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 Bond Index Fund

BlackRock S&P 500 Stock Fund

LifePath® Retirement Portfolio

LifePath 2020 Portfolio®

LifePath® 2025 Portfolio

LifePath 2030 Portfolio®

LifePath® 2035 Portfolio

LifePath 2040 Portfolio®

LifePath® 2045 Portfolio

LifePath® 2050 Portfolio

LifePath® 2055 Portfolio

BlackRock Cash Funds: Institutional

BlackRock Cash Funds: Prime

BlackRock Cash Funds: Government

BlackRock Cash Funds: Treasury

Master Investment Portfolio

Bond Index Master Portfolio

S&P 500 Stock Master Portfolio

LifePath® Retirement Master Portfolio

LifePath 2020 Master Portfolio®

LifePath® 2025 Master Portfolio

LifePath 2030 Master Portfolio®

LifePath® 2035 Master Portfolio

LifePath 2040 Master Portfolio®

LifePath® 2045 Master Portfolio

LifePath® 2050 Master Portfolio

LifePath® 2055 Master Portfolio

Active Stock Master Portfolio

CoreAlpha Bond Master Portfolio

Money Market Master Portfolio

Prime Money Market Master Portfolio

Government Money Market Master Portfolio

Treasury Money Market Master Portfolio

Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Funds III and

Master Investment Portfolio, 40 East 52^nd Street, New York, NY 10022

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

Date of fiscal year end: 12/31/2010

Date of reporting period: 12/31/2010

Item 1 – Report to Stockholders

December 31, 2010

Annual Report

BlackRock Funds III

^u BlackRock Bond Index Fund

Not FDIC Insured ¡ No Bank Guarantee ¡ May Lose Value

Table of Contents

	Page
Dear Shareholder		3
Annual Report:
Portfolio Management Commentary		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		11
Fund Report of Independent Registered Public Accounting Firm		13
Important Tax Information (Unaudited)		13
Master Portfolio Information		14
Master Portfolio Financial Statements:
Schedule of Investments		15
Statement of Assets and Liabilities		21
Statement of Operations		22
Statements of Changes in Net Assets		23
Master Portfolio Financial Highlights		24
Master Portfolio Notes to Financial Statements		25
Master Portfolio Report of Independent Registered Public Accounting Firm		29
Officers and Trustees		30
Additional Information		34

2 BLACKROCK BOND INDEX FUND DECEMBER 31, 2010

Dear Shareholder

Economic data fluctuated widely throughout 2010 as the global economy continued to emerge from the “Great Recession.” As the year drew to a close, it became clear that cyclical stimulus had beat out structural problems as economic data releases generally became more positive and financial markets showed signs of continuing improvement.

Debt and deflationary risks remained present throughout 2010, causing central banks worldwide to respond with unprecedented actions, most notably a second round of quantitative easing (informally known as “QE2”) from the US Federal Reserve Board (the “Fed”). Inflation remained a non-issue in the developed world, but continued to rear its ugly head in some emerging economies, most evidently in China. Global and US gross domestic product (“GDP”) growth both continued in a positive direction but remained subpar compared to most historical economic recoveries. In the United States, the corporate sector has been an important area of strength and consumer spending has shown improvement, although weakness in the housing and labor markets continues to burden the economy.

Stocks moved higher in the early months of 2010 on the continuation of the 2009 asset recovery story. The mid-year months saw a double-digit percentage correction on the back of the Greek sovereign debt crisis and a stalling in jobs growth, leading to fears of a double-dip recession. After touching a late summer low, equity markets rallied through year end as these concerns receded. The announcement of QE2 and extension of the Bush-era tax cuts further boosted equities as the year came to a close. Although the course was uneven and high volatility remained a constant for stocks, equity markets globally ended the year strong. Emerging markets outpaced the developed world in terms of economic growth and posted respectable gains for the year despite sovereign debt problems and heightening inflationary pressures. US stocks recorded double-digit percentage gains for the second consecutive year. Small cap stocks outperformed large caps as investors began to move into higher-risk assets.

In fixed income markets, yields trended lower over most of the year as investors continued to favor safer assets. That trend reversed abruptly in the fourth quarter when market fears abated and investors began seeking higher-risk assets, driving yields sharply upward through year end. However, yields were lower overall for the year and fixed income markets finished 2010 in positive territory. Although fixed income securities generally underperformed equities, high yield bonds only marginally trailed large cap stocks. Conversely, the tax-exempt municipal market was dealt an additional blow as it became apparent that an extension of the Build America Bond program was unlikely. In addition, the fourth quarter brought an increase in negative headlines regarding fiscal challenges faced by state and local governments, sparking additional volatility in the municipal market.

Cash investments, as represented by the 3-month Treasury bill, returned only a fraction over 0% for the year as short-term interest rates remained low. Yields on money market securities remain near all-time lows.

Total returns as of December 31, 2010	6-month			12-month
US large cap equities (S&P 500 Index)		23.27	%		15.06	%
US small cap equities (Russell 2000 Index)		29.38			26.85
International equities (MSCI Europe, Australasia, Far East Index)		24.18			7.75
3-month Treasury bill (BofA Merrill Lynch 3-Month Treasury Bill Index)		0.08			0.13
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		(1.33	)		7.90
US investment grade bonds (Barclays Capital US Aggregate Bond Index)		1.15			6.54
Tax-exempt municipal bonds (Barclays Capital Municipal Bond Index)		(0.90	)		2.38
US high yield bonds (Barclays Capital US Corporate High Yield 2% Issuer Capped Index)		10.04			14.94

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

While no one can peer into a crystal ball and eliminate the uncertainties presented by the economic landscape and financial markets, BlackRock can offer investors the next best thing: partnership with the world’s largest asset management firm and a unique global perspective that allows us to identify trends early and capitalize on market opportunities. For additional market perspective and investment insight, visit www.blackrock.com/shareholdermagazine, where you’ll find the most recent issue of our award-winning Shareholder^® magazine, as well as its quarterly companion newsletter, Shareholder Perspectives. As always, we thank you for entrusting BlackRock with your investments, and we look forward to your continued partnership in the months and years ahead.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

THIS PAGE NOT PART OF YOUR FUND REPORT 3

Fund Summary as of December 31, 2010 BlackRock Bond Index Fund

Portfolio Management Commentary

How did the Fund perform?

• For the 12 months ended December 31, 2010, the BlackRock Bond Index Fund (the “Fund”), a series of BlackRock Funds III, generated a total return of 6.79% through its investment in the Bond Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio, while its benchmark index, Barclays Capital U.S. Aggregate Bond Index (the “Index”), returned 6.54%. The Index is comprised of U.S. government securities and investment-grade corporate bonds, as well as mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities.

• The return for the Fund differs from the benchmark based on Fund expenses.

Describe the market environment.

• Over the course of 2010, cyclical stimulus beat out structural problems and stocks continued the choppy advance they began in 2009. The early months of 2010 saw risk assets move higher on the continuation of the 2009 asset recovery story, aided by preliminary signs of improvement in the employment situation and strong corporate earnings reported for fourth quarter 2009 and first quarter 2010. The middle months of 2010 saw a double-digit percentage correction on the back of the Greek sovereign debt crisis and a stalling in jobs growth, leading to fears of a double-dip recession. Investors were also unnerved by the May “flash crash” and the uncertainty surrounding the financial reform bill in the United States. Nevertheless, after touching a late summer low, equity markets experienced a strong finish to the year as double-dip fears receded, jobs growth resumed and the US mid-term election results were perceived to be capital markets friendly. Additionally, in the United States, Federal Reserve Chairman Ben Bernanke delivered his famous Jackson Hole speech, leading to a second round of quantitative easing measures (informally known as “QE2”) and, perhaps most importantly, the Bush-era tax cuts were extended and supplemented with some fiscal sweeteners.

Describe recent portfolio activity.

• During the 12-month period, the Master Portfolio selected securities for investment in accordance with their relative proportion within the Index as well as based on credit quality, issuer sector, maturity structure, coupon rates and callability, among other factors, in order to maintain its objective of providing investment results that corresponded to the total return performance of the Index.

Describe Fund positioning at period-end.

• In keeping with its investment objective, 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 BOND INDEX FUND DECEMBER 31, 2010

BlackRock Bond Index Fund

Total Return Based on a $10,000 Investment

¹ The Fund invests all of its assets in the Master Portfolio. The Master Portfolio invests primarily in long-term, fixed income securities that are rated in the four highest categories of the recognized rating agencies (Baa or better by Moody’s Investors Service, Inc., or BBB or better by Standard & Poor’s).

² The unmanaged market-weighted index is composed of investment grade corporate bonds (rated BBB or better), mortgages and U.S. Treasury and government agency issues with at least one year to maturity.

Performance Summary for the Period Ended December 31, 2010

	Standardized 30-Day Yields			6-Month Total Returns			Average Annual Total Returns
							1 Year			5 Years			10 Years
BlackRock Bond Index Fund		2.92	%		1.24	%		6.79	%		5.96	%		5.84	%
Barclays Capital US Aggregate Bond Index		—			1.15			6.54			5.80			5.84

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

Past performance is not indicative of future results.

Expense Example

Actual								Hypothetical4
Beginning Account Value July 1, 2010		Ending Account Value December 31, 2010			Expenses Paid During the Period3				Beginning Account Value July  1, 2010			Ending Account Value December 31, 2010			Expenses Paid During the Period3			Annualized Expense Ratio
	$1,000.00		$	1,012.40		$	1.17			$	1,000.00		$	1,024.00		$	1.17		0.23	%

³ Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown). Because the Fund invests significantly in the Master Portfolio, the expense table example reflects the net expenses of both the Fund and the Master Portfolio.

⁴ Hypothetical 5% return before expenses is calculated by pro-rating the number of days in the most recent fiscal half year divided by 365.

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

BLACKROCK BOND INDEX FUND DECEMBER 31, 2010 5

About Fund Performance

Performance information reflects past performance and does not guarantee future results. Current performance data may be lower or higher than the performance data quoted. Call toll free, (800) 441-7762, to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Figures shown in the performance tables on the preceding page assume reinvestment of all dividends and capital gain distributions, if any, at net asset value on the payable date for the Fund. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. The Fund’s administrator waived a portion of the Fund’s expenses. Without such waiver, the Fund’s performance would have been lower.

Disclosure of Expenses

Shareholders of the Fund may incur operating expenses, including advisory fees and other Fund expenses. The expense example on the preceding page (which are based on a hypothetical investment of $1,000 invested on July 1, 2010 and held through December 31, 2010) are 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 table on the preceding page 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 under the heading entitled “Expenses Paid During the Period.”

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

The expenses shown in the table are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, redemption fees or exchange fees. Therefore, the hypothetical example 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.

6 BLACKROCK BOND INDEX FUND DECEMBER 31, 2010

Statement of Assets and Liabilities BlackRock Bond Index Fund

December 31, 2010
Assets
Investment at value – Master Portfolio	$	98,488,753
Capital shares sold receivable		125,455
Total assets		98,614,208
Liabilities
Capital shares redeemed payable		35,067
Administration fees payable		9,224
Professional fees payable		10,963
Total liabilities		55,254
Net Assets	$	98,558,954
Net Assets Consist of
Paid-in capital	$	92,055,386
Accumulated net realized gain		2,759,892
Net unrealized appreciation/depreciation		3,743,676
Net Assets	$	98,558,954
Net Asset Value
Net assets	$	98,558,954
Shares outstanding, unlimited number of shares authorized, no par value		9,694,376
Net asset value	$	10.17

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2010 7

Statement of Operations BlackRock Bond Index Fund

Year Ended December 31, 2010
Investment Income
Net investment income allocated from the Master Portfolio:
Interest	$	4,796,654
Securities lending – affiliated		27,270
Income – affiliated		14,946
Expenses		(99,763	)
Total income		4,739,107
Expenses
Administration		184,415
Professional		11,185
Total expenses		195,600
Less fees waived by administrator		(11,185	)
Total expenses after fees waived		184,415
Net investment income		4,554,692
Realized and Unrealized Gain (Loss) Allocated from the Master Portfolio
Net realized gain from investments		4,424,749
Net change in unrealized appreciation/depreciation on investments		(230,800	)
Total realized and unrealized gain		4,193,949
Net Increase in Net Assets Resulting from Operations	$	8,748,641

See Notes to Financial Statements.

8 BLACKROCK BOND INDEX FUND DECEMBER 31, 2010

Statements of Changes in Net Assets BlackRock Bond Index Fund

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2010				2009
Operations
Net investment income		$	4,554,692			$	5,839,387
Net realized gain			4,424,749				955,336
Net change in unrealized appreciation/depreciation			(230,800	)			622,654
Net increase in net assets resulting from operations			8,748,641				7,417,377
Dividends to Shareholders From
Net investment income			(4,765,772	)			(6,181,175	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions			(62,112,206	)			22,455,344
Net Assets
Total increase (decrease) in net assets			(58,129,337	)			23,691,546
Beginning of year			156,688,291				132,996,745
End of year		$	98,558,954			$	156,688,291

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2010 9

Financial Highlights BlackRock Bond Index Fund

	Year Ended December 31,
	2010				2009				2008				2007				2006
Per Share Operating Performance
Net asset value, beginning of year		$	9.90			$	9.82			$	9.74			$	9.59			$	9.64
Net investment income			0.37	1			0.40	1			0.47				0.48				0.46
Net realized and unrealized gain (loss)			0.30				0.10				0.09				0.19				(0.02	)
Net increase from investment operations			0.67				0.50				0.56				0.67				0.44
Dividends and distributions from:
Net investment income			(0.40	)			(0.42	)			(0.48	)			(0.52	)			(0.49	)
Return of capital			–				–				(0.00	)2			–				–
Total dividends and distributions			(0.40	)			(0.42	)			(0.48	)			(0.52	)			(0.49	)
Net asset value, end of year		$	10.17			$	9.90			$	9.82			$	9.74			$	9.59
Total Investment Return3
Based on net asset value			6.79	%			5.21	%			5.91	%			7.16	%			4.76	%
Ratios to Average Net Assets4
Total expenses			0.26	%			0.25	%			0.26	%			0.28	%			0.26	%
Total expenses after fees waived			0.23	%			0.23	%			0.23	%			0.23	%			0.23	%
Net investment income			3.65	%			4.05	%			4.84	%			5.00	%			4.83	%
Supplemental Data
Net assets, end of year (000)		$	98,559			$	156,688			$	132,997			$	111,847			$	103,592
Portfolio turnover of the Master Portfolio			59	%5			103	%6			89	%			61	%			57	%

¹ Based on average shares outstanding.

² Amount is less than $(0.01) per share.

³ Includes the reinvestment of dividends and distributions.

⁴ Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

⁵ Includes mortgage dollar rolls transactions. Excluding these transactions, the portfolio turnover rate would have been 54%.

⁶ Includes mortgage dollar rolls transactions. Excluding these transactions, the portfolio turnover rate would have been 87%.

See Notes to Financial Statements.

10 BLACKROCK BOND INDEX FUND DECEMBER 31, 2010

Notes to Financial Statements BlackRock Bond Index Fund

1. Organization and Significant Accounting Policies:

BlackRock Bond Index Fund (the “Fund”) is a series of BlackRock Funds III (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. The Trust is organized as a Delaware statutory trust. The Fund seeks to achieve its investment objective by investing substantially all of its assets in Bond Index Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), which has the same investment objective and strategies as the Fund. The performance of the Fund is directly affected by the performance of the Master Portfolio.

The value of the Fund’s investment in the Master Portfolio reflects the Fund’s interest in the net assets of the Master Portfolio (99.99% of the total Master Portfolio assets as of December 31, 2010).

The financial statements of the Master Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with the Fund’s financial statements. The Fund’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

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

Valuation: The Fund’s policy is to fair value its financial instruments at market value. The Fund records its investments 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, including categorization of fair value measurements, is discussed in Note 1 of the Master Portfolio’s Notes to Financial Statements, which are included elsewhere in this report.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions in the Master Portfolio are recorded on the dates the transactions are entered into (the trade dates). The Fund records daily its proportionate share of the Master Portfolio’s income, expenses and realized and unrealized gains and losses. In addition, the Fund accrues its own expenses.

Dividends and Distributions: Dividends from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. If the total dividends and distributions made in any tax year exceed net investment income and accumulated realized capital gains, a portion of the total distribution may be treated as a tax return of capital. The amount and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

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

The Fund files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s US federal tax return remains open for each of the four years ended December 31, 2010. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction. There are no uncertain tax positions that require recognition of a tax liability.

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

2. Administrative Services Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”), Bank of America Corporation (“BAC”) and Barclays Bank PLC (“Barclays”) are the largest stockholders of BlackRock, Inc. (“BlackRock”). Due to the ownership structure, PNC is an affiliate of the Fund for 1940 Act purposes, but BAC and Barclays are not.

The Trust entered into an administration services arrangement with BlackRock Institutional Trust Company, N.A. (“BTC”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC, in consideration thereof, has agreed to bear all costs of operating the fund, excluding brokerage expenses, management fees, 12b-1 distribution or service fees, independent expenses, litigation expenses or other extraordinary expenses. BTC is entitled to receive for these administration services an annual fee of 0.15% of the average daily net assets of the Fund. Effective December 1, 2010, the administration fee was reduced to 0.12%.

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

The fees of the Trust’s independent registered public accounting firm and legal counsel (the “independent expenses”) are paid directly by the Fund. BTC has contractually agreed to provide an offsetting credit against the administration fees paid by the Fund in an amount equal to the independent expenses through April 30, 2012. These amounts are included in fees waived by administrator in the Statement of Operations.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2010 11

Notes to Financial Statements (concluded) BlackRock Bond Index Fund

BNY Mellon Investment Servicing (US) Inc. (formerly PNC Global Investment Servicing (U.S.) Inc. (“PNCGIS”)), serves as transfer agent and dividend disbursing agent. On July 1, 2010, the Bank of New York Mellon Corporation purchased PNCGIS, which prior to this date was an indirect, wholly owned subsidiary of PNC and an affiliate of BTC. Transfer agency fees paid by BTC to PNCGIS are comprised of those fees charged for all shareholder communications including mailing of shareholder reports, dividend and distribution notices, and proxy materials for shareholder meetings, as well as per account and per transaction fees related to servicing and maintenance of shareholder accounts, including the issuing, redeeming and transferring of shares, check writing, anti-money laundering services, and customer identification services.

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

3. Income Tax Information:

Reclassifications: US GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. The following permanent differences as of December 31, 2010 attributable to amortization methods on fixed income securities, distributions paid in excess of taxable income and paydowns gains/losses were reclassified to the following accounts:

Paid-in capital	$	(6,695	)
Undistributed net investment income	$	211,080
Accumulated net realized loss	$	(204,385	)

The tax character of distributions paid during the fiscal years ended December 31, 2010 and December 31, 2009 was as follows:

	12/31/2010			12/31/2009
Ordinary Income		$	4,765,772		$	6,181,175
Total distributions		$	4,765,772		$	6,181,175

As of December 31, 2010, the tax components of accumulated net earnings were as follows:

Undistributed ordinary income		–
Capital loss carryforwards	$	(446,688	)
Net unrealized gains*		6,950,256
Total	$	6,503,568

* The differences between book-basis and tax-basis net unrealized gains were attributable primarily to the tax deferral of losses on wash sales and amortization methods for premiums and discounts on fixed income securities.

As of December 31, 2010, the Fund had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates:

Expires December 31,
2015	$	155,653
2016		291,035
Total	$	446,688

Under the recently enacted Regulated Investment Company Modernization Act of 2010, capital losses incurred by the Fund after December 31, 2010 will not be subject to expiration. In addition, such losses must be utilized prior to the losses incurred in the years preceding enactment.

4. Capital Share Transactions:

Transactions in capital shares for the Fund were as follows:

	Year Ended December 31, 2010							Year Ended December 31, 2009
	Shares			Amount				Shares			Amount
Shares sold		3,652,604			$	37,356,074			3,818,269			$	37,558,069
Shares issued to shareholders in reinvestment of dividends		420,234				4,277,019			569,219				5,609,931
Total issued		4,072,838				41,633,093			4,387,488				43,168,000
Shares redeemed		(10,199,816	)			(103,745,299	)		(2,111,236	)			(20,712,656	)
Net increase		(6,126,978	)		$	(62,112,206	)		2,276,252			$	22,455,344

5. Subsequent Events:

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

12 BLACKROCK BOND INDEX FUND DECEMBER 31, 2010

Report of Independent Registered Public Accounting Firm BlackRock Bond Index Fund

To the Shareholders and Board of Trustees of BlackRock Funds III:

In our opinion, the accompanying statement of assets and liabilities, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock Bond Index Fund, a series of Black-Rock Funds III (the “Trust”), at December 31, 2010, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 24, 2011

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by the Fund during the taxable year ended December 31, 2010:

Interest Related Dividends for Non-U.S. Residents1
	Month(s) Paid:
	January 2010	96.31	%
	February 2010	59.38	%
	March 2010	87.21	%
	April 2010	96.23	%
	May 2010	82.96	%
	June 2010	92.95	%
	July 2010	92.41	%
	August 2010	72.49	%
	September 2010	96.17	%
	October 2010	80.76	%
	November 2010	59.30	%
	December 2010	87.73	%
Federal Obligation Interests2	Jan-Dec 2010	13.88	%

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.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2010 13

Master Portfolio Information As ofDecember 31, 2010 Bond Index Master Portfolio

Portfolio Composition	Percent of Long-Term Investments
U.S. Government Sponsored Agency Securities		41	%
U.S. Treasury Obligations		33
Corporate Bonds		20
Non-Agency Mortgage-Backed Securities		3
Foreign Agency Obligations		2
Taxable Municipal Bonds		1

Credit Quality Allocation1	Percent of Long-Term Investments
AAA/Aaa2		78	%
AA/Aa		5
A/A		9
BBB/Baa		8

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

² Includes US Government Sponsored Agency Securities which are deemed AAA/ Aaa by the investment advisor.

14 BLACKROCK BOND INDEX FUND DECEMBER 31, 2010

Schedule of Investments December 31, 2010	Bond Index Master Portfolio
	(Percentages shown are based on Net Assets)

Asset-Backed Securities	Par (000)			Value
Citibank Credit Card Issuance Trust:
Series 2006-A3, Class A3,
5.30%, 3/15/18		$	100		$	112,055
Series 2008-A1, Class A1,
5.35%, 2/07/20			170			190,449
Total Asset-Backed Securities – 0.3%						302,504
Corporate Bonds
Aerospace & Defense – 0.2%
The Boeing Co., 6.13%, 2/15/33			100			110,247
Honeywell International, Inc., 5.30%, 3/01/18			100			111,282
						221,529
Air Freight & Logistics – 0.1%
United Parcel Service, Inc., 5.13%, 4/01/19			50			55,805
Beverages – 0.6%
Anheuser-Busch Cos., Inc., 6.45%, 9/01/37			100			114,426
Bottling Group, LLC, 4.63%, 11/15/12			100			106,886
The Coca-Cola Co., 0.75%, 11/15/13			100			98,705
Diageo Capital Plc, 5.20%, 1/30/13			150			161,761
PepsiCo, Inc., 4.88%, 11/01/40			100			97,034
						578,812
Biotechnology – 0.1%
Amgen, Inc., 3.45%, 10/01/20			100			95,284
Capital Markets – 1.7%
The Bear Stearns Cos., Inc./JPMorgan Chase &
Co., 5.70%, 11/15/14			200			219,750
Credit Suisse First Boston USA,
6.50%, 1/15/12			100			105,650
Deutsche Bank AG, 5.38%, 10/12/12			100			107,473
The Goldman Sachs Group, Inc.:
5.95%, 1/18/18			300			325,465
6.13%, 2/15/33			100			105,947
International Bank for Reconstruction &
Development, 2.00%, 4/02/12			250			254,925
Jefferies Group, Inc., 8.50%, 7/15/19			50			57,169
Morgan Stanley:
5.30%, 3/01/13			150			159,843
5.75%, 10/18/16 (a)			225			239,957
Nomura Holdings, Inc., 5.00%, 3/04/15			50			52,129
						1,628,308
Chemicals – 0.4%
The Dow Chemical Co., 8.55%, 5/15/19			100			125,325
E.I. du Pont de Nemours & Co.,
6.00%, 7/15/18			125			143,724

Corporate Bonds	Par (000)			Value
Chemicals (concluded)
Potash Corp. of Saskatchewan, Inc.,
3.25%, 12/01/17		$	50		$	48,452
Praxair, Inc., 4.63%, 3/30/15			100			108,840
						426,341
Commercial Banks – 2.2%
American Express Bank FSB, 5.50%, 4/16/13			250			269,448
BB&T Corp., 5.25%, 11/01/19			100			103,585
Barclays Bank Plc, 5.00%, 9/22/16			175			185,185
European Investment Bank:
4.88%, 2/16/16			250			279,081
5.13%, 9/13/16			225			254,080
HSBC Holdings Plc, 6.80%, 6/01/38			100			108,132
Korea Development Bank, 3.25%, 3/09/16 (a)			100			97,245
PNC Funding Corp., 5.63%, 2/01/17 (b)			150			160,341
Royal Bank of Scotland Group Plc,
5.00%, 10/01/14			75			72,148
Swiss Bank Corp., 7.00%, 10/15/15			150			164,200
Wachovia Bank NA/Wells Fargo & Co.,
6.60%, 1/15/38			50			55,054
Wells Fargo & Co., 5.63%, 12/11/17			300			332,155
Westpac Banking Corp., 4.88%, 11/19/19			50			52,540
						2,133,194
Commercial Services & Supplies – 0.2%
Republic Services, Inc., 5.25%, 11/15/21			50			52,694
Vanderbilt University, 5.25%, 4/01/19			100			109,798
						162,492
Communications Equipment – 0.1%
Cisco Systems, Inc., 4.95%, 2/15/19			100			108,976
Computers & Peripherals – 0.3%
ACE INA Holdings, Inc., 2.60%, 11/23/15			50			49,223
Dell, Inc., 5.65%, 4/15/18			75			82,138
Hewlett-Packard Co., 4.75%, 6/02/14			150			164,352
						295,713

Portfolio Abbreviations:

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

BLACKROCK BOND INDEX FUND DECEMBER 31, 2010 15

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

Corporate Bonds	Par (000)			Value
Consumer Finance – 0.2%
Capital One Financial Corp., 6.75%, 9/15/17		$	100		$	115,236
HSBC Finance Corp., 6.68%, 1/15/21 (c)			111			112,141
						227,377
Diversified Financial Services – 2.2%
Bank of America Corp., 7.75%, 8/15/15			250			279,256
Citigroup, Inc.:
5.30%, 10/17/12			100			105,904
6.50%, 8/19/13			150			164,709
6.63%, 6/15/32			100			100,071
6.88%, 3/05/38			100			110,924
General Electric Capital Corp.:
2.25%, 11/09/15			100			96,136
5.63%, 5/01/18			300			327,154
4.38%, 9/16/20			50			49,208
Series G, 6.00%, 8/07/19			100			111,259
JPMorgan Chase & Co.:
1.65%, 9/30/13			150			150,102
5.50%, 10/15/40			125			127,767
Merrill Lynch & Co., Inc.:
6.05%, 8/15/12			200			211,780
6.11%, 1/29/37			100			90,268
SLM Corp., 8.45%, 6/15/18			100			103,936
US Bancorp, 1.38%, 9/13/13			100			99,951
						2,128,425
Diversified Telecommunication Services – 1.0%
AT&T Corp., 8.00%, 11/15/31			4			5,027
AT&T, Inc.:
5.10%, 9/15/14			300			328,231
5.35%, 9/01/40 (c)			113			106,273
Deutsche Telekom International Finance BV,
8.75%, 6/15/30			100			134,395
Embarq Corp., 7.08%, 6/01/16			100			110,591
Telecom Italia Capital SA, 5.25%, 11/15/13			150			156,271
Telefonica Europe BV, 8.25%, 9/15/30			50			58,091
Verizon Global Funding Corp., 7.75%, 12/01/30			100			124,056
						1,022,935
Electric Utilities – 1.3%
Alabama Power Co., 5.50%, 10/15/17			100			112,271
Arizona Public Service Co., 6.50%, 3/01/12			100			105,683
Commonwealth Edison Co., 5.90%, 3/15/36			50			51,657
Consolidated Edison Co. of New York, Inc.,
6.65%, 4/01/19			100			119,188
Duke Energy Carolinas LLC, 6.05%, 4/15/38			100			111,819
Entergy Corp., 3.63%, 9/15/15			50			49,453
Florida Power & Light Co./Progress Energy,
5.95%, 2/01/38			100			110,809
Indiana Michigan Power Co., 6.05%, 3/15/37			100			104,011
Northern States Power Co, 8.00%, 8/28/12			100			111,123
Public Service Electric & Gas Co.,
3.50%, 8/15/20			50			48,202
Southern California Edison Co.:
5.00%, 1/15/16			100			110,839
5.50%, 3/15/40			50			51,845
The Toledo Edison Co., 6.15%, 5/15/37			100			103,300
Virginia Electric & Power Co., 4.75%, 3/01/13			100			106,657
						1,296,857
Electrical Equipment – 0.1%
Emerson Electric Co., 5.00%, 4/15/19			100			108,225
Corporate Bonds	Par (000)			Value
Electronic Equipment, Instruments & Components – 0.1%
Tyco Electronics Group SA, 6.55%, 10/01/17		$	50		$	56,821
Energy Equipment & Services – 0.2%
Halliburton Co., 6.15%, 9/15/19			100			114,855
Transocean, Inc., 5.25%, 3/15/13			100			105,427
						220,282
Food & Staples Retailing – 0.5%
CVS Caremark Corp., 6.60%, 3/15/19			100			117,087
The Kroger Co., 6.15%, 1/15/20			100			113,316
Wal-Mart Stores, Inc.:
1.50%, 10/25/15			100			95,785
3.63%, 7/08/20			150			145,978
						472,166
Food Products – 0.2%
Corn Products International, Inc.,
3.20%, 11/01/15			50			50,152
Kraft Foods, Inc., 6.13%, 8/23/18			150			171,510
						221,662
Health Care Equipment & Supplies – 0.2%
Covidien International Finance SA,
6.55%, 10/15/37			25			29,679
Hospira, Inc., 6.05%, 3/30/17			125			140,041
						169,720
Health Care Providers & Services – 0.3%
Aetna, Inc., 6.75%, 12/15/37			50			56,294
LG&E & KU Energy LLC, 3.75%, 11/15/20 (c)			50			47,601
Medco Health Solutions, Inc., 2.75%, 9/15/15			50			49,607
WellPoint, Inc., 5.25%, 1/15/16			150			164,930
						318,432
Hotels, Restaurants & Leisure – 0.2%
McDonald’s Corp., 3.50%, 7/15/20			100			96,456
Yum! Brands, Inc., 5.30%, 9/15/19			100			105,917
						202,373
Household Durables – 0.1%
Whirlpool Corp., 8.60%, 5/01/14			100			115,310
Household Products – 0.2%
Kimberly-Clark Corp., 3.63%, 8/01/20			50			49,105
The Procter & Gamble Co., 1.80%, 11/15/15			100			98,036
						147,141
Industrial Conglomerates – 0.2%
General Electric Co., 5.00%, 2/01/13			100			106,897
Tyco International Finance SA,
4.13%, 10/15/14			50			53,020
						159,917
Insurance – 0.6%
American International Group, Inc.,
8.25%, 8/15/18			100			115,206
Berkshire Hathaway Finance Corp.,
5.10%, 7/15/14			100			109,270
Genworth Financial, Inc., 7.70%, 6/15/20			50			52,915
Hartford Financial Services Group, Inc.,
6.10%, 10/01/41			100			94,443
MetLife, Inc., 5.00%, 6/15/15			100			108,301
Travelers Property Casualty Corp.,
6.38%, 3/15/33			100			111,539
						591,674

16 BLACKROCK BOND INDEX FUND DECEMBER 31, 2010

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

Corporate Bonds	Par (000)			Value
Internet Software & Services – 0.0%
eBay, Inc., 3.25%, 10/15/20		$	50		$	46,508
IT Services – 0.1%
International Business Machines Corp.,
2.00%, 1/05/16			150			146,667
Machinery – 0.3%
Caterpillar, Inc., 5.70%, 8/15/16			100			115,326
Ingersoll-Rand Global Holding Co. Ltd.,
6.88%, 8/15/18			50			57,547
John Deere Capital Corp., 7.00%, 3/15/12			150			161,003
						333,876
Media – 0.8%
CBS Corp., 5.63%, 8/15/12			10			10,606
COX Communications, Inc., 5.50%, 10/01/15			100			110,028
Comcast Corp., 6.45%, 3/15/37			100			106,847
DIRECTV Holdings LLC/DIRECTV Financing Co.,
3.13%, 2/15/16			100			98,667
NBC Universal, Inc., 4.38%, 4/01/21 (c)			100			97,061
News America, Inc., 6.20%, 12/15/34			100			104,999
TCI Communications, Inc., 8.75%, 8/01/15			50			61,544
Time Warner Cable, Inc., 7.50%, 4/01/14			50			57,340
Time Warner, Inc., 7.70%, 5/01/32			100			122,069
						769,161
Metals & Mining – 0.5%
Alcoa, Inc., 5.90%, 2/01/27			150			146,348
BHP Billiton Finance USA Ltd., 4.80%, 4/15/13			100			108,354
Rio Tinto Alcan, Inc., 4.88%, 9/15/12			150			158,534
Vale Overseas Ltd., 6.88%, 11/21/36			100			109,998
						523,234
Multi-Utilities – 0.1%
Pacific Gas & Electric Co., 6.05%, 3/01/34			100			109,490
Office Electronics – 0.1%
Xerox Corp., 5.63%, 12/15/19 (a)			100			107,194
Oil, Gas & Consumable Fuels – 2.2%
Alberta Energy Co. Ltd., 7.38%, 11/01/31			100			114,895
Anadarko Petroleum Corp., 6.45%, 9/15/36			100			99,739
Apache Corp., 6.00%, 1/15/37			100			109,971
BP Capital Markets Plc, 3.63%, 5/08/14			100			103,083
ConocoPhillips, 4.60%, 1/15/15			200			217,988
EOG Resources, Inc., 2.50%, 2/01/16			50			48,875
Energy Transfer Partners LP, 9.70%, 3/15/19			150			193,869
Enterprise Products Operating LLC,
5.60%, 10/15/14			200			220,861
Kinder Morgan Energy Partners LP,
6.50%, 2/01/37			100			103,190
Marathon Oil Corp., 6.13%, 3/15/12			150			158,512
MidAmerican Energy Holdings Co.,
6.13%, 4/01/36			100			108,019
Nabors Industries, Inc., 5.00%, 9/15/20 (c)			50			48,502
Petrobras International Finance Co.,
5.75%, 1/20/20			150			155,635
Shell International Finance BV, 4.38%, 3/25/20			100			104,886
Statoil ASA, 5.10%, 8/17/40			100			99,979
Tennessee Gas Pipeline Co., 7.50%, 4/01/17			100			114,961
TransCanada PipeLines Ltd., 6.20%, 10/15/37			50			54,863
Valero Energy Corp., 6.13%, 2/01/20			75			79,655
						2,137,483
Corporate Bonds	Par (000)			Value
Paper & Forest Products – 0.1%
International Paper Co., 7.95%, 6/15/18		$	75		$	89,247
Pharmaceuticals – 0.7%
Abbott Laboratories, 5.60%, 11/30/17			50			57,165
AstraZeneca Plc, 5.90%, 9/15/17			100			115,803
Eli Lilly & Co., 5.50%, 3/15/27			50			53,404
GlaxoSmithKline Capital, Inc., 6.38%, 5/15/38			50			59,095
Johnson & Johnson, 5.15%, 8/15/12			125			134,069
Merck & Co., Inc., 5.95%, 12/01/28			100			114,388
Pharmacia Corp., 6.50%, 12/01/18			150			178,614
						712,538
Real Estate Investment Trusts (REITs) – 0.2%
ERP Operating LP, 4.75%, 7/15/20			100			100,785
HCP, Inc., 6.00%, 1/30/17			100			104,588
						205,373
Road & Rail – 0.3%
CSX Corp., 3.70%, 10/30/20			100			94,463
Norfolk Southern Corp., 7.70%, 5/15/17			150			183,209
						277,672
Software – 0.2%
Microsoft Corp., 3.00%, 10/01/20			50			46,885
Oracle Corp., 5.75%, 4/15/18			150			171,592
						218,477
Specialty Retail – 0.1%
Lowe’s Cos., Inc., 4.63%, 4/15/20			100			105,409
Tobacco – 0.1%
Altria Group, Inc., 9.25%, 8/06/19			100			130,504
Wireless Telecommunication Services – 0.3%
America Movil SAB de CV, 5.00%, 3/30/20			100			103,945
American Tower Corp., 5.05%, 9/01/20			25			24,586
Vodafone Group Plc, 7.88%, 2/15/30			100			124,425
						252,956
Total Corporate Bonds – 19.6%						19,331,560
Foreign Agency Obligations
Asian Development Bank, 2.75%, 5/21/14		$	200		$	208,236
Brazilian Government International Bond:
8.00%, 1/15/18			208			243,750
5.63%, 1/07/41			100			99,250
Inter-American Development Bank,
3.00%, 4/22/14			250			263,376
Israel Government International Bond,
4.63%, 6/15/13			100			107,061
Italian Republic, 6.88%, 9/27/23			100			110,206
KFW:
1.88%, 1/14/13			150			152,822
3.25%, 3/15/13			250			262,037
Mexico Government International Bond:
8.13%, 12/30/19			100			127,250
6.75%, 9/27/34			100			112,500
Ontario Electricity Financial Corp.,
7.45%, 3/31/13			150			169,745
Panama Government International Bond,
5.20%, 1/30/20			100			106,000
Peruvian Government International Bond,
8.75%, 11/21/33			91			124,897

BLACKROCK BOND INDEX FUND DECEMBER 31, 2010 17

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

Foreign Agency Obligations	Par (000)			Value
Poland Government International Bond,
6.38%, 7/15/19		$	100		$	112,021
Province of Quebec Canada, 5.00%, 3/01/16			100			111,604
Total Foreign Agency Obligations – 2.4%						2,310,755
Non-Agency Mortgage-Backed Securities
Commercial Mortgage-Backed Securities – 3.0%
Citigroup/Deutsche Bank Commercial Mortgage
Trust, Series 2007-CD4, Class A4,
5.32%, 12/11/49			600			621,912
CS First Boston Mortgage Securities Corp.,
Series 2004-C2, Class A2,
5.42%, 5/15/36 (d)			500			533,079
Greenwich Capital Commercial Funding Corp.,
Series 2007-GG9, Class A4,
5.44%, 3/10/39			700			737,505
JPMorgan Chase Commercial Mortgage
Securities Corp., Series 2005-CB11,
Class A2, 5.02%, 8/12/37			18			18,009
LB-UBS Commercial Mortgage Trust:
Series 2004-C2, Class A4,
4.37%, 3/15/36			500			519,899
Series 2006-C4, Class AM,
5.90%, 6/15/38 (d)			475			493,455
Total Non-Agency Mortgage-Backed Securities – 3.0%						2,923,859
Preferred Securities	Shares
Trust Preferred – 0.1%
Diversified Financial Services – 0.1%
JPMorgan Chase Capital XVIII, 6.95%, 8/17/36			75		$	75,254
Total Preferred Securities – 0.1%						75,254
	Par (000)
Taxable Municipal Bonds
Los Angeles Community College District, GO,
Unlimited, Build America Bonds,
6.75%, 8/01/49		$	50			51,599
Massachusetts School Building Authority,
5.72%, 8/15/39			100			103,755
Metropolitan Transportation Authority, RB, Build
America Bonds, 6.69%, 11/15/40			50			50,050
New Jersey State Turnpike Authority, RB,
4.25%, 1/01/16			190			196,629
Ohio State Water Development Authority, Water
Pollution Control, RB, Build America Bonds,
4.88%, 12/01/34			100			95,483
State of California, 7.55%, 4/01/39			50			51,857
State of California, GO, Unlimited,
5.45%, 4/01/15			100			104,424
State of Illinois, GO, Unlimited, 5.10%, 6/01/33			100			74,817
State of Texas, GO, Build America Bonds,
5.52%, 4/01/39			100			101,838
Total Taxable Municipal Bonds – 0.8%						830,452
U.S. Government Sponsored Agency Securities	Par (000)			Value
Agency Obligations – 5.9%
Fannie Mae:
0.63%, 9/24/12			400			400,413
2.38%, 7/28/15 (a)			600			608,482
2.75%, 2/05/14			300			313,490
4.38%, 3/15/13 (a)			850			915,892
4.63%, 10/15/13 (a)			900			987,885
7.13%, 1/15/30 (a)			100			132,398
Federal Home Loan Banks, 0.88%, 8/22/12 (a)			550			552,736
Financing Corp., 8.60%, 9/26/19			200			274,816
Freddie Mac:
4.63%, 10/25/12			990			1,061,098
6.25%, 7/15/32			95			116,047
Tennessee Valley Authority, 6.25%, 12/15/17			400			480,080
						5,843,337
Federal Deposit Insurance Corporation Guaranteed – 0.8%
Citigroup Funding, Inc., 2.25%, 12/10/12			250			257,153
General Electric Capital Corp., 2.20%, 6/08/12			500			511,194
						768,347
Mortgage-Backed Securities – 33.6%
Fannie Mae Mortgage Backed Securities:
3.24%, 11/01/40 (d)			182			184,529
4.00%, 10/01/25 – 8/01/39			2,853			2,877,980
4.50%, 5/01/24 – 9/01/40			3,238			3,337,289
5.00%, 1/01/19 – 11/01/33			2,841			3,010,427
5.29%, 7/01/39 (d)			231			244,742
5.50%, 6/01/25 – 5/01/39			3,956			4,259,874
6.00%, 3/01/34 – 1/01/41 (e)			1,921			2,101,176
6.50%, 7/01/32			748			841,427
7.00%, 2/01/32			115			131,083
Freddie Mac Mortgage Backed Securities:
3.68%, 9/01/40 (d)			277			287,648
4.00%, 5/01/19 – 1/01/41 (e)			1,365			1,371,674
4.50%, 4/01/18 – 10/01/39			3,074			3,181,597
5.00%, 10/01/18 – 8/01/35			2,605			2,753,317
5.06%, 7/01/38 (d)			440			466,045
5.50%, 4/01/33 – 1/01/39			1,491			1,599,426
6.50%, 6/01/31			157			176,918
8.00%, 12/01/24			450			523,455
Ginnie Mae Mortgage Backed Securities:
4.50%, 7/15/39 – 8/20/40			1,907			1,987,627
5.00%, 8/15/38 – 11/15/39			1,607			1,715,365
5.50%, 12/15/32			387			420,261
6.00%, 3/15/35 – 10/15/37			323			358,735
6.50%, 9/15/36			544			620,034
7.50%, 12/15/23			566			651,281
						33,101,910
Total U.S. Government Sponsored Agency Securities – 40.3%						39,713,594
U.S. Treasury Obligations
U.S. Treasury Bonds:
8.75%, 5/15/17 (a)			500			686,484
8.75%, 5/15/20 (a)			500			727,695
8.75%, 8/15/20			400			584,312
6.25%, 8/15/23 (a)			525			659,859
7.63%, 2/15/25 (a)			195			276,534
6.13%, 11/15/27 (a)			480			603,000
6.25%, 5/15/30			100			128,531
3.50%, 2/15/39			400			344,688
4.25%, 5/15/39			175			172,402

18 BLACKROCK BOND INDEX FUND DECEMBER 31, 2010

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

U.S. Treasury Obligations	Par (000)			Value
4.50%, 8/15/39		$	200		$	205,375
4.38%, 11/15/39			300			301,594
4.63%, 2/15/40			730			764,675
4.38%, 5/15/40			250			251,210
3.88%, 8/15/40			280			257,906
4.25%, 11/15/40			370			363,988
U.S. Treasury Notes:
4.88%, 6/30/12			650			692,936
4.38%, 8/15/12 (a)			500			531,641
1.75%, 8/15/12			400			408,219
0.38%, 8/31/12			750			748,652
1.38%, 9/15/12			1,000			1,014,492
0.38%, 10/31/12 (a)			2,300			2,292,992
1.38%, 11/15/12 (a)			500			507,461
1.13%, 12/15/12			500			505,137
1.38%, 1/15/13			1,500			1,522,851
1.75%, 4/15/13 (a)			400			409,188
1.38%, 5/15/13			1,250			1,267,975
3.38%, 6/30/13			1,070			1,139,300
3.13%, 8/31/13			400			424,344
4.75%, 5/15/14 (a)			175			195,467
2.63%, 7/31/14			450			470,637
2.38%, 8/31/14			1,250			1,294,922
4.25%, 11/15/14 (a)			900			994,992
2.50%, 4/30/15 (a)			790			816,724
1.88%, 6/30/15			1,500			1,505,976
1.75%, 7/31/15			250			249,200
1.25%, 9/30/15 (a)			900			873,211
4.50%, 2/15/16			500			559,883
5.13%, 5/15/16 (a)			250			288,027
4.88%, 8/15/16			500			569,883
4.63%, 11/15/16			250			281,621
2.75%, 11/30/16			750			765,527
4.63%, 2/15/17			150			168,879
2.50%, 6/30/17			1,790			1,783,287
4.75%, 8/15/17			375			425,244
1.88%, 8/31/17			370			353,205
4.25%, 11/15/17			275			303,166
2.25%, 11/30/17			600			583,453
4.00%, 8/15/18 (a)			500			541,836
3.38%, 11/15/19			500			510,430
3.50%, 5/15/20 (a)			500			512,190
2.63%, 11/15/20 (a)			500			471,641
Total U.S. Treasury Obligations – 32.8%						32,312,842
Total Long-Term Investments (Cost – $94,057,154) – 99.3 %						97,800,820
Short-Term Securities	Shares
Money Market Funds – 16.8%
BlackRock Cash Funds: Institutional, SL Agency
Shares, 0.25% (b)(f)(g)			14,588,515			14,588,515
BlackRock Cash Funds: Prime, SL Agency
Shares, 0.24% (b)(f)(g)			1,952,973			1,952,973
Total Short-Term Securities (Cost – $16,541,488) – 16.8 %						16,541,488
Total Investments Before TBA Sale Commitments (Cost – $110,598,642*) – 116.1 %						114,342,308
TBA Sale Commitments (e)
Fannie Mae Mortgage Backed Securities:
6.00%, 3/01/34 – 1/01/41		$	1,000		$	(1,086,875	)
Total TBA Sale Commitments (Proceeds – $1,079,188) – (1.1)%						(1,086,875	)
Total Investments Net of Outstanding TBA Sale Commitments – 115.0%						113,255,433
Liabilities in Excess of Other Assets – (15.0)%						(14,766,398	)
Net Assets – 100.0%					$	98,489,035

* The cost and unrealized appreciation (depreciation) of investments as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	110,727,190
Gross unrealized appreciation	$	4,092,317
Gross unrealized depreciation		(477,199	)
Net unrealized appreciation	$	3,615,118

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

(b) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at December 31, 2009		Shares Purchase		Shares Sold			Shares Held at December 31, 2010		Value at December 31, 2010			Realized Gain (Loss)		Income
BlackRock Cash Funds:
Institutional, SL Agency Shares		37,190,435				(22,601,920	)1		14,588,515		$	14,588,515		–		$	30,001
BlackRock Cash Funds:
Prime, SL Agency Shares		4,310,609				(2,357,636	)1		1,952,973		$	1,952,973		–		$	3,778
PNC Funding Corp., 5.63%, 2/01/17		150		–		–			150		$	160,341		–		$	8,437

¹ Represents net shares activity.

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

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

(e) Represents or includes a “to-be-announced” (“TBA”) transaction. Unsettled TBA transactions as of report date were as follows:

Counterparty	Market Value				Unrealized Appreciation (Depreciation)
RBS Securities LLC		$	2,079,531			$	3,594
Wells Fargo Securities		$	(1,086,875	)		$	(3,594	)

BLACKROCK BOND INDEX FUND DECEMBER 31, 2010 19

Schedule of Investments (concluded) Bond Index Master Portfolio

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

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

• For Master Portfolio compliance purposes, the Master Portfolio’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Master Portfolio management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease.

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities.

• 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 inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Master Portfolio’s Notes to Financial Statements. The following table summarizes the inputs used as of December 31, 2010 in determining the fair valuation of the Master Portfolio’s investments:

Valuation Inputs	Level 1			Level 2				Level 3		Total
Assets:
Investments in Securities:
Long-Term Investments:
Asset-Backed Securities			–		$	302,504			–		$	302,504
Corporate Bonds			–			19,331,560			–			19,331,560
Foreign Agency Obligations			–			2,310,755			–			2,310,755
Non-Agency Mortgage- Backed Securities			–			2,923,859			–			2,923,859
Preferred Securities			–			75,254			–			75,254
Taxable Municipal Bonds			–			830,452			–			830,452
U.S. Government Sponsored Agency Securities			–			39,713,594			–			39,713,594
U.S. Treasury Obligations			–			32,312,842			–			32,312,842
Short-Term Securities:
Money Market Funds		$	16,541,488			–			–			16,541,488
Liabilities:
Investments in Securities:
TBA Sale Commitments			–			(1,086,875	)		–			(1,086,875	)
Total		$	16,541,488		$	96,713,945			–		$	113,255,433

The following is a reconciliation of investments for unobservable inputs (Level 3) used in determining fair value:

	U.S. Government Sponsored Agency Securities
Balance, as of December 31, 2009		$	1,075,042
Accrued discount/premiums			–
Realized gain (loss)			1,378
Change in unrealized appreciation (depreciation) 1			2,397
Net purchases (sales)			(1,078,817	)
Net transfers in/out of Level 3			–
Balance, as of December 31, 2010			–

¹ Included in the related net change of realized appreciation/depreciation on the Statement of Operations. The change in unrealized appreciation/depreciation on securities was $2,397.

20 BLACKROCK BOND INDEX FUND DECEMBER 31, 2010

Statement of Assets and Liabilities Bond Index Master Portfolio

December 31, 2010
Assets
Investments at value – unaffiliated1,2	$	97,640,479
Investments at value – affiliated3		16,701,829
TBA sales commitments receivable		1,079,188
Investments sold receivable		503,197
Securities lending income receivable – affiliated		3,013
Interest receivable		700,037
Total assets		116,627,743
Liabilities
Collateral on securities loaned at value		14,095,793
Investments purchased payable		2,932,116
TBA sale commitments (proceeds – $1,079,188)		1,086,875
Investment advisory fees payable		4,460
Professional fees payable		19,464
Total liabilities		18,138,708
Net Assets	$	98,489,035
Net Assets Consist of
Investors’ capital	$	94,745,369
Net unrealized appreciation/depreciation		3,743,666
Net Assets	$	98,489,035
1 Investments at cost – unaffiliated	$	93,908,615
2 Securities loaned at value	$	13,745,575
3 Investments at cost – affiliated	$	16,690,027

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2010 21

Statement of Operations Bond Index Master Portfolio

Year Ended December 31, 2010
Investment Income
Interest	$	4,796,668
Securities lending – affiliated		27,270
Income – affiliated		14,946
Total income		4,838,884
Expenses
Investment advisory		99,763
Professional		20,836
Independent Trustees		8,778
Total expenses		129,377
Less fees waived by advisor		(29,614	)
Total expenses after fees waived		99,763
Net investment income		4,739,121
Realized and Unrealized Gain (Loss)
Net realized gain from:
Investments – unaffiliated		4,424,757
Net change in unrealized appreciation/depreciation on:
Investments		(230,804	)
		(230,804	)
Total realized and unrealized gain		4,193,953
Net Increase in Net Assets Resulting from Operations	$	8,933,074

See Notes to Financial Statements.

22 BLACKROCK BOND INDEX FUND DECEMBER 31, 2010

Statements of Changes in Net Assets Bond Index Master Portfolio

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2010				2009
Operations
Net investment income		$	4,739,121			$	6,055,581
Net realized gain			4,424,757				955,337
Net change in unrealized appreciation/depreciation			(230,804	)			622,656
Net increase in net assets resulting from operations			8,933,074				7,633,574
Capital Transactions
Proceeds from contributions			22,565,984				35,373,318
Fair value of withdrawals			(89,474,775	)			(20,020,025	)
Net increase (decrease) in net assets derived from capital transactions			(66,908,791	)			15,353,293
Net Assets
Total increase (decrease) in net assets			(57,975,717	)			22,986,867
Beginning of year			156,464,752				133,477,885
End of year		$	98,489,035			$	156,464,752

See Notes to Financial Statements.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2010 23

Financial Highlights Bond Index Master Portfolio

	Year Ended December 31,
	2010				2009				2008				2007				2006
Total Investment Return
Total investment return			6.94	%			5.36	%			6.06	%			7.31	%			4.91	%
Ratios to Average Net Assets
Total expenses			0.10	%			0.09	%			0.10	%			0.11	%			0.10	%
Total expenses after fees waived			0.08	%			0.08	%			0.08	%			0.08	%			0.08	%
Net investment income			3.80	%			4.20	%			4.99	%			5.15	%			4.97	%
Supplemental Data
Net assets, end of year (000)		$	98,489			$	156,465			$	133,478			$	119,907			$	103,696
Portfolio turnover1			59	%2			103	%3			89	%			61	%			57	%

¹ Portfolio turnover rates include in-kind transactions, if any.

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

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

See Notes to Financial Statements.

24 BLACKROCK BOND INDEX FUND DECEMBER 31, 2010

Notes to Financial Statements Bond Index Master Portfolio

1. Organization and Significant Accounting Policies:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust. The financial statements and these accompanying notes relate only to Bond Index Master Portfolio (the “Master Portfolio”), which is a series of MIP. The Master Portfolio’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.

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

Valuation: The Master Portfolio fair values its financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (the “Board”). The Master Portfolio values its bond investments on the basis of last available bid prices or current market quotations provided by dealers or pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more brokers or dealers as obtained from a pricing service. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between investments and calculated yield measures based on valuation technology commonly employed in the market for such investments. Asset-backed and mortgage-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. To-be-announced (“TBA”) commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

Investments in open-end registered investment companies are valued at net asset value each business day.

In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the market value of such investment or is not available, the investment will be valued in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, BlackRock Fund Advisors (“BFA”) seeks to determine the price that the Master Portfolio might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that BFA deems relevant. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof.

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

The Master Portfolio may purchase certain mortgage pass-through securities. There are a number of important differences among the agencies and instrumentalities of the US Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by the 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 the 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 and are supported by the right of the issuer to borrow from the Treasury.

Multiple Class Pass-Through Securities: The Master Portfolio may invest in multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities. These multiple class securities may be issued by Ginnie Mae, US government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by, and multiple class pass-through securities represent direct ownership interests in, a pool of residential or commercial mortgage loans or

BLACKROCK BOND INDEX FUND DECEMBER 31, 2010 25

Notes to Financial Statements (continued) Bond Index Master Portfolio

mortgage pass-through securities (the “Mortgage Assets”), the payments on which are used to make payments on the CMOs or multiple pass-through securities. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. If the underlying mortgage assets experience greater than anticipated pre-payments of principal, the Master Portfolio may not fully recoup its initial investment in IOs.

Capital Trusts: These securities are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics, or by an affiliated business trust of a corporation, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured as either fixed or adjustable coupon securities that can have either a perpetual or stated maturity date. Interest 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 can have a rating that is slightly below that of the issuing company’s senior debt securities.

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

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

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

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis. Consent fees are compensation for agreeing to changes in the terms of debt instruments and are included in interest income in the Statement of Operations.

Securities Lending: The Master Portfolio may lend securities to financial institutions that provide cash as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statement of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the Master Portfolio is entitled to dividend and interest payments on the securities loaned. 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. In the event that the borrower defaults on its obligation to return borrowed securities because of insolvency or for any other reason, the Master Portfolio could experience delays and costs in gaining access to the collateral.

26 BLACKROCK BOND INDEX FUND DECEMBER 31, 2010

Notes to Financial Statements (continued) Bond Index Master Portfolio

The Master Portfolio also could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

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

The Master Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolio’s US federal tax returns remains open for each of the four years ended December 31, 2010. 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. There are no uncertain tax positions that require recognition of a tax liability.

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

2. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”), Bank of America Corporation (“BAC”) and Barclays Bank PLC (“Barclays”) are the largest stockholders of BlackRock, Inc. (“BlackRock”). Due to the ownership structure, PNC is an affiliate of the Master Portfolio for 1940 Act purposes, but BAC and Barclays are not.

MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement with BFA (the “Investment Advisory Agreement”). Pursuant to the Investment Advisory Agreement, BFA is responsible for the management of the Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Master Portfolio. For such services, the Master Portfolio pays BFA an annual investment advisory fee of 0.08% of the average daily net assets of the Master Portfolio.

The fees and expenses of the Master Portfolio’s trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolio. BFA has contractually agreed to cap the expenses of the Master Portfolio whereby BFA reduces the investment advisory fee by an amount equal to the independent expenses, through April 30, 2012, and are shown as fees waived by advisor in the Statement of Operations.

MIP entered into an administration services arrangement with Black-Rock Institutional Trust Company, N.A. (“BTC”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC may delegate certain of its administration duties to sub-administrators.

BTC is not entitled to compensation for providing administration services to the Master Portfolio, for so long as BTC is entitled to compensation for providing administration services to corresponding feeder funds that invest substantially all of their assets in the Master Portfolio, or BTC (or an affiliate) receives investment advisory fees from the Master Portfolio. BTC has agreed to bear all costs of the Master Portfolio, excluding brokerage expenses, investment advisory fees, 12b-1 distribution or service fees, independent expenses, litigation expenses, taxes or other extraordinary expenses.

The Master Portfolio received an exemptive order from the SEC permitting it, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BTC as the securities lending agent. BTC may, on behalf of the Master Portfolio, invest cash collateral received by the Master Portfolio for such loans, among other things, in a private investment company managed by BTC or in registered money market funds advised by BTC or its affiliates. The market value of securities on loan and the value of the related collateral are shown in the Statement of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC is disclosed in the Schedule of Investments. The share of income earned by the Master Portfolio on such investments is shown as securities lending – affiliated in the Statement of Operations. BTC has voluntarily agreed to waive its fees for the period beginning December 1, 2009 until further notice.

The Master Portfolio may invest its positive cash balances in certain money market funds managed by BFA or an affiliate. The income earned on these temporary cash investments is included in income-affiliated in the Statement of Operations.

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

3. Investments:

Purchases and sales of investments including paydowns, mortgage dollar rolls and TBA transactions and excluding short-term securities and US government securities for the year ended December 31, 2010, were $14,268,914 and $38,709,963, respectively.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2010 27

Notes to Financial Statements (concluded) Bond Index Master Portfolio

Purchases and sales of US government securities for the Master Portfolio for the year ended December 31, 2010, were $58,434,542 and $85,452,304, respectively.

Purchases and sales of mortgage dollar roll securities for the Master Portfolio for the year ended December 31, 2010, were $3,195,156 and $3,202,852, respectively.

4. Concentration, Market and Credit Risk:

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

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

5. 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.

28 BLACKROCK BOND INDEX FUND DECEMBER 31, 2010

Report of Independent Registered Public Accounting Firm Bond Index Master Portfolio

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

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Bond Index Master Portfolio, a portfolio of Master Investment Portfolio (the “Master Portfolio”), at December 31, 2010, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 24, 2011

BLACKROCK BOND INDEX FUND DECEMBER 31, 2010 29

Officers and Trustees

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock Advised Registered Investment Companies (‘RICs’) Consisting of Investment Portfolios (‘Portfolios’) Overseen	Public Directorships
Non-Interested Trustees1
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chair of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	36 RICs consisting of 95 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chair of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. since 1987; Director, Fox Chase Cancer Center since 2004; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of Seventy (civic) since 2006.	36 RICs consisting of 95 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Finance and Economics at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy since 2002; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	36 RICs consisting of 95 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President of Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	36 RICs consisting of 95 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 1939	Trustee and Member of the Audit Committee	Since 2009	Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and Professor thereof from 1980 to 2005; President, Hudson Institute (policy research organization) since 1997 and Trustee thereof since 1980; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (strategic solutions company) since 2005; Director, Cerego, LLC (software development and design) since 2005.	36 RICs consisting of 95 Portfolios	AIMS Worldwide, Inc. (marketing)
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, Harvard Business School Publishing since 2005; Director, McLean Hospital since 2005.	36 RICs consisting of 95 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, The West Penn Allegheny Health System (a not-for-profit health system) since 2008; Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investment) since 1998; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	36 RICs consisting of 95 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company); WQED Multi-Media (public broadcasting not-for- profit)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	36 RICs consisting of 95 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, Forward Management, LLC since 2007; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	36 RICs consisting of 95 Portfolios	A.P. Pharma, Inc. (specialty pharmaceuticals)

30 BLACKROCK BOND INDEX FUND DECEMBER 31, 2010

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock Advised Registered Investment Companies (‘RICs’) Consisting of Investment Portfolios (‘Portfolios’) Overseen	Public Directorships
Non-Interested Trustees1 (concluded)
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Chair of the Audit Committee and Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Chairman Elect of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Trustee, The Holy Family Foundation since 2001; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	36 RICs consisting of 95 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee and Member of the Audit Committee	Since 2009	Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh since 2005 and Dean thereof from 1997 to 2005; Director, Alkon Corporation (pneumatics) since 1992; Director, Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008.	36 RICs consisting of 95 Portfolios	None
1        Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year extensions in terms of Trustees who turn 72 prior to December 31, 2013. 2        In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. in December 2009, the Trustees were elected to the Trust’s/MIP’s Board. As a result, although the chart shows the Trustees as joining the Trust’s/MIP’s Board in 2009, each Independent Trustee first became a member of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1999; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees3
Richard S. Davis 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Managing Director, BlackRock, Inc. since 2005; Chief Executive Officer, State Street Research & Management Company from 2000 to 2005; Chairman of the Board of Directors, State Street Research Mutual Funds from 2000 to 2005.	169 RICs consisting of 290 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Consultant, BlackRock, Inc. from 2007 to 2008; Managing Director, BlackRock, Inc. from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	169 RICs consisting of 290 Portfolios	None
3        Mr. Davis is an “interested person” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock, Inc. and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock, Inc. and its affiliates as well as his ownership of BlackRock, Inc. and The PNC Financial Services Group, Inc. securities. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

BLACKROCK BOND INDEX FUND DECEMBER 31, 2010 31

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years
Trust/MIP Officers4
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock, Inc. since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2000; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2002; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2010; Director of BlackRock, Inc. from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009, and Co-head thereof from 2007 to 2009; Vice President of BlackRock, Inc. from 2005 to 2008.
Simon Mendelson 55 East 52nd Street New York, NY 10055 1964	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2005; Co-head of the Global Cash and Securities Landing Group since 2010, Chief Operating Officer and head of the Global Client Group for BlackRock’s Global Cash Management Business since 2007; Head of BlackRock’s Strategy and Development Group from 2005 to 2007; Partner of McKinsey & Co. from 1997 to 2005.
Brian Schmidt 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2004; Various positions with U.S. Trust Company from 1991 to 2003 including Director from 2001 to 2003 and Senior Vice President from 1998 to 2003; Vice President, Chief Financial Officer and Treasurer of Excelsior Funds, Inc., Excelsior Tax-Exempt Funds, Inc. and Excelsior Funds Trust from 2001 to 2003.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal J. Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2009	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 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2009	Managing Director of BlackRock, Inc. since 2007 and Director in 2006; Assistant Treasurer of the Merrill Lynch Investment Managers, L.P. (“MLIM”) and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer	Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock, Inc. since 2005.
Ira Shapiro555 East 52nd Street New York, NY 10055 1963	Secretary	Since 2010	Managing Director of BlackRock, Inc. since 2009; Managing Director and Associate General Counsel of Barclays Global Investors from 2008 to 2009 and principal thereof from 2004 to 2008.
4        Officers of the Trust/MIP serve at the pleasure of the Board. 5        Ira P. Shapiro served as Vice President and Chief Legal Officer of the Trust/MIP from 2007 to 2009. Further information about the Trust/MIP Officers and Trustees is available in the Trust/MIP Statement of Additional Information, which can be obtained without charge by calling (877) 244-1544.

Effective September 24, 2010, John M. Perlowski became President and Chief Executive Officer of the Trust.

Effective November 16, 2010, Ira Shapiro became Secretary of the Trust.

32 BLACKROCK BOND INDEX FUND DECEMBER 31, 2010

Officers and Trustees (concluded)

Investment Advisor BlackRock Fund Advisors San Francisco, CA 94105	Custodian State Street Bank and Trust Company Boston, MA 02101	Transfer Agent BNY Mellon Investment Servicing (vs) Inc. Wilmington, DE 19809	Accounting Agent State Street Bank and Trust Company Boston, MA 02101	Distributor BlackRock Investments, LLC New York, NY 10022
		Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP New York, New York, 10017	Legal Counsel Sidley Austin LLP New York, NY 10019	Address of the Funds 400 Howard Street San Francisco, CA 94105

BLACKROCK BOND INDEX FUND DECEMBER 31, 2010 33

Additional Information

General Information

Availability of Quarterly Portfolio Schedule of Investments

The Fund/Master Portfolio file its complete schedules 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 may be obtained by calling (800) SEC-0330. The Fund’s/Master Portfolio’s Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.

Availability of Proxy Voting Policies and Procedures

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

Availability of Proxy Voting Record

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

Shareholder Privileges

Account Information

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

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.

34 BLACKROCK BOND INDEX FUND DECEMBER 31, 2010

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

# BINF-12/10

December 31, 2010

Annual Report

BlackRock Funds III

^u BlackRock S&P 500 Stock Fund

Not FDIC Insured ¡ No Bank Guarantee ¡ May Lose Value

Table of Contents

	Page
Dear Shareholder		3
Annual Report:
Portfolio Management Commentary		4
About Fund Performance		6
Disclosure of Expenses		6
Derivative Financial Instruments		6
Fund Financial Statements:
Statement of Assets and Liabilities		7
Statement of Operations		8
Statements of Changes in Net Assets		9
Fund Financial Highlights		10
Fund Notes to Financial Statements		11
Fund Report of Independent Registered Public Accounting Firm		13
Important Tax Information (Unaudited)		13
Master Portfolio Information		14
Master Portfolio Financial Statements:
Schedule of Investments		15
Statement of Assets and Liabilities		23
Statement of Operations		24
Statements of Changes in Net Assets		25
Master Portfolio Financial Highlights		26
Master Portfolio Notes to Financial Statements		27
Master Portfolio Report of Independent Registered Public Accounting Firm		30
Officers and Trustees		31
Additional Information		35

2 BLACKROCK FUNDS III DECEMBER 31, 2010

Dear Shareholder

Economic data fluctuated widely throughout 2010 as the global economy continued to emerge from the “Great Recession.” As the year drew to a close, it became clear that cyclical stimulus had beat out structural problems as economic data releases generally became more positive and financial markets showed signs of continuing improvement.

Debt and deflationary risks remained present throughout 2010, causing central banks worldwide to respond with unprecedented actions, most notably a second round of quantitative easing (informally known as “QE2”) from the US Federal Reserve Board (the “Fed”). Inflation remained a non-issue in the developed world, but continued to rear its ugly head in some emerging economies, most evidently in China. Global and US gross domestic product (“GDP”) growth both continued in a positive direction but remained subpar compared to most historical economic recoveries. In the United States, the corporate sector has been an important area of strength and consumer spending has shown improvement, although weakness in the housing and labor markets continues to burden the economy.

Stocks moved higher in the early months of 2010 on the continuation of the 2009 asset recovery story. The mid-year months saw a double-digit percentage correction on the back of the Greek sovereign debt crisis and a stalling in jobs growth, leading to fears of a double-dip recession. After touching a late summer low, equity markets rallied through year end as these concerns receded. The announcement of QE2 and extension of the Bush-era tax cuts further boosted equities as the year came to a close. Although the course was uneven and high volatility remained a constant for stocks, equity markets globally ended the year strong. Emerging markets outpaced the developed world in terms of economic growth and posted respectable gains for the year despite sovereign debt problems and heightening inflationary pressures. US stocks recorded double-digit percentage gains for the second consecutive year. Small cap stocks outperformed large caps as investors began to move into higher-risk assets.

In fixed income markets, yields trended lower over most of the year as investors continued to favor safer assets. That trend reversed abruptly in the fourth quarter when market fears abated and investors began seeking higher-risk assets, driving yields sharply upward through year end. However, yields were lower overall for the year and fixed income markets finished 2010 in positive territory. Although fixed income securities generally underperformed equities, high yield bonds only marginally trailed large cap stocks. Conversely, the tax-exempt municipal market was dealt an additional blow as it became apparent that an extension of the Build America Bond program was unlikely. In addition, the fourth quarter brought an increase in negative headlines regarding fiscal challenges faced by state and local governments, sparking additional volatility in the municipal market.

Cash investments, as represented by the 3-month Treasury bill, returned only a fraction over 0% for the year as short-term interest rates remained low. Yields on money market securities remain near all-time lows.

Total Returns as of December 31, 2010	6-month			12-month
US large cap equities (S&P 500 Index)		23.27	%		15.06	%
US small cap equities (Russell 2000 Index)		29.38			26.85
International equities (MSCI Europe, Australasia, Far East Index)		24.18			7.75
3-month Treasury bill (BofA Merrill Lynch 3-Month Treasury Bill Index)		0.08			0.13
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		(1.33	)		7.90
US investment grade bonds (Barclays Capital US Aggregate Bond Index)		1.15			6.54
Tax-exempt municipal bonds (Barclays Capital Municipal Bond Index)		(0.90	)		2.38
US high yield bonds (Barclays Capital US Corporate High Yield 2% Issuer Capped Index)		10.04			14.94

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

While no one can peer into a crystal ball and eliminate the uncertainties presented by the economic landscape and financial markets, BlackRock can offer investors the next best thing: partnership with the world’s largest asset management firm and a unique global perspective that allows us to identify trends early and capitalize on market opportunities. For additional market perspective and investment insight, visit www.blackrock.com/shareholdermagazine, where you’ll find the most recent issue of our award-winning Shareholder^® magazine, as well as its quarterly companion newsletter, Shareholder Perspectives. As always, we thank you for entrusting BlackRock with your investments, and we look forward to your continued partnership in the months and years ahead.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

THIS PAGE NOT PART OF YOUR FUND REPORT 3

Fund Summary as of December 31, 2010 BlackRock S&P 500 Stock Fund

Portfolio Management Commentary

How did the Fund perform?

• For the 12 months ended December 31, 2010, the BlackRock S&P 500 Stock Fund (the “Fund”), a series of BlackRock Funds III, generated a total return of 14.91% through its investment in the S&P 500 Stock Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio, while the benchmark Standard & Poor’s (S&P) 500 Index (the “Index”) returned 15.06% for the same period. The Index is a capitalization-weighted index representing a broad range of industries chosen for market size, liquidity and industry group representation, and is composed of approximately 500 selected common stocks, most of which are listed on the New York Stock Exchange.

• The return for the Fund differs from the benchmark based on Fund expenses.

Describe the market environment.

• Over the course of 2010, cyclical stimulus beat out structural problems and stocks continued the choppy advance they began in 2009. The early months of 2010 saw risk assets move higher on the continuation of the 2009 asset recovery story, aided by preliminary signs of improvement in the employment situation and strong corporate earnings reported for fourth quarter 2009 and first quarter 2010. The middle months of 2010 saw a double-digit percentage correction on the back of the Greek sovereign debt crisis and a stalling in jobs growth, leading to fears of a double-dip recession. Investors were also unnerved by the May “flash crash” and the uncertainty surrounding the financial reform bill in the United States. Nevertheless, after touching a late summer low, equity markets experienced a strong finish to the year as double-dip fears receded, jobs growth resumed and the US midterm elections results were perceived to be capital markets friendly. Additionally, in the United States, Federal Reserve Chairman Ben Bernanke delivered his famous Jackson Hole speech, leading to a second round of quantitative easing measures (informally known as “QE2”) and, perhaps most importantly, the Bush-era tax cuts were extended and supplemented with some fiscal sweeteners.

• In 2010, US stocks posted double-digit percentage gains for the second consecutive year. The Dow Jones Industrial Average gained 14.06%, a level not seen since before the collapse of Lehman Brothers in late 2008. The S&P 500 Index advanced 15.06%, while the Nasdaq Composite moved up 18.02%.

• Within the benchmark Index, all 10 sectors posted gains for the period. Consumer discretionary posted the strongest returns (+27.66%), followed closely by industrials (+26.73%), materials (+22.20%) and energy (+20.46%), while the weakest returns came from health care (+2.90%) and utilities (+5.46%).

Describe recent portfolio activity.

• During the 12-month period, as changes were made to the composition of the Index, the Master Portfolio purchased and sold securities to maintain its objective of replicating the risks and return of the benchmark.

Describe Fund positioning at period end.

• The Master Portfolio remains positioned to match the risk characteristics of its benchmark, 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 FUNDS III DECEMBER 31, 2010

BlackRock S&P 500 Stock Fund

Total Return Based on a $10,000 Investment

¹ 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 Unites States.

² The unmanaged index covers 500 industrial, utility, transportation and financial companies of the US markets (mostly New York Stock Exchange (“NYSE”) issues), representing about 75% of NYSE market capitalization and 30% of NYSE issues.

Performance Summary for the Period Ended December 31, 2010

	6-Month Total  Returns			Average Annual Total Returns
				1 Year			5 Years			10 Years
BlackRock S&P 500 Stock Fund		23.15	%		14.91	%		2.20	%		1.26	%
S&P 500 Index		23.27			15.06			2.29			1.41

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

Past performance is not indicative of future results.

Expense Example

Actual			Hypothetical4
Beginning Account Value July 1, 2010	Ending Account Value December  31, 2010	Expenses Paid During the Period3	Beginning Account Value July  1, 2010	Ending Account Value December  31, 2010	Expenses Paid During the Period3	Annualized Expense Ratio
$1,000	$1,231.50	$1.12	$1,000	$1,024.20	$1.02	0.20%

³ Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown). Because the Fund invests significantly in the Master Portfolio, the expense table example reflects the net expenses of both the Fund and the Master Portfolio.

⁴ Hypothetical 5% return before expenses is calculated by pro-rating the number of days in the most recent fiscal half year divided by 365. See “Disclosure of Expenses” on page 6 for further information on how expenses were calculated.

BLACKROCK FUNDS III DECEMBER 31, 2010 5

About Fund Performance

Performance information reflects past performance and does not guarantee future results. Current performance data may be lower or higher than the performance data quoted. Call toll free, (800) 441-7762, to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in the performance tables on the preceding pages assume reinvestment of all dividends and capital gain distributions, if any, on ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. The Fund’s administrator waived a portion of the Fund’s expenses. Without such waiver, the Fund’s performance would have been lower.

Disclosure of Expenses

Shareholders of the Fund may incur operating expenses, including advisory fees and other Fund expenses. The expense examples on the preceding page (which are based on a hypothetical investment of $1,000 invested on July 1, 2010 and held through December 31, 2010) are 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 table on the preceding page 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 under the heading entitled “Expenses Paid During the Period.”

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

The expenses shown in the table are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, redemption fees or exchange fees. 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 instruments, including financial futures contracts, as specified in Note 2 of the Master Portfolio’s Notes to Financial Statements, which may constitute forms of economic leverage. Such instruments are used to obtain exposure to a market without owning or taking physical custody of securities or to hedge market and credit risks. Such derivative instruments involve risks, including the imperfect correlation between the value of a derivative instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative instrument. The Master Portfolio’s ability to successfully use a derivative instrument depends on the investment advisor’s ability to accurately predict pertinent market movements, which cannot be assured. The use of derivative instruments may result in losses greater than if they had not been used, may require the Master Portfolio to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation the Master Portfolio can realize on an investment or may cause the Master Portfolio to hold an investment that they might otherwise sell. The Master Portfolio’s investments in these instruments are discussed in detail in the Master Portfolio’s Notes to Financial Statements.

6 BLACKROCK FUNDS III DECEMBER 31, 2010

Statement of Assets and Liabilities BlackRock S&P 500 Stock Fund

December 31, 2010
Assets
Investments at value – Master Portfolio	$	274,043,723
Capital shares sold receivable		3,739,073
Total assets		277,782,796
Liabilities
Capital shares redeemed payable		81,823
Administration fees payable		28,975
Professional fees payable		10,963
Total liabilities		121,761
Net Assets	$	277,661,035
Net Assets Consist of
Paid-in capital	$	537,491,432
Undistributed net investment income		59,627
Accumulated net realized loss		(267,767,466	)
Net unrealized appreciation/depreciation		7,877,442
Net Assets	$	277,661,035
Net Asset Value
Net assets	$	277,661,035
Shares outstanding, unlimited number of shares authorized, no par value		1,843,712
Net asset value	$	150.60

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 7

Statement of Operations BlackRock S&P 500 Stock Fund

Year Ended December 31, 2010
Investment Income
Net investment income allocated from the Master Portfolio:
Dividends	$	4,901,033
Securities lending – affiliated		89,751
Income – affiliated		14,872
Interest		939
Expenses		(121,185	)
Total income		4,885,410
Expenses
Administration		358,538
Professional		11,271
Total expenses		369,809
Less fees waived by administrator		(11,271	)
Total expenses after fees waived		358,538
Net investment income		4,526,872
Realized and Unrealized Gain (Loss) Allocated from the Master Portfolio
Net realized gain (loss) from:
Investments		(39,559,377	)
Financial futures contracts		947,563
		(38,611,814	)
Net change in unrealize appreciation/depreciation on:
Investments		67,819,127
Financial futures contracts		(1,360	)
		67,817,767
Total realized and unrealized gain		29,205,953
Net Increase in Net Assets Resulting from Operations	$	33,732,825

See Notes to Financial Statements.

8 BLACKROCK FUNDS III DECEMBER 31, 2010

Statements of Changes in Net Assets BlackRock S&P 500 Stock Fund

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2010				2009
Operations
Net investment income		$	4,526,872			$	4,153,587
Net realized loss			(38,611,814	)			(17,715,002	)
Net change in unrealized appreciation/depreciation			67,817,767				61,318,749
Net increase in net assets resulting from operations			33,732,825				47,757,334
Dividends to Shareholders From
Net investment income			(4,632,747	)			(4,040,945	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions			33,227,758				2,191,526
Net Assets
Total increase in net assets			62,327,836				45,907,915
Beginning of year			215,333,199				169,425,284
End of year		$	277,661,035			$	215,333,199
Undistributed net investment income		$	59,627			$	171,315

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 9

Financial Highlights BlackRock S&P 500 Stock Fund

	Year Ended December 31,
	2010				2009				2008				2007				2006
Per Share Operating Performance
Net asset value, beginning of year		$	133.49			$	107.85			$	175.47			$	169.53			$	150.07
Net investment income			2.55	1			2.50	1			3.28				3.14				3.04
Net realized and unrealized gain (loss)			17.10				25.60				(67.60	)			5.94				20.11
Net increase (decrease) from investment operations			19.65				28.10				(64.32	)			9.08				23.15
Dividends and distributions from:
Net investment income			(2.54	)			(2.46	)			(3.27	)			(3.14	)			(3.68	)
Return of capital			–				–				(0.03	)			–				(0.01	)
Total dividends and distributions			(2.54	)			(2.46	)			(3.30	)			(3.14	)			(3.69	)
Net asset value, end of year		$	150.60			$	133.49			$	107.85			$	175.47			$	169.53
Total Investment Return2
Based on net asset value			14.91	%			26.48	%			(37.01	)%			5.39	%			15.60	%
Ratios to Average Net Assets3
Total expenses			0.21	%			0.21	%			0.21	%			0.21	%			0.21	%
Total expenses after fees waived			0.20	%			0.20	%			0.20	%			0.20	%			0.20	%
Net investment income			1.87	%			2.20	%			2.16	%			1.83	%			1.78	%
Supplemental Data
Net assets, end of year (000)		$	277,661			$	215,333			$	169,425			$	330,892			$	270,407
Portfolio turnover of the Master Portfolio			9	%			5	%			8	%			7	%			14	%

¹ Based on average shares outstanding.

² Includes the reinvestment of dividends and distributions.

³ Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

See Notes to Financial Statements.

10 BLACKROCK FUNDS III DECEMBER 31, 2010

Notes to Financial Statements BlackRock S&P 500 Stock Fund

1. Organization and Significant Accounting Policies:

BlackRock S&P 500 Stock Fund (the “Fund”) is a series of BlackRock Funds III (the “Trust”) and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. The Trust is organized as a Delaware statutory trust. The Fund seeks to achieve its investment objective by investing substantially all of its assets in S&P 500 Stock Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), which has the same investment objective and strategies as the Fund. The performance of the Fund is directly affected by the performance of the Master Portfolio.

The value of the Fund’s investment in the Master Portfolio reflects the Fund’s interest in the net assets of the Master Portfolio (12.69% of the total Master Portfolio assets as of December 31, 2010).

The financial statements of the Master Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with the Fund’s financial statements. The Fund’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

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

Valuation: The Fund’s policy is to fair value its financial instruments at market value. The Fund records its investments 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, including categorization of fair value measurements, is discussed in Note 1 of the Master Portfolio’s Notes to Financial Statements, which are included elsewhere in this report.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). The Fund records daily its proportionate share of the Master Portfolio’s income, expenses and realized and unrealized gains and losses. In addition, the Fund accrues its own expenses.

Dividends and Distributions: Dividends and distributions paid by the Fund are recorded on the ex-dividend dates. Distributions of capital gains are recorded on the ex-dividend dates. If the total dividends and distributions made in any tax year exceeds net investment income and accumulated realized capital gains, a portion of the total distribution may be treated as a tax return of capital. The amount and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

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

The Fund files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s US federal tax return remains open for each of the four years ended December 31, 2010. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction. There are no uncertain tax positions that require recognition of a tax liability.

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

2. Administration Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”), Bank of America Corporation (“BAC”) and Barclays Bank PLC (“Barclays”) are the largest stockholders of BlackRock, Inc. (“BlackRock”). Due to the ownership structure, PNC is an affiliate of the Fund for 1940 Act purposes, but BAC and Barclays are not.

The fees of the Trust’s independent registered public accounting firm and legal counsel (the “independent expenses”) are paid directly by the Fund. BTC has contractually agreed to provide an offsetting credit against the administration fees paid by the Fund in an amount equal to the independent expenses through April 30, 2012. These amounts are included in fees waived by administrator in the Statement of Operations.

The Trust entered into an administration services arrangement with BlackRock Institutional Trust Company, N.A. (“BTC”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC has agreed to bear all costs of operating the Fund, excluding brokerage expenses, management fees, 12b-1 distribution or service fees, independent expenses, litigation expenses, taxes or other extraordinary expenses. BTC is entitled to receive for these administration services an annual fee of 0.15% of the average daily net assets of the Fund. Effective December 1, 2010, the administration fee was reduced to 0.13%.

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

BLACKROCK FUNDS III DECEMBER 31, 2010 11

Notes to Financial Statements (concluded) BlackRock S&P 500 Stock Fund

BNY Mellon Investment Servicing (US) Inc. (formerly PNC Global Investment Servicing (U.S.) Inc. (“PNCGIS”)), serves as transfer agent and dividend disbursing agent. On July 1, 2010, the Bank of New York Mellon Corporation purchased PNCGIS and PFPC Trust Company, which prior to this date were indirect, wholly owned subsidiaries of PNC and affiliates of BTC. Transfer agency fees paid by BTC to PNCGIS are comprised of those fees charged for all shareholder communications including mailing of shareholder reports, dividend and distribution notices, and proxy materials for shareholder meetings, as well as per account and per transaction fees related to servicing and maintence of shareholder accounts, including the issuing, redeeming and transferring of shares, check writing, anti-money laundering services, and customer identification services.

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

3. Income Tax Information:

Reclassifications: US GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. The following permanent differences as of December 31, 2010 attributable to the sales of securities with a different book and tax basis and the expiration of capital loss carryforwards were reclassified to the following accounts:

Paid-in capital	$	(73,179,217	)
Undistributed net investment income		(5,813	)
Accumulated net realized gain		73,185,030

The tax character of distributions paid during the fiscal years ended December 31, 2010 and December 31, 2009 was as follows:

	12/31/2010			12/31/2009
Ordinary income		$	4,632,747		$	4,040,945
Total		$	4,632,747		$	4,040,945

As of December 31, 2010, the tax components of accumulated net losses were as follows:

Undistributed ordinary income	$	6,767
Capital loss carryforwards		(178,300,474	)
Net unrealized losses*		(81,536,690	)
Total	$	(259,830,397	)

* The differences between book basis and tax-basis net unrealized losses were attributable primarily to the tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains/losses on certain futures contracts and the deferral of post-October capital losses for tax purposes.

As of December 31, 2010, the Fund had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates:

Expires December 31,
2012	$	1,601,227
2013		21,068,838
2014		31,394,394
2015		18,209,354
2016		55,579,531
2017		21,080,621
2018		29,366,509
Total	$	178,300,474

Under the recently enacted Regulated Investment Company Modernization Act of 2010, capital losses incurred by the Fund after December 31, 2010 will not be subject to expiration. In addition, such losses must be utilized prior to the losses incurred in the years preceding enactment.

