My Fellow Shareholders
March 2012

Larry Fink

2011 was filled with opportunity and peril for investors. While the resilience of the U.S. consumer and strong corporate earnings offered some bright spots, markets reacted to political, economic and social upheavals. These ranged from the Arab Spring and Occupy Wall Street, to the devastating earthquake and tsunami in Japan, to the Eurozone crisis and sovereign debt downgrades, to moderating growth in China, India and Brazil.

Early optimism about recovery from the financial crisis gave way to uncertainty and soaring volatility in the second half of the year, driving investors to the sidelines. Their anxiety led them to favor cash and short-term securities over long-term investments, bonds over equities, passive products over active, and ETPs over mutual funds. The S&P 500 ended the year almost exactly where it started, outperforming global and emerging market equity indices, but lagging traditional safe havens, including U.S. Treasurys, gold, the Japanese yen and the Swiss franc.

Sustaining our record of growth

BlackRock not only navigated these challenging business conditions, but we sustained our record of growth. We increased revenues by 5%, adjusted operating income by 7% and diluted earnings per share, as adjusted, by 8%. In addition, we increased our adjusted operating margin to 39.7%, demonstrating our ongoing commitment to disciplined management of the Company. Adjusted operating cash flow rose to $2.6 billion, supporting a 38% increase in our dividends per share. In total, we returned $3.7 billion to shareholders through dividends and share repurchases, while continuing to reinvest meaningfully in our business.

We expanded and diversified our shareholder base over the past 16 months, dramatically increasing the liquidity of our stock and eliminating a source of overhang. In November 2010, we executed a highly successful secondary offering and in June 2011, repurchased the remaining stake held by Bank of America, once a 49% owner. Our public float increased from 20% to nearly 60%. BlackRock also achieved a significant milestone when BLK was added to the S&P 500 Index in April 2011. We view this as a testament to the quality and durability of the franchise we have built.

Transitioning from savers to investors

During 2011, we completed the BGI merger integration and made considerable headway on the implementation of our global operating platform, which we believe will continue to unlock efficiencies over time. This progress allowed us to focus all of our attention on working with BlackRock's clients to address their growing investment challenges. Broadly speaking, these challenges reflect how difficult it is in the current environment to structure portfolios that can generate returns sufficient to meet expected liabilities.

Fear made the problem worse last year. In response to the unfolding European debt crisis, a tense standoff over the U.S. debt ceiling and increased volatility, investors "shortened up" rather than investing in line with their long-term financial needs. They withdrew from equity markets and flocked to cash and U.S. Treasurys. Bank deposits and money market funds in the United States jumped a half-trillion dollars to $14 trillion1, while buyers of U.S. Treasurys drove yields to historic lows. Despite being downgraded to double-A in August, U.S. Treasurys ended the year beating both stocks and commodities with a total return of 9.8%2.

Was this a flight to safety or a false sense of security? We believe it was the latter. In fact, we believe investors increased their risk, as the shift to cash widened the gap between their assets and liabilities. Put simply, short-term "savings" will not produce long-term nest eggs. The conundrum is how we manage our longevity. We are so pre­occupied by our health, exercising and eating better so we can live longer, yet we ignore the need to invest so we can afford that longer life.

The task is more difficult in the current environment. Low real rates may be the medicine needed to restore health to our economies, but savers are the ones left with a bitter taste. Lower yields are sapping their ability to compound earnings on their assets to pay for the rising costs of education, healthcare and living expenses. There are no shortcuts. Investors must "mind the gap" between their assets and earnings power on the one hand, and their current and future expenses on the other. They must invest long-term to meet long-term needs.

This short-termism is a widespread disease afflicting not only investors, but also politicians and businesspeople everywhere. In our connected world, we have become hyper-consumers of information, deluged by data and paralyzed by our inability to digest it all. We let fear erode our opportunities and fail to tackle the larger challenges facing society. We need to build our infrastructure, educate our children, fund our retirements and improve our standard of living. To accomplish these goals, we need to fight off short-termism and move from saving to investing at every level.

BlackRock was built for these times

For BlackRock, this imperative reinforces the sense of responsibility to our clients around which we have built our business. Our capabilities encompass a full range of active and passive strategies and a deep belief in data and analytical rigor, anchored in the risk management expertise of BlackRock Solutions and our deep intellectual talent. Our unparalleled platform makes us a valued partner for our clients across geographies and through market cycles.

This is especially true as investors shift their focus from individual products to investment solutions. Clients want a more holistic approach to asset allocation to achieve targeted outcomes. This focus has encouraged use of active strategies with a proven ability to consistently deliver alpha, whether in long-only portfolios managed relative to a benchmark or in alternative investments that are less correlated to broader markets. It also has driven increased demand for beta or index strategies that offer market access, liquidity and efficiency.

The intersection of index and active strategies across asset classes offers compelling opportunities to design effective investment solutions for clients. To succeed, we have to deliver investment performance: alpha over a benchmark, absolute returns, or beta with minimal tracking error. This will always be our foremost priority. In all cases, we apply disciplined investment processes supported by sophisticated risk management capabilities and our renowned Aladdin® operating system. BlackRock's platform for providing investment solutions simply has no equal.

© 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.

1 Source: Federal Reserve Flow of Funds Accounts of the United States.

2 Source: Barclays Capital U.S. Treasury Index, December 30, 2011.


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.