Edgar Filing: BlackRock Inc.

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

Form 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File No. 001-33099

BlackRock, Inc.

(Exact name of registrant as specified in its charter)

Delaware

32-0174431

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

55 East 52nd Street, New York, NY 10055

(Address of Principal Executive Offices)

(212) 810-5300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class		Name of each exchange on which registered
Common Stock, $.01 par value		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known, seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The aggregate market value of the voting common stock and non-voting common stock equivalents held by non-affiliates of the registrant as of June 30, 2012 was approximately $28.7 billion.

As of January 31, 2013, there were 169,961,312 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated by reference herein:

Portions of the definitive Proxy Statement of BlackRock, Inc. to be filed pursuant to Regulation 14A of the general rules and regulations under the Securities Exchange Act of 1934, as amended, for the 2013 annual meeting of stockholders to be held on May 30, 2013 (“Proxy Statement”) are incorporated by reference into Part III of this Form 10-K.

BlackRock, Inc.

TABLE OF CONTENTS


PART I
Item 1	Business	1
Item 1A	Risk Factors	20
Item 1B	Unresolved Staff Comments	29
Item 2	Properties	30
Item 3	Legal Proceedings	30
Item 4	Mine Safety Disclosures	30
PART II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	31
Item 6	Selected Financial Data	32
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	71
Item 8	Financial Statements and Supplemental Data	72
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	72
Item 9A	Controls and Procedures	72
Item 9B	Other Information	75
PART III
Item 10	Directors, Executive Officers and Corporate Governance	75
Item 11	Executive Compensation	75
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	75
Item 13	Certain Relationships and Related Transactions, and Director Independence	75
Item 14	Principal Accountant Fees and Services	75
PART IV
Item 15	Exhibits and Financial Statement Schedules	75
	Signatures	78

Part I

Item 1.

BUSINESS

Overview

BlackRock, Inc. (NYSE: BLK; “BlackRock” or the “Company”) is the world’s largest publicly traded investment management firm with employees in 30 countries that serve clients in over 100 countries across the globe. We provide a broad range of investment and risk management services and had $3.792 trillion of assets under management (“AUM”) at December 31, 2012. Our clients include retail, high net worth (“HNW”) and institutional investors, comprised of pension funds, official institutions, endowments, insurance companies, corporations, financial institutions, central banks and sovereign wealth funds. The Company is highly regulated and serves its clients as a fiduciary. We do not engage in proprietary trading activities that could conflict with the interests of our clients.

Our unique platform enables us to offer active (alpha) investments with index (beta) products and risk management to develop tailored solutions for clients. Our product range includes single- and multi-asset class portfolios investing in equities, fixed income, alternatives and/or money market instruments. We offer our products directly and through intermediaries in a variety of vehicles, including open-end and closed-end mutual funds, iShares^® exchange-traded funds (“ETFs”) and other exchange-traded products (together with ETFs, “ETPs”), collective investment funds and separate accounts. We also offer our BlackRock Solutions^® (“BRS”) investment systems, risk management and advisory services primarily to institutional investors.

BlackRock is an independent, publicly traded company, with no single majority shareholder and a majority of independent directors on its Board of Directors. At December 31, 2012, The PNC Financial Services Group, Inc. (“PNC”) owned approximately 20.8% of BlackRock’s voting common shares outstanding and approximately 21.9% of total capital stock.

Management seeks to achieve attractive returns for stockholders over time by, among other things, capitalizing on the following factors:

•

the Company’s diversified alpha and beta product offerings, which enhance its ability to offer a variety of traditional and alternative investment products across the risk spectrum and to tailor single- and multi-asset class investment solutions to address specific client needs;

•

the Company’s focus on strong performance providing alpha for active products and limited or no tracking error for passive products;

•

the Company’s longstanding commitment to risk management and the continued development of, and increased interest in, BRS products and services;

•

the Company’s positioning in the face of macro challenges driving trends in investor behavior, including the secular shift to passive investing and ETPs, a focus on income and retirement, and barbelling of risk using passive and high alpha products including alternatives;

•

the Company’s global presence and commitment to best practices around the world, with approximately 45% of employees outside the United States supporting local investment capabilities and serving clients, and approximately 44% of total AUM managed for clients domiciled outside the United States; and

•

the growing recognition of the global BlackRock brand, and the depth and breadth of the Company’s intellectual capital.

BlackRock operates in a global marketplace characterized by a high degree of market volatility and economic uncertainty, factors that can significantly affect earnings and stockholder returns in any given period.

The Company’s ability to increase revenue, earnings and stockholder value over time is predicated on its ability to generate new business, including business in BRS products and services. New business efforts are dependent on BlackRock’s ability to achieve clients’ investment objectives in a manner consistent with their risk preferences and to deliver excellent client service. All of these efforts require the commitment and contributions of BlackRock employees. Accordingly, the ability to attract, develop and retain talented professionals is critical to the Company’s long-term success.

Financial Highlights


	Selected GAAP Financial Results
(Dollar amounts in millions, except per share amounts)	2012			2011			2010			2009			2008			2007			5-Year CAGR⁽⁴⁾
Total revenue	$	9,337		$	9,081		$	8,612		$	4,700		$	5,064		$	4,845			14	%
Operating income	$	3,524		$	3,249		$	2,998		$	1,278		$	1,593		$	1,294			22	%
Operating margin		37.7	%		35.8	%		34.8	%		27.2	%		31.5	%		26.7	%		7	%
Non-operating income (expense)⁽¹⁾	$	(36	)	$	(116	)	$	36		$	(28	)	$	(422	)	$	162			(174	%)
Net income attributable to BlackRock, Inc.	$	2,458		$	2,337		$	2,063		$	875		$	784		$	993			20	%
Diluted earnings per common share	$	13.79		$	12.37		$	10.55		$	6.11		$	5.78		$	7.37			13	%


	Selected Non-GAAP Financial Results
(Dollar amounts in millions, except per share amounts)	2012			2011			2010			2009			2008			2007			5-Year CAGR⁽⁴⁾
As adjusted⁽²⁾:
Operating income	$	3,574		$	3,392		$	3,167		$	1,570		$	1,662		$	1,518			19	%
Operating margin⁽³⁾		40.4	%		39.7	%		39.3	%		38.2	%		38.7	%		37.4	%		2	%
Non-operating income (expense)⁽¹⁾	$	(42	)	$	(113	)	$	25		$	(46	)	$	(384	)	$	150			(178	%)
Net income attributable to BlackRock, Inc.	$	2,438		$	2,239		$	2,139		$	1,021		$	856		$	1,077			18	%
Diluted earnings per common share	$	13.68		$	11.85		$	10.94		$	7.13		$	6.30		$	7.99			11	%

⁽¹⁾	Net of net income (loss) attributable to non-controlling interests.

⁽²⁾

BlackRock reports its financial results in accordance with accounting principles generally accepted in the United States of America (“GAAP”); however, management believes evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP basis financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and, for the reasons described below, considers them to be effective indicators, for both management and investors, of BlackRock’s financial performance over time. BlackRock’s management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. GAAP reported results include certain significant items, the after-tax impact of which management considers non-recurring or transactions that ultimately will not impact BlackRock’s book value and, therefore, are excluded in calculating as adjusted results as described below.

As adjusted operating income excluded certain expenses incurred related to the integration of the acquisitions of Merrill Lynch Investment Managers (“MLIM”), the fund of funds business of Quellos Group, LLC (“Quellos”) and Barclays Global Investors (“BGI”), as well as advisory fees, legal fees and consulting transaction expenses related to the acquisition of BGI from Barclays on December 1, 2009 (the “BGI Transaction”), a 2007 termination fee for closed-end fund administration and servicing arrangements with Merrill Lynch, 2011 and 2012 U.K. lease exit costs, 2008, 2009 and 2011 restructuring charges and a one-time contribution to certain of the Company’s bank-managed short-term investment funds (“STIFs”) in 2012. The portion of compensation expense associated with certain long-term incentive plans (“LTIP”) funded or to be funded through share distributions to participants of BlackRock stock held by PNC and a Merrill Lynch cash compensation contribution has been excluded because, exclusive of the impact related to the exercise of LTIP participants’ put options, primarily in the three months ended March 31, 2007, these charges do not impact BlackRock’s book value. The expense related to the Merrill Lynch cash compensation contribution ceased at the end of third quarter 2011. As of first quarter 2012, all of the Merrill Lynch contributions had been received. Compensation expense associated with appreciation (depreciation) on investments related to certain BlackRock deferred compensation plans has been excluded from operating and non-operating income, as adjusted, as returns on investments set aside for these plans, which substantially offset this expense, are reported in non-operating income (expense).

⁽³⁾

Operating income used for measuring operating margin, as adjusted, is equal to operating income, as adjusted, excluding the impact of closed-end fund launch costs and commissions. Management believes that excluding such costs and commissions is useful because these costs can fluctuate considerably and revenues associated with the expenditure of these costs will not fully impact the Company’s results until future periods. Revenue used for operating margin, as adjusted, excludes distribution and servicing costs. Amortization of deferred sales commissions is excluded from revenue used for operating margin measurement, as adjusted, because such costs, over time, substantially offset distribution fee revenue earned by the Company. In addition, in 2008 and 2007, revenue used for operating margin, as adjusted, excluded reimbursable property management compensation, which represented compensation and benefits paid to personnel of Metric Property Management, Inc. (“Metric”), a subsidiary of BlackRock Realty Advisors, Inc. (“Realty”). Prior to the transfer in 2008 to a third party, these employees were retained on Metric’s payroll when certain properties were acquired by Realty’s clients. The related compensation and benefits were fully reimbursed by Realty’s clients and have been excluded from revenue used for operating margin, as adjusted, because they did not bear an economic cost to BlackRock.

Net income attributable to BlackRock, Inc., as adjusted, and diluted earnings per common share, as adjusted exclude the after-tax impact of the items listed above and also include the effect on deferred income tax expense attributable to changes in corporate income tax rates as a result of income tax law changes and a state tax election.

⁽⁴⁾	Percentage represents compounded annual growth rate.

See reconciliation to GAAP measures in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures for further information on as adjusted items.

Assets Under Management

A summary of the Company’s AUM for the years 2007 through 2012 is presented below:

AUM by Asset Class

December 31,


(Dollar amounts in millions)	2012		2011		2010		2009		2008		2007
Equity	$	1,845,501	$	1,560,106	$	1,694,467	$	1,536,055	$	203,292	$	362,705
Fixed income		1,259,322		1,247,722		1,141,324		1,055,627		481,365		510,207
Multi-asset class		267,748		225,170		185,587		142,029		77,516		98,623
Alternatives		109,795		104,948		109,738		102,101		61,544		71,771

Long-term		3,482,366		3,137,946		3,131,116		2,835,812		823,717		1,043,306
Cash management		263,743		254,665		279,175		349,277		338,439		313,338
Advisory		45,479		120,070		150,677		161,167		144,995		—

Total	$	3,791,588	$	3,512,681	$	3,560,968	$	3,346,256	$	1,307,151	$	1,356,644

Component Changes in AUM by Asset Class

Five Years Ended December 31, 2012


(Dollar amounts in millions)	12/31/2007		Net New Business			Acquired AUM, net⁽¹⁾			Market / FX App (Dep)			12/31/2012		5-Year CAGR⁽²⁾
Equity	$	362,705	$	185,225		$	1,053,952		$	243,619		$	1,845,501		38	%
Fixed income		510,207		(588	)		502,520			247,183			1,259,322		20	%
Multi-asset class		98,623		101,866			39,909			27,350			267,748		22	%
Alternatives		71,771		(8,801	)		55,734			(8,909	)		109,795		9	%

Long-term		1,043,306		277,702			1,652,115			509,243			3,482,366		27	%
Cash management		313,338		(102,727	)		53,616			(484	)		263,743		(3	%)
Advisory		—		39,935			(10	)		5,554			45,479		NM

Total	$	1,356,644	$	214,910		$	1,705,721		$	514,313		$	3,791,588		23	%

NM - Not meaningful.

⁽¹⁾

Amounts include acquisition adjustments and reclassification of certain AUM acquired from BGI in December 2009, Swiss Re Private Equity Partners (“SRPEP”) in September 2012 and Claymore Investments, Inc. (“Claymore”) in March 2012 and other reclassifications to conform to current period combined AUM policy and presentation. Amounts also include BGI merger-related outflows due to manager concentration considerations prior to third quarter 2011 and outflows from scientific active equity performance prior to second quarter 2011. As a result of client investment manager concentration limits and the scientific active equity performance, outflows were expected to occur for a period of time subsequent to the close of the transaction.

⁽²⁾	Percentage represents compounded annual growth rate.

AUM represents the broad ranges of financial assets we manage for clients on a discretionary basis pursuant to investment management agreements that are expected to continue for at least 12 months. In general, reported AUM reflects the valuation methodology that corresponds to the basis used for billing (for example, net asset value). Reported AUM does not include assets for which we provide risk management or other forms of non-discretionary advice, or assets that we are retained to manage on a short-term, temporary basis.

Investment management fees are typically expressed as a percentage of AUM. We also earn performance fees on certain portfolios relative to an agreed-upon benchmark or return hurdle. On some products, we also may earn securities lending fees. In addition, BlackRock offers its proprietary Aladdin^® investment system as well

as risk management, outsourcing and advisory services, to institutional investors under the BRS name. Revenue for these services may be based on several criteria including value of positions, number of users, accomplishment of specific deliverables or other objectives.

At December 31, 2012, total AUM was $3.792 trillion, representing a compounded annual growth rate of 23% over the last five years. AUM growth during the period was achieved through the combination of net market valuation gains, net new business and acquisitions, including BGI, which added approximately $1.844 trillion of AUM in December 2009 and Claymore and SRPEP, which added $13.7 billion of AUM in 2012. These acquisitions significantly changed our AUM mix, from predominantly active fixed income and equity in 2007 to a broadly diversified product range, as described below.

The Company considers the categorization of its AUM by product type, investment style, client type and client region useful to understanding its business. The following discussion of the Company’s AUM will be organized as follows:


Product	Client Type	Client Region
— Equity	— Institutional	— Americas
— Fixed Income	— Retail and HNW	— Europe, the Middle East and Africa (“EMEA”)
— Multi-Asset		— Asia-Pacific
— Alternatives
— Cash Management
— iShares

Products

Component changes in AUM by product type and investment style for 2012 are presented below.


(Dollar amounts in millions)	12/31/2011		Net New Business			Net Acquired		Market /FX App (Dep)			12/31/2012
Equity:
Active	$	275,156	$	(18,111	)	$	—	$	30,170		$	287,215
iShares		419,651		52,973			3,517		58,507			534,648
Fixed income:
Active		614,804		892			—		40,635			656,331
iShares		153,802		28,785			3,026		7,239			192,852
Multi-asset class		225,170		15,817			78		26,683			267,748
Alternatives:
Core		63,647		(3,922	)		6,166		2,476			68,367
Currency and commodities		41,301		(1,547	)		860		814			41,428

Sub-total		1,793,531		74,887			13,647		166,524			2,048,589
Non-ETP Index:
Equity		865,299		19,154			95		139,090			1,023,638
Fixed income		479,116		(96,506	)		—		27,529			410,139

Sub-total non-ETP index		1,344,415		(77,352	)		95		166,619			1,433,777

Long-term		3,137,946		(2,465	)		13,742		333,143			3,482,366
Cash management		254,665		5,048			—		4,030			263,743
Advisory		120,070		(74,540	)		—		(51	)		45,479

Total AUM	$	3,512,681	$	(71,957	)	$	13,742	$	337,122		$	3,791,588

At year-end 2012, products invested primarily in long-term assets represented 92% of total AUM, or $3.482 trillion, of which 53% were equity mandates, 36% fixed income accounts, 8% multi-asset class portfolios and 3% alternative investments. The remaining AUM was in cash management products and advisory mandates representing long-term portfolio liquidation assignments. Net new business in long-term products totaled $107.7 billion excluding the effect of two large, low-fee non-ETP index fixed income outflows from two institutional clients of $36.0 billion in the first quarter of 2012 and $74.2 billion in the third quarter of 2012. Net inflows in long-term products, excluding these outflows, were augmented by net inflows into cash management products. Long-term and cash product net inflows were offset by advisory distributions due to the successful completion of asset dispositions related to the three Maiden Lane vehicles associated with the Federal Reserve Bank of New York,

marking the repayment of all senior and junior obligations of the three vehicles and the generation of net gains benefiting the U.S. public.

Long-term product offerings include active and passive (index) strategies. Our active strategies seek to earn attractive returns in excess of a market benchmark or performance hurdle (alpha) while maintaining an appropriate risk profile. We offer two types of active strategies: those that rely primarily on fundamental research and those that utilize primarily quantitative models to drive portfolio construction. In contrast, passive strategies seek to closely track the returns of a corresponding index (beta), generally by investing in substantially the same underlying securities within the index or in a subset of those securities selected to approximate a similar risk and return profile of the index. Passive strategies include both our institutional non-ETP index products and iShares ETPs.

Although many clients use both active and passive strategies, the application of these strategies differs greatly. For example, clients may use index products to gain exposure to a market or asset class pending reallocation to an active manager. This has the effect of increasing turnover of index AUM. In addition, institutional non-ETP index assignments tend to be very large (multi-billion dollars) and typically reflect low fee rates. This has the potential to exaggerate the significance of net flows in institutional index products on BlackRock’s revenues and earnings.

Equity

Year-end 2012 equity AUM of $1.845 trillion increased by $285.4 billion, or 18%, from the end of 2011, largely due to flows into regional, country-specific and global mandates and the effect of higher market valuations. Equity AUM growth included $54.0 billion in net new business and $3.6 billion in new assets related to the acquisition of Claymore. Net new business of $54.0 billion was driven by net inflows of $53.0 billion and $19.1 billion into iShares and non-ETP index accounts, respectively. Passive inflows were offset by active net outflows of $18.1 billion, with net outflows of $10.0 billion and $8.1 billion from fundamental and scientific active equity products, respectively.

Passive strategies represented 84% of equity AUM with the remaining 16% in active mandates. Institutional investors represented 62% of equity AUM, while iShares, and retail and HNW represented 29% and 9%, respectively. At year-end 2012, 63% of equity AUM was managed for clients in the Americas (defined as the United States, Caribbean, Canada, Latin America and Iberia) compared with 28% and 9% managed for clients in EMEA and Asia-Pacific, respectively.

BlackRock’s effective fee rates fluctuate due to changes in AUM mix. Approximately half of BlackRock’s equity AUM is tied to international markets, including emerging markets, which tend to have higher fee rates than similar U.S. equity strategies. Accordingly, fluctuations in international equity markets, which do not consistently move in tandem with U.S. markets, may have a greater impact on BlackRock’s effective equity fee rates and revenues.

Fixed Income

Fixed income AUM ended 2012 at $1.259 trillion, rising $11.6 billion, or 1%, relative to December 31, 2011. Growth in AUM reflected $43.3 billion in net new business, excluding the two large previously mentioned low-fee outflows, $75.4 billion in market and foreign exchange gains and $3.0 billion in new assets related to Claymore. Net new business was led by flows into domestic specialty and global bond mandates, with net inflows of $28.8 billion, $13.6 billion and $3.1 billion into iShares, non-ETP index and model-based products, respectively, partially offset by net outflows of $2.2 billion from fundamental strategies.

Fixed Income AUM was split between passive and active strategies with 48% and 52%, respectively. Institutional investors represented 74% of fixed income AUM while iShares and retail and HNW represented 15% and 11%, respectively. At year-end 2012, 59% of fixed income AUM was managed for clients in the Americas compared with 33% and 8% managed for clients in EMEA and Asia-Pacific, respectively.

Multi-Asset Class

Component Changes in Multi-Asset Class AUM


(Dollar amounts in millions)	12/31/2011		Net New Business			Net Acquired		Market /FX App (Dep)		12/31/2012
Asset allocation	$	126,067	$	1,575		$	78	$	12,440	$	140,160
Target date/risk		49,063		14,526			—		6,295		69,884
Fiduciary		50,040		(284	)		—		7,948		57,704

Multi-asset	$	225,170	$	15,817		$	78	$	26,683	$	267,748

Multi-asset class AUM totaled $267.7 billion at year-end 2012, up 19%, or $42.6 billion, reflecting $15.8 billion in net new business and $26.7 billion in portfolio valuation gains. BlackRock’s multi-asset class team manages a variety of bespoke mandates for a diversified client base that leverages our broad investment expertise in global equities, currencies, bonds and commodities, and our extensive risk management capabilities. Investment solutions might include a combination of long-only

portfolios and alternative investments as well as tactical asset allocation overlays.