4. Capital Share Transactions:

Transactions in capital shares for the Fund were as follows:

	Year Ended December 31, 2010							Year Ended December 31, 2009
	Shares			Amount				Shares			Amount
Shares sold		725,959			$	101,475,881			965,419			$	104,610,527
Shares issued to shareholders in reinvestment of dividends		28,468				3,914,161			30,158				3,418,853
Total issued		754,427				105,390,042			995,577				108,029,380
Shares redeemed		(523,821	)			(72,162,284	)		(953,450	)			(105,837,854	)
Net increase		230,606			$	33,227,758			42,127			$	2,191,526

5. Subsequent Events:

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

12 BLACKROCK FUNDS III DECEMBER 31, 2010

Report of Independent Registered Public Accounting Firm BlackRock S&P 500 Stock Fund

To the Shareholders and Board of Trustees of BlackRock Funds III:

In our opinion, the accompanying statement of assets and liabilities, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock S&P 500 Stock Fund, a series of BlackRock Funds III (the “Trust”), at December 31, 2010, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 24, 2011

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by the Fund during the fiscal year ended December 31, 2010:

	Payable Dates
Qualified Dividend Income for Individuals*		4/1/2010	84.72	%
		7/1/2010	84.72	%
		10/1/2010	84.72	%
		12/16/2010	84.72	%
Dividends Qualifying for the Dividend Received Deduction for Corporations*		4/1/2010	83.76	%
		7/1/2010	83.76	%
		10/1/2010	83.76	%
		12/16/2010	83.76	%

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

BLACKROCK FUNDS III DECEMBER 31, 2010 13

Master Portfolio Information as of December 31, 2010 Master Investment Portfolio

S&P 500 Stock Master Portfolio

Sector Allocation	Percent of Long-Term Investments
Information Technology		19	%
Financials		16
Energy		12
Consumer Discretionary		11
Industrials		11
Health Care		11
Consumer Staples		10
Materials		4
Utilities		3
Telecommunication Services		3
Ten Largest Holdings	Percent of Long-Term Investments
Exxon Mobil Corp.		3	%
Apple, Inc.		3
Microsoft Corp.		2
General Electric Co.		2
Chevron Corp.		2
International Business Machines Corp.		2
Procter & Gamble Co.		2
AT&T, Inc.		2
Johnson & Johnson		1
JPMorgan Chase & Co.		1

14 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments December 31, 2010	S&P 500 Stock Master Portfolio
	(Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Consumer Discretionary – 11.5%
Auto Components – 0.2%
The Goodyear Tire & Rubber Co. (a)		45,279		$	536,556
Johnson Controls, Inc.		125,803			4,805,675
					5,342,231
Automobiles – 0.6%
Ford Motor Co. (a)		698,864			11,733,927
Harley-Davidson, Inc.		43,899			1,521,978
					13,255,905
Distributors – 0.1%
Genuine Parts Co. (b)		29,380			1,508,369
Diversified Consumer Services – 0.1%
Apollo Group, Inc., Class A (a)		23,651			933,978
DeVry, Inc.		11,735			563,045
H&R Block, Inc. (b)		57,513			684,980
					2,182,003
Hotels, Restaurants & Leisure – 1.7%
Carnival Corp.		80,328			3,703,924
Darden Restaurants, Inc. (b)		25,749			1,195,783
International Game Technology (b)		55,566			982,962
Marriott International, Inc., Class A (b)		53,690			2,230,283
McDonald’s Corp.		197,058			15,126,172
Starbucks Corp. (b)		138,282			4,443,001
Starwood Hotels & Resorts Worldwide, Inc. (b)		35,615			2,164,680
Wyndham Worldwide Corp. (b)		32,635			977,745
Wynn Resorts, Ltd.		14,144			1,468,713
Yum! Brands, Inc.		87,415			4,287,706
					36,580,969
Household Durables – 0.4%
D.R. Horton, Inc.		52,212			622,889
Fortune Brands, Inc. (b)		28,401			1,711,160
Harman International Industries, Inc. (a)(b)		12,962			600,141
Leggett & Platt, Inc. (b)		27,505			626,014
Lennar Corp., Class A (b)		29,711			557,081
Newell Rubbermaid, Inc.		54,147			984,392
Pulte Homes, Inc. (a)		62,773			472,053
Stanley Black & Decker, Inc.		30,882			2,065,079
Whirlpool Corp.		14,167			1,258,455
					8,897,264
Internet & Catalog Retail – 0.8%
Amazon.com, Inc. (a)(b)		66,141			11,905,380
Expedia, Inc. (b)		37,725			946,520
NetFlix, Inc. (a)		8,095			1,422,292
priceline.com, Inc. (a)		9,160			3,659,878
					17,934,070
Leisure Equipment & Products – 0.1%
Hasbro, Inc.		25,403			1,198,513
Mattel, Inc. (b)		66,958			1,702,742
					2,901,255
Media – 3.1%
CBS Corp., Class B		126,897			2,417,388
Cablevision Systems Corp. (b)		44,794			1,515,829
Comcast Corp., Class A (b)		520,407			11,433,342
DIRECTV, Class A (a)		155,505			6,209,315
Discovery Communications, Inc. (a)(b)		53,058			2,212,519
Gannett Co., Inc.		44,468			671,022
Interpublic Group of Cos., Inc. (a)		91,117			967,662
The McGraw-Hill Cos., Inc.		57,302			2,086,366
Meredith Corp.		6,819			236,278
News Corp., Class A (b)		425,998			6,202,531
Omnicom Group, Inc. (b)		56,203			2,574,097
Scripps Networks Interactive, Inc., Class A (b)		16,739			866,243
Time Warner Cable, Inc. (b)		66,389			4,383,666
Time Warner, Inc. (b)		206,905			6,656,134
Viacom, Inc., Class B		112,758			4,466,344
The Walt Disney Co.		353,188			13,248,082
The Washington Post Co., Class B (b)		1,025			450,487
					66,597,305
Multiline Retail – 1.8%
Big Lots, Inc. (a)		14,060			428,268
Family Dollar Stores, Inc. (b)		23,481			1,167,241
J.C. Penney Co., Inc. (b)		44,074			1,424,031
Kohl’s Corp. (a)(b)		57,414			3,119,877
Macy’s, Inc.		79,187			2,003,431
Nordstrom, Inc.		31,459			1,333,232
Sears Holdings Corp. (a)(b)		8,255			608,806
Target Corp. (b)		132,071			7,941,429
Wal-Mart Stores, Inc.		365,407			19,706,399
					37,732,714
Specialty Retail – 2.0%
Abercrombie & Fitch Co., Class A		16,455			948,302
AutoNation, Inc. (a)		11,735			330,927
AutoZone, Inc. (a)(b)		5,078			1,384,212
Bed Bath & Beyond, Inc. (a)		48,330			2,375,419
Best Buy Co., Inc.		61,590			2,111,921
CarMax, Inc. (a)		41,992			1,338,705
GameStop Corp., Class A (a)(b)		28,009			640,846
The Gap, Inc. (b)		82,010			1,815,701
The Home Depot, Inc.		305,670			10,716,790
Limited Brands, Inc.		49,365			1,516,986
Lowe’s Cos., Inc. (b)		257,396			6,455,492
O’Reilly Automotive, Inc. (a)		26,057			1,574,364
RadioShack Corp.		21,232			392,580
Ross Stores, Inc. (b)		22,480			1,421,860
The Sherwin-Williams Co. (b)		16,746			1,402,478
Staples, Inc. (b)		134,890			3,071,445
The TJX Cos., Inc. (b)		73,825			3,277,092
Tiffany & Co.		23,537			1,465,649
Urban Outfitters, Inc. (a)(b)		24,117			863,630
					43,104,399
Textiles, Apparel & Luxury Goods – 0.6%
Coach, Inc.		55,232			3,054,882
NIKE, Inc., Class B (b)		71,306			6,090,959
Polo Ralph Lauren Corp.		12,057			1,337,362
VF Corp. (b)		16,193			1,395,513
					11,878,716
Total Consumer Discretionary					247,915,200
Consumer Staples – 9.6%
Beverages – 2.5%
Brown-Forman Corp., Class B (b)		19,347			1,346,938
The Coca-Cola Co. (b)		433,113			28,485,842
Coca-Cola Enterprises, Inc. (b)		63,220			1,582,397
Constellation Brands, Inc. (a)(b)		33,487			741,737
Dr Pepper Snapple Group, Inc. (b)		42,357			1,489,272

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 15

Schedule of Investments (continued)	S&P 500 Stock Master Portfolio
	(Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Consumer Staples (concluded)
Beverages (concluded)
Molson Coors Brewing Co., Class B		29,460		$	1,478,597
PepsiCo, Inc.		295,602			19,311,679
					54,436,462
Food & Staples Retailing – 1.4%
CVS Caremark Corp.		253,491			8,813,882
Costco Wholesale Corp. (b)		80,639			5,822,943
The Kroger Co. (b)		118,950			2,659,722
SUPERVALU, Inc. (b)		39,541			380,780
Safeway, Inc.		69,535			1,563,842
Sysco Corp. (b)		109,130			3,208,422
Walgreen Co. (b)		172,672			6,727,301
Whole Foods Market, Inc. (a)(b)		27,441			1,388,240
					30,565,132
Food Products – 1.6%
Archer Daniels Midland Co.		119,182			3,584,995
Campbell Soup Co. (b)		35,722			1,241,339
ConAgra Foods, Inc.		81,962			1,850,702
Dean Foods Co. (a)(b)		34,245			302,726
General Mills, Inc.		119,428			4,250,443
H.J. Heinz Co. (b)		59,840			2,959,686
The Hershey Co.		28,791			1,357,496
Hormel Foods Corp. (b)		12,909			661,715
The J.M. Smucker Co.		22,277			1,462,485
Kellogg Co. (b)		47,389			2,420,630
Kraft Foods, Inc., Class A		325,829			10,266,872
McCormick & Co., Inc. (b)		24,837			1,155,666
Sara Lee Corp. (b)		119,236			2,087,822
Tyson Foods, Inc., Class A		55,915			962,856
					34,565,433
Household Products – 2.2%
Colgate-Palmolive Co.		90,030			7,235,711
The Clorox Co. (b)		26,061			1,649,140
Kimberly-Clark Corp. (b)		76,061			4,794,886
The Procter & Gamble Co.		522,100			33,586,693
					47,266,430
Personal Products – 0.3%
Avon Products, Inc.		79,962			2,323,695
The Estee Lauder Cos., Inc., Class A (b)		21,154			1,707,128
Mead Johnson Nutrition Co. (b)		38,131			2,373,655
					6,404,478
Tobacco – 1.6%
Altria Group, Inc.		389,448			9,588,210
Lorillard, Inc.		27,906			2,289,966
Philip Morris International, Inc.		338,418			19,807,605
Reynolds American, Inc. (b)		63,040			2,056,365
					33,742,146
Total Consumer Staples					206,980,081
Energy – 11.8%
Energy Equipment & Services – 2.1%
Baker Hughes, Inc.		80,544			4,604,701
Cameron International Corp. (a)(b)		45,354			2,300,808
Diamond Offshore Drilling, Inc.		12,958			866,501
FMC Technologies, Inc. (a)(b)		22,337			1,985,983
Halliburton Co.		169,546			6,922,563
Helmerich & Payne, Inc. (b)		19,724			956,220
Nabors Industries Ltd. (a)		53,175			1,247,486
National Oilwell Varco, Inc. (b)		78,284			5,264,599
Rowan Cos., Inc. (a)(b)		23,565			822,654
Schlumberger Ltd.		254,482			21,249,247
					46,220,762
Oil, Gas & Consumable Fuels – 9.7%
Anadarko Petroleum Corp.		92,448			7,040,840
Apache Corp.		71,288			8,499,668
Cabot Oil & Gas Corp. (b)		19,410			734,668
Chesapeake Energy Corp. (b)		121,976			3,160,398
Chevron Corp. (b)		375,363			34,251,874
ConocoPhillips		274,037			18,661,920
CONSOL Energy, Inc. (b)		42,090			2,051,467
Denbury Resources, Inc. (a)(b)		74,427			1,420,811
Devon Energy Corp. (b)		80,558			6,324,609
EOG Resources, Inc. (b)		47,387			4,331,646
El Paso Corp. (b)		131,233			1,805,766
Exxon Mobil Corp.		940,528			68,771,407
Hess Corp.		55,970			4,283,944
Marathon Oil Corp. (b)		132,293			4,898,810
Massey Energy Co. (b)		18,964			1,017,419
Murphy Oil Corp.		35,897			2,676,121
Newfield Exploration Co. (a)(b)		24,981			1,801,380
Noble Energy, Inc. (b)		32,707			2,815,418
Occidental Petroleum Corp.		151,570			14,869,017
Peabody Energy Corp. (b)		50,343			3,220,945
Pioneer Natural Resources Co. (b)		21,623			1,877,309
QEP Resources, Inc.		32,647			1,185,413
Range Resources Corp. (b)		29,831			1,341,798
Southwestern Energy Co. (a)(b)		64,800			2,425,464
Spectra Energy Corp. (b)		120,799			3,018,767
Sunoco, Inc. (b)		22,475			905,967
Tesoro Corp. (a)		26,597			493,108
Valero Energy Corp.		105,557			2,440,478
The Williams Cos., Inc.		108,989			2,694,208
					209,020,640
Total Energy					255,241,402
Financials – 15.8%
Capital Markets – 2.5%
Ameriprise Financial, Inc.		46,250			2,661,687
The Bank of New York Mellon Corp.		231,393			6,988,069
The Charles Schwab Corp.		185,314			3,170,723
E*Trade Financial Corp. (a)		37,027			592,432
Federated Investors, Inc., Class B (b)		17,095			447,376
Franklin Resources, Inc.		27,157			3,020,130
The Goldman Sachs Group, Inc. (b)		95,357			16,035,233
Invesco Ltd.		86,183			2,073,563
Janus Capital Group, Inc.		34,576			448,451
Legg Mason, Inc.		28,513			1,034,166
Morgan Stanley		282,212			7,678,988
Northern Trust Corp.		45,129			2,500,598
State Street Corp.		93,555			4,335,339
T Rowe Price Group, Inc.		47,788			3,084,238
					54,070,993
Commercial Banks – 3.0%
BB&T Corp.		129,560			3,406,132
Comerica, Inc.		32,867			1,388,302

See Notes to Financial Statements.

16 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments (continued)	S&P 500 Stock Master Portfolio
	(Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Financials (continued)
Commercial Banks (concluded)
Fifth Third Bancorp (b)		148,442		$	2,179,129
First Horizon National Corp. (a)		43,862			516,700
Huntington Bancshares, Inc.		160,958			1,105,781
KeyCorp		164,091			1,452,205
M&T Bank Corp.		22,311			1,942,173
Marshall & Ilsley Corp.		98,346			680,554
PNC Financial Services Group, Inc. (b)(c)		98,114			5,957,482
Regions Financial Corp.		234,119			1,638,833
SunTrust Banks, Inc.		93,194			2,750,155
U.S. Bancorp (b)		357,828			9,650,621
Wells Fargo & Co.		979,013			30,339,613
Zions BanCorp.		33,227			805,090
					63,812,770
Consumer Finance – 0.7%
American Express Co.		195,359			8,384,808
Capital One Financial Corp.		85,149			3,623,942
Discover Financial Services (b)		101,414			1,879,202
SLM Corp. (a)		90,538			1,139,873
					15,027,825
Diversified Financial Services – 4.2%
Bank of America Corp.		1,881,122			25,094,167
CME Group, Inc. (b)		12,499			4,021,553
Citigroup, Inc. (a)		5,418,541			25,629,699
IntercontinentalExchange, Inc. (a)(b)		13,645			1,625,802
JPMorgan Chase & Co.		729,133			30,929,822
Leucadia National Corp. (b)		36,737			1,071,986
Moody’s Corp.		37,997			1,008,440
The NASDAQ OMX Group, Inc. (a)		26,201			621,226
NYSE Euronext		48,574			1,456,248
					91,458,943
Insurance – 3.8%
ACE Ltd.		63,337			3,942,728
Aon Corp.		61,552			2,832,008
Aflac, Inc.		87,950			4,963,018
The Allstate Corp. (b)		100,304			3,197,691
American International Group, Inc. (a)(b)		26,132			1,505,726
Assurant, Inc.		19,875			765,585
Berkshire Hathaway, Inc., Class B (a)		322,764			25,856,624
Chubb Corp. (b)		56,876			3,392,085
Cincinnati Financial Corp. (b)		30,323			960,936
Genworth Financial, Inc., Class A (a)		91,215			1,198,565
Hartford Financial Services Group, Inc.		82,827			2,194,087
Lincoln National Corp.		59,043			1,641,986
Loews Corp.		58,996			2,295,534
Marsh & McLennan Cos., Inc. (b)		101,496			2,774,901
MetLife, Inc. (b)		169,022			7,511,338
Principal Financial Group, Inc. (b)		59,709			1,944,125
The Progressive Corp.		123,756			2,459,032
Prudential Financial, Inc. (b)		90,540			5,315,603
Torchmark Corp.		14,889			889,469
The Travelers Cos., Inc. (b)		85,621			4,769,946
Unum Group		59,154			1,432,710
XL Group Plc		60,288			1,315,484
					83,159,181
Real Estate Investment Trusts (REITs) – 1.4%
Apartment Investment & Management Co.		21,815			563,700
AvalonBay Communities, Inc.		15,876			1,786,844
Boston Properties, Inc.		26,142			2,250,826
Equity Residential		53,070			2,756,986
HCP, Inc.		67,939			2,499,476
Health Care REIT, Inc.		27,087			1,290,425
Host Hotels & Resorts, Inc. (b)		124,254			2,220,419
Kimco Realty Corp.		75,650			1,364,726
Plum Creek Timber Co., Inc. (b)		30,152			1,129,192
ProLogis		106,190			1,533,384
Public Storage		26,105			2,647,569
Simon Property Group, Inc.		54,692			5,441,307
Ventas, Inc. (b)		29,282			1,536,719
Vornado Realty Trust		30,369			2,530,649
					29,552,222
Real Estate Management & Development – 0.1%
CB Richard Ellis Group, Inc., Class A (a)		54,477			1,115,689
Thrifts & Mortgage Finance – 0.1%
Hudson City Bancorp, Inc. (b)		98,164			1,250,609
People’s United Financial, Inc. (b)		68,692			962,375
					2,212,984
Total Financials					340,410,607
Health Care – 10.7%
Biotechnology – 1.3%
Amgen, Inc. (a)		176,226			9,674,807
Biogen Idec, Inc. (a)		44,448			2,980,238
Celgene Corp. (a)(b)		87,796			5,192,256
Cephalon, Inc. (a)(b)		14,017			865,129
Genzyme Corp. (a)		48,318			3,440,242
Gilead Sciences, Inc. (a)(b)		151,429			5,487,787
					27,640,459
Health Care Equipment & Supplies – 1.6%
Baxter International, Inc.		108,690			5,501,888
Becton Dickinson & Co. (b)		42,892			3,625,232
Boston Scientific Corp. (a)		284,198			2,151,379
C.R. Bard, Inc. (b)		17,384			1,595,330
CareFusion Corp. (a)		41,433			1,064,828
DENTSPLY International, Inc. (b)		26,461			904,172
Hospira, Inc. (a)		31,189			1,736,916
Intuitive Surgical, Inc. (a)		7,336			1,890,854
Medtronic, Inc. (b)		201,311			7,466,625
St. Jude Medical, Inc. (a)(b)		63,963			2,734,418
Stryker Corp.		63,636			3,417,253
Varian Medical Systems, Inc. (a)(b)		22,194			1,537,600
Zimmer Holdings, Inc. (a)(b)		36,827			1,976,873
					35,603,368
Health Care Providers & Services – 1.9%
Aetna, Inc.		74,627			2,276,870
AmerisourceBergen Corp.		51,545			1,758,715
CIGNA Corp.		50,552			1,853,236
Cardinal Health, Inc. (b)		65,088			2,493,521
Coventry Health Care, Inc. (a)(b)		27,659			730,198
DaVita, Inc. (a)		18,130			1,259,854
Express Scripts, Inc. (a)		98,305			5,313,385
Humana, Inc. (a)		31,363			1,716,811
Laboratory Corp. of America Holdings (a)(b)		18,969			1,667,754
McKesson Corp. (b)		47,201			3,322,006
Medco Health Solutions, Inc. (a)		79,159			4,850,072

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 17

Schedule of Investments (continued)	S&P 500 Stock Master Portfolio
	(Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Health Care (concluded)
Health Care Providers & Services (concluded)
Patterson Cos., Inc. (b)		18,026		$	552,136
Quest Diagnostics, Inc. (b)		26,381			1,423,783
Tenet Healthcare Corp. (a)		90,436			605,017
UnitedHealth Group, Inc.		205,159			7,408,292
WellPoint, Inc. (a)		73,416			4,174,434
					41,406,084
Health Care Technology – 0.1%
Cerner Corp. (a)(b)		13,332			1,263,074
Life Sciences Tools & Services – 0.4%
Life Technologies Corp. (a)		34,842			1,933,731
PerkinElmer, Inc. (b)		21,978			567,472
Thermo Fisher Scientific, Inc. (a)		74,137			4,104,224
Waters Corp. (a)(b)		17,035			1,323,790
					7,929,217
Pharmaceuticals – 5.4%
Abbott Laboratories (b)		288,338			13,814,274
Allergan, Inc.		57,325			3,936,508
Bristol-Myers Squibb Co.		319,261			8,454,031
Eli Lilly & Co. (b)		189,169			6,628,482
Forest Laboratories, Inc. (a)		53,228			1,702,231
Johnson & Johnson		512,226			31,681,178
King Pharmaceuticals, Inc. (a)		46,533			653,789
Merck & Co., Inc. (b)		574,660			20,710,746
Mylan, Inc. (a)(b)		81,063			1,712,861
Pfizer, Inc.		1,494,000			26,159,940
Watson Pharmaceuticals, Inc. (a)(b)		23,472			1,212,329
					116,666,369
Total Health Care					230,508,571
Industrials – 10.9%
Aerospace & Defense – 2.6%
The Boeing Co.		136,838			8,930,048
General Dynamics Corp. (b)		70,457			4,999,629
Goodrich Corp.		23,354			2,056,787
Honeywell International, Inc. (b)		145,531			7,736,428
ITT Corp. (b)		34,188			1,781,536
L-3 Communications Holdings, Inc.		21,112			1,488,185
Lockheed Martin Corp.		55,080			3,850,643
Northrop Grumman Corp. (b)		54,462			3,528,048
Precision Castparts Corp. (b)		26,607			3,703,960
Raytheon Co. (b)		67,994			3,150,842
Rockwell Collins, Inc.		29,304			1,707,251
United Technologies Corp. (b)		172,233			13,558,182
					56,491,539
Air Freight & Logistics – 1.1%
C.H. Robinson Worldwide, Inc. (b)		30,919			2,479,395
Expeditors International of Washington, Inc.		39,552			2,159,539
FedEx Corp. (b)		58,745			5,463,872
United Parcel Service, Inc., Class B		184,455			13,387,744
					23,490,550
Airlines – 0.1%
Southwest Airlines Co. (b)		139,051			1,804,882
Building Products – 0.0%
Masco Corp. (b)		66,824			845,992
Commercial Services & Supplies – 0.5%
Avery Dennison Corp.		20,138			852,643
Cintas Corp.		23,578			659,241
Iron Mountain, Inc.		37,155			929,246
Pitney Bowes, Inc. (b)		37,930			917,147
R.R. Donnelley & Sons Co. (b)		38,453			671,774
Republic Services, Inc.		57,453			1,715,547
Stericycle, Inc. (a)(b)		15,901			1,286,709
Waste Management, Inc.		88,726			3,271,328
					10,303,635
Construction & Engineering – 0.2%
Fluor Corp. (b)		33,323			2,207,982
Jacobs Engineering Group, Inc. (a)(b)		23,437			1,074,587
Quanta Services, Inc. (a)		40,235			801,481
					4,084,050
Electrical Equipment – 0.6%
Emerson Electric Co.		140,435			8,028,669
First Solar, Inc. (a)(b)		10,048			1,307,647
Rockwell Automation, Inc. (b)		26,444			1,896,299
Roper Industries, Inc. (b)		17,686			1,351,741
					12,584,356
Industrial Conglomerates – 2.5%
3M Co. (b)		133,343			11,507,501
General Electric Co.		1,987,297			36,347,662
Textron, Inc. (b)		51,114			1,208,335
Tyco International Ltd.		91,291			3,783,099
					52,846,597
Machinery – 2.3%
Caterpillar, Inc.		118,392			11,088,595
Cummins, Inc.		36,896			4,058,929
Danaher Corp. (b)		100,036			4,718,698
Deere & Co.		79,015			6,562,196
Dover Corp.		34,796			2,033,826
Eaton Corp.		31,399			3,187,312
Flowserve Corp. (b)		10,428			1,243,226
Illinois Tool Works, Inc. (b)		92,501			4,939,553
Ingersoll-Rand Plc		60,451			2,846,638
PACCAR, Inc. (b)		67,954			3,901,919
Pall Corp. (b)		21,484			1,065,177
Parker Hannifin Corp.		30,045			2,592,883
Snap-on, Inc.		10,829			612,705
					48,851,657
Professional Services – 0.1%
Dun & Bradstreet Corp. (b)		9,335			766,310
Equifax, Inc. (b)		23,017			819,405
Monster Worldwide, Inc. (a)		24,194			571,704
Robert Half International, Inc. (b)		27,506			841,684
					2,999,103
Road & Rail – 0.8%
CSX Corp. (b)		69,793			4,509,326
Norfolk Southern Corp. (b)		67,776			4,257,688
Ryder System, Inc.		9,748			513,135
Union Pacific Corp.		91,982			8,523,052
					17,803,201

See Notes to Financial Statements.

18 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments (continued)	S&P 500 Stock Master Portfolio
	(Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Industrials (concluded)
Trading Companies & Distributors – 0.1%
Fastenal Co. (b)		27,483		$	1,646,507
W.W. Grainger, Inc. (b)		10,821			1,494,488
					3,140,995
Total Industrials					235,246,557
Information Technology – 18.4%
Communications Equipment – 2.2%
Cisco Systems, Inc. (a)		1,033,825			20,914,280
F5 Networks, Inc. (a)		15,086			1,963,594
Harris Corp. (b)		23,836			1,079,771
JDS Uniphase Corp. (a)(b)		41,379			599,168
Juniper Networks, Inc. (a)(b)		97,608			3,603,687
Motorola, Inc. (a)(b)		438,290			3,975,290
QUALCOMM, Inc.		301,748			14,933,508
Tellabs, Inc. (b)		68,814			466,559
					47,535,857
Computers & Peripherals – 6.0%
Apple, Inc. (a)		171,097			55,189,048
Dell, Inc. (a)		313,231			4,244,280
EMC Corp. (a)(b)		384,334			8,801,249
Hewlett-Packard Co.		422,895			17,803,880
International Business Machines Corp.		231,723			34,007,668
Lexmark International, Inc., Class A (a)		14,637			509,660
NetApp, Inc. (a)		67,427			3,705,788
QLogic Corp. (a)(b)		19,702			335,328
SanDisk Corp. (a)		43,755			2,181,624
Teradata Corp. (a)(b)		31,186			1,283,616
Western Digital Corp. (a)(b)		42,747			1,449,123
					129,511,264
Electronic Equipment, Instruments & Components – 0.6%
Agilent Technologies, Inc. (a)(b)		64,567			2,675,011
Amphenol Corp., Class A (b)		32,583			1,719,731
Corning, Inc. (b)		291,649			5,634,659
FLIR Systems, Inc. (a)		29,473			876,822
Jabil Circuit, Inc. (b)		36,479			732,863
Molex, Inc. (b)		25,659			582,972
					12,222,058
Internet Software & Services – 1.9%
Akamai Technologies, Inc. (a)(b)		34,057			1,602,382
eBay, Inc. (a)(b)		213,991			5,955,369
Google, Inc., Class A (a)		46,524			27,633,860
VeriSign, Inc.		32,080			1,048,054
Yahoo!, Inc. (a)		243,127			4,043,202
					40,282,867
IT Services – 1.3%
Automatic Data Processing, Inc.		92,009			4,258,176
Cognizant Technology Solutions Corp., Class A (a)		56,616			4,149,387
Computer Sciences Corp.		28,779			1,427,438
Fidelity National Information Services, Inc.		49,513			1,356,161
Fiserv, Inc. (a)(b)		27,722			1,623,400
MasterCard, Inc., Class A (b)		18,052			4,045,634
Paychex, Inc. (b)		59,968			1,853,611
SAIC, Inc. (a)(b)		54,733			868,065
Total System Services, Inc. (b)		30,257			465,353
Visa, Inc., Class A (b)		90,891			6,396,909
The Western Union Co.		122,609			2,276,849
					28,720,983
Office Electronics – 0.1%
Xerox Corp.		258,802			2,981,399
Semiconductors & Semiconductor Equipment – 2.4%
Advanced Micro Devices, Inc. (a)		106,909			874,516
Altera Corp.		58,320			2,075,025
Analog Devices, Inc. (b)		55,837			2,103,380
Applied Materials, Inc. (b)		249,061			3,499,307
Broadcom Corp., Class A		84,960			3,700,008
Intel Corp.		1,040,433			21,880,306
KLA-Tencor Corp. (b)		31,161			1,204,061
LSI Corp. (a)		114,998			688,838
Linear Technology Corp. (b)		42,130			1,457,277
MEMC Electronic Materials, Inc. (a)		42,387			477,278
Microchip Technology, Inc. (b)		34,950			1,195,639
Micron Technology, Inc. (a)		159,373			1,278,171
NVIDIA Corp. (a)(b)		108,420			1,669,668
National Semiconductor Corp. (b)		44,650			614,384
Novellus Systems, Inc. (a)		16,794			542,782
Teradyne, Inc. (a)(b)		33,890			475,816
Texas Instruments, Inc.		219,002			7,117,565
Xilinx, Inc. (b)		48,248			1,398,227
					52,252,248
Software – 3.9%
Adobe Systems, Inc. (a)(b)		94,886			2,920,591
Autodesk, Inc. (a)		42,368			1,618,458
BMC Software, Inc. (a)		33,186			1,564,388
CA, Inc.		71,571			1,749,195
Citrix Systems, Inc. (a)		35,035			2,396,744
Compuware Corp. (a)(b)		41,170			480,454
Electronic Arts, Inc. (a)(b)		62,206			1,018,934
Intuit, Inc. (a)(b)		52,142			2,570,601
McAfee, Inc. (a)(b)		28,767			1,332,200
Microsoft Corp.		1,404,268			39,207,162
Novell, Inc. (a)		65,475			387,612
Oracle Corp.		722,013			22,599,007
Red Hat, Inc. (a)		35,563			1,623,451
Salesforce.com, Inc. (a)		22,064			2,912,448
Symantec Corp. (a)		144,786			2,423,718
					84,804,963
Total Information Technology					398,311,639
Materials – 3.7%
Chemicals – 2.0%
Air Products & Chemicals, Inc.		39,975			3,635,726
Airgas, Inc.		14,039			876,876
CF Industries Holdings, Inc.		13,250			1,790,738
The Dow Chemical Co. (b)		216,517			7,391,890
E.I. du Pont de Nemours & Co. (b)		170,287			8,493,916
Eastman Chemical Co.		13,466			1,132,221
Ecolab, Inc. (b)		43,287			2,182,531
FMC Corp. (b)		13,511			1,079,394
International Flavors & Fragrances, Inc.		14,886			827,513
Monsanto Co.		100,047			6,967,273
PPG Industries, Inc.		30,407			2,556,316

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 19

Schedule of Investments (continued)	S&P 500 Stock Master Portfolio
	(Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Materials (concluded)
Chemicals (concluded)
Praxair, Inc. (b)		57,164		$	5,457,447
Sigma-Aldrich Corp. (b)		22,616			1,505,321
					43,897,162
Construction Materials – 0.1%
Vulcan Materials Co. (b)		23,910			1,060,648
Containers & Packaging – 0.2%
Ball Corp. (b)		16,474			1,121,056
Bemis Co., Inc. (b)		20,033			654,278
Owens-Illinois, Inc. (a)		30,488			935,981
Sealed Air Corp. (b)		29,750			757,137
					3,468,452
Metals & Mining – 1.2%
AK Steel Holding Corp. (b)		20,224			331,067
Alcoa, Inc. (b)		190,366			2,929,733
Allegheny Technologies, Inc. (b)		18,375			1,013,933
Cliffs Natural Resources, Inc. (b)		25,248			1,969,596
Freeport-McMoRan Copper & Gold, Inc. (b)		87,835			10,548,105
Newmont Mining Corp.		91,978			5,650,209
Nucor Corp. (b)		58,825			2,577,711
Titanium Metals Corp. (a)		16,790			288,452
United States Steel Corp. (b)		26,762			1,563,436
					26,872,242
Paper & Forest Products – 0.2%
International Paper Co. (b)		81,466			2,219,134
MeadWestvaco Corp.		31,383			820,979
Weyerhaeuser Co.		99,843			1,890,028
					4,930,141
Total Materials					80,228,645
Telecommunication Services – 3.1%
Diversified Telecommunication Services – 2.8%
AT&T, Inc.		1,102,347			32,386,955
CenturyLink, Inc. (b)		56,578			2,612,206
Frontier Communications Corp.		185,992			1,809,702
Qwest Communications International, Inc.		325,552			2,477,451
Verizon Communications, Inc.		527,268			18,865,649
Windstream Corp. (b)		90,065			1,255,506
					59,407,469
Wireless Telecommunication Services – 0.3%
American Tower Corp., Class A (a)		74,436			3,843,875
MetroPCS Communications, Inc. (a)(b)		48,811			616,483
Sprint Nextel Corp. (a)		556,352			2,353,369
					6,813,727
Total Telecommunication Services					66,221,196
Utilities – 3.3%
Electric Utilities – 1.7%
Allegheny Energy, Inc.		31,616			766,372
American Electric Power Co., Inc.		89,654			3,225,751
Duke Energy Corp. (b)		247,095			4,400,762
Edison International (b)		60,735			2,344,371
Entergy Corp.		33,745			2,390,158
Exelon Corp. (b)		123,465			5,141,083
FirstEnergy Corp. (b)		56,825			2,103,661
NextEra Energy, Inc. (b)		77,520			4,030,265
Northeast Utilities (b)		32,835			1,046,780
PPL Corp. (b)		89,986			2,368,432
Pepco Holdings, Inc. (b)		41,733			761,627
Pinnacle West Capital Corp.		20,251			839,404
Progress Energy, Inc. (b)		54,771			2,381,443
Southern Co. (b)		156,448			5,981,007
					37,781,116
Gas Utilities – 0.1%
EQT Corp. (b)		27,798			1,246,462
Nicor, Inc. (b)		8,508			424,719
Oneok, Inc. (b)		19,837			1,100,359
					2,771,540
Independent Power Producers & Energy Traders – 0.2%
The AES Corp. (a)		123,435			1,503,438
Constellation Energy Group, Inc. (b)		37,268			1,141,519
NRG Energy, Inc. (a)		46,108			900,950
					3,545,907
Multi-Utilities – 1.3%
Ameren Corp. (b)		44,593			1,257,077
CMS Energy Corp. (b)		45,658			849,239
Centerpoint Energy, Inc.		79,242			1,245,684
Consolidated Edison, Inc. (b)		54,206			2,686,992
DTE Energy Co.		31,465			1,425,994
Dominion Resources, Inc. (b)		108,276			4,625,551
Integrys Energy Group, Inc. (b)		14,396			698,350
NiSource, Inc. (b)		51,815			912,980
PG&E Corp. (b)		73,144			3,499,209
Public Service Enterprise Group, Inc.		94,319			3,000,287
SCANA Corp. (b)		21,254			862,912
Sempra Energy (b)		44,775			2,349,792
TECO Energy, Inc. (b)		39,999			711,982
Wisconsin Energy Corp. (b)		21,791			1,282,618
Xcel Energy, Inc. (b)		85,682			2,017,811
					27,426,478
Total Utilities					71,525,041
Total Long-Term Investments (Cost – $1,809,138,235) – 98.8%					2,132,588,939
Short-Term Securities
Money Market Funds – 18.7%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)(e)		350,818,795			350,818,795
BlackRock Cash Funds: Prime, SL Agency Shares, 0.24% (c)(d)(e)		53,051,433			53,051,433
					403,870,228
	Par (000)
U.S. Treasury Obligations – 0.1%
U.S. Treasury Bill, 0.14%, 3/24/11 (f)(g)		2,750			2,749,296
Total Short-Term Securities (Cost – $406,619,382) – 18.8%					406,619,524
Total Investments (Cost – $2,215,757,617*) – 117.6%					2,539,208,463
Liabilities in Excess of Other Assets – (17.6)%					(380,491,682	)
Net Assets – 100.0%				$	2,158,716,781

See Notes to Financial Statements.

20 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments (continued) S&P 500 Stock Master Portfolio

* The cost and unrealized appreciation (depreciation) of investments as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	2,296,585,494
Gross unrealized appreciation	$	599,759,310
Gross unrealized depreciation		(357,136,341	)
Net unrealized appreciation	$	242,622,969

(a) Non-income producing security.

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

(c) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at December 31, 2009		Shares Purchased			Shares Sold			Shares Held at December 31, 2010		Value at December 31, 2010		Realized Loss			Income
BlackRock Cash Funds:
Institutional, SL Agency Shares		195,914,609		154,904,186	1		–			350,818,795	$	350,818,795		–		$	742,999
BlackRock Cash Funds:
Prime, SL Agency Shares		26,419,811		26,631,622	1		–			53,051,433	$	53,051,433		–		$	119,499
PNC Financial Services Group, Inc.		93,431		17,521			(12,838	)		98,114	$	5,957,482	$	(2,003,957	)	$	39,131

¹ Represents net activity

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

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

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

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

• In order to track the performance of its benchmark index, the Master Portfolio sold non-index securities that it subsequently received in corporate actions occurring on the opening of market trading on the following business day.

• For Master Portfolio compliance purposes, the Master Portfolio’s sector and industry classifications refer to any one or more of the sector and industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Master Portfolio management. This definition may not apply for purposes of this report, which may combine sector and industry sub-classifications for reporting ease.

• Financial futures contracts purchased as of December 31, 2010 were as follows:

Contracts	Issue	Exchange		Expiration Date		Notional Value			Unrealized Appreciation
424	S&P 500 INDEX		Chicago		March 2011		$	26,563,600		$	674,494

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities.

• 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 inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 21

Schedule of Investments (concluded) S&P Stock Master Portfolio

The following tables summarize the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments and derivatives:

Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Long-Term Investments1:
Common Stocks	$	2,132,588,939		–		–	$	2,132,588,939
Short-Term Securities:
Money Market Funds		403,870,228		–		–		403,870,228
U.S. Government Obligations		–	$	2,749,296		–		2,749,296
Total	$	2,536,459,167	$	2,749,296		–	$	2,539,208,463

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

	Derivative Financial Instruments2
Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets:
Equity Contracts	$	674,494		–		–	$	674,494
Total	$	674,494		–		–	$	674,494

² Derivative financial instruments are financial futures contracts. Financial futures contracts are valued at the unrealized appreciation/depreciation on the instrument.

See Notes to Financial Statements.

22 BLACKROCK FUNDS III DECEMBER 31, 2010

Statement of Assets and Liabilities S&P 500 Stock Master Portfolio

December 31, 2010
Assets
Investments at value – unaffiliated1,2	$	2,129,380,753
Investments at value – affiliated3		409,827,710
Dividends receivable		2,500,736
Securities lending income receivable – affiliated		49,032
Interest receivable		169
Total assets		2,541,758,400
Liabilities
Collateral on securities loaned at value		382,904,489
Margin variation payable		33,234
Investment advisory fees payable		82,903
Professional fees payable		20,640
Trustees’ fees payable		353
Total liabilities		383,041,619
Net assets	$	2,158,716,781
Net Assets Consist of
Investors’ capital	$	1,834,591,441
Net unrealized appreciation/depreciation		324,125,340
Net assets	$	2,158,716,781
1 Investments at cost – unaffiliated	$	1,806,384,731
2 Securities loaned at value	$	373,323,159
3 Investments at cost – affiliated	$	409,372,886

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 23

Statement of Operations S&P 500 Stock Master Portfolio

Year Ended December 31, 2010
Investment Income
Dividends – unaffiliated	$	40,599,881
Securities lending – affiliated		739,091
Income – affiliated		162,538
Interest		7,742
Total income		41,509,252
Expenses
Investment advisory		1,009,304
Professional		27,087
Independent Trustees		56,517
Total expenses		1,092,908
Less fees waived by advisor		(83,604	)
Total expenses after fees waived		1,009,304
Net investment income		40,499,948
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments		(97,436,485	)
Investments – affiliated		(2,003,957	)
Financial futures contracts		1,667,784
		(97,772,658	)
Net change in unrealized appreciation/depreciation on:
Investments		343,480,848
Financial futures contracts		303,047
		343,783,895
Total realized and unrealized gain		246,011,237
Net Increase in Net Assets Resulting from Operations	$	286,511,185

See Notes to Financial Statements.

24 BLACKROCK FUNDS III DECEMBER 31, 2010

Statements of Changes in Net Assets S&P 500 Stock Master Portfolio

	Year Ended December 31,
Increase (Decrease) in Net Assets:	2010				2009
Operations
Net investment income		$	40,499,948			$	40,788,743
Net realized loss			(97,772,658	)			(63,153,127	)
Net change in unrealized appreciation/depreciation			343,783,895				451,937,162
Net increase in net assets resulting from operations			286,511,185				429,572,778
Capital Transactions
Proceeds from contributions			253,464,019				451,069,480
Fair value of withdrawals			(430,320,410	)			(522,559,993	)
Net decrease in net assets derived from capital transactions			(176,856,391	)			(71,490,513	)
Net Assets
Total increase in net assets			109,654,794				358,082,265
Beginning of year			2,049,061,987				1,690,979,722
End of year		$	2,158,716,781			$	2,049,061,987

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 25

Financial Highlights S&P 500 Stock Master Portfolio

	Year Ended December 31,
	2010				2009				2008				2007				2006
Total Investment Return
Total investment return			15.06	%			26.63	%			(36.86	)%			5.54	%			15.75	%
Ratios to Average Net Assets
Total expenses			0.05	%			0.05	%			0.05	%			0.05	%			0.05	%
Total expenses after fees waived			0.05	%			0.05	%			0.05	%			0.05	%			0.05	%
Net investment income			2.01	%			2.35	%			2.32	%			1.98	%			1.93	%
Supplemental Data
Net assets, end of year (000)		$	2,158,717			$	2,049,062			$	1,690,980			$	2,920,748			$	2,727,449
Portfolio turnover1			9	%			5	%			8	%			7	%			14	%

¹ Portfolio turnover rates include in-kind transactions, if any.

See Notes to Financial Statements.

26 BLACKROCK FUNDS III DECEMBER 31, 2010

Notes to Financial Statements S&P 500 Stock Master Portfolio

1. Organization and Significant Accounting Policies:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust. The financial statements and these accompanying notes relate to S&P 500 Stock Master Portfolio (the “Master Portfolio”), which is a series of MIP. The Master Portfolio’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

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

Valuation: The Master Portfolio fair values its financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (the “Board”). Equity investments traded on a recognized securities exchange or the NASDAQ Global Market System are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that such prior day’s price no longer reflects the fair value of the security.

Investments in open-end registered investment companies are valued at net asset value each business day.

Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value. Financial futures contracts traded on exchanges are valued at their last sale price.

In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the market value of such investment or is not available, the investment will be valued in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, BlackRock Fund Advisors (“BFA”) seeks to determine the price that the Master Portfolio might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that BFA deems relevant. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof.

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

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Master Portfolio has determined 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.

Securities Lending: The Master Portfolio may lend securities to financial institutions that provide cash as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statement of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the Master Portfolio is entitled to dividend and interest payments on the securities loaned. 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. In the event that the borrower defaults on its obligation to return borrowed securities because of insolvency or for any other reason, the Master Portfolio could experience delays and costs in gaining access to the collateral. The Master Portfolio also could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

Income Taxes: The Master Portfolio is classified as a partnership for federal income tax purposes. As such, each investor in the Master Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses

BLACKROCK FUNDS III DECEMBER 31, 2010 27

Notes to Financial Statements (continued) S&P 500 Stock Master Portfolio

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

The Master Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolio’s US federal tax returns remains open for each of the four years ended December 31, 2010. 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. There are no uncertain tax positions that require recognition of a tax liability.

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

2. Derivative Financial Instruments:

The Master Portfolio engages in various portfolio investment strategies using derivative contracts both to increase the return of the Master Portfolio and to economically hedge, or protect, its exposure to certain risks such as equity risk. These contracts may be transacted on an exchange.

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

Financial Futures Contracts: The Master Portfolio purchases or sells financial futures contracts to gain exposure to, or economically hedge against, changes in the value of equity securities (equity risk).

Financial futures contracts are agreements between the Fund and counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on settlement date. Pursuant to the contract, the Master Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as margin variation and are recognized by the Master Portfolio as unrealized gains or losses. When the contract is closed, the Master Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures transactions involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest rates and the underlying assets.

Derivative Instruments Categorized by Risk Exposure:

Fair Value of Derivative Instruments as of December 31, 2010
Asset Derivatives
	Statement of Assets and Liabilities Location	Value
Equity Contracts	Net unrealized appreciation/depreciation*		$	674,494

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

The Effect of Derivative Instruments on the Statement of Operations Year Ended December 31, 2010
	Net Realized Gain  From Financial Futures Contracts			Net Change in Unrealized Appreciation on Financial Futures Contracts
Equity Contracts		$	1,667,784		$	303,047

For the year ended December 31, 2010, the average quarterly number of contracts and notional amount of outstanding financial futures contracts purchased was 845 and $47,219,575, respectively.

3. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”), Bank of America Corporation (“BAC”) and Barclays Bank PLC (“Barclays”) are the largest stockholders of BlackRock, Inc. (“BlackRock”). Due to the ownership structure, PNC is an affiliate of the Master Portfolio for 1940 Act purposes, but BAC and Barclays are not.

MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement with BFA (the “Investment Advisory Agreement”). Pursuant to the Investment Advisory Agreement, BFA is responsible for the management of the Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Master Portfolio. For such services, the Master Portfolio pays BFA an annual investment advisory fee of 0.05% of the average daily net assets of the Master Portfolio.

The fees and expenses of the Master Portfolio’s trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolio. BFA has contractually agreed to cap the expenses of the Master Portfolio whereby BFA reduces the investment advisory fee by an amount equal to the independent expenses, through April 30, 2012, and are shown as fees waived by advisor in the Statement of Operations.

28 BLACKROCK FUNDS III DECEMBER 31, 2010

Notes to Financial Statements (concluded) S&P 500 Stock Master Portfolio

MIP entered into an administration services arrangement with Black-Rock Institutional Trust Company, N.A. (“BTC”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC may delegate certain of its administration duties to sub-administrators.

BTC is not entitled to compensation for providing administration services to the Master Portfolio, for so long as BTC is entitled to compensation for providing administration services to corresponding feeder funds that invest substantially all of their assets in the Master Portfolio, or BTC (or an affiliate) receives investment advisory fees from the Master Portfolio. BTC has agreed to bear all costs of the Master Portfolio, excluding brokerage expenses, advisory fees, 12b-1 distribution or service fees, independent expenses, litigation expenses, taxes or other extraordinary expenses.

The Master Portfolio received an exemptive order from the SEC permitting it, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BTC as the securities lending agent. BTC may, on behalf of the Master Portfolio, invest cash collateral received by the Master Portfolio for such loans, among other things, in a private investment company managed by BTC or in registered money market funds advised by BTC or its affiliates. The market value of securities on loan and the value of the related collateral are shown in the Statement of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC is disclosed in the Schedule of Investments. The share of income earned by the Master Portfolio on such investments is shown as securities lending – affiliated in the Statement of Operations. BTC has voluntarily agreed to waive its fees for the period beginning December 1, 2009 until further notice.

The Master Portfolio may invest its positive cash balances in certain money market funds managed by BFA or an affiliate. The income earned on these temporary cash investments is included in income-affiliated in the Statement of Operations.

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

4. Investments:

Purchases and sales of investments excluding short-term securities for the year ended December 31, 2010, were $166,344,718 and $277,814,286, respectively.

5. Concentration, Market and Credit Risk:

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

6. 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 FUNDS III DECEMBER 31, 2010 29

Report of Independent Registered Public Accounting Firm Master Investment Portfolio

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

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of S&P 500 Stock Master Portfolio, a portfolio of Master Investment Portfolio (the “Master Portfolio”), at December 31, 2010, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 24, 2011

30 BLACKROCK FUNDS III DECEMBER 31, 2010

Officers and Trustees

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock Advised Registered Investment Companies (‘RICs’) Consisting of Investment Portfolios (‘Portfolios’) Overseen	Public Directorships
Non-Interested Trustees1
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chair of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	36 RICs consisting of 95 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chair of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. since 1987; Director, Fox Chase Cancer Center since 2004; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of Seventy (civic) since 2006.	36 RICs consisting of 95 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Finance and Economics at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy since 2002; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	36 RICs consisting of 95 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President of Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	36 RICs consisting of 95 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 1939	Trustee and Member of the Audit Committee	Since 2009	Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and Professor thereof from 1980 to 2005; President, Hudson Institute (policy research organization) since 1997 and Trustee thereof since 1980; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (strategic solutions company) since 2005; Director, Cerego, LLC (software development and design) since 2005.	36 RICs consisting of 95 Portfolios	AIMS Worldwide, Inc. (marketing)
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, Harvard Business School Publishing since 2005; Director, McLean Hospital since 2005.	36 RICs consisting of 95 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, The West Penn Allegheny Health System (a not-for-profit health system) since 2008; Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investment) since 1998; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	36 RICs consisting of 95 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company); WQED Multi-Media (public broadcasting not-for-profit)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	36 RICs consisting of 95 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, Forward Management, LLC since 2007; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	36 RICs consisting of 95 Portfolios	A.P. Pharma, Inc. (specialty pharmaceuticals)

BLACKROCK FUNDS III DECEMBER 31, 2010 31

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock Advised Registered Investment Companies (‘RICs’) Consisting of Investment Portfolios (‘Portfolios’) Overseen	Public Directorships
Non-Interested Trustees1 (concluded)
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Chair of the Audit Committee and Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Chairman Elect of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Trustee, The Holy Family Foundation since 2001; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	36 RICs consisting of 95 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee and Member of the Audit Committee	Since 2009	Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh since 2005 and Dean thereof from 1997 to 2005; Director, Alkon Corporation (pneumatics) since 1992; Director, Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008.	36 RICs consisting of 95 Portfolios	None

¹ Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year extensions in terms of Trustees who turn 72 prior to December 31, 2013.

² In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. in December 2009, the Trustees were elected to the Trust’s/MIP’s Board. As a result, although the chart shows the Trustees as joining the Trust’s/MIP’s Board in 2009, each Independent Trustee first became a member of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1999; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.

Interested Trustees3
Richard S. Davis 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Managing Director, BlackRock, Inc. since 2005; Chief Executive Officer, State Street Research & Management Company from 2000 to 2005; Chairman of the Board of Directors, State Street Research Mutual Funds from 2000 to 2005.	169 RICs consisting of 290 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Consultant, BlackRock, Inc. from 2007 to 2008; Managing Director, BlackRock, Inc. from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	169 RICs consisting of 290 Portfolios	None

³ Mr. Davis is an “interested person” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock, Inc. and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock, Inc. and its affiliates as well as his ownership of BlackRock, Inc. and The PNC Financial Services Group, Inc. securities. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

32 BLACKROCK FUNDS III DECEMBER 31, 2010

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2		Principal Occupation(s) During Past Five Years
Trust/MIP Officers4
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer		Since 2010	Managing Director of BlackRock, Inc. since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President		Since 2009	Managing Director of BlackRock, Inc. since 2000; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2002; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President		Since 2009	Managing Director of BlackRock, Inc. since 2010; Director of BlackRock, Inc. from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009, and Co-head thereof from 2007 to 2009; Vice President of BlackRock, Inc. from 2005 to 2008.
Simon Mendelson 55 East 52nd Street New York, NY 10055 1964	Vice President		Since 2009	Managing Director of BlackRock, Inc. since 2005; Co-head of the Global Cash and Securities Landing Group since 2010, Chief Operating Officer and head of the Global Client Group for BlackRock’s Global Cash Management Business since 2007; Head of BlackRock’s Strategy and Development Group from 2005 to 2007; Partner of McKinsey & Co. from 1997 to 2005.
Brian Schmidt 55 East 52nd Street New York, NY 10055 1958	Vice President		Since 2009	Managing Director of BlackRock, Inc. since 2004; Various positions with U.S. Trust Company from 1991 to 2003 including Director from 2001 to 2003 and Senior Vice President from 1998 to 2003; Vice President, Chief Financial Officer and Treasurer of Excelsior Funds, Inc., Excelsior Tax-Exempt Funds, Inc. and Excelsior Funds Trust from 2001 to 2003.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President		Since 2009	Managing Director of BlackRock, Inc. since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal J. Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer		Since 2009	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 55 East 52nd Street New York, NY 10055 1970	Treasurer		Since 2009	Managing Director of BlackRock, Inc. since 2007 and Director in 2006; Assistant Treasurer of the Merrill Lynch Investment Managers, L.P. (“MLIM”) and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer		Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock, Inc. since 2005.
Ira Shapiro5 55 East 52nd Street New York, NY 10055 1963	Secretary		Since 2010	Managing Director of BlackRock, Inc. since 2009; Managing Director and Associate General Counsel of Barclays Global Investors from 2008 to 2009 and principal thereof from 2004 to 2008.

⁴ Officers of the Trust/MIP serve at the pleasure of the Board.

⁵ Ira P. Shapiro served as Vice President and Chief Legal Officer of the Trust/MIP from 2007 to 2009.

Further information about the Trust/MIP Officers and Trustees is available in the Trust/MIP Statement of Additional Information, which can be obtained without charge by calling (877) 244-1544.

Effective September 24, 2010, John M. Perlowski became President and Chief Executive Officer of the Trust.

Effective November 16, 2010, Ira Shapiro became Secretary of the Trust.

BLACKROCK FUNDS III DECEMBER 31, 2010 33

Officers and Trustees (concluded)

Investment Advisor BlackRock Fund Advisors San Francisco, CA 94105 Custodian State Street Bank and Trust Company Boston, MA 02101 Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809   Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP New York, NY 10017 Accounting Agent State Street Bank and Trust Company Boston, MA 02101   Legal Counsel Sidley Austin LLP New York, NY 10019 Distributor BlackRock Investments, LLC New York, NY 10022   Address of the Funds 400 Howard Street San Francisco, CA 94105

34 BLACKROCK FUNDS III DECEMBER 31, 2010

Additional Information

General Information

Availability of Quarterly Portfolio Schedule of Investments

The Fund/Master Portfolio file its complete schedules 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 may be obtained by calling (800) SEC-0330. The Fund’s/Master Portfolio’s Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.

Availability of Proxy Voting Policies and Procedures

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

Availability of Proxy Voting Record

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

Shareholder Privileges

Account Information

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

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, 2010 35

This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Funds unless accompanied or preceded by the Funds’ current prospectus. 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-12/10

December 31, 2010

Annual Report

BlackRock Funds III

^u LifePath^® Retirement Portfolio

^u LifePath 2020 Portfolio^®

^u LifePath 2030 Portfolio^®

^u LifePath 2040 Portfolio^®

^u LifePath^® 2050 Portfolio

Not FDIC Insured ¡ No Bank Guarantee ¡ May Lose Value

Table of Contents

	Page
Dear Shareholder		3
Annual Report:
Portfolio Summaries		4
About Portfolio Performance		15
Derivative Financial Instruments		15
Disclosure of Expenses		16
Portfolio Financial Statements:
Statements of Assets and Liabilities		17
Statements of Operations		18
Statements of Changes in Net Assets		19
Portfolio Financial Highlights		22
Portfolio Notes to Financial Statements		47
Portfolio Report of Independent Registered Public Accounting Firm		55
Important Tax Information (Unaudited)		55
Master Portfolio Information		56
Master Portfolio Financial Statements:
Schedules of Investments		59
Statements of Assets and Liabilities		86
Statements of Operations		88
Statements of Changes in Net Assets		90
Master Portfolio Financial Highlights		92
Master Portfolio Notes to Financial Statements		96
Master Portfolio Report of Independent Registered Public Accounting Firm		103
Officers and Trustees		104
Additional Information		108

2 BLACKROCK FUNDS III DECEMBER 31, 2010

Dear Shareholder:

Economic data fluctuated widely throughout 2010 as the global economy continued to emerge from the “Great Recession.” As the year drew to a close, it became clear that cyclical stimulus had beat out structural problems as economic data releases generally became more positive and financial markets showed signs of continuing improvement.

Debt and deflationary risks remained present throughout 2010, causing central banks worldwide to respond with unprecedented actions, most notably a second round of quantitative easing (informally known as “QE2”) from the US Federal Reserve Board (the “Fed”). Inflation remained a non-issue in the developed world, but continued to rear its ugly head in some emerging economies, most evidently in China. Global and US gross domestic product (“GDP”) growth both continued in a positive direction but remained subpar compared to most historical economic recoveries. In the United States, the corporate sector has been an important area of strength and consumer spending has shown improvement, although weakness in the housing and labor markets continues to burden the economy.

Stocks moved higher in the early months of 2010 on the continuation of the 2009 asset recovery story. The mid-year months saw a double-digit percentage correction on the back of the Greek sovereign debt crisis and a stalling in jobs growth, leading to fears of a double-dip recession. After touching a late summer low, equity markets rallied through year end as these concerns receded. The announcement of QE2 and extension of the Bush-era tax cuts further boosted equities as the year came to a close. Although the course was uneven and high volatility remained a constant for stocks, equity markets globally ended the year strong. Emerging markets outpaced the developed world in terms of economic growth and posted respectable gains for the year despite sovereign debt problems and heightening inflationary pressures. US stocks recorded double-digit percentage gains for the second consecutive year. Small cap stocks outperformed large caps as investors began to move into higher-risk assets.

In fixed income markets, yields trended lower over most of the year as investors continued to favor safer assets. That trend reversed abruptly in the fourth quarter when market fears abated and investors began seeking higher-risk assets, driving yields sharply upward through year end. However, yields were lower overall for the year and fixed income markets finished 2010 in positive territory. Although fixed income securities generally underperformed equities, high yield bonds only marginally trailed large cap stocks. Conversely, the tax-exempt municipal market was dealt an additional blow as it became apparent that an extension of the Build America Bond program was unlikely. In addition, the fourth quarter brought an increase in negative headlines regarding fiscal challenges faced by state and local governments, sparking additional volatility in the municipal market.

Cash investments, as represented by the 3-month Treasury bill, returned only a fraction over 0% for the year as short-term interest rates remained low. Yields on money market securities remain near all-time lows.

Total Returns as of December 31, 2010	6-month			12-month
US large cap equities (S&P 500 Index)		23.27	%		15.06	%
US small cap equities (Russell 2000 Index)		29.38			26.85
International equities (MSCI Europe, Australasia, Far East Index)		24.18			7.75
3-month Treasury bill (BofA Merrill Lynch 3-Month Treasury Bill Index)		0.08			0.13
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		(1.33	)		7.90
US investment grade bonds (Barclays Capital US Aggregate Bond Index)		1.15			6.54
Tax-exempt municipal bonds (Barclays Capital Municipal Bond Index)		(0.90	)		2.38
US high yield bonds (Barclays Capital US Corporate High Yield 2% Issuer Capped Index)		10.04			14.94

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

While no one can peer into a crystal ball and eliminate the uncertainties presented by the economic landscape and financial markets, BlackRock can offer investors the next best thing: partnership with the world’s largest asset management firm and a unique global perspective that allows us to identify trends early and capitalize on market opportunities. For additional market perspective and investment insight, visit www.blackrock.com/shareholdermagazine, where you’ll find the most recent issue of our award-winning Shareholder^® magazine, as well as its quarterly companion newsletter, Shareholder Perspectives. As always, we thank you for entrusting BlackRock with your investments, and we look forward to your continued partnership in the months and years ahead.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

THIS PAGE NOT PART OF YOUR FUND REPORT 3

Portfolio Summary as of December 31, 2010 LifePath Portfolios

Portfolio Management Commentary

How did each Portfolio perform?

• For the 12-month period, all share classes of the LifePath Portfolios with target dates of 2020, 2030, 2040, and 2050, as well as all share classes of the LifePath Retirement Portfolio (altogether, the “LifePath Portfolios”), through their investment in their respective LifePath Master Portfolio, lagged their respective custom benchmarks.

What factors influenced performance?

• Following a positive first quarter, the LifePath Portfolios were negatively impacted by heightened market volatility and decreased investor risk appetite in the second quarter. Shorter dated funds (e.g., LifePath Retirement Portfolio) were less affected by the volatile equity markets than the longer dated funds (e.g., LifePath 2050), which are more heavily allocated to equities.

• In the second half of the year, equity markets staged a broad rebound and outperformed fixed income markets. While all of the LifePath Portfolios benefited from the rally, the longer dated funds (e.g., LifePath 2050) derived a greater benefit due to their larger exposure to equities than the shorter dated funds (e.g., LifePath Retirement Portfolio), which are allocated more heavily toward fixed income investments.

• For the 12-month period, however, the Active Stock Master Portfolio underperformed the S&P 500 Index, resulting in the LifePath Portfolios’ underperformance relative to their respective custom benchmarks for the year. Over the course of 2010, markets were driven more by the influence of broad macroeconomic themes on investor sentiment than by company fundamentals. Consequently, the Active Stock Master Portfolio’s quantitative model for security selection, which is based on factors such as relative value, earnings quality and measures of sentiment, failed to add value in this environment. Also, having a negative impact on the performance of the LifePath Portfolios was their allocation to the iShares MSCI EAFE Index Fund, which failed to adequately track its benchmark index over the annual period.

• The LifePath Portfolios invest a portion of their assets in the CoreAlpha Bond Master Portfolio, which performed in line with its benchmark, the Barclays Capital US Aggregate Bond Index, for the annual period.

• The remaining exposures within the LifePath Portfolios are implemented through various iShares exchange-traded funds, which generally performed in line with their respective indexes.

Describe recent portfolio activity.

• Each LifePath Portfolio has its own time horizon, which affects the acceptable risk level of the LifePath Portfolio and, in turn, its asset allocation. As such, the asset allocation of each LifePath Portfolio was updated systematically during the reporting period, as investors’ time horizons decreased and the LifePath Portfolios were rebalanced accordingly.

Describe portfolio positioning at period end.

• The LifePath Portfolios are largely managed in line with their respective strategic asset allocation benchmarks. As such, any over/underweights in the individual LifePath Portfolios relative to their respective benchmarks are typically small and not material to performance.

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.

The LifePath Portfolios are organized as “feeder” funds in a “master-feeder” structure. Instead of investing directly in individual securities, the feeder fund, which is offered to the public, holds interests in the net assets of its corresponding Master Portfolio. It is the Master Portfolio that actually invests in individual securities. References to “the LifePath Portfolios” are to the feeder funds or the Master Portfolios, as the context requires.

4 BLACKROCK FUNDS III DECEMBER 31, 2010

	LifePath® Retirement Portfolio
Total Return Based on a $10,000 Investment

¹ The Portfolio compares its performance to that of a customized weighted index (the “LifePath Retirement Custom Benchmark”), comprised of the indexes indicated below, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

Period	Barclays Capital US Aggregate Bond Index			Barclays Capital US Treasury Inflation Protected Securities (TIPS)  Index			Citigroup 3-Month Treasury Bill Index			Cohen & Steers Realty Majors Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI All Country World (“ACWI”) ex US IMI Index			MSCI EAFE Index			S&P MidCap 400 Index			S&P 500 Index			S&P Small Cap 600 Index
12/31/99 to 12/31/00		69.2	%		—			11.0	%		—			—			—			6.9	%		0.8	%		11.2	%		0.9	%
1/01/01 to 12/31/01		73.9			—			6.5			—			—			—			6.4			0.9			11.5			0.8
1/01/02 to 12/31/02		65.0			—			—			—			—			—			9.7			1.9			21.8			1.6
1/01/03 to 12/31/03		65.0			—			—			—			—			—			9.1			2.1			22.0			1.8
1/01/04 to 12/31/04		65.0			—			—			—			—			—			8.7			2.3			21.7			2.3
1/01/05 to 12/31/05		65.0			—			—			—			—			—			8.7			3.2			20.9			2.2
1/01/06 to 12/31/06		52.0			10.2	%		—			2.7	%		—			—			9.9			3.3			20.2			1.7
1/01/07 to 12/31/07		52.6			9.6			—			2.8			—			2.7	%		7.7			3.6			19.2			1.8
1/01/08 to 12/31/08		53.0			9.0			—			1.3			1.3	%		11.4			—			4.1			18.0			1.9
1/01/09 to 12/31/09		52.9			9.1			—			—			1.6			10.8			—			4.7			18.7			2.2
1/01/10 to 12/31/10		52.9			9.1			—			—			1.1			10.8			—			5.0			18.9			2.2

See “About Portfolio Performance” on page 15 for descriptions of the indexes.

BLACKROCK FUNDS III DECEMBER 31, 2010 5

	LifePath® Retirement Portfolio (concluded)
Performance Summary for the Period Ended December 31, 2010

				Average Annual Total Returns
				1 Year						5 Years						10 Years					Since Inception
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge		w/o sales charge			w/sales charge
Institutional		9.77	%		9.33	%		—			4.54	%		—			4.57	%		—		5.78	%1		—
Investor A		9.71			9.12			3.39	%		4.29	%		3.17	%		—			—		6.18	2		5.44	%2
Investor C		9.23			—			—			—			—			—			—		4.22	3		3.22	3
Class K		10.08			9.82			—			—			—			—			—		3.73	4		—
Class R		9.49			—			—			—			—			—			—		4.55	3		—
Citigroup 3-Month Treasury Bill Index		0.08			0.13			—			2.30			—			2.26			—		—			—
Barclays Capital US Aggregate Bond Index		1.15			6.54			—			5.80			—			5.84			—		—			—
LifePath Retirement Custom Benchmark		10.00			10.86			—			5.32			—			5.49			—		—			—
S&P 1500 Index		23.85			16.38			—			2.65			—			2.07			—		—			—
MSCI All Country World (“ACWI”) ex US IMI Index		25.84			12.73			—			5.12			—			6.22	%		—		—			—

¹ Total return is calculated from an inception date of March 1, 1994. The Institutional class of shares are successors to the assets of the Institutional class of shares of the Stagecoach Trust LifePath 2000 Fund (the “predecessor fund”), that began operations on March 1, 1994. Performance information for the period before March 26, 1996, the date the LifePath Portfolio began operations, reflects the performance of the predecessor fund.

² Total return is calculated from an inception date of April 11, 2003. This inception date represents the date investors began investing in the Investor A class of shares of the LifePath Portfolio. To establish the new share class, the LifePath Portfolio’s distributor privately seeded Investor A shares on April 30, 2001. The class had no activity from April 30, 2001 until investment began on the Investor A share class inception date. The since inception return calculated from April 30, 2001 for the LifePath Portfolio was 4.31%.

³ Total return is calculated from an inception date of May 3, 2010.

⁴ Total return is calculated from an inception date of May 30, 2008.

Past performance is not indicative of future results.

6 BLACKROCK FUNDS III DECEMBER 31, 2010

	LifePath 2020 Portfolio®
Total Return Based on a $10,000 Investment

¹ The Portfolio compares its performance to that of a customized weighted index (the “LifePath 2020 Custom Benchmark”), comprised of the indexes indicated below, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

Period	Barclays Capital US Aggregate Bond Index	Barclays Capital US Treasury Inflation Protected Securities (TIPS) Index	Cohen & Steers Realty Majors Index	FTSE EPRA/NAREIT Developed Real Estate Index	MSCI All Country World (“ACWI”) ex US IMI Index	MSCI EAFE Index	S&P MidCap 400 Index	S&P 500 Index	S&P SmallCap 600 Index
12/31/99 to 12/31/00	35.0%	—	—	—	—	18.4%	3.0%	40.6%	3.0%
1/01/01 to 12/31/01	36.6	—	—	—	—	17.0	3.1	40.3	3.0
1/01/02 to 12/31/02	33.0	—	—	—	—	17.0	3.7	43.0	3.3
1/01/03 to 12/31/03	36.5	—	—	—	—	15.4	3.7	41.1	3.3
1/01/04 to 12/31/04	34.2	—	—	—	—	16.2	3.0	43.8	2.8
1/01/05 to 12/31/05	35.4	—	—	—	—	15.9	4.3	41.4	3.0
1/01/06 to 12/31/06	28.5	5.2%	4.3%	—	—	16.8	5.1	37.5	2.6
1/01/07 to 12/31/07	29.7	5.0	4.5	—	17.2%	—	5.4	35.4	2.8
1/01/08 to 12/31/08	31.6	5.1	2.2	2.2%	18.4	—	5.8	32.0	2.7
1/01/09 to 12/31/09	33.8	5.5	—	4.8	16.9	—	5.8	30.4	2.8
1/01/10 to 12/31/10	35.2	5.7	—	4.0	16.5	—	5.8	30.2	2.6

See “About Portfolio Performance” on page 15 for descriptions of the indexes.

BLACKROCK FUNDS III DECEMBER 31, 2010 7

	LifePath 2020 Portfolio® (concluded)
Performance Summary for the Period Ended December 31, 2010

				Average Annual Total Returns
				1 Year						5 Years						10 Years					Since Inception
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge		w/o sales charge			w/sales charge
Institutional		14.70	%		10.90	%		—			3.46	%		—			3.13	%		—		6.97	%1		—
Investor A		14.58			10.56			4.76	%		3.21			2.10	%		—			—		3.92	2		3.28	%2
Investor C		14.10			—			—			—			—			—			—		5.03	3		4.03	3
Class K		14.90			11.28			—			—			—			—			—		0.91	4		—
Class R		14.38			—			—			—			—			—			—		5.34	3		—
Citigroup 3-Month Treasury Bill Index		0.08			0.13			—			2.30			—			2.26			—		—			—
Barclays Capital US Aggregate Bond Index		1.15			6.54			—			5.80			—			5.84			—		—			—
LifePath 2020 Custom Benchmark		14.81			12.74			—			4.59			—			4.17			—		—			—
S&P 1500 Index		23.85			16.38			—			2.65			—			2.07			—		—			—
MSCI All Country World (“ACWI”) ex US IMI Index		25.84			12.73			—			5.12			—			6.22			—		—			—

¹ Total return is calculated from an inception date of March 1, 1994. The Institutional class of shares are successors to the assets of the Institutional class of shares of the Stagecoach Trust LifePath 2020 Fund (the “predecessor fund”), that began operations on March 1, 1994. Performance information for the period before March 26, 1996, the date the LifePath Portfolio began operations, reflects the performance of the predecessor fund.

² Total return is calculated from an inception date of March 7, 2002. This inception date represents the date investors began investing in the Investor A class of shares of the LifePath Portfolio. To establish the new share class, the LifePath Portfolio’s distributor privately seeded Investor A shares on April 30, 2001. The class had no activity from April 30, 2001 until investment began on the Investor A share class inception date. The since inception return calculated from April 30, 2001 for the LifePath Portfolio was 3.14%.

³ Total return is calculated from an inception date of May 3, 2010.

⁴ Total return is calculated from an inception date of May 30, 2008.

Past performance is not indicative of future results.

8 BLACKROCK FUNDS III DECEMBER 31, 2010

	LifePath 2030 Portfolio®
Total Return Based on a $10,000 Investment

¹ The Portfolio compares its performance to that of a customized weighted index (the “LifePath 2030 Custom Benchmark”), comprised of the indexes indicated below, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

Period	Barclays Capital US Aggregate Bond Index	Barclays Capital US Treasury Inflation Protected Securities (TIPS) Index	Cohen & Steers Realty Majors Index	FTSE EPRA/NAREIT Developed Real Estate Index	MSCI All Country World (“ACWI”) ex US IMI Index	MSCI EAFE Index	S&P MidCap 400 Index	S&P 500 Index	S&P SmallCap 600 Index
12/31/99 to 12/31/00	19.6%	—	—	—	—	23.6%	3.6%	49.5%	3.7%
1/01/01 to 12/31/01	21.2	—	—	—	—	21.2	3.9	50.0	3.7
1/01/02 to 12/31/02	21.6	—	—	—	—	19.8	4.3	50.4	3.9
1/01/03 to 12/31/03	24.9	—	—	—	—	18.6	4.4	48.3	3.8
1/01/04 to 12/31/04	21.0	—	—	—	—	19.4	3.2	53.3	3.1
1/01/05 to 12/31/05	21.8	—	—	—	—	19.2	4.8	50.9	3.3
1/01/06 to 12/31/06	16.7	2.7%	5.1%	—	—	20.3	6.0	46.2	3.0
1/01/07 to 12/31/07	17.4	2.6	5.4	—	20.9%	—	6.4	44.1	3.2
1/01/08 to 12/31/08	19.0	2.8	5.5	—	22.4	—	6.9	40.2	3.2
1/01/09 to 12/31/09	21.0	3.1	—	7.0%	21.0	—	6.6	38.2	3.1
1/01/10 to 12/31/10	22.0	3.2	—	6.3	20.7	—	6.4	38.6	2.8

See “About Portfolio Performance” on page 15 for descriptions of the indexes.

BLACKROCK FUNDS III DECEMBER 31, 2010 9

	LifePath 2030 Portfolio® (concluded)
Performance Summary for the Period Ended December 31, 2010

				Average Annual Total Returns
				1 Year						5 Years						10 Years					Since Inception
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge		w/o sales charge			w/sales charge
Institutional		18.40	%		11.86	%		—			2.77	%		—			2.54	%		—		7.22	%1		—
Investor A		18.33			11.53			5.68	%		2.52			1.42	%		—			—		6.81	2		6.07	%2
Investor C		17.86			—			—			—			—			—			—		5.64	3		4.64	3
Class K		18.60			12.32			—			—			—			—			—		(0.65	)4		—
Class R		18.12			—			—			—			—			—			—		5.96	3		—
Citigroup 3-Month Treasury Bill Index		0.08			0.13			—			2.30			—			2.26			—		—			—
Barclays Capital US Aggregate Bond Index		1.15			6.54			—			5.80			—			5.84			—		—			—
LifePath 2030 Custom Benchmark		18.55			14.13			—			4.13			—			3.66			—		—			—
S&P 1500 Index		23.85			16.38			—			2.65			—			2.07			—		—			—
MSCI All Country World (“ACWI”) ex US IMI Index		25.84			12.73			—			5.12			—			6.22			—		—			—

¹ Total return is calculated from an inception date of March 1, 1994. The Institutional class of shares are successors to the assets of the Institutional class of shares of the Stagecoach Trust LifePath 2030 Fund (the “predecessor fund”), that began operations on March 1, 1994. Performance information for the period before March 26, 1996, the date the LifePath Portfolio began operations, reflects the performance of the predecessor fund.

² Total return is calculated from an inception date of April 8, 2003. This inception date represents the date investors began investing in the Investor A class of shares of the LifePath Portfolio. To establish the new share class, the LifePath Portfolio’s distributor privately seeded Investor A shares on April 30, 2001. The class had no activity from April 30, 2001 until investment began on the Investor A share class inception date. The since inception return calculated from April 30, 2001 for the LifePath Portfolio was 2.71%.

³ Total return is calculated from an inception date of May 3, 2010.

⁴ Total return is calculated from an inception date of May 30, 2008.

Past performance is not indicative of future results.

10 BLACKROCK FUNDS III DECEMBER 31, 2010

	LifePath 2040 Portfolio®
Total Return Based on a $10,000 Investment

¹ The Portfolio compares its performance to that of a customized weighted index (the “LifePath 2040 Custom Benchmark”), comprised of the indexes indicated below, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

Period	Barclays Capital US Aggregate Bond Index	Barclays Capital US Treasury Inflation Protected Securities (TIPS) Index	Cohen & Steers Realty Majors Index	FTSE EPRA/NAREIT Developed Real Estate Index	MSCI All Country World (“ACWI”) ex US IMI Index	MSCI EAFE Index	S&P MidCap 400 Index	S&P 500 Index	S&P SmallCap 600 Index
12/31/99 to 12/31/00	4.3%	—	—	—	—	26.6%	4.4%	60.2%	4.5%
1/01/01 to 12/31/01	6.6	—	—	—	—	23.2	4.7	60.9	4.6
1/01/02 to 12/31/02	10.7	—	—	—	—	20.0	5.1	59.6	4.6
1/01/03 to 12/31/03	13.9	—	—	—	—	20.0	5.1	56.4	4.6
1/01/04 to 12/31/04	10.0	—	—	—	—	20.0	3.7	62.8	3.5
1/01/05 to 12/31/05	10.6	—	—	—	—	20.0	5.5	60.1	3.8
1/01/06 to 12/31/06	7.4	—	5.8%	—	—	23.2	6.8	53.4	3.4
1/01/07 to 12/31/07	7.7	—	5.9	—	—	23.5	7.2	51.9	3.7
1/01/08 to 12/31/08	9.1	0.5%	3.2	3.2%	25.8%	—	7.7	46.9	3.6
1/01/09 to 12/31/09	10.4	1.1	—	8.8	24.5	—	7.2	44.6	3.4
1/01/10 to 12/31/10	11.2	1.1	—	8.1	24.2	—	6.9	45.5	3.0

See “About Portfolio Performance” on page 15 for descriptions of the indexes.

BLACKROCK FUNDS III DECEMBER 31, 2010 11

	LifePath 2040 Portfolio® (concluded)
Performance Summary for the Period Ended December 31, 2010

				Average Annual Total Returns
				1 Year						5 Years						10 Years					Since Inception
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge		w/o sales charge			w/sales charge
Institutional		21.67	%		12.71	%		—			2.16	%		—			1.89	%		—		7.34	%1		—
Investor A		21.49			12.40			6.50	%		1.91			0.82	%		—			—		6.97	2		6.22	%2
Investor C		21.03			—			—			—			—			—			—		6.15	3		5.15	3
Class K		21.89			13.18			—			—			—			—			—		(2.00	)4		—
Class R		21.29			—			—			—			—			—			—		6.47	3		—
Citigroup 3-Month Treasury Bill Index		0.08			0.13			—			2.30			—			2.26			—		—			—
Barclays Capital US Aggregate Bond Index		1.15			6.54			—			5.80			—			5.84			—		—			—
LifePath 2040 Custom Benchmark		21.65			15.18			—			3.69			—			3.08			—		—			—
S&P 1500 Index		23.85			16.38			—			2.65			—			2.07			—		—			—
MSCI All Country World (“ACWI”) ex US IMI Index		25.84			12.73			—			5.12			—			6.22			—		—			—

¹ Total return is calculated from an inception date of March 1, 1994. The Institutional class of shares are successors to the assets of the Institutional class of shares of the Stagecoach Trust LifePath 2040 Fund (the “predecessor fund”), that began operations on March 1, 1994. Performance information for the period before March 26, 1996, the date the LifePath Portfolio began operations, reflects the performance of the predecessor fund.

² Total return is calculated from an inception date of April 8, 2003. This inception date represents the date investors began investing in the Investor A class of shares of the LifePath Portfolio. To establish the new share class, the LifePath Portfolio’s distributor privately seeded Investor A shares on April 30, 2001. The class had no activity from April 30, 2001 until investment began on the Investor A share class inception date. The since inception return calculated from April 30, 2001 for the LifePath Portfolio was 2.35%.

³ Total return is calculated from an inception date of May 3, 2010.

⁴ Total return is calculated from an inception date of May 30, 2008.

Past performance is not indicative of future results.

12 BLACKROCK FUNDS III DECEMBER 31, 2010

LifePath^® 2050 Portfolio

Total Return Based on a $10,000 Investment

¹ The Portfolio compares its performance to that of a customized weighted index (the “LifePath 2050 Custom Benchmark”), comprised of the indexes indicated below, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

² Commencement of operations.

Period	Barclays Capital US Aggregate Bond Index	FTSE EPRA/NAREIT Developed Real Estate Index	MSCI All Country World (“ACWI”) ex US IMI Index	S&P MidCap 400 Index	S&P 500 Index	S&P SmallCap 600 Index
6/30/08 to 12/31/08	1.0%	3.6%	30.4%	10.5%	49.7%	4.8%
1/01/09 to 12/31/09	1.0	9.1	28.3	9.5	47.5	4.6
1/01/10 to 12/31/10	1.1	9.8	27.4	7.6	50.7	3.4

See “About Portfolio Performance” on page 15 for descriptions of the indexes.

BLACKROCK FUNDS III DECEMBER 31, 2010 13

LifePath^® 2050 Portfolio (concluded)

Performance Summary for the Period Ended December 31, 2010

	6-Month Total Returns			Average Annual Total Returns
				1 Year						Since Inception
				w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		24.49	%		13.43	%		—			0.11	%1		—
Investor A		24.37			13.14			7.21	%		(0.13	)1		(2.25	)%1
Investor C		23.89			—			—			6.55	2		5.55	2
Class K		24.78			13.79			—			0.45	1		—
Class R		24.24			—			—			6.87	2		—
Citigroup 3-Month Treasury Bill Index		0.08			0.13			—			—			—
Barclays Capital US Aggregate Bond Index		1.15			6.54			—			—			—
LifePath 2050 Custom Benchmark		24.44			16.11			—			—			—
S&P 1500 Index		23.85			16.38			—			—			—
MSCI All Country World (“ACWI”) ex US IMI Index		25.84			12.73			—			—			—

¹ Total return is calculated from an inception date of June 30, 2008.

² Total return is calculated from an inception date of May 3, 2010.

Past performance is not indicative of future results.

14 BLACKROCK FUNDS III DECEMBER 31, 2010

About Portfolio Performance BlackRock Funds III

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

• Investor A Shares incur a maximum initial sales charge (front-end load) of 5.25%. Investor A Shares are subject to a service fee of 0.25% per year (but no distribution fee).

• Investor C Shares are subject to a 1.00% contingent deferred sales charge if redeemed within one year of purchase. In addition, Investor C Shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year.

• Class R Shares are not subject to any sales charge (front-end load) or deferred sales charge. Class R Shares are subject to a distribution fee of 0.25% per year and a service fee of 0.25% per year. Class R Shares are available only to certain retirement and other similar plans.

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

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. Figures shown in each of the performance tables on the previous pages assume reinvestment of all dividends and distributions, if any, at net asset value on the payable date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.

The LifePath Portfolios’ administrator waived a portion of each LifePath Portfolio’s expenses. Without such waiver, each LifePath Portfolio’s performance would have been lower. Dividends paid to each class of shares will vary because of the different levels of administration and distribution fees applicable to each class, which are deducted from the income available to be paid to shareholders.

The S&P 1500 Index is a market weighted index comprised of the S&P 500, S&P MidCap 400 and S&P SmallCap 600 Indexes, which together represent approximately 90% of the total US equity market. The Barclays Capital US Aggregate Bond Index is an unmanaged market weighted index comprised of investment grade corporate bonds (rated BBB or better), mortgages and US Treasury and government agencies with at least one year to maturity. The MSCI ACWI ex US IMI Index is a free float-adjusted market capitalization-weighted index that measures the equity market performance of the developed (excluding the US) and emerging investable market universe. The Citigroup 3-Month Treasury Bill Index is a market value weighted index of public obligations of the US Treasury with maturities of three months.

The LifePath custom benchmarks are hypothetical representations of the performance of the respective LifePath Portfolio’s asset classes according to their weightings as of the most recent quarter-end. The weightings of the various indexes that are included in the LifePath Portfolios’ custom benchmarks are adjusted quarterly to reflect the LifePath Portfolios’ changing asset allocations over time. As of December 31, 2010, the following indexes are used to calculate the LifePath Portfolios’ custom benchmarks: S&P 500 Index, S&P 400 Index, S&P 600 Index, Barclays Capital US Aggregate Bond Index, Citigroup 3-Month Treasury Bill Index, Barclays Capital US Treasury TIPS Index, MSCI ACWI ex US IMI Index and FTSE EPRA/NAREIT Developed Real Estate Index.

Derivative Financial Instruments

The Active Stock and CoreAlpha Bond Master Portfolios may invest in various derivative instruments, including financial futures contracts and swaps, as specified in Note 2 of the Notes to Financial Statements, which constitute forms of economic leverage. Such instruments are used to obtain exposure to a market without owning or taking physical custody of securities or to hedge market, credit, equity and interest rate risks. Such derivative instruments involve risks, including the imperfect correlation between the value of a derivative instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative instrument. The Master Portfolios’ ability to successfully use a derivative instrument depends on the investment advisor’s ability to accurately predict pertinent market movements, which cannot be assured. The use of derivative instruments may result in losses greater than if they had not been used, may require the Master Portfolios to sell or purchase portfolio securities at inopportune times or distressed values, may limit the amount of appreciation the Master Portfolios can realize on an investment, may result in lower dividends paid to shareholders or may cause the Master Portfolios to hold a security that it might otherwise sell. The Master Portfolios’ investments in these instruments are discussed in detail in the Master Portfolio Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 15

Disclosure of Expenses BlackRock Funds III

Shareholders of each LifePath Portfolio may incur operating expenses, including advisory fees, distribution or 12b-1 fees, and other portfolio expenses. The expense examples shown below (which are based on a hypothetical investment of $1,000 invested on July 1, 2010 and held through December 31, 2010) are intended to assist shareholders both in calculating expenses based on an investment in a LifePath Portfolio and in comparing these expenses with similar costs of investing in other mutual funds.

The tables 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 share class under the heading entitled “Expenses Paid During the Period.”

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

The expenses shown in the tables are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, redemption fees or exchange fees. 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.

Expense Examples

	Actual									Hypothetical2									Annualized Expense Ratio
	Beginning Account Value July 1, 2010			Ending Account Value December 31, 2010			Expenses Paid During the Period1			Beginning Account Value July 1, 2010			Ending Account Value December 31, 2010			Expenses Paid During the Period1
LifePath® Retirement Portfolio
Institutional		$	1,000.00		$	1,097.70		$	4.02		$	1,000.00		$	1,021.40		$	3.87		0.76	%
Investor A		$	1,000.00		$	1,097.10		$	5.34		$	1,000.00		$	1,020.10		$	5.14		1.01	%
Investor C		$	1,000.00		$	1,092.30		$	9.33		$	1,000.00		$	1,016.30		$	9.00		1.77	%
Class K		$	1,000.00		$	1,100.80		$	2.17		$	1,000.00		$	1,023.10		$	2.09		0.41	%
Class R		$	1,000.00		$	1,094.90		$	6.71		$	1,000.00		$	1,018.80		$	6.46		1.27	%
LifePath 2020 Portfolio®
Institutional		$	1,000.00		$	1,147.00		$	3.95		$	1,000.00		$	1,021.50		$	3.72		0.73	%
Investor A		$	1,000.00		$	1,145.80		$	5.30		$	1,000.00		$	1,020.30		$	4.99		0.98	%
Investor C		$	1,000.00		$	1,141.00		$	9.34		$	1,000.00		$	1,016.50		$	8.79		1.73	%
Class K		$	1,000.00		$	1,149.00		$	2.06		$	1,000.00		$	1,023.30		$	1.94		0.38	%
Class R		$	1,000.00		$	1,143.80		$	6.70		$	1,000.00		$	1,019.00		$	6.31		1.24	%
LifePath 2030 Portfolio®
Institutional		$	1,000.00		$	1,184.00		$	3.91		$	1,000.00		$	1,021.60		$	3.62		0.71	%
Investor A		$	1,000.00		$	1,183.30		$	5.28		$	1,000.00		$	1,020.40		$	4.89		0.96	%
Investor C		$	1,000.00		$	1,178.60		$	9.39		$	1,000.00		$	1,016.60		$	8.69		1.71	%
Class K		$	1,000.00		$	1,186.00		$	1.98		$	1,000.00		$	1,023.40		$	1.84		0.36	%
Class R		$	1,000.00		$	1,181.20		$	6.65		$	1,000.00		$	1,019.10		$	6.16		1.21	%
LifePath 2040 Portfolio®
Institutional		$	1,000.00		$	1,216.70		$	3.86		$	1,000.00		$	1,021.70		$	3.52		0.69	%
Investor A		$	1,000.00		$	1,214.90		$	5.25		$	1,000.00		$	1,020.50		$	4.79		0.94	%
Investor C		$	1,000.00		$	1,210.30		$	9.36		$	1,000.00		$	1,016.70		$	8.54		1.68	%
Class K		$	1,000.00		$	1,218.90		$	1.96		$	1,000.00		$	1,023.40		$	1.79		0.35	%
Class R		$	1,000.00		$	1,212.90		$	6.69		$	1,000.00		$	1,019.20		$	6.11		1.20	%
LifePath® 2050 Portfolio
Institutional		$	1,000.00		$	1,244.90		$	3.79		$	1,000.00		$	1,021.80		$	3.41		0.67	%
Investor A		$	1,000.00		$	1,243.70		$	5.20		$	1,000.00		$	1,020.60		$	4.69		0.92	%
Investor C		$	1,000.00		$	1,238.90		$	9.31		$	1,000.00		$	1,016.90		$	8.39		1.65	%
Class K		$	1,000.00		$	1,247.80		$	1.93		$	1,000.00		$	1,023.50		$	1.73		0.34	%
Class R		$	1,000.00		$	1,242.40		$	6.56		$	1,000.00		$	1,019.40		$	5.90		1.16	%

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

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

16 BLACKROCK FUNDS III DECEMBER 31, 2010

Statements of Assets and Liabilities BlackRock Funds III

December 31, 2010	LifePath Retirement Portfolio			LifePath 2020 Portfolio			LifePath 2030 Portfolio			LifePath 2040 Portfolio			LifePath 2050 Portfolio
Assets
Investments at value – from the applicable Master Portfolio	$	715,135,908		$	1,296,997,706		$	1,069,009,005		$	837,222,416		$	73,294,382
Capital shares sold receivable		833,761			794,201			1,028,098			1,215,856			141,822
Total assets		715,969,669			1,297,791,907			1,070,037,103			838,438,272			73,436,204
Liabilities
Capital shares redeemed payable		42,650,295			73,737,821			63,051,614			56,514,986			3,764,171
Income dividends payable		431,939			554,948			517,044			438,981			28,282
Administration fees payable		298,870			537,491			443,110			346,573			28,855
Capital gain distributions payable		—			—			—			—			31,856
Service and distribution fees payable		38,418			78,972			64,358			46,831			3,856
Professional fees payable		10,963			10,963			10,963			10,963			10,964
Total liabilities		43,430,485			74,920,195			64,087,089			57,358,334			3,867,984
Net Assets	$	672,539,184		$	1,222,871,712		$	1,005,950,014		$	781,079,938		$	69,568,220
Net Assets Consist of
Paid-in capital	$	622,424,200		$	1,123,698,512		$	963,362,035		$	721,180,813		$	61,475,917
Undistributed (distributions in excess of) net investment income		(177,525	)		(811,802	)		(248,543	)		(143,458	)		1,009
Accumulated net realized gain (loss)		(17,711,019	)		(70,613,664	)		(80,921,247	)		(71,571,433	)		197,589
Net unrealized appreciation/depreciation		68,003,528			170,598,666			123,757,769			131,614,016			7,893,705
Net Assets	$	672,539,184		$	1,222,871,712		$	1,005,950,014		$	781,079,938		$	69,568,220
Net Asset Value
Institutional:
Net assets	$	490,419,346		$	843,339,168		$	696,817,029		$	556,625,708		$	50,612,878
Shares outstanding, unlimited number of shares authorized, no par value		42,451,613			52,986,953			47,615,023			31,307,352			2,723,367
Net asset value	$	11.55		$	15.92		$	14.63		$	17.78		$	18.58
Investor A:
Net assets	$	181,297,117		$	376,851,392		$	307,188,576		$	224,164,174		$	18,808,713
Shares outstanding, unlimited number of shares authorized, no par value		16,930,533			24,894,522			21,432,893			13,212,162			1,012,333
Net asset value	$	10.71		$	15.14		$	14.33		$	16.97		$	18.58
Maximum offering price per share (100/94.75 of net asset value)	$	11.30		$	15.98		$	15.12		$	17.91		$	19.61
Investor C:
Net assets	$	20,580		$	115,622		$	20,928		$	21,038		$	20,923
Shares outstanding, unlimited number of shares authorized, no par value		1,783			7,278			1,432			1,184			1,127
Net asset value	$	11.55	1	$	15.89		$	14.62	2	$	17.77		$	18.57
Class K:
Net assets	$	769,094		$	2,484,581		$	1,848,903		$	143,512		$	85,840
Shares outstanding, unlimited number of shares authorized, no par value		66,670			156,197			126,363			8,046			4,607
Net asset value	$	11.54		$	15.91		$	14.63		$	17.84		$	18.63
Class R:
Net assets	$	33,047		$	80,949		$	74,578		$	125,506		$	39,866
Shares outstanding, unlimited number of shares authorized, no par value		2,865			5,097			5,108			7,074			2,148
Net asset value	$	11.54	3	$	15.88		$	14.60		$	17.74		$	18.56

¹ The net asset value is calculated based on net assets of $20,580.10 and shares outstanding of 1,782.531.

² The net asset value is calculated based on net assets of $20,927.60 and shares outstanding of 1,431.639.

³ The net asset value is calculated based on net assets of $33,047.37 and shares outstanding of 2,864.589.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 17

Statements of Operations BlackRock Funds III

Year Ended December 31, 2010	LifePath Retirement Portfolio			LifePath 2020 Portfolio			LifePath 2030 Portfolio			LifePath 2040 Portfolio			LifePath 2050 Portfolio
Investment Income
Net investment income allocated from the applicable Master Portfolio:
Interest	$	12,508,641		$	14,243,657		$	7,230,400		$	2,993,498		$	33,121
Dividends		6,487,264			15,871,384			15,531,363			13,921,154			1,082,164
Securities lending – affiliated		157,412			363,691			359,010			330,431			19,042
Income – affiliated		3,349			6,587			5,815			4,525			758
Expenses1		(1,769,521	)		(2,634,652	)		(1,879,076	)		(1,321,730	)		(75,614	)
Total income		17,387,145			27,850,667			21,247,512			15,927,878			1,059,471
Expenses
Administration		3,337,412			5,663,810			4,519,864			3,538,601			225,281
Service – Investor A		429,578			825,963			649,929			472,424			27,073
Service and distribution – Investor C		132			650			130			128			127
Service and distribution – Class R		71			88			85			103			70
Professional		11,366			12,212			11,906			11,721			10,962
Total expenses		3,778,559			6,502,723			5,181,914			4,022,977			263,513
Less fees waived by administrator		(11,366	)		(12,212	)		(11,906	)		(11,721	)		(10,962	)
Total expenses after fees waived		3,767,193			6,490,511			5,170,008			4,011,256			252,551
Net investment income		13,619,952			21,360,156			16,077,504			11,916,622			806,920
Realized and Unrealized Gain (Loss) Allocated from the Master Portfolios
Net realized gain from investments, financial futures contracts and swaps		22,014,130			30,305,176			25,400,572			21,108,906			1,046,011
Net change in unrealized appreciation/depreciation on investments, financial futures contracts and swaps		24,188,092			69,383,863			66,253,687			57,216,119			6,341,470
Total realized and unrealized gain		46,202,222			99,689,039			91,654,259			78,325,025			7,387,481
Net Increase in Net Assets Resulting from Operations	$	59,822,174		$	121,049,195		$	107,731,763		$	90,241,647		$	8,194,401
1 Net of fees waived	$	2,192,810		$	3,758,032		$	3,021,752		$	2,382,458		$	161,729

See Notes to Financial Statements.

18 BLACKROCK FUNDS III DECEMBER 31, 2010

Statements of Changes in Net Assets BlackRock Funds III

	LifePath Retirement Portfolio						LifePath 2020 Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2010			2009			2010			2009
Operations
Net investment income	$	13,619,952		$	5,627,838		$	21,360,156		$	18,783,029
Net realized gain (loss)		22,014,130			(4,545,046	)		30,305,176			(58,045,241	)
Net change in unrealized appreciation/depreciation		24,188,092			57,906,234			69,383,863			196,056,873
Net increase in net assets resulting from operations		59,822,174			58,989,026			121,049,195			156,794,661
Dividends and Distributions to Shareholders From
Net investment income:
Institutional		(10,003,521	)		(4,739,995	)		(15,188,056	)		(17,223,974	)
Investor A		(3,378,533	)		(1,359,146	)		(5,851,117	)		(6,672,470	)
Investor C		(200	)		—			(1,117	)		—
Class K		(14,062	)		(2,101	)		(54,736	)		(20,977	)
Class R		(341	)		—			(615	)		—
Net realized gain:
Institutional		(1,037,186	)		(38,511	)		—			—
Investor A		(389,605	)		(10,904	)		—			—
Investor C		(40	)		—			—			—
Class K		(1,179	)		(15	)		—			—
Class R		(41	)		—			—			—
Return of capital:
Institutional		—			—			—			(91,672	)
Investor A		—			—			—			(36,106	)
Class K		—			—			—			(97	)
Decrease in net assets resulting from dividends and distributions to shareholders		(14,824,708	)		(6,150,672	)		(21,095,641	)		(24,045,296	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		40,521,675			416,400,035			189,547,268			188,098,878
Net Assets
Total increase in net assets		85,519,141			469,238,389			289,500,822			320,848,243
Beginning of year		587,020,043			117,781,654			933,370,890			612,522,647
End of year	$	672,539,184		$	587,020,043		$	1,222,871,712		$	933,370,890
Distributions in excess of net investment income	$	(177,525	)	$	(400,815	)	$	(811,802	)	$	(1,076,317	)

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 19

Statements of Changes in Net Assets (continued) BlackRock Funds III

	LifePath 2030 Portfolio						LifePath 2040 Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2010			2009			2010			2009
Operations
Net investment income	$	16,077,504		$	13,413,276		$	11,916,622		$	10,083,449
Net realized gain (loss)		25,400,572			(56,951,517	)		21,108,906			(49,341,942	)
Net change in unrealized appreciation/depreciation		66,253,687			182,485,014			57,216,119			161,847,250
Net increase in net assets resulting from operations		107,731,763			138,946,773			90,241,647			122,588,757
Dividends and Distributions to Shareholders From
Net investment income:
Institutional		(11,720,937	)		(12,375,362	)		(8,927,793	)		(9,283,916	)
Investor A		(4,207,651	)		(4,626,595	)		(2,997,617	)		(3,074,278	)
Investor C		(179	)		—			(167	)		—
Class K		(32,962	)		(6,313	)		(2,570	)		(237	)
Class R		(576	)		—			(885	)		—
Return of capital:
Institutional		—			(27,465	)		—			—
Investor A		—			(11,001	)		—			—
Class K		—			(12	)		—			—
Decrease in net assets resulting from dividends and distributions to shareholders		(15,962,305	)		(17,046,748	)		(11,929,032	)		(12,358,431	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		185,595,544			158,362,699			110,875,807			136,290,162
Net Assets
Total increase in net assets		277,365,002			280,262,724			189,188,422			246,520,488
Beginning of year		728,585,012			448,322,288			591,891,516			345,371,028
End of year	$	1,005,950,014		$	728,585,012		$	781,079,938		$	591,891,516
Distributions in excess of net investment income	$	(248,543	)	$	(363,742	)	$	(143,458	)	$	(135,688	)

See Notes to Financial Statements.

