,
2017	$	21,080,621
2018		29,366,509
Total	$	50,447,130

During the year ended December 31, 2016, the Fund utilized $20,420,292 of its respective capital loss carryforward.

16 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016

Notes to Financial Statements (concluded) BlackRock S&P 500 Index Fund

6. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Institutional
Shares sold		7,834,419		$	1,960,467,166			9,491,979		$	2,366,531,483
Shares issued to shareholders in reinvestment of distributions		360,684			93,003,151			294,747			71,632,015
Shares redeemed		(5,409,420	)		(1,366,728,062	)		(4,223,183	)		(1,045,339,030	)
Net increase		2,785,683		$	686,742,255			5,563,543		$	1,392,824,468
Service
Shares sold		425,193		$	106,502,114			363,978		$	87,835,046
Shares issued to shareholders in reinvestment of distributions		28,746			7,401,447			27,395			6,655,833
Shares redeemed		(453,090	)		(113,816,922	)		(271,091	)		(67,543,403	)
Net increase		849		$	86,639			120,282		$	26,947,476
Investor A
Shares sold		2,899,651		$	737,498,755			1,779,017		$	439,866,474
Shares issued to shareholders in reinvestment of distributions		121,980			31,522,882			103,205			25,099,530
Shares redeemed		(1,616,995	)		(404,726,481	)		(1,289,344	)		(319,724,415	)
Net increase		1,404,636		$	364,295,156			592,878		$	145,241,589
Investor C1
Shares sold		8		$	2,205			109		$	27,271
Shares issued to shareholders in reinvestment of distributions		3,671			946,683			3,910			952,238
Shares redeemed		(30,456	)		(7,730,656	)		(20,498	)		(5,108,301	)
Net decrease		(26,777	)	$	(6,781,768	)		(16,479	)	$	(4,128,792	)
Class K
Shares sold		5,395,765		$	1,369,169,350			1,648,844		$	408,582,198
Shares issued to shareholders in reinvestment of distributions		145,577			37,722,202			86,179			20,954,346
Shares redeemed		(1,434,708	)		(362,055,232	)		(784,525	)		(194,796,238	)
Net increase		4,106,634		$	1,044,836,320			950,498		$	234,740,306
Total Net Increase		8,271,025		$	2,089,178,602			7,210,722		$	1,795,625,047

7. Subsequent Events:

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

BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016 17

Report of Independent Registered Public Accounting Firm BlackRock S&P 500 Index Fund

To the Board of Trustees of BlackRock Funds III and the Shareholders of BlackRock S&P 500 Index Fund:

In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock S&P 500 Index Fund (the “Fund”), a series of BlackRock Funds III, as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 16, 2017

Important Tax Information (Unaudited)

During the fiscal year ended December 31, 2016, the following information is provided with respect to the ordinary income distributions paid by the Fund.

	January 2016 — December 2016
Qualified Dividend Income for Individuals1		100.00%
Dividends Qualifying for the Dividends Received Deduction for Corporations1		99.23%

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

Additionally, the Fund distributed long-term capital gains of $0.271623 and $0.803312 per share to shareholders on record June 29, 2016 and December 15, 2016, respectively.

18 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016

Master Portfolio Information S&P 500 Index Master Portfolio

As of December 31, 2016

Ten Largest Holdings Percent of Net Assets

Apple, Inc.	3	%
Microsoft Corp.	2
Exxon Mobil Corp.	2
Johnson & Johnson	2
Berkshire Hathaway, Inc., Class B	2
JPMorgan Chase & Co.	2
Amazon.com, Inc.	2
General Electric Co.	1
Facebook, Inc., Class A	1
AT&T, Inc.	1

Sector Allocation Percent of Net Assets

Information Technology	20	%
Financials	15
Health Care	13
Consumer Discretionary	12
Industrials	10
Consumer Staples	9
Energy	7
Utilities	3
Real Estate	3
Materials	3
Telecommunication Services	3
Short-Term Securities	6
Liabilities in Excess of Other Assets	(4	)

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

BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016 19

Schedule of Investments December 31, 2016 S&P 500 Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Aerospace & Defense — 2.1%
Boeing Co.		286,301	$	44,571,341
General Dynamics Corp.		142,615		24,623,906
L3 Technologies, Inc.		39,847		6,061,127
Lockheed Martin Corp.		125,045		31,253,747
Northrop Grumman Corp.		87,897		20,443,084
Raytheon Co.		145,824		20,707,008
Rockwell Collins, Inc.		66,880		6,203,789
Textron, Inc.		138,123		6,707,253
TransDigm Group, Inc.		25,727		6,404,994
United Technologies Corp.		382,047		41,879,992
				208,856,241
Air Freight & Logistics — 0.7%
C.H. Robinson Worldwide, Inc.		68,910		5,048,347
Expeditors International of Washington, Inc.		87,426		4,630,081
FedEx Corp.		122,908		22,885,469
United Parcel Service, Inc., Class B		344,976		39,548,049
				72,111,946
Airlines — 0.6%
Alaska Air Group, Inc.		59,437		5,273,845
American Airlines Group, Inc.		255,882		11,947,130
Delta Air Lines, Inc.		371,398		18,269,068
Southwest Airlines Co.		311,826		15,541,408
United Continental Holdings, Inc. (a)		141,671		10,324,982
				61,356,433
Auto Components — 0.4%
BorgWarner, Inc.		97,256		3,835,777
Delphi Automotive PLC		137,802		9,280,965
Goodyear Tire & Rubber Co.		126,730		3,912,155
Johnson Controls International PLC		469,396		19,334,421
				36,363,318
Automobiles — 0.5%
Ford Motor Co.		1,957,534		23,744,887
General Motors Co.		697,168		24,289,333
Harley-Davidson, Inc.		86,337		5,036,901
				53,071,121
Banks — 6.6%
Bank of America Corp.		5,049,065		111,584,336
BB&T Corp.		407,895		19,179,223
Citigroup, Inc.		1,425,511		84,718,119
Citizens Financial Group, Inc.		250,840		8,937,429
Comerica, Inc.		83,973		5,719,401
Fifth Third Bancorp		386,176		10,415,167
Huntington Bancshares, Inc.		563,876		7,454,441
JPMorgan Chase & Co.		1,786,192		154,130,508
KeyCorp		550,963		10,066,094
M&T Bank Corp.		78,484		12,277,252
PNC Financial Services Group, Inc. (b)		242,967		28,417,420
Regions Financial Corp.		606,104		8,703,653
SunTrust Banks, Inc.		242,119		13,280,227
US Bancorp		798,266		41,006,924
Wells Fargo & Co.		2,256,890		124,377,208
Zions Bancorporation		99,043		4,262,811
				644,530,213
Beverages — 2.0%
Brown-Forman Corp., Class B		88,073		3,956,239
Coca-Cola Co.		1,935,510		80,246,244

Common Stocks	Shares		Value
Beverages (continued)
Constellation Brands, Inc., Class A		88,632	$	13,588,172
Dr. Pepper Snapple Group, Inc.		93,803		8,505,118
Molson Coors Brewing Co., Class B		92,939		9,043,894
Monster Beverage Corp. (a)		204,405		9,063,318
PepsiCo, Inc.		714,368		74,744,324
				199,147,309
Biotechnology — 2.7%
AbbVie, Inc.		811,275		50,802,041
Alexion Pharmaceuticals, Inc. (a)		112,354		13,746,512
Amgen, Inc.		371,257		54,281,486
Biogen, Inc. (a)		108,597		30,795,937
Celgene Corp. (a)		387,023		44,797,912
Gilead Sciences, Inc.		658,082		47,125,252
Regeneron Pharmaceuticals, Inc. (a)		37,862		13,898,762
Vertex Pharmaceuticals, Inc. (a)		124,833		9,196,447
				264,644,349
Building Products — 0.1%
Allegion PLC		46,307		2,963,648
Fortune Brands Home & Security, Inc.		74,315		3,972,880
Masco Corp.		159,453		5,041,904
				11,978,432
Capital Markets — 2.3%
Affiliated Managers Group, Inc. (a)		26,013		3,779,689
Ameriprise Financial, Inc.		77,946		8,647,329
Bank of New York Mellon Corp.		530,781		25,148,404
BlackRock, Inc. (b)		60,705		23,100,681
Charles Schwab Corp.		604,335		23,853,102
CME Group, Inc.		169,910		19,599,119
E*Trade Financial Corp. (a)		132,156		4,579,205
Franklin Resources, Inc.		169,699		6,716,686
Goldman Sachs Group, Inc.		184,920		44,279,094
Invesco Ltd.		197,938		6,005,439
Morgan Stanley		721,753		30,494,064
Northern Trust Corp.		108,330		9,646,787
State Street Corp.		182,484		14,182,657
T. Rowe Price Group, Inc.		120,020		9,032,705
				229,064,961
Chemicals — 2.0%
Air Products & Chemicals, Inc.		108,879		15,658,978
Albemarle Corp.		54,277		4,672,164
CF Industries Holdings, Inc.		113,423		3,570,556
Dow Chemical Co.		560,498		32,071,696
E.I. du Pont de Nemours & Co.		435,087		31,935,386
Eastman Chemical Co.		71,326		5,364,428
Ecolab, Inc.		131,026		15,358,868
FMC Corp.		64,613		3,654,511
International Flavors & Fragrances, Inc.		38,433		4,528,560
LyondellBasell Industries NV, Class A		169,086		14,504,197
Monsanto Co.		219,016		23,042,673
Mosaic Co.		169,100		4,959,703
PPG Industries, Inc.		133,084		12,611,040
Praxair, Inc.		143,021		16,760,631
Sherwin-Williams Co.		40,679		10,932,075
				199,625,466
Commercial Services & Supplies — 0.4%
Cintas Corp.		44,608		5,154,900
Iron Mountain, Inc.		116,875		3,796,100

See Notes to Financial Statements.

20 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) S&P 500 Index Master Portfolio

Common Stocks	Shares		Value
Commercial Services & Supplies (continued)
Pitney Bowes, Inc.		89,617	$	1,361,282
Republic Services, Inc.		112,575		6,422,404
Stericycle, Inc. (a)(c)		41,065		3,163,648
Waste Management, Inc.		203,532		14,432,454
				34,330,788
Communications Equipment — 1.0%
Cisco Systems, Inc.		2,507,254		75,769,216
F5 Networks, Inc. (a)(c)		31,969		4,626,554
Harris Corp.		63,726		6,530,003
Juniper Networks, Inc.		184,923		5,225,924
Motorola Solutions, Inc.		80,508		6,673,308
				98,825,005
Construction & Engineering — 0.1%
Fluor Corp.		67,239		3,531,392
Jacobs Engineering Group, Inc. (a)		58,635		3,342,195
Quanta Services, Inc. (a)		72,948		2,542,238
				9,415,825
Construction Materials — 0.2%
Martin Marietta Materials, Inc.		32,358		7,168,268
Vulcan Materials Co.		67,421		8,437,738
				15,606,006
Consumer Finance — 0.8%
American Express Co.		385,823		28,581,768
Capital One Financial Corp.		243,342		21,229,156
Discover Financial Services		194,901		14,050,413
Navient Corp.		153,087		2,515,219
Synchrony Financial		394,046		14,292,049
				80,668,605
Containers & Packaging — 0.3%
Avery Dennison Corp.		42,907		3,012,930
Ball Corp.		89,220		6,697,745
International Paper Co.		206,536		10,958,800
Sealed Air Corp.		95,178		4,315,370
WestRock Co.		128,949		6,546,741
				31,531,586
Distributors — 0.1%
Genuine Parts Co.		75,959		7,257,123
LKQ Corp. (a)		148,295		4,545,242
				11,802,365
Diversified Consumer Services — 0.0%
H&R Block, Inc.		105,795		2,432,227
Diversified Financial Services — 2.0%
Berkshire Hathaway, Inc., Class B (a)		947,142		154,365,203
Intercontinental Exchange, Inc.		299,246		16,883,459
Leucadia National Corp.		156,622		3,641,462
Moody’s Corp.		84,870		8,000,695
Nasdaq, Inc.		55,127		3,700,124
S&P Global, Inc.		131,038		14,091,827
				200,682,770
Diversified Telecommunication Services — 2.6%
AT&T, Inc.		3,065,558		130,378,182
CenturyLink, Inc.		279,747		6,652,383
Frontier Communications Corp.		566,447		1,914,591
Level 3 Communications, Inc. (a)		147,419		8,308,535

Common Stocks	Shares		Value
Diversified Telecommunication Services (continued)
Verizon Communications, Inc.		2,034,884	$	108,622,108
				255,875,799
Electric Utilities — 1.7%
American Electric Power Co., Inc.		244,920		15,420,163
Duke Energy Corp.		342,684		26,599,132
Edison International		162,774		11,718,100
Entergy Corp.		91,821		6,746,089
Eversource Energy		160,273		8,851,878
Exelon Corp.		462,136		16,401,207
FirstEnergy Corp.		217,965		6,750,376
NextEra Energy, Inc.		232,120		27,729,055
Pinnacle West Capital Corp.		53,175		4,149,245
PPL Corp.		340,652		11,599,201
Southern Co.		487,642		23,987,110
Xcel Energy, Inc.		254,902		10,374,511
				170,326,067
Electrical Equipment — 0.5%
Acuity Brands, Inc.		21,193		4,892,616
AMETEK, Inc.		112,229		5,454,329
Eaton Corp. PLC		227,209		15,243,452
Emerson Electric Co.		322,996		18,007,027
Rockwell Automation, Inc.		65,356		8,783,847
				52,381,271
Electronic Equipment, Instruments & Components — 0.4%
Amphenol Corp., Class A		154,857		10,406,390
Corning, Inc.		479,400		11,635,038
FLIR Systems, Inc.		66,290		2,399,035
TE Connectivity Ltd.		178,892		12,393,638
				36,834,101
Energy Equipment & Services — 1.2%
Baker Hughes, Inc.		212,601		13,812,687
FMC Technologies, Inc. (a)		108,950		3,870,993
Halliburton Co.		432,451		23,391,275
Helmerich & Payne, Inc.		52,182		4,038,887
National Oilwell Varco, Inc.		192,826		7,219,405
Schlumberger Ltd.		694,181		58,276,495
Transocean Ltd. (a)		187,343		2,761,436
				113,371,178
Food & Staples Retailing — 2.0%
Costco Wholesale Corp.		218,566		34,994,602
CVS Health Corp.		533,652		42,110,479
Kroger Co.		474,153		16,363,020
Sysco Corp.		253,556		14,039,396
Wal-Mart Stores, Inc.		752,069		51,983,009
Walgreens Boots Alliance, Inc.		427,565		35,385,280
Whole Foods Market, Inc.		153,943		4,735,287
				199,611,073
Food Products — 1.6%
Archer-Daniels-Midland Co.		289,497		13,215,538
Campbell Soup Co.		93,969		5,682,305
ConAgra Foods, Inc.		211,039		8,346,592
General Mills, Inc.		295,138		18,230,674
Hershey Co.		71,528		7,398,141
Hormel Foods Corp.		130,487		4,542,253
J.M. Smucker Co.		59,238		7,586,018
Kellogg Co.		127,046		9,364,561

See Notes to Financial Statements.

BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016 21

Schedule of Investments (continued) S&P 500 Index Master Portfolio

Common Stocks	Shares		Value
Food Products (continued)
Kraft Heinz Co.		296,645	$	25,903,041
McCormick & Co., Inc.		55,550		5,184,482
Mead Johnson Nutrition Co.		94,634		6,696,302
Mondelez International, Inc., Class A		771,221		34,188,227
Tyson Foods, Inc., Class A		143,629		8,859,037
				155,197,171
Health Care Equipment & Supplies — 2.2%
Abbott Laboratories		737,030		28,309,322
Baxter International, Inc.		236,367		10,480,513
Becton Dickinson & Co.		106,262		17,591,674
Boston Scientific Corp. (a)		682,965		14,772,533
C.R. Bard, Inc.		37,210		8,359,599
Cooper Cos., Inc. (c)		23,536		4,117,152
Dentsply Sirona, Inc.		112,516		6,495,549
Edwards Lifesciences Corp. (a)		107,404		10,063,755
Hologic, Inc. (a)		134,097		5,379,972
Intuitive Surgical, Inc. (a)		19,420		12,315,581
Medtronic PLC		686,827		48,922,687
St. Jude Medical, Inc.		143,674		11,521,218
Stryker Corp.		155,374		18,615,359
Varian Medical Systems, Inc. (a)(c)		45,091		4,048,270
Zimmer Biomet Holdings, Inc.		100,936		10,416,595
				211,409,779
Health Care Providers & Services — 2.6%
Aetna, Inc.		175,241		21,731,636
AmerisourceBergen Corp.		82,298		6,434,881
Anthem, Inc.		131,564		18,914,956
Cardinal Health, Inc.		161,190		11,600,844
Centene Corp. (a)		82,444		4,658,911
Cigna Corp.		129,097		17,220,249
DaVita, Inc. (a)		80,059		5,139,788
Envision Healthcare Corp. (a)(c)		56,653		3,585,568
Express Scripts Holding Co. (a)		309,349		21,280,118
HCA Holdings, Inc. (a)		147,873		10,945,560
Henry Schein, Inc. (a)		39,497		5,992,090
Humana, Inc.		74,808		15,263,076
Laboratory Corp. of America Holdings (a)		52,431		6,731,092
McKesson Corp.		113,336		15,918,041
Patterson Cos., Inc.		40,235		1,650,842
Quest Diagnostics, Inc.		67,128		6,169,063
UnitedHealth Group, Inc.		475,170		76,046,207
Universal Health Services, Inc., Class B		43,506		4,628,168
				253,911,090
Health Care Technology — 0.1%
Cerner Corp. (a)		153,298		7,261,726
Hotels, Restaurants & Leisure — 1.5%
Carnival Corp.		209,037		10,882,466
Chipotle Mexican Grill, Inc. (a)		14,059		5,304,742
Darden Restaurants, Inc.		60,947		4,432,066
Marriott International, Inc., Class A		161,466		13,350,009
McDonald’s Corp.		414,977		50,511,000
Royal Caribbean Cruises Ltd.		85,737		7,033,864
Starbucks Corp.		728,104		40,424,334
Wyndham Worldwide Corp.		53,056		4,051,887
Wynn Resorts Ltd.		38,339		3,316,707
Yum! Brands, Inc.		175,992		11,145,573
				150,452,648

Common Stocks	Shares		Value
Household Durables — 0.5%
D.R. Horton, Inc.		163,589	$	4,470,887
Garmin Ltd.		55,634		2,697,693
Harman International Industries, Inc.		33,696		3,745,647
Leggett & Platt, Inc.		64,547		3,155,057
Lennar Corp., Class A		103,147		4,428,101
Mohawk Industries, Inc. (a)		32,404		6,470,431
Newell Brands, Inc.		242,864		10,843,878
PulteGroup, Inc.		149,333		2,744,740
Whirlpool Corp.		38,547		7,006,688
				45,563,122
Household Products — 1.8%
Church & Dwight Co., Inc.		133,150		5,883,899
Clorox Co.		65,732		7,889,155
Colgate-Palmolive Co.		443,276		29,007,981
Kimberly-Clark Corp.		178,409		20,360,035
Procter & Gamble Co.		1,333,906		112,154,816
				175,295,886
Independent Power and Renewable Electricity Producers — 0.1%
AES Corp.		318,258		3,698,158
NRG Energy, Inc.		152,241		1,866,475
				5,564,633
Industrial Conglomerates — 2.8%
3M Co.		299,845		53,543,322
Danaher Corp.		305,156		23,753,343
General Electric Co.		4,416,350		139,556,660
Honeywell International, Inc.		379,916		44,013,268
Roper Technologies, Inc.		51,309		9,393,652
				270,260,245
Insurance — 2.7%
Aflac, Inc.		205,738		14,319,365
Allstate Corp.		184,600		13,682,552
American International Group, Inc.		488,085		31,876,831
Aon PLC		131,982		14,719,952
Arthur J Gallagher & Co.		85,484		4,441,749
Assurant, Inc.		27,119		2,518,270
Chubb Ltd.		231,638		30,604,013
Cincinnati Financial Corp.		77,410		5,863,808
Hartford Financial Services Group, Inc.		186,374		8,880,721
Lincoln National Corp.		112,411		7,449,477
Loews Corp.		141,680		6,634,874
Marsh & McLennan Cos., Inc.		257,785		17,423,688
MetLife, Inc.		551,450		29,717,641
Principal Financial Group, Inc.		135,862		7,860,975
Progressive Corp.		292,168		10,371,964
Prudential Financial, Inc.		216,230		22,500,894
Torchmark Corp.		53,785		3,967,182
Travelers Cos., Inc.		142,438		17,437,260
Unum Group		113,303		4,977,401
Willis Towers Watson PLC		62,662		7,662,309
XL Group Ltd.		132,777		4,947,271
				267,858,197
Internet & Direct Marketing Retail — 2.2%
Amazon.com, Inc. (a)		196,944		147,682,397
Expedia, Inc.		61,589		6,976,802
Netflix, Inc. (a)		214,409		26,543,834
Priceline Group, Inc. (a)		24,664		36,158,904
TripAdvisor, Inc. (a)		55,172		2,558,326
				219,920,263

See Notes to Financial Statements.

22 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) S&P 500 Index Master Portfolio

Common Stocks	Shares		Value
Internet Software & Services — 4.2%
Akamai Technologies, Inc. (a)		84,370	$	5,625,791
Alphabet, Inc., Class A (a)		147,798		117,122,525
Alphabet, Inc., Class C (a)		148,250		114,422,315
eBay, Inc. (a)		520,802		15,462,611
Facebook, Inc., Class A (a)		1,168,915		134,483,671
VeriSign, Inc. (a)(c)		44,853		3,411,968
Yahoo!, Inc. (a)		439,431		16,992,797
				407,521,678
IT Services — 3.6%
Accenture PLC, Class A		309,612		36,264,854
Alliance Data Systems Corp.		28,262		6,457,867
Automatic Data Processing, Inc.		224,960		23,121,389
Cognizant Technology Solutions Corp., Class A (a)		304,349		17,052,674
CSRA, Inc.		70,321		2,239,021
Fidelity National Information Services, Inc.		163,935		12,400,043
Fiserv, Inc. (a)(c)		109,751		11,664,336
Global Payments, Inc.		74,184		5,149,111
International Business Machines Corp.		431,865		71,685,271
Mastercard, Inc., Class A		475,653		49,111,172
Paychex, Inc.		161,376		9,824,571
PayPal Holdings, Inc. (a)		560,959		22,141,052
Teradata Corp. (a)		62,967		1,710,813
Total System Services, Inc.		79,893		3,917,154
Visa, Inc., Class A		932,984		72,791,412
Western Union Co.		235,515		5,115,386
Xerox Corp.		411,011		3,588,126
				354,234,252
Leisure Products — 0.1%
Hasbro, Inc.		54,501		4,239,633
Mattel, Inc.		165,011		4,546,053
				8,785,686
Life Sciences Tools & Services — 0.6%
Agilent Technologies, Inc.		165,695		7,549,064
Illumina, Inc. (a)		73,845		9,455,114
Mettler-Toledo International, Inc. (a)		12,791		5,353,801
PerkinElmer, Inc.		52,828		2,754,980
Thermo Fisher Scientific, Inc.		197,497		27,866,827
Waters Corp. (a)		38,907		5,228,712
				58,208,498
Machinery — 1.5%
Caterpillar, Inc.		292,921		27,165,493
Cummins, Inc.		78,089		10,672,424
Deere & Co.		144,954		14,936,060
Dover Corp.		80,201		6,009,461
Flowserve Corp.		62,957		3,025,084
Fortive Corp.		152,436		8,175,143
Illinois Tool Works, Inc.		157,620		19,302,145
Ingersoll-Rand PLC		131,107		9,838,269
PACCAR, Inc.		176,612		11,285,507
Parker Hannifin Corp.		67,446		9,442,440
Pentair PLC		80,453		4,511,000
Snap-on, Inc.		30,107		5,156,426
Stanley Black & Decker, Inc.		76,773		8,805,095
Xylem, Inc.		86,523		4,284,619
				142,609,166

Common Stocks	Shares		Value
Media — 3.0%
CBS Corp., Class B		197,794	$	12,583,654
Charter Communications, Inc., Class A (a)		108,108		31,126,455
Comcast Corp., Class A		1,189,563		82,139,325
Discovery Communications, Inc., Class A (a)(c)		72,862		1,997,148
Discovery Communications, Inc., Class C (a)		108,273		2,899,551
Interpublic Group of Cos., Inc.		194,178		4,545,707
News Corp., Class A		183,752		2,105,798
News Corp., Class B		53,983		636,999
Omnicom Group, Inc.		118,728		10,104,940
Scripps Networks Interactive, Inc., Class A		45,968		3,280,736
TEGNA, Inc.		103,491		2,213,673
Time Warner, Inc.		384,697		37,134,802
Twenty-First Century Fox, Inc., Class A		513,783		14,406,475
Twenty-First Century Fox, Inc., Class B		258,740		7,050,665
Viacom, Inc., Class B		178,557		6,267,351
Walt Disney Co.		730,897		76,174,085
				294,667,364
Metals & Mining — 0.3%
Arconic, Inc.		211,721		3,925,307
Freeport-McMoRan, Inc. (a)		628,531		8,290,324
Newmont Mining Corp.		268,012		9,131,169
Nucor Corp.		160,264		9,538,913
				30,885,713
Multi-Utilities — 1.3%
Alliant Energy Corp.		109,774		4,159,337
Ameren Corp.		124,636		6,538,405
CenterPoint Energy, Inc.		207,966		5,124,282
CMS Energy Corp.		144,104		5,997,608
Consolidated Edison, Inc.		152,303		11,221,685
Dominion Resources, Inc.		311,293		23,841,931
DTE Energy Co.		90,597		8,924,710
NiSource, Inc.		155,575		3,444,431
PG&E Corp.		251,300		15,271,501
Public Service Enterprise Group, Inc.		253,571		11,126,696
SCANA Corp.		69,011		5,057,126
Sempra Energy		125,244		12,604,556
WEC Energy Group, Inc.		159,093		9,330,804
				122,643,072
Multiline Retail — 0.5%
Dollar General Corp.		125,163		9,270,823
Dollar Tree, Inc. (a)		118,837		9,171,840
Kohl’s Corp.		87,034		4,297,739
Macy’s, Inc.		148,952		5,333,971
Nordstrom, Inc.		56,112		2,689,448
Target Corp.		282,654		20,416,099
				51,179,920
Oil, Gas & Consumable Fuels — 6.3%
Anadarko Petroleum Corp.		279,768		19,508,223
Apache Corp.		190,008		12,059,808
Cabot Oil & Gas Corp.		224,608		5,246,843
Chesapeake Energy Corp. (a)(c)		360,538		2,530,977
Chevron Corp.		941,179		110,776,768
Cimarex Energy Co.		48,702		6,618,602
Concho Resources, Inc. (a)(c)		73,386		9,730,983
ConocoPhillips		619,874		31,080,482
Devon Energy Corp.		263,195		12,020,116
EOG Resources, Inc.		287,759		29,092,435

See Notes to Financial Statements.

BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016 23

Schedule of Investments (continued) S&P 500 Index Master Portfolio

Common Stocks	Shares		Value
Oil, Gas & Consumable Fuels (continued)
EQT Corp.		83,415	$	5,455,341
Exxon Mobil Corp.		2,068,307		186,685,390
Hess Corp.		136,071		8,475,862
Kinder Morgan, Inc.		960,789		19,897,940
Marathon Oil Corp.		430,790		7,456,975
Marathon Petroleum Corp.		264,788		13,332,076
Murphy Oil Corp.		78,162		2,433,183
Newfield Exploration Co. (a)		95,901		3,883,990
Noble Energy, Inc.		217,450		8,276,147
Occidental Petroleum Corp.		381,881		27,201,384
ONEOK, Inc.		108,317		6,218,479
Phillips 66		221,451		19,135,581
Pioneer Natural Resources Co.		84,832		15,275,698
Range Resources Corp.		90,775		3,119,029
Southwestern Energy Co. (a)		238,278		2,578,168
Spectra Energy Corp.		349,671		14,367,981
Tesoro Corp.		57,648		5,041,318
Valero Energy Corp.		228,403		15,604,493
Williams Cos., Inc.		343,505		10,696,746
				613,801,018
Personal Products — 0.1%
Coty, Inc., Class A		228,226		4,178,818
Estee Lauder Cos., Inc., Class A		112,190		8,581,413
				12,760,231
Pharmaceuticals — 5.0%
Allergan PLC (a)		187,621		39,402,286
Bristol-Myers Squibb Co.		834,803		48,785,887
Eli Lilly & Co.		485,047		35,675,207
Endo International PLC (a)		95,736		1,576,772
Johnson & Johnson		1,356,654		156,300,107
Mallinckrodt PLC (a)		52,012		2,591,238
Merck & Co., Inc.		1,375,200		80,958,024
Mylan NV (a)		232,530		8,871,020
Perrigo Co. PLC		73,857		6,147,118
Pfizer, Inc.		3,027,659		98,338,364
Zoetis, Inc.		247,113		13,227,959
				491,873,982
Professional Services — 0.3%
Dun & Bradstreet Corp.		17,532		2,126,982
Equifax, Inc.		60,890		7,199,025
Nielsen Holdings PLC		171,360		7,188,552
Robert Half International, Inc.		62,841		3,065,384
Verisk Analytics, Inc. (a)		75,880		6,159,179
				25,739,122
Real Estate Investment Trusts (REITs) — 2.8%
American Tower Corp.		212,354		22,441,571
Apartment Investment & Management Co., Class A		75,625		3,437,156
AvalonBay Communities, Inc.		68,628		12,157,450
Boston Properties, Inc.		77,388		9,733,862
Crown Castle International Corp.		179,670		15,589,966
Digital Realty Trust, Inc. (c)		80,772		7,936,657
Equinix, Inc.		35,426		12,661,607
Equity Residential		183,227		11,792,490
Essex Property Trust, Inc.		33,329		7,748,992
Extra Space Storage, Inc.		60,740		4,691,557
Federal Realty Investment Trust		37,044		5,264,323

Common Stocks	Shares		Value
Real Estate Investment Trusts (REITs) (continued)
General Growth Properties, Inc. (c)		297,815	$	7,439,419
HCP, Inc. (c)		239,156		7,107,716
Host Hotels & Resorts, Inc.		358,526		6,754,630
Kimco Realty Corp. (c)		218,694		5,502,341
Macerich Co.		58,257		4,126,926
Mid-America Apartment Communities, Inc.		54,815		5,367,485
Prologis, Inc.		263,681		13,919,720
Public Storage		74,310		16,608,285
Realty Income Corp. (c)		131,781		7,574,772
Simon Property Group, Inc.		156,119		27,737,663
SL Green Realty Corp.		52,195		5,613,572
UDR, Inc.		128,956		4,704,315
Ventas, Inc.		176,100		11,009,772
Vornado Realty Trust		86,770		9,056,185
Welltower, Inc.		180,783		12,099,806
Weyerhaeuser Co.		375,732		11,305,776
				269,384,014
Real Estate Management & Development — 0.1%
CBRE Group, Inc., Class A (a)		155,277		4,889,673
Road & Rail — 0.9%
CSX Corp.		470,481		16,904,382
JB Hunt Transport Services, Inc.		42,440		4,119,651
Kansas City Southern		52,142		4,424,249
Norfolk Southern Corp.		147,455		15,935,462
Ryder System, Inc.		25,823		1,922,264
Union Pacific Corp.		412,010		42,717,197
				86,023,205
Semiconductors & Semiconductor Equipment — 3.3%
Analog Devices, Inc.		154,513		11,220,734
Applied Materials, Inc.		539,919		17,423,186
Broadcom Ltd.		198,108		35,019,551
First Solar, Inc. (a)(c)		37,428		1,201,065
Intel Corp.		2,366,056		85,816,851
KLA-Tencor Corp.		80,176		6,308,248
Lam Research Corp.		81,866		8,655,692
Linear Technology Corp.		121,943		7,603,146
Microchip Technology, Inc.		109,939		7,052,587
Micron Technology, Inc. (a)(c)		518,395		11,363,218
NVIDIA Corp.		269,061		28,719,571
Qorvo, Inc. (a)(c)		61,758		3,256,499
QUALCOMM, Inc.		737,238		48,067,918
Skyworks Solutions, Inc.		90,537		6,759,493
Texas Instruments, Inc.		497,937		36,334,463
Xilinx, Inc.		128,784		7,774,690
				322,576,912
Software — 4.3%
Activision Blizzard, Inc.		343,408		12,400,463
Adobe Systems, Inc. (a)		248,418		25,574,633
Autodesk, Inc. (a)		99,445		7,359,924
CA, Inc.		151,725		4,820,303
Citrix Systems, Inc. (a)		79,496		7,099,788
Electronic Arts, Inc. (a)		151,076		11,898,746
Intuit, Inc.		122,240		14,009,926
Microsoft Corp.		3,881,239		241,180,192
Oracle Corp.		1,497,178		57,566,494
Red Hat, Inc. (a)		87,447		6,095,056
salesforce.com, Inc. (a)		319,668		21,884,471
Symantec Corp.		313,290		7,484,498
				417,374,494

See Notes to Financial Statements.

24 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) S&P 500 Index Master Portfolio

Common Stocks	Shares		Value
Specialty Retail — 2.4%
Advance Auto Parts, Inc.		37,829	$	6,397,640
AutoNation, Inc. (a)		32,043		1,558,892
AutoZone, Inc. (a)		14,601		11,531,724
Bed Bath & Beyond, Inc.		74,541		3,029,346
Best Buy Co., Inc.		133,287		5,687,356
CarMax, Inc. (a)(c)		92,459		5,953,435
Foot Locker, Inc.		65,337		4,631,740
Gap, Inc.		105,828		2,374,780
Home Depot, Inc.		608,186		81,545,579
L Brands, Inc.		122,607		8,072,445
Lowe’s Cos., Inc.		435,464		30,970,200
O’Reilly Automotive, Inc. (a)(c)		47,319		13,174,083
Ross Stores, Inc.		200,556		13,156,474
Signet Jewelers Ltd.		36,503		3,440,773
Staples, Inc.		314,073		2,842,361
Tiffany & Co.		51,864		4,015,829
TJX Cos., Inc.		328,319		24,666,606
Tractor Supply Co.		64,544		4,893,081
Ulta Salon Cosmetics & Fragrance, Inc. (a)		29,822		7,602,821
Urban Outfitters, Inc. (a)		42,988		1,224,298
				236,769,463
Technology Hardware, Storage & Peripherals — 3.7%
Apple, Inc.		2,663,681		308,507,533
Hewlett Packard Enterprise Co.		832,702		19,268,724
HP, Inc.		861,177		12,779,867
NetApp, Inc.		134,562		4,746,002
Seagate Technology PLC		144,191		5,503,771
Western Digital Corp.		143,836		9,773,656
				360,579,553
Textiles, Apparel & Luxury Goods — 0.7%
Coach, Inc.		134,695		4,717,019
Hanesbrands, Inc.		182,429		3,934,993
Michael Kors Holdings Ltd. (a)(c)		81,611		3,507,641
NIKE, Inc., Class B		670,860		34,099,814
PVH Corp.		38,741		3,495,988
Ralph Lauren Corp.		27,223		2,458,781
Under Armour, Inc., Class A (a)(c)		88,554		2,572,494

Common Stocks	Shares		Value
Textiles, Apparel & Luxury Goods (continued)
Under Armour, Inc., Class C (a)		89,014	$	2,240,482
VF Corp.		170,257		9,083,211
				66,110,423
Thrifts & Mortgage Finance — 0.0%
People’s United Financial, Inc.		150,154		2,906,981
Tobacco — 1.6%
Altria Group, Inc.		972,242		65,743,004
Philip Morris International, Inc.		774,646		70,872,363
Reynolds American, Inc.		413,533		23,174,389
				159,789,756
Trading Companies & Distributors — 0.2%
Fastenal Co.		147,701		6,938,993
United Rentals, Inc. (a)		41,492		4,380,725
W.W. Grainger, Inc.		26,843		6,234,287
				17,554,005
Water Utilities — 0.1%
American Water Works Co., Inc.		91,279		6,604,948
Total Long-Term Investments (Cost — $6,362,561,639) — 98.3%				9,622,612,344
Short-Term Securities
Money Market Funds
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.87% (b)(d)(e)		67,939,998		67,953,586
BlackRock Cash Funds: Treasury, 0.45% SL Agency Shares (b)(d)		485,190,196		485,190,196
Total Short-Term Securities (Cost — $553,136,107) — 5.6%				553,143,782
Total Investments (Cost — $6,915,697,746) — 103.9%				10,175,756,126
Liabilities in Excess of Other Assets — (3.9)%				(383,997,124	)
Net Assets — 100.0%			$	9,791,759,002

Notes to Schedule of investments

(a) Non-income producing security.

(b) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at December 31, 2015		Shares Purchased			Shares Sold			Shares Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gain (Loss)
BlackRock, Inc.		48,211		13,830			(1,336	)		60,705	$	23,100,681	$	506,541		$	(19,246	)
BlackRock Cash Funds: Institutional, SL Agency Shares		374,887,021		—			(306,947,023	)1		67,939,998		67,953,586		1,382,685	2		589
BlackRock Cash Funds: Prime, SL Agency Shares3		26,986,879		—			(26,986,879	)1		—		—		45,005	2		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		485,190,196	4		—			485,190,196		485,190,196		422,544			23,087
PNC Financial Services Group, Inc.		193,874		52,666			(3,573	)		242,967		28,417,420		449,676			(32,786	)
Total											$	604,661,883	$	2,806,451		$	(28,356	)
1   Represents net shares sold.
2   Represents all or portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees, and collateral investment expenses, and other payments to and from borrowers of securities.
3   No longer held by the Master Portfolio as of period end.
4   Represents net shares purchased.

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

(d) Current yield as of period end.

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

See Notes to Financial Statements.

BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016 25

Schedule of Investments (continued) S&P 500 Index Master Portfolio

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts
Contracts Long		Issue	Expiration	Notional Value		Unrealized Depreciation
	1,945	S&P 500 E-Mini Index	March 2017	$	217,470,450	$	(1,593,506	)

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:

Liabilities — Derivative Financial Instruments		Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contacts		Total
Futures contracts	Net unrealized depreciation1		—		—	$	1,593,506		—		—		—	$	1,593,506
1    Includes cumulative depreciation on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

For the year ended December 31, 2016, the effect of derivative financial instruments in the Statement of Operations was as follows:

Net Realized Gain (Loss) From:	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contacts		Total
Futures contracts		—		—	$	31,507,247		—		—		—	$	31,507,247
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts		—		—	$	426,338		—		—		—	$	426,338

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	289,535,633

For more information about the Master Portfolio’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

See Notes to Financial Statements.

26 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016

Schedule of Investments (concluded) S&P 500 Index Master Portfolio

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1			Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks1	$	9,622,612,344			—		—	$	9,622,612,344
Short-Term Securities:
Money Market Funds		553,143,782			—		—		553,143,782
Total	$	10,175,756,126			—		—	$	10,175,756,126
Derivative Financial Instruments 2
Liabilities:
Equity Contracts	$	(1,593,506	)		—		—	$	(1,593,506	)
1   See above Schedule of Investments for values in each industry.
2   Derivative financial instruments are futures contracts. Futures contracts are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016 27

Statement of Assets and Liabilities S&P 500 Index Master Portfolio

December 31, 2016
Assets
Investments at value — unaffiliated (including securities loaned at value of $66,167,161)(cost — $6,331,483,196)	$	9,571,094,243
Investments at value — affiliated (cost — $584,214,550)		604,661,883
Cash		505,291
Cash pledged for futures contracts		20,081,800
Receivables:
Dividends — unaffiliated		11,734,283
Dividends — affiliated		108,136
Securities lending income — affiliated		38,380
Contributions from investors		31,933
Total assets		10,208,255,949
Liabilities
Cash collateral on securities loaned at value		67,945,322
Payables:
Investments purchased		294,162,600
Withdrawals to investors		52,053,586
Variation margin on futures contracts		1,981,524
Investment advisory fees		277,345
Officer’s and Trustees’ fees		54,896
Professional fees		21,674
Total liabilities		416,496,947
Net Assets	$	9,791,759,002
Net Assets Consist of
Investors’ capital	$	6,533,294,128
Net unrealized appreciation (depreciation)		3,258,464,874
Net Assets	$	9,791,759,002

See Notes to Financial Statements.
28	BLACKROCK S&P 500 INDEX FUND	DECEMBER 31, 2016

Statement of Operations S&P 500 Index Master Portfolio

Year Ended December 31, 2016
Investment Income
Dividends — unaffiliated	$	174,201,452
Dividends — affiliated		2,324,945
Securities lending — affiliated — net		481,506
Foreign taxes withheld		(438,795	)
Total investment income		176,569,108
Expenses
Investment advisory		3,288,651
Officer and Trustees		251,948
Professional		43,280
Miscellaneous		810
Total expenses		3,584,689
Less fees waived by the Manager		(518,820	)
Total expenses after fees waived		3,065,869
Net investment income		173,503,239
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — unaffiliated		34,602,669
Investments — affiliated		(51,443	)
Futures contracts		31,507,247
Capital gain distributions from investment companies — affiliated		23,087
		66,081,560
Net change in unrealized appreciation (depreciation) on:
Investments — unaffiliated		730,380,432
Investments — affiliated		7,580,127
Futures contracts		426,338
		738,386,897
Net realized and unrealized gain		804,468,457
Net Increase in Net Assets Resulting from Operations	$	977,971,696

See Notes to Financial Statements.
	BLACKROCK S&P 500 INDEX FUND	DECEMBER 31, 2016	29

Statements of Changes in Net Assets S&P 500 Index Master Portfolio

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	173,503,239		$	134,064,606
Net realized gain		66,081,560			110,235,734
Net change in unrealized appreciation (depreciation)		738,386,897			(168,377,143	)
Net increase in net assets resulting from operations		977,971,696			75,923,197
Capital Transactions
Proceeds from contributions		4,303,951,279			3,573,168,628
Value of withdrawals		(2,700,021,283	)		(2,187,812,801	)
Net increase in net assets derived from capital transactions		1,603,929,996			1,385,355,827
Net Assets
Total increase in net assets		2,581,901,692			1,461,279,024
Beginning of year		7,209,857,310			5,748,578,286
End of year	$	9,791,759,002		$	7,209,857,310

Financial Highlights S&P 500 Index Master Portfolio

	Year Ended December 31,
	2016		2015		2014		2013		2012
Total Return
Total return		11.92%		1.35%		13.63%		32.33%		15.98%
Ratios to Average Net Assets
Total expenses		0.04%		0.05%		0.05%		0.05%		0.06%
Total expenses after fees waived and/or paid indirectly		0.04%		0.04%		0.05%		0.05%		0.05%
Net investment income		2.11%		2.00%		1.98%		2.08%		2.22%
Supplemental Data
Net assets, end of year (000)	$	9,791,759	$	7,209,857	$	5,748,578	$	5,271,130	$	1,717,932
Portfolio turnover rate		4%		2%		3%		2%		10%

See Notes to Financial Statements.
30	BLACKROCK S&P 500 INDEX FUND	DECEMBER 31, 2016

Notes to Financial Statements S&P 500 Index Master Portfolio

1. Organization:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. S&P 500 Index Master Portfolio (the “Master Portfolio”) is a series of MIP. The Master Portfolio is classified as diversified. MIP is organized as a Delaware statutory trust.

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

2. Significant Accounting Policies:

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

Segregation and Collateralization: In cases where the Master Portfolio enters into certain investments (e.g., futures contracts) that would be treated as “senior securities” for 1940 Act purposes, the Master Portfolio may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Master Portfolio may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Master Portfolio is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.

Recent Accounting Standard: In November 2016, the Financial Accounting Standards Board issued Accounting Standards Update “Restricted Cash” which will require entities to include the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the beginning and ending cash balances in the Statement of Cash Flows. The guidance will be applied retrospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. Management is evaluating the impact, if any, of this guidance on the Master Portfolio’s presentation in the Statement of Cash Flows.

Indemnifications: In the normal course of business, the Master Portfolio enters into contracts that contain a variety of representations that provide general indemnification. The Master Portfolio’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Master Portfolio, which cannot be predicted with any certainty.

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

Through May 31, 2016, the Master Portfolio had an arrangement with its custodian whereby credits were earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. Credits previously earned may have been utilized until December 31, 2016. Under current arrangements effective June 1, 2016, the Master Portfolio no longer earns credits on uninvested cash, and may incur charges on uninvested cash balances and overdrafts, subject to certain conditions.

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Master Portfolio’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time) (or if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the Master Portfolio

BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016 31

Notes to Financial Statements (continued) S&P 500 Index 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 using various 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 oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Master Portfolio’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Investments in open-end U.S. mutual funds are valued at NAV each business day.

• Futures contracts traded on exchanges are valued at their last sale price.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include Market approach, Income approach and the Cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

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

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

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

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by Private Companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

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

32 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) S&P 500 Index Master Portfolio

4. Securities and Other Investments:

Securities Lending: The Master Portfolio may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Master Portfolio collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio, or excess collateral returned by the Master Portfolio, on the next business day. During the term of the loan, the Master Portfolio is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as common stocks in the Master Portfolio’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value-unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Master Portfolio under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Master Portfolio can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

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

Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital, Inc	$	58,081	$	(58,081	)		—
BNP Paribas S.A.		14,178,991		(14,178,991	)		—
Citigroup Global Markets, Inc		5,757,204		(5,757,204	)		—
Credit Suisse Securities (USA) LLC		7,773,742		(7,773,742	)		—
Goldman Sachs & Co		10,457,031		(10,457,031	)		—
JP Morgan Securities LLC		14,045,411		(14,045,411	)		—
Merrill Lynch, Pierce, Fenner & Smith, Inc		5,512,518		(5,512,518	)		—
Scotia Capital Inc		333,384		(333,384	)		—
State Street Bank & Trust Co		5,813,447		(5,813,447	)		—
UBS Securities LLC		2,237,352		(2,237,352	)		—
Total	$	66,167,161	$	(66,167,161	)		—

¹  Cash collateral with a value of $67,945,322 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the table above.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Master Portfolio could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016 33

Notes to Financial Statements (continued) S&P 500 Index Master Portfolio

5. Derivative Financial Instruments:

The Master Portfolio engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Master Portfolio and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or over-the-counter (“OTC”).

Futures Contracts: The Master Portfolio invests in long and/or short positions in futures and options on futures contracts to gain exposure to, or manage exposure to, changes in the value of equity securities (equity risk).

Futures contracts are agreements between the Master Portfolio and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Master Portfolio is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Master Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

6. Investment Advisory Agreement and Other Transactions with Affiliates:

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

Investment Advisory and Administration: MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement with the Manager, the Master Portfolio’s investment adviser, 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 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 at an annual rate equal to 0.04% of the average daily value of the Master Portfolio’s net assets.

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

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

Waivers: With respect to the Master Portfolio, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Master Portfolio pays to the Manager indirectly through its investment in affiliated money market funds. This amount is included in fees waived by the Manager in the Statement of Operations. For the year ended December 31, 2016, the amount waived was $223,592.

Effective September 1, 2016, the Manager voluntarily agreed to waive its advisory fee with respect to any portion of Master Portfolio’s assets invested in affiliated equity or fixed-income mutual funds or affiliated exchange-traded funds. Prior to September 1, 2016, the Manager did not waive such fees. This voluntary waiver may be reduced or discontinued at any time without notice.

The fees and expenses of the MIP trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and the Master Portfolio’s independent registered public accounting firm (together, the “independent expenses”) are paid

34 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) S&P 500 Index Master Portfolio

directly by the Master Portfolio. BAL has contractually agreed to reimburse the Master Portfolio or provide an offsetting credit against the administration fees paid by the Master Portfolio in an amount equal to these independent expenses through April 30, 2017. For the year ended December 31, 2016, the amount waived was $295,228.

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

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement effective March 9, 2015, the Master Portfolio retains 71.5% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment fees. In addition, commencing the business day following the date that the aggregate securities lending income earned across certain funds in the Equity-Liquidity Complex in a calendar year exceeds a specified threshold, the Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 75% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment fees. For the period January 1, 2015 through March 8, 2015, BTC could lend securities with respect to the Master Portfolio only when the difference between the borrower rebate rate and the risk free rate exceeded a certain level, and the Master Portfolio retained 80% (85% commencing on the business day following the date that the aggregate securities lending income earned across the Equity-Liquidity Complex in the calendar year 2014 exceeded a specified threshold and for the remainder of that calendar year) of securities lending income.

The share of securities lending income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the year ended December 31, 2016, the Master Portfolio paid BTC $185,979 in total for securities lending agent services and collateral investment fees.

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

Other Transactions: The Master Portfolio may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common trustees. For the year ended December 31, 2016, the purchase and sale transactions and any in net realized gains (losses) with affiliated funds in compliance with Rule 17a-7 under the 1940 Act were as follows:

Purchases	Sales	Net Realized Loss
$137,236,845	$32,401,956	$(11,815,017)

7. Purchases and Sales:

For the year ended December 31, 2016, purchases and sales of investments, excluding short-term securities, were $2,443,151,828 and $281,881,787, respectively.

8. Income Tax Information:

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

The Master Portfolio files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolio’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016. 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.

BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016 35

Notes to Financial Statements (continued) S&P 500 Index Master Portfolio

Management has analyzed tax laws and regulations and their application to the Master Portfolio as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Master Portfolio’s financial statements.

As of December 31, 2016, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	6,609,249,538
Gross unrealized appreciation	$	3,727,444,490
Gross unrealized depreciation		(160,937,902	)
Net unrealized appreciation	$	3,566,506,588

9. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Master Portfolio may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Master Portfolio, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2017 unless extended or renewed. Prior to April 21, 2016, the credit agreement had a fee per annum of 0.06% on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2016, the Master Portfolio did not borrow under the credit agreement.

10. Principal Risks:

In the normal course of business, the Master Portfolio invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer to meet all its obligations, including the ability to pay principal and interest when due (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 of securities owned by the Master Portfolio. Changes arising from the general economy, the overall market and local, regional or global political and/or social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

On October 11, 2016, BlackRock implemented certain changes required by amendments to Rule 2a-7 under the 1940 Act, which governs the operations of U.S. money market funds. The Master Portfolio may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Master Portfolio may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Master Portfolio’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Master Portfolio may lose value, regardless of the individual results of the securities and other instruments in which the Master Portfolio invests.

Counterparty Credit Risk: Similar to issuer credit risk, the Master Portfolio may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Master Portfolio manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the 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,

36 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016

Notes to Financial Statements (concluded) S&P 500 Index Master Portfolio

issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Master Portfolio.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

With exchange-traded futures, there is less counterparty credit risk to the Master Portfolio since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Master Portfolio does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Master Portfolio.

11. Subsequent Events:

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

BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016 37

Report of Independent Registered Public Accounting Firm S&P 500 Index Master Portfolio

To the Board of Trustees of Master Investment Portfolio and the Investors of S&P 500 Index Master Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of S&P 500 Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio, as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers and the transfer agent of the investee funds, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 16, 2017

38 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016

Officers and Trustees¹

Name, Address2 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3
Rodney D. Johnson 1941	Chair of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011; Director, The Mainstay (non-profit) since 2016.	26 RICs consisting of 146 Portfolios	None
Susan J. Carter 1956	Trustee	Since 2016	Director, Pacific Pension Institute since 2014; Advisory Board Member, Center for Private Equity and Entrepreneurship at Tuck School of Business since 1997; Senior Advisor, Commonfund Capital, Inc. (“CCI”) (investment adviser) in 2015; Chief Executive Officer, CCI from 2013 to 2014; President & Chief Executive Officer, CCI from 1997 to 2013; Advisory Board Member, Girls Who Invest since 2015; Advisory Board Member, Bridges Ventures since 2016; Trustee, Financial Accounting Foundation since 2017.	26 RICs consisting of 146 Portfolios	None
Collette Chilton 1958	Trustee	Since 2015	Chief Investment Officer, Williams College since 2006; Chief Investment Officer, Lucent Asset Management Corporation from 1998 to 2006.	26 RICs consisting of 146 Portfolios	None
Neil A. Cotty 1954	Trustee	Since 2016	Bank of America Corporation from 1996 to 2015, serving in various senior finance leadership roles, including Chief Accounting Officer, from 2009 to 2015, Chief Financial Officer of Global Banking, Markets and Wealth Management from 2008 to 2009, Chief Accounting Officer from 2004 to 2008, Chief Financial Officer of Consumer Bank from 2003 to 2004, Chief Financial Officer of Global Corporate Investment Bank from 1999 to 2002.	26 RICs consisting of 146 Portfolios	None
Cynthia A. Montgomery 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012.	26 RICs consisting of 146 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 1947	Trustee	Since 2009	General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Chair, Basic Health International (non-profit) since 2015.	26 RICs consisting of 146 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company); Consol Energy Inc.
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981 and Principal since 2010.	26 RICs consisting of 146 Portfolios	None
Mark Stalnecker 1951	Trustee	Since 2015	Chief Investment Officer, University of Delaware from 1999 to 2013; Trustee, Winterthur Museum and Country Estate from 2001 to 2015; Member of the Investment Committee, Delaware Public Employees’ Retirement System since 2002; Member of the Investment Committee, Christiana Care Health System since 2009; Member of the Investment Committee, Delaware Community Foundation from 2013 to 2014; Director, SEI Private Trust Co. from 2001 to 2014.	26 RICs consisting of 146 Portfolios	None

BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016 39

Officers and Trustees¹ (continued)

Name, Address2 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3 (concluded)
Kenneth L. Urish 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since founding in 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	26 RICs consisting of 146 Portfolios	None
Claire A. Walton 1957	Trustee	Since 2016	Chief Operating Officer and Chief Financial Officer of Liberty Square Asset Management, LP from 1998 to 2015; General Partner of Neon Liberty Capital Management, LLC since 2003; Director, Boston Hedge Fund Group since 2009; Director, Woodstock Ski Runners since 2013; Director, Massachusetts Council on Economic Education from 2013 to 2015.	26 RICs consisting of 146 Portfolios	None
Frederick W. Winter 1945	Trustee	Since 2009	Director, Alkon Corporation since 1992; Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh, Dean and Professor from 1997 to 2005, Professor until 2013.	26 RICs consisting of 146 Portfolios	None
Interested Trustees5
Barbara G. Novick 1960	Trustee	Since 2015	Vice Chairman of BlackRock, Inc. since 2006; Chair of BlackRock’s Government Relations Steering Committee since 2009; Head of the Global Client Group of BlackRock, Inc. from 1988 to 2008.	100 RICs consisting of 220 Portfolios	None
John M. Perlowski 1964	Trustee, President and Chief Executive Officer	Since 2015 (Trustee); Since 2010 (President and Chief Executive Officer)	Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Fund & Accounting Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Advisory Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.	128 RICs consisting of 318 Portfolios	None
	1    As of February 16, 2017.
	2    The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	3    Independent Trustees serve until their resignation, retirement, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Independent Trustees on a case-by-case basis, as appropriate.
	4    In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, certain Independent Trustees were elected to the Board. As a result, although the chart shows certain Independent Trustees as joining the Board in 2009, those Independent Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: Rodney D. Johnson, 1995; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1999; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
	5    Ms. Novick and Mr. Perlowski are both “interested persons,” as defined in the 1940 Act, of the Trust/MIP based on their positions with BlackRock and its affiliates. Mr. Perlowski and Ms. Novick are also board members of certain complexes of BlackRock registered open-end and closed-end funds. Mr. Perlowski is also a board member of the BlackRock Equity-Bond Complex and the BlackRock Closed-End Complex, and Ms. Novick is a board member of the BlackRock Closed-End Complex.

40 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016

Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served as an Officer	Principal Occupation(s) During Past Five Years
Officers Who Are Not Trustees2
Thomas Callahan 1968	Vice President	Since 2016	Managing Director of BlackRock, Inc. since 2013; Head of BlackRock’s Global Cash Management Business since 2016; Co-Head of the Global Cash Management Business from 2014 to 2016; Deputy Head of the Global Cash Management Business from 2013 to 2014; Member of the Cash Management Group Executive Committee since 2013; Chief Executive Officer of NYSE Liffe U.S. from 2008 to 2013.
Jennifer McGovern 1977	Vice President	Since 2014	Managing Director of BlackRock, Inc. since 2016; Director of BlackRock, Inc. from 2011 to 2015; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal J. Andrews 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock, Inc. 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 M. Fife 1970	Treasurer	Since 2007	Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Charles Park 1967	Chief Compliance Officer	Since 2014	Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Fernanda Piedra 1969	Anti-Money Laundering Compliance Officer	Since 2015	Director of BlackRock, Inc. since 2014; Anti-Money Laundering Compliance Officer and Regional Head of Financial Crime for the Americas at BlackRock, Inc. since 2014; Head of Regulatory Changes and Remediation for the Asset Wealth Management Division of Deutsche Bank from 2010 to 2014; Vice President of Goldman Sachs (Anti-Money Laundering/Suspicious Activities Group) from 2004 to 2010.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock, Inc. since 2014; Director of BlackRock, Inc. from 2010 to 2013; Secretary of the iShares® exchange traded funds since 2015; Secretary of the BlackRock-advised mutual funds since 2012.
	1    The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	2    Officers of the Trust/MIP serve at the pleasure of the Board.
	Further information about the Trust’s/MIP’s Officers and Trustees is available in the Trust’s/MIP’s Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.

Effective December 31, 2016, David O. Beim and Dr. Matina S. Horner resigned as Trustees of the Trust/MIP.

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

BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016 41

Additional Information

General Information

Householding

The Fund will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Fund at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Fund/Master Portfolio file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s/Master Portfolio’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room or how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The 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 upon request and without charge (1) by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

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

BlackRock’s Mutual Fund Family

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

Shareholder Privileges

Account Information

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

Automatic Investment Plans

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

Systematic Withdrawal Plans

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

Retirement Plans

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

42 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016

Additional Information (concluded)

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2016 43

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

SPSF-12/16-AR

DECEMBER 31, 2016

  ANNUAL REPORT

BlackRock Total International ex U.S. Index Fund  |  of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
The Markets in Review		3
Annual Report:
Fund Summary		4
About Fund Performance		6
Disclosure of Expenses		6
Derivative Financial Instruments		6
Fund Financial Statements:
Statement of Assets and Liabilities		7
Statement of Operations		8
Statements of Changes in Net Assets		9
Fund Financial Highlights		10
Fund Notes to Financial Statements		13
Fund Report of Independent Registered Public Accounting Firm		18
Important Tax Information		18
Master Portfolio Information		19
Master Portfolio Financial Statements:
Schedule of Investments		20
Statement of Assets and Liabilities		40
Statement of Operations		41
Statements of Changes in Net Assets		42
Master Portfolio Financial Highlights		42
Master Portfolio Notes to Financial Statements		43
Master Portfolio Report of Independent Registered Public Accounting Firm		51
Officers and Trustees		52
Additional Information		55

2 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

The Markets in Review

Dear Shareholder,

The year 2016 started on a fraught note with worries about slowing growth in China, plunging oil prices and sliding share prices. Then reflationary expectations in the United States helped drive a second-half global growth pick-up and big market reversals. As such, higher-quality asset classes such as Treasury bonds, municipals and investment grade credit prevailed in the first half of the year, only to struggle in the second. In contrast, risk assets sold off at the start of the year and rebounded in the latter half, with some asset classes posting strong year-end returns.