At December 31, 2012, institutional investors represented 66% of multi-asset class AUM, while retail and HNW accounted for the remaining AUM. Additionally, 58% of multi-asset class AUM is managed for clients based in the Americas with 37% and 5% managed for clients in EMEA and Asia-Pacific, respectively. Flows reflected ongoing institutional demand for our advice in an increasingly

challenging investment environment with $15.0 billion, or 95%, of net inflows coming from institutional clients, with the remaining $0.8 billion, or 5%, generated by retail and HNW clients. Defined contribution plans of institutional clients remained a significant driver of flows. This client group added $13.1 billion of net new business in 2012. During the year, Americas net inflows of $18.5 billion were partially offset by net outflows of $2.6 billion collectively from EMEA and Asia-Pacific clients.

The Company’s multi-asset strategies include the following:

•

Asset allocation and balanced products represented 52%, or $140.2 billion, of multi-asset class AUM at year-end, up $14.1 billion, with growth in AUM driven by net new business of $1.6 billion and $12.4 billion in market and foreign exchange gains. These strategies combine equity, fixed income and alternative components for investors seeking a tailored solution relative to a specific benchmark and within a risk budget. In certain cases, these strategies seek to minimize downside risk through diversification, derivatives strategies and tactical asset allocation decisions.

•

Target date and target risk products ended the year at $69.9 billion, up $20.8 billion, or 42%, since December 31, 2011. Growth in AUM was driven by

net new business of $14.5 billion, a year-over-year organic growth rate of 30%. Institutional investors represented 90% of target date and target risk AUM, with defined contribution plans accounting for over 80% of AUM. The remaining 10% of target date and target risk AUM consisted of retail client investments. Flows were driven by defined contribution investments in our LifePath and LifePath Retirement Income^® offerings, which are qualified investment options under the Pension Protection Act of 2006. These products utilize a proprietary asset allocation model that seeks to balance risk and return over an investment horizon based on the investor’s expected retirement timing.

•

Fiduciary management services accounted for 22%, or $57.7 billion, of multi-asset AUM at December 31, 2012 and increased $7.7 billion during the year due to market and foreign exchange gains. These are complex mandates in which pension plan sponsors retain BlackRock to assume responsibility for some or all aspects of plan management. These customized services require strong partnership with the clients’ investment staff and trustees in order to tailor investment strategies to meet client-specific risk budgets and return objectives.

Alternatives

Component Changes in Alternatives AUM


(Dollar amounts in millions)	12/31/2011		Net New Business			Net Acquired		Market /FX App (Dep)		12/31/2012
Core	$	63,647	$	(3,922	)	$	6,166	$	2,476	$	68,367
Currency and commodities		41,301		(1,547	)		860		814		41,428

Alternatives	$	104,948	$	(5,469	)	$	7,026	$	3,290	$	109,795

Alternatives AUM totaled $109.8 billion at year-end 2012, up $4.8 billion, or 5%, reflecting $3.3 billion in portfolio valuation gains and $7.0 billion in new assets related to the acquisitions of SRPEP, which deepened our alternatives footprint in the European and Asian markets, and Claymore. Core alternative outflows of $3.9 billion were driven almost exclusively by return of capital to clients. Currency net outflows of $5.0 billion were partially offset by net inflows of $3.5 billion into iShares commodity funds.

We continued to make significant investments in our alternatives platform as demonstrated by our acquisition of SRPEP, successful closes on the renewable power initiative and our build out of an alternatives retail platform, which now stands at nearly $10.0 billion in AUM.

We believe that as alternatives become more conventional and investors adapt their asset allocation strategies to best meet their investment objectives, they will further increase their use of alternative investments to complement core holdings.

Institutional investors represented 69%, or $75.8 billion, of alternatives AUM with retail and HNW investors comprising an additional 9%, or $9.7 billion, at year-end 2012. iShares commodity products accounted for the remaining $24.3 billion, or 22%, of AUM at year-end. Alternative clients are geographically diversified with 56%, 26%, and 18% of clients located in the Americas, EMEA and Asia-Pacific, respectively.

The BlackRock Alternative Investors (“BAI”) group coordinates our alternative investment efforts, including

product management, business development and client service. Our alternatives products fall into two main categories – core, which includes hedge funds, funds of funds (hedge funds and private equity) and real estate offerings, and currency and commodities. The products offered under the BAI umbrella are described below.

Core.

•

Hedge Funds ended the year with $26.6 billion in AUM, down $1.4 billion as net inflows into single-strategy hedge funds of $1.0 billion were more than offset by return of capital on opportunistic funds. Market valuation gains contributed $1.1 billion to AUM growth. Hedge fund AUM includes a variety of single-strategy, multi-strategy, and global macro, as well as portable alpha, distressed and opportunistic offerings. Products include both open-end hedge funds and similar products, and closed-end funds created to take advantage of specific opportunities over a defined, often longer-term investment horizon.

•

Funds of Funds AUM increased $6.3 billion, or 28%, to $29.1 billion at December 31, 2012, including $17.1 billion in funds of hedge funds and hybrid vehicles and $12.0 billion in private equity funds of funds. Growth largely reflected $6.2 billion of assets from SRPEP as we expanded our fund of funds product offerings and further engage in European and Asian markets.

•

Real Estate and Hard Assets AUM totaled $12.7 billion, down $0.1 billion, or 1%, reflecting $0.6 billion in client net redemptions and distributions and $0.5 billion in portfolio valuation gains. Offerings include high yield debt and core, value-added and opportunistic equity portfolios and renewable power funds. We continued to expand our real estate platform and product offerings with the launch of our first U.S. real estate investment trust (“REIT”) mutual fund and addition of an infrastructure debt team to further increase and diversify our offerings within global infrastructure investing.

Currency and Commodities. AUM in currency and commodities strategies totaled $41.4 billion at year-end 2012, flat from year-end 2011, reflecting net outflows of $1.5 billion, primarily from active currency and currency overlays, and $0.8 billion of market and foreign exchange gains. Claymore also contributed $0.9 billion of AUM. Currency and commodities products include a range of active and passive products. Our iShares commodities products represented $24.3 billion of AUM, including $0.7 billion acquired from Claymore, and are not eligible for performance fees.

Cash Management

Cash management AUM totaled $263.7 billion at December 31, 2012, up $9.1 billion, or 4%, from year-end 2011. Cash management products include taxable and tax-exempt money market funds and customized separate accounts. Portfolios may be denominated in U.S. dollar, Euro or British pound.

At year-end 2012, 84% of cash AUM was managed for institutions and 16% for retail and HNW investors. The investor base was also predominantly in the Americas, with 69% of AUM managed for investors in the Americas and 31% for clients in other regions, mostly EMEA-based. We generated net inflows of $5.0 billion during 2012, reflecting continued uncertainty around future regulatory changes and a challenging investing environment. To meet investor needs, we sought to provide new solutions and choices for our clients by launching short duration products in the United States, which both immediately address the challenge of a continuing low interest rate environment and will also be important investment options should regulatory changes occur. In the EMEA business, and in particular for our Euro product set, we have taken action to ensure that we can provide effective cash management solutions in the face of a potentially negative yield environment by taking steps to launch new products and re-engineer our existing product set.

iShares

Our industry-leading U.S. and international iShares ETP suite is discussed below.

Component Changes in AUM – iShares


(Dollar amounts in millions)	12/31/2011		Net New Business		Net Acquired		Market /FX App (Dep)		12/31/2012
Equity	$	419,651	$	52,973	$	3,517	$	58,507	$	534,648
Fixed income		153,802		28,785		3,026		7,239		192,852
Multi-asset class		562		178		78		51		869
Alternatives		19,341		3,232		701		1,064		24,338

Long-term	$	593,356	$	85,168	$	7,322	$	66,861	$	752,707

The ETP industry experienced a banner year as annual inflow records from 2008 were broken in the United States, the Asia-Pacific region and on a global basis, propelled by exceptional growth in fixed income and emerging markets equity products¹. The industry saw $260 billion¹ of net new business, representing 17% in organic growth during 2012, with year-end AUM totaling $1.902 trillion¹.

The global growth of the ETP market reflects both continued adoption and new product introduction with investor product preferences driven to varying degrees by performance (as measured by tracking error, which is the difference between net returns on the ETP and the corresponding targeted index), liquidity (bid-ask spread), tax-efficiency, transparency and client service. Fixed income and emerging markets were drivers of industry growth. Fixed income ETPs globally gathered a record $70 billion of net inflows, $54 billion of which was U.S.-listed, led by investment grade and high yield demand as investors shunned the record low yields of government securities in favor of higher yielding products. Both developed and emerging markets equity ETPs saw strong inflows in 2012 as central banks around the world continued to pump liquidity into the global economy via asset purchase programs and accommodative monetary policy to help spur economic growth. U.S. equity ETPs globally had inflows of $116 billion, $82 billion of which was into U.S.-listed funds, and emerging markets equity ETPs globally had $55 billion of net inflows, $30 billion of which was into U.S.-listed funds.¹

iShares is the leading ETP provider in the world, with $752.7 billion of AUM at December 31, 2012, which increased $159.4 billion, or 27%, since year-end 2011. iShares was the top asset gatherer globally in 2012¹ with $85.2 billion of net inflows for an organic growth rate of 14%, with additional AUM growth of $66.9 billion due to market valuation improvements. During 2012, iShares introduced 85 new ETPs, acquired Claymore’s 35 ETPs in Canada and continued our dual commitment to innovation and responsible product structuring. Our broad product range offers investors a precise, transparent and low-cost way to tap market returns and gain access to a full range of asset classes and global markets that have been difficult or expensive for many investors to access until now, as well as the liquidity required to make adjustments to their exposures quickly and cost-efficiently.

At year-end, iShares AUM included $534.7 billion, or 71%, in equity offerings, $192.9 billion, or 26%, in fixed income ETPs and $25.2 billion, or 3%, in multi-asset class and alternative investments. iShares equity AUM increased $115.0 billion, or 27%, from year-end 2011, with $53.0 billion in net inflows and $58.5 billion of market and

¹	BlackRock; Bloomberg

foreign exchange valuation gains. iShares fixed income AUM rose $39.1 billion, or 25%, over the previous year, with 74% of the increase being driven by $28.8 billion of net inflows. iShares multi-asset class and alternatives AUM grew by $5.3 billion, or 27%, with $3.4 billion of net inflows, predominantly into gold commodity products resulting from a macro environment dominated by accommodative monetary policies and resulting currency debasement with an additional $1.1 billion of market and foreign exchange valuation gains.

iShares offers the most diverse product set in the industry with 621 ETPs at year-end 2012 and serves the broadest client base, covering 27 countries on five continents including North America, South America, Europe, Asia and Australia. iShares was the ETP leader in asset gathering in 2012 with four of the top ten products and the highest number of leading products as measured by total assets, with five of the top ten¹. Notwithstanding an increase in the number of ETP products offered in the industry, iShares continued to maintain the largest share of global AUM with 39% at December 31, 2012¹.

•

U.S. iShares AUM ended at $552.3 billion with $61.0 billion of net inflows driven by strong demand for our yield-oriented and equity dividend products with our flagship emerging markets fund also attracting strong flows in 2012. In the United States, we re-gained the top position for 2012 ETP flows with more than 30% market share, and at year-end 2012, iShares was the largest ETP provider in the United States with 41% share of AUM¹. During the fourth quarter of 2012, we debuted the core series in the United States, designed to provide the essential building blocks for buy-and-hold investors to use in constructing the core of their portfolio. The core series demonstrated solid early results with four new and six rebranded products covering U.S. and international equities and U.S. fixed income.

•

International iShares AUM ended at $200.4 billion with robust net new business of $24.2 billion for the year, led by emerging markets equity and corporate fixed income products. In Europe, we captured 80% and 71% of 2012 fixed income and equity net inflows, respectively. At year-end 2012, iShares was the largest European provider with 38% of AUM and 55% of total 2012 industry inflows in the European market¹.

In addition, we were the largest ETP manager in Latin America with over 85% of AUM at December 31, 2012¹. We continue to look for opportunities to further diversify product offerings in key strategic focus areas including attractive, high-growth markets both organically and

through acquisitions as demonstrated by our acquisition of Claymore and our 2013 agreement with Credit Suisse to acquire their ETF business, the closing of which is subject to customary closing conditions.

In general, we expect to maintain relatively stable pricing, so long as it is supported by performance and the iShares value proposition, although we continually seek to achieve efficiencies and pass them on to our clients.

Clients

We serve a diverse mix of institutional and retail investors worldwide. Clients include tax-exempt institutions, such as defined benefit and defined contribution pension plans, charities, foundations and endowments; official institutions, such as central banks, sovereign wealth funds, supranationals and other government entities; taxable institutions, including insurance companies, financial institutions, corporations and third-party fund sponsors; and retail and HNW investors. We also serve both institutional and retail and HNW investors who acquire iShares on exchanges worldwide. iShares is presented under “Products” above, with investments in iShares by institutions and retail and HNW clients excluded from figures and discussions in their respective sections below.

AUM by Style & Client Type

December 31, 2012


(Dollar amounts in millions)	Institutional		Retail/HNW		*iShares*		Total
Active	$	884,695	$	396,599		—	$	1,281,294
Non-ETP index		1,441,480		6,885		—		1,448,365
iShares		—		—		752,707		752,707

Long-term		2,326,175		403,484		752,707		3,482,366
Cash management		221,447		42,296		—		263,743
Advisory		45,466		13		—		45,479

Total	$	2,593,088	$	445,793	$	752,707	$	3,791,588

In 2012, we completed an internal reorganization of the firm, structuring ourselves to ensure that strong investment performance is our highest priority, and better align with our clients’ needs to capitalize on broader industry trends. Specifically, we organized the client side of our business into two groups: one comprising Retail and iShares and another comprising Institutional and BlackRock Solutions. The separation of the client

functions into these two teams allows us to better focus on the unique needs of these client groups by bringing the full capabilities of the firm to bear in an organized, cohesive approach. Additionally, we split our investments functions into five distinct strategies: Alpha, Beta, Multi-Asset, Alternatives and Trading/Liquidity. This new organizational structure allows us to enhance our focus on performance and client engagement.

Institutional Investors (excluding Investments in iShares)

Institutional Long-Term AUM by Asset Class, Style & Client Region

December 31, 2012


(Dollar amounts in millions)	Americas		EMEA		Asia-Pacific		Total
Active:
Equity	$	51,242	$	54,499	$	23,283	$	129,024
Fixed income		336,998		126,530		54,575		518,103
Multi-asset class		77,105		83,797		5,805		166,707
Alternatives		32,362		20,507		17,992		70,861
Index:
Equity		580,605		318,862		117,613		1,017,080
Fixed income		132,150		235,875		41,918		409,943
Multi-asset class		950		4,434		4,161		9,545
Alternatives		1,464		3,325		123		4,912

Long-term institutional	$	1,212,876	$	847,829	$	265,470	$	2,326,175

Long-term assets managed for institutional investors totaled $2.326 trillion, or 61%, of total AUM at year-end 2012. During the year, net outflows in long-term products totaled $99.2 billion, which includes two large low-fee non-ETP index fixed income outflows from two institutional clients totaling $110.2 billion. Excluding these outflows, long-term net new business from institutional clients totaled $11.0 billion with investment performance, market appreciation and foreign exchange valuation gains contributing $237.9 billion to AUM growth.

BlackRock’s institutional AUM is well diversified by both product and region, with 49% of long-term AUM in equities, 40% in fixed income, 8% in multi-asset class and 3% in alternatives. We serve institutional investors on six continents, with 52% of long-term AUM managed on behalf of investors in the Americas, 37% in EMEA and 11% in Asia-Pacific. Institutional AUM is further diversified by investment style and by sub-categories: pensions, endowments and foundations, official institutions, and financial institutions, as described below.

The mix by investment style was 38% active and 62% passive (excluding institutional investors in iShares). As noted earlier, non-ETP index accounts tend to be larger institutional mandates managed for relatively low fee rates and subject to higher turnover.

A discussion of the Company’s Institutional AUM is presented below:

Institutional active AUM ended the quarter at $884.7 billion, up $53.4 billion, or 6%, since year-end 2011, earning base fees of $1.8 billion. Institutional active represented 25% of long-term firm AUM and 23% of long-term base fees. Growth in AUM included market and investment performance gains of $71.3 billion and continued strength in multi-asset class products with net inflows of $12.3 billion largely into defined contribution plans, target date and asset allocation offerings. Multi-asset net inflows were offset by equity net outflows of $14.1 billion, which were split between active fundamental and scientific active equity, and fixed income net outflows of $15.1 billion, reflecting outflows from U.S. core and local currency mandates. Core alternatives net outflows were $0.3 billion, excluding $3.9 billion of return of capital.

Institutional non-ETP index AUM totaled $1.441 trillion at December 31, 2012, reflecting net outflows of $75.1 billion, which included two large low-fee fixed income outflows from two clients of $36.0 billion and $74.2 billion. Excluding these outflows, net new business was $35.0 billion, with market and foreign exchange valuation gains contributing $166.6 billion to AUM growth. The shift to passive strategies has proven to be a significant and long-term trend in the

industry. Flows were led by equities with net inflows of $20.5 billion with flows primarily into global mandates as clients increasingly looked to use passive vehicles for macro exposure as they modestly re-risked. In 2012, institutional non-ETP index equity AUM crossed the $1 trillion threshold. Excluding the two previously mentioned outflows, fixed income garnered net inflows of $13.6 billion, led by flows into U.S. sector specialty and global bond mandates. While institutional non-ETP index represented 41% of long-term firm AUM, it accounted for 11% of long-term base fees.

The Company’s institutional clients consist of the following:

•

Pensions, Endowments and Foundations. BlackRock is among the largest managers of pension plan assets in the world with $1.542 trillion, or 66%, of long-term institutional AUM managed for defined benefit, defined contribution and other pension plans for corporations, governments and unions at December 31, 2012. Retirement is a key theme as longevity, aging populations and changing demographics worldwide are driving investment decisions. The market landscape is shifting from defined benefit to defined contribution, driving strong flows in our defined contribution channel, which had $28.4 billion of long-term net inflows for the year, or 9% organic growth. Defined contribution net inflows were led by $13.1 billion into multi-asset class products, with our LifePath target date suite serving as a key component of our retirement solutions. We ended 2012 with $404.9 billion in defined contribution AUM and remain well positioned to capitalize on the on-going evolution of the defined contribution market and demand for outcome-oriented investments. An additional $58.1 billion was managed for other tax-exempt investors, including charities, foundations and endowments.

•

Official Institutions. We also managed $171.2 billion, or 7%, of long-term institutional AUM, for official institutions, including central banks, sovereign wealth funds, supranationals, multilateral entities and government ministries and agencies at year-end 2012. This specialty client group flourished with long-term net new business of $24.5 billion for the year. These clients often require specialized investment policy advice, the use of customized benchmarks and training support.

•

Financial Institutions. BlackRock is a top independent manager of assets for insurance companies, which accounted for $226.6 billion, or 10%, of institutional long-term AUM at year-end 2012. Assets managed for other taxable institutions, including corporations, banks and third-party fund sponsors for which we provide sub-advisory services, totaled $328.2 billion, or 14%, of long-term institutional AUM at year-end.

Retail and HNW Investors (Excluding Investments in iShares)

Retail / HNW Long-Term AUM by Asset Class & Client Region

December 31, 2012


(Dollar amounts in millions)	Americas		EMEA		Asia-Pacific		Total
Equity	$	94,805	$	53,140	$	16,803	$	164,748
Fixed income		121,640		11,444		5,341		138,425
Multi-asset class		76,714		9,538		4,374		90,626
Alternatives		4,865		3,577		1,243		9,685

Long-term retail/HNW	$	298,024	$	77,699	$	27,761	$	403,484

BlackRock serves retail and HNW investors globally through separate accounts, open-end and closed-end funds, unit trusts and private investment funds. At December 31, 2012, long-term assets managed for retail and HNW investors totaled $403.5 billion, up 11%, or $40.1 billion, versus year-end 2011. During the year, net inflows of $11.6 billion in long-term products were augmented by market valuation improvements of $28.3 billion.

Retail and HNW investors are served principally through intermediaries, including broker-dealers, banks, trust companies, insurance companies and independent financial advisors. Clients invest primarily in mutual funds, which totaled $322.4 billion, or 80%, of retail and HNW long-term AUM at year-end, with the remainder invested in private investment funds and separately managed accounts. The product mix is well diversified, with 41% of long-term AUM in equities, 34% in fixed income, 23% in multi-asset class and 2% in alternatives. The vast majority (98%) of long-term AUM is invested in active products, although this is partially inflated by the fact that iShares is shown separately, since we do not identify all of the underlying investors.

The client base is also diversified geographically, with 74% of long-term AUM managed for investors based in the Americas, 19% in EMEA and 7% in Asia-Pacific at year-end 2012.

•

U.S. retail and HNW long-term inflows of $9.8 billion were driven by strong demand for U.S. sector-specialty and municipal fixed income mutual fund offerings and income-oriented equity. In 2012, we broadened the distribution of alternatives funds to bring higher alpha, institutional quality hedge fund products to retail investors as three mutual funds launched at the end of 2011 gained traction and acceptance, raising close to $0.8 billion of assets. U.S. retail alternatives AUM crossed the $5.0 billion threshold in 2012. The year also included the launch of the BlackRock Municipal Target Term Trust (“BTT”) with $2.1 billion of assets raised, making it the largest municipal fund ever launched and the

largest overall industry offering since 2007. We are the leading U.S. manager by AUM of separately managed accounts, the second largest closed-end fund manager and a top-ten manager of long-term open-end mutual funds².