20 BLACKROCK FUNDS III DECEMBER 31, 2010

Statements of Changes in Net Assets (concluded) BlackRock Funds III

	LifePath 2050 Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2010			2009
Operations
Net investment income	$	806,920		$	146,638
Net realized gain		1,046,011			289,239
Net change in unrealized appreciation/depreciation		6,341,470			1,627,074
Net increase in net assets resulting from operations		8,194,401			2,062,951
Dividends and Distributions to Shareholders From
Net investment income:
Institutional		(654,541	)		(92,580	)
Investor A		(191,594	)		(13,913	)
Investor C		(164	)		—
Class K		(1,247	)		(488	)
Class R		(337	)		—
Net realized gain:
Institutional		(444,355	)		(440,756	)
Investor A		(151,468	)		(96,288	)
Investor C		(188	)		—
Class K		(704	)		(1,732	)
Class R		(313	)		—
Decrease in net assets resulting from dividends and distributions to shareholders		(1,444,911	)		(645,757	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		45,716,060			15,183,580
Net Assets
Total increase in net assets		52,465,550			16,600,774
Beginning of year		17,102,670			501,896
End of year	$	69,568,220		$	17,102,670
Undistributed net investment income	$	1,009		$	39,674

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 21

Financial Highlights LifePath Retirement Portfolio

	Institutional
	Year Ended December 31,
	2010			2009			2008			2007			2006
Per Share Operating Performance
Net asset value, beginning of year	$	10.80		$	9.42		$	11.46		$	11.59		$	11.22
Net investment income		0.23	1		0.32	1		0.37			0.39			0.39
Net realized and unrealized gain (loss)		0.76			1.37			(2.06	)		0.12			0.58
Net increase (decrease) from investment operations		0.99			1.69			(1.69	)		0.51			0.97
Dividends and distributions from:
Net investment income		(0.22	)		(0.31	)		(0.31	)		(0.37	)		(0.39	)
Net realized gain		(0.02	)		(0.00	)2		(0.04	)		(0.27	)		(0.21	)
Total dividends and distributions		(0.24	)		(0.31	)		(0.35	)		(0.64	)		(0.60	)
Net asset value, end of year	$	11.55		$	10.80		$	9.42		$	11.46		$	11.59
Total Investment Return3
Based on net asset value		9.33	%		18.25	%		(15.04	)%		4.50	%		8.80	%
Ratios to Average Net Assets4
Total expenses		1.11	%		1.10	%		1.11	%		1.12	%		1.13	%
Total expenses after fees waived		0.76	%		0.76	%		0.76	%		0.77	%		0.78	%
Net investment income		2.10	%		3.13	%		3.29	%		3.43	%		3.28	%
Supplemental Data
Net assets, end of year (000)	$	490,419		$	438,987		$	92,717		$	136,923		$	91,518
Portfolio turnover of the Master Portfolio		4	%		6	%		11	%		6	%		10	%

¹ Based on average shares outstanding.

² Amount is less than $0.01 per share.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Includes the LifePath Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

See Notes to Financial Statements.

22 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (continued) LifePath Retirement Portfolio

	Investor A
	Year Ended December 31,
	2010			2009			2008			2007			2006
Per Share Operating Performance
Net asset value, beginning of year	$	10.03		$	8.77		$	10.70		$	10.87		$	10.56
Net investment income		0.19	1		0.27	1		0.32			0.36			0.35
Net realized and unrealized gain (loss)		0.71			1.28			(1.92	)		0.09			0.53
Net increase (decrease) from investment operations		0.90			1.55			(1.60	)		0.45			0.88
Dividends and distributions from:
Net investment income		(0.20	)		(0.29	)		(0.29	)		(0.35	)		(0.36	)
Net realized gain		(0.02	)		(0.00	)2		(0.04	)		(0.27	)		(0.21	)
Total dividends and distributions		(0.22	)		(0.29	)		(0.33	)		(0.62	)		(0.57	)
Net asset value, end of year	$	10.71		$	10.03		$	8.77		$	10.70		$	10.87
Total Investment Return3
Based on net asset value		9.12	%		17.96	%		(15.24	)%		4.17	%		8.52	%
Ratios to Average Net Assets4
Total expenses		1.37	%		1.34	%		1.36	%		1.37	%		1.38	%
Total expenses after fees waived		1.02	%		1.00	%		1.01	%		1.02	%		1.03	%
Net investment income		1.86	%		2.83	%		3.11	%		3.06	%		3.18	%
Supplemental Data
Net assets, end of year (000)	$	181,297		$	147,741		$	25,030		$	22,185		$	13,460
Portfolio turnover of the Master Portfolio		4	%		6	%		11	%		6	%		10	%

¹ Based on average shares outstanding.

² Amount is less than $0.01 per share.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Includes the LifePath Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 23

Financial Highlights (continued) LifePath Retirement Portfolio

	Investor C
	Period May 3, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period	$	11.22
Net investment income2		0.09
Net realized and unrealized gain		0.37
Net increase from investment operations		0.46
Dividends and distributions from:
Net investment income		(0.11	)
Net realized gain		(0.02	)
Total dividends and distributions		(0.13	)
Net asset value, end of period	$	11.55
Total Investment Return3,4
Based on net asset value		4.22	%
Ratios to Average Net Assets5,6
Total expenses		2.11	%
Total expenses after fees waived		1.77	%
Net investment income		1.23	%
Supplemental Data
Net assets, end of period (000)	$	21
Portfolio turnover of the Master Portfolio		4	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

24 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (continued) LifePath Retirement Portfolio

	Class K
	Year Ended December 31,						Period May  30, 20081 to December 31, 2008
2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	10.78		$	9.44		$	11.46
Net investment income		0.28	2		0.35	2		0.25
Net realized and unrealized gain (loss)		0.76			1.33			(1.97	)
Net increase (decrease) from investment operations		1.04			1.68			(1.72	)
Dividends and distributions from:
Net investment income		(0.26	)		(0.34	)		(0.26	)
Net realized gain		(0.02	)		(0.00	)3		(0.04	)
Total dividends and distributions		(0.28	)		(0.34	)		(0.30	)
Net asset value, end of period	$	11.54		$	10.78		$	9.44
Total Investment Return4
Based on net asset value		9.82	%		18.53	%		(15.53	)%5
Ratios to Average Net Assets6
Total expenses		0.76	%		0.74	%		0.79	%7
Total expenses after fees waived		0.41	%		0.40	%		0.44	%7
Net investment income		2.49	%		3.43	%		4.08	%7
Supplemental Data
Net assets, end of period (000)	$	769		$	292		$	35
Portfolio turnover of the Master Portfolio		4	%		6	%		11	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Amount is less than $0.01 per share.

⁴ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵ Aggregate total investment return.

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

⁷ Annualized.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 25

Financial Highlights (concluded) LifePath Retirement Portfolio

	Class R
	Period May 3, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period	$	11.22
Net investment income2		0.14
Net realized and unrealized gain		0.36
Net increase from investment operations		0.50
Dividends and distributions from:
Net investment income		(0.16	)
Net realized gain		(0.02	)
Total dividends and distributions		(0.18	)
Net asset value, end of period	$	11.54
Total Investment Return3,4
Based on net asset value		4.55	%
Ratios to Average Net Assets5,6
Total expenses		1.61	%
Total expenses after fees waived		1.26	%
Net investment income		1.84	%
Supplemental Data
Net assets, end of period (000)	$	33
Portfolio turnover of the Master Portfolio		4	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

26 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights LifePath 2020 Portfolio

	Institutional
	Year Ended December 31,
	2010			2009			2008			2007			2006
Per Share Operating Performance
Net asset value, beginning of year	$	14.62		$	12.32		$	16.98		$	17.48		$	15.85
Net investment income		0.29	1		0.35	1		0.44			0.45			0.40
Net realized and unrealized gain (loss)		1.28			2.38			(4.67	)		0.14			1.64
Net increase (decrease) from investment operations		1.57			2.73			(4.23	)		0.59			2.04
Dividends and distributions from:
Net investment income		(0.27	)		(0.43	)		(0.31	)		(0.44	)		(0.41	)
Net realized gain		–			–			(0.12	)		(0.65	)		–
Return of capital		–			(0.00	)2		–			–			–
Total dividends and distributions		(0.27	)		(0.43	)		(0.43	)		(1.09	)		(0.41	)
Net asset value, end of year	$	15.92		$	14.62		$	12.32		$	16.98		$	17.48
Total Investment Return3
Based on net asset value		10.90	%		22.71	%		(25.42	)%		3.34	%		13.01	%
Ratios to Average Net Assets4
Total expenses		1.08	%		1.08	%		1.07	%		1.08	%		1.08	%
Total expenses after fees waived		0.73	%		0.72	%		0.73	%		0.74	%		0.75	%
Net investment income		1.95	%		2.65	%		2.65	%		2.52	%		2.37	%
Supplemental Data
Net assets, end of year (000)	$	843,339		$	663,890	5	$	432,717		$	781,519		$	598,633
Portfolio turnover of the Master Portfolio		4	%		6	%		13	%		7	%		16	%

¹ Based on average shares outstanding.

² Amount is less than $0.01 per share.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Includes the LifePath Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Revised as a result of reallocation of net income.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 27

Financial Highlights (continued) LifePath 2020 Portfolio

	Investor A
	Year Ended December 31,
	2010			2009			2008			2007			2006
Per Share Operating Performance
Net asset value, beginning of year	$	13.93		$	11.75		$	16.24		$	16.77		$	15.22
Net investment income		0.24	1		0.30	1		0.37			0.38			0.37
Net realized and unrealized gain (loss)		1.21			2.28			(4.45	)		0.13			1.56
Net increase (decrease) from investment operations		1.45			2.58			(4.08	)		0.51			1.93
Dividends and distributions from:
Net investment income		(0.24	)		(0.40	)		(0.29	)		(0.39	)		(0.38	)
Net realized gain		–			–			(0.12	)		(0.65	)		–
Return of capital		–			(0.00	)2		–			–			–
Total dividends and distributions		(0.24	)		(0.40	)		(0.41	)		(1.04	)		(0.38	)
Net asset value, end of year	$	15.14		$	13.93		$	11.75		$	16.24		$	16.77
Total Investment Return3
Based on net asset value		10.56	%		22.42	%		(25.57	)%		3.06	%		12.77	%
Ratios to Average Net Assets4
Total expenses		1.34	%		1.33	%		1.32	%		1.33	%		1.33	%
Total expenses after fees waived		0.99	%		0.97	%		0.98	%		0.99	%		1.00	%
Net investment income		1.71	%		2.42	%		2.51	%		2.26	%		2.31	%
Supplemental Data
Net assets, end of year (000)	$	376,851		$	268,514	5	$	179,389		$	180,740		$	118,364
Portfolio turnover of the Master Portfolio		4	%		6	%		13	%		7	%		16	%

¹ Based on average shares outstanding.

² Amount is less than $0.01 per share.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Includes the LifePath Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Revised as a result of reallocation of net income.

See Notes to Financial Statements.

28 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (continued) LifePath 2020 Portfolio

	Investor C
	Period May 3, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period	$	15.29
Net investment income2		0.12
Net realized and unrealized gain		0.64
Net increase from investment operations		0.76
Dividends and distributions from:
Net investment income		(0.16	)
Total dividends and distributions		(0.16	)
Net asset value, end of period	$	15.89
Total Investment Return3,4
Based on net asset value		5.03	%
Ratios to Average Net Assets5,6
Total expenses		2.09	%
Total expenses after fees waived		1.74	%
Net investment income		1.23	%
Supplemental Data
Net assets, end of period (000)	$	116
Portfolio turnover of the Master Portfolio		4	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 29

Financial Highlights (continued) LifePath 2020 Portfolio

	Class K
	Year Ended December 31,						Period May 30, 20081 to December 31, 2008
	2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	14.61		$	12.33		$	16.90
Net investment income		0.34	2		0.40	2		0.30
Net realized and unrealized gain (loss)		1.28			2.35	3		(4.48	)
Net increase (decrease) from investment operations		1.62			2.75	3		(4.18	)
Dividends and distributions from:
Net investment income		(0.32	)		(0.47	)		(0.27	)
Net realized gain		–			–			(0.12	)
Return of capital		–			(0.00	)4		–
Total dividends and distributions		(0.32	)		(0.47	)		(0.39	)
Net asset value, end of period	$	15.91		$	14.61	3	$	12.33
Total Investment Return5
Based on net asset value		11.28	%		23.15	%		(25.28	)%6
Ratios to Average Net Assets7
Total expenses		0.74	%		0.73	%		0.76	%8
Total expenses after fees waived		0.39	%		0.37	%		0.42	%8
Net investment income		2.29	%		3.05	%		4.27	%8
Supplemental Data
Net assets, end of period (000)	$	2,485		$	967	3	$	416
Portfolio turnover of the Master Portfolio		4	%		6	%		13	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Revised as a result of reallocation of net income.

⁴ Amount is less than $0.01 per share.

⁵ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶ Aggregate total investment return.

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

⁸ Annualized.

See Notes to Financial Statements.

30 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (concluded) LifePath 2020 Portfolio

	Class R
	Period May 3, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period	$	15.29
Net investment income2		0.23
Net realized and unrealized gain		0.57
Net increase from investment operations		0.80
Dividends and distributions from:
Net investment income		(0.21	)
Total dividends and distributions		(0.21	)
Net asset value, end of period	$	15.88
Total Investment Return3,4
Based on net asset value		5.34	%
Ratios to Average Net Assets5,6
Total expenses		1.58	%
Total expenses after fees waived		1.23	%
Net investment income		2.29	%
Supplemental Data
Net assets, end of period (000)	$	81
Portfolio turnover of the Master Portfolio		4	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 31

Financial Highlights LifePath 2030 Portfolio

	Institutional
	Year Ended December 31,
	2010			2009			2008			2007			2006
Per Share Operating Performance
Net asset value, beginning of year	$	13.31		$	10.92		$	16.19		$	16.90		$	15.39
Net investment income		0.25	1		0.29	1		0.35			0.34			0.32
Net realized and unrealized gain (loss)		1.31			2.46			(5.29	)		0.11			1.99
Net increase (decrease) from investment operations		1.56			2.75			(4.94	)		0.45			2.31
Dividends and distributions from:
Net investment income		(0.24	)		(0.36	)		(0.25	)		(0.35	)		(0.36	)
Net realized gain		–			–			(0.08	)		(0.81	)		(0.44	)
Return of capital		–			(0.00	)2		–			–			–
Total dividends and distributions		(0.24	)		(0.36	)		(0.33	)		(1.16	)		(0.80	)
Net asset value, end of year	$	14.63		$	13.31		$	10.92		$	16.19		$	16.90
Total Investment Return3
Based on net asset value		11.86	%		25.77	%		(31.03	)%		2.64	%		15.12	%
Ratios to Average Net Assets4
Total expenses		1.07	%		1.06	%		1.06	%		1.07	%		1.08	%
Total expenses after fees waived		0.70	%		0.70	%		0.72	%		0.73	%		0.74	%
Net investment income		1.85	%		2.47	%		2.29	%		2.10	%		1.95	%
Supplemental Data
Net assets, end of year (000)	$	696,817		$	517,817	5	$	315,028		$	564,348		$	408,564
Portfolio turnover of the Master Portfolio		3	%		7	%		13	%		7	%		22	%

¹ Based on average shares outstanding.

² Amount is less than $0.01 per share.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Includes the LifePath Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁵ Revised as a result of reallocation of net income.

See Notes to Financial Statements.

32 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (continued) LifePath 2030 Portfolio

	Investor A
	Year Ended December 31,
	2010			2009			2008			2007			2006
Per Share Operating Performance
Net asset value, beginning of year	$	13.05		$	10.71		$	15.90		$	16.62		$	15.15
Net investment income		0.21	1		0.26	1		0.29			0.31			0.28
Net realized and unrealized gain (loss)		1.28			2.41	2		(5.17	)		0.09			1.95
Net increase (decrease) from investment operations		1.49			2.67	2		(4.88	)		0.40			2.23
Dividends and distributions from:
Net investment income		(0.21	)		(0.33	)		(0.23	)		(0.31	)		(0.32	)
Net realized gain		–			–			(0.08	)		(0.81	)		(0.44	)
Return of capital		–			(0.00	)3		–			–			–
Total dividends and distributions		(0.21	)		(0.33	)		(0.31	)		(1.12	)		(0.76	)
Net asset value, end of year	$	14.33		$	13.05	2	$	10.71		$	15.90		$	16.62
Total Investment Return4
Based on net asset value		11.53	%		25.51	%2		(31.19	)%		2.38	%		14.83	%
Ratios to Average Net Assets5
Total expenses		1.32	%		1.31	%		1.31	%		1.32	%		1.33	%
Total expenses after fees waived		0.96	%		0.95	%		0.97	%		0.98	%		0.99	%
Net investment income		1.60	%		2.23	%		2.13	%		1.85	%		1.84	%
Supplemental Data
Net assets, end of year (000)	$	307,189		$	210,372	2	$	133,199		$	135,684		$	77,890
Portfolio turnover of the Master Portfolio		3	%		7	%		13	%		7	%		22	%

¹ Based on average shares outstanding.

² Revised as a result of reallocation of net income.

³ Amount is less than $0.01 per share.

⁴ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

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

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 33

Financial Highlights (continued) LifePath 2030 Portfolio

	Investor C
	Period May 3, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period	$	13.97
Net investment income2		0.10
Net realized and unrealized gain		0.67
Net increase from investment operations		0.77
Dividends and distributions from:
Net investment income		(0.12	)
Total dividends and distributions		(0.12	)
Net asset value, end of period	$	14.62
Total Investment Return3,4
Based on net asset value		5.64	%
Ratios to Average Net Assets5,6
Total expenses		2.07	%
Total expenses after fees waived		1.71	%
Net investment income		1.09	%
Supplemental Data
Net assets, end of period (000)	$	21
Portfolio turnover of the Master Portfolio		3	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

34 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (continued) LifePath 2030 Portfolio

	Class K
	Year Ended December 31,						Period May 30, 20081 to December 31, 2008
	2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	13.30		$	10.92		$	16.07
Net investment income		0.29	2		0.38	2		0.25
Net realized and unrealized gain (loss)		1.32			2.40	3		(5.09	)
Net increase (decrease) from investment operations		1.61			2.78	3		(4.84	)
Dividends and distributions from:
Net investment income		(0.28	)		(0.40	)		(0.23	)
Net realized gain		–			–			(0.08	)
Return of capital		–			(0.00	)4		–
Total dividends and distributions		(0.28	)		(0.40	)		(0.31	)
Net asset value, end of period	$	14.63		$	13.30	3	$	10.92
Total Investment Return5
Based on net asset value		12.32	%		26.23	%		(30.65	)%6
Ratios to Average Net Assets7
Total expenses		0.72	%		0.71	%		0.73	%8
Total expenses after fees waived		0.35	%		0.35	%		0.39	%8
Net investment income		2.17	%		3.19	%		3.44	%8
Supplemental Data
Net assets, end of period (000)	$	1,849		$	396	3	$	95
Portfolio turnover of the Master Portfolio		3	%		7	%		13	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Revised as a result of reallocation of net income.

⁴ Amount is less than $0.01 per share.

⁵ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶ Aggregate total investment return.

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

⁸ Annualized.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 35

Financial Highlights (concluded) LifePath 2030 Portfolio

	Class R
	Period May 3, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period	$	13.97
Net investment income2		0.22
Net realized and unrealized gain		0.60
Net increase from investment operations		0.82
Dividends and distributions from:
Net investment income		(0.19	)
Total dividends and distributions		(0.19	)
Net asset value, end of period	$	14.60
Total Investment Return3,4
Based on net asset value		5.96	%
Ratios to Average Net Assets5,6
Total expenses		1.56	%
Total expenses after fees waived		1.20	%
Net investment income		2.39	%
Supplemental Data
Net assets, end of period (000)	$	75
Portfolio turnover of the Master Portfolio		3	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

36 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights LifePath 2040 Portfolio

	Institutional
	Year Ended December 31,
	2010			2009			2008			2007			2006
Per Share Operating Performance
Net asset value, beginning of year	$	16.04		$	12.88		$	20.32		$	20.90		$	18.18
Net investment income		0.28	1		0.32	1		0.35			0.34			0.31
Net realized and unrealized gain (loss)		1.73			3.22			(7.45	)		0.08			2.76
Net increase (decrease) from investment operations		2.01			3.54			(7.10	)		0.42			3.07
Dividends and distributions from:
Net investment income		(0.27	)		(0.38	)		(0.26	)		(0.35	)		(0.35	)
Net realized gain		–			–			(0.08	)		(0.65	)		–
Total dividends and distributions		(0.27	)		(0.38	)		(0.34	)		(1.00	)		(0.35	)
Net asset value, end of year	$	17.78		$	16.04		$	12.88		$	20.32		$	20.90
Total Investment Return2
Based on net asset value		12.71	%		28.08	%		(35.40	)%		2.03	%		16.97	%
Ratios to Average Net Assets3
Total expenses		1.06	%		1.05	%		1.04	%		1.06	%		1.07	%
Total expenses after fees waived		0.69	%		0.69	%		0.69	%		0.72	%		0.73	%
Net investment income		1.75	%		2.33	%		2.02	%		1.71	%		1.62	%
Supplemental Data
Net assets, end of year (000)	$	556,626		$	435,317	4	$	248,491		$	383,391		$	278,716
Portfolio turnover of the Master Portfolio		4	%		6	%		14	%		8	%		29	%

¹ Based on average shares outstanding.

² Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³ Includes the LifePath Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁴ Revised as a result of reallocation of net income.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 37

Financial Highlights (continued) LifePath 2040 Portfolio

	Investor A
	Year Ended December 31,
	2010			2009			2008			2007			2006
Per Share Operating Performance
Net asset value, beginning of year	$	15.33		$	12.32		$	19.46		$	20.06		$	17.47
Net investment income		0.23	1		0.28	1		0.29			0.30			0.25
Net realized and unrealized gain (loss)		1.65			3.08			(7.13	)		0.06			2.64
Net increase (decrease) from investment operations		1.88			3.36			(6.84	)		0.36			2.89
Dividends and distributions from:
Net investment income		(0.24	)		(0.35	)		(0.22	)		(0.31	)		(0.30	)
Net realized gain		–			–			(0.08	)		(0.65	)		–
Total dividends and distributions		(0.24	)		(0.35	)		(0.30	)		(0.96	)		(0.30	)
Net asset value, end of year	$	16.97		$	15.33		$	12.32		$	19.46		$	20.06
Total Investment Return2
Based on net asset value		12.40	%		27.85	%		(35.56	)%		1.78	%		16.64	%
Ratios to Average Net Assets3
Total expenses		1.31	%		1.30	%		1.29	%		1.31	%		1.32	%
Total expenses after fees waived		0.94	%		0.94	%		0.94	%		0.97	%		0.98	%
Net investment income		1.50	%		2.08	%		1.80	%		1.49	%		1.46	%
Supplemental Data
Net assets, end of year (000)	$	224,164		$	156,564	4	$	96,873		$	110,528		$	65,203
Portfolio turnover of the Master Portfolio		4	%		6	%		14	%		8	%		29	%

¹ Based on average shares outstanding.

² Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³ Includes the LifePath Portfolio’s share of its corresponding Master Portfolio’s allocated net expenses and/or net investment income.

⁴ Revised as a result of reallocation of net income.

See Notes to Financial Statements.

38 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (continued) LifePath 2040 Portfolio

	Investor C
	Period May 3, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period	$	16.89
Net investment income2		0.12
Net realized and unrealized gain		0.90
Net increase from investment operations		1.02
Dividends and distributions from:
Net investment income		(0.14	)
Total dividends and distributions		(0.14	)
Net asset value, end of period	$	17.77
Total Investment Return3,4
Based on net asset value		6.15	%
Ratios to Average Net Assets5,6
Total expenses		2.06	%
Total expenses after fees waived		1.69	%
Net investment income		1.11	%
Supplemental Data
Net assets, end of period (000)	$	21
Portfolio turnover of the Master Portfolio		4	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 39

Financial Highlights (continued) LifePath 2040 Portfolio

	Class K
	Year Ended December 31,						Period May  30, 20081 to December 31, 2008
	2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	16.03		$	12.87		$	20.11
Net investment income		0.39	2		0.38	2		0.31
Net realized and unrealized gain (loss)		1.70			3.21	3		(7.21	)
Net increase (decrease) from investment operations		2.09			3.59	3		(6.90	)
Dividends and distributions from:
Net investment income		(0.28	)		(0.43	)		(0.26	)
Net realized gain		–			–			(0.08	)
Total dividends and distributions		(0.28	)		(0.43	)		(0.34	)
Net asset value, end of period	$	17.84		$	16.03	3	$	12.87
Total Investment Return4
Based on net asset value		13.18	%		28.52	%		(34.75	)%5
Ratios to Average Net Assets6
Total expenses		0.70	%		0.70	%		0.69	%7
Total expenses after fees waived		0.33	%		0.34	%		0.36	%7
Net investment income		2.34	%		2.73	%		3.31	%7
Supplemental Data
Net assets, end of period (000)	$	144		$	11		$	6
Portfolio turnover of the Master Portfolio		4	%		6	%		14	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Revised as a result of reallocation of net income.

⁴ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵ Aggregate total investment return.

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

⁷ Annualized.

See Notes to Financial Statements.

40 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (concluded) LifePath 2040 Portfolio

	Class R
	Period May 3, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period	$	16.89
Net investment income2		0.34
Net realized and unrealized gain		0.73
Net increase from investment operations		1.07
Dividends and distributions from:
Net investment income		(0.22	)
Total dividends and distributions		(0.22	)
Net asset value, end of period	$	17.74
Total Investment Return3,4
Based on net asset value		6.47	%
Ratios to Average Net Assets5,6
Total expenses		1.55	%
Total expenses after fees waived		1.19	%
Net investment income		3.13	%
Supplemental Data
Net assets, end of period (000)	$	126
Portfolio turnover of the Master Portfolio		4	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 41

Financial Highlights LifePath 2050 Portfolio

	Institutional
	Year Ended December 31,						Period June  30, 20081 to December 31, 2008
	2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	16.81		$	13.46		$	20.00
Net investment income		0.31	2		0.38	2		0.10
Net realized and unrealized gain (loss)		1.91			3.68			(6.52	)
Net increase (decrease) from investment operations		2.22			4.06			(6.42	)
Dividends and distributions from:
Net investment income		(0.28	)		(0.16	)		(0.09	)
Net realized gain		(0.17	)		(0.55	)		(0.00	)3
Return of capital		–			–			(0.03	)
Total dividends and distributions		(0.45	)		(0.71	)		(0.12	)
Net asset value, end of period	$	18.58		$	16.81		$	13.46
Total Investment Return4
Based on net asset value		13.43	%		30.35	%		(32.18	)%5
Ratios to Average Net Assets6
Total expenses		1.09	%		1.27	%		12.80	%7
Total expenses after fees waived		0.67	%		0.67	%		0.68	%7
Net investment income		1.83	%		2.39	%		2.14	%7
Supplemental Data
Net assets, end of period (000)	$	50,613		$	13,992		$	444
Portfolio turnover of the Master Portfolio		5	%		12	%		0	%8

¹ Commencement of operations.

² Based on average shares outstanding.

³ Amount is less than $0.01 per share.

⁴ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵ Aggregate total investment return.

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

⁷ Annualized.

⁸ Rounds to less than 1%.

See Notes to Financial Statements.

42 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (continued) LifePath 2050 Portfolio

	Investor A
	Year Ended December 31,						Period from June 30, 20081 to December 31, 2008
	2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	16.82		$	13.47		$	20.00
Net investment income		0.28	2		0.41	2		0.14
Net realized and unrealized gain (loss)		1.90			3.63			(6.59	)
Net increase (decrease) from investment operations		2.18			4.04			(6.45	)
Dividends and distributions from:
Net investment income		(0.25	)		(0.14	)		(0.06	)
Net realized gain		(0.17	)		(0.55	)		(0.00	)3
Return of capital		–			–			(0.02	)
Total dividends and distributions		(0.42	)		(0.69	)		(0.08	)
Net asset value, end of period	$	18.58		$	16.82		$	13.47
Total Investment Return4
Based on net asset value		13.14	%		30.08	%		(32.28	)%5
Ratios to Average Net Assets6
Total expenses		1.34	%		1.35	%		13.04	%7
Total expenses after fees waived		0.92	%		0.84	%		0.91	%7
Net investment income		1.67	%		2.45	%		1.68	%7
Supplemental Data
Net assets, end of period (000)	$	18,809		$	3,056		$	34
Portfolio turnover of the Master Portfolio		5	%		12	%		0	%8

¹ Commencement of operations.

² Based on average shares outstanding.

³ Amount is less than $0.01 per share.

⁴ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵ Aggregate total investment return.

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

⁷ Annualized.

⁸ Rounds to less than 1%.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 43

Financial Highlights (continued) LifePath 2050 Portfolio

	Investor C
	Period May 3, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period	$	17.75
Net investment income2		0.12
Net realized and unrealized gain		1.02
Net increase from investment operations		1.14
Dividends and distributions from:
Net investment income		(0.15	)
Net realized gain		(0.17	)
Total dividends and distributions		(0.32	)
Net asset value, end of period	$	18.57
Total Investment Return3,4
Based on net asset value		6.55	%
Ratios to Average Net Assets5,6
Total expenses		2.07	%
Total expenses after fees waived		1.64	%
Net investment income		1.04	%
Supplemental Data
Net assets, end of period (000)	$	21
Portfolio turnover of the Master Portfolio		5	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

44 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (continued) LifePath 2050 Portfolio

	Class K
	Year Ended December 31,						Period June  30, 20081 to December 31, 2008
	2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	16.85		$	13.46		$	20.00
Net investment income		0.37	2		0.64	2		0.17
Net realized and unrealized gain (loss)		1.91			3.49	3		(6.57	)
Net increase (decrease) from investment operations		2.28			4.13	3		(6.40	)
Dividends and distributions from:
Net investment income		(0.33	)		(0.19	)		(0.11	)
Net realized gain		(0.17	)		(0.55	)		(0.00	)4
Return of capital		–			–			(0.03	)
Total dividends and distributions		(0.50	)		(0.74	)		(0.14	)
Net asset value, end of period	$	18.63		$	16.85	3	$	13.46
Total Investment Return5
Based on net asset value		13.79	%3		30.89	%3		(32.10	)%6
Ratios to Average Net Assets7
Total expenses		0.76	%		1.37	%		12.41	%8
Total expenses after fees waived		0.33	%		0.58	%		0.29	%8
Net investment income		2.19	%		4.34	%		3.94	%8
Supplemental Data
Net assets, end of period (000)	$	86		$	55		$	24
Portfolio turnover of the Master Portfolio		5	%		12	%		0	%9

¹ Commencement of operations.

² Based on average shares outstanding.

³ Revised as a result of reallocation of net income.

⁴ Amount is less than $0.01 per share.

⁵ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁶ Aggregate total investment return.

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

⁸ Annualized.

⁹ Rounds to less than 1%.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 45

Financial Highlights (concluded) LifePath 2050 Portfolio

	Class R
	Period May 3, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period	$	17.75
Net investment income2		0.22
Net realized and unrealized gain		0.97
Net increase from investment operations		1.19
Dividends and distributions from:
Net investment income		(0.21	)
Net realized gain		(0.17	)
Total dividends and distributions		(0.38	)
Net asset value, end of period	$	18.56
Total Investment Return3,4
Based on net asset value		6.87	%
Ratios to Average Net Assets5,6
Total expenses		1.57	%
Total expenses after fees waived		1.16	%
Net investment income		1.99	%
Supplemental Data
Net assets, end of period (000)	$	40
Portfolio turnover of the Master Portfolio		5	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

46 BLACKROCK FUNDS III DECEMBER 31, 2010

Notes to Financial Statements BlackRock Funds III

1. Organization and Significant Accounting Policies:

BlackRock Funds III (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. The Trust is organized as a Delaware statutory trust. The LifePath Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The financial statements and these accompanying notes relate to five series of the Trust: LifePath Retirement Portfolio, LifePath 2020 Portfolio, LifePath 2030 Portfolio, LifePath 2040 Portfolio and LifePath 2050 Portfolio (each, a “LifePath Portfolio” and collectively, the “LifePath Portfolios”). Each LifePath Portfolio seeks to achieve its investment objective by investing substantially all of its assets in a separate series of Master Investment Portfolio (“MIP”): LifePath Retirement Master Portfolio, LifePath 2020 Master Portfolio, LifePath 2030 Master Portfolio, LifePath 2040 Master Portfolio and LifePath 2050 Master Portfolio (each, a “Master Portfolio” and collectively, the “Master Portfolios”). Each Master Portfolio has the same or substantially similar investment objective as its corresponding LifePath Portfolio. The performance of a LifePath Portfolio is directly affected by the performance of its corresponding Master Portfolio.

The value of each LifePath Portfolio’s investment in its corresponding Master Portfolio reflects that LifePath Portfolio’s interest in the net assets of that Master Portfolio (51.82%, 55.33%, 54.21%, 55.11% and 61.39% for the LifePath Retirement Portfolio, LifePath 2020 Portfolio, LifePath 2030 Portfolio, LifePath 2040 Portfolio and LifePath 2050 Portfolio, respectively, as of December 31, 2010).

Each LifePath Portfolio offers multiple classes of shares. Prior to May 3, 2010, Institutional Shares were designated Class I Shares, Class K Shares were designated Class S Shares, Investor A Shares were designated Class R Shares and Class R Shares were designated Class R-1 Shares. Institutional and Class K Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally sold with a front-end sales charge. Investor C Shares may be subject to a contingent deferred sales charge. Class R Shares are sold without a sales charge and only to certain retirement or similar plans. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Investor A, Investor C and Class R Shares bear certain expenses related to the shareholder servicing of such shares, and Investor C and Class R Shares also bear certain expenses related to the distribution of such shares. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures.

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

Valuation: The LifePath Portfolios fair value their financial instruments at market value. The LifePath Portfolios record their investments in the Master Portfolio at fair value based on the LifePath Portfolio’s proportionate interest in the net assets of the Master Portfolio. Valuation of securities held by the Master Portfolio, including categorization of fair value measurements, is discussed in Note 1 of the Master Portfolios’ Notes to Financial Statements, which are included elsewhere in this report.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions in the Master Portfolios are recorded on the dates the transactions are entered into (the trade dates). Each LifePath Portfolio records daily its proportionate share of its Master Portfolio’s income, expenses and realized and unrealized gains and losses. In addition, each LifePath Portfolio accrues its own expenses. Income and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Dividends and Distributions: Dividends from net investment income are declared and paid quarterly. Distributions of capital gains are recorded on the ex-dividend dates. If the total dividends and distributions made in any tax year exceeds net investment income and accumulated realized capital gains, a portion of the total distribution may be treated as a tax return of capital. The amount and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

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

The LifePath Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the LifePath Portfolio’s US federal tax return remains open for each of the four years ended December 31, 2010. The statute of limitations on the LifePath Portfolio’s state and local tax returns may remain open for an additional year depending upon the jurisdiction. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

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

BLACKROCK FUNDS III DECEMBER 31, 2010 47

Notes to Financial Statements (continued) BlackRock Funds III

2. Administration Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”), Bank of America Corporation (“BAC”) and Barclays Bank PLC (“Barclays”) are the largest stockholders of BlackRock, Inc. (“BlackRock”). Due to the ownership structure, PNC is an affiliate of the Portfolios for 1940 Act purposes, but BAC and Barclays are not.

The Trust entered into an administration services arrangement with BlackRock Institutional Trust Company, N.A. (“BTC”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC, in consideration thereof, has agreed to bear all costs of operating the LifePath Portfolios, excluding brokerage expenses, management fees, 12b-1 distribution and service fees, independent expenses, litigation expenses or other extraordinary expenses. BTC is entitled to receive for these administration services an annual fee of 0.50% of the average daily net assets of each LifePath Portfolio’s Institutional, Investor A, Investor C and Class R Shares and 0.15% of the average net assets of the Class K Shares.

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

The fees of the Trust’s independent registered public accounting firm and legal counsel (the “independent expenses”) are paid directly by the LifePath Portfolios. BTC has contractually agreed to provide an offsetting credit against the administration fees paid by the Portfolios in an amount equal to the independent expenses through April 30, 2012. These amounts are included in fees waived by administrator in the Statements of Operations.

The LifePath Portfolios entered into a Distribution Agreement and Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of BlackRock. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, the LifePath Portfolio’s pay BRIL ongoing service and distribution fees.

The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the share classes as follows:

	Service Fee	Distribution Fee
Investor A	0.25%	–
Investor C	0.25%	0.75%
Class R	0.25%	0.25%

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

For the year ended December 31, 2010, affiliates earned underwriting discounts, direct commissions and/or dealer concessions on sales of each Fund’s Investor A Shares as follows:

	Investor A
LifePath 2020 Portfolio	$	58
LifePath 2030 Portfolio	$	43
LifePath 2040 Portfolio	$	13
LifePath 2050 Portfolio	$	36

For the year ended December 31, 2010, affiliates of the LifePath 2030 Portfolio received contingent deferred sales charges relating to transactions in Investor C Shares of $12.

BNY Mellon Investment Servicing (US) Inc. (formerly PNC Global Investment Servicing (U.S.) Inc. (“PNCGIS”)), serves as transfer agent and dividend disbursing agent. On July 1, 2010, the Bank of New York Mellon Corporation purchased PNCGIS, which prior to this date were indirect, wholly owned subsidiaries of PNC and affiliates of BTC. Transfer agency fees paid by BTC to PNCGIS are comprised of those fees charged for all shareholder communications including mailing of shareholder reports, dividend and distribution notices, and proxy materials for shareholder meetings, as well as per account and per transaction fees related to servicing and maintenance of shareholder accounts, including the issuing, redeeming and transferring of shares, check writing, anti-money laundering services, and customer identification services.

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

48 BLACKROCK FUNDS III DECEMBER 31, 2010

Notes to Financial Statements (continued) BlackRock Funds III

3. Income Tax Information:

Reclassifications: US GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. The following permanent differences as of December 31, 2010 attributable to the reclassification of distributions, distributions paid in excess of taxable income and the timing and recognition of partnership income were reclassified to the following accounts:

	LifePath Retirement Portfolio			LifePath 2020 Portfolio			LifePath 2030 Portfolio			LifePath 2040 Portfolio			LifePath 2050 Portfolio
Paid-in capital	$	(81,386	)	$	(114,269	)	$	(68,110	)	$	(23,558	)	$	(198	)
Undistributed (distributions in excess of) net investment income	$	(5	)		–			–		$	4,640		$	2,298
Accumulated net realized gain (loss)	$	81,391		$	114,269		$	68,110		$	18,918		$	(2,100	)

The tax character of distributions paid during the fiscal years ended December 31, 2010 and December 31, 2009 were as follows:

	LifePath Retirement Portfolio		LifePath 2020 Portfolio		LifePath 2030 Portfolio		LifePath 2040 Portfolio		LifePath 2050 Portfolio
Ordinary income
12/31/2010	$	14,824,708	$	21,095,641	$	15,962,305	$	11,929,032	$	1,181,921
12/31/2009		6,150,672		23,917,421		17,008,270		12,358,431		561,729
Net long-term capital gains
12/31/2010	$	–	$	–	$	–	$	–	$	262,990
12/31/2009		–		–		–		–		84,028
Return of capital
12/31/2010	$	–	$	–	$	–	$	–	$	–
12/31/2009		–		127,875		38,478		–		–
Total distributions
12/31/2010	$	14,824,708	$	21,095,641	$	15,962,305	$	11,929,032	$	1,444,911
12/31/2009	$	6,150,672	$	24,045,296	$	17,046,748	$	12,358,431	$	645,757

As of December 31, 2010, the tax components of net accumulated earnings were as follows:

	LifePath Retirement Portfolio			LifePath 2020 Portfolio			LifePath 2030 Portfolio			LifePath 2040 Portfolio			LifePath 2050 Portfolio
Undistributed ordinary income	$	110,092		$	116,090		$	36,933		$	–		$	100,432
Undistributed long-term capital gains		–			–			–			–			266,898
Capital loss carryforwards		(20,123,069	)		(46,393,020	)		(45,393,537	)		(39,253,404	)		–
Net unrealized gains*		70,127,961			145,450,130			87,944,583			99,152,529			7,724,973
Total	$	50,114,984		$	99,173,200		$	42,587,979		$	59,899,125		$	8,092,303

* The differences between book-basis and tax-basis net unrealized gains were attributable primarily to the timing and recognition of partnership income.

As of December 31, 2010, the LifePath Portfolios had the following capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates:

Expires December 31,	LifePath Retirement Portfolio		LifePath 2020 Portfolio		LifePath 2030 Portfolio		LifePath 2040 Portfolio
2016	$	13,512,137	$	–	$	–	$	2,141,947
2017		6,610,932		46,393,020		45,393,537		37,111,457
Total	$	20,123,069	$	46,393,020	$	45,393,537	$	39,253,404

Under the recently enacted Regulated Investment Company Modernization Act of 2010, capital losses incurred by the Portfolio after December 31, 2010 will not be subject to expiration. In addition, such losses must be utilized prior to the losses incurred in the years preceding enactment.

BLACKROCK FUNDS III DECEMBER 31, 2010 49

Notes to Financial Statements (continued) BlackRock Funds III

4. Capital Share Transactions:

Transactions in capital shares for each share class were as follows:

	Year Ended December 31, 2010							Year Ended December 31, 2009
LifePath Retirement Portfolio	Shares			Amount				Shares			Amount
Institutional
Shares sold		15,754,230			$	174,109,573			9,138,463			$	93,482,873
Shares issued resulting from reorganization		–				–			26,374,283				252,998,280
Shares issued to shareholders in reinvestment of dividends and distributions		925,464				10,208,251			437,066				4,454,791
Total issued		16,679,694				184,317,824			35,949,812				350,935,944
Shares redeemed		(14,893,180	)			(166,597,185	)		(5,128,509	)			(51,929,051	)
Net increase		1,786,514			$	17,720,639			30,821,303			$	299,006,893
Investor A
Shares sold		5,981,701			$	61,288,546			3,440,963			$	33,560,467
Shares issued resulting from reorganization		–				–			9,701,782				95,558,672
Shares issued to shareholders in reinvestment of dividends and distributions		342,275				3,502,038			138,473				1,317,402
Total issued		6,323,976				64,790,584			13,281,218				130,436,541
Shares redeemed		(4,125,919	)			(42,481,568	)		(1,402,029	)			(13,283,240	)
Net increase		2,198,057			$	22,309,016			11,879,189			$	117,153,301
Investor C1
Shares sold		1,783			$	20,000
Total issued		1,783				20,000
Net increase		1,783			$	20,000
Class K
Shares sold		44,267			$	490,977			8,828			$	95,294
Shares issued resulting from reorganization		–				–			15,549				154,987
Shares issued to shareholders in reinvestment of dividends and distributions		1,377				15,241			206				2,116
Total issued		45,644				506,218			24,583				252,397
Shares redeemed		(6,054	)			(66,623	)		(1,162	)			(12,556	)
Net increase		39,590			$	439,595			23,421			$	239,841
Class R1
Shares sold		2,860			$	32,365
Shares issued to shareholders in reinvestment of dividends and distributions		5				60
Total issued		2,865				32,425
Net increase		2,865			$	32,425

¹ For the period from May 3, 2010 (commencement of operations) to December 31, 2010.

50 BLACKROCK FUNDS III DECEMBER 31, 2010

Notes to Financial Statements (continued) BlackRock Funds III

	Year Ended December 31, 2010							Year Ended December 31, 2009
LifePath 2020 Portfolio	Shares			Amount				Shares			Amount
Institutional
Shares sold		20,063,678			$	299,833,550			18,614,497			$	241,716,589
Shares issued to shareholders in reinvestment of dividends and distributions		957,387				14,301,293			1,300,396				16,761,533
Total issued		21,021,065				314,134,843			19,914,893				258,478,122
Shares redeemed		(13,435,424	)			(205,358,149	)		(9,640,115	)			(124,202,736	)
Net increase		7,585,641			$	108,776,694			10,274,778			$	134,275,386
Investor A
Shares sold		8,394,748			$	118,920,144			6,214,521			$	79,296,989
Shares issued to shareholders in reinvestment of dividends and distributions		404,293				5,752,447			534,686				6,557,206
Total issued		8,799,041				124,672,591			6,749,207				85,854,195
Shares redeemed		(3,186,435	)			(45,410,726	)		(2,728,159	)			(32,481,113	)
Net increase		5,612,606			$	79,261,865			4,021,048			$	53,373,082
Investor C1
Shares sold		7,216			$	105,360
Shares issued to shareholders in reinvestment of dividends and distributions		63				914
Total issued		7,279				106,274
Shares redeemed		(1	)			(15	)
Net increase		7,278			$	106,259
Class K
Shares sold		174,581			$	2,596,584			31,786			$	442,383
Shares issued to shareholders in reinvestment of dividends and distributions		3,669				54,736			1,610				21,074
Total issued		178,250				2,651,320			33,396				463,457
Shares redeemed		(88,260	)			(1,328,409	)		(920	)			(13,047	)
Net increase		89,990			$	1,322,911			32,476			$	450,410
Class R1
Shares sold		5,076			$	79,201
Shares issued to shareholders in reinvestment of dividends and distributions		21				338
Total issued		5,097				79,539
Net increase		5,097			$	79,539
1        For the period from May 3, 2010 (commencement of operations) to December 31, 2010.
LifePath 2030 Portfolio
Institutional
Shares sold		20,160,251			$	273,772,703			16,613,062			$	190,516,204
Shares issued to shareholders in reinvestment of dividends and distributions		804,161				10,873,869			1,037,074				11,903,907
Total issued		20,964,412				284,646,572			17,650,136				202,420,111
Shares redeemed		(12,247,963	)			(170,749,570	)		(7,595,697	)			(88,332,267	)
Net increase		8,716,449			$	113,897,002			10,054,439			$	114,087,844

BLACKROCK FUNDS III DECEMBER 31, 2010 51

Notes to Financial Statements (continued) BlackRock Funds III

LifePath 2030 Portfolio (concluded)	Year Ended December 31, 2010							Year Ended December 31, 2009
	Shares			Amount				Shares			Amount
Investor A
Shares sold		7,398,087			$	98,017,049			5,150,748			$	59,542,811
Shares issued to shareholders in reinvestment of dividends and distributions		314,564				4,176,888			408,463				4,583,915
Total issued		7,712,651				102,193,937			5,559,211				64,126,726
Shares redeemed		(2,406,272	)			(31,900,908	)		(1,867,079	)			(20,125,351	)
Net increase		5,306,379			$	70,293,029			3,692,132			$	44,001,375
Investor C1
Shares sold		1,520			$	21,193
Total issued		1,520				21,193
Shares redeemed		(88	)			(1,219	)
Net increase		1,432			$	19,974
Class K
Shares sold		187,972			$	2,547,559			28,592			$	365,213
Shares issued to shareholders in reinvestment of dividends and distributions		2,411				32,962			525				6,325
Total issued		190,383				2,580,521			29,117				371,538
Shares redeemed		(93,819	)			(1,267,829	)		(8,061	)			(98,058	)
Net increase		96,564			$	1,312,692			21,056			$	273,480
Class R1
Shares sold		5,165			$	73,669
Shares issued to shareholders in reinvestment of dividends and distributions		21				309
Total issued		5,186				73,978
Shares redeemed		(78	)			(1,131	)
Net increase		5,108			$	72,847
1        For the period from May 3, 2010 (commencement of operations) to December 31, 2010.
LifePath 2040 Portfolio
Institutional
Shares sold		12,914,324			$	210,820,133			12,545,999			$	166,714,838
Shares issued to shareholders in reinvestment of dividends and distributions		508,414				8,241,327			651,307				8,881,522
Total issued		13,422,738				219,061,460			13,197,306				175,596,360
Shares redeemed		(9,252,375	)			(154,832,555	)		(5,354,883	)			(73,158,299	)
Net increase		4,170,363			$	64,228,905			7,842,423			$	102,438,061
Investor A
Shares sold		4,442,624			$	68,980,989			3,760,427			$	50,141,955
Shares issued to shareholders in reinvestment of dividends and distributions		192,095				2,981,575			234,350				3,056,456
Total issued		4,634,719				71,962,564			3,994,777				53,198,411
Shares redeemed		(1,638,400	)			(25,566,500	)		(1,639,755	)			(19,349,285	)
Net increase		2,996,319			$	46,396,064			2,355,022			$	33,849,126

52 BLACKROCK FUNDS III DECEMBER 31, 2010

Notes to Financial Statements (continued) BlackRock Funds III

	Year Ended December 31, 2010						Year Ended December 31, 2009
LifePath 2040 Portfolio (concluded)	Shares			Amount			Shares		Amount
Investor C1
Shares sold		1,184		$	20,000
Total issued		1,184			20,000
Net increase		1,184		$	20,000
Class K
Shares sold		37,758		$	624,131			172	$	2,738
Shares issued to shareholders in reinvestment of dividends and distributions		151			2,570			17		237
Total issued		37,909			626,701			189		2,975
Shares redeemed		(30,552	)		(518,330	)		–		–
Net increase		7,357		$	108,371			189	$	2,975
Class R1
Shares sold		7,189		$	124,454
Shares issued to shareholders in reinvestment of dividends and distributions		35			624
Total issued		7,224			125,078
Shares redeemed		(150	)		(2,611	)
Net increase		7,074		$	122,467

¹ For the period from May 3, 2010 (commencement of operations) to December 31, 2010.

LifePath 2050 Portfolio
Institutional
Shares sold	2,591,294		$	43,705,040		906,804		$	13,905,255
Shares issued to shareholders in reinvestment of dividends and distributions	59,713			1,034,800		31,828			533,336
Total issued	2,651,007			44,739,840		938,632			14,438,591
Shares redeemed	(759,817	)		(13,186,393	)	(139,446	)		(2,244,122	)
Net increase	1,891,190		$	31,553,447		799,186		$	12,194,469
Investor A
Shares sold	897,906		$	15,222,321		197,803		$	3,284,326
Shares issued to shareholders in reinvestment of dividends and distributions	19,651			343,034		6,555			110,201
Total issued	917,557			15,565,355		204,358			3,394,527
Shares redeemed	(86,923	)		(1,485,514	)	(25,173	)		(429,138	)
Net increase	830,634		$	14,079,841		179,185		$	2,965,389
Investor C1
Shares sold	1,127		$	20,000
Total issued	1,127			20,000
Net increase	1,127		$	20,000

BLACKROCK FUNDS III DECEMBER 31, 2010 53

Notes to Financial Statements (concluded) BlackRock Funds III

	Year Ended December 31,  2010				Year Ended December 31, 2009
LifePath 2050 Portfolio (concluded)	Shares		Amount		Shares		Amount
Class K
Shares sold		1,247	$	22,177		1,327	$	21,502
Shares issued to shareholders in reinvestment of dividends and distributions		112		1,950		134		2,220
Total issued		1,359		24,127		1,461		23,722
Net increase		1,359	$	24,127		1,461	$	23,722
Class R1
Shares sold		2,135	$	38,417
Shares issued to shareholders in reinvestment of dividends and distributions		13		228
Total issued		2,148		38,645
Net increase		2,148	$	38,645

¹ For the period from May 3, 2010 (commencement of operations) to December 31, 2010.

5. Subsequent Events:

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

54 BLACKROCK FUNDS III DECEMBER 31, 2010

Report of Independent Registered Public Accounting Firm BlackRock Funds III

To the Shareholders and Board of Trustees of BlackRock Funds III:

In our opinion, the accompanying statements of assets and liabilities, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of LifePath Retirement Portfolio, LifePath 2020 Portfolio, LifePath 2030 Portfolio, LifePath 2040 Portfolio and LifePath 2050 Portfolio (the “Portfolios”), each a series of BlackRock Funds III (the “Trust”), at December 31, 2010, 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 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 provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 24, 2011

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid during the tax year ended December 31, 2010.

	Payable Date/Period		LifePath Retirement Portfolio			LifePath 2020 Portfolio			LifePath 2030 Portfolio			LifePath 2040 Portfolio			LifePath 2050 Portfolio
Qualified Dividend Income for Individuals*		4/1/2010		21.16	%		37.47	%		51.66	%		70.68	%		64.88	%
		7/1/2010		21.16	%		37.47	%		51.66	%		70.68	%		64.88	%
		10/1/2010		21.16	%		37.47	%		51.66	%		70.68	%		64.88	%
		1/3/2011		21.16	%		37.47	%		51.66	%		70.68	%		64.88	%
Dividends Qualifying for the Dividend Received Deduction for Corporations*		4/1/2010		13.55	%		24.76	%		33.12	%		39.88	%		29.73	%
		7/1/2010		13.55	%		24.76	%		33.12	%		39.88	%		29.73	%
		10/1/2010		13.55	%		24.76	%		33.12	%		39.88	%		29.73	%
		1/3/2011		13.55	%		24.76	%		33.12	%		39.88	%		29.73	%
Interest Related Dividends and Short-Term Capital Gains for Non-U.S. Residents**		4/1/2010		15.62	%		24.10	%		33.31	%		43.46	%		38.82	%
		7/1/2010		42.53	%		31.74	%		37.47	%		41.95	%		62.12	%
		10/1/2010		65.25	%		65.82	%		66.81	%		69.95	%		60.60	%
		1/3/2011		23.88	%		30.29	%		34.52	%		48.49	%		61.32	%
Federal Obligation Interest***		Jan-Dec 2010		1.58	%		1.17	%		–			–			–

* The LifePath Portfolios hereby designate the percentages indicated above or the maximum amount allowable by law.

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

*** The law varies in each state as to whether and what percentage of dividend 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 LifePath 2050 Portfolio distributed Long-Term Capital Gains of $0.067553 per share to shareholders of record on December 30, 2010.

BLACKROCK FUNDS III DECEMBER 31, 2010 55

Master Portfolio Information as of December 31, 2010 Master Investment Portfolio

LifePath Retirement Master Portfolio

Portfolio Composition	Percent of Affiliated Investment Companies
Fixed Income Funds	63%
Equity Funds	37

Portfolio Holdings	Percent of Affiliated Investment Companies
CoreAlpha Bond Master Portfolio	49%
Active Stock Master Portfolio	19
iShares Barclays TIPS Bond Fund	8
iShares MSCI EAFE Index Fund	6
BlackRock Cash Funds:
Institutional, SL Agency Shares	5
iShares S&P MidCap 400 Index Fund	5
iShares MSCI Emerging Markets Index Fund	2
iShares S&P SmallCap 600 Index Fund	2
iShares MSCI Canada Index Fund	1
BlackRock Cash Funds: Prime, SL Agency Shares	1
iShares MSCI EAFE Small Cap Index Fund	1
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	1

LifePath 2020 Master Portfolio

Portfolio Composition	Percent of Affiliated Investment Companies
Equity Funds	54%
Fixed Income Funds	46

Portfolio Holdings	Percent of Affiliated Investment Companies
CoreAlpha Bond Master Portfolio	33%
Active Stock Master Portfolio	29
iShares MSCI EAFE Index Fund	9
BlackRock Cash Funds:
Institutional, SL Agency Shares	7
iShares Barclays TIPS Bond Fund	5
iShares S&P MidCap 400 Index Fund	5
iShares MSCI Emerging Markets Index Fund	4
iShares S&P SmallCap 600 Index Fund	2
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	2
iShares Cohen & Steers Realty Majors Index Fund	1
iShares MSCI EAFE Small Cap Index Fund	1
iShares MSCI Canada Index Fund	1
BlackRock Cash Funds: Prime, SL Agency Shares	1

56 BLACKROCK FUNDS III DECEMBER 31, 2010

Master Portfolio Information (continued) as of December 31, 2010 Master Investment Portfolio

LifePath 2030 Master Portfolio

Portfolio Composition	Percent of Affiliated Investment Companies
Equity Funds	68%
Fixed Income Funds	32

Portfolio Holdings	Percent of Affiliated Investment Companies
Active Stock Master Portfolio	36%
CoreAlpha Bond Master Portfolio	21
iShares MSCI EAFE Index Fund	11
BlackRock Cash Funds:
Institutional, SL Agency Shares	7
iShares S&P MidCap 400 Index Fund	5
iShares MSCI Emerging Markets Index Fund	5
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	3
iShares Barclays TIPS Bond Fund	3
iShares S&P SmallCap 600 Index Fund	2
iShares Cohen & Steers Realty Majors Index Fund	2
iShares MSCI EAFE Small Cap Index Fund	2
iShares MSCI Canada Index Fund	2
BlackRock Cash Funds: Prime, SL Agency Shares	1

LifePath 2040 Master Portfolio

Portfolio Composition	Percent of Affiliated Investment Companies
Equity Funds	79%
Fixed Income Funds	21

Portfolio Holdings	Percent of Affiliated Investment Companies
Active Stock Master Portfolio	42%
iShares MSCI EAFE Index Fund	13
CoreAlpha Bond Master Portfolio	11
BlackRock Cash Funds:
Institutional, SL Agency Shares	8
iShares S&P MidCap 400 Index Fund	6
iShares MSCI Emerging Markets Index Fund	5
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	4
iShares Cohen & Steers Realty Majors Index Fund	3
iShares S&P SmallCap 600 Index Fund	2
iShares MSCI Canada Index Fund	2
iShares MSCI EAFE Small Cap Index Fund	2
BlackRock Cash Funds: Prime, SL Agency Shares	1
iShares Barclays TIPS Bond Fund	1

BLACKROCK FUNDS III DECEMBER 31, 2010 57

Master Portfolio Information (concluded) as of December 31, 2010 Master Investment Portfolio

LifePath 2050 Master Portfolio

Portfolio Composition	Percent of Affiliated Investment Companies
Equity Funds	89%
Fixed Income Funds	11

Portfolio Holdings	Percent of Affiliated Investment Companies
Active Stock Master Portfolio	47%
iShares MSCI EAFE Index Fund	15
BlackRock Cash Funds:
Institutional, SL Agency Shares	8
iShares S&P MidCap 400 Index Fund	6
iShares MSCI Emerging Markets Index Fund	6
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	5
iShares Cohen & Steers Realty Majors Index Fund	3
iShares S&P SmallCap 600 Index Fund	3
iShares MSCI Canada Index Fund	2
iShares MSCI EAFE Small Cap Index Fund	2
CoreAlpha Bond Master Portfolio	2
BlackRock Cash Funds: Prime, SL Agency Shares	1

Active Stock Master Portfolio

Sector Allocation	Percent of Long-Term Investments
Information Technology	19%
Financials	15
Consumer Discretionary	13
Health Care	12
Consumer Staples	11
Energy	11
Industrials	10
Telecommunication Services	4
Materials	3
Utilities	2

Ten Largest Holdings	Percent of Long-Term Investments
Exxon Mobil Corp.	4%
Apple, Inc.	3
Microsoft Corp.	3
JPMorgan Chase & Co.	3
Google, Inc., Class A	2
AT&T, Inc.	2
The Procter & Gamble Co.	2
ConocoPhillips	2
Cisco Systems, Inc.	2
Verizon Communications, Inc.	2

CoreAlpha Bond Master Portfolio

Portfolio Composition	Percent of Long-Term Investments
U.S. Government Sponsored Agency Securities	54%
Corporate Bonds	22
Asset-Backed Securities	10
Non-Agency Mortgage-Backed Securities	7
U.S. Treasury Obligations	6
Foreign Agency Obligations	1

Credit Quality Allocation1	Percent of Long-Term Investments
AAA/Aaa2	69%
AA/Aa	7
A	9
BBB/Baa	11
BB/Ba	3
B	1

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

² Includes U.S. Government Sponsored Agency Securities which are deemed AAA/Aaa by the investment advisor.

58 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments December 31, 2010		LifePath Retirement Master Portfolio
	(Percentages shown are based on Net Assets)

Affiliated Investment Companies	Shares		Value
Master Portfolios – 71.3%
Active Stock Master Portfolio			$	272,611,476
CoreAlpha Bond Master Portfolio				711,674,200
Total Master Portfolios				984,285,676
Exchange-Traded Funds – 27.1%
iShares Barclays TIPS Bond Fund (a)		1,104,097		118,712,509
iShares Cohen & Steers Realty Majors Index Fund (a)(b)		71,293		4,685,376
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund (a)(b)		211,940		6,623,125
iShares MSCI Canada Index Fund (a)(b)		402,132		12,466,092
iShares MSCI EAFE Index Fund (a)(b)		1,493,685		86,977,278
iShares MSCI EAFE Small Cap Index Fund (a)(b)		273,404		11,540,383
iShares MSCI Emerging Markets Index Fund (a)		740,724		35,273,277
iShares S&P MidCap 400 Index Fund (a)(b)		761,894		69,096,167
iShares S&P SmallCap 600 Index Fund (a)(b)		415,539		28,451,955
Total Exchange-Traded Funds (Cost — $302,377,820*)				373,826,162
Money Market Funds – 6.3%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (a)(c)(d)		75,437,346		75,437,346
BlackRock Cash Funds: Prime, SL Agency Shares, 0.24% (a)(c)(d)		11,685,473		11,685,473
Total Money Market Funds (Cost — $87,122,819*)				87,122,819
Total Affiliated Investment Companies – 104.7%				1,445,234,657
Liabilities in Excess of Other Assets – (4.7)%				(65,093,922	)
Net Assets – 100.0%			$	1,380,140,735

* The cost and unrealized appreciation (depreciation) of investments (excluding investments in the underlying Master Portfolios) as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	393,632,925
Gross unrealized appreciation	$	67,316,056
Gross unrealized depreciation		–
Net unrealized appreciation	$	67,316,056

(a) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, (excluding investments in the underlying Master Portfolios), were as follows:

Affiliate	Shares Held at December 31, 2009		Shares Purchased		Shares Sold			Shares Held at December 31, 2010		Value at December 31, 2010		Realized Gain (Loss)			Income
BlackRock Cash Funds: Institutional, SL Agency Shares		88,781,172		–		(13,343,826	)1		75,437,346	$	75,437,346		–		$	266,669
BlackRock Cash Funds: Prime, SL Agency Shares		13,810,279		–		(2,124,806	)1		11,685,473	$	11,685,473		–		$	41,855
iShares Barclays TIPS Bond Fund		1,018,001		86,096		–			1,104,097	$	118,712,509	$	9,694		$	2,946,504
iShares Cohen & Steers Realty Majors Index Fund		137,046		–		(65,753	)		71,293	$	4,685,376	$	(531,254	)	$	190,568
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		431,794		–		(219,854	)		211,940	$	6,623,125	$	(1,143,992	)	$	581,119
iShares MSCI Canada Index Fund		352,758		84,238		(34,864	)		402,132	$	12,466,092	$	(138,111	)	$	198,809
iShares MSCI EAFE Index Fund		1,402,649		412,063		(321,027	)		1,493,685	$	86,977,278	$	1,430,374		$	2,334,843
iShares MSCI EAFE Small Cap Index Fund		273,404		–		–			273,404	$	11,540,383		–		$	328,310
iShares MSCI Emerging Markets Index Fund		680,505		159,872		(99,653	)		740,724	$	35,273,277	$	(418,004	)	$	508,789
iShares S&P MidCap 400 Index Fund		776,111		92,775		(106,992	)		761,894	$	69,096,167	$	1,847,959		$	797,219
iShares S&P SmallCap 600 Index Fund		452,660		73,830		(110,951	)		415,539	$	28,451,955	$	1,326,829		$	353,659

¹ Represents net activity.

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

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

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

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities.

• 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–collaborated 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 inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 59

Schedule of Investments (concluded)		LifePath Retirement Master Portfolio
	(Percentages shown are based on Net Assets)

The following table summarizes the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments:

Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Affiliated Investment Companies:
Master Portfolios		–	$	984,285,676		–	$	984,285,676
Exchange-Traded Funds	$	373,826,162		–		–		373,826,162
Money Market Funds		87,122,819		–		–		87,122,819
Total	$	460,948,981	$	984,285,676		–	$	1,445,234,657

See Notes to Financial Statements.

60 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments December 31, 2010	LifePath 2020 Master Portfolio
	(Percentages shown are based on Net Assets)

Affiliated Investment Companies	Shares		Value
Master Portfolios – 65.8%
Active Stock Master Portfolio			$	724,236,224
CoreAlpha Bond Master Portfolio				819,101,109
Total Master Portfolios				1,543,337,333
Exchange-Traded Funds – 32.9%
iShares Barclays TIPS Bond Fund (a)		1,198,837		128,898,954
iShares Cohen & Steers Realty Majors Index Fund (a)(b)		523,257		34,388,450
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund (a)(b)		1,606,198		50,193,688
iShares MSCI Canada Index Fund (a)(b)		978,834		30,343,854
iShares MSCI EAFE Index Fund (a)(b)		3,855,084		224,481,541
iShares MSCI EAFE Small Cap Index Fund (a)(b)		727,889		30,724,195
iShares MSCI Emerging Markets Index Fund (a)		1,894,873		90,233,852
iShares S&P MidCap 400 Index Fund (a)(b)		1,417,544		128,557,065
iShares S&P SmallCap 600 Index Fund (a)(b)		782,366		53,568,600
Total Exchange-Traded Funds (Cost — $627,448,537*)				771,390,199
Money Market Funds – 9.0%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (a)(c)(d)		181,776,362		181,776,362
BlackRock Cash Funds: Prime, SL Agency Shares, 0.24% (a)(c)(d)		28,477,459		28,477,459
Total Money Market Funds (Cost — $210,253,821*)				210,253,821
Total Affiliated Investment Companies – 107.7%				2,524,981,353
Liabilities in Excess of Other Assets – (7.7)%				(181,020,436	)
Net Assets – 100.0%			$	2,343,960,917

* The cost and unrealized appreciation (depreciation) of investments (excluding investments in the underlying Master Portfolios) as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	860,487,132
Gross unrealized appreciation	$	121,156,888
Gross unrealized depreciation		–
Net unrealized appreciation	$	121,156,888

(a) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, (excluding investments in the underlying Master Portfolios), were as follows:

Affiliate	Shares Held at December 31, 2009	Shares Purchased	Shares Sold	Shares Held at December 31, 2010	Value at December 31, 2010	Realized Gain (Loss)	Income
BlackRock Cash Funds: Institutional, SL Agency Shares	226,175,226	–	(44,398,864)1	181,776,362	$181,776,362	–	$581,798
BlackRock Cash Funds: Prime, SL Agency Shares	35,603,666	–	(7,126,207)1	28,477,459	$28,477,459	–	$91,647
iShares Barclays TIPS Bond Fund	966,860	231,977	–	1,198,837	$128,898,954	$42,229	$2,947,736
iShares Cohen & Steers Realty Majors Index Fund	601,886	51,599	(130,228)	523,257	$34,388,450	$(2,881,769)	$1,129,305
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	1,834,145	241,950	(469,897)	1,606,198	$50,193,688	$(3,734,439)	$3,417,089
iShares MSCI Canada Index Fund	815,491	214,435	(51,092)	978,834	$30,343,854	$(218,126)	$487,123
iShares MSCI EAFE Index Fund	3,290,386	963,015	(398,317)	3,855,084	$224,481,541	$(2,861,469)	$5,721,449
iShares MSCI EAFE Small Cap Index Fund	613,941	166,672	(52,724)	727,889	$30,724,195	$(214,070)	$875,107
iShares MSCI Emerging Markets Index Fund	1,608,611	391,059	(104,797)	1,894,873	$90,233,852	$(538,895)	$1,244,967
iShares S&P MidCap 400 Index Fund	1,446,958	147,418	(176,832)	1,417,544	$128,557,065	$1,795,508	$1,484,815
iShares S&P SmallCap 600 Index Fund	860,207	109,015	(186,856)	782,366	$53,568,600	$896,758	$670,052

¹ Represents net activity.

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

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

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

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities.

• 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 inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 61

Schedule of Investments (concluded)	LifePath 2020 Master Portfolio
	(Percentages shown are based on Net Assets)

The following table summarizes the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments:

Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Affiliated Investment Companies:
Master Portfolios		–	$	1,543,337,333		–	$	1,543,337,333
Exchange-Traded Funds	$	771,390,199		–		–		771,390,199
Money Market Funds		210,253,821		–		–		210,253,821
Total	$	981,644,020	$	1,543,337,333		–	$	2,524,981,353

See Notes to Financial Statements.

62 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments December 31, 2010	LifePath 2030 Master Portfolio
	(Percentages shown are based on Net Assets)

Affiliated Investment Companies	Shares		Value
Master Portfolios – 61.2%
Active Stock Master Portfolio			$	767,320,441
CoreAlpha Bond Master Portfolio				439,888,230
Total Master Portfolios				1,207,208,671
Exchange-Traded Funds – 37.2%
iShares Barclays TIPS Bond Fund (a)		554,791		59,651,128
iShares Cohen & Steers Realty Majors Index Fund (a)(b)		680,971		44,753,414
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund (a)(b)		2,128,614		66,519,188
iShares MSCI Canada Index Fund (a)(b)		1,040,900		32,267,900
iShares MSCI EAFE Index Fund (a)(b)		4,085,815		237,917,008
iShares MSCI EAFE Small Cap Index Fund (a)(b)		772,751		32,617,820
iShares MSCI Emerging Markets Index Fund (a)(b)		2,015,244		95,965,919
iShares S&P MidCap 400 Index Fund (a)(b)		1,267,897		114,985,579
iShares S&P SmallCap 600 Index Fund (a)(b)		697,237		47,739,817
Total Exchange-Traded Funds (Cost — $602,243,531*)				732,417,773
Money Market Funds – 9.0%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (a)(c)(d)		154,257,212		154,257,212
BlackRock Cash Funds: Prime, SL Agency Shares, 0.24% (a)(c)(d)		24,170,906		24,170,906
Total Money Market Funds (Cost — $178,428,118*)				178,428,118
Total Affiliated Investment Companies – 107.4%				2,118,054,562
Liabilities in Excess of Other Assets – (7.4)%				(145,979,496	)
Net Assets – 100.0%			$	1,972,075,066

* The cost and unrealized appreciation (depreciation) of investments (excluding investments in the underlying Master Portfolios) as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	810,313,863
Gross unrealized appreciation	$	100,532,028
Gross unrealized depreciation		–
Net unrealized appreciation	$	100,532,028

(a) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, (excluding investments in the underlying Master Portfolios), were as follows:

Affiliate	Shares Held at December 31, 2009	Shares Purchased	Shares Sold	Shares Held at December 31, 2010	Value at December 31, 2010	Realized Gain (Loss)	Income
BlackRock Cash Funds: Institutional, SL Agency Shares	217,065,536	–	(62,808,324)1	154,257,212	$154,257,212	–	$586,086
BlackRock Cash Funds: Prime, SL Agency Shares	34,450,272	–	(10,279,366)1	24,170,906	$24,170,906	–	$92,526
iShares Barclays TIPS Bond Fund	432,362	133,529	(11,100)	554,791	$59,651,128	$39,239	$1,397,637
iShares Cohen & Steers Realty Majors Index Fund	736,816	35,088	(90,933)	680,971	$44,753,414	$(2,146,884)	$1,374,199
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	2,218,125	269,005	(358,516)	2,128,614	$66,519,188	$(2,986,296)	$4,239,928
iShares MSCI Canada Index Fund	822,796	218,104	–	1,040,900	$32,267,900	–	$512,705
iShares MSCI EAFE Index Fund	3,306,532	997,321	(218,038)	4,085,815	$237,917,008	$(3,315,374)	$5,883,806
iShares MSCI EAFE Small Cap Index Fund	615,291	169,422	(11,962)	772,751	$32,617,820	$(11,900)	$927,709
iShares MSCI Emerging Markets Index Fund	1,614,028	429,388	(28,172)	2,015,244	$95,965,919	$(141,554)	$1,302,584
iShares S&P MidCap 400 Index Fund	1,306,771	113,770	(152,644)	1,267,897	$114,985,579	$1,608,949	$1,332,298
iShares S&P SmallCap 600 Index Fund	773,189	82,716	(158,668)	697,237	$47,739,817	$995,663	$607,537

¹ Represents net activity.

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

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

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

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities.

• 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 inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 63

Schedule of Investments (concluded) LifePath 2030 Master Portfolio

The following table summarizes the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments:

Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Affiliated Investment Companies:
Master Portfolios		–	$	1,207,208,671		–	$	1,207,208,671
Exchange-Traded Funds	$	732,417,773		–		–		732,417,773
Money Market Funds		178,428,118		–		–		178,428,118
Total	$	910,845,891	$	1,207,208,671		–	$	2,118,054,562

See Notes to Financial Statements.

64 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments December 31, 2010	LifePath 2040 Master Portfolio
	(Percentages shown are based on Net Assets)

Affiliated Investment Companies	Shares		Value
Master Portfolios – 57.0%
Active Stock Master Portfolio			$	687,896,852
CoreAlpha Bond Master Portfolio				177,729,200
Total Master Portfolios				865,626,052
Exchange-Traded Funds – 40.5%
iShares Barclays TIPS Bond Fund (a)		150,344		16,164,987
iShares Cohen & Steers Realty Majors Index Fund (a)(b)		693,309		45,564,267
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund (a)(b)		2,156,480		67,390,000
iShares MSCI Canada Index Fund (a)(b)		949,552		29,436,112
iShares MSCI EAFE Index Fund (a)		3,659,166		213,073,236
iShares MSCI EAFE Small Cap Index Fund (a)(b)		687,000		28,998,270
iShares MSCI Emerging Markets Index Fund (a)(b)		1,807,304		86,063,817
iShares S&P MidCap 400 Index Fund (a)		1,012,776		91,848,655
iShares S&P SmallCap 600 Index Fund (a)(b)		549,842		37,647,682
Total Exchange-Traded Funds (Cost — $513,337,441*)				616,187,026
Money Market Funds – 10.7%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (a)(c)(d)		139,976,764		139,976,764
BlackRock Cash Funds: Prime, SL Agency Shares, 0.24% (a)(c)(d)		22,015,363		22,015,363
Total Money Market Funds (Cost — $161,992,127*)				161,992,127
Total Affiliated Investment Companies – 108.2%				1,643,805,205
Liabilities in Excess of Other Assets – (8.2)%				(124,601,900	)
Net Assets – 100.0%			$	1,519,203,305

* The cost and unrealized appreciation (depreciation) of investments (excluding investments in the underlying Master Portfolios) as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	706,797,536
Gross unrealized appreciation	$	71,381,617
Gross unrealized depreciation		–
Net unrealized appreciation	$	71,381,617

(a) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, (excluding investments in the underlying Master Portfolios), were as follows:

Affiliate	Shares Held at December 31, 2009	Shares Purchased	Shares Sold	Shares Held at December 31, 2010	Value at December 31, 2010	Realized Gain (Loss)	Income
BlackRock Cash Funds: Institutional, SL Agency Shares	199,984,725	–	(60,007,961)1	139,976,764	$139,976,764	–	$529,458
BlackRock Cash Funds: Prime, SL Agency Shares	31,755,867	–	(9,740,504)1	22,015,363	$22,015,363	–	$83,823
iShares Barclays TIPS Bond Fund	118,873	41,871	(10,400)	150,344	$16,164,987	$42,792	$383,607
iShares Cohen & Steers Realty Majors Index Fund	739,619	60,310	(106,620)	693,309	$45,564,267	$(3,241,847)	$1,349,747
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	2,251,865	267,328	(362,713)	2,156,480	$67,390,000	$(3,123,749)	$4,208,828
iShares MSCI Canada Index Fund	757,346	192,206	–	949,552	$29,436,112	–	$457,434
iShares MSCI EAFE Index Fund	3,044,063	838,940	(223,837)	3,659,166	$213,073,236	$(3,549,863)	$5,271,666
iShares MSCI EAFE Small Cap Index Fund	558,635	148,995	(20,630)	687,000	$28,998,270	$(20,523)	$815,214
iShares MSCI Emerging Markets Index Fund	1,492,236	354,934	(39,866)	1,807,304	$86,063,817	$(82,820)	$1,182,340
iShares S&P MidCap 400 Index Fund	1,128,250	36,338	(151,812)	1,012,776	$91,848,655	$1,653,522	$1,105,512
iShares S&P SmallCap 600 Index Fund	669,577	32,074	(151,809)	549,842	$37,647,682	$1,105,177	$511,920

¹ Represents net activity.

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

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

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

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities.

• 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 inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 65

Schedule of Investments (concluded) LifePath 2040 Master Portfolio

The following table summarizes the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments:

Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Affiliated Investment Companies:
Master Portfolios		–	$	865,626,052		–	$	865,626,052
Exchange-Traded Funds	$	616,187,026		–		–		616,187,026
Money Market Funds		161,992,127		–		–		161,992,127
Total	$	778,179,153	$	865,626,052		–	$	1,643,805,205

See Notes to Financial Statements.

66 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments December 31, 2010	LifePath 2050 Master Portfolio
	(Percentages shown are based on Net Assets)

Affiliated Investment Companies	Shares		Value
Master Portfolios – 52.9%
Active Stock Master Portfolio			$	61,094,483
CoreAlpha Bond Master Portfolio				2,094,794
Total Master Portfolios				63,189,277
Exchange-Traded Funds – 45.3%
iShares Cohen & Steers Realty Majors Index Fund (a)(b)		67,805		4,456,144
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund (a)(b)		211,207		6,600,219
iShares MSCI Canada Index Fund (a)		85,268		2,643,308
iShares MSCI EAFE Index Fund (a)(b)		326,243		18,997,130
iShares MSCI EAFE Small Cap Index Fund (a)(b)		62,233		2,626,855
iShares MSCI Emerging Markets Index Fund (a)		160,758		7,655,296
iShares S&P MidCap 400 Index Fund (a)		86,290		7,825,640
iShares S&P SmallCap 600 Index Fund (a)(b)		47,346		3,241,781
Total Exchange-Traded Funds (Cost — $44,994,395*)				54,046,373
Money Market Funds – 10.7%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (a)(c)(d)		11,027,847		11,027,847
BlackRock Cash Funds: Prime, SL Agency Shares, 0.24% (a)(c)(d)		1,709,851		1,709,851
Total Money Market Funds (Cost — $12,737,698*)				12,737,698
Total Affiliated Investment Companies – 108.9%				129,973,348
Liabilities in Excess of Other Assets – (8.9)%				(10,582,802	)
Net Assets – 100.0%			$	119,390,546

* The cost and unrealized appreciation (depreciation) of investments (excluding investments in the underlying Master Portfolios) as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	59,969,558
Gross unrealized appreciation	$	6,814,513
Gross unrealized depreciation		–
Net unrealized appreciation	$	6,814,513

(a) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, (excluding investments in the underlying Master Portfolios), were as follows:

Affiliate	Shares Held at December 31, 2009	Shares Purchased	Shares Sold	Shares Held at December 31, 2010	Value at December 31, 2010	Realized Gain (Loss)	Income
BlackRock Cash Funds: Institutional, SL Agency Shares	8,389,466	2,638,3811	–	11,027,847	$11,027,847	–	$29,595
BlackRock Cash Funds: Prime, SL Agency Shares	1,300,980	408,8711	–	1,709,851	$1,709,851	–	$4,548
iShares Cohen & Steers Realty Majors Index Fund	29,950	43,676	(5,821)	67,805	$4,456,144	$112,753	$103,398
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund	97,846	129,918	(16,557)	211,207	$6,600,219	$109,232	$341,383
iShares MSCI Canada Index Fund	29,411	63,413	(7,556)	85,268	$2,643,308	$33,581	$38,411
iShares MSCI EAFE Index Fund	122,044	225,391	(21,192)	326,243	$18,997,130	$28,207	$385,266
iShares MSCI EAFE Small Cap Index Fund	23,107	40,895	(1,769)	62,233	$2,626,855	$4,589	$69,445
iShares MSCI Emerging Markets Index Fund	58,964	108,511	(6,717)	160,758	$7,655,296	$41,347	$93,796
iShares S&P MidCap 400 Index Fund	45,948	50,694	(10,352)	86,290	$7,825,640	$236,744	$77,152
iShares S&P SmallCap 600 Index Fund	26,860	30,237	(9,751)	47,346	$3,241,781	$178,789	$36,101

¹ Represents net activity.

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

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

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

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities.

• 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 inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 67

Schedule of Investments (concluded) LifePath 2050 Master Portfolio

The following table summarizes the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments:

Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Affiliated Investment Companies:
Master Portfolios		–	$	63,189,277		–	$	63,189,277
Exchange-Traded Funds	$	54,046,373		–		–		54,046,373
Money Market Funds		12,737,698		–		–		12,737,698
Total	$	66,784,071	$	63,189,277		–	$	129,973,348

See Notes to Financial Statements.

68 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments December 31, 2010	Active Stock Master Portfolio
	(Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Consumer Discretionary – 12.6%
Auto Components – 0.3%
Autoliv, Inc. (a)		1,398	$	110,358
Lear Corp. (b)		76,400		7,541,444
TRW Automotive Holdings Corp. (b)		16,980		894,846
WABCO Holdings, Inc. (b)		699		42,590
				8,589,238
Automobiles – 0.5%
General Motors Co. (b)		347,453		12,807,117
Diversified Consumer Services – 0.2%
Apollo Group, Inc., Class A (b)		120,232		4,747,962
Corinthian Colleges, Inc. (b)		19,414		101,147
				4,849,109
Hotels, Restaurants & Leisure – 1.4%
Carnival Corp.		270,974		12,494,611
McDonald’s Corp.		134,508		10,324,834
Starbucks Corp. (a)		316,627		10,173,226
Wendy’s/Arby’s Group, Inc.		363,971		1,681,546
				34,674,217
Household Durables – 1.0%
Harman International Industries, Inc. (b)		1,096		50,744
NVR, Inc. (a)(b)		22,449		15,512,708
Whirlpool Corp.		102,654		9,118,755
				24,682,207
Internet & Catalog Retail – 1.1%
priceline.com, Inc. (b)		70,122		28,017,245
Media – 3.3%
CBS Corp., Class B		1,467,771		27,961,038
Comcast Corp., Class A (a)		1,318,838		28,974,871
Dex One Corp. (b)		89,875		670,467
Scripps Networks Interactive, Inc., Class A		766		39,641
SuperMedia, Inc. (a)(b)		40,283		350,865
Time Warner, Inc.		746,250		24,006,862
The Washington Post Co., Class B (a)		770		338,415
				82,342,159
Multiline Retail – 0.7%
Big Lots, Inc. (b)		4,010		122,145
Sears Holdings Corp. (a)(b)		176,003		12,980,221
Wal-Mart Stores, Inc.		117,807		6,353,331
				19,455,697
Specialty Retail – 2.6%
Aeropostale, Inc. (b)		432,705		10,661,851
Best Buy Co., Inc.		773,789		26,533,225
Foot Locker, Inc.		37,030		726,529
GameStop Corp., Class A (a)(b)		190,481		4,358,205
The Gap, Inc. (a)		820,846		18,173,531
Ross Stores, Inc. (a)		6,673		422,067
Signet Jewelers Ltd. (b)		1,763		76,514
Staples, Inc. (a)		167,800		3,820,806
				64,772,728
Textiles, Apparel & Luxury Goods – 1.5%
Coach, Inc.		46,656		2,580,543
Deckers Outdoor Corp. (a)(b)		38,334		3,056,753
NIKE, Inc., Class B		365,608		31,230,236
Polo Ralph Lauren Corp.		1,839		203,982
				37,071,514
Total Consumer Discretionary				317,261,231
Consumer Staples – 10.8%
Beverages – 1.2%
The Coca-Cola Co.		112,104		7,373,080
Coca-Cola Enterprises, Inc. (a)		357,817		8,956,160
Hansen Natural Corp. (b)		240,743		12,586,044
PepsiCo, Inc.		7,474		488,276
				29,403,560
Food & Staples Retailing – 1.1%
CVS Caremark Corp. (a)		92,337		3,210,557
Costco Wholesale Corp. (a)		273,381		19,740,842
Sysco Corp.		119,855		3,523,737
				26,475,136
Food Products – 1.0%
Dean Foods Co. (a)(b)		166,317		1,470,242
Pilgrim’s Pride Corp. (b)		80,465		570,497
Ralcorp Holdings, Inc. (a)(b)		8,040		522,680
Smithfield Foods, Inc. (b)		18,687		385,513
Tyson Foods, Inc., Class A (a)		1,288,676		22,191,001
				25,139,933
Household Products – 3.1%
Colgate-Palmolive Co.		334,246		26,863,351
The Procter & Gamble Co.		797,566		51,307,421
				78,170,772
Personal Products – 1.2%
The Estee Lauder Cos., Inc., Class A (a)		38,213		3,083,789
Herbalife Ltd. (a)		2,712		185,420
Mead Johnson Nutrition Co.		432,252		26,907,687
				30,176,896
Tobacco – 3.2%
Lorillard, Inc.		323,707		26,563,396
Philip Morris International, Inc.		488,499		28,591,847
Reynolds American, Inc. (a)		814,878		26,581,320
				81,736,563
Total Consumer Staples				271,102,860
Energy – 10.6%
Energy Equipment & Services – 1.4%
Core Laboratories N.V. (a)		24,829		2,211,023
Dresser-Rand Group, Inc. (a)(b)		71,246		3,034,367
McDermott International, Inc. (a)(b)		137,252		2,839,744
National Oilwell Varco, Inc. (a)		256,171		17,227,500
Rowan Cos., Inc. (a)(b)		40,410		1,410,713
SEACOR Holdings, Inc.		75,838		7,666,463
				34,389,810
Oil, Gas & Consumable Fuels – 9.2%
Alpha Natural Resources, Inc. (b)		138,192		8,295,666
Anadarko Petroleum Corp.		27,692		2,109,023
Apache Corp.		242,802		28,949,282
Chevron Corp.		188,354		17,187,303
Concho Resources, Inc. (b)		66		5,786
ConocoPhillips		689,717		46,969,728

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 69

Schedule of Investments (continued)	Active Stock Master Portfolio
	(Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Energy (concluded)
Oil, Gas & Consumable Fuels (concluded)
Energy Partners Ltd. (b)		115,620	$	1,718,113
Exxon Mobil Corp.		1,396,156		102,086,927
Hess Corp.		96,532		7,388,559
Newfield Exploration Co. (a)(b)		29,022		2,092,776
Noble Energy, Inc.		12,331		1,061,452
Valero Energy Corp.		341,231		7,889,261
Whiting Petroleum Corp. (a)(b)		46,299		5,425,780
				231,179,656
Total Energy				265,569,466
Financials – 14.3%
Capital Markets – 2.3%
Ameriprise Financial, Inc. (a)		263,415		15,159,533
The Bank of New York Mellon Corp.		40,810		1,232,462
Franklin Resources, Inc.		7,066		785,810
The Goldman Sachs Group, Inc.		78,720		13,237,555
Invesco Ltd.		244,751		5,888,709
Legg Mason, Inc. (a)		163,892		5,944,363
Morgan Stanley		609,400		16,581,774
				58,830,206
Commercial Banks – 1.6%
Commerce Bancshares, Inc. (a)		20,033		795,911
Cullen/Frost Bankers, Inc. (a)		4,892		298,999
First Citizens BancShares, Inc., Class A		214		40,457
Huntington Bancshares, Inc.		115,193		791,376
M&T Bank Corp.		158,034		13,756,860
Marshall & Ilsley Corp.		2,585		17,888
Regions Financial Corp.		39,485		276,395
SVB Financial Group (b)		36,269		1,924,070
SunTrust Banks, Inc.		64,633		1,907,320
U.S. Bancorp		54,007		1,456,569
Wells Fargo & Co.		634,089		19,650,418
				40,916,263
Consumer Finance – 1.0%
Capital One Financial Corp.		572,256		24,355,215
Diversified Financial Services – 5.9%
Bank of America Corp.		2,124,970		28,347,100
CME Group, Inc.		50,808		16,347,474
Citigroup, Inc. (b)		5,734,793		27,125,571
JPMorgan Chase & Co.		1,433,124		60,793,120
The NASDAQ OMX Group, Inc. (b)		645,816		15,312,297
				147,925,562
Insurance – 3.0%
ACE Ltd.		457,532		28,481,367
Allied World Assurance Co. Holdings Ltd.		4,549		270,393
The Allstate Corp. (a)		708,093		22,574,005
American National Insurance Co.		1,038		88,874
Aspen Insurance Holdings Ltd.		76,014		2,175,521
Berkshire Hathaway, Inc., Class B (b)		64,754		5,187,443
CNA Financial Corp. (b)		2,104		56,913
Everest Re Group Ltd.		471		39,950
MetLife, Inc.		248,874		11,059,961
Reinsurance Group of America, Inc. (a)		12,181		654,241
The Travelers Cos., Inc. (a)		70,501		3,927,611
White Mountains Insurance Group Ltd.		94		31,546
XL Group Plc		37,693		822,461
				75,370,286
Real Estate Investment Trusts (REITs) – 0.5%
AvalonBay Communities, Inc.		26,332		2,963,666
Public Storage		23,531		2,386,514
Rayonier, Inc. (a)		119,311		6,266,214
				11,616,394
Real Estate Management & Development – 0.0%
The Howard Hughes Corp. (b)		5,714		310,956
Jones Lang LaSalle, Inc.		3,584		300,769
				611,725
Thrifts & Mortgage Finance – 0.0%
Hudson City Bancorp, Inc. (a)		57,377		730,983
People’s United Financial, Inc.		4,759		66,674
				797,657
Total Financials				360,423,308
Health Care – 11.3%
Biotechnology – 2.2%
Amgen, Inc. (b)		178,209		9,783,674
Biogen Idec, Inc. (a)(b)		182,615		12,244,336
Celgene Corp. (b)		3,765		222,662
Cephalon, Inc. (a)(b)		212,891		13,139,632
Genzyme Corp. (b)		53,593		3,815,822
Gilead Sciences, Inc. (b)		431,815		15,648,975
United Therapeutics Corp. (b)		3,199		202,241
				55,057,342
Health Care Equipment & Supplies – 2.0%
CareFusion Corp. (b)		402,784		10,351,549
Covidien Plc		221,625		10,119,397
Gen-Probe, Inc. (b)		6,961		406,174
Hospira, Inc. (b)		47,374		2,638,258
Intuitive Surgical, Inc. (a)(b)		101,357		26,124,767
Thoratec Corp. (a)(b)		7,562		214,156
Varian Medical Systems, Inc. (a)(b)		1,413		97,893
Zimmer Holdings, Inc. (a)(b)		10,611		569,598
				50,521,792
Health Care Providers & Services – 2.5%
Express Scripts, Inc. (b)		341,785		18,473,479
Medco Health Solutions, Inc. (a)(b)		492,719		30,188,893
WellPoint, Inc. (b)		237,496		13,504,023
				62,166,395
Life Sciences Tools & Services – 0.3%
Thermo Fisher Scientific, Inc. (a)(b)		150,043		8,306,381
Pharmaceuticals – 4.3%
Allergan, Inc. (a)		231,292		15,882,822
Bristol-Myers Squibb Co.		1,232,325		32,631,966
Eli Lilly & Co.		38,669		1,354,962
Johnson & Johnson		586,234		36,258,573
Medicis Pharmaceutical Corp., Class A (a)		77,948		2,088,227
Merck & Co., Inc.		274,107		9,878,816
Pfizer, Inc.		457,505		8,010,912
Warner Chilcott PLC, Class A		90,541		2,042,605
				108,148,883
Total Health Care				284,200,793

See Notes to Financial Statements.