A key takeaway from 2016’s market performance is that economics can trump politics. The global reflationary theme — governments taking policy action to support growth — was the dominant driver of 2016 asset returns, outweighing significant political upheavals and uncertainty. This trend accelerated after the U.S. election on expectations for an extra boost to U.S. growth via fiscal policy.

Markets were remarkably resilient during the year. Spikes in equity volatility after big surprises such as the U.K.’s vote to leave the European Union and the outcome of the U.S. presidential election were short-lived. Instead, political surprises and initial sell-offs were seized upon as buying opportunities. We believe this reinforces the case for taking the long view rather than reacting to short-term market noise.

Asset returns varied widely in 2016. Perceived safe assets such as government bonds and low-volatility shares underperformed the higher-risk areas of the market. And the reversal of longstanding trends created opportunities, such as in the recovery of value stocks and commodities.

We expect some of these trends to extend into 2017 and see the potential for more flows into risk assets this year. Learn more by reading our market insights at blackrock.com.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2016
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		7.82	%		11.96	%
U.S. small cap equities (Russell 2000® Index)		18.68			21.31
International equities (MSCI Europe, Australasia, Far East Index)		5.67			1.00
Emerging market equities (MSCI Emerging Markets Index)		4.49			11.19
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.18			0.33
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		(7.51	)		(0.16	)
U.S. investment grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index)		(2.53	)		2.65
Tax-exempt municipal bonds (S&P Municipal Bond Index)		(3.43	)		0.77
U.S. high yield bonds (Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		7.40			17.13
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, 2016

Investment Objective

BlackRock Total International ex U.S. Index Fund’s (the “Fund”) investment objective is to match the performance of the MSCI All Country World ex USA Index (the “MSCI ACWI ex USA 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?

• For the 12-month period ended December 31, 2016, the Fund’s Institutional Shares returned 4.31%, Investor A Shares returned 4.07% and Class K Shares returned 4.37%. The benchmark MSCI ACWI ex USA Index returned 4.50% for the same period.

• 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 Total International ex U.S. Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio.

Describe the market environment.

• The year had its worst monthly start since 2008 as the markets struggled with weakness in China and plunging oil prices. Performance declined early in the reporting period as concerns about the slowing global economy rattled developed markets globally. Oil price stability toward the end of the first quarter helped decrease global volatility and fuel the recovery as well.

• Performance of equity indexes was mixed in the second quarter amid recovering oil prices, uncertainty about a potential Federal Reserve (the “Fed”) rate hike and the U.K.’s referendum on European Union (“EU”) membership. The U.K.’s decision to leave the EU shocked investors globally and resulted in a sharp two-day selloff, after which developed markets rallied into the end of the month and recovered much of the losses.

• Global equity markets broadly rallied during the third quarter as the Fed kept rates unchanged, Japan announced additional fiscal and monetary stimulus, and the Bank of England cut rates. However, weak macro data out of China, a terrorist attack in Thailand, flooding in Louisiana, and a more hawkish tone from Fed officials hindered some performance for the quarter.

• Developed markets rallied in the last quarter of the year as global investors embraced the results of the U.S. election and strong macro data, although a stronger U.S. dollar subdued gains for U.S. investors. The year ended with a global equity rally, as strong global economic data and continued optimism around president-elect Trump’s reflationary policies, outweighed the effects of the European Central Bank’s decision to reduce the pace of its asset purchases and diplomatic tensions between the United States and other major powers.

Describe recent portfolio activity.

• During the period, as changes were made to the composition of the MSCI ACWI ex USA 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.

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 TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Total Return Based on a $10,000 Investment

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

²  The Fund invests all of its assets in the Master Portfolio. The Master Portfolio will be substantially invested in equity securities in the MSCI ACWI ex USA Index, and will invest, under normal circumstances, at least 80% of its assets in securities or other financial instruments that are components of or have economic characteristics similar to the securities included in the MSCI ACWI ex USA Index.

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

⁴ Commencement of operations.

Performance Summary for the Period Ended December 31, 2016

	6-Month Total Returns			Average Annual Total  Returns5
				1 Year			5 Years			Since  Inception6
Institutional		4.37	%		4.31	%		4.43	%		0.32	%
Investor A		4.26			4.07			4.14			0.06
Class K		4.41			4.37			4.91			0.75
MSCI ACWI ex USA Index		5.57			4.50			5.00			1.08

⁵  See “About Fund Performance” on page 6 for a detailed description of share classes, including any related sales charges and fees.

⁶  The Fund commenced operations on June 30, 2011.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical8
	Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period7		Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period7		Annualized Expense Ratio
Institutional	$	1,000.00	$	1,043.70	$	0.82	$	1,000.00	$	1,024.33	$	0.81		0.16	%
Investor A	$	1,000.00	$	1,042.60	$	2.11	$	1,000.00	$	1,023.08	$	2.08		0.41	%
Class K	$	1,000.00	$	1,044.10	$	0.57	$	1,000.00	$	1,024.58	$	0.56		0.11	%

⁷  For each class of the Fund, expenses are equal to the annualized net expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period shown). Because the Fund invests all of its assets in the Master Portfolio, the expense example reflects the net expenses of both the Fund and the Master Portfolio in which it invests.

⁸  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366.

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

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 5

About Fund Performance

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

• Investor A Shares are not subject to any sales charge and bear no ongoing distribution fee. These shares are subject to an ongoing service fee of 0.25% per year. These shares are generally available through financial intermediaries.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in the performance table on the previous page

assume reinvestment of all distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Distributions paid to each class of shares will vary because of the different levels of service, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders.

BlackRock Advisors, LLC (“BAL” or the “Administrator”), the Fund’s administrator, has contractually agreed to waive and/or reimburse a portion of the Fund’s expenses. Without such waiver and/or reimbursement, the Fund’s performance would have been lower. The Administrator is under no obligation to continue waiving and/or reimbursing its fees after the applicable termination date of such agreement. See Note 4 of the Notes to Financial Statements for additional information on waivers and/or reimbursements.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including administration fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2016 and held through December 31, 2016) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

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

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

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

Derivative Financial Instruments

The Master Portfolio may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other asset without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default

of the counterparty to the transaction or illiquidity of the instrument. The Master Portfolio’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Master Portfolio can realize on an investment and/or may result in lower distributions paid to shareholders. The Master Portfolio’s investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

6 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Statement of Assets and Liabilities BlackRock Total International ex U.S. Index Fund

December 31, 2016
Assets
Investments at value — Master Portfolio (cost — $426,810,521)	$	427,332,913
Receivables:
Capital shares sold		4,575,381
From the Administrator		16,266
Prepaid expenses		23,850
Total assets		431,948,410
Liabilities
Payables:
Contributions to the Master Portfolio		3,896,613
Capital shares redeemed		678,768
Service fees		52,328
Professional fees		36,328
Administration fees		3,261
Other accrued expenses		49,472
Total liabilities		4,716,770
Net Assets	$	427,231,640
Net Assets Consist of
Paid-in capital	$	430,781,333
Distributions in excess of net investment income		(330,185	)
Accumulated net realized loss allocated from the Master Portfolio		(3,741,900	)
Net unrealized appreciation (depreciation) allocated from the Master Portfolio		522,392
Net Assets	$	427,231,640
Institutional — Based on net assets of $76,001,282 and 9,866,313 shares outstanding, unlimited shares authorized, no par value	$	7.70
Investor A — Based on net assets of $247,732,013 and 32,240,609 shares outstanding, unlimited shares authorized, no par value	$	7.68
Class K — Based on net assets of $103,498,345 and 13,064,862 shares outstanding, unlimited shares authorized, no par value	$	7.92

See Notes to Financial Statements.
	BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND	DECEMBER 31, 2016	7

Statement of Operations BlackRock Total International ex U.S. Index Fund

Year Ended December 31, 2016
Investment Income
Net investment income allocated from the Master Portfolio:
Dividends — unaffiliated	$	8,760,390
Securities lending — affiliated — net		134,137
Dividends — affiliated		7,724
Expenses		(221,302	)
Foreign taxes withheld		(1,064,756	)
Fees waived		2,148
Total investment income		7,618,341
Fund Expenses
Administration		27,308
Service and Distribution — class specific		417,976
Transfer agent — class specific		128,803
Registration		65,242
Professional		41,844
Printing		16,025
Recoupment of past fees waived and/or reimbursed		3,261
Recoupment of past fees waived and/or reimbursed — class specific		2,790
Officer		13
Miscellaneous		10,483
Total expenses		713,745
Less:
Fees waived by the Administrator		(21,545	)
Fees reimbursed by the Administrator		(48,527	)
Transfer agent fees waived and/or reimbursed — class specific		(33,529	)
Total expenses after fees waived and/or reimbursed		610,144
Net investment income		7,008,197
Realized and Unrealized Gain (Loss) Allocated from the Master Portfolio
Net realized gain from investments, futures contracts and foreign currency transactions (net of $670 foreign capital gains tax)		2,730,185
Net change in unrealized appreciation on investments, futures contracts and foreign currency translations		3,278,725
Net realized and unrealized gain		6,008,910
Net Increase in Net Assets Resulting from Operations	$	13,017,107

See Notes to Financial Statements.
8	BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND	DECEMBER 31, 2016

Statements of Changes in Net Assets BlackRock Total International ex U.S. Index Fund

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	7,008,197		$	1,505,163
Net realized gain (loss)		2,730,185			1,963,965
Net change in unrealized appreciation (depreciation)		3,278,725			(6,722,869	)
Net increase (decrease) in net assets resulting from operations		13,017,107			(3,253,741	)
Distributions to Shareholders1
From net investment income:
Institutional		(1,271,110	)		(571,448	)
Investor A		(3,962,291	)		(900,995	)
Class K		(1,899,693	)		(149,505	)
From net realized gain:
Institutional		(588,534	)		(493,712	)
Investor A		(2,049,998	)		(1,217,105	)
Class K		(816,291	)		(107,430	)
Decrease in net assets resulting from distributions to shareholders		(10,587,917	)		(3,440,195	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		232,611,891			174,864,697
Net Assets
Total increase in net assets		235,041,081			168,170,761
Beginning of year		192,190,559			24,019,798
End of year	$	427,231,640		$	192,190,559
Distributions in excess of net investment income, end of year	$	(330,185	)	$	(205,288	)
1    Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND	DECEMBER 31, 2016	9

Financial Highlights BlackRock Total International ex U.S. Index Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	7.65		$	8.43		$	10.06		$	9.06		$	8.13
Net investment income1		0.21			0.21			0.30			0.22			0.17
Net realized and unrealized gain (loss)		0.12			(0.69	)		(0.75	)		1.02			1.16
Net increase (decrease) from investment operations		0.33			(0.48	)		(0.45	)		1.24			1.33
Distributions:2
From net investment income		(0.21	)		(0.17	)		(0.29	)		(0.24	)		(0.40	)
From net realized gain		(0.07	)		(0.13	)		(0.89	)		—			—
From return of capital		—			—			—			—			(0.00	)3
Total distributions		(0.28	)		(0.30	)		(1.18	)		(0.24	)		(0.40	)
Net asset value, end of year	$	7.70		$	7.65		$	8.43		$	10.06		$	9.06
Total Return4
Based on net asset value		4.31%			(5.89)%			(4.78)%			13.94%			16.61%
Ratios to Average Net Assets5
Total expenses6		0.19%			0.45%			0.83%	7		1.25%			0.75%
Total expenses after fees waived and/or reimbursed6		0.16%			0.17%			0.21%	7		0.35%			0.34%
Net investment income6		2.74%			2.49%			3.00%	7		2.35%			1.95%
Supplemental Data
Net assets, end of year (000)	$	76,001		$	40,716		$	17,380		$	15,013		$	9,602
Portfolio turnover rate of the Master Portfolio		15%			6%			49%			36%			42%

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the Fund’s share of the Master Portfolio’s allocated fees waived as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Allocated fees waived		0.00%		0.00%		0.03%		0.01%		0.08%

⁷ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01%.

See Notes to Financial Statements.
10	BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock Total International ex U.S. Index Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	7.63		$	8.41		$	10.06		$	9.06		$	8.13
Net investment income1		0.19			0.13			0.22			0.21			0.19
Net realized and unrealized gain (loss)		0.12			(0.62	)		(0.71	)		1.00			1.12
Net increase (decrease) from investment operations		0.31			(0.49	)		(0.49	)		1.21			1.31
Distributions:2
From net investment income		(0.19	)		(0.16	)		(0.27	)		(0.21	)		(0.38	)
From net realized gain		(0.07	)		(0.13	)		(0.89	)		—			—
From return of capital		—			—			—			—			(0.00	)3
Total distributions		(0.26	)		(0.29	)		(1.16	)		(0.21	)		(0.38	)
Net asset value, end of year	$	7.68		$	7.63		$	8.41		$	10.06		$	9.06
Total Return4
Based on net asset value		4.07%			(6.05)%			(5.19)%			13.63%			16.31%
Ratios to Average Net Assets5
Total expenses6		0.46%			0.43%			1.30%	7		1.91%			1.88%
Total expenses after fees waived and/or reimbursed6		0.41%			0.38%			0.46%	7		0.64%			0.63%
Net investment income6		2.48%			1.63%			2.28%	7		2.21%			2.18%
Supplemental Data
Net assets, end of year (000)	$	247,732		$	144,177		$	372		$	65		$	39
Portfolio turnover rate of the Master Portfolio		15%			6%			49%			36%			42%

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the Fund’s share of the Master Portfolio’s allocated fees waived as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Allocated fees waived		0.00%		0.00%		0.03%		0.01%		0.16%

⁷ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01%.

See Notes to Financial Statements.
	BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND	DECEMBER 31, 2016	11

Financial Highlights (concluded) BlackRock Total International ex U.S. Index Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	7.86		$	8.65		$	10.30		$	9.27		$	8.13
Net investment income1		0.21			0.23			0.19			0.23			0.28
Net realized and unrealized gain (loss)		0.13			(0.71	)		(0.65	)		1.04			1.27
Net increase (decrease) from investment operations		0.34			(0.48	)		(0.46	)		1.27			1.55
Distributions:2
From net investment income		(0.21	)		(0.18	)		(0.30	)		(0.24	)		(0.41	)
From net realized gain		(0.07	)		(0.13	)		(0.89	)		—			—
From return of capital		—			—			—			—			(0.00	)3
Total distributions		(0.28	)		(0.31	)		(1.19	)		(0.24	)		(0.41	)
Net asset value, end of year	$	7.92		$	7.86		$	8.65		$	10.30		$	9.27
Total Return4
Based on net asset value		4.37%			(5.83)%			(4.84)%			13.96%			19.25%
Ratios to Average Net Assets5
Total expenses6		0.14%			0.46%			0.81%	7		1.36%			1.80%
Total expenses after fees waived and/or reimbursed6		0.11%			0.13%			0.15%	7		0.34%			0.33%
Net investment income6		2.68%			2.71%			2.02%	7		2.40%			3.31%
Supplemental Data
Net assets, end of year (000)	$	103,498		$	7,297		$	6,267		$	80		$	50
Portfolio turnover rate of the Master Portfolio		15%			6%			49%			36%			42%

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

⁶ Includes the Fund’s share of the Master Portfolio’s allocated fees waived as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Allocated fees waived		0.00%		0.00%		0.03%		0.01%		0.29%

⁷ Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01%.

See Notes to Financial Statements.
12	BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND	DECEMBER 31, 2016

Notes to Financial Statements BlackRock Total International ex U.S. Index Fund

1. Organization:

BlackRock Funds III (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. BlackRock Total International ex U.S. Index Fund (the “Fund”) is a series of the Trust. The Fund is classified as non-diversified. The Trust is organized as a Delaware statutory trust. The Fund seeks to achieve its investment objective by investing all of its assets in Total International ex U.S. Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), an affiliate of the Fund, which has the same investment objective and strategies as the Fund. The value of the Fund’s investment in the Master Portfolio reflects the Fund’s proportionate interest in the net assets of the Master Portfolio. The performance of the Fund is directly affected by the performance of the Master Portfolio. At December 31, 2016, the percentage of the Master Portfolio owned by the Fund was 42.7%. The financial statements of the Master Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with the Fund’s financial statements.

The Fund offers multiple classes of shares. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that Investor A Shares bear certain expenses related to the shareholder servicing and distribution of such shares. Institutional and Class K Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are sold without a sales charge and generally available through financial intermediaries. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures. The Board of Trustees of the Trust and Board of Trustees of MIP are referred to throughout this report as the “Board of Trustees” or the “Board” and the members are referred to as “Trustees.”

Share Class	Initial Sales Charge		CDSC		Conversion Privilege
Institutional Shares		No		No		None
Investor A Shares		No		No		None
Class K Shares		No		No		None

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

2. Significant Accounting Policies:

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

Investment Transactions and 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 its proportionate share of the Master Portfolio’s income, expenses and realized and unrealized gains and losses on a daily basis. In addition, the Fund accrues its own expenses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

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

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

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

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 13

Notes to Financial Statements (continued) BlackRock Total International ex U.S. Index Fund

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Fund’s policy is to value its financial instruments at fair 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 3 of the Master Portfolio’s Notes to Financial Statements, which are included elsewhere in this report.

4. Administration Agreement and Other Transactions with Affiliates:

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

Administration: The Trust, on behalf of the Fund, entered into an Administration Agreement with BAL, an indirect, wholly owned subsidiary of BlackRock, to provide administrative services (other than investment advice and related portfolio activities). For such services, the Fund pays BAL a monthly fee at an annual rate of 0.01% of the average daily net assets of the Fund. The Fund does not pay an investment advisory fee or investment management fee.

From time to time, BAL may waive such fees in whole or in part. Any such waiver will reduce the expenses of the Fund and, accordingly, have a favorable impact on its performance. BAL may delegate certain of its administration duties to sub-administrators. For the year ended December 31, 2016, BAL waived and/or reimbursed $21,545.

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

BRIL and broker-dealers, pursuant to sub-agreements with 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 the shareholders.

For the year ended December 31, 2016, the class specific service and distribution fees borne directly by Investor A Shares was $417,976.

Transfer Agent: The Administrator maintains a call center that is responsible for providing certain shareholder services to the Fund. Shareholder services include responding to inquiries and processing subscriptions and redemptions based upon instructions from shareholders. For the year ended December 31, 2016, the Fund reimbursed the Administrator the following amounts for costs incurred in running the call center, which are included in transfer agent — class specific in the Statement of Operations:

Institutional	Investor A		Class K		Total
$176	$	1,084	$	7	$	1,267

For the year ended December 31, 2016, the following table shows the class specific transfer agent fees borne directly by each class of the Fund:

Institutional	Investor A		Class K		Total
$20,475	$	107,383	$	945	$	128,803

Expense Limitations, Waivers, Reimbursements, and Recoupments: With respect to the Fund, BAL contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The current expense limitations as a percentage of average daily net assets are as follows:

Institutional		Investor A		Class K
	0.16%		0.41%		0.11%

Prior to October 5, 2016, the expense limitations as a percentage of average daily net assets were as follows:

Institutional		Investor A		Class K
	0.17%		0.42%		0.12%

BAL has agreed not to reduce or discontinue this contractual expense limitation prior to May 1, 2018, unless approved by the Board, including a majority of the trustees who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Trustees”), or by a vote of a majority of the outstanding voting securities of the Fund.

14 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) BlackRock Total International ex U.S. Index Fund

These amounts waived and/or reimbursed are shown as fees reimbursed by the administrator and transfer agent fees waived and/or reimbursed — class specific, respectively, in the Statements of Operations. Fees reimbursed and class specific expense waivers and/or reimbursements are as follows:

Fees reimbursed by the administrator

Institutional	Investor A		Class K		Total
$8,966	$	31,280	$	8,281	$	48,527

Transfer agent fees waived and/or reimbursed

Institutional	Investor A		Class K		Total
$634	$	32,168	$	727	$	33,529

With respect to the contractual expense caps, if during the Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver and/or reimbursement from the Administrator, are less than the expense cap for that share class, the Administrator is entitled to be reimbursed by such share class up to the lesser of the following expenses:

(a) The amount of fees waived and/or expenses reimbursed during those prior two fiscal years under the agreement.

(b) The amount by which the expense cap for that share class exceeds the operating expenses of the share class for the current fiscal year, provided that:

• The Fund, of which the share class is a part, has more than $50 million in assets for the fiscal year; and

• BAL or an affiliate continues to serve as the Fund’s investment adviser or administrator.

In the event the expense cap for a share class is changed subsequent to a fiscal year in which BAL becomes entitled to reimbursement for fees waived and/or reimbursed, the amount available to reimburse BAL shall be calculated by reference to the expense cap for that share class in effect at the time BAL became entitled to receive such reimbursement, rather than the subsequently changed expense cap for that share class.

For the year ended December 31, 2016, BAL recouped the following fund level and class specific waivers and/or reimbursements previously recorded by the Fund:

Fund Level	Institutional		Investor A		Class K
$3,261	$	2,307	$	465	$	18

On December 31, 2016, 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,
	2017		2018
Fund level	$	115,753	$	70,072
Institutional	$	—	$	634
Investor A	$	—	$	32,168
Class K	$	—	$	727

The following fund level and class specific waivers and/or reimbursements previously recorded by the Fund, which were subject to recoupment by the Administrator, expired on December 31, 2016:

Fund Level

$98,913

Interfund Lending: In accordance with an exemptive order (the “Order”) from the U.S. Securities and Exchange Commission, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow under the Interfund Lending Program.

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 15

Notes to Financial Statements (continued) BlackRock Total International ex U.S. Index Fund

The Fund may lend in aggregate up to 15% of its net assets, but no more than 5% of its net assets, to any one borrowing fund through the Interfund Lending Program. The Fund may not borrow through the Interfund Lending Program or from any other source more than 33  ¹/₃% of its total assets or any lower threshold provided for by the Fund’s investment restrictions. If the Fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the period ended December 31, 2016, the Fund did not participate in the Interfund Lending Program.

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

5. Income Tax Information:

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

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016. The statute of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

The tax character of distributions paid was as follows:

		2016		2015
Ordinary income	$	9,036,649	$	2,079,999
Long-term capital gains		1,551,268		1,360,196
Total	$	10,587,917	$	3,440,195

As of period end, the tax components of accumulated net earnings (losses) were as follows:

Undistributed ordinary income	$	106,418
Qualified late-year losses		(232,420	)
Net unrealized gains (losses)1		(3,423,691	)
Total	$	(3,549,693	)

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

6. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Institutional
Shares sold		6,367,264		$	48,657,164			3,607,468		$	29,199,121
Shares issued in reinvestment of distributions		241,230			1,849,084			124,878			1,009,206
Shares redeemed		(2,063,411	)		(15,727,749	)		(474,006	)		(3,845,526	)
Net increase		4,545,083		$	34,778,499			3,258,340		$	26,362,801
Investor A
Shares sold		15,959,069		$	122,888,120			19,293,545		$	150,340,411
Shares issued in reinvestment of distributions		786,744			6,012,289			275,490			2,118,100
Shares redeemed		(3,395,147	)		(25,937,946	)		(723,364	)		(5,709,494	)
Net increase		13,350,666		$	102,962,463			18,845,671		$	146,749,017

16 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Notes to Financial Statements (concluded) BlackRock Total International ex U.S. Index Fund

	Year Ended December 31, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class K
Shares sold		12,867,026		$	100,673,978			485,159		$	4,219,483
Shares issued in reinvestment of distributions		344,410			2,715,984			30,429			256,936
Shares redeemed		(1,074,617	)		(8,519,033	)		(312,244	)		(2,723,540	)
Net increase		12,136,819		$	94,870,929			203,344		$	1,752,879
Total Net Increase		30,032,568		$	232,611,891			22,307,355		$	174,864,697

7. 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 TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 17

Report of Independent Registered Public Accounting Firm BlackRock Total International ex U.S. Index Fund

To the Board of Trustees of BlackRock Funds III and the Shareholders of BlackRock Total International ex U.S. Index Fund:

In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock Total International ex U.S Index Fund (the “Fund”), a series of BlackRock Funds III, as of December 31, 2016, 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 Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid during the taxable year ended December 31, 2016.

	Payable Dates
Qualified Dividend Income for Individuals1		Quarterly	77.28%
Foreign Source Income2		Quarterly	72.25%
Foreign Taxes Paid Per Share3		3/30/2016	$0.005266
		6/29/2016	$0.008960
		9/29/2016	$0.005678
		12/15/2016	$0.003179

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

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

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

Additionally, the Fund distributed long-term capital gains of $0.009035 and $0.023074 per share to shareholders on record June 29, 2016 and December 15, 2016, respectively.

18 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Master Portfolio Information Total International ex U.S. Index Master Portfolio

As of December 31, 2016

Ten Largest Holdings Percent of
Net Assets

Nestlé SA, Registered Shares	1	%
HSBC Holdings PLC	1
Novartis AG, Registered Shares	1
Roche Holding AG	1
Toyota Motor Corp.	1
Samsung Electronics Co. Ltd.	1
Tencent Holding LTD	1
Taiwan Semiconductor Manufacturing Co. Ltd.	1
Royal Dutch Shell PLC, Class A	1
BP PLC	1

Geographic Allocation Percent of
Net Assets

Japan	17	%
United Kingdom	11
United States	9
Canada	7
France	7
Germany	6
Switzerland	6
Australia	5
China	5
Netherlands	4
South Korea	3
Hong Kong	3
Taiwan	3
Spain	2
Sweden	2
India	2
Brazil	2
Other1	14
Liabilities in Excess of Other Assets	(8	)

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

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 19

Schedule of Investments December 31, 2016 Total International ex U.S. Index Master Portfolio (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Australia — 5.1%
AGL Energy Ltd.		42,096	$	669,766
Alumina Ltd.		163,866		214,270
Amcor Ltd.		61,970		666,972
AMP Ltd. (a)		174,018		631,136
APA Group (a)(b)		66,494		410,488
Aristocrat Leisure Ltd.		27,113		302,489
ASX Ltd.		11,763		421,410
Aurizon Holdings Ltd.		104,377		379,496
AusNet Services		164,117		186,831
Australia & New Zealand Banking Group Ltd. (a)		169,726		3,715,501
Bank of Queensland Ltd.		19,847		169,613
Bendigo & Adelaide Bank Ltd.		28,052		256,613
BHP Billiton Ltd. (a)		186,874		3,347,816
Boral Ltd.		92,418		359,791
Brambles Ltd.		85,150		759,885
Caltex Australia Ltd.		14,445		316,716
Challenger Ltd. (a)		31,089		251,196
CIMIC Group Ltd.		10,867		273,426
Coca-Cola Amatil Ltd.		33,925		247,414
Cochlear Ltd.		3,188		281,375
Commonwealth Bank of Australia (a)		96,638		5,732,958
Computershare Ltd. (a)		29,614		265,699
Crown Resorts Ltd. (a)		24,040		200,357
CSL Ltd.		25,149		1,818,771
Dexus Property Group		50,587		350,932
Domino’s Pizza Enterprises Ltd.		3,497		163,531
DUET Group (a)(b)		175,663		346,905
Flight Centre Travel Group Ltd. (a)		1,384		31,191
Fortescue Metals Group Ltd.		88,953		371,735
Goodman Group		90,279		463,639
GPT Group		85,677		310,625
Harvey Norman Holdings Ltd. (a)		53,399		197,856
Healthscope Ltd. (a)		82,216		135,529
Incitec Pivot Ltd. (a)		96,223		248,985
Insurance Australia Group Ltd. (a)		143,357		618,202
Lend Lease Group (b)		31,290		328,812
Macquarie Group Ltd.		17,178		1,076,064
Medibank Pvt Ltd.		149,927		304,601
Mirvac Group (a)		310,098		476,215
National Australia Bank Ltd.		153,287		3,385,877
Newcrest Mining Ltd.		43,527		624,136
Oil Search Ltd. (a)		68,503		352,569
Orica Ltd. (a)		17,936		227,951
Origin Energy Ltd.		106,906		505,799
Qantas Airways Ltd.		21,423		51,319
QBE Insurance Group Ltd.		83,136		742,799
Ramsay Health Care Ltd. (a)		7,590		373,175
REA Group Ltd.		6,650		264,272
Rio Tinto Ltd. (a)		22,393		959,340
Santos Ltd.		81,201		233,910
Scentre Group		288,676		966,338
Seek Ltd.		19,975		213,935

Common Stocks	Shares		Value
Australia (continued)
Sonic Healthcare Ltd.		20,252	$	311,678
South32 Ltd.		304,116		598,668
Stockland		120,177		397,026
Suncorp Group Ltd.		74,741		727,763
Sydney Airport (b)		56,475		243,771
Tabcorp Holdings Ltd.		54,398		188,462
Tatts Group Ltd.		103,429		333,286
Telstra Corp. Ltd.		240,534		883,885
TPG Telecom Ltd. (a)		14,159		69,509
Transurban Group (a)(b)		107,552		800,434
Treasury Wine Estates Ltd.		48,858		375,846
Vicinity Centres		174,986		377,360
Vocus Communications Ltd.		39,036		108,705
Wesfarmers Ltd.		64,983		1,972,359
Westfield Corp.		107,826		729,059
Westpac Banking Corp. (a)		188,170		4,417,083
Woodside Petroleum Ltd. (a)		44,388		994,214
Woolworths Ltd. (a)		71,434		1,239,925
				50,975,264
Austria — 0.1%
Andritz AG		5,013		251,220
Erste Group Bank AG (c)		18,246		533,461
OMV AG		7,068		249,173
Raiffeisen Bank International AG (c)		4,478		81,630
Voestalpine AG		7,675		300,117
				1,415,601
Belgium — 0.8%
Ageas		13,631		538,790
Anheuser-Busch InBev SA		43,455		4,599,451
Colruyt SA (a)		3,569		176,398
Groupe Bruxelles Lambert SA		5,221		437,425
KBC Group NV		14,237		879,673
Proximus		7,467		214,652
Solvay SA		4,091		478,265
Telenet Group Holding NV (c)		1,997		110,687
UCB SA (a)		6,867		439,357
Umicore SA		5,610		319,161
				8,193,859
Brazil — 1.7%
Ambev SA		263,763		1,329,067
Banco Bradesco SA — ADR		48,715		436,155
Banco Bradesco SA, Preference Shares		152,586		1,359,571
Banco do Brasil SA		49,100		423,762
Banco Santander Brasil SA		46,616		422,949
BB Seguridade Participacoes SA		38,243		332,527
BM&FBovespa SA		105,100		532,814
BR Malls Participacoes SA (c)		17,810		65,391
Braskem SA, Preference A Shares		11,000		115,756
BRF SA		35,100		520,348
CCR SA		55,500		272,154

Portfolio Abbreviations

ADR	American Depositary Receipts	NVDR	Non-voting Depository Receipts	PCL	Public Company Limited
CVA	Certificaten Van Aandelen (Dutch Certificate)	OJSC	Open Joint Stock Company	REIT	Real Estate Investment Trust
GDR	Global Depositary Receipt	PJSC	Public Joint Stock Company	S&P	Standard and Poor’s
MSCI	Morgan Stanley Capital International

See Notes to Financial Statements.

20 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) Total International ex U.S. Index Master Portfolio

Common Stocks	Shares		Value
Brazil (continued)
Centrais Eletricas Brasileiras SA (c)		14,343	$	100,520
Centrais Eletricas Brasileiras SA, Preference ‘B’ Shares (c)		13,700		108,979
CETIP SA — Mercados Organizado		9,411		128,961
Cia Brasileira de Distribuicao Grupo Pao de Acucar, Preference Shares		11,446		192,543
Cia Energetica de Minas Gerais, Preference Shares		24,313		57,595
Cia Paranaense de Energia, Preference ‘B’ Shares		11,500		96,673
Cielo SA		57,998		496,993
Companhia de Saneamento Basico do Estado de Sao Paulo		36,474		322,637
Companhia Siderurgica Nacional SA (c)		48,700		162,348
Cosan SA Industria e Comercio		1,800		21,099
CPFL Energia SA		34,186		264,795
Duratex SA (c)		5,621		11,744
EDP — Energias do Brasil SA		900		3,705
Embraer SA		37,700		185,332
Engie Brasil Energia SA		4,600		49,467
Equatorial Energia SA		13,600		227,314
Fibria Celulose SA		10,300		100,921
Gerdau SA, Preference Shares		62,500		207,392
Hypermarcas SA		19,300		154,948
Itau Unibanco Holding SA, Preference Shares		193,025		2,007,526
Itausa — Investimentos Itau SA, Preference Shares		249,383		634,434
JBS SA		31,400		109,983
Klabin SA, Preference Shares		22,200		120,866
Kroton Educacional SA		79,368		325,061
Localiza Rent a Car SA		10,740		112,921
Lojas Americanas SA		7,200		27,586
Lojas Americanas SA, Preference Shares		35,184		183,774
Lojas Renner SA		59,435		423,114
M Dias Branco SA		1,500		53,005
Multiplan Empreendimentos Imobiliarios SA		4,600		83,924
Natura Cosmeticos SA		8,200		57,997
Odontoprev SA		600		2,323
Petroleo Brasileiro SA (c)		164,300		855,146
Petroleo Brasileiro SA, Preference Shares (c)		217,722		994,723
Porto Seguro SA		4,400		36,366
Qualicorp SA		8,500		50,273
Raia Drogasil SA		9,300		174,845
Rumo Logistica Operadora Multimodal SA (c)		53,100		100,173
Sul America SA		8,738		48,325
Suzano Papel e Celulose SA, Preference ‘A’ Shares		13,600		59,336
Telefonica Brasil SA, Preference Shares		25,700		348,068
Tim Participacoes SA		41,040		98,732
Ultrapar Participacoes SA		18,600		391,179
Vale SA		65,800		519,170
Vale SA, Preference Shares		114,000		817,513
WEG SA		18,720		89,151
				17,429,974
Canada — 7.0%
Agnico Eagle Mines Ltd.		12,637		531,306
Agrium, Inc. (a)		7,173		721,013
Alimentation Couche Tard, Inc., Class B		27,387		1,241,813
AltaGas Ltd.		10,487		264,782
ARC Resources Ltd.		22,432		386,105
Atco Ltd. Class I		2,968		98,723
Bank of Montreal		36,572		2,630,438
Bank of Nova Scotia		67,607		3,764,421

Common Stocks	Shares		Value
Canada (continued)
Barrick Gold Corp.		65,604	$	1,050,035
BCE, Inc.		9,423		407,267
BlackBerry Ltd. (c)		30,297		208,501
Bombardier, Inc., Class B (c)		127,918		205,789
Brookfield Asset Management, Inc., Class A		48,474		1,599,373
CAE, Inc.		17,287		241,798
Cameco Corp.		17,020		177,977
Canadian Imperial Bank of Commerce		21,597		1,762,311
Canadian National Railway Co.		47,013		3,163,963
Canadian Natural Resources Ltd.		62,203		1,982,398
Canadian Pacific Railway Ltd.		8,191		1,168,635
Canadian Tire Corp. Ltd., Class A		4,121		427,462
Canadian Utilities Ltd., Class A		9,258		249,542
CCL Industries, Inc., Class B		1,374		269,960
Cenovus Energy, Inc.		47,848		723,431
CGI Group, Inc., Class A (c)		12,922		620,187
CI Financial Corp.		11,539		248,115
Constellation Software, Inc.		1,101		500,311
Crescent Point Energy Corp.		30,179		410,209
Dollarama, Inc.		6,920		507,049
Eldorado Gold Corp. (c)		17,582		56,570
Element Fleet Management Corp.		19,100		177,251
Empire Co. Ltd., Class A		12,024		140,779
Enbridge, Inc.		55,271		2,325,857
Encana Corp.		57,010		669,182
Fairfax Financial Holdings Ltd.		1,258		607,614
Finning International, Inc.		7,357		144,055
First Capital Realty, Inc.		10,928		168,236
First Quantum Minerals Ltd.		39,396		391,715
Fortis, Inc.		25,222		778,836
Franco-Nevada Corp.		9,282		554,991
George Weston Ltd.		3,435		290,606
Gildan Activewear, Inc. (a)		13,076		332,001
Goldcorp, Inc.		47,698		649,402
Great-West Lifeco, Inc.		17,087		447,585
H&R Real Estate Investment Trust		11,922		198,633
Husky Energy, Inc. (c)		15,100		183,204
Hydro One Ltd. (d)		13,003		228,362
IGM Financial, Inc. (a)		4,062		115,569
Imperial Oil Ltd.		16,836		585,714
Industrial Alliance Insurance & Financial Services, Inc.		6,144		244,314
Intact Financial Corp.		7,844		561,433
Inter Pipeline Ltd.		18,400		406,194
Jean Coutu Group PJC, Inc., Class A		3,208		49,984
Keyera Corp.		8,330		251,020
Kinross Gold Corp. (c)		76,176		237,722
Linamar Corp.		5,267		226,309
Loblaw Cos. Ltd.		13,112		691,807
Magna International, Inc.		21,261		923,186
Manulife Financial Corp. (a)		109,960		1,958,175
Methanex Corp.		4,533		198,822
Metro, Inc.		13,402		400,867
National Bank of Canada		19,317		784,535
Onex Corp.		5,499		374,259
Open Text Corp.		7,222		446,020
Pembina Pipeline Corp.		22,045		688,942
Peyto Exploration & Development Corp.		10,662		263,721
Potash Corp. of Saskatchewan, Inc.		54,014		977,172
Power Corp. of Canada		21,464		480,388

See Notes to Financial Statements.

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 21

Schedule of Investments (continued) Total International ex U.S. Index Master Portfolio

Common Stocks	Shares		Value
Canada (continued)
Power Financial Corp. (a)		12,359	$	308,917
PrairieSky Royalty Ltd.		13,775		327,690
Restaurant Brands International, Inc.		13,992		666,435
RioCan Real Estate Investment Trust		12,689		251,672
Rogers Communications, Inc., Class B		20,477		789,859
Royal Bank of Canada		83,893		5,677,844
Saputo, Inc.		14,262		504,664
Seven Generations Energy Ltd. (c)		12,030		280,534
Shaw Communications, Inc., Class B		24,107		483,702
Silver Wheaton Corp.		23,967		463,042
SNC-Lavalin Group, Inc. (a)		9,239		397,663
Sun Life Financial, Inc. (a)		34,533		1,325,868
Suncor Energy, Inc.		92,110		3,011,678
Teck Resources Ltd., Class B		33,629		673,006
TELUS Corp.		8,212		261,470
Thomson Reuters Corp.		18,813		823,336
Toronto-Dominion Bank		103,727		5,115,854
Tourmaline Oil Corp. (c)		10,430		278,957
TransCanada Corp. (a)		50,331		2,269,421
Turquoise Hill Resources Ltd. (c)		39,981		128,342
Valeant Pharmaceuticals International, Inc. (c)		16,850		244,345
Veresen, Inc.		19,009		185,609
Vermilion Energy, Inc.		6,754		284,165
West Fraser Timber Co. Ltd.		2,687		96,081
Yamana Gold, Inc.		84,936		238,490
				69,862,590
Chile — 0.3%
AES Gener SA		90,837		32,441
Aguas Andinas SA, Class A		76,400		39,778
Banco de Chile		1,416,149		165,973
Banco de Credito e Inversiones		747		37,801
Banco Santander Chile SA		5,975,858		332,431
Cencosud SA		119,917		336,568
Colbun SA		466,420		91,767
Companhia Cervecerias Unidas SA		4,404		45,993
Embotelladora Andina SA, Preference ‘B’ Shares		9,220		34,292
Empresa Nacional de Electricidad SA		204,788		135,119
Empresa Nacional de Telecomunicaciones SA (c)		2,032		21,561
Empresas CMPC SA		148,454		303,515
Empresas COPEC SA		24,294		232,800
Enersis Chile SA		1,181,655		109,398
Enersis SA		1,755,061		285,272
Itau CorpBanca		2,375,874		19,928
Latam Airlines Group SA (c)		19,853		167,273
SACI Falabella		35,710		282,542
Sociedad Quimica y Minera de Chile SA, Preference ‘B’ Shares		7,100		202,348
				2,876,800
China — 5.0%
58.com, Inc. — ADR (a)(c)		7,840		219,520
AAC Technologies Holdings, Inc. (a)		39,500		357,544
Agricultural Bank of China Ltd., Class H		1,380,000		563,201
Air China Ltd., Class H		62,000		39,384
Alibaba Group Holding Ltd. — ADR (a)(c)		64,606		5,673,053
Aluminum Corp. of China Ltd., Class H (a)(c)		526,000		215,445
Anhui Conch Cement Co. Ltd., Class H		79,500		215,142
ANTA Sports Products Ltd.		81,000		240,717
AviChina Industry & Technology Co. Ltd., Class H		116,000		79,572
Baidu, Inc. — ADR (c)		16,377		2,692,543

Common Stocks	Shares		Value
China (continued)
Bank of China Ltd., Class H		4,465,000	$	1,968,734
Bank of Communications Co. Ltd., Class H		470,700		338,525
Beijing Capital International Airport Co. Ltd., Class H		100,000		100,802
Byd Co. Ltd., Class H (a)		41,500		217,535
CGN Power Co. Ltd. (a)(d)		546,000		149,222
China Cinda Asset Management Co. Ltd.		681,000		245,217
China CITIC Bank Corp. Ltd., Class H		448,000		283,488
China Coal Energy Co. Ltd., Class H (a)(c)		107,000		50,485
China Communications Construction Co. Ltd., Class H		239,000		273,156
China Communications Services Corp. Ltd., Class H		44,000		27,956
China Conch Venture Holdings Ltd.		92,500		164,277
China Construction Bank Corp., Class H		4,673,000		3,578,723
China Everbright Bank Co. Ltd., Class H		58,000		26,314
China Evergrande Group (a)		286,000		177,267
China Galaxy Securities Co. Ltd., Class H		132,500		118,777
China Huarong Asset Management Co. Ltd. (c)(d)		623,000		223,765
China Huishan Dairy Holdings Co. Ltd. (a)		338,000		131,091
China Life Insurance Co. Ltd., Class H		435,000		1,124,453
China Longyuan Power Group Corp., Class H		125,000		97,131
China Medical System Holdings Ltd.		109,000		172,087
China Mengniu Dairy Co. Ltd.		170,000		325,967
China Merchants Bank Co. Ltd., Class H		209,078		487,599
China Minsheng Banking Corp. Ltd., Class H		306,400		326,029
China National Building Material Co. Ltd., Class H		132,000		63,926
China Oilfield Services Ltd., Class H (a)		64,000		59,070
China Pacific Insurance Group Co. Ltd., Class H		141,800		490,882
China Petroleum & Chemical Corp. Class H		1,448,400		1,020,061
China Railway Construction Corp. Ltd., Class H		72,000		92,264
China Railway Group Ltd., Class H		230,000		187,948
China Resources Gas Group Ltd.		48,000		134,473
China Shenhua Energy Co. Ltd., Class H		179,500		335,524
China Southern Airlines Co. Ltd., Class H		48,000		24,837
China Telecom Corp. Ltd., Class H		754,000		345,867
China Unicom Hong Kong Ltd.		340,000		393,502
China Vanke Co. Ltd., Class H		86,800		197,318
Chongqing Changan Automobile Co. Ltd.		21,400		30,571
Chongqing Rural Commercial Bank, Co. Ltd., Class H		122,000		71,368
CITIC Securities Co. Ltd., Class H		142,000		286,941
CNOOC Ltd.		1,048,000		1,302,386
Country Garden Holdings Co. Ltd.		214,270		119,432
CSPC Pharmaceutical Group Ltd.		262,000		278,972
CSR Corp. Ltd., Class H		222,350		198,587
Ctrip.com International Ltd. — ADR (a)(c)		23,859		954,360
Dongfeng Motor Group Co. Ltd., Class H		182,000		176,805
Far East Horizon Ltd.		141,000		120,417
Fosun International Ltd.		192,500		271,360
GF Securities Co. Ltd., Class H		93,600		194,226
Great Wall Motor Co. Ltd., Class H (a)		243,000		225,415
Guangzhou Automobile Group Co. Ltd., Class H		134,000		161,493
Guangzhou R&F Properties Co. Ltd., Class H		13,200		15,895
Haitian International Holdings Ltd.		67,000		131,146
Haitong Securities Co. Ltd., Class H		163,200		278,043
Hengan International Group Co. Ltd.		39,000		285,642
HengTen Networks Group Ltd. (c)		1,616,000		80,881
Huaneng Power International, Inc., Class H		192,000		126,735
Huaneng Renewables Corp. Ltd., Class H		158,000		51,079

See Notes to Financial Statements.

22 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) Total International ex U.S. Index Master Portfolio

Common Stocks	Shares		Value
China (continued)
Huatai Securities Co. Ltd., Class H (d)		68,800	$	130,444
Industrial & Commercial Bank of China Ltd., Class H		4,103,000		2,446,340
JD.com, Inc. — ADR (c)		43,014		1,094,276
Jiangsu Expressway Co. Ltd., Class H		26,000		32,780
Jiangxi Copper Co. Ltd., Class H		36,000		49,969
Kingsoft Corp. Ltd.		55,000		112,237
Lenovo Group Ltd.		446,000		268,852
Longfor Properties Co. Ltd.		51,500		65,139
NetEase, Inc. — ADR		4,377		942,543
New China Life Insurance Co. Ltd., Class H		65,600		298,717
New Oriental Education & Technology Group, Inc. — ADR (c)		8,627		363,197
People’s Insurance Co. Group of China Ltd., Class H		272,000		106,645
PetroChina Co. Ltd., Class H		1,096,000		813,976
PICC Property & Casualty Co. Ltd., Class H		321,532		497,304
Ping An Insurance Group Co. of China Ltd., Class H		301,500		1,497,876
Qunar Cayman Islands Ltd. — ADR (a)(c)		3,317		99,941
Semiconductor Manufacturing Common Stock (a)(c)		187,600		293,287
Shandong Weigao Group Medical Polymer Co. Ltd., Class H		132,000		87,912
Shanghai Electric Group Co. Ltd., Class H (c)		104,000		46,341
Shanghai Fosun Pharmaceutical Group Co. Ltd., Class H (a)		7,000		21,366
Shanghai Lujiazui Finance & Trade Zone Development Co. Ltd., Class B		71,500		104,449
Shanghai Pharmaceuticals Holding Co. Ltd., Class H		19,100		43,592
Shenzhou International Group Holdings Ltd.		35,000		220,664
SINA Corp. (c)		3,782		229,908
Sino-Ocean Land Holdings Ltd.		137,000		61,047
Sinopec Engineering Group Co. Ltd., Class H		13,500		11,243
Sinopec Shanghai Petrochemical Co. Ltd., Class H		123,000		66,390
Sinopharm Group Co. Ltd., Class H		72,400		296,720
Sinotrans Ltd., Class H		45,000		20,004
SOHO China Ltd.		195,000		95,720
Sunac China Holdings Ltd.		149,000		123,455
Sunny Optical Technology Group Co. Ltd.		47,000		204,872
TAL Education Group — ADR (a)(c)		3,400		238,510
Tencent Holdings Ltd.		325,600		7,894,858
Tingyi Cayman Islands Holding Corp.		138,000		167,301
TravelSky Technology Ltd.,Class H		59,000		123,651
Tsingtao Brewery Co. Ltd., Class H		14,000		52,736
Vipshop Holdings Ltd. — ADR (a)(c)		27,108		298,459
Want Want China Holdings Ltd. (a)		339,000		216,502
Weibo Corp., ADR (a)(c)		2,519		102,271
Weichai Power Co. Ltd., Class H		24,400		37,418
Yanzhou Coal Mining Co. Ltd., Class H		36,000		24,408
YY, Inc. — ADR (a)(c)		2,206		86,961
Zhejiang Expressway Co. Ltd., Class H		54,000		51,408
Zhuzhou CRRC Times Electric Co. Ltd. (a)		25,000		126,252
Zijin Mining Group Co. Ltd., Class H		218,000		69,519
ZTE Corp., Class H		14,400		24,924
				49,874,531
Colombia — 0.1%
Bancolombia SA		29,726		269,138
Cementos Argos SA		38,031		150,249

Common Stocks	Shares		Value
Colombia (continued)
Corp. Financiera Colombiana SA		1,494	$	18,454
Ecopetrol SA (c)		184,080		84,621
Grupo Argos SA		6,618		42,503
Grupo Aval Acciones y Valores		125,734		50,888
Grupo de Inversiones Suramericana SA		6,592		83,882
Grupo de Inversiones Suramericana SA, Preference Shares		23,325		287,483
Interconexion Electrica SA		6,953		23,115
				1,010,333
Czech Republic — 0.0%
CEZ AS		9,764		163,427
Komercni Banka AS		6,617		228,023
				391,450
Denmark — 1.1%
A.P. Moeller — Maersk A/S, Class A		220		332,006
A.P. Moeller — Maersk A/S, Class B (a)		313		498,911
Carlsberg A/S, Class B		6,632		571,209
Chr Hansen Holding A/S		4,943		273,374
Coloplast A/S, Class B		7,083		477,101
Danske Bank A/S		39,615		1,198,502
DONG Energy A/S (c)(d)		4,717		178,428
DSV A/S		11,094		492,687
Genmab A/S (c)		3,120		516,836
ISS A/S		8,788		296,181
Novo Nordisk A/S, Class B		107,035		3,839,579
Novozymes A/S, Class B		12,683		436,446
Pandora A/S		6,873		897,201
TDC A/S (c)		36,256		185,862
Tryg A/S		5,025		90,744
Vestas Wind Systems A/S		12,543		812,341
William Demant Holding A/S (c)		8,025		139,390
				11,236,798
Finland — 0.7%
Elisa OYJ		8,970		291,179
Fortum OYJ		27,286		417,098
Kone OYJ, Class B		18,399		822,133
Metso OYJ		9,428		268,217
Neste Oil OYJ		7,546		288,767
Nokia OYJ		322,966		1,548,998
Nokian Renkaat OYJ		7,561		281,102
Orion OYJ, Class B		4,256		189,102
Sampo OYJ, Class A		23,324		1,042,644
Stora Enso OYJ, Class R		33,625		359,686
UPM-Kymmene OYJ		27,594		674,826
Wartsila OYJ (a)		8,907		399,358
				6,583,110
France — 7.0%
Accor SA		10,752		400,541
Aeroports de Paris		1,132		121,222
Air Liquide SA		21,790		2,423,020
Airbus Group SE		33,147		2,189,315
Alstom SA (c)		10,571		290,688
ArcelorMittal (c)		105,638		776,177
Arkema SA		3,739		365,490
AtoS SE		4,829		508,965
AXA SA		111,138		2,801,654
BNP Paribas SA		59,876		3,810,384

See Notes to Financial Statements.

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 23

Schedule of Investments (continued) Total International ex U.S. Index Master Portfolio

Common Stocks	Shares		Value
France (continued)
Bollore SA		36,855	$	129,769
Bouygues SA		14,191		508,028
Bureau Veritas SA		11,737		227,161
Cap Gemini SA		9,081		765,066
Carrefour SA		31,369		755,239
Casino Guichard-Perrachon SA (a)		2,964		142,019
Christian Dior SE		2,982		624,764
Cie Generale des Etablissements Michelin		10,165		1,129,929
CNP Assurances		7,565		140,023
Compagnie de Saint-Gobain		27,493		1,278,902
Credit Agricole SA		61,377		759,766
Danone SA		32,365		2,048,010
Dassault Aviation SA		211		235,500
Dassault Systemes SA		6,665		507,313
Edenred		13,608		269,445
Eiffage SA		2,780		193,631
Electricite de France SA (a)		14,412		146,640
Engie SA		84,190		1,071,650
Essilor International SA		11,097		1,252,055
Eurazeo		1,782		104,179
Eutelsat Communications SA		10,133		195,948
Fonciere Des Regions		2,240		195,307
Gecina SA		1,956		270,159
Groupe Eurotunnel SE, Registered Shares (a)		23,156		219,980
Hermes International		1,562		640,760
ICADE		1,426		101,634
Iliad SA		1,504		288,839
Imerys SA		2,546		192,890
Ingenico Group SA		4,022		320,899
JCDecaux SA		4,756		139,845
Kering		4,190		939,832
Klepierre		12,763		500,802
L’Oreal SA		14,295		2,605,482
Lagardere SCA		4,159		115,435
Legrand SA		15,082		855,680
LVMH Moet Hennessy Louis Vuitton SE		16,986		3,238,748
Natixis SA		72,625		408,978
Orange SA		110,366		1,673,586
Pernod Ricard SA		11,704		1,266,607
Peugeot SA (c)		28,337		461,529
Publicis Groupe SA		11,656		803,152
Remy Cointreau SA		2,985		254,434
Renault SA		10,798		959,044
Rexel SA		17,849		293,257
Safran SA		17,321		1,245,794
Sanofi		65,508		5,297,317
Schneider Electric SE		33,577		2,332,542
SCOR SE		9,355		322,848
SEB SA		1,060		143,634
SES SA (a)		21,237		467,273
SFR Group SA (c)		5,463		154,017
Societe BIC SA		1,438		195,391
Societe Generale SA		42,646		2,097,621
Sodexo SA		5,001		574,181
Suez		25,669		378,219
Technip SA		7,122		507,313
Thales SA		5,883		569,949
TOTAL SA		129,410		6,637,711
Unibail-Rodamco SE		5,484		1,306,863
Valeo SA		13,293		763,122

Common Stocks	Shares		Value
France (continued)
Veolia Environnement SA		23,837	$	405,035
Vinci SA		27,630		1,879,520
Vivendi SA		64,143		1,216,594
Wendel SA		1,358		163,414
Zodiac Aerospace		9,179		210,484
				69,788,214
Germany — 6.4%
adidas AG		10,305		1,625,286
Allianz SE, Registered Shares		27,266		4,499,923
Axel Springer AG (a)		2,564		124,325
BASF SE		52,893		4,901,933
Bayer AG, Registered Shares		47,069		4,903,810
Bayerische Motoren Werke AG (a)		19,599		1,825,373
Bayerische Motoren Werke AG, Preference Shares (a)		2,023		154,497
Beiersdorf AG		6,208		525,866
Brenntag AG		8,520		472,254
Commerzbank AG (a)		59,739		454,841
Continental AG		6,177		1,190,041
Covestro AG (d)		3,673		251,408
Daimler AG, Registered Shares		56,173		4,168,911
Deutsche Bank AG, Registered Shares (a)(c)		81,371		1,476,016
Deutsche Boerse AG (c)		9,803		797,725
Deutsche Lufthansa AG, Registered Shares (a)		12,602		162,449
Deutsche Post AG, Registered Shares		53,388		1,750,861
Deutsche Telekom AG, Registered Shares (a)		188,436		3,233,034
Deutsche Wohnen AG, Bearer Shares		19,434		609,576
E.ON SE		117,633		827,541
Evonik Industries AG		7,842		233,761
Fraport AG Frankfurt Airport Services Worldwide (a)		2,602		153,539
Fresenius Medical Care AG & Co. KGaA		12,274		1,037,410
Fresenius SE & Co. KGaA		22,058		1,720,763
Fuchs Petrolub SE, Preference Shares		3,377		141,460
GEA Group AG		10,316		413,985
Hannover Rueck SE		3,738		403,806
HeidelbergCement AG		7,796		725,651
Henkel AG & Co. KGaA		5,377		559,603
Henkel AG & Co. KGaA Preference Shares		9,862		1,173,970
Hochtief AG		1,191		166,279
HUGO BOSS AG (a)		3,305		201,767
Infineon Technologies AG		59,995		1,037,762
Innogy SE (c)(d)		13,741		477,472
K+S AG, Registered Shares (a)		10,011		238,473
Lanxess AG		5,116		335,012
Linde AG		10,652		1,747,328
MAN SE (a)		2,023		200,795
Merck KGaA (a)		6,678		695,319
Metro AG		12,654		420,583
Muenchener Rueckversicherungs AG, Registered Shares		9,047		1,708,779
OSRAM Licht AG		4,893		256,224
Porsche Automobil Holding SE, Preference Shares		8,694		472,258
ProSiebenSat.1 Media AG, Registered Shares (a)		17,075		657,251
RWE AG (a)(c)		24,137		299,507
SAP SE		55,339		4,787,103
Schaeffler AG (a)		11,345		167,409
Siemens AG, Registered Shares (a)		43,831		5,366,665
Steinhoff International Holdings NV		181,002		938,196
Symrise AG (a)		6,340		385,204
Telefonica Deutschland Holding AG (a)		33,908		144,936

See Notes to Financial Statements.