•

International retail net inflows of $1.8 billion in 2012 were driven by fixed income net inflows of $5.2 billion. Investor demand remained distinctly risk-off in 2012, largely driven by macro political and economic instability and continued trends toward de-risking. Equity net outflows of $2.9 billion were predominantly from sector-specific and regional and country-specific equity strategies due to uncertainty in European markets. Our international retail and HNW offerings include our Luxembourg cross-border fund families, BlackRock Global Funds (“BGF”), BlackRock Strategic Funds with $83.1 billion and $2.4 billion of AUM at year-end 2012, respectively, and a range of retail funds in the United Kingdom. BGF contained 67 funds registered in 35 jurisdictions at year-end 2012. Over 60% of the funds were rated by S&P. In 2012, we were ranked as the third largest cross border fund provider³. In the United Kingdom, we ranked among the five largest fund managers³, and are known for our innovative product offerings, especially within natural resources, European equity, Asian equity and equity income.

Global Clientele

Our footprint in each of these regions reflects strong relationships with intermediaries and an established ability to deliver our global investment expertise in funds and other products tailored to local regulations and requirements.

²	Simfund, Cerulli

³	Lipper FERI

Americas. At year-end 2012, assets managed on behalf of clients domiciled in the Americas totaled $2.326 trillion, or 61%, of total AUM, up $203.0 billion, or 10%, since year-end 2011. Net new business in long-term products of $69.8 billion and in cash management of $1.9 billion was offset by planned advisory distributions of $72.4 billion, primarily due to the successful completion of asset dispositions related to the Maiden Lane vehicles. Market valuation gains contributed an additional $195.7 billion to AUM growth. During the year, we served clients through offices in 30 states in the United States as well as Canada, Mexico, Brazil, Chile, Colombia and Spain.

EMEA. AUM for clients based in EMEA ended the year at $1.158 trillion, or 31%, of total AUM, an increase of $131.3 billion from year-end 2011. During the year, clients awarded net new business of $9.0 billion, including inflows from investors in 22 countries across the region. In the first quarter 2012, flows were impacted by one $36.0 billion low-fee institutional index fixed income redemption from a single client relating to the client’s decision to insource. Excluding this redemption, EMEA net new business was $45.0 billion, led by equity net inflows of $32.7 billion as clients slowly began to re-risk in the face of improving confidence in European markets. Our offerings include fund families in the United Kingdom, Luxembourg and Dublin and iShares listed on stock exchanges throughout Europe as well as separate accounts and pooled investment products.

Asia-Pacific. Clients in the Asia-Pacific region are served through offices in Japan, Australia, Hong Kong, Singapore, Taiwan and Korea, and joint ventures in China and India. At December 31, 2012, we managed $306.8 billion of AUM for clients in the region, a decrease of 15%, or $55.4 billion, from year-end 2011. Net outflows of $80.3 billion included one large low-fee institutional index fixed income redemption. Market and investment performance were favorable with $24.9 billion of gains.

Investment Performance

Investment performance across active and passive products as of December 31, 2012 was as follows:


	One-year period			Three-year period			Five-year period
Fixed Income:
Actively managed products above benchmark or peer median
Taxable		83	%		78	%		64	%
Tax-exempt		67	%		64	%		77	%
Passively managed products within or above tolerance		95	%		97	%		90	%

Equity:
Actively managed products above benchmark or peer median
Fundamental		30	%		38	%		46	%
Scientific		85	%		89	%		88	%
Passively managed products within or above tolerance		96	%		97	%		96	%

*Multi-Asset:**
Actively managed products above benchmark or peer median		38	%		27	%		81	%

*	Includes funds managed for unlevered, absolute return.

Product Performance Notes. Past performance is not indicative of future results. The performance information shown is based on preliminarily available data. The performance information for actively managed accounts reflects U.S. open-end and closed-end mutual funds and similar EMEA-based products with respect to peer median comparisons, and actively managed institutional and HNW separate accounts and funds located globally with respect to benchmark comparisons, as determined using objectively based internal parameters, using the most current verified information available as of December 31, 2012.

Accounts terminated prior to December 31, 2012 are not included. In addition, accounts that have not been verified as of January 29, 2013 have not been included. If such terminated and other accounts had been included, the performance information may have differed substantially from that shown. The performance information does not include funds or accounts that are not measured against a benchmark, any benchmark-based alternatives product, private equity products, CDOs, or liquidation accounts managed by BlackRock’s FMA group. Comparisons are based on gross-of-fee performance for U.S. retail, institutional and HNW separate accounts and EMEA institutional separate accounts and net-of-fee performance for EMEA based retail products. The performance tracking information for institutional non-ETP index accounts is based on gross-of-fee performance

as of December 31, 2012, and includes all institutional accounts and all iShares funds globally using an index strategy. AUM information is based on AUM for each account or fund in the asset class shown without adjustment for overlapping management of the same account or fund as of December 31, 2012. The information reported may differ slightly from that reported previously due to the increased number of accounts that have been verified since the last performance disclosure. BlackRock considers these differences to be not material.

The source of performance information and peer medians is BlackRock and is based in part on data from Lipper Inc. for U.S. funds and Morningstar, Inc. for non-U.S. funds. Fund performance reflects the reinvestment of dividends and distributions, but does not reflect sales charges.

BlackRock Solutions

BlackRock Solutions offers investment management technology systems, risk management services and advisory services on a fee basis. At December 31, 2012, approximately $13.7 trillion of positions were processed on our Aladdin proprietary technology platform, which serves as the investment system for both BlackRock and a growing number of sophisticated institutional investors around the world. BRS also offers comprehensive risk reporting capabilities via the Green Package^® and risk management advisory services; interactive fixed income analytics through our web-based calculator, AnSer^®; middle and back office outsourcing services; and investment accounting. BRS’ Financial Markets Advisory (“FMA”) group provides services such as valuation and risk assessment of illiquid assets, portfolio restructuring, workouts and dispositions of distressed assets and financial and balance sheet strategies, for a wide range of global clients.

In the face of increasing regulatory scrutiny, clients have increased their focus on risk management and demand for BRS services continues to be robust. During 2012, BRS added 43 net new assignments and ended the year with record revenues of $518 million. At year-end, BRS served 169 clients, including banks, insurance companies, official institutions, pension funds, asset managers and other institutional investors across North America, Europe, Asia and Australia.

Our Aladdin business posted strong annual growth of 16%. In 2012, we added $3.5 trillion in new assets to the Aladdin platform with the addition of 16 clients and expansion of 10 existing client mandates. We now have 51 Aladdin clients and $14 trillion of assets on the platform with the average size of the Aladdin client growing substantially in the last year. Aladdin assignments are long-term contracts that provide significant levels of recurring revenue.

In FMA, the nature of assignments is shifting to longer-term advisory and risk monitoring engagements. Advisory AUM decreased 62% to $45.5 billion, driven by $74.5 billion of planned client distributions reflecting our continued success in disposing of assets for clients at, or above, targeted levels.

Securities Lending

Securities lending, which is offered as a potential source of incremental returns on long-term portfolios, is managed by a dedicated team, supported by quantitative analysis, proprietary technology and disciplined risk management. The cash management team invests the cash we receive as collateral for securities on loan in other portfolios. Fees for securities lending can be structured as a share of earnings and/or as a management fee based on a percentage of the value of the cash collateral. The value of the securities on loan and the revenue earned is captured in the corresponding asset class being managed. The value of the collateral is not included in AUM.

Outstanding loan balances ended the year at approximately $134 billion, up from $122 billion at year-end 2011. Spreads were approximately flat compared to 2011, as lending premiums increased and offset declining cash reinvestment spreads. The proportion of securities commanding premium lending fees grew slowly through the year, and started 2012 above the 2011 average.

BlackRock employs a conservative investment style for cash and securities lending collateral that emphasizes quality, liquidity and superior client service through all market cycles. Disciplined risk management, including a rigorous credit surveillance process, is an integral part of the investment process. BlackRock’s Cash Management Risk Committee has established risk limits, such as aggregate issuer exposure limits and maturity limits, across many of the products BlackRock manages, including over all of its cash management products. In the ordinary course of our business, there may be instances when a portfolio may exceed an internal risk limit or when an internal risk limit may be changed. No such instances, individually or in the aggregate, have been material to the Company. To the extent that daily evaluation/reporting of the profile of the portfolios identifies that a limit has been exceeded, the relevant portfolio will be adjusted. To the extent a portfolio manager would like to obtain a temporary waiver of a risk limit, the portfolio manager must obtain approval from the credit research team, which is independent from the cash management portfolio managers. While a risk limit may be waived, such temporary waivers are infrequent.

Risk & Quantitative Analysis

Across all asset classes, in addition to the efforts of the portfolio management teams, the Risk & Quantitative Analysis (“RQA”) group at BlackRock draws on extensive analytical systems and proprietary and third-party data to identify, measure and manage a wide range of risks. RQA provides risk management advice and independent risk oversight of the investment management processes, identifies and helps manage counterparty and operational risks, coordinates standards for firm wide investment performance measurement and determines risk management-related analytical and information requirements. Where appropriate, RQA will work with portfolio managers and developers to facilitate the development or improvement of risk models and analytics.

Competition

BlackRock competes with investment management firms, mutual fund complexes, insurance companies, banks, brokerage firms and other financial institutions that offer products that are similar to, or alternatives to, those offered by BlackRock. In order to grow its business, BlackRock must be able to compete effectively for AUM. Key competitive factors include investment performance track records, the efficient delivery of beta for passively managed products, investment style and discipline, client service and brand name recognition. Historically, the Company has competed principally on the basis of its long-term investment performance track record, its investment process, its risk management and analytic capabilities and the quality of its client service. These factors may place BlackRock at a competitive disadvantage and there can be no assurance that the Company’s strategies and efforts to maintain its existing AUM and to attract new business will be successful.

Geographic Information

At December 31, 2012, BlackRock had clients in over 100 countries across the globe, including the United States, the United Kingdom and Japan.

The following table illustrates the Company’s total revenue for 2012, 2011 and 2010 by geographic region. These amounts are aggregated on a legal entity basis and do not necessarily reflect where the customer resides.


(Dollar amounts in millions)
Revenue	2012		2011		2010
Americas	$	6,429	$	6,064	$	5,824
Europe		2,460		2,517		2,300
Asia-Pacific		448		500		488

Total revenue	$	9,337	$	9,081	$	8,612

The following table illustrates the Company’s long-lived assets, including goodwill and property and equipment at December 31, 2012, 2011 and 2010 by geographic region. These amounts are aggregated on a legal entity basis and do not necessarily reflect where the asset is physically located.


(Dollar amounts in millions)
Long-lived Assets	2012		2011		2010
Americas	$	13,238	$	13,133	$	13,092
Europe		166		123		42
Asia-Pacific		63		73		99

Total long-lived assets	$	13,467	$	13,329	$	13,233

Americas primarily comprises the United States, Canada, Brazil and Mexico, while Europe primarily comprises the United Kingdom. Asia-Pacific primarily comprises Japan, Australia and Hong Kong.

Employees

At December 31, 2012, BlackRock had a total of approximately 10,500 employees, including approximately 4,800 located in offices outside the United States. Consistent with our commitment to continually expand and enhance our talent base to support our clients, we added approximately 400 employees during the year, including in strategic focus areas such as business operations, Aladdin applications development, iShares, alternatives, institutional sales and Asia.

Regulation

Virtually all aspects of BlackRock’s business are subject to various laws and regulations both in and outside the United States, some of which are summarized below. These laws and regulations are primarily intended to protect investment advisory clients, investors in registered and unregistered investment companies, trust customers of BlackRock Institutional Trust Company, N.A. (“BTC”), PNC and its bank subsidiaries and their customers, and the financial system. Under these laws and regulations, agencies that regulate investment advisers, investment funds and financial and bank holding companies and their subsidiaries, such as BlackRock and its subsidiaries, have broad administrative powers, including the power to limit, restrict or prohibit the regulated entity from carrying on business if it fails to comply with such laws and regulations. Possible sanctions for significant compliance failures include the suspension of individual employees, limitations on engaging in certain lines of business for specified periods of time, revocation of investment adviser and other registrations, censures and fines. The rules governing the regulation of financial institutions and their holding companies and subsidiaries are very detailed and technical. Accordingly, the discussion below is general in nature, does not purport to be complete and is current only as of the date of this report.

Regulatory Reform

In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “DFA”) was signed into law in the United States. The DFA is expansive in scope and requires the adoption of extensive regulations and numerous regulatory decisions in order to be fully implemented. The continued adoption of these regulations and decisions will in large measure determine the impact of the DFA on BlackRock and other financial services firms. The DFA may significantly change BlackRock’s operating environment and the financial markets in general in unpredictable ways. It is not possible to predict the ultimate effects that the DFA, or subsequent implementing regulations and decisions, will have upon BlackRock’s business, financial condition, and results of operations. Among the potential impacts, provisions of the DFA referred to as the Volcker Rule could, to the extent the final Volcker Rule is determined to apply to BlackRock’s activities, affect the extent to which BlackRock invests in and transacts with certain of its investment funds, including private equity funds, hedge funds and fund of funds platforms. The impact of the Volcker Rule on liquidity and pricing in the broader financial markets is unknown at this time. For a further discussion of the Volcker Rule, see “Item 1A – Risk Factors – Legal and Regulatory Risks.” In addition, BlackRock could be designated a systemically important financial institution (“SIFI”) and become subject to direct supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). If BlackRock were designated a SIFI, it could be subject to enhanced prudential, supervisory and other requirements, such as risk-based capital requirements; leverage limits; liquidity requirements; resolution plan and credit exposure report requirements; concentration limits; a contingent capital requirement; enhanced public disclosures; short-term debt limits; and overall risk management requirements. Further, new regulations under the DFA, relating to regulation of swaps and derivatives, will impact the manner by which BlackRock and BlackRock-advised funds and accounts use and trade swaps and other derivatives, and may significantly increase the costs of derivatives trading. Similarly, BlackRock’s management of funds and accounts that use and trade swaps and derivatives could be adversely impacted by recently adopted changes to the Commodity Futures Trading Commission’s (the “CFTC”) regulations. These rule changes include those concerning, among other things, the registration and regulation of commodity pool operators and commodity trading advisors (and the accompanying registration and regulation of such entities by the National Futures Association (the “NFA”)), the registration status of dealer counterparties and other counterparties who are major participants in the swap markets, and requirements concerning mandatory clearing of certain swap transactions. Jurisdictions outside the United States

in which BlackRock operates are also in the process of devising or considering more pervasive regulation of many elements of the financial services industry, which could have a similar impact on BlackRock and the broader markets.

The DFA and its regulations, and other new laws or regulations, or changes in enforcement of existing laws or regulations, could materially and adversely impact the scope or profitability of BlackRock’s business activities; require BlackRock to change certain business practices; divert management’s time and attention from BlackRock’s business activities to compliance activities; and expose BlackRock to additional costs (including compliance and tax costs) and liabilities, as well as reputational harm. For example, in addition to regulatory changes mandated by the DFA, the Securities and Exchange Commission (the “SEC”) continues to review the role of and risks related to, money market funds and has indicated that it may adopt additional regulations. Some of the proposed changes, if adopted, could significantly alter money market fund products and the entire money market fund industry. In 2012, the Office of the Comptroller of the Currency of the United States (the “OCC”) amended the regulations governing bank-maintained short-term investment funds (“STIFs”) to include new disclosure requirements regarding portfolio holdings and to more closely align portfolio limitations, such as maximum weighted average maturity and weighted average life, with those applicable to SEC registered money market funds. Similarly, the SEC continues to review the distribution fees paid to mutual fund distributors under Rule 12b-1 under the Investment Company Act of 1940 (the “Investment Company Act”), which are important to a number of the mutual funds BlackRock manages. Any changes to 12b-1 fees would alter the way BlackRock’s distribution partners distribute BlackRock products. Additionally, the SEC, the Internal Revenue Service (“IRS”) and the CFTC each continue to review the use of futures and derivatives by mutual funds, and such reviews could result in regulations that further limit the use of futures and derivatives by mutual funds. If adopted, these limitations could require BlackRock to change certain mutual fund business practices or to register additional entities with the CFTC, which could result in additional costs and/or restrictions. In addition, BlackRock has begun reporting certain information about a number of its private funds to the SEC and certain information about a number of its commodity pools to the CFTC, pursuant to systemic risk reporting requirements adopted by both agencies, which have required, and will continue to require, investments in people and systems to assure timely and accurate reporting. Still another example of changes in the regulatory landscape was the IRS’ implementation of Foreign Account Tax Compliance Act (“FATCA”). FATCA was enacted in 2010 and is intended to address tax compliance issues associated with U.S. taxpayers with foreign accounts. FATCA requires foreign

financial institutions to report to the IRS information about financial accounts held by U.S. taxpayers and imposes withholding, documentation and reporting requirements on foreign financial institutions. Final regulations were issued by the IRS on January 17, 2013, with the earliest effective dates beginning in January 1, 2014. In many instances, however, the precise nature of what needs to be implemented will be governed by bilateral Intergovernmental Agreements (“IGAs”) between the United States and the countries in which BlackRock does business. Many of these IGAs have yet to be concluded. FATCA could cause the Company to incur significant administrative and compliance costs and subject clients to U.S. tax withholding.

An example of changes in the regulatory landscape in Europe is the European Union (“EU”) Alternative Investment Fund Managers Directive (“AIFMD”), which became effective on July 21, 2011 and is required to be implemented by EU member states by July 22, 2013. The AIFMD regulates managers of, and service providers to, a broad range of alternative investment funds (“AIFs”) domiciled within and (depending on the precise circumstances) outside the EU. The AIFMD also regulates the marketing of all AIFs inside the European Economic Area (the “EEA”). In general, the AIFMD is expected to have a staged implementation between mid-2013 and 2018. Compliance with the AIFMD’s requirements may restrict AIF marketing and will place additional compliance and disclosure obligations regarding remuneration, capital requirements, leverage, valuation, stakes in EU companies, depositaries, the domicile of custodians and liquidity management.

Globally, regulators are examining the potential risks in ETFs and may impose additional regulations on ETFs, including requirements to promote increased transparency and to limit the ability of ETFs to utilize derivatives. The International Organization of Securities Commissions is also examining the appropriate level of regulatory oversight of financial benchmarks, whether standards should apply to methodologies for benchmark calculation, and transparency and governance issues in the benchmarking process. Any of these regulatory changes could also lead to business disruptions, could materially and adversely impact the value of assets in which BlackRock has invested directly and/or on behalf of clients, and, to the extent the regulations strictly control the activities of financial services firms, could make it more difficult for BlackRock to conduct certain businesses or distinguish itself from competitors.

Additional legislation, changes in rules promulgated by regulators and self-regulatory organizations, or changes in the interpretation or enforcement of existing laws and regulations may directly affect the method of operation

and profitability of BlackRock. BlackRock’s profitability also could be materially and adversely affected by modification of the rules and regulations that impact the business and financial communities in general, including changes to the laws governing taxation, antitrust regulation and electronic commerce. See the “–Non-U.S. Regulation” section below for a further discussion of regulatory reforms being considered and/or adopted outside of the United States.

U.S. Regulation

BlackRock and certain of its U.S. subsidiaries are subject to regulation, primarily at the federal level, by the SEC, the Department of Labor (the “DOL”), the Federal Reserve, the OCC, the Financial Industry Regulatory Authority (“FINRA”), the NFA, the CFTC and other government agencies and regulatory bodies. Certain of BlackRock’s U.S. subsidiaries are also subject to various anti-terrorist financing, privacy, anti-money laundering regulations and economic sanctions laws and regulations established by various agencies.

The Investment Advisers Act of 1940 (the “Advisers Act”), imposes numerous obligations on registered investment advisers such as BlackRock, including record-keeping, operational and marketing requirements, disclosure obligations and prohibitions on fraudulent activities. The Investment Company Act imposes stringent governance, compliance, operational, disclosure and related obligations on registered investment companies and their investment advisers and distributors, such as BlackRock. The SEC is authorized to institute proceedings and impose sanctions for violations of the Advisers Act and the Investment Company Act, ranging from fines and censure to termination of an investment adviser’s registration. Investment advisers also are subject to certain state securities laws and regulations. Non-compliance with the Advisers Act, the Investment Company Act or other federal and state securities laws and regulations could result in investigations, sanctions, disgorgement, fines and reputational damage.