70 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments (continued)	Active Stock Master Portfolio
	(Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Industrials – 9.2%
Aerospace & Defense – 2.9%
Alliant Techsystems, Inc. (b)		129,714	$	9,654,613
The Boeing Co.		80,299		5,240,313
General Dynamics Corp. (a)		357,555		25,372,103
L-3 Communications Holdings, Inc. (a)		50,646		3,570,036
Northrop Grumman Corp. (a)		385,552		24,976,059
Raytheon Co.		91,009		4,217,357
				73,030,481
Air Freight & Logistics – 1.0%
C.H. Robinson Worldwide, Inc. (a)		91,280		7,319,743
FedEx Corp. (a)		173,292		16,117,889
UTi Worldwide, Inc. (a)		24,641		522,389
				23,960,021
Airlines – 0.2%
United Continental Holdings, Inc. (a)(b)		217,464		5,179,992
Commercial Services & Supplies – 0.0%
Republic Services, Inc.		32,403		967,553
Construction & Engineering – 0.2%
URS Corp. (b)		98,616		4,103,412
Electrical Equipment – 0.1%
Emerson Electric Co.		27,926		1,596,529
First Solar, Inc. (a)(b)		269		35,008
General Cable Corp. (b)		22,351		784,297
				2,415,834
Industrial Conglomerates – 0.6%
General Electric Co.		859,251		15,715,701
Machinery – 3.0%
AGCO Corp. (a)(b)		528,486		26,773,101
CNH Global N.V. (a)(b)		729		34,802
Cummins, Inc. (a)		280,427		30,849,774
Danaher Corp. (a)		138,122		6,515,215
Flowserve Corp. (a)		14,039		1,673,730
Harsco Corp. (a)		86,881		2,460,470
Navistar International Corp. (b)		92,974		5,384,124
SPX Corp.		7,681		549,115
				74,240,331
Professional Services – 1.0%
Manpower, Inc. (a)		408,676		25,648,506
Trading Companies & Distributors – 0.2%
W.W. Grainger, Inc. (a)		31,560		4,358,751
WESCO International, Inc. (a)(b)		33,511		1,769,381
				6,128,132
Total Industrials				231,389,963
Information Technology – 18.2%
Communications Equipment – 2.5%
ADTRAN, Inc. (a)		22,318		808,135
Brocade Communications Systems, Inc. (a)(b)		809,126		4,280,277
Cisco Systems, Inc. (b)		2,161,940		43,736,046
F5 Networks, Inc. (b)		26,795		3,487,637
Harris Corp. (a)		203,198		9,204,869
				61,516,964
Computers & Peripherals – 4.8%
Apple, Inc. (b)		237,279		76,536,714
Dell, Inc. (b)		975,342		13,215,884
Hewlett-Packard Co.		37,888		1,595,085
International Business Machines Corp.		96,701		14,191,839
NetApp, Inc. (b)		122,257		6,719,245
SanDisk Corp. (b)		37,944		1,891,888
Teradata Corp. (b)		36,100		1,485,876
Western Digital Corp. (a)(b)		121,809		4,129,325
				119,765,856
Electronic Equipment, Instruments & Components – 0.0%
Flextronics International Ltd. (b)		117,604		923,191
Internet Software & Services – 2.5%
AOL, Inc. (b)		15,871		376,301
Google, Inc., Class A (b)		92,784		55,110,913
IAC/InterActiveCorp (b)		276,662		7,940,199
				63,427,413
IT Services – 1.3%
Accenture Plc, Class A		150,384		7,292,120
Amdocs Ltd. (b)		28,027		769,902
Broadridge Financial Solutions, Inc.		86,940		1,906,594
Cognizant Technology Solutions Corp., Class A (a)(b)		44,582		3,267,415
Computer Sciences Corp.		314,111		15,579,905
Convergys Corp. (b)		2,376		31,292
MasterCard, Inc., Class A		11,116		2,491,207
Visa, Inc., Class A (a)		6,442		453,388
The Western Union Co.		43,053		799,494
				32,591,317
Office Electronics – 0.2%
Xerox Corp.		411,579		4,741,390
Semiconductors & Semiconductor Equipment – 2.4%
Altera Corp. (a)		737,308		26,233,419
Applied Materials, Inc.		17,448		245,145
Broadcom Corp., Class A (a)		539,774		23,507,158
Integrated Device Technology, Inc. (b)		1,082		7,206
Intel Corp. (a)		410,646		8,635,885
LSI Corp. (b)		117,501		703,831
Micron Technology, Inc. (b)		95,260		763,985
				60,096,629
Software – 4.5%
Activision Blizzard, Inc.		1,055		13,124
Autodesk, Inc. (a)(b)		239,995		9,167,809
CA, Inc.		39,534		966,211
Check Point Software Technologies (a)(b)		8,039		371,884
Intuit, Inc. (a)(b)		36,051		1,777,315
MICROS Systems, Inc. (b)		47,022		2,062,385
McAfee, Inc. (b)		32,090		1,486,088
Microsoft Corp.		2,489,060		69,494,555
Oracle Corp.		885,610		27,719,593
				113,058,964
Total Information Technology				456,121,724
Materials – 2.6%
Chemicals – 1.1%
Airgas, Inc.		2,227		139,098
Ashland, Inc.		329,641		16,765,541

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 71

Schedule of Investments (continued)	Active Stock Master Portfolio
	(Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Materials (concluded)
Chemicals (concluded)
The Mosaic Co.		11,230	$	857,523
Praxair, Inc. (a)		114,642		10,944,872
				28,707,034
Containers & Packaging – 0.0%
Ball Corp.		2,897		197,141
Metals & Mining – 1.2%
Alcoa, Inc. (a)		949,632		14,614,836
Freeport-McMoRan Copper & Gold, Inc.		25,145		3,019,663
Newmont Mining Corp.		188,983		11,609,226
				29,243,725
Paper & Forest Products – 0.3%
MeadWestvaco Corp.		288,390		7,544,283
Total Materials				65,692,183
Telecommunication Services – 3.9%
Diversified Telecommunication Services – 3.8%
AT&T, Inc.		1,794,529		52,723,262
Qwest Communications International, Inc.		726,055		5,525,279
Verizon Communications, Inc. (a)		1,090,950		39,034,191
				97,282,732
Wireless Telecommunication Services – 0.1%
Sprint Nextel Corp. (b)		360,889		1,526,560
United States Cellular Corp. (b)		3,974		198,462
				1,725,022
Total Telecommunication Services				99,007,754
Utilities – 2.2%
Electric Utilities – 1.2%
Allegheny Energy, Inc.		24,993		605,830
American Electric Power Co., Inc.		92		3,310
Edison International (a)		65,013		2,509,502
Entergy Corp. (a)		352,233		24,948,664
Southern Co. (a)		28,574		1,092,384
				29,159,690
Gas Utilities – 0.5%
Atmos Energy Corp.		15,470		482,664
Oneok, Inc. (a)		223,466		12,395,659
				12,878,323
Independent Power Producers & Energy Traders – 0.3%
Constellation Energy Group, Inc. (a)		123,905		3,795,210
NRG Energy, Inc. (b)		200,719		3,922,049
				7,717,259
Multi-Utilities – 0.2%
NiSource, Inc. (a)		45,842		807,736
Sempra Energy (a)		97,327		5,107,721
				5,915,457
Total Utilities				55,670,729
Total Long-Term Investments (Cost — $2,133,171,465) – 95.7%				2,406,440,011
Short-Term Securities
Money Market Funds – 11.7%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)(e)		259,245,739		259,245,739
BlackRock Cash Funds: Prime, SL Agency Shares, 0.24% (c)(d)(e)		34,372,877		34,372,877
				293,618,616
	Par (000)
U.S. Treasury Obligations – 0.2%
U.S. Treasury Bill, 0.15%, 3/24/11 (f)(g)	$	4,302		4,300,899
Total Short-Term Securities (Cost — $297,919,299) – 11.9%				297,919,515
Total Investments (Cost — $2,431,090,764*) – 107.6%				2,704,359,526
Liabilities in Excess of Other Assets – (7.6)%				(190,935,410	)
Net Assets – 100.0%			$	2,513,424,116

* The cost and unrealized appreciation (depreciation) of investments as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	2,527,175,347
Gross unrealized appreciation	$	207,399,930
Gross unrealized depreciation		(30,215,751	)
Net unrealized appreciation	$	177,184,179

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

(b) Non-income producing security.

(c) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at December 31, 2009	Net Activity	Shares Held at December 31, 2010	Income
BlackRock Cash Funds: Institutional, SL Agency Shares	214,125,678	45,120,061	259,245,739	$1,188,513
BlackRock Cash Funds: Prime, SL Agency Shares	28,279,563	6,093,314	34,372,877	$173,524

See Notes to Financial Statements.

72 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments (concluded) Active Stock Master Portfolio

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

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

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

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

• For Master Portfolio compliance purposes, the Master Portfolio’s sector and industry classifications refer to any one or more of the sector and industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Master Portfolio management. This definition may not apply for purposes of this report, which may combine sector and industry sub-classifications for reporting ease.

• Financial futures contracts purchased as of December 31, 2010 were as follows:

Contracts	Issue	Exchange	Expiration Date	Notional Value		Unrealized Appreciation
813	S&P 500 Index	Chicago	March 2011	$	50,934,450	$	863,629

• Fair Value Measurements – Various inputs are used in determining the fair value of investments and derivatives, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities

• 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 derivatives)

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments and derivatives:

Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets
Investments in Securities:
Long-Term Investments1:
Common Stocks	$	2,406,440,011		–		–	$	2,406,440,011
Short-Term Securities:
Money Market Funds		293,618,616		–		–		293,618,616
U.S. Government Obligations		–	$	4,300,899		–		4,300,899
Total	$	2,700,058,627	$	4,300,899		–	$	2,704,359,526
	Derivative Financial Instruments2
Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets
Equity contracts	$	863,629		–		–	$	863,629

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

² Derivative financial instruments are financial futures contracts. Financial futures contracts are shown at the unrealized appreciation/depreciation on the instrument.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 73

Schedule of Investments December 31, 2010	CoreAlpha Bond Master Portfolio
	(Percentages shown are based on Net Assets)

Asset-Backed Securities	Par (000)		Value
ACE Securities Corp.,
Series 2005-AG1, Class A2D, 0.62%, 8/25/35 (a)	$	5,039	$	4,849,595
AH Mortgage Advance Trust,
Series 2010-ADV2, Class A1, 4.21%, 5/10/41 (b)		5,200		5,219,500
American General Mortgage Loan Trust,
Series 2010-1A, Class A1, 5.15%, 3/25/58 (a)(b)		7,228		7,511,740
AmeriCredit Automobile Receivables Trust:
Series 2006-BG, Class A4, 5.21%,
9/06/13		3,463		3,517,226
Series 2006-RM, Class A3, 5.53%,
1/06/14		6,593		6,676,226
Series 2007-CM, Class A4A, 5.55%,
4/07/14		6,114		6,329,671
Series 2007-CM, Class A4B, 0.35%,
4/07/14 (a)		7,192		7,171,701
Ameriquest Mortgage Securities, Inc.:
Series 2005-R11, Class A2C, 0.49%,
1/25/36 (a)		1,361		1,297,704
Series 2005-R6, Class A2, 0.46%,
8/25/35 (a)		1,002		969,661
Series 2006-R1, Class A2C, 0.45%,
3/25/36 (a)		2,820		2,789,542
Asset Backed Funding Corp. Certificates:
Series 2005-HE2, Class M1, 0.74%,
6/25/35 (a)		635		626,110
Series 2005-OPT1, Class A1SS, 0.51%,
7/25/35 (a)		1,259		1,213,968
Series 2006-OPT2, Class A3B, 0.37%,
10/25/36 (a)		912		906,660
Bank of America Credit Card Trust,
Series 2007-C1, Class C1, 0.55%, 6/16/14 (a)		2,300		2,268,253
Bear Stearns Asset Backed Securities Trust:
Series 2005-HE9, Class M1, 0.77%,
10/25/35 (a)		600		555,586
Series 2007-HE3, Class 1A1, 0.38%,
4/25/37 (a)		5,183		4,991,101
Capital One Auto Finance Trust:
Series 2006-B, Class A4, 0.28%,
7/15/13 (a)		4,277		4,255,833
Series 2006-C, Class A4, 0.29%,
5/15/13 (a)		712		708,397
Series 2007-A, Class A4, 0.28%,
11/15/13 (a)		1,143		1,135,173
Series 2007-B, Class A4, 0.29%,
4/15/14 (a)		4,132		4,110,826
Series 2007-C, Class A3A, 5.13%,
4/16/12		244		244,094
Series 2007-C, Class A3B, 0.77%,
4/16/12 (a)		423		423,301
Capital One Multi-Asset Execution Trust:
Series 2006-C1, Class C, 0.55%,
3/17/14 (a)		5,900		5,868,146
Series 2006-C2, Class C, 0.56%,
6/16/14 (a)		6,365		6,306,723
Carrington Mortgage Loan Trust,
Series 2007-FRE1, Class A1, 0.38%, 2/25/37 (a)		1,864		1,761,714
Chase Funding Mortgage Loan Asset-Backed Certificates,
Series 2003-5, Class 1A4, 4.40%, 2/25/30		653		650,099
Chase Issuance Trust,
Series 2006-C2, Class C, 0.56%, 4/15/13 (a)		7,000		6,994,251
Citibank Credit Card Issuance Trust:
Series 2004-C1, Class C1, 0.91%,
7/15/13 (a)		3,700		3,680,889
Series 2006-C2, Class C2, 5.70%,
5/15/13		6,037		6,164,504
Countrywide Asset-Backed Certificates:
Series 2004-AB2, Class A3, 0.67%,
5/25/36 (a)		2,058		1,981,545
Series 2005-3, Class MV2, 0.71%,
8/25/35 (a)		3,000		2,784,990
Series 2005-4, Class MV1, 0.72%,
10/25/35 (a)		6,545		6,235,503
Series 2006-15, Class A2, 5.68%,
10/25/46 (a)		3,800		3,727,572
Series 2006-22, Class 2A1, 0.31%,
5/25/47 (a)		57		56,692
Series 2006-25, Class 2A1, 0.33%,
6/25/47 (a)		1,319		1,297,897
Series 2007-10, Class 2A1, 0.31%,
6/25/47 (a)		1,988		1,925,954
Series 2007-4, Class A1B, 5.81%,
9/25/37		1,073		1,054,716
Series 2007-5, Class 2A1, 0.36%,
9/25/47 (a)		2,118		2,055,883
Series 2007-6, Class 2A1, 0.36%,
9/25/37 (a)		343		329,449
Series 2007-7, Class 2A1, 0.34%,
10/25/47 (a)		253		249,471
Series 2007-8, Class 2A1, 0.32%,
11/25/37 (a)		3,264		3,061,490
Credit-Based Asset Servicing & Securitization LLC,
Series 2007-SP2, Class A1, 0.41%, 3/25/46 (a)(b)		1,472		1,457,635
First Franklin Mortgage Loan Asset Backed Certificates,
Series 2004-FF10, Class A3, 0.80%, 9/25/34 (a)		330		313,941
First National Master Note Trust,
Series 2009-1, Class A, 1.61%, 5/15/14 (a)		5,800		5,798,906
GMAC Mortgage Corp. Loan Trust,
Series 2006-HLTV, Class A3, 5.59%, 10/25/29		882		852,645
GMAC Mortgage Servicer Advance Funding Co. Ltd.,
Series 2010-1A, Class A, 4.25%, 1/15/22 (b)		1,700		1,708,776
GSAMP Trust,
Series 2007-HE2, Class A2A, 0.38%, 3/25/47 (a)		1,495		1,415,736
GSRPM Mortgage Loan Trust,
Series 2006-2, Class A1A, 0.40%, 9/25/36 (a)(b)		533		527,354
HSBC Home Equity Loan Trust,
Series 2006-2, Class A1, 0.41%, 3/20/36 (a)		4,635		4,340,558

See Notes to Financial Statements.

74 BLACKROCK FUNDS III DECEMBER 31, 2010

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

Asset-Backed Securities	Par (000)			Value
Home Equity Asset Trust:
Series 2005-2, Class M2, 0.74%,
7/25/35 (a)		$	4,200		$	3,937,907
Series 2006-1, Class 2A4, 0.59%,
4/25/36 (a)			4,200			3,430,564
IndyMac Residential Asset Backed Trust,
Series 2007-A, Class 2A1, 0.39%, 4/25/47 (a)			2,843			2,803,668
Lehman XS Trust,
Series 2006-GP4, Class 3A1A, 0.33%, 8/25/46 (a)			364			361,173
MBNA Credit Card Master Note Trust:
Series 2004-C1, Class C1, 1.04%,
7/15/13 (a)			4,600			4,599,879
Series 2006-C3, Class C3, 0.55%,
10/15/13 (a)			800			798,011
MBNA Master Credit Card Trust,
Series 2001-C, Class C, 7.10%, 9/15/13 (b)			4,525			4,596,979
MASTR Asset Backed Securities Trust:
Series 2006-AB1, Class A2, 0.49%,
2/25/36 (a)			4,276			3,836,724
Series 2006-AM1, Class A2, 0.39%,
1/25/36 (a)			368			363,882
Series 2007-HE1, Class A1, 0.34%,
5/25/37 (a)			1,817			1,752,163
Morgan Stanley Capital, Inc.,
Series 2006, Class A3, 0.45%, 12/25/35 (a)			2,027			1,999,516
Morgan Stanley Home Equity Loan Trust,
Series 2006-1, Class A2B, 0.46%, 12/25/35 (a)			975			955,144
New Century Home Equity Loan Trust,
Series 2005-3, Class M1, 0.74%, 7/25/35 (a)			8,200			6,936,011
Park Place Securities, Inc.:
Series 2004-MHQ1, Class M1, 0.96%,
12/25/34 (a)			2,775			2,681,881
Series 2005-WCW3, Class A2C, 0.64%,
8/25/35 (a)			8,100			7,572,666
Residential Asset Mortgage Products, Inc.:
Series 2005-EFC3, Class M1, 0.71%,
8/25/35 (a)			5,547			5,455,484
Series 2007-RZ1, Class A1, 0.33%,
2/25/37 (a)			22			21,514
Residential Asset Securities Corp.:
Series 2005-AHL1, Class A2, 0.53%,
7/25/35 (a)			934			924,862
Series 2005-AHL2, Class A2, 0.52%,
10/25/35 (a)			779			747,748
Series 2005-EMX3, Class M1, 0.69%,
9/25/35 (a)			1,000			936,933
Series 2006-EMX5, Class A2, 0.38%,
7/25/36 (a)			254			253,861
Series 2006-KS1, Class A3, 0.48%,
2/25/36 (a)			1,435			1,335,671
Series 2006-KS5, Class A2, 0.37%,
7/25/36 (a)			353			352,554
Series 2006-KS7, Class A2, 0.36%,
9/25/36 (a)			441			438,607
Series 2007-KS1, Class A1, 0.32%,
1/25/37 (a)			117			116,404
Series 2007-KS3, Class AI1, 0.37%,
4/25/37 (a)			2,339			2,292,483
Series 2007-KS4, Class A1, 0.36%,
5/25/37 (a)			595			585,218
SG Mortgage Securities Trust,
Series 2006-OPT2, Class A3A, 0.31%, 10/25/36 (a)			1,114			1,095,802
SLM Student Loan Trust,
Series 2009-C, Class A, 4.50%, 11/16/43 (a)(b)			6,198			6,023,528
Santander Drive Auto Receivables Trust:
Series 2010-2, Class A2, 0.95%,
8/15/13			1,300			1,301,517
Series 2010-B, Class C, 3.02%,
10/17/16 (b)			2,500			2,505,475
Saxon Asset Securities Trust,
Series 2005-4, Class A1A, 0.49%, 11/25/37 (a)			2,830			2,626,447
Securitized Asset Backed Receivables LLC Trust:
Series 2005-FR5, Class A1A, 0.55%,
8/25/35 (a)			1,408			1,388,433
Series 2006-OP1, Class A2C, 0.56%,
10/25/35 (a)			4,018			3,609,575
Soundview Home Equity Loan Trust:
Series 2005-OPT4, Class 2A3, 0.52%,
12/25/35 (a)			7,846			7,059,528
Series 2006-EQ1, Class A2, 0.37%,
10/25/36 (a)			5,259			5,169,993
Series 2007-OPT5, Class 2A1, 1.06%,
10/25/37 (a)			156			154,737
Structured Asset Investment Loan Trust:
Series 2005-1, Class A5, 0.61%,
2/25/35 (a)(b)			2,043			2,016,296
Series 2005-11, Class A6, 0.48%,
1/25/36 (a)			2,636			2,429,479
Series 2005-6, Class M1, 0.74%,
7/25/35 (a)			3,900			3,079,436
Structured Asset Securities Corp.,
Series 2006-OPT1, Class A4, 0.42%, 4/25/36 (a)			3,580			3,234,822
Terwin Mortgage Trust,
Series 2005-14HE, Class AF2, 4.85%, 8/25/36			4,510			4,455,884
Wachovia Auto Loan Owner Trust,
Series 2007-1, Class D, 5.65%, 2/20/13			2,600			2,621,811
Wheels SPV LLC,
Series 2009-1, Class A, 1.81%, 3/15/18 (a)(b)			5,984			6,024,524
Total Asset-Backed Securities – 11.9%						255,259,701
Corporate Bonds
Aerospace & Defense – 0.4%
BE Aerospace, Inc.,
6.88%, 10/01/20			1,900			1,961,750
ITT Corp.,
6.13%, 5/01/19			800			901,747

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 75

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

Corporate Bonds	Par (000)			Value
Aerospace & Defense (concluded)
L-3 Communications Corp.,
Series B, 6.38%, 10/15/15		$	4,843		$	4,988,290
						7,851,787
Air Freight & Logistics – 0.1%
FedEx Corp.,
8.00%, 1/15/19			600			740,134
United Parcel Service, Inc.,
4.88%, 11/15/40			400			387,440
						1,127,574
Auto Components – 0.0%
Cooper US, Inc.:
2.38%, 1/15/16			350			345,233
3.88%, 12/15/20			300			293,324
						638,557
Automobiles – 0.1%
Daimler Finance North America LLC,
5.88%, 3/15/11			965			974,785
DaimlerChrysler North America Holding Corp.,
8.50%, 1/18/31			1,000			1,336,243
						2,311,028
Beverages – 0.7%
Anheuser-Busch InBev Worldwide, Inc.:
5.38%, 1/15/20			6,400			6,934,963
6.38%, 1/15/40			1,400			1,603,437
Bottling Group LLC,
5.13%, 1/15/19			1,100			1,199,990
Diageo Finance BV,
3.25%, 1/15/15			2,000			2,060,804
Dr Pepper Snapple Group, Inc.,
2.35%, 12/21/12			1,000			1,023,332
PepsiCo, Inc.:
5.50%, 1/15/40			2,000			2,114,058
4.88%, 11/01/40			1,000			970,343
						15,906,927
Biotechnology – 0.4%
Amgen, Inc.,
6.40%, 2/01/39			900			1,036,461
Biogen Idec, Inc.,
6.88%, 3/01/18			3,500			3,945,763
Celgene Corp.,
3.95%, 10/15/20			4,000			3,802,940
Genentech, Inc.,
4.75%, 7/15/15			625			688,184
						9,473,348
Building Products – 0.0%
CRH America, Inc.,
6.00%, 9/30/16			800			853,646
Capital Markets – 1.1%
The Bear Stearns Cos., Inc.,
6.40%, 10/02/17			2,500			2,850,095
The Bear Stearns Cos., Inc./JPMorgan Chase & Co.,
5.70%, 11/15/14			3,600			3,955,497
Credit Suisse First Boston USA, Inc.:
5.13%, 1/15/14 (c)			1,400			1,523,487
4.88%, 1/15/15			900			970,335
The Goldman Sachs Group, Inc.:
5.95%, 1/18/18			1,500			1,627,325
6.15%, 4/01/18			1,500			1,651,790
7.50%, 2/15/19			1,200			1,399,189
6.75%, 10/01/37			1,650			1,686,953
Merrill Lynch & Co., Inc.,
6.88%, 4/25/18 (c)			2,350			2,571,741
Morgan Stanley:
6.00%, 4/28/15			1,400			1,516,204
6.25%, 8/28/17			1,500			1,615,749
5.63%, 9/23/19			2,000			2,039,366
Series F, 5.95%, 12/28/17			850			899,334
						24,307,065
Chemicals – 0.6%
Eastman Chemical Co.,
3.00%, 12/15/15			2,300			2,271,832
Nalco Co.,
6.63%, 1/15/19 (b)			3,500			3,578,750
PPG Industries, Inc.:
6.65%, 3/15/18			2,200			2,530,295
3.60%, 11/15/20			2,000			1,862,398
Yara International ASA,
7.88%, 6/11/19 (b)			1,900			2,264,391
						12,507,666
Commercial Banks – 2.1%
Abbey National Treasury Services Plc,
3.88%, 11/10/14 (b)			2,500			2,477,345
American Express Bank FSB,
5.55%, 10/17/12			1,800			1,925,312
Australia & New Zealand Banking Group Ltd.,
2.40%, 1/11/13 (b)			2,800			2,845,363
BNP Paribas/BNP Paribas LLC,
2.13%, 12/21/12			4,000			4,064,476
Credit Suisse New York,
5.30%, 8/13/19			2,400			2,535,048
Deutsche Bank AG/London,
2.38%, 1/11/13			3,500			3,551,618
Enterprise Products Operating LLC,
5.25%, 1/31/20 (c)			2,000			2,080,380
HSBC Bank USA NA:
4.88%, 8/24/20			1,400			1,391,695
5.88%, 11/01/34			1,700			1,684,056
HSBC Holdings Plc:
5.25%, 12/12/12			3,000			3,190,401
6.50%, 9/15/37			1,400			1,466,136
JPMorgan Chase Bank NA, Series BKNT,
6.00%, 10/01/17			800			886,850
Lloyds TSB Bank Plc,
4.38%, 1/12/15 (b)			2,500			2,499,430
Wachovia Bank NA,
6.00%, 11/15/17			5,400			5,991,111
Wells Fargo & Co.,
5.25%, 10/23/12			7,700			8,255,000
						44,844,221
Commercial Services & Supplies – 0.0%
Iron Mountain, Inc.,
8.38%, 8/15/21			580			622,050

See Notes to Financial Statements.

76 BLACKROCK FUNDS III DECEMBER 31, 2010

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

Corporate Bonds	Par (000)		Value
Communications Equipment – 0.4%
Motorola, Inc.,
8.00%, 11/01/11	$	4,600	$	4,844,522
Omnicom Group, Inc.,
4.45%, 8/15/20		3,800		3,718,410
				8,562,932
Computers & Peripherals – 0.1%
International Business Machines Corp.,
7.63%, 10/15/18		2,050		2,609,566
Consumer Finance – 0.8%
American Express Co.,
8.13%, 5/20/19		4,800		5,972,213
American Express Credit Co.,
2.75%, 9/15/15		2,600		2,557,583
Capital One Financial Corp.,
7.38%, 5/23/14		1,600		1,820,690
Caterpillar Financial Services Corp.,
7.05%, 10/01/18		3,000		3,628,899
Ford Motor Credit Co. LLC,
7.00%, 4/15/15		2,500		2,686,530
HSBC Finance Corp.,
6.68%, 1/15/21 (b)		750		757,711
				17,423,626
Containers & Packaging – 0.5%
Ball Corp.,
5.75%, 5/15/21		2,900		2,805,750
Crown Americas LLC and Crown Americas Capital Corp. II,
7.63%, 5/15/17		3,900		4,192,500
Sealed Air Corp.:
7.88%, 6/15/17		840		923,746
6.88%, 7/15/33 (b)		2,000		1,875,294
				9,797,290
Diversified Financial Services – 1.4%
Associates Corp. of North America,
6.95%, 11/01/18		1,500		1,639,423
Bank of America Corp.:
4.50%, 4/01/15		4,300		4,370,240
3.70%, 9/01/15 (c)		1,000		991,365
5.65%, 5/01/18		1,500		1,532,658
5.49%, 3/15/19 (c)		1,500		1,463,183
Citigroup, Inc.:
6.50%, 8/19/13		1,400		1,537,283
6.38%, 8/12/14		1,400		1,547,290
6.13%, 11/21/17		1,000		1,095,886
8.50%, 5/22/19		1,600		1,986,296
8.13%, 7/15/39		600		763,282
General Electric Capital Corp.:
2.25%, 11/09/15		2,000		1,922,710
4.38%, 9/16/20		4,000		3,936,628
6.75%, 3/15/32		500		566,059
6.88%, 1/10/39		1,000		1,155,660
Genworth Global Funding Trusts,
5.75%, 5/15/13		1,000		1,046,106
JPMorgan Chase & Co.,
4.75%, 5/01/13		3,100		3,318,972
SLM Corp.,
8.00%, 3/25/20		950		963,210
				29,836,251
Diversified Telecommunication Services – 1.5%
AT&T, Inc.:
4.95%, 1/15/13		1,500		1,607,806
6.55%, 2/15/39 (c)		2,000		2,176,908
5.35%, 9/01/40 (b)		1,231		1,157,714
BellSouth Corp.,
6.55%, 6/15/34		2,400		2,524,090
British Telecommunications Plc,
9.88%, 12/15/30		400		533,132
CenturyLink, Inc.,
6.15%, 9/15/19 (c)		100		100,303
Frontier Communications Corp.:
7.88%, 4/15/15		900		983,250
8.25%, 4/15/17		1,500		1,646,250
Qwest Corp.,
8.38%, 5/01/16		3,300		3,910,500
Telecom Italia Capital SA,
7.00%, 6/04/18		1,600		1,694,123
Telefonica Emisiones SAU,
5.86%, 2/04/13		3,600		3,843,677
Verizon Communications, Inc.:
8.75%, 11/01/18		2,000		2,611,632
6.90%, 4/15/38 (c)		900		1,049,718
8.95%, 3/01/39		500		712,545
7.35%, 4/01/39		1,700		2,090,964
Virgin Media Secured Finance Plc,
6.50%, 1/15/18		2,600		2,736,500
Windstream Corp.:
8.63%, 8/01/16		2,250		2,368,125
7.88%, 11/01/17		1,350		1,419,187
				33,166,424
Electric Utilities – 1.3%
Commonwealth Edison Co.:
4.70%, 4/15/15		1,000		1,083,155
5.88%, 2/01/33		3,500		3,611,454
Duke Energy Corp.,
5.05%, 9/15/19		2,000		2,119,196
FirstEnergy Solutions Corp.,
6.05%, 8/15/21		1,200		1,232,722
MidAmerican Energy Holdings Co.,
5.75%, 4/01/18		6,550		7,380,861
Northern States Power Co,
5.25%, 7/15/35		2,500		2,534,203
Oncor Electric Delivery Co. LLC,
5.95%, 9/01/13		2,750		3,044,943
Pacific Gas & Electric Co.,
5.63%, 11/30/17		1,500		1,688,721
PacifiCorp,
5.50%, 1/15/19		1,300		1,465,747
Progress Energy, Inc.,
4.88%, 12/01/19		3,100		3,253,310
Southern Co.,
4.15%, 5/15/14		900		947,238
				28,361,550
Electronic Equipment, Instruments & Components – 0.2%
Corning, Inc.,
4.25%, 8/15/20		600		592,522
Tyco Electronics Group SA,
6.55%, 10/01/17		2,900		3,295,603
				3,888,125

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 77

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

Corporate Bonds	Par (000)		Value
Food & Staples Retailing – 0.1%
The Kroger Co.,
6.90%, 4/15/38	$	400	$	458,654
Wal-Mart Stores, Inc.,
4.88%, 7/08/40		1,700		1,619,568
				2,078,222
Food Products – 0.7%
General Mills, Inc.,
5.65%, 2/15/19		1,400		1,558,557
HJ Heinz Finance Co.,
7.13%, 8/01/39 (b)		1,400		1,646,285
Hershey Co. (The),
4.13%, 12/01/20		1,550		1,563,172
Kellogg Co.:
5.13%, 12/03/12		2,300		2,464,995
4.45%, 5/30/16		100		107,637
Series B, 7.45%, 4/01/31		100		125,323
Kraft Foods, Inc.,
5.38%, 2/10/20		3,600		3,874,568
Mead Johnson Nutrition Co.,
4.90%, 11/01/19		2,400		2,531,674
				13,872,211
Health Care Equipment & Supplies – 0.2%
Covidien International Finance SA,
6.55%, 10/15/37		1,600		1,899,453
Hospira, Inc.,
5.60%, 9/15/40		300		294,857
Zimmer Holdings, Inc.,
4.63%, 11/30/19		1,450		1,488,808
				3,683,118
Health Care Providers & Services – 1.0%
AmerisourceBergen Corp.,
4.88%, 11/15/19		900		917,791
CIGNA Corp.,
4.38%, 12/15/20		1,900		1,854,708
Cardinal Health, Inc.,
4.63%, 12/15/20		4,300		4,290,390
DaVita, Inc.:
6.38%, 11/01/18		2,950		2,935,250
6.63%, 11/01/20		2,200		2,178,000
Express Scripts, Inc.,
6.25%, 6/15/14		2,200		2,459,516
Humana, Inc.,
6.45%, 6/01/16		2,400		2,625,360
Laboratory Corp. of America Holdings,
3.13%, 5/15/16		1,600		1,581,283
UnitedHealth Group, Inc.:
6.88%, 2/15/38		1,700		1,979,162
5.70%, 10/15/40		250		248,916
				21,070,376
Hotels, Restaurants & Leisure – 1.0%
Host Hotels & Resorts, Inc.,
6.00%, 11/01/20 (b)		5,200		5,122,000
McDonald’s Corp.:
6.30%, 10/15/37		1,000		1,179,018
5.70%, 2/01/39		1,100		1,197,882
4.88%, 7/15/40		1,600		1,557,253
Wyndham Worldwide Corp.,
6.00%, 12/01/16		3,850		4,028,775
Yum! Brands, Inc.:
4.25%, 9/15/15		2,000		2,110,374
6.25%, 3/15/18		2,500		2,822,732
3.88%, 11/01/20 (c)		1,500		1,432,931
6.88%, 11/15/37		2,100		2,383,313
				21,834,278
Household Durables – 0.0%
Stanley Black & Decker, Inc.,
5.20%, 9/01/40		600		563,783
Independent Power Producers & Energy Traders – 0.2%
Constellation Energy Group, Inc.,
5.15%, 12/01/20		3,200		3,150,394
Exelon Generation Co. LLC,
5.75%, 10/01/41		500		476,380
				3,626,774
Industrial Conglomerates – 0.2%
Tyco International Finance SA,
8.50%, 1/15/19		3,900		4,991,938
Insurance – 0.9%
Allstate Life Global Funding Trusts,
5.38%, 4/30/13		5,250		5,717,040
American International Group,
6.40%, 12/15/20		1,200		1,259,051
Marsh & McLennan Cos., Inc.:
5.75%, 9/15/15		400		430,534
9.25%, 4/15/19		2,300		2,901,926
Metropolitan Life Global Funding I,
2.50%, 1/11/13 (b)		2,500		2,554,600
Northwestern Mutual Life Insurance,
6.06%, 3/30/40 (b)		2,700		2,982,269
Prudential Financial, Inc.:
5.15%, 1/15/13		1,750		1,866,540
7.38%, 6/15/19		1,000		1,179,039
				18,890,999
Internet & Catalog Retail – 0.2%
Expedia, Inc.,
5.95%, 8/15/20		3,100		3,115,500
Internet Software & Services – 0.1%
Digital Realty Trust LP,
5.88%, 2/01/20		2,800		2,848,588
IT Services – 0.5%
International Business Machines Corp.:
2.00%, 1/05/16		8,600		8,408,908
5.60%, 11/30/39		1,600		1,743,246
				10,152,154
Life Sciences Tools & Services – 0.5%
Bio-Rad Laboratories, Inc.,
4.88%, 12/15/20		4,100		3,981,010
Life Technologies Corp.,
3.50%, 1/15/16		4,400		4,386,589
Thermo Fisher Scientific, Inc.,
3.25%, 11/20/14		1,600		1,645,161
				10,012,760

See Notes to Financial Statements.

78 BLACKROCK FUNDS III DECEMBER 31, 2010

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

Corporate Bonds	Par (000)		Value
Machinery – 0.2%
Case New Holland, Inc.,
7.75%, 9/01/13	$	3,191	$	3,430,325
Media – 1.5%
CSC Holdings, Inc.,
7.63%, 7/15/18		4,400		4,774,000
Comcast Corp.,
5.70%, 5/15/18		7,050		7,758,708
DirecTV Holdings LLC,
5.20%, 3/15/20		2,500		2,591,707
DISH DBS Corp.,
6.38%, 10/01/11 (c)		500		515,000
DirecTV Holdings LLC / DirecTV Financing Co., Inc.:
7.63%, 5/15/16		4,800		5,322,000
5.88%, 10/01/19		1,500		1,630,265
Discovery Communications LLC,
6.35%, 6/01/40		1,000		1,080,081
NBC Universal, Inc.,
6.40%, 4/30/40 (b)		500		530,982
News America, Inc.,
5.65%, 8/15/20 (c)		1,400		1,570,117
TCM Mobile LLC,
3.55%, 1/15/15 (b)		1,600		1,633,082
Time Warner, Inc.:
7.70%, 5/01/32		500		610,346
6.20%, 3/15/40		600		637,832
Viacom, Inc.:
4.38%, 9/15/14		1,300		1,384,006
6.88%, 4/30/36		2,700		3,097,850
				33,135,976
Metals & Mining – 0.7%
Barrick Australian Finance Pty Ltd.,
5.95%, 10/15/39		400		423,545
Freeport-McMoRan Copper & Gold, Inc.,
8.38%, 4/01/17		2,200		2,433,750
Rio Tinto Finance USA Ltd.,
9.00%, 5/01/19		5,300		7,118,144
Vale Overseas Ltd.:
6.88%, 11/21/36		1,000		1,099,982
6.88%, 11/10/39		2,100		2,320,353
Xstrata Canada Corp.,
6.20%, 6/15/35		1,000		1,006,108
				14,401,882
Multi-Utilities – 0.3%
Dominion Resources, Inc.,
6.40%, 6/15/18		4,050		4,711,993
PSEG Power LLC,
6.95%, 6/01/12		2,300		2,479,768
				7,191,761
Oil, Gas & Consumable Fuels – 2.0%
Anadarko Petroleum Corp.,
6.20%, 3/15/40		1,300		1,269,037
Apache Corp.:
5.10%, 9/01/40		700		680,146
5.25%, 2/01/42		1,900		1,888,102
BP Capital Markets Plc,
3.13%, 10/01/15		700		699,519
ConocoPhillips Canada Funding Co. I,
5.63%, 10/15/16		500		568,291
EnCana Corp.,
6.50%, 5/15/19 (c)		400		474,104
Energy Transfer Partners LP:
9.70%, 3/15/19		1,900		2,455,674
9.00%, 4/15/19		800		1,002,222
Enterprise Products Operating LLC:
7.50%, 2/01/11		3,600		3,615,905
5.75%, 3/01/35		1,500		1,480,596
LINN Energy LLC FIN Corp.,
8.63%, 4/15/20 (b)		3,200		3,448,000
Marathon Oil Corp.,
6.60%, 10/01/37		900		1,028,015
Petrobras International Finance Co.:
5.75%, 1/20/20		2,000		2,075,136
6.88%, 1/20/40		1,270		1,334,012
Petronas Capital Ltd.,
5.25%, 8/12/19		2,200		2,359,650
Plains All American Pipeline LP/PAA Finance Corp.:
8.75%, 5/01/19		600		744,597
5.75%, 1/15/20		3,000		3,195,414
6.70%, 5/15/36		1,000		1,043,718
TransCanada PipeLines Ltd.:
6.50%, 8/15/18		6,250		7,377,231
3.80%, 10/01/20		4,200		4,098,473
7.63%, 1/15/39		600		775,841
Williams Partners LP,
3.80%, 2/15/15		800		826,722
				42,440,405
Paper & Forest Products – 0.1%
International Paper Co.,
9.38%, 5/15/19		1,600		2,058,062
Pharmaceuticals – 0.3%
Abbott Laboratories,
5.30%, 5/27/40		1,400		1,438,002
AstraZeneca Plc,
6.45%, 9/15/37		1,500		1,780,810
GlaxoSmithKline Capital, Inc.,
6.38%, 5/15/38		500		590,953
Johnson & Johnson,
4.50%, 9/01/40		1,800		1,704,049
Pfizer, Inc.,
6.20%, 3/15/19		1,500		1,757,041
				7,270,855
Professional Services – 0.0%
Dun & Bradstreet Corp.,
2.88%, 11/15/15		600		586,519
Real Estate Investment Trusts (REITs) – 0.4%
Plum Creek Timberlands LP,
4.70%, 3/15/21		600		571,027
Simon Property Group LP,
5.65%, 2/01/20		2,800		3,028,855
TransDigm, Inc.,
7.75%, 12/15/18 (b)		4,200		4,347,000
				7,946,882
Road & Rail – 0.3%
CSX Corp.:
5.75%, 3/15/13		2,600		2,834,871
5.50%, 4/15/41		800		786,044

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 79

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

Corporate Bonds	Par (000)		Value
Road & Rail (concluded)
Norfolk Southern Corp.,
5.75%, 1/15/16	$	1,100	$	1,236,074
Union Pacific Corp.,
6.13%, 2/15/20 (c)		1,300		1,483,493
				6,340,482
Semiconductors & Semiconductor Equipment – 0.0%
Broadcom Corp.,
2.38%, 11/01/15 (b)		300		292,034
Software – 0.1%
Oracle Corp.:
5.25%, 1/15/16		1,500		1,686,423
5.75%, 4/15/18		550		629,170
				2,315,593
Specialty Retail – 0.5%
AutoZone, Inc.,
4.00%, 11/15/20		3,600		3,400,099
Limited Brands, Inc.,
8.50%, 6/15/19		4,000		4,570,000
The Sherwin-Williams Co.,
3.13%, 12/15/14		3,300		3,395,459
				11,365,558
Thrifts & Mortgage Finance – 0.0%
Countrywide Home Loans, Inc.,
4.00%, 3/22/11 (c)		800		805,833
Tobacco – 0.9%
Altria Group, Inc.:
9.70%, 11/10/18		2,750		3,627,872
9.25%, 8/06/19		1,100		1,435,544
9.95%, 11/10/38		1,200		1,690,958
Lorillard Tobacco Co.,
8.13%, 5/01/40		1,300		1,332,971
Philip Morris International, Inc.:
4.88%, 5/16/13		2,200		2,381,614
5.65%, 5/16/18		1,300		1,465,651
6.38%, 5/16/38		1,500		1,741,031
Reynolds American, Inc.,
1.00%, 6/15/11 (a)		5,060		5,066,026
				18,741,667
Wireless Telecommunication Services – 0.4%
America Movil SAB de CV,
5.00%, 3/30/20		2,800		2,910,454
American Tower Corp.:
4.50%, 1/15/18		2,100		2,081,659
5.05%, 9/01/20 (c)		2,300		2,261,898
Vodafone Group Plc,
5.63%, 2/27/17		950		1,060,530
				8,314,541
Total Corporate Bonds – 25.0%				537,468,709
Foreign Agency Obligations
Brazilian Government International Bond:
5.88%, 1/15/19		7,600		8,436,000
5.63%, 1/07/41		1,500		1,488,750
Indonesia Government International Bond,
5.88%, 3/13/20 (b)		1,800		1,975,500

Foreign Agency Obligations	Par (000)		Value
Peruvian Government International Bond,
7.13%, 3/30/19 (c)	$	1,900	$	2,270,500
Republic of Turkey,
7.50%, 11/07/19		2,000		2,380,000
South Africa Government International Bond:
6.88%, 5/27/19		2,100		2,459,625
5.50%, 3/09/20		2,000		2,127,500
Total Foreign Agency Obligations – 1.0%				21,137,875
Non-Agency Mortgage-Backed Securities
Collateralized Mortgage Obligations – 3.0%
Arran Residential Mortgages Funding Plc,
Series 2010-1A, Class A1C, 1.58%, 5/16/47 (a)(b)		4,090		4,086,675
Banc of America Funding Corp.,
Series 2006-G, Class 2A2, 0.34%, 7/20/36 (a)		1,007		1,004,560
Citicorp Mortgage Securities, Inc.,
Series 2006-1, Class 2A1, 5.00%, 2/25/21		1,572		1,538,500
Countrywide Alternative Loan Trust:
Series 2006-HY12, Class A1, 5.87%,
8/25/36 (a)		1,234		1,229,637
Series 2006-OA2, Class A2A, 0.41%,
5/20/46 (a)		228		222,913
Countrywide Home Loan Mortgage Pass Through Trust,
Series 2004-13, Class 1A1, 5.50%, 8/25/34		1,319		1,321,562
First Horizon Asset Securities, Inc.,
Series 2006-2, Class 1A6, 6.00%, 8/25/36		941		955,630
Fosse Master Issuer Plc,
Series 2006-1A, Class A2, 0.35%, 10/18/54 (a)(b)		1,818		1,816,270
GSR Mortgage Loan Trust,
Series 2006-AR1, Class 2A2, 2.96%, 1/25/36 (a)		4,459		4,311,400
Greenpoint Mortgage Funding Trust,
Series 2006-AR4, Class A1A, 0.36%, 9/25/46 (a)		355		349,520
HSI Asset Securitization Corp. Trust,
Series 2005, Class 2A4, 0.65%, 8/25/35 (a)		1,559		1,461,115
Holmes Master Issuer Plc,
Series 2007-2A, Class 3A1, 0.37%, 7/15/21 (a)		4,802		4,768,468
JPMorgan Alternative Loan Trust,
Series 2006-A7, Class 1A2, 0.32%, 12/25/36 (a)		8,029		7,913,416
Opteum Mortgage Acceptance Corp.,
Series 2005-3, Class A1B, 0.52%, 7/25/35 (a)		1,426		1,345,324
Permanent Financing Plc,
Series 9A, Class 3A, 0.40%, 6/10/33 (a)(b)		3,550		3,540,497
Residential Accredit Loans, Inc.:
Series 2004-QS9, Class A1, 5.00%,
6/25/19		875		863,968
Series 2006-QO7, Class 3A1, 0.36%,
9/25/46 (a)		3,084		2,993,425

See Notes to Financial Statements.

80 BLACKROCK FUNDS III DECEMBER 31, 2010

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

Non-Agency Mortgage-Backed Securities	Par (000)		Value
Collateralized Mortgage Obligations (concluded)
Structured Asset Mortgage Investments, Inc.,
Series 2007-AR4, Class A1, 0.46%, 9/25/47 (a)	$	4,248	$	4,173,833
Thornburg Mortgage Securities Trust:
Series 2007-1, Class A2B, 0.35%,
3/25/37 (a)		4,283		4,178,320
Series 2007-2, Class A1, 0.39%,
6/25/37 (a)		786		757,968
Series 2007-2, Class A3A, 0.38%,
6/25/37 (a)		9,912		9,752,139
WaMu Mortgage Pass Through Certificates:
Series 2005-AR15, Class A1B1, 0.51%,
11/25/45 (a)		852		841,567
Series 2005-AR15, Class A1C2, 0.64%,
11/25/45 (a)		705		699,259
Wells Fargo Mortgage Backed Securities Trust:
Series 2005-7, Class A3, 5.25%,
9/25/35		1,433		1,430,853
Series 2005-AR14, Class A2, 5.37%,
8/25/35 (a)		2,914		2,931,318
				64,488,137
Commercial Mortgage-Backed Securities 4.7%
Banc of America Commercial Mortgage, Inc.:
Series 2004-5, Class A2, 4.18%,
11/10/41		6		5,715
Series 2006-2, Class A4, 5.74%,
5/10/45 (a)		3,245		3,552,504
Bear Stearns Commercial Mortgage Securities,
Series 2001-TOP2, Class A2, 6.48%, 2/15/35		4,057		4,071,279
CW Capital Cobalt Ltd.,
Series 2006-C1, Class A4, 5.22%, 8/15/48		3,000		3,122,663
Citigroup Commercial Mortgage Trust,
Series 2008-C7, Class A4, 6.18%, 12/10/49 (a)		2,500		2,687,250
Credit Suisse First Boston Mortgage Securities Corp.:
Series 2001-CF2, Class A4, 6.51%,
2/15/34		540		540,164
Series 2001-CK3, Class A4, 6.53%,
6/15/34		2,119		2,129,360
GE Capital Commercial Mortgage Corp.,
Series 2007-C1, Class A2, 5.42%, 12/10/49		1,945		1,983,877
Greenwich Capital Commercial Funding Corp.,
Series 2005-GG5, Class A5, 5.22%, 4/10/37 (a)		1,000		1,061,155
JPMorgan Chase Commercial Mortgage Securities Corp.:
Series 2001-CIB3, Class A3, 6.47%,
11/15/35		4,815		4,943,375
Series 2002-CIB4, Class A3, 6.16%,
5/12/34		7,345		7,634,561
Series 2004-CBX, Class A3, 4.18%,
1/12/37		1,608		1,609,825
Series 2005-CB12, Class A3A1, 4.82%,
9/12/37		6,500		6,576,906
Series 2007-CB19, Class A3, 5.74%,
2/12/49 (a)		4,300		4,487,314
Series 2007-LDPX, Class A1S, 4.93%,
1/15/49		9,606		9,746,673
LB-UBS Commercial Mortgage Trust:
Series 2001-C2, Class A2, 6.65%,
11/15/27		2,649		2,655,099
Series 2004-C4, Class A2, 4.57%,
6/15/29 (a)		4,107		4,117,821
Series 2006-C1, Class A4, 5.16%,
2/15/31		2,800		2,990,898
Series 2006-C7, Class A2, 5.30%,
11/15/38		6,600		6,735,344
Series 2006-C7, Class A3, 5.35%,
11/15/38		2,000		2,114,519
Series 2007-C6, Class A4, 5.86%,
7/15/40 (a)		5,700		5,988,819
Merrill Lynch Countrywide Commercial Mortgage Trust,
Series 2006-1, Class A2, 5.44%, 2/12/39 (a)		2,850		2,859,065
Morgan Stanley Capital I,
Series 2007-IQ16, Class A4, 5.81%, 12/12/49		7,100		7,586,545
Wachovia Bank Commercial Mortgage Trust:
Series 2006-C23, Class A5, 5.42%,
1/15/45 (a)		5,700		6,077,712
Series 2007-C34, Class A3, 5.68%,
5/15/46		6,000		6,260,570
				101,539,013
Total Non-Agency Mortgage-Backed Securities – 7.7%				166,027,150
Preferred Securities
Capital Trusts
Insurance – 0.3%
AON Corp.,
8.21%, 1/01/27		1,700		1,827,534
Chubb Corp.:
6.00%, 5/11/37		800		866,986
6.38%, 3/29/67 (a)		2,550		2,658,375
The Travelers Cos., Inc.,
6.25%, 6/15/37		1,000		1,111,328
				6,464,223
Total Capital Trusts – 0.3%				6,464,223
	Shares
Trust Preferred – 0.2%
Diversified Financial Services – 0.2%
JPMorgan Chase Capital XXVII,
7.00%, 11/01/39		3,500		3,664,598
Total Preferred Securities – 0.5%				10,128,821

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 81

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

Taxable Municipal Bonds	Par (000)		Value
Chicago, Illinois Waterworks Revenue,
6.74%, 11/01/40	$	150	$	146,295
Massachusetts State Transportation Fund Revenue,
5.73%, 6/01/40		150		157,935
New Jersey State Turnpike Authority Revenue,
7.10%, 1/01/41		700		758,681
New York City Transitional Finance Authority Revenue,
5.57%, 11/01/38		450		435,992
Orange County Local Transportation Authority Sales Tax Revenue,
6.91%, 2/15/41		450		468,639
Port Authority of New York & New Jersey Revenue,
5.65%, 11/01/40		800		772,880
San Diego County Regional Transportation Commission Revenue,
5.91%, 4/01/39		600		589,200
San Francisco City & County Public Utilities Commission Revenue,
6.95%, 11/01/31		900		927,225
State of California:
7.55%, 4/01/39		400		414,856
7.63%, 3/01/40		1,150		1,199,921
7.60%, 11/01/40		250		260,338
State of Illinois,
2.77%, 1/01/12		5,200		5,212,896
State of Mississippi,
5.25%, 11/01/34		600		573,972
University of Missouri System Facilities Revenue,
5.79%, 11/01/39		300		310,197
Total Taxable Municipal Bonds – 0.6%				12,229,027
U.S. Government Sponsored Agency Securities
Interest Only Collateralized Mortgage Obligations – 0.0%
Freddie Mac Mortgage Backed Securities:
Series 2989, Class WI, 5.50%,
5/15/29		740		18,100
Series 3003, Class BI, 5.00%,
12/15/34		575		12,952
Series 3016, Class PI, 5.50%,
5/15/29		206		3,054
				34,106
Mortgage-Backed Securities – 62.1%
Fannie Mae Mortgage Backed Securities:
2.59%, 5/01/33 (a)		4,602		4,795,001
2.60%, 8/01/33		3,258		3,402,411
2.92%, 1/01/35 (a)		1,852		1,932,578
3.34%, 4/01/40 (a)		781		807,059
3.50%, 1/01/41 (d)		130,000		124,409,375
4.00%, 8/01/25 – 1/01/41 (d)		212,377		211,956,394
4.50%, 10/01/24 – 1/01/41 (d)		254,612		261,839,416
4.76%, 1/01/36 (a)		2,204		2,312,394
5.00%, 1/01/18 – 1/01/41 (d)		159,484		168,113,486
5.50%, 9/01/19 – 1/01/41 (d)		89,112		95,910,922
6.00%, 11/01/22 – 1/01/41 (d)		79,505		86,654,759
6.50%, 7/01/32 – 10/01/36		22,209		24,897,299
U.S. Government Sponsored Agency Securities	Par (000)		Value
Mortgage-Backed Securities (concluded)
Freddie Mac Mortgage Backed Securities:
2.35%, 10/01/33 (a)	$	1,844	$	1,917,470
3.36%, 2/01/40 (a)		5,218		5,406,495
3.50%, 1/01/41 (d)		4,000		4,023,750
4.00%, 4/01/40 – 1/01/41 (d)		27,438		27,631,822
4.50%, 8/01/20 – 1/01/41 (d)		51,888		53,419,104
4.54%, 4/01/38 (a)		8,215		8,653,680
5.00%, 10/01/20 – 1/01/41 (d)		48,657		51,153,071
5.50%, 12/01/27 – 1/01/41 (d)		30,704		32,829,128
6.00%, 12/01/28 – 1/01/41 (d)		22,276		24,253,666
6.24%, 11/01/36 (a)		2,907		3,078,455
6.50%, 5/01/21 – 1/01/36		4,654		5,214,343
Ginnie Mae Mortgage Backed Securities:
4.00%, 12/20/40 – 1/01/41 (d)		9,011		9,081,779
4.50%, 3/15/39 – 1/01/41 (d)		42,399		44,150,795
5.00%, 9/15/39 – 7/20/40		36,567		39,236,547
5.50%, 6/15/34 – 1/01/41 (d)		20,614		22,260,831
6.00%, 1/01/41 (d)		16,000		17,592,500
				1,336,934,530
Total U.S. Government Sponsored Agency Securities – 62.1%				1,336,968,636
U.S. Treasury Obligations
U.S. Treasury Bonds:
6.13%, 8/15/29 (e)		700		885,391
6.25%, 5/15/30		22,400		28,790,989
4.38%, 5/15/40		23,100		23,211,804
3.88%, 8/15/40 (c)		17,300		15,934,926
4.25%, 11/15/40		4,640		4,564,600
U.S. Treasury Notes:
4.00%, 2/15/14 (e)		1,350		1,470,656
3.50%, 5/15/20 (c)		40,900		41,897,142
2.63%, 8/15/20 (c)		35,200		33,371,254
Total U.S. Treasury Obligations – 7.0%				150,126,762
Total Long-Term Investments (Cost — $2,433,619,955) – 115.8%				2,489,346,681
Short-Term Securities	Shares
Money Market Funds – 24.7%
BlackRock Cash Funds: Institutional, SL Agency Shares,
0.25% (f)(g)(h)		519,520,789		519,520,789
BlackRock Cash Funds: Prime, SL Agency Shares,
0.24% (f)(g)(h)		12,803,177		12,803,177
				532,323,966
Total Short-Term Securities (Cost — $532,323,966) – 24.7%				532,323,966
Total Investments Before TBA Sale Commitments (Cost — $2,965,943,921*) – 140.5%				3,021,670,647
TBA Sale Commitments (d)	Par (000)
Fannie Mae Mortgage Backed Securities:
3.50%, 1/01/41		71,000		(67,805,000	)
4.00%, 8/01/25 – 1/01/41		238,000		(236,735,625	)

See Notes to Financial Statements.

82 BLACKROCK FUNDS III DECEMBER 31, 2010

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

TBA Sale Commitments (d)	Par (000)		Value
4.50%, 10/01/24 – 1/01/41	$	47,000	$	(48,241,094	)
5.00%, 1/01/18 – 1/01/41		34,000		(35,742,500	)
6.00%, 11/01/22 – 1/01/41		55,000		(59,778,125	)
Total TBA Sale Commitments (Proceeds – $447,887,724) – (20.8)%				(448,302,344	)
Total Investments Net of TBA Sale Commitments – 119.7%				2,573,368,303
Liabilities in Excess of Other Assets – (19.7)%				(422,805,072	)
Net Assets – 100.0%			$	2,150,563,231

* The cost and unrealized appreciation (depreciation) of investments as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	2,971,602,180
Gross unrealized appreciation	$	63,629,388
Gross unrealized depreciation		(13,560,921	)
Net unrealized appreciation	$	50,068,467

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

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

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

(d) Represents or includes a to-be-announced (“TBA”) transaction. Unsettled TBA transactions as of report date were as follows:

Counterparty	Market Value			Unrealized Appreciation (Depreciation)
Bank of America Securities	$	(14,369,688	)	$	(93,924	)
Barclays Capital Inc.	$	26,493,594		$	506,229
Citigroup Global	$	73,416,094		$	(80,897	)
Credit Suisse Securities LLC	$	127,449,844		$	(265,544	)
Deutsche Bank Securites, Inc.	$	(31,292,969	)	$	162,066
Goldman Sachs & Co.	$	30,021,250		$	370,350
JPMorgan Securities, Ltd.	$	(4,671,250	)	$	(30,000	)
Morgan Stanley Capital Services, Inc.	$	(80,231,094	)	$	(14,056	)
Nomura Securities	$	4,417,656		$	258,817
RBS Securities LLC	$	143,589,063		$	351,001
UBS Securities LLC	$	55,965,000		$	112,479
Wells Fargo Securities	$	5,222,656		$	6,250

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

(f) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at December 31, 2009	Net Activity	Shares Held at December 31, 2010	Income
BlackRock Cash Funds: Institutional, SL Agency Shares	337,863,503	181,657,286	519,520,789	$1,179,974
BlackRock Cash Funds: Prime, SL Agency Shares	9,006,982	3,796,195	12,803,177	$21,394

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

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

For Master Portfolio compliance purposes, the Master Portfolio’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Master Portfolio management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease.

• Financial futures contracts purchased as of December 31, 2010 were as follows:

Contracts	Issue		Exchange		Expiration Date		Notional Value		Unrealized Appreciation (Depreciation)
982		2-Year U.S. Treasury Notes		Chicago		March 2011	$	214,965,938	$	390,523
2,918		5-Year U.S. Treasury Notes		Chicago		March 2011	$	343,503,313		(3,604,574	)
36		30-Year U.S. Treasury Bonds		Chicago		March 2011	$	4,396,500		52,880
262		Ultra Long U.S. Treasury Bonds		Chicago		March 2011	$	33,298,563		(619,048	)
Total									$	(3,780,219	)

• Financial futures contracts sold as of December 31, 2010 were as follows:

Contracts	Issue	Exchange	Expiration Date	Notional Value			Unrealized Appreciation
908	10-Year U.S. Treasury Notes	Chicago	March 2011	$	(109,357,250	)	$	122,912

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 83

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

• Interest rate swaps outstanding as of December 31, 2010 were as follows:

Fixed Rate	Floating Rate	Counterparty	Expiration	Notional Amount (000)		Unrealized Appreciation
1.93%(a)	3-month LIBOR	Deutsche Bank AG	October 2017	$	35,600	$	1,843,823
1.97%(a)	3-month LIBOR	Deutsche Bank AG	October 2017	$	4,500		222,056
3.05%(b)	3-month LIBOR	BNP Paribas	December 2017	$	4,700		76,329
3.32%(b)	3-month LIBOR	Deutsche Bank AG	August 2040	$	14,900		2,045,371
Total						$	4,187,579

(a) Pays fixed interest rate and receives floating rate.

(b) Pays floating interest rate and receives fixed rate.

• Credit default swaps on single-name issues – buy protection outstanding as of December 31, 2010 were as follows:

Issuer	Pay Rate			Counterparty	Expiration	Notional Amount (000)		Unrealized Appreciation
General Electric Capital Corp.		3.25	%	Deutsche Bank AG	December 2013	$	4,000	$	181,228

• Credit default swaps on traded indexes – sold protection outstanding as of December 31, 2010 were as follows:

Issuer	Received Fixed Rate			Counterparty	Expiration	Notional Amount (000)		Unrealized Appreciation
Dow Jones CDX North America Investment Grade		1.00	%	UBS AG	December 2015	$	103,000	$	141,512

• Fair Value Measurements – Various inputs are used in determining the fair value of investments and derivatives, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities

• 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 derivatives)

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments and derivatives:

	Investments in Securities
Valuation Inputs	Level 1		Level 2			Level 3		Total
Assets
Investments in Securities:
Long-Term Investments:
Asset-Backed Securities		–	$	255,259,701			–	$	255,259,701
Corporate Bonds		–		537,468,709			–		537,468,709
Foreign Agency Obligations		–		21,137,875			–		21,137,875
Non-Agency Mortgage- Backed Securities		–		166,027,150			–		166,027,150
Preferred Securities		–		10,128,821			–		10,128,821
Taxable Municipal Bonds		–		12,229,027			–		12,229,027
U.S. Government Sponsored Agency Securities		–		1,336,968,636			–		1,336,968,636
U.S. Treasury Obligations		–		150,126,762			–		150,126,762
Short-Term Securities:
Money Market Funds	$	532,323,966		–			–		532,323,966
Liabilities
Investments in Securities:
TBA Sale Commitments		–		(448,302,344	)		–		(448,302,344	)
Total	$	532,323,966	$	2,041,044,337			–	$	2,573,368,303

See Notes to Financial Statements.

84 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments (concluded) CoreAlpha Bond Master Portfolio

	Derivative Financial Instruments1
Valuation Inputs	Level 1			Level 2		Level 3		Total
Assets
Credit contracts		–		$	322,740		–	$	322,740
Interest rate contracts	$	122,912			4,187,579		–		4,310,491
Liabilities
Interest rate contracts		(3,780,219	)		–		–		(3,780,219	)
Total	$	(3,657,307	)	$	4,510,319		–	$	853,012

¹ Derivative financial instruments are swaps and financial futures contracts. Swaps and financial futures contracts are shown at the unrealized appreciation/depreciation on the instrument.

The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

	Asset- Backed Securities			Collateralized Mortgage Obligations			Mortgage- Backed Securities			Total
Assets
Balance, as of December 31, 2009	$	8,831,446		$	2,595,153		$	21,641,644		$	33,068,243
Accrued discounts/premiums		–			–			–			–
Net realized gain (loss)		185,292			28,240			(42,441	)		171,091
Net change in unrealized appreciation/depreciation		11,267			(9,076	)		114,018			116,209
Purchases		3,637,145			–			–			3,637,145
Sales		(11,249,414	)		(1,075,817	)		(18,449,886	)		(30,775,117	)
Transfers in2		–			–			–			–
Transfers out2		(1,415,736	)		(1,538,500	)		(3,263,335	)		(6,217,571	)
Balance, as of December 31, 2010		–			–			–			–

² The Master Portfolio’s policy is to recognize transfers in and transfers out as of the end of the period of the event or the change in circumstances that caused the transfer.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 85

Statements of Assets and Liabilities Master Investment Portfolio

December 31, 2010	LifePath Retirement Master Portfolio		LifePath 2020 Master Portfolio		LifePath 2030 Master Portfolio		LifePath 2040 Master Portfolio		LifePath 2050 Master Portfolio
Assets
Investments at value – affiliated1,2	$	460,948,981	$	981,644,020	$	910,845,891	$	778,179,153	$	66,784,071
Investments at value – Active Stock Master Portfolio		272,611,476		724,236,224		767,320,441		687,896,852		61,094,483
Investments at value – CoreAlpha Bond Master Portfolio		711,674,200		819,101,109		439,888,230		177,729,200		2,094,794
Investments sold receivable		42,582,745		79,025,147		61,662,640		55,294,121		3,727,436
Dividends receivable		309,172		347,269		196,339		85,891		4,161
Securities lending income receivable		18,948		52,795		40,457		33,605		3,577
Interest receivable		22		38		32		25		3
Total assets		1,488,145,544		2,604,406,602		2,179,954,030		1,699,218,847		133,708,525
Liabilities
Collateral on securities loaned at value		84,341,176		205,539,162		174,456,145		158,898,278		12,341,035
Investments purchased payable		–		6,223,625		–		–		155,807
Withdrawals payable to investors		23,609,778		48,593,720		33,342,596		21,051,119		1,805,424
Investment advisory fees payable		40,326		74,359		65,626		52,215		2,793
Professional fees payable		12,791		12,791		12,791		12,791		12,791
Trustees’ fees payable		738		2,028		1,806		1,139		129
Total liabilities		108,004,809		260,445,685		207,878,964		180,015,542		14,317,979
Net Assets	$	1,380,140,735	$	2,343,960,917	$	1,972,075,066	$	1,519,203,305	$	119,390,546
Net Assets Consist of
Investors’ capital	$	1,256,974,680	$	2,099,981,510	$	1,747,702,629	$	1,337,503,957	$	104,429,161
Net unrealized appreciation/depreciation		123,166,055		243,979,407		224,372,437		181,699,348		14,961,385
Net Assets	$	1,380,140,735	$	2,343,960,917	$	1,972,075,066	$	1,519,203,305	$	119,390,546
1 Investments at cost – affiliated	$	389,500,639	$	837,702,358	$	780,671,649	$	675,329,568	$	57,732,093
2 Securities loaned at value	$	82,330,622	$	201,147,822	$	169,890,678	$	154,967,640	$	12,012,164

See Notes to Financial Statements.

86 BLACKROCK FUNDS III DECEMBER 31, 2010

Statements of Assets and Liabilities (concluded) Master Investment Portfolio

December 31, 2010	Active Stock Master Portfolio		CoreAlpha Bond Master Portfolio
Assets
Investments at value – unaffiliated1,2	$	2,410,740,910	$	2,489,346,681
Investments at value – affiliated3		293,618,616		532,323,966
TBA sales commitments receivable		–		447,887,724
Investments sold receivable		65,444,086		156,248,137
Dividends receivable		1,939,579		–
Credit default swaps at fair value4		–		5,155,175
Securities lending income receivable		203,664		121,825
Interest receivable		368		12,062,649
Margin variation receivable		–		1,221,274
Due from broker – swaps collateral		–		1,030,000
Collateral for open futures contracts		–		2,014,000
Total assets		2,771,947,223		3,647,411,431
Liabilities
Collateral on securities loaned at value		248,089,980		92,408,320
Investments purchased payable		9,790,131		948,302,062
TBA sale commitments (proceeds – $- and $447,887,724, respectively)		–		448,302,344
Margin variation payable		61,624		–
Due to broker – swaps collateral		–		7,196,676
Investment advisory fees payable		357,714		441,833
Administration fees payable		200,553		154,043
Professional fees payable		20,640		27,805
Trustees’ fees payable		2,465		15,117
Total liabilities		258,523,107		1,496,848,200
Net Assets	$	2,513,424,116	$	2,150,563,231
Net Assets Consist of
Investors’ capital	$	2,239,291,725	$	2,093,965,808
Net unrealized appreciation/depreciation		274,132,391		56,597,423
Net Assets	$	2,513,424,116	$	2,150,563,231
1 Investments at cost – unaffiliated	$	2,137,472,148	$	2,433,619,955
2 Securities loaned at value	$	241,807,771	$	90,177,239
3 Investments at cost – affiliated	$	293,618,616	$	532,323,966
4 Includes premiums paid in the amount of $644,856 for the CoreAlpha Bond Master Portfolio.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 87

Statements of Operations Master Investment Portfolio

Year Ended December 31, 2010	LifePath Retirement Master Portfolio			LifePath 2020 Master Portfolio			LifePath 2030 Master Portfolio			LifePath 2040 Master Portfolio			LifePath 2050 Master  Portfolio
Investment Income
Dividends – affiliated	$	8,239,820		$	17,977,643		$	17,578,403		$	15,286,268		$	1,144,952
Securities lending – affiliated		302,096			661,474			667,815			605,002			32,828
Income – affiliated		6,428			11,971			10,797			8,279			1,315
Net investment income allocated from the Active Stock Master and CoreAlpha Bond Master:
Dividends		4,214,300			10,793,464			11,200,341			10,114,546			689,418
Interest		24,024,754			25,900,387			13,446,727			5,480,100			56,415
Expenses		(3,062,537	)1		(4,319,452	)1		(3,150,688	)1		(2,187,195	)1		(115,610	)1
Total income		33,724,861			51,025,487			39,753,395			29,307,000			1,809,318
Expenses
Investment advisory		4,491,543			7,223,037			5,892,043			4,537,180			271,881
Professional		16,415			18,978			17,965			16,995			13,836
Independent Trustees		38,112			58,406			48,490			38,377			7,232
Total expenses		4,546,070			7,300,421			5,958,498			4,592,552			292,949
Less fees waived by advisor		(4,210,408	)		(6,831,268	)		(5,617,067	)		(4,360,963	)		(278,698	)
Total expenses after fees waived		335,662			469,153			341,431			231,589			14,251
Net investment income		33,389,199			50,556,334			39,411,964			29,075,411			1,795,067
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments – unaffiliated		36,228			62,661			25,700			38,851			–
Investments – affiliated		2,383,495			(7,714,273	)		(5,958,157	)		(7,217,311	)		745,242
Allocations from the Active Stock Master and CoreAlpha Bond Master from investments, financial futures contracts and swaps		36,485,361			58,949,629			50,320,311			41,943,224			1,276,706
		38,905,084			51,298,017			44,387,854			34,764,764			2,021,948
Net change in unrealized appreciation/depreciation on:
Investments – affiliated		40,652,398			102,314,342			96,516,146			85,355,355			5,668,214
Allocated from the Active Stock Master and CoreAlpha Bond Master from investments, financial futures contracts and swaps		9,559,056			27,469,273			28,899,070			22,673,265			4,178,555
		50,211,454			129,783,615			125,415,216			108,028,620			9,846,769
Total realized and unrealized gain		89,116,538			181,081,632			169,803,070			142,793,384			11,868,717
Net Increase in Net Assets Resulting from Operations	$	122,505,737		$	231,637,966		$	209,215,034		$	171,868,795		$	13,663,784
1 Net of fees waived	$	197,341		$	455,084		$	453,017		$	398,562		$	27,592

See Notes to Financial Statements.

88 BLACKROCK FUNDS III DECEMBER 31, 2010

Statements of Operations (concluded) Master Investment Portfolio

Year Ended December 31, 2010	Active Stock Master Portfolio			CoreAlpha Bond Master Portfolio
Investment Income
Dividends	$	37,050,530		$	–
Securities lending – affiliated		1,251,974			154,411
Income – affiliated		110,063			1,046,957
Interest		6,155			66,340,026
Foreign taxes withheld		(36,357	)		–
Total income		38,382,365			67,541,394
Expenses
Investment advisory		5,357,466			4,770,173
Administration		2,142,986			1,908,069
Professional		27,163			33,755
Independent Trustees		60,421			67,301
Total expenses excluding interest expense		7,588,036			6,779,298
Interest expense		–			279
Total expenses		7,588,036			6,779,577
Less fees waived by advisor		(1,430,634	)		(101,057	)
Total expenses after fees waived		6,157,402			6,678,520
Net investment income		32,224,963			60,862,874
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments		144,755,801			18,944,474
Financial futures contracts		5,998,496			20,944,942
Swaps		–			(1,666,688	)
		150,754,297			38,222,728
Net change in unrealized appreciation/depreciation on:
Investments		75,790,821			11,491,700
Financial futures contracts		630,541			158,470
Swaps		–			4,751,828
		76,421,362			16,401,998
Total realized and unrealized gain		227,175,659			54,624,726
Net Increase in Net Assets Resulting from Operations	$	259,400,622		$	115,487,600

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 89

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath Retirement Master Portfolio						LifePath 2020 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2010			2009			2010			2009
Operations
Net investment income	$	33,389,199		$	13,421,748		$	50,556,334		$	44,752,714
Net realized gain (loss)		38,905,084			(10,743,532	)		51,298,017			(119,564,329	)
Net change in unrealized appreciation/depreciation		50,211,454			104,466,686			129,783,615			385,023,597
Net increase in net assets resulting from operations		122,505,737			107,144,902			231,637,966			310,211,982
Capital Transactions
Proceeds from contributions		188,899,681			155,214,316			403,212,898			450,201,397
Proceeds from contributions in connection with the acquisition		–			746,169,381			–			–
Fair value of withdrawals		(96,571,523	)		(96,825,377	)		(70,562,768	)		(226,411,370	)
Net increase in net assets derived from capital transactions		92,328,158			804,558,320			332,650,130			223,790,027
Net Assets
Total increase in net assets		214,833,895			911,703,222			564,288,096			534,002,009
Beginning of year		1,165,306,840			253,603,618			1,779,672,821			1,245,670,812
End of year	$	1,380,140,735		$	1,165,306,840		$	2,343,960,917		$	1,779,672,821
	LifePath 2030 Master Portfolio						LifePath 2040 Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2010			2009			2010			2009
Operations
Net investment income	$	39,411,964		$	33,402,964		$	29,075,411		$	24,752,335
Net realized gain (loss)		44,387,854			(121,326,632	)		34,764,764			(102,916,876	)
Net change in unrealized appreciation/depreciation		125,415,216			369,368,469			108,028,620			320,052,420
Net increase in net assets resulting from operations		209,215,034			281,444,801			171,868,795			241,887,879
Capital Transactions
Proceeds from contributions		376,110,374			367,341,745			260,954,409			303,439,581
Fair value of withdrawals		(46,506,661	)		(167,711,261	)		(47,294,585	)		(132,192,111	)
Net increase in net assets derived from capital transactions		329,603,713			199,630,484			213,659,824			171,247,470
Net Assets
Total increase in net assets		538,818,747			481,075,285			385,528,619			413,135,349
Beginning of year		1,433,256,319			952,181,034			1,133,674,686			720,539,337
End of year	$	1,972,075,066		$	1,433,256,319		$	1,519,203,305		$	1,133,674,686

See Notes to Financial Statements.

90 BLACKROCK FUNDS III DECEMBER 31, 2010

Statements of Changes in Net Assets (concluded) Master Investment Portfolio

	LifePath 2050 Master  Portfolio
	Year Ended December 31,
Increase (Decrease) in Net Assets:	2010			2009
Operations
Net investment income	$	1,795,067		$	564,575
Net realized gain (loss)		2,021,948			(154,589	)
Net change in unrealized appreciation/depreciation		9,846,769			6,477,740
Net increase in net assets resulting from operations		13,663,784			6,887,726
Capital Transactions
Proceeds from contributions		70,700,398			29,450,394
Fair value of withdrawals		(5,138,081	)		(3,068,975	)
Net increase in net assets derived from capital transactions		65,562,317			26,381,419
Net Assets
Total increase in net assets		79,226,101			33,269,145
Beginning of year		40,164,445			6,895,300
End of year	$	119,390,546		$	40,164,445

	Active Stock Master Portfolio						CoreAlpha Bond Master Portfolio
	Year Ended December 31,						Year Ended December 31,
Increase (Decrease) in Net Assets:	2010			2009			2010			2009
Operations
Net investment income	$	32,224,963		$	29,029,926		$	60,862,874		$	56,984,530
Net realized gain (loss)		150,754,297			(262,530,568	)		38,222,728			32,127,681
Net change in unrealized appreciation/depreciation		76,421,362			594,321,112			16,401,998			55,139,780
Net increase in net assets resulting from operations		259,400,622			360,820,470			115,487,600			144,251,991
Capital Transactions
Proceeds from contributions		542,158,731			545,050,021			668,474,923			1,003,192,608
Fair value of withdrawals		(126,588,351	)		(318,404,191	)		(267,359,402	)		(629,387,020	)
Net increase in net assets derived from capital transactions		415,570,380			226,645,830			401,115,521			373,805,588
Net Assets
Total increase in net assets		674,971,002			587,466,300			516,603,121			518,057,579
Beginning of year		1,838,453,114			1,250,986,814			1,633,960,110			1,115,902,531
End of year	$	2,513,424,116		$	1,838,453,114		$	2,150,563,231		$	1,633,960,110

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 91

Financial Highlights Master Investment Portfolio

	LifePath Retirement Master Portfolio
	Year Ended December 31,
	2010			2009			2008			2007			2006
Total Investment Return
Total investment return		9.83	%		18.75	%		(14.54	)%		5.00	%		9.30	%
Ratios to Average Net Assets
Total expenses1		0.61	%		0.59	%		0.61	%		0.61	%		0.61	%
Total expenses after fees waived1		0.26	%		0.26	%		0.27	%		0.27	%		0.28	%
Net investment income2		2.60	%		3.61	%		3.81	%		3.87	%		3.80	%
Supplemental Data
Net assets, end of year (000)	$	1,380,141		$	1,165,307		$	253,604		$	331,733		$	260,279
Portfolio turnover		4	%		6	%3		11	%		6	%		10	%
	LifePath 2020 Master Portfolio
	Year Ended December 31,
	2010			2009			2008			2007			2006
Total Investment Return
Total investment return		11.40	%		23.21	%		(24.92	)%		3.84	%		13.51	%
Ratios to Average Net Assets
Total expenses1		0.59	%		0.58	%		0.57	%		0.58	%		0.58	%
Total expenses after fees waived1		0.23	%		0.23	%		0.23	%		0.25	%		0.25	%
Net investment income2		2.45	%		3.15	%		3.18	%		3.01	%		2.91	%
Supplemental Data
Net assets, end of year (000)	$	2,343,961		$	1,779,673		$	1,245,671		$	1,827,888		$	1,391,153
Portfolio turnover		4	%		6	%		13	%		7	%		16	%

¹ Includes the Master Portfolio’s pro rata portion of net advisory and net administration fees from the Active Stock and CoreAlpha Bond Master Portfolios only and does not reflect any expenses incurred indirectly as a result of investments in the BlackRock Cash Funds: Institutional and iShares exchange-traded funds.

² Includes the Master Portfolio’s share of the allocated net investment income from the Active Stock and CoreAlpha Bond Master Portfolios.

³ Excludes in-kind contribution of portfolio securities received in a tax-free reorganization on November 20, 2009.

See Notes to Financial Statements.

92 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (continued) Master Investment Portfolio

	LifePath 2030 Master Portfolio
	Year Ended December 31,
	2010			2009			2008			2007			2006
Total Investment Return
Total investment return		12.36	%		26.27	%		(30.53	)%		3.14	%		15.62	%
Ratios to Average Net Assets
Total expenses1		0.57	%		0.56	%		0.55	%		0.57	%		0.57	%
Total expenses after fees waived1		0.21	%		0.20	%		0.21	%		0.23	%		0.24	%
Net investment income2		2.34	%		2.97	%		2.82	%		2.57	%		2.49	%
Supplemental Data
Net assets, end of year (000)	$	1,972,075		$	1,433,256		$	952,181		$	1,393,178		$	988,640
Portfolio turnover		3	%		7	%		13	%		7	%		22	%
	LifePath 2040 Master Portfolio
	Year Ended December 31,
	2010			2009			2008			2007			2006
Total Investment Return
Total investment return		13.21	%		28.58	%		(34.90	)%		2.53	%		17.47	%
Ratios to Average Net Assets
Total expenses1		0.55	%		0.55	%		0.53	%		0.56	%		0.56	%
Total expenses after fees waived1		0.19	%		0.18	%		0.19	%		0.22	%		0.23	%
Net investment income2		2.24	%		2.82	%		2.52	%		2.20	%		2.17	%
Supplemental Data
Net assets, end of year (000)	$	1,519,203		$	1,133,675		$	720,539		$	1,022,941		$	708,267
Portfolio turnover		4	%		6	%		14	%		8	%		29	%

¹ Includes the Master Portfolio’s pro rata portion of net advisory and net administration fees from the Active Stock and CoreAlpha Bond Master Portfolios only and does not reflect any expenses incurred indirectly as a result of investments in the BlackRock Cash Funds: Institutional and iShares exchange-traded funds.

² Includes the Master Portfolio’s share of the allocated net investment income from the Active Stock and CoreAlpha Bond Master Portfolios.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 93

Financial Highlights (continued) Master Investment Portfolio

	LifePath 2050 Master Portfolio
	Year Ended December 31,						Period June 30, 20081 to December 31,
	2010			2009			2008
Total Investment Return
Total investment return		13.93	%		30.85	%		(31.93	)%2
Ratios to Average Net Assets
Total expenses3		0.56	%		0.59	%		1.11	%4
Total expenses after fees waived3		0.17	%		0.16	%		0.17	%4
Net investment income5		2.31	%		2.84	%		3.05	%4
Supplemental Data
Net assets, end of period (000)	$	119,391		$	40,164		$	6,895
Portfolio turnover		5	%		12	%		0	%6

¹ Commencement of operations.

² Aggregate total investment return.

³ Includes the Master Portfolio’s pro rata portion of net advisory and net administration fees from the Active Stock and CoreAlpha Bond Master Portfolios only and does not reflect any expenses incurred indirectly as a result of investments in the BlackRock Cash Funds: Institutional and iShares exchange-traded funds.

⁴ Annualized.

⁵ Includes the Master Portfolio’s share of the allocated net investment income from the Active Stock and CoreAlpha Bond Master Portfolios.

⁶ Rounds to less than 1%.

See Notes to Financial Statements.

94 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (concluded) Master Investment Portfolio

	Active Stock Master Portfolio
	Year Ended December 31,
	2010			2009			2008			2007			2006
Total Investment Return
Total investment return		11.04	%		24.86	%		(36.65	)%		0.58	%		15.65	%
Ratios to Average Net Assets
Total expenses		0.35	%		0.35	%		0.35	%		0.35	%		0.35	%
Total expenses after fees waived		0.29	%		0.30	%		0.32	%		0.34	%		0.35	%
Net investment income		1.50	%		1.99	%		1.96	%		1.70	%		1.64	%
Supplemental Data
Net assets, end of year (000)	$	2,513,424		$	1,838,453		$	1,250,987		$	2,085,214		$	1,561,940
Portfolio turnover		120	%		149	%		98	%		80	%		65	%
	CoreAlpha Bond Master Portfolio
	Year Ended December 31,
	2010			2009			2008			2007			2006
Total Investment Return
Total investment return		6.56	%		11.67	%		3.62	%		5.10	%		4.36	%
Ratios to Average Net Assets
Total expenses		0.36	%		0.35	%		0.36	%		0.36	%		0.36	%
Total expenses after fees waived		0.35	%		0.35	%		0.36	%		0.35	%		0.35	%
Net investment income		3.19	%		4.33	%		4.47	%		5.18	%		5.11	%
Supplemental Data
Net assets, end of year (000)	$	2,150,563		$	1,633,960		$	1,115,903		$	1,479,888		$	1,082,468
Portfolio turnover1		621	%2		278	%3		351	%		466	%		301	%

¹ Portfolio turnover rates include TBA transactions, if any.

² Excluding TBA transactions, the portfolio turnover rate would have been 170%.

³ Excluding TBA transactions, the portfolio turnover rate would have been 199%.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 95

Notes to Financial Statements Master Investment Portfolio

1. Organization and Significant Accounting Policies:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”) as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust. The financial statements and these accompanying notes relate to seven series of MIP: LifePath Retirement Master Portfolio, LifePath 2020 Master Portfolio, LifePath 2030 Master Portfolio, LifePath 2040 Master Portfolio, LifePath 2050 Master Portfolio, Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio (each, a “Master Portfolio” and collectively, the “Master Portfolios”). The Master Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.

Each of the LifePath Retirement Master Portfolio, LifePath 2020 Master Portfolio, LifePath 2030 Master Portfolio, LifePath 2040 Master Portfolio and LifePath 2050 Master Portfolio (each, a “LifePath Master Portfolio” and collectively, the “LifePath Master Portfolios”) seeks to achieve its investment objective by investing in a combination of equity, bond and money market funds (the “Underlying Funds”) in proportions suggested by its own comprehensive investment strategy. The Underlying Funds are advised by BlackRock Fund Advisors (“BFA”), and include the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio and the BlackRock Cash Funds: Institutional and iShares exchange-traded funds.

The value of a LifePath Master Portfolio’s investment in each of the Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio reflects that LifePath Master Portfolio’s proportionate interest in the net assets of that Master Portfolio. As of December 31, 2010, the interests of the Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio held by each LifePath Master Portfolio were as follows:

	Active Stock			CoreAlpha Bond
	Master Portfolio			Master Portfolio
LifePath Retirement Master Portfolio		10.85	%		33.09	%
LifePath 2020 Master Portfolio		28.81	%		38.09	%
LifePath 2030 Master Portfolio		30.53	%		20.45	%
LifePath 2040 Master Portfolio		27.38	%		8.27	%
LifePath 2050 Master Portfolio		2.43	%		0.10	%

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

Valuation: The Master Portfolios fair value their financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (the “Board”). Equity investments, including exchange traded funds, traded on a recognized securities exchange or the NASDAQ Global Market System (“NASDAQ”) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that such prior day’s price no longer reflects the fair value of the security.

The Master Portfolios value their bond investments on the basis of last available bid prices or current market quotations provided by dealers or pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more brokers or dealers as obtained from a pricing service. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between investments and calculated yield measures based on valuation technology commonly employed in the market for such investments. Asset-backed and mortgage-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche.

Financial futures contracts traded on exchanges are valued at their last sale price. To-be-announced (“TBA”) commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services. Swap agreements are valued utilizing quotes received daily by the Master Portfolio’s pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows and trades and values of the underlying reference instruments. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

Investments in open-end registered investment companies are valued at net asset value each business day.

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

96 BLACKROCK FUNDS III DECEMBER 31, 2010

Notes to Financial Statements (continued) Master Investment Portfolio

relevant. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof.

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

The CoreAlpha Bond Master Portfolio may purchase certain mortgage pass-through securities. There are a number of important differences among the agencies and instrumentalities of the US Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by the 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 the 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 and are supported by the right of the issuer to borrow from the Treasury.

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

Capital Trusts: The CoreAlpha Bond Master Portfolio may invest in capital trusts. These securities are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics, or by an affiliated business trust of a corporation, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured as either fixed or adjustable coupon securities that can have either a perpetual or stated maturity date. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment obligations have been met. The deferral of payments does not affect the purchase or sale of these securities in the open market. Payments on these securities are treated as interest rather than dividends for federal income tax purposes. These securities generally are rated below that of the issuing company’s senior debt securities.

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

Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”) require that the Master Portfolio either delivers collateral

BLACKROCK FUNDS III DECEMBER 31, 2010 97

Notes to Financial Statements (continued) Master Investment Portfolio

or segregates assets in connection with certain investments (e.g., TBA, sale commitments, financial futures contracts and swaps), each Master Portfolio will, consistent with SEC rules and/or certain interpretive letters issued by the SEC, segregate collateral or designate on its books and records cash or other liquid securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, each party has requirements to deliver/deposit securities as collateral for certain investments.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Master Portfolio has determined the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.

Each LifePath Master Portfolio records daily its proportionate share of the Active Stock Master Portfolio’s and CoreAlpha Bond Master Portfolio’s income, expenses and realized and unrealized gains and losses.

Securities Lending: The Master Portfolios may lend securities to financial institutions that provide cash as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statements of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the Master Portfolio earns dividend and interest on the securities loaned. 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. In the event that the borrower defaults on its obligation to return borrowed securities because of insolvency or for any other reason, the Master Portfolio could experience delays and costs in gaining access to the collateral. A Master Portfolio also could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

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

The Master Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolio’s US federal tax returns remains open for each of the four years ended December 31, 2010. The statutes of limitations on the Master Portfolio’s state and local tax returns may remain open for an additional year depending upon the jurisdiction. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

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

2. Derivative Financial Instruments:

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

Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. Each Master Portfolio’s maximum risk of loss from counterparty credit risk on OTC derivatives is generally the aggregate unrealized gain netted against any collateral pledged by/posted to the counterparty. Counterparty risk related to exchange-traded financial futures contracts is deemed to be minimal due to the protection against defaults provided by the exchange on which these contracts trade.

A Master Portfolio may mitigate counterparty risk by procuring collateral and through netting provisions included within an International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreement implemented between the Master Portfolio and each of its respective counterparties. The ISDA Master Agreement allows each Master Portfolio to offset with each separate counterparty certain derivative financial

98 BLACKROCK FUNDS III DECEMBER 31, 2010

Notes to Financial Statements (continued) Master Investment Portfolio

instrument’s payables and/or receivables with collateral held. The amount of collateral moved to/from applicable counterparties is generally based upon minimum transfer amounts of up to $500,000. To the extent amounts due to a Master Portfolio from its counterparties are not fully collateralized contractually or otherwise, the Master Portfolio bears the risk of loss from counterparty non-performance. See Note 1 “Segregation and Collateralization” for information with respect to collateral practices. In addition, each Master Portfolio manages counterparty risk by entering into agreements only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.

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

Financial Futures Contracts: The Master Portfolios purchase or sell financial futures contracts to gain exposure to, or economically hedge against, changes in interest rates (interest rate risk) or changes in the value of equity securities (equity risk). Financial futures contracts are agreements between a Master Portfolio and counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on settlement date. Pursuant to the contract, a Master Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as margin variation and are recorded by the Master Portfolios as unrealized gains or losses. When the contract is closed, the Master Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures transactions involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest rates and the underlying assets.