24 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) Total International ex U.S. Index Master Portfolio

Common Stocks	Shares		Value
Germany (continued)
ThyssenKrupp AG (a)		19,076	$	453,155
TUI AG		24,966		357,442
United Internet AG, Registered Shares (a)		6,889		268,826
Volkswagen AG		1,804		258,919
Vonovia SE		25,145		816,392
Zalando SE (c)(d)		5,190		197,709
				63,576,383
Greece — 0.1%
Alpha Bank AE (c)		69,105		137,937
Eurobank Ergasias SA (c)		92,831		62,927
FF Group (c)		5,764		116,569
Hellenic Telecommunications Organization SA		12,770		119,927
JUMBO SA		9,692		153,568
National Bank of Greece SA (c)		436,719		113,973
OPAP SA		8,833		78,068
Piraeus Bank SA (c)		331,331		72,694
Titan Cement Co. SA		990		23,207
				878,870
Hong Kong — 3.1%
AIA Group Ltd.		706,600		3,958,260
Alibaba Health Information Technology Ltd. (c)		176,000		88,230
Alibaba Pictures Group Ltd. (c)		480,000		77,732
ASM Pacific Technology Ltd.		6,300		66,625
Bank of East Asia Ltd.		59,000		225,239
Beijing Enterprises Holdings Ltd.		38,000		178,867
Beijing Enterprises Water Group Ltd. (c)		232,000		153,550
Belle International Holdings Ltd.		292,000		163,570
BOC Hong Kong Holdings Ltd. (a)		209,000		744,365
Brilliance China Automotive Holdings Ltd. (a)		148,000		203,134
Cathay Pacific Airways Ltd. (a)		32,000		41,995
Cheung Kong Infrastructure Holdings Ltd. (a)		38,000		301,810
Cheung Kong Property Holdings Ltd.		151,508		925,258
China Everbright International Ltd.		107,000		120,689
China Everbright Ltd.		102,000		193,186
China Gas Holdings Ltd.		74,000		100,211
China Jinmao Holdings Group Ltd.		326,000		87,544
China Merchants Holdings International Co. Ltd.		61,655		152,324
China Mobile Ltd.		342,500		3,611,036
China Overseas Land & Investment Ltd.		216,000		568,328
China Power International Development Ltd.		139,000		50,190
China Resources Beer Holdings Co. Ltd. (c)		86,000		170,382
China Resources Land Ltd.		163,111		364,988
China Resources Power Holdings Co. Ltd.		118,000		186,638
China State Construction International Holdings Ltd.		70,000		104,306
China Taiping Insurance Holdings Co. Ltd. (c)		67,872		139,146
CITIC Ltd.		220,000		313,313
CK Hutchison Holdings Ltd.		154,508		1,744,157
CLP Holdings Ltd.		98,000		898,747
COSCO Pacific Ltd.		36,000		36,077
ENN Energy Holdings Ltd.		34,000		139,306
First Pacific Co. Ltd.		140,000		97,664
Fullshare Holdings Ltd.		470,000		218,989
Galaxy Entertainment Group Ltd.		138,000		597,695
GCL-Poly Energy Holdings Ltd. (a)(c)		431,000		51,485
Geely Automobile Holdings Ltd.		365,000		346,916
GOME Electrical Appliances Holding Ltd.		627,000		75,777
Guangdong Investment Ltd.		164,000		215,968
Haier Electronics Group Co. Ltd.		48,000		75,301

Common Stocks	Shares		Value
Hong Kong (continued)
Hanergy Thin Film Power Group Ltd. (c)		11,997		—
Hang Lung Group Ltd.		60,000	$	208,194
Hang Lung Properties Ltd.		120,000		253,038
Hang Seng Bank Ltd.		44,700		828,942
Henderson Land Development Co. Ltd.		64,735		343,094
HK Electric Investments & HK Electric Investments Ltd. (a)(b)(d)		183,500		151,279
HKT Trust & HKT Ltd. (b)		142,900		175,031
Hong Kong & China Gas Co. Ltd. (a)		465,463		822,097
Hong Kong Exchanges & Clearing Ltd. (a)		64,100		1,507,528
Hongkong Land Holdings Ltd.		74,700		470,590
Hysan Development Co. Ltd.		25,000		103,101
Jardine Matheson Holdings Ltd.		14,600		805,595
Kerry Properties Ltd.		16,500		44,620
Kunlun Energy Co. Ltd.		134,000		99,836
Li & Fung Ltd.		250,000		109,565
Link REIT		126,500		820,109
Melco Crown Entertainment Ltd. — ADR (a)		16,247		258,327
MGM China Holdings Ltd.		27,200		56,185
MTR Corp. Ltd. (a)		84,500		409,676
New World Development Co. Ltd.		280,666		295,712
Nine Dragons Paper Holdings Ltd.		178,000		160,733
NWS Holdings Ltd.		52,186		84,833
PCCW Ltd.		452,000		244,343
Power Assets Holdings Ltd.		82,500		725,758
Sands China Ltd.		138,800		598,807
Shanghai Industrial Holdings Ltd.		15,000		40,441
Shangri-La Asia Ltd.		32,000		33,698
Shimao Property Holdings Ltd.		51,000		66,371
Sino Biopharmaceutical Ltd.		198,000		138,843
Sino Land Co. Ltd.		186,800		278,528
SJM Holdings Ltd.		69,000		53,843
Sun Art Retail Group Ltd.		110,000		96,460
Sun Hung Kai Properties Ltd.		80,000		1,007,398
Swire Pacific Ltd., Class A		36,500		347,325
Swire Properties Ltd. (a)		76,400		210,321
Techtronic Industries Co. Ltd.		74,000		264,807
WH Group Ltd. (d)		458,500		369,595
Wharf Holdings Ltd.		73,000		483,550
Wheelock & Co. Ltd.		48,000		269,388
Wynn Macau Ltd. (a)		121,200		191,595
Yue Yuen Industrial Holdings Ltd.		50,500		183,048
				31,401,202
Hungary — 0.1%
MOL Hungarian Oil & Gas PLC		997		69,910
OTP Bank PLC		11,103		317,039
Richter Gedeon Nyrt		14,765		311,872
				698,821
India — 1.9%
ACC Ltd.		1,747		34,209
Adani Ports & Special Economic Zone Ltd.		43,145		170,154
Ambuja Cements Ltd.		26,422		80,102
Apollo Hospitals Enterprise Ltd.		8,931		154,978
Asian Paints Ltd.		11,155		146,326
Aurobindo Pharma Ltd.		13,516		132,963
Axis Bank Ltd.		82,638		545,322
Bajaj Auto Ltd.		3,253		125,951
Bajaj Finance Ltd.		10,000		123,700
Bajaj Finserv Ltd.		2,677		113,904

See Notes to Financial Statements.

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 25

Schedule of Investments (continued) Total International ex U.S. Index Master Portfolio

Common Stocks	Shares		Value
India (continued)
Bharat Forge Ltd.		5,977	$	79,651
Bharat Heavy Electricals Ltd.		22,772		40,503
Bharat Petroleum Corp. Ltd.		38,418		358,883
Bharti Airtel Ltd.		67,324		302,534
Bharti Infratel Ltd.		42,723		215,906
Bosch Ltd.		292		90,394
Cairn India Ltd.		17,443		61,961
Cipla Ltd.		13,384		111,974
Coal India Ltd.		42,303		186,439
Container Corp. of India		2,401		39,186
Dabur India Ltd.		20,426		83,625
Divi’s Laboratories Ltd.		3,088		35,571
Dr. Reddy’s Laboratories Ltd.		3,820		172,447
Dr. Reddy’s Laboratories Ltd. — ADR (a)		4,517		204,530
Eicher Motors Ltd.		723		231,511
GAIL India Ltd.		12,294		79,347
Glenmark Pharmaceuticals Ltd.		5,797		75,721
Godrej Consumer Products Ltd.		4,619		102,580
HCL Technologies Ltd.		29,571		360,070
Hero MotoCorp Ltd.		1,935		86,628
Hindalco Industries Ltd.		43,227		97,834
Hindustan Petroleum Corp. Ltd.		32,724		212,208
Hindustan Unilever Ltd.		40,183		488,482
Housing Development Finance Corp.		86,688		1,607,707
ICICI Bank Ltd.		30,654		114,771
ICICI Bank Ltd. — ADR		20,733		155,290
Idea Cellular Ltd.		41,835		45,615
IDFC Bank Ltd.		120,200		105,870
Indiabulls Housing Finance Ltd.		29,511		281,459
Infosys Ltd.		40,436		600,173
Infosys Ltd. — ADR (a)		75,312		1,116,877
ITC Ltd.		171,946		610,756
JSW Steel Ltd.		3,280		78,393
Larsen & Toubro Ltd.		10,644		210,864
Larsen & Toubro Ltd. — GDR		12,158		241,125
LIC Housing Finance Ltd.		17,978		147,703
Lupin Ltd.		11,830		258,532
Mahindra & Mahindra Financial Services Ltd.		10,804		42,894
Mahindra & Mahindra Ltd.		11,626		202,468
Mahindra & Mahindra Ltd. — GDR		13,518		237,226
Marico Ltd.		22,064		84,546
Maruti Suzuki India Ltd.		5,946		464,590
Motherson Sumi Systems Ltd.		12,306		59,027
Nestle India Ltd.		897		79,575
NTPC Ltd.		63,930		154,918
Oil & Natural Gas Corp. Ltd.		87,400		245,687
Piramal Enterprises Ltd.		8,297		198,316
Power Finance Corp. Ltd.		20,470		36,646
Reliance Industries Ltd.		21,601		343,602
Reliance Industries Ltd. — GDR (a)(d)		27,499		867,593
Shree Cement Ltd.		231		50,016
Shriram Transport Finance Co. Ltd.		5,718		71,732
Siemens Ltd.		2,761		45,135
State Bank of India		54,826		201,068
State Bank of India — GDR		5,712		208,550
Sun Pharmaceutical Industries Ltd.		58,043		537,402
Tata Consultancy Services Ltd.		27,708		963,848
Tata Motors Ltd.		95,969		665,048
Tata Motors Ltd. — ADR		6,008		206,615
Tata Power Co. Ltd.		42,988		47,974

Common Stocks	Shares		Value
India (continued)
Tata Steel Ltd.		11,672	$	66,928
Tech Mahindra Ltd.		11,300		81,196
Titan Co. Ltd.		40,000		192,191
UltraTech Cement Ltd.		7,860		375,475
United Spirits Ltd. (c)		3,702		105,817
UPL Ltd.		13,245		125,920
Vedanta Ltd. — ADR (a)		11,497		142,793
Wipro Ltd.		9,345		65,241
Wipro Ltd. — ADR (a)		18,332		177,454
Yes Bank Ltd.		18,526		314,261
Zee Entertainment Enterprises Ltd.		44,412		295,617
				18,878,098
Indonesia — 0.6%
Adaro Energy Tbk PT		1,086,700		135,675
Astra International Tbk PT		1,198,900		733,093
Bank Central Asia Tbk PT		705,900		809,892
Bank Danamon Indonesia Tbk PT		186,600		51,324
Bank Mandiri Persero Tbk PT		655,300		560,860
Bank Negara Indonesia Persero Tbk PT		405,600		165,590
Bank Rakyat Indonesia Persero Tbk PT		660,000		570,052
Bumi Serpong Damai Tbk PT		111,800		14,494
Charoen Pokphand Indonesia Tbk PT		271,300		62,013
Gudang Garam Tbk PT		43,500		205,891
Hanjaya Mandala Sampoerna Tbk PT		752,200		213,371
Indocement Tunggal Prakarsa Tbk PT		88,600		100,929
Indofood CBP Sukses Makmur Tbk PT		37,800		23,993
Indofood Sukses Makmur Tbk PT		331,300		194,037
Jasa Marga Persero Tbk PT		75,780		24,228
Kalbe Farma Tbk PT		858,400		96,198
Lippo Karawaci Tbk PT		819,500		43,611
Matahari Department Store Tbk PT		98,800		110,591
Media Nusantara Citra Tbk PT		60,162		7,805
Perusahaan Gas Negara Persero Tbk PT		426,200		85,024
Semen Indonesia Persero Tbk PT		106,000		71,925
Summarecon Agung Tbk PT		499,900		48,851
Surya Citra Media Tbk PT		84,000		17,373
Telekomunikasi Indonesia Persero Tbk PT		3,058,500		899,787
Tower Bersama Infrastructure Tbk PT		38,000		14,046
Unilever Indonesia Tbk PT		124,600		358,302
United Tractors Tbk PT		67,700		106,512
XL Axiata Tbk PT (c)		82,000		14,027
				5,739,494
Ireland — 0.5%
Bank of Ireland (c)		1,442,740		353,352
CRH PLC		47,189		1,627,668
DCC PLC		6,086		452,378
Experian PLC		52,256		1,011,761
James Hardie Industries PLC		24,629		388,779
Kerry Group PLC, Class A		8,083		577,732
Paddy Power Betfair PLC		5,863		623,863
				5,035,533
Israel — 0.5%
Azrieli Group Ltd.		1,500		65,100
Bank Hapoalim BM		66,126		392,492
Bank Leumi Le-Israel BM (c)		71,682		294,583
Bezeq The Israeli Telecommunication Corp. Ltd.		106,530		202,069
Check Point Software Technologies Ltd. (c)		8,303		701,271
Elbit Systems Ltd.		1,599		161,529

See Notes to Financial Statements.

26 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) Total International ex U.S. Index Master Portfolio

Common Stocks	Shares		Value
Israel (continued)
Frutarom Industries Ltd.		2,624	$	133,935
Israel Chemicals Ltd.		18,197		74,291
Mizrahi Tefahot Bank Ltd.		8,332		121,686
Mobileye NV (c)		8,390		319,827
NICE Ltd.		2,571		176,403
Taro Pharmaceutical Industries Ltd. (a)(c)		1,519		159,905
Teva Pharmaceutical Industries Ltd. — ADR (a)		55,794		2,022,532
				4,825,623
Italy — 1.3%
Assicurazioni Generali SpA		67,799		1,004,941
Atlantia SpA		23,080		539,987
Enel SpA		416,890		1,832,522
Eni SpA		140,971		2,285,291
Ferrari NV		6,777		394,560
Intesa Sanpaolo SpA		759,780		1,918,145
Leonardo-Finmeccanica SpA (c)		15,326		214,645
Luxottica Group SpA (a)		9,215		495,273
Mediobanca SpA		34,909		284,973
Poste Italiane SpA (d)		38,304		254,222
Prysmian SpA		10,105		258,994
Saipem SpA (a)(c)		391,138		218,768
Snam SpA		147,779		607,793
Telecom Italia SpA (c)		577,797		510,159
Telecom Italia SpA, Non-Convertible Savings Shares (c)		364,284		264,395
Tenaris SA (a)		27,208		485,677
Terna — Rete Elettrica Nazionale SpA (a)		98,434		450,172
UniCredit SpA		313,314		899,753
UnipolSai SpA		92,405		197,093
				13,117,363
Japan — 16.7%
ABC-Mart, Inc.		4,100		231,944
Acom Co. Ltd. (c)		16,100		70,304
Aeon Co. Ltd.		34,200		483,369
AEON Financial Service Co. Ltd. (a)		4,000		70,848
Aeon Mall Co. Ltd.		5,190		72,934
Air Water, Inc.		9,900		178,336
Aisin Seiki Co. Ltd.		15,400		666,349
Ajinomoto Co., Inc.		29,000		583,554
Alfresa Holdings Corp.		8,900		147,001
Alps Electric Co. Ltd. (a)		9,900		237,877
Amada Holdings Co. Ltd.		21,800		242,864
ANA Holdings, Inc.		80,000		215,202
Aozora Bank Ltd.		70,000		247,328
Asahi Glass Co. Ltd. (a)		49,000		332,448
Asahi Group Holdings Ltd.		20,300		639,147
Asahi Kasei Corp.		68,000		591,686
Ashikaga Holdings Co. Ltd.		61,130		225,932
Asics Corp. (a)		10,700		213,229
Astellas Pharma, Inc.		126,700		1,757,754
Bandai Namco Holdings, Inc.		10,000		275,250
Bank of Kyoto Ltd. (a)		15,000		111,188
Benesse Holdings, Inc.		4,800		131,880
Bridgestone Corp.		35,700		1,284,513
Brother Industries Ltd.		13,100		235,504
Calbee, Inc. (a)		10,900		340,964
Canon, Inc. (a)		61,100		1,720,709
Casio Computer Co. Ltd. (a)		15,400		217,034
Central Japan Railway Co.		8,200		1,346,354

Common Stocks	Shares		Value
Japan (continued)
Chiba Bank Ltd. (a)		41,000	$	251,335
Chubu Electric Power Co., Inc.		33,600		467,557
Chugai Pharmaceutical Co. Ltd. (a)		11,800		338,472
Chugoku Bank Ltd.		14,400		206,519
Chugoku Electric Power Co., Inc. (a)		14,700		172,058
Concordia Financial Group Ltd.		56,000		269,479
Credit Saison Co. Ltd. (a)		7,700		137,028
CYBERDYNE, Inc. (a)(c)		7,000		98,707
Dai Nippon Printing Co. Ltd.		26,000		256,533
Dai-ichi Life Insurance Co. Ltd.		62,000		1,030,841
Daicel Corp.		12,000		131,929
Daiichi Sankyo Co. Ltd.		33,700		688,128
Daikin Industries Ltd.		12,700		1,163,433
Daito Trust Construction Co. Ltd.		4,000		601,351
Daiwa House Industry Co. Ltd.		36,100		984,460
Daiwa House REIT Investment Corp.		75		190,137
Daiwa Securities Group, Inc.		104,000		640,403
DeNA Co. Ltd.		6,200		135,501
Denso Corp.		27,200		1,176,575
Dentsu, Inc. (a)		11,900		559,577
Don Quijote Holdings Co. Ltd. (a)		6,600		243,575
East Japan Railway Co.		19,100		1,646,777
Eisai Co. Ltd. (a)		14,600		836,687
Electric Power Development Co. Ltd. (a)		7,100		162,956
FamilyMart UNY Holdings Co. Ltd.		4,900		326,046
FANUC Corp.		10,800		1,806,779
Fast Retailing Co. Ltd. (a)		3,000		1,071,081
Fuji Electric Co. Ltd.		38,000		196,220
Fuji Heavy Industries Ltd.		34,000		1,385,310
Fujifilm Holdings Corp.		24,600		931,498
Fujitsu Ltd.		103,000		570,367
Fukuoka Financial Group, Inc.		34,000		150,789
Hachijuni Bank Ltd.		38,800		224,511
Hakuhodo DY Holdings, Inc.		14,000		172,385
Hamamatsu Photonics KK (a)		6,400		168,098
Hankyu Hanshin Holdings, Inc.		14,700		470,706
Hikari Tsushin, Inc.		1,800		167,558
Hino Motors Ltd.		17,700		179,833
Hirose Electric Co. Ltd.		1,335		165,094
Hiroshima Bank Ltd.		22,000		102,516
Hisamitsu Pharmaceutical Co., Inc.		6,000		299,682
Hitachi Chemical Co. Ltd.		6,200		154,667
Hitachi Construction Machinery Co. Ltd. (a)		4,600		99,447
Hitachi High-Technologies Corp.		4,000		160,882
Hitachi Ltd.		273,000		1,472,054
Hitachi Metals Ltd.		8,000		107,707
Hokuriku Electric Power Co.		7,100		79,414
Honda Motor Co. Ltd.		90,700		2,648,013
Hoshizaki Corp.		2,500		197,923
Hoya Corp.		22,400		939,219
Hulic Co. Ltd.		19,700		174,786
Idemitsu Kosan Co. Ltd.		2,400		63,661
IHI Corp. (a)(c)		92,000		238,271
Iida Group Holdings Co. Ltd.		6,800		128,909
Inpex Corp.		53,500		534,776
Isetan Mitsukoshi Holdings Ltd.		20,100		216,430
Isuzu Motors Ltd.		31,000		391,980
ITOCHU Corp.		86,100		1,140,029
J. Front Retailing Co. Ltd.		9,700		130,598
Japan Airlines Co. Ltd.		10,300		300,562

See Notes to Financial Statements.

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 27

Schedule of Investments (continued) Total International ex U.S. Index Master Portfolio

Common Stocks	Shares		Value
Japan (continued)
Japan Airport Terminal Co. Ltd.		1,500	$	54,201
Japan Exchange Group, Inc.		29,800		425,016
Japan Post Bank Co. Ltd.		37,500		449,383
Japan Post Holdings Co. Ltd.		39,500		491,833
Japan Prime Realty Investment Corp. (a)		41		161,758
Japan Real Estate Investment Corp.		76		415,059
Japan Retail Fund Investment Corp. (a)		141		285,837
Japan Tobacco, Inc. (a)		65,200		2,140,101
JFE Holdings, Inc. (a)		31,700		479,381
JGC Corp. (a)		10,000		181,163
JSR Corp.		12,500		196,754
JTEKT Corp.		12,600		200,917
JX Holdings, Inc.		151,600		640,573
Kajima Corp.		47,000		324,634
Kakaku.com, Inc. (a)		7,400		122,271
Kamigumi Co. Ltd.		18,000		171,438
Kaneka Corp.		19,000		154,544
Kansai Electric Power Co., Inc. (c)		38,500		419,713
Kansai Paint Co. Ltd. (a)		12,600		231,760
Kao Corp.		27,900		1,320,643
Kawasaki Heavy Industries Ltd. (a)		84,000		262,934
KDDI Corp.		105,800		2,671,765
Keihan Holdings Co. Ltd.		36,000		236,139
Keikyu Corp. (a)		22,000		254,830
Keio Corp.		27,000		221,783
Keisei Electric Railway Co. Ltd.		8,000		193,711
Keyence Corp.		2,520		1,724,309
Kikkoman Corp. (a)		8,000		255,250
Kintetsu Group Holdings Co. Ltd.		91,000		346,772
Kirin Holdings Co. Ltd. (a)		47,300		767,737
Kobe Steel Ltd. (a)(c)		12,600		119,803
Koito Manufacturing Co. Ltd.		6,000		316,860
Komatsu Ltd.		52,300		1,184,602
Konami Holdings Corp.		5,700		230,042
Konica Minolta, Inc.		23,700		234,883
Kose Corp.		1,700		140,944
Kubota Corp.		56,000		798,045
Kuraray Co. Ltd.		19,300		289,414
Kurita Water Industries Ltd.		7,400		162,805
Kyocera Corp.		17,900		887,491
Kyowa Hakko Kirin Co. Ltd. (a)		12,000		165,520
Kyushu Electric Power Co. Inc. (a)		25,500		276,253
Kyushu Financial Group, Inc.		20,300		137,543
Lawson, Inc.		3,800		266,729
LINE Corp. (c)		3,000		102,416
Lion Corp.		13,000		213,088
LIXIL Group Corp.		13,600		308,248
M3, Inc.		9,700		243,868
Mabuchi Motor Co. Ltd. (a)		2,300		119,517
Makita Corp.		5,800		387,549
Marubeni Corp.		87,100		492,644
Marui Group Co. Ltd. (a)		9,500		138,411
Maruichi Steel Tube Ltd.		2,400		77,991
Mazda Motor Corp.		29,500		480,377
McDonald’s Holdings Co. Japan Ltd. (a)		4,300		112,483
Medipal Holdings Corp.		10,300		162,247
Meiji Holdings Co. Ltd.		6,200		485,015
Minebea Co. Ltd. (a)		19,000		177,293
Miraca Holdings, Inc.		2,400		107,342
MISUMI Group, Inc.		17,000		279,254

Common Stocks	Shares		Value
Japan (continued)
Mitsubishi Chemical Holdings Corp.		70,100	$	453,243
Mitsubishi Corp.		83,500		1,773,426
Mitsubishi Electric Corp.		106,500		1,481,326
Mitsubishi Estate Co. Ltd.		73,000		1,450,121
Mitsubishi Gas Chemical Co., Inc.		15,500		264,111
Mitsubishi Heavy Industries Ltd.		185,000		841,018
Mitsubishi Logistics Corp. (a)		9,000		126,885
Mitsubishi Materials Corp.		6,200		189,641
Mitsubishi Motors Corp.		35,200		200,098
Mitsubishi Tanabe Pharma Corp.		11,400		223,211
Mitsubishi UFJ Financial Group, Inc.		740,400		4,566,285
Mitsubishi UFJ Lease & Finance Co. Ltd.		11,500		59,314
Mitsui & Co. Ltd.		96,500		1,322,273
Mitsui Chemicals, Inc.		57,000		255,391
Mitsui Fudosan Co. Ltd.		53,000		1,226,976
Mitsui OSK Lines Ltd. (a)		47,000		129,723
Mixi, Inc.		1,800		65,588
Mizuho Financial Group, Inc.		1,436,800		2,578,387
MS&AD Insurance Group Holdings, Inc.		29,100		901,156
Murata Manufacturing Co. Ltd.		10,800		1,442,196
Nabtesco Corp. (a)		7,200		166,903
Nagoya Railroad Co. Ltd. (a)		59,000		284,863
NEC Corp.		148,000		391,449
Nexon Co. Ltd.		11,300		163,298
NGK Insulators Ltd.		15,000		290,353
NGK Spark Plug Co. Ltd. (a)		8,500		188,400
NH Foods Ltd.		8,000		215,812
Nidec Corp.		13,200		1,136,397
Nikon Corp.		19,900		309,056
Nintendo Co. Ltd.		6,300		1,309,615
Nippon Building Fund, Inc. (a)		75		415,775
Nippon Electric Glass Co. Ltd.		28,000		151,073
Nippon Express Co. Ltd.		54,000		289,940
Nippon Paint Holdings Co. Ltd. (a)		8,300		225,301
Nippon Steel & Sumitomo Metal Corp.		46,647		1,033,177
Nippon Telegraph & Telephone Corp.		37,900		1,595,406
Nippon Yusen KK		93,000		172,225
Nissan Chemical Industries Ltd.		8,600		286,670
Nissan Motor Co. Ltd.		136,600		1,370,254
Nisshin Seifun Group, Inc.		9,000		134,855
Nissin Foods Holdings Co. Ltd.		3,500		183,588
Nitori Holdings Co. Ltd.		4,000		456,060
Nitto Denko Corp. (a)		8,800		673,737
NOK Corp. (a)		3,800		76,857
Nomura Holdings, Inc.		215,200		1,272,297
Nomura Real Estate Holdings, Inc.		5,200		88,244
Nomura Real Estate Master Fund, Inc.		346		523,681
Nomura Research Institute Ltd.		7,381		224,320
NSK Ltd.		24,800		286,427
NTT Data Corp.		6,800		328,519
NTT Docomo, Inc.		76,100		1,730,915
Obayashi Corp.		33,000		315,062
Obic Co. Ltd.		4,100		178,825
Odakyu Electric Railway Co. Ltd. (a)		17,000		335,919
Oji Holdings Corp.		39,000		158,597
Olympus Corp. (a)		17,000		585,731
Omron Corp.		11,500		439,472
Ono Pharmaceutical Co. Ltd.		25,800		562,301
Oracle Corp. Japan		2,500		125,760
Oriental Land Co. Ltd. (a)		12,400		699,877

See Notes to Financial Statements.

28 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) Total International ex U.S. Index Master Portfolio

Common Stocks	Shares		Value
Japan (continued)
ORIX Corp.		74,600	$	1,161,093
Osaka Gas Co. Ltd.		94,000		360,683
Otsuka Corp.		2,900		135,268
Otsuka Holdings Co. Ltd. (a)		21,300		927,836
Panasonic Corp.		123,500		1,252,556
Park24 Co. Ltd.		10,500		284,333
Pola Orbis Holdings, Inc.		1,400		115,420
Rakuten, Inc. (a)(c)		48,300		473,236
Recruit Holdings Co. Ltd. (a)		25,800		1,033,970
Resona Holdings, Inc.		137,100		702,640
Ricoh Co. Ltd. (a)		39,000		329,463
Rinnai Corp.		2,100		168,974
Rohm Co. Ltd.		5,400		309,814
Ryohin Keikaku Co. Ltd.		1,400		274,027
Sankyo Co. Ltd.		3,300		106,398
Santen Pharmaceutical Co. Ltd.		20,200		246,467
SBI Holdings, Inc.		8,850		112,448
Secom Co. Ltd.		11,900		869,463
Sega Sammy Holdings, Inc.		6,900		102,534
Seibu Holdings, Inc. (a)		17,300		309,737
Seiko Epson Corp.		14,900		314,577
Sekisui Chemical Co. Ltd.		19,000		302,452
Sekisui House Ltd.		35,900		596,453
Seven & i Holdings Co. Ltd.		41,300		1,570,605
Seven Bank Ltd. (a)		27,800		79,491
Sharp Corp. (c)		97,000		224,435
Shimadzu Corp.		11,000		174,757
Shimamura Co. Ltd.		900		112,215
Shimano, Inc. (a)		4,100		642,194
Shimizu Corp.		29,000		264,711
Shin-Etsu Chemical Co. Ltd.		21,700		1,679,340
Shinsei Bank Ltd.		100,000		167,334
Shionogi & Co. Ltd.		16,700		798,142
Shiseido Co. Ltd.		19,900		502,952
Shizuoka Bank Ltd. (a)		30,000		251,776
Showa Shell Sekiyu KK		13,900		129,137
SMC Corp.		3,200		761,358
Softbank Group Corp.		55,200		3,652,805
Sohgo Security Services Co. Ltd.		4,200		161,212
Sompo Japan Nipponkoa Holdings, Inc.		23,100		780,117
Sony Corp.		69,700		1,947,552
Sony Financial Holdings, Inc. (a)		6,900		107,560
Stanley Electric Co. Ltd. (a)		8,500		231,563
Start Today Co. Ltd.		9,600		165,372
Sumitomo Chemical Co. Ltd.		79,000		374,486
Sumitomo Corp.		71,700		841,716
Sumitomo Dainippon Pharma Co. Ltd.		9,100		156,195
Sumitomo Electric Industries Ltd.		39,500		568,773
Sumitomo Heavy Industries Ltd.		42,000		269,689
Sumitomo Metal Mining Co. Ltd. (a)		29,000		369,973
Sumitomo Mitsui Financial Group, Inc.		79,100		3,012,362
Sumitomo Mitsui Trust Holdings, Inc.		17,700		633,283
Sumitomo Realty & Development Co. Ltd.		19,000		504,399
Sumitomo Rubber Industries Ltd. (a)		10,500		166,135
Sundrug Co. Ltd.		2,700		186,681
Suntory Beverage & Food Ltd.		8,500		352,084
Suruga Bank Ltd. (a)		8,300		185,318
Suzuken Co. Ltd.		5,370		175,398
Suzuki Motor Corp.		18,900		663,558
Sysmex Corp.		9,100		525,793

Common Stocks	Shares		Value
Japan (continued)
T&D Holdings, Inc.		31,400	$	414,398
Taiheiyo Cement Corp.		87,000		274,280
Taisei Corp.		71,000		495,791
Taisho Pharmaceutical Holdings Co. Ltd.		3,500		290,146
Taiyo Nippon Sanso Corp. (a)		4,000		46,208
Takashimaya Co. Ltd.		13,000		107,012
Takeda Pharmaceutical Co. Ltd.		39,600		1,642,846
TDK Corp.		6,800		466,264
Teijin Ltd.		11,800		238,427
Terumo Corp.		19,100		704,127
THK Co. Ltd.		9,900		218,627
Tobu Railway Co. Ltd.		57,000		282,571
Toho Co. Ltd.		5,000		141,045
Toho Gas Co. Ltd.		18,000		146,193
Tohoku Electric Power Co., Inc.		22,400		282,373
Tokio Marine Holdings, Inc.		37,400		1,531,270
Tokyo Electric Power Co. Holdings, Inc. (c)		70,100		282,132
Tokyo Electron Ltd.		8,000		752,395
Tokyo Gas Co. Ltd.		124,000		559,753
Tokyo Tatemono Co. Ltd.		8,000		106,804
Tokyu Corp.		53,000		388,923
Tokyu Fudosan Holdings Corp.		30,800		181,399
TonenGeneral Sekiyu KK		16,000		168,484
Toppan Printing Co. Ltd.		23,000		219,310
Toray Industries, Inc.		85,000		686,420
Toshiba Corp. (c)		234,000		565,237
Toto Ltd. (a)		8,500		335,738
Toyo Seikan Kaisha Ltd. (a)		8,500		158,064
Toyo Suisan Kaisha Ltd.		5,400		195,368
Toyoda Gosei Co. Ltd.		4,300		100,358
Toyota Industries Corp.		9,600		456,434
Toyota Motor Corp.		154,506		9,058,439
Toyota Tsusho Corp.		10,200		265,120
Trend Micro, Inc. (a)(c)		7,600		269,752
Tsuruha Holdings, Inc.		1,800		170,357
Unicharm Corp. (a)		22,300		487,038
United Urban Investment Corp.		187		285,261
USS Co. Ltd.		12,100		192,218
West Japan Railway Co.		10,000		612,559
Yahoo! Japan Corp. (a)		75,400		288,779
Yakult Honsha Co. Ltd. (a)		5,200		240,585
Yamada Denki Co. Ltd.		39,300		211,609
Yamaguchi Financial Group, Inc.		15,000		163,307
Yamaha Corp.		9,600		292,728
Yamaha Motor Co. Ltd. (a)		14,700		322,357
Yamato Holdings Co. Ltd.		17,700		358,797
Yamazaki Baking Co. Ltd.		7,000		134,956
Yaskawa Electric Corp.		14,400		223,271
Yokogawa Electric Corp.		15,100		218,004
Yokohama Rubber Co. Ltd. (a)		5,000		89,376
				166,860,810
Luxembourg — 0.1%
Eurofins Scientific SE		613		261,165
RTL Group SA (c)		5,017		367,561
				628,726
Malaysia — 0.6%
AirAsia Bhd		60,100		30,680
Alliance Financial Group Bhd		90,800		75,296
AMMB Holdings Bhd		68,900		66,092

See Notes to Financial Statements.

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 29

Schedule of Investments (continued) Total International ex U.S. Index Master Portfolio

Common Stocks	Shares		Value
Malaysia (continued)
Astro Malaysia Holdings Bhd		29,600	$	17,156
Axiata Group Bhd (a)		165,600		173,982
Berjaya Sports Toto Bhd		118,478		78,175
British American Tobacco Malaysia Bhd		3,100		30,820
CIMB Group Holdings Bhd		239,100		239,763
Dialog Group Bhd		142,134		48,758
DiGi.Com Bhd (a)		169,300		182,282
Felda Global Ventures Holdings Bhd		89,900		31,003
Gamuda Bhd		39,600		42,126
Genting Bhd		188,800		336,201
Genting Malaysia Bhd		106,100		108,163
Genting Plantations Bhd		10,000		24,017
Hong Leong Bank Bhd		96,940		291,057
Hong Leong Financial Group Bhd		7,000		22,173
IHH Healthcare Bhd		176,500		249,838
IJM Corp. Bhd		126,600		90,244
IOI Corp. Bhd		102,200		99,967
IOI Properties Group Sdn Bhd		23,273		10,895
Kuala Lumpur Kepong Bhd		17,500		93,474
Lafarge Malayan Cement Bhd		17,500		28,019
Malayan Banking Bhd		295,300		539,115
Malaysia Airports Holdings Bhd		11,300		15,265
Maxis Bhd (a)		66,600		88,637
MISC Bhd		27,400		44,893
Petronas Chemicals Group Bhd		261,700		407,193
Petronas Dagangan Bhd		6,100		32,292
Petronas Gas Bhd		52,700		249,736
PPB Group Bhd		12,600		44,547
Public Bank Bhd		156,720		688,925
RHB Capital Bhd		16,824		17,640
Sapurakencana Petroleum Bhd (c)		220,700		79,310
Sime Darby Bhd		159,000		286,826
Telekom Malaysia Bhd		55,900		74,143
Tenaga Nasional Bhd		208,700		646,175
UMW Holdings Bhd (a)		10,900		11,104
Westports Holdings Bhd		70,000		66,947
YTL Corp. Bhd		113,160		39,099
YTL Power International Bhd		42,000		13,950
				5,715,978
Malta — 0.0%
Brait SE (c)		18,341		116,661
Mexico — 0.8%
Alfa SAB de CV, Series A		304,927		378,039
America Movil SAB de CV, Series L		1,912,700		1,202,263
Arca Continental SAB de CV		15,972		83,267
Cemex SAB de C.V. (c)		741,655		591,760
Coca-Cola Femsa SAB de CV, Series L		24,300		153,996
El Puerto de Liverpool SAB de CV, Series C1		10,900		78,636
Fibra Uno Administracion SA de CV		129,500		198,408
Fomento Economico Mexicano SAB de CV		112,600		856,437
Fresnillo PLC (a)		11,261		167,275
Gentera SAB de CV		37,100		59,741
Gruma SAB de C.V.		10,000		126,920
Grupo Aeroportuario del Pacifico SAB de CV, Class B		15,800		129,939
Grupo Aeroportuario del Sureste SAB de CV, Class B		10,700		154,164
Grupo Bimbo SAB de CV, Series A		104,600		237,208
Grupo Carso SAB de CV, Series A1		14,900		60,111

Common Stocks	Shares		Value
Mexico (continued)
Grupo Financiero Banorte SAB de CV, Series O		149,704	$	738,783
Grupo Financiero Inbursa SAB de CV, Series O		99,700		150,875
Grupo Financiero Santander Mexico SAB de CV, Series B		179,526		258,338
Grupo Lala SAB de CV		9,900		14,428
Grupo Mexico SAB de CV, Series B		228,423		621,810
Grupo Televisa SAB CPO		132,200		551,767
Industrias Penoles SAB de CV		7,755		144,426
Infraestructura Energetica Nova SAB de CV		33,988		148,104
Kimberly-Clark de Mexico SAB de C.V., Class A		78,500		141,401
Mexichem SAB de CV		36,623		83,211
OHL Mexico SAB de CV		42,200		41,509
Promotora y Operadora de Infraestructura SAB de CV		9,700		80,942
Wal-Mart de Mexico SAB de CV		281,300		502,766
				7,956,524
Netherlands — 3.6%
ABN AMRO Group NV CVA (d)		13,243		293,223
Aegon NV		109,623		602,230
AerCap Holdings NV (c)		8,129		338,248
Akzo Nobel NV		14,706		918,931
Altice NV Class A (c)		14,627		289,466
Altice NV Class B (c)		14,792		294,330
ASML Holding NV		19,908		2,231,097
CNH Industrial NV		59,213		513,791
EXOR HOLDING NV COMMON STOCK		6,195		266,428
Gemalto NV		4,250		245,443
Heineken Holding NV		5,586		388,454
Heineken NV		12,995		973,818
ING Groep NV		235,375		3,313,786
Koninklijke Ahold Delhaize NV		70,494		1,484,815
Koninklijke Boskalis Westminster NV		4,734		164,232
Koninklijke DSM NV		9,500		569,309
Koninklijke KPN NV (a)		205,405		607,408
Koninklijke Philips NV		54,699		1,672,253
Koninklijke Vopak NV		4,351		205,280
NN Group NV		20,253		685,615
NXP Semiconductor NV (c)		16,349		1,602,365
QIAGEN NV (c)		10,835		303,633
Randstad Holding NV		7,147		387,136
Royal Dutch Shell PLC, Class A		246,333		6,799,656
Royal Dutch Shell PLC, Class B		210,523		6,048,725
Unilever NV CVA (a)		95,208		3,911,032
Wolters Kluwer NV		16,190		585,578
				35,696,282
New Zealand — 0.1%
Auckland International Airport Ltd.		55,568		241,026
Contact Energy Ltd.		39,025		126,195
Fletcher Building Ltd.		30,613		224,937
Mercury NZ Ltd.		12,773		26,240
Meridian Energy Ltd.		95,908		173,012
Ryman Healthcare Ltd.		13,399		75,445
Spark New Zealand Ltd. (a)		115,784		273,971
				1,140,826
Norway — 0.4%
DNB ASA		51,793		768,882
Gjensidige Forsikring ASA		10,710		169,792
Marine Harvest ASA (c)		18,547		335,339

See Notes to Financial Statements.

30 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) Total International ex U.S. Index Master Portfolio

Common Stocks	Shares		Value
Norway (continued)
Norsk Hydro ASA		81,841	$	390,605
Orkla ASA		51,519		466,181
Schibsted ASA, Class A (a)		4,337		99,262
Schibsted ASA, Class B (a)		6,527		138,138
Statoil ASA		62,878		1,147,629
Telenor ASA		42,624		636,236
Yara International ASA		9,441		371,400
				4,523,464
Peru — 0.1%
Compania de Minas Buenaventura SA — ADR		24,540		276,811
Credicorp Ltd.		4,101		647,384
Southern Copper Corp. (a)		5,675		181,260
				1,105,455
Philippines — 0.2%
Aboitiz Equity Ventures, Inc.		86,410		123,080
Aboitiz Power Corp.		29,200		24,448
Alliance Global Group, Inc.		35,800		9,197
Ayala Corp.		13,480		197,906
Ayala Land, Inc.		389,400		250,188
Bank of the Philippine Islands		45,031		80,437
BDO Unibank, Inc.		176,944		398,732
DMCI Holdings, Inc.		170,000		45,270
Energy Development Corp.		642,400		66,480
Globe Telecom, Inc.		845		25,625
GT Capital Holdings, Inc.		2,625		66,943
International Container Terminal Services, Inc.		9,550		13,784
JG Summit Holdings, Inc.		156,443		212,602
Jollibee Foods Corp.		12,070		47,020
Megaworld Corp.		600,000		42,954
Metro Pacific Investments Corp.		1,468,000		196,476
Metropolitan Bank & Trust Co.		12,817		18,702
PLDT, Inc.		6,185		169,617
SM Investments Corp.		9,052		119,184
SM Prime Holdings, Inc.		486,150		276,788
Universal Robina Corp.		34,300		112,665
				2,498,098
Poland — 0.2%
Alior Bank SA (c)		1,352		17,491
Bank Handlowy w Warszawie SA		502		9,161
Bank Millennium SA (c)		13,346		16,552
Bank Pekao SA		12,493		375,123
Bank Zachodni WBK SA		2,479		187,090
CCC SA		981		47,680
Cyfrowy Polsat SA (c)		8,953		52,623
Eurocash SA		9,624		90,475
Grupa Azoty SA		1,551		23,228
Grupa Lotos SA (c)		1,964		17,929
Jastrzebska Spolka Weglowa SA (c)		4,762		76,130
KGHM Polska Miedz SA		4,863		106,943
LPP SA		55		74,504
Mbank (c)		573		45,874
Orange Polska SA		32,359		42,563
PGE SA		64,372		160,554
Polski Koncern Naftowy ORLEN SA		15,864		323,085
Polskie Gornictwo Naftowe i Gazownictwo SA		93,796		126,037
Powszechna Kasa Oszczednosci Bank Polski SA (c)		50,667		340,352
Powszechny Zaklad Ubezpieczen SA		33,880		268,637

Common Stocks	Shares		Value
Poland (continued)
Synthos SA		54,162	$	58,982
Tauron Polska Energia SA (c)		20,989		14,288
				2,475,301
Portugal — 0.1%
EDP — Energias de Portugal SA		127,717		388,713
Galp Energia SGPS SA		18,382		274,043
Jeronimo Martins SGPS SA		18,100		280,724
				943,480
Qatar — 0.2%
Barwa Real Estate Co.		2,548		23,216
Commercial Bank of Qatar QSC		2,974		26,502
Doha Bank QSC		6,076		58,151
Ezdan Holding Group QSC		43,351		179,240
Industries Qatar QSC		10,894		350,778
Masraf Al Rayan QSC		13,978		144,228
Ooredoo QSC		2,666		74,461
Qatar Electricity & Water Co. QSC		1,002		62,504
Qatar Insurance Co. SAQ		5,007		116,602
Qatar Islamic Bank SAQ		11,231		320,388
Qatar National Bank SAQ		11,988		536,200
				1,892,270
Romania — 0.0%
New Europe Property Investments PLC		11,085		128,335
Russia — 1.0%
Alrosa PJSC		173,000		273,823
Gazprom PJSC		542,640		1,365,525
Gazprom PJSC — ADR		113,445		572,347
Inter Rao Ues OAO		2,615,256		162,972
Lukoil PJSC		21,938		1,229,491
Lukoil PJSC — ADR		5,623		314,976
Magnit PJSC — GDR		18,601		818,795
MMC Norilsk Nickel PJSC		3,113		513,844
Mobile TeleSystems PJSC — ADR		46,989		428,070
Moscow Exchange MICEX-RTS PJSC		63,850		130,199
Novatek OJSC — GDR		4,662		603,736
Rosneft PJSC		21,260		139,437
Rosneft PJSC — GDR		20,000		129,891
Rostelecom PJSC		42,250		57,897
RusHydro PJSC		6,552,000		98,671
Sberbank of Russia PJSC		205,970		580,862
Sberbank of Russia PJSC — ADR		70,000		805,981
Severstal PJSC		10,830		165,522
Sistema PJSC FC — GDR		28,457		256,113
Surgutneftegas OJSC		301,050		152,005
Surgutneftegas OJSC — ADR		24,155		121,773
Surgutneftegas OJSC, Preference Shares		395,000		206,297
Tatneft PJSC		79,770		555,843
Transneft PJSC, Preference Shares		32		103,211
VTB Bank PJSC		86,510,000		103,034
VTB Bank PJSC — GDR		50,000		118,986
				10,009,301
Singapore — 0.9%
Ascendas Real Estate Investment Trust		136,378		213,219
CapitaLand Commercial Trust Ltd.		206,800		210,682
CapitaLand Ltd.		147,400		306,314
CapitaLand Mall Trust		215,500		279,515
City Developments Ltd.		32,100		183,188

See Notes to Financial Statements.

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 31

Schedule of Investments (continued) Total International ex U.S. Index Master Portfolio

Common Stocks	Shares		Value
Singapore (continued)
ComfortDelGro Corp. Ltd.		173,800	$	295,333
DBS Group Holdings Ltd.		99,984		1,192,893
Genting Singapore PLC		233,000		145,019
Global Logistic Properties Ltd. (a)		151,800		229,858
Golden Agri-Resources Ltd.		270,000		79,940
Hutchison Port Holdings Trust		309,000		134,081
Jardine Cycle & Carriage Ltd.		4,444		126,209
Keppel Corp. Ltd.		76,700		305,261
Oversea-Chinese Banking Corp. Ltd.		177,549		1,090,442
SATS Ltd.		49,000		164,106
SembCorp Industries Ltd.		40,000		78,444
Singapore Airlines Ltd.		28,600		190,530
Singapore Exchange Ltd.		29,000		143,005
Singapore Press Holdings Ltd.		48,376		117,643
Singapore Technologies Engineering Ltd.		122,400		271,861
Singapore Telecommunications Ltd.		451,700		1,133,060
StarHub Ltd.		41,600		80,531
Suntec Real Estate Investment Trust		137,100		156,016
United Overseas Bank Ltd.		78,500		1,102,838
UOL Group Ltd.		22,000		90,697
Wilmar International Ltd.		108,500		268,045
Yangzijiang Shipbuilding Holdings Ltd. (a)		76,800		43,062
				8,631,792
South Africa — 1.4%
African Bank Investments Ltd. (a)(c)		20,398		15
Anglo American Platinum Ltd. (c)		832		15,873
AngloGold Ashanti Ltd. (c)		19,921		211,635
Aspen Pharmacare Holdings Ltd.		18,439		379,857
Barclays Africa Group Ltd.		20,871		256,177
Bid Corp. Ltd.		29,284		519,031
Bidvest Group Ltd. (a)		15,736		207,201
Capitec Bank Holdings Ltd.		1,291		65,158
Coronation Fund Managers Ltd.		27,149		138,868
Discovery Holdings Ltd.		20,716		172,522
Exxaro Resources Ltd. (a)		15,325		98,954
FirstRand Ltd.		200,957		775,455
Fortress Income Fund Ltd.		67,928		160,028
Foschini Group Ltd.		6,728		77,682
Gold Fields Ltd.		38,623		116,805
Growthpoint Properties Ltd.		130,802		246,273
Hyprop Investments Ltd.		7,562		64,593
Impala Platinum Holdings Ltd. (c)		29,321		90,213
Imperial Holdings Ltd.		3,661		48,434
Investec Ltd.		7,549		49,525
Liberty Holdings Ltd.		1,922		15,426
Life Healthcare Group Holdings Ltd. (a)		99,873		236,490
Massmart Holdings Ltd.		14,916		137,020
MMI Holdings Ltd.		20,454		34,931
Mondi Ltd.		3,303		67,216
Mr Price Group Ltd.		10,819		125,491
MTN Group Ltd.		97,601		893,898
Naspers Ltd., Class N		24,368		3,557,524
Nedbank Group Ltd. (a)		13,358		231,210
Netcare Ltd.		88,635		205,993
Pick n Pay Stores Ltd. (a)		28,036		130,032
Pioneer Foods Group Ltd.		6,964		78,074
PSG Group Ltd.		2,684		42,532
Rand Merchant Investment Holdings Ltd.		15,066		43,488
Redefine Properties Ltd.		238,334		194,069
Remgro Ltd.		27,353		443,829

Common Stocks	Shares		Value
South Africa (continued)
Resilient REIT Ltd.		17,014	$	141,763
RMB Holdings Ltd.		58,722		283,819
Sanlam Ltd.		125,172		572,565
Sappi Ltd. (c)		45,197		294,846
Sasol Ltd.		32,714		938,869
Shoprite Holdings Ltd.		26,136		326,653
Sibanye Gold Ltd.		36,279		65,145
Spar Group Ltd.		4,305		62,247
Standard Bank Group Ltd.		67,456		742,769
Telkom SA SOC Ltd.		11,210		60,103
Tiger Brands Ltd. (a)		7,701		222,624
Truworths International Ltd. (a)		20,564		119,293
Tsogo Sun Holdings Ltd.		25,000		50,148
Vodacom Group Ltd.		23,375		258,959
Woolworths Holdings Ltd.		41,426		214,340
				14,485,665
South Korea — 3.2%
Amorepacific Corp.		2,183		543,607
Amorepacific Group		2,278		250,366
BGF Retail Co. Ltd.		1,224		82,867
BNK Financial Group, Inc.		6,269		44,971
Celltrion, Inc. (c)		4,932		437,425
Cheil Worldwide, Inc.		4,081		53,067
CJ CheilJedang Corp.		518		153,255
CJ Corp.		848		131,133
CJ E&M Corp.		2,172		127,429
CJ Korea Express Co. Ltd. (c)		414		61,314
Coway Co. Ltd.		3,702		270,597
Daelim Industrial Co. Ltd.		1,073		77,236
Daewoo Engineering & Construction Co. Ltd. (c)		19,237		80,814
Daewoo Securities Co. Ltd.		8,184		48,963
DGB Financial Group, Inc.		5,100		41,209
Dongbu Insurance Co. Ltd.		4,311		223,189
Doosan Heavy Industries & Construction Co. Ltd.		776		17,434
E-Mart, Inc.		1,071		162,178
GS Engineering & Construction Corp. (c)		6,155		134,578
GS Holdings Corp.		5,749		257,160
GSretail Co. Ltd.		3,184		125,420
Hana Financial Group, Inc.		14,915		384,957
Hankook Tire Co. Ltd.		4,552		218,840
Hanmi Pharm Co. Ltd.		208		52,452
Hanmi Science Co. Ltd.		709		35,750
Hanon Systems		15,127		128,821
Hanssem Co. Ltd.		731		120,177
Hanwha Chemical Corp.		4,037		82,294
Hanwha Corp.		4,520		130,955
Hanwha Life Insurance Co. Ltd.		7,120		38,466
Hotel Shilla Co. Ltd.		1,174		46,668
Hyosung Corp.		1,140		137,040
Hyundai Department Store Co. Ltd.		314		28,346
Hyundai Development Co-Engineering & Construction		2,250		83,590
Hyundai Engineering & Construction Co. Ltd.		3,298		116,668
Hyundai Glovis Co. Ltd.		1,138		145,394
Hyundai Heavy Industries Co. Ltd. (c)		2,802		336,555
Hyundai Marine & Fire Insurance Co. Ltd.		1,200		31,236
Hyundai Mobis Co. Ltd.		4,170		910,407
Hyundai Motor Co.		9,570		1,154,501
Hyundai Motor Co., Preference Shares		852		67,420
Hyundai Motor Co., Second Preference Shares		1,756		144,207

See Notes to Financial Statements.

32 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) Total International ex U.S. Index Master Portfolio

Common Stocks	Shares		Value
South Korea (continued)
Hyundai Steel Co.		5,604	$	263,765
Hyundai Wia Corp.		513		30,965
Industrial Bank of Korea		11,789		123,728
Kakao Corp.		1,108		70,497
Kangwon Land, Inc.		7,491		221,663
KB Financial Group, Inc.		19,467		687,953
KCC Corp.		266		79,054
KEPCO Plant Service & Engineering Co. Ltd.		707		31,681
Kia Motors Corp.		17,873		580,098
Korea Aerospace Industries Ltd.		5,031		278,345
Korea Electric Power Corp.		12,939		471,989
Korea Gas Corp.		753		30,220
Korea Investment Holdings Co. Ltd.		1,486		51,497
Korea Zinc Co. Ltd.		398		156,553
Korean Air Lines Co. Ltd. (c)		3,387		76,432
KT Corp.		1,200		29,197
KT&G Corp.		7,271		608,218
Kumho Petrochemical Co. Ltd.		423		28,680
LG Chem Ltd.		3,266		704,302
LG Chem Ltd., Preference Shares		179		26,547
LG Corp.		5,702		283,094
LG Display Co. Ltd.		13,391		347,441
LG Electronics, Inc.		4,891		208,809
LG Household & Health Care Ltd.		696		493,806
LG Innotek Co. Ltd.		954		69,698
LG Uplus Corp.		20,673		195,937
Lotte Chemical Corp.		865		263,601
Lotte Confectionery Co. Ltd.		750		110,798
Lotte Shopping Co. Ltd.		752		137,925
Mirae Asset Securities Co. Ltd.		6,804		113,613
NAVER Corp.		1,558		997,708
NCSoft Corp.		1,038		212,329
NH Investment & Securities Co. Ltd.		5,312		42,324
OCI Co. Ltd. (c)		1,017		66,123
Orion Corp.		138		74,797
POSCO		3,514		746,074
Posco Daewoo Corp.		1,160		25,894
S-1 Corp.		442		32,096
S-Oil Corp.		3,144		220,051
Samsung Biologics Co. Ltd. (c)		1,220		152,525
Samsung C&T Corp.		4,015		415,737
Samsung Card Co. Ltd.		1,210		39,784
Samsung Electro-Mechanics Co. Ltd.		2,177		91,388
Samsung Electronics Co. Ltd.		5,598		8,331,571
Samsung Electronics Co. Ltd., Preference Shares		998		1,181,667
Samsung Fire & Marine Insurance Co. Ltd.		1,790		397,731
Samsung Heavy Industries Co. Ltd. (c)		7,874		60,127
Samsung Life Insurance Co. Ltd.		3,994		371,743
Samsung SDI Co. Ltd.		3,829		344,699
Samsung SDS Co. Ltd.		1,671		192,641
Samsung Securities Co. Ltd.		2,400		62,867
Samsung Techwin Co. Ltd.		2,293		82,409
Shinhan Financial Group Co. Ltd.		21,504		806,425
Shinsegae Co. Ltd.		670		97,561
SK Holdings Co. Ltd.		3,174		602,524
SK Hynix, Inc.		31,729		1,167,503
SK Innovation Co. Ltd.		3,761		455,149
SK Networks Co. Ltd.		14,759		84,461
SK Telecom Co. Ltd.		1,670		309,519
Woori Bank (c)		13,531		142,600
Yuhan Corp.		128		21,121
				32,324,210

Common Stocks	Shares		Value
Spain — 2.2%
Abertis Infraestructuras SA (a)		43,251	$	604,282
ACS Actividades de Construccion y Servicios SA		11,772		371,496
Aena SA (d)		3,841		523,302
Amadeus IT Group SA		25,250		1,145,192
Banco Bilbao Vizcaya Argentaria SA		381,111		2,568,278
Banco de Sabadell SA (a)		292,491		406,438
Banco Popular Espanol SA (a)		177,710		171,223
Banco Santander SA		829,804		4,316,865
Bankia SA		308,381		314,254
Bankinter SA (a)		38,876		300,646
CaixaBank SA		191,825		632,212
Distribuidora Internacional de Alimentacion SA (a)		38,924		190,906
Enagas SA (a)		3,839		97,293
Endesa SA (a)		13,298		281,227
Ferrovial SA		32,805		585,052
Gas Natural SDG SA		17,935		337,416
Grifols SA (a)		19,950		396,035
Iberdrola SA		299,672		1,962,217
Industria de Diseno Textil SA (a)		62,702		2,136,004
International Consolidated Airlines Group SA (a)		47,602		256,439
Mapfre SA (a)		66,978		204,022
Red Electrica Corp. SA (a)		8,296		156,298
Repsol SA (a)		65,889		925,947
Telefonica SA		287,289		2,652,354
Zardoya Otis SA (a)		18,792		158,582
				21,693,980
Sweden — 2.0%
Alfa Laval AB		18,245		300,958
Assa Abloy AB, Class B		57,367		1,061,498
Atlas Copco AB, A Shares		37,867		1,148,754
Atlas Copco AB, B Shares		19,981		543,232
Boliden AB		15,966		414,717
Electrolux AB, Class B		12,094		299,460
Getinge AB, Class B		11,241		180,114
Hennes & Mauritz AB, Class B		53,734		1,489,566
Hexagon AB, Class B		13,771		490,467
Husqvarna AB, Class B		17,215		133,573
ICA Gruppen AB (a)		3,148		95,818
Industrivarden AB, Class C		8,883		165,203
Investor AB, Class B		25,067		934,000
Kinnevik AB		12,764		304,870
L E Lundbergforetagen AB, — B Shares		3,372		206,446
Lundin Petroleum AB (c)		9,142		198,122
Millicom International Cellular SA		3,166		134,917
Nordea Bank AB		167,959		1,861,090
Sandvik AB		58,636		723,337
Securitas AB, Class B		18,887		296,258
Skandinaviska Enskilda Banken AB, Class A		85,484		893,324
Skanska AB, Class B		19,249		453,206
SKF AB, Class B		28,867		529,310
Svenska Cellulosa AB, B Shares		34,563		972,828
Svenska Handelsbanken AB, Class A		83,880		1,161,776
Swedbank AB, Class A		49,818		1,200,338
Swedish Match AB		11,349		360,081
Tele2 AB, Class B		13,773		110,129
Telefonaktiebolaget LM Ericsson, Class B		178,647		1,047,045
TeliaSonera AB		198,222		796,296
Volvo AB, Class B		97,775		1,138,297
				19,645,030

See Notes to Financial Statements.

