BlackRock Solutions and Advisory

BlackRock offers investment management technology systems, risk-management services and advisory services on a fee basis under the BlackRock Solutions ("BRS") brand name. In 2011, approximately $10.199 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. The Financial Markets Advisory ("FMA") group within BRS provides services for a wide range of global clients, such as valuation and risk assessment of illiquid assets, portfolio restructuring, workouts and dispositions of distressed assets and financial and balance sheet strategies.

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 the year, BRS added 50 net new assignments and ended the year with record revenues of $510 million, an increase of $50 million, or 11%, from 2010. This was driven by strong demand for our FMA, Aladdin and risk-management services, particularly in EMEA and in Asia-­Pacific, where we added a number of new clients. Aladdin assignments are long­-term contracts that provide significant levels of recurring revenue. At year-end, BRS served 166 clients, including banks, insurance companies, official institutions, pension funds, asset managers and other institutional investors across North America, Europe, Asia and Australia.

In FMA, the growing financial crisis in Europe led to several short-­term risk analytics assignments including a few high­-profile engagements. Overall, the nature of FMA assignments is shifting to longer-­term advisory and risk-monitoring engagements. Advisory AUM decreased 20% to $120.1 billion, driven by $29.9 billion of planned client distributions reflecting our continued success in disposing of assets for clients at, or above, targeted levels.

The BRS and Aladdin teams continued to support key aspects of the BGI integration in 2011. These efforts are vital to establishing a unified operating platform and consistent operating processes. We expect the integration of BGI's extensive quantitative tools, risk-management models and portfolio construction applications across asset classes to enhance the Aladdin platform over time. Additionally, we will seek to leverage our scale for the benefit of our clients through the creation of a robust global trading platform in order to improve execution and enhance alpha, as well as other initiatives.

Transition Management Services

BlackRock also offers transition management services, involving the temporary oversight of a client's assets as the client transitions from one manager or strategy to another. We provide a comprehensive service that includes project management and implementation based on achieving best execution consistent with the client's risk-management tolerances. We use state­-of­-the­-art tools and work closely with BlackRock's global trading research team to manage four dimensions of risk throughout the transition: exposure, execution, process and operational risk. The average transition assignment is executed within three weeks, although the duration can be longer or shorter depending on the size, complexity and liquidity of the related assets. These portfolios are not included in AUM unless BlackRock has been retained to manage the assets after the transition phase.

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.

© Copyright 2012 BlackRock, Inc. All rights reserved.

This is an interactive electronic version of the BlackRock 2011 Annual Report to Shareholders. The contents of this version are qualified in their entirety by reference to the printed version. A reproduction of the printed version is available in PDF here.


Opinions expressed throughout this annual report are those of BlackRock, Inc. as of March 2012 and are subject to change.

BGI Transaction

On December 1, 2009, BlackRock acquired from Barclays Bank PLC all of the outstanding equity interests of subsidiaries of Barclays conducting the business of Barclays Global Investors ("BGI") (the "BGI Transaction").

Adjusted and As Adjusted Results

Diluted earnings per share, operating income, operating margin, operating cash flow and net income are presented on an "as adjusted" basis. See pages 28-30 of the PDF for Explanation of Use of Non-GAAP Financial Measures.

Other Revenue

On the Financial Highlights page Other Revenue includes BlackRock Solutions and advisory, Cash management base fees, Investment advisory performance fees, Distribution fees and Other revenue.

Operating Margin Peer Average

Source: SNL, as of December 31, 2011; Market-cap weighted peer average includes: BEN, IVZ, TROW, LM, AMG, FII, EV, WDR, JNS, CLMS, CNS, GBL and PZN.

Performance Data

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 high net worth 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, 2011.

Accounts terminated prior to December 31, 2011 are not included. In addition, accounts that have not been verified as of January 30, 2012 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 high net worth separate accounts and EMEA institutional separate accounts and net-of-fee performance for EMEA based retail products. The performance tracking information for institutional index accounts is based on gross-of-fee performance as of December 31, 2011, 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, 2011. 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 does not consider these differences to be 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. S&P 500® Index is a widely recognized, unmanaged index of common stock prices of industrial, utility, transportation and financial companies in U.S. markets.

Barclays Capital U.S. Aggregate Index is an unmanaged index considered representative of the U.S. investment-grade, fixed rate bond market.

Net New Business and Net Inflows

Unless stated otherwise, 2011 net new business and net inflows figures are before giving effect to a total of $28.3 billion in BGI merger-related outflows. These outflows reflect manager concentration considerations prior to third quarter 2011 and outflows from scientific active equity performance prior to second quarter 2011. BGI merger-related outflows totaled $121.0 billion in 2010 and $2.9 billion in 2009. Total merger-related outflows since the December 2009 BGI transaction represent less than 9% of acquired assets under management.

Market Share of U.S. Long-Term Mutual Fund Flows

Source: SimFund, as of December 31, 2011; Data is for U.S. long-term open-end mutual funds and excludes ETFs and funds of funds.

BlackRock Data Points

Debt ratings, AUM, ETPs offered, number of countries and employee data as of December 31, 2011. All other data reflect full-year 2011 results unless otherwise noted. BLK Total Return Performance vs. Peers - Source: SNL. Reflects full year 2011 results and assumes reinvestment of all dividends. Market-cap weighted peer average includes: BEN, IVZ, TROW, LM, AMG, FII, EV, WDR, JNS, CL MS, CN S, GBL and PZN.