Swaps: The CoreAlpha Bond Master Portfolio enters into swap agreements, in which the Master Portfolio and a counterparty agree to make periodic net payments on a specified notional amount. These periodic payments received or made by the Master Portfolio are recorded in the Statements of Operations as realized gains or losses, respectively. Any upfront fees paid are recorded as assets and any upfront fees received are recorded as liabilities and amortized over the term of the swap. Swaps are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). When the swap is terminated, the Master Portfolio will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Master Portfolio’s basis in the contract, if any. Generally, the basis of the contracts is the premium received or paid. Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.

• Credit default swaps – The CoreAlpha Bond 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 enters into credit default swap agreements to provide a measure of protection against the default of an issuer (as buyer of protection) and/or gain credit exposure to an issuer to which it is not otherwise exposed (as seller of protection). The Master Portfolio may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers or traded indexes. Credit default swaps on single-name issuers are agreements in which the buyer pays fixed periodic payments to the seller in consideration for a guarantee from the seller to make a specific payment should a negative credit event take place (e.g., bankruptcy, failure to pay, obligation accelerators, repudiation, moratorium or restructuring). Credit default swaps on traded indexes are agreements in which the buyer pays fixed periodic payments to the seller in consideration for a guarantee from the seller to make a specific payment should a write-down, principal or interest shortfall or default of all or individual underlying securities included in the index occurs. As a buyer, if an underlying credit event occurs, the Master Portfolio will either receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising of an index or receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising of an 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 of an 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 of an index.

• Interest rate swaps – The CoreAlpha Bond Master Portfolio enters into interest rate swaps to gain or reduce exposure to or manage duration,

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Notes to Financial Statements (continued) Master Investment Portfolio

the yield curve or interest rate risk by economically hedging the value of the fixed rate bonds which may decrease when interest rates rise (interest rate risk). Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating rate, for another party’s stream of interest payments, either fixed or floating, on the same notional amount for a specified period of time. Interest rate floors, which are a type of interest rate swap, are agreements in which one party agrees to make payments to the other party to the extent that interest rates fall below a specified rate or floor in return for a premium. In more complex swaps, the notional principal amount may decline (or amortize) over time.

Derivative Instruments Categorized by Risk Exposure:

Fair Values of Derivative Instruments as of December 31, 2010
Asset Derivatives
	Statements of Assets and Liabilities Location		Active Stock Master Portfolio		CoreAlpha Bond Master Portfolio
Interest rate contracts		Net unrealized appreciation/depreciation*		–	$	(3,780,219	)
Credit contracts		Credit default swaps at fair value		–		5,155,175
Equity contracts		Net unrealized appreciation/depreciation*	$	863,629		–
Total			$	863,629	$	1,374,956

Liability Derivatives
	Statements of Assets and Liabilities Location	CoreAlpha Bond Master Portfolio
Interest rate contracts	Net unrealized appreciation/depreciation*		$	122,912

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

The Effect of Derivative Instruments on the Statements of Operations Year Ended December 31, 2010
Net Realized Gain (Loss) from
	Active Stock Master Portfolio		CoreAlpha Bond Master Portfolio
Interest rate contracts:
Financial futures contracts		–	$	20,944,942
Credit contracts:
Swaps		–		(1,666,688	)
Equity contracts:
Financial futures contracts	$	5,998,496		–
Total	$	5,998,496	$	19,278,254
Net Change in Unrealized Appreciation/Depreciation on
	Active Stock Master Portfolio		CoreAlpha Bond Master Portfolio
Interest rate contracts:
Financial futures contracts		–	$	158,470
Credit contracts:
Swaps		–		4,751,828
Equity contracts:
Financial futures contracts	$	630,541		–
Total	$	630,541	$	4,910,298

100 BLACKROCK FUNDS III DECEMBER 31, 2010

Notes to Financial Statements (continued) Master Investment Portfolio

For the year ended December 31, 2010, the average quarterly balance of outstanding derivative financial instruments was as follows:

	Active Stock Master Portfolio		CoreAlpha Bond Master Portfolio
Financial futures contracts:
Average number of contracts purchased		872		3,808
Average number of contracts sold		–		1,086
Average notional value of contracts purchased	$	49,480,470	$	482,428,130
Average notional value of contracts sold		–	$	190,884,350
Credit default swaps:
Average number of contracts – buy protection		–		1
Average number of contracts – sell protection		–		1
Average notional value – buy protection		–	$	4,000,000
Average notional value – sell protection		–	$	44,500,000
Interest rate Swaps:
Average number of contracts – pays fixed rate		–		3
Average number of contracts – receives fixed rate		–		1
Average notional value – pays fixed rate		–	$	55,000,000
Average notional value – receives fixed rate		–	$	4,700,000

3. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”), Bank of America Corporation (“BAC”) and Barclays Bank PLC (“Barclays”) are the largest stockholders of BlackRock, Inc. (“BlackRock”). Due to the ownership structure, PNC is an affiliate of the Master Portfolios for 1940 Act purposes, but BAC and Barclays are not.

MIP, on behalf of the Master Portfolios, entered into an Investment Advisory Agreement with BFA (the “Investment Advisory Agreement”). Pursuant to the Investment Advisory Agreement with MIP, BFA is responsible for the management of each Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each Master Portfolio. For such services, each Master Portfolio pays BFA an annual investment advisory fee of 0.35% of the average daily net assets of each of the LifePath Master Portfolios and 0.25% of the average daily net assets of each of the Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio.

The fees and expenses of the Master Portfolios’ trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolios.

BFA contractually agreed to waive investment advisory fees charged to the LifePath Master Portfolios in an amount equal to investment advisory fees and administration fees, if any, received by BFA or BlackRock Institutional Trust Company, N.A. (“BTC”), from each investment company in which the Master Portfolios invest. BFA has also contractually agreed to cap the expenses of the LifePath Master Portfolios at the rate at which the LifePath Master Portfolios pay an advisory fee to BFA by providing an offsetting credit against the investment advisory fees paid by the LifePath Master Portfolios in an amount equal to the independent expenses. These contractual waivers are effective through April 30, 2012. The amounts of the waivers, if any, are shown as fees waived in the Statements of Operations.

MIP entered into an administration services arrangement with BTC, which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC may delegate certain of its administration duties to sub-administrators.

BTC has agreed to bear all costs of the Master Portfolios’ and MIP’s operations, other than brokerage expenses, advisory fees, 12b-1 distribution or service fees, independent expenses, litigation expenses, taxes or other extraordinary expenses.

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

BTC is entitled to receive a monthly fee for administration services from the Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio at an annual rate of 0.10% of their respective average daily net assets. BFA has agreed to bear all costs of each of these Master Portfolios, excluding brokerage expenses, advisory fees, 12b-1 distribution or service fees, independent expense, litigation expenses, taxes or other extraordinary expenses which are borne by each of these Master Portfolios.

BTC voluntarily waived a portion of its administration fees paid by the Active Stock Master Portfolio in an amount sufficient to maintain the advisory fees payable by each of the LifePath Master Portfolios at an annual rate of 0.35% of the average daily net assets. This arrangement is voluntary and may be terminated by BTC at any time. During

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Notes to Financial Statements (concluded) Master Investment Portfolio

the period from October 6, 2010 through October 27, 2010, BFA voluntarily waived a portion of its investment advisory fees paid by the Active Stock Master Portfolio. With respect to the independent expenses discussed above, BTC has contractually agreed to provide and offsetting credit against the administration fees paid by the Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio in an amount equal to the independent expenses, through April 30, 2012. The amounts of the waiver and offsetting credits are shown as fees waived in the Statements of Operations.

The Master Portfolios received an exemptive order from the SEC permitting them, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BTC as the securities lending agent. BTC may, on behalf of a Master Portfolio, invest cash collateral received by the Master Portfolio for such loans, among other things, in a private investment company managed by BTC or its registered money market funds advised by BTC or its affiliates. The market value of securities on loan and the value of the related collateral, if applicable, are shown in the Statements of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC is disclosed in the Schedules of Investments. The share of income earned by the Master Portfolio on such investments is shown as securities lending – affiliated in the Statements of Operations. BTC has voluntarily agreed to waive its fees for the period beginning December 1, 2009 until further notice.

Each Master Portfolio may invest its positive cash balances in certain money market funds managed by BFA or an affiliate. The income earned on these temporary cash investments is included in income-affiliated in the Statements of Operations.

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

4. Investments:

Purchases and sales of investments including paydowns, mortgage dollar rolls and TBA transactions and excluding short-term securities and US government securities for the year ended December 31, 2010, were as follows:

	Purchases		Sales
LifePath Retirement Master Portfolio	$	49,721,421	$	50,240,511
LifePath 2020 Master Portfolio	$	127,474,989	$	79,813,703
LifePath 2030 Master Portfolio	$	118,963,518	$	55,335,259
LifePath 2040 Master Portfolio	$	90,117,268	$	56,933,870
LifePath 2050 Master Portfolio	$	31,773,917	$	4,138,447
Active Stock Master Portfolio	$	2,911,620,563	$	2,491,465,044
CoreAlpha Bond Master Portfolio	$	8,569,296,925	$	8,485,848,000

Purchases and sales of US government securities for the CoreAlpha Bond Master Portfolio for the year ended December 31, 2010 were $2,848,244,542 and $2,540,846,601, respectively.

5. Concentration, Market and Credit Risk:

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

In the normal course of business, the Master Portfolios invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all of its obligations (issuer credit risk). The value of securities held by the Master Portfolios may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Master Portfolios; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency, interest rate and price fluctuations. Similar to issuer credit risk, the Master Portfolios may be exposed to counterparty risk, or the risk that an entity with which the Master Portfolios have unsettled or open transactions may fail to or be unable to perform on its commitments.

The Master Portfolios manage counterparty risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Master Portfolios to market, issuer and counterparty credit risks, consist principally of investments and receivables due from counterparties. The extent of the Master Portfolios’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Master Portfolios’ Statements of Assets and Liabilities, less any collateral held by the Master Portfolio.

6. Subsequent Events:

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

102 BLACKROCK FUNDS III DECEMBER 31, 2010

Report of Independent Registered Public Accounting Firm Master Investment Portfolio

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

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of LifePath Retirement Master Portfolio, LifePath 2020 Master Portfolio, LifePath 2030 Master Portfolio, LifePath 2040 Master Portfolio, LifePath 2050 Master Portfolio, Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio, each a portfolio of Master Investment Portfolio (the “Master Portfolios”), at December 31, 2010, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolios’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 24, 2011

BLACKROCK FUNDS III DECEMBER 31, 2010 103

Officers and Trustees

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Non-Interested Trustees1
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chair of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	36 RICs consisting of 95 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chair of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. since 1987; Director, Fox Chase Cancer Center since 2004; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of Seventy (civic) since 2006.	36 RICs consisting of 95 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Finance and Economics at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy since 2002; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	36 RICs consisting of 95 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President of Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	36 RICs consisting of 95 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 1939	Trustee and Member of the Audit Committee	Since 2009	Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and Professor thereof from 1980 to 2005; President, Hudson Institute (policy research organization) since 1997 and Trustee thereof since 1980; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (strategic solutions company) since 2005; Director, Cerego, LLC (software development and design) since 2005.	36 RICs consisting of 95 Portfolios	AIMS Worldwide, Inc. (marketing)
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, Harvard Business School Publishing since 2005; Director, McLean Hospital since 2005.	36 RICs consisting of 95 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, The West Penn Allegheny Health System (a not-for-profit health system) since 2008; Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investment) since 1998; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	36 RICs consisting of 95 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company); WQED Multi-Media (public broadcasting not-for-profit)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	36 RICs consisting of 95 Portfolios	None

104 BLACKROCK FUNDS III DECEMBER 31, 2010

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Non-Interested Trustees1 (concluded)
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, Forward Management, LLC since 2007; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	36 RICs consisting of 95 Portfolios	A.P. Pharma, Inc. (specialty pharmaceuticals)
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Chair of the Audit Committee and Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Chairman Elect of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and committee member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Trustee, The Holy Family Foundation since 2001; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	36 RICs consisting of 95 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee and Member of the Audit Committee	Since 2009	Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh since 2005 and Dean thereof from 1997 to 2005; Director, Alkon Corporation (pneumatics) since 1992; Director, Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008.	36 RICs consisting of 95 Portfolios	None
1           Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year extensions in terms of Trustees who turn 72 prior to December 31, 2013. 2           In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. in December 2009, the Trustees were elected to the Trust’s/MIP’s Board. As a result, although the chart shows the Trustees as joining the Trust’s/MIP’s Board in 2009, each Independent Trustee first became a member of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1999; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees3
Richard S. Davis 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Managing Director, BlackRock, Inc. since 2005; Chief Executive Officer, State Street Research & Management Company from 2000 to 2005; Chairman of the Board of Directors, State Street Research Mutual Funds from 2000 to 2005.	169 RICs consisting of 290 Portfolios	None

BLACKROCK FUNDS III DECEMBER 31, 2010 105

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2		Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Non-Interested Trustees1 (concluded)
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee		Since 2009	Consultant, BlackRock, Inc. from 2007 to 2008; Managing Director, BlackRock, Inc. from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	169 RICs consisting of 290 Portfolios	None

³ Mr. Davis is an “interested person” as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock, Inc. and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock, Inc. and its affiliates as well as his ownership of BlackRock, Inc. and The PNC Financial Services Group, Inc. securities. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

Name, Address and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers4
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock, Inc. since 2009; Global head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2000; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2002; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2010; Director of BlackRock, Inc. from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009, and Co-head thereof from 2007 to 2009; Vice President of BlackRock, Inc. from 2005 to 2008.
Simon Mendelson 55 East 52nd Street New York, NY 10055 1964	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2005; Co-head of the Global Cash and Securities Lending Group since 2010; Chief Operating Officer and head of the Global Client Group for BlackRock’s Global Cash Management Business since 2007; Head of BlackRock’s Strategy and Development Group from 2005 to 2007; Partner of McKinsey & Co. from 1997 to 2005.
Brian Schmidt 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2004; Various positions with U.S. Trust Company from 1991 to 2003 including Director from 2001 to 2003 and Senior Vice President from 1998 to 2003; Vice President, Chief Financial Officer and Treasurer of Excelsior Funds, Inc., Excelsior Tax-Exempt Funds, Inc. and Excelsior Funds Trust from 2001 to 2003.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2009	Managing Director of BlackRock, 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.

106 BLACKROCK FUNDS III DECEMBER 31, 2010

Officers and Trustees (concluded)

Name, Address and Year of Birth	Position(s) Held with the Trust/ MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers4 (concluded)
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2009	Managing Director of BlackRock, Inc. since 2007 and Director in 2006; Assistant Treasurer of the Merrill Lynch Investment Managers, L.P. (“MLIM”) and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer	Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock, Inc. since 2005.
Ira Shapiro5 55 East 52nd Street New York, NY 10055 1963	Secretary	Since 2010	Managing Director of BlackRock, Inc. since 2009; Managing Director and Associate General Counsel of Barclays Global Investors from 2008 to 2009; Principal thereof from 2004 to 2008.

⁴ Officers of the Trust/MIP serve at the pleasure of the Board.

⁵ Ira P. Shapiro served as Vice President and Chief Legal Officer of the Trust/MIP from 2007 to 2009.

Further information about the Trust/MIP Officers and Trustees is available in the Trust/MIP Statement of Additional Information, which can be obtained without charge by calling (877) 244-1544.

Effective September 24, 2010, John M. Perlowski became President and Chief Executive Officer of MIP.

Effective November 16, 2010, Ira Shapiro became Secretary of MIP.

Investment Advisor BlackRock Fund Advisors San Francisco, CA 94105	Administrator BlackRock Institutional Trust Company, N.A. San Francisco, CA 94105	Custodian State Street Bank and Trust Company Boston, MA 02101	Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Accounting Agent State Street Bank and Trust Company Boston, MA 02101	Distributor BlackRock Investments, LLC New York, NY 10022
			Legal Counsel Sidley Austin LLP New York, NY 10019	Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP New York, NY 10017	Address of the Funds 400 Howard Street San Francisco, CA 94105

BLACKROCK FUNDS III DECEMBER 31, 2010 107

Additional Information

General Information

Availability of Quarterly Portfolio Schedule

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

Availability of Proxy Voting Policies and Procedures

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

Availability of Proxy Voting Record

Information about how each Portfolio/Master Portfolio voted proxies relating to securities held in the Portfolio’s/Master Portfolio’s portfolios during the most recent 12-month period ended December 31 is available upon request and without charge (1) at www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

Shareholder Privileges

Account Information

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

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 nonpublic personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

108 BLACKROCK FUNDS III DECEMBER 31, 2010

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

Investment in foreign securities involves special risks including fluctuating foreign exchange rates, foreign government regulations, differing degrees of liquidity and the possibility of substantial volatility due to adverse political, economic or other developments.

#LIFEPATH-12/10

December 31, 2010

Annual Report

BlackRock Funds III

^u BlackRock Cash Funds: Government

^u BlackRock Cash Funds: Institutional

^u BlackRock Cash Funds: Prime

^u BlackRock Cash Funds: Treasury

Not FDIC Insured ¡ No Bank Guarantee ¡ May Lose Value

Table of Contents

	Page
Dear Shareholder		3
Annual Report:
Yield Information		4
Disclosure of Expenses		5
Fund Financial Statements:
Statements of Assets and Liabilities		6
Statements of Operations		7
Statements of Changes in Net Assets		8
Fund Financial Highlights		10
Fund Notes to Financial Statements		29
Fund Report of Independent Registered Public Accounting Firm		34
Important Tax Information (Unaudited)		34
Master Portfolio Information		35
Master Portfolio Financial Statements:
Schedules of Investments		36
Statements of Assets and Liabilities		44
Statements of Operations		45
Statements of Changes in Net Assets		46
Master Portfolio Financial Highlights		47
Master Portfolio Notes to Financial Statements		49
Master Portfolio Report of Independent Registered Public Accounting Firm		51
Officers and Trustees		52
Additional Information		56

2 BLACKROCK FUNDS III DECEMBER 31, 2010

Dear Shareholder

Economic data fluctuated widely throughout 2010 as the global economy continued to emerge from the “Great Recession.” As the year drew to a close, it became clear that cyclical stimulus had beat out structural problems as economic data releases generally became more positive and financial markets showed signs of continuing improvement.

Debt and deflationary risks remained present throughout 2010, causing central banks worldwide to respond with unprecedented actions, most notably a second round of quantitative easing (informally known as “QE2”) from the US Federal Reserve Board (the “Fed”). Inflation remained a non-issue in the developed world, but continued to rear its ugly head in some emerging economies, most evidently in China. Global and US gross domestic product (“GDP”) growth both continued in a positive direction but remained subpar compared to most historical economic recoveries. In the United States, the corporate sector has been an important area of strength and consumer spending has shown improvement, although weakness in the housing and labor markets continues to burden the economy.

Stocks moved higher in the early months of 2010 on the continuation of the 2009 asset recovery story. The mid-year months saw a double-digit percentage correction on the back of the Greek sovereign debt crisis and a stalling in jobs growth, leading to fears of a double-dip recession. After touching a late summer low, equity markets rallied through year end as these concerns receded. The announcement of QE2 and extension of the Bush-era tax cuts further boosted equities as the year came to a close. Although the course was uneven and high volatility remained a constant for stocks, equity markets globally ended the year strong. Emerging markets outpaced the developed world in terms of economic growth and posted respectable gains for the year despite sovereign debt problems and heightening inflationary pressures. US stocks recorded double-digit percentage gains for the second consecutive year. Small cap stocks outperformed large caps as investors began to move into higher-risk assets.

In fixed income markets, yields trended lower over most of the year as investors continued to favor safer assets. That trend reversed abruptly in the fourth quarter when market fears abated and investors began seeking higher-risk assets, driving yields sharply upward through year end. However, yields were lower overall for the year and fixed income markets finished 2010 in positive territory. Although fixed income securities generally underperformed equities, high yield bonds only marginally trailed large cap stocks. Conversely, the tax-exempt municipal market was dealt an additional blow as it became apparent that an extension of the Build America Bond program was unlikely. In addition, the fourth quarter brought an increase in negative headlines regarding fiscal challenges faced by state and local governments, sparking additional volatility in the municipal market.

Cash investments, as represented by the 3-month Treasury bill, returned only a fraction over 0% for the year as short-term interest rates remained low. Yields on money market securities remain near all-time lows.

Total Returns as of December 31, 2010	6-month			12-month
US large cap equities (S&P 500 Index)		23.27	%		15.06	%
US small cap equities (Russell 2000 Index)		29.38			26.85
International equities (MSCI Europe, Australasia, Far East Index)		24.18			7.75
3-month Treasury bill (BofA Merrill Lynch 3-Month Treasury Bill Index)		0.08			0.13
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		(1.33	)		7.90
US investment grade bonds (Barclays Capital US Aggregate Bond Index)		1.15			6.54
Tax-exempt municipal bonds (Barclays Capital Municipal Bond Index)		(0.90	)		2.38
US high yield bonds (Barclays Capital US Corporate High Yield 2% Issuer Capped Index)		10.04			14.94

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

While no one can peer into a crystal ball and eliminate the uncertainties presented by the economic landscape and financial markets, BlackRock can offer investors the next best thing: partnership with the world’s largest asset management firm and a unique global perspective that allows us to identify trends early and capitalize on market opportunities. For additional market perspective and investment insight, visit www.blackrock.com/shareholdermagazine, where you’ll find the most recent issue of our award-winning Shareholder^® magazine, as well as its quarterly companion newsletter, Shareholder Perspectives. As always, we thank you for entrusting BlackRock with your investments, and we look forward to your continued partnership in the months and years ahead.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

THIS PAGE NOT PART OF YOUR FUND REPORT 3

Yield Information as of December 31, 2010 BlackRock Funds III

BlackRock Cash Funds: Government

	7-Day SEC Yield			7-Day Yield
Institutional		0.04	%		0.04	%
Select		0.00	%		0.00	%
Trust		0.00	%		0.00	%

BlackRock Cash Funds: Institutional

	7-Day SEC Yield			7-Day Yield
Aon Captives		0.12	%		0.15	%
Institutional		0.22	%		0.25	%
Select		0.14	%		0.17	%
SL Agency		0.25	%		0.28	%
Trust		0.00	%		0.04	%

BlackRock Cash Funds: Prime

	7-Day SEC Yield			7-Day Yield
Capital		0.19	%		0.19	%
Institutional		0.21	%		0.21	%
Premium		0.16	%		0.16	%
Select		0.13	%		0.13	%
SL Agency		0.24	%		0.24	%
Trust		0.00	%		0.00	%

BlackRock Cash Funds: Treasury

	7-Day SEC Yield			7-Day Yield
Capital		0.02	%		0.05	%
Institutional		0.04	%		0.07	%
Select		0.00	%		0.03	%
SL Agency		0.07	%		0.10	%
Trust		0.00	%		0.03	%

The 7-Day SEC Yields shown above 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.

4 BLACKROCK FUNDS III DECEMBER 31, 2010

Disclosure of Expenses BlackRock Funds III

Shareholders of each Fund may incur operating expenses, including advisory fees, distribution fees, including 12b-1 fees, and other Fund expenses. The expense examples below (which are based on a hypothetical investment of $1,000 invested on July 1, 2010 and held through December 31, 2010) 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 tables below 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 headings entitled “Expenses Paid During the Period.”

The tables also provide information about hypothetical account values and hypothetical expenses based on each Fund’s actual expense ratios 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 each Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in other funds’ shareholder reports.

The expenses shown in the tables are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, redemption fees or exchange fees. Therefore, the hypothetical tables 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 Example

	Actual									Hypothetical2
	Beginning Account Value July  1, 2010			Ending Account Value December 31, 2010			Expenses Paid During the Period1			Beginning Account Value July  1, 2010			Ending Account Value December 31, 2010			Expenses Paid During the Period1			Annualized Expense Ratio
BlackRock Cash Funds: Government
Institutional		$	1,000.00		$	1,000.50		$	0.61		$	1,000.00		$	1,024.60		$	0.61		0.12	%
Select		$	1,000.00		$	1,000.10		$	0.96		$	1,000.00		$	1,024.20		$	0.97		0.19	%
Trust		$	1,000.00		$	1,000.00		$	1.06		$	1,000.00		$	1,024.10		$	1.07		0.21	%
BlackRock Cash Funds: Institutional
Aon Captives		$	1,000.00		$	1,000.80		$	1.11		$	1,000.00		$	1,024.10		$	1.12		0.22	%
Institutional		$	1,000.00		$	1,001.30		$	0.61		$	1,000.00		$	1,024.60		$	0.61		0.12	%
Select		$	1,000.00		$	1,000.90		$	1.01		$	1,000.00		$	1,024.20		$	1.02		0.20	%
SL Agency		$	1,000.00		$	1,001.50		$	0.45		$	1,000.00		$	1,024.80		$	0.46		0.09	%
Trust		$	1,000.00		$	1,000.10		$	1.87		$	1,000.00		$	1,023.30		$	1.89		0.37	%
BlackRock Cash Funds: Prime
Capital		$	1,000.00		$	1,001.10		$	0.71		$	1,000.00		$	1,024.50		$	0.71		0.14	%
Institutional		$	1,000.00		$	1,001.20		$	0.61		$	1,000.00		$	1,024.60		$	0.61		0.12	%
Premium		$	1,000.00		$	1,001.00		$	0.86		$	1,000.00		$	1,024.30		$	0.87		0.17	%
Select		$	1,000.00		$	1,000.80		$	1.01		$	1,000.00		$	1,024.20		$	1.02		0.20	%
SL Agency		$	1,000.00		$	1,001.40		$	0.45		$	1,000.00		$	1,024.80		$	0.46		0.09	%
Trust		$	1,000.00		$	1,000.00		$	1.81		$	1,000.00		$	1,023.40		$	1.84		0.36	%
BlackRock Cash Funds: Treasury
Capital		$	1,000.00		$	1,000.40		$	0.71		$	1,000.00		$	1,024.50		$	0.71		0.14	%
Institutional		$	1,000.00		$	1,000.50		$	0.61		$	1,000.00		$	1,024.60		$	0.61		0.12	%
Select		$	1,000.00		$	1,000.10		$	1.01		$	1,000.00		$	1,024.20		$	1.02		0.20	%
SL Agency		$	1,000.00		$	1,000.70		$	0.45		$	1,000.00		$	1,024.80		$	0.46		0.09	%
Trust		$	1,000.00		$	1,000.10		$	1.06		$	1,000.00		$	1,024.10		$	1.07		0.21	%

¹ For each class, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

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

BLACKROCK FUNDS III DECEMBER 31, 2010 5

Statements of Assets and Liabilities BlackRock Funds III

December 31, 2010	BlackRock Cash Funds: Government			BlackRock Cash  Funds: Institutional			BlackRock Cash Funds: Prime				BlackRock Cash Funds: Treasury
Assets
Investments at value – from the applicable Master Portfolio1,2		$	26,473,622		$	19,115,270,825		$	9,136,999,799			$	1,735,919,789
Total assets			26,473,622			19,115,270,825			9,136,999,799				1,735,919,789
Liabilities
Income dividends payable			1,709			2,713,846			1,617,116				191,701
Professional fees payable			10,962			10,963			10,963				10,963
Administration fees payable			2,626			374,491			355,891				39,177
Distribution fees payable – Aon Captives			–			14,608			–				–
Total liabilities			15,297			3,113,908			1,983,970				241,841
Net Assets		$	26,458,325		$	19,112,156,917		$	9,135,015,829			$	1,735,677,948
Net Assets Consist of
Paid-in capital		$	26,455,860		$	19,111,241,803		$	9,138,008,613			$	1,735,437,347
Accumulated net realized gain (loss)			2,465			915,114			(2,992,784	)			240,601
Net Assets		$	26,458,325		$	19,112,156,917		$	9,135,015,829			$	1,735,677,948
1 Investments at cost		$	26,473,622		$	19,115,270,825		$	9,136,999,799			$	1,735,919,789
2 Government Money Market Master Portfolio, Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio (each, a “Master Portfolio”).
Net Asset Value
Aon Captives
Net assets			–		$	59,236,721			–				–
Shares outstanding3			–			59,236,127			–				–
Net asset value			–		$	1.00			–				–
Capital
Net assets			–			–		$	517,988,126			$	139,657,193
Shares outstanding3			–			–			517,947,151				139,657,047
Net asset value			–			–		$	1.00			$	1.00
Institutional
Net assets		$	5,662,532		$	1,076,268,268		$	3,570,576,892			$	124,790,847
Shares outstanding3			5,660,553			1,076,144,997			3,573,428,899				124,781,775
Net asset value		$	1.00		$	1.00		$	1.00			$	1.00
Premium
Net assets			–			–		$	1,232,742,584				–
Shares outstanding3			–			–			1,234,050,634				–
Net asset value			–			–		$	1.00				–
Select
Net assets		$	17,263,478		$	29,943,607		$	80,613,865			$	287,881
Shares outstanding3			17,263,098			29,944,431			80,591,186				287,819
Net asset value		$	1.00		$	1.00		$	1.00			$	1.00
SL Agency
Net assets			–		$	17,938,932,350		$	3,696,050,610			$	1,457,942,771
Shares outstanding3			–			17,939,470,162			3,695,067,895				1,457,715,111
Net asset value			–		$	1.00		$	1.00			$	1.00
Trust
Net assets		$	3,532,315		$	7,775,971		$	37,043,752			$	12,999,256
Shares outstanding3			3,532,209			7,776,872			37,031,225				12,995,597
Net asset value		$	1.00		$	1.00		$	1.00			$	1.00
3 No par value, unlimited number of shares authorized.

See Notes to Financial Statements.

6 BLACKROCK FUNDS III DECEMBER 31, 2010

Statements of Operations BlackRock Funds III

Year Ended December 31, 2010	BlackRock Cash Funds: Government				BlackRock Cash Funds: Institutional				BlackRock Cash Funds: Prime				BlackRock Cash Funds: Treasury
Investment Income
Net investment income allocated from the applicable Master Portfolio:
Income		$	249,387			$	59,471,484			$	32,396,758			$	8,014,136
Expenses			(44,590	)			(12,602,250	)			(7,199,478	)			(2,429,900	)
Total income			204,797				46,869,234				25,197,280				5,584,236
Expenses
Administration – class specific			107,311				4,027,839				4,781,963				1,084,320
Distribution – Aon Captives			–				63,945				–				–
Professional			12,067				45,423				31,970				15,814
Total expenses			119,378				4,137,207				4,813,933				1,100,134
Less fees waived by administrator – class specific			(51,267	)			(70,454	)			(124,735	)			(156,713	)
Total expenses after fees waived			68,111				4,066,753				4,689,198				943,421
Net investment income			136,686				42,802,481				20,508,082				4,640,815
Realized Gain Allocated from the Master Portfolios
Net realized gain from investments			2,954				1,533,172				1,317,216				293,999
Net Increase in Net Assets Resulting from Operations		$	139,640			$	44,335,653			$	21,825,298			$	4,934,814

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 7

Statements of Changes in Net Assets BlackRock Funds III

	BlackRock Cash Funds: Government								BlackRock Cash Funds: Institutional
	Year Ended December 31,								Year Ended December 31,
Increase (Decrease) in Net Assets:	2010				2009				2010				2009
Operations
Net investment income		$	136,686			$	794,293			$	42,802,481			$	105,060,433
Net realized gain			2,954				–				1,533,172				754,970
Net increase in net assets resulting from operations			139,640				794,293				44,335,653				105,815,403
Dividends and Distributions to Shareholders From
Net investment income:
Aon Captives			–				–				(71,463	)			(306,830	)
Capital			–				(537	)			(322,253	)			(613,972	)
Institutional			(37,830	)			(193,664	)			(1,563,708	)			(26,948,452	)
Premium			–				(8,251	)			(23,806	)			(3,835,175	)
Select			(8,003	)			(50,455	)			(29,103	)			(330,692	)
SL Agency			(88,963	)			(530,115	)			(40,790,821	)			(72,875,346	)
Trust			(1,890	)			(11,271	)			(1,327	)			(158,479	)
Net realized gain:
Aon Captives			–				–				(3,891	)			(217	)
Capital			–				–				(5,488	)			(456	)
Institutional			(394	)			–				(70,937	)			(8,626	)
Premium			–				–				(158	)			(1,987	)
Select			(74	)			–				(1,821	)			(144	)
SL Agency			–				–				(1,286,835	)			(52,227	)
Trust			(21	)			–				(555	)			(175	)
Decrease in net assets resulting from dividends and distributions to shareholders			(137,175	)			(794,293	)			(44,172,166	)			(105,132,778	)
Capital Share Transactions
Net decrease in net assets derived from capital share transactions			(629,928,342	)			(1,061,321,081	)			(1,184,480,338	)			(1,132,583,000	)
Net Assets
Total decrease in net assets			(629,925,877	)			(1,061,321,081	)			(1,184,316,851	)			(1,131,900,375	)
Beginning of year			656,384,202				1,717,705,283				20,296,473,768				21,428,374,143
End of year		$	26,458,325			$	656,384,202			$	19,112,156,917			$	20,296,473,768

See Notes to Financial Statements.

8 BLACKROCK FUNDS III DECEMBER 31, 2010

Statements of Changes in Net Assets (concluded) BlackRock Funds III

	BlackRock Cash Funds: Prime								BlackRock Cash Funds: Treasury
	Year Ended December 31,								Year Ended December 31,
Increase (Decrease) in Net Assets:	2010				2009				2010				2009
Operations
Net investment income		$	20,508,082			$	48,087,608			$	4,640,815			$	2,304,187
Net realized gain			1,317,216				950,463				293,999				26,602
Net increase in net assets resulting from operations			21,825,298				49,038,071				4,934,814				2,330,789
Dividends and Distributions to Shareholders From
Net investment income:
Capital			(784,850	)			(974,656	)			(34,225	)			(39,674	)
Institutional			(6,796,261	)			(18,329,064	)			(73,605	)			(140,275	)
Premium			(2,073,025	)			(10,708,861	)			(625	)			(19,056	)
Select			(100,741	)			(474,570	)			(740	)			(7,807	)
SL Agency			(10,747,124	)			(17,529,063	)			(4,521,543	)			(2,038,221	)
Trust			(6,081	)			(82,138	)			(10,077	)			(59,154	)
Net realized gain:
Capital			–				–				(10,213	)			–
Institutional			–				–				(3,678	)			–
Select			–				–				(40	)			–
SL Agency			–				–				(65,356	)			–
Trust			–				–				(713	)			–
Decrease in net assets resulting from dividends and distributions to shareholders			(20,508,082	)			(48,098,352	)			(4,720,815	)			(2,304,187	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions			(2,402,394,681	)			(3,955,376,512	)			(2,399,013,443	)			2,599,720,888
Net Assets
Total increase (decrease) in net assets			(2,401,077,465	)			(3,954,436,793	)			(2,398,799,444	)			2,599,747,490
Beginning of year			11,536,093,294				15,490,530,087				4,134,477,392				1,534,729,902
End of year		$	9,135,015,829			$	11,536,093,294			$	1,735,677,948			$	4,134,477,392

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 9

Financial Highlights BlackRock Cash Funds: Government

	Institutional
	Year Ended December 31,
	2010				2009				2008				2007				2006
Per Share Operating Performance
Net asset value, beginning of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Net investment income			0.0008				0.0009				0.0200				0.0500				0.0492
Dividends from net investment income			(0.0008	)			(0.0009	)			(0.0200	)			(0.0500	)			(0.0492	)
Net asset value, end of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Total Investment Return1
Based on net asset value			0.09	%			0.09	%			1.96	%			5.15	%			5.04	%
Ratios to Average Net Assets2
Total expenses			0.19	%			0.15	%3			0.16	%			0.18	%			0.16	%
Total expenses after fees waived			0.11	%			0.08	%			0.10	%			0.12	%			0.12	%
Net investment income			0.09	%			0.11	%			0.29	%			4.67	%			4.75	%
Supplemental Data
Net assets, end of year (000)		$	5,663			$	10,496			$	1,594,728			$	3,031			$	395

¹ Where applicable, total investment returns include the reinvestment of dividends and distributions.

² Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

³ Ratio revised to reflect exclusion of fees waived.

See Notes to Financial Statements.

10 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (continued) BlackRock Cash Funds: Government

	Select
	Year Ended December 31,
	2010				2009				2008				2007				2006
Per Share Operating Performance
Net asset value, beginning of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Net investment income			0.0003				0.0008				0.0200				0.0500				0.0483
Dividends from net investment income			(0.0003	)			(0.0008	)			(0.0200	)			(0.0500	)			(0.0483	)
Net asset value, end of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Total Investment Return1
Based on net asset value			0.03	%			0.08	%			1.89	%			5.06	%			4.94	%
Ratios to Average Net Assets2
Total expenses			0.29	%			0.25	%3			0.23	%			0.28	%			0.26	%
Total expenses after fees waived			0.13	%			0.09	%			0.07	%			0.20	%			0.21	%
Net investment income			0.03	%			0.08	%			0.82	%			5.03	%			4.84	%
Supplemental Data
Net assets, end of year (000)		$	17,263			$	69,139			$	81,424			$	14,269			$	42,683

¹ Where applicable, total investment returns include the reinvestment of dividends and distributions.

² Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

³ Ratio revised to reflect exclusion of fees waived.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 11

Financial Highlights (concluded) BlackRock Cash Funds: Government

	Trust
	Year Ended December 31,
	2010				2009				2008				2007				2006
Per Share Operating Performance
Net asset value, beginning of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Net investment income			0.0002				0.0008				0.0200				0.0500				0.0459
Dividends from net investment income			(0.0002	)			(0.0008	)			(0.0200	)			(0.0500	)			(0.0459	)
Net asset value, end of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Total Investment Return1
Based on net asset value			0.02	%			0.08	%			1.69	%			4.80	%			4.69	%
Ratios to Average Net Assets2
Total expenses			0.53	%			0.48	%3			0.47	%			0.51	%			0.49	%
Total expenses after fees waived			0.15	%			0.09	%			0.07	%			0.45	%			0.45	%
Net investment income			0.03	%			0.08	%			0.16	%			4.78	%			4.60	%
Supplemental Data
Net assets, end of year (000)		$	3,532			$	13,462			$	12,380			$	50			$	108

¹ Where applicable, total investment returns include the reinvestment of dividends and distributions.

² Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

³ Ratio revised to reflect exclusion of fees waived.

See Notes to Financial Statements.

12 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights BlackRock Cash Funds: Institutional

	Aon Captives
	Year Ended December 31,
	2010			2009			2008			2007			2006
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0012			0.0033			0.0300			0.0500			0.0500
Dividends from net investment income		(0.0012	)		(0.0033	)		(0.0300	)		(0.0500	)		(0.0500	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return1
Based on net asset value		0.12	%		0.33	%		2.74	%		5.26	%		5.00	%
Ratios to Average Net Assets2
Total expenses		0.25	%		0.25	%		0.26	%		0.26	%		0.23	%
Total expenses after fees waived		0.22	%		0.22	%		0.23	%		0.21	%		0.19	%
Net investment income		0.11	%		0.35	%		2.67	%		5.12	%		4.86	%
Supplemental Data
Net assets, end of year (000)	$	59,237		$	72,949		$	97,273		$	90,192		$	69,083

¹ Where applicable, total investment returns include the reinvestment of dividends and distributions.

² Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 13

Financial Highlights (continued) BlackRock Cash Funds: Institutional

	Institutional
	Year Ended December 31,
	2010			2009			2008			2007			2006
Per Share Operating Performance
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0022			0.0043			0.0300			0.0500			0.0500
Dividends from net investment income		(0.0022	)		(0.0043	)		(0.0300	)		(0.0500	)		(0.0500	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Investment Return1
Based on net asset value		0.22	%		0.43	%		2.85	%		5.36	%		5.11	%
Ratios to Average Net Assets2
Total expenses		0.15	%		0.15	%		0.15	%		0.16	%		0.14	%
Total expenses after fees waived		0.12	%		0.12	%		0.12	%		0.11	%		0.10	%
Net investment income		0.22	%		0.78	%		2.65	%		5.25	%		4.97	%
Supplemental Data
Net assets, end of year (000)	$	1,076,268		$	973,221		$	20,223,437		$	6,653,737		$	4,198,724

¹ Where applicable, total investment returns include the reinvestment of dividends and distributions.

² Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

See Notes to Financial Statements.

14 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (continued) BlackRock Cash Funds: Institutional

	Select
	Year Ended December 31,
	2010				2009				2008				2007				2006
Per Share Operating Performance
Net asset value, beginning of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Net investment income			0.0014				0.0035				0.0300				0.0500				0.0500
Dividends from net investment income			(0.0014	)			(0.0035	)			(0.0300	)			(0.0500	)			(0.0500	)
Net asset value, end of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Total Investment Return1
Based on net asset value			0.14	%			0.35	%			2.76	%			5.26	%			5.00	%
Ratios to Average Net Assets2
Total expenses			0.25	%			0.23	%			0.28	%			0.25	%			0.23	%
Total expenses after fees waived			0.20	%			0.20	%			0.23	%			0.20	%			0.19	%
Net investment income			0.13	%			0.57	%			2.05	%			5.11	%			4.55	%
Supplemental Data
Net assets, end of year (000)		$	29,944			$	23,204			$	10,014			$	4,807			$	1,229

¹ Where applicable, total investment returns include the reinvestment of dividends and distributions.

² Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 15

Financial Highlights (continued) BlackRock Cash Funds: Institutional

	SL Agency
	Year Ended December 31, 2010				Period from February 4, 20091 to December 31, 2009
Per Share Operating Performance
Net asset value, beginning of period		$	1.00			$	1.00
Net investment income			0.0025				0.0035
Dividends from net investment income			(0.0025	)			(0.0035	)
Net asset value, end of period		$	1.00			$	1.00
Total Investment Return2
Based on net asset value			0.25	%			0.36	%3
Ratios to Average Net Assets4
Total expenses			0.12	%			0.12	%5
Total expenses after fees waived			0.09	%			0.09	%5
Net investment income			0.24	%			0.38	%5
Supplemental Data
Net assets, end of period (000)		$	17,938,932			$	18,832,492

¹ Commencement of operations.

² Where applicable, total investment returns include the reinvestment of dividends and distributions.

³ Aggregate total investment return.

⁴ Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

⁵ Annualized.

See Notes to Financial Statements.

16 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (concluded) BlackRock Cash Funds: Institutional

	Trust
	Year Ended December 31,
	2010				2009				2008				2007				2006
Per Share Operating Performance
Net asset value, beginning of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Net investment income			0.0001				0.0018				0.0200				0.0500				0.0500
Dividends from net investment income			(0.0001	)			(0.0018	)			(0.0200	)			(0.0500	)			(0.0500	)
Net asset value, end of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Total Investment Return1
Based on net asset value			0.01	%			0.18	%			2.51	%			5.01	%			4.76	%
Ratios to Average Net Assets2
Total expenses			0.48	%			0.48	%			0.49	%			0.48	%			0.47	%
Total expenses after fees waived			0.31	%			0.40	%			0.46	%			0.43	%			0.43	%
Net investment income			0.01	%			0.22	%			2.50	%			4.93	%			4.95	%
Supplemental Data
Net assets, end of year (000)		$	7,776			$	19,713			$	76,334			$	85,774			$	197,480

¹ Where applicable, total investment returns include the reinvestment of dividends and distributions.

² Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 17

Financial Highlights BlackRock Cash Funds: Prime

	Capital
									Period from February 28, 20081 to December  31, 2008
	Year Ended December 31,
	2010				2009
Per Share Operating Performance
Net asset value, beginning of period		$	1.00			$	1.00			$	1.00
Net investment income			0.0018				0.0030				0.0200
Dividends from net investment income			(0.0018	)			(0.0030	)			(0.0200	)
Net asset value, end of period		$	1.00			$	1.00			$	1.00
Total Investment Return2
Based on net asset value			0.18	%			0.30	%			2.13	%3
Ratios to Average Net Assets4
Total expenses			0.17	%			0.19	%			0.21	%5
Total expenses after fees waived			0.14	%			0.16	%			0.15	%5
Net investment income			0.17	%			0.27	%			2.23	%5
Supplemental Data
Net assets, end of period (000)		$	517,988			$	673,375			$	226,487

¹ Commencement of operations.

² Where applicable, total investment returns include the reinvestment of dividends and distributions.

³ Aggregate total investment return.

⁴ Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

⁵ Annualized.

See Notes to Financial Statements.

18 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (continued) BlackRock Cash Funds: Prime

	Institutional
	Year Ended December 31,
	2010				2009				2008				2007				2006
Per Share Operating Performance
Net asset value, beginning of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Net investment income			0.0020				0.0032				0.0300				0.0500				0.0500
Dividends from net investment income			(0.0020	)			(0.0032	)			(0.0300	)			(0.0500	)			(0.0500	)
Net asset value, end of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Total Investment Return1
Based on net asset value			0.20	%			0.32	%			2.83	%			5.32	%			5.07	%
Ratios to Average Net Assets2
Total expenses			0.15	%			0.17	%			0.15	%			0.15	%			0.14	%
Total expenses after fees waived			0.12	%			0.14	%			0.11	%			0.12	%			0.11	%
Net investment income			0.20	%			0.39	%			2.80	%			5.19	%			4.93	%
Supplemental Data
Net assets, end of year (000)		$	3,570,577			$	3,014,591			$	10,812,890			$	8,363,790			$	5,915,836

¹ Where applicable, total investment returns include the reinvestment of dividends and distributions.

² Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 19

Financial Highlights (continued) BlackRock Cash Funds: Prime

	Premium
	Year Ended December 31,
	2010				2009				2008				2007				2006
Per Share Operating Performance
Net asset value, beginning of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Net investment income			0.0015				0.0027				0.0270				0.0500				0.0500
Dividends from net investment income			(0.0015	)			(0.0027	)			(0.0270	)			(0.0500	)			(0.0500	)
Net asset value, end of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Total Investment Return1
Based on net asset value			0.15	%			0.27	%			2.78	%			5.27	%			5.02	%
Ratios to Average Net Assets2
Total expenses			0.20	%			0.23	%			0.21	%			0.20	%			0.19	%
Total expenses after fees waived			0.17	%			0.20	%			0.17	%			0.17	%			0.16	%
Net investment income			0.14	%			0.34	%			2.60	%			5.14	%			4.88	%
Supplemental Data
Net assets, end of year (000)		$	1,232,743			$	1,817,088			$	4,304,633			$	1,795,477			$	1,551,648

¹ Where applicable, total investment returns include the reinvestment of dividends and distributions.

² Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

See Notes to Financial Statements.

20 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (continued) BlackRock Cash Funds: Prime

	Select
	Year Ended December 31,
	2010				2009				2008				2007				2006
Per Share Operating Performance
Net asset value, beginning of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Net investment income			0.0012				0.0024				0.0280				0.0500				0.0500
Dividends from net investment income			(0.0012	)			(0.0024	)			(0.0280	)			(0.0500	)			(0.0500	)
Net asset value, end of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Total Investment Return1
Based on net asset value			0.12	%			0.24	%			2.75	%			5.24	%			4.97	%
Ratios to Average Net Assets2
Total expenses			0.25	%			0.27	%			0.25	%			0.25	%			0.24	%
Total expenses after fees waived			0.20	%			0.22	%			0.18	%			0.20	%			0.21	%
Net investment income			0.12	%			0.24	%			2.95	%			5.06	%			4.67	%
Supplemental Data
Net assets, end of year (000)		$	80,614			$	73,810			$	143,150			$	268,352			$	21,642

¹ Where applicable, total investment returns include the reinvestment of dividends and distributions.

² Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 21

Financial Highlights (continued) BlackRock Cash Funds: Prime

	SL Agency
	Year Ended December 31, 2010				Period from February 4, 20091 to December 31, 2009
Per Share Operating Performance
Net asset value, beginning of period		$	1.00			$	1.00
Net investment income			0.0023				0.0028
Dividends from net investment income			(0.0023	)			(0.0028	)
Net asset value, end of period		$	1.00			$	1.00
Total Investment Return2
Based on net asset value			0.23	%			0.28	%3
Ratios to Average Net Assets4
Total expenses			0.12	%			0.14	%5
Total expenses after fees waived			0.09	%			0.11	%5
Net investment income			0.22	%			0.31	%5
Supplemental Data
Net assets, end of period (000)		$	3,696,051			$	5,860,881

¹ Commencement of operations.

² Where applicable, total investment returns include the reinvestment of dividends and distributions.

³ Aggregate total investment return.

⁴ Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

⁵ Annualized.

See Notes to Financial Statements.

22 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (concluded) BlackRock Cash Funds: Prime

	Trust
	Year Ended December 31,
	2010				2009				2008				2007				2006
Per Share Operating Performance
Net asset value, beginning of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Net investment income			0.0001				0.0011				0.0200				0.0500				0.0500
Dividends from net investment income			(0.0001	)			(0.0011	)			(0.0200	)			(0.0500	)			(0.0500	)
Net asset value, end of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Total Investment Return1
Based on net asset value			0.01	%			0.11	%			2.49	%			4.98	%			4.72	%
Ratios to Average Net Assets2
Total expenses			0.48	%			0.51	%			0.52	%			0.48	%			0.47	%
Total expenses after fees waived			0.29	%			0.36	%			0.48	%			0.45	%			0.45	%
Net investment income			0.01	%			0.09	%			1.34	%			4.89	%			4.63	%
Supplemental Data
Net assets, end of year (000)		$	37,044			$	96,349			$	3,370			$	50			$	108

¹ Where applicable, total investment returns include the reinvestment of dividends and distributions.

² Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 23

Financial Highlights BlackRock Cash Funds: Treasury

	Capital
	Year Ended December 31,								Period from February 28, 20081 to December 31, 2008
	2010				2009
Per Share Operating Performance
Net asset value, beginning of period		$	1.00			$	1.00			$	1.00
Net investment income			0.0007				0.0008				0.0100
Dividends from net investment income			(0.0007	)			(0.0008	)			(0.0100	)
Net asset value, end of period		$	1.00			$	1.00			$	1.00
Total Investment Return2
Based on net asset value			0.07	%			0.08	%			1.12	%3
Ratios to Average Net Assets4
Total expenses			0.17	%			0.17	%			0.19	%5
Total expenses after fees waived			0.12	%			0.08	%			0.05	%5
Net investment income			0.06	%			0.07	%			0.37	%5
Supplemental Data
Net assets, end of period (000)		$	139,657			$	32,419			$	44,698

¹ Commencement of operations.

² Where applicable, total investment returns include the reinvestment of dividends and distributions.

³ Aggregate total investment return.

⁴ Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

⁵ Annualized.

See Notes to Financial Statements.

24 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (continued) BlackRock Cash Funds: Treasury

	Institutional
	Year Ended December 31,
	2010				2009				2008				2007				2006
Per Share Operating Performance
Net asset value, beginning of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Net investment income			0.0009				0.0008				0.0200				0.0500				0.0500
Dividends from net investment income			(0.0009	)			(0.0008	)			(0.0200	)			(0.0500	)			(0.0500	)
Net asset value, end of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Total Investment Return1
Based on net asset value			0.09	%			0.08	%			1.61	%			4.95	%			5.04	%
Ratios to Average Net Assets2
Total expenses			0.16	%			0.12	%			0.15	%			0.18	%			0.19	%
Total expenses after fees waived			0.11	%			0.04	%			0.04	%			0.04	%			0.00	%
Net investment income			0.08	%			0.09	%			0.39	%			4.74	%			5.03	%
Supplemental Data
Net assets, end of year (000)		$	124,791			$	30,011			$	1,305,944			$	131,190			$	126,518

¹ Where applicable, total investment returns include the reinvestment of dividends and distributions.

² Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 25

Financial Highlights (continued) BlackRock Cash Funds: Treasury

	Select
	Year Ended December 31,
	2010				2009				2008				2007				2006
Per Share Operating Performance
Net asset value, beginning of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Net investment income			0.0003				0.0007				0.0200				0.0500				0.0500
Dividends from net investment income			(0.0003	)			(0.0007	)			(0.0200	)			(0.0500	)			(0.0500	)
Net asset value, end of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Total Investment Return1
Based on net asset value			0.03	%			0.08	%			1.55	%			4.86	%			4.94	%
Ratios to Average Net Assets2
Total expenses			0.25	%			0.25	%			0.25	%			0.27	%			0.30	%
Total expenses after fees waived			0.12	%			0.08	%			0.09	%			0.10	%			0.10	%
Net investment income			0.04	%			0.08	%			0.92	%			5.06	%			5.15	%
Supplemental Data
Net assets, end of year (000)		$	288			$	4,815			$	24,340			$	10,050			$	55,919

¹ Where applicable, total investment returns include the reinvestment of dividends and distributions.

² Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

See Notes to Financial Statements.

26 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (continued) BlackRock Cash Funds: Treasury

	SL Agency
	Year Ended December 31, 2010				Period from February  4, 20091 to December 31, 2009
Per Share Operating Performance
Net asset value, beginning of period		$	1.00			$	1.00
Net investment income			0.0011				0.0008
Dividends from net investment income			(0.0011	)			(0.0008	)
Net asset value, end of period		$	1.00			$	1.00
Total Investment Return2
Based on net asset value			0.12	%			0.09	%3
Ratios to Average Net Assets4
Total expenses			0.13	%			0.12	%5
Total expenses after fees waived			0.08	%			0.07	%5
Net investment income			0.11	%			0.08	%5
Supplemental Data
Net assets, end of period (000)		$	1,457,943			$	4,009,074

¹ Commencement of operations.

² Where applicable, total investment returns include the reinvestment of dividends and distributions.

³ Aggregate total investment return.

⁴ Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

⁵ Annualized.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 27

Financial Highlights (concluded) BlackRock Cash Funds: Treasury

	Trust
	Year Ended December 31,
	2010				2009				2008				2007				2006
Per Share Operating Performance
Net asset value, beginning of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Net investment income			0.0002				0.0007				0.0100				0.0500				0.0500
Dividends from net investment income			(0.0002	)			(0.0007	)			(0.0100	)			(0.0500	)			(0.0500	)
Net asset value, end of year		$	1.00			$	1.00			$	1.00			$	1.00			$	1.00
Total Investment Return1
Based on net asset value			0.02	%			0.08	%			1.45	%			4.61	%			4.70	%
Ratios to Average Net Assets2
Total expenses			0.48	%			0.47	%			0.47	%			0.51	%			0.52	%
Total expenses after fees waived			0.16	%			0.08	%			0.01	%			0.36	%			0.33	%
Net investment income			0.02	%			0.08	%			0.05	%			4.65	%			4.60	%
Supplemental Data
Net assets, end of year (000)		$	12,999			$	55,618			$	94,654			$	50			$	108

¹ Where applicable, total investment returns include the reinvestment of dividends and distributions.

² Includes the Fund’s share of the Master Portfolio’s allocated net expenses and/or net investment income (loss).

See Notes to Financial Statements.

28 BLACKROCK FUNDS III DECEMBER 31, 2010

Notes to Financial Statements BlackRock Funds III

1. Organization and Significant Accounting Policies:

BlackRock Funds III (the “Trust”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”) as a diversified, open-end management investment company. The Trust is organized as a Delaware statutory trust. The financial statements and these accompanying notes relate to four series of the Trust: BlackRock Cash Funds: Government (“Government”), BlackRock Cash Funds: Institutional (“Institutional”), BlackRock Cash Funds: Prime (“Prime”) and Black-Rock Cash Funds: Treasury (“Treasury”) (each a “Fund” and together, the “Funds”). The Funds’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. Each Fund seeks to achieve its investment objective by investing all or a portion of its assets in a separate series of Master Investment Portfolio (“MIP”): Government Money Market Master Portfolio, Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio (each a “Master Portfolio” and together, the “Master Portfolios”). Each Master Portfolio has the same or substantially similar investment objective as its corresponding Fund. The performance of each Fund is directly affected by the performance of its corresponding Master Portfolio.

The value of each Fund’s investment in its corresponding Master Portfolio reflects that Fund’s interest in the net assets of that Master Portfolio (100%, 95.54%, 90.73% and 78.88% for Government, Institutional, Prime and Treasury, respectively, as of December 31, 2010).

The Funds offer multiple classes of shares although certain share classes may not be outstanding at report date. Each Fund offers the following classes of shares: Capital Shares, Institutional Shares, Premium Shares, Select Shares, SL Agency Shares and Trust Shares. Institutional also offers Aon Captives Shares.

All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions and differ principally with respect to administration and distribution fees to which the classes are subject. The Aon Captives Shares have exclusive voting rights with respect to matters relating to their shareholder servicing expenditures.

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

Valuation: Each Fund’s policy is to fair value its financial instruments at market value. Each Fund records its investment in its corresponding Master Portfolio at fair value based on the Fund’s proportionate interest in the net assets of the Master Portfolio. Valuation of securities held by the Master Portfolios, including categorization of fair value measurements, is discussed in Note 1 of the Master Portfolios’ Notes to Financial Statements, which are included elsewhere in this report.

Investment Transactions and Net Investment Income: For financial reporting purposes, investment transactions in the Master Portfolios are recorded on the dates the transactions are entered into (the trade dates). Each Fund records daily its proportionate share of its Master Portfolio’s income, expenses and realized gains and losses. In addition, each Fund accrues its own expenses. Income and realized gains and losses are allocated daily to each class based on the relative net assets of each class.

Dividends and Distributions: Dividends to shareholders from net investment income are declared daily and distributed monthly. Distributions of capital gains, if any, are recorded on the ex-dividend dates. Dividends are determined separately for each class based on income and expenses allocable to each class. The amount and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

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

The Funds file U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Funds’ US federal tax returns remains open for each of the four years ended December 31, 2010. The statutes of limitations on the Funds’ state and local tax returns may remain open for an additional year depending upon the jurisdiction. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

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

2. Administration Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”), Bank of America Corporation (“BAC”) and Barclays Bank PLC (“Barclays”) are the largest stockholders of BlackRock, Inc. (“BlackRock”). Due to the ownership structure, PNC is an affiliate of the Funds for 1940 Act purposes, but BAC and Barclays are not.

The Trust entered into an administration services arrangement with BlackRock Institutional Trust Company, N.A. (“BTC”), which has agreed to provide general administration services (other than investment

BLACKROCK FUNDS III DECEMBER 31, 2010 29

Notes to Financial Statements (continued) BlackRock Funds III

advice and related portfolio activities). BTC, in consideration thereof, has agreed to bear all of the Funds’ ordinary operating expenses, excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the Funds. BTC is entitled to receive for these administration services an annual fee based on the average daily net assets of each share class of each Fund as follows:

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

For the year ended December 31, 2010, the administration fees, which are included in administration – class specific in the Statements of Operations, for each class of each Fund are as follows:

	Government				Institutional				Prime			Treasury
Aon Captives			N/A			$	31,973				N/A			N/A
Capital			–			$	122,476	*		$	320,508		$	38,526
Institutional		$	22,158			$	363,512			$	1,695,452		$	43,437
Premium			–			$	24,345	*		$	1,492,129		$	1,242	*
Select		$	36,163			$	34,158			$	126,846		$	2,478
SL Agency		$	21,058	*		$	3,394,757			$	961,908		$	815,740
Trust		$	27,932			$	56,618			$	185,120		$	182,897

* There were no shares outstanding as of December 31, 2010.

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

BTC contractually agreed to waive a portion of its administration fees for the Select Shares through April 30, 2012. After giving effect to such contractual waiver, the administration fees for the Select Shares will be 0.13%. These amounts are included in fees waived by administrator – class specific in the Statements of Operations.

The fees of the Trust’s independent registered public accounting firm and legal counsel (the “independent expenses”) are paid directly by the Funds. BTC has contractually agreed to provide an offsetting credit against the administration fees paid by the Funds in an amount equal to the independent expenses through April 30, 2012. These amounts are included in fees waived by administrator – class specific in the Statements of Operations.

BTC has voluntarily agreed to waive administration fees to enable the Funds to maintain a minimum daily net investment income dividend. These amounts are included in fees waived by administrator – class specific in the Statements of Operations. BTC may discontinue the waiver at any time.

For the year ended December 31, 2010, BTC waived administration fees for the Funds as follows:

	Government			Institutional			Prime			Treasury
Aon Captives			–		$	175			–			–
Capital			–		$	596		$	1,508		$	4,605
Institutional		$	7,595		$	1,364		$	9,641		$	4,057
Premium			–		$	18		$	5,079		$	378
Select		$	18,883		$	4,618		$	17,159		$	1,195
SL Agency		$	2,902		$	43,156		$	15,323		$	15,907
Trust		$	21,887		$	20,527		$	76,025		$	130,571

As of December 31, 2010, the only eligible investors for the SL Agency Shares of the Funds are investment companies for which (i) BlackRock Fund Advisors (“BFA”), the investment advisor to the Master Portfolios, BTC, or an affiliate provides investment advisory or administration services, or (ii) BTC acts as securities lending agent and which have directed BTC on their behalf to invest securities lending cash collateral in the Funds. Affiliated shareholders in the SL Agency Shares of the Funds represent a significant portion of the outstanding shares and net assets of Institutional, Prime and Treasury.

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

3. Distribution Plan:

SEI Investments Distribution Company (“SEI”) is the distributor for the Funds. Institutional has adopted a plan pursuant to Rule 12b-1 under the 1940 Act, which authorizes the Aon Captives Shares of Institutional to pay expenses relating to the distribution of such shares. Under the plan, SEI is entitled to receive an annual fee for these services of 0.10% of the average daily net assets of the Aon Captives Shares. The Capital Shares, Institutional Shares, Premium Shares, Select Shares and SL Agency Shares of Institutional do not pay any fees for distribution services. The fees paid to SEI by Institutional are shown as distribution – Aon Captives Shares in the Statements of Operations.

30 BLACKROCK FUNDS III DECEMBER 31, 2010

Notes to Financial Statements (continued) BlackRock Funds III

4. Income Tax Information:

The tax character of distributions paid during the years ended December 31, 2010 and December 31, 2009 was as follows:

	Ordinary Income			Net Long-Term Capital Gain			Total
BlackRock Cash Funds:
Government
12/31/10		$	137,175			–		$	137,175
12/31/09		$	794,293			–		$	794,293
BlackRock Cash Funds:
Institutional
12/31/10		$	44,172,166			–		$	44,172,166
12/31/09		$	105,132,050		$	728		$	105,132,778
BlackRock Cash Funds:
Prime
12/31/10		$	20,508,082			–		$	20,508,082
12/31/09		$	48,098,352			–		$	48,098,352
BlackRock Cash Funds:
Treasury
12/31/10		$	4,720,815			–		$	4,720,815
12/31/09		$	2,304,187			–		$	2,304,187

As of December 31, 2010, the tax components of net undistributed earnings (accumulated losses) were as follows:

	Undistributed Ordinary Income			Capital Loss Carryforward				Net Undistributed Earnings (Accumulated Losses)
BlackRock Cash Funds:
Government		$	2,465			–			$	2,465
BlackRock Cash Funds:
Institutional		$	915,114			–			$	915,114
BlackRock Cash Funds:
Prime			–		$	(2,992,784	)		$	(2,992,784	)
BlackRock Cash Funds:
Treasury		$	240,601			–			$	240,601

As of December 31, 2010, BlackRock Cash Funds: Prime had capital loss carryforward of $2,992,784 expiring on December 31, 2016. Such losses may be used to offset future realized capital gains through the indicated expiration date.

Under the recently enacted Regulated Investment Company Modernization Act of 2010, capital losses incurred by the Fund after December 31, 2010 will not be subject to expiration. In addition, such losses must be utilized prior to the losses incurred in the years preceding enactment.

5. Capital Share Transactions:

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

Transactions in capital shares for each class were as follows:

	Year Ended December  31,
Government (concluded)	2010			2009*
Institutional
Shares sold		592,921,890			9,820,984
Shares issued in reinvestment of dividends		37,427			91,550
Total issued		592,959,317			9,912,534
Shares redeemed		(597,794,818	)		(1,594,144,080	)
Net decrease		(4,835,501	)		(1,584,231,546	)
Select
Shares sold		99,014,400			135,143,389
Shares issued in reinvestment of dividends		12,017			49,156
Total issued		99,026,417			135,192,545
Shares redeemed		(150,902,208	)		(147,478,120	)
Net decrease		(51,875,791	)		(12,285,575	)
SL Agency
Shares sold		801,229,411			4,244,816,469
Shares issued in reinvestment of dividends		–			–
Total issued		801,229,411			4,244,816,469
Shares redeemed		(1,364,516,935	)		(3,681,528,945	)
Net increase (decrease)		(563,287,524	)		563,287,524
Trust
Shares sold		5,004,885			24,142,631
Shares issued in reinvestment of dividends		2,924			10,644
Total issued		5,007,809			24,153,275
Shares redeemed		(14,937,335	)		(23,071,920	)
Net increase (decrease)		(9,929,526	)		1,081,355
Institutional
Aon Captives
Shares sold		10,063,063			16,084,607
Shares issued in reinvestment of dividends		20,132			225,358
Total issued		10,083,195			16,309,965
Shares redeemed		(23,797,290	)		(40,636,507	)
Net decrease		(13,714,095	)		(24,326,542	)
Capital
Shares sold		1,572,533,625			1,231,513,615
Shares issued in reinvestment of dividends		362,375			578,035
Total issued		1,572,896,000			1,232,091,650
Shares redeemed		(1,850,277,220	)		(954,811,001	)
Net increase (decrease)		(277,381,220	)		277,280,649

BLACKROCK FUNDS III DECEMBER 31, 2010 31

Notes to Financial Statements (continued) BlackRock Funds III

	Year Ended December 31,
Institutional (concluded)	2010			2009*
Institutional
Shares sold		7,331,073,034			24,147,118,026
Shares issued in reinvestment of dividends		864,648			3,820,568
Total issued		7,331,937,682			24,150,938,594
Shares redeemed		(7,228,877,516	)		(43,402,541,476	)
Net increase (decrease)		103,060,166			(19,251,602,882	)
Premium
Shares sold		485,300,001			4,452,838,789
Shares issued in reinvestment of dividends		17,598			4,214,337
Total issued		485,317,599			4,457,053,126
Shares redeemed		(582,820,676	)		(5,380,768,140	)
Net decrease		(97,503,077	)		(923,715,014	)
Select
Shares sold		54,213,075			246,192,108
Shares issued in reinvestment of dividends		29,032			317,437
Total issued		54,272,107			246,509,545
Shares redeemed		(47,502,671	)		(233,320,272	)
Net increase		6,739,436			13,189,273
SL Agency
Shares sold		70,137,158,166			96,115,179,849
Shares issued in reinvestment of dividends		7,205			32
Total issued		70,137,165,371			96,115,179,881
Shares redeemed		(71,030,909,239	)		(77,281,965,851	)
Net increase (decrease)		(893,743,868	)		18,833,214,030
Trust
Shares sold		42,283,652			181,665,886
Shares issued in reinvestment of dividends		2,504			32,215
Total issued		42,286,156			181,698,101
Shares redeemed		(54,223,836	)		(238,320,615	)
Net decrease		(11,937,680	)		(56,622,514	)
Prime
Capital
Shares sold		4,560,700,637			3,433,942,542
Shares issued in reinvestment of dividends		763,522			1,093,210
Total issued		4,561,464,159			3,435,035,752
Shares redeemed		(4,716,905,406	)		(2,988,177,681	)
Net increase (decrease)		(155,441,247	)		446,858,071

	Year Ended December 31,
Prime (concluded)	2010			2009*
Institutional
Shares sold		19,420,053,454			43,184,957,114
Shares issued in reinvestment of dividends		2,619,911			8,601,008
Total issued		19,422,673,365			43,193,558,122
Shares redeemed		(18,867,130,981	)		(50,992,241,110	)
Net increase (decrease)		555,542,384			(7,798,682,988	)
Premium
Shares sold		21,165,592,835			29,431,919,881
Shares issued in reinvestment of dividends		1,156,263			11,188,438
Total issued		21,166,749,098			29,443,108,319
Shares redeemed		(21,751,251,754	)		(31,930,820,462	)
Net decrease		(584,502,656	)		(2,487,712,143	)
Select
Shares sold		746,666,852			1,175,454,685
Shares issued in reinvestment of dividends		93,798			626,915
Total issued		746,760,650			1,176,081,600
Shares redeemed		(739,969,815	)		(1,245,434,444	)
Net increase (decrease)		6,790,835			(69,352,844	)
SL Agency
Shares sold		668,882,337			6,745,422,574
Shares issued in reinvestment of dividends		–			25
Total issued		668,882,337			6,745,422,599
Shares redeemed		(2,834,355,287	)		(884,881,754	)
Net increase (decrease)		(2,165,472,950	)		5,860,540,845
Trust
Shares sold		82,329,392			319,473,967
Shares issued in reinvestment of dividends		9,509			82,189
Total issued		82,338,901			319,556,156
Shares redeemed		(141,649,948	)		(226,583,609	)
Net increase (decrease)		(59,311,047	)		92,972,547
Treasury
Capital
Shares sold		460,067,303			167,715,367
Shares issued in reinvestment of dividends		29,950			38,642
Total issued		460,097,253			167,754,009
Shares redeemed		(352,858,461	)		(180,033,363	)
Net increase (decrease)		107,238,792			(12,279,354	)

32 BLACKROCK FUNDS III DECEMBER 31, 2010

Notes to Financial Statements (concluded) BlackRock Funds III

	Year Ended December 31,
Treasury (concluded)	2010			2009*
Institutional
Shares sold		1,755,315,568			1,854,094,500
Shares issued in reinvestment of dividends		69,870			19,914
Total issued		1,755,385,438			1,854,114,414
Shares redeemed		(1,660,614,707	)		(3,130,047,272	)
Net increase (decrease)		94,770,731			(1,275,932,858	)
Premium
Shares sold		19,296,388			78,569,547
Shares issued in reinvestment of dividends		789			19,334
Total issued		19,297,177			78,588,881
Shares redeemed		(21,838,781	)		(141,142,239	)
Net decrease		(2,541,604	)		(62,553,358	)
Select
Shares sold		45,406,723			36,459,090
Shares issued in reinvestment of dividends		924			8,065
Total issued		45,407,647			36,467,155
Shares redeemed		(49,934,402	)		(55,992,127	)
Net decrease		(4,526,755	)		(19,524,972	)
SL Agency
Shares sold		32,115,170,740			22,539,601,350
Shares issued in reinvestment of dividends		2,808			8
Total issued		32,115,173,548			22,539,601,358
Shares redeemed		(34,666,506,887	)		(18,530,552,907	)
Net increase (decrease)		(2,551,333,339	)		4,009,048,451
Trust
Shares sold		219,161,537			62,128,770
Shares issued in reinvestment of dividends		11,988			58,894
Total issued		219,173,525			62,187,664
Shares redeemed		(261,794,793	)		(101,224,685	)
Net decrease		(42,621,268	)		(39,037,021	)

* For SL Agency Shares, the period is from February 4, 2009 (commencement of operations) to December 31, 2009.

6. Subsequent Events:

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

BLACKROCK FUNDS III DECEMBER 31, 2010 33

Report of Independent Registered Public Accounting Firm BlackRock Funds III

To the Shareholders and Board of Trustees of BlackRock Funds III:

In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BlackRock Cash Funds: Government, BlackRock Cash Funds: Institutional, BlackRock Cash Funds: Prime and Black-Rock Cash Funds: Treasury, (each a “Fund” and together, the “Funds”), at December 31, 2010, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 24, 2011

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by Government, Institutional, Prime and Treasury for the taxable year ended December 31, 2010:

Interest Related Dividends and Qualified Short-Term Capital Gains for Non-U.S. Residents *
Month Paid:	Government			Institutional			Prime			Treasury
January 2010		100.00	%		77.53	%		81.46	%		100.00	%
February 2010		100.00	%		77.53	%		81.46	%		100.00	%
March 2010		100.00	%		59.38	%		81.46	%		100.00	%
April 2010		100.00	%		77.53	%		81.46	%		100.00	%
May 2010		100.00	%		77.53	%		81.46	%		100.00	%
June 2010		100.00	%		77.53	%		81.46	%		100.00	%
July 2010		100.00	%		74.22	%		81.46	%		100.00	%
August 2010		100.00	%		80.18	%		81.46	%		100.00	%
September 2010		100.00	%		77.53	%		81.46	%		100.00	%
October 2010		100.00	%		78.07	%		81.46	%		100.00	%
November 2010		100.00	%		80.84	%		81.46	%		100.00	%
December 2010		100.00	%		81.25	%		81.46	%		100.00	%

Federal Obligation Interest **
	January 2010 - December  2010
Institutional		4.17	%
Prime		4.31	%
Treasury		43.86	%

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

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

34 BLACKROCK FUNDS III DECEMBER 31, 2010

Portfolio Information as of December 31, 2010 Master Investment Portfolio

Government Money Market Master Portfolio
Portfolio Composition	Percent of Net  Assets
Repurchase Agreements		100	%
Total		100	%
Money Market Master Portfolio
Portfolio Composition	Percent of Net Assets
Certificates of Deposit		27	%
U.S. Government Sponsored Agency Obligations		26
Commercial Paper		23
Repurchase Agreements		16
U.S. Treasury Obligations		5
Time Deposits		3
Total		100	%

Prime Money Market Master Portfolio
Portfolio Composition	Percent of Net Assets
U.S. Government Sponsored Agency Obligations		29	%
Certificates of Deposit		29
Repurchase Agreements		19
Commercial Paper		12
Time Deposits		7
U.S. Treasury Obligations		4
Total		100	%
Treasury Money Market Master Portfolio
Portfolio Composition	Percent of Net Assets
Repurchase Agreements		75	%
U.S. Treasury Obligations		25
Total		100	%

BLACKROCK FUNDS III DECEMBER 31, 2010 35

Schedule of Investments December 31, 2010	Government Money Market Master Portfolio
	(Percentages shown are based on Net Assets)

Repurchase Agreements	Par (000)			Value
Banc of America Securities LLC, 0.25%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $5,000,104, collateralized by U.S. government obligations, 1.13%, 6/3/11, par and fair value of $5,075,000 and $5,100,553, respectively)		$	5,000		$	5,000,000
Deutsche Bank Securities Inc., 0.28%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $5,000,117, collateralized by U.S. government obligations, 4.00%, 8/15/40, par and fair value of $5,131,631 and $5,100,001, respectively)			5,000			5,000,000
JPMorgan Securities Inc., 0.18%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $5,488,082, collateralized by U.S. government obligations, 0.88%, 3/31/11, par and fair value of $5,580,000 and $5,601,938, respectively)			5,488			5,488,000
Morgan Stanley & Co. Inc., 0.15%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $6,000,075, collateralized by U.S. government obligations, 1.88%, 8/31/17, par and fair value of $6,391,200 and $6,120,015, respectively)			6,000			6,000,000
RBS Securities Inc., 0.25%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $5,000,104, collateralized by U.S. government obligations, 4.50%, 9/1/40, par and fair value of $5,135,000 and $5,100,526, respectively)			5,000			5,000,000
Total Repurchase Agreements – 100.1%						26,488,000
Total Investments (Cost – $26,488,000*) – 100.1 %						26,488,000
Liabilities in Excess of Other Assets – (0.1)%						(14,378	)
Net Assets – 100.0%					$	26,473,622

* Cost for federal income tax purposes.

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities

• 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 inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Master Portfolio’s Notes to Financial Statements. The following table summarizes the inputs used as of December 31, 2010 in determining the fair valuation of the Master Portfolio’s investments:

Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Short-Term Securities1		–	$	26,488,000		–	$	26,488,000

¹ See above Schedule of Investments for values in each security type.

See Notes to Financial Statements.

36 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments December 31, 2010	Money Market Master Portfolio
	(Percentages shown are based on Net Assets)

Certificates of Deposit	Par (000)			Value
Yankee (a)
Banco Bilbao Vizcaya Argentaria S.A., New York,
0.36%, 1/28/11 (b)		$	175,000		$	175,000,000
Bank of Montreal, Chicago,
0.36%, 11/22/11 (b)			300,000			300,000,000
Barclays Bank Plc, New York:
0.42%, 2/18/11			260,000			260,000,000
0.40%, 3/04/11			225,000			225,000,000
BNP Paribas S.A., New York,
0.50%, 12/12/11 (b)			200,000			200,000,000
Canadian Imperial Bank of Commerce, New York,
0.42%, 1/31/11 (b)			432,000			432,000,000
Credit Agricole Corporate & Investment Bank, New York:
0.32%, 2/14/11			300,000			300,000,000
0.41%, 4/08/11			195,000			195,000,000
Dexia Credit Local, New York,
0.56%, 6/29/11 (b)			157,000			157,000,000
DNB NOR Bank ASA, New York,
0.31%, 3/31/11			11,000			11,000,136
KBC Bank N.V., New York,
0.46%, 2/18/11			350,000			350,000,000
Lloyds TSB Bank Plc, New York:
0.62%, 2/11/11			270,000			270,000,000
1.27%, 5/06/11 (b)			75,000			75,000,000
Mizuho Corporate Bank, New York,
0.28%, 2/02/11			320,000			320,000,000
Rabobank Nederland N.V., New York:
0.27%, 1/10/11 (b)			110,000			110,000,000
0.57%, 1/18/11			185,000			185,000,000
Royal Bank of Canada, New York:
0.26%, 1/21/11 (b)			116,015			116,015,000
0.37%, 10/14/11 (b)			170,000			170,000,000
Royal Bank of Scotland Plc, Connecticut:
0.67%, 2/09/11 (b)			150,000			150,000,000
0.51%, 3/01/11 (b)			125,000			125,000,000
0.49%, 4/19/11			200,000			200,000,000
Societe Generale, New York:
0.39%, 2/03/11 (b)			130,000			130,000,000
0.40%, 2/14/11			200,000			200,000,000
1.49%, 5/05/11 (b)			110,000			110,000,000
Sumitomo Mitsui Banking Corp., New York,
0.28%, 1/21/11			200,000			200,000,000
UniCredit SpA, New York,
0.49%, 2/09/11			390,300			390,300,000
Total Certificates of Deposit – 26.8%						5,356,315,136
Commercial Paper
Banco Bilbao Vizcaya Argentaria S.A., London,
0.42%, 1/25/11 (c)(d)			250,000			249,930,000
Bank of Nova Scotia, New York,
0.14%, 1/04/11 (d)			439,000			438,994,878
BNZ International Funding Ltd.,
0.34%, 2/01/11 (c)			250,000			250,002,135
BPCE S.A.:
0.30%, 2/03/11 (c)(d)			500,000			499,853,333
0.54%, 3/23/11 (c)(d)			121,000			120,852,985
Ciesco LLC,
0.27%, 2/24/11 (c)(d)			75,000			74,969,625
CRC Funding LLC,
0.26%, 2/17/11 (d)			63,000			62,978,615
Credit Agricole North America Inc.,
0.57%, 2/10/11 (d)			270,000			269,829,000
Danske Corp.,
0.30%, 2/15/11 (c)(d)			400,000			399,850,000

Commercial Paper	Par (000)			Value
Deutsche Bank Financial LLC:
0.23%, 1/04/11 (d)		$	350,000		$	349,993,292
0.28%, 2/28/11 (d)			393,808			393,630,349
European Investment Bank,
0.40%, 3/24/11 (d)			445,000			444,594,556
ING US Funding LLC,
0.43%, 4/06/11 (d)			250,000			249,716,319
Lloyds TSB Bank Plc,
0.45%, 3/25/11 (d)			55,000			54,942,938
NRW.BANK,
0.39%, 3/15/11 (d)			105,000			104,916,963
Societe Generale North America, Inc.,
0.32%, 2/18/11 (d)			146,700			146,637,408
Westpac Securities NZ Ltd.:
0.26%, 2/08/11 (d)			51,000			50,986,003
0.37%, 10/03/11			486,000			486,000,000
Total Commercial Paper – 23.3%						4,648,678,399
Time Deposits
Natixis,
0.15%, 1/03/11			200,000			200,000,000
Societe Generale, New York,
0.15%, 1/03/11			306,000			306,000,000
Total Time Deposits – 2.5%						506,000,000
U.S. Government Sponsored Agency Obligations
Fannie Mae Discount Notes:
0.18%, 2/14/11 (d)			15,000			14,996,700
0.18%, 2/15/11 (d)			300,000			299,932,500
0.21%, 2/23/11 (d)			248,436			248,361,021
Federal Farm Credit Bank Variable Rate Notes:
0.25%, 5/26/11 (b)			62,225			62,222,487
0.24%, 4/27/12 (b)			144,460			144,430,843
0.38%, 7/13/12 (b)			58,020			58,011,016
0.34%, 10/12/12 (b)			75,000			75,000,000
Federal Home Loan Bank:
0.75%, 1/18/11			35,030			35,035,468
0.40%, 11/28/11			52,930			52,930,000
Federal Home Loan Bank Discount Notes:
0.17%, 2/10/11 (d)			179,750			179,716,047
0.18%, 5/04/11 (d)			85,000			84,947,725
Federal Home Loan Bank Variable Rate Notes,
0.23%, 10/06/11 (b)			187,000			186,942,113
Freddie Mac Discount Notes:
0.21%, 2/22/11 (d)			149,200			149,155,820
0.18%, 2/28/11 (d)			63,637			63,618,033
0.20%, 4/18/11 (d)			233,000			232,861,494
0.20%, 4/21/11 (d)			100,000			99,938,889
0.18%, 5/02/11 (d)			437,073			436,805,394
0.18%, 5/09/11 (d)			275,000			274,824,000
0.21%, 5/10/11 (d)			200,000			199,849,500
0.18%, 5/24/11 (d)			75,000			74,944,885
0.21%, 6/07/11 (d)			685,861			685,245,765
0.26%, 6/21/11 (d)			200,000			199,753,000
Freddie Mac Variable Rate Notes:
0.18%, 11/09/11 (b)			606,000			605,632,282
0.19%, 1/13/12 (b)			652,995			652,585,938
0.22%, 2/16/12 (b)			110,000			109,950,083
Total U.S. Government Sponsored Agency Obligations – 26.1%						5,227,691,003

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 37

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

U.S. Treasury Obligations(d)	Par (000)			Value
U.S. Treasury Bill:
0.19%, 5/19/11		$	900,000		$	899,348,525
0.23%, 6/30/11			125,000			124,859,375
Total U.S. Treasury Obligations – 5.1%						1,024,207,900
Repurchase Agreements
Banc of America Securities LLC, 0.25%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $500,010,417, collateralized by non-U.S. government debt securities, 0.00% to 11.25%, 1/5/11 to 2/15/51, par and fair value of $760,263,328 and $523,963,755, respectively)			500,000			500,000,000
Banc of America Securities LLC, 0.30%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $228,005,700, collateralized by non-U.S. government debt securities, 0.00%, 4/1/11 to 6/7/11, par and fair value of $232,845,093 and $232,560,000, respectively)			228,000			228,000,000
Banc of America Securities LLC, 0.40%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $122,004,067, collateralized by non-U.S. government debt securities, 0.00% to 5.88%, 8/15/13 to 4/15/49, par and fair value of $179,061,836 and $130,540,000, respectively)			122,000			122,000,000
Banc of America Securities LLC, 0.52%, 2/22/11 (Purchased on 12/31/10 to be repurchased at $250,191,389, collateralized by non-U.S. government debt securities, 0.00% to 7.50%, 1/3/11 to 7/25/34, par and fair value of $432,442,582 and $257,229,934, respectively)			250,000			250,000,000
BNP Paribas Securities Corp., 0.27%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $425,009,563, collateralized by non-U.S. government debt securities, 1.00% to 11.25%, 2/1/11 to 9/15/28, par and fair value of $399,767,653 and $437,750,000, respectively)			425,000			425,000,000
Citigroup Global Markets Inc., 0.35%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $69,002,013, collateralized by U.S. government obligations, 1.27% to 5.00%, 3/20/36 to 9/25/40, par and fair value of $145,967,927 and $71,070,000, respectively)			69,000			69,000,000
Citigroup Global Markets Inc., 0.56%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $250,011,667, collateralized by non-U.S. government debt securities, 0.00% to 5.81%, 12/20/11 to 9/15/27, par and fair value of $280,591,755 and $276,538,645, respectively)			250,000			250,000,000

Repurchase Agreements	Par (000)			Value
Citigroup Global Markets Inc., 0.65%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $190,010,292, collateralized by non-U.S. government debt securities, 0.00% to 8.00%, 1/1/11 to 4/1/57, par and fair value of $291,134,878 and $243,451,279, respectively)		$	190,000		$	190,000,000
Citigroup Global Markets Inc., 0.75%, 3/3/11 (Purchased on 12/31/10 to be repurchased at $80,103,333, collateralized by U.S. government obligations, 1.22% to 5.50%, 5/15/32 to 6/25/38, par and fair value of $223,601,980 and $82,400,000, respectively)			80,000			80,000,000
Deutsche Bank Securities Inc., 0.28%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $105,002,450, collateralized by U.S. government obligations, 7.00%, 10/1/38, par and fair value of $254,103,148 and $108,150,000, respectively)			105,000			105,000,000
Greenwich Capital Markets, 0.30%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $400,010,000, collateralized by non-U.S. government debt securities, 0.00% to 8.50%, 1/18/11 to 6/11/38, par and fair value of $418,796,149 and $440,001,769, respectively)			400,000			400,000,000
HSBC Securities (USA) Inc., 0.23%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $100,001,917, collateralized by non-U.S. government debt securities, 0.00% to 9.25%, 9/20/12 to 12/15/37, par and fair value of $95,037,000 and $102,893,979, respectively)			100,000			100,000,000
JPMorgan Securities Inc., 0.32%, 1/6/11 (Purchased on 12/31/10 to be repurchased at $50,002,667, collateralized by non-U.S. government debt securities, 5.05% to 6.61%, 6/15/15 to 7/15/20, par and fair value of $47,856,000 and $52,503,562, respectively)			50,000			50,000,000
JPMorgan Securities Inc., 0.50%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $320,013,333, collateralized by non-U.S. government debt securities, 0.00% to 9.88%, 4/25/11 to 6/1/56, par and fair value of $327,100,500 and $335,454,503, respectively)			320,000			320,000,000
Morgan Stanley & Co. Inc., 0.15%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $75,000,938, collateralized by U.S. Treasury obligations, 3.00% to 3.13%, 9/30/16 to 4/30/17, par and fair value of $73,617,300 and $76,500,093, respectively)			75,000			75,000,000

See Notes to Financial Statements.

38 BLACKROCK FUNDS III DECEMBER 31, 2010

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

Repurchase Agreements	Par (000)			Value
RBS Securities Inc., 0.50%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $75,003,125, collateralized by non-U.S. government debt securities, 0.52% to 10.40%, 7/15/13 to 1/25/29, par and fair value of $141,610,000 and $82,501,871, respectively)		$	75,000		$	75,000,000
Total Repurchase Agreements – 16.2%						3,239,000,000
Total Investments (Cost – $20,001,892,438*) – 100.0 %						20,001,892,438
Other Assets in Excess of Liabilities – 0.0%						5,664,207
Net Assets – 100.0%					$	20,007,556,645

* Cost for federal income tax purposes.

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

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

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

(d) Rate shown reflects the discount rate at the time of purchase.

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities

• 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 inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Master Portfolio’s Notes to Financial Statements. The following table summarizes the inputs used as of December 31, 2010 in determining the fair valuation of the Master Portfolio’s investments:

Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Short-Term Securities1		–	$	20,001,892,438		–	$	20,001,892,438

¹ See above Schedule of Investments for values in each security type.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 39

Schedule of Investments December 31, 2010	Prime Money Market Master Portfolio
	(Percentages shown are based on Net Assets)

Certificates of Deposit	Par (000)			Value
Euro 0.1%
Credit Industriel et Commercial, London,
0.45%, 1/05/11		$	11,000		$	11,000,012
Yankee (a)
Banco Bilbao Vizcaya Argentaria S.A., New York,
0.36%, 1/28/11 (b)			125,000			125,000,000
Bank of Montreal, Chicago,
0.36%, 11/22/11 (b)			200,000			200,000,000
Barclays Bank Plc, New York:
0.42%, 2/18/11			170,000			170,000,000
0.40%, 3/04/11			125,000			125,000,000
BNP Paribas S.A., New York,
0.50%, 12/12/11 (b)			100,000			100,000,000
Canadian Imperial Bank of Commerce, New York,
0.42%, 1/31/11 (b)			288,000			288,000,000
Credit Agricole Corporate & Investment Bank, New York:
0.32%, 2/14/11			200,000			200,000,000
0.41%, 4/08/11			100,000			100,000,000
Dexia Credit Local, New York,
0.56%, 6/29/11 (b)			108,000			108,000,000
KBC Bank N.V., New York,
0.46%, 2/18/11			150,000			150,000,000
Lloyds TSB Bank Plc, New York:
0.62%, 2/11/11			130,000			130,000,000
1.27%, 5/06/11 (b)			45,000			45,000,000
Mizuho Corporate Bank, New York,
0.28%, 2/02/11			180,000			180,000,000
Rabobank Nederland N.V., New York:
0.27%, 1/10/11 (b)			60,000			60,000,000
0.57%, 1/18/11			135,000			135,000,000
Royal Bank of Canada, New York:
0.26%, 1/21/11 (b)			58,485			58,485,000
0.37%, 10/14/11 (b)			110,000			110,000,000
Royal Bank of Scotland Plc, Connecticut:
0.51%, 3/01/11 (b)			125,000			125,000,000
0.49%, 4/19/11			150,000			150,000,000
Societe Generale, New York:
0.39%, 2/03/11 (b)			82,000			82,000,000
1.49%, 5/05/11 (b)			75,000			75,000,000
UniCredit SpA, New York,
0.49%, 2/09/11			200,000			200,000,000
Total Certificates of Deposit – 29.1%						2,927,485,012
Commercial Paper (c)
Banco Bilbao Vizcaya Argentaria S.A., London,
0.42%, 1/25/11 (d)			150,000			149,958,000
BNZ International Funding Ltd.,
0.30%, 3/02/11 (d)			75,000			74,962,500
Commonwealth Bank of Australia,
0.29%, 3/03/11 (d)			94,500			94,453,564
Credit Agricole North America Inc.,
0.57%, 2/10/11			200,000			199,873,333
Danske Corp.,
0.30%, 2/15/11 (d)			200,000			199,925,000
Deutsche Bank Financial LLC,
0.23%, 1/04/11			150,000			149,997,125
ING US Funding LLC,
0.43%, 4/06/11			100,000			99,886,528
Lloyds TSB Bank Plc,
0.45%, 3/25/11			31,000			30,967,837
Natixis US Finance Co. LLC,
0.34%, 1/18/11			125,000			124,979,931
NRW.BANK,
0.39%, 3/15/11			75,000			74,940,687
Total Commercial Paper – 11.9%						1,199,944,505

Time Deposits	Par (000)			Value
Natixis,
0.15%, 1/03/11		$	200,000		$	200,000,000
Societe Generale, New York,
0.15%, 1/03/11			207,000			207,000,000
Wells Fargo Bank NA,
0.01%, 1/03/11			250,000			250,000,000
Total Time Deposits – 6.5%						657,000,000
U.S. Government Sponsored Agency Obligations
Fannie Mae Discount Notes:
0.18%, 2/14/11 (c)			350,000			349,923,000
0.18%, 4/25/11 (c)			150,000			149,914,500
Fannie Mae Variable Rate Notes,
0.25%, 7/26/12 (b)			225,000			224,929,576
Federal Farm Credit Bank Variable Rate Notes:
0.25%, 5/26/11 (b)			37,775			37,773,475
0.24%, 4/27/12 (b)			100,540			100,519,707
0.28%, 5/14/12 (b)			101,000			101,028,506
0.34%, 10/12/12 (b)			50,000			50,000,000
Federal Home Loan Bank:
0.75%, 1/18/11			19,970			19,973,116
0.40%, 11/28/11			29,100			29,100,000
Federal Home Loan Bank Discount Notes,
0.18%, 5/04/11 (c)			67,000			66,958,795
Federal Home Loan Bank Variable Rate Notes:
0.31%, 7/22/11 (b)			25,000			25,000,000
0.23%, 1/23/12 (b)			82,000			81,978,041
Freddie Mac Discount Notes:
0.21%, 2/22/11 (c)			100,000			99,970,389
0.20%, 4/21/11 (c)			80,000			79,951,111
0.18%, 4/25/11 (c)			105,000			104,940,150
0.18%, 5/02/11 (c)			189,394			189,279,417
0.18%, 5/09/11 (c)			150,000			149,904,000
0.18%, 5/24/11 (c)			125,000			124,908,143
0.18%, 5/25/11 (c)			100,000			99,926,000
0.19%, 6/07/11 (c)			297,845			297,598,202
0.26%, 6/21/11 (c)			100,000			99,876,500
Freddie Mac Variable Rate Notes:
0.19%, 1/13/12 (b)			347,005			346,787,622
0.22%, 2/16/12 (b)			100,000			99,954,621
Total U.S. Government Sponsored Agency Obligations – 29.1%						2,930,194,871
U.S. Treasury Obligations (c)
U.S. Treasury Bill:
0.19%, 5/19/11			200,000			199,855,867
0.23%, 6/30/11			250,000			249,718,750
Total U.S. Treasury Obligations – 4.5%						449,574,617
Repurchase Agreements
Banc of America Securities LLC, 0.25%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $250,005,208, collateralized by non-U.S. government debt securities, 0.00% to 7.75%, 2/22/11 to 10/10/45, par and fair value of $281,303,707 and $260,247,672, respectively)			250,000			250,000,000

See Notes to Financial Statements.