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 33

Schedule of Investments (continued) Total International ex U.S. Index Master Portfolio

Common Stocks	Shares		Value
Switzerland — 6.3%
ABB Ltd., Registered Shares (c)		107,179	$	2,255,229
Actelion Ltd., Registered Shares (c)		5,337		1,153,371
Adecco SA, Registered Shares		9,034		589,710
Aryzta AG (a)(c)		3,776		166,055
Baloise Holding AG, Registered Shares		2,811		353,722
Barry Callebaut AG, Registered Shares (c)		143		174,706
Cie Financiere Richemont SA, Registered Shares		29,681		1,961,633
Coca-Cola HBC AG (c)		17,206		374,665
Credit Suisse Group AG, Registered Shares (a)(c)		119,579		1,708,907
Dufry AG (a)(c)		2,230		277,577
EMS-Chemie Holding AG, Registered Shares		450		228,524
Galenica AG		195		219,735
Geberit AG, Registered Shares		2,134		854,361
Givaudan SA, Registered Shares		544		995,613
Glencore PLC (c)		674,813		2,280,114
Julius Baer Group Ltd. (c)		13,520		598,959
Kuehne & Nagel International AG, Registered Shares (a)		3,423		451,831
LafargeHolcim Ltd. (c)		25,384		1,332,459
Lindt & Spruengli AG (a)		47		243,199
Lindt & Spruengli AG, Registered Shares		6		364,531
Lonza Group AG, Registered Shares (c)		3,015		521,080
Nestle SA, Registered Shares		177,915		12,745,398
Novartis AG, Registered Shares		127,378		9,263,366
Pargesa Holding SA, Bearer Shares		4,151		269,811
Partners Group Holding AG (a)		939		439,581
Roche Holding AG		39,997		9,117,419
Schindler Holding AG, Participation Certificates		2,360		415,627
Schindler Holding AG, Registered Shares		1,556		271,597
SGS SA, Registered Shares		282		572,957
Sika AG, Bearer Shares		114		546,955
Sonova Holding AG, Registered Shares		2,902		351,112
STMicroelectronics NV (a)		37,953		430,176
Swatch Group AG, Bearer Shares (a)		1,687		523,582
Swatch Group AG, Registered Shares		1,971		120,287
Swiss Life Holding AG, Registered Shares (c)		1,676		473,434
Swiss Prime Site AG, Registered Shares (c)		3,460		283,120
Swiss Re AG		20,574		1,946,564
Swisscom AG, Registered Shares (a)		1,536		686,583
Syngenta AG, Registered Shares		5,218		2,061,645
UBS Group AG, Registered Shares		206,394		3,227,063
Zurich Insurance Group AG (c)		8,288		2,277,707
				63,129,965
Taiwan — 2.7%
Acer, Inc. (c)		69,504		28,083
Advanced Semiconductor Engineering, Inc.		371,097		378,328
Advantech Co. Ltd.		20,795		163,979
Asia Cement Corp.		57,233		46,554
Asia Pacific Telecom Co. Ltd. (c)		33,000		10,586
Asustek Computer, Inc.		38,220		312,921
AU Optronics Corp.		757,000		274,897
Casetek Holdings Ltd.		6,000		15,879
Catcher Technology Co. Ltd.		36,000		248,821
Cathay Financial Holding Co. Ltd.		455,935		677,800
Chailease Holding Co. Ltd.		23,795		40,619
Chang Hwa Commercial Bank Ltd.		414,701		220,114
Cheng Shin Rubber Industry Co. Ltd.		127,436		239,210
Chicony Electronics Co. Ltd.		15,700		36,349
China Airlines Ltd.		103,687		29,858
China Development Financial Holding Corp.		577,765		143,831

Common Stocks	Shares		Value
Taiwan (continued)
China Life Insurance Co. Ltd.		128,856	$	127,406
China Steel Corp.		734,638		558,433
Chunghwa Telecom Co. Ltd.		212,000		665,696
Compal Electronics, Inc.		192,000		109,672
CTBC Financial Holding Co. Ltd.		1,030,601		562,201
Delta Electronics, Inc.		112,000		550,606
E.Sun Financial Holding Co. Ltd.		395,380		224,397
Eclat Textile Co. Ltd.		7,160		74,551
Eva Airways Corp.		71,073		32,020
Evergreen Marine Corp. Taiwan Ltd. (c)		83,830		28,802
Far Eastern New Century Corp.		210,607		157,720
Far EasTone Telecommunications Co. Ltd.		95,000		213,564
Feng TAY Enterprise Co. Ltd.		16,150		59,816
First Financial Holding Co. Ltd.		465,604		247,889
Formosa Chemicals & Fibre Corp.		181,360		540,116
Formosa Petrochemical Corp.		74,000		256,082
Formosa Plastics Corp.		254,040		700,283
Formosa Taffeta Co. Ltd.		31,000		28,287
Foxconn Technology Co. Ltd.		43,007		113,153
Fubon Financial Holding Co. Ltd.		334,952		528,001
Giant Manufacturing Co. Ltd.		10,000		56,629
Highwealth Construction Corp.		62,400		88,025
Hiwin Technologies Corp.		11,088		50,619
Hon Hai Precision Industry Co. Ltd.		863,000		2,244,738
Hotai Motor Co. Ltd.		8,000		91,255
HTC Corp. (c)		27,050		65,924
Hua Nan Financial Holdings Co. Ltd.		376,928		189,515
Innolux Corp.		658,494		235,737
Inventec Co. Ltd.		218,470		149,034
Largan Precision Co. Ltd.		6,000		699,368
Lite-On Technology Corp.		99,816		150,108
MediaTek, Inc.		98,255		656,416
Mega Financial Holding Co. Ltd.		660,110		469,438
Merida Industry Co. Ltd.		8,150		36,283
Micro-Star International Co. Ltd.		43,000		97,576
Nan Ya Plastics Corp.		251,790		554,622
Nien Made Enterprise Co. Ltd.		9,000		92,423
Novatek Microelectronics Corp.		23,000		75,592
OBI Pharma, Inc. (c)		9,000		79,226
Pegatron Corp.		105,000		249,798
Phison Electronics Corp.		15,000		117,971
Pou Chen Corp.		92,000		114,325
Powertech Technology, Inc.		70,100		188,113
President Chain Store Corp.		37,000		264,484
Quanta Computer, Inc.		138,000		257,148
Realtek Semiconductor Corp.		53,240		168,146
Ruentex Development Co. Ltd. (c)		47,757		54,295
Ruentex Industries Ltd.		17,521		28,975
Shin Kong Financial Holding Co. Ltd. (c)		292,832		71,526
Siliconware Precision Industries Co.		206,848		306,820
SinoPac Financial Holdings Co. Ltd.		518,842		145,838
Standard Foods Corp.		7,060		16,726
Synnex Technology International Corp.		31,500		31,654
TaiMed Biologics, Inc. (c)		15,000		77,025
Taishin Financial Holding Co. Ltd.		321,063		117,246
Taiwan Business Bank		254,176		64,155
Taiwan Cement Corp.		226,000		245,620
Taiwan Cooperative Financial Holding Co. Ltd.		417,121		181,504
Taiwan Fertilizer Co. Ltd.		12,000		14,928
Taiwan Mobile Co. Ltd.		98,800		318,069

See Notes to Financial Statements.

34 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) Total International ex U.S. Index Master Portfolio

Common Stocks	Shares		Value
Taiwan (continued)
Taiwan Semiconductor Manufacturing Co. Ltd.		1,408,000	$	7,886,565
Teco Electric and Machinery Co. Ltd.		39,000		33,644
Transcend Information, Inc.		29,000		76,664
Uni-President Enterprises Corp.		251,950		415,431
United Microelectronics Corp.		488,000		171,860
Vanguard International Semiconductor Corp.		86,000		149,019
Wistron Corp.		125,642		96,827
WPG Holdings Ltd.		216,270		254,158
Yuanta Financial Holding Co. Ltd.		862,260		319,771
Yulon Motor Co. Ltd.		14,000		11,608
Zhen Ding Technology Holding Ltd.		14,710		28,910
				27,207,875
Thailand — 0.5%
Advanced Info Service PCL — NVDR		52,400		214,605
Airports of Thailand PCL — NVDR (a)		26,500		294,275
Bangkok Bank PCL — NVDR		22,400		99,455
Bangkok Bank PCL, Foreign Registered Shares		30,500		137,101
Bangkok Dusit Medical Services PCL — NVDR		276,700		178,168
Banpu PCL — NVDR		29,500		15,713
BEC World PCL — NVDR (a)		16,900		7,824
BTS Group Holdings PCL — NVDR (a)		152,700		36,415
Bumrungrad Hospital PCL — NVDR		22,400		113,027
Central Pattana PCL — NVDR		119,500		188,884
Charoen Pokphand Foods PCL — NVDR		204,000		167,631
CP ALL PCL — NVDR		280,500		488,933
Delta Electronics Thailand PCL — NVDR		20,000		45,435
Energy Absolute PCL — NVDR (a)		45,000		37,319
Glow Energy PCL — NVDR		7,600		16,742
Home Product Center PCL — NVDR		82,832		23,541
Indorama Ventures PCL — NVDR		39,200		36,513
IRPC PCL — NVDR		492,400		65,856
Kasikornbank PCL — NVDR		36,500		180,270
Kasikornbank PCL, Foreign Registered Shares		80,700		398,652
Krung Thai Bank PCL — NVDR		143,775		70,843
Minor International PCL — NVDR		146,680		146,104
PTT Exploration & Production PCL — NVDR		76,522		204,963
PTT Global Chemical PCL — NVDR		110,168		193,173
PTT PCL — NVDR		53,000		548,754
Siam Cement PCL — NVDR		5,700		78,816
Siam Cement PCL, Foreign Registered Shares		31,400		434,061
Siam Commercial Bank PCL — NVDR		82,400		349,444
Thai Oil PCL — NVDR		92,900		187,155
Thai Union Group PCL — NVDR		14,800		8,667
TMB Bank PCL — NVDR		271,500		15,878
True Corp. PCL — NVDR		355,740		70,822
				5,055,039
Turkey — 0.2%
Akbank TAS		156,050		345,441
Anadolu Efes Biracilik Ve Malt Sanayii AS		28,262		141,274
Arcelik AS		3,960		23,784
BIM Birlesik Magazalar AS		8,104		112,460
Coca-Cola Icecek AS		4,750		44,532
Emlak Konut Gayrimenkul Yatirim Ortakligi AS		347,671		294,451
Eregli Demir ve Celik Fabrikalari TAS		51,754		75,299
Ford Otomotiv Sanayi		2,700		23,393
Haci Omer Sabanci Holding AS		32,457		84,023
KOC Holding AS		17,992		70,316
Petkim Petrokimya Holding		56,271		58,963
TAV Havalimanlari Holding AS		2,171		8,624

Common Stocks	Shares		Value
Turkey (continued)
Tofas Turk Otomobil Fabrikasi AS		4,704	$	32,820
Tupras Turkiye Petrol Rafinerileri AS		5,076		101,715
Turk Hava Yollari (a)(c)		26,638		37,788
Turk Telekomunikasyon AS		10,009		14,961
Turkcell Iletisim Hizmetleri AS (c)		33,444		92,346
Turkiye Garanti Bankasi AS		133,513		287,937
Turkiye Halk Bankasi		58,372		154,244
Turkiye Is Bankasi, Class C		88,347		129,566
Turkiye Sise ve Cam Fabrikalari AS		42,918		46,535
Turkiye Vakiflar Bankasi Tao, Class D		173,038		212,974
Ulker Biskuvi Sanayi		3,956		18,107
Yapi ve Kredi Bankasi (a)(c)		65,139		63,202
				2,474,755
United Arab Emirates — 0.2%
Abu Dhabi Commercial Bank PJSC		80,031		150,138
Aldar Properties PJSC		334,873		239,143
DP World Ltd.		10,522		184,284
Dubai Islamic Bank PJSC		36,085		54,691
Emaar Malls Group PJSC		81,000		57,825
Emaar Properties PJSC		172,958		335,335
Emirates Telecommunications Group Co. PJSC		97,764		500,412
First Gulf Bank PJSC		112,849		394,679
Mediclinic International PLC (a)		17,716		168,282
National Bank of Abu Dhabi PJSC		28,159		76,566
				2,161,355
United Kingdom — 11.1%
3i Group PLC		47,964		414,907
Aberdeen Asset Management PLC		47,482		150,128
Admiral Group PLC		11,495		258,512
Anglo American PLC (c)		79,157		1,118,396
Antofagasta PLC (a)		26,475		219,204
Ashtead Group PLC		25,797		501,503
Associated British Foods PLC		23,401		789,598
AstraZeneca PLC		71,925		3,927,661
Auto Trader Group PLC (d)		57,831		290,747
Aviva PLC		227,430		1,354,716
Babcock International Group PLC		15,027		176,258
BAE Systems PLC		180,695		1,314,293
Barclays PLC		940,634		2,581,425
Barratt Developments PLC (a)		48,277		274,460
Berkeley Group Holdings PLC		8,364		289,134
BHP Billiton PLC		117,118		1,864,872
BP PLC		1,065,137		6,671,408
British American Tobacco PLC		106,906		6,058,936
British Land Co. PLC		45,237		351,062
BT Group PLC		473,964		2,139,615
Bunzl PLC		19,227		499,158
Burberry Group PLC		26,661		491,333
Capita PLC (a)		33,043		216,054
Carnival PLC		9,212		466,766
Centrica PLC		319,782		920,986
Cobham PLC		98,005		197,327
Coca-Cola European Partners PLC		12,846		405,435
Compass Group PLC		90,679		1,675,888
Croda International PLC		7,020		276,094
Diageo PLC		144,432		3,747,986
Direct Line Insurance Group PLC		92,064		418,997
Dixons Carphone PLC		53,496		233,643
easyJet PLC		8,921		110,348

See Notes to Financial Statements.

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 35

Schedule of Investments (continued) Total International ex U.S. Index Master Portfolio

Common Stocks	Shares		Value
United Kingdom (continued)
Fiat Chrysler Automobiles NV		45,604	$	414,852
G4S PLC		93,084		269,048
GKN PLC		101,475		413,601
GlaxoSmithKline PLC		274,302		5,268,926
Hammerson PLC		42,497		299,500
Hargreaves Lansdown PLC		17,892		266,239
Hikma Pharmaceuticals PLC (a)		8,947		208,534
HSBC Holdings PLC		1,158,027		9,343,668
IMI PLC		17,672		226,003
Imperial Brands PLC		53,985		2,352,695
Inmarsat PLC		25,312		234,202
InterContinental Hotels Group PLC		9,130		408,240
Intertek Group PLC		7,802		334,378
Intu Properties PLC		62,380		216,066
Investec PLC		59,882		392,742
ITV PLC		194,650		494,217
J. Sainsbury PLC		100,607		309,210
Johnson Matthey PLC		10,060		393,620
Kingfisher PLC		117,839		507,696
Land Securities Group PLC		41,762		548,632
Legal & General Group PLC		329,570		1,003,994
Lloyds Banking Group PLC		3,605,884		2,768,873
London Stock Exchange Group PLC		18,449		659,387
Marks & Spencer Group PLC		87,368		376,354
Meggitt PLC		42,920		242,377
Merlin Entertainments PLC (d)		43,755		241,549
Mondi PLC		18,175		371,174
National Grid PLC		211,627		2,472,594
NEX Group PLC		12,924		73,983
Next PLC		7,051		432,548
Old Mutual PLC		291,686		743,790
Pearson PLC		43,957		441,048
Persimmon PLC		15,176		331,104
Petrofac Ltd.		14,308		153,118
Provident Financial PLC		7,347		256,942
Prudential PLC		148,888		2,971,427
Randgold Resources Ltd.		5,702		438,070
Reckitt Benckiser Group PLC		36,418		3,084,893
RELX NV (a)		55,838		939,188
RELX PLC		61,684		1,099,239
Rio Tinto PLC		71,751		2,739,308
Rolls-Royce Holdings PLC (c)		125,459		1,030,457
Royal Bank of Scotland Group PLC (c)		212,595		587,432
Royal Mail PLC		43,082		244,895
RSA Insurance Group PLC		54,630		393,954
Sage Group PLC		57,581		464,162
Schroders PLC		7,414		272,301
Segro PLC		45,868		259,430
Severn Trent PLC		12,513		341,965
Shire PLC		53,997		3,083,187
Sky PLC		66,246		807,600
Smith & Nephew PLC		51,185		768,247
Smiths Group PLC		22,769		396,342
SSE PLC		63,897		1,220,053
St. James’s Place PLC		26,679		332,788
Standard Chartered PLC (c)		184,091		1,501,246
Standard Life PLC		117,235		536,841
Tate & Lyle PLC		29,549		257,154
Taylor Wimpey PLC		224,715		423,831
Tesco PLC (a)(c)		458,240		1,168,419

Common Stocks	Shares		Value
United Kingdom (continued)
TP ICAP PLC		10,561	$	56,397
Travis Perkins PLC (a)		13,060		233,463
Unilever PLC		74,492		3,012,446
United Utilities Group PLC		37,850		419,540
Vodafone Group PLC		1,538,778		3,786,743
Weir Group PLC		13,734		319,167
Whitbread PLC		9,265		430,991
William Hill PLC		49,735		177,641
WM Morrison Supermarkets PLC (a)		110,313		313,320
Wolseley PLC		14,458		882,605
Worldpay Group PLC (d)		88,773		294,734
WPP PLC		69,946		1,556,537
				110,723,767
United States — 0.1%
Yum China Holdings, Inc. (c)		22,537		588,666
Total Common Stocks — 98.3%				983,603,521
Preferred Stock
Germany — 0.2%
Volkswagen AG, Preference Shares, 0.00% (a)		10,129		1,417,221
Total Preferred Securities — 0.2%				1,417,221
Rights
Qatar — 0.0%
Commercial Bank of Qatar QSC (Expires 01/17/22) (c)		535		655
Spain — 0.0%
Repsol SA (Expires 01/17/22) (a)(c)		65,889		24,414
Total Rights — 0.0%				25,069
Total Long-Term Investments (Cost — $1,000,896,618) — 98.5%				985,045,811
Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.87% (e)(f)(g)		85,655,946		85,673,077
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (e)(f)		6,264,403		6,264,403
Total Short-Term Securities (Cost — $91,929,771) — 9.2%				91,937,480
Total Investments (Cost — $1,092,826,389) — 107.7%				1,076,983,291
Liabilities in Excess of Other Assets — (7.7)%				(76,597,270	)
Net Assets — 100.0%			$	1,000,386,021

See Notes to Financial Statements.

36 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) Total International ex U.S. Index Master Portfolio

Notes to Schedule of Investments

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

(b) A security contractually bound to one or more other securities to form a single saleable unit which cannot be sold separately.

(c) Non-income producing security.

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

(e) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at December 31, 2015		Net Activity			Shares Held at December 31, 2016		Value at December 31, 2016		Income			Realized (Loss)/Capital Gains
BlackRock Cash Funds: Institutional, SL Agency Shares		25,023,891		60,632,055			85,655,946	$	85,673,077	$	383,433	1	$	(153	)
BlackRock Cash Funds: Prime, SL Agency Shares2		16,634,043		(16,634,043	)		—		—		61,383	1		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		6,264,403			6,264,403		6,264,403		7,191			384
Total								$	91,937,480	$	452,007		$	231
1   Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees, and collateral investment expenses, and other payments to and from borrower of securities.
2   No longer held by the Master Portfolio as of period end.

(f) Current yield as of period end.

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

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

Contracts Long		Issue	Expiration		Notional Value		Unrealized Appreciation (Depreciation)
	94	E-Mini MSCI EAFE Index		March 2017	$	7,875,320	$	2,857
	45	MSCI Emerging Markets E-Mini Index		March 2017	$	1,932,525		3,309
	29	S&P/TSX 60 Index		March 2017	$	1,300,505		(5,432	)
	Total						$	734

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts	Credit Contracts	Equity Contracts			Foreign Currency Exchange Contracts	Interest Rate Contracts	Other Contacts	Total
Futures contracts	Net unrealized appreciation1	—	—	$	6,166		—	—	—	$	6,166
Liabilities — Derivative Financial Instruments
Futures contracts	Net unrealized depreciation1	—	—	$	(5,432	)	—	—	—	$	(5,432	)
1    Includes cumulative appreciation (depreciation) on financial futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

For the year ended December 31, 2016, the effect of derivative financial instruments in the Statement of Operations was as follows:

Net Realized Gain (Loss) From:	Commodity Contracts	Credit Contracts	Equity Contracts			Foreign Currency Exchange Contracts	Interest Rate Contracts	Other Contacts	Total
Futures contracts	—	—	$	1,085,178		—	—	—	$	1,085,178
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts	—	—	$	(65,915	)	—	—	—	$	(65,915	)

See Notes to Financial Statements.

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 37

Schedule of Investments (continued) Total International ex U.S. Index Master Portfolio

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	12,154,381
Average notional value of contracts — short	$	324,977	1
1    Actual amounts for the period are shown due to limited outstanding derivative financial instruments as of each quarter.

For more information about the Master Portfolio’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Common Stocks:
Australia		—	$	50,975,264		—	$	50,975,264
Austria		—		1,415,601		—		1,415,601
Belgium	$	4,599,451		3,594,408		—		8,193,859
Brazil		17,429,974		—		—		17,429,974
Canada		69,862,590		—		—		69,862,590
Chile		2,876,800		—		—		2,876,800
China		12,995,542		36,878,989		—		49,874,531
Colombia		1,010,333		—		—		1,010,333
Czech Republic		—		391,450		—		391,450
Denmark		—		11,236,798		—		11,236,798
Finland		—		6,583,110		—		6,583,110
France		—		69,788,214		—		69,788,214
Germany		477,472		63,098,911		—		63,576,383
Greece		—		878,870		—		878,870
Hong Kong		354,787		31,046,415		—		31,401,202
Hungary		—		698,821		—		698,821
India		2,871,152		16,006,946		—		18,878,098
Indonesia		14,046		5,725,448		—		5,739,494
Ireland		577,732		4,457,801		—		5,035,533
Israel		3,203,535		1,622,088		—		4,825,623
Italy		539,195		12,578,168		—		13,117,363
Japan		—		166,860,810		—		166,860,810
Luxembourg		—		628,726		—		628,726
Malaysia		2,014,261		3,701,717		—		5,715,978
Malta		—		116,661		—		116,661
Mexico		7,789,249		167,275		—		7,956,524
Netherlands		1,940,613		33,755,669		—		35,696,282
New Zealand		—		1,140,826		—		1,140,826
Norway		—		4,523,464		—		4,523,464
Peru		1,105,455		—		—		1,105,455
Philippines		80,437		2,417,661		—		2,498,098
Poland		206,385		2,268,916		—		2,475,301
Portugal		—		943,480		—		943,480
Qatar		116,602		1,775,668		—		1,892,270
Romania		128,335		—		—		128,335
Russia		684,183		9,325,118		—		10,009,301
Singapore		164,106		8,467,686		—		8,631,792
South Africa		461,227		14,024,423	$	15		14,485,665
South Korea		152,525		32,171,685		—		32,324,210
Spain		—		21,693,980		—		21,693,980
Sweden		—		19,645,030		—		19,645,030

See Notes to Financial Statements.

38 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Schedule of Investments (concluded) Total International ex U.S. Index Master Portfolio

	Level 1			Level 2		Level 3		Total
Assets (continued):
Switzerland		—		$	63,129,965		—	$	63,129,965
Taiwan	$	76,664			27,131,211		—		27,207,875
Thailand		—			5,055,039		—		5,055,039
Turkey		141,274			2,333,481		—		2,474,755
United Arab Emirates		500,412			1,660,943		—		2,161,355
United Kingdom		130,380			110,593,387		—		110,723,767
United States		588,666			—		—		588,666
Preferred Stock		—			1,417,221		—		1,417,221
Rights		25,069			—		—		25,069
Short-Term Securities		91,937,480			—		—		91,937,480
Total	$	225,055,932		$	851,927,344	$	15	$	1,076,983,291
Derivative Financial Instruments1
Assets:
Equity contracts	$	6,166			—		—	$	6,166
Liabilities:
Equity contracts		(5,432	)		—		—		(5,432	)
Total	$	734			—		—	$	734
1    Derivative financial instruments are futures contracts, which are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 39

Statement of Assets and Liabilities Total International ex U.S. Index Master Portfolio

December 31, 2016
Assets
Investments at value — unaffiliated (including securities loaned at value of $81,327,575) (cost — $1,000,896,618)	$	985,045,811
Investments at value — affiliated (cost — $91,929,771)		91,937,480
Foreign currency at value (cost — $3,520,626)		3,483,758
Cash		13,793
Cash pledged for futures contracts		532,620
Receivables:
Contributions from investors		3,896,613
Dividends — unaffiliated		1,351,257
Securities lending income — affiliated		43,933
Investments sold		6,078
Dividends — affiliated		1,975
Prepaid expenses		1,456
Total assets		1,086,314,774
Liabilities
Cash collateral on securities loaned at value		85,665,521
Payables:
Investments purchased		57,525
Investment advisory fees		24,546
Trustees’ fees		7,263
Other accrued expenses		173,898
Total liabilities		85,928,753
Net Assets	$	1,000,386,021
Net Assets Consist of
Investors’ capital	$	1,016,266,808
Net unrealized appreciation (depreciation)		(15,880,787	)
Net Assets	$	1,000,386,021

See Notes to Financial Statements.
40	BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND	DECEMBER 31, 2016

Statement of Operations Total International ex U.S. Index Master Portfolio

Year Ended December 31, 2016
Investment Income
Dividends — unaffiliated	$	28,663,004
Securities lending — affiliated — net		428,621
Dividends — affiliated		23,386
Foreign taxes withheld		(3,547,659	)
Total investment income		25,567,352
Expenses
Accounting services		324,533
Investment advisory		257,477
Professional		67,716
Trustees		34,674
Printing		770
Miscellaneous		6,602
Total expenses		691,772
Less fees waived and/or reimbursed by the Manager		(6,689	)
Total expenses after fees waived and/or reimbursed		685,083
Net investment income		24,882,269
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — unaffiliated (net of $2,005 foreign capital gains tax)		(11,056,521	)
Investments — affiliated		(153	)
Futures contracts		1,085,178
Foreign currency transactions		(553,123	)
Capital gain distributions from investment companies — affiliated		384
		(10,524,235	)
Net change in unrealized appreciation (depreciation) on:
Investments — unaffiliated		24,175,862
Investments — affiliated		7,709
Futures contracts		(65,915	)
Foreign currency translations		(10,810	)
		24,106,846
Net realized and unrealized gain		13,582,611
Net Increase in Net Assets Resulting from Operations	$	38,464,880

See Notes to Financial Statements.
	BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND	DECEMBER 31, 2016	41

Statements of Changes in Net Assets Total International ex U.S. Index Master Portfolio

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	24,882,269		$	21,060,000
Net realized loss		(10,524,235	)		(6,192,960	)
Net change in unrealized appreciation (depreciation)		24,106,846			(60,069,497	)
Net increase (decrease) in net assets resulting from operations		38,464,880			(45,202,457	)
Capital Transactions
Proceeds from contributions		278,639,031			352,378,750
Value of withdrawals		(153,354,833	)		(61,736,783	)
Net increase in net assets derived from capital transactions		125,284,198			290,641,967
Net Assets
Total increase in net assets		163,749,078			245,439,510
Beginning of year		836,636,943			591,197,433
End of year	$	1,000,386,021		$	836,636,943

Financial Highlights Total International ex U.S. Index Master Portfolio

	Year Ended December 31,
	2016		2015		2014			2013		2012
Total Return
Total return		4.41%		(5.80)%		(4.68)%			13.96%		16.65%
Ratios to Average Net Assets
Total expenses		0.08%		0.08%		0.15%	1		0.25%		0.42%
Total expenses after fees waived and/or reimbursed		0.08%		0.07%		0.12%	1		0.24%		0.32%
Net investment income		2.90%		2.71%		3.08%	1		2.60%		2.23%
Supplemental Data
Net assets, end of year (000)	$	1,000,386	$	836,637	$	591,197		$	556,443	$	381,056
Portfolio turnover rate		15%		6%		49%			36%		42%

¹  Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01%.

See Notes to Financial Statements.
42	BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND	DECEMBER 31, 2016

Notes to Financial Statements Total International ex U.S. Index Master Portfolio

1. Organization:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. Total International ex U.S. Index Master Portfolio (the “Master Portfolio”) is a series of MIP. The Master Portfolio is classified as non-diversified. MIP is organized as a Delaware statutory trust.

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

2. Significant Accounting Policies:

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

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

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

Segregation and Collateralization: In cases where the Master Portfolio enters into certain investments (e.g., futures) that would be treated as “senior securities” for 1940 Act purposes, the Master Portfolio may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Master Portfolio may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Master Portfolio is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain.

Recent Accounting Standard: In November 2016, the Financial Accounting Standards Board issued Accounting Standards Update “Restricted Cash” which will require entities to include the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the beginning and ending cash balances in the Statement of Cash Flows. The guidance will be applied retrospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. Management is evaluating the impact, if any, of this guidance on the Master Portfolio’s presentation in the Statement of Cash Flows.

Indemnifications: In the normal course of business, the Master Portfolio enters into contracts that contain a variety of representations that provide general indemnification. The Master Portfolio’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Master Portfolio, which cannot be predicted with any certainty.

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

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 43

Notes to Financial Statements (continued) Total International ex U.S. Index Master Portfolio

Through May 31, 2016, the Master Portfolio had an arrangement with its custodian whereby credits were earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. Credits previously earned may have been utilized until December 31, 2016. Under current arrangements effective June 1, 2016, the Master Portfolio no longer earns credits on uninvested cash, and may incur charges on uninvested cash balances and overdrafts, subject to certain conditions.

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Master Portfolio’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time or if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end. U.S. GAAP defines fair value as the price the 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 using various 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 oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Master Portfolio’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Master Portfolio’s net assets. Each business day, the Master Portfolio uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the NYSE. Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include Market approach, Income approach and the Cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement.

The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Master Portfolio’s pricing vendors, regular reviews of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis. As a result of the inherent uncertainty in valuation of these investments, the fair values may differ from the values that would have been used had an active market existed.

44 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) Total International ex U.S. Index Master Portfolio

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

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

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

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued investments. Level 3 investments include equity or debt issued by private companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

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

4. Securities and Other Investments:

Preferred Stock: Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well), but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Securities Lending: The Master Portfolio may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Master Portfolio collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio, or excess collateral returned by the Master Portfolio, on the next business day. During the term of the loan, the Master Portfolio is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as corporate bonds in the Master Portfolio’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value — unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedule of Investments.

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 45

Notes to Financial Statements (continued) Total International ex U.S. Index Master Portfolio

Securities lending transactions are entered into by the Master Portfolio under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Master Portfolio can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

As of period end, the following table is a summary of the Master Portfolio securities lending agreements by counterparty which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
BNP Paribas Securities Corp.	$	95,200	$	(95,200	)	—
Citigroup Global Markets, Inc		2,056,877		(2,056,877	)	—
Credit Suisse Securities (USA) LLC		9,026,710		(9,026,710	)	—
Deutsche Bank Securities, Inc.		1,914,456		(1,914,456	)	—
Goldman Sachs & Co		11,364,765		(11,364,765	)	—
JP Morgan Securities LLC.		5,111,931		(5,111,931	)	—
Merrill Lynch, Pierce, Fenner & Smith, Inc.		1,010,148		(1,010,148	)	—
Morgan Stanley		13,960,264		(13,960,264	)	—
Nomura Securities International, Inc.		3,770,205		(3,770,205	)	—
SG Americas Securities LLC.		188		(188	)	—
State Street Bank and Trust Co.		31,353,714		(31,353,714	)	—
UBS AG.		1,663,117		(1,663,117	)	—
Total	$	81,327,575	$	(81,327,575	)	—

¹  Cash collateral with a value of $85,665,521 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Master Portfolio could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. Derivative Financial Instruments:

The Master Portfolio engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Master Portfolio and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or OTC.

Futures Contracts: The Master Portfolio invests in long and/or short positions in futures and options on futures contracts to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Master Portfolio and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Master Portfolio is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

46 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) Total International ex U.S. Index Master Portfolio

Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Master Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

6. Investment Advisory Agreement and Other Transactions with Affiliates:

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

Investment Advisory: MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement with the Manager, the Master Portfolio’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of the Master Portfolio’s portfolio and provides the 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 at an annual rate equal to 0.03% of the average daily value of the Master Portfolio’s net assets.

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

Expense Limitations, Waivers and Reimbursements: With respect to the Master Portfolio, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the 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 expense limitation prior to May 1, 2018, unless approved by the Board, including a majority of the trustees who are not “interested persons” of the Master Portfolio, as defined in the 1940 Act (“Independent Trustees”), or by a vote of a majority of the outstanding voting securities of the Master Portfolio.

With respect to the Master Portfolio, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Master Portfolio pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). This amount is included in fees waived by the Manager in the Statement of Operations. The amount of contractual waivers and/or reimbursements of fees made pursuant to the contractual caps on net expenses will be reduced by the amount of the affiliated money market fund waiver. For the year ended December 31, 2016, the amount waived was $3,780.

Effective September 1, 2016, the Manager voluntarily agreed to waive its advisory fee with respect to any portion of the Master Portfolio’s assets invested in affiliated equity or fixed-income mutual funds or affiliated exchange-traded funds that have a contractual management fee. Prior to September 1, 2016, the Manager did not waive such fees. This voluntary waiver may be reduced or discontinued at any time without notice. For the year ended December 31, 2016, the Manager waived and/or reimbursed $117, which is included in fees waived and/or reimbursed by the Manager in the Statement of Operations.

In addition, the Master Portfolio had a waiver of investment advisory fees, which are included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2016, the Master Portfolio waived $2,792.

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

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 47

Notes to Financial Statements (continued) Total International ex U.S. Index Master Portfolio

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, BTC may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the “specials only securities”).

Pursuant to such agreement, the Master Portfolio retains 80% of securities lending income. In addition, commencing the business day following the date that the aggregate securities lending income earned across certain funds in the Equity-Liquidity Complex in a calendar year exceeds a specified threshold, the Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income.

The share of securities lending income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the year ended December 31, 2016, the Master Portfolio paid BTC $99,378 in total for securities lending agent services and collateral investment fees.

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

Other Transactions: The Master Portfolio may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common trustees. For the year ended December 31, 2016, the purchase and sale transactions and any net realized gains (losses) with affiliated funds in compliance with Rule 17a-7 under the 1940 Act were as follows:

Purchases	Sales		Net Realized Loss
$266,364,275	$	466,665,135	$	(423,884	)

7. Purchase and Sales:

For the year ended December 31, 2016, purchases and sales of investments, excluding short-term securities, were $313,537,214 and $130,498,379 respectively.

8. Income Tax Information:

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

The Master Portfolio files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolio U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016. The statutes of limitations on the Master Portfolio’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Master Portfolio as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Master Portfolio’s financial statements.

As of December 31, 2016, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	1,097,299,369
Gross unrealized appreciation	$	72,656,567
Gross unrealized depreciation		(92,972,645	)
Net unrealized depreciation	$	(20,316,078	)

9. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Master Portfolio may borrow to fund shareholder

48 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) Total International ex U.S. Index Master Portfolio

redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Master Portfolio, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2017 unless extended or renewed. Prior to April 21, 2016, the credit agreement had a fee per annum of 0.06% on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2016, the Master Portfolio did not borrow under the credit agreement.

10. Principal Risks:

In the normal course of business, the Master Portfolio invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer to meet all its obligations, including the ability to pay principal and interest when due (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 of securities owned by the Master Portfolio. Changes arising from the general economy, the overall market and local, regional or global political and/or social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

On October 11, 2016, BlackRock implemented certain changes required by amendments to Rule 2a-7 under the 1940 Act, which governs the operations of U.S. money market funds. The Master Portfolio may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Master Portfolio may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Master Portfolio’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Master Portfolio may lose value, regardless of the individual results of the securities and other instruments in which the Master Portfolio invests.

Counterparty Credit Risk: Similar to issuer credit risk, the Master Portfolio may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Master Portfolio manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the 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 approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Master Portfolio.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

Concentration Risk:

The Master Portfolio’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by the Master Portfolio.

With exchange-traded options purchased and futures, there is less counterparty credit risk to the Master Portfolio since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Master Portfolio does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally,

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 49

Notes to Financial Statements (concluded) Total International ex U.S. Index Master Portfolio

credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Master Portfolio.

Concentration Risk: The Master Portfolio invests a significant portion of its assets in securities of issuers located in Europe or with significant exposure to European issuers or countries. The European financial markets have recently experienced volatility and adverse trends due to concerns about economic downturns in, or rising government debt levels of, several European countries. These events may spread to other countries in Europe and may affect the value and liquidity of certain of the Fund’s investments.

The United Kingdom voted on June 23, 2016 to withdraw from the European Union, which may introduce significant new uncertainties and instability in the financial markets across Europe.

The Master Portfolio invests a significant portion of its assets in securities of issuers located in Asia or with significant exposure to Asian issuers or countries. The Asian financial markets have recently experienced volatility and adverse trends due to concerns in several Asian countries regarding monetary policy, government intervention in the markets, rising government debt levels or economic downturns. These events may spread to other countries in Asia and may affect the value and liquidity of certain of the Master Portfolio’s investments.

11. 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.

50 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Report of Independent Registered Public Accounting Firm Total International ex U.S. Index Master Portfolio

To the Board of Trustees of Master Investment Portfolio and the Investors of Total International ex U.S. Index Master Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Total International ex U.S. Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio, as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers and the transfer agent of the investee funds, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 51

Officers and Trustees¹

Name, Address2 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3
Rodney D. Johnson 1941	Chair of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011; Director, The Mainstay (non-profit) since 2016.	26 RICs consisting of 146 Portfolios	None
Susan J. Carter 1956	Trustee	Since 2016	Director, Pacific Pension Institute since 2014; Advisory Board Member, Center for Private Equity and Entrepreneurship at Tuck School of Business since 1997; Senior Advisor, Commonfund Capital, Inc. (“CCI”) (investment adviser) in 2015; Chief Executive Officer, CCI from 2013 to 2014; President & Chief Executive Officer, CCI from 1997 to 2013; Advisory Board Member, Girls Who Invest since 2015; Advisory Board Member, Bridges Ventures since 2016; Trustee, Financial Accounting Foundation since 2017.	26 RICs consisting of 146 Portfolios	None
Collette Chilton 1958	Trustee	Since 2015	Chief Investment Officer, Williams College since 2006; Chief Investment Officer, Lucent Asset Management Corporation from 1998 to 2006.	26 RICs consisting of 146 Portfolios	None
Neil A. Cotty 1954	Trustee	Since 2016	Bank of America Corporation from 1996 to 2015, serving in various senior finance leadership roles, including Chief Accounting Officer, from 2009 to 2015, Chief Financial Officer of Global Banking, Markets and Wealth Management from 2008 to 2009, Chief Accounting Officer from 2004 to 2008, Chief Financial Officer of Consumer Bank from 2003 to 2004, Chief Financial Officer of Global Corporate Investment Bank from 1999 to 2002.	26 RICs consisting of 146 Portfolios	None
Cynthia A. Montgomery 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012.	26 RICs consisting of 146 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 1947	Trustee	Since 2009	General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Chair, Basic Health International (non-profit) since 2015.	26 RICs consisting of 146 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company); Consol Energy Inc.
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981 and Principal since 2010.	26 RICs consisting of 146 Portfolios	None
Mark Stalnecker 1951	Trustee	Since 2015	Chief Investment Officer, University of Delaware from 1999 to 2013; Trustee, Winterthur Museum and Country Estate from 2001 to 2015; Member of the Investment Committee, Delaware Public Employees’ Retirement System since 2002; Member of the Investment Committee, Christiana Care Health System since 2009; Member of the Investment Committee, Delaware Community Foundation from 2013 to 2014; Director, SEI Private Trust Co. from 2001 to 2014.	26 RICs consisting of 146 Portfolios	None

52 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Officers and Trustees (continued)¹

Name, Address2 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3 (concluded)
Kenneth L. Urish 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since founding in 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	26 RICs consisting of 146 Portfolios	None
Claire A. Walton 1957	Trustee	Since 2016	Chief Operating Officer and Chief Financial Officer of Liberty Square Asset Management, LP from 1998 to 2015; General Partner of Neon Liberty Capital Management, LLC since 2003; Director, Boston Hedge Fund Group since 2009; Director, Woodstock Ski Runners since 2013; Director, Massachusetts Council on Economic Education from 2013 to 2015.	26 RICs consisting of 146 Portfolios	None
Frederick W. Winter 1945	Trustee	Since 2009	Director, Alkon Corporation since 1992; Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh, Dean and Professor from 1997 to 2005, Professor until 2013.	26 RICs consisting of 146 Portfolios	None
	1    As of February 24, 2017.
	2    The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	3    Independent Trustees serve until their resignation, retirement, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Independent Trustees on a case-by-case basis, as appropriate.
	4    In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, certain Independent Trustees were elected to the Board. As a result, although the chart shows certain Independent Trustees as joining the Board in 2009, those Independent Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: Rodney D. Johnson, 1995; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1999; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees5
Barbara G. Novick 1960	Trustee	Since 2015	Vice Chairman of BlackRock, Inc. since 2006; Chair of BlackRock's Government Relations Steering Committee since 2009; Head of the Global Client Group of BlackRock, Inc. from 1988 to 2008.	100 RICs consisting of 220 Portfolios	None
John M. Perlowski 1964	Trustee, President and Chief Executive Officer	Since 2015 (Trustee); Since 2010 (President and Chief Executive Officer)	Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Fund & Accounting Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Advisory Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.	128 RICs consisting of 318 Portfolios	None
	5    Ms. Novick and Mr. Perlowski are both “interested persons,” as defined in the 1940 Act, of the Trust/MIP based on their positions with BlackRock and its affiliates. Mr. Perlowski and Ms. Novick are also board members of certain complexes of BlackRock registered open-end and closed-end funds. Mr. Perlowski is also a board member of the BlackRock Equity-Bond Complex and the BlackRock Closed-End Complex, and Ms. Novick is a board member of the BlackRock Closed-End Complex.

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 53

Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Officers Who Are Not Trustees2
Thomas Callahan 1968	Vice President	Since 2016	Managing Director of BlackRock, Inc. since 2013; Head of BlackRock’s Global Cash Management Business since 2016; Co-Head of the Global Cash Management Business from 2014 to 2016; Deputy Head of the Global Cash Management Business from 2013 to 2014; Member of the Cash Management Group Executive Committee since 2013; Chief Executive Officer of NYSE Liffe U.S. from 2008 to 2013.
Jennifer McGovern 1977	Vice President	Since 2014	Managing Director of BlackRock, Inc. since 2016; Director of BlackRock, Inc. from 2011 to 2015; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal J. Andrews 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock, Inc. 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 M. Fife 1970	Treasurer	Since 2007	Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Charles Park 1967	Chief Compliance Officer	Since 2014	Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Fernanda Piedra 1969	Anti-Money Laundering Compliance Officer	Since 2015	Director of BlackRock, Inc. since 2014; Anti-Money Laundering Compliance Officer and Regional Head of Financial Crime for the Americas at BlackRock, Inc. since 2014; Head of Regulatory Changes and Remediation for the Asset Wealth Management Division of Deutsche Bank from 2010 to 2014; Vice President of Goldman Sachs (Anti-Money Laundering/Suspicious Activities Group) from 2004 to 2010.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock, Inc. since 2014; Director of BlackRock, Inc. from 2010 to 2013; Secretary of the iShares® exchange traded funds since 2015; Secretary of the BlackRock-advised mutual funds since 2012.
	1    The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	2    Officers of the Trust/MIP serve at the pleasure of the Board.
	Further information about the Trust's/MIP's Officers and Trustees is available in the Trust's/MIP's Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.

Effective December 31, 2016, David O. Beim and Dr. Matina S. Horner resigned as Trustees of the Trust/MIP.

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

54 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

Additional Information

General Information

Householding

The Fund will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Fund at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Fund/Master Portfolio file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s/Master Portfolio’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room or how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The 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 upon request and without charge (1) by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

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

BlackRock’s Mutual Fund Family

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

Shareholder Privileges

Account Information

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

Automatic Investment Plans

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

Systematic Withdrawal Plans

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

Retirement Plans

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

BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016 55

Additional Information (concluded)

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

56 BLACKROCK TOTAL INTERNATIONAL ex U.S. INDEX FUND DECEMBER 31, 2016

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

TIEXUS-12/16-AR

DECEMBER 31, 2016

  ANNUAL REPORT

BlackRock U.S. Total Bond Index Fund  |  of BlackRock Funds III

Not FDIC Insured • May Lose Value • No Bank Guarantee

Table of Contents

	Page
The Markets in Review		3
Annual Report:
Fund Summary		4
About Fund Performance		6
Disclosure of Expenses		6
Fund Financial Statements:
Statement of Assets and Liabilities		7
Statement of Operations		8
Statements of Changes in Net Assets		9
Fund Financial Highlights		10
Fund Notes to Financial Statements		13
Fund Report of Independent Registered Public Accounting Firm		17
Important Tax Information		17
Master Portfolio Information		18
Master Portfolio Financial Statements:
Schedule of Investments		19
Statement of Assets and Liabilities		49
Statement of Operations		50
Statements of Changes in Net Assets		51
Master Portfolio Financial Highlights		51
Master Portfolio Notes to Financial Statements		52
Master Portfolio Report of Independent Registered Public Accounting Firm		59
Officers and Trustees		60
Additional Information		63

2 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

The Markets in Review

Dear Shareholder,

The year 2016 started on a fraught note with worries about slowing growth in China, plunging oil prices and sliding share prices. Then reflationary expectations in the United States helped drive a second-half global growth pick-up and big market reversals. As such, higher-quality asset classes such as Treasury bonds, municipals and investment grade credit prevailed in the first half of the year, only to struggle in the second. In contrast, risk assets sold off at the start of the year and rebounded in the latter half, with some asset classes posting strong year-end returns.

A key takeaway from 2016’s market performance is that economics can trump politics. The global reflationary theme — governments taking policy action to support growth — was the dominant driver of 2016 asset returns, outweighing significant political upheavals and uncertainty. This trend accelerated after the U.S. election on expectations for an extra boost to U.S. growth via fiscal policy.

Markets were remarkably resilient during the year. Spikes in equity volatility after big surprises such as the U.K.’s vote to leave the European Union and the outcome of the U.S. presidential election were short-lived. Instead, political surprises and initial sell-offs were seized upon as buying opportunities. We believe this reinforces the case for taking the long view rather than reacting to short-term market noise.

Asset returns varied widely in 2016. Perceived safe assets such as government bonds and low-volatility shares underperformed the higher-risk areas of the market. And the reversal of longstanding trends created opportunities, such as in the recovery of value stocks and commodities.

We expect some of these trends to extend into 2017 and see the potential for more flows into risk assets this year. Learn more by reading our market insights at blackrock.com.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2016
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		7.82	%		11.96	%
U.S. small cap equities (Russell 2000® Index)		18.68			21.31
International equities (MSCI Europe, Australasia, Far East Index)		5.67			1.00
Emerging market equities (MSCI Emerging Markets Index)		4.49			11.19
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.18			0.33
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		(7.51	)		(0.16	)
U.S. investment grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index)		(2.53	)		2.65
Tax-exempt municipal bonds (S&P Municipal Bond Index)		(3.43	)		0.77
U.S. high yield bonds (Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		7.40			17.13
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, 2016

Investment Objective

BlackRock U.S. Total 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 Bloomberg Barclays U.S. Aggregate Bond Index (the “Index”).

Portfolio Management Commentary

How did the Fund perform?

• For the 12-month period ended December 31, 2016, the Fund’s Institutional Shares returned 2.48%, Investor A Shares returned 2.14% and Class K Shares returned 2.53%. For the same period, the benchmark Bloomberg Barclays U.S. Aggregate Bond Index (the “Index”) returned 2.65%.

• 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 U.S. Total Bond Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio.

Describe the market environment.

• Early 2016 proved to be an uncertain and volatile period for the global economy and markets, as fears ranged from slowing in China’s growth and attendant trouble in commodity-exporting emerging markets, to concern over the United States’ own growth prospects and questions over the future path of U.S. Federal Reserve (the “Fed”) monetary policy. The downward shift in market sentiment was particularly remarkable considering that at the end of 2015 the Fed felt that economic conditions warranted an end to seven years of near-zero short-term rates. Yet by mid-February, much of the fear had abated and financial conditions began to stabilize. While many U.S. economic measures disappointed early in 2016, by the end of March the same measurements appeared to be on a stronger footing and markets reversed their losses from earlier in the quarter.

• The monetary policy statement released in March by the Federal Open Market Committee (“FOMC”) represented a continuation of the “wait-and-see” trend anticipated by the market. The Fed continued to keep the door open to interest rate policy normalization, which it began in December, with the pace of change dictated by economic data and financial conditions. Additionally, the FOMC’s changes to its Statement of Economic Projections also highlighted the increasingly incremental path of interest rate changes, and some continued uncertainty over U.S. growth prospects in a world of slowing economic growth. Markets continued to attempt to time the next U.S. rate hike, without great conviction, but were rocked in late June after the United Kingdom voted unexpectedly to leave the European Union. Markets had been positioned for a “Remain” outcome to the referendum and reacted negatively and violently to the decisive 52% to 48% vote for “Brexit.” Risk assets were routed in the immediate aftermath while the British pound plunged more than 10%, a record one-day drop that took the currency to levels not seen since 1985.

• The flight to safety following the Brexit result saw yields for U.S. Treasuries and other sovereign bonds decline sharply. This came on top of downward moves that had already pushed 10-year yields to record lows in Japan, Germany and the United Kingdom ahead of the Brexit vote, as uncertainty over the outcome heightened. Following Brexit, the

yield of the 10-year U.S. Treasury fell to its lowest level since mid- 2012. The U.K. vote also weighed heavily on oil and industrial commodities, while gold rallied by 5%.

• The third quarter was dominated by politics in the form of “Brexit” fallout and the U.S. presidential election. The Fed left the federal funds rate unchanged at its September meeting, but left open the possibility of a hike later in the year, with the market pricing in a 60% chance of a December hike. Yields moved higher over the quarter, with both 10- and 30-year Treasuries reaching post-Brexit peaks of 1.75% and 2.50%, respectively, in mid-September.

• The fourth quarter was dominated by the surprise outcome of the U.S election, the Fed’s December rate hike, Fed statements shifting to a slightly more hawkish tone, and OPEC’s agreement to cut oil output for the first time in eight years. With the Republicans winning control of the White House and both houses of Congress the yield curve steepened and the “reflation” move that had begun in mid-September was propelled further. The market move was driven by the view that fiscal spending, tax cuts and tightened immigration policies would lead to increased inflation, higher interest rates and steeper yield curves.

• The year ended with most equity indices near all-time highs and oil prices at their highest levels in more than a year. Early in December, markets shrugged off a “no” vote to Italian constitutional reform and a surprise European Central Bank (“ECB”) decision to wind down its bond purchases and buy below the deposit rate. The ECB’s decision caused global yield curves to steepen and the euro to experience its worst trading day since Brexit. December also saw the first Fed rate hike of 2016. The Fed’s accompanying statement was perceived to have a slightly hawkish tilt, as it introduced the concept of three rate hikes in 2017, sending the dollar higher. Following the Fed’s decision, the U.S. yield curve de-coupled from global yield curves and flattened quite significantly. After breaking through the psychologically significant 2.5% level, the yield of the 10-year Treasury bond closed December at 2.45%.

Describe recent portfolio activity.

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

• 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.

• The Master Portfolio remains positioned to attempt to match the risk characteristics of the Index, irrespective of the market’s future direction.

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

4 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Total Return Based on a $10,000 Investment

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

²  The Fund invests all of its assets in the Master Portfolio. The Master Portfolio invests primarily in investment-grade U.S. Government securities and corporate bonds, as well as investment-grade mortgage-backed, asset-backed and commercial mortgage-backed securities.

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

Performance Summary for the Period Ended December 31, 2016

	Standardized 30-Day  Yields			Unsubsidized 30-Day Yields			6-Month Total Returns			Average Annual Total Returns
										1 Year			5 Years			10 Years
Institutional		2.04	%		2.02	%		(2.67	)%		2.48	%		2.00	%		4.21	%
Investor A		1.79			1.77			(2.89	)		2.14			1.73			3.94
Class K		2.08			2.07			(2.65	)		2.53			2.05			4.26
Bloomberg Barclays U.S. Aggregate Bond Index		—			—			(2.53	)		2.65			2.23			4.34

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

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical5
	Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period4		Beginning Account Value July 1, 2016		Ending Account Value December 31, 2016		Expenses Paid During the Period4		Annualized Expense Ratio
Institutional	$	1,000.00	$	973.30	$	0.50	$	1,000.00	$	1,024.63	$	0.51		0.10	%
Investor A	$	1,000.00	$	972.10	$	1.74	$	1,000.00	$	1,023.38	$	1.78		0.35	%
Class K	$	1,000.00	$	973.50	$	0.25	$	1,000.00	$	1,024.89	$	0.25		0.05	%

⁴  For each class of the Fund, expenses are equal to the annualized net expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period shown). Because the Fund invests all of its assets in the Master Portfolio, the expense example reflects the net expenses of both the Fund and the Master Portfolio.

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

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

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 5

About Fund Performance

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

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

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund

shares. Figures shown in the performance table on the previous page assume reinvestment of all distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Distributions paid to each class of shares will vary because of the different levels of service, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders.

BlackRock Advisors, LLC (the “Administrator”), the Fund’s administrator, has contractually agreed to waive a portion of the Fund’s expenses. Without such waiver, the Fund’s performance would have been lower. The Administrator is under no obligation to continue waiving its fees after the applicable termination date of such agreement. See Note 4 of the Notes to Financial Statements for additional information on waivers. The standardized 30-day yield includes the effects of any waivers and/or reimbursements. The unsubsidized 30-day yield excludes the effects of any waivers and/or reimbursements.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including administration fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example shown on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2016 and held through December 31, 2016) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

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

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

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

6 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Statement of Assets and Liabilities BlackRock U.S. Total Bond Index Fund

December 31, 2016
Assets
Investments at value — Master Portfolio (cost — $635,204,876)	$	633,549,693
Capital shares sold receivable		10,831,166
Total assets		644,380,859
Liabilities
Payables:
Contributions to the Master Portfolio		10,160,930
Administration fees		12,237
Capital shares redeemed		670,240
Service fees		14,216
Other accrued expenses		9,335
Total liabilities		10,866,958
Net Assets	$	633,513,901
Net Assets Consist of
Paid-in capital	$	639,216,377
Distributions in excess of net investment income		(1,524,099	)
Accumulated net realized loss allocated from the Master Portfolio		(2,523,194	)
Net unrealized appreciation (depreciation) allocated from the Master Portfolio		(1,655,183	)
Net Assets	$	633,513,901
Net Asset Value
Institutional — Based on net assets of $116,473,097 and 11,626,448 shares outstanding, unlimited shares authorized, no par value	$	10.02
Investor A — Based on net assets of $71,391,025 and 7,128,452 shares outstanding, unlimited shares authorized, no par value	$	10.01
Class K — Based on net assets of $445,649,779 and 44,474,668 shares outstanding, unlimited shares authorized, no par value	$	10.02

See Notes to Financial Statements.
	BLACKROCK U.S. TOTAL BOND INDEX FUND	DECEMBER 31, 2016	7

Statement of Operations BlackRock U.S. Total Bond Index Fund

Year Ended December 31, 2016
Investment Income
Net investment income allocated from the Master Portfolio:
Interest — unaffiliated	$	9,548,137
Interest — affiliated		15,349
Dividends — affiliated		363,076
Securities lending — affiliated — net		3,678
Foreign taxes withheld		(63	)
Expenses		(215,661	)
Fees waived		66,039
Total investment income		9,780,555
Fund Expenses
Administration — class specific		152,354
Service — class specific		111,315
Professional		8,406
Miscellaneous		394
Total expenses		272,469
Less fees waived by the Administrator		(8,406	)
Total expenses after fees waived		264,063
Net investment income		9,516,492
Realized and Unrealized Gain (Loss) Allocated from the Master Portfolio
Net realized loss from investments and capital gain distributions from investment companies — affiliated		(797,587	)
Net change in unrealized appreciation (depreciation) on investments		(5,280,286	)
Total realized and unrealized loss		(6,077,873	)
Net Increase in Net Assets Resulting from Operations	$	3,438,619

See Notes to Financial Statements.
8	BLACKROCK U.S. TOTAL BOND INDEX FUND	DECEMBER 31, 2016

Statements of Changes in Net Assets BlackRock U.S. Total Bond Index Fund

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	9,516,492		$	4,060,761
Net realized loss		(797,587	)		(76,251	)
Net change in unrealized appreciation (depreciation)		(5,280,286	)		(3,379,947	)
Net increase in net assets resulting from operations		3,438,619			604,563
Distributions to Shareholders1
From net investment income:
Institutional		(1,992,284	)		(857,237	)
Investor A		(838,384	)		(260,313	)
Class K		(7,429,255	)		(3,138,838	)
From net realized gain:
Institutional		(97,217	)		(82,778	)
Investor A		(58,049	)		(28,069	)
Class K		(338,359	)		(302,505	)
From return of capital:
Institutional		(7,091	)		—
Investor A		(3,294	)		—
Class K		(25,760	)		—
Decrease in net assets resulting from distributions to shareholders		(10,789,693	)		(4,669,740	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		397,474,646			42,736,554
Net Assets
Total increase in net assets		390,123,572			38,671,377
Beginning of year		243,390,329			204,718,952
End of year	$	633,513,901		$	243,390,329
Distributions in excess of net investment income, end of year	$	(1,524,099	)	$	(780,668	)
1   Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.
	BLACKROCK U.S. TOTAL BOND INDEX FUND	DECEMBER 31, 2016	9

Financial Highlights BlackRock U.S. Total Bond Index Fund

	Institutional
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.99		$	10.17		$	9.85		$	10.65		$	10.57
Net investment income1		0.20			0.19			0.17			0.15			0.19
Net realized and unrealized gain (loss)		0.05			(0.16	)		0.41			(0.40	)		0.22
Net increase (decrease) from investment operations		0.25			0.03			0.58			(0.25	)		0.41
Distributions:2
From net investment income		(0.21	)		(0.19	)		(0.17	)		(0.18	)		(0.22	)
From net realized gain		(0.01	)		(0.02	)		(0.09	)		(0.37	)		(0.11	)
From return of capital		(0.00	)3		—			—			—			—
Total distributions		(0.22	)		(0.21	)		(0.26	)		(0.55	)		(0.33	)
Net asset value, end of year	$	10.02		$	9.99		$	10.17		$	9.85		$	10.65
Total Return4
Based on net asset value		2.48%			0.33%			5.88%			(2.39)%			3.91%
Ratios to Average Net Assets5
Total expenses		0.10%	6,7		0.12%	8,9		0.17%	8,9		0.26%	6		0.26%	6
Total expenses after fees waived		0.10%	6,7		0.11%	8,9		0.16%	8,9		0.25%	6		0.25%	6
Net investment income		1.95%	6,7		1.85%	8,9		1.67%	8,9		1.48%	6		1.71%	6
Supplemental Data
Net assets, end of year (000)	$	116,473		$	58,043		$	34,538		$	22,939		$	11,534
Portfolio turnover rate of the Master Portfolio10		278%			356%			476%			417%			436%

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

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

⁷ Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01%.

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

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

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

	Year Ended December 31,
	2016		2015		2014		2013		2012
Portfolio turnover rate (excluding MDRs)		164%		300%		244%		214%		231%

See Notes to Financial Statements.
10	BLACKROCK U.S. TOTAL BOND INDEX FUND	DECEMBER 31, 2016

Financial Highlights (continued) BlackRock U.S. Total Bond Index Fund

	Investor A
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.99		$	10.17		$	9.85		$	10.65		$	10.57
Net investment income1		0.17			0.16			0.15			0.11			0.16
Net realized and unrealized gain (loss)		0.05			(0.15	)		0.41			(0.39	)		0.22
Net increase (decrease) from investment operations		0.22			0.01			0.56			(0.28	)		0.38
Distributions:2
From net investment income		(0.19	)		(0.17	)		(0.15	)		(0.15	)		(0.19	)
From net realized gain		(0.01	)		(0.02	)		(0.09	)		(0.37	)		(0.11	)
From return of capital		(0.00	)3		—			—			—			—
Total distributions		(0.20	)		(0.19	)		(0.24	)		(0.52	)		(0.30	)
Net asset value, end of year	$	10.01		$	9.99		$	10.17		$	9.85		$	10.65
Total Return4
Based on net asset value		2.14%			0.08%			5.63%			(2.63)%			3.66%
Ratios to Average Net Assets5
Total expenses		0.35%	6,7		0.37%	6,7		0.41%	8,9		0.51%	6		0.51%	6
Total expenses after fees waived		0.35%	6,7		0.36%	6,7		0.40%	8,9		0.50%	6		0.50%	6
Net investment income		1.69%	6,7		1.61%	6,7		1.44%	8,9		1.10%	6		1.45%	6
Supplemental Data
Net assets, end of year (000)	$	71,391		$	19,145		$	10,732		$	3,735		$	1,805
Portfolio turnover rate of the Master Portfolio10		278%			356%			476%			417%			436%

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

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

⁷ Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01%.

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

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

¹⁰ Includes MDRs. Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Portfolio turnover rate (excluding MDRs)		164%		300%		244%		214%		231%

See Notes to Financial Statements.
	BLACKROCK U.S. TOTAL BOND INDEX FUND	DECEMBER 31, 2016	11

Financial Highlights (concluded) BlackRock U.S. Total Bond Index Fund

	Class K
	Year Ended December 31,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.99		$	10.17		$	9.85		$	10.65		$	10.57
Net investment income1		0.20			0.19			0.17			0.16			0.22
Net realized and unrealized gain (loss)		0.06			(0.15	)		0.41			(0.41	)		0.19
Net increase (decrease) from investment operations		0.26			0.04			0.58			(0.25	)		0.41
Distributions:2
From net investment income		(0.22	)		(0.20	)		(0.17	)		(0.18	)		(0.22	)
From net realized gain		(0.01	)		(0.02	)		(0.09	)		(0.37	)		(0.11	)
From return of capital		(0.00	)3		—			—			—			—
Total distributions		(0.23	)		(0.22	)		(0.26	)		(0.55	)		(0.33	)
Net asset value, end of year	$	10.02		$	9.99		$	10.17		$	9.85		$	10.65
Total Return4
Based on net asset value		2.53%			0.38%			5.94%			(2.35)%			3.94%
Ratios to Average Net Assets5
Total expenses		0.05%	6,7		0.07%	8,9		0.12%	8,9		0.21%	6		0.21%	8
Total expenses after fees waived		0.05%	6,7		0.06%	8,9		0.10%	8,9		0.20%	6		0.20%	8
Net investment income		2.00%	6,7		1.89%	8,9		1.72%	8,9		1.52%	6		1.96%	8
Supplemental Data
Net assets, end of year (000)	$	445,650		$	166,203		$	159,449		$	96,193		$	115,516
Portfolio turnover rate of the Master Portfolio10		278%			356%			476%			417%			436%

¹ Based on average shares outstanding.