BlackRock’s trading and investment activities for client accounts are regulated under the Securities Exchange Act of 1934 (the “Exchange Act”), as well as the rules of various U.S. and non-U.S. securities exchanges and self-regulatory organizations, including laws governing trading on inside information, market manipulation and a broad number of technical requirements (e.g., short sale limits, volume limitations, reporting obligations) and market regulation policies in the United States and globally. Depending on the scope of the rules to be adopted by the SEC, provisions added to the Exchange Act by the DFA may require certain BlackRock subsidiaries to register as municipal advisors in relation to their services for state

and local governments, pension plans and other investment programs, such as college savings plans. In addition, BlackRock manages a variety of investment funds listed on U.S. and non-U.S. exchanges, which are subject to the rules of such exchanges. Violation of these laws and regulations could result in restrictions on the Company’s activities and damage its reputation.

BlackRock manages a variety of private pools of capital, including hedge funds, funds of hedge funds, private equity funds, CDOs, real estate funds, collective investment trusts, managed futures funds and hybrid funds. Congress, regulators, tax authorities and others continue to explore, on their own and in response to demands from the investment community and the public, increased regulation related to private pools of capital, including changes with respect to investor eligibility, certain limitations on trading activities, record-keeping and reporting, the scope of anti-fraud protections, safekeeping of client assets and a variety of other matters. BlackRock may be materially and adversely affected by new legislation, rule-making or changes in the interpretation or enforcement of existing rules and regulations imposed by various regulators.

Certain BlackRock subsidiaries are subject to the Employee Retirement Income Security Act of 1974 (“ERISA”), and to regulations promulgated thereunder by the DOL, insofar as they act as a “fiduciary” under ERISA with respect to benefit plan clients. ERISA and applicable provisions of the Internal Revenue Code impose certain duties on persons who are fiduciaries under ERISA, prohibit certain transactions involving ERISA plan clients and impose excise taxes for violations of these prohibitions, mandate certain required periodic reporting and disclosures and require BlackRock to carry bonds ensuring against losses caused by fraud or dishonesty. ERISA also imposes additional compliance, reporting and operational requirements on BlackRock that otherwise are not applicable to non-benefit plan clients.

BlackRock has seven subsidiaries that are registered as commodity pool operators (“CPOs”) and/or commodity trading advisors with the CFTC and are members of the NFA. Additional BlackRock entities may need to register as a CPO or commodity trading advisor as a result of recently enacted regulatory changes by the CFTC. The CFTC and NFA each administer a comparable regulatory system covering futures contracts and various other financial instruments, including swaps as a result of the DFA, in which certain BlackRock clients may invest. Three of BlackRock’s other subsidiaries, BlackRock Investments, LLC (“BRIL”), BlackRock Capital Markets, LLC and BlackRock Execution Services, are registered with the SEC as broker-dealers and are member-firms of

FINRA. Each broker-dealer has a membership agreement with FINRA that limits the scope of such broker-dealer’s permitted activities. BRIL is also an approved person with the New York Stock Exchange (“NYSE”) and a member of the Municipal Securities Rulemaking Board (“MSRB”) subject to MSRB rules.

U.S. Banking Regulation

PNC is a bank holding company and regulated as a “financial holding company” by the Federal Reserve under the Bank Holding Company Act of 1956 (the “BHC Act”). Based on PNC’s interests in and relationships with BlackRock, BlackRock is deemed to be a non-bank subsidiary of PNC and is therefore subject to the supervision and regulation of the Federal Reserve and to most banking laws, regulations and orders that apply to PNC, including the Volcker Rule. The supervision and regulation of PNC and its subsidiaries under applicable banking laws is intended primarily for the protection of its banking subsidiaries, its depositors, the Deposit Insurance Fund of the Federal Deposit Insurance Corporation, and the financial system as a whole, rather than for the protection of stockholders, creditors or clients of PNC or BlackRock. PNC’s relationships and good standing with its regulators are important to the conduct of BlackRock’s business. BlackRock may also be subject to foreign banking laws and supervision that could affect its business.

BTC is a limited purpose national trust company that does not accept deposits or make commercial loans and is a member of the Federal Reserve System. Accordingly, BTC is examined and supervised by the OCC and is subject to various banking laws and regulations enforced by the OCC, such as capital adequacy, regulations governing fiduciaries, conflicts of interest, self-dealing, and anti-money laundering laws and regulations. BTC is also subject to various Federal Reserve regulations applicable to member institutions, such as regulations restricting transactions with affiliates. Many of these laws and regulations are meant for the protection of BTC’s customers and not BTC, BlackRock and its affiliates, or BlackRock’s stockholders.

BlackRock generally may conduct only activities that are authorized for a “financial holding company” under the BHC Act. Investment management is an authorized activity, but must be conducted within applicable regulatory requirements, which in some cases are more restrictive than those BlackRock faces under applicable securities laws. BlackRock may also invest in investment companies and private investment funds to which it provides advisory, administrative or other services, only to the extent consistent with applicable law and regulatory

interpretations. The Federal Reserve has broad powers to approve, deny or refuse to act upon applications or notices for BlackRock to conduct new activities, acquire or divest businesses or assets, or reconfigure existing operations. There are limits on the ability of bank subsidiaries of PNC to extend credit to or conduct other transactions with BlackRock or its funds. PNC and its subsidiaries are also subject to examination by various banking regulators, which results in examination reports and ratings that may adversely impact the conduct and growth of BlackRock’s businesses.

The Federal Reserve has broad enforcement authority over BlackRock, including the power to prohibit BlackRock from conducting any activity that, in the Federal Reserve’s opinion, is unauthorized or constitutes an unsafe or unsound practice in conducting BlackRock’s business. The Federal Reserve may also impose substantial fines and other penalties for violations of applicable banking laws, regulations and orders. The DFA strengthened the Federal Reserve’s supervisory and enforcement authority over a bank holding company’s non-bank affiliates, such as BlackRock.

Any failure of PNC to maintain its status as a financial holding company could result in substantial limitations on certain BlackRock activities and its growth. Such a change of status could be caused by any failure of one of PNC’s bank subsidiaries to remain “well capitalized,” by any examination downgrade of one of PNC’s bank subsidiaries, or by any failure of one of PNC’s bank subsidiaries to maintain a satisfactory rating under the Community Reinvestment Act. In addition, the DFA broadened the requirements for maintaining financial holding company status by also requiring the holding company to remain “well capitalized” and “well managed.”

Non-U.S. Regulation

BlackRock’s international operations are subject to the laws and regulations of non-U.S. jurisdictions and non-U.S. regulatory agencies and bodies and, in certain cases, are affected by U.S. laws and regulations that have extra-territorial application. As BlackRock continues to expand its international presence, a number of its subsidiaries and international operations have become subject to regulatory frameworks comparable to those affecting its operations in the United States.

The Financial Services Authority (the “FSA”) currently regulates certain BlackRock subsidiaries in the United Kingdom. Authorization by the FSA is required to conduct any financial services related business in the United Kingdom under the Financial Services and Markets Act 2000. The FSA’s rules made under that Act govern a firm’s capital resources requirements, senior management

arrangements, conduct of business, interaction with clients, and systems and controls. The FSA also supervises the Company’s U.K.-regulated subsidiaries under a “close and continuous” regime – which include regular visits and meetings with senior management and control functions – to monitor the Company’s compliance with regulatory requirements. Breaches of the FSA’s rules may result in a wide range of disciplinary actions against the Company’s U.K.-regulated subsidiaries. In April 2013, the FSA is expected to be replaced by Prudential Regulation Authority and the Financial Conduct Authority. Pending formal implementation, the FSA has introduced a shadow internal structure in anticipation of the creation of the Prudential Regulation Authority and the Financial Conduct Authority, and the Bank of England has created an interim Financial Policy Committee.

In addition to the above, the Company’s U.K.-regulated subsidiaries and other European subsidiaries and branches, must comply with the pan-European regulatory regime established by the Markets in Financial Instruments Directive (“MiFID”), which became effective on November 1, 2007 and regulates the provision of investment services and activities throughout the EEA, as well as the Capital Requirements Directive, which delineates regulatory capital requirements. MiFID sets out detailed requirements governing the organization and conduct of business of investment firms and regulated markets. It also includes pre- and post-trade transparency requirements for equity markets and extensive transaction reporting requirements.

The United Kingdom has adopted the MiFID rules into national legislation and FSA regulations, as have those other European jurisdictions in which BlackRock has a presence (excluding Switzerland which is not part of the EU or EEA). A review of MiFID by the European Commission has led to the publication of a draft amendment Directive and a draft new Markets in Financial Instruments Regulation. The proposals, if implemented, are likely to result in changes to pre- and post-trade reporting obligations and an expansion of the types of instruments subject to these requirements. They may affect the buying and selling of derivatives by moving most derivative trading onto regulated trading venues and may control the activities of algorithmic trading. The proposals may also result in changes to conduct of business requirements including selling practices, intermediary inducements and client categorization. The proposals also envisage giving the European Commission power to ban certain products and services. A further European Commission Regulation, the European Market Infrastructure Regulation (“EMIR”), was adopted in August 2012, and requires the central clearing of standardized OTC derivatives and the mandatory reporting of all derivative contracts. Some of the EMIR technical standards have recently been finalized and the remainder are expected to be finalized in 2013.

In addition, the FSA has finalized rules relating to its retail distribution review. These rules, which came into effect on December 31, 2012, have changed how retail clients pay for investment advice given in respect of all retail investment products, including open-end and closed-end funds, structured products and insurance-based savings products. The FSA is also considering further rules that would ban payments by product providers to distribution platforms for both advised and non-advised business.

In the aftermath of the financial crisis, the European Commission set out a detailed plan for EU financial reform, outlining a number of initiatives to be reflected in new or updated directives, regulations and recommendations of which the MiFID review (mentioned above) was a part. These, together with the changes contemplated by the AIFMD (mentioned above), will have direct and indirect effects on BlackRock’s operations in the EEA.

The European Commission has also published proposals to replace the Market Abuse Directive with a regulation on insider dealing and market manipulation and with an accompanying directive on criminal sanctions. There are also ongoing plans to reform the framework to which regulated firms are subject, including in relation to regulatory capital and the protection of client assets, which will have a direct effect on some of BlackRock’s European operations.

The next iteration of the Undertakings for Collective Investment in Transferable Securities Directive (“UCITS IV”), was required to be adopted in the national law of each EU member state by July 1, 2011. The United Kingdom has adopted UCITS IV requirements into national legislation and FSA regulation. Luxembourg and Ireland have also adopted UCITS IV into their national legislation. However, several other EU member states are still in various stages of the adoption process. UCITS IV introduced new requirements including a requirement on UCITS funds to provide a key investor information document. There are also European Commission consultations in process that are intended to improve retail investor protection, including UCITS V, which addresses, among other items, custodial liability, and UCITS VI, which includes proposals on depositaries, money market funds and product management.

Proposals on packaged retail investment products (“PRIPs”) are to be implemented through the strengthening of MiFID standards (for non-insurance PRIPs), revisions to the Insurance Mediation Directive’s selling standard (for all insurance-based PRIPs) and new investor disclosure requirements for all PRIPs though a separate EU legislative process.

Certain individual EU Member States, such as France and Italy, have enacted national financial transaction taxes (“FTTs”), and a group of Member States also could adopt an FTT under an EU Enhanced Cooperation procedure that would apply only in those Member States. In general, any tax on securities and derivatives transactions would likely have a negative impact on the liquidity of the securities and derivatives markets, could diminish the attractiveness of certain types of products that we manage in those countries and could cause clients to shift assets away from such products. An FTT could significantly increase the operational costs of our entering into, on behalf of our clients, securities and derivatives transactions that would be subjected to an FTT, which would adversely impact our revenues.

For the insurance sector the Solvency II process will increase the amount of capital that insurers will have to set aside and will have an indirect effect on fund managers with insurance clients. The Solvency II process has been delayed from an original compliance date of January 1, 2014; no new timetable has been currently proposed.

In addition to the FSA, the activities of certain BlackRock subsidiaries, branches, and representative offices are overseen by financial services regulators in Germany, The Netherlands, Ireland, Luxembourg, Switzerland, Isle of Man, Jersey, France, Belgium, Italy, Poland, South Africa, Spain and Sweden. Regulators in these jurisdictions have authority with respect to financial services including, among other things, the authority to grant or cancel required licenses or registrations. In addition, these regulators may subject certain BlackRock subsidiaries to net capital requirements. Other BlackRock subsidiaries, branches, and representative offices are regulated in Japan, Australia, China, Hong Kong, Singapore, Taiwan, South Korea, India, Dubai, Cayman Islands, Brazil, Chile, Mexico and Canada.

In Japan, a BlackRock subsidiary is subject to the Financial Instruments and Exchange Law (the “FIEL”) and the Law Concerning Investment Trusts and Investment Corporations. These laws are administered and enforced by the Japanese Financial Services Agency (the “JFSA”), which establishes standards for compliance, including capital adequacy and financial soundness requirements, customer protection requirements and conduct of business rules. The JFSA is empowered to conduct administrative proceedings that can result in censure, fine, the issuance of cease and desist orders or the suspension or revocation of registrations and licenses granted under the FIEL.

In Australia, BlackRock’s subsidiaries are subject to various Australian federal and state laws and certain subsidiaries are regulated by the Australian Securities and Investments Commission (“ASIC”) and the Australian Prudential Regulation Authority (“APRA”). ASIC regulates companies and financial services in Australia and is responsible for promoting investor, creditor and consumer protection. APRA is the prudential regulator of the Australian financial services industry and oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies and most members of the superannuation (pension) industry. Failure to comply with applicable law and regulations could result in the cancellation, suspension or variation of the regulated subsidiaries licenses in Australia.

The activities of certain BlackRock subsidiaries in Hong Kong are subject to the Securities and Futures Ordinance (the “SFO”) which governs the securities and futures markets and regulates, among others, offers of investments to the public and provides for the licensing of intermediaries. The SFO is administered by the Securities and Futures Commission (the “SFC”). The SFC is also empowered under the SFO to establish standards for compliance as well as codes and guidelines. The relevant BlackRock subsidiaries and the employees conducting any of the regulated activities specified in the SFO are required to be licensed with the SFC, and are subject to the rules, codes and guidelines issued by the SFC from time to time. Failure to comply with the applicable laws, regulations, codes and guidelines issued by the SFC could result in the suspension or revocations of the licenses granted by the SFC.

There are parallel legal and regulatory arrangements in force in many other non-U.S. jurisdictions where BlackRock’s subsidiaries are authorized to conduct business.

Available Information

BlackRock files annual, quarterly and current reports, proxy statements and all amendments to these reports and other information with the SEC. BlackRock makes available free-of-charge, on or through its website at http://www.blackrock.com, the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and all amendments to those filings, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The Company also makes available on its website the charters for the Audit Committee, Management Development and Compensation

Committee, Nominating and Governance Committee and Risk Committee of the Board of Directors, its Code of Business Conduct and Ethics, its Code of Ethics for Chief Executive and Senior Financial Officers and its Corporate Governance Guidelines. Further, BlackRock will provide, without charge, upon written request, a copy of the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and all amendments to those filings as well as the committee charters, its Code of Business Conduct and Ethics, its Code of Ethics for Chief Executive and Senior Financial Officers and its Corporate Governance Guidelines. Requests for copies should be addressed to Investor Relations, BlackRock, Inc., 55 East 52nd Street, New York, New York 10055. Investors may read and copy any document BlackRock files at the SEC’s Public Reference Room at 100 F Street N.E., Washington, D.C. 20549. Please call 1-800-SEC-0330 for further information on the operation of the Public Reference Room. Reports, proxy statements and other information regarding issuers that file electronically with the SEC, including BlackRock’s filings, are also available to the public from the SEC’s website at http://www.sec.gov.

Item 1A.

RISK FACTORS

As a leading investment management firm, risk is an inherent part of BlackRock’s business. Global markets, by their nature, are prone to uncertainty and subject participants to a variety of risks. While BlackRock devotes significant resources across all of its operations to identify, measure, monitor, manage and analyze market and operating risks, BlackRock’s business, financial condition, operating results or non-operating results could be materially adversely affected, or the Company’s stock price could decline as a result of any of the following risks.

Risks Related to BlackRock’s Business and Competition

Changes in the value levels of the capital, commodities or currency markets or other asset classes could lead to a decline in revenues and earnings.

BlackRock’s investment management revenues are primarily comprised of fees based on a percentage of the value of AUM and, in some cases, performance fees expressed as a percentage of the returns earned on AUM. Movements in equity, debt, commodity, real estate or alternative investment market prices, interest rates or foreign exchange rates could cause:

•

the value of AUM to decrease;

•

the returns realized on AUM to decrease;

•

clients to withdraw funds in favor of products in markets that they perceive offer greater opportunity that BlackRock may not serve;

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clients to rebalance assets away from products that BlackRock manages into products that it may not manage;

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clients to rebalance assets away from products that earn higher fees into products with lower fees; and

•

an impairment to the value of intangible assets and goodwill.

The occurrence of any of these events could result in lower investment advisory, administration and performance fees or earnings and cause the Company’s stock price to decline.

Poor investment performance could lead to the loss of clients and a decline in revenues and earnings.

The Company’s management believes that investment performance, including the efficient delivery of beta for passively managed products, is one of the most important factors for the growth and retention of AUM. Poor investment performance relative to applicable portfolio benchmarks or to competitors could reduce revenues and cause earnings to decline as a result of:

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existing clients withdrawing funds in favor of better performing products, which could result in lower investment advisory and administration fees;

•

the diminishing ability to attract funds from existing and new clients;

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the Company earning minimal or no performance fees; and

•

an impairment to the value of intangible assets and goodwill.

The determination to provide support to particular products from time to time or provide securities lending indemnifications may reduce earnings or other investments in the business.

BlackRock may, at its option, from time to time support investment products through capital or credit support. Such support and indemnifications utilize capital that would otherwise be available for other corporate purposes. Losses or prohibitions on such support and indemnifications, or failure to have or devote sufficient capital to support products and securities lending, could have an adverse impact on revenues and earnings.

On behalf of certain clients, BlackRock lends securities to highly rated banks and broker-dealers. In these securities lending transactions, the borrower is required to provide

and maintain collateral at or above regulatory minimums. Securities on loan are marked to market daily to determine if the borrower is required to pledge additional collateral. BlackRock has issued certain indemnifications to certain securities lending clients against potential loss resulting from a borrower’s failure to fulfill its obligations should the value of the collateral pledged by the borrower at the time of default be insufficient to cover the borrower’s obligations under the securities lending agreement. These indemnifications cover only the collateral shortfall described above, and do not guarantee, assume or otherwise insure the investment performance or return of any cash collateral vehicle into which securities lending cash collateral is invested. The amount of securities on loan as of December 31, 2012 and subject to indemnification was $99.5 billion. BlackRock held, as agent, cash and securities totaling $104.8 billion as collateral for indemnified securities on loan at December 31, 2012. BlackRock expects indemnified balances to increase over time.

While the collateral pledged by a borrower is intended to be sufficient to offset the borrower’s obligations to return securities borrowed in the event of a borrower default, BlackRock can give no assurance that the collateral pledged by the borrower will be sufficient to fulfill such obligations. If the amount of pledged collateral is not sufficient to fulfill obligations to a client for whom BlackRock has provided indemnification, BlackRock would be responsible for the amount of the shortfall, which could result in additional costs to BlackRock that cannot be estimated with certainty at this time.

Changes in the value levels of the capital markets or other asset classes could lead to a decline in the value of investments that BlackRock owns.

At December 31, 2012, BlackRock’s net economic investment exposure of approximately $1.2 billion in its investments (see “Item 7A – Quantitative and Qualitative Disclosures About Market Risk”) primarily resulted from co-investments and seed investments in its sponsored investment funds. A decline in the prices of equity or debt securities, or the value of real estate or other alternative investments within or outside the United States could lower the value of these investments and result in a decline of non-operating income and an increase in the volatility of BlackRock’s earnings.

Continued capital losses on investments could have adverse income tax consequences.

The Company may generate realized and unrealized capital losses on seed investments and co-investments.

Realized capital losses may be carried back three years and carried forward five years and offset against realized capital gains for federal income tax purposes. The Company has unrealized capital losses for which a deferred tax asset has been established. In the event such unrealized losses are realized, the Company may not be able to offset such losses within the carryback or carryforward period or from future realized capital gains, in which case the deferred tax asset will not be realized. The failure to utilize the deferred tax asset could materially increase BlackRock’s income tax expense.

The soundness of other financial institutions could adversely affect BlackRock.

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. BlackRock, and the products and accounts that it manages, have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, clearing organizations, mutual and hedge funds, and other institutional clients. Many of these transactions expose BlackRock or the funds and accounts that it manages to credit risk in the event of default of its counterparty or client. While BlackRock regularly conducts assessments of such risk posed by its counterparties, the risk of non-performance by such parties is subject to sudden swings in the financial and credit markets, including the effects of the European sovereign debt crisis and/or a collapse of the Eurozone financial system. There is no assurance that any such losses would not materially and adversely impact BlackRock’s revenues and earnings.

The failure or negative performance of products of other financial institutions could lead to reduced AUM in similar products of BlackRock without regard to the performance of BlackRock’s products.