40 BLACKROCK FUNDS III DECEMBER 31, 2010

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

Repurchase Agreements	Par (000)			Value
Banc of America Securities LLC, 0.30%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $49,001,225, collateralized by non-U.S. government debt securities, 0.00%, 1/27/11, par and fair value of $49,992,499 and $49,980,001, respectively)		$	49,000		$	49,000,000
Banc of America Securities LLC, 0.40%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $26,000,867, collateralized by non-U.S. government debt securities, 0.00%, 11/25/34, par and fair value of $103,502,742 and $27,820,000, respectively)			26,000			26,000,000
Banc of America Securities LLC, 0.52%, 2/22/11 (Purchased on 12/31/10 to be repurchased at $185,141,628, collateralized by non-U.S. government debt securities, 0.00% to 1.88%, 1/7/11 to 8/15/15, par and fair value of $196,026,736 and $191,327,800, respectively)			185,000			185,000,000
BNP Paribas Securities Corp., 0.27%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $275,005,625, collateralized by non-U.S. government debt securities, 0.00% to 12.75%, 5/20/11 to 3/6/30, par and fair value of $247,073,406 and $283,250,000, respectively)			275,000			275,000,000
Citigroup Global Markets Inc., 0.35%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $20,000,583, collateralized by U.S. government obligations, 0.70% to 1.50%, 4/15/36 to 2/25/38, par and fair value of $24,457,246 and $20,600,001, respectively)			20,000			20,000,000
Citigroup Global Markets Inc., 0.75%, 3/3/11 (Purchased on 12/31/10 to be repurchased at $50,064,583, collateralized by U.S. government obligations, 4.00% to 5.50%, 7/15/27 to 11/15/40, par and fair value of $59,256,082 and $51,500,000, respectively)			50,000			50,000,000
Deutsche Bank Securities Inc., 0.22%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $5,000,092, collateralized by U.S. government obligations, 0.00%, 8/8/11, par and fair value of $5,107,000 and $5,100,769, respectively)			5,000			5,000,000
Deutsche Bank Securities Inc., 0.28%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $226,005,273, collateralized by U.S. government obligations, 4.50% to 5.00%, 7/1/40 to 9/1/40, par and fair value of $233,678,677 and $232,780,001, respectively)			226,000			226,000,000
Greenwich Capital Markets, 0.30%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $155,003,875, collateralized by non-U.S. government debt securities, 0.00% to 5.60%, 4/1/11 to 9/1/20, par and fair value of $168,066,000 and $170,504,148, respectively)			155,000			155,000,000

Repurchase Agreements	Par (000)			Value
JPMorgan Securities Inc., 0.30%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $100,002,500, collateralized by non-U.S. government debt securities, 0.63% to 8.50%, 6/7/12 to 10/1/37, par and fair value of $96,313,333 and 105,001,887, respectively)		$	100,000		$	100,000,000
JPMorgan Securities Inc., 0.30%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $50,001,250, collateralized by non-U.S. government debt securities, 0.63% to 8.50%, 6/7/12 to 10/1/37, par and fair value of $48,156,667 and 52,500,943, respectively)			50,000			50,000,000
JPMorgan Securities Inc., 0.32%, 1/6/11 (Purchased on 12/31/10 to be repurchased at $50,002,667, collateralized by non-U.S. government debt securities, 0.37% to 5.75%, 7/15/20 to 10/25/22, par and fair value of $52,594,000 and 52,502,092, respectively)			50,000			50,000,000
JPMorgan Securities Inc., 0.50%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $50,002,083, collateralized by non-U.S. government debt securities, 0.00% to 9.63%, 1/15/11 to 2/15/36, par and fair value of $70,609,000 and $52,293,057, respectively)			50,000			50,000,000
Morgan Stanley & Co. Inc., 0.15%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $273,003,413, collateralized by U.S. Treasury obligations, 0.00% to 4.50%, 2/3/11 to 9/30/16, par and fair value of $268,900,500 and $278,460,036, respectively)			273,000			273,000,000
Morgan Stanley & Co. Inc., 0.25%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $90,001,875, collateralized by non-U.S. government debt securities, 0.00%, 1/31/11 to 2/2/11, par and fair value of $94,974,875 and $94,500,001, respectively)			90,000			90,000,000
RBS Securities Inc., 0.50%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $50,002,083, collateralized by non-U.S. government debt securities, 0.39% to 4.99%, 5/6/12 to 10/19/20, par and fair value of $72,178,000 and $55,002,491, respectively)			50,000			50,000,000
Total Repurchase Agreements – 18.9%						1,904,000,000
Total Investments (Cost – $10,068,199,005*) – 100.0%						10,068,199,005
Other Assets in Excess of Liabilities – 0.0%						2,858,141
Net Assets – 100.0%					$	10,071,057,146

* Cost for federal income tax purposes.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 41

Schedule of Investments (concluded) Prime Money Market Master Portfolio

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

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

(c) Rate shown reflects the discount rate at the time of purchase.

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

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities

• 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 inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Master Portfolio’s Notes to Financial Statements. The following table summarizes the inputs used as of December 31, 2010 in determining the fair valuation of the Master Portfolio’s investments:

Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Short-Term Securities1		–	$	10,068,199,005		–	$	10,068,199,005

¹ See above Schedule of Investments for values in each security type.

See Notes to Financial Statements.

42 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments December 31, 2010	Treasury Money Market Master Portfolio
	(Percentages shown are based on Net Assets)

U.S. Treasury Obligations	Par (000)			Value
U.S. Treasury Bill:
0.20%, 1/13/11 (a)		$	50,000		$	49,996,667
0.20%, 1/20/11 (a)			50,000			49,994,854
0.19%, 3/03/11 (a)			100,000			99,967,467
0.20%, 3/24/11 (a)			50,000			49,977,792
0.16%, 5/12/11 (a)			32,000			31,981,252
0.19%, 6/09/11 (a)			45,000			44,963,231
0.19%, 6/23/11 (a)			17,000			16,984,887
0.27%, 9/22/11 (a)			25,000			24,951,417
U.S. Treasury Note:
0.88%, 1/31/11			10,000			10,005,673
0.88%, 2/28/11			169,000			169,177,585
Total U.S. Treasury Obligations – 24.9%						548,000,825
Repurchase Agreements
Banc of America Securities LLC, 0.05%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $100,000,417, collateralized by U.S. Treasury obligations, 0.00%, 5/5/11, par and fair value of $102,050,100 and $102,000,095, respectively)			100,000			100,000,000
Banc of America Securities LLC, 0.10%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $75,000,625, collateralized by U.S. Treasury obligations, 1.00%, 3/31/12, par and fair value of $75,743,600 and $76,500,087, respectively)			75,000			75,000,000
Citigroup Global Markets Inc., 0.23%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $136,002,607, collateralized by U.S. Treasury obligations, 4.38% to 4.88%, 4/30/11 to 11/15/39, par and fair value of $137,375,100 and $138,720,086, respectively)			136,000			136,000,000
Credit Suisse Securities (USA) LLC, 0.15%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $94,501,181, collateralized by U.S. Treasury obligations, 4.63% to 8.13%, 2/29/12 to 8/15/21, par and fair value of $86,331,000 and $96,391,040, respectively)			94,500			94,500,000
Goldman Sachs & Co. Inc., 0.08%, 1/6/11 (Purchased on 12/31/10 to be repurchased at $130,001,733, collateralized by U.S. Treasury obligations, 0.00% to 8.13%, 3/31/11 to 8/15/21, par and fair value of $115,524,000 and $132,600,095, respectively)			130,000			130,000,000
HSBC Securities (USA) Inc., 0.20%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $264,004,400, collateralized by U.S. Treasury obligations, 2.38% to 4.88%, 7/31/11 to 2/15/38, par and fair value of $262,523,000 and $269,284,844, respectively)			264,000			264,000,000

Repurchase Agreements	Par (000)		Value
JPMorgan Securities Inc., 0.18%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $221,728,326, collateralized by U.S. Treasury obligations, 4.75%, 5/15/14, par and fair value of $201,705,000 and $226,164,936, respectively)	$	221,725	$	221,725,000
Morgan Stanley & Co. Inc., 0.15%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $446,005,575, collateralized by U.S. Treasury obligations, 1.00% to 8.75%, 2/28/11 to 5/15/30, par and fair value of $413,583,600 and $454,920,044, respectively)		446,000		446,000,000
RBS Securities Inc., 0.18%, 1/3/11 (Purchased on 12/31/10 to be repurchased at $185,002,775, collateralized by U.S. Treasury obligations, 3.88% to 4.25%, 11/15/17 to 11/15/40, par and fair value of $200,507,300 and $188,700,183, respectively)		185,000		185,000,000
Total Repurchase Agreements – 75.1%				1,652,225,000
Total Investments (Cost – $2,200,225,825*) – 100.0 %				2,200,225,825
Other Assets in Excess of Liabilities – 0.0%				407,936
Net Assets – 100.0%			$	2,200,633,761

* Cost for federal income tax purposes.

(a) Rate shown reflects the discount rate at the time of purchase.

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities

• 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 inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Master Portfolio’s Notes to Financial Statements. The following table summarizes the inputs used as of December 31, 2010 in determining the fair valuation of the Master Portfolio’s investments:

Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Short-Term Securities1		–	$	2,200,225,825		–	$	2,200,225,825

¹ See above Schedule of Investments for values in each security type.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 43

Statements of Assets and Liabilities Master Investment Portfolio

December 31, 2010	Government Money Market Master Portfolio			Money Market Master Portfolio			Prime Money Market Master Portfolio			Treasury Money Market Master Portfolio
Assets
Investments at value – unaffiliated1			–		$	16,762,892,438		$	8,164,199,005		$	548,000,825
Repurchase agreements – unaffiliated2		$	26,488,000			3,239,000,000			1,904,000,000			1,652,225,000
Cash			917			317,883			167,145			175
Interest receivable			161			6,596,127			3,293,107			546,611
Total assets			26,489,078			20,008,806,448			10,071,659,257			2,200,772,611
Liabilities
Investment advisory fees payable			2,471			1,228,309			583,487			122,816
Professional fees payable			12,708			12,298			12,298			12,298
Trustees’ fees payable			277			9,196			6,326			3,736
Total liabilities			15,456			1,249,803			602,111			138,850
Net Assets		$	26,473,622		$	20,007,556,645		$	10,071,057,146		$	2,200,633,761
Net Assets Consist of
Investors’ capital		$	26,473,622		$	20,007,556,645		$	10,071,057,146		$	2,200,633,761
1 Investments at cost – unaffiliated			–		$	16,762,892,438		$	8,164,199,005		$	548,000,825
2 Repurchase agreements at cost – unaffiliated		$	26,488,000		$	3,239,000,000		$	1,904,000,000		$	1,652,225,000

See Notes to Financial Statements.

44 BLACKROCK FUNDS III DECEMBER 31, 2010

Statements of Operations Master Investment Portfolio

Year Ended December 31, 2010	Government Money Market Master Portfolio				Money Market Master Portfolio				Prime Money Market Master Portfolio				Treasury Money Market Master Portfolio
Investment Income
Income		$	249,387			$	62,443,871			$	36,267,784			$	8,419,017
Expenses
Investment advisory			181,083				18,895,597				11,464,903				4,486,432
Professional			14,722				75,426				52,224				25,561
Independent Trustees			7,511				188,477				126,587				56,960
Total expenses			203,316				19,159,500				11,643,714				4,568,953
Less fees waived by advisor			(158,726	)			(5,932,582	)			(3,618,282	)			(2,009,972	)
Total expenses after fees waived			44,590				13,226,918				8,025,432				2,558,981
Net investment income			204,797				49,216,953				28,242,352				5,860,036
Realized Gain
Net realized gain from investments			2,954				1,613,682				1,499,723				352,179
Net Increase in Net Assets Resulting from Operations		$	207,751			$	50,830,635			$	29,742,075			$	6,212,215

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 45

Statements of Changes in Net Assets Master Investment Portfolio

	Government Money Market Master Portfolio								Money Market Master Portfolio
	Year Ended December 31,								Year Ended December 31,
Increase (Decrease) in Net Assets:	2010				2009				2010				2009
Operations
Net investment income		$	204,797			$	1,000,195			$	49,216,953			$	117,041,788
Net realized gain			2,954				–				1,613,682				780,894
Net increase in net assets resulting from operations			207,751				1,000,195				50,830,635				117,822,682
Capital Transactions
Proceeds from contributions			1,493,830,921				4,168,505,861				62,142,807,899				130,222,744,339
Value of withdrawals			(2,124,008,682	)			(5,230,998,486	)			(63,320,829,417	)			(131,694,780,219	)
Net decrease in net assets derived from capital transactions			(630,177,761	)			(1,062,492,625	)			(1,178,021,518	)			(1,472,035,880	)
Net Assets
Total decrease in net assets			(629,970,010	)			(1,061,492,430	)			(1,127,190,883	)			(1,354,213,198	)
Beginning of year			656,443,632				1,717,936,062				21,134,747,528				22,488,960,726
End of year		$	26,473,622			$	656,443,632			$	20,007,556,645			$	21,134,747,528
	Prime Money Market Master Portfolio								Treasury Money Market Master Portfolio
	Year Ended December 31,								Year Ended December 31,
Increase (Decrease) in Net Assets:	2010				2009				2010				2009
Operations
Net investment income		$	28,242,352			$	62,540,020			$	5,860,036			$	3,020,077
Net realized gain			1,499,723				999,413				352,179				27,986
Net increase in net assets resulting from operations			29,742,075				63,539,433				6,212,215				3,048,063
Capital Transactions
Proceeds from contributions			42,435,553,226				93,330,492,363				24,950,734,675				17,947,463,410
Value of withdrawals			(44,602,753,943	)			(97,756,251,132	)			(27,045,251,038	)			(15,312,377,233	)
Net increase (decrease) in net assets derived from capital transactions			(2,167,200,717	)			(4,425,758,769	)			(2,094,516,363	)			2,635,086,177
Net Assets
Total increase (decrease) in net assets			(2,137,458,642	)			(4,362,219,336	)			(2,088,304,148	)			2,638,134,240
Beginning of year			12,208,515,788				16,570,735,124				4,288,937,909				1,650,803,669
End of year		$	10,071,057,146			$	12,208,515,788			$	2,200,633,761			$	4,288,937,909

See Notes to Financial Statements.

46 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights Master Investment Portfolio

	Government Money Market Master Portfolio
	Year Ended December 31,
	2010				2009				2008				2007				2006
Total Investment Return
Total investment return			0.13	%			0.12	%			1.99	%			5.20	%			5.08	%
Ratios to Average Net Assets
Total expenses			0.11	%			0.10	%			0.10	%			0.12	%			0.11	%
Total expenses after fees waived			0.02	%			0.05	%			0.05	%			0.07	%			0.08	%
Net investment income			0.11	%			0.12	%			0.59	%			4.93	%			4.90	%
Supplemental Data
Net assets, end of year (000)		$	26,474			$	656,444			$	1,717,936			$	107,835			$	167,285
	Money Market Master Portfolio
	Year Ended December 31,
	2010				2009				2008				2007				2006
Total Investment Return
Total investment return			0.27	%			0.48	%			2.90	%1			5.40	%			5.13	%
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	%			0.08	%
Net investment income			0.26	%			0.48	%			2.88	%			5.23	%			4.99	%
Supplemental Data
Net assets, end of year (000)		$	20,007,557			$	21,134,748			$	22,488,961			$	31,492,404			$	6,924,965

¹ For the year ended December 31, 2008, 0.01% of the total return consists of purchases of securities by BFA at prices in excess of the securities’ then current fair value. Excluding these items, total return would have been 2.89%.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 47

Financial Highlights (concluded) Master Investment Portfolio

	Prime Money Market Master Portfolio
	Year Ended December 31,
	2010				2009				2008				2007				2006
Total Investment Return
Total investment return			0.25	%			0.37	%			2.88	%1			5.37	%			5.11	%
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	%			0.07	%			0.08	%
Net investment income			0.25	%			0.41	%			2.77	%			5.23	%			4.95	%
Supplemental Data
Net assets, end of year (000)		$	10,071,057			$	12,208,516			$	16,570,735			$	11,022,281			$	8,273,083

¹ For the year ended December 31, 2008, 0.01% of the total return consists of purchases of securities by BFA at prices in excess of the securities’ then current fair value. Excluding these items, total return would have been 2.87%.

	Treasury Money Market Master Portfolio
	Year Ended December 31,
	2010				2009				2008				2007				2006
Total Investment Return
Total investment return			0.13	%			0.11	%			1.64	%			4.98	%			5.04	%
Ratios to Average Net Assets
Total expenses			0.10	%			0.10	%			0.10	%			0.12	%			0.13	%
Total expenses after fees waived			0.06	%			0.05	%			0.02	%			0.01	%			0.00	%
Net investment income			0.13	%			0.10	%			0.48	%			4.81	%			5.03	%
Supplemental Data
Net assets, end of year (000)		$	2,200,634			$	4,288,938			$	1,650,804			$	203,422			$	185,484

See Notes to Financial Statements.

48 BLACKROCK FUNDS III DECEMBER 31, 2010

Notes to Financial Statements Master Investment Portfolio

1. Organization and Significant Accounting Policies:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”) as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust. The financial statements and these accompanying notes relate to four series of MIP: Government Money Market Master Portfolio, Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio (each a “Master Portfolio” and together, the “Master Portfolios”). The Master Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

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

Valuation: The Master Portfolios’ investments are valued under the amortized cost method which approximates current market value in accordance with Rule 2a-7 of the 1940 Act. Under this method, investments are valued at cost when purchased and thereafter, a constant proportionate accretion and amortization of any discounts or premiums are recorded until the maturity of the security. Each Master Portfolio seeks to maintain its net asset value per share at $1.00, although there is no assurance that it will be able to do so on a continuing basis.

Repurchase Agreements: The Master Portfolios may invest in repurchase agreements. In a repurchase agreement, a Master Portfolio purchases a security from a counterparty who agrees to repurchase the same security at a mutually agreed upon date and price. On a daily basis, the counterparty is required to maintain collateral subject to the agreement and in value no less than the agreed repurchase amount. The agreements are conditioned upon the collateral being deposited under the Federal Reserve book entry system or held in a segregated account by the Master Portfolio’s custodian or designated sub-custodians under tri-party repurchase agreements. In the event the counter-party defaults and the fair value of the collateral declines, a Master Portfolio could experience losses, delays and costs in liquidating the collateral.

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

Income Taxes: Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio are each classified as a partnership for federal income tax purposes. As such, each investor in the Master Portfolio is treated as the owner of its proportionate share of net assets, income, expenses and realized 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.

Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio file US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolios’ US federal tax returns remains open for each of the four years ended December 31, 2010. The statutes of limitations on the Master Portfolios’ state and local tax returns may remain open for an additional year depending upon the jurisdiction. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

Government Money Market Master Portfolio is disregarded as an entity separate from its owner for tax purposes. As such, the owner of the Master Portfolio is treated as the owner of the net assets, income, expenses and realized gains and losses of the Master Portfolio. Therefore, no federal income tax provision is required. It is intended that the Master Portfolio’s assets will be managed so the owner of the Master Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

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

2. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”), Bank of America Corporation (“BAC”) and Barclays Bank PLC (“Barclays”) are the largest stockholders of BlackRock, Inc. (“BlackRock”). Due to the ownership structure, PNC is an affiliate of the Master Portfolios for 1940 Act purposes, but BAC and Barclays are not.

MIP, on behalf of the Master Portfolios, entered into an Investment Advisory Agreement with BlackRock Fund Advisors (“BFA” or the “Manager”), the Master Portfolios’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of each Master Portfolio’s portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the

BLACKROCK FUNDS III DECEMBER 31, 2010 49

Notes to Financial Statements (concluded) Master Investment Portfolio

operations of each Master Portfolio. For such services, each Master Portfolio pays the Manager a monthly fee at an annual rate of 0.10% of the average daily value of the Master Portfolio’s net assets. The Manager has contractually agreed to waive 0.03% of its advisory fees through April 30, 2012. After giving effect to such contractual agreement, the advisory fee of 0.10% will be waived to 0.07%. The Manager has also voluntarily agreed to waive investment advisory fees to enable the Master Portfolios to maintain a minimum daily net investment income dividend. The Manager may discontinue the voluntary waiver at any time. For the year ended December 31, 2010, the amounts included in fees waived by advisor in the Statements of Operations are as follows:

Government Money Market Master Portfolio	$	136,729
Money Market Master Portfolio	$	5,668,679
Prime Money Market Master Portfolio	$	3,439,471
Treasury Money Market Master Portfolio	$	1,927,451

The fees and expenses of the trustees of MIP 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 Portfolios. The Manager has contractually agreed to cap the expenses of the Master Portfolios at the rate at which the Master Portfolios pay an advisory fee to the Manager by waiving the investment advisory fees paid by the Master Portfolios in an amount equal to the independent expenses, through April 30, 2012. The amounts waived are included in fees waived by advisor in the Statements of Operations. For the year ended December 31, 2010, such waiver amounts are as follows:

Government Money Market Master Portfolio	$	21,997
Money Market Master Portfolio	$	263,903
Prime Money Market Master Portfolio	$	178,811
Treasury Money Market Master Portfolio	$	82,521

MIP entered into an administration services arrangement with Black-Rock Institutional Trust Company, N.A. (“BTC”), which has agreed to provide general administration services. BTC is not entitled to compensation for providing administration services to the Master Portfolios, for so long as BTC is entitled to compensation for providing administration services to corresponding feeder funds that invest substantially all of their assets in the Master Portfolios, or BTC (or an affiliate) receives investment advisory fees from the Master Portfolios. BTC has agreed to bear all costs of the Master Portfolios’ and MIP’s operations, other than brokerage expenses, advisory fees, 12b-1 distribution or service fees, independent expenses, litigation expenses, taxes or other extraordinary expenses. BTC may delegate certain of its administration duties to sub-administrators.

BTC has agreed to bear all costs of the Master Portfolios’ and MIP’s operations, other than brokerage expenses, advisory fees, 12b-1 distribution or service fees, independent expenses, litigation expenses, taxes or other extraordinary expenses.

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

3. Concentration, Market and Credit Risk:

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

Certain affiliates indirectly invest in the Master Portfolios through the SL Agency Shares of BlackRock Cash Funds. As of December 31, 2010, these affiliated investors represent a significant portion of the net assets of Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio.

4. Subsequent Events:

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

50 BLACKROCK FUNDS III DECEMBER 31, 2010

Report of Independent Registered Public Accounting Firm Master Investment Portfolio

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

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Government Money Market Master Portfolio, Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio, each a portfolio of Master Investment Portfolio (the “Master Portfolios”), at December 31, 2010, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolios’ management.

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which include confirmation of securities at December 31, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 24, 2011

BLACKROCK FUNDS III DECEMBER 31, 2010 51

Officers and Trustees

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2		Principal Occupation(s) During Past Five Years	Number of BlackRock– Advised Registered Investment Companies (‘RICs‘) Consisting of Investment Portfolios (‘Portfolios‘) Overseen	Public Directorships
Non-Interested Trustees1
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chair of the Board and Trustee		Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000	36 RICs consisting of 95 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chair of the Board and Trustee		Since 2009	President, Fairmount Capital Advisors, Inc. since 1987; Director, Fox Chase Cancer Center since 2004; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of Seventy (civic) since 2006	36 RICs consisting of 95 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee		Since 2009	Professor of Finance and Economics at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy since 2002; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006	36 RICs consisting of 95 Portfolios	None
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee		Since 2009	Executive Vice President of Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003	36 RICs consisting of 95 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 1939	Trustee and Member of the Audit Committee		Since 2009	Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and Professor thereof from 1980 to 2005; President, Hudson Institute (policy research organization) since 1997 and Trustee thereof since 1980; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (strategic solutions company) since 2005; Director, Cerego, LLC (software development and design) since 2005	36 RICs consisting of 95 Portfolios	AIMS Worldwide, Inc. (marketing)
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee		Since 2009	Professor, Harvard Business School since 1989; Director, Harvard Business School Publishing since 2005; Director, McLean Hospital since 2005	36 RICs consisting of 95 Portfolios	Newell Rubbermaid, Inc. (manufacturing)
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee		Since 2009	Director, The West Penn Allegheny Health System (a not-for-profit health system) since 2008; Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investment) since 1998; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008	36 RICs consisting of 95 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company); WQED Multi-Media (public broadcasting not-for-profit)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee		Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981	36 RICs consisting of 95 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee		Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, Forward Management, LLC since 2007; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008	36 RICs consisting of 95 Portfolios	A.P. Pharma, Inc. (specialty pharmaceuticals)

52 BLACKROCK FUNDS III DECEMBER 31, 2010

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served as a Trustee2		Principal Occupation(s) During Past Five Years	Number of BlackRock– Advised Registered Investment Companies (‘RICs‘) Consisting of Investment Portfolios (‘Portfolios‘) Overseen	Public Directorships
Non-Interested Trustees1 (concluded)
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Chair of the Audit Committee and Trustee		Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Chairman Elect of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Trustee, The Holy Family Foundation from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007	36 RICs consisting of 95 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee and Member of the Audit Committee		Since 2009	Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh since 2005 and Dean thereof from 1997 to 2005; Director, Alkon Corporation (pneumatics) since 1992; Director, Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008	36 RICs consisting of 95 Portfolios	None
1        Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year extensions in terms of Trustees who turn 72 prior to December 31, 2013. 2        In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. in December 2009, the Trustees were elected to the Trust’s/MIP’s Board. As a result, although the chart shows the Trustees as joining the Trust’s/MIP’s Board in 2009, each Independent Trustee first became a member of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1999; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
Interested Trustees3
Richard S. Davis 55 East 52nd Street New York, NY 10055 1945	Trustee		Since 2009	Managing Director, BlackRock, Inc. since 2005; Chief Executive Officer, State Street Research & Management Company from 2000 to 2005; Chairman of the Board of Directors, State Street Research Mutual Funds from 2000 to 2005	169 RICs consisting of 290 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee		Since 2009	Consultant, BlackRock, Inc. from 2007 to 2008; Managing Director, BlackRock, Inc. from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006	169 RICs consisting of 290 Portfolios	None
3        Mr. Davis is an “interested person”, as defined in the 1940 Act, of the Trust/MIP based on his position with BlackRock, Inc. and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock, Inc. and its affiliates as well as his ownership of BlackRock, Inc. and The PNC Financial Services Group, Inc. securities. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

BLACKROCK FUNDS III DECEMBER 31, 2010 53

Officers and Trustees (continued)

Name, Address and Year of Birth	Position(s) Held with Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers4
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock, Inc. since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2000; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2002; Member of the Cash Management Group Executive Committee since 2005
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2010; Director of BlackRock, Inc. from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009, and Co-head thereof from 2007 to 2009; Vice President of BlackRock, Inc. from 2005 to 2008
Simon Mendelson 55 East 52nd Street New York, NY 10055 1964	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2005; Co-head of the Global Cash and Securities Lending Group since 2010; Chief Operating Officer and head of the Global Client Group for BlackRock’s Global Cash Management Business since 2007; Head of BlackRock’s Strategy and Development Group from 2005 to 2007; Partner of McKinsey & Co. from 1997 to 2005
Brian Schmidt 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2004; Various positions with U.S. Trust Company from 1991 to 2003 including Director from 2001 to 2003 and Senior Vice President from 1998 to 2003; Vice President, Chief Financial Officer and Treasurer of Excelsior Funds, Inc., Excelsior Tax-Exempt Funds, Inc. and Excelsior Funds Trust from 2001 to 2003
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2006; Co-head of BlackRock’s Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006
Neal J. Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2009	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 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2009	Managing Director of BlackRock, Inc. since 2007 and Director in 2006; Assistant Treasurer of the Merrill Lynch Investment Managers, L.P. (“MLIM”) and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer	Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock, Inc. since 2005
Ira Shapiro5 55 East 52nd Street New York, NY 10055 1963	Secretary	Since 2010	Managing Director of BlackRock, Inc. since 2009; Managing Director and Associate General Counsel of Barclays Global Investors from 2008 to 2009 and principal thereof from 2004 to 2008

⁴ Officers of the Trust/MIP serve at the pleasure of the Board.

⁵ Ira P. Shapiro served as Vice President and Chief Legal Officer of the Trust/MIP from 2007 to 2009.

Further information about the Trust/MIP Officers and Trustees is available in the Trust/MIP Statement of Additional Information, which can be obtained without charge by calling (877) 244-1544.

Effective September 24, 2010, John M. Perlowski became President and Chief Executive Officer of the Trust.

Effective November 16, 2010, Ira Shapiro became Secretary of the Trust.

54 BLACKROCK FUNDS III DECEMBER 31, 2010

Officers and Trustees (concluded)

Investment Advisor	Custodian	Transfer Agent	Accounting Agent	Distributor
BlackRock Fund Advisors San Francisco, CA 94105	State Street Bank and Trust Company Boston, MA 02101	State Street Bank and Trust Company Boston, MA 02101	State Street Bank and Trust Company Boston, MA 02101	SEI Investments Distribution Co. Oaks, PA 19456
		Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP New York, NY 10017	Legal Counsel Sidley Austin LLP New York, NY 10019	Address of the Funds c/o the Distributor One Freedom Valley Drive Oaks, PA 19456

BLACKROCK FUNDS III DECEMBER 31, 2010 55

Additional Information

General Information

Availability of Quarterly Portfolio Schedule

The Funds/Master Portfolios file their complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Each Fund’s/Master Portfolio’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (202) SEC-0330. Each Fund’s/Master Portfolio’s Forms N-Q may also be obtained upon request and without charge by calling (877) 244-1544.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Funds/Master Portfolios use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling toll-free (877) 244-1544; (2) at www.blackrock.com; and (3) on the Securities and Exchange Commission’s (the “SEC”) website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how each Fund/Master Portfolio voted proxies relating to securities held in the Fund’s/Master Portfolio’s portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (877) 244-1544 and (2) on the SEC’s website at http://www.sec.gov.

Shareholder Privileges

Account Information

Call us at (877) 244-1544 from 8:00 AM to 6:00 PM EST on any business day to get information about your account balances, recent transactions and share prices. You can also reach us on the Web at http://www.blackrock.com/funds.

56 BLACKROCK FUNDS III DECEMBER 31, 2010

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, 2010 57

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

Investment in foreign securities involves special risks including fluctuating foreign exchange rates, foreign government regulations, differing degrees of liquidity and the possibility of substantial volatility due to adverse political, economic or other developments.

# MMF4-12/10

LifePath^® Portfolios OF BLACKROCK FUNDS III

ANNUAL REPORT December 31, 2010  

LifePath^® 2025 Portfolio

LifePath^® 2035 Portfolio

LifePath^® 2045 Portfolio

LifePath^® 2055 Portfolio

NOT FDIC INSURED

MAY LOSE VALUE

NO BANK GUARANTEE

Table of Contents

	Page
Dear Shareholder		2
Annual Report:
Portfolio Summaries		4
About Portfolio Performance		14
Disclosure of Expenses		16
Portfolio Financial Statements:
Statements of Assets and Liabilities		18
Statements of Operations		20
Statements of Changes in Net Assets		21
Portfolio Financial Highlights		23
Portfolio Notes to Financial Statements		43
Portfolio Report of Independent Registered Public Accounting Firm		53
Important Tax Information (Unaudited)		53
Master Portfolio Information		54
Master Portfolio Financial Statements:
Schedules of Investments		56
Statements of Assets and Liabilities		64
Statements of Operations		65
Statements of Changes in Net Assets		66
Master Portfolio Financial Highlights		68
Master Portfolio Notes to Financial Statements		72
Master Portfolio Report of Independent Registered Public Accounting Firm		77
Disclosure of Investment Advisory Agreement		78
LifePath MIPS Financial Report		83
Officers and Trustees		131
Additional Information		139

1

Dear Shareholder:

Economic data fluctuated widely throughout 2010 as the global economy continued to emerge from the “Great Recession.” As the year drew to a close, it became clear that cyclical stimulus had beat out structural problems as economic data releases generally became more positive and financial markets showed signs of continuing improvement.

Debt and deflationary risks remained present throughout 2010, causing central banks worldwide to respond with unprecedented actions, most notably a second round of quantitative easing (informally known as “QE2”) from the US Federal Reserve Board (the “Fed”). Inflation remained a non-issue in the developed world, but continued to rear its ugly head in some emerging economies, most evidently in China. Global and US gross domestic product (“GDP”) growth both continued in a positive direction but remained subpar compared to most historical economic recoveries. In the United States, the corporate sector has been an important area of strength and consumer spending has shown improvement, although weakness in the housing and labor markets continues to burden the economy.

Stocks moved higher in the early months of 2010 on the continuation of the 2009 asset recovery story. The mid-year months saw a double-digit percentage correction on the back of the Greek sovereign debt crisis and a stalling in jobs growth, leading to fears of a double-dip recession. After touching a late summer low, equity markets rallied through year end as these concerns receded. The announcement of QE2 and extension of the Bush-era tax cuts further boosted equities as the year came to a close. Although the course was uneven and high volatility remained a constant for stocks, equity markets globally ended the year strong. Emerging markets outpaced the developed world in terms of economic growth and posted respectable gains for the year despite sovereign debt problems and heightening inflationary pressures. US stocks recorded double-digit percentage gains for the second consecutive year. Small cap stocks outperformed large caps as investors began to move into higher-risk assets.

In fixed income markets, yields trended lower over most of the year as investors continued to favor safer assets. That trend reversed abruptly in the fourth quarter when market fears abated and investors began seeking higher-risk assets, driving yields sharply upward through year end. However, yields were lower overall for the year and fixed income markets finished 2010 in positive territory. Although fixed income securities generally underperformed equities, high yield bonds only marginally trailed large cap stocks. Conversely, the tax-exempt municipal market was dealt an additional blow as it became apparent that an extension of the Build America Bond program was unlikely. In addition, the fourth quarter brought an increase in negative headlines regarding fiscal challenges faced by state and local governments, sparking additional volatility in the municipal market.

2

Cash investments, as represented by the 3-month Treasury bill, returned only a fraction over 0% for the year as short-term interest rates remained low. Yields on money market securities remain near all-time lows.

Total returns as of December 31, 2010	6-month			12-month
US large cap equities (S&P 500 Index)		23.27	%		15.06	%
US small cap equities (Russell 2000 Index)		29.38			26.85
International equities (MSCI Europe, Australasia, Far East Index)		24.18			7.75
3-month Treasury bill (BofA Merrill Lynch 3-Month Treasury Bill Index)		0.08			0.13
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)		(1.33	)		7.90
US investment grade bonds (Barclays Capital US Aggregate Bond Index)		1.15			6.54
Tax-exempt municipal bonds (Barclays Capital Municipal Bond Index)		(0.90	)		2.38
US high yield bonds (Barclays Capital US Corporate High Yield 2% Issuer Capped index)		10.04			14.94

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

While no one can peer into a crystal ball and eliminate the uncertainties presented by the economic landscape and financial markets, BlackRock can offer investors the next best thing: partnership with the world’s largest asset management firm and a unique global perspective that allows us to identify trends early and capitalize on market opportunities. For additional market perspective and investment insight, visit www.blackrock.com/shareholdermagazine, where you’ll find the most recent issue of our award-winning Shareholder^® magazine, as well as its quarterly companion newsletter, Shareholder Perspectives. As always, we thank you for entrusting BlackRock with your investments, and we look forward to your continued partnership in the months and years ahead.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

3

Portfolio Summary as of December 31, 2010 LifePath Portfolios

PORTFOLIO MANAGEMENT COMMENTARY

How did each Portfolio perform?

• Since their inception on June 30, 2010, through December 31, 2010, all share classes of the LifePath Portfolios with target dates 2025, 2035, 2045 and 2055 (the “LifePath Portfolios”), through their investment in their respective LifePath Master Portfolio, marginally outperformed their respective custom benchmarks.

What factors influenced performance?

• In the second half of the year, equity markets staged a broad rebound and outperformed fixed income markets. While all of the LifePath Portfolios benefited from the rally, the longer dated funds (e.g., LifePath 2055) derived a greater benefit due to their larger exposure to equities than the shorter dated funds (e.g., LifePath 2025), which are allocated more heavily toward fixed income investments.

• The LifePath Portfolios invest a portion of their assets in the CoreAlpha Bond Master Portfolio, which outperformed its benchmark, the Barclays Capital US Aggregate Bond Index, for the period from the inception of the LifePath Portfolios through December 31, 2010.

• The LifePath Portfolios also invest in the Active Stock Master Portfolio, which underperformed its benchmark, the S&P 500 Index, for the period. Over the course of 2010, markets were driven more by the influence of broad macroeconomic themes on investor sentiment than by company fundamentals. Consequently, the Active Stock Master Portfolio’s quantitative model for security selection, which is based on factors such as relative value, earnings quality and measures of sentiment, failed to add value in this environment.

• The remaining exposures within the LifePath Portfolios are implemented through various iShares exchange-traded funds, which generally performed in line with their respective indexes.

Describe recent portfolio activity.

• Each LifePath Portfolio has its own time horizon, which affects the acceptable risk level of the LifePath Portfolio and, in turn, its asset allocation. As such, the asset allocation of each LifePath Portfolio was updated systematically during the reporting period, as investors’ time horizons decreased and the LifePath Portfolios were rebalanced accordingly.

4

Describe portfolio positioning at period end.

• The LifePath Portfolios are largely managed in line with their respective strategic asset allocation benchmarks. As such, any over/underweights in the individual LifePath Portfolios relative to their respective benchmarks are typically small and not material to performance.

The views experessed 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.

The LifePath Portfolios are organized as “feeder” funds in a “master-feeder” structure. Instead of investing directly in individual securities, the feeder fund, which is offered to the public, holds interests in the net assets of its corresponding Master Portfolio. It is the Master Portfolio that actually invests in individual securities. References to “the LifePath Portfolios” are to the feeder funds or the Master Portfolios, as the context requires.

5

LifePath^® 2025 Portfolio

Total Return Based on a $10,000 Investment

¹ The Portfolio compares its performance to that of a customized weighted index (the ‘LifePath 2025 Custom Benchmark’), comprised of the indexes indicated below, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

Period	Barclays Capital US Aggregate Bond Index			Barclays Capital  US Treasury Inflation Protected Securities (TIPS) Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI All Country World (“ACWI”) ex US IMI 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	%		4.9	%		18.8	%		5.9	%		34.9	%		2.6	%

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

6

Performance Summary for the Period Ended December 31, 2010

	Since Inception
	6-Month Total Returns			w/o sales charge			w/sales charge
Institutional		17.40	%		17.40	%1		—
Investor A		17.26	%		17.26	%1		11.10	%1
Investor C		16.84	%		16.84	%1		15.84	%1
Class K		17.60	%		17.60	%1		—
Class R		17.12	%		17.12	%1		—
Citigroup 3-Month
Treasury Bill Index		0.08	%		—			—
Barclays Capital US
Aggregate Bond Index		1.15	%		—			—
LifePath 2025 Custom
Benchmark		16.79	%		—			—
S&P 1500 Index		23.85	%		—			—
MSCI All Country World
(“ACWI”) ex US IMI Index		25.84	%		—			—

¹ Total return is calculated from an inception date of June 30, 2010.

Past performance is not indicative of future results.

7

LifePath^® 2035 Portfolio

Total Return Based on a $10,000 Investment

¹ The Portfolio compares its performance to that of a customized weighted index (the "LifePath 2035 Custom Benchmark"), comprised of the indexes indicated below, and reflecting the investment advisor's changes of the benchmarks' weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the Portfolio's asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

Period	Barclays Capital US Aggregate Bond Index			Barclays Capital  US Treasury Inflation Protected Securities (TIPS) Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI All Country World (“ACWI”) ex US IMI 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	%		6.8	%		22.7	%		6.4	%		42.5	%		2.8	%

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

8

Performance Summary for the Period Ended December 31, 2010

				Since Inception
	6-Month Total Returns			w/o sales charge			w/sales charge
Institutional		20.96	%		20.96	%1		—
Investor A		20.74	%		20.74	%1		14.40	%1
Investor C		20.30	%		20.30	%1		19.30	%1
Class K		21.16	%		21.16	%1		—
Class R		20.67	%		20.67	%1		—
Citigroup 3-Month Treasury Bill Index		0.08	%		—			—
Barclays Capital US Aggregate Bond Index		1.15	%		—			—
LifePath 2035 Custom Benchmark		20.16	%		—			—
S&P 1500 Index		23.85	%		—			—
MSCI All Country World (“ACWI”) ex US IMI Index		25.84	%		—			—

¹ Total return is calculated from an inception date of June 30, 2010.

Past performance is not indicative of future results.

9

LifePath^® 2045 Portfolio

Total Return Based on a $10,000 Investment

¹ The Portfolio compares its performance to that of a customized weighted index (the “LifePath 2045 Custom Benchmark”), comprised of the indexes indicated below, and reflecting the investment advisor’s changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

Period	Barclays Capital US Aggregate Bond Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI All Country World (“ACWI”) ex US IMI Index			S&P MidCap 400 Index			S&P 500 Index			S&P SmallCap 600 Index
6/30/10 to 12/31/10		6.8	%		8.5	%		25.9	%		6.8	%		49.0	%		3.0	%

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

10

Performance Summary for the Period Ended December 31, 2010

				Since Inception
	6-Month Total Returns			w/o sales charge			w/ sales charge
Institutional		24.01	%		24.01	%1		—
Investor A		23.86	%		23.86	%1		17.36	%1
Investor C		23.33	%		23.33	%1		22.33	%1
Class K		24.22	%		24.22	%1		—
Class R		23.68	%		23.68	%1		—
Citigroup 3-Month Treasury Bill Index		0.08	%		—			—
Barclays Capital US Aggregate Bond Index		1.15	%		—			—
LifePath 2045 Custom Benchmark		23.05	%		—			—
S&P 1500 Index		23.85	%		—			—
MSCI All Country World (“ACWI”) ex US IMI Index		25.84	%		—			—

¹ Total return is calculated from an inception date of June 30, 2010.

Past performance is not indicative of future results.

11

LifePath^® 2055 Portfolio

Total Return Based on a $10,000 Investment

¹ The Portfolio compares its performance to that of a customized weighted index (the “LifePath 2055 Custom Benchmark”), comprised of the indexes indicated below, and reflecting the investment advisor's changes of the benchmarks’ weightings over time. The investment advisor adjusts the weightings of these indexes periodically with its evaluation and adjustment of the Portfolio’s asset allocation strategy. The weightings are presented annually but they are adjusted quarterly.

Period	Barclays Capital US Aggregate Bond Index			FTSE EPRA/NAREIT Developed Real Estate Index			MSCI All Country World (“ACWI”) ex US IMI Index			S&P MidCap 400 Index			S&P 500 Index			S&P SmallCap 600 Index
6/30/10 to 12/31/10		1.0	%		9.0	%		28.2	%		8.1	%		50.1	%		3.6	%

See “About Portfolio Performance” on page 14 for descriptions of the indexes.

12

Performance Summary for the Period Ended December 31, 2010

				Since Inception
	6-Month Total Returns			w/o sales charge			w/ sales charge
Institutional		25.58	%		25.58	%1		—
Investor A		25.50	%		25.50	%1		18.92	%1
Investor C		24.98	%		24.98	%1		23.98	%1
Class K		25.84	%		25.84	%1		—
Class R		25.33	%		25.33	%1		—
Citigroup 3-Month Treasury Bill Index		0.08	%		—			—
Barclays Capital US Aggregate Bond Index		1.15	%		—			—
LifePath 2055 Custom Benchmark		24.58	%		—			—
S&P 1500 Index		23.85	%		—			—
MSCI All Country World (“ACWI”) ex US IMI Index		25.84	%		—			—

¹ Total return is calculated from an inception date of June 30, 2010.

Past performance is not indicative of future results.

13

About Portfolio Performance

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

• Investor A Shares incur a maximum initial sales charge (front-end load) of 5.25%. Investor A Shares are subject to a service fee of 0.25% per year (but no distribution fee).

• Investor C Shares are subject to a 1.00% contingent deferred sales charge if redeemed within one year of purchase. In addition, Investor C Shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year.

• Class R Shares are not subject to any sales charge (front-end load) or deferred sales charge. Class R Shares are subject to a distribution fee of 0.25% per year and a service fee of 0.25% per year. Class R Shares are available only to certain retirement and other similar plans.

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

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. Figures shown in each of the performance tables on the previous pages assume reinvestment of all dividends and distributions, if any, at net asset value on the payable date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.

The LifePath Portfolios’ administrator waived a portion of each LifePath Portfolio’s expenses. Without such waiver, each LifePath Portfolio’s performance would have been lower. Dividends paid to each class of shares will vary because of the different levels of administration and distribution fees applicable to each class, which are deducted from the income available to be paid to shareholders.

The S&P 1500 Index is a market weighted index comprised of the S&P 500, S&P MidCap 400 and S&P SmallCap 600 Indexes, which together represent approximately 90% of the total US equity market. The Barclays Capital US Aggregate Bond Index is an unmanaged market weighted index comprised of investment grade corporate bonds (rated BBB or better), mortgages and US Treasury and government agencies with at least one year to maturity. The MSCI ACWI ex US IMI Index is a free float-adjusted market capitalization-weighted index that measures the equity market performance of the developed (excluding the US) and emerging investable market universe. The Citigroup 3-Month Treasury Bill Index is a market value weighted index of public obligations of the US Treasury with maturities of three months.

14

The LifePath custom benchmarks are hypothetical representations of the performance of the respective LifePath Portfolio’s asset classes according to their weightings as of the most recent quarter-end. The weightings of the various indexes that are included in the LifePath Portfolios’ custom benchmarks are adjusted quarterly to reflect the LifePath Portfolios’ changing asset allocations over time. As of December 31, 2010, the following indexes are used to calculate the LifePath Portfolios’ custom benchmarks: S&P 500 Index, S&P 400 Index, S&P 600 Index, Barclays Capital US Aggregate Index, Citigroup 3-Month Treasury Bill Index, Barclays Capital US Treasury TIPS Index, MSCI ACWI ex US IMI Index and FTSE EPRA/NAREIT Developed Real Estate Index.

15

Disclosure of Expenses

Shareholders of each LifePath Portfolio may incur operating expenses, including advisory fees, distribution or 12b-1 fees, and other portfolio expenses. The expense examples shown below (which are based on a hypothetical investment of $1,000 invested on July 1, 2010 and held through December 31, 2010) are intended to assist shareholders both in calculating expenses based on an investment in a LifePath Portfolio and in comparing these expenses with similar costs of investing in other mutual funds.

The tables 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 share class under the heading entitled “Expenses Paid During the Period.”

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

The expenses shown in the tables are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, redemption fees or exchange fees. 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.

Expense Examples

	Actual						Hypothetical2
	Beginning Account Value July 1, 2010		Ending Account Value December 31, 2010		Expenses Paid During the Period1		Beginning Account Value July 1, 2010		Ending Account Value December  31, 2010		Expenses Paid During the Period1		Annualized Expense Ratio
LifePath® 2025 Portfolio
Institutional		$1,000.00		$1,174.00		$4.00		$1,000.00		$1,021.50		$3.72		0.73%
Investor A		$1,000.00		$1,172.60		$5.37		$1,000.00		$1,020.30		$4.99		0.98%
Investor C		$1,000.00		$1,168.40		$9.40		$1,000.00		$1,016.50		$8.74		1.72%
Class K		$1,000.00		$1,176.00		$2.08		$1,000.00		$1,023.30		$1.94		0.38%
Class R		$1,000.00		$1,171.20		$6.73		$1,000.00		$1,019.00		$6.26		1.23%
LifePath® 2035 Portfolio
Institutional		$1,000.00		$1,209.60		$3.95		$1,000.00		$1,021.60		$3.62		0.71%
Investor A		$1,000.00		$1,207.40		$5.34		$1,000.00		$1,020.40		$4.89		0.96%
Investor C		$1,000.00		$1,203.00		$9.44		$1,000.00		$1,016.60		$8.64		1.70%
Class K		$1,000.00		$1,211.60		$2.01		$1,000.00		$1,023.40		$1.84		0.36%
Class R		$1,000.00		$1,206.70		$6.79		$1,000.00		$1,019.10		$6.21		1.22%

16

LifePath® 2045 Portfolio
Institutional	$1,000.00	$1,240.10	$3.84	$1,000.00	$1,021.80	$3.47	0.68%
Investor A	$1,000.00	$1,238.60	$5.25	$1,000.00	$1,020.50	$4.74	0.93%
Investor C	$1,000.00	$1,233.30	$9.51	$1,000.00	$1,016.70	$8.59	1.69%
Class K	$1,000.00	$1,242.20	$1.87	$1,000.00	$1,023.50	$1.68	0.33%
Class R	$1,000.00	$1,236.80	$6.71	$1,000.00	$1,019.20	$6.06	1.19%
LifePath® 2055 Portfolio
Institutional	$1,000.00	$1,255.80	$3.75	$1,000.00	$1,021.90	$3.36	0.66%
Investor A	$1,000.00	$1,255.00	$5.17	$1,000.00	$1,020.60	$4.63	0.91%
Investor C	$1,000.00	$1,249.80	$9.47	$1,000.00	$1,016.80	$8.49	1.67%
Class K	$1,000.00	$1,258.40	$1.76	$1,000.00	$1,023.60	$1.58	0.31%
Class R	$1,000.00	$1,253.30	$6.59	$1,000.00	$1,019.40	$5.90	1.16%

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

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

17

Statements of Assets and Liabilities BlackRock Funds III

December 31, 2010	LifePath 2025 Portfolio			LifePath 2035 Portfolio			LifePath 2045 Portfolio			LifePath 2055 Portfolio
Assets
Investments at value – from the applicable Master Portfolio	$	122,774		$	137,201		$	129,390		$	131,004
Total assets		122,774			137,201			129,390			131,004
Liabilities
Income dividends payable		730			760			829			854
Administration fees payable		42			45			45			45
Capital gain distributions payable		4,223			4,775			6,018			6,141
Service and distribution fees payable		35			36			36			36
Professional fees payable		5,481			5,481			5,481			5,481
Total liabilities		10,511			11,097			12,409			12,557
Net Assets	$	112,263		$	126,104		$	116,981		$	118,447
Net Assets Consist of
Paid-in capital	$	100,185		$	111,168		$	100,051		$	100,010
Undistributed (distributions in excess of) net investment income		6			(6	)		(6	)		3
Accumulated net realized loss		(4,019	)		(4,803	)		(5,307	)		(5,269	)
Net unrealized appreciation/depreciation		16,091			19,745			22,243			23,703
Net Assets	$	112,263		$	126,104		$	116,981		$	118,447
Net Asset Value
Institutional:
Net assets	$	22,469		$	23,067		$	23,414		$	23,708
Shares outstanding, unlimited number of shares authorized, no par value		2,005			2,003			2,001			2,000
Net asset value	$	11.21		$	11.52		$	11.70		$	11.85
Investor A:
Net assets	$	22,454		$	27,086		$	23,399		$	23,691
Shares outstanding, unlimited number of shares authorized, no par value		2,004			2,352			2,000			2,000
Net asset value	$	11.21	1	$	11.51		$	11.70		$	11.85
Maximum offering price per share (100/94.75 of net asset value)	$	11.83		$	12.15		$	12.35		$	12.51

See Notes to Financial Statements.

18

Investor C:
Net assets	$	22,411	$	29,824	$	23,349	$	23,642
Shares outstanding, unlimited number of shares authorized, no par value		2,000		2,595		2,000		2,000
Net asset value	$	11.21	$	11.49	$	11.67	$	11.82
Class K:
Net assets	$	22,489	$	23,089	$	23,436	$	23,731
Shares outstanding, unlimited number of shares authorized, no par value		2,006		2,004		2,003		2,001
Net asset value	$	11.21	$	11.52	$	11.70	$	11.86
Class R:
Net assets	$	22,440	$	23,038	$	23,383	$	23,675
Shares outstanding, unlimited number of shares authorized, no par value		2,002		2,000		2,000		2,000
Net asset value	$	11.21	$	11.52	$	11.69	$	11.84

¹ The net asset value is calculated based on net assets of $22,454.18 and shares outstanding of 2,003.519.

See Notes to Financial Statements.

19

Statements of Operations BlackRock Funds III

Period Ended December 31, 2010	LifePath 2025 Portfolio1			LifePath 2035 Portfolio1			LifePath 2045 Portfolio1			LifePath 2055 Portfolio1
Investment Income
Net investment income allocated from the applicable Master Portfolio:
Dividends	$	920		$	1,142		$	1,265		$	1,353
Interest		550			341			153			46
Income – affiliated		2			2			2			3
Expenses2		(124	)		(118	)		(104	)		(93	)
Total income		1,348			1,367			1,316			1,309
Expenses
Administration		237			246			244			246
Service – Investor A		28			30			29			29
Service and distribution – Investor C		111			113			114			115
Service and distribution – Class R		56			56			57			57
Professional		5,481			5,481			5,481			5,481
Total expenses		5,913			5,926			5,925			5,928
Less fees waived by administrator		(5,481	)		(5,481	)		(5,481	)		(5,481	)
Total expenses after fees waived		432			445			444			447
Net investment income		916			922			872			862
Realized and Unrealized Gain Allocated from the Master Portfolios
Net realized gain from investments, financial futures contracts and swaps		210			405			712			878
Net change in unrealized appreciation/depreciation on investments, financial futures contracts and swaps		16,091			19,745			22,243			23,703
Total realized and unrealized gain		16,301			20,150			22,955			24,581
Net Increase in Net Assets Resulting from Operations	$	17,217		$	21,072		$	23,827		$	25,443

¹ For the period from June 30, 2010 (commencement of operations) to December 31, 2010.

² Net of fees waived of $7,595, $7,603, $7,606 and $7,606, respectively.

See Notes to Financial Statements.

20

Statements of Changes in Net Assets BlackRock Funds III

	LifePath 2025 Portfolio				LifePath 2035 Portfolio
Increase (Decrease) in Net Assets:	Period June 30, 20101 to December 31,  2010				Period June 30, 20101 to December 31,  2010
Operations
Net investment income		$	916			$	922
Net realized gain			210				405
Net change in unrealized appreciation/depreciation			16,091				19,745
Net increase in net assets resulting from operations			17,217				21,072
Dividends and Distributions to Shareholders From
Net investment income:
Institutional			(214	)			(196	)
Investor A			(186	)			(200	)
Investor C			(105	)			(161	)
Class K			(253	)			(235	)
Class R			(159	)			(139	)
Net realized gain:
Institutional			(845	)			(955	)
Investor A			(845	)			(1,115	)
Investor C			(843	)			(1,225	)
Class K			(846	)			(956	)
Class R			(844	)			(954	)
Decrease in net assets resulting from dividends and distributions to shareholders			(5,140	)			(6,136	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions			100,186				111,168
Net Assets
Total increase in net assets			112,263				126,104
Beginning of period			–				–
End of period		$	112,263			$	126,104
Undistributed (distributions in excess of) net investment income		$	6			$	(6	)

¹ Commencement of operations.

See Notes to Financial Statements.

21

Statements of Changes in Net Assets (concluded) BlackRock Funds III

	LifePath 2045 Portfolio				LifePath 2055 Portfolio
Increase (Decrease) in Net Assets:	Period June 30, 20101 to December 31, 2010				Period June 30, 20101 to December 31,  2010
Operations
Net investment income		$	872			$	862
Net realized gain			712				878
Net change in unrealized appreciation/depreciation			22,243				23,703
Net increase in net assets resulting from operations			23,827				25,443
Dividends and Distributions to Shareholders From
Net investment income:
Institutional			(197	)			(188	)
Investor A			(169	)			(173	)
Investor C			(123	)			(128	)
Class K			(237	)			(218	)
Class R			(153	)			(158	)
Net realized gain:
Institutional			(1,204	)			(1,228	)
Investor A			(1,203	)			(1,228	)
Investor C			(1,203	)			(1,228	)
Class K			(1,205	)			(1,229	)
Class R			(1,203	)			(1,228	)
Decrease in net assets resulting from dividends and distributions to shareholders			(6,897	)			(7,006	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions			100,051				100,010
Net Assets
Total increase in net assets			116,981				118,447
Beginning of period			–				–
End of period		$	116,981			$	118,447
Undistributed (distributions in excess of) net investment income		$	(6	)		$	3

¹ Commencement of operations.

See Notes to Financial Statements.

22

Financial Highlights LifePath 2025 Portfolio

	Institutional
	Period June 30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.11
Net realized and unrealized gain			1.63
Net increase from investment operations			1.74
Dividends and distributions from:
Net investment income			(0.11	)
Net realized gain			(0.42	)
Total dividends and distributions			(0.53	)
Net asset value, end of period		$	11.21
Total Investment Return3,4
Based on net asset value			17.40	%
Ratios to Average Net Assets5,6
Total expenses			24.41	%
Total expenses after fees waived			0.73	%
Net investment income			1.93	%
Supplemental Data
Net assets, end of period (000)		$	22
Portfolio turnover of the Master Portfolio			2	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

23

Financial Highlights (continued) LifePath 2025 Portfolio

	Investor A
	Period June 30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.09
Net realized and unrealized gain			1.63
Net increase from investment operations			1.72
Dividends and distributions from:
Net investment income			(0.09	)
Net realized gain			(0.42	)
Total dividends and distributions			(0.51	)
Net asset value, end of period		$	11.21
Total Investment Return3,4
Based on net asset value			17.26	%
Ratios to Average Net Assets5,6
Total expenses			24.68	%
Total expenses after fees waived			0.98	%
Net investment income			1.67	%
Supplemental Data
Net assets, end of period (000)		$	22
Portfolio turnover of the Master Portfolio			2	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

24

Financial Highlights (continued) LifePath 2025 Portfolio

	Investor C
	Period June 30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.05
Net realized and unrealized gain			1.63
Net increase from investment operations			1.68
Dividends and distributions from:
Net investment income			(0.05	)
Net realized gain			(0.42	)
Total dividends and distributions			(0.47	)
Net asset value, end of period		$	11.21
Total Investment Return3,4
Based on net asset value			16.84	%
Ratios to Average Net Assets5,6
Total expenses			25.46	%
Total expenses after fees waived			1.72	%
Net investment income			0.95	%
Supplemental Data
Net assets, end of period (000)		$	22
Portfolio turnover of the Master Portfolio			2	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

25

Financial Highlights (continued) LifePath 2025 Portfolio

	Class K
	Period June 30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.13
Net realized and unrealized gain			1.63
Net increase from investment operations			1.76
Dividends and distributions from:
Net investment income			(0.13	)
Net realized gain			(0.42	)
Total dividends and distributions			(0.55	)
Net asset value, end of period		$	11.21
Total Investment Return3,4
Based on net asset value			17.60	%
Ratios to Average Net Assets5,6
Total expenses			24.05	%
Total expenses after fees waived			0.38	%
Net investment income			2.29	%
Supplemental Data
Net assets, end of period (000)		$	22
Portfolio turnover of the Master Portfolio			2	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

26

Financial Highlights (concluded) LifePath 2025 Portfolio

	Class R
	Period June 30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.08
Net realized and unrealized gain			1.63
Net increase from investment operations			1.71
Dividends and distributions from:
Net investment income			(0.08	)
Net realized gain			(0.42	)
Total dividends and distributions			(0.50	)
Net asset value, end of period		$	11.21
Total Investment Return3,4
Based on net asset value			17.12	%
Ratios to Average Net Assets5,6
Total expenses			24.94	%
Total expenses after fees waived			1.23	%
Net investment income			1.43	%
Supplemental Data
Net assets, end of period (000)		$	22
Portfolio turnover of the Master Portfolio			2	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

27

Financial Highlights LifePath 2025 Portfolio

	Institutional
	Period June 30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.11
Net realized and unrealized gain			1.99
Net increase from investment operations			2.10
Dividends and distributions from:
Net investment income			(0.10	)
Net realized gain			(0.48	)
Total dividends and distributions			(0.58	)
Net asset value, end of period		$	11.52
Total Investment Return3,4
Based on net asset value			20.96	%
Ratios to Average Net Assets5,6
Total expenses			24.07	%
Total expenses after fees waived			0.71	%
Net investment income			1.88	%
Supplemental Data
Net assets, end of period (000)		$	23
Portfolio turnover of the Master Portfolio			1	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

28

Financial Highlights (continued) LifePath 2035 Portfolio

	Investor A
	Period June  30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.10
Net realized and unrealized gain			1.98
Net increase from investment operations			2.08
Dividends and distributions from:
Net investment income			(0.09	)
Net realized gain			(0.48	)
Total dividends and distributions			(0.57	)
Net asset value, end of period		$	11.51
Total Investment Return3,4
Based on net asset value			20.74	%
Ratios to Average Net Assets5,6
Total expenses			22.59	%
Total expenses after fees waived			0.96	%
Net investment income			1.71	%
Supplemental Data
Net assets, end of period (000)		$	27
Portfolio turnover of the Master Portfolio			1	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

29

Financial Highlights (continued) LifePath 2035 Portfolio

	Investor C
	Period June  30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.05
Net realized and unrealized gain			1.98
Net increase from investment operations			2.03
Dividends and distributions from:
Net investment income			(0.06	)
Net realized gain			(0.48	)
Total dividends and distributions			(0.54	)
Net asset value, end of period		$	11.49
Total Investment Return3,4
Based on net asset value			20.30	%
Ratios to Average Net Assets5,6
Total expenses			25.11	%
Total expenses after fees waived			1.70	%
Net investment income			0.89	%
Supplemental Data
Net assets, end of period (000)		$	30
Portfolio turnover of the Master Portfolio			1	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

30

Financial Highlights (continued) LifePath 2035 Portfolio

	Class K
	Period June  30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.13
Net realized and unrealized gain			1.99
Net increase from investment operations			2.12
Dividends and distributions from:
Net investment income			(0.12	)
Net realized gain			(0.48	)
Total dividends and distributions			(0.60	)
Net asset value, end of period		$	11.52
Total Investment Return3,4
Based on net asset value			21.16	%
Ratios to Average Net Assets5,6
Total expenses			23.70	%
Total expenses after fees waived			0.36	%
Net investment income			2.23	%
Supplemental Data
Net assets, end of period (000)		$	23
Portfolio turnover of the Master Portfolio			1	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

31

Financial Highlights (concluded) LifePath 2035 Portfolio

	Class R
	Period June  30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.08
Net realized and unrealized gain			1.99
Net increase from investment operations			2.07
Dividends and distributions from:
Net investment income			(0.07	)
Net realized gain			(0.48	)
Total dividends and distributions			(0.55	)
Net asset value, end of period		$	11.52
Total Investment Return3,4
Based on net asset value			20.67	%
Ratios to Average Net Assets5,6
Total expenses			24.60	%
Total expenses after fees waived			1.22	%
Net investment income			1.39	%
Supplemental Data
Net assets, end of period (000)		$	23
Portfolio turnover of the Master Portfolio			1	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

32

Financial Highlights LifePath 2045 Portfolio

	Institutional
	Period June  30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.10
Net realized and unrealized gain			2.30
Net increase from investment operations			2.40
Dividends and distributions from:
Net investment income			(0.10	)
Net realized gain			(0.60	)
Total dividends and distributions			(0.70	)
Net asset value, end of period		$	11.70
Total Investment Return3,4
Based on net asset value			24.01	%
Ratios to Average Net Assets5,6
Total expenses			23.73	%
Total expenses after fees waived			0.68	%
Net investment income			1.81	%
Supplemental Data
Net assets, end of period (000)		$	23
Portfolio turnover of the Master Portfolio			1	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

33

Financial Highlights (continued) LifePath 2045 Portfolio

	Investor A
	Period June  30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.09
Net realized and unrealized gain			2.29
Net increase from investment operations			2.38
Dividends and distributions from:
Net investment income			(0.08	)
Net realized gain			(0.60	)
Total dividends and distributions			(0.68	)
Net asset value, end of period		$	11.70
Total Investment Return3,4
Based on net asset value			23.86	%
Ratios to Average Net Assets5,6
Total expenses			24.00	%
Total expenses after fees waived			0.93	%
Net investment income			1.56	%
Supplemental Data
Net assets, end of period (000)		$	23
Portfolio turnover of the Master Portfolio			1	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

34

Financial Highlights (continued) LifePath 2045 Portfolio

	Investor C
	Period June  30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.05
Net realized and unrealized gain			2.28
Net increase from investment operations			2.33
Dividends and distributions from:
Net investment income			(0.06	)
Net realized gain			(0.60	)
Total dividends and distributions			(0.66	)
Net asset value, end of period		$	11.67
Total Investment Return3,4
Based on net asset value			23.33	%
Ratios to Average Net Assets5,6
Total expenses			24.78	%
Total expenses after fees waived			1.69	%
Net investment income			0.81	%
Supplemental Data
Net assets, end of period (000)		$	23
Portfolio turnover of the Master Portfolio			1	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

35

Financial Highlights (continued) LifePath 2045 Portfolio

	Class K
	Period June  30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.12
Net realized and unrealized gain			2.30
Net increase from investment operations			2.42
Dividends and distributions from:
Net investment income			(0.12	)
Net realized gain			(0.60	)
Total dividends and distributions			(0.72	)
Net asset value, end of period		$	11.70
Total Investment Return3,4
Based on net asset value			24.22	%
Ratios to Average Net Assets5,6
Total expenses			23.37	%
Total expenses after fees waived			0.33	%
Net investment income			2.17	%
Supplemental Data
Net assets, end of period (000)		$	23
Portfolio turnover of the Master Portfolio			1	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

36

Financial Highlights (continued) LifePath 2045 Portfolio

	Class R
	Period June 30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.07
Net realized and unrealized gain			2.30
Net increase from investment operations			2.37
Dividends and distributions from:
Net investment income			(0.08	)
Net realized gain			(0.60	)
Total dividends and distributions			(0.68	)
Net asset value, end of period		$	11.69
Total Investment Return3,4
Based on net asset value			23.68	%
Ratios to Average Net Assets5,6
Total expenses			24.26	%
Total expenses after fees waived			1.19	%
Net investment income			1.31	%
Supplemental Data
Net assets, end of period (000)		$	23
Portfolio turnover of the Master Portfolio			1	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

37

Financial Highlights (continued) LifePath 2045 Portfolio

	Institutional
	Period June  30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.10
Net realized and unrealized gain			2.45
Net increase from investment operations			2.55
Dividends and distributions from:
Net investment income			(0.09	)
Net realized gain			(0.61	)
Total dividends and distributions			(0.70	)
Net asset value, end of period		$	11.85
Total Investment Return3,4
Based on net asset value			25.58	%
Ratios to Average Net Assets5,6
Total expenses			23.56	%
Total expenses after fees waived			0.66	%
Net investment income			1.78	%
Supplemental Data
Net assets, end of period (000)		$	24
Portfolio turnover of the Master Portfolio			1	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

38

Financial Highlights (continued) LifePath 2055 Portfolio

	Investor A
	Period June  30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.09
Net realized and unrealized gain			2.46
Net increase from investment operations			2.55
Dividends and distributions from:
Net investment income			(0.09	)
Net realized gain			(0.61	)
Total dividends and distributions			(0.70	)
Net asset value, end of period		$	11.85
Total Investment Return3,4
Based on net asset value			25.50	%
Ratios to Average Net Assets5,6
Total expenses			23.83	%
Total expenses after fees waived			0.91	%
Net investment income			1.53	%
Supplemental Data
Net assets, end of period (000)		$	24
Portfolio turnover of the Master Portfolio			1	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

39

Financial Highlights (continued) LifePath 2055 Portfolio

	Investor C
	Period June  30, 20101 to December  31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.04
Net realized and unrealized gain			2.45
Net increase from investment operations			2.49
Dividends and distributions from:
Net investment income			(0.06	)
Net realized gain			(0.61	)
Total dividends and distributions			(0.67	)
Net asset value, end of period		$	11.82
Total Investment Return3,4
Based on net asset value			24.98	%
Ratios to Average Net Assets5,6
Total expenses			24.62	%
Total expenses after fees waived			1.67	%
Net investment income			0.78	%
Supplemental Data
Net assets, end of period (000)		$	24
Portfolio turnover of the Master Portfolio			1	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

40

Financial Highlights (continued) LifePath 2055 Portfolio

	Class K
	Period June  30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.12
Net realized and unrealized gain			2.46
Net increase from investment operations			2.58
Dividends and distributions from:
Net investment income			(0.11	)
Net realized gain			(0.61	)
Total dividends and distributions			(0.72	)
Net asset value, end of period		$	11.86
Total Investment Return3,4
Based on net asset value			25.84	%
Ratios to Average Net Assets5,6
Total expenses			23.20	%
Total expenses after fees waived			0.31	%
Net investment income			2.14	%
Supplemental Data
Net assets, end of period (000)		$	24
Portfolio turnover of the Master Portfolio			1	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

41

Financial Highlights (concluded) LifePath 2055 Portfolio

	Class R
	Period June  30, 20101 to December 31, 2010
Per Share Operating Performance
Net asset value, beginning of period		$	10.00
Net investment income2			0.07
Net realized and unrealized gain			2.46
Net increase from investment operations			2.53
Dividends and distributions from:
Net investment income			(0.08	)
Net realized gain			(0.61	)
Total dividends and distributions			(0.69	)
Net asset value, end of period		$	11.84
Total Investment Return3,4
Based on net asset value			25.33	%
Ratios to Average Net Assets5,6
Total expenses			24.09	%
Total expenses after fees waived			1.16	%
Net investment income			1.29	%
Supplemental Data
Net assets, end of period (000)		$	24
Portfolio turnover of the Master Portfolio			1	%

¹ Commencement of operations.

² Based on average shares outstanding.

³ Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴ Aggregate total investment return.

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

⁶ Annualized.

See Notes to Financial Statements.

42

Notes to Financial Statements BlackRock Funds III

1. Organization and Significant Accounting Policies:

BlackRock Funds III (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. The Trust is organized as a Delaware statutory trust. The LifePath Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The financial statements and these accompanying notes relate to four series of the Trust: LifePath 2025 Portfolio, LifePath 2035 Portfolio, LifePath 2045 Portfolio and LifePath 2055 Portfolio (each, a “LifePath Portfolio” and collectively, the “LifePath Portfolios”). The LifePath Portfolios commenced operations on June 30, 2010. Each LifePath Portfolio seeks to achieve its investment objective by investing substantially all of its assets in a separate series of Master Investment Portfolio (“MIP”): LifePath 2025 Master Portfolio, LifePath 2035 Master Portfolio, LifePath 2045 Master Portfolio and LifePath 2055 Master Portfolio (each, a “Master Portfolio” and collectively, the “Master Portfolios”). The Master Portfolios commenced operations on June 30, 2010. Each Master Portfolio has the same or substantially similar investment objective as its corresponding LifePath Portfolio. The performance of a LifePath Portfolio is directly affected by the performance of its corresponding Master Portfolio.

The value of each LifePath Portfolio’s investment in its corresponding Master Portfolio reflects that LifePath Portfolio’s interest in the net assets of that Master Portfolio (91.29%, 91.92%, 91.28% and 91.28% for the LifePath 2025 Portfolio, LifePath 2035 Portfolio, LifePath 2045 Portfolio and LifePath 2055 Portfolio, respectively, as of December 31, 2010).

Each LifePath Portfolio offers multiple classes of shares. Institutional and Class K Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally sold with a front-end sales charge. Investor C Shares may be subject to a contingent deferred sales charge. Class R Shares are sold without a sales charge and only to certain retirement or similar plans. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Investor A, Investor C and Class R Shares bear certain expenses related to the shareholder servicing of such shares, and Investor C and Class R Shares also bear certain expenses related to the distribution of such shares. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures.

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

Valuation: The LifePath Portfolios fair value their financial instruments at market value. The LifePath Portfolios record their investments in the Master Portfolio at fair value

43

Notes to Financial Statements (continued) BlackRock Funds III

based on the LifePath Portfolio’s proportionate interest in the net assets of the Master Portfolio. Valuation of securities held by the Master Portfolio, including categorization of fair value measurements, is discussed in Note 1 of the Master Portfolios’ Notes to Financial Statements, which are included elsewhere in this report.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions in the Master Portfolios are recorded on the dates the transactions are entered into (the trade dates). Each LifePath Portfolio records daily its proportionate share of its Master Portfolio’s income, expenses and realized and unrealized gains and losses. In addition, each LifePath Portfolio accrues its own expenses. Income and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Dividends and Distributions: Dividends from net investment income are declared and paid quarterly. Distributions of capital gains are recorded on the ex-dividend dates. If the total dividends and distributions made in any tax year exceeds net investment income and accumulated realized capital gains, a portion of the total distribution may be treated as a tax return of capital. The amount and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

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

The LifePath Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

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

2. Administration Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”), Bank of America Corporation (“BAC”) and Barclays Bank PLC (“Barclays”) are the largest stockholders of BlackRock, Inc. (“BlackRock”). Due to the ownership structure, PNC is an affiliate of the Portfolios for 1940 Act purposes, but BAC and Barclays are not.

The Trust entered into an administration services arrangement with BlackRock Institutional Trust Company, N.A. (“BTC”), which has agreed to provide general administration services (other than investment advice and related portfolio activities).

44

Notes to Financial Statements (continued) BlackRock Funds III

BTC, in consideration thereof, has agreed to bear all of the LifePath Portfolios’ ordinary operating expenses, excluding, generally, investment advisory fees, 12b-1 distribution and service fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the Portfolios. BTC is entitled to receive for these administration services an annual fee of 0.50% of the average daily net assets of each LifePath Portfolio’s Institutional, Investor A, Investor C and Class R Shares and 0.15% of the average daily net assets of the Class K Shares.

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

The fees of the Trust’s independent registered public accounting firm and legal counsel, (the “independent expenses”) are paid directly by the LifePath Portfolios. BTC has contractually agreed to provide an offsetting credit against the administration fees paid by the Portfolios in an amount equal to the independent expenses through April 30, 2012. These amounts are included in fees waived by administrator in the Statement of Operations.

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

	Service Fee			Distribution Fee
Investor A		0.25	%		–
Investor C		0.25	%		0.75	%
Class R		0.25	%		0.25	%

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

For the year ended December 31, 2010, affiliates earned underwriting discounts, direct commissions and/or dealer concessions on sales of LifePath 2035 Portfolio Investor A Shares of $7.

BNY Mellon Investment Servicing (US) Inc. (formerly PNC Global Investment Servicing (U.S.) Inc. (“PNCGIS”)), serves as transfer agent and dividend disbursing

45

Notes to Financial Statements (continued) BlackRock Funds III

agent. On July 1, 2010, the Bank of New York Mellon Corporation purchased PNCGIS, which prior to this date were indirect, wholly owned subsidiaries of PNC and affiliates of BTC. Transfer agency fees paid by BTC to PNCGIS are comprised of those fees charged for all shareholder communications including mailing of shareholder reports, dividend and distribution notices, and proxy materials for shareholder meetings, as well as per account and per transaction fees related to servicing and maintence of shareholder accounts, including the issuing, redeeming and transferring of shares, check writing, anti-money laundering services, and customer identification services.

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

3. Income Tax Information:

Reclassifications: US GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. The following permanent differences as of December 31, 2010 attributable to the reclassification of distributions, distributions paid in excess of taxable income and the timing and recognition of partnership income were reclassified to the following accounts:

	LifePath 2025 Portfolio				LifePath 2035 Portfolio				LifePath 2045 Portfolio				LifePath 2055 Portfolio
Paid-in capital		$	(1	)		$	–			$	–			$	–
Undistributed (distributions in excess of) net investment income		$	7			$	3			$	1			$	6
Accumulated net realized gain (loss)		$	(6	)		$	(3	)		$	(1	)		$	(6	)

The tax character of distributions paid during the period ended December 31, 2010 were as follows:

	LifePath 2025 Portfolio			LifePath 2035 Portfolio			LifePath 2045 Portfolio			LifePath 2055 Portfolio
Ordinary Income
12/31/2010		$	2,762		$	3,186		$	3,512		$	3,538
Net long-term capital gains
12/31/2010		$	2,378		$	2,950		$	3,385		$	3,468
Total distributions
12/31/2010		$	5,140		$	6,136		$	6,897		$	7,006

46

Notes to Financial Statements (continued) BlackRock Funds III

As of December 31, 2010, the tax components of net undistributed earnings were as follows:

	LifePath 2025 Portfolio			LifePath 2035 Portfolio			LifePath 2045 Portfolio			LifePath 2055 Portfolio
Undistributed ordinary income		$	–		$	1		$	118		$	288
Undistributed Long Term Capital
Gains			28			16			219			259
Net unrealized gains*			12,050			14,919			16,593			17,890
Total		$	12,078		$	14,936		$	16,930		$	18,437

* The differences between book-basis and tax-basis net unrealized gains were attributable primarily to the timing and recognition of partnership income.

4. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

47

Notes to Financial Statements (continued)

	Period Ended December 31,20101
LifePath 2025 Portfolio	Shares		Amount
Institutional
Shares sold		2,000		$	20,000
Shares issued to shareholders in reinvestment of dividends and distributions		5			52
Total issued		2,005			20,052
Net increase		2,005		$	20,052
Investor A
Shares sold		2,000		$	20,000
Shares issued to shareholders in reinvestment of dividends and distributions		4			39
Total issued		2,004			20,039
Net increase		2,004		$	20,039
Investor C
Shares sold		2,000		$	20,000
Total issued		2,000			20,000
Net increase		2,000		$	20,000
Class K
Shares sold		2,000		$	20,000
Shares issued to shareholders in reinvestment of dividends and distributions		6			70
Total issued		2,006			20,070
Net increase		2,006		$	20,070
Class R
Shares sold		2,000		$	20,000
Shares issued to shareholders in reinvestment of dividends and distributions		2			25
Total issued		2,002			20,025
Net increase		2,002		$	20,025

¹ For the period from June 30, 2010 (commencement of operations) to December 31, 2010.

48

Notes to Financial Statements (continued)

	Period Ended December 31,20101
LifePath 2035 Portfolio	Shares			Amount
Institutional
Shares sold		2,000			$	20,000
Shares issued to shareholders in reinvestment of dividends and distributions		3				31
Total issued		2,003				20,031
Net increase		2,003			$	20,031
Investor A
Shares sold		2,337			$	23,769
Shares issued to shareholders in reinvestment of dividends and distributions		18				209
Total issued		2,355				23,978
Shares redeemed		(3	)			(30	)
Net increase		2,352			$	23,948
Investor C
Shares sold		2,568			$	26,828
Shares issued to shareholders in reinvestment of dividends and distributions		27				307
Total issued		2,595				27,135
Net increase		2,595			$	27,135
Class K
Shares sold		2,000			$	20,000
Shares issued to shareholders in reinvestment of dividends and distributions		4				50
Total issued		2,004				20,050
Net increase		2,004			$	20,050
Class R
Shares sold		2,000			$	20,000
Shares issued to shareholders in reinvestment of dividends and distributions		0	2			4
Total issued		2,000				20,004
Net increase		2,000			$	20,004

¹ For the period from June 30, 2010 (commencement of operations) to December 31, 2010.

² Rounds to less than 1.

49

Notes to Financial Statements (continued)

	Period Ended December 31, 20101
LifePath 2045 Portfolio	Shares			Amount
Institutional
Shares sold		2,000			$	20,000
Shares issued to shareholders in reinvestment of dividends and distributions		1				15
Total issued		2,001				20,015
Net increase		2,001			$	20,015
Investor A
Shares sold		2,000			$	20,000
Shares issued to shareholders in reinvestment of dividends and distributions		0	2			2
Total issued		2,000				20,002
Net increase		2,000			$	20,002
Investor C
Shares sold		2,000			$	20,000
Total issued		2,000				20,000
Net increase		2,000			$	20,000
Class K
Shares sold		2,000			$	20,000
Shares issued to shareholders in reinvestment of dividends and distributions		3				34
Total issued		2,003				20,034
Net increase		2,003			$	20,034
Class R
Shares sold		2,000			$	20,000
Total issued		2,000				20,000
Net increase		2,000			$	20,000

¹ For the period from June 30, 2010 (commencement of operations) to December 31, 2010.

² Rounds to less than 1.

50

Notes to Financial Statements (continued)

	Period Ended December 31, 20101
LifePath 2055 Portfolio	Shares		Amount
Institutional
Shares sold		2,000		$	20,000
Total issued		2,000			20,000
Net increase		2,000		$	20,000
Investor A
Shares sold		2,000		$	20,000
Total issued		2,000			20,000
Net increase		2,000		$	20,000
Investor C
Shares sold		2,000		$	20,000
Total issued		2,000			20,000
Net increase		2,000		$	20,000
Class K
Shares sold		2,000		$	20,000
Shares issued to shareholders in reinvestment of dividends and distributions		1			10
Total issued		2,001			20,010
Net increase		2,001		$	20,010
Class R
Shares sold		2,000		$	20,000
Total issued		2,000			20,000
Net increase		2,000		$	20,000

¹ For the period from June 30, 2010 (commencement of operations) to December 31, 2010.

51

Notes to Financial Statements (continued)

5. Subsequent Events:

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

52

Report Of Independent Registered Public Accounting Firm

To the Shareholders and Board of Trustees of BlackRock Funds III:

In our opinion, the accompanying statements of assets and liabilities, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of LifePath 2025 Portfolio, LifePath 2035 Portfolio, LifePath 2045 Portfolio and LifePath 2055 Portfolio, each a series of BlackRock Funds III (the “Trust”), at December 31, 2010, the results of each of their operations, the changes in each of their net assets and the financial highlights for the period June 30, 2010 (commencement of operations) to December 31, 2010, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

PricewaterhouseCoopers LLP New York, New York February 24, 2011

Important Tax Information (Unaudited)

The following information is provided with respect to the distributions paid during the tax year ended December 31, 2010.

	Payable Date / Period	LifePath 2025 Portfolio				LifePath 2035 Portfolio				LifePath 2045 Portfolio				LifePath 2055 Portfolio
Qualified Dividend Income for Individuals *	10/01/10			23.21	%			25.53	%			26.20	%			27.85	%
	1/3/11			23.21	%			25.53	%			26.20	%			27.85	%
Dividends Qualifying for the Dividend Received Deduction for Corporations *	10/01/10			12.53	%			13.34	%			13.70	%			14.28	%
	1/3/11			12.53	%			13.34	%			13.70	%			14.28	%
Interest Related Dividends and Qualified Short-Term Capital Gains for Non-U.S. Residents **	10/01/10			22.87	%			42.86	%			92.43	%			100.00	%
	1/3/2011			81.40	%			83.25	%			85.64	%			85.95	%
Long-Term Capital Gains Distributions per Share	1/3/2011		$	0.237398			$	0.270346			$	0.338350			$	0.346770

* Expressed as a percentage of the ordinary income distributions. The LifePath Portfolios hereby designate the percentages indicated above or the maximum amount allowable by law.

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

53

Master Portfolio Information as of December 31, 2010 Master Investment Portfolio

LifePath 2025 Master Portfolio

Portfolio Composition	Percent of Affiliated Investment Companies
Equity Funds		69	%
Fixed Income Funds		31	%

Portfolio Holdings	Percent of Affiliated Investment Companies
Active Stock Master Portfolio		36	%
CoreAlpha Bond Master Portfolio		27
iShares MSCI EAFE Index Fund		12
iShares S&P MidCap 400 Index Fund		6
iShares MSCI Emerging Markets Index Fund		5
iShares Barclays TIPS Bond Fund		4
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		3
iShares S&P SmallCap 600 Index Fund		3
iShares Cohen & Steers Realty Majors Index Fund		2
iShares MSCI EAFE Small Cap Index Fund		1
iShares MSCI Canada Index Fund		1

LifePath 2035 Master Portfolio

Portfolio Composition	Percent of Affiliated Investment Companies
Equity Funds		80	%
Fixed Income Funds		20	%

Portfolio Holdings	Percent of Affiliated Investment Companies
Active Stock Master Portfolio		42	%
CoreAlpha Bond Master Portfolio		17
iShares MSCI EAFE Index Fund		13
iShares S&P MidCap 400 Index Fund		6
iShares MSCI Emerging Markets Index Fund		5
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		4
iShares Cohen & Steers Realty Majors Index Fund		3
iShares S&P SmallCap 600 Index Fund		3
iShares Barclays TIPS Bond Fund		2
iShares MSCI EAFE Small Cap Index Fund		2
iShares MSCI Canada Index Fund		2
BlackRock Cash Funds: Institutional, SL Agency Shares		1

54

LifePath 2045 Master Portfolio

Portfolio Composition	Percent of Affiliated Investment Companies
Equity Funds		93	%
Fixed Income Funds		7	%

Portfolio Holdings	Percent of Affiliated Investment Companies
Active Stock Master Portfolio		49	%
iShares MSCI EAFE Index Fund		16
iShares S&P MidCap 400 Index Fund		7
CoreAlpha Bond Master Portfolio		6
iShares MSCI Emerging Markets Index Fund		6
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		5
iShares Cohen & Steers Realty Majors Index Fund		3
iShares S&P SmallCap 600 Index Fund		3
iShares MSCI EAFE Small Cap Index Fund		2
iShares MSCI Canada Index Fund		2
BlackRock Cash Funds: Institutional, SL Agency Shares		1

LifePath 2055 Master Portfolio

Portfolio Composition	Percent of Affiliated Investment Companies
Equity Funds		95	%
Fixed Income Funds		5	%

Portfolio Holdings	Percent of Affiliated Investment Companies
Active Stock Master Portfolio		48	%
iShares MSCI EAFE Index Fund		17
iShares S&P MidCap 400 Index Fund		8
iShares MSCI Emerging Markets Index Fund		7
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		5
BlackRock Cash Funds: Institutional, SL Agency Shares		4
iShares S&P SmallCap 600 Index Fund		3
iShares Cohen & Steers Realty Majors Index Fund		3
iShares MSCI Canada Index Fund		2
iShares MSCI EAFE Small Cap Index Fund		2
CoreAlpha Bond Master Portfolio		1

55

Schedule of Investments December 31, 2010	LifePath 2025 Master Portfolio
	(Percentages shown are based on Net Assets)

	Shares		Value
Affiliated Investment Companies
Master Portfolios - 66.1%
Active Stock Master Portfolio				$	50,786
CoreAlpha Bond Master Portfolio					38,127
Total Master Portfolios					88,913
Exchange-Traded Funds – 38.7%
iShares Barclays TIPS Bond Fund (a)		54			5,806
iShares Cohen & Steers Realty Majors Index Fund (a)		40			2,629
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund (a)		128			4,000
iShares MSCI Canada Index Fund (a)		68			2,108
iShares MSCI EAFE Index Fund (a)		283			16,479
iShares MSCI EAFE Small Cap Index Fund (a)		50			2,111
iShares MSCI Emerging Markets Index Fund (a)		138			6,572
iShares S&P MidCap 400 Index Fund (a)		93			8,434
iShares S&P SmallCap 600 Index Fund (a)		56			3,834
Total Exchange-Traded Funds (Cost – $43,132*)					51,973
Money Market Funds – 0.4%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.30% (a)(b)		595			595
Total Money Market Funds (Cost – $595*)					595
Total Affiliated Investment Companies – 105.2%					141,481
Liabilities in Excess of Other Assets – (5.2)%					(6,986	)
Net Assets – 100.0%				$	134,495

* The cost and unrealized appreciation (depreciation) of investments (excluding investments in the underlying Master Portfolios) as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	43,727
Gross unrealized appreciation	$	8,841
Gross unrealized depreciation		–
Net unrealized appreciation	$	8,841

(a) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, (excluding investments in the underlying Master Portfolios), were as follows:

Affiliate	Shares Purchased			Shares Sold			Shares Held at December 31, 2010		Value at December 31, 2010			Realized Gain			Income
BlackRock Cash Funds: Institutional, SL Agency Shares		595	1		–			595		$	595			–		$	2
iShares Barclays TIPS Bond Fund		55			(1	)		54		$	5,806		$	1		$	67
iShares Cohen & Steers Realty Majors Index Fund		40			–			40		$	2,629			–		$	39
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		128			–			128		$	4,000			–		$	139
iShares MSCI Canada Index Fund		68			–			68		$	2,108			–		$	22
iShares MSCI EAFE Index Fund		305			(22	)		283		$	16,479		$	117		$	152
iShares MSCI EAFE Small Cap Index Fund		50			–			50		$	2,111			–		$	46
iShares MSCI Emerging Markets Index Fund		143			(5	)		138		$	6,572		$	16		$	53
iShares S&P MidCap 400 Index Fund		101			(8	)		93		$	8,434		$	93		$	54
iShares S&P SmallCap 600 Index Fund		56			–			56		$	3,834			–		$	26

¹ Represents net activity.

56

Schedule of Investments December 31, 2010	LifePath 2025 Master Portfolio
	(Percentages shown are based on Net Assets)

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

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities.