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

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

⁴ Where applicable, assumes the reinvestment of distributions.

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

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

⁷ Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01%.

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

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

¹⁰ Includes MDRs. Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Portfolio turnover rate (excluding MDRs)		164%		300%		244%		214%		231%

See Notes to Financial Statements.
12	BLACKROCK U.S. TOTAL BOND INDEX FUND	DECEMBER 31, 2016

Notes to Financial Statements BlackRock U.S. Total Bond Index Fund

1. Organization:

BlackRock Funds III (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. BlackRock U.S. Total Bond Index Fund (the “Fund”) is a series of the Trust. The Fund is classified as diversified. The Trust is organized as a Delaware statutory trust. The Fund seeks to achieve its investment objective by investing all of its assets in U.S. Total Bond Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), an affiliate of the Fund, which has the same investment objective and strategies as the Fund. The value of the Fund’s investment in the Master Portfolio reflects the Fund’s proportionate interest in the net assets of the Master Portfolio. The performance of the Fund is directly affected by the performance of the Master Portfolio. At December 31, 2016, the percentage of the Master Portfolio owned by the Fund was 21.0%. The financial statements of the Master Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with the Fund’s financial statements.

The Fund offers multiple classes of shares. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that certain classes bear expenses related to the shareholder servicing and distribution of such shares. Institutional and Class K Shares are sold only to certain eligible investors. Investor A Shares are generally available through financial intermediaries. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures. The Board of Trustees of the Trust and Board of Trustees of MIP are referred to throughout this report as the “Board of Trustees” or the “Board” and the members are referred to as “Trustees.”

Share Class	Initial Sales Charge		CDSC		Conversion Privilege
Institutional Shares		No		No		None
Investor A Shares		No		No		None
Class K Shares		No		No		None

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

2. Significant Accounting Policies:

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

Investment Transactions and 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 its proportionate share of the Master Portfolio’s income, expenses and realized and unrealized gains and losses on a daily basis. In addition, the Fund accrues its own expenses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Distributions: Distributions paid by the Fund are recorded on the ex-dividend date. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The character and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. The portion of distributions, if any, that exceeds the Fund’s current and accumulated earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. The character and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

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

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 13

Notes to Financial Statements (continued) BlackRock U.S. Total Bond Index Fund

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Fund’s policy is to value its financial instruments at fair 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 3 of the Master Portfolio’s Notes to Financial Statements, which are included elsewhere in this report.

4. Administration Agreement and Other Transactions with Affiliates:

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

Administration: The Trust, on behalf of the Fund, entered into an Administration Agreement with BAL, which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL, in consideration thereof, has agreed to bear all of the Fund’s ordinary operating expenses, excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the Fund. BAL is entitled to receive for these administration services an annual rate based on the average daily net assets of the relevant share class of the Fund as follows:

Institutional	Investor A		Class K
0.06%		0.06%		0.01%

Prior to October 5, 2016, the annual rates as a percentage of average daily net assets of the relevant share class of the Fund were as follows:

Institutional	Investor A		Class K
0.07%		0.07%		0.02%

From time to time, BAL may waive such fees in whole or in part. Any such waiver will reduce the expenses of the Fund and, accordingly, have a favorable impact on its performance. BAL may delegate certain of its administration duties to sub-administrators. For the year ended December 31, 2016, BAL waived $8,406.

For the year ended December 31, 2016, the following table shows the class specific administration fees borne directly by each class of the Fund:

Institutional	Investor A		Class K		Total
$63,979	$	29,403	$	58,972	$	152,354

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

BRIL and broker-dealers, pursuant to sub-agreements with 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 the shareholders.

For the year ended December 31, 2016, the Investor A service fee was $111,315.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the U.S. Securities and Exchange Commission, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow and lend under the Interfund Lending Program.

The Fund may lend in aggregate up to 15% of its net assets. but no more than 5% of its net assets, to any one borrowing fund through the Interfund Lending Program. The Fund may not borrow through the Interfund Lending Program or from any other source more than 33  ¹/₃ of its total assets or any lower threshold provided for by the Fund’s investment restrictions. If the Fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2016, the Fund did not participate in the Interfund Lending Program.

14 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) BlackRock U.S. Total Bond Index Fund

Officers and Trustees: The fees and expenses of the Trust’s trustees who are not “interested persons” of the Trust, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and the Trust’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Fund. BAL has contractually agreed to reimburse the Fund or provide an offsetting credit against the administration fees paid by the Fund in an amount equal to these independent expenses through April 30, 2018.

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

5. Income Tax Information:

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

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016. The statute of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

The tax character of distributions paid was as follows:

	2016		2015
Ordinary income	$	10,753,548	$	4,669,740
Return of capital		36,145		—
Total	$	10,789,693	$	4,669,740

As of period end, the tax components of accumulated net earnings (losses) were as follows:

Net unrealized gains (losses)1	$	(3,300,527	)
Qualified late-year losses2		(2,401,949	)
Total	$	(5,702,476	)

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

²  The Fund has elected to defer certain qualified late-year losses and recognize such losses in the next taxable year.

During the year ended December 31, 2016, the Fund utilized $24,583 of its capital loss carryforward.

6. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended December 31, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Institutional
Shares sold		9,997,004		$	102,270,160			3,494,789		$	35,345,100
Shares issued in reinvestment of distributions		204,879			2,096,591			92,751			940,015
Shares redeemed		(4,384,125	)		(44,963,519	)		(1,175,402	)		(11,908,283	)
Net increase		5,817,758		$	59,403,232			2,412,138		$	24,376,832
Investor A
Shares sold		6,384,502		$	65,506,281			1,692,928		$	17,181,316
Shares issued in reinvestment of distributions		88,119			899,723			28,480			288,368
Shares redeemed		(1,260,562	)		(12,926,826	)		(860,554	)		(8,749,332	)
Net increase		5,212,059		$	53,479,178			860,854		$	8,720,352

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 15

Notes to Financial Statements (concluded) BlackRock U.S. Total Bond Index Fund

	Year Ended December 31, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class K
Shares sold		38,207,729		$	390,051,923			6,441,775		$	65,411,564
Shares issued in reinvestment of distributions		760,043			7,777,159			336,986			3,418,699
Shares redeemed		(11,124,387	)		(113,236,846	)		(5,827,054	)		(59,190,893	)
Net increase		27,843,385		$	284,592,236			951,707		$	9,639,370
Total Net Increase		38,873,202		$	397,474,646			4,224,699		$	42,736,554

7. Subsequent Events:

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

16 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Report of Independent Registered Public Accounting Firm BlackRock U.S. Total Bond Index Fund

To the Board of Trustees of BlackRock Funds III and the Shareholders of BlackRock U.S Total Bond Index Fund:

In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock U.S. Total Bond Index Fund, (the “Fund”), a series of BlackRock Funds III, as of December 31, 2016, 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 Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

Important Tax Information (Unaudited)

During the fiscal year ended December 31, 2016, the following information is provided with respect to the ordinary income distributions paid by the Fund:

Federal Obligation Interest1	24.80%
Interest-Related Dividends for Non-U.S. Residents and Qualified Short-Term Capital Gains2	88.09%

¹  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.

²  Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations.

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 17

Master Portfolio Information U.S. Total Bond Index Master Portfolio

As of December 31, 2016

Portfolio Composition Percent of
Total Investments

U.S. Treasury Obligations	32	%
U.S. Government Sponsored Agency Securities	27
Corporate Bonds	23
Foreign Agency Obligations	3
Non-Agency Mortgage-Backed Securities	1
Municipal Bonds	1
Asset Backed Securities	—	1
Short-Term Securities	14
TBA Sale Commitments	(1	)

¹  Represents less than 1%.

Credit Quality Allocation² Percent of Total  Investments³

AAA/Aaa4	72	%
AA/Aa	5
A	11
BBB/Baa	12
NR	—	1

² For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”). These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

³  Total investments exclude short-term securities.

⁴  The investment adviser evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors, individual investments and/or issuer. Using this approach, the investment adviser has deemed U.S. Government Sponsored Agency Securities and U.S. Treasury Obligations as AAA/Aaa.

18 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Schedule of Investments December 31, 2016 U.S. Total Bond Index Master Portfolio (Percentages shown are based on Net Assets)

Asset-Backed Securities	Par   (000)		Value
BMW Vehicle Owner Trust, Series 2014-A, Class A4, 1.50%, 2/25/21	$	200	$	200,383
Carmax Auto Owner Trust 2016-3, Series 2016-3, Class A3, 1.39%, 5/17/21		3,000		2,980,139
Citibank Credit Card Issuance Trust, Class A1:
Series 2008-A1, 5.35%, 2/07/20		170		177,372
Series 2016-A1, 1.75%, 11/19/21		3,000		2,986,785
GE Capital Credit Card Master Note Trust, Series 2013-1, Class A, 1.35%, 3/15/21		750		748,762
Honda Auto Receivables Owner Trust, Series 2015-3, Class A4, 1.56%, 10/18/21		2,000		2,001,328
Synchrony Credit Card Master Note Trust, Series 2015-1, Class A, 2.37%, 3/15/23		3,000		3,027,055
Toyota Auto Receivables Owner Trust, Series 2014-C, Class A4, 1.44%, 4/15/20		200		200,217
Total Asset-Backed Securities — 0.4%				12,322,041
Corporate Bonds
Aerospace & Defense — 0.4%
Boeing Co.:
2.35%, 10/30/21		75		75,440
1.88%, 6/15/23		500		476,887
6.13%, 2/15/33		100		128,102
3.30%, 3/01/35		65		60,826
3.38%, 6/15/46		250		227,675
Crane Co., 4.45%, 12/15/23		125		129,299
Dover Corp., 3.15%, 11/15/25		250		251,586
Eaton Corp.:
2.75%, 11/02/22		250		247,609
4.00%, 11/02/32		200		197,167
4.15%, 11/02/42		250		244,369
Embraer Netherlands Finance BV, 5.05%, 6/15/25		250		248,500
General Dynamics Corp.:
3.88%, 7/15/21		50		53,130
2.25%, 11/15/22		500		493,960
Harris Corp.:
3.83%, 4/27/25		250		253,967
4.85%, 4/27/35		65		68,292
Honeywell International, Inc., Series 30, 5.38%, 3/01/41		500		610,022
Illinois Tool Works, Inc., 2.65%, 11/15/26		500		477,959
L-3 Communications Corp., 4.95%, 2/15/21		250		267,088
Lockheed Martin Corp.:
2.50%, 11/23/20		1,000		1,008,450
3.55%, 1/15/26		250		255,428
3.60%, 3/01/35		65		61,750
4.07%, 12/15/42		100		98,705
3.80%, 3/01/45		500		473,510
4.70%, 5/15/46		750		815,794
Northrop Grumman Corp.:
1.75%, 6/01/18		250		250,687
3.25%, 8/01/23		500		509,727
4.75%, 6/01/43		375		408,563

Corporate Bonds	Par   (000)		Value
Aerospace & Defense (continued)
Parker-Hannifin Corp., 4.20%, 11/21/34	$	250	$	255,454
Precision Castparts Corp.:
1.25%, 1/15/18		75		74,851
2.50%, 1/15/23		150		147,735
4.20%, 6/15/35		250		261,866
Raytheon Co.:
4.88%, 10/15/40		250		281,130
4.70%, 12/15/41		100		110,106
Textron, Inc., 3.65%, 3/01/21		350		359,544
Tyco Electronics Group SA, 3.45%, 8/01/24		75		75,318
United Technologies Corp.:
1.78%, 5/04/18 (a)		500		500,109
3.10%, 6/01/22		600		616,705
5.70%, 4/15/40		50		61,119
4.50%, 6/01/42		700		749,283
4.15%, 5/15/45		250		252,497
3.75%, 11/01/46		750		713,765
				12,853,974
Air Freight & Logistics — 0.1%
FedEx Corp.:
4.00%, 1/15/24		250		263,517
3.25%, 4/01/26		545		541,260
3.90%, 2/01/35		190		182,443
3.88%, 8/01/42		50		45,635
4.75%, 11/15/45		160		165,708
4.55%, 4/01/46		750		755,782
United Parcel Service, Inc.:
5.13%, 4/01/19		50		53,695
3.13%, 1/15/21		500		516,768
2.45%, 10/01/22		500		497,936
6.20%, 1/15/38		100		131,554
3.40%, 11/15/46		220		202,799
				3,357,097
Airlines — 0.0%
American Airlines Pass-Through Trust:
Series 2013-2, Class A, 4.95%, 1/15/23		160		170,411
Series 2016-2, Class AA, 3.20%, 6/15/28		500		486,250
Continental Airlines Pass-Through Trust, Series 2012-1, Class A, 4.15%, 4/11/24		41		42,525
Southwest Airlines Co., 2.75%, 11/06/19		75		76,324
United Airlines Pass-Through Trust:
Series 2013-1, Class A, 4.30%, 8/15/25		180		185,844
Series 2016-1, Class AA, 3.10%, 7/07/28		500		482,500
				1,443,854
Auto Components — 0.0%
BorgWarner, Inc., 3.38%, 3/15/25		70		68,805
Delphi Automotive PLC, 4.40%, 10/01/46		500		459,395
				528,200
Automobiles — 0.1%
Ford Motor Co.:
4.35%, 12/08/26		750		757,874

Portfolio Abbreviations

AGM	Assured Guaranty Municipal Corp.	GO	General Obligation Bonds	RB	Revenue Bonds
COP	Certificates of Participation	NPFGC	National Public Finance Guarantee Corp.	TBA	To-be-announced
EDA	Economic Development Authority

See Notes to Financial Statements.

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 19

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Automobiles (continued)
Ford Motor Co. (continued):
7.45%, 7/16/31	$	150	$	188,257
4.75%, 1/15/43		350		332,292
5.29%, 12/08/46		500		506,495
General Motors Co.:
4.88%, 10/02/23		100		104,827
5.00%, 4/01/35		750		731,342
6.60%, 4/01/36		250		285,752
5.20%, 4/01/45		250		240,978
6.75%, 4/01/46		275		322,490
				3,470,307
Banks — 3.3%
Australia & New Zealand Banking Group Ltd.:
1.50%, 1/16/18		250		249,827
2.25%, 6/13/19		250		250,809
2.30%, 6/01/21		1,000		984,474
Bancolombia SA, 5.95%, 6/03/21		100		108,530
Bank of Montreal:
1.40%, 4/10/18		730		728,114
1.35%, 8/28/18		1,000		995,260
Bank of New York Mellon Corp.:
1.35%, 3/06/18		250		249,397
2.20%, 5/15/19		250		251,509
2.30%, 9/11/19		500		504,120
2.45%, 11/27/20		190		190,069
2.50%, 4/15/21		250		250,278
2.05%, 5/03/21		500		490,750
3.55%, 9/23/21		50		52,073
2.20%, 8/16/23		1,000		954,086
3.00%, 2/24/25		105		103,254
2.80%, 5/04/26		70		67,411
Bank of Nova Scotia:
2.05%, 10/30/18		250		251,005
1.95%, 1/15/19		250		250,242
2.45%, 3/22/21		500		497,948
4.50%, 12/16/25		250		256,822
Barclays PLC:
2.00%, 3/16/18		500		498,960
3.25%, 1/12/21		1,250		1,251,217
3.20%, 8/10/21		750		741,293
4.38%, 9/11/24		500		495,941
3.65%, 3/16/25		450		435,070
5.20%, 5/12/26		250		254,138
BB&T Corp.:
5.25%, 11/01/19		100		108,041
2.45%, 1/15/20		250		251,959
2.63%, 6/29/20		250		251,959
BNP Paribas SA:
2.40%, 12/12/18		500		503,926
5.00%, 1/15/21		100		109,097
3.25%, 3/03/23		250		252,281
4.25%, 10/15/24		250		250,618
BPCE SA:
2.50%, 12/10/18		250		252,194
4.00%, 4/15/24		250		259,503
Branch Banking & Trust Co.:
2.30%, 10/15/18		250		252,489
1.45%, 5/10/19		1,000		988,866
3.80%, 10/30/26		250		256,908

Corporate Bonds	Par   (000)		Value
Banks (continued)
Citizens Bank NA/Providence:
2.50%, 3/14/19	$	500	$	503,852
2.55%, 5/13/21		1,000		993,861
Commonwealth Bank of Australia, New York:
1.63%, 3/12/18		500		499,630
2.25%, 3/13/19		250		250,963
2.30%, 3/12/20		250		248,735
Compass Bank:
2.75%, 9/29/19		250		248,639
3.88%, 4/10/25		250		237,910
Cooperatieve Centrale Raiffeisen-Boerenleenbank BA:
1.70%, 3/19/18		250		250,022
2.25%, 1/14/19		250		251,339
4.63%, 12/01/23		500		526,045
3.38%, 5/21/25		500		507,316
5.25%, 5/24/41		25		29,097
5.25%, 8/04/45		250		271,619
Cooperatieve Rabobank UA:
2.50%, 1/19/21		1,000		999,840
3.88%, 2/08/22		150		158,372
3.95%, 11/09/22		1,000		1,028,719
4.38%, 8/04/25		250		256,532
3.75%, 7/21/26		500		490,124
Credit Suisse, New York:
1.75%, 1/29/18		500		499,007
2.30%, 5/28/19		600		601,468
5.40%, 1/14/20		150		160,821
3.00%, 10/29/21		250		252,389
Discover Bank/Greenwood Delaware, 7.00%, 4/15/20		500		555,189
Fifth Third Bancorp:
3.50%, 3/15/22		100		102,475
4.30%, 1/16/24		250		256,790
8.25%, 3/01/38		425		590,767
Fifth Third Bank:
1.45%, 2/28/18		200		199,544
2.30%, 3/15/19		1,000		1,006,745
2.88%, 10/01/21		200		202,379
3.85%, 3/15/26		500		503,161
HSBC Bank USA NA, 4.88%, 8/24/20		500		530,062
HSBC Finance Corp., 6.68%, 1/15/21		161		180,971
HSBC Holdings PLC:
3.40%, 3/08/21		500		508,439
2.95%, 5/25/21		500		499,810
2.65%, 1/05/22		500		488,131
4.88%, 1/14/22		150		161,931
3.60%, 5/25/23		750		754,348
4.25%, 3/14/24		500		508,063
4.25%, 8/18/25		500		504,574
4.30%, 3/08/26		1,000		1,036,867
3.90%, 5/25/26		1,000		1,006,829
4.38%, 11/23/26		1,000		1,007,424
6.50%, 5/02/36		200		246,643
6.50%, 9/15/37		250		309,924
6.80%, 6/01/38		250		316,593
5.25%, 3/14/44		250		267,716
HSBC USA, Inc.:
2.25%, 6/23/19		250		250,134
2.35%, 3/05/20		1,000		992,180
2.75%, 8/07/20		250		250,496

See Notes to Financial Statements.

20 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Banks (continued)
Huntington Bancshares, Inc., 3.15%, 3/14/21	$	250	$	253,525
Intesa Sanpaolo SpA:
3.88%, 1/16/18		200		202,658
5.25%, 1/12/24		250		263,016
KeyBank NA, 2.25%, 3/16/20		500		497,901
KeyCorp:
2.30%, 12/13/18		340		342,026
2.90%, 9/15/20		500		505,926
5.10%, 3/24/21		100		109,353
KFW:
1.00%, 1/26/18		500		498,769
0.88%, 4/19/18		2,000		1,989,330
1.13%, 8/06/18		1,500		1,494,075
1.13%, 11/16/18		1,500		1,491,609
1.50%, 2/06/19		2,000		1,999,014
1.88%, 4/01/19		500		503,489
1.50%, 4/20/20		500		494,490
1.88%, 6/30/20		750		748,420
2.75%, 10/01/20		500		514,527
1.88%, 11/30/20		1,000		996,077
1.63%, 3/15/21		1,250		1,227,437
1.50%, 6/15/21		1,500		1,458,735
2.00%, 11/30/21		2,000		1,982,940
2.13%, 1/17/23		200		197,095
2.00%, 5/02/25		2,000		1,913,262
Korea Development Bank:
1.50%, 1/22/18		200		199,286
3.00%, 3/17/19		350		357,181
Landwirtschaftliche Rentenbank, 2.25%, 10/01/21		500		501,450
Lloyds Bank PLC, 2.70%, 8/17/20		250		251,831
Lloyds Banking Group PLC:
4.58%, 12/10/25		250		251,209
4.65%, 3/24/26		250		253,223
5.30%, 12/01/45		250		258,170
Manufacturers & Traders Trust Co.:
1.45%, 3/07/18		250		249,665
2.10%, 2/06/20		250		249,300
MUFG Union Bank NA, 2.63%, 9/26/18		250		252,733
National Australia Bank Ltd.:
2.00%, 1/14/19		500		500,034
1.38%, 7/12/19		500		491,010
2.50%, 7/12/26		250		232,145
Oesterreichische Kontrollbank AG, 1.63%, 3/12/19		500		499,931
PNC Bank NA (b):
1.85%, 7/20/18		500		500,868
2.20%, 1/28/19		500		502,633
2.25%, 7/02/19		350		352,339
1.45%, 7/29/19		500		493,197
2.30%, 6/01/20		500		499,785
2.45%, 11/05/20		1,250		1,252,294
2.15%, 4/29/21		500		493,392
2.95%, 1/30/23		250		246,386
2.95%, 2/23/25		250		245,483
PNC Funding Corp., 3.30%, 3/08/22 (b)		150		154,205
Regions Financial Corp., 3.20%, 2/08/21		1,000		1,014,150
Royal Bank of Canada:
2.20%, 7/27/18		250		251,669
1.80%, 7/30/18		250		250,801
2.00%, 12/10/18		250		250,687

Corporate Bonds	Par   (000)		Value
Banks (continued)
Royal Bank of Canada (continued):
2.15%, 3/06/20	$	250	$	248,664
2.50%, 1/19/21		250		250,612
4.65%, 1/27/26		200		213,065
Santander Holdings USA, Inc.:
3.45%, 8/27/18		250		253,784
2.70%, 5/24/19		500		499,619
2.65%, 4/17/20		150		148,670
Santander Issuances SAU, 5.18%, 11/19/25		200		201,881
Santander UK Group Holdings PLC:
2.88%, 10/16/20		65		64,414
3.13%, 1/08/21		75		74,825
2.88%, 8/05/21		1,000		977,855
Santander UK PLC:
2.00%, 8/24/18		195		194,901
2.50%, 3/14/19		500		502,920
2.38%, 3/16/20		250		248,623
Sumitomo Mitsui Banking Corp.:
2.45%, 1/10/19		250		251,369
2.05%, 1/18/19		1,000		997,108
2.45%, 1/16/20		250		248,966
2.45%, 10/20/20		500		495,363
Sumitomo Mitsui Financial Group, Inc.:
2.93%, 3/09/21		500		502,617
2.44%, 10/19/21		1,000		983,765
3.78%, 3/09/26		500		511,157
SunTrust Banks, Inc.:
2.35%, 11/01/18		250		252,215
2.90%, 3/03/21		500		507,062
Svenska Handelsbanken AB:
1.63%, 3/21/18		250		249,702
2.45%, 3/30/21		500		496,617
Toronto-Dominion Bank:
1.63%, 3/13/18		500		500,519
1.40%, 4/30/18		250		249,396
2.25%, 11/05/19		300		301,785
2.13%, 4/07/21		500		492,356
3.63%, 9/15/31 (c)		500		488,415
US Bancorp:
1.95%, 11/15/18		225		226,145
4.13%, 5/24/21		50		53,505
Series V, 2.38%, 7/22/26		500		462,884
US Bank NA:
1.35%, 1/26/18		500		499,128
1.40%, 4/26/19		750		741,845
2.13%, 10/28/19		250		250,903
2.80%, 1/27/25		500		487,931
Wells Fargo & Co.:
1.50%, 1/16/18		250		249,701
2.15%, 1/15/19		250		251,376
2.13%, 4/22/19		350		351,133
1.75%, 5/24/19		1,500		1,492,747
2.15%, 12/06/19		750		749,535
2.15%, 1/30/20		460		457,827
2.60%, 7/22/20		500		502,890
2.55%, 12/07/20		750		750,857
3.00%, 1/22/21		250		254,395
2.50%, 3/04/21		740		734,517
2.10%, 7/26/21		500		486,528

See Notes to Financial Statements.

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 21

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Banks (continued)
Wells Fargo & Co. (continued):
3.45%, 2/13/23	$	450	$	451,620
4.13%, 8/15/23		250		258,680
4.48%, 1/16/24		250		263,165
3.00%, 2/19/25		350		336,224
3.55%, 9/29/25		1,000		998,343
3.00%, 4/22/26		750		715,674
4.10%, 6/03/26		520		526,858
3.00%, 10/23/26		1,750		1,666,695
4.30%, 7/22/27		500		514,287
5.38%, 11/02/43		400		441,460
5.61%, 1/15/44		306		346,711
4.65%, 11/04/44		345		339,560
3.90%, 5/01/45		150		142,276
4.90%, 11/17/45		250		256,780
4.40%, 6/14/46		600		574,232
4.75%, 12/07/46		350		355,200
Westpac Banking Corp.:
1.60%, 1/12/18		250		249,805
2.25%, 1/17/19		350		351,352
4.88%, 11/19/19		50		53,654
2.60%, 11/23/20		500		502,021
2.85%, 5/13/26		500		479,609
4.32%, 11/23/31 (c)		750		752,389
				99,332,341
Beverages — 0.8%
Anheuser-Busch Cos. LLC, 6.45%, 9/01/37		100		127,436
Anheuser-Busch InBev Finance, Inc.:
1.90%, 2/01/19		1,000		1,001,435
2.15%, 2/01/19		500		503,094
2.65%, 2/01/21		1,160		1,166,664
2.63%, 1/17/23		500		490,105
3.30%, 2/01/23		1,250		1,272,165
3.70%, 2/01/24		750		775,281
3.65%, 2/01/26		2,500		2,537,975
4.70%, 2/01/36		1,000		1,051,868
4.63%, 2/01/44		400		416,018
4.90%, 2/01/46		1,970		2,129,314
Anheuser-Busch InBev Worldwide, Inc.:
7.75%, 1/15/19		250		278,467
2.50%, 7/15/22		200		196,841
8.20%, 1/15/39		150		225,584
3.75%, 7/15/42		50		44,970
Coca-Cola Co.:
1.15%, 4/01/18		250		249,434
1.65%, 11/01/18		500		501,998
1.88%, 10/27/20		500		495,751
2.45%, 11/01/20		350		353,614
2.88%, 10/27/25		125		123,353
2.55%, 6/01/26		750		710,879
Coca-Cola Femsa SAB de CV, 2.38%, 11/26/18		250		251,736
Constellation Brands, Inc., 3.70%, 12/06/26		750		732,780
Diageo Capital PLC:
4.83%, 7/15/20		500		542,285
3.88%, 4/29/43		125		119,077
Diageo Investment Corp.:
2.88%, 5/11/22		100		100,600
4.25%, 5/11/42		250		251,510

Corporate Bonds	Par   (000)		Value
Beverages (continued)
Dr Pepper Snapple Group, Inc.:
3.20%, 11/15/21	$	25	$	25,609
2.70%, 11/15/22		100		98,662
7.45%, 5/01/38		250		347,980
Molson Coors Brewing Co.:
2.10%, 7/15/21		750		730,434
3.50%, 5/01/22		75		77,203
3.00%, 7/15/26		345		326,133
5.00%, 5/01/42		250		261,338
Pepsi Bottling Group, Inc., Series B, 7.00%, 3/01/29		200		273,439
PepsiCo, Inc.:
2.25%, 1/07/19		250		252,970
1.50%, 2/22/19		1,000		996,504
2.75%, 3/05/22		250		252,958
3.10%, 7/17/22		500		513,660
2.75%, 3/01/23		300		299,674
3.60%, 3/01/24		250		260,745
2.75%, 4/30/25		1,000		979,793
3.50%, 7/17/25		250		258,393
2.85%, 2/24/26		500		492,848
4.88%, 11/01/40		100		110,780
3.60%, 8/13/42		100		93,228
4.60%, 7/17/45		250		272,465
4.45%, 4/14/46		250		266,269
3.45%, 10/06/46		250		227,747
				24,069,066
Biotechnology — 0.4%
Amgen, Inc.:
2.20%, 5/22/19		250		251,930
3.45%, 10/01/20		100		103,615
4.10%, 6/15/21		1,000		1,054,167
1.85%, 8/19/21		250		240,404
2.70%, 5/01/22		500		495,090
2.25%, 8/19/23		1,250		1,175,875
3.13%, 5/01/25		750		729,883
2.60%, 8/19/26		715		657,612
4.40%, 5/01/45		175		167,746
4.66%, 6/15/51 (d)		904		868,842
Biogen, Inc.:
2.90%, 9/15/20		500		506,377
4.05%, 9/15/25		95		97,809
5.20%, 9/15/45		250		267,537
Celgene Corp.:
2.88%, 8/15/20		500		505,727
3.25%, 8/15/22		150		151,336
3.55%, 8/15/22		750		769,192
3.88%, 8/15/25		500		507,155
5.25%, 8/15/43		145		152,957
5.00%, 8/15/45		250		259,933
Gilead Sciences, Inc.:
2.55%, 9/01/20		500		505,269
2.50%, 9/01/23		500		482,160
3.70%, 4/01/24		500		513,212
3.50%, 2/01/25		170		171,880
3.65%, 3/01/26		325		329,530
4.60%, 9/01/35		350		363,017
5.65%, 12/01/41		50		57,792
4.50%, 2/01/45		150		149,874
4.75%, 3/01/46		500		517,335

See Notes to Financial Statements.

22 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Biotechnology (continued)
Gilead Sciences, Inc. (continued):
4.15%, 3/01/47	$	500	$	474,901
				12,528,157
Building Products — 0.0%
Johnson Controls International PLC:
3.63%, 7/02/24 (a)		80		81,130
5.13%, 9/14/45		250		265,986
4.95%, 7/02/64 (a)		250		233,140
Owens Corning:
4.20%, 12/15/22		150		155,780
4.20%, 12/01/24		250		256,095
				992,131
Capital Markets — 1.1%
Ameriprise Financial, Inc.:
4.00%, 10/15/23		150		157,313
2.88%, 9/15/26		500		477,199
Ares Capital Corp., 3.88%, 1/15/20		300		304,192
Brookfield Asset Management, Inc., 4.00%, 1/15/25		250		245,220
Charles Schwab Corp.:
2.20%, 7/25/18		75		75,565
4.45%, 7/22/20		100		106,895
3.00%, 3/10/25		80		78,493
CME Group, Inc.:
3.00%, 3/15/25		250		249,873
5.30%, 9/15/43		100		117,150
Franklin Resources, Inc., 2.80%, 9/15/22		150		150,293
Goldman Sachs Capital I,, 6.35%, 2/15/34		250		297,237
Goldman Sachs Group, Inc.:
5.95%, 1/18/18		300		312,523
2.38%, 1/22/18		250		251,486
2.90%, 7/19/18		500		506,905
2.63%, 1/31/19		500		505,376
7.50%, 2/15/19		150		166,287
2.55%, 10/23/19		755		760,543
5.38%, 3/15/20		500		542,493
2.60%, 4/23/20		600		600,629
2.88%, 2/25/21		1,000		1,004,624
2.63%, 4/25/21		500		496,370
5.25%, 7/27/21		500		547,995
2.35%, 11/15/21		1,500		1,457,340
5.75%, 1/24/22		350		393,475
3.63%, 1/22/23		150		153,212
4.00%, 3/03/24		425		440,903
3.85%, 7/08/24		500		510,395
3.50%, 1/23/25		500		493,350
3.75%, 5/22/25		250		250,650
4.25%, 10/21/25		1,050		1,066,633
3.75%, 2/25/26		380		381,116
6.13%, 2/15/33		400		483,450
6.75%, 10/01/37		1,150		1,420,074
4.80%, 7/08/44		250		262,457
5.15%, 5/22/45		250		262,915
4.75%, 10/21/45		750		791,732
Invesco Finance PLC, 4.00%, 1/30/24		250		260,494
Jefferies Group LLC:
5.13%, 4/13/18		1,500		1,550,470
8.50%, 7/15/19		125		141,770
5.13%, 1/20/23		650		680,252

Corporate Bonds	Par   (000)		Value
Capital Markets (continued)
Lazard Group LLC, 4.25%, 11/14/20	$	150	$	157,014
Legg Mason, Inc., 5.63%, 1/15/44		125		121,725
Morgan Stanley:
1.88%, 1/05/18		250		250,373
6.63%, 4/01/18		500		528,764
2.45%, 2/01/19		925		931,352
7.30%, 5/13/19		500		557,139
2.38%, 7/23/19		500		501,424
5.63%, 9/23/19		250		270,990
2.65%, 1/27/20		1,250		1,255,887
5.75%, 1/25/21		750		832,182
2.50%, 4/21/21		500		494,564
5.50%, 7/28/21		1,600		1,773,019
2.63%, 11/17/21		750		740,971
4.88%, 11/01/22		500		535,869
3.75%, 2/25/23		500		513,572
4.10%, 5/22/23		250		256,631
3.88%, 4/29/24		250		256,393
3.70%, 10/23/24		500		505,956
4.00%, 7/23/25		505		517,634
5.00%, 11/24/25		250		267,072
3.88%, 1/27/26		500		505,053
3.13%, 7/27/26		500		477,688
4.35%, 9/08/26		500		512,374
3.95%, 4/23/27		250		247,477
7.25%, 4/01/32		50		67,746
6.38%, 7/24/42		50		64,258
4.30%, 1/27/45		500		498,284
NASDAQ OMX Group, Inc., 4.25%, 6/01/24		250		257,249
Nomura Holdings, Inc., 2.75%, 3/19/19		250		252,366
Raymond James Financial, Inc., 4.95%, 7/15/46		500		475,998
State Street Corp.:
3.10%, 5/15/23		250		249,510
3.30%, 12/16/24		405		408,988
TD Ameritrade Holding Corp., 2.95%, 4/01/22		250		253,112
				34,493,983
Chemicals — 0.5%
Agrium, Inc.:
3.15%, 10/01/22		50		49,709
3.50%, 6/01/23		250		253,367
3.38%, 3/15/25		1,395		1,351,258
Airgas, Inc., 2.38%, 2/15/20		250		250,124
Albemarle Corp., 4.15%, 12/01/24		250		255,537
Cytec Industries, Inc., 3.50%, 4/01/23		250		240,434
Dow Chemical Co.:
8.55%, 5/15/19		100		114,608
4.25%, 11/15/20		186		196,989
4.13%, 11/15/21		50		52,831
3.00%, 11/15/22		250		250,114
4.25%, 10/01/34		600		591,335
5.25%, 11/15/41		100		108,042
4.38%, 11/15/42		250		242,680
E.I. du Pont de Nemours & Co.:
6.00%, 7/15/18		325		345,364
4.25%, 4/01/21		500		531,796
2.80%, 2/15/23		1,000		982,927
Eastman Chemical Co.:
2.70%, 1/15/20		500		502,925
3.60%, 8/15/22		200		205,080
3.80%, 3/15/25		1,050		1,058,914

See Notes to Financial Statements.

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 23

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Chemicals (continued)
Ecolab, Inc.:
2.25%, 1/12/20	$	135	$	134,961
4.35%, 12/08/21		150		162,099
3.25%, 1/14/23		250		254,566
LYB International Finance BV:
4.00%, 7/15/23		200		208,959
5.25%, 7/15/43		75		80,635
4.88%, 3/15/44		350		362,455
LyondellBasell Industries NV, 4.63%, 2/26/55		100		92,924
Methanex Corp., 3.25%, 12/15/19		250		246,147
Monsanto Co.:
2.20%, 7/15/22		1,000		949,215
4.20%, 7/15/34		300		288,378
4.40%, 7/15/44		150		144,974
3.95%, 4/15/45		120		105,293
Mosaic Co.:
3.75%, 11/15/21		50		51,349
5.45%, 11/15/33		250		247,952
Potash Corp. of Saskatchewan, Inc.:
3.63%, 3/15/24		250		247,982
3.00%, 4/01/25		250		235,730
PPG Industries, Inc., 2.30%, 11/15/19		350		351,705
Praxair, Inc.:
1.25%, 11/07/18		250		248,860
2.65%, 2/05/25		165		159,911
3.20%, 1/30/26		250		250,886
Rohm & Haas Co., 7.85%, 7/15/29		250		337,979
Valspar Corp., 3.95%, 1/15/26		500		499,852
Westlake Chemical Corp., 3.60%, 8/15/26 (d)		500		480,915
				13,727,761
Commercial Services & Supplies — 0.1%
Duke University, 3.20%, 10/01/38		100		92,043
George Washington University, 4.87%, 9/15/45		100		108,130
Massachusetts Institute of Technology, 4.68%, 7/01/2114		300		301,991
Northwestern University, 3.87%, 12/01/48		100		96,939
President and Fellows of Harvard College:
3.15%, 7/15/46		75		67,103
3.30%, 7/15/56		200		175,887
Republic Services, Inc.:
5.25%, 11/15/21		50		55,591
3.55%, 6/01/22		250		259,700
3.20%, 3/15/25		250		247,965
2.90%, 7/01/26		85		81,485
Tufts University, Series 2012, 5.02%, 4/15/2112		230		240,088
University of Southern California, 3.03%, 10/01/39		200		177,636
Waste Management, Inc.:
4.60%, 3/01/21		100		107,867
2.90%, 9/15/22		200		201,042
3.90%, 3/01/35		315		313,172
				2,526,639
Communications Equipment — 0.2%
Cisco Systems, Inc.:
2.13%, 3/01/19		500		506,589
1.40%, 9/20/19		1,000		989,095
2.45%, 6/15/20		500		505,044
2.90%, 3/04/21		125		127,910

Corporate Bonds	Par   (000)		Value
Communications Equipment (continued)
Cisco Systems, Inc. (continued):
2.60%, 2/28/23	$	500	$	496,262
2.95%, 2/28/26		500		495,137
5.90%, 2/15/39		500		634,988
5.50%, 1/15/40		350		426,369
Juniper Networks, Inc., 4.35%, 6/15/25		250		252,094
Motorola Solutions, Inc.:
3.75%, 5/15/22		150		151,615
3.50%, 3/01/23		250		246,412
				4,831,515
Construction & Engineering — 0.0%
ABB Finance USA, Inc., 2.88%, 5/08/22		100		101,023
Fluor Corp., 3.50%, 12/15/24		250		252,803
				353,826
Construction Materials — 0.0%
WW Grainger, Inc., 4.60%, 6/15/45		250		267,659
Consumer Discretionary — 0.0%
Ecolab, Inc., 3.70%, 11/01/46		250		227,317
Consumer Finance — 0.3%
American Express Co.:
1.55%, 5/22/18		250		249,514
3.63%, 12/05/24		300		301,243
4.05%, 12/03/42		67		64,656
Automatic Data Processing, Inc., 2.25%, 9/15/20		500		502,584
Block Financial LLC, 4.13%, 10/01/20		500		510,469
Capital One Bank USA NA:
2.25%, 2/13/19		250		251,116
3.38%, 2/15/23		350		346,714
Capital One Financial Corp.:
2.45%, 4/24/19		250		251,583
3.50%, 6/15/23		110		110,416
4.20%, 10/29/25		340		341,131
3.75%, 7/28/26		230		222,961
Capital One NA/Mclean, 2.35%, 8/17/18		500		502,872
Caterpillar Financial Services Corp.:
1.70%, 6/16/18		250		250,221
1.35%, 5/18/19		1,000		986,168
1.70%, 8/09/21		1,000		960,511
3.30%, 6/09/24		250		253,396
Discover Financial Services:
3.95%, 11/06/24		350		346,871
3.75%, 3/04/25		75		73,325
Equifax, Inc., 3.25%, 6/01/26		250		242,795
MasterCard, Inc., 3.38%, 4/01/24		250		257,148
Synchrony Financial:
3.75%, 8/15/21		500		513,908
4.50%, 7/23/25		190		195,162
Total System Services, Inc., 4.80%, 4/01/26		500		538,761
Visa, Inc.:
2.80%, 12/14/22		750		754,202
3.15%, 12/14/25		945		949,145
4.30%, 12/14/45		500		527,757
				10,504,629
Containers & Packaging — 0.0%
Packaging Corp. of America, 4.50%, 11/01/23		250		264,807

See Notes to Financial Statements.

24 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Diversified Financial Services — 2.7%
AerCap Ireland Capital Ltd. / AerCap Global Aviation Trust:
3.75%, 5/15/19	$	500	$	509,375
3.95%, 2/01/22		1,250		1,260,937
Air Lease Corp.:
2.13%, 1/15/18		175		175,311
3.38%, 1/15/19		250		254,239
3.88%, 4/01/21		175		179,797
American Express Credit Corp.:
2.13%, 3/18/19		400		401,594
2.25%, 8/15/19		250		251,391
2.60%, 9/14/20		145		146,212
2.25%, 5/05/21		1,000		988,084
American Honda Finance Corp.:
2.15%, 3/13/20		250		249,309
1.65%, 7/12/21		750		722,294
Bank of America Corp.:
2.00%, 1/11/18		1,050		1,052,416
6.88%, 4/25/18		400		425,164
5.63%, 7/01/20		150		164,933
2.63%, 10/19/20		750		750,428
2.63%, 4/19/21		1,500		1,489,707
5.00%, 5/13/21		100		108,904
5.70%, 1/24/22		100		112,324
2.50%, 10/21/22		1,000		967,127
4.00%, 4/01/24		500		515,669
4.20%, 8/26/24		500		509,352
4.00%, 1/22/25		750		750,942
3.88%, 8/01/25		250		254,208
4.45%, 3/03/26		1,340		1,380,921
3.50%, 4/19/26		645		636,403
4.25%, 10/22/26		290		293,511
3.25%, 10/21/27		375		358,013
6.11%, 1/29/37		350		410,304
7.75%, 5/14/38		200		275,361
5.88%, 2/07/42		100		120,865
5.00%, 1/21/44		250		273,773
4.88%, 4/01/44		675		732,423
Series L, 2.60%, 1/15/19		500		504,274
Series L, 2.65%, 4/01/19		500		505,282
Series L, 2.25%, 4/21/20		750		745,627
Series L, 3.95%, 4/21/25		655		652,045
Series L, 4.18%, 11/25/27		1,000		1,000,639
Bank of America NA:
1.65%, 3/26/18		750		750,700
1.75%, 6/05/18		1,000		999,958
Boeing Capital Corp., 4.70%, 10/27/19		250		269,704
Citigroup, Inc.:
1.80%, 2/05/18		480		479,732
2.50%, 9/26/18		350		353,348
2.05%, 12/07/18		750		749,916
2.55%, 4/08/19		1,000		1,008,142
2.05%, 6/07/19		500		498,112
2.50%, 7/29/19		250		251,714
2.40%, 2/18/20		695		693,590
2.70%, 3/30/21		250		249,428
2.90%, 12/08/21		750		747,976
4.05%, 7/30/22		250		258,746
3.50%, 5/15/23		250		249,193

Corporate Bonds	Par   (000)		Value
Diversified Financial Services (continued)
Citigroup, Inc. (continued):
3.88%, 3/26/25	$	500	$	496,699
3.30%, 4/27/25		155		151,857
4.40%, 6/10/25		500		511,525
4.60%, 3/09/26		250		258,396
3.40%, 5/01/26		500		485,831
3.20%, 10/21/26		500		478,111
4.30%, 11/20/26		150		151,369
4.45%, 9/29/27		500		507,923
4.13%, 7/25/28		750		740,868
6.63%, 6/15/32		100		121,309
6.13%, 8/25/36		184		213,505
8.13%, 7/15/39		75		111,445
6.68%, 9/13/43		250		316,877
5.30%, 5/06/44		500		538,587
4.65%, 7/30/45		250		263,512
Credit Suisse Group Funding Guernsey Ltd.:
3.13%, 12/10/20		250		249,219
3.80%, 9/15/22		500		504,434
3.80%, 6/09/23		1,000		998,898
3.75%, 3/26/25		500		492,401
4.55%, 4/17/26		250		259,644
4.88%, 5/15/45		250		256,619
Daimler Finance North America LLC, 8.50%, 1/18/31		100		150,615
Deutsche Bank AG:
2.85%, 5/10/19		1,000		995,754
3.13%, 1/13/21		200		196,640
4.10%, 1/13/26		350		344,673
Deutsche Bank AG, London:
2.50%, 2/13/19		250		247,997
3.70%, 5/30/24		215		209,073
Ford Motor Credit Co. LLC:
2.38%, 1/16/18		250		251,116
2.24%, 6/15/18		250		250,339
2.38%, 3/12/19		500		499,703
2.02%, 5/03/19		1,000		990,824
2.60%, 11/04/19		250		249,629
2.46%, 3/27/20		250		246,790
5.75%, 2/01/21		250		274,145
3.34%, 3/18/21		500		503,469
3.10%, 5/04/23		500		482,860
4.38%, 8/06/23		220		227,040
3.66%, 9/08/24		1,000		975,757
4.13%, 8/04/25		500		500,601
4.39%, 1/08/26		250		253,369
GE Capital International Funding Co.:
2.34%, 11/15/20		1,270		1,269,394
3.37%, 11/15/25		227		230,763
4.42%, 11/15/35		1,685		1,765,723
General Electric Capital Corp., 3.10%, 1/09/23		1,500		1,520,215
General Motors Financial Co., Inc.:
2.40%, 4/10/18		155		155,166
3.15%, 1/15/20		1,000		1,006,271
3.20%, 7/13/20		1,000		1,003,008
3.70%, 11/24/20		250		254,313
4.20%, 3/01/21		750		773,810
3.45%, 4/10/22		150		148,340
4.00%, 1/15/25		250		243,910
5.25%, 3/01/26		405		425,449

See Notes to Financial Statements.

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 25

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Diversified Financial Services (continued)
Intercontinental Exchange, Inc.:
2.50%, 10/15/18	$	250	$	253,201
3.75%, 12/01/25		115		117,521
International Lease Finance Corp., 5.88%, 4/01/19		500		530,990
John Deere Capital Corp.:
1.95%, 12/13/18		500		502,641
1.95%, 1/08/19		1,000		1,004,213
2.25%, 4/17/19		100		101,076
1.25%, 10/09/19		500		491,091
2.05%, 3/10/20		1,000		997,019
2.80%, 3/04/21		250		253,573
3.90%, 7/12/21		50		52,842
2.80%, 3/06/23		500		500,013
JPMorgan Chase & Co.:
6.00%, 1/15/18		500		521,562
1.80%, 1/25/18		1,000		1,001,106
1.63%, 5/15/18		500		499,358
2.35%, 1/28/19		500		504,139
1.85%, 3/22/19		1,000		996,844
2.20%, 10/22/19		500		502,008
2.25%, 1/23/20		1,000		997,646
2.75%, 6/23/20		500		504,522
2.55%, 10/29/20		500		499,631
2.55%, 3/01/21		500		498,428
2.30%, 8/15/21		2,000		1,962,948
4.35%, 8/15/21		500		534,897
4.50%, 1/24/22		300		323,529
3.25%, 9/23/22		200		202,258
3.20%, 1/25/23		150		151,670
3.38%, 5/01/23		250		249,105
2.70%, 5/18/23		500		489,195
3.88%, 9/10/24		300		303,551
3.13%, 1/23/25		250		244,389
3.90%, 7/15/25		250		257,070
3.30%, 4/01/26		500		491,277
3.20%, 6/15/26		1,000		978,753
4.13%, 12/15/26		250		255,164
4.25%, 10/01/27		500		513,714
3.63%, 12/01/27		1,000		970,186
6.40%, 5/15/38		100		129,578
5.50%, 10/15/40		125		147,652
5.60%, 7/15/41		550		657,689
5.63%, 8/16/43		500		573,767
4.85%, 2/01/44		100		111,276
4.95%, 6/01/45		250		266,577
Leucadia National Corp., 5.50%, 10/18/23		150		158,847
Mitsubishi UFJ Financial Group, Inc.:
3.85%, 3/01/26		500		513,622
2.76%, 9/13/26		250		234,833
Moody’s Corp.:
2.75%, 7/15/19		40		40,456
4.50%, 9/01/22		550		589,488
MUFG Americas Holdings Corp., 3.00%, 2/10/25		250		240,008
National Rural Utilities Cooperative Finance Corp.:
2.30%, 11/15/19		250		251,766
3.40%, 11/15/23		350		359,044
2.85%, 1/27/25		250		245,678
PACCAR Financial Corp., 2.20%, 9/15/19		250		251,642
Royal Bank of Scotland Group PLC, 4.80%, 4/05/26		500		500,564
S&P Global, Inc., 4.40%, 2/15/26		250		264,464

Corporate Bonds	Par   (000)		Value
Diversified Financial Services (continued)
Toyota Motor Credit Corp.:
1.38%, 1/10/18	$	200	$	199,747
2.00%, 10/24/18		500		502,962
2.10%, 1/17/19		250		251,373
2.13%, 7/18/19		350		351,519
2.15%, 3/12/20		500		499,108
1.90%, 4/08/21		500		489,905
UBS AG:
2.38%, 8/14/19		800		803,877
2.35%, 3/26/20		500		497,953
				80,835,727
Diversified Telecommunication Services — 1.0%
AT&T, Inc.:
1.75%, 1/15/18		500		500,305
2.38%, 11/27/18		500		504,368
2.45%, 6/30/20		1,500		1,489,548
5.00%, 3/01/21		500		537,756
3.80%, 3/15/22		250		256,285
3.60%, 2/17/23		500		504,260
4.45%, 4/01/24		500		521,218
3.95%, 1/15/25		500		500,866
3.40%, 5/15/25		500		481,912
4.13%, 2/17/26		1,250		1,265,707
4.50%, 5/15/35		810		782,594
6.30%, 1/15/38		450		511,443
6.00%, 8/15/40		250		274,777
5.35%, 9/01/40		463		475,500
5.55%, 8/15/41		200		208,229
5.15%, 3/15/42		150		149,426
4.30%, 12/15/42		151		135,171
4.80%, 6/15/44		250		236,229
4.35%, 6/15/45		759		676,293
4.75%, 5/15/46		600		568,451
5.65%, 2/15/47		250		268,124
4.50%, 3/09/48		750		673,930
4.55%, 3/09/49		500		451,633
British Telecommunications PLC:
2.35%, 2/14/19		1,750		1,760,206
9.63%, 12/15/30		150		228,852
Deutsche Telekom International Finance BV, 8.75%, 6/15/30		400		588,046
Orange SA:
9.00%, 3/01/31		250		375,881
5.38%, 1/13/42		575		643,365
Qwest Corp.:
6.75%, 12/01/21		550		596,750
6.88%, 9/15/33		212		202,420
Telefonaktiebolaget LM Ericsson, 4.13%, 5/15/22		100		100,355
Telefonica Emisiones SAU:
3.19%, 4/27/18		250		253,595
5.46%, 2/16/21		50		54,504
4.57%, 4/27/23		700		734,392
7.05%, 6/20/36		75		87,053
Telefonica Europe BV, 8.25%, 9/15/30		300		393,908
Verizon Communications, Inc.:
3.65%, 9/14/18		500		516,508
2.55%, 6/17/19		500		507,047
2.63%, 2/21/20		250		252,399
4.50%, 9/15/20		1,000		1,070,113

See Notes to Financial Statements.

26 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Diversified Telecommunication Services (continued)
Verizon Communications, Inc. (continued):
3.50%, 11/01/21	$	400	$	412,870
5.15%, 9/15/23		1,000		1,105,743
4.15%, 3/15/24		250		261,246
3.50%, 11/01/24		500		498,396
2.63%, 8/15/26		900		828,497
7.75%, 12/01/30		50		67,634
6.40%, 9/15/33		500		603,257
5.05%, 3/15/34		500		526,518
4.40%, 11/01/34		500		493,493
4.27%, 1/15/36		1,250		1,196,407
6.40%, 2/15/38		200		241,491
6.00%, 4/01/41		250		287,145
3.85%, 11/01/42		250		216,634
6.55%, 9/15/43		750		936,733
4.86%, 8/21/46		500		506,647
4.52%, 9/15/48		500		479,456
5.01%, 8/21/54		650		646,595
4.67%, 3/15/55		1,000		939,110
				30,587,291
Electric Utilities — 1.5%
AEP Transmission Co. LLC, 3.10%, 12/01/26 (d)		500		492,442
Alabama Power Co.:
3.75%, 3/01/45		250		236,216
4.30%, 1/02/46		250		258,685
Ameren Illinois Co.:
2.70%, 9/01/22		100		100,301
4.30%, 7/01/44		250		261,790
American Electric Power Co., Inc., Series F, 2.95%, 12/15/22		500		503,171
Appalachian Power Co., 4.40%, 5/15/44		250		253,678
Arizona Public Service Co.:
3.15%, 5/15/25		250		250,644
5.05%, 9/01/41		250		281,947
Berkshire Hathaway Energy Co.:
2.00%, 11/15/18		500		502,155
3.75%, 11/15/23		500		522,852
3.50%, 2/01/25		110		112,179
6.13%, 4/01/36		250		312,220
5.15%, 11/15/43		250		280,695
4.50%, 2/01/45		400		414,968
Black Hills Corp., 3.95%, 1/15/26		200		204,223
CenterPoint Energy Houston Electric LLC:
1.85%, 6/01/21		500		488,563
3.55%, 8/01/42		100		94,068
Cleco Corporate Holdings LLC, 3.74%, 5/01/26 (d)		500		492,422
Commonwealth Edison Co.:
2.15%, 1/15/19		500		501,798
3.10%, 11/01/24		250		250,403
2.55%, 6/15/26		250		238,178
5.90%, 3/15/36		50		61,424
3.70%, 3/01/45		250		235,120
Connecticut Light & Power Co., 2.50%, 1/15/23		150		146,835
Consolidated Edison, Inc., 2.00%, 5/15/21		750		732,994
DTE Electric Co.:
4.00%, 4/01/43		150		150,897
3.70%, 3/15/45		145		138,636
3.70%, 6/01/46		250		240,497
Duke Energy Carolinas LLC, 6.05%, 4/15/38		100		126,135

Corporate Bonds	Par   (000)		Value
Electric Utilities (continued)
Duke Energy Corp.:
1.80%, 9/01/21	$	1,000	$	963,303
3.95%, 10/15/23		250		262,219
3.75%, 4/15/24		500		515,613
2.65%, 9/01/26		500		466,664
4.80%, 12/15/45		250		264,243
Duke Energy Florida LLC, 3.40%, 10/01/46		250		222,444
Duke Energy Indiana LLC:
4.20%, 3/15/42		150		148,555
4.90%, 7/15/43		250		277,018
3.75%, 5/15/46		500		470,287
Duke Energy Ohio, Inc., 3.70%, 6/15/46		250		236,327
Duke Energy Progress LLC:
4.10%, 5/15/42		150		149,145
4.10%, 3/15/43		250		249,970
4.38%, 3/30/44		100		103,623
4.20%, 8/15/45		250		254,387
3.70%, 10/15/46		500		473,459
Entergy Arkansas, Inc., 3.50%, 4/01/26		65		66,238
Entergy Corp., 4.00%, 7/15/22		200		209,135
Entergy Louisiana LLC, 4.05%, 9/01/23		250		262,015
Entergy Mississippi, Inc., 2.85%, 6/01/28		500		474,781
Eversource Energy:
1.45%, 5/01/18		250		249,178
2.50%, 3/15/21		500		496,444
Series H, 3.15%, 1/15/25		125		123,414
Exelon Corp.:
3.95%, 6/15/25		250		257,009
3.40%, 4/15/26		750		735,883
5.10%, 6/15/45		250		265,750
4.45%, 4/15/46		250		244,732
Exelon Generation Co. LLC, 6.25%, 10/01/39		150		151,030
Florida Power & Light Co.:
2.75%, 6/01/23		250		250,180
3.13%, 12/01/25		500		505,521
5.95%, 2/01/38		50		64,085
4.13%, 2/01/42		500		512,855
Georgia Power Co., 4.30%, 3/15/42		200		202,388
Great Plains Energy, Inc., 5.29%, 6/15/22 (a)		150		162,671
Indiana Michigan Power Co.:
6.05%, 3/15/37		175		209,621
4.55%, 3/15/46		150		155,576
Interstate Power & Light Co.:
3.25%, 12/01/24		250		250,657
3.70%, 9/15/46		500		459,982
Kansas City Power & Light Co., 3.65%, 8/15/25		150		150,174
LG&E and KU Energy LLC, 3.75%, 11/15/20		50		52,003
Louisville Gas & Electric Co., 4.65%, 11/15/43		250		274,082
MidAmerican Energy Co.:
4.80%, 9/15/43		250		276,543
4.40%, 10/15/44		1,000		1,062,206
Mississippi Power Co., 4.25%, 3/15/42		500		432,539
Nevada Power Co., 5.45%, 5/15/41		50		58,564
NextEra Energy Capital Holdings, Inc., 3.63%, 6/15/23		1,250		1,270,892
NiSource Finance Corp.:
6.13%, 3/01/22		500		576,633
5.95%, 6/15/41		50		59,362
5.25%, 2/15/43		75		82,982
4.80%, 2/15/44		250		263,199

See Notes to Financial Statements.