The failure or negative performance of products of other financial institutions could lead to a loss of confidence in similar products of BlackRock without regard to the performance of BlackRock’s products. Such a negative contagion could lead to withdrawals, redemptions and liquidity issues in such products and have a material adverse impact on the Company’s AUM, revenues and earnings.

Loss of employees could lead to the loss of clients and a decline in revenues.

The ability to attract and retain quality personnel has contributed significantly to BlackRock’s growth and success and is important to attracting and retaining

clients. The market for qualified fund managers, investment analysts, financial advisers and other professionals is competitive. There can be no assurance that the Company will be successful in its efforts to recruit and retain required personnel. Loss of personnel could have a material adverse effect on the Company.

BlackRock’s investment advisory contracts may be terminated or may not be renewed by clients and the liquidation of certain funds may be accelerated at the option of investors.

Separate account and commingled trust clients may terminate their investment management contracts with BlackRock or withdraw funds on short notice. The Company has, from time to time, lost separate accounts and could, in the future, lose accounts or significant AUM due to various circumstances such as adverse market conditions or poor performance.

Additionally, BlackRock manages its U.S. mutual funds, closed-end and exchanged-traded funds under management contracts with the funds that must be renewed and approved by the funds’ boards of directors annually. A majority of the directors of each such fund are independent from BlackRock. Consequently, there can be no assurance that the board of directors of each fund managed by the Company will approve the fund’s management contract each year, or will not condition its approval on the terms of the management contract being revised in a way that is adverse to the Company.

Further, the governing agreements of many of the Company’s private investment funds generally provide that, subject to certain conditions, investors in those funds, and in some cases independent directors of those funds, may remove BlackRock as the investment adviser, general partner or the equivalent of the fund or liquidate the fund without cause by a simple majority vote, resulting in a reduction in the management or performance fees as well as the total carried interest BlackRock could earn.

Failure to comply with client contractual requirements and/or guidelines could result in damage awards against BlackRock and loss of revenues due to client terminations.

When clients retain BlackRock to manage assets or provide products or services on their behalf, they typically specify guidelines or contractual requirements that the Company is required to observe in the provision of its services. A failure to comply with these guidelines or contractual requirements could result in damage to BlackRock’s reputation or in its clients seeking to recover losses, withdrawing their AUM or terminating their contracts, any of which could cause the Company’s revenues and earnings to decline.

Competitive fee pressures could reduce revenues and profit margins.

The investment management industry, including the offering of exchange-traded funds, is highly competitive and has relatively low barriers to entry. To the extent that BlackRock is forced to compete on the basis of price, it may not be able to maintain its current fee structure. Fee reductions on existing or future new business could cause revenues and profit margins to decline.

Performance fees may increase revenue and earnings volatility.

A portion of the Company’s revenues is derived from performance fees on investment and risk management advisory assignments. Performance fees represented $463 million, or 5%, of total revenue for the year ended December 31, 2012. In most cases, performance fees are based on relative or absolute investment returns, although in some cases they are based on achieving specific service standards. Generally, the Company is entitled to performance fees only if the returns on the related portfolios exceed agreed-upon periodic or cumulative return targets. If these targets are not exceeded, performance fees for that period will not be earned and, if targets are based on cumulative returns, the Company may not earn performance fees in future periods. Performance fees will vary from period to period in relation to volatility in investment returns and the timing of revenue recognition, causing earnings to be more volatile.

Additional acquisitions may decrease earnings and harm the Company’s competitive position.

BlackRock employs a variety of strategies intended to enhance earnings and expand product offerings in order to improve profit margins. These strategies have included hiring smaller-sized investment teams, acquisitions of investment management businesses, such as the MLIM, Quellos and BGI transactions and other small and medium-sized strategic acquisitions. These strategies may not be effective, and failure to successfully develop and implement these strategies may decrease earnings and harm the Company’s competitive position in the investment management industry. In the event BlackRock pursues additional acquisitions, it may not be able to find suitable businesses to acquire at acceptable prices, and it may not be able to successfully integrate or realize the intended benefits from such acquisitions.

Risks Related to BlackRock’s Operations

Failure to maintain adequate infrastructure could impede BlackRock’s productivity and growth.

The Company’s infrastructure, including its technological capacity, data centers, and office space, is vital to the

competitiveness of its business. The failure to maintain an adequate infrastructure commensurate with the size and scope of its business, including any expansion, could impede the Company’s productivity and growth, which could cause the Company’s earnings or stock price to decline. Additionally, the overall stability of the euro could pose operational risks to the Company or the funds and accounts that it manages as a result of the adverse impacts that such issues may have on the Company’s trading, clearing, or counterparty relationships.

Failure to maintain adequate business continuity plans could have a material adverse impact on BlackRock and its products.

A significant portion of BlackRock’s critical business operations is concentrated in a few geographic areas, including San Francisco, California, New York, New York and London, England. A major earthquake, hurricane, fire, terrorist or other catastrophic event could result in disruption to the business. The failure of the Company to maintain updated adequate business continuity plans, including secure backup facilities, systems and personnel could impede the Company’s ability to operate upon a disruption, which could cause the Company’s earnings or stock price to decline.

Operating in international markets increases BlackRock’s operational, regulatory and other risks.

As a result of BlackRock’s extensive international business activities, the Company faces increased operational, regulatory, reputational and foreign exchange rate risks. The failure of the Company’s systems of internal control to properly mitigate such additional risks, or of its operating infrastructure to support such international activities, could result in operational failures and regulatory fines or sanctions, which could cause the Company’s earnings or stock price to decline.

Failure to maintain a technological advantage could lead to a loss of clients and a decline in revenues.

A key element to BlackRock’s continued success is the ability to maintain a technological advantage in providing the sophisticated risk analytics incorporated into BlackRock’s Aladdin technology platform that support investment advisory and BRS clients. Moreover, the Company’s technological and software advantage is dependent on a number of third parties who provide various types of data and software. The failure of these third parties to provide such data or software could result in operational difficulties and adversely impact BlackRock’s ability to provide services to its investment advisory and BRS clients. There can be no assurance that the Company will be able to maintain this technological advantage or be able to effectively protect and enforce its intellectual property rights in these systems and processes.

Failure to implement effective information and cyber security policies, procedures and capabilities could disrupt operations and cause financial losses that could result in a decrease in BlackRock’s earnings or stock price.

BlackRock is dependent on the effectiveness of its information and cyber security policies, procedures and capabilities to protect its computer and telecommunications systems and the data that reside on or are transmitted through them. An externally caused information security incident, such as a hacker attack, virus or worm, or an internally caused issue, such as failure to control access to sensitive systems, could materially interrupt business operations or cause disclosure or modification of sensitive or confidential client or competitive information and could result in material financial loss, loss of competitive position, regulatory actions, breach of client contracts, reputational harm or legal liability, which, in turn, could cause a decline in the Company’s earnings or stock price.

The failure of a key vendor to BlackRock to fulfill its obligations could have a material adverse effect on BlackRock and its products.

BlackRock depends on a number of key vendors for various fund administration, accounting, custody and transfer agent roles and other operational needs. The failure or inability of BlackRock to diversify its sources for key services or the failure of any key vendors to fulfill their obligations could lead to operational issues for the Company and in certain products, which could result in financial losses for the Company and its clients.

Failure to manage risks in operating BlackRock’s securities lending program for clients could lead to a loss of clients and a decline in revenues and liquidity.

The size of BlackRock’s securities lending programs increased significantly with the completion of the BGI Transaction. As part of these programs, BlackRock must manage risks associated with (i) ensuring that the value of the collateral held against the securities on loan does not decline in value or become illiquid and that its nature and value complies with regulatory requirements and investment requirements; (ii) the potential that a borrower defaults or does not return a loaned security on a timely basis; and (iii) errors in the settlement of securities, daily mark-to-market valuations and collateral collection. The failure of the Company’s controls to mitigate these risks could result in financial losses for the Company’s clients that participate in its securities lending programs as well as for the Company.

Risks Related to Relationships with Bank of America/Merrill Lynch, PNC and Other Institutional Investors

Merrill Lynch is an important distributor of BlackRock’s products, and the Company is, therefore, subject to risks associated with the business of Merrill Lynch.

Under a global distribution agreement entered into with Merrill Lynch, Merrill Lynch provides distribution, portfolio administration and servicing for certain BlackRock investment management products and services through its various distribution channels. The Company may not be successful in distributing products through Merrill Lynch or in distributing its products and services through other third-party distributors. If BlackRock is unable to distribute its products and services successfully or if it experiences an increase in distribution-related costs, BlackRock’s business, results of operations or financial condition may be materially and adversely affected.

Loss of market share within Merrill Lynch’s Global Wealth & Investment Management business could harm operating results.

A significant portion of BlackRock’s revenue has historically come from AUM generated by Merrill Lynch’s Global Wealth & Investment Management (“GWIM”) business. BlackRock’s ability to maintain a strong relationship within GWIM is material to the Company’s future performance. If one of the Company’s competitors gains significant additional market share within the GWIM retail channel at the expense of BlackRock, then BlackRock’s business, results of operations or financial condition may be negatively impacted.

PNC has agreed to vote as a stockholder in accordance with the recommendation of BlackRock’s Board of Directors, and certain actions will require special board approval or the prior approval of PNC and Merrill Lynch.

As discussed in our proxy statement, PNC has agreed to vote all of its voting shares in accordance with the recommendation of BlackRock’s Board of Directors in accordance with the provisions of its stockholder agreement with BlackRock. As a consequence, if the shares held by PNC constitute a substantial portion of the outstanding voting shares, matters submitted to a stockholder vote that require a majority or a plurality of votes for approval, including elections of directors, will have a substantial number of shares voted in accordance with the determinations of the BlackRock Board of Directors. This arrangement has the effect of concentrating a significant block of voting control over BlackRock in its Board of Directors, whether or not stockholders agree with any particular determination of the Board. At December 31, 2012, PNC owned approximately 20.8% of BlackRock’s voting common stock.

As discussed in our proxy statement, pursuant to our stockholder agreement with PNC, the following may not be done without prior approval of all of the independent directors, or at least two-thirds of the directors, then in office:

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appointment of a new Chief Executive Officer of BlackRock;

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any merger, issuance of shares or similar transaction in which beneficial ownership of a majority of the total voting power of BlackRock capital stock would be held by persons different than those currently holding such majority of the total voting power, or any sale of all or substantially all assets of BlackRock;

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any acquisition of any person or business which has a consolidated net income after taxes for its preceding fiscal year that equals or exceeds 20% of BlackRock’s consolidated net income after taxes for its preceding fiscal year if such acquisition involves the current or potential issuance of BlackRock capital stock constituting more than 10% of the total voting power of BlackRock capital stock issued and outstanding immediately after completion of such acquisition;

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any acquisition of any person or business constituting a line of business that is materially different from the lines of business BlackRock and its controlled affiliates are engaged in at that time if such acquisition involves consideration in excess of 10% of the total assets of BlackRock on a consolidated basis;

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except for repurchases otherwise permitted under their respective stockholder agreements, any repurchase by BlackRock or any subsidiary of shares of BlackRock capital stock such that after giving effect to such repurchase BlackRock and its subsidiaries shall have repurchased more than 10% of the total voting power of BlackRock capital stock within the 12-month period ending on the date of such repurchase;

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any amendment to BlackRock’s certificate of incorporation or bylaws;

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any matter requiring stockholder approval pursuant to the rules of the NYSE; or

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any amendment, modification or waiver of any restriction or prohibition on Merrill Lynch or its affiliates provided for under its stockholder agreements.

Additionally, BlackRock may not enter into any of the following transactions without the prior approval of PNC:

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any sale of any subsidiary of BlackRock, the annualized revenues of which, together with the

annualized revenues of any other subsidiaries disposed of within the same year, are more than 20% of the annualized revenues of BlackRock for the preceding fiscal year on a consolidated basis;

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for so long as BlackRock is a subsidiary of PNC for purposes of the BHC Act, entering into any business or activity that is prohibited for any such subsidiary under the BHC Act;

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any amendment of any provision of a stockholder agreement between BlackRock and any stockholder beneficially owning greater than 20% of BlackRock capital stock that would be viewed by a reasonable person as being adverse to PNC or materially more favorable to the rights of any stockholder beneficially owning greater than 20% of BlackRock capital stock than to PNC;

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any amendment, modification, repeal or waiver of BlackRock’s certificate of incorporation or bylaws that would be viewed by a reasonable person as being adverse to the rights of PNC or more favorable to the rights of any stockholder beneficially owning greater than 20% of BlackRock capital stock, or any settlement or consent in a regulatory enforcement matter that would be reasonably likely to cause PNC or any of its affiliates to suffer regulatory disqualification, suspension of registration or license or other material adverse regulatory consequences; or

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a voluntary bankruptcy or similar filing by BlackRock.

As discussed in our proxy statement, under BlackRock’s stockholder agreement with Merrill Lynch, which terminates on July 31, 2013, BlackRock may not enter into any of the following transactions without the prior approval of Merrill Lynch:

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any amendment, modification or waiver of any provision of a stockholder agreement between BlackRock and PNC or any stockholder beneficially owning greater than 20% of BlackRock capital stock that would be viewed by a reasonable person as being adverse to Merrill Lynch or materially more favorable to the rights of PNC or other stockholder beneficially owning greater than 20% of BlackRock capital stock than to Merrill Lynch;

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any amendment, modification, repeal or waiver of BlackRock’s certificate of incorporation or bylaws that would be viewed by a reasonable person as being adverse to the rights of Merrill Lynch or more favorable to the rights of PNC or other stockholder beneficially owning greater than 20% of BlackRock capital stock, or any settlement or consent in a regulatory enforcement matter that would be

reasonably likely to cause Merrill Lynch or any of its affiliates to suffer regulatory disqualification, suspension of registration or license or other material adverse regulatory consequences;

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any acquisition which would be reasonably likely to require Merrill Lynch to register with the Federal Reserve as a bank holding company or become subject to regulation under the BHC Act, the Change of Bank Control Act of 1978 or Section 10 of the Homeowners Loan Act of 1934; or

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a voluntary bankruptcy or similar filing by BlackRock.

Currently, Merrill Lynch and its affiliates own a de minimis number of shares of our capital stock.

PNC and several other institutional stockholders own a large portion of BlackRock’s capital stock. Future sales of our common stock in the public market by the Company or its large stockholders could adversely affect the trading price of our common stock.

As of December 31, 2012, PNC owned 21.9% of the Company’s capital stock and several other institutional holders own in excess of 5% of BlackRock shares. The Company has entered into a registration rights agreement with PNC. The registration rights agreement, which includes customary “piggyback” registration provisions, may continue to allow PNC to cause us to file one or more registration statements for the resale of its shares of capital stock and cooperate in certain underwritten offerings. Sales by us or our large stockholders of a substantial number of shares of our common stock in the public market pursuant to registration rights or otherwise, or the perception that these sales might occur, could cause the market price of our common stock to decline.

Legal and Regulatory Risks

BlackRock is subject to extensive regulation in the United States and internationally.

BlackRock’s business is subject to extensive regulation in the United States and around the world. See the discussion under “Item 1 – Business – Regulation.” Violation of applicable laws or regulations could result in fines, temporary or permanent prohibition of the engagement in certain activities, reputational harm and related client terminations, suspensions of personnel or revocation of their licenses, suspension or termination of investment adviser or broker-dealer registrations, or other sanctions, which could have a material adverse effect on BlackRock’s reputation, business, results of operations or financial condition and cause the Company’s earnings or stock price to decline.

BlackRock may be adversely impacted by legal and regulatory changes in the United States and internationally.

As previously mentioned, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “DFA”) was signed into law. The DFA is expansive in scope and requires the adoption of extensive regulations and numerous regulatory decisions in order to be implemented. The adoption of these regulations and decisions will in large measure determine the impact of the DFA on BlackRock. BlackRock is continuing to review the impact of the legislation and related rule-making will have on its business, financial condition and results of operations.

The business impact of the DFA and its regulations, and other new laws or regulations, including those affecting money market funds, or changes in enforcement of existing laws or regulations in the United States or internationally, could adversely impact the scope or profitability of BlackRock’s business activities, could require BlackRock to change certain business practices and could expose BlackRock to additional costs (including compliance and tax costs).

The DFA charges the Board of Governors of the Federal Reserve System (the “Federal Reserve”) with establishing enhanced regulatory requirements for non-bank financial institutions designated as “systemically important” by the Financial Stability Oversight Council (“FSOC”). Among the potential impacts of the DFA, if BlackRock were designated a systemically important financial institution (a “SIFI”), it could be subject to these enhanced prudential, supervisory and other requirements, which, individually or in the aggregate, could adversely impact BlackRock’s business and operations.

Provisions of the DFA referred to as the “Volcker Rule” place limitations on the ability of banks, and their subsidiaries and affiliates, to engage in proprietary trading and to invest in and transact with certain investment funds, including hedge funds, private equity funds and funds of those funds (collectively “covered funds”). It is expected that the Volcker Rule will apply to BlackRock by virtue of BlackRock’s relationship to PNC, and BlackRock could become subject to similar limitations if it is designated a SIFI. The Volcker Rule became effective on July 21, 2012; however, final implementing regulations have not yet been issued. Entities subject to the Volcker Rule will have until at least July 21, 2014 to come into compliance with the provisions of the Volcker Rule. To the extent the Volcker Rule applies to BlackRock, it would limit BlackRock’s ability to make and retain investments in covered funds, require BlackRock to remove its name from the name of its covered funds, and limit investments in covered funds by

BlackRock employees, among other restrictions. Depending on the final implementation of the Volcker Rule and the granting of extensions, BlackRock could be required to sell certain seed and co-investments that it holds, including at a discount, depending on market conditions. The scope of the definition of “covered funds” is not yet known, and therefore these restrictions could apply to funds other than those commonly referred to as hedge funds and private equity funds. These limitations and restrictions could disadvantage BlackRock against those competitors that are not subject to the Volcker Rule in the ability to attract clients into BlackRock covered funds and to retain employees.

Regulatory authorities, including the Securities and Exchange Commission (the “SEC”), the FSOC and the International Organization of Securities Commissions, continue to focus on the need for additional regulations for money market mutual funds. In November 2012, the FSOC issued proposed recommendations for money market mutual fund reform for public comment, which closed on February 15, 2013. The FSOC recommendations included floating the net asset value of funds, requiring net asset value buffers and requiring that a portion of redemptions be held back by stable net asset value funds for a period of time, the retention of capital and liquidity gates and/or redemption fees. If adopted by the SEC, these proposals could significantly affect money market fund products and the entire money market fund industry. In light of the uncertainty regarding what changes may ultimately be adopted in a final SEC rule, we cannot predict what investor appetite will be for money market mutual fund products following the adoption of any such reforms or the impact of such reforms on BlackRock.

In 2012, the Office of the Comptroller of the Currency of the United States (the “OCC”) amended the regulations governing bank-maintained short-term investment funds (“STIFs”) to include new disclosure requirements regarding portfolio holdings and to more closely align portfolio limitations, such as maximum weighted average maturity and weighted average life, with those applicable to SEC registered money market funds. As a result of the new OCC rules, BlackRock chose to sell certain securities held within certain STIFs during the fourth quarter of 2012 and to make a one-time contribution to the STIFs to maintain the value of the funds while ensuring compliance with the OCC rules. As a result of the security sales, these STIFs are currently in compliance with the new OCC rules. The ultimate result of these rule changes is uncertain.

Further, regulations under the DFA relating to regulation of swaps and derivatives could impact the manner by which BlackRock-advised funds and accounts use and trade swaps and other derivatives, and could significantly increase the costs of derivatives trading conducted by

BlackRock on behalf of its clients. BlackRock will also need to build new compliance mechanisms to monitor compliance with SEC and Commodity Futures Trading Commission (“CFTC”) rules concerning, among other things, the registration and regulation of commodity pool operators and commodity trading advisors (and the accompanying registration and regulation of such entities by the National Futures Association), the registration status of dealer counterparties and other counterparties who are major swap participants in the swap markets, and requirements concerning mandatory clearing of certain swap transactions. BlackRock, on behalf of its clients, is also preparing for mandated central clearing of swaps and mandated trading venue requirements.

In addition, BlackRock has begun reporting certain information about a number of its private funds to the SEC and certain information about a number of its commodity pools to the CFTC, pursuant to systemic risk reporting requirements adopted by both agencies, which have required, and will continue to require, investments in people and systems to assure timely and accurate reporting.

The SEC, the Internal Revenue Service and the CFTC each continue to review the use of futures and derivatives by mutual funds, which could result in regulations that further limit the use of futures and derivatives by mutual funds. If adopted, these limitations could require BlackRock to change certain mutual fund business practices or to register additional entities with the CFTC, which could result in additional costs and/or restrictions.