• 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 Portfolio’s own assumptions used in determining the fair value of investments)

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments:

Valuation Inputs	Level 1			Level 2			Level 3		Total
Assets:
Investments in Securities:
Affiliated Investment Companies:
Master Portfolios			—		$	88,913		—		$	88,913
Exchange Traded Funds		$	51,973			—		—			51,973
Money Market Funds			595			—		—			595
Total		$	52,568		$	88,913		—		$	141,481

57

Schedule of Investments December 31, 2010	LifePath 2035 Master Portfolio
	(Percentages shown are based on Net Assets)

	Shares		Value
Affiliated Investment Companies
Master Portfolios – 62.4%
Active Stock Master Portfolio				$	66,212
CoreAlpha Bond Master Portfolio					26,920
Total Master Portfolios					93,132
Exchange-Traded Funds – 42.1%
iShares Barclays TIPS Bond Fund (a)		26			2,795
iShares Cohen & Steers Realty Majors Index Fund (a)		69			4,535
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund (a)		198			6,187
iShares MSCI Canada Index Fund (a)		87			2,697
iShares MSCI EAFE Index Fund (a)		359			20,905
iShares MSCI EAFE Small Cap Index Fund (a)		64			2,701
iShares MSCI Emerging Markets Index Fund (a)		185			8,810
iShares S&P MidCap 400 Index Fund (a)		107			9,704
iShares S&P SmallCap 600 Index Fund (a)		65			4,451
Total Exchange-Traded Funds (Cost – $51,930*)					62,785
Money Market Funds – 1.3%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.30% (a)(b)		1,969			1,969
Total Money Market Funds (Cost – $1,969*)					1,969
Total Affiliated Investment Companies – 105.8%					157,886
Liabilities in Excess of Other Assets – (5.8)%					(8,621	)
Net Assets – 100.0%				$	149,265

* The cost and unrealized appreciation (depreciation) of investments (excluding investments in the underlying Master Portfolios) as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	53,899
Gross unrealized appreciation	$	10,857
Gross unrealized depreciation		(2	)
Net unrealized appreciation	$	10,855

(a) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, (excluding investments in the underlying Master Portfolios), were as follows:

Affiliate	Shares Purchased			Shares Sold			Shares Held at December 31, 2010		Value at December 31, 2010			Realized Gain			Income
BlackRock Cash Funds: Institutional, SL Agency Shares		1,969	1		–			1,969		$	1,969			–		$
iShares Barclays TIPS Bond Fund		26			–			26		$	2,795			–		$	32
iShares Cohen & Steers Realty Majors Index Fund		69			–			69		$	4,535			–		$	55
iShares FTSE EPRA/NAREIT Developed Real
Estate ex-U.S. Index Fund		198			–			198		$	6,187			–		$	216
iShares MSCI Canada Index Fund		87			–			87		$	2,697			–		$	28
iShares MSCI EAFE Index Fund		373			(14	)		359		$	20,905		$	81		$	192
iShares MSCI EAFE Small Cap Index Fund		64			–			64		$	2,701			–		$	59
iShares MSCI Emerging Markets Index Fund		185			–			185		$	8,810			–		$	63
iShares S&P MidCap 400 Index Fund		107			–			107		$	9,704			–		$	60
iShares S&P SmallCap 600 Index Fund		69			(4	)		65		$	4,451		$	8		$	32

¹ Represents net activity.

58

Schedule of Investments December 31, 2010	LifePath 2035 Master Portfolio
	(Percentages shown are based on Net Assets)

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

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities.

• 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 inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments:

Valuation Inputs	Level 1			Level 2			Level 3		Total
Assets:
Investments in Securities:
Affiliated Investment Companies:
Master Portfolios			–		$	93,132		–		$	93,132
Exchange Traded Funds		$	62,785			–		–			62,785
Money Market Funds			1,969			–		–			1,969
Total		$	64,754		$	93,132		–		$	157,886

59

Schedule of Investments December 31, 2010	LifePath 2045 Master Portfolio
	(Percentages shown are based on Net Assets)

	Shares		Value
Affiliated Investment Companies
Master Portfolios – 58.0%
Active Stock Master Portfolio				$	72,994
CoreAlpha Bond Master Portfolio					9,261
Total Master Portfolios					82,255
Exchange-Traded Funds – 46.3%
iShares Cohen & Steers Realty Majors Index Fund (a)		72			4,732
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund (a)		229			7,156
iShares MSCI Canada Index Fund (a)		99			3,069
iShares MSCI EAFE Index Fund (a)		408			23,758
iShares MSCI EAFE Small Cap Index Fund (a)		73			3,081
iShares MSCI Emerging Markets Index Fund (a)		189			9,000
iShares S&P MidCap 400 Index Fund (a)		115			10,429
iShares S&P SmallCap 600 Index Fund (a)		65			4,451
Total Exchange-Traded Funds (Cost — $53,456*)					65,676
Money Market Funds – 0.6%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (a)(b)		823			823
Total Money Market Funds (Cost — $823*)					823
Total Affiliated Investment Companies – 104.9%					148,754
Liabilities in Excess of Other Assets – (4.9)%					(7,001	)
Net Assets – 100.0%				$	141,753

* The cost and unrealized appreciation (depreciation) of investments (excluding investments in the underlying Master Portfolios) as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	54,279
Gross unrealized appreciation	$	12,220
Gross unrealized depreciation		–
Net unrealized appreciation	$	12,220

(a) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, (excluding investments in the underlying Master Portfolios), were as follows:

Affiliate	Shares Purchased			Shares Sold			Shares Held at December  31, 2010		Value at December 31, 2010			Realized Gain			Income
BlackRock Cash Funds: Institutional, SL Agency Shares		823	1		–			823		$	823			–		$	3
iShares Cohen & Steers Realty Majors Index Fund		72			–			72		$	4,732			–		$	68
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		229			–			229		$	7,156			–		$	247
iShares MSCI Canada Index Fund		99			–			99		$	3,069			–		$	31
iShares MSCI EAFE Index Fund		438			(30	)		408		$	23,758		$	127		$	220
iShares MSCI EAFE Small Cap Index Fund		73			–			73		$	3,081			–		$	67
iShares MSCI Emerging Markets Index Fund		189			–			189		$	9,000			–		$	73
iShares S&P MidCap 400 Index Fund		115			–			115		$	10,429			–		$	64
iShares S&P SmallCap 600 Index Fund		65			–			65		$	4,451			–		$	31

¹ Represents net activity.

60

Schedule of Investments December 31, 2010	LifePath 2045 Master Portfolio
	(Percentages shown are based on Net Assets)

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

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities.

• 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 inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments:

Valuation Inputs	Level 1			Level 2			Level 3		Total
Assets:
Investments in Securities:
Affiliated Investment Companies:
Master Portfolios			–		$	82,255		–		$	82,255
Exchange Traded Funds		$	65,676			–		–			65,676
Money Market Funds			823			–		–			823
Total		$	66,499		$	82,255		–		$	148,754

61

Schedule of Investments December 31, 2010	LifePath 2055 Master Portfolio
	(Percentages shown are based on Net Assets)

	Shares		Value
Affiliated Investment Companies
Master Portfolios – 53.0%
Active Stock Master Portfolio				$	74,649
CoreAlpha Bond Master Portfolio					1,390
Total Master Portfolios					76,039
Exchange-Traded Funds – 51.3%
iShares Cohen & Steers Realty Majors Index Fund (a)		76			4,995
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund (a)		243			7,594
iShares MSCI Canada Index Fund (a)		109			3,379
iShares MSCI EAFE Index Fund (a)		450			26,204
iShares MSCI EAFE Small Cap Index Fund (a)		80			3,377
iShares MSCI Emerging Markets Index Fund (a)		208			9,905
iShares S&P MidCap 400 Index Fund (a)		143			12,968
iShares S&P SmallCap 600 Index Fund (a)(b)		76			5,204
Total Exchange-Traded Funds (Cost — $59,989*)					73,626
Money Market Funds – 4.3%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (a)(c)(d)		5,486			5,486
BlackRock Cash Funds: Prime, SL Agency Shares, 0.24% (a)(c)(d)		744			744
Total Money Market Funds (Cost — $6,230*)					6,230
Total Affiliated Investment Companies – 108.6%					155,895
Liabilities in Excess of Other Assets – (8.6)%					(12,371	)
Net Assets – 100.0%				$	143,524

* The cost and unrealized appreciation (depreciation) of investments (excluding investments in the underlying Master Portfolios) as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	66,219
Gross unrealized appreciation	$	13,637
Gross unrealized depreciation		–
Net unrealized appreciation	$	13,637

(a) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, (excluding investments in the underlying Master Portfolios), were as follows:

Affiliate	Shares Purchased			Shares Sold			Shares Held at December  31, 2010		Value at December 31, 2010			Realized Gain			Income
BlackRock Cash Funds: Institutional, SL Agency Shares		5,486	1		–			5,486		$	5,486			–		$	3
BlackRock Cash Funds: Prime, SL Agency Shares		744	1		–			744		$	744						–
iShares Cohen & Steers Realty Majors Index Fund		76			–			76		$	4,995			–		$	72
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		243			–			243		$	7,594			–		$	263
iShares MSCI Canada Index Fund		109			–			109		$	3,379			–		$	35
iShares MSCI EAFE Index Fund		469			(19	)		450		$	26,204		$	94		$	242
iShares MSCI EAFE Small Cap Index Fund		80			–			80		$	3,377			–		$	73
iShares MSCI Emerging Markets Index Fund		208			–			208		$	9,905			–		$	80
iShares S&P MidCap 400 Index Fund		143			–			143		$	12,968			–		$	78
iShares S&P SmallCap 600 Index Fund		85			(9	)		76		$	5,204		$	76		$	38

¹ Represents net activity.

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

62

Schedule of Investments December 31, 2010	LifePath 2055 Master Portfolio
	(Percentages shown are based on Net Assets)

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

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

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities.

• 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 inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments:

Valuation Inputs	Level 1			Level 2			Level 3		Total
Assets:
Investments in Securities:
Affiliated Investment Companies:
Master Portfolios			–		$	76,039		–		$	76,039
Exchange Traded Funds		$	73,626			–		–			73,626
Money Market Funds			6,230			–		–			6,230
Total		$	79,856		$	76,039		–		$	155,895

63

Statements of Assets and Liabilities Master Investment Portfolio

December 31, 2010	LifePath 2025 Master Portfolio			LifePath 2035 Master Portfolio			LifePath 2045 Master Portfolio			LifePath 2055 Master Portfolio
Assets
Investments at value – affiliated1,2		$	52,568		$	64,754		$	66,499		$	79,856
Investments at value – Active Stock Master Portfolio			50,786			66,212			72,994			74,649
Investments at value – CoreAlpha Bond Master Portfolio			38,127			26,920			9,261			1,390
Contributions receivable from investors			1,289			–			530			–
Investments sold receivable			3,672			3,918			4,228			2,611
Dividends receivable			19			11			5			4
Total assets			146,461			161,815			153,517			158,510
Liabilities
Collateral on securities loaned at value			–			–			–			5,369
Investments purchased payable			1,289			1,626			530			–
Withdrawals payable to investors			3,672			3,918			4,228			2,611
Investment advisory fees payable			65			66			66			66
Professional fees payable			6,400			6,400			6,400			6,400
Trustees’ fees payable			540			540			540			540
Total liabilities			11,966			12,550			11,764			14,986
Net Assets		$	134,495		$	149,265		$	141,753		$	143,524
Net Assets Consist of
Investors’ capital		$	116,831		$	127,628		$	117,342		$	117,507
Net unrealized appreciation/depreciation			17,664			21,637			24,411			26,017
Net Assets		$	134,495		$	149,265		$	141,753		$	143,524
1 Investments at cost – affiliated		$	43,727		$	53,899		$	54,279		$	66,219
2 Securities loaned at value		$	–		$	–		$	–		$	5,261

See Notes to Financial Statements.

64

Statements of Operations Master Investment Portfolio

Period Ended December 31, 2010	LifePath 2025 Master Portfolio1				LifePath 2035 Master Portfolio1				LifePath 2045 Master Portfolio1				LifePath 2055 Master Portfolio1
Investment Income
Dividends – affiliated		$	598			$	737			$	801			$	881
Income – affiliated			2				2				3				3
Net investment income allocated from the Active Stock Master and CoreAlpha Bond Master:
Dividends			409				510				586				599
Interest			605				374				169				50
Expenses			(125	)2			(115	)2			(106	)2			(95	)2`
Total income			1,489				1,508				1,453				1,438
Expenses
Investment advisory			218				225				225				226
Professional			6,400				6,400				6,400				6,400
Independent Trustees			1,739				1,738				1,738				1,739
Total expenses			8,357				8,363				8,363				8,365
Less fees waived by advisor			(8,346	)			(8,354	)			(8,357	)			(8,357	)
Total expenses after fees waived			11				9				6				8
Net investment income			1,478				1,499				1,447				1,430
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments – affiliated			227				89				127				170
Allocations from the Active Stock Master and CoreAlpha Bond Master from investments, financial futures contracts and swaps			–				357				651				792
			227				446				778				962
Net change in unrealized appreciation/depreciation on:
Investments – affiliated			8,841				10,855				12,220				13,637
Allocated from the Active Stock Master and CoreAlpha Bond Master from investments, financial futures contracts and swaps			8,823				10,782				12,191				12,380
			17,664				21,637				24,411				26,017
Total realized and unrealized gain			17,891				22,083				25,189				26,979
Net Increase in Net Assets Resulting from Operations		$	19,369			$	23,582			$	26,636			$	28,409

¹ For the period from June 30, 2010 (commencement of operations) to December 31, 2010.

² Net of fees waived of $19, 23, 26 and 26 respectively.

See Notes to Financial Statements.

65

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath 2025 Master Portfolio				LifePath 2035 Master Portfolio
Increase (Decrease) in Net Assets:	Period June 30, 20101 to December 31, 2010				Period June 30, 20101 to December 31, 2010
Operations
Net investment income		$	1,478			$	1,499
Net realized gain			227				446
Net change in unrealized appreciation/depreciation			17,664				21,637
Net increase in net assets resulting from operations			19,369				23,582
Capital Transactions
Proceeds from contributions			115,367				125,963
Fair value of withdrawals			(241	)			(280	)
Net increase in net assets derived from capital transactions			115,126				125,683
Net Assets
Total increase in net assets			134,495				149,265
Beginning of period			–				–
End of period		$	134,495			$	149,265

¹ Commencement of operations.

See Notes to Financial Statements.

66

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath 2045 Master Portfolio				LifePath 2055 Master Portfolio
Increase (Decrease) in Net Assets:	Period June 30, 20101 to December 31, 2010				Period June 30, 20101 to December 31, 2010
Operations
Net investment income		$	1,447			$	1,430
Net realized gain			778				962
Net change in unrealized appreciation/depreciation			24,411				26,017
Net increase in net assets resulting from operations			26,636				28,409
Capital Transactions
Proceeds from contributions			115,366				115,365
Fair value of withdrawals			(249	)			(250	)
Net increase in net assets derived from capital transactions			115,117				115,115
Net Assets
Total increase in net assets			141,753				143,524
Beginning of period			–				–
End of period		$	141,753			$	143,524

¹ Commencement of operations.

See Notes to Financial Statements.

67

Financial Highlights Master Investment Portfolio

	LifePath 2025 Master Portfolio
	Period June 30, 20101 to December  31, 2010
Total Investment Return
Total investment return2			17.65	%
Ratios to Average Net Assets
Total expenses3,4			13.61	%
Total expenses after fees waived3,4			0.22	%
Net investment income4,5			2.37	%
Supplemental Data
Net assets, end of period (000)		$	134
Portfolio turnover			2	%

¹ Commencement of operations.

² Aggregate total investment return.

³ Includes the Master Portfolio’s pro rata portion of net advisory and net administration fees from the Active Stock and CoreAlpha Bond Master Portfolios only and does not reflect any expenses incurred indirectly as a result of investments in the BlackRock Cash Funds: Institutional and iShares exchange-traded funds.

⁴ Annualized.

⁵ Includes the Master Portfolio’s share of the allocated net investment income from the Active Stock and CoreAlpha Bond Master Portfolios.

See Notes to Financial Statements.

68

Financial Highlights (continued) Master Investment Portfolio

	LifePath 2035 Master Portfolio
	Period June 30, 20101 to December 31, 2010
Total Investment Return
Total investment return2			21.21	%
Ratios to Average Net Assets
Total expenses3,4			13.23	%
Total expenses after fees waived3,4			0.19	%
Net investment income4,5			2.33	%
Supplemental Data
Net assets, end of period (000)		$	149
Portfolio turnover			1	%

¹ Commencement of operations.

² Aggregate total investment return.

³ Includes the Master Portfolio’s pro rata portion of net advisory and net administration fees from the Active Stock and CoreAlpha Bond Master Portfolios only and does not reflect any expenses incurred indirectly as a result of investments in the BlackRock Cash Funds: Institutional and iShares exchange-traded funds.

⁴ Annualized.

⁵ Includes the Master Portfolio’s share of the allocated net investment income from the Active Stock and CoreAlpha Bond Master Portfolios.

See Notes to Financial Statements.

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Financial Highlights (continued) Master Investment Portfolio

	LifePath 2045 Master Portfolio
	Period June 30, 20101 to December 31, 2010
Total Investment Return
Total investment return2		24.26	%
Ratios to Average Net Assets
Total expenses3,4		13.23	%
Total expenses after fees waived3,4		0.17	%
Net investment income4,5		2.25	%
Supplemental Data
Net assets, end of period (000)	$	142
Portfolio turnover		1	%

¹ Commencement of operations.

² Aggregate total investment return.

³ Includes the Master Portfolio’s pro rata portion of net advisory and net administration fees from the Active Stock and CoreAlpha Bond Master Portfolios only and does not reflect any expenses incurred indirectly as a result of investments in the BlackRock Cash Funds: Institutional and iShares exchange-traded funds.

⁴ Annualized.

⁵ Includes the Master Portfolio’s share of the allocated net investment income from the Active Stock and CoreAlpha Bond Master Portfolios.

See Notes to Financial Statements.

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Financial Highlights (concluded) Master Investment Portfolio

	LifePath 2055 Master Portfolio
	Period June 30, 20101 to December 31, 2010
Total Investment Return
Total investment return2		25.83	%
Ratios to Average Net Assets
Total expenses3,4		13.13	%
Total expenses after fees waived3,4		0.16	%
Net investment income4,5		2.21	%
Supplemental Data
Net assets, end of period (000)	$	144
Portfolio turnover		1	%

¹ Commencement of operations.

² Aggregate total investment return.

³ Includes the Master Portfolio’s pro rata portion of net advisory and net administration fees from the Active Stock and CoreAlpha Bond Master Portfolios only and does not reflect any expenses incurred indirectly as a result of investments in the BlackRock Cash Funds: Institutional and iShares exchange-traded funds.

⁴ Annualized.

⁵ Includes the Master Portfolio’s share of the allocated net investment income from the Active Stock and CoreAlpha Bond Master Portfolios.

See Notes to Financial Statements.

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Notes to Financial Statements Master Investment Portfolio

1. Organization and Significant Accounting Policies:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”) as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust. The financial statements and these accompanying notes relate to four series of MIP: LifePath 2025 Master Portfolio, LifePath 2035 Master Portfolio, LifePath 2045 Master Portfolio and LifePath 2055 Master Portfolio (each, a “Master Portfolio” and collectively, the “Master Portfolios”). The Master Portfolios commenced operations on June 30, 2010. The Master Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.

Each of the Master Portfolios seeks to achieve its investment objective by investing in a combination of equity, bond and money market funds (the “Underlying Funds”) in proportions suggested by its own comprehensive investment strategy. The Underlying Funds are advised by BlackRock Fund Advisors (“BFA”), and include the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio and the BlackRock Cash Funds: Institutional and iShares exchange-traded funds.

The value of a LifePath Master Portfolio’s investment in each of the Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio reflects that LifePath Master Portfolio’s proportionate interest in the net assets of that Master Portfolio. As of December 31, 2010, the interests of the Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio held by each LifePath Master Portfolio were all 0.00%*.

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

Valuation: The Master Portfolios fair value their financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (the “Board”). Equity investments, including exchange-traded funds, traded on a recognized securities exchange or the NASDAQ Global Market System (“NASDAQ”) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that such prior day’s price no longer reflects the fair value of the security. Investments in open-end registered investment companies are valued at net asset value each business day.

* Rounds to less than 1%.

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In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the market value of such investment or is not available, the investment will be valued in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for a Fair Value Assets, BFA seeks to determine the price that each Master Portfolio might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that BFA deems relevant. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Master Portfolio has determined the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.

Each LifePath Master Portfolio records daily its proportionate share of the Active Stock Master Portfolio’s and CoreAlpha Bond Master Portfolio’s income, expenses and realized and unrealized gains and losses.

Securities Lending: The Master Portfolios may lend securities to financial institutions that provide cash as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statements of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the Master Portfolio earns dividend and interest on the securities loaned. 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. In the event that the borrower defaults on its obligation to return borrowed securities because of insolvency or for any other reason, the Master Portfolio could experience delays and costs in gaining access to the collateral. A Master Portfolio also could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

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

The Master Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

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

2. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”), Bank of America Corporation (“BAC”) and Barclays Bank PLC (“Barclays”) are the largest stockholders of BlackRock, Inc. (“BlackRock”). Due to the ownership structure, PNC is an affiliate of the Master Portfolios for 1940 Act purposes, but BAC and Barclays are not.

MIP, on behalf of the Master Portfolios, entered into an Investment Advisory Agreement with BFA (the “Investment Advisory Agreement”). Pursuant to the Investment Advisory Agreement with MIP, BFA is responsible for the management of each Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each Master Portfolio. For such services, each Master Portfolio pays BFA an annual investment advisory fee of 0.35% of the average daily net assets of each of the Master Portfolios.

The fees and expenses of the Master Portfolios’ trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolios.

BFA contractually agreed to waive investment advisory fees charged to the LifePath Master Portfolios in an amount equal to investment advisory fees and administration fees, if any, received by BFA or BlackRock Institutional Trust Company, N.A. (“BTC”), from each investment company in which the Master Portfolios invest. BFA has also contractually agreed to cap the expenses of the LifePath Master Portfolios at the rate at which the LifePath Master Portfolios pay an advisory fee to BFA by providing an offsetting credit against the investment advisory fees paid by the LifePath Master Portfolios in an amount equal to the independent expenses. These contractual waivers are effective through April 30, 2012. The amounts of the waivers, if any, are shown as fees waived in the Statements of Operations.

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MIP entered into an administration services arrangement with BTC, which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC may delegate certain of its administration duties to sub-administrators. BTC has agreed to bear all costs of the Master Portfolios’ and MIP’s operations, other than brokerage expenses, advisory fees, 12b-1 distribution or service fees, independent expenses, litigation expenses, taxes or other extraordinary expenses.

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

The Master Portfolios received an exemptive order from the SEC permitting them, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BTC as the securities lending agent. BTC may, on behalf of a Master Portfolio, invest cash collateral received by the Master Portfolio for such loans, among other things, in a private investment company managed by BTC or its registered money market funds advised by BTC or its affiliates. The market value of securities on loan and the value of the related collateral are shown in the Statements of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC is disclosed in the Schedules of Investments. The share of income earned by the Master Portfolio on such investments is shown as securities lending - affiliated in the Statements of Operations. BTC has voluntarily agreed to waive its fees until further notice.

Each Master Portfolio may invest its positive cash balances in certain money market funds managed by BFA or an affiliate. The income earned on these temporary cash investments is included in income-affiliated in the Statements of Operations.

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

3. Investments:

Purchases and sales of investments excluding short-term securities for the period ended December 31, 2010, were as follows:

	Purchases			Sales
LifePath 2025 Master Portfolio		$	45,104		$	2,198
LifePath 2035 Master Portfolio		$	52,822		$	981
LifePath 2045 Master Portfolio		$	54,954		$	1,625
LifePath 2055 Master Portfolio		$	61,424		$	1,605

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4. Market and Credit Risk:

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

5. Subsequent Events:

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

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Report of Independent Registered Public Accounting Firm

To the Interestholders and Board of Trustees of

Master Investment Portfolio:

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of LifePath 2025 Master Portfolio, LifePath 2035 Master Portfolio, LifePath 2045 Master Portfolio and LifePath 2055 Master Portfolio, each a portfolio of Master Investment Portfolio (the “Master Portfolios”), at December 31, 2010, the results of each of their operations, the changes in each of their net assets and the financial highlights for the period June 30, 2010 (commencement of operations) to December 31, 2010 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 audit, which included confirmation of securities at December 31, 2010 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 24, 2011

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Disclosure of Investment Advisory Agreement

Disclosure of Investment Advisory Agreement

The Board of Trustees of Master Investment Portfolio (the “Master Fund”) met on May 18 19, 2010 to consider the approval of the Master Fund’s proposed investment advisory agreement (the “Agreement”) with BlackRock Fund Advisors (“BlackRock”), the Master Fund’s investment advisor, on behalf of LifePath 2025 Master Portfolio, LifePath 2035 Master Portfolio, LifePath 2045 Master Portfolio and LifePath 2055 Master Portfolio (each, a “Master Portfolio” and collectively, the “Master Portfolios”), each a series of the Master Fund. The Agreement was the same agreement that had previously been approved by the Board of the Master Fund with respect to each of the other master portfolios of the Master Fund. Each of LifePath 2025 Portfolio, LifePath 2035 Portfolio, LifePath 2045 Portfolio and LifePath 2055 Portfolio (each, a “Portfolio” and collectively, the “Portfolios”), each a series of BlackRock Funds III (the “Fund”), is a “feeder” fund that invests all of its investable assets in the corresponding Master Portfolio. Accordingly, the Board of Trustees of the Fund also considered the approval of the Agreement with respect to the Master Portfolios. For simplicity, the Board of Trustees of the Master Fund and the Board of Trustees of the Fund are referred to herein collectively as the “Board,” and the members are referred to as “Board Members.” The Master Portfolios and the Portfolios commenced operations in June 2010.

Activities and Composition of the Board

The Board consists of thirteen individuals, eleven of whom are not “interested persons” of the Master Fund or the Fund as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of the Master Fund or the Fund, as pertinent, and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Co-Chairs of the Board are each Independent Board Members. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight and Contract Committee and an Executive Committee, each of which is composed of Independent Board Members (except for the Executive Committee, which also has one interested Board Member) and is chaired by Independent Board Members. The Board also has one ad hoc committee, the Joint Product Pricing Committee, which consists of Independent Board Members and directors/trustees of the boards of certain other funds managed by BlackRock or other BlackRock advisors, who are not “interested persons” of their respective funds.

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Board Considerations in Approving the Agreements

The Approval Process: At an in-person meeting held on May 18-19, 2010, the Board reviewed materials relating to its consideration of the Agreement with respect to the Master Portfolios. The Board considered all factors it believed relevant with respect to the Master Portfolios and the Portfolios, including, among other factors: (a) the nature, extent and quality of the services to be provided by BlackRock; (b) the investment performance of BlackRock portfolio management; (c) the advisory fee and the cost of the services to be provided and profits to be realized by BlackRock and its affiliates from their relationship with the Master Portfolios and the Portfolios; (d) economies of scale; (e) possible alternatives to the proposed Agreement; (f) the policies and practices of BlackRock with respect to portfolio transactions for the Master Portfolios; and (g) other factors deemed relevant by the Board Members.

In determining to approve the Agreement, the Board met with the relevant investment advisory personnel from BlackRock and considered all information it deemed reasonably necessary to evaluate the terms of the Agreement. The Board received materials in advance of the May 2010 meeting relating to its consideration of the Agreement, including (a) fees and estimated expense ratios of each class of the Master Portfolios and the Portfolios, as applicable, and for certain classes of the Portfolios, in comparison to the fees and expense ratios of a peer group of funds; (b) information regarding BlackRock’s economic outlook for the Master Portfolios and its general investment outlook for the markets; (c) information regarding fees paid to service providers that are affiliates of BlackRock; (d) information regarding compliance records and regulatory matters relating to BlackRock; and (e) information outlining the legal duties of the Board under the 1940 Act with respect to the consideration and approval of the Agreement.

A. Nature, Extent and Quality of the Services

The Board, including the Independent Board Members, reviewed the nature, extent and quality of services to be provided by BlackRock, including the investment advisory services to be provided to each Master Portfolio. The Board received information concerning the investment philosophy and investment process to be used by BlackRock in managing each Master Portfolio, as well as a description of the capabilities, personnel and services of BlackRock. In connection with this review, the Board considered BlackRock’s in-house research capabilities as well as other resources available to its personnel. The Board considered the scope of the services provided by BlackRock to each Master Portfolio under the Agreement relative to services typically provided by third parties to other funds. The Board noted that the standard of care applicable under the Agreement was comparable to that found generally in investment company advisory agreements. The Board concluded that the scope of BlackRock’s services to be provided to the Master Portfolios was consistent with each Master Portfolio’s operational requirements, including, in addition to seeking to meet its investment objective, compliance with investment restrictions, tax and reporting requirements and related interestholder services.

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The Board, including the Independent Board Members, also considered the quality of the administrative and non-investment advisory services to be provided by BlackRock and its affiliates and significant shareholders to the Master Portfolios and the Portfolios. The Board evaluated the procedures of BlackRock designed to fulfill its fiduciary duty to the Master Portfolios with respect to possible conflicts of interest, including BlackRock’s code of ethics (regulating the personal trading of BlackRock’s officers and employees), the procedures by which BlackRock allocates trades among its various investment advisory clients, the integrity of the systems in place to ensure compliance with the foregoing and the record of BlackRock in these matters. The Board also noted information received at prior Board meetings concerning standards of BlackRock with respect to the execution of portfolio transactions.

The Board, including the Independent Board Members, considered, among other factors, the number, education and experience of BlackRock’s investment personnel generally and the portfolio management team for each Master Portfolio. The Board also took into account the time and attention to be devoted by senior management of BlackRock to the Master Portfolios. The Board also considered the business reputation of BlackRock and its financial resources and concluded that BlackRock would be able to meet any reasonably foreseeable obligation under the Agreement.

B. The Investment Performance of the Master Portfolios, the Portfolios and BlackRock

The Board, including the Independent Board Members, previously received and considered information about BlackRock’s investment performance for other funds. The Board, however, did not consider the performance history of the Master Portfolios because the Master Portfolios were newly organized and had not yet commenced operations as of the May 2010 meeting.

C. Consideration of the Advisory Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Master Portfolios and the Portfolios

In connection with the initial approval of the Agreement with respect to the Master Portfolios, the Board, including the Independent Board Members, reviewed each Master Portfolio’s actual advisory fee rates compared with the other funds in a peer group of funds. Both the peer group and the funds within the peer group (collectively, “Peers”) were selected by Lipper, Inc. (“Lipper”), which is not affiliated with BlackRock. It also compared each Portfolio’s estimated total expense ratios to those of its Peers. The Board considered the fee waivers and expense reimbursement arrangements in place, including BlackRock’s contractual agreement, with respect to each Master Portfolio, to waive its management fee at the Master Portfolio level in an amount equal to the management fees and administration fees, if any, received by BlackRock or BlackRock Institutional Trust Company, N.A. (“BTC”) from each investment company in which the Master Portfolio invests through April 30, 2012. The Board also noted that BTC and BlackRock have contractually agreed to reimburse, or provide offsetting credits to, the Portfolios and the Master Portfolios, as applicable, for “independent expenses,” which include the Portfolios’ allocable portion of the fees and expenses of the Independent

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Board Members, counsel to the Independent Board Members and the independent registered public accounting firm that provides audit services to the Portfolios and the Master Portfolios, through April 30, 2012. Additionally, the Board considered information about the services rendered, and the fee rates offered, to other clients advised by BlackRock.

Following consideration of this information, the Board, including the independent Board Members, concluded that the fees to be paid pursuant to the Agreement were fair and reasonable in light of the services provided.

As the Master Portfolios and the Portfolios had not commenced operations as of the date of the May 2010 meeting, BlackRock was not able to provide the Board with specific information concerning the expected profits to be realized by BlackRock and its affiliates from their relationships with the Master Portfolios and the Portfolios. BlackRock, however, will provide the Board with such information at future meetings.

D. Economies of Scale

The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized in respect of the management of the Master Portfolios in tandem with other portfolios of the Master Fund. Since the Master Portfolios are newly formed, BlackRock was not able to provide the Board with specific information concerning the extent to which economies of scale would be realized as the Master Portfolios grow and whether fee levels would reflect such economies of scale, if any.

E. Other Factors Deemed Relevant by the Board Members

The Board, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates and significant shareholders may derive from their respective relationships with the Master Portfolios and the Portfolios, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates and significant shareholders as service providers to the Master Portfolios and the Portfolios, including for administrative, transfer agency and distribution services. The Board also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain mutual fund transactions to assist in managing all or a number of its other client accounts.

The Board, including all of the Independent Board Members, concluded that these ancillary benefits that BlackRock and its affiliates could receive with regard to providing investment advisory and other services to the Master Portfolios and Portfolios were consistent with those generally available to other mutual fund sponsors.

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Conclusion

The Board of the Master LLC, including the Independent Board Members, unanimously approved the Agreement between BlackRock and the Master Fund, with respect to each Master Portfolio, for a two-year term ending May 19, 2012. Based upon its evaluation of all of the aforementioned factors in their totality, the Board of the Master LLC, including the Independent Board Members, was satisfied that the terms of the Agreement were fair and reasonable and in the best interest of each Master Portfolio and its interestholders. The Board of the Fund, including the Independent Board Members, also considered the approval of the Agreement with respect to each Master Portfolio and found the Agreement to be satisfactory. In arriving at a decision to approve the Agreement, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination.

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Master Portfolio Information as of December 31, 2010 Master Investment Portfolio

LifePath Retirement Master Portfolio

Portfolio Composition	Percent of Affiliated Investment Companies
Fixed Income Funds		63	%
Equity Funds		37

Portfolio Holdings	Percent of Affiliated Investment Companies
CoreAlpha Bond Master Portfolio		49	%
Active Stock Master Portfolio		19
iShares Barclays TIPS Bond Fund		8
iShares MSCI EAFE Index Fund		6
BlackRock Cash Funds:
Institutional, SL Agency Shares		5
iShares S&P MidCap 400 Index Fund		5
iShares MSCI Emerging Markets Index Fund		2
iShares S&P SmallCap 600 Index Fund		2
iShares MSCI Canada Index Fund		1
BlackRock Cash Funds: Prime, SL Agency Shares		1
iShares MSCI EAFE Small Cap Index Fund		1
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		1

LifePath 2020 Master Portfolio

Portfolio Composition	Percent of Affiliated Investment Companies
Equity Funds		54	%
Fixed Income Funds		46

Portfolio Holdings	Percent of Affiliated Investment Companies
CoreAlpha Bond Master Portfolio		33	%
Active Stock Master Portfolio		29
iShares MSCI EAFE Index Fund		9
BlackRock Cash Funds:
Institutional, SL Agency Shares		7
iShares Barclays TIPS Bond Fund		5
iShares S&P MidCap 400 Index Fund		5
iShares MSCI Emerging Markets Index Fund		4
iShares S&P SmallCap 600 Index Fund		2
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		2
iShares Cohen & Steers Realty Majors Index Fund		1
iShares MSCI EAFE Small Cap Index Fund		1
iShares MSCI Canada Index Fund		1
BlackRock Cash Funds: Prime, SL Agency Shares		1

BLACKROCK FUNDS III DECEMBER 31, 2010 83

Master Portfolio Information (continued) as of December 31, 2010 Master Investment Portfolio

LifePath 2030 Master Portfolio

Portfolio Composition	Percent of Affiliated Investment Companies
Equity Funds		68	%
Fixed Income Funds		32

Portfolio Holdings	Percent of Affiliated Investment Companies
Active Stock Master Portfolio		36	%
CoreAlpha Bond Master Portfolio		21
iShares MSCI EAFE Index Fund		11
BlackRock Cash Funds:
Institutional, SL Agency Shares		7
iShares S&P MidCap 400 Index Fund		5
iShares MSCI Emerging Markets Index Fund		5
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		3
iShares Barclays TIPS Bond Fund		3
iShares S&P SmallCap 600 Index Fund		2
iShares Cohen & Steers Realty Majors Index Fund		2
iShares MSCI EAFE Small Cap Index Fund		2
iShares MSCI Canada Index Fund		2
BlackRock Cash Funds: Prime, SL Agency Shares		1

LifePath 2040 Master Portfolio

Portfolio Composition	Percent of Affiliated Investment Companies
Equity Funds		79	%
Fixed Income Funds		21

Portfolio Holdings	Percent of Affiliated Investment Companies
Active Stock Master Portfolio		42	%
iShares MSCI EAFE Index Fund		13
CoreAlpha Bond Master Portfolio		11
BlackRock Cash Funds:
Institutional, SL Agency Shares		8
iShares S&P MidCap 400 Index Fund		6
iShares MSCI Emerging Markets Index Fund		5
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		4
iShares Cohen & Steers Realty Majors Index Fund		3
iShares S&P SmallCap 600 Index Fund		2
iShares MSCI Canada Index Fund		2
iShares MSCI EAFE Small Cap Index Fund		2
BlackRock Cash Funds: Prime, SL Agency Shares		1
iShares Barclays TIPS Bond Fund		1

84 BLACKROCK FUNDS III DECEMBER 31, 2010

Master Portfolio Information (concluded) as of December 31, 2010 Master Investment Portfolio

LifePath 2050 Master Portfolio

Portfolio Composition	Percent of Affiliated Investment Companies
Equity Funds		89	%
Fixed Income Funds		11

Portfolio Holdings	Percent of Affiliated Investment Companies
Active Stock Master Portfolio		47	%
iShares MSCI EAFE Index Fund		15
BlackRock Cash Funds:
Institutional, SL Agency Shares		8
iShares S&P MidCap 400 Index Fund		6
iShares MSCI Emerging Markets Index Fund		6
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		5
iShares Cohen & Steers Realty Majors Index Fund		3
iShares S&P SmallCap 600 Index Fund		3
iShares MSCI Canada Index Fund		2
iShares MSCI EAFE Small Cap Index Fund		2
CoreAlpha Bond Master Portfolio		2
BlackRock Cash Funds: Prime, SL Agency Shares		1

Active Stock Master Portfolio

Sector Allocation	Percent of Long-Term Investments
Information Technology		19	%
Financials		15
Consumer Discretionary		13
Health Care		12
Consumer Staples		11
Energy		11
Industrials		10
Telecommunication Services		4
Materials		3
Utilities		2

Ten Largest Holdings	Percent of Long-Term Investments
Exxon Mobil Corp.		4	%
Apple, Inc.		3
Microsoft Corp.		3
JPMorgan Chase & Co.		3
Google, Inc., Class A		2
AT&T, Inc.		2
The Procter & Gamble Co.		2
ConocoPhillips		2
Cisco Systems, Inc.		2
Verizon Communications, Inc.		2

CoreAlpha Bond Master Portfolio

	Percent of
Portfolio Composition	Long-Term Investments
U.S. Government Sponsored Agency Securities		54	%
Corporate Bonds		22
Asset-Backed Securities		10
Non-Agency Mortgage-Backed Securities		7
U.S. Treasury Obligations		6
Foreign Agency Obligations		1

Credit Quality Allocation1	Percent of Long-Term Investments
AAA/Aaa2		69	%
AA/Aa		7
A		9
BBB/Baa		11
BB/Ba		3
B		1

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

² Includes U.S. Government Sponsored Agency Securities which are deemed AAA/Aaa by the investment advisor.

BLACKROCK FUNDS III DECEMBER 31, 2010 85

Schedule of Investments December 31, 2010	LifePath Retirement Master Portfolio
	(Percentages shown are based on Net Assets)

Affiliated Investment Companies	Shares		Value
Master Portfolios – 71.3%
Active Stock Master Portfolio				$	272,611,476
CoreAlpha Bond Master Portfolio					711,674,200
Total Master Portfolios					984,285,676
Exchange-Traded Funds – 27.1%
iShares Barclays TIPS Bond Fund (a)		1,104,097			118,712,509
iShares Cohen & Steers Realty Majors Index Fund (a)(b)		71,293			4,685,376
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund (a)(b)		211,940			6,623,125
iShares MSCI Canada Index Fund (a)(b)		402,132			12,466,092
iShares MSCI EAFE Index Fund (a)(b)		1,493,685			86,977,278
iShares MSCI EAFE Small Cap Index Fund (a)(b)		273,404			11,540,383
iShares MSCI Emerging Markets Index Fund (a)		740,724			35,273,277
iShares S&P MidCap 400 Index Fund (a)(b)		761,894			69,096,167
iShares S&P SmallCap 600 Index Fund (a)(b)		415,539			28,451,955
Total Exchange-Traded Funds (Cost — $302,377,820*)					373,826,162
Money Market Funds – 6.3%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (a)(c)(d)		75,437,346			75,437,346
BlackRock Cash Funds: Prime, SL Agency Shares, 0.24% (a)(c)(d)		11,685,473			11,685,473
Total Money Market Funds (Cost — $87,122,819*)					87,122,819
Total Affiliated Investment Companies – 104.7%					1,445,234,657
Liabilities in Excess of Other Assets – (4.7)%					(65,093,922	)
Net Assets – 100.0%				$	1,380,140,735

* The cost and unrealized appreciation (depreciation) of investments (excluding investments in the underlying Master Portfolios) as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	393,632,925
Gross unrealized appreciation	$	67,316,056
Gross unrealized depreciation		–
Net unrealized appreciation	$	67,316,056

(a) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, (excluding investments in the underlying Master Portfolios), were as follows:

Affiliate	Shares Held at December 31, 2009		Shares Purchased		Shares Sold			Shares Held at December 31, 2010		Value at December 31, 2010		Realized Gain (Loss)			Income
BlackRock Cash Funds: Institutional, SL Agency Shares		88,781,172		–		(13,343,826	)1		75,437,346	$	75,437,346		–		$	266,669
BlackRock Cash Funds: Prime, SL Agency Shares		13,810,279		–		(2,124,806	)1		11,685,473	$	11,685,473		–		$	41,855
iShares Barclays TIPS Bond Fund		1,018,001		86,096		–			1,104,097	$	118,712,509	$	9,694		$	2,946,504
iShares Cohen & Steers Realty Majors Index Fund		137,046		–		(65,753	)		71,293	$	4,685,376	$	(531,254	)	$	190,568
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		431,794		–		(219,854	)		211,940	$	6,623,125	$	(1,143,992	)	$	581,119
iShares MSCI Canada Index Fund		352,758		84,238		(34,864	)		402,132	$	12,466,092	$	(138,111	)	$	198,809
iShares MSCI EAFE Index Fund		1,402,649		412,063		(321,027	)		1,493,685	$	86,977,278	$	1,430,374		$	2,334,843
iShares MSCI EAFE Small Cap Index Fund		273,404		–		–			273,404	$	11,540,383		–		$	328,310
iShares MSCI Emerging Markets Index Fund		680,505		159,872		(99,653	)		740,724	$	35,273,277	$	(418,004	)	$	508,789
iShares S&P MidCap 400 Index Fund		776,111		92,775		(106,992	)		761,894	$	69,096,167	$	1,847,959		$	797,219
iShares S&P SmallCap 600 Index Fund		452,660		73,830		(110,951	)		415,539	$	28,451,955	$	1,326,829		$	353,659

¹ Represents net activity.

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

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

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

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities.

• 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 inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

See Notes to Financial Statements.

86 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments (concluded)	LifePath Retirement Master Portfolio
	(Percentages shown are based on Net Assets)

The following table summarizes the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments:

Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Affiliated Investment Companies:
Master Portfolios		–	$	984,285,676		–	$	984,285,676
Exchange-Traded Funds	$	373,826,162		–		–		373,826,162
Money Market Funds		87,122,819		–		–		87,122,819
Total	$	460,948,981	$	984,285,676		–	$	1,445,234,657

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 87

Schedule of Investments December 31, 2010	LifePath 2020 Master Portfolio
	(Percentages shown are based on Net Assets)

Affiliated Investment Companies	Shares		Value
Master Portfolios – 65.8%
Active Stock Master Portfolio				$	724,236,224
CoreAlpha Bond Master Portfolio					819,101,109
Total Master Portfolios					1,543,337,333
Exchange-Traded Funds – 32.9%
iShares Barclays TIPS Bond Fund (a)		1,198,837			128,898,954
iShares Cohen & Steers Realty Majors Index Fund (a)(b)		523,257			34,388,450
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund (a)(b)		1,606,198			50,193,688
iShares MSCI Canada Index Fund (a)(b)		978,834			30,343,854
iShares MSCI EAFE Index Fund (a)(b)		3,855,084			224,481,541
iShares MSCI EAFE Small Cap Index Fund (a)(b)		727,889			30,724,195
iShares MSCI Emerging Markets Index Fund (a)		1,894,873			90,233,852
iShares S&P MidCap 400 Index Fund (a)(b)		1,417,544			128,557,065
iShares S&P SmallCap 600 Index Fund (a)(b)		782,366			53,568,600
Total Exchange-Traded Funds (Cost — $627,448,537*)					771,390,199
Money Market Funds – 9.0%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (a)(c)(d)		181,776,362			181,776,362
BlackRock Cash Funds: Prime, SL Agency Shares, 0.24% (a)(c)(d)		28,477,459			28,477,459
Total Money Market Funds (Cost — $210,253,821*)					210,253,821
Total Affiliated Investment Companies – 107.7%					2,524,981,353
Liabilities in Excess of Other Assets – (7.7)%					(181,020,436	)
Net Assets – 100.0%				$	2,343,960,917

* The cost and unrealized appreciation (depreciation) of investments (excluding investments in the underlying Master Portfolios) as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	860,487,132
Gross unrealized appreciation	$	121,156,888
Gross unrealized depreciation		–
Net unrealized appreciation	$	121,156,888

(a) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, (excluding investments in the underlying Master Portfolios), were as follows:

Affiliate	Shares Held at December 31, 2009		Shares Purchased		Shares Sold			Shares Held at December 31, 2010		Value at December 31, 2010		Realized Gain (Loss)			Income
BlackRock Cash Funds: Institutional, SL Agency Shares		226,175,226		–		(44,398,864	)1		181,776,362	$	181,776,362		–		$	581,798
BlackRock Cash Funds: Prime, SL Agency Shares		35,603,666		–		(7,126,207	)1		28,477,459	$	28,477,459		–		$	91,647
iShares Barclays TIPS Bond Fund		966,860		231,977		–			1,198,837	$	128,898,954	$	42,229		$	2,947,736
iShares Cohen & Steers Realty Majors Index Fund		601,886		51,599		(130,228	)		523,257	$	34,388,450	$	(2,881,769	)	$	1,129,305
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		1,834,145		241,950		(469,897	)		1,606,198	$	50,193,688	$	(3,734,439	)	$	3,417,089
iShares MSCI Canada Index Fund		815,491		214,435		(51,092	)		978,834	$	30,343,854	$	(218,126	)	$	487,123
iShares MSCI EAFE Index Fund		3,290,386		963,015		(398,317	)		3,855,084	$	224,481,541	$	(2,861,469	)	$	5,721,449
iShares MSCI EAFE Small Cap Index Fund		613,941		166,672		(52,724	)		727,889	$	30,724,195	$	(214,070	)	$	875,107
iShares MSCI Emerging Markets Index Fund		1,608,611		391,059		(104,797	)		1,894,873	$	90,233,852	$	(538,895	)	$	1,244,967
iShares S&P MidCap 400 Index Fund		1,446,958		147,418		(176,832	)		1,417,544	$	128,557,065	$	1,795,508		$	1,484,815
iShares S&P SmallCap 600 Index Fund		860,207		109,015		(186,856	)		782,366	$	53,568,600	$	896,758		$	670,052

¹ Represents net activity.

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

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

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

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities.

• 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 inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

See Notes to Financial Statements.

88 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments (concluded)	LifePath 2020 Master Portfolio
	(Percentages shown are based on Net Assets)

The following table summarizes the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments:

Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Affiliated Investment Companies:
Master Portfolios		–	$	1,543,337,333		–	$	1,543,337,333
Exchange-Traded Funds	$	771,390,199		–		–		771,390,199
Money Market Funds		210,253,821		–		–		210,253,821
Total	$	981,644,020	$	1,543,337,333		–	$	2,524,981,353

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 89

Schedule of Investments December 31, 2010	LifePath 2030 Master Portfolio
	(Percentages shown are based on Net Assets)

Affiliated Investment Companies	Shares		Value
Master Portfolios – 61.2%
Active Stock Master Portfolio				$	767,320,441
CoreAlpha Bond Master Portfolio					439,888,230
Total Master Portfolios					1,207,208,671
Exchange-Traded Funds – 37.2%
iShares Barclays TIPS Bond Fund (a)		554,791			59,651,128
iShares Cohen & Steers Realty Majors Index Fund (a)(b)		680,971			44,753,414
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund (a)(b)		2,128,614			66,519,188
iShares MSCI Canada Index Fund (a)(b)		1,040,900			32,267,900
iShares MSCI EAFE Index Fund (a)(b)		4,085,815			237,917,008
iShares MSCI EAFE Small Cap Index Fund (a)(b)		772,751			32,617,820
iShares MSCI Emerging Markets Index Fund (a)(b)		2,015,244			95,965,919
iShares S&P MidCap 400 Index Fund (a)(b)		1,267,897			114,985,579
iShares S&P SmallCap 600 Index Fund (a)(b)		697,237			47,739,817
Total Exchange-Traded Funds (Cost — $602,243,531*)					732,417,773
Money Market Funds – 9.0%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (a)(c)(d)		154,257,212			154,257,212
BlackRock Cash Funds: Prime, SL Agency Shares, 0.24% (a)(c)(d)		24,170,906			24,170,906
Total Money Market Funds (Cost — $178,428,118*)					178,428,118
Total Affiliated Investment Companies – 107.4%					2,118,054,562
Liabilities in Excess of Other Assets – (7.4)%					(145,979,496	)
Net Assets – 100.0%				$	1,972,075,066

* The cost and unrealized appreciation (depreciation) of investments (excluding investments in the underlying Master Portfolios) as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	810,313,863
Gross unrealized appreciation	$	100,532,028
Gross unrealized depreciation		–
Net unrealized appreciation	$	100,532,028

(a) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, (excluding investments in the underlying Master Portfolios), were as follows:

Affiliate	Shares Held at December 31, 2009		Shares Purchased		Shares Sold			Shares Held at December 31, 2010		Value at December 31, 2010		Realized Gain (Loss)			Income
BlackRock Cash Funds: Institutional, SL Agency Shares		217,065,536		–		(62,808,324	)1		154,257,212	$	154,257,212		–		$	586,086
BlackRock Cash Funds: Prime, SL Agency Shares		34,450,272		–		(10,279,366	)1		24,170,906	$	24,170,906		–		$	92,526
iShares Barclays TIPS Bond Fund		432,362		133,529		(11,100	)		554,791	$	59,651,128	$	39,239		$	1,397,637
iShares Cohen & Steers Realty Majors Index Fund		736,816		35,088		(90,933	)		680,971	$	44,753,414	$	(2,146,884	)	$	1,374,199
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		2,218,125		269,005		(358,516	)		2,128,614	$	66,519,188	$	(2,986,296	)	$	4,239,928
iShares MSCI Canada Index Fund		822,796		218,104		–			1,040,900	$	32,267,900		–		$	512,705
iShares MSCI EAFE Index Fund		3,306,532		997,321		(218,038	)		4,085,815	$	237,917,008	$	(3,315,374	)	$	5,883,806
iShares MSCI EAFE Small Cap Index Fund		615,291		169,422		(11,962	)		772,751	$	32,617,820	$	(11,900	)	$	927,709
iShares MSCI Emerging Markets Index Fund		1,614,028		429,388		(28,172	)		2,015,244	$	95,965,919	$	(141,554	)	$	1,302,584
iShares S&P MidCap 400 Index Fund		1,306,771		113,770		(152,644	)		1,267,897	$	114,985,579	$	1,608,949		$	1,332,298
iShares S&P SmallCap 600 Index Fund		773,189		82,716		(158,668	)		697,237	$	47,739,817	$	995,663		$	607,537

¹ Represents net activity.

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

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

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

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities.

• 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 inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

See Notes to Financial Statements.

90 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments (concluded) LifePath 2030 Master Portfolio

The following table summarizes the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments:

Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Affiliated Investment Companies:
Master Portfolios		–	$	1,207,208,671		–	$	1,207,208,671
Exchange-Traded Funds	$	732,417,773		–		–		732,417,773
Money Market Funds		178,428,118		–		–		178,428,118
Total	$	910,845,891	$	1,207,208,671		–	$	2,118,054,562

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 91

Schedule of Investments December 31, 2010	LifePath 2040 Master Portfolio
	(Percentages shown are based on Net Assets)

Affiliated Investment Companies	Shares		Value
Master Portfolios – 57.0%
Active Stock Master Portfolio				$	687,896,852
CoreAlpha Bond Master Portfolio					177,729,200
Total Master Portfolios					865,626,052
Exchange-Traded Funds – 40.5%
iShares Barclays TIPS Bond Fund (a)		150,344			16,164,987
iShares Cohen & Steers Realty Majors Index Fund (a)(b)		693,309			45,564,267
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund (a)(b)		2,156,480			67,390,000
iShares MSCI Canada Index Fund (a)(b)		949,552			29,436,112
iShares MSCI EAFE Index Fund (a)		3,659,166			213,073,236
iShares MSCI EAFE Small Cap Index Fund (a)(b)		687,000			28,998,270
iShares MSCI Emerging Markets Index Fund (a)(b)		1,807,304			86,063,817
iShares S&P MidCap 400 Index Fund (a)		1,012,776			91,848,655
iShares S&P SmallCap 600 Index Fund (a)(b)		549,842			37,647,682
Total Exchange-Traded Funds (Cost – $513,337,441*)					616,187,026
Money Market Funds – 10.7%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (a)(c)(d)		139,976,764			139,976,764
BlackRock Cash Funds: Prime, SL Agency Shares, 0.24% (a)(c)(d)		22,015,363			22,015,363
Total Money Market Funds (Cost – $161,992,127*)					161,992,127
Total Affiliated Investment Companies – 108.2%					1,643,805,205
Liabilities in Excess of Other Assets – (8.2)%					(124,601,900	)
Net Assets – 100.0%				$	1,519,203,305

* The cost and unrealized appreciation (depreciation) of investments (excluding investments in the underlying Master Portfolios) as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	706,797,536
Gross unrealized appreciation	$	71,381,617
Gross unrealized depreciation		–
Net unrealized appreciation	$	71,381,617

(a) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, (excluding investments in the underlying Master Portfolios), were as follows:

Affiliate	Shares Held at December 31, 2009		Shares Purchased		Shares Sold			Shares Held at December 31, 2010		Value at December 31, 2010		Realized Gain (Loss)			Income
BlackRock Cash Funds: Institutional, SL Agency Shares		199,984,725		–		(60,007,961	)1		139,976,764	$	139,976,764		–		$	529,458
BlackRock Cash Funds: Prime, SL Agency Shares		31,755,867		–		(9,740,504	)1		22,015,363	$	22,015,363		–		$	83,823
iShares Barclays TIPS Bond Fund		118,873		41,871		(10,400	)		150,344	$	16,164,987	$	42,792		$	383,607
iShares Cohen & Steers Realty Majors Index Fund		739,619		60,310		(106,620	)		693,309	$	45,564,267	$	(3,241,847	)	$	1,349,747
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund		2,251,865		267,328		(362,713	)		2,156,480	$	67,390,000	$	(3,123,749	)	$	4,208,828
iShares MSCI Canada Index Fund		757,346		192,206		–			949,552	$	29,436,112		–		$	457,434
iShares MSCI EAFE Index Fund		3,044,063		838,940		(223,837	)		3,659,166	$	213,073,236	$	(3,549,863	)	$	5,271,666
iShares MSCI EAFE Small Cap Index Fund		558,635		148,995		(20,630	)		687,000	$	28,998,270	$	(20,523	)	$	815,214
iShares MSCI Emerging Markets Index Fund		1,492,236		354,934		(39,866	)		1,807,304	$	86,063,817	$	(82,820	)	$	1,182,340
iShares S&P MidCap 400 Index Fund		1,128,250		36,338		(151,812	)		1,012,776	$	91,848,655	$	1,653,522		$	1,105,512
iShares S&P SmallCap 600 Index Fund		669,577		32,074		(151,809	)		549,842	$	37,647,682	$	1,105,177		$	511,920

¹ Represents net activity.

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

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

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

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities.

• 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 inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

See Notes to Financial Statements.

92 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments (concluded) LifePath 2040 Master Portfolio

The following table summarizes the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments:

Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Affiliated Investment Companies:
Master Portfolios		–	$	865,626,052		–	$	865,626,052
Exchange-Traded Funds	$	616,187,026		–		–		616,187,026
Money Market Funds		161,992,127		–		–		161,992,127
Total	$	778,179,153	$	865,626,052		–	$	1,643,805,205

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 93

Schedule of Investments December 31, 2010	LifePath 2050 Master Portfolio
	(Percentages shown are based on Net Assets)

Affiliated Investment Companies	Shares		Value
Master Portfolios – 52.9%
Active Stock Master Portfolio				$	61,094,483
CoreAlpha Bond Master Portfolio					2,094,794
Total Master Portfolios					63,189,277
Exchange-Traded Funds – 45.3%
iShares Cohen & Steers Realty Majors Index Fund (a)(b)		67,805			4,456,144
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund (a)(b)		211,207			6,600,219
iShares MSCI Canada Index Fund (a)		85,268			2,643,308
iShares MSCI EAFE Index Fund (a)(b)		326,243			18,997,130
iShares MSCI EAFE Small Cap Index Fund (a)(b)		62,233			2,626,855
iShares MSCI Emerging Markets Index Fund (a)		160,758			7,655,296
iShares S&P MidCap 400 Index Fund (a)		86,290			7,825,640
iShares S&P SmallCap 600 Index Fund (a)(b)		47,346			3,241,781
Total Exchange-Traded Funds (Cost – $44,994,395*)					54,046,373
Money Market Funds – 10.7%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (a)(c)(d)		11,027,847			11,027,847
BlackRock Cash Funds: Prime, SL Agency Shares, 0.24% (a)(c)(d)		1,709,851			1,709,851
Total Money Market Funds (Cost – $12,737,698*)					12,737,698
Total Affiliated Investment Companies – 108.9%					129,973,348
Liabilities in Excess of Other Assets – (8.9)%					(10,582,802	)
Net Assets – 100.0%				$	119,390,546

* The cost and unrealized appreciation (depreciation) of investments (excluding investments in the underlying Master Portfolios) as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	59,969,558
Gross unrealized appreciation	$	6,814,513
Gross unrealized depreciation		–
Net unrealized appreciation	$	6,814,513

(a) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, (excluding investments in the underlying Master Portfolios), were as follows:

Affiliate	Shares Held at December 31, 2009		Shares Purchased			Shares Sold			Shares Held at December 31, 2010		Value at December 31, 2010		Realized Gain (Loss)		Income
BlackRock Cash Funds: Institutional, SL Agency Shares		8,389,466		2,638,381	1		–			11,027,847	$	11,027,847		–	$	29,595
BlackRock Cash Funds: Prime, SL Agency Shares		1,300,980		408,871	1		–			1,709,851	$	1,709,851		–	$	4,548
iShares Cohen & Steers Realty Majors Index Fund		29,950		43,676			(5,821	)		67,805	$	4,456,144	$	112,753	$	103,398
iShares FTSE EPRA/NAREIT Developed Real Estate ex- U.S. Index Fund		97,846		129,918			(16,557	)		211,207	$	6,600,219	$	109,232	$	341,383
iShares MSCI Canada Index Fund		29,411		63,413			(7,556	)		85,268	$	2,643,308	$	33,581	$	38,411
iShares MSCI EAFE Index Fund		122,044		225,391			(21,192	)		326,243	$	18,997,130	$	28,207	$	385,266
iShares MSCI EAFE Small Cap Index Fund		23,107		40,895			(1,769	)		62,233	$	2,626,855	$	4,589	$	69,445
iShares MSCI Emerging Markets Index Fund		58,964		108,511			(6,717	)		160,758	$	7,655,296	$	41,347	$	93,796
iShares S&P MidCap 400 Index Fund		45,948		50,694			(10,352	)		86,290	$	7,825,640	$	236,744	$	77,152
iSharesS&P SmallCap 600 Index Fund		26,860		30,237			(9,751	)		47,346	$	3,241,781	$	178,789	$	36,101

¹ Represents net activity.

(b) Security, or a portion of security, is on loan. (c) Represents the current yield as of report date.

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

• Fair Value Measurements – Various inputs are used in determining the fair value of investments, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities.

• 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 inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

See Notes to Financial Statements.

94 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments (concluded) LifePath 2050 Master Portfolio

The following table summarizes the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments:

Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Affiliated Investment Companies:
Master Portfolios		–	$	63,189,277		–	$	63,189,277
Exchange-Traded Funds	$	54,046,373		–		–		54,046,373
Money Market Funds		12,737,698		–		–		12,737,698
Total	$	66,784,071	$	63,189,277		–	$	129,973,348

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 95

Schedule of Investments December 31, 2010	Active Stock Master Portfolio
	(Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Consumer Discretionary – 12.6%
Auto Components – 0.3%
Autoliv, Inc. (a)		1,398		$	110,358
Lear Corp. (b)		76,400			7,541,444
TRW Automotive Holdings Corp. (b)		16,980			894,846
WABCO Holdings, Inc. (b)		699			42,590
					8,589,238
Automobiles – 0.5%
General Motors Co. (b)		347,453			12,807,117
Diversified Consumer Services – 0.2%
Apollo Group, Inc., Class A (b)		120,232			4,747,962
Corinthian Colleges, Inc. (b)		19,414			101,147
					4,849,109
Hotels, Restaurants & Leisure – 1.4%
Carnival Corp.		270,974			12,494,611
McDonald’s Corp.		134,508			10,324,834
Starbucks Corp. (a)		316,627			10,173,226
Wendy’s/Arby’s Group, Inc.		363,971			1,681,546
					34,674,217
Household Durables – 1.0%
Harman International Industries, Inc. (b)		1,096			50,744
NVR, Inc. (a)(b)		22,449			15,512,708
Whirlpool Corp.		102,654			9,118,755
					24,682,207
Internet & Catalog Retail – 1.1%
priceline.com, Inc. (b)		70,122			28,017,245
Media – 3.3%
CBS Corp., Class B		1,467,771			27,961,038
Comcast Corp., Class A (a)		1,318,838			28,974,871
Dex One Corp. (b)		89,875			670,467
Scripps Networks Interactive, Inc., Class A		766			39,641
SuperMedia, Inc. (a)(b)		40,283			350,865
Time Warner, Inc.		746,250			24,006,862
The Washington Post Co., Class B (a)		770			338,415
					82,342,159
Multiline Retail – 0.7%
Big Lots, Inc. (b)		4,010			122,145
Sears Holdings Corp. (a)(b)		176,003			12,980,221
Wal-Mart Stores, Inc.		117,807			6,353,331
					19,455,697
Specialty Retail – 2.6%
Aeropostale, Inc. (b)		432,705			10,661,851
Best Buy Co., Inc.		773,789			26,533,225
Foot Locker, Inc.		37,030			726,529
GameStop Corp., Class A (a)(b)		190,481			4,358,205
The Gap, Inc. (a)		820,846			18,173,531
Ross Stores, Inc. (a)		6,673			422,067
Signet Jewelers Ltd. (b)		1,763			76,514
Staples, Inc. (a)		167,800			3,820,806
					64,772,728
Textiles, Apparel & Luxury Goods – 1.5%
Coach, Inc.		46,656			2,580,543
Deckers Outdoor Corp. (a)(b)		38,334			3,056,753
NIKE, Inc., Class B		365,608			31,230,236
Polo Ralph Lauren Corp.		1,839			203,982
					37,071,514
Total Consumer Discretionary					317,261,231
Consumer Staples – 10.8%
Beverages – 1.2%
The Coca-Cola Co.		112,104			7,373,080
Coca-Cola Enterprises, Inc. (a)		357,817			8,956,160
Hansen Natural Corp. (b)		240,743			12,586,044
PepsiCo, Inc.		7,474			488,276
					29,403,560
Food & Staples Retailing – 1.1%
CVS Caremark Corp. (a)		92,337			3,210,557
Costco Wholesale Corp. (a)		273,381			19,740,842
Sysco Corp.		119,855			3,523,737
					26,475,136
Food Products – 1.0%
Dean Foods Co. (a)(b)		166,317			1,470,242
Pilgrim’s Pride Corp. (b)		80,465			570,497
Ralcorp Holdings, Inc. (a)(b)		8,040			522,680
Smithfield Foods, Inc. (b)		18,687			385,513
Tyson Foods, Inc., Class A (a)		1,288,676			22,191,001
					25,139,933
Household Products – 3.1%
Colgate-Palmolive Co.		334,246			26,863,351
The Procter & Gamble Co.		797,566			51,307,421
					78,170,772
Personal Products – 1.2%
The Estee Lauder Cos., Inc., Class A (a)		38,213			3,083,789
Herbalife Ltd. (a)		2,712			185,420
Mead Johnson Nutrition Co.		432,252			26,907,687
					30,176,896
Tobacco – 3.2%
Lorillard, Inc.		323,707			26,563,396
Philip Morris International, Inc.		488,499			28,591,847
Reynolds American, Inc. (a)		814,878			26,581,320
					81,736,563
Total Consumer Staples					271,102,860
Energy – 10.6%
Energy Equipment & Services – 1.4%
Core Laboratories N.V. (a)		24,829			2,211,023
Dresser-Rand Group, Inc. (a)(b)		71,246			3,034,367
McDermott International, Inc. (a)(b)		137,252			2,839,744
National Oilwell Varco, Inc. (a)		256,171			17,227,500
Rowan Cos., Inc. (a)(b)		40,410			1,410,713
SEACOR Holdings, Inc.		75,838			7,666,463
					34,389,810
Oil, Gas & Consumable Fuels – 9.2%
Alpha Natural Resources, Inc. (b)		138,192			8,295,666
Anadarko Petroleum Corp.		27,692			2,109,023
Apache Corp.		242,802			28,949,282
Chevron Corp.		188,354			17,187,303
Concho Resources, Inc. (b)		66			5,786
ConocoPhillips		689,717			46,969,728

See Notes to Financial Statements.

96 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments (continued)	Active Stock Master Portfolio
	(Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Energy (concluded)
Oil, Gas & Consumable Fuels (concluded)
Energy Partners Ltd. (b)		115,620		$	1,718,113
Exxon Mobil Corp.		1,396,156			102,086,927
Hess Corp.		96,532			7,388,559
Newfield Exploration Co. (a)(b)		29,022			2,092,776
Noble Energy, Inc.		12,331			1,061,452
Valero Energy Corp.		341,231			7,889,261
Whiting Petroleum Corp. (a)(b)		46,299			5,425,780
					231,179,656
Total Energy					265,569,466
Financials – 14.3%
Capital Markets – 2.3%
Ameriprise Financial, Inc. (a)		263,415			15,159,533
The Bank of New York Mellon Corp.		40,810			1,232,462
Franklin Resources, Inc.		7,066			785,810
The Goldman Sachs Group, Inc.		78,720			13,237,555
Invesco Ltd.		244,751			5,888,709
Legg Mason, Inc. (a)		163,892			5,944,363
Morgan Stanley		609,400			16,581,774
					58,830,206
Commercial Banks – 1.6%
Commerce Bancshares, Inc. (a)		20,033			795,911
Cullen/Frost Bankers, Inc. (a)		4,892			298,999
First Citizens BancShares, Inc., Class A		214			40,457
Huntington Bancshares, Inc.		115,193			791,376
M&T Bank Corp.		158,034			13,756,860
Marshall & Ilsley Corp.		2,585			17,888
Regions Financial Corp.		39,485			276,395
SVB Financial Group (b)		36,269			1,924,070
SunTrust Banks, Inc.		64,633			1,907,320
U.S. Bancorp		54,007			1,456,569
Wells Fargo & Co.		634,089			19,650,418
					40,916,263
Consumer Finance – 1.0%
Capital One Financial Corp.		572,256			24,355,215
Diversified Financial Services – 5.9%
Bank of America Corp.		2,124,970			28,347,100
CME Group, Inc.		50,808			16,347,474
Citigroup, Inc. (b)		5,734,793			27,125,571
JPMorgan Chase & Co.		1,433,124			60,793,120
The NASDAQ OMX Group, Inc. (b)		645,816			15,312,297
					147,925,562
Insurance – 3.0%
ACE Ltd.		457,532			28,481,367
Allied World Assurance Co. Holdings Ltd.		4,549			270,393
The Allstate Corp. (a)		708,093			22,574,005
American National Insurance Co.		1,038			88,874
Aspen Insurance Holdings Ltd.		76,014			2,175,521
Berkshire Hathaway, Inc., Class B (b)		64,754			5,187,443
CNA Financial Corp. (b)		2,104			56,913
Everest Re Group Ltd.		471			39,950
MetLife, Inc.		248,874			11,059,961
Reinsurance Group of America, Inc. (a)		12,181			654,241
The Travelers Cos., Inc. (a)		70,501			3,927,611
White Mountains Insurance Group Ltd.		94			31,546
XL Group Plc		37,693			822,461
					75,370,286
Real Estate Investment Trusts (REITs) – 0.5%
AvalonBay Communities, Inc.		26,332			2,963,666
Public Storage		23,531			2,386,514
Rayonier, Inc. (a)		119,311			6,266,214
					11,616,394
Real Estate Management & Development – 0.0%
The Howard Hughes Corp. (b)		5,714			310,956
Jones Lang LaSalle, Inc.		3,584			300,769
					611,725
Thrifts & Mortgage Finance – 0.0%
Hudson City Bancorp, Inc. (a)		57,377			730,983
People’s United Financial, Inc.		4,759			66,674
					797,657
Total Financials					360,423,308
Health Care – 11.3%
Biotechnology – 2.2%
Amgen, Inc. (b)		178,209			9,783,674
Biogen Idec, Inc. (a)(b)		182,615			12,244,336
Celgene Corp. (b)		3,765			222,662
Cephalon, Inc. (a)(b)		212,891			13,139,632
Genzyme Corp. (b)		53,593			3,815,822
Gilead Sciences, Inc. (b)		431,815			15,648,975
United Therapeutics Corp. (b)		3,199			202,241
					55,057,342
Health Care Equipment & Supplies – 2.0%
CareFusion Corp. (b)		402,784			10,351,549
Covidien Plc		221,625			10,119,397
Gen-Probe, Inc. (b)		6,961			406,174
Hospira, Inc. (b)		47,374			2,638,258
Intuitive Surgical, Inc. (a)(b)		101,357			26,124,767
Thoratec Corp. (a)(b)		7,562			214,156
Varian Medical Systems, Inc. (a)(b)		1,413			97,893
Zimmer Holdings, Inc. (a)(b)		10,611			569,598
					50,521,792
Health Care Providers & Services – 2.5%
Express Scripts, Inc. (b)		341,785			18,473,479
Medco Health Solutions, Inc. (a)(b)		492,719			30,188,893
WellPoint, Inc. (b)		237,496			13,504,023
					62,166,395
Life Sciences Tools & Services – 0.3%
Thermo Fisher Scientific, Inc. (a)(b)		150,043			8,306,381
Pharmaceuticals – 4.3%
Allergan, Inc. (a)		231,292			15,882,822
Bristol-Myers Squibb Co.		1,232,325			32,631,966
Eli Lilly & Co.		38,669			1,354,962
Johnson & Johnson		586,234			36,258,573
Medicis Pharmaceutical Corp., Class A (a)		77,948			2,088,227
Merck & Co., Inc.		274,107			9,878,816
Pfizer, Inc.		457,505			8,010,912
Warner Chilcott PLC, Class A		90,541			2,042,605
					108,148,883
Total Health Care					284,200,793

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 97

Schedule of Investments (continued)	Active Stock Master Portfolio
	(Percentages shown are based on Net Assets)

Common Stocks	Shares		Value
Industrials – 9.2%
Aerospace & Defense – 2.9%
Alliant Techsystems, Inc. (b)		129,714		$	9,654,613
The Boeing Co.		80,299			5,240,313
General Dynamics Corp. (a)		357,555			25,372,103
L-3 Communications Holdings, Inc. (a)		50,646			3,570,036
Northrop Grumman Corp. (a)		385,552			24,976,059
Raytheon Co.		91,009			4,217,357
					73,030,481
Air Freight & Logistics – 1.0%
C.H. Robinson Worldwide, Inc. (a)		91,280			7,319,743
FedEx Corp. (a)		173,292			16,117,889
UTi Worldwide, Inc. (a)		24,641			522,389
					23,960,021
Airlines – 0.2%
United Continental Holdings, Inc. (a)(b)		217,464			5,179,992
Commercial Services & Supplies – 0.0%
Republic Services, Inc.		32,403			967,553
Construction & Engineering – 0.2%
URS Corp. (b)		98,616			4,103,412
Electrical Equipment – 0.1%
Emerson Electric Co.		27,926			1,596,529
First Solar, Inc. (a)(b)		269			35,008
General Cable Corp. (b)		22,351			784,297
					2,415,834
Industrial Conglomerates – 0.6%
General Electric Co.		859,251			15,715,701
Machinery – 3.0%
AGCO Corp. (a)(b)		528,486			26,773,101
CNH Global N.V. (a)(b)		729			34,802
Cummins, Inc. (a)		280,427			30,849,774
Danaher Corp. (a)		138,122			6,515,215
Flowserve Corp. (a)		14,039			1,673,730
Harsco Corp. (a)		86,881			2,460,470
Navistar International Corp. (b)		92,974			5,384,124
SPX Corp.		7,681			549,115
					74,240,331
Professional Services – 1.0%
Manpower, Inc. (a)		408,676			25,648,506
Trading Companies & Distributors – 0.2%
W.W. Grainger, Inc. (a)		31,560			4,358,751
WESCO International, Inc. (a)(b)		33,511			1,769,381
					6,128,132
Total Industrials					231,389,963
Information Technology – 18.2%
Communications Equipment – 2.5%
ADTRAN, Inc. (a)		22,318			808,135
Brocade Communications Systems, Inc. (a)(b)		809,126			4,280,277
Cisco Systems, Inc. (b)		2,161,940			43,736,046
F5 Networks, Inc. (b)		26,795			3,487,637
Harris Corp. (a)		203,198			9,204,869
					61,516,964
Computers & Peripherals – 4.8%
Apple, Inc. (b)		237,279			76,536,714
Dell, Inc. (b)		975,342			13,215,884
Hewlett-Packard Co.		37,888			1,595,085
International Business Machines Corp.		96,701			14,191,839
NetApp, Inc. (b)		122,257			6,719,245
SanDisk Corp. (b)		37,944			1,891,888
Teradata Corp. (b)		36,100			1,485,876
Western Digital Corp. (a)(b)		121,809			4,129,325
					119,765,856
Electronic Equipment, Instruments & Components – 0.0%
Flextronics International Ltd. (b)		117,604			923,191
Internet Software & Services – 2.5%
AOL, Inc. (b)		15,871			376,301
Google, Inc., Class A (b)		92,784			55,110,913
IAC/InterActiveCorp (b)		276,662			7,940,199
					63,427,413
IT Services – 1.3%
Accenture Plc, Class A		150,384			7,292,120
Amdocs Ltd. (b)		28,027			769,902
Broadridge Financial Solutions, Inc.		86,940			1,906,594
Cognizant Technology Solutions Corp., Class A (a)(b)		44,582			3,267,415
Computer Sciences Corp.		314,111			15,579,905
Convergys Corp. (b)		2,376			31,292
MasterCard, Inc., Class A		11,116			2,491,207
Visa, Inc., Class A (a)		6,442			453,388
The Western Union Co.		43,053			799,494
					32,591,317
Office Electronics – 0.2%
Xerox Corp.		411,579			4,741,390
Semiconductors & Semiconductor Equipment – 2.4%
Altera Corp. (a)		737,308			26,233,419
Applied Materials, Inc.		17,448			245,145
Broadcom Corp., Class A (a)		539,774			23,507,158
Integrated Device Technology, Inc. (b)		1,082			7,206
Intel Corp. (a)		410,646			8,635,885
LSI Corp. (b)		117,501			703,831
Micron Technology, Inc. (b)		95,260			763,985
					60,096,629
Software – 4.5%
Activision Blizzard, Inc.		1,055			13,124
Autodesk, Inc. (a)(b)		239,995			9,167,809
CA, Inc.		39,534			966,211
Check Point Software Technologies (a)(b)		8,039			371,884
Intuit, Inc. (a)(b)		36,051			1,777,315
MICROS Systems, Inc. (b)		47,022			2,062,385
McAfee, Inc. (b)		32,090			1,486,088
Microsoft Corp.		2,489,060			69,494,555
Oracle Corp.		885,610			27,719,593
					113,058,964
Total Information Technology					456,121,724
Materials – 2.6%
Chemicals – 1.1%
Airgas, Inc.		2,227			139,098
Ashland, Inc.		329,641			16,765,541

See Notes to Financial Statements.

98 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments (continued)	Active Stock Master Portfolio
	(Percentages shown are based on Net Assets)

Common Stocks	Shares			Value
Materials (concluded)
Chemicals (concluded)
The Mosaic Co.			11,230		$	857,523
Praxair, Inc. (a)			114,642			10,944,872
						28,707,034
Containers & Packaging – 0.0%
Ball Corp.			2,897			197,141
Metals & Mining – 1.2%
Alcoa, Inc. (a)			949,632			14,614,836
Freeport-McMoRan Copper & Gold, Inc.			25,145			3,019,663
Newmont Mining Corp.			188,983			11,609,226
						29,243,725
Paper & Forest Products – 0.3%
MeadWestvaco Corp.			288,390			7,544,283
Total Materials						65,692,183
Telecommunication Services – 3.9%
Diversified Telecommunication Services – 3.8%
AT&T, Inc.			1,794,529			52,723,262
Qwest Communications International, Inc.			726,055			5,525,279
Verizon Communications, Inc. (a)			1,090,950			39,034,191
						97,282,732
Wireless Telecommunication Services – 0.1%
Sprint Nextel Corp. (b)			360,889			1,526,560
United States Cellular Corp. (b)			3,974			198,462
						1,725,022
Total Telecommunication Services						99,007,754
Utilities – 2.2%
Electric Utilities – 1.2%
Allegheny Energy, Inc.			24,993			605,830
American Electric Power Co., Inc.			92			3,310
Edison International (a)			65,013			2,509,502
Entergy Corp. (a)			352,233			24,948,664
Southern Co. (a)			28,574			1,092,384
						29,159,690
Gas Utilities – 0.5%
Atmos Energy Corp.			15,470			482,664
Oneok, Inc. (a)			223,466			12,395,659
						12,878,323
Independent Power Producers & Energy Traders – 0.3%
Constellation Energy Group, Inc. (a)			123,905			3,795,210
NRG Energy, Inc. (b)			200,719			3,922,049
						7,717,259
Multi-Utilities – 0.2%
NiSource, Inc. (a)			45,842			807,736
Sempra Energy (a)			97,327			5,107,721
						5,915,457
Total Utilities						55,670,729
Total Long-Term Investments (Cost – $2,133,171,465) – 95.7%						2,406,440,011
Short-Term Securities
Money Market Funds – 11.7%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (c)(d)(e)			259,245,739			259,245,739
BlackRock Cash Funds: Prime, SL Agency Shares, 0.24% (c)(d)(e)			34,372,877			34,372,877
						293,618,616
	Par (000)
U.S. Treasury Obligations – 0.2%
U.S. Treasury Bill, 0.15%, 3/24/11 (f)(g)		$	4,302			4,300,899
Total Short-Term Securities (Cost – $297,919,299) – 11.9%						297,919,515
Total Investments (Cost – $2,431,090,764*) – 107.6%						2,704,359,526
Liabilities in Excess of Other Assets – (7.6)%						(190,935,410	)
Net Assets – 100.0%					$	2,513,424,116

* The cost and unrealized appreciation (depreciation) of investments as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	2,527,175,347
Gross unrealized appreciation	$	207,399,930
Gross unrealized depreciation		(30,215,751	)
Net unrealized appreciation	$	177,184,179

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

(b) Non-income producing security.

(c) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at December 31, 2009		Net Activity		Shares Held at December 31, 2010		Income
BlackRock Cash Funds: Institutional, SL Agency Shares		214,125,678		45,120,061		259,245,739		$	1,188,513
BlackRock Cash Funds: Prime, SL Agency Shares		28,279,563		6,093,314		34,372,877		$	173,524

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 99

Schedule of Investments (concluded) Active Stock Master Portfolio

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

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

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

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

• For Master Portfolio compliance purposes, the Master Portfolio’s sector and industry classifications refer to any one or more of the sector and industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Master Portfolio management. This definition may not apply for purposes of this report, which may combine sector and industry sub-classifications for reporting ease.

• Financial futures contracts purchased as of December 31, 2010 were as follows:

Contracts	Issue	Exchange	Expiration Date	Notional Value			Unrealized Appreciation
813	S&P 500 Index	Chicago	March 2011		$	50,934,450		$	863,629

• Fair Value Measurements – Various inputs are used in determining the fair value of investments and derivatives, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities

• 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 derivatives)

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments and derivatives:

Valuation Inputs	Level 1			Level 2			Level 3		Total
Assets
Investments in Securities:
Long-Term Investments1 :
Common Stocks		$	2,406,440,011			–		–		$	2,406,440,011
Short-Term Securities:
Money Market Funds			293,618,616			–		–			293,618,616
U.S. Government Obligations			–		$	4,300,899		–			4,300,899
Total		$	2,700,058,627		$	4,300,899		–		$	2,704,359,526
	Derivative Financial Instruments2
Valuation Inputs	Level 1			Level 2			Level 3		Total
Assets
Equity contracts		$	863,629			–		–		$	863,629

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

² Derivative financial instruments are financial futures contracts. Financial futures contracts are shown at the unrealized appreciation/depreciation on the instrument.

See Notes to Financial Statements.

100 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments December 31, 2010	CoreAlpha Bond Master Portfolio
	(Percentages shown are based on Net Assets)

Asset-Backed Securities	Par (000)			Value
ACE Securities Corp.,
Series 2005-AG1, Class A2D, 0.62%, 8/25/35 (a)		$	5,039		$	4,849,595
AH Mortgage Advance Trust,
Series 2010-ADV2, Class A1, 4.21%, 5/10/41 (b)			5,200			5,219,500
American General Mortgage Loan Trust,
Series 2010-1A, Class A1, 5.15%, 3/25/58 (a)(b)			7,228			7,511,740
AmeriCredit Automobile Receivables Trust:
Series 2006-BG, Class A4, 5.21%,
9/06/13			3,463			3,517,226
Series 2006-RM, Class A3, 5.53%,
1/06/14			6,593			6,676,226
Series 2007-CM, Class A4A, 5.55%,
4/07/14			6,114			6,329,671
Series 2007-CM, Class A4B, 0.35%,
4/07/14 (a)			7,192			7,171,701
Ameriquest Mortgage Securities, Inc.:
Series 2005-R11, Class A2C, 0.49%,
1/25/36 (a)			1,361			1,297,704
Series 2005-R6, Class A2, 0.46%,
8/25/35 (a)			1,002			969,661
Series 2006-R1, Class A2C, 0.45%,
3/25/36 (a)			2,820			2,789,542
Asset Backed Funding Corp. Certificates:
Series 2005-HE2, Class M1, 0.74%,
6/25/35 (a)			635			626,110
Series 2005-OPT1, Class A1SS, 0.51%,
7/25/35 (a)			1,259			1,213,968
Series 2006-OPT2, Class A3B, 0.37%,
10/25/36 (a)			912			906,660
Bank of America Credit Card Trust,
Series 2007-C1, Class C1, 0.55%, 6/16/14 (a)			2,300			2,268,253
Bear Stearns Asset Backed Securities Trust:
Series 2005-HE9, Class M1, 0.77%,
10/25/35 (a)			600			555,586
Series 2007-HE3, Class 1A1, 0.38%,
4/25/37 (a)			5,183			4,991,101
Capital One Auto Finance Trust:
Series 2006-B, Class A4, 0.28%,
7/15/13 (a)			4,277			4,255,833
Series 2006-C, Class A4, 0.29%,
5/15/13 (a)			712			708,397
Series 2007-A, Class A4, 0.28%,
11/15/13 (a)			1,143			1,135,173
Series 2007-B, Class A4, 0.29%,
4/15/14 (a)			4,132			4,110,826
Series 2007-C, Class A3A, 5.13%,
4/16/12			244			244,094
Series 2007-C, Class A3B, 0.77%,
4/16/12 (a)			423			423,301
Capital One Multi-Asset Execution Trust:
Series 2006-C1, Class C, 0.55%,
3/17/14 (a)			5,900			5,868,146
Series 2006-C2, Class C, 0.56%,
6/16/14 (a)			6,365			6,306,723
Carrington Mortgage Loan Trust,
Series 2007-FRE1, Class A1, 0.38%, 2/25/37 (a)			1,864			1,761,714
Chase Funding Mortgage Loan Asset-Backed
Certificates, Series 2003-5, Class 1A4, 4.40%, 2/25/30			653			650,099
Chase Issuance Trust,
Series 2006-C2, Class C, 0.56%, 4/15/13 (a)			7,000			6,994,251
Citibank Credit Card Issuance Trust:
Series 2004-C1, Class C1, 0.91%,
7/15/13 (a)			3,700			3,680,889
Series 2006-C2, Class C2, 5.70%,
5/15/13			6,037			6,164,504
Countrywide Asset-Backed Certificates:
Series 2004-AB2, Class A3, 0.67%,
5/25/36 (a)			2,058			1,981,545
Series 2005-3, Class MV2, 0.71%,
8/25/35 (a)			3,000			2,784,990
Series 2005-4, Class MV1, 0.72%,
10/25/35 (a)			6,545			6,235,503
Series 2006-15, Class A2, 5.68%,
10/25/46 (a)			3,800			3,727,572
Series 2006-22, Class 2A1, 0.31%,
5/25/47 (a)			57			56,692
Series 2006-25, Class 2A1, 0.33%,
6/25/47 (a)			1,319			1,297,897
Series 2007-10, Class 2A1, 0.31%,
6/25/47 (a)			1,988			1,925,954
Series 2007-4, Class A1B, 5.81%,
9/25/37			1,073			1,054,716
Series 2007-5, Class 2A1, 0.36%,
9/25/47 (a)			2,118			2,055,883
Series 2007-6, Class 2A1, 0.36%,
9/25/37 (a)			343			329,449
Series 2007-7, Class 2A1, 0.34%,
10/25/47 (a)			253			249,471
Series 2007-8, Class 2A1, 0.32%,
11/25/37 (a)			3,264			3,061,490
Credit-Based Asset Servicing & Securitization LLC,
Series 2007-SP2, Class A1, 0.41%, 3/25/46 (a)(b)			1,472			1,457,635
First Franklin Mortgage Loan Asset Backed Certificates,
Series 2004-FF10, Class A3, 0.80%, 9/25/34 (a)			330			313,941
First National Master Note Trust,
Series 2009-1, Class A, 1.61%, 5/15/14 (a)			5,800			5,798,906
GMAC Mortgage Corp. Loan Trust,
Series 2006-HLTV, Class A3, 5.59%, 10/25/29			882			852,645
GMAC Mortgage Servicer Advance Funding Co. Ltd.,
Series 2010-1A, Class A, 4.25%, 1/15/22 (b)			1,700			1,708,776
GSAMP Trust,
Series 2007-HE2, Class A2A, 0.38%, 3/25/47 (a)			1,495			1,415,736
GSRPM Mortgage Loan Trust,
Series 2006-2, Class A1A, 0.40%, 9/25/36 (a)(b)			533			527,354
HSBC Home Equity Loan Trust,
Series 2006-2, Class A1, 0.41%, 3/20/36 (a)			4,635			4,340,558

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 101

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

Asset-Backed Securities	Par (000)			Value
Home Equity Asset Trust:
Series 2005-2, Class M2, 0.74%,
7/25/35 (a)		$	4,200		$	3,937,907
Series 2006-1, Class 2A4, 0.59%,
4/25/36 (a)			4,200			3,430,564
IndyMac Residential Asset Backed Trust,
Series 2007-A, Class 2A1, 0.39%, 4/25/47 (a)			2,843			2,803,668
Lehman XS Trust,
Series 2006-GP4, Class 3A1A, 0.33%, 8/25/46 (a)			364			361,173
MBNA Credit Card Master Note Trust:
Series 2004-C1, Class C1, 1.04%,
7/15/13 (a)			4,600			4,599,879
Series 2006-C3, Class C3, 0.55%,
10/15/13 (a)			800			798,011
MBNA Master Credit Card Trust,
Series 2001-C, Class C, 7.10%, 9/15/13 (b)			4,525			4,596,979
MASTR Asset Backed Securities Trust:
Series 2006-AB1, Class A2, 0.49%,
2/25/36 (a)			4,276			3,836,724
Series 2006-AM1, Class A2, 0.39%,
1/25/36 (a)			368			363,882
Series 2007-HE1, Class A1, 0.34%,
5/25/37 (a)			1,817			1,752,163
Morgan Stanley Capital, Inc.,
Series 2006, Class A3, 0.45%, 12/25/35 (a)			2,027			1,999,516
Morgan Stanley Home Equity Loan Trust,
Series 2006-1, Class A2B, 0.46%, 12/25/35 (a)			975			955,144
New Century Home Equity Loan Trust,
Series 2005-3, Class M1, 0.74%, 7/25/35 (a)			8,200			6,936,011
Park Place Securities, Inc.:
Series 2004-MHQ1, Class M1, 0.96%,
12/25/34 (a)			2,775			2,681,881
Series 2005-WCW3, Class A2C, 0.64%,
8/25/35 (a)			8,100			7,572,666
Residential Asset Mortgage Products, Inc.:
Series 2005-EFC3, Class M1, 0.71%,
8/25/35 (a)			5,547			5,455,484
Series 2007-RZ1, Class A1, 0.33%,
2/25/37 (a)			22			21,514
Residential Asset Securities Corp.:
Series 2005-AHL1, Class A2, 0.53%,
7/25/35 (a)			934			924,862
Series 2005-AHL2, Class A2, 0.52%,
10/25/35 (a)			779			747,748
Series 2005-EMX3, Class M1, 0.69%,
9/25/35 (a)			1,000			936,933
Series 2006-EMX5, Class A2, 0.38%,
7/25/36 (a)			254			253,861
Series 2006-KS1, Class A3, 0.48%,
2/25/36 (a)			1,435			1,335,671
Series 2006-KS5, Class A2, 0.37%,
7/25/36 (a)			353			352,554
Series 2006-KS7, Class A2, 0.36%,
9/25/36 (a)			441			438,607
Series 2007-KS1, Class A1, 0.32%,
1/25/37 (a)			117			116,404
Series 2007-KS3, Class AI1, 0.37%,
4/25/37 (a)			2,339			2,292,483
Series 2007-KS4, Class A1, 0.36%,
5/25/37 (a)			595			585,218
SG Mortgage Securities Trust,
Series 2006-OPT2, Class A3A, 0.31%, 10/25/36 (a)			1,114			1,095,802
SLM Student Loan Trust,
Series 2009-C, Class A, 4.50%, 11/16/43 (a)(b)			6,198			6,023,528
Santander Drive Auto Receivables Trust:
Series 2010-2, Class A2, 0.95%,
8/15/13			1,300			1,301,517
Series 2010-B, Class C, 3.02%,
10/17/16 (b)			2,500			2,505,475
Saxon Asset Securities Trust,
Series 2005-4, Class A1A, 0.49%, 11/25/37 (a)			2,830			2,626,447
Securitized Asset Backed Receivables LLC Trust:
Series 2005-FR5, Class A1A, 0.55%,
8/25/35 (a)			1,408			1,388,433
Series 2006-OP1, Class A2C, 0.56%,
10/25/35 (a)			4,018			3,609,575
Soundview Home Equity Loan Trust:
Series 2005-OPT4, Class 2A3, 0.52%,
12/25/35 (a)			7,846			7,059,528
Series 2006-EQ1, Class A2, 0.37%,
10/25/36 (a)			5,259			5,169,993
Series 2007-OPT5, Class 2A1, 1.06%,
10/25/37 (a)			156			154,737
Structured Asset Investment Loan Trust:
Series 2005-1, Class A5, 0.61%,
2/25/35 (a)(b)			2,043			2,016,296
Series 2005-11, Class A6, 0.48%,
1/25/36 (a)			2,636			2,429,479
Series 2005-6, Class M1, 0.74%,
7/25/35 (a)			3,900			3,079,436
Structured Asset Securities Corp.,
Series 2006-OPT1, Class A4, 0.42%, 4/25/36 (a)			3,580			3,234,822
Terwin Mortgage Trust,
Series 2005-14HE, Class AF2, 4.85%, 8/25/36			4,510			4,455,884
Wachovia Auto Loan Owner Trust,
Series 2007-1, Class D, 5.65%, 2/20/13			2,600			2,621,811
Wheels SPV LLC,
Series 2009-1, Class A, 1.81%, 3/15/18 (a)(b)			5,984			6,024,524
Total Asset-Backed Securities – 11.9%						255,259,701
Corporate Bonds
Aerospace & Defense – 0.4%
BE Aerospace, Inc.,
6.88%, 10/01/20			1,900			1,961,750
ITT Corp.,
6.13%, 5/01/19			800			901,747

See Notes to Financial Statements.