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 27

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Electric Utilities (continued)
Northern States Power Co.:
3.40%, 8/15/42	$	200	$	183,515
4.00%, 8/15/45		85		84,676
NSTAR Electric Co., 2.70%, 6/01/26		250		240,300
Oglethorpe Power Corp., 4.55%, 6/01/44		250		247,196
Oncor Electric Delivery Co. LLC:
7.00%, 9/01/22		100		122,057
5.30%, 6/01/42		75		87,970
3.75%, 4/01/45		250		239,690
Pacific Gas & Electric Co.:
3.25%, 6/15/23		500		510,110
2.95%, 3/01/26		750		734,784
6.05%, 3/01/34		250		312,867
5.13%, 11/15/43		1,250		1,424,617
4.75%, 2/15/44		250		274,344
4.25%, 3/15/46		250		254,058
PacifiCorp:
2.95%, 2/01/22		100		101,839
2.95%, 6/01/23		300		301,621
PECO Energy Co., 1.70%, 9/15/21		1,000		970,796
Pennsylvania Electric Co., 6.15%, 10/01/38		250		287,014
Potomac Electric Power Co., 3.60%, 3/15/24		250		258,486
PPL Capital Funding, Inc.:
1.90%, 6/01/18		250		249,941
3.40%, 6/01/23		250		251,704
PPL Electric Utilities Corp., 4.75%, 7/15/43		250		278,752
Progress Energy, Inc.:
4.40%, 1/15/21		100		106,043
7.75%, 3/01/31		50		68,798
Public Service Co. of Colorado:
3.60%, 9/15/42		250		235,134
3.95%, 3/15/43		200		199,585
4.30%, 3/15/44		75		78,385
Public Service Electric & Gas Co.:
1.80%, 6/01/19		250		249,721
3.50%, 8/15/20		50		51,924
2.38%, 5/15/23		250		244,358
3.05%, 11/15/24		250		251,961
3.95%, 5/01/42		50		49,917
3.65%, 9/01/42		50		47,870
3.80%, 3/01/46		250		242,621
Series K, 4.05%, 5/01/45		150		150,200
Puget Energy, Inc.:
5.63%, 7/15/22		500		553,665
3.65%, 5/15/25		250		246,379
Puget Sound Energy, Inc., 5.80%, 3/15/40		500		610,041
Sierra Pacific Power Co., 2.60%, 5/01/26		1,250		1,195,957
South Carolina Electric & Gas Co.:
4.60%, 6/15/43		250		262,765
4.10%, 6/15/46		350		346,439
Southern California Edison Co.:
2.40%, 2/01/22		250		249,283
5.50%, 3/15/40		50		60,137
4.65%, 10/01/43		350		385,946
Series A, 5.95%, 2/01/38		250		313,919
Series C, 3.60%, 2/01/45		250		236,475
Southern Co.:
2.35%, 7/01/21		1,000		983,014
3.25%, 7/01/26		500		486,615

Corporate Bonds	Par   (000)		Value
Electric Utilities (continued)
Tampa Electric Co., 4.10%, 6/15/42	$	250	$	241,467
Toledo Edison Co., 6.15%, 5/15/37		100		118,025
TransAlta Corp., 4.50%, 11/15/22		500		491,373
Virginia Electric & Power Co.:
2.95%, 1/15/22		400		405,488
4.00%, 1/15/43		250		246,973
4.45%, 2/15/44		150		157,480
Series A, 3.15%, 1/15/26		555		551,012
Series A, 6.00%, 5/15/37		250		309,336
Series D, 4.65%, 8/15/43		500		542,789
WEC Energy Group, Inc.:
2.45%, 6/15/20		750		750,487
3.55%, 6/15/25		350		356,696
Westar Energy, Inc., 2.55%, 7/01/26		350		329,205
Xcel Energy, Inc.:
2.40%, 3/15/21		1,000		994,401
3.30%, 6/01/25		292		292,080
3.35%, 12/01/26		500		500,415
				46,422,433
Electrical Equipment — 0.1%
Amphenol Corp., 2.55%, 1/30/19		350		354,201
Emerson Electric Co.:
5.00%, 4/15/19		100		106,953
2.63%, 12/01/21		750		757,857
2.63%, 2/15/23		350		347,292
Roper Industries, Inc., 3.13%, 11/15/22		150		150,116
				1,716,419
Electronic Equipment, Instruments & Components — 0.1%
Arrow Electronics, Inc., 3.00%, 3/01/18		750		758,543
Corning, Inc.:
3.70%, 11/15/23		250		250,483
4.75%, 3/15/42		50		49,689
Fortive Corp., 3.15%, 6/15/26 (d)		500		492,732
Ingram Micro, Inc., 9.13%, 12/15/24		200		188,198
Jabil Circuit, Inc., 4.70%, 9/15/22		250		255,000
Tyco Electronics Group SA, 3.50%, 2/03/22		100		102,900
				2,097,545
Energy Equipment & Services — 0.1%
Baker Hughes, Inc.:
3.20%, 8/15/21		750		766,060
5.13%, 9/15/40		100		109,935
FMC Technologies, Inc., 3.45%, 10/01/22		100		100,043
Halliburton Co.:
6.15%, 9/15/19		100		110,219
3.80%, 11/15/25		1,550		1,574,640
4.85%, 11/15/35		250		263,657
4.50%, 11/15/41		50		49,099
4.75%, 8/01/43		250		256,724
5.00%, 11/15/45		175		188,728
National Oilwell Varco, Inc.:
2.60%, 12/01/22		1,000		926,735
3.95%, 12/01/42		150		115,156
				4,460,996
Food & Staples Retailing — 0.5%
Costco Wholesale Corp., 2.25%, 2/15/22		85		84,248

See Notes to Financial Statements.

28 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Food & Staples Retailing (continued)
CVS Health Corp.:
2.25%, 8/12/19	$	500	$	502,745
4.00%, 12/05/23		500		526,822
3.88%, 7/20/25		443		456,999
2.88%, 6/01/26		750		714,875
4.88%, 7/20/35		1,000		1,075,430
Kroger Co.:
1.50%, 9/30/19		1,000		984,804
6.15%, 1/15/20		100		110,703
3.30%, 1/15/21		500		513,764
3.40%, 4/15/22		100		101,936
3.50%, 2/01/26		495		497,281
5.15%, 8/01/43		125		134,761
3.88%, 10/15/46		500		455,186
NIKE, Inc., 3.88%, 11/01/45		500		492,833
Wal-Mart Stores, Inc.:
1.13%, 4/11/18		250		249,418
1.95%, 12/15/18		750		757,135
3.63%, 7/08/20		150		158,564
4.25%, 4/15/21		1,000		1,081,467
3.30%, 4/22/24		1,750		1,799,437
6.20%, 4/15/38		250		329,549
5.63%, 4/01/40		500		618,526
5.63%, 4/15/41		500		621,798
4.00%, 4/11/43		150		150,686
4.75%, 10/02/43		250		280,336
4.30%, 4/22/44		250		263,819
Walgreen Co., 3.10%, 9/15/22		200		199,971
Walgreens Boots Alliance, Inc.:
3.10%, 6/01/23		1,000		993,391
3.80%, 11/18/24		500		508,888
3.45%, 6/01/26		305		299,388
4.50%, 11/18/34		155		155,969
4.80%, 11/18/44		150		154,171
				15,274,900
Food Products — 0.3%
Archer-Daniels-Midland Co.:
2.50%, 8/11/26		750		708,450
4.54%, 3/26/42		75		79,094
ConAgra Foods, Inc.:
3.25%, 9/15/22		200		200,927
3.20%, 1/25/23		500		499,536
General Mills, Inc.:
2.20%, 10/21/19		300		301,460
3.15%, 12/15/21		150		153,215
3.65%, 2/15/24		500		519,778
JM Smucker Co.:
3.50%, 10/15/21		50		51,976
4.25%, 3/15/35		250		252,395
Kellogg Co.:
3.25%, 4/01/26		65		63,451
4.50%, 4/01/46		350		342,028
Kraft Heinz Foods Co.:
2.00%, 7/02/18		1,000		1,000,225
5.38%, 2/10/20		52		56,321
3.95%, 7/15/25		750		759,776
3.00%, 6/01/26		310		291,039
5.00%, 7/15/35		500		524,549
6.50%, 2/09/40		250		304,610

Corporate Bonds	Par   (000)		Value
Food Products (continued)
Kraft Heinz Foods Co. (continued):
5.00%, 6/04/42	$	200	$	204,787
4.38%, 6/01/46		500		470,490
Mead Johnson Nutrition Co., 4.60%, 6/01/44		250		241,586
Mondelez International, Inc., 6.50%, 2/09/40		250		308,423
Sysco Corp.:
3.75%, 10/01/25		100		101,206
3.30%, 7/15/26		130		127,573
4.85%, 10/01/45		150		159,107
4.50%, 4/01/46		250		252,048
Tyson Foods, Inc.:
2.65%, 8/15/19		500		504,766
4.50%, 6/15/22		150		159,619
4.88%, 8/15/34		70		71,333
Unilever Capital Corp.:
2.20%, 3/06/19		200		202,024
4.25%, 2/10/21		200		214,785
3.10%, 7/30/25		250		251,304
2.00%, 7/28/26		250		228,275
				9,606,156
Gas Utilities — 0.1%
Atmos Energy Corp., 4.15%, 1/15/43		100		97,403
National Fuel Gas Co., 3.75%, 3/01/23		300		292,540
Southern California Gas Co., Series TT, 2.60%, 6/15/26		1,250		1,200,048
Southern Co. Gas Capital Corp.:
3.50%, 9/15/21		50		51,389
3.95%, 10/01/46		750		693,988
				2,335,368
Health Care Equipment & Supplies — 0.3%
Baxter International, Inc., 2.60%, 8/15/26		230		212,330
Becton Dickinson & Co.:
1.80%, 12/15/17		194		194,441
2.68%, 12/15/19		500		507,306
3.30%, 3/01/23		200		200,873
6.00%, 5/15/39		250		291,750
4.69%, 12/15/44		250		258,986
Boston Scientific Corp.:
6.00%, 1/15/20		100		109,883
4.13%, 10/01/23		500		518,726
3.85%, 5/15/25		250		250,492
Medtronic, Inc.:
1.38%, 4/01/18		300		299,486
2.50%, 3/15/20		500		505,596
4.13%, 3/15/21		50		53,073
3.15%, 3/15/22		1,350		1,382,700
3.63%, 3/15/24		400		416,261
4.38%, 3/15/35		350		370,275
4.63%, 3/15/45		1,000		1,081,421
St. Jude Medical, Inc.:
3.25%, 4/15/23		150		149,074
3.88%, 9/15/25		45		45,336
Stryker Corp.:
1.30%, 4/01/18		200		199,160
3.38%, 11/01/25		580		576,316
3.50%, 3/15/26		500		504,720
4.63%, 3/15/46		250		254,919

See Notes to Financial Statements.

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 29

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Health Care Equipment & Supplies (continued)
Zimmer Holdings, Inc.:
3.15%, 4/01/22	$	500	$	498,633
3.55%, 4/01/25		750		730,490
4.25%, 8/15/35		67		62,478
				9,674,725
Health Care Providers & Services — 0.7%
Aetna, Inc.:
3.95%, 9/01/20		500		525,947
4.13%, 6/01/21		250		266,379
2.75%, 11/15/22		250		245,599
2.80%, 6/15/23		500		492,504
3.50%, 11/15/24		320		324,656
3.20%, 6/15/26		1,380		1,365,191
4.25%, 6/15/36		250		250,661
6.75%, 12/15/37		50		64,981
4.75%, 3/15/44		25		26,300
4.38%, 6/15/46		250		251,037
AmerisourceBergen Corp., 4.25%, 3/01/45		250		239,384
Anthem, Inc.:
1.88%, 1/15/18		950		950,418
2.25%, 8/15/19		225		224,546
3.13%, 5/15/22		200		200,101
3.30%, 1/15/23		100		99,831
3.50%, 8/15/24		250		249,290
4.63%, 5/15/42		50		50,238
5.10%, 1/15/44		150		159,833
4.65%, 8/15/44		350		354,300
4.85%, 8/15/54		150		152,499
Ascension Health, 3.95%, 11/15/46		500		477,409
Cardinal Health, Inc.:
3.20%, 6/15/22		50		50,504
3.50%, 11/15/24		250		252,770
4.60%, 3/15/43		50		49,411
4.90%, 9/15/45		250		263,794
Cigna Corp.:
4.00%, 2/15/22		525		548,480
3.25%, 4/15/25		300		292,184
5.38%, 2/15/42		50		55,701
Dignity Health:
2.64%, 11/01/19		100		100,871
5.27%, 11/01/64		100		97,553
Express Scripts Holding Co.:
2.25%, 6/15/19		350		349,960
4.75%, 11/15/21		300		322,222
3.50%, 6/15/24		250		247,052
4.50%, 2/25/26		250		257,368
3.40%, 3/01/27		750		702,683
4.80%, 7/15/46		250		239,357
Humana, Inc.:
3.85%, 10/01/24		500		511,850
4.95%, 10/01/44		250		262,766
Johns Hopkins Health System Corp., 3.84%, 5/15/46		25		23,707
Kaiser Foundation Hospitals, 3.50%, 4/01/22		100		103,195
Laboratory Corp. of America Holdings:
3.75%, 8/23/22		100		102,618
4.00%, 11/01/23		100		102,454
3.60%, 2/01/25		75		74,672
4.70%, 2/01/45		150		148,161

Corporate Bonds	Par   (000)		Value
Health Care Providers & Services (continued)
McKesson Corp.:
2.85%, 3/15/23	$	150	$	146,758
3.80%, 3/15/24		500		515,335
4.88%, 3/15/44		250		254,316
Memorial Sloan-Kettering Cancer Center, 5.00%, 7/01/42		200		224,679
New York and Presbyterian Hospital, 4.02%, 8/01/45		150		145,586
Quest Diagnostics, Inc.:
4.70%, 4/01/21		100		107,332
4.25%, 4/01/24		250		260,744
3.50%, 3/30/25		370		365,598
RWJ Barnabas Health, Inc., 3.95%, 7/01/46		60		55,263
UnitedHealth Group, Inc.:
1.63%, 3/15/19		550		547,889
2.30%, 12/15/19		250		251,876
2.13%, 3/15/21		1,500		1,482,456
3.35%, 7/15/22		750		772,729
2.88%, 3/15/23		250		250,858
3.10%, 3/15/26		500		493,150
3.45%, 1/15/27		500		507,915
4.63%, 7/15/35		555		604,972
6.88%, 2/15/38		100		136,080
5.95%, 2/15/41		100		124,782
3.95%, 10/15/42		150		146,079
4.75%, 7/15/45		250		275,404
4.20%, 1/15/47		500		505,748
				20,305,986
Hotels, Restaurants & Leisure — 0.1%
Carnival Corp., 3.95%, 10/15/20		250		263,645
Hyatt Hotels Corp., 3.38%, 7/15/23		190		187,381
Marriott International, Inc.:
3.00%, 3/01/19		100		101,750
3.25%, 9/15/22		100		100,837
4.50%, 10/01/34		250		244,827
McDonald’s Corp.:
1.88%, 5/29/19		100		99,797
3.50%, 7/15/20		50		51,991
3.25%, 6/10/24		400		405,976
3.38%, 5/26/25		500		501,468
3.70%, 1/30/26		250		254,524
4.70%, 12/09/35		315		333,244
3.70%, 2/15/42		100		89,108
4.88%, 12/09/45		750		803,305
Starbucks Corp., 3.85%, 10/01/23		250		266,743
Wyndham Worldwide Corp., 4.25%, 3/01/22		50		51,703
				3,756,299
Household Durables — 0.1%
Leggett & Platt, Inc., 3.80%, 11/15/24		200		202,193
Mohawk Industries, Inc., 3.85%, 2/01/23		125		127,726
Newell Brands, Inc.:
4.00%, 12/01/24		250		255,684
4.20%, 4/01/26		550		574,079
5.38%, 4/01/36		350		394,484
Whirlpool Corp., 5.15%, 3/01/43		200		213,382
				1,767,548

See Notes to Financial Statements.

30 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Household Products — 0.1%
Clorox Co.:
3.05%, 9/15/22	$	50	$	50,699
3.50%, 12/15/24		250		255,542
Kimberly-Clark Corp.:
1.90%, 5/22/19		500		503,185
3.63%, 8/01/20		50		52,438
2.65%, 3/01/25		85		82,681
2.75%, 2/15/26		500		487,164
3.20%, 7/30/46		210		182,604
Procter & Gamble Co.:
2.30%, 2/06/22		250		250,499
3.10%, 8/15/23		500		514,796
5.55%, 3/05/37		250		323,382
				2,702,990
Independent Power and Renewable Electricity Producers — 0.1%
Exelon Generation Co. LLC:
4.25%, 6/15/22		500		517,530
5.60%, 6/15/42		50		46,293
Southern Power Co.:
5.25%, 7/15/43		500		503,342
Series E, 2.50%, 12/15/21		1,000		979,311
				2,046,476
Industrial Conglomerates — 0.3%
3M Co.:
1.63%, 6/15/19		350		349,730
1.63%, 9/19/21		500		487,256
2.00%, 6/26/22		500		490,120
3.00%, 8/07/25		250		251,648
3.13%, 9/19/46		250		222,806
General Electric Co.:
5.63%, 5/01/18		1,000		1,055,395
6.00%, 8/07/19		100		110,487
2.20%, 1/09/20		1,000		1,003,254
4.38%, 9/16/20		50		53,743
4.63%, 1/07/21		72		78,178
4.65%, 10/17/21		201		220,485
2.70%, 10/09/22		1,000		999,815
3.45%, 5/15/24		86		88,402
6.75%, 3/15/32		394		524,465
5.88%, 1/14/38		215		270,584
6.88%, 1/10/39		72		101,516
4.13%, 10/09/42		500		504,425
4.50%, 3/11/44		750		805,106
Koninklijke Philips NV:
3.75%, 3/15/22		250		260,464
5.00%, 3/15/42		250		255,316
				8,133,195
Insurance — 1.1%
Aflac, Inc.:
3.63%, 6/15/23		250		258,795
3.63%, 11/15/24		250		257,300
2.88%, 10/15/26		750		718,531
Alleghany Corp., 4.95%, 6/27/22		550		596,227
Allstate Corp.:
3.15%, 6/15/23		250		253,150
3.28%, 12/15/26		750		752,489
4.50%, 6/15/43		150		159,093
5.75%, 8/15/53 (c)		250		258,475

Corporate Bonds	Par   (000)		Value
Insurance (continued)
American International Group, Inc.:
2.30%, 7/16/19	$	500	$	502,360
3.38%, 8/15/20		250		257,200
4.88%, 6/01/22		250		273,194
4.13%, 2/15/24		250		259,555
3.75%, 7/10/25		750		754,840
3.90%, 4/01/26		500		508,791
4.70%, 7/10/35		500		518,210
4.50%, 7/16/44		250		246,519
Aon PLC:
2.80%, 3/15/21		250		249,897
3.88%, 12/15/25		600		611,571
4.45%, 5/24/43		200		192,836
Arch Capital Group US, Inc., 5.14%, 11/01/43		125		131,979
Assurant, Inc., 2.50%, 3/15/18		250		252,612
Assured Guaranty US Holdings, Inc., 5.00%, 7/01/24		110		116,173
AXA SA, 8.60%, 12/15/30		50		68,750
Berkshire Hathaway Finance Corp.:
5.40%, 5/15/18		1,000		1,052,440
3.00%, 5/15/22		750		764,200
4.40%, 5/15/42		100		105,275
Berkshire Hathaway, Inc.:
1.55%, 2/09/18		500		501,008
2.10%, 8/14/19		500		504,500
2.20%, 3/15/21		500		498,960
2.75%, 3/15/23		500		498,123
3.13%, 3/15/26		400		397,402
4.50%, 2/11/43		100		106,331
Chubb Corp.:
6.00%, 5/11/37		50		62,368
Series 1, 6.50%, 5/15/38		100		134,035
Chubb INA Holdings, Inc.:
3.35%, 5/15/24		500		509,396
3.35%, 5/03/26		795		805,264
4.15%, 3/13/43		150		151,434
CNA Financial Corp.:
5.75%, 8/15/21		100		111,710
4.50%, 3/01/26		350		366,009
First American Financial Corp., 4.60%, 11/15/24		200		197,604
Hartford Financial Services Group, Inc.:
6.30%, 3/15/18		250		262,311
6.63%, 3/30/40		100		123,406
6.10%, 10/01/41		100		117,349
Lincoln National Corp.:
4.85%, 6/24/21		300		324,958
4.20%, 3/15/22		1,350		1,428,909
4.00%, 9/01/23		200		208,494
3.35%, 3/09/25		65		64,742
6.30%, 10/09/37		250		294,450
Loews Corp.:
2.63%, 5/15/23		250		242,945
3.75%, 4/01/26		500		508,258
Manulife Financial Corp., 4.15%, 3/04/26		500		522,006
Markel Corp., 3.63%, 3/30/23		250		250,661
Marsh & McLennan Cos., Inc.:
2.35%, 9/10/19		235		236,321
2.35%, 3/06/20		190		190,167
4.80%, 7/15/21		50		54,349
3.30%, 3/14/23		500		508,137

See Notes to Financial Statements.

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 31

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Insurance (continued)
MetLife, Inc.:
4.75%, 2/08/21	$	200	$	217,491
3.00%, 3/01/25		650		637,702
3.60%, 11/13/25		1,000		1,016,748
6.40%, 12/15/36		100		108,000
4.13%, 8/13/42		300		295,250
4.88%, 11/13/43		250		270,665
4.05%, 3/01/45		250		239,737
4.60%, 5/13/46		500		526,366
Old Republic International Corp., 4.88%, 10/01/24		250		260,476
Principal Financial Group, Inc.:
3.40%, 5/15/25		250		248,402
3.10%, 11/15/26		1,000		966,549
4.63%, 9/15/42		50		51,785
Progressive Corp.:
3.75%, 8/23/21		50		52,928
4.35%, 4/25/44		100		103,723
3.70%, 1/26/45		200		186,658
Prudential Financial, Inc.:
2.35%, 8/15/19		350		353,376
5.38%, 6/21/20		350		383,374
3.50%, 5/15/24		1,000		1,021,717
8.88%, 6/15/38 (c)		100		108,000
5.63%, 6/15/43 (c)		100		103,875
5.10%, 8/15/43		250		270,518
5.20%, 3/15/44 (c)		100		98,817
5.38%, 5/15/45 (c)		500		511,250
Travelers Cos., Inc.:
3.90%, 11/01/20		250		264,761
4.60%, 8/01/43		100		108,123
4.30%, 8/25/45		250		258,964
Travelers Property Casualty Corp., 6.38%, 3/15/33		100		126,277
Trinity Acquisition PLC, 4.40%, 3/15/26		500		506,127
Unum Group:
3.88%, 11/05/25		250		244,337
5.75%, 8/15/42		250		269,154
Voya Financial, Inc.:
2.90%, 2/15/18		572		579,085
3.65%, 6/15/26		350		342,221
WR Berkley Corp., 4.63%, 3/15/22		200		213,928
XLIT Ltd.:
2.30%, 12/15/18		250		251,646
5.75%, 10/01/21		100		111,133
5.50%, 3/31/45		250		237,217
				31,848,449
Internet & Direct Marketing Retail — 0.0%
Amazon.com, Inc.:
2.60%, 12/05/19		350		356,895
4.80%, 12/05/34		600		660,396
				1,017,291
Internet Software & Services — 0.1%
Alphabet, Inc.:
3.63%, 5/19/21		25		26,512
2.00%, 8/15/26		500		458,927
Baidu, Inc.:
3.25%, 8/06/18		205		208,462
2.75%, 6/09/19		350		353,673
eBay, Inc.:
2.20%, 8/01/19		500		499,772

Corporate Bonds	Par   (000)		Value
Internet Software & Services (continued)
eBay, Inc. (continued):
3.25%, 10/15/20	$	50	$	51,176
3.80%, 3/09/22		640		661,204
2.60%, 7/15/22		50		48,464
Expedia, Inc., 4.50%, 8/15/24		250		254,057
				2,562,247
IT Services — 0.3%
Alibaba Group Holding Ltd.:
3.13%, 11/28/21		225		224,842
3.60%, 11/28/24		500		495,052
4.50%, 11/28/34		250		246,785
Broadridge Financial Solutions, Inc., 3.40%, 6/27/26		270		260,555
Fidelity National Information Services, Inc.:
2.00%, 4/15/18		250		250,762
3.50%, 4/15/23		25		25,318
5.00%, 10/15/25		500		544,567
3.00%, 8/15/26		750		704,198
Fiserv, Inc., 2.70%, 6/01/20		500		502,414
International Business Machines Corp.:
1.25%, 2/08/18		500		499,410
1.95%, 2/12/19		250		251,534
1.88%, 5/15/19		250		250,576
2.25%, 2/19/21		1,000		998,784
2.90%, 11/01/21		100		102,032
3.63%, 2/12/24		275		286,371
3.45%, 2/19/26		250		255,771
4.00%, 6/20/42		350		350,090
4.70%, 2/19/46		250		272,587
Total System Services, Inc., 2.38%, 6/01/18		250		251,035
Verisk Analytics, Inc., 4.00%, 6/15/25		250		253,510
Western Union Co., 6.20%, 11/17/36		25		26,070
Xerox Corp.:
5.63%, 12/15/19		100		107,537
2.80%, 5/15/20		500		491,393
3.80%, 5/15/24		350		337,159
				7,988,352
Leisure Products — 0.0%
Hasbro, Inc., 5.10%, 5/15/44		60		60,679
Mattel, Inc., 1.70%, 3/15/18		200		199,551
				260,230
Life Sciences Tools & Services — 0.1%
Agilent Technologies, Inc., 3.88%, 7/15/23		200		205,769
Life Technologies Corp., 6.00%, 3/01/20		100		108,938
Thermo Fisher Scientific, Inc.:
2.40%, 2/01/19		500		503,801
3.30%, 2/15/22		305		309,872
3.15%, 1/15/23		250		250,245
3.65%, 12/15/25		500		501,622
				1,880,247
Machinery — 0.1%
Caterpillar, Inc.:
3.90%, 5/27/21		50		52,727
3.40%, 5/15/24		500		514,892
5.20%, 5/27/41		100		115,981
3.80%, 8/15/42		450		432,371
Deere & Co., 3.90%, 6/09/42		50		50,067
Flowserve Corp., 3.50%, 9/15/22		100		100,241

See Notes to Financial Statements.

32 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Machinery (continued)
Illinois Tool Works, Inc.:
1.95%, 3/01/19	$	250	$	251,290
4.88%, 9/15/41		50		56,302
3.90%, 9/01/42		75		74,949
Ingersoll-Rand Global Holding Co. Ltd.:
6.88%, 8/15/18		50		54,014
2.88%, 1/15/19		500		508,952
Ingersoll-Rand Luxembourg Finance SA, 4.65%, 11/01/44		30		30,607
Stanley Black & Decker, Inc., 2.90%, 11/01/22		150		150,718
Trinity Industries, Inc., 4.55%, 10/01/24		250		240,371
Valmont Industries, Inc., 5.00%, 10/01/44		250		220,297
				2,853,779
Media — 1.0%
21st Century Fox America, Inc.:
4.50%, 2/15/21		100		106,914
3.00%, 9/15/22		150		149,295
4.00%, 10/01/23		500		516,496
3.70%, 9/15/24		500		506,277
3.70%, 10/15/25		830		840,088
6.20%, 12/15/34		100		117,478
6.65%, 11/15/37		250		307,639
6.15%, 2/15/41		400		473,107
4.75%, 9/15/44		500		499,788
4.75%, 11/15/46 (d)		500		501,492
CBS Corp.:
3.50%, 1/15/25		500		495,279
4.00%, 1/15/26		500		508,522
4.85%, 7/01/42		325		318,143
Charter Communications Operating LLC/Charter Communications Operating Capital:
3.58%, 7/23/20		500		510,117
4.46%, 7/23/22		1,000		1,045,031
4.91%, 7/23/25		930		980,155
6.38%, 10/23/35		250		285,458
6.48%, 10/23/45		500		578,039
Cintas Corp. No 2, 4.30%, 6/01/21		25		26,533
Comcast Corp.:
5.15%, 3/01/20		350		382,051
2.75%, 3/01/23		750		744,638
3.60%, 3/01/24		250		258,053
3.38%, 8/15/25		500		503,019
3.15%, 3/01/26		750		740,005
2.35%, 1/15/27		850		783,555
4.25%, 1/15/33		650		676,432
4.20%, 8/15/34		235		240,046
4.40%, 8/15/35		250		261,535
3.20%, 7/15/36		500		449,737
6.45%, 3/15/37		200		258,229
4.65%, 7/15/42		150		156,168
4.75%, 3/01/44		250		268,131
4.60%, 8/15/45		250		262,067
3.40%, 7/15/46		500		436,656
Discovery Communications LLC:
4.38%, 6/15/21		50		52,720
3.25%, 4/01/23		50		48,745
4.90%, 3/11/26		330		347,496
4.95%, 5/15/42		50		46,116
4.88%, 4/01/43		150		138,614

Corporate Bonds	Par   (000)		Value
Media (continued)
Grupo Televisa SAB:
5.00%, 5/13/45	$	200	$	169,718
6.13%, 1/31/46		250		248,097
Interpublic Group of Cos., Inc., 4.20%, 4/15/24		250		256,874
NBCUniversal Media LLC:
4.38%, 4/01/21		600		648,191
2.88%, 1/15/23		250		249,413
6.40%, 4/30/40		200		258,623
5.95%, 4/01/41		250		308,023
Omnicom Group, Inc.:
3.63%, 5/01/22		125		128,376
3.65%, 11/01/24		70		70,406
3.60%, 4/15/26		500		494,836
Scripps Networks Interactive, Inc., 3.90%, 11/15/24		250		254,059
Thomson Reuters Corp.:
6.50%, 7/15/18		250		267,016
4.30%, 11/23/23		250		261,541
3.35%, 5/15/26		140		135,999
4.50%, 5/23/43		250		234,484
Time Warner Cable, Inc.:
8.25%, 4/01/19		300		337,110
5.00%, 2/01/20		500		530,664
4.13%, 2/15/21		100		103,384
6.55%, 5/01/37		150		169,808
6.75%, 6/15/39		300		348,774
5.88%, 11/15/40		250		266,611
5.50%, 9/01/41		250		254,153
4.50%, 9/15/42		475		430,187
Time Warner, Inc.:
4.88%, 3/15/20		250		266,867
4.70%, 1/15/21		500		534,438
3.60%, 7/15/25		250		248,600
3.88%, 1/15/26		1,000		1,001,077
2.95%, 7/15/26		500		465,761
6.25%, 3/29/41		150		175,017
4.90%, 6/15/42		350		350,127
5.35%, 12/15/43		250		265,809
4.65%, 6/01/44		250		239,037
Viacom, Inc.:
2.50%, 9/01/18		500		501,499
5.63%, 9/15/19		250		268,955
2.25%, 2/04/22		750		704,808
3.13%, 6/15/22		150		145,445
3.25%, 3/15/23		200		191,830
4.25%, 9/01/23		250		250,199
6.88%, 4/30/36		250		272,612
4.38%, 3/15/43		70		55,759
5.85%, 9/01/43		100		98,000
5.25%, 4/01/44		250		227,435
Walt Disney Co.:
1.85%, 5/30/19		500		502,477
2.15%, 9/17/20		500		502,235
2.30%, 2/12/21		500		502,507
3.75%, 6/01/21		50		53,091
2.35%, 12/01/22		300		295,310
3.15%, 9/17/25		165		167,351
3.00%, 2/13/26		200		198,997
3.00%, 7/30/46		75		63,784
Series E, 4.13%, 12/01/41		250		256,393

See Notes to Financial Statements.

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 33

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Media (continued)
WPP Finance 2010:
4.75%, 11/21/21	$	100	$	108,275
3.75%, 9/19/24		250		251,607
				31,411,513
Metals & Mining — 0.4%
Barrick Gold Corp.:
4.10%, 5/01/23		157		161,057
5.25%, 4/01/42		200		194,800
Barrick North America Finance LLC:
5.70%, 5/30/41		250		255,153
5.75%, 5/01/43		250		262,785
BHP Billiton Finance USA Ltd.:
2.05%, 9/30/18		175		175,981
2.88%, 2/24/22		250		252,023
3.85%, 9/30/23		1,000		1,058,339
5.00%, 9/30/43		350		390,936
Goldcorp, Inc.:
2.13%, 3/15/18		150		149,930
3.63%, 6/09/21		250		253,977
Newmont Mining Corp.:
3.50%, 3/15/22		950		965,552
4.88%, 3/15/42		300		281,475
Nucor Corp., 5.20%, 8/01/43		250		282,113
Reliance Steel & Aluminum Co., 4.50%, 4/15/23		25		25,152
Rio Tinto Finance USA Ltd.:
9.00%, 5/01/19		1,000		1,153,054
2.88%, 8/21/22		76		76,315
3.75%, 6/15/25		500		514,903
5.20%, 11/02/40		350		398,216
4.75%, 3/22/42		100		107,259
Southern Copper Corp.:
3.88%, 4/23/25		750		739,522
6.75%, 4/16/40		100		107,891
5.88%, 4/23/45		365		358,330
Vale Overseas Ltd.:
5.88%, 6/10/21		1,250		1,309,375
4.38%, 1/11/22		750		736,875
6.25%, 8/10/26		500		520,000
6.88%, 11/21/36		200		197,000
6.88%, 11/10/39		250		243,125
Vale SA, 5.63%, 9/11/42		250		221,250
				11,392,388
Multi-Utilities — 0.2%
CenterPoint Energy Resources Corp., 5.85%, 1/15/41		250		282,859
CMS Energy Corp., 4.70%, 3/31/43		200		209,101
Consolidated Edison Co. of New York, Inc.:
6.65%, 4/01/19		100		110,317
3.30%, 12/01/24		250		254,107
4.20%, 3/15/42		400		401,073
3.95%, 3/01/43		150		145,179
4.45%, 3/15/44		250		260,275
Series C, 4.30%, 12/01/56		500		499,313
Dominion Gas Holdings LLC:
2.80%, 11/15/20		500		504,550
3.60%, 12/15/24		250		253,070
Dominion Resources, Inc.:
3.63%, 12/01/24		250		251,564

Corporate Bonds	Par   (000)		Value
Multi-Utilities (continued)
Dominion Resources, Inc. (continued):
7.00%, 6/15/38	$	250	$	319,287
4.90%, 8/01/41		50		52,490
ONE Gas, Inc., 4.66%, 2/01/44		250		259,135
San Diego Gas & Electric Co.:
3.60%, 9/01/23		250		261,707
4.30%, 4/01/42		100		103,969
SCANA Corp., 4.13%, 2/01/22		100		101,039
Sempra Energy:
2.40%, 3/15/20		250		249,631
4.05%, 12/01/23		250		261,107
3.55%, 6/15/24		250		253,004
3.75%, 11/15/25		250		252,536
				5,285,313
Multiline Retail — 0.1%
Dollar General Corp., 1.88%, 4/15/18		250		250,320
Kohl’s Corp.:
4.00%, 11/01/21		50		52,436
5.55%, 7/17/45		100		95,499
Nordstrom, Inc.:
4.75%, 5/01/20		750		800,064
4.00%, 10/15/21		100		104,708
Target Corp.:
6.00%, 1/15/18		500		522,763
2.30%, 6/26/19		750		762,087
2.90%, 1/15/22		150		152,855
2.50%, 4/15/26		250		238,511
4.00%, 7/01/42		350		348,054
3.63%, 4/15/46		350		325,223
				3,652,520
Oil, Gas & Consumable Fuels — 2.7%
Alberta Energy Co. Ltd., 7.38%, 11/01/31		250		288,109
Anadarko Petroleum Corp.:
5.55%, 3/15/26		590		660,363
6.45%, 9/15/36		350		416,558
4.50%, 7/15/44		250		234,888
6.60%, 3/15/46		500		616,679
Apache Corp.:
3.25%, 4/15/22		645		655,132
6.00%, 1/15/37		100		115,015
5.10%, 9/01/40		250		261,545
4.75%, 4/15/43		250		257,507
4.25%, 1/15/44		100		98,582
Boardwalk Pipelines LP, 3.38%, 2/01/23		200		190,396
BP Capital Markets PLC:
1.38%, 5/10/18		250		249,229
2.24%, 9/26/18		300		302,244
2.24%, 5/10/19		500		503,029
2.52%, 1/15/20		115		115,668
2.32%, 2/13/20		250		250,035
4.74%, 3/11/21		50		54,541
2.11%, 9/16/21		500		490,575
3.06%, 3/17/22		210		212,415
3.25%, 5/06/22		100		102,113
2.75%, 5/10/23		350		343,612
3.99%, 9/26/23		250		262,779
3.12%, 5/04/26		350		341,834
3.02%, 1/16/27		500		482,532

See Notes to Financial Statements.

34 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Oil, Gas & Consumable Fuels (continued)
Buckeye Partners LP:
4.15%, 7/01/23	$	250	$	252,974
3.95%, 12/01/26		500		486,604
Canadian Natural Resources Ltd.:
3.45%, 11/15/21		1,100		1,124,455
3.80%, 4/15/24		250		249,142
3.90%, 2/01/25		250		250,739
6.25%, 3/15/38		50		56,883
Chevron Corp.:
1.72%, 6/24/18		500		501,531
1.56%, 5/16/19		500		497,947
2.19%, 11/15/19		555		560,534
2.43%, 6/24/20		550		555,310
2.41%, 3/03/22		145		143,749
3.33%, 11/17/25		500		509,580
2.95%, 5/16/26		250		245,918
CNOOC Finance 2013 Ltd., 3.00%, 5/09/23		1,300		1,254,760
CNOOC Finance 2015 Australia Pty Ltd., 2.63%, 5/05/20		500		497,989
CNOOC Finance 2015 USA LLC, 3.50%, 5/05/25		500		485,972
CNOOC Nexen Finance 2014 ULC, 4.25%, 4/30/24		500		511,548
Columbia Pipeline Group, Inc., 4.50%, 6/01/25		250		262,643
ConocoPhillips Co.:
2.40%, 12/15/22		500		483,460
4.95%, 3/15/26		500		552,001
4.15%, 11/15/34		395		386,090
6.50%, 2/01/39		400		506,366
4.30%, 11/15/44		500		497,354
5.95%, 3/15/46		250		309,365
ConocoPhillips Holding Co., 6.95%, 4/15/29		100		125,756
Devon Energy Corp.:
4.00%, 7/15/21		150		155,009
5.85%, 12/15/25		250		284,034
4.75%, 5/15/42		350		330,643
5.00%, 6/15/45		500		491,168
Ecopetrol SA:
7.63%, 7/23/19		100		112,120
5.88%, 9/18/23		350		370,475
4.13%, 1/16/25		1,000		936,500
5.38%, 6/26/26		500		497,500
5.88%, 5/28/45		500		432,000
Enable Midstream Partners LP, 2.40%, 5/15/19		1,350		1,325,427
Enbridge Energy Partners LP:
4.20%, 9/15/21		100		104,070
5.88%, 10/15/25		500		557,460
Enbridge, Inc.:
3.50%, 6/10/24		65		63,305
4.50%, 6/10/44		250		232,417
Encana Corp., 3.90%, 11/15/21		1,250		1,258,975
Energy Transfer Partners LP:
9.70%, 3/15/19		44		50,502
5.20%, 2/01/22		250		267,684
3.60%, 2/01/23		150		147,526
4.90%, 2/01/24		250		258,586
4.75%, 1/15/26		1,000		1,033,842
4.90%, 3/15/35		250		233,633
5.95%, 10/01/43		150		154,594
6.13%, 12/15/45		250		265,985

Corporate Bonds	Par   (000)		Value
Oil, Gas & Consumable Fuels (continued)
EnLink Midstream Partners LP:
4.85%, 7/15/26	$	500	$	504,366
5.05%, 4/01/45		150		135,983
Enterprise Products Operating LLC:
2.55%, 10/15/19		500		505,102
3.90%, 2/15/24		125		128,922
3.75%, 2/15/25		790		802,689
3.70%, 2/15/26		960		963,481
5.95%, 2/01/41		150		169,335
4.45%, 2/15/43		325		308,041
4.85%, 3/15/44		200		201,921
5.10%, 2/15/45		250		263,662
4.90%, 5/15/46		350		359,275
EOG Resources, Inc.:
5.63%, 6/01/19		150		162,093
3.15%, 4/01/25		80		78,496
5.10%, 1/15/36		250		271,934
EQT Corp., 4.88%, 11/15/21		50		53,370
Exxon Mobil Corp.:
2.22%, 3/01/21		500		501,146
2.40%, 3/06/22		500		497,443
3.18%, 3/15/24		250		253,063
2.71%, 3/06/25		250		243,367
3.04%, 3/01/26		620		619,160
4.11%, 3/01/46		500		512,137
Hess Corp.:
4.30%, 4/01/27		500		497,711
5.60%, 2/15/41		550		556,126
Husky Energy, Inc.:
3.95%, 4/15/22		150		155,823
4.00%, 4/15/24		500		509,085
Kinder Morgan Energy Partners LP:
4.30%, 5/01/24		500		511,601
2.65%, 2/01/19		245		246,289
3.50%, 3/01/21		750		761,430
5.80%, 3/01/21		250		273,972
5.00%, 10/01/21		200		212,949
3.95%, 9/01/22		225		231,009
3.45%, 2/15/23		500		495,979
4.25%, 9/01/24		155		158,293
6.50%, 2/01/37		100		109,584
6.95%, 1/15/38		250		289,992
5.00%, 8/15/42		75		71,679
5.50%, 3/01/44		250		254,878
5.40%, 9/01/44		250		249,185
Kinder Morgan, Inc.:
3.05%, 12/01/19		250		253,589
4.30%, 6/01/25		410		422,122
5.30%, 12/01/34		250		253,711
5.55%, 6/01/45		250		262,943
5.05%, 2/15/46		750		742,429
Magellan Midstream Partners LP:
3.20%, 3/15/25		500		486,114
4.25%, 9/15/46		250		234,892
Marathon Oil Corp.:
5.90%, 3/15/18		100		104,416
2.80%, 11/01/22		400		382,504
3.85%, 6/01/25		250		242,433
5.20%, 6/01/45		250		235,638

See Notes to Financial Statements.

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 35

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Oil, Gas & Consumable Fuels (continued)
Marathon Petroleum Corp.:
5.13%, 3/01/21	$	150	$	163,750
3.63%, 9/15/24		115		113,574
4.75%, 9/15/44		250		221,627
5.85%, 12/15/45		250		248,499
MPLX LP:
4.50%, 7/15/23		250		253,904
4.88%, 12/01/24		250		257,424
4.88%, 6/01/25		250		257,037
Nabors Industries, Inc.:
5.00%, 9/15/20		50		51,375
4.63%, 9/15/21		250		254,130
Nexen Energy ULC, 6.40%, 5/15/37		100		118,520
Noble Energy, Inc.:
5.63%, 5/01/21		250		260,820
4.15%, 12/15/21		150		156,103
5.25%, 11/15/43		500		509,307
Occidental Petroleum Corp.:
4.10%, 2/01/21		50		53,114
3.50%, 6/15/25		250		253,531
3.40%, 4/15/26		390		392,942
4.40%, 4/15/46		250		254,409
ONEOK Partners LP:
3.38%, 10/01/22		500		502,087
4.90%, 3/15/25		250		268,155
6.13%, 2/01/41		300		329,969
Petroleos Mexicanos:
3.50%, 7/18/18		350		353,150
3.13%, 1/23/19		250		247,875
3.50%, 7/23/20		500		489,375
4.88%, 1/24/22		400		401,200
3.50%, 1/30/23		400		367,200
4.63%, 9/21/23 (d)		1,500		1,459,200
4.50%, 1/23/26		1,000		911,000
6.88%, 8/04/26 (d)		500		527,500
6.50%, 6/02/41		300		280,965
5.50%, 6/27/44		112		93,206
6.38%, 1/23/45		750		682,500
5.63%, 1/23/46		550		456,500
6.75%, 9/21/47 (d)		473		446,890
Phillips 66:
4.65%, 11/15/34		355		369,526
5.88%, 5/01/42		100		118,406
4.88%, 11/15/44		250		264,016
Phillips 66 Partners LP, 4.90%, 10/01/46		500		480,144
Pioneer Natural Resources Co., 3.95%, 7/15/22		150		155,630
Plains All American Pipeline LP/PAA Finance Corp.:
3.65%, 6/01/22		500		502,759
2.85%, 1/31/23		250		236,335
3.60%, 11/01/24		750		718,129
5.15%, 6/01/42		50		46,359
4.70%, 6/15/44		250		222,758
Regency Energy Partners LP/Regency Energy Finance Corp., 5.88%, 3/01/22		500		550,029
Shell International Finance BV:
1.38%, 5/10/19		250		247,745
4.38%, 3/25/20		100		106,826
2.13%, 5/11/20		750		749,104
2.25%, 11/10/20		120		119,833
1.88%, 5/10/21		250		244,429

Corporate Bonds	Par   (000)		Value
Oil, Gas & Consumable Fuels (continued)
Shell International Finance BV (continued):
3.25%, 5/11/25	$	250	$	249,795
2.88%, 5/10/26		500		483,396
4.13%, 5/11/35		500		510,530
6.38%, 12/15/38		300		386,875
5.50%, 3/25/40		300		348,867
4.55%, 8/12/43		200		208,566
4.00%, 5/10/46		750		717,194
3.75%, 9/12/46		150		138,022
Spectra Energy Capital LLC, 3.30%, 3/15/23		150		145,008
Spectra Energy Partners LP:
4.75%, 3/15/24		250		265,413
3.50%, 3/15/25		250		244,184
3.38%, 10/15/26		500		478,237
Statoil ASA:
1.95%, 11/08/18		250		250,808
2.75%, 11/10/21		500		504,983
2.65%, 1/15/24		1,500		1,472,374
3.70%, 3/01/24		250		261,672
3.25%, 11/10/24		500		506,786
5.10%, 8/17/40		100		111,433
Suncor Energy, Inc.:
6.10%, 6/01/18		200		211,747
3.60%, 12/01/24		165		169,081
6.50%, 6/15/38		500		638,870
6.85%, 6/01/39		250		331,417
Sunoco Logistics Partners Operations LP:
4.25%, 4/01/24		400		403,091
4.95%, 1/15/43		250		228,753
5.30%, 4/01/44		100		96,549
TC PipeLines LP, 4.38%, 3/13/25		250		252,020
Total Capital Canada Ltd., 2.75%, 7/15/23		150		148,436
Total Capital International SA:
2.13%, 1/10/19		350		352,783
2.75%, 6/19/21		250		252,952
2.70%, 1/25/23		500		494,813
Total Capital SA, 2.13%, 8/10/18		500		503,829
TransCanada PipeLines Ltd.:
1.88%, 1/12/18		500		500,785
4.88%, 1/15/26		600		666,686
4.63%, 3/01/34		250		263,623
6.20%, 10/15/37		200		247,980
7.63%, 1/15/39		250		357,913
5.00%, 10/16/43		150		166,620
Transcontinental Gas Pipe Line Co. LLC:
7.85%, 2/01/26 (d)		250		315,242
4.45%, 8/01/42		250		228,311
Valero Energy Corp.:
6.13%, 2/01/20		150		165,560
3.65%, 3/15/25		500		495,904
3.40%, 9/15/26		750		718,510
6.63%, 6/15/37		300		351,109
Western Gas Partners LP:
4.00%, 7/01/22		250		254,079
4.65%, 7/01/26		250		258,850
Williams Partners LP:
5.25%, 3/15/20		500		534,209
4.00%, 11/15/21		250		256,584
3.60%, 3/15/22		750		753,968
4.30%, 3/04/24		250		252,453

See Notes to Financial Statements.

36 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Oil, Gas & Consumable Fuels (continued)
Williams Partners LP (continued):
3.90%, 1/15/25	$	250	$	245,189
4.00%, 9/15/25		250		247,195
6.30%, 4/15/40		250		266,848
4.90%, 1/15/45		500		462,104
				81,265,939
Paper & Forest Products — 0.1%
Celulosa Arauco y Constitucion SA, 4.75%, 1/11/22		50		52,017
Georgia-Pacific LLC, 8.88%, 5/15/31		525		777,873
International Paper Co.:
3.65%, 6/15/24		500		505,573
5.00%, 9/15/35		250		264,143
4.80%, 6/15/44		250		248,313
4.40%, 8/15/47		500		472,507
Westvaco Corp., 8.20%, 1/15/30		100		130,548
				2,450,974
Personal Products — 0.0%
Colgate-Palmolive Co.:
1.75%, 3/15/19		250		250,943
3.25%, 3/15/24		250		258,445
				509,388
Pharmaceuticals — 1.3%
Abbott Laboratories:
2.00%, 3/15/20		500		494,920
2.55%, 3/15/22		1,000		977,348
3.75%, 11/30/26		500		496,546
5.30%, 5/27/40		250		267,749
4.90%, 11/30/46		1,000		1,026,335
AbbVie, Inc.:
1.80%, 5/14/18		500		500,375
2.00%, 11/06/18		150		150,092
2.50%, 5/14/20		500		499,899
2.30%, 5/14/21		750		734,839
3.60%, 5/14/25		500		495,244
3.20%, 5/14/26		685		651,727
4.50%, 5/14/35		450		442,137
4.30%, 5/14/36		200		190,582
4.40%, 11/06/42		400		376,299
4.70%, 5/14/45		250		245,283
4.45%, 5/14/46		250		239,382
Actavis Funding SCS:
2.35%, 3/12/18		750		754,336
3.00%, 3/12/20		1,000		1,013,863
3.45%, 3/15/22		155		157,326
3.80%, 3/15/25		750		750,883
4.55%, 3/15/35		380		376,121
4.85%, 6/15/44		250		247,875
4.75%, 3/15/45		500		490,867
Actavis, Inc., 3.25%, 10/01/22		150		149,388
Allergan, Inc., 1.35%, 3/15/18		250		248,200
AstraZeneca PLC:
1.75%, 11/16/18		1,000		1,001,787
1.95%, 9/18/19		500		500,702
2.38%, 11/16/20		1,500		1,494,900
3.38%, 11/16/25		700		695,164
6.45%, 9/15/37		100		129,369
4.38%, 11/16/45		650		652,440

Corporate Bonds	Par   (000)		Value
Pharmaceuticals (continued)
Baxalta, Inc.:
2.88%, 6/23/20	$	500	$	499,875
4.00%, 6/23/25		100		100,292
5.25%, 6/23/45		350		373,596
Bristol-Myers Squibb Co.:
1.75%, 3/01/19		250		249,668
2.00%, 8/01/22		250		243,609
4.50%, 3/01/44		250		271,127
Eli Lilly & Co.:
1.95%, 3/15/19		250		251,553
2.75%, 6/01/25		45		43,866
3.70%, 3/01/45		250		237,155
GlaxoSmithKline Capital PLC, 2.85%, 5/08/22		650		655,221
GlaxoSmithKline Capital, Inc.:
5.65%, 5/15/18		100		105,401
2.80%, 3/18/23		500		501,246
6.38%, 5/15/38		300		394,576
Johnson & Johnson:
1.65%, 3/01/21		500		492,210
2.45%, 12/05/21		450		456,998
2.05%, 3/01/23		750		729,745
2.45%, 3/01/26		370		353,880
4.38%, 12/05/33		250		274,866
3.55%, 3/01/36		750		750,456
4.50%, 9/01/40		100		111,748
Merck & Co., Inc.:
1.30%, 5/18/18		750		749,221
3.88%, 1/15/21		250		265,302
2.35%, 2/10/22		500		496,496
2.75%, 2/10/25		570		559,661
4.15%, 5/18/43		250		256,794
3.70%, 2/10/45		900		858,188
Merck Sharp & Dohme Corp., 5.00%, 6/30/19		500		541,510
Mylan NV, 3.95%, 6/15/26 (d)		750		701,886
Mylan, Inc., 4.20%, 11/29/23		250		250,301
Novartis Capital Corp.:
4.40%, 4/24/20		100		107,265
3.40%, 5/06/24		650		669,826
3.00%, 11/20/25		1,100		1,092,282
4.40%, 5/06/44		250		269,610
Perrigo Co. PLC, 2.30%, 11/08/18		250		249,668
Perrigo Finance PLC:
3.90%, 12/15/24		250		244,730
4.38%, 3/15/26		250		250,255
Pfizer, Inc.:
1.50%, 6/15/18		500		500,726
1.45%, 6/03/19		500		496,954
1.95%, 6/03/21		500		494,516
5.80%, 8/12/23		500		589,520
2.75%, 6/03/26		115		111,647
3.00%, 12/15/26		750		740,401
7.20%, 3/15/39		250		361,122
4.30%, 6/15/43		500		517,591
4.40%, 5/15/44		250		264,064
Sanofi, 1.25%, 4/10/18		250		249,519
Shire Acquisitions Investments Ireland DAC:
2.88%, 9/23/23		500		475,224
3.20%, 9/23/26		900		840,901

See Notes to Financial Statements.

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 37

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Pharmaceuticals (continued)
Teva Pharmaceutical Finance Co. BV:
3.65%, 11/10/21	$	113	$	114,452
2.95%, 12/18/22		309		297,752
Teva Pharmaceutical Finance Netherlands III BV:
2.20%, 7/21/21		500		478,344
2.80%, 7/21/23		500		473,296
3.15%, 10/01/26		640		590,033
4.10%, 10/01/46		250		214,216
Wyeth LLC, 6.50%, 2/01/34		500		646,122
Zoetis, Inc., 4.70%, 2/01/43		400		389,349
				39,957,810
Real Estate — 0.1%
Boston Properties LP:
3.70%, 11/15/18		200		206,008
3.13%, 9/01/23		250		245,143
3.65%, 2/01/26		190		187,628
Brandywine Operating Partnership LP, 3.95%, 2/15/23		250		249,032
Duke Realty LP, 3.63%, 4/15/23		250		253,944
Host Hotels & Resorts LP:
5.25%, 3/15/22		250		270,413
Series E, 4.00%, 6/15/25		190		187,135
Liberty Property LP, 4.40%, 2/15/24		250		263,249
National Retail Properties, Inc., 3.30%, 4/15/23		500		497,071
Prologis LP, 3.75%, 11/01/25		45		46,110
Ventas Realty LP / Ventas Capital Corp.:
2.70%, 4/01/20		250		251,513
4.25%, 3/01/22		100		105,718
				2,762,964
Real Estate Investment Trusts (REITs) — 0.4%
Alexandria Real Estate Equities, Inc., 4.30%, 1/15/26		250		256,934
American Tower Corp.:
3.40%, 2/15/19		250		255,487
2.80%, 6/01/20		250		250,133
5.05%, 9/01/20		25		26,828
5.90%, 11/01/21		500		559,867
4.70%, 3/15/22		100		106,787
3.50%, 1/31/23		150		150,454
4.40%, 2/15/26		30		30,656
3.38%, 10/15/26		500		473,345
AvalonBay Communities, Inc.:
2.95%, 9/15/22		100		99,686
3.45%, 6/01/25		100		100,115
3.90%, 10/15/46		250		232,083
Brixmor Operating Partnership LP, 4.13%, 6/15/26		250		249,244
DDR Corp.:
4.63%, 7/15/22		100		105,877
4.25%, 2/01/26		250		251,397
Digital Realty Trust LP, 4.75%, 10/01/25		500		518,958
ERP Operating LP:
4.75%, 7/15/20		100		107,596
4.50%, 7/01/44		150		152,425
Essex Portfolio LP, 3.88%, 5/01/24		100		101,804
HCP, Inc.:
2.63%, 2/01/20		250		250,334
5.38%, 2/01/21		250		273,101
3.15%, 8/01/22		100		98,740
4.00%, 12/01/22		250		257,353
4.00%, 6/01/25		500		497,029

Corporate Bonds	Par   (000)		Value
Real Estate Investment Trusts (REITs) (continued)
Healthcare Realty Trust, Inc., 3.75%, 4/15/23	$	150	$	149,464
Hospitality Properties Trust, 5.00%, 8/15/22		200		211,142
Kilroy Realty LP, 6.63%, 6/01/20		250		279,553
Kimco Realty Corp.:
3.20%, 5/01/21		250		253,824
2.80%, 10/01/26		500		464,878
Mid-America Apartments LP, 4.30%, 10/15/23		200		208,625
Omega Healthcare Investors, Inc.:
5.88%, 3/15/24		250		257,902
4.50%, 4/01/27		250		239,919
Realty Income Corp., 4.65%, 8/01/23		250		268,033
Simon Property Group LP:
4.13%, 12/01/21		100		106,716
3.38%, 3/15/22		100		103,386
3.38%, 10/01/24		500		504,659
4.75%, 3/15/42		100		106,159
4.25%, 10/01/44		250		246,682
Ventas Realty LP:
4.13%, 1/15/26		250		255,576
3.25%, 10/15/26		500		474,391
Welltower, Inc.:
4.13%, 4/01/19		200		207,644
5.25%, 1/15/22		50		55,080
4.00%, 6/01/25		250		255,498
4.25%, 4/01/26		350		362,805
Weyerhaeuser Co., 7.38%, 3/15/32		350		443,229
				10,861,398
Real Estate Management & Development — 0.0%
CBRE Services, Inc., 4.88%, 3/01/26		250		249,094
Road & Rail — 0.4%
Burlington Northern Santa Fe LLC:
4.70%, 10/01/19		750		806,575
3.75%, 4/01/24		50		52,563
3.65%, 9/01/25		750		785,107
5.40%, 6/01/41		50		59,019
4.40%, 3/15/42		150		156,391
4.38%, 9/01/42		250		259,804
4.45%, 3/15/43		200		209,600
5.15%, 9/01/43		250		287,111
4.90%, 4/01/44		500		560,309
4.55%, 9/01/44		250		265,812
Canadian National Railway Co.:
2.95%, 11/21/24		305		306,398
2.75%, 3/01/26		560		546,612
3.50%, 11/15/42		100		92,406
Canadian Pacific Railway Co.:
4.45%, 3/15/23		500		536,157
2.90%, 2/01/25		250		245,033
4.80%, 9/15/35		250		269,852
5.75%, 1/15/42		25		30,043
4.80%, 8/01/45		110		117,746
CSX Corp.:
3.70%, 10/30/20		100		103,881
3.35%, 11/01/25		250		250,247
4.75%, 5/30/42		100		104,091
3.95%, 5/01/50		200		179,860
4.50%, 8/01/54		250		245,001
4.25%, 11/01/66		500		456,292

See Notes to Financial Statements.

