Investment Styles (continued)

Institutional Index

Institutional index AUM, generally managed in common trust funds or separate accounts, comprised 39% of total AUM at December 31, 2011. Long­-term AUM growth of $6.5 billion was driven by net new business of $17.1 billion, before the effect of the final BGI merger-­related outflows, and $10.2 billion of market valuation gains. Merger-­related outflows of $20.7 billion were concentrated among a small number of clients.

Equity products comprised 64% of institutional index AUM, ending the year at $865.3 billion, with net inflows of $22.4 billion more than offset by market valuation declines of $48.2 billion. Net inflows of $34.6 billion across global equity, regional strategies and currency overlays were partially offset by outflows of $11.6 billion from U.S. equity mandates. Toward year-end, U.S. equities experienced modest net inflows in the face of more stable economic and market conditions. Institutional index equity portfolios closely tracked their corresponding benchmarks with 96%, 84% and 98% of AUM at or above tracking error tolerance for the one­-, three-­ and five­-year periods ended December 31, 2011, respectively.

Fixed-income products represented 35%, or $479.1 billion, of institutional index AUM, an increase of 12% or $53.2 billion. Net outflows totaled $5.2 billion, reflecting outflows of $14.6 billion in local currency mandates, only partly offset by inflows of $9.4 billion across global and U.S. core, sector­-specialty and target duration strategies. Investors generally sought the relative safety of U.S. fixed-income products and retreated from European exposure as uncertainty around the sovereign debt crisis continued. Institutional index fixed-income portfolios closely tracked their respective benchmarks with 97%, 92% and 99% of AUM at or above tracking error tolerance for the one­-, three- and five­- year periods ended December 31, 2011, respectively.

iShares/Exchange Traded products ("ETP")

iShares is the leading ETP provider in the world, with $593.4 billion of AUM at December 31, 2011, which increased $3.1 billion, or 1%, since year-end 2010. iShares was the top asset gatherer globally in 20114 with $53.0 billion of net inflows largely offset by $49.9 billion of market valuation declines. During 2011, iShares introduced 45 new ETPs 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.

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. Growth was lower than in recent years, primarily due to unfavorable market movements. Industry 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 toward fixed-income oriented products and, within equities, to developed markets and away from broad and single­ country emerging market funds. The ETP industry experienced another strong year with $173.4 billion of net new business and positive inflows for 11 months of the year4. The industry expanded to include more than 4,200 products globally with year-end AUM totaling $1.525 trillion. The broad spectrum of available ETP asset classes attracted new money through periods that were characterized as both "risk­-on" and "risk-­off."

iShares offers the most diverse product set in the industry with 504 ETPs at year-end 2011 and serves the broadest client base, covering 25 countries on five continents including North America, South America, Europe, Asia and Australia4. iShares remained the ETP leader in top asset gathering in 2011 with four of the top ten products and the highest number of leading products as measured by total assets, with five of the top ten4. 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 year-end December 31, 20114.

At year-end, iShares AUM included $419.7 billion, or 71%, in equity offerings, $153.8 billion, or 26%, in fixed income ETPs and $19.9 billion, or 3%, in multi-asset class and alternative investments. iShares equity AUM decreased $28.5 billion, or 6%, from year-end 2010, with $24.6 billion in net inflows more than offset by $53.1 billion of market and foreign exchange losses. iShares fixed income AUM rose $30.7 billion, or 25%, over the previous year, with 88% of the increase being driven by $26.9 billion of net inflows. iShares multi­-asset class and alternatives AUM grew by $0.9 billion, or 5%, with $1.5 billion of net inflows, predominantly in commodity products such as gold and silver, offset by $0.6 billion of market and foreign exchange declines.

United States

In the United States, iShares AUM ended the year at $444.4 billion with $29.6 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 the fourth quarter 2011. However, the search for yield did not deter investment in low­-rate U.S. government bond ETPs, which attracted significant flows. U.S. broad aggregate bond ETPs also remained popular, allowing investors to capture diversified exposures. At year-end 2011, iShares was the largest U.S. provider of ETPs, with a 42% share of AUM4.

International

International iShares AUM ended at $149.0 billion with robust net new business of $23.4 billion for the year, dominated by developed countries equity products.

Sovereign and bank debt concerns in Europe spurred a "flight to safety," leading to strong investments in Europe­-listed ETPs offering exposure to German equities. A DAX index­-based iShares product led European ETPs overall, with net new inflows of $11.6 billion. At year-end 2011, iShares was the largest European provider of ETPs, with 36% of AUM and 79% of total 2011 industry inflows in the European market4.

In addition, we were the largest ETP manager in Latin America with more than 80% of AUM at December 31, 20114. We continue to look for oppor-tunities to continue to diversify product offerings in key strategic focus areas including attractive, high­-growth markets as demonstrated by the July 2011 launch of iShares COLCAP, the first ETP in the Colombian market, and by our acquisition of the Canadian ETP provider Claymore Investments, announced in January 2012. 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.

© 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.

4 Year-end 2011 ETP Landscape Industry Highlights; BlackRock Investment Institute ETP Research Team, BlackRock, Bloomberg, National Stock Exchange (NSX); Bloomberg

*IMPORTANT NOTES
Opinions

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.