In addition, in the aftermath of the financial crisis, the European Commission set out a detailed plan for EU financial reform, outlining a number of initiatives to be reflected in new or updated directives, regulations and recommendations of which the review of the Markets in Financial Instruments Directive (“MiFID”) was a part. These, together with the changes contemplated by the Alternative Investment Fund Managers Directive (“AIFMD”), will have direct and indirect effects on BlackRock’s operations in the European Economic Area, including increased compliance, disclosure and other obligations, which could impact BlackRock’s ability to expand in these markets.

The foregoing regulatory changes, and other reforms globally, could also lead to business disruptions, could adversely impact the value of assets in which BlackRock has invested on behalf of clients and/or via seed or co-investments, and, to the extent the regulations strictly control the activities of financial services firms, could make it more difficult for BlackRock to conduct certain business activities or distinguish itself from competitors. See “Item 1 – Business – Regulation” above for additional information regarding certain laws and regulations that affect BlackRock’s business.

Failure to comply with the Investment Advisers Act of 1940 (the “Advisers Act”) and the Investment Company Act of 1940 (the “Investment Company Act”) and related regulations could result in substantial harm to BlackRock’s reputation and results of operations.

Certain BlackRock subsidiaries are registered with the SEC under the Advisers Act and BlackRock’s U.S. mutual funds and exchange-traded funds are registered with the SEC under the Investment Company Act. The Advisers Act imposes numerous obligations and fiduciary duties on registered investment advisers, including record-keeping, operating and marketing requirements, disclosure obligations and prohibitions on fraudulent activities. The Investment Company Act imposes similar obligations, as well as additional detailed operational and compliance requirements, on investment advisers to registered investment companies. The failure of any of the relevant subsidiaries to comply with the Advisers Act or the Investment Company Act could cause the SEC to institute proceedings and impose sanctions for violations of either of these acts, including censure, termination of an investment adviser’s registration or prohibition to serve as adviser to SEC-registered funds, and could lead to litigation by investors in those funds or harm to the Company’s reputation, any of which could cause its earnings or stock price to decline.

Failure to comply with ERISA regulations could result in penalties and cause the Company’s earnings or stock price to decline.

Certain BlackRock subsidiaries are subject to the Employee Retirement Income Security Act of 1974 (“ERISA”) and to regulations promulgated thereunder, insofar as they act as a “fiduciary” under ERISA with respect to benefit plan clients. ERISA and applicable provisions of the Internal Revenue Code impose duties on persons who are fiduciaries under ERISA, prohibit specified transactions involving ERISA plan clients and provide monetary penalties for violations of these prohibitions. The failure of any of the relevant subsidiaries to comply with these requirements could result in significant penalties that could reduce the Company’s earnings or cause its stock price to decline.

BlackRock is subject to banking regulations that may limit its business activities.

Because the total equity ownership interest of PNC in BlackRock exceeds certain thresholds, BlackRock is deemed to be a non-bank subsidiary of PNC, which is regulated as a financial holding company under the Bank Holding Company Act of 1956. As a non-bank subsidiary of PNC, BlackRock is subject to banking regulation, including the supervision and regulation of the Federal Reserve.

Such banking regulation limits the activities and the types of businesses that BlackRock may conduct. The Federal Reserve has broad enforcement authority over BlackRock, including the power to prohibit BlackRock from conducting any activity that, in the Federal Reserve’s opinion, is unauthorized or constitutes an unsafe or unsound practice, and to impose substantial fines and other penalties for violations. Any failure of PNC to maintain its status as a financial holding company could result in substantial limitations on certain BlackRock activities and its growth. In addition, BlackRock’s trust bank subsidiary is subject to regulation by the OCC, and is subject to capital requirements established by the OCC. The OCC has broad enforcement authority over BlackRock’s trust bank subsidiary. Also, provisions of the DFA referred to as the Volcker Rule could, to the extent the final Volcker Rule is determined to apply to BlackRock’s activities, affect the method by which BlackRock invests in and operates its investment funds, including private equity funds, hedge funds and fund of funds platforms. Being subject to banking regulation, including potentially the Volcker Rule, may put BlackRock at a competitive disadvantage because most of its competitors are not subject to these limitations.

Failure to comply with laws and regulations in the United Kingdom, other member states of the European Union, Hong Kong, Japan, Australia and other non-U.S. jurisdictions in which BlackRock operates could result in substantial harm to BlackRock’s reputation and results of operations.

The FSA regulates BlackRock’s subsidiaries in the United Kingdom. Authorization by the FSA is required to conduct any financial services-related business in the United Kingdom under the Financial Services and Markets Act 2000. The FSA’s rules made under that Act govern a firm’s capital resources requirements, senior management arrangements, conduct of business, interaction with clients and systems and controls. Breaches of these rules may result in a wide range of disciplinary actions against the Company’s U.K.-regulated subsidiaries.

In addition, these subsidiaries, and other European subsidiaries, branches or representative offices, must comply with the pan-European regime established by MiFID, which regulates the provision of investment services and activities throughout the EEA, as well as the Capital Requirements Directive, which delineates regulatory capital requirements. As discussed under “Item 1 - Business - Regulation,” in the aftermath of the financial crisis the European Commission set out a detailed plan to complete the EU’s financial reform, outlining a number of initiatives to be reflected in new or updated directives, regulations and recommendations. The AIFMD, which became effective on July 21, 2011, is required to be

implemented by EU member states by July 22, 2013. Compliance with the AIFMD’s requirements may restrict alternative investment funds marketing and place additional compliance and disclosure obligations regarding remuneration, capital requirements, leverage, valuation, stakes in EU companies, depositaries, the domicile of custodians and liquidity management. UCITS IV was required to be adopted in the national law of each EU member state by July 1, 2011. UCITS IV was adopted into national law by the United Kingdom prior to the deadline but several other EU member states are still in various stages of the adoption process. There are also European Commission consultations in process that are intended to improve retail investor protection including UCITS V, which addresses, among other items, custodial liability. Recent proposals on packaged retail investment products (“PRIPs”) are to be implemented through the strengthening of MiFID standards (for non-insurance PRIPs), revisions to the Insurance Mediation Directive’s selling standard (for all insurance-based PRIPs) and new investor disclosure requirements for all PRIPs through a separate EU legislative process. In the United Kingdom, the Bribery Act 2010 came into force in July 2011 and has required the implementation of additional procedures on the Company’s U.K.-regulated subsidiaries. In addition, a retail distribution review initiated by the FSA is expected to change how investment advice is paid for in the United Kingdom for all investment products. Final retail distribution rules were published in 2011, with implementation at the end of 2012. In a similar area, a further European Commission Regulation, the European Market Infrastructure Regulation (“EMIR”), was adopted in August 2012, and requires the central clearing of standardized OTC derivatives and the mandatory reporting of all derivative contracts. Some of the EMIR technical standards have recently been finalized and the remainder are expected to be finalized in 2013.

In Japan, a BlackRock subsidiary is subject to the Financial Instruments and Exchange Law (the “FIEL”) and the Law Concerning Investment Trusts and Investment Corporations. These laws are administered and enforced by the Japanese Financial Services Agency (the “JFSA”), which establishes standards for compliance, including capital adequacy and financial soundness requirements, customer protection requirements and conduct of business rules. The JFSA is empowered to conduct administrative proceedings that can result in censure, fines, the issuance of cease and desist orders or the suspension or revocation of registrations and licenses granted under the FIEL.

companies and financial services in Australia and is responsible for promoting investor, creditor and consumer protection. Failure to comply with applicable law and regulations could result in the cancellation, suspension or variation of the relevant subsidiaries’ licenses in Australia.

The activities of certain BlackRock subsidiaries in Hong Kong are subject to the Securities and Futures Ordinance (the “SFO”), which governs the securities and futures markets and regulates, among others, offers of investments to the public and provides for the licensing of intermediaries. The SFO is administered by the Securities and Futures Commission (the “SFC”). The SFC is also empowered under the SFO to establish standards for compliance as well as codes and guidelines. The relevant BlackRock subsidiaries and the employees conducting any of the regulated activities specified in the SFO are required to be licensed with the SFC, and are subject to the rules, codes and guidelines issued by the SFC from time to time. Failure to comply with the applicable laws, regulations, codes and guidelines issued by the SFC could result in the suspension or revocations of the licenses granted by the SFC.

There are similar legal and regulatory arrangements in force in many other non-U.S. jurisdictions where BlackRock’s subsidiaries conduct business or where the funds and products it manages are organized. Failure to comply with laws and regulations in any of these jurisdictions could result in substantial harm to BlackRock’s reputation and results of operation.

Legal proceedings could adversely affect operating results, financial condition and cash flows for a particular period.

Many aspects of BlackRock’s business involve substantial risks of legal liability. The Company and certain of its subsidiaries have been named as defendants in various legal actions, including arbitrations, class actions and other litigation arising in connection with BlackRock’s activities. From time to time, BlackRock receives subpoenas or other requests for information from various U.S. and non-U.S. governmental and regulatory authorities in connection with certain industry-wide, company-specific or other investigations or proceedings. Additionally, certain of the investment funds that the Company manages are subject to lawsuits, any of which could potentially harm the investment returns of the applicable fund or result in the Company being liable to the funds for any resulting damages.

Item 1B.

UNRESOLVED STAFF COMMENTS

The Company has no unresolved comments from the SEC staff relating to BlackRock’s periodic or current reports filed with the SEC pursuant to the Exchange Act.

Item 2.

PROPERTIES

BlackRock’s principal office, which is leased, is located at 55 East 52nd Street, New York, New York. BlackRock leases additional office space in New York City at 40 East 52nd Street and throughout the world, including Boston, Chicago, Edinburgh, Gurgaon (India), Hong Kong, London, Melbourne, Munich, Princeton (New Jersey), San Francisco, Seattle, Singapore, Sydney, Taipei and Tokyo. The Company also owns an 84,500 square foot office building in Wilmington (Delaware).

Item 3.

LEGAL PROCEEDINGS

From time to time, BlackRock receives subpoenas or other requests for information from various U.S. federal, state governmental and domestic and international regulatory authorities in connection with certain industry-wide or other investigations or proceedings. It is BlackRock’s policy to cooperate fully with such inquiries. The Company and certain of its subsidiaries have been named as defendants in various legal actions, including arbitrations and other litigation arising in connection with BlackRock’s

activities. Additionally, certain of the investment funds that the Company manages are subject to lawsuits, any of which potentially could harm the investment returns of the applicable fund or result in the Company being liable to the funds for any resulting damages.

Management, after consultation with legal counsel, currently does not anticipate that the aggregate liability, if any, arising out of regulatory matters or lawsuits will have a material effect on BlackRock’s results of operations, financial position or cash flows. However, there is no assurance as to whether any such pending or threatened matters will have a material effect on BlackRock’s results of operations, financial position or cash flows in any future reporting period. Due to uncertainties surrounding the outcome of these matters, management cannot reasonably estimate the possible loss or range of loss that may arise from these matters.

Item 4.

MINE SAFETY DISCLOSURES

Not applicable.

Part II

Item 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

BlackRock’s common stock is listed on the NYSE and is traded under the symbol “BLK”. At the close of business on January 31, 2013, there were 339 common stockholders of record. Common stockholders include institutional or omnibus accounts that hold common stock for multiple underlying investors.

The following table sets forth for the periods indicated the high and low reported sale prices, period-end closing prices for the common stock and dividends declared per share for the common stock as reported on the NYSE:


	Common Stock Price Ranges				Closing Price		Cash Dividend Declared
	High		Low		Closing Price		Cash Dividend Declared
2012
First Quarter	$	205.60	$	179.13	$	204.90	$	1.50
Second Quarter	$	206.57	$	163.37	$	169.82	$	1.50
Third Quarter	$	183.00	$	164.06	$	178.30	$	1.50
Fourth Quarter	$	209.29	$	177.17	$	206.71	$	1.50
2011
First Quarter	$	209.77	$	179.52	$	201.01	$	1.375
Second Quarter	$	207.42	$	183.51	$	191.81	$	1.375
Third Quarter	$	199.10	$	140.22	$	148.01	$	1.375
Fourth Quarter	$	179.77	$	137.00	$	178.24	$	1.375

BlackRock’s closing common stock price as of February 27, 2013 was $241.07.

Dividends

On January 16, 2013, the Board of Directors approved BlackRock’s quarterly dividend of $1.68 to be paid on March 25, 2013 to stockholders of record on March 7, 2013.

PNC and their respective affiliates along with other institutional investors that hold non-voting participating preferred stock receive dividends on these shares, which are equivalent to the dividends received by common stockholders.

Issuer Purchases of Equity Securities

During the three months ended December 31, 2012, the Company made the following purchases of its common stock, which is registered pursuant to Section 12(b) of the Exchange Act.


	Total Number of Shares Purchased⁽²⁾		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs⁽¹⁾
October 1, 2012 through October 31, 2012		199,312	$	187.87		189,000		3,404,900
November 1, 2012 through November 30, 2012		644,724	$	191.16		642,000		2,762,900
December 1, 2012 through December 31, 2012		48,029	$	197.54		37,500		2,725,400

Total		892,065	$	190.77		868,500

⁽¹⁾	In January 2013, the Board of Directors approved an increase in the availability under the Company’s existing share repurchase program to allow for the repurchase of up to 10.2 million shares of BlackRock common stock with no stated expiration date.

⁽²⁾

Includes purchases made by the Company primarily to satisfy income tax withholding obligations of employees and members of our Board of Directors related to the vesting of certain restricted stock or restricted stock unit awards and purchases made by the Company as part of the publicly announced share repurchase program.

Item 6.

SELECTED FINANCIAL DATA

The selected financial data presented below has been derived in part from, and should be read in conjunction with, the consolidated financial statements of BlackRock and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Form 10-K. Prior year data reflects certain reclassifications to conform to the current year presentation.


	Year ended December 31,
(Dollar amounts in millions, except per share data)	2012			2011			2010⁽¹⁾			2009			2008
Income statement data:
Revenue
Related parties⁽²⁾	$	5,501		$	5,431		$	5,025		$	2,716		$	3,006
Other third parties		3,836			3,650			3,587			1,984			2,058

Total revenue		9,337			9,081			8,612			4,700			5,064
Expenses
Restructuring charges		—			32			—			22			38
Other operating expenses		5,813			5,800			5,614			3,400			3,433

Total expenses		5,813			5,832			5,614			3,422			3,471
Operating income		3,524			3,249			2,998			1,278			1,593
Total non-operating income (expense)		(54	)		(114	)		23			(6	)		(577	)

Income before income taxes		3,470			3,135			3,021			1,272			1,016
Income tax expense		1,030			796			971			375			387

Net income		2,440			2,339			2,050			897			629
Less: Net income (loss) attributable to non-controlling interests		(18	)		2			(13	)		22			(155	)

Net income attributable to BlackRock, Inc.	$	2,458		$	2,337		$	2,063		$	875		$	784

Per share data:⁽³⁾
Basic earnings	$	14.03		$	12.56		$	10.67		$	6.24		$	5.86
Diluted earnings	$	13.79		$	12.37		$	10.55		$	6.11		$	5.78
Book value⁽⁴⁾	$	148.20		$	140.07		$	136.09		$	128.86		$	92.91
Common and preferred cash dividends	$	6.00		$	5.50		$	4.00		$	3.12		$	3.12


	December 31,
(Dollar amounts in millions)	2012		2011		2010		2009⁽¹⁾		2008
Balance sheet data:
Cash and cash equivalents	$	4,606	$	3,506	$	3,367	$	4,708	$	2,032
Goodwill and intangible assets, net		30,312		30,148		30,317		30,346		11,974
Total assets⁽⁵⁾		200,451		179,896		178,459		178,124		19,924
Less:
Separate account assets⁽⁶⁾		134,768		118,871		121,137		119,629		2,623
Collateral held under securities lending agreements⁽⁶⁾		23,021		20,918		17,638		19,335		—
Consolidated investment vehicles⁽⁷⁾		2,813		2,006		1,610		282		502

Adjusted total assets	$	39,849	$	38,101	$	38,074	$	38,878	$	16,799
Short-term borrowings	$	100	$	100	$	100	$	2,234	$	200
Convertible debentures		—		—		67		243		245
Long-term borrowings		5,687		4,690		3,192		3,191		697

Total borrowings	$	5,787	$	4,790	$	3,359	$	5,668	$	1,142
Total stockholders’ equity	$	25,403	$	25,048	$	26,094	$	24,329	$	12,069


	December 31,
(Dollar amounts in millions)	2012		2011		2010		2009⁽¹⁾		2008
Assets under management:
Equity:
Active	$	287,215	$	275,156	$	334,532	$	348,574	$	152,216
iShares		534,648		419,651		448,160		381,399		—
Fixed income:
Active		656,331		614,804		592,303		595,580		477,492
iShares		192,852		153,802		123,091		102,490		—
Multi-asset class		267,748		225,170		185,587		142,029		77,516
Alternatives⁽⁸⁾:
Core		68,367		63,647		63,603		66,058		60,954
Currency and commodities⁽⁹⁾		41,428		41,301		46,135		36,043		590

Sub-total		2,048,589		1,793,531		1,793,411		1,672,173		768,768
Non-ETF Index:
Equity		1,023,638		865,299		911,775		806,082		51,076
Fixed Income		410,139		479,116		425,930		357,557		3,873

Sub-total Non-ETF Index		1,433,777		1,344,415		1,337,705		1,163,639		54,949

Long-term		3,482,366		3,137,946		3,131,116		2,835,812		823,717
Cash management		263,743		254,665		279,175		349,277		338,439

Sub-total		3,746,109		3,392,611		3,410,291		3,185,089		1,162,156
Advisory⁽¹⁰⁾		45,479		120,070		150,677		161,167		144,995

Total	$	3,791,588	$	3,512,681	$	3,560,968	$	3,346,256	$	1,307,151

⁽¹⁾	Significant increases in 2009 (for balance sheet data and AUM) and 2010 (for income statement data) were primarily the result of the BGI Transaction that closed on December 1, 2009.

⁽²⁾

BlackRock’s related party revenue includes fees for services provided to registered investment companies that it manages, which include mutual funds and exchange-traded funds, as a result of the Company’s advisory relationship. In addition, equity method investments are considered related parties due to the Company’s influence over the financial and operating policies of the investee. See Note 15 to the consolidated financial statements for more information on related parties.

⁽³⁾	Participating preferred stock is considered to be a common stock equivalent for purposes of earnings per share calculations.

⁽⁴⁾	Total BlackRock stockholders’ equity, excluding appropriated retained earnings, divided by total common and preferred shares outstanding at December 31 of the respective year-end.

⁽⁵⁾

Includes separate account assets that are segregated funds held for purposes of funding individual and group pension contracts and collateral held under securities lending agreements related to these assets that have equal and offsetting amounts recorded in liabilities and ultimately do not impact BlackRock’s stockholders’ equity or cash flows.

⁽⁶⁾	Equal and offsetting amounts, related to separate account assets and collateral held under securities lending agreements, are recorded in liabilities.

⁽⁷⁾	Includes assets held by consolidated variable interest entities and consolidated sponsored investments funds.

⁽⁸⁾	Data reflects the reclassification of prior period AUM into the current period presentation.

⁽⁹⁾	Amounts include commodity iShares.

⁽¹⁰⁾	Advisory AUM represents long-term portfolio liquidation assignments.

Item 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking Statements

This report, and other statements that BlackRock may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock’s future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” and similar expressions.

BlackRock cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and BlackRock assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

In addition to risk factors previously disclosed in BlackRock’s Securities and Exchange Commission (“SEC”) reports and those identified elsewhere in this report the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: (1) the introduction, withdrawal, success and timing of business initiatives and strategies; (2) changes and volatility in political, economic or industry conditions, the interest rate environment, foreign exchange rates or financial and capital markets, which could result in changes in demand for products or services or in the value of assets under management; (3) the relative and absolute investment performance of BlackRock’s investment products; (4) the impact of increased competition; (5) the impact of future acquisitions or divestitures; (6) the unfavorable resolution of legal proceedings; (7) the extent and timing of any share repurchases; (8) the impact, extent and timing of technological changes and the adequacy of intellectual property and information security protection; (9) the impact of legislative and regulatory actions and reforms, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, and regulatory, supervisory or enforcement actions of government agencies relating to BlackRock or The PNC Financial Services Group, Inc. (“PNC”); (10) terrorist activities, international hostilities and natural disasters, which may adversely affect the

general economy, domestic and local financial and capital markets, specific industries or BlackRock; (11) the ability to attract and retain highly talented professionals; (12) fluctuations in the carrying value of BlackRock’s economic investments; (13) the impact of changes to tax legislation, including income, payroll and transaction taxes, and taxation on products or transactions, which could affect the value proposition to clients and, generally, the tax position of the Company; (14) BlackRock’s success in maintaining the distribution of its products; (15) the impact of BlackRock electing to provide support to its products from time to time and any potential liabilities related to securities lending or other indemnification obligations; and (16) the impact of problems at other financial institutions or the failure or negative performance of products at other financial institutions.