38 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Road & Rail (continued)
Kansas City Southern, 3.13%, 6/01/26	$	250	$	238,102
Norfolk Southern Corp.:
3.00%, 4/01/22		750		758,371
3.85%, 1/15/24		1,000		1,041,277
3.95%, 10/01/42		100		94,992
4.80%, 8/15/43		350		380,980
4.45%, 6/15/45		250		259,121
Union Pacific Corp.:
4.16%, 7/15/22		100		107,764
3.65%, 2/15/24		1,000		1,043,975
3.25%, 8/15/25		250		253,779
4.30%, 6/15/42		50		51,800
4.75%, 12/15/43		250		272,240
4.05%, 11/15/45		250		251,611
4.05%, 3/01/46		140		140,400
				11,820,322
Semiconductors & Semiconductor Equipment — 0.2%
Altera Corp., 4.10%, 11/15/23		250		268,960
Analog Devices, Inc., 3.50%, 12/05/26		750		743,059
Applied Materials, Inc.:
4.30%, 6/15/21		500		537,566
3.90%, 10/01/25		160		168,703
5.85%, 6/15/41		50		59,847
Intel Corp.:
1.70%, 5/19/21		1,000		976,597
4.80%, 10/01/41		300		330,248
4.90%, 7/29/45		500		559,341
4.10%, 5/19/46		500		495,589
KLA-Tencor Corp., 4.65%, 11/01/24		305		322,877
Lam Research Corp., 3.80%, 3/15/25		230		230,251
Maxim Integrated Products, Inc., 3.38%, 3/15/23		100		97,682
QUALCOMM, Inc.:
2.25%, 5/20/20		500		500,037
3.45%, 5/20/25		250		254,381
4.65%, 5/20/35		250		264,280
4.80%, 5/20/45		250		267,157
Seagate HDD Cayman:
3.75%, 11/15/18		125		128,078
4.75%, 6/01/23		500		495,625
Texas Instruments, Inc., 1.75%, 5/01/20		250		247,237
Xilinx, Inc., 3.00%, 3/15/21		75		75,939
				7,023,454
Software — 0.6%
CA, Inc., 4.50%, 8/15/23		170		177,056
Hewlett Packard Enterprise Co.:
4.60%, 10/15/22		500		520,683
4.90%, 10/15/25		750		771,610
6.35%, 10/15/45		250		252,525
Microsoft Corp.:
1.30%, 11/03/18		1,000		999,201
1.63%, 12/06/18		250		251,399
1.10%, 8/08/19		500		493,277
1.85%, 2/12/20		500		499,681
3.00%, 10/01/20		50		51,687
2.00%, 11/03/20		500		500,518
1.55%, 8/08/21		500		484,956
2.65%, 11/03/22		500		502,908
2.00%, 8/08/23		1,000		955,803

Corporate Bonds	Par   (000)		Value
Software (continued)
Microsoft Corp. (continued):
3.13%, 11/03/25	$	500	$	505,584
2.40%, 8/08/26		485		458,178
3.50%, 2/12/35		165		158,826
4.20%, 11/03/35		250		263,076
3.45%, 8/08/36		250		237,591
5.30%, 2/08/41		100		118,900
3.75%, 5/01/43		150		141,799
4.45%, 11/03/45		500		532,709
3.70%, 8/08/46		1,000		941,465
4.00%, 2/12/55		500		472,891
4.75%, 11/03/55		250		271,923
3.95%, 8/08/56		250		236,121
Oracle Corp.:
5.75%, 4/15/18		150		158,468
2.25%, 10/08/19		500		506,063
3.88%, 7/15/20		100		106,130
2.80%, 7/08/21		1,000		1,019,202
1.90%, 9/15/21		500		488,597
2.40%, 9/15/23		1,000		968,801
2.95%, 5/15/25		500		490,141
2.65%, 7/15/26		745		707,162
3.25%, 5/15/30		250		243,625
4.30%, 7/08/34		250		258,496
3.90%, 5/15/35		500		493,156
6.13%, 7/08/39		500		629,196
5.38%, 7/15/40		150		174,317
4.50%, 7/08/44		250		255,248
4.13%, 5/15/45		250		242,290
4.00%, 7/15/46		250		239,124
4.38%, 5/15/55		250		248,655
				18,029,038
Specialty Retail — 0.3%
Advance Auto Parts, Inc., 4.50%, 12/01/23		250		258,511
AutoZone, Inc.:
3.70%, 4/15/22		50		51,670
3.13%, 7/15/23		250		247,550
3.25%, 4/15/25		165		161,938
Bed Bath & Beyond, Inc., 5.17%, 8/01/44		250		227,521
Home Depot, Inc.:
2.00%, 6/15/19		350		353,047
2.00%, 4/01/21		500		496,025
4.40%, 4/01/21		150		162,645
2.63%, 6/01/22		750		753,614
3.35%, 9/15/25		500		512,778
3.00%, 4/01/26		500		499,040
2.13%, 9/15/26		500		461,204
5.88%, 12/16/36		100		126,336
5.40%, 9/15/40		500		595,819
4.20%, 4/01/43		250		257,587
4.40%, 3/15/45		250		266,424
4.25%, 4/01/46		250		262,465
3.50%, 9/15/56		140		122,549
Lowe’s Cos., Inc.:
4.63%, 4/15/20		100		107,168
3.12%, 4/15/22		100		102,452
3.38%, 9/15/25		500		508,569
2.50%, 4/15/26		955		906,929
5.00%, 9/15/43		150		166,874

See Notes to Financial Statements.

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 39

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Corporate Bonds	Par   (000)		Value
Specialty Retail (continued)
Lowe’s Cos., Inc. (continued):
4.25%, 9/15/44	$	250	$	253,556
3.70%, 4/15/46		250		233,362
Macy’s Retail Holdings, Inc.:
3.88%, 1/15/22		300		307,268
4.38%, 9/01/23		200		205,644
3.63%, 6/01/24		250		245,182
4.50%, 12/15/34		500		446,970
5.13%, 1/15/42		250		230,985
QVC, Inc.:
5.45%, 8/15/34		200		182,053
5.95%, 3/15/43		350		314,957
Staples, Inc., 2.75%, 1/12/18		150		150,694
				10,179,386
Technology Hardware, Storage & Peripherals — 0.5%
Adobe Systems, Inc., 3.25%, 2/01/25		70		70,034
Apple, Inc.:
1.30%, 2/23/18		1,000		1,000,737
1.00%, 5/03/18		500		498,125
1.10%, 8/02/19		1,250		1,231,325
2.00%, 5/06/20		500		500,929
2.25%, 2/23/21		500		499,584
1.55%, 8/04/21		1,000		966,822
2.85%, 2/23/23		250		251,558
2.50%, 2/09/25		140		134,527
3.20%, 5/13/25		750		753,112
3.25%, 2/23/26		660		660,350
2.45%, 8/04/26		1,410		1,323,351
4.50%, 2/23/36		250		266,983
3.85%, 5/04/43		250		239,061
4.45%, 5/06/44		250		258,869
3.45%, 2/09/45		350		308,927
4.65%, 2/23/46		480		518,328
3.85%, 8/04/46		500		479,071
Diamond 1 Finance Corp./Diamond 2 Finance Corp. (d):
4.42%, 6/15/21		500		517,372
5.45%, 6/15/23		500		530,369
6.02%, 6/15/26		840		909,969
8.10%, 7/15/36		500		594,791
8.35%, 7/15/46		350		430,951
HP, Inc.:
4.38%, 9/15/21		250		263,001
4.65%, 12/09/21		600		640,438
6.00%, 9/15/41		150		151,294
NetApp, Inc., 3.38%, 6/15/21		105		106,641
				14,106,519
Textiles, Apparel & Luxury Goods — 0.0%
VF Corp., 3.50%, 9/01/21		100		103,936
Tobacco — 0.3%
Altria Group, Inc.:
9.25%, 8/06/19		45		53,099
2.63%, 1/14/20		250		252,849
2.85%, 8/09/22		1,500		1,501,837
4.00%, 1/31/24		250		264,154
4.50%, 5/02/43		400		406,549
5.38%, 1/31/44		70		80,859

Corporate Bonds	Par   (000)		Value
Tobacco (continued)
Philip Morris International, Inc.:
1.88%, 1/15/19	$	250	$	250,030
4.13%, 5/17/21		50		53,399
2.63%, 3/06/23		250		245,945
2.13%, 5/10/23		1,000		953,488
3.25%, 11/10/24		1,000		1,006,781
3.38%, 8/11/25		750		762,530
2.75%, 2/25/26		415		398,937
4.50%, 3/20/42		50		51,021
3.88%, 8/21/42		100		92,852
4.13%, 3/04/43		200		193,537
4.25%, 11/10/44		365		360,405
Reynolds American, Inc.:
6.88%, 5/01/20		250		283,896
3.25%, 6/12/20		135		138,330
5.70%, 8/15/35		325		373,308
6.15%, 9/15/43		150		180,993
5.85%, 8/15/45		250		296,032
				8,200,831
Trading Companies & Distributors — 0.0%
GATX Corp.:
2.38%, 7/30/18		150		150,664
3.25%, 9/15/26		750		707,805
				858,469
Transportation Infrastructure — 0.0%
Ryder System, Inc., 2.35%, 2/26/19		500		502,941
Utilities — 0.0%
Emera US Finance LP (d):
3.55%, 6/15/26		75		73,727
4.75%, 6/15/46		350		352,956
				426,683
Water Utilities — 0.0%
American Water Capital Corp.:
3.40%, 3/01/25		250		255,838
4.30%, 9/01/45		250		261,191
United Utilities PLC, 5.38%, 2/01/19		50		52,401
				569,430
Wireless Telecommunication Services — 0.2%
America Movil SAB de CV:
5.00%, 3/30/20		200		213,871
3.13%, 7/16/22		500		492,354
6.13%, 3/30/40		250		285,313
4.38%, 7/16/42		350		324,070
Crown Castle International Corp.:
3.40%, 2/15/21		750		761,063
3.70%, 6/15/26		280		274,829
Rogers Communications, Inc.:
3.00%, 3/15/23		650		645,778
3.63%, 12/15/25		65		65,728
5.00%, 3/15/44		250		267,425
Vodafone Group PLC:
1.50%, 2/19/18		1,250		1,245,358
7.88%, 2/15/30		100		130,417
4.38%, 2/19/43		950		840,562
				5,546,768
Total Corporate Bonds — 25.9%				783,074,990

See Notes to Financial Statements.

40 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Foreign Agency Obligations	Par   (000)		Value
African Development Bank:
1.00%, 5/15/19	$	1,000	$	986,363
1.25%, 7/26/21		500		480,279
Asian Development Bank:
0.88%, 4/26/18		3,000		2,984,946
1.75%, 9/11/18		500		503,298
1.50%, 9/28/18		1,000		1,001,831
1.88%, 4/12/19		500		503,348
1.63%, 3/16/21		250		245,881
Canada Government International Bond, 1.63%, 2/27/19		500		502,217
Chile Government International Bond, 3.63%, 10/30/42		350		325,640
Colombia Government International Bond:
4.38%, 7/12/21		250		261,875
2.63%, 3/15/23		250		235,625
4.00%, 2/26/24		750		757,500
4.50%, 1/28/26		2,250		2,317,500
7.38%, 9/18/37		100		121,500
6.13%, 1/18/41		250		270,000
5.63%, 2/26/44		200		206,000
5.00%, 6/15/45		250		237,188
Council of Europe Development Bank:
1.00%, 3/07/18		250		248,957
1.63%, 3/10/20		250		248,379
European Bank for Reconstruction & Development:
1.63%, 11/15/18		1,000		1,002,662
0.88%, 7/22/19		500		490,503
European Investment Bank:
1.00%, 3/15/18		250		249,039
1.25%, 5/15/18		500		499,122
1.00%, 6/15/18		250		248,740
1.13%, 8/15/18		1,000		995,644
1.88%, 3/15/19		500		503,414
1.25%, 5/15/19		3,000		2,973,372
1.75%, 6/17/19		1,500		1,503,874
1.13%, 8/15/19		1,000		984,593
1.25%, 12/16/19		1,000		983,989
1.38%, 6/15/20		1,000		981,016
1.63%, 12/15/20		1,000		985,622
2.00%, 3/15/21		500		497,902
1.63%, 6/15/21		2,000		1,953,038
1.38%, 9/15/21		2,000		1,925,680
Export Development Canada:
1.00%, 6/15/18		1,000		995,361
1.75%, 8/19/19		500		501,879
1.75%, 7/21/20		500		498,894
Export-Import Bank of Korea:
1.75%, 2/27/18		500		500,011
1.88%, 10/21/21		2,000		1,923,072
3.25%, 11/10/25		500		496,160
FMS Wertmanagement AoeR:
1.63%, 11/20/18		500		501,726
1.38%, 6/08/21		1,000		966,052
Hungary Government International Bond:
5.38%, 2/21/23		500		541,925
5.75%, 11/22/23		500		554,375
5.38%, 3/25/24		500		545,000
7.63%, 3/29/41		250		349,313

Foreign Agency Obligations	Par   (000)		Value
Inter-American Development Bank:
1.25%, 1/16/18	$	1,000	$	1,000,533
0.88%, 3/15/18		1,000		995,394
1.00%, 5/13/19		2,500		2,465,012
1.25%, 10/15/19		500		494,654
1.75%, 10/15/19		1,500		1,503,856
1.88%, 3/15/21		500		496,961
1.25%, 9/14/21		1,000		964,061
1.75%, 4/14/22		750		731,803
International Bank for Reconstruction & Development:
1.38%, 4/10/18		1,000		1,000,728
1.00%, 6/15/18		1,500		1,493,901
0.88%, 7/19/18		1,750		1,739,087
1.00%, 10/05/18		1,500		1,492,578
1.25%, 7/26/19		1,000		989,305
0.88%, 8/15/19		750		734,080
1.13%, 11/27/19		1,000		985,002
1.38%, 3/30/20		750		741,564
1.13%, 8/10/20		1,000		975,735
1.38%, 5/24/21		500		485,903
1.38%, 9/20/21		1,000		968,409
1.75%, 4/19/23		1,000		963,700
International Finance Corp.:
1.75%, 9/16/19		1,500		1,505,469
1.13%, 7/20/21		500		479,537
Israel Government International Bond, 4.50%, 1/30/43		200		199,400
Italian Government International Bond:
6.88%, 9/27/23		100		116,433
5.38%, 6/15/33		250		267,610
Japan Bank for International Cooperation:
2.13%, 2/07/19		200		200,670
1.88%, 4/20/21		2,000		1,953,788
2.00%, 11/04/21		2,000		1,950,322
Korea International Bond, 4.13%, 6/10/44		250		285,443
Mexico Government International Bond:
8.13%, 12/30/19		100		117,000
5.13%, 1/15/20		100		107,350
3.63%, 3/15/22		500		501,000
4.00%, 10/02/23		250		250,600
3.60%, 1/30/25		500		482,000
4.13%, 1/21/26		2,000		1,984,000
6.75%, 9/27/34		150		177,750
6.05%, 1/11/40		300		324,450
4.75%, 3/08/44		450		409,185
5.55%, 1/21/45		775		792,437
4.60%, 1/23/46		500		448,750
4.35%, 1/15/47		750		643,125
Nordic Investment Bank, 1.13%, 3/19/18		500		498,911
Panama Government International Bond:
5.20%, 1/30/20		350		375,900
3.75%, 3/16/25		500		496,250
3.88%, 3/17/28		1,500		1,466,250
6.70%, 1/26/36		350		424,725
Peruvian Government International Bond:
7.35%, 7/21/25		400		513,600
8.75%, 11/21/33		441		643,860
5.63%, 11/18/50		300		339,750
Philippine Government International Bond:
4.00%, 1/15/21		500		531,794

See Notes to Financial Statements.

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 41

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Foreign Agency Obligations	Par   (000)		Value
Philippine Government International Bond (continued):
4.20%, 1/21/24	$	2,500	$	2,687,500
7.75%, 1/14/31		500		702,866
6.38%, 10/23/34		250		325,180
3.95%, 1/20/40		250		246,128
3.70%, 3/01/41		350		335,151
Poland Government International Bond:
6.38%, 7/15/19		250		277,750
5.00%, 3/23/22		300		326,805
3.00%, 3/17/23		200		196,000
4.00%, 1/22/24		250		255,690
3.25%, 4/06/26		250		239,757
Province of Manitoba Canada:
1.13%, 6/01/18		500		497,770
2.05%, 11/30/20		500		501,656
Province of Ontario Canada:
1.20%, 2/14/18		750		748,304
2.00%, 9/27/18		500		503,918
2.00%, 1/30/19		500		503,342
4.40%, 4/14/20		1,200		1,293,185
1.88%, 5/21/20		500		498,366
Province of Quebec Canada:
3.50%, 7/29/20		500		527,000
2.75%, 8/25/21		500		509,578
2.63%, 2/13/23		250		250,618
2.50%, 4/20/26		500		481,261
Republic of South Africa Government International Bond:
4.67%, 1/17/24		200		199,732
5.88%, 9/16/25		500		533,475
4.88%, 4/14/26		500		497,500
4.30%, 10/12/28		1,000		927,500
5.38%, 7/24/44		200		196,800
Svensk Exportkredit AB, 1.88%, 6/17/19		500		501,200
Uruguay Government International Bond:
8.00%, 11/18/22		150		186,000
4.50%, 8/14/24		250		260,625
4.38%, 10/27/27		1,000		1,002,550
5.10%, 6/18/50		500		450,000
Total Foreign Agency Obligations — 3.1%				93,963,137
Municipal Bonds
American Municipal Power, Inc., RB, Build America Bonds, Combined Hydroelectric Projects, Series B, 7.83%, 2/15/41		150		212,134
Bay Area Toll Authority, RB, Build America Bonds, San Francisco Toll Bridge:
Series S-1, 6.92%, 4/01/40		200		270,002
Series S-1, 7.04%, 4/01/50		100		141,459
Series S-3, 6.91%, 10/01/50		200		280,740
Chicago Transit Authority, RB:
Build America Bonds, Series B, 6.20%, 12/01/40		200		233,856
Pension Funding, Series A, 6.90%, 12/01/40		100		124,875
City & County of Denver Colorado School District No. 1, COP, Refunding, Series B, 4.24%, 12/15/37		50		50,871

Municipal Bonds	Par   (000)		Value
City & County of San Francisco California Public Utilities Commission Water Revenue, RB, Build America Bonds, Sub-Series G, 6.95%, 11/01/50	$	100	$	140,085
City of Los Angeles California Department of Water & Power, RB, Build America Bonds:
5.72%, 7/01/39		200		244,170
6.60%, 7/01/50		90		125,573
Series D, 6.57%, 7/01/45		175		239,470
City of New York New York, GO:
Build America Bonds, Series A-2, 5.21%, 10/01/31		225		257,965
Build America Bonds, Series G-1, 5.97%, 3/01/36		100		126,677
Series F-1, 6.27%, 12/01/37		300		391,500
City of New York New York Transitional Finance Authority, RB, Build America Bonds, Future Tax Secured, Sub-Series B-1, 5.57%, 11/01/38		100		121,726
City of New York New York Water & Sewer System, Refunding RB, 2nd General Resolution, Build America Bonds, Fiscal 2010, Series EE, 6.01%, 6/15/42		100		130,618
City of San Antonio Texas Electric & Gas Systems Revenue, RB, 5.72%, 2/01/41		200		250,592
City Public Service Board of San Antonio Texas, RB, 4.43%, 2/01/42		170		182,152
Commonwealth of Massachusetts, GO, Build America Bonds, 5.46%, 12/01/39		500		616,045
Commonwealth of Pennsylvania, GO, Build America Bonds, 4.65%, 2/15/26		100		108,480
County of Clark Nevada Department of Aviation, ARB, Build America Bonds, Series C, 6.82%, 7/01/45		150		210,764
County of Los Angeles California Metropolitan Transportation Authority, RB, Build America Bonds, 5.74%, 6/01/39		100		122,875
County of San Diego California Water Authority, RB, Build America Bonds, Series B, 6.14%, 5/01/49		100		130,283
County of Sonoma California, Refunding RB, Pension Obligation, Series A, 6.00%, 12/01/29		100		117,286
Dallas Area Rapid Transit, RB, Build America Bonds, Senior Lien, Series B, 5.02%, 12/01/48		260		302,926
District of Columbia, RB, Build America Bonds, Series E, 5.59%, 12/01/34		200		243,500
East Bay Municipal Utility District, RB, Build America Bonds, 5.87%, 6/01/40		100		126,233
Florida Hurricane Catastrophe Fund Finance Corp., RB, Series A, 3.00%, 7/01/20		100		102,394
Illinois State Toll Highway Authority, RB, Build America Bonds, 5.85%, 12/01/34		100		122,642
JobsOhio Beverage System, Refunding RB, Series B, 4.53%, 1/01/35		100		107,942
Los Angeles California Community College District, GO, Build America Bonds, 6.75%, 8/01/49		200		287,382
Los Angeles California Unified School District, GO, Build American Bonds:
5.75%, 7/01/34		100		123,286
6.76%, 7/01/34		450		602,896
Massachusetts School Building Authority, RB, Build America Bonds, 5.72%, 8/15/39		100		125,624
Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board, RB, 4.05%, 7/01/26		100		103,210

See Notes to Financial Statements.

42 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Municipal Bonds	Par   (000)		Value
Metropolitan Transportation Authority, RB, Build America Bonds:
Series C-1, 6.69%, 11/15/40	$	305	$	402,191
Series E, 6.81%, 11/15/40		150		200,043
Metropolitan Washington Airports Authority, ARB, Dulles Toll Road Revenue, Build America Bonds, 7.46%, 10/01/46		100		139,984
Metropolitan Water Reclamation District of Greater Chicago, GO, Build America Bonds, 5.72%, 12/01/38		150		179,304
Municipal Electric Authority of Georgia Plant Vogtle Units 3 & 4, Refunding RB, Build America Bonds, Series A, 6.64%, 4/01/57		345		424,805
New Jersey EDA, RB, Series A (NPFGC), 7.43%, 2/15/29		450		529,830
New Jersey State Turnpike Authority, RB, Build America Bonds:
Series A, 7.10%, 1/01/41		300		419,106
Series F, 7.41%, 1/01/40		400		576,212
New Jersey Transportation Trust Fund Authority, RB, Build America Bonds, Series C, 5.75%, 12/15/28		200		208,488
New York City Transitional Finance Authority Future Tax Secured Revenue, RB:
5.27%, 5/01/27		200		231,172
Build America Bonds, 5.77%, 8/01/36		100		123,718
New York City Water & Sewer System, RB, Build America Bonds, 2nd General Resolution, Fiscal 2020, Series DD, 5.95%, 6/15/42		115		148,632
New York City Water & Sewer System, Refunding RB, Build America Bonds, 2nd General Resolution, Fiscal 2011, Series AA, 5.44%, 6/15/43		200		245,160
New York State Dormitory Authority, RB, Build America Bonds:
Series D, 5.50%, 3/15/30		150		177,042
Series H, 5.43%, 3/15/39		135		162,586
New York State Urban Development Corp., RB, Build America Bonds, 5.77%, 3/15/39		200		240,602
North Texas Tollway Authority, RB, Build America Bonds, Series B, 6.72%, 1/01/49		300		418,950
Ohio State University, RB:
Build America Bonds, Series C, 4.91%, 6/01/40		200		228,820
Series A, 4.05%, 12/01/56		150		147,387
Ohio State Water Development Authority, RB, Build America Bonds, Series B-2, 4.88%, 12/01/34		100		112,537
Port Authority of New York & New Jersey, RB:
158th Series, 5.86%, 12/01/24		100		119,957
159th Series, 6.04%, 12/01/29		200		250,528
182nd Series, 5.31%, 8/01/46		100		107,627
192nd Series, 4.81%, 10/15/65		100		106,927
Port Authority of New York & New Jersey, Refunding RB, Consolidated, 174th Series, 4.46%, 10/01/62		550		551,831
Regents of the University of California Medical Center Pooled Revenue, RB, Regents, Build America Bonds, Series H, 6.55%, 5/15/48		50		65,605
Regents of the University of California Medical Center Pooled Revenue, Refunding RB, Build America Bonds, Series F, 6.58%, 5/15/49		100		130,525
Regional Transportation District, RB, Build America Bonds, Series B, 5.84%, 11/01/50		100		129,617

Municipal Bonds	Par   (000)		Value
Salt River Project Agricultural Improvement & Power District, RB, Build America Bonds, Series A, 4.84%, 1/01/41	$	225	$	257,411
Santa Clara Valley Transportation Authority, RB, Build America Bonds, Series A, 5.88%, 4/01/32		100		120,896
South Carolina State Public Service Authority, RB, Build America Bonds, Series C, 6.45%, 1/01/50		100		130,836
State Board of Administration Finance Corp., RB, Series A:
2.16%, 7/01/19		150		151,034
2.64%, 7/01/21		200		200,748
State of California, GO, Build America Bonds, Various Purpose:
5.70%, 11/01/21		200		229,464
7.50%, 4/01/34		145		203,966
7.35%, 11/01/39		200		283,132
7.55%, 4/01/39		1,375		2,041,889
7.60%, 11/01/40		300		451,458
State of Connecticut, GO:
Build America Bonds, Series D, 5.09%, 10/01/30		150		167,795
Series A, 5.85%, 3/15/32		100		122,047
State of Illinois, GO:
5.67%, 3/01/18		200		206,796
5.88%, 3/01/19		500		529,865
5.10%, 6/01/33		1,350		1,206,225
State of Oregon, GO, 5.76%, 6/01/23		100		112,565
State of Texas, GO, Build America Bonds, Series A, 5.52%, 4/01/39		500		631,840
State of Washington, GO, Build America Bonds, Series D, 5.48%, 8/01/39		175		216,025
State of Wisconsin, RB, Series A (AGM), 5.70%, 5/01/26		100		116,595
Texas Transportation Commission, RB, 1st Tier, Build America Bonds, Series B, 5.18%, 4/01/30		600		708,528
University of California, RB:
Build America Bonds, 5.95%, 5/15/45		350		431,494
General, Series AD, 4.86%, 5/15/12		300		290,964
University of California, Refunding RB, General, Series AJ, 4.60%, 5/15/31		150		165,221
University of Massachusetts Building Authority, Build America Bonds, 5.45%, 11/01/40		100		121,258
University of North Carolina at Chapel Hill, Refunding RB, 3.85%, 12/01/34		400		412,280
University of Virginia, RB, Build America Bonds, 6.20%, 9/01/39		140		192,059
Virginia Commonwealth Transportation Board, RB, Build America Bonds, Series A-2, 5.35%, 5/15/35		75		90,293
Total Municipal Bonds — 0.8%				23,650,103
Non-Agency Mortgage-Backed Securities
Commercial Mortgage-Backed Securities — 1.0%
Citigroup Commercial Mortgage Trust:
Series 2013-GC17, Class A4, 4.13%, 11/10/46		750		803,666
Series 2014-GC25, Class A4, 3.64%, 10/10/47		500		517,739
Series 2014-GC25, Class AS, 4.02%, 10/10/47		1,500		1,556,098

See Notes to Financial Statements.

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 43

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Non-Agency Mortgage-Backed Securities	Par   (000)		Value
Commercial Mortgage-Backed Securities (continued)
Citigroup Commercial Mortgage Trust (continued):
Series 2016-GC37, Class A4, 3.31%, 4/10/49	$	500	$	500,856
Series 2016-P5, Class A4, 2.94%, 10/10/49		1,000		969,750
Commercial Mortgage Trust:
Series 2013-CR09, Class A4, 4.23%, 7/10/45 (c)		2,700		2,927,040
Series 2013-CR12, Class A4, 4.05%, 10/10/46		1,300		1,388,539
Series 2013-CR8, Class A5, 3.61%, 6/10/46 (c)		1,900		1,987,406
Series 2014-UBS2, Class A5, 3.96%, 3/10/47		500		526,466
Series 2015-PC1, Class A5, 3.90%, 7/10/50		1,500		1,567,466
Series 2016-CR28, Class A4, 3.76%, 2/10/49		750		779,254
CSAIL Commercial Mortgage Securities Trust, Series 2015-C3, Class A4, 3.72%, 8/15/48		1,000		1,042,944
GS Mortgage Securities Corp. II:
Series 2012-GCJ9, Class A3, 2.77%, 11/10/45		250		252,034
Series 2015-GC30, Class A4, 3.38%, 5/10/50		600		608,745
JPMBB Commercial Mortgage Securities Trust:
Series 2014-C18, Class A5, 4.08%, 2/15/47		250		266,915
Series 2014-C22, Class A4, 3.80%, 9/15/47		300		313,028
Series 2015-C29, Class A2, 2.92%, 5/15/48		1,000		1,022,802
JPMorgan Chase Commercial Mortgage Securities Trust:
Series 2011-C5, Class A3, 4.17%, 8/15/46		550		589,821
Series 2012-LC9, Class A3, 2.48%, 12/15/47		300		301,690
Series 2013-C16, Class A2, 3.07%, 12/15/46		609		621,878
Series 2014-C19, Class A2, 3.05%, 4/15/47		300		307,121
Series 2014-C20, Class A5, 3.80%, 7/15/47		1,400		1,467,416
Morgan Stanley Bank of America Merrill Lynch Trust:
Series 2013-C10, Class A5, 4.08%, 7/15/46 (c)		3,750		4,010,248
Series 2015-C24, Class A4, 3.73%, 5/15/48		750		778,468
Wells Fargo Commercial Mortgage Trust:
Series 2013-LC12, Class A4, 4.22%, 7/15/46 (c)		200		215,451
Series 2015-C27, Class A5, 3.45%, 2/15/48		1,500		1,528,135
WFRBS Commercial Mortgage Trust:
Series 2012-C7, Class A1, 2.30%, 6/15/45		565		576,394
Series 2012-C7, Class A2, 3.43%, 6/15/45		800		835,628
Series 2013-C11, Class A5, 3.07%, 3/15/45		500		509,486
Total Non-Agency Mortgage-Backed Securities — 1.0%				28,772,484
U.S. Government Sponsored Agency Securities
Agency Obligations — 1.7%
Fannie Mae:
0.88%, 5/21/18		2,328		2,321,486
1.13%, 7/20/18		3,000		3,000,048
1.63%, 1/21/20		500		501,480
1.75%, 9/12/19		1,000		1,009,500
6.25%, 5/15/29		2,850		3,777,706
6.63%, 11/15/30		149		207,272
7.25%, 5/15/30		550		796,961
Federal Home Loan Bank:
1.00%, 9/26/19		6,000		5,928,504
1.38%, 2/18/21		7,000		6,867,427
5.50%, 7/15/36		2,100		2,754,639

U.S. Government Sponsored Agency Securities	Par   (000)		Value
Agency Obligations (continued)
Financing Corp., 8.60%, 9/26/19	$	200	$	237,442
Freddie Mac:
0.75%, 1/12/18		2,000		1,995,924
0.88%, 3/07/18		1,500		1,498,055
1.13%, 8/12/21		3,032		2,919,079
1.75%, 5/30/19		420		423,957
2.38%, 1/13/22		12,430		12,633,939
4.88%, 6/13/18		250		263,556
6.25%, 7/15/32		1,300		1,788,982
NCUA Guaranteed Notes, 3.00%, 6/12/19		1,000		1,034,040
Tennessee Valley Authority, 3.50%, 12/15/42		140		136,810
				50,096,807
Commercial Mortgage-Backed Securities — 0.4%
Fannie Mae:
Series 2014-M1, Class ASQ2, 2.32%, 11/25/18 (c)		851		859,655
Series 2012-M9, Class A2, 2.48%, 4/25/22		2,000		2,004,983
Series 2014-M6, Class A2, 2.68%, 5/25/21 (c)		150		151,802
Series 2014-M2, Class ASV2, 2.78%, 6/25/21 (c)		483		493,604
Series 2014-M13, Class A2, 3.02%, 8/25/24 (c)		500		504,531
Freddie Mac:
Series K713, Class A2, 2.31%, 3/25/20		300		303,605
Series K026, Class A2, 2.51%, 11/25/22		200		200,749
Series K038, Class A1, 2.60%, 10/25/23		212		215,591
Series K014, Class A1, 2.79%, 10/25/20		77		77,763
Series K017, Class A2, 2.87%, 12/25/21		500		512,902
Series K033, Class A2, 3.06%, 7/25/23 (c)		100		103,208
Series K052, Class A2, 3.15%, 11/25/25		750		765,862
Series K031, Class A2, 3.30%, 4/25/23 (c)		100		104,641
Series K006, Class A1, 3.40%, 7/25/19		249		254,923
Series K004, Class A1, 3.41%, 5/25/19		325		332,768
Series K035, Class A2, 3.46%, 8/25/23 (c)		2,000		2,107,740
Series K037, Class A2, 3.49%, 1/25/24		200		210,849
Series K034, Class A2, 3.53%, 7/25/23 (c)		3,900		4,131,307
Series K013, Class A2, 3.97%, 1/25/21 (c)		500		534,450
Series K003, Class A5, 5.09%, 3/25/19		300		318,374
				14,189,307
Mortgage-Backed Securities — 28.5%
Fannie Mae Mortgage-Backed Securities:
1.90%, 4/01/43 (c)		270		278,249
1.91%, 5/01/43 (c)		546		559,553
2.04%, 6/01/43 (c)		612		620,037
2.47%, 8/01/42 (c)		189		193,795
2.50%, 9/01/28 - 1/01/47 (e)		35,626		35,586,137
3.00%, 1/01/27 - 1/01/47 (e)		111,411		111,794,028
3.01%, 8/01/41 (c)		45		46,936
3.11%, 11/01/40 (c)		26		27,663
3.50%, 2/01/26 - 1/01/47 (e)		107,268		110,431,214
4.00%, 10/01/25 - 1/01/47 (e)		66,434		69,839,102
4.50%, 5/01/24 - 1/01/47 (e)		27,697		29,723,973
5.00%, 1/01/19 - 1/01/47 (e)		15,833		17,223,520
5.50%, 4/01/36 - 1/01/47 (e)		6,122		6,808,040
6.00%, 3/01/34 - 1/01/47 (e)		7,978		9,035,750
6.50%, 7/01/32		157		181,584
7.00%, 2/01/32		28		29,254

See Notes to Financial Statements.

44 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

U.S. Government Sponsored Agency Securities	Par   (000)		Value
Mortgage-Backed Securities (continued)
Freddie Mac Mortgage-Backed Securities:
1.80%, 6/01/43 (c)	$	114	$	116,262
2.50%, 7/01/28 - 1/01/32 (e)		22,185		22,177,207
3.00%, 9/01/40 (c)		57		59,930
3.00%, 3/01/27 - 1/01/47 (e)		68,946		69,183,720
3.04%, 8/01/41 (c)		31		32,788
3.50%, 1/01/32 - 1/01/47 (e)		66,202		68,053,321
4.00%, 5/01/19 - 1/01/47 (e)		37,693		39,532,670
4.50%, 4/01/18 - 1/01/47 (e)		14,473		15,511,039
5.00%, 10/01/18 - 1/01/47 (e)		9,574		10,381,885
5.50%, 6/01/35 - 1/01/47 (e)		6,112		6,767,139
6.50%, 6/01/31		85		95,742
8.00%, 12/01/24		164		179,463
Ginnie Mae Mortgage-Backed Securities:
2.50%, 5/20/45 - 1/01/47 (e)		1,836		1,780,012
3.00%, 5/15/43 - 1/01/47 (e)		74,987		75,932,454
3.50%, 9/20/42 - 1/01/47 (e)		81,453		84,784,677
4.00%, 3/15/41 - 1/01/47 (e)		37,137		39,471,454
4.50%, 7/15/39 - 1/01/47 (e)		18,568		19,892,703
5.00%, 11/15/39 - 1/01/47 (e)		11,581		12,536,165
5.50%, 12/15/32 - 7/20/40		484		533,001
6.00%, 3/15/35 - 10/20/38		298		341,808
6.50%, 9/15/36		170		196,313
7.50%, 12/15/23		143		158,985
				860,097,573
Total U.S. Government Sponsored Agency Securities — 30.6%				924,383,687
U.S. Treasury Obligations
U.S. Treasury Bonds:
8.88%, 2/15/19		8,000		9,293,752
8.13%, 8/15/19		15,000		17,593,950
8.75%, 8/15/20		400		499,516
7.63%, 11/15/22		3,400		4,440,985
1.50%, 3/31/23		18,500		17,775,891
6.25%, 8/15/23		2,050		2,562,660
7.63%, 2/15/25		375		522,744
6.00%, 2/15/26		2,660		3,438,962
6.75%, 8/15/26		7,500		10,270,605
6.50%, 11/15/26		900		1,218,832
6.63%, 2/15/27		4,000		5,490,780
6.13%, 11/15/27		2,080		2,791,424
5.25%, 2/15/29		2,000		2,556,406
6.13%, 8/15/29		2,500		3,453,905
5.38%, 2/15/31		5,500		7,325,312
4.50%, 2/15/36		13,766		17,418,285
4.75%, 2/15/37		450		585,685
5.00%, 5/15/37		4,000		5,370,780
4.38%, 2/15/38		2,500		3,106,640
4.50%, 5/15/38		1,000		1,263,047
3.50%, 2/15/39		1,300		1,421,672
4.25%, 5/15/39		2,775		3,369,133
4.50%, 8/15/39		1,700		2,134,828
4.38%, 11/15/39		1,800		2,222,015
4.63%, 2/15/40		1,230		1,571,902
4.38%, 5/15/40		1,650		2,038,588
3.88%, 8/15/40		860		987,421

U.S. Treasury Obligations	Par   (000)		Value
U.S. Treasury Bonds (continued):
4.25%, 11/15/40	$	7,528	$	9,139,459
4.75%, 2/15/41		11,000		14,341,250
4.38%, 5/15/41		5,610		6,941,281
3.75%, 8/15/41		6,550		7,377,193
3.13%, 11/15/41		5,200		5,277,392
3.13%, 2/15/42		7,850		7,965,607
3.00%, 5/15/42		480		475,988
2.75%, 8/15/42		750		708,545
2.75%, 11/15/42		4,200		3,966,866
3.13%, 2/15/43		3,050		3,090,388
2.88%, 5/15/43		250		241,475
3.63%, 8/15/43		2,500		2,772,363
3.75%, 11/15/43		1,700		1,927,441
3.63%, 2/15/44		1,000		1,108,398
3.38%, 5/15/44		1,600		1,696,688
3.13%, 8/15/44		2,000		2,024,218
3.00%, 11/15/44		6,300		6,223,468
2.50%, 2/15/45		4,500		4,008,339
3.00%, 5/15/45		12,600		12,429,698
2.88%, 8/15/45		7,500		7,217,287
3.00%, 11/15/45		11,900		11,737,303
2.50%, 2/15/46		12,000		10,663,128
2.50%, 5/15/46		8,350		7,420,411
2.25%, 8/15/46		1,000		840,820
2.88%, 11/15/46		4,500		4,344,611
U.S. Treasury Notes:
0.88%, 1/31/18		2,000		1,998,516
2.63%, 1/31/18		1,500		1,526,660
1.00%, 2/15/18		4,500		4,501,584
0.75%, 2/28/18		4,500		4,489,452
2.75%, 2/28/18		1,300		1,326,051
1.00%, 3/15/18		5,000		5,002,345
2.88%, 3/31/18		8,000		8,187,816
0.75%, 4/15/18		9,000		8,972,226
0.63%, 4/30/18		1,500		1,492,676
2.63%, 4/30/18		15,000		15,318,165
1.00%, 5/15/18		7,000		6,997,536
1.00%, 5/31/18		10,000		9,996,090
1.13%, 6/15/18		8,000		8,007,816
0.88%, 7/15/18		5,000		4,983,985
1.38%, 7/31/18		20,000		20,089,060
4.00%, 8/15/18		500		523,574
1.38%, 9/30/18		8,130		8,160,487
0.88%, 10/15/18		17,000		16,917,652
1.75%, 10/31/18		2,250		2,273,994
1.25%, 12/31/18		39,000		39,039,624
1.38%, 12/31/18		4,030		4,043,065
1.50%, 12/31/18		31,315		31,497,253
1.25%, 1/31/19		11,400		11,406,680
1.50%, 2/28/19		10,000		10,054,690
1.00%, 3/15/19		5,000		4,973,440
1.50%, 3/31/19		10,000		10,051,170
1.63%, 3/31/19		1,500		1,511,895
1.25%, 4/30/19		4,300		4,297,480
1.63%, 4/30/19		17,000		17,132,804
1.50%, 5/31/19		14,000		14,064,526
0.75%, 7/15/19		25,000		24,636,725
0.88%, 7/31/19		1,500		1,482,597
1.00%, 8/31/19		7,300		7,231,278

See Notes to Financial Statements.

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 45

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

U.S. Treasury Obligations	Par   (000)		Value
U.S. Treasury Notes (continued):
1.63%, 8/31/19	$	4,000	$	4,027,656
1.75%, 9/30/19		10,000		10,098,440
1.00%, 10/15/19		9,000		8,903,673
1.50%, 10/31/19		20,000		20,048,440
1.00%, 11/15/19		22,000		21,735,318
1.00%, 11/30/19		4,000		3,951,876
1.50%, 11/30/19		16,500		16,534,155
1.38%, 12/15/19		10,000		9,976,170
1.13%, 12/31/19		4,750		4,703,797
1.63%, 12/31/19		32,500		32,659,965
1.38%, 1/31/20		750		747,158
3.63%, 2/15/20		7,500		7,980,765
1.25%, 2/29/20		6,200		6,150,592
1.38%, 2/29/20		5,700		5,672,834
1.13%, 3/31/20		1,500		1,480,605
1.13%, 4/30/20		2,700		2,662,770
1.38%, 4/30/20		6,200		6,160,041
1.38%, 5/31/20		4,400		4,372,157
1.88%, 6/30/20		2,000		2,019,296
2.00%, 7/31/20		6,500		6,584,045
2.63%, 8/15/20		4,140		4,280,694
2.13%, 8/31/20		7,000		7,113,204
1.38%, 10/31/20		10,000		9,877,340
1.75%, 10/31/20		500		500,996
2.63%, 11/15/20		1,000		1,033,594
1.63%, 11/30/20		6,000		5,975,862
2.00%, 11/30/20		5,300		5,354,866
1.75%, 12/31/20		3,800		3,798,814
2.38%, 12/31/20		900		921,973
2.13%, 1/31/21		11,800		11,957,176
3.63%, 2/15/21		2,310		2,479,642
2.00%, 2/28/21		12,700		12,801,206
1.25%, 3/31/21		9,000		8,792,226
2.25%, 3/31/21		11,500		11,707,989
1.38%, 4/30/21		5,000		4,904,885
3.13%, 5/15/21		3,000		3,161,367
2.00%, 5/31/21		5,000		5,030,665
1.13%, 6/30/21		4,500		4,355,334
2.13%, 6/30/21		10,000		10,107,810
2.25%, 7/31/21		12,804		13,004,562
1.13%, 8/31/21		3,000		2,898,633
2.00%, 8/31/21		8,500		8,533,864
2.13%, 9/30/21		7,900		7,970,049
1.25%, 10/31/21		8,000		7,757,504
2.00%, 10/31/21		9,000		9,026,019
2.00%, 11/15/21		3,700		3,710,260
1.75%, 11/30/21		6,000		5,955,234
1.88%, 11/30/21		3,000		2,991,915
2.13%, 12/31/21		10,000		10,085,550
1.50%, 1/31/22		6,000		5,864,532
2.00%, 2/15/22		1,500		1,502,343
1.75%, 3/31/22		9,100		8,978,788
1.75%, 4/30/22		3,000		2,958,399
2.13%, 6/30/22		8,000		8,028,128
1.88%, 8/31/22		4,958		4,900,284
1.63%, 11/15/22		3,000		2,919,609
2.00%, 11/30/22		11,000		10,925,662
2.13%, 12/31/22		5,000		4,997,265
1.75%, 1/31/23		3,600		3,517,031
1.50%, 2/28/23		3,200		3,077,750

U.S. Treasury Obligations	Par   (000)		Value
U.S. Treasury Notes (continued):
1.63%, 4/30/23	$	4,000	$	3,868,752
1.75%, 5/15/23		1,000		973,984
1.63%, 5/31/23		4,000		3,864,220
1.38%, 6/30/23		11,500		10,924,103
1.25%, 7/31/23		4,000		3,765,624
2.50%, 8/15/23		4,000		4,070,936
1.38%, 8/31/23		8,000		7,579,688
1.38%, 9/30/23		4,000		3,787,968
2.75%, 11/15/23		3,000		3,098,907
2.13%, 11/30/23		24,000		23,840,616
2.25%, 12/31/23		8,000		8,003,752
2.75%, 2/15/24		4,000		4,131,248
2.50%, 5/15/24		2,300		2,334,410
2.38%, 8/15/24		7,500		7,534,860
2.25%, 11/15/24		8,980		8,924,926
2.00%, 2/15/25		6,984		6,797,395
2.13%, 5/15/25		9,000		8,822,808
2.25%, 11/15/25		1,600		1,579,501
1.63%, 2/15/26		3,000		2,803,125
1.63%, 5/15/26		350		326,375
1.50%, 8/15/26		3,500		3,219,045
2.00%, 11/15/26		7,000		6,735,036
Total U.S. Treasury Obligations — 37.2%				1,124,070,305
Total Long-Term Investments (Cost — $3,021,140,899) — 99.0%				2,990,236,747
Short-Term Securities	Shares
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.87% (b)(f)		478,391,317		478,486,995
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.45% (b)(f)		100,000		100,000
Total Short-Term Securities (Cost — $478,512,492) — 15.9%				478,586,995
Total Investments Before TBA Sale Commitments (Cost — $3,499,653,391) — 114.9%				3,468,823,742
TBA Sale Commitments (e)	Par   (000)
Fannie Mae Mortgage-Backed Securities:
2.50%, 1/23/32 – 9/25/46	$	1,175		(1,174,504	)
3.00%, 1/23/32 – 1/18/47		4,455		(4,445,556	)
3.50%, 1/23/32		3,481		(3,625,679	)
4.00%, 1/23/32 – 1/18/47		3,726		(3,914,083	)
4.50%, 1/18/47		1,803		(1,937,943	)
5.00%, 1/18/47		475		(516,711	)
Freddie Mac Mortgage-Backed Securities:
3.50%, 1/23/32 – 1/18/47		3,900		(3,998,828	)
4.00%, 1/18/47		2,613		(2,745,283	)
Total TBA Sale Commitments (Proceeds — $22,281,391) — (0.7)%				(22,358,587	)
Total Investments, Net of TBA Sale Commitments (Cost — $3,477,372,000) — 114.2%				3,446,465,155
Liabilities in Excess of Other Assets — (14.2)%				(428,227,731	)
Net Assets — 100.0%			$	3,018,237,424

See Notes to Financial Statements.

46 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Schedule of Investments (continued) U.S. Total Bond Index Master Portfolio

Notes to Schedule of Investments

(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 as of period end.

(b) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/Par Held at December 31, 2015		Shares/Par Purchased			Shares/ Par Sold			Shares/Par Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gain/Capital Gain
BlackRock Cash Funds: Institutional, SL Agency Shares		190,311,931		288,079,386	1		—			478,391,317	$	478,486,995	$	1,571,609	3	$	43,856
BlackRock Cash Funds: Prime, SL Agency Shares		258,161		—			(258,161	)2		—		—		3,533	3		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		100,000	1		—			100,000		100,000		107,645			7
PNC Bank NA, 1.85%, 7/20/18		—	$	500,000			—		$	500,000		500,868		4,445			—
PNC Bank NA, 2.20%, 1/28/19	$	500,000		—			—		$	500,000		502,633		11,000			—
PNC Bank NA, 2.25%, 7/02/19	$	350,000		—			—		$	350,000		352,339		7,875			—
PNC Bank NA, 1.45%, 7/29/19		—	$	500,000			—		$	500,000		493,197		2,980			—
PNC Bank NA, 2.30%, 6/01/20	$	500,000		—			—		$	500,000		499,785		11,500			—
PNC Bank NA, 2.45%, 11/05/20	$	250,000	$	1,000,000			—		$	1,250,000		1,252,294		10,549			—
PNC Bank NA, 2.15%, 4/29/21		—	$	500,000			—		$	500,000		493,392		4,778			—
PNC Bank NA, 2.95%, 1/30/23	$	250,000		—			—		$	250,000		246,386		7,375			—
PNC Bank NA, 2.95%, 2/23/25		—	$	250,000			—		$	250,000		245,483		6,187			—
PNC Funding Corp., 3.30%, 3/08/22	$	150,000		—			—		$	150,000		154,205		4,950			—
PNC Funding Corp., 5.63%, 2/01/17	$	150,000		—		$	(150,000	)		—		—		1,453			6,450
Total											$	483,327,577	$	1,755,879		$	50,313
1   Represents net shares purchased.
2   Represents net shares sold.
3   Represents all or a portion of securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees, and other payments to and from borrowers of securities, and less the collateral investment expenses.

(c) Variable rate security. Rate as of period end.

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

(e) Represents or includes a TBA transaction. As of period end, unsettled TBA transactions were as follows:

Counterparty	Value		Unrealized Appreciation (Depreciation)
Bank of America Securities LLC	$	55,649,416	$	136,246
Barclays Bank PLC	$	7,108,578		—
BNP Paribas Securities Corp.	$	30,737,192	$	12,938
The Bank of New York Mellon	$	1,837,012	$	15,333
Citigroup Global Markets, Inc.	$	82,504,824	$	49,581
Credit Suisse Securities (USA) LLC	$	76,783,208	$	11,650
Deutsche Bank Securities, Inc.	$	1,781,496	$	12,371
Goldman Sachs & Co.	$	38,115,926	$	119,053
J.P. Morgan Securities LLC	$	31,772,395	$	(2,740	)
Mizuho Securities USA, Inc.	$	9,039,733	$	(3,444	)
Morgan Stanley & Co. LLC	$	52,928,483	$	40,266
Nomura Securities International, Inc.	$	9,974,111	$	(19,169	)
RBC Capital Markets, LLC	$	6,117,019	$	12,637
Wells Fargo Securities, LLC	$	13,961,340	$	43,638

(f) Current yield as of period end.

See Notes to Financial Statements.

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 47

Schedule of Investments (concluded) U.S. Total Bond Index Master Portfolio

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the Master Portfolio’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following table summarizes the Master Portfolio’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities		—	$	12,322,041			—	$	12,322,041
Corporate Bonds		—		783,074,990			—		783,074,990
Foreign Agency Obligations		—		93,963,137			—		93,963,137
Municipal Bonds		—		23,650,103			—		23,650,103
Non-Agency Mortgage-Backed Securities		—		28,772,484			—		28,772,484
U.S. Government Sponsored Agency Securities		—		924,383,687			—		924,383,687
U.S. Treasury Obligations		—		1,124,070,305			—		1,124,070,305
Short-Term Securities	$	478,586,995		—			—		478,586,995
Liabilities:
Investments:
TBA Sale Commitments		—		(22,358,587	)		—		(22,358,587	)
Total	$	478,586,995	$	2,967,878,160			—	$	3,446,465,155

During the year ended December 31, 2016, there were no transfers between levels.    

See Notes to Financial Statements.

48 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Statement of Assets and Liabilities U.S. Total Bond Index Master Portfolio

December 31, 2016
Assets
Investments at value — unaffiliated (cost — $3,016,355,867)	$	2,985,496,165
Investments at value — affiliated (cost — $483,297,524)		483,327,577
Cash		3,101,299
Receivables:
Investments sold		32,961,402
Contributions from investors		47,230,542
TBA sale commitments		22,281,391
Interest — unaffiliated		17,483,719
Dividends — affiliated		286,950
Principal paydowns		3,114
Total assets		3,592,172,159
Liabilities
TBA sale commitments at value (proceeds — $22,281,391)		22,358,587
Payables:
Investments purchased		551,480,602
Investment advisory fees		57,994
Trustees’ fees		17,370
Other accrued expenses		20,182
Total liabilities		573,934,735
Net Assets	$	3,018,237,424
Net Assets Consist of
Investors’ capital	$	3,049,144,269
Net unrealized appreciation (depreciation)		(30,906,845	)
Net Assets	$	3,018,237,424

See Notes to Financial Statements.
	BLACKROCK U.S. TOTAL BOND INDEX FUND	DECEMBER 31, 2016	49

Statement of Operations U.S. Total Bond Index Master Portfolio

Year Ended December 31, 2016
Investment Income
Interest — unaffiliated	$	43,806,258
Interest — affiliated		73,092
Dividends — affiliated		1,665,899
Securities lending — affiliated — net		16,888
Foreign taxes withheld		(322	)
Total investment income		45,561,815
Expenses
Investment advisory		888,560
Trustees		75,412
Professional		23,365
Total expenses		987,337
Less fees waived by the Manager		(302,585	)
Total expenses after fees waived		684,752
Net investment income		44,877,063
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — unaffiliated		(3,146,846	)
Investments — affiliated		12,042
Capital gain distributions from investment companies — affiliated		38,271
		(3,096,533	)
Net change in unrealized appreciation (depreciation) on:
Investments — unaffiliated		(22,071,444	)
Investments — affiliated		31,544
		(22,039,900	)
Net realized and unrealized loss		(25,136,433	)
Net Increase in Net Assets Resulting from Operations	$	19,740,630

See Notes to Financial Statements.
50	BLACKROCK U.S. TOTAL BOND INDEX FUND	DECEMBER 31, 2016

Statements of Changes in Net Assets U.S. Total Bond Index Master Portfolio

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	44,877,063		$	27,215,573
Net realized gain (loss)		(3,096,533	)		2,186,271
Net change in unrealized appreciation (depreciation)		(22,039,900	)		(25,913,499	)
Net increase in net assets resulting from operations		19,740,630			3,488,345
Capital Transactions
Proceeds from contributions		1,704,188,010			653,907,369
Value of withdrawals		(294,065,234	)		(261,514,633	)
Net increase in net assets derived from capital transactions		1,410,122,776			392,392,736
Net Assets
Total increase in net assets		1,429,863,406			395,881,081
Beginning of year		1,588,374,018			1,192,492,937
End of year	$	3,018,237,424		$	1,588,374,018

Financial Highlights U.S. Total Bond Index Master Portfolio

	Year Ended December 31,
	2016		2015		2014		2013			2012
Total Return
Total return		2.55%		0.40%		5.98%		(2.23	)%		4.06%
Ratios to Average Net Assets
Total expenses		0.04%		0.06%		0.09%		0.09%			0.09%
Total expenses after fees waived		0.03%		0.04%		0.07%		0.08%			0.08%
Net investment income		2.02%		1.93%		1.76%		1.63%			1.86%
Supplemental Data
Net assets, end of year (000)	$	3,018,237	$	1,588,374	$	1,192,493	$	933,770		$	481,572
Portfolio turnover rate1,2		278%		356%		476%		417%			436%

¹ Portfolio turnover rates include TBA transactions, if any.

² Includes MDRs. Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,
	2016		2015		2014		2013		2012
Portfolio turnover rate (excluding MDRs)		164%		300%		244%		214%		231%

See Notes to Financial Statements.
	BLACKROCK U.S. TOTAL BOND INDEX FUND	DECEMBER 31, 2016	51

Notes to Financial Statements U.S. Total Bond Index Master Portfolio

1. Organization:

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

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

2. Significant Accounting Policies:

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

Segregation and Collateralization: In cases where the Master Portfolio enters into certain investments (e.g., dollar rolls, to-be-announced (“TBA”) sale commitments) that would be treated as “senior securities” for 1940 Act purposes, the Master Portfolio may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Master Portfolio may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.

Recent Accounting Standard: In November 2016, the Financial Accounting Standards Board issued Accounting Standards Update “Restricted Cash” which will require entities to include the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the beginning and ending cash balances in the Statement of Cash Flows. The guidance will be applied retrospectively and is effective for fiscal years beginning after December 15, 2016, and interim periods within those years. Management is evaluating the impact, if any, of this guidance on the Master Portfolio’s presentation in the Statement of Cash Flows.

Indemnifications: In the normal course of business, the Master Portfolio enters into contracts that contain a variety of representations that provide general indemnification. The Master Portfolio’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Master Portfolio, which cannot be predicted with any certainty.

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

Through May 31, 2016, the Master Portfolio had an arrangement with its custodian whereby credits were earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. Credits previously earned may have been utilized until December 31, 2016. Under current arrangements effective June 1, 2016, the Master Portfolio no longer earns credits on uninvested cash, and may incur charges on uninvested cash balances and overdrafts, subject to certain conditions.

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Master Portfolio’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time or if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the 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 using various 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 oversee the pricing function for all financial instruments.

52 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) U.S. Total Bond Index Master Portfolio

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Master Portfolio’s assets and liabilities:

• Fixed-income securities for which market quotations are readily available are generally valued using the last available bid prices or current market quotations provided by independent dealers or third party pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more independent brokers or dealers as obtained from a third party pricing service. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but the Master Portfolio may hold or transact in such securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), credit quality information, perceived market movements, news, and other relevant information. Certain fixed-income securities, including asset-backed and mortgage related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager determines such method does not represent fair value.

• Municipal investments (including commitments to purchase such investments on a “when-issued” basis) are valued on the basis of prices provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments and information with respect to various relationships between investments.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• TBA commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include Market approach, Income approach and the Cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

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

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

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

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

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

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 53

Notes to Financial Statements (continued) U.S. Total Bond Index Master Portfolio

its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued investments. Level 3 investments include equity or debt issued by Private Companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

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

4. Securities and Other Investments:

Asset-Backed and Mortgage-Backed Securities: Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, the Master Portfolio may subsequently have to reinvest the proceeds at lower interest rates. If the Master Portfolio has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.

For mortgage pass-through securities (the “Mortgage Assets”) there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury.

Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.

Multiple Class Pass-Through Securities: Multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities, may be issued by Ginnie Mae, U.S. Government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or Mortgage Assets. The payments on these are used to make payments on the CMOs or multiple pass-through securities. Multiple class pass-through securities represent direct ownership interests in the Mortgage Assets. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. If the underlying Mortgage Assets experience greater than anticipated prepayments of principal, the Master Portfolio’s initial investment in the IOs may not fully recoup.

Capital Securities and Trust Preferred Securities: Capital securities, including trust preferred securities, are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics. In the case of trust preferred securities, an affiliated business trust of a

54 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) U.S. Total Bond Index Master Portfolio

corporation issues these securities, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured with either a fixed or adjustable coupon that can have either a perpetual or stated maturity date. For trust preferred securities, the issuing bank or corporation pays interest to the trust, which is then distributed to holders of these securities as a dividend. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment obligations have been met. The deferral of payments does not affect the purchase or sale of these securities in the open market. Payments on these securities are treated as interest rather than dividends for federal income tax purposes. These securities generally are rated below that of the issuing company’s senior debt securities and are freely callable at the issuer’s option.

TBA Commitments: TBA commitments are forward agreements for the purchase or sale of mortgage-backed securities for a fixed price, with payment and delivery on an agreed upon future settlement date. The specific securities to be delivered are not identified at the trade date. However, delivered securities must meet specified terms, including issuer, rate and mortgage terms. When entering into TBA commitments, the Master Portfolio may take possession of or deliver the underlying mortgage-backed securities but can extend the settlement or roll the transaction. TBA commitments involve a risk of loss if the value of the security to be purchased or sold declines or increases, respectively, prior to settlement date.

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

Mortgage Dollar Roll Transactions: The Master Portfolio may sell TBA mortgage-backed securities and simultaneously contract to repurchase substantially similar (i.e., same type, coupon and maturity) securities on a specific future date at an agreed upon price. During the period between the sale and repurchase, the Master Portfolio is not entitled to receive interest and principal payments on the securities sold. Mortgage dollar roll transactions are treated as purchases and sales and realize gains and losses on these transactions. Mortgage dollar rolls involve the risk that the market value of the securities that the Master Portfolio is required to purchase may decline below the agreed upon repurchase price of those securities.

Securities Lending: The Master Portfolio may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Master Portfolio collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio, or excess collateral returned by the Master Portfolio, on the next business day. During the term of the loan, the Master Portfolio is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as corporate bonds in the Master Portfolio’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value — unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Master Portfolio under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 55

Notes to Financial Statements (continued) U.S. Total Bond Index Master Portfolio

market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Master Portfolio can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Master Portfolio could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. Investment Advisory Agreement and Other Transactions with Affiliates:

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

Investment Advisory: MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement with the Manager, the Master Portfolio’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of the Master Portfolio’s portfolio and provides the 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 at an annual rate equal to 0.04% of the average daily value of the Master Portfolio’s net assets.

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

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

Expense Waivers: With respect to the Master Portfolio, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Master Portfolio pays to the Manager indirectly through its investment in affiliated money market funds. This amount is included in fees waived by the Manager in the Statement of Operations. For the year ended December 31, 2016, the amount waived was $203,808.

Effective September 1, 2016, the Manager voluntarily agreed to waive its advisory fee with respect to any portion of the Master Portfolio’s assets invested in affiliated equity or fixed-income mutual funds or affiliated exchange-traded funds that have a contractual management fee. Prior to September 1, 2016, the Manager did not waive such fees. This voluntary waiver may be reduced or discontinued at any time without notice.

The fees and expenses of the MIP’s trustees who are not “interested persons” of the MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and the MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolio. BAL has contractually agreed to reimburse the Master Portfolio or provide an offsetting credit against the administration fees paid by the Master Portfolio in an amount equal to these independent expenses through April 30, 2018. For the year ended December 31, 2016, the amount waived was $98,777.

Securities Lending: The U.S. Securities and Exchange Commission has issued an exemptive order which permits BTC, an affiliate of the Manager, to serve as securities lending agent for the Master Portfolio, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. The Master Portfolio is responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by the Manager or its affiliates, however, BTC has agreed to reduce the amount of securities

56 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Notes to Financial Statements (continued) U.S. Total Bond Index Master Portfolio

lending income it receives in order to effectively limit the collateral investment fees the Master Portfolio bears to an annual rate of 0.04% (the “collateral investment fees”).