102 BLACKROCK FUNDS III DECEMBER 31, 2010

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

Corporate Bonds	Par (000)			Value
Aerospace & Defense (concluded)
L-3 Communications Corp.,
Series B, 6.38%, 10/15/15		$	4,843		$	4,988,290
						7,851,787
Air Freight & Logistics – 0.1%
FedEx Corp.,
8.00%, 1/15/19			600			740,134
United Parcel Service, Inc.,
4.88%, 11/15/40			400			387,440
						1,127,574
Auto Components – 0.0%
Cooper US, Inc.:
2.38%, 1/15/16			350			345,233
3.88%, 12/15/20			300			293,324
						638,557
Automobiles – 0.1%
Daimler Finance North America LLC,
5.88%, 3/15/11			965			974,785
DaimlerChrysler North America Holding Corp.,
8.50%, 1/18/31			1,000			1,336,243
						2,311,028
Beverages – 0.7%
Anheuser-Busch InBev Worldwide, Inc.:
5.38%, 1/15/20			6,400			6,934,963
6.38%, 1/15/40			1,400			1,603,437
Bottling Group LLC,
5.13%, 1/15/19			1,100			1,199,990
Diageo Finance BV,
3.25%, 1/15/15			2,000			2,060,804
Dr Pepper Snapple Group, Inc.,
2.35%, 12/21/12			1,000			1,023,332
PepsiCo, Inc.:
5.50%, 1/15/40			2,000			2,114,058
4.88%, 11/01/40			1,000			970,343
						15,906,927
Biotechnology – 0.4%
Amgen, Inc.,
6.40%, 2/01/39			900			1,036,461
Biogen Idec, Inc.,
6.88%, 3/01/18			3,500			3,945,763
Celgene Corp.,
3.95%, 10/15/20			4,000			3,802,940
Genentech, Inc.,
4.75%, 7/15/15			625			688,184
						9,473,348
Building Products – 0.0%
CRH America, Inc.,
6.00%, 9/30/16			800			853,646
Capital Markets – 1.1%
The Bear Stearns Cos., Inc.,
6.40%, 10/02/17			2,500			2,850,095
The Bear Stearns Cos., Inc./JPMorgan Chase & Co.,
5.70%, 11/15/14			3,600			3,955,497
Credit Suisse First Boston USA, Inc.:
5.13%, 1/15/14 (c)			1,400			1,523,487
4.88%, 1/15/15			900			970,335
The Goldman Sachs Group, Inc.:
5.95%, 1/18/18			1,500			1,627,325
6.15%, 4/01/18			1,500			1,651,790
7.50%, 2/15/19			1,200			1,399,189
6.75%, 10/01/37			1,650			1,686,953
Merrill Lynch & Co., Inc.,
6.88%, 4/25/18 (c)			2,350			2,571,741
Morgan Stanley:
6.00%, 4/28/15			1,400			1,516,204
6.25%, 8/28/17			1,500			1,615,749
5.63%, 9/23/19			2,000			2,039,366
Series F, 5.95%, 12/28/17			850			899,334
						24,307,065
Chemicals – 0.6%
Eastman Chemical Co.,
3.00%, 12/15/15			2,300			2,271,832
Nalco Co.,
6.63%, 1/15/19 (b)			3,500			3,578,750
PPG Industries, Inc.:
6.65%, 3/15/18			2,200			2,530,295
3.60%, 11/15/20			2,000			1,862,398
Yara International ASA,
7.88%, 6/11/19 (b)			1,900			2,264,391
						12,507,666
Commercial Banks – 2.1%
Abbey National Treasury Services Plc,
3.88%, 11/10/14 (b)			2,500			2,477,345
American Express Bank FSB,
5.55%, 10/17/12			1,800			1,925,312
Australia & New Zealand Banking Group Ltd.,
2.40%, 1/11/13 (b)			2,800			2,845,363
BNP Paribas/BNP Paribas LLC,
2.13%, 12/21/12			4,000			4,064,476
Credit Suisse New York,
5.30%, 8/13/19			2,400			2,535,048
Deutsche Bank AG/London,
2.38%, 1/11/13			3,500			3,551,618
Enterprise Products Operating LLC,
5.25%, 1/31/20 (c)			2,000			2,080,380
HSBC Bank USA NA:
4.88%, 8/24/20			1,400			1,391,695
5.88%, 11/01/34			1,700			1,684,056
HSBC Holdings Plc:
5.25%, 12/12/12			3,000			3,190,401
6.50%, 9/15/37			1,400			1,466,136
JPMorgan Chase Bank NA, Series BKNT,
6.00%, 10/01/17			800			886,850
Lloyds TSB Bank Plc,
4.38%, 1/12/15 (b)			2,500			2,499,430
Wachovia Bank NA,
6.00%, 11/15/17			5,400			5,991,111
Wells Fargo & Co.,
5.25%, 10/23/12			7,700			8,255,000
						44,844,221
Commercial Services & Supplies – 0.0%
Iron Mountain, Inc.,
8.38%, 8/15/21			580			622,050

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 103

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

Corporate Bonds	Par (000)			Value
Communications Equipment – 0.4%
Motorola, Inc.,
8.00%, 11/01/11		$	4,600		$	4,844,522
Omnicom Group, Inc.,
4.45%, 8/15/20			3,800			3,718,410
						8,562,932
Computers & Peripherals – 0.1%
International Business Machines Corp.,
7.63%, 10/15/18			2,050			2,609,566
Consumer Finance – 0.8%
American Express Co.,
8.13%, 5/20/19			4,800			5,972,213
American Express Credit Co.,
2.75%, 9/15/15			2,600			2,557,583
Capital One Financial Corp.,
7.38%, 5/23/14			1,600			1,820,690
Caterpillar Financial Services Corp.,
7.05%, 10/01/18			3,000			3,628,899
Ford Motor Credit Co. LLC,
7.00%, 4/15/15			2,500			2,686,530
HSBC Finance Corp.,
6.68%, 1/15/21 (b)			750			757,711
						17,423,626
Containers & Packaging – 0.5%
Ball Corp.,
5.75%, 5/15/21			2,900			2,805,750
Crown Americas LLC and Crown Americas Capital Corp. II,
7.63%, 5/15/17			3,900			4,192,500
Sealed Air Corp.:
7.88%, 6/15/17			840			923,746
6.88%, 7/15/33 (b)			2,000			1,875,294
						9,797,290
Diversified Financial Services – 1.4%
Associates Corp. of North America,
6.95%, 11/01/18			1,500			1,639,423
Bank of America Corp.:
4.50%, 4/01/15			4,300			4,370,240
3.70%, 9/01/15 (c)			1,000			991,365
5.65%, 5/01/18			1,500			1,532,658
5.49%, 3/15/19 (c)			1,500			1,463,183
Citigroup, Inc.:
6.50%, 8/19/13			1,400			1,537,283
6.38%, 8/12/14			1,400			1,547,290
6.13%, 11/21/17			1,000			1,095,886
8.50%, 5/22/19			1,600			1,986,296
8.13%, 7/15/39			600			763,282
General Electric Capital Corp.:
2.25%, 11/09/15			2,000			1,922,710
4.38%, 9/16/20			4,000			3,936,628
6.75%, 3/15/32			500			566,059
6.88%, 1/10/39			1,000			1,155,660
Genworth Global Funding Trusts,
5.75%, 5/15/13			1,000			1,046,106
JPMorgan Chase & Co.,
4.75%, 5/01/13			3,100			3,318,972
SLM Corp.,
8.00%, 3/25/20			950			963,210
						29,836,251
Diversified Telecommunication Services – 1.5%
AT&T, Inc.:
4.95%, 1/15/13			1,500			1,607,806
6.55%, 2/15/39 (c)			2,000			2,176,908
5.35%, 9/01/40 (b)			1,231			1,157,714
BellSouth Corp.,
6.55%, 6/15/34			2,400			2,524,090
British Telecommunications Plc,
9.88%, 12/15/30			400			533,132
CenturyLink, Inc.,
6.15%, 9/15/19 (c)			100			100,303
Frontier Communications Corp.:
7.88%, 4/15/15			900			983,250
8.25%, 4/15/17			1,500			1,646,250
Qwest Corp.,
8.38%, 5/01/16			3,300			3,910,500
Telecom Italia Capital SA,
7.00%, 6/04/18			1,600			1,694,123
Telefonica Emisiones SAU,
5.86%, 2/04/13			3,600			3,843,677
Verizon Communications, Inc.:
8.75%, 11/01/18			2,000			2,611,632
6.90%, 4/15/38 (c)			900			1,049,718
8.95%, 3/01/39			500			712,545
7.35%, 4/01/39			1,700			2,090,964
Virgin Media Secured Finance Plc,
6.50%, 1/15/18			2,600			2,736,500
Windstream Corp.:
8.63%, 8/01/16			2,250			2,368,125
7.88%, 11/01/17			1,350			1,419,187
						33,166,424
Electric Utilities – 1.3%
Commonwealth Edison Co.:
4.70%, 4/15/15			1,000			1,083,155
5.88%, 2/01/33			3,500			3,611,454
Duke Energy Corp.,
5.05%, 9/15/19			2,000			2,119,196
FirstEnergy Solutions Corp.,
6.05%, 8/15/21			1,200			1,232,722
MidAmerican Energy Holdings Co.,
5.75%, 4/01/18			6,550			7,380,861
Northern States Power Co,
5.25%, 7/15/35			2,500			2,534,203
Oncor Electric Delivery Co. LLC,
5.95%, 9/01/13			2,750			3,044,943
Pacific Gas & Electric Co.,
5.63%, 11/30/17			1,500			1,688,721
PacifiCorp, 5.50%, 1/15/19			1,300			1,465,747
Progress Energy, Inc.,
4.88%, 12/01/19			3,100			3,253,310
Southern Co.,
4.15%, 5/15/14			900			947,238
						28,361,550
Electronic Equipment, Instruments & Components – 0.2%
Corning, Inc.,
4.25%, 8/15/20			600			592,522
Tyco Electronics Group SA,
6.55%, 10/01/17			2,900			3,295,603
						3,888,125

See Notes to Financial Statements.

104 BLACKROCK FUNDS III DECEMBER 31, 2010

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

Corporate Bonds	Par (000)			Value
Food & Staples Retailing – 0.1%
The Kroger Co.,
6.90%, 4/15/38		$	400		$	458,654
Wal-Mart Stores, Inc.,
4.88%, 7/08/40			1,700			1,619,568
						2,078,222
Food Products – 0.7%
General Mills, Inc.,
5.65%, 2/15/19			1,400			1,558,557
HJ Heinz Finance Co.,
7.13%, 8/01/39 (b)			1,400			1,646,285
Hershey Co. (The),
4.13%, 12/01/20			1,550			1,563,172
Kellogg Co.:
5.13%, 12/03/12			2,300			2,464,995
4.45%, 5/30/16			100			107,637
Series B, 7.45%, 4/01/31			100			125,323
Kraft Foods, Inc.,
5.38%, 2/10/20			3,600			3,874,568
Mead Johnson Nutrition Co.,
4.90%, 11/01/19			2,400			2,531,674
						13,872,211
Health Care Equipment & Supplies – 0.2%
Covidien International Finance SA,
6.55%, 10/15/37			1,600			1,899,453
Hospira, Inc.,
5.60%, 9/15/40			300			294,857
Zimmer Holdings, Inc.,
4.63%, 11/30/19			1,450			1,488,808
						3,683,118
Health Care Providers & Services – 1.0%
AmerisourceBergen Corp.,
4.88%, 11/15/19			900			917,791
CIGNA Corp.,
4.38%, 12/15/20			1,900			1,854,708
Cardinal Health, Inc.,
4.63%, 12/15/20			4,300			4,290,390
DaVita, Inc.:
6.38%, 11/01/18			2,950			2,935,250
6.63%, 11/01/20			2,200			2,178,000
Express Scripts, Inc.,
6.25%, 6/15/14			2,200			2,459,516
Humana, Inc.,
6.45%, 6/01/16			2,400			2,625,360
Laboratory Corp. of America Holdings,
3.13%, 5/15/16			1,600			1,581,283
UnitedHealth Group, Inc.:
6.88%, 2/15/38			1,700			1,979,162
5.70%, 10/15/40			250			248,916
						21,070,376
Hotels, Restaurants & Leisure – 1.0%
Host Hotels & Resorts, Inc.,
6.00%, 11/01/20 (b)			5,200			5,122,000
McDonald’s Corp.:
6.30%, 10/15/37			1,000			1,179,018
5.70%, 2/01/39			1,100			1,197,882
4.88%, 7/15/40			1,600			1,557,253
Wyndham Worldwide Corp.,
6.00%, 12/01/16			3,850			4,028,775
Yum! Brands, Inc.:
4.25%, 9/15/15			2,000			2,110,374
6.25%, 3/15/18			2,500			2,822,732
3.88%, 11/01/20 (c)			1,500			1,432,931
6.88%, 11/15/37			2,100			2,383,313
						21,834,278
Household Durables – 0.0%
Stanley Black & Decker, Inc.,
5.20%, 9/01/40			600			563,783
Independent Power Producers & Energy Traders – 0.2%
Constellation Energy Group, Inc.,
5.15%, 12/01/20			3,200			3,150,394
Exelon Generation Co. LLC,
5.75%, 10/01/41			500			476,380
						3,626,774
Industrial Conglomerates – 0.2%
Tyco International Finance SA,
8.50%, 1/15/19			3,900			4,991,938
Insurance – 0.9%
Allstate Life Global Funding Trusts,
5.38%, 4/30/13			5,250			5,717,040
American International Group,
6.40%, 12/15/20			1,200			1,259,051
Marsh & McLennan Cos., Inc.:
5.75%, 9/15/15			400			430,534
9.25%, 4/15/19			2,300			2,901,926
Metropolitan Life Global Funding I,
2.50%, 1/11/13 (b)			2,500			2,554,600
Northwestern Mutual Life Insurance,
6.06%, 3/30/40 (b)			2,700			2,982,269
Prudential Financial, Inc.:
5.15%, 1/15/13			1,750			1,866,540
7.38%, 6/15/19			1,000			1,179,039
						18,890,999
Internet & Catalog Retail – 0.2%
Expedia, Inc.,
5.95%, 8/15/20			3,100			3,115,500
Internet Software & Services – 0.1%
Digital Realty Trust LP,
5.88%, 2/01/20			2,800			2,848,588
IT Services – 0.5%
International Business Machines Corp.:
2.00%, 1/05/16			8,600			8,408,908
5.60%, 11/30/39			1,600			1,743,246
						10,152,154
Life Sciences Tools & Services – 0.5%
Bio-Rad Laboratories, Inc.,
4.88%, 12/15/20			4,100			3,981,010
Life Technologies Corp.,
3.50%, 1/15/16			4,400			4,386,589
Thermo Fisher Scientific, Inc.,
3.25%, 11/20/14			1,600			1,645,161
						10,012,760

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 105

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

Corporate Bonds	Par (000)			Value
Machinery – 0.2%
Case New Holland, Inc.,
7.75%, 9/01/13		$	3,191		$	3,430,325
Media – 1.5%
CSC Holdings, Inc.,
7.63%, 7/15/18			4,400			4,774,000
Comcast Corp.,
5.70%, 5/15/18			7,050			7,758,708
DirecTV Holdings LLC,
5.20%, 3/15/20			2,500			2,591,707
DISH DBS Corp.,
6.38%, 10/01/11 (c)			500			515,000
DirecTV Holdings LLC / DirecTV Financing Co., Inc.:
7.63%, 5/15/16			4,800			5,322,000
5.88%, 10/01/19			1,500			1,630,265
Discovery Communications LLC,
6.35%, 6/01/40			1,000			1,080,081
NBC Universal, Inc.,
6.40%, 4/30/40 (b)			500			530,982
News America, Inc.,
5.65%, 8/15/20 (c)			1,400			1,570,117
TCM Mobile LLC,
3.55%, 1/15/15 (b)			1,600			1,633,082
Time Warner, Inc.:
7.70%, 5/01/32			500			610,346
6.20%, 3/15/40			600			637,832
Viacom, Inc.:
4.38%, 9/15/14			1,300			1,384,006
6.88%, 4/30/36			2,700			3,097,850
						33,135,976
Metals & Mining – 0.7%
Barrick Australian Finance Pty Ltd.,
5.95%, 10/15/39			400			423,545
Freeport-McMoRan Copper & Gold, Inc.,
8.38%, 4/01/17			2,200			2,433,750
Rio Tinto Finance USA Ltd.,
9.00%, 5/01/19			5,300			7,118,144
Vale Overseas Ltd.:
6.88%, 11/21/36			1,000			1,099,982
6.88%, 11/10/39			2,100			2,320,353
Xstrata Canada Corp.,
6.20%, 6/15/35			1,000			1,006,108
						14,401,882
Multi-Utilities – 0.3%
Dominion Resources, Inc.,
6.40%, 6/15/18			4,050			4,711,993
PSEG Power LLC,
6.95%, 6/01/12			2,300			2,479,768
						7,191,761
Oil, Gas & Consumable Fuels – 2.0%
Anadarko Petroleum Corp.,
6.20%, 3/15/40			1,300			1,269,037
Apache Corp.:
5.10%, 9/01/40			700			680,146
5.25%, 2/01/42			1,900			1,888,102
BP Capital Markets Plc,
3.13%, 10/01/15			700			699,519
ConocoPhillips Canada Funding Co. I,
5.63%, 10/15/16			500			568,291
EnCana Corp.,
6.50%, 5/15/19 (c)			400			474,104
Energy Transfer Partners LP:
9.70%, 3/15/19			1,900			2,455,674
9.00%, 4/15/19			800			1,002,222
Enterprise Products Operating LLC:
7.50%, 2/01/11			3,600			3,615,905
5.75%, 3/01/35			1,500			1,480,596
LINN Energy LLC FIN Corp.,
8.63%, 4/15/20 (b)			3,200			3,448,000
Marathon Oil Corp.,
6.60%, 10/01/37			900			1,028,015
Petrobras International Finance Co.:
5.75%, 1/20/20			2,000			2,075,136
6.88%, 1/20/40			1,270			1,334,012
Petronas Capital Ltd.,
5.25%, 8/12/19			2,200			2,359,650
Plains All American Pipeline LP/PAA Finance Corp.:
8.75%, 5/01/19			600			744,597
5.75%, 1/15/20			3,000			3,195,414
6.70%, 5/15/36			1,000			1,043,718
TransCanada PipeLines Ltd.:
6.50%, 8/15/18			6,250			7,377,231
3.80%, 10/01/20			4,200			4,098,473
7.63%, 1/15/39			600			775,841
Williams Partners LP,
3.80%, 2/15/15			800			826,722
						42,440,405
Paper & Forest Products – 0.1%
International Paper Co.,
9.38%, 5/15/19			1,600			2,058,062
Pharmaceuticals – 0.3%
Abbott Laboratories,
5.30%, 5/27/40			1,400			1,438,002
AstraZeneca Plc,
6.45%, 9/15/37			1,500			1,780,810
GlaxoSmithKline Capital, Inc.,
6.38%, 5/15/38			500			590,953
Johnson & Johnson,
4.50%, 9/01/40			1,800			1,704,049
Pfizer, Inc., 6.20%, 3/15/19			1,500			1,757,041
						7,270,855
Professional Services – 0.0%
Dun & Bradstreet Corp.,
2.88%, 11/15/15			600			586,519
Real Estate Investment Trusts (REITs) – 0.4%
Plum Creek Timberlands LP,
4.70%, 3/15/21			600			571,027
Simon Property Group LP,
5.65%, 2/01/20			2,800			3,028,855
TransDigm, Inc.,
7.75%, 12/15/18 (b)			4,200			4,347,000
						7,946,882
Road & Rail – 0.3%
CSX Corp.:
5.75%, 3/15/13			2,600			2,834,871
5.50%, 4/15/41			800			786,044

See Notes to Financial Statements.

106 BLACKROCK FUNDS III DECEMBER 31, 2010

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

Corporate Bonds	Par (000)			Value
Norfolk Southern Corp.,
5.75%, 1/15/16		$	1,100		$	1,236,074
Union Pacific Corp.,
6.13%, 2/15/20 (c)			1,300			1,483,493
						6,340,482
Semiconductors & Semiconductor Equipment – 0.0%
Broadcom Corp.,
2.38%, 11/01/15 (b)			300			292,034
Software – 0.1%
Oracle Corp.:
5.25%, 1/15/16			1,500			1,686,423
5.75%, 4/15/18			550			629,170
						2,315,593
Specialty Retail – 0.5%
AutoZone, Inc.,
4.00%, 11/15/20			3,600			3,400,099
Limited Brands, Inc.,
8.50%, 6/15/19			4,000			4,570,000
The Sherwin-Williams Co.,
3.13%, 12/15/14			3,300			3,395,459
						11,365,558
Thrifts & Mortgage Finance – 0.0%
Countrywide Home Loans, Inc.,
4.00%, 3/22/11 (c)			800			805,833
Tobacco – 0.9%
Altria Group, Inc.:
9.70%, 11/10/18			2,750			3,627,872
9.25%, 8/06/19			1,100			1,435,544
9.95%, 11/10/38			1,200			1,690,958
Lorillard Tobacco Co.,
8.13%, 5/01/40			1,300			1,332,971
Philip Morris International, Inc.:
4.88%, 5/16/13			2,200			2,381,614
5.65%, 5/16/18			1,300			1,465,651
6.38%, 5/16/38			1,500			1,741,031
Reynolds American, Inc.,
1.00%, 6/15/11 (a)			5,060			5,066,026
						18,741,667
Wireless Telecommunication Services – 0.4%
America Movil SAB de CV,
5.00%, 3/30/20			2,800			2,910,454
American Tower Corp.:
4.50%, 1/15/18			2,100			2,081,659
5.05%, 9/01/20 (c)			2,300			2,261,898
Vodafone Group Plc,
5.63%, 2/27/17			950			1,060,530
						8,314,541
Total Corporate Bonds – 25.0%						537,468,709
Foreign Agency Obligations
Brazilian Government International Bond:
5.88%, 1/15/19			7,600			8,436,000
5.63%, 1/07/41			1,500			1,488,750
Indonesia Government International Bond,
5.88%, 3/13/20 (b)			1,800			1,975,500
Peruvian Government International Bond,
7.13%, 3/30/19 (c)			1,900			2,270,500
Republic of Turkey,
7.50%, 11/07/19			2,000			2,380,000
South Africa Government International Bond:
6.88%, 5/27/19			2,100			2,459,625
5.50%, 3/09/20			2,000			2,127,500
Total Foreign Agency Obligations – 1.0%						21,137,875
Non-Agency Mortgage-Backed Securities
Collateralized Mortgage Obligations – 3.0%
Arran Residential Mortgages Funding Plc,
Series 2010-1A, Class A1C, 1.58%, 5/16/47 (a)(b)			4,090			4,086,675
Banc of America Funding Corp.,
Series 2006-G, Class 2A2, 0.34%, 7/20/36 (a)			1,007			1,004,560
Citicorp Mortgage Securities, Inc.,
Series 2006-1, Class 2A1, 5.00%, 2/25/21			1,572			1,538,500
Countrywide Alternative Loan Trust:
Series 2006-HY12, Class A1, 5.87%,
8/25/36 (a)			1,234			1,229,637
Series 2006-OA2, Class A2A, 0.41%,
5/20/46 (a)			228			222,913
Countrywide Home Loan Mortgage Pass Through Trust,
Series 2004-13, Class 1A1, 5.50%, 8/25/34			1,319			1,321,562
First Horizon Asset Securities, Inc.,
Series 2006-2, Class 1A6, 6.00%, 8/25/36			941			955,630
Fosse Master Issuer Plc,
Series 2006-1A, Class A2, 0.35%, 10/18/54 (a)(b)			1,818			1,816,270
GSR Mortgage Loan Trust,
Series 2006-AR1, Class 2A2, 2.96%, 1/25/36 (a)			4,459			4,311,400
Greenpoint Mortgage Funding Trust,
Series 2006-AR4, Class A1A, 0.36%, 9/25/46 (a)			355			349,520
HSI Asset Securitization Corp. Trust,
Series 2005, Class 2A4, 0.65%, 8/25/35 (a)			1,559			1,461,115
Holmes Master Issuer Plc,
Series 2007-2A, Class 3A1, 0.37%, 7/15/21 (a)			4,802			4,768,468
JPMorgan Alternative Loan Trust,
Series 2006-A7, Class 1A2, 0.32%, 12/25/36 (a)			8,029			7,913,416
Opteum Mortgage Acceptance Corp.,
Series 2005-3, Class A1B, 0.52%, 7/25/35 (a)			1,426			1,345,324
Permanent Financing Plc,
Series 9A, Class 3A, 0.40%, 6/10/33 (a)(b)			3,550			3,540,497
Residential Accredit Loans, Inc.:
Series 2004-QS9, Class A1, 5.00%,
6/25/19			875			863,968
Series 2006-QO7, Class 3A1, 0.36%,
9/25/46 (a)			3,084			2,993,425

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 107

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

Non-Agency Mortgage-Backed Securities	Par (000)			Value
Structured Asset Mortgage Investments, Inc.,
Series 2007-AR4, Class A1, 0.46%, 9/25/47 (a)		$	4,248		$	4,173,833
Thornburg Mortgage Securities Trust:
Series 2007-1, Class A2B, 0.35%,
3/25/37 (a)			4,283			4,178,320
Series 2007-2, Class A1, 0.39%,
6/25/37 (a)			786			757,968
Series 2007-2, Class A3A, 0.38%,
6/25/37 (a)			9,912			9,752,139
WaMu Mortgage Pass Through Certificates:
Series 2005-AR15, Class A1B1, 0.51%,
11/25/45 (a)			852			841,567
Series 2005-AR15, Class A1C2, 0.64%,
11/25/45 (a)			705			699,259
Wells Fargo Mortgage Backed Securities Trust:
Series 2005-7, Class A3, 5.25%,
9/25/35			1,433			1,430,853
Series 2005-AR14, Class A2, 5.37%,
8/25/35 (a)			2,914			2,931,318
						64,488,137
Commercial Mortgage-Backed Securities 4.7%
Banc of America Commercial Mortgage, Inc.:
Series 2004-5, Class A2, 4.18%,
11/10/41			6			5,715
Series 2006-2, Class A4, 5.74%,
5/10/45 (a)			3,245			3,552,504
Bear Stearns Commercial Mortgage Securities,
Series 2001-TOP2, Class A2, 6.48%, 2/15/35			4,057			4,071,279
CW Capital Cobalt Ltd.,
Series 2006-C1, Class A4, 5.22%, 8/15/48			3,000			3,122,663
Citigroup Commercial Mortgage Trust,
Series 2008-C7, Class A4, 6.18%, 12/10/49 (a)			2,500			2,687,250
Credit Suisse First Boston Mortgage Securities Corp.:
Series 2001-CF2, Class A4, 6.51%,
2/15/34			540			540,164
Series 2001-CK3, Class A4, 6.53%,
6/15/34			2,119			2,129,360
GE Capital Commercial Mortgage Corp.,
Series 2007-C1, Class A2, 5.42%, 12/10/49			1,945			1,983,877
Greenwich Capital Commercial Funding Corp.,
Series 2005-GG5, Class A5, 5.22%, 4/10/37 (a)			1,000			1,061,155
JPMorgan Chase Commercial Mortgage Securities Corp.:
Series 2001-CIB3, Class A3, 6.47%,
11/15/35			4,815			4,943,375
Series 2002-CIB4, Class A3, 6.16%,
5/12/34			7,345			7,634,561
Series 2004-CBX, Class A3, 4.18%,
1/12/37			1,608			1,609,825
Series 2005-CB12, Class A3A1, 4.82%,
9/12/37			6,500			6,576,906
Series 2007-CB19, Class A3, 5.74%,
2/12/49 (a)			4,300			4,487,314
Series 2007-LDPX, Class A1S, 4.93%,
1/15/49			9,606			9,746,673
LB-UBS Commercial Mortgage Trust:
Series 2001-C2, Class A2, 6.65%,
11/15/27			2,649			2,655,099
Series 2004-C4, Class A2, 4.57%,
6/15/29 (a)			4,107			4,117,821
Series 2006-C1, Class A4, 5.16%,
2/15/31			2,800			2,990,898
Series 2006-C7, Class A2, 5.30%,
11/15/38			6,600			6,735,344
Series 2006-C7, Class A3, 5.35%,
11/15/38			2,000			2,114,519
Series 2007-C6, Class A4, 5.86%,
7/15/40 (a)			5,700			5,988,819
Merrill Lynch Countrywide Commercial Mortgage Trust,
Series 2006-1, Class A2, 5.44%, 2/12/39 (a)			2,850			2,859,065
Morgan Stanley Capital I,
Series 2007-IQ16, Class A4, 5.81%, 12/12/49			7,100			7,586,545
Wachovia Bank Commercial Mortgage Trust:
Series 2006-C23, Class A5, 5.42%,
1/15/45 (a)			5,700			6,077,712
Series 2007-C34, Class A3, 5.68%,
5/15/46			6,000			6,260,570
						101,539,013
Total Non-Agency Mortgage-Backed Securities – 7.7%						166,027,150
Preferred Securities
Capital Trusts
Insurance – 0.3%
AON Corp.,
8.21%, 1/01/27			1,700			1,827,534
Chubb Corp.:
6.00%, 5/11/37			800			866,986
6.38%, 3/29/67 (a)			2,550			2,658,375
The Travelers Cos., Inc.,
6.25%, 6/15/37			1,000			1,111,328
						6,464,223
Total Capital Trusts – 0.3%						6,464,223
	Shares
Trust Preferred – 0.2%
Diversified Financial Services – 0.2%
JPMorgan Chase Capital XXVII,
7.00%, 11/01/39			3,500			3,664,598
Total Preferred Securities – 0.5%						10,128,821

See Notes to Financial Statements.

108 BLACKROCK FUNDS III DECEMBER 31, 2010

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

Taxable Municipal Bonds	Par (000)			Value
Chicago, Illinois Waterworks Revenue,
6.74%, 11/01/40		$	150		$	146,295
Massachusetts State Transportation Fund Revenue,
5.73%, 6/01/40			150			157,935
New Jersey State Turnpike Authority Revenue,
7.10%, 1/01/41			700			758,681
New York City Transitional Finance Authority Revenue,
5.57%, 11/01/38			450			435,992
Orange County Local Transportation Authority Sales Tax Revenue,
6.91%, 2/15/41			450			468,639
Port Authority of New York & New Jersey Revenue,
5.65%, 11/01/40			800			772,880
San Diego County Regional Transportation Commission Revenue,
5.91%, 4/01/39			600			589,200
San Francisco City & County Public Utilities Commission Revenue,
6.95%, 11/01/31			900			927,225
State of California:
7.55%, 4/01/39			400			414,856
7.63%, 3/01/40			1,150			1,199,921
7.60%, 11/01/40			250			260,338
State of Illinois,
2.77%, 1/01/12			5,200			5,212,896
State of Mississippi,
5.25%, 11/01/34			600			573,972
University of Missouri System Facilities Revenue,
5.79%, 11/01/39			300			310,197
Total Taxable Municipal Bonds – 0.6%						12,229,027
U.S. Government Sponsored Agency Securities
Interest Only Collateralized Mortgage Obligations – 0.0%
Freddie Mac Mortgage Backed Securities:
Series 2989, Class WI, 5.50%,
5/15/29			740			18,100
Series 3003, Class BI, 5.00%,
12/15/34			575			12,952
Series 3016, Class PI, 5.50%,
5/15/29			206			3,054
						34,106
Mortgage-Backed Securities – 62.1%
Fannie Mae Mortgage Backed Securities:
2.59%, 5/01/33 (a)			4,602			4,795,001
2.60%, 8/01/33			3,258			3,402,411
2.92%, 1/01/35 (a)			1,852			1,932,578
3.34%, 4/01/40 (a)			781			807,059
3.50%, 1/01/41 (d)			130,000			124,409,375
4.00%, 8/01/25-1/01/41 (d)			212,377			211,956,394
4.50%, 10/01/24-1/01/41 (d)			254,612			261,839,416
4.76%, 1/01/36 (a)			2,204			2,312,394
5.00%, 1/01/18-1/01/41 (d)			159,484			168,113,486
5.50%, 9/01/19-1/01/41 (d)			89,112			95,910,922
6.00%, 11/01/22-1/01/41 (d)			79,505			86,654,759
6.50%, 7/01/32-10/01/36			22,209			24,897,299
Freddie Mac Mortgage Backed Securities:
2.35%, 10/01/33 (a)			1,844			1,917,470
3.36%, 2/01/40 (a)			5,218			5,406,495
3.50%, 1/01/41 (d)			4,000			4,023,750
4.00%, 4/01/40-1/01/41 (d)			27,438			27,631,822
4.50%, 8/01/20-1/01/41 (d)			51,888			53,419,104
4.54%, 4/01/38 (a)			8,215			8,653,680
5.00%, 10/01/20-1/01/41 (d)			48,657			51,153,071
5.50%, 12/01/27-1/01/41 (d)			30,704			32,829,128
6.00%, 12/01/28-1/01/41 (d)			22,276			24,253,666
6.24%, 11/01/36 (a)			2,907			3,078,455
6.50%, 5/01/21-1/01/36			4,654			5,214,343
Ginnie Mae Mortgage Backed Securities:
4.00%, 12/20/40-1/01/41 (d)			9,011			9,081,779
4.50%, 3/15/39-1/01/41 (d)			42,399			44,150,795
5.00%, 9/15/39-7/20/40			36,567			39,236,547
5.50%, 6/15/34-1/01/41 (d)			20,614			22,260,831
6.00%, 1/01/41 (d)			16,000			17,592,500
						1,336,934,530
Total U.S. Government Sponsored Agency Securities – 62.1%						1,336,968,636
U.S. Treasury Obligations
U.S. Treasury Bonds:
6.13%, 8/15/29 (e)			700			885,391
6.25%, 5/15/30			22,400			28,790,989
4.38%, 5/15/40			23,100			23,211,804
3.88%, 8/15/40 (c)			17,300			15,934,926
4.25%, 11/15/40			4,640			4,564,600
U.S. Treasury Notes:
4.00%, 2/15/14 (e)			1,350			1,470,656
3.50%, 5/15/20 (c)			40,900			41,897,142
2.63%, 8/15/20 (c)			35,200			33,371,254
Total U.S. Treasury Obligations – 7.0%						150,126,762
Total Long-Term Investments (Cost — $2,433,619,955) – 115.8%						2,489,346,681
Short-Term Securities	Shares
Money Market Funds – 24.7%
BlackRock Cash Funds: Institutional, SL Agency Shares, 0.25% (f)(g)(h)			519,520,789			519,520,789
BlackRock Cash Funds: Prime, SL Agency Shares, 0.24% (f)(g)(h)			12,803,177			12,803,177
						532,323,966
Total Short-Term Securities (Cost — $532,323,966) – 24.7%						532,323,966
Total Investments Before TBA Sale Commitments (Cost — $2,965,943,921*) – 140.5%						3,021,670,647
TBA Sale Commitments (d)	Par (000)
Fannie Mae Mortgage Backed Securities:
3.50%, 1/01/41			71,000			(67,805,000	)
4.00%, 8/01/25-1/01/41			238,000			(236,735,625	)

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 109

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

TBA Sale Commitments (d)	Par (000)			Value
4.50%, 10/01/24-1/01/41		$	47,000		$	(48,241,094	)
5.00%, 1/01/18-1/01/41			34,000			(35,742,500	)
6.00%, 11/01/22-1/01/41			55,000			(59,778,125	)
Total TBA Sale Commitments (Proceeds – $447,887,724) – (20.8)%						(448,302,344	)
Total Investments Net of TBA Sale Commitments – 119.7%						2,573,368,303
Liabilities in Excess of Other Assets – (19.7)%						(422,805,072	)
Net Assets – 100.0%					$	2,150,563,231

* The cost and unrealized appreciation (depreciation) of investments as of December 31, 2010, as computed for federal income tax purposes, were as follows:

Aggregate cost	$	2,971,602,180
Gross unrealized appreciation	$	63,629,388
Gross unrealized depreciation		(13,560,921	)
Net unrealized appreciation	$	50,068,467

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

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

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

(d) Represents or includes a to-be-announced (“TBA”) transaction. Unsettled TBA transactions as of report date were as follows:

Counterparty	Market Value			Unrealized Appreciation (Depreciation)
Bank of America Securities	$	(14,369,688	)	$	(93,924	)
Barclays Capital Inc.	$	26,493,594		$	506,229
Citigroup Global	$	73,416,094		$	(80,897	)
Credit Suisse Securities LLC	$	127,449,844		$	(265,544	)
Deutsche Bank Securites, Inc.	$	(31,292,969	)	$	162,066
Goldman Sachs & Co.	$	30,021,250		$	370,350
JPMorgan Securities, Ltd.	$	(4,671,250	)	$	(30,000	)
Morgan Stanley Capital Services, Inc.	$	(80,231,094	)	$	(14,056	)
Nomura Securities	$	4,417,656		$	258,817
RBS Securities LLC	$	143,589,063		$	351,001
UBS Securities LLC	$	55,965,000		$	112,479
Wells Fargo Securities	$	5,222,656		$	6,250

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

(f) Investments in companies considered to be an affiliate of the Master Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at December 31, 2009		Net Activity		Shares Held at December 31, 2010		Income
BlackRock Cash Funds: Institutional, SL Agency Shares		337,863,503		181,657,286		519,520,789		$	1,179,974
BlackRock Cash Funds: Prime, SL Agency Shares		9,006,982		3,796,195		12,803,177		$	21,394

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

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

For Master Portfolio compliance purposes, the Master Portfolio’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Master Portfolio management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease.

• Financial futures contracts purchased as of December 31, 2010 were as follows:

Contracts	Issue		Exchange		Expiration Date		Notional Value			Unrealized Appreciation (Depreciation)
982		2-Year U.S. Treasury Notes		Chicago		March 2011		$	214,965,938		$	390,523
2,918		5-Year U.S. Treasury Notes		Chicago		March 2011		$	343,503,313			(3,604,574	)
36		30-Year U.S. Treasury Bonds		Chicago		March 2011		$	4,396,500			52,880
262		Ultra Long U.S. Treasury Bonds		Chicago		March 2011		$	33,298,563			(619,048	)
Total											$	(3,780,219	)

• Financial futures contracts sold as of December 31, 2010 were as follows:

Contracts	Issue	Exchange	Expiration Date	Notional Value			Unrealized Appreciation
908	10-Year U.S. Treasury Notes	Chicago	March 2011	$	(109,357,250	)	$	122,912

See Notes to Financial Statements.

110 BLACKROCK FUNDS III DECEMBER 31, 2010

Schedule of Investments (continued) CoreAlpha Bond Master Portfolio

• Interest rate swaps outstanding as of December 31, 2010 were as follows:

Fixed Rate	Floating Rate	Counterparty	Expiration	Notional Amount (000)		Unrealized Appreciation
1.93%(a)	3-month LIBOR	Deutsche Bank AG	October 2017	$	35,600	$	1,843,823
1.97%(a)	3-month LIBOR	Deutsche Bank AG	October 2017	$	4,500		222,056
3.05%(b)	3-month LIBOR	BNP Paribas	December 2017	$	4,700		76,329
3.32%(b)	3-month LIBOR	Deutsche Bank AG	August 2040	$	14,900		2,045,371
Total						$	4,187,579

(a) Pays fixed interest rate and receives floating rate.

(b) Pays floating interest rate and receives fixed rate.

• Credit default swaps on single-name issues – buy protection outstanding as of December 31, 2010 were as follows:

Issuer	Pay Rate			Counterparty	Expiration	Notional Amount (000)		Unrealized Appreciation
General Electric Capital Corp.		3.25	%	Deutsche Bank AG	December 2013	$	4,000	$	181,228

• Credit default swaps on traded indexes – sold protection outstanding as of December 31, 2010 were as follows:

Issuer	Received Fixed Rate			Counterparty	Expiration	Notional Amount (000)		Unrealized Appreciation
Dow Jones CDX North America Investment Grade		1.00	%	UBS AG	December 2015	$	103,000	$	141,512

• Fair Value Measurements – Various inputs are used in determining the fair value of investments and derivatives, which are as follows:

• Level 1 – price quotations in active markets/exchanges for identical assets and liabilities

• 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 derivatives)

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the inputs used as of December 31, 2010 in determining the fair value of the Master Portfolio’s investments and derivatives:

	Investments in Securities
Valuation Inputs	Level 1			Level 2				Level 3		Total
Assets
Investments in Securities:
Long-Term Investments:
Asset-Backed Securities			–		$	255,259,701			–		$	255,259,701
Corporate Bonds			–			537,468,709			–			537,468,709
Foreign Agency Obligations			–			21,137,875			–			21,137,875
Non-Agency Mortgage- Backed Securities			–			166,027,150			–			166,027,150
Preferred Securities			–			10,128,821			–			10,128,821
Taxable Municipal Bonds			–			12,229,027			–			12,229,027
U.S. Government Sponsored Agency Securities			–			1,336,968,636			–			1,336,968,636
U.S. Treasury Obligations			–			150,126,762			–			150,126,762
Short-Term Securities:
Money Market Funds		$	532,323,966			–			–			532,323,966
Liabilities
Investments in Securities:
TBA Sale Commitments			–			(448,302,344	)		–			(448,302,344	)
Total		$	532,323,966		$	2,041,044,337			–		$	2,573,368,303

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 111

Schedule of Investments (concluded) CoreAlpha Bond Master Portfolio

	Derivative Financial Instruments1
Valuation Inputs	Level 1				Level 2			Level 3		Total
Assets
Credit contracts			–			$	322,740		–		$	322,740
Interest rate contracts		$	122,912				4,187,579		–			4,310,491
Liabilities
Interest rate contracts			(3,780,219	)			–		–			(3,780,219	)
Total		$	(3,657,307	)		$	4,510,319		–		$	853,012

¹ Derivative financial instruments are swaps and financial futures contracts. Swaps and financial futures contracts are shown at the unrealized appreciation/depreciation on the instrument.

The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

	Asset- Backed Securities				Collateralized Mortgage Obligations				Mortgage- Backed Securities				Total
Assets
Balance, as of December 31, 2009		$	8,831,446			$	2,595,153			$	21,641,644			$	33,068,243
Accrued discounts/premiums			–				–				–				–
Net realized gain (loss)			185,292				28,240				(42,441	)			171,091
Net change in unrealized appreciation/depreciation			11,267				(9,076	)			114,018				116,209
Purchases			3,637,145				–				–				3,637,145
Sales			(11,249,414	)			(1,075,817	)			(18,449,886	)			(30,775,117	)
Transfers in2			–				–				–				–
Transfers out2			(1,415,736	)			(1,538,500	)			(3,263,335	)			(6,217,571	)
Balance, as of December 31, 2010			–				–				–				–

² The Master Portfolio’s policy is to recognize transfers in and transfers out as of the end of the period of the event or the change in circumstances that caused the transfer.

See Notes to Financial Statements.

112 BLACKROCK FUNDS III DECEMBER 31, 2010

Statements of Assets and Liabilities Master Investment Portfolio

December 31, 2010	LifePath Retirement Master Portfolio			LifePath 2020 Master Portfolio			LifePath 2030 Master Portfolio			LifePath 2040 Master Portfolio			LifePath 2050 Master Portfolio
Assets
Investments at value – affiliated1,2		$	460,948,981		$	981,644,020		$	910,845,891		$	778,179,153		$	66,784,071
Investments at value – Active Stock Master Portfolio			272,611,476			724,236,224			767,320,441			687,896,852			61,094,483
Investments at value – CoreAlpha Bond Master Portfolio			711,674,200			819,101,109			439,888,230			177,729,200			2,094,794
Investments sold receivable			42,582,745			79,025,147			61,662,640			55,294,121			3,727,436
Dividends receivable			309,172			347,269			196,339			85,891			4,161
Securities lending income receivable			18,948			52,795			40,457			33,605			3,577
Interest receivable			22			38			32			25			3
Total assets			1,488,145,544			2,604,406,602			2,179,954,030			1,699,218,847			133,708,525
Liabilities
Collateral on securities loaned at value			84,341,176			205,539,162			174,456,145			158,898,278			12,341,035
Investments purchased payable			–			6,223,625			–			–			155,807
Withdrawals payable to investors			23,609,778			48,593,720			33,342,596			21,051,119			1,805,424
Investment advisory fees payable			40,326			74,359			65,626			52,215			2,793
Professional fees payable			12,791			12,791			12,791			12,791			12,791
Trustees’ fees payable			738			2,028			1,806			1,139			129
Total liabilities			108,004,809			260,445,685			207,878,964			180,015,542			14,317,979
Net Assets		$	1,380,140,735		$	2,343,960,917		$	1,972,075,066		$	1,519,203,305		$	119,390,546
Net Assets Consist of
Investors’ capital		$	1,256,974,680		$	2,099,981,510		$	1,747,702,629		$	1,337,503,957		$	104,429,161
Net unrealized appreciation/depreciation			123,166,055			243,979,407			224,372,437			181,699,348			14,961,385
Net Assets		$	1,380,140,735		$	2,343,960,917		$	1,972,075,066		$	1,519,203,305		$	119,390,546
1 Investments at cost – affiliated		$	389,500,639		$	837,702,358		$	780,671,649		$	675,329,568		$	57,732,093
2 Securities loaned at value		$	82,330,622		$	201,147,822		$	169,890,678		$	154,967,640		$	12,012,164

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 113

Statements of Assets and Liabilities (concluded) Master Investment Portfolio

December 31, 2010	Active Stock Master Portfolio			CoreAlpha Bond Master Portfolio
Assets
Investments at value – unaffiliated1,2		$	2,410,740,910		$	2,489,346,681
Investments at value – affiliated3			293,618,616			532,323,966
TBA sales commitments receivable			–			447,887,724
Investments sold receivable			65,444,086			156,248,137
Dividends receivable			1,939,579			–
Credit default swaps at fair value4			–			5,155,175
Securities lending income receivable			203,664			121,825
Interest receivable			368			12,062,649
Margin variation receivable			–			1,221,274
Due from broker – swaps collateral			–			1,030,000
Collateral for open futures contracts			–			2,014,000
Total assets			2,771,947,223			3,647,411,431
Liabilities
Collateral on securities loaned at value			248,089,980			92,408,320
Investments purchased payable			9,790,131			948,302,062
TBA sale commitments (proceeds – $- and $447,887,724, respectively)			–			448,302,344
Margin variation payable			61,624			–
Due to broker – swaps collateral			–			7,196,676
Investment advisory fees payable			357,714			441,833
Administration fees payable			200,553			154,043
Professional fees payable			20,640			27,805
Trustees’ fees payable			2,465			15,117
Total liabilities			258,523,107			1,496,848,200
Net Assets		$	2,513,424,116		$	2,150,563,231
Net Assets Consist of
Investors’ capital		$	2,239,291,725		$	2,093,965,808
Net unrealized appreciation/depreciation			274,132,391			56,597,423
Net Assets		$	2,513,424,116		$	2,150,563,231
1 Investments at cost – unaffiliated		$	2,137,472,148		$	2,433,619,955
2 Securities loaned at value		$	241,807,771		$	90,177,239
3 Investments at cost – affiliated		$	293,618,616		$	532,323,966
4 Includes premiums paid in the amount of $644,856 for the CoreAlpha Bond Master Portfolio.

See Notes to Financial Statements.

114 BLACKROCK FUNDS III DECEMBER 31, 2010

Statements of Operations Master Investment Portfolio

Year Ended December 31, 2010	LifePath Retirement Master Portfolio				LifePath 2020 Master Portfolio				LifePath 2030 Master Portfolio				LifePath 2040 Master Portfolio				LifePath 2050 Master Portfolio
Investment Income
Dividends – affiliated		$	8,239,820			$	17,977,643			$	17,578,403			$	15,286,268			$	1,144,952
Securities lending – affiliated			302,096				661,474				667,815				605,002				32,828
Income – affiliated			6,428				11,971				10,797				8,279				1,315
Net investment income allocated from the Active Stock Master and CoreAlpha
Bond Master:
Dividends			4,214,300				10,793,464				11,200,341				10,114,546				689,418
Interest			24,024,754				25,900,387				13,446,727				5,480,100				56,415
Expenses			(3,062,537	)1			(4,319,452	)1			(3,150,688	)1			(2,187,195	)1			(115,610	)1
Total income			33,724,861				51,025,487				39,753,395				29,307,000				1,809,318
Expenses
Investment advisory			4,491,543				7,223,037				5,892,043				4,537,180				271,881
Professional			16,415				18,978				17,965				16,995				13,836
Independent Trustees			38,112				58,406				48,490				38,377				7,232
Total expenses			4,546,070				7,300,421				5,958,498				4,592,552				292,949
Less fees waived by advisor			(4,210,408	)			(6,831,268	)			(5,617,067	)			(4,360,963	)			(278,698	)
Total expenses after fees waived			335,662				469,153				341,431				231,589				14,251
Net investment income			33,389,199				50,556,334				39,411,964				29,075,411				1,795,067
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments – unaffiliated			36,228				62,661				25,700				38,851				–
Investments – affiliated			2,383,495				(7,714,273	)			(5,958,157	)			(7,217,311	)			745,242
Allocations from the Active Stock Master and CoreAlpha Bond Master from investments, financial futures contracts and swaps			36,485,361				58,949,629				50,320,311				41,943,224				1,276,706
			38,905,084				51,298,017				44,387,854				34,764,764				2,021,948
Net change in unrealized appreciation/depreciation on:
Investments – affiliated			40,652,398				102,314,342				96,516,146				85,355,355				5,668,214
Allocated from the Active Stock Master and CoreAlpha Bond Master from investments, financial futures contracts and swaps			9,559,056				27,469,273				28,899,070				22,673,265				4,178,555
			50,211,454				129,783,615				125,415,216				108,028,620				9,846,769
Total realized and unrealized gain			89,116,538				181,081,632				169,803,070				142,793,384				11,868,717
Net Increase in Net Assets Resulting from Operations		$	122,505,737			$	231,637,966			$	209,215,034			$	171,868,795			$	13,663,784
1 Net of fees waived		$	197,341			$	455,084			$	453,017			$	398,562			$	27,592

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 115

Statements of Operations (concluded) Master Investment Portfolio

Year Ended December 31, 2010	Active Stock Master Portfolio				CoreAlpha Bond Master Portfolio
Investment Income
Dividends		$	37,050,530			$	–
Securities lending – affiliated			1,251,974				154,411
Income – affiliated			110,063				1,046,957
Interest			6,155				66,340,026
Foreign taxes withheld			(36,357	)			–
Total income			38,382,365				67,541,394
Expenses
Investment advisory			5,357,466				4,770,173
Administration			2,142,986				1,908,069
Professional			27,163				33,755
Independent Trustees			60,421				67,301
Total expenses excluding interest expense			7,588,036				6,779,298
Interest expense			–				279
Total expenses			7,588,036				6,779,577
Less fees waived by advisor			(1,430,634	)			(101,057	)
Total expenses after fees waived			6,157,402				6,678,520
Net investment income			32,224,963				60,862,874
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments			144,755,801				18,944,474
Financial futures contracts			5,998,496				20,944,942
Swaps			–				(1,666,688	)
			150,754,297				38,222,728
Net change in unrealized appreciation/depreciation on:
Investments			75,790,821				11,491,700
Financial futures contracts			630,541				158,470
Swaps			–				4,751,828
			76,421,362				16,401,998
Total realized and unrealized gain			227,175,659				54,624,726
Net Increase in Net Assets Resulting from Operations		$	259,400,622			$	115,487,600

See Notes to Financial Statements.

116 BLACKROCK FUNDS III DECEMBER 31, 2010

Statements of Changes in Net Assets Master Investment Portfolio

	LifePath Retirement Master Portfolio								LifePath 2020 Master Portfolio
	Year Ended December 31,								Year Ended December 31,
Increase (Decrease) in Net Assets:	2010				2009				2010				2009
Operations
Net investment income		$	33,389,199			$	13,421,748			$	50,556,334			$	44,752,714
Net realized gain (loss)			38,905,084				(10,743,532	)			51,298,017				(119,564,329	)
Net change in unrealized appreciation/depreciation			50,211,454				104,466,686				129,783,615				385,023,597
Net increase in net assets resulting from operations			122,505,737				107,144,902				231,637,966				310,211,982
Capital Transactions
Proceeds from contributions			188,899,681				155,214,316				403,212,898				450,201,397
Proceeds from contributions in connection with the acquisition			–				746,169,381				–				–
Fair value of withdrawals			(96,571,523	)			(96,825,377	)			(70,562,768	)			(226,411,370	)
Net increase in net assets derived from capital transactions			92,328,158				804,558,320				332,650,130				223,790,027
Net Assets
Total increase in net assets			214,833,895				911,703,222				564,288,096				534,002,009
Beginning of year			1,165,306,840				253,603,618				1,779,672,821				1,245,670,812
End of year		$	1,380,140,735			$	1,165,306,840			$	2,343,960,917			$	1,779,672,821
	LifePath 2030 Master Portfolio								LifePath 2040 Master Portfolio
	Year Ended December 31,								Year Ended December 31,
Increase (Decrease) in Net Assets:	2010				2009				2010				2009
Operations
Net investment income		$	39,411,964			$	33,402,964			$	29,075,411			$	24,752,335
Net realized gain (loss)			44,387,854				(121,326,632	)			34,764,764				(102,916,876	)
Net change in unrealized appreciation/depreciation			125,415,216				369,368,469				108,028,620				320,052,420
Net increase in net assets resulting from operations			209,215,034				281,444,801				171,868,795				241,887,879
Capital Transactions
Proceeds from contributions			376,110,374				367,341,745				260,954,409				303,439,581
Fair value of withdrawals			(46,506,661	)			(167,711,261	)			(47,294,585	)			(132,192,111	)
Net increase in net assets derived from capital transactions			329,603,713				199,630,484				213,659,824				171,247,470
Net Assets
Total increase in net assets			538,818,747				481,075,285				385,528,619				413,135,349
Beginning of year			1,433,256,319				952,181,034				1,133,674,686				720,539,337
End of year		$	1,972,075,066			$	1,433,256,319			$	1,519,203,305			$	1,133,674,686

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 117

Statements of Changes in Net Assets (concluded) Master Investment Portfolio

									LifePath 2050 Master Portfolio
									Year Ended December 31,
Increase (Decrease) in Net Assets:									2010				2009
Operations
Net investment income										$	1,795,067			$	564,575
Net realized gain (loss)											2,021,948				(154,589	)
Net change in unrealized appreciation/depreciation											9,846,769				6,477,740
Net increase in net assets resulting from operations											13,663,784				6,887,726
Capital Transactions
Proceeds from contributions											70,700,398				29,450,394
Fair value of withdrawals											(5,138,081	)			(3,068,975	)
Net increase in net assets derived from capital transactions											65,562,317				26,381,419
Net Assets
Total increase in net assets											79,226,101				33,269,145
Beginning of year											40,164,445				6,895,300
End of year										$	119,390,546			$	40,164,445
	Active Stock Master Portfolio								CoreAlpha Bond Master Portfolio
	Year Ended December 31,								Year Ended December 31,
Increase (Decrease) in Net Assets:	2010				2009				2010				2009
Operations
Net investment income		$	32,224,963			$	29,029,926			$	60,862,874			$	56,984,530
Net realized gain (loss)			150,754,297				(262,530,568	)			38,222,728				32,127,681
Net change in unrealized appreciation/depreciation			76,421,362				594,321,112				16,401,998				55,139,780
Net increase in net assets resulting from operations			259,400,622				360,820,470				115,487,600				144,251,991
Capital Transactions
Proceeds from contributions			542,158,731				545,050,021				668,474,923				1,003,192,608
Fair value of withdrawals			(126,588,351	)			(318,404,191	)			(267,359,402	)			(629,387,020	)
Net increase in net assets derived from capital transactions			415,570,380				226,645,830				401,115,521				373,805,588
Net Assets
Total increase in net assets			674,971,002				587,466,300				516,603,121				518,057,579
Beginning of year			1,838,453,114				1,250,986,814				1,633,960,110				1,115,902,531
End of year		$	2,513,424,116			$	1,838,453,114			$	2,150,563,231			$	1,633,960,110

See Notes to Financial Statements.

118 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights Master Investment Portfolio

	LifePath Retirement Master Portfolio
	Year Ended December 31,
	2010				2009				2008				2007				2006
Total Investment Return
Total investment return			9.83	%			18.75	%			(14.54	)%			5.00	%			9.30	%
Ratios to Average Net Assets
Total expenses1			0.61	%			0.59	%			0.61	%			0.61	%			0.61	%
Total expenses after fees waived1			0.26	%			0.26	%			0.27	%			0.27	%			0.28	%
Net investment income2			2.60	%			3.61	%			3.81	%			3.87	%			3.80	%
Supplemental Data
Net assets, end of year (000)		$	1,380,141			$	1,165,307			$	253,604			$	331,733			$	260,279
Portfolio turnover			4	%			6	%3			11	%			6	%			10	%
	LifePath 2020 Master Portfolio
	Year Ended December 31,
	2010				2009				2008				2007				2006
Total Investment Return
Total investment return			11.40	%			23.21	%			(24.92	)%			3.84	%			13.51	%
Ratios to Average Net Assets
Total expenses1			0.59	%			0.58	%			0.57	%			0.58	%			0.58	%
Total expenses after fees waived1			0.23	%			0.23	%			0.23	%			0.25	%			0.25	%
Net investment income2			2.45	%			3.15	%			3.18	%			3.01	%			2.91	%
Supplemental Data
Net assets, end of year (000)		$	2,343,961			$	1,779,673			$	1,245,671			$	1,827,888			$	1,391,153
Portfolio turnover			4	%			6	%			13	%			7	%			16	%

¹ Includes the Master Portfolio’s pro rata portion of net advisory and net administration fees from the Active Stock and CoreAlpha Bond Master Portfolios only and does not reflect any expenses incurred indirectly as a result of investments in the BlackRock Cash Funds: Institutional and iShares exchange-traded funds.

² Includes the Master Portfolio’s share of the allocated net investment income from the Active Stock and CoreAlpha Bond Master Portfolios.

³ Excludes in-kind contribution of portfolio securities received in a tax-free reorganization on November 20, 2009.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 119

Financial Highlights (continued) Master Investment Portfolio

	LifePath 2030 Master Portfolio
	Year Ended December 31,
	2010				2009				2008				2007				2006
Total Investment Return
Total investment return			12.36	%			26.27	%			(30.53	)%			3.14	%			15.62	%
Ratios to Average Net Assets
Total expenses1			0.57	%			0.56	%			0.55	%			0.57	%			0.57	%
Total expenses after fees waived1			0.21	%			0.20	%			0.21	%			0.23	%			0.24	%
Net investment income2			2.34	%			2.97	%			2.82	%			2.57	%			2.49	%
Supplemental Data
Net assets, end of year (000)		$	1,972,075			$	1,433,256			$	952,181			$	1,393,178			$	988,640
Portfolio turnover			3	%			7	%			13	%			7	%			22	%
	LifePath 2040 Master Portfolio
	Year Ended December 31,
	2010				2009				2008				2007				2006
Total Investment Return
Total investment return			13.21	%			28.58	%			(34.90	)%			2.53	%			17.47	%
Ratios to Average Net Assets
Total expenses1			0.55	%			0.55	%			0.53	%			0.56	%			0.56	%
Total expenses after fees waived1			0.19	%			0.18	%			0.19	%			0.22	%			0.23	%
Net investment income2			2.24	%			2.82	%			2.52	%			2.20	%			2.17	%
Supplemental Data
Net assets, end of year (000)		$	1,519,203			$	1,133,675			$	720,539			$	1,022,941			$	708,267
Portfolio turnover			4	%			6	%			14	%			8	%			29	%

¹ Includes the Master Portfolio’s pro rata portion of net advisory and net administration fees from the Active Stock and CoreAlpha Bond Master Portfolios only and does not reflect any expenses incurred indirectly as a result of investments in the BlackRock Cash Funds: Institutional and iShares exchange-traded funds.

² Includes the Master Portfolio’s share of the allocated net investment income from the Active Stock and CoreAlpha Bond Master Portfolios.

See Notes to Financial Statements.

120 BLACKROCK FUNDS III DECEMBER 31, 2010

Financial Highlights (continued) Master Investment Portfolio

	LifePath 2050 Master Portfolio
	Year Ended December 31,								Period June  30, 20081 to December 31, 2008
	2010				2009
Total Investment Return
Total investment return			13.93	%			30.85	%			(31.93	)%2
Ratios to Average Net Assets
Total expenses3			0.56	%			0.59	%			1.11	%4
Total expenses after fees waived3			0.17	%			0.16	%			0.17	%4
Net investment income5			2.31	%			2.84	%			3.05	%4
Supplemental Data
Net assets, end of period (000)		$	119,391			$	40,164			$	6,895
Portfolio turnover			5	%			12	%			0	%6

¹ Commencement of operations.

² Aggregate total investment return.

³ Includes the Master Portfolio’s pro rata portion of net advisory and net administration fees from the Active Stock and CoreAlpha Bond Master Portfolios only and does not reflect any expenses incurred indirectly as a result of investments in the BlackRock Cash Funds: Institutional and iShares exchange-traded funds.

⁴ Annualized.

⁵ Includes the Master Portfolio’s share of the allocated net investment income from the Active Stock and CoreAlpha Bond Master Portfolios.

⁶ Rounds to less than 1%.

See Notes to Financial Statements.

BLACKROCK FUNDS III DECEMBER 31, 2010 121

Financial Highlights (concluded) Master Investment Portfolio

	Active Stock Master Portfolio
	Year Ended December 31,
	2010				2009				2008				2007				2006
Total Investment Return
Total investment return			11.04	%			24.86	%			(36.65	)%			0.58	%			15.65	%
Ratios to Average Net Assets
Total expenses			0.35	%			0.35	%			0.35	%			0.35	%			0.35	%
Total expenses after fees waived			0.29	%			0.30	%			0.32	%			0.34	%			0.35	%
Net investment income			1.50	%			1.99	%			1.96	%			1.70	%			1.64	%
Supplemental Data
Net assets, end of year (000)		$	2,513,424			$	1,838,453			$	1,250,987			$	2,085,214			$	1,561,940
Portfolio turnover			120	%			149	%			98	%			80	%			65	%
	CoreAlpha Bond Master Portfolio
	Year Ended December 31,
	2010				2009				2008				2007				2006
Total Investment Return
Total investment return			6.56	%			11.67	%			3.62	%			5.10	%			4.36	%
Ratios to Average Net Assets
Total expenses			0.36	%			0.35	%			0.36	%			0.36	%			0.36	%
Total expenses after fees waived			0.35	%			0.35	%			0.36	%			0.35	%			0.35	%
Net investment income			3.19	%			4.33	%			4.47	%			5.18	%			5.11	%
Supplemental Data
Net assets, end of year (000)		$	2,150,563			$	1,633,960			$	1,115,903			$	1,479,888			$	1,082,468
Portfolio turnover1			621	%2			278	%3			351	%			466	%			301	%

¹ Portfolio turnover rates include TBA transactions, if any.

² Excluding TBA transactions, the portfolio turnover rate would have been 170%.

³ Excluding TBA transactions, the portfolio turnover rate would have been 199%.

See Notes to Financial Statements.

122 BLACKROCK FUNDS III DECEMBER 31, 2010

Notes to Financial Statements Master Investment Portfolio

1. Organization and Significant Accounting Policies:

Master Investment Portfolio (“MIP”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”) as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust. The financial statements and these accompanying notes relate to seven series of MIP: LifePath Retirement Master Portfolio, LifePath 2020 Master Portfolio, LifePath 2030 Master Portfolio, LifePath 2040 Master Portfolio, LifePath 2050 Master Portfolio, Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio (each, a “Master Portfolio” and collectively, the “Master Portfolios”). The Master Portfolios’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.

Each of the LifePath Retirement Master Portfolio, LifePath 2020 Master Portfolio, LifePath 2030 Master Portfolio, LifePath 2040 Master Portfolio and LifePath 2050 Master Portfolio (each, a “LifePath Master Portfolio” and collectively, the “LifePath Master Portfolios”) seeks to achieve its investment objective by investing in a combination of equity, bond and money market funds (the “Underlying Funds”) in proportions suggested by its own comprehensive investment strategy. The Underlying Funds are advised by BlackRock Fund Advisors (“BFA”), and include the Active Stock Master Portfolio, CoreAlpha Bond Master Portfolio and the BlackRock Cash Funds: Institutional and iShares exchange-traded funds.

The value of a LifePath Master Portfolio’s investment in each of the Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio reflects that LifePath Master Portfolio’s proportionate interest in the net assets of that Master Portfolio. As of December 31, 2010, the interests of the Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio held by each LifePath Master Portfolio were as follows:

	Active Stock Master Portfolio			CoreAlpha Bond Master Portfolio
LifePath Retirement Master Portfolio		10.85	%		33.09	%
LifePath 2020 Master Portfolio		28.81	%		38.09	%
LifePath 2030 Master Portfolio		30.53	%		20.45	%
LifePath 2040 Master Portfolio		27.38	%		8.27	%
LifePath 2050 Master Portfolio		2.43	%		0.10	%

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

Valuation: The Master Portfolios fair value their financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (the “Board”). Equity investments, including exchange traded funds, traded on a recognized securities exchange or the NASDAQ Global Market System (“NASDAQ”) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that such prior day’s price no longer reflects the fair value of the security.

The Master Portfolios value their bond investments on the basis of last available bid prices or current market quotations provided by dealers or pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more brokers or dealers as obtained from a pricing service. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between investments and calculated yield measures based on valuation technology commonly employed in the market for such investments. Asset-backed and mortgage-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche.

Financial futures contracts traded on exchanges are valued at their last sale price. To-be-announced (“TBA”) commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services. Swap agreements are valued utilizing quotes received daily by the Master Portfolio’s pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows and trades and values of the underlying reference instruments. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

Investments in open-end registered investment companies are valued at net asset value each business day.

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

BLACKROCK FUNDS III DECEMBER 31, 2010 123

Notes to Financial Statements (continued) Master Investment Portfolio

relevant. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof.

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

The CoreAlpha Bond Master Portfolio may purchase certain mortgage pass-through securities. There are a number of important differences among the agencies and instrumentalities of the US Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by the 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 the 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 and are supported by the right of the issuer to borrow from the Treasury.

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

Capital Trusts: The CoreAlpha Bond Master Portfolio may invest in capital trusts. These securities are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics, or by an affiliated business trust of a corporation, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured as either fixed or adjustable coupon securities that can have either a perpetual or stated maturity date. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment obligations have been met. The deferral of payments does not affect the purchase or sale of these securities in the open market. Payments on these securities are treated as interest rather than dividends for federal income tax purposes. These securities generally are rated below that of the issuing company’s senior debt securities.

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

Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”) require that the Master Portfolio either delivers collateral

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Notes to Financial Statements (continued) Master Investment Portfolio

or segregates assets in connection with certain investments (e.g., TBA, sale commitments, financial futures contracts and swaps), each Master Portfolio will, consistent with SEC rules and/or certain interpretive letters issued by the SEC, segregate collateral or designate on its books and records cash or other liquid securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, each party has requirements to deliver/deposit securities as collateral for certain investments.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Master Portfolio has determined the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.

Each LifePath Master Portfolio records daily its proportionate share of the Active Stock Master Portfolio’s and CoreAlpha Bond Master Portfolio’s income, expenses and realized and unrealized gains and losses.

Securities Lending: The Master Portfolios may lend securities to financial institutions that provide cash as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statements of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the Master Portfolio earns dividend and interest on the securities loaned. 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. In the event that the borrower defaults on its obligation to return borrowed securities because of insolvency or for any other reason, the Master Portfolio could experience delays and costs in gaining access to the collateral. A Master Portfolio also could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

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

The Master Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolio’s US federal tax returns remains open for each of the four years ended December 31, 2010. The statutes of limitations on the Master Portfolio’s state and local tax returns may remain open for an additional year depending upon the jurisdiction. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

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

2. Derivative Financial Instruments:

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

Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. Each Master Portfolio’s maximum risk of loss from counterparty credit risk on OTC derivatives is generally the aggregate unrealized gain netted against any collateral pledged by/posted to the counterparty. Counterparty risk related to exchange-traded financial futures contracts is deemed to be minimal due to the protection against defaults provided by the exchange on which these contracts trade.

A Master Portfolio may mitigate counterparty risk by procuring collateral and through netting provisions included within an International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreement implemented between the Master Portfolio and each of its respective counterparties. The ISDA Master Agreement allows each Master Portfolio to offset with each separate counterparty certain derivative financial

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Notes to Financial Statements (continued) Master Investment Portfolio

instrument’s payables and/or receivables with collateral held. The amount of collateral moved to/from applicable counterparties is generally based upon minimum transfer amounts of up to $500,000. To the extent amounts due to a Master Portfolio from its counterparties are not fully collateralized contractually or otherwise, the Master Portfolio bears the risk of loss from counterparty non-performance. See Note 1 “Segregation and Collateralization” for information with respect to collateral practices. In addition, each Master Portfolio manages counterparty risk by entering into agreements only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.

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

Financial Futures Contracts: The Master Portfolios purchase or sell financial futures contracts to gain exposure to, or economically hedge against, changes in interest rates (interest rate risk) or changes in the value of equity securities (equity risk). Financial futures contracts are agreements between a Master Portfolio and counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on settlement date. Pursuant to the contract, a Master Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as margin variation and are recorded by the Master Portfolios as unrealized gains or losses. When the contract is closed, the Master Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures transactions involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest rates and the underlying assets.

Swaps: The CoreAlpha Bond Master Portfolio enters into swap agreements, in which the Master Portfolio and a counterparty agree to make periodic net payments on a specified notional amount. These periodic payments received or made by the Master Portfolio are recorded in the Statements of Operations as realized gains or losses, respectively. Any upfront fees paid are recorded as assets and any upfront fees received are recorded as liabilities and amortized over the term of the swap. Swaps are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). When the swap is terminated, the Master Portfolio will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Master Portfolio’s basis in the contract, if any. Generally, the basis of the contracts is the premium received or paid. Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.

• Credit default swaps – The CoreAlpha Bond 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 enters into credit default swap agreements to provide a measure of protection against the default of an issuer (as buyer of protection) and/or gain credit exposure to an issuer to which it is not otherwise exposed (as seller of protection). The Master Portfolio may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers or traded indexes. Credit default swaps on single-name issuers are agreements in which the buyer pays fixed periodic payments to the seller in consideration for a guarantee from the seller to make a specific payment should a negative credit event take place (e.g., bankruptcy, failure to pay, obligation accelerators, repudiation, moratorium or restructuring). Credit default swaps on traded indexes are agreements in which the buyer pays fixed periodic payments to the seller in consideration for a guarantee from the seller to make a specific payment should a write-down, principal or interest shortfall or default of all or individual underlying securities included in the index occurs. As a buyer, if an underlying credit event occurs, the Master Portfolio will either receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising of an index or receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising of an 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 of an 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 of an index.

• Interest rate swaps – The CoreAlpha Bond Master Portfolio enters into interest rate swaps to gain or reduce exposure to or manage duration,

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the yield curve or interest rate risk by economically hedging the value of the fixed rate bonds which may decrease when interest rates rise (interest rate risk). Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating rate, for another party’s stream of interest payments, either fixed or floating, on the same notional amount for a specified period of time. Interest rate floors, which are a type of interest rate swap, are agreements in which one party agrees to make payments to the other party to the extent that interest rates fall below a specified rate or floor in return for a premium. In more complex swaps, the notional principal amount may decline (or amortize) over time.

Derivative Instruments Categorized by Risk Exposure:

Fair Values of Derivative Instruments as of December 31, 2010
Asset Derivatives
	Statements of Assets and Liabilities Location	Active Stock Master Portfolio		CoreAlpha Bond Master Portfolio
Interest rate contracts	Net unrealized appreciation/depreciation*		–	$	(3,780,219	)
Credit contracts	Credit default swaps at fair value		–		5,155,175
Equity contracts	Net unrealized appreciation/depreciation*	$	863,629		–
Total		$	863,629	$	1,374,956
Liability Derivatives
	Statements of Assets and Liabilities Location			CoreAlpha Bond Master Portfolio
Interest rate contracts	Net unrealized appreciation/depreciation*			$	122,912

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

The Effect of Derivative Instruments on the Statements of Operations Year Ended December 31, 2010
Net Realized Gain (Loss) from
	Active Stock Master Portfolio		CoreAlpha Bond Master  Portfolio
Interest rate contracts:
Financial futures contracts		–	$	20,944,942
Credit contracts:
Swaps		–		(1,666,688	)
Equity contracts:
Financial futures contracts	$	5,998,496		–
Total	$	5,998,496	$	19,278,254
Net Change in Unrealized Appreciation/Depreciation on
	Active Stock Master Portfolio		CoreAlpha Bond Master Portfolio
Interest rate contracts:
Financial futures contracts		–	$	158,470
Credit contracts:
Swaps		–		4,751,828
Equity contracts:
Financial futures contracts	$	630,541		–
Total	$	630,541	$	4,910,298

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Notes to Financial Statements (continued) Master Investment Portfolio

For the year ended December 31, 2010, the average quarterly balance of outstanding derivative financial instruments was as follows:

	Active Stock Master Portfolio			CoreAlpha Bond Master Portfolio
Financial futures contracts:
Average number of contracts purchased			872			3,808
Average number of contracts sold			–			1,086
Average notional value of contracts purchased		$	49,480,470		$	482,428,130
Average notional value of contracts sold			–		$	190,884,350
Credit default swaps:
Average number of contracts – buy protection			–			1
Average number of contracts – sell protection			–			1
Average notional value – buy protection			–		$	4,000,000
Average notional value – sell protection			–		$	44,500,000
Interest rate Swaps:
Average number of contracts – pays fixed rate			–			3
Average number of contracts – receives fixed rate			–			1
Average notional value – pays fixed rate			–		$	55,000,000
Average notional value – receives fixed rate			–		$	4,700,000

3. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”), Bank of America Corporation (“BAC”) and Barclays Bank PLC (“Barclays”) are the largest stockholders of BlackRock, Inc. (“BlackRock”). Due to the ownership structure, PNC is an affiliate of the Master Portfolios for 1940 Act purposes, but BAC and Barclays are not.

MIP, on behalf of the Master Portfolios, entered into an Investment Advisory Agreement with BFA (the “Investment Advisory Agreement”). Pursuant to the Investment Advisory Agreement with MIP, BFA is responsible for the management of each Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each Master Portfolio. For such services, each Master Portfolio pays BFA an annual investment advisory fee of 0.35% of the average daily net assets of each of the LifePath Master Portfolios and 0.25% of the average daily net assets of each of the Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio.

The fees and expenses of the Master Portfolios’ trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolios.

BFA contractually agreed to waive investment advisory fees charged to the LifePath Master Portfolios in an amount equal to investment advisory fees and administration fees, if any, received by BFA or BlackRock Institutional Trust Company, N.A. (“BTC”), from each investment company in which the Master Portfolios invest. BFA has also contractually agreed to cap the expenses of the LifePath Master Portfolios at the rate at which the LifePath Master Portfolios pay an advisory fee to BFA by providing an offsetting credit against the investment advisory fees paid by the LifePath Master Portfolios in an amount equal to the independent expenses. These contractual waivers are effective through April 30, 2012. The amounts of the waivers, if any, are shown as fees waived in the Statements of Operations.

MIP entered into an administration services arrangement with BTC, which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC may delegate certain of its administration duties to sub-administrators.

BTC has agreed to bear all costs of the Master Portfolios’ and MIP’s operations, other than brokerage expenses, advisory fees, 12b-1 distribution or service fees, independent expenses, litigation expenses, taxes or other extraordinary expenses.

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

BTC is entitled to receive a monthly fee for administration services from the Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio at an annual rate of 0.10% of their respective average daily net assets. BFA has agreed to bear all costs of each of these Master Portfolios, excluding brokerage expenses, advisory fees, 12b-1 distribution or service fees, independent expense, litigation expenses, taxes or other extraordinary expenses which are borne by each of these Master Portfolios.

BTC voluntarily waived a portion of its administration fees paid by the Active Stock Master Portfolio in an amount sufficient to maintain the advisory fees payable by each of the LifePath Master Portfolios at an annual rate of 0.35% of the average daily net assets. This arrangement is voluntary and may be terminated by BTC at any time. During

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the period from October 6, 2010 through October 27, 2010, BFA voluntarily waived a portion of its investment advisory fees paid by the Active Stock Master Portfolio. With respect to the independent expenses discussed above, BTC has contractually agreed to provide and offsetting credit against the administration fees paid by the Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio in an amount equal to the independent expenses, through April 30, 2012. The amounts of the waiver and offsetting credits are shown as fees waived in the Statements of Operations.

The Master Portfolios received an exemptive order from the SEC permitting them, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BTC as the securities lending agent. BTC may, on behalf of a Master Portfolio, invest cash collateral received by the Master Portfolio for such loans, among other things, in a private investment company managed by BTC or its registered money market funds advised by BTC or its affiliates. The market value of securities on loan and the value of the related collateral, if applicable, are shown in the Statements of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC is disclosed in the Schedules of Investments. The share of income earned by the Master Portfolio on such investments is shown as securities lending – affiliated in the Statements of Operations. BTC has voluntarily agreed to waive its fees for the period beginning December 1, 2009 until further notice.

Each Master Portfolio may invest its positive cash balances in certain money market funds managed by BFA or an affiliate. The income earned on these temporary cash investments is included in income-affiliated in the Statements of Operations.

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

4. Investments:

Purchases and sales of investments including paydowns, mortgage dollar rolls and TBA transactions and excluding short-term securities and US government securities for the year ended December 31, 2010, were as follows:

	Purchases			Sales
LifePath Retirement Master Portfolio		$	49,721,421		$	50,240,511
LifePath 2020 Master Portfolio		$	127,474,989		$	79,813,703
LifePath 2030 Master Portfolio		$	118,963,518		$	55,335,259
LifePath 2040 Master Portfolio		$	90,117,268		$	56,933,870
LifePath 2050 Master Portfolio		$	31,773,917		$	4,138,447
Active Stock Master Portfolio		$	2,911,620,563		$	2,491,465,044
CoreAlpha Bond Master Portfolio		$	8,569,296,925		$	8,485,848,000

Purchases and sales of US government securities for the CoreAlpha Bond Master Portfolio for the year ended December 31, 2010 were $2,848,244,542 and $2,540,846,601, respectively.

5. Concentration, Market and Credit Risk:

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

In the normal course of business, the Master Portfolios invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all of its obligations (issuer credit risk). The value of securities held by the Master Portfolios may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Master Portfolios; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency, interest rate and price fluctuations. Similar to issuer credit risk, the Master Portfolios may be exposed to counterparty risk, or the risk that an entity with which the Master Portfolios have unsettled or open transactions may fail to or be unable to perform on its commitments.

The Master Portfolios manage counterparty risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Master Portfolios to market, issuer and counterparty credit risks, consist principally of investments and receivables due from counterparties. The extent of the Master Portfolios’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Master Portfolios’ Statements of Assets and Liabilities, less any collateral held by the Master Portfolio.

6. Subsequent Events:

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

BLACKROCK FUNDS III DECEMBER 31, 2010 129

Report of Independent Registered Public Accounting Firm Master Investment Portfolio

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

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of LifePath Retirement Master Portfolio, LifePath 2020 Master Portfolio, LifePath 2030 Master Portfolio, LifePath 2040 Master Portfolio, LifePath 2050 Master Portfolio, Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio, each a portfolio of Master Investment Portfolio (the “Master Portfolios”), at December 31, 2010, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Master Portfolios’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 24, 2011

130 BLACKROCK FUNDS III DECEMBER 31, 2010

Officers and Trustees

Name, Address and Year of Birth	Position(s) Held with Trust/ MIP	Length of Time Served as a Trustee2	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment  Portfolios (“Portfolios”) Overseen	Public Directorships
Non-Interested Trustees1
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chair of the Board and Trustee	Since 2009	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	36 RICs consisting of 95 Portfolios	None
Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chair of the Board and Trustee	Since 2009	President, Fairmount Capital Advisors, Inc. since 1987; Director, Fox Chase Cancer Center since 2004; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of Seventy (civic) since 2006.	36 RICs consisting of 95 Portfolios	None
David O. Beim 55 East 52nd Street New York, NY 10055 1940	Trustee	Since 2009	Professor of Finance and Economics at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy since 2002; Chairman, Wave Hill, Inc. (public garden	36 RICs consisting of 95 Portfolios	None

131

			and cultural center) from 1990 to 2006.
Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Trustee	Since 2009	Executive Vice President of Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	36 RICs consisting of 95 Portfolios	NSTAR (electric and gas utility)
Herbert I. London 55 East 52nd Street New York, NY 10055 1939	Trustee and Member of the Audit Committee	Since 2009	Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and Professor thereof from 1980 to 2005; President, Hudson Institute (policy research organization) since 1997 and Trustee thereof since 1980; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (strategic solutions company) since 2005; Director, Cerego, LLC (software development and design) since 2005.	36 RICs consisting of 95 Portfolios	AIMS Worldwide, Inc. (marketing)
Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2009	Professor, Harvard Business School since 1989; Director, Harvard Business School Publishing since 2005; Director, McLean	36 RICs consisting of 95 Portfolios	Newell Rubbermaid, Inc. (manufacturing)

132

			Hospital since 2005.
Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Director, The West Penn Allegheny Health System (a not-for-profit health system) since 2008; Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investment) since 1998; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	36 RICs consisting of 95 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company); WQED Multi-Media (public broadcast not-for- profit)
Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	36 RICs consisting of 95 Portfolios	None
Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Trustee	Since 2009	President, Founders Investments Ltd. (private investments) since 1999; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, Forward Management, LLC since 2007; Director, The James Irvine Foundation (philanthropic foundation)	36 RICs consisting of 95 Portfolios	A.P. Pharma, Inc. (specialty pharmaceuticals)

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			from 1998 to 2008.
Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Chair of the Audit Committee and Trustee	Since 2009	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Chairman Elect of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and committee member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Trustee, The Holy Family Foundation since 2001; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter- Tel from 2006 to 2007.	36 RICs consisting of 95 Portfolios	None
Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Trustee and Member of the Audit Committee	Since 2009	Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh since 2005 and Dean thereof from 1997 to 2005; Director, Alkon Corporation (pneumatics) since 1992; Director,	36 RICs consisting of 95 Portfolios	None

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Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008.

¹ Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year extensions in terms of Trustees who turn 72 prior to December 31, 2013.

² In connection with the acquisition of Barclays Global Investors by BlackRock, Inc. in December 2009, the Trustees were elected to the Trust’s/MIP’s Board. As a result, although the chart shows the Trustees as joining the Trust’s/MIP’s Board in 2009, each Independent Trustee first became a member of the boards of other funds advised by BlackRock Advisors, LLC or its affiliates as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1999; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.

Interested Trustees3
Richard S. Davis 55 East 52nd Street New York, NY 10055 1945	Trustee	Since 2009	Managing Director, BlackRock, Inc. since 2005; Chief Executive Officer, State Street Research & Management Company from 2000 to 2005; Chairman of the Board of Directors, State Street Research Mutual Funds from 2000 to 2005.	169 RICs consisting of 290 Portfolios	None
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2009	Consultant, BlackRock, Inc. from 2007 to 2008; Managing Director, BlackRock, Inc. from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	169 RICs consisting of 290 Portfolios	None

³ Mr. Davis is an “interested person” as defined in the Investment Company Act of 1940, of the Trust/MIP based on his position with BlackRock, Inc. and its affiliates. Mr. Gabbay is an “interested person” of the Trust/MIP based on his former positions with BlackRock, Inc. and its affiliates as well as his ownership of BlackRock, Inc. and The PNC Financial Services Group, Inc. securities. Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

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Name, Address and Year of Birth	Position(s) Held with the Trust/MIP	Length of Time Served	Principal Occupation(s) During Past Five Years
Trust/MIP Officers4
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock, Inc. since 2009; Global head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009.
Richard Hoerner, CFA 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2000; Co- head of BlackRock's Cash Management Portfolio Management Group since 2002; Member of the Cash Management Group Executive Committee since 2005.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2010; Director of BlackRock, Inc. from 2008 to 2009; Head of Product Development and Management for BlackRock's U.S. Retail Group since 2009, and Co-head thereof from 2007 to 2009; Vice President of BlackRock, Inc. from 2005 to 2008.
Simon Mendelson 55 East 52nd Street New York, NY 10055 1964	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2005; Co- head of the Global Cash and Securities Lending Group since 2010; Chief Operating Officer and head of the Global Client Group for BlackRock's Global Cash Management Business since 2007; Head of BlackRock's Strategy and Development Group from 2005 to 2007; Partner of McKinsey & Co. from 1997 to 2005.
Brian Schmidt 55 East 52nd Street New York, NY 10055 1958	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2004; Various positions with U.S. Trust Company from 1991 to 2003 including Director from 2001 to 2003 and Senior Vice President from 1998 to 2003; Vice President, Chief Financial Officer and Treasurer of Excelsior Funds, Inc., Excelsior Tax-Exempt Funds, Inc. and Excelsior Funds Trust from 2001 to 2003.
Christopher Stavrakos, CFA 55 East 52nd Street New York, NY 10055 1959	Vice President	Since 2009	Managing Director of BlackRock, Inc. since 2006; Co- head of BlackRock's Cash Management Portfolio Management Group since 2006; Senior Vice President, CIO, and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2009	Managing Director of BlackRock, 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.

136

Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2009	Managing Director of BlackRock, Inc. since 2007 and Director in 2006; Assistant Treasurer of the Merrill Lynch Investment Managers, L.P. (“MLIM”) and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer	Since 2009	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock, Inc. since 2005.
Ira Shapiro 55 East 52nd Street New York, NY 10055 1963	Secretary	Since 2010	Managing Director of BlackRock, Inc. since 2009; Managing Director and Associate General Counsel of Barclays Global Investors from 2008 to 2009; Principal thereof from 2004 to 2008.

⁴ Officers of the Trust/MIP serve at the pleasure of the Board.

⁵ Ira P Shapiro served as Vice President and Chief Legal Officer of the Trust/MIP from 2007 to 2009.

Effective September 24, 2010, John M. Perlowski became President and Chief Executive Officer of MIP.

Effective November 16, 2010, Ira Shapiro became Secretary of MIP.

Further information about the Trust/MIP Officers and Trustees is available in the Trust/MIP Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.

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Investment Advisor	Administrator	Custodian	Transfer Agent	Accounting Agent	Distributor
BlackRock Fund Advisors San Francisco, CA 94105	BlackRock Institutional Trust Company, N.A. San Francisco CA 94105	State Street Bank and Trust Company Boston, MA 02101	BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	State Street Bank and Trust Company Boston, MA 02101	BlackRock Investments, LLC New York, NY 10022
			Legal Counsel Sidley Austin LLP New York, NY 10019	Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP New York, NY 10017	Address of the Funds 400 Howard Street San Francisco, CA 94105

138

Additional Information

General Information

Availability of Quarterly Portfolio Schedule

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

Availability of Proxy Voting Policies and Procedures

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

Availability of Proxy Voting Record

Information about how each Portfolio/Master Portfolio voted proxies relating to securities held in the Portfolio’s/Master Portfolio’s portfolios during the most recent 12-month period ended December 31 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

Shareholder Privileges

Account Information

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

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.

139

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 nonpublic 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.

140

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

#LIFEPATH5-12/10

Item 2	–	Code of Ethics – The registrant (or the “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer and principal accounting officer, or persons performing similar functions. During the period covered by this report, there have been no amendments to or waivers granted under the code of ethics. A copy of the code of ethics is available without charge at www.blackrock.com.
Item 3	–	Audit Committee Financial Expert – The registrant’s board of directors or trustees, as applicable (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 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

	(a) Audit Fees						(b) Audit-Related  Fees1						(c) Tax Fees2						(d) All Other Fees3
Entity Name	Current Fiscal Year End			Previous Fiscal Year End			Current Fiscal Year End			Previous Fiscal Year End			Current Fiscal Year End			Previous Fiscal Year End			Current Fiscal Year End			Previous Fiscal  Year End
BlackRock Funds III		$	142,506		$	120,582		$	0		$	0		$	92,928		$	70,230		$	0		$	0
Master Investment Portfolio		$	227,270		$	201,690		$	0		$	0		$	203,177		$	163,820		$	0		$	0

1 The nature of the services include 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 include tax compliance, tax advice and tax planning.

3 The nature of the services include a review of compliance procedures and attestation thereto.

(e)(1) Audit Committee Pre-Approval Policies and Procedures:

The registrant’s audit committee (the “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 Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the registrant’s affiliated service providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are a) consistent with the SEC’s auditor independence rules and b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis (“general pre-approval”). The term of any general pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other non-audit services provided to the registrant which have a direct impact on the operation 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 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 the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not Applicable

(g) Affiliates’ Aggregate Non-Audit Fees:

Entity Name	Current Fiscal Year End		Previous Fiscal Year End
BlackRock Funds III	$	2,849,859	$	4,293,895
Master Investment Portfolio	$	2,960,108	$	4,387,485

(h) The registrant’s audit committee has considered and determined that the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any non-affiliated sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by the registrant’s investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant 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.

Regulation S-X Rule 2-01(c)(7)(ii) – $0, 0%

Item 5	–	Audit Committee of Listed Registrants – Not Applicable
Item 6	–	Investments (a) The registrant’s Schedule of Investments is 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 – The registrant’s Nominating and Governance Committee will consider nominees to the board of directors recommended by shareholders when a vacancy becomes available. Shareholders who wish to recommend a nominee should send nominations which

		include biographical information and set forth the qualifications of the proposed nominee to the registrant’s Secretary. There have been no material changes to these procedures.
Item 11	–	Controls and Procedures
11(a)	–	The registrant’s principal executive and principal financial officers or persons performing similar functions have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended.
11(b)	–	There were no changes in the registrant’s 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 registrant’s internal control over financial reporting.
Item 12	–	Exhibits attached hereto
12(a)(1)	–	Code of Ethics – See Item 2
12(a)(2)	–	Certifications – Attached hereto
12(a)(3)	–	Not Applicable
12(b)	–	Certifications – Attached hereto

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the 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 of BlackRock Funds III and Master Investment Portfolio

Date: March 4, 2011

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 the 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 4, 2011

By:	/s/    Neal J. Andrews
	Neal J. Andrews
	Chief Financial Officer (principal financial officer) of BlackRock Funds III and Master Investment Portfolio

Date: March 4, 2011