Overview

BlackRock, Inc. (“BlackRock” or the “Company”) is the world’s largest publicly traded investment management firm. BlackRock has portfolio managers located around the world, including the United States, the United Kingdom, the Netherlands, Japan, Hong Kong, Singapore, Australia and Germany. At December 31, 2012, the Company managed $3.792 trillion of assets under management (“AUM”) on behalf of institutional and individual investors worldwide. The Company provides a wide array of products, including passively and actively managed products in various equity, fixed income, multi-asset class, alternative investment and cash management products. BlackRock offers clients diversified access to global markets through separate accounts, collective investment trusts, open-end and closed-end mutual funds, exchange-traded products, hedge funds and funds of funds. BlackRock also provides global advisory services for private investment funds and retail products. The Company’s non-U.S. investment funds are based in a number of domiciles and cover a range of asset classes, including equities, fixed income, cash management and alternatives. In addition, BlackRock Solutions^® provides market risk management, financial markets advisory and enterprise investment system services to a broad base of clients. Financial markets advisory services include valuation services relating to illiquid securities, dispositions and workout assignments (including long-term portfolio liquidation assignments), risk management and strategic planning and execution.

In the United States, retail offerings include various open-end and closed-end funds, including iShares^®, the global product leader in exchange-traded products for institutional, retail and HNW investors. There were 621 iShares products at December 31, 2012 compared with 504 at December 31, 2011 globally across equities, fixed

income and commodities, which trade like common stocks on 20 exchanges worldwide. iShares AUM totaled $752.7 billion at December 31, 2012. The BlackRock Global Funds, the Company’s primary retail fund group offered outside the United States, are authorized for distribution in 35 jurisdictions worldwide. Additional fund offerings include structured products, real estate funds, hedge funds, hedge funds of funds, private equity funds and funds of funds, managed futures funds and exchange-traded products. These products are sold to both U.S. and non-U.S. HNW, retail and institutional investors in a wide variety of active and passive strategies covering both equity and fixed income assets.

BlackRock’s client base consists of financial institutions and other corporate clients, pension plans, charities, official institutions, such as central banks, sovereign wealth funds, supranational authorities and other government entities, HNW individuals and retail investors around the world. BlackRock maintains a significant sales and marketing presence both inside and outside the United States that is focused on establishing and maintaining retail and institutional investment management relationships by marketing its services to investors directly and through financial professionals, pension consultants and establishing third-party distribution relationships. BlackRock also distributes its products and services through Merrill Lynch under a

global distribution agreement in effect until January 2014. After such term, the agreement will renew for one automatic three-year extension if certain conditions are met.

On May 29, 2012, BlackRock completed a secondary offering of 26,211,335 shares of common stock held by Barclays Bank PLC (“Barclays”) at a price of $160.00 per share, which included 23,211,335 shares of common stock issued upon the conversion of Series B Convertible Participating Preferred Stock (“Series B Preferred”) by a subsidiary of Barclays. Upon completion of this offering, BlackRock repurchased 6,377,552 shares directly from Barclays at a price of $156.80 per share (consisting of 6,346,036 shares of Series B Preferred and 31,516 shares of common stock). The total transactions, including the full exercise of the underwriters’ option to purchase 2,621,134 additional shares in the secondary offering, amounted to 35,210,021 shares, resulting in Barclays exiting its entire ownership position in BlackRock.

On December 31, 2012, PNC held 20.8% of the Company’s voting common stock and 21.9% of the Company’s capital stock, which includes outstanding common and non-voting preferred stock.

Financial information concerning the Company’s results of operations for the 12 months ended December 31, 2012 (“2012”), December 31, 2011 (“2011”) and December 31, 2010 (“2010”) are discussed below.

Executive Summary


(Dollar amounts in millions, except per share data)	2012			2011			2010
GAAP basis:
Total revenue	$	9,337		$	9,081		$	8,612
Total expenses		5,813			5,832			5,614

Operating income	$	3,524		$	3,249		$	2,998
Operating margin		37.7	%		35.8	%		34.8	%
Non-operating income (expense), less net income (loss) attributable to non-controlling interests⁽¹⁾		(36	)		(116	)		36
Income tax expense		(1,030	)		(796	)		(971	)

Net income attributable to BlackRock	$	2,458		$	2,337		$	2,063

% attributable to common shares		99.9	%		99.1	%		98.6	%
Net income attributable to common shares	$	2,455		$	2,315		$	2,033
Diluted EPS components:
Operating income	$	13.65		$	11.60		$	10.28
Non-operating income (expense), less net income (loss) attributable to non-controlling interests⁽¹⁾		(0.14	)		(0.41	)		0.12
Income tax benefit		0.28			1.18			0.15

Diluted earnings per common share	$	13.79		$	12.37		$	10.55
Effective tax rate		29.5	%		25.4	%		32.0	%
As adjusted⁽²⁾:
Total revenue	$	9,337		$	9,081		$	8,612
Total expenses		5,763			5,689			5,445

Operating income	$	3,574		$	3,392		$	3,167
Operating margin		40.4	%		39.7	%		39.3	%
Non-operating income (expense), less net income (loss) attributable to non-controlling interests⁽¹⁾		(42	)		(113	)		25
Income tax expense		(1,094	)		(1,040	)		(1,053	)

Net income attributable to BlackRock	$	2,438		$	2,239		$	2,139

% attributable to common shares		99.9	%		99.1	%		98.6	%
Net income attributable to common shares	$	2,435		$	2,218		$	2,109
Diluted EPS components:
Operating income	$	13.84		$	12.12		$	10.85
Non-operating income (expense), less net income (loss) attributable to non-controlling interests⁽¹⁾		(0.16	)		(0.40	)		0.09
Income tax benefit		—			0.13			—

Diluted earnings per common share	$	13.68		$	11.85		$	10.94
Effective tax rate		31.0	%		31.7	%		33.0	%
Other:
Assets under management (end of period)	$	3,791,588		$	3,512,681		$	3,560,968
Diluted weighted-average common shares outstanding⁽³⁾		178,017,679			187,116,410			192,692,047
Shares outstanding (end of period)		171,215,729			178,309,109			191,191,553
Book value per share⁽⁴⁾	$	148.20		$	140.07		$	136.09
Cash dividends declared and paid per share	$	6.00		$	5.50		$	4.00

⁽¹⁾	Net of net income (loss) attributable to non-controlling interests (“NCI”) (redeemable and nonredeemable).

⁽²⁾	As adjusted items are described in more detail in Non-GAAP Financial Measures.

⁽³⁾

Unvested restricted stock units (“RSUs”) that contain non-forfeitable rights to dividends are not included as they are deemed to be participating securities in accordance with accounting principles generally accepted in the Unites States (“GAAP”). Upon vesting of the participating RSUs the shares are added to the weighted-average shares outstanding that results in an increase to the percentage of net income attributable to common shares. In addition, non-voting preferred shares are considered to be common stock equivalents for purposes of determining basic and diluted earnings per share.

⁽⁴⁾	Total BlackRock stockholders’ equity, excluding appropriated retained earnings, divided by total common and preferred shares outstanding at December 31 of the respective year-end.

2012 Compared with 2011.

GAAP. Operating income of $3,524 million and operating margin of 37.7% increased $275 million and 190 bps, respectively, from 2011 reflecting growth in base fees and higher performance fees. Operating income in 2012 included a $30 million charge related to a contribution to certain of the Company’s bank-managed short-term investment funds (“STIFs”). Non-operating income (expense), less net income (loss) attributable to non-controlling interests) increased $80 million due to higher net positive marks on investments in 2012 compared with 2011, partially offset by higher interest expense resulting from long-term debt issuances in May 2012 and May 2011. In 2012, income tax expense included a $21 million benefit related to the resolution of certain outstanding tax positions and a $50 million net non-cash benefit related to the revaluation of certain deferred income tax liabilities including tax legislation enacted in the United Kingdom and the state and local income tax effect resulting from changes in the Company’s organizational structure. In 2011, income tax expenses included a $24 million benefit related to the resolution of certain outstanding tax positions and $198 million of net non-cash tax benefits due to a state tax election and enacted U.K., Japan, U.S. state and local tax legislation. Earnings per diluted common share rose $1.42 from 2011 due to higher net income and the benefit of share repurchases. During 2012, the Company repurchased 9.1 million shares.

As Adjusted. Operating income of $3,574 million and operating margin of 40.4% increased $182 million and 70 bps, respectively, from 2011 reflecting higher revenues. Operating income on an as adjusted basis excluded non-GAAP expense adjustments totaling $50 million in 2012 and $143 million in 2011. Non-operating income (expense), less net income (loss) attributable to non-controlling interests) increased $71 million. Income tax expense on an as adjusted basis excluded the $50 million and $198 million non-cash benefits for 2012 and 2011, respectively, described above. Earnings per diluted common share rose $1.83 from 2011 reflecting the improvement in net income and the benefit of share repurchases.

See Non-GAAP Financial Measures for further information on as adjusted items.

2011 Compared with 2010.

GAAP. Operating income of $3,249 million and operating margin of 35.8% increased $251 million and 100 bps, respectively, from 2010 reflecting higher base fees and higher BlackRock Solutions and advisory revenue, partially offset by lower performance fees and higher operating expenses related to business growth. Operating income and operating margin in 2011 also reflected $63 million of U.K. lease exit costs related to the Company’s exit from two London locations and $32 million of restructuring

charges. Results for 2010 included $90 million of Barclays Global Investors (“BGI”) integration costs. Non-operating income (expense), less net income (loss) attributable to non-controlling interests) decreased $152 million due to lower net positive marks on investments compared with 2010 and higher interest expense resulting from long-term debt issuances in May 2011. Income tax expense in 2011 included the previously mentioned $24 million benefit and $198 million of net non-cash tax benefits. In 2010, income tax expense included a $30 million net non-cash benefit related to the revaluation of certain net deferred income tax liabilities primarily related to acquired intangible assets due to enacted U.K. tax legislation. In addition, 2010 included the effect of favorable tax rulings and the resolution of certain outstanding tax positions. Earnings per diluted common share rose $1.82 from 2010.

As Adjusted. Operating income of $3,392 million and operating margin of 39.7% increased $225 million and 40 bps, respectively, from 2010 reflecting higher revenues, partially offset by net increases in operating expenses as discussed above. Operating income on an as adjusted basis excluded non-GAAP expense adjustments totaling $143 million in 2011 and $169 million in 2010. Non-operating income (expense), less net income (loss) attributable to non-controlling interests) decreased $138 million. Income tax expense on an as adjusted basis excluded the $198 million and $30 million non-cash benefits in 2011 and 2010, respectively, described above. Earnings per diluted common share rose $0.91 from 2010.

For further discussion of BlackRock’s revenue, expenses, non-operating results and income tax expense, see Discussion of Financial Results herein.

Business Outlook

BlackRock offers clients a broad range of equity, fixed income, multi-asset and alternative investment products designed to track various indices (beta), achieve returns in excess of specified benchmarks (alpha) or deliver absolute returns. The diversity of BlackRock’s investment platform, across asset classes, investment styles and geographies – combined with world-class risk management, analytics and advisory expertise – positions the Company well to meet the needs of clients in 2013 and beyond and to continue to attract asset flows as investor needs and sentiment evolve.

BlackRock ended 2012 with record assets under management (“AUM”) of $3.792 trillion as clients sought efficient tools and innovative solutions to meet their investment objectives over both the short and long term. The Company experienced strong client demand for exchange traded funds and products (“ETFs” and “ETPs”, respectively), alternative and emerging market investment products, high-yielding income strategies, outcome-oriented solutions and retirement-related products, and the Company expects this demand to continue into 2013.

In early 2013, BlackRock continues to see signs of an improving global economy. While this offers the potential for greater financial market stability, political and regulatory dynamics, persistent low interest rates and protracted periods of heightened volatility will continue to pose challenges in the investment landscape. BlackRock will continue to monitor these factors actively in 2013, along with global credit and monetary policies (including quantitative easing and the direction of interest rates) and their effects on corporate earnings growth.

While investing for stable income remains a core objective for many of its clients, BlackRock expects clients – particularly in its institutional business – to trend towards barbelling their risk profile through the combination of active and index strategies and the use of alternative and multi-asset investment solutions, complemented with access to BlackRock’s risk management tools and advisory services.

AUM and Flows

•

BlackRock’s unique combination of index and active capabilities positions the Company well to help underfunded corporate and public pension plans narrow the gap between their assets and liabilities with barbell strategies that use a combination of index, alpha, multi-asset and alternative products. As responsibility for retirement funding continues to move away from defined benefit plans into defined contributions plans and ultimately to individuals, BlackRock is also well positioned to offer individual investment options through its LifePath^® target date portfolios and a wide array of ETFs and other mutual fund products.

•

BlackRock has a leading global market share in ETPs through iShares, which leads the industry in AUM and the number of products offered in various markets. The industry’s global growth reflects both continued adoption of ETFs by institutional and retail investors and the introduction of new products. ETP asset growth has historically been linked to positive markets, with investors looking to capitalize on strong market returns. In the continued environment of ultra-low interest rates, industry flows shifted in 2012 toward fixed income products and, within equities, to developed markets. BlackRock believes there is opportunity in emerging markets and is well positioned to grow its active franchise in these markets, including China. While more asset managers may enter the marketplace and offer similar products at lower fees, BlackRock believes that many factors beyond price influence investor preferences. These preferences are driven to varying degrees by performance (as measured by tracking error, or the

difference between net returns on the ETP and the corresponding targeted index), liquidity (the bid-ask spread), tax-efficiency, transparency and client service.

•

BlackRock believes alternative investments will continue to become more important for both institutional and retail clients seeking higher returns through alpha-generating products. Several of BlackRock’s single strategy hedge funds are top performers in the industry and are well positioned to grow in 2013.

•

Cash management assets may decline from year-end levels if clients begin to re-risk their portfolios in the search for yield or equity return opportunities amid continued low interest rates, including in the United States where the Federal Reserve expects rates to remain low until 2014. BlackRock’s diversified global product offerings, record of client service and independent advisory capabilities may enable it to retain a portion of these assets.

Regulatory Reform

•

BlackRock will continue to monitor the evolving regulatory landscape and to assess its influence on the competitive environment, including on liquidity and trading costs, which may present risks as well as opportunities for BlackRock and its clients.

Performance fees and BRS/advisory fees

•

BlackRock improved investment performance in key areas such as fixed income and scientific active equity in 2012 and strong investment performance will again be a priority in 2013. Higher market levels and investment performance may continue to enable the Company’s alternative investment products to contribute additional performance fee revenue.

•

BlackRock expects continuing strong global demand for its Aladdin operating platform and its comprehensive risk reporting capabilities from sophisticated institutional investors and governmental agencies investing in longer-term risk management solutions. The Company also expects to see continuing strong demand for its BlackRock Solutions financial markets advisory services.

Future opportunities

•

BlackRock intends to continue to invest in its people, its platform and its global brand. The Company will continue to build out its product offering and geographic presence, including in emerging markets, and to grow its iShares franchise, both through organic growth and targeted acquisitions.

Non-GAAP Financial Measures

BlackRock reports its financial results in accordance with GAAP; however, management believes evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP basis financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and, for the reasons described below, considers them to be effective indicators, for both management and investors, of BlackRock’s financial performance over time. BlackRock’s management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

Computations for all periods are derived from the consolidated statements of income as follows:

(a)	Operating income, as adjusted, and operating margin, as adjusted:

Operating income, as adjusted, equals operating income, GAAP basis, excluding certain items management deems non-recurring, or transactions that ultimately will not impact BlackRock’s book value, as indicated in the table below. Operating income used for operating margin measurement equals operating income, as adjusted, excluding the impact of closed-end fund launch costs and commissions. Operating margin, as adjusted, equals operating income used for operating margin measurement, divided by revenue (net of distribution and servicing costs and amortization of deferred sales commissions) used for operating margin measurement, as indicated in the table below.


(Dollar amounts in millions)	2012			2011			2010
Operating income, GAAP basis	$	3,524		$	3,249		$	2,998
Non-GAAP expense adjustments:
BGI transaction/integration costs
Employee compensation and benefits		—			—			25
General and administration		—			—			65

Total BGI transaction/integration costs		—			—			90
U.K. lease exit costs		(8	)		63			—
Contribution to STIFs		30			—			—
Restructuring charges		—			32			—
PNC LTIP funding obligation		22			44			58
Merrill Lynch compensation contribution		—			7			10
Compensation expense related to appreciation (depreciation) on deferred compensation plans		6			(3	)		11

Operating income, as adjusted		3,574			3,392			3,167
Closed-end fund launch costs		22			26			15
Closed-end fund launch commissions		3			3			2

Operating income used for operating margin measurement	$	3,599		$	3,421		$	3,184

Revenue, GAAP basis	$	9,337		$	9,081		$	8,612
Non-GAAP adjustments:
Distribution and servicing costs		(364	)		(386	)		(408	)
Amortization of deferred sales commissions		(55	)		(81	)		(102	)

Revenue used for operating margin measurement	$	8,918		$	8,614		$	8,102

Operating margin, GAAP basis		37.7	%		35.8	%		34.8	%

Operating margin, as adjusted		40.4	%		39.7	%		39.3	%

Management believes operating income, as adjusted, and operating margin, as adjusted, are effective indicators of BlackRock’s financial performance over time and, therefore, provide useful disclosure to investors.

Operating income, as adjusted:

Operating income, as adjusted reflects non-GAAP expense adjustments. BGI transaction and integration costs consisted principally of compensation expense, legal fees, marketing and promotional, occupancy and consulting

expenses incurred in conjunction with the BGI acquisition from Barclays. U.K. lease exit costs represent costs to exit two locations in London in the third quarter 2011. The amount in 2012 represents an adjustment related to the estimated costs initially recorded in third quarter 2011. The contribution to STIFs represents a one-time contribution to certain of the Company’s bank-managed STIFs (see Liquidity and Capital Resources for more information). Restructuring charges consist of compensation costs and professional fees.

The portion of compensation expense associated with certain long-term incentive plans (“LTIP”) funded or to be funded through share distributions to participants of BlackRock stock held by PNC and a Merrill Lynch & Co., Inc. (“Merrill Lynch”) cash compensation contribution, has been excluded because it ultimately does not impact BlackRock’s book value. The expense related to the Merrill Lynch cash compensation contribution ceased at the end of third quarter 2011. As of first quarter 2012, all of the Merrill Lynch contributions had been received.

Compensation expense associated with appreciation (depreciation) on investments related to certain BlackRock deferred compensation plans has been excluded as returns on investments set aside for these plans, which substantially offset this expense, are reported in non-operating income (expense).

Management believes operating income exclusive of these items is a useful measure in evaluating BlackRock’s operating performance and helps enhance the comparability of this information for the reporting periods presented.

Operating margin, as adjusted:

Operating margin, as adjusted, allows the Company to compare performance from period-to-period by adjusting for items that may not recur, recur infrequently or may have an economic offset in non-operating income (expense). Examples of such adjustments include BGI transaction and integration costs, U.K. lease exit costs, contribution to STIFs, restructuring charges, closed-end fund launch costs, commissions paid to certain employees as compensation and fluctuations in compensation expense based on mark-to-market movements in investments held to fund certain compensation plans. The Company also uses operating margin, as adjusted, to monitor corporate performance and efficiency and as a benchmark to compare its performance with other companies. Management uses both the GAAP and non-GAAP financial measures in evaluating the financial performance of BlackRock. The non-GAAP measure by itself may pose limitations because it does not include all of the Company’s revenues and expenses.

Revenue used for operating margin, as adjusted, excludes distribution and servicing costs paid to related parties and other third parties. Management believes the exclusion of such costs is useful because it creates consistency in the treatment for certain contracts for similar services, which due to the terms of the contracts, are accounted for under GAAP on a net basis within investment advisory, administration fees and securities lending revenue. Amortization of deferred sales commissions is excluded from revenue used for operating margin measurement, as adjusted, because such costs, over time, substantially offset distribution fee revenue earned by the Company. For each of these items, BlackRock excludes from revenue used for operating margin, as adjusted, the costs related to each of these items as a proxy for such offsetting revenues.

(b)	Non-operating income (expense), less net income (loss) attributable to non-controlling interests, as adjusted:

Non-operating income (expense), less net income (loss) attributable to NCI, as adjusted, is presented below. The compensation expense offset is recorded in operating income. This compensation expense has been included in non-operating income (expense), less net income (loss) attributable to NCI, as adjusted, to offset returns on investments set aside for these plans, which are reported in non-operating income (expense), GAAP basis.


(Dollar amounts in millions)	2012			2011			2010
Non-operating income (expense), GAAP basis	$	(54	)	$	(114	)	$	23
Less: Net income (loss) attributable to NCI		(18	)		2			(13	)

Non-operating income (expense)⁽¹⁾		(36	)		(116	)		36
Compensation expense related to (appreciation) depreciation on deferred compensation plans		(6	)		3			(11	)

Non-operating income (expense), less net income (loss) attributable to NCI, as adjusted	$	(42	)	$	(113	)	$	25

⁽¹⁾	Net of net income (loss) attributable to NCI.