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, BTC may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the “specials only securities”).

Pursuant to such agreement, the Master Portfolio retains 80% of securities lending income. In addition, commencing the business day following the date that the aggregate securities lending income earned across certain funds in the Equity-Liquidity Complex in a calendar year exceeds a specified threshold, the Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income.

The share of securities lending income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the year ended December 31, 2016, the Master Portfolio paid BTC $4,222 in total for securities lending agent services and collateral investment fees.

Officers and Trustees: Certain officers and/or trustees of the MIP are officers and/or directors of BlackRock or its affiliates.

Other Transactions: The Master Portfolio may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common trustees. For the year ended December 31, 2016, the purchase and sale transactions and any net realized gains (losses) with affiliated funds in compliance with Rule 17a-7 under the 1940 Act were as follows:

Purchases	Sales		Net Realized Loss
$3,814,964	$	188,846	$	(80,436	)

6. Purchase and Sales:

For the year ended December 31, 2016, purchases and sales of investments, including paydowns and mortgage dollar rolls and excluding short-term securities, were as follows:

	Purchases		Sales
Non-U.S. Government Securities	$	6,685,101,999	$	5,792,104,784
U.S. Government Securities	$	891,775,532	$	340,630,569

For the year ended December 31, 2016, purchases and sales related to mortgage dollar rolls were $2,519,546,506 and $2,522,934,651, respectively.

7. Income Tax Information:

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

The Master Portfolio files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolio U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016. The statutes of limitations on the Master Portfolio’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Master Portfolio as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Master Portfolio’s financial statements.

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 57

Notes to Financial Statements (concluded) U.S. Total Bond Index Master Portfolio

As of December 31, 2016, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	3,499,960,763
Gross unrealized appreciation	$	14,234,584
Gross unrealized depreciation		(45,371,605	)
Net unrealized depreciation	$	(31,137,021	)

8. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Master Portfolio may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Master Portfolio, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2017 unless extended or renewed. Prior to April 21, 2016, the credit agreement had a fee per annum of 0.06% on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2016, the Master Portfolio did not borrow under the credit agreement.

9. Principal Risks:

In the normal course of business, the Master Portfolio invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer to meet all its obligations, including the ability to pay principal and interest when due (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 of securities owned by the Master Portfolio. Changes arising from the general economy, the overall market and local, regional or global political and/or social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

Counterparty Credit Risk: Similar to issuer credit risk, the Master Portfolio may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Master Portfolio manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the 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 approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Master Portfolio.

Concentration Risk: The Master Portfolio invests a significant portion of its assets in fixed income securities and/or uses derivatives tied to the fixed income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed income securities will increase as interest rates fall and decrease as interest rates rise. The Master Portfolio may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

The Master Portfolio invests a significant portion of its assets in securities backed by commercial or residential mortgage loans or in issuers that hold mortgage and other asset-backed securities. Investment percentages in these securities are presented in the Schedule of Investments. Changes in economic conditions, including delinquencies and/or defaults on assets underlying these securities, can affect the value, income and/or liquidity of such positions.

10. Subsequent Events:

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

58 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Report of Independent Registered Public Accounting Firm U.S. Total Bond Index Master Portfolio

To the Board of Trustees of Master Investment Portfolio and the Investors of U.S Total Bond Index Master Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of U.S. Total Bond Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio, as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers and the transfer agent of the investee funds, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 59

Officers and Trustees¹

Name, Address2 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3
Rodney D. Johnson 1941	Chair of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011; Director, The Mainstay (non-profit) since 2016.	26 RICs consisting of 146 Portfolios	None
Susan J. Carter 1956	Trustee	Since 2016	Director, Pacific Pension Institute since 2014; Advisory Board Member, Center for Private Equity and Entrepreneurship at Tuck School of Business since 1997; Senior Advisor, Commonfund Capital, Inc. (“CCI”) (investment adviser) in 2015; Chief Executive Officer, CCI from 2013 to 2014; President & Chief Executive Officer, CCI from 1997 to 2013; Advisory Board Member, Girls Who Invest since 2015; Advisory Board Member, Bridges Ventures since 2016; Trustee, Financial Accounting Foundation since 2017.	26 RICs consisting of 146 Portfolios	None
Collette Chilton 1958	Trustee	Since 2015	Chief Investment Officer, Williams College since 2006; Chief Investment Officer, Lucent Asset Management Corporation from 1998 to 2006.	26 RICs consisting of 146 Portfolios	None
Neil A. Cotty 1954	Trustee	Since 2016	Bank of America Corporation from 1996 to 2015, serving in various senior finance leadership roles, including Chief Accounting Officer, from 2009 to 2015, Chief Financial Officer of Global Banking, Markets and Wealth Management from 2008 to 2009, Chief Accounting Officer from 2004 to 2008, Chief Financial Officer of Consumer Bank from 2003 to 2004, Chief Financial Officer of Global Corporate Investment Bank from 1999 to 2002.	26 RICs consisting of 146 Portfolios	None
Cynthia A. Montgomery 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012.	26 RICs consisting of 146 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 1947	Trustee	Since 2009	General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Chair, Basic Health International (non-profit) since 2015.	26 RICs consisting of 146 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company); Consol Energy Inc.
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981 and Principal since 2010.	26 RICs consisting of 146 Portfolios	None
Mark Stalnecker 1951	Trustee	Since 2015	Chief Investment Officer, University of Delaware from 1999 to 2013; Trustee, Winterthur Museum and Country Estate from 2001 to 2015; Member of the Investment Committee, Delaware Public Employees’ Retirement System since 2002; Member of the Investment Committee, Christiana Care Health System since 2009; Member of the Investment Committee, Delaware Community Foundation from 2013 to 2014; Director, SEI Private Trust Co. from 2001 to 2014.	26 RICs consisting of 146 Portfolios	None

60 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Officers and Trustees¹ (continued)

Name, Address2 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3 (concluded)
Kenneth L. Urish 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since founding in 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	26 RICs consisting of 146 Portfolios	None
Claire A. Walton 1957	Trustee	Since 2016	Chief Operating Officer and Chief Financial Officer of Liberty Square Asset Management, LP from 1998 to 2015; General Partner of Neon Liberty Capital Management, LLC since 2003; Director, Boston Hedge Fund Group since 2009; Director, Woodstock Ski Runners since 2013; Director, Massachusetts Council on Economic Education from 2013 to 2015.	26 RICs consisting of 146 Portfolios	None
Frederick W. Winter 1945	Trustee	Since 2009	Director, Alkon Corporation since 1992; Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh, Dean and Professor from 1997 to 2005, Professor until 2013.	26 RICs consisting of 146 Portfolios	None
Interested Trustees5
Barbara G. Novick 1960	Trustee	Since 2015	Vice Chairman of BlackRock, Inc. since 2006; Chair of BlackRock’s Government Relations Steering Committee since 2009; Head of the Global Client Group of BlackRock, Inc. from 1988 to 2008.	100 RICs consisting of 220 Portfolios	None
John M. Perlowski 1964	Trustee, President and Chief Executive Officer	Since 2015 (Trustee); Since 2010 (President and Chief Executive Officer)	Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Fund & Accounting Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Advisory Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.	128 RICs consisting of 318 Portfolios	None
	1    As of February 24, 2017.
	2    The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	3    Independent Trustees serve until their resignation, retirement, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Independent Trustees on a case-by-case basis, as appropriate.
	4    In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, certain Independent Trustees were elected to the Board. As a result, although the chart shows certain Independent Trustees as joining the Board in 2009, those Independent Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: Rodney D. Johnson, 1995; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1999; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
	5    Ms. Novick and Mr. Perlowski are both “interested persons,” as defined in the 1940 Act, of the Trust/MIP based on their positions with BlackRock and its affiliates. Mr. Perlowski and Ms. Novick are also board members of certain complexes of BlackRock registered open-end and closed-end funds. Mr. Perlowski is also a board member of the BlackRock Equity-Bond Complex and the BlackRock Closed-End Complex, and Ms. Novick is a board member of the BlackRock Closed-End Complex.

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 61

Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served as an Officer	Principal Occupation(s) During Past Five Years
Officers Who Are Not Trustees2
Thomas Callahan 1968	Vice President	Since 2016	Managing Director of BlackRock, Inc. since 2013; Head of BlackRock’s Global Cash Management Business since 2016; Co-Head of the Global Cash Management Business from 2014 to 2016; Deputy Head of the Global Cash Management Business from 2013 to 2014; Member of the Cash Management Group Executive Committee since 2013; Chief Executive Officer of NYSE Liffe U.S. from 2008 to 2013.
Jennifer McGovern 1977	Vice President	Since 2014	Managing Director of BlackRock, Inc. since 2016; Director of BlackRock, Inc. from 2011 to 2015; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal J. Andrews 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock, Inc. 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 M. Fife 1970	Treasurer	Since 2007	Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Charles Park 1967	Chief Compliance Officer	Since 2014	Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Fernanda Piedra 1969	Anti-Money Laundering Compliance Officer	Since 2015	Director of BlackRock, Inc. since 2014; Anti-Money Laundering Compliance Officer and Regional Head of Financial Crime for the Americas at BlackRock, Inc. since 2014; Head of Regulatory Changes and Remediation for the Asset Wealth Management Division of Deutsche Bank from 2010 to 2014; Vice President of Goldman Sachs (Anti-Money Laundering/Suspicious Activities Group) from 2004 to 2010.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock, Inc. since 2014; Director of BlackRock, Inc. from 2010 to 2013; Secretary of the iShares® exchange traded funds since 2015; Secretary of the BlackRock-advised mutual funds since 2012.
	1    The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	2    Officers of the Trust/MIP serve at the pleasure of the Board.
	Further information about the Trust’s/MIP’s Officers and Trustees is available in the Trust’s/MIP’s Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.

Effective December 31, 2016, David O. Beim and Dr. Matina S. Horner resigned as Trustees of the Trust/MIP.

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

62 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

Additional Information

General Information

Householding

The Fund will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Fund at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Fund/Master Portfolio file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s/Master Portfolio’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room or how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The 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 upon request and without charge (1) by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

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

BlackRock’s Mutual Fund Family

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

Shareholder Privileges

Account Information

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

Automatic Investment Plans

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

Systematic Withdrawal Plans

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

Retirement Plans

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

BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016 63

Additional Information (concluded)

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

64 BLACKROCK U.S. TOTAL BOND INDEX FUND DECEMBER 31, 2016

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

USTB-12/16-AR

Portfolio Information as of December 31, 2016

Ten Largest Holdings	Percent of Net Assets
Apple, Inc.		1	%
Microsoft Corp.		1
Bank of America Corp.		1
JPMorgan Chase & Co.		1
Altria Group, Inc.		1
Johnson & Johnson		1
UnitedHealth Group, Inc.		1
Facebook, Inc., Class A		1
Wal-Mart Stores, Inc.		1
Comcast Corp., Class A		1

Sector Allocation	Percent of Net Assets
Information Technology		8	%
Financials		6
Health Care		6
Consumer Discretionary		5
Industrials		4
Consumer Staples		3
Energy		3
Real Estate		2
Utilities		1
Materials		1
Telecommunication Services		1
Short-Term Securities		60
Liabilities in Excess of Other Assets		(-	)1

¹  Represents less than 1% of Net Assets.

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

Derivative Financial Instruments

The Master Portfolio may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other asset without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Master Portfolio’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Master Portfolio can realize on an investment and/or may result in lower distributions paid to shareholders. The Master Portfolio’s investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2016 1

Schedule of Investments December 31, 2016 (Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Aerospace & Defense — 1.0%
Boeing Co. (a)		8,602	$	1,339,159
General Dynamics Corp.		5,578		963,098
Raytheon Co.		18,722		2,658,524
				4,960,781
Air Freight & Logistics — 0.8%
FedEx Corp.		11,600		2,159,920
United Parcel Service, Inc., Class B		18,306		2,098,600
				4,258,520
Auto Components — 0.2%
Delphi Automotive PLC (a)		5,850		393,998
Lear Corp.		2,974		393,668
				787,666
Banks — 3.3%
Bank of America Corp.		194,438		4,297,080
Citigroup, Inc.		19,834		1,178,735
Citizens Financial Group, Inc.		69,024		2,459,325
First Horizon National Corp.		95,053		1,902,011
First Republic Bank		5,718		526,856
JPMorgan Chase & Co.		46,404		4,004,201
SunTrust Banks, Inc.		40,024		2,195,316
Wells Fargo & Co.		2,151		118,542
				16,682,066
Beverages — 0.5%
Dr. Pepper Snapple Group, Inc.		26,691		2,420,073
Biotechnology — 1.4%
Amgen, Inc.		17,408		2,545,223
Biogen, Inc. (b)		4,296		1,218,260
Celgene Corp. (b)		21,133		2,446,145
Gilead Sciences, Inc.		13,618		975,185
				7,184,813
Building Products — 0.6%
Fortune Brands Home & Security, Inc. (a)		22,043		1,178,419
Masco Corp.		55,912		1,767,937
Owens Corning		1,930		99,511
				3,045,867
Capital Markets — 0.9%
Bank of New York Mellon Corp.		8,748		414,480
Charles Schwab Corp.		32,796		1,294,458
CME Group, Inc. (a)		13,462		1,552,842
Evercore Partners, Inc., Class A		3,056		209,947
Legg Mason, Inc.		7,421		221,962
Morgan Stanley		5,452		230,347
State Street Corp.		4,612		358,445
				4,282,481
Chemicals — 0.6%
AdvanSix, Inc. (b)		19,025		421,214
Air Products & Chemicals, Inc.		3,492		502,219
Cabot Corp.		17,640		891,526
Eastman Chemical Co.		10,611		798,053
Monsanto Co.		1,559		164,022
Valspar Corp.		762		78,951
				2,855,985
Communications Equipment — 0.1%
Cisco Systems, Inc.		12,986		392,437
CommScope Holding Co., Inc. (b)		3,724		138,533
				530,970
Consumer Finance — 0.1%
American Express Co.		1,893		140,234
Synchrony Financial		4,009		145,406
				285,640

Common Stocks	Shares		Value
Containers & Packaging — 0.2%
Owens-Illinois, Inc. (b)		6,010	$	104,634
WestRock Co.		15,408		782,264
				886,898
Diversified Financial Services — 0.6%
Berkshire Hathaway, Inc., Class B (b)		7,963		1,297,810
S&P Global, Inc.		15,031		1,616,433
				2,914,243
Diversified Telecommunication Services — 0.1%
AT&T, Inc.		3,248		138,138
Level 3 Communications, Inc. (b)		2,837		159,893
				298,031
Electric Utilities — 0.3%
American Electric Power Co., Inc.		21,607		1,360,377
Westar Energy, Inc.		1,441		81,200
Xcel Energy, Inc.		6,324		257,387
				1,698,964
Electronic Equipment, Instruments & Components — 0.5%
Amphenol Corp., Class A (a)		31,629		2,125,469
SYNNEX Corp.		353		42,720
TE Connectivity Ltd. (a)		4,579		317,233
				2,485,422
Energy Equipment & Services — 0.4%
Baker Hughes, Inc.		25,587		1,662,387
FMC Technologies, Inc. (b)		957		34,002
Nabors Industries Ltd.		13,981		229,289
				1,925,678
Food & Staples Retailing — 0.6%
CVS Health Corp.		3,409		269,004
U.S. Foods Holding Corp. (b)		1,461		40,149
Wal-Mart Stores, Inc.		42,335		2,926,195
				3,235,348
Food Products — 1.2%
Archer-Daniels-Midland Co.		16,152		737,339
Hormel Foods Corp. (a)		54,129		1,884,231
Ingredion, Inc.		13,150		1,643,224
McCormick & Co., Inc. (a)		16,813		1,569,157
				5,833,951
Health Care Equipment & Supplies — 1.3%
Baxter International, Inc.		55,314		2,452,623
C.R. Bard, Inc.		11,322		2,543,600
IDEXX Laboratories, Inc. (b)		9,555		1,120,515
St. Jude Medical, Inc.		2,641		211,782
				6,328,520
Health Care Providers & Services — 1.3%
AmerisourceBergen Corp. (a)		8,938		698,862
Cardinal Health, Inc.		21,548		1,550,809
UnitedHealth Group, Inc.		19,591		3,135,344
VCA, Inc. (b)		16,900		1,160,185
				6,545,200
Hotels, Restaurants & Leisure — 0.9%
Choice Hotels International, Inc.		41,888		2,347,822
Domino’s Pizza, Inc.		4,878		776,773
Extended Stay America, Inc.		15,500		250,325
J Alexander’s Holdings, Inc. (b)		11,575		124,431
Las Vegas Sands Corp.		1,177		62,864
Vail Resorts, Inc. (a)		5,959		961,246
				4,523,461

See Notes to Financial Statements.

2 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2016

Schedule of Investments (continued)

Common Stocks	Shares		Value
Household Durables — 0.0%
D.R. Horton, Inc.		4,544	$	124,187
Harman International Industries, Inc.		668		74,255
				198,442
Household Products — 0.3%
Clorox Co.		12,132		1,456,083
Energizer Holdings, Inc.		708		31,584
				1,487,667
Industrial Conglomerates — 0.5%
Carlisle Cos., Inc.		19,876		2,192,124
General Electric Co.		14,599		461,328
Roper Technologies, Inc.		160		29,293
				2,682,745
Insurance — 1.1%
Aon PLC		5,184		578,172
Aspen Insurance Holdings Ltd.		4,101		225,555
Endurance Specialty Holdings Ltd.		620		57,288
First American Financial Corp.		32,602		1,194,211
FNF Group		2,617		88,873
Hartford Financial Services Group, Inc.		6,467		308,153
Lincoln National Corp.		7,285		482,777
Reinsurance Group of America, Inc.		14,793		1,861,403
Travelers Cos., Inc.		5,482		671,106
				5,467,538
Internet & Direct Marketing Retail — 0.3%
Amazon.com, Inc. (b)		1,715		1,286,027
Expedia, Inc.		164		18,578
				1,304,605
Internet Software & Services — 1.1%
Alphabet, Inc., Class A (b)		624		494,489
Alphabet, Inc., Class C (b)		2,820		2,176,532
Facebook, Inc., Class A (b)		26,464		3,044,683
				5,715,704
IT Services — 1.9%
Accenture PLC, Class A		18,278		2,140,902
Amdocs Ltd.		37,503		2,184,550
Booz Allen Hamilton Holding Corp.		63,827		2,302,240
Mastercard, Inc., Class A		7,123		735,450
Square, Inc., Class A (b)		2,371		32,316
Visa, Inc., Class A (a)		26,406		2,060,196
				9,455,654
Leisure Products — 0.4%
Hasbro, Inc.		26,911		2,093,407
Machinery — 0.7%
Caterpillar, Inc. (a)		5,273		489,018
Cummins, Inc.		1,491		203,775
Fortive Corp.		2,250		120,668
Ingersoll-Rand PLC		32,078		2,407,133
Oshkosh Corp.		2,733		176,579
				3,397,173
Media — 1.2%
CBS Corp., Class B (a)		956		60,821
Comcast Corp., Class A		38,535		2,660,842
Discovery Communications, Inc., Class C (b)		2,214		59,291
Interpublic Group of Cos., Inc. (a)		95,352		2,232,190
Time Warner, Inc.		10,955		1,057,486
				6,070,630
Metals & Mining — 0.2%
Newmont Mining Corp.		24,220		825,175

Common Stocks	Shares		Value
Multi-Utilities — 0.7%
CenterPoint Energy, Inc.		65,232	$	1,607,317
CMS Energy Corp.		42,726		1,778,256
				3,385,573
Multiline Retail — 0.5%
Target Corp.		34,964		2,525,450
Oil, Gas & Consumable Fuels — 2.4%
Anadarko Petroleum Corp.		10,422		726,726
Antero Resources Corp. (b)		11,884		281,057
Chevron Corp.		16,663		1,961,235
ConocoPhillips		21,521		1,079,063
Devon Energy Corp.		5,267		240,544
Energen Corp. (b)		5,802		334,601
EOG Resources, Inc.		14,240		1,439,664
Exxon Mobil Corp.		13,843		1,249,469
Laredo Petroleum, Inc. (b)		41,816		591,278
Marathon Petroleum Corp.		44,343		2,232,670
Occidental Petroleum Corp.		12,979		924,494
Range Resources Corp.		6,431		220,969
Tesoro Corp.		7,388		646,081
Whiting Petroleum Corp. (b)		10,750		129,215
				12,057,066
Paper & Forest Products — 0.2%
Domtar Corp. (a)		26,842		1,047,643
Personal Products — 0.1%
Estee Lauder Cos., Inc., Class A (a)		6,475		495,273
Herbalife Ltd. (a)(b)		760		36,586
				531,859
Pharmaceuticals — 1.5%
Bristol-Myers Squibb Co.		33,972		1,985,324
Eli Lilly & Co.		3,876		285,080
Johnson & Johnson (a)		27,432		3,160,441
Merck & Co., Inc.		3,839		226,002
Pfizer, Inc.		1,249		40,567
Prestige Brands Holdings, Inc. (b)		11,278		587,584
Zoetis, Inc.		28,271		1,513,346
				7,798,344
Professional Services — 0.4%
Equifax, Inc.		7,652		904,696
ManpowerGroup, Inc.		7,529		669,102
TransUnion (b)		19,463		601,991
				2,175,789
Real Estate Investment Trusts (REITs) — 1.7%
Mid-America Apartment Communities, Inc.		12,004		1,175,432
Omega Healthcare Investors, Inc.		37,835		1,182,722
Simon Property Group, Inc.		8,221		1,460,625
Ventas, Inc.		40,462		2,529,684
Weingarten Realty Investors		58,145		2,081,010
Welltower, Inc. (a)		3,526		235,995
				8,665,468
Road & Rail — 0.3%
Union Pacific Corp.		15,254		1,581,535
Semiconductors & Semiconductor Equipment — 1.6%
Applied Materials, Inc.		4,457		143,827
KLA-Tencor Corp.		23,688		1,863,772
Linear Technology Corp.		2,259		140,849
Maxim Integrated Products, Inc.		27,316		1,053,578
QUALCOMM, Inc.		3,149		205,315
Texas Instruments, Inc.		31,356		2,288,047
Xilinx, Inc. (a)		40,216		2,427,840
				8,123,228

See Notes to Financial Statements.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2016 3

Schedule of Investments (continued)

Common Stocks	Shares		Value
Software — 1.8%
Adobe Systems, Inc. (b)		21,503	$	2,213,734
Check Point Software Technologies Ltd. (b)		3,223		272,215
Intuit, Inc.		6,745		773,044
Microsoft Corp.		77,946		4,843,564
Red Hat, Inc. (b)		15,274		1,064,598
				9,167,155
Specialty Retail — 1.7%
Best Buy Co., Inc.		6,507		277,654
Dick’s Sporting Goods, Inc. (a)		15,020		797,562
Home Depot, Inc.		19,610		2,629,309
Lowe’s Cos., Inc.		34,061		2,422,418
Ross Stores, Inc.		4,093		268,501
TJX Cos., Inc.		25,936		1,948,571
				8,344,015
Technology Hardware, Storage & Peripherals — 1.2%
Apple, Inc.		47,454		5,496,122
HP, Inc.		8,225		122,059
NCR Corp. (b)		11,251		456,341
NetApp, Inc.		5,796		204,425
				6,278,947
Textiles, Apparel & Luxury Goods — 0.1%
NIKE, Inc., Class B (a)		11,655		592,424
Thrifts & Mortgage Finance — 0.0%
Essent Group Ltd. (b)		5,051		163,501

Common Stocks	Shares		Value
Tobacco — 0.7%
Altria Group, Inc.		51,173	$	3,460,318
Trading Companies & Distributors — 0.1%
Watsco, Inc.		2,840		420,661
Water Utilities — 0.3%
American Water Works Co., Inc.		23,230		1,680,923
Wireless Telecommunication Services — 0.8%
SBA Communications Corp., Class A (b)		18,680		1,928,897
T-Mobile U.S., Inc. (b)		2,308		132,733
Telephone & Data Systems, Inc.		62,857		1,814,681
				3,876,311
Total Long-Term Investments (Cost — $185,519,825) — 40.7%				204,545,528
Short-Term Securities
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.45% (c)(d)(e)		14,810,719		14,813,681
BlackRock Cash Funds: Treasury, SL Agency Shares, 0.87% (c)(d)		285,459,557		285,459,557
Total Short-Term Securities (Cost — $300,272,678) — 59.7%				300,273,238
Total Investments (Cost — $485,792,503) — 100.4%				504,818,766
Liabilities in Excess of Other Assets — (0.4)%				(1,771,594	)
Net Assets — 100.0%			$	503,047,172

Notes to Schedule of Investments

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

(b) Non-income producing security.

(c) During the year ended December 31, 2016, investments in issuers considered to be affiliates of the Master Portfolio for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at December 31, 2015		Net Activity			Shares Held at December 31, 2016		Value at December 31, 2016		Income			Realized Gains
BlackRock Cash Funds: Institutional, SL Agency Shares		21,712,891		(6,902,172	)		14,810,719	$	14,813,681	$	126,430	1	$	21,168
BlackRock Cash Funds: Prime, SL Agency Shares		14,799,184		(14,799,184	)		—		—		25,143	1		—
BlackRock Cash Funds: Treasury, SL Agency Shares		—		285,459,557			285,459,557		285,459,557		80,718			5,507
Total								$	300,273,238	$	232,291		$	26,675
1    Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

(d) Current yield as of period end.

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

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

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

Contracts Long		Issue	Expiration		Notional Value		Unrealized Depreciation
	217	Russell 2000 E-Mini Index		March 2017	$	14,722,365	$	(280,939	)
	2,532	S&P 500 E-Mini Index		March 2017	$	283,102,920		(1,817,675	)
	Total						$	(2,098,614	)

See Notes to Financial Statements.

4 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2016

Schedule of Investments (concluded)

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:

Liabilities — Derivative Financial Instruments		Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Futures contracts	Net unrealized depreciation1		—		—	$	2,098,614		—		—		—	$	2,098,614
1    Includes cumulative appreciation (depreciation) on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

For the year ended December 31, 2016, the effect of derivative financial instruments in the Statement of Operation was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts		Credit Contracts		Equity Contracts			Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Futures contracts		—		—	$	4,846,200			—		—		—	$	4,846,200
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts		—		—	$	(2,098,253	)		—		—		—	$	(2,098,253	)

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	76,677,868
Average notional value of contracts — short	$	265,000	1
1    Actual amounts for the period are shown due to limited outstanding derivative financial instruments as of each quarter.

For more information about the Master Portfolio’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1			Level 2		Level 3		Total
Assets:
Investments:
Common Stocks1	$	204,545,528			—		—	$	204,545,528
Short-Term Securities		300,273,238			—		—		300,273,238
Total	$	504,818,766			—		—	$	504,818,766
Derivative Financial Instruments 2
Liabilities:
Equity contracts	$	(2,098,614	)		—		—	$	(2,098,614	)
1    See above Schedule of Investments for values in each industry. 2    Derivative financial instruments are futures contracts, which are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2016, there were no transfers between levels.

See Notes to Financial Statements.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2016 5

Statement of Assets and Liabilities

December 31, 2016
Assets
Investments at value — unaffiliated (including securities loaned at value of $14,422,644) (cost — $185,519,825)	$	204,545,528
Investments at value — affiliated (cost — $300,272,678)		300,273,238
Cash pledged for futures contracts		14,068,000
Receivables:
Dividends — unaffiliated		273,691
Dividends — affiliated		65,980
Securities lending income — affiliated		2,532
Prepaid expenses		1,092
Total assets		519,230,061
Liabilities
Cash collateral on securities loaned at value		14,811,880
Bank overdraft		109,549
Payables:
Variation margin on futures contracts		1,183,245
Investment advisory fees		54,102
Trustees’ fees		4,582
Other accrued expenses		19,531
Total liabilities		16,182,889
Net Assets	$	503,047,172
Net Assets Consist of
Investors’ capital	$	486,119,523
Net unrealized appreciation (depreciation)		16,927,649
Net Assets	$	503,047,172

See Notes to Financial Statements.
6	ACTIVE STOCK MASTER PORTFOLIO	DECEMBER 31, 2016

Statement of Operations

Year Ended December 31, 2016
Investment Income
Dividends — unaffliated	$	7,675,570
Securities lending — affiliated — net		134,759
Dividends — affiliated		97,532
Foreign taxes withheld		(51,129	)
Total investment income		7,856,732
Expenses
Investment advisory		1,086,336
Administration		434,534
Professional		16,919
Trustees		13,438
Miscellaneous		700
Total expenses		1,551,927
Less:
Fees waived by the Manager		(460,803	)
Fees waived by the Administrator		(434,534	)
Total expenses after fees waived		656,590
Net investment income		7,200,142
Realized and Unrealized Gain (Loss)
Net realized gain from:
Investments — unaffiliated		26,472,755
Investments — affiliated		5,507
Futures contracts		4,846,200
Foreign currency transactions		581
Capital gain distributions from investment companies — affiliated		21,168
		31,346,211
Net change in unrealized appreciation (depreciation) on:
Investments — unaffiliated		14,797,330
Investments — affiliated		560
Futures contracts		(2,098,253	)
Foreign currency translations		(41	)
		12,699,596
Net realized and unrealized gain		44,045,807
Net Increase in Net Assets Resulting from Operations	$	51,245,949

See Notes to Financial Statements.
	ACTIVE STOCK MASTER PORTFOLIO	DECEMBER 31, 2016	7

Statements of Changes in Net Assets

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	7,200,142		$	30,042,097
Net realized gain		31,346,211			308,795,739
Net change in unrealized appreciation (depreciation)		12,699,596			(312,013,356	)
Net increase in net assets resulting from operations		51,245,949			26,824,480
Capital Transactions
Proceeds from contributions		135,732,410			233,706,507
Value of withdrawals		(129,926,695	)		(2,248,961,465	)
Net increase (decrease) in net assets derived from capital transactions		5,805,715			(2,015,254,958	)
Net Assets
Total increase (decrease) in net assets		57,051,664			(1,988,430,478	)
Beginning of year		445,995,508			2,434,425,986
End of year	$	503,047,172		$	445,995,508

Financial Highlights

	Year Ended December 31,
	2016		2015		2014		2013		2012
Total Return
Total return		12.45%		(1.20)%		11.74%		34.02%		15.55%
Ratios to Average Net Assets
Total expenses		0.36%		0.35%		0.35%		0.35%		0.35%
Total expenses after fees waived and paid indirectly		0.15%		0.15%		0.17%		0.23%		0.26%
Net investment income		1.66%		1.65%		1.56%		1.55%		2.03%
Supplemental Data
Net assets, end of year (000)	$	503,047	$	445,996	$	2,434,426	$	2,940,543	$	2,792,818
Portfolio turnover rate		115%		132%		119%		153%		120%

See Notes to Financial Statements.
8	ACTIVE STOCK MASTER PORTFOLIO	DECEMBER 31, 2016

Notes to Financial Statements

1. Organization:

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

The Board of Trustees of MIP (the “Board”) approved changes to the Master Portfolio’s principal investment strategies. Under its new principal investment strategies, the Master Portfolio will be restructured to utilize various Scientific Active Equity strategies and strategies across market caps, as well as geographic regions, including emerging markets. These changes became effective on November 7, 2016.

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

2. Significant Accounting Policies:

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

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

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

Defensive Positions: Investment policies may vary for temporary defensive purposes during periods in which the investment adviser believes that conditions in the securities markets or other economic, financial or political conditions warrant. Under such conditions, the Master Portfolio may invest up to 100% of its total assets in U.S. Government securities, certificates of deposit, repurchase agreements that involve purchases of debt securities, bankers’ acceptances and other bank obligations, commercial paper, money market funds and/or other debt securities, or may hold its assets in cash. The investment adviser applies this defensive posture as applicable and is consistent with the Master Portfolio’s investment policies.

Segregation and Collateralization: In cases where the Master Portfolio enters into certain investments (e.g., futures contracts) that would be treated as “senior securities” for 1940 Act purposes, the Master Portfolio may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Master Portfolio may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Master Portfolio is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain.

Recent Accounting Standard: In November 2016, the Financial Accounting Standards Board issued Accounting Standards Update “Restricted Cash” which will require entities to include the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the beginning and ending cash balances in the Statement of Cash Flows. The guidance will be applied retrospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. Management is evaluating the impact, if any, of this guidance on the Master Portfolio’s presentation in the Statement of Cash Flows.

Indemnifications: In the normal course of business, the Master Portfolio enters into contracts that contain a variety of representations that provide general indemnification. The Master Portfolio’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Master Portfolio, which cannot be predicted with any certainty.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2016 9

Notes to Financial Statements (continued)

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

Through May 31, 2016, the Master Portfolio had an arrangement with its custodian whereby credits were earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. Credits previously earned may have been utilized until December 31, 2016. Under current arrangements effective June 1, 2016, the Master Portfolio no longer earns credits on uninvested cash, and may incur charges on uninvested cash balances and overdrafts, subject to certain conditions.

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Master Portfolio’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time, or if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the 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 using various independent dealers or pricing services under policies approved by the Board. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Master Portfolio’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price. Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Master Portfolio’s net assets. Each business day, the Master Portfolio uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• Futures contracts traded on exchanges are valued at their last sale price.

• Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the NYSE. Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and the cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

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

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

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

10 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2016

Notes to Financial Statements (continued)

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued investments. Level 3 investments include equity or debt issued by Private Companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

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

4. Securities and Other Investments:

Securities Lending: The Master Portfolio may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Master Portfolio collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio, or excess collateral returned by the Master Portfolio, on the next business day. During the term of the loan, the Master Portfolio is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as common stocks in the Master Portfolio’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value-unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedules of Investments.

Securities lending transactions are entered into by the Master Portfolio under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Master Portfolio can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

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

Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
BNP Paribas S.A	$	8,395,268	$	(8,395,268	)		—
Citigroup Global Markets, Inc.		12,324		(12,324	)		—
Goldman Sachs & Co.		1,427,348		(1,427,348	)		—
Merrill Lynch, Pierce, Fenner & Smith, Inc.		4,132,720		(4,132,720	)		—
State Street Bank and Trust Co.		454,984		(454,984	)		—
Total	$	14,422,644	$	(14,422,644	)		—

¹  Cash collateral with a value of $14,811,880 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the table above.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2016 11

Notes to Financial Statements (continued)

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Master Portfolio could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. Derivative Financial Instruments:

The Master Portfolio engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Master Portfolio and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or OTC.

Futures Contracts: The Master Portfolio invests in long and/or short positions in futures and options on futures contracts to gain exposure to, or manage exposure to changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Master Portfolio and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Master Portfolio are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Master Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

6. Investment Advisory Agreement and Other Transactions with Affiliates:

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

Investment Advisory: MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement with the Manager, the Master Portfolio’s investment adviser, 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 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 at an annual rate equal to the following percentages of the average daily value of the Master Portfolio’s net assets.

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%

Administration: MIP, on behalf of the Master Portfolio, entered into an Administration Agreement with BlackRock Advisor, LLC (“BAL”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL, in consideration thereof, has agreed to bear all of the Master Portfolio’s ordinary operating expenses, excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the Master Portfolio. BAL is entitled to receive for these administration services an annual fee of 0.10% based on the average daily net assets of the Master Portfolio.

Expense Waivers: The Manager has voluntarily agreed to waive 0.095% of its investment advisory fees payable by the Master Portfolio. This voluntary waiver may be terminated at any time. This amount is included in fees waived by the Manager in the Statement of Operations. For the year ended December 31, 2016, the Manager waived $412,808 pursuant to this agreement.

12 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2016

Notes to Financial Statements (continued)

With respect the Master Portfolio, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Master Portfolio pays to the Manager indirectly through its investment in affiliated money market funds. This amount is included in fees waived by the Manager in the Statement of Operations. For the year ended December 31, 2016, the amount waived was $17,638.

The fees and expenses of the MIP trustees who are not “interested persons” of MIP, 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 Master Portfolio. BAL has contractually agreed to reimburse the MIP or provide an offsetting credit against the administration fees paid by the MIP in an amount equal to these independent expenses through April 30, 2017. This amount is included in fees waived by the Manager in the Statement of Operations. For the year ended December 31, 2016, the amount waived was $30,357.

The Administrator voluntarily agreed to waive a portion of its administration fees payable by the Master Portfolio. This arrangement is voluntary and may be terminated by the Administrator at any time. This amount is included in fees waived by the Administrator in the Statement of Operations. For the year ended December 31, 2016, BAL waived $434,534.

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

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

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Master Portfolio Fund retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, the Master Portfolio retains 71.5% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment fees. In addition, commencing the business day following the date that the aggregate securities lending income earned across certain funds in the Equity-Liquidity Complex in a calendar year exceeds a specified threshold, the Master Portfolio Fund, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 75% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment fees.

The share of securities lending income earned by the Master Portfolio is shown as securities lending — affiliated – net in the Statement of Operations. For the year ended December 31, 2016, the Master Portfolio paid BTC $73,390 in total for securities lending agent services and collateral investment fees.

Officers and Trustees: Certain officers and/or trustees of the MIP are officers and/or directors of BlackRock or its affiliates.

Other Transactions: The Master Portfolio may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common trustees. For the year ended December 31, 2016, the purchase and sale transactions and any net realized gains (losses) with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:

	Purchases		Sales		Net Realized Loss
Active Stock Master Portfolio		—	$	1,214,639	$	(117,803	)

7. Purchases and Sales:

For the year ended December 31, 2016, purchases and sales of investments excluding short-term securities were $466,626,594 and $716,959,016, respectively.

8. Income Tax Information:

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

The Master Portfolio files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master portfolio’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2016. 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.

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2016 13

Notes to Financial Statements (continued)

Management has analyzed tax laws and regulations and their application to the Master Portfolio as of December 31, 2016, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Master Portfolio’s financial statements.

As of December 31, 2016, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	488,721,296
Gross unrealized appreciation	$	21,199,757
Gross unrealized depreciation		(5,102,287	)
Net unrealized appreciation	$	16,097,470

9. Bank Borrowings:

MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Master Portfolio may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Master Portfolio, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2017 unless extended or renewed. Prior to April 21, 2016, the credit agreement had a fee per annum of 0.06% on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2016, the Master Portfolio did not borrow under the credit agreement.

10. Principal Risks:

In the normal course of business, the Master Portfolio invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer to meet all its obligations, including the ability to pay principal and interest when due (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 of securities owned by the Master Portfolio. Changes arising from the general economy, the overall market and local, regional or global political and/or social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

On October 11, 2016, BlackRock implemented certain changes required by amendments to Rule 2a-7 under the 1940 Act, which governs the operations of U.S. money market funds. The Master Portfolio may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Master Portfolio may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Master Portfolio’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Master Portfolio may lose value, regardless of the individual results of the securities and other instruments in which the Master Portfolio invests.

Counterparty Credit Risk: Similar to issuer credit risk, the Master Portfolio may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Master Portfolio manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the 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 approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Master Portfolio.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

With exchange-traded futures there is less counterparty credit risk to the Master Portfolio since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is

14 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2016

Notes to Financial Statements (concluded)

limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Master Portfolio does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Master Portfolio.

11. Subsequent Events:

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

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2016 15

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Master Investment Portfolio and the Investors of Active Stock Master Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Active Stock Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio, as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers and the transfer agent of the investee funds, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 24, 2017

16 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2016

Officers and Trustees¹

Name, Address2 and Year of Birth	Position(s) Held with MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3
Rodney D. Johnson 1941	Chair of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011; Director, The Mainstay (non-profit) since 2016.	26 RICs consisting of 146 Portfolios	None
Susan J. Carter 1956	Trustee	Since 2016	Director, Pacific Pension Institute since 2014; Advisory Board Member, Center for Private Equity and Entrepreneurship at Tuck School of Business since 1997; Senior Advisor, Commonfund Capital, Inc. (“CCI”) (investment adviser) in 2015; Chief Executive Officer, CCI from 2013 to 2014; President & Chief Executive Officer, CCI from 1997 to 2013; Advisory Board Member, Girls Who Invest since 2015; Advisory Board Member, Bridges Ventures since 2016; Trustee, Financial Accounting Foundation since 2017.	26 RICs consisting of 146 Portfolios	None
Collette Chilton 1958	Trustee	Since 2015	Chief Investment Officer, Williams College since 2006; Chief Investment Officer, Lucent Asset Management Corporation from 1998 to 2006.	26 RICs consisting of 146 Portfolios	None
Neil A. Cotty 1954	Trustee	Since 2016	Bank of America Corporation from 1996 to 2015, serving in various senior finance leadership roles, including Chief Accounting Officer, from 2009 to 2015, Chief Financial Officer of Global Banking, Markets and Wealth Management from 2008 to 2009, Chief Accounting Officer from 2004 to 2008, Chief Financial Officer of Consumer Bank from 2003 to 2004, Chief Financial Officer of Global Corporate Investment Bank from 1999 to 2002.	26 RICs consisting of 146 Portfolios	None
Cynthia A. Montgomery 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012.	26 RICs consisting of 146 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 1947	Trustee	Since 2009	General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Chair, Basic Health International (non-profit) since 2015.	26 RICs consisting of 146 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company); Consol Energy Inc.
Robert C. Robb, Jr. 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981 and Principal since 2010.	26 RICs consisting of 146 Portfolios	None
Mark Stalnecker 1951	Trustee	Since 2015	Chief Investment Officer, University of Delaware from 1999 to 2013; Trustee, Winterthur Museum and Country Estate from 2001 to 2015; Member of the Investment Committee, Delaware Public Employees’ Retirement System since 2002; Member of the Investment Committee, Christiana Care Health System since 2009; Member of the Investment Committee, Delaware Community Foundation from 2013 to 2014; Director, SEI Private Trust Co. from 2001 to 2014.	26 RICs consisting of 146 Portfolios	None
Kenneth L. Urish 1951	Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since founding in 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	26 RICs consisting of 146 Portfolios	None
Claire A. Walton 1957	Trustee	Since 2016	Chief Operating Officer and Chief Financial Officer of Liberty Square Asset Management, LP from 1998 to 2015; General Partner of Neon Liberty Capital Management, LLC since 2003; Director, Boston Hedge Fund Group since 2009; Director, Woodstock Ski Runners since 2013; Director, Massachusetts Council on Economic Education from 2013 to 2015.	26 RICs consisting of 146 Portfolios	None

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2016 17

Officers and Trustees¹ (continued)

Name, Address2 and Year of Birth	Position(s) Held with MIP	Length of Time Served4	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees3 (continued)
Frederick W. Winter 1945	Trustee	Since 2009	Director, Alkon Corporation since 1992; Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh, Dean and Professor from 1997 to 2005, Professor until 2013.	26 RICs consisting of 146 Portfolios	None
Interested Trustees5
Barbara G. Novick 1960	Trustee	Since 2015	Vice Chairman of BlackRock, Inc. since 2006; Chair of BlackRock's Government Relations Steering Committee since 2009; Head of the Global Client Group of BlackRock, Inc. from 1988 to 2008.	100 RICs consisting of 220 Portfolios	None
John M. Perlowski 1964	Trustee, President and Chief Executive Officer	Since 2015 (Trustee); Since 2010 (President and Chief Executive Officer)	Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Fund & Accounting Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Advisory Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.	128 RICs consisting of 318 Portfolios	None
	1    As of February 24, 2017.
	2    The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	3    Independent Trustees serve until their resignation, retirement, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Independent Trustees on a case-by-case basis, as appropriate.
	4    In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. (“BlackRock”) in December 2009, certain Independent Trustees were elected to the Board. As a result, although the chart shows certain Independent Trustees as joining the Board in 2009, those Independent Trustees first became members of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: Rodney D. Johnson, 1995; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1999; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
	5    Ms. Novick and Mr. Perlowski are both “interested persons,” as defined in the 1940 Act, of MIP based on their positions with BlackRock and its affiliates. Mr. Perlowski and Ms. Novick are also board members of certain complexes of BlackRock registered open-end and closed-end funds. Mr. Perlowski is also a board member of the BlackRock Equity-Bond Complex and the BlackRock Closed-End Complex, and Ms. Novick is a board member of the BlackRock Closed-End Complex.

18 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2016

Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Officers Who Are Not Trustees2
Thomas Callahan 1968	Vice President	Since 2016	Managing Director of BlackRock, Inc. since 2013; Head of BlackRock’s Global Cash Management Business since 2016; Co-Head of the Global Cash Management Business from 2014 to 2016; Deputy Head of the Global Cash Management Business from 2013 to 2014; Member of the Cash Management Group Executive Committee since 2013; Chief Executive Officer of NYSE Liffe U.S. from 2008 to 2013.
Jennifer McGovern 1977	Vice President	Since 2014	Managing Director of BlackRock, Inc. since 2016; Director of BlackRock, Inc. from 2011 to 2015; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal J. Andrews 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock, Inc. 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 M. Fife 1970	Treasurer	Since 2007	Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Charles Park 1967	Chief Compliance Officer	Since 2014	Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Fernanda Piedra 1969	Anti-Money Laundering Compliance Officer	Since 2015	Director of BlackRock, Inc. since 2014; Anti-Money Laundering Compliance Officer and Regional Head of Financial Crime for the Americas at BlackRock, Inc. since 2014; Head of Regulatory Changes and Remediation for the Asset Wealth Management Division of Deutsche Bank from 2010 to 2014; Vice President of Goldman Sachs (Anti-Money Laundering/Suspicious Activities Group) from 2004 to 2010.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock, Inc. since 2014; Director of BlackRock, Inc. from 2010 to 2013; Secretary of the iShares® exchange traded funds since 2015; Secretary of the BlackRock-advised mutual funds since 2012.
	1    The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055. 2    Officers of MIP serve at the pleasure of the Board.
	Further information about the Trust's Officers and Trustees is available in MIP's Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.

Effective December 31, 2016, David O. Beim and Dr. Matina S. Horner resigned as Trustees of MIP.

Investment Adviser BlackRock Fund Advisors San Francisco, CA 94105	Accounting Agent and Custodian State Street Bank and Trust Company Boston, MA 02210	Legal Counsel Sidley Austin LLP New York, NY 10019
Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP Philadelphia, PA 19103	Address of MIP 400 Howard Street San Francisco, CA 94105

ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2016 19

Additional Information

Availability of Quarterly Schedule of Investments

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

Availability of Proxy Voting Policies and Procedures

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

Availability of Proxy Voting Record

Information about how the Master Portfolio voted proxies relating to securities held in the Master Portfolio’s portfolio during the most recent 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.

20 ACTIVE STOCK MASTER PORTFOLIO DECEMBER 31, 2016

Item 2 –	Code of Ethics – Each registrant (or “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. During the period covered by this report, the code of ethics was amended to update certain information and to make other non-material changes. During the period covered by this report, there have been no waivers granted under the code of ethics. Each registrant undertakes to provide a copy of the code of ethics to any person upon request, without charge, by calling 1-800-441-7762.
Item 3 –	Audit Committee Financial Expert – Each registrant’s board of directors (the “board of directors”), has determined that (i) the registrant has the following audit committee financial expert serving on its audit committee and (ii) each audit committee financial expert is independent: Kenneth L. Urish Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification.
Item 4 –	Principal Accountant Fees and Services
	The following table presents fees billed by PricewaterhouseCoopers LLP (“PwC”) in each of the last two fiscal years for the services rendered to the Funds:

	(a) Audit Fees		(b) Audit-Related Fees1		(c) Tax Fees2		(d) All Other Fees3
Entity Name	Current Fiscal Year End	Previous Fiscal Year End	Current Fiscal Year End	Previous Fiscal Year End	Current Fiscal Year End	Previous Fiscal Year End	Current Fiscal Year End	Previous Fiscal Year End
BlackRock Cash Funds: Institutional	$11,148	$10,962	$0	$0	$2,425	$2,425	$0	$0
BlackRock Cash Funds: Prime	$11,148	$10,962	$0	$0	$2,425	$2,425	$0	$0
BlackRock Cash Funds: Treasury	$11,148	$10,962	$0	$0	$2,425	$2,425	$0	$0
BlackRock CoreAlpha Bond Fund	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock Disciplined International Fund	$11,130	$9,900	$0	$0	$7,566	$0	$0	$0
BlackRock Large Cap Index Fund	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock LifePath Dynamic Retirement Fund (Formerly BlackRock LifePath Retirement Fund)	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock LifePath Dynamic 2020 Fund (Formerly BlackRock LifePath 2020 Fund)	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock LifePath Dynamic 2025 Fund (Formerly BlackRock LifePath 2025 Fund)	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock LifePath Dynamic 2030 Fund (Formerly BlackRock LifePath 2030 Fund)	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock LifePath Dynamic 2035 Fund (Formerly BlackRock LifePath 2035 Fund)	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0

3

BlackRock LifePath Dynamic 2040 Fund (Formerly BlackRock LifePath 2040 Fund)	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock LifePath Dynamic 2045 Fund (Formerly BlackRock LifePath 2045 Fund)	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock LifePath Dynamic 2050 Fund (Formerly BlackRock LifePath 2050 Fund)	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock LifePath Dynamic 2055 Fund (Formerly BlackRock LifePath 2055 Fund)	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock LifePath Index Retirement Fund	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock LifePath Index 2020 Fund	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock LifePath Index 2025 Fund	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock LifePath Index 2030 Fund	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock LifePath Index 2035 Fund	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock LifePath Index 2040 Fund	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock LifePath Index 2045 Fund	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock LifePath Index 2050 Fund	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock LifePath Index 2055 Fund	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock LifePath Index 2060 Fund	$9,865	N/A	$0	N/A	$7,566	N/A	$0	N/A
BlackRock S&P 500 Index Fund	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock Total International ex U.S. Index Fund	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
BlackRock U.S. Total Bond Index Fund	$11,148	$10,962	$0	$0	$7,566	$7,566	$0	$0
Active Stock Master Portfolio	$20,991	$20,640	$0	$0	$20,161	$20,161	$0	$0
CoreAlpha Bond Master Portfolio	$34,888	$34,305	$0	$0	$20,161	$20,161	$0	$0
International Tilts Master Portfolio	$20,991	$20,640	$0	$0	$15,126	$15,126	$0	$0
Large Cap Index Master Portfolio	$20,991	$20,640	$0	$0	$15,126	$15,126	$0	$0
LifePath Dynamic Retirement Master Portfolio (Formerly LifePath Retirement Master Portfolio)	$13,007	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Dynamic 2020 Master Portfolio (Formerly LifePath 2020 Master Portfolio)	$15,407	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath 2025 Dynamic Master Portfolio (Formerly LifePath 2025 Master Portfolio)	$15,407	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Dynamic 2030 Master Portfolio (Formerly LifePath 203 Master Portfolio)	$15,407	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Dynamic 2035 Master Portfolio (Formerly LifePath 2035 Master Portfolio)	$15,407	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Dynamic 2040 Master Portfolio (Formerly LifePath 2040 Master Portfolio)	$15,407	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Dynamic 2045 Master Portfolio (Formerly LifePath 2045 Master Portfolio)	$15,407	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Dynamic 2050 Master Portfolio (Formerly LifePath 2050 Master Portfolio)	$15,407	$12,790	$0	$0	$13,119	$13,119	$0	$0

4

LifePath Dynamic 2055 Master Portfolio (Formerly LifePath 2055 Master Portfolio)	$15,407	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index Retirement Master Portfolio	$13,007	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index 2020 Master Portfolio	$13,007	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index 2025 Master Portfolio	$13,007	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index 2030 Master Portfolio	$13,007	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index 2035 Master Portfolio	$13,007	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index 2040 Master Portfolio	$13,007	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index 2045 Master Portfolio	$13,007	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index 2050 Master Portfolio	$13,007	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index 2055 Master Portfolio	$13,007	$12,790	$0	$0	$13,119	$13,119	$0	$0
LifePath Index 2060 Master Portfolio	$13,911	N/A	$0	N/A	$13,119	N/A	$0	N/A
Money Market Master Portfolio	$12,507	$12,298	$0	$0	$3,633	$3,633	$0	$0
Prime Money Market Master Portfolio	$12,507	$12,298	$0	$0	$3,633	$3,633	$0	$0
S&P 500 Index Master Portfolio	$20,991	$20,640	$0	$0	$15,126	$15,126	$0	$0
Total International ex U.S. Index Master Portfolio	$20,991	$20,640	$0	$0	$15,126	$15,126	$0	$0
Treasury Money Market Master Portfolio	$12,507	$12,298	$0	$0	$3,633	$3,633	$0	$0
U.S. Total Bond Index Master Portfolio	$24,370	$23,963	$0	$0	$15,126	$15,126	$0	$0

The following table presents fees billed by PwC that were required to be approved by each registrant’s audit committee (each a “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock Advisors, LLC (“Investment Adviser” or “BlackRock”) and entities controlling, controlled by, or under common control with BlackRock (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund (“Fund Service Providers”):

	Current Fiscal Year End	Previous Fiscal Year End
(b) Audit-Related Fees1	$0	$0
(c) Tax Fees2	$0	$0
(d) All Other Fees3	$0	$0

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 PwC 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

5

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 Cash Funds:  Institutional		$2,425		$2,425
BlackRock Cash Funds:  Prime		$2,425		$2,425
BlackRock Cash Funds:  Treasury		$2,425		$2,425
BlackRock CoreAlpha Bond Fund		$7,566		$7,566
BlackRock Large Cap Index Fund		$7,566		$7,566
BlackRock Disciplined International Fund		$7,566		$7,566
BlackRock LifePath Dynamic Retirement Fund (Formerly BlackRock LifePath Retirement Fund)		$7,566		$7,566
BlackRock LifePath Dynamic 2020 Fund (Formerly BlackRock LifePath 2020 Fund)		$7,566		$7,566
BlackRock LifePath Dynamic 2025 Fund (Formerly BlackRock LifePath 2025 Fund)		$7,566		$7,566
BlackRock LifePath Dynamic 2030 Fund (Formerly BlackRock LifePath 2030 Fund)		$7,566		$7,566
BlackRock LifePath Dynamic 2035 Fund (Formerly BlackRock LifePath 2035 Fund)		$7,566		$7,566
BlackRock LifePath Dynamic 2040 Fund (Formerly BlackRock LifePath 2040 Fund)		$7,566		$7,566
BlackRock LifePath Dynamic 2045 Fund (Formerly BlackRock LifePath 2045 Fund)		$7,566		$7,566
BlackRock LifePath Dynamic 2050 Fund (Formerly BlackRock LifePath 2050 Fund)		$7,566		$7,566
BlackRock LifePath Dynamic 2055 Fund (Formerly BlackRock LifePath 2055 Fund)		$7,566		$7,566
LifePath Index Retirement Fund		$7,566		$7,566
LifePath Index 2020 Fund		$7,566		$7,566

6

LifePath Index 2025 Fund	$7,566	$7,566
LifePath Index 2030 Fund	$7,566	$7,566
LifePath Index 2035 Fund	$7,566	$7,566
LifePath Index 2040 Fund	$7,566	$7,566
LifePath Index 2045 Fund	$7,566	$7,566
LifePath Index 2050 Fund	$7,566	$7,566
LifePath Index 2055 Fund	$7,566	$7,566
LlifePath Index 2060 Fund	$7,566	N/A
BlackRock S&P 500 IndexFund	$7,566	$7,566
BlackRock Total International ex U.S. Index Fund	$7,566	$7,566
BlackRock U.S. Total Bond Index Fund	$7,566	$7,566
Active Stock Master Portfolio	$20,161	$20,161
CoreAlpha Bond Master Portfolio	$20,161	$20,161
International Tilts Master Portfolio	$15,126	$15,126
Large Cap Index Master Portfolio	$15,156	$15,156
LifePath Dynamic Retirement Master Portfolio (Formerly LifePath Retirement Master Portfolio)	$13,119	$13,119
LifePath Dynamic 2020 Master Portfolio (Formerly LifePath 2020 Master Portfolio)	$13,119	$13,119
LifePath 2025 Dynamic Master Portfolio (Formerly LifePath 2025 Master Portfolio)	$13,119	$13,119
LifePath Dynamic 2030 Master Portfolio (Formerly LifePath 203 Master Portfolio)	$13,119	$13,119
LifePath Dynamic 2035 Master Portfolio (Formerly LifePath 2035 Master Portfolio)	$13,119	$13,119
LifePath Dynamic 2040 Master Portfolio (Formerly LifePath 2040 Master Portfolio)	$13,119	$13,119
LifePath Dynamic 2045 Master Portfolio (Formerly LifePath 2045 Master Portfolio)	$13,119	$13,119
LifePath Dynamic 2050 Master Portfolio (Formerly LifePath 2050 Master Portfolio)	$13,119	$13,119
LifePath Dynamic 2055 Master Portfolio (Formerly LifePath 2055 Master Portfolio)	$13,119	$13,119
LifePath Index Retirement Master Portfolio	$13,119	$13,119
LifePath Index 2020 Master Portfolio	$13,119	$13,119
LifePath Index 2025 Master Portfolio	$13,119	$13,119
LifePath Index 2030 Master Portfolio	$13,119	$13,119
LifePath Index 2035 Master Portfolio	$13,119	$13,119
LifePath Index 2040 Master Portfolio	$13,119	$13,119
LifePath Index 2045 Master Portfolio	$13,119	$13,119
LifePath Index 2050 Master Portfolio	$13,119	$13,119
LifePath Index 2055 Master Portfolio	$13,119	$13,119
LifePath Index 2060 Master Portfolio	$13,119	N/A
Money Market Master Portfolio	$3,633	$3,633
Prime Money Market Master Portfolio	$3,633	$3,633
S&P 500 Index Master Portfolio	$15,126	$15,126
Total International ex U.S. Index Master Portfolio	$15,156	$15,156
Treasury Money Market Master Portfolio	$3,633	$3,633
U.S. Total Bond Index Master Portfolio	$15,156	$15,156

7

	(h) Each Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser and the Fund Service Providers that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
Item 5 –	Audit Committee of Listed Registrants – Not Applicable
Item 6 –	Investments
	(a) The registrants’ Schedules of Investments are included as part of the Report to Stockholders filed under Item 1 of this Form.
	(b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing.
Item 7 –	Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not Applicable
Item 8 –	Portfolio Managers of Closed-End Management Investment Companies – Not Applicable
Item 9 –	Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable
Item 10 –	Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.
Item 11 –	Controls and Procedures
	(a) – The registrants’ principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrants’ disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15(d)-15(b) under the Securities Exchange Act of 1934, as amended.
	(b) – There were no changes in the registrants’ internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrants’ internal control over financial reporting.
Item 12 –	Exhibits attached hereto
	(a)(1) – Code of Ethics – See Item 2
	(a)(2) – Certifications – Attached hereto
	(a)(3) – Not Applicable
	(b) – Certifications – Attached hereto

8

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, each registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BlackRock Funds III and Master Investment Portfolio
By:	/s/ John M. Perlowski
	John M. Perlowski
	Chief Executive Officer (principal executive officer) of
	BlackRock Funds III and Master Investment Portfolio
Date: March 6, 2017
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: March 6, 2017
By:	/s/ Neal J. Andrews
	Neal J. Andrews
	Chief Financial Officer (principal financial officer) of
	BlackRock Funds III and Master Investment Portfolio

Date: March 6, 2017

9