Management believes non-operating income (expense), less net income (loss) attributable to NCI, as adjusted, provides comparability of this information among reporting periods and is an effective measure for reviewing BlackRock’s non-operating contribution to its results. As compensation expense associated with (appreciation) depreciation on investments related to certain deferred compensation plans, which is included in operating income, substantially offsets the gain (loss) on the investments set aside for these plans, management

believes non-operating income (expense), less net income (loss) attributable to NCI, as adjusted, provides a useful measure, for both management and investors, of BlackRock’s non-operating results that impact book value.

(c)	Net income attributable to BlackRock, as adjusted:

Management believes net income attributable to BlackRock, as adjusted, and diluted earnings per common

share, as adjusted, are useful measures of BlackRock’s profitability and financial performance. Net income attributable to BlackRock, as adjusted, equals net income attributable to BlackRock, GAAP basis, adjusted for significant non-recurring items, charges that ultimately will not impact BlackRock’s book value or certain tax items that do not impact cash flow.


(Dollar amounts in millions, except per share data)	2012			2011			2010
Net income attributable to BlackRock, GAAP basis	$	2,458		$	2,337		$	2,063
Non-GAAP adjustments, net of tax:^(d)
BGI transaction/integration costs		—			—			59
U.K. lease exit costs		(5	)		43			—
Contribution to STIFs		21			—			—
Restructuring charges		—			22			—
PNC LTIP funding obligation		14			30			40
Merrill Lynch compensation contribution		—			5			7
Income tax law changes/election		(50	)		(198	)		(30	)

Net income attributable to BlackRock, as adjusted	$	2,438		$	2,239		$	2,139

Allocation of net income, as adjusted, to common shares^(e)	$	2,435		$	2,218		$	2,109
Diluted weighted-average common shares outstanding^(f)		178,017,679			187,116,410			192,692,047
Diluted earnings per common share, GAAP basis^(f)	$	13.79		$	12.37		$	10.55
Diluted earnings per common share, as adjusted^(f)	$	13.68		$	11.85		$	10.94

See note (a) Operating income, as adjusted, and operating margin, as adjusted, for information on BGI transaction/integration costs, U.K. lease exit costs, contribution to STIFs, restructuring charges, PNC LTIP funding obligation and Merrill Lynch compensation contribution.

During 2012, income tax changes included adjustments related to the revaluation of certain deferred income tax liabilities due to tax legislation enacted in the United Kingdom and the state and local income tax effect resulting from changes in the Company’s organizational structure. During 2011 and 2010, income tax changes included adjustments related to the revaluation of certain deferred income tax liabilities due to a state tax election and enacted U.K., Japan, U.S. state and local tax legislation. The resulting decrease in income taxes has been excluded from net income attributable to BlackRock, Inc., as adjusted, as these items do not have a cash flow impact and to ensure comparability among periods presented.

(d)	In 2012, 2011 and 2010 non-GAAP adjustments were tax effected at 31.4%, 31.8% and 33%, respectively, reflecting a blended rate applicable to the adjustments.

(e)	Amounts exclude net income attributable to participating securities (see below).

(f)

Non-voting participating preferred shares are considered to be common stock equivalents for purposes of determining basic and diluted earnings per share calculations. Certain unvested RSUs are not included in diluted weighted-average common shares outstanding as they are deemed participating securities in accordance with required provisions of Accounting Standards Codification (“ASC”) 260-10, Earnings per Share. In 2012, 2011 and 2010, average outstanding participating securities were 0.2 million, 1.8 million and 2.8 million, respectively.

Assets Under Management

AUM for reporting purposes generally is based upon how investment advisory and administration fees are

calculated for each portfolio. Net asset values, total assets, committed assets or other measures may be used to determine portfolio AUM.


	December 31,						Variance
(Dollar amounts in millions)	2012		2011		2010		2012 vs. 2011			2011 vs. 2010
Equity:
Active	$	287,215	$	275,156	$	334,532		4	%		(18	%)
iShares		534,648		419,651		448,160		27	%		(6	%)
Fixed income:
Active		656,331		614,804		592,303		7	%		4	%
iShares		192,852		153,802		123,091		25	%		25	%
Multi-asset class		267,748		225,170		185,587		19	%		21	%
Alternatives:
Core		68,367		63,647		63,603		7	%		—	%
Currency and commodities⁽¹⁾		41,428		41,301		46,135		—	%		(10	%)

Sub-total		2,048,589		1,793,531		1,793,411		14	%		—	%
Non-ETF Index
Equity		1,023,638		865,299		911,775		18	%		(5	%)
Fixed Income		410,139		479,116		425,930		(14	%)		12	%

Sub-total Non-ETF Index		1,433,777		1,344,415		1,337,705		7	%		1	%

Long-term		3,482,366		3,137,946		3,131,116		11	%		—	%
Cash management		263,743		254,665		279,175		4	%		(9	%)

Sub-total		3,746,109		3,392,611		3,410,291		10	%		(1	%)
Advisory⁽²⁾		45,479		120,070		150,677		(62	%)		(20	%)

Total	$	3,791,588	$	3,512,681	$	3,560,968		8	%		(1	%)

Mix of Assets Under Management – by Asset Class


	2012			2011			2010
Equity:
Active		8	%		8	%		9	%
iShares		14	%		12	%		13	%
Fixed income:
Active		17	%		18	%		17	%
iShares		5	%		4	%		3	%
Multi-asset class		7	%		6	%		5	%
Alternatives:
Core		2	%		2	%		2	%
Currency and commodities⁽¹⁾		1	%		1	%		1	%

Sub-total		54	%		51	%		50	%
Non-ETF Index
Equity		27	%		25	%		26	%
Fixed Income		11	%		14	%		12	%

Sub-total Non-ETF Index		38	%		39	%		38	%

Long-term		92	%		90	%		88	%
Cash management		7	%		7	%		8	%

Sub-total		99	%		97	%		96	%
Advisory⁽²⁾		1	%		3	%		4	%

Total		100	%		100	%		100	%

⁽¹⁾	Amounts include commodity iShares.

⁽²⁾	Advisory AUM represents long-term portfolio liquidation assignments.

The following table presents the component changes in BlackRock’s AUM for 2012, 2011 and 2010.


	December 31,
(Dollar amounts in millions)	2012			2011			2010
Beginning assets under management	$	3,512,681		$	3,560,968		$	3,346,256
Net subscriptions (redemptions)⁽¹⁾
Long-term⁽²⁾		(2,465	)		67,349			131,206
Cash management		5,048			(22,899	)		(61,424	)
Advisory⁽³⁾		(74,540	)		(29,903	)		(12,021	)

Total net subscriptions (redemptions)		(71,957	)		14,547			57,761
BGI merger-related outflows⁽⁴⁾		—			(28,251	)		(120,969	)
Acquisitions⁽⁵⁾		13,742			—			(6,160	)
Market appreciation (depreciation)		321,377			(27,513	)		266,981
Foreign exchange⁽⁶⁾		15,745			(7,070	)		17,099

Total change		278,907			(48,287	)		214,712

Ending assets under management	$	3,791,588		$	3,512,681		$	3,560,968

⁽¹⁾	Amounts include distributions representing return of capital and return on investment to investors.

⁽²⁾	Amounts include the effect of two single client low-fee institutional index fixed income outflows of $36.0 billion and $74.2 billion in first quarter 2012 and third quarter 2012, respectively.

⁽³⁾	Advisory AUM represents long-term portfolio liquidation assignments.

⁽⁴⁾

Amounts include outflows due to manager concentration considerations prior to third quarter 2011 and outflows from scientific active equity performance prior to second quarter 2011. As a result of client investment manager concentration limits and the scientific active equity performance, outflows were expected to occur for a period of time subsequent to the close of the transaction.

⁽⁵⁾	Amounts include AUM acquired from Swiss Re Private Equity Partners (the “SRPEP Transaction”) in September 2012 of $6.2 billion, the Claymore Investments, Inc. acquisition (the “Claymore Transaction”) in March 2012 of $7.6 billion and BGI acquisition adjustments in 2010 of $6.2 billion.

⁽⁶⁾	Foreign exchange reflects the impact of converting non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

BlackRock has historically grown aggregate AUM through organic growth and acquisitions. Management believes that the Company will be able to continue to grow AUM by focusing on strong investment performance, the efficient delivery of beta for index products, client service, by developing new products and new distribution capabilities and by continuing appropriate acquisitions.

The following table presents the component changes in BlackRock’s AUM for 2012.


(Dollar amounts in millions)	December 31, 2011		Net subscriptions (redemptions)⁽¹⁾			Acquisitions⁽²⁾		Market appreciation (depreciation)			Foreign exchange⁽³⁾			December 31, 2012
Equity:
Active	$	275,156	$	(18,111	)	$	—	$	28,550		$	1,620		$	287,215
iShares		419,651		52,973			3,517		56,433			2,074			534,648
Fixed income:
Active		614,804		892			—		40,524			111			656,331
iShares		153,802		28,785			3,026		6,325			914			192,852
Multi-asset class		225,170		15,817			78		25,072			1,611			267,748
Alternatives:
Core		63,647		(3,922	)		6,166		2,266			210			68,367
Currency and commodities⁽⁴⁾		41,301		(1,547	)		860		1,307			(493	)		41,428

Subtotal		1,793,531		74,887			13,647		160,477			6,047			2,048,589
Non-ETF Index
Equity		865,299		19,154			95		138,730			360			1,023,638
Fixed Income		479,116		(96,506	)		—		20,991			6,538			410,139

Sub-total Non-ETF Index		1,344,415		(77,352	)		95		159,721			6,898			1,433,777

Long-term		3,137,946		(2,465	)		13,742		320,198			12,945			3,482,366
Cash management		254,665		5,048			—		1,983			2,047			263,743

Sub-total		3,392,611		2,583			13,742		322,181			14,992			3,746,109
Advisory⁽⁵⁾		120,070		(74,540	)		—		(804	)		753			45,479

Total	$	3,512,681	$	(71,957	)	$	13,742	$	321,377		$	15,745		$	3,791,588

⁽¹⁾	Amounts include distributions representing return of capital and return on investment to investors. Amount also includes the effect of two single client low-fee institutional index fixed income outflows of $36.0 billion and $74.2 billion.

⁽²⁾	Amounts represent AUM acquired in the SRPEP Transaction in September 2012 of $6.2 billion and Claymore Transaction in March 2012 of $7.6 billion.

⁽³⁾	Foreign exchange reflects the impact of converting non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

⁽⁴⁾	Amounts include commodity iShares.

⁽⁵⁾	Advisory AUM represents long-term portfolio liquidation assignments.

AUM increased $278.9 billion, or 8%, to $3.792 trillion at December 31, 2012 from $3.513 trillion at December 31, 2011. The increase in AUM was driven largely by market gains and positive net new business, excluding the effect of two single client low-fee, institutional index fixed income outflows of $36.0 billion and $74.2 billion in first quarter 2012 and third quarter 2012, respectively. Total flows included $74.5 billion of planned advisory distributions and acquired AUM related to the SRPEP and the Claymore Transactions of $13.7 billion.

Net market appreciation of $321.4 billion reflected growth in U.S. and global equity markets and $67.8 billion appreciation in fixed income products across the majority of strategies.

The $15.7 billion net increase in AUM from converting non-U.S. dollar denominated AUM into U.S. dollars was primarily due to the weakening of the U.S. dollar against the pound sterling and the euro, partially offset by the strengthening of the U.S. dollar against the Japanese yen.

The following table presents the component changes in BlackRock’s AUM for 2011.


(Dollar amounts in millions)	December 31, 2010		Net subscriptions (redemptions)⁽¹⁾			BGI merger- related outflows⁽²⁾			Market appreciation (depreciation)			Foreign exchange⁽³⁾			December 31, 2011
Equity:
Active	$	334,532	$	(22,876	)	$	(6,943	)	$	(29,793	)	$	236		$	275,156
iShares		448,160		24,612			—			(49,863	)		(3,258	)		419,651
Fixed income:
Active		592,303		(17,398	)		(413	)		40,366			(54	)		614,804
iShares		123,091		26,876			—			4,824			(989	)		153,802
Multi-asset class		185,587		42,654			—			(401	)		(2,670	)		225,170
Alternatives:
Core		63,603		48			(152	)		179			(31	)		63,647
Currency and commodities⁽⁴⁾		46,135		(3,818	)		—			(1,462	)		446			41,301

Subtotal		1,793,411		50,098			(7,508	)		(36,150	)		(6,320	)		1,793,531
Non-ETF Index
Equity		911,775		22,403			(20,630	)		(48,402	)		153			865,299
Fixed Income		425,930		(5,152	)		(113	)		55,463			2,988			479,116

Sub-total Non-ETF Index		1,337,705		17,251			(20,743	)		7,061			3,141			1,344,415

Long-term		3,131,116		67,349			(28,251	)		(29,089	)		(3,179	)		3,137,946
Cash management		279,175		(22,899	)		—			128			(1,739	)		254,665

Sub-total		3,410,291		44,450			(28,251	)		(28,961	)		(4,918	)		3,392,611
Advisory⁽⁵⁾		150,677		(29,903	)		—			1,448			(2,152	)		120,070

Total	$	3,560,968	$	14,547		$	(28,251	)	$	(27,513	)	$	(7,070	)	$	3,512,681

⁽¹⁾	Amounts include planned distributions representing return of capital and return on investment to investors.

⁽²⁾

Amounts include outflows due to manager concentration considerations prior to third quarter 2011 and outflows from scientific active equity performance prior to second quarter 2011 of $28.3 billion. As a result of client investment manager concentration limits and the scientific active equity performance, outflows were expected to occur for a period of time subsequent to the close of the transaction.

⁽³⁾	Foreign exchange reflects the impact of converting non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

⁽⁴⁾	Amounts include commodity iShares.

⁽⁵⁾	Advisory AUM represents long-term portfolio liquidation assignments.

AUM decreased approximately $48.3 billion, or 1%, to $3.513 trillion at December 31, 2011 from $3.561 trillion at December 31, 2010. The decline in AUM was primarily attributable to $34.6 billion in net market and foreign exchange valuation declines, $29.9 billion of advisory distributions and $22.9 billion of cash management net outflows, partially offset by $67.3 billion of long-term net new business, before giving effect to the final BGI merger-related outflows of $28.3 billion recorded in the first half of 2011.

Net market depreciation of $27.5 billion included $128.1 billion of depreciation in equity products resulting from the decline in global equity, partially offset by appreciation in fixed income products of $100.7 billion.

The $7.1 billion net decrease in AUM from converting non-U.S. dollar denominated AUM into U.S. dollars was primarily due to the strengthening of the U.S. dollar against the euro, pound sterling and Canadian dollar, partially offset by weakening of the U.S. dollar against the Japanese yen.

Discussion of Financial Results

Introduction

BlackRock derives a substantial portion of its revenue from investment advisory and administration fees, which are recognized as the services are performed. Such fees are primarily based on pre-determined percentages of the market value of AUM or percentages of committed capital during investment periods of certain alternative products and are affected by changes in AUM, including market appreciation or depreciation, foreign exchange translation and net subscriptions or redemptions. Net subscriptions or redemptions represent the sum of new client assets, additional fundings from existing clients (including dividend reinvestment), withdrawals of assets from, and termination of, client accounts and distributions to investors representing return of capital and return on investments to investors. Market appreciation or depreciation includes current income earned on, and changes in the fair value of, securities held in client accounts. Foreign exchange translation reflects the impact of converting non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

BlackRock also earns revenue by lending securities on behalf of clients, primarily to brokerage institutions. The securities loaned are secured by collateral in the form of cash or securities, with minimum collateral generally ranging from approximately 102% to 112% of the value of the loaned securities. The revenue earned is shared between BlackRock and the funds or other third-party accounts managed by the Company from which the

securities are borrowed. Historically, securities lending revenue in the second quarter exceeds the other quarters during the year.

Investment advisory agreements for certain separate accounts and investment funds provide for performance fees, based upon relative and/or absolute investment performance, in addition to base fees based on AUM. Investment advisory performance fees generally are earned after a given period of time and when investment performance exceeds a contractual threshold. As such, the timing of recognition of performance fees may increase the volatility of BlackRock’s revenue and earnings. Historically, the magnitude of performance fees in the third and fourth quarters generally exceeds the first two calendar quarters in a year due to the greater number of products with performance measurement periods that end on either September 30 or December 31.

BlackRock provides a variety of risk management, investment analytic and investment system and advisory services to financial institutions, pension funds, asset managers, foundations, consultants, mutual fund sponsors, real estate investment trusts and government agencies. These services are provided under the brand name BlackRock Solutions and include a wide array of risk management services, valuation services related to illiquid securities, disposition and workout assignments (including long-term portfolio liquidation assignments), strategic planning and execution, and enterprise investment system outsourcing to clients. Approximately $14 trillion of positions are processed on the Company’s Aladdin^® operating platform, which serves as the investment/risk solutions system for BlackRock and other institutional investors. Fees earned for BlackRock Solutions and advisory services are determined using some, or all, of the following methods: (i) percentages of various attributes of advisory AUM or value of positions on the Aladdin platform, (ii) fixed fees and (iii) performance fees if contractual thresholds are met.

BlackRock builds upon its leadership position to meet the growing need for investment and risk management solutions. Through its scale and diversity of products, it is able to provide its clients with customized solutions including fiduciary outsourcing for liability-driven investments and overlay strategies for pension plan sponsors, balance sheet management and related services for insurance companies and target date and target return funds, as well as asset allocation portfolios, for retail investors. BlackRock is also able to service these clients via its Aladdin platform to provide risk management and other outsourcing services for institutional investors and custom and tailored solutions to address complex risk exposures.

The Company earns fees for transition management services comprised of commissions from acting as an introducing broker-dealer in buying and selling securities on behalf of its customers. Commissions related to transition management services are recorded on a trade-date basis as securities transactions occur.

The Company also earns revenue related to operating advisory company investments accounted for as equity method investments.

Operating expenses reflect employee compensation and benefits, distribution and servicing costs, amortization of deferred sales commissions, direct fund expenses, general and administration expenses and amortization of finite-lived intangible assets.

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Employee compensation and benefits expense includes salaries, commissions, temporary help, deferred and incentive compensation, employer payroll taxes, severance and related benefit costs.

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Distribution and servicing costs, which are primarily AUM driven, include payments made to Merrill Lynch-affiliated entities under a global distribution agreement, to PNC and Barclays, as well as other third parties, primarily associated with obtaining and retaining client investments in certain BlackRock products.

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Direct fund expenses primarily consist of third-party non-advisory expenses incurred by BlackRock related to certain funds for the use of index trademarks, reference data for indices, custodial services, fund administration, fund accounting, transfer agent services, shareholder reporting services, legal expenses, audit and tax services as well as other fund-related expenses directly attributable to the non-advisory operations of the fund. These expenses may vary

over time with fluctuations in AUM, number of shareholder accounts, or other attributes directly related to volume of business.

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General and administration expenses include marketing and promotional, occupancy and office-related costs, portfolio services (including clearing expenses related to transition management services), technology, professional services, communications, closed-end fund launch costs and other general and administration expenses, including the impact of foreign currency remeasurement.

Non-operating income (expense) includes the effect of changes in the valuations on investments (excluding available-for-sale investments) and earnings on equity method investments, as well as interest and dividend income and interest expense. Other comprehensive income includes changes in valuations related to available-for-sale investments. BlackRock primarily holds seed and co-investments in sponsored investment products that invest in a variety of asset classes, including private equity, distressed credit/mortgage debt securities, hedge funds and real estate. Investments generally are made for co-investment purposes, to establish a performance track record, to hedge exposure to certain deferred compensation plans or for regulatory purposes, including Federal Reserve Bank stock. BlackRock does not engage in proprietary trading activities that could conflict with the interests of its clients.

In addition, non-operating income (expense) includes the impact of changes in the valuations of consolidated sponsored investment funds and consolidated collateralized loan obligations (“CLOs”). The portion of non-operating income (expense) not attributable to BlackRock is allocated to NCI on the consolidated statements of income.

Revenue


							Variance
(Dollar amounts in millions)	2012		2011		2010		2012 vs. 2011			2011 vs. 2010
Investment advisory, administration fees and securities lending revenue:
Equity:
Active	$	1,753	$	1,967	$	1,848	$	(214	)	$	119
iShares		1,941		1,847		1,660		94			187
Fixed income:
Active		1,182		1,104		1,047		78			57
iShares		441		317		263		124			54
Multi-asset class		957		894		740		63			154
Alternatives:
Core		525		557		522		(32	)		35
Currency and commodities		131		136		110		(5	)		26

Sub-total		6,930		6,822		6,190		108			632
Non-ETF Index:
Equity		552		488		424		64			64
Fixed income		229		203		166		26			37

Sub-total Non-ETF Index		781		691		590		90			101

Long-term		7,711		7,513		6,780		198			733
Cash management		361		383		510		(22	)		(127	)

Total base fees		8,072		7,896		7,290		176			606
Investment advisory performance fees: